<PAGE> 1
BULK RATE
U. S. POSTAGE
PAID
GLENDALE, CA
PERMIT NO. 1090
annual report | December 31, 1996
Pacific Advisors Fund Inc. [LOGO]
BALANCED
fund
[LOGO]
Pacific Global Fund Distributors, Inc.
206 North Jackson Street, Suite 201
Glendale, California 91206
<PAGE> 2
DEAR FELLOW SHAREHOLDERS
The equity and bond markets posted mixed results for 1996. The bull market in
equities continued with the S&P 500 Index up 20.26% for the year. The stock
market was helped by steady economic growth, low inflation and a decline in
interest rates during the last six months of the year. In contrast, bond markets
were bearish as interest rates surpassed 7% before retreating to a trading range
of 6.5-6.75%. The bond market was surprised by the stronger than expected
economy and reflected concern that wage inflation could become a problem. As the
year progressed, many analysts began to describe the U.S. market as a
"Goldilocks" economy -- not too hot and not too cold.
The Pacific Advisors Balanced Fund ("Fund") had a total investment return
of 15.92% for the year. Fund results were based on shares purchased at its
offering price on January 1, 1996 and held through December 31, 1996. The return
reflects the deduction of the Fund's current maximum sales charge and expense
reimbursements. For this same period, the average total return for balanced
funds was 13.01%, according to Lipper Analytical Services, Inc.
As interest rates increased to over 7% during the year, we expected the
stock market to correct and to move from an emphasis on growth to a stronger
emphasis on value investing. In July, the equity markets began a correction when
companies such as Hewlett Packard and Motorola reported disappointing earnings
for the second quarter; then, when interest rates declined later in the summer,
the stock market regained its bull market momentum. Meanwhile, the bond market
settled into a trading range between 6.5-6.75%.
The Fund has continued to invest on a selective basis utilizing our value
oriented approach. The equity position in the Fund was 52% on December 31, 1996.
At the same time, 36% of the Fund's assets were invested in preferred stock and
corporate bonds.
During the year, we looked for undervalued stocks in manufacturing,
financial services, health services and consumer brand franchises. Farm Families
(insurance) Pinkertons (services), UCAR International (industrial services),
Nokia (telecommunications equipment) and Maxicare Health Plans (insurance) were
some of the new stocks acquired by the Fund during the year.
The high yields and lower risk of corporate bonds have continued to make
them more attractive than many stocks. Most of the fixed-income securities in
the Fund are utility and financial services corporate bonds. They include Toledo
Edison, Continental Telephone of California, Barnett Banks and Ford Motor Credit
Corporation. We anticipate that our bond position will continue to represent
1
<PAGE> 3
more than 30.0% of the Fund's assets.
We expect that the economy will continue to grow at a moderate rate, a
scenario which should result in low inflation and mild growth in corporate
profits. There is concern that job inflation could become a problem but we
believe this would be a short term situation due to the slack in international
labor markets. We also believe the stock market will continue to do better in
1997, but with more volatility. As with any forecast, this benign outlook could
change as a result of foreign or domestic developments that might occur in 1997.
Please contact your financial adviser or Pacific Advisors Fund, if you have
questions or would like more information.
Sincerely,
/s/ George A. Henning
George A. Henning
Chairman
/s/ Stephen K. Bache
Stephen K. Bache, CFA
Adviser
Hamilton & Bache
CHANGE IN VALUE OF $10,000 INVESTMENT*
This chart shows the growth of a $10,000 investment made in Pacific Advisors
Balanced Fund on February 8, 1993 compared to the growth of the Standard &
Poor's (S&P) 500 and Lehman T-Bond Indices.
PACIFIC ADVISORS
BALANCED FUND
<TABLE>
<CAPTION>
Lehman
Year Balanced S&P 500 T-Bond (Int.)
------ -------- ------- -------------
<C> <S> <C> <C> <C>
Average Annual Dec-92 10,000 10,000 10,000
Total Return Dec-93 10,000 10,706 10,826
for period ending Dec-94 9,759 10,541 10,604
December 31, 1996 Dec-95 10,608 14,137 12,140
Dec-96 12,297 17,348 12,622
One Year
(15.92%)
Inception
(2/8/93)
5.44%
</TABLE>
* Reflects the deduction of the 5.75% maximum sales charge and assumes all
distributions were reinvested at net asset value and after expense limitations.
The results show annualized returns for 1993, since February 8, 1993 was the
inception date of the Fund.
The Standard & Poor's 500 Index is an unmanaged measure of 500 widely held
common stocks listed on the New York Stock Exchange, American Stock Exchange and
Over-the-Counter market. The Index returns assume reinvestment of dividends but,
unlike the Fund's returns, does not reflect the effects of management fees or
expenses.
The Lehman T-Bond Index is an unmanaged index of intermediate government
bonds since 12/31/80.
Past performance does not guarantee future results. Share price and return
fluctuate, so that your shares when redeemed, may be worth more or less than
their original cost.
2
<PAGE> 4
SCHEDULE OF INVESTMENTS
December 31, 1996
<TABLE>
<CAPTION>
Number of Shares Value
COMMON STOCK (54.00%)
<S> <C> <C>
Aerospace & Defense (3.34%)
Boeing Company 1,000 $ 106,375
- ----------------------------------------------------------------------------------
Agricultural Processing (2.17%)
Archer-Daniels Midland 3,150 69,300
- ----------------------------------------------------------------------------------
Broadcasting & Media (3.41%)
Time Warner Inc. 1,500 56,250
Viacom Inc.* 1,500 52,312
- ----------------------------------------------------------------------------------
108,562
- ----------------------------------------------------------------------------------
Consumer Products (1.85%)
Dial Corporation 4,000 59,000
- ----------------------------------------------------------------------------------
Diversified Companies (1.56%)
ACX Technologies* 2,500 49,688
- ----------------------------------------------------------------------------------
Electronic Testing (2.02%)
Electroglas, Inc.* 4,000 64,500
- ----------------------------------------------------------------------------------
Engineering And Construction (1.57%)
Fluor Corp. 800 50,200
- ----------------------------------------------------------------------------------
Financial Services (2.59%)
Federal Home Loan Mortgage Corporation 750 82,594
- ----------------------------------------------------------------------------------
Health Services (4.79%)
APRIA Healthcare Group, Inc.* 2,000 37,500
Comprehensive Care Corp.* 4,000 48,500
Maxicare Health Plans* 3,000 66,750
- ----------------------------------------------------------------------------------
152,750
- ----------------------------------------------------------------------------------
Industrial Services (6.75%)
Reliance Steel 4,000 140,000
UCAR International, Inc.* 2,000 75,250
- ----------------------------------------------------------------------------------
215,250
- ----------------------------------------------------------------------------------
Insurance (1.22%)
Farm Family Holdings Inc.* 2,000 39,000
- ----------------------------------------------------------------------------------
</TABLE>
* Non-income producing
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
3
<PAGE> 5
<TABLE>
<CAPTION>
Number of Shares Value
COMMON STOCK CONTINUED
<S> <C> <C>
Leisure And Home Entertainment (1.09%)
GC Companies Inc.* 1,000 $ 34,625
- ----------------------------------------------------------------------------------------
Machine Tools (1.26%)
DeVlieg-Bullard* 15,000 40,312
- ----------------------------------------------------------------------------------------
Oil & Gas (5.97%)
Burlington Resources 1,500 75,563
Cooper Cameron* 1,500 114,750
- ----------------------------------------------------------------------------------------
190,313
- ----------------------------------------------------------------------------------------
Pharmaceuticals (3.64%)
Pfizer Inc. 1,400 116,025
- ----------------------------------------------------------------------------------------
Printing and Publishing (0.96%)
Courier Corp. 2,000 30,500
- ----------------------------------------------------------------------------------------
Real Estate Investment Trusts (REIT) (2.17%)
Franchise Finance Corporation of America 2,500 69,063
- ----------------------------------------------------------------------------------------
Retail-Specialty (1.51%)
Michaels Stores Inc.* 4,000 48,000
- ----------------------------------------------------------------------------------------
Services (1.18%)
Pinkertons Inc.* 1,500 37,688
- ----------------------------------------------------------------------------------------
Telecommunications Equipment (3.62%)
Nokia Corp. - ADR A 2,000 115,250
- ----------------------------------------------------------------------------------------
Youth Products And Services (1.33%)
Jostens, Inc.* 2,000 42,250
- ----------------------------------------------------------------------------------------
TOTAL COMMON STOCK 1,721,245
---------
PREFERRED STOCK (4.78%)
Real Estate
Catellus Development Corp. Class A 2,400 152,400
- ----------------------------------------------------------------------------------------
TOTAL PREFERRED STOCK 152,400
---------
</TABLE>
* Non-income producing
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
4
<PAGE> 6
<TABLE>
<CAPTION>
Principal Amounts Value
CORPORATE BONDS (28.32%)
<S> <C> <C>
Commercial Bank (3.75%)
Barnett Banks FL $ 100,000 $ 119,470
- ----------------------------------------------------------------------------------------------------------
Electric Utility (5.45%)
Public Services of OK 7.25% 01/01/99 50,000 50,183
Toledo Edison 7.875% 08/01/04 125,000 123,607
- ----------------------------------------------------------------------------------------------------------
173,790
- ----------------------------------------------------------------------------------------------------------
Financial Services (3.28%)
Ford Motor Credit Corp. 7.75% 03/15/05 100,000 104,562
- ----------------------------------------------------------------------------------------------------------
Health Services (2.51%)
Hospital Corporation of America 9.00 % 03/15/16 77,000 80,067
- ----------------------------------------------------------------------------------------------------------
Oil & Gas (8.14%)
Coastal Corp 9.75% 08/01/03 125,000 143,123
Occidental Petroleum 9.25% 08/01/19 100,000 116,341
- ----------------------------------------------------------------------------------------------------------
259,464
- ----------------------------------------------------------------------------------------------------------
Utility - Telecommunications (5.19%)
Continental Tele of CA 7.625% 12/31/97 25,000 25,024
NYNEX Corp. 123,949 140,335
- ----------------------------------------------------------------------------------------------------------
165,359
- ----------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS 902,712
-----------
TOTAL INVESTMENT SECURITIES (87.10%) $ 2,776,357
SHORT-TERM INVESTMENTS (10.88%)
United Missouri Bank Money Market Fund 346,702
OTHER ASSETS LESS LIABILITIES (2.02%) 64,380
-----------
TOTAL NET ASSETS (100%) $ 3,187,439
==========================================================================================================
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
5
<PAGE> 7
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Investment securities at market value (cost: $2,326,633) $ 2,776,357
Short-term investments, at cost, which is equivalent to market 346,702
Receivable from Investment Manager (Note 3) 26,811
Other assets 12,311
Accrued income receivable 25,941
Receivable for capital shares sold 398
Organizational expenses, net of amortization (Note 1) 12,873
------------
Total assets 3,201,393
LIABILITIES ------------
Payable to Investment Manager (Note 1) 12,873
Accrued expenses 1,081
------------
Total liabilities 13,954
NET ASSETS ------------
(Equivalent to $10.66 per share on 298,952 shares of
Capital Stock outstanding - 100 million shares authorized) $ 3,187,439
============
SUMMARY OF SHAREHOLDERS' EQUITY
Paid-in capital $ 2,737,378
Undistributed net capital gains 342
Distributions of net investment income in excess of income reported
for financial statement purposes (5)
Unrealized appreciation of assets 449,724
------------
Net assets at December 31, 1996 $ 3,187,439
============
Maximum offering price per share ($10.66/94.25%): $ 11.31
------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
6
<PAGE> 8
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1996
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends $ 22,460
Interest 68,295
------------
Total Income 90,755
EXPENSES ------------
Investment Advisory Fees 20,095
Fund Accounting Fees 19,761
Transfer Agent Expense 20,651
Legal Expense 7,582
Amortization Expense 11,158
Registration Fees 6,015
Printing 7,292
Audit Fees 3,799
Custody Fees 6,489
Director Fees/Meetings 1,971
Distribution Fees (Note 3) 2,107
Other Expense 3,006
------------
Total Expenses, before reimbursements 109,926
Less Fees Waived and Expenses Reimbursed (Note 3) (47,430)
------------
Net Expenses 62,496
NET INVESTMENT INCOME ------------ $ 28,259
==========
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments
Proceeds from sales of investment securities (excluding
short-term investments with maturities 60 days or less) $ 1,785,584
Cost of investment securities sold 1,775,268
Net realized gain on investments ------------ 10,316
Net unrealized appreciation of investments
Beginning of year $ 97,457
End of year 449,724
Net unrealized appreciation of investments ------------ 352,267
------------
Net realized and unrealized gain on investments 362,583
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 390,842
===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
</TABLE>
7
<PAGE> 9
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the year ended For the year ended
December 31, 1996 December 31, 1995
INCREASE IN NET ASSETS
FROM OPERATIONS
<S> <C> <C>
Net investment income $ 28,259 $ 42,087
Net realized gain on investments 10,316 9,197
Net unrealized appreciation of investments 352,267 92,703
----------------------------------
Increase in net assets resulting from operations 390,842 143,987
----------------------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income (28,087) (42,319)
Net capital gains (10,790) (1,632)
----------------------------------
Decrease in net assets resulting from distributions (38,877) (43,951)
----------------------------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold (110,863 and 83,720 shares) 1,095,984 762,440
Proceeds from shares purchased by reinvestment
of dividends (3,408 and 4,436 shares) 36,221 41,298
Cost of shares repurchased (44,123 and 12,572 shares) (426,217) (115,227)
----------------------------------
Increase in net assets derived from capital share transactions 705,988 688,511
----------------------------------
Increase in net assets 1,057,953 788,547
NET ASSETS
BEGINNING OF YEAR
(includes undistributed net investment income of $0 and $55) 2,129,486 1,340,939
----------------------------------
END OF YEAR
(includes no undistributed net investment income) $ 3,187,439 $ 2,129,486
==================================
</TABLE>
See Accompanying Notes to Financial Statements
8
<PAGE> 10
NOTES TO FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION
Pacific Advisors Fund Inc. (the "Company") is an open-end diversified
management investment company registered under the Investment Company Act of
1940, as amended. The Company was organized on May 18, 1992 as a Maryland
corporation and had no operations prior to February 8, 1993, other than those
relating to organizational matters including the sale of 2,778 shares of stock
of each of its four series ("Funds") at $9.00 per share to the Company's
investment manager, Pacific Global Investment Management Company (the
"Investment Manager"). The Company currently offers four Funds: Small Cap Fund,
Balanced Fund, Income Fund, and Government Securities Fund. Each Fund is a
separate investment portfolio of the Company with a distinct investment
objective, investment program, policies, and restrictions. The Balanced Fund
seeks to achieve long-term capital appreciation and income consistent with
reduced market risk.
The Investment Manager paid the organizational and other initial
expenses of the Fund incurred prior to the initial offering of the Fund's
shares. However, the Fund has agreed to reimburse the Investment Manager for
such expenses. The organizational costs will be deferred and amortized by each
Fund over a period during which it is expected that a benefit will be realized,
but no longer than five years from the date of the Funds' commencement of
operations. Prepaid expenses will be amortized over a period not to exceed
twelve months.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
A. SECURITY VALUATION. Securities listed on a national securities
exchange and certain over-the-counter ("OTC") issues traded on the NASDAQ
national market system are valued at the last quoted sale price at the close of
the NYSE. OTC issues not quoted on NASDAQ system and other equity securities for
which no sale price is available, are valued at the last bid price as obtained
from published sources (including Quotron), where available, and otherwise from
brokers who are market makers for such securities. Debt securities with a
maturity of less than 60 days are valued on an amortized cost basis.
B. SECURITY TRANSACTIONS AND INVESTMENT INCOME. Security transactions
are accounted for on the trade date. The cost of investments sold is determined
by use of the specific identification method for both financial reporting and
Federal income tax purposes. Dividends are recorded on the ex-dividend date.
Interest income is recorded on an accrual basis.
C. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. The Balanced Fund
declares and distributes dividends of its net investment income, if any,
annually. The Board of Directors will determine the amount and timing of such
payments.
D. FEDERAL INCOME TAXES. No provision is made for Federal taxes since
the Company intends to qualify as a regulated investment company and to make the
requisite distributions to its shareholders, which will be sufficient to relieve
it from Federal income and excise taxes.
E. ORGANIZATIONAL COSTS. Costs incurred by the Balanced Fund in
connection with its organization, registration and initial public offering of
shares have been deferred and are being amortized using the straight-line method
over a five-year period in accordance with the Expense Limitation Agreement for
each of the Funds.
F. USE OF ESTIMATES. The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
9
<PAGE> 11
NOTE 3. INVESTMENT MANAGEMENT, DISTRIBUTOR AND OTHER RELATED PARTY TRANSACTIONS
The Company and Balanced Fund have entered into an investment
management agreement ("Management Agreement") with the Investment Manager. The
Management Agreement provides for investment management fees, payable monthly,
and calculated at the maximum annual rate of 0.75% of average net assets for the
Balanced Fund. The Investment Manager has entered into a sub-advisory agreement
("Sub-Advisory Agreements") with Hamilton & Bach, Inc. ("Adviser"). The
Investment Manager is solely responsible for the payment of these fees to the
Adviser.
In accordance with its expense limitation agreements ("Expense
Limitation Agreements") with the Company, on behalf of each Fund, the Investment
Manager is required to reduce its investment management fee in any fiscal year
in which all Fund Operating Expenses exceed the lowest applicable limit actually
enforced by any state, and to reimburse the Balanced Fund for any additional
expenses that exceed such limit. In addition, from time to time, the Investment
Manager and Adviser may voluntarily waive its management and sub-advisory fees,
and/or absorb certain expenses for the Balanced Fund. In October 1996, the
National Securities Market Improvement Act eliminated state expense limitations
for mutual funds. Accordingly, the Investment Manager will determine in the
future the level and extent of expense limitations, fee waivers, and
reimbursements at its discretion.
Pursuant to the Expense Limitation Agreements, the voluntary waiver of
fees and the assumption of expenses by the Investment Manager, the following
amounts were waived or reimbursed for the year ended December 31, 1996 for the
Balanced Fund, $18,845 of management and sub-advisory fees were waived and
$28,585 was reimbursed by the Investment Manager.
Fund Operating Expenses may not fall below the expense limitation level
established for subsequent years until the Investment Manager has fully recouped
fees forgone and expenses paid or assumed under the Expense Limitation
Agreement, as the Fund will reimburse the Investment Manager in subsequent years
during which the Fund's total assets are greater than $20,000,000. As of
December 31, 1996, the cumulative amounts unrecouped by the Investment Manager
since commencement of operations is $214,431.
For the year ended December 31, 1996, Pacific Global Fund Distributors,
Inc. ("PGFD"), the principal underwriter for the Company, received $1,106 of
commissions on sales of capital stock of the Balanced Fund, after deducting
$5,653 allowed to authorized distributors as commissions. For the fiscal year
ended December 31, 1996 PGFD earned $584 in introducing brokerage fees related
to securities transactions for the Balanced Fund. PGFD is a wholly-owned
subsidiary of the Investment Manager.
The Company and Balanced Fund have entered into an agreement with
Pacific Global Investor Services, Inc., ("PGIS") to provide fund accounting
services at the monthly fee of 3 basis points for the first million in net
assets or a minimum of $1,250. In addition, an agreement to provide transfer
agent services has also been entered into at the monthly fee based on the number
of accounts or a minimum of $1,250. PGIS is a wholly-owned subsidiary of the
Investment Manager.
The Fund has adopted a plan of distribution, whereby the Balanced Fund
may pay a service fee in an amount up to 0.25% per annum of the Fund's average
daily net assets to qualified recipients. For the year ended December 31, 1996,
$2,107 was accrued or paid.
NOTE 4. PURCHASE AND SALES OF SECURITIES
For the year ended December 31, 1996, the Balanced Fund had purchases
of securities, other than short-term investments of $2,190,730. The cost of
securities held is the same for Federal income tax and financial reporting
purposes.
Aggregate gross unrealized appreciation and aggregate gross unrealized
depreciation on securities were $475,799 and $26,075, respectively. Net
unrealized appreciation for tax purposes is $449,724.
10
<PAGE> 12
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
For the Period
For the Year Ended December 31 February 8, 1993(3)
1996 1995 1994 to December 31, 1993
---------------------------------- --------------------
PER SHARE OPERATING PERFORMANCE
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 9.31 $ 8.75 $ 8.99 $ 9.00
Income from Investment Operations: ------------------------------------------------
Investment Income 0.30 0.35 0.07 0.07
Expenses (0.21) (0.17) (0.05) (0.06)
------------------------------------------------
Net Investment Income 0.09 0.18 0.02 0.01
Net realized and unrealized gain (loss) on securities 1.39 0.57 (0.24) (0.01)
------------------------------------------------
Total from Investment Operations 1.48 0.75 (0.22) 0.00
Less Distributions
Distributions from net investment income (0.09) (0.18) (0.02) (0.01)
Distributions from net capital gains (0.04) (0.01) 0.00 0.00
Net Asset Value, End of Year $ 10.66 $ 9.31 $ 8.75 $ 8.99
================================== =======
TOTAL INVESTMENT RETURN (4) 15.92% 8.70% (2.41%) 0.00%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (000) $ 3,187 $ 2,129 $ 1,341 $ 121
Ratio of Expenses to Average Net Assets (1) 2.48% 2.24% 1.83% 1.60%(2)
Ratio of Net Investment Income
to Average Net Assets (1) 1.12% 2.46% 0.93% 0.25%(2)
Portfolio Turnover Ratio 65.94% 41.23% 60.68% 61.71%(2)
Average Commission Per Share
Paid on Equity Transactions $0.0812 $0.1005 -- --
</TABLE>
(1). Without the voluntary fee waivers and reimbursement of expenses, the ratio
of expenses to average daily net assets for the Balanced Fund would have
been 4.36%, 5.31%, 17.85% and 108.91%, for the years 1996 through 1993
respectively, and the ratio of net investment income (loss) to average net
assets would have been (0.76%), (0.62%), (15.11%), and (106.91%), for the
years 1996 through 1993 respectively.
(2). Annualized.
(3). Commencement of Operations.
(4). The Fund's maximum sales charge is not included in the total return
computation.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
11
<PAGE> 13
REPORT OF INDEPENDENT AUDITORS
BOARD OF DIRECTORS AND SHAREHOLDERS
PACIFIC ADVISORS FUND INC.
BALANCED FUND
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of the Pacific Advisors Fund Inc. Balanced Fund as
of December 31, 1996, the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for the years ended December 31,
1996, 1995, and 1994 and for the period February 8, 1993 (commencement of
operations) to December 31, 1993. These financial statements and financial
highlights are the responsibility of the Company'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 as of
December 31, 1996 by correspondence with the custodian and brokers. 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 financial highlights referred
to above present fairly, in all material respects, the financial position of the
Pacific Advisors Fund Inc. Balanced Fund as of December 31, 1996, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and the financial highlights for the
years ended December 31, 1996, 1995, and 1994 and for the period February 8,
1993 (commencement of operations) to December 31, 1993, in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
Los Angeles, California
January 29, 1997
12
<PAGE> 14
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13
<PAGE> 15
PACIFIC ADVISORS FUND INC.
DIRECTORS
GEORGE A. HENNING, CHAIRMAN
VICTORIA L. BREEN
THOMAS M. BRINKER
KATHLEEN M. FISHKIN
L. MICHAEL HALLER III
SIEGFRED S. KAGAWA
TAKASHI MAKINODAN, Ph.D.
GERALD E. MILLER
LOUISE K. TAYLOR
OFFICERS
GEORGE A. HENNING, PRESIDENT
THOMAS H. HANSON, VICE PRESIDENT AND SECRETARY
VICTORIA L. BREEN, ASSISTANT SECRETARY
PAUL W. HENNING, TREASURER
INVESTMENT MANAGER
PACIFIC GLOBAL INVESTMENT MANAGEMENT COMPANY
206 NORTH JACKSON STREET, SUITE 201
GLENDALE, CALIFORNIA 91206
ADVISER
HAMILTON & BACHE, INC.
206 NORTH JACKSON STREET, SUITE 201
GLENDALE, CALIFORNIA 91206
TRANSFER AGENT AND ADMINISTRATOR
PACIFIC GLOBAL INVESTOR SERVICES, INC.
206 NORTH JACKSON STREET, SUITE 201
GLENDALE, CALIFORNIA 91206
DISTRIBUTOR
PACIFIC GLOBAL FUND DISTRIBUTORS, INC.
206 NORTH JACKSON STREET, SUITE 201
GLENDALE, CALIFORNIA 91206
(800) 989-6693
This report is submitted for the general information of the shareholders of the
Fund. It is not authorized for distribution to prospective investors unless
accompanied or preceded by a current effective prospectus of the Fund, which
contains information concerning the investment policies of the Fund as well as
other pertinent information.
