DELAWARE GROUP DIVIDEND & INCOME FUND INC, N-30D, 1995-07-31

DELAWARE GROUP DIVIDEND & INCOME FUND INC
N-30D, 1995-07-31

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Dear Shareholder,

The first six months of Dividend and Income Fund's fiscal year, December 1,
1994, through May 31, 1995, saw a dramatic shift in the financial markets. The
Federal Reserve raised interest rates just once in this six-month period,
compared to six increases that occurred in fiscal 1994. Long-term interest
rates have declined steadily, and the stock market has responded positively
to a slower growth, lower interest rate environment.

- -------------------------------------------------------------------------------
TOTAL RETURN (CAPITAL + INCOME)
DECEMBER 1, 1994 - MAY 31, 1995
- -------------------------------------------------------------------------------
Based on Performance at Based on
Net Asset Value Market Performance
- --------------------------------------------------------------------------------
Dividend and Income Fund +10.67% +13.37%
(NYSE Symbol: DDF)
- --------------------------------------------------------------------------------
S&P 500 Index +19.20%
- --------------------------------------------------------------------------------
Merrill Lynch High-Yield Index +13.15%
- --------------------------------------------------------------------------------
Lipper Closed-End Income Fund Average +16.99%
- --------------------------------------------------------------------------------
The Lipper Closed-End Income Fund average included 11 funds during this
period. The S&P 500 and Merrill Lynch High-Yield Index are
unmanaged indexes.

As you can see, the Fund's market price has responded favorably to
recent conditions in the stock and bond markets. And, the Fund's net asset
value return of +10.67% is a welcome improvement over performance in the last
fiscal year when sharply rising interest rates severely impacted high-yielding,
income-oriented investments like the Dividend and Income Fund. However, as
would be expected with a Fund that emphasizes income as a component of total
return, bond holdings, both convertible and non-convertible, kept the Fund
from capturing the full capital appreciation provided by the bull market in
equities.

Buoyed by declining interest rates, increased demand, and the powerful stock
and bond rallies, the high-yield bond market was very strong in the first half
of this fiscal year. While our presence in this market provided some benefit on
a total return basis, the highest returns within this asset class came from
bonds rated "CCC", a lower quality, riskier area of the market where we
typically have minimal exposure. Consequently, the Fund has slightly lagged
its high-yield benchmark.

We are pleased to report that, Dividend and Income Fund continued to
meet its primary objective for shareholders -- providing high current income.
The Fund's monthly dividend was increased from $0.092 to $0.096 per share,
effective January 1995. Since its March 1993 inception, the Fund's dividend
has risen by 9%. As of May 31, 1995, the Fund's distribution yield was 8.86%
based on a market price of $13.00. For those investors seeking an investment
with potential for current income and capital appreciation, the Fund has been
a sound choice.

The remainder of this report contains a more in-depth review of both
market conditions and the portfolio positioning that contributed to your Fund's
return so far this fiscal year. As always, we thank you for your confidence
in the Delaware Group.

Sincerely,

/s/ Wayne A. Stork /s/ Brian F. Wruble
- ----------------------------- --------------------------------
Wayne A. Stork Brian F. Wruble
Chairman, Board of Directors President and Chief Executive Officer
Delaware Group Dividend and Delaware Group Dividend and
Income Fund, Inc. Income Fund, Inc.

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CAPITAL APPRECIATION DRIVES STOCK MARKET IN 1995

High-yielding stocks are generally less volatile than the overall market, as
measured by the S&P 500 Index. One reason for this is that in times of market
declines, the yield on these stocks may provide underlying support for stock
prices. In a strongly rising market, like we have enjoyed to date in 1995,
where capital appreciation is the dominant component of total return, we
would expect such stocks to rise in value, but not as much as the overall
market. Though our strategy may lead us to underperform in a dramatically
rising market, we consider an emphasis on high-yielding stocks vital to the
Fund's continued success because we believe that:

* Dividends could contribute one-half or more of the total return
from common stock.
* The potential growth of common stock dividends may result in
future increases in the Fund's dividend.
* Focusing on high-yielding stocks helps us to identify
out-of-favor stocks whose depressed prices provide
potential for capital appreciation and reduced risk.

Currently the Fund's equity component is diversified across eight
separate industries with significant holdings in utilities the real estate
investment trusts.

OPPORTUNITIES IN REAL ESTATE INVESTMENT TRUSTS
Real Estate Investment Trusts (REITs) -- companies that own real
estate in a variety of sectors including apartments, office and industrial
space and shopping malls -- have shown improving fundamentals; however,
investors seem to believe that a slowing economy might hinder the real estate
recovery. As a result, this sector has seen only mild appreciation so far this
year and therefore, still offers attractive yields.
Our selection criteria for real estate investment trusts includes low
payout ratios, low debt to capital ratios, core portfolio growth, the ability
to raise rents and an experienced management team. We are optimistic about
the future potential of the REITs in the Dividend and Income Fund portfolio,
which include holdings in each of the sectors listed above. We see
continued absorption of the office and industrial space created by the
over-building of the '80s, which results in higher occupancies and
consequently potential growth of rental income, which REITs
pass along to shareholders (i.e., your Fund) in the form of dividend
increases. From 1992 through 1994, REIT dividend growth has averaged 7%
annually, compared to a 0% growth rate from 1987 through 1991. We believe
this dividend growth will be a key factor in future price appreciation in
this sector.

2
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CONVERTIBLE SECURITIES
The principal advantage of convertible securities is the opportunity
to participate in the capital appreciation of the underlying common stock
while earning a fixed income payment. For Dividend and Income Fund, with its
primary emphasis on high current income, this is also an important tool for
diversification. Often a company's common stock does not meet our minimum
dividend yield guidelines. Through the purchase of convertible securities, we
can include these companies in the portfolio. This can be beneficial in a
market such as we've seen this year, when many lower yielding common stocks
are experiencing very strong returns.
Earlier last year, rising interest rates had made convertible securities
less attractive and we reduced our allocation to convertibles in favor of
common stocks. Late in 1994, as we believed that long-term interest rates
were peaking and that further increases would be minimal, convertibles
became increasingly attractive to us. They were selling below what we saw as
true value and offered good risk/reward characteristics.

Our convertible component, which includes both convertible bonds and
convertible preferred stock, currently, has a higher weighting of convertible
bonds. We believe this positioning reduces the Fund's interest rate
sensitivity and provides better downside protection.

HIGH-YIELD BOND STRATEGY FOCUSES ON HIGHER QUALITY TIERS
At the end of your Fund's 1994 fiscal year, we reported that the
Board of Directors had obtained approval to increase the amount that may be
allocated to high-yield bonds and that we anticipated raising our high-yield
holdings to approximately 45% of the Fund's market value, the new maximum. We
believed that this increased allocation would be beneficial to the Fund's
pursuit of high current income.
This increased allocation has been especially timely given the fall
in interest rates. However, as was explained in the opening letter, our
strategy has generally been to focus on the higher quality tiers of the
high-yield market. We believe this is a prudent approach, which over time,
will help the Fund continue to meet its objective of high current income.
There's no question that the high-yield market involves greater credit risk
than higher quality fixed income securities. Within the high-yield market,
"CCC" rated bonds can involve substantially more credit risk than the higher
quality tiers and, in the past, the returns from these bonds have not fully
compensated investors for that added risk. Nonetheless, over the past six
months, with lower interest rates and only a slight slowing in the economy,
"CCC" rated bonds have been the best performing segment of the high-yield
market. In the face of this performance dichotomy, our focus on "B" and "BB"
rated bonds has somewhat limited the positive contribution of this sector to
the Fund's return, though it did help to reduce the Fund's volatility.
We have continued to upgrade the credit quality of the high-yield
portfolio, believing that the economy may continue to slow and that our
positioning will better enable us to withstand the financial pressures put on
lesser quality credits in any economic slowdown. We continue to believe that
high-yield bonds are a valuable part of our strategy, both for their ability
to provide high income and their low correlation with equities, which makes
them valuable for diversification purposes.

3
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OUTLOOK FOR THE REMAINDER OF
DIVIDEND AND INCOME FUND'S FISCAL YEAR

Although some investors have been perplexed by the stock market's strong
performance, there has been a very strong foundation supporting the gains:
lower interest rates and strong growth from corporate profits. Long-term
rates have moved steadily downward since November 1994, and higher valuations
for the stock market are a natural by-product of lower interest rates. At the
same time, American companies with their growing competitiveness are
generating much better-than-expected levels of earnings growth. Though
we believe the stock market could become somewhat more volatile, we think
that unless interest rates rise significantly and corporate profit growth
falls dramatically, the market should continue to perform well. With 67% of
the net assets of the Fund exposed to the market's appreciation potential
via common stock, preferred stock and convertible securities, we believe the
Dividend and Income Fund is well positioned for such an environment.
In addition, we believe that the Fund's significant holdings of
high-yield corporate bonds, as well as our emphasis on
income-producing equity securities will serve us well in meeting the Fund's
primary objective which is high current income.

/s/ Bernard P. Schaeffer /s/ Paul A. Matlack
- --------------------------- -------------------------
Bernie P. Schaeffer, Paul A. Matlack,
Senior Portfolio Manager Senior Portfolio Manager
Equities Fixed Income

DELAWARE MERGES WITH LINCOLN NATIONAL
We are pleased to tell you that the merger between Delaware
Management Holdings, Inc., the parent company of your Fund's investment
manager, and a subsidiary of Lincoln National Corporation, which was outlined
in your Fund's last shareholder report, was completed on April 3, 1995.
Delaware Management Holdings, Inc. is now a wholly-owned subsidiary of Lincoln
National Corporation, a diversified financial services company, headquartered
in Fort Wayne, Indiana. This merger provides the Delaware Group with
opportunities to meet the challenges of increasingly complex markets with our
existing team of portfolio managers and analysts, while remaining committed to
our fundamental investment philosophies.

PORTFOLIO LEVERAGE STRENGTHENS INCOME POTENTIAL
During the period covered by this report, your Fund's management
increased the amount of leveraged assets in the portfolio -- from $48 million
to $55 million -- in time to take greater advantage of the substantial gains
in the stock and bond markets. As of May 31, 1995, 23% of the Fund's total
assets represented leveraged assets. As we've explained in the past, leverage
is a tool that is not available to open-end funds and one that can be an
important contributor to a Fund's income and total return potential. While
leverage tends to increase income potential in any market environment, it was
a particularly beneficial strategy this year. As interest rates have declined
somewhat, the difference between what the Fund paid to borrow money --
an amount tied to short-term interest rates -- and the amount we can expect to
receive in income or dividends from our investments -- became even more
attractive. The use of leverage was an important factor in your Fund's
ability to raise its monthly dividend in January.
As with any investment, increased return potential can add to
potential risk. Leveraging could result in a higher degree of volatility
since the Fund will be more sensitive to market moves on both the upside and
the downside. We believe this risk is prudent given the potential benefits of
higher income.

4
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STOCK REPURCHASE PROGRAM

As was explained in the Fund's annual report, the Dividend and Income Fund
Board of Directors has approved an open-market Share Repurchase Program that
authorizes the Fund's manager to purchase up to 10% of the outstanding shares
on the floor of the New York Stock Exchange. Although your Fund's manager did
not utilize this option during the past six months, we believe that this
Program could add to shareholder value in two ways, though there is no
guarantee that these results will be met. First, the simultaneous increase
in demand and decrease in supply of outstanding shares could have a positive
impact on the stock's market price. Second, since the share purchases are
likely to be made at a time when they are trading for less than the
underlying value of the assets, the result could be a higher net asset value
per share.

AUTOMATIC REINVESTMENT PROVIDES GREATER POTENTIAL FOR DIVIDEND GROWTH
For people who don't need monthly income for current expenses, we
recommend that you consider having your dividends from Dividend and Income
Fund automatically reinvested. This increases the number of shares you own.
Those additional shares then earn subsequent dividends, compounding your
earning potential. Though dividend reinvestment does not guarantee a
profit, it can add to dividend growth potential as illustrated in the chart
below.
If you decide to reinvest your dividends and your shares are
registered in your name, please call Chemical Mellon Shareholder Services at
1-800-647-4273 and tell the Customer Service representative your preference.
You will be asked to put your request in writing. If you have shares
registered in "street" name, notify your bank, broker or other nominee who
holds the shares to see if you are able to participate in a dividend
reinvestment plan. (Shares of Dividend and Income Fund are listed on the New
York Stock Exchange under the symbol DDF).

A STRATEGY TO INCREASE YOUR FUTURE INCOME:
REINVESTMENT OF DIVIDEND AND CAPITAL GAIN DISTRIBUTIONS

Annual Annual
Dividends with Dividends with
Dividends and Dividends and
Capital Gains Capital Gains
Reinvested in Cash
---------------- --------------

Year 1 $1,000 $1,000
Year 2 $1,100 $1,000
Year 3 $1,210 $1,000
Year 4 $1,331 $1,000
Year 5 $1,464 $1,000
Year 6 $1,611 $1,000
Year 7 $1,772 $1,000
Year 8 $1,949 $1,000
Year 9 $2,144 $1,000
Year 10 $2,358 $1,000

This hypothetical example assumes $10,000 initial investment, 10% annual
dividend and capital gain distribution and does not include impact of income
taxes. This illustration shows only the potential impact of dividend
reinvestment on return and does not reflect the past or future performance of
this or any other Delaware Group fund.

5
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FINANCIAL STATEMENTS

DELAWARE GROUP DIVIDEND AND INCOME FUND, INC.
STATEMENT OF NET ASSETS
May 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
COMMON STOCK - 30.27%
BANKING, FINANCE & INSURANCE-2.72%
<S> <C> <C>
AmSouth Bancorp ........................................ 50,000 $ 1,668,750
Boatmen's Bancshares.................................... 50,000 1,631,250
Fleet Financial Group................................... 55,000 1,918,125
-----------
5,218,125
-----------
CHEMICALS - 2.31%
ARCO Chemical........................................... 10,500 485,625
Dow Chemical............................................ 40,000 2,935,000
Jilin Chemical Industrial............................... 47,300 1,005,125
-----------
4,425,750
-----------
ENERGY - 2.74%
Chevron................................................. 40,000 1,965,000
Occidental Petroleum.................................... 68,400 1,573,200
Pennzoil................................................ 35,000 1,728,125
-----------
5,266,325
-----------
FOOD, BEVERAGE & TABACCO - 0.93%
UST..................................................... 60,000 1,792,500
-----------
1,792,500
-----------
HEALTHCARE & PHARMACEUTICALS - 1.42%
Bristol-Myers Squibb.................................... 41,000 2,721,375
-----------
2,721,375
-----------
MEDIA, LEISURE & ENTERTAINMENT - 0.88%
Dun & Bradstreet........................................ 31,800 1,685,400
-----------
1,685,400
-----------
REAL ESTATE - 12.30%
Agree Realty............................................ 17,200 264,450
Bay Apartment Communities............................... 92,500 1,688,125
Camden Property Trust................................... 50,000 1,143,750
Chelsea GCA Realty...................................... 62,200 1,640,525
Columbus Realty Trust................................... 70,000 1,277,500
Crown American Realty Trust............................. 100,000 1,187,500
Duke Realty Investments................................. 50,000 1,400,000
Healthcare Realty Trust................................. 35,100 688,838
JP Realty............................................... 50,000 1,018,750
Macerich Company (The).................................. 90,000 1,777,500
McArthur/Glen Realty.................................... 90,000 1,305,000
National Golf Properties................................ 60,000 1,290,000
Oasis Residential....................................... 60,000 1,327,500
Prime Residential....................................... 87,500 1,296,094
Reckson Associates Realty............................... 32,600 794,625
ROC Communities......................................... 65,000 1,421,875
Simon Property Group.................................... 79,000 1,965,125

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NUMBER MARKET
OF SHARES VALUE
COMMON STOCK (Continued)
REAL ESTATE (Continued)
Smith (Charles E.) Residential Realty 40,000 930,000
Sun Communities......................................... 50,000 1,193,750
-----------
23,610,907
-----------
UTILITIES - 6.97%
Detroit Edison.......................................... 50,000 1,506,250
Entergy................................................. 100,000 2,475,000
GTE..................................................... 65,000 2,169,375
New England Electric System............................. 60,000 2,070,000
Pacific Telesis Group................................... 135,000 3,611,250
U.S. West............................................... 37,700 1,555,125
-----------
13,387,000
-----------
TOTAL COMMON STOCK (COST $57,813,955) .................. 58,107,382
-----------

CONVERTIBLE PREFERRED STOCK - 13.77%
BANKING, FINANCE & INSURANCE - 1.58%
Allstate 6.7647% pfd cv................................. 40,000 1,555,000
American General Delaware $3.00 pfd cv "A" ............. 18,000 922,500
California Federal Bank 7.75% pfd cv "A" ............... 7,400 169,275
Citicorp $1.217 pfd cv "15" "PERCS" .................. 19,510 392,639
-----------
3,039,414
-----------
BUILDINGS, HOUSING & MATERIALS - 1.24%
Kaufman & Broad Home $1.52 pfd cv "B" .................. 155,000 2,383,125
-----------
2,383,125
-----------
CHEMICALS - 1.56%
ARCO 9.01% "Lyondell" Notes "DECS"...................... 119,400 2,999,925
-----------
2,999,925
-----------
TECHNOLOGY - 1.05%
+Westinghouse Electric $1.30 pfd cv "C" ................ 135,000 2,008,125
-----------
2,008,125
-----------
ENERGY - 1.19%
Noble Drilling $1.50 pfd cv "CHC"....................... 25,000 584,375
Valero Energy $3.125 pfd cv "VLO"....................... 36,000 1,705,500
-----------
2,289,875
-----------
FOOD, BEVERAGE & TABACCO - 1.28%
RJR Nabisco Holding $0.60 pfd cv "C" "PERCS" ........... 400,000 2,450,000
-----------
2,450,000
-----------
METALS & MINING - 2.34%
Freeport-McMoRan Copper & Gold 5.00% pfd cv ............ 80,000 1,730,000
Kaiser Aluminum 8.255% pfd cv........................... 95,400 1,109,025
MascoTech $1.20 pfd cv "DECS"........................... 119,300 1,655,288
-----------
4,494,313
-----------
6
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NUMBER MARKET
OF SHARES VALUE
CONVERTIBLE PREFERRED STOCK (CONTINUED)
PAPER & FOREST PRODUCTS - 0.95%
*Stone Container Equity Linked Indexed notes............. 102,325 $ 1,829,059
-----------
1,829,059
-----------
UTILITIES - 2.21%
First Chicago 5.50% pfd cv "DECS"....................... 120,000 1,995,000
Sprint 8.25% pfd cv..................................... 67,000 2,240,312
-----------
4,235,312
-----------
REAL ESTATE - 0.37%
Prime Retail 8.50% pfd cv "B"........................... 40,000 705,000
-----------
705,000
-----------
TOTAL CONVERTIBLE PREFERRED (COST $27,620,180).......... 26,434,148
-----------

PREFERRED STOCK - 2.02%
BANKING, FINANCE & INSURANCE - 1.21%
+Credit Lyon Capital SCA 9.50% "DTC"................... 100,000 2,312,500
-----------
2,312,500
-----------
FOOD, BEVERAGE & TABACCO - 0.81%
RJR Nabisco Holdings $2.3125 "B"........................ 63,500 1,563,687
-----------
1,563,687
-----------
TOTAL PREFERRED STOCK (COST $4,096,707)................. 3,876,187
-----------

PRINCIPAL
AMOUNT
NON-CONVERTIBLE BONDS - 56.76%
AEROSPACE & DEFENSE - 0.72%
K & F Industries sr sub deb 13.75% 2001................. $1,330,000 1,376,550
-----------
1,376,550
-----------
AUTOMOTIVES & AUTOMOTIVE PARTS - 1.67%
+Aftermarket Tech sr sub notes 12.00% 2004.............. 1,000,000 1,075,000
Exide sr notes 10.75% 2002.............................. 1,000,000 1,062,500
SPX sr sub notes 11.75% 2002............................ 1,000,000 1,072,500
-----------
3,210,000
-----------
BANKING, FINANCE & INSURANCE - 1.48%
Aim Management sr sec notes 9.00% 2003.................. 800,000 792,000
Chevy Chase Savings Bank sub deb 9.25% 2005............. 1,000,000 975,000
Dime Bancorp sr notes 10.50% 2005....................... 1,000,000 1,075,000
-----------
2,842,000
-----------
BUILDINGS, HOUSING & MATERIALS - 2.84%
American Standard sr sub deb 10.875% 1999............... 3,000,000 3,240,000
Schuller International Group sr notes 10.875% 2004...... 2,000,000 2,205,000
-----------
5,445,000
-----------
CHEMICALS - 4.69%
Atlantis Group sr notes 11.00% 2003..................... 1,000,000 1,020,000
Berry Plastics sr sub notes 12.25% 2004................. 2,000,000 2,060,000

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PRINCIPAL MARKET
AMOUNT VALUE
NON-CONVERTIBLE BONDS (CONTINUED)
CHEMICALS (CONTINUED)

Harris Chemical of North America
sr sub notes 10.75% 2003.............................. $2,000,000 $ 1,950,000
NL Industries sr sec notes 11.75% 2003.................. 1,290,000 1,373,850
+Polymer Group sr notes 12.75% 2002..................... 1,000,000 1,020,000
Uniroyal Chemical Acquistion
sr sub notes 11.00% 2003.............................. 1,500,000 1,575,000
-----------
8,998,850
-----------
CONSUMER PRODUCTS - 1.54%
Calmar sr sec notes 12.00% 1997......................... 2,000,000 2,060,000
+Remington Arms sr sub notes 10.00% 2003................ 1,000,000 895,000
-----------
2,955,000
-----------
ENERGY - 1.66%
Ferrellgas sr sub notes 10.00% 2001..................... 1,985,000 2,089,212
Global Marine sr sec notes 12.75% 1999.................. 1,000,000 1,105,000
-----------
3,194,212
-----------
ENVIRONMENTAL SERVICES - 0.54%
Allied Waste Industries sr sub notes 10.75% 2004........ 1,000,000 1,045,000
-----------
1,045,000
-----------
FOOD, BEVERAGE & TABACCO - 1.46%
Chiquita Brands sub notes 11.50% 2001................... 1,000,000 1,030,000
Chiquita Brands sr notes 9.625% 2004.................... 285,000 279,300
Purina Mills 10.25% 2003................................ 375,000 389,063
Specialty Foods sr sub notes 11.25% 2003................ 1,100,000 1,105,500
-----------
2,803,863
-----------
HEALTHCARE & PHARMACEUTICALS - 2.12%
HEALTHSOUTH Rehabilitation
sr sub notes 9.50% 2001............................... 1,750,000 1,798,125
National Medical Enterprises
sr sub notes 10.125% 2015............................. 2,140,000 2,273,750
-----------
4,071,875
-----------
MEDIA, LEISURE & ENTERTAINMENT - 13.23%
Act lll Theatres sr sub notes 11.875% 2003.............. 1,600,000 1,728,000
Bally's Park Place Funding 1st mtg notes 9.25% 2004..... 1,100,000 1,023,000
Century Communications sr notes 9.75% 2002.............. 2,000,000 2,035,000
Cinemark USA sr notes 12.00% 2002....................... 2,000,000 2,165,000
Continental Cablevision sr sub deb 11.00% 2007.......... 3,000,000 3,322,500
Infinity Broadcasting sr sub notes 10.375% 2002......... 1,750,000 1,850,625
Jones Intercable sr notes 9.625% 2002.................. 1,500,000 1,545,000
K-lll Communications sr sec notes 10.625% 2002.......... 1,950,000 2,052,375
Kloster Cruise Ltd. sr notes 13.00% 2003................ 820,000 697,000
MGM Grand Hotel Finance 1st mtg notes 12.00% 2002....... 2,000,000 2,235,000
Rogers Cablesystems sr sec notes 9.625% 2002............ 2,000,000 2,030,000
Royal Caribbean Cruise Lines sr sub notes 11.375% 2002.. 1,000,000 1,105,000
Sullivan Graphics sr sub deb 15.00% 2000................ 1,500,000 1,593,750
Viacom International deb 10.25% 2001.................... 1,800,000 2,007,000
-----------
25,389,250
-----------

7
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PRINCIPAL MARKET
AMOUNT VALUE
NON-CONVERTIBLE BONDS (CONTINUED)
METALS & MINING - 3.61%
AK Steel sr notes 10.75% 2004........................... $2,800,000 $ 2,968,000
Armco sr notes 11.375% 1999............................. 750,000 783,750
G.S. Technologies sr notes 12.00% 2004.................. 2,000,000 2,055,000
Inland Steel unsec notes 12.75% 2002.................... 1,000,000 1,125,000
-----------
6,931,750
-----------
PAPER & FOREST PRODUCTS - 6.79%
Anchor Glass Container 10.25% 2002 ..................... 2,000,000 2,040,000
Domtar sr notes 11.75% 1999 ............................ 2,350,000 2,614,375
Ivex Packaging sr sub notes 12.50% 2002 ................ 1,000,000 1,071,250
Owens-Illinois sr amort deb 11.00% 2003 ................ 2,750,000 3,055,938
Pacific Lumber sr notes 10.50% 2003 .................... 1,000,000 955,000
Rainy River Forest Product sr sec notes 10.75% 2001.... 1,000,000 1,060,000
Repap Wisconsin sr sec notes 9.25% 2002 ................ 1,500,000 1,481,250
Sweetheart Cup sr sec notes 9.625% 2000 ................ 750,000 748,125
-----------
13,025,938
-----------
RETAIL - 2.11%
Di Giorgio sr notes 12.00% 2003......................... 1,000,000 755,000
Fleming Companies sr sub notes 10.625% 2001............. 1,320,000 1,395,900
Food 4 Less Supermarkets sr sub notes 13.75% 2001...... 1,000,000 1,090,000
Penn Traffic sr notes 10.65% 2004 ...................... 775,000 816,656
-----------
4,057,556
-----------
TECHNOLOGY - 3.30%
ADT Operations sr sub notes 9.25% 2003.................. 2,000,000 2,060,000
Mark IV Industries sub notes 8.75% 2003................. 2,000,000 2,040,000
Unisys credit sensitive notes 13.50% 1997............... 2,000,000 2,230,000
-----------
6,330,000
-----------
TRANSPORTATION - 2.31%
Eletson Holdings 1st pfd mtg notes 9.25% 2003........... 1,750,000 1,710,625
Trans Ocean Container sr sub notes 12.25% 2004.......... 1,000,000 1,015,000
Viking Star Shipping 1st pfd ship mtg notes 9.625% 2003 1,750,000 1,715,000
-----------
4,440,625
-----------
UTILITIES - 3.54%
Comcast Cellular sr notes 0.00% 2000.................... 3,000,000 2,205,000
Dial Page sr notes 12.25% 2000.......................... 1,000,000 1,035,000
Midland Funding II deb 11.75% 2005..................... 1,400,000 1,459,291
Rogers Cantel sr sec notes 10.75% 2001.................. 1,000,000 1,045,000
Rogers Cantel sr sub notes 11.125% 2002................. 1,000,000 1,047,500
-----------
6,791,791
-----------
MISCELLANEOUS - 3.15%
Cort Furniture Rental sr notes 12.00% 2000.............. 3,000,000 2,970,000
IMO Industries sr sub deb 12.00% 2001................... 2,000,000 2,080,000
Lamar Advertising sr sec notes 11.00% 2003.............. 1,000,000 1,007,500
-----------
6,057,500
-----------
TOTAL NON-CONVERTIBLE BONDS (COST $105,569,027)......... 108,966,760
-----------
<PAGE>

PRINCIPAL MARKET
AMOUNT VALUE
CONVERTIBLE BONDS - 20.99%
BANKING, FINANCE & INSURANCE - 0.74%
+Banco Nacional De Mexico global jr sub deb 7.00% 1999.. $2,000,000 $ 1,420,000
-----------
1,420,000
-----------
BUILDINGS, HOUSING & MATERIALS - 1.13%
MDC Holdings sub notes 8.75% 2005....................... 750,000 692,812
Schuler Homes sub deb 6.50% 2003........................ 1,800,000 1,467,000
-----------
2,159,812
-----------
ENERGY - 0.49%
Box Energy sub notes 8.25% 2002......................... 1,000,000 947,500
-----------
947,500
-----------
HEALTHCARE & PHARMACEUTICALS - 3.28%
Careline sr sub notes 8.00% 2001........................ 1,300,000 1,183,000
+Columbia HCA Healthcare sub deb 6.75% 2006............. 1,800,000 1,710,000
+Ivax deb 6.50% 2001.................................... 2,000,000 2,002,500
+Theratx 8.00% 2002..................................... 1,500,000 1,410,000
-----------
6,305,500
-----------
MEDIA, LEISURE & ENTERTAINMENT - 2.70%
Time Warner sr notes 8.75% 2015......................... 5,000,000 5,181,250
-----------
5,181,250
-----------
METALS & MINING - 1.11%
MascoTech sub deb 4.50% 2003............................ 3,000,000 2,137,500
-----------
2,137,500
-----------
REAL ESTATE - 10.16%
Alexander Haagen Properties sub deb 7.50% 2001.......... 2,270,000 1,892,613
Developers Diversified Realty sub deb 7.00% 1999........ 1,700,000 1,672,375
IRT Property sub deb 7.30% 2003........................ 3,000,000 2,737,500
Liberty Property Trust sub deb 8.00% 2001............... 2,000,000 1,972,500
LTC Properties sub deb 8.50% 2000....................... 1,000,000 995,000
Malan Realty Investors sub deb 9.50% 2004............... 3,300,000 2,978,250
Mid-Atlantic Realty Trust sub deb 7.625% 2003........... 3,000,000 2,606,250
*National Health Investors sub deb 7.375% 1998.......... 2,000,000 1,970,000
Sizeler Property Investors sub deb 8.00% 2003........... 3,000,000 2,673,750
----------
19,498,238
----------
RETAIL - 0.63%
Proffitt's sub deb 4.75% 2003........................... 1,500,000 1,215,000
-----------
1,215,000
-----------
TRANSPORTATION - 0.75%
Airborne Freight deb 6.75% 2001......................... 1,500,000 1,436,250
-----------
1,436,250
-----------
TOTAL CONVERTIBLE BONDS (COST $42,885,741).............. 40,301,050
-----------
8
<PAGE>

PRINCIPAL MARKET
AMOUNT VALUE

SHORT-TERM SECURITIES - 1.03%
U.S. Treasury Bill 5.47% due 6/8/95...................... $575,000 $ 574,388
U.S. Treasury Bill 5.59% due 6/8/95...................... 460,000 459,500
U.S. Treasury Bill 5.62% due 6/8/95...................... 940,000 938,973
-----------
TOTAL SHORT-TERM SECURITIES (COST $1,972,861)............ 1,972,861
-----------

TOTAL MARKET VALUE OF SECURITIES
OWNED - 124.84% (COST $239,958,471).................... 239,658,388
LIABILITIES NET OF RECEIVABLES
AND OTHER ASSETS - (24.84%)............................ (47,690,957)
-----------
NET ASSETS APPLICABLE TO 14,307,000 SHARES
($0.01 PAR VALUE) OUTSTANDING: EQUIVALENT TO
$13.42 PER SHARE - 100.00%............................. $191,967,431
===========
- ------------
DECS - Dividend Enhanced Convertible Security.
PERCS - Preferred Equity Redemption Cumulative Stock.
REIT - Real Estate Investment Trust.
*Restricted Securities - Investment is not registered under the Securities
Act of 1933. These securities have contractual restrictions on resale. (See
Note 4)
+Securities exempt from registration under rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. (See Note 4)

COMPONENTS OF NET ASSETS AT MAY 31, 1995:
Common stock, $0.01 par value, 500,000,000 shares
authorized to the Fund................................. $200,958,246
Accumulated undistributed income(loss):
Net investment income.................................. 701,548
Net realized loss on investments....................... (9,392,280)
Net unrealized depreciation of investments............. (300,083)
------------
Total net assets applicable to 14,307,000 shares of
common stock; equivalent to $13.42 per share........... $191,967,431
============

See accompanying notes
<PAGE>
DELAWARE GROUP DIVIDEND AND INCOME FUND, INC.
STATEMENT OF OPERATIONS
For the Six Months Ended May 31, 1995
(Unaudited)

INVESTMENT INCOME:
Interest ............................................... $7,155,860
Dividends............................................... 3,752,923 $10,908,783
---------- -----------
EXPENSES:
Management fees......................................... 644,399
Administrative fee...................................... 210,894
Commercial paper fees................................... 82,170
Reports to shareholders................................. 18,129
Taxes, other than taxes on income....................... 16,569
Custodian fees.......................................... 14,641
Amortization of organizational expenses................. 14,365
NYSE fees............................................... 12,130
Auditing................................................ 10,000
Directors' fees......................................... 10,000
Legal................................................... 9,500
Other................................................... 54,613
---------
Total operating expenses (before interest expense).... 1,097,410
Interest expense...................................... 1,531,128
-----------
Total expenses........................................ 2,628,538
NET INVESTMENT INCOME................................... 8,280,245
-----------

NET REALIZED LOSS AND UNREALIZED
GAIN ON INVESTMENTS
Net realized loss from security transactions............ (7,193,805)
Net unrealized appreciation on investments
during the period..................................... 17,554,156
-----------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS ....................................... 10,360,351
-----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS....................................... $18,640,596
===========
</TABLE>
See accompanying notes

9
<PAGE>

DELAWARE GROUP DIVIDEND AND INCOME FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MAY 31, 1995 YEAR ENDED
(UNAUDITED) NOVEMBER 30, 1994

OPERATIONS:
<S> <C> <C>
Net investment income.............................................. $ 8,280,245 $ 15,767,505
Net realized loss from security transactions....................... (7,193,805) (2,196,881)
Net unrealized appreciation (depreciation) on investments during
the period ....................................................... 17,554,156 (22,507,681)
------------ -------------
Net increase (decrease) in net assets resulting from operations ... 18,640,596 (8,937,057)
------------ -------------

DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income.............................................. (8,183,604) (16,066,761)
Net capital gains.................................................. -- (6,767,211)
------------ -------------
(8,183,604) (22,833,972)
------------ -------------

CAPITAL SHARE TRANSACTIONS:
Additional offering costs charged to paid in capital............... -- (10,288)
------------ -------------
Decrease in net assets derived from capital share transactions..... -- (10,288)
------------ -------------

NET INCREASE (DECREASE) IN NET ASSETS ............................. 10,456,992 (31,781,317)

NET ASSETS:
Beginning of period................................................ 181,510,439 213,291,756
------------ -------------
End of period (including undistributed net investment
income of $701,548 and $604,907, respectively) .................. $191,967,431 $181,510,439
============ ============
</TABLE>

See accompanying notes

<PAGE>
<TABLE>
<CAPTION>
DELAWARE GROUP DIVIDEND AND INCOME FUND, INC.
STATEMENT OF CASH FLOWS
For the Six Months Ended May 31, 1995
(Unaudited)
<S> <C>
INCREASE (DECREASE) IN CASH:
Cash flows provided by operating activities:
Interest received (excluding amortization of $180,387)........................................ $10,279,007
Operating expenses paid....................................................................... (1,259,811)
Interest expenses paid........................................................................ (1,474,562)
Purchase of short-term portfolio investments, net............................................. 663,864
Sale of long-term portfolio investments....................................................... (125,346,490)
Proceeds from disposition of long-term portfolio investments.................................. 120,249,713
------------
Net cash provided by operating activities..................................................... 3,111,721
------------

Cash flows provided by financing activities:
Cash provided by issuance of commercial paper................................................. 92,204,870
Cash used to liquidate commercial paper....................................................... (85,491,740)
Cash dividends paid........................................................................... (8,183,604)
-----------
Net cash used by financing activities......................................................... (1,470,474)
-----------
Net increase in cash........................................................................... 1,641,247
Cash at beginning of period.................................................................... (1,582,045)
-----------
Cash at end of period.......................................................................... $ 59,202
===========

RECONCILIATION OF NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS TO NET CASH PROVIDED BY OPERATING ACTIVITIES:
Net increase in net assets resulting from operations........................................... $18,640,596
------------
Increase in investments....................................................................... (1,987,594)
Net realized loss on investments.............................................................. 7,193,805
Change in net unrealized appreciation ........................................................ (17,554,156)
Increase in prepaid assets.................................................................... (3,964)
Increase in receivable for investments sold................................................... (4,423,335)
Increase in interest receivable............................................................... (449,389)
Decrease in deferred organization expenses.................................................... 14,365
Increase in payable for investments purchased................................................. 1,797,629
Increase in interest payable.................................................................. 31,268
Decrease in accrued expenses and other liabilities............................................ (147,504)
------------
Total adjustments............................................................................ (15,528,875)
------------
Net cash provided by operating activities...................................................... $ 3,111,721
============
</TABLE>

See accompanying notes

11
<PAGE>

DELAWARE GROUP DIVIDEND AND INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS
May 31, 1995
(Unaudited)

1. SIGNIFICANT ACCOUNTING POLICIES
Delaware Group Dividend and Income Fund, Inc. (the "Fund") is a diversified,
closed-end management investment company organized under the laws of Maryland
and is registered under the Investment Company Act of 1940, as amended. The
Fund had no operations prior to March 26, 1993, other than the sale of 7,000
shares of common stock for $105,000 to Delaware Management Company, Inc. on
March 15, 1993.

Portfolio securities listed or traded on a national securities exchange,
except for debt securities, are valued at the last sale price on the exchange
where they are primarily traded. Securities not traded on a particular day,
over-the-counter securities and government and agency securities are valued
at the mean value between bid and asked prices. Exchange-traded options are
valued at the last reported sales price or, if no sales are reported, at the
mean between the last reported bid and asked prices. Non-exchange-traded
options are valued using a mathematical model. Short-term instruments having
a maturity of less than 60 days are valued at amortized cost. Debt securities
(other than short-term obligations) are valued on the basis of valuations
provided by a pricing service when such prices are believed to reflect the fair
value of such securities. Use of the pricing service has been approved by the
Board of Directors.

Security transactions are accounted for on the date the securities are
purchased or sold (trade date). Gains and losses are based upon the specific
identification method for both financial statement and federal tax purposes.
Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Interest income and expenses are recorded on the accrual
basis.

The Fund issues short-term commercial paper at a discount from par. The
discount is amortized over the life of the commercial paper using the
straight-line method. In addition, a total of $203,000 was incurred in
connection with the start-up of the short-term commercial paper program.
These costs were deferred and are being amortized ratably over a period of
three years from the date of the first short-term commercial paper issuance.
(See Note 5)

A total of $144,000 was incurred in connection with the organization of the
Fund. These costs were deferred and are being amortized ratably over a five
year period from the date the Fund commenced operations.

No provision for federal income taxes has been made since it is the intention
of the Fund to comply with the provisions of the Internal Revenue Code
available to regulated investment companies and to make requisite
distributions to shareholders.
<PAGE>

2. INVESTMENT MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
In accordance with the terms of the Investment Management Agreement, the
compensation paid to Delaware Management Company, Inc. (DMC) is equal to (on
an annual basis) 0.55% of the Fund's adjusted average weekly net assets. The
Fund has also entered into an Administration Agreement with Middlesex
Administrators L.P., the administrator of the Fund, which provides for
payment, subject to an annual minimum fee of $150,000, of a monthly fee
computed at the annual rate of 0.18% of the Fund's adjusted average weekly
net assets. For purposes of the calculation of the investment management fee
and the administration fee, adjusted weekly net assets do not include the
commercial paper liability.

Certain officers, directors and shareholders of DMC are officers and/or
directors of the Fund. Officers, directors and employees of DMC, who are also
directors, officers and/or employees of the Fund, do not receive any
compensation from the Fund.

On May 31, 1995, the Fund had investment management fees payable to DMC of
$112,258. In addition, the Fund had administrative fees payable to Middlesex
Administators L.P. of $36,739.

On April 3, 1995, Delaware Management Holdings, Inc., the indirect parent of
DMC, through a merger transaction (the "Merger") became a wholly-owned
subsidiary of Lincoln National Corporation. Other than the resulting change
in ownership, the Merger will not materially change the manner in which DMC
has heretofore conducted its relationship with the Fund.

An annual meeting of shareholders was held on March 29, 1995. The matters
submitted to a vote of shareholders were the election of directors, the
approval of a new investment management agreement and the ratification of the
selection of Ernst & Young LLP as independent auditors of the Fund. The new
investment management agreement was submitted for shareholder approval in
connection with the Merger noted above because the Investment Company Act of
1940 requires shareholders to vote on a new investment management agreement
whenever there is a change in control of an investment manager.

12
<PAGE>

The names of each director elected at the meeting along with the final vote
tabulation with respect to each nominee and each matter were as follows:

NUMBER OF VOTES
-------------------------------------------
FOR AGAINST/WITHHELD ABSTENTIONS
--- ---------------- -----------
Election of Directors:
Wayne A. Stork 8,749,884 293,591 --
Walter P. Babich 8,746,298 297,177 --
Anthony D. Knerr 8,747,485 295,990 --
Ann R. Leven 8,748,118 295,357 --
W.Thacher Longstreth 8,751,161 292,314 --
Charles E. Peck 8,751,747 291,728 --
Approval of the New Investment
Management Agreement 8,416,355 162,048 465,072
Selection of Ernst & Young LLP
as Independent Auditors 8,664,110 86,277 293,087

3. INVESTMENTS
Investment securities based on cost for federal income tax purposes at
May 31, 1995, are as follows:

Cost of investments................. $239,962,860
Aggregate unrealized appreciation. 8,138,001
Aggregate unrealized depreciation... (8,442,473)
------------
Market value of investments......... $239,658,388

Net realized loss based on cost of specific certificate or bond for federal
income tax purposes was $7,242,646 for the six months ended May 31, 1995. For
federal income tax purposes, the Fund had accumulated net capital losses at
November 30, 1994, of $2,143,651 which may be carried forward and applied
against future capital gains. The capital loss carry forward expires in 2002.

For the six months ended May 31, 1995, the Fund had purchases of $127,144,119
and sales of $124,290,467 of investment securities, other than U.S.
Government securities and short-term debt securities having maturities of one
year or less.

On May 31, 1995, the Fund had a receivable for investments sold of $5,886,038
and a payable for investment securities purchased of $3,844,858.

<PAGE>

4. CONCENTRATION OF CREDIT RISK
The Fund may invest in high-yield fixed income securities which carry ratings
of CCC or lower by S&P and/or Caa 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 Fund may invest in securities whose value is derived from an underlying
pool of mortgages or consumer loans. Prepayment of these loans may shorten
the stated maturity of the respective obligation and may result in a loss of
premium, if any has been paid.

The Fund may invest up to 10% of its total assets in illiquid securities
which include securities with contractual restrictions on resale, securities
exempt from registration under Rule 144 A 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 Fund's ability to dispose of such securities in a timely
manner and at a fair price when it is necessary to liquidate such securities.
The securities have been denoted in the Statement of Net Assets.

5. COMMERCIAL PAPER
As of May 31, 1995, $55,000,000 commercial paper was outstanding with an
amortized cost of $54,326,995. The weighted average discount rate of
commercial paper outstanding at May 31, 1995, was 6.20%. The average daily
balance of commercial paper outstanding during the six months ended
May 31, 1995, was $50,000,000 at a weighted average discount rate
of 6.04%. The maximum amount of commercial paper outstanding at any time
during the fiscal year was $55,000,000. In conjunction with the issuance of
the commercial paper, the Fund entered into a line of credit arrangement with
a bank for $30,000,000. The commitment fee was computed at the rate of 3/16
of 1% per annum on the unused balance through January 19, 1995, and at the
rate of 0.15% per annum on the unused balance from January 20, 1995, through
the present. During the six months ended May 31, 1995, there were no
borrowings under this arrangement.

6. CAPITAL STOCK
There are 500,000,000 shares of $0.01 par value capital stock authorized.

On June 2, 1995, the Fund declared its monthly dividend in the amount of
$0.096 per share. This dividend is payable June 30, 1995, to stockholders of
record at the close of business on June 16, 1995. The ex-dividend date was
June 14, 1995.

Shares issuable under the Fund's dividend reinvestment plan are purchased by
the Fund's transfer agent, Chemical Mellon Shareholder Services in the open
market.

13
<PAGE>

7. FINANCIAL HIGHLIGHTS
Selected data for each share outstanding throughout each period were as
follows:

SIX MONTHS ENDED FOR THE PERIOD
MAY 31, 1995 YEAR ENDED MARCH 26, 1993* TO
(UNAUDITED) NOVEMBER 30, 1994 NOVEMBER 30, 1993

<S> <C> <C> <C>
Net asset value, beginning of period.................................... $ 12.69 $ 14.91 $ 14.04+
---------- ---------- --------
Income from investment operations:
Net investment income.................................................. 0.58 1.10 0.68
Net realized and unrealized gain(loss) on investment and options
transactions ......................................................... 0.72 (1.73) 0.81
---------- ---------- --------
Net increase(decrease) in net assets from investment operations........ 1.30 (0.63) 1.49
---------- ---------- --------

Less dividends and distributions:
Dividends from net investment income................................... (0.57) (1.12) (0.62)
Distributions from net realized capital gains ......................... -- (0.47) --
---------- ---------- --------
Total dividends and distributions...................................... (.57) (1.59) (0.62)
---------- ---------- --------
Net asset value, end of period.......................................... $ 13.42 $ 12.69 $ 14.91
========== ========== ========
Market value, end of period............................................. $ 13.00 $ 12.00 $ 14.50
========== ========== ========

Total investment return based on: (1)
Market value........................................................... 13.37% (7.23)% 0.82%
========== ========== ========
Net asset value........................................................ 10.67% (4.60)% 10.76%
========== ========== ========

Ratios/supplemental data:
Net assets, end of period (000's omitted).............................. $191,967 $181,510 $213,292
========== ========== ========
Ratio of total operating expenses to average weekly net assets (before
interest expense)..................................................... 0.94%** 1.01% 0.94%**
Ratio of interest expense to average net assets........................ 1.31%** 0.76%** N/A
Ratio of net investment income to average net assets................... 7.10%** 6.80% 6.88%**
Portfolio turnover..................................................... 55% 73% 113%
</TABLE>

- -----------
* Commencement of operations
** Annualized
+ Net of underwriter's discount of $0.90 and offering costs of $0.06 charged
to paid-in capital with respect to issuance of common shares.
(1) Total investment return is calculated assuming a purchase of common stock
on the opening of the first day and a sale on the closing of the last day
of each period reported. Dividends and distributions, if any, are
assumed for the purposes of this calculation, to be reinvested at prices
obtained under the Fund's dividend reinvestment plan. Generally, total
investment return based on net asset value will be higher than total
investment return based on market value in periods where there is an
increase in the discount or a decrease in the premium of the market
value to the net asset value from the beginning to the end of such
periods. Conversely, total investment return based on net asset value
will be lower than total investment return based on market value in
periods where there is a decrease in the discount or an increase in the
premium of the market value to the net asset value from the beginning to
the end of such periods. The total investment returns based on market
value and net asset value have not been annualized for the periods
ended November 30, 1993, and May 31, 1995.

<PAGE>

8. QUARTERLY RESULTS OF OPERATIONS (Unaudited)

NET REALIZED AND NET INCREASE(DECREASE)
INVESTMENT NET INVESTMENT UNREALIZED GAIN(LOSS) IN NET ASSETS RESULTING MARKET PRICE
QUARTER ENDED INCOME INCOME ON INVESTMENTS FROM OPERATIONS ON NYSE+
- ------------ --------------- -------------- -------------------- ----------------------- ---------------
TOTAL PER TOTAL PER TOTAL PER TOTAL PER
(000) SHARE (000) SHARE (000) SHARE (000) SHARE HIGH LOW
------- ------ -------- ------- -------- ------ -------- ------- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
May 31, 1993* ......... $ 2,589 $0.18 $ 2,262 $0.16 $ 1,113 $ 0.08 $ 3,375 $ 0.24 $15.13 $13.63
August 31, 1993 ....... 3,818 0.27 3,341 0.23 9,405 0.66 12,746 0.89 14.63 13.88
November 30, 1993 ..... 4,639 0.32 4,114 0.29 901 0.07 5,015 0.36 14.63 14.00
------- ------ -------- ------- -------- ------ -------- -------
$11,046 $0.77 $ 9,717 $0.68 $ 11,419 $ 0.81 $21,136 $ 1.49
======= ===== ====== ======= ======== ====== ======== =======

February 28, 1994 ..... $ 4,366 $0.31 $ 3,741 $0.26 $ 7,632 $ 0.53 $11,373 $ 0.79 $14.88 $14.25
May 31, 1994 .......... 5,057 0.35 4,006 0.28 (20,135) (1.41) (16,129) (1.13) 14.50 13.50
August 31, 1994 ....... 4,896 0.34 3,794 0.27 1,583 0.11 5,377 0.38 14.25 13.25
November 30, 1994...... 5,288 0.37 4,227 0.29 (13,785) (0.96) (9,558) (0.67) 13.75 11.50
------- ------ -------- ------- -------- ------ -------- -------
$19,607 $1.37 $15,768 $1.10 $(24,705) $(1.73) $(8,937) $(0.63)
======= ====== ======== ======= ======== ====== ======== =======

February 28, 1995 ..... $ 5,141 $0.36 $ 3,867 $0.27 $ 4,341 $ 0.30 $ 8,208 $ 0.57 $13.13 $11.38
May 31, 1995 .......... 5,768 0.40 4,413 0.31 6,019 0.42 10,432 0.73 13.13 12.25
------- ------ -------- ------- -------- ------ -------- -------
$10,909 $0.76 $ 8,280 $0.58 $ 10,360 $ 0.72 $18,640 $ 1.30
======= ====== ======== ======= ======== ====== ======== =======
</TABLE>

- ------------
* The Fund commenced operations on March 26, 1993.
+ As reported on the New York Stock Exchange.

<PAGE>

Board of Directors

WAYNE A. STORK*
Chairman
Delaware Group
Dividend and Income Fund
Philadelphia, PA

WALTER P. BABICH
Board Chairman
Citadel Constructors, Inc.
King of Prussia, PA

ANTHONY D. KNERR
Consultant
Anthony Knerr & Associates
New York, NY

ANN R. LEVEN
Treasurer
National Gallery of Art
Washington, DC

W. THACHER LONGSTRETH
Vice Chairman
Packquisition Corp.
Philadelphia, PA

CHARLES E. PECK
Secretary,
Enterprise Homes, Inc.
Columbia, MD

Executive Officers

BRIAN F. WRUBLE
President and CEO

WINTHROP S. JESSUP
Executive Vice President

DAVID K. DOWNES
Senior Vice President/Chief Administrative
Officer/Chief Financial Officer

GEORGE M. CHAMBERLAIN, JR.
Senior Vice President/Secretary

Audit Committee

ANN R. LEVEN
WALTER P. BABICH
ANTHONY D. KNERR

* Officer and Director

<PAGE>

DELAWARE GROUP OF FUNDS

FOR GROWTH OF CAPITAL
Trend Fund
DelCap Fund
Value Fund

FOR TOTAL RETURN
Dividend Growth Fund
Decatur Total Return Fund
Decatur Income Fund
Delaware Fund

FOR GLOBAL DIVERSIFICATION
International Equity Fund
Global Assets Fund
Global Bond Fund

FOR CURRENT INCOME
Delchester Fund
U.S. Government Fund
Treasury Reserves
Intermediate Fund

FOR TAX-FREE
CURRENT INCOME
Tax-Free USA Fund
Tax-Free Insured Fund
Tax-Free USA
Intermediate Fund
Tax-Free Pennsylvania Fund

MONEY MARKET FUNDS
Delaware Cash Reserve
U.S. Government Money Fund
Tax-Free Money Fund

CLOSED-END EQUITY/INCOME
Dividend and Income Fund
Global Dividend and
Income Fund

Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940 that periodically the Fund may purchase its shares in the
open market at prevailing market prices. This report is for shareholder
information. This is not a prospectus intended for use in the purchase or
sale of Fund shares.

<PAGE>

The Delaware Group includes funds with a wide range
of investment objectives. Stock funds, income funds,
tax-free funds, money market funds, closed-end equity/
income funds and global funds give investors the ability
to create a portfolio that fits their personal financial
goals. For more information, including a prospectus of
any Delaware Group fund, contact your financial
adviser or call the Delaware Group at 800-523-4640 or
215-988-1333 in Philadelphia. Read the prospectus
carefully before investing.
BE SURE TO CONSULT YOUR FINANCIAL ADVISER WHEN
MAKING INVESTMENTS. FUNDS CAN BE A VALUABLE PART
OF YOUR FINANCIAL PLAN; HOWEVER, SHARES OF THE FUND
ARE NOT FDIC OR NCUSIF INSURED, ARE NOT GUARANTEED BY
ANY BANK OR ANY CREDIT UNION, ARE NOT OBLIGATIONS OF
ANY BANK OR ANY CREDIT UNION, AND INVOLVE INVESTMENT
RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
SHARES OF THE FUND ARE NOT BANK OR CREDIT UNION DEPOSITS.

PRINCIPAL OFFICE OF THE FUND
1818 Market Street
Philadelphia, PA 19103

INVESTMENT MANAGER
Delaware Management Company, Inc.
Philadelphia

SUB-ADVISER
Delaware International Advisers Ltd.
London

INDEPENDENT AUDITORS
Ernst & Young LLP
2001 Market Street
Philadelphia, PA 19103

REGISTRAR AND STOCK TRANSFER AGENT
Chemical Mellon Shareholder Services
450 West 33rd Street
New York, NY 10001
800-647-4273

NUMBER OF RECORDHOLDERS
AS OF MAY 31, 1995
491
DDF-02 [5/95] PP795

<PAGE>

DELAWARE GROUP
A TRADITION OF SOUND INVESTING SINCE 1929

PHOTO OF
COLONIAL OBJECTS