<PAGE>
The Fund's
- ----------------------------------------
Investment
- ----------------------------------------
Objectives and
- ----------------------------------------
Strategies
- ----------------------------------------
Delaware Group Dividend and Income Fund's objective is to provide high
current income, and secondarily, capital appreciation, from U.S. stocks and
high-yield bonds. Asset class concentration depends on the manager's
assessment of each market's relative risks and rewards.
The following profiles your Fund's strategy in each of three asset classes:
HIGH-YIELD COMMON STOCKS
The Fund's management focuses on stocks that pay high dividends relative to
their share price. Such high yields may point the Fund to strong companies whose
stocks have capital appreciation potential. The income from these stocks has the
potential to add to total return.
CONVERTIBLE PREFERRED STOCKS AND BONDS
The Fund invests in both convertible preferred stocks and convertible bonds.
Both pay fixed rates of income, but because they can be converted into a certain
number of shares of common stock, both are indirectly tied to the common stock's
performance. As a result, convertible securities generally offer higher income
than common stocks and an opportunity for price appreciation when the value of
the underlying security rises. The Fund may buy convertible securities when the
underlying common stock offers strong growth potential, but a low yield.
HIGH-YIELD CORPORATE BONDS
High-yield bonds, those rated BB or lower, have greater credit risk than
bonds with higher credit quality ratings. Though past performance is not a
guarantee of future results, these bonds have historically provided a greater
level of income that has compensated investors for the additional risk. Of
course high-yield bonds may be more greatly affected by short-term corporate
developments, but high-yield bond prices may be less sensitive to changes in
interest rates than higher-rated bonds.
<PAGE>
July 3, 1996
Dear
- ----------------------------------------
Shareholder:
- ----------------------------------------
Since November, Dividend and Income Fund has provided high income and taken
advantage of the capital appreciation potential of the stock market despite
volatile U.S.interest rates and mixed signals about economic growth.
For the six months ended May 31, your Fund achieved a +17.25% total return
based on market price with dividends reinvested. Your Fund's performance based
on net asset value with dividends reinvested was +9.18% during the period.
Based on market price, Dividend and Income Fund outperformed its peers and
the unmanaged Standard & Poor's 500 Index for the six months ended May 31.
We believe your Fund's progress since November is attributable to several
factors:
1) A substantial increase in the Fund's monthly dividend to $0.125 a share.
2) A strategic positioning in U.S. high-yield corporate bonds, which are
generally less sensitive to rising interest rates than other types of
fixed-income securities.
3) Effective use of stock options to reduce risk during price declines.
We are gratified that the steps we have taken to increase shareholder value
since last fall appear to have been recognized by investors. While most
closed-end mutual funds traded at a discount to net asset value as of May 31,
Dividend and Income Fund traded at a +7.31% premium. As you will see on page 5,
your Fund has done very well against its peers over its lifetime.
In our opinion, Dividend and Income Fund is well-positioned to help investors
benefit from the income and capital appreciation potential of stocks and bonds.
Over time, dividends have been a more reliable component of total returns
from stocks, while income has been the primary source of return from bonds
according to Ibbotson Associates. Though there's no guarantee that this will be
the case in the future, when stock or bond prices move down, dividends and
interest income can usually help cushion the fall.
Though designed to provide high current income, we believe your Fund offers
attractive long-term total return potential for investors who decide to reinvest
dividends and thus benefit from compounding.
On the pages that follow, your Fund's portfolio managers review market
conditions and provide their outlook for the balance of fiscal 1996. We wish to
thank you for your confidence in Delaware Group.
Sincerely,
/s/ Wayne A. Stork
- ------------------------------------------------
Wayne A. Stork
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
- -------------------------------------------------------------------------------
TOTAL RETURN
DECEMBER 1, 1995 - MAY 31, 1996
Based on Based On Premium/
Net Asset Value Market Price Discount
Dividend and Income Fund +9.18% +17.25% +7.31%
(NYSE Symbol: DDF)
Standard & Poor's 500 Index +11.49%
Merrill Lynch High-Yield Bond Index +3.88%
Merrill Lynch Corporate-Government
Mortgage Bond Index -1.14%
Lipper Closed-End Income Fund Average +2.36% -2.70% -6.51%
The Fund's total return assumes reinvestment of monthly dividends. There are
11 closed-end funds in the Lipper Closed-End Fund Average. The indexes cited
above are unmanaged.
- -------------------------------------------------------------------------------
1
<PAGE>
Portfolio
- ----------------------------------------
Managers'
- ----------------------------------------
Review
- ----------------------------------------
The first half of fiscal 1996 has been a time of contrasts. The stock market,
as measured by the Standard & Poor's 500 Index, set new records even as U.S.
bond prices sagged amid concern about inflation, which drove interest rates
higher.
OUR STOCK FOCUS: REITS, BANKS AND UTILITIES
Your Fund's performance since November was helped by the Fund's ownership of
shares in Real Estate Investment Trusts (REITs) such as STARWOOD LODGING TRUST
and RECKSON ASSOCIATES REALTY. Overall, the REIT market provided a total return
of +15.15% for the six months ended May 31, as measured by the unmanaged Morgan
Stanley REIT Index.
We believe this out-performance by REITs was the result of higher rents,
improved cash flow and higher occupancy levels in the office/industrial and
hotel sectors of the U.S. commercial real estate market. As of May 31, about
+15.74% of your Fund's net assets was invested in REITs, with an emphasis on
those with low debt levels, experienced management and a low payout ratio of
dividends relative to earnings.
We are optimistic about the capital appreciation potential of our REIT
holdings in the coming months, as the industry appears to have attracted
increased interest on the part of pension fund investors.
Common stocks represented 33.81% of your Fund's portfolio as of May 31. Some
of our stock selections, such as banks and utilities, are sensitive to movements
in interest rates, and tended to underperform the overall stock market while our
industrial stocks did well.
We remain invested in utilities primarily for income, and for that purpose we
believe they can benefit the Fund. In our opinion, the Fund's bank stock
selections, such as J.P. MORGAN & COMPANY and SUMMIT BANCORP, have superior
long-term capital appreciation potential.
OUR USE OF OPTIONS
In recent months, to help mitigate the effect of short-term interest rate
changes on our stocks, we have been writing covered call options. That is, the
Fund agrees to sell a stock we already own for a set price by a future date if
the buyer of the call exercises the right to buy. Selling a call option is a
strategy used when we think a stock's price may drop.
Selling a covered call can help reduce loss of principal if the underlying
stock's price declines. It also provides additional income for the Fund.
Therefore, we believe this option strategy is appropriate in an income-oriented
fund like Dividend and Income Fund.
However, this strategy can limit the Fund's ability to benefit from capital
appreciation if a stock's price rises. We believe having some "downside
protection" - especially in a volatile interest rate environment - is worth
giving up some growth potential.
- -------------------------------------------------------------------------------
Asset Allocation
Percent of Portfolio May 31, 1996
Treasury Bills 2.72%
Non-Convertible Bonds 40.47%
Convertible Bonds 13.21%
Non-Convertible Preferred Stocks 0.91%
Common Stocks 33.81%
Convertible Preferred Stocks 8.88%
- -------------------------------------------------------------------------------
Asset allocation is based on all securities owned by the Fund as of May 31,
1996, including those purchased through the use of leverage. This chart
differs from the financial statements which also take into account
liabilities.
2
<PAGE>
HIGH-YIELD BONDS OUTPERFORMED OTHER BONDS
The prospect of an increased level of U.S. economic growth during the first
few months of 1996 was generally negative news for the bond market since it
raised concern that the Federal Reserve Board would tighten credit to fight
anticipated inflation.
Nevertheless, high-yield bonds performed well compared to other fixed-income
securities, in part because a healthy economy suggested that corporations
issuing high-yield bonds would have a strong ability to meet obligations to
bondholders.
Your Fund balanced opportunities for high current income while taking a
conservative approach to potential credit risk. We focused on bonds rated BB and
B, the highest non-investment grade ratings. Our performance was helped by the
fact that prior to the start of the current fiscal year, we slightly reduced
average maturity and duration, further reducing the Fund's sensitivity to
changes in interest rates.
As of May 31, your Fund's high-yield component had an average effective
maturity of 5.7 years and an effective duration of 3.9 years. Duration indicates
the approximate percentage of change in a bond's price given a 1% change in
interest rates.
CONVERTIBLE SECURITIES PROVIDED INCOME AND GROWTH
The past six months were generally a period when small stocks and growth
stocks with lower dividend yields tended to outperform stocks of large companies
that pay high dividends. Owning convertible securities helped your Fund
participate in the capital appreciation potential of the small- and mid-cap
markets since November, while it still earned attractive dividend income.
As of May 31, convertible securities represented 22.09% of your Fund's
portfolio. The lowest weighting of this asset class since the Fund's inception.
We believe that the convertible market is fairly valued. Historically, the Fund
has tended to emphasize convertible bonds rather than convertible preferred
stocks. We believe this positioning reduces the Fund's interest rate
sensitivity. It also has the potential to mitigate principal loss during market
declines.
Two examples of convertible bonds we owned during the period were those of
HOME SHOPPING NETWORK, the television retailer, and SAFEGUARD SCIENTIFICS, a
microcomputer and computer software distributor. Neither company's common stock
pays a dividend, however, both companies' common shares have enjoyed substantial
capital appreciation in recent months. We sold some of our Safeguard bonds after
the company's share price rose above our target.
Overall, the convertibles market has slightly under-performed the S&P 500
Index in recent months. The total return of the Merrill Lynch Convertibles Index
was +10.97% for the six months ended May 31.
INVESTMENT OUTLOOK
In common stocks, your Fund remains focused on the same mix of industries we
favored in fiscal 1995. We continue to believe the U.S. financial sector offers
very attractive opportunities for income and capital appreciation. In our
opinion, U.S. interest rates could peak in the latter half of 1996 as economic
growth slows. We may add to our position in selected banks and insurance
companies that we believe are well-positioned to benefit from falling interest
rates.
While your Fund's asset mix is subject to change as market conditions
warrant, we anticipate that our "value"-oriented selection process will lead us
to generally the same asset mix in the months ahead.
/s/ Bernard P. Schaffer
- -------------------------------------------------
Bernard P. Schaffer
VICE PRESIDENT AND SENIOR PORTFOLIO MANAGER
U.S. STOCKS
/s/ Paul A. Matlack
- --------------------------------------------------
Paul A. Matlack
VICE PRESIDENT AND SENIOR PORTFOLIO MANAGER
U.S. FIXED-INCOME
JULY 3, 1996
3
<PAGE>
Fund
- ----------------------------------------
Updates
- ----------------------------------------
LEVERAGING PROGRAM
Some $55 million of the Fund's assets were leveraged as of May 31, 1996. This
helped the Fund realize the capital appreciation potential available in the
stock market. Our objective is to earn more from additional investments acquired
with borrowed money than is being paid out in interest.
Leverage is a tool that is generally not available to open-end mutual funds
and one that can be an important contributor to your Fund's income and total
return potential. Of course, there is no guarantee the Fund will achieve this
objective. Leveraging could result in a higher degree of volatility because the
Fund's net asset value could be more sensitive to fluctuations in short-term
interest rates and equity prices. We believe this risk is reasonable given the
potential benefits of higher income.
MANAGED DISTRIBUTION POLICY ACHIEVES GOALS
As stated in the 1995 annual report, the Fund implemented a managed
distribution policy effective with the payment of the Fund's December dividend.
Under the policy, the Fund is managed with a goal of generating as much of the
dividend as possible from ordinary income. The balance of the dividend then
comes from short-term and long-term capital gains and, if necessary, a return of
capital.
The Fund's management believes this policy has helped the Fund's market share
price rise from a discount to net asset value of -0.07% on November 30, 1995, to
a premium to net asset value of +7.31% as of May 31, as shown in the chart
below. In the opinion of management, this policy should increase the
attractiveness of the Fund for income-oriented investors.
- ----------------------------------------------------------------------------
DELAWARE GROUP DIVIDEND & INCOME FUND
Market Price vs. Net Asset Value
DECEMBER 1, 1995 TO MAY 31, 1996
PREMIUM/DISCOUNT
May 31, 1996 +7.31%
High +9.18% on May 10, 1996
Average +3.66%
Low -0.81% on December 8, 1995
Net
Market Asset Premium/
Price Value Discount
------ ----- --------
1Dec $14.000 $14.040 -0.57%
8Dec $14.125 $14.240 -0.53%
15Dec $14.000 $14.110 -1.06%
22Dec $14.125 $14.180 -0.39%
29Dec $14.375 $14.290 0.17%
5Jan $14.625 $14.390 0.93%
12Jan $14.500 $14.200 1.19%
19Jan $14.750 $14.340 2.5 %
26Jan $14.625 $14.380 1.42%
2Feb $14.750 $14.610 1.17%
9Feb $15.000 $14.790 2.04%
16Feb $15.000 $14.680 2.74%
23Feb $14.625 $14.720 1.17%
1Mar $14.875 $14.670 2.59%
8Mar $14.625 $14.550 1.49%
15Mar $14.875 $14.380 3.51%
22Mar $15.125 $14.510 4.17%
29Mar $15.375 $14.490 6.7 %
5Apr $15.625 $14.550 7.83%
12Apr $15.250 $14.170 7.7 %
19Apr $15.500 $14.310 8.39%
26Apr $15.625 $14.400 8.51%
3May $15.625 $14.370 9.19%
10May $15.875 $14.540 11.03%
17May $15.875 $14.580 9.71%
24May $15.625 $14.650 6.68%
31May $15.625 $14.560 7.54%
Past performance does not guarantee future results.
- -------------------------------------------------------------------------------
4
<PAGE>
Delaware Group Dividend & Income Fund
Total Market Price Return
March 26, 1993 to May 31, 1996
(with dividends reinvested) $10,000 Investment
- -------------------------------------------------------------------------------
Total Return
-------------
May-93 $ 9,391
Jun-93 $ 9,784
Jul-93 $ 9,843
Aug-93 $ 9,902
Sep-93 $ 9,962
Oct-93 $10,022
Nov-93 $10,082
Dec-93 $10,056
Jan-94 $10,641
Feb-94 $10,616
Mar-94 $10,134
Apr-94 $10,017
May-94 $ 9,807
Jun-94 $10,623
Jul-94 $10,316
Aug-94 $10,385
Sep-94 $ 9,692
Oct-94 $ 9,379
Nov-94 $ 9,353
Dec-94 $ 9,131
Jan-95 $ 9,795
Feb-95 $10,465
Mar-95 $ 9,942
Apr-95 $10,019
May-95 $10,603
Jun-95 $10,375
Jul-95 $10,762
Aug-95 $10,739
Sep-95 $10,714
Oct-95 $11,005
Nov-95 $12,038
Dec-95 $12,356
Jan-96 $12,679
Feb-96 $13,004
Mar-96 $13,549
Apr-96 $13,990
May-96 $13,990
- -------------------------------------------------------------------------------
ALTHOUGH YOUR FUND STRIVES TO PROVIDE CURRENT INCOME, DIVIDEND REINVESTMENT
HAS THE POTENTIAL TO MAKE A SUBSTANTIAL DIFFERENCE IN YOUR FUND'S TOTAL
RETURN.
- -------------------------------------------------------------------------------
DDF: RANKED NUMBER ONE AMONG CLOSED-END INCOME FUNDS FOR TOTAL
RETURN BASED ON NET ASSET VALUE WITH DIVIDENDS REINVESTED
Periods Ended May 31, 1996
<TABLE>
<CAPTION>
Cumulative Return Average Annual Return
----------------- ---------------------
6 Months One Year Three Years Lifetime*
-------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Dividend and Income Fund +9.18% +19.10% +10.96% +10.97%
Lipper Closed-End
Income Fund Average +2.36% +11.36% +6.88% +6.85%
DDF Rank #1 #1 #1 #1
Number of funds in category 11 11 10 9
</TABLE>
* Fund's inception date was March 26, 1993.
Based on data compiled by Lipper Analytical Services.
Past performance does not guarantee future results.
- -------------------------------------------------------------------------------
5
<PAGE>
Financial
- -------------------------------------------------------------------------------
Statements
- -------------------------------------------------------------------------------
DELAWARE GROUP DIVIDEND AND INCOME FUND, INC.
STATEMENT OF NET ASSETS
MAY 31, 1996
(UNAUDITED)
Number Market
of Shares Value
COMMON STOCK - 41.43%
Automobiles & Auto Equipment - 0.01%
Chrysler .................................. 400 $ 26,650
-----------
26,650
-----------
Banking, Finance & Insurance - 8.39%
Aetna Life & Casualty ..................... 13,800 1,017,750
Beneficial ................................ 14,100 821,325
CORESTATES FINANCIAL ...................... 69,000 2,716,875
Fleet Financial Group ..................... 24,600 1,085,475
GREAT WESTERN FINANCIAL ................... 100,000 2,300,000
J.P. MORGAN & COMPANY ..................... 40,000 3,475,000
KEYCORP ................................... 100,000 3,875,000
Summit Bancorp ............................ 60,000 2,182,500
-----------
17,473,925
-----------
Building & Materials - 0.54%
Kaufman & Broad Home ...................... 75,000 1,115,625
-----------
1,115,625
-----------
Cable, Media & Publishing - 0.98%
Dun & Bradstreet .......................... 31,800 2,031,225
-----------
2,031,225
-----------
Chemicals - 1.07%
DOW CHEMICAL .............................. 26,700 2,232,788
-----------
2,232,788
-----------
Energy - 2.78%
Exxon ..................................... 20,000 1,695,000
OCCIDENTAL PETROLEUM ...................... 100,000 2,587,500
Pennzoil .................................. 35,000 1,513,750
-----------
5,796,250
-----------
Food, Beverage & Tobacco - 0.95%
Philip Morris Companies ................... 20,000 1,987,500
-----------
1,987,500
-----------
Paper & Forest Products - 0.65%
Georgia-Pacific ........................... 18,700 1,351,075
-----------
1,351,075
-----------
Top 10 common stock holdings, representing 15.98% of net assets, are in
boldface.
<PAGE>
Number Market
of Shares Value
COMMON STOCK (Continued)
Real Estate - 15.74%
American Health Properties ................ 50,000 $ 1,062,500
Bay Apartment Communities ................. 47,500 1,217,187
Camden Property Trust ..................... 50,000 1,156,250
Chelsea GCA Realty ........................ 62,200 1,834,900
Columbus Realty Trust ..................... 30,000 581,250
Colonial Properties Trust ................. 73,000 1,715,500
Developers Diversified Realty ............. 40,000 1,250,000
Duke Realty Investments ................... 48,000 1,446,000
First Industrial Realty Trust ............. 60,000 1,417,500
Healthcare Realty Trust ................... 35,100 798,525
Horizon Group ............................. 57,600 1,252,800
MACERICH COMPANY (THE) ................... 130,000 2,730,000
National Golf Properties .................. 60,000 1,470,000
Oasis Residential ......................... 60,000 1,275,000
Patriot American Hospitality .............. 78,000 2,213,250
Reckson Associates Realty ................. 63,000 1,968,750
ROC Communities ........................... 65,000 1,551,875
Simon Property Group ...................... 79,000 1,915,750
Smith (Charles E.) Residential Realty ..... 40,000 930,000
Sovran Self Storage ....................... 60,000 1,567,500
Starwood Lodging Trust .................... 55,000 2,090,000
Sun Communities ........................... 50,000 1,337,500
-----------
32,782,037
-----------
Telecommunications - 4.92%
NYNEX ..................................... 100,000 4,612,500
U.S. WEST ................................. 172,700 5,634,337
-----------
10,246,837
-----------
Utilities - 5.40%
American Electric Power ................... 50,000 2,006,250
Houston Industries ........................ 100,000 2,187,500
Peco Energy Co. ........................... 30,000 738,750
ROCHESTER GAS & ELECTRIC .................. 155,000 3,119,375
Royal PTT Nederland NV ADR ................ 31,600 1,141,550
Unicom .................................... 75,000 2,071,875
-----------
11,265,300
-----------
Total Common Stock
(cost $82,961,843) ....................... 86,309,212
-----------
CONVERTIBLE PREFERRED STOCK - 10.88%
Banking, Finance & Insurance - 1.68%
California Federal Bank 7.75% pfd cv "A" .. 63,200 1,595,800
Salomon 7.625% series FSA ................. 70,000 1,925,000
-----------
3,520,800
-----------
Chemicals - 1.21%
ARCO 9.01% "Lyondell" Notes "DECS" ........ 100,000 2,525,000
-----------
2,525,000
-----------
6
<PAGE>
Statement of Net Assets (Continued)
Number Market
of Shares Value
CONVERTIBLE PREFERRED STOCK (Continued)
Energy - 0.41%
Noble Drilling $1.50 pfd cv ............... 25,000 $ 850,000
-----------
850,000
-----------
Food, Beverage & Tobacco - 1.27%
RJR Nabisco Holding $0.60
pfd cv "C" "PERCS" ...................... 400,000 2,650,000
-----------
2,650,000
-----------
Leisure, Lodging & Entertainment - 0.94%
Station Casinos 7.00% pfd cv .............. 33,000 1,959,375
-----------
1,959,375
-----------
Metals & Mining - 2.74%
Coeur D' Alene Mines 7.00% pfd cv ......... 70,000 1,557,500
Freeport-McMoRan Copper & Gold
5.00% pfd cv ............................ 80,000 2,290,000
MascoTech $1.20 pfd cv "DECS" ............ 119,300 1,864,063
-----------
5,711,563
-----------
Paper & Forest Products - 1.05%
International Paper 5.25% pfd cv .......... 33,000 1,526,250
James River 9.00% pfd cv "P" "DECS" ....... 27,500 656,562
-----------
2,182,812
-----------
Real Estate - 0.36%
Prime Retail 8.50% pfd cv "B" ............ 40,000 740,000
-----------
740,000
-----------
Transportation & Shipping - 1.22%
Delta Airlines $3.50 pfd cv "C" ........... 40,000 2,535,000
-----------
2,535,000
-----------
Total Convertible Preferred Stock
(cost $21,886,473) ....................... 22,674,550
-----------
PREFERRED STOCK - 1.12%
Banking, Finance & Insurance - 1.12%
Credit Lyon Capital SCA 9.50% ............. 100,000 2,325,000
-----------
Total Preferred Stock (cost $2,500,000) ... 2,325,000
-----------
Principal
Amount
NON-CONVERTIBLE BONDS - 49.60%
Aerospace & Defense - 0.55%
K & F Industries sr deb 13.75% 2001 ....... $1,108,000 1,149,550
-----------
1,149,550
-----------
Automobiles & Auto Equipment - 2.50%
Aftermarket Tech sr sub notes
12.00% 2004 ............................. 2,000,000 2,150,000
Exide sr notes 10.75% 2002 ............... 1,000,000 1,020,000
Harvard Industries sr notes 11.125% 2005 1,000,000 962,500
SPX sr sub notes 11.75% 2002 ............. 1,000,000 1,075,000
-----------
5,207,500
-----------
<PAGE>
Principal Market
Amount Value
NON-CONVERTIBLE BONDS (Continued)
Banking, Finance & Insurance - 2.37%
Aim Management sr sec notes 9.00% 2003 .... $ 350,000 $ 359,625
American General sr notes 12.875% 2002 .... 1,000,000 1,035,000
Chevy Chase Savings Bank sub deb
9.25% 2005 ............................. 1,000,000 996,250
Dime Bancorp sr notes 10.50% 2005 ......... 1,000,000 1,090,000
First Nationwide Holdings sr sub notes
9.125% 2003 ............................ 1,500,000 1,455,000
-----------
4,935,875
-----------
Building & Materials - 1.04%
Schuller International Group sr notes
10.875% 2004 ........................... 2,000,000 2,170,000
-----------
2,170,000
-----------
Cable, Media & Publishing - 6.45%
Century Communications sr sub deb
11.875% 2003 ........................... 1,000,000 1,068,750
Cinemark USA sr notes 12.00% 2002 ......... 2,000,000 2,177,500
+Granite Broadcast sr sub notes 9.375% 2005 2,000,000 1,850,000
Groupe Videotron sr notes 10.625% 2005 .... 2,000,000 2,115,000
Jones Intercable sr notes 9.625% 2002 ..... 1,500,000 1,533,750
Rogers Cablesystem sr sec deb 10.00% 2007 . 810,000 812,025
Rogers Cablesystem sr sub deb 11.00% 2015 . 500,000 526,250
Sullivan Graphics sr sub notes 12.75% 2005 1,500,000 1,410,000
Viacom International sr sub notes
10.25% 2001 ............................. 1,800,000 1,934,321
-----------
13,427,596
-----------
Chemicals - 4.41%
Berry Plastics sr sub notes 12.25% 2004 ... 1,000,000 1,085,000
Foamex sr notes 11.25% 2002 .............. 2,000,000 2,065,000
G-I Holdings sr notes 0.0% 1998 ........... 546,000 442,260
+G-I Holdings sr notes 10.00% 2006 ........ 519,000 515,756
NL Industries sr sec notes 11.75% 2003 .... 2,290,000 2,375,875
Polymer Group sr notes 12.25% 2002 ........ 1,000,000 1,100,000
Uniroyal Chemical Acquistion sr sub notes
11.00% 2003 ............................ 1,500,000 1,605,000
-----------
9,188,891
-----------
Computers & Technology - 0.67%
Unisys credit-sensitive notes 15.00% 1997 . 1,300,000 1,389,375
-----------
1,389,375
-----------
Consumer Products - 1.87%
American Safety Razor sr notes 9.875% 2005 2,000,000 2,050,000
+Remington Arms sr sub notes 10.00% 2003... 2,000,000 1,850,000
-----------
3,900,000
-----------
Electronics - 1.96%
Interlake sr notes 12.00% 2001 ........... 2,000,000 2,095,000
Mark IV Industries sub notes 8.75% 2003 ... 1,985,000 1,989,962
-----------
4,084,962
-----------
7
<PAGE>
Statement of Net Assets (Continued)
Principal Market
Amount Value
NON-CONVERTIBLE BONDS (Continued)
Energy - 2.21%
Falcon Drilling sr notes 8.875% 2003 ...... $1,000,000 $ 982,500
Global Marine sr sec notes 12.75% 1999 .... 1,500,000 1,636,875
Plains Resources sr sub notes 10.25% 2006 . 875,000 892,500
TranTexas Gas sr notes 11.50% 2000 ........ 1,100,000 1,083,500
-----------
4,595,375
-----------
Environmental Services - 1.54%
Allied Waste Industries sr sub notes
12.00% 2004 ............................ 1,000,000 1,087,500
+Norcal Waste Systems sr notes 12.75% 2005. 2,000,000 2,112,500
-----------
3,200,000
-----------
Food, Beverage & Tobacco - 1.15%
Chiquita Brands sub notes 11.50% 2001 ..... 1,000,000 1,052,500
Purina Mills sr sub notes 10.25% 2003 ..... 375,000 371,250
Specialty Foods sr notes 11.125% 2002 ..... 750,000 693,750
Specialty Foods sr sub notes 11.25% 2003 .. 350,000 281,750
-----------
2,399,250
-----------
Healthcare & Pharmaceuticals - 1.13%
+Dade International sr sub notes
11.125% 2006 ........................... 1,000,000 1,035,000
HEALTHSOUTH Rehabilitation sr sub notes
9.50% 2001 ............................. 750,000 778,125
Tenet Healthcare sr sub notes 10.125% 2005 500,000 532,500
-----------
2,345,625
-----------
Leisure, Lodging & Entertainment - 1.87%
Act lll Theatres sr sub notes 11.875% 2003 1,600,000 1,732,000
MGM Grand Hotel Finance 1st mtg notes
12.00% 2002 ............................. 1,000,000 1,090,000
Royal Caribbean Cruise Lines sr sub notes
11.375% 2002 ........................... 1,000,000 1,082,500
-----------
3,904,500
-----------
Metals & Mining - 2.11%
Armco sr notes 11.375% 1999 .............. 750,000 772,500
G.S. Technologies sr notes 12.00% 2004 .... 2,000,000 2,070,000
G.S. Technologies sr notes 12.25% 2005 .... 1,500,000 1,558,125
-----------
4,400,625
-----------
Packaging & Containers - 1.78%
Container Corp. of America sr notes
11.25% 2004 ............................ 1,000,000 1,035,000
Ivex Packaging sr sub notes 12.50% 2002 ... 1,000,000 1,057,500
U.S. Can sr sub notes 13.50% 2002 ......... 1,500,000 1,612,500
-----------
3,705,000
-----------
Paper & Forest Products - 3.00%
Crown Paper sr sub notes 11.00% 2005 ...... 2,000,000 1,900,000
Pacific Lumber sr notes 10.50% 2003 ....... 2,000,000 1,960,000
<PAGE>
Principal Market
Amount Value
NON-CONVERTIBLE BONDS (Continued)
Paper & Forest Products (Continued)
Repap Wisconsin sr sec notes 9.25% 2002 ... $ 1,500,000 $ 1,406,250
Riverwood International sr sub notes
10.875% 2008 ........................... 1,000,000 997,500
-----------
6,263,750
-----------
Retail - 2.50%
Cort Furniture Rental sr notes 12.00% 2000 1,221,000 1,275,945
Fleming Companies sr sub notes
10.625% 2001 ........................... 1,320,000 1,178,100
Penn Traffic sr notes 10.65% 2004 ......... 775,000 749,813
Ralph's Grocery sr notes 10.45% 2004 ...... 1,000,000 967,500
Ralph's Grocery sr sub notes 13.75% 2005 .. 1,000,000 1,027,500
-----------
5,198,858
-----------
Telecommunications - 4.73%
Comcast Cellular sr notes 0.00% 2000 ...... 1,500,000 1,055,626
Galaxy Telecom sr sub notes 12.375% 2005 .. 2,000,000 2,080,000
+IXC Communications sr notes 12.50% 2005 .. 2,000,000 2,120,000
Metrocall sr sub notes 10.375% 2007 ....... 2,000,000 1,950,000
+Pronet sr sub notes 11.875% 2005 ......... 1,500,000 1,590,000
Rogers Cantel sr sub notes 11.125% 2002 ... 1,000,000 1,067,500
-----------
9,863,126
-----------
Textiles - 1.24%
Clark Schwebel sr notes 10.50% 2006 ....... 1,500,000 1,560,000
Knoll sr sub notes 10.875% 2006 ........... 1,000,000 1,022,500
-----------
2,582,500
-----------
Transportation & Shipping - 1.31%
Teekay Shipping 1st pfd ship mtg notes
8.32% 2003 ............................. 1,000,000 942,500
Teekay Shipping 1st pfd ship mtg notes
9.625% 2003 ............................ 1,750,000 1,776,250
-----------
2,718,750
-----------
Utilities - 0.71%
Midland Funding II deb 11.75% 2005 ........ 1,400,000 1,480,500
-----------
1,480,500
-----------
Miscellaneous - 2.50%
+Graphic Controls sr sub notes 12.00% 2005. 2,000,000 2,145,000
Ivac sr notes 9.25% 2002 ................. 2,000,000 2,025,000
Lamar Advertising sr sec notes 11.00% 2003 1,000,000 1,032,500
-----------
5,202,500
-----------
Total Non-Convertible Bonds
(cost $102,339,424) .................... 103,314,108
-----------
8
<PAGE>
Statement of Net Assets (Continued)
Principal Market
Amount Value
CONVERTIBLE BONDS - 16.20%
Banking, Finance & Insurance - 0.87%
+Banco Nacional De Mexico global jr sub deb
7.00% 1999 .............................. $ 2,000,000 $ 1,810,000
-----------
1,810,000
-----------
Cable, Media & Publishing - 0.67%
Home Shopping Network sub deb
5.875% 2006 ............................. 1,100,000 1,391,500
-----------
1,391,500
-----------
Computers & Technology - 2.52%
Safeguard Scientifics sub notes 6.00% 2006.. 500,000 800,000
+Softkey International sr notes 5.50% 2000 . 1,000,000 867,500
+Spectrum Holobyte sub notes 6.50% 2002 .... 1,000,000 710,000
Unisys sub notes 8.25% 2000 ............... 1,800,000 1,842,750
Unisys sr notes 12.00% 2003 ............... 1,000,000 1,037,500
-----------
5,257,750
-----------
Electronics - 1.86%
Dovatron International sub notes 6.00% 2002. 1,300,000 1,423,500
MascoTech sub deb 4.50% 2003 .............. 2,300,000 1,799,750
VSLI Technology sub notes 8.25% 2005 ....... 700,000 643,125
-----------
3,866,375
-----------
Energy - 0.52%
Box Energy sub notes 8.25% 2002 ............ 1,000,000 1,091,250
-----------
1,091,250
-----------
Healthcare & Pharmaceuticals - 1.41%
Rotech Medical sub deb 5.25% 2003 .......... 1,000,000 1,007,500
+Theratx sub deb 8.00% 2002 ............... 2,000,000 1,930,000
-----------
2,937,500
-----------
Real Estate - 7.85%
Alexander Haagen Properties sub deb
7.50% 2001 .............................. 2,270,000 1,983,413
IRT Property sub deb 7.30% 2003 ............ 3,000,000 2,865,000
Liberty Property Trust sub deb 8.00% 2001 .. 2,000,000 2,070,000
LTC Properties sub deb 8.50% 2000 .......... 1,000,000 1,062,500
Malan Realty Investors sub deb 9.50% 2004 .. 3,300,000 3,007,125
Mid-Atlantic Realty Trust sub deb
7.625% 2003 .............................. 3,000,000 2,700,000
Sizeler Property Investors sub deb
8.00% 2003 ............................... 3,000,000 2,662,500
-----------
16,350,538
-----------
Transportation & Shipping - 0.50%
Trans Ocean Container sr sub notes
12.25% 2004 ............................. 1,000,000 1,035,000
-----------
1,035,000
-----------
Total Convertible Bonds
(cost $34,787,720) ...................... 33,739,913
-----------
<PAGE>
Principal Market
Amount Value
SHORT-TERM SECURITIES - 3.33%
*U.S. Treasury Bill 5.005% due 6/20/96 .... $ 146,000 $ 145,614
*U.S. Treasury Bill 5.015% due 6/20/96 .... 61,000 60,838
*U.S. Treasury Bill 5.025% due 6/20/96 .... 3,609,000 3,599,429
*U.S. Treasury Bill 5.03% due 6/20/96 ..... 220,000 219,416
*U.S. Treasury Bill 5.03% due 6/20/96 ..... 104,000 103,724
*U.S. Treasury Bill 5.06% due 6/20/96 ..... 2,820,000 2,812,469
-----------
Total Short-Term Securities
(cost $6,941,490) ....................... 6,941,490
-----------
Shares
Subject
to Call
CALL OPTIONS WRITTEN - (0.07%)
J.P. Morgan & Company, June 1996, $80...... 10,000 (72,500)
J.P. Morgan & Company, June 1996, $85 ..... 20,000 (65,000)
-----------
Total Call Options Written
(premiums received $99,097).. . . (137,500)
-----------
TOTAL MARKET VALUE OF SECURITIES OWNED
- 122.49% (cost $251,317,853)............. 255,166,773
LIABILITIES NET OF RECEIVABLES AND
OTHER ASSETS - (22.49%)................... (46,855,474)
-----------
NET ASSETS APPLICABLE TO 14,307,000 SHARES
($0.01 par value)
OUTSTANDING; EQUIVALENT TO $14.56
PER SHARE - 100.00%....................... $208,311,299
============
ADR - American Depository Receipt.
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, as amended. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers (See Note 6).
COMPONENTS OF NET ASSETS AT MAY 31, 1996:
Common Stock, $0.01 par value, 500,000,000
shares authorized to the Fund............. $200,958,246
Accumulated undistributed income (loss):
Distributions in excess of
net investment income.................... (2,248,651)
Net realized gain on investments.......... 5,752,784
Net unrealized appreciation of investments 3,848,920
-----------
Total net assets............................ $208,311,299
============
See accompanying notes
9
<PAGE>
Delaware Group Dividend and Income Fund, Inc.
Statement of Operations
For the Six Months Ended May 31, 1996
(Unaudited)
INVESTMENT INCOME:
Interest .................................. $ 6,951,446
Dividends ................................. 3,779,310 $10,730,756
----------- -----------
EXPENSES:
Management fees ........................... 718,781
Administrative fees ....................... 235,237
Commercial paper fees ..................... 70,827
Amortization of organizational expenses ... 14,444
NYSE fees ................................. 14,417
Reports to shareholders ................... 12,998
Professional fees ......................... 12,002
Transfer agent fees ....................... 9,439
Shareholders' meeting ..................... 8,207
Custodian fees ............................ 7,800
Taxes, other than taxes on income ......... 6,180
Directors' fees ........................... 4,228
Other ..................................... 1,754
-----------
Total operating expenses (before interest
expense) ................................ 1,116,314
Interest expense .......................... 1,540,792
-----------
Total expenses ............................ 2,657,106
-----------
NET INVESTMENT INCOME ..................... 8,073,650
-----------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS:
Net realized gain from security transactions 5,961,900
Net change in unrealized appreciation
on investments .......................... 4,505,557
-----------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS ..................... 10,467,457
-----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ............... $18,541,107
-----------
See accompanying notes
<PAGE>
Delaware Group Dividend and Income Fund, Inc.
Statements of Changes in Net Assets
Six Months Ended Year Ended
May 31, November 30,
1996 1995
(Unaudited)
OPERATIONS:
Net investment income...................... $ 8,073,650 $ 16,227,479
Net realized gain from security
transactions............................. 5,961,900 1,989,358
Net change in unrealized appreciation
on investments........................... 4,505,557 17,197,602
------------ ------------
Net increase in net assets resulting
from operations.......................... 18,541,107 35,414,439
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (10,730,250) (16,424,436)
------------ ------------
NET INCREASE IN NET ASSETS................. 7,810,857 18,990,003
NET ASSETS:
Beginning of period........................ 200,500,442 181,510,439
------------ ------------
End of period (including distributions
in excess of net investment income of
$2,248,650 and undistributed net
investment of $407,950, respectively).... $208,311,299 $200,500,442
============ ============
See accompanying notes
10
<PAGE>
Delaware Group Dividend and Income Fund, Inc.
Statement of Cash Flows
For the Six Months Ended May 31, 1996
(Unaudited)
Increase (Decrease) in Cash:
Cash flows provided by operating activities:
Interest and dividends received
(excluding amortization of $176,147) .............. $ 10,478,031
Operating expenses paid ............................. (1,344,089)
Interest expenses paid .............................. (1,568,645)
Purchase of short-term portfolio investments, net ... (2,359,664)
Purchase of long-term portfolio investments ......... (89,466,845)
Proceeds from disposition of long-term
portfolio investments ............................. 95,211,164
-------------
Net cash provided by operating activities ........... 10,949,952
-------------
Cash flows used for financing activities:
Cash provided by issuance of commerical paper ..... 134,239,506
Cash used to pay commercial paper offering expenses (50,000)
Cash used to liquidate commerical paper ........... (134,431,355)
Cash dividends paid ............................... (10,730,250)
-------------
Net cash used for financing activities ............ (10,972,099)
-------------
Net decrease in cash ................................ (22,147)
Cash at beginning of period ......................... 22,147
-------------
Cash at end of period ............................... $ 0
=============
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 $ 18,541,107
-------------
Decrease in investments ........................... 14,050,599
Net realized gain from security transactions ...... (5,961,900)
Change in net unrealized appreciation ............. (4,505,557)
Increase in prepaid assets ........................ (4,845)
Increase in receivable for investments sold ....... (1,660,134)
Increase in interest and dividends receivable ..... (76,578)
Decrease in deferred organization expenses ........ 46,472
Decrease in payable for investments purchased ..... (9,181,957)
Decrease in interest payable ...................... (55,609)
Decrease in accrued expenses and other liabilities (241,646)
-------------
Total adjustments ............................... (7,591,155)
-------------
Net cash provided by operating activities ........... $ 10,949,952
=============
See accompanying notes
<PAGE>
Delaware Group Dividend and Income Fund, Inc.
Notes to Financial Statements
May 31, 1996
(Unaudited)
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, as amended. 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
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 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 $199,000 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.
11
<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 May 31, 1996, the Fund had a liability for
Investment Management fees of $120,456.
The Fund has also entered into an Administration Agreement with Princeton
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 May 31, 1996, the Fund had a liability for administration
fees of $39,422.
For purposes of the calculation of investment management fees and
administration fees, adjusted average 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.
3. Investments
During the six months ended May 31, 1996, the Fund made purchases of
$80,284,888 and sales of $96,973,594 of investment securities other than U.S.
government securities and temporary cash investments.
At May 31, 1996, net unrealized depreciation for federal income tax purposes
aggregated $3,847,139 of which $11,221,685 related to unrealized appreciation
of securities and $7,374,546 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.
Transactions in options written for the six months ended May 31, 1996, were
as follows:
<TABLE>
<CAPTION>
Options Terminated
-----------------------------------------
Number Proceeds from Cost Net
of Premiums Sale of of Realized
Contracts Received Investments Investment Gain
<S> <C> <C> <C> <C> <C>
Options outstanding
November 30, 1995....... 4,068 $263,262
Contracts written........ 7,569 749,086
Contracts terminated:
Closed................. 300 51,598 $ -- $ 49,650 $ 1,948
Expired................ 7,045 457,768 -- -- 457,768
Exercised.............. 3,992 403,885 18,086,051 17,142,084 1,347,852
------ -------- ----------- ----------- ----------
Total contracts
terminated........... 11,337 913,251 18,086,051 17,191,734 1,807,568
------ -------- ----------- ----------- ----------
Contracts outstanding
May 31, 1996........... 300 $ 99,097
------ --------
</TABLE>
11
<PAGE>
4. Capital Stock
There are 500,000,000 shares of $0.01 par value capital stock authorized.
On June 3, 1996, the Fund declared its monthly dividend in the amount of
$0.125 per share. This dividend was payable June 28, 1996, to stockholders
of record at the close of business on June 14, 1996. The ex-dividend date
was June 12, 1996.
Shares issuable under the Fund's dividend reinvestment plan are purchased by
the Fund's transfer agent, Chemical Mellon Shareholder Services, L.L.C., in
the open market.
5. Commercial Paper
As of May 31, 1996, $55,000,000 commercial paper was outstanding with an
amortized cost of $54,595,348. The weighted average discount rate of
commercial paper outstanding at May 31, 1996, was 5.44%. The average daily
balance of commercial paper outstanding during the six months ended May 31,
1996, was $54,637,198 at a weighted discount rate of 5.55%. 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 is computed at the rate of 0.15% per annum
on the unused balance. During the six months ended May 31, 1996, 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 form 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.
12
<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>
Six Monthhs Ended For the Period
May 31,1996 Year Ended Year Ended March 26, 1993* to
(unaudited) November 30, 1995 November 30,1994 November 30, 1993
------------------ ----------------- ---------------- ------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.......... $ 14.01 $ 12.69 $ 14.91 $ 14.04+
Income from investment operations:
Net investment income ...................... 0.57 1.13 1.10 0.68
Net realized and unrealized gain (loss)
from security transactions................ 0.73 1.34 (1.73) 0.81
-------- -------- -------- --------
Net increase (decrease) in net assets
from investment operations................ 1.30 2.47 (0.63) 1.49
-------- -------- -------- --------
Less distributions:
Dividends from net investment income........ (0.75) (1.15) (1.12) (0.62)
Distributions from net realized gains
on security transactions.................. -- -- (0.47) --
-------- -------- -------- --------
Total distributions......................... (0.75) (1.15) (1.59) (0.62)
-------- -------- -------- --------
Net asset value, end of period................ $ 14.56 $ 14.01 $ 12.69 $ 14.91
======== ======== ======== ========
Market value, end of period................... $ 15.63 $ 14.00 $ 12.00 $ 14.50
======== ======== ======== ========
Total investment return based on: (1)
Market value................................ 17.25% 28.71% (7.23)% 0.82%
======== ======== ======== ========
Net asset value............................. 9.18% 20.72% (4.60)% 10.76%
======== ======== ======== ========
Ratios and supplemental data:
Net assets, end of period (000 omitted)..... $208,311 $200,500 $181,510 $213,292
======== ======== ======== ========
Ratio of total operating expenses to
adjusted average weekly net assets
(before interest expense)................. 0.88%** 0.89% 1.01% 0.94%**
Ratio of interest expense to adjusted
average weekly net assets................. 1.16%** 1.32% 0.76%** N/A
Ratio of net investment income to
adjusted average weekly net assets........ 6.18%** 6.68% 6.80% 6.88%**
Portfolio turnover ......................... 63%** 118% 73% 113%
Average commission rate paid................ $ 0.0531 N/A N/A N/A
</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 returns calculated
based on market value and net assert value for a period of less than one year
have not been annualized.
13
<PAGE>
<TABLE>
<CAPTION>
Board of Executive
- ------------- --------------
Directors Officers
- ------------- --------------
<S> <C> <C>
MR. WAYNE A. STORK MS. ANN R. LEVEN MR. WAYNE A. STORK
Chairman, President and Deputy Treasurer Chairman, President and
Chief Executive Officer National Gallery of Art Chief Executive Officer
Delaware Group of Funds Washington, DC Delaware Group of Funds
Philadelphia, PA Philadelphia, PA
MR. W. THACHER LONGSTRETH
MR. WALTER P. BABICH Vice Chairman MR. WINTHROP S. JESSUP
Board Chairman Packquisition Corp. Executive Vice President
Citadel Constructors, Inc. Philadelphia, PA
King of Prussia, PA MR. RICHARD G. UNRUH, JR.
MR. CHARLES E. PECK Executive Vice President
MR. ANTHONY D. KNERR Secretary,
Consultant Enterprise Homes, Inc. MR. PAUL E. SUCKOW
Anthony Knerr & Associates Columbia, MD Executive Vice President/Chief Investment
New York, NY 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
Audit
- -------------
Committee
- -------------
MR. WALTER P. BABICH
MS. ANN R. LEVEN
MR. ANTHONY D. KNERR
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
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 DELAWARE
fits their personal financial goals.
GROUP
For a prospectus of any Delaware Group fund,
contact your financial adviser or call the Delaware DIVIDEND
Group at 800-523-4640. Read the Prospectus carefully
before investing. AND INCOME
BE SURE TO CONSULT YOUR FINANCIAL ADVISER WHEN MAKING INVESTMENT DECISIONS. FUND
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 1996
1818 Market Street
Philadelphia, Pennsylvania Semi-Annual
INVESTMENT MANAGER Report
Delaware Management Company, Inc.
Philadelphia, Pennsylvania
INTERNATIONAL AFFILIATE
Delaware International Advisers Ltd.
London, England
INDEPENDENT AUDITORS
Ernst & Young LLP
2001 Market Street
Philadelphia, Pennsylvania
REGISTRAR AND STOCK TRANSFER AGENT
ChaseMellon Shareholder Services, L.L.C. A Tradition of Sound Investing Since 1929
P.O. Box 590
Ridgefield Park, New Jersey
800-851-9677 DELAWARE
GROUP
NUMBER OF RECORDHOLDERS LOGO =====================
AS OF MAY 31, 1996 Philadelphia o London
618
DDF-002[5/96]PP7/96
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