<PAGE> 1
THE FINANCE COMPANY OF PENNSYLVANIA
FOUNDED 1871
[FINANCE COMPANY OF PENNSYLVANIA LOGO]
SEMI-ANNUAL REPORT
JUNE 30, 1996
<PAGE> 2
THE FINANCE COMPANY OF PENNSYLVANIA
226 WALNUT STREET
PHILADELPHIA, PA 19106
BOARD OF DIRECTORS
Charles E. Mather III
<TABLE>
<S> <C>
Shaun F. O'Malley Jonathan D. Scott
Herbert S. Riband, Jr. Frank A. Wood, Jr.
</TABLE>
OFFICERS
Charles E. Mather III, President
Frank A. Wood, Jr., Secretary-Treasurer
Doranne H. Case, Asst. Secretary-Treasurer
Mary Ellen Christ, Assistant Secretary
<PAGE> 3
THE FINANCE COMPANY OF PENNSYLVANIA
226 WALNUT STREET
PHILADELPHIA, PA 19106
August 2, 1996
TO OUR SHAREHOLDERS:
The Semi-annual Report of your Company is attached. In the first half of
1996, the Company's portfolio has held up well in what has been a very volatile
market.
At the Annual Meeting April 16, 1996, Charles E. Mather III was re-elected
Director for a three-year term and Shaun F. O'Malley was elected Director for
one year. Deloitte & Touche LLP were reappointed as our independent auditors and
Cooke & Bieler, Inc. continues as our investment adviser.
I am deeply grateful for the wise counsel of the Board and Officers of your
Company, and thank you, the shareholders, for your continued support.
/s/ Charles E. Mather III
-------------------------------------
Charles E. Mather III, President
<PAGE> 4
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
INVESTMENTS-AT MARKET VALUE (NOTE 1):
U.S. TREASURY NOTES (IDENTIFIED COST
$4,420,463)................................... $ 4,548,812
MUTUAL FUNDS & OTHER SHORT-TERM INVESTMENTS
(IDENTIFIED COST $3,794,410)............... 3,801,026
COMMON STOCKS (IDENTIFIED COST $8,651,942)
INCLUDING AFFILIATE (NOTE 2)............... 34,567,957
-----------
TOTAL INVESTMENTS..................... 42,917,795
CASH.................................................. 15,350
ACCRUED INTEREST AND DIVIDENDS RECEIVABLE............. 208,310
PREPAID TAXES AND EXPENSES............................ 6,705
OTHER ASSETS.......................................... 7,351
-----------
TOTAL................................. 43,155,511
-----------
LIABILITIES
ACCRUED EXPENSES AND TAXES............................ 13,292
-----------
NET ASSETS
NET ASSETS (WITH INVESTMENTS AT MARKET VALUE)
EQUIVALENT
TO $744.41 PER SHARE ON 57,955 SHARES OF $10 PAR
VALUE CAPITAL STOCK OUTSTANDING AT JUNE 30, 1996
(AUTHORIZED 232,000 SHARES)...................... $43,142,219
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
2
<PAGE> 5
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996
(UNAUDITED)
U.S. TREASURY OBLIGATIONS -- 10.60%
<TABLE>
<CAPTION>
Aggregate
Quoted
Principal Identified Market Price
Amount Cost (Note 1)
- --------- ---------- ------------
<C> <S> <C> <C>
1,000,000 U.S. TREASURY NOTES 9 1/4% DUE
8/15/98.................... $1,000,104 $ 1,060,000
900,000 U.S. TREASURY NOTES 8 7/8% DUE
2/15/99.................... 900,872 955,687
700,000 U.S. TREASURY NOTES 7 3/4% DUE
1/31/00.................... 699,181 729,531
1,000,000 U.S. TREASURY NOTES 7 7/8% DUE
8/15/01.................... 1,058,415 1,059,688
750,000 U.S. TREASURY NOTES 6 3/8% DUE
8/15/02.................... 761,891 743,906
---------- ------------
TOTAL GOVERNMENT SECURITIES..... 4,420,463 4,548,812
---------- ------------
</TABLE>
MUTUAL FUNDS AND OTHER SHORT-TERM
SECURITIES -- 8.85%
<TABLE>
<CAPTION>
Face Value/
Principal Amount
- ----------------
<C> <S> <C> <C>
500,000 U.S. TREASURY NOTES 8%
DUE 1/15/97................ 499,634 506,250
45,000 TREASURY TRUST FUND............. 45,000 45,000
1,161,155 FEDERAL TRUST FUND.............. 1,161,155 1,161,155
2,088,621 FED FUND........................ 2,088,621 2,088,621
---------- ------------
TOTAL........................... 3,794,410 3,801,026
---------- ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
3
<PAGE> 6
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996
(UNAUDITED)
COMMON STOCKS -- 80.55%
<TABLE>
<CAPTION>
Aggregate
Quoted
Number Identified Market Price
of Shares Cost (Note 1)
- --------- ---------- ------------
<C> <S> <C> <C>
PETROLEUM AND MINING -- 7.08%
16,000 EXXON CORP...................... $ 91,444 $ 1,390,000
10,000 MOBIL CORP. .................... 62,715 1,123,750
15,000 PENN VIRGINIA CORP. ............ 22,382 525,000
---------- ------------
TOTAL.................... 176,541 3,038,750
---------- ------------
BANKING, INSURANCE AND FINANCIAL
HOLDING COMPANIES -- 39.88%
11,000 DUN & BRADSTREET................ $ 462,115 $ 687,500
9,500 MARSH & MCLENNAN, INC. ......... 522,710 916,750
494,000 PNC BANK CORP. ................. 298,459 14,696,500
16,000 STATE STREET BOSTON CORP. ...... 519,335 816,000
---------- ------------
TOTAL.................... 1,802,619 17,116,750
---------- ------------
MANUFACTURING AND DIVERSIFIED -- 19.71%
10,000 AMP, INC. ...................... 208,710 401,250
20,000 AMERICAN GREETINGS.............. 553,375 547,500
5,000 AVERY DENNISON CORP. ........... 105,350 274,375
3,500 BOEING CO. ..................... 130,807 304,937
21,000 CORNING INC. ................... 631,845 805,875
14,500 DOVER CORP. .................... 261,750 667,000
6,000 DOW CHEMICAL CO. ............... 116,337 456,000
6,000 EMERSON ELECTRIC................ 181,980 542,250
19,000 GENUINE PARTS CO. .............. 469,072 869,250
2,500 INT'L BUSINESS MACHINES......... 268,300 247,500
8,000 INT'L FLAVORS & FRAGRANCES...... 327,606 381,000
10,000 MINNESOTA MINING & MFG. CO. .... 177,770 690,000
4,000 MOTOROLA ....................... 213,280 251,000
18,500 READERS DIGEST "A".............. 769,106 786,250
15,000 SHERWIN WILLIAMS CO. ........... 481,800 697,500
11,000 UNION CAMP CORP. ............... 386,515 536,250
-------------------------------- ---------- ------------
TOTAL................... 5,283,603 8,457,937
-------------------------------- ---------- ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
4
<PAGE> 7
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996
(UNAUDITED)
COMMON STOCKS -- CONCLUDED
<TABLE>
<CAPTION>
Aggregate
Quoted
Number Identified Market Price
of Shares Cost (Note 1)
- --------- ----------- ------------
<C> <S> <C> <C>
DRUGS AND PHARMACEUTICALS -- 5.69%
9,000 BRISTOL-MYERS SQUIBB CO. ...... $ 506,138 $ 810,000
8,000 JOHNSON & JOHNSON.............. 88,070 396,000
7,500 MERCK & CO. ................... 168,925 484,688
12,000 SCHERING-PLOUGH................ 342,795 753,000
----------- ------------
TOTAL.......................... 1,105,928 2,443,688
----------- ------------
COMMUNICATIONS -- 1.49%
10,000 BELL ATLANTIC CORP. ........... 178,287 637,500
----------- ------------
FOOD/RETAIL MERCHANDISING -- 3.20%
28,000 COCA-COLA CO. ................. 33,565 1,372,000
----------- ------------
DIVERSIFIED HOLDING -- 3.50%
732 PENNSYLVANIA WAREHOUSING AND
SAFE DEPOSIT COMPANY (NOTE
2)........................ 71,399 1,501,332
----------- ------------
TOTAL COMMON STOCKS............ 8,651,942 34,567,957
----------- ------------
TOTAL INVESTMENTS.............. $16,866,815 $42,917,795
=========== ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE> 8
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
INCOME:
DIVIDENDS (INCLUDING DIVIDENDS FROM
AFFILIATE -- NOTE 2)..................... $ 706,793
INTEREST...................................... 196,685
---------
TOTAL.................................... 903,478
EXPENSES:
COMPENSATION.................... $ 44,313
TAXES OTHER THAN INCOME TAXES... 10,394
DIRECTORS' FEES (NOTE 5)........ 22,875
INVESTMENT ADVISORY FEES (NOTE
5)............................ 49,348
LEGAL........................... 3,000
AUDITING & ACCOUNTING........... 24,000
CUSTODIAN....................... 6,886
OTHER OFFICE AND
ADMINISTRATIVE................ 27,150
-----------
TOTAL.................................... 187,966
---------
NET INVESTMENT INCOME............................... 715,512
---------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
(NOTE 3):
REALIZED GAIN FROM SECURITY
TRANSACTIONS
(EXCLUDING SHORT-TERM
INVESTMENTS):
PROCEEDS FROM SALES............. $ 1,239,349
COST OF SECURITIES SOLD......... 532,241
-----------
NET REALIZED GAIN........................ 707,108
UNREALIZED APPRECIATION OF
INVESTMENTS:
AT JANUARY 1, 1996.............. 26,719,524
AT JUNE 30, 1996................ 26,050,980
-----------
DECREASE IN NET UNREALIZED APPRECIATION............. (668,544)
---------
NET GAIN ON INVESTMENTS.................................. 38,564
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS..... $ 754,076
==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE> 9
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND THE
YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS:
NET INVESTMENT INCOME................ $ 715,512 $ 1,455,706
NET REALIZED GAIN ON INVESTMENTS..... 707,108 1,559,359
INCREASE (DECREASE) IN NET UNREALIZED
APPRECIATION ON INVESTMENTS....... (668,544) 8,942,162
CAPITAL GAINS TAX PAYABLE ON BEHALF
OF SHAREHOLDERS (NOTE 1).......... -0- (499,377)
----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS......... 754,076 11,457,850
UNDISTRIBUTED INVESTMENT INCOME
INCLUDED IN PRICE OF SHARES
REDEEMED.......................... -0- (14,095)
REALIZED GAIN FROM SECURITY
TRANSACTIONS INCLUDED IN PRICE OF
SHARES REDEEMED................... -0- (18,569)
DIVIDENDS TO SHAREHOLDERS FROM NET
INVESTMENT INCOME................. (318,753) (1,555,512)
CAPITAL SHARE TRANSACTIONS:
(EXCLUSIVE OF AMOUNTS ALLOCATED TO
INVESTMENT INCOME AND NET REALIZED
GAIN FROM SECURITY TRANSACTIONS)
(NOTE 1):
COST OF SHARES OF CAPITAL STOCK
REDEEMED..................... -0- (855,906)
----------- -----------
TOTAL INCREASE (DECREASE) IN NET
ASSETS............................ 435,323 9,013,768
NET ASSETS:
BEGINNING OF PERIOD.................. 42,706,896 33,693,128
----------- -----------
END OF PERIOD [INCLUDING
UNDISTRIBUTED NET INVESTMENT
INCOME (LOSS) OF $128,158 AND
($269,069) RESPECTIVELY].......... $43,142,219 $42,706,896
=========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE> 10
NOTES TO FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1996
1. SIGNIFICANT ACCOUNTING POLICIES
The Company is registered under the Investment Company Act of 1940, as
amended, as a regulated open-end investment company. On April 21, 1964, the
stockholders approved amendments to the Articles of Incorporation whereby, since
that date, the Company has held itself ready to redeem any of its outstanding
shares at net asset value. Net asset value for redemptions is determined at the
close of business on the day of formal tender of shares or the next day on which
the New York Stock Exchange is open. There were -0-shares of capital stock
redeemed during the period ended June 30, 1996.
The following is a summary of significant accounting policies consistently
followed by the Company in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles for
investment companies.
Portfolio Valuation
Marketable securities are generally valued at the last reported sales price
on June 28, 1996. Where a last sales price is not reported, the latest bid price
is used. Marketable securities for which neither a sale nor a bid price was
reported on June 28, 1996 are valued at the latest sale or bid price previously
reported. Investments in non-marketable securities are valued at fair value as
determined by the Board of Directors (see Note 2).
Federal Income Taxes
No provision has been made for Federal income taxes other than capital
gains tax because the Company has elected to be taxed as a regulated investment
company meeting certain requirements of the Internal Revenue Code. As such, the
Company is paying the applicable Federal capital gains tax for shareholders and
retaining the net balance for reinvestment, except to the extent that such gains
are considered to have been distributed to redeeming shareholders.
Equalization
The Company follows the accounting practices known as "equalization" by
which a portion of the costs of redemption of capital shares equivalent to the
amount, on a per share basis, of distributable investment income on the date of
the transaction is charged to the undistributed income, so that undistributed
8
<PAGE> 11
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(UNAUDITED)
income per share is unaffected by Company shares redeemed. Similarly, on
redemptions, a pro rata portion of realized capital gains is charged against
undistributed realized gains.
Other
As is common in the industry, security transactions are accounted for on
the trade date. Dividend income and distributions to shareholders are recorded
on the ex-dividend date.
2. NON-MARKETABLE SECURITY OF AFFILIATE
There is no ready market for the below listed security. Fair value is
established by the Board of Directors of The Finance Company of Pennsylvania.
The Pennsylvania Warehousing and Safe Deposit Company is defined as an
affiliate under the Investment Company Act of 1940 in that the Company owns 5%
or more of the outstanding voting securities of such company. Further, if at the
time of public sale of any of these shares the Company would be deemed a
"control person," it would be necessary to register said shares under the
Securities Act of 1933 prior to their sale.
<TABLE>
<CAPTION>
June 30, 1996 6 Months
------------------------------------- Ended 6/30/96
Percent Identified Fair Dividend
Shares Owned Cost Value Income
- ------- ------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
732 Pennsylvania
Warehousing
and Safe
Deposit
Company 16.92% $ 71,399 $1,501,332 $27,816
======= ========= ========== ===============
</TABLE>
9
<PAGE> 12
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(UNAUDITED)
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of securities purchased, the proceeds from sales and
maturities of investments, and the cost of securities sold for the six months
ended June 30, 1996 (excluding U.S. Government short-term securities) were:
<TABLE>
<CAPTION>
Historical Cost of
Cost of Proceeds from Securities
Investments Sales and Sold and
Purchased Maturities Matured
----------- ------------- -------------
<S> <C> <C> <C>
Common stocks................ $ 678,443 $ 1,239,350 $ 532,241
Short-term securities........ 1,245,627 2,029,015 2,029,015
----------- ------------- -------------
Total................... $1,924,070 $ 3,268,365 $ 2,561,256
=========== ============== ==========
</TABLE>
4. LEASE
The Company rents office space under a lease expiring in April 1997. The
lessor Company's President also serves on the Board of Directors of the Company.
Minimum annual rental for this space is $5,100.
5. OTHER INFORMATION FOR THE SIX MONTHS ENDED
JUNE 30, 1996
Directors of the Company, who are not also employees, are paid a fee for
attendance at meetings of the Board of Directors and its committees.
Compensation of officers amounted to $44,313.
Investment advisory fees payable monthly to Cooke & Bieler, Inc. are based
on the monthly closing portfolio value, less the value of certain investments at
an annual rate of .5 of 1%.
10
<PAGE> 13
SUPPLEMENTARY INFORMATION
(UNAUDITED)
Selected data for each share of capital stock outstanding throughout each
period:
<TABLE>
<CAPTION>
Six
Months
Ended
June 30 Year Ended December 31
1996 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------
Investment
income........... $ 15.60 $ 30.77 $ 28.64 $ 27.52 $ 26.48 $ 24.74
Expenses........... 3.25 5.97 5.59 5.38 5.58 5.14
------- ------- ------- ------- ------- -------
Net investment
income........... 12.35 24.80 23.05 22.14 20.90 19.60
Dividends from net
investment
income........... (5.50) (26.73) (22.99) (22.09) (20.89) (19.81)
Net realized gain
(loss) and
increase
(decrease) in
unrealized
appreciation..... .66 170.09 (77.72) 13.19 35.21 158.47
------- ------- ------- ------- ------- -------
Net increase
(decrease) in net
asset value...... 7.51 168.16 (77.66) 13.24 35.22 158.26
Net asset value:
Beginning of
year.......... 736.90 568.74 646.40 633.16 597.94 439.68
------- ------- ------- ------- ------- -------
End of year...... $744.41 $736.90 $568.74 $646.40 $633.16 $597.94
======= ======= ======= ======= ======= =======
Annual ratio of
expenses to
average net
assets........... 0.88%* 0.89% 0.89% 0.81% 0.91% 0.99%
Annual ratio of net
investment income
to average net
assets........... 3.34%* 3.72% 3.68% 3.34% 3.40% 3.78%
Annual portfolio
turnover rate.... 3.08%* 4.67% 9.17% 9.16% 7.65% 6.21%
Number of shares
outstanding at
end of period
(in thousands)... 58 58 59 60 61 61
</TABLE>
* ANNUALIZED
11
<PAGE> 14
CHANGES IN THE PORTFOLIO OF INVESTMENTS*
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
PURCHASES
<TABLE>
<CAPTION>
Changes Balance
During June 30,
the Period 1996
---------- ------------
Number of Shares
--------------------------
<S> <C> <C>
American Greetings....................... 3,000 20,000
Int'l. Business Machines................. 2,500 2,500
Int'l. Flavors & Fragrances.............. 2,500 8,000
Motorola................................. 4,000 4,000
</TABLE>
STOCK SPLITS
<TABLE>
<CAPTION>
Number of Shares
--------------------------
<S> <C> <C>
Coca-Cola Co. ........................... 14,000 28,000
Johnson & Johnson........................ 4,000 8,000
</TABLE>
SALES
<TABLE>
<CAPTION>
Number of Shares
--------------------------
<S> <C> <C>
Avery Dennison Corp. .................... 5,000 5,000
Boeing Co. .............................. 3,000 3,500
Dover Corp. ............................. 4,500 14,500
Merck & Co. ............................. 1,500 7,500
Philip Morris Cos. ...................... 4,000 -0-
</TABLE>
* EXCLUSIVE OF SHORT-TERM U.S. TREASURY BILLS AND OTHER SHORT-TERM INSTRUMENTS.
12
<PAGE> 15
OTHER INFORMATION RELATING TO THE ANNUAL
SHAREHOLDERS MEETING
Of 57,955 shares of common stock of the company outstanding and entitled to
vote, a total of 52,800 shares were represented either in person or by proxy at
the annual shareholders meeting held April 16, 1996.
Votes totaling 52,800 were cast for Charles E. Mather III to serve as
director of the company for a three-year period expiring in 1999. Votes totaling
52,765 were cast for Shaun F. O'Malley to serve as director of the company for a
one-year period ending in 1997. There were 35 abstentions.
Votes cast for the ratification of the selection of Deloitte & Touche LLP
as auditors of the company for the period April 16, 1996 to April 14, 1997
totalled 52,800.
13
