RAND CAPITAL CORPORATION
1300 Rand Building
Buffalo, New York 14203
SEMI ANNUAL REPORT
June 30, 1996
<PAGE>
August 5, 1996
TO OUR SHAREHOLDERS:
Enclosed is our report for the six months ended June 30, 1996.
Net asset value was $7,425,198 or $1.76 per share, compared to
$9,333,304 or $2.21 per share at December 31, 1995.
During the second quarter, we made an additional investment in
American Tactile Corporation, a maker of equipment for the
manufacture of signs for the visually impaired. We received a
$12,965 dividend from Sand River Resources Limited, and Phoenix
Data Corporation liquidated so we recouped all of our original
$100,000 investment. We sold all 38,570 shares of CAI Wireless
Systems, Inc. at a pre-tax gain of $132,000 and we sold 15,000
shares of Heartland Wireless Communications, Inc. at a pre-tax
gain of $72,000.
Due to a change in estimate in the valuation of Ultra-Scan
Corporation, we re-valued our investment at cost, resulting in a
$1.3 million decrease in unrealized appreciation. Our change in
estimate is due primarily to a longer than anticipated
engineering development cycle. The company recently expanded its
management team with the addition of a Sales and Marketing
Executive.
In our 1995 annual report, we indicated we would conduct a
strategic review of the company in 1996, focusing on cost
structure, investment strategy and investment management policy.
In conjunction with the Board of Directors, management did
complete such a review and formulated certain policies to ensure
continued maximization of shareholder value. Expenses for 1996
are projected to be 25% below 1995 total expenses and represent
permanent reductions in certain categories of our expense base.
In the near term, we will focus on investing in later stage
companies with instruments containing a current pay feature to
generate revenue. We reviewed and refined our investment
valuation and public stock management policies.
For the third quarter, management, in conjunction with the Board
of Directors, plans to address future capital requirements and
methods to improve the quality of shareholder communications.
We remain optimistic about the long term growth and appreciation
of Rand's assets and thank you for continuing to invest in our
future.
Sincerely,
Reginald B. Newman II Allen F. Grum Nora B. Sullivan
Chairman President Executive Vice President
<PAGE>
BOARD OF DIRECTORS
Reginald B. Newman II Chairman of the Board
g Thomas R. Beecher, Jr.
Allen F. Grum
c,g Ross B. Kenzie
a,c Willis S. McLeese
c,g Jayne K. Rand
a Donald A. Ross
a Frederick W. Winter
a Member of audit committee
c Member of compensation committee
g Member of governance committee
OFFICERS
Allen F. Grum President, Chief Executive Officer
Nora B. Sullivan Executive Vice President
Robin K. Penberthy Secretary and Treasurer
CORPORATE DATA
General Counsel Hodgson, Russ, Andrews, Woods &
Goodyear LLP
Independent Accountants Deloitte & Touche LLP
Transfer Agent and Continental Stock Transfer &
Registrar Trust Company
Stock Listing Over the Counter - NASDAQ symbol RAND
<PAGE>
STATEMENTS OF FINANCIAL POSITION
June 30, 1996 and December 31, 1995
Unaudited
ASSETS June 30, December 31,
1996 1995
_______________________
Investments at Directors' valuation 5,397,806 8,997,613
(cost: at 06/30/96 $4,269,678;
at 12/31/95 $5,761,573)
Temporary investments, at market 1,079,349 545,050
value which approximates cost
Cash 40,099 162,509
Interest receivable (net of allowance 135,714 147,556
of $0 at 06/30/96 and
$20,400 at 12/31/95)
Deferred Taxes 679,385 -
Income taxes receivable - 4,187
Other assets 271,398 51,144
_________ _______
7,603,751 9,908,059
========= =========
<PAGE>
LIABILITIES AND STOCKHOLDERS EQUITY (NET ASSETS)
Liabilities:
Accounts payable and accrued expenses 175,639 226,808
Income taxes payable 2,917 -
Deferred taxes - 343,759
__________ ________
178,556 570,567
Stockholder's equity (net assets):
Common stock, $.10 par - authorized 422,548 422,548
7,000,000 shares; issued and
outstanding 4,225,477 shares
Capital in excess of par value 4,810,369 4,810,369
Undistributed net investment (loss) (1,116,448) (812,838)
Undistributed realized gain on 2,676,581 2,867,302
investments
Net unrealized appreciation of 632,145 2,045,924
investments __________ __________
Net assets (per share 06/30/96 $1.76; 7,425,195 9,333,305
12/31/95 - $2.21) _________ _________
7,603,751 9,903,872
========= =========
<PAGE>
STATEMENTS OF OPERATIONS
Six months ended June 30, 1996 and year ended December 31, 1995
Unaudited
June 30, December 31,
1996 1995
__________________________
Investment Income:
Interest from portfolio companies 66,720 225,042
Interest from other investments 9,873 85,896
Other income 12,853 37,266
_______ _______
89,446 348,204
Expenses:
Salaries 134,538 469,985
Employee benefits 20,486 166,412
Directors' fees 23,886 17,750
Legal fees 39,924 82,612
Auditing and accounting 7,050 14,715
Consulting fees 9,500 3,447
Stockholder and office expenses 33,411 31,808
Occupancy 11,040 20,560
Insurance 44,277 35,942
Travel 37,967 27,140
Other operating expenses 18,538 119,324
_______ ________
380,617 989,695
Investment (loss) before income taxes (291,171) (641,491)
Income taxes provision 12,439 14,100
Deferred income tax (benefit) - (245,660)
_________ _________
Net investment (loss) (303,610) (409,931)
Realized and unrealized gain (loss) on investments:
Realized gain (loss) on investments
Cost of sales and dispositions (458,219) (65,416)
_________ ________
Realized (loss) before income tax (458,219) (65,416)
Deferred income tax provision 267,497 30,003
_________ _______
Net realized (loss) (190,722) (95,419)
Unrealized appreciation on investments:
Balance at beginning of period 3,236,040 9,064,200
Balance at end of period 1,066,715 3,236,040
_________ __________
Decrease in unrealized appreciation (2,169,325) (5,828,160)
before income taxes
Deferred income tax provision 755,547 2,229,884
_________ __________
Net decrease in unrealized (1,413,778) (3,598,276)
appreciation
Net realized and unrealized (1,604,500) (3,693,695)
(loss) on investments ____________ ___________
Net decrease in net assets from (1,908,110) (4,103,626)
operations ============ ===========
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO VALUATION
June 30, 1996 and December 31, 1995
June 30, 1996 December 31, 1995
Per Per
Date Share Share of
Acquired Company and Business Type of Investment Cost Value of Rand Value Rand
<S> <C> <C> <C> <C> <C> <C> <C>
10/29/91 ARIA Wireless Systems, CI A stock -
Inc. 1,800 shares $ - $ - $ - $ 198,000 $ 0.05
Buffalo, NY.
Manufactures and CI B stock -
markets radio 1,798,200
transmission
communication
equipment
06/23/95 American Tactile Corp. Convertible
Medina, NY. Develops debentures at 8%
equipment and systems due June 2000 and
to produce ADA signs June 2001 with
for the visually detachable
impaired warrants 150,000 150,000 0.04 100,000 0.02
08/29/91 Auto Radiator Sales, Common stock -
Inc. 25 shares 125,000 250,000
Cheektowaga, NY. Subordinated
Manufactures and convertible
distributes debentures at
replacement automotive 14 2/3% interest,
products due August 2000 375,000 750,000 0.18 1,000,000 0.24
04/28/89 Bydatel Corporation Common stock -
Buffalo, NY. Licensor 219,262 shares 0 0 0.00 33,000 0.01
of telecommunication Demand loans with
technology warrants 0 0 0.00 0 0.00
10/06/95 CAI Wireless Systems, Common stock -
Inc. 0 shares 0 0 0.00 467,447 0.11
Albany, NY. Wireless
cable television
systems operator
10/17/95 CableMaxx, Inc. Common stock -
Austin, TX. Wireless 0 shares 0 0 0.00 114,400 0.03
cable television
systems operator
09/30/88 Chem Pub LP Limited
New York, NY. Limited partnership
partnership invested interest 0 0 0.00 183,775 0.04
in "Chemical Week"
Magazine
02/23/96 Clearview Cable TV, Common stock -
Inc. 400 shares 124,000 124,000 0.03 0 0.00
New Providence, NJ.
Wireless cable
television systems
operator
10/16/95 Commercial Maintenance Capital stock -
Organization, Inc. 170 shares 85,000 85,000 0.02 80,000 0.02
Coral Springs, FL.
Maintenance service
network for retailers,
restaurants, vendors.
09/13/94 Comptek Research, Inc. Common stock -
Buffalo, NY. Develops 49,221 shares 693,998 258,409 0.06 238,307 0.06
electronic systems for Term loan at prime
military and non- less 1%, due June
military applications 1998 133,482 133,482 0.03 154,017 0.04
03/31/94 Coral Systems, Inc. Convertible
Longmont, CO. preferred stock -
Develops fraud 200,000 shares 200,000 422,222 0.10 200,000 0.05
prevention software
for the wireless
industry
03/18/96 HealthWay Products Debenture, 15%
Company, Inc. interest, due
Syracuse, NY. June 18, 1996 100,000 100,000 0.02 0 0.00
Manufactures air
filters and climate
control devices
02/23/96 Heartland Wireless Common stock -
Communications, Inc. 16,880 shares 376,265 384,134 0.09 0 0.00
Richardson, TX.
Wireless cable
television systems
operator
02/26/88 J. Giardino First mortgage at
Buffalo, NY. Own and 10% interest 223,139 223,139 0.05 228,516 0.05
leases commercial
property
11/09/95 Jamestown Savings Bank Common stock -
Jamestown, NY. 50,000 shares 500,000 500,000 0.12 500,000 0.12
Community savings bank
05/24/94 Mobile Data Solutions Convertible
Inc. debenture at 7.5%,
Vancouver, BC. due December 1996 100,000 299,738 0.07 197,800 0.05
Develops mobile data
software
12/31/90 MobileMedia Corp. Common stock -
New York, NY. 71,292 shares 94,250 747,587 0.18 1,586,200 0.38
Provider of paging and
other wireless data
services
06/08/94 Phoenix Data Convertible
Communications Corp. preferred stock -
Warwick, RI. Develops 4,000 shares 0 0 0.00 100,000 0.02
computer networking
and multi-protocol
software.
10/04/95 Reflection Technology, Series J
Inc. convertible
Waltham, MA. Develops preferred stock -
and licenses 243,902 shares 500,000 500,000 0.12 500,000 0.12
proprietary virtual
display technology.
11/06/95 TGT, Inc. Series A
Geneva, NY. Develops convertible
and manufactures preferred stock
biological alternative 32,000 shares 56,000 56,000 0.01 56,000 0.01
to chemical
pesticides.
02/26/87 Three Sixty Corp. Common stock -
New Providence, NJ. 0 shares 0 0 0.00 600,000 0.14
Acquires and manages Convertible
cable television debenture at 8% 0 0 0.00 200,000 0.05
properties. Convertible
debenture at 15% 0 0 0.00 451,306 0.11
01/06/95 Transworld Common stock -
Telecommunications, 132,826 shares 131,498 112,072 0.03 136,998 0.03
Inc.
Salt Lake City, UT.
Wireless cable
television systems
operator
12/11/92 Ultra-Scan Corporation Common stock -
Buffalo, NY. 47,583 shares 276,986 276,986 0.07 1,665,386 0.39
Ultrasonic fingerprint
scanning technology.
Other investments Other 25,060 25,057 0.01 6,461 0.00
_______ ____ ________ ____
Total portfolio
investments 5,397,806 1.28 8,997,613 2.13
Cash and money
market investments 1,119,448 0.26 707,559 0.17
Net receivables
(payables) 231,473 0.06 (28,109) (0.01)
_________ ________
Net assets before
taxes 6,748,727 1.60 9,677,063 2.29
Tax provision
(benefit) (676,468) 0.16 343,759 0.08
_________ _________
Net assets 7,425,195 9,333,304
========= =========
Net asset value
per share
(4,225,477 shares) $1.76 $2.21
==== ====
</TABLE>
