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, 2004
Item 1. Reports to Stockholders
Delaware
Investments(SM)
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A member of Lincoln Financial Group(R)
ANNUAL REPORT NOVEMBER 30, 2004
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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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SECTOR ALLOCATION 5
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FINANCIAL STATEMENTS:
Statement of Net Assets 6
Statement of Operations 11
Statements of Changes in Net Assets 12
Statement of Cash Flows 12
Financial Highlights 13
Notes to Financial Statements 14
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REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM 17
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OTHER FUND INFORMATION 18
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BOARD OF DIRECTORS/OFFICERS 19
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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.
PORTFOLIO DELAWARE INVESTMENTS DIVIDEND AND INCOME FUND, INC.
MANAGEMENT REVIEW December 10, 2004
FUND MANAGERS
Damon J. Andres
Senior Portfolio Manager
Nancy M. Crouse
Senior Portfolio Manager
Timothy L. Rabe
Senior Portfolio Manager
Q: PLEASE DISCUSS HOW THE MARKETS PERFORMED DURING THE FISCAL YEAR ENDED
NOVEMBER 30, 2004.
A: The 12-month period began on a positive note for the U.S. stock market, with
prices increasing until early April. The market then undertook a rather lengthy
period of choppiness, owing to investor uncertainty that stemmed from the
political environment, rapidly rising oil prices, ongoing geopolitical unrest,
and the potential for slowing economic growth, among other key factors (source:
Lipper Inc.).
With the recent conclusion of the presidential election, at least one element of
uncertainty has been effectively removed, which is encouraging. Recent data
suggests that continued economic growth appears to be intact and that job growth
has accelerated (source: U.S. Bureau of Labor Statistics). Also, oil prices
reached the lofty level of $55 per barrel range in October, but retreated
somewhat in the final month of the period. In general, higher energy prices have
neither caused a spike in overall inflation in the U.S., nor have they held back
consumer spending (source: Bloomberg L.P.). Lastly, the Federal Reserve has
managed the increase in short-term rates in a way that has not seemed to have
had a negative impact on the stock market.
During the 12-month period, some of the best-performing sectors of the S&P 500
Index were those typically preferred by investors for their defensive
characteristics, such as the utilities group. Aggressive stocks, like those
found in the technology sector, trailed the broad market in 2004, which we take
as an indication of the risk aversion present in the market.
Q: HOW DID THE FUND PERFORM VERSUS ITS BENCHMARK INDEX AND FUND PEER GROUP FOR
THE 12-MONTH PERIOD ENDED NOVEMBER 30, 2004?
A: Delaware Investments Dividend and Income Fund, Inc. returned +20.29% (at net
asset value with distributions reinvested) for the fiscal year ended November
30, 2004. For the same period, the Fund's benchmark, the Standard & Poor's (S&P)
500 Index appreciated +12.85% and its peer group, as measured by the Lipper
Closed-End Income and Preferred Stock Funds average, rose +12.61% (source:
Lipper Inc.).
Q: HOW DID THE FUND'S FIXED INCOME INVESTMENTS PERFORM FOR THE 12-MONTH PERIOD
ENDED NOVEMBER 30, 2004?
A: The Fund invests in high-yield corporate bonds, a market not to be left out
of the generally favorable investment climate for the fiscal year ended November
30, 2004. Given the typically low yields associated with many income-oriented
securities during 2004, high-yielding corporate bonds appealed to investors,
particularly given the generally strengthening nature of corporate balance
sheets (source: U.S. Bureau of Economic Analysis). The Bear Stearns High Yield
Index, our benchmark for this portion of the Fund, gained a solid +12.02% for
the 12-month period (source: Bloomberg L.P.).
We generated excess return across many areas of this high-yield corporate bond
market, which we credit to our focus on stringent market and securities research
in an attempt to identify securities with appealing fundamentals and attractive
valuations. We have continued to dig deeply into both new issue niche credits
and battered issues that we believe may recover. Also, we have continued to
focus on some smaller issuing companies, which have generally been out of favor
but that have tended to possess solid fundamentals and favorable relative value.
During the 12-month period, we favored the cable, chemical, and packaging
sectors, while we remained cautious of bonds issued by airline, broadcasting,
and lodging-type companies.
Q: PLEASE DESCRIBE THE PERFORMANCE OF THE FUND'S STOCKS FOR THE FISCAL YEAR
ENDED NOVEMBER 30, 2004.
A: In general, Fund performance benefited from the general shift in investor
preference from more aggressive types of common stocks, as with those associated
with the technology arena, for those with more stable operations and a general
orientation toward paying dividends. Specifically, the Fund's common stocks
lagged the Russell 1000 Value Index, with our security selection and sector
allocations impacting Fund return (source: Wilshire Associates, Inc.).
Among preferred securities, a light fall calendar kept investor focus on
secondary issues, with the bank sector being rather strong. Agency-related
preferred securities exhibited volatility due to ongoing concerns about the
status of such government-sponsored enterprises (source: Citigroup Global
Markets Inc.).
1
Q: WHAT IS THE FUND'S POSITION ON REAL ESTATE INVESTMENT TRUSTS?
A: The Fund invests in real estate investment trusts (REITs), which rebounded
nicely from the slump they experienced during the second quarter of 2004.
Throughout April, REITs were treated unfairly in our opinion, with many
investors treating them like bonds due to competitive income streams. REITs got
caught up in a general decline in bond prices, which began when economic data
signaled that interest rates might move higher. When the interest rate
environment calmed and the economy continued on its expansionary path, investor
interest in REITs resumed, leading to strong performances for the 12-month
period; the NAREIT Equity REIT Index appreciated +29.88% for the fiscal year
(source: NAREIT, Inc.).
Q: WHAT INDIVIDUAL BONDS PERFORMED WELL AND WHICH ONES DISAPPOINTED DURING THE
12-MONTH PERIOD?
A: Portola Packaging faced some short-term financing challenges during the 12
months while Advanced Accessory Holdings experienced weakness that typified the
automotive sector. The bonds of chemical manufacturer Rhodia, while struggling
through much of the period, exhibited a measure of strength in the closing
months of the fiscal year. We believe these bonds continue to hold upside
potential, and we thus held them in the portfolio as of fiscal year-end. Bonds
that exhibited strength included those of Kmart, which reflected what we believe
has been a carefully engineered rebuilding process, including the purchase of
Sears and select real estate sales. We sold our holdings during the year.
Another retailer whose bonds benefited the Fund was J. Crew. Also, we saw our
exposure to Gold Kist appreciate, as the poultry producer announced an initial
public offering (IPO) during the period and benefited from rising chicken
prices, given health-related concerns involving beef.
Q: PLEASE NAME SOME REIT INVESTMENTS THAT PERFORMED WELL DURING THE FISCAL YEAR
AND SOME THAT DID NOT.
A: We underperformed in the apartment sector. Our position in Apartment
Investment and Management Company (AIMCO) gained nearly 10 percent during the
fiscal year, yet lagged the market due to continued sector weakness brought
about by aggressive multifamily construction and the attractiveness of low
mortgage rates for potential renters. We sold this position during the period.
Within this same sector, we gained 37 percent during the fiscal year with our
position in Simon Property Group, which largely manages higher-end retail
properties. We maintained our position in Simon Property at period-end, as we
did Ramco-Gershenson Properties, a strip mall manager that modestly
underperformed the market due to a convertible security issuance and investor
concern for the prospects of the stores that anchor Ramco's properties. In the
industrial/office space, we benefited from a position in Reckson Associates,
which gained 42 percent for the fiscal year. Rising a similar amount was
MortgageIT Holdings, a company that performed well due to the continued solid
housing environment.
Q: WHAT COMMON STOCKS DID NOT LIVE UP TO YOUR EXPECTATIONS DURING THE FISCAL
YEAR?
A: We lost a measure of performance with consumer growth stocks, which had the
greatest downside influence on Fund performance. Big name pharmaceuticals
struggled during the period, and our positions in Merck and Pfizer experienced
poor performance. Although our position in Kellogg gained 25 percent during the
fiscal year, in general the portfolio's consumer staples names also did not
experience a favorable environment for the period, and our overweighting in
underperforming food and beverage stocks also caused a drag on Fund return.
Lastly, Morgan Stanley, which declined six percent during the period, weighed on
the performance of our non-bank financial stocks for the 12-month period.
Q: CONVERSELY, COULD YOU IDENTIFY SOME ISSUES THAT GENERATED EXCESS RETURN FOR
THE FUND?
A: Fortunately, we gained excess return in our banking stocks, among which Bank
of America led the way with a 27 percent appreciation for the 12-month period.
We also enjoyed sound performance with Starwood Hotels and Resorts, which rose
55 percent for the fiscal year due to a resurgence in travel and leisure-related
activities. The dramatic run up in petroleum prices during the period greatly
affected energy-related companies, with Kerr-McGee and ChevronTexaco gaining 53
percent and 50 percent, respectively. Our belief that the economy's continued
expansion might benefit the basic materials group resulted in solid gains for
the fiscal year in Dow Chemical, up 38 percent, and Packaging Corporation of
America, which rose 21 percent. We sold our holdings of Packaging Corporation
during the year.
2
DELAWARE
INVESTMENTS DIVIDEND AND INCOME FUND, INC.
The performance data quoted represent past performance; past performance does
not guarantee future results. Investment return and principal value will
fluctuate so your shares, when sold, may be worth more or less than their
original cost. Current performance may be lower or higher than the performance
data quoted. A rise/fall in interest rates can have a significant impact on bond
prices and the net asset value (NAV) of the Fund. Instances of high double-digit
returns are highly unusual and cannot be sustained and were achieved primarily
during favorable market conditions.
FUND PERFORMANCE
Average Annual Total Returns
Through November 30, 2004 Lifetime 10 Years Five Years One Year
--------------------------------------------------------------------------------
At Market Price +8.53% +10.77% +12.14% +7.78%
At Net Asset Value +10.06% +11.24% +11.09% +20.29%
--------------------------------------------------------------------------------
Returns reflect reinvestment of all distributions. Shares of the Fund were
initially offered with a sales charge of 6.0%. Performance since inception does
not include the sales charge or any brokerage commissions for purchases made
since inception. Past performance is not a guarantee of future results.
The performance table does not reflect the deduction of taxes the shareholder
would pay on Fund distributions or sale of Fund shares.
FUND BASICS
As of November 30, 2004
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FUND OBJECTIVES:
The Fund seeks to achieve high current income. Capital appreciation is a
secondary objective.
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TOTAL FUND NET ASSETS:
$166.93 million
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NUMBER OF HOLDINGS:
239
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FUND START DATE:
March 26, 1993
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YOUR FUND MANAGERS:
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, he performed investment consulting
services as a Consulting Associate with Cambridge Associates, Inc. in Arlington,
Virginia. Mr. Andres is a CFA charterholder.
Nancy M. Crouse earned a bachelor's degree form Lafayette College and an MBA
from the University of Pittsburgh. 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.
Timothy L. Rabe received a bachelor's degree in finance from the University of
Illinois. Prior to joining Delaware Investments in 2000, he 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
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3
DELAWARE
INVESTMENTS DIVIDEND AND INCOME FUND, INC.
MARKET PRICE VS. NET ASSET VALUE
November 30, 2003 through November 30, 2004
DELAWARE DIVIDEND & DELAWARE DIVIDEND &
INCOME FUND, INC.- INCOME FUND,
MARKET PRICE INC.- NAV
11/30/03 $11.84 $11.70
12/31/03 $12.10 $12.35
1/31/04 $12.56 $12.47
2/29/04 $12.23 $12.57
3/31/04 $12.40 $12.65
4/30/04 $10.84 $11.85
5/31/04 $11.08 $11.95
6/30/04 $11.02 $12.20
7/31/04 $10.85 $11.98
8/31/04 $11.31 $12.26
9/30/04 $11.55 $12.36
10/31/04 $12.50 $12.50
11/30/04 $11.76 $12.96
Past performance is not a guarantee of future results.
PERFORMANCE OF A $10,000 INVESTMENT
November 30, 1994 through November 30, 2004
DELAWARE
DELAWARE INVESTMENTS LIPPER CLOSED-END LIPPER CLOSED-END
INVESTMENTS DIVIDEND & INCOME INCOME & PREFERRED INCOME & PREFERRED
DIVIDEND & INCOME FUND, INC. @ STOCK FUNDS AVG STOCK FUNDS AVG @
FUND, INC. @ NAV MARKET PRICE @ (NAV) (MARKET PRICE)
11/30/94 $10,000 $10,000 $10,000 $10,000
11/30/95 $12,072 $12,871 $12,036 $12,874
11/30/96 $14,620 $16,819 $13,483 $14,640
11/30/97 $18,600 $19,903 $15,667 $16,575
11/30/98 $18,578 $21,555 $16,869 $18,164
11/30/99 $17,129 $15,836 $16,067 $15,742
11/30/00 $17,329 $18,969 $17,303 $17,157
11/30/01 $19,412 $24,698 $18,614 $21,718
11/30/02 $18,954 $20,010 $17,429 $20,808
11/30/03 $24,096 $26,053 $19,729 $25,787
11/30/2004 $28,985 $28,080 $22,253 $28,064
Chart assumes $10,000 invested on November 30, 1994 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.). Past performance is
not a guarantee of future results.
4
SECTOR ALLOCATION As of November 30, 2004
DELAWARE INVESTMENTS DIVIDEND AND INCOME FUND, INC.
The SEC adopted a requirement that all funds present their categories of
portfolio holdings in a table, chart or graph format in their annual and
semiannual shareholder reports, whether or not a schedule of investments is
utilized. The following chart lists the Fund's categories of portfolio holdings
as a percent of total net assets and is provided in compliance with such
requirement.
PERCENTAGE
SECTOR OF NET ASSETS
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COMMON STOCK 77.71%
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Aerospace & Defense 0.68%
Automobiles & Automotive Parts 2.38%
Banking, Finance & Insurance 10.53%
Capital Goods - Manufacturing 0.01%
Chemicals 3.02%
Computers & Technology 2.32%
Consumer Products 1.09%
Electronics & Electrical Equipment 2.38%
Energy 4.81%
Food, Beverage & Tobacco 5.80%
Healthcare REITs 0.21%
Healthcare & Pharmaceuticals 4.94%
Industrial REITs 1.51%
Investment Companies 1.77%
Mall REITs 5.65%
Manufactured Housing REITs 0.38%
Media 0.09%
Mortgage REITs 5.95%
Multifamily REITs 1.47%
Office/Industrial REITs 8.00%
Paper & Forest Products 1.79%
Real Estate Operating Companies 2.39%
Retail 0.11%
Retail Strip Centers REITs 2.08%
Technology 0.99%
Telecommunications 4.32%
Utilities 3.04%
--------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCK 5.17%
--------------------------------------------------------------------------------
Banking, Finance & Insurance 1.41%
Capital Goods -- Manufacturing 0.07%
Consumer Products 1.43%
Environmental Services 0.51%
Real Estate 0.80%
Telecommunications 0.95%
PERCENTAGE
SECTOR OF NET ASSETS
--------------------------------------------------------------------------------
PREFERRED STOCK 6.24%
--------------------------------------------------------------------------------
Leisure, Lodging & Entertainment 0.90%
Real Estate 4.39%
Utilities 0.95%
--------------------------------------------------------------------------------
CONVERTIBLE BONDS 5.47%
--------------------------------------------------------------------------------
Capital Goods - Manufacturing 0.23%
Consumer Cyclical 3.00%
Media 0.06%
Technology 0.33%
Telecommunications 1.18%
Transportation & Shipping 0.12%
Utilities 0.55%
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CORPORATE BONDS 34.34%
--------------------------------------------------------------------------------
Basic Materials 3.72%
Capital Goods - Manufacturing 2.83%
Consumer Cyclical 7.49%
Consumer Non-Cyclical 2.96%
Energy 1.49%
Finance 1.57%
Media 5.05%
Technology 0.68%
Telecommunications 3.10%
Transportation & Shipping 1.55%
Utilities 3.90%
--------------------------------------------------------------------------------
MUNICIPAL BONDS 0.14%
--------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS 3.18%
--------------------------------------------------------------------------------
SECURITIES LENDING COLLATERAL 11.38%
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TOTAL MARKET VALUE OF SECURITIES 143.63%
--------------------------------------------------------------------------------
OBLIGATION TO RETURN SECURITIES LENDING COLLATERAL (11.38%)
--------------------------------------------------------------------------------
COMMERCIAL PAPER PAYABLE (32.85%)
--------------------------------------------------------------------------------
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES 0.60%
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TOTAL NET ASSETS 100.00%
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5
STATEMENT DELAWARE INVESTMENTS DIVIDEND AND INCOME FUND, INC.
OF NET ASSETS November 30, 2004
Number of Market
Shares Value
COMMON STOCK - 77.71%
Aerospace & Defense - 0.68%
Northrop Grumman 20,129 $ 1,133,867
-----------
1,133,867
-----------
Automobiles & Automotive Parts - 2.38%
^General Motors 39,900 1,539,741
Goodrich (B.F.) 76,400 2,425,700
-----------
3,965,441
-----------
Banking, Finance & Insurance - 10.53%
Bank of America 53,400 2,470,818
#Fieldstone Investments 144A 100,000 1,725,000
^Friedman Billings Ramsey Group Class A 95,495 1,825,864
J.P. Morgan Chase 44,700 1,682,955
MBNA 108,100 2,871,136
Mellon Financial 85,100 2,486,622
Morgan Stanley 57,300 2,907,974
Wells Fargo 26,400 1,630,728
-----------
17,601,097
-----------
Capital Goods - Manufacturing - 0.01%
+Foster Wheeler 634 9,020
-----------
9,020
-----------
Chemicals - 3.02%
Dow Chemical 100,000 5,047,000
-----------
5,047,000
-----------
Computers & Technology - 2.32%
+Intuit 50,700 2,121,288
Pitney Bowes 40,000 1,750,800
-----------
3,872,088
-----------
Consumer Products - 1.09%
Procter & Gamble 34,000 1,818,320
-----------
1,818,320
-----------
Electronics & Electrical Equipment - 2.38%
Emerson Electric 25,000 1,670,500
General Electric 65,100 2,301,936
-----------
3,972,436
-----------
Energy - 4.81%
ChevronTexaco 56,000 3,057,600
Exxon Mobil 40,000 2,050,000
Kerr-McGee 45,300 2,819,019
^+Petroleum Geo-Services ADR 1,989 110,162
-----------
8,036,781
-----------
Food, Beverage & Tobacco - 5.80%
Anheuser-Busch 49,900 2,499,491
General Mills 58,900 2,679,361
Kellogg 47,500 2,075,750
PepsiCo 48,600 2,425,626
-----------
9,680,228
-----------
Healthcare REIT's - 0.21%
#Medical Properties Trust 144A 35,000 350,000
-----------
350,000
-----------
Number of Market
Shares Value
COMMON STOCK (continued)
Healthcare & Pharmaceuticals - 4.94%
Abbott Laboratories 35,000 $ 1,468,600
Merck 30,800 863,016
Pfizer 59,400 1,649,538
+Tenet Healthcare 177,400 1,924,790
Wyeth 58,800 2,344,356
-----------
8,250,300
-----------
Industrial REIT's - 1.51%
AMB Property 63,300 2,528,835
-----------
2,528,835
-----------
Investment Companies - 1.77%
^Gladstone Capital 120,300 2,950,959
-----------
2,950,959
-----------
Mall REIT's - 5.65%
General Growth Properties 113,538 3,895,489
Simon Property Group 89,200 5,537,536
-----------
9,433,025
-----------
Manufactured Housing REIT's - 0.38%
Sun Communities 16,000 630,880
-----------
630,880
-----------
Media - 0.09%
^+XM Satellite Radio Holdings Class A 4,000 147,640
-----------
147,640
-----------
Mortgage REIT's - 5.95%
^American Home Mortgage Investment 98,400 3,221,616
+#KKR Financial 144A 182,600 1,853,390
MortgageIT Holdings 187,000 3,197,700
Saxon Capital 30,000 681,000
Sunset Financial Resources 94,400 979,872
-----------
9,933,578
-----------
Multifamily REIT's - 1.47%
BRE Properties Class A 41,300 1,678,432
Camden Property Trust 15,700 769,771
-----------
2,448,203
-----------
Office/Industrial REIT's - 8.00%
Duke Realty 83,900 2,898,744
Equity Office Properties Trust 92,400 2,536,380
Liberty Property Trust 60,270 2,471,070
Prentiss Properties Trust 73,572 2,750,857
Reckson Associates Realty 83,420 2,701,140
-----------
13,358,191
-----------
Paper & Forest Products - 1.79%
International Paper 40,000 1,660,800
Weyerhaeuser 20,000 1,320,000
-----------
2,980,800
-----------
Real Estate Operating Companies - 2.39%
Starwood Hotels & Resorts Worldwide 76,200 3,984,498
-----------
3,984,498
-----------
6
STATEMENT DELAWARE INVESTMENTS DIVIDEND AND INCOME FUND, INC.
OF NET ASSETS (CONTINUED)
Number of Market
Shares Value
COMMON STOCK (continued)
Retail - 0.11%
^+Kmart Holding 1,750 $ 179,953
-----------
179,953
-----------
Retail Strip Centers REIT's - 2.08%
^Ramco-Gershenson Properties 114,300 3,478,149
-----------
3,478,149
-----------
Technology - 0.99%
Intel 74,200 1,658,370
-----------
1,658,370
-----------
Telecommunications - 4.32%
Alltel 63,500 3,599,815
BCE 148,900 3,610,825
-----------
7,210,640
-----------
Utilities - 3.04%
Dominion Resources 36,600 2,396,202
FPL Group 38,000 2,672,540
-----------
5,068,742
-----------
TOTAL COMMON STOCK (cost $103,955,466) 129,729,041
-----------
CONVERTIBLE PREFERRED STOCK - 5.17%
Banking, Finance & Insurance - 1.41%
Chubb 7.00% 15,000 440,550
Lehman Brothers Holdings 6.25% 16,000 416,000
National Australia Bank Units 7.875% 40,000 1,498,000
-----------
2,354,550
-----------
Capital Goods - Manufacturing - 0.07%
Foster Wheeler Series B 0.00% 120 111,162
-----------
111,162
-----------
Consumer Products - 1.43%
Newell Financial Trust I 5.25% 52,600 2,386,725
-----------
2,386,725
-----------
Environmental Services - 0.51%
Allied Waste Industries 6.25% 16,200 850,338
-----------
850,338
-----------
Real Estate - 0.80%
Crescent Real Estate 6.75% 62,600 1,337,762
-----------
1,337,762
-----------
Telecommunications - 0.95%
Lucent Technologies Capital Trust I 7.75% 1,300 1,582,022
-----------
1,582,022
-----------
TOTAL CONVERTIBLE PREFERRED STOCK
(cost $8,963,550) 8,622,559
-----------
Number of Market
Shares Value
PREFERRED STOCK - 6.24%
Leisure, Lodging & Entertainment - 0.90%
WestCoast Hospitality Capital Trust 9.50% 58,000 $1,508,000
----------
1,508,000
----------
Real Estate - 4.39%
Equity Inns Series B 8.75% 35,700 953,190
LaSalle Hotel Properties 10.25% 113,200 3,182,052
Ramco-Gershenson Properties 9.50% 40,000 1,104,400
SL Green Realty 7.625% 80,000 2,075,000
----------
7,314,642
----------
Utilities - 0.95%
Public Service Enterprise Group 10.25% 27,200 1,585,760
TNP Enterprises PIK 14.50% 1 72
----------
1,585,832
----------
TOTAL PREFERRED STOCKS (cost $9,564,940) 10,408,474
----------
Principal
Amount
CONVERTIBLE BONDS - 5.47%
Capital Goods - Manufacturing - 0.23%
#Tyco International Group 144A
2.75% 1/15/18 $ 250,000 383,125
----------
383,125
----------
Consumer Cyclical - 3.00%
#Gap 144A 5.75% 3/15/09 1,825,000 2,523,062
Meristar Hospitality 9.50% 4/1/10 1,100,000 1,332,375
#Regal Entertainment Group 144A
3.75% 5/15/08 550,000 756,938
#Saks 144A 2.00% 3/15/24 425,000 405,875
----------
5,018,250
----------
Media - 0.06%
#Charter Communications 144A
5.875% 11/16/09 100,000 107,000
----------
107,000
----------
Technology - 0.33%
#Mercury Interactive 144A 4.75% 7/1/07 550,000 552,063
----------
552,063
----------
Telecommunications - 1.18%
#Nextel Partners 144A 1.50% 11/15/08 800,000 1,966,000
----------
1,966,000
----------
Transportation & Shipping - 0.12%
#ExpressJet Holdings 144A 4.25% 8/1/23 200,000 197,000
----------
197,000
----------
Utilities - 0.55%
#CenterPoint Energy 144A 3.75% 5/15/23 800,000 914,000
----------
914,000
----------
TOTAL CONVERTIBLE BONDS (cost $6,598,688) 9,137,438
----------
7
STATEMENT DELAWARE INVESTMENTS DIVIDEND AND INCOME FUND, INC.
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
CORPORATE BONDS - 34.34%
Basic Materials - 3.72%
Abitibi-Consolidated 6.95% 12/15/06 $ 50,000 $ 51,938
#Boise Cascade 144A 7.125% 10/15/14 250,000 262,500
Fort James 7.75% 11/15/23 1,150,000 1,333,999
^#Huntsman 144A 11.75% 7/15/12 500,000 591,250
Ispat Inland 9.75% 4/1/14 100,000 121,250
^Lyondell Chemical 9.875% 5/1/07 250,000 264,375
^Nalco 8.875% 11/15/13 275,000 304,906
^#Newark Group 144A 9.75% 3/15/14 450,000 479,250
#Port Townsend Paper 144A 11.00% 4/15/11 450,000 479,250
Potlatch 12.50% 12/1/09 475,000 586,984
Rhodia 8.875% 6/1/11 545,000 536,825
Smurfit Capital Funding 7.50% 11/20/25 500,000 500,000
^+Solutia 6.72% 10/15/37 700,000 472,500
Witco 6.875% 2/1/26 250,000 226,250
----------
6,211,277
----------
Capital Goods - Manufacturing - 2.83%
Aearo 8.25% 4/15/12 200,000 207,000
^AEP Industries 9.875% 11/15/07 375,000 381,563
Armor Holdings 8.25% 8/15/13 350,000 392,875
Cenveo 7.875% 12/1/13 150,000 142,500
#Flextronics International 144A
6.25% 11/15/14 150,000 147,375
^Foster Wheeler 10.359% 9/15/11 206,250 219,656
#Geo Subordinate 144A 11.00% 5/15/12 450,000 452,250
#Graham Packaging 144A 9.875% 10/15/14 350,000 367,500
IESI 10.25% 6/15/12 500,000 583,749
#IMCO Recycling 144A 9.00% 11/15/14 150,000 155,625
Interline Brands 11.50% 5/15/11 480,000 537,600
*Mueller Holdings 14.75% 4/15/14 325,000 221,000
#Owens-Brockway 144A 6.75% 12/1/14 250,000 251,875
#Park-Ohio Industries 144A 8.375% 11/15/14 175,000 175,438
Portola Packaging 8.25% 2/1/12 150,000 114,375
Radnor Holdings 11.00% 3/15/10 175,000 144,375
o#Radnor Holdings 144A 8.82% 4/15/09 235,000 238,525
----------
4,733,281
----------
Consumer Cyclical - 7.49%
^Adesa 7.625% 6/15/12 200,000 211,000
*Advanced Accessory Holdings
13.25% 12/15/11 600,000 273,000
^Advanced Accessory Systems
10.75% 6/15/11 225,000 214,875
Ameristar Casinos 10.75% 2/15/09 775,000 864,125
+Avado Brands 9.75% 6/1/06 230,000 83,950
Boyd Gaming 9.25% 8/1/09 800,000 865,000
Caesars Entertainment 9.375% 2/15/07 125,000 137,813
^#Collins & Aikman Products 144A
12.875% 8/15/12 450,000 389,250
^#Denny's 144A 10.00% 10/1/12 300,000 316,500
Gaylord Entertainment 8.00% 11/15/13 175,000 189,875
#Gaylord Entertainment 144A
6.75% 11/15/14 225,000 226,125
Interface 10.375% 2/1/10 350,000 404,250
J Crew Operating 10.375% 10/15/07 485,000 497,125
Principal Market
Amount Value
CORPORATE BONDS (continued)
Consumer Cyclical (continued)
#Loehmanns Capital 144A 13.00% 10/1/11 $ 75,000 $ 72,750
#Lone Star Industries 144A 8.85% 6/15/05 300,000 306,911
^Mandalay Resort Group 10.25% 8/1/07 525,000 597,188
MGM Mirage 9.75% 6/1/07 625,000 696,094
O'Charleys 9.00% 11/1/13 430,000 452,575
^Office Depot 10.00% 7/15/08 480,000 576,000
Penn National Gaming 11.125% 3/1/08 600,000 644,250
Perkins Family Restaurants
10.125% 12/15/07 20,000 20,550
Petco Animal Supplies 10.75% 11/1/11 170,000 199,750
Royal Caribbean Cruises 7.25% 3/15/18 350,000 380,625
*Town Sports International 11.00% 2/1/14 400,000 224,000
Venetian Casino Resort 11.00% 6/15/10 775,000 887,375
+Venture Holdings 12.00% 6/1/09 425,000 2,656
^VICORP Restaurant 10.50% 4/15/11 250,000 250,000
Warnaco 8.875% 6/15/13 500,000 553,750
Wheeling Island Gaming 10.125% 12/15/09 525,000 565,688
^Wynn Las Vegas 12.00% 11/1/10 675,000 853,875
#Wynn Las Vegas 144A 6.625% 12/1/14 550,000 543,125
-----------
12,500,050
-----------
Consumer Non-Cyclical - 2.96%
^Ameripath 10.50% 4/1/13 350,000 362,250
#Commonwealth Brands 144A
10.625% 9/1/08 460,000 480,700
Corrections Corporation of America
9.875% 5/1/09 125,000 141,250
Cott Beverages 8.00% 12/15/11 50,000 54,625
Gold Kist 10.25% 3/15/14 28,000 32,620
HCA 5.50% 12/1/09 200,000 199,255
#Jean Coutu Group 144A 8.50% 8/1/14 300,000 306,000
#Le-Natures 144A 10.00% 6/15/13 465,000 516,150
#Mariner Health Care 144A 8.25% 12/15/13 675,000 811,316
^Province Healthcare 7.50% 6/1/13 625,000 706,250
True Temper Sports 8.375% 9/15/11 200,000 179,000
Universal Hospital Services 10.125% 11/1/11 290,000 307,400
^#US Oncology 144A 10.75% 8/15/14 375,000 430,313
*#Vanguard Health 144A 11.25% 10/1/15 650,000 409,500
-----------
4,936,629
-----------
Energy - 1.49%
El Paso Production Holding 7.75% 6/1/13 550,000 576,125
#Hilcorp Energy 144A 10.50% 9/1/10 400,000 456,000
#Hornbeck Offshore 144A 6.125% 12/1/14 500,000 496,250
Petroleum Geo-Services
8.00% 11/5/06 200,159 204,162
10.00% 11/5/10 524,909 601,021
o#Secunda International 144A
9.76% 9/1/12 155,000 153,450
-----------
2,487,008
-----------
8
STATEMENT DELAWARE INVESTMENTS DIVIDEND AND INCOME FUND, INC.
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
CORPORATE BONDS (continued)
Finance - 1.57%
#BCP Caylux Holdings 144A
9.625% 6/15/14 $ 200,000 $ 225,500
BF Saul REIT 7.50% 3/1/14 125,000 128,750
Bluewater Finance 10.25% 2/15/12 265,000 288,850
^#E TRADE Financial 144A 8.00% 6/15/11 530,000 568,425
#Farmers Exchange Capital 144A
7.20% 7/15/48 250,000 248,824
FINOVA Group 7.50% 11/15/09 803,000 389,455
Labranche & Company 11.00% 5/15/12 275,000 295,625
Midland Funding II 11.75% 7/23/05 60,226 63,223
Tanger Properties 9.125% 2/15/08 350,000 393,750
----------
2,602,402
----------
Media - 5.05%
+Adelphia Communications 8.125% 7/15/03 525,000 467,250
American Media Operation 10.25% 5/1/09 200,000 210,000
Avalon Cable 11.875% 12/1/08 504,168 528,116
Charter Communications Holdings
^*12.125% 1/15/12 1,600,000 992,000
10.75% 10/1/09 175,000 152,250
^CSC Holdings 10.50% 5/15/16 750,000 853,125
Dex Media West 9.875% 8/15/13 125,000 145,000
Insight Midwest 10.50% 11/1/10 1,050,000 1,154,999
^Lodgenet Entertainment 9.50% 6/15/13 945,000 1,048,950
Mediacom Capital 8.50% 4/15/08 325,000 333,125
Nextmedia Operating 10.75% 7/1/11 200,000 224,750
PEI Holdings 11.00% 3/15/10 400,000 466,000
Rogers Cablesystems 10.00% 3/15/05 700,000 714,000
Sheridan Acquisition 10.25% 8/15/11 325,000 356,688
#Warner Music Group 144A
7.375% 4/15/14 200,000 206,000
XM Satellite Radio 12.00% 6/15/10 500,000 595,000
----------
8,447,253
----------
Technology - 0.68%
^Chippac International 12.75% 8/1/09 485,000 518,562
^#Stats Chippac 144A 6.75% 11/15/11 300,000 296,250
Stratus Technologies 10.375% 12/1/08 350,000 315,000
----------
1,129,812
----------
Telecommunications - 3.10%
o#AirGate PCS 144A 5.85% 10/15/11 175,000 179,813
Alaska Communications Systems Holdings
9.875% 8/15/11 175,000 184,625
Centennial Cellular Operating
10.125% 6/15/13 500,000 547,500
^Cincinnati Bell 8.375% 1/15/14 625,000 626,562
Citizens Communications 8.50% 5/15/06 75,000 80,719
^*#Inmarsat Finance 144A 10.375% 11/15/12 325,000 225,875
^Intelsat 6.50% 11/1/13 350,000 298,855
#iPCS Escrow 144A 11.50% 5/1/12 200,000 221,000
MCI
5.908% 5/1/07 250,000 253,750
6.688% 5/1/09 225,000 227,250
MetroPCS 10.75% 10/1/11 225,000 237,375
#New Skies Satellite 144A 9.125% 11/1/12 425,000 435,625
#Qwest 144A 7.875% 9/1/11 75,000 80,438
#Qwest Services 144A 14.00% 12/15/10 525,000 624,749
#UbiquiTel Operating 144A 9.875% 3/1/11 200,000 220,500
o^#US LEC 144A 10.67% 10/1/09 225,000 223,875
Principal Market
Amount Value
CORPORATE BONDS (continued)
Telecommunications (continued)
US Unwired 10.00% 6/15/12 $ 450,000 $ 498,375
-----------
5,166,886
-----------
Transportation & Shipping - 1.55%
#Horizon Lines 144A 9.00% 11/1/12 300,000 329,250
^Kansas City Southern Railway
9.50% 10/1/08 300,000 341,250
OMI 7.625% 12/1/13 400,000 432,500
Seabulk International 9.50% 8/15/13 500,000 540,000
#Stena AB 144A 7.00% 12/1/16 100,000 98,500
Stena AB 9.625% 12/1/12 350,000 397,250
^#Ultrapetrol 144A 9.00% 11/24/14 450,000 452,250
-----------
2,591,000
-----------
Utilities - 3.90%
Avista 9.75% 6/1/08 500,000 583,385
^Calpine 10.50% 5/15/06 365,000 363,175
#Calpine 144A
o7.82% 7/15/07 222,188 198,302
9.625% 9/30/14 210,000 209,738
#Dynegy Holdings 144A 10.125% 7/15/13 900,000 1,055,249
^El Paso Natural Gas 7.625% 8/1/10 200,000 218,000
Elwood Energy 8.159% 7/5/26 386,219 420,013
Midwest Generation
8.30% 7/2/09 500,000 541,250
8.75% 5/1/34 425,000 483,969
+Mirant Americas Generation
7.625% 5/1/06 400,000 415,000
^#NRG Energy 144A 8.00% 12/15/13 550,000 610,499
Orion Power Holdings 12.00% 5/1/10 250,000 316,250
^PSE&G Energy Holdings 7.75% 4/16/07 250,000 268,750
^Reliant Energy 9.50% 7/15/13 250,000 288,125
Tennessee Gas Pipeline 8.375% 6/15/32 350,000 386,313
+#USGen New England 144A 7.459% 1/2/15 250,000 160,000
-----------
6,518,018
-----------
TOTAL CORPORATE BONDS (cost $55,446,114) 57,323,616
-----------
MUNICIPAL BONDS - 0.14%
New Jersey Economic Development
Authority Special Facility Revenue
(Continental Airlines Project)
6.25% 9/15/29 (AMT) 300,000 231,000
-----------
TOTAL MUNICIPAL BONDS (cost $254,559) 231,000
-----------
U.S. TREASURY OBLIGATIONS - 3.18%
**U.S. Treasury Bill 1.90% 12/9/04 5,315,000 5,312,794
-----------
TOTAL U.S. TREASURY OBLIGATIONS
(cost $5,312,794) 5,312,794
-----------
Number of
Shares
WARRANTS - 0.00%
+#Solutia Warrants 144A, exercise price $7.59,
expiration date 7/15/09 650 7
-----------
TOTAL WARRANTS (cost $55,294) 7
-----------
TOTAL MARKET VALUE OF SECURITIES BEFORE
SECURITIES LENDING COLLATERAL - 132.25%
(cost $190,151,405) 220,764,929
-----------
9
STATEMENT DELAWARE INVESTMENTS DIVIDEND AND INCOME FUND, INC.
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
SECURITIES LENDING COLLATERAL*** - 11.38%
Banc of America Securities LLC
2.08% 12/1/04 $3,067,911 $3,067,911
Barclays London 1.92% 1/31/05 144,921 144,866
Bear Stearns 2.12% 3/18/05 652,749 653,299
Beta Finance 2.30% 2/11/05 622,558 619,714
BNP Paribus 2.21% 1/25/05 146,334 146,118
Calyon 2.07% 4/19/05 724,287 724,256
Credit Swiss First Boston NY
1.60% 12/13/04 579,512 579,464
Deutsche Bank Financial 2.13% 2/22/05 144,861 144,902
Deutsche Bank London 1.96% 12/31/04 579,529 579,464
Fannie Mae 1.94% 12/29/04 577,716 576,786
General Electric Capital 2.12% 2/3/05 217,309 217,400
Goldman Sachs Group LP
1.80% 12/21/04 333,225 333,192
2.24% 12/8/04 340,416 340,435
IXIS Corporate & Investment Bank
2.19% 12/31/04 724,327 724,330
Landesbank Hessen 2.19% 12/30/04 731,354 730,778
Lehman Holdings 2.13% 12/23/05 727,798 727,798
Merrill Lynch Mortgage Capital
2.16% 11/12/05 579,464 579,464
Morgan Stanley
2.14% 3/10/05 579,464 579,464
2.21% 1/2/06 144,639 144,866
Nordea Bank New York 2.07% 5/13/05 724,299 724,229
Pfizer 2.02% 1/2/06 695,056 695,357
Proctor and Gamble 1.83% 1/2/06 723,938 724,330
Rabobank, New York 2.15% 3/2/05 724,324 724,239
Royal Bank of Canada 2.14% 6/27/05 724,421 724,204
Sigma Finance 1.97% 9/30/05 680,953 680,715
Societe Generale
2.06% 6/14/05 363,508 363,403
2.15% 12/8/04 579,417 579,428
Union Bank of Switzerland
1.13% 12/20/04 724,546 724,330
Wells Fargo 2.06% 1/2/06 724,330 724,330
Wilmington Trust 2.05% 1/5/05 724,402 724,358
------------
TOTAL SECURITIES LENDING COLLATERAL
(cost $19,003,430) 19,003,430
------------
TOTAL MARKET VALUE OF SECURITIES -143.63%
(cost $209,154,835) 239,768,359++
OBLIGATION TO RETURN SECURITIES LENDING
COLLATERAL - (11.38%)*** (19,003,430)
COMMERCIAL PAPER PAYABLE (PAR $55,000,000) - (32.85%) (54,839,657)
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES - 0.60% 1,003,847
------------
NET ASSETS APPLICABLE TO 12,876,300 SHARES
OUTSTANDING; EQUIVALENT TO $12.96 PER
SHARE - 100.00% $166,929,119
============
COMPONENTS OF NET ASSETS AT NOVEMBER 30, 2004:
Common stock, $0.01 par value, 500,000,000
shares authorized to the Fund $169,031,051
Treasury stock, 1,430,700 shares at cost (17,411,619)
Accumulated net realized loss on investments (15,303,837)
Net unrealized appreciation of investments 30,613,524
------------
Total net assets $166,929,119
============
*Step Coupon Bond. Indicates security that has a zero coupon that remains in
effect until a predetermined date at which time the stated interest rate
becomes effective.
#Security exempt from registration under Rule 144A of the Securities Act of
1933. See Note 8 in "Notes to Financial Statements."
+Non-income producing security for the year ended November 30, 2004.
**Zero coupon security. The interest rate shown is the yield at the time of
purchase.
^Fully or partially on loan.
++Includes $18,826,039 of securities loaned.
+Non-income producing security. Security is currently in default.
oVariable Rate Note. The interest rate shown is the rate as of November 30,
2004.
***See Note 7 in "Notes to Financial Statements."
SUMMARY OF ABBREVIATIONS:
ADR - American Depositary Receipts
AMT - Subject to Alternative Minimum Tax
PIK - Pay-in-kind
REIT - Real Estate Investment Trust
10
STATEMENT DELAWARE INVESTMENTS DIVIDEND AND INCOME FUND, INC.
OF OPERATIONS Year Ended November 30, 2004
INVESTMENT INCOME:
Dividends $5,091,562
Interest 5,319,381
Foreign tax withheld (5,151)
Securities lending income 37,950 $10,443,742
---------- -----------
EXPENSES:
Management fees 1,170,405
Commercial paper fees 117,281
Accounting and administration expenses 106,298
Legal and professional fees 57,701
Reports to shareholders 53,861
Transfer agent fees 52,624
NYSE fees 14,937
Directors' fees 11,242
Taxes (0ther than taxes on income) 11,028
Custodian fees 8,241
Pricing fees 6,764
Other 7,672
----------
Total operating expenses (before interest expense) 1,618,054
Interest expense 774,559
-----------
Total operating expenses (after interest expense) 2,392,613
Less expense paid indirectly (316)
-----------
Total expenses 2,392,297
-----------
NET INVESTMENT INCOME 8,051,445
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCIES:
Net realized gain (loss) on:
Investments 9,069,097
Foreign currencies (1,350)
-----------
Net realized gain 9,067,747
Net change in unrealized appreciation/depreciation of investments and foreign currencies 11,577,007
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND FOREIGN CURRENCIES 20,644,754
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $28,696,199
===========
See accompanying notes
11
STATEMENTS DELAWARE INVESTMENTS DIVIDEND AND INCOME FUND, INC.
OF CHANGES IN NET ASSETS
Year Ended
11/30/04 11/30/03
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income $ 8,051,445 $ 9,156,076
Net realized gain (loss) on investments and foreign currencies 9,067,747 (1,708,967)
Net change in unrealized appreciation/depreciation of investments and foreign currencies 11,577,007 27,267,999
------------ ------------
Net increase in net assets resulting from operations 28,696,199 34,715,108
------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM (SEE NOTE 4):
Net investment income (8,531,887) (9,189,360)
Net realized gains (3,830,110) --
Return of capital -- (5,490,473)
------------ ------------
(12,361,997) (14,679,833)
------------ ------------
NET INCREASE IN NET ASSETS 16,334,202 20,035,275
NET ASSETS:
Beginning of year 150,594,917 130,559,642
------------ ------------
End of year (there is no undistributed net investment income at either year end) $166,929,119 $150,594,917
============ ============
See accompanying notes
STATEMENT DELAWARE INVESTMENTS DIVIDEND AND INCOME FUND, INC.
OF CASH FLOWS Year Ended November 30, 2004
NET CASH PROVIDED BY OPERATING ACTIVITIES:
Net increase in net assets resulting from operations $28,696,199
-----------
Adjustments to reconcile net increase in net assets from operations to cash provided by operating activities:
Amortization of premium and discount on securities purchased (215,851)
Net proceeds from investment transactions 6,103,849
Net realized gain from investment transactions (9,069,097)
Net realized loss on foreign currencies 1,350
Change in net unrealized appreciation/depreciation (11,577,007)
Increase in receivable for investments sold (20,670)
Decrease in interest and dividends receivable 228,675
Decrease in distribution payable (1,030,173)
Decrease in payable for investments purchased (707,398)
Increase in interest payable 33,577
Increase in accrued expenses and other liabilities 29,497
-----------
Total adjustments (16,223,248)
-----------
Net cash provided by operating activities 12,472,951
-----------
CASH FLOWS USED FOR FINANCING ACTIVITIES:
Cash provided by issuance of commercial paper 274,166,957
Repayment of commercial paper upon maturity (274,259,018)
Cash dividends and distributions paid (12,361,997)
-----------
Net cash used for financing activities (12,454,058)
-----------
Effect of exchange rate on cash (1,350)
-----------
Net increase in cash 17,543
Cash at beginning of year --
-----------
Cash at end of year $ 17,543
===========
Cash paid for interest $ 740,982
===========
See accompanying notes
12
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
11/30/04 11/30/03 11/30/02(3) 11/30/01 11/30/00
NET ASSET VALUE, BEGINNING OF PERIOD $11.700 $10.140 $11.630 $11.590 $13.000
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income(4) 0.625 0.711 0.635 0.617 0.803
Net realized and unrealized gain (loss) on investments and
foreign currencies 1.595 1.989 (0.650) 0.923 (0.713)
------- ------- ------- ------- -------
Total from investment operations 2.220 2.700 (0.015) 1.540 0.090
------- ------- ------- ------- -------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.663) (0.714) (0.660) (0.617) (0.803)
Net realized gain on investments (0.297) -- -- (0.080) (0.560)
Return of capital -- (0.426) (0.815) (0.803) (0.137)
------- ------- ------- ------- -------
Total dividends and distributions (0.960) (1.140) (1.475) (1.500) (1.500)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $12.960 $11.700 $10.140 $11.630 $11.590
======= ======= ======= ======= =======
MARKET VALUE, END OF PERIOD $11.760 $11.840 $10.020 $13.850 $11.875
======= ======= ======= ======= =======
TOTAL RETURN BASED ON:(1)
Market value 7.78% 30.20% (18.98%) 30.20% 19.78%
Net asset value 20.29% 27.13% (2.36%) 12.02% 1.17%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $166,929 $150,595 $130,560 $149,718 $149,292
Ratio of expenses to average net assets 1.51% 1.63% 1.86% 2.77% 3.02%
Ratio of expenses to adjusted average net assets
(before interest expense)(2) 0.76% 0.79% 0.80% 0.83% 0.71%
Ratio of interest expense to adjusted average net assets(2) 0.36% 0.37% 0.54% 1.22% 1.58%
Ratio of net investment income to average net assets 5.10% 6.70% 5.69% 5.07% 6.45%
Ratio of net investment income to adjusted average net assets(2) 3.78% 4.78% 4.12% 3.75% 4.88%
Portfolio turnover 89% 175% 107% 61% 47%
LEVERAGE ANALYSIS:
Debt outstanding at end of period at par (000 omitted) $55,000 $55,000 $55,000 $55,000 $55,000
Average daily balance of debt outstanding (000 omitted) $54,893 $54,882 $54,857 $54,724 $54,463
Average daily balance of shares outstanding (000 omitted) 12,876 12,876 12,876 12,876 13,744
Average debt per share $4.260 $4.262 $4.260 $4.250 $3.963
Asset coverage per $1,000 of debt outstanding at end of period $4,044 $3,743 $3,379 $3,730 $3,738
(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 premiums 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 share 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 the 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
13
NOTES DELAWARE INVESTMENTS DIVIDEND AND INCOME FUND, INC.
TO FINANCIAL STATEMENTS November 30, 2004
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 U.S generally accepted
accounting principles and are consistently followed by the Fund:
Security Valuation -- Equity securities, except those traded on the Nasdaq Stock
Market, Inc. (NASDAQ), 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 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 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.
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
U.S. 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 -- Expenses common to all funds within the Delaware Investments Family of
Funds are allocated amongst the funds on the basis of average net assets.
Management fees and some other expenses are paid monthly. 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. Premiums and discounts on non-convertible debt
securities 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.
Through December 31, 2003, certain expenses of the Fund were paid through
commission arrangements with brokers. The amount of these expenses was $316 for
the year ended November 30, 2004. The expense paid under the above arrangement
is included on the Statement of Operations with the corresponding expense offset
shown as "expense 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, 2004, the Fund had liabilities payable to affiliates as follows:
Investment management fee payable to DMC $101,149
Accounting and administration fees and
other expenses payable to DSC 23,386
Other expenses payable to DMC and affiliates* 14,478
*DMC, as part of its administration services, pays operating expenses on behalf
of the Fund and is reimbursed on a periodic basis. Such expenses include items
such as printing of shareholder reports, fees for audit, legal and tax
services, stock exchange fees, custodian fees and directors fees.
As provided in the investment management agreement, the Fund bears the cost of
certain legal services expenses, including internal legal
services, provided to the Fund by DMC employees. For the year ended November 30,
2004, the Fund was charged $9,189 for internal legal services provided by DMC.
Certain officers of DMC and DSC are officers and/or directors the Fund. These
officers and directors are paid no compensation by the Fund.
14
NOTES DELAWARE INVESTMENTS DIVIDEND AND INCOME FUND, INC.
TO FINANCIAL STATEMENTS (CONTINUED)
3. INVESTMENTS
For the year ended November 30, 2004, the Fund made purchases of $185,579,381
and sales of $191,295,145 of long-term investment securities other than
long-term U.S. government securities and short-term investments. For the year
ended November 30, 2004, the Fund made purchases of $109,699,522 and sales of
$109,195,255 of long-term U.S. government securities.
At November 30, 2004, the cost of investments for federal income tax purposes
was $209,244,109. At November 30, 2004, the net unrealized appreciation was
$30,524,251, of which $37,171,249 related to unrealized appreciation of
investments and $6,646,998 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 U.S. generally
accepted accounting principles. The distributions made by the Fund during the
fiscal year ended November 30, 2004 were in excess of the net investment income
earned by the Fund for financial reporting purposes. This was offset by realized
gains and therefore there was not a return of capital for federal income tax
purposes. The tax character of dividends and distributions paid during the years
ended November 30, 2004 and 2003 was as follows:
Year Ended
11/30/04 11/30/03
-------- --------
Ordinary income $12,361,997 $ 9,189,360
Return of capital -- 5,490,473
----------- -----------
Total $12,361,997 $14,679,833
=========== ===========
As of November 30, 2004, the components of net assets on a tax basis were as
follows:
Shares of beneficial interest $151,619,432
Capital loss carryforwards (15,214,564)
Unrealized appreciation of investments 30,524,251
------------
Net assets $166,929,119
============
The differences between book basis and tax basis components of net assets are
primarily attributable to tax deferral of losses on wash sales and tax treatment
of market discount and premium on debt instruments.
For financial reporting purposes, capital accounts are adjusted to reflect
the tax character of permanent book/tax differences. For the year ended November
30, 2004, the Fund recorded the following permanent reclassifications.
Reclassifications are primarily due to tax treatment of market discounts and
premiums on certain debt instruments and distributions from net realized gains.
Results of operations and net assets were not affected by these
reclassifications.
Undistributed net investment income $481,792
Accumulated net realized gain (loss) 3,348,318
Paid-in capital (3,830,110)
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: $13,424,663 expires in 2010 and $1,789,901
expires in 2011. For the year ended November 30, 2004, the Fund utilized
$8,892,306 of capital loss carryforwards.
5. CAPITAL STOCK
The Fund did not repurchase any shares under the Share Repurchase Program or
have any transactions in common shares during the year ended November 30, 2004.
Shares issuable under the Fund's dividend investment plan are purchased by the
Fund's transfer agent, Mellon Investor Services, LLC, in the open market.
6. COMMERCIAL PAPER
As of November 30, 2004, $55,000,000 (par value) of commercial paper was
outstanding with an amortized cost of $54,839,657. The weighted average discount
rate of commercial paper outstanding at November 30, 2004 was 2.17%. The average
daily balance of commercial paper outstanding during the year ended November 30,
2004 was $54,893,405 at a weighted discount rate of 1.34%. The maximum amount of
commercial paper outstanding at any time during the year was $55,000,000. In
conjunction with the issuance of the commercial paper, the Fund entered into a
line of credit arrangement with J.P. Morgan Chase 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.
For the year ended November 30, 2004, the Fund was charged fees of $38,083 which
are included in "commercial paper fees" on the Statement of Operations. During
the year ended November 30, 2004, 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 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, 2004, the market value of securities on loan was $18,826,039,
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."
15
NOTES DELAWARE INVESTMENTS DIVIDEND AND INCOME FUND, INC.
TO FINANCIAL STATEMENTS (CONTINUED)
8. CREDIT AND MARKET RISKS
The Fund invests 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 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,
2004. 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. CONTRACTUAL OBLIGATIONS
The Fund enters into contracts in the normal course of business that contain a
variety of indemnifications. The Fund's maximum exposure under these
arrangements is unknown. However, the Fund has not had prior claims or losses
pursuant to these contracts. Management has reviewed the Fund's existing
contracts and expects the risk of loss to be remote.
16
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors
Delaware Investments Dividend and Income Fund, Inc.
We have audited the accompanying statement of net assets of the Delaware
Investments Dividend and Income Fund, Inc. (the "Fund") as of November 30, 2004,
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 the standards of the Public Company
Accounting Oversight Board (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, 2004, 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 the
Delaware Investments Dividend and Income Fund, Inc. at November 30, 2004, 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 U.S. generally accepted accounting principles.
Ernst & Young LLP
Philadelphia, Pennsylvania
January 11, 2005
17
OTHER DELAWARE INVESTMENTS DIVIDEND AND INCOME FUND, INC.
FUND INFORMATION
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.
For the fiscal year ended November 30, 2004, 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)
------------- ------------- ---------- ------------ ------------
-- 100% -- 100% 33%
(A) (B) and (C) are based on a percentage of the Fund's total distributions.
(D) is based on a percentage of the Fund's ordinary income distributions.
(1) Qualifying dividends represent dividends which qualify for the corporate
dividends received deduction.
For the fiscal year ended November 30, 2004, 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 up to a maximum amount
of $12,361,997 to be taxed at a maximum rate of 15%. Complete information will
be computed and reported in conjunction with your 2004 Form 1099-DIV.
CORPORATE GOVERNANCE (UNAUDITED)
The Fund's audit committee charter is available on its web site at
http://www.delawareinvestments.com, and the charter is also available in print
to any shareholder who requests it. The Fund submitted its Annual CEO
certification for 2004 to the NYSE on September 17, 2004 stating that the CEO
was not aware of any violation by the Fund of the NYSE's corporate governance
listing standards. In addition, the Fund has filed the required CEO/CFO
certifications regarding the quality of the Fund's public disclosure as exhibits
to the Form N-CSRs and Form N-Qs filed by the Fund over the past fiscal year.
The Fund's Form N-CSR and Form N-Q filings are available on the Commission's web
site at http://www.sec.gov.
PROXY RESULTS (UNAUDITED)
The Fund held its Annual Meeting of Shareholders on August 19, 2004.
At the Annual Meeting, the Fund's shareholders elected eight 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 10,087,437 168,762 --
------------------------------------------------------------------------
Walter P. Babich 10,071,529 184,670 --
------------------------------------------------------------------------
John H. Durham 10,093,403 162,796 --
------------------------------------------------------------------------
John A. Fry 10,094,254 161,945 --
------------------------------------------------------------------------
Anthony D. Knerr 10,087,859 168,340 --
------------------------------------------------------------------------
Ann R. Leven 10,094,688 161,511 --
------------------------------------------------------------------------
Thomas F. Madison 10,093,395 162,804 --
------------------------------------------------------------------------
Janet L. Yeomans 10,099,088 157,111 --
------------------------------------------------------------------------
18
BOARD OF DIRECTORS AND OFFICERS ADDENDUM
A 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 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 and Officers with 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 Served Past 5 Years or Officer or Officer
-----------------------------------------------------------------------------------------------------------------------------------
INTERESTED DIRECTOR
JUDE T. DRISCOLL(2) Chairman, President 4 Years - Since August 2000, 75 None
2005 Market Street Chief Executive Officer Executive Officer Mr. Driscoll has served in
Philadelphia, PA and Director(4) various executive capacities
19103 1 year - at different times at
Trustee Delaware Investments(1)
March 10, 1963
Senior Vice President and
Director of Fixed-Income Process -
Conseco Capital Management
(June 1998 - August 2000)
-----------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT DIRECTORS
WALTER P. BABICH Director 16 Years Board Chairman - 92 None
2005 Market Street Citadel Construction Corporation
Philadelphia, PA (1989 - Present)
19103
October 1, 1927
JOHN H. DURHAM Director 25 Years(3) Private Investor 92 Trustee - Abington
2005 Market Street Memorial Hospital
Philadelphia, PA
19103
August 7, 1937 President/Director -
22 WR Corporation
JOHN A. FRY Director(4) 3 Years President - 75 Director -
2005 Market Street Franklin & Marshall College Community Health
Philadelphia, PA (June 2002 - Present) Systems
19103
Executive Vice President -
University of Pennsylvania
May 28, 1960 (April 1995 - June 2002)
ANTHONY D. KNERR Director 11 Years Founder/Managing Director - 92 None
2005 Market Street Anthony Knerr & Associates
Philadelphia, PA (Strategic Consulting)
19103 (1990 - Present)
December 7, 1938
19
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 Served Past 5 Years or Officer or Officer
-----------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT DIRECTORS (CONTINUED)
ANN R. LEVEN Director 15 Years Treasurer/Chief Fiscal Officer - 92 Director and
2005 Market Street National Gallery of Art Audit Committee
Philadelphia, PA (1994 - 1999) Chairperson - Andy
19103 Warhol Foundation
Director -
Systemax Inc.
November 1, 1940
THOMAS F. MADISON Director 10 Years President/Chief 92 Director -
2005 Market Street Executive Officer - Banner Health
Philadelphia, PA MLM Partners, Inc.
19103 (Small Business Investing Director -
and Consulting) CenterPoint Energy
(January 1993 - Present)
February 25, 1936 Director -
Digital River Inc.
Director - Rimage
Corporation
Director - Valmont
Industries, Inc.
JANET L. YEOMANS Director 5 Years Vice President/Mergers & 92 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 1 Year Mr. Hastings has served in 92 None(5)
2005 Market Street Vice President various executive capacities
Philadelphia, PA and at different times at
19103 Chief Financial Delaware Investments.
Officer
Decenber 19, 1949
RICHELLE S. MAESTRO Executive Vice President, 1 Year Ms. Maestro has served in 92 None(5)
2005 Market Street Chief Legal Officer various executive capacities
Philadelphia, PA and Secretary at different times at
19103 Delaware Investments.
November 26, 1957
MICHAEL P. BISHOF Senior Vice President 8 Years Mr. Bishof has served in 92 None(5)
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 and
its administrator.
(2) Mr. Driscoll is considered to be an "Interested Trustee" 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 funds 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.
(5) Mr. Hastings, Mr. Bishof and Ms. Maestro also serve in similar capacities
for the six portfolios of the Optimum Fund Trust, which have the same
investment advisor and administrator as the registrant.
20
Delaware DDF
Investments(SM) Listed
-------------------------------------- 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 PRINCIPAL OFFICE OF THE FUND
WALTER P. BABICH 2005 Market Street
Board Chairman RICHELLE S. MAESTRO Philadelphia, PA 19103
Citadel Construction Corporation Executive Vice President,
King of Prussia, PA Chief Legal Officer and Secretary INDEPENDENT REGISTERED PUBLIC
Delaware Investments Family of Funds ACCOUNTING FIRM
JOHN H. DURHAM Philadelphia, PA Ernst & Young LLP
Private Investor 2001 Market Street
Gwynedd Valley, PA MICHAEL P. BISHOF Philadelphia, PA 19103
Senior Vice President and Treasurer
JOHN A. FRY Delaware Investments Family of Funds REGISTRANT AND STOCK TRANSFER AGENT
President Philadelphia, PA Mellon Investor Services, LLC
Franklin & Marshall College Overpeck Centre
Lancaster, PA 85 Challenger Road
Ridgefield, NJ 07660
ANTHONY D. KNERR 800 851-9677
Managing Director
Anthony Knerr & Associates FOR SECURITIES DEALERS AND FINANCIAL
New York, NY INSTITUTIONS REPRESENTATIVES ONLY
800 362-7500
ANN R. LEVEN+
Former Treasurer/Chief Fiscal Officer WEB SITE
National Gallery of Art www.delawareinvestments.com
Washington, DC
THOMAS F. MADISON+
President and Chief Executive Officer
MLM Partners, Inc.
Minneapolis, MN
JANET L. YEOMANS+
Vice President/Mergers & Acquisitions
3M Corporation
St. Paul, MN
--------------------------------------------------------------------------------
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission for the first and third quarters of each fiscal year on
Form N-Q.
The Fund's Forms N-Q, as well as a description of the policies and procedures
that the Fund uses to determine how to vote proxies (if any) relating to
portfolio securities is available without charge (i) upon request, by calling
800 523-1918; (ii) on the Fund's Web site at http://www.delawareinvestments.com;
and (iii) on the Commission's Web site at http://www.sec.gov. The Fund's Forms
N-Q may be reviewed and copied at the Commission's Public Reference Room in
Washington, DC; information on the operation of the Public Reference Room may be
obtained by calling 1-800-SEC-0330.
Information (if any) regarding how the Fund voted proxies relating to portfolio
securities during the most recently disclosed 12-month period ended June 30 is
available without charge (i) through the Fund's Web site at
http://www.delawareinvestments.com; and (ii) on the Commission's Web site at
http://www.sec.gov.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Your Reinvestment Options
Delaware Investments Dividend and Income Fund, Inc. offers an automatic dividend
reinvestment program. If you would like to reinvest dividends, and shares are
registered in your name, contact Mellon Investor Services, LLC at 800 851-9677.
You will be asked to put your request in writing. If you have shares registered
in "street" name, contact the broker/dealer holding the shares or your financial
advisor.
--------------------------------------------------------------------------------
+Audit Committee Member
(9098) Printed in the USA
AR-DDF [11/04] IVES 1/05 J9931
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
(a) Audit fees.
----------
The aggregate fees billed for services provided to the Registrant by
its independent auditors for the audit of the Registrant's annual financial
statements and for services normally provided by the independent auditors in
connection with statutory and regulatory filings or engagements were $29,250 for
the fiscal year ended November 30, 2004.
The aggregate fees billed for services provided to the Registrant by
its independent auditors for the audit of the Registrant's annual financial
statements and for services normally provided by the independent auditors in
connection with statutory and regulatory filings or engagements were $26,025 for
the fiscal year ended November 30, 2003.
_______________________
(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.
(b) Audit-related fees.
------------------
The aggregate fees billed by the Registrant's independent auditors for
services relating to the performance of the audit of the Registrant's financial
statements and not reported under paragraph (a) of this Item were $8,320 for the
fiscal year ended November 30, 2004. The percentage of these fees relating to
services approved by the Registrant's Audit Committee pursuant to the de minimis
exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of
Regulation S-X was 0%. These audit-related services were as follows: issuance of
agreed upon procedures reports with respect to the Fund's commercial paper
program as required by the applicable rating agencies.
The aggregate fees billed by the Registrant's independent auditors for
services relating to the performance of the audit of the financial statements of
the Registrant's investment adviser(s) and other service providers under common
control with the adviser(s) and that relate directly to the operations or
financial reporting of the Registrant were $21,350 for the Registrant's fiscal
year ended November 30, 2004. The percentage of these fees relating to services
approved by the Registrant's Audit Committee pursuant to the de minimis
exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of
Regulation S-X was 0%. These audit-related services were as follows: issuance of
agreed upon procedures reports to the Registrant's Board in connection with the
annual fund accounting service agent contract renewal and the pass-through of
internal legal cost relating to the operations of the Registrant.
The aggregate fees billed by the Registrant's independent auditors for
services relating to the performance of the audit of the Registrant's financial
statements and not reported under paragraph (a) of this Item were $9,850 for the
fiscal year ended November 30, 2003. The percentage of these fees relating to
services approved by the Registrant's Audit Committee pursuant to the de minimis
exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of
Regulation S-X was 0%. These audit-related services were as follows: issuance of
agreed upon procedures reports with respect to the Fund's commercial paper
program as required by the applicable rating agencies.
The aggregate fees billed by the Registrant's independent auditors for
services relating to the performance of the audit of the financial statements of
the Registrant's investment adviser(s) and other service providers under common
control with the adviser(s) and that relate directly to the operations or
financial reporting of the Registrant were $15,750 for the Registrant's fiscal
year ended November 30, 2003. The percentage of these fees relating to services
approved by the Registrant's Audit Committee pursuant to the de minimis
exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of
Regulation S-X was 0%. These audit-related services were as follows: issuance of
agreed upon procedures reports to the Registrant's Board in connection with the
annual fund accounting service agent contract renewal and the pass-through of
internal legal cost relating to the operations of the Registrant.
(c) Tax fees.
--------
The aggregate fees billed by the Registrant's independent auditors for
tax-related services provided to the Registrant were $1,750 for the fiscal year
ended November 30, 2004. The percentage of these fees relating to services
approved by the Registrant's Audit Committee pursuant to the de minimis
exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of
Regulation S-X was 0%. These tax-related services were as follows: review of
income tax returns and review of annual excise distribution calculations.
The aggregate fees billed by the Registrant's independent auditors for
tax-related services provided to the Registrant's investment adviser(s) and
other service providers under common control with the adviser(s) and that relate
directly to the operations or financial reporting of the Registrant were $0 for
the Registrant's fiscal year ended November 30, 2004. The percentage of these
fees relating to services approved by the Registrant's Audit Committee pursuant
to the de minimis exception from the pre-approval requirement in Rule
2-01(c)(7)(i)(C) of Regulation S-X was 0%.
The aggregate fees billed by the Registrant's independent auditors for
tax-related services provided to the Registrant were $1,250 for the fiscal year
ended November 30, 2003. The percentage of these fees relating to services
approved by the Registrant's Audit Committee pursuant to the de minimis
exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of
Regulation S-X was 0%. These tax-related services were as follows: review of
income tax returns and annual review of excise distribution calculations.
The aggregate fees billed by the Registrant's independent auditors for
tax-related services provided to the Registrant's adviser(s) and other service
providers under common control with the adviser(s) and that relate directly to
the operations or financial reporting of the Registrant were $0 for the
Registrant's fiscal year ended November 30, 2003. The percentage of these fees
relating to services approved by the Registrant's Audit Committee pursuant to
the de minimis exception from the pre-approval requirement in Rule
2-01(c)(7)(i)(C) of Regulation S-X was 0%.
(d) All other fees.
--------------
The aggregate fees billed for all services provided by the independent
auditors to the Registrant other than those set forth in paragraphs (a), (b) and
(c) of this Item were $0 for the fiscal year ended November 30, 2004. The
percentage of these fees relating to services approved by the Registrant's Audit
Committee pursuant to the de minimis exception from the pre-approval requirement
in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%.
The aggregate fees billed for all services other than those set forth
in paragraphs (b) and (c) of this Item provided by the Registrant's independent
auditors to the Registrant's adviser(s) and other service providers under common
control with the adviser(s) and that relate directly to the operations or
financial reporting of the Registrant were $0 for the Registrant's fiscal year
ended November 30, 2004. The percentage of these fees relating to services
approved by the Registrant's Audit Committee pursuant to the de minimis
exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of
Regulation S-X was 0%.
The aggregate fees billed for all services provided by the independent
auditors to the Registrant other than those set forth in paragraphs (a), (b) and
(c) of this Item were $0 for the fiscal year ended November 30, 2003. The
percentage of these fees relating to services approved by the Registrant's Audit
Committee pursuant to the de minimis exception from the pre-approval requirement
in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%.
The aggregate fees billed for all services other than those set forth
in paragraphs (b) and (c) of this Item provided by the Registrant's independent
auditors to the Registrant's adviser(s) and other service providers under common
control with the adviser(s) and that relate directly to the operations or
financial reporting of the Registrant were $0 for the Registrant's fiscal year
ended November 30, 2003. The percentage of these fees relating to services
approved by the Registrant's Audit Committee pursuant to the de minimis
exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of
Regulation S-X was 0%.
(e) The Registrant's Audit Committee has not established pre-approval
policies and procedures as permitted by Rule 2-01(c)(7)(i)(B) of Regulation S-X.
(f) Not applicable.
(g) The aggregate non-audit fees billed by the Registrant's independent
auditors for services rendered to the Registrant and to its investment
adviser(s) and other service providers under common control with the adviser(s)
were $236,704 and $166,575 for the Registrant's fiscal years ended November 30,
2004 and November 30, 2003, respectively.
(h) In connection with its selection of the independent auditors, the
Registrant's Audit Committee has considered the independent auditors' provision
of non-audit services to the Registrant's investment adviser(s) and other
service providers under common control with the adviser(s) that were not
required to be pre-approved pursuant to Rule 2-01(c)(7)(ii) of Regulation S-X.
The Audit Committee has determined that the independent auditors' provision of
these services is compatible with maintaining the auditors' independence.
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.
Item 6. Schedule of Investments
Included as part of report to shareholders filed under Item 1 of this
Form N-CSR.
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 generally determined on a
case-by-case basis; (vii) generally vote for reports on the level of greenhouse
gas emissions from a company's operations and products; and (viii) generally
vote for proposals requesting the company to report on its policies and
practices related to social, environmental and economic sustainability.
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. Portfolio Managers of Closed-End Management Investment Companies
Applicable to Form N-CSRs filed for fiscal years ending on or after
December 31, 2005.
Item 9. Purchases of Equity Securities by Closed-End Management Investment
Companies and Affiliated Purchasers
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 11. 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 second fiscal quarter of the
period covered by the report to stockholders included herein (i.e., the
registrant's fourth fiscal quarter) that have materially affected, or are
reasonably likely to materially affect, the registrant's internal control over
financial reporting.
Item 12. 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.
(3) Written solicitations to purchase securities pursuant to Rule 23c-1
under the Securities Exchange Act of 1934.
Not applicable.
(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: 2/1/05
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: 2/1/05
JOSEPH H. HASTINGS
------------------------------
By: Joseph H. Hastings
Title: Chief Financial Officer
Date: 2/1/05