[BACKGROUND GRAPHIC]
CHARTWELL DIVIDEND AND INCOME FUND, INC.
SEMI-ANNUAL REPORT TO SHAREHOLDERS DATED MAY 31, 2001
[GRAPHIC] CHARTWELL
INVESTMENT
PARTNERS
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2001
INVESTMENT OBJECTIVES & STRATEGY
The Chartwell Dividend and Income Fund's [the "Fund"] primary investment
objective is to seek high current income. Capital appreciation is 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
and Income Fund is a closed-end mutual fund which trades on the New York Stock
Exchange under the symbol CWF.
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 and
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, Real Estate
Investment Trusts (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
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2001
LETTER TO SHAREHOLDERS
DEAR SHAREHOLDERS,
We are proud to present the semi-annual report for the Chartwell Dividend and
Income Fund ("CWF" or the "Fund") for the six months ended May 31, 2001. The
Fund returned 29.38% with reinvestment of dividends, combined, with 22.14%
capital appreciation. The net asset value ("NAV") return was 14.24%. The Fund
ended the period at a premium to NAV of 5% versus beginning the period at a
discount of 7%. The distribution rate at May 31, 2001 remained at $0.1033 per
share, paid monthly. The Fund traded at a range of $12.15 to $9.3125 during the
period.
KEY EVENTS OVER THE PAST SIX MONTHS
Perhaps the most prominent event in the market was the Federal Reserve Board's
decision to lower the Discount Rate to its current 3.75% level. By aggressively
lowering interest rates the "Fed" has created more liquidity (cash) for
consumers and businesses to spend and invest. However, this has not yielded a
strong overall market, as determined by the S&P 500 index, which was down 3.9%
for the past six months. The culprits that continue to weigh upon the returns of
the broad market are the telecommunications and technology sectors. Many of the
blue chips of the "Internet Era" such as Cisco Systems, Inc., Juniper Networks,
Inc. and Internet Capital Group, Inc. have plummeted from their absolute highs.
However, other sectors of the market have increased in popularity, such as
energy, utilities, financials and basic materials. Fortunately, we have been
heavily positioned in financials, utilities and energy stocks, which yielded a
higher return over the past six month to shareholders.
ECONOMIC PERSPECTIVE
Many cyclical stocks increased in value primarily as a result of an anticipated
upturn in the economy, and therefore their earnings prospects over the near
future. Soon before the Federal Reserve Board lowered interest rates these
companies bottomed, and have been performing well since. However, thus far the
expectation for better earnings results has been disappointed, as the U.S. and
global economic environment continues to operate in a slump.
Earnings for these largely cyclical companies are affected by a number of
macroeconomic factors, which include borrowing costs, general economic activity,
energy and other input costs and finally foreign exchange rates. With the
exception of borrowing costs, each other factor has been negative and getting
worse over the past half year. First, recent real GDP statistics indicate the
economy has only grown at a 2-3% rate. This is a sharp slowdown from the 5-6%
growth rates in 1999 and 2000. Demand for basic materials and capital goods that
go into packaging, automobiles, housing and other goods have in turn fallen
substantially. In addition, input costs in the form of oil and natural gas
prices have been in a strong upturn for the past year. These commodities are
used for energy, in transportation, and as raw materials for the production of
various
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CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2001
chemicals, metals and papers. The combination of weak demand and high supply
prices created a margin squeeze across most industries -- meaning that profit
expectations have been forced down. Add to this, finally, a strong and
strengthening U.S. Dollar versus the Japanese Yen and Euro and you have an
extremely difficult operating environment for domestic companies. The dollar has
appreciated 10.7% and 11% versus the Yen and Euro over the past year,
respectively. This makes exports less attractive and imports more competitive
with domestic products.
Now the good news! First, while demand is still quite weak, the pro-active
stance of the Fed in lowering interest rates and providing liquidity to the
economy should ensure an eventual improvement in the broader economy. Second,
energy prices seem to have stabilized. West Texas Intermediate Crude (oil)
prices have stabilized at around $27 under the watchful eye of OPEC. It is
anticipated that oil prices are more likely to come down than go up over the
next year as drilling yields more supply and higher prices leads to more
conservation. Natural gas has actually decreased in price substantially from its
peaks last July above $10/mcf (million cubic feet). Currently, standard Henry
Hub natural gas spot prices are hovering around $3-$3.50/mcf. In addition,
futures indicate the expectation for $3.25-$3.75/mcf natural gas at the end of
the year. Like oil, higher prices have led to increased spending on finding and
retrieving natural gas, whether from land based sources, the Gulf of Mexico or
from converted natural gas liquids shipped from South America. A basic law of
economics is that high prices and profits lead to more supply and a
stabilization of prices toward a 'normal' level. We believe this is exactly what
is occurring right now. The real question is not if we will see greater energy
supplies, but when. As supplies come on price will decline. Falling energy
prices will have multiple beneficial effects. First, a major direct costs for
many companies will fall, most likely meaning wider profits margins and higher
earnings. Second, the broader economy should improve as consumers and businesses
have more money to spend on the things they want or need.
We also expect the dollar to weaken relative to other currencies, although the
catalyst for this change is questionable. The value of the dollar relative to
other currencies is influenced by a variety of factors. These include relative
inflation rates, real economic growth, relative interest rates, and the
attractiveness of investable assets. If the U.S. is lowering its interest rate
versus other countries, then the dollar is expected to weaken. Why? Because
financial traders can get a better return on their investments in Europe because
interest rates are higher or more stable. The U.S. has been more aggressive in
lowering interest rates than our neighbors, thus this could be a catalyst for a
weakening dollar. One explanation for the strength of the dollar is that
investors expect the European community to lower interest rates in the near
future as a result of a slowing economy. The dollar has been the safest
investment in the world for some time, which is also driving up its level as
investors all over the world choose to buy dollars. While all this is still
true, we believe it is unlikely that the dollar will
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CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2001
continue to strengthen at its current rate and will likely weaken at some point.
This will yield a better foreign market for domestic goods overseas and reduce
the pressure of low price imports in the domestic market.
In addition to earning income from dividends and interest payments on our
investments, the Fund is actively engaged in generating incremental income from
a buy-write program. A buy-write program involves writing a call option on a
stock that is held in the Fund. We are paid a premium that can be used to
compensate our income needs. The buyer of the call then has the right to
purchase our stock at a pre-determined price and date. The benefit of this
program for the Fund is that it can generate significant income on lower
yielding stocks and stabilize returns. However, we must sacrifice some upside
potential in exchange. The program is especially useful in down markets, and we
use it aggressively when we feel securities are fully priced.
The Fund made strong steps toward growing our capital base over the past six
months. The management will continue to work toward the twin objectives of the
Fund to generate current income and secondarily add capital appreciation. We
wish to thank our long term investors and welcome new investors to the Fund. We
look forward to the events of the next six months and will continue to position
the portfolio in a conservative, income generating manner.
Sincerely,
/s/ Bernard P. Schaffer
Bernard P. Schaffer
Portfolio Manager
/s/ Leslie M. Varrelman
Leslie M. Varrelman
Portfolio Manager
PORTFOLIO MANAGEMENT TEAM
Bernard P. Schaffer
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
Andrew S. Toburen
Portfolio Manager
Fixed Income
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CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2001
FIXED INCOME RESULTS
[FIXED INCOME PIE CHART] [HIGH YIELD INDEX LINE CHART]
HIGH YIELD RECAP
Participants in today's corporate high yield market are navigating through
strong crosscurrents. High yield mutual funds have experienced healthy inflows
year to date, the new issue market has re-opened for many issuers, and the
Federal Reserve has aggressively cut their targeted interest rates. Conversely,
defaults rates have risen, recoveries on defaulted positions have fallen and
economic growth has slowed materially in many sectors. Recent high yield
performance, however, has been solid. The Merrill Lynch High Yield Cash Pay
Index returned 9.40% for the six months ended May 31, 2001. High yield mutual
funds, which experienced record outflows in 2000, have benefited from $7.5
billion of inflows so far this year (see graph). This influx of liquidity has
helped reinvigorated the new issue market, with year to date new issuance
exceeding new issuance for all of 2000. Spreads-over-treasuries have tightened
over the last six months, but remain at historically wide levels (see graph).
HIGH YIELD MUTUAL FUND FLOWS
(Source: CS First Boston, *through 6/21/01)
[HIGH YIELD MUTUAL FUND FLOWS BAR CHART]
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CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2001
HIGH YIELD ANNUAL DEFAULT RATES VS. ANNUAL RETURNS
(*default rate for twelve months ended 5/31/01, source: CS First Boston)
[HI YIELD RATES VS. ANNUAL RETURNS BAR CHART]
The default rate for the twelve months ended May 31, 2001 was 7.6%, sharply
higher than the historical average (graph). Amidst rising default rates, higher
quality credits continued to outperform lower-quality credits. Service,
container, supermarket and automotive issues outperformed, while
telecommunication, steel and textile issues underperformed (see graph). On May
31, 2001 the yield on the Merrill Lynch High Yield Cash Pay Index stood at
12.32%.
HIGH YIELD PERFORMANCE BY SECTOR
(11/30/00-5/31/01, source: Merrill Lynch)
[HIGH YIELD PERFORMANCE BAR CHART]
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CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2001
GROWTH OF THE HIGH YIELD MARKET
(*through 6/21/01, source: CS First Boston)
[GROWTH OF HIGH YIELD MARKET MOUNTAIN CHART]
CWF PERFORMANCE
The high yield portion of the portfolio returned 6.32% for six months ended May
31, 2001, underperforming the index. We attribute our underperformance relative
to the index to three main factors. First, investments in issues such as
360networks Inc., Orius Capital Corp., Ziff Davis Media Inc. and Evenflo
Company, Inc. performed poorly. However, our investment philosophy, which
focuses on cash flow generation and improving credit profiles, uncovered winning
investments in Asia Global Crossing Ltd., Building One Services Corporation,
Jostens, Inc. and Allied Waste North American Industries Inc. Second, with our
primary emphasis on income, we typically overweight single B-rated issues, which
underperformed higher quality issues as the market sought relative safety.
Lastly, we tend to avoid buying 'fallen angels', or formerly investment grade
bonds that have been downgraded to high yield status, due to their negative
credit momentum and lack of bond covenants. Examples of recent fallen angels
include Crown Cork & Seal Company, Inc., J.C. Penney, Inc. and Owens Corning.
Fallen angels have grown to represent ten percent of the high yield index, due
to several high profile downgrades. Recently fallen angels were among the best
performers in the index. Although we are disappointed by our underperformance,
we remain committed to our investment philosophy and believe that rigorous
credit research remains the foundation for achieving our long-term investment
objectives of superior returns and low volatility.
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CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2001
OUTLOOK
The outlook for the high yield market is encouraging. We believe that the
economy has stabilized, and that most companies have adjusted their business
plans to compete cost effectively in an environment of slower economic growth.
In addition, we believe that defaults rates are near their peak and should start
to trend lower over the coming year. At recent spread levels, we believe that
long-term investors are well compensated for the inherent risks associated with
high yield bonds.
In the current slower-growth economic environment we favor the cable, gaming and
utility sectors. Additionally, we believe there may be attractive investment
opportunities in the automotive and general industrial sectors. We have
opportunistically looked to reduce exposure in the telecommunications and
technology sectors. As always, intensive bottom-up research will guide our
investment decision making. Finally, we continually look to improve the credit
quality of the portfolio.
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CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2001
REAL ESTATE INVESTMENT TRUST (REIT) RESULTS
[REIT FIXED INCOME PIE CHART] [REIT RETURNS BAR CHART]
The REIT sector performed well over the past six months. High current income and
reasonable valuations provided the basis for investors to increase their
exposure to this sector. Fundamentally, there has been limited new building, a
slowdown in hotels and in some high-end office space, especially in New York
City and San Francisco. We have lowered our weighting in REITs toward the end of
the past six months based on our concern that valuations have reached relatively
high levels based on net asset value. We are maintaining our exposure to the
sector based on its income generation, but we are less confident that the sector
will provide capital appreciation from here.
Our best real estate related stocks were Healthcare Realty Trust, Inc.,
Hospitality Properties Trust and Host Marriott Corporation. Our worst stocks
were Boston Properties, Inc., Reckson Associates Realty Corporation and LTC
Properties, Inc.
[CWF REITS PIE CHART] [MS REIT INDEX PIE CHART]
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CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2001
UTILITY RESULTS
[UTILITY RESULTS PIE CHART] [UTILITY RETURNS BAR CHART]
Utilities experienced a lackluster period as gas prices fell and political
pressure from California debacle has hurt stocks, especially those with exposure
to western markets. We think they are currently very attractive because we feel
political pressure will ease and rational market will return. This probably
means less broad success of sector, but the best companies will do well. Those
companies most adept at trading between different geographic regions and using
multiple fuels to supply customers with electricity will likely be best.
Our best stocks were Constellation Energy Group, Inc., The Southern Company and
Reliant Resources, Inc. Our underperforming utilities were The Montana Power
Company, FPL Group, Inc. and SEMCO Energy, Inc.
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CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2001
EQUITY RETURNS
[REITS PIE CHART] [EQUITY RETURNS BAR CHART]
The equity portion of the Fund performed quite well over the past six months,
returning 11.19%. This compares to the S&P 500 return of -3.9% and the Russell
1000 Value return of 5.93%.
Among our best sectors were basic materials, capital goods and energy. The past
six months was marked by a sharp upward move in economically sensitive stocks.
This was the result of a low initial valuation level and the active stance of
the Fed in lowering interest rates. The market has anticipated a marked
improvement in economic activity, which will benefit the earnings prospects of
cyclical companies. On a stock specific level, Kinder Morgan Energy Partners
L.P., USEC Inc., Activision Inc. and Bank of America Corporation were all
exceptional performers.
Among our worst sectors were telecommunication, technology and healthcare. While
many tech and telecom stocks experienced a rebound during the beginning of the
year, the aggregate performance of the sectors were nonetheless negative as a
result of extremely poor current earnings and uncertain near term prospects. Our
worst stocks were Flextronics Inc., The Limited Inc., SBC Communications Inc.,
Schering-Plough Corporation and Bristol-Myers Squibb Company.
[CWF COMMON STOCK PIE CHART] [S&P 500 COMMON STOCK PIE CHART]
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CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2001
UTILIZATION OF LEVERAGE
The Chartwell Dividend and Income Fund has utilized leverage through the
issuance of commercial paper. As of May 31, 2001, the Fund had $60 million in
leverage outstanding in the form of commercial paper rated A1/P1 by Moody's
Investors Service, Inc./Standard & Poor's Ratings Group. These ratings 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 capital
losses in excess of the yield spread, if any. Therefore, the addition of
leverage also increases the potential volatility of the Fund. The Fund has the
ability to leverage to a maximum of 33% of the Fund's gross assets.
The Fund utilizes leveraging to seek to enhance the yield and net asset value of
its Common Stock. However, these objectives cannot be achieved in all interest
rate environments. To leverage, the Fund issues Commercial Paper, which is
issued at a discount equivalent to short-term interest rates, and invests the
proceeds in long-term securities. The interest earned on these investments is
paid to Common Stock shareholders in the form of dividends, and the value of
these portfolio holdings is reflected in the per share net asset value of the
Fund's Common Stock. However, in order to benefit Common Stock shareholders, the
yield curve must be positively sloped; that is, short-term interest rates must
be lower than long-term interest rates. At the same time, a period of generally
declining interest rates will benefit Common Stock shareholders. If either of
these conditions change, then the risks of leveraging will begin to outweigh the
benefits.
To illustrate these concepts, assume a fund's common stock capitalization of
$100 million and the issuance of commercial paper for an additional $50 million,
creating a total value of $150 million available for investment in long-term
securities. If prevailing short-term interest rates are approximately 3% and
long-term interest rates are approximately 6%, the yield curve has a strongly
positive slope. The fund pays a discount on the $50 million of commercial paper
based on the lower short-term interest rates. At the same time, the fund's total
portfolio of $150 million earns the income based on long-term interest rates.
In this case, the discount paid to Commercial Paper holders is significantly
lower than the income earned on the Fund's long-term investments, and therefore
the Common Stock shareholders are the beneficiaries of the incremental yield.
However, if short-term interest rates rise, narrowing the differential between
short-term and long-term interest rates, the incremental yield pick-up on the
Common Stock will be reduced or eliminated completely. At the same time, the
market value on the Fund's Common Stock (that is, its price as listed on the New
York Stock Exchange), may, as a result, decline. Furthermore, if long-term
interest rates rise, the Common Stock's net asset value will reflect the full
decline in the price of the portfolio's investments, since the value of the
Fund's Commercial Paper does not fluctuate. In
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CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2001
addition to the decline in net asset value, the market value of the Fund's
Common Stock may also decline.
DIVIDENDS & DISTRIBUTIONS
The Fund currently intends to distribute a monthly fixed amount to shareholders
in the amount of $0.1033 per share. The Fund's final distribution for each
calendar year will exceed that amount, however, to the extent necessary for the
Fund to have distributed all of its net investment company taxable income and
net capital gains recognized during the year, if any. If, for any calendar year,
the total distributions exceed net investment company taxable income and net
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. The Board of Directors reserves the right to change the
aforementioned dividend policy from time-to-time.
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CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2001
SCHEDULE OF INVESTMENTS (unaudited)
MARKET
NUMBER OF VALUE
SHARES (NOTE 1)
COMMON STOCK-- 73.3% ---------------- ------------
BASIC MATERIALS--2.4%
Praxair, Inc................................... 25,000 $ 1,257,250
Transocean Sedco Forex Inc.(a)................. 55,000 2,939,750
------------
4,197,000
------------
BANKING & FINANCE--19.2%
ACE Limited.................................... 75,000 2,906,250
American General Corporation(a)................ 30,000 1,356,900
Bank of America Corporation(a)................. 40,000 2,370,000
Capital One Financial Corporation(a)........... 50,000 3,255,500
CIGNA Corporation.............................. 15,065 1,423,191
Citigroup Inc. ................................ 29,336 1,503,470
Compass Bancshares, Inc.(a).................... 25,000 609,500
Fannie Mae..................................... 20,300 1,673,532
FleetBoston Financial Corporation(a)........... 35,700 1,484,763
Freddie Mac.................................... 20,000 1,324,000
KeyCorp(a)..................................... 40,000 951,200
Marsh & McLennan Companies, Inc. .............. 20,000 2,098,000
MBNA Corporation............................... 85,000 3,065,100
Morgan Stanley Dean Witter & Co................ 35,000 2,275,350
The Bank of New York Company, Inc.(a).......... 71,145 3,885,228
The Hartford Financial Services Group, Inc. ... 50,000 3,385,000
------------
33,566,984
------------
CAPITAL GOODS--2.5%
Emerson Electric Co. .......................... 12,000 812,520
General Electric Company....................... 34,000 1,666,000
Pitney Bowes Inc. ............................. 25,000 988,500
United Technologies Corporation(a)............. 10,000 833,100
------------
4,300,120
------------
CONSUMER CYCLICAL--0.9%
The Limited Inc.(a)............................ 99,135 1,615,901
------------
CONSUMER NON-DURABLE--2.1%
Kimberly-Clark Corporation..................... 36,000 2,176,200
Philip Morris Companies Inc.(a)................ 28,700 1,475,467
------------
3,651,667
------------
CONSUMER STAPLES--1.5%
Anheuser-Busch Companies, Inc. ................ 60,000 2,640,000
------------
See Accompanying Notes to Financial Statements.
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CHARTWELL
SCHEDULE OF INVESTMENTS (unaudited) (continued)
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2001
MARKET
NUMBER OF VALUE
SHARES (NOTE 1)
COMMON STOCK (continued) ---------------- ------------
ENERGY--10.2%
Baker Hughes Incorporated(a)................... 90,000 $ 3,546,000
Exxon Mobil Corporation........................ 34,000 3,017,500
Halliburton Company............................ 21,375 999,067
KeySpan Corporation............................ 30,000 1,197,600
Lakehead Pipe Line Partners, L.P. ............. 20,000 910,000
Mirant Corporation(a).......................... 23,459 921,939
Santa Fe International Corporation(a).......... 60,000 2,212,800
Shamrock Logistics, L.P. ...................... 41,000 1,217,700
The Williams Companies, Inc.(a)................ 28,900 1,138,660
USX-Marathon Group(a).......................... 82,800 2,678,580
------------
17,839,846
------------
HEALTHCARE--8.4%
American Home Products Corporation............. 50,000 3,165,000
Baxter International Inc.(a)................... 20,000 987,600
Bristol-Myers Squibb Company................... 35,000 1,898,400
Merck & Co., Inc. ............................. 30,000 2,189,700
Pfizer Inc.(a)................................. 80,000 3,431,200
Pharmacia Corporation.......................... 60,000 2,913,600
------------
14,585,500
------------
HOTELS--0.2%
Wyndham International, Inc.(b)................. 107,333 276,919
------------
REAL ESTATE*--9.0%
AvalonBay Communities, Inc. ................... 61,500 2,849,295
Boston Properties, Inc. ....................... 40,700 1,623,116
Duke-Weeks Realty Corporation.................. 88,820 2,074,835
Healthcare Realty Trust, Inc. ................. 92,587 2,307,268
Hospitality Properties Trust................... 50,000 1,362,500
Host Marriott Corporation...................... 110,000 1,423,400
LTC Properties, Inc. .......................... 50,000 216,500
Meditrust Companies(b)......................... 46,000 257,140
ProLogis Trust................................. 106,400 2,276,960
Reckson Associates Realty Corporation.......... 60,000 1,302,000
------------
15,693,014
------------
RETAIL--0.7%
Avon Products, Inc. ........................... 30,000 1,312,800
------------
See Accompanying Notes to Financial Statements.
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CHARTWELL
SCHEDULE OF INVESTMENTS (unaudited) (continued)
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2001
MARKET
NUMBER OF VALUE
SHARES (NOTE 1)
COMMON STOCK (concluded) ---------------- ------------
TECHNOLOGY--3.7%
Computer Sciences Corporation(a)(b)............ 30,000 $ 1,259,700
Dell Computer Corporation(a)(b)................ 79,965 1,947,947
Electronic Data Systems Corporation(a)......... 30,000 1,837,500
LSI Logic Corporation(a)(b).................... 25,000 457,750
Motorola, Inc.(a).............................. 30,300 445,410
The Titan Corportation(a)(b)................... 20,000 447,200
------------
6,395,507
------------
TELECOMMUNICATIONS--4.8%
BellSouth Corporation.......................... 50,000 2,061,500
Crown Castle International Corp. .............. 757 12,566
Global Crossing Ltd.(a)(b)..................... 60,000 762,000
SBC Communications Inc. ....................... 57,860 2,490,873
Verizon Communications Inc.(a)................. 40,000 2,194,000
WorldCom Inc.(a)(b)............................ 50,295 897,263
------------
8,418,202
------------
UTILITIES--7.7%
Constellation Energy Group, Inc. .............. 43,910 2,076,943
Dynegy Inc. ................................... 30,000 1,479,000
Exelon Corporation............................. 32,500 2,204,150
FPL Group, Inc. ............................... 15,960 929,670
Kinder Morgan Energy Partners L.P. ............ 15,000 1,075,500
Reliant Energy Incorporated.................... 44,000 2,027,520
Reliant Resources, Inc.(a)..................... 24,200 832,480
The AES Corporation(b)......................... 20,000 908,000
The Montana Power Company...................... 70,000 896,000
Western Resources, Inc. ....................... 44,300 930,300
------------
13,359,563
------------
TOTAL COMMON STOCK (COST $121,104,799)......... 127,853,023
------------
CONVERTIBLE PREFERRED STOCK--1.4%
TELECOMMUNICATIONS--1.0%
Crown Castle International Corp. 6.25%......... 20,000 685,000
Global Crossing Ltd. 6.375%.................... 20,000 1,077,500
------------
1,762,500
------------
See Accompanying Notes to Financial Statements.
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CHARTWELL
SCHEDULE OF INVESTMENTS (unaudited) (continued)
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2001
NUMBER OF MARKET
SHARES/PRINCIPAL VALUE
AMOUNT (NOTE 1)
CONVERTIBLE PREFERRED STOCK (concluded) ---------------- ------------
UTILITIES--0.4%
Dominion Resources, Inc. "PIES" 9.500%(c)...... 10,000 $ 630,700
------------
TOTAL CONVERTIBLE PREFERRED STOCK (COST
$3,500,000).................................. 2,393,200
------------
NON-CONVERTIBLE BONDS--57.2%
BASIC MATERIALS--3.0%
Avecia Group plc 11.000%, 7/01/09.............. $1,000,000 1,062,500
ICO, Inc. 10.375%, 6/01/07..................... 1,500,000 1,507,500
Resolution Performance 13.500%, 11/15/10+...... 1,000,000 1,097,500
U.S. Can Corporation 12.375%, 10/01/10......... 1,500,000 1,545,000
------------
5,212,500
------------
BROADCASTING--2.0%
Crown Castle International Corp.
9.375%, 8/01/11+............................. 2,000,000 1,960,000
Echostar Broadband Corp. 10.375%, 10/01/07..... 1,500,000 1,541,250
------------
3,501,250
------------
BUILDING, PRODUCTS & SERVICES--2.6%
Building One Services Corporation
10.500%, 5/01/09............................. 500,000 488,750
Dayton Superior Corporation 13.000%, 6/15/09... 1,500,000 1,537,500
Integrated Electrical Services, Inc.
9.375%, 2/01/09+............................. 1,000,000 998,750
Lennar Corporation 7.625%, 3/01/09............. 1,500,000 1,460,924
------------
4,485,924
------------
CABLE, MEDIA & PUBLISHING--5.6%
Alliance Atlantis Communications Corporation
13.000%, 12/15/09............................ 2,000,000 2,162,500
Charter Communications Holdings, LLC 10.750%,
10/01/09..................................... 2,000,000 2,135,000
Fox Family Worldwide, Inc. 9.250%, 11/01/07.... 2,500,000 2,568,750
Mediacom LLC 9.500%, 1/15/13+.................. 2,000,000 1,935,000
Ziff Davis Media Inc. 12.000%, 7/15/10......... 1,500,000 885,000
------------
9,686,250
------------
See Accompanying Notes to Financial Statements.
18
-------
CHARTWELL
SCHEDULE OF INVESTMENTS (unaudited) (continued)
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2001
MARKET
PRINCIPAL VALUE
AMOUNT (NOTE 1)
NON-CONVERTIBLE BONDS (continued) ---------------- ------------
CONTAINERS, PACKAGING & GLASS--1.1%
Huntsman Packaging Corporation 13.000%,
6/01/10...................................... $1,250,000 $ 931,250
Stone Container Corporation 9.750%, 2/01/11+... 1,000,000 1,050,000
------------
1,981,250
------------
CONSUMER CYCLICAL--1.0%
Evenflo Company, Inc. 11.750%, 8/15/06......... 750,000 266,250
Phillips-Van Heusen Corporation
9.500%, 5/01/08.............................. 1,500,000 1,545,000
------------
1,811,250
------------
ENERGY--3.0%
Frontier Oil Corporation 11.750%, 11/15/09..... 2,000,000 2,140,000
Magnum Hunter Resources, Inc.
10.000%, 6/01/07............................. 2,000,000 2,050,000
Statia Terminals Group 11.750%, 11/15/03....... 1,000,000 1,028,750
------------
5,218,750
------------
FINANCIAL SERVICES--3.8%
CB Richard Ellis Services, Inc.
11.250%, 6/15/11+............................ 500,000 492,640
Conseco, Inc. 8.750%, 2/09/04.................. 1,250,000 1,190,625
Madison River Capital 13.250%, 3/01/10......... 4,000,000 2,420,000
Metris Companies Inc. 10.125%, 7/15/06......... 1,000,000 940,000
Rent-A-Center, Inc. 11.000%, 8/15/08........... 1,500,000 1,530,000
------------
6,573,265
------------
FOOD, BEVERAGE & TOBACCO--0.9%
Fleming Companies, Inc. 10.125%, 4/01/08+...... 1,500,000 1,552,500
------------
GAMING--2.1%
Alliance Gaming Corporation 10.000%, 8/01/07... 1,000,000 975,000
Argosy Gaming Company 10.750%, 6/01/09+........ 2,500,000 2,725,000
------------
3,700,000
------------
HEALTHCARE--0.7%
Health Net Inc. 8.375%, 4/15/11+............... 1,250,000 1,241,855
------------
See Accompanying Notes to Financial Statements.
19
-------
CHARTWELL
SCHEDULE OF INVESTMENTS (unaudited) (continued)
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2001
MARKET
PRINCIPAL VALUE
AMOUNT (NOTE 1)
NON-CONVERTIBLE BONDS (continued) ---------------- ------------
HOTELS--3.3%
Extended Stay America, Inc. 9.150%, 3/15/08.... $1,500,000 $ 1,449,375
Florida Panthers Holdings, Inc. 9.875%,
4/15/09...................................... 750,000 761,250
John Q. Hammons Hotels, Inc. 8.875%, 2/15/04... 1,500,000 1,490,625
Sun International Hotels Limited
9.000%, 3/15/07.............................. 2,000,000 2,042,500
------------
5,743,750
------------
INDUSTRIALS--7.1%
Actuant Corporation 13.000%, 5/01/09........... 2,000,000 2,030,000
Better Minerals & Aggregates Company 13.000%,
9/15/09...................................... 1,000,000 845,000
Euramax International plc 11.250%, 10/01/06.... 2,000,000 1,550,000
Gentek, Inc. 11.000%, 8/01/09.................. 1,500,000 1,395,000
International Wire Group, Inc. 11.750%,
6/01/05...................................... 1,500,000 1,522,500
Juno Lighting, Inc. 11.875%, 7/01/09........... 1,500,000 1,432,500
Knowles Electronics, Inc. 13.125%, 10/15/09.... 1,500,000 1,496,250
United Rentals (North America), Inc. 10.750%,
4/15/08+..................................... 2,000,000 2,095,000
------------
12,366,250
------------
REAL ESTATE--2.9%
FelCor Lodging Limited Partnership
8.500%, 6/01/11+............................. 1,500,000 1,485,000
Intrawest Corporation 9.750%, 8/15/08.......... 2,000,000 2,005,000
LNR Property Corporation 10.500%, 1/15/09...... 1,500,000 1,552,500
------------
5,042,500
------------
RETAIL--1.6%
Mothers Work Inc. 12.625%, 8/01/05............. 2,000,000 1,750,000
Sbarro, Inc. 11.000%, 9/15/09.................. 1,000,000 1,052,500
------------
2,802,500
------------
TECHNOLOGY--1.6%
SCG Holding Corporation and Semiconductor
Components Industries, LLC
12.000%, 8/01/09............................. 1,500,000 1,200,000
Seagate Technology International
12.500%, 11/15/07+........................... 1,500,000 1,533,750
------------
2,733,750
------------
See Accompanying Notes to Financial Statements.
20
-------
CHARTWELL
SCHEDULE OF INVESTMENTS (unaudited) (continued)
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2001
MARKET
PRINCIPAL VALUE
AMOUNT (NOTE 1)
NON-CONVERTIBLE BONDS (concluded) ---------------- ------------
TELECOMMUNICATIONS--10.0%
Allegiance Telecom, Inc. 12.875%, 5/15/08...... $1,885,000 $ 1,753,050
American Tower Corporation 9.375%, 2/01/09+.... 2,000,000 1,975,000
ASAT Finance LLC 12.500%, 11/01/06............. 2,275,000 2,360,312
Leap Wireless International, Inc.
12.500%, 4/15/10............................. 2,000,000 1,330,000
Nextel Communications, Inc. 9.375%, 11/15/09... 2,000,000 1,625,000
NTELOS Inc. 13.000%, 8/15/10................... 2,000,000 1,495,000
NTL Communications Corp. 11.875%, 10/01/10..... 2,000,000 1,630,000
Orius Capital Corp. 12.750%, 2/01/10........... 2,500,000 787,500
PAC-West Telecomm, Inc. 13.500%, 2/01/09....... 2,500,000 1,575,000
Spectrasite Holdings, Inc. 10.750%, 3/15/10.... 2,000,000 1,820,000
Williams Communication Group, Inc. 10.700%,
10/01/07..................................... 2,000,000 1,090,000
------------
17,440,862
------------
TRANSPORTATION & SHIPPING--1.7%
North American Van Lines, Inc.
13.375%, 12/01/09+........................... 1,500,000 1,372,500
The Kansas City Southern Railway Company
9.500%, 10/01/08............................. 1,500,000 1,590,000
------------
2,962,500
------------
UTILITIES--3.2%
Calpine Corporation 8.750%, 7/15/07............ 1,500,000 1,515,817
PSEG Energy Holdings, Inc. 8.625%, 2/15/08+.... 1,500,000 1,478,279
The AES Corporation 10.250%, 7/15/06........... 2,500,000 2,575,000
------------
5,569,096
------------
TOTAL NON-CONVERTIBLE BONDS
(COST $106,700,507).......................... 99,626,002
------------
CONVERTIBLE BOND--0.2%
TRANSPORTATION & SHIPPING--0.2%
Preston Corporation 7.000%, 5/01/11............ 500,000 417,500
------------
TOTAL CONVERTIBLE BOND (COST $423,750)......... 417,500
------------
See Accompanying Notes to Financial Statements.
21
-------
CHARTWELL
SCHEDULE OF INVESTMENTS (unaudited) (continued)
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2001
NUMBER OF MARKET
CONTRACTS/ VALUE
SHARES (NOTE 1)
WARRANTS--0.1% ---------------- ------------
Dayton Superior Corporation(b)(d)+............. 1,500 $ 30,188
Leap Wireless International, Inc.(b)(e)+....... 2,000 76,500
NTELOS Inc.(b)(f).............................. 2,000 5,000
Pliant Corporation(b)(g)+...................... 1,500 150
------------
TOTAL WARRANTS (COST $664,729)................. 111,838
------------
TOTAL INVESTMENTS--132.2%
(COST $232,393,785).......................... 230,401,563
------------
OPTIONS WRITTEN--(1.3%)
American General Corporation Jul. 45 Call...... (300) (42,000)
Baker Hughes Incorporated Jul. 40 Call......... (300) (60,000)
Bank of America Corporation Aug. 55 Call....... (400) (248,000)
Baxter International Inc. Aug. 47.5 Call....... (200) (82,000)
Capital One Financial Corporation Jun. 65
Call......................................... (200) (56,000)
Compass Bancshares, Inc. Jul. 22.5 Call........ (150) (31,125)
Computer Sciences Corporation Sep. 40 Call..... (150) (87,750)
Dell Computer Corporation Nov. 25 Call......... (400) (164,000)
Electronic Data Systems Corporation
Sep. 65 Call................................. (300) (120,000)
FleetBoston Financial Corporation Jul. 40
Call......................................... (250) (75,000)
Global Crossing Ltd. Jan. 15 Call.............. (200) (46,000)
Global Crossing Ltd. Jul. 12.5 Call............ (400) (56,000)
KeyCorp Sep. 25 Call........................... (400) (39,000)
LSI Logic Corporation Jul. 15 Call............. (250) (97,500)
Mirant Corporation Jun. 40 Call................ (150) (18,000)
Motorola, Inc. Oct. 12.5 Call.................. (300) (100,500)
Pfizer Inc. Jun. 45 Call....................... (200) (6,000)
Philip Morris Companies Inc. Jun. 45 Call...... (250) (175,000)
Reliant Resources, Inc. Aug. 45 Call........... (200) (60,000)
Santa Fe International Corporation Jul. 40
Call......................................... (200) (14,000)
The Bank of New York Company, Inc.
Oct. 50 Call................................. (100) (69,000)
The Bank of New York Company, Inc.
Oct. 55 Call................................. (300) (115,500)
The Limited Inc. Aug. 17.5 Call................ (800) (48,000)
The Titan Corportation Oct. 20 Call............ (200) (93,000)
The Williams Companies, Inc. Aug. 40 Call...... (150) (30,000)
Transocean Sedco Forex Inc. Aug. 55 Call....... (350) (115,500)
See Accompanying Notes to Financial Statements.
22
-------
CHARTWELL
SCHEDULE OF INVESTMENTS (unaudited) (concluded)
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2001
MARKET
NUMBER OF VALUE
CONTRACTS (NOTE 1)
OPTIONS WRITTEN (concluded) ---------------- ------------
United Technologies Corporation Jun. 80 Call... (100) $ (41,000)
USX-Marathon Group Oct. 32.5 Call.............. (500) (117,500)
Verizon Communications Inc. Jun. 55 Call....... (100) (10,000)
WorldCom Inc. Jun. 17.5 Call................... (300) (36,000)
WorldCom Inc. Jun. 20 Call..................... (200) (3,000)
------------
TOTAL OPTIONS (PREMIUM RECEIVED $2,654,208).... (2,256,375)
------------
NET INVESTMENTS IN SECURITIES--130.9% (COST
$229,739,577)................................ 228,145,188
OTHER LIABILITIES IN EXCESS OF
ASSETS--(30.9%).............................. (53,792,713)
------------
NET ASSETS--100%............................... $174,352,475
============
---------------
PIES--Premium Income Equity 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, 2001,
these securities amounted to $23,099,612 or 13.2% of net assets.
(a) Partially held by the custodian as coverage for open call options.
Aggregated value of securities is $29,104,450.
(b) Non-income producing.
(c) Convertible into common stock of Dominion Resources, Inc.
(d) Each warrant entitles the holder to purchase 0.69 non-public shares at an
exercise price of $0.01 per share. The warrants are exercisable until
6/15/09.
(e) Each warrant entitles the holder to purchase 5.146 shares of common stock at
an exercise price of $96.80 per share. The warrants are exercisable until
4/15/10.
(f) Each warrant entitles the holder to purchase 1.8 shares common stock at an
exercise price of $47.58 per share. The warrants are exercisable until
8/15/10.
(g) Each warrant entitles the holder to purchase 1.0 shares of common stock at
an exercise price of $0.01 per share. The warrants are exercisable until
6/01/10.
See Accompanying Notes to Financial Statements.
23
-------
CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2001
STATEMENT OF ASSETS AND LIABILITIES
AS OF MAY 31, 2001 (unaudited)
ASSETS:
Investments, at value (cost $232,393,785) (Note 1).......... $230,401,563
Cash........................................................ 4,241,340
Interest receivable......................................... 3,012,234
Receivable for securities sold.............................. 2,639,434
Dividends receivable........................................ 272,681
Prepaid expenses and other assets........................... 84,428
------------
Total assets............................................ 240,651,680
------------
LIABILITIES:
Commercial paper (Note 4)................................... 59,852,866
Payable for securities purchased............................ 3,523,047
Call options written, at value (premiums
received--$2,654,208) (Note 1)............................ 2,256,375
Dividends to shareholders................................... 268,160
Payable for investment management fees (Note 2)............. 185,188
Payable for administration fees (Note 2).................... 29,240
Accrued expenses and other liabilities...................... 184,329
------------
Total liabilities....................................... 66,299,205
------------
NET ASSETS.................................................. $174,352,475
============
NET ASSETS CONSIST OF:
Common Stock, $0.01 par value (authorized 100,000,000
shares)................................................. $ 156,289
Additional paid-in capital................................ 220,734,208
Distributions in excess of net investment income.......... (4,805,080)
Accumulated net realized losses on investments and
options................................................. (40,138,553)
Net unrealized depreciation on investments and options.... (1,594,389)
------------
NET ASSETS.................................................. $174,352,475
============
NET ASSET VALUE PER SHARE:
$174,352,475 / 15,628,866 shares of Common Stock issued
and outstanding......................................... $ 11.16
============
See Accompanying Notes to Financial Statements.
24
-------
CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2001
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED
MAY 31, 2001 (unaudited)
INVESTMENT INCOME: (NOTE 1)
Interest.................................................... $ 6,952,333
Dividends (net of $2,191 foreign withholding tax)........... 1,467,022
------------
Total investment income................................. 8,419,355
------------
EXPENSES:
Investment management fees (Note 2)......................... 1,100,251
Administration fees (Note 2)................................ 173,724
Commercial paper fees....................................... 99,712
Professional fees........................................... 63,368
Transfer agent fees......................................... 35,022
Printing and shareholder reports............................ 29,279
Custodian fees.............................................. 21,690
Registration fees........................................... 17,785
Directors' fees and expenses................................ 5,585
Pricing fees................................................ 3,503
Other operating expenses.................................... 18,649
------------
Total operating expenses.................................. 1,568,568
Interest expense.......................................... 1,722,929
------------
Total expenses.......................................... 3,291,497
------------
NET INVESTMENT INCOME................................... 5,127,858
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: (NOTE 1)
Net realized loss on investments............................ (16,664,599)
Net realized gain on call options written................... 2,523,117
------------
(14,141,482)
Change in net unrealized depreciation on investments and
options................................................... 31,519,707
------------
Net realized and unrealized gain on investments and
options............................................... 17,378,225
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 22,506,083
============
See Accompanying Notes to Financial Statements.
25
-------
CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2001
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED
MAY 31, 2001 (unaudited)
INCREASE (DECREASE) IN CASH
Cash flows provided from (used for) operating activities:
Interest and dividends received........................... $ 9,099,004
Operating expenses paid................................... (1,519,065)
Interest expense paid..................................... (1,617,962)
Purchase of long-term portfolio investments............... (176,616,889)
Proceeds from sale of long-term portfolio investments..... 167,176,299
Net cash provided from options transactions............... 3,470,623
-------------
Net cash used for operating activities.................. (7,990)
-------------
Cash flows provided from (used for) financing activities:
Net cash provided from commercial paper issuance.......... 97,233
Cash dividends paid to shareholders....................... (8,668,002)
-------------
Net cash used for financing activities.................. (8,570,769)
-------------
Net decrease in cash........................................ (8,578,759)
Cash at beginning of period............................... 12,820,099
-------------
Cash at end of period..................................... $ 4,241,340
=============
RECONCILIATION OF NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS TO NET CASH USED FOR OPERATING ACTIVITIES
Net increase in net assets resulting from operations........ $ 22,506,083
-------------
Increase in investments................................... (8,591,773)
Net realized loss on investments transactions............. 14,141,482
Net change in unrealized depreciation on investments and
options................................................. (31,519,707)
Increase in receivable for securities sold................ (135,572)
Decrease in interest and dividend receivable.............. 659,323
Increase in commercial paper discount..................... 104,967
Decrease in other assets.................................. 2,253
Increase in payable for securities purchased.............. 2,777,704
Increase in accrued expenses and other liabilities........ 47,250
-------------
Total adjustments....................................... (22,514,073)
-------------
Net cash used for operating activities...................... $ (7,990)
=============
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for interest.................. $ 1,617,962
=============
See Accompanying Notes to Financial Statements.
26
-------
CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2001
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX
MONTHS ENDED FOR THE
MAY 31, 2001 YEAR ENDED
(UNAUDITED) NOVEMBER 30, 2000
------------ -----------------
OPERATIONS:
Net investment income.................... $ 5,127,858 $ 12,496,035
Net realized loss on investments......... (16,664,599) (19,935,282)
Net realized gain on options written..... 2,523,117 4,417,001
Change in net unrealized depreciation on
investments and options................ 31,519,707 (12,107,968)
------------ ------------
Net increase (decrease) in net assets
resulting from operations................ 22,506,083 (15,130,214)
------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net investment income.................... (4,853,816) (12,425,463)
Distributions in excess of net investment
income................................. (4,805,080) --
Tax return of capital.................... -- (6,834,290)
------------ ------------
Net decrease in net assets resulting from
dividends and distributions.............. (9,658,896) (19,259,753)
------------ ------------
CAPITAL STOCK TRANSACTIONS:
Reinvestment of dividends resulting in the
issuance of Common Stock................. 1,036,567 --
------------ ------------
Net increase in net assets resulting from
Common Stock transactions................ 1,036,567 --
------------ ------------
Total increase (decrease) in net assets.... 13,883,754 (34,389,967)
------------ ------------
NET ASSETS:
Beginning of period...................... 160,468,721 194,858,688
------------ ------------
End of period distributions in excess of
net investment income of $4,805,080 and
$274,042, respectively................. $174,352,475 $160,468,721
============ ============
See Accompanying Notes to Financial Statements.
27
-------
CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2001
FINANCIAL HIGHLIGHTS
FOR THE
SIX MONTHS
ENDED FOR THE YEAR ENDED
MAY 31, NOVEMBER 30,
2001 --------------------
(UNAUDITED) 2000 1999
THE FOLLOWING PER SHARE DATA AND RATIOS HAVE BEENDERIVED ----------- -------- --------
FROM INFORMATION PROVIDED IN THE FINANCIALSTATEMENTS
NET ASSET VALUE, BEGINNING OF PERIOD................. $ 10.33 $ 12.54 $ 14.17
-------- -------- --------
INCOME GAIN (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (1).......................... 0.33 0.80 0.88
Net realized and unrealized gain (loss) on investment
transactions..................................... 1.12 (1.77) (1.27)
-------- -------- --------
Total from investment operations................. 1.45 (0.97) (0.39)
-------- -------- --------
LESS DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment income............... (0.31) (0.80) (0.86)
Distributions in excess of net investment income... (0.31) -- --
Distributions from realized short-term gains....... -- -- (0.03)
Tax return of capital.............................. -- (0.44) (0.35)
-------- -------- --------
Total dividends and distributions................ (0.62) (1.24) (1.24)
-------- -------- --------
NET ASSET VALUE, END OF PERIOD....................... $ 11.16 $ 10.33 $ 12.54
======== ======== ========
MARKET VALUE, END OF PERIOD.......................... $ 11.70 $ 9.56 $ 10.50
======== ======== ========
TOTAL RETURN BASED ON: (2)
Net asset value.................................... 14.24% (7.72)% (2.47)%
======== ======== ========
Market value....................................... 29.38% 2.02% (18.44)%
======== ======== ========
RATIOS AND SUPPLEMENTAL DATA: (3)
Net assets, end of period (000 omitted)............ $174,352 $160,469 $194,859
======== ======== ========
Total expenses..................................... 3.84%(5) 3.76% 2.03%
Total operating expenses (4)....................... 1.71%(5) 1.66% 1.35%
Commercial paper expenses.......................... 2.13%(5) 2.01% 0.68%
Net investment income.............................. 5.98%(5) 6.51% 6.51%
Portfolio turnover................................. 74% 161% 119%
LEVERAGE ANALYSIS:
Aggregate amount outstanding at end of period (000
omitted)......................................... $ 60,000 $ 60,000 $ 60,000
Average daily balance of amortized cost of commercial
paper outstanding (000 omitted).................. $ 59,615 $ 59,579 $ 59,689
Asset coverage per $1,000 at end of period......... $ 4,021 $ 3,743 $ 4,378
---------------
* 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) Ratios are stated as a percentage of average weekly net assets which
includes any liabilities constituting indebtedness in connection with
financial leverage.
(4) Exclusive of commercial paper expenses.
(5) Annualized.
See Accompanying Notes to Financial Statements.
28
-------
CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2001
FINANCIAL HIGHLIGHTS (CONCLUDED)
FOR THE
PERIOD FROM
JUNE 29,
1998* TO
NOVEMBER 30,
1998
------------
NET ASSET VALUE, BEGINNING OF PERIOD........................ $ 14.96+
--------
INCOME GAIN (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (1)................................. 0.40
Net realized and unrealized gain (loss) on investment
transactions............................................ (0.78)
--------
Total from investment operations........................ (0.38)
--------
LESS DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment income...................... (0.41)
Distributions in excess of net investment income.......... --
Distributions from realized short-term gains.............. --
Tax return of capital..................................... --
--------
Total dividends and distributions....................... (0.41)
--------
NET ASSET VALUE, END OF PERIOD.............................. $ 14.17
========
MARKET VALUE, END OF PERIOD................................. $ 14.19
========
TOTAL RETURN BASED ON: (2)
Net asset value........................................... (2.48)%
========
Market value.............................................. (2.62)%
========
RATIOS AND SUPPLEMENTAL DATA: (3)
Net assets, end of period (000 omitted)................... $219,152
========
Total expenses............................................ 1.32%(5)
Total operating expenses (4).............................. 1.32%(5)
Commercial paper expenses................................. N/A
Net investment income..................................... 6.99%(5)
Portfolio turnover........................................ 27%
LEVERAGE ANALYSIS:
Aggregate amount outstanding at end of period (000
omitted)................................................ N/A
Average daily balance of amortized cost of commercial
paper outstanding (000 omitted)......................... N/A
Asset coverage per $1,000 at end of period................ N/A
---------------
* 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) Ratios are stated as a percentage of average weekly net assets which
includes any liabilities constituting indebtedness in connection with
financial leverage.
(4) Exclusive of commercial paper expenses.
(5) Annualized.
See Accompanying Notes to Financial Statements.
29
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CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2001
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 accounting principles generally accepted in the
United States of America.
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.
WRITTEN OPTIONS: When the Fund writes a covered call option, and amount equal
to the premium received by the portfolio is included in the Fund's statement of
assets and liabilities as a liability. The amount of the liability is
subsequently marked-to-market to reflect the current market value of the option
written.
When a covered written call expires on its stipulated expiration date, or if the
portfolio enters into a closing purchase transaction, the Fund will realize a
gain (or loss if the cost of the closing purchase transaction exceeds the
premium received when the call option was written) without regard to any
unrealized gain or loss on the underlying security, and the liability related to
such option will be extinguished. When a covered written call option is
exercised, the Fund will realize a gain or loss from the sale of the underlying
security and the proceeds of the sale are increased by the premium originally
received. The Fund as writer of
30
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CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2001
an option may have no control over whether the underlying securities may be sold
(call) and as a result bears the market risk of an unfavorable change in the
price of the securities underlying the written option.
FEDERAL INCOME TAXES: It is the Fund's intention to meet the requirements under
Subchapter M 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.
BORROWINGS: The Fund issues short-term commercial paper at a discount from par.
The discount is amortized over the life of the commercial paper using the
straight line method.
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.
In November 2000, the American Institute of Certified Public Accountants issued
new accounting guidelines for investment companies which will require the Fund
to amortize discounts and premiums on fixed income securities effective for the
fiscal year ending November 30, 2002. This accounting change will not affect the
Fund's net asset value, total return, or distributions to shareholders but may
result in certain amounts being reclassified from realized and unrealized gain
to interest income for financial statement purposes. Management of the Fund
believes this change will have no material effect on the financial statements.
USE OF ESTIMATES: The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts in the financial statements. Actual results could differ from those
estimates.
31
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CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2001
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, 2001, the Fund incurred fees, of which $25,628
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 the six months ended May 31, 2001, purchases and sales of investments,
excluding short-term investments, totaled $179,394,593 and $167,311,871,
respectively.
At May 31, 2001, the cost and unrealized appreciation/depreciation of
investments for federal income tax purposes was as follows:
Cost of investments......................................... $230,666,324
============
Gross unrealized appreciation............................... $ 16,230,850
Gross unrealized depreciation............................... (18,751,986)
------------
Net unrealized depreciation................................. $ (2,521,136)
============
32
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CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2001
The following table summarizes the Fund's call options written for the six
months ended May 31, 2001.
NUMBER OF
CONTRACTS PREMIUMS
--------- -----------
Options outstanding November 30, 2000.......... 5,193 $ 1,706,702
Options written................................ 21,730 5,829,099
Options expired................................ (8,129) (2,059,801)
Options closed................................. (6,530) (1,954,131)
Options exercised.............................. (3,964) (867,661)
------ -----------
Options outstanding May 31, 2001............... 8,300 $ 2,654,208
====== ===========
NOTE 4. COMMERCIAL PAPER
As of May 31, 2001, $60,000,000 of commercial paper was outstanding with an
amortized cost of $59,852,866. The average discount rate of commercial paper
outstanding at May 31, 2001 was 5.895%. The average daily balance of commercial
paper outstanding for the six months ended May 31, 2001 was $59,615,118 at a
weighted average discount rate of 4.99%. The maximum amount of commercial paper
outstanding at any time during the six months ended was $60,000,000. In
conjunction with the issuance of the commercial paper, the Fund entered into a
line of credit arrangement with a bank for $30,000,000. Interest on borrowing is
based on market rates in effect at the time of borrowing. The commitment fee is
computed at the rate of 0.15% per annum on the unused balance. During the six
months ended May 31, 2001, there were no borrowings under this arrangement.
NOTE 5. CAPITAL STOCK
There are 100,000,000 shares of $0.01 par value common stock authorized. Of the
15,628,866 shares of common stock outstanding at May 31, 2001, the Manager owned
8,961 shares.
For the six months ended May 31, 2001 and the year ended November 30, 2000 the
Fund issued 91,795 and -0- shares respectively, in connection with the Fund's
dividend reinvestment plan.
NOTE 6. 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 or lower 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
33
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CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2001
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 7. SUBSEQUENT EVENT
The Board of Directors of the Fund declared the following dividends:
DECLARATION DATE EX-DATE RECORD DATE PAYABLE DATE DIVIDEND RATE
---------------- ------------- ------------- ------------- -------------
June 1, 2001 June 15, 2001 June 19, 2001 June 29, 2001 $0.1033
July 2, 2001 July 18, 2001 July 20, 2001 July 31, 2001 $0.1033
NOTE 8. CAPITAL LOSS CARRYFORWARDS
The following summarizes the capital loss carryforwards as of November 30, 2000.
This capital loss carryforward is available to offset future gains.
EXPIRING IN FISCAL YEAR AMOUNT
----------------------- ----------
2007 $8,880,255
2008 $9,509,213
Under the current tax law, capital and currency losses realized after October
31, 2000 are deferred and treated as occurring on the first day of the following
fiscal year. For fiscal year ended November 30, 2000, the Fund elected to defer
capital losses occurring between November 1, 2000 and November 30, 2000 in the
amount of $6,355,782.
AUTOMATIC DIVIDEND REINVESTMENT PLAN (UNAUDITED)
Pursuant to the Fund's Automatic Dividend Reinvestment Plan (the "Plan"), unless
a shareholder otherwise elects, all dividend and capital gains distributions
will be automatically reinvested in additional shares of common stock of the
Fund by PNC Bank, N.A., as agent for shareholders in administering the Plan (the
"Plan Agent"). Shareholders who elect not to participate in the Plan will
receive all dividends and distributions in cash, paid by check mailed directly
to the shareholder of record (or, if the shares are held in street or other
nominee name, then to such nominee) by PNC Bank, N.A., as dividend paying agent.
Such participants may elect not to participate in the Plan and to receive all
distributions of dividends and capital gains in cash by sending written
instructions to PNC Bank, N.A., as dividend paying agent, at the address set
forth below.
Participation in the Plan is completely voluntary and may be terminated or
resumed at any time without penalty by written notice if received by the Plan
Agent not less than ten days prior to any dividend record date. Otherwise such
termination will be effective with respect to any subsequently declared dividend
or distribution.
Whenever the Fund declares a distribution, an ordinary income dividend or a
capital gain dividend (collectively referred to as "dividends") payable either
in
34
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CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2001
shares or in cash, non-participants in the Plan will receive cash, and
participants in the Plan will receive the equivalent in shares of common stock.
The shares will be acquired by the Plan Agent for the participant's account,
depending upon the circumstances described below, either (i) through receipt of
additional unissued but authorized shares of common stock from the Fund or (ii)
by purchase of outstanding shares of common stock on the open market on the NYSE
or elsewhere. If on the payment date of the dividend, the net asset value per
share of the common stock is equal to or less than the market price per share
plus estimated brokerage commissions (such condition being referred to herein as
"market premium"), the Plan Agent will invest the dividend amount in newly
issued shares on behalf of the participant. The number of newly issued shares of
common stock to be credited to the participant's account will be determined by
dividing the dollar amount of the dividend by the net asset value per share on
the date the shares are issued, provided that the maximum discount from the then
current market price per share on the date of issuance may not exceed 5%. If on
the dividend payment date the net asset value per share is greater than the
market value (such condition being referred to herein as "market discount"), the
Plan Agent will invest the dividend amount in shares acquired on behalf of the
participant in open-market purchases.
In the event of a market discount on the dividend payment date, the Plan Agent
will have until the last business day before the next date on which the shares
trade on the "ex-dividend" basis or in no event more than 30 days after the
dividend payment date to invest the dividend amount in shares acquired in
open-market purchases. If, before the Plan Agent has completed its open-market
purchases, the market price of a share of common stock exceeds the net asset
value per share, the average per share purchase price paid by the Plan Agent may
exceed the net asset value of the Fund's shares, resulting in the acquisition of
fewer shares than if the dividend had been paid in newly issued shares on the
dividend payment date. The Plan provides that if the Plan Agent is unable to
invest the full dividend amount in open-market purchases during the purchase
period or if the market discount shifts to market premium during the purchase
period, the Plan Agent will cease making open-market purchases and will invest
the uninvested portion of the dividend amount in newly issued shares at the
close of business on the last purchase date.
The Plan Agent maintains all shareholders' accounts in the Plan and furnishes
written confirmation of all transactions in the accounts, including information
needed by shareholders for tax records. Shares in the account of each Plan
participant will be held by the Plan Agent on behalf of the Plan participant,
and each shareholder's proxy will include those shares purchased or received
pursuant to the Plan. The Plan Agent will forward all proxy solicitation
materials to participants and vote proxies for shares held pursuant to the Plan
in accordance with the instructions of the participants.
In the case of shareholders such as banks, brokers or nominees which hold shares
for others who are the beneficial owners, the Plan Agent will administer the
Plan
35
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CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2001
on the basis of the number of shares certified from time to time by the record
shareholders as representing the total amount registered in the record
shareholder's name and held for the account of beneficial owners who are to
participate in the Plan.
There will be no brokerage charges with respect to shares issued directly by the
Fund as a result of dividends or capital gain distributions payable either in
shares or in cash. However, each participant will pay a pro rata share of
brokerage commissions incurred with respect to the Plan Agent's open-market
purchases in connection with reinvestment of dividends.
The automatic reinvestment of dividends and distributions will not relieve
participants of any federal, state or local income tax that may be payable (or
required to be withheld) on such dividends.
Shareholders participating in the Plan may receive benefits not available to
shareholders not participating in the Plan. If the market price plus commissions
of the Fund's shares is above the net asset value, participants in the Plan will
receive shares of the Fund at less than they could otherwise purchase them and
will have shares with a cash value greater than the value of any cash
distribution they would have received on their shares. If the market price plus
commissions is below the net asset value, participants will receive
distributions in shares with a net asset value greater than the value of any
cash distribution they would have received on their shares. However, there may
be insufficient shares available in the market to make distributions in shares
at prices below the net asset value. Also, since the Fund does not redeem its
shares, the price on resale may be more or less than the net asset value.
Experience under the Plan may indicate that changes are desirable. Accordingly,
the Fund reserves the right to amend or terminate the Plan. There is no direct
service charge to participants in the Plan; however, the Fund reserves the right
to amend the Plan to include a service charge payable by the participants.
All correspondence concerning the Plan should be directed to the Plan Agent at
PNC Bank, N.A., c/o PFPC Inc., 400 Bellevue Parkway, Wilmington, Delaware 19809,
Attn: Closed-End Department.
36
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CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2001
ADDITIONAL INFORMATION (UNAUDITED)
During the period, there have been no material changes in the Fund's investment
objective or fundamental policies that have not been approved by the
shareholders. There have been no changes in the Fund's charter or By-Laws that
would delay or prevent a change in control of the Fund which have not been
approved by the shareholders. There have been no changes in the principal risk
factors associated with investment in the Fund. There have been no changes in
the persons who are primarily responsible for the day-to-day management of the
Fund's portfolio.
EFFECTS OF LEVERAGE
Leverage of $60 million in commercial paper was initially sold by the Fund on
July 28, 1999. Through May 31, 2001, interest paid on the commercial paper
ranged from 4.85% to 6.75%. As of May 31, 2001, the Fund had $30 million
outstanding at 5.12% per annum maturing on June 4, 2001, and $30 million at
4.85% per annum maturing on July 5, 2001. All interest rates include fees due to
the broker-dealer. The Fund must experience an annual return of 1.25% to cover
interest payments on the commercial paper.
The following table explains the potential effects of leverage on the equity
returns of common shareholders:
--------------------------------------------------------------------------------------------
Assumed return on portfolio
(net of expenses) - 10.00% - 5.00% 0.00% 5.00% 10.00%
--------------------------------------------------------------------------------------------
Corresponding return to common
stockholder - 15.00% - 8.33% - 1.67% 5.00% 11.67%
--------------------------------------------------------------------------------------------
Assumes $180 million assets attributable to common shareholders; $60 million
aggregate leverage with an average interest rate of 5.00%. All figures appearing
above are hypothetical returns generated to assist investors in understanding
the effects of leverage. Actual returns may be greater or less than those
appearing in the table.
37
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CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2001
SUPPLEMENTAL PROXY INFORMATION
The Annual Meeting of Shareholders of the Chartwell Dividend and Income Fund,
Inc. was held on April 18, 2001 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:
--------------------------------------------------------------------------------
VOTES VOTES VOTES
FOR AGAINST WITHHELD
--------------------------------------------------------------------------------
1. To elect the
following directors
to serve as Class
II directors for a
three-year term
expiring in 2004: Kevin A. Melich 15,116,614 335,702 --
Bernard P. Schaffer 15,153,538 298,778 --
--------------------------------------------------------------------------------
VOTES VOTES VOTES
FOR AGAINST WITHHELD
--------------------------------------------------------------------------------
2. To ratify the
selection of
Pricewaterhouse
Coopers LLP as
independent public
accountants for the
fiscal year ending
November 30, 2001: 15,219,502 64,946 167,868
--------------------------------------------------------------------------------
38
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CHARTWELL
[This page intentionally left blank]
DIRECTORS
Winthrop S. Jessup, Chairman
George W. Grosz
Kenneth F. Herlihy
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, Suite 330
Berwyn, PA 19312
ADMINISTRATOR
Princeton Administrators, L.P.
P.O. Box 9095
Princeton, NJ 08543-9095
CUSTODIAN AND TRANSFER AGENT
PNC Bank, N.A.
400 Bellevue Parkway
Wilmington, DE 19809
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
Two Commerce Square, Suite 1700
2001 Market Street
Philadelphia, PA 19103-7042
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.
The accompanying financial statements as of May 31, 2001 were not audited and
accordingly, no opinion is expressed on them.
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940 that the Fund may purchase, from time to time, shares of its
common stock in the open market.