<PAGE> 1
SCIOTO INVESTMENT COMPANY
COLUMBUS, OHIO
ANNUAL REPORT
YEAR ENDED
DECEMBER 31, 1996
<PAGE> 2
SCIOTO INVESTMENT COMPANY
c/o 4561 Lanes End Street, Columbus, Ohio 43220-4254
- --------------------------------------------------------------------------------
Directors:
Stephen Kellough Marilyn B. Kellough Arthur D. Herrmann
Brooks P. Julian Donald C. Fanta Kent K. Rinker
Officers:
Stephen Kellough, President and Treasurer
Marilyn B. Kellough, Vice President and Secretary
Transfer Agent and Registrar for the Company's Class A
Common Stock: National City Bank, Stock Transfer Department,
1900 East Ninth Street, Cleveland, Ohio 44114
<TABLE>
<CAPTION>
U.S. Average Annual
Inflation Rate, Based
upon the Consumer Price
Index, as a Per Cent,
for Each Year
----------------------------
<S> <C> <C> <C> <C> <C>
1976 4.8
-----------------
1977 6.8
-----------------
1978 9.0
-----------------
1979 13.3
-----------------
1980 12.4 Class A Common
----------------- Stock Market
1981 8.9 Weighted Average Price per Share
----------------- Maturity Terms of in Dollars,
1982 3.8 the Company's Bond at December 31
----------------- Portfolio, in Years, ------------------------
1983 3.8 at December 31 Bid
----------------- --------------------- ----
1984 3.9
-----------------
1985 3.8 7.1 7.00
---------------------------------------------------------
1986 1.1 7.0 7.50
---------------------------------------------------------
1987 4.4 6.2 7.50
---------------------------------------------------------
1988 4.4 6.0 8.20
--------------------------------------------------------
1989 4.6 3.8 9.00 Asked
-------------------------------------------------------- --------
1990 6.1 3.3 12.00
--------------------------------------------------------
1991 3.1 3.0 12.00 15.00
------------------------------------------------------------------------
1992 2.9 2.8 11.50 14.50
------------------------------------------------------------------------
1993 2.7 2.0 11.00 15.00
------------------------------------------------------------------------
1994 2.7 1.4 12.00 14.00
------------------------------------------------------------------------
1995 2.5 1.4 11.50 14.00
------------------------------------------------------------------------
1996 3.0 2.0 8.00
------------------------------------------------------------------------
</TABLE>
2
<PAGE> 3
SCIOTO INVESTMENT COMPANY
-------------------------
c/o 4561 LANES END STREET
COLUMBUS, OHIO 43220-4254
Dear Fellow Shareholders:
We are pleased to announce that John E. Josephson has been nominated to
stand for election as a new director of Scioto Investment Company at the annual
shareholders' meeting scheduled for June 11, 1997. This will increase the number
of directors to seven. Mr. Josephson is Chief Financial Officer of Beverages &
Moore; and, a former President and Chief Executive Officer, June 1989 to
September 1995, of Big Bear Stores Company, then a subsidiary and now a division
of The Penn Traffic Company.
Scioto Investment Company is qualified as both a regulated investment
company under the Internal Revenue Code and a non-diversified closed-end
management company under the Investment Company Act of 1940. It invests
principally in short-term state and municipal bonds and distributes virtually
all of its net investment income each year to its shareholders. Accordingly, all
of the 1996 dividends were federal income tax exempt to the shareholders, and it
is expected that this same policy will be pursued in 1997.
The details of the Company's investment portfolio at December 31, 1996
and December 31, 1995 are as indicated on the schedules of investments at pages
6 and 7 of this report.
For 1996, the Company earned net investment income of $0.58 per share,
compared to $0.59 for 1995. Gross investment income continued to decline in 1996
as a result of the continuing decline in interest rates compared to previous
years. Dividends distributed to shareholders in 1996 were $0.58 per share, the
same as 1995.
Realized and unrealized depreciation of investments was $0.05 per share
in 1996 versus realized and unrealized appreciation of $0.15 per share in 1995.
Net asset value per share decreased by $0.05 from $17.08 at December 31, 1995 to
$17.03 at December 31, 1996. A financial highlights summary of the per share
data for the last five years is included in Note 2 to the financial statements
at page 11 hereof.
Sincerely,
SCIOTO INVESTMENT COMPANY
/s/ Stephen Kellough
By Stephen Kellough, Chairman,
President and CEO, May 5, 1997
3
<PAGE> 4
[LOGO: Deloitte & Touche LLP]
---------------------------------------------------
155 East Broad Street Telephone: (614) 221-1000
Columbus, Ohio 43215-3611 Facsimile: (614) 229-4647
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Scioto Investment Company:
We have audited the accompanying statements of assets and liabilities of Scioto
Investment Company, including the schedules of investments, as of December 31,
1996 and 1995, and the related statements of operations and of changes in net
assets, and the financial highlights for each of the five years in the period
ended December 31, 1996. These financial statements and the financial highlights
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and the financial highlights
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 financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included either physical counting, or confirmation by
correspondence with the custodian, of securities owned at December 31, 1996 and
1995. 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 our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Scioto Investment
Company at December 31, 1996 and 1995, and the results of its operations, the
changes in its net assets, and the financial highlights for each of the five
years in the period ended December 31, 1996 in conformity with generally
accepted accounting principles.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
January 17, 1997
[Deloitte Touche Tohmatsu International LOGO]
4
<PAGE> 5
SCIOTO INVESTMENT COMPANY
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31,1996 AND 1995
- --------------------------------------------------------------------------------
1996 1995
<TABLE>
<CAPTION>
ASSETS:
<S> <C> <C>
Investments in money market funds and
securities - at quoted market value
(amortized cost, 1996 - $7,551,747;
1995 - $7,583,690) (Note 1) see accompanying
schedules $7,572,439 $7,625,523
Interest receivable 42,301 40,910
Cash 23,237 1,220
Prepaid expenses 784 783
---------- ----------
Total assets 7,638,761 7,668,436
---------- ----------
LIABILITIES:
Accrued expenses - professional and transfer
agent fees 8,299 15,675
---------- ----------
Total liabilities 8,299 15,675
---------- ----------
NET ASSETS (net asset value per common share based
on 447,950 common shares outstanding, 1996 - $17.03;
1995 -$17.08) (Notes 2 and 4) $7,630,462 $7,652,761
========== ==========
</TABLE>
See notes to financial statements
5
<PAGE> 6
<TABLE>
<CAPTION>
SCIOTO INVESTMENT COMPANY
SCHEDULES OF INVESTMENTS
DECEMBER 31, 1996 AND 1995
- -------------------------------------------------------------------------------------------------------------------
DECEMBER 31, 1996
-----------------------------------------------------------------------
MOODY'S
INVESTORS YIELD TO
SERVICE, INC. MOODY'S MATURITY
BOND RATING INVESTORS (BASED ON
BEFORE SERVICE, INC. QUOTED COUPON
NAME OF ISSUER AND INSURANCE BOND RATING MARKET INTEREST DUE PRINCIPAL
TITLE OF ISSUE (UNAUDITED) (UNAUDITED) VALUE) RATE DATE AMOUNT
<S> <C> <C> <C> <C> <C> <C>
UNAFFILIATED MONEY MARKET FUNDS:
Cardinal Government Securities Trust 4.58% 4.58%* Demand $ 136
Cardinal Tax-Exempt Money Fund 2.58 2.58 * Demand 585,528
--------
Total unaffiliated money market funds 585,664
--------
UNAFFILLATED MUNICIPAL BONDS
LISTED IN ORDER OF MATURITY:
Flat Rock Michigan, I.D.R. N/A N/A 4.95 5.375 9/1/97 100,000(3)
Blue Ash, Ohio LTGO Road Improvement AA AA 4.01 4.450 11/1/97 150,000
Grandview Heights, Ohio CSD BEO A A 3.52 7.500 12/1/97 100,000
Belmont County, Ohio Various Purpose N/A AAA 3.51 3.550 12/1/97 150,000
Ottawa County, Ohio Al AAA 3.55 4.700 12/1/97 150,000(2)
Delaware County, Ohio LTGO B/E Al Al 3.56 4.450 12/1/97 250,000
Ohio State Higher Education Series II-A Al AAA 3.50 5.300 12/1/97 400,000
Dublin, Ohio, City School District AAA AAA 3.50 4.650 12/1/97 500,000
Lucas County, Ohio, Improvement Revenue N/A N/A 5.08 5.250 2/1/98 160,000(3)
Ohio State FACS Vern Riffe A N/A N/A 3.77 4.000 10/1/98 700,000(2)
Montgomery County, Ohio Waste B/E N/A AAA 3.94 4.100 11/1/98 100,000
Cuyahoga County, Ohio, LTGO B/E AA AA 3.88 4.100 11/15/98 300,000(3)
Toledo Ohio Waterworks REV B/E AAA AAA 4.03 4.250 11/15/98 200,000(2)
Marietta, Ohio Water REV N/A AAA 3.93 4.300 12/1/98 100,000(2)
Canton, Ohio Waterworks System Import BAA AAA 3.95 5.000 12/1/98 115,000
Montgomery County, Ohio AA AA 3.97 5.300 12/1/98 200,000(2)
Westerville, Ohio City School District A AAA 3.92 4.250 12/1/98 200,000(2)
Springfield, Ohio LSD IMPT UT A A 3.74 6.125 12/1/98 250,000(2)
Columbus, Ohio CSD RFDG B/E AA AAA 3.95 4.450 12/1/98 300,000
Springboro Community City School District, Ohio BAA AAA 3.95 3.800 12/1/98 300,000(2)
Hilliard, Ohio City School District Series A B/E Al AAA 3.90 3.900 12/1/98 400,000(2)
Upper Arlington, Ohio City School District Al AAA 3.95 3.800 12/1/98 600,000(2)
Hilliard, Ohio City School District Series A B/E Al AAA 4.12 4.000 12/1/99 300,000(2)
Clermont County, Ohio Hospital FACS-B AA3 AAA 4.27 4.850 9/1/00 300,000(2)
Napoleon. Ohio City School District B/E/O N/A AAA 4.22 4.150 12/1/00 100,000(2)
Dublin, Ohio CSD UT GO BDS A AAA 4.35 5.250 12/1/00 150,000(2)
Dublin, Ohio LSD UT N/A N/A 4.39 7.125 12/1/00 200,000(2)
Hamilton County, Ohio Sewer System A Al Al 5.03 6.400 12/1/O5 125,000(2)
Salt River Project, Agricultural
Improvement, Arizona 6.00 1/1/96 (1)
Franklin County, Ohio, Children's Hospital 5.40 5/1/96 (1)
State of Ohio, Highway, Series Q 5.70 5/15/96 (3)
State of Ohio, Highway, Series Q 5.70 5/15/96 (3)
Columbus, Ohio, Sewer System Revenue 5.00 6/1/96 (1)
Upper Arlington, Ohio, General Obligation 5.70 12/1/96 (1)
Worthington, Ohio, City School District 6.10 12/1/96 (1)
Lockland, Ohio, City School District 9.70 12/1/96 (1)
Dublin, Ohio, City School District 5.00 12/1/96 (1)
Hamilton County, Ohio, Building Renovation 6.10 12/1/96 (1)
Ohio State University, General Receipts 4.55 12/1/96 (1)
State of Ohio, Higher Education 4.625 12/1/96 (3)
----------
Total unaffiliated municipal bonds 6,900,000
----------
TOTAL $7,485,664
==========
Ratings shown have not been audited by Deloitte & Touche LLP. (1) Total principal amount of 1996 maturities - $1,900,000.
(2) Total principal amount of 1996 purchases - $4,275,000.
* Represents average yield for 1996. (3) Total principal amount of 1996 sales - $1,565,000.
See notes to financial statements.
</TABLE>
6
<PAGE> 7
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
DECEMBER 31, 1996 DECEMBER 31, 1995
- --------------------------------------- ---------------------------------------------------
% OF TOTAL % OF TOTAL
PORTFOLIO PORTFOLIO
ANNUAL (BASED ON (BASED ON
COUPON QUOTED QUOTED QUOTED QUOTED
INTEREST AMORTIZED MARKET MARKET PRINCIPAL AMORTIZED MARKET MARKET
INCOME COST VALUE VALUE) AMOUNT COST VALUE VALUE)
<C> <C> <C> <C> <C> <C> <C> <C>
$ 6 $ 136 $ 136 $ 130 $ 130 $ 130
15,107 585,528 585,528 7.73% 1,464,637 1,464,637 1,464,637 19.22%
------- --------- -------- ---------- ---------- ----------- -----
15,113 585,664 585,664 7.73 1,464,767 1,464,767 1,464,767 19.22
------- --------- -------- ---------- ---------- ----------- -----
5,375 99,892 100,265 1.32 145,000 144,606 145,339 1.91
6,675 150,533 151,382 2.00 150,000 151,175 151,992 1.99
7,500 102,172 103,562 1.37 100,000 104,541 106,375 1.39
5,325 149,737 150,047 1.98 150,000 149,450 148,944 1.95
7,050 151,287 151,547 2.00
11,125 250,000 251,990 3.33 250,000 250,000 251,913 3.30
21,200 403,331 406,436 5.37 400,000 406,964 410,060 5.38
23,250 500,000 505,155 6.67 500,000 500,000 506,640 6.64
8,400 159,407 160,274 2.12 180,000 178,728 180,252 2.36
28,000 697,086 702,730 9.28
4,100 100,169 100,281 1.32 100,000 100,261 99,781 1.31
12,300 300,000 301,170 3.98 400,000 400,000 400,748 5.26
8,500 200,000 200,780 2.65
4,300 100,000 100,671 1.33
5,750 115,000 117,209 1.55 115,000 115,000 117,694 1.54
10,600 204,494 204,842 2.71
8,500 200,000 201,186 2.66
15,313 258,214 260,938 3.45
13,350 302,400 302,763 3.99 300,000 303,657 302,529 3.97
11,400 300,000 299,154 3.95
15,600 400,000 400,000 5.28
22,800 600,000 598,308 7.90
12,000 300,000 299,013 3.95
14,550 307,040 305,859 4.04
4,150 100,000 99,750 1.32
7,875 156,720 154,827 2.04
14,250 220,876 219,468 2.90
8,000 137,725 137,168 1.81
200,000 200,000 200,062 2.62
150,000 150,000 150,797 1.98
200,000 199,966 201,686 2.64
500,000 503,057 504,215 6.61
300,000 300,000 301,638 3.96
100,000 100,000 102,093 1.34
100,000 100,000 102,453 1.34
150,000 154,264 158,273 2.08
500,000 500,000 506,170 6.64
200,000 201,873 204,156 2.68
200,000 202,253 201,374 2.64
700,000 703,128 705,572 9.25
- -------- ---------- ---------- ------ ---------- ---------- ----------- -------
317,238 6,966,083 6,986,775 92.27 6,090,000 6,118,923 6,160,756 80.78
- -------- ---------- ---------- ------ ---------- ---------- ----------- ------
$332,351 $7,551,747 $7,572,439 100.00% $7,554,767 $7,583,690 $7,625,523 100.00%
======== ========== ========== ====== ========== ========== ========== ======
</TABLE>
7
<PAGE> 8
SCIOTO INVESTMENT COMPANY
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, 1994, 1993 AND 1992
- -------------------------------------------------------------------------------
INVESTMENT INCOME:
Nontaxable interest (net of bond premium amortization and discount accretion.
1996 -$21,513; 1995 - $43,899; 1994 - $33,494: 1993 - $22,782; 1992 - $40,508;
1991 - $49,617) (Note 1)
Taxable interest
Total investment income
OPERATING EXPENSES:
Professional services:
Accounting and bookkeeping
Audit and tax
Legal
Transfer agent fees
Directors' fees
Miscellaneous
Total operating expenses
INVESTMENT INCOME - NET
REALlZED AND UNREALIZED GAIN ON INVESTMENTS - Unrealized
appreciation (depreciation) of investments
Net gain (loss) on investments
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, 1994, 1993 AND 1992
- -------------------------------------------------------------------------------
INCREASE IN NET ASSETS;
Operations:
Investments income - net
Realized and unrealized appreciation (depreciation) of investments
Net increase in net assets resulting from operations
DIVIDENDS TO SHAREHOLDERS FROM INVESTMENT INCOME - Net
TOTAL INCREASE (DECREASE) IN NET ASSETS
NET ASSETS AT BEGINNING OF YEAR
NET ASSETS AT END OF YEAR (Including undistributed net investment income,
1996 - $185,172; 1995 - $185,147; 1994 - $179,400; 1993 - $177,832;
1992 - $177,457)
8 See notes to financial statements.
<PAGE> 9
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
Year Ended December 31
- -----------------------------------------------------------------
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C>
$ 319,450 $ 332,004 $ 343,179 $ 369,159 $ 422,049
6 6 4 3 4
- ------------ ---------- ---------- --------- ---------
319,456 332,010 343,183 369,162 422,053
- ------------ ---------- ---------- --------- ---------
16,245 16,550 17,810 15,433 16,195
14,800 13,250 17,400 12,950 12,750
11,101 18,139 35,622 16,967 16,625
7,135 6,207 6,341 6,538 3,907
8,500 8,000 8,000 8,000 7,500
3,631 2,514 2,455 2,053 2,069
- ------------ ---------- ---------- --------- ---------
61,412 64,660 87,628 61,941 59,046
- ------------ ---------- ---------- --------- ---------
258,044 267,350 255,555 307,221 363,007
- ------------ ---------- ---------- --------- ---------
(22,324) 65,933 (182,473) (24,126) 16,745
- ------------ ---------- ---------- --------- ---------
(22,324) 65,933 (182,473) (24,126) 16,745
- ------------ ---------- ---------- --------- ---------
$ 235,720 $ 333,283 $ 73,082 $ 283,095 $ 379,752
============ ========== ========== ========= =========
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
Year Ended December 31
- ------------------------------------------------------------------
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C>
$ 258,044 $ 267,350 $ 255,555 $ 307,221 $ 363,007
(22,324) 65,933 (182,473) (24,126) 16,745
- ------------ ---------- ---------- --------- ----------
235,720 333,283 73,082 283,095 379,752
(258,019) (261,603) (253,988) (306,846) (359,704)
- ------------ ---------- ---------- --------- ----------
(22,299) 71,680 (180,906) (23,751) 20,048
7,652,761 7,581,081 7,761,987 7,785,738 7,765,690
- ------------ ---------- ---------- --------- ----------
$ 7,630,462 $7,652,761 $7,581,081 $7,761,987 $7,785,738
============ ========== ========== ========== ==========
</TABLE>
9
<PAGE> 10
SCIOTO INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31,1996 AND 1995
- --------------------------------------------------------------------------------
1. ACCOUNTING POLICIES
ORGANIZATION - The Company was incorporated in 1933 in Ohio. In September
1976 the Company registered under the Investment Company Act of 1940 and
presently operates as a non-diversified, closed-end management company. See
Note 3 regarding sale of Company assets on August 30, 1976, change of
business and name.
SECURITY VALUATION - Investments in municipal bonds are stated at the bid
price as of the end of the year. The bid price (used to determine quoted
market value in the accompanying schedule of investments) is determined
from written quotations received from a reputable broker. Investments in
money market funds are stated at cost which equals market value. At
December 31, 1996, unrealized appreciation of investments of $21,150
consisted of $29,964 of unrealized gains and $8,814 of unrealized losses.
Cost of investments is the same for Federal income tax purposes.
SECURITY TRANSACTIONS - Security transactions are accounted for on the
trade date. Purchases and sales (including maturities) of investments,
excluding money market funds, for the year ended December 31, 1996 were
$4,275,000 and $3,465,000, respectively. Cost of securities sold is
determined using the identified amortized cost basis.
PERVASIVENESS OF ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
FEDERAL INCOME TAX - The Company's policy is to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies, principally Sections 851 and 852 of Subchapter M, and
to annually distribute substantially all of its investment income to its
shareholders; accordingly, no Federal income tax provision is required on
net investment income. Realized capital gains are subject to Federal income
tax at regular corporate capital gains tax rates. Realized capital losses
can only be used to offset capital gains.
The Tax Reform Act of 1984 permits certain regulated investment companies
to be personal holding companies as defined in Section 542 of the Internal
Revenue Code. The Company will be able to retain regulated investment
company status for Federal income tax purposes even if it is a personal
holding company. As a personal holding company, the Company is permitted to
invest in taxable investments. If, at the close of each quarter of its
taxable year, at least 50 percent of the value of the total assets of the
Company consist of tax exempt obligations, a pro-rata portion of the
Company's distributions will qualify as exempt interest dividends.
INCOME AND EXPENSE RECOGNITION - Interest income and related expenses are
recognized on the accrual basis. Amortization of bond premiums and
accretion of bond discounts, calculated by the straight-line method, are
charged or credited against interest income over the term of the bond.
10
<PAGE> 11
<TABLE>
<CAPTION>
2. FINANCIAL HIGHLIGHTS
Selected data for each of the 447,950 common shares of Scioto Investment Company
outstanding for each of the five years in the period ended December 31, 1996 is
as follows:
PER SHARE DATA: 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Net asset value at
beginning of year $ 17.08 $ 16.92 $ 17.33 $ 17.38 $ 17.34
Income from Investment
Operations:
Investment income (bond interest) 0.71 0.74 0.77 0.82 0.94
Operating expenses (0.13) (0.15) (0.20) (0.14) (0.13)
------- ------- ------- ------- -------
Investment income - net 0.58 0.59 0.57 0.68 0.81
Unrealized and realized gain
(loss) on investments (0.05) 0.15 (0.41) (0.05) 0.04
------- ------- ------- ------- -------
Total from Investment
Operations 0.53 0.74 0.16 0.63 0.85
------- ------- ------- ------- -------
Distributions of investment
income - net (dividends) (0.58) (0.58) (0.57) (0.68) (0.81)
------- ------- ------- ------- -------
Net asset value at end of year $ 17.03 $ 17.08 $ 16.92 $ 17.33 $ 17.38
======= ======= ======= ======= =======
Total return (aggregate) 3.08% 4.40% 0.94% 3 64 4.89%
</TABLE>
<TABLE>
<CAPTION>
RATIOS TO AVERAGE
NET ASSETS: 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Operating expenses 0.80% 0.85% 1.14% 0.80% 0.76%
Investment income - net 3.38% 3.51% 3.33% 3.95% 4.67%
SUPPLEMENTAL DATA:
Net assets at end
of year $7,630,462 $7,652,761 $7,581,081 $7,761,987 $7,785,738
Number of shares
outstanding at end
of year 447,950 447,950 447,950 447,950 447,950
Portfolio turnover rate 50.96% 27.71% 20.60% 32.52% 17.82%
</TABLE>
11
<PAGE> 12
3. SALE OF COMPANY ASSETS, CHANGES IN BUSINESS, AND LEASE LIABILITIES
UNDERTAKING
Prior to August 30, 1976, the Company operated a chain of 54 supermarkets
and 12 discount department stores in Ohio, West Virginia, and Kentucky in
leased premises. On June 30, 1976, the Company and each of its subsidiaries
(the "Company") entered into an Agreement of Sale, pursuant to which
substantially all of the assets of the Company were sold for $33.00 per
Class A and Class B common share cash and assumption of all of the
liabilities of the Company, however, the Company remains contingently
liable for non-cancellable leases entered into previously that are still in
effect. The Company would only be required to make payments under these
leases in the event of non-payment of rent by the existing tenant. The Penn
Traffic Company through its Big Bear Stores Division, (a Delaware
Corporation, Federal ID #25-0716800, which acquired the Big Bear Stores
Company, a Delaware Corporation, Federal ID #31-0888208.)
Subsequent to the sale consummation on August 30, 1976, the Company's
subsidiaries were liquidated and merged into the Company, and the Company's
name was changed from Big Bear Stores Company, an Ohio corporation, to
Scioto Investment Company, an Ohio corporation (Federal ID #31-4128470).
As indicated above, the Company remains contingently liable for
non-cancellable leases entered into prior to the date of sale. At
December 31, 1996, the remaining minimum future lease rental commitments
during the non-cancellable lease terms are approximately $4,500,000
($5,700,000 at December 31, 1995) and the total of the non-cancellable
leases plus total option period minimum future lease rental commitments are
approximately $23,400,000 ($24,500,000 at December 31, 1995). These
non-cancellable leases require approximately $1,200,000 ($1,200,000 at
December 31, 1995) in annual minimum rentals.
4. COMMON SHARES
The status of common shares, stated value of $.66 per share, at
December 31, 1996 follows:
<TABLE>
<CAPTION>
PAR SHARES
TITLE VALUE AUTHORIZED OUTSTANDING
<S> <C> <C> <C> <C>
Class A $.0066-2/3 4,000,000 108,800
Class B $.0066-2/3 1,000,000 339,150
</TABLE>
On July 29, 1981, the shareholders approved a 25 for 1 reverse stock split
which was effective August 3, 1981 and fractioned shares were purchased
(total of $119,950) by the Company at the rate of $23.30 per pre-reverse
split share based on the June 30, 1981 book value per share.
On December 13, 1989, the shareholders approved an amendment to the
Articles of Incorporation to increase the authorized number, and reduce the
par value, of the Company's common shares and to eliminate provisions
relating to the authorization of prior preferred stock and preferred stock.
A 50-for-1 stock split, effective on December 14, 1989, was approved by the
shareholders. Each share of Class A stock is entitled to one vote and each
share of Class B stock is entitled to ten votes.
* * * * * *
12
