didivandincome_nq.htm
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: February 28, 2011

 

Item 1. Schedule of Investments.

Schedule of Investments (Unaudited)
 
Delaware Investments® Dividend and Income Fund, Inc.
  
February 28, 2011        
  Number of      
  Shares             Value
Common Stock – 67.64%        
Consumer Discretionary – 3.30%        
†=∏Avado Brands 1,390   $ 0
Comcast Class A 56,900     1,465,744
†DIRECTV Class A 1,550     71,254
Lowe's 42,800     1,120,076
        2,657,074
Consumer Staples – 7.23%        
Archer-Daniels-Midland 34,700     1,290,146
CVS Caremark 36,300     1,200,078
Kimberly-Clark 17,100     1,126,890
Kraft Foods Class A 37,000     1,178,080
*Safeway 47,100     1,027,722
        5,822,916
Diversified REITs – 0.78%        
*DuPont Fabros Technology 4,900     119,658
*Investors Real Estate Trust 10,300     95,996
Lexington Realty Trust 12,900     122,163
Vornado Realty Trust 3,065     286,056
        623,873
Energy – 9.09%        
Chevron 14,200     1,473,250
ConocoPhillips 19,500     1,518,465
Marathon Oil 32,500     1,611,999
National Oilwell Varco 15,400     1,225,378
Williams 49,200     1,493,712
        7,322,804
Financials – 7.80%        
Allstate 36,600     1,163,148
Bank of New York Mellon 38,300     1,163,937
*Fifth Street Finance 34,041     468,745
Marsh & McLennan 44,600     1,357,623
Rayonier 2,000     122,660
*Solar Capital 30,561     748,745
Travelers 21,000     1,258,529
        6,283,387
Healthcare – 9.09%        
†*Alliance HealthCare Services 7,323     30,317
Baxter International 23,600     1,254,340
Cardinal Health 33,200     1,382,448
Johnson & Johnson 17,900     1,099,776
Merck 29,800     970,586
Pfizer 69,189     1,331,196
Quest Diagnostics 22,000     1,248,500
        7,317,163
Healthcare REITs – 2.53%        
Cogdell Spencer 16,800     107,688
*HCP 6,250     237,500
*Health Care REIT 9,060     473,113
LTC Properties 3,300     96,426
Nationwide Health Properties 8,800     376,112
*Omega Healthcare Investors 9,500     227,715
*Ventas 9,375     519,563
        2,038,117
Hotel REITs – 0.75%        
†DiamondRock Hospitality 14,500     170,520
†Summit Hotel Properties 44,500     433,875
        604,395
Industrial REIT – 0.06%        
AMB Property 1,280     46,566

 

                 46,566
Industrials – 2.98%      
†Delta Air Lines 19   214
†Flextronics International 4,400   35,596
†*Mobile Mini 1,651   37,544
Northrop Grumman 17,200   1,146,896
†=∏PT Holdings 350   4
*Waste Management 31,900   1,182,213
      2,402,467
Information Technology – 5.68%      
Intel 47,800   1,026,266
International Business Machines 8,200   1,327,416
†Motorola Solutions 30,542   1,180,143
Xerox 96,600   1,038,450
      4,572,275
Mall REITs – 2.69%      
General Growth Properties 15,429   245,630
*Macerich 5,026   254,517
*Pennsylvania Real Estate Investment Trust 29,100   420,204
Simon Property Group 11,347   1,248,623
      2,168,974
Materials – 1.64%      
duPont (E.I.) deNemours 24,000   1,316,880
      1,316,880
Mortgage REIT – 0.13%      
Chimera Investment 23,800   102,578
      102,578
Multifamily REITs – 2.11%      
Apartment Investment & Management 7,968   204,379
Associated Estates Realty 7,200   117,000
BRE Properties 5,000   237,550
Camden Property Trust 3,450   204,137
Campus Crest Communities 40,100   574,232
*Equity Residential 6,600   363,726
      1,701,024
Office REITs – 0.70%      
*Boston Properties 3,000   287,760
Brandywine Realty Trust 11,500   141,450
Government Properties Income Trust 4,800   130,416
      559,626
Office/Industrial REITs – 0.75%      
*Digital Realty Trust 8,750   514,675
Liberty Property Trust 2,700   91,179
      605,854
Real Estate Operating REITs – 0.76%      
First Capital Realty 14,058   235,434
†Howard Hughes 1   58
Starwood Property Trust 16,000   374,240
      609,732
Self-Storage REIT – 0.72%      
Public Storage 5,150   578,088
      578,088
Shopping Center REITs – 0.93%      
*Equity One 8,000   153,120
*Federal Realty Investment Trust 300   25,254
*Kimco Realty 20,430   395,933
Ramco-Gershenson Properties 6,200   83,762
*Weingarten Realty Investors 3,600   93,132
      751,201
Single Tenant REIT – 0.21%      
*National Retail Properties 6,700   172,123
      172,123
Specialty REITs – 0.91%      
*Entertainment Properties Trust 2,920   139,196
*Plum Creek Timber 6,885   288,895
*Potlatch 4,825   185,280
PS Business Parks 1,900   119,776
      733,147
Telecommunications – 3.65%      
  
 

AT&T   39,600              1,123,848
†=Century Communications   500,000   0
*France Telecom ADR   6,000   133,260
Frontier Communications   40,000   339,600
†GeoEye   550   24,503
Verizon Communications   35,800   1,321,736
        2,942,947
Utilities – 3.15%        
American Water Works   4,300   119,282
Edison International   30,300   1,124,736
†GenOn Energy   535   2,167
NorthWestern   3,300   98,043
Progress Energy   26,100   1,193,031
        2,537,259
Total Common Stock (cost $47,259,850)       54,470,470
 
Convertible Preferred Stock – 2.40%        
Banking, Finance & Insurance – 0.92%        
Aspen Insurance Holdings 5.625% exercise price $29.28, expiration date 12/31/49   8,800   507,101
Bank of America 7.25% exercise price $50.00, expiration date 12/31/49   90   90,360
Citigroup 7.50% exercise price $3.94, expiration date 12/15/12   1,040   139,880
†@Fannie Mae 8.75% exercise price $32.45, expiration date 5/13/11   3,500   2,805
        740,146
Computers & Technology – 0.05%        
†Unisys 6.25% exercise price $45.66, expiration date 3/1/14   400   40,800
        40,800
Energy – 0.71%        
*Apache 6.00% exercise price $109.12, expiration date 8/1/13   1,700   115,804
*El Paso Energy Capital Trust I 4.75% exercise price $41.59, expiration date 3/31/28   5,250   230,265
SandRidge Energy 8.50% exercise price $8.01, expiration date 12/31/49   1,440   227,232
        573,301
Healthcare & Pharmaceuticals – 0.35%        
HealthSouth 6.50% exercise price $30.50, expiration date 12/31/49   268   282,807
        282,807
Telecommunications – 0.37%        
*Lucent Technologies Capital Trust I 7.75% exercise price $24.80, expiration date 3/15/17   305   297,948
        297,948
Total Convertible Preferred Stock (cost $1,837,558)       1,935,002
       
  Principal    
  Amount    
Convertible Bonds – 12.27%        
Aerospace & Defense – 0.54%        
AAR        
       1.75% exercise price $29.43, expiration date 2/1/26 $ 136,000   150,620
       #144A 1.75% exercise price $29.43, expiration date 2/1/26   260,000   287,950
        438,570
Auto Parts & Equipment – 0.37%        
ArvinMeritor 4.00% exercise price $26.73, expiration date 2/15/27   280,000   295,050
        295,050
Banking, Finance & Insurance – 0.30%        
#Ares Capital 144A 5.75% exercise price $19.13, expiration date 2/1/16   83,000   89,640
Jefferies Group 3.875% exercise price $38.72, expiration date 11/1/29   149,000   154,401
        244,041
Basic Materials – 1.28%        
#Owens-Brockway Glass Container 144A 3.00% exercise price $47.47, expiration date 6/1/15   335,000   343,794
#*Rayonier TRS Holdings 144A 4.50% exercise price $50.24, expiration date 8/15/15   274,000   363,735
#Sino-Forest 144A 5.00% exercise price $20.29, expiration date 8/1/13   255,000   322,894
        1,030,423
Cable, Media & Publishing – 0.56%        
ΦGeneral Cable 4.50% exercise price $36.75, expiration date 11/15/29
   117,000   165,116
VeriSign 3.25% exercise price $34.37, expiration date 8/15/37   235,000   283,763
        448,879
Computers & Technology – 2.63%        
Advanced Micro Devices        
       6.00% exercise price $28.08, expiration date 5/1/15   217,000   223,239
       #144A 6.00% exercise price $28.08, expiration date 5/1/15   83,000   85,386
Euronet Worldwide 3.50% exercise price $40.48, expiration date 10/15/25   435,000   436,088
*Intel 3.25% exercise price $22.68, expiration date 8/1/39   124,000   150,970
Linear Technology 3.00% exercise price $44.72, expiration date 5/1/27   425,000   464,843

 

Live Nation Entertainment 2.875% exercise price $27.14, expiration date 7/15/27 451,000              407,591
#Rovi 144A 2.625% exercise price $47.36, expiration date 2/15/40 99,000   134,269
SanDisk 1.50% exercise price $52.37, expiration date 8/15/17 186,000   217,388
      2,119,774
Energy – 0.51%      
Chesapeake Energy 2.25% exercise price $85.89, expiration date 12/15/38 304,000   279,680
*Peabody Energy 4.75% exercise price $58.40, expiration date 12/15/41 102,000   131,580
      411,260
Healthcare & Pharmaceuticals – 2.06%      
*Alere 3.00% exercise price $43.98, expiration date 5/15/16 215,000   241,069
Amgen      
       0.375% exercise price $79.48, expiration date 2/1/13 270,000   271,012
       #144A 0.375% exercise price $79.48, expiration date 2/1/13 165,000   165,619
Dendreon 2.875% exercise price $51.24, expiration date 1/15/16 109,000   108,728
*Health Care REIT 3.00% exercise price $51.08, expiration date 12/1/29 163,000   182,560
ϕHologic 2.00% exercise price $38.59, expiration date 12/15/37 255,000   247,031
LifePoint Hospitals 3.50% exercise price $51.79, expiration date 5/15/14 266,000   280,962
Medtronic 1.65% exercise price $54.79, expiration date 4/15/13 159,000   164,565
      1,661,546
Leisure, Lodging & Entertainment – 0.69%      
#Gaylord Entertainment 144A 3.75% exercise price $27.25, expiration date 10/1/14 160,000   236,400
#Home Inns & Hotels Management 144A 2.00% exercise price $49.37, expiration date 12/15/15 140,000   134,225
*International Game Technology 3.25% exercise price $19.97, expiration date 5/1/14 160,000   183,200
      553,825
Real Estate – 0.39%      
#Digital Realty Trust 144A 5.50% exercise price $42.49, expiration date 4/15/29 95,000   139,591
#Lexington Realty Trust 144A 6.00% exercise price $7.09, expiration date 1/15/30 123,000   171,892
      311,483
Retail – 0.22%      
Pantry 3.00% exercise price $50.09, expiration date 11/15/12 180,000   178,425
      178,425
Telecommunications – 2.72%      
Alaska Communications System Group 5.75% exercise price $12.90, expiration date 3/1/13 340,000   359,550
Alcatel Lucent USA 2.875% exercise price $15.35, expiration date 6/15/25 82,000   80,155
#Ciena 144A 3.75% exercise price $20.17, expiration date 10/15/18 137,000   214,576
#Clearwire Communications 144A 8.25% exercise price $7.08, expiration date 12/1/40 120,000   127,800
*Equinix 4.75% exercise price $84.32, expiration date 6/15/16 101,000   131,679
*Leap Wireless International 4.50% exercise price $93.21, expiration date 7/15/14 469,000   438,514
Level 3 Communications Holdings 6.50% exercise price $1.23, expiration date 10/1/26 120,000   171,900
NII Holdings 3.125% exercise price $118.32, expiration date 6/15/12 410,000   410,000
SBA Communications 4.00% exercise price $30.38, expiration date 10/1/14 165,000   252,863
      2,187,037
Total Convertible Bonds (cost $8,701,340)     9,880,313
 
Corporate Bonds – 39.00%      
Banking – 0.97%      
*Ally Financial 8.00% 12/31/18 147,000   163,905
•Fifth Third Capital Trust IV 6.50% 4/15/37 180,000   176,850
•#HBOS Capital Funding 144A 6.071% 6/29/49 205,000   185,525
•SunTrust Capital VIII 6.10% 12/15/36 265,000   254,221
      780,501
Basic Industry – 3.88%      
*AK Steel 7.625% 5/15/20 119,000   121,975
#Algoma Acquisition 144A 9.875% 6/15/15 196,000   179,585
#Appleton Papers 144A 10.50% 6/15/15 119,000   123,760
Century Aluminum 8.00% 5/15/14 120,150   125,707
#FMG Resources August 2006 144A      
       *6.875% 2/1/18 82,000   84,460
       7.00% 11/1/15 169,000   176,183
#*Hexion US Finance 144A 9.00% 11/15/20 130,000   138,613
*International Coal Group 9.125% 4/1/18 225,000   249,749
Lyondell Chemical 11.00% 5/1/18 139,000   160,198
#MacDermid 144A 9.50% 4/15/17 159,000   170,130
Millar Western Forest Products 7.75% 11/15/13 159,000   157,013
#Momentive Performance Materials 144A 9.00% 1/15/21 260,000   277,224
#Murray Energy 144A 10.25% 10/15/15 148,000   158,730
•Noranda Aluminum Acquisition PIK 5.193% 5/15/15 145,982   136,858
#Novelis 144A 8.75% 12/15/20 198,000   219,285
#PE Paper Escrow 144A 12.00% 8/1/14 92,000   106,411

 

=@Port Townsend 12.431% 8/27/12 102,592              46,679
Ryerson      
       •7.679% 11/1/14 92,000   88,780
       12.00% 11/1/15 116,000   125,280
#*Steel Dynamics 144A 7.625% 3/15/20 106,000   114,480
*Verso Paper Holdings 11.375% 8/1/16 153,000   163,328
      3,124,428
Brokerage – 0.40%      
E Trade Financial PIK 12.50% 11/30/17 272,000   323,680
      323,680
Capital Goods – 2.58%      
#Associated Materials 144A 9.125% 11/1/17 120,000   130,050
#Berry Plastics 144A 9.75% 1/15/21 154,000   155,155
#*Cemex Espana Luxembourg 144A 9.25% 5/12/20 71,000   73,485
#Cemex Finance 144A 9.50% 12/14/16 150,000   161,700
#DAE Aviation Holdings 144A 11.25% 8/1/15 139,000   146,993
*Graham Packaging 8.25% 10/1/18 145,000   156,963
Manitowoc      
       8.50% 11/1/20 67,000   73,198
       *9.50% 2/15/18 143,000   160,518
*Mueller Water Products 7.375% 6/1/17 169,000   165,619
#Plastipak Holdings 144A 10.625% 8/15/19 66,000   75,570
Ply Gem Industries 13.125% 7/15/14 152,000   167,579
#Polypore International 144A 7.50% 11/15/17 159,000   165,359
Pregis 12.375% 10/15/13 163,000   165,038
*RBS Global/Rexnord 11.75% 8/1/16 145,000   157,688
Trimas 9.75% 12/15/17 111,000   123,765
      2,078,680
Consumer Cyclical – 4.51%      
American Axle & Manufacturing 7.875% 3/1/17 160,000   166,400
ArvinMeritor      
       8.125% 9/15/15 147,000   158,393
       10.625% 3/15/18 78,000   89,505
Beazer Homes USA      
       *9.125% 6/15/18 46,000   47,725
       #144A 9.125% 5/15/19 198,000   205,177
#Burlington Coat Factory Warehouse 144A 10.00% 2/15/19 255,000   258,824
*CKE Restaurants 11.375% 7/15/18 145,000   163,488
*Dana Holding 6.75% 2/15/21 130,000   132,275
Dave & Buster's 11.00% 6/1/18 177,000   199,124
#DineEquity 144A 9.50% 10/30/18 149,000   162,038
#*Dunkin Finance 144A 9.625% 12/1/18 149,000   151,608
Express Finance 8.75% 3/1/18 92,000   99,475
Ford Motor 7.45% 7/16/31 145,000   158,550
Ford Motor Credit 12.00% 5/15/15 147,000   185,802
*Goodyear Tire & Rubber 8.25% 8/15/20 154,000   166,320
#Icon Health & Fitness 144A 11.875% 10/15/16 87,000   92,220
#Interface 144A 7.625% 12/1/18 116,000   123,830
#M/I Homes 144A 8.625% 11/15/18 246,000   251,227
Norcraft Finance 10.50% 12/15/15 101,000   108,575
Norcraft Holdings 9.75% 9/1/12 115,000   116,581
#Pinafore 144A 9.00% 10/1/18 169,000   188,858
Quiksilver 6.875% 4/15/15 185,000   184,538
Standard Pacific 10.75% 9/15/16 69,000   81,420
Susser Holdings & Finance 8.50% 5/15/16 129,000   140,771
      3,632,724
Consumer Non-Cyclical – 3.82%      
#Accellent 144A 10.00% 11/1/17 92,000   91,540
Alere 9.00% 5/15/16 95,000   101,888
#Armored Autogroup 144A 9.25% 11/1/18 169,000   176,183
BioScrip 10.25% 10/1/15 120,000   127,200
#Blue Merger Sub 144A 7.625% 2/15/19 169,000   171,535
#*Bumble Bee Acquisition 144A 9.00% 12/15/17 106,000   115,010
Cott Beverages 8.375% 11/15/17 83,000   89,848
*Dean Foods 7.00% 6/1/16 174,000   166,170
Diversey Holdings 10.50% 5/15/20 266,000   309,889
#DJO Finance 144A 9.75% 10/15/17 231,000   245,437
Lantheus Medical Imaging 9.75% 5/15/17 149,000   161,293
LVB Acquisition 11.625% 10/15/17 158,000   178,934
#NBTY 144A 9.00% 10/1/18 207,000   225,629

 

#Novasep Holding 144A 9.75% 12/15/16 134,000              107,200
*Pinnacle Foods Finance 10.625% 4/1/17 67,000   72,193
#Quintiles Transnational PIK 144A 9.50% 12/30/14 65,000   66,869
#Reynolds Group Issuer 144A 9.00% 4/15/19 169,000   177,028
*Supervalu 8.00% 5/1/16 96,000   96,000
Tops Holding/Markets 10.125% 10/15/15 76,000   81,985
#Viskase 144A 9.875% 1/15/18 152,000   163,400
Yankee Acquisition 9.75% 2/15/17 139,000   149,078
      3,074,309
Energy – 4.78%      
#American Petroleum Tankers 144A 10.25% 5/1/15 146,000   153,483
Antero Resources Finance 9.375% 12/1/17 106,000   115,010
Aquilex Holdings 11.125% 12/15/16 134,000   141,705
#*Chaparral Energy 144A 8.25% 9/1/21 135,000   137,700
*Chesapeake Energy 9.50% 2/15/15 105,000   130,725
Complete Production Service 8.00% 12/15/16 71,000   75,438
Comstock Resources 7.75% 4/1/19 170,000   169,999
Copano Energy 7.75% 6/1/18 96,000   100,320
*Crosstex Energy 8.875% 2/15/18 119,000   131,793
Dynegy Holdings 7.75% 6/1/19 125,000   90,938
El Paso      
       6.875% 6/15/14 45,000   49,400
       7.00% 6/15/17 49,000   54,989
#El Paso Performance-Linked Trust 144A 7.75% 7/15/11 31,000   31,730
Headwaters 11.375% 11/1/14 139,000   164,020
#*Helix Energy Solutions Group 144A 9.50% 1/15/16 191,000   199,594
#Hercules Offshore 144A 10.50% 10/15/17 143,000   142,643
#*Hilcorp Energy I 144A 8.00% 2/15/20 152,000   163,780
Holly 9.875% 6/15/17 112,000   125,160
*Key Energy Services 8.375% 12/1/14 90,000   98,325
#Laredo Petroleum 144A 9.50% 2/15/19 178,000   186,899
#Linn Energy 144A 8.625% 4/15/20 147,000   164,639
#*NFR Energy 144A 9.75% 2/15/17 139,000   141,085
#Oasis Petroleum 144A 7.25% 2/1/19 130,000   132,275
#Offshore Group Investments 144A 11.50% 8/1/15 106,000   119,250
*‡OPTI Canada      
       7.875% 12/15/14 107,000   58,850
       8.25% 12/15/14 205,000   112,750
Petrohawk Energy      
       7.875% 6/1/15 139,000   148,035
       #144A 7.25% 8/15/18 14,000   14,560
Petroleum Development 12.00% 2/15/18 137,000   155,495
Pioneer Drilling 9.875% 3/15/18 69,000   75,555
*Quicksilver Resources 7.125% 4/1/16 105,000   102,638
*SandRidge Energy      
       8.75% 1/15/20 29,000   31,465
       #144A 9.875% 5/15/16 114,000   127,110
      3,847,358
Finance & Investments – 2.16%      
•American International Group 8.175% 5/15/58 220,000   243,100
#AMO Escrow 144A 11.50% 12/15/17 82,000   88,150
•Genworth Financial 6.15% 11/15/66 326,000   258,763
•#ILFC E-Capital Trust I 144A 5.96% 12/21/65 100,000   84,878
•#ILFC E-Capital Trust II 144A 6.25% 12/21/65 325,000   284,374
•#Liberty Mutual Group 144A 7.00% 3/15/37 195,000   190,631
Nuveen Investments      
       10.50% 11/15/15 250,000   256,875
       #144A 10.50% 11/15/15 72,000   73,980
•∏XL Group 6.50% 12/29/49 275,000   257,125
      1,737,876
Media – 3.33%      
#Affinion Group 144A 7.875% 12/15/18 202,000   194,425
Cablevision Systems 8.00% 4/15/20 71,000   77,745
CCO Holdings      
       8.125% 4/30/20 205,000   222,168
       #144A 7.00% 1/15/19 14,000   14,280
#*Clear Channel Communications 144A 9.00% 3/1/21 164,000   167,485
#*Columbus International 144A 11.50% 11/20/14 130,000   149,500
*GXS Worldwide 9.75% 6/15/15 163,000   166,668
#inVentiv Health 144A 10.00% 8/15/18 164,000   168,920

 

MDC Partners 11.00% 11/1/16 146,000              164,433
Nexstar Broadcasting 8.875% 4/15/17 139,000   151,510
Nielsen Finance      
       11.50% 5/1/16 19,000   22,468
       11.625% 2/1/14 25,000   29,500
       #144A 7.75% 10/15/18 87,000   94,504
#*Ono Finance II 144A 10.875% 7/15/19 159,000   171,720
#Sinclair Television Group 144A 9.25% 11/1/17 101,000   114,635
#Sitel 144A 11.50% 4/1/18 139,000   129,270
#UPC Holding 144A 9.875% 4/15/18 189,000   210,734
Visant 10.00% 10/1/17 92,000   100,050
#XM Satellite Radio 144A      
       7.625% 11/1/18 145,000   154,425
       *13.00% 8/1/13 145,000   173,638
      2,678,078
Real Estate – 0.20%      
*Felcor Lodging 10.00% 10/1/14 143,000   163,378
      163,378
Services Cyclical – 3.34%      
Cardtronics 8.25% 9/1/18 72,000   78,480
#*CityCenter Holdings 144A 7.625% 1/15/16 67,000   70,183
#Delta Air Lines 144A 12.25% 3/15/15 129,000   148,350
#Equinox Holdings 144A 9.50% 2/1/16 143,000   156,049
*General Maritime 12.00% 11/15/17 143,000   131,918
*Harrah's Operating 10.00% 12/15/18 358,000   338,309
Kansas City Southern de Mexico 8.00% 2/1/18 32,000   35,120
#*Marina District Finance 144A 9.875% 8/15/18 82,000   85,895
*MGM MIRAGE 11.375% 3/1/18 433,000   493,619
NCL      
       11.75% 11/15/16 75,000   88,969
       #144A 9.50% 11/15/18 72,000   78,300
@Northwest Airlines 10.00% 2/1/11 55,000   176
#PHH 144A 9.25% 3/1/16 145,000   158,050
Pinnacle Entertainment 8.75% 5/15/20 155,000   166,044
Royal Caribbean Cruises 6.875% 12/1/13 76,000   81,795
RSC Equipment Rental      
       •10.25% 11/15/19 13,000   14,885
       #144A 8.25% 2/1/21 87,000   92,438
#*Swift Services Holdings 144A 10.00% 11/15/18 125,000   137,500
#*Swift Transportation 144A 12.50% 5/15/17 101,000   108,954
#United Air Lines 144A 12.00% 11/1/13 203,000   224,822
      2,689,856
Services Non-Cyclical – 1.18%      
Alion Science and Technology PIK 12.00% 11/1/14 87,413   92,111
Casella Waste Systems 11.00% 7/15/14 83,000   94,620
#Casella Waste Systems 144A 7.75% 2/15/19 173,000   178,190
#Darling International 144A 8.50% 12/15/18 82,000   88,868
#Multiplan 144A 9.875% 9/1/18 178,000   192,462
Radiation Therapy Services 9.875% 4/15/17 157,000   162,495
Radnet Management 10.375% 4/1/18 138,000   139,035
      947,781
Technology & Electronics – 1.88%      
#Allen Systems Group 144A 10.50% 11/15/16 164,000   170,150
#Aspect Software 144A 10.625% 5/15/17 143,000   153,010
First Data      
       *9.875% 9/24/15 217,000   220,255
       11.25% 3/31/16 106,000   102,820
#International Wire Group 144A 9.75% 4/15/15 129,000   138,836
MagnaChip Semiconductor 10.50% 4/15/18 101,000   114,635
#MedAssets 144A 8.00% 11/15/18 82,000   84,665
NXP BV/Funding 9.50% 10/15/15 152,000   162,640
*Sanmina-SCI 8.125% 3/1/16 61,000   63,135
#Seagate HDD Cayman 144A 7.75% 12/15/18 164,000   168,920
*SunGard Data Systems 10.25% 8/15/15 127,000   134,144
      1,513,210
Telecommunications – 4.80%      
#Avaya 144A 7.00% 4/1/19 169,000   168,155
#Buccaneer Merger 144A 9.125% 1/15/19 130,000   141,050
#Clearwire Communications 144A      
       12.00% 12/1/15 426,000   466,469
       *12.00% 12/1/17 120,000   129,900

 

*Cricket Communications 7.75% 10/15/20 87,000              83,520
#Digicel Group 144A      
       9.125% 1/15/15 100,000   104,650
       *10.50% 4/15/18 96,000   109,920
Global Crossing 12.00% 9/15/15 262,000   301,955
Intelsat Bermuda      
       11.25% 2/4/17 401,000   445,610
       PIK 11.50% 2/4/17 176,092   196,343
Level 3 Financing 10.00% 2/1/18 162,000   165,848
*MetroPCS Wireless 7.875% 9/1/18 67,000   71,104
NII Capital 10.00% 8/15/16 127,000   144,463
#PAETEC Holding 144A 9.875% 12/1/18 106,000   114,745
Qwest 8.375% 5/1/16 4,000   4,795
Qwest Communications International 7.50% 2/15/14 58,000   59,015
Sprint Capital 8.75% 3/15/32 239,000   249,755
#Telcordia Technologies 144A 11.00% 5/1/18 253,000   284,625
Telesat Canada      
       11.00% 11/1/15 78,000   87,945
       12.50% 11/1/17 131,000   158,346
Virgin Media Finance 8.375% 10/15/19 92,000   104,765
*West 11.00% 10/15/16 147,000   160,781
#Wind Acquisition Finance 144A 11.75% 7/15/17 100,000   115,250
      3,869,009
Utilities – 1.17%      
AES      
       *7.75% 3/1/14 76,000   83,030
       *8.00% 6/1/20 50,000   55,000
       9.75% 4/15/16 19,000   22,183
Edison Mission 7.00% 5/15/17 96,000   78,480
Elwood Energy 8.159% 7/5/26 136,500   136,330
Energy Future Intermediate Holding/Finance 10.00% 12/1/20 149,000   156,279
#GenOn Escrow 144A 9.50% 10/15/18 101,000   106,303
*Mirant Americas Generation 8.50% 10/1/21 185,000   196,099
•Puget Sound Energy 6.974% 6/1/67 110,000   109,301
      943,005
Total Corporate Bonds (cost $29,143,006)     31,403,873
 
«Senior Secured Loans – 0.99%      
Echostar 8.50% 6/30/19 280,000   280,000
Energy Futures Holdings Tranche B2 3.787% 10/10/14 337,785   284,918
Harrahs Operating Tranche 3.303% 1/28/15 70,000   65,052
PQ 6.76% 7/30/15 170,000   167,796
Total Senior Secured Loans (cost $742,829)     797,766
       
  Number of    
  Shares    
Limited Partnership – 0.21%      
Brookfield Infrastructure Partners 7,600   171,608
Total Limited Partnership (cost $144,435)     171,608
 
Preferred Stock – 1.45%      
Financials – 0.47%      
#Ally Financial 144A 400   381,238
      381,238
Industrials – 0.00%      
†=Port Townsend 70   0
      0
Real Estate – 0.98%      
Cogdell Spencer 29,600   735,560
†W2007 Grace Acquisitions 8.75% 34,400   52,030
      787,590
Total Preferred Stock (cost $2,001,800)     1,168,828
 
Warrants – 0.00%      
=∏@Port Townsend 70   1
Alion Science & Technology 120   1
Total Warrants (cost $1,680)     2

 

  Principal                   
  Amount        
Short-Term Investment – 0.28%            
≠Discount Note – 0.28%            
Federal Home Loan Bank 0.07% 3/1/11 $ 220,001     220,001  
Total Short-Term Investment (cost $220,001)         220,001  
 
Total Value of Securities Before Securities Lending Collateral – 124.24%            
       (cost $90,052,499)         100,047,863  
           
  Number of        
  Shares        
Securities Lending Collateral** – 18.12%            
Investment Companies            
       BNY Mellon SL DBT II Liquidating Fund   129,258     124,876  
       Delaware Investments Collateral Fund No. 1   14,463,244     14,463,244  
       @†Mellon GSL Reinvestment Trust II   154,977     0  
Total Securities Lending Collateral (cost $14,747,479)         14,588,120  
 
Total Value of Securities – 142.36%            
       (cost $104,799,978)         114,635,983 ©
Obligation to Return Securities Lending Collateral** – (18.31%)         (14,747,479 )
Borrowing Under Line of Credit – (25.12%)         (20,225,000 )
Receivables and Other Assets Net of Liabilities (See Notes) – 1.07%         864,644  
Net Assets Applicable to 9,439,043 Shares Outstanding – 100.00%       $ 80,528,148  

†Non income producing security.
=Security is being fair valued in accordance with the Fund’s fair valuation policy. At February 28, 2011, the aggregate amount of fair valued securities was $46,684, which represented 0.06% of the Fund’s net assets. See Note 1 in "Notes."
∏Restricted 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 February 28, 2011, the aggregate amount of the restricted securities was $257,130 or 0.32% of the Fund's net assets. See Note 5 in "Notes."
*Fully or partially on loan.
@Illiquid security. At February 28, 2011, the aggregate amount of illiquid securities was $49,661, which represented 0.06% of the Fund’s net assets. See Note 5 in “Notes."
#Security exempt from registration under Rule 144A of the Securities Act of 1933, as amended. At February 28, 2011, the aggregate amount of Rule 144A securities was $17,372,326, which represented 21.57% of the Fund’s net assets. See Note 5 in "Notes."
ϕStep coupon bond. Coupon increases or decreases periodically based on a predetermined schedule. Stated rate in effect at February 28, 2011.
•Variable rate security. The rate shown is the rate as of February 28, 2011. Interest rates reset periodically.
‡Non income producing security. Security is currently in default.
«Senior Secured Loans generally pay interest at rates that 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. Stated rate in effect at February 28, 2011.
≠The rate shown is the effective yield at the time of purchase.
**See Note 4 in "Notes."
©Includes $14,538,667 of securities loaned.
 
Summary of Abbreviations:
ADR – American Depositary Receipts
PIK – Pay-in-kind
REIT – Real Estate Investment Trust
 
 
Notes
 
1. Significant Accounting Policies
The following accounting policies are in accordance with U.S. generally accepted accounting principles (U.S. GAAP) and are consistently followed by Delaware Investments® Dividend and Income Fund, Inc. (Fund). This report covers the period of time since the Fund’s last fiscal year end.
 
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 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 ask prices will be used. Securities listed on a foreign exchange are valued at the last quoted sales price on the valuation date. Short-term debt securities are valued at market value. U.S. Government and agency securities are valued at the mean between the bid and ask prices. Other debt securities 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. Investment company securities are valued at net asset value per share. Foreign currency exchange contracts are valued at the mean between the bid and ask prices. Interpolated values are derived when the settlement date of the contract is an interim date for which quotations are not available. Generally, 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 suspension of trading in a security. The Fund may use fair value pricing more frequently for securities traded primarily in non-U.S. markets because, among other things, most foreign markets close well before the Fund values its securities generally as of 4:00 p.m. Eastern time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, government actions or pronouncements, aftermarket trading, or news events may have occurred in the interim. To account for this, the Fund may frequently value foreign securities using fair value prices based on third-party vendor modeling tools (international fair value pricing).
 
 

Federal Income Taxes – No provision for federal income taxes has been made as 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. The Fund evaluates 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. Management has analyzed the Fund’s tax positions taken on federal income tax returns for all open tax years (November 30, 2007 – November 30, 2010), and has concluded that no provision for federal income tax is required in the Fund’s financial statements.
 
Distributions – The Fund has implemented a managed distribution policy. Under the policy, the Fund is managed with a goal of generating as much of the distribution as possible from net investment income and short-term capital gains. The balance of the distribution will then come from long-term capital gains to the extent permitted, and if necessary, a return of capital. Even though the Fund may realize current year capital gains, such gains may be offset, in whole or in part, by the Fund’s capital loss carryovers from prior years. For federal income tax purposes, the effect of such capital loss carryovers may be to convert (to the extent of such current year gains) what would otherwise be returns of capital into distributions taxable as ordinary income. This tax effect can occur during times of extended market volatility. The actual determination of the source of the Fund’s distributions can be made only at year-end. Shareholders should receive written notification regarding the actual components and tax treatments of all Fund distributions for the calendar year 2011 in early 2012.
 
Foreign Currency Transactions – Transactions denominated in foreign currencies are recorded at the prevailing exchange rates on the valuation date in accordance with the Fund's prospectus. The value of all assets and liabilities denominated in foreign currencies is translated into U.S. dollars at the exchange rate of such currencies against the U.S. dollar daily. Transaction gains or losses resulting from changes in exchange rates during the reporting period or upon settlement of the foreign currency transaction are reported in operations for the current period. The Fund generally isolates that portion of realized gains and losses on investments in debt securities which are due to changes in foreign exchange rates from that which are due to changes in market prices of debt securities. For foreign equity securities, these changes are included in realized gains (losses) on investments. The Fund reports certain foreign currency related transactions as components of realized gains (losses) for financial reporting purposes, whereas such components are treated as ordinary income (loss) for federal income tax purposes.
 
Use of Estimates – The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent 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 and such differences could be material.
 
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 February 28, 2011, the cost of investments for federal income tax purposes has been estimated since final tax characteristics cannot be determined until fiscal year end. At February 28, 2011, the cost of investments and unrealized appreciation (depreciation) for the Fund was as follows:
 
Cost of investments $ 105,187,723  
Aggregate unrealized appreciation $ 14,108,595  
Aggregate unrealized depreciation   (4,660,335 )
Net unrealized appreciation $ 9,448,260  
 
For federal income tax purposes, at November 30, 2010, capital loss carryforwards of $24,101,298 may be carried forward and applied against future capital gains. Such capital loss carryforwards will expire as follows: $12,885,662 expires in 2016 and $11,215,636 expires in 2017.
 
U.S. GAAP 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 under current market conditions. A three level hierarchy for fair value measurements has been established 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 the 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 level hierarchy of inputs is summarized below.
 
Level 1 - inputs are quoted prices in active markets for identical investments (e.g., equity securities, open-end investment companies, futures contracts, options contracts)
Level 2 -  other observable inputs (including, but not limited to: quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs) (e.g., debt securities, government securities, swap contracts, foreign currency exchange contracts, foreign securities utilizing international fair value pricing)
Level 3 - inputs are significant unobservable inputs (including the Fund's own assumptions used to determine the fair value of investments) (e.g., broker-quoted securities, fair valued securities)
 
 

The following table summarizes the valuation of the Fund’s investments by fair value hierarchy levels as of February 28, 2011:
 
  Level 1       Level 2       Level 3       Total
Common Stock $ 54,470,466   $ -   $ 4   $ 54,470,470
Corporate Debt   -     43,690,275     326,679     44,016,954
Short-Term Investment   -     220,001     -     220,001
Other   907,168     381,238     52,032     1,340,438
Securities Lending Collateral   -     14,588,120     -     14,588,120
Total $ 55,377,634   $ 58,879,634   $ 378,715   $ 114,635,983
                       
The following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining fair value:
 
        Corporate              
  Common Stock       Debt       Other       Total
Balance as of 11/30/10 $ 4   $ 313,397     $ 24,082   $ 337,483  
Purchases   -     280,000       -     280,000  
Sales   -     (240,465 )     -     (240,465 )
Net realized gain   -     1,465       -     1,465  
Net change in unrealized                          
       appreciation/depreciation   -     (27,718 )     27,950     232  
Balance as of 2/28/11 $ 4   $ 326,679     $ 52,032   $ 378,715  
 
Net change in unrealized                          
       appreciation/depreciation from                          
       investments still held as of 2/28/11 $  -   $ (27,700 )   $ 27,950   $ 250  
                           
During the period ended February 28, 2011, there were no transfers between Level 1 investments, Level 2 investments or Level 3 investments that had a material impact to the Fund. This does not include transfers between Level 1 investments and Level 2 investments due to the Fund utilizing international fair value pricing during the year.
 
3. Line of Credit
For the period ended February 28, 2011, the Fund borrowed money pursuant to a $30,000,000 Credit Agreement with The Bank of New York Mellon (BNY Mellon) that expires on November 14, 2011. Depending on market conditions, the amount borrowed by the Fund pursuant to the Credit Agreement may be reduced or possibly increased in the future.
 
At February 28, 2011, the par value of loans outstanding was $20,225,000 at a variable interest rate of 1.40%. During the period February 28, 2011, the average daily balance of loans outstanding was $20,225,000 at a weighted average interest rate of approximately 1.45%. Interest on borrowing is based on a variable short-term rate plus an applicable margin. The commitment fee is computed at a rate of 0.25% per annum on the unused balance. The loan is collateralized by the Fund’s portfolio.
 
4. Derivatives
U.S. GAAP requires enhanced disclosures that enable investors to understand: 1) how and why an entity uses derivatives; 2) how they are accounted for; and 3) how they affect an entity's results of operations and financial position.
 
Foreign Currency Exchange Contracts – The Fund may enter into foreign currency exchange contracts as a way of managing foreign exchange rate risk. The Fund may enter into these contracts to fix the U.S. dollar value of a security that it has agreed to buy or sell for the period between the date the trade was entered into and the date the security is delivered and paid for. The Fund may also use these contracts to hedge the U.S. dollar value of securities it already owns that are denominated in foreign currencies. The change in value is recorded as an unrealized gain or loss. When the contract is closed, a realized gain or loss is recorded equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.
 
The use of foreign currency exchange contracts does not eliminate fluctuations in the underlying prices of the securities, but does establish a rate of exchange that can be achieved in the future. Although foreign currency exchange contracts limit the risk of loss due to an unfavorable change in the value of the hedged currency, they also limit any potential gain that might result should the value of the currency change favorably. In addition, the Fund could be exposed to risks if the counterparties to the contracts are unable to meet the terms of their contracts. The Fund's maximum risk of loss from counterparty credit risk is the value of its currency exchanged with the counterparty. The risk is generally mitigated by having a netting arrangement between the Fund and the counterparty and by the posting of collateral by the counterparty to the Fund to cover the Fund's exposure to the counterparty. No foreign currency exchange contracts were outstanding at February 28, 2011.
 
 

5. 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 The Bank of New York Mellon (BNY Mellon). With respect to each loan, if on any business day the aggregate market value of securities collateral plus cash collateral held 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 by the end of the following business day which, together with the collateral already held, will be not less than the applicable collateral requirements for such security loan. If the aggregate market value of securities collateral and cash collateral held with respect to a security loan exceeds the applicable collateral requirement, upon the request of the borrower BNY Mellon must return enough collateral to the borrower by the end of the following business day to reduce the value of the remaining collateral to the applicable collateral requirement for such security loan. As a result of the foregoing, the value of the collateral held with respect to a loaned security may be temporarily more or less than the value of the security on loan.
 
Cash collateral received is generally invested in the Delaware Investments Collateral Fund No. 1 (Collective Trust) established by BNY Mellon for the purpose of investment on behalf of funds managed by Delaware Management Company (DMC), a series of Delaware Management Business Trust, that participate in BNY Mellon’s securities lending program. The Collective Trust may invest in U.S. government securities and high quality corporate debt, asset-backed and other money market securities and in repurchase agreements collateralized by such securities, provided that the Collective Trust will generally have a dollar-weighted average portfolio maturity of 60 days or less. The Collective Trust seeks to maintain a net asset value per unit of $1.00, but there can be no assurance that it will always be able to do so. The Fund may incur investment losses as a result of investing securities lending collateral in the Collective Trust or another collateral investment pool. This could occur if an investment in a collateral investment pool defaulted or if it were necessary to liquidate assets in the collateral investment pool to meet returns on outstanding security loans at a time when the collateral investment pool’s net asset value per unit was less than $1.00. Under those circumstances, the Fund may not receive an amount from the collateral investment pool that is equal in amount to the collateral the Fund would be required to return to the borrower of the securities and the Fund would be required to make up this shortfall. Effective April 20, 2009, BNY Mellon transferred the assets of the Fund’s previous collateral investment pool other than cash and assets with a maturity of one business day or less to the BNY Mellon SL DBT II Liquidating Fund (Liquidating Fund), effectively bifurcating the previous collateral investment pool. The Fund’s exposure to the Liquidating Fund is expected to decrease as the Liquidating Fund’s assets mature or are sold. In October 2008, BNY Mellon transferred certain distressed securities from the previous collateral investment pool into the Mellon GSL Reinvestment Trust II. 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 February 28, 2011, the value of the securities on loan was $14,538,667, for which the Fund received collateral, comprised of non-cash collateral valued at $14,747,479, and cash collateral of $147,136. At February 28, 2011, the value of invested collateral was $14,588,120. Investments purchased with cash collateral are presented on the schedule of investments under the caption “Securities Lending Collateral.”
 
6. Credit and Market Risk
The Fund borrows through its line of credit for purposes of leveraging. Leveraging may result in higher degrees of volatility because the Fund’s net asset value could be subject to fluctuations in short-term interest rates and changes in market value of portfolio securities attributable to the leverage.
 
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 Rating and/or Ba or lower by Moody’s Investors Services. 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 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 February 28, 2011. 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 DMC 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.
 
7. Subsequent Events
Management has determined no material events or transactions occurred subsequent to February 28, 2011 that would require recognition or disclosure in the Fund’s schedule of investments.
 
 
 

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: