<PAGE>
Chartwell
DIVIDEND AND INCOME
Fund, Inc.
Semi-Annual Report
May 31, 1999
CHARTWELL
INVESTMENT
PARTNERS
<PAGE>
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 1999
INVESTMENT OBJECTIVES & STRATEGY
The Chartwell Dividend & Income Fund [the 'Fund'] was created with the primary
objective of seeking high current income with long-term capital appreciation as
a secondary objective. The Fund will seek to achieve its objectives by
investing, under normal circumstances, at least 50% of its total assets in
income generating equity securities, including dividend paying common stocks,
convertible securities, preferred stocks and other equity-related securities. In
addition, the Fund may invest the balance of its total assets in non-convertible
debt securities, consisting primarily of corporate bonds. The Fund attempts to
minimize individual security risk by diversifying the portfolio with
approximately 150 securities, which is subject to change. The Chartwell Dividend
& Income Fund is a closed-end mutual fund which trades on the New York Stock
Exchange under the symbol CWF.
LEVERAGE
The Fund has the ability to increase the assets of the portfolio through
leverage. Leverage is a tool available to closed-end mutual funds and can
contribute to current income and capital appreciation. Of course, there is no
guarantee of positive returns and there is potential for losses. Leverage
assures a higher degree of volatility and more sensitivity to interest rate
fluctuations and stock market changes. Currently, the Fund is not leveraged, but
has the ability to leverage to a maximum of 33% of the Fund's net assets.
HIGH-YIELD CORPORATE BONDS
High-yield bonds are non-investment grade corporate debt obligations rated 'Ba1'
or lower by Moody's Investors Service, Inc. or 'BB+' or lower by Standard &
Poor's Ratings Group; they typically have a higher risk level than
investment-grade bonds. These securities have historically compensated investors
with higher levels of income for that risk. Prices usually are less sensitive to
interest rate fluctuations than higher rated bonds because of the high income
levels. However, the prices of these bonds are more sensitive to changes in the
economy.
CONVERTIBLE SECURITIES
The Fund can invest in both convertible preferred stock and convertible bonds.
Both pay fixed rates of income, but because they can be converted into common
stock, they are indirectly tied to the common stock's performance. As a result,
convertible securities generally offer higher income than common stocks and an
opportunity for price appreciation when the value of the underlying security
rises. The Fund buys convertibles when the underlying common stock offers strong
growth potential as well.
COMMON STOCK
The Fund invests in the common stocks of utility companies, REITs and other
industrial and financial companies as well as other equity securities. Both
utilities and REITs tend to offer a premium dividend yield with steady growth
that can lead to capital appreciation. Industrial and financial stocks are
primarily purchased for capital appreciation based on the fundamental value of
the underlying company.
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CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 1999
LETTER TO SHAREHOLDERS
DEAR SHAREHOLDERS,
It is my pleasure to write this letter as a means of providing you information
about the performance, expectations, strategy and objectives of the Chartwell
Dividend & Income Fund. For the six months ended May 31, 1999, the net asset
value (NAV) of the Fund provided an aggregate total return of 1.99%. During that
same time period, the market value of the Fund had a total return of (2.26%). As
of May 31, 1999, the net assets of the Fund were $214,526,368, corresponding to
an NAV of $13.81. In this letter, we will discuss 1) the performance of the
Fund, 2) the market environment of the past 6 months, and 3) our strategy going
forward and why we believe the Fund continues to be an excellent investment
vehicle.
Our primary investment objective is to seek high current income, while capital
appreciation is a secondary objective. For the six months ended May 31, 1999,
the Fund paid $0.62 cents per share in dividend payments. At the date of this
report, with the share price at $13.25 and monthly distributions of 10.33 cents
per share, the annualized cash distribution rate to shareholders is 9.36% per
annum.
The market price of the Fund fell trading from $14.19 on November 30, 1998 to
$13.25 on May 31, 1999. During that same period, the Fund's stock traded from a
0.12% premium to NAV to a 3.99% discount to NAV. Many income securities across
the investment spectrum performed poorly during this period, as rising interest
rates and a broadened focus on future earnings growth superseded demand for high
current income. However, many of the portfolio securities are priced very
attractively, and we believe Treasury yields will stabilize. Because of this,
the portfolio may be well positioned to provide high current income, as well as
potential capital gains opportunities going forward during the remainder of 1999
and into next year.
In terms of performance attribution, high-yield bonds [representing 41.6% of
your Fund] returned 1.45% for the reporting period; convertible bonds and
preferred stock [representing 23.0% of the Fund] returned 3.50% for the
reporting period; and all other equities [representing 34.4% of the Fund]
returned 3.55% for the reporting period.
We believe the outlook for the Fund is excellent and thank you for your
continued confidence in our portfolio management team and in the Chartwell
Dividend & Income Fund.
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CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 1999
Insert Line graph
Line graph depicting the market price of the Fund compared to the net asset
value of the Fund. Beginning and ending values are:
11/27/98 5/28/99
Price $14.50 $13.25
Net Asset Value $14.24 $13.80
PORTFOLIO MANAGERS' DISCUSSION
During the first half of 1999 the important economic factors contributing to the
performance of both your Fund and the broader markets were the increase in
interest rates and the resurgence of economically sensitive companies in both
the equity and fixed-income markets. First, the yield on the 30-year Treasury
Bond increased from 5.06% to 5.83% for the period from November 30, 1998, to May
31, 1999, as the financial markets recovered from the crises which occurred
during the fall of 1998. As a result of a movement back into growth-oriented
investment vehicles, the prices of many yield-oriented securities fell in tandem
with the increase in interest rates. Most of our asset classes, including
high-yield bonds, yield-oriented convertibles, REITs and utility stocks, are
included in this group. Beyond interest rates, the best performance in both
equity and bond markets came from economically sensitive sectors of the market
such as capital goods, basic industries, energy and transportation. Beginning in
April, REITs and utilities also began to outperform the broader markets. Our
style of investing in income-producing assets is well suited to an environment
where a value style flourishes. Our focus encompasses investing in the debt and
equities of firms with improving ability to generate cash flows and earnings. We
seek to limit our risk by requiring high yields and low relative historical
prices. This discipline is demonstrated in each of our asset classes, as
discussed below.
HIGH-YIELD BONDS
From November 30, 1998 to May 31, 1999, the high-yield market returned 2.55%
with income the impetus for the positive return. Price return for this period
was negative, as interest rates increased. February and May were particularly
difficult months for this asset class due to the large new issue calendar, weak
secondary market momentum, large mutual fund outflows, and investor and dealer
preference for liquidity. Despite this, lower credit tier securities
outperformed their higher-quality counterparts by a wide margin. Partially
offsetting the outperformance of riskier assets so far in 1999 has been the
recent increase in the defaults in $U.S. denominated high-yield debt. The
12-month rolling default rate increased to over 2%, up from the 1.2% default
rate in 1998.
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CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 1999
Insert Pie Chart
A pie chart depicting the Fund's asset allocation as of May 31, 1999:
Industrial/Financial Common Stock 3%
Utilities Common Stock 13%
REITs Common Stock 16%
Fixed Income Securities 42%
Cash 1%
Convertible Securities 23%
The yield to maturity of the market increased from 10.30% over the period to
10.74% as interest rates increased, although the yield premium to equivalent
maturity Treasuries actually tightened from 559 basis points on November 30,
1998 to 512 basis points on May 31, 1999. This yield spread premium still
remains on the historically wide side. Year-to-date issuance remains well ahead
of last year's levels with a strong forward calendar. Investor preference
remains with the larger, more liquid credits, which should benefit our
investment strategy. The high-yield portfolio continues to be focused on
higher-quality names within the high-yield universe, which minimizes downside
risk. These bonds are expected to contribute a significant percentage of the
current income of the Fund, even in difficult market environments. In addition,
the Fund typically looks for bond issuers with growing cash flows and improving
credit profiles.
CONVERTIBLE BONDS AND PREFERRED STOCKS
Within convertibles, as within equities, a large divergence developed between
the performance of high-income securities and growth focused securities. The
difference lay in a significant number of Internet-related and high technology
companies issuing low-yielding, highly equity sensitive convertibles, which
drove the equity alternative index. At the same time, higher-yielding
convertibles in more earnings-intensive industries were hurt by rising interest
rates.
Our strategy has continued to focus on contributing to the dividend through
investments in higher-yielding convertibles and seeking to reduce individual
security risk by maintaining our largest holdings in large cap companies with
stready cash flow, such as Texas Utilities Company 'Prides.' We have maintained
positions in companies with higher growth prospects predominantly through
convertible bonds, which offer greater downside protection. Examples include
Activision, Inc., National Data Corporation, and ITC/Deltacom, Inc.
REAL ESTATE INVESTMENT TRUST (REITS)
After a slow beginning for REITS at the outset of 1999, the sector rebounded
during the first quarter. Continued strong fundamental performance along with a
few choice investments in the sector by none other than Warren Buffet, paved the
way for the turn around. Just as the lodging group bore the brunt of the 1998
REIT decline, many names in this sector rebounded as GDP, consumer confidence
and other relevant indicators of growth and sentiment continued to surprise on
the upside. Our holdings in Starwood Hotels & Resorts, Hospitality Properties
Trust and LaSalle Hotel Properties all benefited from this trend. Office REITS
performed exceptionally well and we steadily increased our weighting in this
area with the additions of Alexandria Real Estate Equities, Inc., Boston
Properties, Inc., Reckson Associates Realty Corporation and SL Green Realty
Corp. Looking ahead, we expect in the near term to concentrate our holdings in
the office, industrial and storage markets, while seeking further reductions in
the healthcare sector. As of May 31, 1999, the five largest REIT holdings were:
Alexandria Real Estate Equities, Inc.; Crescent Real Estate Equities Company;
Healthcare Realty Trust, Inc.; Charles E. Smith Residential Realty, Inc.; and
Weeks Corporation (now Duke-Weeks Realty Corp.).
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CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 1999
UTILITY COMMON STOCK
During the first and second quarters of 1999, most utility stocks trailed the
major averages, though a select few exhibited good relative performance. In
particular, some traditional utility shares benefited from a focus on embedded
assets with appealing strategic value such as natural gas distribution and
pipelines, telecommunication holdings and select generation capabilities. We
fully expect this trend to continue throughout the remainder of the year. Our
positions in SCANA Corporation, BEC Energy and Avista Corporation all benefited
from market recognition of these types of assets. We continue to believe in the
prospects for natural gas and pipeline companies as well and added names such as
Columbia Energy Group, Consolidated Natural Gas Company, KeySpan Energy
Corporation, NICOR Inc. and NiSource Inc. to increase the Fund's weighting in
this sector. As convergence increases between electric and natural gas
utilities, these companies are well positioned and should participate in the
ensuing consolidation. Once again our stable of telecommunication stocks
performed quite well. Our position in Frontier Corporation was sold after a
significant run-up following a bid by Global Crossing. In addition, our holdings
in BCE, Inc. and GTE Corporation rose during the period. Most recently our U S
West, Inc. holding has been the subject of a takeover battle between the same
Global Crossing and Quest Communications. As yield and total return prospects
permit, we will look to add additional telecommunication positions throughout
the year. As of May 31, 1999, the five largest holdings in the sector were:
Consolidated Natural Gas Company; USEC Inc.; Illinova Corporation; Western
Resources Inc.; and MCN Energy Group, Inc.
OUTLOOK AND STRATEGY
For the remainder of 1999, we intend to continue our primary focus of investing
in securities that we believe offer high current income and long-term capital
appreciation opportunities. Over the long run, we believe this will be a sound
and profitable strategy. For example, dividend income, with dividends
reinvested, has represented approximately 40% of the total return of
large-capitalization stocks from 1926 through 1997*. In addition, high-yield
corporate bonds have outperformed other fixed-income classes over the long run
as well.
Interest rates will prove crucial to our investment process during the remainder
of 1999. We believe the danger of more Fed tightening has been reduced, given
current yield levels. From the current 6% level, long bond yields are not
expected to increase above 6.5% this year and we believe they could eventually
fall back to the 5.75% level over time. This is based on key measures of
inflation such as the Consumer Price Index maintaining a 2-2.5% level and real
Gross Domestic Product growth of 3-4%. In that environment, income securities
could provide consistent returns.
- ------------
*Ibbotson Associates, Stocks, Bonds, Bills, and Inflation 1998 Yearbook.
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CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 1999
In addition, the Fund will continue to shift the focus of the portfolio toward
securities in sectors of the market that appear undervalued. For instance, many
equities in banking and finance are inexpensive on a relative historical basis
and offer high current yields. REITs in general are selling near historically
low relative price/cash flow levels. We expect to continue to invest in small
cap companies, as well as economically sensitive sectors through convertible and
non-convertible debt.
In terms of our investment strategy and execution, we expect few changes. There
is an opportunity to increase the flexibility of the asset allocation process
because of the high levels of current yield in the market. This will allow the
Fund to invest in securities with capital appreciation potential. In addition,
there may be an opportunity to leverage the Fund at some point during the second
half of 1999.
CWF continues to offer the possibility of excellent investment returns, trading
at a modest discount to NAV and an annualized current distribution rate of
9.36%. We are confident that our income strategy, investment process and
individual execution will continue to seek consistent current income and
long-term capital appreciation. This report is designed to increase your
understanding of the investments of CWF and we hope that it accomplished that
goal. Thank you for your confidence in the Chartwell Dividend & Income Fund.
Sincerely,
Bernard P. Schaffer
Winthrop S. Jessup Portfolio Manager
Chairman and President
PORTFOLIO MANAGEMENT TEAM
Andrew L. Newcomb
Portfolio Manager
Bernard P. Schaffer REITs and Utility Common Stock
Portfolio Manager
Equities
Doster J. Esh
Portfolio Analyst
Convertible Debt and Preferred Stock
Leslie M. Varrelman
Portfolio Manager
Fixed Income
Christine F. Williams
Portfolio Manager
Fixed Income
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CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 1999
UTILIZATION OF LEVERAGE
The Chartwell Dividend & Income Fund expects to utilize leverage through the
issuance of commercial paper, which will be sometime in the latter half of 1999.
Current market conditions are favorable, allowing the Fund the potential to
realize a higher net return on assets in the portfolio. Initially, it is
expected that the Fund will be leveraged at a level between 20%-25% of its total
assets (including the amount obtained from the leverage), or $60 million. We
anticipate receiving favorable ratings from both Moody's and S&P on the
commercial paper. This should enhance the marketability and reduce the interest
costs associated with the issuance of the commercial paper. However, it must be
noted that the utilization of leverage involves the risk of lower portfolio
returns if the cost of leverage is higher than the resulting yields on assets or
if the Fund experiences significant capital losses. Therefore, the addition of
leverage also increases the potential volatility of the Fund.
DIVIDENDS & DISTRIBUTIONS
The Fund intends to distribute a monthly fixed amount to shareholders in the
amount of $0.1033 per share. If, for any monthly distribution, net investment
income (which term includes net realized short-term capital gain) is less than
the amount of the distribution, the difference will be distributed from the
Fund's assets. The Fund's final distribution for each calendar year will include
any remaining net investment income not distributed during the year, as well as
net capital gains realized during the year, if any. If, for any calendar year,
the total distributions exceed net investment income and net realized capital
gain, the excess, distributed from the Fund's assets, will generally be treated
as a tax-free return of capital and will result in a reduction in the
shareholder's basis. Such excess, however, will be treated as ordinary dividend
income up to the amount of the Fund's current and accumulated earnings and
profits. The Board of Directors reserves the right to change the aforementioned
dividend policy from time-to-time.
DISCUSSION OF Y2K ISSUES
Like other financial and business organizations, the Fund and its portfolio
could be adversely affected if the computer systems they rely on do not properly
process date-related information and data involving the years 2000 and after. We
at Chartwell Investment Partners are taking steps that we believe are reasonable
to address this problem in our own computer system and are seeking assurances
that comparable steps are being taken by the Fund's other major service
providers. Each service provider has informed the Fund that it is taking steps
to prepare for Year 2000 compliance. The service providers and the Fund will
continue to develop contingency plans during fiscal year 1999. Chartwell
Investment Partners is also attempting to evaluate the potential impact of this
problem on the issues of investment securities that the portfolio purchases. At
this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact on the Fund and portfolio.
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CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 1999
SCHEDULE OF INVESTMENTS (unaudited)
NUMBER OF MARKET VALUE
COMMON STOCK--34.4% SHARES (NOTE 1)
----------- -------------
BANKING & FINANCE--2.1%
Bank of America Corporation...................... 11,316 $ 732,004
Bank One Corporation............................. 32,400 1,832,625
Union Planters Corporation....................... 50,000 2,065,625
-------------
4,630,254
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CONSUMER NON-DURABLE--0.4%
Philip Morris Companies Inc...................... 20,000 771,250
-------------
771,250
-------------
FOOD--0.4%
Flowers Industries, Inc.......................... 40,000 890,000
-------------
890,000
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HEALTHCARE--0.6%
Baxter International Inc. ....................... 20,000 1,291,250
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1,291,250
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REAL ESTATE*--15.9%
Alexandria Real Estate Equities, Inc. ........... 52,000 1,644,500
AMRESCO Capital Trust............................ 100,000 1,000,000
Associated Estates Realty Corporation............ 57,700 659,944
Avalon Bay Communities, Inc...................... 31,500 1,114,313
Boston Properties, Inc........................... 30,700 1,103,281
Cabot Industrial Trust........................... 49,900 1,072,850
CarrAmerica Realty Corporation................... 42,000 1,047,375
Charles E. Smith Residential Realty, Inc. ....... 37,000 1,278,813
Commercial Net Lease Realty...................... 75,000 989,062
Crescent Real Estate Equities Company............ 70,000 1,614,375
FelCor Lodging Trust Incorporated................ 38,000 862,125
First Washington Realty Trust, Inc............... 34,900 759,075
Healthcare Realty Trust, Inc..................... 132,587 2,867,194
Highwoods Properties, Inc........................ 46,000 1,210,375
Home Properties of New York, Inc................. 37,000 964,313
Hospitality Properties Trust..................... 38,000 1,030,750
IndyMac Mortgage Holdings, Inc................... 50,000 740,625
Kimco Realty Corporation......................... 30,000 1,198,125
LaSalle Hotel Properties......................... 35,000 492,188
LTC Properties, Inc.............................. 25,000 332,813
Meditrust Companies.............................. 46,000 638,250
National Golf Properties, Inc.................... 45,000 1,161,562
Patriot American Hospitality, Inc................ 107,333 556,790
Prison Realty Trust, Inc......................... 31,000 391,375
ProLogis Trust................................... 56,400 1,152,675
RFS Hotel Investors, Inc. ....................... 78,000 1,067,625
Reckson Associates Realty Corporation............ 30,000 776,250
Regency Realty Corporation....................... 59,000 1,301,687
SL Green Realty Corp. ........................... 16,400 356,700
Shurgard Storage Centers, Inc.................... 42,200 1,147,312
See Notes to Financial Statements.
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CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 1999
SCHEDULE OF INVESTMENTS (continued) (unaudited)
NUMBER OF MARKET VALUE
COMMON STOCK (concluded) SHARES (NOTE 1)
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REAL ESTATE (concluded)
Sovran Self Storage, Inc......................... 15,000 $ 374,062
Starwood Hotels & Resorts........................ 25,000 818,750
Tanger Factory Outlet Centers, Inc. ............. 26,000 648,375
United Dominion Realty Trust, Inc. .............. 45,000 497,812
Weeks Corporation................................ 39,000 1,218,750
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34,090,071
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TELECOMMUNICATIONS--1.6%
BCE Inc.......................................... 22,900 1,054,831
GTE Corporation.................................. 11,500 725,219
U S West, Inc. .................................. 30,800 1,665,125
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3,445,175
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UTILITIES--13.4%
Avista Corporation............................... 35,000 632,187
BEC Energy....................................... 31,200 1,372,800
Cinergy Corp. ................................... 30,000 1,023,750
Columbia Energy Group............................ 12,800 684,800
Consolidated Natural Gas Company................. 60,000 3,566,250
FirstEnergy Corp. ............................... 41,000 1,304,312
Illinova Corporation............................. 82,100 2,232,094
KeySpan Energy Corporation....................... 41,000 1,107,000
Kinder Morgan Energy Partners L.P. .............. 30,000 1,117,500
K N Energy Inc. ................................. 48,600 1,041,863
MCN Energy Group Inc. ........................... 115,500 2,310,000
MDU Resources Group, Inc......................... 44,000 1,006,500
New Century Energies, Inc........................ 25,600 1,035,200
NICOR Inc. ...................................... 16,600 624,575
NiSource Inc. ................................... 21,700 606,244
OGE Energy Corp.................................. 8,800 226,600
SCANA Corporation................................ 44,000 1,174,250
TECO Energy, Inc................................. 44,000 1,020,250
USEC Inc. ....................................... 250,000 2,750,000
Washington Gas Light Company..................... 62,900 1,537,119
Western Resources, Inc. ......................... 79,100 2,298,844
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28,672,138
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TOTAL COMMON STOCK (COST $81,823,327)............ 73,790,138
-------------
CONVERTIBLE PREFERRED STOCK--16.4%
AGRICULTURAL PHARMACEUTICALS--0.3%
Monsanto Company 'ACES' 6.500%................... 16,500 684,750
-------------
684,750
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BANKING & FINANCE--1.3%
Mandatory Common Exchange Trust
'TIMES' 7.250% (a)............................... 60,000 270,000
WBK 'STRYPES' Trust 10.000%...................... 80,000 2,575,000
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2,845,000
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See Notes to Financial Statements.
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CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 1999
SCHEDULE OF INVESTMENTS (continued) (unaudited)
NUMBER OF MARKET VALUE
CONVERTIBLE PREFERRED STOCK (continued) SHARES (NOTE 1)
----------- -------------
BASIC INDUSTRIES--0.5%
United Rentals Trust I 'QUIPS' 6.500%............ 22,000 $ 995,500
-------------
995,500
-------------
COMPUTER EQUIPMENT--0.2%
'DECS' Trust IV 7.000% (b)....................... 50,000 359,375
-------------
359,375
-------------
CONSUMER CYCLICAL--0.7%
Cendant Corporation 'PRIDES' 7.500%.............. 50,000 1,587,500
-------------
1,587,500
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CONSUMER PRODUCTS--1.4%
Estee Lauder 'TRACES' 6.250%..................... 22,400 1,797,600
Newell Financial Trust I 'QUIPS' 5.250%.......... 21,700 1,131,113
-------------
2,928,713
-------------
ENERGY--1.2%
K N Energy, Inc. 'PEPS' Units 8.250%............. 40,000 1,430,000
Tosco Financing Trust 5.750%..................... 25,000 1,206,250
-------------
2,636,250
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HOME BUILDERS--1.0%
Kaufman & Broad Home Corporation
'PRIDES' 8.250%.................................. 113,000 939,313
TXI Capital Trust I 'SPuRS' 5.500%............... 29,600 1,106,300
-------------
2,045,613
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INSURANCE--3.2%
Aetna Inc. 6.250%................................ 20,000 1,508,750
Conseco Financing Trust IV 'PRIDES' 7.000%....... 55,600 2,276,125
Lincoln National Corporation
'PRIDES' 7.750%.................................. 115,000 2,990,000
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6,774,875
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LEISURE & ENTERTAINMENT--0.5%
Premier Parks Inc. 'PIES' 7.500%................. 15,000 997,500
-------------
997,500
-------------
REAL ESTATE--0.3%
Host Marriott Financial Trust
'QUIPS' 6.750%................................... 17,500 745,937
-------------
745,937
-------------
RETAIL--0.9%
CVS 'TRACES' 6.000%.............................. 22,500 1,890,000
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1,890,000
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SUPPLIERS EQUIPMENT--0.3%
Peak 'TrENDS' Trust 9.000%....................... 101,500 672,437
-------------
672,437
-------------
TELECOMMUNICATIONS--1.3%
Adelphia Communications
Corporation 5.500%............................... 2,000 437,000
Global Telesystems Group, Inc. 7.250%+........... 20,000 1,245,000
WinStar Communications, Inc. 7.000%.............. 20,000 1,157,500
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2,839,500
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See Notes to Financial Statements.
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CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 1999
SCHEDULE OF INVESTMENTS (continued) (unaudited)
<TABLE>
<CAPTION>
NUMBER OF MARKET VALUE
CONVERTIBLE PREFERRED STOCK (concluded) SHARES (NOTE 1)
----------- -------------
TECHNOLOGY--0.9%
<S> <C> <C>
Merrill Lynch & Co., Inc. 'STRYPES' 7.875%(c).......... 18,000 $ 834,750
PSINet Inc. Series C 6.375%............................ 25,000 1,175,000
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2,009,750
-------------
UTILITIES--2.4%
Calenergy Capital Trust III 6.500%..................... 15,000 699,375
Texas Utilities Company 'PRIDES' 9.250%................ 80,000 4,415,000
-------------
5,114,375
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TOTAL CONVERTIBLE PREFERRED STOCK
(COST $39,221,215)..................................... 35,127,075
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PRINCIPAL
NON-CONVERTIBLE BONDS--41.6% AMOUNT
------------
APPAREL--0.9%
Supreme International Corporation
12.250%, 4/01/06+...................................... $ 2,000,000 2,000,000
------------
2,000,000
------------
BASIC INDUSTRIES--1.6%
Enterprises Shipholding Corporation
8.875%, 5/01/08........................................ 2,000,000 1,330,000
United Rentals (North America), Inc.
9.500%, 6/01/08........................................ 2,000,000 2,035,000
------------
3,365,000
------------
CABLE, MEDIA & PUBLISHING--2.4%
Fox Family Worldwide, Inc. 9.250%, 11/01/07............ 2,500,000 2,437,500
Regal Cinemas, Inc. 9.500%, 6/01/08.................... 2,800,000 2,667,000
------------
5,104,500
------------
CHEMICALS--0.5%
Lyondell Chemical Co. 9.625%, 5/01/07+................. 1,000,000 1,015,000
------------
1,015,000
------------
CONSUMER PRODUCTS--2.7%
Pillowtex Corporation 9.000%, 12/15/07................. 1,500,000 1,466,250
Playtex Family Products Corporation
9.000%, 12/15/03....................................... 2,500,000 2,543,750
Revlon Consumer Products Corporation
8.625%, 2/01/08........................................ 2,000,000 1,900,000
------------
5,910,000
------------
ENERGY--3.1%
Ocean Energy, Inc. 8.375%, 7/01/08..................... 500,000 495,000
Ocean Energy, Inc. 8.875%, 7/15/07..................... 500,000 500,000
Parker Drilling Company 9.750%, 11/15/06............... 3,000,000 2,685,000
Tokheim Corporation, 11.375%, 8/01/08.................. 3,000,000 2,970,000
------------
6,650,000
------------
</TABLE>
See Notes to Financial Statements.
12
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C H A R T W E L L
<PAGE>
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 1999
SCHEDULE OF INVESTMENTS (continued) (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL MARKET VALUE
NON-CONVERTIBLE BONDS (continued) AMOUNT (NOTE 1)
------------ -------------
<S> <C> <C>
FINANCIAL SERVICES--3.0%
AMRESCO, Inc. 9.875%, 3/15/05......................... $ 3,000,000 $ 2,471,250
CB Richard Ellis Services, Inc.
8.875%, 6/01/06....................................... 2,000,000 1,955,000
DVI, Inc. 9.875%, 2/01/04............................. 2,000,000 1,970,000
-------------
6,396,250
-------------
FOOD, BEVERAGE & TOBACCO--2.7%
Canandaigua Brands, Inc. 8.750%, 12/15/03............. 2,000,000 2,005,000
Jitney-Jungle Stores of America, Inc.
10.375%, 9/15/07...................................... 2,500,000 1,937,500
Nash-Finch Company 8.500%, 5/01/08.................... 2,000,000 1,830,000
-------------
5,772,500
-------------
GAMING--0.7%
Players International, Inc. 10.875%, 4/15/05.......... 1,500,000 1,590,000
-------------
1,590,000
-------------
HEALTHCARE--1.9%
Integrated Health Services, Inc.
9.250%, 1/15/03....................................... 2,500,000 1,637,500
Sun Healthcare Group, Inc. 9.375%, 5/01/08+........... 2,000,000 410,000
Team Health Inc. 12.000%, 3/15/09+.................... 2,000,000 2,030,000
-------------
4,077,500
-------------
HOME BUILDERS--1.4%
Standard Pacific Corp. 8.000%, 2/15/08................ 2,000,000 1,965,000
The Ryland Group, Inc. 10.500%, 7/01/06............... 1,000,000 1,085,000
-------------
3,050,000
-------------
HOTELS--0.9%
Sun International Hotels Limited
8.625%, 12/15/07...................................... 2,000,000 1,980,000
-------------
1,980,000
-------------
LEISURE & ENTERTAINMENT--6.2%
Bally Total Fitness Holding Corporation
9.875%, 10/15/07...................................... 1,800,000 1,777,500
Extended Stay America, Inc. 9.150%, 3/15/08........... 1,500,000 1,445,625
Host Marriott Travel Plaza 9.500%, 5/15/05............ 1,500,000 1,537,500
Marvel Enterprises, Inc. 12.000%, 6/15/09+............ 2,000,000 2,072,500
Park Place Entertainment Corporation,
7.875%, 12/15/05+..................................... 3,000,000 2,895,000
Premier Parks Inc. 9.250%, 4/01/06.................... 2,500,000 2,550,000
Speedway Motorsports Inc. 8.500%, 8/15/07+............ 1,000,000 1,025,000
-------------
13,303,125
-------------
REAL ESTATE--0.7%
HMH Properties Inc. 7.875%, 8/01/05................... 1,500,000 1,428,750
-------------
1,428,750
-------------
RETAIL--1.3%
Eye Care Centers of America, Inc.
9.125%, 5/08/08....................................... 2,000,000 1,730,000
Specialty Retailers, Inc. 8.500%, 7/15/05............. 1,450,000 993,250
-------------
2,723,250
-------------
</TABLE>
See Notes to Financial Statements.
13
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C H A R T W E L L
<PAGE>
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 1999
SCHEDULE OF INVESTMENTS (continued) (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL MARKET VALUE
NON-CONVERTIBLE BONDS (concluded) AMOUNT (NOTE 1)
------------ -------------
TELECOMMUNICATIONS--10.5%
<S> <C> <C>
Alestra S.A. 12.125%, 5/15/06+........................ $ 2,000,000 $ 1,905,000
Allegiance Telecom Inc. 12.875%, 5/15/08.............. 2,000,000 2,180,000
Echostar DBS Corp. 9.250%, 02/01/06+.................. 2,000,000 2,012,500
Intermedia Communations Inc.
9.500%, 3/01/09+...................................... 2,000,000 1,970,000
Level 3 Communications Inc.
9.125%, 5/01/08....................................... 3,000,000 2,940,000
Nextel Partners Inc. 0.000%, 2/01/04+(d).............. 1,000,000 540,000
Nextel Partners Inc. 12.000%, 11/01/08+............... 2,250,000 2,553,750
NTL Incorporated 11.500%, 10/01/08+................... 1,000,000 1,095,000
RCN Corporation 10.000%, 10/15/07..................... 1,500,000 1,507,500
Rhythms NetConnections Inc.
12.750%, 4/15/09+..................................... 3,000,000 2,820,000
RSL Communications plc 10.500%, 11/15/08.............. 1,500,000 1,515,000
Worldwide Fiber Inc. 12.500%, 12/05/05+............... 1,500,000 1,556,250
-------------
22,595,000
-------------
TRANSPORTATION & SHIPPING--1.1%
Northwest Airlines, Inc. 8.700%, 3/15/07.............. 2,000,000 1,969,268
Preston Corporation 7.000%, 5/01/11................... 500,000 400,625
-------------
2,369,893
-------------
TOTAL NON-CONVERTIBLE BONDS
(COST $94,765,040).................................... 89,330,768
-------------
CONVERTIBLE BONDS--6.6%
BIOTECHNOLOGY--0.2%
Centocor Inc. 4.750%, 2/15/05......................... 500,000 540,000
-------------
540,000
-------------
ELECTRONICS--0.3%
Sanmina Corp. 4.250%, 5/01/04+........................ 500,000 560,000
-------------
560,000
-------------
HEALTHCARE--1.8%
Aethna Neurosciences Inc. 4.750%, 11/15/04............ 1,000,000 1,037,500
Quintiles Transnational Corp.
4.250%, 5/31/00....................................... 1,000,000 1,105,000
Sunrise Assisted Living, Inc. 5.500%, 6/15/02......... 1,500,000 1,749,375
-------------
3,891,875
-------------
LEISURE & ENTERTAINMENT--0.9%
Activision, Inc. 6.750%, 1/01/05...................... 2,140,000 1,995,550
-------------
1,995,550
-------------
</TABLE>
See Notes to Financial Statements.
14
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C H A R T W E L L
<PAGE>
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 1999
SCHEDULE OF INVESTMENTS (concluded) (unaudited)
<TABLE>
<CAPTION>
PRINCIPLE MARKET VALUE
CONVERTIBLE BONDS (concluded) AMOUNT (NOTE 1)
------------ ---------------
<S> <C> <C>
TECHNOLOGY--1.4%
Arbor Software Corp.
4.500%, 3/15/05...................................... $ 1,750,000 $ 1,225,000
National Data Corporation
5.000%, 11/01/03..................................... 1,500,000 1,631,250
MindSpring Enterprises, Inc.
5.000%, 4/15/06...................................... 100,000 86,625
---------------
2,942,875
---------------
TELECOMMUNICATIONS--0.8%
ITC/DeltaCom, Inc. 4.500%, 5/15/06+.................. 1,500,000 1,618,125
---------------
1,618,125
---------------
TEXTILES--0.7%
Fieldcrest Cannon, Inc. 6.000%, 3/15/12.............. 1,892,000 1,520,695
---------------
1,520,695
---------------
UTILITIES--0.5%
The AES Corporation 4.500%, 8/15/05.................. 1,000,000 1,131,250
---------------
1,131,250
---------------
TOTAL CONVERTIBLE BONDS
(COST $14,586,790)................................... 14,200,370
---------------
TOTAL INVESTMENTS--99.0%
(COST $230,396,372)................................ 212,448,351
OTHER ASSETS IN EXCESS OF
LIABILITIES--1.0%.................................... 2,078,017
---------------
NET ASSETS--100%..................................... $ 214,526,368
---------------
</TABLE>
- ------------------
ACES--Adjustable Conversion-rate Equity Security
DECS--Dividend Enhanced Convertible Stock
PIES--Premium Income Equity Security
PEPS--Premium Equity Participating Security
PRIDES--Preferred Redeemable Increased Dividend Security
QUIPS--Quarterly Income Preferred Security
SPuRS--Shared Preference Redeemable Security
STRYPES--Structured Yield Product Exchangeable For Stock
TIMES--Trust Issued Mandatory Exchange Security
TRACES--Trust Automatic Common Exchange Security
TrENDS--Trust Enhanced Dividend Security
* Real Estate Investment Trust.
+ Securities 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. At May 31, 1999,
these securities amounted to $28,078,125 or 13.1% of net assets.
(a) Convertible into common stock of FIRSTPLUS Financial Group, Inc.
(b) Convertible into common stock of Maxtor Corporation.
(c) Convertible into common stock of CIBER, Inc.
(d) Coupon increases periodically based upon a predetermined schedule. Stated
interest rate in effect at May 31, 1999.
See Notes to Financial Statements.
15
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C H A R T W E L L
<PAGE>
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 1999
STATEMENT OF ASSETS AND LIABILITIES
AS OF MAY 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments, at value (cost $230,396,372) (Note 1)............. $ 212,448,351
Cash........................................................... 720,843
Interest receivable............................................ 2,451,203
Dividends receivable........................................... 353,010
Prepaid expenses............................................... 9,826
---------------
Total assets................................................... 215,983,233
---------------
LIABILITIES:
Payable for securities purchased............................... 676,950
Dividends to shareholders...................................... 474,390
Payable for investment management fees (Note 2)................ 171,363
Payable for administration fees (Note 2)....................... 27,057
Accrued expenses and other liabilities......................... 107,105
---------------
Total liabilities.............................................. 1,456,865
---------------
NET ASSETS..................................................... $ 214,526,368
---------------
---------------
NET ASSETS CONSIST OF:
Common Stock, $0.01 par value
(authorized 100,000,000 shares)............................ $ 155,371
Paid-in surplus.............................................. 231,992,469
Distributions in excess of net investment income............. (2,743,441)
Accumulated net realized gain on investments................. 3,069,991
Net unrealized depreciation on investments................... (17,948,022)
---------------
NET ASSETS..................................................... $ 214,526,368
---------------
---------------
NET ASSET VALUE PER SHARE:
$214,526,368/15,537,071 shares of Common Stock issued and
outstanding................................................ $ 13.81
---------------
---------------
</TABLE>
See Notes to Financial Statements.
16
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C H A R T W E L L
<PAGE>
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 1999
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED
MAY 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
INVESTMENT INCOME: (NOTE 1)
<S> <C>
Interest and discount earned.................................... $ 4,235,486
Dividends (net of $5,422 foreign withholding tax)............... 4,029,583
-------------
Total investment income......................................... 8,265,069
-------------
EXPENSES:
Investment management fees (Note 2)............................. 1,017,166
Administration fees (Note 2).................................... 160,605
Transfer agent fees............................................. 48,412
Professional fees............................................... 47,815
Printing and shareholder reports................................ 18,389
Registration fees............................................... 14,663
Custodian fees.................................................. 14,416
Directors' fees and expenses.................................... 6,981
Pricing fees.................................................... 4,948
Other operating expenses........................................ 14,975
-------------
Total expenses.................................................. 1,348,370
-------------
NET INVESTMENT INCOME........................................... 6,916,699
-------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: (NOTE 1)
Net realized gain on investments................................ 2,472,391
Change in net unrealized depreciation on investments............ (5,406,208)
-------------
Net realized and unrealized loss on investments................. (2,933,817)
-------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (3,982,882)
-------------
-------------
</TABLE>
See Notes to Financial Statements.
17
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C H A R T W E L L
<PAGE>
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 1999
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE PERIOD FROM
MAY 31, 1999 JUNE 29, 1998* TO
(UNAUDITED) NOVEMBER 30, 1998
--------------- ----------------------
OPERATIONS:
<S> <C> <C>
Net investment income...................... $ 6,916,699 $ 6,292,619
Net realized gain on investments........... 2,472,391 597,600
Change in net unrealized
depreciation on investments................ (5,406,208) (12,541,814)
--------------- ----------------------
Net increase (decrease) in net assets
resulting from operations.................. 3,982,882 (5,651,595)
--------------- ----------------------
Dividends and distributions to
shareholders from:
Net investment income...................... (6,859,812) (6,292,619)
Distributions in excess of net
investment income.......................... (2,743,441) (56,887)
--------------- ----------------------
Net decrease in net assets resulting
from dividends and distributions........... (9,603,253) (6,349,506)
--------------- ----------------------
CAPITAL STOCK TRANSACTIONS:
Net proceeds from initial public
offering................................... -- 229,500,000
Offering costs charged to paid in
capital.................................... -- (660,580)
Reinvestment of dividends resulting
in the issuance of Common Stock 994,563 2,213,852
--------------- ----------------------
Net increase in net assets resulting
from Common Stock transactions............. 994,563 231,053,272
--------------- ----------------------
Total increase (decrease) in net assets (4,625,808) 219,052,171
--------------- ----------------------
NET ASSETS:
Beginning of period........................ 219,152,176 100,005
--------------- ----------------------
End of period (including distributions
in excess of net investment income
of $2,743,441 and $56,887,
respectively).............................. $ 214,526,368 $ 219,152,176
--------------- ----------------------
--------------- ----------------------
</TABLE>
- ------------------
*Commencement of investment operations.
See Notes to Financial Statements.
18
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C H A R T W E L L
<PAGE>
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 1999
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE SIX
THE FOLLOWING PER SHARE DATA AND RATIOS MONTHS ENDED FOR THE PERIOD FROM
HAVE BEEN DERIVED FROM INFORMATION PROVIDED MAY 31, 1999 JUNE 29, 1998* TO
IN THE FINANCIAL STATEMENTS. (UNAUDITED) NOVEMBER 30, 1998
--------------- ----------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD...................................... $ 14.17 $ 14.96+
---------------- ---------------
INCOME (LOSS) FROM INVESTMENT
OPERATIONS:
Net investment income (1)................... 0.45 0.40
Net realized and unrealized gain
(loss) on investment
transactions................................ (0.19) (0.78)
---------------- ---------------
Total from investment operations 0.25 (0.38)
---------------- ---------------
LESS DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment
income...................................... (0.44) (0.41)
Distributions in excess of net
investment income........................... (0.18) --
---------------- ---------------
Total dividends and distributions (0.62) (0.41)
---------------- ---------------
NET ASSET VALUE, END OF PERIOD.............. $ 13.81 $ 14.17
---------------- ---------------
---------------- ---------------
MARKET VALUE, END OF PERIOD................. $ 13.25 $ 14.19
---------------- ---------------
---------------- ---------------
TOTAL RETURN BASED ON: (2)
Market value................................ (2.26)% (2.62)%
---------------- ---------------
---------------- ---------------
Net asset value............................. 1.99% (2.48)%
---------------- ---------------
---------------- ---------------
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted)............................... $ 214,526 $ 219,152
---------------- ---------------
---------------- ---------------
Ratio of total operating expenses to
average weekly net assets................... 1.26%(3) 1.32%(3)
Ratio of net investment income to
average weekly net assets................... 6.48%(3) 6.99%(3)
Portfolio turnover........................ 52% 27%
</TABLE>
- ------------------
* Commencement of operations.
+ Net of offering costs of $0.04 charged to paid-in capital with respect to
issuance of common shares.
(1) Based on average shares outstanding.
(2) Total investment return is calculated assuming a purchase of common stock on
the opening of the first day and a sale on the closing of the last day of
each period reported. Total investment return does not reflect brokerage
commissions. Dividends and distributions, if any, are assumed for the
purposes of this calculation, to be reinvested at prices obtained under the
Fund's dividend reinvestment plan. Total investment returns based on market
value, which can be significantly greater or lesser than the net asset value,
may result in substantially different returns. The total investment returns
calculated based on market value and net asset value for a period of less
than one year have not been annualized.
(3) Annualized.
See Notes to Financial Statements.
19
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C H A R T W E L L
<PAGE>
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 1999
NOTES TO FINANCIAL STATEMENTS (unaudited)
Chartwell Dividend and Income Fund, Inc. (the 'Fund') was incorporated under the
laws of the State of Maryland on April 6, 1998 and is registered under the
Investment Company Act of 1940 (the 'Act'), as amended, as a closed-end,
diversified management investment company. The Fund had no operations until June
17, 1998 when it sold 6,667 shares of common stock for $100,005 to Chartwell
Investment Partners, L.P. (the 'Manager'). Investment operations commenced on
June 29, 1998. The Fund's primary investment objective is to seek high current
income. Capital appreciation is a secondary objective.
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
PORTFOLIO VALUATION: Portfolio securities listed or traded on a national
securities exchange, except for debt securities, are valued at the last sale
price as of the close of regular trading on the New York Stock Exchange.
Securities not traded on a particular day, over-the-counter securities and
government and agency securities are valued at the mean value between bid and
asked prices. Long-term debt securities are valued on the basis of valuations
provided by a pricing service when such prices are believed to reflect the fair
value of such securities. All securities and assets for which quotations are not
readily available are valued at fair value as determined in good faith and
pursuant to a method approved by the Board of Directors. Short-term investments
having a maturity of less than 60 days are valued at amortized cost.
CASH AND CASH EQUIVALENTS: Idle cash is swept into a money market fund at PNC
Bank, N.A., the Fund's custodian, and is classified as a cash equivalent.
Amounts so invested are generally available on the same business day.
FEDERAL INCOME TAXES: It is the Fund's intention to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to shareholders. Therefore,
no provision for Federal income tax or excise tax is required.
DIVIDENDS AND DISTRIBUTIONS: The Fund will declare and pay dividends to
shareholders monthly from net investment income and short-term gains. Long-term
capital gains, if any, in excess of loss carryforwards are distributed to
shareholders annually. Dividends and distributions to shareholders are recorded
on the ex-dividend date.
Dividends from net investment income and capital gain distributions are
determined in accordance with U.S. Federal income tax regulations which may
differ from generally accepted accounting principles. The Fund's fixed dividend
policy may result in a tax return of capital.
20
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C H A R T W E L L
<PAGE>
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 1999
SECURITY TRANSACTIONS AND INVESTMENT INCOME: Security transactions are recorded
on the trade date. Realized gains and losses on sales of securities are
calculated on the identified cost basis.
Dividend income is recorded on the ex-dividend date. Interest income is recorded
on the accrual basis. The Fund accretes original issue discount on securities
using the effective interest method.
USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts in the financial statements.
Actual results could differ from those estimates.
NOTE 2. INVESTMENT MANAGEMENT, ADMINISTRATION AGREEMENTS AND OTHER TRANSACTIONS
WITH AFFILIATES
The Fund has entered into an investment management agreement with the Manager.
The Manager manages the Fund's portfolio and makes investment decisions. For
these services, the Fund pays the Manager a monthly fee 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 related to leverage, short-term debt and the aggregate
liquidation preference of any outstanding preferred stock.
The Fund has entered into an administration agreement with Princeton
Administrators, L.P. (the 'Administrator'). Under such agreement, the
Administrator performs or arranges for the performance of certain administrative
services necessary for the operation of the Fund. For these services, the Fund
pays the Administrator a monthly fee at an annual rate of 0.15% of the Fund's
average weekly Managed Assets, subject to a monthly minimum fee of $12,500.
Certain officers and/or directors of the Fund are officers and/or directors of
the Manager. The Fund pays each director who is not an 'affiliated person' as
defined in the Act a fee of $4,000 per year plus $250 for each meeting attended.
For the six months ended May 31, 1999, the Fund incurred fees of $67,216, of
which $33,853 has been expensed, to Drinker Biddle & Reath LLP, counsel for the
Fund. A partner of the firm is an officer of the Fund.
NOTE 3. PURCHASE AND SALES OF INVESTMENTS
For six months ended May 31, 1999, purchases and sales of investments, excluding
short-term investments, totaled $112,989,587 and $109,932,205, respectively.
At May 31, 1999, the cost and unrealized appreciation/depreciation of
investments for federal income tax purposes was as follows:
Cost of investments $ 230,396,372
---------------
---------------
Gross unrealized appreciation $ 3,837,376
Gross unrealized depreciation (21,785,398)
---------------
Net unrealized depreciation $ (17,948,022)
---------------
---------------
21
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C H A R T W E L L
<PAGE>
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 1999
NOTE 4. CAPITAL STOCK
There are 100,000,000 shares of $0.01 par value common stock authorized. Of the
shares of common stock outstanding at May 31, 1999, the Manager owned 7,129
shares.
Offering costs were charged to capital upon completion of the initial public
offering of the common stock.
For the period from June 29, 1998 (commencement of investment operations) to
November 30, 1998 and for the six months ended May 31, 1999, the Fund issued
156,782 shares and 73,622 shares respectively, in connection with the Fund's
dividend reinvestment plan.
NOTE 5. MARKET AND CREDIT RISKS
The Fund may invest in high-yielding fixed-income securities, which carry
ratings of BB+ or lower by S&P and/or Ba1 by Moody's. Investments in these
higher-yielding securities may be accompanied by a greater degree of credit risk
than higher-rated securities. Additionally, lower-rated securities may be more
susceptible to adverse economic and competitive industry conditions than
investment-grade securities.
The Fund may invest up to 15% of its total assets in illiquid securities and
other securities which may not be readily marketable. In addition, the Fund may
purchase securities sold in reliance of Rule 144A of the Securities Act of 1933.
The relative illiquidity of some of the Fund's portfolio securities may
adversely affect the ability of the Fund to dispose of such securities in a
timely manner and at a fair price at times when it might be necessary or
advantageous for the Fund to liquidate portfolio securities.
NOTE 6. SUBSEQUENT EVENT
On June 1, 1999, the Board of Directors of the Fund declared a dividend of
$0.1033 per share payable on June 30, 1999, to shareholder of record on June 18,
1999.
22
-------
C H A R T W E L L
<PAGE>
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 1999
- --------------------------------------------------------------------------------
SUPPLEMENTAL PROXY INFORMATION
- --------------------------------------------------------------------------------
The Annual Meeting of Shareholders of the Chartwell Dividend and Income Fund was
held on April 21, 1999 at the offices of PFPC Inc., 400 Bellevue Parkway,
Wilmington, Delaware. The description of each proposal and number of shares
voted at the meeting are as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
VOTES VOTES
VOTES FOR AGAINST WITHHELD
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. To elect the following
director to serve as Class
I director for a one-year
term expiring in 2000: Kenneth F. Herlihy 13,534,134 -- 177,452
To elect the following
directors to serve as Class
II directors for a two-year Bernard P. Schaffer 13,535,134 -- 176,452
term expiring in 2001: Kevin A. Melich 13,534,134 -- 177,452
To elect the following
directors to serve as Class
III directors for a
three-year term expiring in Winthrop S. Jessup 13,535,134 -- 176,452
2002: William Kronenberg III 13,534,134 -- 177,452
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
VOTES VOTES
VOTES FOR AGAINST WITHHELD
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
2. To ratify the selection of
PricewaterhouseCoopers LLP
as independent public
accountants for the fiscal
year ending November 30,
1999: 13,345,349 137,201 229,036
- --------------------------------------------------------------------------------
</TABLE>
23
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C H A R T W E L L
<PAGE>
DIRECTORS
Winthrop S. Jessup, Chairman
Kenneth F. Herlihy
William Kronenberg III
Kevin A. Melich
Bernard P. Schaffer
OFFICERS
Winthrop S. Jessup, President
Bernard P. Schaffer, Vice President
Kevin A. Melich, Vice President
Timothy J. Riddle, Vice President and Treasurer
G. Gregory Hagar, Vice President
Leslie M. Varrelman, Vice President
Michael P. Malloy, Secretary
Maria E. Pollack, Assistant Secretary
INVESTMENT MANAGER
Chartwell Investment Partners, L.P.
1235 Westlakes Drive, South 330
Berwyn, PA 19312
ADMINISTRATOR
Princeton Administrators, L.P.
P.O. Box 9095
Princeton, NJ 08543
CUSTODIAN AND TRANSFER AGENT
PNC Bank, N.A.
400 Bellevue Parkway
Wilmington, DE 19809
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
2400 Eleven Penn Center
Philadelphia, PA 19103
LEGAL COUNSEL
Drinker Biddle & Reath LLP
One Logan Square
18th & Cherry Streets
Philadelphia, PA 19103
This report, including the financial statements herein, is transmitted to the
shareholders of Chartwell Dividend and Income Fund, Inc. It is not a prospectus,
circular or representation intended for use in the purchase of shares of the
Fund or any securities mentioned in the report. Past performance results should
not be considered a representation of future performance.
Chrtw--5/99
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ASSET ALLOCATION
(AS OF MAY 31, 1999)
