Registration Nos. 333-935
811-7533
As filed with the Securities and Exchange Commission on
April 30, 1997
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933 / /
Pre-Effective Amendment No. / /
Post-Effective Amendment No. 2 / X /
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 / /
Amendment No. 3 / X /
(Check appropriate box or boxes)
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The Lou Holland Trust
(Exact Name of Registrant as Specified in Charter)
Suite 3260, 35 West Wacker Drive, Chicago, Illinois 60601
(Address of Principal Executive Office)
Registrant's Telephone Number, including Area Code:
(312) 553-1000
----------------------
Louis A. Holland
c/o Holland Capital Management
Suite 3260
35 West Wacker Drive
Chicago, Illinois 60601
(Name and Address of Agent for Service)
Copies to:
Joan E. Boros
Katten Muchin & Zavis
1025 Thomas Jefferson Street, N.W.
Suite 700 - East Lobby
Washington, D.C. 20007
<PAGE>
Approximate Date of Proposed Public Offering: Continuous.
It is proposed that this filing will become effective (check appropriate box):
/ X / immediately upon / / on (date) pursuant to
filing pursuant to paragraph (b)
paragraph (b)
/ / 60 days after filing / / on (date) pursuant to
pursuant to paragraph (a)(1)
paragraph (a)(1)
/ / 75 days after filing / / on date pursuant to
pursuant to paragraph (a)(2) of rule
paragraph (a)(2) 485
Pursuant to the provisions of Rule 24f-2 under the Investment Company Act of
1940, as amended, the Registrant has registered an indefinite number of shares
of beneficial interest. The Registrant filed a
Rule 24f-2 Notice on February 27, 1997.
<PAGE>
The Lou Holland Trust
CROSS-REFERENCE SHEET
FORM N-1A ITEM NO. CAPTION IN PROSPECTUS
1. Cover Cover Page
2. Synopsis Cover Page
3. Condensed Financial Financial Highlights
Information
4. General Description of Introduction; The Growth Fund;
Registrant Risk Factors, Other Investment
Practices, and Policies of the
Growth Fund
5. Management of the Fund How The Trust is Managed
6. Capital Stock and Other Organization of The Trust;
Securities Dividends, Distributions, and
Taxes; How to Purchase Shares
7. Purchase of Securities How to Purchase Shares;
Being Offered Shareholder Services; How the
Growth Fund's Net Asset Value
is Determined
8. Redemption or Repurchase Shareholder Services; How to
Redeem Shares
9. Pending Legal Proceedings Not Applicable
CAPTION IN STATEMENT OF
FORM N-1A ITEM NO. ADDITIONAL INFORMATION
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and General Information and
History History
13. Investment Objectives and Investment Restrictions;
Policies Description of Certain
Investments
14. Management of the Fund Management of The Trust
15. Control Persons and Principal Holders of
Principal Holders of Securities
Securities
16. Investment Advisory and Investment Management and
Other Services Other Services
17. Brokerage Allocation and Brokerage Allocation and Other
Other Practices Practices
<PAGE>
18. Capital Stock and Other Organization of The Trust
Securities
19. Purchase, Redemption and Purchase and Redemption of
Pricing of Securities Securities Being Offered;
Being Offered Determination of Net Asset
Value
20. Tax Status Taxes
21. Underwriters Investment Management and
Other Services -- The
Distributor and Distribution
Services
22. Calculation of Performance Information About
Performance Data the Growth Fund
23. Financial Statements Independent Auditors;
Financial Statements
<PAGE>
LOU HOLLAND
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GROWTH FUND
PROSPECTUS
May 1, 1997
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ABOUT THIS The Lou Holland Trust currently consists of one portfolio,
PROSPECTUS the Growth Fund, which primarily seeks long-term growth of
capital and invests primarily in common stocks of growth
companies, with the receipt of dividend income as a
secondary consideration.
This Prospectus sets forth concisely the information about
the Trust and the Growth Fund that you should know before
investing. It should be retained for future reference. A
Statement of Additional Information, dated May 1, 1997,
about the Trust has been filed with the Securities and
Exchange Commission and is incorporated herein by
reference. You may obtain a copy of the Statement of
Additional Information at no charge by calling the Trust
at 1-800-295-9779.
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<TABLE>
<S> <C> <C> <C> <C>
TABLE OF CONTENTS Introduction.................. How to Redeem Shares..........
How The Trust is Managed......
Expense Summary............... Risk Factors, Other Investment
Financial Highlghts........... Practices, and Policies of
The Growth Fund............... the Growth
How to Purchase Shares........ Fund.........................
Shareholder Services.......... Portfolio Transactions and
Retirement Plans.............. Brokerage
How the Growth Fund's Net Practices....................
Asset Value is Determined.... Organization of The Trust.....
Dividends, Distributions, and
Taxes........................
</TABLE>
THE LOU HOLLAND TRUST
Suite 3260
35 West Wacker Drive
Chicago, Illinois 60601
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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LOU HOLLAND
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GROWTH FUND
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INTRODUCTION The Lou Holland Trust (the "Trust") is a Delaware business
trust registered with the Securities and Exchange
Commission ("SEC") as a no-load, open-end diversified
management investment company, commonly known as a "mutual
fund." The Trust is organized as a series company and
currently consists of one series, the Growth Fund (the
"Growth Fund" or "Fund"). In the future, the Trust may
establish additional series or classes of shares of any
series. The Fund is managed by Holland Capital Management
(the "Investment Manager"), an investment adviser
registered with the SEC that directs the day-to-day
operations of the Fund and provides certain adminis-
trative services to the Trust. HCM Investments, Inc. (the
"Distributor"), a broker-dealer registered with the SEC,
serves as the distributor of the shares of the Trust.
No sales charges or redemption fees or penalties are
charged by the Trust with respect to an investment in the
Growth Fund. This means that all of the money you invest
will be credited to your account(s) in the Fund and
immediately go to work for you.
The Growth Fund primarily seeks long-term growth of
capital and invests primarily in common stocks of growth
companies, with the receipt of dividend income as a
secondary consideration. There can be no assurance that
the investment objective of the Fund will be realized. For
general information, please call the Trust, toll-free at
1-800-295-9779.
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LOU HOLLAND
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GROWTH FUND
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EXPENSE SUMMARY The Expense Summary, including the Examples below, is
included to assist in the understanding of the various costs
and expenses to which an investment in the Growth Fund
would be subject. Certain fees and expenses of the Fund
stated below are estimated. Actual fees and expenses for
the Growth Fund for the current year may be more or less
than those shown below. A more complete description of all
fees and expenses is included in this prospectus under the
section "How The Trust is Managed."
<PAGE>
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES Growth Fund
---------------
<S> <C>
Sales Load Imposed on Purchase.......................................... None
Sales Load Imposed on Reinvested Dividends.............................. None
Deferred Sales Load Imposed on Redemptions.............................. None
Redemption Fee.......................................................... None
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)
Investment Management Fee............................................... .85%*
12b-1 Fees.............................................................. -0-
Other Expenses (After Expense Reimbursements)........................... .50%**
-----
Total Fund Operating Expenses........................................... 1.35%
</TABLE>
* The Investment Management Fee declines at specified
breakpoints as assets increase.
** Other Expenses are based on estimated amounts for the
current fiscal year. The Investment Manager has agreed to
reimburse the Growth Fund to the extent that Other
Expenses actually exceed .50% of the net assets of shares
of the Fund during the current fiscal year of the Fund's
operations. Absent any reimbursements, Other Expenses and
Total Operating Expenses would have been 5.65% and 6.50%,
respectively, for the fiscal year ended December 31, 1996.
EXAMPLES: An investor in the Growth Fund would pay the
following expenses on a $1,000 investment, assuming (i) a 5%
annual return and (ii) redemption at the end of each future
time period:***
1 Year 3 Years
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$ 14 $ 44
*** There are no charges imposed upon redemption.
THESE EXAMPLES SHOULD NOT BE CONSIDERED TO BE A
REPRESENTATION OF PAST OR FUTURE FEES OR EXPENSES FOR THE
GROWTH FUND. ACTUAL FEES AND EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN ABOVE. Similarly, the annual rate of
return assumed in the Example is not an estimate or
guarantee of future investment performance, but is
included for illustrative purposes.
FINANCIAL Financial highlights, for the period April 29, 1996
HIGHLIGHTS (commencement of operations) through December 31, 1996,
have been audited by Deloitte & Touche LLP, the
Trust's independent auditors. The Table below represents a
condensed financial history of the operations of the Growth
Fund and expresses the information in terms of a single
share of the Growth Fund outstanding through the period.
This per share and other information should be read in
conjunction with the financial statements and related notes
in the Trust's Annual Report, which are incorporated
by reference into the Trust's Statement of Additional
Information. A copy of the Growth Fund's Annual Report is
available without charge.
<TABLE>
<CAPTION>
APRIL 29, 1996 (1)
THROUGH
DECEMBER 31, 1996
------------------
<S> <C>
Per Share Data:
Net asset value, beginning
of period $10.00
------
Income from investment operations:
Net investment income 0.00
Net realized and unrealized
gains on investments 1.46
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Total from investment operations 1.46
------
Less distributions:
Dividends from net
investment income (0.05)
Dividends from capital gains (0.13)
------
Total distributions (0.18)
------
Net asset value, end of period $11.28
======
Total return (2) 14.62%
Supplemental data and ratios:
Net assets, end of period $2,860,671
Ratio of expenses to average
net assets (3) 1.35%
Ratio of net investment income
to average net assets (3) 0.04%
Portfolio turnover rate 30.48%
Average commission rate paid $0.0610
<FN>
(1) Commencement of operations.
(2) Not annualized for the period April 29, 1996 through December 31, 1996.
(3) Annualized for the period April 29, 1996 through December 31, 1996. Without
expense waivers of $85,484 for the period April 29, 1996 through
December 31, 1996, the ratio of expenses to average net assets would have
been 6.50% and the ratio of net investment (loss) to average net assets
would have been (5.11)%.
</FN>
See Financial Statements and Notes included in the Growth Fund's Annual Report
for the fiscal year ended December 31, 1996.
2
</TABLE>
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LOU HOLLAND
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GROWTH FUND
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THE GROWTH FUND INVESTMENT OBJECTIVE: The Growth Fund primarily seeks
long-term growth of capital by investing primarily in
common stocks of growth companies, with the receipt of
dividend income as a secondary consideration.
INVESTMENT PROGRAM: The policy of the Growth Fund is to
invest substantially all of its assets in equity
securities under normal market conditions. It invests
primarily in the common stocks of a diversified group of
companies: (i) that have demonstrated historical growth of
earnings faster than the general market; (ii) that have
earnings growth stability; (iii) whose return on equity is
higher than the general market; and (iv) whereby the
dividend growth of the portfolio is typically greater than
that of the market, while dividend yield is typically
less.
Equity securities include common stocks, securities which
are convertible into common stocks and readily marketable
securities, such as rights and warrants, which derive
their value from common stock. Investments in rights and
warrants will be for the purpose of participating in
particular market sectors.
The Growth Fund also may on occasion invest in various
income producing securities including, but not limited to,
dividend-paying equity securities and investment grade
bonds. (SEE "Description of Certain Corporate Bond
Ratings" in the Statement of Additional Information.)
Investments in common stocks in general are subject to
market risks that may cause their prices to fluctuate over
time. In addition, the amount of income generated by the
Fund will fluctuate depending, among other things, on the
composition of the Fund's holdings and the level of
interest and dividend income paid on those holdings.
Therefore, an investment in the Fund may be more suitable
for long-term investors who can bear the risk of these
fluctuations.
The Growth Fund may also invest in common stocks of
foreign issuers. Investments in common stocks of foreign
issuers will be made primarily through the use of U.S.
dollar-denominated American Depositary Receipts ("ADRs"),
although direct market purchases also may be made. ADRs
are issued by domestic banks and evidence ownership of
underlying foreign securities.
The Growth Fund may establish and maintain reserves for
temporary, defensive purposes or to enable it to take
advantage of buying opportunities. The Fund's reserves
will be invested in high-grade domestic and foreign
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LOU HOLLAND
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GROWTH FUND
money market instruments including, but not limited to,
U.S. government obligations, certificates of deposit,
bankers' acceptances, commercial paper, short-term
corporate debt issues and repurchase agreements.
To facilitate the Growth Fund's investment program, the
Fund may lend portfolio securities and purchase securities
on a forward-commitment or when-issued basis.
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HOW TO PURCHASE The initial minimum investment is $2,000 for the Growth
SHARES Fund. Such minimum investment amount may, in certain
cases, be waived or lowered by the Trust.
OPENING AN ACCOUNT. Shareholders may make an initial
purchase of shares of the Growth Fund by mail or by wire.
Shares of the Fund may be purchased on any day the Trust is
open for business.
A COMPLETED AND SIGNED PURCHASE APPLICATION FORM
("APPLICATION") IS REQUIRED FOR EACH NEW ACCOUNT OPENED WITH
THE GROWTH FUND REGARDLESS OF HOW THE INITIAL PURCHASE OF
SHARES IS MADE.
BY MAIL. Shares of the Growth Fund may be purchased by
mailing the completed Application, with a check made
payable to the Trust, c/o Firstar Trust Company
("Firstar"), Post Office Box 701, Milwaukee, Wisconsin
53201-0701. Correspondence sent by overnight delivery
services should be sent to Firstar Trust Company, 3rd
Floor, 615 East Michigan Street, Milwaukee, Wisconsin
53202.
BY WIRE. Shares of the Growth Fund also may be purchased
by wiring funds to the wire bank account for the Fund.
Before wiring funds, please call the Trust toll free at
1-800-295-9779 to advise the Trust of the intention to
invest in the Growth Fund and to receive instructions as
to how and where to wire the investment. Please remember
to return the completed Application to the Trust as
described in the prior paragraph. The bank that wires the
funds may charge a fee.
SUBSEQUENT INVESTMENTS. The minimum subsequent investment
for the Growth Fund is $250. Subsequent purchases of shares
of the Fund may be made by mail or by wire (see instructions
above), or through means of the Telephone Investment
Privilege described below under "Shareholder Services."
SHARE PRICE. To make an initial purchase of shares of the
Growth Fund, except by wire transfer, a completed and signed
Application in good order,
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LOU HOLLAND
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GROWTH FUND
as described below, must first be received and accepted.
Shares in the Fund will be priced at the net asset value
per share of the Fund next determined after a purchase
order has been received by Firstar as transfer agent in
good order, as described below.
CONDITIONS OF PURCHASE. The Trust and the Distributor each
reserves the right to reject any purchase for any reason
and to cancel any purchase due to nonpayment. Purchases
are not binding on the Trust or the Investment Manager or
considered received until such purchase orders are
received by Firstar in good order. Good order requires
that all purchases must be made in U.S. dollars and, to
avoid fees and delays, all checks must be drawn only on
U.S. banks. No cash or third party checks will be
accepted. As a condition of this offering, if a purchase
is canceled due to nonpayment or because a check does not
clear (and, therefore, the account is required to be
redeemed), the purchaser will be responsible for any loss
the Fund incurs. The transfer agent charges a $15 fee
against a shareholder's account for any checks that do
not clear.
Shares may be purchased by rendering payment in-kind in
the form of marketable securities, including but not
limited to shares of common stock and debt instruments,
provided the acquisition of such securities is consistent
with the Growth Fund's investment objective and otherwise
acceptable to the Investment Manager.
SHARE CERTIFICATES. Share certificates will not be issued
for shares unless the shareholder has held them for at
least thirty (30) days and has specifically requested
them. Most shareholders elect not to receive share
certificates. Certificates for full shares only will be
issued. Shareholders who lose a share certificate may
incur an expense to replace it.
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SHAREHOLDER SHAREHOLDER INQUIRIES AND SERVICES OFFERED. If there are
SERVICES any questions about the following services, please call
the Trust at 1-800-295-9779 or write the Trust, c/o
Firstar Trust Company, Post Office Box 701, Milwaukee,
Wisconsin 53201-0701. The Trust reserves the right to
amend the shareholder services described below or to
change their terms or conditions upon sixty (60) days'
notice to shareholders.
SHAREHOLDER STATEMENTS AND REPORTS. Each time a shareholder
buys or sells shares or reinvests a dividend or distribution
in the Growth Fund, the shareholder will receive a statement
confirming such transaction and listing
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LOU HOLLAND
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GROWTH FUND
the current share balance with the Fund. The Trust also
will send shareholders annual and semi-annual reports, as
well as year-end tax information about the accounts with
the Fund.
TELEPHONE PRIVILEGES. For convenience, the Trust provides
telephone privileges that allow telephone authorization to
(i) purchase shares in the Growth Fund, and (ii) redeem
shares in the Fund. Initial purchases of shares may not be
made by telephone. To utilize these telephone privileges,
check the appropriate boxes on the Application and supply
the Trust with the information required. Procedures have
been established by the Trust and Firstar that are
considered to be reasonable and are designed to confirm
personal identification information prior to acting on
telephone instructions, including tape recording telephone
communications and providing written confirmation of
instructions communicated by telephone. If the Investment
Manager does not employ reasonable procedures to confirm
that instructions communicated by telephone are genuine,
it may be liable for any losses arising out of any action
on its part or any failure or omission to act as a result
of its own negligence, lack of good faith, or willful
misconduct. In light of the procedures established, the
Trust will not be liable for following telephone
instructions that it or Firstar, as transfer agent,
believes to be genuine. During periods of extreme economic
conditions or market changes, requests by telephone may be
difficult to make due to heavy volume. During such times,
shareholders should consider placing orders by mail.
The telephone privileges are not available with respect to
shares for which certificates have been issued or with
respect to redemptions for accounts requiring supporting
legal documents.
TELEPHONE INVESTMENT PRIVILEGE. After an account with the
Trust has been opened, additional investments in the
amount of $1,000 or more may be made by telephoning the
Trust at 1-800-295-9779 between 9:00 a.m. and 4:00 p.m.
Eastern Time on any day the Trust is open. Telephone
investment requests made after 4:00 p.m. Eastern Time will
be processed as of the close of business on the next
business day. In accordance with a shareholder's
instructions, the Trust will electronically transfer
monies from a shareholder's bank account designated on the
Application to the shareholder's account with the Trust.
The designated bank must be a member of the Automated
Clearing House ("ACH") network and able to make electronic
transfers in order for a shareholder to use this
privilege. Most electronic fund transfers are completed
within two business days after the call requesting the
transfers.
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LOU HOLLAND
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GROWTH FUND
TELEPHONE REDEMPTION PRIVILEGE. The Telephone Redemption
Privilege permits a shareholder to authorize the
redemption of some or all of the shares in his or her
account with the Trust by telephoning the Trust at
1-800-295-9779 between 9:00 a.m. and 4:00 p.m. Eastern
Time on any day the Trust is open. In accordance with
telephone instructions, we will redeem shares of the
Growth Fund at their net asset value next determined after
a telephone redemption request is received. Telephone
redemption requests made after 4:00 p.m. Eastern Time will
be processed as of the close of business on the next
business day. Redemption proceeds will, in accordance with
any prior election made by a shareholder, be mailed to the
shareholder's current address, or transmitted by wire to
the shareholder's designated bank account. The bank
transmitting the wire may charge a $12 fee for the
service. The designated bank must be a member of the ACH
network and able to receive electronic transfers in order
to use this privilege. Telephone redemption requests will
not be processed if the shareholder has changed his or her
address within the preceding fifteen (15) days.
After an account has been opened, a written request must
be sent to the transfer agent in order to arrange for
telephone redemptions or to make changes in the bank or
account receiving the proceeds. The request must be signed
by each shareholder of an account and the signature
guaranteed.
AUTOMATIC INVESTMENT PLAN (AIP). The Trust offers an AIP
whereby a shareholder may purchase shares on a regular
scheduled basis ($50 minimum per transaction up to four
times per month). Under the AIP, the shareholder's
designated bank account is debited a preauthorized amount
and applied to purchase shares. The financial institution
must be a member of the ACH network. There is no charge
for this service. A $15 fee will be charged by the
transfer agent if there are insufficient funds in the
account at the time of the scheduled transaction. The
program will automatically terminate upon redemption of
all shares in an account.
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RETIREMENT PLANS Trust shares are available in connection with tax
benefitted retirement plans established under Section
401(a) or Section 403(b) of the Internal Revenue Code of
1986, as amended ("Code"), IRAs and SEP-IRAs under Section
408 of the Code, corporate sponsored profit-sharing plans,
and deferred compensation plans of state and local
governments and tax-exempt organizations that comply with
the provisions of Section 457 of the Code. Various
initial, annual maintenance and participant fees may apply
to these
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LOU HOLLAND
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GROWTH FUND
retirement plans. Applicable forms and information
regarding plan administration, all fees, and other plan
provisions are available from the Trust or Firstar, as
transfer agent.
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HOW THE GROWTH The net asset value per share of the Growth Fund is
FUND'S NET ASSET normally calculated as of the close of regular trading on
VALUE IS DETERMINED the New York Stock Exchange ("Exchange"), currently 4:00
p.m. Eastern Time, every day the Exchange is open for
trading. The per share net asset value, calculated as
described below, is effective for all orders received in
good order (as previously described) prior to the close of
trading on the Exchange for that day. Orders received
after the close of trading on the Exchange or on a day
when the Exchange is not open for business will be priced
at the per share net asset value next computed.
The net asset value of the Growth Fund's shares is
determined by adding the value of all securities, cash and
other assets of the Fund, subtracting the liabilities
(including accrued expenses and dividends payable), and
dividing the result by the total number of outstanding
shares in the Fund. Portfolio securities are valued
primarily based on market quotations, or if market
quotations are not available, by a method that the Board
of Trustees of the Trust (the "Board") believes accurately
reflects fair value.
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DIVIDENDS, The Growth Fund intends to elect to be treated and to
DISTRIBUTIONS, AND qualify as a "regulated investment company" under
TAXES Subchapter M of the Code in which case it will not be
subject to federal income tax on any income and capital
gains distributed to its shareholders.
As a result, it is the policy of the Growth Fund to
declare and distribute to its shareholders as income
dividends or capital gains distributions, at least
annually, substantially all of its ordinary income and
capital gains realized from the sale of its portfolio
securities, if any. Distributions will be made in the form
of additional shares unless the shareholder elects to
receive them in cash.
Income dividends for the Growth Fund will be declared and
paid annually, and all distributions of capital gains of
the Fund, if any, realized during the fiscal year, will be
declared and distributed annually. Income dividends are
derived from the Fund's net investment income, including
any net short-term capital gains and dividends received by
the Fund, and are taxable to shareholders as ordinary
income. Distributions of capital gains by the Fund are
derived from the Fund's long-term capital gains and are
taxable to
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LOU HOLLAND
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GROWTH FUND
shareholders as long-term capital gains, regardless of how
long the shares are held. Income dividends and
distributions of capital gains declared in October,
November or December and paid in January are taxable in
the year they are declared. The Trust will mail
shareholders a Form 1099 by the end of January indicating
the federal tax status of income dividends and capital
gains distributions.
BACKUP WITHHOLDING. The Trust is required by federal law
to withhold 31% of reportable payments (which may include
income dividends, capital gains distributions, and share
redemption proceeds) paid to shareholders who have not
complied with IRS regulations. In order to avoid this
backup withholding requirement, certification is required
on the Application, or on a separate W-9 Form supplied by
Firstar, as transfer agent, that the Social Security or
Taxpayer Identification Number is correct (or that the
shareholder has applied for such a number and is waiting
for it to be issued), and that the shareholder is not
currently subject to, or exempt from, backup withholding.
REINVESTMENT OF INCOME DIVIDENDS AND CAPITAL GAINS
DISTRIBUTIONS. Unless elected otherwise, as permitted on
the Application, income dividends and distributions of
capital gains income with respect to the Growth Fund will
be reinvested in additional shares of the Fund and will be
credited to the shareholder's account with the Fund at the
net asset value per share next determined as of the
ex-dividend date. Both income dividends and distributions
of capital gains income are paid by the Fund to each
shareholder on the basis of the shareholder's relative net
assets. As a result, at the time of such payment, the net
asset value per share of the Fund will be reduced by the
amount of such payment. Payments from the Fund to
shareholders of income dividends and capital gains
distributions are taxable to shareholders of the Fund when
such dividends and distributions are declared, regardless
of whether they are taken in cash or reinvested in shares
of the Fund.
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HOW TO REDEEM Shareholders have the right to redeem (subject to the
SHARES restrictions outlined below) all or any part of their
shares in the Growth Fund at a price equal to the net
asset value of such shares next computed following receipt
and acceptance of the redemption request by the Trust.
Unless a shareholder has selected the Telephone Redemption
Privilege and provided the required information, in order
to redeem shares in the Fund, a written request in "proper
form" (as explained below) must be sent to Firstar Trust
Company, Post Office Box 701, Milwaukee, Wisconsin
53201-0701. Correspondence
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LOU HOLLAND
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GROWTH FUND
sent by overnight delivery services should be sent to
Firstar Trust Company, 3rd Floor, 615 East Michigan
Street, Milwaukee, Wisconsin 53202. A shareholder cannot
redeem shares by telephone unless the shareholder is
eligible to use the Telephone Redemption Privilege. In
addition, the Trust cannot accept requests which specify a
particular date for redemption or which specify any other
special conditions.
PROPER FORM FOR ALL REDEMPTION REQUESTS. A redemption
request must be in proper form. To be in proper form, a
redemption request must include: (i) share certificates,
if any, endorsed by all registered shareholders for the
account exactly as the shares are registered and the
signature(s) must be guaranteed, as described below; (ii)
for written redemption requests, a "letter of
instruction," which is a letter specifying the Growth Fund
by name, the number of shares to be sold, the name(s) in
which the account is registered, and the account number.
The letter of instruction must be signed by all registered
shareholders for the account using the exact names in
which the account is registered; (iii) other supporting
legal documents, as may be necessary, for redemption
requests by corporations, trusts, and partnerships; and
(iv) any signature guarantees that are required as
described above in (i), or required by the Trust where the
value of the shares being redeemed is $10,000 or greater,
or where the redemption proceeds are to be sent to an
address other than the address of record or to a person
other than the registered shareholder(s) for the account.
Signature guarantees are required if the amount being
redeemed is $10,000 or more but generally are not required
for redemptions made using the Telephone Redemption
Privilege. If proceeds from a redemption made using the
Telephone Redemption Privilege are to be sent to a person
other than the registered shareholders for the account or
to an address or account other than that of record for a
period no less than fifteen (15) days prior to the date of
the request, then a signature guarantee would be required.
Signature guarantees, when required, can be obtained from
any one of the following institutions: (i) a bank; (ii) a
securities broker or dealer, including a Government or
municipal securities broker or dealer, that is a member of
a clearing corporation or has net capital of at least
$100,000; (iii) a credit union having authority to issue
signature guarantees; (iv) a savings and loan association,
a building and loan association, a cooperative bank, a
federal savings bank or association; or (v) a national
securities exchange, a registered securities exchange or a
clearing agency. Notaries public are not acceptable
guarantors.
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GROWTH FUND
A redemption request will not be processed and will be
held until it is in proper form, as described above.
RECEIVING A REDEMPTION PAYMENT. Except under certain
emergency conditions, a redemption payment will be sent to
the shareholder within seven (7) days after receipt of the
corresponding telephone or written redemption request, in
proper form, by the Trust. No charge of any kind is
imposed on any redemption request.
If a redemption request is with respect to shares
purchased by a personal, corporate, or government check
within ten (10) days of the purchase date, the redemption
payment will be held until the purchase check has cleared
(which may take up to ten (10) days from the purchase
date), although the shares redeemed will be priced for
redemption upon receipt of the redemption request. The
inconvenience of this ten (10) day check clearing period
can be avoided by purchasing shares with a certified,
treasurer's or cashier's check, or with a federal fund or
bank wire.
MINIMUM ACCOUNT SIZE. Due to the relatively high cost of
maintaining accounts, the Trust reserves the right to redeem
shares in any account if, as the result of the redemptions,
the value of that account drops below $2,000. A shareholder
is allowed at least sixty (60) days, after written notice by
the Trust, to make an additional investment to bring the
account value up to at least $2,000 before the redemption is
processed.
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HOW THE TRUST IS BOARD OF TRUSTEES. The management of the Trust's business
MANAGED and affairs is the responsibility of its Board. Although
the Board is not involved in the day-to-day operations of
the Trust, the Board has the responsibility for
establishing broad operating policies and supervising the
overall performance of the Trust.
INVESTMENT MANAGER. The Trust is managed by Holland
Capital Management, a Delaware limited partnership whose
principal place of business is Suite 3260, 35 West Wacker
Drive, Chicago, Illinois 60601. The Investment Manager has
not previously served as investment manager to any other
registered investment company. However, the executives and
members of the investment management staff have extensive
experience in managing investments. In addition, Louis A.
Holland, the Managing Partner and Chief Investment Officer
of the Investment Manager, has served as an investment
adviser for the past 25 years.
Subject to the authority of the Board, the Investment
Manager supervises and directs the day-to-day investments
and operation of the Growth Fund in
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LOU HOLLAND
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GROWTH FUND
accordance with the Fund's investment objective,
investment program, policies, and restrictions. The
Investment Manager also supervises the overall
administration of the Trust, which includes, among other
activities, preparing and filing documents required for
compliance of the Trust with applicable laws and
regulations, preparing agendas and other supporting
documents for the meetings of the Board, maintaining the
corporate records and books of the Trust, and serving as
the Trust's liaison with its independent public accountant
and any service providers such as the custodian, transfer
agent, and administrator.
The persons employed by or associated with the Investment
Manager who are primarily responsible for the day-to-day
management of the Growth Fund's portfolio, are Louis A.
Holland, Monica L. Walker and Laura J. Janus. Their
business experience for the past five years is as follows:
Mr. Holland has served as Managing Partner and Chief
Investment Officer of the Investment Manager, and
President, Treasurer and Director of the Distributor and
of Holland Capital Management, Inc., the General Partner
of the Investment Manager; Ms. Walker has served as
portfolio manager with respect to the Investment Manager's
account clients, and as Trust Funds Administration Manager
of the retirement and thrift and savings plans of Texas
Utilities Company; and Ms. Janus has served as portfolio
manager with respect to the Investment Manager's account
clients, and as Treasurer/ Analyst for Mutual Trust Life
Insurance Company.
The Trust pays the Investment Manager, on a monthly basis,
an investment management fee based on the Growth Fund's
average daily net assets at the following annualized
rates: with respect to the Fund, .85% of the average daily
net assets up to $500 million, .75% of the average daily
net assets up to the next $500 million, and .65% of the
average daily net assets in excess of $1 billion.
The Trust bears all expenses of its operation, other than
those assumed by the Investment Manager. Such expenses
include payment for distribution services, transfer agent
services, accounting services, certain administrative
services, legal fees, and payment of taxes. In addition,
the expense of organizing the Trust and registering and
qualifying its initial shares under federal and state
securities laws will be charged to the Trust's operations,
as an expense, and amortized over a period not to exceed
five years.
DISTRIBUTOR. HCM Investments, Inc. serves as principal
underwriter and the Distributor of the shares of the Growth
Fund pursuant to a Distribution Agreement between the
Distributor and the Trust. The Distributor is a
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LOU HOLLAND
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GROWTH FUND
Delaware corporation whose principal place of business is
Suite 3260, 35 West Wacker Drive, Chicago, Illinois 60601.
The Distributor is an affiliate of the Investment Manager,
as both the Distributor and the Investment Manager are
controlled by Louis A. Holland.
The Trust's shares are sold on a no-load basis and,
therefore, the Distributor receives no sales commission or
sales load for providing services to the Trust under the
Distribution Agreement. The Trust has not currently
entered into any plan or agreement for the payment of fees
pursuant to Rule 12b-1 under the Investment Company Act of
1940 (the "1940 Act"), but reserves the right to do so
with respect to any future classes of shares of any
series.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT.
Pursuant to written agreements between it and Firstar
Trust Company ("Firstar"), Firstar will serve as
custodian, transfer agent and dividend disbursing agent
for the Trust. Firstar also will provide fund accounting
and certain administrative services to the Trust. The
principal business address of Firstar is 615 East Michigan
Street, Post Office Box 701, Milwaukee, Wisconsin
53201-0701.
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RISK FACTORS, OTHER REPURCHASE AGREEMENTS. The Growth Fund may utilize
INVESTMENT repurchase agreements through which it may purchase a
PRACTICES, AND security (the "underlying security") from a well
POLICIES OF THE established domestic securities dealer or bank that is a
GROWTH FUND member of the Federal Reserve System and the seller of the
repurchase agreement (i.e., the securities dealer or bank)
agrees to repurchase the underlying security at a mutually
agreed upon time and price. In these repurchase
transactions, the underlying security is held in custody
for the Fund through the federal book entry system as
collateral and marked-to-market on a daily basis to ensure
full collateralization of the repurchase agreement. The
underlying security must be a high-quality debt security
and must be determined to present minimal credit risks. In
the event of bankruptcy or default of certain sellers of
repurchase agreements, the Fund could experience costs and
delays in liquidating the underlying security held as
collateral and might incur a loss if such collateral
declines in value during this period.
SECURITIES OF FOREIGN ISSUERS. The Growth Fund may invest
up to 20% of its total assets in securities of foreign
issuers. As stated above, investments in common stocks of
foreign issuers will be made primarily through the use of
U.S. dollar-denominated American Depositary Receipts
("ADRs"), although direct market purchases also may be made.
ADRs are U.S. dollar-denominated certificates issued by a
U.S. bank or trust company and
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LOU HOLLAND
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GROWTH FUND
represent the right to receive securities of a foreign
issuer deposited in a domestic bank or foreign branch of a
U.S. bank and traded on a U.S. exchange or in an
over-the-counter market.
Investing in securities of foreign issuers involves
considerations not typically associated with investing in
securities of companies organized and operated in the U.S.
Foreign securities generally are denominated and pay
dividends or interest in foreign currencies. The Growth
Fund may from time to time hold various foreign currencies
pending their investment in foreign securities or their
conversion into U.S. dollars. The value of the assets of
the Fund as measured in U.S. dollars may therefore be
affected favorably or unfavorably by changes in exchange
rates. There may be less publicly available information
concerning foreign issuers than is available with respect
to U.S. issuers. Foreign securities may not be registered
with the SEC, and generally, reporting requirements
comparable to those applicable to U.S. issuers.
ILLIQUID SECURITIES. The Growth Fund will not invest more
than 15% of its net assets in illiquid securities,
including securities that are illiquid by virtue of the
absence of a readily available market or legal or
contractual restrictions on resale. Securities that have
legal or contractual restrictions on resale but have a
readily available market are not deemed illiquid for
purposes of this limitation. The Investment Manager will
monitor the liquidity of such restricted securities under
the supervision of the Board.
The Growth Fund may invest in commercial paper issued in
reliance on the exemption from registration afforded by
Section 4(2) of the Securities Act of 1933 (the "1933
Act"). Commercial paper is restricted as to disposition
under federal securities law, and is generally sold to
institutional investors, such as the Fund, who agree that
they are purchasing the paper for investment purposes and
not with a view to public distribution. Any resale by the
purchaser must be in an exempt transaction. Commercial
paper is normally resold to other institutional investors
like the Fund through or with the assistance of the issuer
or investment dealers who make a market in commercial
paper, thus providing liquidity. The Fund believes that
commercial paper and possible certain other restricted
securities which meet the criteria for liquidity
established by the Board are quite liquid. The Fund
intends, therefore, to treat the restricted securities
which meet the criteria for liquidity established by the
Board, including commercial paper, as determined by the
Investment Manager, as liquid and not subject to the
investment limitations applicable to illiquid securities.
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LOU HOLLAND
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GROWTH FUND
Rule 144A adopted by the SEC allows for a broader
institutional trading market for securities otherwise
subject to a restriction on resale to the general public.
Rule 144A establishes a "safe harbor" from the
registration requirements of the 1933 Act for resales of
certain securities to qualified institutional buyers. The
Investment Manager anticipates that the market for certain
restricted securities such as institutional commercial
paper may expand further as a result of this regulation
and use of automated systems for the trading, clearance
and settlement of unregistered securities of domestic and
foreign issuers, such as the PORTAL System sponsored by
the NASDAQ Stock Market, Inc.
OPTIONS AND FUTURES CONTRACTS. The Growth Fund may write
covered call options, buy put options, buy call options
and write put options, without limitation except as noted
in this paragraph and the Statement of Additional
Information. Such options may relate to particular
securities or to various indexes and may or may not be
listed on a national securities exchange and issued by the
Options Clearing Corporation. The Fund may also invest in
futures contracts and options on futures contracts (index
futures contracts or interest rate futures contracts, as
applicable) for hedging purposes or for other purposes so
long as aggregate initial margins and premiums required
for non-hedging positions do not exceed 5% of its net
assets, after taking into account any unrealized profits
and losses on any such contracts it has entered into.
However, the Fund may not write put options or purchase or
sell futures contracts or options on futures contracts to
hedge more than its total assets unless immediately after
any such transaction the aggregate amount of premiums paid
for put options and the amount of margin deposits on its
existing futures positions do not exceed 5% of its total
assets.
Options trading is an highly specialized activity which
entails greater than ordinary investment risks. A call
option for a particular security gives the purchaser of
the option the right to buy, and a writer the obligation
to sell, the underlying security at the stated exercise
price at any time prior to the expiration of the option,
regardless of the market price of the security. The
premium paid to the writer is in consideration for
undertaking the obligations under the option contract. A
put option for a particular security gives the purchaser
the right to sell the underlying security at the stated
exercise price at any time prior to the expiration date of
the option, regardless of the market price of the
security. In contrast to an option on a particular
security, an option on an index provides the holder with
the right to make or receive a cash settlement upon
exercise of the option. The
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LOU HOLLAND
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GROWTH FUND
amount of this settlement will be equal to the difference
between the closing price of the index at the time of
exercise and the exercise price of the option expressed in
dollars, times a specified multiple.
The Growth Fund may invest in unlisted over-the-counter
options only with broker-dealers deemed creditworthy by
the Investment Manager. Closing transactions in certain
options are usually effected directly with the same
broker-dealer that effected the original option
transaction. The Fund bears the risk that the broker-dealer
will fail to meet its obligations. There is no assurance
that the Fund will be able to close an unlisted option
position. Furthermore, unlisted options are not subject to
the protections afforded purchasers of listed options by
the Options Clearing Corporation, which performs the
obligations of its members who fail to do so in connection
with the purchase or sale of options.
To enter into a futures contract, the Growth Fund must
make a deposit of an initial margin with its custodian in
a segregated account in the name of its futures broker.
Subsequent payments to or from the broker, called
variation margin, will be made on a daily basis as the
price of the underlying security or index fluctuates,
making the long and short positions in the futures
contracts more or less valuable.
The risks related to the use of options and futures
contracts include: (i) the correlation between movements
in the market price of a portfolio's investments (held or
intended for purchase) being hedged and in the price of
the futures contract or option may be imperfect; (ii)
possible lack of a liquid secondary market for closing out
options or futures positions; (iii) the need for
additional portfolio management skills and techniques; and
(iv) losses due to unanticipated market movements.
Successful use of options and futures by the Growth Fund
is subject to the Investment Manager's ability to
correctly predict movements in the direction of the
market. For example, if the Fund uses future contracts as
a hedge against the possibility of a decline in the market
adversely affecting securities held by it and securities
prices increase instead, the Fund will lose part or all of
the benefit of the increased value of its securities which
it has hedged because it will have approximately equal
offsetting losses in its futures positions. The risk of
loss in trading futures contracts in some strategies can
be substantial, due both to the low margin deposits
required, and the extremely high degree of leverage
involved in future pricing. As a result, a relatively
small price movement in a futures contract may result in
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LOU HOLLAND
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GROWTH FUND
immediate and substantial loss or gain to the investor.
Thus, a purchase or sale of a futures contract may result
in losses or gains in excess of the amount invested in the
contract.
WARRANTS. The Growth Fund may invest in warrants, which
are certificates that give the holder the right to buy a
specific number of shares of a company's stock at a
stipulated price within a certain time limit (generally,
two or more years). Because a warrant does not carry with
it the right to dividends or voting rights with respect to
the securities which it entitles a holder to purchase, and
because it does not represent any rights in the assets of
the issuer, warrants may be considered more speculative
than certain other types of investments. Also, the value of
a warrant does not necessarily change with the value of the
underlying securities, and a warrant ceases to have value
if it is not exercised prior to its expiration date.
LENDING OF PORTFOLIO SECURITIES. In order to generate
income, the Growth Fund may lend portfolio securities on a
short-term or a long-term basis, up to one-third of the
value of its total assets to broker-dealers, banks, or
other institutional borrowers of securities. Since this
technique may be considered a form of leverage, the Fund
will only enter into loan arrangements with
broker-dealers, banks, or other institutions which the
Investment Manager for the Fund has determined are
creditworthy under guidelines established by the Trustees,
and will receive collateral in the form of cash (which may
be invested in accordance with the Fund's investment
program) or U.S. Government securities, equal to at least
100% of the value of the securities loaned at all times.
The Fund will continue to receive the equivalent of the
interest or dividends paid by the issuer of the securities
lent. The Fund may also receive interest on the investment
of the collateral or a fee from the borrower as
compensation for the loan. The Fund will retain the right
to call, upon notice, the securities lent. The principal
risk is the potential insolvency of the broker-dealer or
other borrower. As a result there may be delays in
recovery, or even loss of rights in the collateral should
the borrower fail financially. The Investment Manager
reviews the creditworthiness of the entities to which
loans are made to evaluate those risks.
WHEN-ISSUED SECURITIES. The Growth Fund may utilize up to
5% of its total assets to purchase securities on a
"when-issued" basis, which normally settle within 30 to 45
days. The Fund will enter into a when-issued transaction
for the purpose of acquiring portfolio securities and not
for the purpose of leverage, but may sell the securities
before the settlement date if the Investment Manager deems
it advantageous to do so. The payment obligation and the
interest rate that will be received on when-issued
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LOU HOLLAND
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GROWTH FUND
securities are fixed at the time the buyer enters into the
commitment. Due to fluctuations in the value of securities
purchased or sold on a when-issued basis, the yields
obtained may be higher or lower than the yields available
in the market on the dates when the investments are
actually delivered to the buyers. When the Fund agrees to
purchase when-issued securities, its custodian will set
aside in a segregated account cash, U.S. government
securities or other liquid high-grade debt obligations or
other securities that are acceptable as collateral to the
appropriate regulatory authority equal to the amount of
the commitment. Normally, the custodian will set aside
portfolio securities to satisfy a purchase commitment, and
in such a case the Fund may be required subsequently to
place additional assets in the segregated account in order
to ensure that the value of the account remains equal to
the amount of the Fund's commitment. It may be expected
that the Fund's net assets will fluctuate to a greater
degree when it sets aside portfolio securities to cover
such purchase commitments than when it sets aside cash.
When the Fund engages in when-issued transactions, it
relies on the other party to consummate the trade. Failure
of the seller to do so may result in the Fund's incurring
a loss or missing an opportunity to obtain a price
considered to be advantageous.
OTHER INVESTMENT COMPANIES. The Growth Fund may also
invest up to 10% of its total assets in the securities of
other investment companies, including closed-end
investment companies, in accordance with Section
12(d)(1)(A) of the 1940 Act. Such investment in other
investment companies will take into consideration the
operating expenses and fees of these companies, including
advisory fees, as such expenses may reduce investment
return.
CERTAIN POLICIES TO REDUCE RISK. The Growth Fund has
adopted certain fundamental investment policies in
managing its portfolio that are designed to maintain the
portfolio's diversity and reduce risk. The Fund will (i)
not purchase the securities of any company if, as a
result, the Fund's holdings of that issue would amount to
more than 5% of the value of the Fund's total assets, or
more than 25% of the value of total assets would be
invested in any one industry; and (ii) not borrow money
except for temporary purposes and then only in amounts not
exceeding 15% of the value of its total assets. The Fund
will not borrow in order to increase income, but only to
facilitate redemption requests that might otherwise
require untimely disposition of portfolio securities. If
the Fund borrows money, its share price may be subject to
greater fluctuation until the borrowing is paid off.
Limitation (i) does not apply to obligations issued or
guaranteed by the U.S.
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LOU HOLLAND
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GROWTH FUND
Government, its agencies, and instrumentalities. These
investment policies are fundamental and may be changed for
the Fund only by approval of the Fund's shareholders.
If the Fund makes additional investments while borrowings
are outstanding, this may be considered a form of
leverage. The 1940 Act requires the Fund to maintain
continuous asset coverage (that is, total assets including
borrowings, less liabilities exclusive of borrowings) of
300% of the amount borrowed. If the 300% asset coverage
should decline as a result of market fluctuations or other
reasons, the Fund may be required to sell some of its
portfolio holdings within three days to reduce its
borrowings and restore the 300% asset coverage, even
though it may be disadvantageous from an investment
standpoint to sell securities at that time. To avoid the
potential leveraging effects of the Fund's borrowings,
additional investments will not be made while borrowings
are in excess of 5% of the Fund's total assets.
In addition, it is a fundamental investment policy that
the Growth Fund may invest only up to 20% of its total
assets in securities of foreign issuers.
These fundamental investment policies may be changed only
with the consent of a "majority of the outstanding voting
securities" of the Growth Fund. As used in this Prospectus
and Statement of Additional Information, the term
"majority of the outstanding voting shares" means the
lesser of (i) 67% of the shares of the Fund present at a
meeting where the holders of more than 50% of the
outstanding shares of the Fund are present in person or by
proxy, or (ii) more than 50% of the outstanding shares of
the Fund.
FURTHER INFORMATION. The Growth Fund's investment program
is subject to further restrictions as described in the
Statement of Additional Information. The Fund's investment
program, unless otherwise specified, is not fundamental
and may be changed without shareholder approval by the
Board. The Fund's investment objective is fundamental and
may be changed only with approval of the Fund's
shareholders.
PORTFOLIO TURNOVER. Portfolio turnover will tend to rise
during periods of economic turbulence and decline during
periods of stable growth. A higher turnover rate
(100% or more) increases transaction costs (e.g. brokerage
commissions) and increases realized gains and losses.
The portfolio turnover rate for the period April 29, 1996
(commencement of operations) through December 31, 1996 for
the Growth Fund was 30.48%.
INVESTMENT PERFORMANCE. The Growth Fund may illustrate in
advertisements its average annual total return, which is
the rate of growth that would be necessary to achieve the
ending value of an investment kept in the Fund for the
period specified and is based on the following
assumptions: (i) all dividends and distributions by the
Fund are reinvested in shares of the Fund at net asset
value, and (ii) all recurring fees are included for
applicable periods.
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LOU HOLLAND
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GROWTH FUND
The Growth Fund may also illustrate in advertisements its
cumulative total return for several time periods
throughout the Fund's life based on an assumed initial
investment of $1,000. Any such cumulative total return
will assume the reinvestment of all income dividends and
capital gains distributions for the indicated periods and
will include all recurring fees.
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PORTFOLIO The Distributor may act as a broker for the Growth Fund in
TRANSACTIONS AND conformity with the securities laws and rules thereunder.
BROKERAGE PRACTICES Allocations of portfolio transactions for the Fund,
including their frequency, to various brokers is
determined by the Investment Manager in its best judgment
and in a manner deemed fair and reasonable to
shareholders. The primary consideration is prompt and
efficient execution of orders in an effective manner at
the most favorable price. The Investment Manager may also
consider sales of the Fund's shares as a factor in the
selection of broker-dealers, subject to the policy of
obtaining best price and execution. For further
information regarding the allocation of portfolio
transactions and brokerage, see the Statement of
Additional Information.
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ORGANIZATION OF THE The Trust, a Delaware business trust, organized on
TRUST December 20, 1995, currently consists of one portfolio,
the Growth Fund. Shareholders having at least two-thirds
of the outstanding shares of the Trust may remove a
Trustee from office by a vote cast in person or by proxy
at a meeting of shareholders called for that purpose at
the request of holders of 10% or more of the outstanding
shares of the Trust. The Trust has an obligation to assist
in such shareholder communications. The Trust does not
routinely hold annual meetings of shareholders. Each share
of the Fund is entitled to one vote on all matters
submitted to a vote of all shareholders of the Fund.
Fractional shares, when issued, have the same rights,
proportionately, as full shares. All shares are fully
paid and nonassessable when issued and have no preemptive,
conversion or cumulative voting rights.
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20
<PAGE>
THE LOU HOLLAND TRUST
Suite 3260
35 West Wacker Drive
Chicago, Illinois 60601
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information is not a prospectus, but should be
read in conjunction with the Prospectus for the Trust dated May 1, 1997,
which may be obtained by telephoning the Trust at 1-800-295-9779. This
Statement of Additional Information has been incorporated by reference into
the Prospectus.
The date of this Statement of Additional Information is May 1, 1997.
TABLE OF CONTENTS
ITEM PAGE
- ---- ----
General Information and History B-
Investment Restrictions B-
Description of Certain Investments B-
Management of The Trust B-
Committees of the Board of Trustees B-
Principal Holders of Securities B-
Investment Management and Other Services B-
Brokerage Allocation and Other Practices B-
Purchase and Redemption of Securities Being Offered B-
Determination of Net Asset Value B-
Taxes B-
Organization of The Trust B-
Performance Information About the Growth Fund B-
Legal Matters B-
Independent Auditors B-
Financial Statements B-
Appendix B-
<PAGE>
GENERAL INFORMATION AND HISTORY
The Trust is a Delaware business trust registered with the Securities and
Exchange Commission ("SEC") as a no-load, open-end diversified management
investment company, commonly known as a "mutual fund." The Trust is organized
as a series company and currently consists of one series, the Growth Fund. In
the future, the Trust may establish additional series.
The Growth Fund is a separate investment portfolio with a distinct investment
objective, investment programs, policies, and restrictions. The Fund is
managed by Holland Capital Management (the "Investment Manager"), which
directs the day-to-day operations of the Fund. The Investment Manager also
provides administrative services to the Trust. HCM Investments, Inc. (the
"Distributor"), an affiliate of the Investment Manager, serves as
distributor for the shares of the Fund.
INVESTMENT RESTRICTIONS
The following fundamental investment restrictions apply to the Growth Fund and
may be changed only by approval of the Fund's shareholders. Except with
respect to borrowing money, as described in (2) below, if a percentage
limitation is adhered to at the time of investment, a later increase or
decrease in that percentage amount resulting from any change in value of the
portfolio securities or the Fund's net assets will not result in a violation
of such investment restriction.
The Growth Fund will not:
(1) MARGIN AND SHORT SALES: Purchase securities on margin or sell securities
short, except that the Growth Fund may make margin deposits in connection with
permissible options and futures transactions subject to (5) and (8) below, may
make short sales against the box and may obtain short-term credits as may be
necessary for clearance of transactions;
(2) SENIOR SECURITIES AND BORROWING: Issue any class of securities senior to
any other class of securities, although the Growth Fund may borrow from a bank
for temporary, extraordinary or emergency purposes or through the use of
reverse repurchase agreements. The Fund may borrow up to 15% of the value of
its total assets in order to meet redemption requests. No securities will be
purchased when borrowed money exceeds one-third of the value of the Fund's
total assets. The Fund may enter into futures contracts subject to (5) below;
(3) REAL ESTATE: Purchase or sell real estate, or invest in real estate
limited partnerships, except the Growth Fund may, as appropriate and consistent
with its investment objective, investment programs, policies and other
investment restrictions, buy
B-2
<PAGE>
securities of issuers that engage in real estate operations and securities
that are secured by interests in real estate (including shares of real estate
mortgage investment conduits, mortgage pass-through securities,
mortgage-backed securities and collateralized mortgage obligations) and may
hold and sell real estate acquired as a result of ownership of such
securities;
(4) CONTROL OF PORTFOLIO COMPANIES: Invest in portfolio companies for the
purpose of acquiring or exercising control of such companies;
(5) COMMODITIES: Purchase or sell commodities and invest in commodities
futures contracts, except that the Growth Fund may enter into futures
contracts and options thereon where, as a result thereof, no more than 5% of
the total assets for the Fund (taken at market value at the time of entering
into the futures contracts) would be committed to margin deposits on such
futures contracts and premiums paid for unexpired options on such futures
contracts; provided that, in the case of an option that is "in-the-money" at
the time of purchase, the "in-the-money" amount, as defined under Commodity
Futures Trading Commission regulations, may be excluded in computing such 5%
limit;
(6) INVESTMENT COMPANIES: Invest in the securities of other open-end
investment companies, except that the Growth Fund may purchase securities of
other open-end investment companies provided that such investment is in
connection with a merger, consolidation, reorganization, or acquisition or by
purchase in the open market of such securities where no sponsor or dealer
commission or profit, other than a customary brokerage commission, is involved
and only if immediately thereafter the Fund (i) owns no more than 3% of the
total outstanding voting securities of any one investment company and (ii)
invests no more than 10% of its total assets (taken at market value) in the
securities of any one investment company or all other investment companies in
the aggregate;
(7) UNDERWRITING: Underwrite securities issued by other persons, except to the
extent that the Growth Fund may be deemed to be an underwriter, within the
meaning of the 1933 Act, in connection with the purchase of securities
directly from an issuer in accordance with the Fund's investment objective,
investment programs, policies, and restrictions;
(8) OPTIONS AND SPREADS: Invest in puts, calls, straddles, spreads or any
combination thereof, except that the Growth Fund may invest in and commit its
assets to writing and purchasing put and call options to the extent permitted
by the Prospectus and this Statement of Additional Information. In order to
comply with the securities laws of several states, the Fund (as a matter of
operating policy) will not write a covered call option if, as a result, the
aggregate market value of all portfolio securities covering call options or
subject to put options for the Fund
B-3
<PAGE>
exceeds 25% of the market value of the Fund's net assets. The Fund intends to
invest in options primarily to hedge against sudden fluctuations in the
financial markets;
(9) OIL AND GAS PROGRAMS: Invest in interests in oil, gas, or other mineral
exploration or development programs or oil, gas and mineral leases, although
investments may be made in the securities of issuers engaged in any such
businesses;
(10) OWNERSHIP OF PORTFOLIO SECURITIES BY OFFICERS AND TRUSTEES: Purchase
or retain the securities of any issuer if the officers and Trustees or the
Investment Manager who individually own more than 1/2 of 1% of the securities of
such issuer collectively own more than 5% of the securities of such issuer;
(11) LOANS: Make loans, except that the Growth Fund in accordance with its
investment objective, investment program, policies, and restrictions may: (i)
invest in a portion of an issue of publicly issued or privately placed bonds,
debentures, notes, and other debt securities for investment purposes; (ii)
purchase money market securities and enter into repurchase agreements,
provided such repurchase agreements are fully collateralized and marked to
market daily; and (iii) lend its portfolio securities in an amount not
exceeding one-third the value of the Fund's total assets;
(12) UNSEASONED ISSUERS: Invest more than 5% of its total assets in
securities of issuers, including their predecessors and unconditional
guarantors, which, at the time of purchase, have been in operation for less than
three years, other than obligations issued or guaranteed by the U.S. Government,
its agencies, and instrumentalities;
(13) RESTRICTED SECURITIES, ILLIQUID SECURITIES AND SECURITIES NOT READILY
MARKETABLE: Knowingly purchase or otherwise acquire any security or invest in
a repurchase agreement if, as a result, more than 15% of the net assets of the
Growth Fund would be invested in securities that are illiquid or not readily
marketable, including repurchase agreements maturing in more than seven days
and non-negotiable fixed time deposits with maturities over seven days. The
Fund may invest without limitation in restricted securities provided such
securities are considered to be liquid. As a matter of operating policy, in
compliance with certain state regulations, no more than 15% of any Fund's
total assets will be invested in restricted securities;
(14) MORTGAGING: Mortgage, pledge, or hypothecate in any other manner, or
transfer as security for indebtedness any security owned by the Growth Fund,
except as may be necessary in connection with (i) permissible borrowings (in
which event such mortgaging, pledging, and hypothecating may not exceed 15% of
the Fund's total
B-4
<PAGE>
assets in order to secure such borrowings) and (ii) the use of options and
futures contracts;
(15) DIVERSIFICATION: Make an investment unless 75% of the value of the Growth
Fund's total assets is represented by cash, cash items, U.S. Government
securities, securities of other investment companies and other securities. For
purposes of this restriction, the purchase of "other securities" is limited so
that no more than 5% of the value of the Fund's total assets would be invested
in any one issuer. As a matter of operating policy, the Fund will not consider
repurchase agreements to be subject to the above-stated 5% limitation if all
the collateral underlying the repurchase agreements are U.S. Government
securities and such repurchase agreements are fully collateralized; or
(16) CONCENTRATION: Invest 25% or more of the value of its total assets in any
one industry, except that the Growth Fund may invest 25% or more of the value
of its total assets in cash or cash items, securities issued or guaranteed by
the U.S. Government, its agencies or instrumentalities or instruments secured
by these money market instruments, such as repurchase agreements.
DESCRIPTION OF CERTAIN INVESTMENTS
The following is a description of certain types of investments which may be
made by the Growth Fund.
MONEY MARKET INSTRUMENTS
The Growth Fund may invest in high-quality money market instruments in order
to enable it to: (i) take advantage of buying opportunities; (ii) meet
redemption requests or ongoing expenses; or (iii) take defensive action as
necessary, or for other temporary purposes. The money market instruments that
may be used by the Fund include:
U.S. GOVERNMENT OBLIGATIONS: These consist of various types of marketable
securities issued by the U.S. Treasury, i.e., bills, notes and bonds. Such
securities are direct obligations of the U.S. Government and differ mainly in
the length of their maturity. Treasury bills, the most frequently issued
marketable Government security, have a maturity of up to one year and are issued
on a discount basis.
U.S. GOVERNMENT AGENCY SECURITIES: These consist of debt securities issued by
agencies and instrumentalities of the U.S. Government, including the various
types of instruments currently outstanding or which may be offered in the
future. Agencies include, among others, the Federal Housing Administration,
Government National Mortgage Association ("GNMA"), Farmer's Home Administration,
Export-Import Bank of the United States, Maritime Administration, and General
Services Administration.
B-5
<PAGE>
Instrumentalities include, for example, each of the Federal Home Loan Banks,
the National Bank for Cooperatives, the Federal Home Loan Mortgage Corporation
("FHLMC"), the Farm Credit Banks, the Federal National Mortgage Association
("FNMA"), and the U.S. Postal Service. These securities are either: (i) backed
by the full faith and credit of the U.S. Government (e.g., U.S. Treasury
Bills); (ii) guaranteed by the U.S. Treasury (e.g., GNMA mortgage-backed
securities); (iii) supported by the issuing agency's or instrumentality's
right to borrow from the U.S. Treasury (e.g., FNMA Discount Notes); or (iv)
supported only by the issuing agency's or instrumentality's own credit (e.g.,
each of the Federal Home Loan Banks).
BANK AND SAVINGS AND LOAN OBLIGATIONS: These include, among others,
certificates of deposit, bankers' acceptances, and time deposits. Certificates
of deposit generally are short-term, interest-bearing negotiable certificates
issued by commercial banks or savings and loan associations against funds
deposited in the issuing institution. Bankers' acceptances are time drafts
drawn on a commercial bank by a borrower, usually in connection with an
international commercial transaction (e.g., to finance the import, export,
transfer, or storage of goods). With bankers' acceptances, the borrower is
liable for payment as is the bank, which unconditionally guarantees to pay the
draft at its face amount on the maturity date. Most bankers' acceptances have
maturities of six months or less and are traded in secondary markets prior to
maturity. Time deposits are generally short-term, interest-bearing negotiable
obligations issued by commercial banks against funds deposited in the issuing
institutions. In the case of domestic banks, the Growth Fund will not invest
in any security issued by a commercial bank or a savings and loan association
unless the bank or savings and loan association is a member of the Federal
Deposit Insurance Corporation ("FDIC"), or in the case of savings and loan
associations, insured by the FDIC; provided, however, that such limitation
will not prohibit investments in foreign branches of domestic banks which meet
the foregoing requirements. The Fund will not invest in time-deposits maturing
in more than seven days.
COMMERCIAL PAPER AND OTHER SHORT-TERM CORPORATE DEBT INSTRUMENTS: These
include commercial paper (i.e., short-term, unsecured promissory notes issued
by corporations to finance short-term credit needs). Commercial paper is
usually sold on a discount basis and has a maturity at the time of issuance
not exceeding nine months. Also included are non-convertible corporate debt
securities (e.g., bonds and debentures). Corporate debt securities with a
remaining maturity of less than 13 months are liquid (and tend to become more
liquid as their maturities lessen) and are traded as money market securities.
The Growth Fund may purchase corporate debt securities having no more than 13
months remaining to maturity at the date of settlement.
B-6
<PAGE>
REPURCHASE AGREEMENTS: The Growth Fund may invest in repurchase agreements. A
repurchase agreement is an instrument under which the investor (such as the
Fund) acquires ownership of a security (known as the "underlying security")
and the seller (i.e., a bank or primary dealer) agrees, at the time of the
sale, to repurchase the underlying security at a mutually agreed upon time and
price, thereby determining the yield during the term of the agreement. This
results in a fixed rate of return insulated from market fluctuations during
such period, unless the seller defaults on its repurchase obligations. The
underlying securities will consist of high-quality debt securities and must be
determined to present minimal credit risks. Repurchase agreements are, in
effect, collateralized by such underlying securities, and, during the term of
a repurchase agreement, the seller will be required to mark to market such
securities every business day and to provide such additional collateral as is
necessary to maintain the value of all collateral at a level at least equal to
the repurchase price. Repurchase agreements usually are for short periods,
often under one week, and will not be entered into by the Fund for a duration
of more than seven days if, as a result, more than 15% of the net asset value
of the Fund would be invested in such agreements or other securities which are
not readily marketable.
The Growth Fund will assure that the amount of collateral with respect to any
repurchase agreement is adequate. As with a true extension of credit, however,
these is risk of delay in recovery or the possibility of inadequacy of the
collateral should the seller of the repurchase agreement fail financially. In
addition, the Fund could incur costs in connection with the disposition of the
collateral if the seller were to default. The Fund will enter into repurchase
agreements only with sellers deemed to be creditworthy by the Board and only
when the economic benefit to the Fund is believed to justify the attendant
risks. The Fund has adopted standards for the sellers with whom they will
enter into repurchase agreements. The Board believes these standards are
designed to reasonably assure that such sellers present no serious risk of
becoming involved in bankruptcy proceedings within the time frame contemplated
by the repurchase agreement. The Fund may enter into repurchase agreements
only with member banks of the Federal Reserve System or primary dealers in
U.S. Government securities.
SECURITIES OF FOREIGN ISSUERS: As described in the Prospectus, the Growth Fund
also may purchase equity and equity-related securities of foreign issuers. Also
as described in the Prospectus, the Fund may purchase American Depositary
Receipts ("ADRs"). ADRs are U.S. dollar-denominated certificates issued by a
U.S. bank or trust company and represent the right to receive securities of a
foreign issuer deposited in a domestic bank or foreign branch of a U.S. bank and
traded on a U.S. exchange or in an over-the-counter market. Generally, ADRs are
in registered form. There are no fees imposed on the purchase or sale of ADRs
when purchased from the issuing bank or trust company in the initial
underwriting, although
B-7
<PAGE>
the issuing bank or trust company may impose charges for the collection of
dividends and the conversion of ADRs into the underlying securities.
Investments in ADRs have certain advantages over direct investment in the
underlying foreign securities since: (i) ADRs are U.S. dollar-denominated
investments that are registered domestically, easily transferable and for
which market quotations are readily available; and (ii) issuers whose
securities are represented by ADRs are subject to the same auditing,
accounting, and financial reporting standards as domestic issuers.
Investments in foreign securities involve certain risks that are not
typically associated with investing in domestic issuers, including: (i) less
publicly available information about the securities and about the foreign
company or government issuing them; (ii) less comprehensive accounting,
auditing, and financial reporting standards, practices, and requirements;
(iii) stock markets outside the U.S. may be less developed or efficient than
those in the U.S. and government supervision and regulation of those stock
markets and brokers and the issuers in those markets is less comprehensive
than that in the U.S.; (iv) the securities of some foreign issuers may be less
liquid and more volatile than securities of comparable domestic issuers; (v)
settlement of transactions with respect to foreign securities may sometimes be
delayed beyond periods customary in the U.S.; (vi) fixed brokerage commissions
on certain foreign stock exchanges and custodial costs with respect to
securities of foreign issuers generally exceed domestic costs; (vii) with
respect to some countries, there is the possibility of unfavorable changes in
investment or exchange control regulations, expropriation, or confiscatory
taxation, taxation at the source of the income payment or dividend
distribution, limitations on the removal of funds or other assets of the Fund,
political or social instability, or diplomatic developments that could
adversely affect U.S. investments in those countries; and (viii) foreign
securities denominated in foreign currencies may be affected favorably or
unfavorably by changes in currency exchange rates and exchange control
regulations and the Fund may incur costs in connection with conversions
between various currencies. Specifically, to facilitate its purchase of
securities denominated in foreign currencies, the Fund may engage in currency
exchange transactions to convert currencies to or from U.S. dollars. The Fund
does not intend to hedge its foreign currency risks and will engage in
currency exchange transactions on a spot (i.e., cash) basis only at the spot
rate prevailing in the foreign exchange market.
EQUITY SECURITIES. As stated in the Prospectus, the Growth Fund invests
primarily in the common stocks of a diversified group of companies that have
(i) demonstrated historical growth of earnings faster than the general market,
(ii) earnings growth stability, (iii) a return on equity higher than the
general market, and (iv) dividend growth of the portfolio is typically greater
than that of the market, while dividend yield is typically less.
B-8
<PAGE>
MANAGEMENT OF THE TRUST
TRUSTEES AND OFFICERS
The Trustees and officers of the Trust, together with information as to their
principal business occupations during the last five years, are shown below.
Any Trustee who is considered an "interested person" of the Trust (as defined
in Section 2(a)(19) of the 1940 Act) is indicated by an asterisk next to his
or her name. The address for all interested persons, unless otherwise
indicated, is Suite 3260, 35 West Wacker Drive, Chicago, Illinois 60601:
<TABLE>
<CAPTION>
POSITION WITH THE TRUST AND
PRINCIPAL OCCUPATION WITH THE
NAME AGE PAST FIVE YEARS
<S> <C> <C>
*Louis A. Holland 55 President, Trustee and Chairman of the Board of
Trustees. Managing Partner and Chief Investment
Officer of Holland Capital Management, L.P.
President, Treasurer and Director, HCM
Investments, Inc.
*Monica L. Walker 38 SECRETARY AND TRUSTEE. Portfolio Manager, Holland
Capital Management, L.P.; Vice President, HCM
Investments, Inc.
*Laura J. Janus 49 TREASURER. Portfolio Manager, Holland Capital
Management, L.P.; Vice President, HCM Investments,
Inc.
Lester H. McKeever, Jr. 62 TRUSTEE. Managing Partner, Washington, Pittman &
6700 S. Oglesby Ave. McKeever, Certified Public Accountants &
Chicago, IL 60649-1301 Management Consultants.
Kenneth R. Meyer 52 TRUSTEE. Executive Vice President and Managing
1012 Westhoor Rd. Director, Lincoln Capital Management Co.
Winnetka, IL 60093-1840
John D. Mabie 65 TRUSTEE. President, Mid-Continent Capital.
55 W. Monroe St.
STE 3560
Chicago, IL 60603-5011
</TABLE>
B-9
<PAGE>
Of the persons listed in the table above, the following describes any position
held with any affiliated persons or principal underwriters of registrant: Louis
A. Holland is Managing Partner and Chief Investment Officer of the Investment
Manager and President, Treasurer and Director of the Distributor; Monica L.
Walker and Laura J. Janus each is a Vice President of the Distributor and a
partner of, and member of the Investment Policy Committee of, the Investment
Manager.
The following table describes the compensation provided by the Trust for the
fiscal year ended December 31, 1996:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
(1) (2) (3) (4) (5)
NAME OF PERSON, POSITION AGGREGATE COMPENSATION PENSION OR RETIREMENT ESTIMATED BENEFITS TOTAL COMPENSATION
FROM THE TRUST(*) BENEFITS ACCRUED AS PART UPON RETIREMENT FROM THE TRUST PAID
OF TRUST EXPENSES TO TRUSTEES
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Lester H. McKeever,
Trustee and Member of $0 0 0 $0
Audit Committee
- --------------------------------------------------------------------------------------------------------------------------------
Kenneth R. Meyer,
Trustee and Member of $0 0 0 $0
Audit Committee
- --------------------------------------------------------------------------------------------------------------------------------
John D. Mabie,
Trustee and Member of $0 0 0 $0
Audit Committee
- --------------------------------------------------------------------------------------------------------------------------------
<FN>
(*)Each Trustee listed in the table has voluntarily agreed to waive the receipt
of fees for services as a Trustee to the Trust for the fiscal
year ended December 31, 1996.
</FN>
</TABLE>
Trustees who are interested persons of the Trust, as that term is defined by
the 1940 Act, do not receive compensation from the Trust. In the absence of
the voluntary waiver of fees, each Trustee who is not an interested person of
the Trust is expected to receive $2,100 for services as a Trustee for the
fiscal year ending December 31, 1997.
COMMITTEES OF THE BOARD OF TRUSTEES
The Board has an Audit Committee and an Executive Committee. The duties of
these two committees and their present membership are as follows:
AUDIT COMMITTEE: The members of the Audit Committee will consult with the
Trust's independent public accountants if the accountants deem it desirable,
and will meet with the Trust's independent public accountants at least once
annually to discuss the scope and results of the annual audit of the Growth
Fund and such other
B-10
<PAGE>
matters as the Audit Committee members may deem appropriate or desirable.
Lester H. McKeever, Jr., Kenneth R. Meyer and John D. Mabie are the
members of the Audit Committee.
EXECUTIVE COMMITTEE: During intervals between meetings of the Board, the
Executive Committee possesses and may exercise all of the powers of the Board
in the management of the Trust except as to matters where action of the full
Board is specifically required. Included within the scope of such powers are
matters relating to valuation of securities held in the Growth Fund's
portfolio and the pricing of the Fund's shares for purchase and redemption.
Louis A. Holland and Monica L. Walker are the members of the Executive
Committee.
PRINCIPAL HOLDERS OF SECURITIES
The names, addresses, and percentages of ownership of each person who owns of
record or beneficially five percent or more of the Growth Fund's shares as of
March 31, 1997 are listed below:
Name Address Percentage
Robert Fred Heft 2 Oakbrook Club Drive 13.32%
Apt. C307
Hinsdale, IL 60521-1333
Lee Seidler & Lynn Seidler 5001 Joewood Drive 12.07%
JT TEN Sanibel, FL 33957-7512
Firstar Trust Company 270 Euclid Avenue 10.41%
Cust Winnetka, IL 60093-3605
Thomas A. Silberman
IRA Rollover
Tia Lamarre Duppler 9 Woodbury Court 9.62%
Appleton, WI 54915-7111
As of March 31, 1997, Trustees and officers of the Trust, as a group, owned
6.94% of the Growth Fund's outstanding voting securities.
INVESTMENT MANAGEMENT AND OTHER SERVICES
THE INVESTMENT MANAGER
Holland Capital Management, Suite 3260, 35 West Wacker Drive, Chicago,
Illinois 60601, serves as Investment Manager of the Trust pursuant to an
Investment Management and Administration Agreement that has been approved by
the Board, including a majority of independent Trustees.
The controlling persons of the Investment Manager are: Holland Capital
Management, Inc., the General Partner of the Investment Manager; Louis A.
Holland, Managing Partner and Chief Investment Officer of the Investment
Manager; and Catherine E. Lavery, Chief Accounting Officer, Secretary and
Director of Holland Capital Management, Inc.
Investment management fees are paid to the Investment Manager monthly at the
following annualized rates based on a percentage of the average daily net
asset value of the Growth Fund: .85% of average daily net assets up to $500
million, .75% of average daily net assets up to the next $500 million, and
.65% of average daily net assets in excess of $1 billion. For the period
April 29, 1996 (commencement of operations) through December 31, 1996, no
management fees were paid by the Growth Fund. The Investment Manager
has voluntarily agreed to reimburse expenses in an amount that operates to
limit total annual operating expenses to not more than 1.35% of the Growth
Fund's average daily net assets.
In addition to the duties set forth in the Prospectus, The Investment Manager,
in furtherance of such duties and responsibilities, is authorized in its
discretion to engage in the following activities: (i) buy, sell, exchange,
convert, lend, or
B-11
<PAGE>
otherwise trade in portfolio securities and other assets; (ii) place orders
and negotiate the commissions (if any) for the execution of transactions in
securities with or through broker-dealers, underwriters, or issuers; (iii)
prepare and supervise the preparation of shareholder reports and other
shareholder communications; and (iv) obtain and evaluate business and
financial information in connection with the exercise of its duties.
The Investment Manager will also furnish to or place at the disposal of the
Trust such information and reports as requested by or as the Investment
Manager believes would be helpful to the Trust. The Investment Manager has
agreed to permit individuals who are among its officers or employees to serve
as Trustees, officers, and members of any committee or advisory board of the
Trust without cost to the Trust. The Investment Manager has agreed to pay all
salaries, expenses, and fees of any Trustees or officers of the Trust who are
affiliated with the Investment Manager.
In its administration of the Trust, the Investment Manager is responsible for:
(i) maintaining the Trust's books and records; (ii) overseeing the Trust's
insurance relationships; (iii) preparing or assisting in the preparation of
all required tax returns, proxy statements and reports to the Trust's
shareholders and Trustees and reports to and filings with the SEC and any
other governmental agency; (iv) preparing such applications and reports as may
be necessary to register or maintain the registration of the Trust's shares
under applicable state securities laws; (v) responding to all inquiries or
other communications of shareholders which are directed to the Investment
Manager; and (vi) overseeing all relationships between the Trust and its
agents.
In addition to the administrative services provided by the Investment Manager,
Firstar Trust Company, pursuant to agreements between it and the Trust,
performs certain accounting, administrative, recordkeeping, tax related and
other reporting services for the Trust.
THE DISTRIBUTOR AND DISTRIBUTION SERVICES
The Distributor serves as the distributor of the shares of the Growth Fund
pursuant to a Distribution Agreement between the Distributor and the Trust.
The Fund's shares are sold on a no-load basis and, therefore, the Distributor
receives no sales commission or sales load for providing such services. The
Trust has not currently entered into any plan or agreement for the payment of
fees pursuant to Rule 12b-1 under the 1940 Act, but reserves the right to do
so with respect to any future classes of shares of any series. No compensation
was paid to the Distributor for distribution services for the period
April 29, 1996 (commencement of operations) through December 31, 1996.
CUSTODIAN. Firstar Trust Company serves as custodian of the assets of the
Trust. Pursuant to separate agreements with the Trust, Firstar also provides
certain administrative, accounting and transfer agent services.
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<PAGE>
BROKERAGE ALLOCATION AND OTHER PRACTICES
Subject to the general supervision of the Board, the Investment Manager is
responsible for making decisions with respect to the purchase and sale of
portfolio securities on behalf of the Trust, including the selection of
broker-dealers to effect portfolio transactions, the negotiation of
commissions, and the allocation of principal business and portfolio brokerage.
The purchase of any money market instruments and any other debt securities
traded in the over-the-counter market usually will be on a principal basis
directly from issuers or dealers serving as primary market makers. The price
of such money market instruments and debt securities is usually negotiated, on
a net basis, and no brokerage commissions are paid. Although no stated
commissions are paid for securities traded in the over-the-counter market,
transactions in such securities with dealers usually include the dealer's
"mark-up" or "mark-down." Money market instruments and other debt securities
may also be purchased in underwriting offerings, which include a fixed amount
of compensation to the underwriter, generally referred to as the underwriting
discount or concession.
In selecting brokers and dealers to execute transactions for the Growth Fund,
the primary consideration is to seek to obtain the best execution of the
transactions, at the most favorable overall price, and in the most effective
manner possible, considering all the circumstances. Such circumstances
include: the price of the security; the rate of the commission or
broker-dealer's "spread;" the size and difficulty of the order; the
reliability, integrity, financial condition, general execution and operational
capabilities of competing broker-dealers; and the value of research and other
services provided by the broker-dealer. The Investment Manager may also rank
broker-dealers based on the value of their research services and may use this
ranking as one factor in its selection of broker-dealers. Consistent with the
Rules of Fair Practice of the National Association of Securities Dealers, Inc.
and subject to the policy of seeking the best price and execution as stated
above, sales of shares of the Fund by a broker-dealer may be considered by the
Investment Manager in the selection of broker-dealers to execute portfolio
transactions for the Fund.
Under no circumstances will the Trust deal with the Investment Manager or its
affiliates in any transaction in which the Investment Manager or its
affiliates act as a principal.
In placing orders for the Trust, the Investment Manager, subject to seeking
best execution, is authorized to cause the Trust to pay broker-dealers that
furnish brokerage and research services (as
B-13
<PAGE>
such services are defined under Section 28(e) of the Securities Exchange Act
of 1934, as amended (the "1934 Act")) a higher commission than that which
might be charged by another broker-dealer that does not furnish such brokerage
and research services or who furnishes services of lesser value. However, such
higher commissions must be deemed by the Investment Manager as reasonable in
relation to the brokerage and research services provided by the broker-dealer,
viewed in terms of either that particular transaction or the overall
decision-making responsibilities of the Investment Manager with respect to the
Trust or other accounts, as to which it exercises investment discretion (as
such term is defined under Section 3(a)(35) of the 1934 Act).
The Investment Manager currently provides investment advice to other entities
and advisory accounts that have investment programs and an investment
objective similar to the Growth Fund. Accordingly, occasions may arise when
the Investment Manager may engage in simultaneous purchase and sale
transactions of securities that are consistent with the investment objective
and programs of the Fund, and other accounts. On those occasions, the
Investment Manager will allocate purchase and sale transactions in an
equitable manner according to written procedures approved by the Board.
Specifically, such written procedures provide that, in allocating purchase and
sale transactions made on a combined basis, the Investment Manager will seek
to achieve the same average unit price of securities for each entity and will
seek to allocate, as nearly as practicable, such transactions on a pro-rata
basis substantially in proportion to the amounts ordered to be purchased or
sold by each entity. Such procedures may, in certain instances, be either
advantageous or disadvantageous to the Fund.
It is expected that the Distributor, a registered broker-dealer, may act as
broker for the Growth Fund, in conformity with the securities laws and rules
thereunder. The Distributor is an affiliated person of the Investment Manager.
In order for the Distributor to effect any portfolio transactions for the Fund
on an exchange or board of trade, the commissions received by the Distributor
must be reasonable and fair compared to the commission paid to other brokers
in connection with comparable transactions involving similar securities or
futures being purchased or sold on an exchange of board of trade during a
comparable period of time. This standard would allow the Distributor to
receive no more than the remuneration which would be expected to be received
by an unaffiliated broker in a commensurate arm's-length transaction. The
Board will approve procedures for evaluating the reasonableness of commissions
paid to the Distributor and periodically will review these procedures. The
Distributor will not act as principal in effecting any portfolio transactions
for the Fund.
For the period April 29, 1996 (commencement of operations) through
December 31, 1996, total brokerage commission paid by the Growth Fund
was $4,634.93. No brokerage commission was paid to the Distributor.
B-14
<PAGE>
PURCHASE AND REDEMPTION OF SECURITIES BEING OFFERED
The shares of the Growth Fund are offered to the public for purchase
directly through the Distributor. The offering and redemption price of the
shares of the Fund is based upon the Fund's net asset value per share next
determined after a purchase order or redemption request has been received in
good order by the Fund. See "Determination of Net Asset Value" below. The
Trust intends to pay all redemptions of the shares of the Fund in cash.
However, the Trust may make full or partial payment of any redemption request
by the payment to shareholders of portfolio securities (i.e., by
redemption-in-kind), at the value of such securities used in determining the
redemption price. The Trust, nevertheless, pursuant to Rule 18f-1 under the
1940 Act, will file a notification of election under which the Fund will be
committed to pay in cash to any shareholder of record of the Fund, all such
shareholder's requests for redemption made during any 90-day period, up to the
lesser of $250,000 or 1% of the Fund's net asset value at the beginning of
such period. The securities to be paid in-kind to any shareholders will be
readily marketable securities selected in such manner as the Board deems fair
and equitable. If shareholders were to receive redemptions-in-kind, they would
incur brokerage costs should they wish to liquidate the portfolio securities
received in such payment of their redemption request. The Trust does not
anticipate making redemptions-in-kind.
The right to redeem shares or to receive payment with respect to any
redemption of shares of the Growth Fund may only be suspended (i) for any
period during which trading on the New York Stock Exchange ("Exchange") is
restricted or such Exchange is closed, other than customary weekend and
holiday closings, (ii) for any period during which an emergency exists as a
result of which disposal of securities or determination of the net asset value
of the Fund is not reasonably practicable, or (iii) for such other periods as
the SEC may by order permit for protection of shareholders of the Fund.
DETERMINATION OF NET ASSET VALUE
The net asset value of shares of the Growth Fund is normally calculated as of
the close of trading on the Exchange on every day the Exchange is open for
trading, except (i) on days where the degree of trading in the Fund's
portfolio securities would not materially affect the net asset value of the
Fund's shares and (ii) on days during which no shares of the Fund were
tendered for redemption and no purchase orders were received. The Exchange is
open Monday through Friday except on the following national holidays: New
Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
The assets of the Growth Fund are valued as follows:
B-15
<PAGE>
Equity assets are valued based on market quotations, or if market quotations
are not available, by a method that the Board believes accurately reflects
fair value.
All money market instruments held by the Growth Fund are valued on an
amortized cost basis. Amortized cost valuation involves initially valuing a
security at its cost, and thereafter, assuming a constant amortization to
maturity of any discount or premium, regardless of the impact of fluctuating
interest rates on the market value of the security. While this method provides
certainty in valuation, it may result in periods during which value, as
determined by amortized cost, is higher or lower than the price the Fund would
receive if it sold the security.
Short-term debt instruments with a remaining maturity of more than 60 days,
intermediate and long-term bonds, convertible bonds, and other debt securities
are generally valued at prices obtained from an independent pricing service.
Where such prices are not available, valuations will be obtained from brokers
who are market makers for such securities. However, in circumstances where the
Investment Manager deems it appropriate to do so, the mean of the bid and
asked prices for over-the-counter securities or the last available sale price
for exchange-traded debt securities may be used. Where no last sale price for
exchange traded debt securities is available, the mean of the bid and asked
prices may be used.
Other securities and assets for which market quotations are not readily
available or for which valuation cannot be provided, as described above, are
valued in good faith by the Board using its best judgment.
TAXES
The Trust intends to continue to qualify as a "regulated investment company"
("RIC") under Subchapter M of the Code, and as such must satisfy certain
requirements regarding the character of investments in the Trust, investment
diversification, and distribution.
In general, to qualify as a RIC, at least 90% of the gross income of the Trust
for the taxable year must be derived from dividends, interest, and gains from
the sale or other disposition of securities, and less than 30% of its gross
income for the taxable year can be attributable to gains (without deductions
for losses) from the sale or other disposition of securities held for less
than three months.
A RIC must distribute to its shareholders 90% of its ordinary income and net
short-term capital gains. Moreover, undistributed net income may be subject to
tax at the RIC level.
In addition, the Trust must declare and distribute dividends equal to at least
98% of its ordinary income (as of the twelve months
B-16
<PAGE>
ended December 31) and distributions of at least 98% of its capital gains net
income (as of the twelve months ended October 31), in order to avoid a federal
excise tax. The Trust intends to make the required distributions, but cannot
guarantee that it will do so. Dividends attributable to the Trust's ordinary
income are taxable as such to shareholders in the year in which they are
received.
A corporate shareholder may be entitled to take a deduction for income
dividends received by it that are attributable to dividends received from a
domestic corporation, provided that both the corporate shareholder retains its
shares in the Growth Fund for more than 45 days and the Trust retains its
shares in the issuer from whom it received the income dividends for more than
45 days. A distribution of capital gains net income reflects the Trust's
excess of net long-term gains over its net short-term losses. The Trust must
designate income dividends and distributions of capital gains net income and
must notify shareholders of these designations within sixty days after the
close of the Trust's taxable year. A corporate shareholder of the Trust cannot
use a dividends-received deduction for distributions of capital gains net
income.
If, in any taxable year, the Trust should not qualify as a RIC under the Code:
(i) the Trust would be taxed at normal corporate rates on the entire amount of
its taxable income without deduction for dividends or other distributions to
its shareholders, and (ii) the Trust's distributions to the extent made out of
the Trust's current or accumulated earnings and profits would be taxable to
its shareholders (other than shareholders in tax deferred accounts) as
ordinary dividends (regardless of whether they would otherwise have been
considered capital gains dividends), and may qualify for the deduction for
dividends received by corporations.
If the Trust purchases shares in certain foreign investment entities, called
"passive foreign investment companies" ("PFICs"), the Trust may be subject to
U.S. federal income tax on a portion of any "excess distribution" or gain from
the disposition of the shares even if the income is distributed as a taxable
dividend by the Trust to its shareholders. Additional charges in the nature of
interest may be imposed on either the Trust or its shareholders with respect
to deferred taxes arising from the distributions or gains. If the Trust were
to purchase shares in a PFIC and (if the PFIC made the necessary information
available) elected to treat the PFIC as a "qualified electing fund" under the
Code, in lieu of the foregoing requirements, the Trust might be required to
include in income each year a portion of the ordinary earnings and net capital
gains of the PFIC, even if not distributed to the Trust, and the amounts would
be subject to the 90% and calendar year distribution requirements described
above.
B-17
<PAGE>
ORGANIZATION OF THE TRUST
As a Delaware business trust entity, the Trust need not hold regular annual
shareholder meetings and, in the normal course, does not expect to hold such
meetings. The Trust, however, must hold shareholder meetings for such purposes
as, for example: (i) electing the initial Board; (ii) approving certain
agreements as required by the 1940 Act; (iii) changing the fundamental
investment objective, policies, and restrictions of the Growth Fund; and (iv)
filling vacancies on the Board in the event that less than a majority of the
Trustees were elected by shareholders. The Trust expects that there will be no
meetings of shareholders for the purpose of electing Trustees unless and until
such time as less than a majority of the Trustees holding office have been
elected by shareholders. At such time, the Trustees then in office will call a
shareholders meeting for the election of Trustees. In addition, holders of
record of not less than two-thirds of the outstanding shares of the Trust may
remove a Trustee from office by a vote cast in person or by proxy at a
shareholder meeting called for that purpose at the request of holders of 10%
or more of the outstanding shares of the Trust. The Trust has the obligation
to assist in such shareholder communications. Except as set forth above,
Trustees will continue in office and may appoint successor Trustees.
PERFORMANCE INFORMATION ABOUT THE GROWTH FUND
TOTAL RETURN CALCULATIONS
The Growth Fund may provide average annual total return information calculated
according to a formula prescribed by the SEC. According to that formula,
average annual total return figures represent the average annual compounded
rate of return for the stated period. Average annual total return quotations
reflect the percentage change between the beginning value of a static account
in the Fund and the ending value of that account measured by the current net
asset value of the Fund, and assuming that all dividends and capital gains
distributions during the stated period were reinvested in shares of the Fund
when paid. Total return is calculated by finding the average annual compounded
rates of return of a hypothetical investment that would equate the initial
amount invested to the ending redeemable value of such investment, according
to the following formula:
1/n
T = (ERV/P) - 1
where T equals average annual total return; where ERV, the ending redeemable
value, is the value at the end of the applicable period of a hypothetical
$1,000 payment made at the beginning of the applicable period; where P equals
a hypothetical initial payment of $1,000; and where n equals the number of
years.
B-18
<PAGE>
The Growth Fund, from time to time, also may advertise its cumulative total
return figures. Cumulative total return is the compound rate of return on a
hypothetical initial investment of $1,000 for a specified period. Cumulative
total return quotations reflect changes in the price of the Fund's shares and
assume that all dividends and capital gains distributions during the period
were reinvested in shares of the Fund. Cumulative total return is calculated
by finding the compound rates of a hypothetical investment over such period,
according to the following formula (cumulative total return is then expressed
as a percentage):
C = (ERV/P) - 1
Where:
C = Cumulative Total Return
P = a hypothetical initial investment of $1,000
ERV = ending redeemable value; ERV is the value, at the end of
the applicable period, of a hypothetical $1,000 investment
made at the beginning of the applicable period.
Based on the foregoing, the average annual total return for the Growth Fund
for the period April 29, 1996 (commencement of operations) through
December 31, 1996, and the cumulative total return for the Growth Fund since
commencement of operations, were 22.44% and 14.62%, respectively.
From time to time, in reports and promotional literature, the performance of
the Growth Fund may be compared to: (i) other mutual funds or groups of mutual
funds tracked by: (A) Lipper Analytical Services, a widely-used independent
research firm which ranks mutual funds by overall performance, investment
objectives, and asset size; (B) Forbes Magazine's Annual Mutual Fund Survey
and Mutual Fund Honor Roll; or (C) other financial or business publications,
such as Business Week, Money Magazine, and Barron's, which provide similar
information; (ii) the Consumer Price Index (measure for inflation), which may
be used to assess the real rate of return from an investment in the Fund;
(iii) other Government statistics such as Gross Domestic Product, and net
import and export figures derived from Governmental publications, e.g., The
Survey of Current Business, which may be used to illustrate investment
attributes of the Fund or the general economic, business, investment, or
financial environment in which the Fund operates; (iv) Alexander Steele's
Mutual Fund Expert, a tracking service which ranks various mutual funds
according to their performance; and (v) Morningstar, Inc. which ranks mutual
funds on the basis of historical risk and total return. Morningstar's rankings
are calculated using the mutual fund's average annual returns for a certain
period and a
B-19
<PAGE>
risk factor that reflects the mutual fund's performance relative to
three-month Treasury bill monthly returns. Morningstar's rankings range from
five star (highest) to one star (lowest) and represent Morningstar's
assessment of the historical risk level and total return of a mutual fund as a
weighted average for 3, 5, and 10-year periods. In each category, Morningstar
limits its five star rankings to 10% of the mutual funds it follows and its
four star rankings to 22.5% of the mutual funds it follows. Rankings are not
absolute or necessarily predictive of future performance.
The Trust may also illustrate the investment returns of the Growth Fund or
returns in general by graphs and charts that compare, at various points in
time, the return from an investment in the Fund (or returns in general) on a
tax-deferred basis (assuming reinvestment of capital gains and dividends and
assuming one or more tax rates) with the same return on a taxable basis.
LEGAL MATTERS
Legal advice regarding certain matters relating to the federal securities law
applicable to the offer and sale of the shares described in the Prospectus has
been provided by Katten Muchin & Zavis, 1025 Thomas Jefferson Street, N.W.,
Washington, DC 20007, which serves as Special Counsel to the Trust.
INDEPENDENT AUDITORS
The Trust's independent auditors are Deloitte & Touche LLP, 2 Prudential
Plaza, Chicago, Illinois 60601.
FINANCIAL STATEMENTS
The financial statements and accompanying notes for the period April 29, 1996
(commencement of operations) through December 31, 1996 are included in the
Growth Fund's Annual Report, which accompanies this Statement of Additional
Information, and are incorporated herein by reference. The financial statements
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report, and are included herein in reliance upon the reports of such firm
given upon their authority as experts in accounting and auditing.
Shareholders may obtain additional copies of the Annual Report free of charge
by calling 1-800-295-9779.
B-20
<PAGE>
APPENDIX
DESCRIPTION OF RATINGS OF CERTAIN MONEY MARKET SECURITIES
Description of Moody's Investors Service, Inc.'s commercial paper ratings:
Prime-1 (or related institutions) have a superior capacity for repayment of
short-term promissory obligations. Prime-1 repayment capacity will normally be
evidenced by the following characteristics:
1. Leading market positions in well established industries.
High rates of return on funds employed.
2. Conservative capitalization structures with moderate reliance on debt and
ample asset protection.
3. Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
4. Well established access to a range of financial market and assured sources
of alternate liquidity.
Prime-2 (or related supporting institutions) have a strong capacity for
repayment of short term promissory obligations. This will normally be
evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity is maintained.
Description of Standard & Poor's Corporation's commercial paper ratings:
A-1--This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics will be denoted with a plus (+)
sign designation.
A-2--Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues designated
A-1.
Description of Fitch Investor's Service, Inc.'s commercial paper ratings:
Fitch-1--(Highest Grade) Commercial paper assigned this rating is regarded as
having the strongest degree of assurance for timely payment.
B-23
<PAGE>
Fitch-2--(Very Good Grade) Issues assigned this rating reflect an assurance of
timely payment only slightly less in degree than the strongest issues.
Description of Duff & Phelps Inc.'s commercial paper ratings:
Duff 1--High certainty of timely payment. Liquidity factors are excellent and
supported by strong fundamental protection factors. Risk factors are minor.
Duff 2--Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing internal funds needs may enlarge
total financing requirements, access to capital markets is good. Risk factors
are small.
B-24
<PAGE>
DESCRIPTION OF CERTAIN CORPORATE BOND RATINGS
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S BOND RATINGS
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt-edge". Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are not likely to
impair the fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally known
as high-grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities, fluctuation of
protective elements may be of greater amplitude, or there may be other
elements present which make the long-term risks appear somewhat larger than in
Aaa securities.
DESCRIPTION OF STANDARD & POOR'S CORPORATION'S BOND RATINGS
AAA--Debt rated "AAA" has the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely strong.
AA-Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the highest-rated issues only in small degree.
B-25
<PAGE>
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(a) Financial Statements
1. Financial Statements filed as part of Prospectus:
Condensed Financial Information for the Growth Fund for the
period April 29, 1996 (commencement of operations) through
December 31, 1996.
2. Financial Statements incorporated by reference into the
Statement of Additional Information from the Growth Fund's
Annual Report dated December 31, 1996:
Statement of Assets and Liabilities as of
December 31, 1996
Statement of Operations for the period April 29, 1996
(commencement of operations) through December 31, 1996
Statement of Changes in Net Assets for the period
April 29, 1996 (commencement of operations) through
December 31, 1996
Portfolio of Investments as of December 31, 1996
Financial Highlights for the period April 29, 1996
(commencement of operations) through December 31, 1996
Notes to Financial Statements
(b) Exhibits:
1(a). Certificate of Trust and Agreement and
Declaration of Trust of The Holland Trust.1
1(b). Certificate of Amendment of the Certificate of
Trust and Revised Agreement and Declaration of
Trust of The Lou Holland Trust.2
2(a). By-Laws of The Holland Trust.1
2(b). Revised By-Laws of The Lou Holland Trust.2
3. Not applicable.
4. Specimen Certificate of Share of the Growth
Fund.2
5. Investment Management and Administration
Agreement by and between The Holland Trust and
Holland Capital Management.3
<PAGE>
6. Distribution Agreement between the Holland
Trust and HCM Investments, Inc.3
7. Not applicable.
8. Custodian Agreement between The Lou Holland
Trust and Firstar Trust Company.3
9(a). Transfer Agent Agreement by and between The
Lou Holland Trust and Firstar Trust Company.3
9(b). Fund Administration Servicing Agreement by and
between The Lou Holland Trust and Firstar
Trust Company.3
9(c). Fund Accounting Servicing Agreement between
The Lou Holland Trust and Firstar Trust
Company.3
9(d). Expense Limitation Agreement by and between
The Lou Holland Trust and Holland Capital
Management.3
10. Opinion and Consent of Katten Muchin & Zavis
regarding the legality of the securities being
registered.2
11. Consent of Independent Auditors.
12. Not applicable.
13. Share Subscription Agreement by and between
Holland Capital Management and The Holland
Trust.3
14. Not applicable.
15. Not applicable.
16. Schedule for Computation of Performance
Information.
17. Financial Data Schedule.
18. Not applicable.
1 Incorporated herein by reference to Registrant's Registration Statement on
Form N-1A (File No. 333-935).
2 Incorporated herein by reference to Pre-Effective Amendment No. 1 to
Registrant's Registration Statement on Form N-1A (File No. 333-935).
3 Incorporated herein by reference to Post-Effective Amendment No. 1 to
Registrant's Registration Statement on Form N-1A (File No. 333-935).
C-2
<PAGE>
Item 25. Persons Controlled by or under Common Control with the
Trust.
None.
Item 26. Number of Holders of Securities, as of the effective date
of this Registration Statement.
Title of Class Number of Record Holders as of
March 31, 1997
Growth Fund 99
Item 27. Indemnification
Reference is made to the Registrant's By-Laws (Article VI)
filed herein as Exhibit 2 to this Registration Statement.
The Trust's By-Laws provide that the Registrant will
indemnify its Trustees and officers, employees, and other
agents to the extent permitted or required by Delaware law.
The By-Laws require that either a majority of the Trustees
who are neither "interested persons" of the Trust (within
the meaning of the 1940 Act) nor parties to the proceeding,
or independent legal counsel in a written opinion, shall
have determined, based upon a review of the readily
available facts (as opposed to a trial-type inquiry or full
investigation), that there is reason to believe that such
agent will be found entitled to indemnification.
Indemnification may not be made if the Trustee or officer
has incurred liability by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of duties in
the conduct of his or her office ("Disabling Conduct"). The
means of determining whether indemnification shall be made
are (i) a final decision by a court or other body before
whom the proceeding is brought that the Trustee or officer
was not liable by reason of Disabling Conduct, or (ii) in
the absence of such a decision, a reasonable determination,
based on a review of the facts, that the Trustee or officer
was not liable by reason of Disabling Conduct. Such latter
determination may be made either by (a) vote of a majority
of Trustees who are neither interested persons (as defined
in the 1940 Act) nor parties to the proceeding or (b)
independent legal counsel in a written opinion. The
advancement of legal expenses may not occur unless the
Trustee or officer agrees to repay the advance (if it is
determined that the Trustee or officer is not entitled to
the indemnification) and one of three other conditions is
satisfied: (i) the Trustee or officer provides security for
his of her agreement to repay; (ii) the Registrant is
insured against loss by reason of lawful advances; or (iii)
the Trustees who are not
C-3
<PAGE>
interested persons and are not parties to the proceedings,
or independent counsel in a written opinion, determine that
there is reason to believe that the Trustee or officer will
be found entitled to indemnification.
Insofar as indemnification for liability arising under the
1933 Act may be permitted to Trustees, officers, and
controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the SEC such indemnification
is against public policy as expressed in the 1933 Act and
is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a
Trustee, officer or controlling person of the Registrant in
the successful defense of any action, suit or proceeding) is
asserted by such Trustee, officer or controlling person in
connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as
expressed in the 1933 Act and will be governed by the final
adjudication of such issue.
Item 28. Business and Other Connections of Investment Manager.
Certain information pertaining to business and other
connections of the Investment Manager is hereby incorporated
by reference to the section of the Prospectus captioned "How
the Trust is Managed" and to the section of the Statement of
Additional Information captioned "Investment Management and
Other Services." Set forth below is a list of each director
and officer of the Investment Manager indicating each
business, profession, vocation, or employment of a
substantial nature in which each such person has been, at
any time during the past two fiscal years, engaged for his
or her own account or in the capacity of director, officer,
partner, or trustee. The principal business address of each
individual listed in the table below is Suite 3260, 35 West
Wacker Drive, Chicago, Illinois 60601.
C-4
<PAGE>
Position with the
Name Investment Manager
Louis A. Holland Managing Partner and Chief
Investment Officer. President,
Treasurer and Director of
Holland Capital Management,
Inc. (the General Partner of
the Investment Manager).
President, Treasurer and
Director, HCM Investments, Inc.
Monica L. Walker Partner and Portfolio Manager.
Vice President, HCM
Investments, Inc.
Laura J. Janus Partner and Portfolio Manager.
Vice President, HCM
Investments, Inc.
Maurice L. Haywood Vice President and Investment
Analyst. Vice President, HCM
Investments, Inc.
Catherine E. Lavery Vice President. Vice
President, HCM Investments,
Inc.; Chief Accounting Officer,
Secretary and Director, Holland
Capital Management, Inc.
Item 29. Principal Underwriters.
(a) There is no investment company other than the Trust for
which the principal underwriter of the Trust also acts as
principal underwriter, depositor or investment adviser.
(b) Set forth below is information concerning each director
and officer of the Distributor, as of the date of this
filing.
Name Positions and Offices Positions and
with the Trust Offices with
Underwriter
Louis A. Holland President, Trustee and President,
Chairman of the Board Treasurer, and
of Trustees Director
C-5
<PAGE>
Catherine E. None Chief Accounting
Lavery Officer, Vice
President,
Secretary and
Director
Monica L. Walker Secretary and Trustee Vice President
Laura J. Janus Treasurer Vice President
The principal business address of each person listed above
is Suite 3260, 35 West Wacker Drive, Chicago, Illinois
60601.
Item 30. Location of Accounts and Records.
The following entities prepare, maintain and preserve the
records required by Section 31(a) of the 1940 Act for the
Registrant. These services are provided to the Registrant
through written agreements between the parties to the effect
that such services will be provided to the Registrant for
such periods prescribed by the rules and regulations of the
SEC under the 1940 Act and such records are the property of
the entity required to maintain and preserve such records
and will be surrendered promptly on request.
Firstar will serve as the Trust's custodian, transfer agent,
dividend paying agent, and provides certain administrative
services pursuant to written agreements between Firstar and
the Trust. In these capacities, Firstar provides pricing for
the Growth Fund's portfolio securities, keeps records
regarding securities and other assets in custody and in
transfer, bank statements, canceled checks, financial books
and records, and keeps records of each shareholder's account
and all disbursements made to shareholders. The Investment
Manager, pursuant to its Investment Management and
Administration Agreement with respect to the Fund, maintains
all records required pursuant to such agreement, and
Firstar, pursuant to it Fund Administration Servicing
Agreement with the Trust provides certain other
recordkeeping services. Further, the Distributor maintains
all records required to be kept pursuant to the Distribution
Agreement with the Trust.
Item 31. Management Services.
The Investment Manager, pursuant to its Investment
Management and Administration Agreement with the Trust, and
Firstar, pursuant to its Fund Administration Servicing
Agreement, each will perform certain administrative services
for the Trust, as described more fully in the Prospectus and
Statement of Additional Information.
C-6
<PAGE>
Item 32. Undertakings.
Registrant undertakes to call a meeting of shareholders for
the purpose of voting upon the question of removal of a
Trustee(s) when requested in writing to do so by the holders
of at least 10% of Registrant's outstanding shares and in
connection with such meetings, to comply with the provisions
of Section 16(c) of the Investment Company Act of 1940
relating to shareholder Communications.
Registrant hereby undertakes that whenever shareholders
meeting the requirements of Section 16(c) of the Investment
Company Act of 1940 inform the Board of Trustees of their
desire to communicate with shareholders of the Fund, the
Trustees will inform such shareholders as to the approximate
number of shareholders of record and the approximate costs
of mailing or afford said shareholders access to a list of
shareholders.
Registrant undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's
latest annual report to shareholders, upon request and
without charge.
C-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, as amended, the Registrant certifies that this filing
meets all of the requirements for effectiveness pursuant to Rule 485(b) under
the Securities Act of 1933 and the Registrant has duly caused this Post-
Effective Amendment No. 2 to the Trust's Registration Statement No. 333-935 to
be signed on its behalf by the undersigned, thereto duly authorized in
Chicago, Illinois on the 29th day of April, 1997.
THE LOU HOLLAND TRUST
By: /s/ Louis A. Holland
--------------------
Louis A. Holland
Chairman of the
Board of Trustees
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. 2 to the Trust's Registration Statement has been signed below by
the following persons in the capacities and on the date indicated.
Signature Title Date
/s/ Louis A. Holland President & Chairman of April 29, 1997
the Board of Trustees
/s/ Monica L. Walker Secretary & Trustee April 29, 1997
/s/ Laura J. Janus Treasurer April 29, 1997
/s/ John D. Mabie . Trustee April 29, 1997
/s/ Lester H. McKeever, Jr. Trustee April 29, 1997
/s/ Kenneth R. Meyer Trustee April 29, 1997
C-8
EXHIBIT INDEX
Exhibit Sequentially
Number Description Numbered Page
11. Consent of Independent Auditors
16. Schedule for Computation of Performance Information
17. Financial Data Schedule
C-9
INDEPENDENT AUDITORS' CONSENT
Lou Holland Growth Fund
We consent to the use in this Post-Effective Amendment No. 2 to the Registration
Statement File No. 333-935 and Amendment No.3 to the Registration Statement
File No. 811-7533 on Form N-1A of Lou Holland Growth Fund (the "Fund") of our
report dated February 7, 1997, (February 24, 1997 as to Note 5) accompanying
the financial statements of Lou Holland Growth Fund contained in the Fund's
December 31, 1996 Annual Report incorporated by reference in the Statement of
Additional Information, which is part of this Registration Statement, and to
the reference to us under the caption "Financial Highlights" which appears in
the Fund's Prospectus, which is a part of such Registration Statement, and to
the references to us under the headings "Independent Auditors" and "Financial
Statements" in such Statement of Additional Information.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Chicago, Illinois
April 25, 1997
EXHIBIT 16
Schedule for Computation of Performance Quotation
-------------------------------------------------
LOU HOLLAND GROWTH FUND
A. Cumulative Total Return
1. Initial (April 29, 1996) Net Asset Value = 10.00
2. Number of hypothetical shares purchased = $1,000 divided by $10.00 =
100 shares
3. Amount of dividends =
12/31/96 - $0.18202905 per share * 100 shares = $18.20/$11.28 = 1.6135 shares
Total = 1.6135
4. Fees charges to shareholder accounts = 0
5. Ending (December 31, 1996) Net assets Value = $11.28
6. Ending Redeemable value of hypothetical investment =
100 + 1.6135 = 101.6135 x $11.28 = $1,146.20
7. Cumulative Total Return = ($1,146.20 - $1,000) divided by $1,000 = +14.62%
B. Average Annual Total Return
1. Initial (April 29, 1996) Net Asset Value = 10.00
2. Number of hypothetical shares purchased = $1,000 divided by $10.00 =
100 shares
3. Amount of dividends =
12/31/96 - $0.18202905 per share * 100 shares = $18.20/$11.28 = 1.6135 shares
Total = 1.6135
4. Fees charges to shareholder accounts = 0
5. Ending (December 31, 1996) Net Asset Value = $11.28
6. Ending Redeemable value of hypothetical investment =
100 + 1.6135 = 101.6135 x $11.28 = $1,146.20
7. Total Return Index value - $1,146.20/$1,000 = 1.14620
8. Average Annual Total Return = [1.14620(305/240)] -1 = +22.44%
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