Vestaur
Securities,
Inc.
SEMI-Annual Report
To Stockholders
May 31, 1995
BOARD OF
DIRECTORS
Mark E. Stalnecker
Dr. Donald C. Carroll
Paul B. Fay, Jr.
Robert F. Gurnee
John C. Jansing
James S. Morgan
Philip R. Reynolds
Marciarose Shestack
ADVISOR
CoreStates
CoreStates
Investment Advisers
OFFICERS
Mark E. Stalnecker
Chairman
David T. Walker
President
Michael F. Melloy
Vice President
Karen G. Bater
Assistant Vice President
Robert K. Fulton
Secretary
Robert J. Di Domenico
Treasurer and Secretary
VESTAUR SECURITIES, INC.
Centre Square West - Upper Mezz
P.O. Box 7558
Philadelphia, PA 19101-7558
(215) 567-3969
Dear Fellow STOCKHOLDER,
Bond investors have been rewarded in 1995 as the market rallied sharply in price
with the realization of the decline in economic activity and subdued inflation.
The Federal Reserve's tighter monetary policy in 1994 has had a significant
impact on housing and auto sales in 1995. The last Fed action on February 1,
1995 increased the Federal Funds target to 6% from the previous 5 1/2%.
The results of the Federal Reserve's effort to slow the economy and control
inflation became apparent with April's decline in retail sales, decreases in
durable goods orders and the increase in the jobless rate. The bond rally acc-
elerated as economic data showed weakness beyond the anticipated gradual soft-
landings. As sluggish economic data continued, investors have moved to antici-
pating the possibility of the Fed easing monetary policy later in 1995.
The Vestaur portfolio benefitted from the fact that corporate bonds outperformed
government and mortgages obligations this year.
Our portfolio strategy has emphasized purchasing undervalued securities that can
be considered improving credits and provide a yield advantage over similar
maturity Treasury obligations. Georgia Pacific and USX Marathon Corporation are
two examples that have been recognized by the market with a narrowing of the
spread over the comparable US Treasury providing a significant total return.
The rally in bond prices also provides the opportunity to prune the portfolio of
holdings that have not met our expectations such as W.R.Grace.
At the May 17, 1995 Directors meeting, Vestaur Securities declared a regular 27
cents per share quarterly dividend. The quarterly dividend is payable July 19,
1995 to stockholders of record on June 30, 1995.
Net Assets of the Fund were $98,296,644 on May 31, 1995 compared to $90,333,317
at November 30, 1994. The increase is primarily the result of the rally in bond
prices during the period.
The primary objective of the Fund is the attainment of a high level of current
income through investments in a diversified portfolio of high quality debt
securities.
We will continue to manage the Fund in line with the objectives and quality
guidelines.
Sincerely,
Mark E. Stalnecker
Chairman of the Board
June 22, 1995
<TABLE>
STATEMENTS OF ASSETS AND LIABILITIES
<CAPTION>
May 31
(unaudited)
1995 1994
<S> <C> <C>
ASSETS
Investments
Bonds and long-term notes at value (identified cost
$92,768,806 in 1995 and $93,609,429 in 1994) $95,149,430 $92,141,429
Short-term notes at cost plus accrued interest
(approximates market) 1,198,621 1,039,879
Total Investments 96,348,051 93,181,308
Cash 97,014 1,290
Interest receivable 1,923,848 1,893,471
Other assets 9,525 10,931
Total Assets 98,378,438 95,087,000
LIABILITIES
Investments purchased - due to broker 0 1,038,625
Accounts payable and accrued expenses 81,794 61,246
Total Liabilities 81,794 1,099,871
NET ASSETS APPLICABLE TO OUTSTANDING SHARES $98,296,644 $93,987,129
NET ASSETS ARE REPRESENTED BY
Common Stock, par value $.01 per share
Authorized 10,000,000 shares
Issued and outstanding shares 6,651,676
in 1995 and 6,630,066 in 1994 $66,517 $66,300
Capital in excess of par value 94,379,397 94,077,505
Undistributed net investment income 1,242,048 1,184,655
Undistributed/accumulated net realized gain
on investments 228,058 126,669
Unrealized net appreciation (depreciation)
on investments 2,380,624 (1,468,000)
NET ASSETS APPLICABLE TO OUTSTANDING SHARES $98,296,644 $93,987,129
NET ASSET VALUE PER SHARE $14.78 $14.18
</TABLE>
See notes to financial statements
<TABLE>
INVESTMENTS % MAY 31, 1994 (unaudited)
BONDS AND LONG-TERM NOTES
<CAPTION>
PRINCIPAL
AMOUNT INDUSTRIAL AND CONGLOMERATE - 45.0% VALUE
<S> <C> <C>
$ 1,000,000 Air Products & Chemicals Deb. 8 7/8% 8/1/01 $ 1,109,990
2,500,000 Becton Dickinson & Co. S.F. Deb. Reg. 9 1/4% 6/1/16 2,626,725
2,000,000 Burlington Northern, Inc. 7.5% 7/15/23 1,922,170
1,500,000 Chrysler Corp. 10.40% 8/1/99 1,599,345
4,500,000 Crown Cork & Seal, Inc. 8% 4/15/23 4,612,500
2,000,000 Diamond Shamrock, Inc. 8% 4/1/23 1,992,140
4,000,000 General Motors Corp. Deb. Reg. 8 1/8% 4/15/16 4,088,020
4,400,000 Georgia Pacific Corp. 8 1/8% 6/15/23 4,384,600
3,000,000 Ralston Purina Company 9.30% 5/1/21 3,490,605
3,000,000 Tektronix, Inc. 7.5% 8/1/03 2,909,295
4,000,000 Tenneco, Inc. 9% 11/15/12 4,449,400
4,500,000 Time Warner, Inc. 9.125% 1/15/13 4,633,785
2,000,000 Union Pacific Corp. 8.625% 5/15/22 2,151,120
4,000,000 USX Marathon Group 9.375% 2/15/12 4,365,580
42,400,000 44,335,275
PUBLIC UTILITIES - 19.1%
2,000,000 Consumers Pwr. Co. 7.375% 9/15/23 1,926,080
2,150,000 Georgia Power Company 7.55% 8/1/23 2,140,497
1,000,000 GTE - South 9% 9/15/29 1,057,205
2,000,000 Illinois Power Company 8% 2/15/23 1,948,830
4,000,000 Southern Bell Telephone Co. 8.625% Deb. 9/1/26 4,152,640
4,500,000 Tele Communications 8.75% 2/15/23 4,364,798
1,000,000 Texas Utilities Electric Co. 8.5% 8/1/24 1,049,100
2,000,000 Texas Utilities Electric Co. 8.75% 11/1/23 2,136,640
18,650,000 18,775,790
FINANCIAL AND INSURANCE - 7.9%
1,700,000 Chrysler FinUl Corp 9.5% 12/15/99 1,869,023
1,000,000 CIGNA CORP 7.65% 3/1/23 916,670
3,000,000 CIGNA CORP 8.30% 1/15/23 2,962,635
2,000,000 Travelers Group, Inc. 8.375% 12/15/96 2,059,100
7,700,000 7,807,428
CANADIAN PROVINCIAL AND MUNICIPAL - 5.7%
2,900,000 British Columbia Hydro & Power Bonds 15.50% FJ 11/15/11
(U.S. Pay) 3,441,793
2,000,000 Nova Scotia P Province 8.25% 7/30/22 (U.S. Pay) 2,118,310
4,900,000 5,560,103
U.S. GOVERNMENT AGENCIES - 19.0%
2,000,000 Federal Home Loan Bank 9.5% 12/26/95 2,038,910
3,200,000 FNMA 9.35% 02/12/96 3,272,000
626,245 GNMA 8% 3/15/22 Pool #318816 641,608
1,488,616 GNMA 8% 8/15/24 Pool #392478X 1,525,133
2,028,504 GNMA 8.5% 10/15/24 Pool #215821X 2,105,841
1,526,880 GNMA 8.5% 9/15/24 Pool #385902X 1,585,092
1,467,420 GNMA 8.5% 12/15/25 Pool #386672X 1,523,365
414,110 GNMA 9% 12/15/19 Pool #198566 434,169
888,655 GNMA 9% 1/15/20 Pool #202923 931,699
410,663 GNMA 9% 12/15/19 Pool #267601 430,555
212,211 GNMA 9% 1/15/21 Pool #291873 222,490
279,358 GNMA 9% 3/15/21 Pool #299269 292,889
274,755 GNMA 9.5% 5/15/19 Pool #271455 289,952
782,523 GNMA 9.5% 9/15/19 Pool #274141 825,806
123,063 GNMA 9.5% 6/15/20 Pool #290655 129,870
36,058 GNMA 10% 2/15/16 Pool #152585 39,084
177,889 GNMA 10% 3/15/18 Pool #238906 192,815
19,573 GNMA 10% 11/15/18 Pool #255865 21,215
78,714 GNMA 10% 12/15/18 Pool #258705 85,318
183,724 GNMA 10% 12/15/18 Pool #259100 199,140
147,355 GNMA 10% 12/15/18 Pool #259511 159,718
139,421 GNMA 10% 10/15/18 Pool #261851 151,120
408,815 GNMA 10% 1/15/19 Pool #266987 443,117
487,256 GNMA 10% 3/15/20 Pool #285190 528,140
186,024 GNMA 10% 4/15/20 Pool #285618 201,633
233,317 GNMA 10.5% 4/15/19 Pool #262170 255,590
106,250 GNMA 10.5% 5/15/19 Pool #274947 116,393
17,927,399 18,642,662
RESIDENTIAL SECURITIES - 0.1%
Residential Mortgages (1ST & 2ND), Participation, 8 3/8% Average
31,505 Yield, 4 1/2 Year Average Maturity, Acquired 12/29/77 28,172
31,505 28,172
91,608,904 TOTAL BONDS AND LONG-TERM NOTES - 96.8% 95,149,430
SHORT-TERM NOTES
1,200,000 General Electric 5.91% 6/07/95 1,198,621
1,200,000 TOTAL SHORT-TERM NOTES - 1.2% 1,198,621
$92,808,904 TOTAL INVESTMENTS - 98% $96,348,051
OTHER ASSETS LESS LIABILITIES - 2.0% 1,948,593
NET ASSETS - 100% $98,296,644
</TABLE>
See notes to financial statements
<TABLE>
STATEMENTS OF OPERATIONS
<CAPTION>
Six Months
Ended May 31
(unaudited)
1995 1994
<S> <C> <C>
INVESTMENT INCOME
Interest Income $ 4,067,638 $ 4,101,253
EXPENSES
Advisory 333,016 350,796
Legal and auditing 41,587 40,905
Custodian 12,000 12,027
Directors 28,400 28,900
Taxes, other than income 16,574 18,000
Other 34,819 29,297
Total Expenses 466,396 479,925
NET INVESTMENT INCOME 3,601,242 3,621,328
REALIZED AND UNREALIZED gain (LOSS) ON INVESTMENTS
Realized gain from sales of bonds and long-term notes
Proceeds from sales 23,408,096 9,548,903
Cost of investments sold 23,174,564 9,422,234
Net realized gain on investments (on average cost
basis of $238,842 in 1995 and $142,372 in 1994) 233,532 126,669
Unrealized (depreciation) appreciation on investments
Beginning of period (5,679,070) 7,260,449
End of period 2,380,624 (1,468,000)
Unrealized (loss) gain on investments 8,059,694 (8,728,449)
Net realized and unrealized (loss) gain on investments 8,293,226 (8,601,780)
NET (DECREASE) INCREASE IN ASSETS
RESULTING FROM OPERATIONS $11,894,468 $4,980,452)
</TABLE>
See notes to financial statements
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
Six Months Ended May 31
Year Ended
(unaudited) November 30
1995 1994 1994
<S> <C> <C> <C>
OPERATIONS
Net investment income $ 3,601,242 $ 3,621,328 $ 7,255,458
Net realized gain on investments 233,532 126,669 333,759
Unrealized gain (loss) on investments 8,059,694 (8,728,449) (12,939,519)
Net increase (decrease) in assets resulting
from operations 11,894,468 (4,980,452) (5,350,302)
Dividends from net investment income (3,591,906) (3,621,328) (7,255,458)
Dividends in excess of net investment income 0 (84,928) (36,869)
Dividends from net realized gain (233,532) (126,669) (333,759)
Dividends in excess of net realized gain (105,703) (903,955) (696,865)
FROM CAPITAL SHARE TRANSACTIONS
Net asset value of common shares issued under
Automatic Dividend Investment Plan of -0- at
5/31/95; 23,503 at 5/31/94 and 45,113
at 11/30/94 0 359,830 661,939
INCREASE (DECREASE) IN NET ASSETS 7,963,327 (9,357,502) (13,011,314)
NET ASSETS
Beginning of period 90,333,317 103,344,631 103,344,631
End of period (including undistributed
net investment income of $1,242,048,
$1,184,655 and $1,232,714) $ 98,296,644 $ 93,987,129 $ 90,333,317
</TABLE>
<TABLE>
FINANCIAL HIGHLIGHTS
The following table includes selected
data for each share of common stock outstanding throughout each period and other
performance information derived from the financial statements and market price data.
<CAPTION>
Six Months
Ended May 31 (unaudited) Years Ended November 30
Per Share Operating Performance 1995 1994 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 13.58 $ 15.64 $ 15.64 $ 14.93 $ 14.78 $ 13.75 $ 14.32
Net investment income 0.54 0.55 1.09 1.14 1.17 1.20 1.21
Net realized and unrealized
gain (loss) on investments 1.25 (1.30) (1.90) 0.72 0.15 1.04 (0.57)
Total from investment operation 1.79 (0.75) (0.81) 1.86 1.32 2.24 0.64
Dividends from net
investment income (0.54) (0.55) (1.09) (1.14) (1.17) (1.20) (1.21)
Dividends in excess of net
investment income 0 (0.01) (0.01) (0.01) 0.00 (0.01) 0
Dividends from net realized gain (0.04) (0.02) (0.05) 0 0 0 0
Dividends in excess of net
realized gain (0.01) (0.13) (0.10) 0 0 0 0
Total dividends (0.59) (0.71) (1.25) (1.15) (1.17) (1.21) (1.21)
Net asset value, end of period $ 14.78 $ 14.18 $ 13.58 $ 15.64 $ 14.93 $ 14.78 $ 13.75
Market value, end of period $ 13.25 $ 13.25 $ 12.375 $ 15.50 $ 14.125 $ 14.50 $ 13.25
Total Investment Return
Based on market value (a) 8.83% -7.76% -12.91% 18.25% 5.32% 19.22% 7.28%
Based on net asset value (b) 13.08% 0.24% -5.39% 12.86% 9.23% 17.06% 4.81%
Ratios and Supplemental Data
Net assets, end of period
(in 1,000's).. $98,297 $93,987 $90,333 $103,345 $97,698 $95,492 $87,934
Ratio of operating expenses
to average net assets 0.5% 0.5% 0.9% 0.9% 0.9% 0.9% 1.0%
Ratio of net investment income
to average net assets 3.9% 3.7% 7.6% 7.4% 7.9% 8.5% 8.8%
Portfolio turnover 23.9% 8.9% 24.6% 42.0% 40.6% 43.0% 25.5%
Number of shares outstanding
end of period (in thousands) 6,652 6,630 6,652 6,607 6,542 6,463 6,396
</TABLE>
(a) The market value total investment return is based on the current market
value of a purchase on the first day and of a sale on the last day of
each period assuming, the reinvestment of dividends and other
distributions at prices obtained by the Company's dividend reinvestment
plan.
(b) The net asset value total investment return is computed on a similar
basis except the dividends and other distributions are reinvested at
the ex-dividend date net asset value. These percentages are not an
indication of the performance of a shareholder's investment in the
Company based on market value due to differences between the market
price and the net asset value of the Company during each period.
See notes to financial statements
NOTES TO FINANCIAL STATEMENTS
Six Months Ended May 31, 1995 and 1994 (unaudited) and Year Ended
November 30, 1994
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Vestaur Securities, Inc. (RThe CompanyS) is registered under the
Investment Company Act of 1940, as amended, as a diversified, closed-end
management investment company.
The following is a summary of significant accounting policies:
(a) Security valuation - Investments in bonds and long-term notes are
stated at value based on bid prices obtained from dealers regularly
making a market in such investments. Restricted securities are valued in
good faith by the Board of Directors.
(b) Federal income taxes - No provision is made for taxes on income since
the Company's policy is to distribute all taxable net investment income
and qualify as a Rregulated investment companyS under the Internal
Revenue Code.
(c) Securities transactions - In accordance with industry practice,
security transactions are accounted for on the date securities are
purchased or sold.
(d) Interest income - Premiums and other discounts on investments are not
amortized because the Company does not generally plan to hold such
securities until maturity.
(e) Distributions to Stockholders - Dividends to stockholders are recorded
on the ex-dividend date. Stockholders have the option of receiving
their dividends in cash or in the Company's common stock in
accordance with the Company's Automatic Dividend Investment Plan. For
those dividends paid in common stock, the Company attempts to
repurchase enough common stock in the market to satisfy its dividend
needs. If the market price of the common stock plus brokerage
commission equals or exceeds the net asset value or sufficient common
stock cannot be repurchased in the market, the Company will issue new
shares, (-0- shares issued in 1995 and 23,503 shares issued in 1994),
and record the common stock at its net asset value as of the close of
business on the last trading day of the month preceding the month in
which the dividend or other distribution is paid.
NOTE 2 - INVESTMENT ADVISORY AGREEMENT
Investment advisory fees are payable at an annual rate of 1/2% of the
average net asset value of the Company plus 2 1/2% of the net amount of
interest and dividend income after deducting interest on borrowed funds.
The fees are payable monthly to the Advisor, CoreStates Investment
Advisers, Inc. The Advisor manages the Company's portfolio and also
maintains its accounts and records, prepares its tax returns and other
returns and reports, and performs all other functions necessary for the
records, prepares its tax returns and other returns and reports, and
performs all other functions necessary for the maintenance of its
corporate existence and its relations with its stockholders.
Several officers of the Company are also officers of the
Advisor and no officer receives compensation from the Company.
NOTE 3 - INVESTMENT TRANSACTIONS
Purchases and sales of securities other than U.S. Government obligations
and agencies, corporate short-term notes and certificates of deposit
aggregated $12,392,560 and $21,594,102, respectively, during the
six months ended May 31, 1995; and $8,684,757 and $5,386,702,
respectively, during the six months ended May 31, 1994; and $19,640,302
and $18,408,970, respectively, during the year ended November 30, 1994.
Purchases and sales of U.S. Government obligations and agencies were
$9,327,032 and $1,580,463, respectively, during the six months ended
May 31, 1995; and $-0- and $4,035,532, respectively, during the
six months ended May 31, 1994; and $3,519,451 and $4,866,180,
respectively, during the year ended November 30, 1993.
NOTE 4 - DISTRIBUTION TO STOCKHOLDERS
On May 17, 1995, a dividend distribution of 27 cents per share,
aggregating $1,795,953, was declared from 1995 net investment income.
The dividend will be paid on July 19, 1995 to stockholders of
record on June 30, 1995.
Custodian
CoreStates Bank, N.A.
Philadelphia, PA 19101
Transfer Agent, Dividend
Disbursing Agent & Registrar
First Chicago Trust Company
of New York
P.O. BOX 2500
Jersey City, NJ 07303-2500
Shareholder Relations
First Chicago Trust Company
of New York
P.O. BOX 2500
Jersey City, NJ 07303-2500
(201) 324-0498
Common Stock listed on New York
Stock Exchange, Symbol VES.
