<PAGE>
CLOSED-END INCOME
DELAWARE GROUP
Dividend and
Income Fund
service and guidance
professional management
goals
(Various photos demonstrating service and guidance, professional
management and goals)
1996
Annual
Report
DELAWARE
GROUP
- --------
<PAGE>
Investment
Objective and
Strategies
(Photo of glasses, pen and keyboard)
Delaware Group Dividend and Income Fund's objective is to provide high current
income, and secondarily, capital appreciation, from U.S. equities and high-yield
bonds. Asset class concentration depends on the manager's assessment of each
market's relative risks and rewards.
U.S Common Stocks With Above Average Yields
The Fund's management focuses on stocks that pay high dividends relative to
their share price. Such stocks may point the Fund to strong companies whose
stocks have capital appreciation potential. The income from these stocks has the
potential to add to the total return.
Convertible Preferred Stocks and Bonds
The Fund invests in both convertible preferred stock and convertible bonds. Both
pay fixed rates of income, but because they can be converted into common stock,
they are indirectly tied to the common stock's performance. As a result,
convertible securities generally offer higher income potential than common
stocks and an opportunity for price appreciation if the value of the underlying
security rises. The Fund may buy convertibles 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 default risk than bonds
with higher quality ratings, but provide a greater level of income that has
historically compensated many investors for the additional risk. Prices of
high-yield bonds may also be less sensitive to changes in interest rates than
higher rated bonds.
Leveraging
About $55 million of your Fund's net assets were leveraged as of November 30,
1996. Leverage is a tool that is not available to open-end mutual funds and one
that can be an important contributor to your Fund's income and capital
appreciation 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.
current income
A TRADITION OF SOUND INVESTING
commitment
<PAGE>
- -------------------------------------------------------------------------------
December 9, 1996
(Photo of glasses, pen, and keyboard)
Dear Shareholder:
Fiscal 1996 was a remarkably successful year. Dividend and Income Fund provided
high income and took advantage of the stock market's robust capital appreciation
potential to produce results of the first order.
For the 12 months ended November 30, 1996, your Fund achieved an
impressive +30.67% total return based on market price with dividends reinvested.
Your Fund's net asset value rose +21.11% during the period with dividends
reinvested, as shown below.
Measured by its market price, Dividend and Income Fund outperformed
the unmanaged Standard & Poor's 500 Index in fiscal 1996. This was a
significant accomplishment given the fact that: a) only 56% of the Fund's
portfolio was invested in common stocks and b) the bond market languished for
much of the year.
Your Fund's progress since November 1995 is attributable to excellent
stock selection, our prudent use of leverage and our strategic positioning in
U.S. high-yield corporate bonds, which in general were less sensitive to rising
interest rates than other fixed-income securities.
We are gratified that our investment strategies have increased
shareholder value. While most closed-end mutual funds traded at a discount to
net asset value as of November 30,
Total Return
- -------------------------------------------------------------------------------
(December 1, 1995 - November 30, 1996)
<TABLE>
<CAPTION>
Based On Based On Premium/
Net Asset Value Market Price Discount+
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Dividend and Income Fund +21.11% +30.67% +7.81%
(NYSE Symbol: DDF)
- ------------------------------------------------------------------------------------------------------------
Standard & Poor's 500 Index +27.86%
Merrill Lynch High-Yield Bond Index +11.99%
Merrill Lynch Convertibles Index +14.69%
- ------------------------------------------------------------------------------------------------------------
Lipper Closed-End Income Fund Average +12.72% +14.28% -3.23%
</TABLE>
+As of November 30, 1996. There are 11 closed-end funds in the Lipper Closed-End
Income Fund Average. All performance shown assumes dividend reinvestment. Each
Index is unmanaged.
1996 annual report
1
<PAGE>
<TABLE>
<CAPTION>
Average Annual Total Return
- ------------------------------------------------------------------------------------------------------------
(Based on Net Asset Value for Periods Ended November 30, 1996) One Year Lifetime*
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Dividend and Income Fund +21.11% +12.53%
- ------------------------------------------------------------------------------------------------------------
Lipper Closed-End Income Fund Average +12.72% +8.58%
DDF Rank #2 #1
Number of funds in category 11 9
- ------------------------------------------------------------------------------------------------------------
</TABLE>
*Fund's inception date was March 26, 1993. Past performance does not
guarantee future results. All performance assumes dividends reinvested.
Dividend and Income Fund traded at a +7.81% premium, the highest of any fund in
its peer group.
Dividend and Income Fund is designed primarily to provide high current
income, and as of November 30, 1996, your Fund's yield based on market price was
an attractive 9.02%. In our opinion, your Fund also offers attractive long-term
total return potential for investors who decide to reinvest dividends and thus
benefit from compounding. It is gratifying to know that even though capital
appreciation is not the Fund's primary objective, your Fund's market price more
than kept pace with the 1996 bull market, a period when stock prices rallied
sharply.
Dividends have historically been a more reliable component of total
returns from stocks and income has been the primary source of return from bonds.
When stock or bond prices move down, dividends and bond income can help cushion
the fall.
We are delighted to report that Dividend and Income Fund ranked #1 in
total return among closed-end income funds for its three-and-a-half year
lifetime period as tracked by Lipper Analytical Services, and shown above.
On the pages that follow, your Fund's portfolio managers review U.S.
market conditions and provide an outlook for fiscal 1997. We wish to thank you
for your confidence in Delaware Group.
Sincerely,
/s/ Wayne A. Stork
- -----------------------------------------
Wayne A. Stork
Chairman, President and Chief Financial officer
1996 annual report
2
<PAGE>
Portfolio Managers' Review
(Photo of Professional Management)
During the past year your Fund provided superior results that nearly matched our
strong performance in 1995. This was not an easy year to be an investor,
especially in bonds, but we showed we're more than up to the task. Our effective
asset allocation strategy made a good year a great one even though the yield on
30-year Treasury bonds actually rose by 23 basis points (0.23%) to 6.36% as of
November 30, 1996, reflecting a slight decline in bond prices.
Two "Rs" of Income Stock Selection: REITs and Regional Banks
The stocks of Real Estate Investment Trusts (REITs) such as STARWOOD LODGING
and RECKSON ASSOCIATES were significant contributors to your Fund's overall
performance in fiscal 1996. The REIT market provided a total return of +29.64%,
as measured by the unmanaged Morgan Stanley REIT Index, for the fiscal year.
We believe this sector's outperformance 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 November 30,
about 23.7% of your Fund's net assets were invested in REITs, with an emphasis
on trusts with low debt levels, experienced management and a low payout ratio of
dividends relative to earnings. We continue to be optimistic about the total
return potential of REITs. The industry appears to have attracted increased
interest on the part of pension fund investors.
During 1996, our bank stock selections also did well, especially since
the summer. KEYCORP, a regional bank based in Cleveland that announced a major
restructuring to cut costs, was our largest common
(INSERT PIE CHART)
Asset Allocation
Percent of Portfolio November 30, 1996
Common Stocks 54.1%
Convertible Preferred Stocks 12.2%
Non-Convertible Corporate Bonds 41.5%
Convertible Bonds 11.9%
Cash Equivalents 1.8%
Non-Convertible Preferred Stock 1.1%
The above chart adds up to more than 100% because the portfolio is leveraged.
The Fund had stock options equal to (0.2%) of the portfolio as of November 30,
1996.
1996 annual report
3
<PAGE>
Dividend and Income Fund
Market Price vs. Net Asset Value
December 1, 1995, to November 30, 1996
Premium/Discount Data
High 11.95% on November 1, 1995
Average 6.48%
Low 0.81% on December 8, 1995
(weekly changes)
Market Price Net Asset Value
------------ ---------------
Dec 1 '95 $14.000 $14.040
Dec. 8 '95 $14.125 $14.240
Dec. 15 '95 $14.000 $14.110
Dec. 22 '95 $14.125 $14.210
Dec. 29 '95 $14.375 $14.290
Jan. 5 '96 $14.625 $14.390
Jan. 12 '96 $14.500 $14.200
Jan. 19 '96 $14.750 $14.340
Jan 26 '96 $14.625 $14.380
Feb. 2 '96 $14.750 $14.610
Feb. 9 '96 $15.000 $14.790
Feb. 16 '96 $15.000 $14.680
Feb. 23 '96 $14.750 $14.720
Mar. 1 '96 $14.875 $14.670
Mar. 8 '96 $14.625 $14.550
Mar. 15 '96 $14.750 $14.380
Mar. 22 '96 $15.000 $14.510
Mar. 29 '96 $15.375 $14.490
Apr. 5 '96 $15.625 $14.550
Apr. 12 '96 $15.250 $14.170
Apr. 19 '96 $15.500 $14.310
Apr. 26 '96 $15.625 $14.400
May 3 '96 $15.625 $14.370
May 10 '96 $16.000 $14.540
May 17 '96 $15.875 $14.580
May 24 '96 $15.500 $14.650
May 31 '96 $15.625 $14.560
Jun. 7 '96 $15.750 $14.470
Jun. 14 '96 $15.500 $14.490
Jun. 21 '96 $15.500 $14.450
Jun. 28 '96 $15.625 $14.540
Jul. 5 '96 $15.625 $14.430
Jul. 12 '96 $15.625 $14.220
Jul. 19 '96 $15.500 $14.210
Jul. 26 '96 $15.375 $14.100
Aug. 2 '96 $15.875 $14.420
Aug. 9 '96 $16.000 $14.410
Aug. 16 '96 $15.750 $14.320
Aug. 23 '96 $15.875 $14.430
Aug. 3 '96 $16.000 $14.380
Sep. 6 '96 $15.875 $14.350
Sep. 13 '96 $15.875 $14.460
Sep. 20 '96 $15.875 $14.520
Sep. 27 '96 $16.000 $14.630
Oct. 4 '96 $16.125 $14.870
Oct. 11 '96 $16.250 $14.700
Oct. 18 '96 $16.250 $14.740
Oct. 25 '96 $16.375 $14.750
Nov. 1 '96 $16.625 $14.850
Nov. 8 '96 $16.625 $15.110
Nov. 15 '96 $16.375 $15.130
Nov. 22 '96 $16.625 $15.240
Nov. 29 '96 $16.625 $15.410
Source: Bloomberg Business News. Past performance does not guarantee future
results.
<PAGE>
stock holding at year end. Overall, credit sensitive stocks made up 36.3% of the
Fund's portfolio as of November 30.
In fiscal 1996, two areas of disappointment for the Fund were telephones
and electric utilities. Both industries face uncertain earnings prospects, and
we reduced our positions in these sectors.
THE STOCKS OF REAL ESTATE INVESTMENT TRUSTS (REITS) WERE SIGNIFICANT
CONTRIBUTORS TO YOUR FUND'S OVERALL PERFORMANCE IN FISCAL 1996.
High-Yield Bonds Outperformed Other Bonds
During the first half of 1996, the prospect of higher U.S. economic growth had a
negative effect on the bond market by raising concern that the Federal Reserve
Board would tighten credit to fight anticipated inflation.
Nevertheless, the high-yield bond market 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 repay debt.
Our holdings performed well compared to the overall domestic high-yield market.
In the second half, U.S. economic growth moderated enough to convince
investors that inflation was tame but not enough to adversely affect the overall
high-yield market's credit quality. We expect this may continue in 1997.
Your Fund balanced opportunities for high current income while taking a
conservative approach to potential credit risk. We focused on bonds rated BB/Ba
and B, the highest non-investment grade ratings. Our performance was helped by
the fact that prior to the start of the current
1996 annual report
4
<PAGE>
fiscal year, we slightly reduced average maturity and duration, reducing the
Fund's sensitivity to changes in interest rates.
As of November 30, your Fund's high-yield component had an average
effective maturity of 6.4 years and an effective duration of 4.1 years. Duration
indicates the approximate percentage of change in a bond's price given a 1%
change in interest rates.
Convertibles Provided Income and Growth
Convertible securities provided the Fund regular dividend income and allowed us
to participate in the capital appreciation of "growth"-oriented stocks. The
first half of 1996 was generally a period when small stocks and low dividend
yielding stocks tended to outperform stocks of large companies that pay high
dividends. During the second half, the market tended to favor large cap
companies. Owning convertible securities helped your Fund participate in the
capital appreciation potential of both small and large company stocks with low
dividend yields.
At year's end, convertible securities represented 24.1% of your Fund's
net assets, down from nearly 32% of net assets at the close of fiscal 1995.
Generally, we believe that the convertibles market is fairly valued. Overall,
the convertibles market significantly underperformed the unmanaged S&P 500 Index
in 1996. The total return of the unmanaged Merrill Lynch Convertibles Index was
+16.35% for the 12 months ended November 30.
Stock Options
To help mitigate the effect of short-term interest rate changes on our stock
selections, we sometimes write covered call options. That is, the Fund may agree
to sell a stock we already own for a set price at a future date. The sale of 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.
This strategy can limit the Fund's ability to benefit from capital
appreciation if a stock's price rises. However, we believe having some downside
protection - especially in a volatile interest rate environment - is worth
giving up some growth potential.
opportunites
1996 annual report
5
<PAGE>
(Photo of Globes)
Glossary of Terms
P/E Ratio
The price of a stock divided by either past or forecasted earnings per share.
Market Capitalization
The price of a stock times the number of shares outstanding. It represents what
investors think the company is worth at a given point in time.
Our Managed
Distribution Policy
In December 1995, 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 (net investment income and short-term capital gains). The
balance of the dividend then comes from long-term capital gains and, if
necessary, a return of capital. During 1996, the Fund did not have to provide a
return of capital to meet its dividend.
This policy has helped the Fund's market share price rise from a
discount to net asset value of -0.28% on December 1, 1995, to a premium to net
asset value of +7.81% as of November 30, 1996. We believe it will help us in
1997 as well by increasing the attractiveness of the Fund for income-oriented
investors.
Investment Outlook
In common stocks, your Fund remains focused on a mix of industries similar to
those we favored in fiscal 1995, although we have reduced our weighting in
electric and telephone utilities because of the uncertainties generated by
deregulation and increased competition.
Although bank stocks have done well for two years in a row, we believe
the financial sector still offers attractive opportunities for income and total
return. 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 a similar asset mix in 1997.
BERNARD P. SCHAFFER
Vice President
and Senior Portfolio Manager
U.S. Equities
PAUL A. MATLACK
Vice President
and Senior Portfolio Manager
U.S. Fixed-Income
December 9, 1996
1996 annual report
6
<PAGE>
Your Fund's Performance
A $10,000 investment in Dividend and Income Fund when the Fund began operating
on March 23, 1993, would have grown to $15,450 as of November 30, 1996, with
dividends reinvested.
Dividend and Income Fund
Lifetime Performance
Total Market Price Return,
March 23, 1993 to November 30, 1996
Dividend and Income Fund
With Reinvestment of Distributions
----------------------------------
May '93 $10,170
Jun. '93 $10,374
Jul. '93 $10,589
Aug. '93 $10,813
Sep. '93 $10,900
Oct. '93 $11,165
Nov. '93 $11,076
Dec. '93 $11,260
Jan. '94 $11,551
Feb. '94 $11,428
Mar. '94 $10,953
Apr. '94 $10,876
May '94 $10,801
Jun. '94 $10,654
Jul. '94 $10,782
Aug. '94 $11,099
Sep. '94 $11,015
Oct. '94 $10,925
Nov. '94 $10,567
Dec. '94 $10,649
Jan. '95 $10,748
Feb. '95 $11,057
Mar. '95 $11,116
Apr. '95 $11,323
May '95 $11,694
Jun. '95 $11,827
Jul. '95 $12,161
Aug. '95 $12,235
Sep. '95 $12,587
Oct. '95 $12,508
Nov. '95 $12,757
Dec. '95 $13,123
Jan. '96 $13,467
Feb. '96 $13,673
Mar. '96 $13,642
Apr. '96 $13,713
Mar. '96 $13,928
Jun. '96 $14,019
Jul. '96 $13,762
Aug. '96 $14,085
Sep. '96 $14,470
Oct. '96 $14,759
Nov. '96 $15,450
DIVIDEND REINVESTMENT HAS MADE A SUBSTANTIAL DIFFERENCE IN YOUR FUND'S TOTAL
RETURN DURING THE PAST THREE AND A HALF YEARS, ILLUSTRATING THE VALUE OF
COMPOUNDING.
Past performance does not guarantee future results. DDF shares were initially
offered with a sales charge of 6%. Performance since inception does not include
this or any brokerage commissions for purchases made since inception.
If your shares are not held in "street" name and you are not already reinvesting
dividends, Dividend and Income Fund offers an automatic dividend reinvestment
program. If you would like to reinvest dividends and shares are registered in
your name, contact ChaseMellon Shareholder Services at 1.800.851.9677. You will
be asked to put your request in writing. If you have shares registered in
"street" name, contact the broker/dealer holding the shares or your financial
adviser.
- --------------------------------------------------------------------------------
About Our Share Buyback Program
In 1994, Dividend and Income Fund's board of directors authorized a share
repurchase program that authorizes the Fund's lead manager to purchase up to 10%
of the Fund's outstanding shares on the floor of the New York Stock Exchange.
During 1996, the Fund did not utilize this option because, given the Fund's
market price, we believed there were more effective ways of enhancing
shareholder value.
1996 annual report
7
<PAGE>
Financial Statements
DELAWARE GROUP DIVIDEND AND INCOME FUND, INC.
STATEMENT OF NET ASSETS/ NOVEMBER 30, 1996
- -------------------------------------------------------------------------------
Number Market
of Shares Value
- -------------------------------------------------------------------------------
COMMON STOCK - 54.13%
Banking, Finance & Insurance - 13.49%
AmSouth Bancorporation ..................... 75,000 $ 3,740,625
*Beneficial ................................. 14,100 875,963
Chase Manhattan ............................ 25,000 2,362,500
*CoreStates Financial ....................... 69,000 3,717,375
First Chicago NBD .......................... 7,000 411,250
First Union ................................ 15,300 1,168,538
Fleet Financial Group ...................... 24,600 1,362,225
Great Western Financial .................... 100,000 3,112,500
J.P. Morgan & Company ...................... 20,200 1,906,375
KeyCorp .................................... 100,000 5,237,500
Mellon Bank ................................ 30,000 2,167,500
Salomon .................................... 16,500 998,250
Summit Bancorporation ...................... 60,000 2,692,500
-----------
29,753,101
-----------
Building & Materials - 0.44%
Kaufman & Broad Home ....................... 75,000 965,625
-----------
965,625
-----------
Chemicals - 1.01%
*Dow Chemical ............................... 26,700 2,236,125
-----------
2,236,125
-----------
Electronics - 0.51%
AMP ........................................ 29,400 1,124,550
-----------
1,124,550
-----------
Energy - 2.89%
*Exxon ...................................... 20,000 1,892,500
Occidental Petroleum ....................... 100,000 2,400,000
Texaco ..................................... 21,100 2,091,537
-----------
6,384,037
-----------
Food, Beverage & Tobacco - 0.93%
Philip Morris Companies .................... 20,000 2,062,500
-----------
2,062,500
-----------
Healthcare & Pharmaceuticals - 0.96%
*Baxter International ....................... 50,000 2,125,000
-----------
2,125,000
-----------
Paper & Forest Products - 0.62%
Georgia Pacific ............................ 18,700 1,360,425
-----------
1,360,425
-----------
Real Estate - 23.74%
American General Hospitality ............... 74,000 1,498,500
American Health Properties ................. 50,000 1,100,000
Arden Realty Group ......................... 20,000 482,500
Bay Apartment Communities .................. 47,500 1,543,750
- -----------
Top 10 common stock holdings, representing 16.22% of net assets, are printed in
blue.
<PAGE>
- -------------------------------------------------------------------------------
Number Market
of Shares Value
- -------------------------------------------------------------------------------
COMMON STOCK (CONTINUED)
REAL ESTATE (CONTINUED)
Cali Realty .............................. 91,000 $ 2,570,750
Camden Property Trust .................... 73,000 2,016,625
Colonial Properties Trust ................ 73,000 1,961,875
Developers Diversified Realty ............ 40,000 1,345,000
Duke Realty Investments .................. 48,000 1,722,000
Equity Residential Properties Trust ...... 50,000 2,006,250
First Industrial Realty Trust ............ 90,000 2,576,250
Glenborough Realty Trust ................. 73,700 1,105,500
Health Care Property Investors ........... 30,000 1,023,750
Health Care REIT ......................... 35,100 895,050
Horizon Group ............................ 57,600 1,123,200
Macerich Company (The) .................. 100,000 2,325,000
Meridian Industrial Trust ................ 68,600 1,277,675
National Golf Properties ................. 60,000 1,695,000
Oasis Residential ........................ 35,000 735,000
Parkway Properties ....................... 120,500 2,681,125
Patriot American Hospitality ............. 78,000 2,954,250
Prentiss Properties Trust ................ 90,000 2,013,750
Prime Retail ............................. 58,177 719,940
Reckson Associates Realty ................ 108,000 4,090,500
ROC Communities .......................... 65,000 1,608,750
Security Capital Industrial Trust ........ 33,000 627,000
Simon Debartolo Group .................... 79,000 2,162,625
Sovran Self Storage ...................... 80,000 2,270,000
Starwood Lodging Trust ................... 55,000 2,626,250
Sun Communities .......................... 50,000 1,593,750
-----------
52,351,615
-----------
Telecommunications - 2.10%
NYNEX .................................... 100,000 4,637,500
-----------
4,637,500
-----------
Transportation - 1.06%
Union Pacific ............................ 40,000 2,330,000
-----------
2,330,000
-----------
Utilities - 6.11%
American Electric Power .................. 50,000 2,075,000
Houston Industries ....................... 100,000 2,200,000
Peco Energy .............................. 30,000 765,000
PP&L Resources ........................... 100,000 2,287,500
Rochester Gas & Electric ................. 155,000 2,964,375
Royal PTT Nederland NV ADR ............... 31,600 1,181,050
Unicom ................................... 75,000 1,996,875
-----------
13,469,800
-----------
Miscellaneous - 0.27%
Pitney Bowes ............................. 10,000 590,000
-----------
590,000
-----------
Total Common Stock (cost $103,947,457) ... 119,390,278
-----------
1996 annual report
8
<PAGE>
STATEMENT OF NET ASSETS (CONTINUED)
- -------------------------------------------------------------------------------
Number Market
of Shares Value
- -------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCK -- 12.16%
Banking, Finance & Insurance - 2.27%
Banco Commercial Portugues
8.00% series "A" pfd cv ................ 20,000 $ 1,052,500
Salomon 7.625% series "FSA"
pfd cv "DECS" .......................... 70,000 2,108,750
SunAmerica $3.188 pfd cv (PERCS) ......... 45,000 1,845,000
-----------
5,006,250
-----------
Chemicals - 1.02%
ARCO 9.00% "Lyondell" Notes .............. 100,000 2,250,000
-----------
2,250,000
-----------
Food, Beverage & Tobacco - 1.16%
RJR Nabisco Holding $0.60 pfd cv
series "C" "PERCS" .................... 400,000 2,550,000
-----------
2,550,000
-----------
Leisure, Lodging & Entertainment - 0.52%
Station Casinos 7.00% pfd cv ............. 23,000 1,150,000
-----------
1,150,000
-----------
Metals & Mining - 2.46%
Coeur D' Alene Mines 7.00% pfd cv "MARCS" 70,000 1,198,750
Freeport-McMoran Copper 7.00% pfd cv ..... 80,000 2,240,000
MascoTech $1.20 pfd cv "DECS" ............ 119,300 1,983,363
-----------
5,422,113
-----------
Real Estate - 1.87%
First Union Real Estate 8.40% pfd cv ..... 36,700 1,312,025
+Insignia Financing 6.50% pfd cv .......... 33,300 1,698,300
+Timet Capital Trust 6.625% pfd cv ........ 20,000 1,110,000
-----------
4,120,325
-----------
Retail - 2.17%
KMart Financing 7.75% pfd cv ............. 95,000 4,785,625
-----------
4,785,625
-----------
Miscellaneous - 0.69%
+Loral Space & Communication 6.00% pfd cv . 27,000 1,528,875
-----------
1,528,875
-----------
Total Convertible Preferred Stock
(cost $25,910,555) .................... 26,813,188
-----------
PREFERRED STOCK - 1.12%
Banking, Finance & Insurance - 1.12%
Credit Lyon Capital SCA 9.50% ............ 100,000 2,462,500
-----------
Total Preferred Stock (cost $2,500,000) .. 2,462,500
-----------
Principal
Amount
NON-CONVERTIBLE BONDS - 41.52%
Automobiles & Auto Equipment - 2.03%
+Delco Remy International sr
sub notes 10.625% 2006 ................. $ 2,000,000 2,100,000
Exide sr notes 10.75% 2002 ............... 1,000,000 1,052,500
Harvard Industries sr notes 11.125% 2005 750,000 633,750
Speedy Muffler King unsec sr
notes 10.875% 2006 ..................... 650,000 698,750
-----------
4,485,000
-----------
<PAGE>
- -------------------------------------------------------------------------------
Principal Market
Amount Value
- -------------------------------------------------------------------------------
NON-CONVERTIBLE BONDS (CONTINUED)
Banking, Finance & Insurance - 2.13%
+Aetna Industries sr notes 11.875 2006 ...... $2,000,000 $ 2,125,000
Chevy Chase Savings Bank sub
deb 9.25% 2005 ........................... 1,000,000 1,055,000
First Nationwide Holdings sr
sub notes 9.125% 2003..................... 1,500,000 1,522,500
-------------
4,702,500
-------------
Cable, Media & Publishing - 5.26%
Cablevision Systems sr sub deb 10.75% 2004.. 2,000,000 2,065,000
Granite Broadcast sr sub notes 9.375% 2005.. 2,000,000 1,920,000
Jones Intercable sr notes 9.625% 2002 ..... 1,500,000 1,567,500
Muzak LP/Capital unsec sr
notes 10.00% 2003......................... 1,200,000 1,224,000
Rogers Cablesystem sr sec deb 10.00% 2007... 810,000 856,575
Rogers Cablesystem sr unsec
sub deb 11.00% 2015....................... 500,000 540,000
Sullivan Graphics sr sub notes 12.75% 2005 1,500,000 1,462,500
Viacom International sr sub
notes 10.25% 2001......................... 1,800,000 1,979,044
-------------
11,614,619
-------------
Chemicals - 3.56%
+BPC Holding sr notes 12.50% 2006 ........... 1,150,000 1,213,250
Foamex sr notes 11.25% 2002................. 2,000,000 2,110,000
+ISP Holdings sr notes 9.75% 2002 ........... 519,000 542,355
NL Industries sr sec notes 11.75% 2003...... 2,290,000 2,364,425
Uniroyal Chemical Acquisition sr
sub notes 11.00% 2000...................... 1,500,000 1,612,500
-------------
7,842,530
-------------
Computers & Technology - 1.12%
Unisys sr notes 12.00% 2003 ............... 1,000,000 1,061,250
Unisys sr notes 11.75% 2004 ............... 1,350,000 1,417,500
-------------
2,478,750
-------------
Consumer Products - 0.98%
American Safety Razor
sr notes 9.875% 2005 ..................... 2,000,000 2,150,000
-------------
2,150,000
-------------
Electronics - 1.91%
Interlake sr notes 12.00% 2001.............. 2,000,000 2,150,000
Mark IV Industries sub notes 8.75% 2003..... 1,985,000 2,074,325
-------------
4,224,325
-------------
Energy - 1.78%
Costilla Energy sr notes 10.25% 2006........ 875,000 907,812
Falcon Drilling sr notes 8.875% 2003........ 1,000,000 1,015,000
Mesa Operating unsec 10.625% 2006 .......... 1,000,000 1,082,500
Plains Resources sr sub notes 10.25% 2006... 875,000 927,500
-------------
3,932,812
-------------
Food, Beverage & Tobacco - 0.18%
Purina Mills sr sub notes 10.25% 2003 ...... 375,000 388,125
-------------
388,125
-------------
Healthcare & Pharmaceuticals - 0.86%
+Dade International sr sub
notes 11.125% 2006........................ 1,000,000 1,087,500
Healthsouth Rehabilitation sr sub
notes 9.50% 2001 ......................... 750,000 800,625
-------------
1,888,125
-------------
1996 annual report
9
<PAGE>
STATEMENT OF NET ASSETS (CONTINUED)
- -------------------------------------------------------------------------------
Principal Market
Amount Value
- -------------------------------------------------------------------------------
NON-CONVERTIBLE BONDS (CONTINUED)
Industrial Machinery - 0.45%
Jordan Industries sr
notes 10.375% 2003 ...................... $1,000,000 $ 982,500
-------------
982,500
-------------
Leisure, Lodging & Entertainment - 2.24%
Argosy Gaming 1st mtg notes 13.25% 2004.... 1,000,000 955,000
+Cinemark sr sub notes 9.625% 2008.......... 1,000,000 1,012,500
Royal Caribbean Cruise Lines sr sub
notes 11.375% 2002....................... 1,000,000 1,075,000
Trump Atlantic City Associates Funding
sec 1st mtg notes 11.25% 2006............ 2,000,000 1,890,000
-------------
4,932,500
-------------
Metals & Mining - 2.84%
Armco sr notes 11.375% 1999 .............. 750,000 787,500
+Commonwealth Aluminum sr sub
notes 10.75% 2006........................ 750,000 768,750
G.S. Technologies sr notes 12.00% 2004..... 2,000,000 2,067,500
G.S. Technologies sr notes 12.25% 2005..... 1,500,000 1,571,250
Oregon Steel Mills sec 1st mtg
notes 11.00% 2003........................ 1,000,000 1,075,000
-------------
6,270,000
-------------
Packaging & Containers - 2.18%
Container Corporation of America
sr notes 11.25% 2004..................... 1,000,000 1,085,000
Ivex Packaging sr sub notes 12.50% 2002.... 1,000,000 1,090,000
Stone Container sr notes 11.50% 2004....... 1,000,000 1,047,500
U.S. Can sr sub notes 13.50% 2002 ......... 1,500,000 1,590,000
-------------
4,812,500
-------------
Paper & Forest Products - 2.87%
+Four M sr notes 12.00% 2006................ 450,000 464,625
Pacific Lumber sr notes 10.50% 2003 ....... 2,000,000 2,015,000
Repap Wisconsin sr sec notes 9.25% 2002.... 1,500,000 1,485,000
Repap Wisconsin sr sec notes 9.875% 2006... 1,500,000 1,470,000
Riverwood International sr sub
notes 10.875% 2008....................... 1,000,000 905,000
-------------
6,339,625
-------------
Retail - 3.10%
+Cole National Group sr sub
notes 9.875% 2006........................ 2,000,000 2,030,000
Cort Furniture Rental sr notes 12.00% 2000. 1,221,000 1,361,415
Fleming Companies sr sub notes 10.625% 2001 1,320,000 1,328,250
Ralph's Grocery sr notes 10.45% 2004....... 1,000,000 1,046,250
Ralph's Grocery sr sub notes 13.75% 2005... 1,000,000 1,070,000
-------------
6,835,915
-------------
Telecommunications - 1.43%
Galaxy Telecom sr sub notes 12.375% 2005... 2,000,000 2,097,500
Rogers Cantel sr sub notes 11.125% 2002.... 1,000,000 1,061,250
-------------
3,158,750
-------------
Textiles - 1.16%
Clark Schwebel sr notes 10.50% 2006........ 1,500,000 1,593,750
+Lifestyle Furnishings sr sub
notes 10.875% 2006....................... 900,000 960,750
-------------
2,554,500
-------------
<PAGE>
- -------------------------------------------------------------------------------
Principal Market
Amount Value
- -------------------------------------------------------------------------------
NON-CONVERTIBLE BONDS (CONTINUED)
Transportation & Shipping - 1.29%
Teekay Shipping 1st pfd ship mtg
notes 8.32% 2008............................ $1,000,000 $ 1,002,500
Teekay Shipping 1st pfd ship mtg
notes 9.625% 2003........................... 1,750,000 1,837,500
-----------
2,840,000
-----------
Utilities - 2.21%
+Calpine sr notes 10.50% 2006 ............... 2,000,000 2,110,000
Midland Funding II deb 11.75% 2005 .......... 1,400,000 1,561,000
TransTexas Gas sr sec notes 11.50% 2002....... 1,100,000 1,199,000
-----------
4,870,000
-----------
Miscellaneous - 1.94%
Graphic Controls sr sub notes 12.00% 2005..... 2,000,000 2,200,000
Knoll sr sub notes 10.875% 2006 .............. 1,000,000 1,095,000
+Pierce Leahy sr sub notes 11.125% 2006........ 900,000 991,125
-----------
4,286,125
-----------
Total Non-Convertible Bonds
(cost $88,562,852).......................... 91,589,201
-----------
CONVERTIBLE BONDS - 11.92%
Banking, Finance & Insurance - 0.86%
+Banco Nacional De Mexico global jr unsec
sub deb 7.00% 1999.......................... 2,000,000 1,895,000
-----------
1,895,000
-----------
Computers & Technology - 1.59%
MacNeal-Schwendler unsec
sub deb 7.875% 2004. ....................... 1,000,000 917,500
Softkey International sr notes 5.50% 2000..... 1,000,000 812,500
Unisys sub notes 8.25% 2000 ................. 1,800,000 1,770,750
-----------
3,500,750
-----------
Electronics - 0.43%
Richey Electronics sub notes 7.00% 2006...... 1,000,000 938,750
-----------
938,750
-----------
Health Care & Pharmaceuticals - 1.52%
+ARV Assisted Living sub notes 6.75% 2006 .... 1,300,000 1,155,375
+Phymatrix sub deb 6.75% 2003 ................ 1,800,000 1,498,500
+Uromed Corp unsec sub notes 6.00% 2003 ...... 750,000 707,812
-----------
3,361,687
-----------
Metals & Mining - 0.49%
Mascotech sub deb 4.50% 2003................. 1,300,000 1,080,625
-----------
1,080,625
-----------
Real Estate - 6.49%
Alexander Haagen Properties sub
deb 7.50% 2001............................ 2,270,000 2,142,313
IRT Property sub deb 7.30% 2003 ............ 2,000,000 1,975,000
Liberty Property Trust unsec sub
deb 8.00% 2001............................ 1,500,000 1,753,125
LTC Properties sub deb 8.50% 2000........... 1,000,000 1,151,250
Malan Realty Investors unsec sub
deb 9.50% 2004............................. 3,300,000 3,114,375
Mid-Atlantic Realty Trust sub
deb 7.625% 2003 ........................... 1,500,000 1,490,625
1996 annual report
10
<PAGE>
STATEMENT OF NET ASSETS (CONTINUED)
- -------------------------------------------------------------------------------
Principal Market
Amount Value
- -------------------------------------------------------------------------------
CONVERTIBLE BONDS (CONTINUED)
REAL ESTATE (CONTINUED)
Sizeler Property Investors sub
deb 8.00% 2003 .......................... $3,000,000 $ 2,688,750
--------------
14,315,438
--------------
Retail - 0.54%
Home Shopping Network sub deb 5.875% 2006 1,100,000 1,182,500
--------------
1,182,500
--------------
Total Convertible Bonds (cost $27,352,150) 26,274,750
--------------
SHORT-TERM SECURITIES - 1.80%
**U.S. Treasury Bill 4.895% due 1/02/97...... 4,000,000 3,982,596
--------------
Total Short-Term Securities (cost $3,982,596) 3,982,596
--------------
Shares
Subject
to Call
CALL OPTIONS WRITTEN - (0.24%)
Baxter International, February 1997 $45.... 50,000 (56,250)
Beneficial, January 1997 $60............... 14,100 (60,806)
Corestates Financial, January 1997 $50..... 35,000 (155,313)
Dow Chemical, January 1997 $80............. 26,700 (128,494)
Exxon, January 1997 $90.................... 20,000 (120,000)
--------------
Total Call Options Written (520,863)
--------------
(premiums received $259,555)
TOTAL MARKET VALUE OF SECURITIES OWNED - 122.41%
(cost $251,996,055).. . . . . . . . . . . . . . $269,991,650
LIABILITIES NET OF RECEIVABLES AND OTHER ASSETS -
(22.41%). . . . . . . . . . . . . . . . . . . . . . . . . . (49,425,648)
--------------
NET ASSETS APPLICABLE TO 14,307,000 SHARES
($0.01 par value) OUTSTANDING; EQUIVALENT
TO $15.42 PER SHARE - 100.00%. . . . . $220,566,002
==============
------------------
ADR - American Depository Receipt.
DECS - Dividend Enhanced Convertible Stock.
PERCS - Preferred Equity Redemption Cumulative Stock.
MARCS - Mandatory Adjustable Redeemable Convertible Security.
+ 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).
* Security held in connection with open call option written.
** U.S. Treasury Bills are traded on a discount basis; the interest rate
shown is the discount rate paid at the time of purchase by the Fund.
------------------
COMPONENTS OF NET ASSETS AT NOVEMBER 30, 1996:
Common Stock, $0.01 par value, 500,000,000 shares
authorized to the Fund. . . . . . . . . . . . $200,958,246
Accumulated net realized gain on investments 1,612,161
Net unrealized appreciation of investments 17,995,595
--------------
Total net assets . . . . . . . . . . . . . . . . . $220,566,002
==============
See accompanying notes
<PAGE>
Delaware Group
Dividend and Income Fund, Inc.
Statement of Operations
For the Year Ended
November 30, 1996
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest ....................................... $13,865,991
Dividends ...................................... 6,713,607 $20,579,598
-----------
EXPENSES:
Management fees ................................ 1,443,502
Administrative fees ............................ 472,419
Commercial paper fees .......................... 180,057
Reports to shareholders ........................ 47,496
Professional fees .............................. 41,017
NYSE fees ...................................... 28,835
Transfer agent fees ............................ 14,899
Custodian fees ................................. 14,300
Directors' fees ................................ 9,671
Other .......................................... 19,764
-----------
Total operating expenses
(before interest expense) .................... 2,271,960
Interest expense .............................. 3,073,779
-----------
Total expenses ................................ 5,345,739
-----------
NET INVESTMENT INCOME .......................... 15,233,859
-----------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS:
Net realized gain from security transactions ... 7,639,969
Net change in unrealized appreciation
on investments ................................ 18,652,232
-----------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS ........................... 26,292,201
-----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ..................... $41,526,060
===========
See accompanying notes
11
<PAGE>
DELAWARE GROUP
DIVIDEND AND INCOME FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
November 30, November 30,
1996 1995
-------------------------------
OPERATIONS:
Net investment income ....................... $15,233,859 $16,227,479
Net realized gain from security transactions 7,639,969 1,989,358
Net change in unrealized appreciation
on investments .......................... 18,652,232 17,197,602
------------- -------------
Net increase in net assets resulting
from operations ......................... 41,526,060 35,414,439
------------- -------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income and short-term
capital gains ........................... (21,460,500) (16,424,436)
------------- -------------
NET INCREASE IN NET ASSETS .................. 20,065,560 18,990,003
NET ASSETS:
Beginning of year ........................... 200,500,442 181,510,439
------------- -------------
End of year (including undistributed
net investment income of $0 and
$407,950, respectively).................. $ 220,566,002 $ 200,500,442
============= =============
See accompanying notes
<PAGE>
Delaware Group
Dividend and Income Fund, Inc.
Statement of Cash Flows
For the Year Ended November 30, 1996
- --------------------------------------------------------------------------------
Increase (Decrease) in Cash:
Cash flows provided by operating activities:
Interest and dividends received
(excluding amortization of $357,353) ..................... $ 20,995,874
Operating expenses paid ................................... (2,425,301)
Interest expenses paid .................................... (2,948,066)
Sale of short-term portfolio investments, net ............. 1,166,780
Purchase of long-term portfolio investments ............... (180,710,594)
Proceeds from disposition of long-term
portfolio investments ................................... 187,450,856
-------------
Net cash provided by operating activities ................. 23,529,549
-------------
Cash flows used for financing activities:
Cash provided by issuance of commercial paper ............. 234,016,958
Cash used to pay commercial paper offering expenses ....... (50,000)
Cash used to liquidate commercial paper ................... (234,051,932)
Cash dividends paid ....................................... (21,460,500)
-------------
Net cash used for financing activities .................... (21,545,474)
-------------
Net increase in cash ....................................... 1,984,075
Cash at beginning of year .................................. 22,147
-------------
Cash at end of year ........................................ $ 2,006,222
=============
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 ............................................... $ 41,526,060
-------------
Decrease in investments ................................... 15,050,464
Net realized gain from security transactions .............. (7,639,969)
Change in net unrealized appreciation ..................... (18,652,232)
Decrease in prepaid assets ................................ 444
Increase in receivable for investments sold ............... (1,942,018)
Decrease in interest and dividends receivable ............. 773,629
Decrease in deferred organization expenses ................ 92,941
Decrease in payable for investments purchased ............. (5,558,757)
Increase in interest payable .............................. 69,999
Decrease in accrued expenses and other
liabilities .............................................. (191,012)
-------------
Total adjustments ....................................... (17,996,511)
-------------
Net cash provided by operating activities .................. $ 23,529,549
=============
See accompanying notes
12
<PAGE>
Delaware Group
Dividend and Income Fund, Inc.
Notes to Financial Statements
November 30, 1996
- --------------------------------------------------------------------------------
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 has been made.
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.
Distributions - In December 1995, the Fund implemented a managed distribution
policy. Under the policy, the Fund declares and pays monthly dividends at an
annual rate of not less than $1.50 per share and is managed with a goal of
generating as much of the dividend as possible from ordinary income (net
investment income and short-term capital gains). The balance of the dividend
then comes from long-term capital gains (once a year) and if necessary, a return
of capital. No dividends were designated as return of capital for the fiscal
year ended November 30, 1996.
<PAGE>
2.Investment Management and Administration Agreements 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, 1996, the Fund had a liability for Investment
Management fees of $124,096.
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. Effective
January 1, 1997, the administrative fee will be computed at the annual rate of
0.15% of the Fund's adjusted average weekly net assets. At November 30, 1996,
the Fund had a liability for administration fees of $40,613.
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.
1996 annual report
13
<PAGE>
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
3. Investments
During the year ended November 30, 1996, the Fund made purchases of $175,151,837
and sales of $188,821,033 of investment securities other than U.S. government
securities and temporary cash investments.
At November 30, 1996, the federal income tax cost basis of the Fund's
investments was $251,996,055 and net unrealized appreciation for federal income
tax purposes aggregated $17,995,595 of which $22,518,178 related to unrealized
appreciation of securities and $4,522,583 to unrealized depreciation of
securities.
Transactions in options written for the year ended November 30, 1996, were as
follows:
Number
of Premiums
Contracts Received
Contracts outstanding
November 30, 1995 ........................... 4,068 $ 263,262
Contracts written .............................. 10,217 1,194,815
Contracts terminated:
Closed ....................................... 300 51,598
Expired ...................................... 7,987 595,813
Exercised .................................... 4,540 551,111
---------- ----------
Total contracts terminated ..................... 12,827 $1,198,522
---------- ----------
Contracts outstanding
November 30, 1996 ........................... 1,458 $ 259,555
---------- ----------
Premiums received from writing options which expire are treated as realized
gains. Premiums received from writing options which are exercised or are closed
are offset against the proceeds or amount paid on the transaction to determine
the realized gain or loss. The net realized gain on options closed or expired
was $647,411 for the year ended November 30, 1996.
4. Capital Stock
There are 500,000,000 shares of $0.01 par value capital stock authorized.
On December 2, 1996, the Fund declared its monthly dividend in the amount of
$0.125 per share. This dividend was payable December 27, 1996, to stockholders
of record at the close of business on December 13, 1996. The ex-dividend date
was December 11, 1996.
On December 23, 1996, the Fund declared distribution from net realized gain from
security transactions in the amount of $0.087 per share and from net investment
income $0.038 per share. This dividend was payable January 31, 1997 to
stockholders of record at the close of business on December 31, 1996. The
ex-dividend date was December 27, 1996.
Shares issuable under the Fund's dividend reinvestment plan are purchased by the
Fund's transfer agent, ChaseMellon Shareholder Services, L..L.C., in the open
market.
5. Commercial Paper
As of November 30, 1996, $55,000,000 commercial paper was outstanding with an
amortized cost of $54,877,829. The weighted average discount rate of commercial
paper outstanding at November 30, 1996, was 5.42%. The average daily balance of
commercial paper outstanding during the year ended November 30, 1996, was
$54,641,305 at a weighted average discount rate of 5.51%. 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 year
ended November 30, 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
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.
1996 annual report
14
<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 Year Ended March 26, 1993*
November 30, November 30, November 30, to November 30,
1996 1995 1994 1993
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period .......................... $ 14.01 $ 12.69 $ 14.91 $ 14.04+
Income (loss) from investment operations:
Net investment income ..................................... 1.07 1.13 1.10 0.68
Net realized and unrealized gain (loss) from
security transactions ................................... 1.84 1.34 (1.73) 0.81
-------- -------- ---------- -----------
Total from investment operations .......................... 2.91 2.47 (0.63) 1.49
-------- -------- ---------- -----------
Less dividends and distributions:
Dividends from net investment income and
short-term capital gains ................................ (1.50)(2) (1.15) (1.12) (0.62)
Distributions from net realized gains on
security transactions .................................. -- -- (0.47) --
-------- -------- ---------- -----------
Total dividends and distributions ......................... (1.50) (1.15) (1.59) (0.62)
-------- -------- ---------- -----------
Net asset value, end of period ................................ $ 15.42 $ 14.01 $ 12.69 $ 14.91
========= ========= ========= ===========
Market value, end of period ................................... $ 16.63 $ 14.00 $ 12.00 $ 14.50
========= ========= ========= ===========
Total investment return based on:1
Market value .............................................. 30.67% 28.71% (7.23%) 0.82%
Net asset value ........................................... 21.11% 20.72% (4.60%) 10.76%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................... $220,566 $200,500 $ 181,510 $ 213,292
Ratio of total operating expenses to adjusted average
weekly net assets (before interest expense) ............. 0.87% 0.89% 1.01% 0.94%**
Ratio of interest expenses to adjusted average weekly
net assets .............................................. 1.17% 1.32% 0.76%** N/A
Ratio of net investment income to adjusted average
weekly net assets ....................................... 5.80% 6.68% 6.80% 6.88%**
Portfolio turnover ........................................ 69% 118% 73% 113%
Average commission rate paid .............................. $ 0.0532 N/A N/A N/A
Leverage analysis:
Debt outstanding at end of period (000 omitted) ........... $ 55,000 $ 55,000 $ 48,000 N/A
Average daily balance of debt outstanding (000 omitted) ... $ 54,641 $ 52,488 $ 40,803 N/A
Average daily balance of shares outstanding (000 omitted) . 14,307 14,307 14,307 N/A
Average debt per share .................................... $ 3.82 $ 3.67 $ 2.85 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 asset
value for a period of less than one year have not been annualized.
2 Of the $1.50 per share dividends paid during the year $0.41
consisted of short-term capital gains, which are taxable at the same rate as
net investment income.
1996 annual report
15
<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, 1996, 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
the financial highlights for each of the three 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, 1996 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, 1996, 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 three 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 10, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Proxy Results
During the year ended November 30, 1996, The Delaware Group Dividend and Income
Fund shareholders voted on the following proposals at the annual meeting of
shareholders on June 14, 1996. The description of each proposal and number of
shares voted are as follows:
Shares Shares Voted
Voted Without
For Authority
------------ --------------
1. To elect the Fund's Board of Directors:
Wayne A. Stork .............................. 9,469,307 122,325
Walter P. Babich ............................ 9,468,429 123,203
Anthony D. Knerr ............................ 9,469,122 122,510
Ann R. Leven ................................ 9,464,581 127,051
W. Thacher Longstreth ....................... 9,462,224 129,408
Charles E. Peck ............................. 9,467,486 124,146
Shares Shares Shares
Voted Voted Voted
For Against Abstain
------- ------------- -----------
2. To ratify the appointment of Ernst
& Young LLP as the Fund's
independent auditors ............. 9,421,082 47,067 123,483
1996 annual report
16
<PAGE>
This annual report is for the information of Dividend and Income Fund
shareholders. It sets forth details about charges, expenses, investment
objectives and operating policies of each Fund. You should read it carefully
before you invest.
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.
Number of Recordholders as of November 30, 1996: 608
Board of Directors
WAYNE A. STORK
Chairman, President and Chief Executive Officer
Delaware Group of Funds
Philadelphia, PA
WALTER P. BABICH+
Board Chairman, Citadel Constructors, Inc.
King of Prussia, PA
ANTHONY D. KNERR+
Consultant, Anthony Knerr & Associates
New York, NY
ANN R. LEVEN+
Treasurer, National Gallery of Art
Washington, DC
W. THACHER LONGSTRETH
City Councilman
Philadelphia, PA
CHARLES E. PECK
Secretary/Treasurer, Enterprise Homes, Inc.
Fredericksburg, VA
+Audit Committee Member
Executive Officers
WAYNE A. STORK
Chairman, President and Chief Executive Officer
Delaware Group of Funds
Philadelphia, PA
WINTHROP S. JESSUP
Executive Vice President
Philadelphia, PA
RICHARD G. UNRUH, JR.
Executive Vice President
Philadelphia, PA
PAUL E. SUCKOW
Senior Vice President/Chief Investment Officer,
Fixed-Income
Philadelphia, PA
DAVID K. DOWNES
Senior Vice President/Chief Administrative Officer/
Chief Financial Officer
Philadelphia, PA
GEORGE M. CHAMBERLAIN, JR.
Senior Vice President/Secretary
Philadelphia, PA
JOSEPH H. HASTINGS
Vice President/Corporate Controller
Philadelphia, PA
MICHAEL P. BISHOF
Vice President/Treasurer
Philadelphia, PA
<PAGE>
directors & officers
INVESTMENT MANAGER
Delaware Management Company, Inc.
Philadelphia, Pennsylvania
INTERNATIONAL AFFILIATE
Delaware International Advisers Ltd.
London, England
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
Philadelphia, Pennsylvania
REGISTRAR AND
STOCK TRANSFER AGENT
ChaseMellon Shareholder Services, L.L.C.
P.O. Box 590
Ridgefield Park, NJ
1.800.851.9677
PRINCIPAL OFFICE OF THE FUND
1818 Market Street
Philadelphia, PA 19103-3682
INDEPENDENT AUDITOR
Ernst & Young LLP
2001 Market Street
Philadelphia, PA
<PAGE>
(Photo of Globe)
For Securities Dealers
1.800.362.7500
Financial Institutions Representatives Only
1.800.659.2265
Copy Rights Delaware Distributors, L.P.
(DD-12)
Printed in the USA on recycled paper
AR-DDF[11/96]TKO1/97
DELAWARE
GROUP
- --------
Philadelphia o London
