Dear Shareholder:
Following an excellent 1995, Bascom Hill Investors, Inc.
gained an additional 23.4% in 1996. This total return
exceeded the 22.9% return generated by the S&P 500 in a year
when the average growth and income fund (as measured by
Lipper) gained only 20.7%. The last two years produced the
best back to back performance for the market in 20 years,
and we are pleased that Bascom Hill Investors participated
nicely. During this strong bull market, Morningstar has
awarded the Fund a "4 star" rating for a one year and a
three year period.
Although the bond market experienced some volatility in
1996, the stock market marched to new highs virtually
uninterrupted. The conditions during the last 12 months
proved to be ideal with corporations achieving record
earnings as the result of moderate economic growth, low
inflation and relatively low interest rates. Providing
additional fuel, the cash-flow into equity mutual funds
soared to unprecedented levels. It seemed as though
investors just couldn't get enough.
Although the Dow Jones Industrials' climb from 5000 to 6500
was well documented, that is only part of the story. The big
blue chip stocks took the lead in the beginning of the year
and never looked back, however, many of the small and mid-
cap stocks did not keep up. In fact, the broad market
trailed the popular indices by over 10 percentage points. As
we expected early in the year, stock selection was key to
the overall performance of your Fund. Although a higher than
normal cash position was maintained throughout the year to
reduce the overall risk, the stocks as a group outperformed
the market significantly. The best performing sectors were
Technology (led by Intel) and Financials (led by MGIC
Investments).
Looking Ahead... The question remains, "How long can this
continue?" The underlying fundamentals suggest this market
still has room to run. However, the historically high
valuation that currently exists limits the upside potential
from here. The recent surge has been quite exceptional when
you consider that the average annual return of large cap
stocks has been 10.7% over the last 70 years. We are very
comfortable operating in this environment as our stock
selection and portfolio construction have always focused on
stocks with the best risk-reward tradeoff. The market has
demonstrated the "reward" half of the equation but investors
should not be blinded to the other half. In times like
these, it is especially important to stay true to your
philosophy. For Bascom Hill that means buying stocks of high
quality companies delivering consistent, predictable
earnings growth that trade at reasonable valuations. Stocks
exhibiting these characteristics tend to perform best in
both good and bad markets.
We look forward to the challenges that lie ahead, and
appreciate your confidence in the management of your Fund.
Sincerely,
(signature)
Katherine L. Frank
Vice President
<PAGE>
BASCOM HILL INVESTORS, INC.
STATEMENT OF NET ASSETS
Schedule of Investments
December 31, 1996
Market
Common Stocks - 74.3% Shares Value
Basic Industry - 3.7%
Morton International, Inc. 11,950 $486,963
Consumer Discretionary - 3.7%
Eastman Kodak 5,950 477,487
Consumer Products - 8.4%
Kimberly Clark Corp. 4,800 457,200
Lancaster Colony Corp. 13,900 639,400
Consumer - Retail - 7.5%
Pep Boys - Manny Moe & Jack 15,100 464,325
Wal-Mart Stores, Inc. 22,750 517,562
Consumer Services - 3.5%
McDonalds Corp. 10,150 460,556
Financial -Insurance - 3.2%
MGIC Investment Corp. 5,500 418,000
Financial - Regional Banks - 3.5%
Norwest Corp. 10,650 463,275
Financial Services - 7.9%
American Express 8,350 471,775
Federal Home Loan Mortgage Corp. 5,150 568,431
Food & Beverage - 6.4%
Conagra, Inc. 9,675 481,331
Dole Food Co. 10,550 357,381
Medical & Health Care - 14.0%
Abbott Laboratories 12,150 616,613
Columbia/HCA Healthcare Corp. 15,675 638,756
Schering Plough Corp. 8,950 579,513
Technology - 8.9%
Cabletron Systems, Inc. 14,800 492,100
Compaq Computer Corp. 5,250 390,469
Intel Corp. 2,200 288,062
Telecommunications - 3.6%
Bell Atlantic Corp. 7,350 475,913
Total Common Stocks (Cost $8,078,461) $9,745,112
See Accompanying Notes to Financial Statements
<PAGE>
BASCOM HILL INVESTORS, INC.
STATEMENT OF NET ASSETS (continued)
Principal Market
Amount Value
Short Term Investments - 26.1%
Commercial Paper
Associated First Cap Corp 5.45%
due 1/15/97 $450,000 $450,000
Variable Rate Demand Notes
American Family Financial Services
5.21% due 1/1/97 $450,000 $450,000
General Mills, Inc. 5.20% due
1/1/97 450,000 450,000
Johnson Controls, Inc. 5.21%
due 1/1/97 450,000 450,000
Pitney Bowes Credit Corp. 5.20%
due 1/1/97 450,000 450,000
Sara Lee Corp. 5.18% due 1/1/97 450,000 450,000
Southwestern Bell Telephone
5.19% due 1/1/97 450,000 450,000
Warner Lambert 5.18% due 1/1/97 268,258 268,258
Total Short Term Investments (Cost
$3,418,258) $3,418,258
Cash & Receivables Less Liabilities - (.4%) $(51,818)
TOTAL NET ASSETS - Equivalent to $17.92 per share on
731,754.239 shares of $1 par value capital stock outstanding
(authorized capital stock - 1,000,000 shares), and paid-in
capital aggregated $10,712,301. $13,111,552
See Accompanying Notes to Financial Statements
<PAGE>
BASCOM HILL INVESTORS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
Year Ended Year Ended
December 31, 1996 December 31, 1995
Investment Activities
Net Investment Income $149,156 $273,224
Income Distributions to
Shareholders ($.249 and
$.422 per share,
respectively) (153,894) (268,893)
Increase (Decrease) in
Undistributed Net
Investment Income $ (4,738) $ 4,331
Net Realized Gains from
Security Transactions 2,420,310 824,461
Net Realized Gain
Distributions to
Shareholders ($4.01
and $1.26 per share,
respectively) (2,421,537) (822,010)
Increase (Decrease) in
Undistributed Realized
Gains $ (1,227) $ 2,451
Increase in Unrealized
Appreciation $ 5,172 $1,358,532
Increase (Decrease) in
Undistributed Net Assets
Derived From Investment
Activities (793) 1,365,314
Shares Sold and Redeemed
Net Proceeds from Shares
Issued (37,333 and 63,002
shares, respectively) $ 717,580 $1,134,972
Net Asset Value of Shares
Issued in Distributions
(132,406 and 56,550
shares respectively) 2,404,639 1,013,566
$3,122,219 $2,148,538
Cost of Shares Redeemed
(95,706 and 84,141
shares, respectively) (1,870,324) (1,508,728)
Increase in Net Assets
from Sale and Redemption
of Fund Shares $1,251,895 $639,810
Net Assets
Balance at Beginning of Year
(Including undistributed
net investment income
of $5,470 and $1,139,
respectively) 11,860,450 9,855,326
Net Increase (Decrease)
from Investment
Activities (793) 1,365,314
Net Increase from Shares
Sold and Redeemed 1,251,895 639,810
Balance at End of Year
(Including undistributed
net investment income
of $732 and $5,470,
respectively) $13,111,552 $11,860,450
See Accompanying Notes to Financial Statements.
<PAGE>
BASCOM HILL INVESTORS, INC.
STATEMENTS OF OPERATIONS
Year Ended Year Ended
December 31, 1996 December 31, 1995
Income:
Interest $184,714 $316,336
Dividends 110,921 87,726
$295,635 $404,062
Expenses:
Auditing Fee $5,040 $5,006
Custodial Fee 3,708 6,185
Directors' Fee 3,164 3,000
Investment Advisor Fee 99,818 91,637
Legal Fee 1,043 1,219
Licensing Fee 2,525 2,163
Printing Cost 4,581 5,303
Transfer Agent Fee 16,312 13,005
Other Fees 10,288 3,320
$146,479 $130,838
Net Investment Income $149,156 $273,224
Ratio of Expenses to Income 49.5% 32.4%
Realized Gains on Investments:
Proceeds from Sale $7,898,916 $4,126,378
Cost 5,478,606 3,301,917
Net Realized Gains $2,420,310 $824,461
Unrealized Appreciation on Investments:
Balance, Beginning of
Year $1,661,478 $302,946
Balance, End of Year 1,666,650 1,661,478
Increase in Unrealized
Appreciation $5,172 $1,358,532
Net Realized Gains and Increase
in Unrealized
Appreciation $2,425,482 $2,182,993
Financial Highlights - Selected Per Share Data and Ratios
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
<S>
NET ASSET VALUE:
Beginning of year
$ 18.03 15.84 16.73 18.15 16.66 12.90 15.62 14.92 13.84 15.11
INCOME FROM INVESTMENT OPERATIONS:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net investment income
$ .24 .42 .39 .19 .22 .36 .51 .77 .66 .69
Net realized and unrealized gains or (losses) on securities
3.91 3.45 .26 .34 1.59 3.76 (2.71) 1.62 1.08 (.44)
----- ----- ---- ---- ---- ----- ---- ---- -----
Total from investment operations
$ 4.15 3.87 .65 .53 1.81 4.12 (2.20) 2.39 1.74 .25
LESS DISTRIBUTIONS:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dividends from net income
$ (.25) (.42) (.39) (.19) (.22) (.36) (.52) (.78) (.66) (.99)
Capital gains distributions
(4.01) (1.26) (1.15) (1.76) (.10) -- -- (.91) -- (.53)
------ ------ ------ ----- ----- ----- ------
NET ASSET VALUE:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
End of year $ 17.92 18.03 15.84 16.73 18.15 16.66 12.90 15.62 14.92 13.84
TOTAL RETURN: % 23.36 24.63 4.09 3.16 10.98 32.05(14.25)16.25 12.76 1.11
RATIOS:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Operating expenses to average net assets
% 1.17 1.17 1.20 1.20 1.22 1.22 1.27 1.16 1.16 1.15
Net income to average net assets
% 1.20 2.44 2.28 1.00 1.33 2.28 3.78 4.73 4.48 4.60
Portfolio turnover rate
%81.42 57.62 54.49 80.41 68.83 70.90 84.40 69.60 51.23 35.00
<FN>
Average Commission Rate
.08 .0819
</TABLE>
See Accompanying Notes to Financial Statements.
TOTAL RETURN OVER LIFETIME OF FUND
The following table illustrates the total return for
$10,000 invested in Bascom Hill Investors, Inc. on November
1, 1978, the date of the initial ublic offering with income
dividends and capital gain distributions reinvested in the
Fund.
Value of
Net Asset Capital Gains Income Initial
Value Per Distributions Dividends $10,000
Date Share Per Share Per Share Investment
November 1, 1978 $10.00 ------- ----- $10,000
December 31, 1978 $10.36 ------- ----- $10,360
December 31, 1979 $11.83 ------- $ .45 $12,338
December 31, 1980 $13.84 ------- $ .63 $15,192
December 31, 1981 $13.79 $ .650 $1.11 $17,292
December 31, 1982 $16.16 $ .735 $ .94 $23,071
December 31, 1983 $16.94 $ .440 $1.44 $27,162
December 31, 1984 $15.26 $ .800 $ .76 $27,003
December 31, 1985 $18.13 $ .870 $ .75 $35,508
December 31, 1986 $15.11 $ 4.956 $ .69 $41,296
December 31, 1987 $13.84 $ .530 $ .98 $41,766
December 31, 1988 $14.92 ------- $ .65 $47,097
December 31, 1989 $15.62 $ .913 $ .78 $54,750
December 31, 1990 $12.90 ------- $ .51 $46,949
December 31, 1991 $16.66 ------- $ .35 $62,002
December 31, 1992 $18.15 $ .101 $ .22 $68,783
December 31, 1993 $16.73 $ 1.760 $ .19 $70,956
December 31, 1994 $15.84 $ 1.150 $ .39 $73,855
December 31, 1995 $18.03 $ 1.260 $ .42 $91,529
December 31, 1996 $17.92 $ 4.007 $ .25 $112,914
GROWTH OF $10,000 CHART
for the ten years ended December 31, 1996
Chart compares the growth of the S&P 500, $41,491, with the
Bascom Hill Investors, Inc. fun, $27,344, and Value Line,
$16,640.
BASCOM HILL INVESTORS AVERAGE ANNUAL RETURN
1 YEAR 23.36%
5 YEARS 12.78%
10 YEARS 10.58%
18 YEARS 14.18%
Past performance is not a guarantee of future results.
<PAGE>
NOTES TO FINANCIAL STATEMENTS December 31, 1996 and 1995
(1) Significant Accounting Principles
Bascom Hill Investors, Inc. began operations on November 1,
1978. 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.
(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) All percentages for the various classifications relate
to total net assets.
(d) 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.
(2) Investment Advisory Agreement
The investment advisory agreement with Madison Investment
Advisors, Inc., provides for an annual management fee of .80
of 1% of the first $50 million of average net assets of the
Fund. Such fees are remitted quarterly. Although the
investment advisor may be reimbursed for clerical or
administrative expenses incurred by it, none have been
charged to the Fund during 1996. The annual fee is reduced
to the extent that the Fund's total annual expenses
(excluding interest, taxes, brokerage fees) exceeds 2% of
the first $10 million of average net assets and 1 1/2% of
the next $20 million of average net assets. The advisor's
fee was not so reduced for the year ended December 31, 1996.
Certain officers and directors of the Fund are also officers
and directors of Madison Investment Advisors, Inc. The Fund
owed Madison Investment Advisors, Inc. $26,360 as of
December 31, 1996.
(3) Cost of Investments Purchased and Proceeds of
Investments Sold
For the year ended December 31, 1996, the purchases and
sales of investment securities (excluding short-term
securities) were $7,331,946 and $7,898,917, respectively,
(purchases and sales of U.S. government obligations only
were $0 and $0, respectively).
(4) Net Realized Gains and Losses on Investments
Net realized gains and losses on investments are computed on
the basis of specifically identified certificates. During
the year ended December 31, 1996, net realized gains would
have been $2,419,290 if computed on the basis of average
cost.
(5) Aggregate Cost of Securities and Undistributed Income or
Capital Gains
The aggregate cost of securities for Federal income tax
purposes is $8,078,461. The aggregate gross unrealized
appreciation for all securities in which there is an excess
of value over tax cost is $1,889,290. The aggregate gross
unrealized depreciation for all securities in which there is
an excess of tax cost over value amounts to $222,640. The
net unrealized appreciation at December 31, 1996, for all
securities is $1,666,650. Through the year ended December
31, 1996, the accumulated undistributed net investment
income is $732 and the accumulated undistributed realized
capital gain is $109.
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
of Bascom Hill Investors, Inc.
We have audited the accompanying statement of net assets of
Bascom Hill Investors, Inc., including the schedule of
investments, as of December 31, 1996, the related statements
of operations and changes in net assets for each of the two
years in the period then ended, and the selected per share
data and ratios for each of the ten years in the period then
ended. These financial statements and selected per share
data and ratios are the responsibility of the Company's
management. Our responsibility is to express an opinion on
these financial statements and per share data and ratios
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
per share data and ratios 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 as of December 31, 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, the financial statements and selected per
share data and ratios referred to above present fairly, in
all material respects, the financial position of Bascom Hill
Investors, Inc. as of December 31, 1996, the results of its
operations and the changes in its net assets for each of the
two years in the period then ended, and the selected per
share data and ratios for each of the ten years in the
period then ended, in conformity with generally accepted
accounting principles.
WILLIAMS, YOUNG & ASSOCIATES, LLC
(signature)
Madison, Wisconsin
January 24, 1997
<PAGE>
BASCOM HILL INVESTORS, INC.
6411 Mineral Point Road
Madison, WI 53705
(608) 273-2020
(800) 767-0300
ANNUAL REPORT
December 31, 1996
OFFICERS and DIRECTORS
Frank E. Burgess
President, Director
Katherine L. Frank
Vice President, Secretary
Jay R. Sekelsky
Vice President
Christopher C. Berberet
Treasurer
Elizabeth A. Hendricks
Assistant Secretary
James R. Imhoff, Jr.
Director
Edmund B. Johnson
Director
Lorence D. Wheeler
Director
CUSTODIAN, TRANSFER AGENT
and DISBURSING AGENT
Firstar Trust Company
P.O. Box 701
Milwaukee, Wisconsin 53201-0701
(414)765-4124
COUNSEL
DeWitt Ross & Stevens, S.C.
8000 Excelsior Drive
Madison, Wisconsin 53717-1914
AUDITORS
Williams, Young & Associates, LLC
P.O. Box 8700
Madison, Wisconsin 53708
