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:        811-07460 
 
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, 2008 

Item 1. Schedule of Investments.

Schedule of Investments (Unaudited)

Delaware Investments Dividend and Income Fund, Inc.

August 31, 2008

  Number of                  
  Shares  Value 
Common Stock – 79.26%       
Consumer Discretionary – 6.12%       
=@P†Avado Brands 1,390 $ 0
Gap 100,600   1,956,670
Limited Brands 91,200   1,896,960
Mattel 101,200   1,956,196
*†Time Warner Cable Class A 7   187
      5,810,013
Consumer Staples – 8.45%       
Heinz (H.J.)  45,700   2,299,624
Kimberly-Clark 30,900   1,905,912
Kraft Foods Class A 69,800   2,199,398
Safeway 61,400   1,617,276
      8,022,210
Diversified REITs – 0.71%       
Ascendas Real Estate Investment Trust 143,400   229,996
Cousins Properties 5,600   139,944
Vornado Realty Trust 3,100   308,326
      678,266
Energy – 5.34%       
Chevron 19,600   1,691,872
ConocoPhillips 19,900   1,641,949
Marathon Oil  38,500   1,735,195
      5,069,016
Financials – 9.48%       
Allstate 45,400   2,048,902
Discover Financial Services 125,300   2,061,185
Hartford Financial Services Group 26,000   1,640,080
Lehman Brothers Holdings 42,100   677,389
Morgan Stanley 46,700   1,906,761
*Wachovia 42,100   668,969
      9,003,286
Health Care – 12.59%       
Bristol-Myers Squibb 90,800   1,937,672
Johnson & Johnson 32,000   2,253,759
Merck 50,800   1,812,036
Pfizer 101,000   1,930,110
Quest Diagnostics 38,400   2,075,520
Wyeth 45,000   1,947,600
      11,956,697
Health Care REITs – 1.76%       
HCP 21,850   791,407
*Health Care REIT 10,860   563,308
Ventas 6,875   312,263
      1,666,978
Hotel REITs – 0.68%       
Hersha Hospitality Trust 28,200   204,168
Host Hotels & Resorts 30,600   437,580
      641,748
Industrial REITs – 1.14%       
*AMB Property  10,380   471,148
ProLogis 14,200   611,452
      1,082,600


Industrials – 3.85%                  
†Allied Waste Industries 1 13
†Bway Holding  3,550 45,085
Donnelley (R.R.) & Sons 58,900 1,642,132
†Foster Wheeler 2 99
Grupo Aeroportuario del Centro Norte ADR 7,600 114,684
†Northwest Airlines 40 391
=@P†Port Townsend 350 4
Waste Management 52,700 1,853,986
    3,656,394
Information Technology – 8.35%     
Intel 93,000 2,126,910
International Business Machines 15,700 1,911,161
Motorola 207,400 1,953,708
Xerox 139,100 1,937,663
    7,929,442
Mall REITs – 3.73%     
*General Growth Properties 29,481 764,442
Macerich 6,950 430,414
*Simon Property Group 24,700 2,343,536
    3,538,392
Manufactured Housing REITs – 0.21%     
*Sun Communities 10,400 200,824
    200,824
Materials – 2.35%     
duPont (E.I.) deNemours 50,200 2,230,888
    2,230,888
Multifamily REITs – 2.36%     
*American Campus Communities 10,200 309,264
*Apartment Investment & Management 19,949 706,993
Camden Property Trust 7,350 358,754
Equity Residential 20,400 860,879
    2,235,890
Office REITs – 2.16%     
*Alexandria Real Estate Equities 6,190 666,725
*Highwoods Properties 12,300 446,121
Mack-Cali Realty 10,250 414,305
PS Business Parks 3,710 199,709
*SL Green Realty 3,800 326,800
    2,053,660
Office/Industrial REITs – 0.77%     
Digital Realty Trust 6,850 314,210
Liberty Property Trust 11,000 415,360
    729,570
Real Estate Operating Company – 0.24%     
*Macquarie Infrastructure 11,000 228,250
    228,250
Self-Storage REITs – 0.76%     
Public Storage 8,150 719,808
    719,808
Shopping Center REITs – 1.22%     
*Kimco Realty  19,930 740,200
*Ramco-Gershenson Properties 18,000 416,160
    1,156,360
Specialty REITs – 0.97%     
*Entertainment Properties Trust 13,020 706,595
Plum Creek Timber 2,185 108,420
Potlatch 2,225 103,885
    918,900
Telecommunications – 3.94%     
AT&T 58,500 1,871,415
†Century Communications 500,000 0
Verizon Communications 53,100 1,864,872
3,736,287


Utilities – 2.08%                  
†Dynegy 6,300 37,548
*†Mirant 189 5,591
Progress Energy 44,300 1,935,024
    1,978,163
Total Common Stock (cost $78,634,427)    75,243,642
 
Convertible Preferred Stock – 4.95%     
Automobiles & Automotive Parts – 0.24%     
*General Motors 5.25% exercise price $64.90, expiration date 3/6/32 19,500 225,810
    225,810
Banking, Finance & Insurance – 2.14%     
Aspen Insurance 5.625% exercise price $29.28, expiration date 12/31/49 8,800 451,000
Fannie Mae 8.75% exercise price $32.45, expiration date 5/13/11 3,500 60,025
#Morgan Stanley 144A    
       11.00% exercise price $94.64, expiration date 1/7/09 5,300 483,864
       35.50% exercise price $1,000.00 expiration date 10/28/08 1,500 967,103
XL Capital 7.00% exercise price $80.59, expiration date 2/15/09 8,000 67,280
    2,029,272
Cable, Media & Publishing – 0.32%     
#Interpublic Group 144A 5.25% exercise price $13.66, expiration date 12/31/49 360 305,190
    305,190
Energy – 0.69%     
Chesapeake Energy 4.50% exercise price $44.17, expiration date 12/31/49  3,650 457,618
El Paso Energy Capital Trust I 4.75% exercise price $41.59, expiration date 3/31/28 5,250 197,348
    654,966
Health Care & Pharmaceuticals – 0.48%     
Mylan 6.50% exercise price $17.08, expiration date 11/15/10 200 180,224
Schering-Plough 6.00% exercise price $33.69, expiration date 8/13/10 1,500 277,875
    458,099
Telecommunications – 0.24%     
Lucent Technologies Capital Trust I 7.75% exercise price $24.80, expiration date 3/15/17 305 224,251
    224,251
Utilities – 0.84%     
Entergy 7.625% exercise price $86.81, expiration date 2/17/09 6,750 415,125
NRG Energy 5.75% exercise price $30.23, expiration date 3/16/09 1,225 388,095
    803,220
Total Convertible Preferred Stock (cost $5,679,811)    4,700,808
 
Preferred Stock – 2.98%     
Industrials – 0.02%     
=@PPort Townsend 70 17,048
    17,048
Leisure, Lodging & Entertainment – 0.90%     
Red Lion Hotels Capital Trust 9.50% 36,249 852,214
    852,214
Real Estate – 2.06%     
Grace Acquisitions 8.75% 34,400 240,800
*SL Green Realty 7.625% 77,100 1,713,933
    1,954,733
Total Preferred Stock (cost $3,763,025)    2,823,995
  Principal  
  Amount   
Convertible Bonds – 9.48%     
Aerospace & Defense – 0.59%     
#AAR 144A 1.75% 2/1/26 exercise price $29.43, expiration date 2/1/26 $ 260,000 217,100
#L-3 Communications 144A 3.00% 8/1/35 exercise price $101.70, expiration date 8/1/35 290,000 343,288
    560,388
   


Basic Materials – 0.56% 
Rayonier TRS Holdings 3.75% 10/15/12 exercise price $54.82, expiration date 10/15/12              345,000              346,725
#Sino Forest 144A 5.00% 8/1/13 exercise price $20.29 expiration date 8/1/13 160,000 181,600
    528,325
Cable, Media & Publishing – 0.50%     
#Playboy Enterprises 144A 3.00% 3/15/25 exercise price $17.02, expiration date 3/15/25 600,000 477,000
    477,000
Computers & Technology – 1.71%     
Advanced Micro Devices    
     6.00% 5/1/15 exercise price $28.08, expiration date 5/1/15 230,000 131,963
     #144A 6.00% 5/1/15 exercise price $28.08, expiration date 5/1/15 450,000 258,187
Euronet Worldwide 3.50% 10/15/25 exercise price $40.48, expiration date 10/15/25 435,000 357,787
Hutchinson Technology 3.25% 1/15/26 exercise price $36.43, expiration date 1/15/26 340,000 254,150
#Intel 144A 2.95% 12/15/35 exercise price $31.53, expiration date 12/15/35 255,000 251,813
Linear Technology 3.125% 5/1/27 exercise price $49.03, expiration date 5/1/27 180,000 176,850
SanDisk 1.00% 5/15/13 exercise price $82.36, expiration date 5/15/13 280,000 190,050
    1,620,800
Electronics & Electrical Equipment – 0.40%     
Flextronics International 1.00% 8/1/10 exercise price $15.53, expiration date 8/1/10 400,000 374,000
    374,000
Energy – 0.35%     
Peabody Energy 4.75% 12/15/41 exercise price 58.45, expiration date 12/15/41  100,000 128,250
Transocean    
     1.50% 12/15/37 exercise price $168.61, expiration date 12/15/37 100,000 103,375
     1.625% 12/15/37 exercise price $168.61, expiration date 12/15/37 100,000 104,125
    335,750
Environmental Services – 0.08%     
Allied Waste Industries 4.25% 4/15/34 exercise price $20.43, expiration date 4/15/34 80,000 77,300
    77,300
Health Care & Pharmaceuticals – 2.97%     
Advanced Medical Optics 3.25% 8/1/26 exercise price $59.61, expiration date 8/1/26 565,000 394,087
#Allergan 144A 1.50% 4/1/26 exercise price $63.33, expiration date 4/1/26  415,000 451,312
Amgen    
     0.375% 2/1/13 exercise price $79.48, expiration date 2/1/13 235,000 229,713
     #144A 0.375% 2/1/13 exercise price $79.48, expiration date 2/1/13 165,000 161,288
·Bristol-Myers Squibb 2.276% 9/15/23 exercise price $41.28, expiration date 9/15/23 300,000 301,200
CV Therapeutics 3.25% 8/16/13 exercise price $27.00, expiration date 8/16/13  125,000 97,500
fHologic 2.00% 12/15/37 exercise price $38.59, expiration date 12/15/37 200,000 164,250
LifePoint Hospitals 3.50% 5/15/14 exercise price $51.79, expiration date 5/15/14 110,000 99,550
Teva Pharmaceutical Finance 0.25% 2/1/26 exercise price $47.06, expiration date 2/1/26 345,000 368,719
·Wyeth 2.621% 1/15/24 exercise price $60.09, expiration date 1/15/24 550,000 554,399
    2,822,018
Real Estate – 0.25%     
MeriStar Hospitality 9.50% 4/1/10 exercise price $10.18, expiration date 4/1/10 230,000 236,095
      236,095
Retail – 0.33%     
Pantry 3.00% 11/15/12 exercise price $50.10, expiration date 11/15/12 180,000 141,525
#Saks 144A 2.00% 3/15/24 exercise price $11.97, expiration date 3/15/24 160,000 173,200
    314,725
Telecommunications – 1.19%     
Level 3 Communications 3.50% 6/15/12 exercise price $5.46, expiration date 6/15/12   165,000 141,488
NII Holdings 3.125% 6/15/12 exercise price $118.32, expiration date 6/15/12 410,000 354,137
#Nortel Networks 144A    
     1.75% 4/15/12 exercise price $32.00, expiration date 4/15/12 115,000 82,369
     2.125% 4/15/14 exercise price $32.00, expiration date 4/15/14 115,000 71,300
Qwest Communications International 3.50% 11/15/25 exercise price $5.61, expiration date 11/15/25 180,000 173,025
#Virgin Media 144A 6.50% 11/15/16 exercise price $19.22, expiration date 11/15/16 335,000 309,037
    1,131,356
Transportation – 0.18%     
Bristow Group 3.00% 6/15/38 exercise price $77.34 expiration date 6/15/38  180,000 171,900
    171,900


Utilities – 0.37%     
Dominion Resources 2.125% 12/15/23 exercise price $36.33, expiration date 12/15/23 290,000 349,088
    349,088
Total Convertible Bonds (cost $9,896,398)    8,998,745
 
Corporate Bonds – 36.37%     
Basic Industry – 4.79%     
California Steel Industries 6.125% 3/15/14 120,000 105,300
Domtar 7.125% 8/15/15 110,000 106,700
#Evraz Group 144A 9.50% 4/24/18 430,000 413,874
Freeport McMoRan Copper & Gold 8.25% 4/1/15 310,000 325,912
Georgia-Pacific    
     7.70% 6/15/15 130,000 121,875
     8.875% 5/15/31 220,000 209,550
Innophos 8.875% 8/15/14 185,000 190,550
#Innophos Holding 144A 9.50% 4/15/12 115,000 115,575
International Coal Group 10.25% 7/15/14 210,000 214,200
#MacDermid 144A 9.50% 4/15/17 240,000 220,800
Momentive Performance Materials 9.75% 12/1/14 325,000 294,938
NewPage    
     10.00% 5/1/12 90,000 87,750
     #144A 10.00% 5/1/12 190,000 185,250
·Noranda Aluminum Acquisition 6.828% 5/15/15 150,000 129,000
Norske Skog Canada 8.625% 6/15/11 135,000 111,206
·=@PPort Townsend 10.056% 8/27/12 98,000 97,020
Potlatch 13.00% 12/1/09 250,000 272,517
#Rock-Tenn 144A 9.25% 3/15/16 110,000 113,300
*Rockwood Specialties Group 7.50% 11/15/14 150,000 148,125
#Ryerson 144A    
    ·10.176% 11/1/14 205,000 196,800
     12.00% 11/1/15 85,000 83,725
#Sappi Papier Holding 144A 6.75% 6/15/12 300,000 252,061
#Steel Capital 144A 9.75% 7/29/13 100,000 100,075
#Steel Dynamics 144A 7.75% 4/15/16 295,000 289,469
#Vedanta Resources 144A 9.50% 7/18/18 100,000 98,500
·Verso Paper Holdings 6.551% 8/1/14 70,000 62,650
    4,546,722
Brokerage – 0.11%     
LaBranche 11.00% 5/15/12 104,000 107,640
    107,640
Capital Goods – 3.13%     
Associated Materials 9.75% 4/15/12 190,000 190,475
BWAY 10.00% 10/15/10 270,000 270,000
CPG International I 10.50% 7/1/13 120,000 93,000
DRS Technologies 7.625% 2/1/18 235,000 248,513
Graham Packaging    
     8.50% 10/15/12 115,000 108,963
     9.875% 10/15/14 175,000 154,438
Graphic Packaging International 9.50% 8/15/13 300,000 283,499
Greenbrier 8.375% 5/15/15 225,000 208,125
Intertape Polymer 8.50% 8/1/14 90,000 77,513
#Moog 144A 7.25% 6/15/18 110,000 108,350
*NXP BV Funding 9.50% 10/15/15 430,000 292,399
Owens Brockway Glass Container 6.75% 12/1/14 115,000 114,713
*Sally Holdings 10.50% 11/15/16 190,000 191,900
Thermadyne Holdings 10.00% 2/1/14 210,000 201,075
Vitro 11.75% 11/1/13   210,000 196,875
Vought Aircraft Industries 8.00% 7/15/11 250,000 231,875
      2,971,713
Consumer Cyclical – 4.28%     
Centex 4.55% 11/1/10 115,000 102,925
*Denny's Holdings 10.00% 10/1/12              55,000              53,075


*Dollar General 10.625% 7/15/15              370,000              372,775
DR Horton    
     6.00% 4/15/11 25,000 22,625
     7.875% 8/15/11 190,000 181,450
#Expedia 144A 8.50% 7/1/16 95,000 92,863
Ford Motor 7.45% 7/16/31 400,000 208,000
Ford Motor Credit 7.80% 6/1/12 690,000 512,821
General Motors    
     7.20% 1/15/11 230,000 148,350
    *8.375% 7/15/33 395,000 197,500
GMAC 6.875% 8/28/12 675,000 396,286
Goodyear Tire & Rubber 9.00% 7/1/15 100,000 103,250
Lear 8.75% 12/1/16 335,000   253,763
Levi Strauss 9.75% 1/15/15 85,000 77,031
*Neiman Marcus Group 10.375% 10/15/15 305,000 298,900
Ryland Group 6.875% 6/15/13   215,000 189,200
Sonic Automotive 8.625% 8/15/13 105,000 81,375
*Tenneco 8.625% 11/15/14 200,000 171,000
Toll    
     8.25% 2/1/11 265,000 255,725
     8.25% 12/1/11 65,000 62,725
Travelport 9.875% 9/1/14 220,000 180,950
*#TRW Automotive 144A 7.00% 3/15/14 110,000 97,350
    4,059,939
Consumer Non-Cyclical – 1.49%     
ACCO Brands 7.625% 8/15/15 110,000 92,950
Biomet 10.00% 10/15/17 190,000 206,149
*Chiquita Brands International 8.875% 12/1/15 215,000 184,363
*Constellation Brands 8.125% 1/15/12 135,000 135,675
Del Monte    
    *6.75% 2/15/15 55,000 51,975
     8.625% 12/15/12 45,000 45,675
Iron Mountain    
     6.625% 1/1/16 105,000 99,488
     8.00% 6/15/20 85,000 83,088
*Jarden 7.50% 5/1/17 225,000 201,374
National Beef Packing 10.50% 8/1/11 105,000 105,525
Tyson Food 7.35% 4/1/16 100,000 94,786
Visant Holding 8.75% 12/1/13 120,000 114,900
    1,415,948
Energy – 5.39%     
AmeriGas Partners 7.125% 5/20/16 210,000 196,350
Chesapeake Energy 6.375% 6/15/15 155,000 144,925
Complete Production Service 8.00% 12/15/16 105,000 103,688
Compton Petroleum Finance 7.625% 12/1/13 225,000 212,344
#Connacher Oil 144A 10.25% 12/15/15 270,000 280,124
#Copano Energy 144A 7.75% 6/1/18 100,000 93,500
Dynergy Holdings 7.75% 6/1/19 520,000 482,299
El Paso    
     6.875% 6/15/14 50,000 49,782
     7.00% 6/15/17 55,000 54,162
#El Paso Performance-Linked Trust 144A 7.75% 7/15/11 175,000 177,800
Energy Partners 9.75% 4/15/14 105,000 93,713
Ferrellgas Finance Escrow 6.75% 5/1/14 175,000 153,125
Geophysique-Veritas    
     7.50% 5/15/15 30,000 30,000
     7.75% 5/15/17 135,000 135,000
#Helix Energy Solutions Group 144A 9.50% 1/15/16 250,000 249,999
#Hilcorp Energy I 144A    
     7.75% 11/1/15 120,000 109,200
     9.00% 6/1/16 185,000 181,300


Inergy Finance                          
     6.875% 12/15/14 150,000 135,750
     8.25% 3/1/16 75,000 70,875
#Key Energy Services 144A 8.375% 12/1/14 140,000 141,750
Mariner Energy 8.00% 5/15/17 200,000 184,000
#MarkWest Energy Partners/Finance 144A 8.75% 4/15/18 100,000 100,000
Massey Energy 6.875% 12/15/13 225,000 221,063
OPTI Canada    
     7.875% 12/15/14 85,000 84,469
     8.25% 12/15/14 115,000 115,431
PetroHawk Energy        
     9.125% 7/15/13 205,000 205,000
     #144A 7.875% 6/1/15 85,000 79,688
Petroleum Development 12.00% 2/15/18 125,000 131,250
Plains Exploration & Production    
     7.00% 3/15/17 160,000 144,800
    *7.625% 6/1/18 80,000 75,800
Range Resources 7.25% 5/1/18 100,000 97,500
Regency Energy Partners 8.375% 12/15/13 176,000 180,400
Whiting Petroleum 7.25% 5/1/13 290,000 279,849
Williams 7.50% 1/15/31 115,000 116,465
    5,111,401
Finance & Investments – 0.79%     
·Hartford Financial Services Group 8.125% 6/15/38 105,000 98,831
Hexion US Finance 9.75% 11/15/14 135,000 113,063
#Lender Processing Services 144A 8.125% 7/1/16 85,000 86,806
Leucadia National 8.125% 9/15/15 116,000 117,305
#Nuveen Investments 144A 10.50% 11/15/15 215,000 187,588
Washington Mutual Bank 5.65% 8/15/14 250,000 150,168
    753,761
Media – 2.46%     
CCO Holdings 8.75% 11/15/13 185,000 175,288
#Charter Communications Operating 144A 10.875% 9/15/14 555,000 585,524
Clear Channel Communications 5.50% 9/15/14 175,000 86,188
#CSC Holdings 144A 8.50% 6/15/15 165,000 166,650
Dex Media West 9.875% 8/15/13 305,000 235,612
#DirecTV Holdings 144A 7.625% 5/15/16 205,000 205,513
Lamar Media    
    *6.625% 8/15/15 155,000 138,338
     6.625% 8/15/15 85,000 75,756
#LBI Media 144A 8.50% 8/1/17 100,000 73,125
Quebecor Media 7.75% 3/15/16 185,000 174,825
Univision Communications 7.85% 7/15/11 105,000 94,500
#Videotron 144A 9.125% 4/15/18 220,000 232,375
#XM Satellite Radio 144A 13.00% 8/1/13 105,000 92,925
    2,336,619
Real Estate – 0.14%     
*Host Hotels & Resorts 7.125% 11/1/13 140,000 132,650
    132,650
Services Cyclical – 3.03%     
*ARAMARK 8.50% 2/1/15 300,000 303,749
Cardtronics 9.25% 8/15/13 255,000 243,525
FTI Consulting 7.625% 6/15/13 195,000 203,288
#Galaxy Entertainment Finance 144A 9.875% 12/15/12 240,000 226,800
Gaylord Entertainment    
     6.75% 11/15/14 20,000 17,550
     8.00% 11/15/13 205,000 189,113
Global Cash Access 8.75% 3/15/12 210,000 201,600
Harrah's Operating 5.50% 7/1/10 245,000 207,025
#Harrah's Operating 144A 10.75% 2/1/16 65,000 44,038
Hertz 8.875% 1/1/14 105,000 98,831
Kansas City Southern de Mexico 9.375% 5/1/12 195,000 204,750
MGM MIRAGE 7.50% 6/1/16 230,000 188,600


‡Northwest Airlines 10.00% 2/1/09              55,000              550
Pinnacle Entertainment 8.75% 10/1/13 130,000 129,025
#Pokagon Gaming Authority 144A 10.375% 6/15/14 288,000 301,680
Seabulk International 9.50% 8/15/13 100,000 105,125
#Seminole Indian Tribe of Florida 144A    
     7.804% 10/1/20 145,000 140,276
     8.03% 10/1/20 75,000 73,479
    2,879,004
Services Non-cyclical – 2.33%     
*Advanced Medical Optics 7.50% 5/1/17 225,000 202,500
*#Bausch & Lomb 144A 9.875% 11/1/15 315,000   324,450
Casella Waste Systems 9.75% 2/1/13 250,000 248,750
Community Health Systems 8.875% 7/15/15 280,000 284,200
HCA 9.25% 11/15/16 185,000 190,781
HCA PIK 9.625% 11/15/16 485,000 490,457
·HealthSouth 9.133% 6/15/14 205,000 210,381
Select Medical 7.625% 2/1/15   255,000 220,575
Universal Hospital Services PIK 8.50% 6/1/15 40,000 40,000
    2,212,094
Technology & Electronics – 0.75%     
·Freescale Semiconductor 6.651% 12/15/14 175,000 129,938
Sungard Data Systems    
     9.125% 8/15/13 210,000 214,200
     10.25% 8/15/15 360,000 364,500
    708,638
Telecommunications – 5.31%     
·Centennial Communications 8.541% 1/1/13 140,000 140,000
Cincinnati Bell 7.00% 2/15/15 105,000 97,125
Citizens Communication 7.125% 3/15/19 230,000 200,100
Cricket Communications 9.375% 11/1/14 385,000 383,556
#Digicel 144A 9.25% 9/1/12 275,000 283,250
Hughes Network Systems 9.50% 4/15/14 205,000 207,563
WInmarsat Finance 10.375% 11/15/12 370,000 378,788
#Intelsat Subsidiary Holding 144A 8.875% 1/15/15 40,000 39,750
Intelsat Jackson Holdings 11.25% 6/15/16 450,000 474,188
Lucent Technologies 6.45% 3/15/29 165,000 115,500
MetroPCS Wireless 9.25% 11/1/14 380,000 378,575
#Nordic Telephone Company Holdings 144A 8.875% 5/1/16 150,000 145,125
Nortel Networks    
    ·7.041% 7/15/11 225,000 209,813
     10.75% 7/15/16 160,000 148,800
     #144A 10.75% 7/15/16 20,000 18,600
*PAETEC Holding 9.50% 7/15/15 105,000 85,575
Qwest Capital Funding 7.25% 2/15/11 200,000 193,250
Sprint Capital 8.375% 3/15/12 575,000 579,747
Sprint Nextel 6.00% 12/1/16 190,000 173,648
Time Warner Telecom Holdings 9.25% 2/15/14 140,000 142,625
#Vimpelcom 144A 9.125% 4/30/18 195,000 184,668
Virgin Media Finance 8.75% 4/15/14 255,000 244,800
Windstream 8.125% 8/1/13 215,000 213,925
    5,038,971
Utilities – 2.37%     
AES     
     7.75% 3/1/14 98,000 98,000
     8.00% 10/15/17 140,000 138,600
     #144A 8.00% 6/1/20 60,000 57,750
Edison Mission Energy 7.625% 5/15/27 175,000 158,813
Elwood Energy 8.159% 7/5/26 181,203 171,837
Midwest Generation 8.30% 7/2/09 89,453 90,571
Mirant North America 7.375% 12/31/13 185,000 184,538
NRG Energy 7.375% 2/1/16 215,000 212,849
Orion Power Holdings 12.00% 5/1/10 178,000 193,130


#Texas Competitive Electric Holdings 144A 10.25% 11/1/15              945,000                947,362  
      2,253,450  
Total Corporate Bonds (cost $36,031,971)    34,528,550  
 
«Senior Secured Loans – 0.76%     
Ford Motor 5.776% 11/29/13 445,996 347,629  
General Motors 5.163% 11/17/13 200,000 149,806  
Talecris Biotherapeutics 2nd Lien 9.18% 12/6/14 225,000 221,344  
Total Senior Secured Loans (cost $790,512)    718,779  
Sovereign Debt – 0.09%     
Argentina – 0.09%     
Republic of Argentina 8.28% 12/31/33 113,884 85,015  
Total Sovereign Debt (cost $91,385)    85,015  
  Number of  
  Shares  
Exchange Traded Funds – 0.20%       
UltraShort Real Estate ProShares   2,236 191,558  
Total Exchange Traded Funds (cost $191,928)    191,558  
Limited Partnership – 0.32%           
*Brookfield Infrastructure Partners 16,900 304,200  
Total Limited Partnership (cost $321,178)    304,200  
 
Warrant – 0.00%     
=@P†Port Townsend 70 1  
†#Solutia 144A, exercise price $7.59, expiration date 7/15/09 650 0  
Total Warrant (cost $56,974)    1  
  Principal   
  Amount   
Repurchase Agreements** – 8.77%     
Bank of America 1.97%, dated 8/29/08, to be    
repurchased on 9/2/08, repurchase price $1,326,290    
(collateralized by U.S. Government obligations,    
4.75% 12/31/08; with market value $1,353,121) $ 1,326,000 1,326,000  
 
BNP Paribas 2.00%, dated 8/29/08, to be    
repurchased on 9/2/08, repurchase price $7,004,556    
(collateralized by U.S. Government obligations, 3.875%,    
5/15/09 - 7/2/09; with market value $7,154,402) 7,003,000 7,003,000  
Total Repurchase Agreements (cost $8,329,000)    8,329,000  
 
Total Value of Securities Before Securities Lending Collateral – 143.18%     
     (cost $143,786,609)   135,924,293  
  Number of   
  Shares   
Securities Lending Collateral*** – 13.12%     
Investment Companies    
   Mellon GSL DBT II Collateral Fund 12,459,611 12,459,611  
Total Securities Lending Collateral (cost $12,459,611)    12,459,611  
 
Total Value of Securities – 156.30%     
     (cost $156,246,220)   148,383,904 ©
Obligation to Return Securities Lending Collateral*** – (13.12%)    (12,459,611 )
Borrowing Under Line of Credit – (46.35%)    (44,000,000 )
Receivables and Other Assets Net of Liabilities (See Notes) – 3.17%    3,009,665  
Net Assets Applicable to 9,935,835 Shares Outstanding – 100.00%    $ 94,933,958  


PRestricted Security. These investments are in securities not registered under the Securities Act of 1933, as amended, and have certain restrictions on resale which may limit their liquidity. At August 31, 2008, the aggregate amount of the restricted securities was $114,073 or 0.12% of the Fund's net assets. See Note 7 in "Notes."
‡Non income producing security. Security is currently in default.
·Variable rate security. The rate shown is the rate as of August 31, 2008.
†Non income producing security.
@Illiquid security. At August 31, 2008, the aggregate amount of illiquid securities was $114,073, which represented 0.12% of the Fund’s net assets. See Note 7 in “Notes."
=Security is being fair valued in accordance with the Fund’s fair valuation policy. At August 31, 2008, the aggregate amount of fair valued securities was $114,073, which represented 0.12% of the Fund’s net assets. See Note 1 in "Notes."
#Security exempt from registration under Rule 144A of the Securities Act of 1933, as amended. At August 31, 2008, the aggregate amount of Rule 144A securities was $12,932,738, which represented 13.62% of the Fund’s net assets. See Note 7 in "Notes."
«Senior Secured Loans generally pay interest at rates which are periodically redetermined by reference to a base lending rate plus a premium. These base lending rates are generally: (i) the prime rate offered by one or more United States banks, (ii) the lending rate offered by one or more European banks such as the London Inter-Bank Offered Rate (LIBOR), and (iii) the certificate of deposit rate. Senior Secured Loans may be subject to restrictions on resale.
fStep coupon bond. Coupon increases periodically based on a predetermined schedule. Stated rate in effect at August 31, 2008.
WStep 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.
*Fully or partially on loan.
**See Note 1 in "Notes."
***See Note 6 in "Notes."
©Includes $12,057,155 of securities loaned.

Summary of Abbreviations:
ADR – American Depositary Receipts
PIK – Pay-in-kind
REIT – Real Estate Investment Trust

The following swap contracts were outstanding at August 31, 2008:

Swap Contracts1
Credit Default Swap Contracts

Swap Counterparty & Notional Annual Protection Termination Unrealized
Referenced Obligation Value Payments Date Appreciation
Protection Purchased:        
Lehman Brothers              
     Gannet 7 yr CDS $ 122,000   0.88%   9/20/14   $ 14,641  
     New York Times 7 yr CDS   122,000 0.75% 9/20/14    18,496   
     Sara Lee 7 yr CDS   122,000 0.60% 9/20/14   654
Total $ 366,000   $ 33,791

The use of swap contracts involves elements of market risk and risks in excess of the amount recognized in the financial statements. The notional values presented above represents the Fund's (as defined below) total exposure in such contracts, whereas only the net unrealized appreciation is reflected in the Fund's net assets.

1See Note 5 in “Notes.”

 

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. (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. Other long-term debt securities, credit default swap (CDS) contracts and interest rate swap contracts are valued by an independent pricing service or broker. To the extent current market prices are not available, the pricing service may take into account developments related to the specific security, as well as transactions in comparable securities. Short-term debt securities having less than 60 days to maturity are valued at amortized cost, which approximates market value. Securities lending collateral, which is invested in a collective investment vehicle (Collective Trust), is valued at unit value per share. Generally, index swap contracts, spread swap contracts and 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 (Board). 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 under Subchapter M of the Internal Revenue Code of 1986, as amended, and make the requisite distributions to shareholders. Accordingly, no provision for federal income taxes has been made in the financial statements.

Effective May 30, 2008, the Fund adopted FAS 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 are recorded as a tax benefit or expense in the current year. The adoption of FIN 48 did not result in the recording of any tax benefit or expense in the current period.

Repurchase Agreements – The Fund may invest in a pooled cash account along with members of the Delaware Investments® 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 at least 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 ($0.08 monthly). 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.

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 directly attributable to the Fund are charged directly to the Fund. Other expenses common to various funds within the Delaware Investments® Family of Funds are generally allocated amongst such 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 bonds are amortized to interest income over the lives of the respective securities. Distributions received from investments in Real Estate Investment Trusts (REITs) are recorded as dividend income on the ex-dividend date, subject to reclassification upon notice of the character of such distributions by the issuer.

2. Investments
At August 31, 2008, 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, 2008, the cost of investments and unrealized appreciation (depreciation) for the Fund was as follows:

Cost of investments  $ 156,399,659  
Aggregate unrealized appreciation  7,536,544  
Aggregate unrealized depreciation    (15,552,299 )
Net unrealized depreciation  $ (8,015,755 )

Effective December 1, 2007, the Fund adopted Financial Accounting Standards No. 157, Fair Value Measurements (FAS 157). FAS 157 defines fair value as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. FAS 157 also establishes a framework for measuring fair value and a three level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability. Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions that market participants would use in pricing the asset or liability developed based on the best information available under circumstances. The Fund’s investment in its entirety is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three-tier hierarchy of inputs is summarized below.

Level 1 – inputs are quoted prices in active markets
Level 2 – inputs that are observable, directly or indirectly
Level 3 – inputs are unobservable and reflect assumptions on the part of the reporting entity

The following table summarizes the valuation of the Fund’s investments by the above FAS 157 fair value hierarchy levels as of August 31, 2008:

  Securities        Derivatives
Level 1 $ 96,298,013 $ -
Level 2 50,280,053     33,791
Level 3   1,805,838                 -
Total $ 148,383,904 $ 33,791

The following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining fair value:

  Securities
Balance as of 11/30/2007 $ 218,725  
Net change in unrealized  
     appreciation/(depreciation)   (1,442,479 )
Net purchases, sales and settlements   3,029,592  
Balance as of 8/31/08 $ 1,805,838  
 
Net change in unrealized  
     appreciation/depreciation from  
     investments still held as of 8/31/08  $ (218,722 ) 

3. Commercial Paper
The Fund terminated the commercial paper program and related Liquidity Agreement with JPMorgan Chase on December 20, 2007.

4. Line of Credit
For the period ended August 31, 2008, the Fund borrowed money pursuant to a $44,000,000 Line of Credit Agreement with The Bank of New York Mellon (BNY Mellon). At August 31, 2008, the par value of loans outstanding was $44,000,000 at the Fed Funds rate of 2.24% plus 0.25%. During the period ended August 31, 2008, the average daily balance of loans outstanding was $42,429,091 at a weighted average Fed Funds rate of approximately 2.928% plus 0.25%. The maximum amount of borrowings outstanding at any time during the period was $44,000,000. Interest on borrowings is based on market rates in effect at the time of borrowing. The commitment fee is computed at a rate of 0.10% per annum on the unusual balance. The loan is collateralized by the Fund’s portfolio.

5. Swap Contracts
The Fund may enter into interest rate swap contracts, index swap contracts and CDS contracts in accordance with its investment objectives. The Fund may use interest rate swaps to adjust the Fund's sensitivity to interest rates or to hedge against changes in interest rates. Index swaps may be used to gain exposure to markets that the Fund invests in, such as the corporate bond market. The Fund may also use index swaps as a substitute for futures or options contracts if such contracts are not directly available to the Fund on favorable terms. The Fund may enter into CDS contracts in order to hedge against a credit event, to enhance total return or to gain exposure to certain securities or markets.

An interest rate swap involves payments received by the Fund from another party based on a variable or floating interest rate, in return for making payments based on a fixed interest rate. An interest rate swap can also work in reverse with the Fund receiving payments based on a fixed interest rate and making payments based on a variable or floating interest rate. Interest rate swaps may be used to adjust the Fund's sensitivity to interest rates or to hedge against changes in interest rates. Periodic payments on such contracts are accrued daily and recorded as unrealized appreciation/depreciation on swap contracts. Upon periodic payment/receipt or termination of the contract, such amounts are recorded as realized gains or losses on swap contracts.

Index swaps involve commitments to pay interest in exchange for a market linked return based on a notional amount. To the extent the total return of the security, instrument or basket of instruments underlying the transaction exceeds the offsetting interest obligation, the Fund will receive a payment from the counterparty. To the extent the total return of the security, instrument or basket of instruments underlying the transaction falls short of the offsetting interest obligation, the Fund will make a payment to the counterparty. The change in value of swap contracts outstanding, if any, is recorded as unrealized appreciation or depreciation daily. A realized gain or loss is recorded on maturity or termination of the swap contract.

A CDS contract is a risk-transfer instrument through which one party (purchaser of protection) transfers to another party (seller of protection) the financial risk of a credit event (as defined in the CDS agreement), as it relates to a particular reference security or basket of securities (such as an index). In exchange for the protection offered by the seller of protection, the purchaser of protection agrees to pay the seller of protection a periodic amount at a stated rate that is applied to the notional amount of the CDS contract. In addition, an upfront payment may be made or received by the Fund in connection with an unwinding or assignment of a CDS contract. Upon the occurrence of a credit event, the seller of protection would pay the par (or other agreed-upon) value of the referenced security (or basket of securities) to the counterparty.

During the period ended August 31, 2008, the Fund entered into CDS contracts as a purchaser and seller of protection. Periodic payments (receipts) on such contracts are accrued daily and recorded as unrealized losses (gains) on swap contracts. Upon payment (receipt), such amounts are recorded as realized losses (gains) on swap contracts. Upfront payments made or received in connection with CDS contracts are amortized over the expected life of the CDS contracts as unrealized losses (gains) on swap contracts. The change in value of CDS contracts is recorded as unrealized appreciation or depreciation daily. A realized gain or loss is recorded upon a credit event (as defined in the CDS agreement) or the maturity or termination of the agreement.

CDS may involve greater risks than if the Fund had invested in the referenced obligation directly. CDS are subject to general market risk, liquidity risk, counterparty risk and credit risk. If the Fund enters into a CDS contract as a purchaser of protection and no credit event occurs, its exposure is limited to the periodic payments previously made to the counterparty.

Because there is no organized market for swap contracts, the value of open swaps may differ from that which would be realized in the event the Fund terminated its position in the agreement. Risks of entering into these contracts include the potential inability of the counterparty to meet the terms of the contracts. This type of risk is generally limited to the amount of favorable movement in the value of the underlying security, instrument or basket of instruments, if any, at the day of default. Risks also arise from potential losses from adverse market movements and such losses could exceed the unrealized amounts shown on the schedule of investments.

6. 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 BNY Mellon. With respect to each loan, if the aggregate market value of the collateral held on any business day is less than the aggregate market value of the securities which are the subject of such loan, the borrower will be notified to provide additional collateral not less than the applicable collateral requirements. Cash collateral received is invested in a Collective Trust established by BNY Mellon for the purpose of investment on behalf of clients participating in its securities lending programs. The Collective Trust invests in fixed income securities, with a weighted average maturity not to exceed 90 days, rated in one of the top three tiers by Standard & Poor's Ratings Group or Moody’s Investors Service, Inc. or repurchase agreements collateralized by such securities. The Fund can also accept U.S. government securities and letters of credit (non-cash collateral) in connection with securities loans. In the event of default or bankruptcy by the lending agent, realization and/or retention of the collateral may be subject to legal proceedings. In the event the borrower fails to return loaned securities and the collateral received is insufficient to cover the value of the loaned securities and provided such collateral shortfall is not the result of investment losses, the lending agent has agreed to pay the amount of the shortfall to the Fund, or at the discretion of the lending agent, replace the loaned securities. The Fund continues to record dividends or interest, as applicable, on the securities loaned and is subject to change in value of the securities loaned that may occur during the term of the loan. The Fund has the right under the Lending Agreement to recover the securities from the borrower on demand. With respect to security loans collateralized by non-cash collateral, the Fund receives loan premiums paid by the borrower. With respect to security loans collateralized by cash collateral, the earnings from the collateral investments are shared among the Fund, the security lending agent and the borrower. The Fund records security lending income net of allocations to the security lending agent and the borrower.

At August 31, 2008, the value of securities on loan was $12,057,155, 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".

7. Credit and Market Risk
The Fund invests a portion of its assets in high yield fixed income securities, which carry ratings of BB or lower by Standard & Poor’s Ratings Group and/or Ba or lower by Moody’s Investors Service, Inc. Investments in these higher yielding securities are generally accompanied by a greater degree of credit risk than higher rated securities. Additionally, lower rated securities may be more susceptible to adverse economic and competitive industry conditions than investment grade securities.

The Fund invests in REITs and is subject to some of the risks associated with that industry. If the Fund holds real estate directly as a result of defaults or receives rental income directly from real estate holdings, its tax status as a regulated investment company may be jeopardized. There were no direct real estate holdings during the period ended August 31, 2008. The Fund's REIT holdings are also affected by interest rate changes, particularly if the REITs it holds use floating rate debt to finance their ongoing operations.

The Fund may invest up to 10% of its net assets in illiquid securities, which may include securities with contractual restrictions on resale, securities exempt from registration under Rule 144A of the Securities Act of 1933, as amended, and other securities which may not be readily 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 has delegated to Delaware Management Company, a series of Delaware Management Business Trust, the day-to-day functions of determining whether individual securities are liquid for purposes of the Fund’s limitation on investments in illiquid assets. Securities eligible for resale pursuant to Rule 144A, which are determined to be liquid, are not subject to the Fund’s 10% limit on investments in illiquid securities. Rule 144A and illiquid securities have been identified on the schedule of investments.

8. Subsequent Events

Lehman Bankruptcy
At August 31, 2008, Delaware Investments Dividend and Income Fund, Inc. had direct and indirect exposure to investments with Lehman Brothers Holdings Inc. (“Lehman”) or Lehman’s affiliates, including bonds and derivatives for which Lehman or Lehman’s affiliates was the issuer or counterparty. On September 15, 2008, Lehman filed for Chapter 11 bankruptcy protection.

With respect to direct exposure to Lehman, the Fund held bonds valued at approximately 0.39% of net assets as of August 31, 2008. With respect to indirect exposure, the Fund’s exposure through credit default swaps where Lehman or Lehman’s affiliate was counterparty was approximately 0.04% of net assets (which represents the net unrealized appreciation/depreciation on the Fund’s books) as of August 31, 2008.

As of September 15, 2008, approximately 0.00% and 0.04% of the Fund’s net assets were subject to direct and indirect exposure of Lehman or Lehman’s affiliates (before collateral), respectively.

Credit Agreement
In October 2008, Delaware Investments Dividend and Income Fund, Inc. reduced the amount borrowed pursuant to a Credit Agreement with BNY Mellon to approximately $28.2 million as of October 27, 2008. The reduction in the amount borrowed was made so that the Fund could meet the asset coverage requirements set forth in the Credit Agreement.

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 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: