DELAWARE PREMIUM FUND, N-30D, 2000-03-06

DELAWARE PREMIUM FUND
N-30D, 2000-03-06

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<PAGE>

FOR GROWTH

Aggressive Growth Series

Investment Strategy and Performance in 1999

Aggressive Growth Series delivered a strong performance in 1999. The Series
provided a total return of 42.90% (capital change plus reinvestment of
distributions) from its inception on May 3, 1999 through December 31, 1999. The
Series outpaced its benchmark, the Standard & Poor's 500 Index, which had a
total return of 21.0% for the same period. We attribute the Series' performance
primarily to our sector allocation and individual stock selection.
Aggressive Growth Series seeks companies that we believe can perform well
over time, regardless of economic conditions. We focus on companies with strong
growth prospects across all market capitalizations for added diversification.

Portfolio Snapshot

While the stock market was volatile in fiscal 1999, the Series performed well
in both up and down market periods due to our high concentration of technology
and telecommunications stocks. These sectors performed well, providing some
protection when the market dipped and boosting performance during upturns.
We also maintained a higher concentration of stocks in the consumer services
industry than the S&P 500 Index. The solid returns in this sector contributed to
the Series' performance.
We had limited exposure to the financial and healthcare sectors during the
year which also helped our performance.

Investment Outlook

It is likely that the market will remain volatile in 2000, with fluctuations
becoming even more pronounced. We believe that the technology sector will
continue to play a dominant role in the market, at least through the first
quarter of the year, as companies redirect resources from Y2K readiness efforts
to systems upgrades that had been put on hold. We also believe that anticipated
expansion of the internet will cause the telecommunications sector to grow
significantly over the next several years.

Growth of a $10,000 Investment
May 3, 1999 through
December 31, 1999

Aggressive Growth Series Series S&P 500 Index

05/03/1999 $10,000.00 $10,000
05/31/1999 $9,910.00 $9,764
06/30/1999 $10,160.00 $10,306
07/31/1999 $9,730.00 $9,984
08/30/1999 $9,580.00 $9,934
09/30/1999 $10,030.00 $9,662
10/30/1999 $10,820.00 $10,273
11/30/1999 $12,280.00 $10,482
12/31/1999 $14,290.00 $11,100

Aggressive Growth Series
Cumulative Total Return
----------------------------------
Lifetime 42.90%

From inception on May 3, 1999 through December 31, 1999.

Past performance is not a guarantee of future results. Return and share price
will fluctuate so that shares, when redeemed, may be worth more or less than
their original cost.

The chart shows a $10,000 investment in both the Aggressive Growth Series and
the S&P 500 Index for the period from the Series' inception on May 3, 1999
through December 31, 1999. The Index is unmanaged, with no set investment
objective and does not include the "real world" costs of managing a mutual fund.
Earnings from a variable annuity investment compound tax-free until withdrawal,
so no adjustments were made for income taxes. The effect of an expense
limitation is included in the chart. Performance does not reflect insurance fees
related to a variable annuity investment nor the deferred sales charge that
would apply to certain withdrawals of investments held for less than eight
years. Performance shown here would have been reduced if such fees were included
and the expense limitation was removed. For more information about fees, consult
your variable annuity prospectus.

- --------------------------------------------------------------------------------
Aggressive Growth Series Investment Objective
Seeks to provide long-term capital appreciation. It seeks to achieve this
objective by investing primarily in equity securities of companies providing
the potential for high earnings growth.
- --------------------------------------------------------------------------------

Aggressive Growth-1

<PAGE>

Delaware Group Premium Fund-Aggressive Growth Series+
Statement of Net Assets
December 31, 1999

Number Market
of Shares Value
--------- -------
COMMON STOCK-83.22%
Banking, Finance & Insurance-1.27%
Citigroup ............................................ 12,200 $ 677,863
----------
677,863
----------
Business Services-2.65%
*Luminant Worldwide ................................... 13,900 632,450
Young & Rubicam ...................................... 11,100 785,325
----------
1,417,775
----------
Cable, Media & Publishing-10.22%
*ADELPHIA COMMUNICATIONS CLASS A ...................... 22,600 1,483,125
*AMFM ................................................. 4,000 313,000
*AT&T - Liberty Media Class A ......................... 10,600 601,550
*CBS .................................................. 10,700 684,131
*Clear Channel Communications ......................... 4,900 437,325
*Consolidated Graphics ................................ 16,100 240,495
*InterPublic Group .................................... 15,100 871,081
*Omnicom Group ........................................ 8,400 840,000
----------
5,470,707
----------
Computers & Technology-24.48%
*America Online ....................................... 10,900 822,266
*Brio Technology ...................................... 14,300 600,600
*Cisco Systems ........................................ 7,600 814,150
*CITRIX SYSTEMS ....................................... 10,600 1,303,800
*Digital Island ....................................... 4,500 428,063
*Extreme Networks ..................................... 4,300 359,050
*Hall, Kinion & Associates ............................ 5,700 122,550
*INTERNAP NETWORK SERVICES ............................ 5,700 986,100
*INTUIT ............................................... 30,300 1,816,106
*Legato Systems ....................................... 12,500 860,156
*PEREGRINE SYSTEMS .................................... 17,500 1,473,281
*RealNetworks ......................................... 3,500 424,156
*S1 ................................................... 8,700 679,688
*Stamps.com ........................................... 4,500 187,313
*Sun Microsystems ..................................... 6,600 511,088
*VA Linux Systems ..................................... 100 20,663
*VERISIGN ............................................. 5,400 1,030,050
*Veritas Software ..................................... 4,650 665,531
----------
13,104,611
----------
Consumer Products-2.98%
*GEMSTAR INTERNATIONAL
GROUP LIMITED ...................................... 22,400 1,596,000
----------
1,596,000
----------
Electronics & Electrical Equipment-8.46%
*AGILENT TECHNOLOGIES ................................. 13,800 1,066,913
*Applied Micro Circuits ............................... 4,000 509,000
*Globespan ............................................ 5,100 332,138
*JDS UNIPHASE ......................................... 7,400 1,193,713
*Micrel ............................................... 16,900 962,244
*Xilinx ............................................... 10,200 463,781
----------
4,527,789
----------

<PAGE>

Number Market
of Shares Value
--------- -------
COMMON STOCK (Continued)
Healthcare & Pharmacueticals-2.35%
*Genentech ............................................ 5,600 $ 753,200
*United Therapeutics .................................. 11,000 506,000
----------
1,259,200
----------
Industrial Machinery-2.07%
*Applied Materials .................................... 3,500 443,406
*Mettler-Toledo International ......................... 17,400 664,463
----------
1,107,869
----------
Leisure, Lodging & Entertainment-6.10%
*Bally Total Fitness Holding .......................... 20,000 533,750
*Outback Steakhouse ................................... 25,900 671,781
*Papa John's International ............................ 10,800 281,475
*P.F. Chang's China Bistro ............................ 17,100 425,363
Royal Caribbean Cruises .............................. 17,500 862,969
*SFX Entertainment Class A ............................ 13,500 488,531
----------
3,263,869
----------
Packaging & Containers-0.58%
*Mobile Mini .......................................... 14,500 311,750
----------
311,750
----------
Retail-9.20%
*American Eagle Outfitters ............................ 14,100 634,500
*Bed Bath & Beyond .................................... 14,100 489,975
*Best Buy ............................................. 10,700 537,006
*Cost Plus ............................................ 10,200 363,375
HOME DEPOT ........................................... 19,350 1,326,684
*Kohl's ............................................... 9,300 671,344
*Staples .............................................. 22,500 466,875
*Toys R Us ............................................ 30,500 436,531
----------
4,926,290
----------
Telecommunications-9.27%
*Adelphia Business Solutions .......................... 6,800 326,400
*American Tower Class A ............................... 30,500 932,156
*Concord Communications ............................... 9,500 421,563
*Ditech Communications ................................ 5,500 514,250
*Global Crossing Limited .............................. 16,700 835,000
*NEXTEL Communications ................................ 8,000 825,000
*NEXTLINK Communications Class A ...................... 6,400 531,600
*Pinnacle Holdings .................................... 13,600 576,300
----------
4,962,269
----------
Transportation & Shipping-1.83%
Expeditors International ............................. 22,400 981,400
----------
981,400
----------
Utilities-1.76%
*AES .................................................. 12,600 941,850
----------
941,850
----------
Total Common Stock
(cost $33,116,484) .................................. 44,549,242
----------

- ----------------------
Top 10 stock holdings, representing 24.8% of net assets, are printed in bold.
+Effective February 17, 2000, Aggressive Growth Series has been renamed Select
Growth Series.

Aggressive Growth-2
<PAGE>

Aggressive Growth Series
Statement of Net Assets (Continued)

Principal Market
Amount Value
---------- --------
REPURCHASE AGREEMENTS-17.49%
With Chase Manhattan 2.50% 1/3/00
(dated 12/31/99, collateralized by
$2,642,000 U.S. Treasury Notes
4.75% due 2/15/04, market
value $2,537,680) ................................ $2,481,000 $ 2,481,000
With J.P. Morgan Securities 3.00%
1/3/00 (dated 12/31/99, collateralized
by $1,009,000 U.S. Treasury Notes
6.375% due 9/30/01, market value
$1,027,573 and $983,000 U.S.
Treasury Notes 6.625% due 4/30/02,
market value $1,001,517 and
$980,000 U.S. Treasury Notes
6.25% due 6/30/02, market
value $979,551) .................................. 2,948,000 2,948,000
With PaineWebber 3.00% 1/3/00
(dated 12/31/99, collateralized by
$1,010,000 U.S. Treasury Notes
5.625% due 11/30/00, market value
$1,010,923 and $983,000 U.S.
Treasury Notes 5.375% due 2/15/01,
market value $994,750) ........................... 1,965,000 1,965,000
With Prudential Securities 2.75%
1/3/00 (dated 12/31/99,
collateralized by $2,049,000
U.S. Treasury Bills due 5/18/00,
market value $2,006,038) ......................... 1,966,000 1,966,000
-----------
Total Repurchase Agreements
(cost $9,360,000) ................................ 9,360,000
-----------

TOTAL MARKET VALUE OF SECURITIES-100.71% (cost $42,476,484) ...... $53,909,242

LIABILITIES NET OF RECEIVABLES AND OTHER ASSETS-(0.71%) .......... (380,689)
-----------
NET ASSETS APPLICABLE TO 3,743,737 SHARES OUTSTANDING;
EQUIVALENT TO $14.30 PER SHARE-100.00% .......................... $53,528,553
===========
COMPONENTS OF NET ASSETS AT DECMBER 31, 1999:
Shares of beneficial interest (unlimited authorization-no par) ... $40,741,492
Undistributed net investment income .............................. 41,738
Accumulated net realized gain on investments ..................... 1,312,565
Net unrealized appreciation of investments ....................... 11,432,758
-----------
Total net assets ................................................. $53,528,553
===========

*Non-income producing security for the period ended December 31, 1999.

See accompanying notes

Aggressive Growth-3
<PAGE>

Delaware Group Premium Fund-
Aggressive Growth Series
Statement of Operations

5/3/99*
to
12/31/99
--------
INVESTMENT INCOME:
Interest ..................................................... $ 126,390
Dividends .................................................... 18,820
-----------
145,210
-----------
EXPENSES:
Management fees .............................................. 97,202
Accounting and administration ................................ 3,054
Custodian fees ............................................... 2,593
Reports and statements to shareholders ....................... 1,414
Registration fees ............................................ 1,309
Dividend disbursing and transfer agent
fees and expenses ......................................... 215
Trustees' fees ............................................... 178
Professional fees ............................................ 160
Taxes (other than taxes on income) ........................... 40
Other ........................................................ 883
-----------
107,048
Less expenses absorbed or waived ............................. (960)
Less expenses paid indirectly ................................ (2,616)
-----------

Total expenses ............................................... 103,472
-----------

NET INVESTMENT INCOME ........................................ 41,738
-----------

NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on investments ............................. 1,312,565
Net change in unrealized appreciation / depreciation
of investments ............................................ 11,432,758
-----------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS ............................................ 12,745,323
-----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ........................................... $12,787,061
===========

- --------------
* Date of commencement of operations.

See accompanying notes

<PAGE>

Delaware Group Premium Fund-
Aggressive Growth Series
Statement of Changes in Net Assets

5/3/99*
to
12/31/99
--------
INCREASE IN NET ASSETS
FROM OPERATIONS:
Net investment income ......................................... $ 41,738
Net realized gain on investments .............................. 1,312,565
Net change in unrealized appreciation / depreciation
of investments ............................................. 11,432,758
-----------
Net increase in net assets resulting from operations .......... 12,787,061
-----------

CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold ..................................... 45,344,441
Cost of shares repurchased .................................... (4,602,949)
-----------
Increase in net assets derived from capital
share transactions ......................................... 40,741,492
-----------

NET INCREASE IN NET ASSETS .................................... 53,528,553
-----------

NET ASSETS:
Beginning of period ........................................... -
-----------
End of period ................................................. $53,528,553
===========

- ----------------
* Date of commencement of operations.

See accompanying notes

Aggressive Growth-4

<PAGE>

Delaware Group Premium Fund-Aggressive Growth Series
Financial Highlights

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

5/3/99(1)
to
12/31/99
---------

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

Income from investment operations:
Net investment income ........................................... 0.011
Net realized and unrealized gain on investments ................. 4.289
-------
Total from investment operations ................................ 4.300
-------

Net asset value, end of period .................................. $14.300
=======

Total return .................................................... 42.90%

Ratios and supplemental data:
Net assets, end of period (000 omitted) ......................... $53,529
Ratio of expenses to average net assets ......................... 0.80%
Ratio of expenses to average net assets
prior to expense limitation and expenses paid indirectly ..... 0.81%
Ratio of net investment income to average net assets ............ 0.32%
Ratio of net investment income to average net assets prior
to expense limitation and expenses paid indirectly ........... 0.29%
Portfolio turnover .............................................. 174%

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

See accompanying notes

Aggressive Growth-5
<PAGE>

Delaware Group Premium Fund-Aggressive Growth Series
Notes to Financial Statements
December 31, 1999

Delaware Group Premium Fund (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 Delaware Business Trust and offers 18 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, the Trend Series and the U.S. Growth
Series. These financial statements and the related notes pertain to the
Aggressive Growth Series (the "Series"). The shares of the Fund are sold only to
separate accounts of life insurance companies.

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

Federal Income Taxes--The Series intends to 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 102% 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.

The Series will make distributions 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 execution. The amount of
these expenses was approximately $303 for the period ended December 31, 1999.
The Series may receive earnings credits from its custodian when positive cash
balances are maintained, which are used to offset custody fees. These credits
were $2,313 for the period ended December 31, 1999. The expenses paid under the
above arrangements are included in their respective expense captions on the
Statement of Operations with the corresponding expense offset shown as "expenses
paid indirectly".

<PAGE>

DMC has elected to waive its fee and reimburse the Series 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 April 30, 2000.

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

Aggressive Growth-6

<PAGE>

Aggressive Growth Series
Notes to Financial Statements (Continued)

On December 31, 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
--------------- ------------------- --------------
$96,242 $3,930 $7,394

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

3. Investments
During the period ended December 31, 1999, the Series made purchases and sales
of investment securities other than U.S. government securities and temporary
cash investments as follows:

Purchases ................................. $53,813,856
Sales ..................................... $22,009,937

At December 31, 1999, the aggregate cost of securities and unrealized
appreciation (depreciation) for federal income tax purposes for the Series were
as follows:

4. Capital Shares
Transactions in capital shares were as follows:

Shares Net
Shares sold repurchased increase
----------- ----------- --------
Period ended December 31, 1999* ....... 4,188,091 (444,354) 3,743,737

- ---------------
*Commenced operations on 5/3/99.

5. Line of Credit
The Series has a committed line of credit for $700,000. No amount was
outstanding at December 31, 1999, or at any time during the period.

Aggressive Growth-7

<PAGE>

Delaware Group Premium Fund-Aggressive Growth Series
Report of Independent Auditors

To the Shareholders and Board of Trustees
Delaware Group Premium Fund-Aggressive Growth Series

We have audited the accompanying statement of net assets of Aggressive Growth
Series (the "Series") as of December 31, 1999, and the related statement of
operations, statement of changes in net assets and financial highlights for the
period May 3, 1999 (commencement of operations) through December 31, 1999. These
financial statements and financial highlights are the responsibility of the
Series' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of December 31, 1999, by correspondence with
the custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Aggressive Growth Series at December 31, 1999, and the results of its
operations, the changes in its net assets and its financial highlights for the
period May 3, 1999 (commencement of operations) through December 31, 1999, in
conformity with accounting principles generally accepted in the United States.

/s/ Ernst & Young LLP

Philadelphia, Pennsylvania
February 4, 2000

Aggressive Growth-8

<PAGE>
FOR INCOME

Capital Reserves Series

Investment Strategy and Performance in 1999
As global economic recovery took hold in late fall 1998 and early 1999,
investor confidence also recovered. U.S. Treasury bonds lost some appeal as
investors pursued opportunities to earn higher yields. During 1999, the Series
benefited from its yield-based investment strategy.
For the year ended December 31, 1999, Capital Reserves Series provided a
total return of 0.28% (capital change plus reinvestment of distributions). Its
benchmark, Lehman Brothers Intermediate Government/Corporate Bond Index, had a
total return of 0.39%.
We attribute the Series' performance to its lower weighting in U.S.
Treasuries compared to the Index, as well as strong performance from our
investments in mortgage-backed bonds and asset-backed securities. The Index does
not include mortgage-backed and asset-backed securities.
In seeking to provide high current income with capital preservation, the
Series invests primarily in high-quality U.S. government bonds, as well as
corporate bonds with a credit quality rating of Aaa to Bbb (Aaa being the
highest), as rated by Standard & Poor's and Moody's Investor Service. At year
end, the average rating of bonds in the portfolio was Aaa.

Portfolio Snapshot
During the year, we increased our position in U.S. Treasuries to about 6% to
take advantage of the rally in Treasuries following the global economic crises
in 1998. While the Series had roughly 6% of its net assets in U.S. Treasuries
our holdings were still significantly lower than the Index.
Our yield-based orientation led us to hold securities that tend to offer
higher income potential. The Series held about 33% of its net assets in
corporate bonds.
Unlike the Index, which includes only government and corporate bonds, we
included mortgages and asset-backed securities for their strong income
potential. The Series held about 43% of its net assets in mortgage-backed and
asset-backed securities. In 1999, these securities outperformed Treasuries.

Investment Outlook
In the months ahead, we intend to evaluate the interest rate situation
carefully and watch for changes in consumer and producer prices to gauge their
potential effects on fixed income markets. Based on our evaluations, we will
position the Series to take advantage of opportunities as presented.

- --------------------------------------------------------------------------------
Capital Reserves Series Investment Objective
Seeks a high, stable level of current income while attempting to minimize
fluctuations in principal and provide maximum liquidity. It attempts to achieve
its objective by investing in short- and intermediate-term securities including
securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities, instruments secured by U.S. government securities and debt
securities issued by U.S. corporations.
- --------------------------------------------------------------------------------

Capital Reserves-1
<PAGE>

Growth of a $10,000 Investment
January 1, 1990 through
December 31, 1999

Capital Reserves Series
Lehman Brothers Intermediate
Government/Corporate Bond Index

Capital Reserve Series
12/31/1989 $10,000.00
12/31/1990 $10,823.22
12/31/1991 $11,780.46
12/31/1992 $12,628.52
12/31/1993 $13,619.74
12/31/1994 $13,253.99
12/31/1995 $15,119.62
12/31/1996 $15,731.42
12/31/1997 $16,927.40
12/31/1998 $18,049.28
12/31/1999 $18,123.96

Lehman Brothers Intermediate Government/Corporate Bond Index
$10,000
$10,916
$13,409
$14,587
$14,306
$16,499
$17,167
$18,518
$20,078
$20,157

Capital Reserves Series
Average Annual Total Returns
----------------------------
10 Years 6.13%
Five Years 6.46%
One Year 0.28%

For periods ending December 31, 1999

Past performance is not a guarantee of future results. Return and share price
will fluctuate so that shares, when redeemed, may be worth more or less than
their original cost.

The chart shows a $10,000 investment in both the Capital Reserves Series and
Lehman Brothers Intermediate Government/Corporate Bond Index for the 10-year
period from January 1, 1990 through December 31, 1999. All dividends and capital
gains were reinvested. The Index is unmanaged, with no set investment objective
and does not include the "real world" costs of managing a mutual fund. Earnings
from a variable annuity investment compound tax-free until withdrawal, so no
adjustments were made for income taxes. The effect of an expense limitation is
included in the chart. Performance does not reflect insurance fees related to a
variable annuity investment nor the deferred sales charge that would apply to
certain withdrawals of investments held for less than eight years. Performance
shown here would have been reduced if such fees were included and the expense
limitation was removed. For more information about fees, consult your variable
annuity prospectus.

Capital Reserves-2
<PAGE>

Delaware Group Premium Fund-Capital Reserves Series
Statement of Net Assets
December 31, 1999

Principal Market
Amount Value
ASSET-BACKED SECURITIES-12.88%
California Infrastructure PG&E
Series 97-1 A4 6.16% 6/25/03 ................... $555,000 $552,146
CIT RV Trust Series 98-A A5
6.12% 11/15/13 ................................. 440,000 424,380
Discover Card Master Trust Series
99-2 A 5.90% 10/15/04 .......................... 670,000 655,917
EQCC Home Equity Loan Trust
Series 98-2 A3F 6.229% 3/15/13 ................. 535,000 528,313
Honda Auto Lease Trust Series 99-A A4
6.45% 9/16/02 .................................. 705,000 701,828
MetLife Capital Equipment
Loan Trust Series 97-AA 6.85% 5/20/08 .......... 410,000 408,319
NationsCredit Grantor Trust
Series 96-1 A 5.85% 9/15/11 .................... 204,480 197,691
Series 97-1 A 6.75% 8/15/13 .................... 320,524 315,716
PECO Energy Transition Trust Series
99-A A4 5.80% 3/1/07 ........................... 650,000 615,550
Philadelphia, Pennsylvania Authority For
Industrial Development Tax Claim
Revenue Class A 6.488% 6/15/04 ................. 348,737 327,813
-----------
Total Asset-Backed Securities
(cost $4,844,124) .............................. 4,727,673
-----------
COLLATERALIZED MORTGAGE
OBLIGATIONS-6.36%
Asset Securitization Corporation
Series 97-D5 A2 6.816% 2/14/41 ................. 430,000 387,538
Series 97-D5 A3 6.866% 2/14/41 ................. 320,000 284,500
Federal National Mortgage Association
Whole Loan Series 98-W3
A2 6.50% 7/25/28 ............................... 446,870 440,237
Government National Mortgage
Association Series 98-9
B 6.85% 12/20/25 ............................... 765,000 726,812
Residential Accredit Loans Series
98-QS9 A3 6.75% 7/25/28 ........................ 500,000 493,242
-----------
Total Collateralized Mortgage Obligations
(cost $2,481,860) .............................. 2,332,329
-----------
COMMERCIAL MORTGAGE-BACKED
SECURITIES-8.30%
DLJ Commercial Mortgage Series
99-CG1 A1B 6.46% 1/10/09 ....................... 690,000 642,563
First Union-Chase Commercial Mortgage
Series 99-C2 A2 6.645% 4/15/09 ................. 900,000 851,063
Lehman Large Loan Series 97-LLI A1
6.79% 6/12/04 .................................. 412,880 408,945
Mortgage Capital Funding Series
96-MC2-C 7.224% 9/20/06 ........................ 400,000 385,250
Nomura Asset Securities
Series 93-1 A1 6.68% 12/15/01 .................. 307,943 302,843
Series 96-MD5 A3 7.638% 4/13/36 ................ 460,000 457,341
-----------
Total Commercial Mortgage-Backed
Securities ($3,172,000) ........................ 3,048,005
-----------
<PAGE>

Principal Market
Amount Value
CORPORATE BONDS-32.58%
American Financial Group
7.125% 4/15/09 ................................. $ 250,000 $ 227,747
Associates Corporation NA
6.25% 11/1/08 .................................. 500,000 461,639
Banco Santander
6.50% 11/1/05 .................................. 340,000 321,094
Banco Santiago
7.00% 7/18/07 .................................. 270,000 240,485
Consumer Energy 6.375% 2/1/08 ..................... 335,000 303,792
Cox Communications 6.15% 8/1/03 ................... 375,000 360,379
Daimler Chrysler 6.90% 9/1/04 ..................... 465,000 460,350
Fairfax Financial Holdings 7.375% 3/15/06 ......... 130,000 117,371
Federal National
Mortgage Association 4.625% 10/15/01 ........... 440,000 426,348
Finova Capital 7.25% 11/8/04 ...................... 845,000 835,760
Ford Motor Credit 6.70% 7/16/04 ................... 615,000 602,344
Great Western Financial 8.206% 2/1/27 ............. 500,000 467,050
Household Finance 6.50% 11/15/08 .................. 700,000 648,366
Lehman Brothers 6.625% 2/15/08 .................... 670,000 618,343
MCI Worldcom 7.55% 4/1/04 ......................... 795,000 804,879
Meritor Automotive 6.80% 2/15/09 .................. 835,000 756,916
Morgan Stanley Dean Witter
7.125% 1/15/03 ................................. 830,000 828,528
Osprey Trust 8.31% 1/15/03 ........................ 600,000 594,326
Safeway 7.00% 9/15/02 ............................. 570,000 565,390
Sun Microsystems 7.65% 8/15/09 .................... 375,000 373,696
Tommy Hilfiger USA 6.85% 6/1/08 ................... 615,000 555,535
United Health Care 6.60% 12/1/03 .................. 625,000 594,277
United News and Media 7.75% 7/1/09 ................ 525,000 510,290
USA Waste Services 6.125% 7/15/01 ................. 295,000 281,930
-----------
Total Corporate Bonds
(cost $12,520,563 ) ............................ 11,956,835
-----------
MORTGAGE-BACKED SECURITIES-32.53%
Federal Home Loan Mortgage Corporation
Gold 7.00% 4/1/29 .............................. 353,908 342,295
Federal Home Loan Mortgage Corporation
6.25% 10/15/02 ................................. 5,405,000 5,354,237
Federal National Mortgage Association
6.00% 4/1/13 ................................... 375,833 360,448
6.00% 5/1/13 ................................... 480,121 456,565
6.25% 11/15/02 ................................. 400,000 396,153
6.50% 8/15/04 .................................. 650,000 642,068
6.50% 5/1/29 ................................... 1,380,504 1,301,557
7.00% 8/1/28 ................................... 347,203 335,376
7.00% 11/1/28 .................................. 547,246 528,605
7.00% 8/1/29 ................................... 413,597 400,156
7.50% 6/1/28 ................................... 289,887 286,626
7.50% 9/1/29 ................................... 1,490,808 1,474,969
Government National Mortgage Association
12.00% 6/20/14 ................................. 23,714 26,456
12.00% 3/20/15 ................................. 16,228 18,591
12.00% 2/20/16 ................................. 11,415 12,906
-----------
Total Mortgage-Backed Securities
(cost $12,208,334) ............................ 11,937,008
-----------

Capital Reserves-3
<PAGE>

Capital Reserves Series
Statement of Net Assets (Continued)
December 31, 1999

Principal Market
Amount Value
U.S. Treasury Obligations-5.56%
U.S. Treasury Inflation Index Notes
3.625% 7/15/02 ................................. $733,852 $ 726,756
U.S. Treasury Notes
4.50% 1/31/01 .................................. 340,000 334,470
5.25% 5/15/04 .................................. 375,000 359,318
5.50% 8/31/01 .................................. 270,000 266,918
5.875% 11/15/05 ................................ 365,000 354,505
-----------
Total U.S. Treasury Obligations
(cost $2,065,041) .............................. 2,041,967
-----------
<PAGE>

Principal Market
Amount Value

REPURCHASE AGREEMENTS-1.00%
With Chase Manhattan 2.50% 1/3/00
(dated 12/31/99, collateralized by $103,000
U.S. Treasury Notes 4.75% due 2/15/04,
market value $99,230) .......................... $ 97,000 $97,000
With J.P. Morgan Securities 3.00% 1/3/00
(dated 12/31/99, collateralized by $39,000
U.S. Treasury Notes 6.375% due 9/30/01,
market value $40,161 and $38,000
U.S. Treasury Notes 6.625% due 4/30/02,
market value $39,162 and $38,000
U.S. Treasury Notes 6.25% due 6/30/02,
market value $38,303) .......................... 115,000 115,000
With PaineWebber 3.00% 1/3/00
(dated 12/31/99, collateralized by $39,000
U.S. Treasury Notes 5.625% due 11/30/00,
market value $39,530 and $38,000
U.S. Treasury Notes 5.375% due 2/15/01,
market value $38,897) .......................... 77,000 77,000
With Prudential Securities 2.75% 1/3/00
(dated 12/31/99, collateralized by $80,000
U.S. Treasury Bills due 5/18/00,
market value $78,441) .......................... 77,000 77,000
-----------
Total Repurchase Agreements
(cost $366,000) ................................ 366,000
-----------

TOTAL MARKET VALUE OF SECURITIES-99.21% (cost $37,657,922) ...... $36,409,817

RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES-0.79% ........... 291,268
-----------
NET ASSETS APPLICABLE TO 3,920,766 SHARES OUTSTANDING;
EQUIVALENT TO $9.36 PER SHARE-100.00% ........................ $36,701,085
===========
COMPONENTS OF NET ASSETS AT DECEMBER 31, 1999:
Shares of beneficial interest (unlimited authorization-no par) .. $39,711,110
Accumulated net realized loss on investments .................... (1,761,920)
Net unrealized depreciation of investments ...................... (1,248,105)
-----------
Total net assets ................................................ $36,701,085
===========

See accompanying notes

Capital Reserves-4
<PAGE>

Delaware Group Premium Fund-Capital Reserves Series
Statement of Operations
Year Ended December 31, 1999

INVESTMENT INCOME:
Interest ........................................................ $2,616,245
----------
EXPENSES:
Management fees ................................................. 216,148
Professional fees ............................................... 30,034
Accounting and administration ................................... 16,392
Reports and statements to shareholders .......................... 16,149
Taxes (other than taxes on income) .............................. 15,692
Registration fees ............................................... 6,257
Custodian fees .................................................. 6,190
Dividend disbursing and transfer agent
fees and expenses ............................................ 1,387
Trustees' fees .................................................. 1,223
Other ........................................................... 10,109
----------
319,581
Less expenses paid indirectly ................................... (1,871)
----------
Total expenses .................................................. 317,710
----------
NET INVESTMENT INCOME ........................................... 2,298,535
----------
NET REALIZED AND UNREALIZED
LOSS ON INVESTMENTS:
Net realized loss on investments ................................ (567,640)
Net change in unrealized appreciation /
depreciation of investments .................................. (1,610,612)
----------
NET REALIZED AND UNREALIZED LOSS
ON INVESTMENTS ............................................... (2,178,252)
----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS .............................................. $ 120,283
==========
<PAGE>

See accompanying notes

Delaware Group Premium Fund-
Capital Reserves Series
Statements of Changes in Net Assets
Year Ended Year Ended
12/31/99 12/31/98
----------- -----------
INCREASE (DECREASE) IN
NET ASSETS FROM OPERATIONS:
Net investment income ............................. $ 2,298,535 $ 1,962,601
Net realized gain (loss) on investments ........... (567,640) 381,375
Net change in unrealized appreciation /
depreciation of investments .................... (1,610,612) (89,594)
----------- -----------
Net increase in net assets
resulting from operations ...................... 120,283 2,254,382
----------- -----------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income ............................. (2,298,535) (1,962,601)
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold ......................... 9,387,985 23,284,345
Net asset value of shares issued upon
reinvestment of dividends from
net investment income .......................... 2,301,248 1,906,213
----------- -----------
11,689,233 25,190,558
Cost of shares repurchased ........................ (14,521,380) (12,947,687)
----------- -----------
Increase (decrease) in net assets derived
from capital share transactions ................ (2,832,147) 12,242,871
----------- -----------
NET INCREASE (DECREASE)
IN NET ASSETS .................................. (5,010,399) 12,534,652
----------- -----------
NET ASSETS:
Beginning of year ................................. 41,711,484 29,176,832
----------- -----------
End of year ....................................... $36,701,085 $41,711,484
=========== ===========

See accompanying notes

Capital Reserves-5
<PAGE>

Delaware Group Premium Fund-Capital Reserves Series
Financial Highlights

Selected data for each share of the Series outstanding throughout each period
were as follows:
<TABLE>
<CAPTION>

Year Ended December 31,
1999 1998 1997 1996 1995
----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ........................ $ 9.880 $ 9.790 $ 9.690 $ 9.930 $ 9.300

Income (loss) from investment operations:
Net investment income ..................................... 0.546 0.556 0.613 0.623 0.643
Net realized and unrealized gain (loss) on investments .... (0.520) 0.090 0.100 (0.240) 0.630
------ ------ ------ ------ ------
Total from investment operations .......................... 0.026 0.646 0.713 0.383 1.273
------ ------ ------ ------ ------
Less dividends:
Dividends from net investment income ...................... (0.546) (0.556) (0.613) (0.623) (0.643)
------ ------ ------ ------ ------
Total dividends ........................................... (0.546) (0.556) (0.613) (0.623) (0.643)
------ ------ ------ ------ ------
Net asset value, end of year .............................. $9.360 $9.880 $9.790 $9.690 $9.930
====== ====== ====== ====== ======

Total return .............................................. 0.28% 6.78% 7.60% 4.05% 14.08%

Ratios and supplemental data:
Net assets, end of year (000 omitted) ..................... $36,701 $41,711 $29,177 $27,768 $27,935
Ratio of expenses to average net assets ................... 0.79% 0.79% 0.75% 0.72% 0.71%
Ratio of net investment income to average net assets ...... 5.68% 5.62% 6.31% 6.43% 6.64%
Portfolio turnover ........................................ 129% 166% 120% 122% 145%
</TABLE>

See accompanying notes

Capital Reserves-6
<PAGE>

Delaware Group Premium Fund-Capital Reserves Series
Notes to Financial Statements
December 31, 1999

Delaware Group Premium Fund (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 Delaware Business Trust and offers 18 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, the Trend Series and the U.S. Growth
Series. These financial statements and the related notes pertain to the Capital
Reserves Series (the "Series"). The shares of the Fund are sold only to separate
accounts of life insurance companies.

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

Security Valuation--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 Trustees.

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.

Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that effect 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.

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

Certain expenses of the Series are paid through "soft dollar" arrangements with
brokers. These transactions are done subject to best execution. The amount of
these expenses was approximately $931 for the year ended December 31, 1999. The
Series may receive earnings credits from its custodian when positive cash
balances are maintained, which are used to offset custody fees. These credits
were $940 for the year ended December 31, 1999. The expenses paid under the
above arrangements are included in their respective expense captions on the
Statement of Operations with the corresponding expense offset shown as "expenses
paid indirectly".

<PAGE>

DMC has elected to waive its fee and reimburse the Series 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 April 30, 2000. No
reimbursement was due for the year ended December 31, 1999.

Capital Reserves-7
<PAGE>

Capital Reserves Series
Notes to Financial Statements (Continued)

On December 31, 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
-------------- -------------------- --------------
$15,851 $1,523 $3,978

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

3. Investments
During the year ended December 31, 1999, the Series made purchases and sales of
investment securities other than U.S. government securities and temporary cash
investments as follows:
Purchases ......................................... $31,523,923
Sales ............................................. $31,285,912

At December 31, 1999, the aggregate cost of securities and unrealized
appreciation (depreciation) for federal income tax purposes for the Series were
as follows:

Aggregate Aggregate
Cost of unrealized unrealized Net unrealized
investments appreciation depreciation depreciation
----------- ------------ ------------ ------------
$37,660,547 $456 ($1,251,186) ($1,250,730)

For federal income tax purposes, the Series had accumulated capital losses at
December 31, 1999 as follows:

Year of Expiration
2002 2004 2007 Total
---------- ---------- ---------- ----------
$884,453 $292,208 $543,334 $1,719,995
4. Capital Shares
Transactions in capital shares were as follows:
<TABLE>
<CAPTION>

Shares issued
upon reinvestment of
dividends from net Shares Net
Shares sold investment income repurchased increase (decrease)
----------- ----------------- ----------- -------------------
<S> <C> <C> <C> <C>
Year ended December 31, 1999: ...... 975,002 239,847 (1,516,970) (302,121)
Year ended December 31, 1998: ...... 2,364,760 193,836 (1,315,298) 1,243,298
</TABLE>

5. Line of Credit
The Series has a committed line of credit for $1,400,000. No amount was
outstanding at December 31, 1999, or at any time during the year.

6. Credit and Market Risk
The Series may invest in securities whose value is derived from an underlying
pool of mortgages or consumer loans. Prepayment of these loans may shorten the
stated maturity of the respective obligation and may result in a loss of
premium, if any has been paid.

Capital Reserves-8
<PAGE>

Capital Reserves Series
Notes to Financial Statements (Continued)

7. Tax Information (Unaudited)
For the fiscal year ended December 31, 1999, the Series designates as long-term
capital gains and ordinary income distributions paid during the year as follows:

- ---------------
*Items (A) and (B) are based on a percentage of the Series' total
distributions.
**Item (D) is based on a percentage of ordinary income of the Series.
(1)Qualifying dividends represent dividends which qualify for the corporate
dividends received deduction.

Capital Reserves-9
<PAGE>

Delaware Group Premium Fund-Capital Reserves Series
Report of Independent Auditors

To the Shareholders and Board of Trustees
Delaware Group Premium Fund-Capital Reserves Series

We have audited the accompanying statement of net assets of Capital Reserves
Series (the "Series") as of December 31, 1999, and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the five years in the period then ended. These financial statements and
financial highlights are the responsibility of the Series' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of December 31, 1999, by correspondence with
the custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Capital Reserves Series at December 31, 1999, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended, and its financial highlights for each of the five years
in the period then ended, in conformity with accounting principles generally
accepted in the United States.

/s/ Ernst & Young LLP

Philadelphia, Pennsylvania
February 4, 2000
<PAGE>
FOR INCOME

Cash Reserve Series

Investment Strategy and Performance in 1999
Fixed income securities and equity investments experienced tremendous
volatility in 1999. The Federal Reserve Board's interest rate cuts last fall
resulted in a significant stock market recovery that started in the fourth
quarter of 1998 and continued with little interruption through 1999.
Consequently, investors generally remained focused on the equity markets.
During the last six months, fixed-income securities took a back seat to
equities. The success of the stock market in the spring and summer heightened
inflationary concerns and the Fed responded by raising interest rates four times
since June. As of this writing, the Federal Funds rate on overnight loans
between banks stands at 5.75%.
Money market funds benefited from the four interest rate hikes. Prior to the
Fed's first rate increase in June, we shortened the Series' average maturity
from 63 days as of March 31, 1999 to 48 days as of December 31. We believe
maintaining our maturity in this range positions the Series to benefit from
higher interest rates. We plan to hold maturity within this range until we see a
significant yield advantage in extending it.
Cash Reserve Series, a money market fund which invests primarily in high
quality money market instruments, achieved its objective of providing current
income while preserving principal. The Series had a total return of 4.81%, with
dividends reinvested. We maintain a credit quality rating of A1, P1 (as rated by
Standard & Poor's and Moody's Investor Services). This is the highest quality
rating available.

Investment Outlook
Since June, the Federal Reserve has raised interest rates four times, taking
back the rate cuts of last autumn. However, the economy is still growing at a
rapid clip and commodity prices are rising. With unemployment low, there is
concern about possible wage inflation. To curb inflation, the Federal Reserve
Board may decide to raise rates again. Even if the Fed is idle, however,
interest rates may continue to rise. The yield on the 30-year Treasury bond was
6.50% as of December 29, 1999, up from 5.09% a year earlier. We believe that
recently rising rates mark a trend reversal and that higher rates could remain
in force for several months, creating higher income potential for Cash Reserve
Series.

Cash Reserve Series
Average Annual Total Returns
----------------------------------
10 Years 4.79%
Five Years 5.08%
One Year 4.81%

For periods ending December 31, 1999

Growth of a $10,000 Investment
January 1, 1990 through
December 31, 1999
Cash Reserve Series
12/31/1989 $10,000.00
12/31/1990 $10,755.50
12/31/1991 $11,355.80
12/31/1992 $11,724.90
12/31/1993 $12,015.60
12/31/1994 $12,457.10
12/31/1995 $13,140.00
12/31/1996 $13,788.20
12/31/1997 $14,491.40
12/31/1998 $15,209.90
12/31/1999 $15,960.40

Past performance is not a guarantee of future results.

The chart shows a $10,000 investment in the Cash Reserve Series for the 10-year
period from January 1, 1990 through December 31, 1999. All dividends were
reinvested. An investment in the Series is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Although
the Series seeks to preserve the value of your investment at $10.00 per share,
it is possible to lose money by investing in the Series. Earnings from a
variable annuity investment compound tax-free until withdrawal, so no
adjustments were made for income taxes. The effect of an expense limitation is
included in the chart. Performance does not reflect insurance fees related to a
variable annuity investment nor the deferred sales charge that would apply to
certain withdrawals of investments held for less than eight years. Performance
shown here would have been reduced if such fees were included and the expense
limitation was removed. For more information about fees, consult your variable
annuity prospectus.

- --------------------------------------------------------------------------------
Cash Reserve Series Investment Objective
Seeks to provide maximum current income while preserving principal and
maintaining liquidity by investing its assets in a diversified portfolio of
money market securities and managing the Series to maintain a constant net asset
value of $10 per share.
- --------------------------------------------------------------------------------

Cash Reserve-1
<PAGE>
Delaware Group Premium Fund-Cash Reserve Series
Statement of Net Assets
December 31, 1999

Principal Market
Amount Value
COMMERCIAL PAPER-77.49%
Financial Services-47.88%
Aegon Funding 5.90% 3/2/00 ........................ $2,000,000 $ 1,980,006
Allianz of America 5.83% 3/15/00 .................. 1,000,000 988,016
Bank of America
5.40% 2/14/00 .................................. 1,000,000 993,400
5.89% 4/12/00 .................................. 1,000,000 983,312
Ciesco LP 5.95% 1/27/00 ........................... 2,000,000 1,991,406
Corporate Asset Funding 6.00% 2/2/00 .............. 1,700,000 1,690,903
Fleet Funding 6.00% 1/31/00 ....................... 2,000,000 1,990,000
Ford Motor Credit 6.48% 1/21/00 ................... 2,000,000 1,996,040
GE Capital International Funding
5.77% 3/6/00 ................................... 1,000,000 989,582
HD Real Estate Funding 5.71% 2/7/00 ............... 2,000,000 1,988,263
International Nederlanden U.S. Fund
5.84% 3/24/00 .................................. 1,500,000 1,479,803
Marsh USA 5.57% 4/28/00 ........................... 2,000,000 1,963,486
National Australia Funding
5.94% 2/4/00 ................................... 2,000,000 1,988,780
St. Paul Companies 5.65% 2/18/00 .................. 2,000,000 1,984,933
Swiss Re Financial Products
5.82% 2/23/00 .................................. 1,100,000 1,090,575
5.90% 3/2/00 ................................... 1,207,000 1,194,933
UBS Finance 4.50% 1/4/00 .......................... 2,200,000 2,199,175
-----------
27,492,613
-----------
Industrial-10.60%
AT&T 6.136% 7/13/00 ............................... 1,000,000 999,788
BMW US Capital 4.50% 1/3/00 ....................... 2,100,000 2,099,475
Golden Peanut 5.90% 3/15/00 ....................... 1,000,000 987,872
Koch Industries 3.50% 1/5/00 ...................... 2,000,000 1,999,222
-----------
6,086,357
-----------
Mortgage Bankers & Brokers-19.01%
Bear Stearns 5.84% 3/16/00 ........................ 2,000,000 1,975,667
Credit Suisse First Boston
5.57% 2/10/00 .................................. 1,000,000 993,811
5.80% 3/9/00 ................................... 1,000,000 989,044
Goldman Sachs Group 5.70% 2/29/00 ................. 1,000,000 990,658
Merril Lynch 5.95% 1/31/00 ........................ 2,000,000 1,990,083
Morgan (J.P.) 5.92% 3/10/00 ....................... 2,000,000 1,977,307
Morgan Stanley Dean Witter
5.30% 2/3/00 ................................... 1,000,000 1,000,000
5.30% 2/4/00 ................................... 1,000,000 1,000,000
-----------
10,916,570
-----------
Total Commercial Paper ............................ 44,495,540
-----------

<PAGE>
Principal Market
Amount Value
CERTIFICATES OF DEPOSIT-20.02%
American Express Century
5.97% 2/17/00 .................................. $2,000,000 $ 2,000,000
Candian Imperial Bank 5.18% 3/15/00 .............. 2,000,000 1,995,772
Commerzbank 5.085% 2/16/00 ....................... 1,500,000 1,499,936
Svenska Handelsbanken
5.145% 3/20/00 ................................. 2,000,000 1,997,634
West Deutsche Landes Bank
6.00% 3/1/00 ................................... 2,000,000 2,000,000
Wilmington Trust 6.10% 3/9/00 .................... 2,000,000 2,000,000
-----------
Total Certificates of Deposit .................... 11,493,342
-----------

*FLOATING RATE NOTES-1.74%
Racers 6.503% 6/2/00 ............................. 1,000,000 1,000,000
-----------
Total Floating Rate Notes ........................ 1,000,000
-----------

REPURCHASE AGREEMENTS - 0.08%
With Chase Manhattan 2.50%
1/3/00 (dated 12/31/99, collateralized
by $13,000 U.S. Treasury Notes
4.75% due 2/15/04, market
value $12,743) ................................. 12,400 12,400
With J.P. Morgan Securities 3.00%
1/3/00 (dated 12/31/99, collateralized
by $5,000 U.S. Treasury Notes
6.375% due 9/30/01, market value
$5,160 and $5,000 U.S. Treasury
Notes 6.625% due 4/30/02, market
value $5,029 and $5,000 U.S.
Treasury Notes 6.25% due 6/30/02,
market value $4,919) ........................... 14,800 14,800
With PaineWebber 3.00% 1/3/00
(dated 12/31/99, collateralized by
$5,000 U.S. Treasury Notes 5.625%
due 11/30/00, market value $5,076
and $5,000 U.S. Treasury Notes
5.375% due 2/15/01, market
value $4,995) .................................. 9,900 9,900
With Prudential Securites 2.75% 1/3/00
(dated 12/31/99, collateralized by
$10,000 U.S. Treasury Bills due
5/18/00, market value $10,073) ................. 9,900 9,900
-----------
Total Repurchase Agreements .................... 47,000
-----------

TOTAL MARKET VALUE OF SECURITIES-99.33% (cost $57,035,882 )** ... $57,035,882

RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES-0.67% ........... 384,914
-----------

NET ASSETS APPLICABLE TO 5,742,080 SHARES OUTSTANDING;
EQUIVALENT TO $10.00 PER SHARE-100.00% .......................... $57,420,796
===========
- -------------
* Floating Rate Notes-The interest rate shown is the rate as of December 31,
1999 and the maturity shown is the longer of the next interest readjustment
date or the date the principal amount shown can be recovered through demand.
** Also the cost for federal income tax purposes.

See accompanying notes

Cash Reserve-2

<PAGE>

Delaware Group Premium Fund-
Cash Reserve Series
Statement of Operations
Year Ended December 31, 1999

INVESTMENT INCOME:
Interest .......................................... $2,797,649
----------

EXPENSES:
Management fees ................................... 246,155
Accounting and administration ..................... 21,418
Custodian fees .................................... 7,050
Reports and statements to shareholders ............ 6,375
Professional fees ................................. 4,895
Taxes (other than taxes on income) ................ 2,590
Trustees' fees .................................... 1,542
Dividend disbursing and transfer agent
fees and expenses .............................. 1,380
Registration fees ................................. 795
Other ............................................. 6,590
----------
298,790
Less expenses paid indirectly ..................... (1,218)
----------
Total expenses .................................... 297,572
----------

NET INVESTMENT INCOME ............................. 2,500,077
----------

NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ................................ $2,500,077
==========

See accompanying notes

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

Year Year
Ended Ended
12/31/99 12/31/98
---------- ----------
INCREASE IN NET ASSETS
FROM OPERATIONS:
Net investment income ............................. $2,500,077 $ 2,120,119
------------ -----------
Net increase in net assets resulting
from operations ................................ 2,500,077 2,120,119
------------ -----------

DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income ............................. (2,500,077) (2,120,119)
------------ -----------

CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold ......................... 170,410,782 94,961,957
Net asset value of shares issued upon
reinvestment of dividends from net
investment income .............................. 2,476,890 2,068,676
------------ -----------
172,887,672 97,030,633
Cost of shares repurchased ........................ (158,359,931)(84,848,754)
------------ -----------
Increase in net assets derived from
capital share transactions ..................... 14,527,741 12,181,879
------------ -----------

NET INCREASE IN NET ASSETS ........................ 14,527,741 12,181,879
------------ -----------

NET ASSETS:
Beginning of year ................................. 42,893,055 30,711,176
------------ -----------
End of year ....................................... $57,420,796 $42,893,055
============ ===========

See accompanying notes

Cash Reserve-3

<PAGE>
Delaware Group Premium Fund-Cash Reserve Series
Financial Highlights

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

<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997 1996 1995
---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ........................ $10.000 $10.000 $10.000 $10.000 $10.000

Income from investment operations:
Net investment income ..................................... 0.471 0.497 0.497 0.482 0.535
------- ------- ------- ------- -------
Total from investment operations .......................... 0.471 0.497 0.497 0.482 0.535
------- ------- ------- ------- -------

Less dividends:
Dividends from net investment income ...................... (0.471) (0.497) (0.497) (0.482) (0.535)
------- ------- ------- ------- -------
Total dividends ........................................... (0.471) (0.497) (0.497) (0.482) (0.535)
------- ------- ------- ------- -------

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

Total return .............................................. 4.81% 5.08% 5.10% 4.93% 5.48%

Ratios and supplemental data:
Net assets, end of year (000 omitted) ..................... $57,421 $42,893 $30,711 $26,479 $16,338
Ratio of expenses to average net assets ................... 0.56% 0.59% 0.64% 0.61% 0.62%
Ratio of net investment income to average net assets ...... 4.72% 4.96% 4.98% 4.82% 5.35%
</TABLE>

See accompanying notes

Cash Reserve-4

<PAGE>

Delaware Group Premium Fund-Cash Reserve Series
Notes to Financial Statements
December 31, 1999

Delaware Group Premium Fund (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 Delaware Business Trust and offers 18 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, the Trend Series and the U.S. Growth
Series. These financial statements and the related notes pertain to the Cash
Reserve Series (the "Series"). The shares of the Fund are sold only to separate
accounts of life insurance companies.

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

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

Certain expenses of the Series are paid through "soft dollar" arrangements with
brokers. These transactions are done subject to best execution. The amount of
these expenses was approximately $1,218 for the year ended December 31, 1999.
The Series may receive earnings credits from its custodian when positive cash
balances are maintained, which are used to offset custody fees. There were no
earnings credits for the year ended December 31, 1999. The expenses paid under
the above arrangements are included in their respective expense captions on the
Statement of Operations with the corresponding expense offset shown as "expenses
paid indirectly".

DMC has elected to waive its fee and reimburse the Series 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 April 30, 2000. No
reimbursement was due for the year ended December 31, 1999.

Cash Reserve-5

<PAGE>
Cash Reserve Series
Notes to Financial Statements (Continued)

On December 31, 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
-------------- -------------------- --------------
$21,955 $2,134 $7,797

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

3. Capital Shares
Transactions in capital shares were as follows:
<TABLE>
<CAPTION>

Shares issued upon
reinvestment of
dividends from net Shares Net
Shares sold investment income repurchased increase
----------- ------------------ ------------ ---------
<S> <C> <C> <C> <C>
Year ended December 31, 1999: ............ 17,041,078 247,689 (15,835,993) 1,452,774
Year ended December 31, 1998: ............ 9,496,196 206,867 (8,484,875) 1,218,188
</TABLE>

4. Tax Information (Unaudited)
For the fiscal year ended December 31, 1999, the Series designates as ordinary
income distributions paid during the year as follows:

(A)*
Ordinary
Income
Distributions
(Tax Basis)
-------------
100%

- ------------
* Item (A) is based on a percentage of the Series' total distributions.

Cash Reserve-6

<PAGE>
Delaware Group Premium Fund-Cash Reserve Series
Report of Independent Auditors

To the Shareholders and Board of Trustees
Delaware Group Premium Fund-Cash Reserve Series

We have audited the accompanying statement of net assets of Cash Reserve Series
(the "Series") as of December 31, 1999, and the related statement of operations
for the year then ended, the statements of changes in net assets for each of the
two years in the period then ended, and the financial highlights for each of the
five years in the period then ended. These financial statements and financial
highlights are the responsibility of the Series' management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Cash
Reserve Series at December 31, 1999, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended, and its financial highlights for each of the five years in
the period then ended, in conformity with accounting principles generally
accepted in the United States.

/s/ Ernst & Young LLP

Philadelphia, Pennsylvania
February 4, 2000

Cash Reserve-7
<PAGE>

FOR TOTAL RETURN

Convertible Securities Series

Investment Strategy and Performance in 1999
Convertible Securities, because their performance is indirectly linked to the
performance of common stock, shared in the stock market's success in fiscal
1999. Moreover, because convertibles pay a fixed rate of income, their prices
rose to a lesser extent than common stocks during the year.
For the year ended December 31, 1999, Convertible Securities Series provided
a total return of 6.97% (capital change plus reinvestment of distributions),
underforming its benchmark Merrill Lynch Convertible Securities Index, which
returned 44.31% for the same period.
During 1999, the stock market's gains were generally provided by a small
number of large cap growth stocks and selected technology stocks. A similar
situation occurred in the convertible securities market. A small number of
convertible securities, issued by growth-oriented companies, were responsible
for a disproportionate share of the Index's performance. Because we tend to
follow a value-oriented strategy, we did not own these convertible securities
and were unable to keep pace with the Index. The Series underperformed largely
because of our strict adherence to a value-style approach to investing. We
strive to select what we believe are healthy, undervalued companies with the
potential to reach their full intrinsic value in the not too distant future.
Over longer time periods, we believe this strategy will enable your Series to
deliver returns in line with its benchmarks, although it did not do so for this
time period.
At year end fiscal 1999, 80% of the Series' net assets was invested in
convertible securities - split equally between convertible preferred stocks and
convertible bonds. Common stocks accounted for 19% of the Series' net assets,
with the remainder in cash.
Our focus on convertible securities seeks to capture both the fixed-income
benefits of bonds and the capital appreciation potential of owning stocks. We
believe that over time this combination should result in a lower risk profile
for the Series than a portfolio invested solely in common stocks. In general,
convertible securities can be expected to deliver about two-thirds of the return
of common stocks, according to Merrill Lynch. That means that either way the
market moves, convertibles would likely gain or lose one-third less than stocks
in general.

Portfolio Snapshot
During fiscal 1999, we remained diversified across a broad range of
industries to help protect the Series against a downturn in any one sector. We
invested in financial services companies, real estate investment trusts (REITs),
utilities, consumer services companies and cyclicals. Both REITs and cyclical
securities did poorly in 1999 - REITs were out of favor as investors stayed
narrowly focused on large-cap growth stocks and cyclicals were weak as a result
of reduced demand for commodities.
We were able to increase our holdings in technology, telecommunications and
internet-related companies in 1999. We found opportunities in several companies
whose securities offered high enough yields to meet our investment strategy.
However, we are still underweighted in these areas compared to the index, which
hurt our performance.

Investment Outlook
We believe the stock market will exhibit some significant price swings in the
coming months due to interest rate concerns. However, we believe investors will
inevitably seek out companies and industries where solid earnings growth is
available at reasonable prices. We will continue to concentrate on convertible
securities that have the potential to offer the Series an attractive level of
current income while we wait for capital appreciation potential.

- --------------------------------------------------------------------------------
Convertible Securities Series Investment Objective
Seeks a high level of total return through a combination of capital appreciation
and current income. It seeks to achieve this objective by investing primarily in
preferred stocks, fixed-income securities or other securities that can be
converted into common stock.
- --------------------------------------------------------------------------------

Convertible Securities-1

<PAGE>

Growth of a $10,000 Investment
May 1, 1997 to
December 31, 1999

Convertible Merrill Lynch Convertible
Securities Series Securities Index
----------------- ----------------

05/01/1997 $10,000.00 $10,000.00
06/30/1997 $10,390.00 $10,788.00
09/30/1997 $11,980.00 $11,903.00
12/31/1997 $11,670.00 $12,541.00
03/31/1998 $12,597.76 $12,979.00
06/30/1998 $11,936.35 $13,078.00
09/30/1998 $10,665.20 $13,320.00
12/31/1998 $11,533.30 $14,105.00
03/31/1999 $11,338.17 $14,846.52
06/30/1999 $11,810.59 $15,971.76
09/30/1999 $11,348.90 $15,898.74
12/31/1999 $12,336.70 $20,356.00

Convertible Securities Series
Average Annual Total Returns
----------------------------
Lifetime 8.18%
One Year 6.97%

For periods ending December 31, 1999

Past performance is not a guarantee of future results. Return and share price
will fluctuate so that shares, when redeemed, may be worth more or less than
their original cost.

The chart shows a $10,000 investment in both the Convertible Securities Series
and the Merrill Lynch Convertible Securities Index for the period from the
Series' inception on May 1, 1997 through December 31, 1999. All dividends and
capital gains were reinvested. The Index is unmanaged, with no set investment
objective and does not include the "real world" costs of managing a mutual fund.
Earnings from a variable annuity investment compound tax-free until withdrawal,
so no adjustments were made for income taxes. The effect of an expense
limitation is included in the chart. Performance does not reflect insurance fees
related to a variable annuity investment nor the deferred sales charge that
would apply to certain withdrawals of investments held for less than eight
years. Performance shown here would have been reduced if such fees were included
and the expense limitation was removed. For more information about fees, consult
your variable annuity prospectus.

Convertible Securities-2
<PAGE>

Delaware Group Premium Fund-Convertible Securities Series
Statement of Net Assets
December 31, 1999

Principal Market
Amount Value
CONVERTIBLE BONDS-37.67%
Automobiles & Automotive Parts-3.28%
Magna International 4.875% 2/15/05 ............. $175,000 $ 149,625
Tower Automotive 5.00% 8/1/04 .................. 200,000 166,750
----------
316,375
----------
Banking, Finance & Insurance-1.42%
Bell Atlantic Financial
Services 5.75% 4/1/03 ......................... 135,000 137,025
----------
137,025
----------
Cable, Media & Publishing-6.32%
Clear Channel Communications
1.50% 12/1/02 ................................. 300,000 308,250
**Jacor Communications 4.625% 2/9/18 ............. 300,000 201,750
World Color Press 6.00% 10/1/07 ................ 100,000 99,250
----------
609,250
----------
Computers & Technology-12.37%
Amazon.com 4.75% 2/1/09 ........................ 155,000 176,119
Mindspring Enterprises 5.00% 4/15/06 ........... 310,000 298,375
National Data 5.00% 11/1/03 .................... 200,000 182,000
**Network Associates 4.628% 2/13/18 .............. 300,000 113,250
**Network Associates 4.127% 2/13/18 .............. 220,000 83,050
Siebel Systems 5.50% 9/15/06 ................... 175,000 339,281
----------
1,192,075
----------
Consumer Products-2.19%
Devon Energy 4.95% 8/15/08 ..................... 215,000 210,700
----------
210,700
----------
Food, Beverage & Tobacco-1.18%
**Whole Foods Market 4.93% 3/2/18 ................ 300,000 113,250
----------
113,250
----------
Industrial Machinery-3.62%
Mail-Well 5.00% 11/1/02 ........................ 250,000 235,313
Thermo Fibertek 4.50% 7/15/04 .................. 140,000 113,400
----------
348,713
----------
Metals & Mining-1.90%
MascoTech 4.50% 12/15/03 ....................... 250,000 183,125
----------
183,125
----------
Telecommunications-3.64%
Level Three Communications
6.00% 9/15/09 ................................. 250,000 351,250
----------
351,250
----------
Miscellaneous-1.75%
Omnicare 5.00% 12/1/07 ......................... 250,000 168,750
----------
168,750
----------
Total Convertible Bonds
(cost $3,502,962) .............................. 3,630,513
----------

Number
of Shares
COMMON STOCK-18.99%
Automobiles & Automotive Parts-2.34%
General Motors ................................. 3,100 225,331
----------
225,331
----------
Buildings & Materials-2.12%
*Georgia-Pacific PEPS ........................... 4,000 204,500
----------
204,500
----------
Energy-4.41%
Exxon Mobil .................................... 5,272 424,726
----------
424,726
----------
<PAGE>

Number Market
of Shares Value
COMMON STOCK (Continued)
Leisure, Lodging & Entertainment-1.83%
Starwood Hotels & Resorts Worldwide ............ 7,500 $176,250
----------
176,250
----------
Real Estate-8.24%
Grove Property Trust ........................... 26,200 347,150
Public Storage ................................. 10,400 235,950
SL Green Realty ................................ 9,700 210,975
----------
794,075
----------
Telecommunications-0.05%
* WinStar Communications ......................... 67 5,017
----------
5,017
----------
Total Common Stock
(cost $1,763,486) ............................. 1,829,899
----------

CONVERTIBLE PREFERRED STOCKS-42.27%
Banking, Finance & Insurance-10.24%
American General Series A 6.00% ................ 2,500 235,313
American Heritage Life 8.50% ................... 4,100 355,419
National Australia Bank units 7.875% ........... 5,500 151,938
*Sovereign Capital Trust II 7.50% ............... 5,000 243,750
----------
986,420
----------
Buildings & Materials-2.70%
Kaufman and Broad Home 8.25% ................... 33,000 259,875
----------
259,875
----------
Cable, Media & Publishing-5.56%
Cox Communications Prides 7.00% ................ 5,800 394,400
Tribune 6.25% .................................. 8,000 141,000
----------
535,400
----------
Computers & Technology-6.71%
*Maxtor DECS 7.00% .............................. 47,000 367,188
----------
*Metromedia Fiber Network
DECS 6.25% .................................... 6,000 279,000
----------
646,188
----------
Paper & Forest Products-1.41%
International Paper 5.25% ...................... 2,500 136,250
----------
136,250
----------
Real Estate-5.38%
General Growth Properties 7.25% ................ 7,400 148,000
Kimco Realty 7.50% ............................. 5,900 125,744
Reckson Associates Realty 7.625% ............... 12,300 244,463
----------
518,207
----------
Telecommunications-3.79%
Winstar Communications 7.00% ................... 4,600 365,125
----------
365,125
----------
Transportation-1.94%
*Union Pacific Capital Trust 6.25% .............. 4,500 187,313
----------
187,313
----------
Utilities-4.54%
Houston Industries 7.00% ....................... 1,500 180,750
Texas Utilities 9.25% .......................... 5,900 257,388
----------
438,138
----------
Total Convertible Preferred Stocks
(cost $3,828,338) ............................. 4,072,916
----------

Convertible Securities-3
<PAGE>

Convertible Securities Series
Statement of Net Assets (Continued)

Principal Market
Amount Value
REPURCHASE AGREEMENTS-0.75%
With Chase Manhattan 2.50%
1/3/00 (dated 12/31/99,
collateralized by $20,300
U.S. Treasury Notes 4.75%
due 2/15/04, market value
$19,521) ....................................... $19,100 $19,100
With J.P. Morgan Securities 3.00%
1/3/00 (dated 12/31/99,
collateralized by $7,800
U.S. Treasury Notes 6.375%
due 9/30/01, market value
$7,904 and $7,600 U.S. Treasury Notes
6.625% due 4/30/02, market value
$7,704 and $7,500 U.S. Treasury Notes
6.25% due 6/30/02, market value
$7,535) ........................................ 22,700 22,700
With PaineWebber 3.00% 1/3/00
(dated 12/31/99, collateralized by
$7,800 U.S. Treasury Notes
5.625% due 11/30/00, market value
$7,776 and $7,600 U.S.Treasury Notes
5.375% due 2/15/01, market value
$7,652) ........................................ 15,100 15,100
With Prudential Securities 2.75% 1/3/00
(dated 12/31/99, collateralized by
$15,800 U.S. Treasury Bills due 05/18/00,
market value $15,431) .......................... 15,100 15,100
----------
Total Repurchase Agreements
(cost $72,000) ................................. 72,000
----------

TOTAL MARKET VALUE OF SECURITIES-99.68% (cost $9,166,786) ......... $9,605,328

RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES-0.32% ............. 31,189
----------

NET ASSETS APPLICABLE TO 838,776 SHARES OUTSTANDING;
EQUIVALENT TO $11.49 PER SHARE-100.00% ......................... $9,636,517
==========

COMPONENTS OF NET ASSETS AT DECEMBER 31, 1999:
Shares of beneficial interest (unlimited authorization- no par) ... $9,233,478
Undistributed net investment income ............................... 404,506
Accumulated net realized loss on investments ...................... (440,009)
Net unrealized appreciation of investments ........................ 438,542
----------
Total net assets .................................................. $9,636,517
==========
- -------------
*Non-income producing security for the year ended December 31,1999.
**Zero coupon security as of December 31, 1999. The interest rate shown is the
effective yield.

Summary of Abbreviations:
DECS-Dividend Enhanced Convertible Stock
PEPS-Premium Equity Participating Securities
PRIDES-Preferred Redeemable Increased Dividend Securities

See accompanying notes

Convertible Securities-4
<PAGE>

Delaware Group Premium Fund-
Convertible Securities Series
Statement of Operations
Year Ended December 31, 1999

INVESTMENT INCOME:
Dividends ......................................... $302,463
Interest .......................................... 176,572
--------
479,035
--------

EXPENSES:
Management fees ................................... 65,656
Accounting and administration ..................... 3,487
Registration fees ................................. 711
Dividend disbursing and transfer agent
fees and expenses .............................. 1,107
Custodian fees .................................... 480
Trustees' fees .................................... 311
Other ............................................. 627
--------
72,379
Less expenses paid indirectly ..................... (201)
--------

Total expenses .................................... 72,178
--------

NET INVESTMENT INCOME ............................. 406,857
--------

NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on investments .................. 4,848
Net change in unrealized appreciation /
depreciation of investments .................... 213,388
--------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS ............................ 218,236
--------

NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ...................... $625,093
========

See accompanying notes
<PAGE>

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

Year Ended Year Ended
12/31/99 12/31/98
-------- --------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income ............................ $406,857 $294,141
Net realized gain (loss) on investments .......... 4,848 (444,857)
Net change in unrealized appreciation /
depreciation of investments ................... 213,388 (26,655)
---------- ----------
Net increase (decrease) in net assets
resulting from operations ..................... 625,093 (177,371)
---------- ----------

DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ............................ (292,545) (110,178)
Net realized gain on investments ................. - (25,287)
---------- ----------
(292,545) (135,465)
---------- ----------

CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold ........................ 2,813,309 5,903,108
Net asset value of shares issued upon
reinvestment of distributions from net
investment income and net realized
gain on investments ........................... 292,545 135,465
---------- ----------
3,105,854 6,038,573
Cost of shares repurchased ....................... (1,934,838) (1,514,161)
---------- ----------
Increase in net assets derived from capital
share transactions ............................ 1,171,016 4,524,412
---------- ----------

NET INCREASE IN NET ASSETS ....................... 1,503,564 4,211,576
---------- ----------

NET ASSETS:
Beginning of year ................................ 8,132,953 3,921,377
---------- ----------
End of year ...................................... $9,636,517 $8,132,953
========== ==========

See accompanying notes

Convertible Securities-5
<PAGE>

Delaware Group Premium Fund-Convertible Securities Series
Financial Highlights

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

<TABLE>
<CAPTION>
Year Ended 5/1/97(1)
December 31, to
1999 1998 12/31/97
------- ------- -------
<S> <C> <C> <C>
Net asset value, beginning of period ............................ $11.160 $11.660 $10.000

Income (loss) from investment operations:
Net investment income ........................................... 0.493 0.386 0.318
Net realized and unrealized gain (loss) on investments .......... 0.247 (0.511) 1.342
------- ------- -------
Total from investment operations ................................ 0.740 (0.125) 1.660
------- ------- -------

Less dividends and distributions:
Dividends from net investment income ............................ (0.410) (0.305) none
Distributions from net realized gain on investments ............. none (0.070) none
------- ------- -------
Total dividends and distributions ............................... (0.410) (0.375) none
------- ------- -------

Net asset value, end of period .................................. $11.490 $11.160 $11.660
======= ======= =======

Total return .................................................... 6.97% (1.17%) 16.60%

Ratios and supplemental data:
Net assets, end of period (000 omitted) ......................... $9,637 $8,133 $3,921
Ratio of expenses to average net assets ......................... 0.83% 0.82% 0.80%
Ratio of expenses to average net assets prior to expense
limitation and expenses paid indirectly ...................... 0.83% 0.82% 2.30%
Ratio of net investment income to average net assets ............ 4.64% 4.78% 5.68%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly ..... 4.64% 4.78% 4.18%
Portfolio turnover .............................................. 35% 77% 209%
</TABLE>
- -------------
(1) Date of commencement of operations; ratios have been annualized and total
return has not been annualized.

See accompanying notes

Convertible Securities-6
<PAGE>

Delaware Group Premium Fund-Convertible Securities Series
Notes to Financial Statements
December 31, 1999

Delaware Group Premium Fund (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 Delaware Business Trust and offers 18 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, the Trend Series, and the U.S. Growth
Series. These financial statements and the related notes pertain to the
Convertible Securities Series (the "Series"). The shares of the Fund are sold
only to separate accounts of life insurance companies.

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

Security Valuation--All equity securities are valued at the last quoted sales
price as of the close of the New York Stock Exchange (NYSE) on the valuation
date. If on a particular day an equity security does not trade, then the mean
between the bid and asked prices will be used. 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 Trustees.

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.

<PAGE>

The Series will make distributions 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 execution. The amount of
these expenses was approximately $201 for the year ended December 31, 1999. The
Series may receive earnings credits from its custodian when positive cash
balances are maintained, which are used to offset custody fees. There were no
earnings credits for the year ended December 31, 1999. The expenses paid under
the above arrangements are included in their respective expense captions on the
Statement of Operations with the corresponding expense offset shown as "expenses
paid indirectly".

Convertible Securities-7
<PAGE>

Convertible Securities Series
Notes to Financial Statements (Continued)

On December 31, 1999, the Series had liabilities payable to affiliates as
follows:

<TABLE>
<CAPTION>
Dividend disbursing Other
Investment transfer agent, expenses
management accounting fees payable
fee payable to and other expenses to DMC
DMC payable to DSC and affiliates
-------------- -------------------- --------------
<S> <C> <C> <C>
$6,034 $239 $783
</TABLE>

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

3. Investments
During the year ended December 31, 1999, the Series made purchases and sales of
investment securities other than U.S. government securities and temporary cash
investments as follows:

Purchases ............. $4,777,591
Sales ................. $2,885,623

At December 31, 1999, the aggregate cost of securities and unrealized
appreciation (depreciation) for federal income tax purposes for the Series were
as follows:

<TABLE>
<CAPTION>
Aggregate Aggregate
Cost of unrealized unrealized Net unrealized
investments appreciation depreciation appreciation
----------- ------------ ------------ --------------
<S> <C> <C> <C> <C>
$9,167,012 $1,129,762 ($691,446) $438,316
</TABLE>

For federal income tax purposes, the Series had accumulated capital losses at
December 31, 1999 as follows:

<TABLE>
<CAPTION>
Year of
Expiration
2006
----------
<S> <C>
$415,439
</TABLE>

4. Capital Shares
Transactions in capital 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>
Year ended December 31, 1999 258,217 27,782 (175,771) 110,228
Year ended December 31, 1998 522,662 12,084 (142,453) 392,293
</TABLE>

5. Line of Credit
The Series has a committed line of credit for $300,000. No amount was
outstanding at December 31, 1999, or at any time during the year.

Convertible Securities-8
<PAGE>

Convertible Securities Series
Notes to Financial Statements (Continued)

6. Credit and Market Risk
The Series may invest in high-yield fixed income securities which carry ratings
of BB or lower by S&P and/or Ba or lower by Moody's. Investments in these higher
yielding securities may be accompanied by a greater degree of credit risk than
higher rated securities. Additionally, lower rated securities may be more
susceptible to adverse economic and competitive industry conditions than
investment grade securities.

The Series may invest up to 15% of its total assets in illiquid securities which
may include securities with contractual restrictions on resale, securities
exempt from registration under Rule 144A of the Securities Act of 1933, as
amended, and other securities which may not be readily marketable. The relative
illiquidity of some of these securities may adversely affect the Series' ability
to dispose of such securities in a timely manner and at a fair price when it is
necessary to liquidate such securities.

7. Tax Information (Unaudited)
For the fiscal year ended December 31, 1999, the Series designates as long-term
capital gains and ordinary income distributions paid during the year as follows:

- -------------
*Items (A) and (B) are based on a percentage of the Series' total
distributions.
**Item (D) is based on a percentage of ordinary income of the Series.
(1) Qualifying dividends represent dividends which qualify for the corporate
dividends received deduction.

Convertible Securities-9
<PAGE>

Delaware Group Premium Fund-Convertible Securities Series
Report of Independent Auditors

To the Shareholders and Board of Trustees
Delaware Group Premium Fund-Convertible Securities Series

We have audited the accompanying statement of net assets of Convertible
Securities Series (the "Series") as of December 31, 1999, and the related
statement of operations for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended, and the financial
highlights for each of the two years in the period then ended and for the period
May 1, 1997 (commencement of operations) through December 31, 1997. These
financial statements and financial highlights are the responsibility of the
Series' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Convertible Securities Series at December 31, 1999, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and its financial highlights for each of
the two years in the period then ended and for the period May 1, 1997
(commencement of operations) through December 31, 1997, in conformity with
accounting principles generally accepted in the United States.

/s/ Ernst & Young LLP

Philadelphia, Pennsylvania
February 4, 2000

Convertible Securities-10
<PAGE>
FOR TOTAL RETURN

Delaware Balanced Series

Investment Strategy and Performance in 1999
During most of 1999, investors focused almost exclusively on a select group
of large capitalization growth stocks. As a result of the narrow market,
Delaware Balanced Series was not able to keep pace with the Standard & Poor's
500 Index. For the year ended December 31, 1999, the Series provided a total
return of -7.85% (capital change plus reinvestment of distributions) compared to
the S&P 500 Index, which had a total return of 21.0% for the same period. The
Series also lagged the returns of its benchmark, the Lehman Brothers Aggregate
Bond Index, which had a total return of -0.12% for the year. We replaced the
Lehman Brothers Government/Corporate Bond Index with the Lehman Brothers
Aggregate Bond Index because this index more closely represents the mix of
investments in the Delaware Balanced Series.

Portfolio Snapshot
As of December 31, 1999, the Delaware Balanced Series held roughly a 70/30%
mix of stocks and bonds.
Delaware Balanced Series adheres to a disciplined investment strategy that
focuses on what we call "transition stocks"--that is, stocks we believe are
currently selling below their true value with strong prospects for future
growth. During fiscal 1999, our strategy precluded us from investing in the top
tier performers in the S&P 500, given that most of these stocks had high P/E
ratios, an indication that they were too expensive relative to their future
earnings potential. This is the primary reason the Series did not keep pace with
the S&P 500.
During 1999, the Series also had less exposure to technology stocks than the
S&P 500. Technology companies, in general, had very high price-to-earnings
ratios and thus have not met our standard for "reasonable prices." For fiscal
1999, our underweighting of stocks in the technology and cyclical sectors hurt
the Series' performance.
In order to maintain an attractive yield profile and to take advantage of
lower prices for investment grade corporate bonds, we invested modestly in U.S.
Treasuries. Corporate bonds, mortgage-related securities and asset-backed
securities made up the majority of the Series holdings. This positioning served
us well during the first half of the fiscal year. However, as interest rates
rose in the second half, our holdings declined in value, as did most
fixed-income securities.
As a result of the fluctuating interest rate environment, we made changes to
the Series' average duration during 1999. When the Fed pushed interest rates
higher, we reduced our duration so that it was in line with that of the Lehmann
Brothers Aggregate Bond Index. This helped us protect the gains we made in the
first half of the year.

Investment Outlook
We expect generally stronger worldwide economic growth in the months ahead.
Given that outlook, we are trying to position the portfolio to benefit from such
anticipated growth. We are concentrating on capital goods, energy and selected
financial stocks which, based on our research, appear to have strong future
earnings potential and yet are selling at relatively attractive prices.
We also think that because the economy is growing faster than anticipated,
there is a strong likelihood that the Fed will raise short-term interest rates
again. Until there's a better sense of what the Fed's next move will be, we
believe it's unlikely that investor demand for fixed-income securities will
improve. On the other hand, if there is increased volatility in the stock
market, there is a greater chance that investors will reallocate some of their
stock holdings to bonds.

- --------------------------------------------------------------------------------
Delaware Balanced Series Investment Objective
Seeks a balance of capital appreciation, income and preservation of capital. The
Series invests primarily in common stocks of established companies believed to
have potential for long-term capital growth and has at least 25 percent of of
its assets in various types of fixed income securities.
- --------------------------------------------------------------------------------

Delaware Balanced-1
<PAGE>

Growth of a $10,000 Investment
January 1, 1990 through
December 31, 1999

Delaware Balanced Series
Lehman Brothers Aggregate Bond Index
S&P 500 Index
Lehman Brothers Government/Corporate Bond Index

Delaware Balanced Series

<TABLE>
<CAPTION>
Lehman Brothers Lehman Brothers
S&P 500 Index Aggregate Bond Index Government/Corporte Bond Index Delaware Balanced Series
<S> <C> <C> <C> <C>
12/31/1989 $10,000 $10,000 $10,000 $10,000
12/31/1990 $ 9,689 $10,896 $10,828 $ 9,982
12/31/1991 $12,642 $12,639 $12,574 $12,635
12/31/1992 $13,605 $13,575 $13,528 $14,385
12/31/1993 $14,976 $14,898 $15,020 $15,561
12/31/1994 $15,174 $14,464 $14,493 $15,539
12/31/1995 $20,877 $17,136 $17,282 $19,669
12/31/1996 $25,669 $17,758 $17,783 $22,798
12/31/1997 $34,233 $19,473 $19,519 $28,817
12/31/1998 $44,015 $21,164 $21,371 $34,182
12/31/1999 $53,281 $20,988 $20,908 $31,498
</TABLE>

Delaware Balanced Series
Average Annual Total Returns
----------------------------
10 Years 12.16%
Five Years 15.18%
One Year -7.85%

For periods ending December 31, 1999

Past performance is not a guarantee of future results. Return and share price
will fluctuate so that shares, when redeemed, may be worth more or less than
their original cost.

The chart shows a $10,000 investment in the Delaware Balanced Series, the S&P
500 Index, the Lehman Brothers Aggregate Bond Index and the Lehman Brothers
Government/Corporate Bond Index for the 10-year period from January 1, 1990
through December 31, 1999. All dividends and capital gains were reinvested. The
Indexes are unmanaged, with no set investment objective and do not include the
"real world" costs of managing a mutual fund. Earnings from a variable annuity
investment compound tax-free until withdrawal, so no adjustments were made for
income taxes. The effect of an expense limitation is included in the chart.
Performance does not reflect insurance fees related to a variable annuity
investment nor the deferred sales charge that would apply to certain withdrawals
of investments held for less than eight years. Performance shown here would have
been reduced if such fees were included and the expense limitation was removed.
For more information about fees, consult your variable annuity prospectus.

Delaware Balanced-2
<PAGE>

Delaware Group Premium Fund-Delaware Balanced Series
Statement of Net Assets
December 31, 1999

Number Market
of Shares Value
COMMON STOCK-66.51%
Aerospace & Defense-0.99%
United Technologies ........................... 26,200 $ 1,703,000
-----------
1,703,000
-----------
Automobiles & Automotive Parts-1.37%
Danaher ....................................... 48,800 2,354,600
-----------
2,354,600
-----------
Banking, Finance & Insurance-12.44%
AFLAC ......................................... 25,600 1,208,000
American International Group .................. 14,706 1,590,113
Citigroup ..................................... 42,300 2,350,294
FEDERAL HOME LOAN MORTGAGE .................... 80,900 3,807,356
First Tennessee National ...................... 30,200 860,700
FleetBoston Financial ......................... 47,500 1,653,594
MBNA .......................................... 135,300 3,686,925
Nationwide Financial Services Class A ......... 69,600 1,944,450
UnionBanCal ................................... 28,900 1,139,744
WASHINGTON MUTUAL ............................. 121,200 3,151,200
-----------
21,392,376
-----------
Buildings & Materials-1.07%
Masco ......................................... 72,400 1,837,150
-----------
1,837,150
-----------
Cable, Media & Publishing-3.60%
GANNETT ....................................... 35,500 2,895,469
+KNIGHT-RIDDER ................................. 55,500 3,302,250
-----------
6,197,719
-----------
Chemicals-1.31%
Avery Dennison ................................ 30,800 2,244,550
-----------
2,244,550
-----------
Computers & Technology-4.00%
*+BMC Software .................................. 21,000 1,678,688
Computer Associates International ............. 24,900 1,741,444
*CSG Systems International ..................... 44,200 1,762,475
International Business Machines ............... 15,700 1,695,600
-----------
6,878,207
-----------
Consumer Products-1.49%
Dial .......................................... 105,200 2,557,675
-----------
2,557,675
-----------
Electronics & Electrical Equipment-7.06%
HONEYWELL INTERNATIONAL ....................... 71,737 4,138,328
*Integrated Device Technology .................. 50,900 1,476,100
INTEL ......................................... 44,700 3,679,369
Symbol Technologies ........................... 25,700 1,633,556
Teleflex ...................................... 38,900 1,218,056
-----------
12,145,409
-----------
Energy-6.16%
Anadarko Petroleum ............................ 30,500 1,040,813
BP Amoco ADR .................................. 52 3,084
Coastal ....................................... 60,200 2,133,338
Columbia Energy ............................... 19,800 1,252,350
Schlumberger .................................. 39,700 2,233,125
Shell Transport and Trading ADR ............... 11,700 576,225
Tosco ......................................... 54,300 1,476,281
Transocean Sedco Forex ........................ 7,686 258,919
Unocal ........................................ 48,200 1,617,713
-----------
10,591,848
-----------
- --------
Top 10 stock holdings, representing 19.7% of net assets, are printed in bold.

<PAGE>

Number Market
of Shares Value
COMMON STOCK (Continued)
Environmental Services-1.20%
Ecolab ........................................ 52,800 $ 2,065,800
-----------
2,065,800
-----------
Food, Beverage & Tobacco-1.77%
Bestfoods ..................................... 25,100 1,319,319
*+Suiza Foods ................................... 43,400 1,719,725
-----------
3,039,044
-----------
Healthcare & Pharmaceuticals-6.21%
American Home Products ........................ 67,500 2,662,031
Biomet ........................................ 56,400 2,256,000
Bristol-Myers Squibb .......................... 13,800 885,788
Johnson & Johnson ............................. 26,300 2,449,188
Pharmacia & Upjohn ............................ 16,700 751,500
*Watson Pharmaceuticals ........................ 47,000 1,683,188
-----------
10,687,695
-----------
Industrial Machinery-2.43%
Black & Decker ................................ 48,000 2,508,000
Pentair ....................................... 43,600 1,678,600
-----------
4,186,600
-----------
Leisure, Lodging & Entertainment-1.76%
VIAD .......................................... 108,500 3,024,438
-----------
3,024,438
-----------
Real Estate-1.85%
CarrAmerica Realty ............................ 48,600 1,026,675
Developers Diversified Realty ................. 85,200 1,096,950
Sun Communities ............................... 33,100 1,065,406
-----------
3,189,031
-----------
Retail-5.03%
Blockbuster Class A ........................... 87,600 1,171,650
Circuit City Stores ........................... 24,500 1,104,062
INTIMATE BRANDS ............................... 79,480 3,427,575
*Kroger ........................................ 82,300 1,553,413
Lowe's Companies .............................. 23,200 1,386,200
-----------
8,642,900
-----------
Telecommunications-6.58%
ALLTEL ........................................ 24,800 2,050,650
AT&T .......................................... 37,500 1,903,125
GTE ........................................... 32,000 2,258,000
*MCI WORLDCOM .................................. 52,650 2,793,741
SBC Communications ............................ 47,600 2,320,500
-----------
11,326,016
-----------
Textiles, Apparel & Furniture-0.19%
HON Industries ................................ 14,900 326,869
-----------
326,869
-----------
Total Common Stock
(cost $107,247,759) .......................... 114,390,927
-----------
CONVERTIBLE PREFERRED STOCK-1.34%
Freeport McMoRan Copper & Gold ................ 37,600 716,750
Sealed Air .................................... 31,573 1,594,411
-----------
Total Convertible Preferred Stock
(cost $2,197,137) ............................ 2,311,161
-----------

Delaware Balanced-3
<PAGE>

Delaware Balanced Series
Statement of Net Assets (Continued)
December 31, 1999

Principal Market
Amount Value
ASSET-BACKED SECURITIES-3.48%
California Infrastructure PG&E
Series 97-1 A4 6.16% 6/25/03 .................. $640,000 $ 636,708
CIT RV Trust Series
98-A A5 6.12% 11/15/13 ........................ 535,000 516,008
Discover Card Master Trust
Series 99-2 A 5.90% 10/15/04 .................. 810,000 792,975
EQCC Home Equity Loan Trust
Series 98-2 A3F 6.229% 3/15/13 ................ 625,000 617,188
Honda Auto Lease Trust
Series 99-A A4 6.45% 9/16/02 .................. 955,000 950,703
MetLife Capital Equipment Loan
Trust Series 97-AA 6.85% 5/20/08 .............. 420,000 418,278
NationsCredit Grantor Trust
Series 96-1A 5.85% 9/15/11 .................... 210,494 203,506
Series 97-1A 6.75% 8/15/13 .................... 593,562 584,659
Neiman Marcus Group
Series 95-1A 7.60% 6/15/03 .................... 180,000 180,504
PECO Energy Transition Trust
Series 99-A A4 5.80% 3/1/07 ................... 785,000 743,395
Philadelphia, Pennsylvania Industrial
Development Authority
for Tax Claim Revenue Class A
6.488% 6/15/04 ................................ 357,679 336,219
-----------
Total Asset-Backed Securities
(cost $6,128,162) ............................. 5,980,143
-----------

COLLATERALIZED MORTGAGE OBLIGATIONS-1.71%
Asset Securitization Corporation
Series 97-D5 A2 6.816% 2/14/41 ................ 480,000 432,600
Series 97-D5 A3 6.866% 2/14/41 ................ 375,000 333,398
Series 97-MD7 A3 7.574% 1/13/30 ............... 400,000 382,125
Federal National Mortgage Association
Whole Loan Series 98-W3 A2
6.50% 7/25/28 ................................. 540,948 532,918
Government National Mortgage Association
Series 98-9 B 6.85% 12/20/25 .................. 810,000 769,566
Residential Accredit Loans
Series 98-QS9 A3 6.75% 7/25/28 ................ 500,000 493,242
-----------
Total Collateralized Mortgage
Obligations (cost $3,136,617) ................. 2,943,849
-----------

COMMERCIAL MORTGAGE-BACKED SECURITIES-2.12%
Chase Commercial Mortgage Securities
Series 96-2 C 6.90% 11/19/06 .................. 250,000 237,578
DLJ Commerical Mortgage
Series 99-CG1 A1B 6.46% 1/10/09 ............... 930,000 866,063
First Union Chase Commercial Mortgage
Series 99-C2 A2 6.65% 4/15/09 ................. 1,175,000 1,111,109
Lehman Large Loan Series 97-LLI A1
6.79% 6/12/04 ................................. 422,372 418,346
Mortgage Capital Funding
Series 96-MC2-C 7.224% 9/20/06 ................ 380,000 365,988
Nomura Asset Securities
Series 93-1 A1 6.68% 12/15/01 ................. 307,943 302,843
Series 96-MD5 A3 7.638% 4/13/36 ............... 340,000 338,034
-----------
Total Commercial Mortgage-Backed
Securities (cost $3,797,317) .................. 3,639,961
-----------
<PAGE>

Principal Market
Amount Value
CORPORATE BONDS-8.88%
ABN-AMRO Bank NV 8.25% 8/1/09 .................... $80,000 $ 81,687
American Financial Group
7.125% 4/15/09 ................................ 280,000 255,077
Banco Santander 6.50% 11/1/05 .................... 360,000 339,982
Banco Santiago 7.00% 7/18/07 ..................... 280,000 249,392
Commercial Credit 6.50% 8/1/04 ................... 450,000 436,353
Consumer Energy 6.375% 2/1/08 .................... 380,000 344,600
Cox Communications 6.15% 8/1/03 .................. 455,000 437,260
Daimler Chrysler 6.90% 9/1/04 .................... 630,000 623,700
Fairfax Financial 7.375% 3/15/06 ................. 160,000 144,457
Finova Capital 7.25% 11/8/04 ..................... 950,000 939,612
Ford Motor Credit 6.70% 7/16/04 .................. 655,000 641,520
Household Finance 6.50% 11/15/08 ................. 775,000 717,834
Lehman Brothers 6.625% 2/15/08 ................... 795,000 733,706
MCI Communications 6.125% 4/15/02 ................ 350,000 342,106
MCI Worldcom 7.55% 4/1/04 ........................ 1,050,000 1,063,048
Meritor Automotive 6.80% 2/15/09 ................. 1,085,000 983,537
Morgan Stanley Dean Witter
7.125% 1/15/03 ................................ 1,125,000 1,123,004
Osprey Trust 8.31% 1/15/03 ....................... 825,000 817,199
Safeway 7.00% 9/15/02 ............................ 450,000 446,360
Stagecoach Holdings 8.625% 11/15/09 .............. 610,000 608,890
Sun Microsystems 7.65% 8/15/09 ................... 510,000 508,226
Tommy Hilfiger USA 6.85% 6/1/08 .................. 810,000 731,680
Travelers Property Casualty
6.75% 4/15/01 ................................. 775,000 772,280
United Health Care 6.60% 12/1/03 ................. 665,000 632,310
United News and Media 7.75% 7/1/09 ............... 560,000 544,310
U.S. Bank N.A. 6.50% 2/1/08 ...................... 450,000 419,222
USA Waste Services 6.125% 7/15/01 ................ 360,000 344,050
-----------
Total Corporate Bonds
(cost $15,890,521) ............................ 15,281,402
-----------
MORTGAGE-BACKED SECURITIES-9.52%
Federal Home Loan Mortgage Corporation-Gold
6.00% 3/1/11 ..................................... 155,213 149,053
7.00% 4/1/29 ..................................... 1,187,772 1,148,798
Federal National Mortgage Association
6.00% 4/1/13 ..................................... 609,685 584,726
6.00% 5/1/13 ..................................... 322,991 307,144
6.00% 10/1/28 .................................... 479,741 439,263
6.50% 5/1/29 ..................................... 2,649,207 2,497,706
7.00% 8/1/28 ..................................... 420,298 405,982
7.00% 12/1/28 .................................... 731,287 706,378
7.00% 8/1/29 ..................................... 1,122,622 1,086,137
7.50% 6/1/28 ..................................... 371,920 367,736
7.50% 10/1/29 .................................... 8,665,231 8,575,250
9.50% 6/1/19 ..................................... 98,139 102,740
-----------
Total Mortgage-Backed Securities
(cost $16,885,768) 16,370,913
-----------

Delaware Balanced-4
<PAGE>

Delaware Balanced Series
Statement of Net Assets (Continued)
December 31, 1999

Principal Market
Amount Value
U.S. GOVERNMENT AGENCY OBLIGATIONS-1.29%
Federal National Mortgage Association
+4.625% 10/15/01 ................................. $490,000 $ 474,797
5.75% 4/15/03 ................................... 620,000 602,469
+6.25% 11/15/02 .................................. 360,000 356,538
+6.50% 8/15/04 ................................... 800,000 790,237
-----------
Total U.S. Government Agency Obligations
(cost $2,294,045) .............................. 2,224,041
-----------
U.S. TREASURY OBLIGATIONS-2.01%
U.S. Treasury Bond 6.125% 11/15/27 .............. 535,000 498,257
+U.S. Treasury Inflation Index Notes
3.625% 7/15/02 ................................ 995,942 986,311
+U.S. Treasury Notes 5.25% 5/15/04 ............... 250,000 239,545
#U.S. Treasury Strips 6.775% 2/15/27 ............. 10,000,000 1,732,633
-----------
Total U.S. Treasury Obligations
(cost $3,602,490) ............................. 3,456,746
-----------
REPURCHASE AGREEMENTS-2.82%
With Chase Manhattan
2.50% 1/3/00 (dated 12/31/99,
collateralized by $1,369,000
U.S. Treasury Notes
4.75% due 2/15/04, market value
$1,314,659) .................................... 1,285,000 1,285,000
<PAGE>

Principal Market
Amount Value
REPURCHASE AGREEMENTS(Continued)
With J.P. Morgan Securities
3.00% 1/3/00 (dated 12/31/99,
collateralized by $523,000
U.S. Treasury Notes 6.375%
due 9/30/01, market value
$532,340 and $509,000
U.S. Treasury Notes 6.625%
due 4/30/02, market value
$518,841, and $508,000
U.S. Treasury Notes 6.25%
due 6/30/02, market value $507,462) ........... $1,528,000 $1,528,000
With PaineWebber
3.00% 1/3/00 (dated 12/31/99,
collateralized by $523,000
U.S. Treasury Notes 5.625%
due 11/30/00, market value
$523,714 and $509,000
U.S. Treasury Notes 5.375%
due 2/15/01, market value $515,337) ........... 1,018,000 1,018,000
With Prudential Securities
2.75% 1/3/00 (dated 12/31/99,
collateralized by $1,061,000
U.S. Treasury Bills due
5/18/00, market value $1,039,239) ............. 1,018,000 1,018,000
------------
Total Repurchase Agreements
(cost $4,849,000) ............................. 4,849,000
------------

TOTAL MARKET VALUE OF SECURITIES-99.68% (cost $166,028,816) ..... $171,448,143

RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES-0.32% ........... 554,159
------------

NET ASSETS APPLICABLE TO 9,917,333 SHARES OUTSTANDING;
EQUIVALENT TO $17.34 PER SHARE-100.00% ....................... $172,002,302
============

COMPONENTS OF NET ASSETS AT DECEMBER 31, 1999:
Shares of beneficial interest (unlimited authorization-no par) .. $153,824,886
Undistributed net investment income ............................. 2,694,146
Accumulated net realized gain on investments .................... 10,063,943
Net unrealized appreciation of investments ...................... 5,419,327
------------
Total net assets ................................................ $172,002,302
============

- -----------
* Non-income producing security for the year ended December 31, 1999.
+ Security is partially or fully on loan.
# Zero-coupon security as of December 31, 1999. The coupon shown is the
effective yield.
ADR - American Depository Receipt

See accompanying notes

Delaware Balanced-5
<PAGE>

Delaware Group Premium Fund-
Delaware Balanced Series
Statement of Operations
Year Ended December 31, 1999

INVESTMENT INCOME:
Dividends ................................................... $ 2,000,373
Interest .................................................... 3,667,234
------------
5,667,607
------------
EXPENSES:
Management fees ............................................. 1,236,740
Accounting and administration ............................... 77,548
Reports and statements to shareholders ...................... 35,230
Professional fees ........................................... 34,480
Custodian fees .............................................. 13,661
Registration fees ........................................... 6,200
Taxes (other than taxes on income) .......................... 5,279
Dividend disbursing and transfer
agent fees and expenses .................................. 4,562
Trustees' fees .............................................. 2,862
Other ....................................................... 24,321
------------
1,440,883
Less expenses paid indirectly ............................... (13,457)
------------

Total expenses .............................................. 1,427,426
------------

NET INVESTMENT INCOME ....................................... 4,240,181
------------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain on investments ............................ 9,856,207
Net change in unrealized appreciation /
depreciation of investments .............................. (30,081,326)
------------
NET REALIZED AND UNREALIZED LOSS
ON INVESTMENTS ........................................... (20,225,119)
------------
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS .......................................... ($15,984,938)
============
See accompanying notes

<PAGE>

Delaware Group Premium Fund-
Delaware Balanced Series
Statements of Changes in Net Assets

Year Ended Year Ended
12/31/99 12/31/98
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income ............................ $ 4,240,181 $ 3,569,141
Net realized gain on investments ................. 9,856,207 9,851,624
Net change in unrealized appreciation /
depreciation of investments ................... (30,081,326) 15,510,399
------------ ------------
Net increase (decrease) in net assets
resulting from operations ..................... (15,984,938) 28,931,164
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ............................ (3,997,585) (3,221,563)
Net realized gain on investments ................. (8,076,774) (12,969,759)
------------ ------------
(12,074,359) (16,191,322)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold ........................ 22,178,765 50,954,284
Net asset value of shares issued upon
reinvestment of distributions from net
investment income and net realized
gain on investments ........................... 12,074,359 16,191,322
------------ ------------
34,253,124 67,145,606
Cost of shares repurchased ....................... (36,047,049) (5,705,268)
------------ ------------
Increase (decrease) in net assets derived
from capital share transactions ............... (1,793,925) 61,440,338
------------ ------------

NET INCREASE (DECREASE)
IN NET ASSETS ................................. (29,853,222) 74,180,180
------------ ------------
NET ASSETS:
Beginning of year ................................ 201,855,524 127,675,344
------------ ------------
End of year ...................................... $172,002,302 $201,855,524
============ ============

See accompanying notes

Delaware Balanced-6
<PAGE>

Delaware Group Premium Fund-Delaware Balanced Series
Financial Highlights

Selected data for each share of the Series outstanding throughout each period
were as follows:
<TABLE>
<CAPTION>

Year Ended December 31,
1999 1998 1997 1996 1995
----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $20.040 $19.050 $16.640 $15.500 $12.680

Income (loss) from investment operations:
Net investment income ..................................... 0.408 0.349 0.435 0.530 0.509
Net realized and unrealized gain (loss) on investments .... (1.958) 2.831 3.575 1.765 2.761
------- ------- ------- ------- -------
Total from investment operations .......................... (1.550) 3.180 4.010 2.295 3.270
------- ------- ------- ------- -------

Less dividends and distributions:
Dividends from net investment income ...................... (0.380) (0.420) (0.530) (0.500) (0.450)
Distributions from net realized gain on investments ....... (0.770) (1.770) (1.070) (0.655) none
------- ------- ------- ------- -------
Total dividends and distributions ......................... (1.150) (2.190) (1.600) (1.155) (0.450)
------- ------- ------- ------- -------

Net asset value, end of year .............................. $17.340 $20.040 $19.050 $16.640 $15.500
======= ======= ======= ======= =======

Total return .............................................. (7.85%) 18.62% 26.40% 15.91% 26.58%

Ratios and supplemental data:
Net assets, end of year (000 omitted) ..................... $172,002 $201,856 $127,675 $75,402 $63,215
Ratio of expenses to average net assets ................... 0.74% 0.70% 0.67% 0.68% 0.69%
Ratio of net investment income to average net assets ...... 2.17% 2.20% 2.85% 3.56% 3.75%
Portfolio turnover ........................................ 107% 94% 67% 92% 106%
</TABLE>

See accompanying notes

Delaware Balanced-7
<PAGE>
Delaware Group Premium Fund-Delaware Balanced Series
Notes to Financial Statements
December 31, 1999

Delaware Group Premium Fund (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 Delaware Business Trust and offers 18 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, the Trend Series and the U.S. Growth
Series. These financial statements and the related notes pertain to the Delaware
Balanced Series (the "Series"). The shares of the Fund are sold only to separate
accounts of life insurance companies.

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

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

Certain expenses of the Series are paid through "soft dollar" arrangements with
brokers. These transactions are done subject to best execution. The amount of
these expenses was approximately $4,496 for the year ended December 31, 1999.
The Series receives earnings credits from its custodian when positive cash
balances are maintained, which are used to offset custody fees. These credits
were $8,961 for the year ended December 31, 1999. The expenses paid under the
above arrangements are included in their respective expense captions on the
Statement of Operations with the corresponding offset shown as "expenses paid
indirectly".

<PAGE>

DMC has elected to waive its fee and reimburse the Series 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 April 30, 2000. No
reimbursement was due for the year ended December 31, 1999.

Delaware Balanced-8
<PAGE>

Delaware Balanced Series
Notes to Financial Statements (Continued)

On December 31, 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
-------------- ------------------- --------------
$95,450 $6,283 $19,460

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

3. Investments
During the year ended December 31, 1999, the Series made purchases and sales of
investment securities other than U.S. government securities and temporary cash
investments as follows:

Purchases .................................. $172,550,488
Sales ...................................... $172,671,038

At December 31, 1999, the aggregate cost of securities and unrealized
appreciation (depreciation) for federal income tax purposes for the Series were
as follows:

4. Capital Shares
Transactions in capital 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>
Year ended December 31, 1999 ....... 1,185,181 677,710 (2,020,042) (157,151)
Year ended December 31, 1998 ....... 2,757,318 928,152 (313,121) 3,372,349
</TABLE>

5. Line of Credit

The Series has a committed line of credit for $6,800,000. No amount was
outstanding at December 31, 1999, or at any time during the year.

Delaware Balanced-9
<PAGE>

Delaware Balanced Series
Notes to Financial Statements (Continued)

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. 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 December 31, 1999, were as follows:

Market value of Market value of
securities on loan collateral
------------------ ----------
$8,545,274 $8,741,056

Net income from securities lending activity for the year ended December 31,
1999, was $76,503 and is included in interest income on the Statement of
Operations.

8. Tax Information (Unaudited)
For the fiscal year ended December 31, 1999, the Series designates as long-term
capital gains and ordinary income distributions paid during the year as follows:

* Items (A) and (B) are based on a percentage of the Series' total
distributions.
** Item (D) is based on a percentage of ordinary income of the Series.
(1) Qualifying dividends represent dividends which qualify for the corporate
dividends received deduction.To the Shareholders and Board of Directors

Delaware Balanced-10
<PAGE>

Delaware Group Premium Fund-Delaware Balanced Series
Report of Independent Auditors

To the Shareholders and Board of Trustees
Delaware Group Premium Fund-Delaware Balanced Series

We have audited the accompanying statement of net assets of Delaware Balanced
Series (the "Series") as of December 31, 1999, and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the five years in the period then ended. These financial statements and
financial highlights are the responsibility of the Series' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Delaware Balanced Series at December 31, 1999, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended, and its financial highlights for each of the five years
in the period then ended, in conformity with accounting principles generally
accepted in the United States.

/s/ Ernst & Young LLP

Philadelphia, Pennsylvania
February 4, 2000

Delaware Balanced-11
<PAGE>
FOR GROWTH OF CAPITAL

DelCap Series

Investment Strategy and Performance in 1999
The stock market recovered dramatically from its slump of the fall of 1998.
The success of the market was driven by some very large, successful companies.
Medium-sized and smaller stocks, for the most part, remained on the sidelines
during much of the year.
Despite the difficulties experienced by medium-sized companies, DelCap
Series, which concentrates on medium-size companies performed very well. The
Series provided a total return of 62.94% (capital change plus reinvestment of
distributions) for the year ended December 31, 1999. The Series outperformend
its benchmark, the Russell MidCap Growth Index, which provided a total return of
51.98% for the same period.
The Series is built on stringent stock selection and in-depth fundamental
research. We seek mid-sized companies that have a demonstrated history of growth
and have the potential to support continued growth.

Portfolio Snapshot

DelCap Series is diversified across a wide range of sectors to better manage
the risks related to medium-sized companies.
Many of our consumer stock selections performed well in fiscal 1999 as
consumer confidence soared. Our positions included a combination of retailers,
food processors and consumer service companies. Although retail and consumer
stocks have been volatile the last few years, companies with strong fundamentals
and excellent management teams have delivered double digit returns in a strong
domestic economy. We believe this trend will continue.
Technology stocks performed extremely well for the Series during 1999. The
technology area was one of the Series' largest concentrations of stocks and our
best performing sector. Our holdings in semiconductor companies and
technology-based telecommunications companies boosted performance.

Investment Outlook
The economy is still growing at a rapid clip. In the coming months, we expect
to:
o Focus on companies that we believe will meet or exceed expected earnings;
o Maintain a stock portfolio of medium-size companies that we believe have a
projected average overall earnings growth of 20%;
o Emphasize consumer and technology stocks, while increasing our position in
financial stocks as opportunities arise.

- --------------------------------------------------------------------------------
DelCap Series Investment Objective
Seeks long-term capital appreciation. It attempts to achieve this objective by
investing in stock of medium-sized companies that the investment manager
believes will grow more rapidly than the average of stocks listed in the S&P 500
Index.
- --------------------------------------------------------------------------------

DelCap-1

<PAGE>

DelCap Series
Average Annual Total Returns
--------------------------------
Lifetime 17.75%
Five Years 26.95%
One Year 62.94%

For periods ending December 31, 1999

Growth of a $10,000 investment
July 12, 1991 through
December 31, 1999
Russell Mid-Cap
DelCap Series Growth Index
------------- ---------------
07/12/1991 $10,000.00 $10,000
12/31/1991 $11,030.00 $11,552
12/31/1992 $11,249.55 $12,559
12/31/1993 $12,549.92 $13,963
12/31/1994 $12,105.79 $13,663
12/31/1995 $15,680.73 $18,306
12/31/1996 $17,947.91 $21,509
12/31/1997 $20,621.59 $26,356
12/31/1998 $24,500.65 $31,065
12/31/1999 $39,922.89 $47,214

Past performance is not a guarantee of future results. Return and share price
will fluctuate so that shares, when redeemed, may be worth more or less than
their original cost.

The chart shows a $10,000 investment in DelCap Series and the Russell MidCap
Growth Index for the period from the Series' inception on July 12, 1991 through
December 31, 1999. All dividends and capital gains were reinvested. The Index is
unmanaged, with no set investment objective and does not include the "real
world" costs of managing a mutual fund. Earnings from a variable annuity
investment compound tax-free until withdrawal, so no adjustments were made for
income taxes. The effect of an expense limitation is included in the chart.
Performance does not reflect insurance fees related to a variable annuity
product investment nor the deferred sales charge that would apply to certain
withdrawals of investments held for less than eight years. Performance shown
here would have been reduced if such fees were included and the expense
limitation was removed. For more information about fees, consult your variable
annuity prospectus.

DelCap-2
<PAGE>

Delaware Group Premium Fund-DelCap Series
Statement of Net Assets
December 31, 1999

Number Market
of Shares Value
COMMON STOCK-93.08%
Banking, Finance & Insurance-1.49%
Ambac Financial Group ............................. 61,800 $ 3,225,185
-----------
3,225,185
-----------

Cable, Media & Publishing-19.57%
+*ADELPHIA COMMUNICATIONS CLASS A ................... 104,600 6,864,375
+*AMFM .............................................. 51,300 4,014,225
*CLEAR CHANNEL COMMUNICATIONS ...................... 88,761 7,921,919
+*Echostar Communications Class A ................... 56,600 5,518,500
*Hispanic Broadcasting ............................. 40,900 3,771,747
InterPublic Group ................................. 87,500 5,047,656
+*Lamar Advertising ................................. 48,100 2,913,056
Omnicom Group ..................................... 48,500 4,850,000
*Spanish Broadcasting Systems ...................... 34,400 1,384,600
-----------
42,286,078
-----------
Computers & Technology-24.06%
*Ariba ............................................. 12,600 2,234,925
*Checkfree Holdings ................................ 24,200 2,528,900
*CITRIX SYSTEMS .................................... 76,800 9,446,400
+*Extreme Networks .................................. 34,400 2,872,400
*Fiserv ............................................ 72,500 2,777,656
*Internap Network Services ......................... 23,500 4,065,500
*LEGATO SYSTEMS .................................... 117,000 8,051,063
*Peregrine Systems ................................. 42,500 3,577,969
*S1 ................................................ 51,800 4,046,875
*VERITAS SOFTWARE .................................. 72,100 10,319,313
*Whittman-Hart ..................................... 38,400 2,059,200
-----------
51,980,201
-----------
Consumer Products-3.92%
*GEMSTAR INTERNATIONAL
GROUP LIMITED .................................... 118,800 8,464,500
-----------
8,464,500
-----------
Electronics & Electrical Equipment-15.25%
*Altera ............................................ 66,900 3,315,731
*Applied Materials ................................. 26,800 3,395,225
+*E-Tek Dynamics .................................... 25,900 3,486,788

<PAGE>

Number Market
of Shares Value
COMMON STOCK (Continued)
Electronics & Electrical Equipment (Continued)
*JDS UNIPHASE ...................................... 37,000 $ 5,968,563
*PMC-SIERRA ........................................ 66,300 10,628,719
*XILINX ............................................ 135,400 6,156,469
-----------
32,951,495
-----------
Leisure, Lodging & Entertainment-3.79%
*Brinker International ............................. 96,900 2,325,600
*Premier Parks ..................................... 41,200 1,189,650
+*Prime Hospitality ................................. 109,500 964,969
Royal Caribbean Cruises ........................... 75,300 3,713,231
-----------
8,193,450
-----------
Retail-9.50%
*Bed Bath & Beyond ................................. 121,200 4,211,700
*Best Buy .......................................... 23,200 1,164,350
*Jack in the Box ................................... 147,700 3,055,544
*Kohl's ............................................ 53,800 3,883,688
*Outback Steakhouse ................................ 101,200 2,624,875
*Papa John's International ......................... 51,500 1,342,219
*Staples ........................................... 80,300 1,666,225
*Toys R Us ......................................... 180,000 2,576,250
-----------
20,524,851
-----------
Telecommunications-14.25%
+*American Tower Class A ............................ 146,800 4,486,575
*Ciena ............................................. 59,300 3,409,750
*Global Crossing Limited ........................... 83,851 4,192,550
+*McLeod USA ........................................ 50,200 2,955,525
*NETWORK APPLIANCE ................................. 121,600 10,100,400
+*NEXTLINK Communications ........................... 50,800 4,219,575
*TeleCorp PCS ...................................... 37,500 1,425,000
-----------
30,789,375
-----------
Textiles, Apparel & Furniture-1.25%
*Jones Apparel Group ............................... 99,200 2,690,800
-----------
2,690,800
-----------
Total Common Stock
(cost $111,893,091) .............................. 201,105,935
-----------

- -------------
Top 10 stock holdings, representing 38.8% of net assets, are printed in bold.

DelCap-3

<PAGE>
DelCap Series
Statement of Net Assets (Continued)

Principal Market
Amount Value
REPURCHASE AGREEMENTS-5.80%
With Chase Manhattan 2.50%
1/3/00 (dated 12/31/99,
collateralized by $3,539,000
U.S. Treasury Notes 4.75%
due 2/15/04, market value
$3,399,841) .................................... $3,324,000 $3,324,000
With J.P. Morgan Securities 3.00%
1/3/00 (dated 12/31/99,
collateralized by $1,352,000
U.S. Treasury Notes 6.375%
due 9/30/01, market value
$1,376,684 and $1,317,000
U.S. Treasury Notes 6.625%
due 4/30/02, market value
$1,341,776 and $1,313,000
U.S.Treasury Notes 6.25%
due 6/30/02, market value
$1,312,348) .................................... 3,950,000 3,950,000
With PaineWebber 3.00% 1/3/00
(dated 12/31/99, collateralized
by $1,353,000 U.S. Treasury Notes
5.625% due 11/30/00, market value
$1,354,378 and $1,317,000
U.S. Treasury Notes 5.375%
due 2/15/01, market value
$1,332,712) .................................... 2,633,000 2,633,000
With Prudential Securities 2.75% 1/3/00
(dated 12/31/99, collateralized by
$2,745,000 U.S. Treasury Bills due
5/18/00, market value $2,687,576) .............. 2,633,000 2,633,000
------------
Total Repurchase Agreements
(cost $12,540,000) 12,540,000
------------

TOTAL MARKET VALUE OF SECURITIES-98.88% (cost $124,433,091) ... $213,645,935

RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES-1.12% ......... 2,415,910
------------
NET ASSETS APPLICABLE TO 7,568,399 SHARES OUTSTANDING;
EQUIVALENT TO $28.55 PER SHARE-100.00% ..................... $216,061,845
============
COMPONENTS OF NET ASSETS AT DECEMBER 31, 1999:

Shares of beneficial interest (unlimited authorization-no par) $104,081,676
Accumulated net realized gain on investments .................. 22,767,325
Net unrealized appreciation of investments .................... 89,212,844
------------
Total net assets .............................................. $216,061,845
============

- ---------------
*Non-income producing security for the year ended December 31, 1999.
+Security is partially or fully on loan.

See accompanying notes

DelCap-4

<PAGE>
Delaware Group Premium Fund-
DelCap Series
Statement of Operations
Year Ended December 31, 1999

INVESTMENT INCOME:
Dividends ......................................... $ 257,142
Interest .......................................... 533,988
-----------
791,130
-----------

EXPENSES:
Management fees ................................... 1,088,438
Accounting and administration ..................... 46,378
Reports and statements to shareholders ............ 14,800
Professional fees ................................. 13,075
Taxes (other than taxes on income) ................ 7,770
Dividend disbursing and transfer agent
fees and expenses .............................. 4,850
Trustees' fees .................................... 2,680
Registration fees ................................. 1,550
Custodian fees .................................... 2,580
Other ............................................. 14,924
-----------
1,197,045
Less expenses paid indirectly ..................... (5,445)
-----------

Total expenses .................................... 1,191,600
-----------
NET INVESTMENT LOSS ............................... (400,470)
-----------

NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS:
Net realized gain on investments .................. 24,142,493
Net change in unrealized appreciation /
depreciation of investments .................... 57,703,960
-----------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS ............................ 81,846,453
-----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ...................... $81,445,983
===========

See accompanying notes
<PAGE>

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

Year Ended Year Ended
12/31/99 12/31/98
----------- -----------
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS:
Net investment loss ............................... $(400,470) $ (177,043)
Net realized gain on investments .................. 24,142,493 5,972,689
Net change in unrealized appreciation /
depreciation of investments .................... 57,703,960 14,448,864
------------ ------------
Net increase in net assets
resulting from operations ...................... 81,445,983 20,244,510
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain on investments .................. (6,882,148) (9,882,425)
------------ ------------

CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold ......................... 52,179,408 19,648,168
Net asset value of shares issued upon
reinvestment of distributions from
net realized gain on investments ............... 6,882,148 9,882,425
------------ ------------
59,061,556 29,530,593
Cost of shares repurchased ........................ (48,111,245) (19,799,484)
------------ ------------
Increase in net assets derived from
capital share transactions ..................... 10,950,311 9,731,109
------------ ------------

NET INCREASE IN NET ASSETS ........................ 85,514,146 20,093,194
------------ ------------

NET ASSETS:
Beginning of year ................................. 130,547,699 110,454,505
------------ ------------
End of year ....................................... $216,061,845 $130,547,699
============ ============

See accompanying notes

DelCap-5
<PAGE>

Delaware Group Premium Fund-DelCap Series
Financial Highlights

Selected data for each share of the Series outstanding throughout each period
were as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997 1996 1995
----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ........................ $18.550 $17.270 $15.890 $15.130 $11.750

Income (loss) from investment operations:
Net investment income (loss)(1)............................ (0.055) (0.026) (0.010) (0.015) 0.072
Net realized and unrealized gain on investments ........... 11.055 2.901 2.260 2.030 3.378
------- ------- ------- ------- -------
Total from investment operations .......................... 11.000 2.875 2.250 2.015 3.450
------- ------- ------- ------- -------

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

Net asset value, end of year .............................. $28.550 $18.550 $17.270 $15.890 $15.130
======= ======= ======= ======= =======

Total return .............................................. 62.94% 18.81% 14.90% 14.46% 29.53%

Ratios and supplemental data:
Net assets, end of year (000 omitted) ..................... $216,062 $130,548 $110,455 $79,900 $58,123
Ratio of expenses to average net assets ................... 0.82% 0.80% 0.80% 0.80% 0.80%
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly ........ 0.82% 0.86% 0.87% 0.82% 0.85%
Ratio of net investment income (loss)
to average net assets (0.27%) (0.16%) (0.06%) (0.11%) 0.61%
Ratio of net investment income (loss) to average net assets
prior to expense limitation and expenses paid indirectly (0.27%) (0.22%) (0.13%) (0.13%) 0.56%
Portfolio turnover 132% 142% 134% 85% 73%
</TABLE>
- -----------
(1) Per share information for the years ended December 31, 1997, 1998 and 1999
was based on the average shares outstanding method.

See accompanying notes

DelCap-6
<PAGE>
Delaware Group Premium Fund-DelCap Series
Notes to Financial Statements
December 31, 1999

Delaware Group Premium Fund (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 Delaware Business Trust and offers 18 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, the Trend Series and the U.S. Growth
Series. These financial statements and the related notes pertain to the DelCap
Series (the "Series"). The shares of the Fund are sold only to separate accounts
of life insurance companies.

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

The Series will make distributions 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 execution. The amount of
these expenses was approximately $3,365 for the year ended December 31, 1999.
The Series may receive earnings credits from its custodian when positive cash
balances are maintained, which are used to offset custody fees. These credits
were $2,080 for the year ended December 31, 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".

DelCap-7
<PAGE>
DelCap Series
Notes to Financial Statements (Continued)

On December 31, 1999, the Series had liabilities payable to affiliates as
follows:

Dividend disbursing
Investment transfer agent,
management accounting fees Other expenses
fee payable to and other expenses payable to DMC
DMC payable to DSC and affiliates
-------------- -------------------- ----------------
$120,726 $907 $16,695

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

3. Investments
During the year ended December 31, 1999, the Series made purchases and sales of
investment securities other than U.S. government securities and temporary cash
investments as follows:

Purchases ................................. $182,008,243
Sales ..................................... $188,228,893

At December 31, 1999, the aggregate cost of securities and unrealized
appreciation (depreciation) for federal income tax purposes for the Series were
as follows:

4. Capital Shares
Transactions in capital shares were as follows:
<TABLE>
<CAPTION>
Shares issued upon
reinvestment of distributions
from net realized Shares Net
Shares sold gain on investments repurchased increase
----------- ----------------------------- ----------- --------
<S> <C> <C> <C> <C>
Year ended December 31, 1999 ........ 2,424,830 404,119 (2,296,410) 532,539
Year ended December 31, 1998 ........ 1,184,490 657,513 (1,201,127) 640,876
</TABLE>

5. Line of Credit
The Series has a committed line of credit for $6,400,000. No amount was
outstanding at December 31, 1999, or at any time during the year.

DelCap-8
<PAGE>
DelCap 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. 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 December 31, 1999 were as follows:

Market Value of Market Value of
Securities on Loan Collateral
------------------ ---------------
$29,184,322 $29,461,200

Net income from securities lending activities for the year ended December 31,
1999 was $83,086 and is included in interest income on the Statement of
Operations.

7. Tax Information (Unaudited)
For the fiscal year ended December 31, 1999, the Series designates as long-term
capital gains and ordinary income distributions paid during the year as follows:

- -----------
* Items (A) and (B) are based on a percentage of the Series' total
distributions.

** Item (D) is based on a percentage of ordinary income of the Series.

(1) Qualifying dividends represent dividends which qualify for the corporate
dividends received deduction.

DelCap-9

<PAGE>
Delaware Group Premium Fund-DelCap Series
Report of Independent Auditors

To the Shareholders and Board of Trustees
Delaware Group Premium Fund--DelCap Series

We have audited the accompanying statement of net assets of DelCap Series (the
"Series") as of December 31, 1999, and the related statement of operations for
the year then ended, the statements of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
five years in the period then ended. These financial statements and financial
highlights are the responsibility of the Series' management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of DelCap
Series at December 31, 1999, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended, and its financial highlights for each of the five years in the
period then ended, in conformity with accounting principles generally accepted
in the United States.

/s/ Ernst & Young LLP

Philadelphia, Pennsylvania
February 4, 2000

DelCap-10
<PAGE>

FOR INCOME

Delchester Series

Investment Strategy and Performance in 1999
Though 1999 marked the stock market's recovery from the losses of the
previous summer, it remained a difficult year for U.S. high-yield corporate
bonds. Low demand for high-yield, higher risk bonds sharply reduced market
liquidity and generally caused high-yield bond prices to decline during the
year.
Early in the year, investor demand focused on the highest yielding, lowest
quality segments of the market--bonds rated CCC and below. Because Delchester
Series' management emphasizes higher quality, slightly lower yielding bonds
within the high-yield universe--those rated B and BB--the Series did not benefit
as much from the rising prices of CCC-rated bonds. Beginning in the second
quarter of 1999, higher interest rates and volatility in the U.S. stock market
re-ignited concerns about credit risk. Consequently, demand for high-yield bonds
of all quality ratings weakened again and prices declined.
For 1999, Delchester Series had a total return of -2.64% (capital change with
reinvestment of distributions). The Series trailed its benchmark, the Salomon
Smith Barney High-Yield Cash Pay Bond Index which returned 2.62% for the period.
Though we attribute the Series' underperformance primarily to our focus on bonds
rated B and BB, we remain committed to that strategy because we believe it is a
sound approach for the long term.

Portfolio Snapshot
In managing the Delchester Series, we look for bonds that offer a high level
of income from issuers who demonstrate a strong likelihood of being able to pay
their debts. We continued to focus on bonds rated B, which typically have higher
yields than bonds rated BB. Single B bonds represented almost 67% of net assets,
while BB bonds represented almost 30% of net assets as of December 31, 1999.
We had several holdings of small bond issues that detracted from our
performance. However, because of liquidity problems in the high-yield bond
market, we continued to hold the bonds and collect the high income they paid,
rather than realize a capital loss.
Given that smaller bond offerings (up to $100 million) now appear less likely
to gain sponsorship from Wall Street, we are shifting toward bonds that were
issued in offerings of $200 million or more. Increasing the Series' holdings of
larger issue bonds should position us better for the market conditions going
forward.

Investment Outlook
The high-yield bond market is in the midst of an unusual period in its
history. In spite of a strong domestic economy and economic recovery in Asia and
Latin America, the high-yield bond market has been stymied by poor trading
liquidity and an uncertain market outlook.
If the U.S. economy remains strong and fundamental conditions in the
high-yield market--relatively strong credit quality, low default rates and
above-average yields--do not change, we believe investors will eventually
reallocate assets to high-yield bonds, seeking to capture compelling
opportunities for high current income with potential for capital appreciation.

- --------------------------------------------------------------------------------
Delchester Series Investment Objective
Seeks as high a level of current income as possible. It attempts to achieve
its objective by investing in rated and unrated corporate bonds, including
higher risk, non-investment grade bonds, U.S. government securities and
commercial paper.
- --------------------------------------------------------------------------------

Delchester-1
<PAGE>

Delchester Series
Average Annual Total Returns
----------------------------
Ten Years +8.77%
Five Years +7.19%
One Year -2.64%

For periods ending December 31, 1999

Growth of a $10,000 Investment
January 1, 1990 through Salomon Smith Barney High Yield
December 31, 1999 Delchester Series Cash Pay Bond Index

12/31/1989 $10,000.00 $10,000.00
12/30/1990 $9,286.72 $ 9,296.17
12/31/1991 $12,772.60 $12,478.54
12/31/1992 $14,489.71 $14,768.85
12/31/1993 $16,859.60 $17,332.71
12/31/1994 $16,376.05 $17,190.58
12/31/1995 $18,914.89 $20,496.61
12/31/1996 $21,333.36 $22,719.71
12/31/1997 $24,241.37 $25,705.57
12/31/1998 $23,738.68 $26,843.56
12/31/1999 $23,170.36 $27,065.95

Past performance is not a guarantee of future results. Return and share price
will fluctuate so that shares, when redeemed, may be worth more or less than
their original cost.

The chart shows a $10,000 investment in both the Delchester Series and the
Salomon Smith Barney High-Yield Cash Pay Bond Index for the 10-year period from
January 1, 1990 through December 31, 1999. All dividends and capital gains were
reinvested. The Index is unmanaged, with no set investment objective and does
not include the "real world" costs of managing a mutual fund. Earnings from a
variable annuity investment compound tax-free until withdrawal, so no
adjustments were made for income taxes. The effect of an expense limitation is
included in the chart. Performance does not reflect insurance fees related to a
variable annuity investment nor the deferred sales charge that would apply to
certain withdrawals of investments held for less than eight years. Performance
shown here would have been reduced if such fees were included and the expense
limitation was removed. For more information about fees, consult your variable
annuity prospectus.

Delchester-2

<PAGE>

Delaware Group Premium Fund-Delchester Series
Statement of Net Assets
December 31, 1999

Principal Market
Amount Value
CORPORATE BONDS-84.86%
Automobiles & Automotive Parts-2.45%
Accuride sr sub nts 9.25% 2/1/08 .................... $ 300,000 $ 277,500
Holley Performance Products sr nts
12.25% 9/15/07 .................................... 1,000,000 955,000
Safety Components International
sr sub nts 10.125% 7/15/07 ........................ 600,000 372,000
Venture Holdings Trust sr sub nts
12.00% 6/1/09 ..................................... 1,000,000 910,000
---------
2,514,500
---------
Banking, Finance & Insurance-1.83%
Willis Corroon co guarantee
9.00% 2/1/09 ...................................... 2,250,000 1,878,750
---------
1,878,750
---------
Buildings & Materials-1.85%
Formica sr sub nts 10.875% 3/1/09 ................... 800,000 732,000
K. Hovnanian Enterprises co guarantee
9.125% 5/1/09 ..................................... 700,000 675,500
Nortek sr nts 9.25% 3/15/07 ......................... 500,000 490,000
---------
1,897,500
---------
Cable, Media & Publishing-3.72%
Echostar DBS sr nts 9.25% 2/1/06 .................... 625,000 628,125
Pegasus Communications sr nts
9.625% 10/15/05 ................................... 250,000 253,750
PREMIER GRAPHICS sr nts
11.50% 12/1/05 .................................... 400,000 288,000
+PX Escrow sr disc nts 9.625% 2/1/06 ................. 750,000 367,500
Sinclair Broadcast Group sr sub nts
8.75% 12/15/07 .................................... 1,200,000 1,128,000
Sullivan Graphics sr sub nts
12.75% 8/1/05 ..................................... 250,000 259,688
+United International Holdings
sr disc nts 10.75% 2/15/08 ........................ 1,400,000 896,000
---------
3,821,063
---------
Chemicals-5.92%
Aqua Chemical sr sub nts
11.25% 7/1/08 ..................................... 800,000 456,000
Geo Specialty Chemicals sr sub nts
10.125% 8/1/08 .................................... 100,000 93,500
Huntsman sr sub nts 9.50% 7/1/07 .................... 400,000 380,000
Koppers unsec sr sub nts
9.875% 12/1/07 .................................... 300,000 273,000
LaRoche sr sub nts 9.50% 9/15/07 .................... 1,500,000 412,500
Lyondell Chemical sr sub nts
10.875% 5/1/09 .................................... 900,000 936,000
Sterling Chemicals co guarantee
12.375% 7/15/06 ................................... 1,050,000 1,084,125
Sterling Chemicals sr sub nts
11.75% 8/15/06 .................................... 200,000 150,000
ZSC Specialty Chemical co guarantee
11.00% 7/1/09 ..................................... 2,200,000 2,288,000
---------
6,073,125
---------
Computers & Technology-0.16%
+Cellnet Data Systems sr disc nts
14.00% 10/1/07 .................................... 1,000,000 130,000
Federal Data sr sub nts 10.125% 8/1/05 .............. 50,000 36,000
---------
166,000
---------

<PAGE>

Principal Market
Amount Value
CORPORATE BONDS (Continued)
Consumer Products-5.33%
Albecca sr sub nts 10.75% 8/15/08 ................... $ 400,000 $ 276,000
Burhrmann US sr sub nts
12.25% 11/1/09 .................................... 900,000 936,000
Derby Cycle sr nts 10.00% 5/15/08 ................... 1,300,000 741,000
Desa International sr sub nts
9.875% 12/15/07 ................................... 715,000 514,800
Drypers sr nts 10.25% 6/15/07 ....................... 500,000 408,750
Home Interiors & Gifts sr sub nts
10.125% 6/1/08 .................................... 450,000 384,750
+Iron Age sr disc nts 12.125% 5/1/09 ................. 500,000 140,000
Iron Age co guarantee 9.875% 5/1/08 ................. 300,000 222,375
Polaroid sr nts 11.50% 2/15/06 ...................... 950,000 926,250
Revlon Consumer Products sr sub nts
8.625% 2/1/08 ..................................... 1,800,000 918,000
---------
5,467,925
---------
Electronics & Electrical Equipment-1.29%
Protection One Alarm co guarantee
7.375% 8/15/05 .................................... 1,650,000 1,320,000
---------
1,320,000
---------
Energy-4.91%
First Wave Marine sr nts 11.00% 2/1/08 .............. 900,000 635,625
Frontier Oil sr nts 11.75% 11/15/09 ................. 500,000 492,500
Gulf Canada Resources sr sub debs
9.25% 1/15/04 ..................................... 600,000 600,000
RBF Finance co guarantee
11.375% 3/15/09 ................................... 2,475,000 2,679,188
+Universal Compression sr disc nts
9.875% 2/15/08 .................................... 1,000,000 633,750
---------
5,041,063
---------
Environmental Services-1.97%
Allied Waste sr sub nts 10.00% 8/1/09 ............... 1,600,000 1,432,000
Norcal Waste Systems co guarantee
13.50% 11/15/05 ................................... 550,000 591,250
---------
2,023,250
---------
Food, Beverage & Tobacco-3.85%
Ameriking sr nts 10.75% 12/1/06 ..................... 200,000 186,000
Ameriserve Food Distributors sr sub nts
10.125% 7/15/07 ................................... 500,000 180,000
Carrols sr sub nts 9.50% 12/1/08 .................... 800,000 736,000
Chiquita Brands sr nts 10.00% 6/15/09 ............... 2,000,000 1,500,000
DiGiorgio sr nts 10.00% 6/15/07 ..................... 650,000 604,500
Fresh Foods co guarantee
10.75% 6/1/06 ..................................... 800,000 747,000
---------
3,953,500
---------
Healthcare & Pharmaceuticals-4.93%
+Alaris Medical sr disc nts 11.125% 8/1/08 ........... 1,435,000 617,050
Fisher Scientific International
sr sub nts 9.00% 2/1/08 ............................ 1,850,000 1,780,625
Insight Health Services co guarantee
9.625% 6/15/08 .................................... 1,000,000 945,000
Kinetic Concepts sr sub nts
9.625% 11/1/07 .................................... 1,000,000 755,000
Tenet Healthcare sr sub nts
8.625% 1/15/07 .................................... 1,000,000 959,255
---------
5,056,930
---------

Delchester-3

<PAGE>

Delchester Series
Statement of Net Assets (Continued)

Principal Market
Amount Value
CORPORATE BONDS (Continued)
Industrial Machinery-0.84%
Burke Industries unsec sr nts
10.00% 8/15/07 .................................... $ 500,000 $ 240,000
Grove Worldwide sr sub nts
9.25% 5/1/08 ...................................... 600,000 192,000
Tokheim co guarantee 11.375% 8/1/08 ................. 700,000 427,000
---------
859,000
---------
Leisure, Lodging & Entertainment-6.83%
Boca Resorts co guarantee
9.875% 4/15/09 .................................... 1,250,000 1,215,625
Cinemark USA sr sub nts
9.625% 8/1/08 ..................................... 1,850,000 1,711,250
Hollywood Casino co guarantee
11.25% 5/1/07 ..................................... 1,000,000 1,045,000
Majestic Star co guarantee
10.875% 7/1/06 .................................... 1,000,000 975,000
Outboard Marine co guarantee
10.75% 6/1/08 ..................................... 850,000 620,500
Regal Cinemas sr sub nts 9.50% 6/1/08 ............... 1,550,000 1,205,125
United Artists Theatre sr sub nts
9.75% 4/15/08 ..................................... 1,175,000 235,000
---------
7,007,500
---------
Metals & Mining-4.11%
Algoma Steel mtg nts 12.375% 7/15/05 ................ 950,000 897,750
Doe Run Resources co guarantee
11.25% 3/15/05 .................................... 1,000,000 957,500
Great Lakes Carbon co guarantee
10.25% 5/15/08 .................................... 750,000 712,500
Jorgensen Earle sr nts 9.50% 4/1/05 ................. 950,000 912,000
Metallurg co guarantee 11.00% 12/1/07 ............... 800,000 740,000
---------
4,219,750
---------
Packaging & Containers-1.06%
+SF Holdings Group sr disc nts
12.75% 3/15/08 .................................... 1,500,000 851,250
Sweetheart Cup sr sub nts
10.50% 9/1/03 ..................................... 250,000 239,375
---------
1,090,625
---------
Paper & Forest Products-2.11%
Doman Industries sr nts 8.75% 3/15/04 ............... 1,400,000 1,204,000
Fibermark sr nts 9.375% 10/15/06 .................... 400,000 405,000
MAXXAM Group sr sec nts
12.00% 8/1/03 ..................................... 600,000 559,500
---------
2,168,500
---------
Retail-2.37%
Advance Stores sr sub nts
10.25% 4/15/08 .................................... 800,000 696,000
Fleming sr sub nts 10.50% 12/1/04 ................... 800,000 744,000
Frank's Nursery & Crafts sr sub nts
10.25% 3/1/08 ..................................... 800,000 544,000
Leslie's Poolmart sr nts
10.375% 7/15/04 ................................... 500,000 447,500
---------
2,431,500
---------
Telecommunications-24.21%
AMSC Acquisition sr nts 12.25% 4/1/08 ............... 650,000 516,750
BTI Telecom sr nts 10.50% 9/15/07 ................... 550,000 514,250
+Call-Net Enterprises sr disc nts
10.80% 5/15/09 .................................... 1,250,000 612,500

<PAGE>

Principal Market
Amount Value
CORPORATE BONDS (Continued)
Telecommunications (Continued)
Covad Communications Group sr nts
12.50% 2/15/09 .................................... $1,000,000 $1,042,500
Global Crossing sr nts 9.50% 11/15/09 ............... 1,300,000 1,293,500
+GST USA sr disc nts 13.875% 12/15/05 ................ 1,500,000 1,102,500
Hyperion Telecommunications sr nts
12.25% 9/1/04 ..................................... 1,000,000 1,077,500
+KMC Telecom Holdings sr disc nts
12.50% 2/15/08 .................................... 2,500,000 1,356,250
KMC Telecom Holdings sr nts
13.50% 5/15/09 .................................... 400,000 395,000
Metromedia Fiber sr nts
10.00% 11/15/08 ................................... 1,050,000 1,078,875
Metromedia Fiber Network sr nts
10.00% 12/15/09 ................................... 300,000 309,000
+Microcell Telecommunications sr disc nts
14.00% 6/1/06 ..................................... 1,260,000 1,118,250
+Nextel Partners sr disc nts
14.00% 2/1/09 ..................................... 1,500,000 990,000
+Nextlink Communications sr disc nts
12.125% 12/1/09 ................................... 1,000,000 597,500
Nextlink Communications sr nts
10.75% 11/15/08 ................................... 1,400,000 1,456,000
Pathnet sr nts 12.25% 4/15/08 ....................... 200,000 128,500
PSINet sr nts 11.00% 8/1/09 ......................... 1,000,000 1,035,000
RCN sr nts 11.25% 1/15/10 ........................... 400,000 400,000
RSL Communications Limited co
guarantee 12.25% 11/15/06 ......................... 750,000 768,750
+Telecorp PCS co guarantee
11.625% 4/15/09 ................................... 1,500,000 948,750
+Teligent sr disc nts 11.50% 3/1/08 .................. 2,750,000 1,615,625
Teligent sr nts 11.50% 12/1/07 ...................... 1,000,000 975,000
+21st Century Telecom Group sr disc nts
12.25% 2/15/08 .................................... 700,000 469,000
USA Mobile Communication sr nts
14.00% 11/1/04 .................................... 500,000 435,000
Verio sr nts 10.625% 11/15/09 ....................... 1,450,000 1,489,875
Viatel sr nts 11.50% 3/15/09 ........................ 891,839 894,069
+Viatel sr disc notes 12.50% 4/15/08 ................. 1,050,000 661,500
Worldwide Fiber sr nts 12.00% 8/1/09 ................ 1,500,000 1,563,750
----------
24,845,194
----------
Textiles, Apparel & Furniture-0.16%
Globe Manufacturing sr sub nts
10.00% 8/1/08 ..................................... 350,000 168,000
----------
168,000
----------
Transportation & Shipping-3.83%
Avis Rent A Car co guarantee
11.00% 5/1/09 ..................................... 2,200,000 2,326,500
Budget Group sr nts 9.125% 4/1/06 ................... 850,000 790,500
Navigator Gas Transport nts
10.50% 6/30/07 .................................... 400,000 198,000
Navigator Gas Transport units
12.00% 6/30/07 .................................... 400,000 16,000
Sea Containers sr nts 10.75% 10/15/06 ............... 600,000 597,000
----------
3,928,000
----------

Delchester-4
<PAGE>
Delchester Series
Statement of Net Assets (Continued)

Principal Market
Amount Value
CORPORATE BONDS (Continued)
Utilities-0.91%
Trench Electric & Trench co guarantee
10.25% 12/15/07 ................................... $1,250,000 $ 937,500
----------
937,500
----------
Miscellaneous-0.22%
Indesco International sr sub nts
9.75% 4/15/08 ..................................... 500,000 225,000
----------
225,000
----------
Total Corporate Bonds
(cost $98,364,094) ................................ 87,094,175
----------

Number of
Shares
PREFERRED STOCK-2.34%
*Dobson Communications pik ........................... 317 319,325
*Eagle-Picher Holdings pik ........................... 90 414,000
*Nebco Evans Holding pik ............................. 4,846 174,455
*Nextel Communications pik ........................... 1,066 1,103,310
*Pegasus Communications pik .......................... 126 128,673
*Pegasus Communications Unit ......................... 250 266,250
*SF Holdings Class C ................................. 3,000 3,000
*TCR Holdings Class B ................................ 3,802 38
*TCR Holdings Class C ................................ 2,091 21
*TCR Holdings Class D ................................ 5,512 55
*TCR Holdings Class E ................................ 11,405 114
----------
Total Preferred Stock
(cost $2,791,996) ................................. 2,409,241
----------

CONVERTIBLE PREFERRED STOCK-0.17%
*E.Spire Communications pik .......................... 8,593 171,863
----------
Total Convertible Preferred Stock
(cost $802,807) ................................... 171,863
----------
RIGHTS AND WARRANTS-0.12%
*American Banknote ................................... 1,500 15,000
*American Mobile Satellite ........................... 950 38,000
*Cellnet Data Systems ................................ 1,000 10,500
*Electronic Retailing System ......................... 500 75
*Gothic Energy ....................................... 1,400 1,400
*KMC Telecom Holdings ................................ 1,500 37,500
*McCaw International ................................. 31 751
*Millenium Seacarriers ............................... 200 2
*Pathnet ............................................. 200 2,000
*Spincycle ........................................... 500 5
*Terex-Appreciation .................................. 800 16,000
----------
Total Rights and Warrants
(cost $101,886) ................................... 121,233
----------

Delchester-5
<PAGE>

Delchester Series
Statement of Net Assets (Continued)

Principal Market
Amount Value

REPURCHASE AGREEMENTS-10.30%
With Chase Manhattan 2.50% 1/3/00 (dated
12/31/99, collateralized by $2,984,000
U.S. Treasury Notes 4.75% due 2/15/04,
market value $2,866,277) .......................... $2,802,000 $2,802,000
With J.P. Morgan Securities 3.00% 1/3/00
(dated 12/31/99, collateralized by
$1,140,000 U.S. Treasury Notes
6.375% due 9/30/01, market value
$1,160,631 and $1,110,000
U.S. Treasury Notes 6.625% due
4/30/02, market value $1,131,200
and $1,107,000 U.S. Treasury Notes
6.25% due 6/30/02, market value
$1,106,391) ....................................... 3,330,000 3,330,000
With PaineWebber 3.00% 1/3/00 (dated
12/31/99, collateralized by $1,141,000
U.S. Treasury Notes 5.625% due
11/30/00, market value $1,141,825
and $1,110,000 U.S. Treasury Notes
5.375% due 2/15/01, market value
$1,123,559) ....................................... 2,220,000 2,220,000
With Prudential Securities 2.75% 1/3/00
(dated 12/31/99, collateralized by
$2,314,000 U.S. Treasury Bills due
5/18/00, market value $2,265,794) ................. 2,220,000 2,220,000
------------
Total Repurchase Agreements
(cost $10,572,000) ................................ 10,572,000
------------

TOTAL MARKET VALUE OF SECURITIES-97.79% (cost $112,632,783) .... $100,368,512

RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES-2.21% .......... 2,264,972
------------
NET ASSETS APPLICABLE TO 13,829,411 SHARES OUTSTANDING;
EQUIVALENT TO $7.42 PER SHARE-100.00% ....................... $102,633,484
============
COMPONENTS OF NET ASSETS AT DECEMBER 31, 1999:
Shares of beneficial interest (unlimited authorization - no par) $129,445,599
Undistributed net investment income 72,868
Accumulated net realized loss on investments ................... (14,620,712)
Net unrealized depreciation of investments ..................... (12,264,271)
------------
Total net assets ............................................... $102,633,484
============

- -------------
*Non-income producing security for the year ended December 31, 1999.
+Zero coupon security as of December 31, 1999. The coupon shown is the step
up rate.

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

See accompanying notes

Delchester-6
<PAGE>
Delaware Group Premium Fund-
Delchester Series
Statement of Operations
Year Ended December 31, 1999

INVESTMENT INCOME:
Dividends .......................................... $ 272,603
Interest ........................................... 11,976,638
-----------
12,249,241
-----------
EXPENSES:
Management fees .................................... 739,669
Accounting and administration ...................... 50,103
Professional fees .................................. 13,385
Taxes (other than taxes on income) ................. 10,191
Reports and statements to shareholders ............. 7,880
Registration fees .................................. 3,438
Dividend disbursing and transfer agent
fees and expenses ............................... 1,996
Trustees' fees ..................................... 1,922
Custodian fees ..................................... 300
Other .............................................. 9,841
-----------
838,725
Less expenses paid indirectly ...................... (2,691)
-----------
Total expenses ..................................... 836,034
-----------

NET INVESTMENT INCOME .............................. 11,413,207
-----------

NET REALIZED AND UNREALIZED
LOSS ON INVESTMENTS:
Net realized loss on investments ................... (13,315,901)
Net change in unrealized appreciation /
depreciation of investments ..................... (1,219,031)
-----------
NET REALIZED AND UNREALIZED LOSS
ON INVESTMENTS .................................. (14,534,932)
-----------

NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS ................................. ($3,121,725)
===========

See accompanying notes

<PAGE>

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

Year Ended Year Ended
12/31/99 12/31/98
---------- ----------
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS:
Net investment income .............................. $11,413,207 $11,358,280
Net realized loss on investments ................... (13,315,901) (577,975)
Net change in unrealized appreciation /
depreciation of investments ..................... (1,219,031) (13,468,140)
----------- -----------
Net decrease in net assets
resulting from operations ....................... (3,121,725) (2,687,835)
----------- -----------

DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net investment income .............................. (11,458,462) (11,317,743)
Net realized gain on investments ................... (726,836) (32,038)
----------- -----------
(12,185,298) (11,349,781)
----------- -----------

CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold .......................... 24,182,918 45,702,613
Net asset value of shares issued upon
reinvestment of distributions from net
investment income and net realized
gain on investments ............................. 12,213,628 11,048,248
----------- -----------
36,396,546 56,750,861
Cost of shares repurchased ......................... (39,164,311) (20,879,855)
----------- -----------
Increase (decrease) in net assets derived
from capital share transactions ................. (2,767,765) 35,871,006
----------- -----------

NET INCREASE (DECREASE)
IN NET ASSETS ................................... (18,074,788) 21,833,390
----------- -----------

Net Assets:
Beginning of year .................................. 120,708,272 98,874,882
------------ ------------
End of year ........................................ $102,633,484 $120,708,272
============ ============

See accompanying notes

Delchester-7

<PAGE>
Delaware Group Premium Fund-Delchester Series
Financial Highlights

Selected data for each share of the Series outstanding throughout each period
were as follows:
<TABLE>
<CAPTION>

Year Ended December 31,
1999 1998 1997 1996 1995
---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ....................... $8.460 $9.510 $9.170 $8.940 $8.540

Income (loss) from investment operations:
Net investment income .................................... 0.781 0.906 0.863 0.853 0.872
Net realized and unrealized gain (loss) on investments ... (0.987) (1.048) 0.332 0.230 0.400
------- ------- ------- ------- -------
Total from investment operations ......................... (0.206) (0.142) 1.195 1.083 1.272
------- ------- ------- ------- -------

Less dividends and distributions:
Dividends from net investment income ..................... (0.784) (0.905) (0.855) (0.853) (0.872)
Distributions from net realized gain on investments ...... (0.050) (0.003) none none none
------- ------- ------- ------- -------
Total dividends and distributions ........................ (0.834) (0.908) (0.855) (0.853) (0.872)
------- ------- ------- ------- -------

Net asset value, end of year ............................. $7.420 $8.460 $9.510 $9.170 $8.940
======= ======= ======= ======= =======

Total return ............................................. (2.64%) (1.83%) 13.63% 12.79% 15.50%

Ratios and supplemental data:
Net assets, end of year (000 omitted) .................... $102,633 $120,708 $98,875 $67,665 $56,605
Ratio of expenses to average net assets .................. 0.72% 0.70% 0.70% 0.70% 0.69%
Ratio of net investment income to average net assets ..... 9.75% 9.85% 9.24% 9.54% 9.87%
Portfolio turnover ....................................... 110% 86% 121% 93% 74%
</TABLE>

See accompanying notes

Delchester-8
<PAGE>
Delaware Group Premium Fund-Delchester Series
Notes to Financial Statements
December 31, 1999

Delaware Group Premium Fund (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 Delaware Business Trust and offers 18 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, the Trend Series and the U.S. Growth
Series. These financial statements and the related notes pertain to the
Delchester Series (the "Series"). The shares of the Fund are sold only to
separate accounts of life insurance companies.

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

Certain expenses of the Series are paid through "soft dollar" arrangements with
brokers. These transactions are done subject to best execution. The amount of
these expenses was approximately $2,691 for the year ended December 31, 1999.
The Series may receive earnings credits from its custodian when positive cash
balances are maintained, which are used to offset custody fees. There were no
earnings credits for the year ended December 31, 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".

Delchester-9
<PAGE>
Delchester Series
Notes to Financial Statements (Continued)

DMC has elected to waive its fee and reimburse the Series 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 April 30, 2000.

On December 31, 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
------------- ------------------- --------------
$56,932 $3,473 $9,697

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

3. Investments
During the year ended December 31, 1999, the Series made purchases and sales of
investment securities other than U.S. government securities and temporary cash
investments as follows:

Purchases ..................................... $110,012,164
Sales ......................................... $113,703,820

At December 31, 1999, the aggregate cost of securities and unrealized
appreciation (depreciation) for federal income tax purposes for the Series were
as follows:

Aggregate Aggregate
Cost of unrealized unrealized Net unrealized
investments appreciation depreciation depreciation
------------ ------------ ------------ --------------
$112,740,908 $1,467,828 ($13,840,224) ($12,372,396)

For federal income tax purposes, the Series had accumulated capital losses at
December 31, 1999 as follows:

Year of
Expiration
2007
-----------
$13,033,766

4. Capital Shares
Transactions in capital 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>
Year ended December 31, 1999 2,979,441 1,528,740 (4,943,297) (435,116)
Year ended December 31, 1998 4,940,859 1,206,292 (2,277,223) 3,869,928
</TABLE>

Delchester-10

<PAGE>
Delchester Series
Notes to Financial Statements (Continued)

5. Line of Credit
The Series has a committed line of credit for $5,700,000. No amount was
outstanding at December 31, 1999, or at any time during the year.

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.

7. Tax Information (Unaudited)
For the fiscal year ended December 31, 1999, the Series designates as long-term
capital gains and ordinary income distributions paid during the year as follows:

- ------------
* Items (A) and (B) are based on a percentage of the Series' total
distributions.
** Item (D) is based on a percentage of ordinary income of the Series.
(1) Qualifying dividends represent dividends which qualify for the corporate
dividends received deduction.

Delchester-11

<PAGE>

Delaware Group Premium Fund-Delchester Series
Report of Independent Auditors

To the Shareholders and Board of Trustees
Delaware Group Premium Fund-Delchester Series

We have audited the accompanying statement of net assets of Delchester Series
(the "Series") as of December 31, 1999, and the related statement of operations
for the year then ended, the statements of changes in net assets for each of the
two years in the period then ended, and the financial highlights for each of the
five years in the period then ended. These financial statements and financial
highlights are the responsibility of the Series' management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Delchester Series at December 31, 1999, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended, and its financial highlights for each of the five years in
the period then ended, in conformity with accounting principles generally
accepted in the United States.

Ernst & Young LLP

Philadelphia, Pennsylvania
February 4, 2000

Delchester-12
<PAGE>
FOR TOTAL RETURN

Devon Series
Investment Strategy and Performance in 1999
Devon Series' performance was negatively affected by the narrow market focus
which persisted through most of fiscal 1999. For the year ended December 31,
1999, the Series provided a return of -10.13% (capital change plus reinvestment
of distributions). The unmanaged Standard & Poor's 500 Index had a total return
of 21.0% for the same period.
Devon Series adheres to a disciplined investment strategy that focuses on
what we call "transition stocks"--stocks we believe are currently selling below
their true value with strong prospects for future growth.
In evaluating a stock's total return prospects, we seek five indicators of a
company's potential success:
o An attractive stock price relative to the rest of the market;
o A history of stable earnings growth; o Substantial positive cash flow;
o Evidence of a major fundamental change (expansion or acquisition); and
o Are not widely followed or are misunderstood by Wall Street Analysts.
During 1999, our strategy precluded us from investing in the top tier
performers in the S&P 500, given that most of those stocks--including technology
stocks--had high P/E ratios, an indication that they were expensive relative to
their future earnings potential. This is the primary reason why the Fund did not
keep pace with the S&P 500.

Portfolio Snapshot
Traditionally, technology is an area where we have had less exposure than the
S&P 500. In 1999, this was due to exceptionally high prices that did not meet
our value-conscious investment criteria. As of December 31, 1999, the Series'
holdings in technology-related companies were less than 25% of the weighting of
the S&P 500.
Our strategy also typically steers us away from investing heavily in cyclical
industries--including paper, energy and chemicals--given that these areas have
historically had earnings spurts rather than the consistent growth we look for.
Capital goods companies (such as electronics and electrical equipment
companies) became an increasingly attractive area for us to invest in during
1999. The P/E ratios on capital goods companies, in general, have been
depressed, partially due to the narrowness of the U.S. stock market. We believe
these companies will benefit from the recent pick up in worldwide economic
growth, particularly in Asia and Europe.

Investment Outlook
We expect stronger worldwide economic growth in the months ahead. Given that
outlook, we are trying to position the portfolio to benefit from such
anticipated growth. We are concentrating on capital goods and selected financial
stocks which, based on our research, appear to have strong future earnings
potential and yet, are selling at relatively attractive prices.
We think our disciplined approach--and our adherence to that approach
throughout favorable and unfavorable market cycles--will prove very beneficial
over the long term.

- --------------------------------------------------------------------------------
Devon Series Investment Objective
Seeks current income and capital appreciation. It attempts to achieve this
objective by investing primarily in income- producing common stocks of large-
and mid-cap U.S. companies that the investment manager believes have the
potential for above-average dividend increases over time.
- --------------------------------------------------------------------------------

Devon-1
<PAGE>
Devon Series
Average Annual Total Returns
-------------------------------------
Lifetime +14.00%
One Year -10.13%

For periods ending December 31, 1999

Growth of a $10,000 Investment
May 1, 1997 to
December 31, 1999
S&P
Devon Series 500 Index
------------ ----------
05/01/1997 $10,000.00 $10,000.00
06/30/1997 $10,900.00 $11,084.00
09/30/1997 $12,030.00 $11,914.00
12/31/1997 $12,730.00 $12,256.00
03/31/1998 $14,256.86 $13,966.00
06/30/1998 $14,236.40 $14,427.00
09/30/1998 $13,070.49 $12,992.00
12/31/1998 $15,790.95 $15,759.00
03/31/1999 $14,472.41 $16,546.00
06/30/1999 $15,774.82 $17,712.00
09/30/1999 $13,868.09 $16,605.00
12/31/1999 $14,191.09 $19,076.00

Past performance is not a guarantee of future results. Return and share price
will fluctuate so that shares, when redeemed, may be worth more or less than
their original cost.

The chart shows a $10,000 investment in both the Devon Series and the S&P 500
Index for the period from the Series' inception on May 1, 1997 through December
31, 1999. All dividends and capital gains were reinvested. The Index is
unmanaged, with no set investment objective and does not include the "real
world" costs of managing a mutual fund. Earnings from a variable annuity
investment compound tax-free until withdrawal, so no adjustments were made for
income taxes. The effect of an expense limitation is included in the chart.
Performance does not reflect insurance fees related to a variable annuity
investment nor the deferred sales charge that would apply to certain withdrawals
of investments held for less than eight years. Performance shown here would have
been reduced if such fees were included and the expense limitation was removed.
For more information about fees, consult your variable annuity prospectus.

Devon-2

<PAGE>
Delaware Group Premium Fund-Devon Series
Statement of Net Assets
December 31, 1999

Number Market
of Shares Value
Common Stock-95.85%
Aerospace & Defense-4.86%
HONEYWELL INTERNATIONAL ............................. 46,487 $ 2,681,718
United Technologies ................................. 17,000 1,105,000
-----------
3,786,718
-----------
Automobiles & Automotive Parts-1.97%
Danaher ............................................. 31,800 1,534,350
-----------
1,534,350
-----------
Banking, Finance & Insurance-17.49%
AFLAC ............................................... 16,500 778,594
American International Group ........................ 9,106 984,585
Citigroup ........................................... 26,800 1,489,075
FEDERAL HOME LOAN MORTGAGE .......................... 50,400 2,371,950
First Tennessee National ............................ 19,700 561,450
FleetBoston Financial ............................... 30,900 1,075,706
MBNA ................................................ 88,700 2,417,075
Nationwide Financial Services Class A ............... 43,700 1,220,869
UnionBanCal ......................................... 18,900 745,369
WASHINGTON MUTUAL ................................... 76,500 1,989,000
-----------
13,633,673
-----------
Buidings & Materials-1.53%
Masco ............................................... 47,000 1,192,624
-----------
1,192,624
-----------
Cable, Media & Publishing-5.00%
GANNETT ............................................. 22,300 1,818,843
KNIGHT-RIDDER ....................................... 34,900 2,076,550
-----------
3,895,393
-----------
Chemicals-1.86%
Avery Dennison ...................................... 19,900 1,450,213
-----------
1,450,213
-----------
Computers & Technology-6.40%
*BMC Software ........................................ 20,200 1,614,737
*CSG Systems International ........................... 28,700 1,144,413
Computer Associates International ................... 16,100 1,125,994
International Business Machines ..................... 10,200 1,101,600
-----------
4,986,744
-----------
Consumer Products-4.20%
Black & Decker ...................................... 31,300 1,635,424
Dial ................................................ 67,200 1,633,800
-----------
3,269,224
-----------
Electronics & Electrical Equipment-6.66%
*Integrated Device Technologies ...................... 33,100 959,900
INTEL ............................................... 29,000 2,387,063
Symbol Technologies ................................. 16,725 1,063,083
Teleflex ............................................ 25,000 782,812
-----------
5,192,858
-----------
Energy-9.18%
Anadarko Petroleum .................................. 19,300 658,613
BP Amoco ADR ........................................ 36 2,135
Coastal ............................................. 39,200 1,389,150
Columbia Energy ..................................... 12,800 809,600
Schlumberger ........................................ 25,100 1,411,874
Shell Transport and Trading ADR ..................... 7,700 379,225
Tosco ............................................... 34,500 937,969
Transocean Sedco Forex .............................. 4,859 163,700
Unocal .............................................. 41,700 1,399,556
-----------
7,151,822
-----------
- ------------
Top 10 stock holdings, representing 27.8% of net assets, are printed in bold.

<PAGE>

Number Market
of Shares Value
COMMON STOCK (Continued)
Environmental Services-1.71%
Ecolab .............................................. 34,000 $1,330,250
----------
1,330,250
----------
Food, Beverage & Tobacco-2.59%
Bestfoods ........................................... 16,100 846,256
*Suiza Foods ......................................... 29,500 1,168,937
----------
2,015,193
----------
Healthcare & Pharmaceuticals-8.44%
American Home Products .............................. 42,100 1,660,319
Biomet .............................................. 35,800 1,432,000
Bristol-Myers Squibb ................................ 8,900 571,269
Johnson & Johnson ................................... 14,500 1,350,313
Pharmacia & Upjohn .................................. 11,000 495,000
*Watson Pharmaceuticals .............................. 29,900 1,070,794
----------
6,579,695
----------
Industrial Machinery-1.35%
Pentair ............................................. 27,400 1,054,900
----------
1,054,900
----------
Leisure, Lodging & Entertainment-2.47%
VIAD ................................................ 69,100 1,926,163
----------
1,926,163
----------
Real Estate-2.42%
CarrAmerica Realty .................................. 30,300 640,088
Developers Diversified Realty ....................... 45,100 580,663
Sun Communities ..................................... 20,700 666,281
----------
1,887,032
----------
Retail-7.74%
Blockbuster Class A ................................. 55,900 747,663
Circuit City Stores ................................. 16,000 721,000
INTIMATE BRANDS ..................................... 51,125 2,204,766
*Kroger .............................................. 53,200 1,004,150
Lowe's Companies .................................... 22,600 1,350,350
----------
6,027,929
----------
Telecommunications-9.71%
ALLTEL .............................................. 20,100 1,662,019
AT&T ................................................ 24,400 1,238,300
GTE ................................................. 20,200 1,425,363
*MCI WORLDCOM ........................................ 34,200 1,814,738
SBC Communications .................................. 29,300 1,428,375
----------
7,568,795
----------
Textiles, Apparel & Furniture-0.27%
HON Industries ...................................... 9,700 212,794
----------
212,794
----------
Total Common Stock
(cost $73,333,809) 74,696,370
----------
Convertible Preferred Stock-1.43%
Freeport McMoRan Copper & Gold ...................... 22,500 428,906
Sealed Air .......................................... 13,490 681,266
----------
Total Convertible Preferred Stock
(cost $978,354) 1,110,172
----------

Devon-3
<PAGE>
Devon Series
Statement of Net Assets (Continued)

Principal Market
Amount Value
REPURCHASE AGREEMENTS-3.11%
With Chase Manhattan 2.50%
1/3/00 (dated 12/31/99,
collateralized by $684,000
U.S. Treasury Notes
4.75% due 2/15/04,
market value $656,923) ......................... $642,000 $642,000
With J.P. Morgan Securities 3.00%
1/3/00 (dated 12/31/99,
collateralized by $261,000
U.S. Treasury Notes 6.375%
due 9/30/01, market value
$266,005 and $254,000
U.S. Treasury Notes 6.625%
due 4/30/02, market value
$259,260 and $254,000
U.S. Treasury Notes
6.25% due 6/30/02,
market value $253,574) ......................... 763,000 763,000
With PaineWebber 3.00%
1/3/00 (dated 12/31/99,
collateralized by $261,000
U.S. Treasury Notes 5.625%
due 11/30/00, market value
$261,695 and $254,000
U.S. Treasury Notes
5.375% due 2/15/01,
market value $257,509) ......................... 509,000 509,000
With Prudential Securities 2.75%
1/3/00 (dated 12/31/99,
collateralized by $530,000
U.S. Treasury Bills
due 5/18/00, market
value $519,298) ................................ 509,000 509,000
-----------
Total Repurchase Agreements
(cost $2,423,000) 2,423,000
-----------

TOTAL MARKET VALUE OF SECURITIES-100.39% (cost $76,735,163) .... $78,229,542

LIABILITIES NET OF RECEIVABLES AND OTHER ASSETS-(0.39%) ........ (300,225)
-----------
NET ASSETS APPLICABLE TO 5,722,249 SHARES OUTSTANDING;
EQUIVALENT TO $13.62 PER SHARE-100.00% ...................... $77,929,317
===========

COMPONENTS OF NET ASSETS AT DECEMBER 31, 1999:
Shares of beneficial interest (unlimited authorization-no par) . $78,255,106
Undistributed net investment income ............................ 734,592
Accumulated net realized loss on investments ................... (2,554,760)
Net unrealized appreciation of investments ..................... 1,494,379
-----------
Total net assets ............................................... $77,929,317
===========

- ------------
*Non-income producing security for the year ended December 31, 1999.
ADR - American Depository Receipt

See accompanying notes

Devon-4
<PAGE>
Delaware Group Premium Fund-Devon Series
Statement of Operations
Year Ended December 31, 1999

INVESTMENT INCOME:
Dividends ......................................... $1,091,078
Interest .......................................... 290,665
-----------
1,381,743
-----------
EXPENSES:
Management fees ................................... 533,852
Accounting and administration ..................... 30,802
Reports and statements to shareholders ............ 32,522
Custodian fees .................................... 13,185
Professional fees ................................. 9,450
Taxes (other than taxes on income) ................ 3,807
Dividend disbursing and transfer agent
fees and expenses .............................. 2,447
Trustees' fees .................................... 1,401
Other ............................................. 6,102
-----------
633,568
Less expenses paid indirectly ..................... (9,270)
-----------

Total expenses .................................... 624,298
-----------

NET INVESTMENT INCOME ............................. 757,445
-----------
NET REALIZED AND UNREALIZED
LOSS ON INVESTMENTS:
Net realized loss on investments .................. (2,551,998)
Net change in unrealized appreciation /
depreciation of investments .................... (6,947,654)
-----------
NET REALIZED AND UNREALIZED
LOSS ON INVESTMENTS ............................ (9,499,652)
-----------
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS ...................... ($8,742,207)
===========

See accompanying notes

<PAGE>

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

Year Ended Year Ended
12/31/99 12/31/98
----------- ------------

INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income .............................. $ 757,445 $ 476,986
Net realized gain (loss) on investments ............ (2,551,998) 947,836
Net change in unrealized appreciation /
depreciation of investments ..................... (6,947,654) 7,281,217
----------- -----------
Net increase (decrease) in net assets
resulting from operations ....................... (8,742,207) 8,706,039
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income .............................. (490,185) (109,925)
Net realized gain on investments ................... (947,691) (281,684)
----------- -----------
(1,437,876) (391,609)
----------- -----------

CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold .......................... 38,341,698 48,520,957
Net asset value of shares issued
upon reinvestment of distributions
from net investment income and net
realized gain on investments .................... 1,437,876 391,609
----------- -----------
39,779,574 48,912,566
Cost of shares repurchased ......................... (20,384,439) (5,166,222)
----------- -----------

Increase in net assets derived from capital
share transactions .............................. 19,395,135 43,746,344
----------- -----------

NET INCREASE IN NET ASSETS ......................... 9,215,052 52,060,774
----------- -----------
NET ASSETS:
Beginning of year .................................. 68,714,265 16,653,491
----------- -----------
End of year ........................................ $77,929,317 $68,714,265
=========== ===========

See accompanying notes

Devon-5

<PAGE>
Delaware Group Premium Fund-Devon Series
Financial Highlights

Selected data for each share of the Series outstanding throughout each period
were as follows:
<TABLE>
<CAPTION>

5/1/97(1)
Year Ended December 31, to
1999 1998 12/31/97
------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period ..................... $15.440 $12.730 $10.000

Income (loss) from investment operations:
Net investment income .................................... 0.113 0.106 0.080
Net realized and unrealized gain (loss) on investments ... (1.669) 2.889 2.650
------- ------- -------
Total from investment operations ......................... (1.556) 2.995 2.730
------- ------- -------

Less dividends and distributions:
Dividends from net investment income ..................... (0.090) (0.080) none
Distributions from net realized gain on investments ...... (0.174) (0.205) none
------- ------- -------
Total dividends and distributions ........................ (0.264) (0.285) none
------- ------- -------

Net asset value, end of period ........................... $13.620 $15.440 $12.730
======= ======= =======

Total return ............................................. (10.13%) 24.05% 27.30%

Ratios and supplemental data:
Net assets, end of period (000 omitted) .................. $77,929 $68,714 $16,653
Ratio of expenses to average net assets .................. 0.75% 0.66% 0.80%
Ratio of expenses to average net assets prior to expense
limitation and expense paid indirectly ................ 0.75% 0.66% 0.91%
Ratio of net investment income to average net assets 0.90% 1.30% 2.01%
Ratio of net investment income to average net assets prior
to expense limitation and expenses paid undirectly .... 0.90% 1.30% 1.90%
Portfolio turnover ....................................... 101% 34% 80%
</TABLE>
- ------------
(1) Date of initial public offering; ratios have been annualized and total
return has not been annualized.

See accompanying notes

Devon-6
<PAGE>

Delaware Group Premium Fund-Devon Series
Notes to Financial Statements
December 31, 1999

Delaware Group Premium Fund (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 Delaware Business Trust and offers 18 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, the Trend Series and the U.S. Growth
Series. These financial statements and the related notes pertain to the Devon
Series (the "Series"). The shares of the Fund are sold only to separate accounts
of life insurance companies.

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

The Series will make distributions 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 execution. The amount of
these expenses was approximately $1,933 for the year ended December 31, 1999.
The Fund may receive earnings credit from its custodian when positive cash
balances are maintained, which are used to offset custody fees. These credits
were $7,337 for the year ended December 31, 1999. The expenses paid under the
above arrangements are included in their respective expense captions on the
Statement of Operations with the corresponding expense offset shown as "expenses
paid indirectly".

DMC has elected to waive its fee and reimburse the Series 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 April 30, 2000. No
reimbursement was due for the year ended December 31, 1999.

Devon-7
<PAGE>
Devon Series
Notes to Financial Statements (Continued)

On December 31, 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
-------------- ------------------- --------------
$42,958 $554 $7,172

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

3. Investments
During the year ended December 31, 1999, the Series made purchases and sales of
investment securities other than U.S. government securities and temporary cash
investments as follows:

Purchases .................................... $100,993,178
Sales ........................................ $77,870,585

At December 31, 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, 1999 as follows:

Year of
Expiration
2007
----------
$2,345,618

4. Capital Shares
Transactions in capital 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>
Year ended December 31, 1999 ............ 2,647,758 102,267 (1,478,955) 1,271,070
Year ended December 31, 1998 ............ 3,519,429 31,229 (407,718) 3,142,940
</TABLE>

5. Line of Credit
The Series has a committed line of credit for $3,100,000. No amount was
outstanding at December 31, 1999, or at any time during the year.

6. Tax Information (Unaudited)
For the fiscal year ended December 31, 1999, the Series designates as long-term
capital gains and ordinary income distributions paid during the year as follows:

- -----------
* Items (A) and (B) are based on a percentage of the Series' total
distributions.
** Item (D) is based on a percentage of ordinary income of the Series.
(1) Qualifying dividends represent dividends which qualify for the corporate
dividends received deduction.

Devon-8

<PAGE>
Delaware Group Premium Fund-Devon Series
Report of Independent Auditors

To the Shareholders and Board of Trustees
Delaware Group Premium Fund-Devon Series

We have audited the accompanying statement of net assets of Devon Series (the
"Series") as of December 31, 1999, and the related statement of operations for
the year then ended, the statements of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the two
years in the period then ended and for the period May 1, 1997 (commencement of
operations) through December 31, 1997. These financial statements and financial
highlights are the responsibility of the Series' management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Devon
Series at December 31, 1999, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended, and its financial highlights for each of the two years in the period
then ended and for the period May 1, 1997 (commencement of operations) through
December 31, 1997, in conformity with accounting principles generally accepted
in the United States.

/s/ Ernst & Young LLP

Philadelphia, Pennsylvania
February 4, 2000

Devon-9
<PAGE>

FOR INTERNATIONAL DIVERSIFICATION

Emerging Markets Series

Investment Strategy and Performance in 1999
Emerging market investors saw substantial improvement during 1999. Emerging
Markets Series returned 48.28% (capital change plus reinvestment of
distributions). Although the Series performed well in absolute terms, it fell
short of its benchmark, the Morgan Stanley Emerging Markets Free Index, which
had a 64.39% return for the period. We attribute this to the underperformance of
value stocks relative to growth stocks, and of smaller companies relative to
larger companies. The Series is strongly focused on value stocks and somewhat
biased towards smaller companies, so performance was hit on both counts. We
believe this situation may be corrected in due course if there is widespread
perception that the worst of the global recession is over and that worldwide
economies are recovering.

Portfolio Snapshot
Because of the higher degree of risk associated with investing in emerging
markets, the Series maintains a diversified portfolio that includes 73 different
stocks from numerous emerging market countries as of the end of the fiscal year.
We believe this broad diversification can help reduce investment risk over the
long term, but it did limit the Series' total investment returns in fiscal 1999.
At year end, the largest percentage of the Series' assets was invested in
Brazil. Brazil's market made remarkable progress throughout fiscal 1999 after
the devaluation of the nation's currency on January 21, 1999. The currency
devaluation slowed the outflow of international capital, lowered interest rates
and improved investor confidence.
Although South Korea's market performed well over the past fiscal year, we
chose to invest less heavily in this country than our benchmark, the Morgan
Stanley Emerging Markets Free Index. While the South Korean government has
promoted strong measures to turn its economy around, many companies in South
Korea are still borrowing heavily and expanding into unprofitable markets. Our
underweighting limited the Series' returns in fiscal 1999.

Investment Outlook
It appears that many emerging markets have begun to turn the corner. As
emerging nations continue to work with the International Monetary Fund to
implement economic reforms, we expect long-term benefits for emerging market
investors.
In the Pacific Rim, we will remain focused on companies with strong balance
sheets from countries where both the government and businesses are committed to
economic reform. We will also continue to allocate a substantial portion of the
Series' assets to Brazil where many companies still appear very inexpensive to
us. Most of these companies maintain healthy balance sheets and we believe are
positioned for growth in the coming year.

- -------------------------------------------------------------------------------
Emerging Markets Series Investment Objective
Seeks long-term capital appreciation. It seeks to achieve this objective by
investing primarily in the stocks of companies located or operating in emerging
market countries.
- -------------------------------------------------------------------------------

Emerging Markets-1
<PAGE>

Growth of a
$10,000 Investment
May 1, 1997 to
December 31, 1999

Emerging Markets Series
Average Annual Total Returns
----------------------------
Lifetime -4.31%
One Year +48.28%

For periods ending December 31, 1999

Emerging Markets MSCI Emerging Market
Series Free Index
05/01/1997 $10,000.00 $10,000
06/30/1997 $10,840.00 $10,837
09/30/1997 $10,610.00 $9,865
12/31/1997 $8,880.00 $8,137
03/31/1998 $9,556.04 $8,641
06/30/1998 $7,430.18 $6,602
09/30/1998 $5,851.27 $5,149
12/31/1998 $5,995.75 $6,075
03/31/1999 6,212.57 $6,830
06/30/1999 $7,588.44 $8,497
09/30/1999 7,228.60 $8,059
12/31/1999 $8,890.22 $10,109

Past performance is not a guarantee of future results. Return and share price
will fluctuate so that shares, when redeemed, may be worth more or less than
their original cost.

The chart shows a $10,000 investment in both the Emerging Markets Series and the
Morgan Stanley Emerging Markets Free Index for the period from the Series'
inception on May 1, 1997 through December 31, 1999. All dividends and capital
gains were reinvested. The Index is unmanaged, with no set investment objective
and does not include the "real world" costs of managing a mutual fund. Earnings
from a variable annuity investment compound tax-free until withdrawal, so no
adjustments were made for income taxes. The effect of an expense limitation is
included in the chart. Performance does not reflect insurance fees related to a
variable annuity investment nor the deferred sales charge that would apply to
certain withdrawals of investments held for less than eight years. Performance
shown here would have been reduced if such fees were included and the expense
limitation was removed. For more information about fees, consult your variable
annuity prospectus.

Emerging Markets-2
<PAGE>

Delaware Group Premium Fund-Emerging Markets Series
Statement of Net Assets
December 31, 1999

Number Market
of Shares Value
(U.S. $)
COMMON STOCK-81.50%
ARGENTINA-1.64%
Central Puerto Class B .......................... 64,838 $ 105,053
Transportadora de Gas del Sur Class B ........... 60,600 113,945
----------
218,998
----------
BRAZIL-18.28%
Aracruz Celulose ADR ............................ 8,100 212,625
Centrais Eletricas de Santa Catarina ............ 198,000 94,260
Centrais Eletricas
de Santa Catarina GDR ......................... 600 28,770
Companhia Energetica de Minas Gerais ............ 2,700,000 60,531
Companhia Energetica de Minas
Gerais ADR .................................... 3,937 88,903
Companhia Paranaense de
Energia Copel ADR ............................. 26,276 244,695
Elevadores Atlas Schindler ...................... 7,500 95,488
GERDAU METALURGICA .............................. 8,000,000 385,275
PETROLEO BRASILEIRO ............................. 1,247,127 317,563
Renner Participacoes ............................ 870,000 1,950
*Rossi Residential ............................... 8,100 14,001
Telecomunicacoes de Minas Gerais ................ 4,820,000 186,503
TELECOMUNICACOES DO PARANA ...................... 900,000 293,934
UNIAO DE BANCOS BRASILEIROS ..................... 10,454,560 283,457
Usinas Siderurgicas de Minas Gerais ............. 20,500 111,209
Usinas Siderurgicas de Minas
Gerais ADR .................................... 1,400 7,650
Usinas Siderurgicas de Minas
Gerais ADR .................................... 2,334 12,753
----------
2,439,567
----------
CHILE-2.44%
A.F.P. Provida ADR .............................. 10,023 215,495
Empresa Nacional Electricidad ADR ............... 7,800 110,662
----------
326,157
----------
CROATIA-0.86%
Zagrebacka Banka GDR ............................ 9,540 114,480
----------
114,480
----------
EGYPT-0.57%
Paints & Chemical Industries GDR ................ 15,825 76,356
----------
76,356
----------
ESTONIA-1.36%
Eesti Telekom GDR ............................... 5,264 108,438
Eesti Uhispank GDR .............................. 15,554 72,715
----------
181,153
----------
HONG KONG-4.36%
First Tractor ................................... 555,000 78,536
Guangdong Kelon Electric Holding ................ 198,000 150,280
Guangshen Railway ............................... 774,000 86,625
Hengan International Group ...................... 376,000 103,994
Shenzhen Expressway ............................. 1,029,300 162,866
----------
582,301
----------
HUNGARY-4.07%
Gedeon Richter GDR .............................. 4,000 262,000
MATAV ADR ....................................... 7,803 280,908
----------
542,908
----------
- ----------
Top 10 stock holdings, representing 22.7% of net assets, are printed in bold.
<PAGE>

Number Market
of Shares Value
(U.S. $)
COMMON STOCK (Continued)
INDIA-10.10%
*Gas Authority of India GDR ...................... 17,059 $ 157,796
*ICICI ADR ....................................... 8,838 122,627
*INDIA FUND ...................................... 21,000 351,750
Larsen & Toubro GDR ............................. 449 15,042
Larsen & Toubro GDR ............................. 8,001 268,034
Mahanagar Telephone Nigam GDR ................... 13,700 155,495
VIDESH SANCHAR NIGAM GDR ........................ 11,185 277,388
----------
1,348,132
----------
INDONESIA-0.11%
*United Tractors ................................. 15,500 15,306
----------
15,306
----------
ISRAEL-3.73%
Bank Hapoalim ................................... 73,200 227,979
ECI TELECOMMUNICATIONS .......................... 8,517 269,350
----------
497,329
----------
MALAYSIA-5.15%
*Leader Universal Holdings ....................... 359,000 115,256
Petronas Dagangan ............................... 163,000 184,445
Public Finance .................................. 17,000 19,326
Resorts World ................................... 84,000 240,944
Sime Darby ...................................... 100,000 126,840
----------
686,811
----------
MEXICO-4.67%
*Alfa Class A .................................... 34,800 162,706
CEMEX CLASS B ................................... 52,749 292,834
*Grupo Minsa ADR ................................. 2,400 12,450
*Grupo Minsa Class C ............................. 103,096 53,316
Vitro ADR ....................................... 18,600 102,300
----------
623,606
----------
PERU-2.41%
Banco de Credito del Peru ADR ................... 64,101 45,493
CreditCorp ...................................... 9,100 109,200
Telefonica del Peru ADR ......................... 12,500 167,188
----------
321,881
----------
RUSSIA-2.52%
Gazprom ADR ..................................... 1,900 16,103
Gazprom ADR ..................................... 5,400 45,765
Lukoil ADR ...................................... 4,800 249,600
Mosenergo ADR ................................... 5,700 25,080
----------
336,548
----------
SOUTH AFRICA-9.25%
ABSA Group ...................................... 53,779 241,154
Iscor ........................................... 69,900 264,609
SANLAM LIMITED .................................. 196,700 274,837
Sappi ........................................... 21,500 212,380
Sasol ........................................... 29,500 242,039
----------
1,235,019
----------
SOUTH KOREA-2.40%
Pohang Iron & Steel ............................. 500 61,922
Pohang Iron & Steel ADR ......................... 7,380 258,300
----------
320,222
----------
TAIWAN-1.90%
Yageo ........................................... 28,000 160,300
Yageo GDR ....................................... 16,384 93,796
----------
254,096
----------

Emerging Markets-3
<PAGE>

Emerging Markets Series
Statement of Net Assets (Continued)
Number Market
of Shares Value
(U.S. $)
COMMON STOCK (Continued)
THAILAND-4.14%
*Bangkok Bank 101,700 $ 256,511
*Hana Microelectronics 48,300 230,824
Thai Reinsurance 60,000 65,313
----------
552,648
----------
TURKEY-1.54%
*Efes Sinai Yatirim ADR 32,150 49,029
*Efes Sinai Yatirim Holding Class B 10,228,660 156,212
----------
205,241
----------
Total Common Stock
(cost $10,671,706) 10,878,759
----------

Principal
Amount
REPURCHASE AGREEMENTS-7.59%
With Chase Manhattan 2.50%
1/3/00 (dated 12/31/99,
collateralized by $286,000
U.S. Treasury Notes 4.75%
due 2/15/04, market value
$274,915) ..................................... $269,000 269,000
<PAGE>

Principal Market
Amount Value
(U.S. $)
REPURCHASE AGREEMENTS (Continued)
With J.P. Morgan Securities 3.00%
1/3/00 (dated 12/31/99,
collateralized by $109,000
U.S. Treasury Notes 6.375%
due 9/30/01, market value
$111,320 and $106,000
U.S. Treasury Notes 6.625%
due 4/30/02, market value
$108,498 and $106,000
U.S. Treasury Notes
6.25% due 06/30/02,
market value $106,118) ........................ $ 319,000 $ 319,000
With PaineWebber 3.00%
1/3/00 (dated 12/31/99,
collateralized by $109,000
U.S. Treasury Notes 5.625%
due 11/30/00, market value
$109,517 and $106,000 U.S.
Treasury Notes 5.375%
due 2/15/01, market value $107,765) ........... 213,000 213,000
With Prudential Securities 2.75%
1/3/00 (dated 12/31/99,
collateralized by $222,000
U.S. Treasury Bills
due 5/18/00, market value $217,321) ........... 213,000 213,000
-----------
Total Repurchase Agreements
(cost $1,014,000) 1,014,000
-----------
TOTAL MARKET VAUE OF SECURITIES-89.09% (cost $11,685,706) ....... $11,892,759

RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES-10.91% .......... 1,456,084
-----------
NET ASSETS APPLICABLE TO 1,588,942 SHARES OUTSTANDING;
EQUIVALENT TO $8.40 PER SHARE-100.00% ........................ $13,348,843
===========
COMPONENTS OF NET ASSETS AT DECEMBER 31, 1999:
Shares of beneficial interest (unlimited authorization - no par) $13,318,257
Undistributed net investment income** ........................... 112,645
Accumulated net realized loss on investments .................... (286,609)
Net unrealized appreciation of investments and foreign currencies 204,550
-----------
Total net assets ................................................ $13,348,843
===========
- ------
*Non-income producing security for the year ended December 31, 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.

ADR-American Depository Receipt
GDR-Global Depository Receipt

See accompanying notes

Emerging Markets-4
<PAGE>

Delaware Group Premium Fund-
Emerging Markets Series
Statement of Assets and Liabilities
December 31, 1999

Assets
Investments at market (cost $11,685,706) ......... $11,892,759
Cash and foreign currencies ...................... 1,458,523
Dividends and interest receivable ................ 23,948
Subscriptions receivable ......................... 2,812
-----------
Total assets $13,378,042
-----------
Liabilities
Liquidations payable ............................. 20,995
Other accounts payable
and accrued expenses .......................... 8,204
-----------
Total liabilities ............................. 29,199
-----------
TOTAL NET ASSETS ................................. $13,348,843
===========
See accompanying notes

Delaware Group Premium Fund-
Emerging Markets Series
Statement of Operations
Year ended December 31, 1999

INVESTMENT INCOME:
Dividends ....................................................... $ 207,803
Interest ........................................................ 63,824
Foreign tax withheld ............................................ (8,716)
----------
262,911
----------
EXPENSES:
Management fees ................................................. 98,475
Custodian fees .................................................. 6,666
Professional fees ............................................... 1,230
Registration fees ............................................... 1,310
Dividend disbursing and transfer agent fees and expenses ........ 260
Accounting and administration ................................... 3,054
Reports and statements to shareholders .......................... 6,218
Taxes (other than taxes on income) .............................. 903
Trustee's fees .................................................. 344
Other ........................................................... 2,275
----------
120,735
Less expenses absorbed or waived ................................ (4,789)
Less expenses paid indirectly ................................... (869)
----------
Total expenses .................................................. 115,077
----------
NET INVESTMENT INCOME ........................................... 147,834
----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCIES:
Net realized loss on:
Investments ..................................................... (59,009)
Foreign currencies .............................................. (19,505)
----------
Net realized loss ............................................... (78,514)
Net change in unrealized appreciation / depreciation
of investments and foreign currencies ........................ 3,389,812
----------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS AND FOREIGN CURRENCIES ........................ 3,311,298
----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $3,459,132
==========

See accompanying notes

<PAGE>

Delaware Group Premium Fund-
Emerging Markets Series
Statements of Changes In Net Assets
Year Ended Year Ended
12/31/99 12/31/98
---------- ----------

INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS:
Net investment income ............................ $147,834 $134,046
Net realized loss on investments
and foreign currencies ........................ (78,514) (246,532)
Net change in unrealized appreciation /
depreciation of investments
and foreign currencies ........................ 3,389,812 (2,161,591)
----------- -----------
Net increase (decrease) in net assets
resulting from operations ..................... 3,459,132 (2,274,077)
----------- -----------
DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income ............................ (127,668) (19,005)
Net realized gain on investments ................. - (139,368)
----------- -----------
(127,668) (158,373)
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold ........................ 7,257,077 2,966,309
Net asset value of shares issued upon
reinvestment of distributions from net
investment income and net realized
gain on investments ........................... 127,668 158,373
----------- -----------
7,384,745 3,124,682
Cost of shares repurchased ....................... (2,723,434) (1,111,948)
----------- -----------
Increase in net assets derived from capital
share transactions ............................ 4,661,311 2,012,734
----------- -----------

NET INCREASE (DECREASE)
IN NET ASSETS ................................. 7,992,775 (419,716)
----------- -----------

NET ASSETS:
Beginning of year ................................ 5,356,068 5,775,784
----------- -----------
End of year ...................................... $13,348,843 $5,356,068
=========== ==========

See accompanying notes

Emerging Markets-5
<PAGE>

Delaware Group Premium Fund - Emerging Markets Series
Financial Highlights

Selected data for each share of the Series outstanding throughout each period
were as follows:
<TABLE>
<CAPTION>

Year Ended 5/1/97(1)
December 31, to
1999 1998 12/31/97
----------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period ....................... $5.810 $8.880 $10.000

Income (loss) from investment operations:
Net investment income(2) ................................... 0.126 0.171 0.060
Net realized and unrealized gain (loss)
on investments and foreign currencies ................... 2.597 (2.991) (1.180)
------ ------ ------
Total from investment operations ........................... 2.723 (2.820) (1.120)
------ ------ ------
Less dividends and distributions:
Dividends from net investment income ....................... (0.133) (0.030) none
Distributions from net realized gain on investments ........ none (0.220) none
------ ------ ------
Total dividends and distributions .......................... (0.133) (0.250) none
------ ------ ------
Net asset value, end of period ............................. $8.400 $5.810 $8.880
====== ====== ======

Total return ............................................... 48.28% (32.48%) (11.20%)

Ratios and supplemental data:
Net assets, end of period (000 omitted) .................... $13,349 $5,356 $5,776
Ratio of expenses to average net assets .................... 1.47% 1.50% 1.50%
Ratio of expenses to average net assets
prior to expense limitation and expenses paid indirectly 1.53% 1.67% 2.45%
Ratio of net investment income to average net assets ....... 1.88% 2.34% 0.89%
Ratio of net investment income to average net assets prior
to expense limitation and expenses paid indirectly ...... 1.82% 2.17% (0.06%)
Portfolio turnover ......................................... 20% 38% 48%
</TABLE>

- ---------
(1) Date of commencement of operations; ratios have been annualized and total
return has not been annualized.
(2) Per share information was based on the average shares outstanding method.

See accompanying notes

Emerging Markets-6
<PAGE>

Delaware Group Premium Fund-Emerging Markets Series
Notes to Financial Statements
December 31, 1999

Delaware Group Premium Fund (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 Delaware Business Trust and offers 18 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, the Trend Series and the U.S. Growth
Series. These financial statements and the related notes pertain to the Emerging
Markets Series (the "Series"). The shares of the Fund are sold only to separate
accounts of life insurance companies.

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

Security Valuation--All equity securities are valued at the last quoted sales
price as of the close of the New York Stock Exchange (NYSE) on the valuation
date. If on a particular day an equity security does not trade, then the mean
between the bid and asked prices will be used. 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
Trustees.

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

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

The Series will make distributions from net investment income and 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 execution. The amount of
these expenses was approximately $181 for the year ended December 31, 1999. The
Series may receive earnings credits from its custodian when positive cash
balances are maintained, which are used to offset custody fees. These credits
were $688 for the year ended December 31, 1999. The expenses paid under the
above arrangements are included in their respective expense captions on the
Statement of Operations with the corresponding expense offset shown as "expenses
paid indirectly".

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

DIAL has elected to waive its fee and reimburse the Series to the extent
necessary to ensure that annual operating expenses, exclusive of taxes,
interest, brokerage commissions and extraordinary expenses, do not exceed 1.50%
of average daily net assets of the Series through April 30, 2000.

Emerging Markets-7
<PAGE>

Emerging Markets Series
Notes to Financial Statements (Continued)

The Series has engaged Delaware Service Company, Inc. ("DSC"), an affiliate of
Delaware Management Company ("DMC"), to provide dividend disbursing, transfer
agent, accounting and administrative 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 December 31, 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
-------------- -------------------- --------------
$12,306 $764 $1,218

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

3. Investments
During the period ended December 31, 1999, the Series made purchases and sales
of investment securities other than U.S. government securities and temporary
cash investments as follows:

Purchases ........................ $4,276,177
Sales ............................ $1,316,456

At December 31, 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, 1999 as follows:

Year of
Expiration
2006 2007 Total
-------- ------- --------
$227,600 $58,465 $286,065

4. Capital Shares
Transactions in capital 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>
Year ended December 31, 1999: .......... 1,036,898 24,552 (394,563) 666,887
Year ended December 31, 1998: .......... 405,355 20,252 (153,929) 271,678
</TABLE>

5. Line of Credit
The Series has a committed line of credit for $500,000. No amount was
outstanding at December 31, 1999, or at any time during the year.

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

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

Emerging Markets-8
<PAGE>

Emerging Markets Series
Notes to Financial Statements (Continued)

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

There were no forward foreign currency contracts outstanding at December 31,
1999.

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

The 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 portion of the aggregate market
value of equity securities listed on the major securities exchanges in emerging
markets are held by a smaller number of investors. This may limit the number of
shares available for acquisition or disposition by the Series.

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

8. Tax Information (Unaudited)
For the fiscal year ended December 31, 1999, the Series designates as long-term
capital gains and ordinary income distributions paid during the year as follows:

- ------------
*Items (A) and (B) are based on a percentage of the Series' total
distributions.
**Item (D) is based on a percentage of ordinary income of the Series.
(1) Qualifying dividends represent dividends which qualify for the corporate
dividends received deduction.

Emerging Markets-9
<PAGE>

Delaware Group Premium Fund-Emerging Markets Series
Report of Independent Auditors

To the Shareholders and Board of Trustees
Delaware Group Premium Fund-Emerging Markets Series

We have audited the accompanying statement of net assets and statement of assets
and liabilities of Emerging Markets Series (the "Series") as of December 31,
1999, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the two years in the period then
ended and for the period May 1, 1997 (commencement of operations) through
December 31, 1997. These financial statements and financial highlights are the
responsibility of the Series' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Emerging Markets Series at December 31, 1999, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended and its financial highlights for each of the two years in
the period then ended and for the period May 1, 1997 (commencement of
operations) through December 31, 1997, in conformity with accounting principles
generally accepted in the United States.

/s/ Ernst & Young LLP

Philadelphia, Pennsylvania
February 4, 2000

Emerging Markets-10
<PAGE>

FOR INTERNATIONAL DIVERSIFICATION

Global Bond Series

Investment Strategy and Performance in 1999
Global bond markets took second billing to global equity markets in fiscal
1999. The Global Bond Series had a total return of -3.60% (capital change plus
reinvestment of dividends) for the year ended December 31, 1999. Despite its
disappointing return, the Series outperformed its benchmark Salomon Smith Barney
World Government Bond Index, which had a -4.27% return for the same period.
Global Bond Series seeks to provide a steady stream of current income while
preserving capital by investing in both U.S. and foreign government and
corporate bonds. The credit quality of the Series' holdings is a top priority.
As of December 31, 1999, all of the bonds in the portfolio are rated "A" or
better by Standard & Poor's or Moody's Investor Service.
We generally look for bonds with an average maturity of between five and 10
years. We believe this allows the Series to earn an attractive level of income
without increasing the risk to principal from fluctuating interest rates.

Portfolio Snapshot
During much of the year, we had sizable investments in Australia, Canada and
New Zealand, as we viewed currencies in these countries as extremely undervalued
relative to the U.S. dollar. The Series benefited over the past fiscal year as
currencies in these countries strengthened. We have, however, begun to reduce
our exposure in these countries in favor of the better values we believe to be
now available in Europe.
We increased our exposure to the U.S. bond market over the year to stand at
the current 15%, as yields rose in the U.S. faster than in many other countries
and began to offer more value. However, this exposure remains substantially
below the Index weight, as we believe there is yet better value elsewhere in the
world. Additionally, over 5% of the Series' U.S. bond holdings is invested in
U.S. Treasury Inflation Protection Securities (TIPS), which, in our opinion,
offer a very high guaranteed real (above inflation) yield.
Some 5% of the portfolio is invested in South African bonds which, in our
opinion, offer a high yield, with very good longer term prospects.

Investment Outlook
We believe that inflation could begin to increase in both the U.S. and
abroad. We plan to maintain a somewhat conservative position for the Series in
the coming months. We will probably keep the Series' average effective duration
shorter than the Salomon Smith Barney World Government Bond Index in order to
preserve capital if yields rise and prices fall. As of December 31, 1999, the
Series' average effective duration was 5 years.
We will also continue to maintain a portion of the portfolio in foreign
bonds. We believe that a portfolio consisting of both U.S. bonds and foreign
bonds helps reduce investment risk and increase opportunity for high current
income and capital appreciation.

- --------------------------------------------------------------------------------
Global Bond Series Investment Objective
To seek current income consistent with the preservation of principal. It
attempts to achieve this objective by investing primarily in fixed income
securities from at least three different countries, one of which may be the
United States that may also provide the potential for capital appreciation.
- --------------------------------------------------------------------------------

Global Bond-1
<PAGE>

Global Bond Series
Average Annual Total Returns
----------------------------
Lifetime +4.43%
One Year -3.60%

For periods ending December 31, 1999

Growth of a $10,000 Investment
May 2, 1996 to
December 31, 1999

Salomon Smith Barney
Global Bond World Government
Series Bond Index
----------- --------------------
05/02/1996 $10,000.00 $10,000
09/30/1996 $10,673.01 $10,357
12/31/1996 $11,179.20 $10,603
03/31/1997 $10,835.83 $10,165
06/30/1997 $11,151.36 $10,472
09/30/1997 $11,374.73 $10,606
12/31/1997 $11,277.53 $10,629
03/31/1998 $11,382.75 $10,712
06/30/1998 $11,371.68 $10,925
09/30/1998 $11,854.40 $11,834
12/31/1998 $12,159.71 $12,254
03/31/1999 $12,065.33 $11,781
06/30/1999 $11,959.93 $11,370
09/30/1999 $11,984.55 $11,895
12/31/1999 $11,722.41 $11,736

Past performance is not a guarantee of future results. Return and share price
will fluctuate so that shares, when redeemed, may be worth more or less than
their original cost.

The chart shows a $10,000 investment in both the Global Bond Series and the
Salomon Smith Barney World Government Bond Index for the period from the Series'
inception on May 2, 1996 through December 31, 1999. All dividends and capital
gains were reinvested. The Index is unmanaged, with no set investment objective
and does not include the "real world" costs of managing a mutual fund. Earnings
from a variable annuity investment compound tax-free until withdrawal, so no
adjustments were made for income taxes. The effect of an expense limitation is
included in the chart. Performance does not reflect insurance fees related to a
variable annuity investment nor the deferred sales charge that would apply to
certain withdrawals of investments held for less than eight years. Performance
shown here would have been reduced if such fees were included and the expense
limitation was removed. For more information about fees, consult your variable
annuity prospectus.

Global Bond-2

<PAGE>

Delaware Group Premium Fund-Global Bond Series
Statement of Net Assets
December 31, 1999
<TABLE>
<CAPTION>
Principal Market
Amount* Value
(U.S. $)
<S> <C> <C> <C>
BONDS-96.47%
Australia-5.11%
New South Wales Treasury 6.50% 5/1/06 ..................... A$ 1,300,000 $ 824,053
Queensland Treasury Global
8.00% 8/14/01 .......................................... 310,000 209,376
------------
1,033,429
------------
Austria-1.41%
Republic of Austria 7.25% 5/3/07 .......................... Dem 500,000 284,555
------------
284,555
------------
Canada-5.63%
Government of Canada
7.50% 3/1/01 ........................................... C$ 350,000 247,743
10.25% 3/15/14 ......................................... 300,000 283,714
Ontario Hydro
5.60% 6/2/08 ........................................... 600,000 390,306
10.00% 3/19/01 ......................................... 300,000 218,177
------------
1,139,940
------------
Germany-12.15%
Deutschland Republic
6.00% 7/4/07 ........................................... Eu 660,000 694,481
6.25% 1/4/24 ........................................... 900,000 939,773
Depfa Pfandbriefbank 5.625% 2/7/03 ........................ 802,258 825,358
------------
2,459,612
------------
Italy-2.31%
Republic of Italy 5.00% 11/20/03 .......................... $ 500,000 467,650
------------
467,650
------------
Japan-3.42%
Export-Import Bank of Japan
7.75% 10/8/02 .......................................... C$ 160,000 114,937
Japan Highway Public Corporation
7.875% 9/27/02 ......................................... 800,000 576,540
------------
691,477
------------
Korea-0.47%
Korea Electric Power 6.375% 12/1/03 ....................... $ 100,000 94,760
------------
94,760
------------
Netherlands-10.80%
Baden Wurt L - Finance 6.625% 8/20/03 ..................... Dem 700,000 378,980
DSL Finance
5.75% 3/19/09 .......................................... 400,000 204,982
6.00% 2/21/06 .......................................... 1,400,000 741,030
Netherlands Government 5.75% 2/15/07 ...................... Eu 829,000 859,377
------------
2,184,369
------------
New Zealand-13.36%
New Zealand Government
6.00% 11/15/11 ......................................... NZ$ 1,300,000 607,365
7.00% 7/15/09 .......................................... 200,000 102,439
8.00% 4/15/04 .......................................... 1,050,000 567,300
8.00% 11/15/06 ......................................... 1,900,000 1,035,478
10.00% 3/15/02 ......................................... 700,000 390,584
------------
2,703,166
------------
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
Principal Market
Amount* Value
(U.S. $)
<S> <C> <C> <C>
BONDS (Continued)
Norway-0.72%
Kingdom of Norway 8.375% 1/27/03 .......................... C$ 200,000 146,359
-----------
146,359
-----------
Portugal-4.66%
Portugese Government 5.375% 6/23/08 ....................... Eu 950,000 942,742
-----------
942,742
-----------
South Africa-4.76%
Republic of South Africa
12.50% 1/15/02 ......................................... Sa 3,500,000 571,009
13.00% 8/31/10 ......................................... 2,500,000 391,080
-----------
962,089
-----------
Spain-4.85%
Spanish Government 5.15% 7/30/09 .......................... Eu 1,000,000 980,580
-----------
980,580
-----------
Supranational-3.85%
International Bank Reconstruction &
Development
5.25% 1/12/09 .......................................... $ 500,000 439,203
5.50% 4/15/04 .......................................... NZ$ 700,000 339,599
-----------
778,802
-----------
Sweden-3.76%
Swedish Export Credit 6.50% 6/5/01 ........................ Sk 500,000 59,956
Swedish Government
8.00% 8/15/07 .......................................... 2,200,000 295,211
9.00% 4/20/09 .......................................... 2,800,000 405,524
-----------
760,691
-----------
United Kingdom-4.06%
Halifax 5.625% 7/23/07 .................................... Dem 1,600,000 820,627
-----------
820,627
-----------
United States-15.15%
Federal National Mortgage Association
5.75% 9/5/00 ........................................... A$ 700,000 460,567
KFW International Finance
6.50% 12/28/01 ......................................... C$ 60,000 41,831
U.S. Treasury Inflation Index Notes
3.375% 1/15/07 ......................................... $ 635,844 599,359
3.625% 1/15/08 ......................................... 519,640 495,001
U.S. Treasury Notes
5.75% 8/15/03 .......................................... 800,000 783,883
6.25% 2/15/07 .......................................... 500,000 492,365
6.375% 8/15/27 ......................................... 200,000 192,094
-----------
3,065,100
-----------
Total Bonds (cost $21,013,345) ............................ 19,515,948
-----------
</TABLE>

Global Bond-3

<PAGE>

Global Bond Series
Statement of Net Assets (Continued)

Principal Market
Amount* Value
(U.S. $)
REPURCHASE AGREEMENTS-0.89%
With Chase Manhattan 2.50%
1/3/00 (dated 12/31/99,
collateralized by $51,000 U.S.
Treasury Notes 4.75% due
2/15/04, market value $49,073) ..................... $48,000 $48,000
With J.P. Morgan Securities 3.00%
1/3/00 (dated 12/31/99,
collateralized by $20,000
U.S. Treasury Notes 6.375%
due 9/30/01, market value
$19,871 and $19,000 U.S.
Treasury Notes 6.625% due
4/30/02, market value $19,367
and $19,000 U.S. Treasury
Notes 6.25% due 6/30/02,
market value $18,942) .............................. 57,000 57,000
With PaineWebber 3.00% 1/3/00
(dated 12/31/99, collateralized
by $20,000 U.S. Treasury Notes
5.625% due 11/30/00, market
value $19,549 and $19,000
U.S.Treasury Notes 5.375%
due 2/15/01, market
value $19,236) ..................................... 38,000 38,000
With Prudential Securities 2.75%
1/3/00 (dated 12/31/99, collateralized
by $40,000 U.S. Treasury Bills
due 5/18/00, market value $38,792) ................. 38,000 38,000
---------
Total Repurchase Agreements
(cost $181,000) .................................... 181,000
---------

TOTAL MARKET VALUE OF SECURITIES-97.36% (cost $21,194,345) ....... $19,696,948

RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES-2.64% ............ 533,908
-----------
NET ASSETS APPLICABLE TO 2,079,876 SHARES OUTSTANDING;
EQUIVALENT TO $9.73 PER SHARE-100.00% ......................... $20,230,856
===========
COMPONENTS OF NET ASSETS AT DECEMBER 31, 1999:
Shares of beneficial interest (unlimited authorization-no par) ... $21,773,953
Undistributed net investment income** ............................ 142,390
Accumulated net realized loss on investments ..................... (175,022)
Net unrealized depreciation of investments and foreign currencies. (1,510,465)
-----------
Total net assets ................................................. $20,230,856
===========
- ------------------
* Principal amount is stated in the currency in which each bond is denominated.
A$ - Australian Dollars
C$ - Canadian Dollars
Dem - German Deutsche Marks
Eu - European Monetary Units
NZ$ - New Zealand Dollars
Sa - South African Rand
Sk - Swedish Kroner
$ - U. S. Dollars

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

See accompanying notes

Global Bond-4

<PAGE>

Delaware Group Premium Fund-Global Bond Series
Statement of Operations
Year Ended December 31, 1999

INVESTMENT INCOME:
Interest ......................................................... $1,411,902
----------
EXPENSES:
Management fees .................................................. 163,185
Accounting and administration .................................... 8,620
Custodian fees ................................................... 3,410
Professional fees ................................................ 550
Reports and statements to shareholders ........................... 550
Registration fees ................................................ 550
Taxes (other than taxes on income) ............................... 210
Dividend disbursing and transfer agent
fees and expenses ............................................. 50
Trustees' fees ................................................... 579
Other ............................................................ 6,898
----------
184,602

Less expenses paid indirectly .................................... (710)
----------
Total expenses ................................................... 183,892
----------
NET INVESTMENT INCOME ............................................ 1,228,010
----------
NET REALIZED AND UNREALIZED LOSS ON
INVESTMENTS AND FOREIGN CURRENCIES:
Net realized loss on:
Investments ...................................................... (164,814)
Foreign currencies ............................................... (314,634)
----------
Net realized loss ................................................ (479,448)
Net change in unrealized appreciation /
depreciation of investments and foreign currencies ............ (1,541,203)
----------

NET REALIZED AND UNREALIZED LOSS ON
INVESTMENTS AND FOREIGN CURRENCIES ............................ (2,020,651)
----------

NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS ............................................... ($792,641)
=========

See accompanying notes

<PAGE>
Delaware Group Premium Fund-Global Bond Series
Statements of Changes in Net Assets

Year Ended Year Ended
12/31/99 12/31/98
---------- ----------
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS:
Net investment income .............................. $ 1,228,010 $ 1,103,809
Net realized gain (loss) on investments
and foreign currencies .......................... (479,448) 47,334
Net change in unrealized appreciation /
depreciation on investments and
foreign currencies .............................. (1,541,203) 309,368
----------- -----------
Net increase (decrease) in net assets
resulting from operations ....................... (792,641) 1,460,511
----------- -----------

DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income .............................. (1,084,242) (1,059,148)
Net realized gain on investments ................... (128,140) (16,415)
----------- -----------
(1,212,382) (1,075,563)
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold .......................... 4,466,372 6,858,379
Net asset value of shares issued upon
reinvestment of distributions from
net investment income and net
realized gain on investments .................... 1,212,382 1,075,563
----------- -----------
5,678,754 7,933,942
Cost of shares repurchased ......................... (5,154,045) (3,483,316)
----------- -----------
Increase in net assets derived from
capital share transactions ...................... 524,709 4,450,626
----------- -----------

NET INCREASE (DECREASE)
IN NET ASSETS ................................... (1,480,314) 4,835,574
----------- -----------

NET ASSETS:
Beginning of year .................................. 21,711,170 16,875,596
----------- -----------
End of year ........................................ $20,230,856 $21,711,170
=========== ===========

See accompanying notes

Global Bond-5

<PAGE>

Delaware Group Premium Fund-Global Bond Series
Financial Highlights

Selected data for each share of the Series outstanding throughout each period
were as follows:
<TABLE>
<CAPTION>
5/2/96(1)
Year Ended December 31, to
1999 1998 1997 12/31/96
----------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ...................... $10.680 $10.500 $10.960 $10.000

Income (loss) from investment operations:
Net investment income(2) .................................. 0.576 0.608 0.636 0.339
Net realized and unrealized gain (loss)
on investments and foreign currencies .................. (0.950) 0.182 (0.551) 0.831
-------- -------- -------- -------
Total from investment operations .......................... (0.374) 0.790 0.085 1.170
-------- -------- -------- -------
Less dividends and distributions:
Dividends from net investment income ...................... (0.514) (0.600) (0.460) (0.210)
Distributions from net realized gain
on investments ......................................... (0.062) (0.010) (0.085) none
-------- -------- -------- -------
Total dividends and distributions ......................... (0.576) (0.610) (0.545) (0.210)
-------- -------- -------- -------

Net asset value, end of period ............................ $ 9.730 $10.680 $10.500 $10.960
======== ======= ======= =======
Total return .............................................. (3.60%) 7.82% 0.88% 11.79%

Ratios and supplemental data:
Net assets, end of period (000 omitted) ................... $ 20,231 $21,711 $16,876 $9,471
Ratio of expenses to average net assets ................... 0.85% 0.83% 0.80% 0.80%
Ratio of expenses to average net assets prior to expense
limitation and expenses paid indirectly ................ 0.85% 0.92% 1.08% 1.19%
Ratio of net investment income to average net assets ...... 5.64% 5.83% 6.03% 6.51%
Ratio of net investment income to average net assets prior
to expense limitation and expenses paid indirectly ..... 5.64% 5.74% 5.75% 6.12%
Portfolio turnover ........................................ 100% 79% 97% 56%
</TABLE>
- ------------------
(1) Date of initial public offering; ratios have been annualized and total
return has not been annualized.
(2) Per share information for the years ended December 31, 1997, 1998 and 1999
was based on the average shares outstanding method.

See accompanying notes

Global Bond-6

<PAGE>

Delaware Group Premium Fund-Global Bond Series
Notes to Financial Statements
December 31, 1999

Delaware Group Premium Fund (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 Delaware Business Trust and offers 18 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, the Trend Series and the U.S. Growth
Series. These financial statements and the related notes pertain to the Global
Bond Series (the "Series"). The shares of the Fund are sold only to separate
accounts of life insurance companies.

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

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

<PAGE>

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

Other--Expenses common to all funds within the Delaware Investments Family of
Funds are allocated amongst the funds on the basis of average net assets.
Security transactions are recorded on the date the securities are purchased or
sold (trade date). Costs used in calculating realized gains and losses on the
sale of investment securities are those of the specific securities sold.
Interest income is recorded on the accrual basis. Withholding taxes on foreign
interest have been provided for in accordance with the Series' understanding of
the applicable country's tax rules and rates. Original issue discounts are
accreted to interest income over the lives of the respective securities.

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

Certain expenses of the Series are paid through "soft dollar" arrangements with
brokers. These transactions are done subject to best execution. The amount of
these expenses was approximately $500 for the year ended December 31, 1999. The
Series may receive earnings credits from its custodian when positive cash
balances are maintained, which are used to offset custody fees. These credits
were $210 for the year ended December 31, 1999. The expenses paid under the
above arrangements are included in their respective expense captions on the
Statement of Operations with the corresponding expense offset shown as "expenses
paid indirectly".

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

Global Bond-7

<PAGE>

Delaware Group Premium Fund-Global Bond Series
Notes to Financial Statements (Continued)

DIAL has elected to waive its fee and reimburse the Series 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 April 30, 2000. No
reimbursement was due for the year ended December 31, 1999.

On December 31, 1999, the Series had liabilities payable to affiliates as
follows:

Dividend disbursing
Investment transfer agent,
management accounting fees Other expenses
fee payable to and other expenses payable to DMC
DIAL payable to DSC and affiliates
-------------- -------------------- --------------
$12,960 $457 $1,848

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

3. Investments
During the year ended December 31, 1999, the Series made purchases and sales of
investment securities other than U.S. government securities and temporary cash
investments as follows:

Purchases .................. $18,019,208
Sales ...................... $18,000,743

At December 31, 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, 1999 as follows:

Year of
Expiration
2007
-----------
$147,409

4. Capital Shares
Transactions in capital shares were as follows:
<TABLE>
<CAPTION>
Shares issued upon
reinvestment of distributions
from net investment income and Shares Net
Shares sold net realized gain on investments repurchased increase
----------- -------------------------------- ----------- --------
<S> <C> <C> <C> <C>
Year ended December 31, 1999 ........... 433,476 119,782 (506,787) 46,471
Year ended December 31, 1998: .......... 656,617 103,550 (334,171) 425,996
</TABLE>

5. Line of Credit
The Series has a committed line of credit for $1,200,000. No amount was
outstanding at December 31, 1999, or at any time during the year.

Global Bond-8

<PAGE>

Global Bond Series
Notes to Financial Statements (Continued)

There were no forward foreign currency contracts outstanding at December 31,
1999.

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 portion of the aggregate market
value of securities listed on the major securities exchanges in emerging markets
are held by a smaller number of investors. This may limit the number of shares
available for acquisition or disposition by the Series.

8. Tax Information (Unaudited)
For the fiscal year ended December 31, 1999, the Series designates as long-term
capital gains and ordinary income distributions paid during the year as follows:

Global Bond-9

<PAGE>

Delaware Group Premium Fund-Global Bond Series
Report of Independent Auditors

To the Shareholders and Board of Trustees
Delaware Group Premium Fund-Global Bond Series

We have audited the accompanying statement of net assets of Global Bond Series
(the "Series") as of December 31, 1999, and the related statement of operations
for the year then ended, the statements of changes in net assets for each of the
two years in the period then ended, and the financial highlights for each of the
three years in the period then ended and for the period May 2, 1996
(commencement of operations) through December 31, 1996. These financial
statements and financial highlights are the responsibility of the Series'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Global
Bond Series at December 31, 1999, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended, and its financial highlights for each of the three years in
the period then ended and for the period May 2, 1996 (commencement of
operations) through December 31, 1996, in conformity with accounting principles
generally accepted in the United States.

/s/ Ernst & Young LLP

Philadelphia, Pennsylvania
February 4, 2000

Global Bond-10

<PAGE>

FOR TOTAL RETURN

Growth and Income Series (Formerly Decatur Total Return Series)

Investment Strategy and Performance in 1999
During most of 1999, a select group of large-cap growth stocks--mostly
technology and internet-related companies--dominated market returns. This made
it difficult for Growth and Income Series' large-cap value strategy to keep
pace.
For the year ended December 31, 1999, the Series provided a total return of
- -2.98% (capital change plus reinvestment of distributions) compared to the
Standard & Poor's 500 Index, which returned 21.0% for the same period.
We attribute our lower relative return largely to our avoidance of technology
company stocks. With very high prices and very low dividend yields, most
technology companies do not meet our investment criteria.

Portfolio Snapshot
We believe that a stock's dividend yield can be a good indicator of a stock's
future value. We focus on stocks yielding more than the average dividend yield
of the unmanaged S&P 500 Index in an effort to uncover companies selling below
their underlying worth. The potential benefits of this strategy are two-fold: a
high yield may signal future appreciation potential and dividends provide
up-front income.
When a stock's yield falls below the average yield of the S&P 500, we view
that as a signal that the stock is fairly priced and future appreciation
potential is no longer attractive relative to possible risks. This is when we
typically begin to sell the stock.
Though a low yield is usually basis for selling, we may sell a stock with an
above-average yield because of negative changes affecting the individual
company, which might potentially reduce its future growth.
During fiscal 1999, we increased our holdings in economically sensitive
companies--including energy, paper, metals, auto and chemical companies--which
have reported better than expected earnings. The Series benefited from the
performance of several aluminum, paper and energy companies that have been
managing their businesses more efficiently.

Investment Outlook
We believe global economic recovery will continue. Based on our analysis of
the companies we own, we believe that there is a strong likelihood that these
companies will beat analysts' earnings and dividend growth expectations. We
think their growth will be driven by global economic recovery.
While we expect the stock market to exhibit some significant price swings in
the coming months due to interest rate concerns, we believe investors will
inevitably seek out companies and industries where solid earnings growth is
available at deep price discounts. We believe the Series is well positioned to
benefit if this broadening trend occurs.

- --------------------------------------------------------------------------------
Growth and Income Series Investment Objective
Seeks the highest possible total rate of return by selecting securities that
offer the potential for capital appreciation while providing higher than average
dividend income.
- --------------------------------------------------------------------------------

Growth and Income-1

<PAGE>

Growth and Income Series
Average Annual Total Returns
----------------------------
10 Years +11.95%
Five Years +18.39%
One Year -2.98%

For periods ending December 31, 1999

Growth of a $10,000 Investment
January 1, 1990 through
December 31, 1999

Growth and Income Series S&P 500 Index

12/31/1989 $10,000.00 $10,000.00
12/31/1990 $ 8,668.00 $ 9,689.00
12/31/1991 $10,603.00 $12,642.00
12/31/1992 $11,539.00 $13,605.00
12/31/1993 $13,322.00 $14,976.00
12/31/1994 $13,295.00 $15,174.00
12/31/1995 $18,097.00 $20,877.00
12/31/1996 $21,848.00 $25,669.00
12/31/1997 $28,621.00 $34,233.00
12/31/1998 $31,868.00 $44,015.00
12/31/1999 $30,919.00 $53,281.00

Past performance is not a guarantee of future results. Return and share price
will fluctuate so that shares, when redeemed, may be worth more or less than
their original cost.

The chart shows a $10,000 investment in both the Growth and Income Series and
the S&P 500 Index for the 10-year period from January 1, 1990 through December
31, 1999. All dividends and capital gains were reinvested. The Index is
unmanaged, with no set investment objective and does not include the "real
world" costs of managing a mutual fund. Earnings from a variable annuity
investment compound tax-free until withdrawal, so no adjustments were made for
income taxes. The effect of an expense limitation is included in the chart.
Performance does not reflect insurance fees related to a variable annuity
product investment nor the deferred sales charge that would apply to certain
withdrawals of investments held for less than eight years. Performance shown
here would have been reduced if such fees were included and the expense
limitation was removed. For more information about fees, consult your variable
annuity prospectus.

Growth and Income-2

<PAGE>

Delaware Group Premium Fund-Growth and Income Series
Statement of Net Assets
December 31, 1999

Number Market
of Shares Value
COMMON STOCK-97.94%
Aerospace & Defense-1.23%
General Dynamics ................................ 117,400 $ 6,192,850
------------
6,192,850
------------
Automobiles & Automotive Parts-4.06%
Dana ............................................ 68,300 2,044,731
General Motors .................................. 106,300 7,726,681
Rockwell International .......................... 126,900 6,075,338
TRW ............................................. 86,800 4,508,175
------------
20,354,925
------------
Banking, Finance & Insurance-20.93%
American General ................................ 156,200 11,851,675
Aon ............................................. 214,687 8,587,480
Bank of America ................................. 164,811 8,271,452
Bank of New York ................................ 211,300 8,452,000
Bank One ........................................ 220,394 7,066,383
Chase Manhattan ................................. 99,200 7,706,600
Federal National Mortgage ....................... 114,200 7,130,363
First Union ..................................... 143,200 4,698,750
FleetBoston Financial ........................... 225,000 7,832,813
J.P. Morgan ..................................... 19,900 2,519,838
+Marsh & McLennan ................................ 97,500 9,329,531
Mellon Financial ................................ 283,200 9,646,500
Merrill Lynch ................................... 35,000 2,922,500
Summit Bancorp .................................. 130,975 4,011,109
U.S. Bancorp .................................... 211,300 5,031,581
------------
105,058,575
------------
Cable, Media & Publishing-3.52%
+Knight-Ridder ................................... 95,900 5,706,050
MCGRAW-HILL ..................................... 193,700 11,936,763
------------
17,642,813
------------
Chemicals-5.33%
DOW CHEMICAL .................................... 91,100 12,173,238
duPont(EI)deNemours ............................. 96,852 6,380,116
Imperial Chemical ADR ........................... 192,800 8,206,050
------------
26,759,404
------------
Computers & Technology-3.12%
Minnesota Mining & Manufacturing ................ 76,600 7,497,225
Pitney Bowes .................................... 169,300 8,179,306
------------
15,676,531
------------
Consumer Products-2.35%
Avon Products ................................... 136,500 4,504,500
Clorox .......................................... 144,900 7,299,338
------------
11,803,838
------------
Electronics & Electrical Equipment-3.41%
Eaton ........................................... 70,900 5,149,113
Emerson Electric ................................ 72,600 4,165,425
Raytheon Class B ................................ 142,300 3,779,844
+Thomas & Betts .................................. 126,400 4,029,000
------------
17,123,382
------------
Energy-14.44%
Baker Hughes .................................... 272,100 5,731,106
+BP Amoco ADR .................................... 284 16,845
CHEVRON ......................................... 142,500 12,344,063
Conoco Class B .................................. 314,523 7,823,760
- -------------
Top 10 stock holdings, representing 24.4% of net assets, are printed in bold.

<PAGE>

Number Market
of Shares Value

COMMON STOCK (Continued)
Energy (Continued)
+El Paso Energy .................................. 255,900 $ 9,932,119
EXXON MOBIL ..................................... 154,653 12,459,232
ROYAL DUTCH PETROLEUM ........................... 205,300 12,407,819
Unocal .......................................... 253,800 8,518,163
Williams ........................................ 106,100 3,242,681
------------
72,475,788
------------
Food, Beverage & Tobacco-4.39%
Bestfoods ....................................... 99,700 5,240,481
H.J. Heinz ...................................... 133,300 5,307,006
Nabisco Group Holdings .......................... 393,300 4,178,813
PepsiCo ......................................... 206,900 7,293,225
------------
22,019,525
------------
Healthcare & Pharmaceuticals-5.88%
American Home Products .......................... 149,000 5,876,188
AstraZeneca ADR ................................. 127,000 5,302,250
Baxter International ............................ 147,100 9,239,719
Glaxo Wellcome ADR .............................. 75,400 4,212,975
Pharmacia & Upjohn .............................. 108,300 4,873,500
------------
29,504,632
------------
Industrial Machinery-2.80%
Caterpillar ..................................... 70,500 3,317,906
Deere & Company ................................. 247,500 10,735,313
------------
14,053,219
------------
Metals & Mining-4.80%
ALCAN ALUMINUM .................................. 289,400 11,919,663
ALCOA ........................................... 146,800 12,184,400
------------
24,104,063
------------
Paper & Forest Products-7.07%
+INTERNATIONAL PAPER ............................. 236,667 13,356,894
Kimberly-Clark .................................. 154,800 10,100,700
WEYERHAEUSER .................................... 167,600 12,035,775
------------
35,493,369
------------
Retail-2.49%
Albertson's ..................................... 191,200 6,166,200
May Department Stores ........................... 195,700 6,311,325
------------
12,477,525
------------
Utilities-1.34%
Duke Energy ..................................... 134,300 6,731,788
------------
6,731,788
------------
Telecommunications-8.14%
ALLTEL .......................................... 126,800 10,484,775
AT&T ............................................ 136,100 6,907,075
+Cable & Wireless ADR ............................ 138,200 7,315,963
GTE ............................................. 112,700 7,952,394
SBC Communications .............................. 167,724 8,176,545
------------
40,836,752
------------
Transportation & Shipping-1.36%
British Airways ADR ............................. 63,400 4,081,375
Norfolk Southern ................................ 133,700 2,740,850
------------
6,822,225
------------
Miscellaneous-1.28%
H&R Block ....................................... 147,100 6,435,625
------------
6,435,625
------------
Total Common Stock
(cost $483,653,119) ............................ 491,566,829
------------

Growth and Income-3

<PAGE>

Growth and Income Series
Statement of Net Assets (Continued)

Principal Market
Amount Value
REPURCHASE AGREEMENTS-1.87%
With Chase Manhattan 2.50%
1/3/00 (dated 12/31/99,
collateralized by $2,662,000
U.S. Treasury Notes 4.75%
due 2/15/04, market
value $2,556,930) ................................ $2,499,000 $2,499,000
With J.P. Morgan Securities 3.00%
1/3/00 (dated 12/31/99,
collateralized by $1,017,000
U.S. Treasury Notes 6.375%
due 9/30/01, market value
$1,035,368 and $990,000 U.S.
Treasury Notes 6.625% due
4/30/02, market value
$1,009,114 and $988,000 U.S.
Treasury Notes 6.25% due
6/30/02, market
value $986,982) .................................. 2,971,000 2,971,000
With PaineWebber 3.00% 1/3/00
(dated 12/31/99, collateralized
by $1,018,000 U.S. Treasury
Notes 5.625% due 11/30/00,
market value $1,018,591 and
$990,000 U.S.Treasury Notes
5.375% due 2/15/01, market
value $1,002,297) ................................ 1,981,000 1,981,000
With Prudential Securities 2.75%
1/3/00 (dated 12/31/99,
collateralized by $2,064,000
U.S. Treasury Bills due 5/18/00,
market value $2,021,254) ......................... 1,980,000 1,980,000
----------
Total Repurchase Agreements
(cost $9,431,000) ................................ 9,431,000
----------

TOTAL MARKET VALUE OF SECURITIES-99.81% (cost $493,084,119) ...... $500,997,829

RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES-0.19% ............ 930,625
------------

NET ASSETS APPLICABLE TO 29,486,825 SHARES OUTSTANDING;
EQUIVALENT TO $17.02 PER SHARE-100.00% ........................ $501,928,454
============

COMPONENTS OF NET ASSETS AT DECEMBER 31, 1999:
Shares of beneficial interest (unlimited authorization- no par) .. $469,783,449
Undistributed net investment income .............................. 681,620
Accumulated net realized gain on investments ..................... 23,549,675
Net unrealized appreciation of investments ....................... 7,913,710
------------
Total net assets ................................................. $501,928,454
============
- ------------
ADR - American Depository Receipt
+Security is partially or fully on loan.

See accompanying notes

Growth and Income-4

<PAGE>

Delaware Group Premium Fund
Growth and Income Series
Statement of Operations
For the Year Ended December 31, 1999

INVESTMENT INCOME:
Dividends ..................................................... $ 13,578,293
Interest ...................................................... 452,360
------------
14,030,653
------------
EXPENSES:
Management fees ............................................... 3,414,163
Accounting and administration ................................. 227,149
Reports and statements to shareholders ........................ 79,000
Professional fees ............................................. 79,400
Registration fees ............................................. 41,734
Taxes (other than taxes on income) ............................ 48,700
Dividend disbursing and transfer agent
fees and expenses .......................................... 19,200
Custodian fees ................................................ 15,365
Trustees' fees ................................................ 7,559
Other ......................................................... 127,396
------------
4,059,666
Less expenses paid indirectly ................................. (15,861)
------------
Total expenses ................................................ 4,043,805
------------

NET INVESTMENT INCOME ......................................... 9,986,848
------------

NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain on investments .............................. 23,887,122
Net change in unrealized appreciation /
depreciation of investments ................................ (50,476,169)
------------
NET REALIZED AND UNREALIZED LOSS
ON INVESTMENTS ............................................. (26,589,047)
------------

NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS ............................................ ($16,602,199)
===========

See accompanying notes

<PAGE>

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

Year Year
Ended Ended
12/31/99 12/31/98

Increase (Decrease) In Net Assets
From Operations:
Net investment income ........................... $ 9,986,848 $ 10,116,886
Net realized gain on investments ................ 23,887,122 43,739,574
Net change in unrealized appreciation /
depreciation of investments .................. (50,476,169) (3,304,465)
------------ ------------
Net increase (decrease) in net assets
resulting from operations .................... (16,602,199) 50,551,995
------------ ------------
Distributions To Shareholders From:
Net investment income ........................... (11,124,097) (8,876,285)
Net realized gain on investments ................ (43,919,243) (23,162,228)
------------ ------------
(55,043,340) (32,038,513)
------------ ------------
Capital Share Transactions:
Proceeds from shares sold ....................... 48,519,273 180,559,930
Net asset value of shares issued upon
reinvestment of distributions from
net investment income and net
realized gain on investments ................. 55,043,340 32,038,513
------------ ------------
103,562,613 212,598,443
Cost of shares repurchased ...................... (109,895,317) (52,607,198)
------------ ------------
Increase (decrease) in net assets
derived from capital
share transactions ........................... (6,332,704) 159,991,245
------------ ------------
Net Increase (Decrease) In
Net Assets ................................... (77,978,243) 178,504,727
------------ ------------
Net Assets:
Beginning of year ............................... 579,906,697 401,401,970
------------ ------------
End of year ..................................... $501,928,454 $579,906,697
============ ============

See accompanying notes

Growth and Income-5

<PAGE>

Delaware Group Premium Fund-Growth and Income Series
Financial Highlights

Selected data for each share of the Series outstanding throughout each period
were as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997 1996 1995
---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ........................ $19.420 $18.800 $15.980 $14.830 $11.480

Income (loss) from investment operations:
Net investment income ..................................... 0.323 0.361 0.324 0.377 0.416
Net realized and unrealized gain (loss) on investments .... (0.882) 1.636 4.216 2.398 3.574
-------- -------- -------- -------- -------
Total from investment operations .......................... (0.559) 1.997 4.540 2.775 3.990
-------- -------- -------- -------- -------
Less dividends and distributions:
Dividends from net investment income ...................... (0.361) (0.327) (0.370) (0.420) (0.430)
Distributions from net realized gain on investments ....... (1.480) (1.050) (1.350) (1.205) (0.210)
-------- -------- -------- -------- -------
Total dividends and distributions ......................... (1.841) (1.377) (1.720) (1.625) (0.640)
-------- -------- -------- -------- -------
Net asset value, end of year .............................. $17.020 $19.420 $18.800 $15.980 $14.830
======== ======== ======== ======== ========
Total return .............................................. (2.98%) 11.35% 31.00% 20.72% 36.12%

Ratios and supplemental data:
Net assets, end of period (000 omitted) ................... $501,928 $579,907 $401,402 $166,647 $109,003
Ratio of expenses to average net assets ................... 0.71% 0.71% 0.71% 0.67% 0.69%
Ratio of net investment income to average net assets ...... 1.75% 2.00% 2.02% 2.66% 3.24%
Portfolio turnover ........................................ 92% 81% 54% 81% 85%
</TABLE>

See accompanying notes

Growth and Income-6

<PAGE>

Delaware Group Premium Fund-Growth and Income Series
Notes to Financial Statements
December 31, 1999

Delaware Group Premium Fund (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 Delaware Business Trust and offers 18 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, the Trend Series and the U.S. Growth
Series. These financial statements and the related notes pertain to the Growth
and Income Series (the "Series"). The shares of the Fund are sold only to
separate accounts of life insurance companies.

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

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

Certain expenses of the Series are paid through "soft dollar" arrangements with
brokers. These transactions are done subject to best execution. The amount of
these expenses was approximately $13,096 for the year ended December 31, 1999.
The Series may receive earnings credits from its custodian when positive cash
balances are maintained, which are used to offset custody fees. These credits
were $2,765 for the year ended December 31, 1999. The expenses paid under the
above arrangements are included in their respective expense captions on the
Statement of Operations with the corresponding expense offset shown as "expenses
paid indirectly".

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

Growth and Income-7

<PAGE>

Growth and Income Series
Notes to Financial Statements (Continued)

DMC has elected to waive its fee and reimburse the Series 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 April 30, 2000.

On December 31, 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
-------------- ------------------- --------------
$257,810 $18,086 $7,525

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

3. Investments
During the year ended December 31, 1999, the Series made purchases and sales of
investment securities other than U.S. government securities and temporary cash
investments as follows:

Purchases ............... $510,780,453
Sales ................... $560,662,978

At December 31, 1999, the aggregate cost of securities and unrealized
appreciation (depreciation) for federal income tax purposes for the Series were
as follows:

4. Capital Shares
Transactions in capital 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>
Year ended December 31, 1999: ......... 2,609,244 3,149,796 (6,128,772) (369,732)
Year ended December 31, 1998: ......... 9,550,511 1,783,160 (2,829,984) 8,503,687
</TABLE>

5. Line of Credit
The Series has a committed line of credit for $19,900,000. No amount was
outstanding at December 31, 1999, or at any time during the year.

Growth and Income-8

<PAGE>

Growth and Income Series
Notes to Financial Statements (Continued)

Market Value of Market Value of
Securities on Loan Collateral
------------------ ---------------
$27,502,724 $27,665,424

Net income from securities lending activities for the year ended December 31,
1999 was $38,575 and is included in interest income on the Statement of
Operations.

7. Tax Information (Unaudited)
For the fiscal year ended December 31, 1999, the Series designates as long-term
capital gains and ordinary income distributions paid during the year as follows:

- ----------------
* Items (A) and (B) are based on a percentage of the Series' total
distributions.
** Item (D) is based on a percentage of ordinary income of the Series.
(1) Qualifying dividends represent dividends which qualify for the corporate
dividends received deduction.

Growth and Income-9

<PAGE>

Delaware Group Premium Fund-Growth and Income Series
Report of Independent Auditors

To the Shareholders and Board of Trustees
Delaware Group Premium Fund-Growth and Income Series

We have audited the accompanying statement of net assets of Growth and Income
Series (the "Series") as of December 31, 1999, and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the five years in the period then ended. These financial statements and
financial highlights are the responsibility of the Series' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Growth
and Income Series at December 31, 1999, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended, and its financial highlights for each of the five years in
the period then ended, in conformity with accounting principles generally
accepted in the United States.

/s/ Ernst & Young LLP

Philadelphia, Pennsylvania
February 4, 2000

Growth and Income-10

<PAGE>

FOR INTERNATIONAL DIVERSIFICATION

International Equity Series

Investment Strategy and Performance in 1999
Global economic conditions improved during 1999. We have seen strength in the
economies along the Pacific Rim, along with moderate growth in Europe and the
United Kingdom. International Equity Series benefited from this relative
strength and provided a total return of 15.76% (capital change plus reinvestment
of dividends) for the year ended December 31, 1999. However, the Series did not
keep pace with its benchmark Morgan Stanley Europe, Australia, Far East (EAFE)
Index, which had a return of 20.66% for the same period.
International Equity Series invests primarily in developed countries,
concentrating on Western Europe and select Pacific Rim nations that meet the
Series' value standards. Our research of countries evaluates the potential
effects of currency fluctuations, inflation, local economic and political
issues. Next, we look for individual companies that offer superior income and
capital appreciation potential.
Our selection process, known as a dividend discount approach, seeks to lower
the Series' overall risk profile.

Portfolio Snapshot
Within Europe, we were cautious about the prospects for the euro and focused
on countries that did not participate in the European Monetary Union.
International Equity Series held the largest percentage of its net assets in the
United Kingdom at year end.
The Series also invested heavily in companies from Australia and New Zealand,
which benefited from growing investor interest in commodity-based stocks.
Because of the Series' value-oriented investment style, our holdings in
Japanese stocks have historically been lower than the Index. This remained true
as of year end. Over the last year, faster-than-expected economic growth
signaled an improving outlook for the Japanese economy and helped generate
stronger investment returns. This is the primary reason for International Equity
Series' relative underperformance. We still view the Japanese market as
overvalued and expect the economic recovery in the country to be slow and
difficult.

Investment Outlook
In the coming months, International Equity Series country allocations should
remain relatively stable. The U.K., in our opinion, currently offers attractive
values and will probably remain the Series' largest position.
We continue to closely monitor economic conditions in Japan, while searching
for select companies that offer reasonably priced stocks. We anticipate keeping
our position in Japanese stocks relatively small.

- -------------------------------------------------------------------------------
International Equity Series Investment Objective
Seeks long-term growth without undue risk to principal. It seeks to achieve
this objective by investing primarily in stocks of foreign companies providing
the potential for capital appreciation and income.
- -------------------------------------------------------------------------------

International Equity-1
<PAGE>

Growth of a $10,000 Investment
October 29, 1992 through
December 31, 1999

International Equity Series
Average Annual Total Returns
----------------------------
Lifetime 11.77%
Five Years 13.24%
One Year 15.76%

For periods ending December 31, 1999

International Equity Series MSCI EAFE Index
10/29/1992 $10,000.00 $10,000.00
12/31/1992 $10,030.00 410,152.00
12/31/1993 $11,631.62 $13,497.00
12/31/1994 $11,931.05 $14,585.00
12/31/1995 $13,598.74 $16,270.00
12/31/1996 $16,321.82 $17,305.00
12/31/1997 $17,399.63 $17,661.00
12/31/1998 $19,196.23 $21,252.00
12/31/1999 $22,221.31 $27,054.00

Past performance is not a guarantee of future results. Return and share price
will fluctuate so that shares, when redeemed, may be worth more or less than
their original cost.

The chart shows a $10,000 investment in both the International Equity Series and
the Morgan Stanley EAFE Index for the period from the Series' inception on
October 29, 1992 through December 31, 1999. All dividends and capital gains were
reinvested. The Index is unmanaged, with no set investment objective and does
not include the "real world" costs of managing a mutual fund. Earnings from a
variable annuity investment compound tax-free until withdrawal, so no
adjustments were made for income taxes. The effect of an expense limitation is
included in the chart. Performance does not reflect insurance fees related to a
variable annuity investment nor the deferred sales charge that would apply to
certain withdrawals of investments held for less than eight years. Performance
shown here would have been reduced if such fees were included and the expense
limitation was removed. For more information about fees, consult your variable
annuity prospectus.

International Equity-2
<PAGE>

Delaware Group Premium Fund-International Equity Series
Statement of Net Assets
December 31, 1999

Number Market
of Shares Value
(U.S. $)
COMMON STOCK-95.14%
AUSTRALIA- 10.00%
Amcor ....................................... 1,415,000 $ 6,632,159
CSR ......................................... 1,904,966 4,630,782
Foster's Brewing Group ...................... 2,411,051 6,922,344
NATIONAL AUSTRALIA BANK ..................... 587,657 8,995,912
Orica ....................................... 599,900 3,235,843
-----------
30,417,040
-----------
BELGIUM-1.41%
Electrabel .................................. 13,115 4,289,867
-----------
4,289,867
-----------
FRANCE-9.85%
ALCATEL ..................................... 38,015 8,723,325
Compagnie de Saint Gobain ................... 34,299 6,444,927
+Societe Generale ............................ 27,108 6,302,338
Total Fina Class B .......................... 63,688 8,493,089
-----------
29,963,679
-----------
GERMANY-10.86%
Bayer ....................................... 134,600 6,394,098
Bayerische Hypo-und Vereinsbank ............. 103,900 7,089,857
Continental ................................. 117,200 2,353,221
RWE ......................................... 146,000 5,804,197
SIEMENS ..................................... 89,050 11,382,295
-----------
33,023,668
-----------
HONG KONG-3.41%
Hong Kong Electric .......................... 1,458,000 4,557,715
Jardine Matheson Holdings ................... 569,822 2,245,099
Wharf Holdings .............................. 1,534,285 3,562,597
-----------
10,365,411
-----------
JAPAN-14.69%
Canon ....................................... 197,000 7,831,773
Eisai ....................................... 250,000 4,810,281
HITACHI ..................................... 648,000 10,406,069
+Kinki Coca-Cola Bottling .................... 177,000 2,513,096
Koito Manufacturing ......................... 451,000 2,512,793
MATSUSHITA ELECTRIC ......................... 286,000 7,925,384
Nichido Fire & Marine ....................... 479,000 2,757,914
West Japan Railway .......................... 1,669 5,916,063
-----------
44,673,373
-----------
MALAYSIA-0.53%
Oriental Holdings ........................... 510,720 1,115,505
Sime Darby .................................. 380,000 481,994
-----------
1,597,499
-----------
NETHERLANDS-7.22%
Elsevier .................................... 424,150 5,062,865
ING Groep ................................... 90,200 5,441,460
Royal Dutch Petroleum ....................... 109,500 6,706,052
+Unilever .................................... 51,286 2,830,649
*Vopak ....................................... 80,534 1,912,861
-----------
21,953,887
-----------
- -------------
Top 10 stock holdings, representing 30.1% of net assets, are printed in bold.
<PAGE>

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

COMMON STOCK (Continued)
NEW ZEALAND-2.81%
Carter Holt Harvey ......................... 1,187,800 $ 1,551,564
+Telecom Corporation of New Zealand ......... 1,486,193 6,988,823
------------
8,540,387
------------
SPAIN-8.13%
BANCO SANTANDER CENTRAL
HISPANAMERICANO ............................ 733,492 8,297,627
+Iberdrola .................................. 465,800 6,450,749
*TELEFONICA ................................. 399,067 9,960,696
------------
24,709,072
------------
UNITED KINGDOM-26.23%
Bass ....................................... 436,964 5,422,273
BG ......................................... 771,242 4,940,823
Blue Circle Industries ..................... 918,236 5,252,379
Boots ...................................... 648,199 6,321,747
British Airways ............................ 889,471 5,788,002
CABLE & WIRELESS ........................... 556,000 9,399,685
GKN ........................................ 482,000 7,821,768
GLAXO WELLCOME ............................. 280,100 7,932,947
Great Universal Stores ..................... 1,361,000 7,548,779
PowerGen ................................... 751,592 5,354,991
Rio Tinto .................................. 271,100 6,513,648
Taylor Woodrow ............................. 1,365,000 2,953,448
Unigate .................................... 808,000 4,501,138
------------
79,751,628
------------
Total Common Stock
(cost $226,645,392) ........................ 289,285,511
------------
Principal
Amount**
FOREIGN BONDS-0.17%
UNITED KINGDOM-0.17%
BG Transco 4.1875% 12/14/22 ................ Gbp 110,669 178,250
BG Transco 7.00% 12/16/24 .................. Gbp 110,669 173,622
BG Transco 7.0573% 12/14/09 ................ Gbp 110,669 179,796
------------
Total Foreign Bonds
(cost $541,016) ............................ 531,668
------------

International Equity-3
<PAGE>

International Equity Series
Statement of Net Assets (Continued)

Principal Market
Amount** Value
(U.S. $)
REPURCHASE AGREEMENTS-4.70%
With Chase Manhattan 2.50%
1/3/00 (dated 12/31/99,
collateralized by $4,031,000
U.S. Treasury Notes 4.75%
due 2/15/04, market
value $3,872,131) ................................ $3,785,000 $3,785,000
With J.P. Morgan Securities 3.00%
1/3/00 (dated 12/31/99,
collateralized by $1,540,000
U.S. Treasury Notes 6.375%
due 9/30/01, market value
$1,567,927 and $1,500,000
U.S. Treasury Notes 6.625%
due 4/30/02, market value
$1,528,169 and $1,496,000
U.S. Treasury Notes 6.25%
due 6/30/02, market
value $1,494,653) ................................ 4,499,000 4,499,000
<PAGE>

Principal Market
Amount** Value
(U.S. $)

REPURCHASE AGREEMENTS (Continued)
With PaineWebber 3.00%
1/3/00 (dated 12/31/99,
collateralized by $1,541,000
U.S. Treasury Notes 5.625%
due 11/30/00, market value
$1,542,522 and $1,500,000
U.S. Treasury Notes 5.375%
due 2/15/01, market
value $1,517,847) ................................ $2,999,000 $ 2,999,000
With Prudential Securities 2.75%
1/3/00 (dated 12/31/99,
collateralized by $3,126,000
U.S. Treasury Bills due 5/18/00,
market value $3,060,922) 2,999,000 2,999,000
-----------
Total Repurchase Agreements
(cost $14,282,000) .............................. 14,282,000
-----------

TOTAL MARKET VAUE OF SECURITIES-100.01% (cost $241,468,408) ...... $304,099,179

LIABILITES NET OF RECEIVABLES AND OTHER ASSETS-(0.01%) ........... (39,128)
------------
NET ASSETS APPLICABLE TO 16,319,854 SHARES OUTSTANDING;
EQUIVALENT TO $18.63 PER SHARE-100.00% ........................ $304,060,051
============
COMPONENTS OF NET ASSETS AT DECEMBER 31, 1999:
Shares of beneficial interest (unlimited authorization - no par) . $229,576,982
Undistributed net investment income*** ........................... 6,387,831
Accumulated net realized gain on investments ..................... 5,461,502
Net unrealized appreciation of investments and foreign currencies. 62,633,736
------------
Total net assets ................................................. $304,060,051
============

- --------
*Non-income producing security for the year ended December 31, 1999.
**Principal amount is stated in the currency in which each bond is denominated.
Gbp - British Pounds
$ - U.S. Dollars
***Undistributed net investment income includes net realized gains (losses) on
foreign currencies. Net realized gains (losses) on foreign currencies are
treated as net investment income in accordance with provisions of the
Internal Revenue Code.
+Security is partially or fully on loan.

See accompanying notes

International Equity-4
<PAGE>

Delaware Group Premium Fund-
International Equity Series
Statement of Operations
Year Ended December 31, 1999

INVESTMENT INCOME:
Dividends ...................................................... $ 7,861,461
Interest ....................................................... 653,922
Foreign tax withheld ........................................... (700,325)
-----------
7,815,058
-----------
EXPENSES:
Management fees ................................................ 2,071,821
Reports and statements to shareholders ......................... 105,740
Accounting and administration .................................. 100,809
Professional fees .............................................. 24,350
Custodian fees ................................................. 13,000
Taxes (other than taxes on income) ............................. 11,400
Registration fees .............................................. 8,650
Dividend disbursing and transfer agent
fees and expenses ........................................... 6,612
Trustees' fees ................................................. 3,566
Other .......................................................... 35,333
-----------
2,381,281
-----------
Less expenses absorbed or waived ............................... (43,791)
Less expenses paid indirectly .................................. (5,829)
-----------
Total expenses ................................................. 2,331,661
-----------
NET INVESTMENT INCOME .......................................... 5,483,397
-----------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS AND FOREIGN CURRENCIES:
Net realized gain on:
Investments .................................................... 6,325,232
Foreign currencies ............................................. 1,257,776
-----------
Net realized gain .............................................. 7,583,008
Net change in unrealized appreciation / depreciation
of investments and foreign currencies ....................... 26,659,663
-----------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS AND FOREIGN CURRENCIES .......................... 34,242,671
-----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ............................................. $39,726,068
===========

See accompanying notes
<PAGE>

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

Year Year
Ended Ended
12/31/99 12/31/98
-------- --------
INCREASE IN NET ASSETS
FROM OPERATIONS:
Net investment income ........................ $ 5,483,397 $ 5,415,775
Net realized gain on investments and
foreign currencies ........................ 7,583,008 1,031,088
Net change in unrealized appreciation /
depreciation of investments and
foreign currencies ........................ 26,659,663 14,401,533
------------ ------------
Net increase in net assets resulting
from operations ........................... 39,726,068 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 .................... 150,884,715 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
------------ ------------
156,555,646 74,603,160
Cost of shares repurchased ................... (130,086,773) (43,147,474)
------------ ------------
Increase in net assets derived from
capital share transactions ................ 26,468,873 31,455,686
------------ ------------
NET INCREASE IN NET ASSETS ................... 60,524,010 44,672,780
------------ ------------
NET ASSETS:
Beginning of year ............................ 243,536,041 198,863,261
------------ ------------
End of year .................................. $304,060,051 $243,536,041
============ ============

See accompanying notes

International Equity-5
<PAGE>

Delaware Group Premium Fund-International Equity Series
Financial Highlights

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

Income from investment operations:
Net investment income(1) ....................................... 0.371 0.386 0.359 0.557 0.419
Net realized and unrealized gain on investments
and foreign currencies ...................................... 2.161 1.169 0.596 1.966 1.191
------- ------- ------- ------- -------
Total from investment operations ............................... 2.532 1.555 0.955 2.523 1.610
------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income ........................... (0.356) (0.595) (0.545) (0.420) (0.240)
Distributions from net realized gain on investments ............ (0.026) none none (0.113) (0.090)
------- ------- ------- ------- -------
Total dividends and distributions .............................. (0.382) (0.595) (0.545) (0.533) (0.330)
------- ------- ------- ------- -------
Net asset value, end of year ................................... $18.630 $16.480 $15.520 $15.110 $13.120
======= ======= ======= ======= =======
Total return ................................................... 15.76% 10.33% 6.60% 20.03% 13.98%

Ratios and supplemental data:
Net assets, end of period (000 omitted) ........................ $304,060 $243,536 $198,863 $131,428 $81,548
Ratio of expenses to average net assets ........................ 0.92% 0.87% 0.85% 0.80% 0.80%
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly ............. 0.94% 0.88% 0.90% 0.91% 0.89%
Ratio of net investment income to average net assets ........... 2.16% 2.41% 2.28% 4.71% 3.69%
Ratio of net investment income to average net assets prior
to expense limitation and expenses paid indirectly .......... 2.14% 2.40% 2.23% 4.60% 3.60%
Portfolio turnover ............................................. 9% 5% 7% 8% 19%
</TABLE>

- -----------
(1) Per share information for the years ended December 31, 1997, 1998 and 1999
was based on the average shares outstanding method.

See accompanying notes

International Equity-6
<PAGE>

Delaware Group Premium Fund-International Equity Series
Notes to Financial Statements
December 31, 1999

Delaware Group Premium Fund (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 Delaware Business Trust and offers 18 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, the Trend Series and the U.S. Growth
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--All equity securities are valued at the last quoted sales
price as of the close of the New York Stock Exchange (NYSE) on the valuation
date. If on a particular day an equity security does not trade, then the mean
between the bid and asked prices will be used. 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
Trustees.

Foreign Currency Transactions--Transactions denominated in foreign currencies
are recorded at the prevailing exchange rates on the valuation date. The value
of all assets and liabilities denominated in foreign currencies are translated
into U.S. dollars at the exchange rate of such currencies against the U.S.
dollar as of 3:00 PM EST. Transaction gains or losses resulting from changes in
exchange rates during the reporting period or upon settlement of the foreign
currency transaction are reported in operations for the current period. It is
not practical to isolate that portion of both realized and unrealized gains and
losses on investments in equity securities in the Statement of Operations that
result from fluctuations in foreign currency exchange rates. The Series isolates
that portion of gains and losses on investments in debt securities which are due
to changes in the foreign exchange rate from that which are due to changes in
market prices of debt securities. The Series reports certain foreign currency
related transactions as components of realized gains (losses) for financial
reporting purposes, whereas such components are treated as ordinary income
(loss) for federal income tax purposes.
<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 Series will make distributions 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 execution. The amount of
these expenses was approximately $5,829 for the year ended December 31, 1999.
The Series may receive earnings credits from its custodian when positive cash
balances are maintained, which are used to offset custody fees. There were no
earnings credits for the year ended December 31, 1999. The expenses paid under
the above arrangements are included in their respective expense captions on the
Statement of Operations with the corresponding expense offset shown as "expenses
paid indirectly".

2. Investment Management and Other Transactions with Affiliates
In accordance with the terms of the Investment Management Agreement, the Series
pays Delaware International Advisers Ltd. ("DIAL"), the Investment Manager of
the Series, an annual fee which is calculated at the following rates: 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.
Prior to May 1, 1999, the management fee was calculated at the rate of 0.75% on
the average daily net assets of the Series, less the fees paid to the
unaffiliated directors.

DIAL has elected to waive its fee and reimburse the Series 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 April 30, 2000.

International Equity-7
<PAGE>

International Equity Series
Notes to Financial Statements (Continued)

On December 31, 1999, the Series had liabilities payable to affiliates as
follows:

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

3. Investments
During the year ended December 31, 1999, the Series made purchases and sales of
investment securities other than U.S. government securities and temporary cash
investments as follows:

Purchases ................ $44,143,306
Sales .................... $23,000,350

At December 31, 1999, the aggregate cost of securities and unrealized
appreciation (depreciation) for federal income tax purposes for the Series were
as follows:

4. Capital Shares
Transactions in capital 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>
Year ended December 31, 1999: ...... 8,758,569 356,214 (7,575,588) 1,539,195
Year ended December 31, 1998: ...... 4,191,375 498,862 (2,725,472) 1,964,765
</TABLE>
5. Line of Credit
The Series has a committed line of credit for $9,000,000. No amount was
outstanding at December 31, 1999, or at any time during the year.

International Equity-8
<PAGE>

International Equity Series
Notes to Financial Statements (Continued)

There were no forward foreign currency contracts outstanding at December 31,
1999.

8. 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 December 31, 1999 were as follows:

Market Value of Market Value of
Securities on Loan Collateral
------------------ ---------------
$12,787,842 $13,484,270

Net income from securities lending activities for the year ended December 31,
1999 was $124,788 and is included in interest income on the Statement of
Operations.

9. Tax Information (Unaudited)
For the fiscal year ended December 31, 1999, the Series designates as long-term
capital gains and ordinary income distributions paid during the year as follows:

- ---------
* Items (A) and (B) are based on a percentage of the Series' total
distributions.
** Item (D) is based on a percentage of ordinary income of the Series.
(1) Qualifying dividends represent dividends which qualify for the corporate
dividends received deduction.

International Equity-9
<PAGE>

Delaware Group Premium Fund-International Equity Series
Report of Independent Auditors

To the Shareholders and Board of Trustees
Delaware Group Premium Fund--International Equity Series

We have audited the accompanying statement of net assets of International Equity
Series (the "Series") as of December 31, 1999, and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the five years in the period then ended. These financial statements and
financial highlights are the responsibility of the Series' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
International Equity Series at December 31, 1999, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended, and its financial highlights for each of the five
years in the period then ended, in conformity with accounting principles
generally accepted in the United States.

/s/ Ernst & Young LLP

Philadelphia, Pennsylvania
February 4, 2000

International Equity-10
<PAGE>

FOR TOTAL RETURN

REIT Series

Investment Strategy and Performance in 1999
For much of 1999, real estate investment trusts (REITs) remained out of favor
as investors stayed narrowly focused on large cap growth stocks. Recessionary
fears and tight capital markets limited the ability of REITs to raise capital by
borrowing or issuing stock. This lowered investors' perception of the future
growth prospects for the REIT asset class.
The Series' total return was -2.61% for the year ended December 31, 1999. In
spite of REITs experiencing another difficult year, the Series outperformed its
unmanaged benchmark, the NAREIT Equity REIT Index, which provided a total return
of -4.62% for the period. Our ability to preserve capital better than our
benchmark can be attributed to a combination of the Series' sector allocations
and individual REIT selection.

Portfolio Snapshot
The Series' sector allocations allowed it to capitalize on high performing
sectors. The Series' largest sector--office and industrial REITs--performed
consistently well throughout the year. Our holdings in the Office/Industrial
sector comprised about 42% of net assets as of year end. Our higher
concentration in this sector, compared to the index's 24% helped us perform
better than the index. We continue to highlight this sector as we believe it has
strong earnings potential.
Apartment REITs in the Multi-Family sector were also a source of positive
performance for the Series. This sector is still experiencing strong demand
relative to supply in the major markets where the Series is invested.
Hotel REITs in the Hotels/Diversified Reits sector continued to underperform
amid concerns of overbuilding. This sector, which comprised about 9% of net
assets, weighed down our performance.

Investment Outlook
As of the date of this report, concerns persist about the direction interest
rates will take and whether the growth rate for U.S. companies is sustainable.
Another rate hike by the Fed could cause the market to slow down or even
decline. Historically, two-thirds of REIT returns have come from dividends. This
could be favorable during periods when stock prices are rising less rapidly.
We believe REITs remain very attractively priced versus most financial
assets. REIT yields are high relative to both Treasury yields and yields
available from utility investments. We expect that as market leadership
broadens, investments that deliver more stable returns with lower volatility
will become relatively more attractive, potentially increasing the overall
appeal of REITs.
Our long-term outlook for the real estate sector remains positive. The sector
is well positioned with strong economic fundamentals, attractive valuations and
a relatively well-balanced supply. In a rising interest rate environment, the
REIT sector is focusing on improving efficiencies by maximizing returns on
existing properties, reducing operating expenses and developing new sources of
revenues (Source: NAREIT). If these conditions continue, we believe REITs will
be in a position to deliver earnings growth in the months ahead.

- --------------------------------------------------------------------------------
REIT Series Investment Objective
Seeks to achieve maximum long-term total return. Capital appreciation is a
secondary objective. It seeks to achieve its objectives by investing in
securities of companies primarily engaged in the real estate industry.
- --------------------------------------------------------------------------------
REIT-1

<PAGE>

Growth of a $10,000 Investment
May 4, 1998 to
December 31, 1999

REIT Series
Average Annual Total Returns
----------------------------
Lifetime -7.00%
One Year -2.61%

For periods ending December 31, 1999

REIT Series NAREIT Equity Index
05/01/1998 $10,000.00 $10,000
06/30/1998 $ 9,850.00 $ 9,863
09/30/1998 $ 9,020.00 $ 8,825
12/31/1998 $ 9,100.00 $ 8,568
03/31/1999 $ 8,586.48 $ 8,155
06/30/1999 $ 9,578.00 $ 8,977
09/30/1999 $ 8,862.47 $ 8,255
12/31/1999 $ 8,862.00 $ 8,172

Past performance is not a guarantee of future results. Return and share price
will fluctuate so that shares, when redeemed, may be worth more or less than
their original cost.

The chart shows a $10,000 investment in both the REIT Series and the NAREIT
Equity REIT Index for the period from the Series' inception on May 4, 1998
through December 31, 1999. All dividends and capital gains were reinvested. The
Index is unmanaged, with no set investment objective and does not include the
"real world" costs of managing a mutual fund. Earnings from a variable annuity
investment compound tax-free until withdrawal, so no adjustments were made for
income taxes. The effect of an expense limitation is included in the chart.
Performance does not reflect insurance fees related to a variable annuity
investment nor the deferred sales charge that would apply to certain withdrawals
of investments held for less than eight years. Performance shown here would have
been reduced if such fees were included and the expense limitation was removed.
For more information about fees, consult your variable annuity prospectus.

REIT-2

<PAGE>

Delaware Group Premium Fund-REIT Series
Statement of Net Assets
December 31, 1999

Number Market
of Shares Value
COMMON STOCK-93.37%
Hotels/Diversified REITs-9.07%
*Catellus Development ............................... 21,900 $ 280,594
Franchise Finance .................................. 11,900 284,856
MeriStar Hospitality ............................... 8,700 139,200
Starwood Hotels & Resorts Worldwide ................ 14,870 349,445
----------
1,054,095
----------
Mall REITs-6.27%
Macerich ........................................... 15,000 312,188
SIMON PROPERTY GROUP ............................... 18,150 416,316
----------
728,504
----------
Manufactured Housing REITs-7.07%
Chateau Communities ................................ 15,460 400,994
SUN COMMUNITIES .................................... 13,060 420,369
----------
821,363
----------
Multifamily REITs-17.93%
APARTMENT INVESTMENT &
MANAGEMENT ........................................ 10,710 426,392
AVALONBAY COMMUNITIES .............................. 14,873 510,334
Equity Residential Properties Trust ................ 9,600 409,800
Essex Property Trust ............................... 10,610 360,740
Grove Property Trust ............................... 28,450 376,963
----------
2,084,229
----------
Office/Industrial REITs-41.65%
ALEXANDRIA R. E. EQUITIES .......................... 13,570 431,696
AMB Property ....................................... 15,790 314,813

- ----------------
Top 10 stock holdings, representing 38.4% of net assets, are printed in bold.

<PAGE>

Number Market
of Shares Value

Common Stock (Continued)
Office/Industrial REITs (Continued)
Cabot Industrial Trust ............................. 16,400 $ 301,350
CarrAmerica Realty ................................. 13,580 286,878
DUKE-WEEKS REALTY .................................. 23,600 460,196
EQUITY OFFICE PROPERTIES TRUST ..................... 18,290 450,391
Liberty Property Trust ............................. 12,560 304,580
*ProLogis Trust ..................................... 11,300 217,525
Prentiss Properties Trust .......................... 16,580 348,180
RECKSON ASSOCIATES REALTY .......................... 22,090 452,845
SL GREEN REALTY .................................... 20,690 450,008
Spieker Properties ................................. 10,315 375,853
TRIZEC HAHN ........................................ 26,500 447,188
----------
4,841,503
----------
Retail Strip Center REITs-8.08%
First Washington Realty Trust ...................... 7,500 140,156
JDN Realty ......................................... 7,570 122,066
Kimco Realty ....................................... 9,400 318,425
Pan Pacific Retail Properties ...................... 21,990 358,712
----------
939,359
----------
Self Storage REITs - 3.30%
Public Storage ..................................... 16,900 383,419
----------
383,419
----------
Total Common Stock
(cost $11,407,272) ................................. 10,852,472
----------

REIT-3

<PAGE>

REIT Series
Statement of Net Assets (Continued)

Principal Market
Amount Value
REPURCHASE AGREEMENTS-5.54%
With Chase Manhattan 2.50%
1/3/00 (dated 12/31/99,
collateralized by $182,000
U.S. Treasury Notes 4.75%
due 2/15/04, market value
$174,601) ........................................ $171,000 $171,000
With J.P. Morgan Securities
3.00% 1/3/00 (dated 12/31/99,
collateralized by $69,000
U.S. Treasury Notes 6.375%
due 9/30/01, market value
$70,701 and $68,000
U.S. Treasury Notes 6.625%
due 4/30/02, market value
$68,908, and $67,000 U.S.
Treasury Notes 6.25%
due 6/30/02, market value $67,396) ............... 203,000 203,000
With PaineWebber 3.00%
1/3/00 (dated 12/31/99,
collateralized by $69,000
U.S. Treasury Notes 5.625%
due 11/30/00, market value
$69,555 and $68,000 U.S.
Treasury Notes 5.375% due
2/15/01, market value $68,442) ................... 135,000 135,000
With Prudential Securities
2.75% 1/3/00 (dated 12/31/99,
collateralized by $141,000
U.S. Treasury Bills due 5/18/00,
market value $138,022) ........................... 135,000 135,000
-----------
Total Repurchase Agreements
(cost $644,000) .................................. 644,000
-----------

TOTAL MARKET VALUE OF SECURITIES-98.91% (cost $12,051,272) ....... $11,496,472

RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES-1.09% ............ 127,033
-----------

NET ASSETS APPLICABLE TO 1,339,954 SHARES OUTSTANDING;
EQUIVALENT TO $8.67 PER SHARE-100.00% ........................... $11,623,505
===========

COMPONENTS OF NET ASSETS AT DECEMBER 31, 1999:
Shares of beneficial interest (unlimited authorization-no par) ... $12,195,265
Undistributed net investment income .............................. 484,304
Accumulated net realized loss on investments ..................... (501,264)
Net unrealized depreciation of investments ....................... (554,800)
-----------
Total net assets ................................................. $11,623,505
===========
- ----------------
REITs: Real Estate Investment Trusts
*Non-income producing security for the year ended December 31, 1999.

See accompanying notes.

REIT-4

<PAGE>

Delaware Group Premium Fund-REIT Series
Statement of Operations
Year Ended December 31, 1999

INVESTMENT INCOME:
Dividends ............................................ $ 529,266
Interest ............................................. 29,590
---------
558,856
---------

EXPENSES:
Management fees ...................................... 64,478
Reports and statements to shareholders ............... 10,975
Accounting and administration ........................ 3,195
Custodian fees ....................................... 1,095
Professional fees .................................... 480
Taxes (other than taxes on income) ................... 251
Dividend disbursing and transfer agent
fees and expenses ................................. 226
Trustees' fees ....................................... 210
Registration fees .................................... 150
Other ................................................ 934
---------
81,994
Less expenses absorbed or waived ..................... (9,210)
Less expenses paid indirectly ........................ (198)
---------
Total expenses ....................................... 72,586
---------
NET INVESTMENT INCOME ................................ 486,270
---------

NET REALIZED AND UNREALIZED
LOSS ON INVESTMENTS:
Net realized loss on investments ..................... (325,253)
Net change in unrealized appreciation /
depreciation of investments ....................... (451,401)
---------
NET REALIZED AND UNREALIZED
LOSS ON INVESTMENTS ............................... (776,654)
---------

NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS ................................... ($290,384)
========

See accompanying notes

<PAGE>

Delaware Group Premium Fund-REIT Series
Statement of Changes in Net Assets

Year Ended 5/4/98* to
12/31/99 12/31/98
---------- ----------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income .............................. $ 486,270 $ 132,582
Net realized loss on investments ................... (325,253) (176,011)
Net change in unrealized appreciation /
depreciation of investments ..................... (451,401) (103,399)
----------- ----------
Net decrease in net assets resulting
from operations ................................. (290,384) (146,828)
----------- ----------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income .............................. (134,548) -
----------- ----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold .......................... 7,672,323 5,925,102
Net asset value of shares issued upon
reinvestment of dividends from
net investment income ........................... 134,548 -
----------- ----------
7,806,871 5,925,102
Cost of shares repurchased ......................... (1,320,226) (216,482)
----------- ----------
Increase in net assets derived from
capital share transactions ...................... 6,486,645 5,708,620
----------- ----------

NET INCREASE IN NET ASSETS ......................... 6,061,713 5,561,792
----------- ----------
NET ASSETS:
Beginning of period ................................ 5,561,792 -
----------- ----------
End of period ...................................... $11,623,505 $5,561,792
=========== ==========
- --------------
*Date of commencement of operations.

See accompanying notes

REIT-5

<PAGE>

Delaware Group Premium Fund-REIT Series
Financial Highlights

Selected data for each share of the Series outstanding throughout each period
were as follows:
<TABLE>
<CAPTION>
Year Ended 5/4/98* to
12/31/1999 12/31/1998
---------- ----------
<S> <C> <C>
Net asset value, beginning of period ........................... $ 9.100 $10.000

Income (loss) from investment operations:
Net investment income .......................................... 0.334 0.217
Net realized and unrealized loss on investments ................ (0.574) (1.117)
------- -------
Total from investment operations ............................... (0.240) (0.900)
------- -------
Less dividends:
Dividends from net investment income ........................... (0.190) none
------- -------
Total dividends ................................................ (0.190) none
------- -------

Net asset value, end of period ................................. $ 8.670 $ 9.100
======= -======
Total return ................................................... (2.61%) (9.00%)

Ratios and supplemental data:
Net assets, end of period (000 omitted) ........................ $11,624 5,562
Ratio of expenses to average net assets ........................ 0.85% 0.85%
Ratio of expenses to average net assets prior to expense
limitation and expenses paid indirectly ..................... 0.96% 1.02%
Ratio of net investment income to average net assets ........... 5.65% 6.42%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly .... 5.54% 6.25%
Portfolio turnover ............................................. 33% 39%
</TABLE>
- --------------
(1) Date of commencement of operations; ratios have been annualized and total
return has not been annualized.

See accompanying notes

REIT-6

<PAGE>

Delaware Group Premium Fund-REIT Series
Notes to Financial Statements
December 31, 1999

Delaware Group Premium Fund (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 Delaware Business Trust and offers 18 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, the Trend Series and the U.S. Growth
Series. These financial statements and the related notes pertain to the REIT
Series (the "Series"). The shares of the Fund are sold only to separate accounts
of life insurance companies.

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

The Series will make distributions from net investment income and 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 execution. The amount of
these expenses was approximately $198 for the year ended December 31, 1999. The
Series may receive earnings credits from its custodian when positive cash
balances are maintained, which are used to offset custody fees. There were no
earnings credits for the year ended December 31, 1999. The expenses paid under
the above arrangements are included in their respective expense captions on the
Statement of Operations with the corresponding expense offset shown as "expenses
paid indirectly".

REIT-7

<PAGE>

REIT Series
Notes to Financial Statements (Continued)

On December 31, 1999, the Series had liabilities payable to affiliates as
follows:

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

3. Investments
During the year ended December 31, 1999, the Series made purchases and sales of
investment securities other than U.S. government securities and temporary cash
investments as follows:

Purchases ...... $9,179,388
Sales .......... $2,673,114

At December 31, 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, 1999 as follows:

Year of Expiration
2006 2007 Total
-------- -------- --------
$127,938 $147,232 $275,170
4. Capital Shares
Transactions in capital shares were as follows:
<TABLE>
<CAPTION>
Shares issued upon
reinvestment of dividends
from net investment Shares Net
Shares sold income repurchased increase
----------- -------------------------- ----------- --------
<S> <C> <C> <C> <C>
Year ended December 31, 1999 ......................... 864,979 15,718 (152,143) 728,554
Period ended December 31, 1998* ...................... 636,299 - (24,899) 611,400
</TABLE>
- -------------------------
*Commenced operations on 5/4/98.

5. Line of Credit
The Series has a committed line of credit for $400,000. No amount was
outstanding at December 31, 1999, or at any time during the year.

6. Tax Information (Unaudited)
For the fiscal year ended December 31, 1999, the Series designates as long-term
capital gains and ordinary income distributions paid during the year as follows:

(A)* (B)*
Long-Term Ordinary (C)
Capital Gains Income Total (D)**
Distributions Distributions Distribution Qualifying
(Tax Basis) (Tax Basis) (Tax Basis) Dividends(1)
------------- -------------- ------------ ------------
- 100% 100% -
- -----------------
* Items (A) and (B) are based on a percentage of the Series' total
distributions.
** Item (D) is based on a percentage of ordinary income of the
Series.
1 Qualifying dividends represent dividends which qualify for the corporate
dividends received deduction.

REIT-8

<PAGE>

Delaware Group Premium Fund-REIT Series
Report of Independent Auditors

To the Shareholders and Board of Trustees
Delaware Group Premium Fund-REIT Series

We have audited the accompanying statement of net assets of REIT Series (the
"Series") as of December 31, 1999, and the related statement of operations for
the year then ended, and the statement of changes in net assets and financial
highlights for the year then ended and for the period May 4, 1998 (commencement
of operations) through December 31, 1998. These financial statements and
financial highlights are the responsibility of the Series' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of REIT
Series at December 31, 1999, the results of its operations for the year then
ended, and the changes in its net assets and its financial highlights for the
year then ended and for the period May 4, 1998 (commencement of operations)
through December 31, 1998, in conformity with accounting principles generally
accepted in the United States.

/s/ Ernst & Young LLP

Philadelphia, Pennsylvania
February 4, 2000

REIT-9

<PAGE>
FOR GROWTH OF CAPITAL

Social Awareness Series

Investment Strategy and Performance in 1999
During fiscal 1999, the stock market experienced some of its biggest gains in
history. The Dow Jones Industrial Average climbed to a new record high. The
Standard and Poor's 500 Index also made impressive gains during the period.
These advances, however, were driven by a small number of large-cap growth
stocks and selected technology companies. Stocks of mid-size companies did not
fare as well and their prices rose to a much lesser extent.
Social Awareness Series--which invests in both mid- and large-cap stocks--did
not benefit as much from the market's gains. The Series provided a total return
of +12.91% for the year. The Series' benchmarks, the Standard & Poor's 500 Index
and the Domini Social 400 Index, delivered returns of 21.0% and 24.49%,
respectively.
While over the long term, social screens should have no material impact on
relative returns, the exposures created by the screens can impact returns in the
short-term, especially in a period where certain market segments outperform
others by a significant amount. The social screens result in the Series having a
lower average market capitalization than the S&P 500. As a result, the Series
emphasized the smaller companies in the Index, the segment that underperformed.
In addition, the Series' emphasis on value stocks also dragged on returns
compared to the Index.
The Series' subadviser, Vantage Investment Advisors, located in New York,
combines a socially responsible selection process with computer-driven,
quantitative stock selection. In general, the Series seeks attractively priced
stocks with favorable long-term prospects.
Our stock picking technique evaluates some 1200 mid- and large-cap U.S.
stocks every day. Companies are first examined to see whether they meet the
Series' socially responsible screens. The Series avoids companies that:
o Pollute the environment;
o Produce nuclear power, design or construct nuclear power plants or
manufacture equipment for the production of nuclear power;
o Make military weapons;
o Conduct animal testing for cosmetic or personal care products;
o Make alcoholic beverages or tobacco products; or
o Are involved in the gambling industry.

Portfolio Snapshot
During fiscal 1999, approximately 800 companies met our social screens. We
then analyze each company based on stock price and earnings fundamentals.
This past year, we generally avoided the energy sector as we typically do,
because many of these companies do not pass screens for environmental standards.
However, energy delivered strong returns with the spike in oil prices and we
missed out on this sector's strong performance.
Instead, we overweighted the Series in areas of technology and financial
services in an attempt to keep pace with the S&P 500. Our technology holdings,
which offered attractive capital appreciation prospects, helped boost the
Series' performance in 1999.
While fiscal 1999 was a strong year for computers and technology, financial
services companies did not fare as well. This past year was challenging for
these companies as they dealt with a rapidly changing interest rate environment
and increased pricing competition. The trouble experienced by this sector helps
explain why the Series underperformed the S&P 500 Index for the year ended
December 31, 1999.
In 1999, we avoided many "super cap" stocks--very large company stocks with
relatively high price/earnings ratios--because they fail to rate highly
according to our growth and value investment parameters. One super cap stock
that did meet our investment parameters this past year was Microsoft, which was
a strong performer in 1999.

- --------------------------------------------------------------------------------
Social Awareness Series Investment Objective
Seeks long-term capital appreciation. It attempts to achieve this objective by
investing in large- and mid-capitalization stocks of U.S. companies expected to
grow over time and deemed socially responsible.
- --------------------------------------------------------------------------------

Social Awareness-1
<PAGE>
Investment Outlook
We believe the current economic environment of steady growth and low
inflation provides fertile ground for long-term stock market growth.
The positioning of Social Awareness Series' portfolio over the past year has
helped it benefit from U.S. economic growth. At this time, we think there is
room for continued optimism for the stock market and believe the Series is well
positioned to capitalize on any market strength in the first half of 2000.

Social Awareness Series
Average Annual Returns
-----------------------------------
Lifetime 21.27%
One Year 12.91%

For periods ending December 31, 1999

Growth of a $10,000 Investment
May 1, 1997 through
December 31, 1999

Social Awareness Series
Dollar
Value
------
05/01/1997 $10,000.00
05/31/1997 $10,480.00
06/30/1997 $10,790.00
07/31/1997 $11,860.00
08/31/1997 $11,440.00
09/30/1997 $12,290.00
10/31/1997 $12,020.00
11/30/1997 $12,560.00
12/31/1997 $12,840.00
03/31/1998 $14,671.01
06/30/1998 $14,742.33
09/30/1998 $12,205.46
12/31/1998 $14,823.83
06/30/1999 $15,510.04
12/31/1999 $16,738.75

Period Domini
End S&P 500 Index Social 400 Index
------ ------------- ----------------
05/01/1997 $10,000 $10,000
06/30/1997 $11,084 $10,944
09/30/1997 $11,914 $11,862
12/31/1997 $12,256 $12,419
03/31/1998 $13,966 $14,209
06/30/1998 $14,427 $14,769
09/30/1998 $12,992 $13,352
12/31/1998 $15,759 $16,709
03/31/1999 $16,546 $17,578
06/30/1999 $17,712 $18,771
09/30/1999 $16,605 $17,637
12/31/1999 $19,076 $20,803

Past performance is not a guarantee of future results. Return and share price
will fluctuate so that shares, when redeemed, may be worth more or less than
their original cost.

The chart shows a $10,000 investment in both the Social Awareness Series, the
S&P 500 Index and the Domini Social 400 Index for the period from the Series'
inception on May 1, 1997 through December 31, 1999. All dividends and capital
gains were reinvested. The Indexes are unmanaged, with no set investment
objective and do not include the "real world" costs of managing a mutual fund.
Earnings from a variable annuity investment compound tax-free until withdrawal,
so no adjustments were made for income taxes. The effect of an expense
limitation is included in the chart. Performance does not reflect insurance fees
related to a variable annuity investment nor the deferred sales charge that
would apply to certain withdrawals of investments held for less than eight
years. Performance shown here would have been reduced if such fees were included
and the expense limitation was removed. For more information about fees, consult
your variable annuity prospectus.

Social Awareness-2
<PAGE>
Delaware Group Premium Fund-Social Awareness Series
Statement of Net Assets
December 31, 1999

Number Market
of Shares Value
COMMON STOCK-99.38%
Banking, Finance & Insurance-19.52%
A.G. Edwards ........................................ 4,745 $ 152,137
Allmerica Financial ................................. 2,000 111,250
Allstate ............................................ 6,380 153,120
Ambac Financial Group ............................... 500 26,094
American Express .................................... 2,800 465,500
American International Group ........................ 4,125 446,016
AmSouth Bancorp ..................................... 4,455 86,037
Bank One ............................................ 3,512 112,603
Chase Manhattan ..................................... 6,210 482,439
CITIGROUP ........................................... 10,335 574,238
City National ....................................... 4,025 132,573
Comerica ............................................ 2,662 124,282
Conseco ............................................. 3,700 66,137
Countrywide Credit Industries ....................... 6,000 151,500
Dime Bancorp ........................................ 12,800 193,600
Federal Home Loan Mortgage .......................... 1,800 84,713
Federal National Mortgage ........................... 5,600 349,650
*FIRSTPLUS Financial Group ........................... 6,800 476
Financial Security Assurance Holdings ............... 1,200 62,550
First Union ......................................... 2,970 97,453
Hibernia Class A .................................... 11,500 122,188
John Nuveen ......................................... 3,000 108,188
J.P. Morgan ......................................... 1,600 202,600
Marsh & McLennan .................................... 3,215 307,635
Mellon Financial .................................... 2,410 82,091
Metris .............................................. 11,510 410,763
Morgan Stanley Dean Witter .......................... 3,000 428,250
National City ....................................... 7,220 171,024
Paine Webber Group .................................. 3,870 150,204
PMI Group ........................................... 2,350 114,709
PNC Bank ............................................ 6,800 302,600
SLM Holding ......................................... 3,002 126,835
SouthTrust .......................................... 1,700 64,281
St. Paul ............................................ 2,000 67,375
T. Rowe Price Associates ............................ 2,200 81,263
*UICI ................................................ 11,000 116,188
UnionBanCal ......................................... 8,500 335,219
Washington Mutual ................................... 4,000 104,000
---------
7,167,781
---------
Buildings & Materials-0.79%
*American Standard ................................... 1,300 59,637
Kaufman & Broad Home ................................ 8,000 193,500
York International .................................. 1,400 38,413
---------
291,550
---------
Cable, Media & Publishing-6.02%
*Circle.Com .......................................... 925 11,389
Dun & Bradstreet .................................... 4,805 141,747
Gannett ............................................. 2,070 168,834
Knight-Ridder ....................................... 1,700 101,150
McGraw-Hill ......................................... 5,800 357,425
New York Times ...................................... 10,200 501,075
Omnicom Group ....................................... 1,200 120,000
Reynolds & Reynolds Class A ......................... 6,700 150,750
*R.H. Donnelley ...................................... 5,361 101,189
*Snyder Communications ............................... 3,700 71,225
Time Warner ......................................... 2,200 159,363

<PAGE>
Number Market
of Shares Value
COMMON STOCK (Continued)
Cable, Media & Publishing (Continued)
*Valassis Communications ............................. 7,500 $ 316,875
*Ventiv Health ....................................... 1,233 11,328
----------
2,212,350
----------
Chemicals-1.02%
Lubrizol ............................................ 12,100 373,588
----------
373,588
----------
Computers & Technology-23.35%
*Adaptec ............................................. 3,100 154,612
Adobe Systems ....................................... 1,100 73,975
*America Online ...................................... 4,400 331,925
*American Power Conversion ........................... 4,050 106,819
*Apple Computer ...................................... 3,900 400,969
*BMC Software ........................................ 6,300 503,606
*CISCO SYSTEMS ....................................... 12,200 1,306,925
Compaq Computer ..................................... 5,000 135,312
COMPUTER ASSOCIATES INTERNATIONAL ................... 8,600 601,462
*Compuware ........................................... 7,100 264,475
*Comverse Technology ................................. 3,000 434,250
*Dell Computer ....................................... 7,500 382,500
Deluxe .............................................. 3,315 90,955
*EMC ................................................. 6,940 758,195
*Lexmark International Group Class A ................. 5,200 470,600
*Micron Technology ................................... 2,400 186,600
*MICROSOFT ........................................... 16,160 1,886,680
*SunGard Data Systems ................................ 4,000 95,000
*Symantec ............................................ 1,500 87,938
*Teradyne ............................................ 4,600 303,600
----------
8,576,398
----------
Consumer Products-1.87%
Avon Products ....................................... 4,060 133,980
Clorox .............................................. 2,380 119,892
Gillete ............................................. 3,300 135,919
*United Stationers ................................... 10,400 297,050
----------
686,841
----------
Electronics & Electrical Equipment-2.65%
*Applied Materials ................................... 1,400 177,362
General Cable ....................................... 9,000 68,063
*LSI Logic ........................................... 2,600 175,500
*Novellus Systems .................................... 700 85,772
*Sanmina ............................................. 1,400 139,825
*Waters .............................................. 6,200 328,600
----------
975,122
----------
Energy-3.39%
Apache .............................................. 7,600 280,725
*Barrett Resources ................................... 3,900 114,806
Enron ............................................... 10,800 479,250
Equitable Resources ................................. 5,800 193,575
*Noble Drilling ...................................... 4,400 144,100
Questar ............................................. 2,300 34,500
----------
1,246,956
----------
Food & Beverage-2.93%
*Agribrands International ............................ 27 1,242
General Mills ....................................... 6,400 228,800
Interstate Bakeries ................................. 1,870 33,894
*Keebler Foods ....................................... 9,300 261,563
Quaker Oats ......................................... 3,925 257,578

Top 10 stock holdings, representing 23.3% of net assets, are printed in bold.

Social Awareness-3
<PAGE>
Social Awareness Series
Statement of Net Assets (Continued)

Number Market
of Shares Value
COMMON STOCK (Continued)
Food & Beverage (Continued)
*Suiza Foods ......................................... 3,900 $ 154,538
Supervalu ........................................... 3,600 72,000
Universal Foods ..................................... 3,200 65,200
----------
1,074,815
----------
Healthcare & Pharmaceuticals-7.30%
*AmeriSource Health Class A .......................... 5,300 80,494
*AMGEN ............................................... 10,000 600,625
Bergen Brunswig Class A ............................. 12,294 102,194
*Biogen .............................................. 800 67,600
*Boston Scientific ................................... 4,000 87,500
Cardinal Health ..................................... 3,553 170,100
C.R. Bard ........................................... 5,100 270,300
Eli Lilly ........................................... 2,600 172,900
*Health Management Associates Class A ................ 12,250 163,844
*IVAX ................................................ 3,400 87,550
*Lincare Holdings .................................... 2,590 89,841
McKesson ............................................ 2,941 66,356
Medtronic ........................................... 10,588 385,801
Mylan Laboratories .................................. 6,200 156,163
*Rexall Sundown ...................................... 12,900 133,031
*VISX ................................................ 900 46,575
----------
2,680,874
----------
Industrial Machinery-1.67%
Illinois Tool Works ................................. 4,121 278,425
Ingersoll-Rand ...................................... 6,100 335,881
----------
614,306
----------
Leisure, Lodging & Entertainment-1.77%
*Brinker International ............................... 9,800 235,200
McDonald's .......................................... 6,200 249,938
Walt Disney ......................................... 5,700 166,725
----------
651,863
----------
Metals & Mining-0.42%
Cleveland Cliffs Iron ............................... 2,700 84,037
Worthington Industries .............................. 4,300 71,219
----------
155,256
----------
Packaging & Containers-0.07%
*Sealed Air .......................................... 500 25,906
----------
25,906
----------
Retail-9.62%
Dayton Hudson ....................................... 1,000 73,437
*Dollar Tree Stores .................................. 3,500 169,531
Gap ................................................. 6,769 311,374

<PAGE>

Number Market
of Shares Value
COMMON STOCK (Continued)
Retail (Continued)
Home Depot .......................................... 11,400 $ 781,613
Jostens ............................................. 7,245 176,144
Lowe's Companies .................................... 3,800 227,050
Ross Stores ......................................... 11,460 205,564
*Safeway ............................................. 4,460 158,609
TJX ................................................. 8,520 174,128
Tupperware Corporation .............................. 2,100 35,569
WAL-MART STORES ..................................... 13,200 912,450
*Zale ................................................ 6,400 309,600
----------
3,535,069
----------
Telecommunications-13.16%
ALLTEL .............................................. 4,850 401,034
AT&T ................................................ 9,892 502,017
BELLSOUTH ........................................... 12,180 570,176
CenturyTel .......................................... 7,350 348,206
Corning ............................................. 3,600 464,175
*MCI WorldCom ........................................ 7,500 397,969
Nortel Networks ..................................... 2,300 232,300
SBC COMMUNICATIONS .................................. 11,709 570,814
*Tellabs ............................................. 6,400 410,800
*United States Cellular .............................. 2,300 232,156
U.S.West ............................................ 6,370 458,640
Vodafone Group ...................................... 5,000 247,500
----------
4,835,787
----------
Textiles, Apparel & Furniture-1.12%
Shaw Industries ..................................... 9,900 152,831
*Tommy Hilfiger ...................................... 6,640 154,795
Westpoint Stevens ................................... 5,900 103,250
----------
410,876
----------
Transportation & Shipping-1.66%
*Alaska Air Group .................................... 7,000 245,875
Delta Air Lines ..................................... 2,300 114,569
Tidewater ........................................... 4,400 158,400
*UAL ................................................. 1,180 91,524
----------
610,368
----------
Utilities-1.05%
OGE Energy .......................................... 7,900 150,100
Utilicorp United .................................... 12,100 235,194
----------
385,294
----------
Total Common Stock
(cost $29,208,300) ................................ 36,511,000
----------

Social Awareness-4
<PAGE>
Social Awareness Series
Statement of Net Assets (Continued)

Principal Market
Amount Value
REPURCHASE AGREEMENTS-3.92%
With Chase Manhattan 2.50% 1/3/00
(dated 12/31/99, collateralized by
$407,000 U.S. Treasury Notes 4.75%
due 2/15/04, market value
$390,683) ......................................... $382,000 $382,000
With J.P. Morgan Securities 3.00% 1/3/00
(dated 12/31/99, collateralized by
$155,000 U.S. Treasury Notes 6.375%
due 9/30/01, market value
$158,198 and $151,000 U.S. Treasury Notes 6.625%
due 4/30/02, market value
$154,186 and $151,000 U.S. Treasury Notes 6.25%
due 6/30/02, market value
$150,805) ......................................... 453,000 453,000
With PaineWebber 3.00% 1/3/00
(dated 12/31/99, collateralized by
$155,000 U.S. Treasury Notes 5.625%
due 11/30/00, market value
$155,635 and $151,000 U.S. Treasury
Notes 5.375% due 2/15/01, market
value $153,145) ................................... 303,000 303,000
With Prudential Securities 2.75% 1/3/00
(dated 12/31/99, collateralized by
$315,000 U.S. Treasury Bills
due 5/18/00, market value
$308,836) ......................................... 303,000 303,000
----------
Total Repurchase Agreements
(cost $1,441,000) ......................................... 1,441,000
----------

TOTAL MARKET VALUE OF SECURITIES-103.30% (COST $30,649,300) .. $37,952,000

LIABILITIES NET OF RECEIVABLES AND OTHER ASSETS-(3.30%) ...... (1,213,382)
-----------

NET ASSETS APPLICABLE TO 2,245,871 SHARES OUTSTANDING;
EQUIVALENT TO $16.36 PER SHARE-100.00% .................... $36,738,618
===========

COMPONENTS OF NET ASSETS AT DECEMBER 31, 1999:
Shares of beneficial interest (unlimited authorization-no par) $29,576,854
Undistributed net investment income .......................... 91,862
Accumulated net realized loss on investments ................. (232,798)
Net unrealized appreciation of investments ................... 7,302,700
-----------
Total net assets ............................................. $36,738,618
===========

- ------------
*Non-income producing security for the year ended December 31, 1999.

See accompanying notes

Social Awareness-5
<PAGE>
Delaware Group Premium Fund-
Social Awareness Series
Statement of Operations
Year Ended December 31, 1999

INVESTMENT INCOME:
Dividends ........................................... $ 314,055
Interest ............................................ 53,609
----------
367,664
----------

EXPENSES:
Management fees ..................................... 241,011
Reports and statements to shareholders .............. 16,658
Accounting and administration ....................... 12,730
Professional fees ................................... 5,650
Taxes (other than taxes on income) .................. 2,450
Registration fees ................................... 1,450
Custodian fees ...................................... 1,249
Dividend disbursing and transfer agent
fees and expenses ................................ 1,050
Trustees' fees ...................................... 568
Other ............................................... 4,698
----------
287,514

Less expenses absorbed or waived .................... (14,657)
Less expenses paid indirectly ....................... (1,002)
----------
Total expenses 271,855
----------

NET INVESTMENT INCOME ............................... 95,809
----------

NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on investments .................... 344,943
Net change in unrealized appreciation /
depreciation of investments ...................... 3,613,446
----------

NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS .............................. 3,958,389
----------

NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ........................ $4,054,198
==========

See accompanying notes

<PAGE>

Delaware Group Premium Fund-
Social Awareness Series
Statements of Changes in Net Assets

Year Ended Year Ended
12/31/99 12/31/98
---------- ----------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income .............................. $ 95,809 $ 124,637
Net realized gain (loss) on investments ............ 344,943 (574,831)
Net change in unrealized appreciation /
depreciation of investments ..................... 3,613,446 3,051,264
----------- -----------
Net increase in net assets resulting
from operations ................................. 4,054,198 2,601,070
----------- -----------

DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income .............................. (123,491) (33,744)
Net realized gain on investments ................... - (124,853)
----------- -----------
(123,491) (158,597)
----------- -----------

CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold .......................... 15,310,894 19,771,054
Net asset value of shares issued upon
reinvestment of distributions from net
investment income and net realized
gain on investments ............................. 123,491 158,597
----------- -----------
15,434,385 19,929,651
Cost of shares repurchased ......................... (9,588,372) (3,210,331)
----------- -----------
Increase in net assets derived from
capital share transactions ...................... 5,846,013 16,719,320
----------- -----------

NET INCREASE IN NET ASSETS ......................... 9,776,720 19,161,793
----------- -----------

NET ASSETS:
Beginning of year .................................. 26,961,898 7,800,105
----------- -----------
End of year ........................................ $36,738,618 $26,961,898
=========== ===========

See accompanying notes

Social Awareness-6
<PAGE>

Delaware Group Premium Fund-Social Awareness Series
Financial Highlights

Selected data for each share of the Series outstanding throughout each period
were as follows:
<TABLE>
<CAPTION>
Year Ended 5/1/97(1)
December 31, to
1999 1998 12/31/97
------- ------- ----------
<S> <C> <C> <C>
Net asset value, beginning of period ...................... $14.550 $12.840 $10.000

Income from investment operations:
Net investment income ..................................... 0.036 0.065 0.051
Net realized and unrealized gain
on investments ......................................... 1.834 1.880 2.789
------- ------- -------
Total from investment operations .......................... 1.870 1.945 2.840
------- ------- -------

Less dividends and distributions:
Dividends from net investment income ...................... (0.060) (0.050) none
Distributions from net realized gain
on investments ......................................... none (0.185) none
------- ------- -------
Total dividends and distributions ......................... (0.060) (0.235) none
------- ------- -------

Net asset value, end of period ............................ $16.360 $14.550 $12.840
======= ======= =======

Total return .............................................. 12.91% 15.45% 28.40%

Ratios and supplemental data:
Net assets, end of period (000 omitted) ................... $36,739 $26,962 $7,800
Ratio of expenses to average net assets ................... 0.85% 0.83% 0.80%
Ratio of expenses to average net assets prior to expense
limitation and expenses paid indirectly ................ 0.90% 0.89% 1.40%
Ratio of net investment income to average net assets ...... 0.30% 0.80% 1.13%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 0.25% 0.74% 0.53%
Portfolio turnover ........................................ 22% 30% 52%
</TABLE>
- --------
(1) Date of commencement of operations; ratios have been annualized and total
return has not been annualized

Social Awareness-7
<PAGE>

Delaware Group Premium Fund-Social Awareness Series
Notes to Financial Statements
December 31, 1999

Delaware Group Premium Fund (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 Delaware Business Trust and offers 18 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, the Trend Series and the U.S. Growth
Series. These financial statements and the related notes pertain to the Social
Awareness Series (the "Series"). The shares of the Fund are sold only to
separate accounts of life insurance companies.

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

The Series will make distributions 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 execution. The amount of
these expenses was approximately $739 for the year ended December 31, 1999. The
Series may receive earnings credits from its custodian when positive cash
balances are maintained, which are used to offset custody fees. These credits
were $263 for the year ended December 31, 1999. The expenses paid under the
above arrangements are included in their respective expense captions on the
Statement of Operations with the corresponding expense offset shown as "expenses
paid indirectly".

<PAGE>

2. Investment Management and Other Transactions with Affiliates
In accordance with the terms of the Investment Management Agreement, the Series
pays Delaware Management Company ("DMC"), the Investment Manager of the Series,
an annual fee which is calculated at the following rates: 0.75% of the first
$500 million of average daily net assets of the Series, 0.70% on the next $500
million, 0.65% on the next $1,500 million and 0.60% on the average daily net
assets over $2,500 million. These rates became effective May 1, 1999. Prior to
May 1, 1999, the management fees were calculated at the rate of 0.75% of the
average daily net assets of the Series. Vantage Global Advisors, Inc., an
affiliate of DMC, receives a fee equal to 0.25% of average daily net assets up
to $20 million, 0.35% of average daily net assets between $20 million and $50
million, and 0.40% of average daily net assets over $50 million of the Series
for acting as a sub-advisor to this Series. The Series does not pay any fees to
the sub-adviser.

Social Awareness-8
<PAGE>

Social Awareness Series
Notes to Financial Statements (Continued)

On December 31, 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
-------------- -------------------- --------------
$21,857 $1,555 $3,132

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

3. Investments
During the year ended December 31, 1999, the Series made purchases and sales of
investment securities other than U.S. government securities and temporary cash
investments as follows:

Purchases .................................. $13,143,118
Sales ...................................... $6,864,152

At December 31, 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, 1999 as follows:

Year of
Expiration
2006 2007 Total
-------- -------- --------
$103,467 $129,331 $232,798

4. Capital Shares
Transactions in capital 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>
Year ended December 31, 1999 ...... 1,034,353 8,635 (650,169) 392,819
Year ended December 31, 1998 ...... 1,464,605 12,698 (231,596) 1,245,707
</TABLE>

5. Line of Credit
The Series has a committed line of credit for $1,200,000. No amount was
outstanding at December 31, 1999, or at any time during the year.

6. Tax Information (Unaudited)
For the fiscal year ended December 31, 1999, the Series designates as long-term
capital gains and ordinary income distributions paid during the year as follows:

Social Awareness-9

<PAGE>
Delaware Group Premium Fund-Social Awareness Series
Report of Independent Auditors

To the Shareholders and Board of Trustees
Delaware Group Premium Fund-Social Awareness Series

We have audited the accompanying statement of net assets of Social Awareness
Series (the "Series") as of December 31, 1999, and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the two years in the period then ended and for the period May 1, 1997
(commencement of operations) through December 31, 1997. These financial
statements and financial highlights are the responsibility of the Series'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Social
Awareness Series at December 31, 1999, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended, and its financial highlights for each of the two years in the
period then ended and for the period May 1, 1997 (commencement of operations)
through December 31, 1997, in conformity with accounting principles generally
accepted in the United States.

/s/ Ernst & Young LLP

Philadelphia, Pennsylvania
February 4, 2000

Social Awareness-10
<PAGE>

FOR GROWTH OF CAPITAL

Small Cap Value Series

Investment Strategy and Performance in 1999
For most of 1999, investors focused almost exclusively on a handful of
companies--especially high priced technology and internet-related stocks.
For much of the year, Small Cap Value Series stock selection strategy ran
counter to market trends, resulting in a disappointing return of -4.86% for the
year ended December 31, 1999. This was less than the Series' unmanaged
benchmark, the Russell 2000 Index, largely due to the performance of our
technology holdings. Although the Series' overall technology allocation was
close to the Russell 2000 Index, the market clearly favored technology companies
which had little or no earnings. Small Cap Value Series, however, looks for
companies with high sales and earnings potential relative to competitors. This
prevented us from investing in some of the technology sector's best performers.
The Russell 2000 Value Index, which tracks the return of Small Cap Value Stocks
and has a lower allocation to technology than the Russell 2000 Index, returned
- -1.55% for the year.

Portfolio Snapshot
Small Cap Value Series focuses on less expensive stocks from smaller,
under-recognized companies. We generally purchase stocks from companies with
market capitalizations between $400 million and $1.4 billion. When selecting
stocks, we look for companies that trade actively. This allows us to increase or
decrease our holdings of a company without significantly affecting its price.
Another important consideration is free cash flow, or the amount of money a
business generates through its operations. Free cash flow helps us gauge a
company's ability to expand and respond to competition.
Because the market has been so narrowly focused on a few growth and
technology stocks, we've been able to add high quality companies to our
portfolio at inexpensive prices. For example, due to rising interest rates in
the summer and fall of 1999, prices for a number of financial services companies
fell and now meet Small Cap Value Series' value criteria. Over the next several
months we may take advantage of these lower prices and increase the Series'
allocation to the financial services sector.
After nearly two years of recession, we expected many foreign economies to
rebound in 1999. We added to our holdings of consumer cyclical stocks and energy
stocks, which normally rise during periods of economic growth, to position Small
Cap Value Series to benefit from this expected turnaround. This strategy worked
well last April and May, during a brief period when undervalued consumer
cyclical stocks and energy stocks rallied strongly.

Investment Outlook
Three Federal Reserve interest rate hikes during the summer and fall of 1999
essentially brought us back to where we were a year ago, before the Fed tilted
its interest rate policy in favor of economic growth as a means to compensate
for the global recession. After a relatively uneventful transition to the year
2000, we think the Fed may raise rates again to slow the rapid pace of U.S.
economic growth.
We expect the global recovery that began in 1999 to continue throughout 2000.
In our opinion, as the world's economies continue to recover, a wider range of
companies may begin to demonstrate reliable earnings growth, attracting the
attention of investors and sharing more in the stock market's appreciation
potential. We have positioned Small Cap Value Series for this possibility.

- -------------------------------------------------------------------------------
Small Cap Value Series Investment Objective
Seeks capital appreciation. It attempts to achieve this objective by investing
in stocks of small companies whose market value appears low relative to
underlying value or future potential.
- -------------------------------------------------------------------------------

Small Cap Value-1
<PAGE>

Small Cap Value Series
Average Annual Total Returns
----------------------------
Lifetime +11.07%
Five Years +12.81%
One Year -4.86%
For periods ending December 31, 1999

Premium Fund
Growth of a $10,000 investment

Small Cap Value Series Russell 2000 Index
12/27/1993 10,000 $10,000
12/31/1993 10,210 $10,000
12/31/1994 10,290 $ 9,818
12/31/1995 12,744 $12,610
12/31/1996 15,617 $14,690
12/31/1997 20,757 $17,974
12/31/1998 19,762 $17,516
12/31/1999 18,802 $21,182

Past performance is not a guarantee of future results. Return and share price
will fluctuate so that shares, when redeemed, may be worth more or less than
their original cost.

The chart shows a $10,000 investment in both the Small Cap Value Series and the
Russell 2000 Index for the period from the Series' inception on December 27,
1993 through December 31, 1999. All dividends and capital gains were reinvested.
The Index is unmanaged, with no set investment objective and does not include
the "real world" costs of managing a mutual fund. Earnings from a variable
annuity investment compound tax-free until withdrawal, so no adjustments were
made for income taxes. The effect of an expense limitation is included in the
chart. Performance does not reflect insurance fees related to a variable annuity
investment nor the deferred sales charge that would apply to certain withdrawals
of investments held for less than eight years. Performance shown here would have
been reduced if such fees were included and the expense limitation was removed.
For more information about fees, consult your variable annuity prospectus.

Small Cap Value-2
<PAGE>

Delaware Group Premium Fund-Small Cap Value Series
Statement of Net Assets
December 31, 1999

Number Market
of Shares Value
COMMON STOCK-93.94%
Aerospace & Defense-1.08%
Cordant Technologies ..................... 31,300 $ 1,032,900
-----------
1,032,900
-----------
Automobiles & Automotive Parts-6.44%
Arvin Industries ......................... 42,800 1,214,450
*AVIS RENT A CAR .......................... 69,700 1,781,706
BORG-WARNER AUTOMOTIVE ................... 46,808 1,895,724
Federal Signal ........................... 78,300 1,257,694
-----------
6,149,574
-----------
Banking, Finance & Insurance-12.85%
Bank United Class A ...................... 24,700 673,075
Colonial Bancgroup ....................... 66,000 684,750
Enhance Financial Services Group ......... 64,200 1,043,250
Everest Reinsurance Holdings ............. 36,900 823,331
*Farm Family Holdings ..................... 26,500 1,119,625
*Financial Federal ........................ 61,950 1,413,234
Horace Mann Educators .................... 47,700 936,113
Liberty Financial Companies .............. 35,900 823,456
North Fork Bancorporation ................ 95,050 1,663,375
PEOPLES HERITAGE FINANCIAL GROUP ......... 113,400 1,708,088
Westamerica Bancorporation ............... 49,300 1,377,319
-----------
12,265,616
-----------
Buildings & Materials-4.61%
D.R. Horton .............................. 97,100 1,341,194
*Griffon .................................. 104,800 818,750
*JACOBS ENGINEERING GROUP ................. 68,900 2,239,250
-----------
4,399,194
-----------
Business Services-2.60%
*Metamor Worldwide ........................ 33,600 978,600
*Modis Professional Services .............. 105,600 1,504,800
-----------
2,483,400
-----------
Chemicals-5.00%
CK Witco ................................. 65,700 878,738
Hanna (M.A.) ............................. 71,700 784,219
OM Group ................................. 35,500 1,222,531
*SCOTTS CLASS A ........................... 46,700 1,879,675
-----------
4,765,163
-----------
Computers & Technology-4.08%
*Metro Information Services ............... 52,000 1,248,000
*SYNOPSYS ................................. 39,600 2,643,300
-----------
3,891,300
-----------
Electronics & Electrical Equipment-1.76%
*Etec Systems ............................. 37,500 1,682,813
-----------
1,682,813
-----------
Energy-9.72%
*Forest Oil ............................... 48,800 643,550
Helmerich & Payne ........................ 31,200 680,550
*Louis Dreyfus Natural Gas ................ 36,400 659,750
NICOR .................................... 49,600 1,612,000
NUI ...................................... 30,300 799,163
*Ocean Energy ............................. 79,700 617,675
*Oceaneering International ................ 57,500 858,906

- ------------------
Top 10 stock holdings, representing 22.3% of net assets, are printed in bold.

<PAGE>

Number Market
of Shares Value
COMMON STOCK (Continued)
Energy (Continued)
*Santa Fe Snyder .......................... 143,100 $1,144,800
*Titan Exploration ........................ 115,500 628,031
*Tom Brown ................................ 43,400 580,475
Valero Energy ............................ 52,800 1,049,400
-----------
9,274,300
-----------
Food, Beverage & Tobacco-6.12%
Corn Products ............................ 51,500 1,686,625
*SUIZA FOODS .............................. 44,300 1,755,388
UNIVERSAL FOODS .......................... 117,700 2,398,138
-----------
5,840,151
-----------
Healthcare & Pharmaceuticals-3.76%
*AmeriSource Health Class A ............... 47,800 725,963
*Conmed ................................... 31,900 825,413
*VARIAN MEDICAL SYSTEMS ................... 68,300 2,036,194
-----------
3,587,570
-----------
Industrial Machinery-6.81%
CLARCOR .................................. 55,850 1,005,300
Harsco ................................... 28,200 895,350
IDEX ..................................... 32,950 1,000,856
Milacron ................................. 80,100 1,231,538
Regal Beloit ............................. 55,200 1,138,500
Smith (A.O.) ............................. 56,050 1,226,094
-----------
6,497,638
-----------
Metals & Mining-1.62%
*CIRCOR International ..................... 18,500 190,781
*Mueller Industries ....................... 37,400 1,355,750
-----------
1,546,531
-----------
Paper & Forest Products-3.38%
Caraustar Industries ..................... 43,600 1,046,400
Chesapeake ............................... 32,100 979,050
Rayonier ................................. 24,900 1,202,981
-----------
3,228,431
-----------
Real Estate-6.64%
Cabot Industrial Trust ................... 69,500 1,277,063
Chateau Communities ...................... 27,015 700,702
Kilroy Realty ............................ 41,600 915,200
MeriStar Hospitality ..................... 19,445 311,120
Pan Pacific Retail Properties ............ 64,300 1,048,894
Prentiss Properties Trust ................ 52,500 1,102,500
Reckson Associates Realty ................ 47,800 979,900
-----------
6,335,379
-----------
Retail-5.11%
*BJ's Wholesale Club ...................... 25,600 934,400
Casey's General Stores ................... 97,500 1,017,656
*ZALE ..................................... 60,400 2,921,850
-----------
4,873,906
-----------
Telecommunications-1.69%
*Brightpoint .............................. 122,600 1,609,125
-----------
1,609,125
-----------

Small Cap Value-3
<PAGE>

Small Cap Value Series
Statement of Net Assets (Continued)

Number Market
of Shares Value
COMMON STOCK (Continued)
Textiles, Apparel & Furniture-4.66%
*Furniture Brands International .......... 63,600 $1,399,200
HON Industries .......................... 47,900 1,050,806
Kellwood ................................ 55,900 1,086,556
Wolverine World Wide .................... 83,500 913,281
-----------
4,449,843
-----------
Transportation & Shipping-4.39%
Alexander & Baldwin ..................... 47,500 1,083,594
*Mesaba Holdings ......................... 69,500 794,906
*M.S. Carriers ........................... 45,200 1,079,150
USFreightways ........................... 25,700 1,230,388
-----------
4,188,038
-----------
Utilities-1.62%
California Water Service Group .......... 27,100 821,469
Sierra Pacific Resources ................ 41,732 722,485
-----------
1,543,954
-----------
Total Common Stock
(cost $89,789,553) ...................... 89,644,826
-----------

Principal Market
Amount Value
REPURCHASE AGREEMENTS-5.92%
With Chase Manhattan 2.50%
1/3/00 (dated 12/31/99, collateralized
by $1,594,000 U.S. Treasury Notes
4.75% due 2/15/04, market
value $1,531,284) ......................... $1,497,000 $1,497,000
With J.P. Morgan Securities 3.00%
1/3/00 (dated 12/31/99, collateralized
by $609,000 U.S. Treasury Notes
6.375% due 9/30/01, market value
$620,057 and $593,000 U.S. Treasury
Notes 6.625% due 4/30/02, market
value $604,334 and $591,500 U.S.
Treasury Notes 6.25% due 6/30/02,
market value $591,080) .................... 1,779,000 1,779,000
With PaineWebber 3.00% 1/3/00
(dated 12/31/99, collateralized by
$609,000 U.S. Treasury Notes
5.625% due 11/30/00, market value
$610,010 and $593,000 U.S.Treasury
Notes 5.375% due 2/15/01, market
value $600,252) ........................... 1,186,000 1,186,000
With Prudential Securities 2.75%
1/3/00 (dated 12/31/99, collateralized
by $1,236,000 U.S. Treasury Bills due
5/18/00, market value $1,210,481) ......... 1,186,000 1,186,000
Total Repurchase Agreements -----------
(cost $5,648,000) ......................... 5,648,000
-----------
TOTAL MARKET VALUE OF SECURITIES-99.86% (cost $95,437,553) ....... $95,292,826

RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES-0.14% ............ 132,056
-----------
NET ASSETS APPLICABLE TO 6,211,017 SHARES OUTSTANDING;
EQUIVALENT TO $15.36 PER SHARE-100.00% ........................ $95,424,882
===========
COMPONENTS OF NET ASSETS AT DECEMBER 31, 1999:
Shares of beneficial interest (unlimited authorization- no par) .. $93,705,646
Undistributed net investment income .............................. 1,123,621
Accumulated net realized gain on investments ..................... 740,342
Net unrealized depreciation of investments ....................... (144,727)
-----------
Total net assets ................................................. $95,424,882
===========
- --------------
*Non-income producing security for the year ended December 31, 1999.

See accompanying notes

Small Cap Value-4
<PAGE>

Delaware Group Premium Fund-
Small Cap Value Series
Statement of Operations
For the Year Ended December 31, 1999

INVESTMENT INCOME:
Dividends ................................................. $1,692,976
Interest .................................................. 258,270
----------
1,951,246
----------
EXPENSES:
Management fees ........................................... 727,190
Accounting and administration ............................. 38,405
Professional fees ......................................... 13,685
Reports and statements to shareholders .................... 8,250
Registration fees ......................................... 5,500
Custodian fees ............................................ 6,341
Taxes (other than taxes on income) ........................ 6,240
Dividend disbursing and transfer agent fees
and expenses ........................................... 2,900
Trustee's fees ............................................ 1,843
Other ..................................................... 15,863
----------
826,217
Less expenses paid indirectly ............................. (2,230)
----------
Total expenses ............................................ 823,987
----------

NET INVESTMENT INCOME ..................................... 1,127,259
----------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain on investments .......................... 2,075,493
Net change in unrealized appreciation / depreciation
of investments ......................................... (8,409,767)
----------
NET REALIZED AND UNREALIZED
LOSS ON INVESTMENTS .................................... (6,334,274)
----------
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS ........................................ ($5,207,015)
==========
See accompanying notes

<PAGE>

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

Year Year
Ended Ended
12/31/99 12/31/98
-------- --------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income ....................... $ 1,127,259 $ 1,245,041
Net realized gain (loss) on investments ..... 2,075,493 (827,096)
Net change in unrealized appreciation /
depreciation of investments .............. (8,409,767) (5,586,278)
------------ ------------
Net decrease in net assets resulting
from operations .......................... (5,207,015) (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 ................... 18,087,758 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
------------ ------------
19,818,450 37,457,863
Cost of shares repurchased .................. (21,445,285) (9,392,119)
------------ ------------
Increase (decrease) in net assets derived
from capital share transactions .......... (1,626,835) 28,065,744
------------ ------------
NET INCREASE (DECREASE)
IN NET ASSETS ............................ (8,564,542) 19,918,281
------------ ------------
NET ASSETS:
Beginning of year ........................... 103,989,424 84,071,143
------------ ------------
End of year ................................. $ 95,424,882 $103,989,424
============ ============

See accompanying notes

Small Cap Value-5
<PAGE>

Delaware Group Premium Fund-Small Cap Value Series
Financial Highlights

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

<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
------------------------------------------------------------------
Net asset value, beginning of year ............................ $16.450 $17.920 $14.500 $12.470 $10.290

Income (loss) from investment operations:
Net investment income ......................................... 0.182 0.196 0.122 0.112 0.192
Net realized and unrealized gain (loss) on investments ........ (0.997) (1.036) 4.338 2.548 2.208
------- ------- ------- ------- -------
Total from investment operations .............................. (0.815) (0.840) 4.460 2.660 2.400
------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income .......................... (0.195) (0.135) (0.110) (0.180) (0.150)
Distributions from net realized gain on investments ........... (0.080) (0.495) (0.930) (0.450) (0.070)
------- ------- ------- ------- -------
Total dividends and distributions ............................. (0.275) (0.630) (1.040) (0.630) (0.220)
------- ------- ------- ------- -------
Net asset value, end of year .................................. $15.360 $16.450 $17.920 $14.500 $12.470
======= ======= ======= ======= =======
Total return .................................................. (4.86%) (4.79%) 32.91% 22.55% 23.85%

Ratios and supplemental data:
Net assets, end of year (000 omitted) ......................... $95,425 $103,989 $84,071 $23,683 $11,929
Ratio of expenses to average net assets ....................... 0.85% 0.83% 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%
Ratio of net investment income to average net assets .......... 1.16% 1.32% 1.24% 1.28% 2.13%
Ratio of net investment income to average net assets prior
to expense limitation and expenses paid indirectly ......... 1.16% 1.30% 1.14% 1.09% 1.97%
Portfolio turnover ............................................ 47% 45% 41% 84% 71%
</TABLE>

See accompanying notes

Small Cap Value-6
<PAGE>

Delaware Group Premium Fund-Small Cap Value Series
Notes to Financial Statements
December 31, 1999

Delaware Group Premium Fund (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 Delaware Business Trust and offers 18 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, the Trend Series and the U.S. Growth
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.

The Series will make distributions 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 execution. The amount of
these expenses was approximately $2,230 for the year ended December 31, 1999.
The Series may receive earnings credits from its custodian when positive cash
balances are maintained, which are used to offset custody fees. There were no
earnings credits for the year ended December 31, 1999. The expenses paid under
the above arrangements are included in their respective expense captions on the
Statement of Operations with the corresponding expense offset shown as "expenses
paid indirectly".

<PAGE>

Small Cap Value-7
<PAGE>

Small Cap Value Series
Notes to Financial Statements (Continued)

On December 31, 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
-------------- ------------------- --------------
$58,470 $962 $18,966

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

3. Investments
During the year ended December 31, 1999, the Series made purchases and sales of
investment securities other than U.S. government securities and temporary cash
investments as follows:

Purchases .................................... $43,185,129
Sales ........................................ $45,324,757

At December 31, 1999, the aggregate cost of securities and unrealized
appreciation (depreciation) for federal income tax purposes for the Series were
as follows:

4. Capital Shares
Transactions in capital shares were as follows:

<TABLE>
<CAPTION>
Shares issued upon
reinvestment of distributions
from net investment Net
income and net realized Shares increase
Shares sold gain on investments repurchased (decrease)
<S> <C> <C> <C> <C>
----------- ----------------------------- ----------- ----------
Year ended December 31, 1999: ...... 1,162,723 118,948 (1,390,784) (109,113)
Year ended December 31, 1998: ...... 2,030,407 175,656 (578,317) 1,627,746
</TABLE>

5. Line of Credit
The Series has a committed line of credit for $4,400,000. No amount was
outstanding at December 31, 1999, or at any time during the year.

6. Tax Information (Unaudited)
For the fiscal year ended December 31, 1999, the Series designates as long-term
capital gains and ordinary income distributions paid during the year as follows:

<TABLE>
<CAPTION>
(A)* (B)*
Long-Term Ordinary (C)
Capital Gains Income Total (D)**
Distributions Distributions Distribution Qualifying
(Tax Basis) (Tax Basis) (Tax Basis) Dividends(1)
<S> <C> <C> <C> <C>
------------- ------------- ------------ ------------
Year ended December 31, 1998: ....... 29% 71% 100% 42%
</TABLE>

Small Cap Value-8
<PAGE>

Delaware Group Premium Fund-Small Cap Value Series
Report of Independent Auditors

To the Shareholders and Board of Trustees
Delaware Group Premium Fund-Small Cap Value Series

We have audited the accompanying statement of net assets of Small Cap Value
Series (the "Series") as of December 31, 1999, and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the five years in the period then ended. These financial statements and
financial highlights are the responsibility of the Series' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Small
Cap Value Series at December 31, 1999, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended, and its financial highlights for each of the five years in
the period then ended, in conformity with accounting principles generally
accepted in the United States.

/s/ Ernst & Young LLP

Philadelphia, Pennsylvania
February 4, 2000

Small Cap Value-9
<PAGE>

FOR INCOME

Strategic Income Series

Investment Strategy and Performance in 1999
In 1999, bond market conditions were shifting and sometimes volatile. The
Series provided a total return of -3.29% (capital change plus reinvestment of
distributions) for the year ended December 31, 1999. Its benchmark Lehman
Brothers Aggregate Bond Index returned -0.82%, and the Lehman Brothers Treasury
Index returned -2.56% for the same period.
Strategic Income Series invests primarily in:
o U.S. government and investment grade corporate bonds;
o higher risk, high-yield U.S. corporate bonds; and
o foreign government and investment grade corporate bonds.

Portfolio Snapshot
Following the economic crises of the summer of 1998, global markets responded
positively as the U.S., 11 Euro-zone nations and other countries abroad lowered
interest rates during the fall of 1998. Lower interest rates added liquidity,
helping to ease both domestic and international concerns. The International
Monetary Fund also played a role in the global turnaround by providing billions
of dollars to struggling economies in Brazil, Russia and Asia.
Lower interest rates, continued growth of the U.S. economy and a brightening
picture abroad restored faith in the equity markets worldwide. This favorable
scenario for stocks, however, put a damper on both U.S. and foreign fixed income
securities, which had benefited from a global flight to quality in 1998.
Robust U.S. economic growth and improved foreign economies reduced demand for
U.S. government debt, reducing bond prices and pushing yields higher. U.S.
Treasury bonds, particularly 30-year Treasuries, were hit hardest. The yield on
the benchmark 30-year bond rose from 5.09% on January 1, 1999 to 6.50% as of
December 31, 1999.
U.S. government bonds, which represented 6.86% of net assets, fared better
than corporate bonds in 1999. However, because we tend to underweight U.S.
Treasuries relative to the Index, this contributed less to the Series'
performance.
Our most significant holdings in non-government securities during the past
year were corporate bonds. These bonds began to appreciate from early winter
through spring 1999, as they capitalized on the comeback of both equity and
credit markets. We reduced our holdings in response to the trend of monetary
tightening by the Federal Reserve Board and in anticipation of Y2K anxiety. We
will probably increase our weighting in this area when we believe that the yield
premium is large enough to compensate for the uncertainty facing this segment of
the bond market
Investment grade corporate bonds represented 6.82% of the total assets as of
December 31, 1999.
Throughout fiscal 1999, the high-yield bond market suffered from reduced
demand and a corresponding low level of liquidity. The lack of liquidity stemmed
in large part from unwillingness among Wall Street underwriters to use their own
capital to create capital markets for issues they had underwritten.
Our allocation to U.S. high-yield bonds represented 36.10% of the Series'
total assets as of December 31, 1999. The Series' return was negatively impacted
by this sector's disappointing performance. Typically, we expect high-yield
bonds to lead the Series' investments, in terms of both income generated and
total return potential.
Foreign bonds represented 28.76% of the Series net assets as of December 31,
1999. Demand for foreign fixed-income investments appeared to wane as investor
confidence increased with economic recovery. Over the year, we lost value in our
investments in Australia and New Zealand, due to decreased demand in
commodities. We reduced our exposure to these countries in favor of better
values we see in Europe. The Euro's weakness increased bond yields in European
Monetary Union member nations, creating better value.

Investment Outlook
As long as the stock market continues to perform well, we do not foresee any
stampede into fixed-income securities. As a result, we don't expect demand to
push bond prices higher. As yields rise on a global basis, fixed-income markets
appear increasingly attractive. In 2000, we will continue to maintain positions
in liquid securities while also investing in sectors where yields seem high
enough to overcompensate for perceived risk. We believe this should help us to
maximize our return potential.

- --------------------------------------------------------------------------------
Strategic Income Series Investment Objective
To seek high current income and total return. It attempts to achieve its
objective by investing primarily in three sectors of the fixed-income market:
high-yield, investment grade U.S. bonds and high quality international
fixed-income securities.
- --------------------------------------------------------------------------------

Strategic Income-1

<PAGE>

Strategic Income Series
Average Annual Total Returns
----------------------------
Lifetime +1.99%
One Year -3.29%

For periods ending December 31, 1999

Growth of a $10,000 Investment
May 1, 1997 to
December 31, 1999

Lehman Brothers
Strategic Income Series Aggregate Bond Index
05/01/1997 $10,000.00 $10,000
06/30/1997 $10,230.00 $10,214
09/30/1997 $10,570.00 $10,554
12/31/1997 $10,620.00 $10,865
03/31/1998 $10,837.23 $11,033
06/30/1998 $10,826.95 $11,291
09/30/1998 $10,724.13 $11,768
12/31/1998 $10,898.92 $11,808
03/31/1999 $10,944.00 $11,748
06/30/1999 $10,660.73 $11,644
09/30/1999 $10,562.53 $11,724
12/31/1999 $10,540.00 $11,710

Past performance is not a guarantee of future results. Return and share price
will fluctuate so that shares, when redeemed, may be worth more or less than
their original cost.

The chart shows a $10,000 investment in both the Strategic Income Series and the
Lehman Brothers Aggregate Bond Index for the period from the Series' inception
on May 1, 1997 through December 31, 1999. All dividends and capital gains were
reinvested. The Index is unmanaged, with no set investment objective and does
not include the "real world" costs of managing a mutual fund. Earnings from a
variable annuity investment compound tax-free until withdrawal, so no
adjustments were made for income taxes. The effect of an expense limitation is
included in the chart. Performance does not reflect insurance fees related to a
variable annuity product investment nor the deferred sales charge that would
apply to certain withdrawals of investments held for less than eight years.
Performance shown here would have been reduced if such fees were included and
the expense limitation was removed. For more information about fees, consult
your variable annuity prospectus.

Strategic Income-2

<PAGE>

Delaware Group Premium Fund-Strategic Income Series
Statement of Net Assets
December 31, 1999

Principal Market
Amount* Value
(U.S. $)
CORPORATE BONDS-42.92%
Aerospace & Defense-0.50%
Lockheed Martin notes 8.20% 12/1/09 .................. $100,000 $ 99,787
----------
99,787
----------
Automobiles & Automotive Parts-2.87%
Accuride sr sub notes 9.25% 2/1/08 ................... 150,000 138,750
Avis Rent A Car co guarantee
11.00% 5/1/09 ..................................... 200,000 211,500
Meritor Automotive notes 6.80% 2/15/09 ............... 150,000 135,973
Stanadyne Automotive co guarantee
10.25% 12/15/07 ................................... 100,000 83,000
----------
569,223
----------
Banking, Finance & Insurance-2.58%
American Financial Group debs
7.125% 4/15/09 .................................... 50,000 45,549
Banco Santander notes 6.50% 11/1/05 .................. 50,000 47,220
Caithness Coso Fund sec 9.05% 12/15/09 ............... 150,000 148,875
Conseco notes 9.00% 10/15/06 ......................... 100,000 102,565
Fairfax Financial Holdings notes
7.375% 3/15/06 .................................... 75,000 67,714
Osprey Trust sec 8.31% 1/15/03 ....................... 100,000 99,054
----------
510,977
----------
Building & Materials-0.84%
Henry co guarantee 10.00% 4/15/08 .................... 200,000 166,000
----------
166,000
----------
Cable, Media & Publishing-5.25%
Adelphia Communications sr notes
7.75% 1/15/09 ..................................... 150,000 135,750
American Lawyer Media co guarantee
9.75% 12/15/07 .................................... 100,000 99,000
American Media Operation sr sub notes
10.25% 5/1/09 ..................................... 200,000 202,500
Cox Communications notes 6.15% 8/1/03 ................ 65,000 62,466
Muzak co guarantee 9.875% 3/15/09 .................... 200,000 193,500
PSiNet sr notes 10.00% 2/15/05 ....................... 150,000 149,250
STC Broadcasting sr sub notes
11.00% 3/15/07 .................................... 150,000 150,000
United News and Media notes
7.75% 7/1/09 ...................................... 50,000 48,599
----------
1,041,065
----------
Chemicals-5.50%
Equistar Chemicals notes 8.75% 2/15/09 ............... 100,000 99,000
General Chemical sr sub notes
10.625% 5/1/09 .................................... 200,000 198,000
Huntsman sr sub notes 9.50% 7/1/07 ................... 25,000 23,750
LaRoche sr sub notes 9.50% 9/15/07 ................... 200,000 55,000
Lyondell Chemical sr notes
9.625% 5/1/07 ..................................... 250,000 257,500
Octel Developments co guarantee
10.00% 5/1/06 ..................................... 300,000 309,000
Sterling Chemicals sr sub notes
11.75% 8/15/06 .................................... 200,000 150,000
----------
1,092,250
----------
Computers & Technology-0.74%
Seagate Technology sr notes
7.45% 3/1/37 ...................................... 100,000 86,367
Sun Microsystems sr notes
7.65% 8/15/09 ..................................... 60,000 59,791
----------
146,158
----------

<PAGE>

Principal Market
Amount* Value
(U.S. $)
CORPORATE BONDS (Continued)
Consumer Products-1.06%
Drypers sr notes 10.25% 6/15/07 ...................... $25,000 $ 20,438
Outboard Marine co guarantee
10.75% 6/1/08 ..................................... 200,000 146,000
Precise Technology co guarantee
11.125% 6/15/07 ................................... 25,000 22,563
Riddell Sports co guarantee
10.50% 7/15/07 .................................... 25,000 21,313
--------
210,314
--------
Energy-0.92%
General Electric Capital notes
8.85% 3/1/07 ...................................... 75,000 81,162
PSEG Energy sr notes 10.00% 10/1/09 .................. 100,000 101,960
--------
183,122
--------
Food, Beverage & Tobacco-2.52%
Big V Supermarkets sr sub notes
11.00% 2/15/04 .................................... 150,000 147,000
Canandaigua Brands co guarantee
8.50% 3/1/09 ...................................... 200,000 191,000
Standard Commercial Tobacco co
guarantee 8.875% 8/1/05 ........................... 200,000 163,000
--------
501,000
--------
Industrial Machinery-2.13%
Alliance Laundry Systems co guarantee
9.625% 5/1/08 ..................................... 300,000 267,000
Burke Industries co guarantee
10.00% 8/15/07 .................................... 25,000 12,000
Holley Performance Products sr notes
12.25% 9/15/07 .................................... 150,000 143,250
--------
422,250
--------
Leisure, Lodging & Entertainment-2.30%
Cinemark USA sr sub nts 9.625% 8/1/08 ................ 100,000 92,500
Derby Cycle sr notes 10.00% 5/15/08 .................. 200,000 114,000
Hollywood Casino co guarantee
11.25% 5/1/07 ..................................... 200,000 209,000
United Artists Theatre sr sub notes
9.75% 4/15/08 ..................................... 200,000 40,000
--------
455,500
--------
Metals & Mining-1.88%
Algoma Steel 1st mtg nts12.375% 7/15/05 .............. 200,000 189,000
Metallurg co guarantee 11.00% 12/1/07 ................ 200,000 185,000
--------
374,000
--------
Packaging & Containers-1.00%
Riverwood International co guarantee
10.875% 4/1/08 .................................... 200,000 198,000
--------
198,000
--------
Paper & Forest Products-0.94%
US Timberlands sr notes
9.625% 11/15/07 ................................... 200,000 186,000
--------
186,000
--------
Retail-2.91%
Advance Stores co guarantee
10.25% 4/15/08 ................................... 300,000 261,000
Frank's Nursery and Crafts sr sub notes
10.25% 3/1/08 ..................................... 250,000 170,000

Strategic Income-3

<PAGE>

Strategic Income Series
Statement of Net Assets (Continued)

Principal Market
Amount* Value
(U.S. $)
CORPORATE BONDS (Continued)
Retail (Continued)
Leslie's Poolmart sr notes
10.375% 7/15/04 ................................. $25,000 $ 22,375
Wilsons The Leather Expert co
guarantee 11.25% 8/15/04 ........................ 125,000 125,000
----------
578,375
----------
Telecommunications-5.28%
Global Crossing sr notes
9.50% 11/15/09 ................................. 150,000 149,250
KMC Telecom Holdings sr notes
13.50% 5/15/09 ................................. 125,000 123,438
Metromedia Fiber Network sr notes
10.00% 11/15/08 ................................ 150,000 154,125
***Microcell Telecommunications sr disc
notes 14.00% 6/1/06 ............................ 175,000 155,313
***Nextel Communications sr disc nts
10.65% 9/15/07 ................................. 200,000 150,500
Nextlink Communications sr notes
10.75% 11/15/08 ................................ 150,000 156,000
***Telecorp PCS co guarantee
11.625% 4/15/09 ................................ 250,000 158,125
----------
1,046,751
----------
Textiles, Apparel & Furniture-0.65%
McNaughton Apparel Group co
guarantee 12.50% 6/1/05 ........................ 150,000 128,250
----------
128,250
----------
Utilities-0.58%
Ras Laffan Liquid Natural Gas sec
8.294% 3/15/14 ................................. 125,000 114,166
----------
114,166
----------
Miscellaneous-2.47%
Allied Waste sr sub notes
10.00% 8/1/09 .................................. 150,000 134,250
Budget Group sr notes 9.125% 4/1/06 ............... 200,000 186,000
First Wave Marine sr notes
11.00% 2/1/08 .................................. 100,000 70,625
Stagecoach Holdings notes
8.625% 11/15/09 ................................ 100,000 99,818
----------
490,693
----------
Total Corporate Bonds
(cost $9,239,715) 8,513,881
----------

Foreign Bonds-28.76%
Australia-1.69%
Queensland Treasury Global
8.00% 8/14/01 ................................... A$ 200,000 135,082
8.00% 5/14/03 ................................... 100,000 68,143
Toyota Finance Australia
7.00% 12/5/01 ................................... 200,000 131,861
----------
335,086
----------
Austria-1.89%
Bank of Austria 10.875% 11/17/04 ...................A$ 200,000 147,102
Republic of Austria 7.25% 5/3/07 .................Dem 400,000 227,644
----------
374,746
----------

<PAGE>

Principal Market
Amount* Value
(U.S. $)
FOREIGN Bonds (Continued)
Canada-2.95%
General Electric Capital of Canada
7.125% 2/12/04 ........................... C$ 150,000 $105,773
Government of Canada 10.25% 3/15/14 160,000 151,314
Ontario Province 6.25% 12/3/08 ................. NZ$ 400,000 185,226
Scott's Hospitality 10.95% 4/16/01 ............. C$ 100,000 72,683
Toyota Credit Canada 8.00% 12/29/00 ............ 100,000 70,661
--------
585,657
--------
Germany-0.42%
Deutschland Republic 6.25% 1/4/24 .............. Eu 80,000 83,535
--------
83,535
--------
Greece-0.68%
Hellenic Republic 8.70% 4/8/05 ................. Grd 40,000,000 134,031
--------
134,031
--------
Italy-1.05%
Buoni Poliennali Del Tes
4.50% 5/1/09 ................................ Eu 130,000 121,680
9.50% 2/1/01 ................................ 83,000 88,330
--------
210,010
--------
Netherlands-1.93%
Bank Neder Gemeenten 9.125% 9/27/04 ............ C$ 300,000 228,144
Rabobank Nederland 9.75% 8/5/04 ................ 200,000 155,359
--------
383,503
--------
Netherlands Antilles-1.01%
Commerzbank 10.25% 4/28/00 ..................... A$ 300,000 199,692
--------
199,692
--------
New Zealand-2.30%
New Zealand Government
8.00% 4/15/04 ............................... NZ$ 220,000 118,863
8.00% 11/15/06 .............................. 620,000 337,892
--------
456,755
--------
South Africa-5.66%
Electric Supply Communication
11.00% 6/1/08 ............................... Sa 2,100,000 289,386
Republic of South Africa
12.50% 1/15/02 .............................. 1,900,000 309,976
12.50% 12/21/06 ............................. 2,200,000 339,195
Transnet 16.50% 4/1/10 ......................... 1,000,000 183,865
--------
1,122,422
--------
Supranational-0.49%
International Bank of
Reconstruction & Development
5.50% 4/15/04 ............................... NZ$ 200,000 97,028
--------
97,028
--------
Sweden-4.63%
Swedish Government
8.00% 8/15/07 ............................... Sk 3,800,000 509,909
9.00% 4/20/09 ............................... 1,000,000 144,830
10.25% 5/5/00 ............................... 400,000 47,996
10.25% 5/5/03 ............................... 1,600,000 216,135
--------
918,870
--------
United Kingdom-3.78%
DeBeers Centenary 8.25% 3/31/09 ................ Gbp 50,000 82,971
Ford Credit Europe Bank 9.45% 3/1/00 ........... Grd 80,000,000 243,043
Halifax 5.625% 7/23/07 ......................... Dem 400,000 205,157

Strategic Income-4

<PAGE>

Strategic Income Series
Statement of Net Assets (Continued)

Principal Market
Amount* Value
(U.S. $)
FOREIGN BONDS (Continued)
United Kingdom (Continued)
Northumbrian Water Group
9.25% 2/1/02 ............................. Gbp 40,000 $ 66,907
United Kingdom Treasury
8.00% 6/10/03 90,000 152,836
----------
750,914
----------
United States-0.28%
Toyota Motor Credit 7.50% 11/5/01 ........... Itl 100,000,000 54,588
----------
54,588
----------
Total Foreign Bonds
(cost $6,246,869) ........................ 5,706,837
----------

U.S. Treasury Obligations-6.86%
+U.S. Treasury Bond 6.125% 11/15/27 .......... 120,000 111,759
U.S. Treasury Inflation Index Notes
3.625% 7/15/02 ........................... 104,836 103,822
U.S. Treasury Notes
5.875% 11/15/04 .......................... 750,000 735,526
6.125% 8/15/29 ........................... 365,000 347,997
+++U.S. Treasury Strips 8.875% 2/15/19 ......... 225,000 61,743
----------
Total U.S. Treasury Obligations
(cost $1,434,885) ........................ 1,360,847
----------

Agency Mortgage-Backed Securities-6.83%
Federal Home Loan Mortgage Corporation
6.25% 10/15/02 ........................... $ 100,000 99,061
6.50% 1/25/15 ............................ 100,000 97,563
Federal National Mortgage Association
6.50% 7/25/28 ............................ 47,039 46,341
7.50% 9/1/29 ............................. 89,449 88,498
Government National Mortgage Association
7.50% 11/15/29 ........................... 574,598 568,493
8.00% 11/15/29 ........................... 449,699 454,477
----------
Total Agency Mortgage-Backed Securities
(cost $1,365,258) ........................ 1,354,433
----------

Asset-Backed Securities-5.77%
CIT RV Trust Series
98-A A5 6.12% 11/15/13 ................... 100,000 96,450
Countrywide Home Equity Loan
Series 97-1 A4 6.95% 5/25/21 ............. 50,000 49,695
EQCC Home Equity Loan Trust Series
99-3 A3F 7.067% 1/25/25 .................. 75,000 74,133
98-2 A3F 6.229% 3/15/13 .................. 211,000 208,363
Honda Auto Lease Trust Series 99-A A4
6.45% 9/16/02 ............................ 100,000 99,550
MBNA Master Credit Card Trust
99-L A 5.66% 3/16/09 ..................... 400,000 401,360
MetLife Capital Equipment Loan Trust
Series 97-AA 6.85% 5/20/08 ............... 60,000 59,754
NationsCredit Grantor Trust
Series 97-1A 6.75% 8/15/13 ............... 73,602 72,498

<PAGE>

Principal Market
Amount* Value
(U.S. $)
ASSET-BACKED SECURITIES (Continued)
Philadelphia, Pennsylvania Authority
For Industrial Development
Tax Claim Revenue Class A
6.488% 6/15/04 ........................... $89,420 $ 84,055
----------
Total Asset-Backed Securities
(cost $1,160,728) ........................ 1,145,858
----------

COLLATERIZED MORTGAGE OBLIGATIONS-3.60%
Asset Securitization Corporation Series
97-D5 A2 6.816% 2/14/41 .................. 75,000 67,594
DLJ Commerical Mortgage Series
99-CG1 A1B 6.46% 1/10/09 ................. 100,000 93,125
First Union-Chase Commerical Mortgage Series
99-C2 A2 6.65% 4/15/09 ................... 105,000 99,291
Government National Mortgage Series
98-9 B 6.85% 12/20/25 .................... 100,000 95,008
Lehman Large Loan Series
97-LLI A1 6.79% 6/12/04 .................. 94,915 94,010
Mortgage Capital Funding Series
96-MC2-C 7.224% 9/20/06 .................. 100,000 96,313
Nomura Asset Securities-Series 93-1
A1 6.68% 12/15/01 ........................ 72,457 71,257
Residential Accredit Loans Series
98-QS9 A3 6.75% 7/25/28 .................. 100,000 98,648
----------
Total Collateralized Mortgage
Obligations (cost $752,123) .............. 715,246
----------

Number
of Shares
PREFERRED STOCKS-0.26%
Energy-0.00%
TCR Holdings
Class B ..................................... 219 2
Class C ..................................... 121 1
Class D ..................................... 318 3
Class E ..................................... 658 7
----------
13
----------
Telecommunications-0.26%
21st Century
Telecommunications pik ................... 62 51,784
----------
51,784
----------
Total Preferred Stocks
(cost $56,493) ........................... 51,797
----------

WARRANTS-0.07%
Banking, Finance & Insurance-0.07%
**21st Century Telecommunications ............. 2,750 10,000
**American Banknote ........................... 3,011 3,000
----------
Total Warrants
(cost $5,761) ............................ 13,000
----------

Strategic Income-5

<PAGE>
Strategic Income Series
Statement of Net Assets (Continued)
Principal Market
Amount* Value
(U.S. $)
REPURCHASE AGREEMENTS-2.36%
With Chase Manhattan 2.50% 1/3/00
(dated 12/31/99, collateralized by
$132,000 U.S. Treasury Notes 4.75%
due 2/15/04, market value
$127,155) .......................................... $124,500 $124,500
With J.P. Morgan Securities 3.00% 1/3/00
(dated 12/31/99, collateralized by
$51,000 U.S. Treasury Notes 6.375%
due 9/30/01, market value $51,488 and
$49,000 U.S. Treasury Notes 6.625%
due 4/30/02, market value $50,183
and $49,000 U.S. Treasury Notes
6.25% due 6/30/02, market value
$49,082) ........................................... 148,000 148,000
With PaineWebber 3.00% 1/3/00
(dated 12/31/99, collateralized by
$51,000 U.S. Treasury Notes 5.625%
due 11/30/00, market value $50,654 and
$49,000 U.S.Treasury Notes 5.375%
due 2/15/01, market value $49,844) ................. 98,500 98,500
With Prudential Securities 2.75% 1/3/00
(dated 12/31/99, collateralized by
$103,000 U.S. Treasury Bills due
5/18/00, market value $100,516). ................... 98,000 98,000
--------
Total Repurchase Agreements
(cost $469,000) .................................... 469,000
--------
TOTAL MARKET VALUE OF SECURITIES-97.43% (cost $20,730,832) ........ $19,330,899

RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES-2.57% ............. 510,920
-----------
NET ASSETS APPLICABLE TO 2,054,186 SHARES OUTSTANDING;
EQUIVALENT TO $9.66 PER SHARE-100.00% .......................... $19,841,819
===========
Components of net assets at December 31, 1999:
Shares of beneficial interest (unlimited authorization-no par) .... $21,507,546
Undistributed net investment income++ ............................. 1,622,698
Accumulated net realized loss on investments ...................... (1,876,813)
Net unrealized depreciation of investments and foreign currencies . (1,411,612)
-----------
Total net assets .................................................. $19,841,819
===========
- ---------------------
*Principal amount is stated in the currency in which each bond is denominated.
A$ - Australian Dollars
C$ - Canadian Dollars
Dem - German DeutscheMarks
Eu - European Monetary Units
Gbp - British Pounds
Grd - Greek Drakma
Itl - Italian Lire
NZ$ - New Zealand Dollars
Sa - South African Rand
Sk - Swedish Kroner
$ - U. S. Dollars

**Non income producing security for the year ended December 31, 1999.
***Zero coupon security as of December 31, 1999. The coupon shown is the step-up
rate.
+Fully or partially pledged as collateral for financial futures contracts.
++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.
+++Zero coupon security as of December 31, 1999. The coupon shown is the
effective rate.

Summary of Abbreviations:
1st mtg - first mortgage
co guarantee - company guaranteed
debs - debentures
disc - discount
pik - payment in kind
sec - secured
sr - senior
sub - subordinated

See accompanying notes

Strategic Income-6
<PAGE>

Delaware Group Premium Fund-
Strategic Income Series
Statement of Operations
Year Ended December 31, 1999

INVESTMENT INCOME:
Interest ................................................... $1,811,141
Dividends .................................................. 41,905
Foreign tax withheld ....................................... (1,232)
----------
1,851,814
----------
EXPENSES:
Management fees ............................................ 138,695
Accounting and administration .............................. 8,454
Custodian fees ............................................. 7,075
Professional fees .......................................... 2,941
Registration fees .......................................... 2,700
Taxes (other than taxes on income) ......................... 2,240
Reports and statements to shareholders ..................... 2,335
Dividend disbursing and transfer agent
fees and expenses ....................................... 748
Trustees' Fees ............................................. 541
Other ...................................................... 6,558
----------
172,287
Less expenses paid indirectly .............................. (1,666)
----------

Total expenses ............................................. 170,621
----------

NET INVESTMENT INCOME ...................................... 1,681,193
----------

NET REALIZED AND UNREALIZED
LOSS ON INVESTMENTS AND
FOREIGN CURRENCIES:
Net realized loss on:
Investments ............................................. (1,766,565)
Futures contracts ....................................... (20,267)
Options written ......................................... (2,701)
Foreign currencies ...................................... (35,237)
----------
Net realized loss .......................................... (1,824,770)
Net change in unrealized appreciation /
depreciation of investments and foreign currencies ...... (600,544)
----------

NET REALIZED AND UNREALIZED
LOSS ON INVESTMENTS AND
FOREIGN CURRENCIES ...................................... (2,425,314)
----------

NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS ............................... ($744,121)
==========

See accompanying notes
<PAGE>

Delaware Group Premium Fund-
Strategic Income Series
Statements of Changes in Net Assets

Year Ended Year Ended
12/31/99 12/31/98
---------- ----------
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS:
Net investment income ............................ $1,681,193 $1,235,293
Net realized loss on investments and
foreign currencies ............................ (1,824,770) (144,029)
Net change in unrealized appreciation /
depreciation of investments and
foreign currencies ............................ (600,544) (784,625)
----------- ----------
Net increase (decrease) in net assets
resulting from operations ..................... (744,121) 306,639
----------- ----------

DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ............................ (1,197,603) (246,632)
Net realized gain on investments - (22,836)
----------- ----------
(1,197,603) (269,468)
----------- ----------

CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold ........................ 5,634,142 16,915,964
Net asset value of shares issued upon
reinvestment of distributions from
net investment income and net
realized gain on investments .................. 1,197,603 269,468
----------- ----------
6,831,745 17,185,432
Cost of shares repurchased ....................... (5,618,966) (5,258,026)
----------- ----------
Increase in net assets derived from
capital share transactions .................... 1,212,779 11,927,406
----------- ----------

NET INCREASE (DECREASE)
IN NET ASSETS ................................. (728,945) 11,964,577
----------- ----------

NET ASSETS:
Beginning of year ................................ 20,570,764 8,606,187
----------- ----------
End of year ...................................... $19,841,819 $20,570,764
=========== ===========

See accompanying notes

Strategic Income-7

<PAGE>

Delaware Group Premium Fund-Strategic Income Series
Financial Highlights

Selected data for each share of the Series outstanding throughout each period
were as follows:
<TABLE>
<CAPTION>
Year Ended 5/1/97(1)
December 31, to
1999 1998 12/31/97
------- ------- --------
<S> <C> <C> <C>
Net asset value, beginning of period ...................... $10.600 $10.620 $10.000

Income (loss) from investment operations:
Net investment income(2) .................................. 0.779 0.832 0.523
Net realized and unrealized gain (loss)
on investments and foreign currencies .................. (1.109) (0.557) 0.097
------ ------ -----
Total from investment operations .......................... (0.330) 0.275 0.620
------ ------ -----

Less dividends and distributions:
Dividends from net investment income ...................... (0.610) (0.270) none
Distributions from net realized gain
on investments ......................................... none (0.025) none
------ ------ -----
Total dividends and distributions ......................... (0.610) (0.295) none
------ ------ -----

Net asset value, end of period ............................ $9.660 $10.600 $10.620
====== ======= =======

Total return .............................................. (3.29%) 2.63% 6.20%

Ratios and supplemental data:
Net assets, end of period (000 omitted) ................... $19,842 $20,571 $8,606
Ratio of expenses to average net assets ................... 0.80% 0.80% 0.80%
Ratio of expenses to average net assets prior to expense
limitation and expenses paid indirectly ................ 0.80% 0.81% 1.23%
Ratio of net investment income to average net assets ...... 7.88% 7.90% 7.44%
Ratio of net investment income to average net assets
prior to expense limitation and
expenses paid indirectly ............................... 7.88% 7.89% 7.01%
Portfolio turnover ........................................ 101% 143% 70%
</TABLE>
- ---------------
(1) Date of commencement of operations; ratios have been annualized and total
return has not been annualized.
(2) Per share information was based on the average shares outstanding method.

See accompanying notes

Strategic Income-8

<PAGE>

Delaware Group Premium Fund-Strategic Income Series
Notes to Financial Statements
December 31, 1999

Delaware Group Premium Fund (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 Delaware Business Trust and offers 18 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, the Trend Series and the U.S. Growth
Series. These financial statements and the related notes pertain to the
Strategic Income Series (the "Series"). The shares of the Fund are sold only to
separate accounts of life insurance companies.

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

Security Valuation--All equity securities are valued at the last quoted sales
price as of the close of the New York Stock Exchange (NYSE) on the valuation
date. If on a particular day an equity security does not trade, then the mean
between the bid and asked prices will be used. Securities listed on a foreign
exchange are valued at the last quoted sales price before the Series is valued.
Long-term debt securities are valued by an independent pricing service and such
prices are believed to reflect the fair value of such securities. Money market
instruments having less than 60 days to maturity are valued at amortized cost,
which approximates market value. Other securities and assets for which market
quotations are not readily available are valued at fair value as determined in
good faith by or under the direction of the Fund's Board of Trustees.

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

Other--Expenses common to all funds within the Delaware Investments Family of
Funds are allocated amongst the funds on the basis of average net assets.
Security transactions are recorded on the date the securities are purchased or
sold (trade date). Costs used in calculating realized gains and losses on the
sale of investment securities are those of the specific securities sold.
Interest income is recorded on the accrual basis. Withholding taxes have been
provided for in accordance with the Series' understanding of the applicable
country's tax rules and rates. Original issue discounts are accreted to interest
income over the lives of the respective securities.

Certain expenses of the Series are paid through "soft dollar" arrangements with
brokers. These transactions are done subject to best execution. The amount of
these expenses was approximately $491 for the year ended December 31, 1999. The
Series may receive earnings credits from its custodian when positive cash
balances are maintained, which are used to offset custody fees. These credits
were $1,175 for the year ended December 31, 1999. The expenses paid under the
above arrangements are included in their respective expense captions on the
Statement of Operations with the corresponding expense offset shown as "expenses
paid indirectly".

2. Investment Management and Other Transactions with Affiliates
In accordance with the terms of the Investment Management Agreement, the Series
pays Delaware Management Company ("DMC"), the Investment Manager of the Series,
an annual fee which is calculated at the following rates: 0.65% of the first
$500 million of average daily net assets of the Series, 0.60% on the next $500
million, 0.55% on the next $1,500 million and 0.50% on the average daily net
assets over $2,500 million. These rates became effective May 1, 1999. Prior to
May 1, 1999, the management fee was calculated at the rate of 0.65% on the
average daily net assets of the Series. Delaware International Advisers Ltd., an
affiliate of DMC, receives one third of the management fee paid to DMC for
managing the foreign bond portion of the Series.

Strategic Income-9

<PAGE>

Strategic Income Series
Notes to Financial Statements (Continued)

DMC has elected to waive its fee and reimburse the Series 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 April 30, 2000.

On December 31, 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
-------------- ------------------- --------------
$11,290 $527 $3,710

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

3. Investments
During the year ended December 31, 1999, the Series made purchases and sales of
investment securities other than U.S. government securities and temporary cash
investments as follows:

Purchases ........ $20,396,077
Sales ............ $16,686,147

At December 31, 1999, the aggregate cost of securities and unrealized
appreciation (depreciation) for federal income tax purposes for the Series were
as follows:

Aggregate Aggregate
Cost of unrealized unrealized Net unrealized
investments appreciation depreciation depreciation
------------ ------------ ------------ --------------
$20,730,858 $120,644 ($1,520,603) ($1,399,959)

For federal income tax purposes the Series had accumulated capital losses at
December 31, 1999 as follows:

Year of Expiration
2006 2007 Total
------ ------------------ ----------
$7,365 $1,573,761 $1,581,126

<PAGE>

4. Capital Shares
Transactions in capital 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>
Year ended December 31, 1999 ....................... 563,667 120,241 (570,992) 112,916
Year ended December 31, 1998 ....................... 1,604,989 25,762 (500,017) 1,130,734
</TABLE>

5. Line of Credit
The Series has a committed line of credit for $1,100,000. No amount was
outstanding at December 31, 1999, or at any time during the year.

Strategic Income-10

<PAGE>

Strategic Income Series
Notes to Financial Statements (Continued)

No forward foreign currency contracts were outstanding at December 31, 1999.

7. Futures Contracts
The Series invests in financial futures contracts for the purpose of hedging its
existing portfolio securities against fluctuations in fair value caused by
changes in prevailing market rates. Upon entering into a futures contract, the
Series deposits cash or pledges U.S. government securities to a broker, equal to
the minimum "initial margin" requirements of the exchange on which the contract
is traded. Subsequent payments are received from or paid to the broker each day,
based on the daily fluctuation in the market value of the contract. These
receipts or payments are known as "variation margin" and are recorded daily by
the Series as unrealized gains or losses until the contracts are closed. When
the contracts are closed, the Series records a realized gain or loss equal to
the difference between the value of the contract at the time it was opened and
the value at the time it was closed. Risk may arise upon entering into futures
contracts from potential imperfect correlation between the futures contracts and
the underlying securities and from the possibility of an illiquid secondary
market for these instruments.

Financial futures contracts open at December 31, 1999 were as follows:
<TABLE>
<CAPTION>
Contracts Notional Unrealized
to buy cost amount Expiration date loss
----------------------------- ----------- --------------- -----------
<S> <C> <C> <C>
3 U.S. Treasury 20 year notes $276,188 3/00 ($3,375)
</TABLE>

8. Options Written
During the year ended December 31, 1999, the Series entered into options
contracts in accordance with its investments objectives. When the Series writes
an option, a premium is received is and a liability is recorded and adjusted on
a daily basis to reflect the current market value of the option written.
Premiums received from writing options that expire unexercised are treated by
the Series on the expiration date as realized gains from investments. The
difference between the premium and the amount paid on effecting a closing
purchase transaction, including brokerage commissions, is also treated as a
realized gain or loss. If a call option is exercised, the premium is added to
the proceeds from the sale of the underlying security in determining whether the
Series has realized a gain or loss. If a put option is exercised, the premium
reduces the cost basis of the securities purchased by the Series. The Series as
writer of an option bears the market risk of an unfavorable change in the price
of the seurity underlying the written option.

<PAGE>

Transactions in options written during the year ended December 31, 1999 for the
Series were as follows:

Number Premiums
of contracts received
------------ --------
Options outstanding at December 31, 1998 ............ - $-
Options written ..................................... 8 3,821
Options terminated in closing purchase transaction .. (8) (3,821)
------------ -------
Options written outstanding at December 31, 1999 .... - $-
============ =======

9. 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 portion of the aggregate market
value of securities listed on the major securities exchanges in emerging markets
are held by a smaller number of investors. This may limit the number of shares
available for acquisition or disposition by the Series.

The Series may invest in high-yield fixed income securities which carry ratings
of BB or lower by S&P and/or Ba or lower by Moody's. Investments in these higher
yielding securities may be accompanied by a greater degree of credit risk than
higher rated securities. Additionally, lower rated securities may be more
susceptible to adverse economic and competitive industry conditions than
investment grade securities.

Strategic Income-11

<PAGE>

Strategic Income Series
Notes to Financial Statements (Continued)

10. Tax Information (Unaudited)
For the fiscal year ended December 31, 1999, the Series designates as long-term
capital gains and ordinary income distributions paid during the year as follows:

- ---------------
* Items (A) and (B) are based on a percentage of the Series' total
distributions.
** Item (D) is based on a percentage of ordinary income of the Series.
(1) Qualifying dividends represent dividends which qualify for the corporate
dividends received deduction.

Strategic Income-12

<PAGE>

Delaware Group Premium Fund-Strategic Income Series
Report of Independent Auditors

To the Shareholders and Board of Trustees
Delaware Group Premium Fund-Strategic Income Series

We have audited the accompanying statement of net assets of Strategic Income
Series (the "Series") as of December 31, 1999, and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the two years in the period then ended and for the period May 1, 1997
(commencement of operations) through December 31, 1997. These financial
statements and financial highlights are the responsibility of the Series'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Strategic Income Series at December 31, 1999, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended, and its financial highlights for each of the two years in
the period then ended and for the period May 1, 1997 (commencement of
operations) through December 31, 1997, in conformity with accounting principles
generally accepted in the United States.

/s/ Ernst & Young

Philadelphia, Pennsylvania
February 4, 2000

Strategic Income-13

<PAGE>

FOR CAPITAL GROWTH

Trend Series

Investment Strategy and Performance in 1999
Throughout most of 1999, investors focused almost exclusively on a handful of
stocks--mostly large technology and internet-related companies. Medium size and
smaller stocks, for the most part, remained on the sidelines.
Despite the difficulties experienced by its peers, Trend Series generated
excellent returns during the year. Our strategic focus on bottom-up stock
selection allowed the Series to pinpoint stocks that performed very well even in
a market environment that was generally unfavorable to small companies.
Trend Series provided a robust return of 70.45% for the year. It
significantly outperformed its primary benchmark, the Russell 2000 Growth Index,
which had a return of 43.10% for the period. Trend Series was successful during
this period because the Series focused on companies that were, in our view,
well-managed and displayed above average sales growth.

Portfolio Snapshot
Our focus on technology and the business services sector helped us, but was
offset by weakness in consumer and financial stocks. We attribute strong
performance in the technology sector to our positions in electronics and
electrical equipment companies. We continue to see strong profit margins for
small cap stocks operating in the electronics segment of the technology sector.
The software industry continues to underperform. Because software companies
focused so much on solving Year 2000 problems, they did not develop as much new
software, which has led to slowing sales. We believe the software sector will
regain earnings momentum and perform well in 2000.
Performance in the health care industry continues to be disappointing,
largely the result of underperformance on the service side of the industry--that
is hospitals and hospital management companies. We kept our holdings in this
area low compared to the Russell 2000 Growth Index.
Many of our consumer stock selections performed well in 1999 as consumer
confidence soared. Our position, representing the Series' largest weighting at
approximately 30% of the portfolio, included a combination of retailers, food
processors and consumer services companies.

Investment Outlook
Large-cap stocks dominated small cap stocks in 1999 until approximately late
September (Source: Bloomberg). In the last three months of fiscal 1999, however,
we have seen small cap stocks start to stage a comeback. As investors become
more confident in the U.S. economy's ability to sustain the longest peacetime
expansion on record, they returned to the small cap market.
We remain convinced that over the long term, smaller companies offer
investors substantial opportunities for capital appreciation. Although past
market activity does not ensure future results and we certainly can't predict
it, we are optimistic as we have witnessed powerful rallies by small company
stocks, often in environments similar to what we are now experiencing.

- --------------------------------------------------------------------------------
Trend Series Investment Objective
Seeks long-term capital appreciation. It attempts to achieve this objective by
investing primarily in small growth-oriented companies that we believe are
responsive to changes in the marketplace and have the fundamental
characteristics to support continued growth.
- --------------------------------------------------------------------------------

Trend-1

<PAGE>

Trend Series
Average Annual Total Returns
----------------------------
Lifetime 24.68%
Five Years 29.97%
One Year 70.45%

For periods ending December 31, 1999

Growth of a $10,000 Investment
December 27, 1993 through
December 31, 1999
Russell 2000
Trend Series Growth Index
12/27/1993 $10,000.00 $10,000
12/31/1994 $10,160.00 $ 9,757
12/31/1995 $14,143.94 $12,785
12/31/1996 $15,699.00 $14,225
12/31/1997 $19,053.70 $16,068
12/31/1998 $22,109.70 $16,266
12/31/1999 $37,685.70 $23,276

Past performance is not a guarantee of future results. Return and share price
will fluctuate so that shares, when redeemed, may be worth more or less than
their original cost.

The chart shows a $10,000 investment in both the Trend Series and the Russell
2000 Growth Index for the period from the Series' inception on December 27, 1993
through December 31, 1999. All dividends and capital gains were reinvested. The
Index is unmanaged, with no set investment objective and does not include the
"real world" costs of managing a mutual fund. Earnings from a variable annuity
investment compound tax-free until withdrawal, so no adjustments were made for
income taxes. The effect of an expense limitation is included in the chart.
Performance does not reflect insurance fees related to a variable annuity
investment nor the deferred sales charge that would apply to certain withdrawals
of investments held for less than eight years. Performance shown here would have
been reduced if such fees were included and the expense limitation was removed.
For more information about fees, consult your variable annuity prospectus.

Trend-2

<PAGE>

Delaware Group Premium Fund-Trend Series
Statement of Net Assets
December 31, 1999

Number Market
of Shares Value
COMMON STOCK-88.44%
Banking, Finance & Insurance-3.89%
Ambac Financial Group .......................... 118,900 $ 6,205,094
Doral Financial ................................ 164,000 2,019,250
Metris ......................................... 159,800 5,702,863
*+Sovereign Bancorp .............................. 223,800 1,668,009
Webster Financial .............................. 170,400 4,015,050
-----------
19,610,266
-----------
Business Services-3.46%
*Bright Horizons Family Solutions ............... 87,100 1,633,125
*DBT Online ..................................... 110,600 2,695,875
*+Diamond Technology Partners .................... 41,300 3,549,219
*NFO Worldwide .................................. 42,800 957,650
*Profit Recovery Group .......................... 323,650 8,596,953
-----------
17,432,822
-----------
Cable, Media & Publishing-8.88%
*Acme Communications ............................ 50,500 1,679,125
*+AMFM ........................................... 44,900 3,513,425
*Consolidated Graphics .......................... 125,400 1,873,178
*Cumulus Media Class A .......................... 30,700 1,558,025
*Emmis Broadcasting ............................. 53,500 6,668,273
*+Getty Images ................................... 53,200 2,600,150
*Insight Communications ......................... 163,700 4,849,613
*Radio One ...................................... 92,200 8,482,400
*Salem Communications Class A ................... 102,100 2,310,013
*USA NETWORKS ................................... 202,804 11,204,921
-----------
44,739,123
-----------
Chemicals-2.34%
*Mettler-Toledo International ................... 308,400 11,777,025
-----------
11,777,025
-----------
Computers & Technology-13.04%
*+Bindview Development ........................... 149,700 7,438,219
*+eSPEED Class A ................................. 22,900 814,381
*Exchange Applications .......................... 68,400 3,821,850
Henry (Jack) & Associates ...................... 135,800 7,290,763
*+HotJobs.com .................................... 61,400 2,682,413
*Legato Systems ................................. 112,800 7,762,050
*Onyx Software .................................. 54,800 2,027,600
*RSA Security ................................... 31,700 2,456,750
*+Sanchez Computer Associates .................... 88,300 3,636,856
*Technology Solutions ........................... 118,200 3,871,050
*VERITAS SOFTWARE ............................... 166,825 23,876,828
-----------
65,678,760
-----------
Consumer Products-4.65%
G&K Services Class A ........................... 157,100 5,086,113
*+GEMSTAR INTERNATIONAL
GROUP LIMITED .................................. 257,000 18,311,250
-----------
23,397,363
-----------
Electronics & Electrical Equipment-15.41%
*APPLIED MICRO CIRCUITS ......................... 198,400 25,246,400
*Etec Systems ................................... 44,900 2,014,888
*Lam Research ................................... 42,700 4,763,719
*MICREL ......................................... 323,500 18,419,281
*Novellus Systems ............................... 38,300 4,692,947
*PMC-SIERRA ..................................... 91,100 14,604,469
*+Teradyne ....................................... 119,000 7,854,000
-----------
77,595,704
-----------
- ----------
Top 10 stock holdings, representing 35.3% of net assets, are printed in bold.

<PAGE>

Number Market
of Shares Value
COMMON STOCK-(Continued)
Environmental Services-0.50%
*Waste Connections ............................ 174,300 $ 2,516,456
------------
2,516,456
------------
Food, Beverage & Tobacco-2.15%
*American Italian Pasta Class A ............... 118,300 3,637,725
*Cheesecake Factory ........................... 181,300 6,345,500
Morrison Management Specialist ............... 39,600 853,875
------------
10,837,100
------------
Healthcare & Pharmaceuticals-2.99%
*Brookdale Living Communities ................. 165,900 2,053,013
*CIMA Labs .................................... 45,600 595,650
*Neurocrine Biosciences ....................... 21,000 519,750
*Pharmacopeia ................................. 67,600 1,529,450
*Trimeris ..................................... 118,900 2,809,013
*+United Therapeutics .......................... 104,900 4,825,400
*Wesley Jessen VisionCare ..................... 60,900 2,306,588
*Women First Healthcare ....................... 75,900 398,475
------------
15,037,339
------------
Industrial Machinery-0.02%
*Spinnaker Industries ......................... 5,800 68,875
*Spinnaker Industries Class A ................. 4,500 54,000
------------
122,875
------------
Leisure, Lodging & Entertainment-4.74%
*CEC Entertainment ............................ 298,100 8,458,588
*Extended Stay America ........................ 110,200 840,275
Ruby Tuesday ................................. 122,000 2,218,875
*Westwood One ................................. 73,200 5,563,200
*Sonic ........................................ 238,850 6,807,225
------------
23,888,163
------------
Retail-12.24%
*+American Eagle Outfitters .................... 139,900 6,295,500
*Cost Plus .................................... 293,925 10,471,078
*DOLLAR TREE STORES ........................... 295,200 14,298,750
*+DUANE READE .................................. 196,900 5,427,056
*Linens' n Things ............................. 188,700 5,590,238
*+O'Reilly Automotive .......................... 238,800 5,134,200
Schultz Sav-O Stores ......................... 30,000 382,500
+Talbots ...................................... 73,700 3,288,863
*Too .......................................... 193,200 3,332,700
*Tweeter Home Entertainment Group ............. 180,400 6,404,200
*West Marine .................................. 125,200 1,032,900
------------
61,657,985
------------
Telecommunications-13.05%
*+Concord Communications ....................... 112,400 4,987,750
*Dycom ........................................ 231,800 10,213,688
*NETWORK APPLIANCE ............................ 270,000 22,426,875
*+NEXTLINK COMMUNICATIONS CLASS A .............. 210,100 17,451,431
*Pinnacle Holdings ............................ 233,800 9,907,275
*Tickets.com .................................. 51,200 732,800
------------
65,719,819
------------
Transportation & Shipping-1.08%
*Forward Air .................................. 125,900 5,460,913
------------
5,460,913
------------
Total Common Stock
(cost $278,748,121) .......................... 445,471,713
------------

Trend-3

<PAGE>

Trend Series
Statement of Net Assets (Continued)

Principal Market
Amount Value
REPURCHASE AGREEMENTS-12.14%
With Chase Manhattan 2.50%
1/3/00 (dated 12/31/99,
collateralized by $17,253,000
U.S. Treasury Notes 4.75%
due 2/15/04, market value
$16,573,545) ................................... $16,201,000 $16,201,000
With J.P. Morgan Securities 3.00%
1/3/00 (dated 12/31/99,
collateralized by $6,592,000
U.S. Treasury Notes 6.375%
due 9/30/01, market value
$6,711,062 and $6,418,000
U.S. Treasury Notes 6.625%
due 4/30/02, market value
$6,540,889 and $6,402,000
U.S. Treasury Notes 6.25%
due 6/30/02, market value
$6,397,433) .................................... 19,255,000 19,255,000
With PaineWebber 3.00%
1/3/00 (dated 12/31/99,
collateralized by $6,596,000
U.S. Treasury Notes 5.625%
due 11/30/00, market value
$6,602,322 and $6,418,000
U.S. Treasury Notes 5.375%
due 2/15/01, market value
$6,496,706) .................................... $12,837,000 $12,837,000
With Prudential Securities 2.75%
1/3/00 (dated 12/31/99,
collateralized by $13,379,000
U.S. Treasury Bills
due 5/18/00, market value
$13,101,398) ................................... 12,837,000 12,837,000
-----------
Total Repurchase Agreements
(cost $61,130,000) ........................................... 61,130,000
-----------

TOTAL MARKET VALUE OF SECURITIES-100.58% (cost $339,878,121 ) .... $506,601,713

LIABILITIES NET OF RECEIVABLES AND OTHER ASSETS-(0.58%) .......... (2,944,422)
-------------

NET ASSETS APPLICABLE TO 14,964,599 SHARES OUTSTANDING;
EQUIVALENT TO $33.66 PER SHARE-100.00% ........................ $ 503,657,291
=============

COMPONENTS OF NET ASSETS AT DECEMBER 31, 1999:
Shares of beneficial interest (unlimited authorization-no par) ... $ 295,803,936
Accumulated net realized gain on investments ..................... 41,129,763
Net unrealized appreciation of investments ....................... 166,723,592
-------------
Total net assets ................................................. $ 503,657,291
=============

- ----------
*Non-income producing security for the year ended December 31, 1999.
+Security is partially or fully on loan.

See accompanying notes

Trend-4

<PAGE>

Delaware Group Premium Fund-Trend Series
Statement of Operations
Year Ended December 31, 1999

INVESTMENT INCOME:
Interest ................................................ $ 1,323,296
Dividends ............................................... 256,834
-------------
1,580,130
-------------
EXPENSES:
Management fees ......................................... 1,858,141
Accounting and administration ........................... 85,590
Reports and statements to shareholders .................. 28,020
Professional fees ....................................... 14,830
Custodian fees .......................................... 10,277
Taxes (other than taxes on income) ...................... 6,299
Dividend disbursing and transfer agent
fees and expenses .................................... 5,358
Registration fees ....................................... 5,050
Trustees' fees .......................................... 2,829
Other ................................................... 14,370
-------------
2,030,764
Less expenses absorbed or waived ........................ (9,990)
Less expenses paid indirectly ........................... (9,375)
-------------
Total expenses .......................................... 2,011,399
-------------
NET INVESTMENT LOSS ..................................... (431,269)
-------------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS:
Net realized gain on investments ........................ 42,917,993
Net change in unrealized appreciation /
depreciation of investments .......................... 125,502,501
-------------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS ....................................... 168,420,494
-------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ............................ $ 167,989,225
=============

See accompanying notes

<PAGE>

Delaware Group Premium Fund-Trend Series
Statements of Changes in Net Assets

Year Ended Year Ended
12/31/99 12/31/98
---------- ----------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income (loss) ............ $ (431,269) $ 42,700
Net realized gain (loss) on investments.. 42,917,993 (1,048,182)
Net change in unrealized appreciation /
depreciation of investments .......... 125,502,501 23,501,658
------------- -------------
Net increase in net assets
resulting from operations ............ 167,989,225 22,496,176
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ................... (17,149) (135,410)
Net realized gain on investments ........ -- (2,315,513)
------------- -------------
(17,149) (2,450,923)
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold ............... 299,364,862 113,799,362
Net asset value of shares issued upon
reinvestment of distributions from net
investment income and net realized
gain on investments .................. 17,149 2,450,923
------------- -------------
299,382,011 116,250,285
Cost of shares repurchased .............. (131,948,006) (86,320,418)
------------- -------------
Increase in net assets derived from
capital share transactions ........... 167,434,005 29,929,867
------------- -------------
NET INCREASE IN NET ASSETS .............. 335,406,081 49,975,120
------------- -------------
NET ASSETS:
Beginning of year ....................... 168,251,210 118,276,090
------------- -------------
End of year ............................. $ 503,657,291 $ 168,251,210
============= =============

See accompanying notes

Trend-5

<PAGE>

Delaware Group Premium Fund-Trend Series
Financial Highlights

Selected data for each share of the Series outstanding throughout each period
were as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997 1996 1995
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year .................................... $ 19.760 $ 17.380 $ 14.560 $14.020 $10.160

Income (loss) from investment operations:
Net investment income (loss)(1) ....................................... (0.043) 0.006 0.019 0.050 0.098
Net realized and unrealized gain on investments ....................... 13.945 2.736 3.031 1.380 3.852
-------- -------- -------- ------- -------
Total from investment operations ...................................... 13.902 2.742 3.050 1.430 3.950
-------- -------- -------- ------- -------

Less dividends and distributions:
Dividends from net investment income .................................. (0.002) (0.020) (0.050) (0.090) (0.090)
Distributions from net realized gain on investments ................... none (0.342) (0.180) (0.800) none
-------- -------- -------- ------- -------
Total dividends and distributions ..................................... (0.002) (0.362) (0.230) (0.890) (0.090)
-------- -------- -------- ------- -------

Net asset value, end of year .......................................... $ 33.660 $ 19.760 $ 17.380 $14.560 $14.020
======== ======== ======== ======= =======

Total return .......................................................... 70.45% 16.04% 21.37% 11.00% 39.21%

Ratios and supplemental data:
Net assets, end of year (000 omitted) ................................. $503,657 $168,251 $118,276 $56,423 $20,510
Ratio of expenses to average net assets ............................... 0.82% 0.81% 0.80% 0.80% 0.80%
Ratio of expenses to average net assets prior to expense
limitation and expenses paid indirectly ............................ 0.82% 0.85% 0.88% 0.92% 0.96%
Ratio of net investment income (loss) to average net assets ........... (0.18%) 0.03% 0.16% 0.56% 1.03%
Ratio of net investment income (loss) to average net assets prior
to expense limitation and expenses paid indirectly ................. (0.18%) (0.01%) 0.08% 0.44% 0.87%
Portfolio turnover .................................................... 82% 121% 125% 112% 76%
</TABLE>
- ----------
(1) Per share information for the year ended December 31, 1999 was based on the
average shares outstanding method.

See accompanying notes

Trend-6

<PAGE>

Delaware Group Premium Fund-Trend Series
Notes to Financial Statements
December 31, 1999

Delaware Group Premium Fund (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 Delaware Business Trust and offers 18 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, the Trend Series and the U.S. Growth
Series. These financial statements and the related notes pertain to the Trend
Series (the "Series"). The shares of the Fund are sold only to separate accounts
of life insurance companies.

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

Trend-7
<PAGE>

The Series will make distributions 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 execution. The amount of
these expenses was approximately $5,698 for the year ended December 31, 1999.
The Series may receive earnings credits from its custodian when positive cash
balances are maintained, which are used to offset custody fees. These credits
were $3,677 for the year ended December 31, 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".

On December 31, 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
-------------- ------------------- --------------
$285,726 $1,631 $40,772

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

Trend-8

<PAGE>

Trend Series
Notes to Financial Statements (Continued)

3. Investments
During the year ended December 31, 1999, the Series made purchases and sales of
investment securities other than U.S. government securities and temporary cash
investments as follows:

Purchases ................................... $303,588,950
Sales ....................................... $186,886,351

At December 31, 1999, the aggregate cost of securities and unrealized
appreciation (depreciation) for federal income tax purposes for the Series were
as follows:
<TABLE>
<CAPTION>

Aggregate Aggregate
Cost of unrealized unrealized Net unrealized
investments appreciation depreciation appreciation
------------ ------------ ------------- --------------
<S> <C> <C> <C> <C>
$340,809,473 $177,099,950 ($11,307,710) $165,792,240
</TABLE>
4. Capital Shares
Transactions in capital 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>
Year ended December 31, 1999 ................ 12,063,724 895 (5,616,834) 6,447,785
Year ended December 31, 1998 ................ 6,458,076 147,114 (4,891,718) 1,713,472
</TABLE>

5. Line of Credit
The Series has a committed line of credit for $12,100,000. No amount was
outstanding at December 31, 1999, or at any time during the year.

Trend-9
<PAGE>
<TABLE>
<CAPTION>
Market value of Market value of
securities on loan collateral
------------------ ---------------
<S> <C> <C>
$54,413,902 $54,705,600
</TABLE>
Net income from securities lending activities for the year ended December 31,
1999 was $80,724 and is included in interest income on the Statement of
Operations.

7. Tax Information (Unaudited)
For the fiscal year ended December 31, 1999, the Series designates as long-term
capital gains and ordinary income distributions paid during the year as follows:
<TABLE>
<CAPTION>
(A)* (B)*
Long-Term Ordinary (C)
Capital Gains Income Total (D)**
Distributions Distributions Distribution Qualifying
(Tax Basis) (Tax Basis) (Tax Basis) Dividends(1)
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
- 100% 100% 2%
</TABLE>
* Items (A) and (B) are based on a percentage of the Series' total
distributions.
** Item (D) is based on a percentage of ordinary income of the
Series.
(1) Qualifying dividends represent dividends which qualify for the corporate
dividends received deduction.To the Shareholders and Board of Directors

Trend-10

<PAGE>

Delaware Group Premium Fund-Trend Series
Report of Independent Auditors

To the Shareholders and Board of Trustees
Delaware Group Premium Fund--Trend Series

We have audited the accompanying statement of net assets of Trend Series (the
"Series") as of December 31, 1999, and the related statement of operations for
the year then ended, the statements of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
five years in the period then ended. These financial statements and financial
highlights are the responsibility of the Series' management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Trend
Series at December 31, 1999, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended, and its financial highlights for each of the five years in the
period then ended, in conformity with accounting principles generally accepted
in the United States.

/s/ Ernst & Young LLP

Philadelphia, Pennsylvania
February 4, 2000

Trend-11
<PAGE>

FOR CAPITAL GROWTH

U.S. Growth Series

Investment Strategy and Performance in 1999
Mixed signals from the U.S. economy over the past year set a challenging
backdrop for equity investors. Equity markets flourished during much of the
first half of 1999. However throughout the summer and fall of 1999, the market
faltered as renewed inflation fears and increasing interest rates eroded
investor confidence.
U.S. Growth Series provided a total cumulative return of 5.90% (capital
change plus reinvestment of distributions) for the period from its inception on
November 15, 1999 through December 31, 1999. The Series kept pace with its
benchmark, the Standard & Poor's 500 Index which returned 5.89% for the period.
U.S. Growth Series focuses on stocks that demonstrate signs of positive
fundamental change, accelerating earnings and strong long-term growth prospects.
We particularly focus on companies that are undergoing a positive fundamental
change, such as:
o A new product innovation;
o Recently introduced new products;
o An improved industry environment; or
o A corporate restructuring or a "turnaround" situation.

Portfolio Snapshot
U.S. Growth Series strives to maintain a well-balanced portfolio to offset
the risks associated with investing heavily in only one sector.
We believe the Series was able to perform well due to our focus on companies
that took advantage of technological advances. We see dynamic growth
opportunities in electronic commerce, technology and broadband communications.
We attribute these opportunities to significant technological innovation, new
product cycles and continued consumer confidence. As a result, a large number of
U.S. Growth Series' holdings are found in these sectors.
The Series also benefited from our holdings in the retail sector. In our
opinion, benign inflation, record high consumer comfort and historically low
unemployment levels continue to bode well for retail stocks.
We also saw opportunities in certain healthcare sectors as a result of new
product innovation, an aging U.S. population and consolidation within the
industry. We have focused particularly on medical and biotechnology companies
that have led advances in medicine.

Investment Outlook
Our outlook for the U.S. economy during the next few months remains
favorable. We believe that U.S. Growth Series is well positioned to take
advantage of advances in numerous technological areas over the coming year. We
will focus on stocks that demonstrate signs of positive fundamental change,
accelerating earnings and strong long-term growth prospects. We expect continued
growth from these companies which should, in our opinion, enable U.S. Growth
Series to continue to provide healthy returns.

U.S. Growth Series
Cumulative Total Return
----------------------------------
Lifetime* 5.90%

*From inception on November 15, 1999 through
December 31, 1999. Such a short period will not be
representative of the Series' performance.

- --------------------------------------------------------------------------------
U.S. Growth Series Investment Objective
Seeks to provide maximum capital appreciation. It invests primarily in companies
of all sizes that the investment manager believes will grow faster than the U.S.
economy in general.
- --------------------------------------------------------------------------------

U.S Growth-1
<PAGE>

Delaware Group Premium Fund-U.S. Growth Series
Statement of Net Assets
December 31, 1999

Number Market
of Shares Value
COMMON STOCK-60.76%
Banking, Finance & Insurance-3.85%
American Express ................................. 1,000 $166,250
Citigroup ........................................ 2,000 111,125
SLM Holding ...................................... 1,400 59,150
--------
336,525
--------
Cable, Media & Publishing-10.37%
*CBS .............................................. 3,800 242,963
*Clear Channel Communications ..................... 2,500 223,125
*EchoStar Communications .......................... 800 78,000
Time Warner ...................................... 2,800 202,825
*USA Networks ..................................... 2,900 160,225
--------
907,138
--------
Computers & Technology-10.04%
*Cisco Systems .................................... 1,700 182,113
Hewlett-Packard .................................. 1,400 159,513
*Oracle ........................................... 700 78,444
*Parametric Technology ............................ 2,100 56,831
Pitney Bowes ..................................... 5,100 246,394
*Sun Microsystems ................................. 2,000 154,875
--------
878,170
--------
Consumer Products-0.59%
Gillette ......................................... 1,250 51,484
--------
51,484
--------
Electronics & Electrical Equipment-5.70%
Motorola ......................................... 1,100 161,975
*National Semiconductor ........................... 4,300 184,094
*Solectron ........................................ 1,600 152,200
--------
498,269
--------
Energy-3.58%
Enron ............................................ 3,800 168,624
Schlumberger ..................................... 2,300 129,375
Transocean Sedco Forex ........................... 445 15,000
--------
312,999
--------
- -----------------
Top 10 stock holdings, representing 24.4% of net assets, are printed in bold.

<PAGE>

Number Market
of Shares Value
COMMON STOCK (Continued)
Food, Beverage & Tobacco-1.13%
Coca-Cola ........................................ 1,700 $ 99,025
----------
99,025
----------
Healthcare & Pharmaceuticals-5.67%
*Amgen ............................................ 1,400 84,088
*Genentech ........................................ 900 121,050
*Guidant .......................................... 3,000 141,000
Medtronic ........................................ 4,100 149,394
----------
495,532
----------
Industrial Machinery-3.97%
*Applied Materials ................................ 1,600 202,700
*Celestica ........................................ 2,600 144,300
----------
347,000
----------
Telecommunications-13.89%
AT&T ............................................. 2,800 142,100
Lucent Technologies .............................. 2,900 216,955
*MCI WorldCom ..................................... 4,350 230,822
*NEXTEL Communications ............................ 1,300 134,063
*Sprint ........................................... 1,400 143,500
*Tellabs .......................................... 2,300 147,632
*VoiceStream Wireless ............................. 1,400 199,237
----------
1,214,309
----------
Utilities-1.97%
*AES .............................................. 2,300 171,925
----------
171,925
----------
Total Common Stock
(cost $4,952,305) ............................... 5,312,376
----------

U.S Growth-2
<PAGE>

U.S. Growth Series
Statement of Net Assets (Continued)

Principal Market
Amount Value
REPURCHASE AGREEMENTS-37.89%
With Chase Manhattan 2.50%
1/3/00 (dated 12/31/99,
collateralized by $935,000
U.S. Treasury Notes 4.75%
due 2/15/04, market
value $898,219) ................................. $878,000 $ 878,000
With J.P. Morgan Securities 3.00%
1/3/00 (dated 12/31/99,
collateralized by $357,000 U.S.
Treasury Notes 6.375% due
9/30/01, market value $363,713
and $348,000 U.S. Treasury
Notes 6.625% due 4/30/02,
market value $354,490 and
$347,000 U.S. Treasury Notes
6.25% due 6/30/02, market
value $346,715) ................................. 1,043,000 1,043,000

Principal Market
Amount Value
REPURCHASE AGREEMENTS (Continued)
With PaineWebber 3.00%
1/3/00 (dated 12/31/99,
collateralized by $357,000
U.S. Treasury Notes 5.625%
due 11/30/00, market
value $357,819 and $348,000
U.S. Treasury Notes 5.375%
due 2/15/01, market value
$352,095) ....................................... $696,000 $ 696,000
With Prudential Securities
2.75% 1/3/00 (dated 12/31/99,
collateralized by $725,000
U.S. Treasury Bills due 5/18/00,
market value $710,000) .......................... 696,000 696,000
----------
Total Repurchase Agreements
(cost $3,313,000) ............................... 3,313,000
----------

TOTAL MARKET VALUE OF SECURITIES-98.65% (cost $8,265,305) ....... $8,625,376

RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES-1.35% ........... 118,204
----------

NET ASSETS APPLICABLE TO 825,355 SHARES OUTSTANDING;
EQUIVALENT TO $10.59 PER SHARE-100.00% ....................... $8,743,580
==========

COMPONENTS OF NET ASSETS AT DECEMBER 31, 1999:
Shares of beneficial interest (unlimited authorization -
no par) ...................................................... $8,362,047
Undistributed net investment income ............................. 21,462
Net unrealized appreciation of investments ...................... 360,071
----------
Total net assets ................................................ $8,743,580
==========

- -------------------
*Non-income producing security for the year ended December 31, 1999.

See accompanying notes

U.S Growth-3

<PAGE>

Delaware Group Premium Fund-U.S. Growth Series
Statement of Operations

11/15/99* to
12/31/99
------------
INVESTMENT INCOME:
Dividends ........................................... $ 24,301
Interest ............................................ 1,914
---------
26,215
---------
EXPENSES:
Management fees ..................................... 4,141
Accounting and administration ....................... 270
Reports and statements to shareholders .............. 210
Custodian fees ...................................... 117
Professional fees ................................... 67
Taxes (other than taxes on income) .................. 40
Trustee's fees ...................................... 18
Dividend disbursing and transfer agent fees and
expenses ......................................... 15
Other ............................................... 178
---------
5,056
Less expenses absorbed or waived .................... (252)
Less expenses paid indirectly ....................... (51)
---------
Total expenses ...................................... 4,753
---------
NET INVESTMENT INCOME ............................... 21,462
---------

NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on investments .................... -
Net change in unrealized appreciation /
depreciation of investments ...................... 360,071
---------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS ................................... 360,071
---------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS .................................. $ 381,533
=========
- --------------
*Date of commencement of operations.

See accompanying notes

<PAGE>

Delaware Group Premium Fund-U.S. Growth Series
Statement of Changes in Net Assets

11/15/99* to
12/31/99
------------
INCREASE IN NET ASSETS
FROM OPERATIONS:
Net investment income .................................... $ 21,462
Net realized gain on investments ......................... -
Net change in unrealized appreciation / depreciation
of investments ........................................ 360,071
----------
Net increase in net assets resulting from operations ..... 381,533
----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold ................................ 8,362,469
Cost of shares repurchased ............................... (422)
----------
Increase in net assets derived from capital
share transactions .................................... 8,362,047
----------
NET INCREASE IN NET ASSETS ............................... 8,743,580
----------
NET ASSETS:
Beginning of period ...................................... -
----------
End of period ............................................ $8,743,580
==========
- ----------------
*Date of commencement of operations.

See accompanying notes

U.S Growth-4

<PAGE>

Delaware Group Premium Fund - U.S. Growth Series
Financial Highlights

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

11/15/99(1)
to
12/31/99
-----------
Net asset value, beginning of period ...................... $10.000

Income from investment operations:
Net investment income ..................................... 0.026
Net realized and unrealized gain on investments ........... 0.564
-------
Total from investment operations .......................... 0.590
-------
Net asset value, end of period ............................ $10.590
=======
Total return .............................................. 5.90%

Ratios and supplemental data:
Net assets, end of period (000 omitted) ................... $ 8,744
Ratio of expenses to average net assets ................... 0.75%
Ratio of expenses to average net assets prior to expense
limitation and expenses paid indirectly ................ 0.79%
Ratio of net investment income to average net assets ...... 3.33%
Ratio of net investment income to average net assets
prior to expense limitation and expenses
paid indirectly ........................................ 3.29%
Portfolio turnover ........................................ 0%

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

See accompanying notes

U.S Growth-5

<PAGE>

Delaware Group Premium Fund-U.S. Growth Series
Notes to Financial Statements
December 31, 1999

Delaware Group Premium Fund (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 Delaware Business Trust and offers 18 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, the Trend Series and the U.S. Growth
Series. These financial statements and the related notes pertain to the U.S.
Growth Series (the "Series"). The shares of the Fund are sold only to separate
accounts of life insurance companies.

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

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

The Series will make distributions from net investment income and 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 execution. The amount of
these expenses was approximately $14 for the period ended December 31, 1999. The
Series may receive earnings credits from its custodian when positive cash
balances are maintained, which are used to offset custody fees. These credits
were $37 for the period ended December 31, 1999. The expenses paid under the
above arrangements are included in their respective expense captions on the
Statement of Operations with the corresponding expense offset shown as "expenses
paid indirectly".

DMC has elected to waive its fee and reimburse the Series to the extent
necessary to ensure that annual operating expenses, exclusive of taxes,
interest, brokerage commissions and extraordinary expenses, do not exceed 0.75%
of average daily net assets of the Series through April 30, 2000.

U.S Growth-6

<PAGE>

U.S. Growth Series
Notes to Financial Statements (Continued)

On December 31, 1999, the Series had liabilities payable to affiliates as
follows:

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

3. Investments
During the year ended December 31, 1999, the Series made purchases and sales of
investment securities other than U.S. government securities and temporary cash
investments as follows:

Purchases .................................... $4,952,305
Sales ........................................ -

At December 31, 1999, the aggregate cost of securities and unrealized
appreciation (depreciation) for federal income tax purposes for the Series were
as follows:

4. Capital Shares
Transactions in capital shares were as follows:

Shares Net
Shares sold repurchased increase
----------- ----------- --------
Period ended December 31, 1999*:... 825,396 (41) 825,355

- -----------------
*Commenced operations on 11/15/99.

U.S Growth-7

<PAGE>

Delaware Group Premium Fund-U.S. Growth Series
Report of Independent Auditors

To the Shareholders and Board of Trustees
Delaware Group Premium Fund--U.S. Growth Series

We have audited the accompanying statement of net assets of U.S. Growth Series
(the "Series") as of December 31, 1999, and the related statement of operations,
statement of changes in net assets and financial highlights for the period
November 15, 1999 (commencement of operations) through December 31, 1999. These
financial statements and financial highlights are the responsibility of the
Series' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of U.S.
Growth Series at December 31, 1999, and the results of its operations, the
changes in its net assets and its financial highlights for the period November
15, 1999 (commencement of operations) through December 31, 1999, in conformity
with accounting principles generally accepted in the United States.

/s/ Ernst & Young LLP

Philadelphia, Pennsylvania
February 4, 2000

U.S Growth-8