<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
Arthur Andersen LLP
701 "B" Street (1600)
San Diego, CA 92101
CUSTODIAN
Bankers Trust Company
16 Wall Street
New York, N.Y. 10015
SHAREHOLDER SERVICES
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"
ANNUAL REPORT
DECEMBER 31, 1996
Investment Advisor:
PACIFIC ALLIANCE
CAPITAL MANAGEMENT-REGISTERED TRADEMARK-
A DIVISION OF
UNION BANK OF CALIFORNIA, N.A.
445 South Figueroa Street
Los Angeles, California 90071
<PAGE>
- --------------------------------------------------------------------------------
CURRENT INCOME SHARES, INC.
- --------------------------------------------------------------------------------
PACIFIC ALLIANCE
CAPITAL MANAGEMENT
January 14, 1997
Dear Shareholders:
We are pleased to report to you the results of the operation of your company
for the year 1996. During the twelve-month period, total dividends paid to
shareholders was $3,232,533, consisting of quarterly dividends per share of 20
cents, 22 cents, 23 cents, and 23 cents. The year-end net asset value was
$13.052, a decrease from the 1995 year-end net asset value of $13.644 but an
increase over the June 1996 net asset value of $12.842.
The total return of the bond market in 1996 as represented by the Lehman
Bros. Aggregate Bond Index was 3.63%. This means that on average bond prices
(market values) declined approximately 3.75%, offsetting coupon income. Your
fund is typically positioned in such a way that when bond prices rise, the total
return will exceed the market's return. Conversely, if prices decline, the total
return will be less than the market's. This year was no exception, but the
relative performance was enhanced by individual security decisions on corporate
bond investments.
While the first six months of the year generated one of the worst bond
market performance periods, the second half began a turnaround with several
spurts and reversals, but overall provided a second half-year rally, which
brought us back to a positive 3.6% over where the year started. Since reaching a
peak yield of 7.2% in early July, long bond yields fell to a year-end closing of
6.6%.
The decline in rates over the second half of the year was fueled by
additional evidence of softer economic growth and benign inflation. Long-term
interest rates declined nearly 10 basis points on November 7, when it was
announced that October consumer credit declined for the first time in three and
one-half years. Coincidentally, the Federal Reserve survey of business
conditions reported that banks were tightening credit standards as delinquency
rates continued to rise. Industrial production declined .5 percent in October,
while housing starts fell 5 percent, and sales of existing homes fell for the
fifth straight month. Inflation has continued to hold steady at a year-over-year
rate of around 3%, as measured by both the CPI and PPI. Bond prices were also
helped by revived talk of a balanced budget agreement, and, more recently, by
the Boskin commission's recommendations on revising the CPI, which increases the
chances of reaching a budget agreement.
As the 4th quarter closed, the economy showed some renewed strength and '97
finds us balanced on the fence; a real softening of the economy could bring on
lower rates or continued moderate growth could push yields
<PAGE>
- --------------------------------------------------------------------------------
higher for a while. Our strategy will be to maintain the year end's maturity
structure and sector weightings as we start the new year.
The audited financial statements for the year ending December 31, 1996,
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........................... 27.7%
AA............................ 0%
A............................. 26.1%
BBB........................... 32.9%
-------
Subtotal................ 86.7%
BB............................ 12.2%
B............................. 1.1%
-------
Total 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.
[LOGO]
Clark R. Gates
President
<PAGE>
- --------------------------------------------------------------------------------
CURRENT INCOME SHARES, INC.
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES STATEMENT OF OPERATIONS
DECEMBER 31, 1996 FOR THE YEAR ENDED DECEMBER 31, 1996
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments in securities at
market value:
Bonds (Cost $45,677,016)...................................... $ 47,215,071
Cash............................................................ 36,148
Interest receivable............................................. 747,991
------------
Total Assets.................................................. 47,999,210
------------
LIABILITIES
Accrued expenses................................................ 56,597
------------
NET ASSETS........................................................ $ 47,942,613
------------
------------
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 losses............................... (249,282)
Unrealized appreciation on
investments................................................. 1,538,055
Undistributed net investment income........................... 2,679
------------
NET ASSETS........................................................ $ 47,942,613
------------
------------
NET ASSET VALUE PER SHARE
($47,942,613 DIVIDED BY 3,673,334 shares
of common stock outstanding).................................. $13.05
</TABLE>
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest......................................... $ 3,497,112
--------------
Total Investment Income........................ $ 3,497,112
EXPENSES
Investment management
and advisory fees.............................. 240,422
Custodian fees................................... 9,953
Transfer agent fees.............................. 54,025
Directors' fees and
shareholders expenses.......................... 30,000
Printing......................................... 39,800
Legal and auditing fees.......................... 43,432
Listing fees -- NYSE............................. 5,016
Insurance expense................................ 17,400
Taxes............................................ 9,018
Other expenses................................... 11,566
--------------
Total Expenses................................. 460,632
-----------
Net Investment
Income..................................... $ 3,036,480
-----------
REALIZED AND
UNREALIZED GAINS AND LOSSES
ON INVESTMENTS IN SECURITIES
Realized loss from
securities transactions:
Proceeds from sales............................ $ 67,404,946
Cost of securities
sold.......................................... (67,654,323)
--------------
Net realized loss on
investments sold........................... (249,377)
Unrealized depreciation
of investments:
Beginning of period............................ 3,270,235
End of period.................................. 1,538,055
--------------
Net unrealized
(depreciation) during the period.......... $(1,732,180)
-----------
Net realized and
unrealized loss on
investments............................... $(1,981,557)
-----------
Net increase in net assets resulting from
operations...................................... $ 1,054,923
-----------
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 2 -
<PAGE>
- --------------------------------------------------------------------------------
CURRENT INCOME SHARES, INC.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31,
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
------------ -----------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES
Net investment income.......................................... $ 3,036,480 $ 3,239,415
Net realized gain/(loss) on investments sold................... (249,377) 2,730,664
Net unrealized appreciation/(depreciation) of investments
during the period............................................ (1,732,180) 3,836,426
------------ -----------
Net increase in net assets resulting from operations........... 1,054,923 9,806,505
Dividends to shareholders from net investment income........... (3,232,533) (5,424,782)
------------ -----------
Increase/(decrease) in net assets............................ (2,177,610) 4,381,723
NET ASSETS
Beginning of year.............................................. 50,120,223 45,738,500
------------ -----------
End of year [including under/(over)distributed net investment
income of $2,679 and $(5,504), respectively]................. $ 47,942,613 $50,120,223
------------ -----------
------------ -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 3 -
<PAGE>
- --------------------------------------------------------------------------------
CURRENT INCOME SHARES, INC.
PORTFOLIO OF INVESTMENTS IN SECURITIES
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Standard & Poor's Principal Market
Security Rating Amount Value
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
BONDS -- (98.48%)
- --------------------------------------------------------------------------------------------------------------------
ASSET BACKED (6.97% OF NET ASSETS)
Chase Manhattan Auto Grantor 6.61%, 09/16/02........................ AAA $1,371,791 $ 1,382,903
Standard Credit Card 95-9A 6.55%, 10/07/07.......................... AAA 2,000,000 1,958,073
- --------------------------------------------------------------------------------------------------------------------
TOTAL ASSET BACKED (Cost $3,370,138) 3,340,976
- --------------------------------------------------------------------------------------------------------------------
BANKS (10.87% OF NET ASSETS)
Bankers Trust Company 7.25%, 01/15/03............................... A 1,500,000 1,530,000
First Nationwide 10.625%, 10/01/03.................................. B 500,000 538,750
Fleet Financial Group 7.125%, 04/15/06.............................. BBB+ 1,500,000 1,498,125
NationsBank Corporation 7.75%, 08/15/15............................. A- 1,600,000 1,646,000
- --------------------------------------------------------------------------------------------------------------------
TOTAL BANKS (Cost $5,156,391) 5,212,875
- --------------------------------------------------------------------------------------------------------------------
CANADIANS (5.25% OF NET ASSETS)
Nova Scotia Province 8.75%, 04/01/22................................ A- 1,100,000 1,281,500
Saskatchewan Province Deb. 9.375%, 12/15/20......................... BBB+ 1,000,000 1,233,750
- --------------------------------------------------------------------------------------------------------------------
TOTAL CANADIANS (Cost $2,186,426) 2,515,250
- --------------------------------------------------------------------------------------------------------------------
CONSUMER (4.26% OF NET ASSETS)
Ralston Purina Company 7.75%, 10/01/15.............................. A- 2,000,000 2,037,500
- --------------------------------------------------------------------------------------------------------------------
TOTAL CONSUMER (Cost $2,087,785) 2,037,500
- --------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES (10.19% OF NET ASSETS)
Chugach Electric Assn., Inc. 9.14%, 03/15/22........................ A 1,000,000 1,117,500
Houston Industries, Inc. 9.375%, 06/01/01........................... BBB 2,000,000 2,200,000
UtiliCorp United 8.45%, 11/15/99.................................... BBB 1,500,000 1,569,375
- --------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES (Cost $4,598,646) 4,886,875
- --------------------------------------------------------------------------------------------------------------------
ENERGY (7.88% OF NET ASSETS)
Union Oil Co. of California 9.125%, 02/15/06........................ BBB 2,000,000 2,267,500
Union Pacific Resources 7%, 10/15/06................................ A 1,500,000 1,509,375
- --------------------------------------------------------------------------------------------------------------------
TOTAL ENERGY (Cost $3,647,555) 3,776,875
- --------------------------------------------------------------------------------------------------------------------
GAS (7.09% OF NET ASSETS)
Coastal Corporation 9.625%, 05/15/12................................ BB+ 2,000,000 2,355,000
Panhandle Eastern Corporation 7.875%, 08/15/04...................... BBB 1,000,000 1,046,250
- --------------------------------------------------------------------------------------------------------------------
TOTAL GAS (Cost $3,045,448) 3,401,250
- --------------------------------------------------------------------------------------------------------------------
MANUFACTURING (7.15% OF NET ASSETS)
Georgia Pacific Corporation 7.7%, 06/15/15.......................... BBB- 750,000 750,000
Lockheed Martin Corporation 7.7%, 06/15/08.......................... BBB+ 1,500,000 1,575,000
Westvaco Corporation 10.125%, 06/01/19.............................. A 1,000,000 1,105,000
- --------------------------------------------------------------------------------------------------------------------
TOTAL MANUFACTURING (Cost $3,274,423) 3,430,000
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
- 4 -
<PAGE>
- --------------------------------------------------------------------------------
CURRENT INCOME SHARES, INC.
PORTFOLIO OF INVESTMENTS IN SECURITIES (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Standard & Poor's Principal Market
Security Rating Amount Value
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
TOTAL OTHER FINANCE (2.04% OF NET ASSETS)
U.S. West Capital Funding, Inc. 6.75%, 10/01/05.......................... A+ 1,000,000 $ 977,500
- -------------------------------------------------------------------------------------------------------------------------
TOTAL OTHER FINANCE (Cost $1,000,471) 977,500
- -------------------------------------------------------------------------------------------------------------------------
SECURITIES BROKERS (2.35% OF NET ASSETS)
Lehman Brothers Holdings, Inc. Note 8.8%, 03/01/15....................... A $1,000,000 1,127,500
- -------------------------------------------------------------------------------------------------------------------------
TOTAL SECURITIES BROKERS (Cost $1,104,411) 1,127,500
- -------------------------------------------------------------------------------------------------------------------------
SERVICE (3.17% OF NET ASSETS)
Loewen Group, Inc. 8.25%, 04/15/03....................................... BB+ 1,500,000 1,518,750
- -------------------------------------------------------------------------------------------------------------------------
TOTAL SERVICE (Cost $1,498,691) 1,518,750
- -------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS (7.08% OF NET ASSETS)
GTE Corporation 10.3%, 11/15/17.......................................... BBB+ 2,000,000 2,157,500
360 Communication Company 7.5%, 03/01/06................................. BBB- 1,250,000 1,237,500
- -------------------------------------------------------------------------------------------------------------------------
TOTAL TELECOMMUNICATIONS (Cost $3,548,395) 3,395,000
- -------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION (3.88% OF NET ASSETS)
AMR Corporation Deb 10%, 04/15/21........................................ BB+ 1,500,000 1,858,125
- -------------------------------------------------------------------------------------------------------------------------
TOTAL TRANSPORTATION (Cost $1,470,800) 1,858,125
- -------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT (20.31% OF NET ASSETS)
U.S. Treasury Note 7.5%, 11/15/01........................................ AAA 1,000,000 1,052,760
U.S. Treasury Note 6.5%, 05/15/05........................................ AAA 1,600,000 1,610,096
U.S. Treasury Note 6.25%, 05/31/00....................................... AAA 1,000,000 1,004,180
U.S. Treasury Note 6.5%, 08/15/05........................................ AAA 900,000 905,238
U.S. Treasury Note 6.125%, 09/30/00...................................... AAA 2,500,000 2,498,450
U.S. Treasury Note 6.125%, 03/31/98...................................... AAA 500,000 502,410
U.S. Treasury Note 6.875%, 05/15/06...................................... AAA 2,100,000 2,163,461
- -------------------------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT (Cost $9,687,437) 9,736,595
- -------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (98.48% OF NET ASSETS)
(COST $46,677,017) 47,215,071
- -------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET
(1.52% of Net Assets) 727,542
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100.00% OF NET ASSETS) $47,942,613
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 5 -
<PAGE>
- --------------------------------------------------------------------------------
CURRENT INCOME SHARES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
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 $19,637,749 and $13,060,712, respectively.
Purchases and redemptions of U.S. Government obligations aggregated $11,320,617
and $16,789,234, respectively.
As of December 31, 1996, unrealized appreciation for Federal income tax
purposes aggregated $1,538,055 of which $1,865,353 related to appreciated
securities and $327,298 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
Union Bank of California (the "Adviser") received fees of $240,422 during the
year ended December 31, 1996 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 provides 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 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 year ended
December 31, 1996, did not exceed the limitation established by the Advisory
Agreement.
- 6 -
<PAGE>
- --------------------------------------------------------------------------------
CURRENT INCOME SHARES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
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. Supplementary Information -- Selected per share data and ratios
Selected data for each share of capital stock outstanding throughout each
year follows:
<TABLE>
<CAPTION>
01/01/96 TO 01/01/95 to 01/01/94 to 01/01/93 to 01/01/92 to
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Investment Income....................................... $ 0.95 $ 1.00 $ 1.06 $ 1.09 $ 1.10
Expenses................................................ 0.12 0.12 0.12 0.12 0.12
------------ ------------ ------------ ------------ ------------
Net Investment income................................... 0.83 0.88 0.94 0.97 0.98
Dividends distributed from net Investment
Income and realized gain on investments............... (0.88) (1.48) (0.94) (0.97) (1.03)
Net realized and unrealized gain (loss) on
investments........................................... (0.54) 1.79 (1.74) 0.86 0.22
------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net asset value.............. (0.59) 1.19 (1.74) 0.86 0.17
Net asset value:
Beginning of period................................... 13.64 12.45 14.19 13.33 13.16
------------ ------------ ------------ ------------ ------------
End of period......................................... $ 13.05 $ 13.64 $ 12.45 $ 14.19 $ 13.33
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Per share market value:
End of period......................................... $ 11.375 $ 11.875 $ 11.000 $ 13.00 $ 12.625
Total investment return*................................ 3.54% 22.25% (8.33)% 10.53% 3.22%
RATIOS AND SUPPLEMENTAL DATA
Ratio of expenses to average net assets................. 1.0% 0.9% 0.9% 0.8% 0.9%
Ratio of net investment income to average net assets.... 6.3% 6.6% 7.2% 6.9% 7.5%
Portfolio turnover rate................................. 62.86% 118.52% 42.21% 24.15% 87.08%
Net assets, end of period (000)......................... $ 47,943 $ 50,120 $ 45,739 $ 52,137 $ 48,967
</TABLE>
* Excluding the effect of shareholders' brokerage commissions, if any.
- 7 -
<PAGE>
- --------------------------------------------------------------------------------
CURRENT INCOME SHARES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
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:
March 31, 1996....................................... $ 862,729 $ 747,568 $ 0.20 $ (2,274,615) $ (0.62)
June 30, 1996........................................ 871,085 760,129 0.21 (637,224) (0.17)
September 30, 1996................................... 880,365 771,119 0.21 60,387 0.02
December 31, 1996.................................... 882,933 757,664 0.21 869,895 0.24
March 31, 1995....................................... $ 918,292 $ 818,261 $ 0.22 $ 1,548,456 $ 0.42
June 30, 1995........................................ 958,845 854,814 0.23 2,635,485 0.72
September 30, 1995................................... 922,945 815,939 0.22 503,217 0.14
December 31, 1995.................................... 887,539 750,401 0.21 1,879,952 0.51
</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 totaling $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 December 31, 1996, there were 25,000,000 shares of $1.00 par value
capital stock authorized. There were no capital share transactions during the
years ended December 31, 1996 & 1995.
- 8 -
<PAGE>
- --------------------------------------------------------------------------------
CURRENT INCOME SHARES, INC.
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
To the Board of Directors and Shareholders
of Current Income Shares, Inc.:
We have audited the accompanying statement of assets and liabilities of
Current Income Shares, Inc., including the portfolio of investments in
securities as of December 31, 1996, and the related statement of operations for
the year then ended, statements of changes in net assets for each of the two
years in the period then ended, and the selected per share data and ratios,
disclosed in note 5, for each of the five years in the period then ended. These
financial statements and financial highlights are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and 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 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 confirmation of securities owned as of
December 31, 1996, by correspondence with the custodian. 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, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Current Income Shares, Inc. as of December 31, 1996, the results of its
operations for the year then ended, changes in its net assets for each of the
two years in the period then ended, and the selected per share data and ratios
for each of the five years in the period then ended, in conformity with
generally accepted accounting principles.
Arthur Andersen LLP
San Diego, CA
January 31, 1997
