<PAGE>
- --------------------------------------------------------------------------------
DELAFIELD 600 FIFTH AVENUE, NEW YORK, N.Y. 10020
FUND, INC. (212) 830-5200
================================================================================
Dear Fellow Shareholders:
To those of you who received our January letter, this one will be repetitious
but for the benefit of those who did not, we are reprinting it verbatim.
During the past quarter our Fund's asset value increased 7.5% versus an increase
of 8.3% in the Standard & Poor's 500, each on a total return basis. The Fund's
net asset value on December 31, 1996 was $13.49 per share, which is after taking
into account three dividends paid on December 31st amounting to $1.92 per share.
The dividends were composed of ordinary income of $.0873, short term capital
gains of $.467, and a long term capital gains distribution of $1.3681 per share.
For the year as a whole the Fund appreciated 26.35% versus an increase of 23%
for the Standard & Poor's 500. At year-end our Fund was invested 72.1% in
equities and had grown to $61,279,432.
We are pleased with the performance of the Fund this year especially in view of
the large reserves which we have maintained. We expect to continue in this
posture until either we discover new undervalued investment opportunities or
there is a correction in the stock market allowing us to establish positions at
more reasonable prices.
While we have been overly cautious we will remain so, as signs of Mr.
Greenspan's "irrational exuberance" continue to multiply. Here are a few
examples: in the first 11 months of 1996 there were $50 billion of initial
public offerings, more than twice those in all of 1995; mergers/acquisitions
amounted to $500 billion in the first nine months, 41% more than in all of 1995;
and the flow to equity mutual funds amounted to $207 billion in the first 11
months versus $130 billion in all of 1995. Traditional market benchmarks are at
all time highs: the value of stocks in relation to GDP is the highest ever; the
Standard & Poor's 500 dividend yield is the lowest of this century; the Tobin Q
ratio is the highest ever recorded; the S & P 500 book value ratio is at over 4,
the highest ever; the value of stocks relative to house prices is up past
previous peak levels; the number of hours worked to buy one unit of the S & P
500 is close to 60, a record; the number of active investment clubs has soared
to a peak roughly six times that of 1980; and there are now many who trade the
stock market for a living.
Many economists and stock market pundits believe that we are in a virtuous
economic and political cycle which militates that investors be fully committed
to common stocks over an extended period of time. Market timing has become a
dirty word and there are many studies to prove that it is ineffectual, if not
counterproductive. Nevertheless, over the years we have found that above-average
investment performance comes more from stock selection more than it does from
commitment to the stock market.
None of the above means that we believe that one should be mostly or entirely
out of the stock market. Rather we think yellow flags are flying. Our
investments seem well positioned and we look forward to seeing them prosper in
the year ahead. If we have analyzed our holdings correctly, then there are
reasons for each to perform well independently within the market. Still, we have
lived through many market cycles from 1957 to present and this seems a time when
it is wise to keep some powder dry. We always like to have cash available to buy
our favorite investments when they decline due to some unforeseen event. As was
pointed out in a recent issue of Barron's, there have been no extended and
severe market declines since 1973.
On a macro basis we believe the economy's performance is now more intertwined
with the stock market than ever before. A general feeling of well-being, derived
from an increasing exposure to equities direct and indirect in a rising market,
should buoy consumer expenditures despite some deterioration in
creditworthiness. Industry remains in fighting trim. So we see no obvious
pitfalls ahead, only a nagging feeling that "this is as good as it gets."
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
In late October we began to accumulate a position in Alexander & Alexander, a
large insurance broker with a fine market position, but one which had stumbled
in recent years. An infusion of capital several years ago from the American
International Group and a new management team led by Frank Zarb (formerly with
Primerica/Travelers) and Ed Kosnick were working hard to clean up the balance
sheet, cut costs and improve the unprofitable parts of its business. However,
before we established a full position, the Aon Group made a cash offer of $17.50
per share for the company which was accepted by the Board. Accordingly, in
keeping with our general policy of selling to arbitrageurs rather than waiting
for the final conclusion of a deal, we have sold our shares.
The Board of Federal-Mogul recently announced the appointment of Richard Snell
as its new Chairman, President and Chief Executive Officer. Since 1993 Mr. Snell
has been the President and Chief Executive Officer of Tenneco Automotive, best
known for its Monroe and Walker brands. Over that time worldwide sales grew from
$1.8 billion to nearly $3 billion. We anticipate that he will present his vision
of the new Federal-Mogul to the investment community in early February. This
will likely entail further streamlining measures to reduce the overall cost
structure and a plan to grow revenues. Given his early comments that he believes
the company's core competency lies in its engine parts business, it would not be
surprising if he attempts to exit the foreign retail store business developed by
his predecessor.
At year-end Corning Glass Works distributed shares in two of its businesses on a
tax-free basis. The first, Quest Diagnostics, is its clinical labs business.
This is being distributed on the basis of one new Quest share for each eight
shares of Corning owned at year-end. The second, Covance, is Corning
Pharmaceutical Services. It is being distributed on the basis of one Covance
share for each four shares of Corning owned at year-end. Quest is a sizable
business with revenues in excess of $1.6 billion and a good management team
which operates in an extraordinarily difficult business and regulatory
environment. Hence, profits will be modest. Covance, with an equally fine
management team and revenues of close to $500 million, has great prospects, but
seems fully valued in the marketplace. For the moment we are holding all three
pieces.
BancTec, one of our largest holdings, seems positioned to do particularly well
in 1997. BancTec is a worldwide systems integration services company
specializing in automated applications for the banking, financial services,
insurance, health care and government markets. BancTec's revenues amounted to
roughly $550 million in 1996 and we expect the company earned roughly $1.75 per
share. This year we anticipate earnings in the vicinity of $2.00 per share. We
believe that the company will generate substantial excess cash and be in a
position to widen its margins further in 1998 and beyond.
In October, Waban announced that it would spin off 100% of its BJ's Wholesale
Club division on a share-for-share basis to stockholders. HomeBase, its west
coast home improvement chain, will be the surviving entity and Waban will change
its name to HomeBase. Pending shareholder approval and receipt of a tax-free
ruling from the IRS, we will receive shares in two publicly traded companies. We
estimate that the combined value ultimately should be in excess of $30 per
share. It is anticipated that the transaction will take place this spring.
On December 31st shareholders of the Provident Companies and Paul Revere voted
to merge. This transaction, which was restructured after an in-depth examination
of Paul Revere's reserves (to the benefit of the Provident Companies), is
scheduled to close as soon as permission is received from the insurance
regulators of the Commonwealth of Massachusetts. We hope this will occur in the
next few weeks. We expect the combined companies, with premium income of $2.3
billion, to show outstanding growth in the next several years.
Sunglass Hut, with estimated revenues in excess of $500 million, is the dominant
specialty retailer of sunglasses, with over 2,000 locations worldwide. Wall
Street, enamored by the company's very rapid sales growth, accorded it a market
valuation of nearly $2 billion, or four times revenue. The shares, as recently
as March of this year, traded at $36 per share. Subsequently management
announced a slowing of retail sales and the stock plummeted by more than 80%.
Clearly the valuation earlier in the year was unwarranted. However, we view the
correction as excessive given the company's strong franchise and ability to
generate free cash flow. Management also appears sound and should take the steps
needed to refocus the company's efforts.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Elsag Bailey is the second largest company in the process control industry.
Elsag which has been built in recent years through a series of acquisitions
including Bailey Controls, Fisher & Porter and Hartmann & Braun is expected to
show revenues of roughly $1.8 billion in 1997. This amalgamation has not been
without incident. High expectations for 1996 were dashed when new order rates
were modestly below expectations and investors were further disquieted by a
quarrel with the city of Detroit over a major contract for a water purification
plant.
We think most of the growing pains are over and that Elsag Bailey will come to
be viewed as a strong competitor in the worldwide engineering market with
particular expertise in automation systems for electric utilities. It is now a
worldwide competitor in scope, and financial management systems are in place to
allow the company to be managed as an integrated business. In early 1996, at the
time of the Hartmann & Braun acquisition, Finmeccanica infused capital into
Elsag Bailey at $26.75 per share and at year-end the Italian automation arm was
merged into Elsag Bailey on terms which were negotiated prior to the recent
decline in the market.
Elsag Bailey's earning power was masked in 1996 by virtue of consolidation
accounting. While expectations have been lowered, management is forecasting
earnings in the vicinity of $2.00 per share for 1997, which, if achieved, will
certainly lead to higher expectations in 1998 and beyond. While we recognize it
is very difficult to forecast earnings for a company with major operations in
the Far East, Europe (especially Germany) and the Americas, we nonetheless feel
that Elsag Bailey's substantial assets and market position are undervalued by
investors today.
Elsag Bailey is controlled by Finmeccanica which is majority-owned by the
Italian government. There are rumors that Finmeccanica will be more fully
privatized by the end of 1998, an event which we think will be viewed favorably
by shareholders of Elsag Bailey.
Atlantic Realty, which we have discussed before, was spun out when RPS merged
with Ramco-Gershenson. At the time of the distribution, management indicated
that they expected the sale or liquidation of ATLRS within 18 months. This was
conditioned upon settlement of several issues with the IRS. To date no
settlement has been announced and we await events. In the interim, Atlantic
Realty declared a dividend of $0.39 per share, payable January 21, 1997.
Our Fund has grown nicely in its first three years of existence. We lack,
however, any formal marketing effort. As a result, the Fund has grown only
through performance and word-of-mouth from our friends. We feel it would be
advantageous for the Fund to continue to grow moderately, so we would welcome
any and all inquiries from potential investors, large or small. Anyone
interested is encouraged to call Cindy Jeran at (212) 830-5455 or either of us.
The Delafield Fund is now available through Charles Schwab's Mutual Fund
Marketplace.
With very best wishes.
Sincerely,
\s\J. Dennis Delafield \s\Vincent Sellecchia
J. Dennis Delafield Vincent Sellecchia
Chairman President
Tel. (212) 830-5454 Tel. (212) 830-5456
P.S. The net asset value per share of the Fund is determined as of 4:00PM, New
York City time on each Fund Business Day (as fully described on page 16 of
the Fund Prospectus). In addition to the Fund's published NASDAQ listing,
you may check its net asset value at any time by calling 1-800-221-3079
(or, 212-830-5220) to speak directly to a Fund representative during the
normal business hours of 8:30AM - 5:30PM, NYC time. During off business
hours, you may use the same 800 number (or, 212-830-5225) for a
pre-recorded message. The new 3-digit number for The Delafield Fund is
819.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN WITH INCOME*
<TABLE>
<CAPTION>
Indices
-------
S & P
Delafield Fund** 500
-------------- -----
<S> <C> <C>
Quarter ended December 31, 1996 7.5% 8.3%
Year ended December 31, 1996 26.4 23.0
Inception, November 19, 1993 to December 31, 1996 72.9 73.3
<CAPTION>
Annual Average Total Return with Income*
S & P
Delafield Fund** 500
-------------- -----
<S> <C> <C>
Three years ended December 31, 1996 19.3% 19.7%
Inception, November 19, 1993 to December 31, 1996 19.2 19.3
<CAPTION>
ASSET MIX
12/31/95 3/31/96 6/30/96 9/30/96 12/31/96
-------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Equities 74.0% 72.7% 73.9% 78.0% 72.1%
U.S. Government Obligations 6.6 11.4 14.8 14.3 13.0
Corporate Bonds 2.6 1.9 1.8 1.7 1.6
Cash Equivalents 16.8 14.0 9.5 6.0 13.3
-------- ------- ------- ------- --------
100% 100% 100% 100% 100%
<CAPTION>
TEN LARGEST HOLDINGS
% of Total
Company Portfolio
- ------- ---------
<S> <C>
BancTec, Inc. 4.9%
Federal-Mogul Corporation 3.6
Conseco Inc. 3.1
Allegheny Teledyne Inc. 2.9
Varian Associates Inc. 2.9
Zurich Reinsurance Centre Holdings, Inc. 2.8
Polaroid Corporation 2.5
Elsag Bailey Process Automation, N.V. 2.3
Great Lakes Chemical Corporation 2.3
AMETEK, Inc. 2.3
----
29.6%
----
</TABLE>
* The performance data quoted above represents past performance. The investment
return and principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than the orginal cost.
** Delafield Performance is stated after fees.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Comparison of change in value of $10,000 investment in the
Delafield Fund, Inc. and the S&P Index.
The Table below represents the omitted line graph which compares the change in
value of $10,000 investment in the Delafield Fund, Inc. and the S&P Index.
<TABLE>
<CAPTION>
INCEPTION S&P 500 DELAFIELD
- --------- --------- ---------
<C> <C> <C>
11/19/93 10,000.00 10,000.00
12/31/93 10,112.00 10,170.00
03/31/94 9,728.76 10,060.16
06/30/94 9,769.62 10,360.96
09/30/94 10,247.35 10,892.48
12/31/94 10,245.30 10,738.90
03/31/95 11,243.19 11,805.27
06/30/95 12,316.92 12,349.49
09/30/95 13,296.11 13,075.64
12/31/95 14,096.54 13,679.74
03/31/96 14,853.52 14,571.66
06/30/96 15,520.45 15,565.44
09/30/96 16,000.03 16,080.66
12/31/96 17,334.43 17,283.49
</TABLE>
The following table was embedded in the line graph represented above.
<TABLE>
<CAPTION>
Average Annual Return
-------------------------------------------
Since
One Year Five Year 11/19/1993
------------ ------------- ------------
<S> <C> <C> <C>
Delafield Fund, Inc. 26.35% N/A 19.20%
S&P 500 22.96% N/A 19.30%
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
DELAFIELD FUND, INC.
STATEMENT OF NET ASSETS
DECEMBER 31, 1996
================================================================================
<TABLE>
<CAPTION>
Value
Shares (Note 1)
------ --------
Common Stocks (72.07%)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Banking (1.16%)
Mellon Bank Corporation 10,000 $ 710,000
---------------
Chemical (3.07%)
Freeport McMoRan, Inc. 15,000 481,875
Great Lakes Chemical Corporation 30,000 1,402,500
---------------
1,884,375
---------------
Consumer Products & Services (4.92%)
Bush Industries Inc. 50,000 962,500
O'Sullivan Industries Holdings* 38,000 532,000
Polaroid Corporation 35,000 1,522,500
---------------
3,017,000
---------------
Energy (2.46%)
ENSERCH Corporation 36,500 839,500
McDermott International, Inc. 40,000 665,000
---------------
1,504,500
---------------
Food and Beverage (1.88%)
Rykoff-Sexton Inc. 72,700 1,154,113
---------------
Industrial Products (17.64%)
AMETEK, Inc. 62,000 1,379,500
Atchison Casting Corporation* 39,200 705,600
Corning Inc. 10,000 462,500
Elsag Bailey Process Automation, N.V.* 75,000 1,406,250
Federal-Mogul Corporation 100,000 2,200,000
Greif Brothers Corporation Class A 11,500 324,875
Navistar International Corporation* 70,000 638,750
Sheldahl Inc.* 35,000 651,875
Stimsonite Corporation* 90,000 542,813
Varian Associates Inc. 35,000 1,780,625
Watts Industries Inc. Class A 30,000 716,250
----------------
10,809,038
----------------
Insurance (Life) (5.09%)
Conseco Inc. 30,000 1,912,500
Provident Companies Inc. 25,000 1,209,375
----------------
3,121,875
----------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
================================================================================
<TABLE>
<CAPTION>
Value
Shares (Note 1)
------ --------
Common Stocks (Continued)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Insurance (Property/Casualty) (4.64%)
Highlands Insurance Group* 25,000 $ 506,250
Home State Holdings Inc.* 120,000 900,000
Orion Capital Corporation 15,000 916,875
20th Century Industries 30,700 518,062
---------------
2,841,187
---------------
Insurance (Reinsurance) (4.22%)
Risk Capital Holding Inc.* 45,000 866,250
Zurich Reinsurance Centre Holdings, Inc. 55,000 1,718,750
---------------
2,585,000
---------------
Metals/Mining (3.86%)
Allegheny Teledyne Inc. 78,000 1,794,000
Armco Inc.* 138,000 569,250
---------------
2,363,250
---------------
Office Equipment (5.21%)
BancTec, Inc.* 145,000 2,990,625
Wang Laboratories, Inc.* 10,000 203,750
---------------
3,194,375
---------------
Real Estate (3.56%)
Atlantic Realty Trust 21,875 221,484
Kimco Realty Corporation 35,000 1,220,625
Ramco-Gershenson Properties Trust 43,750 738,281
---------------
2,180,390
---------------
Retail (5.64%)
The Limited, Inc. 52,214 959,432
Sunglass Hut International, Inc.* 165,000 1,196,250
Waban Inc.* 50,000 1,300,000
---------------
3,455,682
---------------
Textile/Apparel (4.50%)
Burlington Industries Inc.* 40,000 440,000
Delta Woodside Industries Inc. 210,000 1,338,750
Farah Inc.* 126,000 976,500
---------------
2,755,250
---------------
Miscellaneous (4.22%)
Florida East Coast Industries 13,000 1,135,875
Gilbert Associates, Inc. 74,700 1,045,800
White River Corporation* 7,400 403,300
---------------
2,584,975
---------------
Total Common Stocks (Cost $36,922,152) 44,161,010
---------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
DELAFIELD FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)
DECEMBER 31, 1996
================================================================================
<TABLE>
<CAPTION>
Face Value
Amount (Note 1)
------ --------
Corporate Bonds (1.61%)
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Industrial Products (0.35%)
AMETEK, Inc. 9.750% debentures, due 03/15/2004 200,000 $ 214,250
--------------
Insurance (Life) (0.22%)
PennCorp Financial Group 9.250%, due 12/15/2003 125,000 132,500
--------------
Miscellaneous (1.04%)
American Annuity Group Senior Notes, 9.500%, due 08/15/2001 600,000 637,500
--------------
Total Corporate Bond (Cost $925,178) 984,250
--------------
<CAPTION>
U.S. Government Obligations (13.04%)
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Treasury Note, 5.500%, due 07/31/97 $8,000,000 7,992,504
--------------
Total U.S. Government Obligations (Cost $7,999,127) 7,992,504
--------------
<CAPTION>
Short-Term Investments (12.84%)
Repurchase Agreements (12.84%)
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
J.P. Morgan Securities Inc., 6.65%, due 01/02/97
(Collateralized by $6,120,000
U.S. Treasury Note, 10.375%, due 11/15/12) $7,871,000 7,871,000
--------------
Total Short-Term Investments (Cost $7,871,000) 7,871,000
--------------
Total Investments (99.56%) (Cost $53,717,457+) 61,008,764
Cash and Other Assets, net of liabilities (0.44%) 270,668
--------------
Net Assets (100.00%), 4,542,193 shares outstanding (Note 3) $ 61,279,432
==============
Net asset value, offering and redemption price per share $ 13.49
==============
</TABLE>
* Non-income producing.
+ Aggregate cost for federal income tax purposes is $53,722,265. Aggregate
unrealized appreciation and depreciation, based on cost for Federal income
tax purposes, are $7,775,676 and $489,177, respectively.
- --------------------------------------------------------------------------------
See Notes to Financial Statements
<PAGE>
- --------------------------------------------------------------------------------
DELAFIELD FUND, INC.
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
================================================================================
<TABLE>
<CAPTION>
INVESTMENT INCOME
<S> <C>
Income:
Interest....................................................................... $ 754,510
Dividends...................................................................... 532,168
--------------
Total income................................................................ 1,286,678
--------------
Expenses: (Note 2)
Investment management fee...................................................... 419,025
Administration fee............................................................. 109,994
Shareholder servicing fee...................................................... 130,945
Custodian expenses............................................................. 10,598
Shareholder servicing and related shareholder expenses......................... 41,605
Legal, compliance and filing fees.............................................. 12,583
Audit and accounting........................................................... 38,068
Directors' fees and expenses................................................... 6,924
Amortization of organization costs............................................. 8,718
Other.......................................................................... 1,584
--------------
Total expenses.............................................................. 780,044
Less:
Fees waived................................................................. ( 106,606)
Expenses paid indirectly.................................................... ( 3,314)
--------------
Net expenses................................................................ 670,124
--------------
Net investment income....................................................... 616,554
--------------
<CAPTION>
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
<S> <C>
Net realized gain (loss) on investments............................................ 7,345,183
Net change in unrealized appreciation (depreciation) of investments................ 4,380,986
--------------
Net gain (loss) on investments............................................. 11,726,169
--------------
Increase (decrease) in net assets from operations.................................. $ 12,342,723
==============
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
DELAFIELD FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
================================================================================
<TABLE>
<CAPTION>
Year Period from
Ended October 1, 1995 to
December 31, 1996 December 31, 1995
----------------- -----------------
INCREASE (DECREASE) IN NET ASSETS
<S> <C> <C>
Operations:
Net investment income.................................................... $ 616,554 $ 170,368
Net realized gain on investments......................................... 7,345,183 630,148
Net change in unrealized appreciation (depreciation) .................... 4,380,986 1,216,404
------------- -------------
Increase (decrease) in net assets from operations...................... 12,342,723 2,016,920
Distributions from:
Net investment income.................................................... ( 616,554) ( 179,845)
Net realized gain on investments......................................... ( 7,293,283) ( 643,645)
In excess of net realized gain........................................... ( -- ) ( 51,900)
Return of capital........................................................ ( 516) ( 8,609)
Capital share transactions (Note 3)....................................... 11,117,028 2,280,846
------------- --------------
Total increase (decrease).............................................. 15,549,398 3,413,767
Net Assets:
Beginning of period...................................................... 45,730,034 42,316,267
------------- --------------
End of period............................................................ $ 61,279,432 $ 45,730,034
============= ==============
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
DELAFIELD FUND, INC.
NOTES TO FINANCIAL STATEMENTS
================================================================================
1. Summary of Accounting Policies
Delafield Fund, Inc. is a no-load, diversified, open-end management investment
company registered under the Investment Company Act of 1940. The investment
objectives of the Fund are to seek long-term preservation of capital and growth
of capital by investing primarily in equity securities of domestic companies.
Effective October 1, 1995 the Fund changed its fiscal year end to December 31.
Its financial statements are prepared in accordance with generally accepted
accounting principles for investment companies as follows:
a) Valuation of Securities -
Securities traded on a national securities exchange or admitted to trading
on the National Association of Securities Dealers Inc. Automated Quotations
National List are valued at the last reported sales price on the last
business day of the fiscal period. Common stocks for which no sale was
reported on that date and over-the-counter securities, are valued at the
mean between the last reported bid and asked prices. United States
Government obligations and other debt instruments having sixty days or less
remaining until maturity are stated at amortized cost. Debt instruments
having a remaining maturity of more than sixty days are valued at the
highest bid price obtained from a dealer maintaining an active market in
that security or on the basis of prices obtained from a pricing service
approved as reliable by the Board of Directors. All other investment
assets, including restricted and not readily marketable securities, are
valued in such manner as the Board of Directors in good faith deems
appropriate to reflect their fair market value.
b) Federal Income Taxes -
It is the Fund's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
all of its taxable income to its shareholders. Therefore, no provision for
federal income tax is required.
c) Use of Estimates -
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of increases and decreases in
net assets from operations during the reporting period. Actual results
could differ from those estimates.
d) General -
Securities transactions are recorded on the trade date basis. Interest
income is accrued as earned and dividend income is recorded on the
ex-dividend date. Realized gains and losses from securities transactions
are recorded on the identified cost basis. Dividends and capital gain
distributions to shareholders, which are determined in accordance with
income tax regulations, are recorded on the ex-dividend date. It is the
Fund's policy to take possession of securities as collateral under
repurchase agreements and to determine on a daily basis that the value of
such securities plus accrued interest are sufficient to cover the value of
the repurchase agreements.
2. Investment Management Fees and Other Transactions with Affiliates
Under the Investment Management Contract, the Fund pays an investment management
fee to Reich & Tang Asset Management, L.P. (the "Manager") equal to .80% of the
Fund's average daily net assets.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
DELAFIELD FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
2. Investment Management Fees and Other Transactions with Affiliates
Pursuant to an Administrative Services Agreement, the Fund pays to the Manager
an annual fee of .21% of the Fund's average daily net assets.
Pursuant to a Distribution Plan adopted under Securities Exchange Commission
Rule 12b-1, the Fund and Reich & Tang Distributors L.P. (the Distributor) have
entered into a Distribution Agreement and a Shareholder Servicing Agreement. For
its services under the Shareholder Servicing Agreement, the Distributor receives
from the Fund an annual fee equal to .25% of the Fund's average daily net
assets. There were no additional expenses borne by the Fund pursuant to the
Distribution Plan.
During the year ended December 31, 1996, the Distributor voluntarily waived
shareholder servicing fees of $106,606.
Brokerage commissions paid during the period to the Distributor amounted to
$48,305.
Fees are paid to Directors who are unaffiliated with the Manager on the basis of
$1,500 per annum plus $250 per meeting attended.
Included in the Statement of Operations under the caption "Shareholder servicing
and related shareholder expenses" are fees of $18,334 paid to Reich & Tang
Services L.P., an affiliate of the Manager as servicing agent for the Fund.
Included in the Statement of Operations under the captions "Custodian expenses"
and "Shareholder servicing and related shareholder expenses" are expense offsets
of $3,314.
3. Capital Stock
At December 31, 1996, 20,000,000,000 shares of $.001 par value stock were
authorized and capital paid in amounted to $53,992,933. Transactions in capital
stock were as follows:
<TABLE>
<CAPTION>
Year Ended Period Ended
December 31, 1996 December 31, 1995
------------------------- -------------------------
Shares Amount Shares Amount
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Sold........................................ 486,042 $ 6,686,946 221,341 $ 2,650,363
Issued on reinvestment of dividends......... 584,374 7,889,402 71,878 881,282
Redeemed.................................... ( 259,075) ( 3,459,320) ( 103,911) ( 1,250,799)
--------- ---------- --------- ----------
Net increase (decrease)..................... 811,341 $11,117,028 189,308 $ 2,280,846
========= ========== ========= ==========
</TABLE>
4. Investment Transactions
Purchases and sales of investment securities, other than U.S. Government direct
and agency obligations and short-term investments, totaled $33,969,114 and
$35,368,125 respectively.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
================================================================================
5. Selected Financial Information
<TABLE>
<CAPTION>
Year Period from Year November 19, 1993
Ended October 1, 1995 to Ended (Inception) to
December 31, 1996 December 31, 1995 September 30, 1995 September 30, 1994
----------------- ----------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
(for a share outstanding throughout the period)
Net asset value, beginning of period........ $ 12.26 $ 11.95 $ 10.82 $ 10.00
--------- ---------- ---------- ---------
Income from investment operations:
Net investment income................... .16 .05 .13 .07
Net realized and unrealized
gains (losses) on investments......... 3.07 .50 1.99 .82
--------- ---------- ---------- ----------
Total from investment operations............ 3.23 .55 2.12 .89
--------- ---------- ---------- ----------
Less distributions:
Dividends from net investment income.... ( .16) ( .05) ( .13) ( .07)
Distributions from net
realized gains on investments......... ( 1.84) ( .18) ( .86) --
In excess of net realized gain.......... -- ( .01) -- --
--------- ---------- ---------- ----------
Total distributions......................... ( 2.00) ( .24) ( .99) ( .07)
--------- ---------- ---------- ----------
Net asset value, end of period.............. $ 13.49 $ 12.26 $ 11.95 $ 10.82
========= ========== ========== ==========
Total Return................................ 26.35% 4.62%(a) 20.05% 8.93%(a)
========= ========== ========== ==========
Ratios/Supplemental Data
Net assets, end of period (000)............. $ 61,279 $ 45,730 $ 42,316 $ 9,658
Ratios to average net assets:
Expenses................................ 1.29%(b)(d) 1.67%*(b)(d) 1.65%(b) 1.78%*(b)
Net investment income................... 1.18%(b) 1.57%*(b) 1.35%(b) 0.96%*(b)
Portfolio turnover rate..................... 75.54 20.49 70.36 42.84
Average commission rate paid (per share).... $ .0378(c) $ .0343(c) -- --
</TABLE>
* Annualized
(a) Not Annualized
(b) Net of investment management, administration and shareholder servicing fees
waived equivalent to .20%, .20%, .71% and 1.12%, respectively, of average
net assets.
(c) Required by regulations issued in 1995.
(d) Includes expenses paid indirectly, equivalent to .01% and .07%,
respectively, of average net assets.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
DELAFIELD FUND, INC.
INDEPENDENT AUDITOR'S REPORT
================================================================================
The Board of Directors and Shareholders
Delafield Fund, Inc.
We have audited the accompanying statement of net assets of Delafield Fund, Inc.
as of December 31, 1996 and the related statement of operations for the year
then ended, the statements of changes in net assets for the year then ended and
the period from October 1, 1995 to December 31, 1995, and the selected financial
information for the periods indicated in the accompanying financial statements.
These financial statements and selected financial information are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and selected financial information based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and selected
financial information are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1996 by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and selected financial information
referred to above present fairly, in all material respects, the financial
position of Delafield Fund, Inc. as of December 31, 1996, the results of its
operations, the changes in its net assets and the selected financial information
for the periods indicated, in conformity with generally accepted accounting
principles.
\s\McGladrey & Pullen, LLP
New York, New York
February 10, 1997
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
DELAFIELD
FUND, INC.
Annual Report
December 31, 1996
- --------------------------------------------------------------------------------
<PAGE>
- -----------------------------------------------------
This report is submitted for the general
information of the shareholders of the Fund. It is
not authorized for distribution to prospective
investors in the Fund unless preceded or
accompanied by an effective prospectus, which
includes information regarding the Fund's
objectives and policies, experience of its
management, marketability of shares, and other
information.
- -----------------------------------------------------
Delafield Fund, Inc.
600 Fifth Avenue
New York, New York 10020
Manager
Reich & Tang Asset Management, L.P.
600 Fifth Avenue
New York, New York 10020
Custodian
Investors Fiduciary Trust Company
127 West 10th Street
Kansas City, Missouri 64105
Transfer Agent
Reich & Tang Services L.P.
600 Fifth Avenue
New York, New York 10020
- --------------------------------------------------------------------------------
