Madison Opportunity Fund, Inc.
Financial Statements
December 31, 1997
INDEPENDENT AUDITOR'S REPORT
To the Board of Trustees and Shareholders of Madison Opportunity Fund,
Inc.
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of the Madison Opportunity Fund,
Inc. (the "Fund") as of December 31, 1997, and the related statements
of operations, changes in net assets and the financial highlights for
the year then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements
and financial highlights based on our audit. The financial statements
and the financial highlights of the Fund for the year ended December 31,
1996 were audited by other auditors whose report, dated January 24,
1997, expressed an unqualified opinion on those financial statements and
financial highlights.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included
confirmation of securities owned at December 31, 1997 by correspondence
with the custodian and brokers. An audit also includes assessing the
accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of the
Madison Opportunity Fund, Inc. as of December 31, 1997, the results of
its operations, the changes in its net assets, and its financial
highlights for the year then ended in conformity with generally accepted
accounting principles.
Deloitte & Touche LLP
(signature)
Princeton, New Jersey
February 13, 1998
<PAGE>
Madison Opportunity Fund, Inc.
Portfolio of Investments - December 31, 1997
Market
Value
Short Term Investments: 83.4% of Net Assets
Repurchase Agreement:
With Donaldson, Lufkin & Jenrette Securities Corporation issued
12/31/97 at 6.00%, due 1/2/98, collateralized by $679,934 in United
States Treasury Notes due 2/29/00. Proceeds at maturity are $667,222.
(Cost $667,000) $667,000
TOTAL INVESTMENTS 667,000
Cash & Receivables Less Liabilities: 16.6% of Net Assets 133,105
TOTAL NET ASSETS: 100% $800,105
Madison Opportunity Fund, Inc.
Statement of Assets and Liabilities
December 31, 1997
Market
Value
ASSETS
Investment at value (Notes 1 and 6)
Repurchase Agreement $667,000
Cash 127
Receivables
Investments sold 140,178
Dividends and interest 377
Total Assets 807,682
LIABILITIES
Income dividend payable 54
Capital gain distribution payable 7,523
Total Liabilities 7,577
NET ASSETS (Note 7) $800,105
CAPITAL SHARES OUTSTANDING 37,932
NET ASSET VALUE PER SHARE $21.09
Madison Opportunity Fund, Inc.
Statement of Operations
For the Year Ended December 31, 1997
Year Ended
December 31, 1997
INVESTMENT INCOME (Note 1)
Interest income $7,092
Dividend income 3,819
Total investment income $10,911
EXPENSES (Note 3 and 5)
Investment advisory Fee $3,190
Transfer agent and administrative expenses 2,023
Registration and professional expenses 2,632
Total expenses $7,845
NET INVESTMENT INCOME $3,066
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on investments $153,547
Net unrealized depreciation of investments (42,374)
NET GAIN ON INVESTMENTS $111,173
TOTAL INCREASE IN NET ASSETS RESULTING FROM OPERATIONS$114,238
Madison Opportunity Fund, Inc.
Statements of Changes in Net Assets
For the Years Ended December 31
1997 1996
INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS
Net investment income $3,066 $6,562
Net realized gain on investments 153,547 28,361
Net unrealized appreciation (depreciation) of
investments (42,374) 42,374
Total increase in net assets resulting
from operations $114,239 $77,297
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income (1,043) (5,866)
From net capital gains (144,212) (28,362)
Total distributions $(145,255) $(34,228)
CAPITAL SHARE TRANSACTIONS (Note 8) $195,903 $192,149
TOTAL INCREASE IN NET ASSETS $164,887 $235,218
NET ASSETS
Beginning of period $635,218 $400,000
End of period $800,105 $635,218
Madison Opportunity Fund, Inc.
FINANCIAL HIGHLIGHTS - Selected Per Share Data and Ratios
Selected data for a share outstanding throughout each year:
Year Ended Year Ended
December 31, 1997 December 31, 1996
NET ASSET VALUE:
Beginning of year $21.77 $20.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .08 0.24
Net realized and unrealized gains
on securities 3.86 2.77
Total from investment operations $3.94 $3.01
LESS DISTRIBUTIONS:
Dividends from net income (0.03) (0.21)
Capital gains distributions (4.59) (1.03)
NET ASSET VALUE:
End of year $21.09 $21.77
TOTAL RETURN: 18.14% 15.05%
RATIOS:
Operating expenses to average net assets 1.09% 0.81%
Net income to average net assets .43% 1.20%
Portfolio turnover rate 113.00% 56.52%
Average commission rate paid .0800% --
Madison Opportunity Fund, Inc.
Notes to Financial Statements
December 31, 1997
1. Significant Accounting Principles. Madison Opportunity Fund, Inc.
began operations on December 27, 1995. There were no operations in 1995
and net assets consisted solely of $400,000 for the purchase of 20,000
shares by investors. The Fund is registered under the Investment
Company Act of 1940, as amended, as an open-end management company. The
following is a summary of significant accounting principles followed by
the Fund in the preparation of its financial statements. The policies
are in conformity with generally accepted accounting principles.
(a) The market quotation for each security is the last reported sale
price on a national securities exchange, or, in the case of Over-The-
Counter securities, the latest available bid price. Other securities
for which quotations are not readily available are valued at fair value
as determined by the Board of Directors. Short-term securities
(maturing within 60 days) are valued on the basis of amortized cost.
Securities with maturities in excess of 60 days are valued at market
value. The cost of investments sold is determined on the identified
cost basis for financial statements and federal income tax purposes.
(b) No provision is made for Federal income taxes since it is the
intention of the Fund to comply with the provisions of the Internal
Revenue Code available to investment companies, and to make the
requisite distribution to shareholders of taxable income which will be
sufficient to relieve it from all or substantially all Federal income
taxes.
(c) The Fund follows industry practice and records security transactions
on the trade date. Dividend income is recognized on the ex-dividend
date and interest income is accrued on a daily basis.
Use of Estimates: The preparation of the financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and reported amounts of increases and
decreases in net assets from operations during the reporting period.
Actual results could differ from those estimates.
2. Investments in Repurchase Agreements. When the Fund purchases
securities under agreements to resell, the securities are held for
safekeeping by the custodian bank as collateral. Should the market
value of the securities purchased under such an agreement decrease below
the principal amount to be received at the termination of the agreement
plus accrued interest, the counterparty is required to place an
equivalent amount of additional securities in safekeeping with the
Fund's custodian bank. Repurchase agreements may be terminated within
seven days. Pursuant to an Exemptive Order issued by the Securities and
Exchange Commission, the Fund, along with other registered investment
companies having Advisory and Services Agreements with the same advisor,
transfers uninvested cash balances into a joint trading account. The
aggregate balance in this joint trading account is invested in one or
more consolidated repurchase agreements whose underlying securities are
U.S. Treasury or federal agency obligations.
3. Investment Advisory Agreement. The investment advisory agreement
with Madison Investment Advisors, Inc., provides for an annual
management fee of .75 of 1% on the average net assets of the Fund. Such
fees were waived until June 16, 1997. The Fund paid Madison Investment
Advisors, Inc. $3,190 in advisory fees in 1997. Certain officers and
directors of the Fund are also officers and directors of Madison
Investment Advisors, Inc.
4. Cost of Investments Purchased and Proceeds of Investments Sold. For
the year ended December 31, 1997, the purchases and sales of investment
securities (excluding short-term securities) were $665,298 and
$1,297,597, respectively.
5. Other Expenses. The Fund paid expenses of $2,388 for custodial,
transfer agent and other services for the period January 1, 1997 through
June 16, 1997. The advisor was not reimbursed for any clerical or
administrative expenses incurred by it during that time. For the period
June 16, 1997 to December 31, 1997, the Fund paid $2,268 to the advisor
for direct services or other support services provided by the advisor.
This amount was equal to .49% of the average net assets of the Fund
during that time period.
6. Aggregate Cost of Securities. The aggregate cost of securities for
Federal income tax purposes is $667,000. The aggregate gross unrealized
appreciation for all securities in which there is an excess of value
over tax cost is $0. The aggregate gross unrealized depreciation for
all securities in which there is an excess of tax cost over value
amounts to $0. The net unrealized appreciation at December 31, 1997,
for all securities is $0.
7. Net Assets. At December 31, 1997, net assets include the following:
Net paid in capital on shares of beneficial interest $788,053
Undistributed net income 2,718
Accumulated net realized gains 9,334
Total net assets $800,105
8. Capital Shares Transactions. 500,000 shares of capital shares, with
a $.01 par value, are authorized. Transactions in capital shares for
the years ended December 31, 1997 and 1996 were:
Year Ended Year Ended
December 31, December 31,
1997 1996
In Dollars
Shares sold $95,914 $157,921
Shares issued in reinvestment of dividends 137,857 34,228
Total shares issued 233,771 192,149
Shares redeemed (37,868) --
Net increase $195,903 $192,149
In Shares
Shares sold 3,654 7,604
Shares issued in reinvestment of dividends 6,527 1,572
Total shares issued 10,181 9,176
Shares redeemed (1,426) --
Net increase 8,755 9,176
9. Subsequent Events. Effective January 1, 1998, pursuant to the
unanimous written consent of its shareholders, the Fund changed its
name, investment objectives and investment company diversification
status. In addition, the shareholders approved changes to a variety of
matters affecting the Fund.
Specifically, effective January 1, 1998, the Fund shall be a non-
diversified investment company as that term is understood under the
Investment Company Act of 1940, as amended (the "40 Act"); the
investment objectives and policies of the Fund shall be changed to
achieve its capital appreciation objective by means of investment in a
concentrated portfolio of securities investments; the Fund shall be
reorganized as a Massachusetts Business Trust and upon such
reorganization, the name of the Fund shall be changed to "Mosaic Focused
Fund"; the Fund shall enter into an Investment Advisory Agreement with
Madison Mosaic, LLC (previously known as Bankers Finance Advisors, LLC,
and hereinafter referred to as "Mosaic"), a wholly owned subsidiary of
Madison Investment Advisors, Inc., the current investment advisor to the
Fund; the Fund shall serve as its own transfer agent and dividend paying
agent; the Fund shall enter into a Services Agreement with Mosaic for
all administrative and other services not covered by the Investment
Advisory Agreement; the Fund shall enter into a Distribution Agreement
with Artisan Securities, LLC, a wholly owned subsidiary of Madison
Investment Advisors, Inc., upon its effectiveness as a registered
broker-dealer with the Securities and Exchange Commission and its
acceptance as a member of the National Association of Securities
Dealers, Inc.; the Fund, as reorganized, shall have four Trustees; Star
Bank, NA, shall serve as custodian of the Fund's securities; effective
for fiscal years beginning after December 31, 1996, the Fund's
independent accountants shall be Deloitte & Touche LLP; and the Fund
shall make a filing with the Securities and Exchange Commission under
the Securities Act of 1933, as amended, and file a post-effective
amendment under the 40 Act upon completion of the matters described
above in order to make public the sale of the Fund's securities.
