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DELAWARE GROUP
Dividend and
Income Fund
(various photos demonstrating service and
guidance, professional management and goals)
service and guidance
professional management
goals
1997
Annual
Report
DELAWARE
GROUP
========
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A TRADITION OF SOUND INVESTING
commitment
Investment Objectives
and Strategies
(photo of keyboard)
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.
U.S. COMMON STOCKS WITH ABOVE-AVERAGE YIELDS
The Fund's management focuses on stocks that pay high dividends relative to
their share price at the time of purchase. Such high-yield stocks can point
the Fund to strong companies whose stocks have capital appreciation
potential. The dividend income from these stocks has the potential to add to
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.
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 convertibles when the underlying common
stock offers strong growth potential but a low yield.
LEVERAGING
Approximately $55 million of your Fund's net assets were leveraged as of Novem
ber 30, 1997. Leveraging is a tool that is not usually used by 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
that leveraging will be successful. 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.
(photo of family on beach)
HIGH-YIELD CORPORATE BONDS
High-yield, higher risk bonds, those rated BB or lower, have greater default
risk than bonds with higher quality ratings. However, they historically have
provided a greater level of income that has compensated investors for the
additional risks. Prices of high-yield bonds may also be less sensitive to
changes in interest rates than higher rated bonds.
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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 the Fund. You should read it carefully
before you invest. The return and principal value of an investment in the Fund
will fluctuate so that shares, when redeemed, may be worth more or less than
their original cost.
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 on the open market.
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<CAPTION>
<S> <C>
Board of Directors Executive Officers
WAYNE A. STORK WAYNE A. STORK
Chairman Chairman
Delaware Group of Funds Delaware Group of Funds
Philadelphia, PA Philadelphia, PA
JEFFREY J. NICK JEFFREY J. NICK
President and Chief Executive Officer President and Chief Executive Officer
Delaware Group of Funds Delaware Group of Funds
Philadelphia, PA Philadelphia, PA
WALTER P. BABICH+ RICHARD G. UNRUH, JR.
Board Chairman, Citadel Constructors, Inc. Executive Vice President
King of Prussia, PA Philadelphia, PA
ANTHONY D. KNERR+ PAUL E. SUCKOW
Consultant, Anthony Knerr & Associates Senior Vice President/Chief Investment
New York, NY Officer, Fixed-Income
Philadelphia, PA
ANN R. LEVEN+
Treasurer, National Gallery of Art DAVID K. DOWNES
Washington, DC Executive Vice President/Chief Administrative
Officer/ Chief Financial Officer
W. THACHER LONGSTRETH Philadelphia, PA
City Councilman
Philadelphia, PA GEORGE M. CHAMBERLAIN, JR.
Senior Vice President/Secretary/General Counsel
THOMAS F. MADISON Philadelphia, PA
President and Chief Executive Officer
MLM Partners, Inc. JOSEPH H. HASTINGS
Minneapolis, MN Senior Vice President/
Corporate Controller
CHARLES E. PECK Philadelphia, PA
Secretary/Treasurer, Enterprise Homes, Inc.
Fredericksburg, VA MICHAEL P. BISHOF
Senior Vice President/Treasurer
+Audit Committee Member Philadelphia, PA
directors
& officers
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INVESTMENT MANAGER PRINCIPAL OFFICE OF THE FUND
Delaware Management Company, Inc. 1818 Market Street
Philadelphia, Pennsylvania Philadelphia, PA 19103-3682
INTERNATIONAL AFFILIATE INDEPENDENT AUDITORS
Delaware International Advisers Ltd. Ernst & Young LLP
London, England 2001 Market Street (Photo of globe)
Philadelphia, PA
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December 8, 1997
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Dear Shareholder:
DIVIDEND AND INCOME FUND WAS WELL positioned to take advantage of the U.S. stock
market's robust capital appreciation potential in fiscal 1997 while still
providing a steady stream of monthly income.
Your Fund had a total return of +27.22%, based on net asset value
with dividends reinvested, for the 12 months ended November 30, 1997. Through
a diversification strategy in five distinct asset classes, we achieved 96% of
the total return of the unmanaged S&P 500 Index, as shown below, even though
less than two-thirds of the Fund's portfolio was invested in common stocks.
We are delighted to report that, as of November 30, Dividend and
Income Fund ranked #1 in total return among closed-end income funds for both
the 1997 fiscal year and its lifetime, as tracked by Lipper Analytical
Services and shown on page 2.
We are equally pleased to report that Dividend and Income Fund provided
an attractive level of monthly income while the Fund's share price fluctuated
much less than the S&P 500 in 1997, a year when market volatility increased
substantially. The Fund's yield, based on market price, stood at 8.30%, as of
November 30, 1997. Dividend and Income Fund's three-year beta, or volatility
measured against the S&P 500, stood at just 0.58 as of November 30, 1997.*
In selecting securities for Dividend and Income Fund, the portfolio
manager emphasizes large cap dividend-paying stocks, high-yield corporate
bonds and convertible stocks and bonds. The Fund's average cost of borrowing
was 5.60%.
The U.S. stock market suffered two brief corrections in 1997 - one as
a result of the Federal Reserve Board modestly raising short-term interest
rates in the spring, and the other as a result of financial uncertainty in
several Asian countries. However, low inflation and the fundamental strength
of the U.S. economy allowed the market to generally shrug off these temporary
setbacks.
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<CAPTION>
TOTAL RETURN
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DECEMBER 1, 1996 TO NOVEMBER 30, 1997
Based On Premium/Discount
Net Asset Value as of November 30, 1997
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<S> <C> <C>
Dividend and Income Fund (NYSE Symbol: DDF) +27.22% +0.29%
Standard & Poor's 500 Index +28.51%
Merrill Lynch High-Yield Bond Index +12.62%
Merrill Lynch Convertibles Index +17.89%
Lipper Closed-End Income Fund Average +15.91% (11 funds) -4.92%
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The Fund's total return and the returns of unmanaged indexes shown above
assume reinvestment of dividends and distributions. Past performance does not
guarantee future results.
*A beta of less than 1.00 means a security has fluctuated less in price than
the S&P 500 Index. A number greater than 1.00 means the security has
fluctuated more than the Index. closed-end income
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Opportunity is often found in moments of crisis, and we believe that
currency devaluation and recession along the Pacific Rim presents a financial
yin and yang for investors in large multinational companies and U.S.
fixed-income securities.
On the one hand, some large cap U.S. companies may derive lower
profits from the region, resulting in a more moderate U.S. growth rate in
1998, according to economists at the Federal Reserve. However, these same
analysts also believe that domestic inflation is likely to remain benign
because the costs of imports to the U.S. from Asia is expected to drop.
Continued low inflation would be encouraging news for bond investors, and
higher bond values have historically helped support equity prices.
During the 12 months ended November 30, 1997, the yield on 30-year
U.S. Treasury bonds dropped 32 basis points (0.32%) to 6.04%. This bullish
bond environment, coupled with a growing economy, helped both stocks and
bonds, particularly those of financial firms and real estate investment
trusts.
On the pages that follow, Babak Zenouzi, your Fund's senior portfolio
manager since March, and Paul A. Matlack, who manages the high-yield bond
component of the Fund, review fiscal 1997's performance and provide an outlook
for 1998.
At Delaware, Mr. Zenouzi and Mr. Matlack manage a combined total of more
than $2.5 billion in real estate investment trusts (REIT), high-yield bonds and
equity assets for mutual fund investors and institutional clients. Together,
they have more than two decades of investment experience.
While we can't guarantee the future, your Fund's management team
plans to continue using the same disciplined investment strategy that has
helped Dividend and Income Fund consistently outpace its peers. On behalf of
Delaware, we wish you a joyous and prosperous New Year.
Sincerely,
/s/ Wayne A. Stork
- -----------------------------
WAYNE A. STORK
Chairman
/s/ Jeffrey J. Nick
- -----------------------------
JEFFREY J. NICK
President and Chief Executive Officer
discipline
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<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
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Based On Net Asset Value For Periods Ended November 30,1997
One Year Lifetime*
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<S> <C> <C>
Dividend and Income Fund (DDF) +27.22% +15.51%
Lipper Closed-End Income Fund Average +15.91% +10.15%
DDF Rank 1 1
Number of funds in category 11 11
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* Fund's inception date was March 26, 1993. Past performance does not
guarantee future results. All performance assumes dividends and
distributions reinvested.
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Portfolio Managers' Review
DURING FISCAL 1997, DIVIDEND AND Income Fund's positioning in common stocks,
high-yield corporate bonds, and convertible stocks and bonds was an attractive
asset mix that helped us attain our goal of providing high current income with
capital appreciation.
Approximately 61% of your Fund's net assets were allocated to common
stocks as of November 30, 1997, a seven percentage point increase from a year
earlier. The increase is primarily due to capital appreciation in the price
of stocks in the Fund's portfolio during a phenomenal year for the U.S.
equity market. The balance of your Fund's portfolio was allocated to
preferred stocks and fixed-income securities.
Fiscal 1997 was a rewarding year for income-oriented investors. The
Federal Reserve Board's modest interest rate increase in March was the
medicine the U.S. economy needed to keep inflation from reaching a feverish
pace. Bond prices subsequently rose while the yield on 30-year Treasury Bonds
stood at just above 6% as of year's end.
Your Fund is managed with a goal of generating as much of its $0.125
monthly dividend as possible from ordinary income. The balance of the
dividend would come from short-term and long-term capital gains and, if
necessary, a return of capital. We are pleased to report that since its
inception, the Fund has not had to provide a return of capital to meet its
dividend.
BANKS AND REITS
PERFORMED WELL
The largest contributors to your Fund's total return in fiscal 1997 were our
bank and real estate investment trust (REIT) holdings. These two sectors,
which represented a combined 40% of your Fund's net assets as of November 30,
benefited from internal expansion, restructuring and merger activity.
The Fund's largest equity holding as of November 30 was KeyCorp, a
regional banking company based in Cleveland. Investors recognized the value
of the company's 1996 restructuring, an effort that reduced operating costs.
Other regional banking companies such as Mellon Bank and Summit Bancorp also
performed exceptionally well this past year and we believe offer further
capital appreciation potential as the banking industry continues to
consolidate.
We are attracted to the real estate sector because the industry is
undergoing a positive fundamental transformation that we believe makes
certain stocks attractive for both their income and total return potential.
In our opinion, many REITs are
strategy
New President and CEO
On October 13, 1997, Jeffrey J. Nick was named President and Chief Executive
Officer of the Delaware Group Of Funds. Mr. Nick has been CEO of Lincoln
National Investment Companies, Delaware's indirect parent, since October
1996. He joined Lincoln National in April 1990, and from 1992 to 1996 he
managed Lincoln's operations in the United Kingdom. Mr. Nick holds an MBA
from the University of Chicago and a bachelor's degree from Princeton
University.
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PORTFOLIO HIGHLIGHTS AND ASSET ALLOCATION
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NOVEMBER 30, 1997
Beta* 0.58
Portfolio Turnover Rate 74%
Current Monthly Dividend Rate $0.125 per share
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* A measure of market price volatility relative to the S&P 500 Index. A
number less than 1.00 means a security has fluctuated less in price than
the Index. A number more than 1.00 means the security has fluctuated more
than the Index.
Cash Equivalents 0.6%
Preferred Stocks 1.9%
Convertible Preferred Stocks 9.2%
Convertible Bonds 9.1%
Non-Convertible Corporate Bonds 37.4%
Common Stocks 61.0%
The chart above adds up to more than 100% because the portfolio is leveraged.
undervalued compared to the overall U.S. stock market. The industry is
benefiting from an increasing level of public ownership and from stronger and
more sophisticated management.
The REIT portion of your Fund's portfolio has two characteristics:
1) Management teams with a record of improving their REITs' operating cash
flow and increasing dividends to shareholders; and,
2) Broad diversification. As of November 30, 1997, the Fund owns 42 stocks
representing nine property types.
One example of the type of company we seek is the Simon DeBartolo
Group of Indianapolis. This REIT owns, develops and manages regional malls
and shopping centers across the U.S. We believed this company is poised to
benefit from rising retail sales and rents paid by department stores,
specialty shops and other tenants.
Our analysis also shows that profits at many REITs may accelerate in the
year ahead. In our opinion, the earnings growth rate of REITs in 1998 may
outpace what a consensus of analysts expect will be a 7% to 10% earnings growth
rate for S&P 500 stocks.+
During 1997, we reduced our weighting in telephone stocks in the U.S.
We sold some of our NYNEX Corp. position after the stock reached our price
target following regulatory approval of its merger with Bell Atlantic Corp.
In our opinion, increasing industry competition in the U.S. has made the
industry's prospects less than clear.
A POSITIVE ENVIRONMENT FOR HIGH-YIELD BONDS
Fiscal 1997 was an exceptional year for the high-yield bond market. Default
rates by corporate issuers fell to historic lows, while both the supply and
demand for high-yield bonds from investors increased.
Dividend and Income Fund's approach to high-yield bond investing
emphasizes income and stresses capital preservation over appreciation. We
strive to achieve this
+Source: First Call
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by investing in bonds issued exclusively by U.S. based corporations, which
are rated either B or BB, the two highest non-investment grade ratings.
During the past year, the Fund's high-yield bond component focused on
bonds rated B with a relatively high average coupon (interest rate at the
time the bond was issued), an approach we plan to continue to follow in the
year ahead. This reflects our belief that the current healthy U.S. economic
expansion is likely to reduce credit risks for many high-yield bond issuers
in 1998.
One high-yield sector that performed well beyond our expectations in
1997 was media bonds. Many of our selections exceeded our price targets
during the second half amid industry merger activity, credit quality upgrades
and a rise in advertising revenue. For example, our Cablevision Systems bonds
doubled in value - a highly unusual occurrence for any type of domestic
fixed-income security.
As of November 30, your Fund's high-yield bond component had an
average effective maturity of 8.7 years and an effective duration of 3.7
years. Duration indicates the approximate percentage change in a bond's price
given a 1% change in interest rates, although high-yield bonds tend to be
less affected by interest rates than high quality, investment grade bonds.
WE REDUCED OUR WEIGHTING IN CONVERTIBLE STOCKS AND BONDS
Dividend and Income Fund significantly reduced its position in convertible
securities during fiscal 1997, from 24.1% of net assets a year ago to 18.2%
as of November 30, 1997. We concluded that common stocks offered somewhat
greater total return potential, and reallocated the Fund's assets
accordingly.
Convertible securities tend to provide a better dividend or bond
yield than common
FISCAL 1997 WAS AN EXCEPTIONAL YEAR FOR THE HIGH-YIELD BOND MARKET AS DEFAULT
RATES BY CORPORATE ISSUERS FELL TO HISTORIC LOWS, WHILE BOTH THE SUPPLY AND
DEMAND FOR HIGH-YIELD BONDS FROM INVESTORS INCREASED.
DIVIDEND AND INCOME FUND
MARKET PRICE VS. NET ASSET VALUE
DECEMBER 1, 1996, TO NOVEMBER 30, 1997
Market Market
Price NAV Price NAV
Nov. 30 '96 $16.625 $15.410 Jun. 6 '97 $17.250 $16.440
Dec. 6 '96 $16.750 $15.460 Jun.13 '97 $17.375 $16.670
Dec. 13 '96 $16.000 $15.400 Jun. 20 '97 $17.750 $16.740
Dec. 20 '96 $16.125 $15.670 Jun. 27 '97 $17.688 $16.700
Dec. 27 '96 $16.500 $15.720 Jul. 4 '97 $18.250 $16.920
Jan. 3 '97 $16.625 $15.660 Jul. 11 '97 $18.313 $16.850
Jan. 10 '97 $16.750 $15.850 Jul. 18 '97 $18.250 $16.900
Jan. 17 '97 $17.000 $16.140 Jul. 25 '97 $18.438 $17.200
Jan. 24 '97 $16.750 $16.170 Aug. 1 '97 $18.563 $17.400
Jan. 31 '97 $16.750 $16.150 Aug. 8 '97 $18.000 $17.370
Feb. 7 '97 $17.000 $16.240 Aug. 15 '97 $17.875 $17.080
Feb. 14 '97 $17.000 $16.360 Aug. 22 '97 $17.563 $17.180
Feb. 21 '97 $17.000 $16.480 Aug. 29 '97 $17.125 $17.160
Feb. 28 '97 $17.125 $16.400 Sep. 5 '97 $18.625 $17.410
Mar. 7 '97 $17.750 $16.660 Sep. 12 '97 $18.625 $17.480
Mar. 14 '97 $17.250 $16.380 Sep. 19 '97 $18.375 $17.780
Mar. 21 '97 $16.375 $16.150 Sep. 26 '97 $18.500 $17.900
Mar. 28 '97 $16.000 $16.030 Oct. 3 '97 $18.875 $18.280
Apr. 4 '97 $16.250 $15.600 Oct. 10 '97 $18.375 $18.150
Apr. 11 '97 $16.375 $15.390 Oct. 17 '97 $18.375 $18.020
Apr. 18 '97 $16.750 $15.470 Oct. 24 '97 $18.500 $18.080
Apr. 25 '97 $17.000 $15.330 Oct. 31 '97 $17.750 $17.730
May 2 '97 $17.000 $15.840 Nov. 7 '97 $18.750 $17.780
May 9 '97 $17.000 $16.080 Nov. 14 '97 $18.563 $17.520
May 16 '97 $17.000 $16.040 Nov. 21 '97 $18.250 $17.950
May 23 '97 $17.000 $16.220 Nov. 30 '97 $18.063 $18.010
May 30 '97 $17.000 $16.270
Source: Bloomberg Business News. Past performance does not guarantee future
results.
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stocks while offering somewhat less capital appreciation potential. We
typically buy convertibles to participate in the capital appreciation of
growth-oriented stocks that either do not pay a dividend or have a dividend
yield lower than the S&P 500 Index.
Two examples of convertible preferred stocks we held in fiscal 1997
were 1) Tosco Financing Trust, an oil refining company whose shares offered
above-average yield and growth prospects and which benefited from higher U.S.
energy consumption and 2) SunAmerica, an insurance company that provides
retirement products such as life insurance, annuities and trust services.
Overall, the convertibles market significantly underperformed the S&P
500 Index during fiscal 1997. The total return of the Merrill Lynch
Convertibles Index was +17.89% for the 12 months ended November 30, 1997,
more than 900 basis points (9%) less than the S&P 500. As with other asset
classes the Fund invests in, we take a diversified approach to convertibles
and are not heavily weighted in any one industry.
OUTLOOK
In the coming months, we expect to look carefully at utility stocks in states
such as California and Massachusetts, where regulators are making changes
likely to increase industry competition. Although we believe competition
could increase utility stock price volatility in the coming years, we believe
this sector offers attractive dividend yields. Stocks of companies that can
effectively compete may also offer capital appreciation potential.
We expect financial stocks such as banks and REITs to continue to play
an important role in your Fund's portfolio in 1998. Banks have begun to offer
more innovative products and services and at the same time are increasing profit
margins through increased economies of scale. In addition, more banks are
deriving a greater percentage of revenue from services, which tend to be more
profitable than loans.
Since technology stocks typically do not meet our income
requirements, we anticipate that we generally will remain underweighted in
this volatile sector.
Overall, many economic indicators remain positive. Despite the lowest
unemployment rate in 24 years, U.S. inflation was just 1.8% for the 12 months
ended November 30, 1997 providing a healthy climate for financial assets,
especially interest-rate sensitive companies. In addition, many industrial
companies are finding new ways to boost profits through new technology,
mergers and restructuring.
Any portfolio of stocks and bonds is subject to market fluctuations.
We believe investors can more effectively prepare for inevitable market
volatility by utilizing a consistent investment discipline. We believe
Dividend and Income Fund can offer an element of diversification and
potential risk reduction for investors' portfolios by providing income from
several asset classes.
BABAK ZENOUZI
Vice President and Senior Portfolio Manager - U.S. Equities
PAUL A. MATLACK
Vice President and Senior Portfolio Manager - U.S. Fixed-Income
December 8, 1997
outlook
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Fund Performance
A $10,0000 INVESTMENT IN Dividend and Income Fund when the Fund began operating
on March 26, 1993, would have grown to $19,650 as of November 30, 1997, based on
net asset value with dividends and distributions reinvested. That's more than
35% higher than the average of the Fund's peers during the same period,
according to Lipper Analytical Services.
DIVIDEND AND INCOME FUND -
GROWTH OF A $10,000.00 INVESTMENT
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MARCH 26, 1993, TO NOVEMBER 30, 1997
Dividend and Income Fund - $19,650
Lipper Closed-End Income Fund Average (9 Funds) $15,847
Above performance assumes reinvestment of dividends and distributions. 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.
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 fiscal 1997, the Fund did not utilize this option. Given the
Fund's market price, we believed there were more effective ways of enhancing
shareholder value.
Your Reinvestment Options
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.
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FINANCIAL STATEMENTS
DELAWARE GROUP
DIVIDEND AND INCOME FUND, INC.
STATEMENT OF NET ASSETS
NOVEMBER 30, 1997
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Number Market
of Shares Value
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COMMON STOCK - 61.04%
AUTOMOBILES & AUTO EQUIPMENT - 1.70%
Chrysler ................................... 65,000 $ 2,230,312
General Motors ............................. 35,000 2,135,000
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4,365,312
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BANKING, FINANCE & INSURANCE - 9.89%
Chase Manhattan ............................ 25,000 2,715,625
CoreStates Financial ....................... 34,000 2,628,625
First Chicago NBD .......................... 7,000 547,750
Fleet Financial Group ...................... 24,600 1,625,137
J.P. Morgan & Company ...................... 20,200 2,306,588
KeyCorp .................................... 70,000 4,720,625
Mellon Bank ................................ 46,000 2,607,625
Summit Bancorp ............................. 90,000 4,196,250
Washington Mutual .......................... 60,030 4,149,574
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25,497,799
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CHEMICALS - 0.49%
Lyondell Petrochemical ..................... 49,520 1,259,665
-----------
1,259,665
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ELECTRONICS - 0.88%
AMP ........................................ 29,400 1,277,062
MascoTech .................................. 56,631 980,424
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2,257,486
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ENERGY - 4.40%
Duke Energy ................................ 35,000 1,820,000
El Paso Natural Gas ........................ 30,000 1,841,250
Occidental Petroleum ....................... 100,000 2,968,750
PacifiCorp ................................. 100,000 2,331,250
Texaco ..................................... 42,200 2,384,300
-----------
11,345,550
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FOOD, BEVERAGE & TOBACCO - 2.25%
Fortune Brands ............................. 31,900 1,154,381
Philip Morris Companies .................... 40,000 1,740,000
RJR Nabisco Holdings ....................... 80,000 2,915,000
-----------
5,809,381
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PAPER & FOREST PRODUCTS - 0.62%
Georgia-Pacific ............................ 18,700 1,596,513
-----------
1,596,513
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REAL ESTATE - 30.05%
Alexandria Real Estate Equities ............ 53,900 1,677,637
American Health Properties ................. 50,000 1,300,000
Apartment Investment & Management .......... 63,300 2,239,237
Bay Apartment Communities .................. 37,500 1,497,656
Brandywine Realty Trust .................... 90,600 2,191,387
Camden Property Trust ...................... 75,000 2,451,563
CarrAmerica Realty ......................... 40,000 1,205,000
Chateau Communities ........................ 67,730 2,065,765
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Number Market
of Shares Value
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COMMON STOCK (CONTINUED)
REAL ESTATE (CONTINUED)
Crescent Real Estate Equities .................. 56,000 $ 2,156,000
Duke Realty Investments ........................ 96,000 2,208,000
Equity Residential Properties Trust ............ 30,000 1,500,000
Essex Property Trust ........................... 48,000 1,734,000
Excel Realty Trust ............................. 54,500 1,662,250
FelCor Suite Hotels ............................ 39,000 1,416,188
First Industrial Realty Trust .................. 55,000 1,942,188
Glenborough Realty Trust ....................... 83,150 2,245,050
Golf Trust of America .......................... 66,600 1,798,200
Grove Property Trust ........................... 99,549 1,082,595
Health Care REIT ............................... 50,250 1,284,516
Highwoods Properties ........................... 29,500 1,060,156
Innkeepers USA Trust ........................... 41,100 660,169
Kilroy Realty .................................. 50,000 1,312,500
Kimco Realty ................................... 37,000 1,271,875
Lexington Corporate Properties ................. 79,300 1,154,806
Liberty Property Trust ......................... 127,470 3,561,193
Macerich Company (The) ........................ 91,000 2,468,375
National Golf Properties ....................... 60,000 1,905,000
Pacific Gulf Properties ........................ 80,000 1,790,000
Pan Pacific Retail Properties .................. 66,800 1,369,400
Parkway Properties ............................. 50,500 1,663,344
Patriot American Hospitality ................... 106,000 3,312,500
Prentiss Properties Trust ...................... 117,672 3,044,763
Public Storage ................................. 74,000 2,044,250
Reckson Associates Realty ...................... 106,000 2,815,625
SL Green Realty ................................ 20,600 535,600
Simon DeBartolo Group .......................... 79,000 2,582,313
Sovran Self Storage ............................ 50,000 1,525,000
Spieker Properties ............................. 50,000 2,031,250
Starwood Lodging Trust ......................... 51,500 2,761,688
Storage Trust Realty ........................... 70,000 1,741,250
Sun Communities ................................ 50,000 1,821,875
Vornado Realty Trust ........................... 30,000 1,344,375
-----------
77,434,539
-----------
TELECOMMUNICATIONS - 1.36%
Bell Atlantic .................................. 39,120 3,491,460
-----------
3,491,460
-----------
TRANSPORTATION & SHIPPING - 0.93%
Union Pacific .................................. 40,000 2,400,000
-----------
2,400,000
-----------
UTILITIES - 7.49%
American Electric Power ........................ 50,000 2,478,125
Boston Edison .................................. 70,000 2,450,000
GPU ............................................ 60,000 2,370,000
Houston Industries ............................. 100,000 2,368,750
Peco Energy .................................... 30,000 729,375
- -----------
Top 10 common stock holdings, representing 14.03% of net assets, are in bold
face.
<PAGE>
closed-end
income
9
STATEMENT OF NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
Number Market
of Shares Value
- --------------------------------------------------------------------------------
COMMON STOCK (CONTINUED)
UTILITIES (CONTINUED)
Rochester Gas & Electric ..................... 135,000 $ 3,712,500
Texas Utilities .............................. 75,000 3,000,000
Unicom ....................................... 75,000 2,184,375
-----------
19,293,125
-----------
MISCELLANEOUS - 0.98%
Pitney Bowes ................................. 30,000 2,521,875
-----------
2,521,875
-----------
Total Common Stock (cost $119,556,747) ....... 157,272,705
-----------
CONVERTIBLE PREFERRED STOCK - 9.16%
Automobiles & Auto Equipment - 0.51%
+BTI Cap Trust 6.50% ........................ 25,500 1,316,438
-----------
1,316,438
-----------
BANKING, FINANCE & INSURANCE - 2.67%
National Australia Bank 7.875% ............... 40,000 1,125,000
Salomon 7.625% Series FSA "DECS" ............. 70,000 2,738,750
Salomon 6.25% Series CSN "DECS" .............. 16,500 940,500
SunAmerica $3.188 "PERCS" .................... 45,000 2,092,500
-----------
6,896,750
-----------
CABLE, MEDIA AND PUBLISHING - 2.54%
Cablevision Systems Series I 8.50% ........... 67,000 2,353,375
Chancellor Media 7.00% ...................... 26,000 2,304,250
Metromedia Intl Group 7.25% .................. 40,900 1,881,400
-----------
6,539,025
-----------
ENERGY - 1.05%
+CalEnergy Capital Trust 3 6.50% ............. 31,600 1,516,800
+Tosco Financing Trust 5.75% ................ 20,000 1,185,000
-----------
2,701,800
-----------
HEALTHCARE & PHARMACEUTICALS - 0.38%
Medpartners 6.50% "TAPS" ..................... 40,500 972,000
-----------
972,000
-----------
METALS & MINING - 0.28%
Worthington Industries 7.25% "DECS" .......... 46,900 726,950
-----------
726,950
-----------
TELECOMMUNICATIONS - 0.67%
+Loral Space & Communication 6.00% ........... 27,000 1,721,250
-----------
1,721,250
-----------
TRANSPORTATION & SHIPPING - 0.58%
+Greyhound Lines 8.50% ...................... 53,500 1,498,000
-----------
1,498,000
-----------
UTILITIES - 0.48%
Houston Industries 7.00% "ACES" .............. 22,300 1,237,650
-----------
1,237,650
-----------
Total Convertible Preferred Stock
(cost $19,605,870) ......................... 23,609,863
-----------
<PAGE>
- --------------------------------------------------------------------------------
Number Market
of Shares Value
- --------------------------------------------------------------------------------
PREFERRED STOCK - 1.93%
Banking, Finance & Insurance - 1.02%
+Credit Lyonnais Capital SCA 9.50% ............... 100,000 $2,625,000
----------
2,625,000
----------
Cable, Media & Publishing - 0.91%
American Radio Systems Series B 11.375% .......... 243 28,674
Granite Broadcasting 12.75% ...................... 2,173 2,314,245
----------
2,342,919
----------
Total Preferred Stock (cost $4,525,172) .......... 4,967,919
----------
Principal
Amount
NON-CONVERTIBLE BONDS - 37.38%
Aerospace & Defense - 1.33%
+Atlas Air Inc sr unsec notes 10.75% 2005 ........ $2,000,000 2,110,000
Derlan Manufacturing sr notes 10.00% 2007 ........ 1,250,000 1,312,500
----------
3,422,500
----------
AUTOMOBILES & AUTO EQUIPMENT - 2.71%
Chief Auto Parts sr unsec notes 10.50% 2005 ...... 750,000 746,250
Collins & Aikman
Series B sr sub notes 10.00% 2007 ............... 1,250,000 1,312,500
Exide sr notes 10.75% 2002 ....................... 2,000,000 2,110,000
Motors and Gears
Series B sr notes 10.75% 2006 ................... 1,000,000 1,062,500
Venture Holdings Trust sr sub notes 9.75% 2004 ... 1,800,000 1,739,250
----------
6,970,500
----------
BANKING, FINANCE & INSURANCE - 1.17%
Chevy Chase Savings Bank sub deb 9.25% 2005 ...... 1,000,000 1,015,000
DVI unsec sr notes 9.875% 2004 ................... 425,000 442,000
First Nationwide Holdings
sr sub notes 9.125% 2003 ........................ 1,500,000 1,567,500
----------
3,024,500
----------
BUILDINGS & MATERIALS - 1.46%
Atrium Companies sr sub notes 10.50% 2006 ........ 600,000 630,000
+Maxim Group sr notes 9.25% 2007 ................. 1,000,000 982,500
+Safelite Glass sr sub notes 9.875% 2006 ......... 2,000,000 2,155,000
----------
3,767,500
----------
CABLE, MEDIA & PUBLISHING - 1.87%
+Dialog sr sub notes 11.00% 2007 ................. 2,000,000 2,030,000
Granite Broadcasting sr sub notes 9.375% 2005 .... 2,000,000 1,995,000
Muzak LP/Capital sr unsec notes 10.00% 2003 ...... 220,000 229,900
Rogers Cablesystems
sr unsec sub deb 11.00% 2015 .................... 500,000 570,000
----------
4,824,900
----------
CHEMICALS - 1.53%
BPC Holding Series B sr sec notes 12.50% 2006 .... 1,150,000 1,266,438
Sterling Chemicals
Series A sr sub notes 11.25% 2007 ............... 1,000,000 1,070,000
UCC Investors sr sub notes 11.00% 2003 ........... 1,500,000 1,597,500
----------
3,933,938
----------
COMPUTERS & TECHNOLOGY - 0.44%
Unisys sr unsec notes 11.75% 2004 ................ 1,000,000 1,140,000
----------
1,140,000
----------
<PAGE>
closed-end
income
9
STATEMENT OF NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
Principal Market
Amount Value
- --------------------------------------------------------------------------------
NON-CONVERTIBLE BONDS (Continued)
CONSUMER PRODUCTS - 1.54%
American Safety Razor
Series B sr notes 9.875% 2005 ................. $1,875,000 $2,006,250
+Fedders North America
sr sub notes 9.375% 2007 ...................... 1,000,000 1,022,500
Pen-Tab Industries
Series B sr unsec sub notes 10.875% 2007 ...... 1,000,000 947,500
----------
3,976,250
----------
ELECTRONICS - 0.69%
+HCC Industries sr sub notes 10.75% 2007 ......... 1,000,000 1,047,500
+Insilco Corp sr sub notes 10.25% 2007 ........... 700,000 726,250
----------
1,773,750
----------
ENERGY - 2.32%
Costilla Energy sr unsec notes 10.25% 2006 ...... 875,000 918,750
Falcon Drilling Series B sr notes 8.875% 2003 ... 1,000,000 1,055,000
Pride Petroleum Services
sr unsec notes 9.375% 2007 .................... 800,000 862,000
+Transamerican Energy sr notes 11.50% 2002 ....... 1,000,000 1,002,500
Trizec Hahn Series B sr notes 10.875% 2005 ...... 1,000,000 1,085,000
+United Refining sr unsec notes 10.75% 2007 ...... 1,000,000 1,050,000
----------
5,973,250
----------
FOOD, BEVERAGE & TOBACCO - 1.80%
Aurora Foods sr sub notes 9.875% 200 ............ 1,000,000 1,035,000
Big V Supermarkets
Series B sr sub notes 11.00% 2004 ............. 450,000 472,500
Core Mark International
sr sub notes 11.375% 2003 ..................... 400,000 422,000
Delta Beverage sr notes 9.75% 2003 .............. 1,250,000 1,321,875
DiGiorgio Corp Series B sr notes 10.00% 2007 .... 1,000,000 992,500
PMI Acquisition sr sub notes 10.25% 2003 ........ 375,000 397,500
----------
4,641,375
----------
HEALTHCARE & PHARMACEUTICALS - 0.71%
Healthsouth sr sub notes 9.50% 2001 ............. 750,000 789,375
Paracelsus Healthcare
sr unsec sub notes 10.00% 2006 ................ 1,000,000 1,042,500
----------
1,831,875
----------
INDUSTRIALS - 0.80%
American Builders and Contractors
Series B sr unsec sub notes 10.625% 2007 ...... 1,175,000 1,224,937
Interlake sr sub deb 12.125% 2002 ............... 800,000 833,000
----------
2,057,937
----------
LEISURE, LODGING & ENTERTAINMENT - 2.67%
AFC Enterprises sr sub notes 10.25% 2007 ........ 1,000,000 1,050,000
+Alliance Gaming sr sub notes 10.00% 2007 ........ 1,300,000 1,309,750
+Bally Total Fitness sr sub notes 9.875% 2007 .... 2,000,000 2,000,000
Cinemark USA
Series B sr sub notes 9.625% 2008 ............. 1,000,000 1,035,000
Trump Atlantic City Associates Funding
sec 1st mtg notes 11.25% 2006 ................. 1,500,000 1,488,750
----------
6,883,500
----------
<PAGE>
- --------------------------------------------------------------------------------
Principal Market
Amount Value
- --------------------------------------------------------------------------------
NON-CONVERTIBLE BONDS (Continued)
METALS & MINING - 1.49%
Commonwealth Aluminum
sr sub notes 10.75% 2006 ....................... $ 750,000 $ 806,250
+Keystone Consolidated Industries
sr sec notes 9.625% 2007 ....................... 1,900,000 1,952,250
Oregon Steel Mills
sec 1st mtg notes 11.00% 2003 .................. 1,000,000 1,085,000
----------
3,843,500
----------
PACKAGING & CONTAINERS - 1.01%
Container Corporation of America
Series A sr notes 11.25% 2004 .................. 1,000,000 1,092,500
Pierce Leahy sr sub notes 9.125% 2007 ........... 800,000 840,000
Pierce Leahy sr sub notes 11.125% 2006 .......... 584,000 661,380
----------
2,593,880
----------
PAPER & FOREST PRODUCTS - 0.74%
Drypers Series B sr notes 10.25% 2007 ........... 1,000,000 1,012,500
Four M Series B sr sec notes 12.00% 2006 ........ 450,000 482,625
Pacific Lumber sr unsec notes 10.50% 2003 ....... 400,000 415,500
----------
1,910,625
----------
Retail - 3.36%
Central Tractor sr notes 10.625% 2007 ........... 325,000 343,281
Cole National Group sr sub notes 9.875% 2006 .... 2,000,000 2,135,000
Cort Furniture Rental sr notes 12.00% 2000 ...... 1,221,000 1,346,153
Fleming Companies sr notes 10.625% 2001 ......... 1,820,000 1,929,200
+Fleming Companies sr sub notes 10.50% 2004 ...... 750,000 785,625
Ralph's Grocery sr notes 10.45% 2004 ............ 1,000,000 1,125,000
+Wilsons Leather sr notes 11.25% 2004 ............ 1,000,000 997,500
----------
8,661,759
----------
TELECOMMUNICATIONS - 3.09%
Galaxy Telecom sr sub notes 12.375% 2005 ........ 2,000,000 2,180,000
Jacor Communications
sr unsec sub notes 9.75% 2006 .................. 750,000 798,750
Outdoor Communications
sr sub notes 9.25% 2007 ........................ 575,000 577,875
Pronet sr sub notes 11.875% 2005 ................ 350,000 373,625
Rogers Communications
sr unsec notes 8.875% 2007 ..................... 1,950,000 1,954,875
STC Broadcasting
sr unsec sub notes 11.00% 2007 ................. 1,000,000 1,077,500
Telex Communications sr sub notes 10.50% 2007 ... 1,000,000 1,000,000
----------
7,962,625
----------
TEXTILES - 1.10%
Anvil Knitwear Series B sr notes 10.875% 2007 ... 1,000,000 1,032,500
Brazos Sportswear
sr unsec sub notes 10.50% 2007 ................. 750,000 753,750
Synthetic Industries
Series B sr sub notes 9.25% 2007 ............... 1,000,000 1,047,500
----------
2,833,750
----------
TRANSPORTATION & SHIPPING - 1.81%
+Atlantic Express sr sec notes 10.75% 2004 ....... 675,000 708,750
+Chemical Leaman sr notes 10.375% 2005 ........... 1,000,000 1,040,000
+Navigator Gas Transport 12.00% 2007 ............. 1,000,000 1,100,000
<PAGE>
closed-end
income
11
STATEMENT OF NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
Principal Market
Amount Value
- --------------------------------------------------------------------------------
NON-CONVERTIBLE BONDS (Continued)
Transportation & Shipping (Continued)
Teekay Shipping
1st pfd ship mtg notes 9.625% 2003 ........... $ 1,736,000 $ 1,820,630
-----------
4,669,380
-----------
UTILITIES - 1.47%
Calpine sr notes 10.50% 2006 .................. 2,000,000 2,160,000
Midland Funding II Series A deb 11.75% 2005 ... 1,400,000 1,610,000
-----------
3,770,000
-----------
MISCELLANEOUS - 2.27%
Graphic Controls
Series A sr sub notes 12.00% 2005 ............ 2,000,000 2,235,000
+Huntsman sr sub notes 9.50% 2007 .............. 2,000,000 2,100,000
Loomis Fargo & Co
unsec sr sub notes 10.00% 2004 ............... 750,000 755,625
Riverwood International
sr unsec notes 10.25% 2006 ................... 750,000 765,000
-----------
5,855,625
-----------
Total Non-Convertible Bonds
(cost $92,321,125) ........................... 96,322,919
-----------
CONVERTIBLE BONDS - 9.08%
AEROSPACE & DEFENSE - 0.76%
+Kellstrom Industries sub notes 5.75% 2002 ..... 1,735,000 1,973,563
-----------
1,973,563
-----------
AUTOMOBILES & AUTO EQUIPMENT - 0.16%
+Tower Automotive sub notes 5.00% 2004 ......... 400,000 402,000
-----------
402,000
-----------
BUSINESS SERVICES - 0.21%
+Personnel Group of America
sub notes 5.75% 2004 ......................... 450,000 542,250
-----------
542,250
-----------
ELECTRONICS - 0.38%
+Atmel SA 3.25% 2002 (a) ....................... 600,000 579,000
Kent Electronics sub notes 4.50% 2004 ......... 418,000 389,262
-----------
968,262
-----------
HEALTHCARE & PHARMACEUTICALS - 0.81%
+Sunrise Assisted Living sub notes 5.50% 2002 .. 1,800,000 2,097,000
-----------
2,097,000
-----------
INDUSTRIALS - 0.62%
+Thermo Fibertek sub notes 4.50% 2004 .......... 1,530,000 1,591,200
-----------
1,591,200
-----------
LEISURE, LODGING & ENTERTAINMENT - 0.51%
Capstar Hotel sub notes 4.75% 2004 ............ 1,260,000 1,307,250
-----------
1,307,250
-----------
REAL ESTATE - 5.11%
Alexander Haagen Properties
Series A sub deb 7.50% 2001 .................. 2,270,000 2,281,350
+Atria Communities sub notes 5.00% 2002 ........ 940,000 952,925
IRT Property sub deb 7.30% 2003 ............... 2,000,000 2,205,000
LTC Properties sub deb 8.50% 2000 ............. 1,000,000 1,362,500
<PAGE>
- --------------------------------------------------------------------------------
Principal Market
Amount Value
- --------------------------------------------------------------------------------
CONVERTIBLE BONDS (Continued)
REAL ESTATE (CONTINUED)
LTC Properties sub deb 8.50% 2001 .............. $ 450,000 $ 592,875
Malan Realty Investors
unsec sub deb 9.50% 2004 ...................... 2,300,000 2,392,000
Mid-Atlantic Realty Trust sub deb 7.625% 2003 .. 1,500,000 1,948,125
Sizeler Property Investors sub deb 8.00% 2003 .. 1,500,000 1,451,250
-----------
13,186,025
-----------
TELECOMMUNICATIONS - 0.52%
+Tel Save Holdings sub notes 4.50% 2002 ......... 1,230,000 1,329,937
-----------
1,329,937
-----------
Total Convertible Bonds (cost $21,357,493) ..... 23,397,487
-----------
SHORT-TERM SECURITIES - 0.62%
*U.S. Treasury Bills 5.155% due 1/22/98 ......... 110,000 109,181
*U.S. Treasury Bills 5.185% due 1/22/98 ......... 1,487,000 1,475,863
-----------
Total Short Term Securities (cost $1,585,044) .. 1,585,044
-----------
TOTAL MARKET VALUE OF SECURITIES OWNED - 119.21%
(cost $258,951,451) ....................................... $ 307,155,937
LIABILITIES NET OF RECEIVABLES AND OTHER ASSETS - (19.21%) .. (49,504,531)
-------------
NET ASSETS APPLICABLE TO 14,307,000 SHARES
($0.01 par value) OUTSTANDING; EQUIVALENT TO $18.01
PER SHARE - 100.00% ....................................... $ 257,651,406
=============
- ----------
DECS - Dividend Enhanced Convertible Stock
PERCS - Preferred Equity Redemption Cumulative Stock
TAPS - Threshold Appreciation Price Security
ACES - Automatic Common Exchange 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. At November 30, 1997, these securities amounted to
43,450,488 or 16.86% of net assets.
* US 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.
(a) Coupon will increase periodically based upon a predetermined
schedule. Stated interest rate in effect at November 30, 1997.
- --------------------
COMPONENTS OF NET ASSETS AT NOVEMBER 30, 1997:
Common Stock, $0.01 par value, 500,000,000 shares
authorized to the Fund ..................................... $200,958,246
Accumulated net realized gain on investments ............... 8,488,674
Net unrealized appreciation of investments ................. 48,204,486
------------
Total net assets ............................................ $257,651,406
============
See accompanying notes
<PAGE>
closed-end
income
12
DELAWARE GROUP DIVIDEND AND INCOME FUND, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED NOVEMBER 30, 1997
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest ..................................... $12,222,885
Dividends .................................... 7,762,573 $19,985,458
----------- -----------
EXPENSES:
Management fees .............................. 1,612,896
Administrative fees .......................... 446,809
Commercial paper fees ........................ 109,862
Reports to shareholders ...................... 58,674
Shareholders' meeting ........................ 40,000
NYSE fees .................................... 30,187
Amortization of organizational expenses ...... 28,809
Transfer agent fees .......................... 21,602
Professional fees ............................ 17,659
Directors' fees .............................. 9,608
Other ........................................ 15,954
-----------
Total operating expenses
(before interest expense) .................. 2,392,060
Interest expense ............................ 3,120,012
-----------
Total expenses .............................. 5,512,072
-----------
NET INVESTMENT INCOME ........................ 14,473,386
-----------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS:
Net realized gain on investment transactions . 13,863,649
Net change in unrealized appreciation
on investments ............................... 30,208,891
-----------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS ......................... 44,072,540
-----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ................... $58,545,926
===========
DELAWARE GROUP DIVIDEND AND INCOME FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
Year Ended Year Ended
11/30/97 11/30/96
OPERATIONS:
Net investment income ...................... $ 14,473,386 $ 15,233,859
Net realized gain on investment transactions 13,863,649 7,639,969
Net change in unrealized appreciation
on investments ............................ 30,208,891 18,652,232
------------- -------------
Net increase in net assets
resulting from operations ................. 58,545,926 41,526,060
------------- -------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income ...................... (14,473,386) (15,641,809)
Net realized gains on
investment transactions ................... (6,987,136) (5,818,691)
------------- -------------
(21,460,522) (21,460,500)
------------- -------------
NET INCREASE IN NET ASSETS ................. 37,085,404 20,065,560
NET ASSETS:
Beginning of year .......................... 220,566,002 200,500,442
------------- -------------
End of year ................................ $ 257,651,406 $ 220,566,002
============= =============
See accompanying notes
<PAGE>
DELAWARE GROUP DIVIDEND AND INCOME FUND, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED NOVEMBER 30, 1997
- --------------------------------------------------------------------------------
Increase (Decrease) in Cash:
Cash flows provided by operating activities:
Interest and dividends received
(excluding amortization of $266,706) ...................... $ 19,658,735
Operating expenses paid .................................... (2,471,492)
Interest expenses paid ..................................... (3,460,608)
Sale of short-term portfolio investments, net .............. 2,608,390
Purchase of long-term portfolio investments ................ (212,018,439)
Proceeds from disposition of long-term portfolio investments 214,758,433
-------------
Net cash provided by operating activities .................. 19,075,019
-------------
Cash flows used for financing activities:
Cash provided by issuance of commercial paper .............. 226,922,964
Cash used to liquidate commercial paper .................... (226,539,392)
Cash dividends paid ........................................ (21,460,522)
-------------
Net cash used for financing activities ..................... (21,076,950)
-------------
Net decrease in cash ........................................ (2,001,931)
Cash at beginning of year ................................... 2,006,222
-------------
Cash at end of year ......................................... $ 4,291
=============
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 ........ $ 58,545,926
-------------
Decrease in investments .................................... 6,908,252
Net realized gain from investment transactions ............. (13,863,649)
Net change in unrealized appreciation on investments ....... (30,208,891)
Increase in prepaid assets ................................. (136)
Decrease in receivable for investments sold ................ 536,626
Increase in interest and dividends receivable .............. (60,017)
Decrease in deferred organizational expenses ............... 39,667
Decrease in payable for investments purchased .............. (2,363,200)
Decrease in interest payable ............................... (396,361)
Decrease in accrued expenses and other liabilities ......... (63,198)
-------------
Total adjustments ......................................... (39,470,907)
-------------
Net cash provided by operating activities ................... $ 19,075,019
=============
See accompanying notes
<PAGE>
closed-end
income
13
DELAWARE GROUP
DIVIDEND AND INCOME FUND, INC.
FINANCIAL HIGHLIGHTS
NOVEMBER 30, 1997
- --------------------------------------------------------------------------------
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 Year Ended 3/26/93* to
11/30/97 11/30/96++ 11/30/95 11/30/94 11/30/93
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................... $15.42 $14.01 $12.69 $14.91 $14.04+
Income (loss) from investment operations:
Net investment income...................................... 1.01 1.07 1.13 1.10 0.68
Net realized and unrealized gain (loss) on investments .... 3.08 1.84 1.34 (1.73) 0.81
---- ------ ------ ----- ------
Total from investment operations........................... 4.09 2.91 2.47 (0.63) 1.49
---- ---- ---- ----- -----
Less dividends and distributions:
Dividends from net investment income....................... (1.01) (1.09) (1.15) (1.12) (0.62)
Distributions from net realized gains on
investment transactions .................................. (0.49) (0.41) - (0.47) -
---- ---- ------ ----- ----
Total dividends and distributions.......................... (1.50) (1.50) (1.15) (1.59) (0.62)
---- ---- ------ ----- ------
Net asset value, end of period................................. $18.01 $15.42 $14.01 $12.69 $14.91
====== ====== ====== ====== ======
Market value, end of period.................................... $18.06 $16.63 $14.00 $12.00 $14.50
====== ====== ====== ====== ======
Total investment return based on:(1)
Market value............................................... 18.34% 30.67% 28.71% (7.23)% 0.82%
===== ===== ===== ===== ====
Net asset value............................................ 27.22% 21.11% 20.72% (4.60)% 10.76%
===== ===== ===== ===== =====
Ratios and supplemental data:
Net assets, end of period (000 omitted).................... $257,651 $220,566 $200,500 $181,510 $213,292
======== ======== ======== ======== ========
Ratio of total operating expenses to adjusted average
weekly net assets (before interest expense) ............. 0.82% 0.87% 0.89% 1.01% 0.94%**
Ratio of interest expense to adjusted average
weekly net assets ........................................ 1.06% 1.17% 1.32% 0.76%* * N/A
Ratio of net investment income to adjusted average weekly
net assets .............................................. 4.93% 5.80% 6.68% 6.80% 6.88%**
Portfolio turnover......................................... 74% 69% 118% 73% 113%
Average commission rate paid............................... $0.0584 $0.0532 N/A N/A N/A
Leverage analysis:
Debt outstanding at end of period (000 omitted) ........... $55,000 $55,000 $55,000 $48,000 N/A
Average daily balance of debt outstanding (000 omitted).... $54,631 $54,641 $52,488 $40,803 N/A
Average daily balance of shares outstanding (000 omitted).. 14,307 14,307 14,307 14,307 N/A
Average debt per share..................................... $3.82 $3.82 $3.67 $2.85 N/A
</TABLE>
<PAGE>
- --------------------
* 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.
++ Certain prior year information has been reclassified to conform with
current year presentation.
(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.
See accompanying notes
<PAGE>
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income
13
DELAWARE GROUP
DIVIDEND AND INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1997
- --------------------------------------------------------------------------------
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. The primary investment objective is to seek high current income.
Capital appreciation is a secondary objective.
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 on an exchange are valued at the last
quoted sale price as of the close of the NYSE on the valuation date. Securities
not traded or securities not listed on an exchange are valued at the mean of the
last quoted bid and asked prices. Long-term debt securities are valued by an
independent pricing service and such prices are believed to reflect the fair
value of such securities. 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. Short-term instruments having less than 60 days
to maturity are valued at amortized cost which approximates market value. Other
securities and assets for which market quotations are not readily available are
valued at fair value as determined in good faith by or under the direction of
the Fund's Board of Directors.
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 in the
financial statements. Income and capital gain distributions are determined in
accordance with federal income tax regulations which may differ from generally
accepted accounting principles.
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 year ended
November 30, 1997.
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 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 is recorded on the ex-dividend date and interest income is
recorded on the accrual basis. Original issue discounts are accreted to interest
income over the lives of the respective securities.
Certain Fund expenses are paid through "soft dollar" arrangements with brokers.
The amount of these expenses is less than 0.01% of the Fund's average weekly net
assets.
Certain prior year information has been reclassified to conform with current
year presentation.
<PAGE>
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
2. Investment Management, 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, 1997, the Fund had a liability for Investment Management
fees of $141,785.
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 0.15% of the Fund's adjusted average weekly net assets.
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 year ended November 30, 1997, the Fund made purchases of $209,655,239
and sales of $214,221,348 of investment securities other than U.S. government
securities and temporary cash investments.
At November 30, 1997, the aggregate cost of securities and unrealized
appreciation (depreciation) for federal income tax purposes was as follows:
Cost of Investments ........................................ $258,951,451
============
Aggregated unrealized appreciation ......................... $ 49,314,809
Aggregated unrealized depreciation ......................... 1,110,323
------------
Net unrealized appreciation ................................ $ 48,204,486
============
4. Capital Stock
There are 500,000,000 shares of $0.01 par value capital stock authorized.
The Fund did not repurchase any shares under The Share Repurchase Program during
the year ended November 30, 1997.
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.
<PAGE>
closed-end
income
15
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
5. Commercial Paper
As of November 30, 1997, $55,000,000 of commercial paper was outstanding with an
amortized cost of $54,865,041. The weighted average discount rate of commercial
paper outstanding at November 30, 1997, was 5.63%. The average daily balance of
commercial paper outstanding during the year ended November 30, 1997, was
$54,631,278 at a weighted average discount rate of 5.60%. The maximum amount of
commercial paper outstanding at any time during the 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. Interest on borrowings
is based on market rates in effect at the time of borrowing. The commitment fee
is computed at the rate of 0.15% per annum on the unused balance. During the
year ended November 30, 1997, there were no borrowings under this arrangement.
6. Market and Credit Risks
The Fund may invest in high-yield fixed-income securities which carry ratings of
BB or lower by S&P and/or Ba or lower by Moody's. Investments in these higher
yielding securities may be accompanied by a greater degree of credit risk than
higher rated securities. Additionally, lower rated securities may be more
susceptible to adverse economic and competitive industry conditions than
investment grade securities.
The Fund may invest up to 10% of its total assets in illiquid securities which
may include securities with contractual restrictions on resale, securities
exempt from registration under Rule 144A of the Securities Act of 1933, as
amended, and other securities which may not be readily marketable. The relative
illiquidity of some of these securities may adversely affect the 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.
7. Written Options
When the Fund writes an option, an amount equal to the premium received by the
Fund is recorded as a liability and is subsequently adjusted to the current
market value of the option written. Premiums received from writing options that
expire unexercised are treated by the Fund on the expiration date as realized
gains from investments. The difference between the premium and the amount paid
on effecting a closing purchase transaction, including brokerage commissions, is
also treated as a realized gain, or if the premium is less than the amount paid
for the closing purchase transaction, as a realized loss. If a call option is
exercised, the premium is added to the proceeds from the sale of the underlying
security in determining whether the Fund has realized a gain or loss. If a put
option is exercised, the premium reduces the cost basis of the securities
purchased by the Fund. The Fund as writer of an option bears the market risk of
an unfavorable change in the price of the security underlying the written
option.
Transactions in options written during the year ended November 30, 1997, were as
follows:
Number of Premiums
Contracts Received
-------- --------
Options outstanding at November 30, 1996 ......... 1,458 $259,555
Options exercised ................................ 1,458 259,555
-------- --------
Options outstanding at November 30, 1997 ......... -- $ --
-------- --------
<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, 1997, 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 four years in the period then ended and
for the period March 26, 1993, (commencement of operations) to November 30,
1993. These financial statements and financia l 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 and financial highlights. Our procedures included confirmation of
securities owned as of November 30, 1997, 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, 1997, 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 four 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 13, 1998
<PAGE>
closed-end
income
16
PROXY RESULTS (UNAUDITED)
- --------------------------------------------------------------------------------
During the year ended November 30, 1997, The Delaware Group Dividend and Income
Fund shareholders voted on the following proposals at the annual meeting of
shareholders on July 15, 1997. The description of each proposal and number of
shares voted are as follows:
Shares Shares Voted
Voted Withheld
For Authority
------------ ------------
1 To elect the Fund's Board of Directors:
Wayne A. Stork ....................... 9,514,273 110,691
Walter P. Babich ..................... 9,513,112 111,852
Anthony D. Knerr ..................... 9,522,897 102,067
Ann R. Leven ......................... 9,518,757 106,207
W. Thacher Longstreth ................ 9,507,122 117,842
Charles E. Peck ...................... 9,510,419 114,545
Thomas F. Madison .................... 9,519,597 105,367
Jeffrey J. Nick ...................... 9,517,824 107,140
Shares Shares Shares
Voted Voted Voted
For Against Abstain
--------- -------- -------
2. To ratify the appointment of
Ernst & Young LLP as the
Fund's independent auditors .... 9,425,366 68,186 131,412
TAX INFORMATION (UNAUDITED)
- --------------------------------------------------------------------------------
Of the ordinary income distributions paid by the Fund during its taxable year
ended November 30, 1997, 28.04% qualifies for the dividends received deduction
for corporations. Additionally, the Fund distributed long-term capital gains
of $0.087 per share and $0.000397 per share to shareholders of record on
December 31, 1996, and February 14, 1997, respectively.
<PAGE>
Registrar and
Stock Transfer Agent
ChaseMellon Shareholder Services, L.L.C.
P.O. Box 590
Ridgefield Park, NJ
1.800.851.9677
For Securities Dealers
1.800.362.7500
Financial Institutions
Representatives Only
1.800.659.2265
Recordholders as of November 30, 1997: 618
Copy Rights Delaware Distributors, L.P.
DDF
Listed
NYSR
The New York Stock Exchange
DELAWARE
GROUP
=====================
Philadelphia o London
Printed in the USA
on recycled paper
(409)
AR-DDF[11/97]TKO1/98
Closed-end Income
