<PAGE> 1
THE FINANCE COMPANY OF PENNSYLVANIA
FOUNDED 1871
LOGO
SEMI-ANNUAL REPORT
JUNE 30, 2000
<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 4, 2000
TO OUR SHAREHOLDERS:
The Semi-annual Report of your Company is enclosed. In this uncertain
market, we continue to monitor the Company's portfolio diligently.
At the Annual Meeting April 19, 2000, 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. Cooke & Bieler, Inc. remains as our
investment adviser.
We wish to remind you that The Finance Company of Pennsylvania has the
right to meet requests to redeem shares by distributing portfolio securities in
whole or in part, in lieu of cash. Redeeming shareholders should understand that
any difference between their cost basis in their Finance Company shares and the
market value of the securities (and cash, if any) distributed to them will be
treated as a capital gain or loss for tax purposes. Such gain or loss, if any,
will be no different than if the shareholder had received only cash. Of course,
any expenses incurred in disposing of the securities distributed will be borne
by the shareholder, and not by The Finance Company.
The Board and Officers of the Company are most appreciative of our
shareholders' continuing support.
/s/ Charles E. Mather III
Charles E. Mather III, President
<PAGE> 4
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2000
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
INVESTMENTS -- AT MARKET OR FAIR VALUE (NOTE 1):
SHORT-TERM SECURITIES
(IDENTIFIED COST $3,352,016)............... $ 3,357,300
U.S. TREASURY NOTES AND BONDS
(IDENTIFIED COST $5,345,311)............... 5,288,359
COMMON STOCKS (IDENTIFIED COST $12,006,952)
INCLUDING AFFILIATE (NOTE 2)............... 48,357,286
-----------
TOTAL INVESTMENTS..................... 57,002,945
CASH.................................................. 549,737
ACCRUED INTEREST AND DIVIDENDS RECEIVABLE............. 178,859
PREPAID EXPENSES...................................... 23,871
OTHER ASSETS.......................................... 11,585
-----------
TOTAL................................. 57,766,997
-----------
LIABILITIES
ACCRUED EXPENSES AND TAXES (NOTE 1)................... 5,528
COVERED CALLS WRITTEN AT VALUE (PREMIUM RECEIVED
$125,646) (NOTE 3)............................... 131,896
DIVIDENDS PAYABLE (NOTE 7)............................ 4,941
-----------
TOTAL................................. 142,365
-----------
NET ASSETS
NET ASSETS (WITH INVESTMENTS AT MARKET OR FAIR VALUE)
EQUIVALENT TO $1,064.44 PER SHARE ON SHARES OF
54,136 $10 PAR VALUE CAPITAL STOCK OUTSTANDING AT
JUNE 30, 2000 (AUTHORIZED 232,000 SHARES)........ $57,624,632
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
2
<PAGE> 5
PORTFOLIO OF INVESTMENTS
JUNE 30, 2000
(UNAUDITED)
SHORT-TERM SECURITIES -- 5.89%
<TABLE>
<CAPTION>
Aggregate
Quoted
Face Value/ Identified Market Price
Principal Amount Cost (Note 1)
-------------------------------------------------------- ---------- ------------
<C> <S> <C> <C>
2,090,298 FED FUND........................ $2,090,298 $2,090,298
70,653 FEDERAL TRUST FUND.............. 70,653 70,653
10,000 TREASURY TRUST FUND............. 10,000 10,000
500,000 TREASURY BILLS 8/24/00.......... 490,708 495,992
700,000 TREASURY BILLS 9/28/00.......... 690,357 690,357
---------- ----------
TOTAL........................... 3,352,016 3,357,300
---------- ----------
</TABLE>
U.S. TREASURY NOTES AND BONDS -- 9.28%
<TABLE>
<CAPTION>
Principal
Amount
---------
<C> <S> <C> <C>
1,000,000 U.S. TREASURY NOTES 7 7/8% DUE
8/15/01.................... 1,012,801 1,014,687
750,000 U.S. TREASURY NOTES 6 3/8% DUE
8/15/02.................... 754,125 749,297
1,000,000 U.S. TREASURY NOTES 7 1/4% DUE
8/15/04.................... 1,064,618 1,033,437
500,00 U.S. TREASURY NOTES 6 1/2% DUE
5/15/05.................... 498,416 505,000
1,000,000 U.S. TREASURY NOTES 5 5/8% DUE
2/15/06.................... 956,253 970,000
1,000,000 U.S. TREASURY BOND 7 5/8% DUE
2/15/07.................... 1,059,098 1,015,938
---------- ----------
TOTAL........................... 5,345,311 5,288,359
---------- ----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
3
<PAGE> 6
PORTFOLIO OF INVESTMENTS
JUNE 30, 2000
(UNAUDITED)
COMMON STOCKS -- 84.83%
<TABLE>
<CAPTION>
Aggregate
Quoted
Number Identified Market Price
of Shares Cost (Note 1)
--------------------- ---------- ------------
<C> <S> <C> <C>
PETROLEUM AND MINING -- 9.34%
58,403 EXXON MOBIL CORP................ $ 154,159 $ 4,584,636
30,000 PENN VIRGINIA CORP. ............ 22,382 738,750
---------- -----------
TOTAL........................... 176,541 5,323,386
---------- -----------
BANKING, INSURANCE AND FINANCIAL
HOLDING COMPANIES -- 40.42%
15,000 AON CORP. ...................... 377,800 465,938
424,000 PNC BANK CORP. ................. 256,167 19,875,000
10,000 MARSH & MCLENNAN INC. .......... 262,439 1,044,375
30,000 UNUMPROVIDENT CORP. ............ 434,313 601,875
10,000 STATE STREET CORP. ............. 152,542 1,060,625
---------- -----------
TOTAL........................... 1,483,261 23,047,813
---------- -----------
MANUFACTURING AND DIVERSIFIED -- 17.72%
16,000 AVON PRODUCTS................... 414,988 712,000
24,000 DOVER CORP. .................... 215,644 973,500
18,000 DOW CHEMICAL CO. ............... 116,337 543,375
12,000 EMERSON ELECTRIC................ 181,980 724,500
28,500 GENUINE PARTS .................. 469,072 570,000
22,500 HASBRO ......................... 422,456 347,344
10,000 INT'L BUSINESS MACHINES......... 256,675 1,095,625
10,000 MINNESOTA MINING & MFG. CO. .... 170,764 835,000
12,000 MOTOROLA ....................... 173,640 348,750
22,500 NATIONAL SERVICES INDUSTRIES.... 664,419 438,750
18,766 NEWELL RUBBERMAID INC. ......... 555,988 483,224
10,000 PITNEY BOWES INC. .............. 439,869 400,000
22,500 SNAP-ON INC. ................... 630,468 599,063
30,000 SHERWIN WILLIAMS CO. ........... 481,800 635,625
22,000 WENDYS INTERNATIONAL............ 377,850 396,000
48,000 XEROX CORP. .................... 1,169,450 996,000
---------- -----------
TOTAL........................... 6,741,400 10,098,756
---------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
4
<PAGE> 7
PORTFOLIO OF INVESTMENTS
JUNE 30, 2000
(UNAUDITED)
COMMON STOCKS -- CONCLUDED
<TABLE>
<CAPTION>
Aggregate
Quoted
Number Identified Market Price
of Shares Cost (Note 1)
--------------------- ----------- ------------
<C> <S> <C> <C>
DRUGS AND PHARMACEUTICALS -- 4.85%
12,000 ABBOTT LABORATORIES............ $ 416,100 $ 532,500
15,000 BECTON, DICKINSON CO........... 441,067 430,312
8,000 JOHNSON & JOHNSON.............. 88,070 815,000
13,000 MERCK & CO. ................... 146,402 986,375
----------- -----------
TOTAL.......................... 1,091,639 2,764,187
----------- -----------
COMMUNICATIONS -- 1.78%
20,000 BELL ATLANTIC CORP. ........... 178,287 1,015,000
----------- -----------
FOOD/RETAIL MERCHANDISING -- 2.02%
20,000 COCA COLA CO. ................. 23,981 1,148,750
----------- -----------
INTERNATIONAL FUNDS -- 5.02%
80,496 SCUDDER INT'L EQUITY INVEST.
TR. ...................... 2,240,444 2,860,018
----------- -----------
DIVERSIFIED HOLDING -- 3.68%
732 PENNSYLVANIA WAREHOUSING AND
SAFE DEPOSIT COMPANY (NOTE
2)........................ 71,399 2,099,376
----------- -----------
TOTAL COMMON STOCKS............ 12,006,952 48,357,286
----------- -----------
TOTAL INVESTMENTS.............. $20,704,279 $57,002,945
=========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE> 8
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
INCOME:
DIVIDENDS (INCLUDING DIVIDENDS FROM
AFFILIATE -- NOTE 2)................... $ 761,361
INTEREST.................................... 195,641
OTHER INCOME................................ 49,590
-----------
TOTAL.................................. 1,006,592
EXPENSES:
COMPENSATION................... $ 52,825
TAXES OTHER THAN INCOME
TAXES........................ 18,414
DIRECTORS' FEES................ 25,875
INVESTMENT ADVISORY FEES (NOTE
6)........................... 59,376
LEGAL.......................... 6,000
AUDITING & ACCOUNTING.......... 26,550
CUSTODIAN...................... 8,157
INSURANCE...................... 9,496
OTHER OFFICE AND
ADMINISTRATIVE............... 4,263
-----------
TOTAL.................................. 210,956
-----------
NET INVESTMENT INCOME............................. 795,636
-----------
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS (NOTE 4):
REALIZED GAIN FROM SECURITY
TRANSACTIONS
(EXCLUDING SHORT-TERM
INVESTMENTS):
PROCEEDS FROM SALES............ $ 2,953,211
COST OF SECURITIES SOLD........ 703,896
-----------
NET REALIZED GAIN...................... 2,249,315
UNREALIZED APPRECIATION OF
INVESTMENTS:
AT JANUARY 1, 2000............. 37,622,291
AT JUNE 30, 2000............... 36,292,416
-----------
INCREASE IN NET UNREALIZED APPRECIATION........... (1,329,875)
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS........ 919,440
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS... $ 1,715,076
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE> 9
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND THE
YEAR ENDED DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
2000 1999
----------- -----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS:
NET INVESTMENT INCOME................ $ 795,636 $ 1,462,089
NET REALIZED GAIN ON INVESTMENTS..... 2,249,315 2,081,530
(DECREASE) INCREASE IN NET UNREALIZED
APPRECIATION ON INVESTMENTS....... (1,329,875) (2,778,555)
CAPITAL GAINS TAX PAYABLE ON BEHALF
OF SHAREHOLDERS (NOTE 1).......... -- (725,451)
----------- -----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS................... 1,715,076 39,613
UNDISTRIBUTED INVESTMENT INCOME
INCLUDED IN PRICE OF SHARES
REDEEMED.......................... (5,883) (7,582)
REALIZED GAIN FROM SECURITY
TRANSACTIONS INCLUDED IN PRICE OF
SHARES REDEEMED................... (24,763) (8,813)
DIVIDENDS TO SHAREHOLDERS FROM NET
INVESTMENT INCOME................. (367,014) (1,454,503)
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..................... (657,038) (1,186,939)
----------- -----------
TOTAL INCREASE IN NET ASSETS......... 660,378 (2,618,224)
NET ASSETS:
BEGINNING OF YEAR.................... 56,964,254 59,582,478
----------- -----------
END OF YEAR [INCLUDING UNDISTRIBUTED
NET INVESTMENT INCOME (LOSS) OF
$153,435 AND ($269,299)
RESPECTIVELY]..................... $57,624,632 $56,964,254
=========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE> 10
NOTES TO FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(UNAUDITED)
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 631 shares of capital stock
redeemed during the period ended June 30, 2000.
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, 2000.
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, 2000 6 Months
--------------------------------- Ended 6/30/00
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 $2,099,376 $32,940
====== ======= ========== =======
</TABLE>
9
<PAGE> 12
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(UNAUDITED)
3. COVERED CALLS WRITTEN
At June 30, 2000, the Company has written covered calls as follows:
<TABLE>
<CAPTION>
Expiration Exercise Shares Subject
Common Stock Date Price to Call Value
------------ ---------- -------- -------------- -----
<S> <C> <C> <C> <C>
State Street Corp. ..... 11/17/00 $120 10,000 $ 84,697
PNC Financial Group..... 1/19/01 60 10,000 47,199
--------
$131,896
--------
</TABLE>
4. 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, 2000 (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................ $2,619,096 $2,953,211 $ 703,896
Short-term securities........ 2,096,225 2,794,912 2,794,912
U.S. Treasury Notes.......... 953,125 1,200,000 1,200,000
---------- ---------- ----------
Total................... $5,668,446 $6,948,123 $4,698,808
========== ========== ==========
</TABLE>
5. LEASE
The Company rents office space under a lease expiring in April 2001. The
lessor Company's President also serves on the Board of Directors of the Company.
Minimum annual rental for this space is $5,400.
6. OTHER INFORMATION FOR THE SIX MONTHS ENDED
JUNE 30, 2000
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 $52,825.
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,
-------------- -------------------------------------------
2000 1999 1998 1997 1996
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment income............... $ 18.35 $ 34.49 $ 33.33 $ 32.49 $ 32.33
Expenses........................ 3.85 8.10 7.84 7.27 6.68
--------- --------- --------- --------- -------
Net investment income........... 14.50 26.39 25.49 25.22 25.65
Dividends from net investment
income........................ (6.75) (26.48) (25.54) (25.33) (25.67)
Net realized gain (loss) and
increase (decrease) in
unrealized appreciation....... 16.57 (27.25) 15.40 224.41 90.93
--------- --------- --------- --------- -------
Net increase (decrease) in net
asset value................... 24.32 (27.34) 15.35 224.30 90.91
Net asset value:
Beginning of year............. 1,040.12 1,067.46 1,052.11 827.81 736.90
--------- --------- --------- --------- -------
End of year................... $1,064.44 $1,040.12 $1,067.46 $1,052.11 $827.81
========= ========= ========= ========= =======
Annual ratio of expenses to
average net assets............ 0.74%* 0.74% 0.74% 0.78% 0.86%
Annual ratio of net investment
income to average net
assets........................ 2.78%* 2.40% 2.42% 2.68% 3.32%
Annual portfolio turnover
rate.......................... 15.10%* 6.31% 8.13% 10.44% 5.29%
Number of shares outstanding at
end of period in thousands.... 54 55 55 56 58
</TABLE>
* Annualized.
11
<PAGE> 14
CHANGES IN THE PORTFOLIO OF INVESTMENTS
(EXCLUSIVE OF SHORT-TERM INVESTMENTS)
FOR THE SIX MONTHS ENDED JUNE 30, 2000
PURCHASES
<TABLE>
<CAPTION>
Changes Balance
During June 30,
the Period 2000
---------- ------------
Number of Shares
-------------------------
<S> <C> <C>
Abbott Laboratories...................... 12,000 12,000
AON Corp. ............................... 15,000 15,000
National Services Industries............. 7,500 22,500
Pitney-Bowes Inc. ....................... 4,000 10,000
Snap-On Inc. ............................ 7,500 22,500
Unumprovident Corp. ..................... 30,000 30,000
Wendys International Inc. ............... 22,000 22,000
Xerox Corp. ............................. 24,000 48,000
</TABLE>
SALES
<TABLE>
<CAPTION>
Number of Shares
-------------------------
<S> <C> <C>
Corning Inc. ............................ 10,500 --
Marsh & McLennan Inc. ................... 6,500 10,000
Motorola Inc. ........................... 4,500 12,000
</TABLE>
STOCK SPLITS
<TABLE>
<CAPTION>
Number of Shares
-------------------------
<S> <C> <C>
Dow Chemical............................. 12,000 18,000
Motorola Inc. ........................... 8,000 12,000
</TABLE>
12
<PAGE> 15
OTHER INFORMATION RELATING TO THE ANNUAL
SHAREHOLDERS MEETING
Of 54,737 shares of common stock of the company outstanding and entitled to
vote, a total of 51,940 shares were represented either in person or by proxy at
the annual shareholders meeting held on April 19, 2000.
Votes totaling 51,580 were cast for both Shaun F. O'Malley and Jonathan D.
Scott, to serve as directors of the company for a three-year period. There were
360 abstentions.
Votes cast for the ratification of the selection of Deloitte & Touche LLP
as auditors of the company for the period April 19, 2000 to April 18, 2001
totalled 51,842.
13
