BASCOM HILL BALANCED FUND, INC.
6411 Mineral Point Road
Madison, WI 53705
(608) 273-2020
(800) 767-0300
Securities & Exchange Commission
Attention: Filing Desk
450 Fifth Street NW
Washington, DC 20549
Re: Bascom Hill BALANCED Fund, Inc.
Registration No. 33-8431
Dear Sirs:
Enclosed are copies of the Bascom Hill BALANCED Fund, Inc. Second Quarter
Report which was recently mailed to shareholders.
This filing is intended to fulfill the requirements of Section 24(b) and
Section 30(b)(2) of the Inevestment Company Act.
Sincerely,
Katherine L. Frank
Vice President/Secretary
KLF:mh
Enclosures
August, 1996
Dear Shareholder:
While most experts expected 1996 to be a quiet year in the investment
world, that clearly hasn't been the case. Following the impressive gains in
1995, the bond market fell sharply in the first five months of 1996 before
stabilizing in June and July. The stock market, on the other hand, rallied to
new highs in the first six months of the year before hitting a few speed bumps
in the second half. Bascom Hill BALANCED Fund increased 5.5% through June 30,
1996, and has posted additional gains in the last six weeks bringing the total
return to 8.0% year-to-date.
THE STOCK MARKET
The primary catalysts for the market's strong showing in the first half of
the year were low inflation, a strong economy and surprisingly robust corporate
earnings. However, growing inflationary pressures and higher interest rates
finally caught up with stock prices in July with mid and small-cap stocks
bearing the brunt of the correction. While most large-cap indicies declined less
than 10%, the broad market dropped in excess of 15%. Ultimately, the sell-off
was short lived. In August, the market once again reversed course, however,
only the large-cap stocks have recovered fully.
This year your stocks have outpaced the market (as measured by the S&P
`500'') while maintaining a modest risk posture. Our fundamental and technical
analysis suggests that we are undoubtedly operating in a relatively high risk
environment. However, we continue to find quality companies that represent good
value. Granted the hunting ground has narrowed due to excessive
valuation/speculation in some sectors.
THE BOND MARKET
Interest rates rose and bond prices fell in early 1996 due to stronger than
expected economic growth, some ominous signs of building inflation, and rising
fears that the Federal Reserve would need to raise interest rates to slow the
economy. It appears as though the bond market has done the Fed's job by moving
interest rates higher, without the Fed taking action. The general higher pattern
of interest rates may itself slow the economy during the second half of the
year.
Given the increased risk in the market, we have positioned Bascom Hill
BALANCED Fund to participate in any additional gains while at the same time
provide ample protection should stocks or bonds suffer another set-back.
Obviously, the next four months will be exciting as we follow the mixed bag of
economic signals and get ready for an election that could have a major impact on
the markets.
If we may provide additional information, please call. Best regards.
Sincerely,
Katherine L. Frank
Vice President
<TABLE>
BASCOM HILL BALANCED FUND, INC.
STATEMENT OF NET ASSETS (unaudited)
<CAPTION>
Schedule of Investments
June 30, 1996
SHARES OR
PRINCIPAL MARKET
COMMON STOCKS - 51.7% AMOUNT VALUE
- --------------------- ------------ ------------
<S> <C> <C>
CONSUMER & BUSINESS SERVICES - 3.2%
Banta Corp. 13,000 $ 328,250
CONSUMER - DISCRETIONARY - 3.1%
Carnival Corp. 11,050 319,069
CONSUMER PRODUCTS - 6.1%
Kimberly Clark Corp. 4,000 309,000
Lancaster Colony Corp. 8,800 328,900
CONSUMER - RETAIL -2.7%
Wal-Mart Stores, Inc. 11,300 286,738
FINANCIAL - INSURANCE - 5.4%
MBIA, Inc. 3,000 233,625
MGIC Investment Corp. 5,800 325,525
FINANCIAL - REGIONAL BANKS - 3.2%
Norwest Corp. 9,450 329,569
FINANCIAL SERVICES - 6.1%
Federal Home Loan Mortgage Corp. 4,400 376,200
MBNA Corp. 9,075 258,637
MEDICAL & HEALTH CARE - 10.4%
Abbott Laboratories 7,750 337,125
Columbia/ HCA Healthcare Corp. 4,300 230,587
Forest Laboratories, Inc. 4,700 181,537
Schering Plough Corp. 5,350 335,713
TECHNOLOGY - 11.5%
Cabletron Systems, Inc. 3,600 247,050
Compaq Computer Corp. 7,750 380,719
Fiserv, Inc. 8,800 264,000
Intel Corp. 4,250 312,109
---------
TOTAL COMMON STOCKS $5,384,353
----------
FIXED INCOME INVESTMENTS - 32.7%
- --------------------------------
TREASURY SECURITIES - 15.7%
U.S. Treasury Notes 5.125% due 3/31/96 $275,000 $ 275,494
U.S. Treasury Notes 6.50% due 11/30/96 220,000 220,979
U.S. Treasury Notes 6.25% due 5/31/00 425,000 422,938
U.S. Treasury Notes 5.25% due 1/31/01 450,000 429,002
U.S. Treasury Notes 5.875% due 2/15/04 300,000 286,757
---------
TOTAL TREASURY SECURITIES $1,635,170
----------
PRINCIPAL MARKET
AMOUNT VALUE
------------ ------------
COMMERCIAL PAPER - 4.3%
Associates Corp. 5.3% due 7/8/96 $450,000 $ 450,000
TOTAL COMMERCIAL PAPER $ 450,000
---------
CMO/REMIC SECURITIES - 3.2%
Residential Funding 7.00% due 12/25/07 $140,401 $ 140,006
FNMA Remic 6.75% due 5/25/19 200,000 191,312
---------
TOTAL CMO/REMIC SECURITIES $ 331,318
---------
CORPORATE BONDS - 9.5%
National Coop Svcs. Corp. 8.375% due 7/2/96 $ 38,000 $ 38,016
General Telephone Co. of California 6.75% due
12/1/97 125,000 125,469
Ford Motor Credit Corp. 7.75% due 3/15/05 130,000 133,615
Morgan Stanley Group, Inc. 8.10% due 6/24/02 130,000 136,762
Price/Costco Wholesale Corp. 5.75% due 5/15/02 125,000 115,303
Norwest Corp. 6.625% due 3/15/03 90,000 87,877
Marshall & Ilsley Corp. 6.375% due 7/15/03 100,000 95,500
WMX Technologies, Inc. 6.375% due 12/1/03 130,000 124,843
Kohls Corp. 6.70% due 2/1/06 135,000 126,647
---------
TOTAL CORPORATE BONDS $ 984,032
---------
TOTAL FIXED INCOME INVESTMENTS $3,400,520
----------
SHORT TERM INVESTMENTS - 15.3%
- ------------------------------
VARIABLE RATE DEMAND NOTES
American Family Financial Services 5.08% due
7/1/96 $403,921 $ 403,921
Johnson Controls Inc. 5.02% due 7/1/96 288,004 288,004
Pitney Bowes Credit Corp. 5.08% due 7/1/96 450,000 450,000
Wisconsin Electric Power Corp. 5.12% due 7/1/96 450,000 450,000
---------
TOTAL SHORT TERM INVESTMENTS $1,591,925
----------
CASH & RECEIVABLES LESS LIABILITIES - .3% $ 34,226
- ----------------------------------------- ---------
TOTAL NET ASSETS - Equivalent to $23.56 per
share on 441,922.298 shares of $.01 par value
capital stock outstanding (authorized capital
stock - 5,600,000 shares). $10,411,024
===========
</TABLE>
<TABLE>
BASCOM HILL BALANCED FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS (unaudited)
<CAPTION>
Six Months Six Months
Ended Ended
June 30, 1996 June 30, 1995
-----------------------------
<S> <C> <C>
INVESTMENT ACTIVITIES
Net Investment Income $ 109,907 $ 186,997
Income Distributions to Shareholders
($.12 and $.20 per share, respectively) (55,391) (94,210)
---------- ---------
Increase in Undistributed Net Investment Income $ 54,516 $ 92,787
---------- ---------
Net Realized Gains from Security Transactions $ 732,816 $ 428,325
Net Realized Gain Distribution to Shareholders 0 0
---------- ---------
Increase in Undistributed Realized Gains $ 732,816 $ 428,325
---------- ---------
Increase (Decrease) in Unrealized Appreciation $ (269,849) $ 493,505
----------- ---------
Increase in Undistributed Net Assets Derived
From Investment Activities $ 517,483 $1,014,617
========== ==========
SHARES SOLD AND REDEEMED
Net Proceeds from Shares Issued
(4,237 and 5,019 shares, respectively) $ 98,013 $ 108,443
Net Asset Value of Shares Issued in
Distributions
(2,288 and 4,205 shares, respectively) 52,789 89,696
---------- ---------
150,802 198,139
Cost of Shares Redeemed
(48,526 and 32,630 shares, respectively) $(1,114,132) $(693,651)
------------ ---------
(Decrease) in Net Assets from Sale and
Redemption of Fund Shares $ (963,330) $(495,512)
========== =========
NET ASSETS
Balance at Beginning of Period (Including
undistributed net income of $2,755 and
($1,367)) $10,856,871 $9,912,294
Net Increase from Investment Activities 517,483 1,014,617
Net (Decrease) from Shares Sold and Redeemed (963,330) (495,512)
---------- ---------
Balance at End of Period (Including
undistributed net investment income of $57,273
and $91,420, respectively) $10,411,024 $10,431,399
=========== ===========
<FN>
See Accompanying Notes to Financial Statements.
</TABLE>
<TABLE>
BASCOM HILL BALANCED FUND, INC.
STATEMENT OF OPERATIONS (unaudited)
<CAPTION>
Six Months Six Months
Ended Ended
June 30, 1996 June 30, 1995
------------- -------------
<S> <C> <C>
INCOME:
Interest $ 156,659 $ 233,474
Dividends 29,351 26,563
--------- ---------
$ 186,010 $ 260,037
--------- ---------
EXPENSES:
Auditing Fee $ 2,940 $ 2,929
Custodian Fee 1,695 3,126
Directors' Fee 1,800 1,800
Fidelity Bond 539 693
Investment Advisor Fee 45,334 42,878
Legal Fee 624 819
Licensing Fee 1,824 1,769
Printing Fee 4,648 4,323
Transfer Agent Fee 13,999 12,215
Other Fees 2,700 2,488
--------- ---------
$ 76,103 $ 73,040
--------- ---------
Net Investment Income $ 109,907 $ 186,997
========= =========
Ratio of Expenses to Income 40.9% 28.1%
REALIZED GAINS ON INVESTMENTS:
Proceeds from Sale $3,488,426 $2,936,165
Cost 2,755,610 2,507,840
--------- ---------
Net Realized Gains $ 732,816 $ 428,325
--------- ---------
UNREALIZED APPRECIATION (DEPRECIATION) ON
INVESTMENTS:
Balance, Beginning of Period $1,123,739 $ 52,802
Balance, End of Period 853,890 546,307
--------- ---------
Increase (Decrease) in Unrealized Appreciation $(269,849) $ 493,505
---------- ---------
NET REALIZED GAINS AND INCREASE (DECREASE) IN
UNREALIZED APPRECIATION $ 462,967 $ 921,830
========= =========
<FN>
See Accompanying Notes to Financial Statements.
</TABLE>
BASCOM HILL BALANCED FUND, INC.
NOTES TO FINANCIAL STATEMENTS JUNE 30, 1996 AND 1995
(1) SIGNIFICANT ACCOUNTING PRINCIPLES
Bascom Hill BALANCED Fund, Inc. began operations on December 18, 1986.
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) COST OF INVESTMENTS PURCHASED AND PROCEEDS OF INVESTMENTS SOLD
For the period ended June 30, 1996 the purchases and sales of investment
securities (excluding short-term securities) were $3,400,375 and
$3,488,426, respectively (purchases and sales of U.S. government
obligations were $980,073 and $663,480, respectively).
(3) 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 period ended June 30,
1996 net realized gains would have been $732,816 computed on the basis of
average cost.
(4) AGGREGATE COST OF SECURITIES AND UNDISTRIBUTED INCOME OR CAPITAL GAINS
The aggregate cost of securities for Federal income tax purposes is
$7,480,983. The aggregate gross unrealized appreciation for all securities
in which there is an excess of value over tax cost is $924,441. The
aggregate gross unrealized depreciation for all securities in which there
is an excess of tax cost over value amounts to $188,551. The net
unrealized appreciation at June 30, 1996 for all securities is $853,890.
Through the period ended June 30, 1996, the accumulated undistributed net
investment income is $57,273, and the accumulated undistributed realized
capital gain is $736,666.
(5) INVESTMENT ADVISORY AGREEMENT
The investment advisory agreement with Madison Investment Advisors, Inc.,
provides for an annual management fee of .85 of 1% of the first $100
million of average net assets of the Fund. Such fees are remitted
quarterly. The annual fee is reduced to the extent that the Fund's total
annual operating expenses (including the advisory fee and distribution
fee, but excluding interest and taxes) exceeds 2% of average daily net
assets. The advisor's fee was not so reduced for the period ended June 30,
1996.
(6) OTHER TRANSACTIONS WITH AFFILIATES
Madison Investment Advisors, Inc. receives all contingent deferred sales
charges imposed on some redemptions of shares held for less than five
years.
Certain officers and directors of the Fund are also officers and directors
of Madison Investment Advisors, Inc. The Fund owed Madison Investment
Advisors, Inc. $22,409 as of June 30, 1996.
(7) SALES CHARGE
Purchases from July 1, 1993 through September 12, 1994, were subject to a
sales charge of 3.0% of the offering price (3.09% of the net amount
invested) in the purchase of Fund shares (unless waived by broker/dealer).
The sales charge was then paid to the broker or dealer at time of
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BASCOM HILL
BALANCED FUND SEMI-ANNUAL REPORT DATED 6-30-96 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH SEMI-ANNUAL REPORT.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 9523
<INVESTMENTS-AT-VALUE> 10377
<RECEIVABLES> 54
<ASSETS-OTHER> 2
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 10433
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 22
<TOTAL-LIABILITIES> 22
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 8760
<SHARES-COMMON-STOCK> 442
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 55
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 733
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1124
<NET-ASSETS> 10411
<DIVIDEND-INCOME> 29
<INTEREST-INCOME> 157
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<EXPENSES-NET> 76
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<REALIZED-GAINS-CURRENT> 733
<APPREC-INCREASE-CURRENT> (270)
<NET-CHANGE-FROM-OPS> 573
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<NUMBER-OF-SHARES-REDEEMED> 49
<SHARES-REINVESTED> 2
<NET-CHANGE-IN-ASSETS> (446)
<ACCUMULATED-NII-PRIOR> 3
<ACCUMULATED-GAINS-PRIOR> 4
<OVERDISTRIB-NII-PRIOR> 0
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<AVERAGE-NET-ASSETS> 10667
<PER-SHARE-NAV-BEGIN> 22.44
<PER-SHARE-NII> .25
<PER-SHARE-GAIN-APPREC> 1.66
<PER-SHARE-DIVIDEND> 1.91
<PER-SHARE-DISTRIBUTIONS> .12
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 23.56
<EXPENSE-RATIO> .71
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
