BEACON HILL MUTUAL FUND, INC.
Financial Statements for the
Years Ended June 30, 1996 and 1995
and Independent Auditors' Report
<PAGE>
[LETTERHEAD OF DELOITTE & TOUCHE LLP]
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Beacon Hill Mutual Fund, Inc.:
We have audited the accompanying statement of assets and liabilities, including
the investment portfolio, of Beacon Hill Mutual Fund, Inc. as of June 30, 1996,
and the related statement of operations for the year then ended, the statements
of changes in net assets for the years ended June 30, 1996 and 1995, and the
financial highlights for each of the years in the five-year period ended June
30, 1996. 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
audits.
We conducted our audits 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 June 30,
1996 by correspondence with the custodian. 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
audits provide 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 Beacon Hill Mutual
Fund, Inc. at June 30, 1996, and the results of its operations, the changes in
its net assets and its financial highlights for the respective stated periods in
conformity with generally accepted accounting principles.
As discussed in Note 7 to the financial statements, on July 1, 1996, the Fund's
Board of Directors notified shareholders that it had unanimously approved a Plan
of Liquidation. The Board has prepared proxy materials for a shareholder vote on
this issue.
/s/ Deloitte & Touche LLP
July 26, 1996
<PAGE>
BEACON HILL MUTUAL FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS:
Investments (Note 2):
<S> <C>
Common stocks, at value (identified cost, $550,445) $ 4,502,900
Cash 573,869
Dividends receivable
4,390
Other assets
933
-----------
Total assets 5,082,092
-----------
LIABILITIES:
Payable to affiliate - management fees (Note 4) 12,479
Accrued expenses 40,643
-----------
Total liabilities 53,122
-----------
NET ASSETS - Equivalent to $40.25 per share based on 124,945 shares of capital
stock outstanding at June 30, 1996 (Note 3) $ 5,028,970
-----------
NET ASSETS CONSIST OF:
Paid-in capital $ 1,319,185
Accumulated net investment loss (509,964)
Undistributed net realized gain on investments 267,294
Unrealized appreciation of investments 3,952,455
-----------
Total $ 5,028,970
-----------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE
PER SHARE $ 40.25
-----------
</TABLE>
See notes to financial statements.
-2-
<PAGE>
BEACON HILL MUTUAL FUND, INC.
STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 1996
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Income - dividends $ 93,046
-----------
EXPENSES:
Management fees (Note 4)
48,402
Transfer agent fees
37,700
Legal fees (Note 4)
33,423
Custodian fees
25,709
Audit fees
12,956
Printing
13,960
Registration fees
5,584
Other expenses
3,037
-----------
Total expenses 180,771
Less fees paid indirectly (Note 2)
(22,889)
-----------
Net expenses 157,882
-----------
Investment loss - net
(64,836)
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Realized gain on sale of investments 265,096
Increase in unrealized appreciation of investments 755,855
Total realized and unrealized gain on investments 1,020,951
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 956,115
===========
See notes to financial statements.
-3-
<PAGE>
BEACON HILL MUTUAL FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED JUNE 30, 1996 AND 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS:
<S> <C> <C>
Investment loss - net $ (64,836) $ (41,564)
Realized gain on sale of investments 265,096 235,070
Increase in unrealized appreciation of investments 755,855 828,784
----------- ------------
Net increase in net assets from operations 956,115 1,022,290
CAPITAL GAIN DISTRIBUTION (232,467)
CAPITAL SHARE TRANSACTIONS (Note 3) (221,106) (703,456)
----------- ------------
TOTAL INCREASE IN NET ASSETS 735,009 86,367
NET ASSETS:
Beginning of year 4,293,961 4,207,594
----------- ------------
End of year (including accumulated investment loss of $509,964
and $445,128) $ 5,028,970 $ 4,293,961
----------- ------------
</TABLE>
See notes to financial statements.
-4-
<PAGE>
BEACON HILL MUTUAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED JUNE 30, 1996
- --------------------------------------------------------------------------------
1. BUSINESS AND ORGANIZATION
Beacon Hill Mutual Fund, Inc. (the "Fund") is organized as a Massachusetts
corporation and is registered under the Investment Company Act of 1940, as
amended, as a diversified, open-end, management investment company.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements.
Valuation of Securities - Investments in common stocks traded on a
national securities exchange are valued at the last reported sales price
on the last business day of the accounting period; common stocks traded in
the over-the-counter market and listed securities for which no sale was
reported on that date are valued at the last reported bid price.
Security Transactions and Income - Security transactions are accounted for
on the trade date. Dividend income is recorded on the ex-dividend date.
For purposes of determining net realized gains and losses, the Fund uses
the identified-cost method of accounting for investment securities.
Federal Income Taxes - No provision has been made for federal income taxes
as it is the Fund's policy to distribute substantially all of its taxable
income and comply with the provisions of the Internal Revenue Code
applicable to regulated investment companies. The identified cost of
investments owned at June 30, 1996 was the same for both accounting and
federal income tax purposes.
Fees Paid Indirectly - The Fund's custodian bank calculates its fee based
on the Fund's average daily net assets. The fee is reduced according to a
fee arrangement, which provides for custody fees to be reduced based on a
formula developed to measure the value of cash deposited with the
custodian by the Fund. This amount is shown as a reduction of expenses on
the statement of operations.
-5-
<PAGE>
3. CAPITAL STOCK
At June 30, 1996, there were 1,500,000 shares of $1.00 par value capital
stock authorized. Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
Year Ended June 30
---------------------------------------------------
1996 1995
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Shares sold $ 8,041 290,584 17,357 $ 514,443
Shares issued for reinvestment of
distributions 7,102 222,338
Shares redeemed (13,755) (511,690) (48,647) (1,440,237)
---------- --------- --------- -----------
Net decrease $ (5,714) (221,106) (24,188) $ (703,456)
========== ========= ========== ===========
</TABLE>
4. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund's management contract with Beacon Hill Management, Inc. (the
"Company") provides for investment advice and other services. The
management fee is computed on a quarterly basis at a rate of 0.25% of the
average of the net asset values of the Fund at the close of business on
the last business day of each month throughout the quarter, or at an
approximate annual rate of 1%. Management fees aggregated $48,402 for the
year ended June 30, 1996.
The clerk of the Fund is a partner in the firm of Kramer, Levin, Naftalis
& Frankel, the Fund's legal counsel.
The President and Treasurer of the Fund also serves in that capacity for
the Company, and is a director in both organizations.
5. FEDERAL INCOME TAX BASIS OF INVESTMENT SECURITIES
The cost and unrealized appreciation in value of the investment securities
owned at June 30, 1996, as computed on a federal income tax basis, are as
follows:
Aggregate cost $ 550,445
==========
Gross and net unrealized appreciation $3,952,455
==========
6. INVESTMENT TRANSACTIONS
Sales of investments for the year ended June 30, 1996 amounted to
$293,801. There were no purchases of investments for the year ended June
30, 1996.
-6-
<PAGE>
7. FUND LIQUIDATION
On July 1, 1996, the Fund's Board of Directors (the "Board") notified
shareholders that it had unanimously approved a Plan of Liquidation (the
"Liquidation"). The Board has prepared proxy materials to call for a
shareholder vote on this issue, and informed shareholders that they should
consider their option to redeem shares prior to such a vote. The Board
anticipates that the proxy will be mailed to shareholders on or about
August 15, 1996, and that, if the Liquidation is approved, final
distribution of unredeemed assets will occur on or about October 31, 1996.
The Board anticipates that the Fund will incur approximately $30,000 in
Liquidation-related expenses.
In connection with the anticipated Liquidation, for the period from July
1, 1996 to July 26, 1996, the Fund received $4,187,411 in proceeds from
the sales of investments. The value of such investments on June 30, 1996
was $4,203,150. Additionally, the Fund paid $3,011,517 to redeeming
shareholders during the period from July 1, 1996 to July 26, 1996.
* * * * * *
-7-
<PAGE>
BEACON HILL MUTUAL FUND, INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended June 30
-----------------------------------------------------------
1996* 1995* 1994* 1993* 1992*
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $32.86 $27.17 $30.52 $31.83 $31.51
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss
(0.49) (0.30) (0.17) (0.21) (0.32)
Net gains (losses) on securities
(both realized and unrealized)
7.88 7.88 (1.53) (0.51) 2.00
------ ------ ------ ------ ------
Total from investment operations
7.39 7.58 (1.70) (0.72) 1.68
LESS DISTRIBUTIONS FROM REALIZED
CAPITAL GAINS
- (1.89) (1.65) (0.59) (1.36)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF YEAR $40.25 $32.86 $27.17 $30.52 $31.83
====== ====== ====== ====== ======
TOTAL RETURN 22.5 % 28.2 % (5.6)% (2.2)% 5.3 %
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $5,029 $4,294 $4,208 $5,253 $5,039
Ratio of expenses to average net assets 3.7 %** 3.0 % 2.7 % 2.6 % 2.8 %
Ratio of net loss to average net assets (1.3)% (1.0)% (0.6)% (0.7)% (1.0)%
Portfolio turnover rate 0.0 % 0.0 % 0.0 % 2.5 % 5.5 %
</TABLE>
*Based on average shares outstanding during the period.
**For the year ended June 30, 1996, the Fund's expenses are calculated without
reduction for fees paid indirectly.
See notes to financial statements.
-8-
<PAGE>
BEACON HILL MUTUAL FUND, INC.
INVESTMENT PORTFOLIO
JUNE 30, 1996
- --------------------------------------------------------------------------------
Number Value
of Shares (Note 2)
COMMON STOCKS
BEVERAGES (10.1%)
14,400 Pepsico, Inc. $ 509,400
---------------
ELECTRICAL EQUIPMENT (5.4%)
3,000 Emerson Electric Company 271,125
---------------
FOOD PROCESSING (6.2%)
6,000 Heinz (H.J.) Company 182,250
4,000 Sara Lee Corp. 129,500
---------------
311,750
HOSPITAL SUPPLIES (14.8%)
8,000 Abbott Labs 348,000
8,000 Johnson & Johnson 396,000
---------------
744,000
HOUSEHOLD PRODUCTS (9.4%)
5,200 Procter & Gamble Company 471,250
---------------
PHARMACEUTICALS (20.0%)
4,000 American Home Products Corp. 240,500
4,200 Bristol-Myers Squibb 378,000
6,000 Merck & Co. Inc. 387,750
---------------
1,006,250
(Continued)
-9-
<PAGE>
BEACON HILL MUTUAL FUND, INC.
INVESTMENT PORTFOLIO
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (Note 2)
COMMON STOCKS (Continued)
PUBLISHING AND SPECIALTY RETAILING (8.9%)
<S> <C> <C>
9,000 Harcourt General Inc. 450,000
=============
RETAIL - DRUG (2.7%)
4,000 Walgreen Co. 134,000
=============
RETAIL - FOOD (4.5%)
7,000 Weis Markets, Inc. 228,375
=============
WHOLESALE - FOOD (7.5%)
11,000 Sysco Corp.
376,750
=============
TOTAL INVESTMENTS IN COMMON STOCKS (89.5%)
(Identified cost, $550,445)
4,502,900
EXCESS OF OTHER ASSETS OVER TOTAL LIABILITIES (10.5%)
526,070
=============
NET ASSETS (100%) $ 5,028,970
=============
</TABLE>
See notes to financial statements.
(Concluded)
-10-
