Registration Nos. 333-00935
811-7533
As filed with the Securities and Exchange Commission on
April 30, 1998
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SECURITIES AND EXCHANGE COMMISION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. ___
Post-Effective Amendment No. 3 _X_
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 ___
Amendment No. 4 _X_
(Check appropriate box or boxes)
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The Lou Holland Trust
(Exact Name of Registrant as Specified in Charter)
35 West Wacker Drive, Suite 3260, Chicago, IL 60601
(Address of Principal Executive Office)
Registrant's Telephone Number, including Area Code:
(312) 553-1000
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Louis A. Holland
c/o Holland Capital Management
35 Wacker Drive
Suite 3260
Chicago, IL 60601
(Name and Address of Agent for Service)
Copies to:
Joan E. Boros
Jorden Burt Boros Cicchetti Berenson & Johnson
1025 Thomas Jefferson Street, N.W.
Suite 400 - East Lobby
Washington, D.C. 20007
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
<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
FORM N-1A ITEM NO. CAPTION IN STATEMENT OF
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
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, 1998
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ABOUT THIS The Lou Holland Trust currently consists of one
PROSPECTUS portfolio, 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, 1998, 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>
<CAPTION>
<S> <C> <C>
TABLE OF CONTENTS Introduction...................... How to Redeem Shares.............
Expense Summary............... How The Trust is Managed........
Financial Highlights............ Risk Factors, Other Investment
The Growth Fund................ Practices, and Policies of the
How to Purchase Shares........ Growth Fund.......................
Shareholder Services............ Portfolio Transactions and
Retirement Plans................ Brokerage Practice................
How the Growth Fund's Net Organization of The Trust.........
Asset Value is Determined...
Dividends, Distributions, and
Taxes............................
</TABLE>
THE LOU HOLLAND TRUST
35 West Wacker Drive
Suite 3260
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 administrative 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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GROWTH FUND
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."
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES Growth Fund
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<S> <C>
Sales Load Imposed on Purchases................................................ 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%
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Total Fund Operating Expenses.................................................. 1.35%**
</TABLE>
* The Investment Management Fee declines at specified
breakpoints as assets increase.
** Other Expenses are based on amounts incurred for
the current fiscal year ended December 31, 1997. The
Investment Manager has agreed to reimburse the Growth
Fund for 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
during the current fiscal year of the Fund's
operations. Absent any reimbursements, Other Expenses
and Total Operating Expenses would have been 3.34%
and 4.19%, respectively, for the fiscal year ended
December 31, 1997.
<TABLE>
<CAPTION>
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 5 YEARS 10 YEARS
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<S> <C> <C> <C> <C>
$ 14 $ 43 $ 74 $ 162
*** There are no charges imposed upon redemption.
</TABLE>
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 periods ended
HIGHLIIGHTS December 31, 1996 and December 31, 1997, 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)
Year Ended through
DECEMBER 31. 1997 DECEMBER 31, 1996
----------------- -----------------
Per Share Data:
<S> <C> <C>
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
Ratio 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.
</TABLE>
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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) whose dividend growth is typically greater
than that of the market.
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 money market instruments including, but not
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GROWTH FUND
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
SHARES Growth 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 may also 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, to
receive instructions as to how and where to wire the
investment, and to obtain a confirmation number to
ensure prompt and accurate handling of funds. Please
remember to return the completed Application to the
Trust as described in the prior paragraph. The Fund
and its transfer agent are not responsible for the
consequences of delays resulting from the banking or
Federal Reserve Wire system, or from incomplete
wiring instructions. The bank that wires the funds
may charge a fee. Instruct your bank to use the
following instructions when wiring funds:
Wire To: Firstar Bank Milwaukee, N.A.
ABA 075000022
Credit: Firstar Trust Company
Account 112-952-137
Further Credit: Lou Holland Growth Fund
(Shareholder Account Number)
(Shareholder Registration)
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, a completed and signed Application
in good order, as described below, must first be
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GROWTH FUND
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 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
$20 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 objectives and otherwise acceptable to the
Investment Manager. If you wish to purchase shares
with marketable securities, please call
1-800-295-9779 to determine whether the particular
securities will be accepted as payment by the Fund
and the manner by which they would be transferred to
the Fund.
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
SERVICES are 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 the current share balance
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LOU HOLLAND
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GROWTH FUND
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 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.
Shares will be purchased at the net asset value
determined on the day the order is placed, provided
the call is received prior to 4:00 p.m. Eastern Time.
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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 any amount from 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 the 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
shareholder's current address, or transmitted by wire
to the shareholder's designated bank account. Firstar
will 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.
IRA accounts may not be redeemed via telephone.
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 the account.
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RETIREMENT PLANS Trust shares are available in connection with tax
benefited 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, Roth IRAs under
Section 408A of the Code, Education IRAs under
Section 530 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
VALUE IS trading on the New York Stock Exchange ("Exchange"),
DETERMINED 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.
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GROWTH FUND
Distributions of capital gains by the Fund are
derived from the Fund's long-term capital gains and
are taxable to 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 sent by
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GROWTH FUND
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; in
the case of an IRA account, the letter of instruction
must indicate whether or not 10% federal income tax
should be withheld from the redemption. Failure to
provide a withholding election will result in 10%
being withheld; (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.
There are no redemption fees imposed on any
redemption request.
If a redemption request is with respect to shares
purchased by a personal, corporate, or government
check within twelve (12) days of the purchase date,
the redemption payment will be held until the
purchase check has cleared (which may take up to
twelve (12) days from the purchase date), although
the shares redeemed will be priced for redemption
upon receipt of the redemption request. The
inconvenience of this twelve (12) 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
MANAGED business 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 35 West Wacker
Drive, Suite 3260, 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 private 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 private 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,
0.85% of the average daily net assets up to $500
million, 0.75% of the average daily net assets up to
the next $500 million, and 0.65% 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 Delaware corporation whose principal
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LOU HOLLAND
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GROWTH FUND
place of business is 35 West Wacker Drive, Suite
3260, 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, REPURCHASE AGREEMENTS. The Growth Fund may utilize
OTHER 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
GROWTH FUND is a member of the Federal Reserve System and the
seller of the repurchase agreement (i.e., the
securities dealer or bank) agrees torepurchase 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 represent the right to
receive securities of a foreign issuer deposited in a
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13
LOU HOLLAND
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GROWTH FUND
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 may not be
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, as contemplated
by SEC Rule 144A, 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 a 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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15
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 or listed
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 immediate and substantial loss or gain to the
investor. Thus, a purchase or sale of a futures
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16
LOU HOLLAND
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GROWTH FUND
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
securities are fixed at
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17
LOU HOLLAND
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GROWTH FUND
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 liquid 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 or
instruments secured by such obligations such as
repurchase agreements, or to cash or cash items.
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. The
Fund adheres to certain other fundamental investment
policies which are set forth in the Statement of
Additional Information.
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 year ended December 31, 1997 for the
Growth Fund was 34.29%.
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
TRANSACTIONS AND Fund in conformity with the securities
BROKERAGE PRACTICES laws and rules thereunder. 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 Trust, a Delaware business trust, organized on
THE 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 non-assessable when issued
and have no preemptive, conversion or cumulative
voting rights.
GENERAL Like other mutual funds, financial and business
INFORMATION organizations and individuals around the
world, the Fund could be adversely affected if the
computer systems used by the Advisor, the
Administrator and their service providers do not
properly process and calculate date-related
information and data from and after January 1, 2000.
This is commonly known as the "Year 2000 Problem."
The Advisor and the Administrator are taking steps
that they believe are reasonably designed to address
the Year 2000 Problem with respect to computer
systems that they use and to obtain reasonable
assurance that comparable steps are being taken by
the Fund's other major service providers.
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20
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
President and Managing Partner
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
Jorden Burt Boros Cicchetti Berenson & Johnson
Washington, D.C.
LOU HOLLAND
GROWTH FUND
<PAGE>
THE LOU HOLLAND TRUST
35 West Wacker Drive
Suite 3260
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, 1998, 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, 1998.
TABLE OF CONTENTS
ITEM PAGE
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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-
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 5% 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 securities of issuers that engage in real estate operations
and securities that are secured by interests in real estate (including shares of
B-2
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 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;
B-3
(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 individually own more than 1/2 of 1% of the securities of
such issuer or 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 maturing in more than seven days, 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;
(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 assets in order to secure such borrowings) and (ii) the use
of options and futures contracts;
B-4
(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. Instrumentalities include, for example, each of the
Federal Home Loan Banks, the National Bank for Cooperatives, the
B-5
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
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, there 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 the issuing bank or trust company
B-7
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) whose dividend growth
is typically greater than that of the market.
B-8
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
35 West Wacker Drive, Suite 3260, Chicago, Illinois 60601:
<TABLE>
<CAPTION>
POSITION WITH THE TRUST AND
PRINCIPAL OCCUPATION DURING THE
NAME AGE PAST FIVE YEARS
<S> <C> <C>
*Louis A. Holland 56 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 39 SECRETARY AND TRUSTEE. Portfolio
----------------------
Manager, Holland Capital Management, L.P.;
Vice President, HCM Investments, Inc.
*Laura J. Janus 50 TREASURER. Portfolio Manager, Holland
----------
Capital Management, L.P.; Vice President,
HCM Investments, Inc.
Lester H. McKeever, Jr. 63 TRUSTEE. Managing Partner, Washington,
--------
6700 S. Oglesby Ave. Pittman & McKeever, Certified Public
Chicago, IL 60649-1301 Accountants & Management Consultants.
Kenneth R. Meyer 53 TRUSTEE. President and Managing
1012 Westhoor Rd. --------
Winnetka, IL 60093-1840 Director, Lincoln Capital Management Co.
John D. Mabie 65 TRUSTEE. President, Mid-Continent Capital.
--------
55 W. Monroe St.
Suite 3560
Chicago, IL 60603-5011
B-9
</TABLE>
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 are a Vice President of the Distributor and a
partner of, and member of the Investment Policy Committee of, the Investment
Manager.
<TABLE>
<CAPTION>
The following table describes the compensation provided by the Trust for the
fiscal year ended December 31, 1997:
- ------------------------------------------------------------------------------------------------------------------------------------
(1) (2) (3) (4) (5)
NAME OF PERSON, POSITION AGGREGATE COMPENSATION PENSION OR RETIREMENT ESTIMATED BENEFITS TOTAL COMPENSATION FROM
FROM THE TRUST BENEFITS ACCRUED AS PART UPON RETIREMENT THE TRUST PAID TO TRUSTEES
OF TRUST EXPENSES
- ------------------------------------------------------------------------------------------------------------------------------------
<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
- ------------------------------------------------------------------------------------------------------------------------------------
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, 1997.
</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, 1998.
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 matters as the Audit Committee members may deem appropriate or desirable.
B-10
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, 1998 are listed below:
Name Address Percentage
Robert Fred Heft 2 Oakbrook Club Drive 10.36%
Apt. C307
Hinsdale, IL 60521-1333
Lee & Lynn Seidler 5001 Joewood Drive 9.22%
Joint tenants Sanibel, FL 33957-7512
Thomas A. Silberman 270 Euclid Avenue 7.87%
IRA Rollover Winnetka, IL 60093-3605
Firststar Trust Company Cust
Tia Lamarre Duppler 9 Woodbury Court 7.27%
Appleton, WI 54915-7111
Great West Life & Annuity Attn: Financial Control 2T2 5.99%
Insurance Company 8515 E. Orchard Rd.
FBO Chicago Park District 457 Plan Englewood, CO 80111-5002
As of March 31, 1998, Trustees and officers of the Trust, as a group, owned
5.37% of the Growth Fund's outstanding voting securities.
INVESTMENT MANAGEMENT AND OTHER SERVICES
THE INVESTMENT MANAGER
Holland Capital Management, 35 West Wacker Drive, Suite 3260, 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: 0.85% of average daily net assets up to $500 million,
0.75% of average daily net assets up to the next $500 million, and 0.65% of
average daily net assets in excess of $1 billion. For the period April 29, 1996
(commencement of operations) through December 31, 1996 and for the year ended
December 31, 1997, no management fees were paid to the Investment Manager by the
Growth Fund. The Investment Manager has voluntarily agreed to waive its
management fee and/or 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 otherwise trade in portfolio securities and other assets;
B-11
(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 year ended December
31, 1997.
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.
B-12
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 state 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 such services are defined under section
B-13
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 or 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 periods April 29, 1996 through December 31, 1996 and the year ended
December 31, 1997, total brokerage commissions paid by the Growth Fund were
$2,773 and $4,508 respectively. No brokerage commissions were paid to the
Distributor.
B-14
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 are 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. The Exchange is open Monday through Friday except on national holidays.
The assets of the Growth Fund are valued as follows:
B-15
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.
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 ended December 31) and
distributions of at least 98% of its capital gains net income (as of the
B-16
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
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 the 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:
T = (ERV/P)1/n - 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
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 year ended December 31, 1997, was 27.92%. The performance results are based
on historical earnings and should not be considered as representative of the
performance of the Fund in the future. Such performance results also reflect
waivers and reimbursements made by the Adviser during the year ended December
31, 1997, to keep aggregate annual operating expenses at 1.35% of daily net
assets. An investment in the Fund will fluctuate in value and at redemption, its
value may be more or less than the initial investment.
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 risk factor that reflects the mutual fund's
performance relative to three-month Treasury bill monthly returns. Morningstar's
B-19
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 Jorden Burt Boros Cicchetti Berenson & Johnson , 1025 Thomas
Jefferson Street, N.W., Suite 400 - East Lobby, Washington, DC 20007, which
serves as Special Counsel to the Trust.
INDEPENDENT AUDITORS
The Trust's independent auditors are Deloitte & Touche LLP, 180 North Stetson,
Two Prudential Plaza, Chicago, Illinois 60601.
FINANCIAL STATEMENTS
The financial statements and accompanying notes for the year ended December 31,
1997 and for the period from 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
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
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
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
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
year ended December 31, 1997 and for the period from 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, 1997:
Statement of Assets and Liabilities as of December 31, 1997
Statement of Operations for the year ended December 31, 1997
Statementof Changes in Net Assets for the year ended December
31, 1997 and for the period from April 29, 1996
(commencement of operations) through December 31,
1996
Portfolio of Investments as of December 31, 1997
FinancialHighlights for the year ended December 31, 1997 and
for the period from April 29, 1996 (commencement of
operations) through December 31, 1996
Notes to Financial Statements
(b) Exhibits:
l(a). Certificate of Trust and Agreement and
Declaration of Trust of The Holland Trust.1
l(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
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. Not applicable.
11(a). Consent of Independent Auditors.
11(b). Consent of Jorden Burt Boros Cicchetti Berenson
& Johnson
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.3
17. Financial Data Schedule.
18. Not applicable.
1 Incorporated herein by reference to Registrant's Registration Statement on
Form N-lA (File No. 333-935).
2 Incorporated herein by reference to Pre-Effective Amendment No. 1 to
Registrant's Registration Statement on Form N-lA (File No.
333-935).
3 Incorporated herein by reference to Post-Effective Amendment No. 2 to
Registrant's Registration Statement on Form N-IA (File No.
333-935).
C-2
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, 1998
Growth Fund 135
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 interested
persons and are not parties to the proceedings, or
C-3
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
Name Position with the
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 Partner and 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
Catherine E. None Chief Accounting officer, Vice
Lavery 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
35 West Wacker Drive, Suite 3260, 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
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
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. 3 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, 1998.
THE LOU HOLLAND TRUST
By: 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. 3 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
Louis A. Holland President & Chairman of April 29, 1998
the Board of Trustees
Monica L. Walker Secretary & Trustee April 29, 1998
Laura J. Janus Treasurer April 29, 1998
John D. Mabie Trustee April 29, 1998
Lester H. McKeever, Jr. Trustee April 29, 1998
Kenneth R. Meyer Trustee April 29, 1998
C-8
EX-99
EXHIBIT INDEX
EXHIBIT INDEX
Exhibit Sequentially
Number Description Numbered Page
11a. Consent of Independent Auditors
11b. Consent of Jorden Burt Boros Cicchetti Berenson & Johnson
17. Financial Data Schedule
C-9
INDEPENDENT AUDITORS' CONSENT
Lou Holland Growth Fund
We consent to the incorporation by reference in this Post-Effective Amendment
No. 3 to the Registration Statement File No. 333-00935 and Amendment No. 4 to
the Registration Statement File No. 811-7533 on Form N-lA of The Lou Holland
Trust (the "Trust") of our report dated February 13, 1998, accompanying the
financial statements of Lou Holland Growth Fund (the "Fund") contained in the
Fund's December 31, 1997 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 27, 1998
EX-99.B11b
COUNSEL'S CONSENT
SPECIAL COUNSEL'S CONSENT
Lou Holland Growth Fund
Re: Post-Effective Amendment No. 3 to the Registration Statement on Form N-1A
FILE NOS. 3333-00935 AND 811-7533
We have acted as special counsel to The Lou Holland Trust, a Delaware business
trust, regarding the federal securities laws applicable to the above-captioned
Registration Statement. We hereby consent to the reference to us in the
Registration Statement filed today with the Securities and Exchange Commission.
Very truly yours,
/s/ Jorden Burt Boros Cicchetti Berenson & Johnson LLP
JORDEN BURT BOROS CICCHETTI BERENSON & JOHNSON LLP
THE LOU HOLLAND TRUST
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