<PAGE>
Closed-End Income
DELAWARE GROUP
Dividend and
Income Fund
service and guidance
professional management
goals
1999
Semi-Annual
Report
DELAWARE(SM)
INVESTMENTS
- ----------------------
Philadelphia o London
(Photo of illustration
from current income brochure)
<PAGE>
Investment
Objectives and
Strategies
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
manager's assessment of each market's relative risks and rewards.
U.S. Common Stocks With
Above-Average Yields
The Fund's management focuses on stocks that pay high dividends relative to
their share price. Such 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. 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 have the potential for a higher 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 (24.7%) of your Fund's assets were leveraged as of May 31,
1999. 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.
current income
commitment
A TRADITION OF SOUND INVESTING
<PAGE>
June 7, 1999
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1
Dear Shareholder:
The first half of fiscal 1999 began the same way our 1998 fiscal year ended,
with large-capitalization growth stocks dominating U.S. stock performance. This
narrow group of stocks pushed the Dow Jones Industrial Average to a record high
of 10,000 in late March. A change in investor sentiment in April led to a
resurgence of value investing.
Early in our fiscal year, investors feared the worst as financial crises in
emerging markets posed a threat to U.S. economic growth. Driven by the belief
that only the largest U.S. companies would be able to sustain earnings growth if
the economy slowed, many investors seemed willing to pay any price for stocks of
select large-capitalization companies.
The release of strong first quarter economic growth in April 1999 and better
than expected corporate earnings across the stock market altered these
perceptions. Investors renewed their interest in a broader range of stocks, as
optimism in the nation's continued growth took hold. Many of the stocks that had
sizzling performance through March cooled down in this environment.
For the six months ended May 31, 1999, Dividend and Income Fund (NYSE symbol:
DDF) provided a solid total return of +4.40% (at net asset value with
distributions reinvested). We benefited from a return to the "value" approach in
April. The Fund returned 6% in that one month. Though we easily outpaced the
average return of our peers in the Lipper Closed-End Income Fund Average, the
ground we made up late in our reporting period was not enough to compete with
the +12.60% six-month return of the S&P 500 Index, which mainly includes
large-cap stocks.
The Fund's premium to net asset value has compressed since last fall.
Dividend and Income Fund's shares closed at a 1.56% premium to net asset value
on May 31, 1999. At the end of November 1998, the Fund traded at an 8.63%
premium to net asset value.
Over Dividend and Income Fund's lifetime, its average premium has been
<TABLE>
<CAPTION>
CUMULATIVE/AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------------------------------------------
At Net Asset Value for Periods Ended May 31, 1999
Lifetime Premium/
March 26, 1993 Discount
Through as of
Six Months One Year May 31, 1999 May 31, 1999
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dividend and Income Fund +4.40% -0.60% +12.32% +1.56%
- --------------------------------------------------------------------------------------------------------------------
Standard & Poor's 500 Index +12.60% +21.03% +21.34%
Merill Lynch High-Yield Bond Index +2.56% +1.67% +9.50%
Lipper Closed-End Income Fund Average +2.43% +3.36% +9.30%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
Source: Lipper Analytical, Inc., Bloomberg Business Systems. 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 12 funds in the Lipper Closed-End
Income Fund Average for the cumulative six-month period, 11 funds for the
one-year period, and 9 funds for the lifetime period ended 5/31/99,
respectively.
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2
about 6%. We believe the Fund's premium could move back into that range given
our expectation that value stocks will come back into vogue.
Dividend and Income Fund's dividend yield, based on market price, was 9.49%
as of May 31. This was far greater than the 1.23% dividend yield on the stocks
in the unmanaged S&P 500 Index. Roughly one-third of the Fund's assets were
allocated to high-yield corporate bonds, which provided significant income
during the period.
Conditions in the high-yield bond market improved gradually since our last
report. Lack of liquidity and low demand in late 1998 had caused prices to
decline. In early 1999, however, investors seeking more income began to venture
back into high-yield bonds. Even so, we remain in a difficult environment for
high-yield bonds as new supply has not been met with ample demand.
On the pages that follow, your Fund's co-managers discuss Dividend and Income
Fund's performance during the first half of fiscal 1999. Michael Dugan, who
joined the portfolio's management team in 1998, manages the U.S stock holdings
and determines the asset mix of the Fund. Paul Matlack manages the U.S.
high-yield corporate bond component. Together, they review recent market
activity and give an update of the Fund's current positioning.
We thank you for choosing Dividend and Income Fund for your financial plan.
As we approach the new millennium, we pledge our continued commitment to helping
you make the most of your investment.
Sincerely,
/s/ Wayne A. Stork
- -------------------------------------
Wayne A. Stork
Chairman
Delaware Investments Family of Funds
/s/ David K. Downes
- -------------------------------------
David K. Downes
President and Chief Executive Officer
Delaware Investments Family of Funds
On May 5, 1999, Michael J. Dugan, Vice President/Senior Portfolio Manager of
Delaware Investments was named as portfolio manager for Delaware Group Dividend
and Income Fund. Mr. Dugan earned a bachelor's degree in Business Administration
and a Master's degree in finance from Loyola College in Baltimore. He rejoined
Delaware in 1997 after serving as Vice President at Thompson, Siegel and
Walmsley, where he managed value-oriented equity and balanced portfolios. He
initially joined Delaware in 1985. He previously held positions at Capitoline
Investment Services, First National Bank of Maryland, Mercantile Safe Deposit
and Trust Company, and Bache and Company. Mr. Paul Matlack continues to manage
the fixed income portion of the portfolio.
<PAGE>
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3
Portfolio Managers' Review
Michael Dugan
Vice President/Senior Portfolio Manager
U.S. Equities
Paul A. Matlack
Vice President/Senior Portfolio Manager
U.S. Fixed Income
June 7, 1999
A Spring Break in
Market Leadership
Through most of the spring of 1999, a select group of large capitalization
companies were responsible for most of the stock market's gains. Fears of a U.S.
recession resulting from last year's global financial crises caused many
investors to focus on these companies for their perceived ability to sustain
earnings and revenue growth in a slower economic environment.
The world's most downtrodden stock markets in 1998--including Japan,
Malaysia, Singapore and Hong Kong--began to rebound in early 1999. Consequently,
investor morale began to improve and recession fears eased somewhat. Robust
first quarter U.S. economic growth and stronger than expected corporate earnings
gave investors even more encouragement.
Such optimism led many investors to expand their shopping list of stocks
beyond a very select group to a broader array of stocks with strong earnings
growth potential that could be bought at much lower prices. We believe this may
have marked the beginning of a new cycle for value stocks.
Strategic Positioning
Since last November, we increased Dividend and Income Fund's allocation to U.S
common stocks from 43.2% to 48.6% of investments. We made this move by drawing
from the Fund's cash position, cut nearly in half to 3.75% between November 30
and May 31. Our objective was to position the Fund in more economically
sensitive (or cyclical) stocks that might benefit from continued economic
growth. We achieved our objective, benefiting from our holdings in the following
industries:
o Basic Industry. Chemical and metal companies have performed extremely well
since investors got a glimpse at first quarter economic and earnings data.
Individual companies that contributed positively to the Fund's performance
included: DuPont, a leading U.S. chemical firm, Imperial Chemical Industries,
a manufacturer of specialty chemicals and the producer of such popular paint
brands as Glidden and Dulux, and ALCOA (formerly Aluminum Company of
America), the world's premier aluminum manufacturer. ALCOA has had
consistently strong earnings in spite of a decline in aluminum prices and
less overseas demand.
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4
o Energy. Energy stocks were boosted this past spring by a continuing rise in
oil prices that began early in the year. The price of oil rose from $11 to
$18 per barrel, creating a new enthusiasm in the industry. Our holdings of
Chevron delivered the best results in this sector. Given signs of economic
improvement in Asia and the other parts of the globe, we believe demand for
commodities may start to pick up significantly.
Holdings that did not perform as well for us over the past six months
included Real Estate Investment Trusts (REITs), health care and financial
services stocks.
o REITs. Despite their attractive yields and low valuations, REIT stocks
continued to lose ground through March 1999. Investors soured on REITs in
mid-1998 over concerns of paired-share REIT legislation, overbuilding in the
sector, and the potential effects of an economic slowdown on the capital
markets. As a result, the majority of REIT holdings lagged stock returns in
other industries.
REIT legislation that limited tax breaks for paired-share REITs did not
affect the industry as much as expected. Moreover, occupancy levels for most
office, retail and residential properties remain high, reflecting continued
strong demand. And finally, the temporary credit crunch in the fall of 1998 has
eased considerably as lenders have once again opened their wallets. Following
April's shift to value investing, REITs began to win back investor interest.
We continue to stay the course in REITs (21% of net assets) primarily to take
advantage of strong dividend yields. REITs were yielding around 8% on average at
the end of the period, up from about 5% last fall. (Source: National Association
of Real Estate Trusts.)
o Health Care. We believe this area became overvalued in the growth stock mania
of last year. As investors have recently begun to look for stocks that are
relatively cheap and offer the
Portfolio highlights and asset mix
- --------------------------------------------------------------------------------
May 31, 1999
Non-Convertible Corporate Bonds 32.79%
Common Stocks 48.63%
Convertible Preferred Stocks 8.75%
Convertible Bonds 5.33%
Preferred Stocks 1.91%
U.S. Treasury Bills 2.59%
The above chart is based on market value of investments.
- ---------------------------------------------------
Beta* 0.45
Portfolio Turnover Rate 43%
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 has
fluctuated less in price than the Index. A number more than 1.00 means the
security has fluctuated more than the Index.
<PAGE>
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5
potential for better earnings, health care stocks--namely drug companies--have
fallen out of favor. We expect to shift portfolio assets out of consumer
defensive health care stocks in favor of increasing holdings in economically
sensitive companies.
o Financial Services. The overriding fear of higher interest rates hurt
financial stocks late in our reporting period. The Federal Reserve Board
announced in May that it was leaning toward raising interest rates to ward
off inflation. Historically, banks have been less successful at generating
earnings in a rising rate environment. We continue to hold First Union,
despite earnings shortfalls, as we wait to see how its recent acquisitions
will play out.
A Gradual Recovery for
High-Yield Corporate Bonds
U.S. high-yield bonds have been gradually recovering since liquidity disappeared
from the market last summer and early fall. At the time, U.S. Treasuries led
fixed-income performance as recession-fearing investors bailed out of riskier
investment in stocks and non-government bonds for the safety and liquidity of
Treasuries.
The rally in U.S. Treasury bonds peaked in October when the yield on the
30-Year U.S. Treasury fell to an historic low of 4.72%. Once it seemed that
global economic troubles were contained and that the U.S. economy would remain
healthy, investor sentiment slowly shifted back in favor of high-yield corporate
bonds. This caused Treasury prices to fall and yields to rise. As of May 31, the
yield on the bellwether Treasury was 5.8%, its highest level since last summer.
Rising bond yields during the first half of fiscal 1999 caused the yield
difference between U.S. Treasuries and high-yield bonds to narrow from 6% to
4.7%. Typically, the greater the difference, the more attractive high-yield
bonds look to investors. When high-yield bonds offer less income potential above
and beyond Treasuries, demand for high-yield bonds generally declines. This was
the case in April and May as Treasury rates rose. Demand has not kept pace with
a high volume of new supply issued by companies seeking to take advantage of low
interest rates. High-yield bond prices declined as a result.
<PAGE>
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6
Fortunately, our bond holdings generated enough income to more than make up
for recent price depreciation. We continue to focus our selection on bonds rated
BB and B. We have a heavier concentration in single B bonds because we expect
them to have greater sensitivity to economic growth and lower sensitivity to
rising interest rates.
Outlook
For the remainder of 1999, we may slightly increase Dividend and Income Fund's
stock allocation, with an emphasis on cyclical stocks--including aluminum,
paper, metals and energy companies. We believe these companies may benefit the
most from improving worldwide economic growth.
Should the Federal Reserve Board modestly raise interest rates in the coming
months, we do not believe it will trigger a U.S. recession. We think a 0.25
percentage point increase had already been priced into the market. If that
assumption is correct, we should not experience any significant fallout in
either the U.S. stock or bond markets.
We believe that Dividend and Income Fund, which invests in a combination of
U.S. stocks and high-yield bonds, continues to offer the potential for
attractive long-term total return. We are hopeful that the events of this past
spring signal a prolonged period of outperformance for value-oriented styles of
investing like the one we use for the Dividend and Income Fund.
Dividend and Income Fund
Market Price vs. Net Asset Value
December 1, 1998 to May 31, 1999
Market Price Net Asset Value
December 1998 $18.50 $15.46
January 1999 $17.31 $15.26
February 1999 $17.00 $14.84
March 1999 $15.94 $14.81
April 1999 $15.56 $15.58
May 1999 $15.81 $15.57
Source: Bloomburg Business News.
Past performance does not guarantee future results.
Premium/Discount Data
Current + 1.56%
High +19.66% on 12/31/98
Average + 9.45%
Low - 0.11% on 4/30/99
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7
Fund Performance
A $10,000 investment in Dividend and Income Fund since March 26, 1993, the date
it began operations, would have grown to $20,758 as of May 31, 1999, based on
net asset value with distributions reinvested. The average of the Fund's peers
provided only 74% of this return during the same period.
Your Fund's Share
Buyback Program
Your Fund's board of directors approved a share repurchase program in 1994 that
authorizes 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
May 31, 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.
Your Reinvestment Options
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 Investor Services at 1.800.581.9677. 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.
Above 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.
DIVIDEND AND INCOME FUND
Growth of $10,000 Investment
March 26, 1993 to May 31, 1999
Lipper Closed-End
Dividend and Income Fund Average
Income Fund (9 funds)
05/31/1993 $10,120 $10,093
08/31/1993 $10,764 $10,695
11/30/1993 $11,021 $10,424
02/28/1994 $11,376 $10,384
05/31/1994 $10,747 $ 9,820
08/31/1994 $11,050 $10,017
11/30/1994 $10,505 $ 9,553
02/28/1995 $10,987 $10,305
05/31/1995 $11,612 $11,159
08/31/1995 $12,136 $11,453
11/30/1995 $12,641 $12,144
02/29/1996 $13,560 $12,311
05/31/1996 $13,841 $12,428
08/31/1996 $14,029 $12,650
11/30/1996 $15,420 $13,705
02/28/1997 $16,804 $14,155
05/31/1997 $17,075 $14,395
08/31/1997 $18,402 $15,054
11/30/1997 $19,724 $15,886
02/28/1998 $20,327 $16,507
05/31/1998 $20,623 $16,912
08/31/1998 $18,317 $16,608
11/30/1998 $19,701 $17,042
02/28/1999 $19,303 $16,877
05/31/1999 $20,513 $17,465
Above 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.
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8 closed-end income
Financial Statements
Delaware Group
Dividend and Income Fund, Inc.
Statement of Net Assets
May 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Number of Market
Shares Value
--------- ----------
COMMON STOCK - 59.87%
Aerospace & Defense - 1.09%
Lockheed Martin ...................................... 60,000 $2,426,250
----------
2,426,250
----------
Automobiles & Automotive Parts - 2.88%
Dana ................................................. 50,000 2,581,250
Delphi Automotive Systems ............................ 24,463 480,078
General Motors ....................................... 35,000 2,415,000
Tenneco .............................................. 40,000 932,500
----------
6,408,828
----------
Banking, Finance & Insurance - 10.24%
Chase Manhattan ...................................... 35,000 2,537,500
Chubb ................................................ 30,000 2,101,875
Financial Security Assurance Holdings Limited ........ 57,379 3,256,258
First Union .......................................... 55,080 2,537,123
Fleet Financial Group ................................ 39,200 1,612,100
KeyCorp .............................................. 90,000 3,127,500
Mellon Bank .......................................... 92,000 3,283,250
Summit Bancorp ....................................... 55,000 2,251,563
Washington Mutual .................................... 55,045 2,102,031
----------
22,809,200
----------
Chemicals - 0.59%
Imperial Chemical ADR ................................ 30,000 1,318,125
----------
1,318,125
----------
Computers & Technology - 1.14%
Pitney Bowes ......................................... 40,000 2,550,000
----------
2,550,000
----------
Electronics & Electrical Equipment - 2.03%
Emerson Electric ..................................... 45,000 2,874,375
Raytheon Class A ..................................... 2,231 148,222
Thomas & Betts ....................................... 35,000 1,498,438
----------
4,521,035
----------
Energy - 2.41%
Chevron .............................................. 28,000 2,595,250
Texaco ............................................... 42,200 2,764,100
----------
5,359,350
----------
Food, Beverage & Tobacco - 1.37%
Philip Morris ........................................ 40,000 1,542,500
RJR Nabisco Holdings ................................. 49,000 1,515,938
----------
3,058,438
----------
Healthcare & Pharmaceuticals - 0.00%
LTC Healthcare ....................................... 2,903 5,625
----------
5,625
----------
Industrial Machinery - 1.54%
Deere & Co. .......................................... 90,000 3,425,625
----------
3,425,625
----------
Metals & Mining - 0.57%
Alcan Aluminum Limited ............................... 45,000 1,260,000
----------
1,260,000
----------
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Number of Market
Shares Value
--------- ----------
COMMON STOCK (Continued)
Paper & Forest Products - 0.83%
Georgia-Pacific (Timber Group) ...................... 68,700 $1,842,019
----------
1,842,019
----------
Real Estate - 21.00%
American Health Properties .......................... 50,000 1,000,000
Apartment Investment & Management ................... 43,300 1,818,600
Arden Realty Group .................................. 90,000 2,300,625
AvalonBay Communities ............................... 37,500 1,326,563
Camden Property Trust ............................... 75,000 2,057,813
Capital Automotive .................................. 43,800 572,138
Chateau Communities ................................. 67,730 2,044,599
Duke Realty Investments ............................. 96,000 2,220,000
Equity Office Properties Trust ...................... 55,000 1,553,750
Essex Property Trust ................................ 48,000 1,542,000
Franchise Finance Capital America ................... 70,000 1,723,750
Glenborough Realty Trust ............................ 103,150 1,888,934
Golf Trust of America ............................... 66,600 1,623,375
Grove Property Trust ................................ 99,549 1,281,693
Healthcare Realty Trust ............................. 60,000 1,297,500
Liberty Property Trust .............................. 52,470 1,265,839
Macerich ............................................ 81,000 2,141,438
Newhall Land & Farming .............................. 40,000 1,005,000
New Plan Excel Realty Trust ......................... 65,400 1,308,000
Pan Pacific Retail Properties ....................... 66,800 1,327,650
Patriot American Hospitality ........................ 4,179 21,679
Pennsylvania Real Estate Investment Trust ........... 47,600 987,700
Philips International Realty ........................ 70,000 1,124,375
Prentiss Properties Trust ........................... 87,672 2,071,251
Public Storage ...................................... 74,000 2,159,875
Reckson Associates Realty ........................... 50,000 1,293,750
*Reckson Associates Realty Class B ................... 17,520 485,085
Simon Property Group ................................ 79,000 2,310,750
Spieker Properties .................................. 36,800 1,506,500
Starwood Hotels & Resorts Worldwide ................. 51,500 1,686,625
Sun Communities ..................................... 50,000 1,828,125
----------
46,774,982
----------
Telecommunications - 1.92%
Bell Atlantic ....................................... 78,240 4,283,640
----------
4,283,640
----------
Transportation & Shipping - 1.61%
Alexander & Baldwin ................................. 50,000 1,131,250
Norfolk Southern .................................... 75,000 2,456,250
----------
3,587,500
----------
Utilities - 10.65%
American Electric Power ............................. 50,000 2,168,750
Duke Energy ......................................... 60,000 3,618,750
General Public Utilities ............................ 60,000 2,613,750
PacifiCorp .......................................... 110,000 2,000,625
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closed-end income 9
Statement of Net Assets (Continued)
- --------------------------------------------------------------------------------
Number of Market
Shares Value
--------- ----------
COMMON STOCK (Continued)
Utilities (Continued)
PECO Energy .......................................... 30,000 $ 1,468,125
Reliant Energy ....................................... 100,000 3,050,000
Rochester Gas & Electric ............................. 100,000 2,793,750
Southern ............................................. 100,000 2,837,500
Unicom ............................................... 75,000 3,173,438
-----------
23,724,688
-----------
Total Common Stock (cost $108,462,034) ............... 133,355,305
-----------
CONVERTIBLE PREFERRED STOCK - 10.77%
Banking, Finance & Insurance - 2.94%
National Australia Bank Units 7.875% ................. 40,000 1,195,000
Newell Financial Trust I 5.25% ....................... 80,200 4,190,450
Salomon Smith Barney 6.25% 2/1/01
Series CSN "DECS" ................................. 16,500 1,161,188
-----------
6,546,638
-----------
Cable, Media & Publishing - 1.52%
Comcast 3.35% ........................................ 24,100 2,015,363
MetroMedia International Group 7.25% ................. 37,900 1,364,400
-----------
3,379,763
-----------
Consumer Products - 0.93%
Cendant 7.50% "PRIDES" ............................... 65,200 2,070,100
-----------
2,070,100
-----------
Industrial Machinery - 0.64%
Ingersoll-Rand 6.75% "PRIDES" ........................ 49,000 1,433,250
-----------
1,433,250
-----------
Metals & Mining - 0.12%
Rouge Steel 7.25% "DECS" ............................. 30,200 275,575
-----------
275,575
-----------
Real Estate - 2.10%
Crescent Real Estate 6.75% ........................... 62,600 1,048,550
General Growth Properties 7.25% ...................... 76,700 1,946,263
SL Green Realty 8.00% ................................ 70,000 1,680,000
-----------
4,674,813
-----------
Transportation & Shipping - 1.37%
Greyhound Lines 8.50% ................................ 53,500 1,783,155
Union Pacific Capital Trust 6.25% "TIDES" ............ 23,900 1,266,700
-----------
3,049,855
-----------
Utilities - 1.15%
Houston Industries 7.00% "ACES" ...................... 22,300 2,553,350
-----------
2,553,350
-----------
Total Convertible Preferred Stock
(cost $23,883,389) ................................ 23,983,344
-----------
PREFERRED STOCK - 2.35%
Banking, Finance & Insurance - 1.16%
Credit Lyonnais Capital SCA 9.50% .................... 100,000 2,587,500
-----------
2,587,500
-----------
Cable, Media & Publishing - 1.19%
Granite Broadcasting 12.75% "PIK" .................... 2,615 2,653,921
-----------
2,653,921
-----------
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Number of Market
Shares Value
--------- ----------
PREFERRED STOCK (Continued)
Energy - 0.00%
*TCR Holdings Class B ............................. 1,756 $ 105
*TCR Holdings Class C ............................. 966 54
*TCR Holdings Class D ............................. 2,546 135
*TCR Holdings Class E ............................. 5,267 332
----------
626
----------
Total Preferred Stock (cost $4,808,689) .......... 5,242,047
----------
Principal
Amount
----------
NON-CONVERTIBLE BONDS - 40.36%
Aerospace & Defense - 0.55%
Derlan Manufacturing sr nts 10.00% 1/15/07 ....... $1,250,000 1,225,000
----------
1,225,000
----------
Automobiles & Automotive Parts - 2.01%
American Axle & Manufacturing sr sub nts
9.75% 3/1/09 ................................... 2,500,000 2,531,250
HDA Parts System sr sub nts 12.00% 8/1/05 ........ 2,000,000 1,940,000
----------
4,471,250
----------
Banking, Finance & Insurance - 0.45%
Chevy Chase Savings Bank sub debs
9.25% 12/1/05 .................................. 1,000,000 1,003,750
----------
1,003,750
----------
Buildings & Materials - 1.49%
American Standard sr nts 7.375% 2/1/08 ........... 2,425,000 2,306,781
Maxim Group Series B sr nts
9.25% 10/15/07 ................................. 1,000,000 1,001,250
----------
3,308,031
----------
Cable, Media & Publishing - 1.85%
American Lawyer Media sr nts
9.75% 12/15/07 ................................. 1,000,000 1,033,750
Granite Broadcasting sr sub nts
9.375% 12/1/05 ................................. 2,000,000 2,027,500
STC Broadcasting sr sub nts 11.00% 3/15/07 ....... 1,000,000 1,061,250
----------
4,122,500
----------
Chemicals - 3.65%
BPC Holding sr nts 12.50% 6/15/06 ................ 1,150,000 1,214,688
Huntsman sr sub nts 9.50% 7/1/07 ................. 2,000,000 2,025,000
LaRoche Industries sr sub nts 9.50% 9/15/07 ...... 2,500,000 1,856,250
Octel Developments unsec sr nts
10.00% 5/1/06 .................................. 2,000,000 2,090,000
Sterling Chemicals Series A sr sub nts
11.25% 4/1/07 .................................. 1,000,000 940,000
----------
8,125,938
----------
Computers & Technology - 0.50%
Unisys sr nts 11.75% 10/15/04 .................... 1,000,000 1,122,500
----------
1,122,500
----------
Consumer Products - 1.63%
American Safety Razor Series B sr nts
9.875% 8/1/05 .................................. 1,875,000 1,891,406
Drypers sr nts 10.25% 6/15/07 .................... 1,000,000 720,000
Fedders North America sr sub nts
9.375% 8/15/07 ................................. 1,000,000 1,021,250
----------
3,632,656
----------
<PAGE>
10 closed-end income
Statement of Net Assets (Continued)
- --------------------------------------------------------------------------------
Principal Market
Amount Value
-------------------------
Non-Convertible Bonds (Continued)
Electronics & Electrical Equipment - 2.33%
Geologistics sr unsec nts 9.75% 10/15/07 ......... $5,250,000 $4,232,813
HCC Industries sr sub nts 10.75% 5/15/07 ......... 1,000,000 966,250
----------
5,199,063
----------
Energy - 1.78%
Continental Resources sr sub nts 10.25% 8/1/08 ... 1,500,000 1,125,000
Grant Geophysical sr unsec nts
9.75% 2/15/08 ................................. 1,000,000 500,000
Newpark Resources unsec sr sub nts
8.625% 12/15/07 ............................... 1,425,000 1,355,531
Pride Petroleum Services sr nts 9.375% 5/1/07 .... 1,000,000 983,750
----------
3,964,281
----------
Food, Beverage & Tobacco - 2.48%
Ameriserve Food Distributors sr sub nts
10.125% 7/15/07 ............................... 2,000,000 1,757,500
Core-Mark International sr sub nts
11.375% 9/15/03 ............................... 400,000 398,000
Delta Beverage Group sr nts 9.75% 12/15/03 ....... 1,250,000 1,285,938
DiGiorgio Series B sr nts 10.00% 6/15/07 ......... 1,000,000 1,001,250
Standard Commercial Tobacco sr nts
8.875% 8/1/05 ................................. 1,300,000 1,069,250
----------
5,511,938
----------
Healthcare & Pharmaceuticals - 2.06%
Alliance Imaging sr sub nts 9.625% 12/15/05 ...... 1,000,000 993,750
Healthsouth sr sub nts 9.50% 4/1/01 .............. 750,000 771,563
Paracelsus Healthcare sr sub nts
10.00% 8/15/06 ................................ 1,000,000 780,000
Team Health sr sub nts 12.00% 3/15/09 ............ 2,000,000 2,042,500
----------
4,587,813
----------
Industrial Machinery - 0.50%
Alliance Laundry Systems sr sub nts
9.625% 5/1/08 ................................. 1,200,000 1,111,500
----------
1,111,500
----------
Leisure, Lodging & Entertainment - 3.72%
AFC Enterprises sr sub nts 10.25% 5/15/07 ........ 1,000,000 1,030,000
Bally Total Fitness Holdings sr sub nts
9.875% 10/15/07 ............................... 2,000,000 1,975,000
Cinemark USA Series C sr sub nts
9.625% 8/1/08 ................................. 1,000,000 1,008,750
Hollywood Casino sr sec nts 11.25% 5/1/07 ........ 1,000,000 992,500
Trump-Atlantic City 1st mtg nts 11.25% 5/1/06 .... 1,500,000 1,325,625
Vail Resorts sr sub nts 8.75% 5/15/09 ............ 2,000,000 1,950,000
----------
8,281,875
----------
Metals & Mining - 1.07%
Armco sr nts 8.875% 12/1/08 ...................... 550,000 564,438
G.S.Technologies sr nts 12.00% 9/1/04 ............ 2,000,000 1,820,000
----------
2,384,438
----------
Packaging & Containers - 1.17%
Container Corporation of America Series A
sr nts 11.25% 5/1/04 .......................... 1,000,000 1,057,500
Pierce Leahy Command sr unsec nts
8.125% 5/15/08 ................................ 800,000 783,000
Riverwood International unsec sr nts
10.25% 4/1/06 ................................. 750,000 764,063
----------
2,604,563
----------
<PAGE>
- --------------------------------------------------------------------------------
Principal Market
Amount Value
-------------------------
Non-Convertible Bonds (Continued)
Real Estate - 0.17%
LTC Properties sub debs 8.50% 1/1/01 ........... $ 450,000 $ 386,438
-----------
386,438
-----------
Retail - 3.21%
Amscan Holdings sr sub nts 9.875% 12/15/07 ..... 650,000 556,563
Big V Supermarkets Series B sr sub nts
11.00% 2/15/04 .............................. 450,000 466,313
Cole National Group sr sub nts
9.875% 12/31/06 ............................. 2,000,000 2,080,000
Fleming sr sub nts 10.50% 12/1/04 .............. 1,000,000 953,750
Fleming sr nts 10.625% 12/15/01 ................ 1,820,000 1,838,200
Frank's Nursery & Crafts sr sub nts
10.25% 3/1/08 ............................... 250,000 249,688
Wilsons The Leather Expert Series B sr nts
11.25% 8/15/04 .............................. 1,000,000 1,005,000
-----------
7,149,514
-----------
Telecommunications - 3.49%
Galaxy Telecommunication L.P. sr sub nts
12.375% 10/1/05 ............................. 2,000,000 2,222,500
Intermedia Communication sr nts
8.60% 6/1/08 ................................ 2,000,000 1,880,000
ProNet sr sub nts 11.875% 6/15/05 .............. 350,000 357,000
Rogers Communications sr nts
8.875% 7/15/07 .............................. 1,950,000 2,003,625
Rural Cellular sr sub nts 9.625% 5/15/08 ....... 700,000 724,500
TELEX Communications sr sub nts
10.50% 5/1/07 ............................... 750,000 590,625
-----------
7,778,250
-----------
Textiles, Apparel & Furniture - 2.76%
Norton McNaughton unsec sr nts
12.50% 6/1/05 ............................... 1,000,000 848,750
Ntex sr nts 11.50% 6/1/06 ...................... 2,500,000 2,300,000
Pillowtex Series B sr unsec sub nts
9.00% 12/15/07 .............................. 2,050,000 1,978,250
Synthetic Industries Series B sr sub nts
9.25% 2/15/07 ............................... 1,000,000 1,028,750
-----------
6,155,750
-----------
Transportation & Shipping - 2.44%
Atlantic Express sr sec nts 10.75% 2/1/04 ...... 675,000 681,750
Eletson Holdings 1st pfd mtg nts
9.25% 11/15/03 .............................. 2,500,000 2,375,000
MTL sr sub nts 10.00% 6/15/06 .................. 2,000,000 1,982,500
Navigator Gas Transport unit 12.00% 6/30/07 .... 1,000,000 390,000
-----------
5,429,250
-----------
Utilities - 0.71%
Midland Funding II Series A sr sub debs
11.75% 7/23/05 .............................. 1,400,000 1,576,750
-----------
1,576,750
-----------
Miscellaneous - 0.34%
Loomis Fargo sr sub nts 10.00% 1/15/04 ......... 750,000 763,125
-----------
763,125
-----------
Total Non-Convertible Bonds
(cost $92,403,912) .......................... 89,896,173
-----------
<PAGE>
closed-end income 11
Statement of Net Assets (Continued)
- --------------------------------------------------------------------------------
Principal Market
Amount Value
---------------------------
Convertible Bonds - 6.56%
Automobiles & Automotive Parts - 0.19%
Tower Automotive sub nts 5.00% 8/1/04 ......... $ 400,000 $ 426,000
-----------
426,000
-----------
Banking, Finance & Insurance - 0.18%
Bell Atlantic Financial Services sr unsec nts
5.75% 4/1/03 ................................ 400,000 411,000
-----------
411,000
-----------
Cable, Media & Publishing - 0.78%
Mail-Well sr nts 5.00% 11/1/02 ................ 1,700,000 1,740,375
-----------
1,740,375
-----------
Industrial Machinery - 0.58%
Thermo Fibertek sub nts 4.50% 7/15/04 ......... 1,530,000 1,285,200
-----------
1,285,200
-----------
Metals & Mining - 0.65%
MascoTech sub debs 4.50% 12/15/03 ............. 1,800,000 1,446,750
-----------
1,446,750
-----------
Real Estate - 4.18%
Centertrust Retail Properties Series A sub debs
7.50% 1/15/01 ............................... 2,270,000 2,111,100
IRT Property sub debs 7.30% 8/15/03 ........... 2,000,000 2,032,500
Malan Realty Investors unsec sub debs
9.50% 7/15/04 ............................... 2,300,000 2,294,250
MidAtlantic Realty 7.625% 9/15/03 ............. 1,500,000 1,500,000
Sizeler Property Investors sub debs
8.00% 7/15/03 ............................... 1,500,000 1,370,625
-----------
9,308,475
-----------
Total Convertible Bonds ($14,725,075) ......... 14,617,800
-----------
Short-Term Securities - 3.19%
**U.S. Treasury Bill 4.19% 6/3/99 ............... 7,111,000 7,109,303
-----------
Total Short-Term Securities
(cost $7,109,303) .......................... 7,109,303
-----------
<PAGE>
Total Market Value of Securities - 123.10%
(cost $251,392,402) ........................ $ 274,203,972
Liabilities Net of Receivables and
Other Assets - (23.10%) .................... (51,450,267)
-------------
Net Assets Applicable to 14,307,000 Shares
($0.01 Par Value) Outstanding;
Equivalent to $15.57 Per Share - 100.00% ... $ 222,753,705
=============
Components Of Net Assets At May 31, 1999:
Common stock, $0.01 par value, 500,000,000
shares authorized to the Fund ............... $ 200,958,246
Distributions in excess of net investment
income ...................................... (1,769,919)
Accumulated net realized gain on investments .. 753,808
Net unrealized appreciation of investments .... 22,811,570
-------------
Total net assets .............................. $ 222,753,705
=============
- ----------
* Non-income producing security.
** U.S. 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
mtg - mortgage
nts - notes
pfd - preferred
sec - secured
sr - senior
sub - subordinated
unsec - unsecured
ACES - Automatic Common Exchange Security
ADR - American Depository Receipt
DECS - Dividend Enhanced Convertible Stock
PIK - Payment In Kind
PRIDES - Preferred Redeemable Increased Dividend Securities
TIDES - Term Income Deferrable Equity Securities
See accompanying notes
<PAGE>
12 closed-end income
Delaware Group
Dividend and Income Fund, Inc.
Statement of Operations
Six Months Ended May 31, 1999
(Unaudited)
- --------------------------------------------------------------------------------
Investment Income:
Interest ............................................ $5,589,018
Dividends ........................................... 4,108,770 $9,697,788
---------- ----------
Expenses:
Management fees ..................................... 750,052
Commercial paper fees ............................... 84,000
Administrative fees ................................. 67,773
Professional fees ................................... 41,434
Reports to shareholders ............................. 33,000
Shareholders' meeting ............................... 24,000
Transfer agent fees ................................. 16,200
Taxes, other than taxes on income ................... 12,205
NYSE fees ........................................... 12,132
Directors' fees ..................................... 5,280
Custodian fees ...................................... 4,500
Other ............................................... 54,892
----------
Total operating expenses
(before interest expense) ........................ 1,105,468
Interest expense .................................... 1,423,487
Less: expenses paid indirectly ...................... (3,140)
-----------
Total expenses ...................................... 2,525,815
-----------
Net Investment Income ............................... 7,171,973
-----------
Net Realized And Unrealized Gain
On Investments:
Net realized gain on investments .................... 1,812,724
Net change in unrealized appreciation/depreciation
of investments ................................... 3,032,290
-----------
Net Realized And Unrealized Gain
On Investments ................................... 4,845,014
-----------
Net Increase In Net Assets Resulting
From Operations .................................. $12,016,987
===========
See accompanying notes
Delaware Group
Dividend and Income Fund, Inc.
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
Six Months
Ended Year
5/31/99 Ended
(Unaudited) 11/30/98
---------------------------
Operations:
Net investment income .............................. $7,171,973 $14,565,754
Net realized gain on investments ................... 1,812,724 15,774,593
Net change in unrealized appreciation/depreciation
of investments .................................. 3,032,290 (28,425,206)
------------ ------------
Net increase in net assets resulting
from operations ................................. 12,016,987 1,915,141
------------ ------------
Distributions To Shareholders From:
Net investment income .............................. (8,941,892) (14,565,754)
Net realized gains on investments .................. (12,590,160) (12,732,023)
------------ ------------
(21,532,052) (27,297,777)
------------ ------------
Net Decrease In Net Assets ......................... (9,515,065) (25,382,636)
Net Assets:
Beginning of year .................................. 232,268,770 257,651,406
------------ ------------
End of year ........................................ $222,753,705 $232,268,770
============ ============
See accompanying notes
<PAGE>
closed-end income 13
Delaware Group
Dividend and Income Fund, Inc.
Statement of Cash Flows
Six Months Ended May 31, 1999
(Unaudited)
- --------------------------------------------------------------------------------
Net Cash Provided by Operating Activities:
Net increase in net assets resulting from operations ............ $12,016,987
-----------
Adjustments to Reconcile Net Increase in Net Assets from
Operations to Cash Provided by Operating Activities:
Decrease in investments ......................................... 20,039,968
Net realized gain from security transactions .................... (1,812,724)
Change in net unrealized appreciation ........................... (3,032,290)
Decrease in receivable for investments sold ..................... 828,441
Decrease in interest and dividends receivable ................... 270,678
Decrease in payable for investments purchased ................... (8,268,657)
Increase in interest payable .................................... 20,745
Decrease in accrued expenses and other liabilities .............. (59,957)
-----------
Total adjustments ............................................... 7,986,204
-----------
Net cash provided by operating activities ....................... 20,003,191
-----------
Cash Flows Used for Financing Activities:
Cash provided by issuance of commercial paper ................... 89,672,302
Cash used to liquidate commercial paper ......................... (89,597,258)
Cash dividends paid ............................................. (21,532,052)
-----------
Net cash used for financing activities .......................... (21,457,008)
-----------
Net increase in cash ............................................ (1,453,817)
Cash at beginning of period ..................................... 53,401
-----------
Cash at end of period ........................................... $(1,400,416)
===========
Cash paid for interest .......................................... $ 1,402,742
===========
See accompanying notes
<PAGE>
14 closed-end income
Delaware Group
Dividend and Income Fund, Inc.
Financial Highlights
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period were as follows:
---------------------------------------------------------------------------
Six Months
Ended Year Ended November 30,
5/31/99(1) 1998 1997 1996 1995 1994
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $16.230 $18.010 $15.420 $14.010 $12.690 $14.910
Income (loss) from investment operations:
Net investment income ............................... 0.501 1.020 1.010 1.070 1.130 1.100
Net realized and unrealized gain (loss)
on investments ................................... 0.344 (0.890) 3.080 1.840 1.340 (1.730)
-------- -------- -------- -------- -------- --------
Total from investment operations .................... 0.845 0.130 4.090 2.910 2.470 (0.630)
-------- -------- -------- -------- -------- --------
Less dividends and distributions:
Dividends from net investment income ................ (0.625) (1.020) (1.010) (1.090) (1.150) (1.120)
Distributions from net realized gains
on investments ................................... (0.880) (0.890) (0.490) (0.410) -- (0.470)
-------- -------- -------- -------- -------- --------
Total dividends and distributions ................... (1.505) (1.910) (1.500) (1.500) (1.150) (1.590)
-------- -------- -------- -------- -------- --------
Net asset value, end of period ...................... $15.570 $16.230 $18.010 $15.420 $14.010 $12.690
======== ======== ======== ======== ======== ========
Market value, end of period ......................... $15.813 $17.630 $18.060 $16.630 $14.000 $12.000
======== ======== ======== ======== ======== ========
Total return based on:(2)
Market value ........................................ (2.37%) 8.30% 18.34% 30.67% 28.71% (7.23%)
======== ======== ======== ======== ======== ========
Net asset value ..................................... 4.40% (0.12%) 27.22% 21.11% 20.72% (4.60%)
======== ======== ======== ======== ======== ========
Ratios and supplemental data:
Net assets, end of period (000 omitted) ............. $222,754 $232,269 $257,651 $220,566 $200,500 $181,510
Ratio of total operating expenses to
average net assets ............................... 1.86% 2.22% 2.32% 2.59% 2.82% 2.01%
Ratio of total operating expenses to
average net assets prior to expenses
paid indirectly .................................. 1.86% 2.22% 2.32% 2.59% 2.82% 2.01%
Ratio of total operating expenses to
adjusted average net assets
(before interest expense)(3) ..................... 1.01% 0.80% 0.82% 0.87% 0.89% 1.01%
Ratio of interest expenses to adjusted
average net assets(3) ............................ 1.31% 1.02% 1.06% 1.17% 1.32% 0.76%
Ratio of net investment income to average
net assets ....................................... 5.27% 5.91% 6.10% 7.38% 8.49% 8.25%
Ratio of net investment income to average
net assets prior to expenses
paid indirectly .................................. 5.27% 5.91% 6.10% 7.38% 8.49% 8.25%
Ratio of net investment income to adjusted
average net assets(3) ............................ 6.59% 4.84% 4.93% 5.80% 6.68% 6.80%
Portfolio turnover .................................. 43% 46% 74% 69% 118% 73%
Leverage analysis:
Debt outstanding at end of period
(000 omitted) .................................... $55,000 $55,000 $55,000 $55,000 $55,000 $48,000
Average daily balance of debt outstanding
(000 omitted) .................................... $54,575 $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 14,307
Average debt per share .............................. $3.815 $3.813 $3.818 $3.820 $3.670 $2.850
</TABLE>
- ------------
(1) Ratios have been annualized and total return has not been annualized.
(2) 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.
(3) Adjusted net assets excludes debt outstanding.
See accompanying notes
<PAGE>
closed-end income 15
Delaware Group
Dividend and Income Fund, Inc.
Notes To Financial Statements
May 31, 1999(Unaudited)
- --------------------------------------------------------------------------------
Delaware Group Dividend and Income Fund, Inc. (the "Fund") is registered as a
diversified closed-end management investment company under the Investment
Company Act of 1940, as amended. The Fund is organized as a Maryland
corporation. 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 period
ended May 31, 1999.
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
recorded on the accrual basis. Original issue discounts are accreted to interest
income over the lives of the respective securities.
Certain expenses of the Fund are paid through "soft dollar" arrangements with
brokers. These transactions are done subject to best price and execution. The
amount of these expenses was approximately $3,140 for the period ended May 31,
1999. The Fund may receive earnings credits from its custodian when positive
cash balances are maintained, which are used to offset custody fees. There were
no credits for the period ended May 31, 1999. The expenses paid under the above
arrangements are included in their respective expense captions on the Statement
of Operations with the corresponding expense offset shown as "expenses paid
indirectly."
<PAGE>
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 May 31, 1999, the Fund had a liability for
Investment Management fees and other expenses payable to DMC of $134,937.
The Fund has engaged 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. At May 31, 1999 the Fund
had a liability for such fees and other expenses payable to DSC of $15,972.
For purposes of the calculation of investment management fees and administration
fees, adjusted average weekly 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 period ended May 31, 1999, the Fund made purchases of $56,471,600 and
sales of $63,249,148 of investment securities other than U.S. government
securities and temporary cash investments. The Fund made purchases of
$88,813,795 and sales of $102,064,460 of U.S. government securities.
The cost of investments for federal income tax purposes approximates cost for
book purposes. At May 31, 1999, the aggregate cost of securities and unrealized
appreciation (depreciation) for the Fund was as follows:
Cost of Investments .............................. $251,392,402
============
Aggregated unrealized appreciation ............... $ 32,586,590
Aggregated unrealized depreciation ............... (9,775,020)
------------
Net unrealized appreciation ...................... $ 22,811,570
============
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 period ended May 31, 1999.
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.
<PAGE>
16 closed-end income
Notes to Financial Statements (Continued)
5. Commercial Paper
As of May 31, 1999, $55,000,000 of commercial paper was outstanding with an
amortized cost of $54,600,771. The weighted average discount rate of commercial
paper outstanding at May 31, 1999, was 4.95%. The average daily balance of
commercial paper outstanding during the period ended May 31, 1999, was
$54,574,769 at a weighted discount rate of 5.19%. The maximum amount of
commercial paper outstanding at any time during the period 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
period ended May 31, 1999, 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.
7. Year 2000
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.
<PAGE>
This Semi-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 from time to time purchase shares of its Common Stock on
the open market at market prices.
Board of Directors
Wayne A. Stork
Chairman
Delaware Investments Family of Funds
Philadelphia, PA
David K. Downes
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
Thomas F. Madison
President and Chief Executive Officer
MLM Partners, Inc.
Minneapolis, MN
Charles E. Peck+
Secretary/Treasurer, Enterprise Homes, Inc.
Fredericksburg, VA
Jan L. Yeomans
Vice President and Treasurer
3M Corporation
St. Paul, MN
+Audit Committee Member
Executive Officers
David K. Downes
President and Chief Executive Officer
Delaware Investments Family of Funds
Philadelphia, PA
Richard G. Unruh, Jr.
Executive Vice President
Philadelphia, PA
H. Thomas McMeekin
Executive Vice President/Chief Investment Officer
Fixed-Income
Philadelphia, PA
Richard J. Flannery
Executive Vice President and General Counsel
Delaware Investments Family of Funds
Philadelphia, PA
Joseph H. Hastings
Vice President/Corporate Controller
Philadelphia, PA
Eric E. Miller
Senior Vice President/Secretary
Delaware Investments Family of Funds
Philadelphia, PA
Michael P. Bishof
Senior Vice President/Treasurer
Philadelphia, PA
(photo of globes)
<PAGE>
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
<PAGE>
(photo of globes)
Registrar and
Stock Transfer Agent
ChaseMellon Shareholder Services, L.L.C.
P.O. Box 590
Ridgefield Park, NJ
1.800.581.9677
For Securities Dealers
1.800.362.7500
For Financial Institutions
Representatives Only
1.800.659.2265
www.delawareinvestments.com
(DDF Listed NYSE Logo)
DELAWARE(SM)
INVESTMENTS
- ---------------------
Philadelphia o London
Printed in the USA
on recycled paper
(1865)
SA-DDF [5/99] PP7/99
Recordholders as of May 28, 1999: 567
(C) Delaware Distributors, L.P.
