<PAGE>
- -------------------------------------------------------------------------------
CHAIRMAN'S LETTER
- -------------------------------------------------------------------------------
Dear Fellow Shareholders:
1996 was another excellent year for Equity Investors. The Economy
continued to deliver growth with modest inflation. Stock Market indices
recorded all-time highs.
The Bell Weather S&P Index recorded a gain of 22.8%. Addison Capital joined
only a handful of Mutual Funds to outperform this index with a gain in 1996 of
23.45%.
Increasing use of technology and emphasis on cost control should aid in
maintaining the competitive position of Corporate America.
With the Equity Markets at record levels we could see short term volatility,
however long term investors should stay focused on their long term goals. Time,
not timing, has provided the most investment success.
Since our Annual Report to you on June 30, 1996, Addison Capital Shares paid
.1491 cents in income dividends and $2.48 in Capital Gains.
We appreciate your support and we remain confident that our focus on value
will continue to be successful in facing the investment challenges ahead.
Sincerely,
/s/ Rudolph C. Sander
----------------------------
Rudolph C. Sander
Chairman
Dated: February 20, 1997
1
<PAGE>
- --------------------------------------------------------------------------------
PRESIDENT'S LETTER
- --------------------------------------------------------------------------------
Dear Fellow Shareholders:
We know that we haven't been here before, but there is a disconcerting
similarity between our mood this year and last year. Our exhilaration at the
beginning of 1996 was tempered by a couple of concerns: first, that our clients'
expectations might become unrealistic in the afterglow of such a profitable
experience, but secondarily, that there was the possibility of some
disappointing or shocking development derailing the financial markets from what
might otherwise be an average return sort of year. We also commented that stock
market price volatility ought to increase in 1996. Fortunately, nobody (at least
as far as we know) is grading us on our market or economic forecasts.
In any event, 1996 unfolded as a surprisingly calm year, with most of the
volatility concentrated among technology and small capitalization stocks. Many
of the year's surprises turned out to be positive, and the market's relief at
the maintenance of the political status quo in November produced the biggest
monthly price advance since December of 1991. Despite some year-end nervousness
and selling, the S&P 500 posted a total return of better than 8% for the fourth
quarter and nearly 23% for the year. Addison Capital Shares return for the final
calendar quarter was slightly behind the S&P 500, but for the full year, we're
pleased to report that the Fund came out slightly ahead, with a total return of
23.45%. Over the two years ended December 31, the Fund's cumulative return is a
very pleasing 73.18%.
The two-year total return on the S&P 500 is nearly 69% -- not unprecedented,
but enough to suggest that a slowing in the rate of advance is probable, and a
flat-to-down year shouldn't come as a surprise. After all, we are pretty far
above the long term average of about 11% per year. Indeed, one study points out
that in the period since 1960, there have been eight previous instances of
back-to-back years of double digit stock market returns, and only eight yearly
declines. Five of those eight declines occurred in a year after a
"double-double." There is also a "pattern" of returns which coincides with the
presidential election cycle, in which the first year of an administration tends
to be the weakest and the third year tends to be the best, followed by the
fourth and second years, in that order. One can imagine a whole host of reasons
for this pattern to have developed over time. Of course, we are not suggesting
that this, nor any other indicator, be used as the justification for changing
investment policy or strategy, however, it is useful to be aware of historical
reference points so as not to be too surprised when the market does suffer a
period of weakness, as it inevitably will.
So here we are again, at the beginning of another year, wondering what lies
ahead for the economy and the financial markets. We remain convinced that
inflation is waning and that the Federal Reserve does not intend to raise
interest rates. Alan Greenspan's comment late last year about the stock market's
"irrational exuberance" was surely intended to give some pause to speculative
traders, and as we have noted, there have been some signs of speculation in the
market during the last year or two. By and large though, the market seems to
have corrected these excesses without a broad sell-off or outside interference
from the monetary authorities. Based on the market's current valuation as
represented by the S&P 500 Index, stocks are selling at a premium price/earnings
ratio of about 19 times trailing earnings, versus their historical average of
roughly 16 times earnings. The market is also selling outside of its normal
range in terms of price/book value and dividend yield, however it can be argued
that these measures are less meaningful due to the extensive amount of corporate
restructuring and the effects of the tax code on corporate dividend policies.
The current valuation premium may be justified by the lower level of inflation
in the current environment and by what we hope will prove to be a less volatile
economic environment -- if the Federal Reserve can resist the urge to apply the
monetary brakes, followed months later by renewed monetary stimulus. We continue
to be in a moderate growth period without substantial inflation pressures
2
<PAGE>
building, outside of the concerns about the rapid rise of financial asset
values, and it seems possible for those asset values to be sustained, barring
some outside catalyst or shock to the system.
We expect stable to lower interest rates throughout 1997, and moderate
economic growth, remaining in the 2-3% range. In that sort of environment, we
look for corporate profits to be up at slightly less than a double digit rate,
and our expectation for stock returns in 1997 is in line with that growth in
earnings, although as we suggested before, we do expect that the market will be
more volatile this year than last.
The best performing groups in 1996 seem likely to continue their leadership
in 1997, as the outlook for finance, technology, and energy companies remains
bright. The dominance of larger capitalization issues during 1996 was well
documented, and while we would welcome a resurgence of the smaller issues, we
see no evidence of that at this point. Addison is maintaining its
higher-than-market weight in the financial sector as well as in cyclical and
energy related issues. For better or for worse, we will also stick to our
diversification discipline, maintaining at least some holdings in every economic
sector. The effect of that discipline should be to dampen volatility of returns.
During 1996, we would have been better off focusing all of our efforts only in
the sectors where the earnings and price momentum was the best. Our valuation
criteria kept us from owning many of the better performing issues among the
consumer staples issues, and our success there was limited to a couple of
stocks, such as Rhone-Poulenc Rorer and Philip Morris, while the rest of our
selection stayed cheap or got cheaper. The financial sector was a clear winner,
with every holding but our lone REIT position, Health Care Property Investors,
providing superior returns. Similarly, the technology sector was an area of
strong performance, with only Raytheon and Xerox lagging the market. Our heavier
than market weight in basic industry issues was a mixed blessing, as evidenced
by the lagging performance of Union Carbide in contrast to an excellent year for
Du Pont. Metals and forest products issues were almost uniformly disappointing.
The utility sector was a standout for poor performance, and our performance
there was only relatively good, saved by the merger of Portland General, and the
good performance of Nicor, a natural gas distributor. Perhaps, Nicor belonged
with the rest of the energy related issues in the portfolio, where we had
roughly a market weight and where returns were above average with
higher-than-market dividend yields.
All of us at Addison want to thank you for your continued confidence in us,
and we look forward to sharing the rewards of a consistently applied long term
investment philosophy.
Sincerely,
/s/ Radcliffe Cheston
--------------------------------
Radcliffe Cheston
President
February, 1997
3
<PAGE>
- --------------------------------------------------------------------------------
ADDISON CAPITAL SHARES, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1996
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Value
Shares (Note A)
- ------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK -- 97.5%
- ------------------------------------------------------------------------------
Aerospace -- 5.5%
Northrop Grumman Corporation ........... 13,413 $1,109,926
Raytheon Company ....................... 18,624 896,280
Textron, Incorporated .................. 12,000 1,131,000
------------
3,137,206
------------
Automobiles & Related -- 1.7%
General Motors Corporation .. ........ 17,000 947,750
------------
Automotive Parts -- 2.8%
Echlin, Incorporated ................... 22,500 711,563
TRW, Incorporated ...................... 18,000 891,000
------------
1,602,563
------------
Banking -- 12.9%
Bank of Boston Corporation ........... 18,000 1,156,500
Chase Manhattan Corporation .......... 14,000 1,249,500
First Bank Systems, Incorporated ...... 16,500 1,126,125
First Union Corporation ..... ........ 15,750 1,165,500
Standard Federal Bancorporation ....... 24,000 1,365,000
Zions Bancorporation ................. 12,500 1,300,000
------------
7,362,625
------------
Business Services -- 1.8%
Reynolds & Reynolds Company ........... 40,000 1,040,000
------------
Capital Goods -- 5.8%
Harsco Corporation .................... 15,510 1,062,435
Ingersoll-Rand Company ............... 24,000 1,068,000
Precision Castparts Corporation ....... 25,000 1,240,625
------------
3,371,060
------------
Chemicals -- 3.4%
Du Pont (E.I.) De Nemours and
Company ............................ 11,000 1,038,125
Union Carbide Corporation ............. 23,000 940,125
------------
1,978,250
------------
Computers -- 2.0%
Gateway 2000*** ...................... 21,500 1,151,594
------------
Computers Software -- 1.6%
Computer Associates
International, Incorporated ........ 18,000 895,500
------------
Consumer Products -- 1.6%
Mattel, Incorporated .................. 32,812 910,533
------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Number
of Value
Shares (Note A)
- ------------------------------------------------------------------------------
<S> <C> <C>
Electronics -- 1.8%
Harris Corporation ..................... 15,000 $1,029,375
------------
Financial -- 2.7%
Sunamerica, Incorporated ............... 34,746 1,541,854
------------
Food, Beverage and Tobacco -- 3.7%
American Brands, Incorporated .......... 18,000 893,250
Philip Morris Companies,
Incorporated ........................... 11,000 1,238,875
------------
2,132,125
------------
Healthcare Facilities -- 1.5%
Tenet Health Care Corporation** ........ 40,000 875,000
------------
Household Products -- 1.8%
First Brands Corporation ............... 36,000 1,021,500
------------
Insurance -- 4.0%
Allstate Corporation ................... 20,000 1,157,500
Reliastar Financial Corporation ........ 20,000 1,155,000
------------
2,312,500
------------
International Oils -- 4.0%
Exxon Corporation ...................... 12,000 1,176,000
Royal Dutch Petroleum Company,
N.Y .................................. 6,038 1,077,091
------------
2,253,091
------------
Machinery -- 1.7%
Pentair, Incorporated .................. 30,000 967,500
------------
Medical Supplies -- 1.8%
Becton Dickinson & Company ............ 24,000 1,041,000
------------
Metals and Mining -- 1.6%
Phelps Dodge Corporation .............. 13,300 897,750
------------
Natural Gas -- 2.4%
PanEnergy Corporation ................ 30,000 1,350,000
------------
Office Equipment -- 1.6%
Xerox Corporation .................... 17,358 913,465
------------
Oil -- 2.0%
Amoco Corporation .................... 14,000 1,127,000
------------
Oil Equipment & Services -- 1.7%
Halliburton Company .................. 16,000 964,000
------------
Paper & Forest Products -- 1.5%
Rayonier, Incorporated ............... 22,000 844,250
------------
Pharmaceuticals -- 2.0%
Rhone-Poulenc Rorer, Incorporated ..... 15,000 $1,171,875
------------
</TABLE>
4
<PAGE>
- -------------------------------------------------------------------------------
ADDISON CAPITAL SHARES, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1996
(UNAUDITED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Value
Shares (Note A)
- -------------------------------------------------------------------------------
<S> <C> <C>
Rails/Trucking/Transportation -- 3.1%
Burlington Northern Sante Fe .......... 10,000 $ 863,750
Norfolk Southern Corporation .......... 10,450 914,374
------------
1,778,124
------------
Real Estate -- 1.8%
Health Care Property Investors,
Incorporated ....................... 28,778 1,007,230
------------
Restaurants/Fast Foods -- 1.7%
Wendy's International,
Incorporated ....................... 48,000 984,000
------------
Retail Merchandising -- 1.6%
Sears, Roebuck and Company ............ 20,000 922,500
------------
Services -- 1.8%
PHH Group, Incorporated ............... 24,000 1,032,000
------------
Steel -- 2.0%
Carpenter Technology
Corporation ........................ 32,000 1,172,000
------------
Textiles and Apparel -- 1.7%
Spring Industries, Incorporated ....... 22,000 946,000
------------
Utilities -- Electric -- 6.8%
DQE, Incorporated ..................... 35,000 1,015,000
FPL Group, Incorporated ............... 22,000 1,012,000
Idaho Power Company ................... 29,000 902,625
NIPSCO Industries, Incorporated ....... 24,820 983,492
------------
3,913,117
------------
Utilities -- Natural Gas -- 2.1%
Nicor, Incorporated ................... 32,886 1,175,674
------------
TOTAL COMMON STOCK
(Cost $36,274,860) .................... $ 55,770,011
------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Principal Value
Amount (Note A)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENTS** -- 2.5%
- -------------------------------------------------------------------------------
<S> <C> <C>
PNC Bank $1,444,000 at 4.50%
(Agreement dated 12/31/96, to
be repurchased at $1,445,083
on 1/6/97; collateralized by
$1,378,000 U.S. Treasury Notes
7.125%, due 9/30/99).
(Value $1,469,064 -- Cost
$1,444,000) ............................ $1,444,000 1,444,000
-------------
Total Investments
(Cost $37,718,860*) .................. 100.0% $ 57,214,011
Liabilities in excess of
other Assets ......................... -0.0% (28,037)
---------- -------------
Net Assets .............................. 100.0% $ 57,185,974
========== =============
</TABLE>
================================================================================
* Aggregate cost for federal income tax purposes was $37,718,860. The
aggregate gross unrealized appreciation (depreciation) for all securities is
as follows:
<TABLE>
<CAPTION>
<S> <C>
Gross Appreciation .................... $19,651,228
Gross Depreciation .................... (156,077)
-------------
Net Appreciation ................... $19,495,151
=============
</TABLE>
** It is the Fund's policy to always receive, as collateral, securities whose
value, including accrued interest, will be at least equal to 102% of the
dollar amount to be paid to the Fund under each agreement at its maturity.
The values of the securities are monitored daily. If the value falls below
101% of the amount to be paid at maturity, additional collateral is
obtained. The Fund makes payment for such securities only upon physical
delivery of evidence of book entry transferred to the account of its
custodian.
*** Non-income producing security.
See Notes to Financial Statements.
5
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
December 31, 1996 (unaudited)
- --------------------------------------------------------------------------------
ASSETS:
Investments, at value (Cost $37,718,860) ........... $57,214,011
Receivables:
Dividends ........................................ 74,695
Interest ......................................... 181
Fund shares sold ................................. 41,142
Prepaid expense .................................... 5,601
-----------
- --------------------------------------------------------------------------------
TOTAL ASSETS ............................. 57,335,630
-----------
- --------------------------------------------------------------------------------
LIABILITIES:
Cash Overdraft ..................................... 1,098
Payable:
Fund shares repurchased .......................... 78,316
Dividend Distributions ........................... 1,331
Accrued expenses ................................... 68,911
-----------
- --------------------------------------------------------------------------------
TOTAL LIABILITIES ........................ 149,656
-----------
- --------------------------------------------------------------------------------
NET ASSETS .............................................. $57,185,974
===========
SHARES OUTSTANDING ...................................... 2,125,250
===========
===============================================================================
NET ASSET VALUE PER SHARE ($57,185,974 / 2,125,250
shares) ............................................... $26.91
===========
===============================================================================
NET ASSETS CONSISTED OF THE FOLLOWING:
Paid-in capital .................................... $37,419,357
Undistributed net investment income ................ 1,267
Undistributed net realized gains ................... 270,199
Unrealized appreciation of investments ............. 19,495,151
------------
$57,185,974
============
===============================================================================
See Notes to Financial Statements.
6
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the Six Months Ended December 31, 1996 (unaudited)
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Income:
Dividends ................................ $ 612,306
Interest ................................. 45,972
----------
- --------------------------------------------------------------------------------
Total Income ........................ 658,278
----------
- --------------------------------------------------------------------------------
Expenses:
Investment advisory fee .................. 202,489
Distribution fee ......................... 107,994
Shareholder servicing .................... 67,496
Administration fee ....................... 37,808
Transfer agent fee ....................... 24,198
Insurance ................................ 11,885
Audit .................................... 9,730
Printing ................................. 8,216
Legal fee ................................ 8,067
Custodian fee ............................ 7,801
Directors' fee ........................... 7,562
Federal and state registration fees ...... 6,957
State Taxes .............................. 2,872
Miscellaneous ............................ 2,017
----------
- --------------------------------------------------------------------------------
Total Expenses ......................... 505,092
----------
- --------------------------------------------------------------------------------
Net investment income ............... 153,186
----------
- --------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain from security transactions .. 1,476,298
Change in unrealized appreciation of
investments ................................. 4,935,979
----------
- --------------------------------------------------------------------------------
Net gain on investments .................. 6,412,277
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $6,565,463
==========
===============================================================================
See Notes to Financial Statements.
7
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the six months For the Year
ended ended
December 31, 1996 June 30, 1996
------------------ ---------------
- -----------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment income ........................................ $ 153,186 $ 314,177
Net realized gain from security transactions ................. 1,476,298 5,495,012
Change in unrealized appreciation of investments ............. 4,935,979 4,333,438
----------- -----------
- ---------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations ....... 6,565,463 10,142,627
----------- -----------
- ---------------------------------------------------------------------------------------------------------
Distributions to shareholders:
Net investment income ($0.15 and $0.21 per share,
respectively) .............................................. (298,195) (361,787)
Capital gains ($2.49 and $1.88 per share, respectively) ...... (4,873,658) (3,269,571)
----------- -----------
Total distributions ......................................... (5,171,853) (3,631,358)
----------- -----------
Capital share transactions:
Net increase in net assets derived from capital share
transactions* .............................................. 5,088,564 5,686,785
----------- -----------
Total increase in net assets ............................ 6,482,174 12,198,054
----------- -----------
- ---------------------------------------------------------------------------------------------------------
NET ASSETS:
- ---------------------------------------------------------------------------------------------------------
Beginning of period ............................................. 50,703,800 38,505,746
----------- -----------
End of period** ................................................. $57,185,974 $50,703,800
=========== ===========
=========================================================================================================
*Capital share transactions are as follows:
Shares Value
----------- ------------
For the six months ended December 31, 1996
Shares purchased ........................................... 112,906 $ 2,867,470
Shares reinvested .......................................... 199,193 4,976,250
Shares redeemed ............................................ (105,880) (2,755,156)
----------- -----------
Net Increase ............................................ 206,219 $ 5,088,564
=========== ===========
For the year ended June 30, 1996
Shares purchased ............................................. 237,345 $ 5,838,906
Shares reinvested ............................................ 150,801 3,491,291
Shares redeemed .............................................. (148,869) (3,643,412)
----------- -----------
Net increase ............................................ 239,277 $ 5,686,785
=========== ===========
</TABLE>
**Undistributed net investment income $1,267 and $146,276, respectively.
See Notes to Financial Statements.
8
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The Table below sets forth financial data for a share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
For the six months
ended
December 31, 1996
(Unaudited) Years ended June 30,
------------------ ----------------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year .. $ 26.42 $ 22.92 $ 20.45 $ 22.69 $ 19.64 $ 18.90
------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income ............. $ 0.07 $ 0.17 $ 0.22 $ 0.21 $ 0.24 $ 0.26
Net gains on securities (both
realized and unrealized) ....... 3.06 5.42 3.77 (0.76) 3.72 1.57
------- ------- ------- ------- ------- -------
Total from investment
operations ..................... 3.13 5.59 3.99 (0.55) 3.96 1.83
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS
Dividends from net investment
income ......................... (0.15) (0.21) (0.20) (0.23) (0.24) (0.27)
Distributions from capital gains .. (2.49) (1.88) (1.32) (1.46) (0.67) (0.82)
------- ------- ------- ------- ------- -------
Total distributions .............. (2.64) (2.09) (1.52) (1.69) (0.91) (1.09)
------- ------- ------- ------- ------- -------
Net asset value, end of year ........ $ 26.91 $ 26.42 $ 22.92 $ 20.45 $ 22.69 $ 19.64
======= ======= ======= ======= ======= =======
Total Return (1) .................... 12.84% 25.92% 21.11% (2.73)% 20.98% 9.93%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in 000's) ..................... $57,186 $50,704 $38,506 $36,171 $37,621 $31,243
Ratio of expenses to average assets 1.87% 1.96% 2.06% 2.06% 2.13% 2.12%
Ratio of net investment income to
average net assets ............. 0.57% 0.69% 1.03% 1.00% 1.14% 1.32%
Portfolio Turnover ................ 8.73% 38.97% 42.82% 43.26% 30.01% 57.34%
</TABLE>
- --------------------------------------------------------------------------------
* Annualized
** Not Annualized
(1) Exclusive of deduction of sales charge on investment.
This report has been prepared for Shareholders and may be distributed to others
only preceded or accompanied by a current prospectus.
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
9
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(Unaudited)
- --------------------------------------------------------------------------------
A. Addison Capital Shares, Inc. (the "Fund") was organized as a Maryland
corporation on June 4, 1986. The Fund is registered under the Investment
Company Act of 1940, as amended, as a diversified, open-end management
investment company. Significant accounting policies relating to the Fund are
as follows:
Security Valuation -- Portfolio securities which are traded on a national
securities exchange or included in the NASDAQ National Market System are valued
at the last sales price. Securities traded on an exchange or NASDAQ for which
there has been no sale on that day and other over-the-counter securities are
valued at the mean between the closing bid and asked prices. Debt instruments
having a maturity of 60 days or less are valued at amortized cost.
Securities Transactions and Investment Income -- Securities transactions are
accounted for on trade date. The cost of investments sold is determined by use
of the specific identification method for both financial reporting and income
tax purposes. Interest income is recorded on an accrual basis; dividend income
is recorded on the ex-dividend date.
Dividends and Distributions to Shareholders -- Substantially all of the Fund's
net investment income and net realized capital gains, if any, will be
distributed to shareholders on an annual basis.
Federal Income Taxes -- No provision is made for Federal income taxes as it is
the Fund's intention to qualify as a regulated investment company and to make
the requisite distributions to its shareholders which will be sufficient to
relieve it from all or substantially all Federal income taxes.
B. Addison Capital Management Company (Addison Capital), a wholly-owned
subsidiary of Janney Montgomery Scott Inc. (Janney), serves as the Fund's
investment adviser. For its services as adviser, Addison Capital receives a fee,
computed daily and paid monthly, at an annual rate of .75% of the Fund's first
$100 million in average net assets, .50% of the next $150 million in average net
assets, and .25% of average net assets in excess of $250 million.
PFPC, Inc., a wholly-owned, indirect subsidiary of PNC Bank, serves as the
Fund's administrative and accounting agent. As compensation for these services,
PFPC receives a fee computed daily and paid monthly, at an annual rate of .10%
of the Fund's average net assets or $100,000, whichever is greater, PFPC agreed
to reduce its minimum annual fee to $75,000 for the fiscal year ending June 30,
1997.
PNC Bank acts as the Fund's custodian. PFPC, Inc. also acts as the Fund's
transfer agent and dividend disbursing agent.
Pursuant to an Underwriting Agreement with the Fund, Janney, a wholly-owned
subsidiary of Independence Square Properties, Inc., which is in turn wholly
owned by Penn Mutual Life Insurance Company, serves as the Fund's distributor.
As compensation for these services, Janney receives a fee from the Fund,
computed daily and paid monthly, at an annual rate of .40% of the Fund's average
net assets. Janney received brokerage commissions for the six months ended
December 31, 1996 of $660.00.
Under a Services Agreement between the Fund and Janney, Janney will provide
office space to the Fund, will supervise performance by PNC Bank and PFPC, Inc.,
of their respective duties, and will respond to shareholders' inquiries for an
annual fee equal to .25% of the Fund's average daily net assets.
If expenses borne by the Fund in any fiscal year exceed expense limitations
imposed by applicable state securities regulations, Janney and Addison Capital
may reduce their fees on a pro-rata basis to the extent required by such
regulations. No such reduction was required for the six months ended December
31, 1996.
Certain officers and directors of the Fund are officers and/or directors of
Addison Capital and Janney. The law firm of Morgan, Lewis & Bockius, a member of
which is also an officer of the Fund, received $12,111 from the Fund for legal
services rendered during the six months ended December 31, 1996.
C. Purchases and sales of securities, other than short-term obligations,
aggregated $5,170,049 and $4,524,260, respectively, for the six months ended
December 31, 1996.
D. As of July 3, 1995 Fund shares are sold at their net asset value. As of
that date all sales charges are eliminated for all Fund Share purchases.
10
<PAGE>
Directors & Officers
Rudolph C. Sander
Chairman of the Board
Radcliffe Cheston
President & Chief Executive Officer
Margaret M. Healy ADDISON
Director ===============
CAPITAL
Charles E. Mather, III ===============
Director SHARES
William R. Dimeling
Director
James Wolitarsky
Treasurer, Chief Accounting Officer
& Chief Financial Officer
James V. Kelly Distributed by:
Vice President [LOGO]
Janney Montgomery Scott
Michael R. Patitucci INC
Vice President
Charles J. Sullivan
Vice President
Fred W. Thomas
Vice President
James W. Jennings
Secretary
Investment Adviser
ADDISON CAPITAL MANAGEMENT CO. Semi-Annual Report
1608 Walnut Street to Shareholders
Philadelphia, PA 19103 December 31, 1996
Distributor
JANNEY MONTGOMERY SCOTT INC.
1801 Market Street
Philadelphia, PA 19103
Administrator
PFPC, INC.
103 Bellevue Parkway
Wilmington, DE 19809
Transfer Agent
PFPC, INC.
103 Bellevue Parkway
Wilmington, DE 19809
