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 F. Connor, Esq.
2005 Market Street
Philadelphia, PA 19103
Registrant's telephone number, including area code: (800) 523-1918
Date of fiscal year end: November 30
Date of reporting period: February 28, 2006
Item 1. Schedule of Investments.
Schedule of Investments (Unaudited)
Delaware Investments Dividend and Income Fund, Inc.
February 28, 2006
Number of Market
Shares Value
Common Stock- 73.95%
Consumer Discretionary - 5.65%
=+@Avado Brands 1,390 $ 19,502
Gap 132,200 2,450,988
*+Great Wolf Resorts 74,100 765,453
Limited Brands 104,000 2,461,680
Mattel 160,200 2,699,370
+XM Satellite Radio Holdings Class A 2,000 44,180
------
8,441,173
Consumer Staples - 5.56%
B&G Foods 4,800 71,952
ConAgra Foods 113,800 2,393,214
Heinz (H.J.) 30,400 1,151,248
Kimberly-Clark 39,000 2,308,020
Safeway 98,300 2,389,673
---------
8,314,107
Energy - 3.31%
Chevron 41,000 2,315,680
ConocoPhillips 40,000 2,438,400
*+Petroleum Geo-Services ADR 4,867 192,247
-------
4,946,327
Financials - 12.70%
Allstate 43,000 2,355,540
Aon 64,700 2,562,766
Chubb 23,800 2,278,850
Hartford Financial Services Group 27,100 2,232,498
Huntington Bancshares 97,900 2,354,495
Morgan Stanley 41,000 2,446,060
Wachovia 44,000 2,467,080
Washington Mutual 53,400 2,280,180
---------
18,977,469
Health Care - 9.98%
Abbott Laboratories 59,000 2,606,620
Baxter International 60,900 2,305,065
Bristol-Myers Squibb 101,200 2,337,720
Merck 73,100 2,548,266
Pfizer 99,700 2,611,142
Wyeth 50,500 2,514,900
---------
14,923,713
Health Care REITs - 0.23%
#Medical Properties Trust 144A 35,000 350,000
-------
350,000
Hotel REITs - 0.76%
Strategic Hotel Capital 52,700 1,138,320
---------
1,138,320
Industrial REITs - 2.07%
AMB Property 57,800 3,100,970
---------
3,100,970
Industrials - 3.64%
*+Foster Wheeler 6,960 334,074
Union Pacific 28,900 2,559,095
Waste Management 76,600 2,547,716
---------
5,440,885
Information Technology - 4.91%
Hewlett-Packard 81,200 2,664,172
International Business Machines 28,700 2,302,888
+Xerox 158,700 2,364,630
---------
7,331,690
Mall REITs - 2.63%
General Growth Properties 6 302
Simon Property Group 47,300 3,924,481
---------
3,924,783
Manufactured Housing REITs - 0.40%
Equity Lifestyle Properties 12,600 600,894
-------
600,894
Materials - 1.47%
duPont (E.I.) deNemours 54,700 2,201,128
---------
2,201,128
Mortgage REITs - 9.30%
American Home Mortgage Investment 89,900 2,562,150
*Gramercy Capital 79,100 2,077,166
*Friedman Billings Ramsey Group Class A 87,195 868,462
JER Investors Trust 110,600 1,933,288
+#KKR Financial 144A 91,300 2,088,031
*MortgageIT Holdings 187,000 2,178,550
+#Peoples Choice 144A 176,700 971,850
*Saxon Capital 122,400 1,217,880
---------
13,897,377
Office REITs - 5.76%
American Financial Realty Trust 109,700 1,296,654
*Duke Realty 76,600 2,688,660
Brandywine Realty Trust 46,348 1,361,241
*Reckson Associates Realty 79,820 3,264,638
---------
8,611,193
Shopping Center REITs - 0.38%
*Ramco-Gershenson Properties 19,400 563,764
-------
563,764
Telecommunications - 3.49%
AT&T 94,900 2,618,291
Verizon Communications 77,200 2,601,640
---------
5,219,931
Utilities - 1.71%
+Mirant 8,223 202,286
Progress Energy 52,900 2,347,702
---------
2,549,988
Total Common Stock (cost $98,157,248) 110,533,712
===========
Convertible Preferred Stock- 4.65%
Banking, Finance & Insurance - 1.49%
Aspen Insurance 5.625% exercise price $29.28, expiration date 12/31/49 8,800 442,200
Chubb 7.00% exercise price $71.40, expiration date 8/16/06 15,000 509,700
oCitigroup Funding 5.18% exercise price $29.50, expiration date 9/27/08 17,000 543,830
*E Trade Financial 6.125% exercise price $21.82, expiration date 11/18/08 9,000 300,375
*Lehman Brothers Holdings 6.25% exercise price $54.24, expiration date 10/15/07 16,000 426,000
-------
2,222,105
Basic Materials - 0.37%
Huntsman 5.00% exercise price $28.29, expiration date 2/16/08 12,400 556,450
-------
556,450
Cable, Media & Publishing - 0.24%
#Interpublic 5.25% 144A exercise price $13.66, expiration date 12/31/49 360 354,150
-------
354,150
Consumer Products - 0.33%
Newell Financial Trust I 5.25% exercise price $50.69, expiration date 12/1/27 11,630 494,275
-------
494,275
Energy - 0.59%
Chesapeake 4.50% exercise price $44.17, expiration date 12/31/49 5,800 528,525
El Paso Energy Capital Trust 4.75% exercise price $41.59, expiration date 3/31/28 9,250 346,875
-------
875,400
Environmental Services - 0.58%
Allied Waste Industries 6.25% exercise price $10.13, expiration date 4/1/06 16,200 868,806
-------
868,806
Food, Beverage & Tobacco - 0.36%
Constellation Brands 5.75% exercise price $17.08, expiration date 9/1/06 13,800 539,580
-------
539,580
Utilities - 0.69%
Entergy 7.625% exercise price $87.64, expiration date 2/17/09 9,000 468,000
*NRG Energy 5.75% exercise price $60.45, expiration date 3/16/09 2,450 571,463
-------
1,039,463
Total Convertible Preferred Stock (cost $6,848,493) 6,950,229
=========
Preferred Stock- 5.71%
Leisure, Lodging & Entertainment - 1.01%
Red Lion Hotels 9.50% 58,000 1,510,320
---------
1,510,320
Real Estate - 4.70%
Equity Inns Series B 8.75% 35,700 944,265
LaSalle Hotel Properties 10.25% 113,200 2,965,840
Ramco-Gershenson Properties 9.50% 40,000 1,054,200
SL Green Realty 7.625% 80,000 2,052,504
---------
7,016,809
Total Preferred Stock (cost $8,172,500) 8,527,129
=========
Principal
Amount
Commercial Mortgage-Backed Securities- 0.20%
#First Union National Bank Commercial Mortgage Series 2001-C2 L 144A 6.46%
1/12/43 $300,000 296,331
-------
Total Commercial Mortgage-Backed Securities (cost $304,488) 296,331
=======
Convertible Bonds- 7.33%
Aerospace & Defense - 0.55%
#AAR 144A 1.75% 2/1/26 exercise price $29.43, expiration date 2/1/26 260,000 274,625
EDO 4.00% 11/15/25 exercise price $34.19, expiration date 11/15/25 235,000 252,919
#L-3 Communications 144A 3.00% 8/1/35 exercise price $102.31, expiration date 8/1/35 290,000
299,062
826,606
Cable, Media & Publishing - 0.49%
#Charter Communications 144A 5.875% 11/16/09 exercise price $2.42, expiration date 11/16/09 165,000 119,006
#Playboy Enterprises 144A 3.00% 3/15/25 exercise price $17.02, expiration date 3/15/25 600,000
607,500
726,506
Capital Goods - Manufacturing - 0.19%
#Tyco International Group 144A 2.75% 1/15/18 exercise price $22.78, expiration date 1/15/18 250,000
284,375
284,375
Computers & Technology - 0.71%
Hutchinson Technology 3.25% 1/15/26 exercise price $36.43, expiration date 1/15/26 340,000 334,475
#Intel 144A 2.95% 12/15/35 exercise price $31.53, expiration date 12/15/35 255,000 226,631
#Sybase 144A 1.75% 2/22/25 exercise price $25.22, expiration date 2/22/25 500,000 507,500
-------
1,068,606
Energy - 0.99%
Halliburton 3.125% 7/15/23 exercise price $37.65, expiration date 7/15/23 250,000 465,938
Pride International 3.25% 5/1/33 exercise price $25.70, expiration date 5/1/33 350,000 463,750
Schlumberger 2.125% 6/1/23 exercise price $80.00, expiration date 6/1/23 360,000 549,000
-------
1,478,688
Health Care & Pharmaceuticals - 1.00%
CV Therapeutics 3.25% 8/16/13 exercise price $27.00, expiration date 8/16/13 125,000 152,031
Encysive Pharmaceuticals 2.50% 3/15/12 exercise price $13.95, expiration date 3/15/12 630,000
574,087
#Nektar Therapeutics 144A 3.25% 9/28/12 exercise price $21.52, expiration date 9/28/12 350,000
414,750
Teva Pharmaceutical Finance 0.25% 2/1/26 exercise price $47.16, expiration date 2/1/26 345,000
352,763
1,493,631
Leisure, Lodging & Entertainment - 0.45%
#Regal Entertainment Group 144A 3.75% 5/15/08 exercise price $15.19, expiration date 5/15/08 550,000 679,250
-------
679,250
Real Estate - 0.77%
MeriStar Hospitality 9.50% 4/1/10 exercise price $10.18, expiration date 4/1/10 1,100,000 1,149,500
---------
1,149,500
Retail - 0.92%
*Dick's Sporting Goods 1.606% 2/18/24 exercise price $58.13, expiration date 2/18/24 380,000
286,900
Lowe's Companies 0.861% 10/19/21 exercise price $50.03, expiration date 10/19/21 280,000 332,150
#Saks 144A 2.00% 3/15/24 exercise price $18.69, expiration date 3/15/24 425,000 465,906
#United Auto Group 144A 3.50% 4/1/26 exercise price $47.39, expiration date 4/1/26 260,000 284,050
-------
1,369,006
Technology - 0.36%
#Mercury Interactive 144A 4.75% 7/1/07 exercise price $111.25, expiration date 7/1/07 550,000
538,313
538,313
Telecommunications - 0.15%
Qwest Communications International 3.50% 11/15/25 exercise price $5.90, expiration date 11/15/25 180,000 227,025
-------
227,025
Transportation - 0.12%
*#ExpressJet Holdings 144A 4.25% 8/1/23 exercise price $18.20, expiration date 8/1/23 200,000
174,750
174,750
Utilities - 0.63%
#CenterPoint Energy 144A 3.75% 5/15/23 exercise price $11.44, expiration date 5/15/23 800,000
942,000
942,000
Total Convertible Bonds (cost $10,356,999) 10,958,256
==========
Corporate Bonds- 31.08%
Banking - 0.17%
Western Financial 9.625% 5/15/12 225,000 253,688
-------
253,688
Basic Industry - 4.13%
Abitibi-Consolidated
6.95% 12/15/06 20,000 20,275
*7.875% 8/1/09 95,000 93,338
*AK Steel 7.875% 2/15/09 340,000 332,350
Bowater 9.50% 10/15/12 575,000 600,874
Georgia-Pacific
8.875% 5/15/31 75,000 79,125
9.50% 12/1/11 300,000 329,250
Gold Kist 10.25% 3/15/14 205,000 227,550
*Huntsman International 10.125% 7/1/09 100,000 103,000
#Ineos Group Holdings 144A 8.50% 2/15/16 475,000 467,875
Lyondell Chemical 10.50% 6/1/13 45,000 50,513
*#Nell AF Sarl 144A 8.375% 8/15/15 250,000 252,500
NewPage 10.00% 5/1/12 350,000 367,500
Norske Skog 8.625% 6/15/11 330,000 328,350
#Port Townsend Paper 144A 12.00% 4/15/11 450,000 362,250
Potlatch 13.00% 12/1/09 475,000 561,480
*Rhodia
8.875% 6/1/11 98,000 102,165
10.25% 6/1/10 110,000 124,300
Smurfit Capital Funding 7.50% 11/20/25 595,000 550,375
*++Solutia 6.72% 10/15/37 705,000 525,225
Tembec Industries 8.625% 6/30/09 790,000 442,400
Witco 6.875% 2/1/26 250,000 242,500
-------
6,163,195
Brokerage - 0.81%
*E Trade Financial 8.00% 6/15/11 505,000 534,038
LaBranche & Company
9.50% 5/15/09 300,000 322,500
11.00% 5/15/12 320,000 357,600
-------
1,214,138
Capital Goods - 1.83%
*Armor Holdings 8.25% 8/15/13 225,000 241,313
#Case New Holland 144A 7.125% 3/1/14 75,000 75,563
*Graham Packaging 9.875% 10/15/14 390,000 397,800
Interface 10.375% 2/1/10 290,000 318,275
Interline Brands 11.50% 5/15/11 576,000 642,239
Intertape Polymer 8.50% 8/1/14 405,000 400,950
(TM)Mueller Holdings 14.75% 4/15/14 285,000 232,275
*#Panolam Industrial 144A 10.75% 10/1/13 170,000 164,050
Trimas 9.875% 6/15/12 305,000 269,925
-------
2,742,390
Consumer Cyclical - 2.12%
*Accuride 8.50% 2/1/15 250,000 250,000
Carrols 9.00% 1/15/13 125,000 127,188
General Motors Acceptance Corporation
6.875% 9/15/11 385,000 345,101
*8.00% 11/1/31 250,000 228,895
*Landry's Restaurant 7.50% 12/15/14 315,000 306,338
*Metaldyne 10.00% 11/1/13 405,000 372,599
*#Neiman Marcus 144A 9.00% 10/15/15 285,000 302,456
O'Charleys 9.00% 11/1/13 225,000 232,313
*#Uno Restaurant 144A 10.00% 2/15/11 275,000 232,375
++Venture Holdings 12.00% 6/1/09 425,000 799
*Visteon
7.00% 3/10/14 75,000 56,063
8.25% 8/1/10 230,000 184,000
Warnaco 8.875% 6/15/13 500,000 537,499
-------
3,175,626
Consumer Non-Cyclical - 2.43%
Biovail 7.875% 4/1/10 565,000 584,774
*Constellation Brands 8.125% 1/15/12 124,000 130,510
Cott Beverages 8.00% 12/15/11 250,000 258,125
#Doane Pet Care 144A 10.625% 11/15/15 195,000 207,188
#Le-Natures 144A 10.00% 6/15/13 375,000 395,625
National Beef Packing 10.50% 8/1/11 385,000 393,663
Pilgrim's Pride 9.625% 9/15/11 320,000 340,400
Playtex Products 9.375% 6/1/11 350,000 368,375
Swift & Co. 12.50% 1/1/10 125,000 124,375
True Temper Sports 8.375% 9/15/11 420,000 380,100
#Warner Chilcott 144A 9.25% 2/1/15 455,000 449,313
-------
3,632,448
Energy - 1.91%
Bluewater Finance 10.25% 2/15/12 280,000 303,100
Compton Petroleum Finance 7.625% 12/1/13 135,000 138,713
#Copano Energy 144A 8.125% 3/1/16 100,000 104,500
El Paso Natural Gas 7.625% 8/1/10 200,000 211,459
El Paso Production Holding 7.75% 6/1/13 350,000 370,999
#Hilcorp Energy 144A
*7.75% 11/1/15 110,000 111,925
10.50% 9/1/10 100,000 111,500
Inergy Finance
6.875% 12/15/14 250,000 239,375
#144A 8.25% 3/1/16 75,000 76,875
oSecunda International 12.60% 9/1/12 260,000 279,500
Tennessee Gas Pipeline 8.375% 6/15/32 350,000 423,362
#VeraSun Energy 144A 9.875% 12/15/12 230,000 246,100
Whiting Petroleum 7.25% 5/1/13 235,000 239,113
-------
2,856,521
Financials - 0.15%
FINOVA Group 7.50% 11/15/09 673,750 222,338
-------
222,338
Media - 4.01%
oAdelphia Communications 8.125% 7/15/06 525,000 341,250
#CCH I 144A 11.00% 10/1/15 554,000 468,823
Cenveo 9.625% 3/15/12 190,000 205,200
Charter Communications Holdings
*11.125% 1/15/11 400,000 216,000
(TM)13.50% 1/15/11 450,000 272,250
o#Cleveland Unlimited 144A 12.73% 12/15/10 150,000 154,500
CSC Holdings
8.125% 8/15/09 95,000 98,444
*10.50% 5/15/16 495,000 527,175
Dex Media East 12.125% 11/15/12 205,000 237,544
Insight Midwest 10.50% 11/1/10 725,000 767,593
Lodgenet Entertainment 9.50% 6/15/13 505,000 547,924
*Mediacom Capital 9.50% 1/15/13 515,000 517,575
#RH Donnelley 144A 8.875% 1/15/16 225,000 235,969
Sheridan Acquisition 10.25% 8/15/11 225,000 234,281
*Sirius Satellite 9.625% 8/1/13 380,000 374,300
Vertis 10.875% 6/15/09 185,000 182,688
Warner Music Group 7.375% 4/15/14 230,000 231,725
XM Satellite Radio 12.00% 6/15/10 338,000 379,405
-------
5,992,646
Real Estate - 0.84%
American Real Estate Partners 8.125% 6/1/12 365,000 381,060
BF Saul REIT 7.50% 3/1/14 400,000 412,000
Tanger Properties 9.125% 2/15/08 430,000 456,236
-------
1,249,296
Services Cyclical - 4.02%
*Adesa 7.625% 6/15/12 295,000 300,900
*#CCM Merger 144A 8.00% 8/1/13 335,000 335,000
Corrections Corporation of America 7.50% 5/1/11 390,000 405,113
*Foster Wheeler 10.359% 9/15/11 67,000 74,370
FTI Consulting 7.625% 6/15/13 105,000 110,513
#Galaxy Entertainment Finance 144A 9.875% 12/15/12 400,000 416,000
Gaylord Entertainment 8.00% 11/15/13 180,000 189,225
(TM)H-Lines Finance Holdings 11.00% 4/1/13 491,000 409,985
#Hertz 144A
8.875% 1/1/14 150,000 157,500
10.50% 1/1/16 65,000 70,363
Horizon Lines 9.00% 11/1/12 176,000 187,000
Kansas City Southern Railway 9.50% 10/1/08 400,000 434,000
#Knowledge Learning 144A 7.75% 2/1/15 315,000 302,400
Mandalay Resort Group 10.25% 8/1/07 100,000 106,625
OMI 7.625% 12/1/13 500,000 514,999
Penn National Gaming 8.875% 3/15/10 400,000 417,752
Royal Caribbean Cruises 7.25% 3/15/18 95,000 102,864
Seabulk International 9.50% 8/15/13 250,000 277,813
*Stena 9.625% 12/1/12 335,000 366,825
(TM)Town Sports International 11.00% 2/1/14 330,000 239,250
Wheeling Island Gaming 10.125% 12/15/09 555,000 583,443
-------
6,001,940
Services Non-cyclical - 2.54%
#Accellent 144A 10.50% 12/1/13 235,000 247,925
Aleris International 9.00% 11/15/14 365,000 386,900
Allied Waste North America 9.25% 9/1/12 370,000 403,300
Casella Waste Systems 9.75% 2/1/13 485,000 520,163
#CRC Health 144A 10.75% 2/1/16 275,000 285,313
Geo Subordinate 11.00% 5/15/12 470,000 460,600
*HealthSouth
8.375% 10/1/11 75,000 84,750
10.75% 10/1/08 520,000 539,499
US Oncology 10.75% 8/15/14 435,000 482,850
*(TM)Vanguard Health 11.25% 10/1/15 515,000 383,675
-------
3,794,975
Technology & Electronics - 0.56%
*Magnachip Semiconductor 8.00% 12/15/14 450,000 436,500
*#Sunguard Data Systems 144A 10.25% 8/15/15 385,000 405,694
-------
842,194
Telecommunications - 3.24%
American Cellular 10.00% 8/1/11 245,000 267,663
*American Tower 7.125% 10/15/12 275,000 289,438
*#Centennial Communications 144A 10.00% 1/1/13 170,000 177,650
*Cincinnati Bell 8.375% 1/15/14 470,000 477,050
#Digicel Limited 144A 9.25% 9/1/12 275,000 290,125
(TM)Inmarsat Finance 10.375% 11/15/12 645,000 546,637
iPCS 11.50% 5/1/12 200,000 230,500
oIwo Escrow Company 8.35% 1/15/12 75,000 78,469
Qwest
o7.741% 6/15/13 325,000 356,688
7.875% 9/1/11 125,000 134,375
Rural Cellular 9.875% 2/1/10 275,000 295,625
o#Rural Cellular 144A 10.43% 11/1/12 170,000 175,950
#Telcordia Technologies 144A 10.00% 3/15/13 565,000 522,625
*Triton Communications 9.375% 2/1/11 260,000 182,650
oUS LEC 12.716% 10/1/09 225,000 245,531
#Wind Acquisition 144A 10.75% 12/1/15 535,000 575,124
-------
4,846,100
Utilities - 2.32%
Avista 9.75% 6/1/08 200,000 216,889
++#Calpine 144A 9.90% 7/15/07 337,238 315,739
#Dynegy Holdings 144A 10.125% 7/15/13 700,000 790,999
Elwood Energy 8.159% 7/5/26 166,450 179,697
Midwest Generation
8.30% 7/2/09 500,000 517,641
8.75% 5/1/34 275,000 301,813
Mirant Americas 8.30% 5/1/11 350,000 367,938
NRG Energy 7.25% 2/1/14 475,000 488,063
Orion Power 12.00% 5/1/10 250,000 287,500
=++#USGen New England 144A 7.459% 1/2/15 250,000 1,800
-----
3,468,079
Total Corporate Bonds (cost $46,879,245) 46,455,574
==========
Number of
Shares
Warrant- 0.00%
+#Solutia 144A, exercise price $7.59, expiration date 7/15/09 650 -
-
Total Warrant (cost $55,294) -
-
Principal
Amount
Repurchase Agreements - 10.12%
With BNP Paribas 4.50% 3/1/06
(dated 2/28/06, to be repurchased at $9,054,132,
collateralized by $9,446,000 U.S.Treasury Bills
due 8/24/06, market value $9,236,988)
$9,053,000 9,053,000
With Cantor Fitzgerald 4.50% 3/1/06 (dated 2/28/06, to be repurchased at
$2,023,253 collateralized by $2,072,000 U.S. Treasury Notes 4.50% due 2/15/09,
market value $2,064,243)
2,023,000 2,023,000
With UBS Warburg 4.50% 3/1/06 (dated 2/28/06, to be repurchased at $4,047,506,
collateralized by $4,077,000 U.S. Treasury Notes 4.625% due 5/15/06, market
value $4,131,169)
4,047,000 4,047,000
=========
Total Repurchase Agreements (cost $15,123,000)
15,123,000
==========
Total Market Value of Securities Before Securities Lending Collateral - 133.04%
(cost 185,897,267) 198,844,231
===========
Securities Lending Collateral**- 18.45%
Short-Term Investments
Fixed Rate Demand Notes - 2.29%
Citigroup Global Markets 4.60% 3/1/06 3,072,422 3,072,422
Washington Mutual 4.54% 3/28/06 354,052 354,046
-----------
3,426,468
oVariable Rate Demand Notes -16.16%
American Honda Finance 4.57% 2/21/07 796,694 796,604
ANZ National 4.55% 4/2/07 177,043 177,023
Australia New Zealand 4.55% 4/2/07 885,152 885,115
Bank of America 4.57% 2/23/07 1,150,814 1,150,649
Bank of New York 4.54% 4/2/07 708,064 708,092
Bank of the West 4.55% 3/2/06 885,115 885,115
Bayerische Landesbank 4.59% 8/25/06 884,957 885,115
Bear Stearns 4.63% 8/31/06 1,062,138 1,062,138
Beta Finance 4.58% 4/18/06 885,106 885,093
Canadian Imperial Bank 4.55% 4/2/07 442,468 442,558
CDC Financial Products 4.66% 3/31/06 1,150,650 1,150,649
Citigroup Global Markets 4.63% 3/7/06 1,150,650 1,150,649
Commonwealth Bank Australia 4.54% 4/2/07 885,189 885,115
Credit Suisse First Boston 4.55% 4/18/06 955,939 955,924
Goldman Sachs 4.70% 2/28/07 1,150,650 1,150,649
Manufacturers & Traders 4.57% 9/26/06 885,167 884,990
Marshall & Ilsley Bank 4.55% 4/2/07 973,691 973,627
Merrill Lynch Mortgage Capital 4.66% 3/7/06 796,604 796,604
Morgan Stanley 4.74% 2/28/07 1,097,543 1,097,543
National Australia Bank 4.54% 3/7/07 1,027,155 1,026,733
National City Bank 4.53% 3/2/07 1,071,349 1,071,554
Nordea Bank Norge 4.55% 4/2/07 885,088 885,115
Procter & Gamble 4.46% 4/2/07 885,121 885,115
Royal Bank of Scotland 4.54% 4/2/07 885,096 885,115
Sigma Finance 4.58% 3/16/06 265,544 265,543
Societe Generale 4.54% 4/2/07 442,524 442,558
Toyota Motor Credit 4.55% 6/23/06 885,104 885,140
Wells Fargo 4.56% 4/2/07 884,958 885,115
-------
24,155,240
Total Securities Lending Collateral (cost $27,581,708)
27,581,708
Total Market Value of Securities - 151.49%
(cost $213,478,975) 226,425,939o
Obligation to Return Securities Lending Collateral** -
(18.45%) (27,581,708)
Commercial Paper Payable (par $48,000,000) -
(31.84%)
(47,590,824)
Liabilities Net of Receivables and Other Assets (See Notes) -
(1.20%) (1,791,074)
===========
Net Assets Applicable to 11,588,670 Shares Outstanding -
100.00% $149,462,333
============
+Non-income producing security for the period ended February 28, 2006. oVariable
rate security. The interest rate shown is the rate as of February 28, 2006.
o(TM)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 being fair valued in accordance with the
Fund's fair valuation policy. At February 28, 2006, the aggregate amount of fair
valued securities equals $21,302, which represented 0.01% of the Fund's net
assets. See Note 1 in "Notes." @Illiquid security. At February 28, 2006, the
aggregate amount of illiquid securities equals $19,502, which represented 0.01%
of the Fund's net assets. See Note 5 in "Notes." #Security exempt from
registration under Rule 144A of the Securities Act of 1933. At February 28,
2006, the aggregate amount of Rule 144A securities equals $19,367,674, which
represented 12.96% of the Fund's net assets. See Note 5 in "Notes." oSecurity is
currently in default. The issue has missed the maturity date. Bankruptcy
proceedings are in process to determine distribution of assets. The date listed
is the estimate of when proceedings will be finalized. ++Non-income producing
security. Security is currently in default. *Fully or partially on loan. **See
Note 4 in "Notes." oIncludes $26,966,833 of securities loaned.
Summary of Abbreviations:
REIT - Real Estate Investment Trust
ADR - American Depositary Receipts
--------------------------------------------------------------------------------
Notes
1. Significant Accounting Policies
The following accounting policies are in accordance with U.S. generally
accepted accounting principals and are consistently followed
by 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. Long-term debt securities are valued by an
independent pricing service and such prices are believed to reflect the fair
value of such securities. Short-term debt securities having less than 60 days to
maturity are valued at amortized cost, which
approximates market value. Securities lending collateral is valued at amortized
cost, which approximates market value. Other securities and assets for which
market quotations are not readily available are valued at fair value as
determined in good faith under the direction of the Fund's Board of Directors.
In determining whether market quotations are readily available or fair valuation
will be used, various factors will be taken into consideration, such as market
closures, or with respect to foreign securities, aftermarket trading or
significant events after local market trading (e.g., government actions or
pronouncements, trading volume or volatility on markets, exchanges among
dealers, or news events).
Federal Income Taxes - The Fund intends to continue to qualify for federal
income tax purposes as a regulated investment company and make the requisite
distributions to shareholders. Accordingly, no provision for federal income
taxes has been made in the financial statements.
Distributions - The Fund has a managed distribution policy. Under the policy,
the Fund declares and pays monthly distributions and is managed with a goal of
generating as much of the distribution as possible from ordinary income (net
investment income and short-term capital gains). The balance of the distribution
then comes from long-term capital gains and if necessary, a return of capital.
The current annualized rate is $0.96 per share. The Fund continues to evaluate
its monthly distribution in light of ongoing economic and market conditions and
may change the amount of the monthly distributions in the future.
Borrowings - The Fund issues short-term commercial paper at a discount from par.
The discount is amortized as interest expense over the life of the commercial
paper using the straight-line method (See Note 3).
Repurchase Agreements - The Fund may invest in a pooled cash account along with
other members of the Delaware Investments(R) Family of Funds pursuant to an
exemptive order issued by the Securities and Exchange Commission. The aggregate
daily balance of the pooled cash account is invested in repurchase agreements
secured by obligations of the U.S. government. The respective collateral is held
by the Fund's custodian bank until the maturity of the respective repurchase
agreements. Each repurchase agreement is 102% collateralized. However, in the
event of default or bankruptcy by the counterparty to the agreement, realization
of the collateral may be subject to legal proceedings.
Use of Estimates - The preparation of financial statements in conformity with
U.S. generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Other - Expenses common to all funds within the Delaware Investments(R) Family
of Funds are allocated amongst the funds on the basis of average net assets.
Management fees and some other expenses are paid monthly. Security transactions
are recorded on the date the securities are purchased or sold (trade date) for
financial reporting purposes. Costs used in calculating realized gains and
losses on the sale of investment securities are those of the specific securities
sold. Dividend income is recorded on the ex-dividend date and interest income is
recorded on the accrual basis. Discounts and premiums on non-convertible debt
securities are amortized to interest income over the lives of the respective
securities. Distributions received from investments in Real Estate Investment
Trusts (REITs) are recorded as dividend income on ex-dividend date, subject to
reclassification upon notice of the character of such distributions by the
issuer. The Fund may direct certain security trades to brokers who have agreed
to rebate a portion of the related brokerage commission to the Fund in cash.
There were no commission rebates during the period ended February 28, 2006.
2. Investments
At February 28, 2006, 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 February 28, 2006, the cost of investments and
unrealized appreciation (depreciation) for the Fund was as follows:
Cost of investments $213,476,178
------------
Aggregate unrealized appreciation $ 19,965,392
Aggregate unrealized depreciation (7,015,631)
Net unrealized appreciation $ 12,949,761
3. Commercial Paper
As of February 28, 2006, $48,000,000 (par value) of commercial paper was
outstanding with an amortized cost of $47,590,824. The weighted average discount
rate of commercial paper outstanding at February 28, 2006, was 4.68%. The
average daily balance of commercial paper outstanding during the period ended
February 28, 2006, was $47,753,078 at a weighted discount rate of 4.31%. The
maximum amount of commercial paper outstanding at any time during the period was
$48,000,000. 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 0.12% per annum
on the unused balance. During the period ended February 28, 2006, there were no
borrowings under this arrangement.
4. Securities Lending
The Fund, along with other funds in the Delaware Investments(R) Family of Funds,
may lend its securities pursuant to a security lending agreement (Lending
Agreement) with J.P. Morgan Chase. Initial security loans made pursuant to the
Lending Agreement are required to be secured by U.S. Treasury obligations and/or
cash collateral not less than 102% of the market value of the securities issued
in the United States. With respect to each loan, if the aggregate market value
of the collateral held on any business day is less than the aggregate market
value of the securities which are the subject of such loan, the borrower will be
notified to provide additional collateral not less than the applicable
collateral requirements. Cash collateral received is invested in fixed income
securities, with a weighted average maturity not to exceed 90 days, rated in one
of the top two tiers by Standard & Poor's Ratings Group or Moody's Investors
Service, Inc. or repurchase agreements collateralized by such securities.
However, in the event of default or bankruptcy by the lending agent, realization
and/or retention of the collateral may be subject to legal proceedings. In the
event the borrower fails to return loaned securities and the collateral received
is insufficient to cover the value of the loaned securities and provided such
collateral shortfall is not the result of investment losses, the lending agent
has agreed to pay the amount of the shortfall to the Fund, or at the discretion
of the lending agent, replace the loaned securities. The Fund continues to
record dividends on the securities loaned and is subject to change in value of
the securities loaned that may occur during the term of the loan. The Fund has
the right under the Lending Agreement to recover the securities from the
borrower on demand. The security lending agent and the borrower retain a portion
of the earnings from the collateral investments. The Fund records security
lending income net of such allocation.
At February 28, 2006, the market value of the securities on loan was
$26,966,833, 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 may invest up to 10% of its total assets in illiquid securities, which
may include securities with contractual restrictions on resale, securities
exempt from registration under Rule 144A of the Securities Act of 1933, as
amended, and other securities which may not be readily marketable. The relative
illiquidity of these securities may impair the Fund from disposing of them in a
timely manner and at a fair price when it is necessary or desirable to do so.
While maintaining oversight, the Fund's 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. Rule 144A and illiquid securities have been
denoted on the Schedule of Investments.
The Fund invests 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 holdings
during the period ended February 28, 2006. 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:
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: April 27, 2006
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
JUDE T. DRISCOLL
------------------------------------
By: Jude T. Driscoll
Title: Chief Executive Officer
Date: April 27, 2006
MICHAEL P. BISHOF
------------------------------------
By: Michael P. Bishof
Title: Chief Financial Officer
Date: April 27, 2006