Dear Shareholder:
Following an excellent 1995, Bascom Hill BALANCED Fund, Inc.
gained an additional 17% in 1996. This was the result of
another great year in the stock market and a rather volatile
bond market. Performance compares quite favorably with the
average balanced fund's gain (as measured by Lipper) of only
13.0%. The last two years produced the best back to back
performance for the stock market in 20 years, and we are
pleased that the equity portion of your Fund participated
nicely. Solid performance this past year has earned the
Bascom Hill BALANCED Fund a "4 star" rating by Morningstar.
1996 in Review... The stock market marched to new highs
virtually uninterrupted in 1996. 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, 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. Thus, as we
expected early last year, stock selection proved to be key
to the overall performance of your Fund.
The bond market did not fare as well. Interest rates rose
significantly early in the year as the economy exceeded
expectations, and then fell once it appeared faster growth
would not be sustained and inflation remained subdued. Our
defensive posture helped to limit the downside during the
first six months. Then, in mid-year believing that interest
rates would not go higher, we purchased additional bonds. As
a result, the bond portfolio was well positioned for the
subsequent late-year economic slowdown and bond market
rally.
Looking Ahead... The question remains, "How far can the
stock market go?" 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. 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.
The backdrop for the bond market today is generally
favorable relative to 1996. Not only are interest rates 1%
higher than a year ago, but heavy debt burdens should
restrain consumer spending in 1997 keeping a lid on the
economy. In addition, inflation remains under control and
the Federal Reserve appears content to leave short-term
interest rates unchanged.
In summary, we are optimistic about 1997, while keeping
mindful of the higher risk environment brought on by the
recent rally in stock prices. We look forward to the
challenges that lie ahead, and we appreciate your confidence
in the management of your Fund.
Sincerely,
(signature)
Katherine L. Frank
Vice President
<PAGE>
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 $2.8 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.
<TABLE>
<S> <C> <C> <C> <C> <C>
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
December 31, 1996 $22.03 $ 3.61 $ .50 $23,586
<PAGE>
BASCOM HILL BALANCED FUND, INC.
STATEMENT OF NET ASSETS
Schedule of Investments
December 31, 1996
Market
Common Stocks - 51.5% Shares Value
Basic Industry - 2.7%
Morton International, Inc. 7,400 $301,550
Consumer - Discretionary - 2.5%
Eastman Kodak 3,450 276,862
Consumer Products - 6.1%
Kimberly Clark Corp. 2,800 266,700
Lancaster Colony Corp. 8,800 404,800
Consumer - Retail - 5.2%
Pep Boys - Manny Moe & Jack 8,750 269,063
Wal-Mart Stores, Inc. 13,200 300,300
Consumer Services - 2.4%
McDonalds 5,900 267,712
Financial - Insurance - 4.6%
American Express 4,800 271,200
MGIC Investment Corp. 3,150 239,400
Financial - Regional Banks - 2.4%
Norwest Corp. 6,150 267,525
Financial Services - 3.0%
Federal Home Loan Mortgage Corp. 2,950 325,606
Food & Beverage - 4.4%
Conagra, Inc. 5,575 277,356
Dole Food Co. 6,050 204,944
Medical & Health Care - 9.4%
Abbott Laboratories 6,700 340,025
Columbia/ HCA Healthcare Corp. 8,700 354,525
Schering Plough Corp. 5,350 346,413
Technology - 6.1%
Cabletron Systems, Inc. 8,500 282,625
Compaq Computer Corp. 2,900 215,687
Intel Corp. 1,300 170,219
Telecommunications - 2.7%
Bell Atlantic Corp. 4,550 294,613
Total Common Stocks (Cost $4,711,765) $5,677,125
<PAGE>
Statement of Net Assets (continued)
Principal Market
Amount Value
Fixed Income Investments - 28.5%
Treasury Securities - 15.2%
U.S. Treasury Notes 5.625% due 1/31/98 $375,000 $375,311
U.S. Treasury Notes 6.25% due 5/31/00 425,000 427,689
U.S. Treasury Notes 5.625% due 2/28/01 450,000 441,396
U.S. Treasury Notes 5.875% due 2/15/04 250,000 243,675
U.S. Treasury Notes 6.50% due 8/15/05 190,000 191,476
Total Treasury Securities (Cost $1,670,709) $1,679,547
CMO/Remic Securities - 1.9%
Residential Funding 7.00% due 12/25/07 $17,822 $17,782
FNMA Remic 6.75% due 5/25/19 200,000 196,250
Total CMO/Remic Securities (Cost $215,751) $214,032
Corporate Bonds - 11.4%
General Telephone Co. of California 6.75%
due 12/1/97 $125,000 $125,469
Morgan Stanley Group, Inc. 8.10% due
6/24/02 160,000 169,874
Price/Costco Wholesale Corp. 5.75%
due 5/15/02 125,000 119,087
Norwest Corp. 6.625% due 3/15/03 90,000 89,498
Marshall & Ilsley Corp. 6.375%
due 7/15/03 100,000 97,610
Ford Motor Credit Corp. 7.75%
due 3/15/05 130,000 136,623
Columbia/HCA 6.91% due 6/15/05 170,000 170,067
Kohls Corp. 6.70% due 2/1/06 175,000 169,417
Disney 6.75% due 3/30/06 175,000 173,791
Total Corporate Bonds (Cost $1,246,935) $1,251,436
Total Fixed Income Investments
(Cost $3,133,395) $3,145,015
Short Term Investments - 19.7%
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. 5.23% due 1/1/97 450,000 450,000
Pitney Bowes Credit Corp. 5.20%
due 1/1/97 450,000 450,000
Southwestern Bell Telephone 5.19%
due 1/1/97 364,670 364,670
Total Short Term Investments (Cost $2,164,670) $2,164,670
Cash & Receivables Less Liabilities - .3% $30,949
TOTAL NET ASSETS - Equivalent to $22.03 per share on
500,139.637 shares of $.01 par value capital stock
outstanding (authorized capital stock - 5,600,000 shares),
and paid in capital aggregated $10,025,975. $11,017,759
See Accompanying Notes to Financial Statements
<PAGE>
BASCOM HILL BALANCED FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
Year Ended Year Ended
December 31, 1996 December 31, 1995
Investment Activities
Net Investment Income $221,615 $348,794
Income Distributions to
Shareholders ($.50 and
$.74 per share,
respectively (221,362) (344,671)
Increase in
Undistributed Net
Investment Income $ 253 4,123
Net Realized Gains from
Security Transactions 1,558,337 593,051
Net Realized Gain
Distribution to
Shareholders($3.61 and
$1.26 per share,
respectively) (1,554,066) (573,199)
Increase in Undistributed
Realized Gains 4,271 19,852
Increase (Decrease) in
Unrealized Appreciation (146,758) 1,070,937
Increase (Decrease) in
Undistributed Net Assets
Derived From Investment
Activities (142,234) 1,094,912
Shares Sold and Redeemed
Net Proceeds from Shares Issued
(7,944 and 14,517 shares,
respectively) 190,147 330,849
Net Asset Value of Shares
Issued in Distributions
(75,908 and 39,470 shares,
respectively) 1,699,086 879,563
$1,889,233 $1,210,412
Cost of Shares Redeemed
(67,635 and 61,862 shares,
respectively) (1,586,111) (1,360,747)
Increase (Decrease) in
Net Assets from Sale and
Redemption of Fund
Shares $303,122 $(150,335)
Net Assets
Balance at Beginning of
Year (Including undistributed
net investment income of
$2,755 and ($1,367),
respectively) $10,856,871 $9,912,294
Net Increase (Decrease)
from Investment
Activities (142,234) 1,094,912
Net Increase (Decrease)
from Shares Sold and
Redeemed 303,122 (150,335)
Balance at End of Year
(Including undistributed
net investment income of
$3,008 and $2,755,
respectively) $11,017,759 $10,856,871
See Accompanying Notes to Financial Statements.
<PAGE>
BASCOM HILL BALANCED FUND, INC.
STATEMENTS OF OPERATIONS
Year Ended Year Ended
December 31, 1996 December 31, 1995
Income:
Interest $307,236 $434,961
Dividends 67,454 55,031
$374,690 $489,992
Expenses:
Auditing Fee $ 5,896 $ 5,907
Custodial Fee 3,359 5,833
Directors' Fee 3,000 3,000
Fidelity Bond 1,082 1,397
Investment Advisor Fee 91,311 88,169
Legal Fee 848 1,219
Licensing Fee 3,018 3,635
Printing Cost 5,808 5,172
Transfer Agent Fee 28,213 24,425
Other Fees 10,540 2,441
$153,075 $141,198
Net Investment Income $221,615 $348,794
Ratio of Expenses to Income 40.9% 28.8%
Realized Gains on Investments:
Proceeds from Sale $7,809,936 $5,077,080
Cost 6,251,599 4,484,029
Net Realized Gains $ 1,558,337 $593,051
Unrealized Appreciation on Investments:
Balance, Beginning of
Year $1,123,739 $52,802
Balance, End of Year 976,981 1,123,739
Increase (Decrease) in
Unrealized Appreciation (146,758) 1,070,937
Net Realized Gains and Increase
(Decrease) in Unrealized
Appreciation $1,411,579 $1,663,988
See Accompanying Notes to Financial Statements.
Financial Highlights - Selected Per Share Data and Ratios
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
- - - - --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
NET ASSET VALUE:
Beginning of year $22.44 20.16 22.36 23.65 23.00 19.04 21.62 20.76 20.13 20.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .50 .75 .72 .62 .59 .73 1.00 1.15 .91 .63
Net realized and
unrealized gains
or (losses) on
securities 3.20 3.53 (.46) .37 1.30 1.43 2.58) 1.34 .63 .10
----- ----- --- ---- ---- ----- ---- ----- ---- -----
Total from
investment
operations $ 3.70 4.28 .26 .99 1.89 2.16 (1.58) 2.49 1.54 .73
LESS DISTRIBUTIONS:
Dividends from net
income $ (.50) (.74) (.72) (.62) (.60) (.73)(1.00)(1.17) (.91) (.60)
Capital gains
distributions (3.61) (1.26)(1.74)(1.66) (.64) (.05) .00 (.46) .00 .00
------ ------ ------ ---- ----- --- ----- --- --- ---
NET ASSET VALUE:
End of year $22.03 22.44 20.16 22.36 23.65 23.00 19.04 21.62 20.76 20.13
TOTAL RETURN: 17.00 21.51% 1.31 4.35 8.43 25.10 (7.30)12.14 7.75 3.66
RATIOS:
Operating expenses to average net assets
1.42% 1.36% 1.34 1.24 1.90 1.94 1.96 2.00 2.00 2.00
Net income to average net assets
2.06% 3.36% 3.03 2.53 2.53 3.33 5.00 5.60 4.90 4.80
Portfolio turnover rate
86.11% 65.83% 76.40 76.01 71.76 64.76 71.60 47.50 .45 .00
Average Commission Rate Paid
.08 .0818
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
Notes to Financial Statements December 31, 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 year ended December 31, 1996 the purchases and sales
of investment securities (excluding short-term securities)
were $7,287,790 and $7,809,936, respectively (purchases and
sales of U.S. government obligations were $2,041,104 and
$1,703,531, 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, 1996 net realized gains would
have been $1,551,436 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 $7,845,160. The aggregate gross unrealized
appreciation for all securities in which there is an excess
of value over tax cost is $1,120,698. The aggregate gross
unrealized depreciation for all securities in which there is
an excess of tax cost over value amounts to $143,717. The
net unrealized appreciation at December 31, 1996 for all
securities is $976,981. Through the year ended December 31,
1996, the accumulated undistributed net investment income is
$3,008, and the accumulated undistributed realized capital
gain is $8,122.
(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, 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. $23,804 as of
December 31, 1996.
GROWTH OF $10,000 CHART
Since Inception
Chart compares growth in the Bascom Hill BALANCED Fund,
Inc., $23,586, with the Value Line, $16,339, the CPI,
$14,332 and a Blend represented by 50% NYSE, 40% Lehman G/C
& 10% T-Bills, $25,317.
Bascom Hill BALANCED Fund Average Annual Total Return:
1 Year 17.00%
5 Years 10.19%
10 Years 8.96%
Past performance is not a guarantee of future results.
<PAGE>
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, 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 Balanced Fund,
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 BALANCED Fund, Inc.
ANNUAL REPORT
December 31, 1996
6411 Mineral Point Road
Madison, WI 53705
(608) 273-2020
(800) 767-0300
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
Auditor
Williams, Young & Associates, LLC
P.O. Box 8700
Madison, Wisconsin 53708
