Vestaur
Securities,
Inc.
Annual Report
To Stockholders
November 30, 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
OFFICERS
Mark E. Stalnecker
Chairman
Dung Vukhac
President
Michael F. Melloy
Vice President
Karen G. Bater
Assistant Vice President
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 Shareholder:
The bond market staged a remarkable rally in price in 1995 as inflation
declined to a 2.6% annual rate, economic growth moderated and the Federal gov-
ernment moved towards a balanced budget agreement.
Bond returns as measured by the Salomon Brothers Broad Investment Grade Index
had a positive year-to-date return of +16.9% through November 30, 1995.
Corporate bonds were the best performing sector of the market with returns
outperforming comparable maturity mortgages and government obligations.
The bond market expects additional easing of Federal Reserve monetary policy in
1996. These anticipations were evidenced at the end of November when yield on
the two-year Treasury note at 5.45% was lower than the overnight Fed Funds rate
of 5.75%.
Net assets of Vestaur were $100,938,285 on November 30,1995 compared with net
assets of $90,333,317 on November 30,1994. Net assets per share were $15.17 and
$13.58, respectively for November 30,1995 and 1994.
At the December 13,1995 Directors meeting, Vestaur Securities, Inc. declared a
distribution which is payable January 18,1996 to stockholders of record December
29, 1995. The total amount of this distribution is 33 cents per share, which
consists of 27 cents per share for the regular quarterly dividend, 1 cent per
share for a year end extra dividend and 5 cents per share for the capital gain
distribution.
The primary objective of the fund is the attainment of a high level of current
income through investments in a diversified portfolio of debt securities.
The outlook for the bond market continues to be constructive. Corporate bonds
remain attractive while mortgages may continue to underperform as investors are
concerned regarding prepayment risks. We are encouraged that inflation
continues to decline, world-wide economic growth remains moderate and there
is the expectation of further Fed easing of monetary policy to lower short-term
rates.
Your management and directors extend best wishes for a happy and prosperous New
Year.
Sincerely,
Mark E. Stalnecker
Chairman of the Board
December 22, 1995
AUTOMATIC DIVIDEND INVESTMENT PLAN
Any registered Stockholder of Vestaur Securities, Inc. may participate in the
Automatic Dividend Investment Plan (the "Plan"), with the exception of brokers
and nominees of banks and other financial institutions. If you are a beneficial
owner, whose shares are registered in the name of another (e.g., in a broker's
"street name") and desire to participate in the Plan you must become a regis-
tered holder by having the shares transferred to your name.
To participate in the Plan, you must complete and forward an enrollment autho-
rization form to the Plan agent. This form, authorizes the Plan agent to
receive your dividends and other distributions from the Company in additional
shares of common stock. The additional shares will be issued by the Company, if
the net asset value per share is equal to or lower than the market price of
the Company's Common Stock plus brokerage commissions. The newly issued shares
will be valued in accordance with the Plan. If the net asset value per share is
higher than the market price of the Company's Common Stock plus brokerage com
- -missions, the additional shares will be purchased in the open market and the
cost of the brokerage commissions will be charged against the amounts invested.
Shares will be held by First Chicago Trust Company of New York, the Plan agent.
You will receive a statement each time shares are distributed by the Company
or purchased for you.
There is no direct charge for Plan participation. The administrative costs of
the Plan are paid out of the investment advisory fees received from the Company
by its investment adviser, CoreStates Investment Advisers, Inc.
If your dividends and other distributions are reinvested, they will be subject
to capital gains and income taxes as if they were paid to you in cash.
You may terminate your participation in the Plan at any time by giving written
notice to the Plan agent.
For additional information on the Plan, please write First Chicago Trust
Company of New York, P.O. Box 2500, Jersey City, NJ 07303-2500 or call 1-201-
324-0313.
<TABLE>
STATEMENTS OF ASSETS AND LIABILITIES
<CAPTION>
November 30
1995 1994
<S> <C> <C>
ASSETS
Investments
Bonds and long-term notes at value (identified cost
$93,020,835 in 1995 and $94,229,134 in 1994) $ 97,871,801 $ 88,550,064
Short-term notes at cost plus accrued interest
(approximates market) 1,192,660 0
Total Investments 99,064,461 88,550,064
Cash 1,960 16,031
Interest receivable 1,957,931 1,842,302
Other receivable 1,361 1,366
Total Assets 101,025,713 90,409,763
LIABILITIES
Accounts payable and accrued expenses 87,428 76,446
Total Liabilities 87,428 76,446
NET ASSETS APPLICABLE TO OUTSTANDING SHARES $ 100,938,285 $ 90,333,317
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 in 1994 $ 66,517 $ 66,517
Capital in excess of par value 94,379,397 94,379,397
Undistributed net investment income 1,308,738 1,232,714
Undistributed/accumulated net realized gain
on investments 332,667 333,759
Unrealized net appreciation (depreciation)
on investments 4,850,966 (5,679,070)
NET ASSETS APPLICABLE TO OUTSTANDING SHARES $ 100,938,285 $ 90,333,317
NET ASSET VALUE PER SHARE $15.17 $13.58
</TABLE>
See notes to financial statements
<TABLE>
INVESTMENTS % NOVEMBER 30, 1995
BONDS AND LONG-TERM NOTES
<CAPTION>
PRINCIPAL
AMOUNT INDUSTRIAL AND CONGLOMERATE - 45.2% VALUE
<S> <C> <C>
$4,000,000 ADT Operations, Inc. 8 25% 8/1/00 $ 4,241,480
1,000,000 Air Products & Chemicals Deb. 8 7/8% 8/1/01 1,129,615
2,500,000 Becton Dickinson & Co. S.F. Deb. Reg. 9 1/4% 6/1/16 2,636.525
2,000,000 Burlington Northern, Inc. 7.5% 7/15/23 2,022,520
1,135,000 Chrysler Corp. 10.40% 8/1/99 1,212,963
4,500,000 Crown Cork & Seal, Inc. 8% 4/15/23 4,693,590
2,000,000 Diamond Shamrock, Inc. 8% 4/1/23 2,090,970
4,000,000 General Motors Corp. Deb. Reg. 8 1/8% 4/15/16 4,175,300
4,400,000 Georgia Pacific Corp. 8 1/8% 6/15/23 4,550,722
3,000,000 Ralston Purina Company 9.30% 5/1/21 3,633,615
3,000,000 Tenneco, Inc. 9% 11/15/12 3,468,315
4,500,000 Time Warner, Inc. 9 1/8% 1/15/13 4,976,595
2,000,000 Union Pacific Corp. 8.625% 5/15/22 2,239,880
4,000,000 USX Marathon Group 9.375% 2/15/12 4,575,660
42,035,000 45,647,750
PUBLIC UTILITIES - 20.9%
2,150,000 Georgia Power Company 7.55% 8/1/23 2,211,770
1,000,000 GTE - South 9% 9/15/29 1,063,790
2,000,000 Illinois Power Company 8% 2/15/23 2,051,010
4,000,000 Southern Bell Telephone Co. 8.625% Deb. 9/1/26 4,199,540
4,500,000 Tele Communications 8.75% 2/15/23 4,678,200
3,410,000 Tennessee Valley Ser C 8.25% 9/15/34 3,599,067
1,000,000 Texas Utilities Electric Co. 8.5% 8/1/24 1,075,750
2,000,000 Texas Utilities Electric Co. 8.75% 11/1/23 2,197,580
20,060,000 21,076,707
FINANCIAL AND INSURANCE - 9.7%
1,700,000 Chrysler Financial Corp. 9.5% 12/15/99 1,897,005
3,000,000 CIGNA Corp. 8.30% 1/5/23 3,205,005
2,450,000 Ford Motor Credit Co. 9.25% 6/15/98 2,642,484
2,000,000 Travelers Group, Inc. 8.375% 12/15/96 2,054,940
9,150,000 9,799,434
CANADIAN PROVINCIAL AND MUNICIPAL - 3.3%
2,900,000 British Columbia Hydro & Power Bonds 15.50% FJ 11/15/11 (U.S. Pay) 3,347,006
2,900,000 3,347,006
U.S. GOVERNMENT AGENCIES - 17.8%
1,700,000 FHLB 9.8% 03/25/96 1,720,188
3,750,000 FNMA 9.35% 02/12/96 3,779,306
536,225 GNMA 8% 3/15/22 Pool #318816 554,741
1,464,870 GNMA 8% 8/15/24 Pool #392478X 1,515,454
1,795,352 GNMA 8.5% 10/15/24 Pool #215821X 1,874,460
1,402,176 GNMA 8.5% 9/15/24 Pool #385902X 1,463,959
1,373,359 GNMA 8.5% 2/15/25 Pool #386672X 1,433.873
352,963 GNMA 9% 12/15/19 Pool #198566 372,210
883,638 GNMA 9% 1/15/20 Pool #202923 931,824
407,815 GNMA 9% 12/15/19 Pool #267601 430,054
183,184 GNMA 9% 1/15/21 Pool #291873 193,173
259,505 GNMA 9% 3/15/21 Pool #299269 273,657
244,436 GNMA 9.5% 5/15/19 Pool #271455 261,623
737,417 GNMA 9.5% 9/15/19 Pool #274141 789,267
121,848 GNMA 9.5% 6/15/20 Pool #290655 130,416
31,174 GNMA 10% 2/15/16 Pool #152585 34,087
176,829 GNMA 10% 3/15/18 Pool #238906 193,351
19,466 GNMA 10% 11/15/18 Pool #255865 21,285
59,398 GNMA 10% 12/15/18 Pool #258705 64,948
182,772 GNMA 10% 12/15/18 Pool #259100 199,850
137,844 GNMA 10% 12/15/18 Pool #259511 150,724
138,687 GNMA 10% 10/15/18 Pool #261851 151,645
400,397 GNMA 10% 1/15/19 Pool #266987 437,809
427,877 GNMA 10% 3/15/20 Pool #285190 467,857
185,207 GNMA 10% 4/15/20 Pool #285618 202,512
232,174 GNMA 10.5% 4/15/19 Pool #262170 256,624
61,277 GNMA 10.5% 5/15/19 Pool # 274947 67,730
17,265,890 17,972,627
RESIDENTIAL SECURITIES - 0.1%
Residential Mortgages (first and second),
Participation, 8 3/8% Average
29,794 Yield, 2 Year Average Maturity, Acquired 12/29/77 28,277
29,794 28,277
91,440,684 TOTAL BONDS AND LONG-TERM NOTES - 97 % 97,871,801
Short-Term Notes
1,194,000 General Electric 5.77% 12/7/95 1,192,660
1,194,000 TOTAL short-TERM NOTES - 1.1 % 1,192,660
92,634,684 TOTAL INVESTMENTS - 98.1% 99,064,461
OTHER ASSETS LESS LIABILITIES - 1.9 % 1,873,824
NET ASSETS - 100.0% $ 100,938,285
</TABLE>
<TABLE>
STATEMENTS OF OPERATIONS
<CAPTION>
Year Ended November 30
1995 1994
<S> <C> <C>
INVESTMENT INCOME
Interest Income $ 8,179,586 $ 8,169,757
EXPENSES
Advisory 681,471 684,234
Legal and auditing 57,768 51,674
Custodian 22,846 23,225
Directors 54,300 54,600
Taxes, other than income 29,710 36,000
Other 73,655 64,566
Total Expenses 919,750 914,299
NET INVESTMENT INCOME 7,259,836 7,255,458
REALIZED AND UNREALIZED gain (LOSS) ON INVESTMENTS
Realized gain from sales of bonds and long-term notes
Proceeds from sales 38,173,584 23,608,909
Cost of investments sold 37,835,441 23,275,150
Net realized gain on investments (on average cost
basis of $387,866 in 1995 and $350,174 in 1994) 338,143 333,759
Unrealized (depreciation) appreciation on investments
Beginning of year (5,679,070) 7,260,449
End of year 4,850,966 (5,679,070)
Unrealized gain (loss) on investments 10,530,036 (12,939,519)
Net realized and unrealized gain (loss) on investments 10,868,179 (12,605,760)
NET INCREASE (DECREASE) IN ASSETS
RESULTING FROM OPERATIONS $ 18,128,015 $ (5,350,302)
</TABLE>
See notes to financial statements
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
Year Ended November 30
1995 1994
<S> <C> <C>
OPERATIONS
Net investment income $ 7,259,836 $ 7,255,458
Net realized gain on investments 338,143 333,759
Unrealized gain (loss) on investments 10,530,036 (12,939,519)
Net increase (decrease) in assets resulting
from operations 18,128,015 (5,350,302)
Dividends from net investment income (7,183,812) (7,255,458)
Dividends in excess of net investment Income. 0 (36,869)
Dividends from net realized gain (338,143) (333,759)
Dividends in excess of net realized gain (1,092) (696,865)
FROM CAPITAL SHARE TRANSACTIONS
Net asset value of common shares issued
under the Automatic Dividend Investment Plan
of -0- at 11/30/95 and 45,113 at 11/30/94 0 661,939
INCREASE (DECREASE) IN NET ASSETS 10,604,968 (13,011,314)
NET ASSETS
Beginning of year 90,333,317 103,344,631
End of year (including undistributed net
investment income of $1,308,738 at 11/30/95
and $1,232,714 at 11/30/94) $ 100,938,285 $ 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>
Year Ended November 30
Per Share Operating Performance 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 13.58 $ 15.64 $ 14.93 $ 14.78 $ 13.75
Net investment income 1.09 1.09 1.14 1.17 1.20
Net realized and unrealized gain
(loss) on investments 1.63 (1.90) 0.72 0.15 1.04
Total from investment operations 2.72 (0.81) 1.86 1.32 2.24
Dividends from net investment income (1.08) (1.09) (1.14) (1.17) (1.20)
Dividends in excess of
net investment income 0 (0.01) (0.01) 0 (0.01)
Dividends from net realized gain (0.05) (0.05) 0 0 0
Dividends in excess of net realized gain 0 (0.10) 0 0 0
Total dividends (1.13) (1.25) (1.15) (1.17) (1.21)
Net asset value, end of year $ 15.17 $ 13.58 $ 15.64 $ 14.93 $ 14.78
Market value, end of year $ 13.625 $ 12.375 $ 15.50 $ 4.125 $ 14.50
Total Investment Return
Based on market value (a) 19.76% -12.91% 18.25% 5.32% 19.22%
Based on net asset value (b) 20.93% -5.39% 12.86% 9.23% 17.06%
Ratios and Supplemental Data
Net assets, end of year
(in thousands) $100,938 $90,333 $103,345 $97,698 $95,492
Ratio of operating expenses
to average net assets 0.9% 0.9% 0.9% 0.9% 0.9%
Ratio of net investment income
to average net assets 7.6% 7.6% 7.4% 7.9% 8.5%
Portfolio turnover 39.2% 24.6% 42.0% 40.6% 43.0%
Number of shares outstanding at
year-end (in thousands) 6,652 6,652 6,607 6,542 6,463
</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 year 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 year.
See notes to financial statements
NOTES TO FINANCIAL STATEMENTS
Years ended November 30,1995 and 1994.
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Vestaur Securities, Inc. (the "Company") 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 "regulated
investment company" 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 and record the common stock at the greater of: share 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. For the year
ended November 30, 1995, no shares were issued. For the year ended
November 30, 1994, 45,113 shares were issued.
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 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
$21,982,989 and $32,375,524, respectively, during the year ended November 30,
1995 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
$14,651,220 and $5,459,917, respectively, during the year ended November
30,1995 and $3,519,451 and $4,866,180, respectively, during the year ended
November 30, 1994.
NOTE 4 - DISTRIBUTIONS TO STOCKHOLDERS
On December 13,1995 a dividend distribution of 27 cents per share plus a year-
end extra dividend of 1 cent per share, aggregating $1,862,469, was declared
from 1995 net investment income. The dividend will be paid on January 18, 1996
to stockholders of record December 29,1995.
On December 13,1995, a capital gain dividend of 5 cents per share, aggregating
$332,584, was declared from 1995 net capital gain. The character of the capital
gain portion is 2.6 cents per share for the long term capital gain and 2.4 cents
per share for the short term capital gain. The dividend will be paid on January
18,1996 to stockholders of record December 29,1995.
Independent Auditor's Report
The Stockholders and Board of Directors
Vestaur Securities, Inc.
Philadelphia, Pennsylvania
We have audited the accompanying statements of assets and liabilities of Vestaur
Securities, Inc. (the "Company") as of November 30, 1995 and 1994, including the
schedule of investments as of November 30, 1995, and the related statements of
operations and changes in net assets for the years ended November 30, 1995 and
1994, and the financial highlights for each of the five years in the period
ended November 30, 1995. These financial statements and financial highlights are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and the financial highlights based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at November
30, 1995 by correspondence with the custodians. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Vestaur Securities,
Inc. as of November 30, 1995 and 1994, and the results of its operations and
changes in its net assets for the years then ended, and the financial highlights
for each of the five years in the period ended November 30, 1995 in conformity
with generally accepted accounting principles.
Philadelphia, Pennsylvania
December 19, 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) 324-0313
Common Stock listed on New York
Stock Exchange, Symbol VES.
