<PAGE> 1
THE FINANCE COMPANY OF PENNSYLVANIA
FOUNDED 1871
LOGO
SEMI-ANNUAL REPORT
JUNE 30, 1997
<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 1, 1997
TO OUR SHAREHOLDERS:
The Semi-annual Report of your Company is enclosed. In the first half of
1997, the Company has fared well in an unusually buoyant market. No one can
predict how long this unprecedented momentum will continue. Recognizing this
market's volatility, your Company will continue to exercise vigilance.
At the Annual Meeting April 16, 1997, Shaun F. O'Malley and Jonathan D.
Scott were re-elected Directors for three-year terms. Deloitte & Touche LLP were
reappointed as our independent auditors and Cooke & Bieler, Inc. remains as our
investment adviser.
I thank the Board and Officers of your Company for their advice and
assistance, and you, our shareholders, for your continued faith in our Company.
LOGO
Charles E. Mather III, President
<PAGE> 4
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
INVESTMENTS-AT MARKET VALUE (NOTE 1):
U.S. TREASURY NOTES (IDENTIFIED COST
$4,904,527)................................... $ 4,999,953
MUTUAL FUNDS & OTHER SHORT-TERM INVESTMENTS
(IDENTIFIED COST $4,231,119)............... 4,242,310
COMMON STOCKS (IDENTIFIED COST $8,560,698)
INCLUDING AFFILIATE (NOTE 2)............... 44,380,439
-----------
TOTAL INVESTMENTS..................... 53,622,702
CASH.................................................. 23,562
ACCRUED INTEREST AND DIVIDENDS RECEIVABLE............. 195,877
PREPAID TAXES AND EXPENSES............................ 6,726
OTHER ASSETS.......................................... 1,800
-----------
TOTAL................................. 53,850,667
-----------
LIABILITIES
ACCRUED EXPENSES AND TAXES............................ 12,294
-----------
NET ASSETS
NET ASSETS (WITH INVESTMENTS AT MARKET VALUE)
EQUIVALENT TO $945.13 PER SHARE ON 56,964 SHARES
OF $10 PAR VALUE CAPITAL STOCK OUTSTANDING AT
JUNE 30, 1997 (AUTHORIZED 232,000 SHARES)........ $53,838,373
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
2
<PAGE> 5
PORTFOLIO OF INVESTMENTS
JUNE 30, 1997
(UNAUDITED)
U.S. TREASURY OBLIGATIONS -- 9.32%
<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.................... $1,000,055 $1,035,312
900,000 U.S. TREASURY NOTES 8 7/8% DUE
2/15/99.................... 900,541 938,531
700,000 U.S. TREASURY NOTES 7 3/4% DUE
1/31/00.................... 699,409 724,937
1,000,000 U.S. TREASURY NOTES 7 7/8% DUE
8/15/01.................... 1,047,019 1,053,438
750,000 U.S. TREASURY NOTES 6 3/8% DUE
8/15/02.................... 759,951 749,297
500,000 U.S. TREASURY NOTES 6 1/2% DUE
5/15/05.................... 497,552 498,438
---------- ------------
TOTAL GOVERNMENT SECURITIES..... 4,904,527 4,999,953
---------- ------------
MUTUAL FUNDS AND OTHER SHORT-TERM
SECURITIES -- 7.91%
</TABLE>
<TABLE>
<CAPTION>
Face Value/
Principal Amount
--------------------------
<C> <S> <C> <C>
500,000 U.S. TREASURY NOTES 5.375%
DUE 11/30/97............... 499,253 494,375
26,087 TREASURY TRUST FUND............. 26,087 26,087
261,154 FEDERAL TRUST FUND.............. 261,154 261,154
2,444,625 FED FUND........................ 2,444,625 2,444,625
41,203 SCUDDER INT'L. EQUITY INV.
TR. ....................... 1,000,000 1,016,069
---------- ------------
TOTAL........................... 4,231,119 4,242,310
---------- ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
3
<PAGE> 6
PORTFOLIO OF INVESTMENTS
JUNE 30, 1997
(UNAUDITED)
COMMON STOCKS -- 82.77%
<TABLE>
<CAPTION>
Aggregate
Quoted
Number Identified Market Price
of Shares Cost (Note 1)
- --------- ---------- ------------
<C> <S> <C> <C>
PETROLEUM AND MINING -- 7.63%
32,000 EXXON CORP...................... $ 91,444 $ 1,960,000
20,000 MOBIL CORP. .................... 62,715 1,397,500
15,000 PENN VIRGINIA CORP. ............ 22,382 735,000
---------- ------------
TOTAL........................... 176,541 4,092,500
---------- ------------
BANKING, INSURANCE AND FINANCIAL
HOLDING COMPANIES -- 40.73%
19,000 MARSH & MCLENNAN, INC. ......... 522,710 1,356,125
464,000 PNC BANK CORP. ................. 280,334 19,372,000
24,000 STATE STREET CORP. ............. 376,689 1,110,000
---------- ------------
TOTAL........................... 1,179,733 21,838,125
---------- ------------
MANUFACTURING AND DIVERSIFIED -- 20.76%
16,000 AMP, INC. ...................... 422,130 668,000
5,000 BOEING CO. ..................... 93,363 265,312
17,000 CORNING INC. ................... 424,535 945,625
14,500 DOVER CORP. .................... 261,750 893,562
6,000 DOW CHEMICAL CO. ............... 116,337 521,250
12,000 EMERSON ELECTRIC................ 181,980 660,750
7,000 FLUOR CORP. .................... 364,239 386,313
28,500 GENUINE PARTS CO. .............. 469,072 965,438
15,000 HASBRO INC. .................... 422,456 425,625
7,000 INT'L BUSINESS MACHINES......... 363,995 631,750
8,000 INT'L FLAVORS & FRAGRANCES...... 327,606 404,000
10,000 MINNESOTA MINING & MFG. CO. .... 170,764 1,022,500
10,000 MOTOROLA ....................... 516,200 761,250
20,000 PALL CORP. ..................... 474,525 465,000
20,000 RUBBERMAID INC. ................ 474,275 595,000
30,000 SHERWIN WILLIAMS CO. ........... 481,800 926,250
7,500 XEROX CORP. .................... 351,150 591,563
-------------------------------- ---------- ------------
TOTAL........................... 5,916,177 11,129,188
-------------------------------- ---------- ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
4
<PAGE> 7
PORTFOLIO OF INVESTMENTS
JUNE 30, 1997
(UNAUDITED)
COMMON STOCKS -- CONCLUDED
<TABLE>
<CAPTION>
Aggregate
Quoted
Number Identified Market Price
of Shares Cost (Note 1)
- --------- ----------- ------------
<C> <S> <C> <C>
DRUGS AND PHARMACEUTICALS -- 6.59%
16,000 BRISTOL-MYERS SQUIBB CO. ...... $ 465,235 $ 1,296,000
8,000 JOHNSON & JOHNSON.............. 88,070 515,000
7,500 MERCK & CO. ................... 168,925 767,344
20,000 SCHERING-PLOUGH................ 292,350 957,500
----------- ------------
TOTAL.......................... 1,014,580 3,535,844
----------- ------------
COMMUNICATIONS -- 1.41%
10,000 BELL ATLANTIC CORP. ........... 178,287 758,750
----------- ------------
FOOD/RETAIL MERCHANDISING -- 2.54%
20,000 COCA-COLA CO. ................. 23,981 1,360,000
----------- ------------
DIVERSIFIED HOLDING -- 3.11%
732 PENNSYLVANIA WAREHOUSING AND
SAFE DEPOSIT COMPANY (NOTE
2)........................ 71,399 1,666,032
----------- ------------
TOTAL COMMON STOCKS............ 8,560,698 44,380,439
----------- ------------
TOTAL INVESTMENTS.............. $17,696,344 $53,622,702
=========== ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE> 8
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
INCOME:
DIVIDENDS (INCLUDING DIVIDENDS FROM
AFFILIATE -- NOTE 2)..................... $ 720,762
INTEREST...................................... 198,908
---------
TOTAL.................................... 919,670
EXPENSES:
COMPENSATION.................... $ 46,375
TAXES OTHER THAN INCOME TAXES... 11,218
DIRECTORS' FEES (NOTE 5)........ 22,675
INVESTMENT ADVISORY FEES (NOTE
5)............................ 56,858
LEGAL........................... 3,210
AUDITING & ACCOUNTING........... 24,375
CUSTODIAN....................... 7,807
OTHER OFFICE AND
ADMINISTRATIVE................ 31,708
-----------
TOTAL.................................... 204,226
---------
NET INVESTMENT INCOME............................... 715,444
---------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
(NOTE 3):
REALIZED GAIN FROM SECURITY
TRANSACTIONS
(EXCLUDING SHORT-TERM
INVESTMENTS):
PROCEEDS FROM SALES............. $ 3,789,420
COST OF SECURITIES SOLD......... 2,583,794
-----------
NET REALIZED GAIN........................ 1,205,626
UNREALIZED APPRECIATION OF
INVESTMENTS:
AT JANUARY 1, 1997.............. 30,791,626
AT JUNE 30, 1997................ 35,926,357
-----------
INCREASE IN NET UNREALIZED APPRECIATION............. 5,134,731
---------
NET GAIN ON INVESTMENTS.................................. 6,340,357
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS..... $7,055,801
==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE> 9
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND THE
YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS:
NET INVESTMENT INCOME................ $ 715,444 $ 1,470,623
NET REALIZED GAIN ON INVESTMENTS..... 1,205,626 1,823,302
INCREASE (DECREASE) IN NET UNREALIZED
APPRECIATION ON INVESTMENTS....... 5,134,731 4,072,102
CAPITAL GAINS TAX PAYABLE ON BEHALF
OF SHAREHOLDERS (NOTE 1).......... -- (631,197)
----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS......... 7,055,801 6,734,830
UNDISTRIBUTED INVESTMENT INCOME
INCLUDED IN PRICE OF SHARES
REDEEMED.......................... (4,817) (2,860)
REALIZED GAIN FROM SECURITY
TRANSACTIONS INCLUDED IN PRICE OF
SHARES REDEEMED................... (8,753) (4,509)
DIVIDENDS TO SHAREHOLDERS FROM NET
INVESTMENT INCOME................. (314,231) (1,482,730)
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..................... (659,913) (181,342)
----------- -----------
TOTAL INCREASE (DECREASE) IN NET
ASSETS............................ 6,068,087 5,063,389
NET ASSETS:
BEGINNING OF PERIOD.................. 47,770,286 42,706,897
----------- -----------
END OF PERIOD [INCLUDING
UNDISTRIBUTED NET INVESTMENT
INCOME (LOSS) OF $127,266 AND
($269,130) RESPECTIVELY].......... $53,838,373 $47,770,286
=========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE> 10
NOTES TO FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
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 743 shares of capital stock
redeemed during the period ended June 30, 1997.
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 30, 1997. 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 30, 1997 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, 1997 6 Months
------------------------------------- Ended 6/30/97
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 $1,666,032 $35,928
======= ========= ========== ===============
</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, 1997 (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................ $1,374,070 $ 2,789,419 $ 1,583,793
Short-term securities........ 3,783,162 5,785,234 5,785,234
U.S. Treasury Notes.......... 996,406 500,000 500,000
----------- ------------- -------------
Total................... $6,153,638 $ 9,074,653 $ 7,869,027
=========== ============== ==========
</TABLE>
4. LEASE
The Company rents office space under a lease expiring in April 1998. 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, 1997
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 $46,375.
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
1997 1996 1995 1994 1993 1992
-------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment income................ $15.94 $ 32.33 $ 30.77 $ 28.64 $ 27.52 $ 26.48
Expenses......................... 3.54 6.68 5.97 5.59 5.38 5.58
------- ------- ------- ------- ------- -------
Net investment income............ 12.40 25.65 24.80 23.05 22.14 20.90
Dividends from net investment
income......................... (5.50) (25.67) (26.73) (22.99) (22.09) (20.89)
Net realized gain (loss) and
increase (decrease) in
unrealized appreciation........ 110.42 90.93 170.09 (77.72) 13.19 35.21
------- ------- ------- ------- ------- -------
Net increase (decrease) in net
asset value.................... 117.32 90.91 168.16 (77.66) 13.24 35.22
Net asset value:
Beginning of year.............. 827.81 736.90 568.74 646.40 633.16 597.94
------- ------- ------- ------- ------- -------
End of year.................... $945.13 $827.81 $736.90 $568.74 $646.40 $633.16
======= ======= ======= ======= ======= =======
Annual ratio of expenses to
average net assets............. .81% * .86% 0.89% 0.89% 0.81% 0.91%
Annual ratio of net investment
income to average net assets... 2.82% * 3.32% 3.72% 3.68% 3.34% 3.40%
Annual portfolio turnover rate... 6.56% * 5.21% 4.67% 9.17% 9.16% 7.65%
Number of shares outstanding at
end of period
(in thousands)................. 57 58 58 59 60 61
</TABLE>
* ANNUALIZED
11
<PAGE> 14
CHANGES IN THE PORTFOLIO OF INVESTMENTS*
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
PURCHASES
<TABLE>
<CAPTION>
Changes Balance
During June 30,
the Period 1997
---------- ------------
Number of Shares
--------------------------
<S> <C> <C>
Fluor Corp............................... 7,000 7,000
Hasbro Inc............................... 15,000 15,000
Poll Corp. .............................. 20,000 20,000
Rubbermaid Inc. ......................... 5,000 20,000
</TABLE>
<TABLE>
<CAPTION>
Principal Amount
--------------------------
<S> <C> <C>
U.S. Treasury Notes 6.5% due 5/15/05..... 500,000 500,000
U.S. Treasury Notes 5.375% due
11/30/97............................... 500,000 500,000
</TABLE>
SPIN OFFS
<TABLE>
<CAPTION>
Number of Shares
--------------------------
<S> <C> <C>
Covance.................................. 5,250 -0-
Quest Diagnostics........................ 2,625 -0-
</TABLE>
STOCK SPLITS
<TABLE>
<CAPTION>
Number of Shares
--------------------------
<S> <C> <C>
Boeing Co. .............................. 2,500 5,000
Bristol Myers Squibb Co. ................ 9,000 16,000
Emerson Electric......................... 6,000 12,000
Exxon Corp. ............................. 16,000 32,000
Genuine Parts............................ 9,500 28,500
Int'l Business Machines.................. 3,500 7,000
Marsh & McLennan Inc. ................... 9,500 19,000
Mobil Corp. ............................. 10,000 20,000
Schering-Plough.......................... 10,000 20,000
Sherwin Williams......................... 15,000 30,000
State Street Corp. ...................... 12,000 24,000
</TABLE>
* EXCLUSIVE OF SHORT-TERM U.S. TREASURY BILLS AND OTHER SHORT-TERM INSTRUMENTS.
12
<PAGE> 15
CHANGES IN THE PORTFOLIO OF INVESTMENTS*
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
SALES
<TABLE>
<CAPTION>
Changes Balance
During June 30,
the Period 1997
---------- --------
Number of Shares
---------------------
<S> <C> <C>
$ 2,000 $ 16,000
Bristol-Myers Squibb........................
3,000 20,000
Coca-Cola Co. ..............................
4,000 17,000
Corning.....................................
5,250 -0-
Covance.....................................
20,000 464,000
PNC Bank Corp. .............................
2,625 -0-
Quest Diagnostics...........................
21,500 -0-
Reader's Digest "A".........................
2,000 20,000
Schering-Plough.............................
11,000 -0-
Union Camp Corp. ...........................
</TABLE>
* EXCLUSIVE OF SHORT-TERM U.S. TREASURY BILLS AND OTHER SHORT-TERM INSTRUMENTS.
13
<PAGE> 16
OTHER INFORMATION RELATING TO THE ANNUAL
SHAREHOLDERS MEETING
Of 57,302 shares of common stock of the company outstanding and entitled to
vote, a total of 51,532 shares were represented either in person or by proxy at
the annual shareholders meeting held April 16, 1997.
Votes totaling 51,532 were cast for Shaun F. O'Malley to serve as director
of the company for a three-year period ending in 2000. Votes totaling 51,497
were cast for Jonathan D. Scott to serve as director of the company for a three-
year period expiring in 2000. 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, 1997 to April 15, 1998
totalled 51,532.
14
