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 Real Estate Investment Trusts (REITs) are recorded as dividend income on the ex-dividend date as an estimate, subject to reclassification upon notice of the character of such distribution 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. Such commission rebates are included in realized gain on investments in the accompanying financial statements and totaled $555 for the year ended November 30, 2007. 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.
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.”
In accordance with the terms of its investment management agreement, the Fund pays Delaware Management Company (DMC), a series of Delaware Management Business Trust and the investment manager, an annual fee of 0.55%, which is calculated daily based on the adjusted average weekly net assets.
For purposes of the calculation of investment management fees and administration fees, adjusted average weekly net assets does not include the commercial paper or line of credit liability.
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, 2007, the Fund was charged $7,681 for internal legal and tax services provided by DMC and/or its affiliates’ employees.
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.
For the year ended November 30, 2007, the Fund made purchases of $91,517,341 and sales of $112,007,994 of investment securities other than short-term investments.
At November 30, 2007, the cost of investments for federal income tax purposes was $172,913,324. At November 30, 2007, net unrealized appreciation was $11,681,570, of which $21,028,772 related to unrealized appreciation of investments and $9,347,202 related to unrealized depreciation of investments.
Income and long-term capital gain distributions are determined in accordance with federal income tax regulations, which may differ from U.S. generally accepted accounting principles. Additionally, 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, 2007 and 2006 was as follows:
5. Components of Net Assets on a Tax Basis
As of November 30, 2007, the components of net assets on a tax basis were as follows:
| Shares of beneficial interest | $ | 112,392,634 | |
| Other temporary differences | | (146,091 | ) |
| Unrealized appreciation of investments | | 11,681,570 | |
| Net assets | $ | 123,928,113 | |
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, interest accrued on bonds in default, tax treatment of CDS contracts, 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 market discount and premium on certain debt instruments, passive foreign investment companies, gain (loss) on contingent payment debt instruments, REITs and CDS contracts. Results of operations and net assets were not affected by these reclassifications. For the year ended November 30, 2007, the Fund recorded the following reclassifications:
| Distributions in excess of net investment income | | $1,442,605 | |
| Accumulated net realized gain | | (1,442,605 | ) |
6. Capital Stock
Shares obtained under the Fund’s dividend reinvestment plan are purchased by the Fund’s transfer agent, Mellon Investor Services, LLC, in the open market. There were no shares issued under the Fund’s dividend reinvestment plan for the years ended November 30, 2007 and 2006.
On May 21, 2007, the Fund’s Board of Directors approved a tender offer for shares of the Fund’s common stock. The tender offer authorized the Fund to purchase up to 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 July 2, 2007, the first business day following the expiration of the offer. The tender offer commenced on June 1, 2007 and expired on June 29, 2007. In connection with the tender offer, the Fund purchased 550,462 shares of capital stock at a total cost of $7,943,167. The tender offer was oversubscribed, and all tenders of the shares were subject to pro-ration (at a ratio of approximately 0.529105872) in accordance with the terms of the tender offer.
On May 18, 2006, the Fund’s Board of Directors approved a tender offer for shares of the Fund’s common stock. The tender offer authorized the Fund to purchase up to 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 July 3, 2006, the first business day following the expiration of the offer. The tender offer commenced on June 2, 2006 and expired on June 30, 2006. In connection with the tender offer, the Fund purchased 579,434 shares of capital stock at a total cost of $7,463,110. The tender offer was oversubscribed, and all tenders of the shares were subject to pro-ration (at a ratio of approximately 0.775731221) in accordance with the terms of the tender offer.
The Fund did not purchase any shares under the Share Repurchase Program during the years ended November 30, 2007 and 2006.
7. Commercial Paper
As of November 30, 2007, $24,000,000 (par value) of commercial paper was outstanding with an amortized cost of $23,939,400. The weighted discount rate of commercial paper outstanding at November 30, 2007 was 5.05%. The average daily balance of commercial paper outstanding during the year ended November 30, 2007 was $43,057,292 at a weighted discount rate of 5.35%. The maximum amount of commercial paper outstanding at any time during the year was $44,000,000. On November 19, 2007, the Fund reduced the commercial paper outstanding to $24,000,000 from $44,000,000.
In conjunction with the issuance of the commercial paper, the Fund entered into a Liquidity Agreement with JPMorgan Chase for $30,000,000. Interest on borrowings is based on market rates in effect at the time of borrowing. The commitment fee is computed at the rate of 0.10% per annum on the unused balance. During the year ended November 30, 2007, there were no borrowings under this arrangement.
8. Line of Credit
On November 19, 2007, the Fund entered into a Credit Agreement with The Bank of New York for $44,000,000 that expires on November 18, 2008. At November 30, 2007, outstanding borrowings were $20,000,000 at the Fed Funds rate of 4.50% plus 0.25%. During the period November 19, 2007 to November 30, 2007, the average daily balance of loans outstanding was $20,000,000 at a weighted average interest rate of approximately 4.50% plus 0.25%. The maximum amount of borrowings outstanding at any time during the period was $20,000,000. Interest on borrowings is based on market rates in effect at the time of borrowing. The commitment fee is computed at a rate of 0.10% per annum on the unused balance. The loan is collateralized by the Fund’s portfolio.
9. 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.
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
(continues) 23
Notes to financial statements
Delaware Investments Dividend and Income Fund, Inc.
9. Swap Contracts (continued)
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.
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 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, 2007, the Fund entered into CDS contracts as a purchaser and seller of protection. Periodic payments on such contracts are accrued daily and recorded as unrealized gains or 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 realized losses (gains) 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.
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. 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.
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 movements 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.
10. 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 Mellon Bank, N.A. (Mellon). With respect to each loan, if the aggregate market value of the collateral held on any business day is less than the aggregate market value of the securities which are the subject of such loan, the borrower will be notified to provide additional collateral not less than the applicable collateral requirements. Cash collateral received is invested in a collective investment vehicle (Collective Trust) established by Mellon for the purpose of investment on behalf of clients participating in its securities lending programs. The Collective Trust invests in fixed income securities with a weighted average maturity not to exceed 90 days, rated in one of the top two tiers by Standard & Poor’s Ratings Group or Moody’s Investors Service, Inc. or repurchase agreements collateralized by such securities. However, in the event of default or bankruptcy by the lending agent, realization and/or retention of the collateral may be subject to legal proceedings. In the event the borrower fails to return loaned securities and the collateral received is insufficient to cover the value of the loaned securities and provided such collateral shortfall is not the result of investment losses, the lending agent has agreed to pay the amount of the shortfall to the Fund, or at the discretion of the lending agent, replace the loaned securities. The Fund continues to record dividends 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. The security lending agent and the borrower retain a portion of the earnings from the collateral investments. The Fund records security lending income net of such allocation.
At November 30, 2007, the market value of securities on loan was $17,161,513, for which cash collateral was received and invested in accordance with the Lending Agreement. Such investments are presented on the Statement of net assets under the caption “Securities Lending Collateral.”
11. Credit and Market Risk
The Fund invests a portion of its assets in high yield fixed income securities, which carry ratings of BB or lower by Standard & Poor’s Ratings Group and/or Ba or lower by Moody’s Investors Service, Inc. Investments in these higher yielding securities are generally accompanied by a greater degree of credit risk than higher rated securities. Additionally, lower rated securities may be more susceptible to adverse economic and competitive industry conditions than investment grade securities.
The Fund 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, 2007. 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
24
11. Credit and Market Risk (continued)
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 of Directors has delegated to DMC the day-to-day functions of determining whether individual securities are liquid for purposes of each Fund’s limitation on investments in illiquid assets. Rule 144A and illiquid securities have been identified on the Statement of net assets.
12. 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.
13. Change in Custodian
On August 9, 2007, Mellon Bank, N.A., One Mellon Center, Pittsburgh, PA, 15285, became the Fund’s custodian. Prior to August 9, 2007, JPMorgan Chase Bank served as the Fund’s custodian.
14. Subsequent Events
On December 20, 2007, the commercial paper program and related Liquidity Agreement with JPMorgan Chase were terminated. On December 19, 2007, the Fund increased its borrowing under its Line of Credit Agreement with The Bank of New York to $44,000,000 from $20,000,000.
15. 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, 2007, 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 |
| 40% | | 29% | | 31% | | 100% | | 41% |
(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, 2007, 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 a maximum amount $2,749,126 to be taxed at maximum rate of 15%. Complete information will be computed and reported in conjunction with your 2007 Form 1099-DIV. |
25
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, 2007, 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, 2007, 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, 2007, 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 22, 2008
26
Other Fund information (unaudited)
Delaware Investments Dividend and Income Fund, Inc.
Proxy Results
The Fund held its Annual Meeting of Shareholders on August 15, 2007. 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 | | 10,389,813.960 | | 146,907.226 | | 472,514.814 |
| Thomas L. Bennett | | 10,390,838.960 | | 145,882.226 | | 472,514.814 |
| John A. Fry | | 10,386,934.861 | | 149,786.325 | | 472,514.814 |
| Anthony D. Knerr | | 10,390,601.074 | | 146,120.112 | | 472,514.814 |
| Lucinda S. Landreth | | 10,389,868.960 | | 146,852.226 | | 472,514.814 |
| Ann R. Leven | | 10,389,325.074 | | 147,396.112 | | 472,514.814 |
| Thomas F. Madison | | 10,385,878.294 | | 150,842.892 | | 472,514.814 |
| Janet L. Yeomans | | 10,389,355.180 | | 147,366.006 | | 472,514.814 |
| J. Richard Zecher | | 10,388,135.960 | | 148,585.226 | | 472,514.814 |
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 2007 to the New York Stock Exchange (“NYSE”) on September 14, 2007 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
During the year ended November 30, 2007, Thomas H. Chow, Kevin P. Loome, and Roger A. Early were appointed co-portfolio managers of the Fund in May 2007, August 2007, and January 2008, respectively. Messrs. Chow, Early, and Loome work with Babak Zenouzi, Damon J. Andres, D. Tysen Nutt, Jr., Anthony A. Lombardi, Robert A. Vogel, Jr., Nikhil G. Lalvani, and Nashira S. Wynn in making day-to-day decisions for the Fund.
Fund management
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. His experience includes significant exposure to asset liability management strategies and credit risk opportunities. Prior to joining Delaware Investments in 2001, 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, Senior Portfolio Manager
Roger A. Early is a member of the firm’s taxable fixed income portfolio management team with primary responsibility for portfolio construction and strategic asset allocation. He re-joined Delaware Investments in March 2007. During his previous tenure 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. Early most recently worked at Chartwell Investment Partners, where he served as a senior portfolio manager in fixed income from 2003 to 2007. He also worked at Turner Investments from 2002 to 2003, where he served as chief investment officer for fixed income, and Rittenhouse Financial from 2001 to 2002. He started his career in Pittsburgh, leaving to join Delaware Investments in 1994 after 10 years at Federated Investors. 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, and he is a member of The CFA Society of Philadelphia.
(continues) 27
Other Fund information (unaudited)
Delaware Investments Dividend and Income Fund, Inc.
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, 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.
Babak (Bob) Zenouzi
Senior Vice President, Senior Portfolio Manager
Bob Zenouzi rejoined Delaware Investments in May 2006. He left the firm in 1999 after seven years as an analyst and portfolio manager. Currently, he leads the firm’s REIT group, including the team, its process, and its institutional and retail products, which he created during his prior time with the firm. He also serves as lead portfolio manager for the firm’s Dividend Income products, which he helped create in the 1990s. Most recently, Zenouzi worked at Chartwell Investment Partners from 1999 to 2006, where 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.
Damon J. Andres, CFA
Vice President, Senior Portfolio Manager
Damon J. Andres, who joined Delaware Investments in 1994, 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.
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 (MLIM), where he managed mutual funds and separate accounts for institutions and private clients. He departed MLIM as a managing director. Prior to joining MLIM 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.
Anthony A. Lombardi, CFA
Vice President, Senior Portfolio Manager
Anthony A. Lombardi joined Delaware Investments in 2004 as a vice president and senior portfolio manager for the firm’s Large-Cap Value Focus strategy. Previously, Lombardi worked at Merrill Lynch Investment Managers from 1998 to 2004, where he rose to the position of director and portfolio manager for the U.S. Active Large-Cap Value team, managing mutual funds and separate accounts for institutions and private clients. Prior to that, he worked at Dean Witter Reynolds for seven years as a sell-side equity research analyst, and he began his career as an investment analyst with Crossland Savings in 1989. 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.
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. 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, and he is a member of the New York Society of Security Analysts and The CFA Society of Philadelphia.
28
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, he was a research associate with Bloomberg. Lalvani holds a bachelor’s degree in finance from The Pennsylvania State University and is a member of 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, 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.
Jordan L. Irving and Timothy L. Rabe are no longer co-portfolio managers for the Fund.
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.
| | Net Investment | | Return of | | Gain from | | Total |
| | Income | | Capital | | Sale of Securities | | Distribution |
| | per share | | per share | | per share | | Amount |
| 12/06 | | | $0.040 | | | | $ — | | | | $0.288 | | | | $0.328 | |
| 1/07 | | | 0.044 | | | | 0.005 | | | | 0.031 | | | | 0.080 | |
| 2/07 | | | 0.029 | | | | 0.020 | | | | 0.031 | | | | 0.080 | |
| 3/07 | | | 0.045 | | | | 0.035 | | | | — | | | | 0.080 | |
| 4/07 | | | 0.035 | | | | 0.045 | | | | — | | | | 0.080 | |
| 5/07 | | | 0.035 | | | | 0.045 | | | | — | | | | 0.080 | |
| 6/07 | | | 0.036 | | | | 0.044 | | | | — | | | | 0.080 | |
| 7/07 | | | 0.039 | | | | 0.041 | | | | — | | | | 0.080 | |
| 8/07 | | | 0.031 | | | | 0.049 | | | | — | | | | 0.080 | |
| 9/07 | | | 0.038 | | | | 0.042 | | | | — | | | | 0.080 | |
| 10/07 | | | 0.030 | | | | — | | | | 0.050 | | | | 0.080 | |
| 11/07 - Regular Monthly Distribution | | | 0.004 | | | | 0.076 | | | | — | | | | 0.080 | |
| 11/07 - Special Distribution | | | 0.042 | | | | 0.239 | | | | 0.629 | | | | 0.910 | |
| Total | | | $0.448 | | | | $0.641 | | | | $1.029 | | | | $2.118 | |
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.
(continues) 29
Other Fund information (unaudited)
Delaware Investments Dividend and Income Fund, Inc.
Change in Fund Accounting and Financial Administration Services Agent and Custodian
Effective October 1, 2007, Mellon Bank, N.A. provides fund accounting and financial administration services to the Fund. Those services include performing functions related to calculating the Fund’s NAV and providing financial reporting information, regulatory compliance testing and other related accounting services. For these services, the Fund pays Mellon Bank, N.A. an asset-based fee, subject to certain fee minimums, plus certain out-of-pocket expenses and transactional charges. Effective October 1, 2007, Delaware Service Company, Inc. (“DSC”) provides fund accounting and financial administration oversight services to the Fund. Those services include overseeing the Fund’s pricing process, the calculation and payment of fund expenses, and financial reporting in shareholder reports, registration statements and other regulatory filings. DSC also manages the process for the payment of dividends and distributions and the dissemination of Fund NAVs and performance data. For these services, the Fund pays DSC an asset-based fee, plus certain out-of-pocket expenses and transactional charges. The fees payable to Mellon Bank, N.A. and DSC under the service agreements described above will be allocated among all Funds in the Delaware Investments® Family of Funds on a relative net asset value basis. Prior to October 1, 2007, DSC provided fund accounting and financial administration services to the Fund at an annual rate of 0.04% of the Fund’s average daily net assets.
Mellon Bank, N.A., One Mellon Center, Pittsburgh, PA 15285, is custodian of the Fund’s securities and cash. As custodian for the Fund, Mellon Bank, N.A. maintains (a) separate account(s) for the Fund; receives, holds and releases portfolio securities on account of the Fund; receives and disburses money on behalf of the Fund; and collects and receives income and other payments and distributions on account of the Fund’s portfolio securities.
Termination of Commercial Paper Program
On October 25, 2007, the Fund’s Board of Directors approved an agreement that allowed the Fund to enter into a $44,000,000 revolving credit facility with The Bank of New York. The credit facility replaced the Fund’s commercial paper program that permitted the Fund to issue up to $60 million in commercial paper. The conversion to the credit facility occurred in two steps, in conjunction with the expiration of a $20 million tranche of commercial paper on November 19, 2007 and a $24 million tranche of commercial paper on December 19, 2007. Accordingly, the commercial paper program and the related liquidity agreement expired on December 20, 2007.
Changes to Fund’s Investment Strategies and Policies
In August 2007, the Fund’s Board of Directors approved the following changes in investment strategies. The changes became effective on October 23, 2007, after a 60 day notice period.
A loan participation is an interest in a loan or other direct indebtedness, such as an assignment, that entitles the acquiring of such interest payments, and/or other amounts due under the structure of the loan or other direct indebtedness. In addition to being structured as secured or unsecured loans, such investments could be structured as novations or assignments or represent trade or other claims owed by a company to a supplier. The Fund may invest without restriction in loan participations that meet the credit standards established by the portfolio managers. The portfolio managers perform their own independent credit analysis on each borrower and on the collateral securing each loan. The portfolio managers consider the nature of the industry in which the borrower operates, the nature of the borrower’s assets and the general quality and creditworthiness of the borrower. The Fund may invest without limitation in loan participations in order to enhance total return, to affect diversification or to earn additional income. The Fund will not use loan participations for reasons inconsistent with its investment objective.
These loans are made generally to finance internal growth, mergers, acquisitions, stock repurchases, leveraged buy-outs and other corporate activities. Such loans are typically made by a syndicate of lending institutions, represented by an agent lending institution that has negotiated and structured the loan and is responsible for collecting interest, principal and other amounts due on its own behalf and on behalf of the others in the syndicate, and for enforcing its and their other rights against the borrower. Alternatively, such loans may be structured as novations, pursuant to which the Fund would assume all of the rights of the lending institution in a loan or as an assignment, pursuant to which the Fund would purchase an assignment of a portion of a lender’s interest in a loan either directly from the lender or through an intermediary.
The Fund may also purchase trade or other claims against companies, which generally represent money owed by the company to a supplier of goods or services. These claims may also be purchased at a time when the company is in default.
Loans and other direct indebtedness involve the risk that the Fund will not receive payment of principal, interest and other amounts due in connection with these investments and will depend primarily on the financial condition of the borrower. Loans that are fully secured offer the Fund more protection than unsecured loans in the event of non-payment of scheduled interest or principal, although there is no assurance that the liquidation of collateral from a secured loan would satisfy the corporate borrower’s obligation, or that the collateral can be liquidated. Some loans or claims may be in default at the time of purchase. Certain of the loans and the other direct indebtedness acquired by the Fund may involve revolving credit facilities or other standby financing commitments which obligate the Fund to pay additional cash on a certain date or on demand. These commitments may require the Fund to increase its investment in a company at a time when the Fund might not otherwise decide to do so (including at a time when the company’s financial condition makes it unlikely that such amounts will be repaid). To the extent that the Fund is committed to advance additional funds, it will, at all times, hold and maintain in a segregated account cash or other high-grade debt obligations in an amount sufficient to meet such commitments. The Fund’s ability to receive payment of principal, interest and other amounts due in connection with these investments will depend primarily on the financial condition of the borrower.
As the Fund may be required to rely upon another lending institution to collect and pass on to the Fund amounts payable with respect to the loan and to enforce the Fund’s rights under the loan and other direct indebtedness, an insolvency, bankruptcy or reorganization of the lending institution may delay or prevent the Fund from receiving such amounts. In such cases, the Fund will evaluate the creditworthiness of the borrower and the lending institution and will treat both the borrower and the lending institution as an “issuer” of the loan for purposes of compliance with applicable law
30
pertaining to the diversification of the Fund’s portfolio investments. The highly leveraged nature of many such loans and other direct indebtedness may make such loans and other direct indebtedness especially vulnerable to adverse changes in economic or market conditions. Investments in such loans and other direct indebtedness may involve additional risk to the Fund.
Tender Offer
As described in Note 6 to the Financial Statements, the Fund conducted a tender offer in 2007. There can be no assurance that a tender offer will reduce or eliminate any spread between market price and the net asset value of the Fund’s shares. The market price of the shares will, among other things, be determined by the relative demand for and supply of shares in the market, the Fund’s investment performance, the Fund’s dividends and yields, and investor perception of the Fund’s overall attractiveness as an investment as compared with other investment alternatives. Nevertheless, the fact that a tender offer may be conducted may result in more of a reduction in the spread between market price and net asset value than might otherwise be the case. The Fund’s Board of Directors, consistent with its fiduciary obligations, may explore alternatives to a tender offer to reduce or eliminate the Fund’s potential market value discount from net asset value. Therefore, the Fund cannot provide assurance that it will make tender offers in the future.
The tender offer plan described in the Fund’s prospectus contemplates that a shareholder wishing to accept a tender offer must tender all (but not less than all) of the Fund shares owned by the shareholder or attributed to it under Section 318 of the Internal Revenue Code, unless the Fund has received a private letter ruling from the Internal Revenue Service (“IRS”) that a tender of less than all of a shareholder’s shares will not cause non-tendering shareholders to realize constructive distributions on their shares under Section 305 of the Internal Revenue Code. In connection with the 2005 tender offer and the favorable private letter ruling received by the Fund on May 5, 2005, the Fund, through its counsel, was informed by the Office of Associate Chief Counsel (Corporate) that the IRS would not issue to the Fund a similar ruling in future years. The IRS’s informal policy is to issue no more than two such rulings to any one taxpayer on the premise that multiple tender offers may constitute such a “plan” that has the result of increasing the proprietary interests of some shareholders in the assets and income of the funds and the receipt of money by other shareholders. Since the Fund’s organization in 1993, the Fund has consummated four tender offers, including tender offers in 2000, 2005, 2006, and 2007.
In light of this communication from the IRS, it was determined that the Fund had no affirmative obligation to obtain a ruling from the IRS as a precondition to accepting partial tenders. The Fund has previously stated that it would not seek a private letter ruling from the IRS in connection with accepting partial tenders for any future Fund tender offers.
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.
Mellon Investor Services, LLC (“Mellon”) 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 Mellon 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 Mellon so that Mellon 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.
If written instructions are not received by Mellon at least 10 days prior to the record date for a particular Distribution, that Distribution may be reinvested at the sole discretion of Mellon. 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, Mellon 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 Mellon 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.
Mellon 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 Mellon. 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 Mellon 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.
31
Board of trustees/directors
and officers addendum
Delaware Investments® Family of Funds
A fund is governed by a Board of Trustees/Directors (“Trustees”), which has oversight responsibility for the management of a fund’s business affairs. Trustees establish procedures and oversee and review the performance of the investment manager, and others who perform services for the fund. The independent fund trustees, in particular, are advocates for shareholder interests. Each trustee has served in that capacity since he or she was elected to or appointed to the Board of Trustees, and will continue to serve until his or her retirement or the election of a new trustee in his or her place. The following is a list of the Trustees and Officers with certain background and related information.
| | | | Number of | |
| | | | Portfolios in Fund | Other |
| Name, | | | | Complex Overseen | Directorships |
| Address, | Position(s) | Length of | Principal Occupation(s) | by Trustee | Held by |
| and Birth Date | Held with Fund(s) | Time Served | During Past 5 Years | or Officer | Trustee or Officer |
| Interested Trustees | | | | | |
| Patrick P. Coyne1 | Chairman, | Chairman and Trustee | Patrick P. Coyne has served in | 84 | Director — |
| 2005 Market Street | President, | since August 16, 2006 | various executive capacities | | Kaydon Corp. |
| Philadelphia, PA | Chief Executive | | at different times at | | |
| 19103 | Officer, and | President and | Delaware Investments.2 | | |
| Trustee | Chief Executive Officer | | | |
| April 14, 1963 | | since August 1, 2006 | | | |
| Independent Trustees | | | | | |
| Thomas L. Bennett | Trustee | Since | Private Investor — | 84 | Director — |
| 2005 Market Street | | March 2005 | (March 2004–Present) | | Bryn Mawr |
| Philadelphia, PA | | | | | Bank Corp. (BMTC) |
| 19103 | | | Investment Manager — | | (April 2007–Present) |
| | | Morgan Stanley & Co. | | |
| October 4, 1947 | | | (January 1984–March 2004) | | |
| John A. Fry | Trustee | Since | President — | 84 | Director — |
| 2005 Market Street | | January 2001 | Franklin & Marshall College | | Community Health |
| Philadelphia, PA | | | (June 2002–Present) | | Systems |
| 19103 | | | | | |
| | | Executive Vice President — | | Director — |
| May 28, 1960 | | | University of Pennsylvania | | Allied Barton |
| | | | (April 1995–June 2002) | | Security Holdings |
| Anthony D. Knerr | Trustee | Since | Founder and Managing Director — | 84 | None |
| 2005 Market Street | | April 1990 | Anthony Knerr & Associates | | |
| Philadelphia, PA | | | (Strategic Consulting) | | |
| 19103 | | | (1990–Present) | | |
| |
| December 7, 1938 | | | | | |
| Lucinda S. Landreth | Trustee | Since | Chief Investment Officer — | 84 | None |
| 2005 Market Street | | March 2005 | Assurant, Inc. | | |
| Philadelphia, PA | | | (Insurance) | | |
| 19103 | | | (2002–2004) | | |
| |
| June 24, 1947 | | | | | |
| Ann R. Leven | Trustee | Since | Consultant — | 84 | Director and |
| 2005 Market Street | | October 1989 | ARL Associates | | Audit Committee |
| Philadelphia, PA | | | (Financial Planning) | | Chairperson — Andy |
| 19103 | | | (1983–Present) | | Warhol Foundation |
| |
| November 1, 1940 | | | | | Director and Audit |
| | | | | Committee Chair — |
| | | | | | Systemax, Inc. |
32
| | | | Number of | |
| | | | Portfolios in Fund | Other |
| Name, | | | | Complex Overseen | Directorships |
| Address, | Position(s) | Length of | Principal Occupation(s) | by Trustee | Held by |
| and Birth Date | Held with Fund(s) | Time Served | During Past 5 Years | or Officer | Trustee or Officer |
| Independent Trustees (continued) |
| Thomas F. Madison | Trustee | Since | President and Chief | 84 | Director — |
| 2005 Market Street | | May 19973 | Executive Officer — | | CenterPoint Energy |
| Philadelphia, PA | | | MLM Partners, Inc. | | |
| 19103 | | | (Small Business Investing | | Director and Audit |
| | | and Consulting) | | Committee Chair — |
| February 25, 1936 | | | (January 1993–Present) | | Digital River, Inc. |
| |
| | | | | Director and Audit |
| | | | | Committee Member — |
| | | | | Rimage |
| | | | | Corporation |
| |
| | | | | Director — Valmont |
| | | | | | Industries, Inc. |
| Janet L. Yeomans | Trustee | Since | Treasurer | 84 | None |
| 2005 Market Street | | April 1999 | (January 2006–Present) | | |
| Philadelphia, PA | | | Vice President — Mergers & Acquisitions | | |
| 19103 | | | (January 2003–January 2006), and | | |
| | | Vice President | | |
| July 31, 1948 | | | (July 1995–January 2003) | | |
| | | 3M Corporation | | |
| |
| | | Ms. Yeomans has held | | |
| | | various management positions | | |
| | | | at 3M Corporation since 1983. | | |
| J. Richard Zecher | Trustee | Since | Founder — | 84 | Director and Audit |
| 2005 Market Street | | March 2005 | Investor Analytics | | Committee Member — |
| Philadelphia, PA | | | (Risk Management) | | Investor Analytics |
| 19103 | | | (May 1999–Present) | | |
| | | | | Director and Audit |
| July 3, 1940 | | | Founder — | | Committee Member — |
| | | Sutton Asset Management | | Oxigene, Inc. |
| | | (Hedge Fund) | | |
| | | | (September 1996–Present) | | |
| Officers |
| David F. Connor | Vice President, | Vice President since | David F. Connor has served as | 84 | None4 |
| 2005 Market Street | Deputy General | September 2000 | Vice President and Deputy | | |
| Philadelphia, PA | Counsel, and Secretary | and Secretary | General Counsel of | | |
| 19103 | | since | Delaware Investments | | |
| | October 2005 | since 2000. | | |
| December 2, 1963 | | | | | |
| Daniel V. Geatens | Vice President | Treasurer | Daniel V. Geatens has served | 84 | None4 |
| 2005 Market Street | and Treasurer | since | in various capacities at | | |
| Philadelphia, PA | | October 25, 2007 | different times at | | |
| 19103 | | | Delaware Investments. | | |
| |
| October 26, 1972 | | | | | |
| David P. O’Connor | Senior Vice | Senior Vice President, | David P. O’Connor has served in | 84 | None4 |
| 2005 Market Street | President, | General Counsel, and | various executive and legal | | |
| Philadelphia, PA | General Counsel, | Chief Legal Officer | capacities at different times | | |
| 19103 | and Chief | since | at Delaware Investments. | | |
| Legal Officer | October 2005 | | | |
| February 21, 1966 | | | | | |
| Richard Salus | Senior | Chief Financial | Richard Salus has served in | 84 | None4 |
| 2005 Market Street | Vice President | Officer since | various executive capacities | | |
| Philadelphia, PA | and | November 2006 | at different times at | | |
| 19103 | Chief Financial | | Delaware Investments. | | |
| Officer | | | | |
| October 4, 1963 | | | | | |
1 Patrick P. Coyne is considered to be an “Interested Trustee” because he is an executive officer of the Fund’s(s’) investment advisor. |
2 Delaware Investments is the marketing name for Delaware Management Holdings, Inc. and its subsidiaries, including the Fund’s(s’) investment advisor, principal underwriter, and its transfer agent. |
3 In 1997, several funds managed by Voyageur Fund Managers, Inc. (the “Voyageur Funds”) were incorporated into the Delaware Investments Family of Funds. Mr. Madison served as a director of the Voyageur Funds from 1993 until 1997. |
4 David F. Connor, Daniel V. Geatens, David P. O’Connor, and Richard Salus serve in similar capacities for the six portfolios of the Optimum Fund Trust, which have the same investment advisor, principal underwriter, and transfer agent as the registrant. |
33
About the organization
This annual report is for the information of Delaware Investments® Dividend and Income Fund, Inc. shareholders. The figures in this report represent past results that are not a guarantee of future results. The return and principal value of an investment in the Fund will fluctuate so that shares, when sold, may be worth more or less than their original cost.
Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940 that the Fund may, from time to time, purchase shares of its Common Stock on the open market at market prices.
Board of Directors Patrick P. Coyne
Chairman, President,
and Chief Executive Officer
Delaware Investments Family of Funds
Philadelphia, PA Thomas L. Bennett†
Private Investor
Rosemont, PA John A. Fry
President
Franklin & Marshall College
Lancaster, PA Anthony D. Knerr
Founder and Managing Director
Anthony Knerr & Associates
New York, NY Lucinda S. Landreth
Former Chief Investment Officer
Assurant Inc.
Philadelphia, PA Ann R. Leven
Consultant
ARL Associates
New York, NY Thomas F. Madison†
President and Chief Executive Officer
MLM Partners Inc.
Minneapolis, MN Janet L. Yeomans†
Vice President and Treasurer
3M Corporation
St. Paul, MN J. Richard Zecher†
Founder
Investor Analytics
Scottsdale, AZ †Audit committee member | | Affiliated officers David F. Connor
Vice President, Deputy General Counsel,
and Secretary
Delaware Investments Family of Funds
Philadelphia, PA Daniel V. Geatens
Vice President and Treasurer
Delaware Investments Family of Funds
Philadelphia, PA David P. O’Connor
Senior Vice President, General Counsel,
and Chief Legal Officer
Delaware Investments Family of Funds
Philadelphia, PA Richard Salus
Senior Vice President and
Chief Financial Officer
Delaware Investments Family of Funds
Philadelphia, PA The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q, as well as a description of the policies and procedures that the Fund uses to determine how to vote proxies (if any) relating to portfolio securities is available without charge (i) upon request, by calling 800 523-1918; (ii) on the Fund’s Web site at http://www.delawareinvestments.com; and (iii) on the Commission’s Web site at http://www.sec.gov. The Fund’s Forms N-Q may be reviewed and copied at the Commission’s Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling 800 SEC-0330. Information (if any) regarding how the Fund voted proxies relating to portfolio securities during the most recently disclosed 12-month period ended June 30 is available without charge (i) through the Fund’s Web site at http://www.delawareinvestments.com; and (ii) on the Commission’s Web site at http://www.sec.gov. | | Contact information Investment manager
Delaware Management Company
a series of Delaware Management
Business Trust
Philadelphia, PA Principal office of the Fund
2005 Market Street
Philadelphia, PA 19103-7057 Independent registered public
accounting firm
Ernst & Young LLP
2001 Market Street
Philadelphia, PA 19103 Registrar and stock transfer
agent
BNY Mellon Investor Services
480 Washington Blvd.
Jersey City, NJ 07310
800 851-9677 For securities dealers
and financial institutions
representatives
800 362-7500 Web site
www.delawareinvestments.com Delaware Investments is the marketing name of Delaware Management Holdings, Inc. and its subsidiaries. Your reinvestment options
Delaware Investments Dividend and Income Fund, Inc. offers an automatic dividend reinvestment program. If you would like to reinvest dividends, and shares are registered in your name, contact Mellon Investor Services, LLC at 800 851-9677. You will be asked to put your request in writing. If you have shares registered in “street” name, contact the broker/dealer holding the shares or your financial advisor. |
34
| (2611) | Printed in the USA |
| AR-DDF [11/30] CGI 1/08 | MF-07-12-022 PO12526 |
Item 2. Code of Ethics
The registrant has adopted a code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. A copy of the registrant’s Code of Business Ethics has been posted on Delaware Investments’ internet website at www.delawareinvestments.com. Any amendments to the Code of Business Ethics, and information on any waiver from its provisions granted by the registrant, will also be posted on this website within five business days of such amendment or waiver and will remain on the website for at least 12 months.
Item 3. Audit Committee Financial Expert
The registrant’s Board of Trustees/Directors has determined that each member of the registrant’s Audit Committee is an audit committee financial expert, as defined below. For purposes of this item, an “audit committee financial expert” is a person who has the following attributes:
a. An understanding of generally accepted accounting principles and financial statements;
b. The ability to assess the general application of such principles in connection with the accounting for estimates, accruals, and reserves;
c. Experience preparing, auditing, analyzing, or evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by the registrant’s financial statements, or experience actively supervising one or more persons engaged in such activities;
d. An understanding of internal controls and procedures for financial reporting; and
e. An understanding of audit committee functions.
An “audit committee financial expert” shall have acquired such attributes through:
a. Education and experience as a principal financial officer, principal accounting officer, controller, public accountant, or auditor or experience in one or more positions that involve the performance of similar functions;
b. Experience actively supervising a principal financial officer, principal accounting officer, controller, public accountant, auditor, or person performing similar functions;
c. Experience overseeing or assessing the performance of companies or public accountants with respect to the preparation, auditing, or evaluation of financial statements; or
d. Other relevant experience.
The registrant’s Board of Trustees/Directors has also determined that each member of the registrant’s Audit Committee is independent. In order to be “independent” for purposes of this item, the Audit Committee member may not: (i) other than in his or her capacity as a member of the Board of Trustees/Directors or any committee thereof, accept directly or indirectly any consulting, advisory or other compensatory fee from the issuer; or (ii) be an “interested person” of the registrant as defined in Section 2(a)(19) of the Investment Company Act of 1940.
The names of the audit committee financial experts on the registrant’s Audit Committee are set forth below:
Thomas L. Bennett 1
Thomas F. Madison
Janet L. Yeomans 1
J. Richard Zecher
Item 4. Principal Accountant Fees and Services
(a) Audit fees.
The aggregate fees billed for services provided to the registrant by its independent auditors for the audit of the registrant’s annual financial statements and for services normally provided by the independent auditors in connection with statutory and regulatory filings or engagements were $14,300 for the fiscal year ended November 30, 2007.
_______________________
1 The instructions to Form N-CSR require disclosure on the relevant experience of persons who qualify as audit committee financial experts based on “other relevant experience.” The Board of Trustees/Directors has determined that Mr. Bennett qualifies as an audit committee financial expert by virtue of his education, Chartered Financial Analyst designation, and his experience as a credit analyst, portfolio manager and the manager of other credit analysts and portfolio managers. The Board of Trustees/Directors has determined that Ms. Yeomans qualifies as an audit committee financial expert by virtue of her education and experience as the Treasurer of a large global corporation.
The aggregate fees billed for services provided to the registrant by its independent auditors for the audit of the registrant’s annual financial statements and for services normally provided by the independent auditors in connection with statutory and regulatory filings or engagements were $13,700 for the fiscal year ended November 30, 2006.
(b) Audit-related fees.
The aggregate fees billed by the registrant’s independent auditors for services relating to the performance of the audit of the registrant’s financial statements and not reported under paragraph (a) of this Item were $6,868 for the fiscal year ended November 30, 2007. The percentage of these fees relating to services approved by the registrant’s Audit Committee pursuant to the de minimis exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%. These audit-related services were as follows: issuance of agreed upon procedures report with respect to the Fund’s commercial paper program as required by the applicable rating agencies.
The aggregate fees billed by the registrant’s independent auditors for services relating to the performance of the audit of the financial statements of the registrant’s investment adviser and other service providers under common control with the adviser and that relate directly to the operations or financial reporting of the registrant were $0 for the registrant’s fiscal year ended November 30, 2007.
The aggregate fees billed by the registrant’s independent auditors for services relating to the performance of the audit of the registrant’s financial statements and not reported under paragraph (a) of this Item were $6,868 for the fiscal year ended November 30, 2006. The percentage of these fees relating to services approved by the registrant’s Audit Committee pursuant to the de minimis exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%. These audit-related services were as follows: issuance of agreed upon procedures report with respect to the Fund’s commercial paper program as required by the applicable rating agencies.
The aggregate fees billed by the registrant’s independent auditors for services relating to the performance of the audit of the financial statements of the registrant’s investment adviser and other service providers under common control with the adviser and that relate directly to the operations or financial reporting of the registrant were $15,000 for the registrant’s fiscal year ended November 30, 2006. The percentage of these fees relating to services approved by the registrant’s Audit Committee pursuant to the de minimis exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%. These audit-related services were as follows: issuance of agreed upon procedures report to the registrant’s Board in connection with the pass-through of internal legal cost relating to the operations of the registrant.
(c) Tax fees.
The aggregate fees billed by the registrant’s independent auditors for tax-related services provided to the registrant were $4,050 for the fiscal year ended November 30, 2007. The percentage of these fees relating to services approved by the registrant’s Audit Committee pursuant to the de minimis exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%. These tax-related services were as follows: review of income tax return and review of annual excise distribution calculation.
The aggregate fees billed by the registrant’s independent auditors for tax-related services provided to the registrant’s investment adviser and other service providers under common control with the adviser and that relate directly to the operations or financial reporting of the registrant were $0 for the registrant’s fiscal year ended November 30, 2007.
The aggregate fees billed by the registrant’s independent auditors for tax-related services provided to the registrant were $2,500 for the fiscal year ended November 30, 2006. The percentage of these fees relating to services approved by the registrant’s Audit Committee pursuant to the de minimis exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%. These tax-related services were as follows: review of income tax return and review of annual excise distribution calculation.
The aggregate fees billed by the registrant’s independent auditors for tax-related services provided to the registrant’s adviser and other service providers under common control with the adviser and that relate directly to the operations or financial reporting of the registrant were $0 for the registrant’s fiscal year ended November 30, 2006.
(d) All other fees.
The aggregate fees billed for all services provided by the independent auditors to the registrant other than those set forth in paragraphs (a), (b) and (c) of this Item were $0 for the fiscal year ended November 30, 2007.
The aggregate fees billed for all services other than those set forth in paragraphs (b) and (c) of this Item provided by the registrant’s independent auditors to the registrant’s adviser and other service providers under common control with the adviser and that relate directly to the operations or financial reporting of the registrant were $0 for the registrant’s fiscal year ended November 30, 2007.
The aggregate fees billed for all services provided by the independent auditors to the registrant other than those set forth in paragraphs (a), (b) and (c) of this Item were $0 for the fiscal year ended November 30, 2006.
The aggregate fees billed for all services other than those set forth in paragraphs (b) and (c) of this Item provided by the registrant’s independent auditors to the registrant’s adviser and other service providers under common control with the adviser and that relate directly to the operations or financial reporting of the registrant were $0 for the registrant’s fiscal year ended November 30, 2006.
(e) The registrant’s Audit Committee has established pre-approval policies and procedures as permitted by Rule 2-01(c)(7)(i)(B) of Regulation S-X (the “Pre-Approval Policy”) with respect to services provided by the registrant’s independent auditors. Pursuant to the Pre-Approval Policy, the Audit Committee has pre-approved the services set forth in the table below with respect to the registrant up to the specified fee limits. Certain fee limits are based on aggregate fees to the registrant and other registrants within the Delaware Investments Family of Funds.
| Service | Range of Fees |
| Audit Services | |
| Statutory audits or financial audits for new Funds | up to $25,000 per Fund |
| Services associated with SEC registration statements (e.g., Form N-1A, Form N-14, etc.), periodic reports and other documents filed with the SEC or other documents issued in connection with securities offerings (e.g., comfort letters for closed-end Fund offerings, consents), and assistance in responding to SEC comment letters | up to $10,000 per Fund |
| Consultations by Fund management as to the accounting or disclosure treatment of transactions or events and/or the actual or potential impact of final or proposed rules, standards or interpretations by the SEC, FASB, or other regulatory or standard-setting bodies (Note: Under SEC rules, some consultations may be considered “audit-related services” rather than “audit services”) | up to $25,000 in the aggregate |
| Audit-Related Services | |
| Consultations by Fund management as to the accounting or disclosure treatment of transactions or events and /or the actual or potential impact of final or proposed rules, standards or interpretations by the SEC, FASB, or other regulatory or standard-setting bodies (Note: Under SEC rules, some consultations may be considered “audit services” rather than “audit-related services”) | up to $25,000 in the aggregate |
| Tax Services | |
| U.S. federal, state and local and international tax planning and advice (e.g., consulting on statutory, regulatory or administrative developments, evaluation of Funds’ tax compliance function, etc.) | up to $25,000 in the aggregate |
| U.S. federal, state and local tax compliance (e.g., excise distribution reviews, etc.) | up to $5,000 per Fund |
| Review of federal, state, local and international income, franchise and other tax returns | up to $5,000 per Fund |
Under the Pre-Approval Policy, the Audit Committee has also pre-approved the services set forth in the table below with respect to the registrant’s investment adviser and other entities controlling, controlled by or under common control with the investment adviser that provide ongoing services to the registrant (the “Control Affiliates”) up to the specified fee limit. This fee limit is based on aggregate fees to the investment adviser and its Control Affiliates.
| Service | Range of Fees |
| Non-Audit Services | |
| Services associated with periodic reports and other documents filed with the SEC and assistance in responding to SEC comment letters | up to $10,000 in the aggregate |
The Pre-Approval Policy requires the registrant’s independent auditors to report to the Audit Committee at each of its regular meetings regarding all services initiated since the last such report was rendered, including those services authorized by the Pre-Approval Policy.
(f) Not applicable.
(g) The aggregate non-audit fees billed by the registrant’s independent auditors for services rendered to the registrant and to its investment adviser and other service providers under common control with the adviser were $259,606 and $263,188 for the registrant’s fiscal years ended November 30, 2007 and November 30, 2006, respectively.
(h) In connection with its selection of the independent auditors, the registrant’s Audit Committee has considered the independent auditors’ provision of non-audit services to the registrant’s investment adviser and other service providers under common control with the adviser that were not required to be pre-approved pursuant to Rule 2-01(c)(7)(ii) of Regulation S-X. The Audit Committee has determined that the independent auditors’ provision of these services is compatible with maintaining the auditors’ independence.
Item 5. Audit Committee of Listed Registrants
The registrant has a separately-designated standing Audit Committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934. The members of the registrant’s Audit Committee are Thomas L. Bennett, Thomas F. Madison, Janet L. Yeomans and J. Richard Zecher.
Item 6. Schedule of Investments
Included as part of report to shareholders filed under Item 1 of this Form N-CSR.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies
The registrant has formally delegated to its investment adviser (the “Adviser”) the ability to make all proxy voting decisions in relation to portfolio securities held by the registrant. If and when proxies need to be voted on behalf of the registrant, the Adviser will vote such proxies pursuant to its Proxy Voting Policies and Procedures (the “Procedures”). The Adviser has established a Proxy Voting Committee (the “Committee”) which is responsible for overseeing the Adviser’s proxy voting process for the registrant. One of the main responsibilities of the Committee is to review and approve the Procedures to ensure that the Procedures are designed to allow the Adviser to vote proxies in a manner consistent with the goal of voting in the best interests of the registrant.
In order to facilitate the actual process of voting proxies, the Adviser has contracted with Institutional Shareholder Services (“ISS”) to analyze proxy statements on behalf of the registrant and other Adviser clients and vote proxies generally in accordance with the Procedures. The Committee is responsible for overseeing ISS’s proxy voting activities. If a proxy has been voted for the registrant, ISS will create a record of the vote. By no later than August 31 of each year, information (if any) regarding how the registrant voted proxies relating to portfolio securities during the most recently disclosed 12-month period ended June 30 is available without charge (i) through the registrant’s website at http://www.delawareinvestments.com; and (ii) on the Commission’s website at http://www.sec.gov.
The Procedures contain a general guideline that recommendations of company management on an issue (particularly routine issues) should be given a fair amount of weight in determining how proxy issues should be voted. However, the Adviser will normally vote against management’s position when it runs counter to its specific Proxy Voting Guidelines (the “Guidelines”), and the Adviser will also vote against management’s recommendation when it believes that such position is not in the best interests of the registrant.
As stated above, the Procedures also list specific Guidelines on how to vote proxies on behalf of the registrant. Some examples of the Guidelines are as follows: (i) generally vote for shareholder proposals asking that a majority or more of directors be independent; (ii) generally vote against proposals to require a supermajority shareholder vote; (iii) votes on mergers and acquisitions should be considered on a case-by-case basis, determining whether the transaction enhances shareholder value; (iv) generally vote against proposals to create a new class of common stock with superior voting rights; (v) generally vote re-incorporation proposals on a case-by-case basis; (vi) votes with respect to equity-based compensation plans are generally determined on a case-by-case basis; and (vii) generally vote for proposals requesting reports on the level of greenhouse gas emissions from a company’s operations and products.
Because the registrant has delegated proxy voting to the Adviser, the registrant is not expected to encounter any conflict of interest issues regarding proxy voting and therefore does not have procedures regarding this matter. However, the Adviser does have a section in its Procedures that addresses the possibility of conflicts of interest. Most proxies which the Adviser receives on behalf of the registrant are voted by ISS in accordance with the Procedures. Because almost all registrant proxies are voted by ISS pursuant to the pre-determined Procedures, it normally will not be necessary for the Adviser to make an actual determination of how to vote a particular proxy, thereby largely eliminating conflicts of interest for the Adviser during the proxy voting process. In the very limited instances where the Adviser is considering voting a proxy contrary to ISS’s recommendation, the Committee will first assess the issue to see if there is any possible conflict of interest involving the Adviser or affiliated persons of the Adviser. If a member of the Committee has actual knowledge of a conflict of interest, the Committee will normally use another independent third party to do additional research on the particular proxy issue in order to make a recommendation to the Committee on how to vote the proxy in the best interests of the registrant. The Committee will then review the proxy voting materials and recommendation provided by ISS and the independent third party to determine how to vote the issue in a manner which the Committee believes is consistent with the Procedures and in the best interests of the registrant.
Item 8. Portfolio Managers of Closed-End Management Investment Companies
The following chart lists certain information about types of other accounts for which the portfolio managers are primarily responsible as of November 30, 2007.
| | | | | Total Assets |
| | | | | in Accounts with |
| | | | No. of Accounts with | Performance- |
| | No. of | Total Assets | Performance-Based | Based |
| | Accounts | in Accounts Fee | Fees | Fee |
| Damon J. Andres | | | | |
| Registered | 8 | $2.6 billion | 0 | $0 |
| Investment | | | | |
| Companies | | | | |
| Other pooled | 0 | $0 | 0 | $0 |
| Investment Vehicles | | | | |
| Other Accounts | 3 | $83.2 million | 0 | $0 |
| Thomas H. Chow | | | | |
| Registered | 17 | $8.7 billion | 0 | $0 |
| Investment | | | | |
| Companies | | | | |
| Other pooled | 0 | $0 | 0 | $0 |
| Investment Vehicles | | | | |
| Other Accounts | 4 | $1.6 billion | 0 | $0 |
| Roger A. Early | | | | |
| Registered | 15 | $4.9 billion | 0 | $0 |
| Investment | | | | |
| Companies | | | | |
| Other pooled | 1 | $7.7 million | 0 | $0 |
| Investment Vehicles | | | | |
| Other Accounts | 20 | $3.9 billion | 0 | $0 |
| Nikhil G. Lalvani | | | | |
| Registered | 11 | $4.3 billion | 0 | $0 |
| Investment | | | | |
| Companies | | | | |
| Other pooled | 0 | $0 | 0 | $0 |
| Investment Vehicles | | | | |
| Other Accounts | 28 | $4.2 billion | 2 | $1.1 billion |
| Anthony A. Lombardi | | | | |
| Registered | 11 | $4.3 billion | 0 | $0 |
| Investment | | | | |
| Companies | | | | |
| Other pooled | 0 | $0 | 0 | $0 |
| Investment Vehicles | | | | |
| Other Accounts | 28 | $4.2 billion | 2 | $1.1 billion |
| Kevin P. Loome | | | | |
| Registered | 18 | $6.8 billion | 0 | $0 |
| Investment | | | | |
| Companies | | | | |
| Other pooled | 0 | $0 | 0 | $0 |
| Investment Vehicles | | | | |
| Other Accounts | 6 | $584.3 million | 0 | $0 |
| D. Tysen Nutt, Jr. | | | | |
| Registered | 11 | $4.3 billion | 0 | $0 |
| Investment | | | | |
| Companies | | | | |
| Other pooled | 0 | $0 | 0 | $0 |
| Investment Vehicles | | | | |
| Other Accounts | 28 | $4.2 billion | 2 | $1.1 billion |
| Robert A. Vogel, Jr. | | | | |
| Registered | 11 | $4.3 billion | 0 | $0 |
| Investment | | | | |
| Companies | | | | |
| Other pooled | 0 | $0 | 0 | $0 |
| Investment Vehicles | | | | |
| Other Accounts | 28 | $4.2 billion | 2 | $1.1 billion |
| Nashira S. Wynn | | | | |
| Registered | 11 | $4.3 billion | 0 | $0 |
| Investment | | | | |
| Companies | | | | |
| Other pooled | 0 | $0 | 0 | $0 |
| Investment Vehicles | | | | |
| Other Accounts | 28 | $4.2 billion | 2 | $1.1 billion |
| Babak Zenouzi | | | | |
| Registered | 8 | $2.6 billion | 0 | $0 |
| Investment | | | | |
| Companies | | | | |
| Other pooled | 0 | $0 | 0 | $0 |
| Investment Vehicles | | | | |
| Other Accounts | 3 | $83.2 million | 0 | $0 |
Description of Material Conflicts of Interest
Individual portfolio managers may perform investment management services for other accounts similar to those provided to the Funds and the investment action for each account and Fund may differ. For example, an account or Fund may be selling a security, while another account or Fund may be purchasing or holding the same security. As a result, transactions executed for one account may adversely affect the value of securities held by another account. Additionally, the management of multiple accounts and Funds may give rise to potential conflicts of interest, as a portfolio manager must allocate time and effort to multiple accounts and Funds. A portfolio manager may discover an investment opportunity that may be suitable for more than one account or Fund. The investment opportunity may be limited, however, so that all accounts for which the investment would be suitable may not be able to participate. The Manager has adopted procedures designed to allocate investments fairly across multiple accounts.
A portfolio manager’s management of personal accounts also may present certain conflicts of interest. While the Manager’s Code of Ethics is designed to address these potential conflicts, there is no guarantee that it will do so.
Compensation Structure
Each portfolio manager’s compensation consists of the following:
Base Salary. Each named portfolio manager receives a fixed base salary. Salaries are determined by a comparison to industry data prepared by third parties to ensure that portfolio manager salaries are in line with salaries paid at peer investment advisory firms.
Bonus. Each portfolio manager is eligible to receive an annual cash bonus which is based on quantitative and qualitative factors. The amount of the pool for bonus payments is first determined by mathematical equation based on assets, management fees and expenses, including fund waiver expenses, for registered investment companies, pooled vehicles, and managed separate accounts. Generally, approximately 80% of the bonus is quantitatively determined. For investment companies, each manager is compensated according the Fund’s Lipper peer group percentile ranking on a one-year and three-year basis. For managed separate accounts the portfolio managers are compensated according to the composite percentile ranking in consultant databases. There is no objective award for a fund that falls below the 50th percentile for a given time period. There is a sliding scale for investment companies that are ranked above the 50th percentile. The managed separate accounts are compared to Callan and other databases. The remaining 20% portion of the bonus is discretionary as determined by Delaware and takes into account subjective factors.
Due to the transitioning of responsibilities of Mr. Early and Mr. Loome, their bonus for the past year was guaranteed. It is anticipated that going forward an objective component will be added that is reflective of account performance relative to an appropriate peer group or database.
Deferred Compensation. Each named portfolio manager is eligible to participate in the Lincoln National Corporation Executive Deferred Compensation Plan, which is available to all employees whose income exceeds a designated threshold. The Plan is a non-qualified unfunded deferred compensation plan that permits participating employees to defer the receipt of a portion of their cash compensation.
Stock Option Incentive Plan/Equity Compensation Plan: Portfolio managers may be awarded options to purchase common shares of Delaware Investments U.S., Inc. pursuant to the terms the Delaware Investments U.S., Inc. Stock Option Plan (non-statutory or “non-qualified” stock options). In addition, certain managers may be awarded restricted stock units, or “performance shares”, in Lincoln. Delaware Investments U.S., Inc., is an indirect subsidiary of DMH and, therefore, of Lincoln.
The Delaware Investments U.S., Inc. Stock Option Plan was established in 2001 in order to provide certain investment personnel of the Manager with a more direct means of participating in the growth of the investment manager. Under the terms of the plan, stock options typically vest in 25% increments on a four-year schedule and expire ten years after issuance. Options are awarded from time to time by the investment manager in its full discretion. Option awards may be based in part on seniority.
Portfolio managers who do not participate in the Delaware Investments U.S., Inc. Stock Option Plan are eligible to participate in Lincoln’s Long-Term Incentive Plan, which is designed to provide a long-term incentive to officers of Lincoln. Under the plan, a specified number of performance shares are allocated to each unit and are awarded to participants in the discretion of their managers in accordance with recommended targets related to the number of employees in a unit that may receive an award and the number of shares to be awarded. The performance shares have a three year vesting schedule and, at the end of the three years, the actual number of shares distributed to those who received awards may be equal to, greater than or less than the amount of the award based on Lincoln’s achievement of certain performance goals relative to a pre-determined peer group.
Other Compensation: Portfolio managers may also participate in benefit plans and programs available generally to all employees.
Ownership of Securities
As of November 30, 2007, none of the Fund’s portfolio managers owned shares of the Fund.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 11. Controls and Procedures
The registrant’s principal executive officer and principal financial officer have evaluated the registrant’s disclosure controls and procedures within 90 days of the filing of this report and have concluded that they are effective in providing reasonable assurance that the information required to be disclosed by the registrant in its reports or statements filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission.
There were no significant changes in the registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by the report to stockholders included herein (i.e., the registrant’s fourth fiscal quarter) that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12. Exhibits
| (a) | | (1) Code of Ethics |
| |
| | | | Not applicable. |
| | | | | |
| | | (2) | | Certifications of Principal Executive Officer and Principal Financial Officer pursuant to Rule 30a-2 under the Investment Company Act of 1940 are attached hereto as Exhibit 99.CERT. |
| |
| | | (3) | | Written solicitations to purchase securities pursuant to Rule 23c-1 under the Securities Exchange Act of 1934. |
| |
| | | | | Not applicable. |
| |
| (b) | | Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 are furnished herewith as Exhibit 99.906CERT. |
| |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf, by the undersigned, thereunto duly authorized.
Name of Registrant: Delaware Investments Dividend and Income Fund, Inc.
| PATRICK P. COYNE | |
| By: | Patrick P. Coyne |
| Title: | Chief Executive Officer |
| Date: | February 1, 2008 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| PATRICK P. COYNE | |
| By: | Patrick P. Coyne |
| Title: | Chief Executive Officer |
| Date: | February 1, 2008 |
| |
| |
| RICHARD SALUS | |
| By: | Richard Salus |
| Title: | Chief Financial Officer |
| Date: | February 1, 2008 |
