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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number: 811-08747

Dividend and Income Fund

(Exact name of registrant as specified in charter)

11 Hanover Square, New York, NY 10005

(Address of principal executive offices) (Zipcode)

Russell Kamerman, Esq.

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: 1/1/20 – 12/31/20

Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.

A registrant is required to disclose the information specified by Form N-CSR and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. sec. 3507.

Item 1. Reports to Stockholders.

TO OUR SHAREHOLDERS

December 31, 2020

Dear Fellow Shareholders:

It is a pleasure to welcome each of our new shareholders to Dividend and Income Fund and to submit this 2020 Annual Report. The Fund seeks to achieve its primary investment objective of high current income and secondary objective of capital appreciation by investing, under normal circumstances, at least 50% of its total assets in income generating equity securities. These securities may include dividend paying common stocks, convertible securities, preferred stocks, securities of registered investment companies, exchange traded funds organized as investment companies or otherwise, real estate investment trusts, depositary receipts, and other equity related securities. Of course, there can be no assurance that the Fund will achieve its objectives.

Economic and Market Report

After its December 2020 meeting, the Federal Open Market Committee (“FOMC”) of the Federal Reserve Bank issued a statement that economic activity and employment have continued to recover but remain well below their levels at the beginning of the year. Nevertheless, the FOMC indicated that the Federal Reserve is committed to using its full range of tools to support the U.S. economy in this challenging time, thereby promoting its maximum employment and price stability goals. Accordingly, the FOMC decided to keep the target range for the federal funds rate at 0 to 1/4% and expects it will be appropriate to maintain this target range until labor market conditions have reached levels consistent with the FOMC’s assessments of maximum employment and inflation has risen to 2% and is on track to moderately exceed 2% for some time. Meanwhile, the FOMC observed, the ongoing public health crisis will continue to weigh on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term.

In financial markets, many investments gained ground in 2020 on low interest rates and supportive government policies, including generally U.S. stocks and bonds.

In general, the FOMC appears to be suggesting that substantial headwinds remain for economic activity in the near term with considerable medium term risks. Accordingly, our investing outlook is currently somewhat cautious and we are prepared for periods of heightened volatility and price weakness.

Investment Strategy and Returns

In view of these economic and market developments, the Fund’s strategy in 2020 was to seek companies with strong operations showing superior returns on equity and assets, generating free cash flow, and with reasonable valuations. Generally, the Fund purchased and held income generating equity securities of profitable, growing, and conservatively valued companies across a broad array of

industries in seeking to achieve its primary investment objective of high current income and secondary objective of capital appreciation and sold investments that appeared to have appreciated to levels reflecting full or over-valuation.

In the year ended December 31, 2020, the Fund’s net investment income, net realized gain on investments, and unrealized appreciation on investments were, respectively, $512,844, $5,494,674, and $6,040,940, which contributed materially to the Fund’s net asset value return of 10.26%, including the reinvestment of dividends, as did dilution occurring under the Fund’s dividend reinvestment plan. Profitable sales in the period were made of, among others, shares of Apple Inc. in the Industrial and Commercial Machinery and Computer Equipment sector. Losses were taken on, among others, ViacomCBS Inc. in the Communications sector. The Fund’s holdings of the Wells Fargo & Company in the Depository Institutions sector contributed to unrealized depreciation during the period. At the same time, the Fund benefited from unrealized appreciation from its investment in Medifast, Inc. in the Food and Kindred Products sector.

The Fund’s market return for 2020, also including the reinvestment of dividends, was (7.33)%. Generally, the Fund’s total return on a market value basis will be lower than total return on a net asset value basis in periods when there is an increase in the discount or a decrease in the premium of the market value to the net asset value from the beginning to the end of such periods. For comparison, in the same period, the S&P 500 Index total return was 18.40%. This index is unmanaged and does not reflect fees and expenses, nor is it available for direct investment. At December 31, 2020, the Fund’s portfolio included securities of over 65 different issuers, with the top ten securities amounting to approximately 29% of net assets. At that time, the Fund’s investments totaled approximately $213 million on net assets of approximately $203 million and leverage of approximately $10 million. As the Fund pursues its primary investment objective of seeking high current income, with capital appreciation as a secondary objective, these holdings and allocations are subject to change at any time.

Quarterly Distributions

On December 1, 2020, the Fund declared a distribution of $0.25, its fourth distribution of the year, bringing the annual total to $1.00 per share. The quarterly distribution reflects the Fund’s current distribution policy to provide shareholders with a relatively stable cash flow per share. This policy did not have a material effect on the Fund’s investment strategy and resulted in distributions of capital that reduced the Fund’s per share net asset value by $0.45 in 2020. There is no guarantee that the Fund’s current distribution policy will reduce or eliminate the Fund’s market price discount to its net asset value per share and the Fund’s trustees have no fiduciary

DIVIDEND AND INCOME FUND

Annual Report 2020 1

TO OUR SHAREHOLDERS

December 31, 2020

duty to take action, or to consider taking any action, to narrow any such discount. The distribution policy may be changed or discontinued without notice.

As of December 1, 2020, and based on the Fund’s results and estimates for the current quarter, the distribution of $0.25 per share would include approximately 8%, 0%, and 92% from net investment income, capital gains, and return of capital, respectively. Shareholders should not draw any conclusions about the Fund’s investment performance from the amount of this distribution. The amounts and sources of distributions reported are only estimates based on book basis earnings, are likely to change over time, and are not being provided for tax reporting purposes. The actual amounts and sources of the amounts for tax reporting 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. The amounts and sources of distributions year-to-date may be subject to additional adjustments. The Fund intends to send shareholders a Form 1099-DIV for the calendar year that will instruct how to report these distributions for federal income tax purposes.

Distributions may be paid in part or in full from net investment income, realized capital gains, return of capital, or a combination thereof. To the extent that the Fund has estimated that it has distributed more than its income and net realized capital gains, a portion of your distribution may be a return of capital. A return of capital may occur, for example, when some or all of the money that you invested in the Fund is paid back to you. A return of capital distribution does not necessarily reflect the Fund’s investment performance and should not be confused with “yield” or “income.” Additionally, a return of capital is not taxable; rather it reduces a shareholder’s tax basis in his or her shares of the Fund, thereby increasing the shareholder’s potential gain or reducing its potential loss on the subsequent sale of those shares.

For those shareholders who are currently receiving the Fund’s quarterly distributions in cash but are interested in adding to their account through the Fund’s dividend reinvestment plan, we encourage you to review the plan set forth later in this document and contact the Fund’s transfer agent, who will be pleased to assist you with no obligation on your part.

New Trading Market and Ticker Symbol

On October 8, 2020, the Fund announced that its common shares of beneficial interest would begin trading on the OTC Market, a nationally recognized electronic trading market, under the trading symbol DNIF at the open of the market on October 9, 2020. Previously, the Fund had announced the voluntary delisting of the shares from the New York Stock Exchange (“NYSE”).

The Board of Trustees of the Fund, with the recommendation of the Governance Committee of the Board, unanimously approved the delisting for reasons based on many factors. These factors include, but are not limited to: the expenses, both direct and indirect, associated with being listed on the NYSE; the extent to which the Fund has taken advantage of its NYSE listing, including raising capital; trading, liquidity, spreads, and discount to net asset value of the Fund’s shares on the NYSE; and the burden of governance, shareholder meeting, and reporting requirements of the NYSE. Also considered was the extent to which the delisting would permit the Fund’s Board and management to focus on seeking the Fund’s primary investment objective of high current income with capital appreciation as a secondary objective. The Fund will continue to maintain its investment company registration and update its shareholders with financial and other information as required by applicable law.

We are pleased that our transition from the NYSE to the OTC Market has been successfully completed. From the date of moving our trading market through the end of 2020, according to OTC Markets Group, our shares have traded over 5,600 times, with total volume of over 2 million shares (of approximately 12.5 million outstanding), representing over $20 million in cumulative dollar volume. Bloomberg data indicates during this period an average inside spread of around 9 cents. Average daily OTC volume in the period was about 35,000 shares, versus in the year ago period about 36,000 shares on the NYSE. Recently, 7 market makers have been quoting bids and asks on our shares.

Fund Website

The Fund’s website, www.DividendandIncomeFund.com, provides investors with investment information, news, and other material about the Fund. The website also has links to SEC filings, performance, tax, and daily net asset value reporting. You are invited to use this resource to learn more about the Fund.

Management’s Long Term Focus

We thank you for investing in the Fund and share your enthusiasm for its potential, as evidenced by the fact that affiliates of the Investment Manager own approximately 10.0% of the Fund’s outstanding shares pursuant to the Fund’s governing documents that permit ownership of more than 4.99% of the Fund’s outstanding shares only with the prior approval of the Fund’s Board of Trustees. We look forward to serving your investment needs over the years ahead.

Sincerely,

LOGO

Thomas B. Winmill

President and Portfolio Manager

2 Annual Report 2020

DIVIDEND AND INCOME FUND

PORTFOLIO ANALYSIS

December 31, 2020


TOP TEN		December 31, 2020
SECURITY HOLDINGS

1 AutoZone, Inc. (4%)

2 Skyworks Solutions, Inc. (3%)

3 Medifast, Inc. (3%)

4 T. Rowe Price Group, Inc. (3%)

5 Tractor Supply Company (3%)

6 Credit Acceptance Corp. (3%)

7 Intel Corp. (3%)

8 Comcast Corp. (3%)

9 Citizens Financial Group, Inc. (2%)

10 Williams-Sonoma, Inc. (2%)


TOP TEN		December 31, 2020
INDUSTRIES

1 Business Services (9%)

2 Chemical and Allied Products (9%)

3 Depository Institutions (8%)

4 Insurance Carriers (8%)

5 Electronic and Other Electrical Equipment and Components, except Computer Equipment (8%)

6 Security and Commodity Brokers, Dealers, Exchanges, and Services (6%)

7 Transportation Equipment (5%)

8 Non-Depository Credit Institutions (5%)

9 Building Materials, Hardware, Garden Supply, and Mobile Home Dealers (5%)

10 Food and Kindred Products (5%)

Top ten security holdings and industries are shown for informational purposes only as an approximate percentage of net assets and are subject to change. Top ten industries uses Standard Industrial Classification codes. The above portfolio information should not be considered as a recommendation to purchase or sell a particular security and there is no assurance that any securities will remain in or out of the Fund.

SECURITY HOLDINGS

by Sector on December 31, 2020*

LOGO

DIVIDEND AND INCOME FUND

Annual Report 2020 3

FUND PERFORMANCE

December 31, 2020

HYPOTHETICAL $10,000 INVESTMENT This chart shows the value of a hypothetical $10,000 investment in the Fund at market price compared to the S&P 500 Index (“S&P 500”) over the past 10 years. Fund returns reflect reinvestment of dividend distributions at the price received in the Fund’s dividend reinvestment plan and do not reflect the deduction of taxes, if any, that a shareholder would pay on Fund distributions or the sale of shares. The S&P 500 is an unmanaged broad equity index and is fully invested in common stocks. You cannot invest directly in an index. The data presented represents past performance and cannot be used to predict future results.


Average Annual Total Returns at December 31, 2020
	1-Year		5-Year		10-Year
DNIF Market Price		(7.33)%		8.08%		5.20%
S&P 500		18.40%		15.22%		13.89%

4 Annual Report 2020

DIVIDEND AND INCOME FUND

SCHEDULE OF PORTFOLIO INVESTMENTS

December 31, 2020

Financial Statements


Common Stocks (103.69%)	Shares		Value

Automotive Dealers and Gasoline Service Stations (3.53%)
AutoZone, Inc. ^(a)		6,050	$	7,171,912

Automotive Repair, Services, and Parking (2.24%)
AMERCO		10,000		4,539,600

Building Materials, Hardware, Garden Supply, and Mobile Home Dealers (4.90%)
The Home Depot, Inc.		15,000		3,984,300
Tractor Supply Company		42,500		5,974,650

				9,958,950

Business Services (9.22%)
Accenture plc		6,100		1,593,381
Alphabet Inc. Class A ^(a)		727		1,274,169
BG Staffing, Inc.		40,522		546,642
Check Point Software Technologies Ltd. ^(a)		29,000		3,854,390
eBay Inc.		85,000		4,271,250
Kforce Inc.		50,000		2,104,500
Open Text Corporation		22,237		1,010,894
Robert Half International Inc.		65,000		4,061,200

				18,716,426

Chemical and Allied Products (8.64%)
Amgen Inc.		16,000		3,678,720
Biogen Inc. ^(a)		4,900		1,199,814
Celanese Corporation		22,500		2,923,650
LyondellBasell Industries N.V. Class A		35,000		3,208,100
Roche Holding Ltd. ADR		80,000		3,507,200
Westlake Chemical Corporation		37,000		3,019,200

				17,536,684

Coal Mining (1.73%)
Warrior Met Coal, Inc.		165,000		3,517,800

Communications (3.73%)
AMC Networks Inc. Class A ^(a)		65,000		2,325,050
Comcast Corporation		100,000		5,240,000

				7,565,050

Depository Institutions (8.06%)
Citigroup Inc.		40,000		2,466,400
Citizens Financial Group, Inc.		140,000		5,006,400
Signature Bank Corp.		20,500		2,773,445
U.S. Bancorp		70,000		3,261,300
Wells Fargo & Company		95,000		2,867,100

				16,374,645


	Shares		Value

Educational Services (2.20%)
Grand Canyon Education, Inc. ^(a)		48,000	$	4,469,280

Electronic and Other Electrical Equipment and Components, except Computer Equipment (7.54%)
Intel Corporation		106,000		5,280,920
Methode Electronics, Inc.		82,500		3,158,100
Skyworks Solutions, Inc.		45,000		6,879,600

				15,318,620

Food and Kindred Products (4.69%)
Medifast, Inc.		35,000		6,871,900
Tyson Foods, Inc.		41,000		2,642,040

				9,513,940

General Merchandise Stores (2.13%)
Dollar General Corporation		20,600		4,332,180

Heavy Construction other than Building Construction Contractors (1.31%)
MasTec, Inc. ^(a)		39,000		2,659,020

Home Furniture, Furnishings, and Equipment Stores (2.41%)
Williams-Sonoma, Inc.		48,000		4,888,320

Industrial and Commercial Machinery and Computer Equipment (3.29%)
Arista Networks, Inc. ^(a)		6,600		1,917,762
Cummins Inc.		21,000		4,769,100

				6,686,862

Insurance Carriers (7.76%)
Essent Group Ltd.		100,000		4,320,000
NMI Holdings, Inc. ^(a)		106,000		2,400,900
Prudential Financial, Inc.		35,000		2,732,450
Radian Group Inc.		78,000		1,579,500
UnitedHealth Group Incorporated		13,500		4,734,180

				15,767,030

Metal Mining (1.24%)
Rio Tinto plc		33,500		2,519,870

Motor Freight Transportation and Warehousing (1.41%)
J.B. Hunt Transport Services, Inc.		21,000		2,869,650

Non-Depository Credit Institutions (5.13%)
Credit Acceptance Corporation ^(a)		17,000		5,884,380
Discover Financial Services		50,000		4,526,500

				10,410,880

See notes to financial statements.

DIVIDEND AND INCOME FUND

Annual Report 2020 5

SCHEDULE OF PORTFOLIO INVESTMENTS

December 31, 2020

Financial Statements


Common Stocks (continued)		Shares		Value


Oil and Gas Extraction (1.65%)
Cabot Oil & Gas Corporation		206,000	$	3,353,680

Paper and Allied Products (1.90%)
Packaging Corporation of America		28,000		3,861,480

Petroleum Refining and Related Industries (1.37%)
Valvoline Inc.		120,000		2,776,800

Primary Metal Industries (1.42%)
Steel Dynamics, Inc.		78,000		2,875,860

Security and Commodity Brokers, Dealers, Exchanges, and Services (6.37%)
Ameriprise Financial, Inc.		18,000		3,497,940
BlackRock, Inc.		4,700		3,391,238
T. Rowe Price Group, Inc.		39,876		6,036,828

				12,926,006

Transportation by Air (4.51%)
Alaska Air Group, Inc.		65,000		3,380,000
Allegiant Travel Company		19,700		3,728,028
Southwest Airlines Co.		44,000		2,050,840

				9,158,868

Transportation Equipment (5.31%)
Honeywell International Inc.		18,000		3,828,600
Huntington Ingalls Industries, Inc.		7,000		1,193,360
LCI Industries		22,500		2,917,800
Lockheed Martin Corporation		8,000		2,839,840

				10,779,600
Total common stocks (Cost $162,350,301)				210,549,013


Corporate Bonds and Notes (0.17%)	Principal Amount		Value

Electric Services (0.17%)
Elwood Energy LLC, 8.159%, 7/5/26 (Cost $330,586)		327,392		350,309

Reorganization Interests (0.00%)	Shares		Value

Penson Technologies LLC Units ^(a)^(b)
(Cost $0)		813,527		0


Master Limited Partnership (0.39%)	Units		Value

Electric, Gas, and Sanitary Services (0.39%)
Enterprise Products Partners L.P. Units (Cost $374,214)		40,000	$	783,600

Preferred Stocks (0.56%)	Shares		Value

Holding and other Investment Offices (0.56%)
Ashford Hospitality Trust, Inc., 7.50 % Series H		15,000		199,125
Cedar Realty Trust, Inc., 6.50% Series C		15,000		321,000
Hersha Hospitality Trust 6.50% Series E		2,812		53,105
Pennsylvania Real Estate Investment Trust, 6.875% Series D		35,000		360,850
Washington Prime Group Inc., 7.50% Series H		9,000		135,090
Washington Prime Group Inc., 6.875% Series I		5,000		70,050


Total preferred stocks (Cost $1,742,738)				1,139,220


Total investments (Cost $164,797,839) (104.81%) ^(c)				212,822,142
Liabilities in excess of cash and other assets (-4.81%)				(9,776,370	)


Net assets (100.00%)			$	203,045,772

(a)

Non-income producing.

(b)

Illiquid and/or restricted security that has been fair valued.

(c)

The Fund’s total investment portfolio value of $212,822,142 has been pledged as collateral for borrowings under the Fund’s credit agreement. As of December 31, 2020 there was $9,401,500 in outstanding borrowing.

See notes to financial statements.

6 Annual Report 2020

DIVIDEND AND INCOME FUND

STATEMENT OF ASSETS AND LIABILITIES

Financial Statements



Assets	December 31, 2020
Investments, at value (cost: $164,797,839)	$	212,822,142
Cash		363,650
Receivables:
Dividends		122,818
Interest		13,066
Prepaid expenses and other assets		66,556


Total assets		213,388,232


Liabilities
Credit agreement borrowing		9,401,500
Payables:
Securities purchased		625,616
Investment management		170,598
Accrued expenses		122,029
Administrative services		18,889
Trustees		3,828


Total liabilities		10,342,460


Net Assets	$	203,045,772


Net Asset Value Per Share
(applicable to 12,564,957 shares issued and outstanding)	$	16.16


Net Assets Consist of
Paid in capital	$	154,144,871
Distributable earnings		48,900,901


	$	203,045,772

See notes to financial statements.

DIVIDEND AND INCOME FUND

Annual Report 2020 7

STATEMENT OF OPERATIONS

Financial Statements


	Year Ended
	December 31, 2020
Investment Income
Dividends (net of $78,256 foreign tax withholding)	$	4,423,954
Interest		26,489


Total investment income		4,450,443


Expenses
Investment management		1,832,930
Legal		910,501
Interest and fees on credit agreement		458,566
Administrative services		226,341
Shareholder communications		145,333
Trustees		113,178
Bookkeeping and pricing		98,475
Insurance		48,717
Auditing		34,620
Custodian		23,961
Transfer agent		21,535
Registration		14,765
Other		8,637


Total expenses		3,937,559


Net investment income		512,884


Realized and Unrealized Gain (Loss)
Net realized gain (loss) on
Investments		5,497,237
Foreign currencies		(2,563	)
Unrealized appreciation on investments		6,040,940


Net realized and unrealized gain		11,535,614


Net increase in net assets resulting from operations	$	12,048,498

See notes to financial statements.

8 Annual Report 2020

DIVIDEND AND INCOME FUND

STATEMENTS OF CHANGES IN NET ASSETS

Financial Statements


	Year Ended			Year Ended
	December 31, 2020			December 31, 2019
Operations
Net investment income	$	512,884		$	1,998,234
Net realized gain on investments		5,494,674			1,016,950
Unrealized appreciation investments		6,040,940			49,675,582


Net increase in net assets resulting from operations		12,048,498			52,690,766


Distributions to Shareholders
Distributable earnings		(6,787,214	)		(2,659,077	)
Return of capital		(5,701,511	)		(7,273,076	)


Total distributions		(12,488,725	)		(9,932,153	)


Capital Share Transactions
Reinvestment of distributions to shareholders		1,138,790			736,352


Increase in net assets from capital share transactions		1,138,790			736,352


Total change in net assets		698,563			43,494,965

Net Assets
Beginning of period		202,347,209			158,852,244


End of period	$	203,045,772		$	202,347,209

See notes to financial statements.

DIVIDEND AND INCOME FUND

Annual Report 2020 9

STATEMENTS OF CASH FLOWS

Financial Statements


	Year Ended
	December 31, 2020
Cash Flows from Operating Activities
Net increase in net assets resulting from operations	$	12,048,498
Adjustments to reconcile increase in net assets resulting from operations to net cash provided by (used in) operating activities:
Unrealized appreciation on investments		(6,040,940	)
Net realized gain on sales of investments		(5,494,674	)
Purchase of long term investments		(55,318,058	)
Proceeds from sales of long term investments		92,777,920
Net purchases of short term investments		(2,564	)
Amortization of premium on investments		450
Decrease in dividends receivable		300,690
Decrease in due from transfer agent		158,808
Decrease in foreign tax reclaims receivable		21,272
Decrease in interest receivable		2,136
Decrease in prepaid expenses and other assets		77,930
Increase in payable for securities purchased		625,616
Decrease in accrued expenses		(116,099	)
Decrease in investment management fee payable		(41,961	)
Increase in administrative services payable		4,390
Decrease in trustee expenses payable		(4,622	)


Net cash provided by operating activities		38,998,792


Cash Flows from Financing Activities
Credit agreement borrowing repayment, net		(27,286,000	)
Cash distributions paid		(11,349,935	)


Net cash used in financing activities		(38,635,935	)


Net change in cash		362,857

Cash
Beginning of period		793


End of period	$	363,650



Supplemental disclosure of cash flow information:
Cash paid for interest on credit agreement	$	349,738
Non-cash financing activities not included herein consisted of:
Reinvestment of dividend distributions	$	1,138,790

See notes to financial statements.

10 Annual Report 2020

DIVIDEND AND INCOME FUND

NOTES TO FINANCIAL STATEMENTS

December 31, 2020

Financial Statements

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES Dividend and Income Fund (the “Fund”), a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “Company Act”), is a diversified, closed end management investment company whose shares are quoted over the counter under the ticker symbol DNIF. The Fund’s primary investment objective is to seek high current income. Capital appreciation is a secondary objective. The Fund retains Bexil Advisers LLC as its investment manager (the “Investment Manager”).

As an investment company, the Fund follows the accounting and reporting guidance of the Financial Accounting Standards Board Accounting Standard Codification Topic 946 “Financial Services – Investment Companies.” The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”), which require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from those estimates. Subsequent events, if any, through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. The following summarizes the significant accounting policies of the Fund:

Valuation of Investments – 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 in the United States are usually 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 usually 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. In the event of an unexpected closing of the primary market or exchange, a security may continue to trade on one or more other markets, and the price as reflected on those other trading venues may be more reflective of the security’s value than an earlier price from the primary market or exchange. Accordingly, the Fund may seek to use these additional sources of pricing data or information when prices from the primary market or exchange are unavailable, or are earlier and less representative of current market value. Certain debt securities may be 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 or according to prices quoted by a securities dealer that offers pricing services. Open end investment companies are valued at their net asset

value. Foreign securities markets may be open on days when the U.S. markets are closed. For this reason, the value of any foreign securities owned by the Fund could change on a day when shareholders cannot buy or sell shares of the Fund. Securities for which market quotations are not readily available or reliable and other assets may be valued as determined in good faith by the Investment Manager under the direction of or pursuant to procedures approved by the Fund’s Board of Trustees (the “Board”), called “fair value pricing.” Due to the inherent uncertainty of valuation, fair value pricing values may differ from the values that would have been used had a readily available and reliable market quotation 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 NAV 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 traded.

Cash – Cash may include deposits allocated among banks insured by the Federal Deposit Insurance Corporation in amounts up to the insurance coverage maximum amount of $250,000. Cash may also include uninvested cash balances held by the Fund’s custodian.

Foreign Currency Translation – Securities denominated in foreign currencies are translated into U.S. dollars at prevailing exchange rates. Realized gain or loss on sales of such investments in local currency terms is reported separately from gain or loss attributable to a change in foreign exchange rates for those investments.

Investments in Other Investment Companies – The Fund may invest in shares of other investment companies such as closed end funds, exchange traded funds, and mutual funds (each, an “Acquired Fund”) in accordance with the Company Act and related rules. Shareholders in the Fund bear the pro rata portion of the fees and expenses of an Acquired Fund in addition to the Fund’s expenses. Expenses incurred by the Fund that are disclosed in the Statement of Operations do not include fees and expenses incurred by an Acquired Fund. The fees and expenses of an Acquired Fund are reflected in such Acquired Fund’s total return.

Option Transactions – The Fund may write (i.e., sell) covered call options on securities or on indexes to attempt to enhance returns through price changes of the option, increase income, hedge to reduce overall portfolio risk, and hedge to reduce individual

DIVIDEND AND INCOME FUND

Annual Report 2020 11

NOTES TO FINANCIAL STATEMENTS

Financial Statements

security risk. When the Fund writes an option, an amount equal to the premium received by the Fund is recorded as a liability and is subsequently adjusted to the current fair value of the option written. Premiums received from writing options that expire unexercised are treated by the Fund on the expiration date as realized gains from investments. The difference between the premium and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain or, if the premium is less than the amount paid for the closing purchase transaction, as a realized loss. If a call option is exercised, the premium is added to the proceeds from the sale of the underlying security or currency in determining whether the Fund has realized a gain or loss. If a put option is exercised, the premium reduces the cost basis of the securities purchased by the Fund. The Fund, as the writer of an option, bears the market risk of an unfavorable change in the price of the option. Writing option contracts results in off-balance sheet risk as the Fund’s ultimate obligation to satisfy terms of the contract may exceed the amount recognized in the statement of assets and liabilities.

Investments in Real Estate Investment Trusts (“REITs”) – Dividend income is recorded based on the income included in distributions received from the REIT investments using published REIT reclassifications, including some management estimates when actual amounts are not available. Distributions received in excess of this estimated amount are recorded as a reduction of the cost of investments or reclassified to capital gains. The actual amounts of income, return of capital, and capital gains are only determined by each REIT after its fiscal year end, and may differ from the estimated amounts.

Short Sales – The Fund may sell a security short it does not own in anticipation of a decline in the market value of the security. When the Fund sells a security short, it must borrow the security sold short and deliver it to the broker/dealer through which it made the short sale. The Fund is liable for any dividends or interest paid on securities sold short. A gain, limited to the price at which the Fund sold the security short, or a loss, unlimited in size, normally is recognized upon the termination of the short sale. Securities sold short result in off balance sheet risk as the Fund’s ultimate obligation to satisfy the terms of a sale of securities sold short may exceed the amount recognized in the Statement of Assets and Liabilities.

Investment Transactions – Investment transactions are accounted for on the trade date (the date the order to buy or sell is executed). Realized gains or losses are determined by specifically identifying the cost basis of the investment sold.

Investment Income – Dividend income is recorded on the ex-divdend date or in the case of certain foreign securities and private company securities, as soon as practicable after the Fund is notified. Interest income is recorded on the accrual basis. Amortization of premium and accretion of discount on corporate bonds and notes are included in interest income. Taxes withheld on foreign dividends have been provided for in accordance with the Fund’s understanding of the applicable country’s tax rules and rates.

Expenses – Expenses deemed to have been incurred solely by the Fund are normally charged to the Fund in the entirety. Expenses deemed to have been incurred jointly by the Fund and one or more of the other investment companies for which the Investment Manager or its affiliates serve as investment manager, or other related entities, are generally allocated based on the most practicable method deemed equitable at the time the expense is incurred, including, without limitation, on the basis of relative assets under management.

Distributions to Shareholders – Distributions to shareholders are determined in accordance with the Fund’s distribution policies and income tax regulations and are recorded on the ex-dividend date.

Income Taxes – No provision has been made for U.S. income taxes because the Fund’s current intention is to continue to qualify as a regulated investment company under the Internal Revenue Code of 1986, as amended (the “IRC”), and to distribute to its shareholders substantially all of its taxable income and net realized gains. The Fund recognizes the tax benefits of uncertain tax positions only where the position is “more likely than not” to be sustained assuming examination by tax authorities. The Fund has reviewed its tax positions and has concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions taken on federal, state, and local income tax returns for open tax years (2017-2019) or expected to be taken in the Fund’s 2020 tax returns.

The Fund may be subject to foreign taxation related to foreign securities held by the Fund, income received, capital gains on the sale of securities, and certain foreign currency transactions in the foreign jurisdictions in which it invests. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests. When a capital gain tax is determined to apply, the Fund records an estimated deferred tax liability in an amount that would be payable if the securities were disposed of on the valuation date.

12 Annual Report 2020

DIVIDEND AND INCOME FUND

NOTES TO FINANCIAL STATEMENTS

Financial Statements

2. FEES AND TRANSACTIONS WITH RELATED PARTIES The Fund has retained the Investment Manager pursuant to an investment management agreement. Under the terms of the investment management agreement, the Investment Manager receives a fee payable monthly for investment advisory services at an annual rate of 0.95% of the Fund’s Managed Assets. “Managed Assets” means the average weekly value of the Fund’s total assets minus the sum of the Fund’s liabilities, which liabilities exclude debt relating to leverage, short term debt, and the aggregate liquidation preference of any outstanding preferred stock.

Pursuant to the investment management agreement, the Fund reimburses the Investment Manager for providing at cost certain administrative services comprised of compliance and accounting services. For the year ended December 31, 2020, the Fund’s reimbursements of such costs were $226,341, of which $133,478 and $92,863 was for compliance and accounting services, respectively. Certain officers and trustees of the Fund are officers and managers of the Investment Manager. As of December 31, 2020, Bexil Securities LLC (“Bexil Securities”), an affiliate of the Investment Manager, and the Investment Manager, collectively, owned approximately 9.8% of the Fund’s outstanding shares, pursuant to the Fund’s governing documents that permit ownership of more than 4.99% of the Fund’s outstanding shares only with the prior approval of the Fund’s Board. Bexil Securities and the Investment Manager, collectively, acquired 83,424 and 42,451 shares of the Fund during the years ended December 31, 2020 and 2019, respectively, through the Fund’s Dividend Reinvestment Plan.

Each Fund trustee who is not an employee of the Investment Manager or its affiliates is compensated by the Fund. These trustees receive fees for service as a trustee from the Fund and the other funds of which they are a director and for which the Investment Manager or its affiliates serve as investment manager. In addition, trustee out-of-pocket expenses are allocated to such funds which the Investment Manager or its affiliates serve as investment manager based on the most practicable method deemed equitable at the time the expense is incurred, including, without limitation, on the basis of relative assets under management. Expenses deemed to have been incurred solely by the Fund are normally charged to the Fund in the entirety.

3. DISTRIBUTIONS TO SHAREHOLDERS AND DISTRIBUTABLE EARNINGS The tax character of distributions paid by the Fund for the years ended December 31, 2020 and 2019 are comprised of the following:


Tax characteristics of distributions:		2020		2019
Ordinary income	$	335,397	$	2,659,077
Capital gains		6,451,817		-
Return of capital		5,701,511		7,273,076

Total distribution	$	12,488,725	$	9,932,153

As of December 31, 2020, the component of distributable earnings on a tax basis was as follows:



Unrealized appreciation	$	48,900,901

The difference between book and tax unrealized depreciation is primarily related to partnership income.

Federal income tax regulations permit post-October net capital losses, if any, to be deferred and recognized on the tax return of the next succeeding taxable year.

GAAP requires certain components related to permanent differences of net assets to be classified differently for financial reporting than for tax reporting purposes. These differences have no effect on net assets or net asset value per share. These differences, which may result in distribution reclassifications, are primarily due to differences in partnership income, recharacterization of capital gain income, and timing of distributions. As of December 31, 2020, the Fund recorded the following financial reporting reclassifications to the net asset accounts to reflect those differences:


Distributable Earnings		Paid in Capital
$228,579		$(228,579)

4. VALUE MEASUREMENTS GAAP establishes a hierarchy that prioritizes inputs to valuation methods. The three levels of inputs are:

• 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

DIVIDEND AND INCOME FUND

Annual Report 2020 13

NOTES TO FINANCIAL STATEMENTS

Financial Statements

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 deter mining 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 necessarily 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. 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 is normally 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 many corporate bonds and notes may be categorized in level 2 of the fair value hierarchy, in instances where lower relative weight is placed 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 approved by the Fund’s Board. 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 categorized in either level 2 or level 3 of the fair value hierarchy.

The following is a summary of the inputs used as of December 31, 2020 in valuing the Fund’s assets. Refer to the Schedule of Portfolio Investments for detailed information on specific investments.


ASSETS	Level 1	Level 2	Level 3	Total
Investments, at value
Common stocks	$ 210,549,013	$ -	$ -	$ 210,549,013
Corporate bonds and notes	-	350,309	-	350,309
Reorganization interests	-	-	0	0
Master limited partnerships	783,600	-	-	783,600
Preferred stocks	1,139,220	-	-	1,139,220
Total Investments, at value	$ 212,471,833	$ 350,309	$ 0	$ 212,822,142

There were no securities transferred into or out of level 3 during the year ended December 31, 2020.

14 Annual Report 2020

DIVIDEND AND INCOME FUND

NOTES TO FINANCIAL STATEMENTS

Financial Statements

The following is a reconciliation of level 3 assets including securities valued at zero:


		Reorganization interests

Balance at December 31, 2019		$ 0

Transfers into (out of) level 3		-

Change in unrealized depreciation		-

Balance at December 31, 2020		$ 0


Net change in unrealized appreciation attributable to assets still held as level 3 at December 31, 2020		$ -

Unrealized gains (losses) are included in the related amounts on investments in the Statement of Operations.

The Investment Manager, under the direction of or pursuant to procedures approved by the Fund’s Board, considers various valuation techniques and inputs for valuing assets categorized within level 3 of the fair value hierarchy. These include, but are not limited to: the type of the security; the size of the asset; the initial cost of the security; the existence of any contractual restrictions on the security’s disposition; prices of and extent of public trading in similar securities of the issuer or of comparable issuers; quotations or evaluated prices from broker-dealers and/or pricing services; information obtained from the issuer or analysts; an analysis of the issuer’s financial statements; an evaluation of the forces that influence the issuer and the market in which the asset is purchased and sold; multiples of earnings, cash flow, enterprise value, and similar measures; and the discount rate for lack of marketability. Significant changes in any of those techniques or inputs in isolation may result in a significantly lower or higher fair value measurement. The pricing of all fair value assets is regularly reported to the Fund’s Board. As of December 31, 2020, these investments did not have a material impact on the Fund’s net assets and, there fore, disclosure of unobservable inputs used in formulating valuations is not presented.

5. INVESTMENT TRANSACTIONS Purchases and proceeds from sales or maturities of investment securities, excluding short term investments, were $55,318,058 and $92,264,179, respectively, for the year ended December 31, 2020. As of December 31, 2020, for federal income tax purposes, the aggregate cost of securities was $163,921,241 and net unrealized appreciation was $48,900,901, comprised of gross unrealized appreciation of $53,371,517 and gross unrealized depreciation of $4,470,616. The aggregate cost of securities 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.

6. 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, fair value pricing values may differ from the values that would have been used had a readily available and reliable market quotation for the securities existed. These differences in valuation could be material. Illiquid and/or restrict ed securities owned as of December 31, 2020 were as follows:

Acquisition
Date

SEC Form N-CSR filed