<PAGE> 1
THE FINANCE COMPANY OF PENNSYLVANIA
FOUNDED 1871
LOGO
SEMI-ANNUAL REPORT
JUNE 30, 1999
<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, 1999
TO OUR SHAREHOLDERS:
The Semi-annual Report of your Company is enclosed. In this unpredictable
market and with the long-term trend of declining yields, we will continue to
monitor the Company's portfolio diligently.
At the Annual Meeting April 21, 1999, Charles E. Mather III was re-elected
Director for a three-year term. Deloitte & Touche LLP were reappointed as our
independent auditors and Cooke & Bieler, Inc. remains as our investment adviser.
I am most appreciative to the Board and Officers of the Company, and to our
shareholders, for their continuing support.
/s/ Charles E. Mather III
Charles E. Mather III, President
<PAGE> 4
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
INVESTMENTS-AT MARKET OR FAIR VALUE (NOTE 1):
SHORT-TERM SECURITIES
(IDENTIFIED COST $3,225,748)............... $ 3,225,078
U.S. TREASURY NOTES AND BONDS
(IDENTIFIED COST $5,626,133)............... 5,637,563
COMMON STOCKS (IDENTIFIED COST $10,362,996)
INCLUDING AFFILIATE (NOTE 2)............... 55,098,879
-----------
TOTAL INVESTMENTS..................... 63,961,520
CASH.................................................. 24,149
ACCRUED INTEREST AND DIVIDENDS RECEIVABLE............. 185,150
PREPAID EXPENSES...................................... 6,040
OTHER ASSETS.......................................... 9,900
-----------
TOTAL................................. 64,186,759
-----------
LIABILITIES
ACCRUED EXPENSES AND TAXES (NOTE 1)................... 652
-----------
NET ASSETS
NET ASSETS (WITH INVESTMENTS AT MARKET OR FAIR VALUE)
EQUIVALENT TO $1,160.75 PER SHARE ON SHARES OF
55,297 $10 PAR VALUE CAPITAL STOCK OUTSTANDING AT
JUNE 30, 1999 (AUTHORIZED 232,000 SHARES)........ $64,186,107
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
2
<PAGE> 5
PORTFOLIO OF INVESTMENTS
JUNE 30, 1999
(UNAUDITED)
SHORT-TERM SECURITIES -- 5.04%
<TABLE>
<CAPTION>
Aggregate
Quoted
Face Value/ Identified Market Price
Principal Amount Cost (Note 1)
- -------------------------------------------------------- ---------- ------------
<C> <S> <C> <C>
2,079,768 FED FUND........................ $2,079,768 $2,079,768
151,759 FEDERAL TRUST FUND.............. 151,759 151,759
10,000 TREASURY TRUST FUND............. 10,000 10,000
500,000 TREAS. BILL 4.4%; 10/28/99...... 492,955 492,612
500,000 TREAS. BILL 4.4%; 11/18/99...... 491,266 490,939
---------- ----------
TOTAL........................... 3,225,748 3,225,078
---------- ----------
</TABLE>
U.S. TREASURY NOTES AND BONDS -- 8.82%
<TABLE>
<CAPTION>
Principal
Amount
- ---------------------
<C> <S> <C> <C>
700,000 U.S. TREASURY NOTES 7 7/5% DUE
1/31/00.................... $ 699,865 710,063
500,000 U.S. TREASURY NOTES 5 3/8% DUE
6/30/00.................... 499,480 499,531
1,000,000 U.S. TREASURY NOTES 7 7/8% DUE
8/15/01.................... 1,024,228 1,045,000
750,000 U.S. TREASURY NOTES 6 3/8% DUE
8/15/02.................... 756,071 764,531
1,000,000 U.S. TREASURY NOTES 7 1/4% DUE
8/15/04.................... 1,080,332 1,062,813
500,000 U.S. TREASURY NOTES 6 1/2% DUE
5/15/05.................... 498,128 516,250
1,000,000 U.S. TREASURY NOTES 7 5/8% DUE
2/15/07.................... 1,068,029 1,039,375
---------- ----------
TOTAL........................... 5,626,133 5,637,563
---------- ----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
3
<PAGE> 6
PORTFOLIO OF INVESTMENTS
JUNE 30, 1999
(UNAUDITED)
COMMON STOCKS -- 86.14%
<TABLE>
<CAPTION>
Aggregate
Quoted
Number Identified Market Price
of Shares Cost (Note 1)
- --------------------- ---------- ------------
<C> <S> <C> <C>
PETROLEUM AND MINING -- 7.87%
32,000 EXXON CORP...................... $ 91,444 $ 2,468,000
20,000 MOBIL CORP. .................... 62,715 1,975,000
30,000 PENN VIRGINIA CORP. ............ 22,382 592,500
---------- -----------
TOTAL........................... 176,541 5,035,500
---------- -----------
BANKING, INSURANCE AND FINANCIAL
HOLDING COMPANIES -- 42.39%
16,500 MARSH & MCLENNAN, INC. ......... 428,862 1,248,844
434,000 PNC BANK CORP. ................. 262,209 25,009,250
10,000 STATE STREET CORP. ............. 152,542 853,750
---------- -----------
TOTAL........................... 843,613 27,111,844
---------- -----------
MANUFACTURING AND DIVERSIFIED -- 20.44%
7,000 AVON PRODUCTS................... 190,663 388,500
5,000 BOEING CO. ..................... 245,663 220,000
19,000 CORNING INC. ................... 561,722 1,332,375
29,000 DOVER CORP. .................... 261,750 1,015,000
6,000 DOW CHEMICAL CO. ............... 116,338 761,250
12,000 EMERSON ELECTRIC................ 181,980 755,250
28,500 GENUINE PARTS .................. 469,072 997,500
22,500 HASBRO ......................... 422,456 628,594
10,000 INT'L BUSINESS MACHINES......... 256,675 1,292,500
10,000 MINNESOTA MINING & MFG. CO. .... 170,764 869,375
18,000 MOTOROLA ....................... 839,381 1,705,500
15,766 NEWELL RUBBERMAID INC. ......... 474,275 731,148
16,000 RAYCHEM ........................ 374,988 592,000
10,000 SNAP-ON INC. ................... 302,187 361,875
30,000 SHERWIN WILLIAMS CO. ........... 481,800 832,500
10,000 XEROX CORP. .................... 234,100 590,625
---------- -----------
TOTAL........................... 5,583,814 13,073,992
---------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
4
<PAGE> 7
PORTFOLIO OF INVESTMENTS
JUNE 30, 1999
(UNAUDITED)
COMMON STOCKS -- CONCLUDED
<TABLE>
<CAPTION>
Aggregate
Quoted
Number Identified Market Price
of Shares Cost (Note 1)
- --------------------- ----------- ------------
<C> <S> <C> <C>
DRUGS AND PHARMACEUTICALS -- 3.19%
10,000 BECTON, DICKINSON CO........... $ 307,161 $ 300,000
8,000 JOHNSON & JOHNSON.............. 88,070 784,000
13,000 MERCK & CO. ................... 146,402 957,125
----------- -----------
TOTAL.......................... 541,633 2,041,125
----------- -----------
COMMUNICATIONS -- 2.04%
20,000 BELL ATLANTIC CORP. ........... 178,287 1,307,500
----------- -----------
FOOD/RETAIL MERCHANDISING -- 1.94%
20,000 COCA COLA CO. ................. 23,981 1,240,000
----------- -----------
INTERNATIONAL FUNDS -- 3.62%
80,496 SCUDDER INT'L EQUITY INVEST.
TR. ...................... 1,943,728 2,315,061
----------- -----------
SMALL CAP FUNDS -- 1.38%
69,881 KALMAR SMALL CAP FUND.......... 1,000,000 883,997
----------- -----------
DIVERSIFIED HOLDING -- 3.27%
732 PENNSYLVANIA WAREHOUSING AND
SAFE DEPOSIT COMPANY (NOTE
2)........................ 71,399 2,089,860
----------- -----------
TOTAL COMMON STOCKS............ 10,362,996 55,098,879
----------- -----------
TOTAL INVESTMENTS.............. $19,214,877 $63,961,520
=========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE> 8
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
INCOME:
DIVIDENDS (INCLUDING DIVIDENDS FROM
AFFILIATE -- NOTE 2).................... $ 671,836
INTEREST..................................... 197,467
----------
TOTAL................................... 869,303
EXPENSES:
COMPENSATION.................... $ 50,925
TAXES OTHER THAN INCOME TAXES... 13,388
DIRECTORS' FEES................. 25,875
INVESTMENT ADVISORY FEES (NOTE
5)............................ 64,413
LEGAL........................... 5,520
AUDITING & ACCOUNTING........... 25,600
CUSTODIAN....................... 8,351
INSURANCE....................... 9,486
OTHER OFFICE AND
ADMINISTRATIVE................ 19,964
-----------
TOTAL................................... 223,522
----------
NET INVESTMENT INCOME.............................. 645,781
----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
(NOTE 3):
REALIZED GAIN FROM SECURITY
TRANSACTIONS
(EXCLUDING SHORT-TERM
INVESTMENTS):
PROCEEDS FROM SALES............. $ 2,083,458
COST OF SECURITIES SOLD......... 1,544,602
-----------
NET REALIZED GAIN....................... 538,856
UNREALIZED APPRECIATION OF
INVESTMENTS:
AT JANUARY 1, 1999.............. 40,400,846
AT JUNE 30, 1999................ 44,746,645
-----------
INCREASE IN NET UNREALIZED APPRECIATION............ 4,345,799
----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS............. 4,884,655
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.... $5,530,436
==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE> 9
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JUNE 30, AND THE
YEAR ENDED DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS:
NET INVESTMENT INCOME................ $ 645,781 $ 1,432,797
NET REALIZED GAIN ON INVESTMENTS..... 538,856 3,508,789
(DECREASE) INCREASE IN NET UNREALIZED
APPRECIATION ON INVESTMENTS....... 4,345,799 (1,422,815)
CAPITAL GAINS TAX PAYABLE ON BEHALF
OF SHAREHOLDERS (NOTE 1).......... -- (1,218,450)
----------- -----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS................... 5,530,436 2,300,321
UNDISTRIBUTED INVESTMENT INCOME
INCLUDED IN PRICE OF SHARES
REDEEMED.......................... (3,082) (4,941)
REALIZED GAIN FROM SECURITY
TRANSACTIONS INCLUDED IN PRICE OF
SHARES REDEEMED................... (3,684) (27,502)
DIVIDENDS TO SHAREHOLDERS FROM NET
INVESTMENT INCOME................. (346,566) (1,427,702)
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..................... (573,475) (621,152)
----------- -----------
TOTAL INCREASE IN NET ASSETS......... 4,603,629 219,024
NET ASSETS:
BEGINNING OF YEAR.................... 59,582,478 59,363,454
----------- -----------
END OF PERIOD [INCLUDING
UNDISTRIBUTED NET INVESTMENT
INCOME (LOSS) OF $26,829 AND
($269,302) RESPECTIVELY].......... $64,186,107 $59,582,478
=========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE> 10
NOTES TO FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
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 520 shares of capital stock
redeemed during the period ended June 30, 1999.
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
Investments are valued using published bid quotes as of June 30, 1999.
Costs used to determine realized gain or loss from securities transactions are
those of the specific securities sold. 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
income per share is unaffected by Company shares redeemed. Similarly, on
8
<PAGE> 11
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(UNAUDITED)
redemptions, a pro rata portion of realized capital gains is charged against
undistributed realized gains.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. The Company's financial statements include amounts that are based on
management's best estimates and judgments. Actual results could differ from
those estimates.
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, 1999 6 Months
--------------------------------- Ended 6/30/99
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 $2,089,860 $29,280
====== ======= ========== =======
</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, 1999 (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................ $ 439,599 $2,083,458 $1,544,602
Short-term securities........ 4,468,512 5,069,387 5,069,387
U.S. Treasury Notes.......... 1,071,250 900,000 900,000
---------- ---------- ----------
Total................... $5,979,361 $8,052,845 $7,513,989
========== ========== ==========
</TABLE>
4. LEASE
The Company rents office space under a lease expiring in April 2000. The
lessor Company's President also serves on the Board of Directors of the Company.
Minimum annual rental for this space is $5,400.
5. OTHER INFORMATION FOR THE SIX MONTHS ENDED
JUNE 30, 1999
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 $50,925.
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
CONDENSED FINANCIAL 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,
-------------- -----------------------------------------
1999 1998 1997 1996 1995
----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment income................ $ 15.56 $ 33.33 $ 32.49 $ 32.33 $ 30.77
Expenses......................... 4.00 7.84 7.27 6.68 5.97
--------- --------- --------- ------- -------
Net investment income............ 11.56 25.49 25.22 25.65 24.80
Dividends from net investment
income......................... (6.25) (25.54) (25.33) (25.67) (26.73)
Net realized gain (loss) and
increase (decrease) in
unrealized appreciation........ 87.98 15.40 224.41 90.93 170.09
--------- --------- --------- ------- -------
Net increase (decrease) in net
asset value.................... 93.29 15.35 224.30 90.91 168.16
Net asset value:
Beginning of year.............. 1,067.46 1,052.11 827.81 736.90 568.74
--------- --------- --------- ------- -------
End of year.................... $1,160.75 $1,067.46 $1,052.11 $827.81 $736.90
========= ========= ========= ======= =======
Annual ratio of expenses to
average net assets............. 0.74%* 0.74% 0.78% 0.86% 0.89%
Annual ratio of net investment
income to average net assets... 2.10%* 2.42% 2.68% 3.32% 3.72%
Annual portfolio turnover rate... 5.78%* 8.13% 10.44% 5.29% 4.67%
Number of shares outstanding at
end of period (in thousands)... 55 55 56 58 58
</TABLE>
* Annualized.
11
<PAGE> 14
CHANGES IN THE PORTFOLIO OF INVESTMENTS
(EXCLUSIVE OF SHORT-TERM INVESTMENTS)
FOR THE SIX MONTHS ENDED JUNE 30, 1999
PURCHASES
<TABLE>
<CAPTION>
Changes Balance
During June 30,
the Period 1999
---------- ------------
Number of Shares
-------------------------
<S> <C> <C>
</TABLE>
<TABLE>
<S> <C> <C>
Becton, Dickinson & Co................... 10,000 10,000
Raychem.................................. 5,000 16,000
</TABLE>
<TABLE>
<CAPTION>
Principal Amount
-------------------------
<S> <C> <C>
U.S. Treasury Bond 7.625 due 2/15/07..... 1,000,000 1,000,000
</TABLE>
SALES
<TABLE>
<CAPTION>
Number of Shares
-------------------------
<S> <C> <C>
AMP...................................... 16,753 --
Corning Inc. ............................ 4,000 19,000
Int'l Business Machines.................. 1,000 10,000
Motorola................................. 6,000 18,000
Pall Corp. .............................. 25,000 --
</TABLE>
STOCK SPLITS
<TABLE>
<CAPTION>
Number of Shares
-------------------------
<S> <C> <C>
Hasbro................................... 7,500 22,500
Int'l Business Machines.................. 5,000 10,000
Merck & Co. ............................. 6,500 13,000
Xerox Corp. ............................. 5,000 10,000
</TABLE>
STOCK MERGERS
<TABLE>
<CAPTION>
Number of Shares
-------------------------
<S> <C> <C>
Newell Rubbermaid Inc. .................. 15,766 15,766
</TABLE>
12
<PAGE> 15
OTHER INFORMATION RELATING TO THE ANNUAL
SHAREHOLDERS MEETING
Of 55,617 shares of common stock of the company outstanding and entitled to
vote, a total of 53,366 shares were represented either in person or by proxy at
the annual shareholders meeting held on April 21, 1999.
Votes totaling 53,041 were cast for Charles E. Mather III, to serve as
director of the company for a three-year period. There were 325 abstentions.
Votes cast for the ratification of the selection of Deloitte & Touche LLP
as auditors of the company for the period April 21, 1999 to April 19, 2000
totalled 53,366.
13
