BASCOM HILL BALANCED FUND, INC.
6411 Mineral Point Road
Madison, WI 53705
(608) 274-0300
March 5, 1996
Securities & Exchange Commission
Attn: Filing Desk
450 Fifth Street NW
Washington, DC 20549
Re: Bascom Hill BALANCED Fund, Inc.
Reg. No. 33-8431
Dear Sirs:
Enclosed please find the Annual Report for the above named
registrant, covering the year ended December 31, 1995. This
report has been mailed to all shareholders of record.
This filing is intended to fulfill the requirements of
Section 24(b) and Section 30(b)(2) of the Investment Company
Act.
Sincerely,
Katherine L. Frank
Vice President
BASCOM HILL BALANCED FUND, INC.
Dear Shareholder:
We are pleased to report that the Bascom Hill BALANCED Fund
increased 22% in 1995, a year that finally produced above average
results in both the stock and bond markets. History shows that
once every 4 or 5 years the markets have an impressive run. Your
Fund participated nicely in 1995, and, because it showed positive
results in 1994, you did not have to waste time making up lost
ground.
The Stock Market... Throughout 1995, interest rates
declined as the economy slowed and corporate earnings posted
surprisingly strong gains. The stock market loved it. Although
inappropriate for a `balanced'' portfolio, it would have been an
excellent year to be 100% in stocks. However, the actual stocks
used were the right stuff, gaining about 47%, as compared to 36%
for the major indices. While it is tempting to continue to
reflect on 1995, we are quickly refocusing on getting off to a
positive start in 1996.
Falling short term interest rates combined with stable
corporate earnings continue to fuel the advance this year.
Although the stock market marches on to new highs daily, it is
interesting to note that only 11% of the equity mutual funds beat
the S&P `500'' last year. This illustrates that the broad stock
market has lagged the big-stock indices, and suggests a wide
variety of stocks continue to show promise for the years ahead.
However, a mild correction is a good possibility over the near
term, and careful stock selection is clearly warranted.
The Bond Market... After 1994, the worst calendar year on
record for the bond market, we entered 1995 believing the economy
would slow and rates would move lower. As the year played out,
the economy did slow, inflationary pressures subsided, the
federal reserve started lowering interest rates, and bond prices
moved higher. The explosive rally in the bond market produced
double digit returns in the fixed income portion of your Fund,
adding significantly to the overall return.
Looking ahead, as long as the economy remains in a sluggish,
slow growth mode, interest rates should remain low. The Federal
Reserve is in the process of gently lowering rates in response to
the slow economy and low inflation rates. Our indicators suggest
a quieter market this year, however, the budget debate and the
upcoming elections will undoubtedly provide some excitement in
the months ahead.
While it is great to celebrate years like 1995, it is
unlikely that we will see a repeat in 1996. However, given the
current environment, we anticipate a solid return come year-end
despite some volatility along the way. We wish you the best in
1996 and appreciate your continued confidence in the management
of your Fund.
Sincerely,
Katherine L. Frank
Vice President
INVESTMENT HIGHLIGHTS
Investment The Fund's investment objectives are to
Objective produce current income and achieve long-term
growth in the value of fund shares. The investment
portfolio will consist primarily of common stocks,
government and corporate bonds and money market
instruments. The mix of assets will be regularly
adjusted or `balanced'' by the investment advisor.
Investment The advisor's willingness to hold substantial
Strategy cash reserves during periods of market risk is the
single most important factor in comparing the
Fund's `market timing'' strategy with most other
mutual funds. You are hiring a portfolio manager
to determine when to `switch'' between common stocks,
bonds and cash reserves. The advisor's sensitivity to
down markets and skillful allocation of assets is
critical to your investment results.
Benefits to - Exposure to common stocks is limited to 70% of
Shareholders assets.
- At least 25% of assets will be maintained in fixed
income senior securities.
- Conservative, `value'' driven common stock selection
process.
- Diversified portfolio. No more then 5% may be
invested in the securities of any one corporation
or issuer,except in U.S. Government securities.
- IRA Plan and easy transfer forms available.
- Wisconsin based investment advisor. Madison
Investment Advisors, Inc. manages over $1.8 billion
for individual, foundation and tax-exempt
portfolios. Since 1973 the firm has worked to
achieve comendable performance for its
"balanced'' accounts.
Total Return Over Lifetime of Fund
The following table illustrates the total return for $10,000
invested in Bascom Hill BALANCED Fund, Inc. on December 18, 1986,
the date of the initial public offering, with income dividends
and capital gain distributions reinvested in the Fund.
Value of
Net Asset Capital Gains Income Initial
Per Distributions Dividends $10,000
Date Share Per Share Per Share Investment
December 31, 1986 $20.00 --- --- $10,000
December 31, 1987 $20.13 --- $ .60 $10,366
December 31, 1988 $20.76 --- $ .91 $11,169
December 31, 1989 $21.62 $ .46 $ 1.17 $12,526
December 31, 1990 $19.04 --- $ 1.00 $11,611
December 31, 1991 $23.00 $ .05 $ .73 $14.525
December 31, 1992 $23.65 $ .64 $ .60 $15,750
December 31, 1993 $22.36 $ 1.66 $ .62 $16,435
December 31, 1994 $20.16 $ 1.74 $ .72 $16,650
December 31, 1995 $22.44 $ 1.26 $ .74 $20,158
BASCOM HILL BALANCED FUND, INC.
STATEMENT OF NET ASSETS
Schedule of Investments
December 31, 1995
Shares or
Principal Market
Common Stocks - 44.0% Amount Value
--------------------- ---------- ----------
Consumer - Business Services - 3.2%
Banta Corp. 8,000 $352,000
Consumer - Retail - 2.3%
Wal-Mart Stores, Inc. 11,300 251,425
Consumer - Discretionary - 8.0%
Carnival Corp. 11,050 269,344
Lancaster Colony Corp. 8,300 309,175
Newell Co. 11,300 292,388
Consumer - Financial - 5.5%
Federal Home Loan Mortgage Corp. 4,400 367,400
MBNA Corp. 6,050 223,094
Financial Services - 4.7%
MBIA, Inc. 3,000 225,000
United Asset Management Corp. 7,400 283,975
Medical & Health Care - 6.2%
Columbia/ HCA Healthcare Corp. 4,300 218,225
Forest Laboratories, Inc. 4,700 212,675
Mylan Laboratories, Inc. 10,150 238,525
Regional Banks - 5.2%
Norwest Corp. 9,450 311,850
State Street Boston Corp. 5,700 256,500
Technology - 8.9%
Compaq Computer Corp. 5,650 271,200
Intel Corp. 4,250 241,187
Sun Microsystems, Inc. 9,800 447,125
--------
Total Common Stocks (cost
$3,760,889) $4,771,088
----------
Fixed Income Investments - 29.1%
--------------------------------
Treasury Securities - 12.5%
U.S. Treasury Notes 5.125% due
3/31/96 $275,000 $274,986
U.S. Treasury Notes 6.50% due
11/30/96 605,000 612,036
U.S. Treasury Notes 6.25% due
5/31/00 160,000 165,651
U.S. Treasury Notes 5.875% due
2/15/04 300,000 306,875
--------
Total Treasury Securities (cost
$1,332,747) $1,359,548
----------
STATEMENT OF NET ASSETS (continued)
Principal Market
Amount Value
---------- ----------
CMO/Remic Securities - 3.3%
Residential Funding 7.00% due
12/25/07 $150,000 $150,093
FNMA Remic 6.75% due 5/25/19 200,000 205,250
--------
Total CMO/Remic Securities (cost
$347,400) $355,343
--------
Corporate Bonds - 13.3%
National Coop Svcs. Corp. 8.375%
due 7/2/96 $70,000 $ 70,858
General Telephone Co. of
California 6.75% due 12/1/97 125,000 125,109
Lehman Brothers, Inc. 10% due
5/15/99 160,000 177,733
Ford Capital BV 9.375% due
5/15/01 185,000 213,348
Morgan Stanley Group, Inc. 8.10%
due 6/24/02 150,000 166,000
Price/Costco Wholesale Corp.
5.75% due 5/15/02 125,000 119,013
Georgia Pacific Corp. 9.95% due
6/15/02 135,000 161,325
Norwest Corp. 6.625% due 3/15/03 90,000 92,907
Marshall & Ilsley Corp. 6.375%
due 7/15/03 100,000 101,140
WMX Technologies, Inc. 6.375% due
12/1/03 215,000 219,294
--------
Total Corporate Bonds (cost
$1,367,933) $1,446,727
----------
Total Fixed Income Investments
(cost $3,048,080) $3,161,618
----------
Short Term Investments - 26.7%
------------------------------
Variable Rate Demand Notes
American Family Financial
Services 5.49% due 01/01/96 $46,219 $ 46,219
Eli Lilly & Co. 5.32% due
01/01/96 367,665 367,665
General Mills, Inc. 5.49% due
01/01/96 265,157 265,157
Pitney Bowes Credit Corp. 5.49%
due 01/01/96 450,000 450,000
Sara Lee Corp. 5.47% due 01/01/96 450,000 450,000
Southwestern Bell Telephone 5.72%
due 01/01/96 450,000 450,000
Warner Lambert 5.46% due 01/01/96 449,722 449,722
Wisconsin Electric Power Corp.
5.53% due 01/01/96 419,900 419,900
--------
Total Short Term Investments
(cost $2,898,663) $2,898,663
----------
Cash & Receivables Less
-----------------------
Liabilities - 0.2% $ 25,502
------------------ --------
TOTAL NET ASSETS - Equivalent to
$22.44 per share on 483,863.517
shares of $.01 par value capital
stock outstanding (authorized
capital stock - 5,600,000
shares), and paid-in capital
aggregated $9,721,687 $10,856,871
===========
BASCOM HILL BALANCED FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
Year Ended Year Ended
December 31, 1995 December 31, 1994
Investment Activities
Net Investment Income $348,794 $334,770
Income Distributions to
Shareholders
($.74 and $.72 per share,
respectively) (344,671) (335,745)
--------- --------
Increase (Decrease) in
Undistributed Net Investment
Income $ 4,123 $ (975)
-------- ---------
Net Realized Gains from Security
Transactions $593,051 $761,608
Net Realized Gain Distribution to
Shareholders
($1.26 and $1.70 per share,
respectively) (573,199) (763,864)
Excess Gain Distribution to
Shareholders
($.00 and $.04 per share,
respectively) 0 (16,002)
-------- ---------
Increase (Decrease) in
Undistributed Realized Gains $ 19,852 $(18,258)
-------- ---------
Increase (Decrease) in Unrealized
Appreciation $1,070,937 $(940,314)
---------- ---------
Increase (Decrease) in
Undistributed Net Assets
Derived From Investment
Activities $1,094,912 $(959,547)
========== ==========
Shares Sold and Redeemed
Net Proceeds from Shares Issued
(14,517 and 10,720 shares,
respectively) $330,849 $240,837
Net Asset Value of Shares Issued
in Distributions
(39,470 and 52,137 shares,
respectively) 879,563 1,072,091
-------- ---------
$1,210,412 $1,312,928
Cost of Shares Redeemed
(61,862 and 188,468 shares,
respectively) (1,360,747) (4,244,449)
----------- ----------
(Decrease) in Net Assets from
Sale and Redemption of Fund
Shares $(150,335) $(2,931,521)
========= ===========
Net Assets
Balance at Beginning of Year
(Including undistributed net
income of ($1,367) and ($390)) $9,912,294 $13,803,362
Net Increase (Decrease) from
Investment Activities 1,094,912 (959,547)
Net (Decrease) from Shares Sold
and Redeemed (150,335) (2,931,521)
-------- ----------
Balance at End of Year (Including
undistributed net investment
income of $2,755 and ($1,367),
respectively) $10,856,871 $9,912,294
=========== ==========
See Accompanying Notes to Financial Statements.
BASCOM HILL BALANCED FUND, INC.
STATEMENTS OF OPERATIONS
Year Ended Year Ended
December 31, 1995 December 31, 1994
Income:
Interest $434,961 $358,268
Dividends 55,031 97,451
Other 0 26,609
-------- --------
$489,992 $482,328
-------- --------
Expenses:
Auditing Fee $ 5,907 $ 5,945
Custodial Fee 5,833 5,563
Directors' Fee 3,000 2,250
Fidelity Bond 1,397 1,397
Investment Advisor Fee 88,169 93,783
Legal Fee 1,219 1,101
Licensing Fee 3,635 3,097
Printing Cost 5,172 5,457
Transfer Agent Fee 24,425 24,470
Other Fees 2,441 4,495
-------- --------
$141,198 $147,558
-------- --------
Net Investment Income $348,794 $334,770
======== ========
Ratio of Expenses to Income 28.8% 30.6%
Realized Gains on Investments:
Proceeds from Sale $5,077,080 $14,018,442
Cost 4,484,029 13,256,834
--------- ----------
Net Realized Gains $593,051 $761,608
-------- --------
Unrealized Appreciation on
Investments:
Balance, Beginning of Year $ 52,802 $993,116
Balance, End of Year 1,123,739 52,802
--------- --------
Increase (Decrease) in Unrealized
Appreciation $1,070,937 $(940,314)
---------- ---------
Net Realized Gains and Increase
(Decrease) in Unrealized
Appreciation $1,663,988 $(178,706)
========== =========
See Accompanying Notes to Financial Statements.
FINANCIAL HIGHLIGHTS-Selected per Share Data and Ratios
Year Ended December 31,
- --------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986*
NET ASSET VALUE:
Beg. of year $20.16 22.36 23.65 23.00 19.04 21.62 20.76 20.13 20.00 20.00
INCOME FROM INVESTMENT OPERATIONS:
Net invest. income .75 .72 .62 .59 .73 1.00 1.15 .91 .63 .01
Net realized and unrealized gains or (losses) on securities
3.53 (.46) .37 1.30 1.43 2.58) 1.34 .63 .10 .00
----- ----- --- ---- ---- ----- ---- ----- ---- -----
Total from investment operations
$ 4.28 .26 .99 1.89 2.16 (1.58) 2.49 1.54 .73 .01
LESS DISTRIBUTIONS:
Dividends from net income
$ (.74) (.72) (.62) (.60) (.73)(1.00)(1.17) (.91) (.60) .00
Capital gains distributions
(1.26) (1.74) (1.66)(.64) (.05) .00 (.46) .00 .00 .00
------ ------ ------ ---- ----- --- ----- --- --- ---
NET ASSET VALUE:
End of year $22.44 20.16 22.36 23.65 23.00 19.04 21.62 20.76 20.13 20.00
TOTAL RETURN: 21.51% 1.31 4.35 8.43 25.10 (7.30)12.14 7.75 3.66 n/a
RATIOS:
Operating expenses to average net assets
1.36% 1.34 1.24 1.90 1.94 1.96 2.00 2.00 2.00 .06
Net income to average net assets
3.36% 3.03 2.53 2.53 3.33 5.00 5.60 4.90 4.80 .04
Portfolio turnover rate
65.83% 76.40 76.01 71.76 64.76 71.60 47.50 .45 .00 .00
Average Commission Rate Paid
.0818
*The Fund began operations on December 18, 1986.
NOTES TO FINANCIAL STATEMENTS December 31, 1995 and 1994
(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 year ended December 31, 1995 the purchases and
sales of investment securities (excluding short-term
securities) were $5,996,862 and $5,077,079, respectively
(purchases and sales of U.S. government obligations were
$1,890,970 and $2,295,235, 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 year ended December 31, 1995 net realized gains
would have been $596,878 if 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 $6,808,969. The aggregate gross unrealized
appreciation for all securities in which there is an excess
of value over tax cost is $1,156,479. The aggregate gross
unrealized depreciation for all securities in which there
is an excess of tax cost over value amounts to $32,737.
The net unrealized appreciation at December 31, 1995 for
all securities is $1,123,742. Through the year ended
December 31, 1995, the accumulated undistributed net
investment income is $2,755, and the accumulated
undistributed realized capital gain is $3,851.
(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 year ended December 31, 1995.
(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. $22,907 as
of December 31, 1995.
(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
purchase.
GROWTH OF $10,000 CHART
Bascom Hill BALANCED Fund Average Annual Total Return:
1 Year 21.51%
5 Years 11.67%
9 Years 8.10%
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
of Bascom Hill Balanced Fund, Inc.
We have audited the accompanying statement of net assets of
Bascom Hill Balanced Fund, Inc., including the schedule of
investments, as of December 31, 1995, 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 nine years and 14 days 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, 1995, 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 Balanced Fund,
Inc. as of December 31, 1995, 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 nine years and 14 days in the period then ended, in
conformity with generally accepted accounting principles.
WILLIAMS, YOUNG & ASSOCIATES, LLC
Madison, Wisconsin
January 25, 1996
