<PAGE>
CURRENT INCOME SHARES, INC.
- --------------------------------------------------------------------------------
DIRECTORS
Lorenzo D. Courtright* Clark R. Gates
Morris A. Densmore* William R. Howell*
Stephen J. Dunn* Michael L. Noel*
*Serve as members of the Audit Committee
OFFICERS
Morris A. Densmore CHAIRMAN
Clark R. Gates PRESIDENT
James V. Atkinson VICE PRESIDENT AND
PORTFOLIO
MANAGER
Richard H. Earnest VICE PRESIDENT
Kevin A. Rogers VICE PRESIDENT
Paul Mastin TREASURER
Jonathan A. Wright SECRETARY
AUDITORS
Deloitte & Touche LLP
50 Fremont St.
San Francisco, CA 94105
CUSTODIAN
Bankers Trust Company
16 Wall Street
New York, N.Y. 10015
TRANSFER & DIVIDEND
REINVESTMENT PLAN AGENT
Harris Trust Company of California
311 West Monroe St. (11th Floor)
Chicago, IL 60606
(800) 554-3406
COMPANY MAILING ADDRESS
Current Income Shares, Inc.
P.O. Box 3100
Terminal Annex
Los Angeles, California 90030
COMPANY TELEPHONE
(800) 634-6521
NYSE SYMBOL
"CUR"
SEMI-ANNUAL REPORT
JUNE 30, 1997
Investment Adviser:
PACIFIC ALLIANCE
CAPITAL MANAGEMENTSM
A DIVISION OF
UNION BANK OF CALIFORNIA, N.A.
445 South Figueroa Street
Los Angeles, California 90071
<PAGE>
- --------------------------------------------------------------------------------
CURRENT INCOME SHARES, INC.
- --------------------------------------------------------------------------------
Dear Shareholders:
We are pleased to report to you the results of the operation of your company
for the first half of 1997. During the six-month period, total dividends paid to
shareholders was $1,487,701, consisting of quarterly dividends per share of 20.0
cents and 20.5 cents. The net asset value at the end of this period was $12.992,
a slight decrease from the 1996 year-end net asset value of $13,052.
FIRST QUARTER HIGHLIGHTS
As we moved thru the first quarter of 1997, there was disappointment for bond
investors as yields moved higher due to stronger than anticipated economic
growth, forcing the Federal Reserve to raise interest rates for the first time
in over two years, and causing the first negative quarterly return for bonds in
a year. Bond yields began the year at 6.6 percent, fell to a low of 6.5 percent
on February 14, then retreated during March to end the quarter at a yield of 7.1
percent, the first time yields have been above 7 percent since last September.
Very modest bond market gains during January and February were not enough to
overcome a 30 basis point rise in long-term rates, and a 35 basis point increase
in one- to ten-year interest rates during March.
Strong retail sales gains announced in mid-March caused bond yields to rise 10
basis points, and led forecasters to begin increasing their estimates of first
quarter GDP growth. Yields rose another 12 basis points near the end of the
month with the announcement of strong durable goods orders and a 9 percent
increase in new home sales.
As a result, 1997 became the eleventh consecutive year in which bond prices
declined during the month of March. Long-term interest rates rose fifty basis
points for the quarter, resulting in total return losses of 4.3 percent for the
thirty year Treasury bond and 2.3 percent for the ten-year.
SECOND QUARTER HIGHLIGHTS
The second quarter showed a 180 DEG. turnaround. The Lehman Aggregate index
rose 3.7 percent during the second quarter, its best quarterly return in a year
and a half, as interest rates declined nearly 40 basis points. After six months
of rapid growth, economic activity slowed during the second quarter, while the
inflation miracle continued, causing interest rates to fall from their first
quarter peak. Long-term Treasury rates reached a high of 7.2 percent early in
the quarter, matching the high for all of last year, then declined to 6.8
percent on June 30 resulting in a thirty-year bond return of 5.7 percent for the
quarter. The ten-year Treasury also declined 40 basis points during the quarter,
producing a return of 4.9 percent, while the five-year returned 3.2 percent, and
the two-year gained 2.3 percent. Despite the robust second quarter gain, the
Lehman Aggregate index returned only 3.1 percent for the first half of the year
due to the rise in rates during the first quarter. As of June 30, interest rates
remained approximately 15 basis points above the levels at the start of the
year.
Mortgage backed securities performed well again during the second quarter,
outgaining duration equivalent Treasuries by 57 basis points for the quarter,
and a cumulative 114 basis points so far this year. Interest rates at the end of
the quarter were within 25 basis points of their levels of one year ago, a
stable interest rate environment in which prepayment speeds are more
predictable, enhancing the value of mortgage backed securities. Mortgages have
also benefited from strong demand by banks as a supplement to their loan
portfolios, and from an increase in CMO origination. Corporate bonds
outperformed duration equivalent Treasuries by 31 basis points during the
quarter, and a cumulative 55 basis points for the first half of
<PAGE>
- --------------------------------------------------------------------------------
the year. After six consecutive years as the best aggregate sector, corporates
took second place behind mortgages during the first half of 1997.
Our outlook for the second half of the year is for a continuation of the
gradual trend toward lower interest rates as the market shifts its perception of
inflation from three percent to something closer to two percent. In this
environment, corporate bonds and mortgages should continue to do well, although
mortgages have recently given back some of their outstanding relative
performance of the first half of the year as interest rates have continued to
fall. Despite the nearly 40 basis point decline in rates during the second
quarter, U.S. rates remain high relative to the rest of the world. Japanese bond
yields are over 400 basis points lower than the U.S. rates, both German and
French yields are over 100 basis points lower, Canadian rates are 50 basis
points lower, and even Italy has slightly lower bond yields than the U.S.
Relatively high domestic rates have accelerated demand from foreign buyers, not
only foreign central banks, but also private investors who now constitute the
largest single class of buyers of U.S. corporate bonds.
The unaudited financial statements for the period ending June 30, 1997,
together with the portfolio of investments owned on the same date, are presented
on the following pages. The table below reflects the current portfolio
distribution according to the rating grades assigned by Standards and Poor's.
<TABLE>
<CAPTION>
As a Percent of
Total Investments
Grade in Securities
- ------------------------ -----------------
<S> <C>
AAA..................... 28.1%
A....................... 28.9%
BBB..................... 30.7%
-------
Subtotal............ 87.7%
BB...................... 11.1%
B....................... 1.2%
-------
100.00%
-------
-------
</TABLE>
If you have any questions regarding Current Income Shares, Inc., please
contact us or the transfer agent, Harris Trust Company of California, at the
address or phone numbers presented on the cover of this report.
[SIGNATURE]
Clark R. Gates
President
July 30, 1997
<PAGE>
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------
CURRENT INCOME SHARES, INC.
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997
(Unaudited)
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments in securities at
market value:
Bonds (Cost $45,392,186)........................................ $ 46,871,711
Cash............................................................ 234,882
Interest receivable............................................. 667,915
------------
Total Assets.................................................. 47,774,508
LIABILITIES
Accrued expenses................................................ 51,350
------------
NET ASSETS........................................................ $ 47,723,158
------------
------------
Net assets are represented by:
Capital stock, $1 par, 25,000,000
shares authorized, 3,673,334
shares issued and outstanding............................... $ 3,673,334
Paid-in capital in excess of par
value....................................................... 42,977,827
Accumulated net realized loss................................. (461,399)
Unrealized appreciation on
investments................................................. 1,479,525
Undistributed net investment
income...................................................... 53,871
------------
NET ASSETS........................................................ $ 47,723,158
------------
------------
NET ASSET VALUE PER SHARE
($47,723,158 DIVIDED BY 3,673,334 shares
of common stock outstanding).................................... $12.99
------------
------------
</TABLE>
<TABLE>
<S> <C> <C>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(Unaudited)
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest......................................... $ 1,771,414
--------------
Total Investment Income........................ $ 1,771,414
-----------
EXPENSES
Investment management
and advisory fees.............................. 117,975
Custodian fees................................... 4,952
Transfer agent fees.............................. 29,222
Directors' fees and
shareholder expenses........................... 14,876
Printing......................................... 18,707
Legal and auditing fees.......................... 27,370
Listing fees -- NYSE............................. 2,488
Insurance expense................................ 5,705
Pricing expense.................................. 508
Taxes............................................ 5,499
Other expenses................................... 5,219
--------------
Total Expenses................................. 232,521
-----------
Net Investment Income........................ $ 1,538,893
-----------
REALIZED AND
UNREALIZED GAINS AND LOSSES
ON INVESTMENTS IN SECURITIES
Realized loss from
securities transactions:
Proceeds from sales............................ $ 28,829,531
Cost of securities sold........................ (29,041,648)
--------------
Net realized loss on investments sold........ (212,117)
Unrealized appreciation/
(depreciation) of investments:
Beginning of period............................ 1,538,055
End of period.................................. 1,479,525
--------------
Net unrealized depreciation during the
period..................................... $ (58,530)
-----------
Net realized and unrealized loss on
investments................................ $ (270,647)
-----------
Net increase in net assets resulting from
operations...................................... $ 1,268,246
-----------
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 2 -
<PAGE>
- --------------------------------------------------------------------------------
CURRENT INCOME SHARES, INC.
STATEMENTS OF CHANGES IN NET ASSETS
(Unaudited)
FOR THE PERIODS ENDED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS Twelve Months
JUNE 30, DECEMBER 31,
1997 1996
------------ ---------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES
Net investment income...................................... $ 1,538,893 $ 3,036,460
Net realized gain/(loss) on investments sold............... (212,117) (249,377)
Net unrealized depreciation of investments during the
period................................................... (58,530) (1,732,160)
------------ ---------------
Net increase in net assets resulting from operations....... 1,268,246 1,054,923
Dividends to shareholders from net investment income....... (1,487,701) (3,232,533)
------------ ---------------
Decrease in net assets................................... (219,455) (2,177,610)
NET ASSETS
Beginning of period........................................ 47,942,613 50,120,223
------------ ---------------
End of period [including underdistributed net investment
income of $53,871 and $2,679 respectively]............... $ 47,723,158 $ 47,942,613
------------ ---------------
------------ ---------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
- 3 -
<PAGE>
- --------------------------------------------------------------------------------
CURRENT INCOME SHARES, INC.
PORTFOLIO OF INVESTMENTS IN SECURITIES
(Unaudited)
JUNE 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Standard & Poor's Principal Market
Security Rating Amount Value
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
BONDS -- (98.22%)
- -------------------------------------------------------------------------------------------------------------------
ASSET BACKED (2.38% OF NET ASSETS)
Chase Manhattan Auto Grantor 6.61%, 09/15/02....................... AAA $1,128,911 $ 1,133,449
- -------------------------------------------------------------------------------------------------------------------
TOTAL ASSET BACKED (Cost $1,128,672) 1,133,449
- -------------------------------------------------------------------------------------------------------------------
BANKS (7.45% OF NET ASSETS)
Bankers Trust Company 7.25%, 01/15/03.............................. A- 1,500,000 1,515,000
First Nationwide 10.625%, 10/01/03................................. B 500,000 551,250
Fleet Financial Group 7.125%, 04/15/06............................. BBB+ 1,500,000 1,488,750
- -------------------------------------------------------------------------------------------------------------------
TOTAL BANKS (Cost $3,506,912) 3,555,000
- -------------------------------------------------------------------------------------------------------------------
CANADIANS (5.17% OF NET ASSETS)
Nova Scotia Province 8.75%, 04/01/22............................... A- 1,100,000 1,258,125
Saskatchewan Province 9.375%, 12/15/20............................. A- 1,000,000 1,208,750
- -------------------------------------------------------------------------------------------------------------------
TOTAL CANADIANS (Cost $2,185,865) 2,466,875
- -------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES (10.15% OF NET ASSETS)
Chugach Electric Assn., Inc. 9.14%, 03/15/22 A 1,000,000 1,116,250
Houston Industries, Inc. 9.375%, 06/01/01.......................... BBB+ 2,000,000 2,170,000
UtiliCorp United 8.45%, 11/15/99................................... BBB 1,500,000 1,558,125
- -------------------------------------------------------------------------------------------------------------------
TOTAL ELECTRIC UTILITIES (Cost $4,598,174) 4,844,375
- -------------------------------------------------------------------------------------------------------------------
ENERGY (7.84% OF NET ASSETS)
Union Oil Co. of California 9.125%, 02/15/06....................... BBB+ 2,000,000 2,252,500
Union Pacific Resources 7.00%, 10/15/06............................ A 1,500,000 1,490,625
- -------------------------------------------------------------------------------------------------------------------
TOTAL ENERGY (Cost $3,640,889) 3,743,125
- -------------------------------------------------------------------------------------------------------------------
GAS (7.21% OF NET ASSETS)
Coastal Corporation 9.625%, 05/15/12............................... BB+ 2,000,000 2,400,000
Panhandle Eastern Corporation 7.875%, 08/15/04..................... A- 1,000,000 1,041,250
- -------------------------------------------------------------------------------------------------------------------
TOTAL GAS (Cost $3,044,485) 3,441,250
- -------------------------------------------------------------------------------------------------------------------
MANUFACTURING (8.26% OF NET ASSETS)
Lockheed Martin Corporation 7.70%, 06/15/08........................ BBB+ 1,500,000 1,567,500
Owens-Illinois, Inc. 8.10%, 05/15/07............................... BB+ 1,250,000 1,271,875
Westvaco Corporation 10.125%, 06/01/19............................. A 1,000,000 1,102,500
- -------------------------------------------------------------------------------------------------------------------
TOTAL MANUFACTURING (Cost $3,810,130) 3,941,875
- -------------------------------------------------------------------------------------------------------------------
MORTGAGE GOVERNMENT AGENCY (17.96% OF NET ASSETS)
GNMA Pool #439463 8.00%, 12/15/26 AAA 8,380,376 8,571,532
- -------------------------------------------------------------------------------------------------------------------
TOTAL MORTGAGE GOVERNMENT AGENCY
(Cost $8,542,173) 8,571,532
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
- 4 -
<PAGE>
- --------------------------------------------------------------------------------
CURRENT INCOME SHARES, INC.
PORTFOLIO OF INVESTMENTS IN SECURITIES (CONTINUED)
(Unaudited)
JUNE 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Standard & Poor's Principal Market
Security Rating Amount Value
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
OTHER FINANCE (2.04% OF NET ASSETS)
U.S. West Capital Funding, Inc. 6.75%, 10/01/05.......................... BBB+ $1,000,000 $ 973,750
- -------------------------------------------------------------------------------------------------------------------------
TOTAL OTHER FINANCE (Cost $1,000,296) 973,750
- -------------------------------------------------------------------------------------------------------------------------
SECURITIES BROKERS (2.24% OF NET ASSETS)
Lehman Brothers Holdings, Inc. 8.75%, 05/15/02........................... A 1,000,000 1,067,500
- -------------------------------------------------------------------------------------------------------------------------
TOTAL SECURITIES BROKERS (Cost $1,070,892) 1,067,500
- -------------------------------------------------------------------------------------------------------------------------
SERVICE (3.19% OF NET ASSETS)
Loewen Group, Inc. 8.25%, 04/15/03....................................... BB+ 1,500,000 1,524,375
- -------------------------------------------------------------------------------------------------------------------------
TOTAL SERVICE (Cost $1,498,377) 1,524,375
- -------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS (7.65% OF NET ASSETS)
GTE Corporation 10.30%, 11/15/17......................................... A 2,000,000 2,125,000
WorldCom, Inc. 7.55%, 04/01/04........................................... BBB- 1,500,000 1,524,375
- -------------------------------------------------------------------------------------------------------------------------
TOTAL TELECOMMUNICATIONS (Cost $3,786,256) 3,649,375
- -------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION (9.38% OF NET ASSETS)
AMR Corporation 10.00%, 04/15/21......................................... BBB- 1,500,000 1,833,750
General Motors Corporation 8.95%, 07/02/09............................... A- 1,500,000 1,628,610
Norfolk Southern Corporation 7.05%, 05/01/37............................. BBB+ 1,000,000 1,012,500
- -------------------------------------------------------------------------------------------------------------------------
TOTAL TRANSPORTATION (Cost $4,077,751) 4,474,860
- -------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT (7.30% OF NET ASSETS)
U.S. Treasury Note 6.25%, 05/31/00....................................... AAA 350,000 350,067
U.S. Treasury Note 6.125%, 09/30/00...................................... AAA 1,000,000 995,380
U.S. Treasury Note 7.50%, 11/15/01....................................... AAA 1,000,000 1,041,750
U.S. Treasury Note 6.50%, 05/15/05....................................... AAA 1,100,000 1,097,173
- -------------------------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT (Cost $3,501,314) 3,484,370
- -------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (98.22% OF NET ASSETS)
(COST $45,392,186) 46,871,711
- -------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET
(1.78% of Net Assets) 851,447
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100.00% OF NET ASSETS) $47,723,158
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 5 -
<PAGE>
- --------------------------------------------------------------------------------
CURRENT INCOME SHARES, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
JUNE 30, 1997
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
Current Income Shares, Inc. (the "Company") is registered under the Investment
Company Act of 1940, as amended, as a diversified, closed-end management
investment company. The Company was incorporated on November 15, 1972, and
commenced operations on March 27, 1973. The primary investment objective of the
Company is to seek a high level of current income for its shareholders
consistent with investment in a diversified portfolio in which marketable debt
securities considered by management to be of high quality will predominate. To a
lesser extent the Company may also invest in other debt securities and in
certain equities.
The following is a summary of significant accounting policies followed by the
Company in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles.
(a) Security valuation -- Portfolio securities listed or traded on a national
securities exchange are valued at the last reported sales price;
securities traded in the over-the-counter market and listed securities for
which no sales were reported on that date are valued at the most recent
bid price.
(b) Federal income taxes -- It is the Company's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income and net
capital gains to its shareholders. Accordingly, no Federal income tax
provision is required.
(c) 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 amount of income and
expenses during the reporting period. Actual results could differ from
those estimates.
(d) Other -- Security transactions are accounted for on the trade date the
securities are purchased or sold. Purchased discounts and premiums on
securities held are accreted or amortized to interest income over the life
of each security using a method which approximates the effective interest
method. Interest income is recognized on the accrual basis of accounting.
Realized gains and losses are computed using the specific cost of the
securities sold.
2. Purchases and Sales of Securities
Purchases and proceeds of securities other than short-term securities and U.S.
Government obligations aggregated $6,452,193 and $8,926,048, respectively.
Purchases and redemptions of U.S. Government obligations aggregated $9,733,905
and $7,303,483, respectively.
As of June 30, 1997, unrealized appreciation for Federal income tax purposes
aggregated $1,479,525 of which $1,744,072 related to appreciated securities and
$264,547 related to depreciated securities. The aggregate cost for Federal
income tax purposes was not materially different from amounts reported for
financial reporting purposes.
3. Transactions with Affiliates
Pacific Alliance Capital Management (the "Adviser") received fees of $117,975
during the six months ended June 30, 1997 for providing investment management
and advisory services to the Company. The fee is based on an annual rate of 0.5%
of the Company's average net assets.
The Advisory Agreement requires that the Adviser reimburse the Company for
expenses (excluding interest, taxes, the expenses of any offering of the
Company's securities and brokerage commissions) incurred by the
- 6 -
<PAGE>
- --------------------------------------------------------------------------------
CURRENT INCOME SHARES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
JUNE 30, 1997
- --------------------------------------------------------------------------------
Company in excess of one and one-half percent (1 1/2%) per year of the first $30
million of average net assets of the Company and one percent (1%) of average net
assets in excess of $30 million. The expenses incurred by the Company for the
six months ended June 30, 1997 did not exceed the limitation established by the
Advisory Agreement.
4. Agreements with Service Providers
Harris Trust Company of California provides Transfer Agent and Dividend
Reinvestment Plan services and Bankers Trust Company provides custodial services
for the Company.
5. Financial Highlights
Selected data for each share of capital stock outstanding throughout each
period follows:
<TABLE>
<CAPTION>
01/01/97 TO
06/30/97 01/01/96 to 01/01/95 to 01/01/94 to 01/01/93 to
(UNAUDITED) 12/31/96 12/31/95 12/31/94 12/31/93
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Investment Income.................................... $ 0.48 $ 0.95 $ 1.00 $ 1.06 $ 1.09
Expenses............................................. 0.06 0.12 0.12 0.12 0.12
------------ ------------ ------------ ------------ ------------
Net Investment Income................................ 0.42 0.83 0.88 0.94 0.97
Dividends distributed from net Investment Income..... (0.41) (0.88) (1.48) (0.94) (0.97)
Net realized and unrealized gain (loss) on
investments........................................ (0.07) (0.54) 1.79 (1.74) 0.86
------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net asset value........... (0.06) (0.59) 1.19 (1.74) 0.86
Net asset value:
Beginning of period................................ 13.05 13.64 12.45 14.19 13.33
------------ ------------ ------------ ------------ ------------
End of period...................................... $ 12.99 $ 13.05 $ 13.64 $ 12.45 $ 14.19
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Per share market value:
End of period...................................... $ 11.313 $ 11.375 $ 11.875 $ 11.000 $ 13.00
Total investment return+............................. 3.13% 3.54% 22.25% 8.33% 10.53%
RATIOS AND SUPPLEMENTAL DATA
Ratio of expenses to average net assets.............. 1.0%* 1.0% 0.9% 0.9% 0.8%
Ratio of net investment income to average net
assets............................................. 6.6%* 6.3% 6.6% 7.2% 6.9%
Portfolio turnover rate.............................. 34.65% 62.86% 118.52% 42.21% 24.15%
Net assets, end of period (000)...................... $ 47,723 $ 47,943 $ 50,120 $ 45,739 $ 52,137
</TABLE>
+ Does not reflect the brokerage commission.
* Annualized
- 7 -
<PAGE>
- --------------------------------------------------------------------------------
CURRENT INCOME SHARES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
JUNE 30, 1997
- --------------------------------------------------------------------------------
6. Unaudited Quarterly Results of Operations
The following is a summary of unaudited quarterly results of operations:
<TABLE>
<CAPTION>
Net Realized and
Unrealized Gain (Loss)
Net Investment Income on Investments
Investment ------------------------- ---------------------------
Income Amount Per Share Amount Per Share
----------- ------------ ----------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Three months ended:
September 30, 1996.................................. $ 880,365 $ 771,119 $ 0.21 $ 60,367 $ 0.02
December 31, 1996................................... 882,933 757,664 0.21 869,895 0.24
March 31, 1997...................................... 877,206 761,816 0.21 (1,163,210) (0.31)
June 30, 1997....................................... 894,207 777,077 0.21 892,563 0.24
September 30, 1995.................................. $ 922,945 $ 815,939 $ 0.22 $ 503,217 $ 0.14
December 31, 1995................................... 867,539 750,401 0.21 1,879,952 0.51
March 31, 1996...................................... 862,729 747,588 0.20 (2,274,615) (0.62)
June 30, 1996....................................... 871,085 760,129 0.21 (837,224) (0.17)
</TABLE>
7. Dividend Reinvestment Plan
The Company maintains a Dividend Reinvestment Plan in which shareholders may
participate. The Plan is offered through Harris Trust Company of California (the
"Agent"). Under the Plan the Agent uses dividends and other cash distributions
from the Company to purchase additional shares of Company common stock in the
open market for Plan participants. Participants may also make certain cash
contributions to the Plan. Further information regarding the Plan may be
obtained by writing to the Agent at: Harris Trust Company of California, 311
West Monroe Street (11th floor), Chicago, IL 60606.
8. Distributions to Shareholders
On February 8, 1996, a distribution of $.20 per share totalling $734,668 was
declared. Of these amounts, $0.0556 per share, or $204,237, related to net
realized gains from investment transactions during 1995. The dividend was paid
March 15, 1996, to shareholders of record on February 28, 1996.
9. Capital Share Transactions
As of June 30, 1997, there were 25,000,000 shares of $1.00 per value capital
stock authorized. There were no capital share transactions during the period
ended June 30, 1997 and the year ended December 31, 1996.
- 8 -
