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: August 31, 2006
Item 1. Schedule of Investments (Unaudited)
Delaware Investments Dividend and Income Fund, Inc.
___________________________________________________
August 31, 2006
Number of Market
Shares Value
Common Stock - 76.85%
Consumer Discretionary - 5.15%
=II@+ Avado Brands 1,390 $ 1,307
Gap 132,200 2,222,282
Limited Brands 87,800 2,259,094
Mattel 131,100 2,469,924
Starwood Hotels & Resorts Worldwide 10,900 580,534
_______
7,533,141
_________
Consumer Staples - 6.98%
ConAgra Foods 107,200 2,551,360
Heinz (H.J.) 56,500 2,363,960
Kimberly-Clark 38,500 2,444,750
Safeway 92,100 2,848,653
_________
10,208,723
__________
Diversified REITs - 0.72%
iStar Financial 25,100 1,052,192
_________
1,052,192
_________
Energy - 3.23%
Chevron 36,900 2,376,360
ConocoPhillips 34,900 2,213,707
*+ Petroleum Geo-Services ADR 2,667 138,684
_______
4,728,751
_________
Financials - 13.37%
Allstate 43,000 2,491,420
Aon 72,500 2,506,325
Chubb 58,103 2,914,447
Hartford Financial Services Group 27,100 2,326,806
Huntington Bancshares 97,900 2,341,768
Morgan Stanley 36,900 2,427,651
Wachovia 43,700 2,387,331
Washington Mutual 51,200 2,144,768
_________
19,540,516
__________
Health Care - 10.37%
Abbott Laboratories 53,900 2,624,930
Baxter International 60,900 2,702,742
Bristol-Myers Squibb 92,900 2,020,575
Merck 64,300 2,607,365
Pfizer 99,700 2,747,732
Wyeth 50,500 2,459,350
_________
15,162,694
__________
Health Care REITs - 1.40%
+# Medical Properties Trust 144A 35,000 468,650
* Nationwide Health Properties 28,900 753,134
Ventas 20,700 829,035
_______
2,050,819
_________
Industrial REITs - 3.11%
AMB Property 27,700 1,546,491
First Potomac Realty Trust 21,700 672,917
ProLogis 41,100 2,320,506
_________
4,539,914
_________
Industrials - 4.36%
Donnelley (R.R.) & Sons 74,700 2,421,783
*+ Foster Wheeler 6,960 302,546
* Macquarie Infrastructure 40,800 1,326,000
*+ Petrojarl ADR 2,667 28,765
Waste Management 66,800 2,289,904
_________
6,368,998
_________
Information Technology - 6.65%
Hewlett-Packard 71,300 2,606,728
Intel 125,100 2,444,454
International Business Machines 28,700 2,323,839
+ Xerox 158,700 2,350,347
_________
9,725,368
_________
Hotel REITs - 0.99%
* Highland Hospitality 58,400 804,168
* Strategic Hotels & Resorts 31,200 636,480
_______
1,440,648
_________
Mall REITs - 2.97%
General Growth Properties 22,406 1,015,664
Macerich 10,400 776,464
Simon Property Group 30,100 2,552,179
_________
4,344,307
_________
Manufactured Housing REITs - 0.56%
Equity Lifestyle Properties 18,100 811,423
_______
811,423
_______
Materials - 1.50%
duPont (E.I.) deNemours 54,700 2,186,359
_________
2,186,359
_________
Mortgage REITs - 2.05%
* American Home Mortgage Investment 12,600 399,420
* Gramercy Capital 43,800 1,186,980
JER Investors Trust 24,800 413,912
+II KKR Financial 41,700 997,047
_______
2,997,359
_________
Multi Family REITs - 0.97%
Equity Residential 28,400 1,416,308
_________
1,416,308
_________
Office REITs - 5.32%
Brandywine Realty Trust 46,348 1,512,335
Duke Realty 76,600 2,909,268
Liberty Property Trust 13,700 655,819
Mack-Cali Realty 4,200 223,230
* Parkway Properties 15,600 764,712
Reckson Associates Realty 40,120 1,716,735
_________
7,782,099
_________
Self -Storage REITS - 0.18%
* U-Store-It Trust 13,000 258,960
_______
258,960
_______
Shopping Center REITs - 0.91%
* Cedar Shopping Centers 46,200 710,556
* Ramco-Gershenson Properties 19,400 620,800
_______
1,331,356
_________
Specialty REITs - 0.95%
* Entertainment Properties Trust 27,800 1,386,108
_________
1,386,108
_________
Telecommunications - 3.34%
AT&T 76,100 2,368,993
Verizon Communications 71,400 2,511,852
_________
4,880,845
_________
Utilities - 1.77%
+ Mirant 8,223 238,220
Progress Energy 52,900 2,345,057
_________
2,583,277
_________
Total Common Stock (cost $96,041,313) 112,330,165
___________
Convertible Preferred Stock - 3.75%
Banking, Finance & Insurance - 1.18%
Aspen Insurance 5.625% exercise price $29.28, expiration date 12/31/49 8,800 453,200
~ Citigroup Funding exercise price $29.50, expiration date 9/27/08 17,000 558,790
E Trade Group 6.125% exercise price $21.82, expiration date 11/18/08 9,000 277,875
* Lehman Brothers Holdings 6.25% exercise price $54.24, expiration date 10/15/07 16,000 432,000
_______
1,721,865
_________
Basic Materials - 0.44%
Freeport-McMoRan Copper & Gold 5.50% exercise price $48.29, expiration date 12/31/49 115 150,909
Huntsman 5.00% exercise price $28.29, expiration date 2/16/08 12,400 496,000
_______
646,909
_______
Cable, Media & Publishing - 0.22%
# Interpublic 5.25% 144A exercise price $13.66, expiration date 12/31/49 360 326,700
_______
326,700
_________
Consumer Products - 0.37%
Newell Financial Trust I 5.25% exercise price $50.69, expiration date 12/1/27 11,630 534,980
_______
534,980
_______
Energy - 0.48%
* Chesapeake 4.50% exercise price $44.17, expiration date 12/31/49 3,650 348,119
El Paso Energy Capital Trust 4.75% exercise price $41.59, expiration date 3/31/28 9,250 359,270
_______
707,389
_______
Food, Beverage & Tobacco - 0.38%
Constellation Brands 5.75% exercise price $17.08, expiration date 9/1/06 13,800 548,550
_______
548,550
_______
Telecommunications - 0.14%
Lucent Technologies Capital Trust I 7.75% exercise price $4.84, expiration date 3/15/17 205 207,050
_______
207,050
_______
Utilities - 0.54%
Entergy 7.625% exercise price $87.64, expiration date 2/17/09 9,000 473,625
NRG Energy 5.75% exercise price $60.45, expiration date 3/16/09 1,225 313,906
_______
787,531
_______
Total Convertible Preferred Stock (cost $5,477,979) 5,480,974
_________
Preferred Stock - 5.49%
Leisure, Lodging & Entertainment - 0.67%
Red Lion Hotels 9.50% 37,649 986,780
_______
986,780
_______
Real Estate - 4.82%
Equity Inns Series B 8.75% 35,700 952,298
LaSalle Hotel Properties 10.25% 113,200 2,961,312
Ramco-Gershenson Properties 9.50% 40,000 1,068,000
SL Green Realty 7.625% 80,000 2,062,504
_________
7,044,114
_________
Total Preferred Stock (cost $7,663,725) 8,030,894
_________
Principal
Amount
Commercial Mortgage-Backed Securities - 0.21%
# First Union National Bank Commercial Mortgage Series 2001-C2 L 144A 6.46% 1/12/43 $300,000 302,557
_______
Total Commercial Mortgage-Backed Securities (cost $304,488) 302,557
_______
Convertible Bonds - 8.52%
Aerospace & Defense - 0.54%
# AAR 144A 1.75% 2/1/26 exercise price $29.43, expiration date 2/1/26 260,000 260,975
EDO 4.00% 11/15/25 exercise price $34.19, expiration date 11/15/25 235,000 229,419
# L-3 Communications 144A 3.00% 8/1/35 exercise price $102.16, expiration date 8/1/35 290,000 293,262
_______
783,656
_______
Cable, Media & Publishing - 0.37%
#Playboy Enterprises 144A 3.00% 3/15/25 exercise price $17.02, expiration date 3/15/25 600,000 534,750
_______
534,750
_______
Computers & Technology - 1.83%
Fairchild Semiconductor International 5.00% 11/1/08 exercise price $30.00, expiration date 11/1/08 410,000 407,438
Hutchinson Technology 3.25% 1/15/26 exercise price $36.43, expiration date 1/15/26 340,000 300,050
# Informatica 144A 3.00% 3/15/26 exercise price $20.00, expiration date 3/15/26 510,000 543,149
# Intel 144A 2.95% 12/15/35 exercise price $31.53, expiration date 12/15/35 255,000 224,719
^ ON Semiconductor Series B 1.142% 4/15/24 exercise price $9.82 expiration date 4/15/24 575,000 502,406
SanDisk 1.00% 5/15/13 exercise price $82.36, expiration date 5/15/13 165,000 164,381
# Sybase 144A 1.75% 2/22/25 exercise price $25.22, expiration date 2/22/25 500,000 538,125
_______
2,680,268
_________
Energy - 0.89%
Halliburton 3.125% 7/15/23 exercise price $37.65, expiration date 7/15/23 250,000 445,625
Pride International 3.25% 5/1/33 exercise price $25.70, expiration date 5/1/33 230,000 268,238
Schlumberger 2.125% 6/1/23 exercise price $40.00, expiration date 6/1/23 360,000 584,100
_______
1,297,963
_________
Health Care & Pharmaceuticals - 1.29%
# Allergan 144A 1.50% 4/1/26 exercise price $126.66, expiration date 4/1/26 415,000 443,012
# Amgen 144A 0.375% 2/1/13 exercise price $79.48, expiration date 2/1/13 165,000 161,494
CV Therapeutics 3.25% 8/16/13 exercise price $27.00, expiration date 8/16/13 125,000 103,281
Encysive Pharmaceuticals 2.50% exercise price $13.95, expiration date 3/15/12 630,000 471,712
# Nektar Therapeutics 144A 3.25% 9/28/12 exercise price $21.52, expiration date 9/28/12 350,000 376,688
Teva Pharmaceutical Finance 0.25% 2/1/26 exercise price $47.16, expiration date 2/1/26 345,000 336,806
_______
1,892,993
_________
Leisure, Lodging & Entertainment - 0.51%
# Regal Entertainment Group 144A 3.75% 5/15/08 exercise price $14.97, expiration date 5/15/08 550,000 739,063
_______
739,063
_______
Real Estate - 0.78%
MeriStar Hospitality 9.50% 4/1/10 exercise price $10.18, expiration date 4/1/10 1,100,000 1,134,650
_________
1,134,650
_________
Retail - 0.90%
*; Dick's Sporting Goods 1.606% 2/18/24 exercise price $58.13, expiration date 2/18/24 380,000 305,900
~ Lowe's Companies 0.861% 10/19/21 exercise price $50.03, expiration date 10/19/21 280,000 270,900
# Saks 144A 2.00% 3/15/24 exercise price $14.92, expiration date 3/15/24 425,000 462,188
# United Auto Group 144A 3.50% 4/1/26 exercise price $23.69, expiration date 4/1/26 260,000 276,575
_______
1,315,563
_________
Technology - 0.38%
# Mercury Interactive 144A 4.75% 7/1/07 exercise price $111.25, expiration date 7/1/07 550,000 556,875
_______
556,875
_______
Telecommunications - 0.20%
Qwest Communications International 3.50% 11/15/25 exercise price $5.90, expiration date 11/15/25 180,000 297,225
_______
297,225
_______
Transportation - 0.12%
*# ExpressJet Holdings 144A 4.25% 8/1/23 exercise price $18.20, expiration date 8/1/23 200,000 182,000
_______
182,000
_______
Utilities - 0.71%
# CenterPoint Energy 144A 3.75% 5/15/23 exercise price $11.44, expiration date 5/15/23 800,000 1,035,000
_________
1,035,000
_________
Total Convertible Bonds (cost $11,929,631) 12,450,006
__________
Corporate Bonds - 29.30%
Basic Industry - 3.41%
Abitibi-Consolidated
6.95% 12/15/06 20,000 20,200
7.875% 8/1/09 175,000 173,250
* AK Steel 7.875% 2/15/09 340,000 339,575
Bowater 9.50% 10/15/12 725,000 735,874
Georgia-Pacific 9.50% 12/1/11 275,000 297,688
* Gold Kist 10.25% 3/15/14 250,000 279,375
Lyondell Chemical 10.50% 6/1/13 45,000 49,725
*# Nell AF Sarl 144A 8.375% 8/15/15 325,000 327,031
NewPage 10.00% 5/1/12 205,000 212,688
Norske Skog 8.625% 6/15/11 425,000 419,688
# Port Townsend Paper 144A 12.00% 4/15/11 450,000 405,000
Potlatch 13.00% 12/1/09 250,000 293,489
Rhodia 8.875% 6/1/11 235,000 241,463
*++ Solutia 6.72% 10/15/37 465,000 439,424
Tembec Industries 8.625% 6/30/09 775,000 428,188
# Verso Paper 144A 9.125% 8/1/14 100,000 100,000
Witco 6.875% 2/1/26 250,000 223,750
_______
4,986,408
_________
Brokerage - 0.70%
E Trade Financial 8.00% 6/15/11 340,000 354,450
LaBranche & Company
9.50% 5/15/09 300,000 314,250
11.00% 5/15/12 325,000 350,188
_______
1,018,888
_________
Capital Goods - 1.89%
Armor Holdings 8.25% 8/15/13 400,000 415,999
CPG International I 10.50% 7/1/13 125,000 129,688
* Graham Packaging 9.875% 10/15/14 450,000 435,374
Interface 10.375% 2/1/10 325,000 355,469
Interline Brands 8.125% 6/15/14 50,000 50,625
Intertape Polymer 8.50% 8/1/14 405,000 379,688
{ Mueller Holdings 14.75% 4/15/14 185,000 163,725
{* NTK Holdings 10.75% 3/1/14 305,000 205,875
# RBS Global/Rexnord 144A 9.50% 8/1/14 200,000 202,000
*# TransDigm 144A 7.75% 7/15/14 150,000 149,625
Trimas 9.875% 6/15/12 295,000 280,988
_______
2,769,056
_________
Consumer Cyclical - 2.32%
Accuride 8.50% 2/1/15 250,000 234,375
# Baker & Taylor 144A 11.50% 7/1/13 225,000 225,000
Ford Motor Credit
7.375% 10/28/09 300,000 294,446
* 9.875% 8/10/11 125,000 130,727
* General Motors 8.375% 7/15/33 180,000 151,650
General Motors Acceptance Corporation
6.875% 9/15/11 385,000 379,574
* 8.00% 11/1/31 250,000 253,359
Landry's Restaurant 7.50% 12/15/14 275,000 261,250
* Metaldyne 10.00% 11/1/13 150,000 150,750
Neiman Marcus
9.00% 10/15/15 230,000 245,525
* 10.375% 10/15/15 75,000 80,625
*# NPC International 144A 9.50% 5/1/14 350,000 340,374
* O'Charleys 9.00% 11/1/13 225,000 230,625
*# Uno Restaurant 144A 10.00% 2/15/11 175,000 135,625
* Visteon 8.25% 8/1/10 235,000 231,475
Warnaco 8.875% 6/15/13 50,000 51,375
______
3,396,755
_________
Consumer Non-Cyclical - 2.40%
# Angiotech Pharmaceuticals 144A 7.75% 4/1/14 350,000 343,000
Biovail 7.875% 4/1/10 175,000 175,438
Constellation Brands 8.125% 1/15/12 130,000 135,525
Cott Beverages 8.00% 12/15/11 250,000 254,375
* Dole Food 8.875% 3/15/11 275,000 269,500
Ingles Markets 8.875% 12/1/11 300,000 314,250
# Le-Natures 144A 10.00% 6/15/13 255,000 267,750
* Marsh Supermarket 8.875% 8/1/07 100,000 99,750
National Beef Packing 10.50% 8/1/11 350,000 366,625
Pilgrim's Pride 9.625% 9/15/11 250,000 263,125
Playtex Products 9.375% 6/1/11 350,000 367,500
True Temper Sports 8.375% 9/15/11 215,000 192,425
* Warner Chilcott 8.75% 2/1/15 450,000 452,250
_______
3,501,513
_________
Energy - 1.97%
Bluewater Finance 10.25% 2/15/12 200,000 201,750
# Brigham Exploration 144A 9.625% 5/1/14 95,000 94,763
Compton Petroleum Finance 7.625% 12/1/13 135,000 132,300
Copano Energy 8.125% 3/1/16 100,000 101,750
El Paso Natural Gas
7.625% 8/1/10 200,000 206,500
8.375% 6/15/32 100,000 112,534
# El Paso Performance-Linked Trust 144A 7.75% 7/15/11 175,000 179,156
El Paso Production 7.75% 6/1/13 100,000 102,000
*# Hilcorp Energy I 144A 9.00% 6/1/16 275,000 286,687
Inergy Finance
6.875% 12/15/14 150,000 142,875
* 8.25% 3/1/16 75,000 77,438
# MarkWest Energy 144A 8.50% 7/15/16 75,000 76,313
*# PetroHawk Energy 144A 9.125% 7/15/13 400,000 408,999
~ Secunda International 13.507% 9/1/12 260,000 272,024
VeraSun Energy 9.875% 12/15/12 230,000 245,525
Whiting Petroleum 7.25% 5/1/13 235,000 233,238
_______
2,873,852
_________
Finance - 0.31%
FINOVA Group 7.50% 11/15/09 754,800 222,666
# iPayment 144A 9.75% 5/15/14 225,000 228,938
_______
451,604
_______
Media - 3.28%
} Adelphia Communications 8.125% 12/15/06 325,000 192,563
*++ Century Communications 9.50% 11/30/06 500,000 537,500
# Charter Communications 144A 5.875% 11/16/09 100,000 88,125
Charter Communications Holdings
11.125% 1/15/11 275,000 213,125
* 11.75% 5/15/11 125,000 95,625
13.50% 1/15/11 835,000 663,824
#~ Cleveland Unlimited 144A 13.579% 12/15/10 150,000 161,250
Dex Media East 12.125% 11/15/12 205,000 229,600
Insight Communications 12.25% 2/15/11 25,000 26,625
Insight Midwest 10.50% 11/1/10 725,000 764,874
Lodgenet Entertainment 9.50% 6/15/13 475,000 511,813
* Mediacom Capital 9.50% 1/15/13 575,000 593,688
RH Donnelley 8.875% 1/15/16 150,000 148,500
Sheridan Acquisition 10.25% 8/15/11 205,000 207,563
* Vertis 10.875% 6/15/09 140,000 142,100
Warner Music Group 7.375% 4/15/14 230,000 222,525
_______
4,799,300
_________
Real Estate - 0.69%
American Real Estate Partners 8.125% 6/1/12 390,000 401,700
BF Saul REIT 7.50% 3/1/14 400,000 408,000
# Rouse 144A 6.75% 5/1/13 200,000 200,121
_______
1,009,821
_________
Services Cyclical - 4.71%
Adesa 7.625% 6/15/12 385,000 381,149
American Airlines 7.377% 5/23/19 134,813 121,331
Boyd Gaming 8.75% 4/15/12 350,000 368,813
Brickman Group 11.75% 12/15/09 120,000 129,000
Corrections Corporation of America 7.50% 5/1/11 30,000 30,788
FTI Consulting 7.625% 6/15/13 225,000 227,813
*# Galaxy Entertainment Finance 144A 9.875% 12/15/12 550,000 578,874
Gaylord Entertainment 8.00% 11/15/13 210,000 214,200
Groupo Transportation 9.375% 5/1/12 318,875 319,125
{ H-Lines Finance Holdings 11.00% 4/1/13 491,000 430,852
# Hertz 144A
8.875% 1/1/14 150,000 156,375
* 10.50% 1/1/16 65,000 70,363
* Horizon Lines 9.00% 11/1/12 176,000 181,500
Kansas City Southern Railway 9.50% 10/1/08 325,000 338,813
# Knowledge Learning 144A 7.75% 2/1/15 315,000 293,738
Mandalay Resort Group
9.50% 8/1/08 350,000 371,875
* 9.375% 2/15/10 200,000 212,250
# Mobile Service Group 144A 9.75% 8/1/14 235,000 239,700
OMI 7.625% 12/1/13 275,000 276,375
*# Penhall International 144A 12.00% 8/1/14 175,000 179,375
# Pokagon Gaming Authority 144A 10.375% 6/15/14 300,000 318,750
Seabulk International 9.50% 8/15/13 250,000 273,750
Stena 9.625% 12/1/12 325,000 347,750
# TDS Investor 144A 11.875% 9/1/16 100,000 98,000
{ Town Sports International 11.00% 2/1/14 250,000 203,750
Wheeling Island Gaming 10.125% 12/15/09 505,000 521,412
_______
6,885,721
_________
Services Non-Cyclical - 2.13%
Allied Waste North America 9.25% 9/1/12 291,000 312,825
Casella Waste Systems 9.75% 2/1/13 550,000 578,874
# CRC Health 144A 10.75% 2/1/16 340,000 348,500
Geo Subordinate 11.00% 5/15/12 315,000 318,150
*# HealthSouth 144A 10.75% 6/15/16 250,000 256,875
US Oncology 10.75% 8/15/14 445,000 486,163
{ Vanguard Health 11.25% 10/1/15 665,000 482,125
# WCA Waste 144A 9.25% 6/15/14 325,000 333,938
_______
3,117,450
_________
Technology & Electronics - 0.87%
* MagnaChip Semiconductor 8.00% 12/15/14 675,000 435,374
* STATS ChipPAC 7.50% 7/19/10 275,000 277,063
Sungard Data 10.25% 8/15/15 420,000 431,025
# UGS Capital II PIK 144A 10.38% 6/1/11 125,000 126,563
_______
1,270,025
_________
Telecommunications - 3.42%
* American Tower
7.125% 10/15/12 275,000 279,813
7.25% 12/1/11 100,000 103,250
# Broadview Network 144A 11.375% 9/1/12 125,000 127,656
* Cincinnati Bell 8.375% 1/15/14 470,000 474,112
# Digicel Limited 144A 9.25% 9/1/12 275,000 288,063
*# Hughes Network Systems 144A 9.50% 4/15/14 425,000 433,499
{ Inmarsat Finance 10.375% 11/15/12 695,000 609,862
# Intelsat Bermuda 144A 11.25% 6/15/16 155,000 161,394
* iPCS 11.50% 5/1/12 100,000 113,000
~ IWO Escrow Company 9.257% 1/15/12 75,000 77,813
# Nordic Telephone Company Holdings 144A 8.875% 5/1/16 150,000 156,750
Qwest
# 144A 7.50% 10/1/14 375,000 383,438
~ 8.579% 6/15/13 200,000 216,250
Rural Cellular
* 9.875% 2/1/10 275,000 285,313
~ 11.239% 11/1/12 170,000 175,950
# Telcordia Technologies 144A 10.00% 3/15/13 440,000 353,100
Triton Communications 9.375% 2/1/11 260,000 178,100
~ US LEC 13.62% 10/1/09 150,000 159,188
*# Wind Acquisition 144A 10.75% 12/1/15 385,000 420,130
_______
4,996,681
_________
Utilities - 1.20%
++# Calpine 144A 8.496% 7/15/07 337,238 346,512
Elwood Energy 8.159% 7/5/26 164,250 178,568
Midwest Generation
8.30% 7/2/09 247,939 253,207
8.75% 5/1/34 200,000 214,000
* Mirant Americas 8.30% 5/1/11 375,000 376,875
Mirant North America 7.375% 12/31/13 100,000 99,500
Orion Power 12.00% 5/1/10 250,000 285,000
++=# USGen New England 144A 7.459% 1/2/15 5,630 3,800
_____
1,757,462
_________
Total Corporate Bonds (cost $43,006,234) 42,834,536
__________
Number of
Shares
Warrant - 0.00%
+# Solutia 144A, exercise price $7.59, expiration date 7/15/09 650 0
_
Total Warrant (cost $55,294) 0
_
Principal
Amount
Repurchase Agreements - 4.84%
With BNP Paribas 5.20% 9/1/06 (dated 8/31/06, to be repurchased at
$4,222,610, collateralized by $1,903,000 U.S. Treasury Notes 3.125% due
10/15/08, market value $1,864,026,
$952,000 U.S. Treasury Notes 3.375%
due 9/15/09, market value $930,798,
$952,000 U.S. Treasury Notes 3.50%
due 11/15/09, market value $927,164
and $603,000 U.S. Treasury Notes 3.50%
due 12/15/09, market value $585,338) $4,222,000 4,222,000
With Cantor Fitzgerald 5.20% 9/1/06
(dated 8/31/06, to be repurchased at $952,138,
collateralized by $476,000 U.S. Treasury Notes
3.375% due 12/15/08, market value $465,194
and $488,000 U.S. Treasury Notes 6.00%
due 8/15/09, market value $506,406) 952,000 952,000
With UBS Warburg 5.20% 9/1/06
(dated 8/31/06, to be repurchased at $1,903,275,
collateralized by $1,913,000 U.S. Treasury Notes
4.875% due 4/30/08, market value $1,944,395) 1,903,000 1,903,000
_________
Total Repurchase Agreements (cost $7,077,000) 7,077,000
_________
Total Market Value of Securities Before Securities Lending Collateral - 128.96%
(cost $171,555,664) 188,506,132
___________
Securities Lending Collateral** - 15.71%
Short-Term Investments
Fixed Rate Notes - 2.71%
Citigroup Global Markets 5.32% 9/1/06 3,953,363 3,953,363
_________
3,953,363
_________
~ Variable Rate Notes - 13.00%
American Honda Finance 5.32% 2/21/07 626,200 626,200
ANZ National 5.39% 10/1/07 139,156 139,155
Australia New Zealand 5.32% 10/1/07 695,778 695,778
Bank of America 5.32% 2/23/07 904,511 904,511
Bank of New York 5.36% 10/1/07 556,622 556,622
Barclays New York 5.31% 5/18/07 904,511 904,511
Bayerische Landesbank 5.38% 10/1/06 695,778 695,777
Bear Stearns 5.47% 2/28/07 834,933 834,933
BNP Paribas 5.36% 10/1/07 695,778 695,778
Canadian Imperial Bank
5.30% 10/1/07 347,889 347,889
5.32% 11/22/06 695,778 695,778
CDC Financial Products 5.41% 10/2/06 904,511 904,511
Citigroup Global Markets 5.38% 9/7/06 904,511 904,511
Commonwealth Bank 5.33% 10/1/07 695,778 695,778
Deutsche Bank 5.34% 2/23/07 834,933 834,933
Goldman Sachs 5.45% 8/31/07 904,511 904,511
Manufacturers & Traders 5.31% 9/26/06 695,776 695,765
Marshall & Ilsley Bank 5.31% 10/1/07 765,355 765,355
Merrill Lynch Mortgage Capital 5.41% 9/5/06 626,200 626,200
National Australia Bank 5.38% 3/7/07 862,764 862,764
National City Bank 5.32% 3/2/07 835,011 835,166
National Rural Utilities 5.39% 10/1/07 1,099,329 1,099,329
Nordea Bank New York 5.31% 5/16/07 347,888 347,876
Nordea Bank Norge 5.34% 10/1/07 695,778 695,778
Royal Bank of Scotland 5.32% 10/1/07 695,778 695,778
Societe Generale 5.36% 10/1/07 347,889 347,889
Wells Fargo 5.34% 10/1/07 695,778 695,778
_______
19,008,854
__________
Total Securities Lending Collateral (cost $22,962,217) 22,962,217
__________
Total Market Value of Securities - 144.67%
(cost $194,517,881) 211,468,349 !
Obligation to Return Securities Lending Collateral - (15.71%)** (22,962,217)
Commercial Paper Payable - (29.94%)
(par $44,000,000) (43,768,727)
Receivables and Other Assets Net of Liabilities (See Notes) - 0.98%
1,429,162
_________
Net Assets Applicable to 11,009,236 Shares Outstanding - 100.00% $146,166,567
____________
= Security is being fair valued in accordance with the Fund's fair valuation policy. At August 31, 2006, the aggregate amount of
fair valued securities equaled $5,107, which represented 0.00% of the Fund's net assets. See Note 1 in "Notes."
@ Illiquid security. At August 31, 2006, the aggregate amount of illiquid securities equaled $1,307, which represented 0.00% of the
Fund's net assets. See Note 5 in "Notes."
II Restricted Security. Investment in a security not registered under the Securities Act of 1933, as amended. This security has
certain restrictions on resale which may limit its liquidity. At August 31, 2006, the aggregate amount of the restricted security
equaled $998,354 or 0.68% of the Fund's net assets. See Note 5 in "Notes."
~ Variable rate security. The interest rate shown is the rate as of August 31, 2006.
^ Zero coupon security. The interest rate shown is the yield at the time of purchase.
; Step coupon bond. Coupon increases/decreases periodically based on a predetermined schedule. Stated interest rate in effect at
August 31, 2006.
{ 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.
+ Non-income producing security for the period ended August 31, 2006.
++ Non-income producing security. Security is currently in default.
} Security 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.
# Security exempt from registration under Rule 144A of the Securities Act of 1933, as amended. At August 31, 2006, the aggregate
amount of Rule 144A securities equaled $17,620,932, which represented 12.06% of the Fund's net assets. See Note 5 in "Notes."
* Fully or partially on loan.
** See Note 4 in "Notes."
! Includes $22,041,998 of securities loaned.
Summary of Abbreviations
ADR - American Depositary Receipts
REIT - Real Estate Investment Trust
PIK - Pay-in-kind
____________________________________________________________________________________________________________________________________
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. U.S. Government and agency securities are
valued at the mean between the bid and asked prices. Long-term debt securities
are valued by an independent pricing service and such prices are believed to
reflect the fair value of such securities. Short-term debt securities having
less than 60 days to maturity are valued at amortized cost, which approximates
market value. Securities lending collateral is valued at amortized cost, which
approximates market value. Other securities and assets for which market
quotations are not readily available are valued at fair value as determined in
good faith under the direction of the Fund's Board of Directors. In determining
whether market quotations are readily available or fair valuation will be used,
various factors will be taken into consideration, such as market closures, or
with respect to foreign securities, aftermarket trading or significant events
after local market trading (e.g., government actions or pronouncements, trading
volume or volatility on markets, exchanges among dealers, or news events).
Federal Income Taxes - The Fund intends to continue to qualify for federal
income tax purposes as a regulated investment company and make the requisite
distributions to shareholders. Accordingly, no provision for federal income
taxes has been made in the financial statements.
On July 13, 2006, the Financial Accounting Standards Board (FASB) released FASB
Interpretation No. 48 "Accounting for Uncertainty in Income Taxes" (FIN 48). FIN
48 provides guidance for how uncertain tax positions should be recognized,
measured, presented, and disclosed in the financial statements. FIN 48 requires
the evaluation of tax positions taken or expected to be taken in the course of
preparing the Fund's tax returns to determine whether the tax positions are
"more-likely-than-not" of being sustained by the applicable tax authority. Tax
positions not deemed to meet the more-likely-than-not threshold would be
recorded as a tax benefit or expense in the current year. Adoption of FIN 48 is
required for fiscal years beginning after December 15, 2006 and is to be applied
to all open tax years as of the effective date. Although the Fund's tax
positions are currently being evaluated, management does not expect the adoption
of FIN 48 to have a material impact on the Fund's financial statements.
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.
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(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.
2. Investments
At August 31, 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 August 31, 2006, the cost of investments and unrealized
appreciation (depreciation) for the Fund was as follows:
Cost of investments $194,803,312
____________
Aggregate unrealized appreciation 20,424,932
Aggregate unrealized depreciation (3,759,895)
___________
Net unrealized appreciation $ 16,665,037
____________
3. Commercial Paper
As of August 31, 2006, $44,000,000 (par value) of commercial paper was
outstanding with an amortized cost of $43,768,727. The weighted average discount
rate of commercial paper outstanding at August 31, 2006, was 5.26%. The average
daily balance of commercial paper outstanding during the period ended August 31,
2006 was $46,690,701 at a weighted discount rate of 4.59%. The maximum amount of
commercial paper outstanding at any time during the period was $48,000,000. On
June 22, 2006, the Fund reduced the commercial paper outstanding to $44,000,000
in conjunction with the tender offer. In conjunction with the issuance of the
commercial paper, the Fund entered into a line of credit arrangement with J.P.
Morgan Chase for $30,000,000. Interest on borrowings is based on market rates in
effect at the time of borrowing. The commitment fee is computed at the rate of
0.12% per annum on the unused balance. During the period ended August 31, 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. 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, 2006, the market value of the securities on loan was $22,041,998,
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 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.
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
identified on the Schedule of Investments.
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 August 31, 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: