<PAGE>
[LOGO OF VESTAUR]
Vestaur Securities, Inc.
--------------------------------------------------------------------------------
SEMI-ANNUAL
REPORT
TO SHAREHOLDERS
May 31, 2000
--------------------------------------------------------------------------------
BOARD OF DIRECTORS OFFICERS
Glen T. Insley Glen T. Insley
Chairman
Steven S. Elbaum
Dung Vukhac
Paul B. Fay, Jr. President
Robert F. Gurnee J.P. Weaver
Vice President and Secretary
John C. Jansing
Carol Kosel
Charles P. Pizzi Treasurer
Philip R. Reynolds Brian McCarthy
Assistant Treasurer
Marciarose Shestack
Robert E. Shultz
ADVISOR
[LOGO OF FIRST UNION]
First Union National Bank
VESTAUR SECURITIES, INC. -----------------
First Capital Group/First Union Bulk Rate
123 South Broad Street, 2nd Floor U.S. Postage
Philadelphia, PA 19109 PAID
Permit No. 19
Hudson, MA
-----------------
<PAGE>
Vestaur Securities, Inc.
Shareholder Letter
[LOGO OF VESTAUR SECURITIES]
Semi-Annual Report, period ended May 31, 2000
Dear Fellow Shareholders:
High volatility and divergent sector performances characterized the bond
market during the first half of the Vestaur Securities, Inc.'s ("the Company")
fiscal year. Much stronger than expected economic growth, a drum tight labor
market and a deteriorating inflation outlook prompted the Federal Reserve to
tighten policy three times during the first half of the Company's fiscal year,
raising the Federal funds rate by a total of 100 basis points to 6.5%.
Anticipating a much more aggressive monetary policy, treasury yields rose
across the board by as much as 60 basis points in December and January. Yield
on the benchmark 30-year treasury bond peaked at 6.75% in late January before
plunging to a low of 5.67% in early April in response to the launch of the
bond buy back program by the Treasury Department and sharp corrections of the
equity market.
With the exception of the long-term Treasury bond sector, which posted an
impressive total return of 5.23%, all other fixed income securities suffered a
net decline in market price over the period under review. Yield on the
benchmark ten-year treasury notes rose 8 basis points to 6.27% while the yield
on the benchmark two-year note rose by as much as 66 basis points to 6.67%.
Treasuries outperformed all spread sectors by a wide margin as yield spreads
widened to levels not seen since the height of the Asian financial crisis in
1998. Agency debts came under pressure as both the Treasury and the Federal
Reserve signaled their support for a revisit of the special status of
obligations issued by Government Sponsored Enterprises (GSEs). Corporate bonds
were handicapped by relative supply, a weak equity market, the negative impact
of the inverted treasury curve on swap spreads and growing fear of a hard
landing for the economy should the Federal Reserve decide to slam the monetary
brake. Among credit sectors, high grade posted the best performance and high
yield the worst.
At this writing, the bond market has taken on a much more constructive tone.
Much weaker than expected economic data released since mid-May has given rise
to hope that a soft landing may be at hand and the Federal Reserve may be
close to the end of its tightening cycle. Retail sales have declined both in
April and May, led by sharp downturn in the big-ticket durable goods category.
GM, Ford and Daimler Chrysler all reported much weaker than expected domestic
sales in June. The National Association of Purchasing Managers Composite
Index, a closely watched indicator of manufacturing activity, registered the
fourth straight lower reading in June, falling to 51.8%. While May employment
and unemployment statistics were too weak to be credible, the four week
average of new unemployment claims have drifted above 300,000, up from an
average of 283,000 year to date.
While bond yields may have seen their highs for the year, we think that it is
premature to conclude that the Federal Reserve has finished its task of
reigning in economic growth. In both 1998 and 1999, economic activity slowed
sharply in the second quarter only to re-accelerate in the second half of the
year. We suspect that a similar scenario will unfold abetted by the recent
decline in long-term interest rates and increased government spending in an
election year, prompting the Federal Reserve to tighten policy again.
Nevertheless, the magnitude of the rebound in GDP growth should be more muted
due to a less exuberant equity market and the dampening effect of already high
rates on interest-sensitive sectors of the economy, leading to a soft landing
in 2001.
Despite significant risk of still higher short-term interest rates in the
coming months, we remain constructive on the outlook for the bond market
longer term. The Federal Reserve's vigilance should keep inflation expectation
in check while the prospect of rising Federal budget surplus should provide
the bond market with strong technical support in the years ahead.
Consequently, we would consider any market sell-off as fresh opportunities to
lock in attractive inflation-adjusted yields.
The net assets of the Company on May 31, 2000 were $90,488,931 or $13.32 per
share compared to $94,268,632 or $13.88 per share on November 30,1999
reflecting the sharp increase in corporate bond yields over the past six
months. At the May 10, 2000 Directors meeting, Vestaur Securities, Inc.
declared the regular quarterly income dividend of 26 cents per share. This
dividend is payable on July 17, 2000 to shareholders of record on June 30,
2000. We would like to inform you that effective May 10, 2000, John P. Weaver,
Vice President of the Company, assumed the additional roles of Secretary and
lead Portfolio Manager.
Your investment portfolio continues to be managed by First Capital Group with
the primary objective of maintaining a high level of current income through a
diversified portfolio of fixed income securities. We would like to take this
opportunity to thank you for your support in our effort at the annual meeting
to update the Company's investment guidelines and look forward to providing
you with excellent investment services as in the past. Thank you for your
continued investment in Vestaur Securities, Inc.
Sincerely,
/s/ Glen T. Insley
Glen T. Insley, CFA
Chairman of the Board
July 7, 2000
<PAGE>
SCHEDULE OF INVESTMENTS
May 31, 2000 (unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
LONG-TERM BONDS AND NOTES - 96.7%
TELECOMMUNICATION SERVICES & EQUIPMENT - 16.9%
$3,000,000 AT&T Corp. 8.35% 1/15/2025........................... $ 2,812,890
1,500,000 AT&T Corp. 8.625% 12/1/2031.......................... 1,423,440
1,000,000 Global Crossing, Ltd. 9.125% 11/15/2006.............. 940,000
1,900,000 Metromedia Fiber Network, Inc. 10.00% 11/15/2008..... 1,809,750
1,100,000 Metromedia Fiber Network, Inc. 10.00% 12/15/2009..... 1,050,500
3,000,000 Nextlink Communications, Inc. 10.75% 6/1/2009........ 2,880,000
1,000,000 SBC Communications, Inc. 8.70% 6/15/2001............. 1,009,900
350,000 Vodafone Airtouch, PLC 7.75% 2/15/2010............... 335,181
3,000,000 Williams Communications Group, Inc. 10.875%
10/1/2009........................................... 3,000,000
-----------
15,261,661
-----------
BROADCASTING & MEDIA - 16.0%
2,000,000 Chancellor Media Corp. 8.75% 6/15/2007............... 2,000,000
2,000,000 Comcast Corp. 9.125% 10/15/2006...................... 2,068,480
1,960,000 Comcast Corp. 10.25% 10/15/2001...................... 2,023,014
1,150,000 Lenfest Communications, Inc. 8.375% 11/1/2005........ 1,149,643
2,000,000 Seagram Ltd. 8.35% 1/15/2022......................... 1,788,460
4,200,000 Time Warner, Inc. 9.125% 1/15/2013................... 4,432,806
1,000,000 Viacom, Inc. 10.25% 9/15/2001........................ 1,027,770
-----------
14,490,173
-----------
U.S. GOVERNMENT AGENCIES - 10.9%
2,700,000 FNMA 8.90% 6/12/2000................................. 2,702,106
1,814,320 FNMA 9.00% 2/1/2025.................................. 1,864,178
883,243 FNMA 10.00% 4/1/2021................................. 927,687
881,234 GNMA 8.00% 3/15/2022 - 8/15/2024..................... 885,085
749,290 GNMA 8.25% 5/15/2020................................. 760,349
1,510,486 GNMA 8.50% 10/15/2024 - 1/15/2027.................... 1,539,152
405,318 GNMA 9.00% 12/15/2019 - 3/15/2021.................... 419,718
281,372 GNMA 9.50% 5/15/2019 - 6/15/2020..................... 295,216
311,838 GNMA 10.00% 1/15/2019 - 4/15/2020.................... 332,203
132,263 GNMA 10.50% 4/15/2019 - 5/15/2019.................... 143,092
-----------
9,868,786
-----------
OIL & ENERGY - 9.5%
1,750,000 Atlantic Richfield Co. 10.875% 7/15/2005............. 1,993,390
2,000,000 Diamond Shamrock Inc. 8.00% 4/1/2023................. 1,907,260
3,150,000 Occidental Petroleum Corp. 8.45% 2/15/2029........... 3,047,373
1,500,000 Pennzoil Co. 10.125% 11/15/2009...................... 1,621,155
-----------
8,569,178
-----------
PUBLIC UTILITIES - 7.5%
1,143,000 Niagara Mohawk Power Corp. 8.75% 4/1/2022............ 1,125,283
2,494,000 Niagara Mohawk Power Corp. 9.75% 11/1/2005........... 2,631,569
2,000,000 Texas Utilities Electric Co. 8.50% 8/1/2024.......... 2,026,660
1,000,000 Texas Utilities Electric Co. 8.75% 11/1/2023......... 1,044,860
-----------
6,828,372
-----------
FINANCE & INSURANCE - 5.2%
1,000,000 CIGNA Corp. 8.30% 1/15/2033.......................... 958,750
1,055,000 CIGNA Corp. 8.75% 10/1/2001.......................... 1,065,350
2,600,000 GMAC 9.625% 12/15/2001............................... 2,661,620
-----------
4,685,720
-----------
PAPER & PACKAGING - 4.3%
4,400,000 Georgia Pacific Corp. 8.125% 6/15/2023............... 3,927,484
-----------
</TABLE>
<PAGE>
SCHEDULE OF INVESTMENTS (continued)
May 31, 2000 (unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
LONG-TERM BONDS AND NOTES - Continued
TRANSPORTATION - 4.1%
$2,000,000 Burlington Northern, Inc. 7.50% 7/15/2023............ $ 1,796,960
1,800,000 Federal Express Corp. 9.65% 6/15/2012................ 1,898,784
-----------
3,695,744
-----------
CHEMICAL & AGRICULTURAL PRODUCTS - 3.9%
3,500,000 Air Products & Chemicals, Inc. 8.875% 8/1/2001....... 3,548,230
-----------
RETAILING & WHOLESALE - 3.9%
1,000,000 Dayton Hudson Corp. 9.25% 3/1/2006................... 1,012,210
450,000 Dayton Hudson Corp. 10.00% 12/1/2000................. 456,282
2,000,000 Wal-Mart Stores, Inc. 8.625% 4/1/2001................ 2,022,760
-----------
3,491,252
-----------
TRUST PREFERRED - 3.7%
4,000,000 MBNA Capital 8.278% 12/1/2026........................ 3,359,840
-----------
AEROSPACE & DEFENSE - 3.2%
3,000,000 Northrop Grumman Corp. 9.375% 10/15/2024............. 2,852,700
-----------
CANADIAN BONDS - 2.7%
2,500,000 Rogers Cablesystems Ltd. 9.625% 8/1/2002............. 2,475,000
-----------
INTERNET SOFTWARE & SERVICES - 2.2%
1,000,000 PSI Net, Inc. 11.00% 8/1/2009........................ 905,000
1,000,000 Verio, Inc. 10.625% 11/15/2009....................... 1,105,000
-----------
2,010,000
-----------
INDUSTRIAL & CONGLOMERATE - 1.5%
1,560,000 USA Waste Service, Inc. 7.125% 10/1/2007............. 1,364,095
-----------
IRON & STEEL - 1.2%
1,000,000 USX Marathon Group 9.375% 2/15/2012.................. 1,055,560
-----------
RESIDENTIAL SECURITIES - 0.0%
9,332 Residential Mortgages (first and second),
Participation, 8.375% Average Yield, 2 Year Average
Maturity, Acquired 12/29/1977....................... 8,769
-----------
Total Long-Term Bonds and Notes (Cost $93,771,872)... 87,492,564
-----------
</TABLE>
<TABLE>
<C> <S> <C> <C>
SHORT-TERM INVESTMENTS - 0.8%
COMMERCIAL PAPER - 0.8% (cost $726,868)
727,000 Stellar Funding Group 6.55% 6/2/2000........... 726,868
-----------
Total Investments (Cost $94,498,740)........... 97.5% 88,219,432
Other Assets and Liabilities (Net)............. 2.5 2,269,499
----- -----------
Net Assets..................................... 100.0% $90,488,931
===== ===========
SUMMARY OF ABBREVIATIONS
FNMA Federal National Mortgage Association
GMAC General Motors Acceptance Corp.
GNMA Government National Mortgage Association
</TABLE>
See Notes to Financial Statements.
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
Six Months Ended May 31, 2000 (unaudited)
<TABLE>
<S> <C>
ASSETS
Identified cost of securities................................... $94,498,740
Net unrealized loss on securities............................... (6,279,308)
-----------
Market value of securities...................................... 88,219,432
Cash............................................................ 763
Interest receivable............................................. 2,322,491
Prepaid expenses and other assets............................... 15,273
-----------
Total assets.................................................... 90,557,959
-----------
LIABILITIES
Advisory fee payable............................................ 54,594
Accrued expenses and other liabilities.......................... 14,434
-----------
Total liabilities............................................... 69,028
-----------
NET ASSETS........................................................ $90,488,931
===========
NET ASSETS REPRESENTED BY
Common stock, par value $0.01 per share, 10,000,000 shares
authorized, 6,794,105 shares issued and outstanding............ $ 67,941
Capital in excess of par value.................................. 97,460,998
Undistributed net investment income............................. 284,067
Accumulated net realized losses on investments.................. (1,044,767)
Net unrealized gains or losses on investments................... (6,279,308)
-----------
Total net assets................................................ $90,488,931
===========
SHARES OUTSTANDING................................................ 6,794,105
-----------
NET ASSET VALUE PER SHARE......................................... $ 13.32
-----------
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
Six Months Ended May 31, 2000 (unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest........................................................ $ 4,067,949
EXPENSES
Advisory fee.................................................... 335,677
Directors' fees and expenses.................................... 35,101
Professional fees............................................... 23,151
Printing expenses............................................... 21,376
Custodian fee................................................... 13,172
Other........................................................... 24,771
-----------
Total expenses.................................................. 453,248
Less: Expense reductions........................................ (519)
-----------
Net expenses.................................................... 452,729
-----------
NET INVESTMENT INCOME............................................. 3,615,220
-----------
NET REALIZED AND UNREALIZED LOSSES ON INVESTMENTS
Net realized losses on investments.............................. (102,699)
Net change in unrealized losses on investments.................. (3,759,289)
-----------
Net realized and unrealized losses on investments............... (3,861,988)
-----------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS.............. $ (246,768)
===========
</TABLE>
See Notes to Financial Statements.
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Year
Ended Ended
May 31, 2000 November 30, 1999
------------ -----------------
(unaudited)
<S> <C> <C>
OPERATIONS
Net investment income......................... $ 3,615,220 $ 6,965,956
Net realized losses on investments............ (102,699) (899,961)
Net change in unrealized losses on
investments.................................. (3,759,289) (4,907,289)
----------- -----------
Net increase (decrease) in net assets
resulting from operations.................... (246,768) 1,158,706
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income......................... (3,532,933) (7,022,889)
CAPITAL SHARE TRANSACTIONS
Net asset value of common shares issued under
the Automatic Dividend Investment Plan....... 0 1,018,019
----------- -----------
TOTAL DECREASE IN NET ASSETS................... (3,779,701) (4,846,164)
NET ASSETS
Beginning of period........................... 94,268,632 99,114,796
----------- -----------
End of period................................. $90,488,931 $94,268,632
=========== ===========
Undistributed net investment income............ $ 284,067 $ 201,780
=========== ===========
</TABLE>
See Notes to Financial Statements
-------------------------------------------------------------------------------
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.
<TABLE>
<CAPTION>
Six Months Year Ended November 30,
Ended -----------------------------------------------------
May 31, 2000 1999 1998 (d) 1997 1996 1995
------------ ------- -------- ------- ------- --------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net asset value beginning
of period............... $ 13.88 $ 14.74 $ 14.82 $ 14.72 $ 15.17 $ 13.58
------- ------- ------- ------- ------- --------
Income from investment
operations
Net investment income.... 0.53 1.03 1.05 1.07 1.08 1.09
Net realized and
unrealized gains or
losses on investments... (0.57) (0.85) (0.06) 0.11 (0.39) 1.63
------- ------- ------- ------- ------- --------
Total from investment
operations.............. (0.04) 0.18 0.99 1.18 0.69 2.72
Less distributions from:
Net investment income.... (0.52) (1.04) (1.04) (1.08) (1.09) (1.08)
Net realized gains....... 0 0 (0.03) 0 (0.05) (0.05)
------- ------- ------- ------- ------- --------
Total distributions to
shareholders............ (0.52) (1.04) (1.07) (1.08) (1.14) (1.13)
------- ------- ------- ------- ------- --------
Net asset value, end of
period.................. $ 13.32 $ 13.88 $ 14.74 $ 14.82 $ 14.72 $ 15.17
======= ======= ======= ======= ======= ========
Market value, end of
period.................. $ 11.94 $ 12.75 $ 14.94 $ 14.06 $ 13.50 $ 13.625
======= ======= ======= ======= ======= ========
Total Return
Based on net asset value
(a).................... (0.31%) 1.29% 6.90% 8.50% 4.91% 20.93%
Based on market value
(b).................... (2.53%) (8.12%) 14.19% 12.58% 7.69% 19.76%
Ratios/supplemental data
Net assets end of period
(in thousands).......... $90,489 $94,269 $99,115 $98,594 $97,907 $100,938
======= ======= ======= ======= ======= ========
Ratios to average net
assets
Expenses................ 0.98% + (c) 1.00% (c) 0.97% (c) 0.9% 0.9% 0.9%
Net investment income... 7.84% + 7.25% 7.13% 7.4% 7.4% 7.6%
Portfolio turnover rate.. 4% 42% 43% 33% 47% 39%
</TABLE>
(a) The net asset value total return is based on the net asset value on the
first and last day of each period. Dividends and other distributions are
reinvested at the ex-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.
(b) The market value total return is based on the market value on the first
and last day of each period and computed on a similar basis as above,
except the dividends and other distributions are reinvested at prices
obtained by the Company's dividend reinvestment plan.
(c) The ratio of expenses to average net assets includes expense reductions.
Excluding expense reductions, the ratio is the same.
(d) Effective April 28, 1998, First Union National Bank became the investment
advisor. Prior to that date, CoreStates Investment Advisors was the
investment advisor.
+ Annualized
See Notes to Financial Statements.
<PAGE>
Vestaur Securities, Inc.
NOTES TO FINANCIAL STATEMENTS (unaudited)
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 primary investment objective of the Company is to seek
a high level of current income for its shareholders through investment in a
diversified portfolio of fixed income securities which management considers to
be of high quality.
The following is a summary of significant accounting policies consistently
followed by the Company in the preperation of its financial statements. The
policies are in conformity with generally accepted accounting principles,
which require management to make estimates and assumptions that affect amounts
reported herein. Actual results could differ from these estimates.
(a)Valuation of Securities -
Corporate bonds, U.S. government obligations, other fixed-income securities,
and mortgage and other asset-backed securities are valued at prices provided
by an independent pricing service. In determining a price for normal
institutional-size transactions, the pricing service uses methods based on
market transactions for comparable securities and analysis of various
relationships between similar securities which are generally recognized by
institutional traders. Securities for which valuations are not available from
an independent pricing service may be valued by brokers which use prices
provided by market makers or estimates of market value obtained from yield
data relating to investments or securities with similar characteristics.
Otherwise, securities for which valuations are not readily available from an
independent pricing service (including restricted securities) are valued at
fair value as determined in good faith according to procedures established by
the Board of Directors.
Short-term investments with remaining maturities of 60 days or less are
carried at amortized cost, which approximates market value.
(b)Repurchase Agreements -
The Company may invest in repurchase agreements. Securities pledged as
collateral for repurchase agreements are held by the custodian on the
Company's behalf. The Company monitors the adequacy of the collateral daily
and will require the seller to provide additional collateral in the event the
market value of the securities pledged falls below the carrying value of the
repurchase agreement, including accrued interest. The Company will only enter
into repurchase agreements with its custodian bank, State Street Bank and
Trust Company.
(c)Security Transactions and Investment Income -
Securities transactions are accounted for no later than one business day after
the trade date. Realized gains and losses are computed on the identified cost
basis. Interest income is recorded on the accrual basis.
(d)Federal Taxes -
The Company has qualified and intends to continue to qualify as a regulated
investment company under the Internal Revenue Code of 1986, as amended (the
"Code" ). Thus, the Company will not incur any federal income tax liability
since it is expected to distribute all of its net investment company taxable
income and net capital gains, if any, to its shareholders. The Company also
intends to avoid any excise tax liability by making the required distributions
under the Code. Accordingly, no provision for federal taxes is required. To
the extent that realized capital gains can be offset by capital loss
carryforwards, it is the Company's policy not to distribute such gains.
(e)Distributions -
Distributions from net investment income are declared and paid on a quarterly
basis. These dividends are recorded on the ex-dividend date. Shareholders 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 (i) the per share net asset value, or (ii) 95% of the market price per
share as of the close of business on the last trading day of the month in
which the dividend or other distribution is paid. Distributions from net
realized capital gains, if any, are paid at least annually.
Income and capital gains distributions to shareholders are determined in
accordance with income tax regulations, which may differ from generally
accepted accounting principles. Certain distributions paid during previous
years have been reclassified to conform with current year presentation.
NOTE 2 - INVESTMENT ADVISORY AGREEMENT
First Union National Bank ("FUNB"), a subsidiary of First Union, is the
investment advisor for the Company and is paid a management fee that is
computed and paid monthly. The advisory fee is computed at an annual rate of
0.50% of the Company's average monthly net assets plus 2.50% of the Company's
investment income.
Officers of the Company and affiliated Directors receive no compensation
directly from the Company.
<PAGE>
NOTE 3 - CAPITAL SHARE TRANSACTIONS
The Company has authorized capital of 10,000,000 shares of common stock with
a par value of $0.01 per share. For the six months ended May 31, 2000 and year
ended November 31, 1999 the Company issued 0 and 71,640 shares, respectively
of common stock.
NOTE 4 - SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of investment securities (excluding
short-term securities) were as follows for the six months ended May 31, 2000:
<TABLE>
<CAPTION>
Cost of Proceeds
Purchases from Sales
---------- ----------
<S> <C> <C>
Non-U.S. Government.................................... $3,752,022 $3,774,615
U.S. Government........................................ 0 658,758
</TABLE>
As of November 30, 1999, the Company has a $942,068 capital loss carryforward
for federal income tax purposes of which $46,223 expires in 2006 and $895,845
expires in 2007.
NOTE 5 - EXPENSE REDUCTIONS
The Company has entered into an expense offset arrangement with its custodian
where by credits realized as a result of uninvested cash balances were used to
reduce a portion of the Company's related expenses. The assets deposited with
the custodian under this expense offset arrangement could have been invested
in income-producing assets.
NOTE 6 - SUBSEQUENT DISTRIBUTION TO SHAREHOLDERS
On May 10, 2000, the Company declared a dividend of $0.26 per share which
will be payable on July 17, 2000 to shareholders of record as of June 30,
2000.
-------------------------------------------------------------------------------
ADDITIONAL INFORMATION (unaudited)
On May 10, 2000 the Annual meeting of shareholders of the Company was held to
consider a number of proposals. On March 22, 2000, the record date of the
meeting, the Company had
Record Date Shares Outstanding 6,794,105
Shares represented at meeting 5,522,384
Percentage of record date shares
represented at the meeting 81.282%
The votes recorded at the meeting, by proposal, were as follows:
Proposal 1 - Election of Directors:
Shares voted "For" 5,461,446
Shares voted "Against" 0
Shares voted "Abstain" 60,938
Proposal 2 - Ratification of auditors:
Shares voted "For" 5,451,323
Shares voted "Against" 21,258
Shares voted "Abstain" 49,803
On May 31, 2000 the shareholders reconvened to consider the following proposal.
On May 22, 2000, the record date of the meeting, the Company had
Record Date Shares Outstanding 6,794,105
Shares represented at meeting 5,574,963
Percentage of record date
shares represented at the
meeting 82.056%
The votes recorded at the meeting were as follows:
Proposal 3 - Change Investment Objective:
Shares voted "For" 3,559,444
Shares voted "Against" 65,899
Shares voted "Abstain" 100,168
Shares Not Voted 1,849,452
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Custodian Shareholder Relations
State Street Bank and Trust Company EquiServe,
Box 9021 First Chicago Trust Division
Boston, MA 02205-9827 P.O. Box 2500
Jersey City, NJ 07303-2500
Transfer Agent, Dividend Disbursing (201) 324-0313
Agent & Registrar
EquiServe, Common Stock listed on New York
First Chicago Trust Division Stock Exchange, Symbol VES.
P.O. Box 2500
Jersey City, NJ 07303-2500
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
