<PAGE>
As filed with the Securities and Exchange Commission on October 22, 1997
Registration No. 33-6364
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
POST-EFFECTIVE AMENDMENT NO. 12 / X /
and
REGISTRATION STATEMENT UNDER THE INVESTMENT / X /
COMPANY ACT OF 1940
AMENDMENT NO. 14 / X /
ADDISON CAPITAL SHARES, INC.
(Exact Name of Registrant as Specified in Charter)
c/o Janney Montgomery Scott Inc.
2 Bala Cynwyd Plaza
Bala Cynwyd, PA 19004
(Address of Principal Executive Offices)
Registrant's Telephone Number: (215) 667-7007
JAMES W. JENNINGS, ESQUIRE
MORGAN, LEWIS & BOCKIUS LLP
2000 One Logan Square
Philadelphia, PA 19103
(Name and Address of Agent for Service)
It is proposed that this filing will become effective
[ ] immediately upon filing pursuant to Paragraph (b)
[X] on October 31, 1997 pursuant to Paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to Paragraph (a)
[ ] on __________ pursuant to Paragraph (a) of Rule 485
Title of Securities Being Registered: Common Stock, par value $0.001
<PAGE>
ADDISON CAPITAL SHARES, INC.
Cross Reference Sheet
<TABLE>
<CAPTION>
Form N-1A Item Location
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Part A. Information Required in a Prospectus Caption
Prospectus
<S> <C> <C>
Item 1. Cover Page......................................... Cover Page
Item 2. Synopsis........................................... Summary of Fund Expenses
Item 3. Condensed Financial
Information........................................ Financial Highlights
Item 4. General Description of
Registrant......................................... The Fund; The Fund's
Investment Objective and
Policies; The Fund's
Investment Limitations
Item 5. Management of the Fund............................. Management of the Fund
Item 5A. Managment's Discussions of
Fund Performance................................... Not Applicable -Disclosure
in Annual Report
Item 6. Capital Stock and Other
Securities......................................... Description of Fund
Shares; Dividends and
Capital Gains
Distributions; Tax Status
of Dividends and Capital
Gains Distributions;
Shareholder Inquiries
Item 7. Purchase of Securities
Being Offered...................................... How You Can Invest in the
Fund; What Shares Will
Cost; How Net Asset Value
is Determined; The Fund's
Distributor
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Item 8. Redemption or Repurchase........................... How You Can Sell Your Fund
Shares
Item 9. Legal Proceedings.................................. Not applicable
Part B. Information Required in a Statement of Additional
Information
Item 10. Cover Page......................................... Cover Page
Item 11. Table of Contents.................................. Table of Contents
Item 12. General Information and
History............................................ Not applicable
Item 13. Investment Objectives and
Policies........................................... Additional Information
About Investment
Limitations and Policies;
Portfolio Transactions and
Brokerage
Item 14. Management of the
Registrant......................................... Management of the Fund
(Prospectus); Additional
Information About the
Fund's Management and
Affiliations
Item 15. Control Persons and
Principal Holders of
Securities......................................... The Fund's Directors and
Officers
Item 16. Investment Advisory and
Other Services..................................... Investment Advisory and
Other Services; The Fund's
Custodian, Transfer and
Dividend Disbursing Agent;
The Fund's Certified
Public Accountants
Item 17. Brokerage Allocation............................... Portfolio Transactions and
Brokerage
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Item 18. Capital Stock and Other
Services........................................... Additional Information
About Fund Shares
Item 19. Purchase, Redemption and
Pricing of Securities Being
Offered............................................ Additional Purchase and
Redemption Information;
Valuation of Shares
Item 20. Tax Status......................................... Additional Tax Information
Item 21. Underwriters....................................... The Fund's Distributor
Item 22. Calculation on Yield
Quotations of Money Market
Funds.............................................. Not applicable
Item 23. Financial Statements............................... Financial Statements
</TABLE>
Part C. Other Information
Information required to be included in Part C is set forth under the appropriate
item, so numbered, in Part C of the Registration Statement.
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<PAGE>
[LOGO]
Addison Capital Shares, Inc. (the "Fund") is a mutual fund
seeking long-term capital appreciation. The Fund invests principally in those
equity securities which the Fund's investment adviser, Addison Capital
Management Company, believes are undervalued and therefore offer above-average
potential for capital appreciation. See "The Fund's Investment Objective and
Policies" at page 9.
The Fund's shares are distributed by Janney Montgomery
Scott Inc.
This Prospectus sets forth concisely the information about the
Fund that a prospective investor ought to know before investing. It should be
retained for future reference. A Statement of Additional Information about the
Fund dated the same date as this Prospectus, and which is incorporated herein by
reference, has been filed with the Securities and Exchange Commission and is
available without charge upon request from Janney Montgomery Scott Inc. (address
and telephone numbers listed below).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR BY ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
DISTRIBUTOR
JANNEY MONTGOMERY SCOTT INC.
1801 Market Street
Philadelphia, Pennsylvania 19103
In Philadelphia, Pennsylvania (215) 665-6000
Outside Philadelphia, Pennsylvania (800) 526-6397
The date of this Prospectus is November 1, 1997.
<PAGE>
TABLE OF CONTENTS
Page
----
The Fund............................................................. 3
Advantages to Investors................................. 3
Summary of Fund Expenses............................................. 5
Financial Highlights................................................. 7
The Fund's Investment Objective and Policies......................... 10
The Fund's Investment Limitations.................................... 12
How You Can Invest in the Fund....................................... 13
What Shares Will Cost................................................ 14
How Your Shareholder Account will be Maintained...................... 15
How You Can Sell Your Fund Shares.................................... 15
Redemption in Kind...................................... 17
Exchange Privilege...................................... 18
How Net Asset Value is Determined.................................... 18
Dividends and Capital Gains Distributions............................ 19
Tax Status of Dividends and Capital
Gains Distributions..................................... 19
Shareholder Services................................................. 21
Confirmations and Reports............................... 21
Systematic Withdrawal Plan.............................. 22
Qualified Retirement Plans........................................... 22
Management of the Fund............................................... 23
The Fund's Distributor............................................... 28
Description of Fund Shares........................................... 30
Transfer Agent....................................................... 31
Shareholder Inquiries................................................ 31
Application for Pre-Authorized Check Plan............................ __
Account Application.................................................. __
================================================================================
This Prospectus does not constitute an offering by the Fund or by the principal
underwriter in any jurisdiction in which such offering may not lawfully be made.
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<PAGE>
THE FUND
Addison Capital Shares, Inc. (the "Fund") is a corporation
formed under the laws of the state of Maryland on June 4, 1986. The Fund is an
open-end diversified mutual fund and commenced operations on September 15, 1986.
The Fund currently offers one class of common stock designed for investment by
individuals, institutions and fiduciaries whose investment objective is
long-term capital appreciation. See "The Fund's Investment Objective and
Policies" at page 10. The Fund may later offer additional series of shares
designed for investment by persons or entities with different investment
objectives. A minimum initial investment of $1,000. See "How You Can Invest in
the Fund" at page 13.
The Fund currently pays an annual distribution fee to its
distributor, Janney Montgomery Scott Inc. ("Janney"), equal to .40% of the
Fund's average daily net assets, pays an annual service fee to Janney equal to
.25% of the Fund's average daily net assets and pays other fees for management
and investment advisory services. Addison Capital Management Company acts as the
Fund's investment adviser. The total amount of the Fund's investment advisory
services, financial accounting, management and distribution fees should equal
approximately 1.50% of the Fund's average daily net assets, which amount is
higher than that paid by many other equity investment companies. See "Management
of the Fund" at page 23 and "The Fund's Distributor" at page 28.
Advantages to Investors
- Investors will obtain the benefit of professional
management for securities investments and avoid the
cost and burden of selecting, supervising, and
handling an individual securities portfolio.
- Investors will obtain an interest in a diversified
portfolio of many different securities, with the
brokerage costs incurred by the Fund being
significantly less than those which would be borne by
investors individually making a small series of
purchases.
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<PAGE>
- By investing in the Fund through an Individual
Retirement Account ("IRA"), Self-Employed
Individual Retirement Plan ("Keogh Plan"), or
corporate retirement plan, investors can obtain
tax-shelter for a portion of their current income
and tax deferral of the earnings on their
investment. See "Qualified Retirement Plans" at
page 22.
- Investors will be free to redeem their shares at any
time at the next determined net asset value. See "How
You Can Sell Your Fund Shares" at page 15 and
"Qualified Retirement Plans" at page 22.
-4-
<PAGE>
SUMMARY OF FUND EXPENSES
The following information concerning shareholder transaction
expenses and annual Fund operating expenses was developed for use by all mutual
funds to aid investors in understanding the various expenses that are borne
directly or indirectly by the Fund. It should be noted that the long term
investor in the Fund may pay more through the distribution fees described below
than the economic equivalent of the maximum front-end sales charges permitted by
the Rules of the National Association of Securities Dealers.
Shareholder Transaction Expenses
- --------------------------------
Maximum Sales Load Imposed on Purchases1/
(as a percentage of offering price)...................................... None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)...................................... None
Deferred Sales Load (as a percentage of original
purchase price or redemption proceeds,as applicable)..................... None
Redemption Fees (as a percentage of
amount redeemed, if applicable).......................................... None
Exchange Fees............................................................ None
Annual Fund Operating Expenses
- ------------------------------
(as a percentage of average net assets)
Asset Based Sales Charges
(12b-1 Fees)2/........................................................... 0.40%
- --------
1/ Janney has agreed to waive the front-end sales charge of 3% for all new
share purchases.
2/ Janney receives total payments for distribution of Funds shares in an
amount equal to .65% of the Fund's average net assets. Of this amount, .40%
is received from the Fund under the Compensation Plan and .25% is received
from Addison. Janney distributes this fee to brokers for promoting sales of
Fund shares. The NASD imposes a maximum limit on asset based charges for
funds with a 12b-1 fee of 6.25% of new sales, plus interest.
-5-
<PAGE>
Investment Management Fees3/.......................................... 0.75%
Shareholder Servicing Fees4/.......................................... 0.25%
Other Expenses........................................................ 0.42%
Total Fund Operating Expenses......................................... 1.82%
The following example illustrates the expenses that are paid on a
$1,000 investment over various time periods assuming (1) a 5% annual rate of
return and (2) redemption at the end of each time period. As noted above, the
Fund charges no redemption fees of any kind.
1 year 3 years 5 years 10 years
------ ------- ------- --------
You would pay the following expenses on a $1000 investment assuming (1) 5%
annual return and (2) redemption at the end of each
period: $18 $57 $99 $214
This example should not be considered a representation of past or future
expenses or performance. Actual expenses may be greater or lesser than those
shown.
- --------
3/ Addison has agreed to pay Janney an amount equal to .25% of the Fund's
average net assets for Janney's efforts in selling and marketing the shares
of the Fund.
4/ 100% of the Servicing Fees are retained by Janney for continuous personal
service, such as responding to shareholder inquiries, quoting net asset
values, and attending to other shareholder matters, including shareholder
account maintenance.
-6-
<PAGE>
FINANCIAL HIGHLIGHTS
The table below sets forth certain information
concerning the investment results of the Fund. The following information for
each of the five years in the period ended June 30, 1997 has been audited by
Tait, Weller & Baker, independent certified public accountants, whose report
thereon appears with the Fund's financial statements included in the Statement
of Additional Information, which may be obtained by shareholders by contacting
Janney.
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<PAGE>
Financial Highlights (for a Fund Share Outstanding Throughout the Period)
<TABLE>
<CAPTION>
Year Year Year Year Year
Ended Ended Ended Ended Ended
6/30/97 6/30/96 6/30/95 6/30/94 6/30/93
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of
period.................................. $26.42 $22.92 $20.45 $22.69 $19.64
------ ------ ------ ------ ------
Income from Investment Operations
Net investment income................... .15 .17 .22 .21 .24
Net realized and unrealized
gains (losses) on investments........... 7.60 5.42 3.77 3.72
------ ------ ------ ------ ------
(.76)
Total from investment operations........ 7.75 5.59 3.99 (.55) 3.96
------ ------ ------ ------ ------
Less Distributions
Dividends from net investment
income.................................. (.15) (.21) (.20) (.23) (.24)
Distributions from capital gains........ (2.49) (1.88) (1.32) (1.46) (.67)
------ ------ ------ ------ ------
Total distributions.................... (2.64) (2.09) (1.52) (1.69) (.91)
------ ------ ------ ------ ------
Net asset value at end of period....... $31.53 $26.42 $22.92 $20.45 $22.69
Total return(1)........................ 32.20% 25.92% 21.11% (2.73)% 20.98%
Ratios/Supplemental Data
Net assets at end of period (in
000's).................................. $66,609 $50,704 $38,506 $36,171 $37,621
Ratio of expenses to average net
assets.................................. 1.82% 1.96% 2.06% 2.06% 2.13%
Ratio of net income to average net
assets.................................. 0.54% 0.69% 1.03% 1.00% 1.14%
Portfolio turnover rate................. 29.48% 38.97% 42.82% 43.26% 30.01%
Average commission rate per share(4).... $0.0673
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Year Year Year Year Year
Ended Ended Ended Ended Ended
6/30/92 6/30/91 6/30/90 6/30/89 6/30/88
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of
period.................................. $18.90 $18.17 $16.45 $14.62
------ ------ ------ ------
$16.21
Income from Investment Operations
Net investment income................... .26 .22 .22 .42 .21
Net realized and unrealized
gains (losses) on investments........... 1.57 .74 1.71 1.79 (1.62)
------ ------ ------ ------ ------
Total from investment operations....... 1.83 .96 1.93 2.21 (1.41)
------ ------ ------ ------ ------
Less Distributions
Dividends from net investment
income................................. (.27) (.23) (.21) (.38) (.17)
Distributions from capital gains....... (.82) --- --- --- (.01)
------ ------ ------ ------ ------
Total distributions.................... (1.09) (.23) (.21) (.38) (.18)
------ ------ ------ ------ ------
Net asset value at end of period....... $19.64 $18.90 $18.17 $16.45 $14.62
Total return(1)........................ 9.93% 5.40% 11.70% 15.37% (8.64%)
Ratios/Supplemental Data
Net assets at end of period (in
000's).................................. $31,243 $28,744 $29,037 $26,953 $25,843
------ ------ ------ ------ ------
Ratio of expenses to average net
assets.................................. 2.12% 2.34% 2.21% 2.30%
(2) 2.24%(2)
Ratio of net income to average net
assets.................................. 1.32% 1.24% 1.20% 2.26%
(2) 1.47%(2)
Portfolio turnover rate................. 57.34% 57.52% 68.97% 52.39% 63.12%
Average commission rate per share(4)....
</TABLE>
- -------------------
(1) Assumes an initial investment made at the net asset value last calculated
on the business day before the first day of each fiscal year and does not
reflect sales charges on investments. As of July 3, 1995, all sales charges
were waived by the Fund's distributor.
(2) Prior to reimbursement of expenses by Janney and the Adviser, the ratio of
expenses to average net assets on an annualized basis was 2.45%, 2.49% and
3.16% for 1989, 1988 and 1987, respectively, and the ratio of net
investment income to average net assets on an annualized basis was 2.11%,
1.22% and 0.16% for 1989, 1988 and 1987, respectively.
(3) Annualized.
(4) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for security
trades on which commissions are charged.
-9-
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE AND POLICIES
The Fund's objective will be long-term capital appreciation. The
Fund's adviser, Addison Capital Management Company (the "Adviser"), believes
that this objective can best be met through the purchase of equity securities
that appear to be undervalued. A security may be undervalued because of many
factors, including but not limited to investor apathy, market decline within an
industry group, poor industry conditions, tax-loss selling or other factors that
may provide buying opportunities at attractive prices relative to the long-term
prospects for the securities in question. Such securities are usually
characterized by low price to earnings ratios relative to standard indices, such
as the Standard & Poor's 500 index, or low price to earnings ratios relative to
the relevant industry grouping. There can be no assurance that the Fund's
investment objective will be achieved. Fund shares will fluctuate in value as a
result of changes in value of portfolio investments.
The Adviser intends to invest in securities which are undervalued due
to investor apathy, earnings declines, or other adverse developments where the
Adviser believes these developments have abated. It believes that such
securities are likely to provide a greater return than securities with prices
that appear to reflected anticipated favorable developments because the latter
are subject to much greater correction should any unfavorable developments
occur. Although the Fund will invest primarily in dividend-paying companies, the
Fund may from time to time invest in securities that pay no dividends or
interest.
The Fund will invest primarily in common stock, but may also invest in
debt instruments, preferred stock and convertible securities. Investments in
stock may include purchases of securities of closed-end investment companies
provided that, immediately after any such purchase, not more than 10% of the
Fund's total assets will be invested in such securities.
Debt instruments held by the Fund may include money market
instruments, such as securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities and repurchase agreements secured thereby, bank
certificates of deposit and bankers' acceptances issued by banks having net
assets of at
-10-
<PAGE>
least $1 billion as of the end of their most recent fiscal year, commercial
paper which at the date of the investment is rated at the highest grade by
Standard & Poor's Corporation (A-1), by Moody's Investors Service, Inc. (P-1) or
by Fitch's Investor's Service (F-1), or, if not rated, is issued by a company
which at the date of investment has an outstanding issue rated A or better by
Standard & Poor's or Moody's, and other long and short-term debt instruments
which are rated A or higher by Standard & Poor's or Moody's, including corporate
bonds, debentures and notes, and bonds and notes issued by state and local
governments and governmental entities. In periods of market decline, the Fund
expects to continue its policy of seeking investments in equity securities that
appear undervalued rather than building cash reserves.
The Fund may purchase securities traded both on recognized securities
exchanges and in the over-the-counter market. While the Fund may invest in some
foreign securities, investments in foreign securities that are not traded on the
New York Stock Exchange, the American Stock Exchange or the NASDAQ National
Market System will constitute less than 10% of the Fund's portfolio. The Fund's
investments in securities of foreign companies may involve greater risks than
are present in domestic investments. There is generally less publicly available
information about foreign companies and there may be less governmental
regulation and supervision of foreign stock exchanges, brokers and listed
companies. In addition, such companies may use different accounting and
financial standards. The Fund will consider possible political and financial
instability abroad, as well as the liquidity and volatility of foreign
investments.
When cash is temporarily available, the Fund may invest in repurchase
agreements. A repurchase agreement is an agreement under which either U.S.
government obligations or high quality debt securities are acquired from a
securities dealer or bank subject to resale at an agreed upon price and date.
The securities will be held for the Fund by its Custodian as collateral until
retransferred and will be supplemented by additional collateral (without cost to
the Fund) if necessary to maintain a total value equal to or in excess of the
value of the repurchase agreements. The Fund will not enter into repurchase
agreements of more than seven days' duration if more than 10% of
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<PAGE>
its net assets would be invested in such agreements and other illiquid
investments. The Fund will bear a risk of loss in the event that the other party
to a repurchase agreement defaults on its obligations and the Fund is delayed or
prevented from exercising its rights to dispose of the collateral securities.
The Adviser, with the approval of the Fund's Board of Directors, will enter into
repurchase agreements only with financial institutions deemed to present minimal
risk of bankruptcy or insolvency during the term of the agreement.
The timing of purchases and sales of the Fund's portfolio securities
will be made primarily on the investment merits of such securities. Only
secondarily will such timing be influenced by whether any gain from such
transactions would be classified as short-term or long-term for tax purposes.
THE FUND'S INVESTMENT LIMITATIONS
Under the Fund's fundamental policies, which cannot be changed except
by vote of a majority of the Fund's outstanding shares, the Fund may not:
1. Borrow money, except for temporary purposes in an aggregate amount
not to exceed 5% of the value of its total assets at the time of
borrowing. Although not a fundamental policy subject to
shareholder approval, the Fund intends to repay any money borrowed
before any additional portfolio securities are purchased.
2. Mortgage, pledge or hypothecate any of its assets, except to
secure permitted borrowings up to 5% of the value of its total
assets at the time of borrowing.
3. Invest more than 5% of its total assets (taken at market value at
the time of the purchase) in securities of any one issuer, other
than the U.S. Government or its agencies and instrumentalities, or
buy more than 10% of the voting securities or more than 10% of all
the securities of any issuer.
4. Invest more than 5% of its total assets (taken at market value at
the time of the purchase) in securities of companies that,
including their predecessors, have
-12-
<PAGE>
been in operation for less than three years or in equity
securities that are not readily marketable.
See the Fund's Statement of Additional Information for a listing of
other investment limitations.
HOW YOU CAN INVEST IN THE FUND
You may purchase Fund shares through any Janney broker. See "What
Shares Will Cost" at page 13. Documents available from your Janney broker should
be completed if you invest in Fund shares through an IRA, Keogh Plan or
corporate retirement plan.
The minimum initial investment in the Fund for each account will be
$1,000. However, the initial investment in an IRA account established on behalf
of a non-working spouse of a shareholder who has an IRA invested in the Fund
requires a minimum amount of only $250. The minimum investment of each purchase
of additional shares, including purchases of shares through the Fund's
Pre-authorized Check Plan, and plans involving transfers from other financial
institutions, will be $50. In addition, once an account is established, the
minimum amount for subsequent investment will be waived if an investment in an
IRA or similar plan is the maximum amount permitted under the Internal Revenue
Code. You should always furnish your shareholder account number when making
additional purchases of Fund shares.
There are three ways you can invest in the Fund:
1. Through Your Janney Broker.
Fund shares may be purchased through any Janney broker. Each will be
pleased to explain to you the shareholder services available from the Fund, and
answer any questions you may have. After you have initially purchased Fund
shares, you can order additional Fund shares from your Janney broker in person,
by telephone or by mail. An order placed with Janney on behalf of an IRA or
Keogh Plan that is sponsored by Janney and that is being opened at the same time
that the order is placed, will not be transmitted to the Fund until Janney
receives a check for the amount of the purchase. Other investors must make
payment within three business days of their order.
-13-
<PAGE>
2. Through the Pre-authorized Check Plan and Other Transfers of Funds
from Financial Institutions.
Once you are a Fund shareholder, you can make additional investments
through the Fund's Pre-authorized Check Plan for convenient automatic monthly
investments. In addition, certain financial institutions may allow you to
request the automatic transfer of $50 or more on a monthly basis to Provident
National Bank, custodian for the Fund (the "Custodian"), for investment in
shares of the Fund.
3. Open Account Program.
If you do not elect otherwise on your application to purchase Fund
shares, you are automatically enrolled in an Open Account Program. You may
schedule your purchases to suit your personal requirements and you are not
obligated in any way. As each payment is received by the Fund's Transfer Agent,
full and fractional shares will be purchased at the next effective offering
price and proper entry is made on the books of the Fund.
The market value of the Fund's shares is subject to fluctuation.
Before undertaking any plan for systematic investment, the investor should keep
in mind that such a program does not assure a profit or protect against a loss
in declining markets.
WHAT SHARES WILL COST
Fund shares will be sold on each day on which the New York Stock
Exchange (the "Exchange") is open. The shares of the Fund will be sold at their
next determined net asset value. See "How Net Asset Value is Determined" at page
17. Prior to July 3, 1995, the Fund imposed a 3% sales charge payable to Janney
on purchases of shares. This sales charge would decrease depending on the amount
of purchase as set forth by the Fund. However, commencing July 3, 1995, Janney
waived the payment of the 3% sales charge on purchases of Fund shares. The Board
of Directors of the Fund determined that such waiver was appropriate to
encourage sales of Fund shares, and has approved Janney's continuation of such
waiver. Janney will not re-introduce this sales charge without the prior consent
of the Board, including a
-14-
<PAGE>
majority of the "non-interested" directors as defined in the Investment Company
Act of 1940.
Except with respect to certain orders for Fund shares to be invested
in an IRA (see "Qualified Retirement Plans" at page 21), orders accepted by
Janney before the close of business of the Exchange on any day that the Exchange
is open for business will be executed at the net asset value determined as of
the close of the Exchange on that day. Orders accepted by Janney after the close
of the Exchange will be executed at the offering price determined as of the
close of the Exchange on its next trading day. Fund shares ordered through the
Fund's Pre-authorized Check Plan will be purchased at the offering price
determined on the close of business of the Exchange on the date in each month
the Custodian draws a check on your account. Fund shares purchased through an
automatic monthly transfer of funds from your account to the Custodian will be
purchased at the net asset value determined at the close of the business of the
Exchange on the respective dates such transfers are made. The Fund reserves the
right to reject any order for Fund shares.
HOW YOUR SHAREHOLDER ACCOUNT WILL BE MAINTAINED
When you initially purchase Fund shares, an account will automatically
be established for you. Any shares that you purchase or receive as a
distribution from time to time will be credited directly to your account at the
time of purchase or receipt. No certificates will be issued unless you
specifically request them in writing, and no charge will be made for the
issuance of certificates. Certificates will be issued in full shares only. No
certificates will be issued for shares prior to 15 business days after purchase
of such shares by check unless the Fund can be reasonably assured during that
period that payment for the purchase of such shares has been collected.
HOW YOU CAN SELL YOUR FUND SHARES
There are two ways you can sell and receive cash for your Fund shares.
First, you may give your Janney broker an order for repurchase of your shares.
At its discretion, Janney will transmit your order to the Fund for processing as
a redemption request or repurchase your shares itself. Janney will not impose
any charge or fee for transmitting a redemption request to the
-15-
<PAGE>
Fund or for repurchasing your shares. Second, if you hold your Fund shares in
certificate form, or if you do not hold Fund shares in a Janney account, you may
send a written request for redemption to Addison Capital Shares, Inc., c/o PFPC,
Inc., P.O. Box 8916, Wilmington, DE 19899-8916.
Upon receipt by the Transfer Agent or Janney of a request for
redemption or a repurchase order in "good order" as described below, you will be
sent a check equal to the amount of the net asset value of the redeemed shares
next determined after the redemption request or repurchase order has been
received. If the request for redemption is received by the Transfer Agent or
Janney before the close of business of the Exchange, the Shares will be redeemed
or repurchased at the net asset value per share determined at the close of the
Exchange on that day. Requests for redemption received by the Transfer Agent or
Janney after the close of business of the Exchange or on a day when the Exchange
is not open for business will be executed at the net asset value determined at
the close of the Exchange on its next trading day.
Your check normally will be forwarded promptly after redemption.
However the Fund reserves the right to take up to seven days to make payment if,
in the judgment of the Adviser, the Fund could be adversely affected by
immediate payment. The proceeds of your redemption or repurchase may be more or
less than your original cost. If the shares to be redeemed or repurchased were
paid for by check (including certified or cashier's checks) within 15 business
days of the redemption or repurchase request, the proceeds may not be disbursed
unless the Fund can be reasonably assured that the check has been collected.
A redemption or repurchase request will be considered to be received
in "good order" only if:
1. You have indicated in writing the number of shares to be
redeemed and your shareholder account number.
2. The written request is signed by you and by any co-owner of
the account with exactly the same name or names used in
establishing the account.
3. The written request is accompanied by any certificates
representing the shares that have been issued to you,
-16-
<PAGE>
and you have endorsed the certificates for transfer or an
accompanying stock power exactly as the name or names appear
on the certificates.
4. The signatures on the written redemption request and on any
certificates for your shares (or an accompanying stock power)
have been guaranteed by a national bank, a state bank (not
including a savings bank) or a trust company, or by Janney, or
by any other member firm of the New York, American, Boston,
Midwest, Pacific or Philadelphia Stock Exchanges.
Other supporting legal documents may be required from corporations or
other organizations, fiduciaries or persons other than the shareholder of record
making the request for redemption or repurchase. If you have a question
concerning the sale of Fund shares, contact your Janney broker.
The Fund reserves the right to suspend redemption or payment at times
when the Exchange is closed (other than customary weekend or holiday closings)
or during periods of emergency or other periods as permitted by the Securities
and Exchange Commission. In the case of any such suspension, you may either
withdraw your request for redemption or repurchase order or receive payment
based upon the net asset value next determined after the suspension is lifted.
Because of the high cost of maintaining small accounts, the Fund may
elect to close any account with a current value of less than $500 by redeeming
all of the shares in the account and mailing the proceeds to you. However, if
the Fund so elects, you will be notified that your account is below $500 and
will be allowed 60 days in which to make an additional investment in order to
avoid having your account closed.
Redemption in Kind
Although the Fund intends to redeem shares in cash, it reserves the
right under certain circumstances to pay the redemption price in whole or in
part by a distribution of securities from the Fund's portfolio.
-17-
<PAGE>
Redemption in kind will be made in conformity with applicable
Securities and Exchange Commission rules, taking such securities at the same
value employed in determining net asset value and selecting the securities in a
manner the Fund determines to be fair and equitable.
The Fund has also elected to be governed by Rule 18f-1 of the
Investment Company Act of 1940 under which the Fund is obligated to redeem
shares for any one shareholder in cash only up to the lesser of $250,000 or 1%
of the Fund's net asset value during any 90-day period.
Redemption in kind is not as liquid as a cash redemption. If
redemption is made in kind, shareholders who receive securities and sell them
could receive less than the redemption value of their securities and could incur
certain transaction costs, including brokerage fees incurred in disposing of the
securities received.
Exchange Privilege
Shares of the Fund may be exchanged for shares of the Janney
Montgomery Scott ("JMS") Money Market Fund portfolios. Shares of the Fund and
the JMS Money Market Fund portfolios are exchanged at their respective net asset
values. The JMS Money Market portfolios do not presently impose any sales
charges. Further information concerning this privilege is contained in the
Fund's Statement of Additional Information.
HOW NET ASSET VALUE IS DETERMINED
Net asset value per Fund share will be determined by dividing the
value of the total assets of the Fund, less liabilities, by the number of shares
outstanding. Net asset value will be determined daily, as of the close of the
Exchange on its customary business days. Securities owned by the Fund for which
market quotations are readily available will be valued at current market value,
or, in their absence, at fair value as determined by the Fund's Board of
Directors.
-18-
<PAGE>
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The Fund intends to declare dividends out of its net investment income
to shareholders twice a year. The Fund also intends to distribute to
shareholders substantially all net long-term and short-term capital gains
realized on portfolio securities after the end of its fiscal year and the
calendar year, in which the gains are realized. Shareholders may elect to:
1. Receive both dividend and capital gains distributions
in shares;
2. Receive dividends in cash and capital gains
distributions in shares; or
3. Receive both dividends and capital gains distributions in
cash.
Such an election may be made by completing the section entitled
"Subsequent Investments/Dividends and Distributions" in the Share Application
located at the back of this Prospectus. If no election is made, both dividends
and capital gains distributions will be credited to your account in additional
shares at the net asset value of the shares determined at the close of the day
following the record date for payment of the dividends and distributions. You
may elect at any time to change your option by notifying in writing the Transfer
Agent, who is also the dividend disbursing agent for the Fund.
TAX STATUS OF DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The following discussion of federal income tax consequences is based
on the Internal Revenue Code of 1986, as amended (the "Code") and the
regulations issued thereunder as in effect on the date of this Statement. New
legislation, administrative changes, and court decisions may significantly
change the conclusions expressed herein and may have a retroactive effect with
respect to the transactions contemplated herein.
No attempt has been made to present a detailed explanation of the
federal, state, or local income tax treatment of the Fund or its shareholders.
Accordingly, investors are urged to consult
-19-
<PAGE>
their tax advisors regarding specific questions as to federal, state, and local
income taxes.
The Fund intends to continue to qualify as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). As long as the Fund qualifies for this tax treatment, the Fund will be
relieved of Federal income tax on amounts distributed to shareholders. The Code
requires, among other things, that the Fund distribute each year at least 90% of
its investment company taxable income. The Fund also intends to make sufficient
distributions prior to the end of each calendar year to avoid liability for
Federal excise tax. For additional information, please see the Fund's Statement
of Additional Information.
Distributions to shareholders of net investment income of the Fund and
of net short-term capital gains of the Fund will be taxable to shareholders as
ordinary income, whether such distributions are received in cash or in
additional shares. Generally, to the extent attributable to dividends received
by the Fund from domestic corporations, a portion of the Fund's distributions of
net investment income will be eligible for the dividends received deduction for
corporate shareholders.
Distributions to shareholders of net capital gain of the Fund are
taxable to shareholders as gain from the sale or exchange of a capital asset
held for more than one year, whether received in cash or additional shares, and
regardless of how long a shareholder has held the shares.
Dividends declared in October, November or December of a year and
payable to shareholders of record on a specified date in such a month are deemed
to be paid by the Fund and received by the shareholder on December 31 of such
year, provided they are paid before February 1 of the following year.
The price paid for a share of the Fund ordinarily includes an amount
equal to any per share undistributed earnings and a proportionate amount of any
undistributed capital gains realized in the Fund's investments. Any distribution
of such earnings or gains after a purchase may in effect be a return of capital,
but would nevertheless be subject to tax.
-20-
<PAGE>
Any gain or loss recognized on a sale or redemption of shares of the
Fund by a shareholder who is not a dealer in securities will generally, for
individual shareholders, be treated as a long-term capital gain or loss if the
shares have been held for more than eighteen months, mid-term capital gain if
the shares are held for more than twelve months but not more than eighteen
months, and otherwise will be generally treated as a short-term capital gain or
loss. However, if shares on which a net capital gain distribution has been
received are subsequently sold or redeemed and such shares have been held for
six months or less, any loss recognized will be treated as a long-term capital
loss to the extent of the long-term capital gain distribution.
Long-term capital gains are currently taxed at a maximum rate of 20%,
mid-term capital gains are currently taxed at a rate of 28%, and short-term
capital gains are currently taxed at ordinary income tax rates.
Shareholders will be advised annually as to the Federal income tax
consequences of distributions made during the year. Shareholders are encouraged
to consult with their tax advisors concerning the application of the rules set
forth above to their particular circumstances, and also concerning the
application of state and local taxes to an investment in the Fund. State and
local tax consequences of an investment in the Fund may differ from the Federal
income tax consequences described above.
SHAREHOLDER SERVICES
Confirmations and Reports
You will receive after each purchase or sale a confirmation showing
the particular transaction and the current status of your account. Reports will
be sent to shareholders at least semiannually showing the Fund's portfolio and
other information. An annual report containing financial statements audited by
independent certified public accountants will also be sent to shareholders each
year.
Shareholder inquiries should be addressed to Janney Montgomery Scott
Inc., 1801 Market Street, Philadelphia, PA 19103
-21-
<PAGE>
(telephone in Philadelphia: (215)665-6000; telephone outside Philadelphia:
(800)526-6397).
Systematic Withdrawal Plan
You may elect to make systematic withdrawals from your Fund account of
a minimum of $50 on a monthly basis or $150 on a quarterly basis if you are
purchasing or already own shares with a net asset value of $10,000 or more.
Please contact Janney for further information.
QUALIFIED RETIREMENT PLANS
An investment in Fund shares may be appropriate for IRAs, Keogh Plans,
and corporate retirement plans. Investors who are considering establishing such
a plan may wish to consult their attorneys or tax advisers with respect to
individual tax questions. Janney can make available to you forms of self-
directed IRAs, Keogh Plans, and corporate retirement plans.
The Internal Revenue Code requires the custodian of any IRA to furnish
each individual benefitting from an IRA with a copy of the governing instrument
used to establish the IRA and a disclosure statement satisfying the requirements
of regulations under Section 408 of the Internal Revenue Code no later than the
earlier of the date of establishment or purchase of the IRA. If, however, the
governing instrument and disclosure statement are not furnished to such
individual at least seven days preceding the earlier of the date of purchase or
establishment of the IRA, the individual must be permitted to revoke his IRA and
receive a full refund for a period of seven days from the earlier of those
dates. If the revocation period applies, Janney, as custodian of a Janney
self-directed IRA will hold the individual's initial payment to his IRA in a
suspense account until the expiration of the seven-day period. Thereupon, if the
IRA has not been revoked, such payment will be applied to the purchase of Fund
shares at the net asset value next calculated following such expiration date
plus the appropriate sales charge. No interest will be paid on funds held in
such suspense account. An order placed with Janney on behalf of a Janney
self-directed IRA will not be transmitted to the Fund until Janney receives a
check and completed IRA application.
-22-
<PAGE>
The option of investing in the retirement plans described above
through regular payroll deductions may be arranged with Janney and your
employer. Additional information with respect to these plans is available upon
request from any Janney broker.
MANAGEMENT OF THE FUND
The Fund's Board of Directors have overall responsibility for the
operation of the Fund.
The Fund's officers are responsible for the operation of the Fund
under the supervision of the Board of Directors. The directors and officers of
the Fund, their principal occupations during the past five years and other
business affiliations are set forth below. An asterisk (*) indicates directors
who are "interested persons" of the Fund as defined by the Investment Company
Act of 1940. <TABLE> <CAPTION>
Position(s) Held Principal Occupation
Name and Address With the Fund During Past Five Years
- ---------------- ------------- ----------------------
<S> <C> <C>
Radcliffe Cheston President and President and Director of
1608 Walnut Street Chief Executive Addison Capital Management
Philadelphia, PA Officer Company since May 1990;
Vice
President,
Treasurer
and
Secretary
of
Addison
Capital
Management
Company
and
general
partner
of
its
predecessor
since
January
1984.
Rudolph C. Sander* Chairman of the Chairman of the Board and
1801 Market Street Board and Director Chairman of the Executive
Philadelphia, PA Committee of Janney
Montgomery Scott Inc.
Margaret M. Healy Director President, Rosemont
Rosemont College College; Lecturer in
Rosemont, PA Philosophy, Bryn Mawr
College, 1978-1995.
</TABLE>
-23-
<PAGE>
<TABLE>
<CAPTION>
Position(s) Held Principal Occupation
Name and Address With the Fund During Past Five Years
- ---------------- ------------- ----------------------
<S> <C> <C>
William R. Dimeling Director Partner, Dimeling,
1629 Locust Street Schreiber & Park and its
Philadelphia, PA predecessor, Dimeling &
Schreiber,
a
private
investment
partnership
since
1982;
Trustee
of
Pennsylvania
Real
Estate
Investment
Trust;
Director
of
Aero
Services
International
Inc.
Charles E. Mather, III Director President and Director of
226 Walnut Street Mather & Co. (insurance
Philadelphia, PA brokers); Director of American
Shipbuilders
and
Shipowners
Mutual
Assurance
Company
and
Christiana
Bank
&
Trust
(a
state
chartered
bank
not
a
member
of
the
Federal
Reserve
Board);
Director
and
President
of
Finance
Company
of
Pennsylvania
(a
registered
investment
company).
Charles L. Sullivan Vice President Senior Vice President and
1801 Market Street Director of Janney
Philadelphia, PA Montgomery Scott Inc.
James W. Wolitarsky Treasurer, Chief Senior Vice President,
1801 Market Street Financial Officer Treasurer and Director of
Philadelphia, PA and Chief Janney Montgomery Scott
Accounting Officer Inc.
</TABLE>
-24-
<PAGE>
<TABLE>
<CAPTION>
Position(s) Held Principal Occupation
Name and Address With the Fund During Past Five Years
- ---------------- ------------- ----------------------
<S> <C> <C>
James V. Kelly, CFA Vice President Senior Vice President and
1608 Walnut Street Director of Addison Capital
Philadelphia, PA Management Company since
August
1992;
Vice
President
of
Addison
Capital
Management
Company
since
October
1990;
President
of
Sysdicon
Investment
Counsel
January
1989
to
October
1990;
Vice
President
and
Chief
Equity
Investment
Officer
of
Wilmington
Trust
Company
January
1986
to
January
1989.
James W. Jennings Secretary Partner, Morgan, Lewis &
2000 One Logan Square Bockius LLP
Philadelphia, PA
</TABLE>
Pursuant to the Board of Directors' responsibility for Fund management,
it has employed the Adviser to serve as the Fund's investment adviser. Subject
to the overall supervision of the Board of Directors, the Adviser manages the
investment affairs of the Fund and directs the investments of the Fund in
accordance with its investment objective, policies and limitations. The Adviser
manages the investment affairs of the Fund pursuant to an Investment Advisory
Agreement between the Fund and the Adviser dated September 8, 1986 and approved
by the Fund's sole shareholder, Janney, on August 13, 1986. The Investment
Advisory Agreement was subsequently approved by the Fund's shareholders at a
meeting on October 29, 1987. The Adviser is a wholly-owned subsidiary of Janney,
which, in turn, is an indirect wholly-owned subsidiary of Penn Mutual Life
Insurance Company. The Adviser's address is 1608 Walnut Street, Thirteenth
Floor, Philadelphia, PA 19103.
The Adviser is entitled to receive for its services a fee, calculated
daily and payable monthly, at an annual rate of 0.75% of the average daily net
assets of the Fund for the first $100
-25-
<PAGE>
million of average net assets, 0.50% of average daily net assets exceeding $100
million but less than or equal to $250 million, and 0.25% of average net assets
exceeding $250 million. The advisory fee is higher than that paid by most other
mutual funds.
For the fiscal year ended June 30, 1997, the Adviser received $430,263
in advisory fees from the Fund.
The advisory fee may be reduced because of regulations in various
states where Fund shares may be qualified for sale which impose limitations on
the annual expense ratio of the Fund. For example, the Fund has qualified its
shares for sale in California. Under California law the Fund's aggregate annual
expenses may not exceed 2.5% of the first $30 million of its average daily net
assets, 2% of the next $70 million of average daily net assets, and 1.5% of
average daily net assets in excess of $100 million. Interest, taxes, capital
items (including brokerage) and the distribution fee to be paid to Janney as
described below will not be included in calculating aggregate annual expenses
for this purpose. The Fund may also seek to qualify its shares in other
jurisdictions which impose limitations on its expenses.
If the purchase or sale of securities consistent with the investment
policies of the Fund and one or more other clients served by the Adviser is
considered at or about the same time, transactions in such securities will be
allocated among the Fund and such other clients in a manner deemed fair and
reasonable by the Adviser. Although there is no specified formula for allocating
such transactions, the various allocation methods used by the Adviser, and the
results of such allocations, will be subject to periodic review by the Fund's
Board of Directors. Simultaneous transactions in the same securities by the Fund
and other clients served by the Adviser may have an adverse effect upon the
price or volume of securities available to the Fund.
Under an Administration and Accounting Services Agreement between the
Fund and PFPC, Inc.("PFPC"), PFPC provides certain administrative and accounting
services, including bookkeeping, record maintenance, and preparation of filings
required by the Securities and Exchange Commission and federal and state tax
authorities. PFPC's annual fees, payable monthly, for these services equal 0.10%
of the Fund's average daily
-26-
<PAGE>
assets, with a minimum annual fee of $100,000 (a portion of which has been
voluntarily waived since commencement of the Fund's operations). The Fund also
reimburses PFPC for certain disbursements. These amounts do not include fees
payable to the Transfer Agent and the Fund's Custodian for their services. PFPC
is a wholly-owned subsidiary of the Custodian. For the year ended June 30, 1997,
PFPC received fees of $75,000 for accounting services.
Under a Services Agreement between the Fund and Janney, Janney provides
office space to the Fund, oversees PFPC's performance of its duties under the
Administration and Accounting Services Agreement, oversees the performance by
the Custodian and Transfer Agent of their respective duties to the Fund and
responds to shareholder inquiries, for an annual fee equal to 0.25% of the
Fund's average daily net assets. This fee is in addition to the annual
distribution fee which Janney will also receive from the Fund. See "The Fund's
Distributor" below. Janney has waived payment of this fee since commencement of
the Fund's operations through June 30, 1993. Commencing July 1, 1993, Janney
began collecting this fee from the Fund. For the year ended June 30, 1997,
Janney received services fees of $143,421.
The total amount of the advisory services, financial accounting and
management fees described above and distribution fees described below paid by
the Fund during the fiscal year ended June 30, 1997 was 1.53% of the Fund's
average daily net assets. In addition to such fees, the Fund incurs and pays the
following types of expenses: taxes, expenses for legal and auditing services,
the expense of preparing (including typesetting, printing and mailing) reports,
prospectuses and notices to its shareholders, the cost of printing stock
certificates, fees and disbursements of the Custodian, disbursements of PFPC,
the expense of issuing and redeeming Fund shares, the cost of registering Fund
shares under federal and state laws, shareholder meetings and related proxy
solicitation expenses, the fees and out-of-pocket expenses of Directors who are
not affiliated with Janney or the Adviser, insurance, interest, brokerage costs,
legal, including any litigation, expenses, association membership dues, and
other expenses properly payable by the Fund.
-27-
<PAGE>
The Fund uses a variety of brokers, including Janney, as broker for
agency transactions in listed and over-the-counter securities at commission
rates and under circumstances consistent with the policy of best execution.
Janney received $660 in brokerage commissions from the Fund during the fiscal
year ended June 30, 1997.
THE FUND'S DISTRIBUTOR
Janney is the distributor of the Fund's shares whose principal business
address is shown on the cover of this Prospectus.
The Underwriting Agreement between Janney and the Fund obligates Janney
to pay certain expenses in connection with the offering of Fund shares,
including sales commissions to its brokers. Under the Underwriting Agreement, as
well as a distribution plan adopted by the Fund's Board of Directors (the
"Compensation Plan"), Janney will also pay for the printing and distribution of
prospectuses and periodic reports used in connection with the offering of Fund
shares to prospective investors and for supplementary sales literature and
advertising costs. The Compensation Plan and the Underwriting Agreement provide
that the Fund will compensate Janney for these expenses by paying Janney an
annual distribution fee equivalent to 0.65% of the Fund's average daily net
assets. However, commencing July 1, 1993, Janney waived a portion of this fee
equal to 0.25% of the Fund's average daily net assets. The Board of Directors of
the Fund determined that such a waiver was appropriate in view of Janney's
decision to commence collecting the service fee described above under
"Management of the Fund". The distribution fee is computed daily and paid
monthly, and is in addition to the Adviser's fee and Janney's fee, if any, for
other services described under "Management of the Fund" above. For the year
ended June 30, 1997, Janney received distribution fees of $229,473. As set forth
above under "What Shares Will Cost", Janney commencing on July 3, 1995, has
waived the payment of a 3% sales charge on purchases of Fund shares. At the same
time, the Adviser agreed to pay Janney an amount equal to .25% of the Fund's
average net assets out of said Adviser's own assets. The Board of Directors of
the Fund determined that in order to encourage sales of Fund shares, it is
reasonable to permit the Adviser to use its own assets to pay Janney for its
distribution
-28-
<PAGE>
efforts and to permit Janney to waive sales charges on purchases of new funds
shares, and has approved Janney's continuation of such waiver.
At any given time, Janney may incur expenses in distributing shares of
the Fund which are in excess of the total payments made by the Fund pursuant to
the Compensation Plan. For example, Janney may conduct sales promotions and,
from its own resources, pay additional consideration or other incentives in the
form of cash or other compensation (such as merchandise or trips) to its own
representatives. Because there is no requirement under the Plan that Janney be
reimbursed for all its expenses or any requirement that the Plan be continued
from year to year, this excess amount does not constitute a liability of the
Fund. Any cumulative expenses incurred by Janney but not yet recovered through
distribution fees may or may not be recovered through future distribution fees.
Thus, Janney's actual distribution expenditures in a given year may be less than
the Plan payments it receives from the Fund for that year, and no effect will be
given to previously accumulated distribution expenditures in excess of the Plan
payments borne by Janney out of its own resources in other years. The Fund's
Compensation Plan is classified as a "compensation plan" because it will pay the
distribution fee regardless of the actual distribution expenses. To the extent
that the fee under the Plan exceeds the actual distribution expenses of Janney
(which has not occurred to date), any excess should be considered direct
compensation to Janney.
To date the fees under the Plan have not fully reimbursed Janney for
the distribution expenses it incurred. In later years, the distribution fee may
exceed Janney's distribution expenses. The Fund is not obligated under the
Compensation Plan and the Underwriting Agreement to reimburse Janney for the
excess of distribution expenses incurred in any one year over the amount of the
distribution fee actually paid, or to reimburse Janney in a later year for any
part of the amount of the distribution fee owed in a prior year but not paid
because the amount of such expenses exceeded expense ceilings imposed by state
regulations. In the event that the Fund later offers shares in other portfolios
and uses Janney to distribute such shares, the distribution fee herein described
may be used by Janney to finance distribution of such shares.
-29-
<PAGE>
DESCRIPTION OF FUND SHARES
The Fund has authorized capital of two billion shares of common stock,
par value $0.001. Each share will be entitled to one vote for the election of
directors and on any matter submitted to a shareholder vote. Fractional shares
will have fractional voting rights. Voting rights will not be cumulative. In the
opinion of Morgan, Lewis & Bockius LLP, counsel for the Fund, the shares are
exempt from existing personal property taxes in Pennsylvania.
Pursuant to the Maryland General Corporation Law, the Fund is not
required to hold annual meetings of shareholders unless the Investment Company
Act of 1940 requires action by the shareholders to elect members of the Board of
Directors under certain circumstances.
The Fund's Articles of Incorporation authorize the Board of Directors,
without shareholder approval (unless otherwise required by applicable law), to:
(i) sell and convey the Fund's assets to another management investment company
for consideration which may include securities issued by the purchaser and, in
connection therewith, to cause all outstanding Fund shares to be redeemed at a
price which is equal to their net asset value and which may be paid in cash or
by distribution of the securities or other consideration received from the sale
and conveyance; (ii) sell and convert the Fund's assets into money and, in
connection therewith, to cause all outstanding Fund shares to be redeemed at
their net asset value; or (iii) combine the Fund's assets with the assets
belonging to another portfolio of the Fund hereafter organized if the Board of
Directors reasonably determines that such combination will not have a material
adverse effect on the shareholders of the Fund and such other portfolio and, in
connection therewith, to cause all outstanding Fund shares to be redeemed or
converted into shares of another class of the Fund's capital stock at net asset
value. The exercise of such authority by the Board will be subject, however, to
the provisions of the Investment Company Act of 1940, including Section 13(a)(4)
of that Act which prohibits an investment company from changing the nature of
its business so as to cease being an investment company without the authorizing
vote of a majority of its outstanding voting securities.
-30-
<PAGE>
TRANSFER AGENT
PFPC, Inc., P.O. Box 8916, Wilmington, DE 19899-8916, serves as
transfer agent and dividend disbursing agent for the Fund.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be made by calling Janney at the telephone
number shown on the cover page of this Prospectus.
-31-
<PAGE>
BANK DRAFT AUTHORIZATION
The authorization on the reverse side is subject to the following provisions:
1. PNCBank shall collect the amount specified from the investor's personal
checking account, as authorized on the reverse side, by drawing checks on
such accounts to its own order.
2. Checks will be drawn once each month. The cancelled checks will constitute
receipts for such amounts.
3. The privilege of making deposits under this service may be revoked by
PNCBank without prior notice if any check is not paid upon presentation.
PNCBank shall be under no obligation to notify the investor as to the
non-payment of any check.
4. This service may be discontinued by the investor by written notice to
PNCBank, which is received at least ten business days prior to the
collection date or at any time by PNCBank upon thirty days' written notice
prior to any collection date.
When this card has been completed, please mail to:
PFPC, Inc.
c/o Addison Capital Shares, Inc.
P.O. Box 8916
Wilmington, DE 19899-8916
Please enclose a voided blank check.
INDEMNIFICATION AGREEMENT
To: Bank named on the reverse side.
Your depositor executing the authorization on the reverse side is purchasing
shares of Addison Capital Shares, Inc. (the "Fund"), a mutual fund for which
PNCBank is custodian, and has authorized PFPC to collect the amounts indicated
for investment from his or her personal checking account by drawing checks on
such account to its order. In consideration of your compliance with such
depositor's request that you pay and charge to his or her account checks drawn
on such account by, and payable to the order of PNCBank, Janney Montgomery Scott
Inc. ("Janney"), distributor for the Fund, hereby agrees:
1. To indemnify and hold you harmless from any loss you may suffer resulting
from or in connection with the execution and issuance of any check, whether or
not genuine, purporting to be drawn by or on behalf of and payable to PNCBank on
the account of your depositor executing the authorization on the reverse side
and received by you in the regular course of business through normal banking
channels for the purpose of payment, including any costs or expenses reasonably
incurred in connection with such loss, but excepting any loss due to your
payment of any check drawn against insufficient funds.
2. In the event that any such check shall be dishonored, whether with or without
cause, and whether intentionally or inadvertently, to indemnify you and hold you
harmless from any loss resulting from such dishonor, including the costs and
reasonable expenses.
Janney Montgomery Scott Inc.
by Norman T. Wilde, Jr., President
Authorized by a resolution adopted by the Board of Directors of Janney
Montgomery Scott Inc.
See preceding page for instructions to start a monthly investment program.
<PAGE>
IF YOU WANT TO START A MONTHLY
INVESTMENT PROGRAM
-----------------------------------------------------
o Complete both parts of the bank draft authorization in the
panel to the right
o Complete the Account Application on the next page
o Send
|_| A check made out for the total amount of your initial
investment
and
|_| a blank check marked "void" to:
PFPC, Inc.
c/o Addison Capital Shares, Inc.
P.O. Box 8916
Wilmington, DE 19899-8916
(The blank check marked "void" is required because the Transfer Agent must
obtain, and retain in its records, an exact replica of the coding at the bottom
of the voided check so that it can arrange through appropriate bank channels
monthly withdrawals from your check account.)
COMPLETE, DETACH AND MAIL WITH COMPLETE SHARE APPLICATION
TO BEGIN BANK DRAFT INVESTING
THROUGH YOUR CHECKING ACCOUNT
(Pre-Authorized Check Plan)
I hereby authorize PNCBank to draw $_______________ from my checking account
monthly, beginning with the 20th day of _______________ to be used to purchase
shares of Addison (month) Capital Shares, Inc. for my account through the
- --------------------------------------------------------------------------------
Name of Bank, Branch Name and Number (if any)
- --------------------------------------------------------------------------------
Address of Bank or Branch
- --------------------------------------------------------------- ---------------
(Routing symbol)
This authorization is subject to the provisions on the reverse side.
Name(s)_________________________________________________________________________
Street__________________________________________________________________________
City ___________________________________________State___________Zip_____________
Note: Please enclose a blank check marked "void"
----------------------------------------
<PAGE>
AUTHORIZATION TO HONOR BANK DRAFTS
DRAWN BY
PNCBANK
To:_____________________________________________________________________________
(Print Bank Name -- and Branch, if any)
- --------------------------------------------------------------------------------
(Bank Address)
- --------------------------------------------------------------------------------
For my convenience, I hereby request and authorize you to pay and charge to my
account checks drawn on my account by, and payable to the order of, PNCBank. I
agree that while this authorization remains in effect (1) your rights in respect
to each such check shall be the same as if it were signed personally by me, (2)
you shall be fully protected in honoring any such check and (3) if any such
check be dishonored, with or without cause, and whether inadvertently, you shall
be under no liability whatsoever.
This authorization shall remain in effect until you receive written revocation
signed by me.
- --------------------------------------------------------------------------------
(Print Name of Depositor(s) As Shown On Bank Records)
- --------------------------------------------------------------------------------
(Checking Account No.)
- ----------- ------------------------------------------------------------------
(Date) (Signature of Depositor As Shown On Bank Records)
<PAGE>
ADDISON CAPITAL SHARES, INC.
SHARE APPLICATION
Send Completed Application to:
ADDISON CAPITAL SHARES, INC.,
c/o JANNEY MONTGOMERY SCOTT INC.,
2 BALA CYNWYD PLAZA, BALA CYNWYD, PA 19004
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ACCOUNT REGISTRATION
Owner (print) |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| |_|_|_|-|_|_|-|_|_|_|_|
Co-owner (if any) |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| |_|_|_|-|_|_|-|_|_|_|_|
Street Address |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| | | Exempt from Backup Withholding (For
Instructions, see Step 3 on last page)
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
City State Zip Code
*If joint registration is indicated, both must sign and the registration will be
as joint tenants with right of survivorship and not as tenants in common, unless
otherwise specifically stated.
- ------------------------------------------------------------------------------------------------------------------------------------
SUBSEQUENT INVESTMENTS/DIVIDENDS AND DISTRIBUTIONS-- Minimum initial investment
is $1,000; thereafter $50. I enclose a check in the amount of $---------------.
| | I intend without obligation, to make additional investments in the amount of
$--------------------. Dividend and other distributions election: (please check
applicable box; if no box checked, you will be deemed to have checked box 1): |
| 1. All dividends and distributions of realized securities profits shall be
accepted in additional shares at net asset value. | | 2. All dividends shall be
paid to me in cash and all distributions of realized securities profits will be
accepted in additional
shares at net asset value.
| | 3. All dividends and distributions of realized securities profits shall be paid to me in cash.
- ------------------------------------------------------------------------------------------------------------------------------------
SYSTEMATIC WITHDRAWAL PLAN: Minimum required investment is $10,000.
| | Monthly | | Quarterly $____________________ Starting the _________ of __________________ Month ____________ Year
- ------------------------------------------------------------------------------------------------------------------------------------
APPLICANT(S) SIGNATURE(S) Sign below exactly as printed in Account Registration:
Under penalties of perjury, I certify (1) that the number shown on this form is
my correct taxpayer identification number, and (2) that I am not subject to
backup withholding because (a) I have not been notified that I am subject to
backup withholding as a result of a failure to report all interest or dividends,
or (b) the Internal Revenue Service has notified me that I am no longer subject
to backup withholding. If you have been notified by the IRS that you are
currently subject to backup withholding, strike out phrase (2).
We hereby certify that each of the persons listed below has been duly elected,
is now legally holding the office set opposite his name and has the authority to
make this authorization.
Citizenship: | | U.S. | | Other _______________ Telephone No. (_____)___________________. Please print titles below if signing for a
business or trust. (Please provide)
X________________________________________________ _______________________________________________________________________________
(Signature) (President, Trustee, General Partner or Agent)
X________________________________________________ _______________________________________________________________________________
(Signature) (Co-owner, Secretary of Corporation, Co-trustee, etc.)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
MUST BE COMPLETED BY DEALER Dealer's Name and Address:
--------------------------------------------------
|-|-|-|-|-|-| |-|-|-|-|-|-| |-|-|-|-|-|-| | |
Invoice Date No. of Shares Trade Date | |
| |
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-| | |
Representative's Last Name and Number | |
| |
|-|-|-|-|-|-|-|-|-|-|-| | |
(Area Code) Representative's Phone Number | |
| |
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-| | |
Dealer Branch Branch Number | |
| |
- -------------------------------------------- | |
Authorized Signature of Dealer |__________________________________________________|
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
ADDISON CAPITAL SHARES, INC.
c/o Janney Montgomery Scott Inc.
2 Bala Cynwyd Plaza
Bala Cynwyd, PA 19004
Investment Adviser
ADDISON CAPITAL MANAGEMENT ADDISON
COMPANY
1608 Walnut Street =========
Philadelphia, PA 19103
CAPITAL
Distributor/Shareholder
Servicing =========
JANNEY MONTGOMERY SCOTT INC.
1801 Market Street SHARES
Philadelphia, PA 19103
Custodian
PNCBank
Airport Business Center
International Court 2
200 Stevens Drive
Lester, PA 19113
Transfer Agent Distributed by:
PFPC, INC. JANNEY MONTGOMERY SCOTT INC.
P.O. Box 8916
Wilmington, DE 19899-8916
Independent Accountants Prospectus
TAIT, WELLER & BAKER Two Penn Center Plaza, Suite 700 Philadelphia, PA 19102
Legal Counsel
MORGAN, LEWIS & BOCKIUS LLP November 1, 1997
2000 One Logan Square
Philadelphia, PA 19103
==================================== ====================================
<PAGE>
======================
ADDISON CAPITAL SHARES
======================
Addison Capital Shares, Inc. (the "Fund") is a mutual fund seeking
long-term capital appreciation. The Fund invests principally in those equity
securities which the Fund's investment adviser, Addison Capital Management
Company, believes are undervalued and therefore offer above-average potential
for capital appreciation.
This Statement of Additional Information is not a prospectus and should
be read in conjunction with the Fund's Prospectus, dated November 1, 1997, which
has been filed with the Securities and Exchange Commission. A copy of the
Prospectus is available without charge from Janney Montgomery Scott Inc.
(address and telephone number listed below).
JANNEY MONTGOMERY SCOTT INC.
1801 Market Street
Philadelphia, Pennsylvania 19103
In Philadelphia, Pennsylvania (215)665-6000
Outside Philadelphia, Pennsylvania (800)526-6397
Dated: November 1, 1997
<PAGE>
Statement of Additional Information
November 1, 1997
TABLE OF CONTENTS
Page
----
Additional Information About Investment
Limitations and Policies............................................ B-3
Additional Tax Information............................................ B-6
Additional Purchase and Redemption Information........................ B-7
Pre-Authorized Check Plan and Transfer of
Funds from Financial Institutions...................... B-7
Open Account Program..................................... B-8
Systematic Withdrawal Plan............................... B-8
Redemption by Securities................................. B-10
Exchange Privilege with JMS Money Market
Fund Portfolios........................................ B-10
Additional Information About Fund Shares.............................. B-11
Valuation of Shares................................................... B-12
Retirement Plans...................................................... B-13
Individual Retirement Account - IRA...................... B-13
IRAs, Keogh Plans and Corporate
Retirement Plans Available from Janney................. B-14
Additional Information About the Fund's
Management and Affiliations.............................. B-15
Investment Advisory and Other Services................................ B-16
Portfolio Transactions and Brokerage.................................. B-18
The Fund's Distributor................................................ B-20
The Fund's Custodian, Transfer Agent and Dividend
Disbursing Agent......................................... B-23
The Fund's Legal Counsel.............................................. B-23
Financial Statements.................................................. B-24
The Fund's Independent Certified Public Accountants................... B-24
B-2
<PAGE>
ADDITIONAL INFORMATION ABOUT
INVESTMENT LIMITATIONS AND POLICIES
In addition to the investment objectives and investment policies
described in the Prospectus, Addison Capital Shares, Inc. (the "Fund") has
adopted certain investment limitations that cannot be changed except by vote of
a majority of the Fund's outstanding voting securities. The Fund may not:
1. Purchase securities on "margin";
2. Invest more than 25% of its total assets (taken at market
value) in any one industry;
3. Invest in securities issued by other investment
companies, except in connection with a merger,
consolidation, acquisition or reorganization, or by
purchase in the open market of securities of closed-end
investment companies where no underwriter or dealer
commission or profit, other than a customary brokerage
commission, is involved and only if immediately
thereafter not more than 10% of the Fund's total assets
(taken at market value) would be invested in such
securities;
4. Purchase or sell commodities and commodity contracts;
5. Underwrite the securities of other issuers, except that the
Fund may invest in securities that are not readily marketable
without registration under the Securities Act of 1933 if
immediately after the making of such investment not more than
5% of the value of the Fund's total assets (taken at cost)
would be so invested;
6. Make loans, except loans of portfolio securities, except to
the extent a repurchase agreement may be considered a loan and
except to the extent the purchase of a portion of an issue of
publicly distributed notes, bonds or other evidences of
indebtedness or deposits with banks and other financial
institutions may be considered loans;
B-3
<PAGE>
7. Write or purchase put, call, straddle or spread
options;
8. Purchase or retain the securities of any issuer if the
officers or directors of the Fund, its investment advisers, or
other managers owning beneficially more than one-half of one
percent of such outstanding securities together own
beneficially more than five percent of such outstanding
securities;
9. Purchase or sell real estate, except that the Fund may invest
in readily marketable securities secured by real estate or
interests therein or in readily marketable securities issued
by companies that invest in real estate or interests therein;
10. Purchase or sell interests in oil and gas or other mineral
exploration or development programs, except that the Fund may
invest in so-called master limited partnerships which have oil
and gas interests so long as such partnerships are listed on
the New York Stock Exchange or the American Stock Exchange or
are included in the National Association of Securities
Dealers, Inc. national market system; or
11. Make any short sales of securities.
As noted above, the investment policies of the Fund described in the
preceding paragraphs, along with its objectives and certain other policies
described in the Prospectus, are fundamental policies of the Fund and may not be
changed without the vote of a majority of the holders of the Fund's outstanding
voting securities. Under the Investment Company Act of 1940, a "vote of a
majority of the outstanding voting securities" of the Fund means the affirmative
vote of the lesser of (1) more than 50% of the outstanding shares of the Fund or
(2) 67% or more of the shares present at a shareholders' meeting if more than
50% of the outstanding shares are represented at the meeting in person or by
proxy.
The Fund also may invest in foreign securities. It is presently the
Fund's intention that the value of investments in foreign securities which are
not traded on the New York or
B-4
<PAGE>
American Stock Exchange, or the NASDAQ National Market System, will not exceed
10% of the value of its total assets.
Although not a fundamental policy subject to shareholder vote, so long
as the Fund's shares continue to be registered in certain states, the Fund may
not invest more than 5% of the value of its net assets, taken at the lower of
cost or market value, in warrants or invest more than 2% of the value of such
net assets in warrants not listed on the New York or American Stock Exchanges.
The Fund presently has no intention of purchasing any warrants during the
foreseeable future. In addition, although not a fundamental policy subject to
shareholder vote, so long as the Fund's shares continue to be registered in
certain states, the Fund may not make short sales of securities. Although not
prohibited by the Fund's fundamental investment policies, the Fund has no
present intention of loaning its portfolio securities to others.
When cash is expected to be available only temporarily, the Fund may
invest in repurchase agreements. A repurchase agreement is an agreement under
which either U.S. government obligations or high quality debt securities are
acquired from a securities dealer or bank subject to resale at an agreed upon
price and date. The resale price reflects an agreed upon interest rate which is
unrelated to the interest rate provided by the securities which are transferred.
In these transactions, the securities are held for the Fund by its custodian as
collateral until retransferred and will be supplemented by additional collateral
(without cost to the Fund) if necessary to maintain a total value equal to or in
excess of the value of the repurchase agreements. Repurchase agreements are
usually for periods of one week or less, but may be for longer periods. The Fund
will not enter into repurchase agreements of more than seven days' duration if
more than 10% of its net assets would be invested in such agreements and other
illiquid investments. The Fund's Adviser will monitor the credit-worthiness of
any party with whom the Fund has a then-outstanding repurchase agreement.
To the extent that proceeds from any sale upon a default of the
obligation to repurchase were less than the repurchase price, the Fund might
suffer a loss. If bankruptcy proceedings were commenced with respect to the
seller of the security, realization upon the collateral by the Fund could be
delayed or limited.
B-5
<PAGE>
However, the Fund has adopted standards for the parties with whom it will enter
into repurchase agreements which the Fund's Board of Directors believes are
reasonably designed to assure that each party presents no serious risk of
becoming involved in bankruptcy proceedings within the time frame contemplated
by the repurchase agreement.
The timing of purchases and sales of Fund securities will be made
primarily on the investment merits of the securities. Only secondarily will such
timing be influenced by whether any gain from such transactions would be
classified as short-term or long-term for tax purposes. This factor may be
expected to result from time to time in a higher rate of portfolio turnover than
if both factors were given equal weight. High portfolio activity increases the
Fund's transaction costs, including brokerage commissions. To the extent
short-term trading results in realization of gains on securities held less than
twelve months, shareholders are subject to taxes at ordinary income tax rates.
See "Tax Status of Dividends and Capital Gains Distributions". However, it is
anticipated that the Fund will not realize substantial short-term capital gains.
ADDITIONAL TAX INFORMATION
The Fund intends to continue to qualify as a "regulated investment
company" under Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"). As a regulated investment company, the Fund will not be subject to
federal income tax to the extent it distributes its net investment income
(including net short-term capital gains) and the excess of its net long-term
capital gains over net short-term capital losses.
In order to qualify for treatment as a regulated investment company,
the Fund will be required, among other things, to distribute annually at least
90% of its net investment income. In addition to this distribution requirement,
the Fund must derive at least 90% of its gross income each taxable year from
dividends, interest, payments with respect to securities loans, gains from the
disposition of stock or securities, and certain other income. Moreover, at the
close of each quarter of its taxable year, at least 50% of the Fund's total
assets must be represented by (i) cash items, Government securities, and
B-6
<PAGE>
securities of other regulated investment companies, and (ii) other securities,
but limited, in respect of any one issuer, to an amount not greater than 5% of
the value of the Fund's total assets and to not more than 10% of the voting
securities of such issuer. Finally, at the close of each quarter of the Fund's
taxable year, no more than 25% of the total assets of the Fund may be invested
in the securities (other than Government securities or securities of other
regulated investment companies) of any one issuer, or of two or more issuers
which the Fund controls and which are engaged in the same, similar, or related
trades or businesses.
While the above requirements are aimed at qualification of the Fund as
a regulated investment company under Subchapter M of the Code, the Fund also
intends to comply with certain requirements of the Code to avoid liability for
federal excise tax. Accordingly, the Fund will distribute, on or before December
31 of each year, at least 98% of its ordinary income for such year and at least
98% of its capital gain net income for the one-year period ended October 31 of
such year, plus certain other amounts.
The Fund may be required to withhold and remit to the U.S. Treasury 31%
of any taxable dividends, capital gains distributions and redemption proceeds
paid to any individual or certain other non-corporate shareholder (1) who has
failed to provide a correct taxpayer identification number (generally an
individual's social security number or non-individual's employer identification
number) on the Application Form, (2) who is subject to backup withholding by the
Internal Revenue Service, or (3) who has not certified to the Fund that such
shareholder is not subject to backup withholding. This backup withholding is not
an additional tax, and any amounts withheld may be credited against the
shareholder's ultimate U.S. tax liability.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Pre-authorized Check Plan and Transfer of Funds from Financial Institutions.
The Prospectus explains that you may buy additional shares of the Fund
through the Fund's Pre-authorized Check Plan. Under this plan you may arrange
for automatic monthly investments in
B-7
<PAGE>
the Fund of $50 or more by authorizing the Fund's Custodian, PNCBank (the
"Custodian") to prepare a check each month drawn on your checking account at a
commercial bank. Each month the Custodian will send a check to your bank for
collection, and the proceeds of the check will be used to buy shares of the Fund
at the per share net asset value determined on the day the check is sent to your
bank. You will receive a confirmation after each purchase of additional shares
through your checking account, and the cancelled check will be returned to you
by your bank with your regular checking account statement.
You may also buy additional shares of the Fund through a plan
permitting transfers of funds from a financial institution. Certain financial
institutions may allow you, on a pre-authorized basis, to have $50 or more
automatically transferred monthly to the Transfer Agent for investment in shares
of the Fund.
If your check is not honored by the institution it is drawn on, you may
be subject to extra charges in order to cover collection costs. These charges
may be deducted from your shareholder account.
Open Account Program
If you do not elect otherwise on your application to purchase Fund
shares, you are automatically enrolled in an Open Account Program. You may
schedule your purchases to suit your personal requirements and you are not
obligated in any way. As each payment is received, full and fractional shares
will be purchased at the next effective offering price and proper entry is made
on the books of the Fund.
The market value of the Fund's shares is subject to fluctuation. Before
undertaking any plan for systematic investment, the investor should keep in mind
that such a program does not assure a profit or protect against a loss in
declining markets.
Systematic Withdrawal Plan
You may also elect to make systematic withdrawals from your Fund
account of a minimum of $50 on a monthly basis or $150 on a quarterly basis if
you are purchasing or already own shares with
B-8
<PAGE>
a net asset value of $10,000 or more. The amounts paid to you each month or
quarter will be obtained by redeeming sufficient shares from your account to
provide the withdrawal amount that you have specified. The Systematic Withdrawal
Plan will also be available for shares held in an IRA, Keogh Plan, SEPP or
corporate retirement plan. You may change the monthly or quarterly amount to be
paid to you without charge not more than once a year by notifying Janney
Montgomery Scott Inc. ("Janney"). Redemptions will be made at net asset value
determined as of the close of business on the New York Stock Exchange (the
"Exchange") on the 25th day of each month or the 25th day of the last month of
each quarter, whichever is applicable. If the Exchange is not open for business
on that day, the shares will be redeemed at net asset value determined as of the
close of business of the Exchange on the preceding business day. The check for
the withdrawal payment will usually be mailed to you on the next business day
following redemption. If you elect to participate in the Systematic Withdrawal
Plan, dividends and distributions on all shares in your account must be
automatically reinvested in Fund shares. You may terminate the Systematic
Withdrawal Plan at any time without charge or penalty. The Fund, the Fund's
transfer agent, PFPC, Inc. (the "Transfer Agent") and Janney also reserve the
right to modify or terminate the Systematic Withdrawal Plan at any time.
Withdrawal payments will be treated as sales of shares rather than as
dividends or capital gains distributions. These payments will be taxable to the
extent that the total amount of the payments exceeds the tax basis of the shares
sold. If the periodic withdrawals exceed reinvested dividends and distributions,
the amount of your original investment may be correspondingly reduced.
Ordinarily, you should not purchase additional shares of the Fund if
you maintain a Systematic Withdrawal Plan because you may incur tax liabilities
in connection with such purchases and withdrawals. The Fund will not knowingly
accept purchase orders from you for additional shares if you maintain a
Systematic Withdrawal Plan unless your purchase is equal to at least one year's
scheduled withdrawals. In addition, if you maintain a Systematic Withdrawal Plan
you may not make periodic investments under the Pre-authorized Check Plan.
B-9
<PAGE>
Redemption by Securities
In addition to the Fund's rights to suspend or delay redemptions noted
in the Fund's Prospectus, the Fund further reserves the right, if conditions
exist which make cash payments undesirable, to honor any request for a
redemption or repurchase order by making payment in whole or in part by
securities valued in the same way as they would be valued for purposes of
computing the Fund's per share net asset value. If payment is made in
securities, a shareholder may incur brokerage expenses in converting those
securities into cash, and will be subject to fluctuation in the market price of
those securities until they are sold.
Exchange Privilege with JMS Money Market Fund Portfolios.
Shareholders may redeem shares of the Fund having a value of $1,000 or
more and use the proceeds to acquire shares of the JMS Money Market Fund, the
JMS Tax-Free Money Market Fund and the JMS Government Money Market Fund (the
"JMS Funds") without sales commission. Subsequently, if they wish within not
more than three years after the date of the transfer to the JMS Funds, to redeem
such Fund shares (and any JMS Fund shares acquired through reinvestment of
income dividends and capital gains distributions on such shares) they may use
the proceeds to reinvest in shares of the Fund without sales commission or any
further service charge. Each redemption, investment and reinvestment will be
made at the then currently applicable net asset value per share. If the monies
previously transferred to any of the JMS Funds have not been transferred back
into shares of the Fund within three years time, then the Exchange Privilege
will expire. This Exchange Privilege will not be available if the proceeds from
a redemption of Fund shares or JMS Fund shares are paid directly to the investor
or at his direction to any person other than the Fund. A broker-dealer other
than Janney may charge the investor a fee for handling any exercise of this
Exchange Privilege. For tax purposes, any such redemption of Fund shares or
Independence Fund shares will be regarded as a sale on which a capital gain or
loss may be realized by the shareholder.
The JMS Funds are open-end investment companies, the shares of which
are sold without sales commission, investing exclusively in money market
instruments (Money Market Fund), tax-exempt money
B-10
<PAGE>
market instruments (Tax-Free Money Market Fund), and U.S. Government issued or
guaranteed marketable debt obligations (Government Money Market Fund). The Fund
and the JMS Funds have materially different investment objectives and policies,
investment portfolios and methods of operations. The Fund and the JMS Funds have
separate managements and investment advisers. Janney acts as distributor for the
Fund and the JMS Funds. The Exchange Privilege does not in any way constitute an
offering or recommendation on the part of the Fund of an investment in shares of
any of the JMS Funds. Any shareholder who considers acquiring JMS Fund shares
should first obtain and review a Fund prospectus before exercising the Exchange
Privilege.
The Exchange Privilege may be exercised by a Fund investor only once in
any ninety-day period. The Fund or the JMS Funds may further limit the number of
times the Exchange Privilege may be exercised by any investor within a specified
period of time. This Exchange Privilege may be terminated at any time by the
Fund or the JMS Funds. However, in such event, six months prior written notice
of termination must be given to the former shareholders who hold JMS Fund shares
pursuant to the Exchange Privilege.
ADDITIONAL INFORMATION ABOUT FUND SHARES
The Fund's Articles of Incorporation authorize the Board of Directors
to issue up to two billion full and fractional shares of capital stock. The Fund
presently has one class of shares known as Class A Common Stock. The Fund's
Articles of Incorporation authorize the Board of Directors to classify or
reclassify any unissued shares of the Fund into one or more additional classes
by setting or changing in any one or more respects their respective preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions of redemption.
Shares have no subscription or preemptive rights and only such
conversion or exchange rights as the Board may grant in its discretion. When
issued for payment as described in the Prospectus and this Statement of
Additional Information, the Fund's shares will be fully paid and non-assessable.
B-11
<PAGE>
Rule 18f-2 under the Investment Company Act of 1940 provides that, upon
the issuance of an additional class or classes of shares representing interests
in separate portfolios of the Fund ("Portfolios"), any matter required to be
submitted to the holders of the Fund's outstanding voting securities shall not
be deemed to have been effectively acted upon unless approved by the holders of
a majority of the outstanding shares of each Portfolio affected by the matter. A
Portfolio is affected by a matter unless it is clear that the interests of each
Portfolio in the matter are identical or that the matter does not affect any
interest of the Portfolio. Under Rule 18f-2 the approval of an investment
advisory agreement or any change in a fundamental investment policy would be
effectively acted upon with respect to a Portfolio only if approved by a
majority of the outstanding shares of such Portfolio. However, Rule 18f-2 also
provides that the ratification of independent public accountants, the approval
of principal underwriting contracts and the election of directors may be
effectively acted upon by shareholders of the Fund voting without regard to
class. In the event of the liquidation or dissolution of the Fund, shares of a
Portfolio would be entitled to receive the assets available for distribution
belonging to the Portfolio, and a proportionate distribution, based upon the
relative asset values of the respective Portfolios, of any general assets not
belonging to any particular Portfolio which are available for distribution.
The Fund's Articles of Incorporation provide that, in the event any
proposed corporate action requires shareholder approval, the action may be taken
upon the majority vote of all outstanding shares of voting securities of the
Fund, regardless of class. However, this provision will not apply if it is
contrary to federal law, including Rule 18f-2.
VALUATION OF SHARES
The net asset value of a Fund share is determined by dividing the value
of the total assets of the Fund, less liabilities, by the number of shares
outstanding. Net asset value is determined daily, as of the close of the New
York Stock Exchange, on its customary business days. Securities owned by the
Fund for which market quotations are readily available are valued at current
market value, or, in their absence, at fair value as determined by the Fund's
Board of Directors. Securities
B-12
<PAGE>
traded on an exchange or NASD National Market System securities will be normally
valued at last sale prices. Other over-the-counter securities, and securities
traded on exchanges for which there is no sale on a particular day, are valued
at the mean of the latest closing bid and asked prices. Debt instruments that
mature in sixty or fewer days are valued at amortized cost.
RETIREMENT PLANS
As noted in the Fund's Prospectus, an investment in Fund shares may be
appropriate for IRAs, Keogh Plans and corporate retirement plans. Unless the
Fund is otherwise directed, capital gains distributions and dividends received
on Fund shares held by any of these plans will be automatically reinvested in
additional Fund shares and will be exempt from taxation until distributed from
the plans. Investors who are considering establishing such a plan may wish to
consult their attorneys or tax advisers with respect to individual tax
questions. The option of investing in these plans through regular payroll
deductions may be arranged with Janney and your employer. Additional information
with respect to these plans is available upon request from any Janney broker.
Individual Retirement Account - IRA
Under the tax law as currently in effect, the Code imposes substantial
restrictions on your ability to make deductible contributions to an IRA. Under
the Code, deductible IRA contributions are limited if (1) an individual has an
adjusted gross income of more than $25,000 (or a married couple filing a joint
return has an adjusted gross income of more than $40,000), and (2) an individual
is an active participant (or, with respect to a married couple filing a joint
return, either spouse is an active participant) in a tax-qualified employer
sponsored retirement plan or certain other tax-favored or government plans (an
"Employer Plan") for any part of the individual's (or couple's) taxable year.
Under the Code, an individual who is an active participant in an Employer Plan
and who has an adjusted gross income of $25,000 or more, but not exceeding
$35,000, is allowed to deduct a portion of his IRA contribution. That portion
decreases proportionately to the extent the individual's income exceeds $25,000.
A married couple filing a joint return whose adjusted gross income is $40,000 or
more, but does not
B-13
<PAGE>
exceed $50,000, is also allowed to deduct a portion of their IRA contributions,
which portion decreases proportionately to the extent the couple's adjusted
gross income exceeds $40,000. An individual with an adjusted gross income
exceeding $35,000 and who is an active participant in an Employer Plan is not
allowed to deduct any portion of his IRA contributions, and a married couple
filing a joint return whose adjusted gross income exceeds $50,000 is not able to
deduct any portion of their IRA contributions if either spouse is an active
participant in an Employer Plan. Under the Code, individuals may make
nondeductible contributions to the extent they are not eligible to make
deductible contributions.
An investment in Fund shares through IRA contributions is advantageous
from a tax standpoint because all income, dividends and capital gains earned on
your Fund shares are not immediately taxable to you or the IRA, but will be
taxable, as are all IRA distributions, as ordinary income when distributed. To
avoid penalties, your interest in an IRA must be distributed, or start to be
distributed, to you not later than April 1 following the taxable year in which
you attain age 70 1/2. Distributions made before age 59 1/2 are subject to a
penalty equal to 10% of the distribution, except in the case of death or
disability or where the distribution is rolled over into another IRA in
accordance with certain rules specified in Section 408(d) of the Code.
IRAs, Keogh Plans and Corporate Retirement Plans Available From Janney
You may also create, through Janney a self-directed IRA (the "Janney
IRA").
Janney also makes available to self-employed individuals a Plan and
Custodial Agreement for Keogh and Corporate Retirement Plans through which Fund
shares may be purchased. The custodial services pursuant to the Agreement are
performed by Janney. However, you have the right to use a bank of your own
choice to provide these services at your own cost. There are penalties for
premature distributions from a Keogh Plan prior to age 59 1/2, except in the
case of death or disability.
B-14
<PAGE>
ADDITIONAL INFORMATION CONCERNING THE
FUND'S MANAGEMENT AND AFFILIATIONS
Officers and directors of the Fund who are interested persons of the
Fund receive no salary or fees from the Fund. Directors of the Fund who are not
interested persons of the Fund receive an annual fee of $5,000 and related
expenses for each meeting of the Board of Directors attended by them.
The following Compensation Table shows aggregate compensation paid to each of
the Fund's Directors by the Fund and the Fund Complex, respectively in the year
ended June 30, 1997.
<TABLE>
<CAPTION>
COMPENSATION TABLE
====================================================================================================================================
(1) Name of Person, (2) Aggregate (3) Pension or Retirement (4) Estimated Annual (5) Total Compensation
Position Compensation From Benefits Accrued as part of Benefits Upon Retirement From Registrant and Fund
Registrant for the fiscal Fund Expenses Complex Paid to Directors
year ended June 30, for the fiscal year ended
1997 June 30, 1997
====================================================================================================================================
<S> <C> <C> <C> <C>
*Rudolph C. Sander $0 $0 $0 $0
Chairman of the Board
and Director
Margaret M. Healy $5,000 $0 $0 $5,000
Director
William R. Dimeling $5,000 $0 $0 $5,000
Director
Charles E. Mather, III $5,000 $0 $0 $5,000
Director
====================================================================================================================================
* A Trustee who is an "interested person" as defined in the Investment Company Act.
</TABLE>
Janney, a Delaware corporation, wholly owned by Independence Square
Properties, Inc., a Pennsylvania corporation, which is in turn wholly owned by
Penn Mutual Life Insurance Company, a life insurance company formed under the
laws of Pennsylvania. The address of Janney is 1801 Market Street, Philadelphia,
Pennsylvania. The address of each of its parent companies described above is
Independence Square, Philadelphia, Pennsylvania.
B-15
<PAGE>
As of September 1, 1997, the Fund knew of no person who owned of record
or beneficially five percent or more of the Fund's shares.
INVESTMENT ADVISORY AND OTHER SERVICES
Addison Capital Management Company (the "Adviser") serves as the Fund's
investment adviser. The Adviser is a wholly-owned subsidiary of Janney;
therefore, each of the companies listed immediately above may be deemed to
control the Adviser. The Adviser acts as the Fund's investment adviser under an
Investment Advisory Agreement dated September 8, 1986. The Agreement provides
that, subject to overall supervision by the Board of Directors of the Fund, the
Adviser will manage the investment affairs of the Fund. The Adviser will be
responsible for managing the Fund's portfolio and for making purchases and sales
of portfolio securities consistent with the Fund's investment objective and
policies described in the Prospectus and this Statement of Additional
Information.
The Adviser receives for its services a management fee, calculated
daily and payable monthly, at an annual rate of 0.75% of the average daily net
assets of the Fund for the first $100 million of daily average net assets, 0.50%
of average daily net assets exceeding $100 million but less than $250 million,
and 0.25% of average daily net assets exceeding $250 million. For the fiscal
years ended June 30, 1995, June 30, 1996 and June 30, 1997 the Adviser received
$269,708, $340,192 and $430,263 respectively, in advisory fees from the Fund.
The advisory fee, and the annual management and distribution fees paid to
Janney, may be reduced on a pro rata basis under regulations in various states
where Fund shares are qualified for sale which impose limitations on the annual
expense ratio of the Fund.
The Investment Advisory Agreement was approved by the Fund's sole
shareholder on September 4, 1986 and by the Fund's shareholders at a meeting on
October 29, 1987. It will remain in effect from year to year, provided each
annual continuance is approved in the manner required by the Investment Company
Act of 1940 and, in respect to any continuance, if the Adviser does not notify
the Fund at least 60 days prior to each anniversary date of the Agreement that
it does not desire such continuance. Each
B-16
<PAGE>
continuance must be approved by a majority of the Board of Directors or by vote
of the holders of a majority of the outstanding voting securities of the Fund.
Additionally, the Agreement, and each continuance hereof, must be approved by
vote of a majority of the directors of the Fund who are not parties to the
Agreement or "interested" persons of such parties as that term is defined in the
Investment Company Act of 1940. The Fund's Board of Directors, including all the
non-interested Directors approved the continuation of the Agreement on September
2, 1992. The Agreement may be terminated by the Fund, without penalty, on 60
days' written notice to the Adviser and will terminate automatically in the
event of its assignment.
Under the Investment Advisory Agreement, the Fund has the non-exclusive
right to use the name "Addison" until that Agreement is terminated, or until the
right is withdrawn in writing by the Adviser.
Under a Services Agreement between the Fund and Janney, Janney provides
office space to the Fund, supervises performance by PFPC, Inc.("PFPC") and by
the Fund's Custodian of their respective duties, and responds to shareholders
inquiries, for an annual fee equal to 0.25% of the Fund's average daily net
assets. This fee is in addition to the annual distribution fee which Janney will
also receive from the Fund. See "The Fund's Distributor" below. Janney has
waived payment of this fee since commencement of the Fund's operations through
June 30, 1993. Commencing July 1, 1993, Janney began collecting this fee from
the Fund. For the years ended June 30, 1996 and June 30, 1997, Janney received
service fees of $113,397 and $143,421, respectively.
Pursuant to an Administration and Accounting Services Agreement dated
September 8, 1986 between PFPC and the Fund, PFPC performs accounting and
recordkeeping services for the Fund. For example, PFPC keeps all books and
records with respect to the Fund's security transactions, controls disbursements
from the Fund, computes daily the net asset value of the Fund, prepares monthly
financial statements and security transactions listings and quarterly broker
security transactions summaries, and provides various Fund statistical data on
an ongoing basis as requested. PFPC also prepares and files, on the Fund's
behalf, the Fund's annual and quarterly reports to the Securities and
B-17
<PAGE>
Exchange Commission, assists in the preparation of federal and state tax
returns, and assists generally in all aspects of the Fund's operations other
than those duties to be performed by the Custodian, the Transfer Agent, the
Adviser, and Janney. As fees for its services, PFPC receives an annual fee equal
to .10% of the Fund's average daily net assets, with a minimum annual fee of
$100,000 (a portion of which has been voluntarily waived since commencement of
the Fund's operations). For the fiscal years ended June 30, 1995, June 30, 1996
and June 30, 1997, PFPC received fees of $75,000, $75,000 and $75,000,
respectively.
PORTFOLIO TRANSACTIONS AND BROKERAGE
As a general rule, the timing of the Fund's purchases and sales of
securities will be based primarily on the investment merits of the securities
and only secondarily will timing be influenced by whether capital gains will be
long-term or short-term. Thus, the turnover rate may vary greatly from year to
year or during periods within a year. The portfolio turnover rate is computed by
dividing the lesser of purchases or sales of securities for the period by the
average value of portfolio securities for that period. The Fund's portfolio
turnover rate for the fiscal years ended June 30, 1996 and June 30, 1997 was
38.97% and 29.48%, respectively.
Under the Investment Advisory Agreement the Adviser is responsible for
the execution of the Fund's portfolio transactions and must seek best execution
for such transactions. Best execution, however, does not mean that the Fund
necessarily will be paying the lowest commission or spread available. Rather,
the Fund also will take into account such factors as size of the order,
difficulty of execution, efficiency of the executing broker's facilities
(including the services described below), and any risk assumed by the executing
broker.
Consistent with the policy of best execution, the Adviser may give
consideration to research, statistical and other services furnished by brokers
or dealers to the Adviser for its use and may place orders with brokers who
provide supplemental investment and market research and securities and economic
analysis. Accordingly, the Investment Advisory Agreement also incorporates the
concepts of Section 28(e) of the Securities Exchange Act of 1934 by providing
that, subject to the approval
B-18
<PAGE>
of the Fund's Board of Directors, the Adviser may cause the Fund to pay a
broker-dealer which furnishes brokerage and research services a higher
commission than that which might be charged by another broker-dealer for
effecting the same transaction; provided that such commission is deemed
reasonable in terms of either the particular transaction or the overall
responsibilities of the Adviser to the Fund. Such research services may be
useful to the Adviser in connection with services to clients other than the
Fund. For the fiscal year ended June 30, 1997, the Adviser directed transactions
for the Fund aggregating $28,295,734 to broker-dealers for research services,
for which the broker-dealers received $45,870 in commissions.
From time to time the Fund may use Janney as broker for agency
transactions in listed and over-the-counter securities at commission rates and
under circumstances consistent with the policy of best execution. Commissions
paid to Janney will not exceed "usual and customary" brokerage commissions. Rule
17e-1 under the Investment Company Act of 1940 defines "usual and customary
commissions" to include amounts which are "reasonable and fair compared to the
commission, fee or other remuneration received or to be received by other
brokers in connection with comparable transactions involving similar securities
being purchased or sold on a securities exchange during a comparable period of
time." For the fiscal years ended June 30, 1995 and June 30, 1996, Janney
received brokerage commissions of $6,713 and $0, respectively, from the Fund.
For the fiscal year ended June 30, 1997, Janney received brokerage commissions
of $660, or 1.4% of the aggregate brokerage commissions paid by the Fund. The
securities transactions effected through Janney represented 3% of the aggregate
dollar amount of transactions involving the payment of commissions.
The Adviser will also select other brokers to execute portfolio
transactions. In the over-the-counter market, the Fund generally will deal with
responsible primary market-makers unless a more favorable execution can
otherwise be obtained.
The Fund may not buy securities from, or sell to, Janney as principal.
However, the Fund's Board of Directors has adopted procedures in conformity with
Rule 10f-3 under the Investment Company Act of 1940 whereby the Fund may
purchase securities that
B-19
<PAGE>
are offered in underwritings in which Janney is a participant. The Board of
Directors of the Fund will consider the possibilities of seeking to recapture
for the benefit of the Fund expenses of certain portfolio transactions, such as
underwriting commissions and tender offer solicitation fees, by conducting such
portfolio transactions through affiliated entities, including Janney, only to
the extent such recapture would be permissible under applicable regulations,
including the rules of the National Association of Securities Dealers, Inc. and
other self-regulatory organizations.
Section 11(a)(1)(H) of the Securities Exchange Act of 1934 (the "1934
Act") repeals the managed account provisions of Section 11(a) to allow members
of national securities exchanges to effect transactions on such exchanges for
managed accounts, i.e. accounts for which members exercise investment
discretion. Pursuant to Section 11(a)(1)(H), Janney is permitted, as a member of
a national securities exchange, to perform functions other than execution in
connection with a securities transactions for the Fund on that exchange only if
the Fund expressly consents by written contract. The Fund has expressly provided
such consent in accordance with Section 11(a)(1)(H).
Investment decisions for the Fund are made independently from those of
other accounts advised by the Adviser. However, the same security may be held in
the portfolios of more than one account.
When two or more accounts simultaneously engage in the purchase or sale
of the same security, the prices and amounts will be equitably allocated among
each account. In some cases, this procedure may adversely affect the price or
quantity of the security available to a particular account. In other cases,
however, an account's ability to participate in large-volume transactions may
produce better executions and prices.
THE FUND'S DISTRIBUTOR
Janney is the distributor of the Fund's shares pursuant to an
Underwriting Agreement with the Fund. Janney's distribution services are
performed on a "best efforts" basis. Offering of the Fund's shares will be
continuous. The Underwriting Agreement obligates Janney to pay for the printing
and distribution of
B-20
<PAGE>
prospectuses and periodic reports used in connection with the offering of Fund
shares to prospective investors, after the prospectuses and reports have been
prepared, set in type and mailed to existing shareholders at the Fund's
expenses, and for supplementary sales literature and advertising costs. Rudolph
C. Sander, who is Chairman of the Board and a Director of the Fund, is also
Chairman of the Board, Chairman of the Executive Committee and a Director of
Janney. Charles J. Sullivan, a Vice President of the Fund, is also a Senior Vice
President and Director of Janney.
As compensation for its services, Janney receives an annual
distribution fee equivalent to 0.65% of the Fund's average daily net assets in
accordance with the Distribution Plan described below. However, commencing July
1, 1993, Janney waived a portion of this fee equal to 0.25% of the Fund's
average daily net assets. The Board of Directors of the Fund determined that
such a waiver was appropriate in view of Janney's decision to commence
collecting the service fee described above under "Investment Advisory and Other
Services". The distribution fee will be computed daily and paid monthly. For the
fiscal years ended June 30, 1995, June 30, 1996 and June 30, 1997, Janney
received fees of $143,844 , $181,436 and $229,473, respectively, from the Fund
for distribution services.
Prior to July 3, 1995, Janney also received, upon each sale of Fund
shares, the entire amount of the applicable sales charge. Commencing on July 3,
1995, Janney waived the payment of the 3% sales charge on purchases on Fund
shares. At the same time, the Adviser agreed to pay Janney an amount equal to
.25% of the Fund's average net assets from its own assets. The Board of
Directors of the Fund determined that in order to encourage sales of Fund
shares, it is reasonable to permit the Adviser to use its own assets to pay
Janney for its distribution efforts and to permit Janney to waive sales charges
on purchases of new Fund Shares, and has approved Janney's continuation of such
waiver. Janney will not re-introduce this sales charge without the prior consent
of the Board, including a majority of the "non-interested" directors as defined
in the Investment Company Act of 1940.
The Fund has adopted a Distribution Plan ("Plan") which, among other
things, permits it to pay Janney the 0.65%
B-21
<PAGE>
distribution fee out of its net assets. The Plan was approved by the Fund's sole
shareholder on August 13, 1986 and, as required by Rule 12b-1 under the
Investment Company Act of 1940, was also approved by the Board of Directors of
the Fund on August 12, 1986, including a majority of the directors who were not
"interested persons" of the Fund as that term is defined in the Investment
Company Act of 1940 and who had no direct or indirect financial interest in the
operation of the Plan or the Underwriting Agreement. In approving the Plan, in
accordance with the requirements of Rule 12b-1, the directors considered various
factors including the amount of the distribution fee. The directors determined
that there is a reasonable likelihood that the Plan will benefit the Fund and
the shareholders.
Although the payment by the Adviser to Janney in the amount of .25% of
the Fund's average net assets is made from the Adviser's own assets, the Board
of Directors has deemed such payment subject to the 12b-1 Distribution Plan.
Accordingly, the Board of Directors determined the payment from the Adviser is
appropriate and consistent with Rule 12b-1 and the Distribution Plan.
The Plan may be terminated by vote of a majority of the independent
directors of the Fund who have no direct or indirect financial interest in the
Plan or in the Underwriting Agreement, or by vote of a majority of the
outstanding voting securities of the Fund. Any change in the Plan that would
materially increase the distribution costs to the Fund requires shareholder
approval; otherwise the Plan may be amended by the directors, including a
majority of the independent directors, as described above.
The Plan continues in effect for successive one-year periods (from each
September 8 anniversary date), provided that each such continuance is
specifically approved by (i) the vote of a majority of the directors who are not
parties to the Underwriting Agreement or interested persons of any such party
and who have no direct or indirect financial interest in the Plan or Agreement
and (2) the vote of a majority of the entire Board of Directors. The Fund's
Board, including all non-interested directors, approved the continuance of the
Plan on September, 1995.
Rule 12b-1 requires that any person authorized to direct the
disposition of monies paid or payable by the Fund pursuant to the
B-22
<PAGE>
Plan or any related agreement shall provide to the Fund's Board of Directors,
and the directors shall review, at least quarterly, a written report of the
amounts so expended and the purposes for which expenditures were made. Rule
12b-1 also provides that the Fund may rely on that rule only if the selection
and nomination of the Fund's independent directors are committed to the
discretion of such independent directors.
The Underwriting Agreement will continue in effect for successive
one-year periods subject to the same provisions for renewal as the Plan. In
addition, the Underwriting Agreement will terminate upon assignment or upon 60
days' notice, given prior to the second anniversary of the date of the agreement
and each anniversary thereafter, from Janney. The Fund may terminate the
Underwriting Agreement, without penalty, upon 60 days' notice, by a majority
vote of either its Board of Directors, the independent directors who have no
direct or indirect interest in the Plan or the Underwriting Agreement, or the
outstanding voting securities of the Fund.
THE FUND'S CUSTODIAN, TRANSFER AND DIVIDEND
DISBURSING AGENT
Cash and securities owned by the Fund will be held by PNCBank, Airport
Business Center, International Court 2, 200 Stevens Drive, Lester, Pennsylvania
19113, as Custodian pursuant to a Custodian Agreement. Under the Custodian
Agreement, the Custodian will (i) maintain a separate account in the name of the
Fund, (ii) disburse money on behalf of the Fund, and (iii) collect all income
and other payments on account of the Fund's portfolio securities.
PFPC, Inc., P.O. Box 8916, Wilmington, Delaware 19899-8916, will serve
as the Fund's transfer agent and dividend disbursing agent pursuant to a
Transfer Agency Agreement. Under the Agreement, PFPC will (i) issue and redeem
shares of the Fund, (ii) process dividend and distribution payments to
shareholders, (iii) mail annual and semi-annual reports, dividend notices and
other shareholder communications, (iv) respond to correspondence by shareholders
and others, and (v) maintain shareholder accounts. Shareholders who request a
historical transcript of their account from the Transfer Agent will be charged a
fee based upon the number of years researched. The Fund reserves the
B-23
<PAGE>
right, upon 60 days' written notice, to make other charges to investors to cover
administrative costs.
THE FUND'S LEGAL COUNSEL
Morgan, Lewis & Bockius LLP, 2000 One Logan Square, Philadelphia,
Pennsylvania 19103, serves as counsel to the Fund and has passed upon certain
matters in connection with this offering. Mr. Jennings, who is Secretary of the
Fund, is a partner in the firm. The firm also acts as counsel to the Adviser and
to Janney.
FINANCIAL STATEMENTS
The financial statements for the Fund for the fiscal year ended June
30, 1997 and the report of Tait, Weller & Baker, independent auditors, all of
which are included in the Funds' 1997 Annual Report to Shareholders, are hereby
incorporated by reference in this Statement of Additional Information. Copies of
the Fund's 1997 Annual Report to Shareholders may be obtained without charge by
contacting Janney.
THE FUND'S INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS
Tait, Weller & Baker, Two Penn Center Plaza, Suite 700, Philadelphia,
Pennsylvania 19102 have been selected as the independent certified public
accountants for the Fund. The Financial Statements of the Fund which appear in
this Statement of Additional Information have been examined by Tait, Weller &
Baker whose report thereon appears elsewhere herein and has been included herein
in reliance upon the report of said firm of accountants, which is given upon
their authority as experts in accounting and auditing.
B-24
<PAGE>
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
(1) The following financial statements are incorporated
by reference into Parts A and B of the Registration
Statement from the Registrant's 1997 Annual Report
to Shareholders filed on October 20, 1997:
- Schedule of Portfolio Investments for the fiscal
year ended June 30, 1997
- Statement of Assets and Liabilities for the fiscal
year ended June 30, 1997
- Statement of Operations for the fiscal year ended
June 30, 1997
- Statement of Changes in Net Assets for the fiscal
year ended June 30, 1997
- Financial Highlights for the fiscal years ended
June 30, 1993 through June 30, 1997
- Notes to the Financial Highlights
- Report of Independent Certified Public Accountants
(2) All required financial statements are incorporated
by reference from the Registrant's 1997 Annual Report
to Shareholders and included in Parts A and B
hereof. All other financial statements and schedules
are inapplicable.
C-1
<PAGE>
(b) Exhibits:
(1) Articles of Incorporation dated June 3, 1986
are incorporated herein by reference to
Exhibit 1 of the Registrant's Registration
Statement on Form N-1A.
(2) By-Laws as amended on March 7, 1990 are
incorporated herein by reference to Exhibit 2
of Post-Effective Amendment No. 5 to
Registrant's Registration Statement on Form
N-1A.
(3) None.
(4) Specimen Copy of Share Certificate for the
Registrant's Class A Common Stock is incorporated
herein by reference to Exhibit 4 to the Registrant's
Registration Statement on Form N-1A.
(5) Investment Advisory Agreement between the
Registrant and Addison Capital Management
Company is incorporated herein by reference
to Exhibit 5 to the Registrant's
Registration Statement on Form N-1A.
(6) (a) Underwriting Agreement between the
Registrant and Janney Montgomery Scott
Inc. is incorporated herein by reference
to Exhibit 6(a) to the Registrant's
Registration Statement on Form N-1A.
(b) Dealer Agreement between Janney
Montgomery Scott Inc. and Penn Mutual
Equity Services, Inc. is incorporated
herein by reference to Exhibit 6(b) to
the Registrant's Registration Statement
on Form N-1A.
(7) None.
C-2
<PAGE>
(8) Custodian Agreement between the Registrant and
Provident National Bank is incorporated herein
by reference to Exhibit 8 to the Registrant's
Registration Statement on form
N-1A.
(9) (a) Services Agreement between the
Registrant and Janney Montgomery Scott
Inc. is incorporated herein by reference
to Exhibit 9(a) to the Registrant's
Registration Statement on Form N-1A.
(b) Administration and Accounting Services
Agreement between the Registrant and
Provident Institutional Management
Corporation is incorporated herein by
reference to Exhibit 9(b) to the
Registrant's Registration Statement on
Form N-1A.
(c) Transfer Agency Agreement between the
Registrant and Provident Financial
Processing Corporation is incorporated
herein by reference to Exhibit 9(c) to
the Registrant's Registration Statement
on Form N-1A.
(10) (a) Opinion re: legality and consent of
Morgan, Lewis & Bockius LLP is
incorporated herein by reference to
Exhibit 10(a) to the Registrant's
Registration Statement on Form N-1A.
(b) Opinion re: Pennsylvania personal
property taxes and consent of Morgan,
Lewis & Bockius LLP is incorporated
herein by reference to Exhibit 10(b) to
the Registrant's Registration Statement
on Form N-1A.
*(11) Consent of Tait, Weller & Baker.
(12) None.
C-3
<PAGE>
(13) Agreement with Janney Montgomery Scott
Inc. for providing Initial Capital is
incorporated herein by reference to
Exhibit 13A the Registrant's Registration
Statement on Form N-1A.
(14) None.
(15) The Registrant's 12b-1 Plan is
incorporated herein by reference to
Exhibit 15 to the Registrant's
Registration Statement on Form N-1A.
(16) None.
(17) None.
(18) Powers of Attorney.
*(27) Financial Data Schedules.
- --------------------
* Filed with this Post-Effective Amendment
C-4
<PAGE>
Item 25. Persons Controlled by or under Common Control with
Registrant
Not Applicable.
Item 26. Number of Holders of Securities
The following information is as of June 30, 1997:
Title of Class Number of Record Holders
-------------- ------------------------
Common Stock, par 2,608
value $.001 per share
Item 27. Indemnification
Article VII of the Registrant's Articles of Incorporation provides,
"The Corporation shall indemnify its present and past directors,
officers, employees, and agents, and persons who are serving or
have served at the request of the Corporation as a director,
officer, employee or agent of another corporation, partnership,
joint venture, trust or enterprise, to the maximum extent permitted
by applicable law, in such manner as may be provided in the
By-Laws; provided, that no director or officer of the Corporation
shall be indemnified against any liability to the Corporation or
its stockholders to which he would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office. The
Corporation may purchase insurance against any liability which may
be asserted against or incurred by any director or officer in such
capacity or arising out of his status as such (whether or not
indemnification with respect to such liability is permitted under
these Articles of Incorporation or any provision of law), as the
Board of Directors may determine."
Article VIII of the Registrant's By-Laws provides,
C-5
<PAGE>
"ARTICLE VIII.1. Indemnification of Officers, Directors,
Employees and Agents. The Corporation shall indemnify its present
and past Directors, officers, employees, and agents, and persons
who are serving or have served at the request of the Corporation
as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, or enterprise, to the maximum
extent provided and allowed by Md. Corp. and Assigns. Code
Section 2-418, as amended from time to time.
Article VIII.2. Limitations of Indemnification.
(a) Notwithstanding anything herein to the contrary, no Director,
officer, investment adviser, or principal underwriter of the
Corporation shall be indemnified for any liability, whether or
not there is an adjudication of liability, arising by reason of
willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office or
in performance of its contract. Subject to the limitation of any
applicable law, the determination of whether or not there has
been such disabling conduct may be determined by (1) a final
decision on the merits by a court or other body before whom the
proceeding was brought that such person to be indemnified was not
liable by reason of such disabling conduct, or (2) in the absence
of such a decision, a reasonable determination, based upon a
review of the facts, that such person to be indemnified was not
liable by reason of such disabling conduct, by (i) the vote of a
majority of a quorum of directors which are neither "interested
persons", as defined in the Investment Company Act of 1940
("disinterested directors") nor parties to the proceeding, or
(ii) whether or not such quorum is obtainable, if a majority of a
quorum of disinterested directors so directs, by an independent
legal counsel in a written opinion.
(b) Notwithstanding anything herein to the contrary, no expenses
(including attorneys' fees) incurred by the Corporation's
Directors and officers in any pending proceeding shall be paid by
the Corporation in advance unless such person to be indemnified,
or someone on his behalf, undertakes to repay the advance unless
it is
C-6
<PAGE>
ultimately determined that he is entitled to indemnification and
(a) such person provides security for his undertaking, (2) the
Corporation is insured against losses arising by reason of any
lawful advances, or (3) a majority of a quorum of the disinterested
directors who are not parties to the proceeding, or an independent
legal counsel (chosen by a majority of a quorum of disinterested
directors) in a written opinion, shall determine, based upon a
review of readily available facts, that there is reason to believe
that such person will ultimately be entitled to indemnification."
In the Underwriting Agreement between the Fund and Janney
Montgomery Scott Inc., the Fund has agreed to indemnify Janney
against any liability arising out of any alleged untrue statement
of material fact, or failure to state a material fact, in the
Fund's Registration Statement and Prospectus, except liabilities
arising from the Distributor's will misfeasance, bad faith, or
gross negligence, and liabilities arising from written
misstatements furnished by the Distributor for use in the
Registration Statement. Insofar as indemnification for liabilities
arising under the Securities Act of 1933 may be permitted to
directors, officers and controlling persons of the Registrant by
the Registrant pursuant to the Articles of Incorporation or
otherwise, the Registrant is aware that in the opinion of the
Securities and Exchange Commission, such indemnification is against
public policy as expressed in the Act and, therefore, is
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant
of express incurred or paid by trustees, officers or controlling
persons of the Registrant in connection with the successful defense
of any act, suit or proceeding) is asserted by such trustees,
officers or controlling persons in connection with the shares being
registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issues.
C-7
<PAGE>
Item 28. Business and Other Connections of Investment Adviser
Radcliffe Cheston, President, Treasurer and a director of Addison
Capital Management Company (the "Adviser") was a general partner of
a now dissolved partnership, also known as Addison Capital
Management Company (the "Predecessor"), an investment advisory
business from which the Adviser acquired its assets in April 1986.
Rudolph C. Sander, a director and Chairman of the Board of the
Adviser, is Chairman of the Board and Chairman of the Executive
Committee of Janney Montgomery Scott Inc., a brokerage and
investment banking firm which is the Fund's distributor.
Item 29. Principal Underwriter
(a) Janney does not act as principal underwriter for
any other investment company.
(b) The Directors and executive officers of Janney
Montgomery Scott Inc. as of August 1, 1996 are
listed below. Except as otherwise noted, each
person's principal business address is at Janney
Montgomery Scott Inc., 1801 Market Street,
Philadelphia, Pennsylvania 19103.
C-8
<PAGE>
<TABLE>
<CAPTION>
Positions and Offices Positions and Offices
Name with Underwriter with Registrant
- ---- ---------------- ---------------
<S> <C> <C>
Avallon, Richard 1st Vice President None
Barrett, William Joel(1) Sr. Vice President None
Bennett, Robert John 1st Vice President None
Berardino, Ronald Michael(1) Exec. Vice President and Director None
Betz, Jr., William Raymond 1st Vice President None
Biggs, Randall 1st Vice President None
Brodie, Nancy S. Director None
Brandreth, Sr., William Rea Sr. Vice President and Director None
Carlin, Jr., William James 1st Vice President None
Chappell, Robert E. Director None
Cook, Jr., Charles Beckwith(1) Vice Chair, Bd. of Directors None
Croonquist, Jr., George Thomas 1st Vice President None
Croonquist, Sr., George Thomas(2) Sr. Vice President and Director None
Dallas, Paul 1st Vice Pesident None
Day, Steve Woodward 1st Vice President None
DiCicco, Dominic Charles 1st Vice President None
Doyle, Lawrence Patrick 1st Vice President None
Eldredge, Jr., Ashton Goodliff Sr. Vice President and Director None
Fenton, Joseph Patrick 1st Vice President None
Foley, Michael C. Sr. Vice President and Director None
Fortuna, Jr., John 1st Vice President None
Gardner, Herbert M.(1) Sr. Vice President None
Gonzalez, Jay Clark 1st Vice President None
Gray, John Joseph Exec. Vice President and Director None
Grim, Jack 1st Vice President None
Hunter, Jr., James Terrance 1st Vice President None
Howell, Christopher R. 1st Vice President None
Johnson, Lawrence Retlaw 1st Vice President None
Kashishian, Steven Sr. Vice President None
Kirkpatrick, Jr., Henry Halsey 1st Vice President None
Lagana, Thomas Frank 1st Vice President None
Langen, Robert Carl 1st Vice President None
Lee, Brian Westcott 1st Vice President None
Lichtenthal, Steven Mark Sr. Vice President None
Lombard, Jr., Jerome F. 1st Vice President None
Losty, Edward 1st Vice President None
Madvedoff, Mark 1st Vice President None
Marks, Katherine A. 1st Vice President None
McAlenney, Jr., Edward Joseph 1st Vice President None
McCrea, James Anthony 1st Vice President and Assistant Secretary None
Meminger, Alan Smith 1st Vice President None
Meyer, James Maurice Sr. Vice President and Director None
Mielziner, Norman Kenneth 1st Vice President None
Mufson, Michael J. Sr. Vice President None
O'Malley, III, William Gresham Sr. Vice President, Secretary and Director None
Onori, Paul Nicholas 1st Vice President None
</TABLE>
C-9
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Patitucci, Michael Robert 1st Vice President None
Peroni, Jr., Eugene 1st Vice President None
Purkiss, Richard Allen Sr. Vice President and Director None
Radetzky, William Richard Sr. Vice President None
Richards, II, Robert Kenneth 1st Vice President None
Rosato, Kenneth Vincento 1st Vice President None
Rubel, Steven K. 1st Vice President None
Ruello, John K. Sr. Vice President None
Rulon-Miller, William L. Sr. Vice President None
Sander, Rudolph Charles Chairman and Chairman Executive Committee Chairman and Director
Sanford, William Joseph 1st Vice President None
Schankel, Alan Miller Sr. Vice President and Director None
Scherer, Howard B. Vice President None
Simon, Gail Roberta 1st Vice President None
Spatacco, Michael Stephan Sr. Vice President None
Stark, Jeanette Louise 1st Vice President None
Sullivan, Charles John Sr. Vice President and Director Vice President
Thornton, Richard Anson 1st Vice President and Asst. Treasurer None
Thompson, Richard A. 1st Vice President None
Tickner, Will S. 1st Vice President None
Travlos, Darcy 1st Vice President None
Waitneight, Stephen Karl(3) 1st Vice President None
Warren, Frederick R. 1st Vice President None
Weissenborn, Stanton Sr. Vice President None
Whitaker, Jr., Arthur James 1st Vice President None
Wilde, Jr., Norman Taylor President, Chief Executive Office and Director None
Wolitarsky, James William Sr. Vice President, Treasurer and Director None
</TABLE>
(1) Principal Business Address is Janney Montgomery Scott Inc., 26 Broadway,
New York, NY 10004.
(2) Principal Business Address is Janney Montgomery Scott Inc., 505 Main
Street, Hackensack, NJ 07601.
(3) Principal Business Address is Janney Montgomery Scott Inc., 1909 E. Marlton
Pike, Cherry Hill, NJ 08003.
Item 30. Location of Accounts and Records
Books or other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940,
and the rules promulgated thereunder, are maintained
as follows:
(a) With the respect to Rule 31a-1(a);
(b)(1); (b)(2)(i); (3); and (7), the
required books and records are
maintained at the offices of the
Registrant's custodian: PNCBank,
Airport Business Center,
International Court 2, 200 Stevens
Drive, Lester, Pennsylvania 19113.
C-10
<PAGE>
(b) With respect to Rule 31a-1(a);
(b)(2)(ii), (iii); (5); (6); and (8)
the required books and records are
maintained at the offices of
Registrant's accounting and
administrative services agent: PFPC,
103 Bellevue Parkway, Wilmington,
Delaware 19809.
(c) With respect to Rule 31a-1(a) and
(b)(2)(iv), the required books and
records are maintained at the
offices of Registrant's transfer
agent: PFPC, Inc. , 3531 Silverside
Road, Wilmington, Delaware 19803.
(d) With respect to Rule 31a-1(d), the
required books and records are
maintained at the offices of the
Fund's distributor, Janney
Montgomery Scott Inc., 1801 Market
Street, Philadelphia, Pennsylvania
19103.
(e) With respect to Rules 31a-1(a);
(b)(9); (10); (f), the required
books and records are maintained at
the offices of Registrant's
Investment Adviser: Addison Capital
Management Company, 1608 Walnut
Street, Philadelphia, Pennsylvania.
(f) With respect to records required by
Rule 31a-1(b)(4), the required books
and records are maintained at the
offices of Registrant's counsel:
Morgan, Lewis & Bockius LLP, 2000
One Logan Square, Philadelphia,
Pennsylvania 19103.
Item 31. Management Services
None.
Item 32. Undertakings
None.
C-11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933 and the Investment Company Act of 1940, the Registrant certifies that it
meets all of the requirements for effectiveness of this Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused
this Amendment to the Registration Statement to be duly signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Philadelphia and
Commonwealth of Pennsylvania as of the 22nd day of October, 1997.
ADDISON CAPITAL SHARES, INC.
Registrant
/s/ Radcliffe Cheston
-------------------------------
Radcliffe Cheston, President
Pursuant to the requirements of the Securities Act of
1933, this Amendment to the Registration Statement has been signed below by the
following persons in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Radcliffe Cheston President and Chief October 22,
- -------------------------------- Executive Officer 1997
Radcliffe Cheston
/s/ Radcliffe Cheston Chairman of the Board October 22,
- -------------------------------- and Director 1997
Rudolph C. Sander*
/s/ Radcliffe Cheston Director October 22,
- -------------------------------- 1997
Margaret M. Healey*
/s/ Radcliffe Cheston Director October 22,
- -------------------------------- 1997
William R. Dimeling*
/s/ Radcliffe Cheston Director October 22,
- -------------------------------- 1997
Charles E. Mather, III*
/s/ Radcliffe Cheston Treasurer and Chief October 22,
- -------------------------------- Financial and 1997
James W. Wolitarsky* Accounting Officer
/s/ Radcliffe Cheston
- --------------------------------
*Radcliffe Cheston
Attorney-in-Fact
</TABLE>
C-12
<PAGE>
EXHIBIT INDEX
Page
----
(1) Articles of Incorporation.
(2) By-Laws.
(5) Investment Advisory Agreement between the
Registrant and Addison Capital Management
Company.
(6) (a) Underwriting Agreement between the
Registrant and Janney Montgomery
Scott Inc.
(b) Dealer's Agreement between Janney
Montgomery Scott Inc. and Penn Mutual
Equity Services, Inc.
(8) Custodian Agreement between the Registrant
and The Provident National Bank.
(9) (a) Services Agreement between the Registrant
and Janney Montgomery Scott Inc.
(b) Administration and Accounting Services;
Agreement between the Registrant and
Provident Institutional Management
Corporation.
(c) Transfer Agency Agreement between the
Registrant and Provident Financial
Processing Corporation.
(10) (b) Opinion re: Pennsylvania personal
property taxes and Consent of Morgan,
Lewis & Bockius LLP.
*(11) Consent of Tait, Weller & Baker.
(13) Agreement with Janney Montgomery
Scott Inc. for providing Initial Capital.
(15) Registrant's 12b-1 Plan.
C-13
<PAGE>
Page
----
(18) Powers of Attorney.
(27) Financial Data Schedules.
C-14
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the use of our report dated July 18, 1997 on the financial
statements and the financial highlights of Addison Capital Shares, Inc. Such
financial statements and financial highlights appear in the 1997 Annual Report
to Shareholders which is included in the Statement of Additional Information
filed in Post-Effective Amendment No. 12 to the Registration Statement on Form
N-1A of Addison Capital Shares, Inc. We also consent to the references to our
Firm in the Registration Statement and Prospectus.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
October 16, 1997
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 42,603,883
<INVESTMENTS-AT-VALUE> 66,436,879
<RECEIVABLES> 286,672
<ASSETS-OTHER> 14,860
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 66,738,411
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 128,959
<TOTAL-LIABILITIES> 128,959
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 36,996,785
<SHARES-COMMON-STOCK> 2,112,426
<SHARES-COMMON-PRIOR> 1,919,031
<ACCUMULATED-NII-CURRENT> 160,541
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 5,619,130
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 23,832,996
<NET-ASSETS> 66,609,452
<DIVIDEND-INCOME> 1,273,705
<INTEREST-INCOME> 84,389
<OTHER-INCOME> 0
<EXPENSES-NET> 1,046,964
<NET-INVESTMENT-INCOME> 311,130
<REALIZED-GAINS-CURRENT> 6,825,229
<APPREC-INCREASE-CURRENT> 9,273,824
<NET-CHANGE-FROM-OPS> 16,410,183
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 296,865
<DISTRIBUTIONS-OF-GAINS> 4,873,658
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 239,811
<NUMBER-OF-SHARES-REDEEMED> (245,822)
<SHARES-REINVESTED> 199,406
<NET-CHANGE-IN-ASSETS> 15,905,652
<ACCUMULATED-NII-PRIOR> 146,276
<ACCUMULATED-GAINS-PRIOR> 3,667,559
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 430,263
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,046,964
<AVERAGE-NET-ASSETS> 57,368,394
<PER-SHARE-NAV-BEGIN> 26.42
<PER-SHARE-NII> .15
<PER-SHARE-GAIN-APPREC> 7.60
<PER-SHARE-DIVIDEND> .15
<PER-SHARE-DISTRIBUTIONS> 2.49
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 31.53
<EXPENSE-RATIO> 1.82
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
