Dividend and
Income Fund
service and guidance
[GRAPHIC OMITTED: PHOTO OF TWO MEN AND A WOMAN IN DISCUSSION]
[GRAPHIC OMITTED: PHOTO OF A COMPUTER KEYBOARD]
[GRAPHIC OMITTED: PHOTO OF A MAN IN SUIT WITH ARMS CROSSED]
professional management
[GRAPHIC OMITTED: PHOTO OF GLASSES, KEYBOARD AND BALANCE SHEET]
goals
[GRAPHIC OMITTED: PHOTO OF MAN, WOMAN, CHILD LOOKING AT OCEAN ON BEACH]
1998
Annual
Report
[GRAPHIC OMITTED: LOGO OF DELAWARE INVESTMENTS
----------------------------
Philadelphia * London]
A TRADITION OF SOUND INVESTING
commitment
Investing Objectives and Strategies
[GRAPHICS OMITTED: PHOTO OF COMPUTER KEYBOARD AND PHOTO OF MAN, WOMAN,
CHILD LOOKING AT OCEAN ON BEACH]
DELAWARE GROUP DIVIDEND AND INCOME FUND'S OBJECTIVE
To provide high current income, and secondarily, capital appreciation
from U.S. stocks and high-yield bonds. Asset class concentration depends
on the portfolio managers' 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 high yields 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. As a result, convertible securities generally offer higher
income than common stocks and an opportunity for price appreciation when
the value of the underlying security rises. The Fund may buy
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 to compensate investors for the additional risks. Prices of high-
yield bonds tend to be less sensitive to changes in interest rates than
higher rated bonds.
LEVERAGING
About $55 million (23.7%) of your Fund's assets were leveraged as of
November 30, 1998. Leveraging is a tool that is generally not available
to open-end mutual funds and one that can be an important contributor to
your Fund's income and capital appreciation. Of course, there is no
guarantee the Fund will achieve its objective by using leveraging.
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.
closed-end income
December 18, 1998
Dear Shareholder:
DURING FISCAL YEAR 1998, DETERIORATING economic and financial conditions
around the globe caused U.S. securities markets to decline. The
ebullient market climate of the past four years faded in late summer as
a wave of recession fears and concern about credit risk weakened
investor confidence. Most asset classes, with the exception of U.S.
Treasury bonds, stalled in the wake of uncertainty.
The Federal Reserve Board's Open Market Committee then stepped in,
lowering its target for short-term interest rates three times. As of
November 30, the federal funds rate (the rate charged between banks for
overnight loans) had been reduced by 75 basis points (0.75%) to 4.75%.
The rate cuts sent stocks soaring to new highs, and restored much needed
liquidity in the bond market.
For the 12 months ended November 30, 1998, Dividend and Income Fund
(NYSE symbol: DDF) provided a disappointing total return of -0.12% (at
net asset value with distributions reinvested). This was far less than
the return from the large cap stock S&P 500 Index, and the average
return of our peers in the Lipper Closed-End Income Fund Average.
The Fund's underperformance of its benchmarks was caused mainly by
our considerable allocation to Real Estate Investment Trusts (REITs).
Lack of liquidity in both the stock and high-yield bond markets created
a global credit crunch making it difficult for REITs to secure the
capital necessary to support continued growth. The REIT sector was down
14% for the year through November 30.
On a positive note, Dividend and Income Fund shares closed at an
8.63% premium to net asset value on November 30, 1998. In our report to
you last June, you may recall that the Fund was trading at a discount to
its net asset value. We believed this was temporary, since the Fund had
previously traded at a premium to net asset value. We are gratified to
see the Fund again trading above its net asset value.
AVERAGE ANNUAL TOTAL RETURNS
AT NET ASSET VALUE FOR PERIODS ENDED NOVEMBER 30, 1998
Lifetime: Premium(+)/
March 26, 1993 Discount(-)
Through as of
12 Months 5 Years November 30, 1998 November 30, 1998
Dividend and
Income Fund -0.12% +12.13% +12.70% +8.63%
Standard &
Poor's 500
Index +23.68% +22.97% +20.88%
Merrill Lynch
High-Yield
Bond Index +4.61% +9.22% +9.79%
Lipper
Closed-End
Income Fund
Average +7.41% +11.17% +9.74%
The Fund's total return and the returns of unmanaged indexes shown above
assume reinvestment of distributions. Past performance does not
guarantee future results. The Fund's inception date was March 26, 1993.
There were 11 funds in the Lipper Closed-End Income and Preferred Stock
Fund Average for the 12-month period and 9 funds for the lifetime period
ended 11/30/98, respectively. The indexes are not available for direct
investment.
As of November 30, Dividend and Income Fund's dividend yield, based
on market price, was 8.51%. This was more than six times the 1.37%
dividend yield on stocks in the unmanaged S&P 500 Index. The Fund's
yield was boosted by investments in the utilities sector, which
generally offered yields over 5%.
In conjunction with this summer's sell-off in riskier types of
investments, high-yield bond prices fell sharply. Lack of liquidity and
low demand pushed prices down an average of 6.5%. The net result was a
loss in principal for high-yield bonds. The supply and demand equation
also weakened corporate bond yields. This negatively affected
performance of the Fund's bond holdings.
On the pages that follow, your Fund's three co-managers discuss
Dividend and Income Fund's fiscal 1998 performance. Michael Dugan, who
has two decades of investment management experience, has joined Babak
Zenouzi and Paul Matlack as a portfolio manager of the Fund (see below).
The managers also review the Fund's current positioning as they seek
high current income and capital appreciation from U.S. stocks and high-
yield bonds.
One final note, we are pleased to report that Dividend and Income
Fund paid a year-end distribution of $0.88 ($0.787 was a long-term
capital gain and $0.093 was a short-term capital gain, both from
realized securities profits.) to shareholders of record on December 9,
1998.
We wish you our best this new year, and look forward to reporting
to you again in June.
Sincerely,
/S/ Jeffrey J. Nick
JEFFREY J. NICK
Chairman, President and
Chief Executive Officer
Delaware Investments Family of Funds
Introducing Michael Dugan, Co-Manager of Dividend and Income Fund
Michael Dugan has joined Babak Zenouzi and Paul Matlack as co-manager of
the Dividend and Income Fund. Mr. Dugan will work with Mr. Zenouzi,
primarily on the stocks and convertible securities in the portfolio.
Mr. Dugan has been in the investment business for over 20 years. He
joined Delaware Management Company as a portfolio manager in May 1997.
He was previously a senior portfolio manager and research director at
Thompson, Siegel and Walmsley in Richmond, VA. Mr. Dugan received a
bachelor's degree in 1969 and a Master in Finance degree in 1981,
both from Loyola College.
Portfolio Managers' Review
BY BABAK ZENOUZI
Vice President/Senior Portfolio Manager
U.S. Equities
MICHAEL DUGAN
Vice President/Senior Portfolio Manager
U.S. Equities
PAUL A. MATLACK
Vice President/Senior Portfolio Manager
U.S. Fixed Income
December 18, 1998
ACHIEVING TOTAL RETURN THROUGH DIVERSIFICATION
Dividend and Income Fund's asset allocation policy is based on a careful
process of evaluating a security's risk relative to its potential
rewards. The Fund combines investing in income-oriented stocks whose
dividend yields are higher than the S&P 500 Index, with high-yield
corporate bonds. The Fund may also invest in convertible preferred
stocks and convertible bonds, which generally offer higher income than
common stocks.
Diversification across asset classes can help buffer the Fund's
performance during periods of short-term volatility. By investing in
both stocks and high-yield bonds, your Fund provides more uniform
exposure to different markets which can help deliver more consistent
results over time. Of course, over short-term periods such as 1998, both
asset classes may be negatively impacted by market conditions.
[GRAPHIC OMITTED: PIE CHART PORTFOLIO HIGHLIGHTS AND ASSET MIX]
PORTFOLIO HIGHLIGHTS AND ASSET MIX
NOVEMBER 30, 1998
Preferred Stock 1.53%
Convertible Bonds 5.45%
Convertible Preferred
Stock 9.46%
Non-Convertible
Corporate Bonds 33.45%
Cash 6.96%
Common Stocks 43.15%
- ----------------------------------------------------
Beta* 0.48
Portfolio Turnover Rate 74%
Current Monthly Dividend Rate $0.125 per share
- ----------------------------------------------------
*A measure of DDF share price volatility relative to the S&P 500 Index
for the preceding three years. A number less than 1.00 means a
security's price has fluctuated less in price than the Index. A number
more than 1.00 means the security's price has fluctuated more than the
Index.
REITS: CAUGHT IN THE CREDIT CRUNCH
Since October 1997, the REIT market has benefited from strong tenant
demand and a trend toward higher rents in many parts of the country.
However, financial problems in Russia, Asia and other emerging markets
raised concerns about lenders' ability to finance continued domestic
development.
By September 1998, investors and banks were lending more
cautiously. Lower availability of capital affected all types of equity
assets, including REITs, which had a more difficult time acquiring new
properties and companies. The silver lining to this cloud is that
reduced construction as a result of the credit crunch has helped push
property prices higher.
As of November 30, 1998, Dividend and Income Fund had reduced its
equity REIT positioning to 18.44% of net assets from 30.05% at the
opening of the fiscal year. However, REITs are still the Fund's largest
sector and the area where the Fund's performance was hurt most in fiscal
1998.
Our strategy is to stay the course in REITs. We believe lending and
market conditions will improve in 1999, though we expect returns on
REITs to be moderate. Strong dividend yields in this sector - ranging
from 5% to 6% - continue to attract our attention.
UTILITIES: DEREGULATION YIELDS OPPORTUNITY
Utility stocks accounted for 8.71% of net assets as of November 30.
Traditionally, these stocks have offered above-average dividend yields.
Over the past few years, electric companies have been moving toward
deregulation and competition, a path first broken by other industries,
including telecommunications, natural gas, and airlines.
Several states, including Pennsylvania, have enacted legislation
allowing retail electric utility competition. Others, including
California, Florida and Texas are now considering it. We believe
deregulation will give utility companies the opportunity to grow, and we
hold several stocks that we believe may benefit. These include
Pennsylvania-based PECO Energy and California's General Public Utilities
- - all currently yielding between 4% and 5%.
BANKS: GLOBAL EXPOSURE BAD FOR BUSINESS
During the second half of 1998, the economic turmoil that began in Asia
a year ago caused stocks on Wall Street to stall. Many banks were among
them, having taken big hits from their exposure to ailing overseas
economies.
We minimized the Fund's losses in this sector by reducing Dividend
and Income Fund's bank allocation to 9.15%. Our stock selection within
this sector has focused less on banks with far reaching global exposure
such as J.P. Morgan & Company - and more on those whose business is
domestically oriented. Among them are Mellon Bank, Fleet Financial Group
and Summit Bancorp. We continue to hold Chase Manhattan and BankAmerica
despite their global exposure because of their consistently strong
yields and positive earnings prospects.
ENERGY: MASSIVE CONSOLIDATION
Merger activity in the banking industry in 1998 is being rivaled by
plans for massive consolidations among energy companies. In August,
British Petroleum and Amoco announced a merger which has since been
completed. In December, Exxon and Mobil agreed to merge. These two
mergers represent the largest merger/acquisition transactions in
history.
In early December, oil stock prices fell sharply due to concerns
that demand for oil companies' services and equipment would decline
because of low crude oil prices and industry consolidation. Not since
the oil bust of 1986 have oil prices been so low.
liquidity
Since May, we have added several oil companies to the portfolio -
Texaco, Mobil and Chevron. The Fund's overall weighting in this sector
was 3.35% as of the end of November. With stock prices falling and
dividend yields well above average, this sector looks very inviting for
future growth and income potential.
LIQUIDITY DROUGHT PRESSURED HIGH-YIELD CORPORATE BONDS
Early in fiscal 1998, U.S. high-yield bonds delivered the strongest
performance of any segment of the fixed-income market. At the time,
strong liquidity supported bond prices. However, the summer's reports of
foreign loan defaults and credit problems pushed U.S. high-yield bonds
from center stage. Cash flows abruptly shifted away from stocks and
high-yield bonds, and into the safety net of U.S. Treasuries. This
liquidity drought halted new debt issuance.
AFTER THE FED'S OCTOBER INTEREST RATE REDUCTION, LIQUIDITY IN MANY HIGH-
YIELD ISSUES IMPROVED.
After the Fed's October interest rate reduction, liquidity in many
high-yield issues improved. Lower rates enabled corporations to sell new
bonds; however, new issuances this late in the year did not keep up with
renewed investor demand. This imbalance pushed high-yield bond prices
slightly higher, though yields declined somewhat as a result.
[GRAPHIC OMITTED: WORM CHART SHOWING DIVIDEND AND INCOME FUND MARKET PRICE VS.
NET ASSET VALUE]
DIVIDEND AND INCOME FUND
MARKET PRICE VS. NET ASSET VALUE
DECEMBER 1, 1997 TO NOVEMBER 30, 1998
Premium/Discount Data
Current +8.63% on 11/30/98
High +14.04% on 10/2/98
Low -4.79% on 5/29/98
Month and Year Market Price Net Asset Value
Nov. 28,'97 $18.06 $18.01
Dec. 26,'97 $18.81 $18.15
Jan. 30,'98 $18.25 $17.79
Feb. 27,'98 $19.38 $17.90
Mar. 27,'98 $18.68 $18.34
Apr. 24,'98 $18.81 $18.12
May 29,'98 $16.94 $17.79
June 26,'98 $17.37 $17.38
July 31,'98 $18.06 $17.03
Aug. 28,'98 $16.94 $15.89
Sep. 25,'98 $17.56 $15.72
Oct. 30,'98 $17.00 $15.19
Nov. 30,'98 $17.63 $16.23
Source: Bloomberg Business News. Past performance does not guarantee
future results.
In the recent market environment, Dividend and Income Fund's short-
term performance from high-yield bonds - focused on bonds rated BB or
lower - was disappointing. As there was no fundamental change in the
portfolio's holdings, that is, there were no credit problems that caused
our underperformance, we remain confident that our holdings will
continue to pay the high level of income for which we selected them.
OUTLOOK
In 1999, we believe that corporate earnings growth will remain
essentially flat. In our opinion, corporate profits will be under
considerable pressure from rising labor costs and financial market
excesses over the next 12 months. This may pave the way for a profit
rebound in 2000.
Growth rates in the real estate industry are likely to moderate in
1999 and 2000. However, our long-term outlook for the real estate market
remains positive. We believe that many more properties will switch from
private hands to REIT ownership over the coming years.
We expect continued market volatility over the coming months. Many
economists believe that the Fed is finished cutting rates for a while.
We will wait and see if the Fed's previous actions have been enough to
ward off the strain of the global financial crisis and support future
U.S. economic growth.
In spite of short-term volatility, we are confident that our
diversified, value-oriented strategy offers the potential for long-term
rewards. Over its lifetime of five years, Dividend and Income Fund has
very capably fulfilled its investment objective of capturing high
current income with capital appreciation potential as well.
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 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.
Fund Performance
A $10,000 INVESTMENT IN DIVIDEND and Income Fund since inception on
March 26, 1993, would have grown to $19,690 as of November 30, 1998,
based on net asset value with distributions reinvested. That's 16.0%
higher than the average of the Fund's peers during the same period.
[GRAPHIC OMITTED: VERTICAL BAR CHART SHOWING DIVIDEND AND INCOME
FUND GROWTH OF A $10,000 INVESTMENT]
DIVIDEND AND INCOME FUND
GROWTH OF A $10,000 INVESTMENT
MARCH 26, 1993 TO NOVEMBER 30, 1998
Dividend and Lipper Closed-End
Income Fund Income Fund
(9 funds)
$19,690 $16,972
Performance assumes reinvestment of 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.
YOUR FUND'S SHARE BUYBACK PROGRAM
In 1994, your Fund's board of directors approved a share repurchase
program that authorizes Global Dividend and Income Fund's lead manager
to purchase up to 10% of the Fund's outstanding shares on the floor of
the New York Stock Exchange. Through November 30, we did not make use of
this option since we did not see this as the most effective way to add
value to the portfolio.
JEFFREY NICK NAMED CHAIRMAN
On December 17, 1998, Jeffrey J. Nick was named Chairman of the Delaware
Investments Family of Funds. He replaces Wayne A. Stork who has retired
as Chairman of the Board of Directors, but continues to serve as a Board
Member. Mr. Nick was named President and Chief Executive Officer of
Delaware Investments Family of Funds in October 1997. He has been CEO of
Lincoln National Investment Companies since October 1996 and previously
managed Lincoln's operations in the United Kingdom. Mr. Nick holds an
MBA from the University of Chicago and a bachelor of arts degree from
Princeton University.
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS
DELAWARE GROUP
DIVIDEND AND INCOME FUND, INC.
STATEMENT OF NET ASSETS
NOVEMBER 30, 1998
NUMBER OF MARKET
SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK - 53.76%
AUTOMOBILES & AUTO EQUIPMENT - 1.06%
General Motors 35,000 $2,450,000
------------
2,450,000
------------
BANKING, FINANCE & INSURANCE - 9.15%
BankAmerica 39,606 2,581,816
Chase Manhattan 50,000 3,171,875
First Union 55,080 3,346,110
Fleet Financial Group 49,200 2,051,025
KeyCorp 90,000 2,761,875
Mellon Bank 46,000 2,895,125
Summit Bancorp 55,000 2,299,688
Washington Mutual 55,045 2,134,714
------------
21,242,228
------------
CHEMICALS - 1.37%
DuPont(E.I.)deNemours 35,000 2,056,250
Imperial Chemical ADR 30,000 1,136,250
------------
3,192,500
------------
CONSUMER PRODUCTS - 0.61%
Tenneco 40,000 1,425,000
------------
1,425,000
------------
ELECTRONICS - 1.03%
Emerson Electric 35,000 2,275,000
Raytheon-Class A 2,232 122,060
------------
2,397,060
------------
ENERGY - 3.35%
Chevron 28,000 2,341,500
Mobil 35,000 3,016,563
Texaco 42,200 2,429,138
------------
7,787,201
------------
FOOD, BEVERAGE & TOBACCO - 1.72%
Fortune Brands 51,900 1,767,844
Philip Morris 40,000 2,237,500
------------
4,005,344
------------
HEALTHCARE & PHARMACEUTICALS - 0.49%
American Health Properties 50,000 1,134,375
LTC Healthcare 2,903 8,346
------------
1,142,721
------------
INDUSTRIAL MACHINERY - 0.90%
Deere & Co. 60,000 2,096,258
------------
2,096,258
------------
METALS AND MINING - 1.40%
Aluminum Company of America 40,000 2,965,000
Rouge Steel 30,200 271,800
------------
3,236,800
------------
PAPER & FOREST PRODUCTS - 1.84%
Georgia-Pacific (Timber Group) 68,700 1,580,100
Temple-Inland 50,000 2,684,375
------------
4,264,475
------------
REAL ESTATE - 18.44%
Apartment Investment & Management 43,300 1,483,025
Arden Realty Group 90,000 2,070,000
Avalonbay Communities 37,500 1,270,313
Boston Properties 40,000 1,262,500
Camden Property Trust 75,000 1,926,563
Capital Automotive 43,800 584,456
Chateau Communities 67,730 1,938,771
Duke Realty Investments 96,000 2,178,000
Equity Office Properties Trust 55,000 1,381,875
Essex Property Trust 48,000 1,485,000
Glenborough Realty Trust 103,150 2,204,831
Golf Trust of America 66,600 1,739,925
Grove Property Trust 99,549 1,070,152
Liberty Property Trust 52,470 1,292,085
New Plan Excel Realty Trust 65,400 1,430,625
Newhall Land & Farming 40,000 1,097,500
Pan Pacific Retail Properties 66,800 1,331,825
Patriot American Hospitality 57,001 420,382
Pennsylvania Real Estate Investment Trust 47,600 952,000
Philips International Realty 70,000 1,085,000
Prentiss Properties Trust 87,672 1,906,866
Public Storage 74,000 1,965,625
Reckson Associates Realty 50,000 1,153,125
Simon Property Group 79,000 2,340,375
Spieker Properties 36,800 1,329,400
Starwood Hotels & Resorts Trust 51,500 1,564,313
Sun Communities 50,000 1,628,125
Tower Realty Trust 31,100 585,069
------------
42,834,351
------------
TELECOMMUNICATIONS - 1.87%
Bell Atlantic 78,240 4,352,100
------------
4,352,100
------------
TRANSPORTATION & SHIPPING - 0.37%
Alexander & Baldwin 37,200 850,950
------------
850,950
------------
UTILITIES - 8.71%
American Electric Power 50,000 2,318,750
General Public Utilities 60,000 2,628,750
Houston Industries 100,000 3,162,500
PacifiCorp 110,000 2,062,500
PECO Energy 30,000 1,203,750
Rochester Gas & Electric 100,000 3,075,000
Southern 100,000 2,950,000
Unicom 75,000 2,826,563
------------
20,227,813
------------
MISCELLANEOUS - 1.45%
Pitney Bowes 60,000 3,360,000
------------
3,360,000
------------
Total Common Stock (cost $104,126,157) 124,864,801
------------
CONVERTIBLE PREFERRED STOCKS - 11.79%
BANKING, FINANCE & INSURANCE - 4.24%
National Australia Bank Units 7.875% 40,000 1,145,000
Newell Financial Trust I 5.25% 80,200 4,501,225
Salomon 6.25% Series CSN "DECS" 16,500 948,750
Salomon 7.625% Series FSA "DECS" 70,000 3,246,250
------------
9,841,225
------------
BUILDING & MATERIALS - 0.51%
Ingersoll-Rand 6.75% "PRIDES" 49,000 1,179,063
------------
1,179,063
------------
CABLE, MEDIA AND PUBLISHING - 0.41%
MetroMedia International Group 7.25% 37,900 956,975
------------
956,975
------------
CHEMICALS - 0.54%
Monsanto 6.50% "ACES" 27,800 1,257,950
------------
1,257,950
------------
CONSUMER PRODUCTS - 0.95%
Cendant 7.50% "PRIDES" 65,200 2,192,350
------------
2,192,350
------------
REAL ESTATE - 2.04%
Crescent Real Estate 6.75% 62,600 1,103,325
General Growth Properties 7.25% 76,700 1,975,025
SL Green Realty 8.00% 70,000 1,653,750
------------
4,732,100
------------
RETAIL - 0.91%
Dollar General Trust 8.50% "STRYPES" 61,100 2,123,225
------------
2,123,225
------------
TRANSPORTATION & SHIPPING - 1.31%
Greyhound Lines 8.50% 53,500 1,919,313
Union Pacific Capital Trust 6.25% "TIDES" 23,900 1,126,288
------------
3,045,601
------------
UTILITIES - 0.88%
Houston Industries 7.00% "ACES" 22,300 2,051,600
------------
2,051,600
------------
Total Convertible Preferred Stocks
(cost $26,665,483) 27,380,089
------------
PREFERRED STOCKS - 1.91%
BANKING, FINANCE & INSURANCE - 1.03%
Credit Lyonnais Capital SCA 9.50% 100,000 2,400,000
------------
2,400,000
------------
CABLE, MEDIA AND PUBLISHING - 0.88%
Granite Broadcasting 12.75% "PIK" 2,458 2,040,411
------------
2,040,411
------------
Total Preferred Stocks (cost $4,647,326) 4,440,411
------------
PRINCIPAL
AMOUNT
NON-CONVERTIBLE BONDS - 41.67%
AEROSPACE AND DEFENSE - 0.45%
Derlan Manufacturing sr notes 10.00% 01/15/07 1,250,000 1,050,000
------------
1,050,000
------------
AUTOMOBILE & AUTO EQUIPMENT - 1.55%
HDA Parts System 12.00% 08/01/05 2,000,000 1,840,000
Venture Holdings Trust sr sub notes 9.75% 04/01/04 1,800,000 1,764,000
------------
3,604,000
------------
BANKING, FINANCE & INSURANCE - 0.57%
Chevy Chase Savings Bank sub deb 9.25% 12/01/05 1,000,000 1,000,000
DVI unsec sr notes 9.875% 02/01/04 325,000 315,250
------------
1,315,250
------------
BUILDING & MATERIALS - 3.30%
American Builders and Contractors sr unsec sub notes
10.625% 05/15/07 975,000 931,125
American Standard sr notes 7.375% 02/01/08 2,425,000 2,431,063
Collins & Aikman Floorcovers sr sub notes 10.00%
1/15/07 1,250,000 1,312,500
Maxim Group Series B sr unsec notes 9.25%
10/15/07 1,000,000 1,001,250
Safelite Glass sr sub notes 9.875% 12/15/06 2,000,000 1,990,000
------------
7,665,938
------------
CABLE, MEDIA AND PUBLISHING - 3.23%
American Lawyer Media sr notes 9.75% 12/15/07 1,000,000 1,050,000
Dialog Series A sr sub notes 11.00% 11/15/07 2,000,000 2,085,000
Granite Broadcasting sr sub notes 9.375%
12/1/05 2,000,000 1,872,500
Muzak LP/Capital sr unsec notes 10.00%
10/1/03 220,000 226,600
Outdoor Communications sr sub notes 9.25%
8/15/07 575,000 609,500
Rogers Cablesystems sr unsec sub debs 11.00%
12/1/15 500,000 586,250
STC Broadcasting sr sub notes 11.00% 03/15/07 1,000,000 1,070,000
------------
7,499,850
------------
CHEMICALS - 1.74%
BPC Holding Series B sr sec notes 12.50%
6/15/06 1,150,000 1,204,625
Huntsman sr sub notes 9.50% 07/01/07 2,000,000 2,002,500
Sterling Chemicals Series A sr sub notes 11.25%
4/1/07 1,000,000 835,000
------------
4,042,125
------------
COMPUTERS & TECHNOLOGY - 0.49%
Unisys sr unsec notes 11.75% 10/15/04 1,000,000 1,145,000
------------
1,145,000
------------
CONSUMER PRODUCTS - 1.66%
American Safety Razor Series B sr notes 9.875%
8/1/05 1,875,000 1,875,000
Drypers sr notes 10.25% 06/15/07 1,000,000 962,500
Fedders North America sr sub notes 9.375% 08/15/07 1,000,000 1,005,000
------------
3,842,500
ELECTRONICS - 0.42%
HCC Industries sr unsec sub notes 10.75% 05/15/07 1,000,000 970,000
------------
970,000
------------
ENERGY - 1.39%
Continental Resources sr sub notes 10.25% 08/01/08 1,500,000 1,290,000
Costilla Energy sr unsec notes 10.25% 10/01/06 875,000 765,625
Grant Geophysical 9.75% 02/15/08 1,000,000 760,000
Transamerican Energy Series B sr notes 11.50%
6/15/02 1,000,000 410,000
------------
3,225,625
------------
FOOD, BEVERAGE & TOBACCO - 2.61%
Ameriserve Food Distributors sr sub notes 10.125%
7/15/07 2,000,000 1,820,000
Aurora Foods Series B sr unsec sub notes 9.875%
2/15/07 1,000,000 1,090,000
Big V Supermarkets Series B sr sub notes 11.00%
2/15/04 450,000 466,875
Core Mark International sr sub notes 11.375%
9/15/03 400,000 409,000
Delta Beverage sr notes 9.75% 12/15/03 1,250,000 1,315,625
Di Giorgio Series B sr unsec notes 10.00% 06/15/07 1,000,000 960,000
------------
6,061,500
------------
HEALTHCARE & PHARMACEUTICALS - 1.16%
Alliance Imaging sr sub notes 9.625% 12/15/05 1,000,000 985,000
Healthsouth sr sub notes 9.50% 04/01/01 750,000 777,188
Paracelsus Healthcare sr unsec sub notes 10.00%
8/15/06 1,000,000 921,250
------------
2,683,438
------------
INDUSTRIALS - 1.27%
Alliance Laundry Systems 9.625% 05/01/08 1,200,000 1,117,500
Interlake sr sub debs 12.125% 03/01/02 800,000 808,000
Motors and Gears sr notes 10.75% 11/15/06 1,000,000 1,035,000
------------
2,960,500
------------
LEISURE, LODGING & ENTERTAINMENT - 2.87%
AFC Enterprises sr sub notes 10.25% 05/15/07 1,000,000 1,042,500
Alliance Gaming sr unsec sub notes 10.00%
8/1/07 1,300,000 1,170,000
Bally Total Fitness sr sub notes 9.875% 10/15/07 2,000,000 1,985,000
Cinemark USA Series C sr sub notes 9.625%
8/1/08 1,000,000 1,052,500
Trump-Atlantic City Associates Funding sec 1st mtg
notes 11.25% 05/01/06 1,500,000 1,417,500
------------
6,667,500
------------
METALS & MINING - 1.14%
Commonwealth Aluminum sr sub notes 10.75%
10/1/06 750,000 757,500
Keystone Consolidated Industries sr sec notes 9.625%
8/1/07 1,900,000 1,890,500
------------
2,648,000
------------
PACKAGING & CONTAINERS - 1.09%
Container Corporation of America Series A sr notes
11.25% 05/01/04 1,000,000 1,040,000
Pierce Leahy sr sub notes 9.125% 07/15/07 800,000 848,000
Pierce Leahy sr sub notes 11.125% 07/15/06 584,000 645,320
------------
2,533,320
------------
PAPER & FOREST PRODUCTS - 0.13%
Four M Series B sr sec notes 12.00% 06/01/06 450,000 310,500
------------
310,500
------------
REAL ESTATE - 0.52%
LTC Properties sub debs 8.50% 01/01/01 450,000 489,375
Ryland Group sr sub notes 8.25% 04/01/08 750,000 727,500
------------
1,216,875
------------
RETAIL - 3.29%
Amscan Holdings sr sub notes 9.875% 12/15/07 650,000 611,000
Cole National Group sr sub notes 9.875% 12/31/06 2,000,000 2,140,000
Fleming Companies sr notes 10.625% 12/15/01 1,820,000 1,874,600
Fleming Companies sr sub notes 10.50% 12/01/04 1,750,000 1,767,500
Frank's Nursery & Crafts sr sub notes 10.25%
3/1/08 250,000 247,500
Wilsons Leather Series B sr unsec notes 11.25%
8/15/04 1,000,000 1,010,000
------------
7,650,600
------------
TELECOMMUNICATIONS - 4.32%
CBS Radio sub debs 11.375% 01/15/09 24,300 28,674
Galaxy Telecom sr sub notes 12.375% 10/01/05 2,000,000 2,215,000
Intermedia Communication sr notes 8.60%
6/1/08 2,000,000 1,960,000
Octel Developments sr notes 10.00% 05/01/06 2,000,000 2,090,000
ProNet sr sub notes 11.875% 06/15/05 350,000 371,000
Rogers Communications sr unsec notes 8.875%
7/15/07 1,950,000 2,018,250
Rural Cellular sr sub notes 9.625% 05/15/08 700,000 714,000
Telex Communications sr sub notes 10.50% 05/01/07 750,000 630,000
------------
10,026,924
------------
TEXTILES - 2.99%
Anvil Knitwear Series B sr unsec notes 10.875%
3/15/07 450,000 383,063
Norton McNaught 12.50% 06/01/05 1,000,000 977,500
Ntex sr notes 11.50% 06/01/06 2,500,000 2,400,000
Pillowtex Series B sr unsec sub notes 9.00%
12/15/07 2,050,000 2,142,250
Synthetic Industries Series B sr sub notes 9.25%
2/15/07 1,000,000 1,032,500
------------
6,935,313
------------
TRANSPORTATION & SHIPPING - 1.62%
Atlantic Express sr sec notes 10.75% 02/01/04 675,000 683,438
MTL sr sub notes 10.00% 06/15/06 2,000,000 1,995,000
Navigator Gas Transport 12.00% 06/30/07 1,000,000 1,080,000
------------
3,758,438
------------
UTILITIES - 1.62%
Calpine sr notes 10.50% 05/15/06 2,000,000 2,160,000
Midland Funding II Series A debs 11.75% 07/23/05 1,400,000 1,611,750
------------
3,771,750
------------
MISCELLANEOUS - 2.24%
Graphic Controls Series A sr sub notes 12.00%
9/15/05 2,000,000 2,300,000
Loomis Fargo & Co sr unsec sub notes 10.00%
1/15/04 750,000 727,500
Newpark Resources 8.625% 12/15/07 1,425,000 1,425,000
Riverwood International unsec sr notes 10.25%
4/1/06 750,000 757,500
------------
5,210,000
------------
Total Non-Convertible Bonds (cost $97,391,389) 96,794,946
------------
CONVERTIBLE BONDS - 6.79%
AUTOMOBILES & AUTO EQUIPMENT - 0.18%
Tower Automotive sub notes 5.00% 08/01/04 400,000 429,500
------------
429,500
------------
BANKING, FINANCE & INSURANCE - 0.18%
Bell Atlantic Financial Services sr unsec notes 5.75%
4/1/03 400,000 412,000
------------
412,000
------------
COMPUTERS & TECHNOLOGY - 0.45%
Platinum Technology sub notes 6.25% 12/15/02 1,215,000 1,050,975
------------
1,050,975
------------
INDUSTRIALS - 0.98%
Mail-Well 5.00% 11/01/02 1,100,000 1,012,000
Thermo Fibertek sub notes 4.50% 07/15/04 1,530,000 1,256,513
------------
2,268,513
------------
LEISURE, LODGING & ENTERTAINMENT - 0.39%
Capstar Hotel sub notes 4.75% 10/15/04 1,260,000 913,500
------------
913,500
------------
METALS & MINING - 0.63%
MascoTech 4.50% 12/15/03 1,800,000 1,460,250
------------
1,460,250
------------
REAL ESTATE - 3.98%
Centertrust Retail Properties Series A sub debs
7.50% 01/15/01 2,270,000 2,111,100
IRT Property sub deb 7.30% 08/15/03 2,000,000 1,940,000
Malan Realty Investors unsec sub deb 9.50%
7/15/04 2,300,000 2,265,500
Mid-Atlantic Realty Trust sub debs 7.625%
9/15/03 1,500,000 1,500,000
Sizeler Property Investors sub debs 8.00%
7/15/03 1,500,000 1,423,125
------------
9,239,725
------------
Total Convertible Bonds (cost $16,645,075) 15,774,463
------------
SHORT-TERM SECURITIES - 8.67%
*U.S. Treasury Bill 4.06% 12/24/98 20,196,000 20,144,216
------------
20,144,216
------------
Total Short Term Securities (cost $20,144,216) 20,144,216
------------
TOTAL MARKET VALUE OF SECURITIES OWNED - 124.59%
(cost $269,619,646) $289,398,926
LIABILITIES NET OF RECEIVABLES AND OTHER ASSETS - (24.59%) (57,130,156)
------------
NET ASSETS APPLICABLE TO 14,307,000 SHARES
($0.01 par value) OUTSTANDING; EQUIVALENT TO
$16.23 PER SHARE - 100.00% $232,268,770
------------
COMPONENTS OF NET ASSETS AT NOVEMBER 30, 1998
Common Stock, $0.01 par value, 500,000,000 shares authorized
to the Fund. $200,958,246
Accumulated net realized gain on investments 11,531,244
Net unrealized appreciation of investments 19,779,280
------------
Total net assets $232,268,770
------------
* US Treasury Bills are traded on a discount basis; the interest rate shown is the
yield at the time of purchase by the Fund.
debs - debentures
sr - senior
sec - secured
sub - subordinated
unsub - unsubordinated
ACES - Automatic Common Exchange Security
DECS - Dividend Enhanced Convertible Stock
PERCS - Preferred Equity Redemption Cumulative Stock
PIK - Payment In Kind
PRIDES - Preferred Redeemable Increased Dividend Securities
QUIPS - Quarterly Income Preferred Security
STRYPES - Structured Yield Product Exchangeable For Stock
TAPS - Threshold Appreciation Price Security
TIDES - Term Income Deferrable Equity Securities
See accompanying notes
</TABLE
</TABLE>
<TABLE>
<CAPTION>
DELAWARE GROUP DIVIDEND AND INCOME FUND, INC.
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1998
<S> <C> <C>
INVESTMENT INCOME:
Interest $11,215,146
Dividends 8,833,263 $20,048,409
------------ ------------
EXPENSES:
Management fees 1,656,813
Administrative fees 332,690
Commercial paper fees 112,956
Reports to shareholders 67,800
Shareholders' meeting 40,000
Transfer agent fees 39,258
Taxes, other than taxes on income 27,413
Professional fees 22,264
NYSE fees 20,220
Amortization of organizational expenses 9,080
Directors' fees 7,915
Custodian fees 6,000
Other 75,165
------------
Total operating expenses (before
interest expense) 2,417,574
Interest expense 3,065,081
------------
Total expenses 5,482,655
------------
NET INVESTMENT INCOME 14,565,754
------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain on investment transactions 15,774,593
Net change in unrealized appreciation/
depreciation of investments (28,425,206)
------------
NET REALIZED AND UNREALIZED LOSS
ON INVESTMENTS (12,650,613)
------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $1,915,141
============
</TABLE>
<TABLE>
<CAPTION>
DELAWARE GROUP DIVIDEND AND INCOME FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED
11/30/98 11/30/97
<S> <C> <C>
OPERATIONS:
Net investment income $14,565,754 $14,473,386
Net realized gain on investment
transactions 15,774,593 13,863,649
Net change in unrealized appreciation/
depreciation of investments (28,425,206) 30,208,891
------------ ------------
Net increase in net assets resulting
from operations 1,915,141 58,545,926
------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income (14,565,754) (14,473,386)
Net realized gains on investment
transactions (12,732,023) (6,987,136)
------------ ------------
(27,297,777) (21,460,522)
------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS (25,382,636) 37,085,404
NET ASSETS:
Beginning of year 257,651,406 220,566,002
------------ ------------
End of year $232,268,770 $257,651,406
============ ============
See accompanying notes
</TABLE>
<TABLE>
<CAPTION>
DELAWARE GROUP
DIVIDEND AND INCOME FUND, INC.
STATEMENT OF CASH FLOWS
YEAR ENDED NOVEMBER 30, 1998
<S> <C>
Net Cash Provided by Operating Activities:
Net increase in net assets resulting from operations $ 1,915,122
------------
Adjustments to reconcile net increase in net assets from
operations to cash provided by operating activities
Decrease in investments 5,136,960
Net realized gain from security transactions (15,774,593)
Change in net unrealized appreciation 28,425,225
Decrease in receivable for investments sold 1,249,856
Increase in interest and dividends receivable (329,005)
Increase in payable for investments purchased 7,008,657
Decrease in interest payable (202,582)
Increase in accrued expenses and other liabilities 84,696
------------
Total adjustments 25,599,214
------------
Net cash provided by operating activities 27,514,336
Cash Flows Used for Financing Activities:
Cash provided by issuance of commerical paper 216,539,518
Cash used to liquidate commerical paper (216,706,967)
Cash dividends paid (27,297,777)
------------
Net cash used for financing activities (27,465,226)
------------
Net increase in cash 49,110
Cash at beginning of period 4,291
------------
Cash at end of period $ 53,401
============
Cash paid for interest $ 3,267,663
============
See accompanying notes
</TABLE>
<TABLE>
<CAPTION>
DELAWARE GROUP
DIVIDEND AND INCOME FUND, INC.
FINANCIAL HIGHLIGHTS
NOVEMBER 30, 1998
Selected data for each share of the Fund outstanding throughout each period
were as follows:
YEAR ENDED NOVEMBER 30,
1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $18.010 $15.420 $14.010 $12.690 $14.910
Income(loss) from
investment operations:
Net investment
income 1.020 1.010 1.070 1.130 1.100
Net realized and
unrealized gain (loss)
on investments (0.890) 3.080 1.840 1.340 (1.730)
------- ------- ------- ------- -------
Total from investment
operations 0.130 4.090 2.910 2.470 (0.630)
------- ------- ------- ------- -------
Less dividends and
distributions:
Dividends from net
investment income (1.020) (1.010) (1.090) (1.150) (1.120)
Distributions from
net realized gains
on investment
transactions (0.890) (0.490) (0.410) -- (0.470)
------- ------- ------- ------- -------
Total dividends
and distributions (1.910) (1.500) (1.500) (1.150) (1.590)
------- ------- ------- ------- -------
Net asset value,
end of period $16.230 $18.010 $15.420 $14.010 $12.690
======= ======= ======= ======= =======
Market value,
end of period $17.630 $18.060 $16.630 $14.000 $12.000
======= ======= ======= ======= =======
Total return based on:(1)
Market value 8.30% 18.34% 30.67% 28.71% (7.23%)
======= ======= ======= ======= =======
Net asset value (0.12%) 27.22% 21.11% 20.72% (4.60%)
======= ======= ======= ======= =======
Ratios and
supplemental data:
Net assets, end of
period(000 omitted) $232,269 $257,651 $220,566 $200,500 $181,510
Ratio of total
operating expenses
to average net assets 2.22% 2.32% 2.59% 2.82% 2.01%
Ratio of total
operating expenses
to adjusted average
net assets
(before interest
expense)(2) 0.80% 0.82% 0.87% 0.89% 1.01%
Ratio of interest
expenses to adjusted
average net assets(2) 1.02% 1.06% 1.17% 1.32% 0.76%
Ratio of net investment
income to average
net assets 5.91% 6.10% 7.38% 8.49% 8.25%
Ratio of net investment
income to adjusted
average net assets(2) 4.84% 4.93% 5.80% 6.68% 6.80%
Portfolio turnover 46% 74% 69% 118% 73%
Leverage analysis:
Debt outstanding at
end of period(000)
omitted) $55,000 $55,000 $55,000 $55,000 $48,000
Average daily balance
of debt outstanding
(000 omitted) $54,555 $54,631 $54,641 $52,488 $40,803
Average daily balance
of shares outstanding
(000 omitted) 14,307 14,307 14,307 14,307 14,307
Average debt per
share $3.81 $3.82 $3.82 $3.67 $2.85
__________________
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 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.
2 Adjusted net assets excludes debt outstanding.
See accomanying notes
DELAWARE GROUP
DIVIDEND AND INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1998
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. 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,
1998.
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
(See Note 5).
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.
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 record 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.
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 (DMC), the Investment Manager of
the Fund, an annual fee which is calculated daily at the rate of 0.55%
of the adjusted average daily net assets. At November 30, 1998, the Fund
had a liability for Investment Management fees payable to DMC of
$130,007.
Commencing on June 30, 1998 the Fund entered into an Administration
Agreement with Delaware Service Company, Inc. (DSC), an affiliate of
DMC, to provide accounting and administration services. The Fund pays
DSC a monthly fee computed at the annual rate of 0.05% of the Fund's
adjusted average daily net assets subject to an annual minimum of
$100,000. Prior to June 30, 1998 accounting and administrative services
were provided by Princeton Administrators, L.P. At November 30, 1998 the
Fund had a liability for such fees and other expenses payable to DSC of
$17,618.
For the year ended November 30, 1998, DSC and Princeton Administrators
earned $273,106, and $59,584 respectively for their services.
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, 1998, the Fund made purchases of
$134,111,298 and sales of $157,237,653 of investment securities other
than U.S. government securities and temporary cash investments.
At November 30, 1998, the aggregate cost of securities and unrealized
appreciation (depreciation) for the federal income tax purposes for the
Fund was as follows:
Cost of Investments $269,619,663
============
Aggregate unrealized appreciation $30,398,345
Aggregate unrealized depreciation (10,619,082)
------------
Net unrealized appreciation $19,779,263
============
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, 1998.
Shares issuable under the Fund's dividend investment plan are purchased
by the Fund's transfer agent, ChaseMellon Shareholder Services, L.L.C.,
in the open market.
5. Commercial Paper
At of November 30, 1998, $55,000,000 of commercial paper was outstanding
with an amortized cost of $54,504,982. The weighted average discount
rate of commercial paper outstanding at November 30, 1998, was 5.49%.
The average daily balance of commercial paper outstanding during the
year ended November 30, 1998, was $54,555,284 at a weighted average
discount rate of 5.62%. 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, 1998, there were no
borrowings under this arrangement.
6. Credit and Market 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 form registration under Rule 144A of the Securities
Act of 1933, as amended, and other securities which may not be readily
marketable. The relative illiquidity of some of these securities may
adversely affect the Fund's ability to dispose of such securities in a
timely manner and at a fair price when it is necessary to liquidate such
securities.
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. (the "Fund") as of November 30,
1998, 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 five years in the period then ended. 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 and financial highlights. Our
procedures included confirmation of securities owned as of November 30,
1998, by correspondence with the Fund's 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, 1998, 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 its financial highlights for each of
the five years in the period then ended, in conformity with generally
accepted accounting principles.
/S/Ernst & Young LLP
--------------------
Ernst & Young LLP
Philadelphia, Pennsylvania
January 8, 1999
</TABLE>
<TABLE>
<CAPTION>
PROXY RESULTS (UNAUDITED)
For the fiscal year ended November 30, 1998, the Delaware Group Dividend
and Income Fund shareholders voted on the following proposals at the
annual meeting of shareholders on December 4, 1998. The description of
each proposal and number of shares voted are as follows.
SHARES SHARES VOTED
VOTED WITHHELD
FOR AUTHORITY
-------------- --------------
<S> <C> <C> <C>
1. To elect the Fund's Board of Directors:
Wayne A. Stork 8,857,361 209,545
Walter P. Babich 8,844,522 223,384
Anthony D. Knerr 8,854,446 212,460
Ann R. Leven 852,409 214,497
W. Thacher Longstreth 8,827,242 239,664
Charles E. Peck 8,847,910 218,996
Thomas F. Madison 8,848,728 218,178
Jeffrey J. Nick 8,852,336 214,570
John H. Durham 8,857,932 208,974
2. To approve the reclassification of the Fund's investment objective from fundamental
to non-fundamental.
SHARES SHARES SHARES
VOTED VOTED VOTED
FOR AGAINST ABSTAIN
-------------- -------------- --------------
6,335,482 325,097 325,113
3. To approve standardized fundamental investment restrictions for the Fund (proposal
involves separate votes on sub-proposals 3A-3G).
3A. To adopt a new fundamental investment restriction concerning concentration of the
Fund'sinvestments in the same industry.
SHARES SHARES SHARES
VOTED VOTED VOTED
FOR AGAINST ABSTAIN
-------------- -------------- --------------
6,378,888 269,570 337,234
3B. To adopt a new fundamental investment restriction concerning borrowing money and
issuing senior securities.
SHARES SHARES SHARES
VOTED VOTED VOTED
FOR AGAINST ABSTAIN
-------------- -------------- --------------
6,317,249 303,973 364,470
3C. To adopt a new fundamental investment restriction concerning underwriting.
SHARES SHARES SHARES
VOTED VOTED VOTED
FOR AGAINST ABSTAIN
-------------- -------------- --------------
6,311,408 299,174 375,110
3D. To adopt a new fundamental investment restriction concerning investments in real
estate.
SHARES SHARES SHARES
VOTED VOTED VOTED
FOR AGAINST ABSTAIN
-------------- -------------- --------------
6,308,026 307,085 370,581
3E. To adopt a new fundamental investment restriction concerning investments in
commodities.
SHARES SHARES SHARES
VOTED VOTED VOTED
FOR AGAINST ABSTAIN
-------------- -------------- --------------
6,248,470 373,890 363,332
3F. To adopt a new fundamental investment restriction concerning lending by the Fund.
SHARES SHARES SHARES
VOTED VOTED VOTED
FOR AGAINST ABSTAIN
-------------- -------------- --------------
6,279,019 341,874 364,799
3G. To reclassify all current fundamental investment restrictions as non-fundamental.
SHARES SHARES SHARES
VOTED VOTED VOTED
FOR AGAINST ABSTAIN
-------------- -------------- --------------
6,181,019 403,208 401,465
4. To approve a new investment management agreement with Delaware Management
Company for the Fund.
SHARES SHARES SHARES
VOTED VOTED VOTED
FOR AGAINST ABSTAIN
-------------- -------------- --------------
6,296,783 325,394 363,516
5. To ratify the selection of Ernst & Young LLP, as independent auditors for the
Company.
SHARES SHARES SHARES
VOTED VOTED VOTED
FOR AGAINST ABSTAIN
-------------- -------------- --------------
8,566,568 135,376 288,078
</TABLE>
TAX INFORMATION (UNAUDITED)
Of the ordinary income distributions paid by the Fund during its taxable
year ended November 30, 1998, 60.64% qualifies for the dividends received
deduction for corporations. Additionally, the Fund distributed long-term
gains of $0.787 per share and short-term gains of $0.093 per share to
shareholders of record on December 9, 1998.
Year 2000 (Unaudited)
Like other investment companies, financial and business organizations
and individuals around the world, the Fund could be adversely affected
if computer systems used by the Investment Manager and other service
providers do not properly process and calculate date-related information
and data on and after January 1, 2000. The Fund is taking steps to
obtain satisfactory assurances that the Investment Manager and other
major service providers are taking steps reasonably designed to address
the Year 2000 issue with respect to the computer systems that such
service providers use. At this time, however, there can be no assurance
that these steps will be sufficient to avoid any adverse impact to the
Fund.
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 each 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 from time to time purchase
shares of its Common Stock on the open market at market prices.
BOARD OF DIRECTORS
JEFFREY J. NICK
Chairman, President and Chief Executive Officer
Delaware Investments Family of Funds
Philadelphia, PA
WALTER P. BABICH+
Board Chairman, Citadel Constructors, Inc.
King of Prussia, PA
JOHN H. DURHAM
Partner, Complete Care services
Horsham, 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
THOMAS F. MADISON
President and Chief Executive Officer
MLM Partners, Inc.
Minneapolis, MN
CHARLES E. PECK
Secretary/Treasurer, Enterprise Homes, Inc.
Fredericksburg, VA
WAYNE A. STORK
Chairman
Delaware Management Holdings, Inc.
Philadelphia, PA
+Audit Committee Member
EXECUTIVE OFFICERS
JEFFREY J. NICK
Chairman, President and Chief Executive Officer
Delaware Investments Family of Funds
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
Executive Vice President, Chief Financial Officer
and Chief Operating Officer
Delaware Investments Family of Funds
Philadelphia, PA
GEORGE M. CHAMBERLAIN, JR.
Senior Vice President, Secretary
and General Counsel
Delaware Investments Family of Funds
Philadelphia, PA
JOSEPH H. HASTINGS
Senior Vice President/
Corporate Controller
Philadelphia, PA
MICHAEL P. BISHOF
Senior Vice President/Treasurer
Philadelphia, PA
[GRAPHIC OMITTED: PHOTO OF SEVERAL GLOBES]
directors
& officers
INVESTMENT MANAGER
Delaware Management Company
Philadelphia, Pennsylvania
INTERNATIONAL AFFILIATE
Delaware International Advisers Ltd.
London, England
PRINCIPAL OFFICE OF THE FUND
1818 Market Street
Philadelphia, PA 19103-3682
INDEPENDENT AUDITORS
Ernst & Young LLP
2001 Market Street
Philadelphia, PA
[GRAPHIC OMITTED: PHOTO OF SEVERAL GLOBES]
[GRAPHIC OMITTED: DDF/NYSE LOGO]
[GRAPHIC OMITTED: LOGO OF DELAWARE INVESTMENTS
----------------------------
Philadelphia * London]
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
For Financial Institutions
Representatives Only
1.800.659.2265
www.delawarefunds.com
Printed in the USA
on recycled paper
(1349)
AR-DDF[12/98]TKO1/99
Recordholders as of November 30, 1998: 904
(copyright) Delaware Distributors, L.P.
