N-Q 1 n-q.txt N-Q 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: Richelle S. Maestro, 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, 2004 ITEM 1. SCHEDULE OF INVESTMENTS. SCHEDULE OF INVESTMENTS (UNAUDITED) DELAWARE INVESTMENTS DIVIDEND AND INCOME FUND, INC. --------------------------------------------------- August 31, 2004
NUMBER OF MARKET SHARES VALUE COMMON STOCK - 82.10% Automobiles & Automotive Parts - 2.58% General Motors 39,900 $ 1,648,269 Goodrich (B.F.) 76,400 2,426,464 ----------- 4,074,733 ----------- Banking, Finance & Insurance - 13.72% *American Home Mortgage Investment 98,400 2,678,448 Bank of America 53,400 2,401,932 +#Fieldstone Investments 144A 100,000 1,625,000 *Friedman Billings Ramsey Group Class A 95,495 1,800,081 J.P. Morgan Chase 44,700 1,769,226 MBNA 108,100 2,609,534 Mellon Financial 85,100 2,455,986 Morgan Stanley 57,300 2,906,829 Sunset Financial Resources 94,400 959,104 Wells Fargo 41,900 2,461,625 ----------- 21,667,765 ----------- Cable, Media & Publishing - 0.11% +XM Satellite Radio Class A 6,500 178,555 ----------- 178,555 ----------- Chemicals - 2.71% Dow Chemical 100,000 4,281,000 ----------- 4,281,000 ----------- Computers & Technology - 2.46% +Intuit 50,700 2,144,103 Pitney Bowes 40,000 1,742,400 ----------- 3,886,503 ----------- Consumer Products - 1.21% Procter & Gamble 34,000 1,902,980 ----------- 1,902,980 ----------- Electronics & Electrical Equipment - 2.34% Emerson Electric 25,000 1,556,250 General Electric 65,100 2,134,629 ----------- 3,690,879 ----------- Energy - 4.46% ChevronTexaco 28,000 2,730,000 Exxon Mobil 40,000 1,844,000 Kerr-McGee 45,300 2,390,934 *+Petroleum Geo-Services ADR 1,989 78,026 ----------- 7,042,960 ----------- Food, Beverage & Tobacco - 6.23% Anheuser-Busch 49,900 2,634,720 General Mills 58,900 2,783,025 Kellogg 47,500 1,994,050 PepsiCo 48,600 2,430,000 ----------- 9,841,795 ----------- Healthcare & Pharmaceuticals - 5.56% Abbott Laboratories 35,000 1,459,150 Merck & Co. 30,800 1,385,076 Pfizer 59,400 1,940,598 +Tenet Healthcare 177,400 1,848,508 Wyeth 58,800 2,150,316 ----------- 8,783,648 ----------- Investment Companies - 1.79% *Gladstone Capital 120,300 2,825,847 ----------- 2,825,847 ----------- Leisure, Lodging & Entertainment - 1.58% +Jameson Inns 1,427,500 2,498,125 ----------- 2,498,125 ----------- Mortgage REIT's - 1.96% +HomeBanc Corporate 91,000 759,850 *+MortgageIT Holdings 187,000 2,337,500 ----------- 3,097,350 -----------
Paper & Forest Products - 1.81% International Paper 40,000 1,600,800 Weyerhaeuser 20,000 1,250,200 ----------- 2,851,000 ----------- Real Estate - 25.12% AMB Property 63,300 2,364,255 Apartment Investment & Management 23,700 841,350 BRE Properties Class A 48,100 1,797,497 Camden Property Trust 15,700 739,156 Duke Realty 83,900 2,852,600 Equity Office Properties Trust 92,400 2,638,944 General Growth Properties 113,538 3,425,441 +#KKR Financial 144A 182,600 1,826,000 Liberty Property Trust 60,270 2,438,524 +#Medical Properties Trust 144A 35,000 350,000 Pan Pacific Retail Properties 59,200 3,160,688 Prentiss Properties Trust 73,572 2,700,828 Ramco-Gershenson Properties 114,300 3,088,386 Reckson Associates Realty 83,420 2,452,548 Simon Property Group 89,200 4,990,740 Starwood Hotels & Resorts Worldwide 76,200 3,368,040 Sun Communities 16,000 624,000 ----------- 39,658,997 ----------- Retail - 0.13% *+Kmart Holdings 2,750 210,705 ----------- 210,705 ----------- Technology/Semiconductors - 1.00% Intel 74,200 1,579,718 ----------- 1,579,718 ----------- Telecommunications - 4.16% Alltel 63,500 3,470,275 BCE 148,900 3,100,098 ----------- 6,570,373 ----------- Utilities - 3.17% Dominion Resources 36,600 2,374,974 FPL Group 38,000 2,629,600 ----------- 5,004,574 ----------- TOTAL COMMON STOCK (cost $108,627,822) 129,647,507 =========== CONVERTIBLE PREFERRED STOCK - 5.60% Aerospace & Defense - 0.68% Northrop Grumman 7.25% 10,500 1,076,985 ----------- 1,076,985 ----------- Banking, Finance & Insurance - 1.11% Chubb 7.00% 15,000 410,850 National Australia Bank Units 7.875% 40,000 1,344,000 ----------- 1,754,850 ----------- Consumer Products - 1.47% Newell Financial Trust I 5.25% 52,600 2,320,975 ----------- 2,320,975 ----------- Environmental Services - 0.59% Allied Waste Industries 6.25% 16,200 937,980 ----------- 937,980 ----------- Real Estate - 0.84% Crescent Real Estate 6.75% 62,600 1,320,860 ----------- 1,320,860 ----------- Telecommunications - 0.91% Lucent Technologies Capital Trust I 7.75% 1,300 1,433,328 ----------- 1,433,328 ----------- TOTAL CONVERTIBLE PREFERRED STOCK (cost $9,545,050) 8,844,978 =========== PREFERRED STOCK - 6.52% Leisure, Lodging & Entertainment - 0.95% WestCoast Hospitality Capital Trust 9.50% 58,000 1,501,040 ----------- 1,501,040 ----------- Real Estate - 4.58% *Equity Inns Series B 8.75% 35,700 953,904 LaSalle Hotel Properties 10.25% 113,200 3,107,340 Ramco-Gershenson Properties 9.50% 40,000 1,080,000 *SL Green Realty 7.625% 80,000 2,092,504 ----------- 7,233,748 ----------- Utilities - 0.99% Public Service Enterprise Group 10.25% 27,200 1,562,443 ----------- 1,562,443 ----------- TOTAL PREFERRED STOCK (cost $9,564,940) 10,297,231 ===========
PRINCIPAL AMOUNT CONVERTIBLE BONDS - 5.22% Computers & Technology - 0.35% #Mercury Interactive 144A 4.75% 7/1/07 $550,000 545,188 --------- 545,188 --------- Leisure, Lodging & Entertainment - 0.43% #Regal Entertainment 144A 3.75% 5/15/08 550,000 679,938 --------- 679,938 --------- Miscellaneous - 0.23% #Tyco International Group 144A 2.75% 1/15/18 250,000 360,625 --------- 360,625 --------- Real Estate - 0.81% Meristar Hospitality 9.50% 4/1/10 1,100,000 1,284,250 --------- 1,284,250 --------- Retail - 1.68% #Gap 144A 5.75% 3/15/09 1,825,000 2,272,124 #Saks 144A 2.00% 3/15/24 425,000 380,906 --------- 2,653,030 --------- Telecommunications - 1.02% #Nextel Partners 144A 1.50% 11/15/08 800,000 1,612,000 --------- 1,612,000 --------- Transportation & Shipping - 0.12% #Expressjet Holdings 144A 4.25% 8/1/23 200,000 186,750 --------- 186,750 --------- Utilities - 0.58% #Centerpoint Energy 144A 3.75% 5/15/23 800,000 916,000 --------- 916,000 --------- TOTAL CONVERTIBLE BONDS (cost $6,498,688) 8,237,781 ========= BONDS - 33.52% Aerospace & Defense - 0.24% Armor Holdings 8.25% 8/15/13 $350,000 379,750 --------- 379,750 --------- Automobiles & Automotive Parts - 0.73% Adesa 7.625% 6/15/12 300,000 304,500 *++Advanced Accessory Holdings 13.25% 12/15/11 600,000 261,000 Advanced Accessory Systems 10.75% 6/15/11 200,000 191,000 *#Collins & Aikman Products 144A 12.875% 8/24/12 400,000 401,000 &Venture Holdings Trust 12.00% 6/1/09 425,000 2,656 --------- 1,160,156 --------- Banking, Finance & Insurance - 0.99% *#E*TRADE Financial 144A 8.00% 6/15/11 440,000 451,000 #Farmers Exchange Capital 144A 7.20% 7/15/48 350,000 356,325 Finova Group 7.50% 11/15/09 283,500 142,813 #LaBranche 144A 11.00% 5/15/12 375,000 380,625 #Refco Finance 144A 9.00% 8/1/12 215,000 223,600 --------- 1,554,363 --------- Building & Materials - 0.59% Interline Brands 11.50% 5/15/11 480,000 531,600 #Lone Star Industries 144A 8.85% 6/15/05 300,000 310,211 *Standard Pacific 7.75% 3/15/13 90,000 95,175 --------- 936,986 --------- Business Services - 0.30% Brickman Group 11.75% 12/15/09 275,000 319,000 #Language Line 144A 11.125% 6/15/12 150,000 152,250 --------- 471,250 --------- Cable, Media & Publishing - 4.75% American Media Operation 10.25% 5/1/09 200,000 210,750 #Atlantic Broadband Finance 144A 9.375% 1/15/14 615,000 582,713 ++Avalon Cable 11.875% 12/1/08 283,595 300,610 #Cablevision Systems 144A 8.00% 4/15/12 550,000 566,500
++Charter Communications 12.125% 1/15/12 875,000 516,250 Charter Communications Holdings 10.75% 10/1/09 750,000 633,749 *CSC Holdings 10.50% 5/15/16 500,000 571,250 Dex Media West/Finance 9.875% 8/15/13 240,000 277,200 *#Hollinger 144A 12.875% 3/1/11 130,000 149,013 *Lodgenet Entertainment 9.50% 6/15/13 425,000 466,438 Mediacom Broadband 11.00% 7/15/13 950,000 1,033,124 PEI Holdings 11.00% 3/15/10 400,000 466,000 Rogers Cablesystems 10.00% 3/15/05 500,000 520,000 #Sheridan Acquisition 144A 10.25% 8/15/11 325,000 347,750 #Warner Music Group 144A 7.375% 4/15/14 385,000 385,000 XM Satellite Radio 12.00% 6/15/10 403,000 464,458 --------- 7,490,805 --------- Chemicals - 1.93% *#BCP Caylux Holdings 144A 9.625% 6/15/14 510,000 550,162 #Borden US Finance/Nova Scotia Finance 144A 9.00% 7/15/14 195,000 201,825 *#Huntsman 144A 11.50% 7/15/12 200,000 206,000 Huntsman International 10.125% 7/1/09 425,000 439,875 *Lyondell Chemical 9.875% 5/1/07 250,000 264,688 *#Nalco 144A 8.875% 11/15/13 275,000 298,031 *Rhodia 8.875% 6/1/11 525,000 446,250 &Solutia 6.72% 10/15/37 700,000 437,500 Witco 6.875% 2/1/26 250,000 210,625 --------- 3,054,956 --------- Computers & Technology - 0.61% Activant Solutions 10.50% 6/15/11 165,000 172,425 *Chippac International 12.75% 8/1/09 485,000 518,950 #Stratus Technologies 144A 10.375% 12/1/08 300,000 271,500 --------- 962,875 --------- Consumer Services - 0.09% Corrections Corporation of America 9.875% 5/1/09 125,000 140,156 --------- 140,156 --------- Energy - 1.66% Bluewater Finance 10.25% 2/15/12 375,000 399,375 #Dynegy Holdings 144A 10.125% 7/15/13 900,000 1,017,000 #Hilcorp Energy/Finance 144A 10.50% 9/1/10 400,000 445,000 Petroleum Geo-Services 8.00% 11/5/06 200,159 205,663 10.00% 11/5/10 374,909 404,902 #^Secunda International 144A 9.76% 9/1/12 155,000 153,450 --------- 2,625,390 --------- Environmental Services - 0.77% *#Clean Harbors 144A 11.25% 7/15/12 295,000 308,275 #Geo Sub 144A 11.00% 5/15/12 410,000 362,850 IESI 10.25% 6/15/12 500,000 542,500 --------- 1,213,625 --------- Food, Beverage & Tobacco - 1.90% B&G Foods 9.625% 8/1/07 925,000 942,343 Chiquita Brands International 10.56% 3/15/09 450,000 489,938 #Commonwealth Brands 144A 10.625% 9/1/08 460,000 488,750 #Gold Kist 144A 10.25% 3/15/14 175,000 193,375 #Le-Natures 144A 10.00% 6/15/13 465,000 488,250 #Standard Commercial 144A 8.00% 4/15/12 390,000 393,900 --------- 2,996,556 --------- Healthcare & Pharmaceuticals - 1.16% *Ameripath 10.50% 4/1/13 490,000 504,700 Province Healthcare 7.50% 6/1/13 455,000 511,875 Universal Hospital Service 10.125% 11/1/11 290,000 295,800 #US Oncology 144A 10.75% 8/15/14 490,000 518,175 --------- 1,830,550 --------- Industrial Machinery - 0.30% Aearo 8.25% 4/15/12 200,000 206,000 *Foster Wheeler 6.75% 11/15/05 275,000 273,625 --------- 479,625 --------- Leisure, Lodging & Entertainment - 2.50% Ameristar Casinos 10.75% 2/15/09 405,000 458,663 Boyd Gaming 9.25% 8/1/09 575,000 630,343 *Mandalay Resort Group 10.25% 8/1/07 360,000 405,450 MGM Mirage 9.75% 6/1/07 350,000 389,375 Penn National Gaming 8.875% 3/15/10 260,000 286,000
Prime Hospitality 8.375% 5/1/12 200,000 231,000 Royal Caribbean Cruises 7.25% 3/15/18 550,000 566,500 ++#Town Sports International 144A 11.00% 2/1/14 725,000 351,625 Wheeling Island Gaming 10.125% 12/15/09 590,000 628,350 --------- 3,947,306 --------- Metals & Mining - 0.51% AK Steel 7.75% 6/15/12 255,000 240,975 *#Ispat Inland 144A 9.75% 4/1/14 530,000 568,425 --------- 809,400 --------- Packaging & Containers - 0.94% *AEP Industries 9.875% 11/15/07 275,000 281,875 ++#Consolidated Container 144A 10.75% 6/15/09 205,000 165,025 Pliant 11.125% 9/1/09 275,000 296,313 *Portola Packaging 8.25% 2/1/12 400,000 350,000 Radnor Holdings 11.00% 3/15/10 175,000 147,875 *#^Radnor Holdings 144A 8.35% 4/15/09 235,000 236,175 --------- 1,477,263 --------- Paper & Forest Products - 3.03% Abitibi-Consolidated 6.95% 12/15/06 275,000 286,344 *Bowater 9.00% 8/1/09 670,000 749,372 *Buckeye Technologies 8.00% 10/15/10 265,000 263,013 Fort James 7.75% 11/15/23 1,125,000 1,184,062 *#Newark Group 144A 9.75% 3/15/14 450,000 438,750 #Port Townsend Paper 144A 11.00% 4/15/11 450,000 461,250 Potlatch 12.50% 12/1/09 475,000 579,984 Smurfit Capital Funding 7.50% 11/20/25 850,000 820,250 --------- 4,783,025 --------- Real Estate - 0.52% BF Saul 7.50% 3/1/14 125,000 125,625 Tanger Properties 7.875% 10/24/04 300,000 303,000 9.125% 2/15/08 350,000 385,000 --------- 813,625 --------- Restaurants - 0.78% &Avado Brands 9.75% 6/1/06 230,000 85,100 Denny's 12.75% 9/30/07 300,000 322,500 O'Charleys 9.00% 11/1/13 430,000 455,800 Perkins Family Restaurants 10.125% 12/15/07 20,000 20,950 *#VICORP Restaurants 144A 10.50% 4/15/11 345,000 350,175 --------- 1,234,525 --------- Retail - 1.11% J Crew Operating 10.375% 10/15/07 485,000 497,125 *#Jean Coutu Group 144A 8.50% 8/1/14 300,000 303,750 *Office Depot 10.00% 7/15/08 480,000 566,400 *Petco Animal Supplies 10.75% 11/1/11 195,000 221,325 Remington Arms 10.50% 2/1/11 175,000 161,875 --------- 1,750,475 --------- Telecommunications - 2.17% Alaska Communications Systems 9.875% 8/15/11 400,000 402,000 *Centennial Cellular Operating 10.125% 6/15/13 475,000 490,438 *Cincinnati Bell 8.375% 1/15/14 555,000 493,950 Citizens Communications 8.50% 5/15/06 75,000 80,813 #iPCS Escrow 144A 11.50% 5/1/12 200,000 210,500 MCI 5.908% 5/1/07 250,000 246,563 6.688% 5/1/09 225,000 212,625 MetroPCS 10.75% 10/1/11 225,000 240,750 #Qwest Services 144A 14.00% 12/15/10 500,000 583,749 US Unwired 10.00% 6/15/12 450,000 463,500 --------- 3,424,888 --------- Textiles, Apparel & Furniture - 0.60% Interface 10.375% 2/1/10 350,000 395,500 Warnaco 8.875% 6/15/13 500,000 555,000 --------- 950,500 --------- Transportation & Shipping - 1.62% #Horizon Lines 144A 9.00% 11/1/12 400,000 422,000 *Hornbeck Offshore Services 10.625% 8/1/08 250,000 276,250 *Kansas City Southern Railway 9.50% 10/1/08 300,000 327,000 Ocean Rig Norway 10.25% 6/1/08 325,000 324,594 OMI 7.625% 12/1/13 285,000 287,850 Seabulk International 9.50% 8/15/13 500,000 523,750 Stena 9.625% 12/1/12 355,000 396,269 --------- 2,557,713 ---------
Utilities - 3.72% Avista 9.75% 6/1/08 500,000 592,500 *Calpine 8.25% 8/15/05 70,000 68,600 10.50% 5/15/06 365,000 344,925 #Calpine 144A 8.75% 7/15/13 530,000 416,050 *Edison Mission Energy 9.875% 4/15/11 200,000 230,500 El Paso Natural Gas 7.625% 8/1/10 200,000 214,000 El Paso Production Holding 7.75% 6/1/13 550,000 543,125 Elwood Energy 8.159% 7/5/26 159,031 158,236 Midland Funding II 11.75% 7/23/05 60,226 64,582 Midwest Generation 8.30% 7/2/09 500,000 512,500 8.75% 5/1/34 425,000 453,688 &Mirant Americas Generation 7.625% 5/1/06 400,000 335,000 *#NRG Energy 144A 8.00% 12/15/13 550,000 580,250 Orion Power Holdings 12.00% 5/1/10 250,000 313,750 PSEG Energy Holdings 7.75% 4/16/07 250,000 266,875 Reliant Resources 9.50% 7/15/13 250,000 277,500 Tennessee Gas Pipeline 8.375% 6/15/32 350,000 369,250 #&USGen New England 144A 7.459% 1/2/15 250,000 138,750 ---------- 5,880,081 ---------- TOTAL BONDS (cost $52,107,774) 52,925,844 ========== MUNICIPAL BONDS - 0.14% New Jersey Economic Development Authority Special Facility Authority Continental Airlines Project 6.25% 9/15/29 300,000 219,705 ---------- TOTAL MUNICIPAL BONDS (cost $254,528) 219,705 ========== NUMBER OF SHARES WARRANTS - 0.00% *+#Solutia 144A 650 7 ========== TOTAL WARRANTS (cost $55,294) 7 ========== PRINCIPAL AMOUNT U.S. TREASURY OBLIGATIONS - 0.68% @U.S. Treasury Bills 1.22% 9/9/04 $1,070,000 1,069,683 ----------- TOTAL U.S. TREASURY OBLIGATIONS (cost $1,069,683) 1,069,683 =========== TOTAL MARKET VALUE OF SECURITIES BEFORE SECURITIES LENDING COLLATERAL - 133.78% (cost $187,723,706) 211,242,736 =========== SECURITIES LENDING COLLATERAL+++ - 13.13% Abbey National 1.19% 10/15/04 401,650 404,873 Banc of America Securities 1.58% 9/1/04 4,481,853 4,481,853 Bank of America 1.65% 10/29/04 853,009 853,012 Barclays 1.92% 1/31/05 170,541 170,602 CDC IXIS 1.49% 11/12/04 682,577 682,410 Citicorp 1.55% 9/21/04 852,274 851,543 Credit Suisse First Boston 1.60% 12/13/04 682,598 682,410 Deutsche Bank Financial 1.63% 2/22/05 170,499 170,689 Fifth Third Bank 1.53% 9/15/04 853,014 853,012 General Electric Capital 1.59% 10/25/04 290,080 290,219 1.62% 2/3/05 255,795 256,143 1.63% 10/4/04 255,919 256,025 Goldman Sachs Group 1.74% 12/8/04 400,916 400,916 1.80% 12/21/04 392,329 392,386 HBOS Treasury Services PLC 1.62% 10/29/04 853,036 853,012 ING Bank Geneva 1.10% 9/30/04 682,573 682,410 Merrill Lynch Mortgage Capital 1.66% 10/12/04 682,410 682,410 Morgan Stanley 1.64% 3/10/05 682,487 682,410 1.72% 9/30/05 170,307 170,602
Proctor & Gamble 1.53% 9/30/05 853,336 853,012 Rabobank 1.62% 3/2/05 853,036 852,851 Royal Bank of Canada 1.57% 6/27/05 853,020 852,799 Societe Generale New York 1.57% 6/14/05 428,065 427,924 1.65% 12/8/04 682,303 682,324 Union Bank of Switzerland 1.13% 12/20/04 854,258 853,012 Wachovia Bank NA 1.63% 11/15/04 682,369 682,557 Wells Fargo Bank 1.57% 9/30/05 853,513 853,012 Wilmington Trust 1.44% 9/8/04 853,019 853,012 ------------ TOTAL SECURITIES LENDING COLLATERAL (cost $20,727,440) 20,727,440 ============ TOTAL MARKET VALUE OF SECURITIES - 146.91% (cost $208,451,146) 231,970,176** OBLIGATION TO RETURN SECURITIES LENDING COLLATERAL - (13.13%)+++ (20,727,440) COMMERCIAL PAPER PAYABLE (PAR $55,000,000) - (34.76) (54,890,167) RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES (SEE NOTES) - 0.98% 1,553,233 ============ NET ASSETS APPLICABLE TO 12,876,300 SHARES OUTSTANDING - 100.00% $157,905,802 ============
*Fully or partially on loan. **Includes $20,510,171 of securities loaned. #Securities exempt from registration under Rule 144A of the Securities Act of 1933. See Note 5 in "Notes." +Non-income producing security for the period ended August 31, 2004. ++Step coupon bond. +++See Note 3 in "Notes." &Non-income producing security. Security is currently in default. ^Variable Rate Notes - the interest rate shown is the rate as of August 31, 2004. @U.S. Treasury Bills are traded on a discount basis; the interest rate shown is the effective yield at the time of purchase by the Fund. 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 Delaware Investments Dividend and Income Fund, Inc. (the "Fund"). The Fund's shares trade on the New York Stock Exchange under the symbol DDF. 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. For the eight months ended August 31, 2004, the Fund paid dividends totaling $0.64 per share and as of August 31, 2004, it is estimated that 35.6% of the dividends represent a return of capital. The actual determination of the source of the Fund's dividends can be made only at year-end. 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 accounting principles generally accepted in the United States 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. 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, 2004, 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, 2004, the aggregate cost of investments and gross unrealized appreciation (depreciation) for the Fund for federal income tax purposes was as follows: AGGREGATE COST OF INVESTMENTS $187,863,528 ------------ Aggregate unrealized appreciation 30,798,587 Aggregate unrealized depreciation (7,419,379) ------------ Net unrealized appreciation $ 23,379,208 ------------ For federal income tax purposes, at November 30, 2003, capital loss carryforwards of $24,106,870 may be carried forward and applied against future capital gains. Such capital loss carryforwards expire as follows: Year of expiration Amount ------------------ ----------- 2009 $ 6,557,294 2010 15,759,675 2011 1,789,901 3. COMMERCIAL PAPER As of August 31, 2004, $55,000,000 (par value) of commercial paper was outstanding with an amortized cost of $54,890,167. The weighted average discount rate of commercial paper outstanding at August 31, 2004, was 1.41%. The average daily balance of commercial paper outstanding during the period ended August 31, 2004, was $54,893,405 at a weighted discount rate of 1.18%. 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 with a scheduled termination date of January 6, 2005. 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, 2004, 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 and 105% of the market value of securities issued outside 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 fair 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, 2004, the market value of securities on loan was $20,510,171, 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 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. 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. There were no direct holdings during the period ended August 31, 2004. 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: Chairman Date: 10/29/04 -------------------- CERTIFICATION ------------- I, Joseph H. Hastings, 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. JOSEPH H. HASTINGS ------------------------------- By: Joseph H. Hastings Title: Chief Financial Officer Date: 10/29/04 ------------------------ 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: Chairman Date: 10/29/04 ------------------------ 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: Chairman Date: 10/29/04 ------------------------ JOSEPH H. HASTINGS ------------------------------- By: Joseph H. Hastings Title: Chief Financial Officer Date: 10/29/04 ------------------------