LOU HOLLAND
- --------------------------------------------------------------------------------
GROWTH FUND
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Dear Shareholder:
Letter to We are pleased to report that the Lou Holland Growth Fund
Shareholders gained 35.75% for the year, outperforming the Lipper General
December 1998 U.S. Stock Funds average return of 14.52%, the Lipper Growth
Stock Funds average return of 22.86%, and the S&P 500 return
of 28.58%.
1998 was a milestone year for the U.S. Stock Market, marking
the first time in history that the market has had four
consecutive years of 20+% stock returns, with a four-year
average return of over 30%. While the major capitalization-
weighted indexes have generated historically high rates of
return over the last several years, most stocks have not
enjoyed the same success. An analysis of the performance of
the S&P 500 indicates that while the index was up 28.6%
during 1998, the average stock in the index was up only
16.2% and the median stock return was 6.9%.
The 25 largest stocks in the S&P 500 Index which represented
38% of the capitalization weight of the index contributed
over 86% of the total return of the entire 500 stock index
in 1998. The ten largest stocks in the almost 5,000 stock
technology-dominated Nasdaq composite index represented 41%
of the capitalization weight of the index and 156% of the
Nasdaq composite 1998 total return of 39.63%.
Small capitalization stocks have now underperformed large
capitalization stocks for the last five years,
underperforming by almost 30 percentage points in 1998 and
almost 12 percentage points annually over the last five as
measured by the Russell 1000 large stock index and the
Russell 2000 small stock index. Both large and small
capitalization growth stocks outperformed value stocks
during 1998.
The performance of the Fund was impacted positively by our
emphasis on high quality mid- and large-capitalization
growth companies whose earnings are growing faster than the
general market. The Fund`s performance was also enhanced by
strong performance in technology, healthcare (pharmaceutical
and medical device) and consumer related stocks that have
benefited from strong consumer sentiment, job and income
growth, and a relatively strong U.S. economy. The Fund's
underweighting relative to the S&P 500 in producer durables,
energy and other economy-sensitive stocks has been additive
to performance because of the global economic slowdown. Our
overweighting in financial stocks impacted our performance
negatively, however we continue to be positive on the sector
because we believe that valuations are attractive relative
to the overall market.
Market Review & Outlook
1998 was a turbulent year for global economies and stock
markets. With recessions in Japan, most of Asia, the former
Soviet Union, Latin America and Canada, most investors were
concerned about the foreign impact on the U.S. economy,
corporate earnings and the U.S. stock and bond markets.
During the first half of the year, the U.S. stock market
ignored these concerns with the S&P 500 increasing by over
18%. However as the market became more concerned about the
global effect on the U.S. economy and ultimately corporate
earnings, the stock market corrected and wiped out all of
the first half market gains. By the end of the July/August
correction, over 75% of all stocks were down 20% or more,
and over 55% of all stocks were down 30% or more from their
52 week highs. Small stocks during this period as measured
by the Russell 2000 index were down over 30% from their
mid-April highs, comparable to their declines in the 1987
and 1990 bear markets.
The Federal Reserve Board came to the rescue with three
one-quarter percent interest rate cuts from the end of
September to the middle of November. Foreign central banks
followed the Federal Reserve Board's lead by cutting
interest rates collectively over 60 times to increase the
liquidity in the global economy. This infusion of liquidity
in the global financial system has stabilized many of these
economies, and their stock markets have rallied along with
the U.S. equity market. Because of the renewed strength in
the U.S. economy and the stock market over the last several
months, a number of strategists are wondering whether the
third interest rate cut was necessary. Our view is that the
Federal Reserve is likely to maintain a stable interest rate
policy over the remainder of the year unless the global
economy deteriorates in the coming months.
As we move into 1999, we continue to be concerned about the
global economic environment, even though the U.S. appears to
be an oasis of economic prosperity and low inflation. We at
the Lou Holland
<PAGE>
LOU HOLLAND
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GROWTH FUND
Growth Fund are trying to find high quality mid- and
large-growth companies, with a leadership position in their
industry, that we can buy at a reasonable price.
Our principle concern as we enter 1999 is corporate earnings
growth expectations. Corporate earnings growth rates peaked
in the second quarter of 1995 at almost 20% and have been
declining ever since. The principal driver of performance
since 1995 has been the expansion of price-earnings ratios
to historically high levels. With price-earnings ratios at
such high levels it is inconceivable that we could have
another 20% year without a dramatic increase in earnings
growth rates.
Thank you for your investment in the Lou Holland Growth
Fund. We are dedicated to providing high quality service and
superior long-term performance.
Sincerely,
/s/ Louis A. Holland
Louis A. Holland
President
Line chart:
Russell
Growth 1000
S&P 500 Fund Growth
4/29/96 $10000 $10000 $10000
6/30/96 10520 10297 10363
9/30/96 10910 10615 10737
12/31/96 11462 11500 11385
3/31/97 11329 11809 11447
6/30/97 13355 13870 13611
9/30/97 14210 14909 14635
12/31/97 14663 15337 14857
6/30/98 17290 18054 17885
12/31/98 19720 19905 20609
- --------------------------------------------------------------------------------
THIS CHART ASSUMES AN INITIAL GROSS INVESTMENT OF $10,000 MADE ON 4/29/96
(COMMENCEMENT OF OPERATIONS). RETURNS SHOWN INCLUDE THE REINVESTMENT OF ALL
DIVIDENDS. IN THE ABSENCE OF FEE WAIVERS AND REIMBURSEMENTS, TOTAL RETURN WOULD
BE REDUCED. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. INVESTMENT
RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, SO THAT YOUR SHARES, WHEN REDEEMED,
MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST.
RUSSELL 1000 GROWTH INDEX - An unmanaged index which measures the
performance of those companies within the 1,000 largest U.S. market
capitalization companies with higher price-to-book 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.
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.
- --------------------------------------------------------------------------------
Average Annual Rate of Return for the Periods Ended December 31, 1998
Year-to-Date Since Inception 4/29/96
Lou Holland Growth Fund 35.75% 29.36%
S&P 500 28.58% 28.91%
Russell 1000 Growth Index 38.71% 31.05%
Russell Mid-Cap Growth Index 17.86% 16.97%
<PAGE>
<TABLE>
LOU HOLLAND
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GROWTH FUND
Statement of Assets and Liabilities
December 31, 1998
<CAPTION>
<S> <C>
ASSETS:
Investments, at value
(cost $6,006,207) $9,362,335
Deferred organization charges 35,673
Receivable for investments sold 7,743
Dividends receivable 8,104
Interest receivable 2,143
Other assets 4,587
----------
Total Assets 9,420,585
----------
LIABILITIES:
Payable for securities purchased 250,908
Payable to investment manager 320
Accrued expenses and
other liabilities 34,454
----------
Total Liabilities 285,682
----------
NET ASSETS $9,134,903
==========
NET ASSETS CONSIST OF:
Capital stock $5,745,033
Undistributed net realized
gain on investments 33,742
Net unrealized appreciation
on investments 3,356,128
----------
Total Net Assets $9,134,903
==========
Shares outstanding (no par,
unlimited shares authorized) 475,504
Net Asset Value, Redemption
Price and Offering Price
Per Share $ 19.21
==========
<PAGE>
<CAPTION>
Statement of Operations
For the Year Ended December 31, 1998
INVESTMENT INCOME:
<S> <C>
Dividend income
(net of withholding tax $1,107) $ 67,858
Interest income 17,784
-----------
Total Investment Income 85,642
-----------
EXPENSES:
Investment management fee 58,754
Administration fee 26,948
Shareholder servicing and
accounting costs 48,777
Custody fees 4,148
Federal and state registration 5,332
Professional fees 16,342
Amortization of deferred
organization charges 15,337
Reports to shareholders 11,288
Other 9,490
-----------
Total expenses before
reimbursement 196,416
Less: Reimbursement from
Investment Manager (103,101)
-----------
Net Expenses 93,315
-----------
NET INVESTMENT LOSS (7,673)
-----------
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS:
Net realized gain on investments 57,854
Change in unrealized appreciation
on investments 2,077,211
-----------
Net realized and unrealized gain
on investments 2,135,065
-----------
NET INCREASE IN NET
ASSETS RESULTING FROM
OPERATIONS $ 2,127,392
===========
See notes to the financial statements.
</TABLE>
<PAGE>
<TABLE>
LOU HOLLAND
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GROWTH FUND
Statement of Changes in Net Assets
<CAPTION>
Year Ended Year Ended
December 31, 1998 December 31, 1997
----------- -----------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (7,673) $ 742
Net realized gain on investments 57,854 29,248
Change in unrealized
appreciation on investments 2,077,211 944,164
----------- -----------
Net increase in net assets
from operations 2,127,392 974,154
----------- -----------
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment income (2,756) (12,160)
From net realized gains (15,843) (76,341)
----------- -----------
(18,599) (88,501)
----------- -----------
CAPITAL SHARE
TRANSACTIONS:
Proceeds from shares sold 2,594,987 1,781,372
Shares issued to holders in
reinvestment of dividends 18,575 88,056
Cost of shares redeemed (887,368) (315,836)
----------- -----------
Net increase in net assets from
capital share transactions 1,726,194 1,553,592
----------- -----------
TOTAL INCREASE IN
NET ASSETS 3,834,987 2,439,245
----------- -----------
NET ASSETS:
Beginning of period 5,299,916 2,860,671
----------- -----------
End of period $ 9,134,903 $ 5,299,916
=========== ===========
CHANGES IN
SHARES OUTSTANDING:
Shares sold 157,598 139,462
Shares issued to holders in
reinvestment of dividends 967 6,290
Shares redeemed (56,762) (25,637)
----------- -----------
Net increase 101,803 120,115
=========== ===========
See notes to the financial statements.
</TABLE>
<PAGE>
<TABLE>
LOU HOLLAND
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GROWTH FUND
Financial Highlights
<CAPTION>
April 29, 1996 (1)
Year Ended Year Ended through
December 31, December 31, December 31,
1998 1997 1996
------------- ------------- -------------
<S> <C> <C> <C>
Per Share Data:
Net asset value, beginning of period $ 14.18 $ 11.28 $ 10.00
------------- ------------- -------------
Income from investment operations:
Net investment income(2) (0.02) 0.00 0.00
Net realized and unrealized
gains on investments 5.09 3.14 1.46
------------- ------------- -------------
Total from investment operations 5.07 3.14 1.46
------------- ------------- -------------
Less distributions:
Dividends from net
investment income (0.01) (0.03) (0.05)
Dividends from capital gains (0.03) (0.21) (0.13)
------------- ------------- -------------
Total distributions (0.04) (0.24) (0.18)
------------- ------------- -------------
Net asset value, end of period $ 19.21 $ 14.18 $ 11.28
============= ============= =============
Total return 35.75% 27.92% 14.62%(3)
Supplemental data and ratios:
Net assets, end of period $ 9,134,903 $ 5,299,916 $ 2,860,671
Ratios of expenses to average net assets
Before expense reimbursement 2.84% 4.19% 6.50%(4)
After expense reimbursement 1.35% 1.35% 1.35%(4)
Ratio of net investment income (loss)
to average net assets
Before expense reimbursement (1.60)% (2.83)% (5.11)%(4)
After expense reimbursement (0.11)% 0.02% 0.04%(4)
Portfolio turnover rate 32.84% 34.29% 30.48%
(1) Commencement of operations
(2) 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.
(3) Not annualized.
(4) Annualized.
See notes to the financial statements.
</TABLE>
<PAGE>
<TABLE>
LOU HOLLAND
- --------------------------------------------------------------------------------
GROWTH FUND
<CAPTION>
Schedule of Investments
December 31, 1998
Shares Value
- --------- ---------
<S> <C> <C>
COMMON STOCKS - 92.2%
Auto & Transportation - 1.4%
1,500 Federal Signal Corp. $ 41,062
1,400 Magna International Inc. F 86,800
---------
127,862
---------
Business Service - 1.0%
1,950 Affiliated Computer
Services - A * 87,750
---------
Conglomerate - 1.9%
2,250 Tyco International Ltd 169,734
---------
Consumer Discretionary - 7.1%
1,275 American Management
Systems Inc. * 51,000
1,775 Automatic Data Processing Inc. 142,333
3,550 Carnival Corporation 170,400
1,975 Home Depot Inc. 120,594
1,325 Lowe's Companies 67,823
1,150 Wal-mart Stores Inc. 93,653
---------
645,803
---------
Consumer Staples - 16.4%
1,325 Albertson's Inc. 84,386
2,325 CVS Corporation 127,702
850 Clorox Company 99,291
1,100 Coca-Cola Company 73,563
875 Colgate-Palmolive Company 81,266
1,900 Gillette Company 91,794
3,150 PepsiCo Inc. 128,953
4,700 Philip Morris Companies Inc. 251,450
1,300 The Procter & Gamble Company 118,706
3,300 Safeway, Inc. * 201,094
4,175 Walgreen Company 244,216
---------
1,502,421
---------
<PAGE>
<CAPTION>
Shares Value
- --------- ---------
<S> <C> <C>
Energy Raw Material - 0.9%
1,800 AES Corporation* $ 85,275
---------
Financial Services - 14.2%
1,962 American International
Group Inc. 189,540
1,255 Bank One Corp. 64,083
1,550 Citigroup Inc. 76,725
2,437 Concord EFS Inc. * 103,268
2,750 Fannie Mae 203,433
2,800 Federal Home Loan Mortgage
Corporation 180,400
1,600 MBIA Inc. 104,900
1,300 Mellon Bank Corp. 89,375
1,600 Northern Trust Corp. 139,700
3,550 Wells Fargo Company 141,778
---------
1,293,202
---------
Health Care - 20.7%
2,600 Abbott Laboratories 127,400
1,250 American Home Products Corp 70,391
1,325 Elan Corporation PLC ADR * 92,170
600 Guidant Corporation 65,943
1,975 Johnson & Johnson 165,653
1,475 Eli Lilly & Company 130,912
2,500 Medtronic Inc. 185,625
1,225 Merck & Co. Inc. 180,807
1,300 Novartis AG ADR 127,778
1,300 Pfizer Inc. 163,069
1,475 Pharmacia & Upjohn Inc. 83,522
3,850 Schering-Plough Corporation 212,713
2,050 Smithkline Beecham PLC ADR 142,475
1,900 Warner-Lambert Company 142,856
---------
1,891,314
---------
See notes to the financial statements.
</TABLE>
<PAGE>
<TABLE>
LOU HOLLAND
- --------------------------------------------------------------------------------
GROWTH FUND
<CAPTION>
Schedule of Investments
December 31, 1998
Shares Value
- --------- ---------
<S> <C> <C>
Integrated Oils - 3.0%
1,100 Amoco Corporation $ 64,900
1,525 Enron Corporation 87,020
800 Mobil Corporation 69,700
1,200 Royal Dutch Petroleum Company ADR 57,450
----------
279,070
----------
Materials & Processing - 1.8%
2,400 Jacobs Engineering
Group, Inc. * 97,800
1,725 Valspar Corporation 64,364
----------
162,164
----------
Other - 3.3%
2,950 General Electric Company 300,887
----------
Producer Durables - 0.7%
1,500 Grainger (W.W.) Inc. 62,438
----------
Technology - 15.8%
1,862 Cisco Systems Inc. * 172,817
1,850 EMC Corporation * 157,250
1,425 Hewlett-Packard Company 97,471
1,275 Intel Corporation 151,167
1,250 International Business
Machines Corp. 230,938
1,800 Lucent Technologies Inc. 198,000
2,400 Microsoft Corporation * 332,850
1,525 Network Associates Inc. * 101,031
----------
1,441,524
----------
<PAGE>
<CAPTION>
Shares Value
- --------- ----------
<S> <C> <C>
Utilities - 4.0%
3,250 GTE Corporation $ 212,140
2,200 MCI Worldcom Inc. * 157,819
----------
369,959
----------
Total common stocks
(cost $5,063,275) $8,419,403
==========
<CAPTION>
Principal
Amount Value
- --------- -----------
<S> <C> <C>
SHORT-TERM
INVESTMENTS - 10.3%
Variable Rate
Demand Notes - 10.3%
$ 116,000 American Family $ 116,000
312,299 General Mills 312,299
246,633 Pitney Bowes 246,633
20,000 Sara Lee 20,000
150,000 Warner Lambert 150,000
98,000 Wisconsin Electric 98,000
-----------
Total variable rate demand
notes (cost $942,932) 942,932
-----------
Total investments - 102.5%
(cost $6,006,207) 9,362,335
Other assets in excess
of liabilities - (2.5)% (227,432)
-----------
TOTAL NET ASSETS -
100.0% $ 9,134,903
===========
* Non-income producing security.
F Foreign security.
See notes to the financial statements.
</TABLE>
<PAGE>
LOU HOLLAND
- --------------------------------------------------------------------------------
GROWTH FUND
Notes to the Financial Statements
1. ORGANIZATION The Lou Holland Trust (the "Trust") was organized on
AND SIGNIFICANT December 20, 1995, as a Delaware business trust and
ACCOUNTING is registered as a no-load, open-end diversified
POLICIES management investment company under the Investment
Company Act of 1940 (the "1940 Act"). The Trust is
organized as a series company and currently consists
of one series, the Growth Fund (the "Fund"). The
principle investment objective of the Fund is to
seek long-term growth of capital by investing
primarily in common stocks of growth companies, with
the receipt of dividend income as a secondary
consideration. The Fund commenced operations on April
29, 1996.
The costs incurred in connection with the
organization, initial registration and public
offering of shares, were approximately $76,688. These
costs are being amortized over the period of benefit,
but not to exceed sixty months from the Fund's
commencement of operations.
The following is a summary of significant accounting
policies consistently followed by the Fund.
a) Investment Valuation - Common stocks and other
equity-type securities that are listed on a
securities exchange are valued at the last quoted
sales price on the day the valuation is made. Price
information on listed stocks is taken from the
exchange where the security is primarily traded.
Securities which are listed on an exchange but which
are not traded on the valuation date are valued at
the most recent bid prices. Unlisted securities for
which market quotations are readily available are
valued at the latest quoted bid price. Debt
securities are valued at the latest bid prices
furnished by independent pricing services. Other
assets and securities for which no quotations are
readily available are valued at fair value as
determined in good faith by the Holland Capital
Management, L.P. (the "Investment Manager") under the
supervision of the Board of Trustees. Short-term
instruments (those with remaining maturities of 60
days or less) are valued at amortized cost, which
approximates market.
b) Federal Income Taxes - Provision for federal
income taxes or excise taxes has not been made since
the Fund has elected to be taxed as a "regulated
investment company" and intends to distribute
substantially all taxable income to its shareholders
and otherwise comply with the provisions of the
Internal Revenue Code applicable to regulated
investment companies. Generally accepted accounting
principles require that permanent differences between
financial reporting and tax reporting be reclassified
between various components of net assets. On the
Statement of Assets and Liabilities, as a result of
permanent book-to-tax
<PAGE>
LOU HOLLAND
- --------------------------------------------------------------------------------
GROWTH FUND
differences, undistributed net investment income has
been increased by $10,429, undistributed net realized
gains on investments has been increased by $19,753,
and capital stock has been decreased by $30,182.
These differences relate to the exclusion of certain
organization costs and the inclusion of realized
gains related to the Holland L.P. conversion for tax
purposes.
c) Distributions to Shareholders - Dividends from net
investment income and distributions of net realized
capital gains, if any, will be declared and paid at
least annually. For the fiscal year ended December
31, 1998 the Fund designated and paid $15,843 as a
20% long term capital gain distribution.
d) Use of Estimates - The preparation of financial
statements in conformity with generally accepted
accounting principles requires management to make
estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of
revenues and expenses during the reporting period.
Actual results could differ from those estimates.
e) Foreign Securities - Investing in securities of
foreign companies and foreign governments involves
special risks and considerations not typically
associated with investing in U.S. companies and the
U.S. government. These risks include revaluation of
currencies and future adverse political and economic
developments. Moreover, securities of many foreign
companies and foreign governments and their markets
may be less liquid and their prices more volatile
than those of securities of comparable U.S.
companies and the U.S. government.
f) Foreign Currency Translations - The books and
records of the Fund are maintained in U.S. dollars.
Foreign currency transactions are translated into
U.S. dollars on the following basis: (i) market
value of investment securities, assets and
liabilities at the daily rates of exchange, and (ii)
purchases and sales of investment securities,
dividend and interest income and certain expenses at
the rates of exchange prevailing on the respective
dates of such transactions. For financial reporting
purposes, the Fund does not isolate changes in the
exchange rate of investment securities from the
fluctuations arising from changes in the market
prices of securities. However, for federal income tax
purposes the Fund does isolate and treat as ordinary
income the effect of changes in
<PAGE>
LOU HOLLAND
- --------------------------------------------------------------------------------
GROWTH FUND
foreign exchange rates on realized gain or loss from
the sale of investment securities and payables and
receivables arising from trade date and settlement
date differences.
g) Other - Investment and shareholder transactions
are recorded on the trade date. The Fund determines
the gain or loss realized from the investment
transactions by comparing the original cost of the
security lot sold with the net sales proceeds.
Dividend income is recognized on the ex-divided date
or as soon as information is available to the Fund,
and interest income is recognized on an accrual
basis. Generally accepted accounting principles
require that permanent financial reporting and tax
differences be reclassified to capital stock.
2. INVESTMENT The aggregate purchases and sales of securities,
TRANSACTIONS excluding short-term investments, by the Fund for the
year ended December 31, 1998, were as follows:
Purchases Sales
------------- ------------
U.S. Government $ -- $ --
Other $ 3,210,041 $ 2,138,844
At December 31, 1998, gross unrealized appreciation
and depreciation of investments for tax purposes
were as follows:
Appreciation $3,556,446
(Depreciation) (30,987)
----------
Net appreciation on investments $3,525,459
==========
At the close of business on May 2, 1996, the partners
of The Holland Fund, L.P. transferred their assets to
the Fund. As a result of the tax-free transfer the
Fund acquired $244,079 of unrealized appreciation for
tax purposes. As of December 31, 1998, the Fund
realized $70,516 of the appreciation.
At December 31, 1998, the cost of investments for
federal income tax purposes was $5,836,876.
3. AGREEMENTS The Fund has entered into an Investment Management
and Administration Agreement with Holland Capital
Management, L.P. Pursuant to its management agreement
with the Fund, the Investment Manager is entitled to
receive a fee, calculated daily and payable monthly,
at the annual rate of 0.85% as applied to the Fund's
daily net assets up to $500 million. The fee declines
at specified breakpoints as assets increase.
<PAGE>
LOU HOLLAND
- --------------------------------------------------------------------------------
GROWTH FUND
The Investment Manager voluntarily agrees to
reimburse its management fee and other expenses to
the extent that total operating expenses (exclusive
of interest, taxes, brokerage commissions and other
costs incurred in connection with the purchase or
sale of portfolio securities, and extraordinary
items) exceed the annual rate of 1.35% of the net
assets of the Fund, computed on a daily basis. This
voluntary reimbursement may be terminated under the
approval of the Board of Trustees.
HCM Investments, Inc. serves as principal underwriter
and the Distributor of the shares of the Fund
pursuant to a Distribution Agreement between the
Distributor and the Trust. The Distributor is an
affiliate of the Investment Manager. The Fund's
shares are sold on a no-load basis and, therefore,
the Distributor receives no sales commission or sales
load for providing services to the Fund. The Fund has
not currently entered into any plan or agreement for
the payment of fees pursuant to Rule 12b-1 under the
1940 Act.
Firstar Mutual Fund Services, LLC, serves as transfer
agent, administrator and accounting services agent
for the Fund. Firstar Bank Milwaukee, N.A. serves as
custodian for the Fund.
END OF NOTES TO THE FINANCIAL STATEMENTS
Effective December 31, 1997, and ratified by the
Board of Trustees on August 27, 1998, Deloitte and
Touche LLP was terminated as the Fund's independent
accountants. For the years ended December 31, 1996
through December 31, 1997, Deloitte and Touche LLP
expressed an unqualified opinion on the Fund's
financial statements. There were no disagreements
between Fund management and Deloitte and Touche LLP
prior to their termination. The Board of Trustees
approved the termination of Deloitte and Touche LLP
and the appointment of KPMG LLP as the Fund's
independent accountants.
<PAGE>
LOU HOLLAND
- --------------------------------------------------------------------------------
GROWTH FUND
- --------------------------------------------------------------------------------
Independent The Shareholders and Board of Trustees
Auditors' of the Lou Holland Growth Fund:
Report
We have audited the accompanying statement of assets
and liabilities of the Lou Holland Growth Fund (the
"Fund"), including the schedule of investments, as
of December 31, 1998, and the related statements of
operations, changes in net assets and financial
highlights for the year ended December 31, 1998.
These financial statements and financial highlights
are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these
financial statements and financial highlights based
on our audits. The accompanying statement of changes
in net assets and financial highlights of the Lou
Holland Growth Fund for the year ended December 31,
1997, and the financial highlights for the period
ended December 31, 1996, were audited by other
auditors whose report thereon, dated February 13,
1998, expressed an unqualified opinion on that
statement and those financial highlights.
We conducted our audit in accordance with generally
accepted auditing standards. Those standards require
that we plan and perform the audit to obtain
reasonable assurance about whether the financial
statements and financial highlights are free of
material misstatements. An audit includes examining,
on a test basis, evidence supporting the amounts and
disclosures in the financial statements and financial
highlights. Our procedures included confirmation of
securities owned, by correspondence with the
custodian and brokers. An audit also includes
assessing the accounting principles used and
significant estimates made by management, as well as
evaluating the overall financial statement
presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements and
financial highlights referred to above present
fairly, in all material respects, the financial
position of the Fund as of December 31, 1998 and the
results of its operations, changes in its net assets
and financial highlights for the year then ended, in
conformity with generally accepted accounting
principles.
KPMG LLP
Chicago, Illinois
February 12, 1999
<PAGE>
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TRUSTEES AND OFFICERS
Louis A. Holland, President, Trustee, and
Chairman of the Board of Trustees
Managing Partner and Chief Investment Officer, Holland
Capital Management, L.P. and President, Treasurer, and
Director, HCM Investments, Inc.
Monica L. Walker, Secretary and Trustee
Portfolio Manager, Holland Capital Management, L.P.
Vice President, HCM Investments, Inc.
Laura J. Janus, Treasurer
Portfolio Manager, Holland Capital Management, L.P.
Vice President, HCM Investments, Inc.
Lester H. McKeever, Jr., Trustee
Managing Partner, Washington, Pittman & McKeever
Certified Public Accountants & Management Consultants
Kenneth R. Meyer, Trustee
President and Managing Partner
Lincoln Capital Management Company
John D. Mabie, Trustee
President, Mid-Continent Capital
MANAGER
Holland Capital Management, L.P.
35 West Wacker Drive, Suite 3260
Chicago, IL 60601
Telephone (312) 553-1000
CUSTODIAN AND TRANSFER AGENT
Firstar Bank Milwaukee, N.A.
Firstar Mutual Fund Services, LLC
P.O. Box 701
Milwaukee, Wisconsin 53201-0701
Telephone (800) 295-9779
INDEPENDENT AUDITOR
KPMG LLP
Chicago, IL
LEGAL COUNSEL
Jorden Burt Boros Cicchetti Berenson & Johnson
Washington, D.C.
Logo:
LOU HOLLAND
GROWTH FUND
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ANNUAL REPORT
December 31, 1998
