dninqmar2014.htm
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM N-Q
 
QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY
 
Investment Company Act File Number:  811-8747
 
DIVIDEND AND INCOME FUND
(Exact name of registrant as specified in charter)
 
11 Hanover Square, 12th Floor
New York, NY
10005
(Address of principal executive offices)
(Zip Code)


John F. Ramírez, Esq.
Dividend and Income Fund
11 Hanover Square
New York, NY 10005
(Name and address of agent for service)

Registrant's telephone number, including area code: 1-212-785-0900

 
 
Date of Fiscal Year End:   12/31
 
Date of Reporting Period:  3/31/2014
 
Item 1. Schedule of Investments
 
 
DIVIDEND AND INCOME FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
March 31, 2014
(Unaudited)
                 
Shares
      
Cost
    
Value
  
   
COMMON STOCKS (100.35%)
            
   
Agricultural Chemicals (1.09%)
            
  45,000  
Potash Corporation of Saskatchewan Inc.
   $ 1,449,013     $ 1,629,900  
                       
     
Arrangement of Transportation of Freight & Cargo (0.88%)
                
  25,000  
C.H. Robinson Worldwide, Inc.
     1,491,810       1,309,750  
                       
     
Beverages (2.17%)
                
  45,000  
Coca-Cola Company (a)
     1,431,802       1,739,700  
  18,000  
PepsiCo, Inc. (a)
     1,189,936       1,503,000  
            2,621,738       3,242,700  
                       
     
Biological Products (1.00%)
                
  12,100  
Amgen Inc. (a)
     783,805       1,492,414  
                       
     
Cable & Other Pay Television Services (1.84%)
                
  32,500  
Rogers Communications Inc.
     1,442,883       1,346,800  
  21,400  
Time Warner Inc. (a)
     781,678       1,398,062  
            2,224,561       2,744,862  
                       
     
Cigarettes (1.64%)
                
  30,000  
Lorillard, Inc.
     1,532,064       1,622,400  
  10,000  
Philip Morris International, Inc. (a)
     485,376       818,700  
            2,017,440       2,441,100  
                       
     
Commercial Banks (1.85%)
                
  149,000  
Banco Santander (Brasil) S.A.
     717,107       829,930  
  60,000  
Westpac Banking Corporation
     1,862,046       1,923,600  
            2,579,153       2,753,530  
                       
     
Computer & Office Equipment (1.03%)
                
  8,000  
International Business Machines Corporation (a)
     1,333,311       1,539,920  
                       
     
Computer Communications Equipment (1.28%)
                
  85,000  
Cisco Systems, Inc. (a)
     1,760,853       1,904,850  
                       
     
Construction, Mining & Materials Handling Machinery & Equipment (0.74%)
          
  13,500  
Dover Corp. (a)
     648,424       1,103,625  
                       
     
Crude Petroleum & Natural Gas (5.54%)
                
  16,000  
Apache Corporation
     1,445,757       1,327,200  
  55,000  
Canadian Natural Resources Limited
     1,725,927       2,110,350  
  30,000  
Devon Energy Corporation
     1,821,048       2,007,900  
  8,160  
Occidental Petroleum Corporation (a)
     527,752       777,566  
  28,000  
Royal Dutch Shell PLC ADR
     1,859,609       2,045,680  
            7,380,093       8,268,696  
                       
     
Deep Sea Foreign Transportation of Freight (0.74%)
                
  50,000  
Seaspan Corp. (a)
     347,030       1,103,500  
                       
     
Dolls & Stuffed Toys (0.67%)
                
  25,000  
Mattel, Inc. (a)
     601,242       1,002,750  
                       
     
Drilling Oil & Gas Wells (0.94%)
                
  33,700  
Transocean Ltd.
     1,444,945       1,393,158  
                       
     
Electric Services (2.32%)
                
  11,000  
Entergy Corp. (a)
     693,431       735,350  
  18,600  
FirstEnergy Corp. (a)
     785,714       632,958  
  47,500  
Southern Company (a) (b)
     1,805,622       2,087,150  
            3,284,767       3,455,458  
                       
     
Electromedical & Electrotherapeutic Apparatus (0.83%)
                
  20,200  
Medtronic, Inc. (a)
     788,000       1,243,108  
                       
     
Electronic & Other Electrical Equipment (2.92%)
                
  111,900  
General Electric Company (a)
     1,949,675       2,897,091  
  41,400  
Koninklijke Philips Electronics N.V. (a)
     783,100       1,455,624  
            2,732,775       4,352,715  
                       
     
Electronic & Other Services Combined (2.17%)
                
  51,500  
Exelon Corp. (a) (b)
     1,712,684       1,728,340  
  35,000  
PG&E Corp. (a)
     1,444,087       1,512,000  
            3,156,771       3,240,340  
                       
     
Farm Machinery & Equipment (1.99%)
                
  25,000  
AGCO Corporation
     1,450,051       1,379,000  
  17,500  
Deere & Company
     1,465,928       1,589,000  
            2,915,979       2,968,000  
                       
     
Fire, Marine & Casualty Insurance (2.44%)
                
  20,000  
Ace Ltd. (a)
     829,324       1,981,200  
  40,000  
W.R. Berkley Corporation
     1,746,240       1,664,800  
            2,575,564       3,646,000  
                       
     
Food & Kindred Products (1.58%)
                
  25,000  
Campbell Soup Co. (a)
     783,645       1,122,000  
  22,000  
Kraft Foods Group, Inc.
     964,842       1,234,200  
            1,748,487       2,356,200  
                       
     
Gold and Silver Ores (2.17%)
                
  65,000  
Silver Wheaton Corp.
     1,533,023       1,475,500  
  200,000  
Yamana Gold Inc.
     1,735,860       1,756,000  
            3,268,883       3,231,500  
                       
     
Hospital & Medical Service Plans (1.14%)
                
  17,100  
WellPoint, Inc.
     1,507,610       1,702,305  
                       
     
Household Audio & Video Equipment (0.14%)
                
  6,750  
Knowles Corporation
     133,249       213,098  
                       
     
Investment Advice (0.63%)
                
  25,402  
Invesco Ltd. (a)
     620,581       939,874  
                       
     
Leather & Leather Products (1.00%)
                
  30,000  
Coach, Inc.
     1,522,710       1,489,800  
                       
     
Life Insurance (1.42%)
                
  40,000  
MetLife, Inc. (a)
     699,693       2,112,000  
                       
     
Malt Beverages (0.63%)
                
  16,000  
Molson Coors Brewing Company (a)
     707,427       941,760  
                       
     
Metal Mining (2.70%)
                
  165,000  
Compania de Minas Buenaventura S.A.A.
     1,871,421       2,074,050  
  35,000  
Rio Tinto plc
     1,832,376       1,954,050  
            3,703,797       4,028,100  
                       
     
Mining Machinery & Equipment (1.07%)
                
  27,500  
Joy Global Inc.
     1,534,746       1,595,000  
                       
     
Miscellaneous Food Preparations & Kindred Products (0.96%)
                
  20,000  
McCormick & Company, Incorporated
     1,357,602       1,434,800  
                       
     
Motor Vehicle Parts & Accessories (1.55%)
                
  25,000  
Honeywell International, Inc. (a) (b)
     889,529       2,319,000  
                       
     
Motor Vehicles & Passenger Car Bodies (2.21%)
                
  120,000  
Ford Motor Company
     1,878,024       1,872,000  
  41,500  
General Motors Company
     1,517,452       1,428,430  
            3,395,476       3,300,430  
                       
     
National Commercial Banks (4.66%)
                
  20,200  
Capital One Financial Corporation
     1,460,438       1,558,632  
  36,800  
JPMorgan Chase & Co. (a)
     774,303       2,234,128  
  39,000  
U.S. Bancorp
     1,329,909       1,671,540  
  30,000  
Wells Fargo & Company
     1,044,225       1,492,200  
            4,608,875       6,956,500  
                       
     
Natural Gas Transmission (0.92%)
                
  42,000  
Kinder Morgan, Inc.
     1,519,850       1,364,580  
                       
     
Natural Gas Transmission & Distribution (1.02%)
                
  41,000  
Spectra Energy Corp.
     1,211,550       1,514,540  
                       
     
Oil & Gas Field Machinery & Equipment (1.00%)
                
  19,200  
National Oilwell Varco, Inc.
     1,476,415       1,495,104  
                       
     
Petroleum Refining (4.77%)
                
  15,000  
Chevron Corp. (a)
     1,715,544       1,783,650  
  11,000  
ConocoPhillips (a)
     557,868       773,850  
  16,500  
Exxon Mobil Corp. (a)
     1,307,097       1,611,720  
  5,500  
Phillips 66 (a)
     173,935       423,830  
  62,500  
Statoil ASA ADR
     1,442,188       1,763,750  
  21,800  
Suncor Energy Inc.
     730,028       762,128  
            5,926,660       7,118,928  
                       
     
Pharmaceutical Preparations (6.14%)
                
  50,000  
Abbott Laboratories (a)
     1,475,179       1,925,500  
  23,100  
Johnson & Johnson (a)
     1,492,730       2,269,113  
  40,300  
Merck & Co., Inc. (a)
     1,463,305       2,287,831  
  37,924  
Pfizer Inc.
     750,477       1,218,119  
  27,900  
Sanofi (a)
     1,104,024       1,458,612  
            6,285,715       9,159,175  
                       
     
Pipe Lines (1.37%)
                
  45,000  
Enbridge Inc.
     1,880,340       2,047,950  
                       
     
Radio & TV Broadcasting & Communications Equipment (1.01%)
                
  45,600  
NTT DOCOMO, INC.
     742,496       719,112  
  10,000  
QUALCOMM, Inc. (a)
     383,189       788,600  
            1,125,685       1,507,712  
                       
     
Railroads, Line-Haul Operating (3.08%)
                
  108,500  
CSX Corp. (a) (b)
     2,808,708       3,143,245  
  15,000  
Norfolk Southern Corp.
     1,042,125       1,457,550  
            3,850,833       4,600,795  
                       
     
Retail - Department Stores (1.09%)
                
  28,600  
Kohl's Corporation
     1,466,508       1,624,480  
                       
     
Retail - Eating Places (1.22%)
                
  18,500  
McDonald's Corp. (a)
     1,800,503       1,813,555  
                       
     
Retail - Variety Stores (1.64%)
                
  16,000  
Target Corp. (a)
     660,150       968,160  
  19,400  
Wal-Mart Stores, Inc.
     1,456,257       1,482,742  
            2,116,407       2,450,902  
                       
     
Savings Institution, Federally Chartered (0.60%)
                
  60,000  
People's United Financial, Inc. (a)
     826,108       892,200  
                       
     
Semiconductors & Related Devices (3.55%)
                
  70,000  
Broadcom Corporation
     1,948,555       2,203,600  
  120,000  
Intel Corp. (a)
     2,608,156       3,097,200  
            4,556,711       5,300,800  
     
Services - Business Services (1.93%)
                
  83,000  
The Western Union Company (a)
     1,517,775       1,357,880  
  135,000  
Xerox Corporation
     1,456,987       1,525,500  
            2,974,762       2,883,380  
                       
     
Services - Medical Laboratories (1.09%)
                
  28,000  
Quest Diagnostics Incorporated
     1,461,692       1,621,760  
                       
     
Services - Miscellaneous Repair Services (0.09%)
                
  756  
Aquilex Holdings LLC Units (c)
     496,372       130,086  
                       
     
Services - Prepackaged Software (2.06%)
                
  30,000  
Microsoft Corp. (a)
     900,672       1,229,700  
  45,000  
Oracle Corporation
     1,480,414       1,840,950  
            2,381,086       3,070,650  
                       
     
Soap, Detergent, Cleaning Preparations, Perfumes, Cosmetics (2.05%)
                
  18,000  
The Procter & Gamble Company (a)
     1,215,778       1,450,800  
  37,500  
Unilever PLC ADR
     1,489,414       1,604,250  
            2,705,192       3,055,050  
                       
     
Specialty Cleaning, Polishing and Sanitation Preparations (1.00%)
                
  17,000  
Clorox Co. (a)
     1,241,222       1,496,170  
                       
     
Surety Insurance (1.10%)
                
  100,000  
Old Republic International Corp.
     1,167,370       1,640,000  
                       
     
Surgical & Medical Instruments & Apparatus (2.17%)
                
  27,000  
Baxter International Inc. (a)
     1,544,081       1,986,660  
  10,700  
Becton, Dickinson and Company
     782,308       1,252,756  
            2,326,389       3,239,416  
                       
     
Telephone Communications (2.42%)
                
  43,000  
CenturyLink, Inc.
     1,615,497       1,412,120  
  150,000  
Orange ADR
     1,830,370       2,203,500  
            3,445,867       3,615,620  
                       
     
Title Insurance (1.40%)
                
  11,496  
Fidelity National Financial, Inc.
     370,746       361,434  
  65,000  
First American Financial Corporation
     1,631,552       1,725,750  
            2,002,298       2,087,184  
                       
     
Water Transportation (0.60%)
                
  23,800  
Carnival Corp. (a)
     785,476       901,068  
                       
     
Wholesale - Groceries & Related Products (1.09%)
                
  45,000  
Sysco Corp.
     1,440,266       1,625,850  
                       
     
Total common stocks
     124,307,216       149,713,698  
                       
Principal
                    
Amount
                    
     
Corporate Bonds and Notes (4.36%)
                
     
Cable & Other Pay Television Services (0.36%)
                
  500,000  
CCO Holdings LLC, 7.00%, 1/15/19 (a)
     499,681       530,000  
                       
     
Cogeneration Services & Small Power Producers (0.33%)
                
  450,000  
Covanta Holding Corp., 7.25%, 12/1/20 (a)
     456,082       493,875  
                       
     
Electric Services (0.80%)
                
  650,000  
Edison Mission Energy, 7.00%, 5/15/17 (d)
     650,694       594,750  
  541,593  
Elwood Energy LLC, 8.159%, 7/5/26 (a)
     569,787       598,460  
            1,220,481       1,193,210  
     
Hospital & Medical Service Plans (0.18%)
                
  250,000  
Health Net, Inc., 6.375%, 6/1/17 (a)
     241,167       273,125  
                       
     
Natural Gas Transmission (0.23%)
                
  350,000  
Southern Star Central Corp., 6.75%, 3/1/16 (a)
     338,205       350,875  
                       
     
Oil & Gas Field Exploration Services (0.34%)
                
  500,000  
CGG-Veritas, 7.75%, 5/15/17 (a)
     506,641       508,750  
                       
     
Papers & Allied Products (0.35%)
                
  500,000  
Cascades, Inc., 7.75%, 12/15/17 (a)
     494,227       521,875  
                       
     
Services - Equipment Rental & Leasing, NEC (0.36%)
                
  500,000  
Aircastle Ltd., 9.75%, 8/1/18 (a)
     502,100       539,025  
                       
     
Services - Miscellaneous Amusement & Recreation (0.54%)
                
  750,000  
Cedar Fair LP, 9.125%, 8/1/18 (a)
     752,553       802,725  
                       
     
Services - Prepackaged Software (0.29%)
                
  400,000  
Scientific Games International, Inc., 9.25%, 6/15/19 (a)
     422,159       426,000  
                       
     
Special Industry Machinery (0.36%)
                
  500,000  
Novelis, Inc., 8.375%, 12/15/17 (a)
     503,803       535,625  
                       
     
Wholesale - Electronic Parts & Equipment, NEC (0.22%)
                
  300,000  
SoftBank Corp., 9.50%, 12/1/16 (a) (e)
     300,000       328,500  
                       
     
Total corporate bonds and notes
     6,237,099       6,503,585  
                       
     
REAL ESTATE INVESTMENT TRUSTS  (3.70%)
                
  34,500  
HCP, Inc.
     1,471,180       1,338,255  
  22,500  
Health Care REIT, Inc.
     1,469,925       1,341,000  
  22,650  
Mid-America Apartment Communities, Inc.
     1,420,551       1,546,315  
  200,000  
New Residential Investment Corp.
     771,976       1,294,000  
                       
     
Total real estate investment trusts
     5,133,632       5,519,570  
                       
     
CLOSED END FUNDS (3.61%)
                
  200,000  
Alpine Total Dynamic Dividend Fund
     1,648,650       1,678,000  
  185,383  
Boulder Growth & Income Fund, Inc.
     1,449,975       1,507,164  
  75,000  
John Hancock Tax-Advantaged Dividend Income Fund
     1,285,154       1,494,000  
  90,669  
Wells Fargo Advantage Global Dividend Opportunity Fund
     664,956       713,565  
                       
      Total closed end funds     5,048,735       5,392,729  
                       
     
MASTER LIMITED PARTNERSHIPS (2.34%)
                
     
Natural Gas Transmission (2.34%)
                
  39,000  
Energy Transfer Partners, L.P. (a)
     1,979,798       2,097,810  
  20,000  
Enterprise Products Partners LP (a) (b)
     374,214       1,387,200  
                       
     
Total master limited partnerships
     2,354,012       3,485,010  
                       
     
PREFERRED STOCKS (1.41%)
                
     
Financial (1.41%)
                
  79,469  
Annaly Capital Management, Inc., 7.625% Series C Cumulated Redeemable
     1,771,714       1,933,481  
  7,473  
Hatteras Financial Corp., 7.625% Series A Cumulated Redeemable
     175,298       176,736  
  80,000  
Solar Cayman Ltd. (a) (c) (d)
     568,802       -  
                       
     
Total preferred stocks
     2,515,814       2,110,217  
                       
     
MONEY MARKET FUND (0.01%)
                
  21,606  
SSgA Money Market Fund, 7 day annualized yield 0.00%
     21,606       21,606  
                       
     
Total investments (115.78%)
   $ 145,618,114       172,746,415  
                       
     
Liabilities in excess of other assets (-15.78%)
             (23,548,453 )
                       
     
Net assets (100.00%)
           $ 149,197,962  
                       
(a) All or a portion of these securities have been segregated as collateral pursuant to the bank credit facility. As of March 31, 2014, the value of securities pledged as collateral was $57,094,520.
  
(b) All or portion of these securities are on loan pursuant to the Fund's Lending Agreement in the aggregate amount of $6,063,482.
  
(c) Illiquid and/or restricted security that has been fair valued.
                
(d) Non-income producing.
                
(e) These securities are exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.
  
                       
ADR
  
American Depositary Receipt
                
LLC
  
Limited Liability Company
                
LP
  
Limited Partnership
                
PLC
  
Public Limited Company
                
 
 
Notes to Schedule of Portfolio Investments (Unaudited)

Security Valuation
Portfolio securities are valued by various methods depending on the primary market or exchange on which they trade.  Most equity securities for which the primary market is the United States are valued at the official closing price, last sale price or, if no sale has occurred, at the closing bid price.  Most equity securities for which the primary market is outside the United States are valued using the official closing price or the last sale price in the principal market in which they are traded.  If the last sale price on the local exchange is unavailable, the last evaluated quote or closing bid price normally is used. Debt obligations with remaining maturities of 60 days or less are valued at cost adjusted for amortization of premiums and accretion of discounts. Certain of the securities in which the Fund may invest are priced through pricing services that may utilize a matrix pricing system which takes into consideration factors such as yields, prices, maturities, call features, and ratings on comparable securities.  Bonds may be valued according to prices quoted by a bond dealer that offers pricing services.  Open end investment companies are valued at their net asset value.  Securities for which quotations are not readily available or reliable and other assets may be valued as determined in good faith by Bexil Advisers LLC, the Fund’s Investment Manager, under the direction of or pursuant to procedures established or approved by the Fund’s Board of Trustees, called fair value pricing. Due to the inherent uncertainty of valuation, fair value pricing values may differ from the value that would have been used had a readily available market for the securities existed.  These differences in valuation could be material.  A security’s valuation may differ depending on the method used for determining value.  The use of fair value pricing by the Fund may cause the net asset value of its shares to differ from the net asset value that would be calculated using market prices. A fair value price is an estimate and there is no assurance that such price will be at or close to the price at which a security is next quoted or next trades.

Value Measurements
Inputs to valuation methods are prioritized by a three level hierarchy as follows:

·  
Level 1 – unadjusted quoted prices in active markets for identical assets or liabilities including securities actively traded on a securities exchange.
·  
Level 2 – observable inputs other than quoted prices included in level 1 that are observable for the asset or liability which may include quoted prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default  rates, and similar data.
·  
Level 3 - unobservable inputs for the asset or liability including the Fund’s own assumptions about the assumptions a market participant would use in valuing the asset or liability.

The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including, for example the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the security. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for investments categorized in level 3.

The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement falls in its entirety is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

The inputs or methodology used for valuing investments are not an indication of the risk associated with investing in those securities.

The following is a description of the valuation techniques applied to the Fund’s major categories of assets and liabilities measured at fair value on a recurring basis:

Equity securities (common and preferred stock) – Most publicly traded equity securities are valued normally at the most recent official closing price, last sale price, evaluated quote, or closing bid price. To the extent these securities are actively traded and valuation adjustments are not applied, they may be categorized in level 1 of the fair value hierarchy. Preferred stock and other equities on inactive markets or valued by reference to similar instruments may be categorized in level 2.

Corporate bonds and notes - The fair value of corporate bonds and notes are estimated using various techniques which may consider, among other things, recently executed transactions in securities of the issuer or comparable issuers, market price quotations (where observable), bond spreads, and fundamental data relating to the issuer. Although most corporate bonds and notes may be categorized in level 2 of the fair value hierarchy, in instances where lower relative weight is place on transaction prices, quotations, or similar observable inputs, they may be categorized in level 3.

Restricted and/or illiquid securities - Restricted and/or illiquid securities for which quotations are not readily available or reliable may be valued with fair value pricing as determined in good faith by the Investment Manager under the direction of or pursuant to procedures established by the Fund’s Board of Trustees. Restricted securities issued by publicly traded companies are generally valued at a discount to similar publicly traded securities. Restricted or illiquid securities issued by nonpublic entities may be valued by reference to comparable public entities or fundamental data relating to the issuer or both or similar inputs. Depending on the relative significance of valuation inputs, these instruments may be classified in either level 2 or level 3 of the fair value hierarchy.

The following is a summary of the inputs used as of March 31, 2014 in valuing the Fund’s assets carried at fair value. Refer to the Schedule of Portfolio Investments for detailed information on specific investments.
 
   
Level 1
    
Level 2
    
Level 3
    
Total
  
                         
 Assets
                        
 Investments at value
                        
 Common stocks
   $ 149,583,612     $ -     $ 130,086     $ 149,713,698  
 Corporate bonds and notes
     -       6,503,585       -       6,503,585  
 Real estate investment trusts
     5,519,570       -       -       5,519,570  
 Closed end funds
     5,392,729       -       -       5,392,729  
 Master limited partnerships
     3,485,010       -       -       3,485,010  
 Preferred stocks
     2,110,217       -       0       2,110,217  
 Money market fund
     21,606       -       -       21,606  
                                 
 Total investments, at value
   $ 166,112,744     $ 6,503,585     $ 130,086     $ 172,746,415  
                                 


There were no securities transferred from level 1 on December 31, 2013 to level 2 on March 31, 2014. Transfers from level 1 to level 2, or from level 2 to level 1 are valued utilizing values at the beginning of the period.

The following is a reconciliation of assets for which significant unobservable inputs were used to determine fair value:

   
Common Stocks
    
Preferred Stocks
    
Total
  
                   
Balance at December 31, 2013
   $ 130,086     $ 0     $ 130,086  
                         
Proceeds from sales
     -       -       -  
Realized loss
     -       -       -  
Transfers into (out of) level 3
     -       -       -  
Change in unrealized depreciation
     -       -       -  
                         
Balance at March 31, 2014
   $ 130,086     $ 0     $ 130,086  
                         
Net change in unrealized depreciation attributable to assets still held as level 3 at March 31, 2014
   $ -     $ -     $ -  
                         
 
The Investment Manager under the direction of the Fund’s Board of Trustees considers various valuation approaches for valuing securities categorized within level 3 of the fair value hierarchy. The factors used in determining the value of the Fund’s private investments may include, but are not limited to: the discounts applied to the selection of comparable investments due to the private nature of the investment; the type of the security; the size of the holding; the initial cost of the security; the existence of any contractual restrictions on the security’s disposition; the price and extent of public trading in similar securities of the issuer or of comparable companies; quotations or evaluated prices from broker-dealers and/or pricing services; information obtained from the issuer or analysts; an analysis of the company’s or issuer’s financial statements; or an evaluation of the forces that influence the issuer and the market in which the security is purchased and sold. Significant changes in any of those inputs in isolation may result in a significantly lower or higher fair value measurement. The pricing of all fair value holdings is subsequently reported to the Fund’s Board of Trustees.

The following table presents additional information about valuation methodologies and inputs used for investments that are measured at fair value and categorized with level 3 as of March 31, 2014:

 
Fair Value
            
 
March 31, 2014
  
Valuation Technique
Unobservable Input
Range
               
Common stocks
              
Services - Miscellaneous Repair Services
 $130,086
  
Share of taxable income and comparable exchange offer
Discount rate for lack of marketability
74%
               
Preferred stock
              
Financial
 $0
  
Analysis of operating results and net asset value
Discount rate for lack of marketability
100%
               
 
Cost for Federal Income Tax Purposes
The aggregate cost of investments for tax purposes will depend upon the Fund's investment experience during the entirety of its fiscal year and may be subject to changes based on tax regulations. As of March 31, 2014, for federal income tax purposes subject to changes, the aggregate cost of securities was $145,618,114 and net unrealized appreciation was $27,128,301, comprised of gross unrealized appreciation of $29,871,634 and gross unrealized depreciation of $2,743,333.

Illiquid and Restricted Securities
The Fund owns securities which have a limited trading market and/or certain restrictions on trading and, therefore, may be illiquid and/or restricted. Such securities have been valued using fair value pricing. Due to the inherent uncertainty of valuation, these values may differ from the values that would have been used had a readily available market for the securities existed. These differences in valuation could be material. Illiquid and/or restricted securities owned at March 31, 2014, were as follows:
 
 
Acquisition
            
 
Date
  
Cost
    
Value
  
               
Aquilex Holdings LLC
12/23/09
   $ 496,372     $ 130,086  
Solar Cayman Ltd.
3/7/07
     568,802       0  
                   
      $ 1,065,174     $ 130,086  
                   
Percent of net assets
       0.71%       0.09%  
                   
 
Item 2.  Controls and Procedures

(a)  
The registrant's principal executive officer and principal financial officer have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the "1940 Act")) are effective as of a date within 90 days of the filing date of this report that includes the disclosure required by this paragraph, based on their evaluation of the disclosure controls and procedures required by Rule 30a-3(b) under the 1940 Act and 15d-15(b) under the Securities Exchange Act of 1934.

(b)  
There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) 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

(a)  
Certifications of the registrant's principal executive officer and principal financial officer as required by Rule 30a-2(a) under the 1940 Act.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dividend and Income Fund

By: /s/ Thomas B. Winmill
Thomas B. Winmill, President

Date: May 30, 2014
 
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By: /s/ Thomas B. Winmill
Thomas B. Winmill, President

Date: May 30, 2014
 
By: /s/ Thomas O'Malley
Thomas O'Malley, Chief Financial Officer

Date: May 30, 2014
 
 
EXHIBIT INDEX
 
(a) Certifications of the registrant's principal executive and principal financial officer as required by Rule 30a-2(a) under the 1940 Act. (EX-99.CERT)