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>
November 5, 1997
To My Fellow Shareholders:
Our Fund's net investment return for its second full year of
operations, ending September 30, 1997, is 22.7% The cumulative total
return from inception (10/2/95 to 9/30/97) is 41.9% vs. 37.6% for the
Lipper Balanced Fund Index.
The global equity markets recent volatility is a reminder of the
common sense basis for having at least a portion of one's investments
balanced by a long-term portfolio of "blue chip' equities combined
with U.S. Treasury fixed income securities and money market
instruments.
With Bullish Regards,
Michael F. Holland
President & Founder
<PAGE>
Graph
<PAGE>
Management Discussion of
Fund Performance
September 30, 1997
Since inception (October 2, 1995 through September 30, 1997), the
Fund outperformed the Lipper Balanced Fund Index by 4.3% (41.9% vs.
37.6%). During fiscal 1997, the Fund's returns were 1.9% less than
the Lipper Balanced Fund Index. The Fund's 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 fiscal 1997 the
Fund's "blue chip" equities produced slightly lower returns than the
broader group of equity holdings of certain funds included in the
Lipper Balanced Fund Index in contrast to fiscal 1996 in which the
Fund's "blue chip" equities produced higher returns than the equity
holdings of certain funds included in the Lipper Balance Fund Index.
The Fund has outperformed the Lipper Balanced Fund Index for the
period from its inception through September 30, 1997 largely due to
the performance of the Fund's selected "blue chip" equities during
such period.
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 despite market volatility. 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 30,1997
<TABLE>
<S> <C> <C>
- ------------------------------------------------------------------------------
Shares Value +
- -------------------------------------------------------------------------------
Common Stocks-56.4%
Autos-7.2%
Chrysler Corp. 26,400 $971,850
General Motors Corp. 14,400 963,900
--------------------
Total 1,935,750
--------------------
Banks-3.1%
J.P. Morgan & Company, Inc. 7,400 840,825
--------------------
Chemicals-2.9%
DuPont (E.I.) de Nemours & Company 12,800 788,000
--------------------
Computers-3.1%
International Business Machines Corp. 7,900 836,906
--------------------
Electronics-10.1%
Hewlett-Packard Co. 13,300 925,180
Intel Corp. 10,800 996,975
Motorola, Inc. 10,900 783,438
--------------------
Total 2,705,593
--------------------
Insurance-3.7%
Chubb Corp. 13,800 980,663
--------------------
Oil/Gas-9.9%
Chevron Corp. 10,400 865,150
Exxon Corp. 14,300 916,093
Texaco, Inc. 14,000 860,125
--------------------
2,641,368
Total --------------------
Paper-3.7%
International Paper Co. 17,800 980,113
--------------------
Pharmaceuticals-3.4%
Merck & Company, Inc. 9,000 899,438
--------------------
Producer Goods-6.3%
General Electric Co. 12,700 864,394
Minnesota Mining & Manufacturing Co. 9,000 832,500
--------------------
Total
1,696,894
--------------------
Retail-3.0%
Sears, Roebuck and Company 14,000 797,125
--------------------
Total Common Stocks (Cost-$11,746,072) 15,102,675
--------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
U.S. Government Securities-35.3%
U.S. Treasury Note, 5.625% due 10/31/97 $ 300,000 $300,094
U.S. Treasury Note, 5.000% due 1/31/98 250,000 249,688
U.S. Treasury Note, 5.500% due 11/15/98 500,000 498,750
U.S. Treasury Note, 6.000% due 8/15/99 500,000 501,406
U.S. Treasury Note, 5.625% due 11/30/00 1,000,000 991,562
U.S. Treasury Note, 5.625% due 2/28/01 1,000,000 990,625
U.S. Treasury Note, 6.375% due 8/15/02 1,000,000 1,015,312
U.S. Treasury Note, 5.875% due 2/15/04 3,500,000 3,463,904
U.S. Treasury Bond, 6.250% due 8/15/23 1,500,000 1,456,875
--------------------
9,468,216
Total U.S. Government Securities (Cost-$9,390,647) --------------------
Repurchase Agreements-7.3%
Investors Bank & Trust Co. Repurchase Agreement,
5.620% due 10/1/97 in the amount of $1,949,732; Issued
9/30/97
(Collaterized by $2,013,196, FNMA ARM, 5.840% due 2/25/22
with a market value of $2,046,899)
(Cost-$1,949,427) 1,949,427 1,949,427
--------------------
26,520,318
Total Investments - 99.0% (Cost $23,086,146) --------------------
Other Assets and Liabilities-1.0%
Other assets
311,546
Accrued expenses and other liabilities
(44,008)
--------------------
Other assets and liabilities, net 267,538
--------------------
Net Assets-100.0%
Applicable to 1,955,018 outstanding $0.01 par value
shares (authorized 1,000,000,000) $26,787,856
====================
Net asset value per share, offering price and redemption price $ 13.70
====================
Components of Net Assets as of September 30, 1997
Capital stock at par value ($0.01) $19,550
Capital stock in excess of par value 23,257,568
Undistributed net investment income 189,295
Net accumulated realized loss on investments (112,729)
Net unrealized appreciation on investments 3,434,172
--------------------
Net Assets $26,787,856
====================
See Notes to the Financial Statements
+ See Note 2 to Financial Statements
ARM Adjustable Rate Mortgage
FNMA Federal National Mortgage Association
</TABLE>
<PAGE>
Holland Series Fund, Inc.
Holland Balanced Fund - Statement of Operations
Year Ended September 30, 1997
<TABLE>
<S> <C>
Investment Income
Interest $403,533
Dividends 197,744
---------------------
Total investment income 601,277
---------------------
Expenses
Investment advisory fees (Note 2) 118,211
Administration fees 50,000
Custodian fees 11,935
Shareholder account maintenance 49,221
Audit fees 20,000
Legal fees 24,482
Shareholder reports 31,750
Insurance expense 10,274
Amortization of organizational costs 33,453
Registration fees 21,712
Directors fees 15,842
Miscellaneous fees and expenses 14,471
---------------------
Total operating expenses 401,351
Waiver of investment advisory fees and reimbursement
of other expenses (Note 2) (164,839)
---------------------
Net expenses 236,512
---------------------
Net investment income 364,765
---------------------
Net Realized and Unrealized Gain (Loss) on Investments
Net realized loss on investments (112,729)
Net change in unrealized appreciation on investments 2,896,694
---------------------
Net realized and unrealized gain on investments 2,783,965
---------------------
Net increase in net assets resulting from operations $3,148,730
=====================
See Notes to Financial Statements
</TABLE>
<PAGE>
Holland Series Fund, Inc.
Holland Balanced Fund - Statement of Changes in Net Assets
<TABLE>
<S> <C> <C>
Year Ended Period from 10/2/95 *
9/30/97 to 9/30/96
Net Increase in Net Assets Resulting from Operations
Net investment income $ 364,765 $ 120,561
Net realized gain (loss) on investments (112,729) 444
Net change in unrealized appreciation on investments 2,896,694 537,478
------------------------- ------------------------
Net increase in net assets resulting from operations 3,148,730 658,483
------------------------- ------------------------
Distributions to Shareholders From
Net investment income 258,314 77,953
Net realized gain on investments 447 -
------------------------- ------------------------
Total distributions 258,761 77,953
------------------------- ------------------------
Capital Share Transactions, Net (Note 6) 16,292,039 6,925,318
------------------------- ------------------------
Total increase in net assets 19,182,008 7,505,848
Net Assets
Beginning of period 7,605,848 100,000
------------------------- ------------------------
End of period $ 26,787,856 $ 7,605,848
========================= ========================
Undistributed net investment income, end of period $ 189,295 $ 42,608
========================= ========================
See Notes to the Financial Statements
* Commencement of Investment Operations
</TABLE>
<PAGE>
Holland Series Fund, Inc.
Holland Balanced Fund - Financial Highlights
<TABLE>
<S> <C> <C> <C>
For a share outstanding Year Ended Period from 10/2/95 *
throughout the period 9/30/97 to 9/30/96
Per Share Data
Net asset value, beginning of period $11.39 $10.00
----------------------- -----------------------
Increases From Investment Operations
Net investment income 0.26 0.23
Net realized and unrealized gain on investments 2.30 1.33
----------------------- -----------------------
Total from investment operations 2.56 1.56
----------------------- -----------------------
Less Distributions From:
Net investment income (0.25) (0.17 )
Net realized gain on investments (0.00) # -
----------------------- -----------------------
Total distributions (0.25) (0.17)
----------------------- -----------------------
Net asset value, end of period $13.70 $11.39
======================= =======================
Total Return (c) 22.71% 15.65% (a)
Ratios/Supplemental Data
Net assets, end of period (000's) $26,788 $7,606
Ratio of expenses to average net assets 1.50% 1.50% (b)
Ratio of expenses to average net assets before fee waivers
and reimbursement of other expenses 2.55% 4.81% (b)
Ratio of net investment income to average net assets 2.31% 2.36% (b)
Portfolio turnover 5.07% 5.04%
Average commission rate per share (d) $0.05 $0.06
See Notes to Financial Statements
(a) Not annualized
(b) Annualized
(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 and sold during the period.
# Rounds to less than $0.01
* Commencement of Investment Operations
</TABLE>
<PAGE>
Holland Series Fund, Inc.
Holland Balanced Fund
Notes to financial statements
September 30, 1997
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, 1997 was $101,058.
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 of 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 continue to qualify 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, 1997, the
Investment Adviser voluntarily waived $118,211 of advisory
fees and reimbursed the Fund $46,628 of other expenses.
<PAGE>
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 Investment Capital Gain
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.
Income and capital gain distributions are determined in
accordance with federal tax regulations and may differ from
those determined in accordance with generally accepted
accounting principles. 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"), three 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
$50,000 for services provided to the Company.
4. Investment Transactions
Purchase cost and proceeds from sales of investment
securities, other than short-term investments, for year the
ended September 30, 1997 were as follows:
<TABLE>
<S> <C> <C> <C>
- ----------------------- ---------------------- ---------------------- ---------------------
Purchases Purchases Sales Sales
U.S. Government Other Securities U.S. Government Other Securities
- ----------------------- ---------------------- ---------------------- ---------------------
$8,332,816 $9,189,683 $ - $660,050
</TABLE>
<PAGE>
4. Investment Transactions (continued)
The components of net unrealized appreciation (depreciation) of
investments based on Federal tax cost at September 30, 1997 for the Fund
were as follows:
<TABLE>
<S> <C> <C> <C>
- ---------------------- ---------------------- --------------------- ----------------------
Cost for Federal
Appreciation Depreciation Net Appreciation Tax Purposes
- ---------------------- ---------------------- --------------------- ----------------------
$ 3,445,462 $ (11,290) $ 3,434,172 $23,086,146
</TABLE>
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, 1997, there were 1,000,000,000 shares of
$.01 par value capital stock authorized. Transactions in
capital stock were as follows:
----------------------------------------- -----------------------------------
Year Ended 9/30/97 Period from 10/2/95* to 9/30/96
----------------------------------------- -----------------------------------
<TABLE>
<S> <C> <C> <C> <C>
Shares Amount Shares Amount
-------------------- -------------------- --------------------- --------------------
Shares Sold 1,366,431 $17,319,459 680,814 $7,181,990
Shares Reinvested 20,140 252,436 7,038 76,167
-------------------- -------------------- --------------------- --------------------
1,386,571 17,571,895 687,852 7,258,157
Shares Redeemed (99,083) (1,279,856) (30,322) (332,839)
-------------------- -------------------- --------------------- --------------------
Net Increase 1,287,488 $16,292,039 657,530 $6,925,318
==================== ==================== ===================== ====================
</TABLE>
* Commencement of Investment Operations
7. Federal Income Tax Status
Capital losses incurred after October 31, 1996 for the Fund
are deemed to arise on the first business day of the
following fiscal year for tax purposes. The Fund incurred
and elected to defer post October losses of $112,729 for the
year ended September 30, 1997.
At September 30, 1997 the Fund had permanent book/tax
differences attributable to non-deductible expenses. To
reflect this book/tax difference for the year ended
September 30, 1997, undistributed net investment income, net
accumulated realized loss on investments, and paid in
capital were reclassified. Net assets of the Fund were not
affected by this change.
<PAGE>
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>
<TABLE>
<S> <C>
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 International, Inc. AMT Capital Services, 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>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000947441
<NAME> Holland Series Fund, Inc.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 23086
<INVESTMENTS-AT-VALUE> 26520
<RECEIVABLES> 148
<ASSETS-OTHER> 164
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 26832
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 44
<TOTAL-LIABILITIES> 44
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 23277
<SHARES-COMMON-STOCK> 1955
<SHARES-COMMON-PRIOR> 668
<ACCUMULATED-NII-CURRENT> 189
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (113)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3434
<NET-ASSETS> 26788
<DIVIDEND-INCOME> 198
<INTEREST-INCOME> 404
<OTHER-INCOME> 0
<EXPENSES-NET> 237
<NET-INVESTMENT-INCOME> 365
<REALIZED-GAINS-CURRENT> (113)
<APPREC-INCREASE-CURRENT> 2897
<NET-CHANGE-FROM-OPS> 3149
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 258
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1366
<NUMBER-OF-SHARES-REDEEMED> 99
<SHARES-REINVESTED> 20
<NET-CHANGE-IN-ASSETS> 19182
<ACCUMULATED-NII-PRIOR> 43
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 118
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 401
<AVERAGE-NET-ASSETS> 15798
<PER-SHARE-NAV-BEGIN> 11.39
<PER-SHARE-NII> .26
<PER-SHARE-GAIN-APPREC> 2.30
<PER-SHARE-DIVIDEND> .25
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.70
<EXPENSE-RATIO> 1.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
