<PAGE> 1
CHESTNUT STREET EXCHANGE FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
ROBERT R. FORTUNE
Chairman and President
May 1, 1995
Fellow Partner:
Our Fund earned $.78 per share of net investment income in the three months
ended March 31, 1995, as compared to $.70 per share in the same period of 1994.
The quarterly distribution to partners from net investment income was
increased to $.60 per share with the payment made on April 7, 1995.
Distributions in 1994 were $.50 per quarter. After providing for the quarterly
distribution to partners of record on March 31, 1995, the net asset value per
partnership share at that date was a new high of $160.52.
Portfolio additions since our last report were 82,611 shares of AMP Inc.,
arising from a stock split. Securities distributed in redemption of partners'
shares were 474 shares of Alco Standard Corporation, 18,246 shares of Barnett
Banks Inc., 1,698 shares of Coca-Cola Company, 6,825 shares of Intel Corp., 77
shares of Johnson & Johnson, Inc., 3,377 shares of Loctite Corp., and 1,218
shares of WMX Technologies, Inc.
The accompanying Investment Adviser's Report illustrates the performance of
our Fund as compared to leading stock market indices. Your inquiries or comments
concerning Chestnut Street Exchange Fund are welcomed.
Yours sincerely,
/s/ ROBERT R. FORTUNE
---------------------
Robert R. Fortune
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INVESTMENT ADVISER'S REPORT
Although the global financial markets have exhibited much volatility recently
with concerns over a steadily eroding dollar, the U.S. equity markets continued
to post gains during the first quarter of 1995. The S&P 500 gain of 9.0% was the
most positive quarterly performance result for the equity markets since the
first quarter of 1991. Other large cap indices such as the Dow Jones Industrial
Average gained 8.4% with the smaller cap NASDAQ keeping pace and gaining 8.7%.
During the same time period your Fund gained 11.1%.
A number of positive forces have been at work on the equity markets thus far in
1995. Positive seasonal cash flows, a political environment which favors equity
prices as capital gains tax talk heats up, and the lack of Fed tightening have
all served to make the equity markets the preferred place for investors to be in
the first quarter of 1995.
COMPARATIVE PERFORMANCE
<TABLE>
<CAPTION>
QUARTER ENDED QUARTER ENDED
3/31/95 3/31/94
------------- -------------
<S> <C> <C>
Chestnut Street Exchange Fund..................................... +11.1% -2.8%
Dow Jones Industrial Average...................................... + 8.4% -3.1%
Standard & Poor's 500 Index....................................... + 9.0% -4.4%
Standard & Poor's 400 Index....................................... + 9.0% -3.5%
NASDAQ Composite.................................................. + 8.7% -4.3%
</TABLE>
For the remainder of 1995 stock buybacks announced, but not yet completed,
should add some further strength to equity prices. Although slower, earnings
growth should still rise 6-9%, with multinational U.S. companies benefitting
from a surge in export demand. In addition, foreign capital flows and
repatriated U.S. investment should be a further boost to equity demand later
this year.
At these levels, the equity markets are selling at approximately 15 times
forecast earnings. This valuation is well within the historical range of 7 to 20
times earnings. Your Fund continues to be invested in companies with better than
market growth potential for both earnings and dividends.
April 28, 1995 PNC Institutional Management Corporation
2
<PAGE> 3
CHESTNUT STREET EXCHANGE FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENT OF NET ASSETS
MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
NO. OF
SHARES VALUE
-------- -------------
<C> <S> <C>
COMMON STOCKS--96.6%
AUTO & AUTO PARTS--0.8%
41,299 Genuine Parts Company...... $ 1,646,798
-------------
BANKS--6.7%
12,476 Barnett Banks Inc. ........ 567,658
60,000 CoreStates Financial
Corp. ................... 1,920,000
16,993 First Chicago Corp. ....... 851,774
40,000 Morgan (J.P.) & Co.,
Inc. .................... 2,440,000
89,328 NationsBank Corp. ......... 4,533,396
157,266 Norwest Corp. ............. 3,990,625
-------------
14,303,453
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BUILDING MATERIALS & FOREST
PRODUCTS--1.9%
45,130 Armstrong World Industries,
Inc. .................... 2,059,056
52,117 Weyerhaeuser Company....... 2,026,048
-------------
4,085,104
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BUSINESS PRODUCTS &
SERVICES--3.9%
50,647 Dun & Bradstreet
Corporation.............. 2,665,298
68,416 Harland (John H.) Co. ..... 1,547,912
52,000 Minnesota Mining &
Manufacturing Company.... 3,022,500
30,000 PHH Corp. ................. 1,140,000
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8,375,710
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CHEMICALS--10.2%
96,700 Air Products & Chemicals,
Inc. .................... 5,040,488
53,948 Betz Laboratories, Inc. ... 2,360,225
107,844 Cabot Corporation.......... 3,976,747
213,832 Loctite Corp. ............. 10,290,665
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21,668,125
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CONSUMER NON-DURABLES &
SERVICES--6.2%
231,354 Coca-Cola (The) Company.... 13,071,501
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CONTAINERS--1.4%
67,148 *Crown Cork & Seal Company,
Inc. .................... 2,946,119
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DIVERSIFIED COMPANIES--2.7%
78,595 Alco Standard
Corporation.............. 5,698,138
-------------
<CAPTION>
NO. OF
SHARES VALUE
-------- -------------
<C> <S> <C>
DRUGS & MEDICAL--14.2%
122,442 Abbott Laboratories,
Inc. .................... $ 4,361,996
39,177 Baxter International,
Inc. .................... 1,283,047
220,121 Johnson & Johnson, Inc. ... 13,097,199
211,266 Merck & Company, Inc. ..... 9,005,213
62,000 SmithKline Beecham p.l.c.
ADR unit................. 2,325,000
-------------
30,072,455
-------------
ELECTRICAL EQUIPMENT--4.9%
102,865 Emerson Electric Company... 6,840,523
64,000 General Electric Company... 3,464,000
-------------
10,304,523
-------------
ELECTRONICS--16.6%
165,222 AMP, Inc. ................. 5,947,992
11,149 Hewlett-Packard Company.... 1,342,061
182,066 Intel Corp. ............... 15,452,852
119,118 Motorola, Incorporated..... 6,506,821
79,666 Raytheon Company........... 5,805,660
-------------
35,055,386
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ENTERTAINMENT--1.7%
68,000 Walt Disney Company........ 3,629,500
-------------
FOOD PROCESSING &
DISTRIBUTION--1.8%
170,000 McCormick & Co. Inc. ...... 3,846,250
-------------
INSURANCE & FINANCIAL--2.5%
22,000 Aetna Life & Casualty
Co. ..................... 1,254,000
43,930 American Express Company... 1,532,059
12,028 CIGNA Corp. ............... 899,093
19,392 Marsh & McLennan Companies,
Inc. .................... 1,592,568
-------------
5,277,720
-------------
LODGING & RESTAURANT--1.6%
101,234 McDonald's Corporation..... 3,454,610
-------------
NATURAL GAS
TRANSMISSION--0.5%
24,000 Tenneco, Inc. ............. 1,131,000
-------------
OFFICE EQUIPMENT--0.4%
10,471 International Business
Machines Corporation..... 857,313
-------------
PAPER--1.4%
30,000 Consolidated Papers,
Inc. .................... 1,492,500
36,955 Westvaco Corp. ............ 1,533,633
-------------
3,026,133
-------------
</TABLE>
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<PAGE> 4
STATEMENT OF NET ASSETS (CONCLUDED)
<TABLE>
<CAPTION>
NO. OF
SHARES VALUE
-------- -------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
PETROLEUM--2.7%
13,500 Atlantic Richfield Co. .... $ 1,552,500
40,000 Exxon Corp. ............... 2,670,000
40,360 Louisiana Land &
Exploration Company...... 1,508,455
-------------
5,730,955
-------------
PETROLEUM EQUIPMENT &
SERVICES--0.9%
30,216 Schlumberger, Ltd. ........ 1,801,629
-------------
POLLUTION CONTROL--2.5%
114,556 Browning-Ferris Industries,
Inc. .................... 3,894,904
49,836 WMX Technologies, Inc. .... 1,370,490
-------------
5,265,394
-------------
RETAIL--GENERAL &
SPECIALTY--4.7%
116,772 Albertson's Inc. .......... 3,765,897
80,076 K Mart Corp. .............. 1,101,045
61,502 Melville Corp. ............ 2,290,949
60,000 Penney (J.C.) Company,
Inc. .................... 2,692,500
-------------
9,850,391
-------------
TELEPHONE UTILITIES--4.2%
65,000 AT&T Corp. ................ 3,363,750
163,900 GTE Corp. ................. 5,449,675
-------------
8,813,425
-------------
TRANSPORTATION--2.2%
39,932 Burlington Northern,
Inc. .................... 2,370,962
40,000 Union Pacific Corp. ....... 2,200,000
-------------
4,570,962
-------------
Total Common Stocks
(Cost $46,433,481)... 204,482,594
-------------
<CAPTION>
NO. OF
SHARES VALUE
-------- -------------
<C> <S> <C>
PREFERRED STOCKS--0.0%
2,994 *Al Copeland Enterprises,
Inc., 17.50%, Cum.Cvt.
(Cost $25,670)........... $ 0
-------------
<CAPTION>
PAR
--------
<C> <S> <C>
SHORT-TERM OBLIGATIONS--3.2%
$6,700,000 General Electric Capital
Corp., Commercial Paper,
5.93%, 04/28/95
(Cost $6,700,000)........ 6,700,000
-------------
TOTAL INVESTMENTS IN SECURITIES
(Cost $53,159,151)........ 99.8% 211,182,594
Distributions payable....... (0.4) (791,274)
Other assets in excess of
other liabilities......... 0.6 1,292,085
----------- ------------
NET ASSETS (Applicable to
1,318,712 partnership
shares outstanding)....... 100.0% $211,683,405
========== =============
NET ASSET VALUE PER SHARE... $ 160.52
=============
NET ASSETS APPLICABLE TO
SHARES OWNED BY:
Limited partners
(1,259,781 shares)........ $202,223,633
Managing general partners
(13,274 shares)........... $ 2,130,780
Non-managing general partner
(45,657 shares)........... 7,328,992 9,459,772
----------- ------------
Total net assets
(1,318,712 shares)........ $211,683,405
=============
</TABLE>
* Non-Income Producing
Values for securities listed on a securities exchange are based upon the last
reported sales price on March 31, 1995. Securities not so listed or not traded
on that date are valued at the latest bid price.
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MANAGING GENERAL PARTNERS
Robert R. Fortune
G. Willing Pepper
R. Stewart Rauch
David R. Wilmerding, Jr.
INVESTMENT ADVISERS
PNC Bank, National Association
and
PNC Institutional
Management Corporation
400 Bellevue Parkway
Wilmington, Delaware 19809
TRANSFER AGENT
PFPC Inc.
P.O. Box 8950
Wilmington, Delaware 19899
(800) 852-4750
(302) 791-1043 (Delaware)
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(LOGO)
First Quarter Report
March 31, 1995
Chestnut Street Exchange
Fund
400 Bellevue Parkway
Suite 100
Wilmington, Delaware 19809
(302) 792-2555
Edward J. Roach, Treasurer
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