<PAGE> 1
THE FINANCE COMPANY OF PENNSYLVANIA
FOUNDED 1871
LOGO
ANNUAL REPORT
DECEMBER 31, 1995
<PAGE> 2
THE FINANCE COMPANY OF PENNSYLVANIA
226 WALNUT STREET
PHILADELPHIA, PA 19106
BOARD OF DIRECTORS
Charles E. Mather III
<TABLE>
<S> <C>
Geoffrey Stengel 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
February 9, 1996
TO OUR SHAREHOLDERS:
We are pleased to submit your Company's one hundred and twenty-fourth
Annual Report.
The following is a summary of financial information for the years 1991 to
1995:
<TABLE>
<CAPTION>
Dividends Paid
Net ------------------ Dec. 31
Investment Net Asset
Year Income Regular Extra Value
- ---- ---------- ------- ------ ---------
<S> <C> <C> <C> <C>
1991 $19.60 $10.00 $ 9.81 $597.94
1992 20.90 10.75 10.14 633.16
1993 22.14 11.00 11.09 646.40
1994 23.05 11.00 11.99 568.74
1995 24.80 11.00 15.73 736.90
</TABLE>
As a Regulated Investment Company, the Company is required to pay to its
shareholders at least 98% of its ordinary income for the calendar year 1995 or
pay a 4% non-deductible Federal Excise Tax on its undistributed ordinary income.
Your Board of Directors has elected to distribute 100% of the ordinary income.
On January 26, 1996, the Company paid to the Shareholders of record on
December 29, 1995, the regular quarterly dividend of $2.75 and an extra dividend
of $15.73, making a total dividend of $18.48 per share. The tax law also
requires that the final dividend, although paid in 1996, is taxable to the
shareholders in 1995. In addition to this dividend, the Company paid three
regular dividends of $2.75 in 1995 to the shareholders on March 31, June 30 and
September 30, for a total of $11.00 in regular dividends.
Common stocks constitute 78.87% of the portfolio of investments at market
on December 31, 1995, compared with 81.20% one year earlier.
Our Investment Adviser, Cooke & Bieler, Inc., is present at each of our
Board Meetings and is available for consultation throughout the year.
We were pleased in 1995 to increase the extra dividend by $3.74 per share,
however we should point out that of this amount, $1.97 per share represents a
short-term capital gain which we cannot expect to recur this year. The board and
staff of THE FINANCE COMPANY OF PENNSYLVANIA look forward to 1996 and the
challenges it will present.
/s/ CHARLES E. MATHER III
--------------------------------
Charles E. Mather III, President
<PAGE> 4
[LOGO]
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Shareholders of The Finance Company of
Pennsylvania:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of The Finance Company of Pennsylvania as of
December 31, 1995, the related statement of operations for the year then ended,
the statements of changes in net assets for the years ended December 31, 1995
and 1994, and the condensed financial information for each of the years in the
five-year period ended December 31, 1995. These financial statements and the
condensed financial information are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and the condensed financial information 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 condensed
financial information are free of material misstatement. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned at December 31, 1995 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 out audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and condensed financial information
present fairly, in all material respects, the financial position of The Finance
Company of Pennsylvania at December 31, 1995, the results of its operations, the
changes in its net assets, and the condensed financial information for the
respective stated periods in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania
January 17, 1996
2
<PAGE> 5
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS
INVESTMENTS-AT MARKET OR FAIR VALUE (NOTE 1):
U.S. TREASURY NOTES (IDENTIFIED COST
$4,926,453)................................... $ 5,265,594
MUTUAL FUNDS & OTHER SHORT-TERM INVESTMENTS
(IDENTIFIED COST $4,078,163)............... 4,078,163
COMMON STOCKS (IDENTIFIED COST $8,505,741)
INCLUDING AFFILIATE (NOTE 2)............... 34,886,124
-----------
TOTAL INVESTMENTS..................... 44,229,881
CASH.................................................. 12,595
ACCRUED INTEREST AND DIVIDENDS RECEIVABLE............. 233,905
PREPAID EXPENSES...................................... 29,784
OTHER ASSETS.......................................... 3,150
-----------
TOTAL................................. 44,509,315
-----------
LIABILITIES
DIVIDENDS PAYABLE (NOTE 6)............................ 1,075,888
ACCRUED EXPENSES AND TAXES (NOTE 1)................... 519,457
PAYABLE FOR REDEMPTIONS............................... 207,074
-----------
TOTAL................................. 1,802,419
-----------
NET ASSETS
NET ASSETS (WITH INVESTMENTS AT MARKET OR FAIR VALUE)
EQUIVALENT TO $736.90 PER SHARE ON 57,955 SHARES
OF $10 PAR VALUE CAPITAL STOCK OUTSTANDING AT
DECEMBER 31, 1995 (AUTHORIZED 232,000 SHARES).... $42,706,896
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
3
<PAGE> 6
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
U.S. TREASURY OBLIGATIONS -- 11.91%
<TABLE>
<CAPTION>
Aggregate
Quoted
Market
Principal Identified Price
Amount Cost (Note 1)
- --------- ---------- ----------
<C> <S> <C>
U.S.TREASURY NOTES 8%
500,000 DUE 1/15/97.................. $ 499,301 $ 513,437
U.S. TREASURY NOTES 9 1/4% DUE
1,000,000 8/15/98...................... 1,000,128 1,096,563
U.S. TREASURY NOTES 8 7/8% DUE
900,000 2/15/99...................... 901,037 991,688
U.S. TREASURY NOTES 7 3/4% DUE
700,000 1/31/00...................... 699,068 760,155
U.S. TREASURY NOTES 7 7/8% DUE
1,000,000 8/15/01...................... 1,064,066 1,117,188
U.S. TREASURY NOTES 6 3/8% DUE
750,000 8/15/02...................... 762,853 786,563
---------- ----------
TOTAL............................. 4,926,453 5,265,594
---------- ----------
MUTUAL FUNDS AND OTHER SHORT-TERM
SECURITIES -- 9.22%
</TABLE>
<TABLE>
<CAPTION>
Face Value/
Principal Amount
-----------------------
<C> <S> <C> <C>
45,000 TREASURY TRUST FUND............... 45,000 45,000
1,971,776 FEDERAL TRUST FUND................ 1,971,776 1,971,776
2,061,387 FED FUND.......................... 2,061,387 2,061,387
---------- ----------
TOTAL............................. 4,078,163 4,078,163
---------- ----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
4
<PAGE> 7
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
COMMON STOCKS -- 78.87%
<TABLE>
<CAPTION>
Aggregate
Quoted
Market
Number Identified Price
of Shares Cost (Note 1)
- --------- ---------- ----------
<C> <S> <C>
PETROLEUM AND MINING -- 6.53%
16,000 EXXON CORP........................ $ 91,444 $1,288,000
10,000 MOBILE CORP. ..................... 62,715 1,117,500
15,000 PENN VIRGINIA CORP. .............. 22,382 483,750
---------- ----------
TOTAL............................. 176,541 2,889,250
---------- ----------
BANKING, INSURANCE AND FINANCIAL
HOLDING COMPANIES -- 41.17%
11,000 DUN & BRADSTREET.................. 462,115 712,250
9,500 MARSH & MCLENNAN, INC. ........... 522,710 843,125
494,000 PNC BANK CORP. ................... 298,459 15,931,500
16,000 STATE STREET BOSTON CORP. ........ 519,335 720,000
---------- ----------
TOTAL............................. 1,802,619 18,206,875
---------- ----------
MANUFACTURING AND DIVERSIFIED -- 18.76%
17,000 AMERICAN GREETINGS................ 472,000 469,625
10,000 AMP, INC. ........................ 208,710 382,500
10,000 AVERY DENNISON CORP. ............. 209,660 501,250
6,500 BOEING CO. ....................... 238,456 509,438
21,000 CORNING INC. ..................... 631,845 672,000
19,000 DOVER CORP. ...................... 345,719 700,625
6,000 DOW CHEMICAL CO. ................. 116,337 421,500
6,000 EMERSON ELECTRIC.................. 181,980 490,500
19,000 GENUINE PARTS CO. ................ 469,072 779,000
5,500 INT'L FLAVORS & FRAGRANCES........ 212,118 264,000
10,000 MINNESOTA MINING & MFG. CO. ...... 177,770 663,750
4,000 PHILIP MORRIS COS. ............... 202,530 361,000
18,500 READERS DIGEST.................... 769,106 948,125
15,000 SHERWIN WILLIAMS CO. ............. 481,800 611,250
11,000 UNION CAMP CORP. ................. 386,515 523,875
---------------------------------- ---------- ----------
TOTAL............................. 5,103,618 8,298,438
---------------------------------- ---------- ----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE> 8
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
COMMON STOCKS -- CONCLUDED
<TABLE>
<CAPTION>
Aggregate
Quoted
Market
Number Identified Price
of Shares Cost (Note 1)
- --------- ----------- -----------
<C> <S> <C>
DRUGS AND PHARMACEUTICALS -- 5.34%
9,000 BRISTOL-MYERS SQUIBB CO. ....... $ 506,137 $ 772,874
4,000 JOHNSON & JOHNSON............... 88,070 342,000
9,000 MERCK & CO. .................... 202,710 590,625
12,000 SCHERING-PLOUGH................. 342,795 657,000
----------- -----------
TOTAL........................... 1,139,712 2,362,499
----------- -----------
COMMUNICATIONS -- 1.51%
10,000 BELL ATLANTIC CORP. ............ 178,287 668,750
----------- -----------
FOOD/RETAIL MERCHANDISING -- 2.35%
14,000 COCA-COLA CO. .................. 33,565 1,039,500
----------- -----------
DIVERSIFIED HOLDING -- 3.21%
732 PENNSYLVANIA WAREHOUSING AND
SAFE DEPOSIT COMPANY (NOTE
2)......................... 71,399 1,420,812
----------- -----------
TOTAL COMMON STOCKS............. 8,505,741 34,886,124
----------- -----------
TOTAL INVESTMENTS............... $17,510,357 $44,229,881
=========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE> 9
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME:
INCOME:
DIVIDENDS (INCLUDING DIVIDENDS FROM
AFFILIATE -- NOTE 2).................... $ 1,416,349
INTEREST..................................... 386,659
-----------
TOTAL................................... 1,803,008
EXPENSES:
COMPENSATION.................... $ 98,400
TAXES OTHER THAN INCOME TAXES... 18,169
DIRECTORS' FEES (NOTE 5)........ 39,525
INVESTMENT ADVISORY FEES (NOTE
5)............................ 88,647
LEGAL........................... 5,455
AUDITING & ACCOUNTING........... 47,675
CUSTODIAN....................... 13,330
INSURANCE....................... 19,251
OTHER OFFICE AND
ADMINISTRATIVE................ 16,850
----------
TOTAL................................... 347,302
-----------
NET INVESTMENT INCOME.............................. 1,455,706
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
(NOTE 3):
REALIZED GAIN FROM SECURITY
TRANSACTIONS
(EXCLUDING SHORT-TERM
INVESTMENTS):
PROCEEDS FROM SALES............. $4,811,902
COST OF SECURITIES SOLD......... 3,252,543
----------
NET REALIZED GAIN....................... 1,559,359
UNREALIZED APPRECIATION OF
INVESTMENTS:
AT JANUARY 1, 1995.............. 17,777,362
AT DECEMBER 31, 1995............ 26,719,524
----------
DECREASE IN NET UNREALIZED APPRECIATION............ 8,942,162
-----------
NET GAIN ON INVESTMENTS................................. 11,957,227
-----------
CAPITAL GAINS TAX PAYABLE ON BEHALF OF SHAREHOLDERS
(NOTE 1).............................................. (499,377)
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.... $11,457,850
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE> 10
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS:
NET INVESTMENT INCOME................ $ 1,455,706 $ 1,375,616
NET REALIZED GAIN ON INVESTMENTS..... 1,559,359 277,041
INCREASE (DECREASE) IN NET UNREALIZED
APPRECIATION ON INVESTMENTS....... 8,942,162 (4,800,243)
CAPITAL GAINS TAX PAYABLE ON BEHALF
OF SHAREHOLDERS (NOTE 1).......... (499,377) (96,208)
----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS......... 11,457,850 (3,243,794)
UNDISTRIBUTED INVESTMENT INCOME
INCLUDED IN PRICE OF SHARES
REDEEMED.......................... (14,095) (8,734)
REALIZED GAIN FROM SECURITY
TRANSACTIONS INCLUDED IN PRICE OF
SHARES REDEEMED................... (18,569) (2,162)
DIVIDENDS TO SHAREHOLDERS FROM NET
INVESTMENT INCOME................. (1,555,512) (1,367,197)
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..................... (855,906) (547,522)
----------- -----------
TOTAL INCREASE (DECREASE) IN NET
ASSETS............................ 9,013,768 (5,169,409)
NET ASSETS:
BEGINNING OF YEAR.................... 33,693,128 38,862,537
----------- -----------
END OF YEAR [INCLUDING UNDISTRIBUTED
NET INVESTMENT LOSS OF ($269,069)
AND ($268,602) RESPECTIVELY]...... $42,706,896 $33,693,128
=========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE> 11
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
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. Transactions in capital stock were as
follows:
<TABLE>
<CAPTION>
Number Aggregate
of Shares amount
--------- ---------
<S> <C> <C>
Shares redeemed:
Year Ended December 31, 1995...... 1,287 $888,570
Year Ended December 31, 1994...... 880 $558,418
</TABLE>
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 December 31, 1995. 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 December 31, 1995 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.
9
<PAGE> 12
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
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
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>
For the
year ended
December 31, 1995 December 31,
------------------------------------- 1995
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 $1,420,812 $ 65,880
======= ========= ========== =============
</TABLE>
10
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
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 (excluding U.S.
Government short-term securities) for the year ended December 31, 1995 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................ $1,003,935 $ 4,145,043 $ 2,551,275
U.S. Treasury notes.......... 698,859 666,859 701,268
Mutual funds and other short-
term securities............ 5,670,163 3,264,073 3,264,073
----------- ------------- -------------
Total................... $7,372,957 $ 8,075,975 $ 6,516,616
=========== ============== ==========
</TABLE>
4. LEASE
The Company rents office space under a lease expiring in April 1996. 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 YEAR ENDED
DECEMBER 31, 1995
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 $98,400.
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%.
6. SUBSEQUENT EVENT
A dividend from net investment income of $1,071,008 was declared on
December 13, 1995 payable at $18.48 per share on January 26, 1996 to
shareholders of record on December 29, 1995.
11
<PAGE> 14
CONDENSED FINANCIAL INFORMATION
Selected data for each share of capital stock outstanding throughout each
period:
<TABLE>
<CAPTION>
Year Ended December 31
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
---------------------------------------------------
Investment income...... $ 30.77 $ 28.64 $ 27.52 $ 26.48 $ 24.74
Expenses............... 5.97 5.59 5.38 5.58 5.14
------- ------- ------- ------- -------
Net investment
income............... 24.80 23.05 22.14 20.90 19.60
Dividends from net
investment income.... (26.73) (22.99) (22.09) (20.89) (19.81)
Net realized gain
(loss) and increase
(decrease) in
unrealized
appreciation......... 170.09 (77.72) 13.19 35.21 158.47
------- ------- ------- ------- -------
Net increase (decrease)
in net asset value... 168.16 (77.66) 13.24 35.22 158.26
Net asset value:
Beginning of year.... 568.74 646.40 633.16 597.94 439.68
------- ------- ------- ------- -------
End of year.......... $736.90 $568.74 $646.40 $633.16 $597.94
======= ======= ======= ======= =======
Annual ratio of
expenses to average
net assets........... 0.89% 0.89% 0.81% 0.91% 0.99%
Annual ratio of net
investment income to
average net assets... 3.72% 3.68% 3.34% 3.40% 3.78%
Annual portfolio
turnover rate........ 4.67% 9.17% 9.16% 7.65% 6.21%
Number of shares
outstanding at end of
period (in
thousands)........... 58 59 60 61 61
</TABLE>
See Notes to Financial Statements
12
<PAGE> 15
CHANGES IN THE PORTFOLIO OF INVESTMENTS
(EXCLUSIVE OF SHORT-TERM INVESTMENTS)
FOR THE SIX MONTHS ENDED DECEMBER 31, 1995
PURCHASES
<TABLE>
<CAPTION>
Changes Balance
During December 31,
the Period 1995
---------- ------------
Number of Shares
--------------------------
<S> <C> <C>
American Greetings....................... 7,000 17,000
Corning, Inc. ........................... 3,000 21,000
</TABLE>
SALES
<TABLE>
<CAPTION>
Number of Shares
--------------------------
<S> <C> <C>
Boeing, Co. ............................. 4,000 6,500
Bristol Meyers Squibb.................... 2,500 9,000
Dover Corp. ............................. 1,500 19,000
PNC Bancorp. ............................ 10,000 494,000
Schering Plough.......................... 2,000 12,000
State Street Boston Co. ................. 4,000 16,000
Union Camp Corp. ........................ 2,500 11,000
</TABLE>
STOCK SPLITS
<TABLE>
<CAPTION>
Number of Shares
--------------------------
<S> <C> <C>
Dover Corp. ............................. 9,500 19,000
</TABLE>
13
