Edgar Filing: CHARTWELL DIVIDEND & INCOME FUND INC

[CHARTWELL INVESTMENT PARTNERS LOGO]

ARTWORK

CHARTWELL DIVIDEND AND INCOME FUND, INC.
SEMI-ANNUAL REPORT TO SHAREHOLDERS DATED MAY 31, 2002

CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2002

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 over 100
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 DIVIDEND AND INCOME FUND, INC. MAY 31, 2002

LETTER TO SHAREHOLDERS

DEAR SHAREHOLDERS,

The following is the semi-annual report for the Chartwell Dividend & Income Fund
(NYSE symbol: "CWF") for the six months ended May 31, 2002. The Fund returned
19.50% assuming reinvestment of dividends in additional shares. The net asset
value ("NAV") return was 1.73%. The Fund ended the period at a premium to NAV of
26.9% versus beginning the period at an 8.1% premium to NAV. The Fund traded on
the NYSE between a range of $10.35 and $12.15 during the six months ended May
31, 2002. However, this was followed by a very weak beginning to the Fund's
second half results in June. This is due to both a poor stock market and the
reduction in the Fund's monthly distribution.

SIX MONTHS RETURN
NOVEMBER 30, 2001-MAY 31, 2002

CWF................................................ +19.50%
CWF NAV............................................ +1.73%
S&P 500............................................ -5.68%
High Yield Bonds*.................................. +2.29%

---------------

* Merrill Lynch Cash Pay Index.

On June 4, 2002, Chartwell Dividend & Income Fund announced a reduced monthly
distribution of $0.0833 per share of common stock, equal to $1.00 per share
annually. This new level represents a reduction of $0.02 per share from the
previously declared monthly distribution of $0.1033 per share, equal to $1.24
per share annually. Given current economic and market conditions, we believe the
new monthly payout better aligns the Fund's distribution policy with its net
asset value. As manager of the Fund, Chartwell Investment Partners is reducing
the investment management fee from 0.95 percent to 0.85 percent, effective July
1, 2002. While we are disappointed by the weak markets and the necessity to
reduce the monthly distribution, we believe that this difficult decision will
better serve shareholders over the long term. While the markets continue to
experience difficult times, we believe the U.S. economy is on a recovery track.
We appreciate your continued confidence and look forward to serving you well
into the future.

KEY EVENTS OVER THE PAST SIX MONTHS

The equity markets declined largely due to several major negative concerns.
First, accounting usage and standards came under tremendous scrutiny as a number
of high-profile companies have been accused of abusing accounting standards in
order to make company results appear better than reality. This was often done
with the blessing of their accountants. Enron Corp., WorldCom Inc. and other
companies were analyzed and in some cases found to have distorted their
financial results. Without being able to trust the numbers published in company

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CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2002

filings, investors simply assumed the worst and not only abandoned stocks that
appeared to have questionable earnings, but also pulled even more money out of
all stocks.

CHARTWELL DIVIDEND & INCOME FUND TOTAL RETURN VS S&P 500
TOTAL RETURN
NOVEMBER 30, 2001 THROUGH MAY 31, 2002

[LINE GRAPH]

Another driver of the weak market was the ongoing problems in technology and
telecommunications companies. Results continue to disappoint, forcing investors
to further reduce valuations within these groups. Because these stocks were so
widely held, their negative performance has led to broad market weakness.
Investors remain focused on companies such as Cisco Systems, Inc. and Intel
Corporation. The outlook here remains cloudy.

Compared to the stock markets, the broad economy continues to signal better
aggregate strength, although there has been little in the way of a grass-roots
confirmation in the form of company earnings. GDP (Gross Domestic Product) in
the first quarter of '02 grew a strong 5.8%, while inflation was a tame
annualized 2.9%. Interest rates remained at a low level, as the 10-year U.S.
Treasury bond yield rose from 4.75% to 5.05%. The one area of commodity strength
was crude oil, which increased in price per barrel from $19 to $25.50. While
growth in the second quarter will moderate, it appears that the recession was
short lived and that an economic rebound is in place.

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CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2002

CURRENT POSITIONING AND OUTLOOK

[FIXED INCOME PIE CHART]
Within the portfolio, high yield bonds and
Real Estate Investment Trust ("REITs")
continued to perform well. Equities showed a
slightly positive return despite the decline
in the overall stock market. Utilities were
down for the reported period. Among our best
securities were Philip Morris Companies Inc.
and Bank of America Corporation within
equities, Hospitality Properties Trust within
REITs and MDC Corporation Inc. and Atrium
Companies, Inc. within high yield bonds.

The portfolio currently holds 48% in high yield bonds, 37% in diversified
equities, 8% in utilities and 6% in REITs. At this point we are confident that
our asset allocation offers a balanced opportunity to meet the needs of our
investors for income while retaining some of the upside potential of equities.

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
Equity and Convertible Securities

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 DIVIDEND AND INCOME FUND, INC. MAY 31, 2002

FIXED INCOME

[FIXED INCOME PIE CHART] [PERFORMANCE BAR CHART]

High yield corporate bonds provided a positive total return during the six
months ended May 31, 2002, with the Merrill Lynch High Yield Cash Pay Index
returning 2.29%. The high yield portion of your Fund outperformed the index,
returning 4.13% for the same period.

HIGH YIELD INDEX SPREAD TO TREASURY
(SOURCE: MERRILL LYNCH, BLOOMBERG)

[HIGH YIELD INDEX LINE CHART]

The Merrill Lynch High Yield Cash Pay Index's interest rate spread over
Treasuries declined nearly 100 basis points, from 742 basis points on November
30, 2001 to 643 basis points on May 31, 2002. Some of the spread tightening was
due to a 30 basis point increase in the 10-year Treasury yield from 4.75% to
5.05%. Most of the recent spread tightening was due to defaulted issues (with
extremely high yields) exiting the index. Spreads are wide by historical
standards.

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CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2002

HIGH YIELD DEFAULT RATES
(Latest 12 months ended 5/31/02, source: CS First Boston)

[HIGH YIELD INDEX BAR CHART]

Defaults have remained stubbornly high recently, with the trailing-twelve-month
default rate at 10.8%, according to CS First Boston.

HIGH YIELD SECTOR PERFORMANCE
(11/30/01-5/31/02, source: Merrill Lynch)

[HIGH YIELD INDEX BAR CHART]

Generally speaking, higher quality issuers outperformed lower quality issuers.
High profile accounting improprieties and the continued threat of terrorism left
investors little choice but to remain conservative. There was a wide dispersion
of returns among high yield sectors. Most sectors outperformed the index, though
telecommunications, cable TV, and utilities underperformed by a wide margin.
Your Fund held winning investments in Seagate Technology International, MMI
Products, Inc. and Atrium Companies, Inc., though we were off the mark with
positions in Allegiance Telecom, Inc., Leap Wireless International, Inc. and AES
Corporation.

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CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2002

OUTLOOK

We are cautiously optimistic about the outlook for high yield bonds. We believe
that default rates have peaked, or are near a peak, and should begin to decline,
provided the economy continues to recover. We are intensely focused on an
issuer's ability to generate consistent cash flow, particularly free cash flow
after debt service and capital expenditures. We aim to position the high yield
portion of your Fund conservatively with the objective of capturing high yield's
excess income while minimizing principal losses. As always, rigorous fundamental
credit research will be our roadmap to uncover superior investments in high
yield.

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CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2002

EQUITY

[EQUITY RETURNS PIE CHART] [EQUITY RETURNS BAR CHART]

The equity portion of the Fund returned 1.02% (including convertible preferred
stock and option overwriting gains). This compares to the S&P 500 (-5.68%) and
the Dow Jones Industrial Average (+0.75%).

One area that provided consistently good returns within the equities was
regional banks. Bank of America Corporation ("BAC") was a top performer, up 26%
during the period. As one of the premier consumer banking franchises in the
southern and western United States, BAC benefited from strong mortgage lending
results and robust deposit growth. In addition, the bank has exited many large
corporate lending commitments that are currently causing their competition
problems. Contrasting this, Comerica Incorporated ("Comerica") performed well
off of a low starting base after investors punished the stock too much for its
exposure to middle-American industry. While large lenders are facing credit
difficulties, mid-sized, specialized corporate lenders like Comerica continue to
run solid businesses. The Fund was fortunate enough to purchase the stock at
approximately $50 and sell it near $63.

[BANK OF AMERICA LINE CHART]

Also performing well within financials was Capital One Financial Corporation.
Part of the strategy of this top-five credit card issuer is to conduct over
100,000 marketing "tests" per year in order to determine what different
consumers respond to when choosing and using a credit card. The company has been
able to

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grow far faster and be more profitable than the credit card market as a whole by
scientifically focusing on "what's in your wallet."

[CAPITAL ONE LINE CHART]

Philip Morris Companies ("MO") has taken a different track, depending on its
consistent franchises to trade as high as $57 during the past six months.
Overseas markets continue to provide growth opportunities. In addition, U.S.
consumers continue to enjoy MO's food brands such as Oscar Meyer, Cool-Aid and
Jell-O.

[PHILIP MORRIS LINE CHART]

Finally, GlobalSantaFe Corporation depends less on brands and more on
engineering expertise to help the worlds largest energy producers find and
produce oil and gas. They operate large land- and water-based drilling rigs that
draw crude oil and natural gas out of reserve basins deep below the earth's
surface. While demand for their service in the Gulf of Mexico has been lukewarm
lately, internal usage has been strong, helping drive the performance of these
shares.

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CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2002

[GLOBAL SANTA FE LINE CHART]

Other stocks obviously faired less well and must be addressed. First worth
mentioning is Halliburton Company ("HAL"). While a worldwide leader in oil
services (similar to GlobalSantaFe Corporation), HAL suffered from acute
exposure to asbestos litigation, which has recently come to prominence again.
Given the unknown potential liability that is associated with asbestos, it is
often an unpredictable variable. Currently the company may be on the verge of a
settlement with the major plaintiffs' attorneys representing individuals
actually sick from asbestos exposure. If this settlement occurs, which it may
not, investors will likely return focus to HAL's improving fundamental business
characteristics.

[HALLIBURTON LINE CHART]

While being the bluest of blue chips, General Electric Company's ("GE") stock
has performed poorly since Jack Welch gave up the helm. GE has suffered from
concern about the future of its turbine business, which sells to power
generators. It also has seen weakness in GE capital, a major player in large
corporate lending. We view the company as solid, with NBC, appliances and
plastics continuing to perform well. We expect the stock to react well to any
improvement in the economy.

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[GENERAL ELECTRIC LINE CHART]

Finally, the Fund held a number of major pharmaceutical stocks, including Merck
and Co., Inc. and Wyeth (formerly American Home Products). Many worries plague
these stocks, including major drugs coming off patent, a dearth of new pipeline
drugs to replace former blockbusters, and regulatory pressure from states to
implement drug price controls. However, their cash flows and returns remain
robust and well above market averages. Despite this, they trade at below-market
price-to-earnings ratios. In addition, innovation has always been the savior of
this industry and likely will again as they use newly discovered techniques and
technologies to create more effective drugs.

[MERCK & COMPANY LINE CHART]

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CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2002

UTILITIES

[UTILITY RESULTS PIE CHART] [UTILITY RETURNS BAR CHART]

Utilities had a poor period of performance. The main weakness in utilities came
from owning stocks that participated in energy marketing and trading and used
acquisitions to boost growth. We underestimated the degree to which competition
would hurt business and to what degree investors would punish companies for not
meeting expectations. Stocks such as El Paso Corporation (Natural Gas) were down
significantly for the last six months and hurt the Fund's performance. That
said, many utilities are now trading below break-up valuations, meaning an
acquirer could buy the entire company and sell off the pieces to make a profit.
It is unlikely that valuations will remain at such low levels, especially as the
stronger companies right themselves and improve their balance sheets.

There were certainly some bright spots in the utility portfolio. Exelon
Corporation, the power company serving much of Illinois and Pennsylvania, did
very well, coming off low valuations and benefiting from better uptime at their
power plants. KeySpan Corporation also did quite well, serving the Long Island
and New York City areas. Hurting the Fund was Williams Companies, Inc. which was
hurt by poor trading operations and a poorly operating telecommunications
subsidiary. El Paso Energy also underperformed as they were forced to write down
the value of trading assets. They have begun to sell assets and raise equity to
improve the stability of their balance sheet.

Going forward, we think that the healing process has begun. In the utility
sector, many struggling companies have been able to raise equity to reduce debt.
Natural gas prices are relatively stable. Deals to sell excess assets have been
inked and there appears to be further demand and financial resources available
for further purchases. While we do not expect an immediate snap-back in the
prices of natural gas stocks, we do believe the valuations justify holding them
at this time.

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CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2002

REAL ESTATE INVESTMENT TRUSTS

[REAL ESTATE TRUSTS PIE CHART] [REITs RETURNS BAR CHART]

Shares of Real Estate Investment Trusts ("REITs") provided positive returns in a
challenging investing environment. Fueled by strong cash flows, high dividend
yields and low price-to-funds from operation ratios, these stocks appear
attractive to many investors. In past years, some institutional and mutual fund
managers have avoided REITs because of their concentration on real estate and
unique corporate structures. Now it appears that many fund managers and
individual investors are more open to REITs, which we expect to continue.
However, the majority of REITs now trade at or near the value of the real estate
they own. It is unlikely that they will appreciate much beyond current levels.
Therefore we have attempted to focus on those trading at reasonable valuations
relative to their underlying assets and with stable cash flows to fund
dividends.

Among our best REITs were Duke-Weeks Realty Corporation, Prologis Trust, Reckson
Associates Realty Corporation and Healthcare Realty Trust, Inc. The only REIT in
the portfolio to lose money during the period was Boston Properties Inc. a large
office/industrial/hotel property developer.

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CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2002

UTILIZATION OF LEVERAGE

The Chartwell Dividend and Income Fund has utilized leverage through the
issuance of commercial paper. As of May 31, 2002, 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 and stock market 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 addition to the decline in net
asset value, the market value of the Fund's Common Stock may also decline.

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SCHEDULE OF INVESTMENTS (unaudited)
MARKET
NUMBER OF VALUE
SHARES (NOTE 1)
COMMON STOCK-- 69.0% ---------------- ------------

BANKING--6.3%
Bank of America Corporation.................... 33,000 $ 2,501,730
Citigroup Inc. ................................ 55,336 2,389,408
J.P. Morgan Chase & Co. ....................... 30,000 1,078,500
KeyCorp........................................ 100,000 2,730,000
PNC Financial Services Group, Inc. ............ 12,000 675,000
------------
9,374,638
------------
BASIC MATERIALS--2.1%
Alcoa Inc. .................................... 53,000 1,853,940
International Paper Company.................... 30,000 1,293,000
------------
3,146,940
------------
CAPITAL GOODS--4.6%
Cooper Industries, Ltd. ....................... 46,575 2,019,958
General Electric Company....................... 65,000 2,024,100
Pitney Bowes Inc. ............................. 70,000 2,866,500
------------
6,910,558
------------
CONSUMER DISCRETIONARY--2.2%
Ford Motor Company............................. 96,600 1,704,990
Stanley Works.................................. 35,995 1,532,667
------------
3,237,657
------------
CONSUMER NON-DURABLE--2.3%
Philip Morris Companies Inc. .................. 60,700 3,475,075
------------
CONSUMER STAPLES--1.9%
General Mills, Inc. ........................... 11,000 500,500
Loews Corp--Carolina Group..................... 74,430 2,400,368
------------
2,900,868
------------
ENERGY--7.6%
Baker Hughes Incorporated...................... 20,000 733,000
Conoco Inc. ................................... 40,000 1,075,200
El Paso Corporation............................ 60,000 1,539,000
Exxon Mobil Corporation........................ 38,000 1,517,340
Halliburton Company............................ 45,000 834,750
KeySpan Corporation............................ 60,000 2,271,600

See Accompanying Notes to Financial Statements.
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CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2002

SCHEDULE OF INVESTMENTS (unaudited) (continued)
MARKET
NUMBER OF VALUE
SHARES (NOTE 1)
COMMON STOCK (continued) ---------------- ------------

ENERGY (concluded)
Marathon Oil Corporation....................... 82,800 $ 2,270,376
Williams Companies, Inc. ...................... 71,900 1,020,980
------------
11,262,246
------------
FINANCIAL SERVICES--9.6%
ACE Limited.................................... 61,600 2,131,976
Capital One Financial Corporation.............. 50,000 3,122,000
Fannie Mae..................................... 30,300 2,424,303
Hartford Financial Services Group, Inc. ....... 18,500 1,221,000
Household International, Inc. ................. 34,640 1,771,836
Merrill Lynch & Co., Inc. ..................... 30,000 1,221,300
Morgan Stanley Dean Witter & Co. .............. 23,090 1,049,671
Travelers Property Casualty Corp. ............. 75,260 1,320,813
------------
14,262,899
------------
HEALTHCARE--6.8%
Abbott Laboratories............................ 46,000 2,185,000
Bristol-Myers Squibb Company................... 20,000 622,400
C.R. Bard, Inc. ............................... 20,000 1,102,000
Merck & Co., Inc. ............................. 25,000 1,427,500
Pharmacia Corporation.......................... 60,000 2,591,400
Wyeth.......................................... 40,000 2,220,000
------------
10,148,300
------------
REAL ESTATE*--8.3%
BRE Properties, Inc. .......................... 40,000 1,286,000
Duke-Weeks Realty Corporation.................. 108,820 2,944,669
Healthcare Realty Trust, Inc. ................. 62,587 1,883,869
ProLogis Trust................................. 126,400 3,027,280
Reckson Associates Realty Corporation.......... 80,000 2,012,000
SL Green Realty Corp. ......................... 35,000 1,253,000
------------
12,406,818
------------
TECHNOLOGY--3.0%
Electronic Data Systems Corporation............ 30,000 1,584,600
Flextronics International Ltd.(a).............. 80,000 1,058,400
International Business Machines Corporation.... 12,000 965,400
LSI Logic Corporation(a)....................... 80,000 912,000
------------
4,520,400
------------

See Accompanying Notes to Financial Statements.
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SCHEDULE OF INVESTMENTS (unaudited) (continued)
MARKET
NUMBER OF VALUE
SHARES (NOTE 1)
COMMON STOCK (concluded) ---------------- ------------

TELECOMMUNICATIONS--3.6%
AT&T Corp. .................................... 51,845 $ 620,585
SBC Communications Inc. ....................... 63,860 2,189,759
Verizon Communications Inc. ................... 61,000 2,623,000
------------
5,433,344
------------
UTILITIES--10.7%
Allegheny Energy, Inc. ........................ 55,000 1,976,150
AmeriGas Partners, L.P. ....................... 50,200 1,127,994
Cinergy Corp. ................................. 40,000 1,458,000
Duke Energy Corporation........................ 41,000 1,312,410
Exelon Corporation............................. 54,755 2,928,845
Heritage Propane Partners L.P. ................ 35,900 958,530
Kinder Morgan Energy Partners L.P. ............ 50,000 1,701,000
Northern Border Partners, L.P. ................ 26,600 1,037,400
Reliant Energy Incorporated.................... 79,000 1,343,790
TEPPCO Partners, L.P. ......................... 34,800 1,069,752
TXU Corp. ..................................... 20,000 1,026,600
------------
15,940,471
------------
TOTAL COMMON STOCK (COST $105,488,718)......... 103,020,214
------------
CONVERTIBLE PREFERRED STOCK--0.5%
ENERGY--0.5%
Williams Companies, Inc. "PACS" 9.000%(b)...... 40,000 720,000
------------
TOTAL CONVERTIBLE PREFERRED STOCK (COST
$1,000,000).................................. 720,000
------------

NON-CONVERTIBLE PREFERRED STOCK--0.5%

ENERGY--0.3%
TransCanada Pipelines Limited.................. 14,905 383,357
------------
HEALTHCARE--0.2%
Rhone-Poulenc Overseas......................... 10,620 274,208
------------
TOTAL NON-CONVERTIBLE PREFERRED STOCK (COST
$657,218).................................... 657,565
------------

See Accompanying Notes to Financial Statements.
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SCHEDULE OF INVESTMENTS (unaudited) (continued)
MARKET
PRINCIPAL VALUE
AMOUNT (NOTE 1)
NON-CONVERTIBLE BONDS--67.2% ---------------- ------------

AEROSPACE & DEFENSE--1.0%
Sequa Corporation 9.000%, 8/01/09.............. $1,500,000 $ 1,522,500
------------
AUTOMOBILE--2.9%
AutoNation, Inc. 9.000%, 8/01/08............... 1,800,000 1,899,000
Collins & Aikman Products Co. 10.750%,
12/31/11+.................................... 1,325,000 1,392,906
Sonic Automotive, Inc. 11.000%, 8/01/08........ 1,000,000 1,070,000
------------
4,361,906
------------
BANKING--1.0%
Western Financial Bank 9.625%, 5/15/12......... 1,400,000 1,421,000
------------
BASIC MATERIALS--4.0%
Avecia Group plc 11.000%, 7/01/09.............. 1,950,000 1,974,375
Foamex L.P. 10.750%, 4/01/09+.................. 950,000 1,002,250
ICO, Inc. 10.375%, 6/01/07..................... 500,000 387,500
Resolution Performance 13.500%, 11/15/10....... 1,500,000 1,695,000
U.S. Can Corporation 12.375%, 10/01/10......... 1,000,000 877,500
------------
5,936,625
------------
BUILDING, PRODUCTS & SERVICES--7.1%
Atrium Companies, Inc. 10.500%, 5/01/09........ 1,500,000 1,522,500
Dayton Superior Corporation 13.000%, 6/15/09... 1,500,000 1,522,500
Integrated Electrical Services, Inc. 9.375%,
2/01/09...................................... 1,500,000 1,462,500
Interface, Inc. 10.375%, 2/01/10+.............. 1,775,000 1,928,094
KB Home 9.500%, 2/15/11........................ 1,450,000 1,533,375
MMI Products, Inc. 11.250%, 4/15/07............ 1,000,000 1,025,000
Schuler Homes, Inc. 9.375%, 7/15/09............ 1,500,000 1,575,000
------------
10,568,969
------------
CABLE, MEDIA & PUBLISHING--3.6%
Alliance Atlantis Communications Corporation
13.000%, 12/15/09............................ 1,750,000 1,968,750
Charter Communications Holdings, LLC 10.750%,
10/01/09..................................... 2,000,000 1,860,000
Echostar Broadband Corp. 10.375%, 10/01/07..... 1,500,000 1,578,750
------------
5,407,500
------------

See Accompanying Notes to Financial Statements.
19
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CHARTWELL

CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2002

SCHEDULE OF INVESTMENTS (unaudited) (continued)
MARKET
PRINCIPAL VALUE
AMOUNT (NOTE 1)
NON-CONVERTIBLE BONDS (continued) ---------------- ------------

CONSUMER--0.2%
American Achievement Corporation 11.625%,
1/01/07...................................... $ 250,000 $ 262,500
------------
CONTAINERS, PACKAGING & GLASS--1.6%
Huntsman Packaging Corporation 13.000%,
6/01/10...................................... 1,250,000 1,312,500
Tekni-Plex, Inc. 12.750%, 6/15/10.............. 1,000,000 1,055,000
------------
2,367,500
------------
ENERGY--5.5%
Bluewater Finance Limited 10.250%, 2/15/12+.... 1,350,000 1,390,500
Frontier Oil Corporation 11.750%, 11/15/09..... 2,000,000 2,140,000
Lone Star Technologies, Inc. 9.000%, 6/01/11... 1,000,000 945,000
Magnum Hunter Resources, Inc. 9.600%,
3/15/12+..................................... 1,450,000 1,529,750
Parker Drilling Company 9.750%, 11/15/06....... 1,350,000 1,400,625
Tri-Union Development Corporation 12.500%,
6/01/06...................................... 1,000,000 857,500
------------
8,263,375
------------
FARMING & AGRICULTURE--1.0%
Premium Standard Farms, Inc. 9.250%, 6/15/11... 1,500,000 1,494,375
------------
FINANCIAL SERVICES--1.3%
CB Richard Ellis Services, Inc. 11.250%,
6/15/11...................................... 1,000,000 925,000
iStar Financial Inc. 8.750%, 8/15/08........... 900,000 937,597
------------
1,862,597
------------
FOOD, BEVERAGE & TOBACCO--2.5%
Fleming Companies, Inc. 9.875%, 5/01/12+....... 1,750,000 1,785,000
Land O' Lakes Inc. 8.750%, 11/15/11+........... 2,000,000 1,950,000
------------
3,735,000
------------
GAMING--2.9%
Penn National Gaming, Inc. 8.875%, 3/15/10..... 2,000,000 1,992,500
Resorts International Hotel and Casino Inc.
11.500%, 3/15/09+............................ 2,450,000 2,330,563
------------
4,323,063
------------

See Accompanying Notes to Financial Statements.
20
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CHARTWELL

CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2002

SCHEDULE OF INVESTMENTS (unaudited) (continued)
MARKET
PRINCIPAL VALUE
AMOUNT (NOTE 1)
NON-CONVERTIBLE BONDS (continued) ---------------- ------------

HEALTHCARE--3.2%
PacifiCare Health Systems, Inc. 10.750%,
6/01/09+..................................... $1,800,000 $ 1,867,500
Res-Care, Inc. 10.625%, 11/15/08............... 1,450,000 1,372,063
United Surgical Partners International, Inc.
10.000%, 12/15/11............................ 1,450,000 1,508,000
------------
4,747,563
------------
HOTELS--1.0%
Extended Stay America, Inc. 9.150%, 3/15/08.... 1,500,000 1,518,750
------------
INDUSTRIALS--7.9%
Actuant Corporation 13.000%, 5/01/09........... 1,300,000 1,488,500
Better Minerals & Aggregates Company 13.000%,
9/15/09...................................... 1,000,000 1,025,000
Euramax International plc 11.250%, 10/01/06.... 2,000,000 2,005,000
International Wire Group, Inc. 11.750%,
6/01/05...................................... 1,500,000 1,357,500
Juno Lighting, Inc. 11.875%, 7/01/09........... 1,500,000 1,575,000
Knowles Electronics, Inc. 13.125%, 10/15/09.... 1,500,000 1,237,500
MDC Corporation Inc. 10.500%, 12/01/06......... 1,000,000 895,000
United Rentals (North America), Inc. 10.750%,
4/15/08...................................... 2,000,000 2,215,000
------------
11,798,500
------------
LEISURE--1.0%
Royal Caribbean Cruises Ltd. 8.750%, 2/02/11... 1,500,000 1,487,662
------------
PRINTING & PUBLISHING--0.9%
Mail-Well Inc. 9.625%, 3/15/12+................ 1,300,000 1,319,500
------------
REAL ESTATE--2.7%
Crescent Real Estate Equities Limited
Partnership 9.250%, 4/15/09+................. 1,300,000 1,350,138
Intrawest Corporation 9.750%, 8/15/08.......... 1,000,000 1,055,000
LNR Property Corporation 10.500%, 1/15/09...... 1,500,000 1,590,000
------------
3,995,138
------------

See Accompanying Notes to Financial Statements.
21
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CHARTWELL

CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2002

SCHEDULE OF INVESTMENTS (unaudited) (continued)
MARKET
PRINCIPAL VALUE
AMOUNT (NOTE 1)
NON-CONVERTIBLE BONDS (concluded) ---------------- ------------

RETAIL--3.5%
Mothers Work Inc. 12.625%, 8/01/05............. $2,000,000 $ 2,027,500
Rent-A-Center, Inc. 11.000%, 8/15/08........... 1,500,000 1,612,500
Saks Incorporated 9.875%, 10/01/11............. 1,500,000 1,612,500
------------
5,252,500
------------
TECHNOLOGY--2.1%
ASAT (Finance) LLC 12.500%, 11/01/06........... 487,500 411,937
ON Semiconductor Corporation 12.000%,
5/15/08+..................................... 1,450,000 1,406,500
Solectron Corporation 9.625%, 2/15/09.......... 1,350,000 1,380,375
------------
3,198,812
------------
TELECOMMUNICATIONS--3.9%
Crown Castle International Corp. 9.375%,
8/01/11...................................... 1,500,000 1,215,000
Leap Wireless International, Inc. 12.500%,
4/15/10...................................... 1,500,000 517,500
Madison River Capital 13.250%, 3/01/10......... 2,500,000 2,012,500
Nextel Communications, Inc. 9.375%, 11/15/09... 2,000,000 1,305,000
PAC-West Telecomm, Inc. 13.500%, 2/01/09....... 2,000,000 790,000
------------
5,840,000
------------
TRANSPORTATION & SHIPPING--3.5%
Atlas Air, Inc. 10.750%, 8/01/05............... 850,000 573,750
Kansas City Southern Railway Company 9.500%,
10/01/08..................................... 1,500,000 1,629,375
North American Van Lines, Inc. 13.375%,
12/01/09+.................................... 1,500,000 1,599,375
Pacer International, Inc. 11.750%, 6/01/07..... 1,450,000 1,457,250
------------
5,259,750
------------
UTILITIES--2.9%
AES Corporation 10.250%, 7/15/06............... 2,500,000 1,612,500
Calpine Corporation 8.750%, 7/15/07............ 1,500,000 1,246,448
PSEG Energy Holdings, Inc. 8.625%, 2/15/08..... 1,500,000 1,511,557
------------
4,370,505
------------
TOTAL NON-CONVERTIBLE BONDS (COST
$101,575,916)................................ 100,315,590
------------

See Accompanying Notes to Financial Statements.
22
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CHARTWELL

CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2002

SCHEDULE OF INVESTMENTS (unaudited) (continued)
NUMBER OF MARKET
SHARES/ VALUE
CONTRACTS (NOTE 1)
---------------- ------------

WARRANTS--0.0%
Dayton Superior Corporation(a)(c)+............. 1,500 $ 15,000
Leap Wireless International, Inc.(a)(d)+....... 2,000 1,250
NTELOS Inc.(a)(e).............................. 1,000 4,125
Pliant Corporation(a)(f)+...................... 1,500 15,375
------------
TOTAL WARRANTS (COST $664,729)................. 35,750
------------
TOTAL INVESTMENTS--137.2%
(COST $209,386,581).......................... 204,749,119
------------
COVERED CALL OPTIONS WRITTEN--(0.5)%
Alcoa Inc. Jul. 40 Call........................ (400) (8,000)
Baker Hughes Incorporated Jul. 37.5 Call....... (200) (32,500)
Bank of America Corporation Jul. 80 Call....... (130) (10,400)
Bank of America Corporation Aug. 75 Call....... (200) (72,000)
Capital One Financial Corporation Jun. 55
Call......................................... (400) (312,000)
Conoco Inc. Jul. 30 Call....................... (200) (3,000)
Cooper Industries, Ltd. Jul. 45 Call........... (100) (14,000)
Cooper Industries, Ltd. Jul. 50 Call........... (250) (5,000)
C.R. Bard, Inc. Jul. 60 Call................... (150) (6,000)
Fannie Mae Dec. 90 Call........................ (300) (40,500)
Household International, Inc. Jun. 55 Call..... (300) (18,000)
J.P. Morgan Chase & Co. Sept. 37.5 Call........ (300) (61,500)
KeyCorp Jun. 30 Call........................... (300) (3,000)
Marathon Oil Corporation Jul. 30 Call.......... (100) (2,000)
Merrill Lynch & Co., Inc. Jun. 45 Call......... (300) (15,000)
Morgan Stanley Dean Witter & Co. Jul. 60
Call......................................... (130) (1,300)
Philip Morris Companies Inc. Jun. 55 Call...... (100) (26,500)
Philip Morris Companies Inc. Sept. 60 Call..... (200) (24,000)
Pitney Bowes Inc. Jul. 45 Call................. (200) (2,000)
Pitney Bowes Inc. Oct. 45 Call................. (300) (24,000)
SBC Communications Inc. Oct. 40 Call........... (600) (36,000)

See Accompanying Notes to Financial Statements.
23
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CHARTWELL

CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2002

SCHEDULE OF INVESTMENTS (unaudited) (concluded)
MARKET
NUMBER VALUE
OF CONTRACTS (NOTE 1)
---------------- ------------

COVERED CALL OPTIONS WRITTEN (concluded)
Verizon Communications Inc. Jul. 50 Call....... (610) $ (12,200)
Williams Companies, Inc. Aug. 25 Call.......... (500) (5,000)
------------
TOTAL OPTIONS (PREMIUM RECEIVED $949,204)...... (733,900)
------------
OTHER LIABILITIES IN EXCESS OF OTHER
ASSETS--(36.7)%.............................. (54,786,462)
------------
NET ASSETS--100.0%............................. $149,228,757
============

---------------
PACS--Price Appreciation Cap Securities.
* 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, 2002,
these securities amounted to $20,883,701 or 14.0% of net assets.
(a) Non-income producing.
(b) Convertible into common stock of Williams Companies, Inc.
(c) 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.
(d) 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.
(e) 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.
(f) 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.
24
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CHARTWELL

CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2002

STATEMENT OF ASSETS AND LIABILITIES
AS OF MAY 31, 2002 (unaudited)

ASSETS:
Investments, at value (cost $209,386,581) (Note 1).......... $204,749,119
Cash........................................................ 1,049,638
Interest receivable......................................... 2,949,687
Receivable for securities sold.............................. 2,091,327
Dividends receivable........................................ 276,334
Prepaid expenses and other assets........................... 50,225
------------
Total assets............................................ 211,166,330
------------
LIABILITIES:
Commercial paper (Note 4)................................... 59,767,100
Payable for securities purchased............................ 896,463
Options written, at value (premiums received--$949,204)
(Note 1).................................................. 733,900
Dividends to shareholders................................... 252,808
Payable for investment management fees (Note 2)............. 167,495
Payable for administration fees (Note 2).................... 26,447
Accrued expenses and other liabilities...................... 93,360
------------
Total liabilities....................................... 61,937,573
------------
NET ASSETS.................................................. $149,228,757
============
NET ASSETS CONSIST OF:
Common Stock, $0.01 par value (authorized 100,000,000
shares)................................................. $ 159,242
Additional paid-in capital................................ 214,584,574
Distributions in excess of net investment income (Note
1)...................................................... (4,912,393)
Accumulated net realized losses on investments and options
(Note 1)................................................ (56,180,508)
Net unrealized depreciation on investments and options
(Note 1)................................................ (4,422,158)
------------
NET ASSETS.................................................. $149,228,757
============
NET ASSET VALUE PER SHARE:
$149,228,757 / 15,924,214 shares of Common Stock issued
and outstanding......................................... $ 9.37
============

See Accompanying Notes to Financial Statements.
25
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CHARTWELL

CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2002

STATEMENT OF OPERATIONS

FOR THE SIX MONTHS ENDED
MAY 31, 2002 (unaudited)

INVESTMENT INCOME: (NOTE 1)
Interest.................................................... $ 5,586,751
Dividends................................................... 1,623,673
-----------
Total investment income................................. 7,210,424
-----------
EXPENSES:
Investment management fees (Note 2)......................... 1,009,125
Administration fees (Note 2)................................ 159,335
Commercial paper fees....................................... 102,574
Professional fees........................................... 63,549
Printing and shareholder reports............................ 62,908
Custodian fees.............................................. 21,189
Registration fees........................................... 18,077
Transfer agent fees......................................... 15,437
Directors' fees and expenses................................ 8,122
Pricing fees................................................ 3,479
Other operating expenses.................................... 16,794
-----------
Total operating expenses.................................. 1,480,589
Interest expense............................................ 613,792
-----------
Total expenses.......................................... 2,094,381
-----------
NET INVESTMENT INCOME................................... 5,116,043
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 1)
Net realized loss on investments............................ (9,644,274)
Net realized gain on call options written................... 1,435,385
-----------
(8,208,889)
Change in net unrealized depreciation on investments and
options................................................... 6,682,592
-----------
Net realized and unrealized loss on investments and
options................................................... (1,526,297)
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 3,589,746
===========

See Accompanying Notes to Financial Statements.
26
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CHARTWELL

CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2002

STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED
MAY 31, 2002 (unaudited)

INCREASE (DECREASE) IN CASH
Cash flows provided from (used for) operating activities:
Interest and dividends received........................... $ 7,561,081
Operating expenses paid................................... (1,562,541)
Interest paid............................................. (741,575)
Purchase of long-term portfolio investments............... (118,078,165)
Proceeds from sale of long-term portfolio investments..... 111,916,428
Net premiums received from written options transactions... 2,411,156
-------------
Net cash provided from operating activities............. 1,506,384
-------------
Cash flows used for financing activities:
Net cash used for commercial paper issuance............... (28,500)
Cash dividends paid to shareholders....................... (8,246,761)
-------------
Net cash used for financing activities.................. (8,275,261)
-------------
Net decrease in cash........................................ (6,768,877)
Cash at beginning of period............................... 7,818,515
-------------
Cash at end of period..................................... $ 1,049,638
=============
RECONCILIATION OF NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS TO NET CASH PROVIDED BY OPERATING ACTIVITIES
Net increase in net assets resulting from operations........ $ 3,589,746
-------------
Decrease in investments................................... 3,394,050
Net realized loss on investments transactions............. 8,208,889
Net change in unrealized depreciation on investments and
options................................................. (6,682,592)
Increase in receivable for securities sold................ (1,081,327)
Decrease in interest and dividend receivable.............. 217,104
Decrease in commercial paper discount..................... (127,783)
Increase in other assets.................................. (7,418)
Decrease in payable for securities purchased.............. (5,929,751)
Decrease in accrued expenses and other liabilities........ (74,534)
-------------
Total adjustments....................................... (2,083,362)
-------------
Net cash provided for operating activities.................. $ 1,506,384
=============
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for interest.................. $ 741,575
=============

See Accompanying Notes to Financial Statements.
27
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CHARTWELL

CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2002

STATEMENTS OF CHANGES IN NET ASSETS

FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
MAY 31, 2002 NOVEMBER 30,
(UNAUDITED) 2001
------------ ------------

OPERATIONS:
Net investment income......................... $ 5,116,043 $ 10,138,885
Net realized loss on investments.............. (9,644,274) (28,648,512)
Net realized gain on call options written..... 1,435,385 6,740,135
Change in net unrealized depreciation on
investments and options..................... 6,682,592 22,056,666
------------ ------------
Net increase in net assets resulting from
operations.................................... 3,589,746 10,287,174
------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net investment income......................... (4,919,256) (10,175,121)
Distributions in excess of net investment
income...................................... (4,912,393) --
Tax return of capital......................... -- (9,222,550)
------------ ------------
Net decrease in net assets resulting from
dividends and distributions................... (9,831,649) (19,397,671)
------------ ------------
CAPITAL STOCK TRANSACTIONS:
Reinvestment of dividends resulting in the
issuance of Common Stock transactions......... 1,332,080 2,780,356
------------ ------------
Net increase in net assets resulting from
Common Stock transactions..................... 1,332,080 2,780,356
------------ ------------
Total decrease in net assets.................... (4,909,823) (6,330,141)
------------ ------------
NET ASSETS
Beginning of period........................... 154,138,580 160,468,721
------------ ------------
End of period................................. $149,228,757 $154,138,580
============ ============

See Accompanying Notes to Financial Statements.
28
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CHARTWELL

CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2002

FINANCIAL HIGHLIGHTS

FOR THE SIX
MONTHS ENDED FOR THE YEAR ENDED
MAY 31, NOVEMBER 30,
THE FOLLOWING PER SHARE DATA AND RATIOS HAVE 2002 (1) --------------------------------
BEEN DERIVED FROM INFORMATION PROVIDED IN THE (UNAUDITED) 2001 2000 1999
FINANCIAL STATEMENTS ------------ ---------- -------- --------

NET ASSET VALUE, BEGINNING OF PERIOD........ $ 9.76 $ 10.33 $ 12.54 $ 14.17
-------- -------- -------- --------
INCOME GAIN (LOSS) FROM INVESTMENT
OPERATIONS:
Net investment income (2).................. 0.32 0.65 0.80 0.88
Net realized and unrealized gain (loss) on
investment transactions.................. (0.09) 0.02 (1.77) (1.27)
-------- -------- -------- --------
Total from investment operations......... 0.23 0.67 (0.97) (0.39)
-------- -------- -------- --------
LESS DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment income....... (0.31) (0.65) (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...................... -- (0.59) (0.44) (0.35)
-------- -------- -------- --------
Total dividends and distributions........ (0.62) (1.24) (1.24) (1.24)
-------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD.............. $ 9.37 $ 9.76 $ 10.33 $ 12.54
======== ======== ======== ========
MARKET VALUE, END OF PERIOD................. $ 11.89 $ 10.55 $ 9.56 $ 10.50
======== ======== ======== ========
TOTAL RETURN BASED ON: (3)
Net asset value............................ 1.73% 6.15% (7.72)% (2.47)%
======== ======== ======== ========
Market value............................... 19.50% 23.95% 2.02% (18.44)%
======== ======== ======== ========
RATIOS AND SUPPLEMENTAL DATA: (4)
Net assets, end of period (000 omitted).... $149,229 $154,139 $160,469 $194,859
======== ======== ======== ========
Total expenses............................. 1.97%(6) 2.62% 3.76% 2.03%
Total operating expenses (5)............... 1.39%(6) 1.36% 1.66% 1.35%
Commercial paper expenses.................. 0.58%(6) 1.26% 2.10% 0.68%
Net investment income...................... 4.82%(6) 4.51% 6.51% 6.51%
Portfolio turnover......................... 54% 132% 161% 119%
LEVERAGE ANALYSIS:
Aggregate amount outstanding at end of
period (000 omitted)..................... $ 60,000 $ 60,000 $ 60,000 $ 60,000
Average daily balance of amortized cost of
commercial paper outstanding (000
omitted)................................. $ 59,799 $ 59,690 $ 59,579 $ 59,689
Asset coverage per $1,000 at end of
period................................... $ 3,533 $ 3,703 $ 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) As required, effective December 1, 2001, the Fund adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies and began
accreting market discount and amortizes premium on fixed income securities
for financial purposes. The effect of this change for the six months ended
May 31, 2002 was to increase net investment income per share by less than
$0.005, increase net realized and unrealized losses on investments and
options per share by less than $0.005 and increase the ratio of net
investment income from 4.77% to 4.82%. Per share, ratios and supplemental
data for periods prior to December 1, 2001 have not been restated to reflect
this change.
(2) Based on average shares outstanding.
(3) 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.
(4) Ratios are stated as a percentage of average weekly net assets which
includes any liabilities constituting indebtedness in connection with
financial leverage.
(5) Exclusive of commercial paper expenses.
(6) Annualized.

See Accompanying Notes to Financial Statements.
29
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CHARTWELL

CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2002

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 (2).................................. 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: (3)
Net asset value............................................ (2.48)%
========
Market value............................................... (2.62)%
========
RATIOS AND SUPPLEMENTAL DATA: (4)
Net assets, end of period (000 omitted).................... $219,152
========
Total expenses............................................. 1.32%(6)
Total operating expenses (5)............................... 1.32%(6)
Commercial paper expenses.................................. N/A
Net investment income...................................... 6.99%(6)
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

See Accompanying Notes to Financial Statements.
30
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CHARTWELL

CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2002

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 PFPC
Trust Company, 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, an 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

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CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2002

an option has 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 continue 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 on a monthly basis. Long-term capital gains, if any, in excess of
loss carryforwards are distributed to shareholders annually. 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. Dividends and distributions to shareholders are
recorded on the ex-dividend date.

The Fund currently intends to distribute a monthly fixed amount to shareholders.
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.

BORROWINGS: The Fund issues short-term commercial paper at a discount from par.
The discount is amortized to interest expense 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 discount and amortizes premium on
securities using the effective interest method.

NEW ACCOUNTING POLICIES: As required, effective December 1, 2001, the Fund has
adopted the provisions of the AICPA Audit and Accounting Guide for Investment
Companies and began accreting market discount and amortizing premium on fixed
income securities for financial reporting. Prior to December 1, 2001, the Fund
did not accrete market discount and amortize premium on fixed income securities.
The cumulative effect of this accounting change had no impact on total net
assets of the Trust, but resulted in a $47,320 increase in cost of

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CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2002

securities and a corresponding $47,320 increase in net unrealized depreciation
based on securities held by the Trust on December 1, 2001.

The effect of this change for the six months ended May 31, 2002, was to increase
net investment income by $50,263; increase net unrealized depreciation by
$29,413, and increase net realized losses by $20,850. The statements of changes
in net assets and financial highlights for prior periods have not been restated
to reflect this change.

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.

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. Effective July 1,
2002, the Manager is reducing the investment management fee from 0.95% to 0.85%.

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.
Effective July 1, 2002, the Administrator is reducing the administrative fee
from 0.15% to 0.125%.

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, 2002, the Fund incurred fees, of which $32,444
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, 2002, purchases and sales of investments,
excluding short-term investments, totaled $111,478,178 and $112,997,755,
respectively.

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CHARTWELL

CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2002

At May 31, 2002, the cost and unrealized appreciation/depreciation of
investments for federal income tax purposes was as follows:

Cost of investments......................................... $208,684,690
============
Gross unrealized appreciation............................... $ 10,483,773
Gross unrealized depreciation............................... (15,153,244)
------------
Net unrealized depreciation................................. $ (4,669,471)
============

The following table summarizes the Fund's call options written for the six
months ended May 31, 2002.

NUMBER OF
CONTRACTS PREMIUMS
--------- -----------

Options outstanding November 30, 2001.......... 5,070 $ 643,668
Options written................................ 25,340 3,032,745
Options expired................................ (8,210) (952,961)
Options exercised.............................. (4,450) (670,235)
Options closed................................. (11,480) (1,104,013)
------- -----------
Options outstanding May 31, 2002............... 6,270 $ 949,204
======= ===========

NOTE 4. COMMERCIAL PAPER

As of May 31, 2002, $60,000,000 of commercial paper was outstanding with an
amortized cost of $59,767,100. The average discount rate of commercial paper
outstanding at May 31, 2002 was 2.17%. The average daily balance of commercial
paper outstanding for the six months ended May 31, 2002 was $59,799,402 at a
weighted average discount rate of 2.42%. 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, 2002, 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
15,924,214 shares of common stock outstanding at May 31, 2002, the Manager owned
10,088 shares.

For the six months ended May 31, 2002 and the year ended November 30, 2001 the
Fund issued 126,652 and 260,491 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

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CHARTWELL

CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2002

higher-yielding securities may be accompanied by a greater degree of credit risk
than higher rated securities. Additionally, lower-rated securities may be more
susceptible to adverse economic and competitive industry conditions than
investment-grade securities. The Fund may invest up to 15% of its total assets
in illiquid securities and other securities which may not be readily marketable.
In addition, the Fund may purchase securities sold in reliance of Rule 144A of
the Securities Act of 1933. The relative illiquidity of some of the Fund's
portfolio securities may adversely affect the ability of the Fund to dispose of
such securities in a timely manner and at a fair price at times when it might be
necessary or advantageous for the Fund to liquidate portfolio securities.

NOTE 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 3, 2002 June 14, 2002 June 18, 2002 June 28, 2002 $0.0833
July 1, 2002 July 17, 2002 July 19, 2002 July 31, 2002 $0.0833

NOTE 8. CAPITAL LOSS CARRYFORWARDS

The following summarizes the capital loss carryforwards as of November 30, 2001.
This capital loss carryforward is available to offset future gains.

EXPIRING IN FISCAL YEAR AMOUNT
----------------------- -----------

2007 $ 8,880,255
2008 $ 9,509,213
2009 $25,913,206

Under the current tax law, capital and currency losses realized after October
31, 2001 are deferred and treated as occurring on the first day of the following
fiscal year. For fiscal year ended November 30, 2001, the Fund elected to defer
capital losses occurring between November 1, 2001 and November 30, 2001 in the
amount of $3,148,870.

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CHARTWELL

CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2002

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 PFPC Inc., 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 PFPC Inc., 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 PFPC Inc., 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 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

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CHARTWELL

CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2002

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 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.

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CHARTWELL

CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2002

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
PFPC Inc., P.O. Box 43027, Providence, RI 02940-3027, Attn: Closed-End
Department.

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, 2002, interest paid on the commercial paper
ranged from 1.95% to 6.75%. As of May 31, 2002, the Fund had $30 million
outstanding at 1.98% per annum maturing on June 3, 2002, and $30 million at
2.36% per annum maturing on October 1, 2002. All interest rates include fees due
to the broker-dealer. The Fund must experience an annual return of 0.64% 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 - 14.90% - 7.90% - 90% 6.10% 13.10%
--------------------------------------------------------------------------------------------

Assumes $160 million assets attributable to common shareholders; $60 million
aggregate leverage with an average interest rate of 2.25%. 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.

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CHARTWELL

CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2002

SUPPLEMENTAL PROXY INFORMATION

The Annual Meeting of Shareholders of the Chartwell Dividend and Income Fund,
Inc. was held on April 24, 2002 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 FOR VOTES AGAINST VOTES WITHHELD
------------------------------------------------------------------------------------------

1 To elect the following
director to serve as
Class I director for a
one-year term expiring
in 2003: C. Warren Ormerod 15,338,679 -- 268,749

2 To elect the following
directors to serve as
Class III directors for
a three-year term
expiring in 2005: George W. Grosz 15,339,529 -- 267,899
Winthrop S. 15,338,679 -- 268,749
Jessup
------------------------------------------------------------------------------------------

Directors whose term of office continues beyond this meeting are Kenneth F.
Herlihy, Kevin A. Melich and Bernard P. Schaffer.

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CHARTWELL

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CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2002

DIRECTORS

Winthrop S. Jessup, Chairman
George W. Grosz
Kenneth F. Herlihy
Kevin A. Melich
C. Warren Ormerod
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

PFPC Trust Company
Eastwick Center
800 Tinicum Blvd.
Philadelphia, PA 19153

TRANSFER AGENT

PFPC Inc.
P.O. Box 43027
Providence, RI 02940-3027

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. Statements and other
information contained in this report are as dated and are subject to change.

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.