deldividendincome_ncsr.htm
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: 811-07460
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, 2009
Item 1. Reports to
Stockholders
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Annual
Report |
Delaware Investments® Dividend
and Income Fund, Inc. |
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November 30, 2009 |
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The figures in the annual
report for Delaware Investments Dividend and Income Fund, Inc. represent
past results, which are not a guarantee of future results. A rise or fall
in interest rates can have a significant impact on bond prices. Funds that
invest in bonds can lose their value as interest rates
rise.
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Closed-end fund |
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Table of
contents
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> Portfolio management
review |
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1 |
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> Performance summary |
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4 |
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> Security type and top 10 equity
holdings |
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6 |
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> Statement of net assets |
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8 |
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> Statement of operations |
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17 |
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> Statements of changes in net
assets |
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18 |
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> Statement of cash flows |
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19 |
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> Financial highlights |
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20 |
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> Notes to financial
statements |
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21 |
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> Report of independent registered
public accounting firm |
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27 |
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> Other Fund information |
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28 |
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> Board of trustees/directors and
officers addendum |
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36 |
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> About the organization |
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39 |
On January 4, 2010, Delaware
Management Holdings, Inc. and its subsidiaries (collectively known by the
marketing name of Delaware Investments) were sold by a subsidiary of Lincoln
National Corporation to Macquarie Group Limited, a global provider of banking,
financial, advisory, investment and funds management services. Please see recent
press releases for more complete information.
Investments in Delaware
Investments®
Dividend and Income Fund, Inc. are not and will not be deposits with or
liabilities of Macquarie Bank Limited ABN 46 008 583 542 and its holding
companies, including subsidiaries or related companies, and are subject to
investment risk, including possible delays in repayment and loss of income and
capital invested. No Macquarie Group company guarantees or will guarantee the
performance of the Fund, the repayment of capital from the Fund, or any
particular rate of return.
Views expressed herein
are current as of Dec. 8, 2009, and are subject to change.
Funds are not FDIC
insured and are not guaranteed. It is possible to lose the principal amount
invested.
Mutual fund advisory
services are provided by Delaware Management Company, a series of Delaware
Management Business Trust, which is a registered investment advisor. Delaware
Investments is the marketing name of Delaware Management Holdings, Inc. and its
subsidiaries. Macquarie Group refers to Macquarie Group Limited and its
subsidiaries and affiliates worldwide.
© 2010 Delaware Management Holdings, Inc.
All third-party
trademarks cited are the property of their respective owners.
Portfolio management
review
Delaware Investments® Dividend and Income
Fund, Inc.
Dec. 8,
2009
Performance preview (for the period
ended Nov. 30, 2009) |
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Delaware
Investments Dividend and Income Fund, Inc. @ market price |
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1-year
return |
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+86.93% |
Delaware Investments Dividend and Income
Fund, Inc. @ NAV |
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1-year
return |
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+53.26% |
Lipper Closed-end
Income and Preferred Stock Funds Average @ market price |
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1-year
return |
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+72.45% |
Lipper Closed-end Income and Preferred
Stock Funds Average @ NAV |
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1-year
return |
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+54.38% |
Past performance
does not guarantee future results. For complete, annualized performance for
Delaware Investments Dividend and Income Fund, Inc., please see the table
on page 4. Index performance returns do not reflect any management fees,
transaction costs, or expenses. Indices are unmanaged and one cannot
invest directly in an index.
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Delaware Investments
Dividend and Income Fund, Inc. returned + 53.26% at net asset value and +86.93%
at market price (both figures reflect all distributions reinvested) for the
fiscal year ended Nov. 30, 2009. Complete, annualized performance information
for Delaware Investments Dividend and Income Fund, Inc. is shown in the table on
page 4.
Prices of risky assets fell steeply before
recovery
The fiscal year was
largely a story in two parts. The period began amid the worst economic and
financial markets that the portfolio management team has ever witnessed. The
latter part of the period, however, featured a considerable recovery, with what
the team viewed as attractive opportunities within both the fixed income and
equity markets.
At the start of the
fiscal period, financial markets were still reacting to the jolt received when
storied Wall Street investment bank Lehman Brothers declared bankruptcy in
September 2008. The bankruptcy, followed soon after by the federal bailout of
insurance giant American International Group (AIG), sent the financial markets
into a near panic. Risk aversion had become extreme by late 2008 and investors
generally fled “risk” assets for the relative safety of securities issued by the
U.S. government and other sovereign entities. Signs of the fallout from the
financial crisis were abundant, both in the economy and in the securities
markets.
The S&P 500 Index, a
measure of the broad stock market in the United States, dropped by March 2009 to
its lowest level since September 1996. Meanwhile, high yield bond spreads (which
are used to measure a bond’s perceived level of risk) in the U.S. peaked in December 2008 at 21.0% as measured
by J.P. Morgan, a level not seen since January 1995. (Source:
Bloomberg.)
The prices of energy and
commodities also fell sharply during the first half of the year, before starting
to recover during the latter half. In early March 2009, the broad-based Thomson
Reuters/Jefferies CRB Commodity Index dropped to its lowest level since January
2002 (source: Bloomberg). The price of crude oil also sank, with the West Texas
Intermediate (a type of crude oil used as a benchmark in oil pricing) hitting a
low of $31 a barrel in late December 2008, a full 78% below its all-time peak
price of $145 in early July 2008 (source: Bloomberg).
Global equity and fixed
income markets touched lows in March, and then began to recover vigorously for
much of the rest of the period. Governments and central banks around the world
stressed their intentions of continuing to provide support for economic recovery
for as long as necessary, which helped investors become more willing to accept
risk. At first, many investors began to reach for risk at the expense of
quality, within both the equity and fixed income markets. Lower-rated bonds, for
example, significantly outperformed their higher-rated peers during the spring
and summer months, while stocks of many companies with questionable fundamentals
outpaced those of fundamentally solid companies. As the market recovery matured,
however, it broadened to include almost every corner of the market, including
higher-quality securities.
Importantly, economies
around the world began to show early signs of stabilization and cyclical
recovery. During the third calendar quarter of 2009, in fact, the
The views expressed are
current as of the date of this report and are subject to change.
(continues) 1
Portfolio
management review
Delaware Investments® Dividend and Income
Fund, Inc.
U.S. economy expanded by
an estimated 2.8%, according to the U.S. Commerce Department’s reading of GDP
released in November. It was the fastest growth in the past two
years.
Fund positioning
The Fund’s primary
objective is to seek high current income, with a secondary objective of capital
appreciation. In managing the Fund, we pursue these goals by investing broadly
in a range of income-generating securities. These include core fixed income
holdings (such as Treasury and agency securities) as well as investment grade
and high yield corporate bonds, convertible bonds, real estate investment trusts
(REITs), and large-cap value stocks.
Broadly speaking, we
positioned the Fund defensively as the period began. When determining the Fund’s
asset allocation at a portfolio level, for instance, we placed an emphasis on
fixed income securities and convertible bonds over equities and REITs. From a
risk-reward perspective, we tended to find fixed income asset classes as more
appropriate for the Fund.
Among corporate bonds,
for example, yields rose to historically high levels during the opening months
of the period. Because prices decline as yields rise, the high yields on
corporate bonds reflected the extreme risk aversion by investors at that time,
and also highlighted some extraordinary value opportunities in our opinion.
Although corporate bonds were affected by the difficult investment climate early
in the period, both high yield and investment grade corporate bond positions
within the Fund ultimately contributed performance for the fiscal year. Both
asset classes performed well during the market’s recovery, and high yield bonds’
rebound was particularly notable.
Within high yield, the
Fund generally carried a heavy position in speculative B-rated securities
because we believed that the most favorable risk and reward opportunities
existed there. Conversely, we maintained less exposure to bonds with a higher BB
rating, which is just below investment grade.
Our limited exposure to
BB-rated bonds moderated Fund returns, however, because these bonds were among
the better-performing bonds within the high yield asset class. (Credit ratings
based on Standard & Poor’s opinion.)
The Fund’s increased
exposure to convertible bonds also added to its overall performance. We added to
convertible bond exposure because we believed the combination of yield, capital
structure positioning, and potential upside made them attractive.
Among our REIT holdings,
we continued to employ our “bottom up” security selection strategy, in which we
evaluate potential investments one by one, based on our assessment of each
company’s growth prospects, relative valuation, and balance-sheet quality (among
other factors). Given the highly volatile conditions of the fiscal year,
however, our approach was more opportunistic than usual, as we sought to take
advantage of shifting opportunities in the marketplace.
Early on, as the
investment environment deteriorated, we made our REIT holdings more defensive by
focusing on companies with longer lease terms, including healthcare and “triple
net” REITs. Triple-net leases, in which tenants pay all property maintenance
costs in addition to rent, tend to be relatively defensive because they provide
a greater income stream to landlords. Simultaneously, we limited our exposure to
companies with shorter-duration leases, such as hotel companies, which tend to
have uncertain cash flows relative to other sectors. We also looked to avoid
stocks of companies with what we believed were significant balance-sheet
problems.
This defensive stance
was generally beneficial to Fund performance during the downturn. Nonetheless,
we calculated that the recovery would be much shorter than it turned out to be
when credit markets loosened and the REIT market advanced. In actuality, credit
conditions continued to improve, and by summer it was evident that a
longer-lived improvement was taking place. Our maintenance of cautious
positioning for a time caused the Fund’s REIT positions to trail the broader
market gains during some of the rally.
2
The gains made during
the fiscal year by the Fund’s large-cap value equity holdings were more subdued
than those of its high yield fixed income or REIT holdings. Much of the
performance gains (versus the broader equity markets) from this equity
allocation relative to the S&P 500 Index came in periods of market decline,
such as the first several months of the period and again in October
2009.
This trend has been
consistent with the aim of our management approach; through our value-oriented,
defensive style, we seek to do well in relative terms in down markets by
minimizing losses. The biggest positive for the Fund’s large-cap value holdings
came from de-emphasizing the financial sector, the hardest-hit group in the
marketplace during the downturn. Fund returns were negatively affected by our
holdings in both the materials and industrials sectors, two groups in which our
security selection proved disappointing.
We recognize that the
recent environment, one in which investors could be rewarded for simply
increasing the amount of risk within their portfolios, cannot last forever. With
this in mind, the Fund continued at the portfolio level to be positioned
generally defensively at fiscal year end, based on our opinion of relative value
opportunities among asset classes.
3
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. Funds that
invest in bonds can lose their value as interest rates rise, and an investor can
lose principal. Please obtain the performance data for the most recent month end
by calling 800 523-1918.
A rise or fall in
interest rates can have a significant impact on bond prices and the net asset
value (NAV) of the Fund.
Fund performance |
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Average
annual total returns |
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Through
Nov. 30, 2009 |
1 year |
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5 years |
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10 years |
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Lifetime |
At market price |
86.93% |
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0.13% |
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5.96% |
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5.94% |
At net asset value |
53.26% |
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-0.53% |
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5.14% |
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3.80% |
Instances of high
double-digit returns are unusual, cannot be sustained, and were primarily
achieved during favorable market conditions.
Diversification may not
protect against market risk.
Fixed income securities
and bond funds can lose value, and investors can lose principal, as interest
rates rise. They also may be affected by economic conditions that hinder an
issuer’s ability to make interest and principal payments on its debt. The Fund
may also be subject to prepayment risk, the risk that the principal of a fixed
income security that is held by the Fund may be prepaid prior to maturity,
potentially forcing the Fund to reinvest that money at a lower interest rate.
High yielding, noninvestment grade bonds (junk bonds) involve higher risk than
investment grade bonds.
Narrowly focused
investments may exhibit higher volatility than investments in multiple industry
sectors. REIT investments are subject to many of the risks associated with
direct real estate ownership, including changes in economic conditions, credit
risk, and interest rate fluctuations.
The Fund may invest in
derivatives, which may involve additional expenses and are subject to risk,
including the risk that an underlying security or securities index moves in the
opposite direction from what the portfolio manager anticipated. A derivative
transaction depends upon the counterparties’ ability to fulfill their
contractual obligations.
The “Fund performance” table and
the “Performance of a $10,000 investment” graph do not reflect the deduction of
taxes the shareholder would pay on Fund distributions or redemptions of Fund
shares.
Returns reflect the
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 other brokerage commission for purchases made since
inception. Past performance is not a guarantee of future results.
Fund basics |
As of
Nov. 30, 2009 |
|
Fund objectives |
The
Fund seeks to achieve high current income. Capital appreciation is a
secondary objective. |
|
Total Fund net
assets |
$66
million |
|
Number of holdings |
427 |
Fund start date |
March
26, 1993 |
|
NYSE symbol |
DDF |
4
Market price versus net asset
value (see notes below)
Nov. 30, 2008, through Nov. 30,
2009
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Starting
value |
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Ending
value |
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|
(Nov. 30, 2008) |
|
(Nov. 30, 2009) |
|
|
Delaware Investments® Dividend and
Income Fund, Inc. @ NAV |
$5.22 |
|
$7.04 |
|
|
Delaware Investments Dividend and Income Fund,
Inc. @ Market price |
$4.02 |
|
$6.60 |
Past performance is not a guarantee
of future results.
Performance of a $10,000
Investment
Average
annual total returns from Nov. 30, 1999, through Nov. 30, 2009
|
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Starting value |
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Ending value |
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|
(Nov. 30, 1999) |
|
(Nov. 30, 2009) |
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|
Delaware Investments
Dividend and Income Fund, Inc. @ Market price |
$10,000 |
|
$17,867 |
|
|
|
Delaware Investments
Dividend and Income Fund, Inc. @ NAV |
$10,000 |
|
$16,463 |
|
|
Lipper Closed-end
Income and Preferred Stock Funds Average @ Market price |
$10,000 |
|
$15,411 |
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Lipper Closed-end
Income and Preferred Stock Funds Average @ NAV |
$10,000 |
|
$13,327 |
The chart assumes
$10,000 invested in the Fund on Nov. 30, 1999, and includes 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 NAV. Performance of the Fund and the Lipper class at market value is based on
market performance during the period. Performance of the Fund and Lipper class
at NAV is based on the fluctuations in NAV during the period. Delaware
Investments Dividend and Income Fund, Inc. was initially offered with a sales
charge of 6%. Performance shown in both charts above does not include fees, the
initial sales charge, or any brokerage commissions for purchases. Investments in
the Fund are not available at NAV.
The Lipper Closed-end
Income and Preferred Stock Funds Average represents the average return of
closed-end income and preferred stock mutual funds tracked by Lipper (source:
Lipper).
Market price is the
price an investor would pay for shares of the Fund on the secondary market. NAV
is the total value of one fund share, generally equal to a fund’s net assets
divided by the number of shares outstanding.
Past performance is not
a guarantee of future results.
5
Security type and top 10
equity holdings
Delaware Investments® Dividend and Income
Fund, Inc.
As of November 30,
2009
Sector designations may
be different than the sector designations presented in other Fund materials. The
sector designations may represent the investment manager’s internal sector
classifications, which may result in the sector designations for one fund being
different than another fund’s sector designations.
|
Percentage |
Security Type |
of Net
Assets |
Common Stock |
66.34 |
% |
Consumer Discretionary |
3.42 |
% |
Consumer Staples |
10.08 |
% |
Diversified REITs |
0.75 |
% |
Energy |
6.16 |
% |
Financials |
5.18 |
% |
Health Care |
10.84 |
% |
Health
Care REITs |
2.76 |
% |
Hotel REITs |
0.37 |
% |
Industrial REITs |
0.34 |
% |
Industrials |
3.50 |
% |
Information Technology |
6.86 |
% |
Mall REITs |
1.60 |
% |
Materials |
1.67 |
% |
Mortgage REITs |
0.50 |
% |
Multifamily REITs |
1.39 |
% |
Office REITs |
1.37 |
% |
Office/Industrial REITs |
0.53 |
% |
Real Estate Operating REITs |
0.47 |
% |
Self-Storage REITs |
0.62 |
% |
Shopping Center REITs |
0.59 |
% |
Specialty REITs |
0.87 |
% |
Telecommunications |
3.12 |
% |
Utilities |
3.35 |
% |
Convertible Preferred
Stock |
2.64 |
% |
Preferred Stock |
0.25 |
% |
Convertible Bonds |
14.05 |
% |
Aerospace & Defense |
0.77 |
% |
Automobiles |
0.26 |
% |
Banking, Finance & Insurance |
0.16 |
% |
Basic Materials |
1.01 |
% |
Building & Materials |
0.15 |
% |
Cable, Media & Publishing |
0.24 |
% |
Computers & Technology |
2.31 |
% |
Electronics & Electrical
Equipment |
0.13 |
% |
Energy |
0.39 |
% |
Health Care &
Pharmaceuticals |
2.59 |
% |
Leisure, Lodging & Entertainment |
0.61 |
% |
Real Estate |
1.74 |
% |
Retail |
0.23 |
% |
Telecommunications |
2.57 |
% |
Transportation |
0.39 |
% |
Utilities |
0.50 |
% |
Corporate Bonds |
43.08 |
% |
Banking |
2.11 |
% |
Basic
Industry |
4.76 |
% |
Brokerage |
0.56 |
% |
Capital
Goods |
3.29 |
% |
Consumer Cyclical |
5.34 |
% |
Consumer Non-Cyclical |
3.03 |
% |
Energy |
3.99 |
% |
Finance
& Investments |
1.26 |
% |
Media |
3.09 |
% |
Real
Estate |
0.23 |
% |
Services Cyclical |
4.24 |
% |
Services Non-Cyclical |
1.70 |
% |
Technology & Electronics |
1.34 |
% |
Telecommunications |
6.27 |
% |
Utilities |
1.87 |
% |
Senior Secured Loans |
0.57 |
% |
Exchange Traded Fund |
0.03 |
% |
Limited Partnerships |
0.24 |
% |
Warrant |
0.00 |
% |
Discount Note |
2.39 |
% |
Securities Lending
Collateral |
6.11 |
% |
Total Value of
Securities |
135.70 |
% |
Obligation to Return Securities Lending
Collateral |
(6.39 |
%) |
Borrowing Under Line of
Credit |
(30.45 |
%) |
Receivables and Other Assets Net of
Liabilities |
1.14 |
% |
Total Net Assets |
100.00 |
% |
6
Holdings are for
informational purposes only and are subject to change at any time. They
are not a recommendation to buy,
sell, or hold any security.
|
Percentage |
Top 10 Equity Holdings |
of Net
Assets |
Pfizer |
2.10 |
% |
Merck |
2.09 |
% |
Travelers |
2.00 |
% |
International Business Machines |
1.98 |
% |
Cardinal Health |
1.93 |
% |
Kimberly-Clark |
1.92 |
% |
Intel |
1.82 |
% |
Heinz
(H.J.) |
1.75 |
% |
Edison International |
1.74 |
% |
Archer-Daniels-Midland |
1.72 |
% |
7
Statement of net
assets
Delaware Investments® Dividend and Income
Fund, Inc.
November 30,
2009
|
|
|
Number of |
|
|
|
|
|
|
Shares |
|
Value |
Common Stock – 66.34% |
|
|
|
|
|
Consumer Discretionary – 3.42% |
|
|
|
|
|
=∏† |
Avado Brands |
|
1,390 |
|
$ |
0 |
*† |
DIRECTV
Class A |
|
1,550 |
|
|
49,027 |
|
Lowe’s |
|
51,200 |
|
|
1,116,672 |
|
Mattel |
|
56,800 |
|
|
1,105,328 |
|
|
|
|
|
|
2,271,027 |
Consumer Staples – 10.08% |
|
|
|
|
|
|
Archer-Daniels-Midland |
|
37,100 |
|
|
1,143,051 |
|
CVS
Caremark |
|
35,900 |
|
|
1,113,259 |
|
Heinz (H.J.) |
|
27,400 |
|
|
1,163,130 |
|
Kimberly-Clark |
|
19,300 |
|
|
1,273,221 |
|
Kraft Foods Class A |
|
37,000 |
|
|
983,460 |
|
Safeway |
|
45,400 |
|
|
1,021,500 |
|
|
|
|
|
|
6,697,621 |
Diversified REITs – 0.75% |
|
|
|
|
|
|
Vornado Realty Trust |
|
7,638 |
|
|
499,983 |
|
|
|
|
|
|
499,983 |
Energy – 6.16% |
|
|
|
|
|
|
Chevron |
|
12,600 |
|
|
983,304 |
|
ConocoPhillips |
|
19,500 |
|
|
1,009,515 |
|
Marathon Oil |
|
32,500 |
|
|
1,060,150 |
|
National Oilwell Varco |
|
24,200 |
|
|
1,041,084 |
|
|
|
|
|
|
4,094,053 |
Financials – 5.18% |
|
|
|
|
|
|
Allstate |
|
36,600 |
|
|
1,039,806 |
|
Bank of New York Mellon |
|
36,700 |
|
|
977,688 |
† |
Global
Brands Acquisition |
|
9,100 |
|
|
89,271 |
|
Travelers |
|
25,400 |
|
|
1,330,706 |
|
|
|
|
|
|
3,437,471 |
Health Care – 10.84% |
|
|
|
|
|
† |
Alliance HealthCare Services |
|
5,127 |
|
|
30,352 |
† |
Bristol-Myers Squibb |
|
42,200 |
|
|
1,068,082 |
|
Cardinal Health |
|
39,800 |
|
|
1,282,754 |
|
Johnson & Johnson |
|
17,000 |
|
|
1,068,280 |
|
Merck |
|
38,384 |
|
|
1,389,890 |
|
Pfizer |
|
76,789 |
|
|
1,395,255 |
|
Quest
Diagnostics |
|
16,700 |
|
|
967,598 |
|
|
|
|
|
|
7,202,211 |
Health Care REITs – 2.76% |
|
|
|
|
|
|
HCP |
|
15,650 |
|
|
489,845 |
|
Health
Care REIT |
|
9,060 |
|
|
403,623 |
|
LTC Properties |
|
3,800 |
|
|
97,698 |
|
Nationwide Health Properties |
|
8,800 |
|
|
299,288 |
* |
Omega Healthcare Investors |
|
7,900 |
|
|
142,911 |
|
Ventas |
|
9,375 |
|
|
402,469 |
|
|
|
|
|
|
1,835,834 |
Hotel REITs – 0.37% |
|
|
|
|
|
|
Host Hotels & Resorts |
|
23,100 |
|
|
243,012 |
|
|
|
|
|
|
243,012 |
Industrial REITs – 0.34% |
|
|
|
|
|
|
AMB
Property |
|
1,280 |
|
|
30,144 |
|
ProLogis |
|
15,000 |
|
|
196,200 |
|
|
|
|
|
|
226,344 |
Industrials – 3.50% |
|
|
|
|
|
† |
Delta
Air Lines |
|
4 |
|
|
33 |
† |
Flextronics International |
|
4,400 |
|
|
31,108 |
† |
Foster
Wheeler |
|
2 |
|
|
60 |
* |
Grupo
Aeroportuario del Centro |
|
|
|
|
|
|
Norte
ADR |
|
5,800 |
|
|
70,818 |
*† |
Mobile
Mini |
|
1,651 |
|
|
25,112 |
|
Northrop Grumman |
|
19,900 |
|
|
1,090,520 |
∏=† |
PT
Holdings |
|
350 |
|
|
4 |
|
Waste Management |
|
33,700 |
|
|
1,106,707 |
|
|
|
|
|
|
2,324,362 |
Information Technology – 6.86% |
|
|
|
|
|
|
Intel |
|
63,100 |
|
|
1,211,520 |
|
International Business
Machines |
|
10,400 |
|
|
1,314,040 |
† |
Motorola |
|
124,800 |
|
|
999,648 |
|
Xerox |
|
134,200 |
|
|
1,033,340 |
|
|
|
|
|
|
4,558,548 |
Mall REITs – 1.60% |
|
|
|
|
|
† |
General
Growth Properties |
|
6 |
|
|
39 |
* |
Macerich |
|
8,265 |
|
|
245,966 |
|
Simon
Property Group |
|
11,278 |
|
|
819,460 |
|
|
|
|
|
|
1,065,465 |
Materials – 1.67% |
|
|
|
|
|
|
duPont (E.I.) deNemours |
|
32,100 |
|
|
1,110,018 |
|
|
|
|
|
|
1,110,018 |
Mortgage REITs – 0.50% |
|
|
|
|
|
|
Annaly
Capital Management |
|
2,300 |
|
|
42,343 |
|
Chimera Investment |
|
23,800 |
|
|
95,914 |
|
Cypress
Sharpridge Investments |
|
14,800 |
|
|
193,880 |
|
|
|
|
|
|
332,137 |
Multifamily REITs – 1.39% |
|
|
|
|
|
|
Apartment Investment & |
|
|
|
|
|
|
Management |
|
7,968 |
|
|
107,648 |
|
BRE Properties |
|
4,600 |
|
|
144,118 |
|
Camden Property Trust |
|
3,450 |
|
|
133,688 |
|
Equity Residential |
|
16,600 |
|
|
534,685 |
|
|
|
|
|
|
920,139 |
Office REITs – 1.37% |
|
|
|
|
|
* |
Alexandria Real Estate
Equities |
|
3,090 |
|
|
174,183 |
* |
Boston Properties |
|
3,000 |
|
|
200,940 |
|
Brandywine Realty Trust |
|
11,500 |
|
|
112,930 |
|
Government Properties Income
Trust |
|
4,800 |
|
|
119,856 |
|
Highwoods Properties |
|
5,700 |
|
|
174,477 |
|
Mack-Cali Realty |
|
4,250 |
|
|
130,433 |
|
|
|
|
|
|
912,819 |
Office/Industrial REITs –
0.53% |
|
|
|
|
|
* |
Digital Realty Trust |
|
5,550 |
|
|
270,063 |
|
Liberty Property Trust |
|
2,700 |
|
|
80,028 |
|
|
|
|
|
|
350,091 |
Real Estate Operating REITs –
0.47% |
|
|
|
|
|
|
Starwood Property Trust |
|
16,000 |
|
|
310,400 |
|
|
|
|
|
|
310,400 |
8
|
|
Number of |
|
|
|
|
|
Shares |
|
Value |
Common Stock (continued) |
|
|
|
|
|
Self-Storage REITs – 0.62% |
|
|
|
|
|
|
Public Storage |
|
5,150 |
|
$ |
409,837 |
|
|
|
|
|
|
409,837 |
Shopping Center REITs – 0.59% |
|
|
|
|
|
|
Cedar Shopping Centers |
|
5,700 |
|
|
34,428 |
* |
Federal Realty Investment
Trust |
|
300 |
|
|
19,296 |
|
Kimco Realty |
|
20,430 |
|
|
251,698 |
|
Ramco-Gershenson Properties
Trust |
|
9,200 |
|
|
83,720 |
|
|
|
|
|
|
389,142 |
Specialty REITs – 0.87% |
|
|
|
|
|
|
Entertainment Properties Trust |
|
6,320 |
|
|
199,649 |
* |
Plum Creek Timber |
|
6,885 |
|
|
237,463 |
* |
Potlatch |
|
4,825 |
|
|
142,048 |
|
|
|
|
|
|
579,160 |
Telecommunications – 3.12% |
|
|
|
|
|
|
AT&T |
|
33,200 |
|
|
894,408 |
=† |
Century Communications |
|
500,000 |
|
|
0 |
|
Frontier Communications |
|
24,400 |
|
|
192,760 |
† |
GeoEye |
|
550 |
|
|
17,144 |
|
Verizon Communications |
|
30,700 |
|
|
965,822 |
|
|
|
|
|
|
2,070,134 |
Utilities – 3.35% |
|
|
|
|
|
|
Edison International |
|
33,900 |
|
|
1,154,295 |
† |
Mirant |
|
189 |
|
|
2,691 |
|
NorthWestern |
|
3,300 |
|
|
85,107 |
|
Progress Energy |
|
25,100 |
|
|
981,159 |
|
|
|
|
|
|
2,223,252 |
Total Common Stock (cost $47,571,627) |
|
|
|
|
44,063,060 |
|
|
Convertible Preferred Stock –
2.64% |
|
|
|
|
|
Banking, Finance & Insurance –
0.71% |
|
|
|
|
|
|
Aspen Insurance 5.625% |
|
|
|
|
|
|
exercise price $29.28, |
|
|
|
|
|
|
expiration date 12/31/49 |
|
8,800 |
|
|
470,800 |
@ |
Fannie Mae 8.75% exercise price |
|
|
|
|
|
|
$32.45, expiration date
5/13/11 |
|
3,500 |
|
|
4,900 |
|
|
|
|
|
|
475,700 |
Cable, Media & Publishing –
0.37% |
|
|
|
|
|
# |
Interpublic Group 144A 5.25% |
|
|
|
|
|
|
exercise price $13.66, |
|
|
|
|
|
|
expiration date 12/31/49 |
|
360 |
|
|
246,690 |
|
|
|
|
|
|
246,690 |
Energy – 0.46% |
|
|
|
|
|
|
El Paso Energy Capital Trust I |
|
|
|
|
|
|
4.75% exercise price $41.59, |
|
|
|
|
|
|
expiration date 3/31/28 |
|
5,250 |
|
|
176,715 |
|
Whiting Petroleum 6.25% |
|
|
|
|
|
|
exercise price $43.42, |
|
|
|
|
|
|
expiration date 12/31/49 |
|
800 |
|
|
128,768 |
|
|
|
|
|
|
305,483 |
Health Care & Pharmaceuticals –
0.37% |
|
|
|
|
|
|
Mylan 6.50% exercise price $17.08, |
|
|
|
|
|
|
expiration date 11/15/10 |
|
220 |
|
|
245,630 |
|
|
|
|
|
|
245,630 |
Telecommunications – 0.73% |
|
|
|
|
|
|
Crown Castle International |
|
|
|
|
|
|
6.50%
exercise price $36.88, |
|
|
|
|
|
|
expiration
date 8/15/12 |
|
4,450 |
|
|
256,988 |
|
Lucent Technologies Capital Trust I |
|
|
|
|
|
|
7.75%
exercise price $24.80, |
|
|
|
|
|
|
expiration
date 3/15/17 |
|
305 |
|
|
225,776 |
|
|
|
|
|
|
482,764 |
Total Convertible Preferred
Stock |
|
|
|
|
|
|
(cost $1,963,794) |
|
|
|
|
1,756,267 |
|
Preferred Stock – 0.25% |
|
|
|
|
|
Banking, Finance & Insurance –
0.22% |
|
|
|
|
|
|
Bank of America |
|
|
|
|
|
|
8.00% |
|
150,000 |
|
|
130,834 |
|
·8.125% |
|
15,000 |
|
|
13,084 |
|
|
|
|
|
|
143,918 |
Industrials – 0.00% |
|
|
|
|
|
†= |
Port Townsend |
|
70 |
|
|
0 |
|
|
|
|
|
|
0 |
Real Estate – 0.03% |
|
|
|
|
|
|
W2007 Grace Acquisitions I
8.75% |
|
34,400 |
|
|
20,640 |
|
|
|
|
|
|
20,640 |
Total Preferred Stock
(cost $1,079,051) |
|
|
|
|
164,558 |
|
|
|
Principal |
|
|
|
|
|
Amount |
|
|
|
Convertible Bonds –
14.05% |
|
|
|
|
|
Aerospace & Defense –
0.77% |
|
|
|
|
|
# |
AAR 144A 1.75% exercise price |
|
|
|
|
|
|
$29.43,
expiration date 1/1/26 |
$ |
260,000 |
|
|
240,825 |
# |
L-3 Communications Holdings 144A |
|
|
|
|
|
|
3.00%
exercise price $100.14, |
|
|
|
|
|
|
expiration
date 8/1/35 |
|
265,000 |
|
|
272,288 |
|
|
|
|
|
|
513,113 |
Automobiles – 0.26% |
|
|
|
|
|
|
Ford Motor 4.25% exercise
price |
|
|
|
|
|
|
$9.30,
expiration date 11/15/16 |
|
150,000 |
|
|
171,563 |
|
|
|
|
|
|
171,563 |
Banking, Finance & Insurance –
0.16% |
|
|
|
|
|
|
Jefferies Group 3.875% exercise |
|
|
|
|
|
|
price
$39.20, expiration |
|
|
|
|
|
|
date
11/1/29 |
|
115,000 |
|
|
107,238 |
|
|
|
|
|
|
107,238 |
Basic Materials – 1.01% |
|
|
|
|
|
|
Century Aluminum 1.75%
exercise |
|
|
|
|
|
|
price
$30.54, expiration |
|
|
|
|
|
|
date
8/1/24 |
|
20,000 |
|
|
18,575 |
|
Rayonier TRS Holdings 3.75% exercise |
|
|
|
|
|
|
price
$54.82, expiration |
|
|
|
|
|
|
date
10/15/12 |
|
345,000 |
|
|
361,387 |
# |
Sino-Forest 144A 5.00% exercise
price |
|
|
|
|
|
|
$20.29,
expiration date 8/1/13 |
|
255,000 |
|
|
290,063 |
|
|
|
|
|
|
670,025 |
(continues) 9
Statement
of net assets
Delaware Investments® Dividend and Income
Fund, Inc.
|
|
Principal |
|
|
|
|
|
Amount |
|
Value |
Convertible Bonds (continued) |
|
|
|
|
|
Building & Materials –
0.15% |
|
|
|
|
|
|
Beazer Homes USA 4.625% |
|
|
|
|
|
|
exercise price $49.64, |
|
|
|
|
|
|
expiration date 6/15/24 |
$ |
110,000 |
|
$ |
100,925 |
|
|
|
|
|
|
100,925 |
Cable, Media & Publishing –
0.24% |
|
|
|
|
|
|
Interpublic Group 4.25% |
|
|
|
|
|
|
exercise price $12.42, |
|
|
|
|
|
|
expiration date 3/15/23 |
|
75,000 |
|
|
73,313 |
|
VeriSign 3.25% exercise price |
|
|
|
|
|
|
$34.37, expiration date
8/15/37 |
|
105,000 |
|
|
87,937 |
|
|
|
|
|
|
161,250 |
Computers & Technology –
2.31% |
|
|
|
|
|
|
Advanced Micro Devices |
|
|
|
|
|
|
6.00% exercise price $28.08, |
|
|
|
|
|
|
expiration date 5/1/15 |
|
70,000 |
|
|
61,775 |
|
#144A 6.00%
exercise price |
|
|
|
|
|
|
$28.08, expiration date 5/1/15 |
|
450,000 |
|
|
397,125 |
|
Euronet Worldwide 3.50% |
|
|
|
|
|
|
exercise price $40.48, |
|
|
|
|
|
|
expiration date 10/15/25 |
|
435,000 |
|
|
402,918 |
|
Hutchinson Technology 3.25% |
|
|
|
|
|
|
exercise price $36.43, |
|
|
|
|
|
|
expiration date 1/14/26 |
|
340,000 |
|
|
257,975 |
# |
Intel 144A 3.25% exercise
price |
|
|
|
|
|
|
$22.68, expiration date 8/1/39 |
|
70,000 |
|
|
77,788 |
|
Linear Technology 3.125% |
|
|
|
|
|
|
exercise price $47.33, |
|
|
|
|
|
|
expiration date 5/1/27 |
|
120,000 |
|
|
117,150 |
|
SanDisk 1.00% exercise price |
|
|
|
|
|
|
$82.35, expiration date
5/15/13 |
|
280,000 |
|
|
220,500 |
|
|
|
|
|
|
1,535,231 |
Electronics & Electrical Equipment –
0.13% |
|
|
|
|
|
|
Flextronics International 1.00% |
|
|
|
|
|
|
exercise price $15.53, |
|
|
|
|
|
|
expiration date 8/1/10 |
|
85,000 |
|
|
83,831 |
|
|
|
|
|
|
83,831 |
Energy – 0.39% |
|
|
|
|
|
|
Chesapeake Energy 2.25% |
|
|
|
|
|
|
exercise price $85.89, |
|
|
|
|
|
|
expiration date 12/15/38 |
|
220,000 |
|
|
164,175 |
|
Peabody Energy 4.75% exercise price |
|
|
|
|
|
|
$58.44, expiration date
12/15/41 |
|
100,000 |
|
|
98,500 |
|
|
|
|
|
|
262,675 |
Health Care & Pharmaceuticals –
2.59% |
|
|
|
|
|
# |
Allergan 144A 1.50% exercise
price |
|
|
|
|
|
|
$63.33, expiration date 4/1/26 |
|
415,000 |
|
|
466,874 |
|
Amgen |
|
|
|
|
|
|
0.375% exercise price $79.48, |
|
|
|
|
|
|
expiration date 2/1/13 |
|
235,000 |
|
|
235,000 |
|
#144A 0.375%
exercise price |
|
|
|
|
|
|
$79.48, expiration date 2/1/13 |
|
165,000 |
|
|
165,000 |
Φ |
Hologic 2.00% exercise price |
|
|
|
|
|
|
$38.59, expiration date
12/15/37 |
|
280,000 |
|
|
228,200 |
|
Inverness Medical Innovations 9.00% |
|
|
|
|
|
|
Series B exercise price
$43.98, |
|
|
|
|
|
|
expiration date 5/15/16 |
|
215,000 |
|
|
246,981 |
|
LifePoint Hospitals 3.50% |
|
|
|
|
|
|
exercise price $51.79, |
|
|
|
|
|
|
expiration date 5/14/14 |
|
110,000 |
|
|
98,863 |
|
Medtronic 1.65% exercise price |
|
|
|
|
|
|
$55.41, expiration date
4/15/13 |
|
275,000 |
|
|
280,844 |
|
|
|
|
|
|
1,721,762 |
Leisure, Lodging & Entertainment –
0.61% |
|
|
|
|
|
# |
Gaylord Entertainment 144A
3.75% |
|
|
|
|
|
|
exercise price $27.25,
expiration |
|
|
|
|
|
|
date 9/29/14 |
|
220,000 |
|
|
208,450 |
# |
International Game Technology 144A |
|
|
|
|
|
|
3.25% exercise price $19.97, |
|
|
|
|
|
|
expiration date 5/1/14 |
|
160,000 |
|
|
196,400 |
|
|
|
|
|
|
404,850 |
Real Estate – 1.74% |
|
|
|
|
|
# |
Corporate Office Properties
144A |
|
|
|
|
|
|
3.50% exercise price $53.12, |
|
|
|
|
|
|
expiration date 9/15/26 |
|
195,000 |
|
|
184,763 |
|
Developers Diversified Realty |
|
|
|
|
|
|
3.00% exercise price $74.75, |
|
|
|
|
|
|
expiration date 3/15/12 |
|
65,000 |
|
|
59,719 |
*# |
Digital
Realty Trust 144A 5.50% |
|
|
|
|
|
|
exercise price $43.00,
expiration |
|
|
|
|
|
|
date 4/15/29 |
|
220,000 |
|
|
282,974 |
@ |
MeriStar Hospitality
9.50% |
|
|
|
|
|
|
exercise price $10.18, |
|
|
|
|
|
|
expiration date 4/1/10 |
|
230,000 |
|
|
236,095 |
|
National Retail Properties |
|
|
|
|
|
|
5.125% exercise price $25.42, |
|
|
|
|
|
|
expiration date 6/15/28 |
|
210,000 |
|
|
216,038 |
|
Vornado Realty Trust
2.85% |
|
|
|
|
|
|
exercise price $159.04, |
|
|
|
|
|
|
expiration date 3/15/27 |
|
175,000 |
|
|
175,875 |
|
|
|
|
|
|
1,155,464 |
Retail – 0.23% |
|
|
|
|
|
|
Pantry 3.00% exercise price
$50.09, |
|
|
|
|
|
|
expiration date 11/15/12 |
|
180,000 |
|
|
151,425 |
|
|
|
|
|
|
151,425 |
Telecommunications – 2.57% |
|
|
|
|
|
|
Alaska Communications System |
|
|
|
|
|
|
Group 5.75% exercise price |
|
|
|
|
|
|
$12.90, expiration date 3/1/13 |
|
260,000 |
|
|
235,300 |
|
Leap Wireless International
4.50% |
|
|
|
|
|
|
exercise price $93.21,
expiration |
|
|
|
|
|
|
date 7/15/14 |
|
120,000 |
|
|
94,800 |
|
Level 3 Communications 5.25% |
|
|
|
|
|
|
exercise price $3.98,
expiration |
|
|
|
|
|
|
date 12/15/11 |
|
180,000 |
|
|
164,250 |
|
NII Holdings 3.125% exercise
price |
|
|
|
|
|
|
$118.32, expiration date
6/15/12 |
|
410,000 |
|
|
372,587 |
|
Qwest Communications International |
|
|
|
|
|
|
3.50% exercise price $5.01, |
|
|
|
|
|
|
expiration date 11/15/25 |
|
400,000 |
|
|
401,499 |
# |
SBA Communications 144A 4.00% |
|
|
|
|
|
|
exercise price $30.38,
expiration |
|
|
|
|
|
|
date 10/1/14 |
|
165,000 |
|
|
207,488
|
10
|
|
Principal |
|
|
|
|
|
Amount |
|
Value |
Convertible Bonds (continued) |
|
|
|
|
|
Telecommunications (continued) |
|
|
|
|
|
# |
Virgin Media 144A 6.50%
exercise |
|
|
|
|
|
|
price $19.22, expiration |
|
|
|
|
|
|
date
11/15/16 |
$ |
198,000 |
|
$ |
231,165 |
|
|
|
|
|
|
1,707,089 |
Transportation – 0.39% |
|
|
|
|
|
|
Bristow Group 3.00% exercise price |
|
|
|
|
|
|
$77.34,
expiration date 6/14/38 |
|
300,000 |
|
|
259,500 |
|
|
|
|
|
|
259,500 |
Utilities – 0.50% |
|
|
|
|
|
|
Dominion Resources 2.125% |
|
|
|
|
|
|
exercise
price $36.14, expiration |
|
|
|
|
|
|
date
12/15/23 |
|
290,000 |
|
|
329,150 |
|
|
|
|
|
|
329,150 |
Total Convertible Bonds |
|
|
|
|
|
|
(cost $9,073,391) |
|
|
|
|
9,335,091 |
|
Corporate Bonds –
43.08% |
|
|
|
|
|
Banking – 2.11% |
|
|
|
|
|
· |
BAC Capital Trust XIV 5.63%
12/31/49 |
|
215,000 |
|
|
143,513 |
|
Capital One Capital V 10.25% 8/15/39 |
|
135,000 |
|
|
148,870 |
· |
Citigroup Capital XXI 8.30%
12/21/57 |
|
65,000 |
|
|
58,175 |
# |
GMAC 144A |
|
|
|
|
|
|
6.00%
12/15/11 |
|
71,000 |
|
|
67,539 |
|
6.625%
5/15/12 |
|
85,000 |
|
|
81,281 |
|
6.875%
9/15/11 |
|
174,000 |
|
|
169,215 |
|
6.875%
8/28/12 |
|
196,000 |
|
|
187,670 |
|
JPMorgan Chase Capital XXV |
|
|
|
|
|
|
6.80%
10/1/37 |
|
20,000 |
|
|
19,788 |
@ |
Popular North America Capital Trust I |
|
|
|
|
|
|
6.564%
9/15/34 |
|
70,000 |
|
|
51,479 |
·# |
Rabobank 144A 11.00% 12/29/49 |
|
150,000 |
|
|
185,984 |
|
USB Capital IX 6.189% 10/29/49 |
|
115,000 |
|
|
90,850 |
|
Zions Bancorporation |
|
|
|
|
|
|
5.50%
11/16/15 |
|
57,000 |
|
|
39,661 |
|
6.00%
9/15/15 |
|
141,000 |
|
|
98,232 |
|
7.75%
9/23/14 |
|
65,000 |
|
|
57,906 |
|
|
|
|
|
|
1,400,163 |
Basic Industry – 4.76% |
|
|
|
|
|
# |
Algoma Acquisition 144A |
|
|
|
|
|
|
9.875%
6/15/15 |
|
115,000 |
|
|
98,325 |
|
California Steel Industries |
|
|
|
|
|
|
6.125%
3/15/14 |
|
113,000 |
|
|
105,655 |
|
Century Aluminum 7.50% 8/15/14 |
|
115,000 |
|
|
106,375 |
·# |
Cognis GmbH 144A 2.299%
9/15/13 |
|
75,000 |
|
|
69,000 |
# |
Drummond 144A 9.00% 10/15/14 |
|
145,000 |
|
|
148,625 |
# |
Evraz Group 144A 9.50% 4/24/18 |
|
195,000 |
|
|
196,462 |
# |
FMG Finance 144A 10.625%
9/1/16 |
|
90,000 |
|
|
98,550 |
|
Freeport McMoRan Copper &
Gold |
|
|
|
|
|
|
8.25%
4/1/15 |
|
120,000 |
|
|
128,839 |
|
8.375%
4/1/17 |
|
10,000 |
|
|
10,802 |
* |
Hexion US Finance 9.75%
11/15/14 |
|
121,000 |
|
|
116,765 |
# |
Innophos Holdings 144A |
|
|
|
|
|
|
9.50%
4/15/12 |
|
115,000 |
|
|
115,575 |
|
International Coal Group |
|
|
|
|
|
|
10.25% 7/15/14 |
|
163,000 |
|
|
158,925 |
# |
MacDermid 144A 9.50% 4/15/17 |
|
188,000 |
|
|
187,059 |
# |
Momentive Performance Material |
|
|
|
|
|
|
144A 12.50% 6/15/14 |
|
70,000 |
|
|
77,000 |
# |
Murray Energy 144A 10.25%
10/15/15 |
|
115,000 |
|
|
113,275 |
# |
NewPage144A 11.375% 12/31/14 |
|
145,000 |
|
|
143,550 |
· |
Noranda Aluminum Acquisition |
|
|
|
|
|
|
PIK 5.274 % 5/15/15 |
|
151,023 |
|
|
110,247 |
|
Norske Skog Canada 8.625%
6/15/11 |
|
61,000 |
|
|
45,598 |
|
Novelis |
|
|
|
|
|
|
7.25% 2/15/15 |
|
50,000 |
|
|
45,375 |
|
#144A 11.50% 2/15/15 |
|
72,000 |
|
|
75,240 |
=@ |
Port Townsend 7.32% 8/27/12 |
|
102,592 |
|
|
74,379 |
|
Potlatch 12.50% 12/1/09 |
|
250,000 |
|
|
249,999 |
|
Ryerson |
|
|
|
|
|
|
·7.656% 11/1/14 |
|
99,000 |
|
|
87,863 |
|
12.25% 11/1/15 |
|
40,000 |
|
|
40,900 |
# |
Sappi Papier Holding 144A |
|
|
|
|
|
|
6.75% 6/15/12 |
|
101,000 |
|
|
94,036 |
# |
Steel Capital 144A 9.75%
7/29/13 |
|
100,000 |
|
|
101,125 |
# |
Steel Dynamics 144A 8.25%
4/15/16 |
|
127,000 |
|
|
128,905 |
# |
Teck Resources 144A |
|
|
|
|
|
|
10.25% 5/15/16 |
|
38,000 |
|
|
43,130 |
|
10.75% 5/15/19 |
|
75,000 |
|
|
87,938 |
# |
Vedanta Resources 144A |
|
|
|
|
|
|
9.50% 7/18/18 |
|
100,000 |
|
|
99,750 |
|
|
|
|
|
|
3,159,267 |
Brokerage – 0.56% |
|
|
|
|
|
|
E Trade Financial PIK |
|
|
|
|
|
|
12.50% 11/30/17 |
|
116,875 |
|
|
132,069 |
|
LaBranche 11.00% 5/15/12 |
|
252,000 |
|
|
243,180 |
|
|
|
|
|
|
375,249 |
Capital Goods – 3.29% |
|
|
|
|
|
|
AMH Holdings 11.25% 3/1/14 |
|
60,000 |
|
|
56,550 |
|
Associated Materials |
|
|
|
|
|
|
9.75% 4/15/12 |
|
42,000 |
|
|
42,683 |
|
#144A 9.875% 11/15/16 |
|
15,000 |
|
|
15,750 |
|
Building Materials Corporation
of |
|
|
|
|
|
|
America 7.75% 8/1/14 |
|
104,000 |
|
|
103,480 |
# |
BWAY 144A 10.00% 4/15/14 |
|
123,000 |
|
|
129,458 |
·# |
C8 Capital 144A 6.64% 12/31/49 |
|
100,000 |
|
|
70,715 |
# |
CPM Holdings 144A 10.625%
9/1/14 |
|
28,000 |
|
|
29,400 |
|
Eastman Kodak 7.25% 11/15/13 |
|
99,000 |
|
|
79,200 |
* |
Graham Packaging Capital I |
|
|
|
|
|
|
9.875% 10/15/14 |
|
123,000 |
|
|
125,460 |
# |
Graphic Packaging
International |
|
|
|
|
|
|
144A 9.50% 6/15/17 |
|
126,000 |
|
|
133,560 |
|
Intertape Polymer 8.50% 8/1/14 |
|
100,000 |
|
|
78,500 |
|
JSG Funding 7.75% 4/1/15 |
|
210,000 |
|
|
201,599 |
# |
Plastipak Holdings 144A |
|
|
|
|
|
|
8.50% 12/15/15 |
|
66,000 |
|
|
66,248 |
|
10.625% 8/15/19 |
|
71,000 |
|
|
78,455 |
(continues) 11
Statement
of net assets
Delaware Investments® Dividend and Income
Fund, Inc.
|
|
Principal |
|
|
|
|
|
Amount |
|
Value |
Corporate Bonds (continued) |
|
|
|
|
|
Capital Goods (continued) |
|
|
|
|
|
|
Pregis 13.375% 10/15/13 |
$ |
222,000 |
|
$ |
212,009 |
* |
RBS Global/Rexnord 11.75% 8/1/16 |
|
183,000 |
|
|
180,254 |
# |
Reynolds Group Issuer 144A |
|
|
|
|
|
|
7.75% 10/15/16 |
|
100,000 |
|
|
101,500 |
* |
Sally Holdings Capital |
|
|
|
|
|
|
10.50% 11/15/16 |
|
75,000 |
|
|
80,625 |
* |
Solo Cup 8.50% 2/15/14 |
|
134,000 |
|
|
129,645 |
|
Thermadyne Holdings 10.50%
2/1/14 |
|
137,000 |
|
|
119,875 |
|
USG |
|
|
|
|
|
|
6.30%
11/15/16 |
|
127,000 |
|
|
110,808 |
|
#144A 9.75% 8/1/14 |
|
35,000 |
|
|
36,838 |
|
|
|
|
|
|
2,182,612 |
Consumer Cyclical – 5.34% |
|
|
|
|
|
# |
Allison Transmission 144A |
|
|
|
|
|
|
11.00% 11/1/15 |
|
220,000 |
|
|
228,799 |
* |
ArvinMeritor 8.125% 9/15/15 |
|
165,000 |
|
|
150,975 |
|
Beazer Homes USA 8.625% 5/15/11 |
|
138,000 |
|
|
134,550 |
|
Burlington Coat Factory
Investment |
|
|
|
|
|
|
Holdings 14.50% 10/15/14 |
|
225,000 |
|
|
226,687 |
* |
Burlington Coat Factory Warehouse |
|
|
|
|
|
|
11.125% 4/15/14 |
|
70,000 |
|
|
72,800 |
|
Carrols 9.00% 1/15/13 |
|
33,000 |
|
|
33,330 |
|
Denny’s Holdings 10.00% 10/1/12 |
|
57,000 |
|
|
58,425 |
|
Ford Motor 7.45% 7/16/31 |
|
174,000 |
|
|
148,988 |
|
Ford Motor Credit 12.00% 5/15/15 |
|
260,000 |
|
|
299,935 |
|
Goodyear Tire & Rubber |
|
|
|
|
|
|
10.50% 5/15/16 |
|
2,000 |
|
|
2,160 |
|
Interface |
|
|
|
|
|
|
9.50% 2/1/14 |
|
19,000 |
|
|
18,929 |
|
#144A 11.375% 11/1/13 |
|
50,000 |
|
|
54,938 |
# |
Invista 144A 9.25% 5/1/12 |
|
118,000 |
|
|
120,360 |
|
K Hovnanian Enterprises |
|
|
|
|
|
|
6.25% 1/15/15 |
|
40,000 |
|
|
29,000 |
|
7.50% 5/15/16 |
|
70,000 |
|
|
50,750 |
|
#144A 10.625% 10/15/16 |
|
70,000 |
|
|
71,750 |
# |
Landry’s Restaurants 144A |
|
|
|
|
|
|
11.625% 12/1/15 |
|
220,000 |
|
|
224,399 |
|
M/I Homes 6.875% 4/1/12 |
|
75,000 |
|
|
70,125 |
|
Macy’s Retail Holdings |
|
|
|
|
|
|
6.375% 3/15/37 |
|
110,000 |
|
|
93,500 |
|
6.70% 7/15/34 |
|
15,000 |
|
|
12,750 |
|
7.875% 8/15/36 |
|
50,000 |
|
|
44,000 |
|
Meritage Homes |
|
|
|
|
|
|
6.25% 3/15/15 |
|
24,000 |
|
|
21,960 |
|
7.00% 5/1/14 |
|
108,000 |
|
|
103,140 |
|
Mobile Mini 6.875% 5/1/15 |
|
119,000 |
|
|
111,860 |
|
Navistar International 8.25% 11/1/21 |
|
145,000 |
|
|
143,188 |
|
Norcraft Holdings Capital 9.75%
9/1/12 |
|
150,000 |
|
|
143,250 |
|
OSI Restaurant Partners |
|
|
|
|
|
|
10.00% 6/15/15 |
|
83,000 |
|
|
72,210 |
|
Quiksilver 6.875% 4/15/15 |
|
200,000 |
|
|
154,000 |
|
Rite Aid 9.375% 12/15/15 |
|
190,000 |
|
|
160,075 |
# |
Standard Pacific Escrow |
|
|
|
|
|
|
144A 10.75% 9/15/16 |
|
75,000 |
|
|
74,625 |
* |
Tenneco Automotive 8.625% 11/15/14 |
|
146,000 |
|
|
143,810 |
# |
Toys R Us Property 144A |
|
|
|
|
|
|
10.75% 7/15/17 |
|
66,000 |
|
|
70,785 |
*# |
TRW Automotive 144A |
|
|
|
|
|
|
7.00% 3/15/14 |
|
210,000 |
|
|
199,763 |
|
|
|
|
|
|
3,545,816 |
Consumer Non-Cyclical – 3.03% |
|
|
|
|
|
|
Accellent 10.50% 12/1/13 |
|
105,000 |
|
|
101,588 |
# |
Alliance One International 144A |
|
|
|
|
|
|
10.00% 7/15/16 |
|
133,000 |
|
|
140,315 |
|
Bausch & Lomb 9.875%
11/1/15 |
|
137,000 |
|
|
141,453 |
# |
Cott Beverages 144A |
|
|
|
|
|
|
8.375% 11/15/17 |
|
90,000 |
|
|
90,225 |
|
DJO Finance 10.875% 11/15/14 |
|
80,000 |
|
|
84,600 |
# |
Dole Food 144A |
|
|
|
|
|
|
8.00% 10/1/16 |
|
30,000 |
|
|
30,450 |
|
13.875% 3/15/14 |
|
62,000 |
|
|
73,160 |
# |
Ingles Markets 144A 8.875%
5/15/17 |
|
75,000 |
|
|
77,438 |
|
Inverness Medical Innovations |
|
|
|
|
|
|
9.00% 5/15/16 |
|
104,000 |
|
|
105,820 |
# |
JBS USA Finance 144A |
|
|
|
|
|
|
11.625% 5/1/14 |
|
113,000 |
|
|
126,136 |
# |
JohnsonDiversey Holdings 144A |
|
|
|
|
|
|
10.50% 5/15/20 |
|
305,000 |
|
|
301,187 |
|
LVB Acquisition |
|
|
|
|
|
|
PIK 10.375% 10/15/17 |
|
57,000 |
|
|
61,418 |
|
11.625% 10/15/17 |
|
75,000 |
|
|
81,938 |
# |
M-Foods Holdings 144A |
|
|
|
|
|
|
9.75% 10/1/13 |
|
42,000 |
|
|
43,890 |
|
Smithfield Foods |
|
|
|
|
|
|
7.75% 5/15/13 |
|
155,000 |
|
|
144,537 |
|
#144A 10.00% 7/15/14 |
|
38,000 |
|
|
39,995 |
# |
Tops Markets 144A 10.125% 10/15/15 |
|
140,000 |
|
|
144,200 |
|
Universal Hospital Services
PIK |
|
|
|
|
|
|
8.50% 6/1/15 |
|
80,000 |
|
|
79,200 |
|
Yankee Acquisition 9.75% 2/15/17 |
|
150,000 |
|
|
144,000 |
|
|
|
|
|
|
2,011,550 |
Energy – 3.99% |
|
|
|
|
|
# |
Antero Resources Finance 144A |
|
|
|
|
|
|
9.375% 12/1/17 |
|
115,000 |
|
|
115,863 |
|
Chesapeake Energy 9.50% 2/15/15 |
|
24,000 |
|
|
25,260 |
|
Complete Production Service |
|
|
|
|
|
|
8.00% 12/15/16 |
|
77,000 |
|
|
75,845 |
|
Copano Energy Finance 7.75% 6/1/18 |
|
94,000 |
|
|
94,000 |
|
Denbury Resources |
|
|
|
|
|
|
7.50% 4/1/13 |
|
15,000 |
|
|
15,075 |
|
9.75% 3/1/16 |
|
66,000 |
|
|
70,125 |
|
Dynegy Holdings 7.75% 6/1/19 |
|
162,000 |
|
|
133,245 |
|
El Paso |
|
|
|
|
|
|
6.875% 6/15/14 |
|
47,000 |
|
|
46,530 |
|
7.00% 6/15/17 |
|
52,000 |
|
|
51,220 |
# |
El Paso Performance-Linked Trust 144A |
|
|
|
|
|
|
7.75% 7/15/11 |
|
33,000 |
|
|
33,700 |
12
|
|
Principal |
|
|
|
|
|
Amount |
|
Value |
Corporate Bonds (continued) |
|
|
|
|
|
Energy (continued) |
|
|
|
|
|
· |
Enterprise Products Operating |
|
|
|
|
|
|
8.375% 8/1/66 |
$ |
30,000 |
|
$ |
29,249 |
|
Forest Oil 7.25% 6/15/19 |
|
94,000 |
|
|
89,535 |
*# |
Headwaters 144A 11.375%
11/1/14 |
|
145,000 |
|
|
148,987 |
# |
Helix Energy Solutions Group 144A |
|
|
|
|
|
|
9.50% 1/15/16 |
|
156,000 |
|
|
158,729 |
# |
Hercules Offshore 144A |
|
|
|
|
|
|
10.50% 10/15/17 |
|
145,000 |
|
|
147,175 |
# |
Hilcorp Energy I 144A |
|
|
|
|
|
|
7.75% 11/1/15 |
|
47,000 |
|
|
45,473 |
|
9.00% 6/1/16 |
|
94,000 |
|
|
94,705 |
# |
Holly 144A 9.875% 6/15/17 |
|
121,000 |
|
|
126,143 |
* |
Key Energy Services 8.375% 12/1/14 |
|
141,000 |
|
|
138,356 |
|
Mariner Energy 8.00% 5/15/17 |
|
118,000 |
|
|
112,100 |
|
MarkWest Energy Partners/Finance |
|
|
|
|
|
|
8.75% 4/15/18 |
|
130,000 |
|
|
131,625 |
|
OPTI Canada |
|
|
|
|
|
|
7.875% 12/15/14 |
|
116,000 |
|
|
92,800 |
|
8.25% 12/15/14 |
|
67,000 |
|
|
53,935 |
|
PetroHawk Energy |
|
|
|
|
|
|
7.875% 6/1/15 |
|
80,000 |
|
|
80,200 |
|
9.125% 7/15/13 |
|
52,000 |
|
|
54,210 |
|
Petroleum Development |
|
|
|
|
|
|
12.00% 2/15/18 |
|
118,000 |
|
|
119,770 |
|
Plains Exploration & Production |
|
|
|
|
|
|
8.625% 10/15/19 |
|
40,000 |
|
|
40,300 |
|
Quicksilver Resources |
|
|
|
|
|
|
7.125% 4/1/16 |
|
115,000 |
|
|
104,363 |
|
11.75% 1/1/16 |
|
33,000 |
|
|
36,836 |
|
Regency Energy Partners |
|
|
|
|
|
|
8.375% 12/15/13 |
|
57,000 |
|
|
58,853 |
# |
SandRidge Energy 144A |
|
|
|
|
|
|
9.875% 5/15/16 |
|
123,000 |
|
|
126,690 |
|
|
|
|
|
|
2,650,897 |
Finance & Investments –
1.26% |
|
|
|
|
|
·# |
C5 Capital 144A 6.196% 12/31/49 |
|
100,000 |
|
|
69,663 |
|
Cardtronics 9.25% 8/15/13 |
|
130,000 |
|
|
132,926 |
|
International Lease Finance |
|
|
|
|
|
|
5.25% 1/10/13 |
|
85,000 |
|
|
68,553 |
|
5.35% 3/1/12 |
|
15,000 |
|
|
12,801 |
|
5.55% 9/5/12 |
|
50,000 |
|
|
40,295 |
|
5.625% 9/20/13 |
|
120,000 |
|
|
94,515 |
|
6.375% 3/25/13 |
|
25,000 |
|
|
20,139 |
|
6.625% 11/15/13 |
|
70,000 |
|
|
56,547 |
·# |
MetLife Capital Trust X 144A |
|
|
|
|
|
|
9.25% 4/8/38 |
|
100,000 |
|
|
105,000 |
@# |
Nuveen Investments 144A |
|
|
|
|
|
|
10.50% 11/15/15 |
|
269,000 |
|
|
238,064 |
|
|
|
|
|
|
838,503 |
Media – 3.09% |
|
|
|
|
|
|
Affinion Group I 11.50%
10/15/15 |
|
70,000 |
|
|
73,150 |
# |
Cablevision Systems 144A |
|
|
|
|
|
|
8.625% 9/15/17 |
|
80,000 |
|
|
82,400 |
# |
Cengage Learning Acquisitions
144A |
|
|
|
|
|
|
10.50% 1/15/15 |
|
85,000 |
|
|
79,263 |
# |
Charter Communications |
|
|
|
|
|
|
Operating 144A |
|
|
|
|
|
|
10.00% 4/30/12 |
|
33,000 |
|
|
33,743 |
|
10.375% 4/30/14 |
|
66,000 |
|
|
67,485 |
|
12.875% 9/15/14 |
|
273,000 |
|
|
305,418 |
# |
Columbus International 144A |
|
|
|
|
|
|
11.50% 11/20/14 |
|
135,000 |
|
|
138,888 |
# |
DISH DBS 144A 7.875% 9/1/19 |
|
150,000 |
|
|
151,874 |
# |
MDC Partners 144A 11.00%
11/1/16 |
|
70,000 |
|
|
70,350 |
# |
Mediacom Capital 144A |
|
|
|
|
|
|
9.125% 8/15/19 |
|
95,000 |
|
|
96,900 |
|
Nielsen Finance |
|
|
|
|
|
|
W12.50% 8/1/16 |
|
66,000 |
|
|
58,080 |
|
10.00% 8/1/14 |
|
75,000 |
|
|
77,813 |
|
11.50% 5/1/16 |
|
35,000 |
|
|
37,800 |
|
11.625% 2/1/14 |
|
2,000 |
|
|
2,160 |
|
#144A 11.625% 2/1/14 |
|
40,000 |
|
|
43,200 |
*# |
Sinclair Television Group 144A |
|
|
|
|
|
|
9.25% 11/1/17 |
|
110,000 |
|
|
112,063 |
# |
Terremark Worldwide 144A |
|
|
|
|
|
|
12.00% 6/15/17 |
|
66,000 |
|
|
72,353 |
# |
Univision Communications 144A |
|
|
|
|
|
|
12.00%
7/1/14 |
|
103,000 |
|
|
112,528 |
# |
UPC Holding 144A 9.875%
4/15/18 |
|
100,000 |
|
|
104,500 |
# |
XM Satellite Radio 144A |
|
|
|
|
|
|
13.00% 8/1/13 |
|
130,000 |
|
|
135,525 |
|
XM Satellite Radio Holdings
PIK |
|
|
|
|
|
|
10.00% 6/1/11 |
|
203,000 |
|
|
194,879 |
|
|
|
|
|
|
2,050,372 |
Real Estate – 0.23% |
|
|
|
|
|
|
Developers Diversified Realty |
|
|
|
|
|
|
9.625% 3/15/16 |
|
25,000 |
|
|
26,062 |
# |
Felcor Lodging 144A |
|
|
|
|
|
|
10.00%
10/1/14 |
|
130,000 |
|
|
127,400 |
|
|
|
|
|
|
153,462 |
Services Cyclical – 4.24% |
|
|
|
|
|
* |
ARAMARK 8.50% 2/1/15 |
|
87,000 |
|
|
87,653 |
# |
Ashtead Capital 144A 9.00%
8/15/16 |
|
100,000 |
|
|
98,500 |
|
Avis Budget Car Rental |
|
|
|
|
|
|
7.625% 5/15/14 |
|
190,000 |
|
|
175,750 |
|
7.75% 5/15/16 |
|
80,000 |
|
|
72,000 |
|
Delta Air Lines |
|
|
|
|
|
|
7.92% 11/18/10 |
|
61,000 |
|
|
61,000 |
|
#144A 9.50% 9/15/14 |
|
65,000 |
|
|
66,300 |
# |
Galaxy Entertainment Finance 144A |
|
|
|
|
|
|
9.875% 12/15/12 |
|
240,000 |
|
|
242,399 |
|
Gaylord Entertainment |
|
|
|
|
|
|
6.75% 11/15/14 |
|
66,000 |
|
|
60,060 |
# |
General Maritime 144A |
|
|
|
|
|
|
12.00% 11/15/17 |
|
85,000 |
|
|
88,613 |
|
Global Cash Access 8.75%
3/15/12 |
|
41,000 |
|
|
40,334 |
(continues) 13
Statement
of net assets
Delaware Investments® Dividend and Income
Fund, Inc.
|
|
Principal |
|
|
|
|
|
Amount |
|
Value |
Corporate Bonds (continued) |
|
|
|
|
|
Services Cyclical (continued) |
|
|
|
|
|
# |
Harrah’s Operating 144A |
|
|
|
|
|
|
10.00%
12/15/18 |
$ |
289,000 |
|
$ |
221,084 |
* |
Hertz 10.50% 1/1/16 |
|
91,000 |
|
|
95,095 |
# |
Kansas City Southern de Mexico
144A |
|
|
|
|
|
|
12.50% 4/1/16 |
|
100,000 |
|
|
114,500 |
|
MGM MIRAGE |
|
|
|
|
|
|
*6.625% 7/15/15 |
|
42,000 |
|
|
31,500 |
|
7.50% 6/1/16 |
|
42,000 |
|
|
32,025 |
|
*7.625% 1/15/17 |
|
145,000 |
|
|
110,925 |
|
13.00% 11/15/13 |
|
101,000 |
|
|
115,014 |
|
#144A 11.375% 3/1/18 |
|
75,000 |
|
|
65,063 |
|
Mohegan Tribal Gaming
Authority |
|
|
|
|
|
|
7.125% 8/15/14 |
|
100,000 |
|
|
63,500 |
*# |
NCL 144A 11.75% 11/15/16 |
|
75,000 |
|
|
74,344 |
@‡ |
Northwest Airlines 10.00%
2/1/10 |
|
55,000 |
|
|
413 |
|
PHH 7.125% 3/1/13 |
|
140,000 |
|
|
131,250 |
|
Pinnacle Entertainment 7.50%
6/15/15 |
|
226,000 |
|
|
202,269 |
|
Royal Caribbean Cruises |
|
|
|
|
|
|
6.875% 12/1/13 |
|
80,000 |
|
|
75,600 |
|
RSC Equipment Rental |
|
|
|
|
|
|
9.50% 12/1/14 |
|
202,000 |
|
|
198,718 |
|
#144A 10.25% 11/15/19 |
|
15,000 |
|
|
14,625 |
# |
ServiceMaster PIK 144A |
|
|
|
|
|
|
10.75% 7/15/15 |
|
155,000 |
|
|
157,324 |
# |
Shingle Springs Tribal Gaming |
|
|
|
|
|
|
Authority 144A 9.375% 6/15/15 |
|
171,000 |
|
|
124,830 |
|
|
|
|
|
|
2,820,688 |
Services Non-Cyclical – 1.70% |
|
|
|
|
|
# |
Alliance HealthCare Services 144A |
|
|
|
|
|
|
8.00% 12/1/16 |
|
70,000 |
|
|
69,300 |
|
Casella Waste Systems 9.75%
2/1/13 |
|
137,000 |
|
|
134,260 |
|
Community Health Systems |
|
|
|
|
|
|
8.875% 7/15/15 |
|
62,000 |
|
|
63,395 |
|
Cornell 10.75% 7/1/12 |
|
52,000 |
|
|
53,300 |
|
HCA PIK 9.625% 11/15/16 |
|
255,000 |
|
|
272,531 |
|
Psychiatric Solutions |
|
|
|
|
|
|
7.75% 7/15/15 |
|
94,000 |
|
|
91,180 |
|
#144A 7.75% 7/15/15 |
|
42,000 |
|
|
39,690 |
|
Select Medical 7.625% 2/1/15 |
|
179,000 |
|
|
172,288 |
|
Tenet Healthcare 7.375% 2/1/13 |
|
70,000 |
|
|
69,300 |
· |
US Oncology Holdings PIK |
|
|
|
|
|
|
6.428% 3/15/12 |
|
180,000 |
|
|
162,900 |
|
|
|
|
|
|
1,128,144 |
Technology & Electronics –
1.34% |
|
|
|
|
|
# |
Advanced Micro Devices 144A |
|
|
|
|
|
|
8.125% 12/15/17 |
|
30,000 |
|
|
28,463 |
|
Avago Technologies Finance |
|
|
|
|
|
|
10.125% 12/1/13 |
|
75,000 |
|
|
79,031 |
|
First Data 9.875% 9/24/15 |
|
295,000 |
|
|
264,025 |
* |
Freescale Semiconductor |
|
|
|
|
|
|
8.875% 12/15/14 |
|
173,000 |
|
|
147,915 |
|
Sanmina-SCI 8.125% 3/1/16 |
|
154,000 |
|
|
150,535 |
* |
SunGard Data Systems 10.25% 8/15/15 |
|
138,000 |
|
|
142,140 |
# |
Unisys 144A 12.75% 10/15/14 |
|
71,000 |
|
|
79,520 |
|
|
|
|
|
|
891,629 |
Telecommunications – 6.27% |
|
|
|
|
|
|
Cincinnati Bell 8.25% 10/15/17 |
|
105,000 |
|
|
104,738 |
# |
Clearwire Communications 144A |
|
|
|
|
|
|
12.00% 12/1/15 |
|
295,000 |
|
|
290,788 |
* |
Cricket Communications |
|
|
|
|
|
|
9.375% 11/1/14 |
|
222,000 |
|
|
214,785 |
# |
Digicel Group 144A |
|
|
|
|
|
|
8.25% 9/1/17 |
|
110,000 |
|
|
108,075 |
|
*8.875% 1/15/15 |
|
100,000 |
|
|
97,500 |
# |
DigitalGlobe 144A 10.50% 5/1/14 |
|
61,000 |
|
|
65,575 |
# |
GCI 144A 8.625% 11/15/19 |
|
145,000 |
|
|
145,725 |
# |
GeoEye 144A 9.625% 10/1/15 |
|
65,000 |
|
|
67,763 |
# |
Global Crossing 144A 12.00%
9/15/15 |
|
135,000 |
|
|
144,450 |
|
Hughes Network Systems |
|
|
|
|
|
|
9.50% 4/15/14 |
|
127,000 |
|
|
128,905 |
# |
Intelsat Bermuda 144A |
|
|
|
|
|
|
11.25% 2/4/17 |
|
283,000 |
|
|
281,584 |
|
Intelsat Jackson Holdings |
|
|
|
|
|
|
11.25% 6/15/16 |
|
236,000 |
|
|
253,109 |
|
Level 3 Financing |
|
|
|
|
|
|
9.25% 11/1/14 |
|
66,000 |
|
|
58,575 |
|
12.25% 3/15/13 |
|
66,000 |
|
|
69,218 |
|
Lucent Technologies 6.45% 3/15/29 |
|
156,000 |
|
|
120,900 |
* |
MetroPCS Wireless 9.25%
11/1/14 |
|
214,000 |
|
|
215,605 |
# |
NII Capital 144A 10.00% 8/15/16 |
|
138,000 |
|
|
146,970 |
# |
Nordic Telephone Holdings 144A |
|
|
|
|
|
|
8.875% 5/1/16 |
|
75,000 |
|
|
79,125 |
|
PAETEC Holding 8.875% 6/30/17 |
|
71,000 |
|
|
70,823 |
# |
Qwest 144A 8.375% 5/1/16 |
|
5,000 |
|
|
5,250 |
|
Qwest Communications International |
|
|
|
|
|
|
7.50% 2/15/14 |
|
61,000 |
|
|
60,695 |
|
Sprint Capital |
|
|
|
|
|
|
6.00% 12/1/16 |
|
94,000 |
|
|
81,545 |
|
6.875% 11/15/28 |
|
65,000 |
|
|
49,075 |
|
8.75% 3/15/32 |
|
305,000 |
|
|
262,680 |
# |
Telcordia Technologies 144A |
|
|
|
|
|
|
10.00% 3/15/13 |
|
85,000 |
|
|
70,975 |
|
Telesat Canada |
|
|
|
|
|
|
11.00% 11/1/15 |
|
80,000 |
|
|
85,000 |
|
12.50% 11/1/17 |
|
94,000 |
|
|
101,520 |
|
US West Capital Funding |
|
|
|
|
|
|
7.75% 2/15/31 |
|
80,000 |
|
|
65,200 |
|
US West Communications |
|
|
|
|
|
|
7.25% 9/15/25 |
|
90,000 |
|
|
79,650 |
# |
Viasat 144A 8.875% 9/15/16 |
|
75,000 |
|
|
76,031 |
# |
VimpelCom 144A 9.125% 4/30/18 |
|
150,000 |
|
|
158,250 |
|
Virgin Media Finance 8.375%
10/15/19 |
|
100,000 |
|
|
100,500 |
|
West 11.00% 10/15/16 |
|
110,000 |
|
|
111,375 |
# |
Wind Acquisition Finance 144A |
|
|
|
|
|
|
10.75% 12/1/15 |
|
75,000 |
|
|
80,625 |
|
11.75% 7/15/17 |
|
100,000 |
|
|
111,500 |
|
|
|
|
|
|
4,164,084 |
14
|
|
Principal |
|
|
|
|
|
|
Amount |
|
Value |
Corporate Bonds (continued) |
|
|
|
|
|
|
Utilities – 1.87% |
|
|
|
|
|
|
|
AES |
|
|
|
|
|
|
|
7.75% 3/1/14 |
$ |
83,000 |
|
$ |
83,623 |
|
|
8.00% 10/15/17 |
|
47,000 |
|
|
47,118 |
|
* |
Edison Mission Energy 7.00% 5/15/17 |
|
125,000 |
|
|
91,875 |
|
|
Elwood Energy 8.159% 7/5/26 |
|
167,845 |
|
|
151,422 |
|
|
Energy Future Holdings |
|
|
|
|
|
|
|
10.875% 11/1/17 |
|
66,000 |
|
|
46,695 |
|
* |
Mirant Americas Generation |
|
|
|
|
|
|
|
8.50% 10/1/21 |
|
200,000 |
|
|
181,999 |
|
w
|
Mirant Mid Atlantic Pass Through |
|
|
|
|
|
|
|
Trust Series A 8.625% 6/30/12 |
|
59,067 |
|
|
60,027 |
|
|
NRG Energy |
|
|
|
|
|
|
|
7.375% 2/1/16 |
|
144,000 |
|
|
143,640 |
|
|
7.375% 1/15/17 |
|
45,000 |
|
|
44,775 |
|
|
Orion Power Holdings 12.00% 5/1/10 |
|
116,000 |
|
|
119,770 |
|
· |
Puget Sound Energy 6.974%
6/1/67 |
|
110,000 |
|
|
97,200 |
|
* |
Texas Competitive Electric Holdings |
|
|
|
|
|
|
|
10.50% 11/1/15 |
|
141,000 |
|
|
100,815 |
|
|
TXU 5.55% 11/15/14 |
|
105,000 |
|
|
72,975 |
|
|
|
|
|
|
|
1,241,934 |
|
Total Corporate Bonds |
|
|
|
|
|
|
|
(cost $26,905,306) |
|
|
|
|
28,614,370 |
|
|
|
|
«Senior Secured Loans –
0.57% |
|
|
|
|
|
|
|
Chester Downs & Marina Term |
|
|
|
|
|
|
|
Tranche Loan 12.375% 12/31/16 |
|
72,000 |
|
|
72,180 |
|
|
PQ Term Tranche Loan 6.79%
7/30/15 |
|
170,000 |
|
|
142,658 |
|
|
Texas Competitive Electric Holdings |
|
|
|
|
|
|
|
Term Tranche Loan B2 |
|
|
|
|
|
|
|
3.742% 10/10/14 |
|
115,414 |
|
|
86,550 |
|
|
Univision Communications Term |
|
|
|
|
|
|
|
Tranche Loan B 2.533% 9/29/14 |
|
90,000 |
|
|
74,318 |
|
Total Senior Secured
Loans |
|
|
|
|
|
|
|
(cost $341,745) |
|
|
|
|
375,706 |
|
|
|
|
|
|
Number of |
|
|
|
|
|
|
Shares |
|
|
|
|
Exchange Traded Fund –
0.03% |
|
|
|
|
|
|
Equity Fund – 0.03% |
|
|
|
|
|
|
|
*ProShares UltraShort Real
Estate |
|
2,400 |
|
|
20,904 |
|
Total Exchange Traded
Fund |
|
|
|
|
|
|
|
(cost $59,893) |
|
|
|
|
20,904 |
|
|
|
|
Limited Partnerships –
0.24% |
|
|
|
|
|
|
|
Blackstone Group |
|
3,000 |
|
|
41,520 |
|
|
Brookfield Infrastructure
Partners |
|
7,600 |
|
|
117,040 |
|
Total Limited
Partnerships |
|
|
|
|
|
|
|
(cost $184,721) |
|
|
|
|
158,560 |
|
|
|
|
Warrant – 0.00% |
|
|
|
|
|
|
=† |
Port Townsend |
|
70 |
|
|
1 |
|
Total Warrant (cost $1,680) |
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
Principal |
|
|
|
|
|
|
Amount |
|
|
¹Discount Note – 2.39% |
|
|
|
|
|
|
|
Federal Home Loan Bank |
|
|
|
|
|
|
|
0.02% 12/1/09 |
$ |
1,587,002 |
|
$ |
1,587,002 |
|
Total Discount Note (cost $1,587,002) |
|
|
|
|
1,587,002 |
|
|
Total Value of Securities
Before |
|
|
|
|
|
|
|
Securities Lending Collateral –
129.59% |
|
|
|
|
|
(cost $88,768,210) |
|
|
|
|
86,075,519 |
|
|
|
|
Number of |
|
|
|
|
|
|
Shares |
|
|
|
|
Securities Lending Collateral** –
6.11% |
|
|
|
|
|
|
|
Investment Companies |
|
|
|
|
|
|
|
Mellon GSL DBT II Collateral
Fund |
|
1,228,217 |
|
|
1,228,217 |
|
|
BNY Mellon SL DBT II |
|
|
|
|
|
|
|
Liquidating Fund |
|
2,855,882 |
|
|
2,824,753 |
|
|
@†Mellon GSL Reinvestment Trust
II |
|
163,237 |
|
|
6,938 |
|
Total Securities Lending
Collateral |
|
|
|
|
|
|
|
(cost $4,247,336) |
|
|
|
|
4,059,908 |
|
|
Total Value of Securities –
135.70% |
|
|
|
|
|
|
|
(cost $93,015,546) |
|
|
|
|
90,135,427 |
© |
Obligation to Return
Securities |
|
|
|
|
|
|
|
Lending Collateral** –
(6.39%) |
|
|
|
|
(4,247,336 |
) |
Borrowing Under Line of Credit –
(30.45%) |
|
|
(20,225,000 |
) |
Receivables and
Other Assets |
|
|
|
|
|
|
|
Net of Liabilities –
1.14% |
|
|
|
|
757,501 |
|
Net Assets Applicable to
9,439,043 |
|
|
|
|
|
|
|
Shares Outstanding; Equivalent
to |
|
|
|
|
|
|
|
$7.04 Per Share –
100.00% |
|
|
|
$ |
66,420,592 |
|
|
Components of Net Assets at November 30,
2009: |
|
|
|
|
Common stock, $0.01 par value, |
|
|
|
|
|
|
|
500,000,000 shares authorized to the
Fund |
|
$ |
97,186,304 |
|
Distributions in excess of net
investment income |
|
|
(66,931 |
) |
Accumulated net realized loss on
investments |
|
|
(27,818,662 |
) |
Net unrealized depreciation of
investments |
|
|
|
|
|
|
|
and foreign currencies |
|
|
|
|
(2,880,119 |
) |
Total net assets |
|
|
|
$ |
66,420,592 |
|
† |
Non income
producing security.
|
‡ |
Non income
producing security. Security is currently in default.
|
· |
Variable rate
security. The rate shown is the rate as of November 30,
2009.
|
¹ |
The rate shown is
the effective yield at the time of purchase.
|
@ |
Illiquid security.
At November 30, 2009, the aggregate amount of illiquid securities was
$612,268, which represented 0.92% of the Fund’s net assets. See Note 10 in
“Notes to financial statements.”
|
∏ |
Restricted Security. These investments are in
securities not registered under the Securities Act of 1933, as amended,
and have certain restrictions on resale which may limit their liquidity.
At November 30, 2009, the aggregate amount of the restricted securities
was $4 or 0.00% of the Fund’s net assets. See Note 10 in “Notes to
financial statements.” |
(continues) 15
Statement
of net assets
Delaware Investments® Dividend and Income
Fund, Inc.
|
|
= |
Security is being
fair valued in accordance with the Fund’s fair valuation policy. At
November 30, 2009, the aggregate amount of fair valued securities was
$74,384, which represented 0.11% of the Fund’s net assets. See Note 1 in
“Notes to financial statements.”
|
# |
Security exempt from registration
under Rule 144A of the Securities Act of 1933, as amended. At November 30,
2009, the aggregate amount of Rule 144A securities was $15,370,289, which
represented 23.14% of the Fund’s net assets. See Note 10 in “Notes to
financial statements.” |
« |
Senior Secured Loans generally pay
interest at rates which are periodically redetermined by reference to a
base lending rate plus a premium. These base lending rates are generally:
(i) the prime rate offered by one or more United States banks, (ii) the
lending rate offered by one or more European banks such as the London
Inter-Bank Offered Rate (LIBOR), and (iii) the certificate of deposit
rate. Senior Secured Loans may be
subject to restrictions on resale. Stated rate in effect at November 30,
2009. |
W |
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.
|
Φ |
Step coupon bond.
Coupon increases/decreases periodically based on a predetermined schedule.
Stated rate in effect at November 30, 2009.
|
w |
Pass Through
Agreement. Security represents the contractual right to receive a
proportionate amount of underlying payments due to the counterparty
pursuant to various agreements related to the rescheduling of obligations
and the exchange of certain notes.
|
* |
Fully or partially
on loan.
|
** |
See Note 9 in
“Notes to financial statements.”
|
© |
Includes $4,253,690 of securities
loaned. |
Summary of
Abbreviations:
ADR —
American Depositary Receipts
PIK — Pay-in-kind
REIT — Real Estate
Investment Trust
See accompanying
notes
16
Statement of
operations
Delaware Investments® Dividend and Income
Fund, Inc.
Year Ended November 30,
2009
Investment Income: |
|
|
|
|
|
|
Dividends |
$ |
1,756,045 |
|
|
|
|
Interest |
|
3,270,000 |
|
|
|
|
Securities lending income |
|
36,455 |
|
$ |
5,062,500 |
|
|
Expenses: |
|
|
|
|
|
|
Management fees |
|
424,571 |
|
|
|
|
Reports to shareholders |
|
122,610 |
|
|
|
|
Dividend disbursing and transfer agent fees and
expenses |
|
94,780 |
|
|
|
|
Legal fees |
|
45,510 |
|
|
|
|
Accounting and administration
expenses |
|
30,879 |
|
|
|
|
NYSE fees |
|
23,750 |
|
|
|
|
Leverage expenses |
|
18,958 |
|
|
|
|
Audit and tax |
|
16,363 |
|
|
|
|
Pricing fees |
|
15,128 |
|
|
|
|
Dues and services |
|
6,895 |
|
|
|
|
Directors’ fees |
|
4,004 |
|
|
|
|
Custodian fees |
|
3,931 |
|
|
|
|
Insurance fees |
|
1,668 |
|
|
|
|
Consulting fees |
|
783 |
|
|
|
|
Registration fees |
|
643 |
|
|
|
|
Directors’ expenses |
|
277 |
|
|
810,750 |
|
Less expense paid indirectly |
|
|
|
|
(274 |
) |
Total operating expenses (before interest
expense) |
|
|
|
|
810,476 |
|
Interest expense |
|
|
|
|
230,345 |
|
Total operating expenses (after interest
expense) |
|
|
|
|
1,040,821 |
|
Net Investment Income |
|
|
|
|
4,021,679 |
|
|
Net Realized and Unrealized Gain (Loss)
on Investments and Foreign Currencies: |
|
|
|
|
|
|
Net realized loss on: |
|
|
|
|
|
|
Investments |
|
|
|
|
(10,717,121 |
) |
Swap contracts |
|
|
|
|
(5,260 |
) |
Foreign currencies |
|
|
|
|
(249 |
) |
Net realized loss |
|
|
|
|
(10,722,630 |
) |
Net change in unrealized
appreciation/depreciation of investments and foreign
currencies |
|
|
|
|
31,142,775 |
|
Net Realized and Unrealized Gain on
Investments and Foreign Currencies |
|
|
|
|
20,420,145 |
|
|
Net Increase in Net Assets Resulting
from Operations |
|
|
|
$ |
24,441,824 |
|
See accompanying
notes
17
Statements of changes in
net assets
Delaware Investments® Dividend and Income
Fund, Inc.
|
Year Ended |
|
11/30/09 |
|
11/30/08 |
Increase (Decrease) in Net Assets from
Operations: |
|
|
|
|
|
|
|
Net investment
income |
$ |
4,021,679 |
|
|
$ |
5,021,360 |
|
Net realized loss on
investments |
|
(10,722,630 |
) |
|
|
(16,172,098 |
) |
Net change in unrealized
appreciation/depreciation of investments |
|
31,142,775 |
|
|
|
(46,110,238 |
) |
Net increase (decrease) in net assets resulting
from operations |
|
24,441,824 |
|
|
|
(57,260,976 |
) |
|
Dividends and Distributions to
Shareholders from:1 |
|
|
|
|
|
|
|
Net investment income |
|
(3,988,862 |
) |
|
|
(5,710,800 |
) |
Tax return of capital |
|
(2,947,565 |
) |
|
|
(4,120,447 |
) |
|
|
(6,936,427 |
) |
|
|
(9,831,247 |
) |
Capital Share
Transactions: |
|
|
|
|
|
|
|
Cost of shares repurchased2 |
|
(2,916,169 |
) |
|
|
(5,004,526 |
) |
Decrease in net assets derived from capital
share transactions |
|
(2,916,169 |
) |
|
|
(5,004,526 |
) |
Net Increase (Decrease) in Net
Assets |
|
14,589,228 |
|
|
|
(72,096,749 |
) |
|
Net Assets: |
|
|
|
|
|
|
|
Beginning of year |
|
51,831,364 |
|
|
|
123,928,113 |
|
End of year (including distributions in excess
of |
|
|
|
|
|
|
|
net investment income of $66,931 and
$156,700, respectively) |
$ |
66,420,592 |
|
|
$ |
51,831,364 |
|
1See Note 4 in “Notes to financial statements.”
2See Note 6 in “Notes to financial
statements.”
See accompanying
notes
18
Statement of cash
flows
Delaware Investments® Dividend and Income Fund, Inc.
Year Ended November 30,
2009
Net Cash Provided by Operating
Activities: |
|
|
|
Net increase in net assets resulting from operations |
$ |
24,441,824 |
|
|
Adjustments to reconcile net decrease in net assets from |
|
|
|
operations to cash provided by operating activities: |
|
|
|
Amortization of premium and discount on investments purchased |
|
(392,275 |
) |
Purchase of investment securities |
|
(48,237,972 |
) |
Proceeds from disposition of investment securities |
|
51,950,262 |
|
Proceeds from disposition of short-term investment securities,
net |
|
2,652,908 |
|
Net realized loss from investment transactions |
|
10,948,938 |
|
Net change in net unrealized appreciation/depreciation of investments and
foreign currencies |
|
(31,142,775 |
) |
Decrease in receivable for investments sold |
|
121,116 |
|
Decrease in interest and dividends receivable and other assets |
|
107,091 |
|
Increase in payable for investments purchased |
|
254,540 |
|
Decrease in interest payable |
|
(11,965 |
) |
Decrease in accrued expenses |
|
(47,269 |
) |
Total adjustments |
|
(13,797,401 |
) |
Net cash provided by operating
activities |
|
10,644,423 |
|
|
Cash Flows Used for Financing
Activities: |
|
|
|
Cash dividends and
distributions paid |
|
(6,936,427 |
) |
Purchase of fund shares (tender offer) |
|
(2,916,169 |
) |
Net cash used for financing activities |
|
(9,852,596 |
) |
Net increase in cash |
|
791,827 |
|
Cash (overdraft) at beginning of year |
|
(774,889 |
) |
Cash at end of year |
$ |
16,938 |
|
|
Cash paid for interest expense for
leverage |
$ |
242,310 |
|
See accompanying
notes
19
Financial
highlights
Delaware Investments® Dividend and Income Fund, Inc.
Selected data for each
share of the Fund outstanding throughout each period were as
follows:
|
|
Year
Ended |
|
|
11/30/09 |
|
|
11/30/08 |
|
|
11/30/07 |
|
|
11/30/06 |
|
|
11/30/05 |
|
Net asset value, beginning of
period |
|
$5.220 |
|
|
$11.850 |
|
|
$14.200 |
|
|
$12.650 |
|
|
$12.960 |
|
|
Income (loss) from investment
operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income1 |
|
0.413 |
|
|
0.490 |
|
|
0.408 |
|
|
0.470 |
|
|
0.623 |
|
Net realized and unrealized gain (loss)
on investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
foreign currencies |
|
2.120 |
|
|
(6.160 |
) |
|
(0.640 |
) |
|
2.150 |
|
|
0.027 |
|
Total from investment operations |
|
2.533 |
|
|
(5.670 |
) |
|
(0.232 |
) |
|
2.620 |
|
|
0.650 |
|
|
Less dividends and distributions
from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income |
|
(0.410 |
) |
|
(0.558 |
) |
|
(0.553 |
) |
|
(0.486 |
) |
|
(0.722 |
) |
Net realized gain on
investments |
|
— |
|
|
— |
|
|
(0.912 |
) |
|
(0.584 |
) |
|
(0.238 |
) |
Return of capital |
|
(0.303 |
) |
|
(0.402 |
) |
|
(0.653 |
) |
|
— |
|
|
— |
|
Total dividends and
distributions |
|
(0.713 |
) |
|
(0.960 |
) |
|
(2.118 |
) |
|
(1.070 |
) |
|
(0.960 |
) |
|
Net asset value, end of
period |
|
$7.040 |
|
|
$5.220 |
|
|
$11.850 |
|
|
$14.200 |
|
|
$12.650 |
|
|
Market value, end of
period |
|
$6.600 |
|
|
$4.020 |
|
|
$10.660 |
|
|
$13.460 |
|
|
$12.550 |
|
|
Total return based on:2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value |
|
53.26% |
|
|
(50.35% |
) |
|
(0.94% |
) |
|
22.41% |
|
|
5.44% |
|
Market value |
|
86.93% |
|
|
(57.51% |
) |
|
(5.99% |
) |
|
16.96% |
|
|
15.38% |
|
|
Ratios and supplemental
data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets, end of period (000 omitted) |
|
$66,421 |
|
|
$51,831 |
|
|
$123,928 |
|
|
$156,324 |
|
|
$146,638 |
|
Ratio of expenses to average net
assets |
|
1.83% |
|
|
2.39% |
|
|
2.71% |
|
|
2.71% |
|
|
2.20% |
|
Ratio of expenses to adjusted average net assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(before interest expense)3 |
|
1.05% |
|
|
0.88% |
|
|
0.84% |
|
|
0.88% |
|
|
0.91% |
|
Ratio of interest expense to adjusted
average net assets3 |
|
0.30% |
|
|
0.80% |
|
|
1.25% |
|
|
1.19% |
|
|
0.78% |
|
Ratio of net investment income to average net assets |
|
7.06% |
|
|
5.12% |
|
|
2.92% |
|
|
3.59% |
|
|
4.81% |
|
Ratio of net investment income to
adjusted average net assets3 |
|
5.21% |
|
|
3.59% |
|
|
2.27% |
|
|
2.74% |
|
|
3.70% |
|
Portfolio turnover |
|
65% |
|
|
64% |
|
|
49% |
|
|
63% |
|
|
94% |
|
|
Leverage Analysis: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt outstanding at end of period at par (000 omitted) |
|
$20,225 |
|
|
$20,225 |
|
|
$44,000 |
|
|
$44,000 |
|
|
$48,000 |
|
Asset coverage per $1,000 of debt
outstanding at end of period |
|
$4,284 |
|
|
$3,563 |
|
|
$3,820 |
|
|
$4,577 |
|
|
$4,073 |
|
|
1 The average
shares outstanding method has been applied for per share
information. |
2 Total investment
return is calculated assuming a purchase of common stock on the opening of
the first day and a sale on the closing of the last day of each period
reported. Dividends and distributions, if any, are assumed for the
purposes of this calculation, to be reinvested at prices obtained under
the Fund’s dividend reinvestment plan. Generally, total investment return
based on net asset value will be higher than total investment return based
on market value in periods where there is an increase in the discount or
decrease in the premium of the market value to the net asset value from
the beginning to the end of such periods. Conversely, total investment
return based on net asset value will be lower than total investment return
based on market value in periods where there is a decrease in the discount
or an increase in the premium of the market value to the net asset value
from the beginning to the end of such periods. |
3 Adjusted average
net assets excludes debt outstanding. |
See accompanying
notes
20
Notes to financial
statements
Delaware Investments® Dividend and Income Fund, Inc.
November 30,
2009
Delaware Investments
Dividend and Income Fund, Inc. (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 (NYSE) 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
(GAAP) 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 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 ask prices will be
used. Securities listed on a foreign exchange are valued at the last quoted
sales price on the valuation date. U.S. government and agency securities are
valued at the mean between the bid and ask prices. Other debt securities, credit
default swap (CDS) contracts and interest rate swap contracts are valued by an
independent pricing service or broker. To the extent current market prices are
not available, the pricing service may take into account developments related to
the specific security, as well as transactions in comparable securities.
Investment companies are valued at net asset value per share. Foreign currency
exchange contracts are valued at the mean between the bid and ask prices.
Interpolated values are derived when the settlement date of the contract is an
interim date for which quotations are not available. Generally, 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 (Board). 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 suspension of trading in a security.
The Fund may use fair value pricing more frequently for securities traded
primarily in non-U.S. markets because, among other things, most foreign markets
close well before the Fund values its securities at 4:00 p.m. Eastern time. The
earlier close of these foreign markets gives rise to the possibility that
significant events, including broad market moves, government actions or
pronouncements, aftermarket trading, or news events may have occurred in the
interim. To account for this, the Fund may frequently value foreign securities
using fair value prices based on third-party vendor modeling tools
(international fair value pricing).
Federal Income Taxes — No provision for federal income taxes has
been made as the Fund intends to continue to qualify for federal income tax
purposes as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended, and make the requisite distributions to
shareholders. The Fund evaluates tax positions taken or expected to be taken in
the course of preparing the Fund’s tax returns to determine whether the tax
positions are “more-likely-than-not” of being sustained by the applicable tax
authority. Tax positions not deemed to meet the more-likely-than-not threshold
are recorded as a tax benefit or expense in the current year. Management has
analyzed the Fund’s tax positions
taken on federal income tax returns for all open tax years (tax years ended
November 30, 2006 – November 30, 2009), and has concluded that no provision for
federal income tax is required in the Fund’s 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 to the
extent permitted and, if necessary, a return of capital.
Repurchase Agreements — The Fund may invest in a pooled cash account
along with members of the Delaware Investments Family of Funds pursuant to an
exemptive order issued by the Securities and Exchange Commission. The aggregate
daily balance of the pooled cash account is invested in repurchase agreements
secured by obligations of the U.S. government. The respective collateral is held
by the Fund’s custodian bank until the maturity of the respective repurchase
agreements. Each repurchase agreement is at least 102% collateralized. However,
in the event of default or bankruptcy by the counterparty to the agreement,
realization of the collateral may be subject to legal proceedings. At November
30, 2009, the Fund held no investments in repurchase agreements.
Foreign Currency Transactions
— Transactions denominated
in foreign currencies are recorded at the prevailing exchange rates on the
valuation date. The value of all assets and liabilities denominated in foreign
currencies is translated into U.S. dollars at the exchange rate of such
currencies against the U.S. dollar daily. Transaction gains or losses resulting
from changes in exchange rates during the reporting period or upon settlement of
the foreign currency transaction are reported in operations for the current
period. The Fund isolates that portion of realized gains and losses on
investments in debt securities, which is due to changes in foreign exchange
rates from that which is due to changes in market prices of debt securities. For
foreign equity securities, these changes are included in realized gains (losses)
on investments. The Fund reports certain foreign currency related transactions
as components of realized gains (losses) for financial reporting purposes,
whereas such components are treated as ordinary income (loss) for federal income
tax purposes.
Use of Estimates — The preparation of financial statements in
conformity with U.S. GAAP 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 directly attributable to the Fund
are charged directly to the Fund. Other expenses common to various funds within
the Delaware Investments Family of Funds are generally allocated amongst such
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 bonds are amortized to interest
income over the lives of the respective securities. Distributions received from
investments in
(continues) 21
Notes to
financial statements
Delaware Investments® Dividend and Income
Fund, Inc.
1. Significant Accounting Policies
(continued)
Real Estate Investment
Trusts (REITs) are recorded as dividend income on the ex-dividend date, subject
to reclassification upon notice of the character of such distributions by the
issuer.
Subject to seeking best
execution, 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. In general, best execution refers to many factors, including the price
paid or received for a security, the commission charged, the promptness and
reliability of execution, the confidentiality and placement accorded the order,
and other factors affecting the overall benefit obtained by the Fund on the
transaction. DMC, as defined below, and its affiliates have previously and may
in the future act as an investment advisor to mutual funds or separate accounts
affiliated with the administrator of the commission recapture program described
above. In addition, affiliates of the administrator act as consultants in
helping institutional clients choose investment advisors and may also
participate in other types of business and provide other services in the
investment management industry. There were no commission rebates the year ended
November 30, 2009.
The Fund receives
earnings credits from its custodian when positive cash balances are maintained,
which are used to offset custody fees. The expense paid under this arrangement
is included in custodian fees on the Statement of operations with the
corresponding expense offset shown as “expense paid indirectly.”
On July 1, 2009, the
Financial Accounting Standards Board (FASB) issued the FASB Accounting Standards
Codification (Codification). The Codification became the single source of
authoritative nongovernmental U.S. GAAP, superseding existing literature of the
FASB, American Institute of Certified Public Accountants, Emerging Issues Task
Force and other sources. The Codification is effective for interim and annual
periods ending after September 15, 2009. The Fund adopted the codification for
the year ended November 30, 2009. There was no impact to financial statements as
the Codification requirements are disclosure-only in nature.
Management has evaluated
whether any events or transactions occurred subsequent to November 30, 2009
through January 21, 2010, the date of issuance of the Fund’s financial
statements, and determined that there were no material events or transactions
that would require recognition or disclosure in the Fund’s financial
statements.
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% (calculated daily) of the adjusted average
weekly net assets of the Fund. For purposes of the calculation of investment
management fees, adjusted average weekly net assets excludes the line of credit
liability.
Delaware Service
Company, Inc. (DSC), an affiliate of DMC, provides fund accounting and financial
administration oversight services to the Fund. For these services, the Fund pays
DSC fees based on the aggregate daily net assets of the Delaware Investments
Family of Funds at the following
annual rate: 0.0050% of the first $30 billion; 0.0045% of the next $10 billion;
0.0040% of the next $10 billion; and 0.0025% of aggregate average daily net
assets in excess of $50 billion. The fees payable to DSC under the service
agreement described above are allocated among all Funds in the Delaware
Investments Family of Funds on a relative net asset value basis. For the year
ended November 30, 2009 the Fund was charged $3,860 for these services.
At November 30, 2009,
the Fund had liabilities payable to affiliates as follows:
Investment management fee payable to
DMC |
$ |
39,437 |
Fees and expenses payable to DSC |
|
354 |
Other expenses payable to DMC and
affiliates* |
|
2,720 |
*DMC, as part of its administrative 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 and
tax services, including internal legal and tax services provided to the Fund by
DMC and/or its affiliates’ employees. For the year ended November 30, 2009, the
Fund was charged 4,876 for internal legal and tax services provided by DMC
and/or its affiliates’ employees.
Directors’ fees include
expenses accrued by the Fund for each Directors’ retainer and per meeting fees.
Certain officers of DMC and DSC are officers and/or directors of the Fund. These
officers and directors are paid no compensation by the Fund.
3. Investments
For the year ended
November 30, 2009, the Fund made purchases of $48,237,972 and sales of
$51,950,262 of investment securities other than short-term investments.
At November 30, 2009,
the cost of investments for federal income tax purposes was $93,395,806. At
November 30, 2009, net unrealized depreciation was $3,260,379, of which
$6,026,772 related to unrealized appreciation of investments and $9,287,151
related to unrealized depreciation of investments.
The Fund applies the
provisions, as amended to date, of Accounting Standards Codification 820 (ASC
820), Fair Value Measurements and Disclosures. ASC 820 defines fair value as the
price that the Fund would receive to sell an asset or pay to transfer a
liability in an orderly transaction between market participants at the
measurement date under current market conditions. ASC 820 also establishes a
framework for measuring fair value, and a three level hierarchy for fair value
measurements based upon the transparency of inputs to the valuation of an asset
or liability. Inputs may be observable or unobservable and refer broadly to the
assumptions that market participants would use in pricing the asset or
liability. Observable inputs reflect the assumptions market participants would
use in pricing the asset or liability based on market data obtained from sources
independent of the reporting entity. Unobservable inputs reflect the reporting
entity’s own assumptions about the assumptions that market participants would
use in pricing the asset or liability developed based on the best information
available under the
22
circumstances. The
Fund’s investment in its entirety is assigned a level based upon the
observability of the inputs which are significant to the overall valuation. The
three-tier hierarchy of inputs is summarized below.
Level 1 – inputs are
quoted prices in active markets
Level 2 – inputs are
observable, directly or indirectly
Level 3 – inputs are
unobservable and reflect assumptions on the part of the reporting entity
The following table
summarizes the valuation of the Fund’s investments by ASC 820 fair value
hierarchy levels as of November 30, 2009:
|
Level
1 |
|
Level
2 |
|
Level
3 |
|
Total |
Common Stock |
$ |
44,063,017 |
|
$ |
— |
|
$ |
43 |
|
$ |
44,063,060 |
Corporate Debt |
|
— |
|
|
40,007,055 |
|
|
74,379 |
|
|
40,081,434 |
Investment |
|
|
|
|
|
|
|
|
|
|
|
Companies |
|
20,904 |
|
|
— |
|
|
— |
|
|
20,904 |
Short-Term |
|
— |
|
|
1,587,002 |
|
|
— |
|
|
1,587,002 |
Securities Lending |
|
|
|
|
|
|
|
|
|
|
|
Collateral |
|
1,228,217 |
|
|
2,824,753 |
|
|
6,938 |
|
|
4,059,908 |
Other |
|
158,560 |
|
|
143,918 |
|
|
20,641 |
|
|
323,119 |
Total |
$ |
45,470,698 |
|
$ |
44,562,728 |
|
$ |
102,001 |
|
$ |
90,135,427 |
The following is a
reconciliation of investments in which significant unobservable inputs (Level 3)
were used in determining fair value:
|
|
|
|
|
|
|
|
|
Securities |
|
|
|
|
|
|
|
|
|
Corporate |
|
Common |
|
Lending |
|
|
|
|
|
|
|
|
|
Debt |
|
Stock |
|
Collateral |
|
Other |
|
Total Fund |
Balance as of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11/30/08 |
$ |
362,100 |
|
|
$ |
4 |
|
|
$ |
13,385 |
|
|
$ |
525,893 |
|
|
$ |
901,382 |
|
Net purchases, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
sales, and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
settlements |
|
(498,263 |
) |
|
|
— |
|
|
|
— |
|
|
|
(533,793 |
) |
|
|
(1,032,056 |
) |
Net realized loss |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(427,726 |
) |
|
|
(427,726 |
) |
Net change in |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
unrealized |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
appreciation/ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
depreciation |
|
210,542 |
|
|
|
39 |
|
|
|
(6,447 |
) |
|
|
456,267 |
|
|
|
660,401 |
|
Balance as of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11/30/09 |
$ |
74,379 |
|
|
$ |
43 |
|
|
$ |
6,938 |
|
|
$ |
20,641 |
|
|
$ |
102,001 |
|
|
Net change in |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
unrealized |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
appreciation/ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
depreciation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
from |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
still held as |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of
11/30/09 |
$ |
(25,970 |
) |
|
$ |
39 |
|
|
$ |
(6,447 |
) |
|
$ |
(82,407 |
) |
|
$ |
(114,785 |
) |
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. GAAP. Additionally, distributions from
net gains on foreign currency transactions and net short-term gains on sales of
investment securities are treated as ordinary income for federal income tax
purposes. The tax character of dividends and distributions paid during the years
ended November 30, 2009 and 2008 was as follows:
|
Year Ended |
|
2009 |
|
2008 |
Ordinary income |
$ |
3,988,862 |
|
$ |
5,710,800 |
Return of capital |
|
2,947,565 |
|
|
4,120,447 |
Total |
$ |
6,936,427 |
|
$ |
9,831,247 |
5. Components of Net Assets on a Tax
Basis
As of November 30, 2009,
the components of net assets on a tax basis were as follows:
Shares of beneficial interest |
$ |
97,186,304 |
|
Capital loss carryforwards |
|
(27,438,402 |
) |
Unrealized depreciation of
investments |
|
|
|
and
foreign currencies |
|
(3,260,379 |
) |
Other temporary differences |
|
(66,931 |
) |
Net assets |
$ |
66,420,592 |
|
The differences between
book basis and tax basis components of net assets are primarily attributable to
tax deferral of losses on wash sales, contingent payment debt instruments, tax
treatment of partnership income and market discount and premium on debt
instruments.
For financial reporting
purposes, capital accounts are adjusted to reflect the tax character of
permanent book/tax differences. Reclassifications are primarily due to tax
treatment of dividends and distributions, partnership income, gain (loss) on
foreign currency transactions, market discount and premium on certain debt
instruments, REITs and CDS contracts. Results of operations and net assets were
not affected by these classifications. For the year ended November 30, 2009, the
Fund recorded the following reclassifications.
Distributions in excess of net
investment income |
$ |
56,952 |
|
Accumulated net realized loss |
|
120,223 |
|
Paid-in capital |
|
(177,175 |
) |
For federal income tax
purposes, capital loss carryforwards may be carried forward and applied against
future capital gains. Capital loss carryforwards remaining at November 30, 2009
will expire as follows: $16,115,503 expires in 2016 and $11,322,899 expires in
2017.
6. Capital Stock
Shares obtained under
the Fund’s dividend reinvestment plan are purchased by the Fund’s transfer
agent, The Bank of New York Mellon (BNY Mellon) Shareowner Services, in the open
market. There were no shares issued under the Fund’s dividend reinvestment plan
for the years ended November 30, 2009 and 2008.
(continues) 23
Notes to
financial statements
Delaware Investments® Dividend and Income
Fund, Inc.
6. Capital Stock
(continued)
On May 21, 2009, the
Fund’s Board approved a tender offer for shares of the Fund’s common stock. The
tender offer authorized the Fund to purchase up to 5% of its issued and
outstanding shares at a price equal to the Fund’s net asset value at the close
of business on the NYSE on June 29, 2009, the first business day following the
expiration of the offer. The tender offer commenced on June 1, 2009 and expired
on June 26, 2009.
In connection with the
tender offer, the Fund purchased 496,792 shares of capital stock at a total cost
of approximately $2,916,169. The tender offer was oversubscribed, and all
tenders of shares were subject to proration (at a ratio of approximately
0.879434237) in accordance with the terms of the tender offer.
On May 22, 2008, the
Fund’s Board approved a tender offer for shares of the Fund’s common stock. The
tender offer authorized the Fund to purchase up to 5% of its issued and
outstanding shares at a price equal to the Fund’s net asset value at the close
of business on the NYSE on June 30, 2008, the first business day following the
expiration of the offer. The tender offer commenced on May 30, 2008 and expired
on June 27, 2008. In connection with the tender offer, the Fund purchased
522,939 shares of capital stock at a total cost of $5,004,526.
The Fund did not
repurchase any shares under the Share Repurchase Program during the years ended
November 30, 2009 and 2008.
7. Line of Credit
Effective November 17,
2009, the Fund borrowed money pursuant to a $ 30,000,000 Credit Agreement with
BNY Mellon that expires on November 15, 2010. Prior to November 17, 2009, the
Credit Agreement was $44,000,000. Depending on market conditions, the amount
borrowed by the Fund pursuant to the Credit Agreement may be reduced or possibly
increased in the future.
At November 30, 2009,
the par value of loans outstanding was $20,225,000 at a variable interest rate
of 1.38%. During the year ended November 30, 2009, the average daily balance of
loans outstanding was $20,225,000 at a weighted average interest rate of
approximately 1.14%. Interest on borrowings is based on a variable short-term
rate plus an applicable margin. The commitment fee is computed at a rate of
0.25% per annum on the unused balance. The loan is collateralized by the Fund’s
portfolio.
8. Swap Contracts
The Fund may enter into
interest rate swap contracts, index swap contracts and CDS contracts in
accordance with its investment objectives. The Fund may use interest rate swaps
to adjust the Fund’s sensitivity to interest rates or to hedge against changes
in interest rates. Index swaps may be used to gain exposure to markets that the
Fund invests in, such as the corporate bond market. The Fund may also use index
swaps as a substitute for futures or options contracts if such contracts are not
directly available to the Fund on favorable terms. The Fund may enter into CDS
contracts in order to hedge against a credit event, to enhance total return or
to gain exposure to certain securities or markets.
Interest rate swaps. An interest rate swap is an exchange of
interest rates between counterparties. In one instance, an interest rate swap
involves payments received by the Fund from another party based on a variable or
floating interest rate, in return for making payments based on a fixed interest rate. An interest rate swap can
also work in reverse with the Fund receiving payments based on a fixed interest
rate and making payments based on a variable or floating interest rate. Interest
rate swaps may be used to adjust the Fund’s sensitivity to interest rates or to
hedge against changes in interest rates. Periodic payments on such contracts are
accrued daily and recorded as unrealized appreciation/depreciation on swap
contracts. Upon periodic payment/receipt or termination of the contract, such
amounts are recorded as realized gains or losses on swap contracts. A Fund’s
maximum risk of loss from counterparty credit risk is the discounted net value
of the cash flows to be received from/paid to the counterparty over the interest
rate swap contract’s remaining life, to the extent that the amount is positive.
This risk is mitigated by having a netting arrangement between the Fund and the
counterparty and by the posting of collateral by the counterparty to the Fund to
cover the Fund’s exposure to the counterparty.
Index swaps. Index swaps involve commitments to pay
interest in exchange for a market linked return based on a notional amount. To
the extent the total return of the security, instrument or basket of instruments
underlying the transaction exceeds the offsetting interest obligation, the Fund
will receive a payment from the counterparty. To the extent the total return of
the security, instrument or basket of instruments underlying the transaction
falls short of the offsetting interest obligation, the Fund will make a payment
to the counterparty. The change in value of swap contracts outstanding, if any,
is recorded as unrealized appreciation or depreciation daily. A realized gain or
loss is recorded on maturity or termination of the swap contract. A Fund’s
maximum risk of loss from counterparty credit risk is the discounted net value
of the cash flows to be received from/paid to the counterparty over the index
swap contract’s remaining life, to the extent that the amount is positive. This
risk is mitigated by having a netting arrangement between the Fund and the
counterparty and by the posting of collateral by the counterparty to the Fund to
cover the Fund’s exposure to the counterparty.
Credit default swaps. A CDS contract is a risk-transfer instrument
through which one party (purchaser of protection) transfers to another party
(seller of protection) the financial risk of a credit event (as defined in the
CDS agreement), as it relates to a particular reference security or basket of
securities (such as an index). In exchange for the protection offered by the
seller of protection, the purchaser of protection agrees to pay the seller of
protection a periodic amount at a stated rate that is applied to the notional
amount of the CDS contract. In addition, an upfront payment may be made or
received by the Fund in connection with an unwinding or assignment of a CDS
contract. Upon the occurrence of a credit event, the seller of protection would
pay the par (or other agreed-upon) value of the referenced security (or basket
of securities) to the counterparty.
During the year ended
November 30, 2009, the Fund did not enter into CDS contracts as a purchaser or
seller of protection. Periodic payments on such contracts are accrued daily and
recorded as unrealized losses on swap contracts. Upon payment, such amounts are
recorded as realized losses on swap contracts. Upfront payments made or received
in connection with CDS contracts are amortized over the expected life of the CDS
contracts as unrealized losses on swap contracts. The change in value of CDS
contracts is recorded as unrealized appreciation or depreciation daily. A
realized gain or loss is recorded upon a credit event (as defined in the CDS
agreement) or the maturity or termination of the agreement. There were no
outstanding credit default swap contracts at November 30, 2009.
24
Credit default swaps may
involve greater risks than if the Fund had invested in the referenced obligation
directly. Credit default swaps are subject to general market risk, liquidity
risk, counterparty risk and credit risk. The Fund’s maximum risk of loss from
counterparty is mitigated by having a netting arrangement between the Fund and
the counterparty and by posting of collateral by the counterparty to the Fund to
cover the Fund’s exposure to the counterparty. If the Fund enters into a CDS
contract as a purchaser of protection and no credit event occurs, its exposure
is limited to the periodic payments previously made to the
counterparty.
Swaps generally. Because there is no organized market for swap
contracts, the value of open swaps may differ from that which would be realized
in the event the Fund terminated its position in the agreement. Risks of
entering into these contracts include the potential inability of the
counterparty to meet the terms of the contracts. This type of risk is generally
limited to the amount of favorable movement in the value of the underlying
security, instrument or basket of instruments, if any, at the day of default.
Risks also arise from potential losses from adverse market movements and such
losses could exceed the unrealized amounts shown on the statement of net
assets.
9. Securities Lending
The Fund, along with
other funds in the Delaware Investments® Family of Funds, may lend its securities
pursuant to a security lending agreement (Lending Agreement) with BNY Mellon.
With respect to each loan, if the aggregate market value of securities
collateral held plus cash collateral received 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 generally
invested in the Mellon GSL DBT II Collateral Fund (Collective Trust) established
by BNY Mellon for the purpose of investment on behalf of clients participating
in its securities lending programs. The Collective Trust may invest in fixed
income securities, with a weighted average maturity not to exceed 90 days, rated
in one of the top three tiers by Standard & Poor’s Ratings Group (S&P)
or Moody’s Investors Service, Inc. (Moody’s) or repurchase agreements
collateralized by such securities. The Collective Trust seeks to maintain a net
asset value per unit of $1.00, but there can be no assurance that it will always
be able to do so. At November 30, 2009, the Collective Trust held only cash and
assets with a maturity of one business day or less (Cash/Overnight Assets). The
Fund may incur investment losses as a result of investing securities lending
collateral in the Collective Trust. This could occur if an investment in the
Collective Trust defaulted or if it were necessary to liquidate assets in the
Collective Trust to meet returns on outstanding security loans at a time when
the Collective Trust’s net asset value per unit was less than $1.00. Under those
circumstances, the Fund may not receive an amount from the Collective Trust that
is equal in amount to the collateral the Fund would be required to return to the
borrower of the securities and the Fund would be required to make up for this
shortfall. Effective April 20, 2009, BNY Mellon transferred the assets of the
Collective Trust other than the Cash/Overnight Assets to the BNY Mellon SL DBT
II Liquidating Fund (Liquidating Fund), effectively bifurcating the collateral
investment pool. The Fund’s exposure to the Liquidating Fund is expected to
decrease as the Liquidating Fund’s assets mature or are sold. In October 2008,
BNY Mellon transferred certain distressed securities from the Collective Trust
into the Mellon GSL Reinvestment Trust II.
The Fund can also accept
U.S. government securities and letters of credit (non-cash collateral) in
connection with securities loans. 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 or interest, as
applicable, 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. With respect to security loans collateralized by non-cash collateral,
the Fund receives loan premiums paid by the borrower. With respect to security
loans collateralized by cash collateral, the earnings from the collateral
investments are shared among the Fund, the security lending agent and the
borrower. The Fund records security lending income net of allocations to the
security lending agent and the borrower.
At November 30, 2009,
the value of the securities on loan was $4,253,690, for which the Fund received
collateral, comprised of securities collateral valued at $113,400, and cash
collateral of $4,247,336. At November 30, 2009, the value of invested collateral
was $4,059,908. Investments purchased with cash collateral are presented on the
statement of net assets under the caption “Securities Lending
Collateral.”
10. Credit and Market
Risks
The Fund borrows through
its line of credit for purposes of leveraging. Leveraging may result in higher
degrees of volatility because the Fund’s net asset value could be subject to
fluctuations in short-term interest rates and changes in market value of
portfolio securities attributable to the leverage.
The Fund invests a
portion of its assets in high yield fixed income securities, which carry ratings
of BB or lower by S&P and/or Ba or lower by Moody’s. Investments in these
higher yielding securities are generally accompanied by a greater degree of
credit risk than higher rated securities. Additionally, lower rated securities
may be more susceptible to adverse economic and competitive industry conditions
than investment grade securities.
The Fund invests in
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 real estate holdings
during the year ended November 30, 2009. 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.
The Fund may invest up
to 10% of its net 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 Fund’s Board has delegated to DMC the day-to-day functions of
determining whether individual securities are liquid for purposes of the
(continues) 25
Notes to
financial statements
Delaware Investments® Dividend and Income
Fund, Inc.
10. Credit and Market Risks
(continued)
Fund’s limitation on
investments in illiquid assets. Securities eligible for resale pursuant to Rule
144A, which are determined to be liquid, are not subject to the 10% limit on
investments in illiquid securities. Rule 144A and illiquid securities have been
identified on the statement of net assets.
11. 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.
12. Sale of Delaware Investments to Macquarie
Group
On August 18, 2009,
Lincoln National Corporation (parent company of Delaware Investments) and
Macquarie Group (Macquarie) entered into an agreement pursuant to which Delaware
Investments, including DMC and DSC, would be acquired by Macquarie, an
Australia-based global provider of banking, financial, advisory, investment and
funds management services (Transaction). The Transaction was completed on
January 4, 2010. DMC and DSC are now
wholly owned subsidiaries of Macquarie.
The Transaction resulted
in a change of control of DMC which, in turn, caused the termination of the
investment advisory agreement between DMC and the Fund. On January 4, 2010, the
new investment advisory agreement between DMC and the Fund that was approved by
the shareholders became effective.
13. Tax Information
(Unaudited)
The information set
forth below is for the Fund’s fiscal year as required by federal income tax
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, 2009, the Fund designates distributions paid during the year
as follows:
(A) |
|
(B) |
|
|
|
|
|
|
Long-Term |
|
Ordinary |
|
(C) |
|
|
|
|
Capital Gain |
|
Income |
|
Return |
|
Total |
|
(D) |
Distributions |
|
Distributions* |
|
of Capital |
|
Distributions |
|
Qualifying |
(Tax Basis) |
|
(Tax Basis) |
|
(Tax Basis) |
|
(Tax Basis) |
|
Dividends1 |
— |
|
57.51% |
|
42.49% |
|
100.00% |
|
23.87% |
(A), (B) and (C) are based on a percentage
of the Fund’s total distributions. |
(D) is based on percentage of ordinary
income distributions of the Fund. |
1 Qualifying dividends represent dividends, which
qualify for the corporate dividends received
deduction. |
* For the fiscal year ended November 30,
2009, 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 $ 954,309 to be taxed at maximum rate of 15%. Complete
information will be computed and reported in conjunction with your 2009
Form 1099-DIV. |
26
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, 2009, 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, 2009 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 the Delaware Investments
Dividend and Income Fund, Inc. at November 30, 2009, 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.
Philadelphia,
Pennsylvania
January 21, 2010
27
Other Fund
information
(Unaudited)
Delaware Investments® Dividend and Income Fund, Inc.
Proxy Results
Annual Meeting
The Fund held its Annual
Meeting of Shareholders on August 19, 2009. At the Annual Meeting, the Fund’s
shareholders elected nine Directors. The results of the voting at the meeting
were as follows:
|
|
|
|
|
|
No Ballot |
Nominee |
|
|
Shares Voted
For |
|
Shares
Withheld |
|
Received |
Patrick P. Coyne |
|
9,021,001.85 |
|
295,749.00 |
|
619,083.15 |
Thomas L. Bennett |
|
9,046,287.40 |
|
270,463.45 |
|
619,083.15 |
John A. Fry |
|
9,018,095.95 |
|
298,654.90 |
|
619,083.15 |
Anthony D. Knerr |
|
8,992,984.26 |
|
323,766.59 |
|
619,083.15 |
Lucinda S. Landreth |
|
9,039,017.00 |
|
277,733.85 |
|
619,083.15 |
Ann R. Leven |
|
9,013,650.87 |
|
303,099.98 |
|
619,083.15 |
Thomas F. Madison |
|
8,991,631.65 |
|
325,119.20 |
|
619,083.15 |
Janet L. Yeomans |
|
9,024,478.77 |
|
292,272.08 |
|
619,083.15 |
J. Richard Zecher |
|
9,045,289.36 |
|
271,461.49 |
|
619,083.15 |
Investment Management
Agreement
The Fund held a Special
Meeting of Shareholders on November 12, 2009. At the meeting, the Fund’s
shareholders approved a new investment advisory agreement between the Fund and
Delaware Management Company, a series of Delaware Management Business Trust. The
results of the meeting were as follows:
Shares Voted For |
4,425,276.247 |
Shares Voted Against or Withheld |
329,615.530 |
No Vote |
4,684,150.223 |
The meeting was held in
connection with the Transaction described in Note 12 above.
Corporate Governance
The Fund’s audit
committee charter is available on its web site at 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 2009 to the New York Stock
Exchange (“NYSE”) on September 16, 2009 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 Forms N-CSR and
Forms N-Q 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
www.sec.gov.
Changes to Portfolio Management
Team
Kristen E. Bartholdson
was appointed co-portfolio manager of the Fund on Dec. 8, 2008. Ms. Bartholdson
joined Babak Zenouzi, Damon J. Andres, D. Tysen Nutt Jr., Anthony A. Lombardi,
Robert Vogel Jr., Nikhil G. Lalvani, Nashira S. Wynn, Thomas H. Chow, Roger A.
Early, and Kevin P. Loome in making day-to-day decisions for the
Fund.
Fund management
Babak “Bob”
Zenouzi
Senior Vice President,
Senior Portfolio Manager
Bob Zenouzi is the lead
manager for the domestic and global REIT effort at Delaware Investments, which
includes the team, its process, and its institutional and retail products, which
he created during his prior time with the firm. He also focuses on opportunities
in Japan, Singapore, and Malaysia for the firm’s global REIT product.
Additionally, he serves as lead portfolio manager for the firm’s Dividend Income
products, which he helped to create in the 1990s. He is also a member of the
firm’s asset allocation committee, which is responsible for building and
managing multi-asset class portfolios. He rejoined Delaware Investments in May
2006 as senior portfolio manager and head of real estate securities. In his
first term with the firm, he spent seven years as an analyst and portfolio
manager, leaving in 1999 to work at Chartwell Investment Partners, where from
1999 to 2006 he was a partner and senior portfolio manager on Chartwell’s
Small-Cap Value portfolio. He began his career with The Boston Company, where he
held several positions in accounting and financial analysis. Zenouzi earned a
master’s degree in finance from Boston College and a bachelor’s degree from
Babson College. He is a member of the National Association of Real Estate
Investment Trusts and the Urban Land Institute.
28
Damon J. Andres,
CFA
Vice President, Senior
Portfolio Manager
Damon J. Andres, who
joined Delaware Investments in 1994 as an analyst, currently serves as a
portfolio manager for REIT investments and convertibles. He also serves as a
portfolio manager for the firm’s Dividend Income products. From 1991 to 1994, he
performed investment-consulting services as a consulting associate with
Cambridge Associates. Andres earned a bachelor’s degree in business
administration with an emphasis in finance and accounting from the University of
Richmond.
Kristen E.
Bartholdson
Vice President,
Portfolio Manager
Kristen E. Bartholdson
is a portfolio manager with the firm’s Large-Cap Value Focus team. Prior to
joining the firm in 2006 as an associate portfolio manager, she worked at
Susquehanna International Group from 2004 to 2006, where she was an equity
research salesperson. From 2000 to 2004 she worked in equity research at Credit
Suisse, most recently as an associate analyst in investment strategy.
Bartholdson earned her bachelor’s degree in economics from Princeton University.
Thomas H. Chow, CFA
Senior Vice President, Senior
Portfolio Manager
Thomas H. Chow is a
member of the firm’s taxable fixed income portfolio management team, with
primary responsibility for portfolio construction and strategic asset allocation
in investment grade credit exposures. He is the lead portfolio manager for
Delaware Corporate Bond Fund and Delaware Extended Duration Bond Fund, as well
as several institutional mandates. His experience includes significant exposure
to asset liability management strategies and credit risk opportunities. Prior to
joining Delaware Investments in 2001 as a portfolio manager working on the
Lincoln General Account, he was a trader of high grade and high yield
securities, and was involved in the portfolio management of collateralized bond
obligations (CBOs) and insurance portfolios at SunAmerica/AIG from 1997 to 2001.
Before that, he was an analyst, trader, and portfolio manager at Conseco Capital
Management from 1989 to 1997. Chow received a bachelor’s degree in business
analysis from Indiana University, and he is a Fellow of Life Management
Institute.
Roger A. Early, CPA,
CFA, CFP
Senior Vice
President, Co-Chief Investment Officer – Total Return Fixed Income Strategy
Roger A. Early rejoined
Delaware Investments in March 2007 as a member of the firm’s taxable fixed
income portfolio management team, with primary responsibility for portfolio
construction and strategic asset allocation. During his previous time at the
firm, from 1994 to 2001, he was a senior portfolio manager in the same area, and
he left Delaware Investments as head of its U.S. investment grade fixed income
group. In recent years, Early was a senior portfolio manager at Chartwell
Investment Partners and Rittenhouse Financial and served as the chief investment
officer for fixed income at Turner Investments. Prior to joining Delaware
Investments in 1994, he worked for more than 10 years at Federated Investors
where he managed more than $25 billion in mutual fund and institutional
portfolios in the short-term and investment grade markets. He left the firm as
head of institutional fixed income management. Earlier in his career, he held
management positions with the Federal Reserve Bank, PNC Financial, Touche Ross,
and Rockwell International. Early earned his bachelor’s degree in economics from
The Wharton School of the University of Pennsylvania and an MBA with
concentrations in finance and accounting from the University of Pittsburgh. He
is a member of the CFA Society of Philadelphia.
Nikhil G. Lalvani, CFA
Vice President, Portfolio
Manager
Nikhil G. Lalvani is a
portfolio manager with the firm’s Large-Cap Value Focus team. At Delaware
Investments, Lalvani has served as both a fundamental and quantitative analyst.
Prior to joining the firm in 1997 as an account analyst, he was a research
associate with Bloomberg. Lalvani holds a bachelor’s degree in finance from The
Pennsylvania State University. He is a member of the CFA Institute and the CFA
Society of Philadelphia.
Anthony A. Lombardi,
CFA
Vice President, Senior
Portfolio Manager
Anthony A. Lombardi is a
senior portfolio manager for the firm’s Large-Cap Value Focus strategy. Prior to
joining the firm in 2004 in his current role, Lombardi was a director at Merrill
Lynch Investment Managers. He joined Merrill Lynch Investment Managers’ Capital
Management Group in 1998 and last served as a portfolio manager for the U.S.
Active Large-Cap Value team, managing mutual funds and separate accounts for
institutions and private clients. From 1990 to 1997, he worked at Dean Witter
Reynolds as a sell-side equity research analyst. He began his career as an
investment analyst with Crossland Savings. Lombardi graduated from Hofstra
University, receiving a bachelor’s degree in finance and an MBA with a
concentration in finance. He is a member of the New York Society of Security
Analysts and the CFA Institute.
(continues) 29
Other Fund
information
(Unaudited)
Delaware
Investments® Dividend and Income Fund, Inc.
Fund management
(continued)
Kevin P. Loome,
CFA
Senior Vice President,
Senior Portfolio Manager, Head of High Yield Investments
Kevin P. Loome is head
of the High Yield fixed income team, responsible for portfolio construction and
strategic asset allocation of all high yield fixed income assets. Prior to
joining Delaware Investments in August 2007 in his current position, Loome spent
11 years at T. Rowe Price, starting as an analyst and leaving the firm as a
portfolio manager. He began his career with Morgan Stanley as a corporate
finance analyst in the New York and London offices. Loome received his
bachelor’s degree in commerce from the University of Virginia and earned an MBA
from the Tuck School of Business at Dartmouth.
D. Tysen Nutt Jr.
Senior Vice President, Senior
Portfolio Manager, Team Leader – Large-Cap Value Focus Equity
D. Tysen Nutt Jr. joined
Delaware Investments in 2004 as senior vice president and senior portfolio
manager for the firm’s Large-Cap Value Focus strategy. Before joining the firm,
Nutt led the U.S. Active Large-Cap Value team within Merrill Lynch Investment
Managers, where he managed mutual funds and separate accounts for institutions
and private clients. He departed Merrill Lynch Investment Managers as a managing
director. Prior to joining Merrill Lynch Investment Managers in 1994, Nutt was
with Van Deventer & Hoch (V&H) where he managed large-cap value
portfolios for institutions and private clients. He began his investment career
at Dean Witter Reynolds, where he eventually became vice president, investments.
Nutt earned his bachelor’s degree from Dartmouth College, and he is a member of
the New York Society of Security Analysts and the CFA Institute.
Robert A. Vogel Jr.,
CFA
Vice President, Senior
Portfolio Manager
Robert A. Vogel Jr.
joined Delaware Investments in 2004 as a vice president, senior portfolio
manager for the firm’s Large-Cap Value Focus strategy. He previously worked at
Merrill Lynch Investment Managers for more than seven years, where he rose to
the position of director and portfolio manager within the U.S. Active Large-Cap
Value team. He began his career in 1992 as a financial consultant at Merrill
Lynch Investment Managers. Vogel graduated from Loyola College in Maryland,
earning both bachelor’s and master’s degrees in finance. He also earned an MBA
with a concentration in finance from The Wharton School of the University of
Pennsylvania. Vogel is a member of the New York Society of Security Analysts,
the CFA Institute, and the CFA Society of Philadelphia.
Nashira S.
Wynn
Vice President, Portfolio
Manager
Nashira S. Wynn is a
portfolio manager with the firm’s Large-Cap Value Focus team. Prior to joining
Delaware Investments in 2004 as a senior equity analyst, she was an equity
research analyst for Merrill Lynch Investment Managers, starting there in July
2001. Wynn earned a bachelor’s degree in finance, with a minor in economics,
from The College of New Jersey, and she attended England’s Oxford University as
a Presidential Scholar.
30
Distribution Information
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,
certain of these estimates have been corrected in part. Listed below is a
written statement of the sources of these monthly distributions on a book
basis.
|
|
|
|
|
|
Long Term |
|
Total |
|
|
Investment |
|
Return of |
|
Capital |
|
Distribution |
|
|
Income |
|
Capital |
|
Gain(Loss) |
|
Amount |
Month |
|
|
per
Share |
|
per
Share |
|
per Share |
|
per
Share |
December 2008 |
|
$ |
0.0480 |
|
|
|
$ |
0.0320 |
|
|
|
$ |
— |
|
|
|
$ |
0.0800 |
|
January 2009 |
|
$ |
0.0295 |
|
|
|
$ |
0.0280 |
|
|
|
|
— |
|
|
|
$ |
0.0575 |
|
February 2009 |
|
$ |
0.0299 |
|
|
|
$ |
0.0276 |
|
|
|
|
— |
|
|
|
$ |
0.0575 |
|
March 2009 |
|
$ |
0.0334 |
|
|
|
$ |
0.0241 |
|
|
|
|
— |
|
|
|
$ |
0.0575 |
|
April 2009 |
|
$ |
0.0222 |
|
|
|
$ |
0.0353 |
|
|
|
|
— |
|
|
|
$ |
0.0575 |
|
May 2009 |
|
$ |
0.0348 |
|
|
|
$ |
0.0227 |
|
|
|
|
— |
|
|
|
$ |
0.0575 |
|
June 2009 |
|
$ |
0.0259 |
|
|
|
$ |
0.0316 |
|
|
|
|
— |
|
|
|
$ |
0.0575 |
|
July 2009 |
|
$ |
0.0314 |
|
|
|
$ |
0.0261 |
|
|
|
|
— |
|
|
|
$ |
0.0575 |
|
August 2009 |
|
$ |
0.0355 |
|
|
|
$ |
0.0220 |
|
|
|
|
— |
|
|
|
$ |
0.0575 |
|
September 2009 |
|
$ |
0.0370 |
|
|
|
$ |
0.0205 |
|
|
|
|
— |
|
|
|
$ |
0.0575 |
|
October 2009 |
|
$ |
0.0285 |
|
|
|
$ |
0.0290 |
|
|
|
|
— |
|
|
|
$ |
0.0575 |
|
November 2009 |
|
$ |
0.0446 |
|
|
|
$ |
0.0129 |
|
|
|
|
— |
|
|
|
$ |
0.0575 |
|
|
|
$ |
0.4007 |
|
|
|
$ |
0.3118 |
|
|
|
$ |
0.0000 |
|
|
|
$ |
0.7125 |
|
Please note that the
information in the preceding chart is for book purposes only. Shareholders
should be aware 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.
In January 2009, the
Fund reduced the monthly distribution amount from $0.08 per share to $0.0575 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.
Tender Offer
As described in Note 6
to the Financial Statements, the Fund conducted a tender offer in 2009. 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.
Since the Fund’s
organization in 1993, the Fund has consummated six tender offers, including
tender offers in 2000, 2005, 2006, 2007, 2008, and 2009.
Dividend Reinvestment Plan
The Fund offers an
automatic dividend reinvestment program (“Plan”). Shareholders who have shares
registered in their own names are automatically considered participants in the
Plan, unless they elect to withdraw from the Plan. Shareholders who hold their
shares through a bank, broker, or other nominee should request the bank, broker,
or nominee to participate in the Plan on their behalf. This can be done as long
as the bank, broker, or nominee provides a dividend reinvestment service for the
Fund. If the bank, broker, or nominee does not provide this service, such
shareholders must have their shares taken out of “street” or nominee name and
re-registered in their own name in order to participate in the Plan.
BNY Mellon Shareowner
Services will apply all cash dividends, capital gains and other distributions
(collectively, “Distributions”) on the Fund’s shares of common stock which
become payable to each Plan participant to the purchase of outstanding shares of
the Fund’s common stock for such participant. These purchases may be made on a
securities exchange or in the over-the-counter market, and may be subject to
such terms of price, delivery, and related matters to which BNY Mellon
Shareowner Services may agree. The Fund will not issue new shares in connection
with the Plan.
Distributions reinvested
for participants are subject to income taxes just as if they had been paid
directly to the shareholder in cash. Participants will receive a year-end
statement showing distributions reinvested, and any brokerage commissions paid
on such participant’s behalf.
Shareholders holding
shares of the Fund in their own names who wish to terminate their participation
in the Plan may do so by sending written instruction to BNY Mellon Shareowner
Services so that BNY Mellon Shareowner Services receives such instructions at
least 10 days prior to the Distribution record date. Shareholders with shares
held in account by a bank, broker, or other nominee should contact such bank,
broker, or other nominee to determine the procedure for withdrawal from the
Plan.
(continues) 31
Other Fund
information
(Unaudited)
Delaware
Investments® Dividend and Income Fund, Inc.
Dividend Reinvestment Plan
(continued)
If written instructions
are not received by BNY Mellon Shareowner Services at least 10 days prior to the
record date for a particular Distribution, that Distribution may be reinvested
at the sole discretion of BNY Mellon Shareowner Services. After a shareholder’s
instructions to terminate participation in the Plan become effective,
Distributions will be paid to shareholders in cash. Upon termination, a
shareholder may elect to receive either stock or cash for all the full shares in
the account. If cash is elected, BNY Mellon Shareowner Services will sell such
shares at the then current market value and then send the net proceeds to the
shareholder, after deducting brokerage commissions and related expenses. Any
fractional shares at the time of termination will be paid in cash at the current
market price, less brokerage commissions and related expenses, if any.
Shareholders may at any time request a full or partial withdrawal of shares from
the Plan, without terminating participation in the Plan. When shares outside of
the Plan are liquidated, Distributions on shares held under the Plan will
continue to be reinvested unless BNY Mellon Shareowner Services is notified of
the shareholder’s withdrawal from the Plan.
An investor holding
shares that participate in the Plan in a brokerage account may not be able to
transfer the shares to another broker and continue to participate in the Plan.
Please contact your broker/dealer for additional details.
BNY Mellon Shareowner
Services will charge participants their proportional share of brokerage
commissions on market purchases. Participants may obtain a certificate or
certificates for all or part of the full shares credited to their accounts at
any time by making a request in writing to BNY Mellon Shareowner Services. A fee
may be charged to the participant for each certificate issuance.
If you have any
questions and shares are registered in your name, contact BNY Mellon Shareowner
Services at 800 851-9677. If you have any questions and shares are registered in
“street” name, contact the broker/dealer holding the shares or your financial
advisor.
Effective August 1,
2008, the Dividend Reinvestment Plan may be amended by the Fund upon twenty days
written notice to the Plan’s participants.
Board Consideration of New Investment Advisory
Agreement
At a meeting held on
September 3, 2009 (the “Meeting”), the Board of Directors of the Delaware
Investments Family of Funds (the “Board”), including the independent
Directors, unanimously approved a new investment advisory agreement between
each registrant on behalf of each series (each, a “Fund” and together, the
“Funds”) and Delaware Management Company (“DMC”) in connection with the sale of
Delaware Investments’ advisory business to Macquarie Bank Limited (the
“Macquarie Group”) (the “Transaction”). In making its decision, the Board
considered information furnished specifically in connection with the approval of
the new investment advisory agreements with DMC (the “New Investment Advisory
Agreements”), which included extensive materials about the Transaction and
matters related to the proposed approvals. To assist the Board in considering
the New Investment Advisory Agreements, Macquarie Group provided materials and
information about Macquarie Group, including detailed written responses to the
questions posed by the independent Directors. DMC also provided materials and
information about the Transaction, including detailed written responses to the
questions posed by the independent Directors.
At the
Meeting, the Directors discussed the Transaction with DMC management and with
key Macquarie Group representatives. The Meeting included discussions of the
strategic rationale for the Transaction and Macquarie Group’s general plans and
intentions regarding the Funds and DMC. The Board members also inquired about
the plans for, and anticipated roles and responsibilities of, key employees and
officers of Delaware Management Holdings Inc. and DMC in connection with the
Transaction.
In
connection with the Directors’ review of the New Investment Advisory Agreements
for the Funds, DMC and/or Macquarie Group emphasized that:
- They expected that there would be no adverse
changes as a result of the Transaction, in the nature, quality, or extent of
services currently provided to the Funds and their shareholders, including
investment management, distribution, or other shareholder services.
- No material changes in personnel or
operations were contemplated in the operation of DMC under Macquarie Group as
a result of the Transaction and no material changes were currently
contemplated in connection with third party service providers to the
Funds.
- Macquarie Group had no intention to cause DMC
to alter the voluntary expense waivers and reimbursements currently in effect
for the Funds.
- Under the
agreement between Macquarie Group and Lincoln National Corporation (“LNC”)
(the “Transaction Agreement”), Macquarie Group has agreed to conduct, and to
cause its affiliates to conduct, their respective businesses in compliance
with the conditions of Section 15(f) of the Investment Company Act of 1940
(the “1940 Act”) with respect to the Funds, to the extent within its control,
including maintaining Board composition of at least 75% of the Board members
qualifying as independent Directors and not imposing any “unfair burden” on
the Funds for at least two years from the closing of the Transaction (the
“Closing”).
In addition to the
information provided by DMC and Macquarie Group as described above, the
Directors also considered all other factors they believed to be relevant to
evaluating the New Investment Advisory Agreements, including the specific
matters discussed below. In their deliberations, the Directors did not identify
any particular information that was controlling, and different Directors may
have attributed different weights to the various factors. However, for each
Fund, the Directors determined that the overall arrangements between the Fund
and DMC, as provided in the respective
32
New Investment Advisory
Agreement, including the proposed advisory fee and the related administration
arrangements between the Fund and DMC, were fair and reasonable in light of the
services to be performed, expenses incurred, and such other matters as the
Directors considered relevant. Factors evaluated included:
- The potential for expanding distribution of
Fund shares through access to Macquarie Group’s existing distribution
channels;
- Delaware Investments’ acquisition of an
exclusive wholesaling sales force from a subsidiary of LNC;
- The reputation, financial strength, and
resources of Macquarie Group as well as its historic and ongoing commitment to
the asset management business in Australia as well as other parts of the
world;