<PAGE>
- --------------------------------------------------------------------------------
Chairman's Letter
- --------------------------------------------------------------------------------
Dear Fellow Shareholders:
The turmoil in the far east created significant volitility in the equity
market place in the last quarter of 1997. Even with this uncertainty, the stock
market indices recorded healthy gains. The Dow Jones was up 22.64% and the S &
P increased 31.01%. Your Addison Capital Shares increased 29.3%. It is
impossible to predict with certainty the direction the market will take in
1998. However, we believe those investors who take a long term view of their
portfolios and can afford to remain invested through the inevitable up and down
cycles will continue to be well rewarded in the equity market place. Since our
annual report on June 30, 1997, Addison Capital Shares paid $0.1213 in income
dividends and $3.69 in capital gains. We appreciate your continued support and
remain confident that our focus on value will be a successful strategy in
facing the challenges ahead.
Sincerely,
/s/ Rudolph C. Sander
Rudolph C. Sander
Chairman
Dated: February 15, 1998
1
<PAGE>
- --------------------------------------------------------------------------------
President's Letter
- --------------------------------------------------------------------------------
Dear Fellow Shareholders:
The tradition of celebrating the New Year by closing the books on the old
year and budgeting and making resolutions for the coming year requires us to
reflect on the past and to engage in that most dreaded of exercises --
forecasting the future. Our crystal ball has never been noted for its clarity
or accuracy, especially over short periods of time, and we view a year as a
short period, and getting shorter all the time! Take our prognostication for
1997, for example. A year ago, we observed that a two-year total return of
nearly 69% was extraordinary and that stock market returns over the past decade
were far above the long-term average. Our expectation for 1997 was for a
less-then double digit gain in profits, and while we correctly anticipated a
favorable interest rate climate, we failed to anticipate the effect of lower
interest rates and inflation on price/earnings ratios. We thought that a third
consecutive year of above-average stock market returns was a tall order.
Nevertheless, the stock market's P/E rose from about 20 times trailing earnings
to more than 23 times earnings, and that increase, combined with an earnings
increase of nearly 13% boosted the Standard & Poor's 500 Index by over 30% for
the year just ended.
Addison Capital Shares enjoyed what most investors would consider an
excellent year, however the Fund's total return of 29.3% broke a two-year
string of surpassing the index return, trailing the S & P 500 by slightly more
than 4 percentage points for the year ended December 31. Addison's portfilio
returns benefited from a higher-than-market weight in the financial services
sector, but energy and basic industry issues (also well represented) lagged, as
did utilities, despite a strong fourth quarter. Better returns were also highly
correlated with larger market capitalizations, and in such an environment,
Addison's portfolio, in which stocks are approximately equal-weighted, tends to
be at a disadvantage versus the S&P 500, where the stocks of larger companies
have a larger impact on the index return. The fourth quarter was a particularly
difficult period, as energy and technology issues and small stocks generally
declined, as illustrated by the -3.7% return posted by the Russell 2000 index.
The ongoing debate of the past year involves the issue raised by so many
economists, including the Fed chairman: can we continue to enjoy an expanding
economy without inflation heating up? Indeed, even Alan Greenspan has mentioned
the possibility of a "new paradigm" at work in the current environment. The
confluence of factors and events over the last couple of years has been
favorable to U.S. economic growth and financial markets. It has been a period
of worldwide corporate restructuring, just now accelerating in other parts of
the world, with plant closings and layoffs, businesses being sold and acquired.
At the same time, there has been a capital-spending boom occurring in the U.S.
This capital spending has combined with moderate wages to generate substantial
productivity increases. Unlike so many economic expansions in the past, where
it was taken for granted that a period of economic growth was inevitably
followed by rising cost and wage pressures, this time around -- thus far --
events have proceeded differently. There do appear to be some wage pressures,
but raw materials prices remain soft and many industries find themselves with
little or no pricing leverage. Is this good news or bad news? The answer has to
be that it depends on whom you ask. Clearly, from the standpoint of consumers,
it is good news.
What happens next, with the Asian markets and economies in turmoil, the
dollar ever stronger against a multitude of foreign currencies, the yield curve
virtually flat, and the U.S. economy apparently still growing at a sustainable
rate? The consensus view is that the Asian economic crisis will inevitably have
a dampening effect on our economy. It seems likely that imports will continue
to rise as the strong dollar makes imported goods less expensive, and the U.S.
trade deficit could be expected to swell. On the other hand, the strong dollar
should make our financial markets look relatively attractive to foreign
investors. At 5%, U.S. Treasury Bills are a bargain for a Japanese investor,
with rates at 1% or less at home. The bottom line for U.S. investors is that
even on a company by company basis, it is extremely difficult to forecast
exactly what impact the Asian problems will have, and to attempt to make a
forecast for entire industries, sectors, or the economy as a whole is more
prob-
2
<PAGE>
lematic. The likely direction of change is downward for most earnings
estimates, and therefore, the overall market seems likely to be subject to
disappointments for which it seems ill prepared at these historically high
valuations. The saving grace may be that the Fed could actually choose to lower
interest rates if the economy shows signs of slowing. Real interest rates
(adjusted for reported inflation) are at levels that are above average for the
last 50 years, so we find worries about the possibility of a Fed rate hike to
be needless.
There are a couple of things that worry us about the scenario we find
ourselves painting here: one is that we seem to be expressing a consensus
viewpoint, and that sets us up for a surprise, be it positive or negative.
Another worry is that we keep finding ourselves making that most dangerous of
pronouncements, that "it's different this time." Indeed, it probably is in many
important ways, but the single unifying factor, which makes it unlikely to turn
out differently, is human nature. The bull market is undeniably mature and the
"easy money" has been made, but if history is any kind of a guide, this market
will get far more overvalued and speculative than it is currently. We will have
more market corrections (10-15% declines) to deal with before then, but the risk
of a major bear market at this time seems remote to us. As we said at this time
last year, we expect increased volatility and at best an average (10-12% total
return) year for stocks. Our hope for 1998 is that smaller stocks may perform
relatively well, both because of their relatively poor 1997 returns, and because
they may be less subject to the effects of currency fluctuations and foreign
trade. We feel cautious, but our value orientation and fully invested investment
philosophy represent a sound long-term approach to deal with short-term
concerns.
Sincerely,
/s/ Radcliffe Cheston
Radcliffe Cheston
President
February, 1998
3
<PAGE>
- --------------------------------------------------------------------------------
ADDISON CAPITAL SHARES, INC.
Schedule of Portfolio Investments
December 31, 1997
(Unaudited)
- --------------------------------------------------------------------------------
Number
of Value
Shares (Note A)
- ------------------------------------------------------------------------------
COMMON STOCK -- 96.1%
- ------------------------------------------------------------------------------
Aerospace -- 3.9%
Northrop Grumman Corporation ............ 13,413 $1,542,495
Raytheon Company, Class A ............... 1,275 62,893
Textron, Incorporated ................... 20,000 1,250,000
----------
2,855,388
----------
Airlines -- 1.9%
UAL Corporation ......................... 15,000 1,387,500
----------
Apparel -- 2.1%
The Dress Barn, Incorporated*** ......... 55,000 1,560,625
----------
Automobiles & Related -- 1.6%
General Motors Corporation .............. 20,000 1,212,500
----------
Banking -- 11.6%
Bank of Boston Corporation .............. 18,000 1,690,875
Charter One Financial, Incorporated ..... 30,576 1,930,110
Chase Manhattan Corporation ............. 14,000 1,533,000
First Union Corporation ................. 31,500 1,614,375
Zions Bancorporation .................... 40,000 1,815,000
----------
8,583,360
----------
Business Services -- 2.1%
Bowne and Company, Incorporated.......... 38,000 1,515,250
----------
Capital Goods -- 5.1%
Harsco Corporation ...................... 31,020 1,337,737
Precision Castparts Corporation ......... 20,000 1,206,250
Timken Company .......................... 35,400 1,216,875
----------
3,760,862
----------
Cement Products -- 0.3%
Southdown, Incorporated ................. 3,700 218,300
----------
Chemicals -- 3.4%
Du Pont (E.I.) De Nemours and
Company .............................. 22,000 1,321,375
Union Carbide Corporation ............... 28,000 1,202,250
----------
2,523,625
----------
Computers -- 3.4%
Compaq Computer, Incorporated ........... 23,100 1,303,706
Gateway 2000*** ......................... 37,000 1,207,125
----------
2,510,831
----------
Consumer Products -- 1.8%
Fortune Brands Incorporated ............. 35,000 1,297,187
----------
<PAGE>
Number
of Value
Shares (Note A)
- ------------------------------------------------------------------------------
Electronics -- 1.9%
Harris Corporation ...................... 30,000 $1,376,250
----------
Financial -- 2.4%
SunAmerica, Incorporated ................ 41,619 1,779,213
----------
Food, Beverage and Tobacco -- 2.0%
Philip Morris Companies,
Incorporated .......................... 33,000 1,495,312
----------
Healthcare Facilities -- 2.0%
Tenet Health Care Corporation ........... 44,000 1,457,500
----------
Home Furnishing/Housewares -- 2.2%
Ethan Allen Interiors, Incorporated ..... 42,000 1,619,625
----------
Insurance -- 4.7%
Allstate Corporation .................... 20,000 1,817,500
Reliastar Financial Corporation ......... 40,000 1,647,500
----------
3,465,000
----------
International Oils -- 3.8%
Exxon Corporation ....................... 24,000 1,468,500
Royal Dutch Petroleum Corporation ....... 25,232 1,367,259
----------
2,835,759
----------
Machinery -- 1.5%
Pentair, Incorporated ................... 30,000 1,078,125
----------
Manufacturing -- 0.7%
Aptargroup, Incorporated ................ 10,000 555,000
----------
Medical Supplies -- 1.6%
Becton Dickinson & Company .............. 24,000 1,200,000
----------
Metals & Mining -- 1.5%
Phelps Dodge Corporation ................ 18,000 1,120,500
----------
Natural Gas -- 2.1%
Columbia Gas System, Incorporated........ 19,400 1,524,113
----------
Office Equipment -- 1.7%
Xerox Corporation ....................... 17,358 1,281,237
----------
Oil -- 1.6%
Amoco Corporation ....................... 14,000 1,191,750
----------
Oil Equipment & Services -- 2.2%
Halliburton Company ..................... 32,000 1,662,000
----------
Paper & Forest Products -- 1.6%
Rayonier, Incorporated .................. 28,000 1,191,750
----------
4
<PAGE>
- --------------------------------------------------------------------------------
ADDISON CAPITAL SHARES, INC.
Schedule of Portfolio Investments
December 31, 1997
(Unaudited)
- --------------------------------------------------------------------------------
Number
of Value
Shares (Note A)
- ----------------------------------------------------------------------
Rails/Trucking/Transportation -- 1.3%
Norfolk Southern Corporation ........... 31,350 $ 965,972
-----------
Real Estate -- 1.9%
Health Care Property Investors,
Incorporated ........................ 37,778 1,428,481
-----------
Restaurants -- 1.6%
Wendy's International, Incorporated..... 48,000 1,155,000
-----------
Retail Store -- 3.2%
Ross Stores, Incorporation ............. 40,000 1,455,000
Sears, Roebuck and Company ............. 20,000 905,000
-----------
2,360,000
-----------
Steel -- 2.1%
Carpenter Technology Corporation ....... 32,000 1,538,000
-----------
Technology -- 2.0%
Comdisco, Incorporated ................. 45,000 1,504,688
-----------
Tobacco -- 4.0%
RJR Nabisco Holdings Corporation ....... 42,000 1,575,000
VF Corporation ......................... 30,000 1,378,125
-----------
2,953,125
-----------
Utilities -- Electric -- 7.4%
DQE, Incorporated ...................... 35,000 1,229,375
Duke Power Company ..................... 31,332 1,735,010
FPL Group, Incorporated ................ 22,000 1,302,125
NIPSCO Industries, Incorporated ........ 24,820 1,227,039
-----------
5,493,549
-----------
Utilities -- Natural Gas -- 1.9%
NICOR, Incorporated .................... 32,886 1,387,378
-----------
TOTAL COMMON STOCK
(Cost $42,706,223)........................... $71,044,755
-----------
<PAGE>
Principal Value
Amount (Note A)
- ----------------------------------------------------------------------
REPURCHASE AGREEMENTS** -- 4.0%
- ----------------------------------------------------------------------
PNC Bank $2,966,000 at 475%
(Agreement dated 12/31/97, to
be repurchased at $2,967,957
on 01/05/98; collateralized by
$3,030,000 Federal National
Mortgage Association Notes,
6.50%, due 09/25/20)
(Value $3,048,938 -- Cost
$2,966,000)....................... $ 2,966,000 $ 2,966,000
-----------
- ----------------------------------------------------------------------
TOTAL INVESTMENTS
(Cost $45,672,223*)............... 100.1% 74,010,755
Other Assets in excess of
Liabilities ................... -0.1% (111,220)
----------- -----------
Net Assets ....................... 100.0% $73,899,535
=========== ===========
======================================================================
* Aggregate cost for federal income tax purposes was $45,672,223. The
aggregate gross unrealized appreciation (depreciation) for all securities
is as follows:
Gross Appreciation .......... $28,425,207
Gross Depreciation .......... (86,675)
-----------
Net Appreciation .......... $28,338,532
===========
** 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 CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the six
months ended
December 31, For the Year
1997 ended
(Unaudited) June 30, 1997
--------------- --------------
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS:
Operations:
Net investment income ................................................... $ 129,776 $ 311,130
Net realized gain from security transactions ............................ 2,243,038 6,825,229
Change in unrealized appreciation of investments ........................ 4,505,536 9,273,824
------------ ------------
- --------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations ................... 6,878,350 16,410,183
------------ ------------
- --------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
Net investment income ($0.13 and $0.15 per share, respectively).......... (283,838) (296,865)
Capital gains ($3.62 and $2.49 per share, respectively) ................. (7,862,175) (4,873,658)
------------ ------------
Total distributions .................................................... (8,146,013) (5,170,523)
------------ ------------
Capital share transactions:
Net increase in net assets derived from capital share transactions* ..... 8,557,746 4,665,992
------------ ------------
Total increase in net assets .......................................... 7,290,083 15,905,652
------------ ------------
- --------------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period ....................................................... 66,609,452 50,703,800
------------ ------------
End of period** ........................................................... $ 73,899,535 $ 66,609,452
============ ============
==============================================================================================================
*Capital share transactions are as follows:
Shares Value
------------ ------------
For the year ended December 31, 1997
Shares purchased ........................................................ 118,028 $ 3,622,212
Shares reinvested ....................................................... 269,347 7,900,002
Shares redeemed ......................................................... (97,044) (2,964,468)
------------ ------------
Net Increase .......................................................... 290,331 $ 8,557,746
============ ============
For the year ended June 30, 1997
Shares purchased ........................................................ 239,811 $ 6,477,547
Shares reinvested ....................................................... 199,406 4,981,584
Shares redeemed ......................................................... (245,822) (6,793,139)
------------ ------------
Net increase .......................................................... 193,395 $ 4,665,992
============ ============
</TABLE>
**Undistributed net investment income of $6,479 and $160,541, respectively.
See Notes to Financial Statements.
6
<PAGE>
- ----------------------------------------------------------------------------
Statement of Operations
- ----------------------------------------------------------------------------
For the Six Months Ended December 31, 1997 (unaudited)
- ----------------------------------------------------------------------------
INVESTMENT INCOME:
Income:
Dividends ............................................... $ 686,087
Interest ................................................ 70,585
----------
- ----------------------------------------------------------------------------
Total Income ......................................... 756,672
----------
- ----------------------------------------------------------------------------
Expenses:
Investment advisory fee ................................. 269,856
Distribution fee ........................................ 143,923
Shareholder servicing ................................... 89,952
Administration fee ...................................... 37,808
Transfer agent fee ...................................... 23,806
Insurance ............................................... 11,256
Custodian fee ........................................... 9,751
Audit ................................................... 9,350
Printing ................................................ 8,591
Directors' fee .......................................... 7,934
Federal and state registration fees ..................... 7,328
Legal fee ............................................... 5,572
Miscellaneous ........................................... 1,769
----------
- ----------------------------------------------------------------------------
Total Expenses ........................................ 626,896
----------
- ----------------------------------------------------------------------------
Net investment income ................................ 129,776
----------
- ----------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain from security transactions .............. 2,243,038
Change in unrealized appreciation of investments .......... 4,505,536
----------
- ----------------------------------------------------------------------------
Net gain on investments ................................. 6,748,574
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ......... $6,878,350
==========
============================================================================
See Notes to Financial Statements.
7
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
December 31, 1997 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $45,672,223)........................ $74,010,755
Cash ........................................................... 584
Receivables:
Dividends ..................................................... 94,438
Interest ...................................................... 391
Fund shares sold .............................................. 29,204
Prepaid expense ................................................ 5,979
-----------
- ------------------------------------------------------------------------------------
TOTAL ASSETS .............................................. 74,141,351
-----------
- ------------------------------------------------------------------------------------
LIABILITIES:
Payable:
Fund shares repurchased ....................................... 166,095
Accrued expenses ............................................... 75,721
-----------
- ------------------------------------------------------------------------------------
TOTAL LIABILITIES ......................................... 241,816
-----------
- ------------------------------------------------------------------------------------
NET ASSETS ........................................................ $73,899,535
===========
SHARES OUTSTANDING ................................................ 2,402,757
====================================================================================
NET ASSET VALUE PER SHARE ($73,899,535 / 2,402,757 shares)......... $30.76
====================================================================================
NET ASSETS CONSISTED OF THE FOLLOWING AT DECEMBER 31, 1997:
Paid-in capital ................................................ $45,554,531
Undistributed net investment income ............................ 6,479
Undistributed net realized loss ................................ (7)
Unrealized appreciation on investments ......................... 28,338,532
-----------
$73,899,535
===========
====================================================================================
</TABLE>
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 Years ended June 30,
December 31, 1997 ----------------------------------------------------------------
(Unaudited) 1997 1996 1995 1994 1993
------------------- ------------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year ........ $ 31.53 $ 26.42 $ 22.92 $ 20.45 $ 22.69 $ 19.64
------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income .................... $ 0.05 $ 0.15 $ 0.17 $ 0.22 $ 0.21 $ 0.24
Net gains on securities (both
realized and unrealized) ............... 2.93 7.60 5.42 3.77 ( 0.76) 3.72
------- ------- ------- ------- ------- -------
Total from investment
operations ............................ 2.98 7.75 5.59 3.99 ( 0.55) 3.96
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS
Dividends from net investment
income ................................. ( 0.13) ( 0.15) ( 0.21) ( 0.20) ( 0.23) ( 0.24)
Distributions from capital gains ......... ( 3.62) ( 2.49) ( 1.88) ( 1.32) ( 1.46) ( 0.67)
-------- -------- ------- ------- ------- -------
Total distributions ..................... ( 3.75) ( 2.64) ( 2.09) ( 1.52) ( 1.69) ( 0.91)
-------- -------- ------- ------- ------- -------
Net asset value, end of year .............. $ 30.76 $ 31.53 $ 26.42 $ 22.92 $ 20.45 $ 22.69
======== ======== ======= ======= ======= =======
Total Return (1) .......................... 10.36%** 32.20% 25.92% 21.11% ( 2.73)% 20.98%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) ..... $ 68,804 $ 57,368 $50,704 $38,506 $36,171 $37,621
Ratio of expenses to average assets ...... 1.81%* 1.82%* 1.96% 2.06% 2.06% 2.13%
Ratio of net investment income to
average net assets ..................... 0.37%* 0.54% 0.69% 1.03% 1.00% 1.14%
Portfolio Turnover ....................... 10.85% 29.48% 38.97% 42.82% 43.26% 30.01%
Average Commission Rate Per
Share (2) .............................. $ 0.0637 $ 0.0673 -- -- -- --
</TABLE>
- --------------------------------------------------------------------------------
* Annualized
** Not Annualized
(1) Exclusive of deduction of sales charge on investment.
(2) 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.
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, 1997
- --------------------------------------------------------------------------------
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,
1998.
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, 1997 of $1,950.
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, 1997.
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 $3,127 from the Fund for
legal services rendered during the six months ended December 31, 1997.
C. Purchases and sales of securities, other than short-term obligations,
aggregated $7,990,312 and $7,394,009, respectively, for the six months ended
December 31, 1997.
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.
E. Addison Capital Shares, Inc. distributed a total Long term Capital Gain
Dividend of $6,330,097 during the six months ending December 31, 1997. Of this
total Long Term Capital Gain Dividend amount, the fund made a 28 Percent Rate
Gain distribution at $3,078,512 and a 20 Percent Rate Gain distribution at
$3,251,585.
10
<PAGE>
Directors & Officers
Rudolph C. Sander
Chairman of the Board
Radcliffe Cheston
President & Chief Executive Officer
Margaret M. Healy
Director
Charles E. Mather, III
Director
William R. Dimeling
Director
James Wolitarsky
Treasurer, Chief Accounting Officer [ADDISON CAPITAL LOGO]
& Chief Financial Officer
James V. Kelly
Vice President
Michael R. Patitucci
Vice President
Charles J. Sullivan
Vice President
James W. Jennings
Secretary
Investment Adviser
ADDISON CAPITAL MANAGEMENT CO.
1608 Walnut Street
Philadelphia, PA 19103
Distributor
JANNEY MONTGOMERY SCOTT INC. [JANNEY MONTGOMERY SCOTT LOGO]
1801 Market Street
Philadelphia, PA 19103
Administrator
PFPC, INC.
103 Bellevue Parkway
Wilmington, DE 19809
Semi-Annual Report
Transfer Agent to Shareholders
PFPC, INC. December 31, 1997
103 Bellevue Parkway
Wilmington, DE 19809
