LOU HOLLAND
- --------------------------------------------------------------------------------
GROWTH FUND
- --------------------------------------------------------------------------------
LETTER TO Dear Shareholder:
SHAREHOLDERS
FEBRUARY 1998 We are pleased to report that the Fund gained 27.92% for the
year, outperforming both the Lipper General U.S. Stock Funds
average return of 24.26%, and the Lipper Growth Funds
average return of 25.17%, but trailing the performance of
the S&P 500 index return of 33.36%. The wide divergence of
performance over the past several years between large stocks
and small stocks continued in 1997 with the S&P 500 large
stock index outperforming the Russell 2000 small stock
index by over 10 percentage points. The performance of the
Fund was impacted negatively by a somewhat smaller weighted
market capitalization than the S&P 500. While rotation among
sectors was evident during 1997, financial services,
healthcare, utilities and energy services were the best
performing market sectors. Materials and processing,
producer durables, integrated oils and technology were the
worst performing market sectors. The Fund's overweighting in
pharmaceutical, medical device, and financial services
companies had a positive impact on performance, while the
underweighting in utilities and energy services had a
negative impact on performance. The portfolio is
underweighted relative to the S&P 500 in producer durables,
or economy sensitive stocks that have been negatively
affected by the events in South East Asia.
ADDITIONAL BENCHMARKS FOR THE LOU HOLLAND GROWTH FUND
To provide our shareholders with a better representation of
the stocks in our Fund, we would like to introduce two
additional performance benchmarks, the Russell 1000 Growth
Index and the Russell Mid-Cap Growth Index. The Russell 1000
Growth Index measures the performance of those companies
within the 1,000 largest U.S. market capitalization
companies with higher price-to-book and higher forecasted
earnings growth rates. The Russell Mid-Cap Growth Index
measures the performance of those Russell Mid-Cap companies
with higher price-to-book ratios and higher forecasted
earnings growth rates. These stocks are also members of the
Russell 1000 Growth Index. We will continue to provide the
S&P 500 Index which is a broad-based stock market index that
is more representative of the overall market.
MARKET REVIEW & OUTLOOK
Concerns regarding the strength or weakness of the economy
and its effect on interest rates and inflation permeated the
investment landscape in 1997. These concerns were reflected
by a dramatic increase in volatility, with the Dow Jones
Industrial average rising or falling 1% or more from the
previous day's close 80 times during the year, more than
doubling the average of the 5 previous years, and the
highest level since the bear market in 1990. The second
quarter began with a 9-10% correction in mid-April, but
ended with the strongest quarterly equity performance in a
decade. The fourth quarter began with a correction of
greater than 10% caused by a collapse in the Asian stock and
currency markets. However the market bounced back in
November and December as investor fears were relieved by the
possibility of lower interest rates and the view that the
U.S. economy would not be significantly affected by the
problems in Asia. Despite the volatility experienced during
1997, most of the major large capitalization indexes were up
30% or more. This is the first time in history that stocks
returned 20% or more for three consecutive years.
We believe that corporate earnings growth will be the driver
of common stock performance in 1998. While S&P 500 corporate
operating earnings of 11% in 1997 are well below their
mid-1995 peak of over 20%, we expect 1998 S&P 500 earnings
to increase by only 8%, consistent with our expectations for
1998 stock market returns. During 1998, we do not expect any
Price/Earnings (P/E) ratio expansion above the current
historically high levels of over 20x; however we do not
believe that P/E's will contract materially in 1998.
Historically, whenever there has been a sustained period of
low inflation, which occurred from 1952-1965, and
1992-present, P/E ratios have been high. We believe that
inflation risk remains low in 1998; however we do have some
concern as to how much corporate earnings will be affected
by the events in Asia.
<PAGE>
Low inflation and a shrinking supply of U.S. Government bond
offerings as a result of the expected balanced budget should
bode well for the bond market and the stock market in 1998.
The supply and demand equation should also continue to be
favorable for U.S. equities, with continued strength in both
mutual fund demand and strong foreign demand, because of the
strong U.S. dollar and foreign investor underweighting in
U.S. equities. The supply side of the equation is likely to
be reduced by continued mergers and acquisitions. In 1997
there were 9,838 transactions with a dollar value of over 1
trillion dollars.
While we expect continued volatility over the next 6-8
months, we want to reaffirm our long-term bullish outlook
for stocks, but believe investors will have to reduce their
performance expectations to historical rates of return
versus the high rates of return achieved over the last 15
years.
Sincerely,
/s/ Louis A. Holland
Louis A. Holland
President
LINE CHART:
RUSSELL
GROWTH 1000
FUND S&P 500 GROWTH
4/29/96 10000 10000 10000
6/30/97 10520 10297 10363
9/30/96 10910 10615 10737
12/31/96 11462 11500 11385
3/31/97 11329 11809 11447
6/30/97 13355 13870 13611
9/30/97 14210 14909 14635
12/31/97 14663 15337 14857
THIS CHART ASSUMES AN INITIAL GROSS INVESTMENT OF $10,000 MADE ON 4/29/96
(COMMENCEMENT OF OPERATIONS). RETURNS SHOWN INCLUDE THE REINVESTMENT OF ALL
DIVIDENDS. IN THE ABSENCE OF FEE WAIVERS AND REIMBURSEMENTS, TOTAL RETURN
WOULD BE REDUCED. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, SO THAT YOUR SHARES,
WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST.
RUSSELL 1000 GROWTH INDEX - An unmanaged index which measures the
performance of those companies within the 1,000 largest U.S. market
capitalization companies with higher price-to-book and higher forecasted earning
growth rates.
RUSSELL MID-CAP GROWTH INDEX - An unmanaged index which measures the
performance of those Russell Mid-Cap companies with higher price-to-book ratios
and higher forecasted earnings growth rates. These stocks are also members of
the Russell 1000 Growth Index.
S&P 500 INDEX - An unmanaged capitalization-weighted index of 500 stocks
designed to measure performance of the broad domestic economy through changes
in the aggregate market value of the 500 stocks which represent all
major industries.
<TABLE>
<CAPTION>
Average Annual Rate of Return for the Year Ended December 31, 1997
YEAR ENDED SINCE
DECEMBER 31, 1997 INCEPTION
<S> <C> <C>
Lou Holland Growth Fund 27.92% 25.69%
S&P 500 33.36% 29.11%
Russell 1000 Growth Index 30.50% 26.68%
Russell Mid-Cap Growth Index 22.54% 16.43%
</TABLE>
<PAGE>
LOU HOLLAND
- -------------------------------------------------------------------------------
GROWTH FUND
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<CAPTION>
ASSETS:
<S> <C>
Investments, at value
(cost $4,077,866) $5,356,783
Receivable for securities sold 13,690
Deferred organization charges 51,010
Dividends and interest receivable 7,256
Other assets 4,428
----------
Total Assets 5,433,167
----------
LIABILITIES:
Payable for securities purchased 93,330
Payable to Investment Manager 3,531
Accrued expenses and other
liabilities 36,390
----------
Total Liabilities 133,251
----------
NET ASSETS $5,299,916
==========
NET ASSETS CONSIST OF:
Capital stock $4,049,020
Undistributed net realized
loss on investments (28,021)
Net unrealized appreciation
on investments 1,278,917
----------
Total Net Assets $5,299,916
==========
Shares outstanding (no par,
unlimited shares authorized) 373,701
Net Asset Value, Redemption
Price and Offering Price
Per Share $14.18
==========
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<CAPTION>
<S> <C>
INVESTMENT INCOME:
Dividend income* $ 46,411
Interest income 11,122
---------
Total Investment Income 57,533
---------
EXPENSES:
Investment management fee 35,757
Administration fee 26,917
Shareholder servicing and
accounting costs 43,239
Custody fees 10,644
Federal and state registration 5,073
Professional fees 16,014
Amortization of deferred
organization charges 16,783
Reports to shareholders 14,986
Other 7,299
---------
Total expenses before
reimbursement 176,712
Less: Reimbursement from
Investment Manager (119,921)
---------
Net Expenses 56,791
---------
NET INVESTMENT INCOME 742
---------
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS:
Net realized gain on investments 29,248
Change in unrealized appreciation
on investments 944,164
---------
Net realized and unrealized gain
on investments 973,412
---------
NET INCREASE IN NET
ASSETS RESULTING FROM
OPERATIONS $974,154
=========
* NET OF FOREIGN TAXES WITHHELD $ 484
=========
See notes to the financial statements.
</TABLE>
<PAGE>
<TABLE>
LOU HOLLAND
- -------------------------------------------------------------------------------
GROWTH FUND
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
APRIL 29, 1996 (1)
YEAR ENDED THROUGH
DECEMBER 31, 1997 DECEMBER 31, 1996
------------------ ------------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 742 $ 612
Net realized gain on investments 29,248 7,076
Change in unrealized
appreciation on investments 944,164 334,753
---------- ----------
Net increase in net assets
from operations 974,154 342,441
---------- ----------
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment income (12,160) (12,338)
From net realized gains (76,341) (33,089)
---------- ----------
(88,501) (45,427)
---------- ----------
CAPITAL SHARE
TRANSACTIONS:
Proceeds from shares sold 1,781,372 2,879,746
Shares issued to holders in
reinvestment of dividends 88,056 45,427
Cost of shares redeemed (315,836) (361,516)
---------- ----------
Net increase in net assets from
capital share transactions 1,553,592 2,563,657
---------- ----------
TOTAL INCREASE IN
NET ASSETS 2,439,245 2,860,671
NET ASSETS:
Beginning of period 2,860,671 0
---------- ----------
End of period $5,299,916 $2,860,671
========== ==========
CHANGES IN SHARES OUTSTANDING:
Shares sold 139,462 281,119
Shares issued to holders in
reinvestment of dividends 6,290 4,027
Shares redeemed (25,637) (31,560)
---------- ----------
Net increase 120,115 253,586
========== ==========
(1) Commencement of operations.
See notes to the financial statements.
</TABLE>
<PAGE>
<TABLE>
LOU HOLLAND
- -------------------------------------------------------------------------------
GROWTH FUND
<CAPTION>
FINANCIAL HIGHLIGHTS
APRIL 29, 1996 (1)
YEAR ENDED THROUGH
DECEMBER 31, 1997 DECEMBER 31, 1996
------------------ ------------------
<S> <C> <C>
Per Share Data:
Net asset value, beginning of period $11.28 $10.00
------ ------
Income from investment operations:
Net investment income 0.00 (2) 0.00 (3)
Net realized and unrealized
gains on investments 3.14 1.46
------ ------
Total from investment operations 3.14 1.46
------ ------
Less distributions:
Dividends from net
investment income (0.03) (0.05)
Dividends from capital gains (0.21) (0.13)
------ ------
Total distributions (0.24) (0.18)
------ ------
Net asset value, end of period $14.18 $11.28
====== ======
Total return 27.92% 14.62% (4)
Supplemental data and ratios:
Net assets, end of period $5,299,916 $2,860,671
Ratios of expenses to average net assets
Before expense reimbursement 4.19% 6.50% (5)
After expense reimbursement 1.35% 1.35% (5)
Ratio of net investment income (loss)
to average net assets
Before expense reimbursement (2.83)% (5.11)% (5)
After expense reimbursement 0.02% 0.04% (5)
Portfolio turnover rate 34.29% 30.48%
Average commission rate paid $0.0616 $0.0610
(1) Commencement of operations
(2) Net investment income per share represents net investment income divided by
the average shares outstanding throughout the year.
(3) Net investment income per share is calculated using the ending balance of
undistributed net investment income prior to consideration of adjustments
for permanent book and tax differences.
(4) Not annualized.
(5) Annualized.
See notes to the financial statements.
</TABLE>
<PAGE>
<TABLE>
LOU HOLLAND
- -------------------------------------------------------------------------------
GROWTH FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1997
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
- --------- --------
<S> <C> <C>
COMMON STOCKS - 98.4%
AUTO & TRANSPORTATION - 1.2%
1,000 Magna International, Inc. f $ 62,813
--------
CONSUMER DISCRETIONARY - 12.7%
2,000 American Management
Systems, Inc. # 39,000
1,800 Carnival Corporation 99,675
500 Walt Disney Company 49,531
2,050 First Brands Corporation 55,222
1,175 Home Depot, Inc. 69,178
2,575 Service Corporation
International 95,114
1,200 Stewart Enterprises, Inc. 55,950
4,275 Sunglass Hut International,
Inc. # 26,986
2,250 Toll Brothers, Inc.# 60,187
2,625 Viking Office Products, Inc. # 57,258
1,700 Wal-Mart Stores, Inc. 67,044
--------
675,145
--------
CONSUMER STAPLES - 14.5%
1,225 Albertson's, Inc. 58,034
1,075 Clorox Company 84,992
775 Colgate-Palmolive Company 56,962
925 CVS Corporation 59,258
1,200 Gillette Company 120,525
600 International Flavors &
Fragrances, Inc. 30,900
1,725 PepsiCo, Inc. 62,855
2,150 Philip Morris Companies, Inc. 97,422
1,200 The Proctor & Gamble
Company 95,775
3,275 Walgreen Company 102,753
--------
769,476
--------
<PAGE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
- --------- --------
<S> <C> <C>
FINANCIAL SERVICES - 18.5%
1,050 American International
Group, Inc. $ 114,187
1,575 Automatic Data Processing, Inc. 96,666
400 Citicorp 50,575
1,625 Concord EFS, Inc. # 40,422
1,650 Federal Home Loan
Mortgage Corporation 69,197
2,150 Federal National
Mortgage Association 122,684
1,400 First Chicago NBD
Corporation 116,900
1,025 First Commerce Corporation 68,931
2,850 First Data Corporation 83,363
1,400 MBIA, Inc. 93,538
3,150 Norwest Corporation 121,669
---------
978,132
---------
HEALTH CARE - 21.5%
1,200 Abbott Laboratories 78,675
1,175 Elan Corporation PLC ADR # 60,145
1,200 Eli Lilly & Company 83,550
900 Guidant Corporation 56,025
1,650 Johnson & Johnson 108,694
1,050 Medtronic, Inc. 54,928
975 Merck & Co., Inc. 103,594
1,300 Novartis AG ADR 105,618
1,775 Pfizer, Inc. 132,348
1,650 Schering-Plough Corporation 102,506
1,825 Smithkline Beecham PLC ADR 93,873
2,100 Sola International, Inc. # 68,250
725 Warner-Lambert Company 89,900
---------
1,138,106
---------
INTEGRATED OILS - 3.9%
500 Amoco Corporation 42,562
1,400 Enron Corporation 58,188
625 Mobil Corporation 45,117
See notes to the financial statements.
</TABLE>
<PAGE>
<TABLE>
LOU HOLLAND
- -------------------------------------------------------------------------------
GROWTH FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1997
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
- --------- --------
<S> <C> <C>
INTEGRATED OILS (CONTINUED)
1,100 Royal Dutch Petroleum
Company ADR $ 59,606
--------
205,473
--------
MATERIALS & PROCESSING - 3.0%
2,000 Jacobs Engineering Group, Inc. # 50,750
1,250 Kimberly-Clark Corporation 61,641
1,525 Valspar Corporation 48,609
--------
161,000
--------
OTHER - 3.2%
2,325 General Electric Company 170,597
--------
170,597
--------
OTHER ENERGY - 1.4%
900 Schlumberger Limited 72,450
--------
72,450
--------
PRODUCER DURABLES - 1.5%
900 Boeing Company 44,044
350 Grainger (W.W.), Inc. 34,016
--------
78,060
--------
TECHNOLOGY - 15.0%
1,125 Cisco Systems, Inc. # 62,719
1,612 Computer Associates
International, Inc. 85,234
2,900 Danka Business Systems PLC 46,219
1,850 EMC Corporation # 50,759
1,650 Telefonaktiebolaget LM
Ericsson ADR 61,566
1,850 Hewlett-Packard Company 115,625
1,300 Intel Corporation 91,325
900 Lucent Technologies, Inc. 71,888
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
- --------- --------
<S> <C> <C>
TECHNOLOGY (CONTINUED)
600 Microsoft Corporation # $ 77,550
400 Network Associates, Inc. # 21,150
2,575 Oracle Corporation # 57,455
1,600 3Com Corporation # 55,900
-----------
797,390
-----------
UTILITIES - 2.0%
2,000 GTE Corporation 104,500
-----------
104,500
-----------
Total common stocks
(cost $3,934,225) 5,213,142
-----------
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
- --------- --------
<S> <C> <C>
SHORT-TERM
INVESTMENTS - 2.7%
VARIABLE RATE DEMAND
NOTES - 2.7%
$ 80,855 General Mills, Inc. $ 80,855
29,931 Johnson Controls, Inc. 29,931
32,288 Pitney Bowes, Inc. 32,288
567 Warner-Lambert Company 567
-----------
Total variable rate demand
notes (cost $143,641) 143,641
-----------
Total investments - 101.1%
(cost $4,077,866) 5,356,783
-----------
Liabilities in excess of
other assets - (1.1%) (56,867)
-----------
TOTAL NET ASSETS -
100.0% $5,299,916
===========
# Non-income producing security.
f foreign security
See notes to the financial statements.
</TABLE>
<PAGE>
LOU HOLLAND
- -------------------------------------------------------------------------------
GROWTH FUND
NOTES TO THE FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
1. ORGANIZATION The Lou Holland Trust (the "Trust") was organized on
AND SIGNIFICANT December 20, 1995, as a Delaware business trust and
ACCOUNTING is registered as a no-load, open-end diversified
POLICIES management investment company under the Investment
Company Act of 1940 (the "1940 Act"). The Trust is
organized as a series company and currently
consists of one series, the Growth Fund (the "Fund").
The principle investment objective of the Fund is to
seek long-term growth of capital by investing
primarily in common stocks of growth companies, with
the receipt of dividend income as a secondary
consideration. The Fund commenced operations on April
29, 1996.
The costs incurred in connection with the
organization, initial registration and public
offering of shares aggregated $76,688. These costs
are being amortized over the period of benefit, but
not to exceed sixty months from the Fund's
commencement of operations.
The following is a summary of significant accounting
policies consistently followed by the Fund.
a) Investment Valuation - Common stocks and other
equity-type securities that are listed on a
securities exchange are valued at the last quoted
sales price on the day the valuation is made. Price
information on listed stocks is taken from the
exchange where the security is primarily traded.
Securities which are listed on an exchange but which
are not traded on the valuation date are valued at
the most recent bid prices. Unlisted securities for
which market quotations are readily available are
valued at the latest quoted bid price. Debt
securities are valued at the latest bid prices
furnished by independent pricing services. Other
assets and securities for which no quotations are
readily available are valued at fair value as
determined in good faith by Holland Capital
Management, L.P. (the "Investment Manager") under the
supervision of the Board of Trustees. Short-term
instruments (those with remaining maturities of 60
days or less) are valued at amortized cost, which
approximates market.
b) Federal Income Taxes - It is the Fund's policy to
meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and the
Fund intends to distribute investment company net
taxable income and net capital gains to shareholders.
Therefore, no federal income tax provision is
required.
c) Distributions to Shareholders - Dividends from net
investment income and distributions of net realized
capital gains, if any, will be declared and paid at
least annually.
<PAGE>
d) Use of Estimates - The preparation of financial
statements in conformity with generally accepted
accounting principles requires management to make
estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of
revenues and expenses during the reporting period.
Actual results could differ from those estimates.
e) Foreign Securities - Investing in securities of
foreign companies and foreign governments involves
special risks and considerations not typically
associated with investing in U.S. companies and the
U.S. government. These risks include revaluation of
currencies and future adverse political and economic
developments. Moreover, securities of many foreign
companies and foreign governments and their markets
may be less liquid and their prices more volatile
than those of securities of comparable U.S. companies
and the U.S. government.
f) Foreign Currency Translations - The books and
records of the Fund are maintained in U.S. dollars.
Foreign currency transactions are translated into
U.S. dollars on the following basis:(i) market value
of investment securities, assets and liabilities at
the daily rates of exchange, and (ii) purchases and
sales of investment securities, dividend and interest
income and certain expenses at the rates of exchange
prevailing on the respective dates of such
transactions. For financial reporting purposes, the
Fund does not isolate changes in the exchange rate of
investment securities from the fluctuations arising
from changes in the market prices of securities.
However, for federal income tax purposes the Fund
does isolate and treat as ordinary income the effect
of changes in foreign exchange rates on realized gain
or loss from the sale of investment securities and
payables and receivables arising from trade date and
settlement date differences.
g) Other - Investment and shareholder transactions
are recorded on the trade date. The Fund determines
the gain or loss realized from the investment
transactions by comparing the original cost of the
security lot sold with the net sales proceeds.
Dividend income is recognized on the ex-dividend date
or as soon as information is available to the Fund,
and interest income is recognized on an accrual
basis. Generally accepted accounting principles
require that permanent financial reporting and tax
differences be reclassified to capital stock.
- -------------------------------------------------------------------------------
2. INVESTMENT The aggregate purchases and sales of investments,
TRANSACTIONS excluding short-terminvestments, by the Fund for the
year ended December 31, 1997, were $2,820,516 and
$1,351,883, respectively. There were no purchases or
sales of long-term U.S. Government securities.
<PAGE>
At December 31, 1997, gross unrealized appreciation
and depreciation of invest ments for tax purposes
were as follows:
<TABLE>
<CAPTION>
<S> <C>
Appreciation $1,550,704
(Depreciation) (91,925)
----------
Net appreciation on investments $1,458,779
==========
</TABLE>
At the close of business on May 2, 1996, the partners
of The Holland Fund, L.P. transferred their assets to
the Fund. As a result of the tax-free transfer the
Fund acquired $243,721 of unrealized appreciation
for tax purposes. As of December 31, 1997, the Fund
realized $50,763 of the appreciation.
At December 31, 1997, the cost of investments for
federal income tax purposes was $3,898,004.
- -------------------------------------------------------------------------------
3. AGREEMENTS The Fund has entered into an Investment Management
and Administration Agreement with Holland Capital
Management, L.P. Pursuant to its management agreement
with the Fund, the Investment Manager is entitled to
receive a fee, calculated daily and payable monthly,
at the annual rate of 0.85% as applied to the Fund's
daily net assets up to $500 million. The fee declines
at specified breakpoints as assets increase.
The Investment Manager voluntarily agrees to
reimburse its management fee and other expenses to
the extent that total operating expenses (exclusive
of interest, taxes, brokerage commissions and other
costs incurred in connection with the purchase or
sale of portfolio securities, and extraordinary
items) exceed the annual rate of 1.35% of the net
assets of the Fund, computed on a daily basis. This
voluntary reimbursement may be terminated under the
approval of the Board of Trustees.
HCM Investments, Inc. serves as principal underwriter
and the Distributor of the shares of the Fund
pursuant to a Distribution Agreement between the
Distributor and the Trust. The Distributor is an
affiliate of the Investment Manager. The Fund'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 Fund. The Fund has
not currently entered into any plan or agreement for
the payment of fees pursuant to Rule 12b-1 under the
1940 Act.
Firstar Trust Company, a subsidiary of Firstar
Corporation, a publicly held bank holding company,
serves as custodian, transfer agent, administrator
and accounting services agent for the Fund.
<PAGE>
LOU HOLLAND
- -------------------------------------------------------------------------------
GROWTH FUND
- -------------------------------------------------------------------------------
INDEPENDENT To the Board of Trustees and Shareholders
AUDITORS' of the Lou Holland Growth Fund:
REPORT
We have audited the accompanying statement of assets
and liabilities of the Lou Holland Growth Fund (the
"Fund"), including the schedule of investments, as of
December 31, 1997, the related statement of
operations for the year then ended, and the statement
of changes in net assets and the financial highlights
for the year ended December 31, 1997 and for the
period from April 29, 1996 (commencement of
operations) to December 31, 1996. These financial
statements and financial highlights are the
responsibility of the Fund's management. Our
responsibility is to express an opinion on these
financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require
that we plan and perform the audit to obtain
reasonable assurance about whether the financial
statements and financial highlights are free of
material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our
procedures included confirmation of securities owned
at December 31, 1997 by correspondence with the
custodian and brokers; where replies were not
received from brokers, we performed other audit
procedures. An audit includes assessing the
accounting principles used and significant estimates
made by management, as well as evaluating the
overall financial statement presentation. We believe
that our audits provide a reasonable basis for
our opinion.
In our opinion, such financial statements and
financial highlights present fairly, in all material
respects, the financial position of the Lou Holland
Growth Fund at December 31, 1997, the results of its
operations for the year then ended, and the changes
in its net assets and its financial highlights for
the year ended December 31, 1997 and for the period
from April 29, 1996 to December 31, 1996 in
conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Chicago, Illinois
February 13, 1998
<PAGE>
- -------------------------------------------------------------------------------
TRUSTEES AND OFFICERS
LOUIS A. HOLLAND, President, Trustee, and
Chairman of the Board of Trustees
Managing Partner and Chief Investment Officer, Holland
Capital Management, L.P. and President, Treasurer,
and Director, HCM Investments, Inc.
MONICA L. WALKER, Secretary and Trustee
Portfolio Manager, Holland Capital Management, L.P.
Vice President, HCM Investments, Inc.
LAURA J. JANUS, Treasurer
Portfolio Manager, Holland Capital Management, L.P.
Vice President, HCM Investments, Inc.
LESTER H. MCKEEVER, JR., Trustee
Managing Partner, Washington, Pittman & McKeever
Certified Public Accountants & Management Consultants
KENNETH R. MEYER, Trustee
Executive Vice President and Managing Director
Lincoln Capital Management Company
JOHN D. MABIE, Trustee
President, Mid-Continent Capital
MANAGER
Holland Capital Management, L.P.
35 West Wacker Drive, Suite 3260
Chicago, IL 60601
Telephone (312) 553-1000
CUSTODIAN AND TRANSFER AGENT
Firstar Trust Company
Mutual Fund Services
P.O. Box 701
Milwaukee, Wisconsin 53201-0701
Telephone (800) 295-9779
INDEPENDENT AUDITOR
Deloitte & Touche LLP
Chicago, IL
LEGAL COUNSEL
Katten Muchin & Zavis
Washington, D.C.
LOU HOLLAND
GROWTH FUND
ANNUAL REPORT
December 31, 1997
<PAGE>
