UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM N-Q
QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED MANAGEMENT
INVESTMENT COMPANY
Investment Company Act file number: 811-7460
Exact name of registrant as specified in charter: Delaware Investments Dividend and Income
Fund, Inc.
Address of principal executive offices: 2005 Market Street
Philadelphia, PA 19103
Name and address of agent for service: David P. O'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: August 31, 2005
ITEM 1. SCHEDULE OF INVESTMENTS.
SCHEDULE OF INVESTMENTS (Unaudited)
DELAWARE INVESTMENTS DIVIDEND AND INCOME FUND, INC.
AUGUST 31, 2005
NUMBER OF MARKET
SHARES VALUE
COMMON STOCK - 80.13%
Consumer Discretionary - 4.96%
Gap 113,213 $ 2,152,179
+Great Wolf Resorts 74,100 852,150
Limited Brands 98,200 2,158,436
Mattel 127,800 2,304,234
*+XM Satellite Radio Holdings Class A 2,000 70,500
------------
7,537,499
------------
Consumer Staples - 6.34%
Archer-Daniels-Midland 110,400 2,485,104
B&G Foods 900 11,655
ConAgra Foods 105,100 2,399,433
Kimberly-Clark 37,600 2,343,232
Safeway 101,200 2,401,476
------------
9,640,900
------------
Energy - 4.94%
Chevron 39,500 2,425,300
ConocoPhillips 37,700 2,485,938
Exxon Mobil 40,400 2,419,960
*+Petroleum Geo-Services ADR 5,967 179,607
------------
7,510,805
------------
Financials - 12.37%
Allstate 39,300 2,209,053
Aon 94,300 2,821,455
*Chubb 26,700 2,321,832
Hartford Financial Services 30,200 2,206,110
Huntington Bancshares 94,700 2,271,853
Morgan Stanley 45,200 2,299,324
Wachovia 47,300 2,347,026
Washington Mutual 56,300 2,340,954
------------
18,817,607
------------
Health Care - 9.18%
Abbott Laboratories 50,800 2,292,604
Baxter International 60,900 2,456,097
Bristol-Myers Squibb 95,500 2,336,885
Merck 77,900 2,199,117
Pfizer 89,700 2,284,659
Wyeth 52,100 2,385,659
------------
13,955,021
------------
Healthcare REITs - 0.25%
#Medical Properties Trust 144A 35,000 385,000
------------
385,000
------------
Industrials - 3.22%
Boeing 35,400 2,372,508
+Foster Wheeler 8,434 226,871
Union Pacific 33,700 2,300,699
------------
4,900,078
------------
Industrial REITs - 1.68%
AMB Property 57,800 2,562,274
------------
2,562,274
------------
Information Technology - 4.88%
Hewlett-Packard 97,500 2,706,600
International Business Machines 28,700 2,313,794
+Xerox 179,500 2,407,095
------------
7,427,489
------------
Lodging/Resort REITs - 0.85%
Strategic Hotel Capital 70,200 1,294,488
------------
1,294,488
------------
Mall REITs - 5.73%
General Growth Properties 113,538 5,119,428
Simon Property Group 47,300 3,598,111
------------
8,717,539
------------
Manufactured Housing REITs - 0.37%
*Equity Lifestyle Properties 12,600 569,016
------------
569,016
------------
NUMBER OF MARKET
SHARES VALUE
Materials - 1.48%
Weyerhaeuser 34,600 2,249,692
------------
2,249,692
------------
Mortgage REITs - 9.51%
*American Home Mortgage Investment 89,900 2,875,901
*Friedman Billings Ramsey Group Class A 87,195 1,020,182
+JER Investors Trust 110,600 1,997,436
KKR Financial 5,900 138,001
+#KKR Financial 144A 91,300 2,135,507
*MortgageIT Holdings 187,000 3,020,050
+#Peoples Choice 144A 176,700 1,722,825
*Saxon Capital 122,400 1,550,808
------------
14,460,710
------------
Multifamily REITs - 0.62%
*Education Realty Trust 50,900 939,105
------------
939,105
------------
Office/Industrial REITs - 1.65%
*Duke Realty 76,600 2,507,884
------------
2,507,884
------------
Office REITs - 5.23%
Equity Office Properties Trust 81,700 2,720,610
Prentiss Properties Trust 67,172 2,582,092
*Reckson Associates Realty 79,820 2,646,033
------------
7,948,735
------------
Retail Strip Centers REITs - 0.47%
*Ramco-Gershenson Properties Trust 24,800 719,696
------------
719,696
------------
Telecommunication Services - 4.80%
*Fairpoint Communications 164,400 2,641,908
SBC Communications 97,700 2,352,616
Verizon Communications 70,400 2,302,784
------------
7,297,308
------------
Utilities - 1.60%
FPL Group 56,300 2,425,967
------------
2,425,967
------------
TOTAL COMMON STOCK (cost $105,452,045) 121,866,813
============
CONVERTIBLE PREFERRED STOCK - 5.46%
Consumer Products - 1.58%
Newell Financial Trust I 5.25% 52,600 2,399,875
------------
2,399,875
------------
Diversified REITs - 0.90%
Crescent Real Estate 6.75% 62,600 1,372,192
------------
1,372,192
------------
Environmental Services - 0.50%
Allied Waste Industries 6.25% 16,200 762,453
------------
762,453
------------
Financials - 1.62%
Chubb 7.00% 15,000 475,200
*Lehman Brothers Holdings 6.25% 16,000 416,000
National Australia Bank Units 7.875% 40,000 1,574,000
------------
2,465,200
------------
Telecommunications - 0.86%
Lucent Technologies Capital Trust I 7.75% 1,300 1,303,900
------------
1,303,900
------------
TOTAL CONVERTIBLE PREFERRED STOCK (cost $8,895,050) 8,303,620
============
PREFERRED STOCK - 5.76%
Leisure, Lodging & Entertainment - 1.03%
WestCoast Hospitality Capital Trust 9.50% 58,000 1,571,220
------------
1,571,220
------------
Lodging/Resort REITs - 2.64%
Equity Inns Series B 8.75% 35,700 958,545
LaSalle Hotel Properties 10.25% 113,200 3,050,740
------------
4,009,285
------------
Office REITs - 1.37%
SL Green Realty 7.625% 80,000 2,082,504
------------
2,082,504
------------
Retail Strip Centers REITs - 0.72%
Ramco-Gershenson Properties 9.50% 40,000 1,101,000
------------
1,101,000
------------
TOTAL PREFERRED STOCK (cost $8,172,500) 8,764,009
============
PRINCIPAL
AMOUNT
COMMERCIAL MORTGAGE-BACKED SECURITIES - 0.29%
#Meristar Commercial Mortgage Trust Series 1999-C1 C 144A 8.29% 3/3/16 $ 400,000 435,415
------------
TOTAL COMMERCIAL MORTGAGE-BACKED SECURITIES (cost $445,969) 435,415
------------
CONVERTIBLE BONDS - 4.13%
Capital Goods - Manufacturing - 0.20%
#Tyco International Group 144A 2.75% 1/15/18 250,000 308,438
------------
308,438
------------
Consumer Cyclical - 2.33%
*Dick's Sporting Goods 1.606% 2/18/24 380,000 262,200
Meristar Hospitality 9.50% 4/1/10 1,100,000 1,434,125
#Playboy Enterprises 144A 3.00% 3/15/25 600,000 601,500
#Regal Entertainment Group 144A 3.75% 5/15/08 550,000 712,250
#Saks 144A 2.00% 3/15/24 425,000 524,875
------------
3,534,950
------------
Technology - 0.71%
#Mercury Interactive 144A 4.75% 7/1/07 550,000 556,875
#Sybase 144A 1.75% 2/22/25 500,000 527,500
------------
1,084,375
------------
Transportation - 0.11%
*#ExpressJet Holdings 144A 4.25% 8/1/23 200,000 167,500
------------
167,500
------------
Utilities - 0.78%
#CenterPoint Energy 144A 3.75% 5/15/23 800,000 1,026,000
*++Mirant 2.50% 6/15/21 180,000 162,450
------------
1,188,450
------------
TOTAL CONVERTIBLE BONDS (cost $5,391,456) 6,283,713
============
CORPORATE BONDS - 31.13%
Basic Industry - 4.36%
Bowater 9.50% 10/15/12 475,000 524,875
Fort James 7.75% 11/15/23 925,000 1,047,562
*#Huntsman International 144A 7.375% 1/1/15 425,000 431,375
#NewPage 144A 10.00% 5/1/12 250,000 252,500
*Norske Skog 8.625% 6/15/11 400,000 418,000
#Novelis 144A 7.25% 2/15/15 400,000 403,000
#Port Townsend Paper 144A 12.00% 4/15/11 450,000 362,250
Potlatch 12.50% 12/1/09 475,000 586,131
*Rhodia
8.875% 6/1/11 125,000 122,500
10.25% 6/1/10 110,000 119,625
Smurfit Capital Funding 7.50% 11/20/25 500,000 465,000
*++Solutia 6.72% 10/15/37 705,000 606,299
Stone Container 9.75% 2/1/11 565,000 592,544
Tembec Industries 8.625% 6/30/09 540,000 437,400
*Witco 6.875% 2/1/26 250,000 257,500
------------
6,626,561
------------
Brokerage - 0.72%
*E Trade Financial 8.00% 6/15/11 555,000 591,075
LaBranche & Company
*9.50% 5/15/09 300,000 319,500
11.00% 5/15/12 175,000 194,250
------------
1,104,825
------------
Capital Goods - 2.19%
++Anchor Glass 11.00% 2/15/13 300,000 202,500
*Armor Holdings 8.25% 8/15/13 225,000 245,250
*Graham Packaging 9.875% 10/15/14 220,000 228,800
Interline Brands 11.50% 5/15/11 576,000 642,240
Intertape Polymer 8.50% 8/1/14 375,000 376,431
@Mueller Holdings 14.75% 4/15/14 285,000 209,475
Park-Ohio Industries 8.375% 11/15/14 225,000 211,781
*Pliant 11.125% 9/1/09 490,000 459,375
Radnor Holdings
o10.349% 4/15/09 235,000 229,125
11.00% 3/15/10 300,000 198,000
Trimas 9.875% 6/15/12 375,000 322,500
------------
3,325,477
------------
PRINCIPAL
AMOUNT
Consumer Cyclical - 2.01%
Accuride 8.50% 2/1/15 480,000 501,600
*Advanced Accessory Systems 10.75% 6/15/11 190,000 167,200
++Avado Brands 9.75% 6/1/06 230,000 21,850
*#Carrols 144A 9.00% 1/15/13 185,000 194,250
Dana 5.85% 1/15/15 180,000 160,973
Landry's Restaurant 7.50% 12/15/14 430,000 422,475
*#Metaldyne 144A 11.00% 11/1/13 400,000 370,000
O'Charleys 9.00% 11/1/13 225,000 244,125
#Uno Restaurant 144A 10.00% 2/15/11 275,000 264,000
++Venture Holdings 12.00% 6/1/09 425,000 638
Visteon
*7.00% 3/10/14 75,000 66,750
8.25% 8/1/10 100,000 97,500
Warnaco 8.875% 6/15/13 500,000 550,000
------------
3,061,361
------------
Consumer Non-Cyclical - 2.13%
#Commonwealth Brands 144A 10.625% 9/1/08 460,000 487,600
Constellation Brands 8.125% 1/15/12 234,000 250,380
Cott Beverages 8.00% 12/15/11 175,000 185,500
Great Atlantic & Pacific Tea 7.75% 4/15/07 300,000 313,575
#Le-Natures 144A 10.00% 6/15/13 550,000 596,750
*National Beef Packing 10.50% 8/1/11 375,000 393,750
*Pilgrim's Pride 9.625% 9/15/11 320,000 348,000
Pinnacle Foods 8.25% 12/1/13 230,000 223,100
#Warner Chilcott 144A 8.75% 2/1/15 450,000 447,750
------------
3,246,405
------------
Energy - 2.03%
*Bluewater Finance 10.25% 2/15/12 280,000 305,200
*El Paso Natural Gas 7.625% 8/1/10 200,000 215,101
*El Paso Production Holding 7.75% 6/1/13 545,000 579,063
#Hilcorp Energy I 144A 10.50% 9/1/10 205,000 228,575
#Inergy Finance 144A 6.875% 12/15/14 250,000 245,000
Petroleum Geo-Services 10.00% 11/5/10 524,909 593,147
oSecunda International 11.599% 9/1/12 260,000 260,000
Tennessee Gas Pipeline 8.375% 6/15/32 350,000 421,257
Whiting Petroleum 7.25% 5/1/13 235,000 237,350
------------
3,084,693
------------
Finance/Investments - 0.24%
FINOVA Group 7.50% 11/15/09 609,000 255,780
#FTI Consulting 144A 7.625% 6/15/13 105,000 107,625
------------
363,405
------------
Industrial Machinery - 0.07%
*#Nell AF SARL 144A 8.375% 8/15/15 100,000 101,625
------------
101,625
------------
Media - 3.81%
~Adelphia Communications 8.125% 7/15/06 525,000 445,594
*American Media Operation 10.25% 5/1/09 150,000 151,313
Cenveo 9.625% 3/15/12 200,000 215,000
#Charter Communications 144A 5.875% 11/16/09 165,000 134,269
*Charter Communications Holdings 10.75% 10/1/09 900,000 769,499
CSC Holdings
8.125% 7/15/09 250,000 257,500
*10.50% 5/15/16 325,000 353,438
Dex Media West 9.875% 8/15/13 13,000 14,771
Insight Midwest 10.50% 11/1/10 375,000 398,438
*Lodgenet Entertainment 9.50% 6/15/13 275,000 303,188
*Mediacom Capital 9.50% 1/15/13 500,000 511,249
*Nextmedia Operating 10.75% 7/1/11 210,000 228,375
Rogers Cablesystems 11.00% 12/1/15 275,000 294,938
Sheridan Acquisition Group 10.25% 8/15/11 225,000 236,250
*#Sirius Satellite 144A 9.625% 8/1/13 300,000 296,250
Warner Music Group 7.375% 4/15/14 575,000 589,374
XM Satellite Radio
12.00% 6/15/10 315,000 361,856
14.00% 3/15/10 225,000 243,000
------------
5,804,302
------------
Real Estate - 0.83%
#America Real Estate 144A 7.125% 2/15/13 405,000 409,050
BF Saul REIT 7.50% 3/1/14 375,000 388,594
Tanger Properties 9.125% 2/15/08 430,000 466,550
------------
1,264,194
------------
PRINCIPAL
AMOUNT
Services Cyclical - 3.74%
*Adesa 7.625% 6/15/12 250,000 255,625
#Ashtead Holdings 144A 8.625% 8/1/15 75,000 78,938
*#CCM Merger Motor 144A 8.00% 8/1/13 275,000 281,875
Corrections Corporation of America 7.50% 5/1/11 225,000 233,719
Foster Wheeler 10.359% 9/15/11 275,000 303,875
@#H-Lines Finance Holding 144A 11.00% 4/1/13 655,000 537,918
Horizon Lines 9.00% 11/1/12 275,000 299,406
Kansas City Southern Railway 9.50% 10/1/08 400,000 437,000
#Knowledge Learning 144A 7.75% 2/1/15 315,000 311,063
#MGM Mirage 144A 6.625% 7/15/15 215,000 218,225
OMI 7.625% 12/1/13 500,000 516,250
Penn National Gaming 8.875% 3/15/10 250,000 265,000
Royal Caribbean Cruises 7.25% 3/15/18 400,000 434,000
Seabulk International 9.50% 8/15/13 250,000 282,500
Stena 9.625% 12/1/12 375,000 413,438
@Town Sports International 11.00% 2/1/14 330,000 228,938
Wheeling Island Gaming 10.125% 12/15/09 555,000 590,380
------------
5,688,150
------------
Services Non-cyclical - 1.68%
Aleris International 9.00% 11/15/14 295,000 312,700
Biovail 7.875% 4/1/10 190,000 197,838
Casella Waste Systems 9.75% 2/1/13 220,000 237,600
Geo Subordinate 11.00% 5/15/12 470,000 480,575
NDCHealth 10.50% 12/1/12 475,000 548,625
US Oncology 10.75% 8/15/14 435,000 493,725
Vanguard Health 9.00% 10/1/14 260,000 284,050
------------
2,555,113
------------
Technology & Electronics - 0.37%
*Magnachip Semiconductor 8.00% 12/15/14 275,000 259,875
#Sunguard Data 144A 10.25% 8/15/15 285,000 299,250
------------
559,125
------------
Telecommunications - 3.74%
Alaska Communications Systems 9.875% 8/15/11 375,000 412,500
American Cellular 10.00% 8/1/11 245,000 262,150
American Tower 7.125% 10/15/12 270,000 284,175
Centennial Cellular Operating 10.125% 6/15/13 315,000 352,800
Cincinnati Bell
7.00% 2/15/15 75,000 73,875
*8.375% 1/15/14 275,000 279,125
*#Digicel Limited 144A 9.25% 9/1/12 275,000 288,750
@Inmarsat Finance 10.375% 11/15/12 275,000 227,563
iPCS 11.50% 5/1/12 200,000 232,000
Iwo Escrow
o7.349% 1/15/12 75,000 79,125
@10.75% 1/15/15 75,000 53,063
@PanAmSat 10.375% 11/1/14 600,000 415,500
o#Qwest 144A 6.671% 6/15/13 325,000 342,063
Qwest Service 13.50% 12/15/10 470,000 544,024
*Rural Cellular
9.625% 5/15/08 250,000 252,500
9.875% 2/1/10 275,000 292,875
*#Telcordia Technologies 144A 10.00% 3/15/13 555,000 530,024
*Time Warner Telecom 9.75% 7/15/08 100,000 102,000
*oUS LEC 11.89% 10/1/09 225,000 231,750
US Unwired 10.00% 6/15/12 10,000 11,650
#Valor Telecom Enterprises 144A 7.75% 2/15/15 425,000 419,688
------------
5,687,200
------------
PRINCIPAL
AMOUNT
Utilities - 3.21%
*Avista 9.75% 6/1/08 500,000 561,403
Calpine
*7.625% 4/15/06 110,000 102,300
10.50% 5/15/06 155,000 144,925
o#Calpine 144A 9.349% 7/15/07 338,100 280,623
#Dynegy Holdings 144A 10.125% 7/15/13 700,000 785,749
Elwood Energy 8.159% 7/5/26 173,406 194,215
Midwest Generation
8.30% 7/2/09 500,000 527,500
8.75% 5/1/34 425,000 478,125
*++Mirant Americas Generation 7.625% 5/1/06 400,000 474,000
*NRG Energy 8.00% 12/15/13 290,000 313,925
Orion Power Holdings 12.00% 5/1/10 250,000 303,750
PSE&G Energy Holdings 7.75% 4/16/07 250,000 258,125
Reliant Energy 9.50% 7/15/13 125,000 139,688
#Texas Genco 144A 6.875% 12/15/14 300,000 312,750
=++#USGen New England 144A 7.459% 1/2/15 250,000 1,800
------------
4,878,878
------------
TOTAL CORPORATE BONDS (cost $46,711,006) 47,351,314
============
U.S. TREASURY OBLIGATIONS - 3.63%
*^Treasury Bill 3.256% 9/1/05 5,515,000 5,515,000
------------
TOTAL U.S. TREASURY OBLIGATIONS (cost $5,515,000) 5,515,000
============
NUMBER OF
WARRANT - 0.00% SHARES
+#Solutia 144A, exercise price $7.59, expiration date 7/15/09 650 0
------------
TOTAL WARRANT (cost $55,294) 0
============
TOTAL MARKET VALUE OF SECURITIES BEFORE SECURITIES LENDING COLLATERAL - 130.53%
(cost $180,638,320) 198,519,884
============
PRINCIPAL
AMOUNT
SECURITIES LENDING COLLATERAL** - 17.19%
Short-Term Investments
Abbey National 3.59% 1/13/06 $ 546,122 546,204
Australia New Zealand 3.60% 10/2/06 738,062 737,912
Bank of New York
3.54% 10/28/05 368,980 368,961
3.54% 4/4/06 590,381 590,329
Bank of the West 3.49% 3/2/06 737,930 737,912
Barclays London
3.55% 9/16/05 737,907 737,912
3.81% 11/28/05 368,964 368,956
Bayerische Landesbank 3.66% 8/25/06 737,713 737,912
Bear Stearns
3.60% 1/17/06 147,614 147,632
3.62% 2/28/06 811,703 811,703
Beta Finance 3.58% 4/18/06 737,887 737,856
Calyon
3.69% 11/3/05 546,080 546,055
3.77% 12/30/05 518,977 518,379
CDC Financial Product 3.66% 9/30/05 959,285 959,285
Citigroup Global Markets
3.60% 9/1/05 3,633,403 3,633,403
3.63% 9/7/05 959,285 959,285
Commonwealth Bank Australia 3.61% 10/2/06 737,997 737,912
Credit Swiss First Boston New York
3.49% 12/29/05 154,967 154,968
3.56% 4/18/06 797,025 796,945
Deutsche Bank London
3.55% 9/20/05 812,101 812,095
3.76% 12/27/05 221,448 221,401
Goldman Sachs 3.70% 8/31//06 811,703 811,703
Lehman Holdings 3.64% 12/23/05 738,008 738,354
Marshall & Ilsley Bank 3.44% 12/29/05 738,090 737,934
Merrill Lynch Mortgage Capital 3.66% 9/12/05 959,285 959,285
National City Bank Cleveland 3.56% 1/23/06 841,245 841,250
Nordea Bank Norge ASA 3.55% 10/2/06 737,980 737,912
Pfizer 3.52% 10/2/06 708,400 708,395
Proctor & Gamble 3.34% 10/2/06 737,912 737,912
Royal Bank of Canada 3.78% 11/18/05 737,918 737,912
Royal Bank of Scotland 3.58% 10/2/06 737,949 737,912
Sigma Finance
3.48% 9/30/05 693,582 693,608
3.55% 9/15/05 147,588 147,583
3.58% 3/16/06 221,757 221,783
Washington Mutual Bank 3.49% 9/19/05 737,924 737,912
Wells Fargo 3.56% 10/2/06 737,727 737,912
------------
TOTAL SECURITIES LENDING COLLATERAL (cost $26,150,384) 26,150,384
============
TOTAL MARKET VALUE OF SECURITIES - 147.72% 224,670,268>
(cost $206,788,704)
OBLIGATION TO RETURN SECURITIES LENDING COLLATERAL - (17.19%)** (26,150,384)
COMMERCIAL PAPER PAYABLE (PAR $48,000,000) - (31.45%) (47,828,324)
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES (SEE NOTES) - 0.92% 1,393,556
------------
NET ASSETS APPLICABLE TO 11,588,670 SHARES OUTSTANDING $152,085,116
============
#Security exempt from registration under Rule 144A of the Securities Act of
1933. See Note 5 in "Notes."
^U.S. Treasury bills are treated on a discount basis; the interest rate shown is
the yield at the time of purchase.
*Fully or partially on loan.
**See Note 4 in "Notes."
>Includes $25,856,263 of securities loaned.
oVariable rate securities. The interest rate shown is the rate as of August 31,
2005.
+Non-income producing security for the period ended August 31, 2005.
++Non-income producing security. Security is currently in default.
@Step Coupon Bond. Indicates security that has a zero coupon that
remains in effect until a predetermined date at which time the stated interest
rate becomes effective.
~Security is currently in default. The issue has missed the maturity date.
Bankruptcy proceedings are in the process to determine distribution of assets.
The date listed is the estimate of when proceedings will be finalized.
=Security is being fair valued in accordance with the Fund's fair valuation
policy. See Note 1 in "Notes." At August 31, 2005, one security was fair valued
which represented 0.00% of the Fund's net assets.
SUMMARY OF ABBREVIATIONS:
ADR - American Depositary Receipts
REIT - Real Estate Investment Trust
--------------------------------------------------------------------------------
NOTES
1. SIGNIFICANT ACCOUNTING POLICIES
The following accounting policies are in accordance with U.S. generally accepted
accounting principals and are consistently followed by the Delaware Investments
Dividend and Income Fund, Inc. (the "Fund").
SECURITY VALUATION - Equity securities, except those traded on the Nasdaq Stock
Market, Inc. (Nasdaq), are valued at the last quoted sales price as of the time
of the regular close of the New York Stock Exchange (NYSE) on the valuation
date. Securities traded on the Nasdaq are valued in accordance with the Nasdaq
Official Closing Price, which may not be the last sales price. If on a
particular day an equity security does not trade, then the mean between the bid
and the asked prices will be used. U.S. Government and agency securities are
valued at the mean between the bid and asked prices. Long-term debt securities
are valued by an independent pricing service and such prices are believed to
reflect the fair value of such securities. Short-term debt securities having
less than 60 days to maturity are valued at amortized cost, which approximates
market value. Other securities and assets for which market quotations are not
readily available are valued at fair value as determined in good faith under the
direction of the Fund's Board of Directors. In determining whether market
quotations are readily available or fair valuation will be used, various factors
will be taken into consideration, such as market closures, or with respect to
foreign securities, aftermarket trading or significant events after local market
trading (e.g., government actions or pronouncements, trading volume or
volatility on markets, exchanges among dealers, or news events).
FEDERAL INCOME TAXES - The Fund intends to continue to qualify for federal
income tax purposes as a regulated investment company and make the requisite
distributions to shareholders. Accordingly, no provision for federal income
taxes has been made in the financial statements.
DISTRIBUTIONS - The Fund has a managed distribution policy. Under the policy,
the Fund declares and pays monthly distributions and is managed with a goal of
generating as much of the distribution as possible from ordinary income (net
investment income and short-term capital gains). The balance of the distribution
then comes from long-term capital gains and if necessary, a return of capital.
The current annualized rate is $0.96 per share. The Fund continues to evaluate
its monthly distribution in light of ongoing economic and market conditions and
may change the amount of the monthly distributions in the future.
BORROWINGS - The Fund issues short-term commercial paper at a discount from par.
The discount is amortized as interest expense over the life of the commercial
paper using the straight-line method (See Note 3).
USE OF ESTIMATES - The preparation of financial statements in conformity with
U.S. generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
OTHER - Expenses common to all funds within the Delaware Investments Family of
Funds are allocated amongst the funds on the basis of average net assets.
Management fees and some other expenses are paid monthly. Security transactions
are recorded on the date the securities are purchased or sold (trade date).
Costs used in calculating realized gains and losses on the sale of investment
securities are those of the specific securities sold. Dividend income is
recorded on the ex-dividend date and interest income is recorded on the accrual
basis. Discounts and premiums are amortized to interest income over the lives of
the respective securities. Premiums and discounts on non-convertible debt
securities are amortized to interest income over the lives of the respective
securities. Distributions received from investments in Real Estate Investment
Trusts are recorded as dividend income on ex-dividend date, subject to
reclassification upon notice of the character of such distribution by the
issuer.
2. INVESTMENTS
At August 31, 2005, the cost of investments for federal income tax purposes has
been estimated since the final tax characteristics cannot be determined until
fiscal year end. At August 31, 2005, the cost of investments and unrealized
appreciation (depreciation) for the Fund was as follows:
Cost of investments $206,995,033
------------
Aggregate unrealized appreciation $ 24,757,905
Aggregate unrealized depreciation (7,082,670)
------------
Net unrealized appreciation $ 17,675,235
============
For federal income tax purposes, at November 30, 2004, capital loss
carryforwards of $15,214,564 may be carried forward and applied against future
capital gains. Such capital loss carryforwards expire as follows: $13,424,663
expires in 2010 and $1,789,901 expires in 2011.
3. COMMERCIAL PAPER
As of August 31, 2005, $48,000,000 (par value) of commercial paper was
outstanding with an amortized cost of $47,828,324. The weighted average discount
rate of commercial paper outstanding at August 31, 2005, was 3.72%. The average
daily balance of commercial paper outstanding during the period ended August 31,
2005, was $53,187,738 at a weighted discount rate of 2.96%. The maximum amount
of commercial paper outstanding at any time during the period was $55,000,000.
In conjunction with the issuance of the commercial paper, the Fund entered into
a line of credit arrangement with J.P. Morgan Chase for $30,000,000. Interest on
borrowings is based on market rates in effect at the time of borrowing. The
commitment fee is computed at the rate of 0.15% per annum on the unused balance.
During the period ended August 31, 2005 there were no borrowings under this
arrangement.
4. SECURITIES LENDING
The Fund, along with other funds in the Delaware Investments Family of Funds,
may lend its securities pursuant to a security lending agreement (Lending
Agreement) with J.P. Morgan Chase. Initial security loans made pursuant to the
Lending Agreement are required to be secured by U.S. government obligations
and/or cash collateral not less than 102% of the market value of the securities
issued in the United States. With respect to each loan, if the aggregate market
value of the collateral held on any business day is less than the aggregate
market value of the securities which are the subject of such loan, the borrower
will be notified to provide additional collateral not less than the applicable
collateral requirements. Cash collateral received is invested in fixed income
securities, with a weighted average maturity not to exceed 90 days, rated in one
of the top two tiers by Standard & Poor's Ratings Group or Moody's Investors
Service, Inc. or repurchase agreements collateralized by such securities.
However, in the event of default or bankruptcy by the lending agent, realization
and/or retention of the collateral may be subject to legal proceedings. In the
event the borrower fails to return loaned securities and the collateral received
is insufficient to cover the value of the loaned securities and provided such
collateral shortfall is not the result of investment losses, the lending agent
has agreed to pay the amount of the shortfall to the Fund, or at the discretion
of the lending agent, replace the loaned securities. The Fund continues to
record dividends on the securities loaned and is subject to change in value of
the securities loaned that may occur during the term of the loan. The Fund has
the right under the Lending Agreement to recover the securities from the
borrower on demand. The security lending agent and the borrower retain a portion
of the earnings from the collateral investments. The Fund records security
lending income net of such allocation.
At August 31, 2005, the market value of securities on loan was $25,856,263, for
which cash collateral was received and invested in accordance with the Lending
Agreement. Such investments are presented on the Schedule of Investments under
the caption "Securities Lending Collateral."
5. CREDIT AND MARKET RISKS
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 may invest up to 10% of its total assets in illiquid securities, which
may include securities with contractual restrictions on resale, securities
exempt from registration under Rule 144A of the Securities Act of 1933, as
amended, and other securities which may not be readily marketable. The relative
illiquidity of these securities may impair the Fund from disposing of them in a
timely manner and at a fair price when it is necessary or desirable to do so. At
August 31, 2005, Rule 144A securities represented approximately 12.57% of total
assets and no securities has been determined to be illiquid under the Fund's
Liquidity Procedures. While maintaining oversight, the Board of Directors has
delegated to Delaware Management Company the day-to-day functions of determining
whether individual securities are liquid for purposes of the Fund's limitation
on investments in illiquid assets.
The Fund invests in real estate investment trusts (REITs) and is subject to some
of the risks associated with that industry. If the Fund holds real estate
directly as a result of defaults or receives rental income directly from real
estate holdings, its tax status as a regulated investment company may be
jeopardized. 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.
ITEM 2. CONTROLS AND PROCEDURES.
The registrant's principal executive officer and principal financial
officer have evaluated the registrant's disclosure controls and procedures
within 90 days of the filing of this report and have concluded that they are
effective in providing reasonable assurance that the information required to be
disclosed by the registrant in its reports or statements filed under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported
within the time periods specified in the rules and forms of the Securities and
Exchange Commission.
There were no significant changes in the registrant's internal control
over financial reporting that occurred during the registrant's last fiscal
quarter (the registrant's second fiscal half-year in the case of an annual
report) that have materially affected, or are reasonably likely to materially
affect, the registrant's internal control over financial reporting.
ITEM 3. EXHIBITS.
File as exhibits as part of this Form a separate certification for each
principal executive officer and principal financial officer of the registrant as
required by Rule 30a-2(a) under the Act (17 CFR 270.30a-2(a)), exactly as set
forth below:
CERTIFICATION
I, Jude T. Driscoll, certify that:
1. I have reviewed this report on Form N-Q of Delaware Investments Dividend
and Income Fund, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the schedules of investments included in this
report fairly present in all material respects the investments of the registrant
as of the end of the fiscal quarter for which the report is filed;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Rule 30a-3(c) under the Investment Company Act of 1940) and internal control
over financial reporting (as defined in Rule 30a-3(d) under the Investment
Company Act of 1940) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting
principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of a date
within 90 days prior to the filing date of this report, based on such
evaluation; and
(d) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize, and report financial information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Jude T. Driscoll
--------------------------------
By: Jude T. Driscoll
Title: Chief Executive Officer
Date: October 28, 2005
CERTIFICATION
I, Michael P. Bishof, certify that:
1. I have reviewed this report on Form N-Q of Delaware Investments Dividend
and Income Fund, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the schedules of investments included in this
report fairly present in all material respects the investments of the registrant
as of the end of the fiscal quarter for which the report is filed;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Rule 30a-3(c) under the Investment Company Act of 1940) and internal control
over financial reporting (as defined in Rule 30a-3(d) under the Investment
Company Act of 1940) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting
principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of a date
within 90 days prior to the filing date of this report, based on such
evaluation; and
(d) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize, and report financial information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Michael P. Bishof
--------------------------------
By: Michael P. Bishof
Title: Chief Financial Officer
Date: October 28, 2005
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
DELAWARE INVESTMENTS DIVIDEND AND INCOME FUND, INC.
Jude T. Driscoll
--------------------------------
By: Jude T. Driscoll
Title: Chief Executive Officer
Date: October 28, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
Jude T. Driscoll
--------------------------------
By: Jude T. Driscoll
Title: Chief Executive Officer
Date: October 28, 2005
Michael P. Bishof
--------------------------------
By: Michael P. Bishof
Title: Chief Financial Officer
Date: October 28, 2005