<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 14.3% versus an
increase of 16.3% in the Russell 2000 and 21.3% in the Standard & Poor's 500,
each on a total return basis. The Fund's net asset value as of December 31st was
$13.06, which was after taking into account an ordinary income dividend of
$0.051 per share paid on December 29th.
For the year as a whole, the Fund's asset value declined 11.5% versus a decrease
of 2.6% in the Russell 2000 and an increase of 28.6% in the Standard & Poor's
500. At the beginning of the year our commitment to equities was 73.4%, by
year-end this had increased to roughly 99% as valuations became compelling.
We are certainly disappointed with our results in 1998. Although we experienced
some recovery in the fourth quarter, many of our investments remain severely
depressed. Even though their market prices have declined significantly, we
believe their intrinsic values have increased and will increase further in 1999.
We expect this dichotomy to change in 1999 as the internal improvements become
evident leading to increases in valuations. If this improvement is not
recognized in the marketplace, we believe it is likely to be by larger companies
which will wish to acquire attractive business franchises at bargain basement
prices.
It seems worthwhile reiterating the strategy which we employ to protect your
capital and enhance its growth. This strategy has resulted in above average
returns over many years and we believe it is low risk, logical and likely to
result in attractive results in the years ahead.
1. We search for companies that are selling at prices which seem modest in
relationship to the company's intrinsic value.
2. We meet with management, visit plants, talk to competition, consider the
makeup of the Board of Directors and make a judgment as to whether we wish
to be in business with the management. In other words, we try to understand
the business of the companies in which we invest and the individuals who
direct the company's future.
3. We search for companies wherein something may change which will alter that
company's future for the better. These can be simple matters ranging from a
change in the management or management's attitude toward how they run the
business, to a change in control, to a change in business opportunity, or
to a change in the dynamics of a company's cash flow and its use.
4. If we perform our analysis correctly, the value added we bring to you is an
earlier and better understanding of the companies in our portfolio than
other investors have. Then, if the companies begin to improve, their
earnings should increase and they should be valued at a higher price
earnings multiple.
5. We have never worried about the profits that we did not make. We worry much
more about what we might lose. We believe that stock selection is much more
relevant to successful investing than total commitment to equities. In the
volatile markets which have developed over the last 15 to 20 years, we have
come to believe that the long term investors' best hedge against a violent
decline is to have cash with which to buy companies when prices seem unduly
depressed.
Your portfolio is composed of such companies. We have become fully invested as
we believe that many of our holdings have suffered a sharp market decline, which
is unwarranted. Usually a good part of our quarterly letter is committed to a
description of several of our holdings. We will forego that exercise in this
letter since we have discussed the majority of our large holdings in recent
letters.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
While we have confidence that our investments will show improved performance in
1999, the geo-political and economic environments have not changed for the
better. In the early part of the year there will be a focus on Washington and
impeachment activities. In the global arena uncertainties surrounding events in
Russia, the Middle East, Latin America (in particular Brazil) and Asia will
continue to make for an unsettled environment. The advent of the Euro as a major
financial competitor to the U. S. dollar may have unforeseen consequences.
Moreover, depressed commodity prices and intensely competitive conditions are
likely to keep the inflation rate subdued but lead to diminishing profit margins
and earnings disappointments.
We are not in the camp which believes that catastrophe is lurking at the advent
of the millennium when the "year 2000 problem" will be fully upon us. Most
companies large and small are addressing this directly and to the extent
possible requiring their suppliers and their customers to address the issue as
well. Certainly there will be problems. Perhaps fortunately some have already
become evident, which will lead to ever increasing vigilance throughout this
year.
The market itself is clearly becoming more speculative. Valuations of Internet
companies have reached levels from which there is no room for error whatsoever,
and secondary stocks have trailed large stocks creating a huge disparity.
Our companies have managements which we believe are fully up to the task of
improving their position within a difficult and changing environment. Their
valuation should be dictated by profit improvement from restructuring and excess
free cash flow. Testimony to this expectation comes from both insider open
market purchases and increasing share repurchase programs.
We have often likened our style of investing to gardening. You plant seeds
expecting them to germinate and grow. But one never knows how long it will take
or which will ripen first. Often there is a steady harvest, but sometimes there
can be a lengthy period without fruit. This approach does not necessarily
correlate with broad market movements but over time the harvest should be
bountiful.
We feel it would be advantageous of the Fund to grow moderately, so we welcome
inquiries from potential investors, large or small. Anyone interested is
encouraged to call Cleo Piperis at (212) 830-5452 or either of us.
We have become aware that many shareholders have not been receiving our
quarterly letters since they may not be distributed to those who are not direct
shareholders. Accordingly, anyone who wishes to be on our mailing list should
either call Cleo or write to us and we will be happy to add you to the list.
The Delafield Fund is now available through Charles Schwab's Mutual Fund
Marketplace, Fidelity Investments Fund Network, Jack White & Company and
National Investor Services Corp. (Waterhouse Securities) and First Trust Co.
(Datalynx).
We wish you all a healthy and happy New Year.
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 4:00 P.M.,
New York City time on each Fund Business Day (as fully described on page 17
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 8:30 A.M. - 5:30 P.M.,
NYC time. During off business hours, you may use the same 800 number (or,
212-380-5225) for a pre-recorded message. The 3-digit code number for The
Delafield Fund is 819.
Our Website address is: www.delafieldfund.com.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN WITH INCOME*
Russell
S & P 2000
Delafield Fund** 500 Total
-------------- ----- -------
<S> <C> <C> <C>
Quarter ended December 31, 1998 14.3% 21.3% 16.3%
Year ended December 31, 1998 (11.5) 28.6 (2.6)
Inception, November 19, 1993 to December 31, 1998 83.1 197.2 80.8
<CAPTION>
Annual Average Total Return with Income*
Russell
S & P 2000
Delafield Fund** 500 Total
-------------- ----- -------
<S> <C> <C> <C>
Three years ended December 31, 1998 10.2% 28.2% 11.6%
Five years ended December 31, 1998 12.5 24.1 11.9
Inception, November 19, 1993 to December 31, 1998 12.6 23.7 12.3
<CAPTION>
Asset Mix
12/31/97 3/31/98 6/30/98 9/30/98 12/31/98
-------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Equities 73.4% 75.5% 78.8% 94.3% 99.4%
Corporate Bonds 0.2 0.2 0.2 0.1 0.1
Cash Equivalents 26.4 24.3 21.0 5.6 0.5
-------- ------- ------- ------- --------
100% 100% 100% 100% 100%
<CAPTION>
TEN LARGEST HOLDINGS
% of Total
Company Portfolio
------- ---------
<S> <C>
Trenwick Group, Inc. 5.5
Delta Woodside Industries 5.4
Wang Laboratories, Inc. 5.1
Kennametal, Inc. 4.4
Fruit of the Loom, Inc. Class A 3.7
UNOVA, Inc. 3.7
Sunglass Hut International, Inc. 3.6
Burlington Industries, Inc. 3.5
Varian Associates, Inc. 3.5
Kimco Realty Corporation 3.4
----
41.8%
----
* 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 Fund Performance is stated after fees.
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
Comparison of change in value of $10,000 investment in the
Delafield Fund, Inc. and the S&P Index.
DELAFIELD FUND, INC.
Performance Comparision Chart
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.
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
06/30/94 9,769.20 10,361.20
12/31/94 10,244.96 10,739.38
06/30/95 12,315.47 12,350.29
12/31/95 14,095.06 13,680.41
06/30/96 15,518.66 15,566.94
12/31/96 17,331.24 17,285.53
06/30/97 20,903.20 19,631.18
12/31/97 23,114.76 20,683.41
06/30/98 27,208.39 21,351.48
12/31/98 29,719.72 18,311.03
<CAPTION>
------------------------------------------- ------------------------------------
Average Annual Total Return
-------------------------- ---------------- ------------------------------------
Since
One Year Five-Year 11/19/93
------------- ----------------- ------------------
<S> <C> <C> <C>
Delafield Fund, Inc. -11.47% 12.48% 12.55%
S & P 500 Index 28.58% 24.06% 23.73%
-------------------------- ---------------- ----------------- ------------------
Past performance is not predictive of future performance.
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
DELAFIELD FUND, INC.
STATEMENT OF NET ASSETS
DECEMBER 31, 1998
================================================================================
<TABLE>
<CAPTION>
Value
Shares (Note 1)
------ ------
Common Stocks (99.29%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Automotive/Auto Parts (1.42%)
OEA, Inc. 125,000 $ 1,476,563
---------------
Building (4.04%)
Champion Enterprises, Inc.* 60,000 1,642,500
Dal-Tile International* 120,000 1,245,000
Walter Industries* 85,000 1,301,562
---------------
4,189,062
---------------
Chemicals (0.52%)
Lyondell Petrochemicals 30,000 540,000
---------------
Consumer Products & Services (6.23%)
Bush Industries Inc. 225,000 2,798,437
O'Sullivan Industries Holdings* 260,000 2,730,000
Polaroid Corporation 50,000 934,375
---------------
6,462,812
---------------
Electronics (4.69%)
Bell Industries* 194,200 2,209,025
International Rectifier Corporation* 225,000 2,193,750
Sheldahl Inc.* 75,000 464,062
---------------
4,866,837
---------------
Energy (2.71%)
Devon Energy Corporation 35,000 1,074,062
EEX Corporation 77,658 543,606
Forest Oil Corporation* 140,000 1,190,000
---------------
2,807,668
---------------
Financial Products and Services (9.67%)
BancTec, Inc.* 225,000 2,826,563
Harland (John H.) Company 122,900 1,943,356
Wang Laboratories* 190,000 5,260,625
---------------
10,030,544
---------------
Industrial Products (24.19%)
AMETEK, Inc. 80,000 1,785,000
Atchison Casting Corporation* 172,800 1,598,400
Flowserve Corporation 79,680 1,319,700
Furon Company 112,100 1,912,707
Kennametal Inc. 215,000 4,568,750
MagneTek, Inc.* 90,000 1,040,625
Roper Industries, Inc. 75,000 1,528,125
Scott Technologies* 165,000 2,727,656
Stimsonite Corporation* 135,000 923,906
Telxon, Inc. 20,000 278,750
UNOVA, Inc.* 210,000 3,806,250
Varian Associates Inc. 95,000 3,598,125
---------------
25,087,994
---------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
DELAFIELD FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)
DECEMBER 31, 1998
================================================================================
<TABLE>
<CAPTION>
Value
Shares (Note 1)
------ ------
Common Stocks (Continued)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Insurance (Property/Casualty) (0.95%)
Highlands Insurance Group* 75,500 $ 986,219
---------------
Insurance (Reinsurance) (6.40%)
Risk Capital Holding Inc.* 41,000 930,187
Trenwick Group, Inc. 175,000 5,709,375
---------------
6,639,562
---------------
Metals/Mining (5.38%)
Allegheny Teledyne Inc. 125,000 2,554,688
Armco, Inc.* 340,000 1,487,500
Carpenter Technology 17,500 593,906
Special Metals Corporation* 106,100 948,269
---------------
5,584,363
---------------
Real Estate (4.06%)
Kimco Realty Corporation 90,000 3,571,875
Ramco-Gershenson Properties Trust 43,750 634,375
---------------
4,206,250
---------------
Retail (5.71%)
Nine West Group, Inc.* 140,000 2,178,750
Sunglass Hut International, Inc.* 535,000 3,745,000
---------------
5,923,750
---------------
Telecommunications (2.54%)
CommScope, Inc.* 80,000 1,345,000
Salient 3 Communications 141,400 1,290,275
---------------
2,635,275
---------------
Textile/Apparel (15.25%)
Burlington Industries Inc.* 330,000 3,630,000
Delta Woodside Industries Inc. 925,000 5,550,000
Dyersburg Corporation 123,000 345,938
Fruit of the Loom, Inc.* 280,000 3,867,500
Shaw Industries, Inc. 100,000 2,425,000
---------------
15,818,438
---------------
Miscellaneous (5.53%)
Calgon Carbon Corporation 80,000 600,000
Dames & Moore Group 155,000 1,995,625
Moore Corporation, Ltd. 55,000 605,000
Unisource Worldwide, Inc. 350,000 2,537,500
---------------
5,738,125
---------------
Total Common Stocks (Cost $111,925,193) 102,993,462
---------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
================================================================================
<TABLE>
<CAPTION>
Value
Shares (Note 1)
------ ------
Convertible Preferred Stock (0.09%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Real Estate (0.09%)
Kimco Realty Corporation Class Depository Shares 3,600 $ 93,150
---------------
Total Convertible Preferred Stock (Cost $82,722) 93,150
---------------
Face Value
Amount (Note 1)
------ ------
<CAPTION>
Corporate Bonds (0.06%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Insurance (Life) (0.06%)
PennCorp Financial Group, 9.250%, due 12/15/2003 $125,000 65,313
---------------
Total Corporate Bonds (Cost $125,100) 65,313
---------------
<CAPTION>
Short-Term Investments (0.79%)
Repurchase Agreements (0.79%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Morgan (J.P.) Securities Inc., 4.75%, due 01/04/99
(Collateralized by $492,000
U.S. Treasury Bond, 11.250%, due 02/15/15) $818,000 818,000
---------------
Total Short-Term Investments (Cost $818,000) 818,000
---------------
Total Investments (100.23%) (Cost $112,951,015+) 103,969,925
Liabilities In Excess of Cash and Other Assets (-0.23%) ( 239,832)
---------------
Net Assets (100.00%), 7,943,559 shares outstanding (Note 3) $ 103,730,093
===============
Net asset value, offering and redemption price per share $ 13.06
===============
* Non-income producing.
+ Aggregate cost for federal income tax purposes is $112,951,015. Aggregate
unrealized appreciation and depreciation, based on cost for Federal income
tax purposes, are $7,586,017 and $16,567,107, respectively.
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
DELAFIELD FUND, INC.
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
================================================================================
<TABLE>
<CAPTION>
INVESTMENT INCOME
<S> <C>
Income:
Interest....................................................................... $ 1,367,972
Dividends...................................................................... 1,476,910
----------------
Total income................................................................ 2,844,882
----------------
Expenses: (Note 2)
Investment management fee...................................................... 1,100,927
Administration fee............................................................. 288,993
Shareholder servicing fee...................................................... 246,116
Custodian expenses............................................................. 18,251
Shareholder servicing and related shareholder expenses......................... 125,416
Legal, compliance and filing fees.............................................. 80,865
Audit and accounting........................................................... 55,658
Directors' fees and expenses................................................... 7,540
Amortization of organization costs............................................. 7,670
Other.......................................................................... 7,244
----------------
Total expenses.............................................................. 1,938,680
Less:
Fees waived................................................................. ( 226,294)
Expenses paid indirectly.................................................... ( 2,995)
----------------
Net expenses................................................................ 1,709,391
----------------
Net investment income....................................................... 1,135,491
----------------
<CAPTION>
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
<S> <C>
Net realized gain (loss) on investments........................................... ( 11,297)
Net change in unrealized appreciation (depreciation) of investments............... ( 20,835,046)
----------------
Net gain (loss) on investments...................................... ( 20,846,343)
----------------
Increase (decrease) in net assets from operations................................. $( 19,710,852)
================
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
DELAFIELD FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1998 AND 1997
================================================================================
<TABLE>
<CAPTION>
1998 1997
-------------- ---------------
INCREASE (DECREASE) IN NET ASSETS
Operations:
<S> <C> <C>
Net investment income............................................. $ 1,135,491 $ 1,716,397
Net realized gain (loss) on investments........................... ( 11,297) 9,364,322
Net change in unrealized appreciation (depreciation) ............. ( 20,835,046) 4,562,649
-------------- ---------------
Increase (decrease) in net assets from operations............... ( 19,710,852) 15,643,368
Distributions from:
Net investment income............................................. ( 1,141,794) ( 1,710,095)
Net realized gain on investments.................................. -- ( 9,359,513)
Return of capital................................................. ( 1,296) --
Capital share transactions (Note 3)............................... ( 22,039,937) 80,770,780
-------------- ---------------
Total increase (decrease)....................................... ( 42,893,879) 85,344,540
Net Assets:
Beginning of year................................................. 146,623,972 61,279,432
-------------- ---------------
End of year (including undistributed net investment
income of $0 and $6,303, respectively)........................ $ 103,730,093 $ 146,623,972
============== ===============
</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 August 18, 1998, the Fund authorized three classes of stock:
Administrative Class, Institutional Class, and Retail Class. Original shares of
the Fund were automatically converted to Institutional Class shares of the Fund.
The Administrative Class shares of the Fund are available to qualified
retirement plan clients of financial intermediaries and are subject to a service
fee pursuant to the Fund's 12b-1 Plan. The Institutional Class shares of the
Fund are available to corporate, institutional and individual investors and are
not subject to a service fee. The Retail Class shares of the Fund are subject to
a service fee pursuant to the Fund's Rule 12b-1 Distribution and Service Plan
and are sold through financial intermediaries who provide servicing to Retail
Class shareholders. As of December 31, 1998 only the Institutional Class of the
Fund was active. 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.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
================================================================================
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.
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.
Prior to August 18, 1998 the Fund and Reich & Tang Distributors, Inc. (The
"Distributor") entered into a Distribution Plan adopted under Securities
Exchange Commission Rule 12b-1. For its services under the Shareholder Servicing
Agreement, the Distributor was to receive from the Fund a fee equal to .25% of
the Fund's average daily net assets. For the period ended August 18, 1998, the
Distributor voluntarily waived shareholder servicing fees of $226,294.
Effective August 18, 1998, the Fund and the Distributor entered into a new
Distribution Agreement and a new Shareholder Servicing Agreement, only with
respect to the Administrative Class and Retail Class shares of the Fund. For its
services under the Shareholder Servicing Agreement, the Distributor receives
from the Fund with respect only to the Administrative Class and Retail Class
shares, a fee equal to .25% of the Fund's average daily net assets. There is no
shareholder servicing fee for Institutional Class shares of the Fund. There were
no additional expenses borne by the Fund pursuant to the Distribution Agreement.
Brokerage commissions paid during the period to the Distributor amounted to
$188,803.
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 $68,859 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 "Shareholder
servicing and related shareholder expenses" are expense offsets of $2,995.
3. Capital Stock
At December 31, 1998, 20,000,000,000 shares of $.001 par value stock were
authorized and capital paid in amounted to $112,722,480. Transactions in capital
stock were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1998 December 31, 1997
-------------------------- ---------------------------
Shares Amount Shares Amount
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Sold........................................ 2,711,119 $ 39,948,178 5,631,514 $ 86,536,997
Issued on reinvestment of dividends......... 78,658 1,116,708 729,075 10,714,899
Redeemed.................................... ( 4,699,355) (63,104,823) ( 1,049,645) (16,481,116)
---------- ---------- ---------- -----------
Net increase (decrease)..................... ( 1,909,578) $(22,039,937) 5,310,944 $ 80,770,780
========== ========== ========== ===========
</TABLE>
4. Investment Transactions
Purchases and sales of investment securities, other than U.S. Government direct
and agency obligations and short-term investments, totaled $107,958,644 and
$91,868,468, respectively. Accumulated undistributed realized loses at December
31, 1998 amounted to $11,297. This amount represents tax basis capital losses
which may be carried forward to offset future capital gains. Such losses expire
December 31, 2006.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
DELAFIELD FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
<TABLE>
<CAPTION>
5. Financial Highlights
Years
Ended Period from Year
December 31, October 1, 1995 to Ended
------------------------------------- December 31, September 30,
1998 1997 1996 1995 1995
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
(for a share outstanding throughout the period)
Net asset value, beginning of period.......... $ 14.88 $ 13.49 $ 12.26 $ 11.95 $ 10.82
------- -------- -------- -------- --------
Income from investment operations:
Net investment income..................... .12 .21 .16 .05 .13
Net realized and unrealized
gains (losses) on investments............... ( 1.82 ) 2.42 3.07 .50 1.99
------- -------- -------- -------- --------
Total from investment operations.............. ( 1.70 ) 2.63 3.23 .55 2.12
------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income........ ( .12 ) ( .21 ) ( .16 ) ( .05 ) ( .13 )
Distributions from net realized gains
on investments............................ -- ( 1.03 ) ( 1.84 ) ( .18 ) ( .86 )
In excess of net realized gain.............. -- -- -- ( .01 ) --
------- -------- -------- -------- --------
Total distributions........................... ( .12 ) ( 1.24 ) ( 2.00 ) ( .24 ) ( .99 )
------- -------- -------- -------- --------
Net asset value, end of period................ $ 13.06 $ 14.88 $ 13.49 $ 12.26 $ 11.95
======= ======== ======== ======== ========
Total Return.................................. ( 11.47%) 19.66% 26.35% 4.62%(a) 20.05%
Ratios/Supplemental Data
Net assets, end of period(000)................ $ 103,730 $ 146,624 $ 61,279 $ 45,730 $ 42,316
Ratios to average net assets:
Expenses, net of fees waived................ 1.24%+ 1.29%+ 1.29%+ 1.67%*+ 1.65%
Net investment income....................... 0.83% 1.64% 1.18% 1.57%* 1.35%
Management, administration and
shareholder servicing fees waived........ .16% .20% .20% .20%* .71%
Expenses paid indirectly.................... .00% .00% .01% .07%* .00%
Portfolio turnover rate....................... 81.56% 55.43% 75.54% 20.49% 70.36%
* Annualized
+ Includes expenses paid indirectly
(a) Not Annualized
</TABLE>
- --------------------------------------------------------------------------------
<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, 1998 and the related statement of operations for the year
then ended, the statement of changes in net assets for each of the two years in
the period then ended and the financial highlights for the periods indicated in
the accompanying financial statements. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
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 financial
highlights 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, 1998 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 financial highlights referred to
above present fairly, in all material respects, the financial position of
Delafield Fund, Inc. as of December 31, 1998, 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
January 29, 1999
- --------------------------------------------------------------------------------
<PAGE>
[GRAPHIC OMITTED] DELAFIELD
FUND, INC.
Annual Report
December 31, 1998
<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
801 Pennsylvania
Kansas City, Missouri 64105
Transfer Agent &
Dividend Disbursing Agent
Reich & Tang Services, Inc.
600 Fifth Avenue
New York, New York 10020
DEL1298AN
<PAGE>
