<PAGE>
[LOGO OF VESTAUR]
Vestaur
Securities,
Inc.
- --------------------------------------------------------------------------------
ANNUAL
REPORT
TO SHAREHOLDERS
November 30, 1999
- --------------------------------------------------------------------------------
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
John C. Jansing
Karen G. Bater
Charles P. Pizzi Vice President
and Secretary
Philip R. Reynolds
Carol Kosel
Marciarose Shestack Treasurer
Robert E. Shultz Brian McCarthy
Assistant Treasurer
ADVISOR
[LOGO OF FIRST UNION]
First Union
National Bank
Bulk Rate
VESTAUR SECURITIES, INC. U.S. Postage
First Capital Group/First Union PAID
123 South Broad Street, 2nd Floor Permit No. 19
Philadelphia, PA 19109 Hudson, MA
<PAGE>
Vestaur Securities, Inc.
Shareholder Letter
[LOGO OF VESTAUR SECURITIES]
Annual Report, period ended November 30, 1999
Dear Fellow Shareholders:
Bond yields rose further during the second half of the Fund's fiscal year as
the Federal Reserve reversed the three easing moves made in the fall of 1998,
returning the target Federal Funds rate to 5.50%. Since the market had already
anticipated a tightening of monetary policy, the Treasury Bond yield curve
rose less than the 75 basis points increase in Federal Funds rate. The yield
on the benchmark thirty-year Treasury bond rose 47 basis points, taking its
yield from 5.82% to 6.29% while the yield on the two-year Treasury note
increased 43 basis points, from 5.58% to 6.01%. For the fiscal year under
review, Treasury coupon yields rose 120 to 150 basis points, making this
period the worst market setback for bonds since calendar year 1994.
As discussed in our semi-annual report, the key contributor to the shift in
market direction has been the extraordinary strength of the domestic economy
powered by consumer spending, housing activities and capital expenditures.
Real Gross Domestic Product registered an annualized increase of 5.7% in the
third quarter and should easily exceed 4% in the fourth quarter of 1999 based
on recent retail sales and durable goods order statistics. When the final
tally is in, calendar year 1999 may be the third consecutive year that real
GDP grew at an annual rate of 4% or more, which would exceed the Federal
Reserve's well-publicized target range of 2% to 3%.
It is ironic that the run up in interest rates occurred in an environment of
tame inflation despite exceptional economic growth that has been characterized
by some as a state of "economic nirvana". While the economy no longer benefits
from declining industrial commodity prices induced by the Asian Crisis and
energy prices doubling from their February lows, inflation at the wholesale,
finished goods and consumer levels remains quiescent. At this writing, the
"core" Consumer Price Index (i.e., excluding food and energy) was up only 2.1%
year to year. The "core" Producer Price Index rose only 1.8% year to year,
down from 2.8% in 1998. Surprisingly strong productivity growth due to the on-
going technology revolution and intensified competition abetted by the
internet and globalization of markets for goods and services appear to be the
key contributors to the current favorable inflation climate. Business and
manufacturing productivity were up 4.7% and 3.9%, respectively, in the third
quarter of 1999, raising their year-to-year increases to 3.2% and 5.7%,
respectively.
The market, nevertheless, remains worried that the current economic
environment is unsustainable and productivity growth might not be high enough
to offset even larger wage increases in the future, should the unemployment
rate continue to decline. The threat of higher inflation and interest rates
was underscored by the Federal Reserve's decision to issue a policy statement
following the December Federal Open Market Committee meeting that strongly
hinted at "the possible need for adjustment in the stance of policy to contain
inflationary pressures" at the next meeting.
We expect bond yields to remain highly volatile yet range-bound in the coming
months. A tightening move by the Federal
Reserve at the February meeting is widely anticipated. The only uncertainties
in investors' minds are the magnitude of the next hike of the target Federal
Funds rate and the number of tightening moves the Federal Reserve will need to
make this year to slow economic growth to what it considers sustainable. On
the other hand, a surprise rally prompted by an equity market correction or
perception of a slow down of economic activity cannot be ruled out. The
economy currently enjoys strong forward momentum and the century date change
turned out to be a non-event. Real GDP growth, however, should moderate to the
3% range over the next two quarters, reflecting the end of Y2K-related outlays
by both businesses and consumers as well as the delayed impact of higher
interest rates on housing and durable goods purchases.
Our investment strategy continues to call for a neutral duration posture with
emphasis on security selection to enhance yield and maximize total return.
Although the risk of higher short-term interest rates remains significant in
the coming months, the Federal Reserve's vigilance should keep inflation
expectation in check while the prospect of a rising Federal budget surplus
should provide the bond market with strong technical support in the year
ahead. We remain constructive on the long term outlook of the bond market and
would consider further increases in interest rates as opportunities to lock in
attractive inflation-adjusted yields.
The net assets of the Fund on November 30, 1999 were $94,268,632 or $13.88
per share compared to $99,114,796 or $14.74 per share on November 30,1998,
reflecting the impact of the sharp increase in bond yields over the past year.
At the December 8, 1999 Directors meeting, Vestaur Securities, Inc. declared
the regular quarterly income dividend of 26 cents per share. This dividend is
payable on January 14, 2000 to shareholders of record on December 31,1999.
Your investment portfolio continues to be managed by First Capital Group, a
subsidiary of First Union National Bank, with the primary objective of
maintaining a high level of current income through a diversified portfolio of
debt securities. We would like to take this opportunity to thank you for your
continuing confidence in Vestaur Securities, Inc. We look forward to providing
shareholders with excellent investment services in the new Millennium as in
the past.
Sincerely,
/s/ Glen T. Insley
Glen T. Insley, CFA
Chairman of the Board
January 10, 2000
- -------------------------------------------------------------------------------
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
- -------------------------------------------------------------------------------
<PAGE>
SCHEDULE OF INVESTMENTS
November 30, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
LONG TERM BONDS AND NOTES - 97.6%
INDUSTRIAL & CONGLOMERATE - 19.4%
$3,500,000 Air Products & Chemicals, Inc. 8.875% 8/1/2001........ $ 3,606,645
2,000,000 Burlington Northern, Inc. 7.50% 7/15/2023............. 1,921,720
1,800,000 Federal Express Corp. 9.65% 6/15/2012................. 2,015,856
4,400,000 Georgia Pacific Corp. 8.125% 6/15/2023................ 4,177,316
3,000,000 Northrop Grumman Corp. 9.375% 10/15/2024.............. 3,139,920
350,000 Rohm & Haas Co. 7.85% 7/15/2029....................... 357,736
2,000,000 Seagram Ltd. 8.35% 1/15/2022.......................... 2,060,380
1,000,000 Verio, Inc. 10.625% 11/15/2009........................ 1,022,500
-----------
18,302,073
-----------
BROADCASTING & MEDIA - 17.0%
2,000,000 Chancellor Media Corp. 8.75% 6/15/2007................ 2,000,000
2,000,000 Comcast Corp. 9.125% 10/15/2006....................... 2,064,860
1,960,000 Comcast Corp. 10.25% 10/15/2001....................... 2,073,856
4,000,000 Lenfest Communications, Inc. 8.375% 11/1/2005......... 4,133,240
4,200,000 Time Warner, Inc. 9.125% 1/15/2013.................... 4,705,176
1,000,000 Viacom, Inc. 10.25% 9/15/2001......................... 1,049,700
-----------
16,026,832
-----------
U.S. GOVERNMENT AGENCIES - 11.3%
2,700,000 FNMA 8.90% 6/12/2000.................................. 2,736,693
2,044,623 FNMA 9.00% 2/1/2025................................... 2,144,841
975,136 FNMA 10.00% 4/1/2021.................................. 1,050,972
927,812 GNMA 8.00% 3/15/2022 - 8/15/2024...................... 944,532
815,488 GNMA 8.25% 5/15/2020.................................. 839,757
1,592,231 GNMA 8.50% 9/15/2024 - 1/15/2027...................... 1,645,459
447,769 GNMA 9.00% 12/15/2019 - 3/15/2021..................... 472,558
286,513 GNMA 9.50% 5/15/2019 - 6/15/2020...................... 304,608
348,156 GNMA 10.00% 1/15/2019 - 4/15/2020..................... 376,557
167,077 GNMA 10.50% 4/15/2019 - 5/15/2019..................... 182,583
-----------
10,698,560
-----------
OIL & ENERGY - 10.7%
1,750,000 Atlantic Richfield Co. 10.875% 7/15/2005.............. 2,071,528
2,000,000 Diamond Shamrock, Inc. 8.00% 4/1/2023................. 1,879,400
3,150,000 Occidental Petroleum Corp. 8.45% 2/15/2029............ 3,318,241
1,500,000 Pennzoil Co. 10.125% 11/15/2009....................... 1,664,130
1,000,000 USX Marathon Group 9.375% 2/15/2012................... 1,128,880
-----------
10,062,179
-----------
TELECOMMUNICATION SERVICES & EQUIPMENT - 9.2%
3,000,000 AT&T Corp. 8.35% 1/15/2025............................ 3,019,080
1,500,000 AT&T Corp. 8.625% 12/1/2031........................... 1,519,245
3,000,000 Nextlink Communications, Inc. 10.75% 6/1/2009......... 3,075,000
1,000,000 Pacific Bell 8.70% 6/15/2001.......................... 1,030,080
-----------
8,643,405
-----------
UTILITIES - 7.5%
1,143,000 Niagara Mohawk Power Corp. 8.75% 4/1/2022............. 1,164,923
2,494,000 Niagara Mohawk Power Corp. 9.75% 11/1/2005............ 2,768,589
2,000,000 Texas Utilities Electric Co. 8.50% 8/1/2024........... 2,118,640
1,000,000 Texas Utilities Electric Co. 8.75% 11/1/2023.......... 1,064,810
-----------
7,116,962
-----------
</TABLE>
See Notes to Financial Statements
<PAGE>
SCHEDULE OF INVESTMENTS (continued)
November 30, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
LONG TERM BONDS AND NOTES - Continued
FIBER OPTICS - 6.6%
$1,900,000 Metromedia Fiber Network, Inc. 10.00% 11/15/2008..... $ 1,919,000
1,100,000 Metromedia Fiber Network, Inc. 10.00% 12/15/2009..... 1,123,375
3,000,000 Williams Communications Group, Inc. 10.875%
10/1/2009........................................... 3,135,000
-----------
6,177,375
-----------
FINANCIAL & INSURANCE - 5.6%
1,000,000 CIGNA Corp. 8.30% 1/15/2033.......................... 975,820
1,055,000 CIGNA Corp. 8.75% 10/1/2001.......................... 1,083,422
500,000 Ford Motor Credit Co. 9.50% 4/15/2000................ 506,000
2,600,000 GMAC 9.625% 12/15/2001............................... 2,738,996
-----------
5,304,238
-----------
TRUST PREFERRED - 3.8%
4,000,000 MBNA Capital 8.28% 12/1/2026......................... 3,547,520
-----------
RETAILING & WHOLESALE - 3.8%
1,000,000 Dayton Hudson Corp. 9.25% 3/1/2006................... 1,025,080
450,000 Dayton Hudson Corp. 10.00% 12/1/2000................. 464,171
2,000,000 Wal-Mart Stores, Inc. 8.625% 4/1/2001................ 2,053,260
-----------
3,542,511
-----------
CANADIAN BONDS - 2.7%
2,500,000 Rogers Cablesystems Ltd. 9.625% 8/1/2002............. 2,581,250
-----------
</TABLE>
<TABLE>
<C> <S> <C> <C>
RESIDENTIAL SECURITIES - 0.0%
10,233 Residential Mortgages (first and second),
Participation, 8.375% Average Yield, 2 Year
Average Maturity, Acquired 12/29/1977........ 9,682
-----------
Total Investments (Cost $94,532,606).......... 97.6% 92,012,587
Other Assets and Liabilities (Net)............ 2.4 2,256,045
----- -----------
Net Assets.................................... 100.0% $94,268,632
===== ===========
SUMMARY OF ABBREVIATIONS
FNMA Federal National Mortgage Association
GNMA Government National Mortgage Association
GMAC General Motors Acceptance Corp.
</TABLE>
Cost of purchases and proceeds from sales of investment securities (excluding
short-term securities) were as follows for the year ended November 30, 1999:
<TABLE>
<CAPTION>
Cost of Purchases Proceeds from Sales
-------------------------------------------------------------------------
<S> <C> <C>
Non-U.S. Government $39,373,448 $39,377,788
U.S. Government 4,151,438 2,130,336
</TABLE>
As of November 30, 1999 the tax cost of securities was $94,532,606. Net
unrealized losses on investments aggregated $2,520,019, of which $948,153
related to appreciated securities and $3,468,172 related to depreciated
securities.
See Notes to Financial Statements
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
November 30, 1999
<TABLE>
<S> <C>
ASSETS
Identified cost of investments.................................. $94,532,606
Net unrealized gains or losses on investments................... (2,520,019)
-----------
Market value of investments..................................... 92,012,587
Cash............................................................ 125,682
Interest receivable............................................. 2,235,918
Prepaid expenses and other assets............................... 5,914
-----------
Total assets.................................................. 94,380,101
-----------
LIABILITIES
Advisory fee payable............................................ 60,532
Accrued expenses and other liabilities.......................... 50,937
-----------
Total liabilities............................................. 111,469
-----------
NET ASSETS........................................................ $94,268,632
===========
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............................. 201,780
Accumulated net realized losses on investments.................. (942,068)
Net unrealized gains or losses on investments................... (2,520,019)
-----------
Total net assets.............................................. $94,268,632
===========
SHARES OUTSTANDING................................................ 6,794,105
-----------
NET ASSET VALUE PER SHARE......................................... $ 13.88
-----------
</TABLE>
See Notes to Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
Year Ended November 30, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest........................................................ $ 7,930,432
EXPENSES
Advisory fee.................................................... 681,901
Directors' fees and expenses.................................... 71,384
Professional fees............................................... 63,398
Printing expenses............................................... 42,758
Custodian fee................................................... 19,782
Other........................................................... 85,253
-----------
Total expenses................................................ 964,476
-----------
NET INVESTMENT INCOME............................................. 6,965,956
-----------
NET REALIZED AND UNREALIZED LOSSES ON INVESTMENTS
Net realized losses on investments.............................. (899,961)
Net change in unrealized gains or losses on investments......... (4,907,289)
-----------
Net realized and unrealized losses on investments............... (5,807,250)
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............. $ 1,158,706
===========
</TABLE>
See Notes to Financial Statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended November 30,
------------------------
1999 1998
----------- -----------
<S> <C> <C>
OPERATIONS
Net investment income............................... $ 6,965,956 $ 7,050,235
Net realized losses on investments.................. (899,961) (43,202)
Net change in unrealized gains or losses on
investments........................................ (4,907,289) (363,550)
----------- -----------
Net increase in net assets resulting from
operations....................................... 1,158,706 6,643,483
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income............................... (7,022,889) (6,951,195)
Net capital gains................................... 0 (199,573)
----------- -----------
Total distributions to shareholders............... (7,022,889) (7,150,768)
----------- -----------
CAPITAL SHARE TRANSACTIONS
Net asset value of common shares issued under the
Automatic Dividend Investment Plan................. 1,018,019 1,027,756
----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS.............. (4,846,164) 520,471
NET ASSETS
Beginning of period................................. 99,114,796 98,594,325
----------- -----------
End of period....................................... $94,268,632 $99,114,796
=========== ===========
Undistributed net investment income.................. $ 201,780 $ 262,829
=========== ===========
</TABLE>
See Notes to Financial Statements
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS - The following table includes selected data for
each share of common stock outstanding
throughout each year and other performance
information derived from the financial
statements and market price data.
<TABLE>
<CAPTION>
Year Ended November 30,
------------------------------------------------
1999 1998 (d) 1997 1996 1995
------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Net asset value beginning
of period................ $ 14.74 $ 14.82 $ 14.72 $ 15.17 $ 13.58
------- ------- ------- ------- --------
Income from investment
operations
Net investment income..... 1.03 1.05 1.07 1.08 1.09
Net realized and
unrealized gains or
losses on investments.... (0.85) (0.06) 0.11 (0.39) 1.63
------- ------- ------- ------- --------
Total from investment
operations............... 0.18 0.99 1.18 0.69 2.72
------- ------- ------- ------- --------
Less distributions from:
Net investment income..... (1.04) (1.04) (1.08) (1.09) (1.08)
Net capital gains......... 0 (0.03) 0 (0.05) (0.05)
------- ------- ------- ------- --------
Total distributions....... (1.04) (1.07) (1.08) (1.14) (1.13)
------- ------- ------- ------- --------
Net asset value, end of
period................... $ 13.88 $ 14.74 $ 14.82 $ 14.72 $ 15.17
======= ======= ======= ======= ========
Market value, end of
period................... $ 12.75 $ 14.94 $ 14.06 $ 13.50 $ 13.625
======= ======= ======= ======= ========
Total Return
Based on net asset value
(a)..................... 1.29% 6.90% 8.50% 4.91% 20.93%
Based on market value
(b)..................... (8.12%) 14.19% 12.58% 7.69% 19.76%
Ratios/supplemental data
Net assets end of period
(in thousands)........... $94,269 $99,115 $98,594 $97,907 $100,938
======= ======= ======= ======= ========
Ratios to average net
assets
Expenses................. 1.00% 0.97% (c) 0.9% 0.9% 0.9%
Net investment income.... 7.25% 7.13% 7.4% 7.4% 7.6%
Portfolio turnover rate... 44% 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 during each year.
(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 that 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 fee credits.
Excluding fee credits, 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.
See Notes to Financial Statements
<PAGE>
Vestaur Securities, Inc.
NOTES TO FINANCIAL STATEMENTS
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 debt securities which management considers to be of
high quality, of which some may be privately placed and some may have equity
features.
The following is a summary of significant accounting policies. 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 -
U.S. Government obligations, corporate bonds, 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. The significant differences between financial
statement amounts available for distributions and distributions made in
accordance with income tax regulations are primarily due to differing
treatment of paydown gains and losses. Certain distributions paid during
previous years have been reclassified to conform with current year
presentation.
(f) Expense Offset Arrangement -
The Company has entered into an expense offset arrangement with its custodian.
The assets deposited with the custodian under this expense offset arrangement
could have been invested in income-producing assets.
NOTE 2 - INVESTMENT ADVISORY AGREEMENT
First Union National Bank, a subsidiary of First Union Corporation, serves as
the investment advisor to the Company. In return for providing investment
management and administrative services, the Company pays an advisory fee that
is 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.
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 years ended November 30, 1999 and
November 30, 1998 the Company issued 71,640 and 70,027 shares of common stock
respectively.
NOTE 4 - SECURITIES TRANSACTIONS
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 - SUBSEQUENT DISTRIBUTION TO SHAREHOLDERS
On December 8, 1999, the Company declared a dividend of $0.26 per share which
will be payable on January 14, 2000 to shareholders of record as of December
31, 1999.
<PAGE>
- -------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
The Shareholders and Board of Directors
Vestaur Securities, Inc.
Philadelphia, Pennsylvania
We have audited the accompanying statement of assets and liabilities of
Vestaur Securities, Inc. (the "Company") as of November 30, 1999, including
the schedule of investments as of November 30, 1999, and the related statement
of operations for the year then ended and the statement of changes in net
assets for the years ended November 30, 1999 and 1998, and the financial
highlights for each of the years in the five-year period ended November 30,
1999. 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 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
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, 1999 by correspondence with the custodian. 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, 1999, the results of its operations, the
changes in its net assets and its financial highlights for the respective
stated periods in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Boston, Massachusetts
December 27, 1999
- -------------------------------------------------------------------------------
AUTOMATIC DIVIDEND INVESTMENT PLAN
Any registered Shareholder 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 registered holder by having the shares transferred to your name.
To participate in the Plan, you must complete and forward an enrollment 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 or sufficient common stock
cannot be purchased in the market. 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 commissions, 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 advisor, First Union National Bank.
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.
- -------------------------------------------------------------------------------
