HOLLAND BALANCED FUND
Semi-Annual Report - March 31, 1997 (Unaudited)
CONTENTS
Letter from the President 1
Cumulative Performance 2
Statement of Net Assets 3
Statement of Operations 5
Statement of Changes in Net Assets 6
Financial Highlights 7
Notes to Financial Statements 8
April 30, 1997
To My Fellow Shareholders:
Our second year has begun with continued positive results, and I
continue to caution that the markets can be perverse. Our Fund's cumulative
total return from inception (10/2/95-3/31/97) is 25.8% vs. 17.0% for the Lipper
Balanced Fund Index, and the environment for our Fund's approach has been
nearly perfect. However, such conditions will not persist forever.
Nevertheless, our Fund's basic approach of long-term investment in "blue
chip" equities, U.S. Treasury fixed income securities and money market
instruments should, I believe, weather less ideal market conditions in an
acceptable manner.
With Bullish Regards,
Michael F. Holland
President & Founder
Holland Balanced Fund - Cumulative Performance
The Graph represents the Comparison of Change in Value of $10,000 Investment
in the Holland Balanced Fund and the Constructed Index* and the Lipper
Balanced Fund Index
Holland Balanced Fund - Statement of Net Assets
March 31, 1997 (Unaudited)
Common Stocks-54.3%
Shares Value +
Autos-7.1%
Chrysler Corp. 7,800 447,000
General Motors Corp. 4,400 448,537
Total 895,537
Banks-3.1%
J.P. Morgan & Company, Inc. 3,000 393,000
Chemicals-3.4%
DuPont (E.I.) de Nemours & Company 3,000 424,000
Electronics-9.6%
Hewlett-Packard Co. 4,200 441,975
Intel Corp. 2,400 333,900
Motorola, Inc. 3,000 434,700
Total 1,210,575
Insurance - 2.9%
Chubb Corp. 6,800 366,350
Oil/Gas-9.8%
Chevron Corp. 4,100 389,900
Exxon Corp. 2,800 420,225
Texaco, Inc. 2,800 427,050
Total 1,237,175
Paper-2.6%
International Paper Co. 6,200 334,325
Pharmaceuticals-3.4%
Merck & Company, Inc. 3,800 438,100
Producer Goods-9.4%
Eastman Kodak Co. 3,400 349,025
General Electric Co. 3,000 416,850
Minnesota Mining & Manufacturing 3,700 430,950
Total 1,196,825
Retail-3.0%
Sears, Roebuck and Company 5,400 376,875
Total Common Stocks (Cost-$5,762,031) 6,872,762
See Notes to the Financial Statements
Face
U.S. Government Securities-26.7% Amount Value +
U.S. Treasury Note, 5.750% due 9/30/97 400,000 399,875
U.S. Treasury Note, 5.625% due 10/31/97 300,000 299,531
U.S. Treasury Note, 5.000% due 1/31/98 250,000 247,734
U.S. Treasury Note, 5.500% due 11/15/98 500,000 493,281
U.S. Treasury Note, 6.000% due 8/15/99 500,000 494,218
U.S. Treasury Note, 5.625% due 2/28/01 1,000,000 963,125
U.S. Treasury Note, 5.875% due 2/15/04 500,000 472,813
Total U.S. Government Securities
(Cost-$3,411,259) 3,370,577
Repurchase Agreements-17.3%
Investors Bank & Trust Co. Repurchase
Agreement, 5.85% due 4/1/97; Issued
3/31/97 (Collateralized by
$2,195,586.21 FNMA ARM, 7.928% due
8/1/24 with a market value of $2,294,490)
(Cost - $2,185,092) 2,185,092 2,185,092
Total Investments-98.3% (Cost-$11,358,382) 12,428,431
Other Assets and Liabilities-1.7%
Receivable from investment adviser 62,143
Other assets 190,512
Accrued expenses and other liabilities (39,205)
Other assets and liabilities, net 213,450
Net Assets-100.0%
Applicable to 1,033,250 outstanding $0.01 par value
shares (authorized 1,000,000,000) $ 12,641,881
Net asset value, offering price and redemption
price per share $ 12.24
Components of Net Assets as of March 31, 1997
Capital stock at par value ($0.01) $ 10,333
Capital stock in excess of par value 11,516,209
Undistributed net investment income 44,362
Net accumulated realized gain on investments 927
Net unrealized appreciation on investments 1,070,050
Net Assets $ 12,641,881
See Notes to the Financial Statements
+ See Note 2 to the Financial Statements
ARM Adjustable Rate Mortgage
Holland Balanced Fund - Statement of Operations
Six Months Ended 3/31/97 (Unaudited)
Investment Income
Interest $ 119,903
Dividends 62,759
Total investment income 182,662
Expenses
Investment advisory fees 36,363
Administration fees 25,000
Custodian fees 5,213
Shareholder account maintenance 14,182
Audit fees 10,000
Legal fees 16,500
Shareholder communications expenses 17,900
Insurance expense 5,126
Amortization of organizational costs 16,726
State registration fees 12,161
Directors fees 7,500
Taxes 688
Miscellaneous fees and expenses 3,765
Total operating expenses 171,124
Waiver of investment advisory fees and reimbursement of
other expenses (98,506)
Net expenses 72,618
Investment income, net 110,044
Net Realized and Unrealized Gain on Investments
Net realized gain on investments 930
Net unrealized appreciation on investments 532,572
Net realized and unrealized gain on investments 533,502
Net increase in net assets resulting from operations $ 643,546
See Notes to the Financial Statements
Holland Balanced Fund - Statement of Changes in Net Assets
Six Months
Ended 3/31/97 Period from
(Unaudited) 10/2/95 *
to 9/30/96
Net Increase in Net Assets Resulting
from Operations
Net Investment income $110,044 $120,561
Net realized gain on investments 930 444
Net unrealized appreciation on investments 532,572 537,478
Net increase in net assets resulting from
operations 643,546 658,483
Distributions to Shareholders From
Net investment income 108,290 77,953
Net realized gain on investments 447 -
Total distributions 108,737 77,953
Capital Share Transactions, Net (Note 6) 4,501,224 6,925,318
Total increase in net assets 5,036,033 7,505,848
Net Assets
Beginning of period 7,605,848 100,000
End of period $12,641,881 7,605,848
Undistributed net investment
income, end of period $44,362 42,608
See Notes to the Financial Statements
* Commencement of Investment Operations
Holland Balanced Fund - Financial Highlights
Six Months
Ended 3/31/97 Period from
(Unaudited) 10/2/95 *
to 9/30/96
For a share outstanding
throughout the period
Per Share Data
Net asset value,
beginning of period $11.39 $10.00
Increases From Investment
Operations
Net investment income 0.13 0.23
Net realized and unrealized
gain on investments 0.87 1.33
Total from investment
operations 1.00 1.56
Less Distributions From:
Net investment income 0.15 (0.17)
Net realized gain on investments 0.00# 0.00
Total Distributions 0.15 (0.17)
Net asset value, end of period $12.24 $11.39
Total Return (c) 14.46%(a) 15.65%(a)
Ratios/Supplemental Data
Net assets, end of period $12,641,881 $7,605,848
Ratio of expenses to average
net assets 1.50%(b) 1.50%(b)
Ratio of expenses to average
net assets before fee waivers
and reimbursement of other expenses 3.51%(b) 4.81%(b)
Ratio of net investment income
to average net assets 2.26%(b) 2.36%(b)
Portfolio turnover 0.25%(a) 5.04%(a)
Average commission rate per share $0.05 (d) $0.06 (d)
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.
# Rounds to less than $0.01
* Commencement of Investment Operations
Holland Balanced Fund - Notes to Financial Statements
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 March 31,
1997 was $117,084.
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 March 31, 1997, the
Investment Adviser voluntarily waived $36,363 of advisory fees and reimbursed
the Fund $62,143 of other expenses.
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
$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 six months ended March 31, 1997 were as
follows:
Purchases Purchases Sales Sales
U.S. Government Other Securities U.S. Government Other Securities
$ 1,963,516 $ 2,441,859 $ - $ 9,925
The components of net unrealized appreciation (depreciation) of investments
based on Federal tax cost at March 31, 1997 for the Fund were as follows:
Cost for Federal
Appreciation Depreciation Net Appreciation Tax Purposes
$ 1,110,732 $ (40,682) $ 1,070,050 $ 11,358,382
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 March 31, 1997, there were 1,000,000,000 shares of $0.01 par value
capital stock authorized. Transactions in capital stock for the Fund were as
follows for the periods indicated:
Six Months For the Period from
Ended 3/31/97 10/2/95 * to 9/30/96
Shares Amount Shares Amount
Shares Sold 375,685 $ 4,625,919 680,814 $ 7,181,990
Shares Reinvested 8,917 106,089 7,038 76,167
384,602 4,732,008 687,852 7,258,157
Shares Redeemed (18,882) (230,784) (30,322) (332,839)
Net Increase 365,720 $ 4,501,224 657,530 $ 6,925,318
* Commencement of Investment Operations
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
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
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