UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number: 811-7460
Exact name of registrant as specified in charter:
Delaware Investments Dividend and Income Fund, Inc.
Address of principal executive offices:
2005 Market Street
Philadelphia, PA 19103
Name and address of agent for service:
Richelle S. Maestro, Esq.
2005 Market Street
Philadelphia, PA 19103
Registrant's telephone number, including area code: (800) 523-1918
Date of fiscal year end: November 30
Date of reporting period: November 30, 2003
Item 1. Reports to Stockholders
Delaware
Investments(SM)
--------------------------------------
A member of Lincoln Financial Group(R)
CLOSED-END
Annual Report 2003
--------------------------------------------------------------------------------
DELAWARE INVESTMENTS
DIVIDEND AND INCOME FUND, INC.
[LOGO] POWERED BY RESEARCH.(SM)
Table
OF CONTENTS
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PORTFOLIO MANAGEMENT REVIEW 1
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PERFORMANCE SUMMARY 3
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FINANCIAL STATEMENTS:
Statement of Net Assets 5
Statement of Operations 10
Statements of Changes in Net Assets 11
Statement of Cash Flows 11
Financial Highlights 12
Notes to Financial Statements 13
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REPORT OF INDEPENDENT AUDITORS 16
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BOARD OF DIRECTORS/OFFICERS 17
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Funds are not FDIC insured and are not guaranteed. It is possible to lose the
principal amount invested.
Mutual fund advisory services provided by Delaware Management Company, a series
of Delaware Management Business Trust, which is a registered investment advisor.
(C)2004 Delaware Distributors, L.P.
Portfolio Delaware Investments Dividend and Income Fund, Inc.
MANAGEMENT REVIEW December 10, 2003
Fund Managers
Damon J. Andres
Senior Portfolio Manager
Equities
Nancy M. Crouse
Senior Portfolio Manager
Equities
Timothy L. Rabe
Senior Portfolio Manager
Fixed Income
Q: How did the Fund perform relative to its benchmark for the 12-month period
ended November 30, 2003?
A: Delaware Investments Dividend and Income Fund, Inc. gained +27.13% (at net
asset value with distributions reinvested) for the fiscal year. In comparison,
its benchmark, the Standard & Poor's (S&P) 500 Index, gained +15.08% for the
same time period. The Fund's peer group, as measured by the Lipper Closed-End
Income and Preferred Stock Funds Average, rose +23.93% for the fiscal year.
Q: How would you describe your equity outlook at the beginning of the fiscal
year?
A: Our outlook for common stocks (excluding real estate investment trusts, or
REITs), which represents 58% of net assets at the onset of the fiscal year, was
generally optimistic. We believed the economic recovery would likely gather
steam in 2003, to the benefit of corporate profitability. We also experienced an
environment marked by attractive stock valuations, which favors our
value-oriented style of investing.
Q: How would you describe your equity investment strategy during the fiscal
year?
A: We favored market sectors such as financials. We viewed J.P. Morgan Chase as
a sound holding, given its strong balance sheet and a dividend yield that we
believe was both robust and durable. We also leaned our security weightings
toward economically-sensitive companies, such as Weyerhaeuser. The producer of
wood-related products also generated an attractive income stream and was well
positioned, in our opinion, to benefit from the economy's improvement.
Q: Did any common stocks within the Fund underperform relative to your
expectations?
A: Some of our healthcare positions turned in performances that we believe did
not reflect the quality of their underlying companies. We credit this
circumstance, in part, to investor uncertainty regarding proposed changes in
Medicare legislation, as well as concerns regarding patent expirations.
Q: How might the passage of new tax legislation in May 2003 impact the Fund's
stock holdings?
A: Beyond the relatively immediate effect of lowering the tax rate assessed
against dividends for most taxpayers, we believe the legislation dovetails
nicely into the trend among corporate leaders for greater managerial and fiscal
discipline, as well as their attempt to re-orient how investors are rewarded.
The 1990s saw companies use earnings to buy back their stock, in an attempt to
increase price through reduced supply. Of late, we have witnessed more companies
turning to dividends -- either by starting a dividend or increasing an existing
dividend -- as a primary means of returning profits to investors.
Q: What caused high-yield bonds to perform as they did for the 12-month period?
A: A primary cause for the high-yield bond market rebound was the Federal
Reserve's push to add liquidity to the economy. By lowering short-term interest
rates, the Fed attempted to provide incentive for greater bank lending, which in
turn puts more money to work in the economy and tends to foster economic
expansion. When the prospects for a stronger economy became apparent, investors
directed their assets toward securities that particularly benefit from such an
environment, including high-yield corporate bonds -- and high-yield bond mutual
funds. High-yield bonds also benefited from generally improving operational
conditions throughout the business community. Companies issuing high-yield bonds
tended to extend their debt and experienced declining default rates, from as
high as double-digit levels to roughly the five-to-six percent range of late.
Q: How did you manage the Fund's high-yield bond allocation during the fiscal
year?
A: We saw no reason to alter the manner in which we strategically managed the
portfolio during the 12-month period. We continued to focus on the lower-rated
securities within this asset class, given the availability of attractive yields,
as well as the general prospect for rising bond prices. Compared to our
high-yield benchmark, the Citigroup High Yield Cash Pay Index, we tended to hold
a greater weighting in utility bonds, due in part to the presence of "fallen
angels" -- high-grade bonds that were downgraded to high-yield status. Given
Delaware's strong commitment to fundamental research capabilities, we believe we
could identify attractive candidates for acquisition among such bonds.
1
Q: Please describe some high-yield securities that impacted Fund performance
during the 12-month period.
A: High-yield issues that provided sound positive performance for the Fund
included Charter Communications. While our overall return was strong, we held
some underperforming securities, too. One was DiGiorgio Foods, which declined in
value after losing one of its larger customers.
Q: How did real estate investment trusts (REITs) impact Fund performance during
the fiscal year?
A: As an asset class, REITs turned in a strong performance. Specifically, the
Fund benefitted from its exposure to the retail sector, which included General
Growth Properties. We also gained a measure of performance versus our REIT
benchmark by being less heavily weighted in the multi-family sector, where
apartment vacancies rose during the 12-month period. Conversely, the Fund lost
performance with its overweighting in the travel sector, a position we developed
in anticipation of speedy economic recovery but which suffered from industry
volatility. Performance was also impeded somewhat from an overweighting in the
office sector. Like the multi-family sector, this area of the REIT market
suffered from falling occupancy rates.
Q: What role did convertible securities play for the 12-month period?
A: As a percentage of net assets, convertible securities represent a smaller
portion of your Fund. However, we believe they play a beneficial role in adding
diversification to the portfolio, as well as generating income and offering
capital appreciation potential. Our approach to managing the portfolio's
convertible securities did not change over the 12-month period. Our research
focused on identifying companies selling at attractive valuations that feature
strong cash flows and balance sheets. Convertible securities' performance within
the Fund was in line with the broad equity market, yet with less volatility and
a greater income stream.
2
Delaware
INVESTMENTS DIVIDEND AND INCOME FUND, INC.
Fund Basics Fund Performance
As of November 30, 2003 Average Annual Total Returns
------------------------------------------------ Through November 30, 2003 Lifetime 10 Years Five Years One Year
Fund Objectives: --------------------------------------------------------------------------------
The Fund seeks to achieve high current income. At Market Price +8.59% +9.12% +3.86% +30.20%
Capital appreciation is a secondary objective.
------------------------------------------------ At Net Asset Value +9.15% +8.69% +5.34% +27.13%
Total Fund Net Assets: --------------------------------------------------------------------------------
$150.59 million
------------------------------------------------ Returns reflect reinvestment of all distributions. Shares of the Fund were
Number of Holdings: initially offered with a sales charge of 6.0%. Performance since inception does
244 not include the sales charge or any brokerage commissions for purchases made
------------------------------------------------ since inception. Past performance is not a guarantee of future results.
Fund Start Date:
March 26, 1993 The performance table and graphs on the following page do not reflect the
------------------------------------------------ deduction of taxes the shareholder would pay on Fund distributions or
Your Fund Managers: redemptions of Fund shares.
Damon J. Andres earned a bachelor's degree in
business administration with an emphasis in
finance and accounting from the University of
Richmond. Prior to joining Delaware Investments
in 1994, Mr. Andres performed
investment-consulting services with Cambridge
Associates, Inc. in Arlington, Virginia. Mr.
Andres is a CFA charterholder.
Nancy M. Crouse has a bachelor's degree from
Lafayette College and an MBA from the University
of Pittsburgh. She is the consumer growth and
consumer staples team leader, a member of the
portfolio review team and a co-manager of open-
and closed-end mutual funds. Ms. Crouse began
her career in finance at Philadelphia National
Bank. Before joining Delaware Investments in
1993, she served as Vice President at CoreStates
Investment Advisers, where she performed
securities analysis and managed balanced
portfolios. Ms. Crouse is a CFA charterholder
and a member of the Philadelphia Society of
Financial Analysts.
Timothy L. Rabe is Senior Vice-President/Senior
Portfolio Manager of Delaware's high-yield
funds. Mr. Rabe received a bachelor's degree in
finance from the University of Illinois. Prior
to joining Delaware Investments in 2000, Mr.
Rabe was a high-yield portfolio manager for
Conseco Capital Management. Before that, he
worked as a tax analyst for The Northern Trust
Company. Mr. Rabe is a CFA charterholder.
------------------------------------------------
NYSE Symbol:
DDF
3
Market Price vs. Net Asset Value
November 30, 2002 through November 30, 2003
-- Delaware Investments Dividend and Income Fund, Inc. @ Market Price
-- Delaware Investments Dividend and Income Fund, Inc. @ NAV
Delaware Investments Dividend &
Income Fund, Inc.- Delaware Investments Dividend &
Market Price Income Fund, Inc.- NAV
11/30/02 $10.02 $10.14
12/31/02 $11.15 $9.94
1/31/03 $10.59 $9.72
2/28/03 $10.71 $9.52
3/31/03 $10.78 $9.72
4/30/03 $12.05 $10.49
5/31/03 $12.20 $10.83
6/30/03 $12.95 $10.99
7/31/03 $13.40 $11.09
8/31/03 $11.76 $11.11
9/30/03 $11.18 $11.21
10/31/03 $11.65 $11.50
11/30/03 $11.84 $11.78
Past performance is not a guarantee of future results.
Performance of a $10,000 Investment
November 30, 1993 through November 30, 2003
-- Delaware Investments Dividend and Income Fund, Inc. @ Market Price
-- Delaware Investments DIvidend and Income Fund, Inc. @ NAV
-- Lipper Closed-End Income and Preferred Stock Funds Average @ NAV
-- Lipper Closed-End Income and Preferred Stock Funds Average @ Market Price
Delaware Investments Dividend & Income Fund - Peformance of $10,000 investment
chart
Delaware Investments Lipper Closed-end
Delaware Investments Dividend & Income Lipper Closed-end Income & Preferred
Dividend & Income Fund, Inc. @ Market Income & Preferred stock funds avg @ (Market
Fund, Inc. @ NAV Price stock funds avg @ (NAV) Price)
11/30/93 $10,000 $10,000 $10,000 $10,000
11/30/94 $ 9,540 $ 9,277 $ 9,562 $ 8,704
11/30/95 $11,517 $11,940 $11,509 $11,205
11/30/96 $13,948 $15,603 $12,892 $12,742
11/30/97 $17,744 $18,464 $14,980 $14,426
11/30/98 $17,723 $19,997 $16,130 $15,809
11/30/99 $16,341 $14,691 $15,363 $13,701
11/30/00 $16,532 $17,597 $16,544 $14,933
11/30/01 $18,519 $22,912 $17,798 $18,902
11/30/02 $18,082 $18,563 $16,665 $18,110
11/30/03 $22,595 $24,169 $18,864 $22,444
Chart assumes $10,000 invested on November 30, 1993, and reflects the
reinvestment of all distributions at market value. Performance of the Fund and
the Lipper peer group at market value are based on market performance during the
period. Performance of the Fund and the Lipper peer group at net asset value are
based on the fluctuations in net asset value during the period. The chart also
assumes $10,000 invested in the Lipper Closed-End Income and Preferred Stock
Funds Average at Market Price and at Net Asset Value. Returns plotted were as of
the last day of each month shown. Delaware Investments Dividend and Income Fund,
Inc. was initially offered with a sales charge of 6.0%. Performance since
inception does not include fees, the initial sales charge or any brokerage
commissions for purchases made since inception. Investments in the Fund are not
available at net asset value. The Lipper Closed-End Income and Preferred Stock
Funds Average represents the average return of closed-end income and preferred
stock mutual funds tracked by Lipper (Source: Lipper Inc.). You cannot invest
directly in an index. Past performance is not a guarantee of future results.
4
Statement Delaware Investments Dividend and Income Fund, Inc.
OF NET ASSETS November 30, 2003
Number of Market
Shares Value (U.S.$)
Common Stock - 77.15%
Aerospace & Defense - 1.10%
Raytheon 59,800 $ 1,657,058
-----------
1,657,058
-----------
Automobiles & Automotive Parts - 1.13%
General Motors 39,900 1,706,922
-----------
1,706,922
-----------
Banking, Finance & Insurance - 11.47%
Bank of America 34,100 2,572,163
Friedman Billings Ramsey Group 98,995 2,113,543
J.P. Morgan Chase 44,700 1,580,592
Keycorp 72,300 2,009,217
Mellon Financial 85,100 2,450,880
Morgan Stanley 57,300 3,167,544
Wells Fargo 41,900 2,402,127
XL Capital Ltd. Class A 13,000 977,600
-----------
17,273,666
-----------
Business Services - 1.10%
+++Fieldstone Investments 144A 100,000 1,650,000
-----------
1,650,000
-----------
Cable, Media & Publishing - 1.21%
Gannett 21,100 1,827,260
-----------
1,827,260
-----------
Chemicals - 3.93%
Air Products & Chemicals 45,200 2,166,888
Dow Chemical 100,000 3,755,000
-----------
5,921,888
-----------
Computers & Technology - 1.06%
Pitney Bowes 40,000 1,590,000
-----------
1,590,000
-----------
Consumer Products - 2.49%
Kimberly-Clark 39,000 2,114,580
Procter & Gamble 17,000 1,636,080
-----------
3,750,660
-----------
Electronics & Electrical Equipment - 1.01%
Emerson Electric 25,000 1,526,000
-----------
1,526,000
-----------
Energy - 4.55%
ChevronTexaco 28,000 2,102,800
ConocoPhillips 23,385 1,326,865
Exxon Mobil 40,000 1,446,800
Kerr-McGee 45,300 1,902,147
++Petro Geo Services ADR 1,989 73,604
-----------
6,852,216
-----------
Food, Beverage & Tobacco - 6.23%
General Mills 58,900 2,651,089
Heinz (H.J.) 60,700 2,191,270
Kellogg 61,500 2,199,855
PepsiCo 48,600 2,338,632
-----------
9,380,846
-----------
Healthcare & Pharmaceuticals - 6.20%
Abbott Laboratories 35,000 1,547,000
Biomet 62,100 2,221,317
Bristol-Myers Squibb 91,500 2,411,025
Number of Market
Shares Value (U.S.$)
Common Stock (continued)
Healthcare & Pharmaceuticals (continued)
++Medco Health Solutions 3,714 $ 135,301
Merck & Co. 30,800 1,250,480
Wyeth 45,100 1,776,940
-----------
9,342,063
-----------
Industrial Machinery - 1.62%
Caterpillar 32,000 2,433,600
-----------
2,433,600
-----------
Investment Companies - 1.71%
Gladstone Capital 120,300 2,578,029
-----------
2,578,029
-----------
Paper & Forest Products - 1.75%
International Paper 40,000 1,488,400
Weyerhaeuser 20,000 1,140,000
-----------
2,628,400
-----------
Real Estate - 24.11%
AMB Property 65,600 2,063,776
Apartment Investment & Management 55,200 1,879,560
AvalonBay Communities 22,300 1,065,940
Camden Property Trust 54,900 2,307,996
Duke Realty 87,000 2,679,600
*Equity Office Properties Trust 95,800 2,656,534
Equity One 2,700 46,305
General Growth Properties 37,844 3,050,226
Liberty Property Trust 62,470 2,363,240
Pan Pacific Retail Properties 61,400 2,852,030
Prentiss Properties Trust 76,272 2,421,636
Ramco-Gershenson Properties 118,500 3,086,925
Reckson Associates Realty 91,520 2,196,480
Simon Property Group 92,500 4,389,125
Starwood Hotels & Resorts Worldwide 76,200 2,626,614
Sun Communities 16,600 622,998
-----------
36,308,985
-----------
Retail - 0.16%
*++Kmart Holdings 7,768 236,536
-----------
236,536
-----------
Telecommunications - 1.73%
BellSouth 60,000 1,561,800
Verizon Communications 31,720 1,039,464
-----------
2,601,264
-----------
Transportation & Shipping - 1.52%
Union Pacific 36,000 2,292,480
-----------
2,292,480
-----------
Utilities - 3.07%
Dominion Resources 36,600 2,205,882
FPL Group 38,000 2,414,900
-----------
4,620,782
-----------
Total Common Stock (cost $102,126,002) 116,178,655
-----------
Convertible Preferred Stock - 6.09%
Aerospace & Defense - 0.71%
Northrop Grumman 7.25% 10,500 1,075,305
-----------
1,075,305
-----------
5
Statement Delaware Investments Dividend and Income Fund, Inc.
OF NET ASSETS (CONTINUED)
Number of Market
Shares Value (U.S.$)
Convertible Preferred Stock (continued)
Banking, Finance & Insurance - 3.35%
Chubb 7.00% 15,000 $ 412,500
National Australia Bank Units 7.875% 40,000 1,465,600
Newell Financial Trust 5.25% 52,600 2,386,725
Travelers Property Casualty 4.50% 32,200 766,682
----------
5,031,507
----------
Environmental Services - 0.76%
Allied Waste Industries 6.25% 16,200 1,144,368
----------
1,144,368
----------
Real Estate - 0.93%
*Crescent Real Estate 6.75% 62,600 1,402,240
----------
1,402,240
----------
Transportation & Shipping - 0.34%
Union Pacific Capital Trust 6.25% 2,322 118,132
+Union Pacific Capital Trust TIDES 144A 6.25% 7,818 397,741
----------
515,873
----------
Total Convertible Preferred Stock
(cost $9,134,779) 9,169,293
----------
Preferred Stock - 4.78%
Cable, Media & Publishing - 0.27%
*CSC Holdings 11.75% 3,775 399,206
----------
399,206
----------
Real Estate - 3.46%
Equity Inns Series B 8.75% 37,000 986,050
LaSalle Hotel Properties 10.25% 113,200 3,141,315
Ramco-Gershenson Properties 9.50% 40,000 1,101,000
----------
5,228,365
----------
Utilities - 1.05%
Public Service Enterprise Group 10.25% 27,200 1,577,600
----------
1,577,600
----------
Total Preferred Stock (cost $6,472,996) 7,205,171
----------
Principal
Amount (U.S.$)
Convertible Bonds - 6.77%
Automobiles & Automotive Parts - 0.26%
+Tower Automotive 144A 5.00% 8/1/04 $ 400,000 396,000
----------
396,000
----------
Computers & Technology - 0.37%
+Mercury Interactive 144A 4.75% 7/1/07 550,000 554,125
----------
554,125
----------
Consumer Products - 0.11%
Eastman Kodak 3.375% 10/15/33 150,000 162,750
----------
162,750
----------
Leisure, Lodging & Entertainment - 0.41%
+Regal Entertainment 144A 3.75% 5/15/08 550,000 620,125
----------
620,125
----------
Miscellaneous - 0.19%
+Tyco International Group 144A
2.75% 1/15/18 250,000 291,250
----------
291,250
----------
Principal Market
Amount (U.S.$) Value (U.S.$)
Convertible Bonds (continued)
Real Estate - 2.02%
Malan Realty Investors 9.50% 7/15/04 $ 1,755,000 $ 1,763,775
Meristar Hospitality 9.50% 4/1/10 1,100,000 1,274,625
-----------
3,038,400
-----------
Retail - 1.78%
+Gap 144A 5.75% 3/15/09 1,825,000 2,675,906
-----------
2,675,906
-----------
Telecommunications - 0.91%
+Nextel Partners 144A 1.50% 11/15/08 800,000 1,371,000
-----------
1,371,000
-----------
Transportation & Shipping - 0.15%
+Expressjet Holdings 144A 4.25% 8/1/23 200,000 229,500
-----------
229,500
-----------
Utilities - 0.57%
+Centerpoint Energy 144A 3.75% 5/15/23 800,000 853,000
-----------
853,000
-----------
Total Convertible Bonds (cost $8,205,238) 10,192,056
-----------
Bonds - 38.55%
Aerospace & Defense - 0.36%
+Armor Holdings 144A 8.25% 8/15/13 500,000 535,000
-----------
535,000
-----------
Automobiles & Automotive Parts - 1.16%
+Advanced Accessory Systems 144A
10.75% 6/15/11 200,000 217,000
*General Motors 8.375% 7/15/33 325,000 355,064
+Metaldyne 144A 10.00% 11/1/13 250,000 241,250
+UIS 144A 9.375% 6/15/13 875,000 936,250
*[CHECK MARK]Venture Holdings Trust 12.00% 6/1/09 425,000 2,125
-----------
1,751,689
-----------
Banking, Finance & Insurance - 1.14%
+Crum & Forster 144A 10.375% 6/15/13 325,000 355,875
+Eircum Funding 144A 8.25% 8/15/13 200,000 218,000
+Farmers Exchange Capital 144A
7.20% 7/15/48 350,000 306,445
Finova Group 7.50% 11/15/09 200,000 112,000
+Poster Financial Group 144A
8.75% 12/1/11 300,000 308,625
*Qwest Capital Funding 5.875% 8/3/04 225,000 226,125
TIG Holdings 8.125% 4/15/05 175,000 178,719
-----------
1,705,789
-----------
Building & Materials - 1.78%
+Beazer Homes USA 144A 6.50% 11/15/13 100,000 100,000
DR Horton 9.75% 9/15/10 250,000 295,625
+Lone Star Industries 144A 8.85% 6/15/05 300,000 314,625
Schuler Homes 10.50% 7/15/11 575,000 660,531
*Standard Pacific 9.25% 4/15/12 375,000 418,125
*Technical Olympic USA 10.375% 7/1/12 525,000 585,375
WCI Communities 10.625% 2/15/11 275,000 309,375
-----------
2,683,656
-----------
Business Services - 0.21%
Brickman Group 11.75% 12/15/09 275,000 317,625
-----------
317,625
-----------
Cable, Media & Publishing - 4.76%
Charter Communications 10.75% 10/1/09 1,575,000 1,354,499
6
Statement Delaware Investments Dividend and Income Fund, Inc.
OF NET ASSETS (CONTINUED)
Principal Market
Amount (U.S.$) Value (U.S.$)
Bonds (continued)
Cable, Media & Publishing (continued)
*CSC Holdings 10.50% 5/15/16 $ 750,000 $ 832,500
+Hollinger 144A 11.875% 3/1/11 200,000 220,000
*#Insight Communications 12.25% 2/15/10 1,050,000 838,688
*Insight Midwest 10.50% 11/1/10 50,000 54,750
*Lodgenet Entertainment 9.50% 6/15/13 575,000 628,188
*Mediacom Broadband 11.00% 7/15/13 600,000 646,500
*PanAmSat 8.50% 2/1/12 425,000 464,313
PEI Holdings 11.00% 3/15/10 225,000 262,406
Rogers Cable Systems 10.00% 3/15/05 500,000 545,000
+Sheridan Acquisition 144A
10.25% 8/15/11 325,000 344,500
Vertis
10.875% 6/15/09 225,000 231,750
13.50% 12/7/09 125,000 117,500
XM Satellite Radio 12.00% 6/15/10 550,000 616,000
----------
7,156,594
----------
Chemicals - 1.87%
*Huntsman International
9.875% 3/1/09 250,000 269,375
10.125% 7/1/09 350,000 350,875
#*+Johnsondiversey 144A 10.67% 5/15/13 450,000 343,125
*Lyondell Chemical 9.625% 5/1/07 325,000 336,375
*+Rhodia SA 144A 8.875% 6/1/11 775,000 689,750
Solutia
*6.72% 10/15/37 975,000 755,625
11.25% 7/15/09 75,000 67,875
----------
2,813,000
----------
Computers & Technology - 1.39%
*Amkor Technologies 7.75% 5/15/13 200,000 215,000
*ChipPac International 12.75% 8/1/09 150,000 167,250
Cooperative Computing 10.50% 6/15/11 225,000 245,250
Lone Star Technologies 9.00% 6/1/11 150,000 146,250
Northern Telecom Capital 7.875% 6/15/26 900,000 886,500
+Stratus Technologies 144A
10.375% 12/1/08 425,000 437,750
----------
2,098,000
----------
Consumer Products - 1.36%
*American Greetings 11.75% 7/15/08 610,000 710,650
*+Hines Nurseries 144A 10.25% 10/1/11 200,000 217,500
Jafra Cosmetics 10.75% 5/15/11 350,000 376,250
*Remington Arms 10.50% 2/1/11 225,000 235,125
Salton 10.75% 12/15/05 500,000 515,000
----------
2,054,525
----------
Consumer Services - 0.49%
*Alderwoods Group 12.25% 1/2/09 475,000 534,375
Corrections Corporation of America
*7.50% 5/1/11 50,000 52,625
+144A 7.50% 5/1/11 150,000 157,875
----------
744,875
----------
Energy - 2.24%
*Bluewater Finance 10.25% 2/15/12 325,000 332,313
*Citgo Petroleum 11.375% 2/1/11 475,000 550,999
*+Dynegy Holdings 144A 10.125% 7/15/13 900,000 996,749
Hanover Equipment Trust 8.50% 9/1/08 250,000 256,250
+Hilcorp Energy/Finance 144A
10.50% 9/1/10 225,000 246,375
+Massey Energy 144A 6.625% 11/15/10 300,000 304,500
Principal Market
Amount (U.S.$) Value (U.S.$)
Bonds (continued)
Energy (continued)
Petro Gas Services
8.00% 11/5/06 $ 35,159 $ 35,863
*10.00% 11/5/10 254,910 268,930
*Sonat 7.625% 7/15/11 175,000 152,250
*Transcontinental Gas Pipeline
6.25% 1/15/08 225,000 233,438
----------
3,377,667
----------
Environmental Services - 0.58%
*Casella Waste 9.75% 2/1/13 225,000 253,125
IESI 10.25% 6/15/12 575,000 626,750
----------
879,875
----------
Food, Beverage & Tobacco - 2.75%
B&G Foods 9.625% 8/1/07 725,000 750,375
+Commonwealth Brands 144A
10.625% 9/1/08 625,000 678,125
*DiGiorgio Foods 10.00% 6/15/07 475,000 450,063
+Le-Natures 144A 9.00% 6/15/13 300,000 312,000
+National Beef Packing 144A
10.50% 8/1/11 475,000 522,500
*+Pinnacle Foods 144A 8.25% 12/1/13 1,025,000 1,055,749
+Seminis Vegtable 144A 10.25% 10/1/13 350,000 373,188
----------
4,142,000
----------
Foreign Government - 0.21%
Republic of Peru 8.75% 11/21/33 325,000 322,238
----------
322,238
----------
Healthcare & Pharmaceuticals - 0.60%
*Alliance Imaging 10.375% 4/15/11 325,000 338,813
Team Health 12.00% 3/15/09 525,000 570,937
----------
909,750
----------
Industrial Machinery - 0.21%
*Foster Wheeler 6.75% 11/15/05 525,000 315,000
----------
315,000
----------
Leisure, Lodging & Entertainment - 1.43%
+Gaylord Entertainment 144A
8.00% 11/15/13 275,000 287,375
+Hard Rock Hotel 144A 8.875% 6/1/13 300,000 318,000
Herbst Gaming 10.75% 9/1/08 325,000 365,625
+Host Marriott 144A 7.125% 11/1/13 125,000 124,375
+Imax 144A 9.625% 12/1/10 300,000 312,000
Royal Caribbean Cruises
6.875% 12/1/13 175,000 175,438
7.50% 10/15/27 600,000 575,250
----------
2,158,063
----------
Metals & Mining - 0.34%
*AK Steel 7.75% 6/15/12 350,000 238,000
*United States Steel 10.75% 8/1/08 250,000 279,375
----------
517,375
----------
Packaging & Containers - 1.00%
*AEP Industries 9.875% 11/15/07 275,000 275,000
Portola Packaging 10.75% 10/1/05 175,000 174,125
*Radnor Holdings 11.00% 3/15/10 300,000 275,250
+Silgan Holdings 144A 6.75% 11/15/13 425,000 427,125
+Tekni-Plex 144A 8.75% 11/15/13 350,000 359,625
----------
1,511,125
----------
7
Statement Delaware Investments Dividend and Income Fund, Inc.
OF NET ASSETS (CONTINUED)
Principal Market
Amount (U.S.$) Value (U.S.$)
Bonds (continued)
Paper & Forest Products - 2.24%
Ainsworth Lumber
*12.50% 7/15/07 $ 475,000 $ 553,375
13.875% 7/15/07 100,000 115,500
Consolidated Container 10.125% 7/15/09 475,000 287,375
Georgia Pacific
8.125% 6/15/23 350,000 345,625
*8.625% 4/30/25 275,000 280,500
9.875% 11/1/21 225,000 234,000
+Millar Western 144A 7.75% 11/15/13 625,000 638,280
Pacifica Papers 10.00% 3/15/09 175,000 185,938
Smurfit Capital 7.50% 11/20/25 575,000 552,000
Tembec Industries 8.625% 6/30/09 175,000 174,563
----------
3,367,156
----------
Real Estate - 0.26%
Tanger Properties 9.125% 2/15/08 350,000 384,125
----------
384,125
----------
Restaurants - 0.46%
Avado Brands 9.75% 6/1/06 230,000 100,050
*Denny's 12.75% 9/30/07 250,000 258,750
+O'Charleys 144A 9.00% 11/1/13 325,000 327,438
----------
686,238
----------
Retail - 0.87%
*J Crew 10.375% 10/15/07 485,000 503,188
*Office Depot 10.00% 7/15/08 480,000 576,000
Petco Animal Supplies 10.75% 11/1/11 195,000 231,075
----------
1,310,263
----------
Telecommunications - 2.78%
+Alaska Communications Systems
144A 9.875% 8/15/11 500,000 527,499
+American Tower 144A 7.25% 12/1/11 300,000 302,250
*+Centennial Cellular Operating 144A
10.125% 6/15/13 475,000 503,500
+Cincinnati Bell 144A
7.25% 7/15/13 225,000 235,125
8.375% 1/15/14 125,000 131,563
Crown Castle International
*10.75% 8/1/11 200,000 225,000
+144A 7.50% 12/1/13 250,000 248,750
+Level 3 Finance 144A 10.75% 10/15/11 375,000 393,750
+MetroPCS 144A 10.75% 10/1/11 400,000 392,000
Nextel Partners 12.50% 11/15/09 150,000 174,000
*+Qwest Services 144A 13.50% 12/15/10 350,000 413,438
*Time Warner Telecommunications
9.75% 7/15/08 425,000 431,375
Western Wireless 9.25% 7/15/13 200,000 209,000
----------
4,187,250
----------
Textiles, Apparel & Furniture - 0.34%
+Warnaco 144A 8.875% 6/15/13 500,000 510,000
----------
510,000
----------
Transportation & Shipping - 2.03%
Hornbeck Offshore Services
10.625% 8/1/08 250,000 275,625
Kansas City Southern Railway
9.50% 10/1/08 425,000 478,656
Ocean Rig Norway 10.25% 6/1/08 325,000 297,375
+OMI 144A 7.625% 12/1/13 300,000 303,000
Principal Market
Amount (U.S.$) Value (U.S.$)
Bonds (continued)
Transportation & Shipping (continued)
Overseas Shipholding Group
8.25% 3/15/13 $ 475,000 $ 508,844
+Seabulk International 144A
9.50% 8/15/13 500,000 523,750
Stena AB 9.625% 12/1/12 600,000 672,000
-----------
3,059,250
-----------
Utilities - 5.69%
+Allegheny Energy Supply Statutory Trust
2001 144A Series A 10.25% 11/15/07 385,000 400,400
Aquila 7.95% 2/1/11 300,000 321,000
*Avista 9.75% 6/1/08 500,000 587,500
Calpine
8.25% 8/15/05 200,000 188,000
+144A 8.75% 7/15/13 600,000 556,500
*10.50% 5/15/06 550,000 514,250
Cogentrix Energy 8.75% 10/15/08 425,000 430,844
Edison Mission 9.875% 4/15/11 200,000 203,000
El Paso Natural Gas
7.625% 8/1/10 325,000 328,250
*7.875% 6/15/12 300,000 265,500
Elwood Energy 8.159% 7/5/26 165,449 168,137
+Gemstone Investor 144A
7.71% 10/31/04 225,000 226,406
Homer City Fund 8.137% 10/1/19 200,000 211,750
Illinois Power 7.50% 6/15/09 500,000 545,000
*Midland Funding II 11.75% 7/23/05 160,377 174,009
Midwest Generation 8.30% 7/2/09 500,000 510,000
[CHECK MARK]Mirant Americas Generation
7.625% 5/1/06 400,000 340,000
*+MSW Energy Holdings/Finance II 144A
7.375% 9/1/10 300,000 310,500
Orion Power Holdings 12.00% 5/1/10 375,000 438,750
PSEG Energy Holdings 7.75% 4/16/07 250,000 259,063
+Reliant Resource 144A 9.50% 7/15/13 250,000 253,750
Southern Natural Gas 8.875% 3/15/10 200,000 221,500
Tennessee Gas Pipeline 8.375% 6/15/32 350,000 366,625
+USGen New England 144A 7.459% 1/2/15 250,000 110,923
*Williams Companies 8.125% 3/15/12 575,000 623,874
-----------
8,555,531
-----------
Total Bonds
(cost $55,940,450) 58,053,659
-----------
Municipal Bonds - 0.17%
New Jersey Economic Development
Authority Continental Airlines Project
6.25% 9/15/29 300,000 255,339
-----------
Total Municipal Bonds (cost $254,422) 255,339
-----------
Number of
Shares
Warrants - 0.13%
+++Solutia 144A 650 12,025
++XM Satellite Radio 100 180,000
-----------
Total Warrants (cost $75,794) 192,025
-----------
8
Statement Delaware Investments Dividend and Income Fund, Inc.
OF NET ASSETS (CONTINUED)
Principal Market
Amount (U.S.$) Value (U.S.$)
Short-Term Securities - 3.16%
**U.S. Treasury Bills 0.905% 1/8/04 $ 4,765,000 $ 4,760,624
-------------
Total Short-Term Securities
(cost $4,760,624) 4,760,624
-------------
Total Market Value of Securities Before
Securities Lending Collateral- 136.80%
(cost $186,970,305) 206,006,822
-------------
Securities Lending Collateral*** - 13.08%
Short-Term Investments
ABN AMRO Bank Chicago
1.06% 6/07/04 748,078 748,039
ABN AMRO Bank Tokyo 1.10% 1/13/04 213,742 213,742
Allied Irish Dublin 1.12% 1/20/04 854,951 854,968
Credit Suisse First Boston
1.60% 12/13/04 854,968 854,968
Deutsche Bank Financial
1.071% 1/16/04 855,109 855,270
FHLMC 1.12% 1/15/04 482,769 484,016
FNMA 1.035% 1/29/04 5,343,755 5,343,482
General Electric Capital
1.13% 10/04/04 320,892 321,439
Goldman Sachs Group LP
1.193% 12/15/03 748,090 748,097
HBOS Treasury Services PLC
1.09%12/12/03 854,961 854,968
Keybank NA 1.146% 1/26/04 427,554 427,698
Marsh & McLennan 1.291% 6/15/04 549,796 565,446
Merrill Lynch Mortgage Capital
1.163% 12/08/03 854,968 854,968
Morgan Stanley Dean Witter
1.10% 12/01/03 3,576,574 3,576,574
1.22% 12/28/04 213,395 213,742
1.30% 3/19/04 534,011 534,355
Swiss Re Financial 1.103% 1/15/04 533,597 532,869
Wachovia Bank NA 1.127% 11/15/04 854,985 855,729
Wilmington Trust 1.11% 1/22/04 854,951 854,968
-------------
Total Securities Lending Collateral
(cost $19,695,338) 19,695,338
-------------
Total Market Value of Securities - 149.88%
(cost $206,665,643) $ 225,702,160
Obligation to Return Securities
Lending Collateral - (13.08%)*** (19,695,338)
Commercial Paper Payable
(par $55,000,000) - (36.46%) (54,898,141)
Liabilities Net of Receivables and
Other Assets - (0.34%) (513,764)
-------------
Net Assets Applicable to 12,876,300
Shares Outstanding; Equivalent
to $11.70 per share - 100.00% $ 150,594,917
=============
Components of Net Assets at November 30, 2003:
Common stock, $0.01 par value,
500,000,000 shares authorized to the Fund $ 172,861,161
Treasury stock, 1,430,700 shares at cost (17,411,619)
Accumulated net realized loss on investments (23,891,142)
Net unrealized appreciation of investments 19,036,517
-------------
Total net assets $ 150,594,917
=============
++Non-income producing security for the year ended November 30, 2003.
[CHECK MARK]Non-income producing security. Security is currently in default.
+Security exempt from registration under Rule 144A of the Securities Act of
1933. See Note 8 in "Notes to Financial Statements."
#Step coupon bond.
*Fully or partially on loan.
**U.S. Treasury bills are traded on a discount basis; the interest rate shown
is the effective yield at the time of purchase by the Fund.
***See Note 7 in "Notes to Financial Statements."
+++Includes $19,339,198 of securities loaned.
Summary of Abbreviations:
ADR - American Depositary Receipts
FHLMC - Federal Home Loan Mortgage Corporation
FNMA - Federal National Mortgage Association
TIDES - Term Income Deferred Equity Securities
9
Statement Delaware Investments Dividend and Income Fund, Inc.
OF OPERATIONS Year Ended November 30, 2003
Investment Income:
Interest $6,241,858
Dividends 5,106,615
Securities lending income 38,405 $11,386,878
---------- -----------
Expenses:
Management fees 1,052,526
Commercial paper fees 116,680
Accounting and administration expenses 95,916
Reports to shareholders 61,420
Professional fees 52,679
Transfer agent fees 46,680
NYSE fees 35,040
Custodian fees 14,040
Directors' fees 10,880
Other 32,620
----------
Total operating expenses (before interest expense) 1,518,481
Interest expense 715,597
-----------
Total operating expenses (after interest expense) 2,234,078
Less expenses paid indirectly (3,276)
-----------
Total expenses 2,230,802
-----------
Net Investment Income 9,156,076
-----------
Net Realized and Unrealized Gain (Loss) on Investments:
Net realized loss on investments (1,708,967)
Net change in unrealized appreciation/depreciation of
investments 27,267,999
-----------
Net Realized and Unrealized Gain on Investments 25,559,032
-----------
Net Increase in Net Assets Resulting from Operations $34,715,108
===========
See accompanying notes
10
Statements Delaware Investments Dividend and Income Fund, Inc.
OF CHANGES IN NET ASSETS
Year Ended
11/30/03 11/30/02
Increase (Decrease) in Net Assets from Operations:
Net investment income $ 9,156,076 $ 8,177,813
Net realized loss on investments (1,708,967) (15,574,367)
Net change in unrealized appreciation/depreciation of investments 27,267,999 7,232,078
------------ ------------
Net increase (decrease) in net assets resulting from operations 34,715,108 (164,476)
------------ ------------
Dividends and Distributions to Shareholders from:
Net investment income (9,189,360) (8,496,926)
Return of capital (5,490,473) (10,496,508)
------------ ------------
(14,679,833) (18,993,434)
------------ ------------
Net Increase (Decrease) in Net Assets 20,035,275 (19,157,910)
Net Assets:
Beginning of year 130,559,642 149,717,552
------------ ------------
End of year $150,594,917 $130,559,642
============ ============
See accompanying notes
Statement Delaware Investments Dividend and Income Fund, Inc.
OF CASH FLOWS Year Ended November 30, 2003
Net Cash Provided by Operating Activities:
Net increase in net assets resulting from operations $ 34,715,108
------------
Adjustments to reconcile net increase in net assets from operations to cash provided by operating activities:
Amortization of premium and discount on investments (955,414)
Net proceeds from investment transactions 3,274,043
Net realized loss on investment transactions 1,708,967
Change in net unrealized appreciation/depreciation of investments (27,267,999)
Decrease in receivable for investments sold 2,595,349
Increase in interest and dividends receivable (242,374)
Increase in distribution payable 1,030,173
Decrease in payable for investments purchased (519,058)
Decrease in interest payable (35,960)
Increase in accrued expenses and other liabilities 9,970
------------
Total adjustments (20,402,303)
------------
Net cash provided by operating activities 14,312,805
------------
Cash Flows Used for Financing Activities:
Cash provided by issuance of commercial paper 246,304,977
Repayment of commercial paper upon maturity (246,248,443)
Cash dividends and distributions paid (14,679,833)
------------
Net cash used for financing activities (14,623,299)
------------
Net decrease in cash (310,494)
Cash at beginning of year 246,912
------------
Cash (overdraft) at end of year $ (63,582)
============
Cash paid for interest $ 751,557
============
See accompanying notes
11
Financial
HIGHLIGHTS
Selected data for each share of the Fund outstanding
throughout each period were as follows:
Delaware Investments Dividend and Income Fund, Inc.
---------------------------------------------------------------------------------------------------------------------------
Year Ended
11/30/03 11/30/02(3) 11/30/01 11/30/00 11/30/99
Net asset value, beginning of period $10.140 $11.630 $11.590 $13.000 $16.230
Income (loss) from investment operations:
Net investment income(4) 0.711 0.635 0.617 0.803 0.939
Net realized and unrealized gain (loss) on investments 1.989 (0.650) 0.923 (0.713) (1.914)
------- ------- ------- ------- -------
Total from investment operations 2.700 (0.015) 1.540 0.090 (0.975)
------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income (0.714) (0.660) (0.617) (0.803) (0.939)
Net realized gain on investments -- -- (0.080) (0.560) (1.316)
Return of capital (0.426) (0.815) (0.803) (0.137) --
------- ------- ------- ------- -------
Total dividends and distributions (1.140) (1.475) (1.500) (1.500) (2.255)
------- ------- ------- ------- -------
Net asset value, end of period $11.700 $10.140 $11.630 $11.590 $13.000
======= ======= ======= ======= =======
Market value, end of period $11.840 $10.020 $13.850 $11.875 $11.250
======= ======= ======= ======= =======
Total return based on:(1)
Market value 30.20% (18.98%) 30.20% 19.78% (26.53%)
Net asset value 27.13% (2.36%) 12.02% 1.17% (7.80%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $150,595 $130,560 $149,718 $149,292 $185,985
Ratio of expenses to average net assets 1.63% 1.86% 2.77% 3.02% 2.34%
Ratio of expenses to adjusted
average net assets (before interest expense)(2) 0.79% 0.80% 0.83% 0.71% 0.77%
Ratio of interest expense to adjusted average net assets(2) 0.37% 0.54% 1.22% 1.58% 1.08%
Ratio of net investment income to average net assets 6.70% 5.69% 5.07% 6.45% 6.34%
Ratio of net investment income to adjusted average net assets(2) 4.78% 4.12% 3.75% 4.88% 5.03%
Portfolio turnover 175% 107% 61% 47% 55%
Leverage analysis:
Debt outstanding (at par) at end of period (000 omitted) $55,000 $55,000 $55,000 $55,000 $55,000
Average daily balance of debt outstanding (000 omitted) $54,882 $54,857 $54,724 $54,463 $54,567
Average daily balance of shares outstanding (000 omitted) 12,876 12,876 12,876 13,744 14,307
Average debt per share $4.262 $4.260 $4.250 $3.963 $3.814
Asset coverage per $1,000 of debt outstanding at end of period $3,743 $3,379 $3,730 $3,738 $4,401
(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 purpose 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
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.
(2) Adjusted average net assets excludes debt outstanding.
(3) As required, effective December 1, 2001, the Fund adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies that requires
amortization of all premium and discounts on debt securities. The effect of
this change for the year ended November 30, 2002 was a decrease in net
investment income per shares of $0.025, an increase in net realized and
unrealized gain (loss) per share of $0.025, a decrease in the ratio of net
investment income to average net assets of 0.22%, and a decrease in the
ratio of net investment income to adjusted net assets of 0.16%. Per share
data and ratios for periods prior to December 1, 2001 have not been restated
to reflect this change in accounting.
(4) The average shares outstanding method has been applied for per share
information.
See accompanying notes
12
Notes Delaware Investments Dividend and Income Fund, Inc.
TO FINANCIAL STATEMENTS November 30, 2003
Delaware Investments Dividend and Income Fund, Inc. (the "Fund") is organized as
a Maryland corporation and is a diversified closed-end management investment
company under the Investment Company Act of 1940, as amended. The Fund's shares
trade on the New York Stock Exchange under the symbol DDF.
The investment objective of the Fund is to seek high current income. Capital
appreciation is a secondary objective.
1. Significant Accounting Policies
The following accounting policies are in accordance with accounting principles
generally accepted in the United States and are consistently followed by the
Fund.
Security Valuation -- All equity securities are valued at the last quoted sales
price as of the time of the regular close of the New York Stock Exchange (NYSE)
on the valuation date. Securities traded on the Nasdaq Stock Market, Inc.
(NASDAQ) are valued in accordance with the NASDAQ Official Closing Price, which
may not be the last sales price. If on a particular day an equity security does
not trade, then the mean between the bid and the asked prices will be used. U.S.
government and agency securities are valued at the mean between the 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 debt securities 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. In determining whether market quotations are readily available or
fair valuation will be used, various factors will be taken into consideration,
such as market closures, or with respect to foreign securities, aftermarket
trading or significant events after local market trading (e.g., government
actions or pronouncements, trading volume or volatility on markets, exchanges
among dealers, or news events).
Federal Income Taxes -- The Fund intends to continue to qualify for federal
income tax purposes 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.
Distributions -- The Fund has a managed distribution policy. Under the policy,
the Fund declares and pays monthly distributions and is managed with a goal of
generating as much of the distribution as possible from ordinary income (net
investment income and short-term capital gains). The balance of the distribution
then comes from long-term capital gains, and, if necessary, a return of capital.
Effective September 1, 2003, the current annualized rate is $0.96 per share. The
Fund continues to evaluate its monthly distribution in light of ongoing economic
and market conditions and may change the amount of the monthly distributions in
the future.
Borrowings -- The Fund issues short-term commercial paper at a discount from
par. The discount is amortized as interest expense over the life of the
commercial paper using the straight-line method (See Note 6).
Use of Estimates -- The preparation of financial statements in conformity with
accounting principles generally accepted in the United States 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 -- Expenses common to all funds within the Delaware Investments Family of
Funds are allocated amongst the funds on the basis of average net assets.
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. Discounts and premiums are amortized to interest
income over the lives of the respective securities. Distributions received from
investments in Real Estate Investment Trusts are recorded as dividend income on
ex-dividend date, subject to reclassification upon notice of the character of
such distribution by the issuer.
Certain expenses of the Fund are paid through commission arrangements with
brokers. The amount of these expenses was approximately $3,276 for the year
ended November 30, 2003. In addition, 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 earnings credits for the year ended November
30, 2003. 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."
2. Investment Management, Administration Agreements and Other Transactions with
Affiliates
In accordance with the terms of its investment management agreement, the Fund
pays Delaware Management Company (DMC), a series of Delaware Management Business
Trust and the investment manager, an annual fee of 0.55%, which is calculated
daily based on the adjusted average weekly net assets.
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 weekly
net assets, subject to an annual minimum of $85,000.
For purposes of the calculation of investment management fees and administration
fees, adjusted average weekly net assets does not include the commercial paper
liability.
At November 30, 2003, the Fund had liabilities payable to affiliates as follows:
Investment management fee payable to DMC $18,567
Accounting, administration and
other expenses payable to DSC 11,401
Other expense payable to DMC and affiliates* 28,127
*DMC, as part of its administrative services, pays Fund operating expenses on
behalf of the Fund and is reimbursed on a periodic basis. Such expenses include
items such as printing of shareholder reports, professional fees, stock
exchange fees, custodian fees and directors fees.
Certain officers of DMC and DSC are officers and/or directors of the Fund. These
officers and directors are paid no compensation by the Fund.
3. Investments
For the year ended November 30, 2003, the Fund made purchases of $312,330,161
and sales of $316,857,252 of investment securities other than U.S. government
securities and short-term investments.
At November 30, 2003, the cost of investments for federal income tax purposes
was $186,754,577. At November 30, 2003, the net unrealized appreciation was
$19,252,245, of which $29,180,798 related to unrealized appreciation of
investments and $9,928,553 related to unrealized depreciation of investments.
4. Dividend and Distribution Information
Income and long-term capital gain distributions are determined in accordance
with federal income tax regulations, which may differ from accounting principles
generally accepted in the United States. The tax
13
Notes Delaware Investments Dividend and Income Fund, Inc.
TO FINANCIAL STATEMENTS (CONTINUED)
4. Dividend and Distribution Information (continued)
character of dividends and distributions paid during the years ended November
30, 2003 and 2002 were as follows:
2003 2002
Ordinary income $ 9,189,360 $ 8,496,926
Return of capital 5,490,473 10,496,508
----------- -----------
Total $14,679,833 $18,993,434
=========== ===========
As of November 30, 2003, the components of net assets on a tax basis were as
follows:
Shares of beneficial interest $155,449,542
Capital loss carryforwards (24,106,870)
Unrealized appreciation of investments 19,252,245
------------
Net assets $150,594,917
============
For federal income tax purposes, capital loss carryforwards may be carried
forward and applied against future capital gains. Such capital loss
carryforwards expire as follows: $6,557,294 expires in 2009, $15,759,675 expires
in 2010 and $1,789,901 expires in 2011.
5. Capital Stock
The Fund did not have any transactions in common shares during the year ended
November 30, 2003.
Shares issuable under the Fund's dividend reinvestment plan are purchased by the
Fund's transfer agent, Mellon Investor Services, LLC, in the open market.
6. Commercial Paper
As of November 30, 2003, $55,000,000 (par value) of commercial paper was
outstanding with an amortized cost of $54,898,141. The weighted average discount
rate of commercial paper outstanding at November 30, 2003 was 1.17%. The average
daily balance of commercial paper outstanding during the year ended November 30,
2003 was $54,882,329 at a weighted average discount rate of 1.29%. 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 J.P. Morgan Chase for $30,000,000
with a scheduled termination date of January 6, 2005. 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. For the year
ended November 30, 2003, the Fund was charged a commitment fee of $45,000, which
is included in "commercial paper fees" on the Statement of Operations. During
the year ended November 30, 2003, there were no borrowings under this
arrangement.
7. Securities Lending
The Fund, along with other funds in the Delaware Investments Family of Funds,
may lend its securities pursuant to a security lending agreement (Lending
Agreement) with J.P. Morgan Chase. Initial security loans made pursuant to the
Lending Agreement are required to be secured by U.S. Treasury obligations and/or
cash collateral not less than 102% of the market value of the securities issued
in the United States. With respect to each loan, if the aggregate market value
of the collateral held on any business day is less than the aggregate market
value of the securities which are the subject of such loan, the borrower will be
notified to provide additional collateral not less than the applicable
collateral requirements.
Cash collateral received is invested in fixed-income securities, with a weighted
average maturity not to exceed 90 days, rated in one of the top two tiers by
Standard & Poor's Ratings Group or Moody's Investors Service, Inc. or repurchase
agreements collateralized by such securities. However, in the event of default
or bankruptcy by the lending agent, realization and/or retention of the
collateral may be subject to legal proceedings. In the event the borrower fails
to return loaned securities and the collateral received is insufficient to cover
the value of the loaned securities and provided such collateral shortfall is not
the result of investment losses, the lending agent has agreed to pay the amount
of the shortfall to the Fund, or at the discretion of the lending agent, replace
the loaned securities. The Fund continues to record dividends on the securities
loaned and is subject to change in fair value of the securities loaned that may
occur during the term of the loan. The Fund has the right under the Lending
Agreement to recover the securities from the borrower on demand. The security
lending agent and the borrower retain a portion of the earnings from the
collateral investments. The Fund records security lending income net of such
allocation.
At November 30, 2003, the market value of securities on loan was $19,339,198,
for which cash collateral was received and invested in accordance with the
Lending Agreement. Such investments are presented on the Statement of Net Assets
under the caption "Securities Lending Collateral."
8. Credit and Market Risks
The Fund invests in high-yield fixed income securities, which carry ratings of
BB or lower by Standard & Poor's Rating Group and/or Ba or lower by Moody's
Investor's Services, Inc. Investments in these higher yielding securities are
generally accompanied by a greater degree of credit risk than higher rated
securities. Additionally, lower rated securities may be more susceptible to
adverse economic and competitive industry conditions than investment grade
securities.
The Fund may invest up to 10% of its total assets in illiquid securities, which
may include securities with contractual restrictions on resale, securities
exempt from registration under Rule 144A of the Securities Act of 1933, as
amended, and other securities which may not be readily marketable. The relative
illiquidity of these securities may impair the Fund from disposing of them in a
timely manner and at a fair price when it is necessary or desirable to do so.
The Fund invests in real estate investment trusts (REITs) and is subject to some
of the risks associated with that industry. If the Fund holds real estate
directly as a result of defaults or receives rental income directly from real
estate holdings, its tax status as a regulated investment company may be
jeopardized. There were no direct holdings during the year ended November 30,
2003. The Fund's REIT holdings are also affected by interest rate changes,
particularly if the REITs it holds use floating rate debt to finance their
ongoing operations.
9. Tax Information (Unaudited)
The information set forth below is for the Fund's fiscal year as required by
federal laws. Shareholders, however, must report distributions on a calendar
year basis for income tax purposes, which may include distributions for portions
of two fiscal years of a fund. Accordingly, the information needed by
shareholders for income tax purposes will be sent to them in January of each
year. Please consult your tax advisor for proper treatment of this information.
14
Notes Delaware Investments Dividend and Income Fund, Inc.
TO FINANCIAL STATEMENTS (CONTINUED)
9. Tax Information (Unaudited) (continued)
For the fiscal year ended November 30, 2003, the Fund designates distributions
paid during the year as follows:
(A) (B)
Long-Term Ordinary (C)
Capital Gains Income Return of Total (D)
Distributions Distributions Capital Distribution Qualifying
(Tax Basis) (Tax Basis) (Tax Basis) (Tax Basis) Dividends(1)
------------- ------------- ----------- ------------ ------------
-- 63% 37% 100% 25%
(A) (B) and (C) are based on a percentage of the Fund's total distributions.
(D) is based on a percentage of ordinary income of the Fund.
(1) Qualifying dividends represent dividends which qualify for the corporate
dividends received deductions.
For the fiscal year ended November 30, 2003 certain dividends may be subject to
a maximum tax rate of 15%, as provided for by the Jobs and Growth Tax Relief
Reconciliation Act of 2003. The Fund intends to designate $1,665,421 to be taxed
at a maximum rate of 15%. Complete information will be computed and reported in
conjunction with your 2003 Form 1099-DIV.
10. Proxy Results (Unaudited)
The Fund held its Annual Meeting of Shareholders on August 14, 2003.
At the Annual Meeting, the Fund's shareholders elected nine Directors. The
results of the voting at the meeting were as follows:
Shares Shares Shares
Nominee Voted For Voted Against Voted Abstain
--------------------------------------------------------------------------------
Jude T. Driscoll 11,536,093 140,867 --
--------------------------------------------------------------------------------
David K. Downes 11,540,950 136,010 --
--------------------------------------------------------------------------------
Walter P. Babich 11,523,777 153,183 --
--------------------------------------------------------------------------------
John H. Durham 11,541,247 135,713 --
--------------------------------------------------------------------------------
John A. Fry 11,536,078 140,882 --
--------------------------------------------------------------------------------
Anthony D. Knerr 11,535,935 141,025 --
--------------------------------------------------------------------------------
Ann R. Leven 11,535,064 141,896 --
--------------------------------------------------------------------------------
Thomas F. Madison 11,541,410 135,550 --
--------------------------------------------------------------------------------
Janet L. Yeomans 11,535,174 141,786 --
--------------------------------------------------------------------------------
15
Report
OF INDEPENDENT AUDITORS
To the Shareholders and Board of Directors
Delaware Investments Dividend and Income Fund, Inc.
We have audited the accompanying statement of net assets of Delaware Investments
Dividend and Income Fund, Inc. (the "Fund") as of November 30, 2003, 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 auditing standards generally accepted
in the United States. 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, 2003, by correspondence with
the custodian and brokers or by other appropriate auditing procedures where
replies from brokers were not received. 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 Investments Dividend and Income Fund, Inc. at November 30, 2003, 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 accounting principles generally accepted in the United
States.
Ernst & Young LLP
Philadelphia, Pennsylvania
January 16, 2004
16
Delaware Investments Family of Funds
BOARD OF DIRECTORS AND OFFICERS ADDENDUM
A mutual fund is governed by a Board of Directors which has oversight
responsibility for the management of a fund's business affairs. Directors
establish procedures and oversee and review the performance of the investment
manager, the distributor and others that perform services for the fund. The
independent fund Directors, in particular, are advocates for shareholder
interests. The following is a list of the Directors/Officers and certain
background and related information.
Number of Other
Principal Portfolios in Fund Directorships
Name, Position(s) Occupation(s) Complex Overseen Held by
Address Held with Length of Time During by Director Director
and Birthdate Fund(s) Served Past 5 Years or Officer or Officer
-----------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES
Jude T. Driscoll(2) Chairman and 3 Years - Since August 2000, 83 None
2005 Market Street Director(4) Executive Officer Mr. Driscoll has served in
Philadelphia, PA various executive capacities
19103 Director since at different times at
May 15, 2003 Delaware Investments(1)
March 10, 1963
Senior Vice President and
Director of Fixed-Income Process -
Conseco Capital Management
(June 1998 - August 2000)
Managing Director -
NationsBanc Capital Markets
(February 1996 - June 1998)
-----------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
Walter P. Babich Director 15 Years Board Chairman - 101 None
2005 Market Street Citadel Construction Corporation
Philadelphia, PA (1989 - Present)
19103
October 1, 1927
John H. Durham Director 24 Years(3) Private Investor 101 Trustee - Abington
2005 Market Street Memorial Hospital
Philadelphia, PA
19103
August 7, 1937 President/Director -
22 WR Corporation
John A. Fry Director(4) 2 Years President - 83 None
2005 Market Street Franklin & Marshall College
Philadelphia, PA (June 2002 - Present)
19103
Executive Vice President -
University of Pennsylvania
May 28, 1960 (April 1995 - June 2002)
Anthony D. Knerr Director 10 Years Founder/Managing Director - 101 None
2005 Market Street Anthony Knerr & Associates
Philadelphia, PA (Strategic Consulting)
19103 (1990 - Present)
December 7, 1938
17
Number of Other
Principal Portfolios in Fund Directorships
Name, Position(s) Occupation(s) Complex Overseen Held by
Address Held with Length of Time During by Director Director
and Birthdate Fund(s) Served Past 5 Years or Officer or Officer
-----------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES (CONTINUED)
Ann R. Leven Director 14 Years Treasurer/Chief Fiscal Officer - 101 Director - Andy
2005 Market Street National Gallery of Art Warhol Foundation
Philadelphia, PA (1994 - 1999)
19103 Director -
Systemax Inc.
November 1, 1940
Thomas F. Madison Director 9 Years President/Chief 101 Director -
2005 Market Street Executive Officer - CenterPoint Energy
Philadelphia, PA MLM Partners, Inc.
19103 (Small Business Investing Director - Digital
and Consulting) River Inc.
(January 1993 - Present)
February 25, 1936 Director - Rimage
Corporation
Director - Valmont
Industries, Inc.
Janet L. Yeomans Director 4 Years Vice President/Mergers & 101 None
2005 Market Street Acquisitions - 3M Corporation
Philadelphia, PA (January 2003 - Present)
19103
Ms. Yeomans has held
July 31, 1948 various management
positions at 3M Corporation
since 1983.
-----------------------------------------------------------------------------------------------------------------------------------
OFFICERS
Joseph H. Hastings Executive Executive Mr. Hastings has served in 101 None
2005 Market Street Vice President Vice President various executive capacities
Philadelphia, PA and and at different times at
19103 Chief Financial Chief Financial Delaware Investments.
Officer Officer since
August 21, 2003
Decenber 19, 1999
Richelle S. Maestro Senior Vice President, Chief Legal Ms. Maestro has served in 101 None
2005 Market Street Chief Legal Officer Officer since various executive capacities
Philadelphia, PA and Secretary March 17, 2003 at different times at
19103 Delaware Investments.
November 26, 1957
Michael P. Bishof Senior Vice President 7 Years Mr. Bishof has served in 101 None
2005 Market Street and Treasurer various executive capacities
Philadelphia, PA at different times at
19103 Delaware Investments.
August 18, 1962
(1) Delaware Investments is the marketing name for Delaware Management Holdings,
Inc. and its subsidiaries, including the Registrant's investment advisor.
(2) Mr. Driscoll is considered to be an "Interested Director" because he is an
executive officer of the Fund's manager.
(3) Mr. Durham served as a Director Emeritus from 1995 through 1998.
(4) Mr. Driscoll and Mr. Fry are not Trustees of the portfolios of Voyageur
Insured Funds, Voyageur Intermediate Tax Free Funds, Voyageur Investment
Trust, Voyageur Mutual Funds, Voyageur Mutual Funds II, Voyageur Mutual
Funds III and Voyageur Tax Free Funds.
18
Delaware DDF
Investments(SM) List
-------------------------------------- NYSE
A member of Lincoln Financial Group(R) THE NEW YORK STOCK EXCHANGE
This annual report is for the information of Delaware Investments Dividend and
Income Fund, Inc. shareholders. The figures in this report represent past
results which are not a guarantee of future results. The return and principal
value of an investment in the Fund will fluctuate so that shares, when sold, may
be worth more or less than their original cost.
Notice is hereby given in accordance with Section 23(c) of the Investment
Company 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 Affiliated Officers Contact Information
Jude T. Driscoll Joseph H. Hastings Investment Manager
Chairman Executive Vice President and Delaware Management Company
Delaware Investments Family of Funds Chief Financial Officer Philadelphia, PA
Philadelphia, PA Delaware Investments Family of Funds
Philadelphia, PA International Affiliate
Walter P. Babich Delaware International Advisers Ltd.
Board Chairman Richelle S. Maestro London, England
Citadel Construction Corporation Senior Vice President,
King of Prussia, PA Chief Legal Officer and Secretary Principal Office of the Fund
Delaware Investments Family of Funds 2005 Market Street
John H. Durham Philadelphia, PA Philadelphia, PA 19103
Private Investor
Gwynedd Valley, PA Michael P. Bishof Independent Auditors
Senior Vice President and Treasurer Ernst & Young LLP
John A. Fry Delaware Investments Family of Funds 2001 Market Street
President Philadelphia, PA Philadelphia, PA 19103
Franklin & Marshall College
Lancaster, PA Registrant and Stock Transfer Agent
Mellon Investor Services, LLC
Anthony D. Knerr Overpeck Centre
Managing Director 85 Challenger Road
Anthony Knerr & Associates Ridgefield, NJ 07660
New York, NY 800 851-9677
Ann R. Leven+ For Securities Dealers and Financial
Former Treasurer/Chief Fiscal Officer Institutions Representatives Only
National Gallery of Art 800 362-7500
Washington, DC
Web site
Thomas F. Madison+ www.delawareinvestments.com
President and Chief Executive Officer
MLM Partners, Inc.
Minneapolis, MN
Janet L. Yeomans+
Vice President/Mergers & Acquisitions ----------------------------------------
3M Corporation Your Reinvestment Options
St. Paul, MN Delaware Investments Dividend and Income
-------------------------------------------------------------------------------- Fund, Inc. offers an automatic dividend
A description of the policies and procedures that the Fund uses to determine how reinvestment program. If you would like
to vote proxies (if any) relating to portfolio securities is available without to reinvest dividends, and shares are
charge (i) upon request, by calling 800-523-1918; (ii) on the Fund's website at registered in your name, contact Mellon
http://www.delawareinvestments.com; and (iii) on the Commission's website at Investor Services, LLC at 800 851-9677.
http://www.sec.gov.; and beginning no later than August 31, 2004, information You will be asked to put your request in
(if any) regarding how the Fund voted proxies relating to portfolio securities writing. If you have shares registered
during the most recent 12-month period ended June 30 is available without charge in "street" name, contact the
(i) through the Fund's website at http://www.delawareinvestments.com; and (ii) broker/dealer holding the shares or your
on the Commission's website at http://www.sec.gov. financial advisor.
-------------------------------------------------------------------------------- ----------------------------------------
+Audit Committee Member
(8458) Printed in the USA
AR-DDF [11/03] IVES 1/04 J9519 EXP: 1/05
Item 2. Code of Ethics
The registrant has adopted a code of ethics that applies to the
registrant's principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant or a
third party. A copy of the registrant's Code of Business Ethics has been posted
on Delaware Investments' internet website at www.delawareinvestments.com. Any
amendments to the Code of Business Ethics, and information on any waiver from
its provisions granted by the registrant, will also be posted on this website
within five business days of such amendment or waiver and will remain on the
website for at least 12 months.
Item 3. Audit Committee Financial Expert
The registrant's Board of Trustees/Directors has determined that each
member of the registrant's Audit Committee is an audit committee financial
expert, as defined below. For purposes of this item, an "audit committee
financial expert" is a person who has the following attributes:
a. An understanding of generally accepted accounting principles and
financial statements;
b. The ability to assess the general application of such principles in
connection with the accounting for estimates, accruals, and reserves;
c. Experience preparing, auditing, analyzing, or evaluating financial
statements that present a breadth and level of complexity of accounting issues
that are generally comparable to the breadth and complexity of issues that can
reasonably be expected to be raised by the registrant's financial statements, or
experience actively supervising one or more persons engaged in such activities;
d. An understanding of internal controls and procedures for financial
reporting; and
e. An understanding of audit committee functions.
An "audit committee financial expert" shall have acquired such attributes
through:
a. Education and experience as a principal financial officer, principal
accounting officer, controller, public accountant, or auditor or experience in
one or more positions that involve the performance of similar functions;
b. Experience actively supervising a principal financial officer,
principal accounting officer, controller, public accountant, auditor, or person
performing similar functions;
c. Experience overseeing or assessing the performance of companies or
public accountants with respect to the preparation, auditing, or evaluation of
financial statements; or
d. Other relevant experience.
The registrant's Board of Trustees/Directors has also determined that
each member of the registrant's Audit Committee is independent. In order to be
"independent" for purposes of this item, the Audit Committee member may not: (i)
other than in his or her capacity as a member of the Board of Trustees/Directors
or any committee thereof, accept directly or indirectly any consulting, advisory
or other compensatory fee from the issuer; or (ii) be an "interested person" of
the registrant as defined in Section 2(a)(19) of the Investment Company Act of
1940.
The names of the audit committee financial experts on the registrant's
Audit Committee are set forth below:
Ann R. Leven
Thomas F. Madison
Janet L. Yeomans(1)
Item 4. Principal Accountant Fees and Services
Required only for fiscal years ending after December 15, 2003.
Not applicable.
Item 5. Audit Committee of Listed Registrants
The registrant has a separately-designated standing Audit Committee
established in accordance with Section 3(a)(58)(A) of the Securities Exchange
Act of 1934. The members of the registrant's Audit Committee are Ann R. Leven,
Thomas F. Madison and Janet L. Yeomans.
-----------------------
(1) The instructions to Form N-CSR require disclosure on the relevant experience
of persons who qualify as audit committee financial experts based on "other
relevant experience." The Board of Trustees/Directors has determined that Ms.
Yeomans qualifies as an audit committee financial expert by virtue of her
education and experience as the Treasurer of a large global corporation.
Item 6. [Reserved]
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies
The registrant has formally delegated to its investment adviser(s)
(including any sub-adviser) (the "Adviser") the ability to make all proxy voting
decisions in relation to portfolio securities held by the registrant. If and
when proxies need to be voted on behalf of the registrant, the Adviser will vote
such proxies pursuant to its Proxy Voting Policies and Procedures (the
"Procedures"). The Adviser has established a Proxy Voting Committee (the
"Committee") which is responsible for overseeing the Adviser's proxy voting
process for the registrant. One of the main responsibilities of the Committee is
to review and approve the Procedures to ensure that the Procedures are designed
to allow the Adviser to vote proxies in a manner consistent with the goal of
voting in the best interests of the registrant.
In order to facilitate the actual process of voting proxies, the
Adviser has contracted with Institutional Shareholder Services ("ISS") to
analyze proxy statements on behalf of the registrant and other Adviser clients
and vote proxies generally in accordance with the Procedures. The Committee is
responsible for overseeing ISS's proxy voting activities. If a proxy has been
voted for the registrant, ISS will create a record of the vote. Beginning no
later than August 31, 2004, information (if any) regarding how the registrant
voted proxies relating to portfolio securities during the most recent 12-month
period ended June 30 is available without charge (i) through the registrant's
website at http://www.delawareinvestments.com; and (ii) on the Commission's
website at http://www.sec.gov.
The Procedures contain a general guideline that recommendations of
company management on an issue (particularly routine issues) should be given a
fair amount of weight in determining how proxy issues should be voted. However,
the Adviser will normally vote against management's position when it runs
counter to its specific Proxy Voting Guidelines (the "Guidelines"), and the
Adviser will also vote against management's recommendation when it believes that
such position is not in the best interests of the registrant.
As stated above, the Procedures also list specific Guidelines on how to
vote proxies on behalf of the registrant. Some examples of the Guidelines are as
follows: (i) generally vote for shareholder proposals asking that a majority or
more of directors be independent; (ii) generally vote against proposals to
require a supermajority shareholder vote; (iii) votes on mergers and
acquisitions should be considered on a case-by-case basis, determining whether
the transaction enhances shareholder value; (iv) generally vote against
proposals to create a new class of common stock with superior voting rights; (v)
generally vote re-incorporation proposals on a case-by-case basis; (vi) votes
with respect to management compensation plans are determined on a case-by-case
basis; and (vii) generally vote for reports on the level of greenhouse gas
emissions from a company's operations and products.
Because the registrant has delegated proxy voting to the Adviser, the
registrant is not expected to encounter any conflict of interest issues
regarding proxy voting and therefore does not have procedures regarding this
matter. However, the Adviser does have a section in its Procedures that
addresses the possibility of conflicts of interest. Most proxies which the
Adviser receives on behalf of the registrant are voted by ISS in accordance with
the Procedures. Because almost all registrant proxies are voted by ISS pursuant
to the pre-determined Procedures, it normally will not be necessary for the
Adviser to make an actual determination of how to vote a particular proxy,
thereby largely eliminating conflicts of interest for the Adviser during the
proxy voting process. In the very limited instances where the Adviser is
considering voting a proxy contrary to ISS's recommendation, the Committee will
first assess the issue to see if there is any possible conflict of interest
involving the Adviser or affiliated persons of the Adviser. If a member of the
Committee has actual knowledge of a conflict of interest, the Committee will
normally use another independent third party to do additional research on the
particular proxy issue in order to make a recommendation to the Committee on how
to vote the proxy in the best interests of the registrant. The Committee will
then review the proxy voting materials and recommendation provided by ISS and
the independent third party to determine how to vote the issue in a manner which
the Committee believes is consistent with the Procedures and in the best
interests of the registrant.
Item 8. [Reserved]
Item 9. Controls and Procedures
The registrant's principal executive officer and principal financial
officer have evaluated the registrant's disclosure controls and procedures
within 90 days of the filing of this report and have concluded that they are
effective in providing reasonable assurance that the information required to be
disclosed by the registrant in its reports or statements filed under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported
within the time periods specified in the rules and forms of the Securities and
Exchange Commission.
There were no significant changes in the registrant's internal control
over financial reporting that occurred during the registrant's last fiscal
half-year (the registrant's second fiscal half-year in the case of an annual
report) that have materially affected, or are reasonably likely to materially
affect, the registrant's internal control over financial reporting.
Item 10. Exhibits
(a) (1) Code of Ethics
Not applicable.
(2) Certifications of Principal Executive Officer and Principal Financial
Officer pursuant to Rule 30a-2 under the Investment Company Act of 1940
are attached hereto as Exhibit 99.CERT.
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
are furnished herewith as Exhibit 99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf, by the undersigned, thereunto duly authorized.
Name of Registrant: Delaware Investments Dividend and Income Fund, Inc.
JUDE T. DRISCOLL
---------------------------
By: Jude T. Driscoll
--------------------
Title: Chairman
Date: 2/2/04
--------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
JUDE T. DRISCOLL
------------------------------------
By: Jude T. Driscoll
-----------------------------
Title: Chairman
Date: 2/2/04
-----------------------------
JOSEPH H. HASTINGS
------------------------------------
By: Joseph H. Hastings
Title: Chief Financial Officer
Date: 2/2/04
-----------------------------