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: David F. Connor, 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, 2005
Item 1. Reports to Stockholders
Delaware
Investments(R)
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CLOSED-END A member of Lincoln Financial Group
Annual Report NOVEMBER 30, 2005
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DELAWARE INVESTMENTS
DIVIDEND AND INCOME FUND, INC.
[Logo] POWERED BY RESEARCH(R)
TABLE
OF CONTENTS
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PORTFOLIO MANAGEMENT REVIEW 1
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PERFORMANCE SUMMARY 4
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SECTOR ALLOCATION 6
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FINANCIAL STATEMENTS:
Statement of Net Assets 7
Statement of Operations 13
Statements of Changes in Net Assets 14
Statement of Cash Flows 15
Financial Highlights 16
Notes to Financial Statements 17
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REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM 20
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OTHER FUND INFORMATION 21
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BOARD OF TRUSTEES/DIRECTORS AND OFFICERS 24
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ABOUT THE ORGANIZATION 26
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Funds are not FDIC insured and are not guaranteed. It is possible to lose the
principal amount invested.
Investment advisory services provided by Delaware Management Company, a series
of Delaware Management Business Trust, which is a registered investment advisor.
(C) 2006 Delaware Distributors, L.P.
Portfolio Delaware Investments Dividend and Income Fund, Inc.
MANAGEMENT REVIEW December 13, 2005
FUND MANAGERS
D. Tysen Nutt, Jr.
Co-Manager
Jordan L. Irving
Co-Manager
Anthony A. Lombardi
Co-Manager
Timothy L. Rabe
Co-Manager
Damon J. Andres
Co-Manager
Robert A. Vogel, Jr.
Co-Manager
During the fiscal year ended November 30, 2005, D. Tysen Nutt, Jr., Jordan L.
Irving, Anthony A. Lombardi and Robert A. Vogel, Jr. (the "New Equity Team")
were appointed co-portfolio managers of the Fund. The New Equity Team replaced
Nancy M. Crouse, and will work with Damon J. Andres with respect to the equity
portion of the Fund. The members of the New Equity Team will work with Damon J.
Andres and Timothy L. Rabe in making day-to-day decisions for the Fund.
PLEASE DISCUSS THE INVESTMENT ENVIRONMENT DURING THE YEAR.
During the 12-month period ended November 30, 2005, the Federal Reserve steadily
increased short term interest rates in the form of the fed funds rate--a factor
which we believe has had a significant impact on equity and fixed income
markets. The market sustained further losses due to rising energy prices and a
string of intense hurricanes, which disrupted oil production on the Gulf Coast
and initiated massive federal borrowing to fund rebuilding. While the economy
and corporate earnings continue to grow, there was the potential for the
combined effects of heavy consumer debt, higher energy prices, and rising
interest rates to impact consumer spending and increase volatility in the
financial markets going forward.
Q: HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARK FOR THE 12-MONTH PERIOD
ENDED NOVEMBER 30, 2005?
A: Delaware Investments Dividend and Income Fund, Inc., a diversified closed-end
fund, returned +5.44% at net asset value and +15.38% at market price (both
figures reflect all distributions reinvested) for the fiscal year ended November
30, 2005. For complete, annualized performance, please see the table on page 4.
By comparison, the Fund's collective benchmark, the Standard & Poor's (S&P) 500
Index, returned +8.44% during the same period. Unlike its all-stock benchmark,
the Fund is diversified across four sectors: large-cap value stocks, high yield
bonds, real estate investment trusts (REITs), and convertible securities.
Generally speaking, each of these asset classes has relatively low correlation
with the others. As such, the Fund is designed with the idea that this
well-diversified asset allocation may help to reduce volatility over time.
Q: PLEASE DISCUSS THE FUND'S EQUITY PERFORMANCE.
A: In March, 2005, the Delaware Investments Large-Cap Value Equity Team of D.
Tysen Nutt, Jordan Irving, Anthony Lombardi, and Robert Vogel took over
day-to-day operations of the equity investments within Delaware Investments
Dividend and Income Fund, Inc. (Damon Andres remained as the portfolio manager
responsible for both REITs and convertible securities in the Fund, while Tim
Rabe continued to handle the Fund's allocation to high-yield fixed income.)
During the 12-month period, the Fund's common stocks trailed our collective
benchmark, the S&P 500 Index. We attribute performance to individual security
selection and sector allocations. The strongest returns came from the industrial
sector. We also benefited from our positioning in the information technology
sector. Hewlett-Packard, one of our strongest holdings in this group, was the
beneficiary of a successful corporate restructuring that included management
changes. The company benefited in particular from its imaging business. Overall,
we remain confident about Hewlett-Packard's long-term prospects. The company
offers investors a fairly diversified line of business, and we believe that
improved efficiency and earnings were reflected in attractive valuations at the
close of the period.
1
Conversely, individual security selection in the staples and healthcare sectors
hurt performance. The stock performance of both Pfizer and Merck, in particular,
proved disappointing during the fiscal year. Growing concern about the number of
drugs coming off patent and the impact of generic competition was compounded by
an unfavorable outlook for new product development. In addition, potential legal
liabilities related to the withdrawal of Merck's Vioxx in 2004 and Pfizer's
Bextra in April 2005 had a significant impact on valuations. We believe that
these companies have suffered unfairly, and remain optimistic that they will
benefit from strong franchises, healthy balance sheets, improving cash flow, and
attractive dividend generation over the next three to five years.
Q: HOW DID THE FUND'S REIT INVESTMENTS PERFORM?
A: The Fund's REIT investments contributed positively to overall performance as
this asset class turned in another strong year. During the period, we had
exposure to mortgage REITs, which underperformed due to concerns about consumer
credit and the housing market. Our investment strategy is focused on identifying
high-quality securities with attractive dividend yields, while avoiding rich
valuations and stressed balance sheets.
PLEASE DISCUSS AREAS OF POSITIVE AND NEGATIVE PERFORMANCE OF THE FUND'S REIT
INVESTMENT.
The Fund benefited from Simon Property Group, a regional mall company. The
company's strong internal growth and operating performance were further enhanced
by its 2004 acquisition of Chelsea Property Group, the world's largest owner and
operator of outlet centers. This acquisition represents an attractive complement
to Simon's overall business strategy and development pipeline.
The Fund's position in Great Wolf Resorts, an entertainment resort company in
the consumer discretionary sector, generated disappointing performance. We were
adversely impacted by a variety of factors, including earnings misrepresentation
and poor corporate management. As investors, we believe a buyout may be imminent
for the company, which could lead to brighter long-term prospects. A light
weighting in the multi-family housing sector, which performed well, also served
as a drag on the performance of our REIT allocation compared to the NAREIT
Equity REIT Index. We maintained less exposure than the NAREIT Equity REIT Index
in this sector due to our concerns about the long-term prospects for new home
and condominium construction, and about rising interest rates.
Q: HOW DID THE FUND'S FIXED INCOME INVESTMENTS FARE DURING THE YEAR?
A: Overall, the Fund's investments in high yield corporate bonds performed
positively on an absolute basis, despite a difficult environment for the sector.
Though defaults among issuers in the sector remained low, we believe the
negative effect of the Treasury market and tightening spreads created a drag on
performance.
Within these markets, we continued to thoroughly research new offerings -- and
especially first-time issuers -- before investing. We have especially been
cautious about deals that may be used solely for a dividend.
2
This page intentionally left blank.
PERFORMANCE SUMMARY
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. Funds that invest in bonds can
lose their value as interest rates rise and an investor can lose principal.
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, 2005 Lifetime Ten Years Five Years One Year
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At Market Price +9.05% +9.66% +11.29% +15.38%
At Net Asset Value +9.69% +9.74% +12.02% +5.44%
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Returns reflect reinvestment of all distributions. 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 policy. Shares of the
Fund were initially offered with a sales charge of 6%. 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 and graphs on the following page do not reflect the
deduction of taxes the shareholder would pay on Fund distributions or sale of
Fund shares.
FUND BASICS
As of November 30, 2005
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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:
$147 million
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NUMBER OF HOLDINGS:
255
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FUND START DATE:
March 26, 1993
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FUND MANAGERS:
D. Tysen Nutt joined Delaware Investments in 2004. Mr. Nutt began his investment
career in 1983 at Dean Witter Reynolds where he advanced to Vice President,
Investments. In 1988, he joined investment advisor Van Deventer & Hoch (V&H),
where he managed large cap value portfolios for both institutional and private
clients. As a senior vice president at V&H, he was a member of the firm's
Management Committee and directed new business development in addition to his
portfolio management duties. Mr. Nutt moved to Merrill Lynch Investment Managers
in 1994 and later served as leader of the U.S. Active Large Cap Value Team,
managing mutual funds and separate accounts for institutions and private
clients. He is a member of the New York Society of Security Analysts and the CFA
Institute. Mr. Nutt graduated from Dartmouth College with a BA.
Anthony A. Lombardi joined Delaware Investments in 2004. Mr. Lombardi's first
financial services position was as an investment analyst with Crossland Savings,
FSB, Brooklyn, NY from 1989-1990. He started at Dean Witter Reynolds, Inc. as a
research assistant in 1990 and rose to the position of vice president, research
analyst, which he held from 1993-1997. He then moved to Merrill Lynch Investment
Managers (MLIM) in 1998, joining the Capital Management Group, and became a
portfolio manager with the U.S. Active Large Cap Value Team in 2000. He departed
MLIM as a Director. He is a Chartered Financial Analyst and a member of the New
York Society of Security Analysts and the CFA Institute. Mr. Lombardi graduated
from Hofstra University with a BBA and his MBA in Finance.
Robert A. Vogel, Jr. joined Delaware Investments in 2004. Prior to that,
Mr. Vogel started his financial services career as a Financial Consultant with
Merrill Lynch in 1992. He then moved to Merrill Lynch Investment Managers (MLIM)
in 1997, joining the Capital Management Group, and became a portfolio manager
with the U.S. Active Large Cap Value Team in 1998. He departed MLIM as a
Director. Mr. Vogel is a Chartered Financial Analyst and a member of the New
York Society of Security Analysts and the CFA Institute. Mr. Vogel graduated
from Loyola College in Maryland earning both his BBA and his MS in Finance. He
earned his MBA with a concentration in Finance at the Wharton School of Business
at the University of Pennsylvania.
Timothy L. Rabe joined Delaware Investments
in 2000. Prior to joining Delaware Investments, Mr. Rabe was a high-yield
portfolio manager for Conseco Capital Management. Before that, he worked as a
tax analyst for The Northern Trust Company. Mr. Rabe received a bachelor's
degree in finance from the University of Illinois. He is a CFA charterholder.
Damon J. Andres earned a bachelor's degree in Business Administration with an
emphasis in finance and accounting from the University of Richmond. Prior to
joining Delaware Investments in 1994, Mr. Andres performed investment consulting
services with Cambridge Associates, Inc. in Arlington, Virginia. He is a CFA
charterholder. He is also co-manager of Delaware REIT Fund.
Jordan L. Irving joined Delaware Investments in 2004. Prior to that, he joined
Merrill Lynch Investment Managers (MLIM) as a Portfolio Manager in 1998. In
2004, Mr. Irving joined Delaware Investments as Vice President, Senior Portfolio
Manager. Mr. Irving graduated from Yale University with a BA in American Studies
and earned a Special Diploma in Social Studies at Oxford University the
following year.
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NYSE SYMBOL:
DDF
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4
MARKET PRICE VS. NET ASSET VALUE
November 30, 2004 through November 30, 2005
(NEED PLOT POINTS FROM DTP)
Past performance is not a guarantee of future results.
PERFORMANCE OF A $10,000 INVESTMENT
November 30, 1995 through November 30, 2005
(NEED PLOT POINTS FROM DTP)
Chart assumes $10,000 invested in the Fund on November 30, 1995, and reflects
the reinvestment of all distributions at market value. The chart assumes $10,000
invested in the Lipper Closed-End Income and Preferred Stock Funds Average at
Market Price and at Net Asset Value. Performance of the Fund and the Lipper peer
group at market value is based on market performance during the period.
Performance of the Fund and the Lipper peer group at net asset value is based on
the fluctuations in net asset value during the period. 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%. 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 Inc. (Source: Lipper Inc.). You cannot
invest directly in an index. Past performance is not a guarantee of future
results.
5
SECTOR ALLOCATION As of November 30, 2005
DELAWARE INVESTMENTS DIVIDEND AND INCOME FUND, INC.
Sector designations may be different than the sector designations presented in
other Fund materials.
PERCENTAGE
SECTOR OF NET ASSETS
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COMMON STOCK 77.66%
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Consumer Discretionary 3.47%
Consumer Staples 5.84%
Energy 4.81%
Financials 13.35%
Health Care 8.66%
Health Care REITs 0.22%
Industrial REITs 1.84%
Industrials 5.35%
Information Technology 5.45%
Lodging/Resort REITs 0.89%
Mall REITs 2.49%
Materials 1.74%
Mortgage REITs 10.70%
Multifamily REITs 0.40%
Office/Industrial REITs 1.78%
Office REITs 5.37%
Shopping Center REITs 0.36%
Telecommunications 3.28%
Utilities 1.66%
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CONVERTIBLE PREFERRED STOCK 7.06%
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Banking, Finance & Insurance 2.29%
Basic Materials 0.37%
Cable, Media & Publishing 0.22%
Consumer Products 1.51%
Diversified REITs 0.93%
Energy 0.35%
Environmental Services 0.53%
Telecommunications 0.86%
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PREFERRED STOCK 5.81%
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Leisure, Lodging & Entertainment 1.04%
Real Estate 4.77%
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COMMERCIAL MORTGAGE-BACKED SECURITIES 0.20%
PERCENTAGE
SECTOR OF NET ASSETS
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CONVERTIBLE BONDS 5.74%
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Aerospace & Defense 0.36%
Cable, Media & Publishing 0.42%
Capital Goods - Manufacturing 0.21%
Energy 0.31%
Health Care & Pharmaceuticals 0.79%
Leisure, Lodging & Entertainment 0.50%
Real Estate 0.92%
Retail 0.47%
Technology 0.72%
Telecommunications 0.13%
Transportation 0.12%
Utilities 0.79%
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CORPORATE BONDS 31.31%
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Banking 0.17%
Basic Industries 4.78%
Brokerage 0.86%
Capital Goods 1.59%
Consumer Cyclical 1.74%
Consumer Non-Cyclical 2.61%
Energy 2.24%
Financials 0.15%
Media 4.00%
Real Estate 0.83%
Services Cyclical 3.39%
Services Non-Cyclical 2.14%
Technology & Electronics 0.46%
Telecommunications 3.73%
Utilities 2.62%
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WARRANT 0.00%
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REPURCHASE AGREEMENTS 3.84%
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SECURITIES LENDING COLLATERAL 19.17%
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TOTAL MARKET VALUE OF SECURITIES 150.79%
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OBLIGATION TO RETURN SECURITIES LENDING COLLATERAL (19.17%)
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COMMERCIAL PAPER PAYABLE (32.55%)
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RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES 0.93%
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TOTAL NET ASSETS 100.00%
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6
STATEMENT DELAWARE INVESTMENTS DIVIDEND AND INCOME FUND, INC.
OF NET ASSETS November 30, 2005
Number of Market
Shares Value
COMMON STOCK - 77.66%
Consumer Discretionary - 3.47%
*+Great Wolf Resorts 74,100 $ 720,252
Limited Brands 98,200 2,184,950
Mattel 127,800 2,127,870
*+XM Satellite Radio Holdings Class A 2,000 58,520
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5,091,592
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Consumer Staples - 5.84%
Archer-Daniels-Midland 70,300 1,656,971
B&G Foods 4,800 69,840
ConAgra Foods 105,100 2,259,650
Kimberly-Clark 37,600 2,217,648
Safeway 101,200 2,352,900
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8,557,009
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Energy - 4.81%
Chevron 39,500 2,263,745
ConocoPhillips 37,700 2,281,227
Exxon Mobil 40,400 2,344,412
*+Petroleum Geo-Services ADR 5,967 168,866
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7,058,250
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Financials - 13.35%
Allstate 39,300 2,204,730
Aon 68,700 2,501,367
Chubb 26,700 2,585,628
Hartford Financial Services 30,200 2,638,573
Huntington Bancshares 94,700 2,269,012
Morgan Stanley 45,200 2,532,556
Wachovia 47,300 2,525,820
Washington Mutual 56,300 2,318,997
-----------
19,576,683
-----------
Health Care - 8.66%
Abbott Laboratories 50,800 1,915,668
Baxter International 60,900 2,368,401
Bristol-Myers Squibb 95,500 2,061,845
Merck 77,900 2,290,260
Pfizer 89,700 1,901,640
Wyeth 52,100 2,165,276
-----------
12,703,090
-----------
Health Care REITs - 0.22%
Medical Properties Trust 35,000 319,900
-----------
319,900
-----------
Industrial REITs - 1.84%
AMB Property 57,800 2,702,728
-----------
2,702,728
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Industrials - 5.35%
Boeing 35,400 2,413,926
*+Foster Wheeler 9,960 346,902
Union Pacific 33,700 2,579,398
Waste Management 83,700 2,503,467
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7,843,693
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Information Technology - 5.45%
Hewlett-Packard 97,500 2,892,825
International Business Machines 28,700 2,551,430
+Xerox 179,500 2,548,900
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7,993,155
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Number of Market
Shares Value
COMMON STOCK (CONTINUED)
Lodging/Resort REITs - 0.89%
*Strategic Hotel Capital 70,200 $ 1,296,594
-----------
1,296,594
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Mall REITs - 2.49%
General Growth Properties 6 274
Simon Property Group 47,300 3,656,763
-----------
3,657,037
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Materials - 1.74%
duPont (E.I.) deNemours 59,700 2,552,175
-----------
2,552,175
-----------
Mortgage REITs - 10.70%
*American Home Mortgage Investment 89,900 2,669,131
*Friedman Billings Ramsey Group Class A 87,195 927,755
*Gramercy Capital 117,000 2,743,650
JER Investors Trust 110,600 1,780,660
KKR Financial 5,900 140,125
xKKR Financial 91,300 2,168,375
*MortgageIT Holdings 187,000 2,472,140
xPeoples Choice 176,700 1,325,250
*Saxon Capital 122,400 1,468,800
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15,695,886
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Multifamily REITs - 0.40%
*Equity Lifestyle Properties 12,600 584,136
-----------
584,136
-----------
Office/Industrial REITs - 1.78%
*Duke Realty 76,600 2,604,400
-----------
2,604,400
-----------
Office REITs - 5.37%
Equity Office Properties Trust 70,400 2,195,072
*Prentiss Properties Trust 67,172 2,754,052
*Reckson Associates Realty Trust 79,820 2,931,789
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7,880,913
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Shopping Center REITs - 0.36%
*Ramco-Gershenson Properties 19,400 532,142
-----------
532,142
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Telecommunications - 3.28%
AT&T 96,700 2,408,797
Verizon Communications 74,900 2,395,302
-----------
4,804,099
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Utilities - 1.66%
Progress Energy 54,200 2,427,076
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2,427,076
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Total Common Stock (cost $102,437,957) 113,880,558
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CONVERTIBLE PREFERRED STOCK - 7.06%
Banking, Finance & Insurance - 2.29%
*Chubb 7.00% exercise price $71.40,
expiration date 8/16/08 15,000 522,450
oCitigroup Funding 5.21% exercise price
$29.50, expiration date 9/27/08 17,000 565,216
E TRADE Financial 6.125% exercise price
$21.82, expiration date 11/18/08 9,000 240,570
*Lehman Brothers Holdings 6.25% exercise
price $54.24, expiration date 10/15/07 16,000 420,000
7
STATEMENT DELAWARE INVESTMENTS DIVIDEND AND INCOME FUND, INC.
OF NET ASSETS (CONTINUED)
Number of Market
Shares Value
CONVERTIBLE PREFERRED STOCK (CONTINUED)
Banking, Finance & Insurance (continued)
National Australia Bank Units 7.875% exercise
price $76.38, expiration date 12/31/49 40,000 $ 1,606,400
-----------
3,354,636
-----------
Basic Materials - 0.37%
*Huntsman 5.00% exercise price $28.29,
expiration date 2/16/08 12,400 536,300
-----------
536,300
-----------
Cable, Media & Publishing - 0.22%
*#Interpublic 5.25% 144A exercise price
$13.66, expiration date 12/31/49 360 329,670
-----------
329,670
-----------
Consumer Products - 1.51%
Newell Financial Trust I 5.25% exercise
price $50.68, expiration date 12/1/27 52,600 2,209,200
-----------
2,209,200
-----------
Diversified REITs - 0.93%
*Crescent Real Estate 6.75% exercise
price $40.87, expiration date 12/31/49 62,600 1,364,054
-----------
1,364,054
-----------
Energy - 0.35%
*Chesapeake 4.50% exercise price $44.17,
expiration date 12/31/49 5,800 520,550
-----------
520,550
-----------
Environmental Services - 0.53%
Allied Waste Industries 6.25% exercise
price $10.13, expiration date 4/1/06 16,200 777,924
-----------
777,924
-----------
Telecommunications - 0.86%
Lucent Technologies Capital Trust I
7.75% exercise price $4.84,
expiration date 3/15/17 1,300 1,256,288
-----------
1,256,288
-----------
TOTAL CONVERTIBLE PREFERRED STOCK
(cost $11,149,296) 10,348,622
-----------
PREFERRED STOCK - 5.81%
Leisure, Lodging & Entertainment - 1.04%
Red Lion Hotels 9.50% 58,000 1,526,850
-----------
1,526,850
-----------
Real Estate - 4.77%
Equity Inns Series B 8.75% 35,700 935,340
LaSalle Hotel Properties 10.25% 113,200 2,965,840
Ramco-Gershenson Properties 9.50% 40,000 1,068,200
SL Green Realty 7.625% 80,000 2,025,000
-----------
6,994,380
-----------
TOTAL PREFERRED STOCK (COST $8,172,500) 8,521,230
-----------
Principal Market
Amount Value
COMMERCIAL MORTGAGE-BACKED SECURITIES - 0.20%
#First Union National Bank Commercial
Mortgage Series 2001-C2 L 144A
6.46% 1/12/43 $300,000 $ 297,756
-----------
TOTAL COMMERCIAL MORTGAGE-BACKED
SECURITIES (COST $304,488) 297,756
-----------
CONVERTIBLE BONDS - 5.74%
Aerospace & Defense - 0.36%
EDO 4.00% 11/15/25 exercise price
$34.19, expiration date 11/15/25 235,000 237,644
#L-3 Communications 144A
3.00% 8/1/35 exercise price $102.31,
expiration date 8/1/35 290,000 283,475
-----------
521,119
-----------
Cable, Media & Publishing - 0.42%
#Playboy Enterprises 144A
3.00% 3/15/25 exercise price $17.02,
expiration date 3/15/25 600,000 614,250
-----------
614,250
-----------
Capital Goods - Manufacturing - 0.21%
#Tyco International Group 144A 2.75%
1/15/18 exercise price $22.78
expiration date 1/15/18 250,000 314,063
-----------
314,063
-----------
Energy - 0.31%
Pride International 3.25% 5/1/33 exercise
price $25.70, expiration date 5/1/33 350,000 453,688
-----------
453,688
-----------
Health Care & Pharmaceuticals - 0.79%
Encysive Pharmaceutical
2.50% 3/15/12 exercise price $13.95,
expiration date 3/15/12 630,000 627,637
#Nektar Therapeutics 144A
3.25% 9/28/12 exercise price $21.52,
expiration date 9/28/12 525,000 532,875
-----------
1,160,512
-----------
Leisure, Lodging & Entertainment - 0.50%
#Regal Entertainment Group 144A
3.75% 5/15/08 exercise price $15.30,
expiration date 5/15/08 550,000 734,938
-----------
734,938
-----------
Real Estate - 0.92%
MeriStar Hospitality 9.50% 4/1/10 exercise
price $10.18, expiration date 4/1/10 1,100,000 1,343,374
-----------
1,343,374
-----------
Retail - 0.47%
@Dick's Sporting Goods
1.606% 2/18/24 exercise price $58.13,
expiration date 2/18/24 380,000 273,125
#Saks 144A 2.00% 3/15/24 exercise price
$18.69, expiration date 3/15/24 425,000 421,281
-----------
694,406
-----------
Technology - 0.72%
#Mercury Interactive 144A
4.75% 7/1/07 exercise price $111.25,
expiration date 7/1/07 550,000 528,688
8
STATEMENT DELAWARE INVESTMENTS DIVIDEND AND INCOME FUND, INC.
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
CONVERTIBLE BONDS (CONTINUED)
Technology (continued)
#Sybase 144A 1.75% 2/22/25 exercise
price $25.22, expiration date 2/22/25 $500,000 $ 521,875
-----------
1,050,563
-----------
Telecommunications - 0.13%
Qwest Communications International
3.50% 11/15/25 exercise price $5.90,
expiration date 11/15/25 180,000 197,100
-----------
197,100
-----------
Transportation - 0.12%
*#ExpressJet Holdings 144A
4.25% 8/1/23 exercise price $18.20,
expiration date 8/1/23 200,000 169,000
-----------
169,000
-----------
Utilities - 0.79%
#CenterPoint Energy 144A
3.75% 5/15/23 exercise price $11.58,
expiration date 5/15/23 800,000 966,000
++Mirant 2.50% 6/15/21 exercise price
$67.95, expiration date 6/15/21 180,000 189,900
-----------
1,155,900
-----------
TOTAL CONVERTIBLE BONDS (cost $7,720,109) 8,408,913
-----------
CORPORATE BONDS - 31.31%
Banking - 0.17%
Western Financial Bank 9.625% 5/15/12 225,000 253,688
-----------
253,688
-----------
Basic Industries - 4.78%
Abitibi-Consolidated 6.95% 4/1/08 115,000 116,725
*AK Steel
7.75% 6/15/12 105,000 95,288
7.875% 2/15/09 120,000 115,200
Bowater 9.50% 10/15/12 555,000 574,424
Fort James 7.75% 11/15/23 650,000 818,999
Georgia-Pacific
8.875% 5/15/31 155,000 155,775
9.50% 12/1/11 180,000 192,825
Gold Kist 10.25% 3/15/14 205,000 232,675
Huntsman International 10.125% 7/1/09 85,000 87,975
#Huntsman International 144A 7.375% 1/1/15 425,000 412,781
Lyondell Chemical 10.50% 6/1/13 45,000 51,356
*#Nell AF Sarl 144A 8.375% 8/15/15 250,000 246,250
*NewPage 10.00% 5/1/12 275,000 272,250
Norske Skog 8.625% 6/15/11 400,000 393,000
#Novelis 144A 7.50% 2/15/15 100,000 94,000
#Port Townsend Paper 144A 12.00% 4/15/11 450,000 306,000
Potlatch 13.00% 12/1/09 475,000 570,090
*Rhodia
8.875% 6/1/11 125,000 127,500
10.25% 6/1/10 110,000 121,275
Smurfit Capital Funding 7.50% 11/20/25 530,000 466,400
++Solutia 6.72% 10/15/37 705,000 507,600
Stone Container 9.75% 2/1/11 405,000 412,088
Tembec Industries 8.625% 6/30/09 605,000 402,325
Witco 6.875% 2/1/26 250,000 236,250
-----------
7,009,051
-----------
Principal Market
Amount Value
CORPORATE BONDS (continued)
Brokerage - 0.86%
*E Trade Financial 8.00% 6/15/11 $505,000 $ 518,888
#E Trade Financial 144A 8.00% 6/15/11 60,000 61,650
LaBranche & Company
9.50% 5/15/09 300,000 316,500
11.00% 5/15/12 320,000 354,400
-----------
1,251,438
-----------
Capital Goods - 1.59%
*Armor Holdings 8.25% 8/15/13 225,000 244,125
*Graham Packaging 9.875% 10/15/14 390,000 379,275
Interline Brands 11.50% 5/15/11 576,000 642,239
Intertape Polymer 8.50% 8/1/14 405,000 380,941
&Mueller Holdings 14.75% 4/15/14 285,000 215,888
*#Panolam Industrial 144A 10.75% 10/1/13 170,000 164,050
*Trimas 9.875% 6/15/12 375,000 309,375
-----------
2,335,893
-----------
Consumer Cyclical - 1.74%
*Accuride 8.50% 2/1/15 300,000 295,500
++#=Avado Brands 144A 9.75% 6/1/06 230,000 21,850
*General Motors Acceptance Corporation
8.00% 11/1/31 135,000 132,741
*Landry's Restaurant 7.50% 12/15/14 220,000 207,900
*#Metaldyne 144A 11.00% 11/1/13 400,000 360,000
*#Neiman Marcus 144A 10.375% 10/15/15 285,000 289,631
O'Charleys 9.00% 11/1/13 225,000 232,875
#Uno Restaurant 144A 10.00% 2/15/11 275,000 242,000
++Venture Holdings 12.00% 6/1/09 425,000 531
Visteon
*7.00% 3/10/14 75,000 60,656
8.25% 8/1/10 190,000 166,250
Warnaco 8.875% 6/15/13 500,000 543,751
-----------
2,553,685
-----------
Consumer Non-Cyclical - 2.61%
Biovail 7.875% 4/1/10 500,000 521,250
#Commonwealth Brands 144A
10.625% 9/1/08 460,000 527,275
Constellation Brands 8.125% 1/15/12 124,000 129,580
Cott Beverages 8.00% 12/15/11 175,000 180,250
#Doane Pet Care 144A 10.625% 11/15/15 155,000 158,294
#Le-Natures 144A 10.00% 6/15/13 375,000 388,125
*National Beef Packing 10.50% 8/1/11 375,000 389,063
*Pilgrim's Pride 9.625% 9/15/11 320,000 340,000
Playtex Products 9.375% 6/1/11 350,000 370,563
Spectrum Brands 8.50% 10/1/13 160,000 145,800
#Warner Chilcott 144A 8.75% 2/1/15 645,000 590,174
#Williams Scotsman 144A 8.50% 10/1/15 90,000 93,150
-----------
3,833,524
-----------
Energy - 2.24%
*Bluewater Finance 10.25% 2/15/12 280,000 300,300
#*Comptom Petroleum 144A 7.625% 12/1/13 135,000 137,700
El Paso Natural Gas 7.625% 8/1/10 200,000 209,109
El Paso Production Holding 7.75% 6/1/13 350,000 360,500
#Hilcorp Energy I 144A
7.75% 11/1/15 110,000 111,925
10.50% 9/1/10 100,000 111,250
Inergy Finance 6.875% 12/15/14 250,000 234,375
Petroleum Geo-Services 10.00% 11/5/10 396,115 449,095
Schlumberger 2.125% 6/1/23 360,000 463,950
oSecunda International 12.15% 9/1/12 260,000 274,300
9
STATEMENT DELAWARE INVESTMENTS DIVIDEND AND INCOME FUND, INC.
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
CORPORATE BONDS (continued)
Energy (continued)
Tennessee Gas Pipeline 8.375% 6/15/32 $350,000 $ 393,264
Whiting Petroleum 7.25% 5/1/13 235,000 239,113
-----------
3,284,881
-----------
Financials - 0.15%
FINOVA Group 7.50% 11/15/09 598,500 218,453
-----------
218,453
-----------
Media - 4.00%
JAdelphia Communications 8.125% 7/15/06 525,000 315,000
*#CCH I 144A 11.00% 10/1/15 749,000 646,012
Cenveo 9.625% 3/15/12 170,000 184,025
#Charter Communications 144A
5.875% 11/16/09 165,000 122,719
Charter Communications Holdings
&13.50% 1/15/11 430,000 298,850
*11.125% 1/15/11 335,000 204,350
*CSC Holdings 10.50% 5/15/16 370,000 396,825
Dex Media East 12.125% 11/15/12 265,000 310,050
Insight Midwest 10.50% 11/1/10 735,000 776,343
Lodgenet Entertainment 9.50% 6/15/13 505,000 552,974
*Mediacom Capital 9.50% 1/15/13 545,000 538,188
Rogers Cablesystems 11.00% 12/1/15 275,000 290,813
Sheridan Acquisition Group 10.25% 8/15/11 225,000 235,125
#Sirius Satellite 144A 9.625% 8/1/13 280,000 275,100
*Vertis 10.875% 6/15/09 185,000 180,838
Warner Music Group 7.375% 4/15/14 230,000 224,250
XM Satellite Radio 12.00% 6/15/10 273,000 308,490
-----------
5,859,952
-----------
Real Estate - 0.83%
American Real Estate Partners
8.125% 6/1/12 240,000 246,000
#American Real Estate Partners 144A
7.125% 2/15/13 100,000 98,750
BF Saul REIT 7.50% 3/1/14 400,000 411,000
Tanger Properties 9.125% 2/15/08 430,000 462,196
-----------
1,217,946
-----------
Services Cyclical - 3.39%
*Adesa 7.625% 6/15/12 295,000 295,000
#CCM Merger 144A 8.00% 8/1/13 245,000 238,263
Corrections Corporation of America
7.50% 5/1/11 125,000 130,625
*Foster Wheeler 10.359% 9/15/11 67,000 75,710
#FTI Consulting 144A 7.625% 6/15/13 105,000 108,675
Gaylord Entertainment 6.75% 11/15/14 45,000 43,650
&H-LINES Finance Holdings 11.00% 4/1/13 426,000 353,580
Horizon Lines 9.00% 11/1/12 216,000 228,690
Kansas City Southern Railway
9.50% 10/1/08 400,000 434,000
#Knowledge Learning 144A 7.75% 2/1/15 315,000 299,250
Mandalay Resort Group 10.25% 8/1/07 120,000 128,700
MGM MIRAGE 9.75% 6/1/07 5,000 5,288
OMI 7.625% 12/1/13 500,000 507,499
Penn National Gaming 8.875% 3/15/10 360,000 378,900
*Royal Caribbean Cruises 7.25% 3/15/18 150,000 160,125
Seabulk International 9.50% 8/15/13 250,000 281,875
Stena 9.625% 12/1/12 375,000 410,625
&Town Sports International 11.00% 2/1/14 330,000 221,100
United Air Lines 7.73% 7/1/10 89,931 88,433
Principal Market
Amount Value
CORPORATE BONDS (continued)
Services Cyclical (continued)
Wheeling Island Gaming 10.125% 12/15/09 $555,000$ 584,137
-----------
4,974,125
-----------
Services Non-Cyclical - 2.14%
Aleris International 9.00% 11/15/14 295,000 309,013
Casella Waste Systems 9.75% 2/1/13 485,000 516,525
Geo Subordinate 11.00% 5/15/12 470,000 454,725
*HealthSouth 10.75% 10/1/08 560,000 540,400
NDCHealth 10.50% 12/1/12 475,000 542,687
US Oncology 10.75% 8/15/14 435,000 483,938
&Vanguard Health 11.25% 10/1/15 395,000 284,400
-----------
3,131,688
-----------
Technology & Electronics - 0.46%
#Avago Technologies Finance 144A
10.125% 12/1/13 40,000 41,000
*#Ikon Office Solutions 144A 7.75% 9/15/15 30,000 28,800
*Magnachip Semiconductor 8.00% 12/15/14 340,000 316,200
#Sunguard Data Systems 144A
10.25% 8/15/15 285,000 289,275
-----------
675,275
-----------
Telecommunications - 3.73%
Alaska Communications Systems
9.875% 8/15/11 375,000 408,281
American Cellular 10.00% 8/1/11 245,000 266,438
American Tower 7.125% 10/15/12 270,000 280,125
Centennial Cellular Operating
10.125% 6/15/13 315,000 352,800
Cincinnati Bell 8.375% 1/15/14 415,000 408,775
#Digicel Limited 144A 9.25% 9/1/12 275,000 284,625
&Inmarsat Finance 10.375% 11/15/12 275,000 225,500
iPCS 11.50% 5/1/12 200,000 231,500
Iwo Escrow Company
&10.75% 1/15/15 75,000 54,188
o7.90% 1/15/12 75,000 78,000
oQwest 7.875% 9/1/11 125,000 134,688
#Qwest 144A 7.12% 6/15/13 325,000 351,813
Rural Cellular
9.625% 5/15/08 250,000 255,313
*9.875% 2/1/10 275,000 289,094
o#Rural Cellular 144A 10.041% 11/1/12 170,000 169,150
#Telcordia Technologies 144A 10.00% 3/15/13 555,000 485,624
*Time Warner Telecommunications
9.75% 7/15/08 100,000 102,375
*Triton Communications 9.375% 2/1/11 130,000 98,150
*oUS LEC 12.716% 10/1/09 225,000 243,000
Valor Telecom Enterprises 7.75% 2/15/15 425,000 418,624
*#Wind Acquisition 144A 10.75% 12/1/15 320,000 334,400
-----------
5,472,463
-----------
Utilities - 2.62%
*Avista 9.75% 6/1/08 500,000 549,390
Calpine
*7.625% 4/15/06 245,000 83,300
10.50% 5/15/06 155,000 52,700
o#Calpine 144A 9.90% 7/15/07 337,238 263,045
#Dynegy Holdings 144A 10.125% 7/15/13 700,000 787,500
Elwood Energy 8.159% 7/5/26 173,406 191,830
Midwest Generation
8.30% 7/2/09 500,000 520,000
8.75% 5/1/34 275,000 304,563
10
STATEMENT DELAWARE INVESTMENTS DIVIDEND AND INCOME FUND, INC.
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
CORPORATE BONDS (continued)
Utilities (continued)
++Mirant Americas 8.30% 5/1/11 $ 200,000 $ 249,500
Orion Power Holdings 12.00% 5/1/10 250,000 286,250
PSEG Energy Holdings 7.75% 4/16/07 250,000 256,250
Reliant Energy 9.50% 7/15/13 125,000 128,125
#Texas Genco 144A 6.875% 12/15/14 155,000 166,625
++=#USGen New England 144A 7.459% 1/2/15 250,000 1,800
-----------
3,840,878
-----------
TOTAL CORPORATE BONDS (cost $46,986,105) 45,912,940
-----------
Number of
Shares
WARRANT - 0.00%
+#Solutia 144A, exercise price $7.59,
expiration date 7/15/09 650 0
-----------
TOTAL WARRANT (cost $55,294) 0
-----------
Principal
Amount
Repurchase Agreements - 3.84%
With BNP Paribas 3.92% 12/1/05
(dated 11/30/05, to be repurchased
at $3,781,412, collateralized by
$3,877,000 U.S. Treasury Bills due
1/19/06, market value $3,857,250) $3,781,000 3,781,000
With UBS Warburg 3.93% 12/1/05
(dated 11/30/05, to be repurchased
at $1,847,202, collateralized by
$1,886,000 U.S. Treasury Bills due
12/8/05, market value $1,884,622) 1,847,000 1,847,000
-----------
Total Repurchase Agreements
(cost $5,628,000) 5,628,000
-----------
Total Market Value of Securities Before
Securities Lending Collateral - 131.62%
(cost $182,453,751) 192,998,019
-----------
Principal Market
Amount Value
Securities Lending Collateral** - 19.17%
Short-Term Investments
oAbbey National 4.14% 1/13/06 $ 689,614 $ 689,707
oAustralia New Zealand 4.15% 1/2/07 931,911 931,911
oBank of New York 4.07% 4/4/06 745,529 745,529
oBank of the West 4.07% 3/2/06 931,911 931,911
oBayerische Landesbank 4.21% 8/25/06 931,911 931,911
oBear Stearns
4.14% 1/17/06 186,382 186,414
4.15% 5/31/06 1,118,293 1,118,293
oBeta Finance 4.08% 4/18/06 931,911 931,864
Calyon London 3.77% 12/30/05 652,338 654,663
oCDC Financial Products 4.16% 1/3/06 1,211,484 1,211,484
oCitigroup Global Markets
4.10% 12/1/05 2,377,799 2,377,799
4.13% 12/7/05 1,211,484 1,211,484
oCommonwealth Bank Australia
4.16% 1/2/07 931,911 931,911
oCredit Suisse First Boston New York
4.02% 12/29/05 195,701 195,705
4.12% 4/18/06 1,006,464 1,006,464
Deutsche Bank London 3.76% 12/27/05 279,573 279,608
oGoldman Sachs 4.20% 11/30/06 1,211,484 1,211,484
oLehman Holdings 4.14% 12/23/05 931,911 932,189
oManufacturers & Traders 4.18% 9/26/06 931,911 931,722
oMarshall & Ilsley Bank 3.97% 12/29/05 931,911 931,925
oMerrill Lynch Mortgage Capital
4.16% 1/12/06 1,211,484 1,211,484
oMorgan Stanley 4.24% 11/30/06 1,155,570 1,155,570
oNational City Bank 4.06% 1/23/06 1,062,378 1,062,398
oNordea Bank Norge ASA 4.10% 1/2/07 931,911 931,911
oProcter & Gamble 3.77% 1/2/07 931,911 931,911
oRoyal Bank of Scotland 4.13% 1/2/07 931,911 931,911
oSigma Finance 4.08% 3/16/06 279,573 279,592
oSociete Generale NY 4.06% 1/2/07 465,955 465,955
oToyota Motor Credit 4.05% 6/23/06 931,911 931,958
oWells Fargo 4.11% 1/2/07 931,911 931,911
Wilmington Trust Company 4.05% 1/5/06 931,911 931,911
------------
TOTAL SECURITIES LENDING COLLATERAL
(cost $28,110,490) 28,110,490
------------
TOTAL MARKET VALUE OF SECURITIES - 150.79%
(cost $210,564,239) 221,108,509***
OBLIGATION TO RETURN SECURITIES LENDING
COLLATERAL** - (19.17%) (28,110,490)
COMMERCIAL PAPER PAYABLE
(PAR $48,000,000) - (32.55%) (47,725,117)
RECEIVABLES AND OTHER ASSETS
NET OF LIABILITIES - 0.93% 1,365,231
------------
NET ASSETS APPLICABLE TO 11,588,670
SHARES OUTSTANDING; EQUIVALENT TO
$12.65 PER SHARE - 100.00% $146,638,133
============
11
STATEMENT DELAWARE INVESTMENTS DIVIDEND AND INCOME FUND, INC.
OF NET ASSETS (CONTINUED)
Components of Net Assets at November 30, 2005:
Common stock, $0.01 par value,
500,000,000 shares authorized to the Fund $134,764,355
Distribution in excess of net investment income (59,410)
Accumulated net realized gain on investments 1,388,918
Net unrealized appreciation of investments 10,544,270
------------
Total net assets $146,638,133
============
&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.
@Step coupon bond. Coupon increases periodically based on a predetermined
schedule. Stated interest rate in effect at November 30, 2005.
oVariable rate securities. The interest rate shown is the rate as of
November 30, 2005.
+Non-income producing security for the year ended November 30, 2005.
#Security exempt from registration under Rule 144A of the Securities Act of
1933. At November 30, 2005, the aggregate amount of the 144A securities
equals $15,022,402 or 10.24% of the Fund's net assets. See Note 8 in "Notes
to Financial Statements."
=Security is being fair valued in accordance with the Fund's fair valuation
policy. See Note 1 in "Notes to Financial Statements." At November 30, 2005,
two securities were fair valued which represented 0.02% of the Fund's net
assets.
JSecurity is currently in default. The issue has missed the maturity date.
Bankruptcy proceedings are in process to determine distribution of assets.
The date listed is the estimate of when proceedings will be finalized.
++Non-income producing security. Security is currently in default.
*Fully or partially on loan.
**See Note 7 in "Notes to Financial Statements."
***Includes $27,410,643 of securities loaned.
xRestricted Security. Investment in a security not registered under the
Securities Act of 1933. This security has certain restrictions on resale
which may limit its liquidity. At November 30, 2005, the aggregate amount of
the restricted securities equals $3,493,625 or 2.38% of the Fund's net
assets. See Note 8 in "Notes to Financial Statements."
Summary of Abbreviations:
ADR - American Depositary Receipts
REIT - Real Estate Investment Trust
See accompanying notes
12
STATEMENT DELAWARE INVESTMENTS DIVIDEND AND INCOME FUND, INC.
OF OPERATIONS
INVESTMENT INCOME:
Dividends $6,097,310
Interest 5,053,147
Securities lending income 68,154
Foreign tax withheld (11,583) $11,207,028
---------- -----------
EXPENSES:
Management fees 1,164,208
Reports to shareholders 202,724
Commercial paper fees 169,231
Accounting and administration expenses 95,134
Legal and professional fees 92,021
Transfer agent fees 71,614
Taxes (other than taxes on income) 27,663
NYSE fees 25,000
Insurance fees 14,066
Custodian fees 10,038
Directors' fees 8,823
Pricing fees 5,826
Registration fees 526
Other 8,185
----------
Total operating expenses (before interest expense) 1,895,059
Interest expense 1,615,826
-----------
Total operating expenses (after interest expense) 3,510,885
Less expenses paid indirectly (105)
-----------
Total expenses 3,510,780
-----------
NET INVESTMENT INCOME 7,696,248
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCIES:
Net realized gain (loss) on:
Investments 20,784,396
Foreign currencies (1,103)
-----------
Net realized gain 20,783,293
Net change in unrealized appreciation/depreciation of
investments and foreign currencies (20,069,254)
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
AND FOREIGN CURRENCIES 714,039
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 8,410,287
-----------
See accompanying notes
13
STATEMENT DELAWARE INVESTMENTS DIVIDEND AND INCOME FUND, INC.
OF CHANGES IN NET ASSETS
Year Ended
11/30/05 11/30/04
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income $ 7,696,248 $ 8,051,445
Net realized gain on investments and foreign currencies 20,783,293 9,067,747
Net change in unrealized appreciation/depreciation of
investments and foreign currencies (20,069,254) 11,577,007
------------ ------------
Net increase in net assets resulting from operations 8,410,287 28,696,199
------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM
(SEE NOTE 4):
Net investment income (8,898,947) (8,531,887)
Net realized gains (2,947,249) (3,830,110)
------------ ------------
(11,846,196) (12,361,997)
------------ ------------
CAPITAL STOCK TRANSACTIONS:
Cost of shares repurchased (See Note 5) (16,855,077) --
------------ ------------
Decrease in net assets derived from capital
stock transactions (16,855,077) --
------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS (20,290,986) 16,334,202
NET ASSETS:
Beginning of year 166,929,119 150,594,917
------------ ------------
End of year (including distributions in excess of
net investment income of $60,513 and $0, respectively) $146,638,133 $166,929,119
============ ============
See accompanying notes
14
STATEMENT DELAWARE INVESTMENTS DIVIDEND AND INCOME FUND, INC.
OF CASH FLOWS Year Ended November 30, 2005
NET CASH PROVIDED BY OPERATING ACTIVITIES:
Net increase in net assets resulting from operations $ 8,410,287
--------------
Adjustments to reconcile net increase in net assets from
operations to cash provided by operating activities:
Amortization of premium and discount on securities purchased (236,443)
Net proceeds from investment transactions 28,718,495
Net realized gain from investment transactions (20,784,396)
Net realized loss on foreign currencies 1,103
Net change in net unrealized appreciation/depreciation of
investments and foreign currency 20,069,254
Increase in receivable for investments sold (3,213,177)
Increase in interest and dividends receivable and other assets (54,662)
Increase in payable for investments purchased 2,913,500
Increase in interest payable 53,161
Increase in accrued expenses
and other liabilities 46,880
--------------
Total adjustments 27,513,715
--------------
Net cash provided by operating activities 35,924,002
--------------
CASH FLOWS USED FOR FINANCING ACTIVITIES:
Cash provided by issuance of commercial paper 256,269,634
Repayment of commercial paper upon maturity (263,437,335)
Cash dividends and distributions paid (11,846,196)
Tender offer (16,855,077)
--------------
Net cash used for financing activities (35,868,974)
--------------
Effect of exchange rates on cash (1,103)
--------------
Net increase in cash 53,925
Cash at beginning of year 17,543
--------------
Cash at end of year $ 71,468
==============
Cash paid for interest expense for leverage $ 1,562,665
==============
See accompanying notes
15
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
11/30/05 11/30/04 11/30/03 11/30/02(1) 11/30/01
NET ASSET VALUE, BEGINNING OF PERIOD $12.960 $11.700 $10.140 $11.630 $11.590
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income(2) 0.623 0.625 0.711 0.635 0.617
Net realized and unrealized gain (loss) on investments
and foreign currencies 0.027 1.595 1.989 (0.650) 0.923
------- ------- ------- ------- -------
Total from investment operations 0.650 2.220 2.700 (0.015) 1.540
------- ------- ------- ------- -------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.722) (0.663) (0.714) (0.660) (0.617)
Net realized gain on investments (0.238) (0.297) -- -- (0.080)
Return of capital -- -- (0.426) (0.815) (0.803)
------- ------- ------- ------- -------
Total dividends and distributions (0.960) (0.960) (1.140) (1.475) (1.500)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $12.650 $12.960 $11.700 $10.140 $11.630
======= ======= ======= ======= =======
MARKET VALUE, END OF PERIOD $12.550 $11.760 $11.840 $10.020 $13.850
======= ======= ======= ======= =======
TOTAL RETURN BASED ON:(3)
Market value 15.38% 7.78% 30.20% (18.98%) 30.20%
Net asset value 5.44% 20.29% 27.13% (2.36%) 12.02%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $146,638 $166,929 $150,595 $130,560 $149,718
Ratio of expenses to average net assets 2.20% 1.51% 1.63% 1.86% 2.77%
Ratio of expenses to adjusted average net assets
before interest expense) 4 0.91% 0.76% 0.79% 0.80% 0.83%
Ratio of interest expense to adjusted average net assets(4) 0.78% 0.36% 0.37% 0.54% 1.22%
Ratio of net investment income to average net assets 4.81% 5.10% 6.70% 5.69% 5.07%
Ratio of net investment income to adjusted average
net assets(4) 3.70% 3.78% 4.78% 4.12% 3.75%
Portfolio turnover 94% 89% 175% 107% 61%
LEVERAGE ANALYSIS:
Debt outstanding at end of period at par (000 omitted) $48,000 $55,000 $55,000 $55,000 $55,000
Average daily balance of debt outstanding (000 omitted) $51,697 $54,893 $54,882 $54,857 $54,724
Average daily balance of shares outstanding (000 omitted) 12,361 12,876 12,876 12,876 12,876
Average debt per share $4.180 $4.260 $4.262 $4.260 $4.250
Asset coverage per $1,000 of debt outstanding at
end of period $4,073 $4,044 $3,743 $3,379 $3,730
(1) As required, effective December 1, 2001, the Fund adopted the provision 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.
(2) The average shares outstanding method has been applied for per share
information.
(3) 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.
(4) Adjusted average net assets excludes debt outstanding.
See accompanying notes
16
NOTES DELAWARE INVESTMENTS DIVIDEND AND INCOME FUND, INC.
TO FINANCIAL STATEMENTS November 30, 2005
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. Securities lending collateral is 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(R) 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) for
financial reporting purposes. 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 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 distributions by the
issuer. The Fund may direct certain security trades to brokers who have agreed
to rebate a portion of the related brokerage commission to the Fund in cash.
There were no commission rebates during the year ended November 30, 2005.
The Fund may receive earnings credits from its custodian when positive cash
balances are maintained, which are used to offset custody fees. The expense paid
under the above arrangement is included in custodian fees 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.
Delaware Service Company, Inc. (DSC), an affiliate of DMC, provides
accounting and administration services. Effective May 19, 2005, the Fund pays
DSC a monthly fee computed at an annual rate of 0.04% of the Fund's adjusted
average weekly net assets for accounting and administration services. Prior to
May 19, 2005, the Fund paid 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, 2005, the Fund had liabilities payable to affiliates as follows:
Investment management fee payable to DMC $88,808
Accounting and administration fees and other expenses payable to DSC 7,232
Other expenses payable to DMC and affiliates* 18,035
* 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, 2005, the Fund was
charged $9,987 for internal legal services provided by DMC.
Certain officers of DMC and DSC are officers and/or directors of the Fund. These
officers and directors are paid no compensation by the Fund.
3. INVESTMENTS
For the year ended November 30, 2005, the Fund made purchases of $194,173,980
and sales of $221,373,982 of long-term investment securities other than
long-term U.S. government securities and short-term investments. At November 30,
2005, the cost of investments for federal income tax purposes was $210,818,035.
At November 30, 2005, the net unrealized appreciation was $10,290,474, of which
$20,291,844 related to unrealized appreciation of investments and $10,001,370
related to unrealized depreciation of investments.
17
NOTES DELAWARE INVESTMENTS DIVIDEND AND INCOME FUND, INC.
TO FINANCIAL STATEMENTS (CONTINUED)
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. Additionally, gains (losses) on foreign currency
transactions and net short-term gains on sales of investment securities are
treated as ordinary income (loss) for federal income tax purposes. The tax
character of dividends and distributions paid during the years ended November
30, 2005 and 2004 was as follows:
Year Ended
2005 2004
Ordinary income $8,898,947 $12,361,997
Long-term capital gains 2,947,249 --
----------- -----------
Total $11,846,196 $12,361,997
=========== ===========
As of November 30, 2005, the components of net assets on a tax basis were as
follows:
Shares of beneficial interest $134,764,355
Undistributed long-term capital gain 1,583,302
Unrealized appreciation of investments 10,290,474
------------
Net assets $146,638,131
============
The differences between book basis and tax basis components of net assets are
primarily attributable to tax deferral of losses on wash sales, tax treatment of
market discount and premium on debt instruments and treatment of contingent
payment debt instruments.
For financial reporting purposes, capital accounts are adjusted to reflect the
tax character of permanent book/tax differences. Reclassifications are primarily
due to tax treatment of market discounts and premiums on certain debt
instruments, gain (loss) on foreign currency transactions, distributions from
net realized gains and treatment of contingent payment debt instruments. Results
of operations and net assets were not affected by these reclassifications. For
the year ended November 30, 2005, the Fund recorded the following permanent
reclassifications.
Undistributed net investment income $1,143,289
Accumulated net realized gain (loss) (1,143,289)
For federal income tax purposes, $15,214,564 of capital loss carryforwards from
prior years was utilized in the year ended November 30, 2005. There are no
remaining capital loss carryforwards.
5. CAPITAL STOCK
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. There
were no shares issued under the Fund's dividend reinvestment plan.
On May 19, 2005, the Fund's Board of Directors approved a tender offer for
shares of the Fund's common stock. The tender offer authorized the Fund to
purchase up to 10% of its issued and outstanding shares at a price equal to the
Fund's net asset value at 4:00 pm. New York City time on July 1, 2005, the first
business day following expiration of the offer. The tender offer commenced on
June 3, 2005 and expired on June 30, 2005. In connection with the tender offer,
the Fund purchased 1,287,630 shares of capital stock at a total cost of
$16,855,077.
The Fund did not purchase any shares under the Share Repurchase Program during
the year ended November 30, 2005.
6. COMMERCIAL PAPER
As of November 30, 2005, $48,000,000 (par value) of commercial paper was
outstanding with an amortized cost of $47,725,117. The weighted average discount
rate of commercial paper outstanding at November 30, 2005 was 4.18%. The average
daily balance of commercial paper outstanding during the year ended November 30,
2005 was $51,697,090 at a weighted discount rate of 1.89%. The maximum amount of
commercial paper outstanding at any time during the year was $55,000,000. On
June 24, 2005, the Fund reduced the commercial paper outstanding to $48 million
in conjunction with the tender offer. 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. As of November 18, 2005, the commitment fee is
computed at the rate of 0.12% per annum on the unused balance. Prior to November
18, 2005, the rate was 0.15%. For the year ended November 30, 2005, the Fund was
charged fees of $45,458 which are included in "commercial paper fees" on the
Statement of Operations. During the year ended November 30, 2005, there were no
borrowings under this arrangement.
7. SECURITIES LENDING
The Fund, along with other funds in the Delaware Investments(R) 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, 2005, the market value of securities on loan was $27,410,643,
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."
18
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 Standard & Poor's Rating Group and/or Ba or lower by Moody's
Investors Service, Inc. Investments in these higher yielding securities are
generally accompanied by a greater degree of credit risk than higher rated
securities. Additionally, lower rated securities may be more susceptible to
adverse economic and competitive industry conditions than investment grade
securities.
The Fund may invest up to 10% of its total assets in illiquid securities, which
may include securities with contractual restrictions on resale, securities
exempt from registration under Rule 144A of the Securities Act of 1933, as
amended, and other securities which may not be readily marketable. The relative
illiquidity of these securities may impair the Fund from disposing of them in a
timely manner and at a fair price when it is necessary or desirable to do so.
While maintaining oversight, the Board of Directors has delegated to DMC the
day-to-day functions of determining whether individual securities are liquid for
purposes of the Fund's limitation on investments in illiquid assets. At November
30, 2005, no securities were determined to be illiquid under the Fund's
Liquidity Procedures.
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,
2005. 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.
19
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 Delaware Investments
Dividend and Income Fund, Inc. (the "Fund") as of November 30, 2005, 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. We were
not engaged to perform an audit of the Fund's internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Fund's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of November 30, 2005, by correspondence with the custodian
and brokers or by other appropriate auditing procedures where replies from
brokers were not received. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Delaware Investments Dividend and Income Fund, Inc. at November 30, 2005, the
results of its operations and 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.
/s/ Ernst & Young LLP
Philadelphia,
Pennsylvania January 11, 2006
20
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, 2005, 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)
-------------- -------------- ----------- ------------ ------------
25% 75% -- 100% 42%
(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, 2005, certain dividends paid by the
Fund 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 $8,898,947 to be taxed at a maximum rate
of 15%. Complete information will be computed and reported in conjunction
with your 2005 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 2005 to the NYSE on August 31, 2005 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 had 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.
BY-LAWS (UNAUDITED)
The Fund recently amended and restated its By-Laws. The following provisions
were included in the Fund's Amended and Restated By-Laws.
ARTICLE II, SECTION 3. SPECIAL MEETINGS.
Special meetings of the stockholders may be called at any time by the
Chairperson, President or a majority of the members of the Board of Directors
and shall be called by the secretary of the Corporation upon the written request
of the holders of at least a majority of the shares of the capital stock of the
Corporation issued and outstanding and entitled to vote at such meeting. Upon
receipt of a written request from such holders entitled to call a special
meeting, which shall state the purpose of the meeting and the matter proposed to
be acted on at it, the secretary shall issue notice of such meeting. The cost of
preparing and mailing the notice of a special meeting of stockholders shall be
borne by the Corporation. Special meetings of the stockholders shall be held at
the principal office of the Corporation, or at such place within or without the
State of Maryland as shall be specified in the notice of such meeting.
ARTICLE III, SECTION 2. NUMBER OF DIRECTORS.
The Board of Directors shall consist of not less than three members; provided,
however, that if there are fewer than three stockholders, then the number of
directors may be the same as the number of stockholders, but not less than one.
The Board of Directs may alter the number of directors set by these By-Laws in
accordance with applicable provisions of law; provided however, that such action
shall not affect the tenure of office of any director.
21
OTHER DELAWARE INVESTMENTS DIVIDEND AND INCOME FUND, INC.
FUND INFORMATION (CONTINUED)
PROXY RESULTS (UNAUDITED)
The Fund held its Annual Meeting of Shareholders on August 17, 2005. At the
Annual Meeting, the Fund's shareholders elected nine Directors. The results of
the voting at the meeting were as follows:
Nominee Shares Voted For Shares Voted Against
------- ---------------- --------------------
Jude T. Driscoll 12,269,268 138,372
Thomas L. Bennett 12,247,942 159,697
John A. Fry 12,272,279 135,361
Anthony D. Knerr 12,266,390 141,249
Lucinda S. Landreth 12,254,907 152,732
Ann R. Leven 12,272,792 134,847
Thomas F. Madison 12,259,401 148,238
Janet L. Yeomans 12,262,990 144,649
J. Richard Zecher 12,255,955 151,684
CHANGES TO FUND'S INVESTMENT OBJECTIVES AND POLICIES (UNAUDITED)
In August 2005, the Fund's Board of Directors approved the following changes in
investment strategies. The changes became effective on November 14, 2005, after
a 60 day notice period.
NON-INCOME PRODUCING COMMON STOCKS
The Fund may invest up to 15 percent of its total assets in non-income producing
common stocks.
SECURITY SELECTION PROCESS
The Fund will adhere to the following policy regarding the selection of
securities:
In selecting investments for the Fund's portfolio, Delaware Management Company
(the "Manager") employs a yield-oriented and value driven approach. The Manager
analyzes economic and market conditions, and assesses the income and potential
for appreciation that can be achieved from the equity investments being
considered. The Manager will then apply fundamental analysis to identify the
equity securities that it believes can best help the Fund meet its investment
objectives. The industry sector weightings in the Income Generating Equity
Securities portion of the Fund's portfolio will be determined based on the
Manager's investment research efforts. The Fund defines Income Generating Equity
Securities as dividend paying common stocks, convertible securities, preferred
stocks and other equity related securities.
This new policy replaces the following policy regarding the selection of
securities:
In selecting Income Generating Equity Securities for the Fund's investment
portfolio, the preponderance of the securities in that portion of the Fund's
portfolio will be selected by the Manager from among the top two quartiles in
terms of yield of all Income Generating Equity Securities as determined by the
Manager. After identifying all Income Generating Equity Securities in such
quintiles, the Manager will then apply fundamental investment analysis to select
the Fund's specific portfolio securities. The industry sector weightings in the
Income Generating Equity Securities portion of the Fund's portfolio will be
determined based on the Manager's investment research efforts.
DEFINITION OF COMMON STOCK
The Fund will adhere to the following definition of common stock:
Common stock is defined as shares of a corporation that entitle the holder to a
pro rata share of the profits of the corporation, if any, without a preference
over any other shareholder or class of shareholders, including holders of the
corporation's preferred stock and other senior equity. Common stock usually
carries with it the right to vote and frequently an exclusive right to do so.
Holders of common stock also have the right to participate in the remaining
assets of the corporation after all claims are paid, including those of debt
securities and preferred stock. In selecting common stocks for investment, the
Manager will generally focus on a variety of factors, including, among other
things, the earnings and cash flow potential and the asset value of the issuer.
22
OTHER DELAWARE INVESTMENTS DIVIDEND AND INCOME FUND, INC.
FUND INFORMATION (CONTINUED)
TENDER OFFERS (UNAUDITED)
As described in Note 5 to the Financial Statements, the Fund conducted a tender
offer in 2005. There can be no assurance that a tender offer will reduce or
eliminate any spread between market price and the net asset value of the Fund's
shares. The market price of the shares will, among other things, be determined
by the relative demand for and supply of shares in the market, the Fund's
investment performance, the Fund's dividends and yields and investor perception
of the Fund's overall attractiveness as an investment as compared with other
investment alternatives. Nevertheless, the fact that a tender offer may be
conducted may result in more of a reduction in the spread between market price
and net asset value than might otherwise be the case. The Fund's Board of
Directors, consistent with its fiduciary obligations, may explore alternatives
to a tender offer to reduce or eliminate the Fund's potential market value
discount from net asset value. Therefore, the Fund cannot provide assurance that
it will make tender offers in the future.
The tender offer plan described in the Fund's prospectus contemplates that a
shareholder wishing to accept a tender offer must tender all (but not less than
all) of the Fund shares owned by the shareholder or attributed to it under
Section 318 of the Internal Revenue Code, unless the Fund has received a private
letter ruling the Internal Revenue Service that a tender of less than all of a
shareholder's shares will not cause non-tendering shareholders to realize
constructive distributions on their shares under Section 305 of the Internal
Revenue Code. The Fund has obtained such a ruling in the past. There is no
guarantee that the Fund will be able to obtain a similar ruling in the future.
Nevertheless, if the Fund determines to conduct another tender offer in the
future, the Fund may, in its discretion, choose whether or not to accept tenders
of less than all of a shareholder's shares.
DISTRIBUTION INFORMATION (UNAUDITED)
Shareholders were sent monthly notices from the Fund that set forth estimates,
on a book basis, of the source or sources from which monthly distributions were
paid. Subsequently, these estimates may have been corrected in part. Listed
below is a written statement of the sources of these monthly distributions, as
corrected, on a book basis.
Net Investment Return of Long Term Total
Income Capital Capital Gain Distribution
per share per share per share Amount
--------------- --------- ------------ ------------
12/04 $0.080 $ -- $ -- $0.080
1/05 0.045 0.035 -- 0.080
2/05 0.045 0.035 -- 0.080
3/05 0.073 0.007 -- 0.080
4/05 0.052 0.028 -- 0.080
5/05 0.039 0.041 -- 0.080
6/05 0.068 0.012 -- 0.080
7/05 0.046 0.034 -- 0.080
8/05 0.038 -- 0.042 0.080
9/05 0.063 -- 0.017 0.080
10/05 0.033 -- 0.047 0.080
11/05 0.066 -- 0.014 0.080
------ ------ ------ ------
$0.648 $0.192 $0.120 $0.960
====== ====== ====== ======
Please note that the information in the preceding chart is for book purposes
only. Shareholders should be aware that the tax treatment of distributions may
differ from their book treatment. The tax treatment of distributions will be set
forth in a Form 1099-DIV.
23
DELAWARE INVESTMENTS(R) FAMILY OF FUNDS
BOARD OF TRUSTEES/DIRECTORS AND OFFICERS ADDENDUM
A fund is governed by a Board of Trustees/Directors ("Trustees"), which has
oversight responsibility for the management of a fund's business affairs.
Trustees establish procedures and oversee and review the performance of the
investment manager and others who perform services for the fund. The independent
fund trustees, in particular, are advocates for shareholder interests. The
following is a list of the Trustees 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 TRUSTEE TRUSTEE
AND BIRTHDATE FUND(S) SERVED PAST 5 YEARS OR OFFICER OR OFFICER
------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES
JUDE T. DRISCOLL(2) Chairman, 5 Years - Since August 2000, 87 None
2005 Market Street President, Executive Officer Mr. Driscoll has served in
Philadelphia, PA Chief Executive various executive capacities
19103 Officer and 2 Years - at different times at
Trustee Trustee Delaware Investments(1)
March 10, 1963
------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
THOMAS L. BENNETT Trustee Since Private Investor - 87 None
2005 Market Street March 23, 2005 (March 2004 - Present)
Philadelphia, PA
19103 Investment Manager -
Morgan Stanley & Co.
October 4, 1947 (January 1984 - March 2004)
------------------------------------------------------------------------------------------------------------------------------------
JOHN A. FRY Trustee 4 Years President - 87 Director -
2005 Market Street Franklin & Marshall College Community Health
Philadelphia, PA (June 2002 - Present) Systems
19103
Executive Vice President -
May 28, 1960 University of Pennsylvania
(April 1995 - June 2002)
------------------------------------------------------------------------------------------------------------------------------------
ANTHONY D. KNERR Trustee 12 Years Founder/Managing Director - 87 None
2005 Market Street Anthony Knerr & Associates
Philadelphia, PA (Strategic Consulting)
19103 (1990 - Present)
December 7, 1938
------------------------------------------------------------------------------------------------------------------------------------
LUCINDA S. LANDRETH Trustee Since Chief Investment Officer - 87 None
2005 Market Street March 23, 2005 Assurant, Inc.
Philadelphia, PA (Insurance)
19103 (2002 - 2004)
June 24, 1947
------------------------------------------------------------------------------------------------------------------------------------
ANN R. LEVEN Trustee 16 Years Treasurer/Chief Fiscal Officer - 87 Director and
2005 Market Street National Gallery of Art Audit Committee
Philadelphia, PA (1994 - 1999) Chairperson - Andy
19103 Warhol Foundation
November 1, 1940 Director and Audit
Committee Member -
Systemax Inc.
------------------------------------------------------------------------------------------------------------------------------------
24
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 TRUSTEE TRUSTEE
AND BIRTHDATE FUND(S) SERVED PAST 5 YEARS OR OFFICER OR OFFICER
------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES (CONTINUED)
THOMAS F. MADISON Trustee 11 Years President/Chief 87 Director -
2005 Market Street Executive Officer - Banner Health
Philadelphia, PA MLM Partners, Inc.
19103 (Small Business Investing Director -
and Consulting) CenterPoint Energy
February 25, 1936 (January 1993 - Present)
Director and Audit
Committee Member -
Digital River Inc.
Director and Audit
Committee Member -
Rimage
Corporation
Director - Valmont
Industries, Inc.
------------------------------------------------------------------------------------------------------------------------------------
JANET L. YEOMANS Trustee 6 Years Vice President 87 None
2005 Market Street (January 2003 - Present)
Philadelphia, PA and Treasurer
19103 (January 2006 - Present)
3M Corporation
Ms. Yeomans has held
July 31, 1948 various management positions
at 3M Corporation since 1983.
------------------------------------------------------------------------------------------------------------------------------------
J. RICHARD ZECHER Trustee Since Founder - 87 Director and Audit
2005 Market Street March 23, 2005 Investor Analytics Committee Member -
Philadelphia, PA (Risk Management) Investor Analytics
19103 (May 1999 - Present)
Director and Audit
July 3, 1940 Committee Member -
Oxigene, Inc.
------------------------------------------------------------------------------------------------------------------------------------
OFFICERS
MICHAEL P. BISHOF Senior Chief Financial Mr. Bishof has served 87 None(3)
2005 Market Street Vice President Officer since in various executive
Philadelphia, PA and February 17, 2005 capacities at different
19103 Chief Financial times at Delaware
Officer Investments.
August 18, 1962
------------------------------------------------------------------------------------------------------------------------------------
DAVID F. CONNOR Vice President, Vice President since Mr. Connor has served as 87 None(3)
2005 Market Street Deputy General September 21, 2000 Vice President and Deputy
Philadelphia, PA Counsel and Secretary and Secretary General Counsel of
19103 since Delaware Investments
October 25, 2005 since 2000.
December 2, 1963
------------------------------------------------------------------------------------------------------------------------------------
DAVID P. O'CONNOR Senior Vice Senior Vice President, Mr. O'Connor has served 87 None(3)
2005 Market Street President, General Counsel and in various executive
Philadelphia, PA General Counsel Chief Legal Officer and legal capacities at
19103 and Chief since different times at
Legal Officer October 25, 2005 Delaware Investments.
February 21, 1966
------------------------------------------------------------------------------------------------------------------------------------
JOHN J. O'CONNOR Senior Vice President Treasurer Mr. O'Connor has served in 87 None(3)
2005 Market Street and Treasurer since various executive capacities
Philadelphia, PA February 17, 2005 at different times at
19103 Delaware Investments.
June 16, 1957
------------------------------------------------------------------------------------------------------------------------------------
1 Delaware Investments is the marketing name for Delaware Management Holdings,
Inc. and its subsidiaries, including the Fund's(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(s') manager and distributor.
3 Mr. Bishof, Mr. Connor, Mr. David P. O'Connor and Mr. John J. O'Connor serve
in similar capacities for the six portfolios of the Optimum Fund Trust, which
have the same investment advisor as the registrant. Mr. John J. O'Connor also
serves in a similar capacity for Lincoln Variable Insurance Products Trust,
which has the same investment advisor as the registrant.
25
ABOUT
THE ORGANIZATION
This annual report is for the information of Delaware Investments Dividend and
Income Fund, Inc. shareholders. The figures in this report represent past
results that 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 MICHAEL P. BISHOF INVESTMENT MANAGER
Chairman Senior Vice President and Delaware Management Company,
Delaware Investments(R) Family of Funds Chief Financial Officer a Series of Delaware Management Business Trust
Philadelphia, PA Delaware Investments(R) Family of Funds Philadelphia, PA
Philadelphia, PA
THOMAS L. BENNETT PRINCIPAL OFFICE OF THE FUND
Private Investor DAVID F. CONNOR 2005 Market Street
Rosemont, PA Vice President, Deputy General Counsel Philadelphia, PA 19103
and Secretary
JOHN A. FRY Delaware Investments(R) Family of Funds INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
President Philadelphia, PA Ernst & Young LLP
Franklin & Marshall College 2001 Market Street
Lancaster, PA DAVID P. O'CONNOR Philadelphia, PA 19103
Senior Vice President, General Counsel
ANTHONY D. KNERR and Chief Legal Officer REGISTRANT AND STOCK TRANSFER AGENT
Managing Director Delaware Investments(R) Family of Funds Mellon Investor Services, LLC
Anthony Knerr & Associates Philadelphia, PA 480 Washington Boulevard
New York, NY Jersey City, NJ 07310
JOHN J. O'CONNOR 800 851-9677
LUCINDA S. LANDRETH Senior Vice President and Treasurer
Former Chief Investment Officer Delaware Investments(R) Family of Funds FOR SECURITIES DEALERS AND FINANCIAL
Assurant, Inc. Philadelphia, PA INSTITUTIONS REPRESENTATIVES ONLY
Philadelphia, PA 800 362-7500
ANN R. LEVEN The Fund files its complete schedule WEB SITE
Former Treasurer/Chief Fiscal Officer of portfolio holdings with the www.delawareinvestments.com
National Gallery of Art Securities and Exchange Commission
Washington, DC for the first and third quarters of Delaware Investments is the marketing name
each fiscal year on Form N-Q. The for Delaware Management Holdings, Inc. and
THOMAS F. MADISON Fund's Forms N-Q, as well as a its subsidiaries.
President and Chief Executive Officer description of the policies and
MLM Partners, Inc. procedures that the Fund uses to
Minneapolis, MN determine how to vote proxies (if
any) relating to portfolio securities
JANET L. YEOMANS is available without charge (i) upon
Vice President and Treasurer request, by calling 800 523-1918;
3M Corporation (ii) on the Fund's Web site at
St. Paul, MN http://www.delawareinvestments.com; YOUR REINVESTMENT OPTIONS
and (iii) on the Commission's Web Delaware Investments Dividend and
J. RICHARD ZECHER site at http://www.sec.gov. The Income Fund, Inc. offers an automatic
Founder Fund's Forms N-Q may be reviewed and dividend reinvestment program. If you
Investor Analytics copied at the Commission's Public would like to reinvest dividends, and
Scottsdale, AZ Reference Room in Washington, DC; shares are registered in your name,
information on the operation of the contact Mellon Investor Services, LLC
Public Reference Room may be obtained at 800 851-9677. You will be asked to
by calling 800-SEC-0330. put your request in writing. If you
have shares registered in "street"
Information (if any) regarding how name, contact the broker/dealer
the Fund voted proxies relating to holding the shares or your financial
portfolio securities during the most advisor.
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.
26
Delaware DDF
Investments(R) Listed
----------------------------------- NYSE
A member of Lincoln Financial Group THE NEW YORK STOCK EXCHANGE
CONTACT INFORMATION
WEB SITE
www.delawareinvestments.com
E-MAIL
service@delinvest.com
SHAREHOLDER SERVICE CENTER
800 523-1918
Call the Shareholder Service Center Monday to Friday,
8 a.m. to 7 p.m. Eastern Time:
o For fund information, literature, price, yield and performance figures.
o For information on existing regular investment accounts and retirement plan
accounts including wire investments, wire redemptions, telephone redemptions
and telephone exchanges.
DELAPHONE SERVICE
800 362-FUND (800 362-3863)
o For convenient access to account information or current performance
information on all Delaware Investments(R) Funds seven days a week, 24 hours a
day, use this Touch-Tone(R) service.
--------------------------------------------------------------------------------
Printed in the USA
(9981) ANN-0512 DI
AR-DDF [11/05] IVES 1/06 MF0512078 PO10660
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:
Thomas L. Bennett (1)
Thomas F. Madison
Janet L. Yeomans (1)
J. Richard Zecher
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 $14,800 for
the fiscal year ended November 30, 2005.
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.
(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 $5,905 for the
fiscal year ended November 30, 2005. 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.
-----------------------
(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 Mr.
Bennett qualifies as an audit committee financial expert by virtue of his
education, Chartered Financial Analyst designation, and his experience as a
credit analyst, portfolio manager and the manager of other credit analysts and
portfolio managers. 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.
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 and other service providers under common
control with the adviser and that relate directly to the operations or financial
reporting of the registrant were $16,350 for the registrant's fiscal year ended
November 30, 2005. 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 $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 and other service providers under common
control with the adviser 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.
(c) Tax fees.
The aggregate fees billed by the registrant's independent auditors for
tax-related services provided to the registrant were $2,800 for the fiscal year
ended November 30, 2005. 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 return and review of annual excise distribution calculation.
The aggregate fees billed by the registrant's independent auditors for
tax-related services provided to the registrant's investment adviser and other
service providers under common control with the adviser and that relate directly
to the operations or financial reporting of the registrant were $0 for the
registrant's fiscal year ended November 30, 2005.
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 return and review of annual excise distribution calculation.
The aggregate fees billed by the registrant's independent auditors for
tax-related services provided to the registrant's adviser and other service
providers under common control with the adviser 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.
(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, 2005.
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 and other service providers under common
control with the adviser and that relate directly to the operations or financial
reporting of the registrant were $0 for the registrant's fiscal year ended
November 30, 2005
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 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 and other service providers under common
control with the adviser 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.
(e) The registrant's Audit Committee has established pre-approval
policies and procedures as permitted by Rule 2-01(c)(7)(i)(B) of Regulation
S-X (the "Pre-Approval Policy") with respect to services provided by the
registrant's independent auditors. Pursuant to the Pre-Approval Policy, the
Audit Committee has pre-approved the services set forth in the table below
with respect to the registrant up to the specified fee limits. Certain fee
limits are based on aggregate fees to the registrant and other registrants
within the Delaware Investments Family of Funds.
--------------------------------------------------------------------------------------------------------------------
SERVICE RANGE OF FEES
--------------------------------------------------------------------------------------------------------------------
AUDIT SERVICES
--------------------------------------------------------------------------------------------------------------------
Statutory audits or financial audits for new Funds up to $25,000 per Fund
--------------------------------------------------------------------------------------------------------------------
Services associated with SEC registration statements (e.g., Form N-1A, Form
N-14, etc.), periodic reports and other documents filed with the SEC or other
documents issued in connection with securities offerings (e.g., comfort letters up to $10,000 per Fund
for closed-end Fund offerings, consents), and assistance in responding to SEC
comment letters
--------------------------------------------------------------------------------------------------------------------
Consultations by Fund management as to the accounting or disclosure treatment of
transactions or events and/or the actual or potential impact of final or
proposed rules, standards or interpretations by the SEC, FASB, or other up to $25,000 in the aggregate
regulatory or standard-setting bodies (Note: Under SEC rules, some
consultations may be considered "audit-related services" rather than "audit
services")
--------------------------------------------------------------------------------------------------------------------
AUDIT-RELATED SERVICES
--------------------------------------------------------------------------------------------------------------------
Consultations by Fund management as to the accounting or disclosure treatment of
transactions or events and /or the actual or potential impact of final or
proposed rules, standards or interpretations by the SEC, FASB, or other up to $25,000 in the aggregate
regulatory or standard-setting bodies (Note: Under SEC rules, some
consultations may be considered "audit services" rather than "audit-related
services")
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
TAX SERVICES
--------------------------------------------------------------------------------------------------------------------
U.S. federal, state and local and international tax planning and advice (e.g.,
consulting on statutory, regulatory or administrative developments, evaluation up to $25,000 in the aggregate
of Funds' tax compliance function, etc.)
--------------------------------------------------------------------------------------------------------------------
U.S. federal, state and local tax compliance (e.g., excise distribution up to $5,000 per Fund
reviews, etc.)
--------------------------------------------------------------------------------------------------------------------
Review of federal, state, local and international income, franchise and other up to $5,000 per Fund
tax returns
--------------------------------------------------------------------------------------------------------------------
Under the Pre-Approval Policy, the Audit Committee has also
pre-approved the services set forth in the table below with respect to the
registrant's investment adviser and other entities controlling, controlled by or
under common control with the investment adviser that provide ongoing services
to the registrant (the "Control Affiliates") up to the specified fee limit. This
fee limit is based on aggregate fees to the investment adviser and its Control
Affiliates.
--------------------------------------------------------------------------------------------------------------------
SERVICE RANGE OF FEES
--------------------------------------------------------------------------------------------------------------------
NON-AUDIT SERVICES
--------------------------------------------------------------------------------------------------------------------
Services associated with periodic reports and other documents filed with the up to $10,000 in the aggregate
SEC and assistance in responding to SEC comment letters
--------------------------------------------------------------------------------------------------------------------
The Pre-Approval Policy requires the registrant's independent auditors
to report to the Audit Committee at each of its regular meetings regarding all
services initiated since the last such report was rendered, including those
services authorized by the Pre-Approval Policy.
(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
and other service providers under common control with the adviser were $213,940
and $236,704 for the registrant's fiscal years ended November 30, 2005 and
November 30, 2004, 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 and other service
providers under common control with the adviser 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 Thomas L.
Bennett, Thomas F. Madison, Janet L. Yeomans and J. Richard Zecher.
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. 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.
DELAWARE INVESTMENTS DIVIDEND AND INCOME FUND, INC.
JUDE T. DRISCOLL
------------------------------------
By: Jude T. Driscoll
Title: Chief Executive Officer
Date: February 1, 2006
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: Chief Executive Officer
Date: February 1, 2006
MICHAEL P. BISHOF
------------------------------------
By: Michael P. Bishof
Title: Chief Financial Officer
Date: February 1, 2006