JORDEN BURT BOROS CICCHETTI
1025 THOMAS JEFFERSON STREET, NW
SUITE 400 EAST
WASHINGTON, DC 20007-0805
(202) 965-8100
March 1, 1999
VIA EDGAR TRANSIMMISSION
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549
ATTENTION: Filing Desk
Re: The Lou Holland Trust
File Nos. 333-00935; 811-7533
Ladies and Gentlemen:
Enclosed for filing pursuant to Rule 485(a) under the Securities Act of 1933,
please find post-effective amendment no. 4 to the registration statement on Form
N-1A for The Lou Holland Trust. This post-effective amendment is being filed for
the purpose of complying with: (1) Section 10(a)(3) of the 1933 Act; (2) the new
plain English requirements; and (3) the recent amendments to Form N-1A.
Please contact me at (202) 965-8150 or Christopher Menconi at (202) 965-8129
with any questions or comments you may have concerning the enclosed.
Sincerely,
Joan E. Boros
<PAGE>
Registration Nos. 333-00935
811-7533
As filed with the Securities and Exchange Commission on
____________, 1999
----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. ----
Post-Effective Amendment No. 4 X
----
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 5 X
----
(Check appropriate box or boxes)
----------------------------------------------
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
-------------------------
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 LLP
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):
___ immediately upon filing pursuant to paragraph (b)
___ on (date) pursuant to paragraph (b)
X 60 days after filing pursuant to paragraph (a)(1)
___ on (date) pursuant to paragraph (a) (1)
___ 75 days after filing pursuant to paragraph (a) (2)
___ on (date) pursuant to paragraph (a)(2) of Rule 485
<PAGE>
THE LOU HOLLAND TRUST
35 West Wacker Drive
Suite 3260
Chicago, Illinois 60601
PROSPECTUS FOR THE
GROWTH FUND
A "No-Load" Mutual Fund
The Securities and Exchange Commission has not approved or disapproved of these
securities or passed upon the accuracy or adequacy of the disclosure in this
Prospectus. Any representation to the contrary is a criminal offense.
The date of this Prospectus is May 1, 1999
<PAGE>
TABLE OF CONTENTS
An Overview of the Growth Fund
Investment Objective
Investment Adviser
Principal Investment Strategies
Principal Investment Risks
Past Performance of the Growth Fund
Fee Table and Expense Example
Fees and Expenses of the Growth Fund
Example of Expenses You Would Pay as a Shareholder of the Growth Fund
More Information About the Investment Strategies, Risks and Practices of the
Growth Fund
Share Price
How to Purchase Shares
Shareholder Services
Retirement Plans
Dividends, Capital Gains Distributions and Taxes
How to Redeem Shares
How the Trust is Managed
Year 2000
Financial Highlights
Additional Information about The Lou Holland Trust and the Growth Fund
How to Obtain Additional Information
<PAGE>
THE LOU HOLLAND TRUST
GROWTH FUND
AN OVERVIEW OF THE GROWTH FUND
The following overview of the Growth Fund is a summary of more important
information you should know before investing. More detailed information about
The Lou Holland Trust (the "Trust") and the Growth Fund's investment strategies
and risks is included elsewhere in this Prospectus.
The Growth Fund is a "no load" mutual fund. This means that you pay no sales
charges or 12b-1 fees when you purchase shares of the Fund. Therefore, all of
the money you invest will immediately go to work for you.
As with any mutual fund, there is no assurance that the Growth Fund will achieve
its investment objective. You should know that the Growth Fund's share price
will fluctuate and, when you redeem your shares, they could be worth more or
less than what you paid for them. Thus, like investing in any other mutual fund,
you could lose money.
<PAGE>
INVESTMENT The Growth Fund primarily seeks long-term growth of capital.
OBJECTIVE The receipt of dividend income is a secondary consideration.
INVESTMENT Holland Capital Management (the "Investment Manager").
ADVISER
PRINCIPAL The Growth Fund seeks to achieve its investment objective by
INVESTMENT investing primarily in common stocks of growth companies.
STRATEGIES In pursuing its investment objective, the Growth Fund maintains
a diversified portfolio of equity securities of companies that
have the following characteristics:
(i) demonstrated historical growth of earnings faster than
the general market;
(ii) earnings growth stability;
(iii) return on equity that is higher than the general market;
and
(iv) dividend growth that is typically greater than that of the
market.
While the Growth Fund invests primarily in U.S.
companies, it may seek companies that are organized
in foreign countries that exhibit the growth
characteristics mentioned above.
PRINCIPAL All mutual funds are subject to various risks associated with
INVESTMENT investing. Generally speaking, the more risk a mutual fund takes
RISKS on, the greater the opportunity for higher returns. The risks
associated with investing in a mutual fund are primarily
determined by the securities in which it invests and the
investment strategies it employs. The ultimate risk to you when
you invest in the Growth Fund, or any other mutual fund for
that matter, is that you could lose money.
You should know that the market value of the Growth Fund's
investments can be expected to fluctuate over time. Similarly,
the amount of income generated by the Fund will fluctuate based
on the composition of the Fund's assets and the level of
interest and dividends paid on those assets. Since the Growth
Fund seeks long-term growth of capital, an investment in the
Growth Fund may be more suitable for long-term investors who
can bear the risk of these fluctuations.
The Growth Fund is subject to the following principal investment
risks while pursuing its investment objective:
<PAGE>
Market Risk: The risk that the market value of a security may move up and
down, sometimes rapidly and unpredictably. This volatility may
cause a security to be worth less than what was paid for it.
Market risk may affect a single issuer, industry, sector of the
economy or the market as a whole.
Manager Risk: The risk that a strategy used by the Growth Fund's Investment
Manager may fail to produce the intended result.
Foreign The risk that the market value of a foreign security or the
Security securities markets of a foreign country may be more volatile or
Risk: perform differently than a security issued by a U.S. company or
the U.S. securities markets due to, for example, adverse
political, regulatory, economic or other developments affecting
the particular foreign country. There is also a risk that a
change in currency exchange rates between U.S. dollars and a
foreign currency may reduce the value of a security valued in, or
based on, that foreign currency.
Derivatives There are several risks associated with the use of derivatives,
Risk: but the primary risk to which the Growth Fund is subject when it
utilizes derivatives, such as options or futures contracts,
is that fluctuations in the value of a derivative will not
correlate perfectly with the overall securities markets or the
value of an investment that the Fund is seeking to protect.
PAST The bar chart below shows the Growth Fund's performance for each
PERFORMANCE full calendar year since the Fund's inception.
OF THE The table that follows the bar chart shows average annual total
GROWTH FUND return for the Growth Fund. the S&P 500 Index, the Russell 1000
Growth Index, and the Russell Mid-Cap Growth Index for the one
year period ended December 31, 1998 and the period since
the Growth Fund's inception on April 29, 1996 until December 31,
1998. This information is intended to give you an indication of
the risks of investing in the Growth Fund by showing you changes
in the Growth Fund's performance from year to year, and by
showing how the Growth Fund's average annual total returns since
its inception compare with those of three broad measurs of stock
market performance. Please remember that past performance is not
an indication of how the Growth Fund, the S&P 500 Index, the
Russell 1000 Growth Index or the Rusell Mid-Cap Growth Index
will perform in the future.
YEAR-BY-YEAR TOTAL RETURN
CHART
1997 27.92% 1998 35.75%
Since its inception on April 29, 1996, the Growth
Fund's highest return for a calendar quarter was
24.03% (December 31, 1998) and its lowest return
for a calendar quarter was -7.18% (September 30,
1998).
AVERAGE ANNUAL TOTAL RETURN
Average Annual Total Returns Past Since
(for the period ending One Year Inception
December 31, 1998)
Lou Holland Growth Fund 35.75% 29.36%
S&P 500 Index 28.58% 28.91%
Russell 1000 Growth Index 38.71% 31.05%
Russell Mid-Cap Growth Index 17.86% 16.97%
S&P 500 Index - An unmanaged capitalization-weighted index of
500 stocks designed to measure performance of the broad domestic
economy through changes in the aggregate market value of the
500 stocks which represent all major industries.
Russell 1000 Growth Index - An unmanaged index which measures the
performance of those companies within the 1,000 largest U.S.
market capitalization companies with higher price-to-book ratios
and higher forecasted earnings growth rates.
Russell Mid-Cap Growth Index - An unmanaged index which measures
the performance of those Russell Mid-Cap companies with higher
price-to-book ratios and higher forecasted earnings growth rates.
These stocks are also members of the Russell 1000 Growth Index.
[GRAPHIC OMITTED]
THE LOU HOLLAND TRUST
GROWTH FUND
FEE TABLE AND EXPENSE EXAMPLE
<PAGE>
FEES AND When you purchase shares of a mutual fund, you pay the fees and
EXPENSES expenses associated with its operation. This table describes the
OF THE fees and expenses that you may pay if you buy and hold shares of
GROWTH the Growth Fund.
FUND
<PAGE>
SHAREHOLDER FEES (fees paid directly from your investment)
Sales Load Imposed on
Purchases........................................... None
Sales Load Imposed on Reinvested Dividends.......... None
Deferred Sales Load Imposed on Redemptions.......... None
Redemption
Fee................................................. None
ANNUAL GROWTH FUND OPERATING EXPENSES (expenses that
are deducted from Growth Fund assets)
Investment Management Fee........................... 85%*
12b-1 Fees.......................................... NONE
Other Expenses...................................... 2.00%
--------
Gross Total Operating Expenses...................... 2.85%
Fee Waiver & Expense Reimbursement **............... 1.50%
--------
Net Total Operating Expenses........................ 1.35%
========
<PAGE>
* The Investment Management Fee declines at
specified breakpoints as the Growth Fund's assets
increase.
** The Investment Manager has contractually agreed
to waive its fees and reimburse other expenses of
the Growth Fund to the extent that the Fund's
"Total Operating Expenses" exceed 1.35%. Thus, the
Growth Fund actually paid 1.35% of Total Operating
Expenses during its fiscal year ended December 31,
1998 and not 2.85%.
EXAMPLE OF This Example is intended to help you compare the cost of
EXPENSES investing in the Growth Fund with the cost of investing in other
YOU WOULD mutual funds. The Example assumes that you invest $10,000 in the
PAY AS A Growth Fund for the time periods shown and then redeem all of your
SHAREHOLDER shares at the end of those periods. The Example also assumes that
OF THE your investment has a 5% return each year and the Growth Fund's
GROWTH FUND operating expenses remain the same. Since the Growth Fund
imposes no charges when you redeem your shares, the expenses you
would pay are the same whether you redeem your shares or continue
to hold them at the end of the time periods shown. Although your
actual costs may be higher or lower, based on these assumptions
your costs would be:
<PAGE>
1 Year 3 Years 5 Years 10 Years
------- ------- ------- --------
Before reimbursement $288 $883 $1504 $3176
After reimbursement $137 $428 $739 $1624
<PAGE>
You should not consider these examples 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 merely for illustrative purposes only.
THE LOU HOLLAND TRUST
GROWTH FUND
MORE INFORMATION ABOUT THE INVESTMENT STRATEGIES, RISKS AND PRACTICES OF
THE GROWTH FUND
<PAGE>
Equity Under normal market conditions, the Growth Fund invests
Securities substantially all of its assets in equity securities.
Therefore, as an investor in the Growth Fund, the return on
your investment will be based primarily on the risks and
rewards associated with investing in equity securities.
The Growth Fund invests primarily in common stocks. Other types
of equity securities the Fund may acquire include preferred
stocks, securities which are convertible into common stocks and
readily marketable securities, such as rights and warrants,
which derive their value from common stock. As a general matter,
these other types of securities are subject to many of the same
risks as common stocks.
Common stocks represent partial ownership in a company and
entitle stockholders to share in the company's profits (or
losses). Common stocks may also entitle the holder to share in
the company's dividends. Investments in common stocks in general
are subject to market risks that may cause their prices to
fluctuate over time. For example, the value of a company's stock
may fall as a result of factors which directly relate to that
company, such as lower demand for the company's products or
services or poor management decisions. A stock's price may also
fall because of economic conditions which affect many companies,
such as increases in production costs. The value of a company's
stock may also be affected by changes in financial market
conditions that are not directly related to the company or its
industry, such as changes in interest rates or currency
exchange rates.
Foreign The Growth Fund may invest in common stocks of foreign companies.
Securities These investments will be made primarily through the use of
American Depositary Receipts ("ADRs"), although the Growth Fund
may make direct market purchases of such foreignsecurities.
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 company deposited in a domestic bank or
foreign branch of a U.S. bank and are 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 investment in
foreign securities or 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.
<PAGE>
Options and Options and futures contracts are types of derivative
Futures instruments. They "derive" their value from an underlying
Contracts security, index or other financial instrument. The use of options
and futures permits the Growth Fund to increase or decrease the
level of risk associated with its investments or to change the
character of that risk. Options and futures contracts trading are
highly specialized activities which entail greater than ordinary
investment risks.
The Growth Fund may write covered call options, buy put options,
buy call options and write put options on particular securities
or various indexes. The Fund may also invest in futures contracts
and options on futures contracts. The Fund may make these
investments for the purpose of protecting its assets (this is
known as "hedging") or to generate income.
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.
A futures contract is an exchange-traded contract to buy or sell
a standard quantity and quality of a financial instrument or
index at a specified future date and price.
The risks related to the use of options and futures contracts
include: (i) the correlation between movements in the market
price of the Growth Fund'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 contract may
result in losses or gains in excess of the amount invested in
the contract.
Temporary While the Growth Fund's primary strategy is to be fully invested
Defensive in equities, the Fund may depart from its principal
Strategy investment strategies in response to adverse market, economic,
political or other conditions. During these periods, the Fund may
engage in a temporary, defensive strategy that permits it to
invest up to 100% of its assets in high-grade domestic and
foreign money market instruments. It is possible that the Growth
Fund will not achieve its investment objective when it employs a
temporary, defensive strategy.
<PAGE>
SHARE PRICE You pay no sales charges to invest in the Growth Fund. When you
buy or redeem shares, your share price is the Fund's net asset
value per share next-determined after we receive your purchase or
redemption order. We determine the Growth Fund's net asset value
each day that the New York Stock Exchange ("NYSE") is open at the
close of trading on that exchange (normally, 4:00 p.m. Eastern
Time). Net asset value will not be calculated and, therefore,
shares will not be priced when the NYSE is closed.
The Growth Fund's net asset value per share is calculated by
adding the value of all securities, cash and other assets of the
Fund, subtracting the Fund's liabilities (including accrued
expenses and dividends payable), and dividing the result by the
total number of outstanding Fund shares.
The Growth Fund's investments are generally valued based on
market value, or if market quotations are not readily available,
fair value as determined in good faith by the Fund's board
of trustees.
<PAGE>
HOW TO The initial minimum investment for the Growth Fund is $2,000.
PURCHASE This minimum amount may, in certain cases, be waived or lowered
SHARES 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 The minimum subsequent investment for the Growth Fund is $250.
Investments. 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 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.
SHAREHOLDER Shareholder Inquiries and Services Offered. If there are any
SERVICES 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 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 $1,00
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.
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.
RETIREMENT Trust shares are available in connection with tax benefited
PLANS 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 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.
DIVIDENDS, The Growth Fund earns ordinary investment income from dividends
CAPITAL GAINS and interest on its investments. The Fund expects to distribute
DISTRIBUTIONS substantially all of this income, less Fund expenses, to
AND TAXES shareholders annually, or at such other times as the Fund
may elect.
The Fund also realizes capital gains and losses when it sells
securities in its portfolio for more or less than it paid for
them. If total gains on sales exceed total losses (including
losses carried forward from previous years), the Fund has a net
realized capital gain. Net realized capital gains, if any, are
distributed to shareholders at least annually.
Under present federal income tax laws, capital gains may be
taxable at different rates, depending on how long the Growth
Fund has held the underlying investment. Short-term capital
gains which are derived from the sale of assets held one year or
less are taxed as ordinary income. Long-term capital gains
which are derived from the sale of assets held for more than one
year are taxed at the maximum capital gains rate.
Dividends and capital gains distributions will be paid to you if
you hold shares on the record date of the distribution
regardless of how long you have held your shares. These
distributions are paid by the Fund on the basis of each
shareholder's relative net assets. The Fund's net asset value
will decrease by the amount of the distribution on the day the
distribution is made.
Dividends and capital gains distributions by the Growth Fund are
automatically reinvested in additional Fund shares at the share
price on the ex-dividend date, unless you choose to have them
paid to you directly. If you choose to have distribution checks
mailed to you and either the U.S. Postal Service is unable to
deliver the check to you or if the check(s) remain outstanding
for at least six months, the Fund reserves the right to
reinvest the check(s) at the then current net asset value until
you notify us with different instructions. Dividends and other
distributions, whether received in cash or reinvested in
additional Fund shares are taxable to you (unless your
investment is in an IRA or other tax-advantaged account).
Dividends and capital gains distributions declared in October,
November or December and paid in January are taxable in the
year in which they are declared.
The Trust is required by federal law to withhold 31% of
reportable payments (which may include 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, you must
certify that your Social Security or Taxpayer Identification
Number is correct (or that you have applied for such a number
and are waiting for it to be issued), and that you are not
currently subject to, or exempt from, backup withholding.
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 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. 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.
HOW THE Investment Manager. The Growth Fund is managed by Holland
TRUST IS Capital Management, a Delaware limited partnership whose
MANAGED 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. 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 of trustees, the
Investment Manager supervises and directs the day-to-day
investments and operation of the Growth Fund in 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 and Ms.Janus have
served as portfolio managers with respect to the Investment
Manager's private account clients.
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 Investment Manager has contractually
agreed to waive its investment management fee and reimburse
expenses of the Fund so that the Fund's total annual operating
expenses do not exceed more than 1.35%.
YEAR 2000 Like other mutual funds, financial and business organizations
and individuals around the world, the Fund could be adversely
affected if the computer systems used by the Investment Manager
and the Fund's 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 Investment Manager is taking steps that it
believes are reasonably designed to address the Year 2000
Problem with respect to computer systems that it uses and to
obtain reasonable assurance that comparable steps are being
taken by the Fund's other service providers.
FINANCIAL The financial highlights table is intended to help you
HIGHLIGHTS understand the Growth Fund's financial performance since the
Fund commenced operations. Certain information reflects
financial results for a single Fund share. The total returns in
the table represent the rate that an investor would have earned
on an investment in the Growth Fund (assuming reinvestment of
all dividends and distributions). The information for year ended
December 31, 1998 has been audited by KPMG LLP and information
for year ended December 31, 1997 and the period ended
December 31, 1996 has been audited by Deloitte & Touche LLP,
whose reports, along with the Fund's financial statements, are
included in the Fund's Annual Report, which is available
upon request.
<TABLE>
<CAPTION>
Year Ended Year Ended April 29, 1996 (1)
December 31, 1998 December 31, 1997 through
December 31,1996
------------------ ------------------- --------------------
<S> <C> <C> <C>
Net asset value, beginning of period $14.18 $11.28 $10.00
------ ----- ------
Income From Investment Operations:
Net Investment Income (0.02) (2) 0.00 (2) 0.00 (3)
Net Gains on Securities (both
realized and unrealized)
5.08 3.14 1.46
---- ---- ----
Total from investment operations 5.06 3.14 1.46
---- ---- ----
Less Distributions:
Dividends (from net
investment income) 0.00 (0.03) (0.05)
Dividends (from capital gains) (0.03) (0.21) (0.13)
------ ------ ------
Total distributions (0.03) (0.24) (0.18)
------ ------ ------
Net asset value, end of period $19.21 $14.18 $11.28
------ ------
Total return 35.75% 27.92% 14.62% (4)
Supplemental Data and Ratios:
Net assets, end of period $9,134,903 $5,299,916 $2,860,671
Ratio of expenses to average net assets
Before expense reimbursement 2.84% 4.19% 6.50% (5)
After expense reimbursement 1.35% 1.35% 1.35% (5)
Ratio of net investment income (loss)
to average net assets
Before expense reimbursement 1.60% (2.83)% (5.11)% (5)
After expense reimbursement 0.11% 0.02% 0.04% (5)
Portfolio turnover rate 32.84% 34.29% 30.48%
</TABLE>
(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.
<PAGE>
THE LOU HOLLAND TRUST
GROWTH FUND
<PAGE>
ADDITIONAL Additional information about The Lou Holland Trust and the Growth
INFORMATION Fund is available from several sources.
ABOUT THE
LOU HOLLAND Financial Reports. Additional information about the Growth Fund's
TRUST investments is available in the Fund's annual and semi-annual
AND THE reports. In the annual report, you will find a discussion of the
GROWTH FUND market conditions and investment strategies that significantly
affected the Growth Fund's performance during its last fiscal year
ended December 31, 1998.
Statement of Additional Information. The SAI, dated May 1, 1999,
contains detailed information about The Lou Holland Trust and the
Growth Fund's investment policies and practices. A current SAI is
on file with the Securities and Exchange Commission and is
incorporated in this Prospectus by reference, which means that the
SAI is legally a part of the Prospectus.
HOW TO OBTAIN To obtain a free copy of the current annual report, semi-annual
ADDITIONAL report or SAI, requests can be made:
INFORMATION
By Mail Write to: The Lou Holland Trust c/o Firstar Trust Company,
P.O. Box 701, Milwaukee, Wisconsin 53201-0701.
By Telephone Call: 1-800-295-9779.
By E-Mail Our address is: [email protected]
By Internet Visit our website at: www.hollandcap.com
You also can obtain copies of this information by visiting the
SEC's website at www.sec.gov or by visiting or writing to the
SEC's Public Reference Section at 450 Fifth Street,
Washington, D.C. Information on the Public Reference Section can
be obtained by calling 1-800-SEC-0330. The SEC's Public Reference
Section may impose a copying charge for any information
you request.
The SEC's Investment Company Act File Number for The Lou Holland
Trust is 811-7533.
WDC# 44835
<PAGE>
THE LOU HOLLAND TRUSTLOU 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, 1999, 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,
which means that it is legally a part of the Prospectus.
The date of this Statement of Additional Information is May 1, 1999.
TABLE OF CONTENTS
ITEM PAGE
General Information and History B-
Investment Restrictions B-
Description of Certain Investments and Policies B-
Management of The Trust B-
Committees of the Board of Trustees B-
Principal Holders of Securities B-
Investment Management and Other Services B-
Brokerage Allocation and Other Practices B-
Purchase and Redemption of Securities Being Offered B-
Determination of Net Asset Value B-
Taxes B-
Organization of The Trust B-
Performance Information About the Growth Fund B-
Legal Matters B-
Independent Auditors B-
Financial Statements B-
Appendix B-
<PAGE>
GENERAL INFORMATION AND HISTORY
The Lou Holland Trust (the "Trust") was organized as a Delaware business trust
on December 20, 1995 and is 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.
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.
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
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;
<PAGE>
(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;
(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;
(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 AND POLICIES
The following is a description of certain types of investments which may be made
by the Growth Fund and of certain investment policies that may be followed by
the Fund.
Money Market InstrumentsMarket 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:
<PAGE>
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 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.
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.
<PAGE>
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 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.
Convertible Securities
Convertible securities may be converted at either a stated price or stated rate
into underlying shares of common stock. Convertible securities have
characteristics similar to both fixed-income and equity securities. Convertible
securities generally are subordinated to other similar but non-convertible
securities of the same issuer, although convertible bonds, as corporate debt
obligations, enjoy seniority in right of payment to all equity securities, and
convertible preferred stock is senior to common stock of the same issuer.
Because of the subordination feature, however, convertible securities typically
have lower ratings than similar non-convertible securities.
<PAGE>
Although to a lesser extent than with fixed-income securities, the market value
of convertible securities tends to decline as interest rates increase and,
conversely, tends to increase as interest rates decline. In addition, because of
the conversion feature, the market value of convertible securities tends to vary
with fluctuations in the market value of the underlying common stock. A unique
feature of convertible securities is that as the market price of the underlying
common stock declines, convertible securities tend to trade increasingly on a
yield basis, and so may not experience market value declines to the same extent
as the underlying common stock. When the market price of the underlying common
stock increases, the prices of the convertible securities tend to rise as a
reflection of the value of the underlying common stock. While no securities
investments are without risk, investments in convertible securities generally
entail less risk than investments in common stock of the same issuer.
Convertible securities are investments that provide for a stable stream of
income with generally higher yields than common stocks. There can be no
assurance of current income because the issuers of the convertible securities
may default on their obligations. A convertible security, in addition to
providing fixed income, offers the potential for capital appreciation through
the conversion feature, which enables the holder to benefit from increases in
the market price of the underlying common stock. There can be no assurance of
capital appreciation, however, because securities prices fluctuate. Convertible
securities, however, generally offer lower interest or dividend yields than
non-convertible securities of similar quality because of the potential for
capital appreciation.
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 in the Fund's investment restrictions set forth in this 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 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.
<PAGE>
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 contract may result
in losses or gains in excess of the amount invested in the contract.
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.
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.
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.
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 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.
<PAGE>
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.
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.
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 this 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.
MANAGEMENT OF THE TRUST
Board of Trustees
The management of the Trust's business and affairs is the responsibility of its
Board of Trustees. 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.
Trustees and Officersand 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:
<PAGE>
Position with the Trust and
Principal Occupation During the
Name Age Past Five Years
*Louis A. Holland 57 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 40 Secretary and Trustee. Portfolio
---------------------
Manager, Holland Capital Management, L.P.;
Vice President, HCM Investments, Inc.
*Laura J. Janus 51 Treasurer. Portfolio Manager, Holland
----------
Capital Management, L.P.; Vice President,
HCM Investments, Inc.
Lester H. McKeever, Jr. 64 Trustee. Managing Partner, Washington,
--------
6700 S. Oglesby Ave. Pittman & McKeever, Certified Public
Chicago, IL 60649-1301 Accountants & Management Consultants.
Kenneth R. Meyer 54 Trustee. President and Managing
--------
1012 Westhoor Rd. Director, Lincoln Capital Management Co.
Winnetka, IL 60093-1840
John D. Mabie 66 Trustee. President, Mid-Continent Capital.
--------
55 W. Monroe St.
Suite 3560
Chicago, IL 60603-5011
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.
<PAGE>
The following table describes the compensation provided by the Trust for the
fiscal year ended December 31, 1998:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
(1) (2) (3) (4) (5)
Name of Person, Aggregate Pension or Retirement Estimated Benefits Total Compensation
Position Compensation from Benefits Accrued as Part Upon Retirement from The Trust
The Trust * of Trust Expenses Paid to Trustees
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
Lester H. McKeever,
Trustee and Member of $0 0 0 $0
Audit Committee
- ----------------------------------------------------------------------------------------------------------------
Kenneth R. Meyer,
Trustee and Member of $0 0 0 $0
Audit Committee
- ----------------------------------------------------------------------------------------------------------------
John D. Mabie,
Trustee and Member of $0 0 0 $0
Audit Committee
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
*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, 1998.
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, 1999.
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.
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, 1999 are listed below:
Name Address Percentage
As of March 31, 1999, Trustees and officers of the Trust, as a group, owned
X.XX% of the Growth Fund's outstanding voting securities.
INVESTMENT MANAGEMENT AND OTHER SERVICES
The Investment ManagerInvestment 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 years ended
December 31, 1997 and 1998, no management fees were paid to the Investment
Manager by the Growth Fund. The Investment Manager has contractually 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; (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.
<PAGE>
The Distributor and Distribution Services
The Distributor serves as the principal underwriter 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 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 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 the Growth Fund, any future series of shares or any future
classes of shares of any series. No compensation was paid to the Distributor for
distribution services for the year ended December 31, 1998.
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, administrative,
recordkeeping, tax related and other reporting services for the Trust. The
principal business address of Firstar is 615 East Michigan Street, Post Office
Box 701, Milwaukee, Wisconsin 53201-0701.
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
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).
<PAGE>
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 period April 29, 1996 through December 31, 1996 and the years ended
December 31, 1997 and 1998, total brokerage commissions paid by the Growth Fund
were $2,773, $4,508, and $4,805, respectively. No brokerage commissions were
paid to the Distributor.
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:
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.
<PAGE>
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. As such, it will not be subject to
federal income tax on any income and capital gains distributed to its
shareholders. Under Subchapter M of the Code, the Trust 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 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.
<PAGE>
ORGANIZATION OF THE TRUST
Each share of the Growth Fund is entitled to one vote on all matters submitted
to a vote of 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.
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 CalculationsReturn 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.
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.
<PAGE>
Based on the foregoing, the average annual total return for the Growth Fund for
the year ended December 31, 1998, was 35.75%.
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, 1998, 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
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 KPMG LLP, 303 East Wacker Drive, Chicago,
Ilinois, 60601.
Effective December 31, 1997, and ratified by the Board of Trustees on August 27,
1998, Deloitte & Touche LLP was terminated as the Trust's independent auditors.
For the years ended December 31, 1996 through December 31, 1997, Deloitte &
Touche LLP expressed an unqualified opinion on the Growth Fund's Financial
Statements. There were no disagreements between Trust management and Deloitte &
Touche LLP prior to their termination. The Board of Trustees approved the
termination of Deloitte & Touch LLP and the appointment of KPMG LLP as the
Trust's independent auditors
FINANCIAL STATEMENTS
The financial statements and accompanying notes for the years ended December 31,
1998 and 1997 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, including the financial highlights
contained in the prospectus, for the year ended December 31, 1998 have been
audited by KPMG 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. The financial statements for
the year ended December 31, 1997 and the financial highlights contained in the
prospectus for the years ended December 31, 1997 and 1996 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.
<PAGE>
APPENDIX
DESCRIPTION OF RATINGS OF CERTAIN MONEY MARKET SECURITIES
Description of Moody's Investors Service, Inc.'s commercial paper ratings:
Prime-1 (or related institutions) have a superior capacity for repayment of
short-term promissory obligations. Prime-1 repayment capacity will normally be
evidenced by the following characteristics:
1. Leading market positions in well established industries. High rates of return
on funds employed.
2. Conservative capitalization structures with moderate reliance on debt and
ample asset protection.
3. Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
4. Well established access to a range of financial market and assured sources of
alternate liquidity.
Prime-2 (or related supporting institutions) have a strong capacity for
repayment of short term promissory obligations. This will normally be evidenced
by many of the characteristics cited above but to a lesser degree. Earnings
trends and coverage ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.
Description of Standard & Poor's Corporation's commercial paper ratings:
A-1--This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics will be denoted with a plus (+) sign
designation.
A-2--Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues designated
A-1.
Description of Fitch Investor's Service, Inc.'s commercial paper ratings:
Fitch-1--(Highest Grade) Commercial paper assigned this rating is regarded as
having the strongest degree of assurance for timely payment.
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.
<PAGE>
DESCRIPTION OF CERTAIN CORPORATE BOND RATINGS
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S BOND RATINGS
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt-edge". Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are not likely to impair the
fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally known
as high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities, fluctuation of protective
elements may be of greater amplitude, or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
DESCRIPTION OF STANDARD & POOR'S CORPORATION'S BOND RATINGS
AAA--Debt rated "AAA" has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA-Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the highest-rated issues only in small degree.
<PAGE>
PART C. OTHER INFORMATION
Item 23. Exhibits
(a)(1). Certificate of Trust and Agreement and
Declaration of Trust of The Holland Trust.1
(a)(2). Certificate of Amendment of the Certificate of Trust and Revised
Agreement and Declaration of Trust of The Lou Holland Trust.2
(b)(1). By-Laws of The Holland Trust.1
(b)(2). Revised By-Laws of The Lou Holland Trust.2
(c). Specimen Certificate of Share of the Growth Fund.2
(d). Investment Management and Administration Agreement by and between
The Holland Trust and Holland Capital Management.3
(e). Distribution Agreement between the Holland Trust and HCM Investments,
Inc.3
(f). Not applicable.
(g). Custodian Agreement between The Lou Holland Trust and Firstar Trust
Company.3
(h)(1). Transfer Agent Agreement by and between The Lou Holland Trust and
Firstar Trust Company.3
(h)(2). Fund Administration Servicing Agreement by and between The Lou Holland
Trust and Firstar Trust Company.3
(h)(3). Fund Accounting Servicing Agreement between The Lou Holland Trust and
Firstar Trust Company.3
(h)(4). Expense Limitation Agreement by and between The Lou Holland Trust and
Holland Capital Management.3
(i). Not applicable.
(j)(1). Consent of Independent Auditors. 4
(j)(2). Consent of Jorden Burt Boros Cicchetti Berenson & Johnson 4
(k) Not applicable.
(l). Share Subscription Agreement by and between Holland Capital Management
and The Holland Trust.3
(m). Not applicable.
(n). Financial Data Schedule. 5
(o). Not applicable.
<PAGE>
- --------------------------------------------------------------------------------
1 Incorporated herein by reference to Registrant's Registration Statement on
Form N-1A (File No. 333-935).
2 Incorporated herein by reference to Pre-Effective Amendment No. 1 to
Registrant's Registration Statement on Form N-1A (File No. 333-935).
3 Incorporated herein by reference to Post-Effective Amendment No. 2 to
Registrant's Registration Statement on Form N-1A (File No. 333-935).
4 To be filed by amendment.
5 Incorporated herein by reference to Post-Effective Amendment No. 3 to
Registrant's Registration Statement on Form N-1A (File No. 333-935).
- --------------------------------------------------------------------------------
Item 24. Persons Controlled by or under Common Control with the Trust.
None.
Item 25. Indemnification
Reference is made to the Registrant's By-Laws (Article VI)
filed herein as Exhibit (b) 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 independent
counsel in a written opinion, determine that there is reason
to believe that the Trustee or officer will be found entitled
to indemnification.
<PAGE>
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 26. Business and Other Connections of the 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.
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 27. 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.
<PAGE>
Name Positions and Offices Positions and
with Underwriter Offices with the Trust
Louis A. Holland President, Treasurer and President, Trustee,
Director and Chairman of the
Board of Trustees
Catherine E. Chief Accounting Officer, None
Lavery Vice President, Secretary,
and Director
Monica L. Walker Vice President Secretary and Trustee
Laura J. Janus Vice President Treasurer
Maurice L. Haywood Vice President None
The principal business address of each person listed above is
35 West Wacker Drive, Suite 3260, Chicago, Illinois 60601.
Item 28. 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 29. 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.
Item 30. 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.
<PAGE>
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.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, as amended, the Registrant has duly caused this
Post-Effective Amendment No. 4 to the Trust's Registration Statement No. 333-935
to be signed on its behalf by the undersigned, duly authorized, in the City of
Chicago, and State of Illinois on the ____ day of __________, 1999.
THE LOU HOLLAND TRUST
--------------------------
By: Louis A. Holland
Chairman of the
Board of Trustees
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. 4 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 ___________, 1999
the Board of Trustees
Monica L. Walker Secretary & Trustee ___________, 1999
Laura J. Janus Treasurer ___________, 1999
John D. Mabie Trustee ___________, 1999
Lester H. McKeever, Jr. Trustee ___________, 1999
Kenneth R. Meyer Trustee ___________, 1999
