HOLLAND BALANCED FUND
Annual Report
September 30, 1996
<PAGE>
CONTENTS
Letter from the President............................................... 1
Cumulative Performance.................................................. 2
Management Discussion of Fund Performance............................... 3
Statement of Net Assets................................................. 4
Statement of Operations................................................. 6
Statement of Changes in Net Assets...................................... 7
Financial Highlights ................................................... 8
Notes to Financial Statements........................................... 9
<PAGE>
- -------------------------------------------------------------------------------
Holland Balanced Fund - LETTER FROM THE PRESIDENT
- -------------------------------------------------------------------------------
November 5, 1996
To My Fellow Shareholders:
As we know from the investment performance record in the box on the lower
right, this has been an unusually good first year for our Fund. And while we
are confident our long-term investment strategy (of holding 60% in "blue chip"
equities, 30% in U.S. Treasury fixed income securities, and 10% in money
market instruments) will provide more than acceptable future returns, we
caution that the financial markets have a perverse streak on a shorter-term
basis.
With Bullish Regards,
/s/Michael F. Holland
Michael F. Holland
President & Founder
<PAGE>
Holland Series Fund, Inc.
- -------------------------------------------------------------------------------
Holland Balanced Fund - CUMULATIVE PERFORMANCE
- -------------------------------------------------------------------------------
September 30, 1996
Set forth below is the cumulative total return figure for the period indicated
and a graph showing the hypothetical $10,000 investment made in the Holland
Balanced Fund on October 2, 1995. The cumulative total return figures and the
information in the graph represent past performance; they reflect changes in
the price of the Fund's shares and assume that any income dividends and/or
capital gain distributions made by the Fund during the period were reinvested
in additional shares of the Fund.
GRAPH:
Comparison of Change in Value of $10,000 Investment in the Holland Balanced
Fund and the Constructed Index and the Lipper Balanced Fund Index
Investment Performance
(For Period Ended September 30, 1996)
Total Return
Cumulative Since Inception (10/2/95)
Holland Balanced Fund 15.66%
Constructed Benchmark* 12.53%
Lipper Balanced Fund Index 10.40%
* Constructed benchmark consists of 60% S&P 500 Composite Index; 30% Merrill
Lynch 7-10 Year U.S. Treasuty Index; and 10% IBC/Donoghue Money Market Fund
Average.
(a) Reflects waiver of fees and reimbursement of expenses by the investment
advisor. Adsent such waiver and reimbursement, the Fund's total return would
have been lower.
<PAGE>
- -------------------------------------------------------------------------------
Holland Balanced Fund - Management Discussion of Fund Performance
- -------------------------------------------------------------------------------
During fiscal year 1996, the Fund outperformed both the Constructed Index and
the Lipper Balanced Fund Index by 3.13% and 5.26% respectively. The Fund's
strong performance is attributable to many factors including its long-term
investment strategy of holding 60% of its assets in "blue chip" equities, 30%
in U.S. Treasury fixed income securities and 10% in money market instruments.
The Fund's "blue chip" equity holdings are generally common stocks of
companies with large market capitalizations that are leaders in their
respective industries. During the past year the Fund's "blue chip" equities
produced higher returns than the broader group of equity holdings of
securities represented by the S&P 500 Composite Index or the equity holdings
of certain funds included in the Lipper Balanced Fund Index. The Fund's
higher performance in the past year relative to the Constructed Index and the
Lipper Balanced Fund Index was largely due to the performance of the Fund's
selected "blue chip" equities.
We made no significant changes in the Fund's holdings during the year,
reflecting our long-term approach to the Fund's investments and our continued
belief that the Fund's current holdings will deliver acceptable future
returns. The Fund's investments are selected based on potential returns for
the long-term rather than on a short-term basis.
<PAGE>
- --------------------------------------------------------------------------------
Holland Balanced Fund - Statement of Net Assets
- --------------------------------------------------------------------------------
September 30, 1996 Shares Value+
Common Stocks-50.9%
Autos-5.7%
Chrysler Corp. 7,800 223,275
General Motors Corp. 4,400 211,200
Total 434,475
Banks-3.5%
J.P. Morgan & Company, Inc. 3,000 266,625
Chemicals-3.5%
DuPont (E.I.) de Nemours & Company 3,000 264,750
Electronics-7.7%
Hewlett-Packard Co. 4,200 204,750
Intel Corp. 2,400 229,050
Motorola, Inc. 3,000 154,875
Total 588,675
Oil/Gas-9.8%
Chevron Corp. 4,100 256,763
Exxon Corp. 2,800 233,100
Texaco, Inc. 2,800 257,600
Total 747,463
Paper-3.4%
International Paper Co. 6,200 263,500
Pharmaceuticals-3.5%
Merck & Company, Inc. 3,800 267,425
Producer Goods-10.5%
Eastman Kodak Co. 3,400 266,900
General Electric Co. 3,000 273,000
Minnesota Mining & Manufacturing Co. 3,700 258,538
Total 798,437
Retail-3.2%
Sears, Roebuck and Company 5,400 241,650
Total Common Stocks (Cost-$3,329,168) 3,873,000
See Notes to Financial Statements
<PAGE>
- --------------------------------------------------------------------------------
Holland Balanced Fund - Statement of Net Assets (continued)
- --------------------------------------------------------------------------------
September 30, 1996 Face
Amount Value+
U.S. Government Securities-22.8%
U.S. Treasury Bill, 5.020% due 12/12/96 $ 300,000 $ 297,036
U.S. Treasury Note, 5.750% due 9/30/97 400,000 399,750
U.S. Treasury Note, 5.625% due 10/31/97 300,000 299,250
U.S. Treasury Note, 5.000% due 1/31/98 250,000 246,875
U.S. Treasury Note, 5.500% due 11/15/98 500,000 493,438
Total U.S. Government Securities 1,736,348
(Cost-$1,742,702)
Repurchase Agreements-22.4%
Investors Bank & Trust Co. Repurchase
Agreement, 5.300% due 10/1/96; Issued
9/30/96 (Collateralized by $159,090
FNMA ARM, 7.554% due 11/1/22 with
a market value of $163,928; and
$1,561,580 FNMA ARM, 7.469% due 4/1/24
with a market value of $1,622,944)
(Cost-$1,701,157) 1,701,157 1,701,157
Total Investments-96.1% (Cost-$6,773,027) 7,310,505
Other Assets and Liabilities-3.9%
Receivable from investment adviser 131,302
Other assets 194,915
Accrued expenses and other liabilities (30,874)
Other assets and liabilities, net 295,343
Net Assets-100.0%
Applicable to 667,530 outstanding $0.01 par value
shares (authorized 1,000,000,000) $7,605,848
Net asset value per share $11.39
Components of Net Assets as of September 30, 1996
Capital stock at par value ($0.01) 6,675
Capital stock in excess of par value 7,018,643
Undistributed net investment income 42,608
Net undistributed realized gains on investments 444
Net unrealized appreciation on investments 537,478
Net Assets $7,605,848
See Notes ot the Financial Statements
+ See Note 2 to Financial Statements
ARM Adjustable Rate Mortgage
<PAGE>
- --------------------------------------------------------------------------------
Holland Balanced Fund - Statement of Operations
- --------------------------------------------------------------------------------
Period from October 2, 1995* to September 30, 1996
Investment Income
Interest $115,212
Dividends 81,650
Total investment income 196,862
Expenses
Investment advisory fees 38,075
Administration fees 25,000
Custodian fees 12,477
Shareholder account maintenance 32,995
Audit fees 15,850
Legal fees 32,989
Marketing and distribution 28,625
Insurance expense 11,340
Amortization of organizational costs 33,453
Directors fees and expenses 12,000
Registration filing fees 2,302
Miscellaneous fees and expenses 573
Total operating expenses 245,678
Waiver of investment advisory fees and reimbursement of
other expenses (169,377)
Net expenses 76,301
Investment income, net 120,561
Net Realized and Unrealized Gain on Investments
Net realized gain on investments 444
Net unrealized appreciation on investments 537,478
Net realized and unrealized gain on investments 537,922
Net increase in net assets resulting from operations $658,483
* Commencement of Investment Operations
See Notes to the Financial Statements
<PAGE>
- --------------------------------------------------------------------------------
Holland Balanced Fund - Statement of Changes in Net Assets
- -------------------------------------------------------------------------------
Period from October 2, 1995* to September 30, 1996
Increase in Net Assets from Operations
Net Investment income $ 120,561
Net realized gain from investments 444
Net unrealized appreciation on investments 537,478
Net increase in net assets resulting from operations 658,483
Distributions to Shareholders From
Investment income, net 77,953
Net realized gain on investments -
Total distributions 77,953
Capital Share Transactions, Net 6,925,318
Total increase in net assets 7,505,848
Net Assets
Beginning of period 100,000
End of period 7,605,848
Undistributed net investment income 42,608
* Commencement of Investment Operations
See Notes to the Financial Statements
<PAGE>
- -------------------------------------------------------------------------------
Holland Balanced Fund - Financial Highlights
- -------------------------------------------------------------------------------
For a share outstanding
Period from October 2, 1995* to September 30, 1996 throughout the period
Per Share Data
Net asset value, beginning of period $ 10.00
Increases From Investment Operations
Investment income, net 0.23
Net realized and unrealized gain on investments 1.33
Total from investment operations 1.56
Distributions From
Net Investment income (0.17)
Net realized gain on investments -
Total Distributions (0.17)
Net asset value, end of period $ 11.39
Total Return (c) 15.65% (a)
Ratios/Supplemental Data
Net assets, end of period $ 7,605,848
Ratio of expenses to average net assets 1.50% (b)
Ratio of expenses to average net assets before expense
waivers and reimbursement of other expenses 4.81% (b)
Ratio of net investment income to average net assets 2.36% (b)
Portfolio turnover 5.04%
Average commission rate per share $ 0.06 (d)
* Commencement of Investment Operations
See Notes to the Financial Statements
(a) Not annualized
(b) Annualized (Fund expenses are capped at 1.50%)
(c) Total return would have been lower had certain expenses not been waived
or reimbursed.
(d) Computed by dividing the total amount of brokerage commissions paid on
equity securities by the total number of shares of equity securities
purchased or sold.
<PAGE>
- --------------------------------------------------------------------------------
HOLLAND BALANCED FUND - NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1996
1. Organization
The Holland Series Fund, Inc. (the "Company") was organized as a Maryland
corporation on June 26, 1995 and is registered under the Investment Company
Act of 1940, as amended, as an open-end, management investment company. The
Company currently has one portfolio, the Holland Balanced Fund (the "Fund").
The costs incurred by the Company in connection with the organization and
initial registration of shares are being amortized on a straight-line basis by
the Fund over a sixty-month period beginning with commencement of its
operations. The unamortized balance of organizational expenses at September 30,
1996 was $133,810.
Investment Objective
The Fund is designed to provide investors with a convenient and professionally
managed vehicle for seeking a high total investment return. Total investment
return is the aggregate of dividend and interest income and realized and
unrealized capital gains/losses on investments. The Fund seeks to achieve its
objective through a combined portfolio of equity and investment grade
fixed-income securities.
2. Summary of Significant Accounting Policies
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts and disclosures in the financial statements.
Actual results could differ from those estimates.
Securities
Securities transactions are recorded on a trade date basis. Interest income
and expenses are recorded on an accrual basis. The Fund amortizes discount or
premium using the yield-to-maturity method on a daily basis, except for
securities having a maturity date of less than sixty days at the time
acquisition which are amortized on a straight-line basis. Dividend income is
recorded on the ex-dividend date. The Fund uses the specific identification
method for determining gain or loss on sales of securities.
Income Tax
There is no provision for Federal income or excise tax since the Fund intends
to qualify and to elect to be taxed as a regulated investment company ("RIC")
and intends to comply with the requirements of Subchapter M of the Internal
Revenue Code applicable to RICs and to distribute all of its taxable income.
Valuation
Securities traded on an exchange are valued at their last sales price on that
exchange. Securities for which over-the-counter market quotations are
available are valued at the latest bid price. Securities purchased with sixty
days or less remaining to maturity are valued at amortized cost which
approximates fair value.
Expenses
Holland & Company L.L.C. (the "Investment Adviser") has agreed to voluntarily
waive its fee and to reimburse the Fund for expenses exceeding 1.50% of
average daily net assets. During the period ended September 30, 1996, the
Investment Adviser voluntarily waived $38,075 of advisory fees and reimbursed
the Fund $131,302 of other expenses.
2. Summary of Significant Accounting Policies (continued)
Dividends to Shareholders
It is the policy of the Fund to declare dividends according to the following
schedule:
- --------------------------------------------------------------------------------
Dividends from Net Capital Gain
Investment Income Distributions
- --------------------------------------------------------------------------------
Quarterly Annually
April, July, October and December December
Dividends from net short-term capital gains and net long-term capital gains,
if any, are normally declared and paid annually, but the Fund may make
distributions on a more frequent basis to comply with the distribution
requirements of the Internal Revenue Code. To the extent that a net realized
capital gain can be reduced by a capital loss carryover, such gain will not be
distributed.
The classification of income and capital gains distributions is determined in
accordance with income tax regulations. Permanent book and tax differences
relating to shareholder distributions will result in reclassifications to
paid-in capital and may affect the distributable amount of net investment
income per share. Undistributed net investment income, accumulated net
investment loss, or distributions in excess of net investment income may
include temporary book and tax differences which may reverse in a subsequent
period.
3. Investment Advisory Agreement and Administration Agreement
The Company's Board of Directors has approved an investment advisory agreement
with the Investment Adviser. For its services as investment adviser, the
Company pays the Investment Adviser a monthly fee at an annual rate of 0.75%
of the Fund's average daily net assets. Currently, the Investment Adviser is
waiving all of its fee. The Investment Adviser is controlled by Michael F.
Holland, its managing member and owner of 99% interest in the limited
liability company.
Pursuant to its Administration Agreement, AMT Capital Services, Inc. (the
"Administrator"), two employees of which serve as officers of the Company,
earns a fee for providing fund administration services to the Company. The
Company pays the Administrator a monthly fee at the annual rate of 0.15% of
the Fund's average daily net assets and reimbursement for out-of-pocket
expenses pursuant to the Administration Agreement. Pursuant to the
Administration Agreement, the Administrator will be paid a minimum fee of
$25,000 for services provided to the Company during its first year of
operation and a minimum fee of $50,000 for the second and third years of the
Company's operation.
4. Investment Transactions
Purchase cost and proceeds from sales of investment securities, other than
short-term investments, for the period from October 2, 1995 (commencement of
operations) to September 30, 1996 were as follows:
- --------------------------------------------------------------------------------
Purchases Purchases Sales Sales
U.S. Government Other Securities U.S. Government Other Securities
- --------------------------------------------------------------------------------
$1,444,906 $3,532,423 $- $203,700
The components of net unrealized appreciation (depreciation) of investments
based on Federal tax cost at September 30, 1996 for the Fund were as follows:
- --------------------------------------------------------------------------------
Cost for Federal
Appreciation Depreciation Net Appreciation Tax Purposes
- --------------------------------------------------------------------------------
$563,028 $(25,550) $537,478 $6,773,027
5. Repurchase Agreements
The Fund may enter into repurchase agreements under which a bank or securities
firm that is a primary or reporting dealer in U.S. Government securities
agrees, upon entering into a contract, to sell U.S. Government securities to
the Fund and repurchase such securities from the Fund at a mutually agreed
upon price and date.
The Fund will engage in repurchase transactions with parties selected on the
basis of such party's creditworthiness. The collateral on repurchase
agreements must have an aggregate market value greater than or equal to the
repurchase price plus accrued interest at all times. If the value of the
underlying securities falls below the value of the repurchase price plus
accrued interest, the Fund will require the seller to deposit additional
collateral by the next business day. If the request for additional collateral
is not met, or the seller defaults on its repurchase obligation, the Fund
maintains the right to sell the underlying securities at market value and may
claim any resulting loss against the seller. However, in the event of default
or bankruptcy by the counterparty to the agreement, realization and/or
retention of the collateral may be subject to legal proceedings.
6. Capital Share Transactions
As of September 30, 1996, there were 1,000,000,000 shares of $0.01 par value
capital stock authorized. Transactions in capital stock for the period from
October 2, 1995 (commencement of operations) to September 30, 1996 were as
follows:
- --------------------------------------------------------------------------------
Shares Amount
- --------------------------------------------------------------------------------
Shares Sold 680,814 $ 7,181,990
Shares Reinvested 7,038 76,167
687,852 7,258,157
Shares Redeemed (30,322) (332,839)
Net Increase 657,530 $ 6,925,318
<PAGE>
- --------------------------------------------------------------------------------
Holland Balanced Fund - Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Board of Directors
and Shareholders of the
Holland Balanced Fund
In our opinion, the accompanying statement of net assets, and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material aspects, the financial position of
the Holland Balanced Fund (the "Fund") at September 30, 1996, and the results
of its operations, the changes in its net assets and the financial highlights
for the period October 2, 1995 (commencement of operations) through September
30, 1996, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audit, which included confirmation of
securities at September 30, 1996 by correspondence with the custodian,
provides a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
New York, New York
November 4, 1996
<PAGE>
BOARD OF DIRECTORS ADVISER
Michael F. Holland* Holland & Company L.L.C.
Director and President 375 Park Avenue
Chairman, New York, NY 10152
Holland & Company L.L.C. phone (212) 486-2002
fax (212) 486-0744
Sheldon S. Gordon*
Director FUND ADMINISTRATOR
Chairman, AND DISTRIBUTOR
Union Bancaire Privee AMT Capital Services, Inc.
International, Inc. 600 Fifth Avenue, 26th Floor
New York, NY 10020
Herbert S. Winokur, Jr. phone (800) 304-6552
Director
Managing General Partner, CUSTODIAN AND
Capricorn Investors, L.P. FUND ACCOUNTING AGENT
Investors Bank & Trust Company
P.O. Box 1537
Desmond G. FitzGerald Boston, MA 02205
Director
Chairman,
North American Properties Group TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT
Unified Advisers, Inc.
Jeff C. Tarr 429 N. Pennsylvania Street
Director Indianapolis, IN 46204
Chairman, phone (800) 249-0763
Junction Advisors
LEGAL COUNSEL
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
*interested person as defined in
the Investment Company Act of 1940 INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> HOLLAND BALANCED FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 6,773
<INVESTMENTS-AT-VALUE> 7,311
<RECEIVABLES> 174
<ASSETS-OTHER> 152
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 7,637
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 31
<TOTAL-LIABILITIES> 31
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 7,025
<SHARES-COMMON-STOCK> 668
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 43
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 538
<NET-ASSETS> 7,606
<DIVIDEND-INCOME> 82
<INTEREST-INCOME> 115
<OTHER-INCOME> 0
<EXPENSES-NET> 76
<NET-INVESTMENT-INCOME> 121
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 538
<NET-CHANGE-FROM-OPS> 659
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 78
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 691
<NUMBER-OF-SHARES-REDEEMED> 30
<SHARES-REINVESTED> 7
<NET-CHANGE-IN-ASSETS> 7,606
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 38
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 245
<AVERAGE-NET-ASSETS> 5,110
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .23
<PER-SHARE-GAIN-APPREC> 1.33
<PER-SHARE-DIVIDEND> .17
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.39
<EXPENSE-RATIO> 1.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
