dninqmar2012.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: 1-212-785-0400

 
Date of Fiscal Year End:   12/31
 
Date of Reporting Period:  3/31/12
 
Item 1. Schedule of Investments
 
 
DIVIDEND AND INCOME FUND*
SCHEDULE OF PORTFOLIO INVESTMENTS
March 31, 2012
(Unaudited)

 
Shares
        
Cost
      
Value
  
                       
     
COMMON STOCKS (88.88%)
                
     
Aircraft Engines & Engine Parts (0.84%)
                
  10,000  
United Technologies Corp.
   $ 727,426     $ 829,400  
                       
     
Beverages (1.80%)
                
  15,000  
Coca-Cola Company
     835,675       1,110,150  
  10,000  
PepsiCo, Inc.
     529,400       663,500  
            1,365,075       1,773,650  
                       
     
Biological Products (0.84%)
                
  12,100  
Amgen Inc.
     783,805       822,679  
                       
     
Cable & Other Pay Television Services (0.82%)
  
  21,400  
Time Warner Inc.
     781,678       807,850  
                       
     
Canned, Frozen & Preserved Fruit, Vegetable & Food Specialties (0.93%)
  
  17,100  
H.J. Heinz Company
     885,684       915,705  
                       
     
Cigarettes (1.84%)
                
  30,000  
Altria Group, Inc.
     634,550       926,100  
  10,000  
Philip Morris International, Inc.
     485,376       886,100  
            1,119,926       1,812,200  
                       
     
Computer & Office Equipment (1.03%)
  
  25,000  
Hewlett-Packard Company
     1,088,505       595,750  
  2,000  
International Business Machines Corporation
     258,964       417,300  
            1,347,469       1,013,050  
                       
     
Computer Communications Equipment (0.89%)
  
  41300  
Cisco Systems, Inc.
     783,771       873,495  
                       
     
Construction, Mining & Materials Handling Machinery & Equipment (0.86%)
  
  13500  
Dover Corp.
     781,673       849,690  
                       
     
Converted Paper & Paperboard Products (0.94%)
  
  12500  
Kimberly-Clark Corp.
     890,751       923,625  
                       
     
Crude Petroleum & Natural Gas (0.79%)
  
  8,160  
Occidental Petroleum Corporation
     527,752       777,077  
                       
     
Deep Sea Foreign Transportation of Freight (0.88%)
  
  50,000  
Seaspan Corp.
     347,030       867,000  
                       
     
Dolls & Stuffed Toys (0.85%)
                
  25,000  
Mattel, Inc.
     610,742       841,500  
                       
     
Electric Services (4.58%)
                
  11,000  
Entergy Corp.
     693,431       739,200  
  18,600  
First Energy Corp.
     785,714       847,974  
  65,000  
Southern Company
     2,326,432       2,920,450  
            3,805,577       4,507,624  
                       
     
Electromedical & Electrotherapeutic Apparatus (0.80%)
  
  20,200  
Medtronic, Inc.
     788,000       791,638  
                       
     
Electronic & Other Electrical Equipment (4.15%)
  
  20,000  
Emerson Electric Company
     747,590       1,043,600  
  111,900  
General Electric Company
     1,949,675       2,245,833  
  39,300  
Koninklijke Philips Electronics N.V.
     783,100       799,755  
            3,480,365       4,089,188  
                       
     
Electronic & Other Services Combined (1.52%)
  
  17,000  
Exelon Corp.
     715,134       666,570  
  19,100  
PG&E Corp.
     784,489       829,131  
            1,499,623       1,495,701  
                       
     
Fire, Marine & Casualty Insurance (1.49%)
  
  20,000  
Ace Ltd.
     829,324       1,464,000  
                       
     
Food & Kindred Products (1.24%)
          
  25,000  
Campbell Soup Co.
     783,645       846,250  
  10,000  
Kraft Foods, Inc. Class A
     258,704       380,100  
            1,042,349       1,226,350  
                       
     
Gold & Silver Ores (2.37%)
                
  17,900  
Barrick Gold Corp.
     889,694       778,292  
  18,000  
Goldcorp Inc.
     888,318       811,080  
  14,500  
Newmont Mining Corp.
     891,740       743,415  
            2,669,752       2,332,787  
     
Grain Mill Products (0.85%)
                
  15,600  
Kellogg Company
     790,809       836,628  
                       
     
Investment Advice (0.54%)
                
  20,000  
Invesco Ltd.
     437,950       533,400  
                       
     
Life Insurance (1.52%)
                
  40,000  
MetLife, Inc.
     699,693       1,494,000  
                       
     
Malt Beverages (0.73%)
                
  16,000  
Molson Coors Brewing Company
     707,427       724,000  
                       
     
Measuring & Controlling Devices, NEC (0.87%)
  
  10,700  
Rockwell Automation, Inc.
     780,522       852,790  
                       
     
Miscellaneous Business Credit Institution (1.00%)
  
  39,355  
Solar Capital Ltd.
     754,269       868,565  
  46,169  
Star Asia Financial Ltd. (a)
     686,145       117,615  
            1,440,414       986,180  
                       
     
Miscellaneous Fabricated Metal Products (0.87%)
  
  10,100  
Parker-Hannifin Corp.
     787,011       853,955  
                       
     
Motor Vehicle Parts & Accessories (1.55%)
  
  25,000  
Honeywell International, Inc.
     889,529       1,526,250  
                       
     
Motor Vehicles & Passenger Car Bodies (0.93%)
  
  19,600  
PACCAR Inc.
     788,028       917,868  
                       
     
National Commercial Banks (1.72%)
          
  36,800  
JPMorgan Chase & Co.
     774,303       1,692,064  
                       
     
Paints, Varnishes, Lacquers, Enamels & Allied Products (0.97%)
  
  10,000  
PPG Industries, Inc.
     657,378       958,000  
                       
     
Perfumes, Cosmetics & Other Preparations (0.98%)
  
  50,000  
Avon Products, Inc.
     1,596,424       968,000  
                       
     
Petroleum Refining (2.51%)
                
  7,200  
Chevron Corp.
     782,448       772,128  
  11,000  
ConocoPhillips
     731,803       836,110  
  10,000  
Exxon Mobil Corp.
     738,274       867,300  
            2,252,525       2,475,538  
                       
     
Pharmaceutical Preparations (10.40%)
  
  30,000  
Abbott Laboratories
     1,522,047       1,838,700  
  55,000  
Bristol-Myers Squibb Company
     1,241,872       1,856,250  
  23,100  
Johnson & Johnson
     1,492,730       1,523,676  
  40,300  
Merck & Company, Inc.
     1,463,305       1,547,520  
  116,200  
Pfizer Inc.
     1,997,252       2,633,092  
  21,900  
Sanofi
     787,206       848,625  
            8,504,412       10,247,863  
                       
     
Plastic Materials, Resins & Nonvulcanelastomers (1.78%)
  
  20,000  
E.I. du Pont de Nemours and Company
     751,716       1,058,000  
  20,000  
Dow Chemical Company
     580,754       692,800  
            1,332,470       1,750,800  
                       
     
Pumps & Pumping Equipment (0.90%)
  
  38,600  
ITT Corp.
     785,425       885,484  
                       
     
Radio & TV Communications Equipment (1.33%)
  
  115,000  
Nokia Corp.
     715,012       631,350  
  10,000  
QUALCOMM, Inc.
     383,189       680,200  
            1,098,201       1,311,550  
                       
     
Radio Telephone Communications (0.56%)
  
  20,000  
Vodafone Group PLC ADR
     453,234       553,400  
                       
     
Railroads, Line-Haul Operating (0.74%)
  
  34,100  
CSX Corp.
     785,517       733,832  
                       
     
Real Estate Investment Trust (3.09%)
          
  53,400  
Annaly Capital Management, Inc.
     922,335       844,788  
  61,000  
Invesco Mortgage Capital Inc.
     996,977       1,076,650  
  150,000  
MFA Financial, Inc.
     1,201,341       1,120,500  
            3,120,653       3,041,938  
                       
     
Refuse Systems (0.53%)
                
  15,000  
Waste Management, Inc.
     532,822       524,400  
                       
     
Retail - Eating Places (0.90%)
                
  9,000  
McDonald's Corp.
     888,124       882,900  
                       
     
Retail - Grocery Stores (0.79%)
                
  32,300  
The Kroger Co.
     782,471       782,629  
                       
     
Retail - Miscellaneous Shopping Goods Stores (0.87%)
  
  53,200  
Staples, Inc.
     783,945       860,776  
                       
     
Retail - Variety Stores (0.95%)
                
  16,000  
Target Corp.
     660,150       932,320  
                       
     
Retail - Women's Clothing Stores (2.63%)
  
  54,000  
Limited Brands, Inc.
     475,950       2,592,000  
                       
     
Savings Institution, Federally Chartered (0.81%)
  
  60,000  
People's United Financial, Inc.
     826,108       794,400  
                       
     
Security & Commodity Brokers, Dealers, Exchanges & Services (0.46%)
  
  15,000  
NYSE Euronext
     372,671       450,150  
                       
     
Semiconductors & Related Devices (5.35%)
  
  23,000  
Analog Devices, Inc.
     726,742       929,200  
  71,100  
Intel Corp.
     1,584,801       1,998,621  
  35,000  
Microchip Technology, Inc.
     998,144       1,302,000  
  127,300  
STMicroelectronics N.V.
     786,574       1,042,587  
            4,096,261       5,272,408  
                       
     
Services - Business Services (1.82%)
          
  40,000  
Lender Processing Services, Inc.
     733,684       1,040,000  
  42,900  
The Western Union Company
     785,465       755,040  
            1,519,149       1,795,040  
                       
     
Services - Engineering, Accounting, Research, Management (0.31%)
  
  10,000  
Paychex, Inc.
     309,491       309,900  
                       
     
Services - Miscellaneous Repair Services (0.13%)
  
  756  
Aquilex Holdings LLC Units (a) (b)
     496,372       124,066  
                       
     
Services - Prepackaged Software (0.98%)
  
  30,000  
Microsoft Corp.
     900,672       967,500  
                       
     
Soap, Detergent, Cleaning Preparations, Perfumes, Cosmetics (0.82%)
  
  12,000  
The Procter & Gamble Company
     739,290       806,520  
                       
     
Specialty Cleaning, Polishing and Sanitation Preparations (0.82%)
  
  11,700  
Clorox Co.
     788,186       804,375  
                       
     
Surgical & Medical Instruments & Apparatus (3.61%)
  
  20,000  
3M Company
     1,133,436       1,784,200  
  15,700  
Baxter International Inc.
     785,058       938,546  
  10,700  
Becton, Dickinson and Company
     782,308       830,855  
            2,700,802       3,553,601  
                       
     
Telephone Communications (2.78%)
          
  45,000  
AT&T, Inc.
     1,672,513       1,405,350  
  35,000  
Verizon Communications, Inc.
     1,206,032       1,338,050  
            2,878,545       2,743,400  
                       
     
Water Transportation (1.02%)
                
  23,800  
Carnival Corp.
     785,476       763,504  
  15,000  
Nordic American Tankers Limited
     448,115       238,200  
            1,233,591       1,001,704  
                       
     
Total common stocks
     74,734,297       87,555,838  
                       
 
Principal
              
 
Amount
              
     
Corporate Bonds and Notes (29.45%)
          
     
Accident & Health Insurance (0.55%)
          
  500,000  
CNO Financial Group, Inc. 9%, 1/15/18
     506,509       542,500  
                       
     
Auto/Truck Parts & Equipment - Orig (0.51%)
  
  460,000  
Tower Automotive Holdings USA LLC, 10.625%, 9/1/17 (c)
     466,167       501,400  
                       
     
Cable & Other Pay Television Services (1.33%)
  
  500,000  
CCO Holdings LLC, 7%, 1/15/19
     499,601       532,500  
  750,000  
Mediacom Broadband LLC, 8.50%, 10/15/15
     756,817       776,250  
            1,256,418       1,308,750  
                       
     
Cable/Satellite TV (1.10%)
                
  1,000,000  
Cequel Communications Holdings I LLC and Cequel Capital Corp., 8.625%, 11/15/17  (c)
     1,010,697       1,078,750  
                       
     
Cogeneration Services & Small Power Producers (0.49%)
  
  450,000  
Covanta Holding Corp., 7.25%, 12/1/20
     457,441       486,387  
                       
     
Converted Paper & Paperboard Products (1.06%)
  
  1,000,000  
Appleton Papers, Inc., 10.50%, 6/15/15  (c)
     996,858       1,042,500  
                       
     
Crude Petroleum & Natural Gas (0.27%)
  
  250,000  
Plains Exploration & Productions Company, 7.625%, 6/1/18
     250,622       266,875  
                       
     
Drawing & Insulating of Nonferrous Wire (0.53%)
  
  500,000  
Belden, Inc., 7%, 3/15/17
     484,409       518,125  
                       
     
Drilling Oil & Gas Wells (0.56%)
          
  500,000  
Offshore Group Investments Ltd., 11.50%, 8/1/15  (c)
     500,756       552,500  
                       
     
Electric - Integrated (0.45%)
                
  400,000  
North American Energy Alliance LLC, 10.875%, 6/1/16 (c)
     408,200       443,000  
                       
     
Electric Services (1.11%)
                
  650,000  
Edison Mission Energy, 7.00%, 5/15/17
     650,780       412,750  
  664,001  
Elwood Energy LLC, 8.159%, 7/5/26
     701,811       678,941  
            1,352,591       1,091,691  
                       
     
Fats & Oils (0.57%)
                
  500,000  
Darling International Inc., 8.50%, 12/15/18
     519,385       560,000  
                       
     
Hospital & Medical Service Plans (0.27%)
  
  250,000  
Health Net, Inc., 6.375%, 6/1/17
     236,590       268,750  
                       
     
Ice Cream & Frozen Desserts (0.56%)
          
  500,000  
Dean Foods Company, 9.75%, 12/15/18
     505,075       555,625  
                       
     
Machine Tools, Metal Cutting Types (0.44%)
  
  425,000  
Thermadyne Holdings Corp., 9%, 12/15/17  (c)
     427,599       437,750  
                       
     
Metal Forgings & Stampings (0.19%)
          
  170,000  
Trimas Corp., 9.75%, 12/15/17 (c)
     167,237       188,700  
                       
     
Miscellaneous Business Credit Institution (0.52%)
  
  500,000  
PHH Corp., 9.25%, 3/1/16 (c)
     505,715       510,625  
                       
     
Miscellaneous Electrical Machinery, Equipment & Supplies (0.32%)
  
  55,000  
Exide Technologies, 8.625%, 2/1/18
     55,000       46,338  
  240,000  
Spectrum Brands Holdings, Inc., 9.50%, 6/15/18  (c)
     244,744       271,800  
            299,744       318,138  
                       
     
Miscellaneous Fabricated Metal Products (1.05%)
  
  1,000,000  
WireCo WorldGroup, 9.50%, 5/15/17  (c)
     977,006       1,037,500  
                       
     
Mortgage Banks (0.50%)
                
  500,000  
Provident Funding Associates, 10.25%, 4/15/17  (c)
     500,000       488,750  
                       
     
Natural Gas Transmission (1.41%)
          
  500,000  
Energy Transfer Equity LP, 7.50%, 10/15/20
     513,565       557,500  
  500,000  
Niska Gas Storage US LLC, 8.875%, 3/15/18  (c)
     509,944       472,500  
  350,000  
Southern Star Central Corp., 6.75%, 3/1/16
     327,804       357,000  
            1,351,313       1,387,000  
                       
     
Oil & Gas Field Exploration Services (0.53%)
  
  500,000  
CGG-Veritas, 7.75%, 5/15/17
     510,218       522,500  
                       
     
Paper Mills (0.60%)
                
  517,000  
Abitibibowater Inc., 10.25%, 10/15/18 (c)
     523,268       595,842  
                       
     
Papers & Allied Products (0.51%)
          
  500,000  
Cascades, Inc., 7.75%, 12/15/17
     491,786       502,500  
                       
     
Paper & Related Products (0.28%)
          
  250,000  
PE Paper Escrow, 12%, 8/1/14  (c)
     243,186       272,500  
                       
     
Personal Credit Institutions (0.82%)
          
  740,000  
Credit Acceptance Corp., 9.125%, 2/1/17  (c)
     756,980       802,900  
                       
     
Petroleum Refining (0.53%)
                
  272,000  
Coffeyville Resources LLC, 9%, 4/1/15  (c)
     275,095       292,400  
  200,000  
Coffeyville Resources LLC, 10.875%, 4/1/17  (c)
     199,376       226,000  
            474,471       518,400  
                       
     
Pharmaceutical Preparations (0.88%)
          
  1,000,000  
Patheon, Inc., 8.625%, 4/15/17  (c)
     1,021,658       865,000  
                       
     
Racetracks (0.39%)
                
  360,000  
Yonkers Racing Corp., 11.375%, 7/15/16 (c)
     358,790       387,900  
                       
     
Radio & TV Broadcasting & Communications Equipment (0.54%)
  
  500,000  
CommScope, Inc., 8.25%, 1/15/19
     510,231       535,000  
                       
     
Retail - Convenience Stores (0.56%)
          
  500,000  
Susser Holdings L.L.C., 8.50%, 5/15/16
     506,608       551,250  
                       
     
Retail - Miscellaneous Retail (0.23%)
          
  250,000  
Ferrellgas Partners, L.P., 6.50%, 5/1/21
     245,292       226,875  
                       
     
Security Brokers, Dealers & Flotation Companies (0.32%)
  
  750,000  
Penson Worldwide, Inc., 12.50%, 5/15/17 (c)
     757,913       315,000  
                       
     
Semiconductors & Related Devices (0.28%)
  
  250,000  
Advanced Micro Devices, 7.75%, 8/1/20
     257,942       276,250  
                       
     
Services - Business Services, NEC (0.44%)
  
  500,000  
DynCorp International, Inc. 10.375%, 7/1/17 (c)
     501,842       436,875  
                       
     
Services - Equipment Rental & Leasing, NEC (0.57%)
  
  500,000  
Aircastle Ltd., 9.75%, 8/1/18
     502,868       560,000  
                       
     
Services - Miscellaneous Amusement & Recreation (0.86%)
  
  750,000  
Cedar Fair LP, 9.125%, 8/1/18 (c)
     753,503       845,625  
                       
     
Services - Miscellaneous Equipment Rental & Leasing (0.71%)
  
  675,000  
H&E Equipment Services, Inc., 8.375%, 7/15/16
     680,159       698,625  
                       
     
Services - Motion Picture Theaters (0.11%)
  
  95,000  
Regal Entertainment Group, 9.125%, 8/15/18
     96,100       104,500  
                       
     
Services - Prepackaged Software (0.45%)
  
  400,000  
Scientific Games International, Inc., 9.25%, 6/15/19
     428,599       445,000  
                       
     
Special Industry Machinery (0.55%)
          
  500,000  
Novelis, Inc., 8.375%, 12/15/17
     505,473       545,000  
                       
     
Steel Pipes & Tubes (0.32%)
                
  300,000  
Atkore International Inc., 9.875%, 1/1/18
     306,082       315,750  
                       
     
Steel Works, Blast Furnaces & Rolling & Finishing Mills (0.88%)
  
  840,000  
Gibraltar Industries, Inc., 8%, 12/1/15
     840,695       865,200  
                       
     
Telephone Communications (1.51%)
          
  1,000,000  
Cincinnati Bell, Inc., 8.75%, 3/15/18
     1,008,206       938,750  
  500,000  
Equinix, Inc., 8.125%, 3/1/18
     508,830       552,500  
            1,517,036       1,491,250  
                       
     
Textile - Home Furnishings (0.05%)
          
  50,000  
Empire Today LLC, 11.375%, 2/1/17
     49,530       49,625  
                       
     
Transportation - Marine (0.43%)
          
  400,000  
Marquette Transportation Company, 10.875%, 1/15/17 (c)
     401,416       423,500  
                       
     
Water Transportation (1.69%)
                
  679,000  
American Petroleum Tankers LLC, 10.25%, 5/1/15 (c)
     669,645       713,799  
  900,000  
Hornbeck Offshore Services, Inc., 8%, 9/1/17
     906,416       949,500  
            1,576,061       1,663,299  
                       
     
Wholesale - Electronic Parts & Equipment, NEC (0.32%)
  
  300,000  
Brightstar Corp., 9.50%, 12/1/16  (c)
     300,000       313,500  
                       
     
Wholesale - Petroleum & Petroleum Products (0.30%)
  
  275,000  
Crosstex Energy LP, 8.875%, 2/15/18
     275,531       293,562  
                       
     
Total corporate bonds and notes
     28,573,570       29,008,544  
                       
     
INVESTEMENT COMPANIES (2.43%)
          
  Shares  
Exchange Traded Fund (2.43%)
                
  15,000  
iShares Dow Jones Select Dividend Index
     699,712       839,400  
  65,000  
SPDR S&P 500 ETF Trust
     871,731       1,550,250  
            1,571,443       2,389,650  
                       
     
MASTER LIMITED PARTNERSHIPS (2.88%)
  
     
Natural Gas Transmission (2.88%)
          
  39,000  
Energy Transfer Partners LP
     1,979,798       1,829,490  
  20,000  
Enterprise Products Partners LP
     374,214       1,009,400  
            2,354,012       2,838,890  
                       
     
PREFERRED STOCK (0%)
                
     
Financial (0.01%)
                
  80,000  
Solar Cayman Ltd. (a) (b) (c)
     568,802       2,000  
                       
     
Total investments (123.64%)
   $ 107,802,124       121,794,922  
                       
     
Bank line of credit (-24.87%) (d)
       (24,500,000 )
     
Other assets in excess of other liabilities (1.23%)
       1,212,405  
                       
     
Net assets (100.00%)
           $ 98,507,327  
                       
  *  On May 14, 2012, Dividend and Income Fund (the “Trust”) completed its reorganization into a Delaware statutory trust (the “Reorganization”). The Trust is the successor to Dividend and Income Fund, Inc. (the “Fund”), a Maryland corporation. As a result of the Reorganization, former shareholders of the Fund now own shares of the Trust that are equal in number and in value to the shares of the Fund they held at the close of business on May 11, 2012. The Trust did not issue certificates representing the Trust shares issued in the Reorganization. The Reorganization had previously been approved by shareholders at the Fund’s Annual Meeting of Shareholders on April 24, 2012.   
       
(a)
  
Illiquid and/or restricted security that has been fair valued.
  
                     
(b)
  
Non-income producing.
                
                     
(c)
 
 
 
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.
  
(d)
  
Borrowings under the line of credit are secured by a perfected security interest on all of the the Fund's portfolio of investments.
  
                     
ADR
  
American Depositary Receipt
                
LLC
  
Limited Liability Company
                
LP
  
Limited Partnership
                
PLC
  
Public Limited Company
                
SPDR
  
Standard & Poor’s Depositary Receipt
          
 
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 markets 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 by the Fund’s Board of Directors, called “fair value pricing.”  Due to the inherent uncertainty of valuation, these 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.

Fair 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.

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 follows:

Equity securities (common and preferred stock). Securities traded on a national securities exchange or reported on the Nasdaq national market generally are stated at the last reported sales price on the day of valuation. 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. The fair value of corporate bonds is 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 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 as determined in good faith by the Investment Manager under the direction of or pursuant to procedures established by the Fund’s Board of Directors. 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. 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.

Derivative instruments. Listed derivatives, such as equity option contracts, may be valued based on quoted prices from the exchange and are categorized in level 1 of the fair value hierarchy.

The flowing is a summary of the inputs used as of March 31, 2012 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 stock
   $ 87,314,157     $ -     $ 241,681     $ 87,555,838  
 Corporate bonds and notes
     -       29,008,544       -       29,008,544  
 Investment companies
     2,389,650       -       -       2,389,650  
 Master limited partnerships
     2,838,890       -       -       2,838,890  
 Preferred stock
     -       -       2,000       2,000  
 Total investments, at value
   $ 92,542,697     $ 29,008,544     $ 243,681     $ 121,794,922  
 
There were no transfers between level 1 and level 2 during the three months ended March 31, 2012.

The following is a reconciliation of level 3 investments for which significant unobservable inputs were used to determine fair value:



   
Common
    
Preferred
        
   
Stocks
    
Stocks
    
Total
  
Balance at December 31, 2011
   $ 116,808     $ 2,000     $ 118,808  
Purchases or sales
     -       -       -  
Realized gain (loss)
     -       -       -  
Change in unrealized appreciation
     873       -       873  
Transfers in or out of level 3
     124,000       -       124,000  
Balance at March 31, 2012
   $ 241,681     $ 2,000     $ 243,681  
                         
 
Cost for Federal Income Tax Purposes
At March 31, 2012, for federal income tax purposes the aggregate cost of securities was $107,802,124 and net unrealized appreciation was $13,992,798, comprised of gross unrealized appreciation of $19,107,003 and gross unrealized depreciation of $5,114,205.

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 at fair value in accordance with the procedures described above. 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, 2012, were as follows:
 


 
Acquisition
            
 
Date
  
Cost
    
Value
  
               
Aquilex Holdings LLC Units
12/23/09
   $ 496,372     $ 124,066  
Star Asia Financial Ltd.
2/22/07
     686,145       117,615  
Solar Cayman Ltd.
3/7/07
     568,802       2,000  
      $ 1,751,319     $ 243,681  
Percent of net assets
       1.78 %     0.25 %
 
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 1940 Act, 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 29, 2012
 
Pursuant to the requirements of the Securities Exchange Act of 1934 and the 1940 Act, 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 29, 2012
 
By: /s/ Thomas O'Malley
Thomas O'Malley, Chief Financial Officer

Date: May 29, 2012

 
 
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)