<PAGE>
The
- ------------------------------------
Fund's Investment
- ------------------------------------
Objectives and
- ------------------------------------
Strategies
- ------------------------------------
Dividend and Income Fund is designed mainly to offer investors a high level
of current income with a secondary goal of capital appreciation.
To achieve this goal, the Fund strategically diversifies assets among three
main categories of securities.
COMMON STOCKS WITH HIGH YIELDS
Since yield is the relationship between a stock's dividend and its
price, high-yield stocks offer three primary benefits. First, they pay high
income relative to their share price. This helps the Fund meet its
primary objective, which is providing high current income to shareholders.
Second, a high yield can point the portfolio managers to strong companies
that are selling for less than they may be worth. Generally,
when a stock's yield is high, its price has fallen. As a result, a high yield
is often considered a positive indicator by value investors. A strong
company's stock may have a high yield relative to the average yield of stocks
in the S&P 500 Index for several reasons, such as a temporary price decline
resulting from a negative outlook for its industry sector or because of
speculation about an event specific to the company.
Price appreciation can occur if either the outlook for the company
or its industry changes or if the yield attracts income investors--
particularly during periods of low interest rates. And finally, a high yield
can help cushion a stock's performance during a market decline.
CONVERTIBLE SECURITIES
The Fund invests in convertible preferred stock and convertible
bonds. Both are securities that pay fixed rates of income, but because they
can be converted into a certain number of shares of common (or sometimes
preferred) stock, they are indirectly tied to the company's common stock
performance. As a result, convertible securities generally offer higher
income than common stocks, as well as the opportunity for price appreciation
when the value of the related common stock rises beyond a certain level.
HIGH-YIELD CORPORATE BONDS
The third investment category the Fund focuses on is high-yield
bonds. These are non-investment grade bonds issued by companies across the
broad spectrum of corporate America. Because these bonds involve more credit
risk than investment grade bonds, they tend to pay income at significantly
higher rates, making them very attractive to income-oriented investors.
High-yield bonds can also offer diversification benefits since, like
convertible securities, the high-yield bond market reacts to events in both
the stock and bond markets. The economic and business outlook affects
high-yield bonds' appreciation potential because it influences perceptions
about the risk versus the potential reward of a particular company's bonds.
Changes in interest rates also have an impact because like all fixed-income
securities, high-yield bond prices generally rise when interest rates decline
and decline when interest rates increase.
<PAGE>
December 29, 1995
Dear
- ------------------------------------
Shareholder:
- ------------------------------------
The past 12 months have been an exceptionally strong period for the U.S.
stock and bond markets. Driven primarily by tame inflation reports and
corresponding declines in interest rates, the bond market rallied throughout
our fiscal year ended November 30, 1995. In turn, the stock market was
bolstered by the favorable interest rates and continued strong earnings from
an efficient and productive corporate America.
Though it was designed to focus primarily on current income, the
Delaware Group Dividend & Income Fund did take considerable advantage of the
appreciation potential in both markets. As you can see from the chart, the
Fund's total return (capital plus reinvested income) was a solid +20.72% for
the fiscal period. Our performance is especially significant in that Dividend
and Income Fund held only 34.33% of its investments in common stocks, and in
general avoided the technology and other higher risk growth stocks that led
the market in 1995. Market price per share was even stronger than the
performance of the portfolio. Shares appreciated 28.71% during the year as
demand for the portfolio's income potential and investment strategy drove up
the Fund's price on the New York Stock Exchange.
- ---------------------------------------------------------------------------
TOTAL RETURN
DECEMBER 1, 1994 -- NOVEMBER 30, 1995
Based on Performance Based On
at Net Asset Value Market Price
-----------------------------------------
Dividend and Income Fund +20.72 +28.71
(NYSE Symbol: DDF)
Standard & Poor's 500 Index +36.93
Merrill Lynch High-Yield Index +19.73
Lipper Closed-End Income
Fund Average +27.16
The Fund's total return assumes reinvestment of monthly dividends. There are
11 closed-end funds in the Lipper Closed-End Income Fund Average.
- ----------------------------------------------------------------------------
Over the period, Dividend and Income Fund continued to provide
shareholders a high level of current income, which is its primary objective.
Beginning in January 1995, the monthly dividend was increased 4.3%, from
$0.092 to $0.096 per share. Then in December 1995, the Board of Directors
authorized a managed distribution policy which is explained in detail later
in this report. This boosted the Fund's monthly dividend rate to $0.125 per
share, representing a total increase of over 35% since the beginning of the
fiscal year ended November 30, 1995, and a distribution yield of 10.7%, based
on the $14.00 market price on November 30.
We believe the new dividend rate could be viewed positively by the
market, particularly if the relatively low interest rate environment
continues. Early reaction to the managed dividend announcement was positive,
with the Fund's market price increasing from a discount of 5.4% at net asset
value at the beginning of our fiscal year to a premium of 0.07% by November
30.
We believe the Fund is well-positioned for the coming year. While we
believe stock market performance will remain strong, we think U.S. economy
will slow further and that the market will begin to favor the more
value-oriented, dividend-paying companies we emphasize. Our focus on the
higher quality areas of the high-yield bond market should also serve us well
in a slower growth economy.
On the pages that follow, the Fund's investment strategy and
performance over the past fiscal year are described in greater detail. Thank
you for your confidence in the Delaware Group and our best wishes for the
coming year.
Sincerely,
/s/ Wayne A. Stork
- ----------------------------
Wayne A. Stork
Chairman
1
<PAGE>
Portfolio
- ------------------------------------
Managers'
- ------------------------------------
Review
- ------------------------------------
COMMON STOCKS AND CONVERTIBLE SECURITIES
In what had been a phenomenal year for the U.S. stock market, the
Dow Jones Industrial Average, the S&P 500 Index and the NASDAQ Composite all
reached new record highs by the end of November. The market was reacting to a
combination of factors, including a background of low inflation and interest
rates, and earnings that remained strong even as economic growth slowed.
Because of the slowing in the economy, the market favored non-cyclical
companies, those that can provide earnings growth regardless of the economic
cycle. So although almost all areas of the domestic stock market performed
well, the runaway leaders were growth companies like technology firms, food
and beverage and drug manufacturers, whose sales generally remained steady
even as the economy showed signs of weakness.
While these types of companies rarely meet our yield guidelines, we
were able to participate in the strong market through convertible securities
of firms like California Federal Bank, a company with strong earnings growth,
but whose common stock does not pay dividends.
- ----------------------------------------------------------------------------
Investments by Security Type
As of November 30, 1995
Convertible Securities 24.70%
Common Stocks 34.33%
High-Yield Bonds 38.59%
Other 2.38%
- ----------------------------------------------------------------------------
Asset allocation is based on all securities owned by the Fund as of November
30, 1995, including those purchased through the use of leverage. This chart
differs from the financial statements which also take into account
liabilities. Portfolio subject to change.
Since we evaluate stocks first for their income potential, decisions
over the past year also placed the portfolio in a number of dividend-paying
stocks within financial services, a sector that was among the highest in
price appreciation. The Fund bought common and convertible preferred stocks
and convertible bonds in the financial services sector because early in the
year we saw value in terms of price, yield, underlying fundamental strengths
and possible merger activity. Regional banking stocks performed quite well,
posting an average return of +58.33% for the period.
Utilities are another sector where we have large holdings in both
common stocks and convertible securities. Utilities have traditionally been a
high-yielding stock sector because of the cash flow generated by monthly
utility bill payments. Because investors often turn to utilities for income,
these stocks benefited over the course of the year as falling interest rates
reduced the yields available from most areas of the bond market. Our
investments here focused mainly on the electric sector. We believe electric
utilities are currently well-positioned, having increased earnings during a
period of declining interest rates.
Since common stock performance in both financial services and
utilities were strong, our holdings of convertible stocks and bonds shared in
that appreciation. Convertible securities in general benefited from
increasing investor demand for sources of steady income. Together, the Fund's
stock and convertible-to-stock holdings provided most of the portfolio's net
asset value appreciation.
One area of the stock market that generally did not show as much
capital appreciation as the majority of stocks was the Real Estate Investment
Trust (REIT) sector. REITs, which have strongly benefited us in the past,
turned in an average return of +16.72% for the fiscal year. Though this is
2
<PAGE>
good performance on an absolute basis, in a year when the S&P 500 was up
+36.93%, these stocks limited our appreciation somewhat. Of course, we invest
in REITs primarily for income, and for that purpose they served us well.
Unlike the underlying real estate they consist of, REITs are liquid
investments traded on stock exchanges. But because REITs are companies that
own blocks of income-producing real estate, their performance is tied to, and
involves some of the risks of the real estate market, including changes in
rental demand and occupancy rates as well as rising property taxes. Over the
fiscal year, the portfolio has avoided the difficult retail-oriented
REITs--such as shopping center and mall portfolios--in favor of those that
specialize in healthcare facilities, office buildings and apartments. REITs
by their nature have historically paid high income and shown strong dividend
increases over time; however, they can be affected by changes in supply and
demand or in regional economies. While the portfolio was well diversified by
both region and property type, in this year's market, REITs in general did
not keep pace with the more growth-oriented areas of the stock market. We
believe their performance should improve in the coming months as low interest
rates support seasonal improvements in the real estate market.
One strategy we have begun to implement and which we may make
greater use of in the coming months is writing covered call options. (Writing
a covered call indicates that the Fund is selling a call option on a stock it
owns.) We believe this strategy can be a mechanism to help the Fund minimize
the effect of market declines. It also allows the Fund to hold stocks that we
believe have very promising long-term potential, but somewhat limited
short-term prospects.
HIGH-YIELD BONDS
High-yield corporate bonds were one of the best performing sectors
of the bond market over the 12 months ended November 30. They benefited from
increased demand for their comparatively high levels of income in a declining
interest rate environment as well as from the strength of the stock market.
Economic growth, though it was slower, remained fairly steady, and earnings
at many of the companies that issue high-yield bonds remained strong.
Dividend and Income Fund's policy over the course of the year has
been to balance opportunities for high current income with a relatively
conservative approach to potential credit risk. Over the period, the
high-yield bond portion of the portfolio consisted primarily of B and
BB-rated bonds, which don't pay the highest income available from the
high-yield sector, but are issued by companies with stronger balance sheets
than those issuing higher yielding bonds. Another conservative move was to
reduce our average maturity and average duration (price sensitivity to
changes in interest rates). After the past year's extremely strong bond
market, we believed there was limited further appreciation potential to be
gained from extending the Fund's maturity.
High-yield corporate bond sectors that provided good returns for the
Fund over the period included the media and entertainment area as well as
chemical, paper and forest products companies. Media and entertainment
companies have traditionally been insulated from the effects of economic
slowdowns. On the other hand, while performance in the economically sensitive
chemical and paper products should have been weaker as the economy slowed,
this sector performed well for the Fund because we were able to buy bonds at
depressed prices at the end of 1994.
OUTLOOK
Going forward, our focus in common stocks is on areas where there is
still a measure of value--a feature that's become somewhat more difficult to
find after the past year's market advance, but that should attract investors
at this time of relatively high stock prices. We believe the financial sector
continues to offer opportunities both in terms of income and appreciation
potential, and that utilities and REITs should also continue to help the Fund
capture high current income.
3
<PAGE>
We may reduce our holdings in convertible securities slightly over
the coming year. Because these securities appreciated so much this year, many
have neared our price targets and so we believe they may offer only limited
future appreciation potential. One area where convertible securities remain
attractive, however, is in the growth sectors of the market. While our use of
yield as a selection criterion for common stocks generally keeps the Fund from
investing in growth companies (which typically use any excess cash for
expansion rather than dividend payments), the Fund can participate in their
potential through their dividend-paying convertible securities. Even if the
economy slows further, we believe growth companies should continue to do well.
In high-yield bonds, we are still somewhat conservative. We are
focusing on the higher rated issues among non-investment grade bonds, which
again is an effort to counter any potential negative effects a slow-growth
economy could have on corporate profits and, therefore, on ability to pay
interest and repay principal. Though the portfolio remains highly
diversified, our allocation to particular industries has continued to follow
economic trends. We're looking both for companies that we believe will be able
to grow faster than the economy and those whose bonds are selling at prices
that appear low compared to their issuer's financial situation or business
prospects.
/s/ Bernard P. Schaffer
- ----------------------------
Bernard P. Schaffer
Senior Portfolio Manager
Equities
/s/ Paul A. Matlack
- ----------------------------
Paul A. Matlack
Senior Portfolio Manager
High-Yield Bonds
Fund
- ------------------------------------------------------------
Updates
- ------------------------------------------------------------
MANAGED DISTRIBUTION POLICY
In November 1995, Dividend and Income Fund's Board of Directors
approved the adoption of a managed distribution policy and set the Fund's
monthly dividend at $0.125 per share, a 30% increase over the previous rate,
for a total dividend increase of 42% since the Fund's first dividend was paid
in May 1993.
The purpose of the managed distribution policy is to make the Fund
more attractive to income-oriented investors, thereby, we believe,
encouraging additional share purchases which should help the Fund's market
price to more accurately reflect the value of its holdings.
Going forward, we may make minor adjustments to the Fund's asset
allocation in keeping with our income-oriented strategy. Under the new
policy, the Fund will now be managed with a goal of generating as much of the
dividend as possible from ordinary income. However, the balance of the
dividend will come from short-term capital gains and, if necessary, a return
of capital. The final calendar year dividend payment may include a
distribution from net long-term capital gains. For tax purposes, a final
audited figure showing the sources of all distributions will be provided on
your 1099-DIV statement at the end of each year.
It's our opinion that this decision may help ensure that the Fund's
market price accurately reflects the underlying assets and the potential
benefits the Fund can offer.
4
<PAGE>
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 the November 30 fiscal year end, 21% of the
Fund's assets were leveraged.
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 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 pays to borrow money -- an amount tied to short-term interest rates -- and
the amount we can expect to receive from our investments became even more
attractive. The use of leverage can enhance your Fund's potential to earn
income for shareholders.
As with any investment, increased return potential can add to
potential risk. Leveraging could result in a higher degree of volatility
because the Fund will be more sensitive to market moves on both the upside
and the downside. We believe this risk is reasonable given the potential
benefits of higher income.
- ---------------------------------------------------------------------------
Dividend & Income Fund
Monthly Dividend History
(Dividends Paid Per Share)
5/93 - 1/94 $0.088
2/94 - 12/94 $0.092
1/95 - 11/95 $0.096
12/95 $0.125
- --------------------------------------------------------------------------
DELAWARE MERGES WITH LINCOLN NATIONAL
As was noted in the semi-annual report, the merger between Delaware
Management Holdings, Inc., the parent company of your Fund's investment
manager, and a newly created, wholly owned subsidiary of Lincoln National
Corp. was completed on April 3, 1995. Delaware Management Holdings, Inc. is
now a wholly owned subsidiary of Lincoln National Corp., a diversified
financial services company headquartered in Fort Wayne, Indiana. This merger
provides Delaware 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.
STOCK REPURCHASE PROGRAM
As was explained in the Fund's 1994 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
management did not utilize this option during the past year, 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.
5
<PAGE>
Automatic
- ---------------------------------------
Reinvestment
- ---------------------------------------
Provides Greater
- ---------------------------------------
Potential for
- ---------------------------------------
Dividend Growth
- ---------------------------------------
For people who don't use the Fund's monthly income for current
expenses, we recommend that you consider having your dividends from the Fund
automatically reinvested. This increases the total number of shares you own,
shares which in turn earn any subsequent dividends, compounding your earning
potential. Though dividend reinvestment does not guarantee a profit, it can
add to your growth potential, as you can see from the hypothetical
illustration below.
If you'd like to reinvest your dividends and your shares are
registered in your name, please call Chemical Mellon Shareholder Services at
1-800-982-7649 and tell the Customer Service Representative your decision.
You will be asked to put your request in writing. If you have shares
registered in "street" name, contact 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 Dividend with Annual Dividend with
Dividends and Capital Dividends and Capital
Gains in Cash Gains Reinvested
--------------------- ---------------------
Year 1 $1,000 $1,000
Year 2 $1,000 $1,100
Year 3 $1,000 $1,210
Year 4 $1,000 $1,331
Year 5 $1,000 $1,464
Year 6 $1,000 $1,611
Year 7 $1,000 $1,772
Year 8 $1,000 $1,949
Year 9 $1,000 $2,144
Year 10 $1,000 $2,358
- -----------------------------------------------------------------------------
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. It assumes no additional return on the
dividends and capital gains taken in cash.
6
<PAGE>
Financial
- ---------------------------------------
Statements
- ---------------------------------------
DELAWARE GROUP DIVIDEND AND INCOME FUND, INC.
STATEMENT OF NET ASSETS
NOVEMBER 30, 1995
Number Market
of Shares Value
COMMON STOCK - 44.38%
Banking, Finance & Insurance - 7.59%
Bankers Trust New York. . . . . . . . . 31,000 $ 2,011,125
Beneficial. . . . . . . . . . . . . . . 16,100 817,075
CoreStates Financial. . . . . . . . . . 80,000 3,100,000
Fleet Financial Group. . . . . . . . . 24,600 1,027,050
Great Western Financial. . . . . . . . 100,000 2,550,000
Integra Financial . . . . . . . . . . . 30,000 1,856,250
Meridian Bancorp. . . . . . . . . . . . 40,000 1,845,000
UJB Financial . . . . . . . . . . . . . 60,000 2,010,000
----------
15,216,500
----------
Cable, Media & Publishing - 0.99%
Dun & Bradstreet. . . . . . . . . . . . 31,800 1,983,525
----------
1,983,525
----------
Chemicals - 2.72%
Dow Chemical. . . . . . . . . . . . . . 40,000 2,835,000
DuPont (E.l.) De Nemours. . . . . . . . 39,500 2,626,750
----------
5,461,750
----------
Energy - 4.77%
Exxon . . . . . . . . . . . . . . . . . 20,000 1,547,500
Kerr-McGee. . . . . . . . . . . . . . . 35,000 2,025,625
Occidental Petroleum. . . . . . . . . . 100,000 2,212,500
Pennzoil. . . . . . . . . . . . . . . . 35,000 1,386,875
Tenneco . . . . . . . . . . . . . . . . 50,000 2,400,000
----------
9,572,500
----------
Food, Beverage & Tobacco - 1.72%
Philip Morris Companies . . . . . . . . 17,000 1,491,750
UST . . . . . . . . . . . . . . . . . . 60,000 1,957,500
----------
3,449,250
----------
Healthcare & Pharmaceuticals - 1.44%
American Home Products. . . . . . . . . 10,000 912,500
Bristol-Myers Squibb. . . . . . . . . . 20,000 1,605,000
Glaxo Wellcome PLC ADR. . . . . . . . . 13,500 361,125
----------
2,878,625
----------
<PAGE>
Number Market
of Shares Value
COMMON STOCK (Continued)
Paper & Forest Products - 1.04%
Federal Paper Board. . . . . . . . . . 40,000 $ 2,080,000
----------
2,080,000
----------
Real Estate - 15.84%
American Health Properties . . . . . . 50,000 993,750
Bay Apartment Communities . . . . . . 92,500 2,011,875
Camden Property Trust. . . . . . . . . 50,000 1,031,250
Chelsea GCA Realty . . . . . . . . . . 62,200 1,733,825
Columbus Realty Trust. . . . . . . . . 70,000 1,321,250
Duke Realty Investments. . . . . . . . 25,000 693,750
Glimcher Realty Trust. . . . . . . . . 60,000 1,050,000
Healthcare Realty Trust. . . . . . . . 35,100 728,325
HGI Realty . . . . . . . . . . . . . . 57,600 1,281,600
Highwood Properties. . . . . . . . . . 50,000 1,318,750
JP Realty. . . . . . . . . . . . . . . 31,600 628,050
Macerich Company (The) . . . . . . . . 130,000 2,567,500
National Golf Properties . . . . . . . 60,000 1,327,500
Oasis Residential. . . . . . . . . . . 60,000 1,252,500
Patriot American Hospitality . . . . . 78,000 1,852,500
Reckson Associates Realty. . . . . . . 63,000 1,756,125
ROC Communities. . . . . . . . . . . . 65,000 1,454,375
Simon Property Group . . . . . . . . . 79,000 1,836,750
Smith (Charles E.) Residential Realty 40,000 920,000
Sovran Self Storage. . . . . . . . . . 60,000 1,492,500
Starwood Lodging Trust . . . . . . . . 55,000 1,519,375
Sun Communities. . . . . . . . . . . . 50,000 1,250,000
Walden Residential Properties. . . . . 34,000 607,750
Weeks. . . . . . . . . . . . . . . . . 50,000 1,137,500
----------
31,766,800
----------
Transportation & Shipping - 0.08%
Norfolk Southern . . . . . . . . . . . 2,000 157,500
----------
157,500
----------
Utilities - 8.19%
Houston Industries . . . . . . . . . . 50,000 2,287,500
New England Electric System. . . . . . 45,000 1,755,000
Potomac Electric Power . . . . . . . . 100,000 2,450,000
Rochester Gas & Electric . . . . . . . 155,000 3,642,500
Royal PTT Nederland NV ADR . . . . . . 31,600 1,117,850
Texas Utilities. . . . . . . . . . . . 75,000 2,887,500
U.S. West. . . . . . . . . . . . . . . 72,700 2,271,875
----------
16,412,225
----------
Total Common Stock (cost $86,523,387) 88,978,675
----------
7
<PAGE>
Number Market
of Shares Value
CONVERTIBLE PREFERRED STOCK - 15.96%
Banking, Finance & Insurance - 1.42%
Advanta 6.75% pfd cv. . . . . . . . . . . . 33,500 $ 1,289,750
California Federal Bank 7.75% pfd cv "A". . 63,200 1,548,400
----------
2,838,150
----------
Building & Materials - 1.02%
Kaufman & Broad Home $1.52 pfd cv "B" . . . 155,000 2,053,750
----------
2,053,750
----------
Chemicals - 1.49%
ARCO 9.01% "Lyondell" Notes "DECS" . . . . 119,400 2,985,000
----------
2,985,000
----------
Electronics - 1.11%
+Westinghouse Electric $1.30 pfd cv "C" . . 135,000 2,227,500
----------
2,227,500
----------
Energy - 0.31%
Noble Drilling $1.50 pfd cv "CHC" . . . . . 25,000 625,000
----------
625,000
----------
Food, Beverage & Tobacco - 1.17%
RJR Nabisco Holding $0.60 pfd cv "C" "PERCS" 400,000 2,350,000
----------
2,350,000
----------
Healthcare & Pharmaceuticals - 0.78%
US Surgical $2.20 pfd cv "A" "DECS" . . . . 55,000 1,567,500
----------
1,567,500
----------
Leisure & Lodging - 0.67%
Bally Entertainment 8.00% pfd cv. . . . . . 110,000 1,333,750
----------
1,333,750
----------
Metals & Mining - 1.81%
Freeport-McMoRan Copper & Gold 5.00% pfd cv 80,000 2,120,000
MascoTech $1.20 pfd cv "DECS". . . . . . . . 119,300 1,506,163
----------
3,626,163
----------
Paper & Forest Products - 2.39%
+International Paper 5.25% pfd cv . . . . . 66,000 3,003,000
James River 9.00% pfd cv "P" "DECS" . . . . 60,000 1,800,000
----------
4,803,000
----------
Real Estate - 0.37%
Prime Retail 8.50% pfd cv "B". . . . . . . . 40,000 735,000
----------
735,000
----------
Transportation - 1.22%
Delta Airlines $3.50 pfd cv "C" . . . . . . 40,000 2,450,000
----------
2,450,000
----------
Utilities - 1.20%
Sprint 8.25% pfd cv. . . . . . . . . . . . . 67,000 2,403,625
----------
2,403,625
----------
Miscellaneous - 1.00%
Alco Standard $5.04 pfd cv "BB" . . . . . . 24,000 1,998,000
----------
1,998,000
----------
Total Convertible Preferred (cost $32,406,737) 31,996,438
----------
<PAGE>
Number Market
of Shares Value
PREFERRED STOCK - 1.24%
Banking, Finance & Insurance - 1.24%
+Credit Lyon Capital SCA 9.50% "DTC" . . . . . 100,000 $ 2,487,500
----------
Total Preferred Stock (cost $2,500,000) . . . . 2,487,500
----------
Principal
Amount
NON-CONVERTIBLE BONDS - 49.89%
Aerospace & Defense - 1.69%
American General sr notes 12.875% 2002 . . . . $2,000,000 1,995,000
K & F Industries sr deb 13.75% 2001 . . . . . 1,330,000 1,389,850
----------
3,384,850
----------
Automobiles & Auto Equipment - 2.64%
Aftermarket Tech sr sub notes 12.00% 2004 . . 2,000,000 2,120,000
Exide sr notes 10.75% 2002 . . . . . . . . . . 1,000,000 1,080,000
Harvard Industries sr notes 11.125% 2005 . . . 1,000,000 1,020,000
SPX sr sub notes 11.75% 2002 . . . . . . . . . 1,000,000 1,070,000
----------
5,290,000
----------
Banking, Finance & Insurance - 1.08%
Aim Management sr sec notes 9.00% 2003 . . . . 50,000 51,000
Chevy Chase Savings Bank sub deb 9.25% 2005. . 1,000,000 1,005,000
Dime Bancorp sr notes 10.50% 2005 . . . . . . 1,000,000 1,115,000
----------
2,171,000
----------
Building & Materials - 1.12%
Schuller International Group sr notes
10.875% 2004. . . . . . . . . . . . . . . . . 2,000,000 2,240,000
----------
2,240,000
----------
Cable, Media & Publishing - 6.76%
Act III Theatres sr sub notes 11.875% 2003 . . 1,600,000 1,704,000
Century Communications sr sub deb 11.875% 2003 1,000,000 1,068,750
Cinemark USA sr notes 12.00% 2002 . . . . . . 2,000,000 2,185,000
Groupe Videotron sr notes 10.625% 2005 . . . . 2,000,000 2,115,000
Jones Intercable sr notes 9.625% 2002 . . . . 1,500,000 1,601,250
Rogers Cablesystem sr sec deb 10.00% 2007 . . 810,000 838,350
Rogers Cablesystem sr sub deb 11.00% 2015 . . 500,000 517,500
+Sullivan Graphics sr sub notes 12.75% 2005 . 1,500,000 1,501,875
Viacom International sr sub notes 10.25% 2001. 1,800,000 2,025,000
----------
13,556,725
----------
Chemicals - 4.04%
Berry Plastic sr sub notes 12.25% 2004 . . . . 1,000,000 1,060,000
Foamex sr notes 11.25% 2002. . . . . . . . . . 2,000,000 2,035,000
NL Industries sr sec notes 11.75% 2003 . . . . 2,290,000 2,438,850
Polymer Group sr notes 12.25% 2002 . . . . . 1,000,000 1,035,000
Uniroyal Chemical Acquistion sr sub notes
11.00% 2003. . . . . . . . . . . . . . . . . . 1,500,000 1,518,750
----------
8,087,600
----------
8
<PAGE>
Principal Market
Amount Value
NON-CONVERTIBLE BONDS (Continued)
Computers & Technology - 4.05%
Galaxy Telecom sr sub notes 12.375% 2005 . . . $2,000,000 $ 1,972,500
+IXC Communications sr notes 12.50% 2005 . . 2,000,000 2,100,000
Metrocall sr sub notes 10.375% 2007 . . . . . 2,000,000 2,075,000
Unisys credit-sensitive notes 13.50% 1997 . . 2,000,000 1,970,000
----------
8,117,500
----------
Consumer Products - 1.43%
American Safety Razor sr notes 9.875% 2005 . . 1,000,000 995,000
+Remington Arms sr sub notes 10.00% 2003 . . . 2,000,000 1,875,000
----------
2,870,000
----------
Electronics - 2.83%
Interlake Corp sr notes 12.00% 2001 . . . . . 2,000,000 1,995,000
Mark IV Industries sub notes 8.75% 2003 . . . 1,985,000 2,059,438
Pronet sr sub notes 11.875% 2005 . . . . . . 1,500,000 1,623,750
----------
5,678,188
----------
Energy - 1.34%
+Clark USA sr notes 10.875% 2005 . . . . . . . 1,000,000 1,022,500
Global Marine sr sec notes 12.75% 1999 . . . . 1,500,000 1,665,000
----------
2,687,500
----------
Environmental Services - 1.52%
Allied Waste Industries sr sub notes 12.00%
2004 . . . . . . . . . . . . . . . . . . . . 1,000,000 1,075,000
+Norcal Waste sr notes 12.50% 2005 . . . . . . 2,000,000 1,975,000
----------
3,050,000
----------
Food, Beverage & Tobacco - 1.23%
Chiquita Brands sub notes 11.50% 2001. . . . . 1,000,000 1,057,500
Purina Mills sr sub notes 10.25% 2003. . . . . 375,000 386,250
Specialty Foods sr notes 11.125% 2002 . . . . 750,000 712,500
Specialty Foods sr sub notes 11.25% 2003 . . 350,000 302,750
----------
2,459,000
----------
Healthcare & Pharmaceuticals - 0.94%
HEALTHSOUTH Rehabilitation sr sub notes
9.50% 2001. . . . . . . . . . . . . . . . . . 750,000 800,625
Tenet Healthcare sr sub notes 10.125% 2005 . . 1,000,000 1,090,000
----------
1,890,625
----------
Leisure & Lodging - 1.65%
MGM Grand Hotel Finance 1st mtg notes
12.00% 2002. . . . . . . . . . . . . . . . . . 2,000,000 2,195,000
Royal Caribbean Cruise Lines sr sub notes
11.375% 2002 . . . . . . . . . . . . . . . . . 1,000,000 1,105,000
----------
3,300,000
----------
Metals & Mining - 2.69%
Armco sr notes 11.375% 1999. . . . . . . . . . 750,000 778,125
G.S. Technologies sr notes 12.00% 2004 . . . . 2,000,000 1,995,000
G.S. Technologies sr notes 12.25% 2005 . . . . 1,500,000 1,500,000
Inland Steel unsec notes 12.75% 2002 . . . . . 1,000,000 1,112,500
----------
5,385,625
----------
<PAGE>
Principal Market
Amount Value
NON-CONVERTIBLE BONDS (Continued)
Packaging & Containers - 1.73%
Anchor Glass Container 10.25% 2002 . . . . . . $1,850,000 $ 1,359,750
Container Corp of America sr notes 11.25% 2004 1,000,000 1,040,000
Ivex Packaging sr sub notes 12.50% 2002 . . . 1,000,000 1,065,000
----------
3,464,750
----------
Paper & Forest Products - 2.62%
Crown Paper sr sub notes 11.00% 2005 . . . . . 2,000,000 1,890,000
Pacific Lumber sr notes 10.50% 2003 . . . . . 2,000,000 1,910,000
Repap Wisconsin sr sec notes 9.25% 2002 . . . 1,500,000 1,447,500
----------
5,247,500
----------
Retail - 3.20%
Cort Furniture Rental sr notes 12.00% 2000 . . 2,121,000 2,269,470
Fleming Companies sr sub notes 10.625% 2001 . 1,320,000 1,386,000
Penn Traffic sr notes 10.65% 2004 . . . . . . 775,000 719,781
Ralph's Grocery sr notes 10.45% 2004 . . . . . 1,000,000 987,500
Ralph's Grocery sr sub notes 13.75% 2005 . . . 1,000,000 1,060,000
----------
6,422,751
----------
Transportation & Shipping - 1.41%
Trans Ocean Container sr sub notes 12.25% 2004 1,000,000 1,042,500
Viking Star Shipping 1st pfd ship mtg
notes 9.625% 2003 . . . . . . . . . . . . . . 1,750,000 1,793,750
-----------
2,836,250
-----------
Utilities - 2.35%
Comcast Cellular sr notes 0.00% 2000 . . . . . 1,500,000 1,147,500
Midland Funding II deb 11.75% 2005 . . . . . 1,400,000 1,451,507
Rogers Cantel sr sec notes 10.75% 2001 . . . . 1,000,000 1,055,000
Rogers Cantel sr sub notes 11.125% 2002 . . . 1,000,000 1,065,000
-----------
4,719,007
-----------
Miscellaneous - 3.57%
+Graphic Controls sr sub notes 12.00% 2005 . . 2,000,000 2,042,500
IMO Industries sr sub deb 12.00% 2001 . . . 2,000,000 2,047,500
Ivac sr notes 9.25% 2002 . . . . . . . . . . . 2,000,000 2,035,000
Lamar Advertising sr sec notes 11.00% 2003 . . 1,000,000 1,037,500
-----------
7,162,500
-----------
Total Non-Convertible Bonds
(cost $98,934,182). . . . . . . . . . . . . . 100,021,371
-----------
CONVERTIBLE BONDS - 15.98%
Banking, Finance & Insurance - 1.78%
Alfa S.A. De C.V. sub notes 8.00% 2000 . . . 500,000 478,125
+Banco Nacional De Mexico global jr sub deb
7.00% 1999. . . . . . . . . . . . . . . . . . 2,000,000 1,537,500
+Career Horizon 7.00% 2002. . . . . . . . . . 1,500,000 1,561,875
-----------
3,577,500
-----------
9
<PAGE>
Principal Market
Amount Value
CONVERTIBLE BONDS (Continued)
Building & Materials - 0.38%
MDC Holdings sub notes 8.75% 2005. . . . . . . $ 750,000 $ 756,562
-----------
756,562
-----------
Computers & Technology - 1.48%
Softkey International sr notes 5.50% 2000. . . 1,500,000 1,308,750
Unisys sub notes 8.25% 2000. . . . . . . . . . 1,800,000 1,651,500
-----------
2,960,250
-----------
Electronics - 1.00%
Dovatron International sub notes 6.00% 2002. . 1,300,000 1,342,250
VSLI Technology sub notes 8.25% 2005 . . . . . 700,000 659,750
-----------
2,002,000
-----------
Energy - 0.49%
Box Energy sub notes 8.25% 2002. . . . . . . . 1,000,000 976,250
-----------
976,250
-----------
Healthcare & Pharmaceuticals - 0.93%
TheraTx sub deb 8.00% 2002 . . . . . . . . . . 2,000,000 1,870,000
-----------
1,870,000
-----------
Metals & Mining - 1.15%
MascoTech sub deb 4.50% 2003 . . . . . . . . . 3,000,000 2,313,750
-----------
2,313,750
-----------
Real Estate - 8.41%
Alexander Haagen Properties sub deb
7.50% 2001. . . . . . . . . . . . . . . . . . 2,270,000 1,878,425
Developers Diversified Realty sub deb
7.00% 1999. . . . . . . . . . . . . . . . . . 1,400,000 1,382,500
IRT Property sub deb 7.30% 2003. . . . . . . . 3,000,000 2,782,500
LTC Properties sub deb 8.50% 2000. . . . . . . 1,000,000 1,011,250
Liberty Property Trust sub deb 8.00% 2001. . . 2,000,000 1,995,000
Malan Realty Investors sub deb 9.50% 2004. . . 3,300,000 2,664,750
Mid-Atlantic Realty Trust sub deb 7.625% 2003. 3,000,000 2,580,000
Sizeler Property Investors sub deb 8.00% 2003. 3,000,000 2,572,500
-----------
16,866,925
-----------
Retail - 0.36%
Baker (J.) sub notes 7.00% 2002 1,000,000 722,500
-----------
722,500
-----------
Total Convertible Bonds (cost $35,626,825) 32,045,737
-----------
SHORT-TERM SECURITIES - 1.83%
*U.S. Treasury Bill 5.52% due 12/21/95. . . . . 3,650,000 3,638,807
*U.S. Treasury Bill 5.63% due 12/21/95. . . . . 40,000 39,875
-----------
Total Short-Term Securities (cost $3,678,682) 3,678,682
-----------
<PAGE>
Shares Market
Subject to Call Value
Call Options Written - (0.23%)
CoreStates Financial, January 1996, $40. . . . 80,000 $ (60,000)
DuPont (E.I.) De Nemours, December 1995, $65 . 35,000 (109,375)
Dun & Bradstreet, January 1996, $65. . . . . . 31,800 (22,864)
Occidental Petroleum, December 1995, $22.50. . 100,000 (18,750)
Potomac Electric Power, February 1996, $25 . . 100,000 (75,000)
UST, February 1996, $30. . . . . . . . . . . . 60,000 (172,500)
-----------
Total Call Options Written
(premiums received $263,262). . . . . . . . . (458,489)
-----------
TOTAL MARKET VALUE OF SECURITIES OWNED - 129.05%
(cost $259,406,551) . . . . . . . . . . . . . 258,749,914
LIABILITIES NET OF RECEIVABLES
AND OTHER ASSETS - (29.05%) . . . . . . . . . (58,249,472)
-----------
NET ASSETS APPLICABLE TO
14,307,000 SHARES ($0.01 par value)
OUTSTANDING: EQUIVALENT TO $14.01
PER SHARE - 100.00% . . . . . . . . . . . . . $200,500,442
============
DECS - Dividend Enhanced Convertible Security.
PERCS - Preferred Equity Redemption Cumulative Stock.
* U.S. Treasury Bills are traded on a discount basis; the interest rates
shown are the discount rates paid at the time of purchase by the Fund.
+ 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.
COMPONENTS OF NET ASSETS AT NOVEMBER 30, 1995
Common stock $.01 par value, 500,000,000 shares
authorized to the Fund . . . . . . . . . . . . $200,958,246
Accumulated undistributed income (loss):
Net investment income. . . . . . . . . . . . . 407,950
Net realized loss on investments . . . . . . . (209,117)
Net unrealized depreciation of investments . . (656,637)
------------
Total net assets. . . . . . . . . . . . . . . . $200,500,442
============
See accompanying notes
<PAGE>
DELAWARE GROUP DIVIDEND AND INCOME FUND, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED NOVEMBER 30, 1995
INVESTMENT INCOME:
Interest. . . . . . . . . . . . . . . . . . $14,917,997
Dividends . . . . . . . . . . . . . . . . . 6,688,503 $21,606,500
----------- -----------
EXPENSES:
Management fees . . . . . . . . . . . . . . 1,336,548
Administrative fees . . . . . . . . . . . . 437,441
Commercial paper fees . . . . . . . . . . . 164,525
Reports to shareholders . . . . . . . . . . 41,500
Professional fees . . . . . . . . . . . . . 39,000
Amortization of organizational expenses 28,809
NYSE fees . . . . . . . . . . . . . . . . . 24,260
Taxes, other than taxes on income 22,300
Custodian fees. . . . . . . . . . . . . . . 14,300
Directors' fees . . . . . . . . . . . . . . 14,000
Other . . . . . . . . . . . . . . . . . . . 44,573
-----------
Total operating expenses (before interest
expense) . . . . . . . . . . . . . . . . 2,167,256
Interest expense. . . . . . . . . . . . . 3,211,765
-----------
Total expenses. . . . . . . . . . . . . . . 5,379,021
-----------
NET INVESTMENT INCOME . . . . . . . . . . . 16,227,479
-----------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS:
Net realized gain from security transactions 1,989,358
Net change in unrealized depreciation
on investments . . . . . . . . . . . . . . . . 17,197,602
-----------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS. . . . . . . . . . . . . . 19,186,960
NET INCREASE IN NET ASSETS -----------
RESULTING FROM OPERATIONS. . . . . . . . . . . $35,414,439
===========
See accompanying notes
<PAGE>
DELAWARE GROUP DIVIDEND AND INCOME FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
Year Ended Year Ended
November 30, November 30,
1995 1994
OPERATIONS:
Net investment income . . . . . . . . . . $ 16,227,479 $ 15,767,505
Net realized gain (loss)
from security transactions . . . . . . . 1,989,358 (2,196,881)
Net change in unrealized appreciation
(depreciation) on investments. . . . . . 17,197,602 (22,507,681)
------------- -------------
Net increase (decrease) in net assets
resulting from operations . . . . . . . . 35,414,439 (8,937,057)
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income . . . . . . . . . . (16,424,436) (16,066,761)
Net realized gain on security transactions -- (6,767,211)
------------- -------------
(16,424,436) (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 18,990,003 (31,781,317)
NET ASSETS:
Beginning of period. . . . . . . . . . . 181,510,439 213,291,756
------------- -------------
End of period (including undistributed net
investment income of $407,950 and
$604,907, respectively) . . . . . . . . $200,500,442 $181,510,439
============= =============
See accompanying notes
<PAGE>
DELAWARE GROUP DIVIDEND AND INCOME FUND, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED NOVEMBER 30, 1995
Increase (Decrease) in Cash:
Cash flows provided by operating activities:
Interest received (excluding amortization of $551,931). . . . $21,109,874
Operating expenses paid . . . . . . . . . . . . . . . . . . . (2,132,493)
Interest expenses paid. . . . . . . . . . . . . . . . . . . . (3,196,854)
Purchase of short-term portfolio investments, net . . . . . . (692,463)
Purchase of long-term portfolio investments . . . . . . . . . (285,146,841)
Proceeds from disposition of long-term portfolio
investments. . . . . . . . . . . . . . . . . . . . . . . . . 280,822,346
-----------
Net cash provided by operating activities. . . . . . . . . . . 10,763,569
-----------
Cash flows used by financing activities:
Cash provided by issuance of commerical paper . . . . . . . . 180,068,205
Cash used to liquidate commerical paper . . . . . . . . . . . (172,803,146)
Cash dividends paid . . . . . . . . . . . . . . . . . . . . . (16,424,436)
-----------
Net cash used by financing activities. . . . . . . . . . . . . (9,159,377)
-----------
Net increase in cash . . . . . . . . . . . . . . . . . . . . . 1,604,192
Cash at beginning of period. . . . . . . . . . . . . . . . . . (1,582,045)
-----------
Cash at end of period. . . . . . . . . . . . . . . . . . . . . $ 22,147
===========
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 . . . . . . . . . . . . . . . . . . $35,414,439
-----------
Increase in investments . . . . . . . . . . . . . . . . . . . (12,252,512)
Net realized gain from security transactions. . . . . . . . . (1,989,358)
Change in net unrealized depreciation . . . . . . . . . . . . (17,197,602)
Decrease in prepaid assets. . . . . . . . . . . . . . . . . . 6,356
Increase in receivable for investments sold . . . . . . . . . (451,105)
Decrease in interest receivable . . . . . . . . . . . . . . . 55,305
Decrease in deferred organization expenses. . . . . . . . . . 96,389
Increase in payable for investments purchased . . . . . . . . 7,134,728
Decrease in interest payable. . . . . . . . . . . . . . . . . (38,548)
Decrease in accrued expenses and other liabilities. . . . . . (14,523)
-----------
Total adjustments. . . . . . . . . . . . . . . . . . . . . . . (24,650,870)
-----------
Net cash provided by operating activities. . . . . . . . . . . $10,763,569
===========
See accompanying notes
<PAGE>
DELAWARE GROUP DIVIDEND AND INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1995
Delaware Group Dividend and Income Fund, Inc. (the "Fund") is registered
as a diversified closed-end management investment company under the
Investment Company Act of 1940. The Fund is organized as a Maryland
corporation.
1. Significant Accounting Policies
The following accounting policies are in accordance with generally accepted
accounting principles and are consistently followed by the Fund:
Security Valuation - Securities listed or traded on a national 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 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
date of less than 60 days are valued at amortized cost. Long-term debt
securities are valued by an independent pricing service when such prices are
believed to reflect the fair value of such securities.
Federal Income Taxes - The Fund intends to continue to qualify as a regulated
investment company and make the requisite distributions to shareholders.
Accordingly, no provision for federal income taxes is required in the
financial statements.
Borrowings - 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 $149,000 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)
Other - 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 and distributions are recorded on the
ex-dividend date and interest income and expenses are recorded on the accrual
basis. Original issue discounts are accreted to interest income over the
lives of the respective securities.
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.
Certain Fund expenses are paid directly by brokers. The amount of these
expenses is less than 0.01% of the Fund's average weekly net assets.
<PAGE>
Notes to Financial Statements (Continued)
2. Investment Management Fee and Other Transactions with Affiliates
In accordance with the terms of the Investment Management Agreement, the Fund
pays Delaware Management Company, Inc. (DMC), the Investment Manager of the
Fund, an annual fee equal to 0.55% of the Fund's adjusted average weekly net
assets. At November 30, 1995, the Fund had a liability for Investment
Management fees of $232,778.
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. At November 30, 1995, the Fund had a liability for administration
fees of $76,182.
For purposes of the calculation of investment management fees and
administration fees, adjusted weekly net assets do not include the commercial
paper liability.
Officers, directors and employees of DMC, who are also officers, directors
and employees of the Fund do not receive any compensation from the Fund.
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.
3. Investments
During the year ended November 30, 1995, the Fund made purchases of
$292,281,569 and sales of $280,290,186 of investment securities other than
U.S. government securities and temporary cash investments.
At November 30, 1995, net unrealized depreciation for federal income tax
purposes aggregated $660,458 of which $8,220,492 related to unrealized
appreciation of securities and $8,880,950 to unrealized depreciation of
securities.
For federal income tax purposes, the Fund had accumulated capital losses at
November 30, 1995 of $203,702 which may be carried forward and applied
against future capital gains. The capital loss carryforward expires in 2002.
Of the ordinary income distributions paid by the Fund during its taxable year
ended November 30, 1995, 32% qualifies for the dividends received deduction
for corporations. Additionally, there were no long-term capital gain
distributions paid by the Fund during the year.
<PAGE>
Notes to Financial Statements (Continued)
Transactions in options written for the year ended November 30, 1995, were as
follows:
Options Terminated
----------------------------------
Number Proceeds from Cost Net
of Premiums Sale of of Realized
Contracts Received Investments Investment Gain
Options outstanding
November 30, 1994. . -- $ --
Contracts written . . 5,025 331,643
Contracts terminated:
Closed . . . . . . . 292 31,973 $ -- $ 20,367 $ 11,606
Exercised. . . . . . 665 36,408 1,661,115 1,591,678 105,845
----- -------- ---------- ---------- --------
Total contracts
terminated 957 68,381 1,661,115 1,612,045 117,451
----- -------- ========== ========== ========
Contracts outstanding
November 30, 1995 4,068 $263,262
===== ========
4. Capital Stock
There are 500,000,000 shares of $0.01 par value capital stock authorized.
On December 1, 1995, the Fund declared its monthly dividend in the amount of
$0.125 per share. This dividend was payable December 29, 1995, to
stockholders of record at the close of business on December 15, 1995. The
ex-dividend date was December 13, 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.
5. Commercial Paper
As of November 30, 1995, $55,000,000 commercial paper was outstanding with an
amortized cost of $54,842,806. The weighted average discount rate of
commercial paper outstanding at November 30, 1995, was 5.79%. The average
daily balance of commercial paper outstanding during the year ended November
30, 1995, was $52,487,671 at a weighted discount rate of 6.01%. 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 subsequently at a rate of 0.15%
per annum on the unused balance. During the year ended November 30, 1995,
there were no borrowings under this arrangement.
6. Concentration of Credit Risk
The Fund invests in high-yield fixed-income securities which carry ratings of
BB or lower by Standard & Poor's 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 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 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
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. These securities
have been denoted in the Statement of Net Assets.
<PAGE>
Notes to Financial Statements (Continued)
7. Financial Highlights
Selected data for each share of the Fund outstanding throughout each period
were as follows:
<TABLE>
<CAPTION>
For the Period
Year Ended Year Ended March 26, 1993* to
November 30, 1995 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. . . . . . . . . . . 1.13 1.10 0.68
Net realized and unrealized gain
(loss) from security transactions 1.34 (1.73) 0.81
-------- -------- --------
Net increase (decrease) in net assets
from investment operations. . . . . . . . 2.47 (0.63) 1.49
-------- -------- --------
Less distributions:
Dividends from net investment income . . . (1.15) (1.12) (0.62)
Distributions from net realized gains
on security transactions. . . . . . . . -- (0.47) --
-------- -------- --------
Total distributions. . . . . . . . . . . . (1.15) (1.59) (0.62)
-------- -------- --------
Net asset value, end of period . . . . . . $14.01 $12.69 $14.91
======== ======== ========
Market value, end of period. . . . . . . . $14.00 $12.00 $14.50
======== ======== ========
Total investment return based on: (1)
Market value. . . . . . . . . . . . . . . 28.71% (7.23)% 0.82%
======== ======== ========
Net asset value . . . . . . . . . . . . . 20.72% (4.60)% 10.76%
======== ======== ========
Ratios and supplemental data:
Net assets, end of period (000 omitted). . $200,500 $181,510 $213,292
======== ======== ========
Ratio of total operating expenses to
average weekly net assets (before
interest expense) . . . . . . . . . . . . 0.89% 1.01% 0.94%**
Ratio of interest expense to
average weekly net assets. . . . . . . . . 1.32% 0.76%** N/A
Ratio of net investment income to
average weekly net assets. . . . . . . . . 6.68% 6.80% 6.88%**
Portfolio turnover . . . . . . . . . . . . 118% 73% 113%
</TABLE>
- ---------------
* Commencement of operations.
** Annualized - Commercial paper was initially issued on January 25, 1994.
+ 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 return based on market value and net asset value have not
been annualized for the period ended November 30, 1993.
The accompanying notes are an integral part of the financial statements.
<PAGE>
Notes to Financial Statements (Concluded)
8. Quarterly Results of Operations
(Unaudited)
<TABLE>
<CAPTION>
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
August 31, 1995. . 5,413 0.38 4,006 0.28 4,578 0.32 8,584 0.60 13.13 12.38
November 30, 1995 5,285 0.37 3,941 0.27 4,249 0.30 8,190 0.57 14.38 12.50
------- ----- ------- ----- -------- ----- ------- ------
$21,607 $1.51 $16,227 $1.13 $ 19,187 $1.34 $35,414 $ 2.47
======= ===== ======= ===== ======== ===== ======= ======
</TABLE>
* The Fund commenced operations on March 26, 1993.
+ As reported on the New York Stock Exchange.
<PAGE>
DELAWARE GROUP DIVIDEND AND INCOME FUND, INC.
REPORT OF INDEPENDENT AUDITORS
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
DELAWARE GROUP DIVIDEND AND INCOME FUND, INC.
We have audited the accompanying statement of net assets of Delaware Group
Dividend and Income Fund, Inc. as of November 30, 1995, and the related
statements of operations and cash flows for the year then ended, the
statements of changes in net assets for each of the two years in the period
then ended and financial highlights for each of the two years in the period
then ended and for the period March 26, 1993, (commencement of operations) to
November 30, 1993. These financial statements and financial highlights are
the responsibility of the Fund's 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 generally accepted auditing
standards. 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. Our procedures included confirmation of
securities owned as of November 30, 1995, 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
Delaware Group Dividend and Income Fund, Inc. at November 30, 1995, the
results of its operations and its cash flows for the year then ended, the
changes in its 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 March 26, 1993, (commencement of operations) to
November 30, 1993, in conformity with generally accepted accounting
principles.
Ernst & Young LLP
Philadelphia, Pennsylvania
January 16, 1996
<PAGE>
A Report on Dividend and Income Fund's Annual Meeting
At an annual meeting of shareholders held on March 29, 1995, the following
matters were submitted for shareholder vote: the election of directors, the
ratification of the selection of Ernst & Young LLP as independent auditors of
the Fund and the approval of a new investment management agreement. The new
investment management agreement was proposed in connection with the April 3,
1995, merger of Delaware Management Holdings, Inc. (the parent of Delaware
Management Company, Inc.) and a subsidiary of Lincoln National Corporation.
Whenever there is a change in control of an investment manager, the
Investment Company Act of 1940 requires shareholders to vote on a new
investment management agreement.
Below are the names of each director elected at the meeting as well as the
results of the other matters voted on by shareholders.
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. Thatcher Longstreth 8,751,161 292,314 --
Charles E. Peck 8,751,747 291,728 --
Approval of the New
Management Agreement 8,416,355 162,048 465,072
Selection of
Ernst & Young LLP as
Independent Auditors 8,664,110 86,277 293,087
*Please note that the results of this meeting were not audited by Ernst &
Young LLP.
<PAGE>
BOARD OF
==========================
DIRECTORS
==========================
MR. WAYNE A. STORK
Chairman, President and
Chief Executive Officer
Delaware Group of Funds
Philadelphia, PA
MR. WALTER P. BABICH
Board Chairman
Citadel Constructors, Inc.
King of Prussia, PA
MR. ANTHONY D. KNERR
Consultant
Anthony Knerr & Associates
New York, NY
MS. ANN R. LEVEN
Deputy Treasurer
National Gallery of Art
Washington, DC
MR. W. THACHER LONGSTRETH
Vice Chairman
Packquisition Corp.
Philadelphia, PA
MR. CHARLES E. PECK
Secretary,
Enterprise Homes, Inc.
Columbia, MD
<PAGE>
AUDIT
==========================
COMMITTEE
==========================
MR. WALTER P. BABICH
MS. ANN R. LEVEN
MR. ANTHONY D. KNERR
EXECUTIVE
==========================
OFFICERS
==========================
MR. WAYNE A. STORK
Chairman, President and
Chief Executive Officer
Delaware Group of Funds
Philadelphia, PA
MR. WINTHROP S. JESSUP
Executive Vice President
MR. RICHARD G. UNRUH, JR.
Executive Vice President
MR. PAUL E. SUCKOW
Senior Vice President/Chief Investment
Officer, Fixed-Income
MR. DAVID K. DOWNES
Senior Vice President/Chief Administrative
Officer/Chief Financial Officer
MR. GEORGE M. CHAMBERLAIN, JR.
Senior Vice President/Secretary
MR. JOSEPH H. HASTINGS
Vice President/Corporate Controller
MR. MICHAEL P. BISHOF
Vice President/Treasurer
<PAGE>
The Delaware Group includes funds with a wide range of investment objectives.
Stock funds, income funds, tax-free funds, money market funds and closed-end
equity/income funds give investors the ability to create a portfolio that
fits their personal financial goals.
For a prospectus of any Delaware Group fund, contact your financial adviser
or call the Delaware Group at 800-523-4640. Read the Prospectus carefully
before investing.
BE SURE TO CONSULT YOUR FINANCIAL ADVISER WHEN MAKING INVESTMENTS. MUTUAL
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 CREDIT UNION
OR ANY BANK, ARE NOT OBLIGATIONS OF ANY CREDIT UNION OR ANY BANK, AND INVOLVE
INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. SHARES OF THE FUND
ARE NOT CREDIT UNION OR BANK DEPOSITS.
NOTICE IS HEREBY GIVEN IN ACCORDANCE WITH SECTION 23(C) OF THE INVESTMENT ACT
OF 1940 THAT THE FUND MAY PURCHASE AT MARKET PRICES FROM TIME TO TIME SHARES
OF ITS COMMON STOCK IN THE OPEN MARKET.
PRINCIPAL OFFICE OF THE FUND
1818 Market Street
Philadelphia, PA 19103
INVESTMENT MANAGER
Delaware Management Company, Inc.
Philadelphia
INTERNATIONAL AFFILIATE
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, L.L.C.
P.O. Box 590
Ridgefield Park, New Jersey 07660
800-851-9677
NUMBER OF RECORDHOLDERS LOGO
AS OF NOVEMBER 30, 1995
396
DDF-002[11/95]PP1/96
<PAGE>
====================
DIVIDEND
AND INCOME
FUND
====================
1995
ANNUAL
REPORT
A Tradition of Sound Investing Since 1929
LOGO
