Registration Nos. 333-00935
811-7533
As filed with the Securities and Exchange Commission on
April 28, 2000
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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. 6 X
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 7 X
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(Check appropriate box or boxes)
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The Lou Holland Trust
(Exact Name of Registrant as Specified in Charter)
35 West Wacker Drive, Suite 3260, Chicago, IL 60601
(Address of Principal Executive Office)
Registrant's Telephone Number, including Area Code:
(312) 553-1000
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Louis A. Holland
c/o Holland Capital Management
35 Wacker Drive
Suite 3260
Chicago, IL 60601
(Name and Address of Agent for Service)
Copies to:
Joan E. Boros
Jorden Burt Boros Cicchetti Berenson & Johnson 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):
X immediately upon filing pursuant to paragraph (b)
___ on (date) pursuant to paragraph (b)
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
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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, 2000
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LOU HOLLAND
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GROWTH FUND
TABLE OF CONTENTS
Investment Objective 1
Principal Investment Strategies 1
Principal Investment Risks 1
Past Performance of the Growth Fund 3
Fee Table and Expense Example 5
Fees and Expenses of the Growth Fund 5
Example of Expenses You Would Pay as
a Shareholder of the Growth Fund 5
More Information About the Investment Strategies,
Risks and Practices of the Growth Fund 6
Other Investment Strategies, Risks and Practices of the Growth Fund 7
Share Price 8
How to Purchase Shares 9
Shareholder Services 10
Retirement Plans 13
Dividends, Capital Gains Distributions and Taxes 13
How to Redeem Shares 14
How the Trust is Managed 16
Investment Manager 16
Portfolio Managers 16
Financial Highlights 17
Additional Information about
The Lou Holland Trust and the Growth Fund 19
How to Obtain Additional Information 19
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LOU HOLLAND
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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"), the Growth Fund's
investment strategies and risks, and Holland Capital
Management, L.P. (the "Investment Manager"), the
Trust's investment adviser, is included elsewhere in
this Prospectus.
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INVESTMENT OBJECTIVE The Growth Fund primarily seeks long-term growth of
capital. The receipt of dividend income is a secondary
consideration.
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PRINCIPAL The Growth Fund seeks to achieve its investment
INVESTMENT objective by investing primarily in common stocks of
STRATEGIES growth companies. In pursuing its investment
objective, the Growth Fund maintains a diversified
portfolio of equity securities of mid- to
large-capitalization 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.
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PRINCIPAL All mutual funds are subject to various risks
INVESTMENT RISKS associated with investing. 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.
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LOU HOLLAND
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GROWTH FUND
The Growth Fund is subject to the following principal
investment risks while pursuing its investment
objective:
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 SECURITY RISK: The risk that the market value
of a foreign security or the securities markets of a
foreign country may be more volatile or 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.
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LOU HOLLAND
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GROWTH FUND
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PAST PERFORMANCE OF The bar chart below shows the Growth Fund's
THE GROWTH FUND performance for each full calendar year since the
Fund's inception. The table that follows the bar
chart shows average annual total 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, 1999 and
the period since the Growth Fund's inception on April
29, 1996 until December 31, 1999. 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 measures 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 Russell Mid-Cap
Growth Index will perform in the future.
YEAR-BY-YEAR TOTAL RETURN
12-31-97 27.92%
12/31/98 35.75%
12/31/99 9.01%
Since its inception on April 29, 1996, the Growth
Fund's highest return for a calendar quarter was
24.03% (quarter ending December 31, 1998) and its
lowest return for a calendar quarter was -7.18%
(quarter ending September 30, 1998).
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LOU HOLLAND
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GROWTH FUND
AVERAGE ANNUAL TOTAL RETURN
SINCE
AVERAGE ANNUAL TOTAL RETURNS PAST INCEPTION
(FOR THE PERIOD ENDING DECEMBER 31, 1999) ONE YEAR (APRIL 29, 1996)
Lou Holland Growth Fund 9.01% 23.74%
S&P 500 Index 21.04% 26.72%
Russell 1000 Growth Index 33.16% 31.63%
Russell Mid-Cap Growth Index 51.29% 25.45%
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 a subset of approximately
523 of those Russell 1000 companies (that is, the 1,000
largest U.S. companies in terms of market capitalization)
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 a subset of
approximately 369 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.
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LOU HOLLAND
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GROWTH FUND
FEE TABLE AND EXPENSE EXAMPLE
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FEES AND EXPENSES OF When you purchase shares of a mutual fund, you pay
THE GROWTH FUND the fees and expenses associated with its operation.
This table describes the fees and expenses that you
may pay if you buy and hold shares of the Growth
Fund.
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%*
Distribution (12b-1) Fees None
Other Expenses 1.63%
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Gross Total Operating Expenses 2.48%
Less Fee Waiver & Expense Reimbursement ** -1.13%
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Net Total Operating Expenses 1.35%
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* 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%. This agreement may
be terminated only by the Trust's Board of Trustees.
As a result of the agreement, the Growth Fund
actually paid 1.35% of Total Operating Expenses
during its fiscal year ended December 31, 1999 and
not 2.48%.
EXAMPLE OF EXPENSES This Example is intended to help you compare the cost of
YOU WOULD PAY AS A investing in the Growth Fund with the cost of investing in
SHAREHOLDER OF THE other mutual funds. The Example assumes that you invest
GROWTH FUND $10,000 in the Growth Fund for the time periods shown and
then redeem all of your shares at the end of those
periods. The Example also assumes that your investment has
a 5% return each year and the Growth Fund's operating
expenses remain the same. The Example also assumes that
the fee waiver and expense reimbursements described above
remain in effect throughout the periods shown. 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:
1 Year 3 Years 5 Years 10 Years
------- ------- ------- -------
$137 $428 $739 $1,624
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.
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LOU HOLLAND
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GROWTH FUND
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.
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MORE INFORMATION EQUITY SECURITIES. Under normal market conditions,
ABOUT THE INVESTMENT the Growth Fund invests substantially all of its
STRATEGIES, RISKS AND assets in equity securities. Therefore, as an
PRACTICES OF investor in the Growth Fund, the return on your
THE GROWTH FUND 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 SECURITIES. The Growth Fund may invest in
common stocks of foreign companies. 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 foreign
securities. 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.
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LOU HOLLAND
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GROWTH FUND
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.
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OTHER INVESTMENT OPTIONS AND FUTURES CONTRACTS. Options and futures
STRATEGIES, RISKS AND contracts are types of derivative instruments.
PRACTICES OF They "derive" their value from an underlying
THE GROWTH FUND 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
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LOU HOLLAND
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GROWTH FUND
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 futures
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 DEFENSIVE STRATEGY. While the Growth Fund's
primary strategy is to be fully invested in equities,
the Fund may depart from its principal 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.
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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.
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LOU HOLLAND
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GROWTH FUND
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HOW TO The initial minimum investment for the Growth Fund
PURCHASE SHARES is $2,000. This minimum amount may, in certain cases,
be waived or lowered by the Trust.
OPENING AN ACCOUNT. Shareholders may make an initial
purchase of shares of the Growth Fund by mail or by
wire. Shares of the Fund may be purchased on any day
the Trust is open for business.
A COMPLETED AND SIGNED PURCHASE APPLICATION FORM
("APPLICATION") IS REQUIRED FOR EACH NEW ACCOUNT
OPENED WITH THE GROWTH FUND REGARDLESS OF HOW THE
INITIAL PURCHASE OF SHARES IS MADE.
BY MAIL. Shares of the Growth Fund may be purchased
by mailing the completed Application, with a check
made payable to the Trust, c/o Firstar Trust Company
("Firstar"), Post Office Box 701, Milwaukee,
Wisconsin 53201-0701. Correspondence sent by
overnight delivery services should be sent to Firstar
Trust Company, 3rd Floor, 615 East Michigan Street,
Milwaukee, Wisconsin 53202.
BY WIRE. Shares of the Growth Fund may also be
purchased by wiring funds to the wire bank account
for the Fund. Before wiring funds, please call the
Trust toll free at 1-800-295-9779 to advise the Trust
of the intention to invest in the Growth Fund, to
receive instructions as to how and where to wire the
investment, and to obtain a confirmation number to
ensure prompt and accurate handling of funds. Please
remember to return the completed Application to the
Trust as described in the prior paragraph. The Fund
and its transfer agent are not responsible for the
consequences of delays resulting from the banking or
Federal Reserve Wire system, or from incomplete
wiring instructions. The bank that wires the funds
may charge a fee. Instruct your bank to use the
following instructions when wiring funds:
Wire To: Firstar Bank Milwaukee, N.A.
ABA 075000022
Credit: Firstar Trust Company
Account 112-952-137
Further Credit: Lou Holland Growth Fund
(Shareholder Account Number)
(Shareholder Registration)
SUBSEQUENT INVESTMENTS. The minimum subsequent
investment for the Growth Fund is $250. Subsequent
purchases of shares of the Fund may be made by mail
or by wire (see instructions above), or through means
of the Telephone Investment Privilege described below
under "Shareholder Services."
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GROWTH FUND
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. 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, HCM Investments, Inc., each reserves the
right to reject any purchase for any reason and to
cancel any purchase due to nonpayment. Purchases are
not binding on the Trust or the Investment Manager or
considered received until such purchase orders are
received by Firstar in good order. Good order
requires that purchases must be made in U.S. dollars
and, to avoid fees and delays, all checks must be
drawn only on U.S. banks. No cash or third party
checks will be accepted. As a condition of this
offering, if a purchase is canceled due to nonpayment
or because a check does not clear (and therefore, the
account is required to be redeemed), the purchaser
will be responsible for any loss the Fund incurs. The
transfer agent charges a $20 fee against a
shareholder's account for any checks that do not
clear.
Shares may be purchased by rendering payment in-kind
in the form of marketable securities, including but
not limited to shares of common stock and debt
instruments, provided the acquisition of such
securities is consistent with the Growth Fund's
investment objectives and otherwise acceptable to the
Investment Manager. If you wish to purchase shares
with marketable securities, please call
1-800-295-9779 to determine whether the particular
securities will be accepted as payment by the Fund
and the manner by which they would be transferred to
the Fund.
SHARE CERTIFICATES. Share certificates will not be
issued for shares unless the shareholder has held
them for at least thirty (30) days and has
specifically requested them. Most shareholders elect
not to receive share certificates. Certificates for
full shares only will be issued. Shareholders who
lose a share certificate may incur an expense to
replace it.
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SHAREHOLDER SERVICES SHAREHOLDER INQUIRIES AND SERVICES OFFERED. If there
are any questions about the following services,
please call the Trust at 1-800-295-9779 or write the
Trust, c/o Firstar Trust Company, Post Office Box
701, Milwaukee, Wisconsin 53201-0701. The Trust
reserves the right to amend the shareholder services
described below or to change their terms or
conditions upon sixty (60) days notice to
shareholders.
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LOU HOLLAND
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GROWTH FUND
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 $1,000 or more may be made by
telephoning the Trust at 1-800-295-9779 between 9:00
a.m. and 4:00 p.m. Eastern Time on any day the Trust
is open. Telephone investment requests made after
4:00 p.m. Eastern Time will be processed as of close
of business on the next business day. In accordance
with a shareholder's instructions, the Trust will
electronically transfer monies from a shareholder's
bank account designated on the Application to the
shareholder's account with the Trust. The designated
bank must be a member of the Automated Clearing House
("ACH") network and able to make electronic transfers
in order for a shareholder to use this privilege.
Shares will be purchased at the net asset value
determined on the day the order is placed, provided
the call is received prior to 4:00 p.m. Eastern Time.
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LOU HOLLAND
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GROWTH FUND
TELEPHONE REDEMPTION PRIVILEGE. The Telephone
Redemption Privilege permits a shareholder to
authorize the redemption of any amount from his or
her account with the Trust by telephoning the Trust
at 1-800-295-9779 between 9:00 a.m. and 4:00 p.m.
Eastern Time on any day the Trust is open. In
accordance with telephone instructions, we will
redeem shares of the Growth Fund at their net asset
value next determined after the telephone redemption
request is received. Telephone redemption requests
made after 4:00 p.m. Eastern Time will be processed
as of the close of business on the next business day.
Redemp tion proceeds will, in accordance with any
prior election made by a shareholder, be mailed to
shareholder's current address, or transmitted by wire
to the shareholder's designated bank account. Firstar
will charge a $12 fee for the service. The designated
bank must be a member of the ACH network and able to
receive electronic transfers in order to use this
privilege. Telephone redemption requests will not be
processed if the shareholder has changed his or her
address within the preceding fifteen (15) days.
IRA accounts may not be redeemed via telephone.
After an account has been opened, a written request
must be sent to the transfer agent in order to
arrange for telephone redemptions or to make changes
in the bank or account receiving the proceeds. The
request must be signed by each shareholder of an
account and the signature guaranteed.
AUTOMATIC INVESTMENT PLAN (AIP). The Trust offers an
AIP whereby a shareholder may purchase shares on a
regular scheduled basis ($50 minimum per transaction
up to four times per month). Under the AIP, the
shareholder's designated bank account is debited a
preauthorized amount and applied to purchase shares.
The financial institution must be a member of the ACH
network. There is no charge for this service. A $15
fee will be charged by the transfer agent if there
are insufficient funds in the account at the time of
the scheduled transaction. The program will
automatically terminate upon redemption of all shares
in the account.
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GROWTH FUND
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RETIREMENT PLANS Trust shares are available in connection with tax
benefited retirement plans established under Section
401 (a) or Section 403 (b) of the Internal Revenue
Code of 1986 as amended ("Code"), IRAs and SEP-IRAs
under Section 408 of the Code, Roth IRAs under
Section 408A of the Code, Education IRAs under
Section 530 of the Code, corporate sponsored profit
sharing plans, and deferred compensation plans of
state and local governments and tax-exempt
organizations that comply with the provisions of
Section 457 of the Code. Various initial, annual
maintenance and participant fees may apply to these
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, CAPITAL The Growth Fund earns ordinary investment income from
GAINS DISTRIBUTIONS dividends and interest on its investments. The Fund
AND TAXES expects to distribute substantially all of this
income, less Fund expenses, to 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
- --------------------------------------------------------------------------------
13
<PAGE>
LOU HOLLAND
- --------------------------------------------------------------------------------
GROWTH FUND
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 Shareholders have the right to redeem (subject to the
REDEEM 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 of the redemption request in proper
form 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
- --------------------------------------------------------------------------------
14
<PAGE>
LOU HOLLAND
- --------------------------------------------------------------------------------
GROWTH FUND
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 funds or bank wire.
- --------------------------------------------------------------------------------
15
<PAGE>
LOU HOLLAND
- --------------------------------------------------------------------------------
GROWTH FUND
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 TRUST INVESTMENT MANAGER. The Growth Fund is managed by
IS MANAGED Holland Capital Management, L.P., a Delaware limited
partnership whose principal place of business is 35
West Wacker Drive, Suite 3260, Chicago, Illinois
60601. The Invest ment 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 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%.
PORTFOLIO MANAGERS. 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
- --------------------------------------------------------------------------------
16
<PAGE>
LOU HOLLAND
- --------------------------------------------------------------------------------
GROWTH FUND
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.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS The financial highlights table is intended to help
you 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, 1999 and
December 31, 1998 has been audited by KPMG LLP, whose
reports, along with the Fund's financial statements,
are included in the Fund's Annual Report, which is
available upon request. Information for other periods
presented was audited by other independent auditors.
- --------------------------------------------------------------------------------
17
<PAGE>
LOU HOLLAND
- --------------------------------------------------------------------------------
GROWTH FUND
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, APRIL 29, 1996(1)
------------------------------- THROUGH
Per Share Data: 1999 1998 1997 DECEMBER 31, 1996
-----------------
<S> <C> <C> <C> <C>
Net asset value, beginning
of period $19.21 $14.18 $11.28 $10.00
------- ------- ------- -------
Income From Investment Operations:
Net Investment Income (0.03)(2) (0.02)(2) 0.00(2) 0.00(2)
Net Gains on Securities (both
realized and unrealized) 1.76 5.09 3.14 1.46
------- ------- ------- -------
Total from
investment operations 1.73 5.07 3.14 1.46
------- ------- ------- -------
Less Distributions:
Dividends (from net
investment income) - (0.01) (0.03) (0.05)
Dividends (from capital gains) (0.07) (0.03) (0.21) (0.13)
------- ------- ------- -------
Total distributions (0.07) (0.04) (0.24) (0.18)
------- ------- ------- -------
Net asset value,
end of period $20.87 $19.21 $14.18 $11.28
======= ======= ======= =======
Total return 9.01% 35.75% 27.92% 14.62%(3)
Supplemental Data and Ratios:
Net assets, end of period $11,171,660 $9,134,903 $5,299,916 $2,860,671
Ratio of expenses to average net assets
Before expense
reimbursement 2.48% 2.84% 4.19% 6.50%(4)
After expense
reimbursement 1.35% 1.35% 1.35% 1.35%(4)
Ratio of net investment income (loss)
to average net assets
Before expense
reimbursement (0.97%) (1.60)% (2.83)% (5.11)%(4)
After expense
reimbursement 0.16% (0.11)% 0.02% 0.04%(4)
Portfolio turnover rate 24.13% 32.84% 34.29% 30.48%
</TABLE>
(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.
- --------------------------------------------------------------------------------
18
<PAGE>
LOU HOLLAND
- --------------------------------------------------------------------------------
GROWTH FUND
- --------------------------------------------------------------------------------
ADDITIONAL Additional information about The Lou Holland Trust
INFORMATION ABOUT and the Growth Fund is available from several
THE LOU HOLLAND TRUST sources.
AND THE GROWTH FUND
FINANCIAL REPORTS. Additional information about the
Growth Fund's investments is available in the Fund's
annual and semi-annual reports. In the annual report,
you will find a discussion of the market conditions
and investment strategies that significantly affected
the Growth Fund's performance during its last fiscal
year ended December 31, 1999.
STATEMENT OF ADDITIONAL INFORMATION. The SAI, dated
May 1, 2000, 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,
ADDITIONAL semi-annual 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 EDGAR database on 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. 20549-0102, or by electronic request
to the SEC at the following e-mail address:
[email protected]. Information on the Public
Reference Section can be obtained by calling
1-202-942-8090. 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.
- --------------------------------------------------------------------------------
19
<PAGE>
- --------------------------------------------------------------------------------
TRUSTEES AND OFFICERS
LOUIS A. HOLLAND, President, Trustee, and
Chairman of the Board of Trustees
Managing Partner and Chief Investment Officer,
Holland Capital Management, L.P. and President,
Treasurer, and Director, HCM Investments, Inc.
MONICA L. WALKER, Secretary and Trustee
Portfolio Manager, Holland Capital Management, L.P.
Vice President, HCM Investments, Inc.
LAURA J. JANUS, Treasurer
Portfolio Manager, Holland Capital Management, L.P.
Vice President, HCM Investments, Inc.
LESTER H. MCKEEVER, JR., Trustee
Managing Partner, Washington, Pittman & McKeever
Certified Public Accountants & Management Consultants
KENNETH R. MEYER, Trustee
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 LLP
Washington, D.C.
LOGO: LOU HOLLAND GROWTH FUND
- --------------------------------------------------------------------------------
PROSPECTUS
MAY 1, 2000
<PAGE>
THE LOU HOLLAND TRUST
35 West Wacker Drive
Suite 3260
Chicago, Illinois 60601
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information is not a prospectus, but should be read
in conjunction with the Prospectus for the Trust dated May 1, 2000, 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, 2000.
TABLE OF CONTENTS
ITEM PAGE
- ---- ----
General Information and History B-2
Investment Restrictions B-2
Description of Certain Investments and Policies B-3
Management of The Trust B-8
Committees of the Board of Trustees B-9
Principal Holders of Securities B-9
Investment Management and Other Services B-10
Brokerage Allocation and Other Practices B-11
Purchase and Redemption of Securities Being Offered B-12
Determination of Net Asset Value B-12
Taxes B-13
Organization of The Trust B-13
Performance Information About the Growth Fund B-14
Legal Matters B-15
Independent Auditors B-15
Financial Statements B-15
Appendix B-16
<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 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.
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.
<PAGE>
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 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>
<TABLE>
<CAPTION>
POSITION WITH THE TRUST AND
PRINCIPAL OCCUPATION DURING THE
NAME AGE PAST FIVE YEARS
<S> <C> <C>
*Louis A. Holland 58 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 41 Secretary and Trustee. Portfolio
Manager, Holland Capital Management, L.P.;
Vice President, HCM Investments, Inc.
*Laura J. Janus 52 Treasurer. Portfolio Manager, Holland
Capital Management, L.P.; Vice President,
HCM Investments, Inc.
Lester H. McKeever, Jr. 65 Trustee. Managing Partner, Washington,
6700 S. Oglesby Ave. Pittman & McKeever, Certified Public
Chicago, IL 60649-1301 Accountants & Management Consultants.
Kenneth R. Meyer 55 Trustee. President and Managing
1012 Westhoor Rd. Director, Lincoln Capital Management Co.
Winnetka, IL 60093-1840
John D. Mabie 67 Trustee. President, Mid-Continent Capital.
55 W. Monroe St.
Suite 3560
Chicago, IL 60603-5011
</TABLE>
Of the persons listed in the table above, the following describes any position
held with any affiliated persons or principal underwriters of registrant: Louis
A. Holland is Managing Partner and Chief Investment Officer of the Investment
Manager and President, Treasurer and Director of the Distributor; Monica L.
Walker and Laura J. Janus each are a Vice President of the Distributor and a
partner of, and member of the Investment Policy Committee of, the Investment
Manager.
<PAGE>
<TABLE>
<CAPTION>
The following table describes the compensation provided by the Trust for the
fiscal year ended December 31, 1999:
- -----------------------------------------------------------------------------------------------------------------------
(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 $1,000 0 0 1,000
Audit Committee
- -----------------------------------------------------------------------------------------------------------------------
Kenneth R. Meyer,
Trustee and Member of $1,000 0 0 $1,000
Audit Committee
- -----------------------------------------------------------------------------------------------------------------------
John D. Mabie,
Trustee and Member of $500 0 0 $500
Audit Committee
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
*Each Trustee listed in the table voluntarily agreed to waive the receipt of
fees for services as a Trustee to the Trust for the first half of the fiscal
year ended December 31, 1999 Therefore, the compensation shown in this table
represents those fees paid only for services performed during the second half of
the fiscal year ended December 31, 1999.
Trustees who are interested persons of the Trust, as that term is defined by the
1940 Act, do not receive compensation from the Trust. Each Trustee who is not an
interested person of the Trust is expected to receive $2,250 for services as a
Trustee for the fiscal year ending December 31, 2000.
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, 2000 are listed below:
<PAGE>
Name Address Percentage
Robert Fred Heft 2 Oakbrook Club Drive 8.12%
Apt C307
Hinsdale, Il 60523-1333
Great West Life Recordkeeper 8515 E. Orchard Rd 7.36%
Chicago Park District Def Comp Englewood, Co 80111-5002
Trust FBO Chicago Park
Distirct 457
Lee Seidler & Lynn Seidler 5001 Joewood Dr 7.20%
Jt Ten Sanibel Fl 33957-7512
Tia Lamarre Duppler 9 Woodbury Ct 6.44%
Appleton, WI 54915-7111
Lady Joan LP 50A Marlin Lane 5.40%
Key Largo, Fl 33037
As of March 31, 2000, Trustees and officers of the Trust, as a group, owned
5.17% of the Growth Fund's outstanding voting securities.
INVESTMENT MANAGEMENT AND OTHER SERVICES
THE INVESTMENT MANAGER
Holland Capital Management, 35 West Wacker Drive, Suite 3260, Chicago, Illinois
60601, serves as Investment Manager of the Trust pursuant to an Investment
Management and Administration Agreement that has been approved by the Board,
including a majority of independent Trustees.
The controlling persons of the Investment Manager are: Holland Capital
Management, Inc., the General Partner of the Investment Manager; Louis A.
Holland, Managing Partner and Chief Investment Officer of the Investment
Manager; and Catherine E. Lavery, Chief Accounting Officer, Secretary and
Director of Holland Capital Management, Inc.
Investment management fees are paid to the Investment Manager monthly at the
following annualized rates based on a percentage of the average daily net asset
value of the Growth Fund: 0.85% of average daily net assets up to $500 million,
0.75% of average daily net assets up to the next $500 million, and 0.65% of
average daily net assets in excess of $1 billion. For the fiscal years ended
December 31, 1997, 1998 and 1999, 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.
CODE OF ETHICS
The Trust adheres to a Code of Ethics established pursuant to Rule 17j-1 under
the 1940 Act. The Code is designed to prevent unlawful practices in connection
with the purchase or sale of securities by persons associated with the Trust.
The Manager has included similar provisions in its Code of Ethics. The Codes
require all access persons to obtain prior clearance before engaging in personal
securities transactions. Transactions must be executed within three business
days of their clearance. The Codes also contain other restrictions applicable to
specified types of transactions. In addition, all employees must report their
personal securities transactions within 10 days after the end of the calendar
quarter. Any material violation of the Codes relating to the Trust is reported
to the Board of the Trust. The Board also reviews the administration of the
Codes on an annual basis.
<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, 1999.
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 fiscal years ended December 31, 1997, 1998 and 1999, total brokerage
commissions paid by the Growth Fund were $4,508, $4,805, and $6,842
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.
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 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, 1999, was 9.01%, and the average annual total return
for the Growth Fund since inception on April 29, 1996 was 23.47%
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
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.
FINANCIAL STATEMENTS
The financial statements and accompanying notes for the years ended December 31,
1999 and 1998 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, 1999 and 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
highlights contained in the prospectus for the years ended December 31, 1997 and
1996 have been audited by other independent auditors.
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
(h)(4)(a). Amendment to Expense Limitation Agreement. 4
(i). Not applicable.
(j)(1). Consent of Independent Auditors. 5
(j)(2). Consent of Jorden Burt Boros Cicchetti Berenson &
Johnson 5
(k) Not applicable.
(l). Share Subscription Agreement by and between Holland
Capital Management and The Holland Trust.3
(m). Not applicable.
(n). Not applicable.
(o). Reserved.
(p). Code of Ethics Holland Capital Management and The Lou
Holland Trust & HCM Investments, Inc. Code of Ethics
with Respect to Securities Transactions of Access
Persons 5
<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 Incorporated herein by reference to Post-Effective Amendment No. 5 to
Registrant's Registration Statement on Form N-1A (File No. 333-935).
5 Filed herewith.
- ------------------------------------------------------------------------------
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.
<TABLE>
<CAPTION>
Name Position with the
Investment Manager
<S> <C>
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.
Carl R. Bhathena Vice President and Investment Analyst,
Vice President, HCM Investments, Inc.
David L. Frank Vice President and Investment Analyst,
Vice President, HCM Investments, Inc.
Michelle RhodesBrown Vice President and Investment Analyst
Vice President, HCM Investment, Inc.
Charles M. Sloan 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.
</TABLE>
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>
<TABLE>
<CAPTION>
Name Positions and Offices Positions and
with Underwriter Offices with the Trust
<S> <C> <C>
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
Carl R. Bhathena Vice President None
David L. Frank Vice President None
Michelle RhodesBrown Vice President None
Charles L. Sloan Vice President None
</TABLE>
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 certifies that it meets all of
the requirements for effectiveness of this Registration Statement under rule
485(b) under Securities Act and has duly caused this Post-Effective Amendment
No. 6 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 28th day of April, 2000.
THE LOU HOLLAND TRUST
/s/Louis A. Holland
--------------------
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. 6 to the Trust's Registration Statement has been signed below by
the following persons in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/Louis A. Holland President & Chairman of April 28, 2000
the Board of Trustees
/s/Monica L. Walker Secretary & Trustee April 28, 2000
/s/Laura J. Janus Treasurer April 28, 2000
/s/John D. Mabie Trustee April 28, 2000
/s/Lester H. McKeever, Jr. Trustee April 28, 2000
/s/Kenneth R. Meyer Trustee April 28, 2000
</TABLE>
CONSENT OF INDEPENDENT AUDITORS
The Shareholders and Board of Trustees
of the Lou Holland Growth Fund:
We consent to the use of our report incorporated herein by reference and the
references to our firm under the headings "Financial Highlights" in the
Prospectus and "Independent Auditors" and "Financial Statements" in the
Statement of Additional Information.
/s/ KPMG LLP
Chicago, Illinois
April 24, 2000
[JordenBurt]
[1025 Thomas Jefferson Street, N.W.]
[Suite 400 East]
[Washington, D.C. 20007-0805]
[(202) 965-8100]
[TELECOPIER: (202) 965-8104]
[HTTP://WWW.JORDENUSA.COM]
April 28, 2000
The Lou Holland Trust
35 West Wacker Drive
Suite 3260
Chicago, Illinois 60601
RE: THE LOU HOLLAND TRUST
POST-EFFECTIVE AMENDMENT NO. 6 TO THE REGISTRATION STATEMENT
ON FORM N-1A, FILE NOS. 333-00935; 811-7533
Ladies and Gentlemen:
We have acted as special counsel to The Lou Holland Trust, a Delaware
business trust, regarding the federal securities laws applicable to the
above-captioned Registration Statement. We hereby consent to the reference to us
in the Registration Statement filed today with the Securities and Exchange
Commission. In giving this consent, we do not admit that we are in the category
of persons whose consent is required under Section 7 of the Securities Act
of1933.
Very truly yours,
/s/ Jorden Burt Boros Cicchetti Berenson & Johnson LLP
Jorden Burt Boros Cicchetti Berenson & Johnson LLP
71616
CODE OF ETHICS
HOLLAND CAPITAL MANAGEMENT, L.P.
MARCH 8, 2000
<PAGE>
HOLLAND CAPITAL MANAGEMENT, L.P.
CODE OF ETHICS AND CONDUCT
As an investment adviser, Holland Capital Management, L.P. ("Holland")
is a fiduciary. As such it owes its clients the highest duty of diligence and
loyalty. Accordingly, one of the fundamental policies of Holland is to avoid any
conflict of interest or even the appearance of such a conflict in connection
with the performance of investment advisory and portfolio management services
for its clients. In furtherance of such fundamental policy, Holland has adopted
this Code of Ethics and Conduct ("Code"), which applies to each Employee1 of
Holland who is involved in the provision of investment advisory or portfolio
management services --whether by way of security analysis or recommendation,
portfolio recommendation, or otherwise.
Because Holland is an investment adviser to a mutual fund, The Lou
Holland Trust (the "Trust"), Holland must comply with the applicable provisions
of the Investment Company Act of 1940 (the "1940 Act"). In this connection, Rule
17j-1 under the 1940 Act requires an adviser to a mutual fund to adopt a code of
ethics designed to ensure that the interests of the fund and its shareholders
are put ahead of those of the adviser. Thus, Holland has adopted, and the Board
of Trustees of the Trust (the "Board"), including a majority of the
Disinterested Trustees,2 has approved this Code under Rule 17j-1 of the 1940
Act. Since the Trust is one of Holland's clients, wherever the term "client" is
used in this Code, you should remember that it includes the Trust.
Please carefully read the policies and procedures detailed below. When
you believe that you sufficiently understand them, sign, date, and return one
copy of this memorandum to our Compliance Officer, and keep the other copy for
your reference. Employees should consult with Holland's Compliance Officer
regarding any questions about these items and other issues relating to Holland's
fiduciary obligations to its clients.
Please also note that the Insider Trading and Securities Fraud
Enforcement Act of 1988 and Section 204A of the Investment Advisers Act of 1940
("Advisers Act") require every investment adviser to establish, maintain, and
enforce policies and procedures to detect and prevent the misuse of material,
non-public information. In response to those requirements, Holland has developed
Policies and Procedures Concerning the Misuse of Material Non-Public
- -----------------
1 The term "Employee" as used, herein includes "Employees" and "advisory
representatives," as those terms are defined in Rule 17j-1 under the Investment
Company Act of 1940 and Rule 204-2 under the Investment Advisers Act of 1940,
respectively, as well as all other employees of Holland. Your receipt of this
Code for your review and signature means you are a designated person to whom all
of the provisions of the Code apply.
2 The term "Disinterested Trustee" means a trustee of the Trust who is not an
"interested person" of the Trust or Holland within the meaning of Section
2(a)(19) of the 1940 Act.
2
<PAGE>
Information ("Policies and Procedures"). Please refer to those Policies and
Procedures as appropriate.
I. CONFLICTS OF INTEREST-PERSONAL INVESTMENTS
A. General. Holland believes that every Employee should have
reasonable freedom with respect to their investment activities and those of
their families. At the same time, conflicts of interest could arise between
Holland's clients and the personal investment activities of Holland or its
Employees.
Holland's fundamental policy is to avoid conflicts of interest
or even the appearance of such conflicts whenever possible. However, if a
conflict were to unavoidably occur, it is also Holland's policy to resolve such
conflict in favor of the client. Even in instances in which there is an identity
of interest among a Holland client, Holland and its Employees, an Employee must
recognize that the Holland client has priority in its right to benefit from
Holland's investment advice over any rights of Holland, the Employee, or any
non-client members of the Employee's family whom the Employee may advise. This
condition inevitably places some restriction on freedom of investment for
Employees and their families.
This Code does not attempt to describe all possible conflicts
of interest, but rather attempts to establish general principles and to
highlight possible problem areas. Employees should be conscious that areas other
than personal securities transactions may involve conflicts of interest. For
example, one such area would be accepting gifts or favors from persons such as
brokers since such gifts or favors could impair the Employee's objectivity.
Thus, the requirements set forth below are not intended to cover all situations
that may involve a possible conflict of interest. Rather, they are intended to
provide a (i) framework for understanding such conflicts and (ii) mechanism for
monitoring and reporting personal securities transactions. If there is any doubt
about a matter, the Compliance Officer should be consulted before any action
regarding such matter is taken.
B. Prohibited Personal Trading
1. Improper Use of Information. No Employee may use his3 knowledge
concerning Holland's advisory clients' securities transactions for trading
in his personal account, any account in which he has a "beneficial
ownership interest,"4 or in any account controlled by or under the
influence of such Employee.5
- -------------------
3 The use of the masculine pronoun is for convenience
of reference only and is intended to include the feminine in all cases.
4 The SEC has interpreted such a "beneficial ownership interest" to include the
account of a spouse, minor child and any relative resident in the advisory
representative's house, an account as to which a person is a trustee if such
person established the trust and has the power to revoke it or if the person or
the person's child, stepchild, spouse,
continue
3
<PAGE>
2. Prohibited Transactions. No Employee shall purchase or sell,
directly or indirectly, any security in which he has, or by reason of such
transaction acquires, any direct or indirect beneficial ownership interest
without obtaining prior clearance as described in Section I.B.3. of this
Code, provided that this prohibition shall not apply to any transaction
that:
a. is exempt under Section I.B.4. of this Code; or
b. does not involve (i) a Covered Security;6 (ii) a security to
be made available in an Initial Public Offering; 7 or (iii)
a security to be made available in a Limited Offering. 8
- ---------------------
continue
ancestor, stepfather or stepmother has a vested interest in the trust, as well
as any other contract, undertaking, relationship, agreement or other arrangement
from which benefits substantially equivalent to ownership flow to the designated
person. (Employees with spouses who are employed in the securities industry must
immediately notify our Compliance Officer, who will discuss with you the
policies and procedures concerning trades by those spouses.) See Appendix A for
examples of beneficial ownership arrangements.
5 Rule 204-2 under the Advisers Act states that an Employee need not report
securities transactions effected in any account over which the Employee does not
have "any direct or indirect influence or control." However, this "no direct or
indirect influence or control" exception is limited to few situations. The
principal situation arises where securities are held in a trust in which an
Employee has a beneficial interest, but the Employee is not the trustee and the
Employee has no control or influence over the trustee. Specific questions
regarding the "no influence or control" exception or general questions
concerning beneficial ownership or reporting responsibility should be directed
to the Compliance Officer.
6 For the purpose of the trading prohibitions and reporting requirements of this
Code, consistent with the SEC interpretations under the relevant rules, the term
"Covered Security" has the same meaning as the term "security" set forth in
Section 2(a)(36) of the 1940 Act, except that is shall not include shares of
registered open-end investment companies, securities issued by United States
Government, bankers' acceptance, bank certificates of deposit, commercial paper,
short-term debt securities which are "government securities" within the meaning
of Section 2(a)(16) of the 1940 Act, or other money market instruments
designated by Holland.
7 The term "Initial Public Offering" means an offering of securities registered
under the Securities Act of 1933, the issuer of which, immediately before the
registration, was not subject to the reporting requirements of Sections 13 or
15(d) of the Securities Exchange Act of 1934.
8 The term "Limited Offering" means an offering that is exempt from registration
under the Securities Act of 1933 pursuant to Section 4(2) or Section 4(6) or
pursuant to Rule 504, Rule 505, or Rule 506 under the Securities Act of 1933.
4
<PAGE>
3. Prior Clearance of Transactions
a. General Requirement. Every Employee shall obtain prior
written clearance from the Compliance Officer before
directly or indirectly initiating, recommending, or in any
other way participating in the purchase or sale of a Covered
Security, or directly or indirectly acquiring any security
made available in an Initial Public Offering or in a Limited
Offering, in which the Employee has, or by reason of the
transaction may acquire, a direct or indirect beneficial
ownership interest. When requesting prior clearance, each
Employee should be aware that:
i. all requests for prior clearance must be set forth in
writing on the standard Personal Request and Trading
Authorization Form (a copy of each such Form submitted
by an Employee should be retained by the Employee for
personal recordkeeping purposes);
ii. prior clearance of a securities transaction is
effective for three (3) business days from and
including the date clearance is granted; and
iii. Holland's trading desk will promptly provide copies of
the Personal Trading Request and Authorization Form it
receives to the Compliance Officer for review.
b. Bases for Denial of Prior Clearance. The Compliance Officer
shall deny a request for prior clearance if he determines
that the security at issue is a Covered Security or is being
made available in an Initial Public Offering or Limited
Offering and:
i. the Employee has actual knowledge that such security is
being considered for purchase or sale on any client's
behalf, even though no order has been placed; or
ii. the Employee has actual knowledge that such security
has been purchased or sold by a client within the prior
seven (7) business days; or
iii. the Employee has actual knowledge that such security is
being purchased or sold on behalf of a client (i.e., an
order has been entered but not executed for a client);
or
5
<PAGE>
iv. with respect to Initial Public Offerings:
A. the number of shares to be purchased is not
commensurate with the normal size and activity of the
Employee's brokerage or other account; or
B. an order for the purchase of such securities has
been placed by Holland for any of its client accounts;
or
v. the transaction would be potentially harmful to any
client; or
vi. the transaction would likely affect the market in which
such securities are traded; or
vii. the decision to purchase or sell the security appears
to be the result of material non-public information
obtained in the course of the Employee's relationship
with Holland or any of its affiliates; or
viii. the granting of prior clearance would, in the judgment
of the Compliance Officer, be inconsistent with the
purposes of this Code. If a prior clearance request is
denied under this Section I.B.3.b.viii, the Compliance
Officer shall explain in writing the reasons therefor.
4. Exempt Transactions. The prohibitions of Section I.B.2 of this Code
and the pre-clearance procedures described in Section I.B.3 of this
Code shall not apply to:
a. purchases or sales effected in any account over which the
Employee has no direct or indirect influence or control, or
in any account of the Employee which is managed on a
discretionary basis by a person other than the Employee and,
with respect to which the Employee does not in fact
influence or control purchase or sale transactions;
b. purchases or sales of securities which are not eligible for
purchase or sale by any client;
c. purchases or sales which are non-volitional on the part of
the Employee;
6
<PAGE>
d. purchases which are part of an automatic dividend
reinvestment plan; or
e. purchases effected upon the exercise of rights issued by the
issuer pro rata to all holders of a class of its securities,
to the extent such rights were acquired from such issuer,
and sales of such rights so acquired.
C. Specific Rules. The following rules govern Employee investment
activities for the Employee's personal account or for accounts in
which the Employee has any direct or indirect beneficial ownership
interest. These rules are in addition to those noted in Section I.B.
above.
1. Short Sales. No Employee may sell a security short that is
owned by any Holland client, except "short sales against the box" for
tax purposes.
2. Dealing with Clients. No Employee may directly or indirectly
sell to or purchase from a client any security, except purchases and
sales with respect to the Trust in the normal course of Holland's
provision of advisory services to the Trust.
3. Client Ownership. No Employee may purchase a security of a
company with respect to which 5% or more of its outstanding stock is
owned, in the aggregate, by Holland clients, unless prior written
approval is obtained.
4. Day Trading. No day trading (i.e., the purchase and sale of
securities on a short term basis, such as one to five days) by
Employees is permitted, without written approval of the Compliance
Officer.
5. Commissions. Commissions on personal transactions may be
negotiated by the Employee, but payment of a commission rate which is
better than the rate available to Holland clients through similar
negotiation is prohibited.
6. Options and Futures. The purchase, sale, and utilization of options
and futures contracts on specific securities by the Employee are
subject to the same restrictions as those set forth in this Code with
respect to securities, i.e., the option or futures contract should be
treated as if it were the security for these purposes.
II. GENERAL STANDARDS
A. Written Record of Securities Recommendations. Every recommendation
for the purchase or sale of securities for clients, excluding recommendations to
increase or decrease existing securities positions, must be memorialized in
writing either prior to or immediately after the recommendation is made. A
standard Security Trading Advice form for purchase or sale
7
<PAGE>
orders must be used for this purpose and should be provided to or otherwise made
available to the Holland trading desk.
B. Use of Securities Recommendations. Any investment ideas developed by
an Employee in the course of their work for Holland will be made available for
use by Holland's clients prior to any personal trading or investment by any
Employee based on such ideas. See also the prohibitions against self-dealing and
front-running described in Sections II.E. and F. below.
C. Gifts, Favors, and Gratuities. No Employee should seek from a
broker-dealer, securities salesperson, approved company (i.e., a company the
securities of which are held by a Holland client), supplier, client or other
person or organization with whom Holland has a business relationship any gift,
favor, gratuity, or preferential treatment that is or may appear to be connected
with any present or future business dealings between Holland and that person or
organization or which may create or appear to create a conflict of interest. As
one consequence, no Employee may purchase Initial Public Offerings in primary or
secondary distributions, unless prior written approval is obtained and certain
other requirements are met, as described above in Section I.B. No gifts may be
accepted, other than those offered as a courtesy. All gifts, favors, or
gratuities with a fair market value in excess of $100 should be reported and
described on the Quarterly Transaction Report and will be reviewed by Holland's
Compliance Officer; gifts with a value of less than $100 need only be reported.
After such review, a determination will be made whether such gifts, favors or
gratuities should be returned. In addition, discretion should be used in
accepting invitations for dinners, evening entertainment, sporting events or
theater. While in certain circumstances it may be appropriate to accept such
invitations, all invitations whose value exceeds $100 should also be reported to
our Compliance Officer on the Quarterly Transaction Report. Any invitations from
any person or organization involving free travel for more than one day must
receive prior approval from our Compliance Officer. No Employee should offer any
gifts, favors or gratuities that could be viewed as influencing decision-making
or otherwise could be considered as creating a conflict of interest on the part
of their recipient.
D. Inside Information. No Employee may seek any benefit for himself, a
client, or anyone else from material, non-public information about issuers,
whether or not held in the portfolios of our clients or suitable for inclusion
in their portfolios. Any Employee who believes he is in possession of such
information must contact our Compliance Officer immediately. This prohibition
should not preclude an Employee from contacting officers and employees of
issuers or other investment professionals in seeking information about issuers
that is publicly available. Please remember, in this regard, to review Holland's
Policies and Procedures.
E. Fair Dealing vs. Self-Dealing. An Employee shall act in a manner
consistent with the obligation to deal fairly with all clients when taking
investment action. Self-dealing for personal benefit or the benefit of Holland,
at the expense of clients, will not be tolerated. The receipt of "special
favors" from a stock promoter, such as participation in a Limited Offering or
Initial Public Offering, as an inducement to purchase other securities for
Holland clients is not permitted. The existence of any substantial economic
relationship between a proposed personal
8
<PAGE>
securities transaction and any securities held or to be acquired by Holland or
Holland clients must be disclosed on the Authorization Form.
F. Front-Running. An Employee shall not engage in "front-running" an
order or recommendation, even if the Employee is not handling either the order
or the recommendation and even if the order or recommendation is for someone
other than a client of Holland. Front-running consists of executing a
transaction in the same or underlying securities, options, rights, warrants,
convertible securities or other related securities, in advance of block or large
transactions of a similar nature likely to affect the value of the securities,
based on the knowledge of the forthcoming transaction or recommendation.
G. Confidentiality. Information relating to any client's portfolio or
activities is strictly confidential and should not be discussed with anyone
outside Holland. In addition, from the time that an Employee anticipates making
a recommendation to purchase or sell a security, through the time that all
transactions for clients based on that recommendation have been consummated, the
"subject and content" of the recommendation may be considered to constitute
"inside information." Accordingly, Employees must maintain the utmost
confidentiality with respect to their recommendations during this period and may
not discuss a contemplated recommendation with anyone outside of Holland. In
this regard, please also see Holland's Policies and Procedures.
Any written or oral disclosure of information concerning Holland,
Holland's clients, or particular purchase or sale transactions for client
accounts should be made only by persons who are specifically authorized to
release that information, after consultation with Holland's General Counsel.
Please note that this prohibition is not intended to inhibit exchanges of
information among Holland Employees.
III. REPORTS OF PERSONAL INVESTMENTS BY EMPLOYEES
A. Account Reporting. Every Employee must immediately notify our
Compliance Officer in writing of any account in which he has or will have a
beneficial interest or for which he exercises influence or control over
investment decisions. Such notification must identify the brokerage firm at
which the account is maintained, the account executive, the title of the
account, the account number, and the names and addresses of all individuals with
a beneficial interest in the account. This requirement also includes all such
accounts of Holland clients in which the Employee has or will have a beneficial
interest. Each Employee is responsible for arranging to have records for
securities transactions in such accounts, other than those at Holland, sent to
our Compliance Officer in accordance with paragraph III.B. below.
B. Periodic Reporting. Rule 204-2 under the Advisers Act requires that,
with certain minor exceptions, Holland must maintain a record of every
transaction in a security in which the firm or any Employee has, or by reason of
such transaction acquires, any direct or indirect beneficial ownership interest,
subject to certain exceptions described below. In addition, because
9
<PAGE>
Holland serves as an investment adviser to the Trust, Holland and its Employees
must comply with the recordkeeping requirements of Rule 17j-1 under the 1940
Act. Set forth below are Holland's recordkeeping procedures.
1. Content and Timing of Employee Reports. Every Employee shall make the
following reports to the Compliance Officer:
a. Initial Holdings Report. No later than ten (10) days after
becoming an Employee, such Employee shall report the following
information:
i. the title, number of shares and principal amount of each
Covered Security:
A. in which the Employee had any direct or indirect
beneficial ownership interest; or
B. held in any accounts of non-Holland clients that the
Employee manages or to which the Employee provides
investment or voting advice
when the person became an Employee;
ii. the name of any broker, dealer or bank with whom the
Employee maintained an account in which any securities were
held for the direct or indirect benefit of the Employee as
of the date the person became an Employee; and
iii. the date that the report is submitted by the Employee.
b. Quarterly Transaction Reports. No later than ten (10) days after
the end of a calendar quarter, the Employee shall report the
following information:
i. With respect to any transaction during the quarter in a
Covered Security:
A. in which the Employee had any direct or indirect
beneficial ownership interest; or
B. held in any accounts of non-Holland clients that the
Employee managed or to which the Employee provided
investment or voting advice:
10
<PAGE>
1. the date of the transaction, the title, the interest
rate and maturity date (if applicable), the number
of shares and the principal amount of each Covered
Security involved;
2. the nature of the transaction (i.e., purchase, sale
or any other type of acquisition or disposition);
3. the price of the Covered Security at which the
transaction was effected;
4. the name of the broker, dealer, or bank with or
through whom the transaction was effected; and
5. the date that the report is submitted by the
Employee.
ii. with respect to any account established by the Employee in
which any securities were held during the quarter for the
direct or indirect benefit of the Employee:
A. the name of the broker, dealer or bank with whom the
Employee established the account;
B. the date the account was established; and
C. the date that the report was submitted by the Employee.
c. Annual Holding Reports. No later than twenty (20) days after the
end of every calendar year, the Employee shall report the
following information (which information must be current as of
December 31 of the calendar year for which the report is being
submitted):
i. the title, number of shares and principal amount of each
Covered Security:
A. in which the Employee has any direct or indirect
beneficial ownership interest; or
11
<PAGE>
B. held in any accounts of non-Holland clients that the
Employee managed or to which the Employee provided
investment or voting advice;
ii. the name of any broker, dealer or bank with whom the
Employee maintains an account in which any securities are
held:
A. for the direct or indirect benefit of the Employee; or
B. in any accounts of non-Holland clients that the
Employee managed or to which the Employee provided
investment or voting advice; and
iii. the date that the report is being submitted by the Employee.
2. No Holdings or Transactions to Report. If an Employee has no holdings
to report on either an Initial Holdings Report or any Annual Holdings
Report nor transactions to report on any Quarterly Transaction Report,
that Employee shall nevertheless submit the appropriate Report stating
that the Employee had no holdings or transactions (as appropriate) to
report and the date the report is submitted by the Employee.
3. Copies of Confirmations and Period Account Statements. Each Employee
shall direct every broker or dealer through whom the Employee effects
any securities transactions to deliver to the Compliance Officer, on a
timely basis, duplicate copies of confirmations of all Employee
securities transactions, including Initial Public Offerings and
Limited Offerings, and copies of periodic statements for all Employee
securities accounts.
4. Exceptions From Reporting Requirements.
a. An Employee need not make a report under this Section III.B. with
respect to transactions for, and Covered Securities held in, any
account over which the Employee has no direct or indirect
influence or control.
b. An Employee need not make a Quarterly Transaction Report under
Section III.B.1.b. if the confirmations or periodic account
statements delivered to the Compliance Officer under Section
III.B.3 are received within the time period required by Section
III.B.1.b., provided that all information required by Section
III.B.1.b. is contained in such confirmations or account
statements.
12
<PAGE>
c. An Employee need not make a Quarterly Transaction Report with
respect to the "exempt transactions" described in Section I.B.4.
5. Review of Reports. The Compliance Officer shall review all reports
submitted pursuant to Section III.B. for the purpose of detecting and
preventing a potential or actual violation of this Code.
a. The Compliance Officer shall review an Initial Holdings Report
within fifteen (15) days of the date such Report is submitted by
an Employee.
b. The Compliance Officer shall review all Quarterly Transaction
Reports and all Annual Holding Reports within thirty (30) days of
the date such a Report is submitted by an Employee.
c. The Compliance Officer shall maintain a record of each report
reviewed and the date such review was completed. Such record
shall indicate whether the Compliance Officer's review detected a
potential or actual violation of this Code. If the Compliance
Officer detects a potential or actual material violation of this
Code, the Compliance Officer shall promptly inform management of
Holland in writing.
d. The Compliance Officer promptly after furnishing such written
notification of a potential or actual material violation of this
Code, shall take those measures the Compliance Officer deems
necessary and appropriate to remedy such violation, including,
but not limited to, requiring the Employee to divest any
inappropriate securities holdings and recommending sanctions.
e. The Compliance Officer shall take such other actions and measures
as he deems necessary and appropriate to carry out his duties
with respect to the review of reports required under this Code.
6. Notification of Reporting Obligation. The Compliance Officer shall
identify all Employees who are required to make reports under Section
III.B. and shall inform those Employees of their reporting obligation.
Once informed of the duty to file reports, an Employee has a
continuing obligation to file such reports in a timely manner.
7. Disclaimer of Beneficial Ownership. The broad definition of
"beneficial ownership" is for purposes of this Code only. It does not
necessarily cover other securities or tax laws. In reporting a
securities transaction to Holland, an Employee can include in his
Quarterly Report "a statement declaring that the reporting or
recording of any securities transaction shall not be construed as an
admission that the reporting person has any direct or indirect
beneficial ownership in the security." For example, if an Employee who
is a parent or custodian sold
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securities owned by a minor child under a Uniform Gifts to Minors Act,
the Employee would report such transaction on the Quarterly
Transaction Report, but such Employee could disclaim beneficial
ownership by checking the appropriate box on the Quarterly Transaction
Report.
Whether an Employee's Report should include such a disclaimer is a
personal matter on which Holland will make no recommendation. A disclaimer may
be important not only for securities law purposes, but also because it might be
some evidence of ownership for other purposes, such as estate taxes.
Accordingly, an Employee may wish to consult his own attorney on this issue.
8. Form of Reports. All reports required to be filed under Section III.B.
shall be prepared by Employees using the forms attached to this Code.
9. Annual Certification of Compliance.
At the time of submission of Annual Holding Reports, all Employees must
certify that they have read, understand and are subject to this Code, and have
complied at all times with this Code, including the execution of personal
securities transactions disclosures in connection with obtaining prior clearance
of securities transactions and the submission of all required reports. When a
person becomes an Employee, that person shall be given a copy of the Code.
Within 72 hours after being given the Code, that person shall certify that he or
she has had an opportunity to ask questions, and has read and understands the
Code, and agrees to comply with the Code. All Employees shall be given a copy of
any amendment to the Code. Within three months after the amendment becomes
effective, all Employees shall certify that they have received a copy of the
amendment, that they have had an opportunity to ask questions, and that they
understand the amendment and agree to comply with the amendment.
IV. ADVISING NON-HOLLAND CLIENTS
Employees may not render investment advice to persons other than
clients of Holland or members of the Employee's immediate family, unless the
advisory relationship, including the identity of those involved and any fee
arrangements, has been disclosed to and cleared with our Compliance Officer.
Such advisory relationships are subject to the reporting provisions of Section
III. above.
V. VIOLATIONS OF THIS CODE
Violations of this Code may result in the imposition of sanctions by
regulatory authorities and/or Holland, including forfeiture of any profit from a
transaction, reduction in salary, censure, suspension, or termination of
employment.
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VI. REPORTS TO THE BOARD
A. No less than thirty (30) days prior to the final regular meeting of
the Board for each fiscal year of the Trust, the Compliance Officer shall
furnish to the Board, and the Board shall consider, a written report that:
1. Describes any issues arising under this Code since the last
report to the Board, including, but not limited to, information about
material violations of this Code and the sanctions, if any, imposed in
response to the material violations; and
2. Certifies that Holland has adopted procedures reasonably
necessary to prevent Employees from violating the Code.
B. In considering the written report, the Board shall determine
whether any action is required in response to the report.
To the extent that immaterial violations of this Code (such as late
filings of required reports) may collectively indicate material problems
with the implementation and enforcement of this Code, the written report
shall describe any violations that are material in the aggregate.
VII. MATERIAL CHANGES TO THE CODE
A. The Board, including a majority of the Disinterested Trustees,
shall approve any material change made to this Code no later than the next
regularly scheduled Board meeting after adoption of the material change.
B. The Board shall base its approval of any material change to the
Code on a determination that the Code contains provisions reasonably
necessary to prevent Employees from engaging in any conduct proscribed by
Rule 17j-1 under the 1940 Act or any conduct that contravenes the policies
set forth in Section I. of this Code.
VIII. RECORD RETENTION
In addition to its obligations under the Advisers Act, Holland shall
maintain records in the manner and to the extent set forth below, which records
may be maintained on microfilm under the conditions described in Rule
31a-2(f)(1) under the 1940 Act, and shall be available for examination by
representatives of the Securities and Exchange Commission:
A. Retention of Code. A copy of this Code and any Code that was in
effect at any time within the past five years shall be preserved in an
easily accessible place.
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B. Record of Violations. A record of any violation of this Code and of
any action taken as a result of such violation shall be preserved in an
easily accessible place for a period of not less than five years following
the end of the fiscal year in which the violation occurs.
C. Copy of Forms and Reports. A copy of each Personal Trading Request
and Authorization Form and each Initial Holdings Report, Quarterly
Transaction Report, Annual Holdings Report and Conflict of Interest Report
prepared and submitted by an Employee pursuant to this Code must be
preserved by the Compliance Officer for a period of not less than five
years from the end of the fiscal year in which such report is made, the
first two years in an easily accessible place.
D. List of Employees. A list of all persons who are, or within the
past five years of business have been, required to file Personal Trading
Request and Authorization Forms and Initial Holdings Reports, Quarterly
Transaction Reports, Annual Holdings Reports and Conflict of Interest
Reports pursuant to this Code and a list of those persons who are or were
responsible for reviewing such Forms and Reports shall be maintained in an
easily accessible place.
E. Written Reports to the Board. A copy of each written report
furnished to the Board under Section VI. of this Code shall be maintained
for at least five years after the end of the Trust's fiscal year in which
it is made, the first two years in an easily accessible place.
F. Records Relating to Decisions Involving Initial Public Offerings
and Limited Offerings. A record of any decision, and the reasons supporting
the decision, to approve the acquisition by Employees of securities made
available in an Initial Public Offering or Limited Offering shall be
maintained for at least five years after the end of the Trust's fiscal year
in which the approval is granted.
G. Sites of Records to be Kept. All such records and/or documents
required to be maintained pursuant to this Code, the Advisers Act, and/or
Rule 17j-1 under the 1940 Act shall be kept at the offices of Holland at
Suite 3260, 35 West Wacker Drive, Chicago, Illinois 60601.
XI. CONFIDENTIAL TREATMENT
All reports and other records required to be filed or maintained under
this Code shall be treated as confidential.
X. INTERPRETATIONS OF PROVISIONS
Management of Holland may, from time to time, adopt such
interpretations of this Code as such management deems appropriate, provided
that the Board shall approve any material changes to this Code in
accordance with Section VII.
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XI. AMENDMENTS TO THE CODE
Any amendment to the Code shall be effective thirty (30) calendar days
after written notice of such amendment shall have been received by the
Compliance Officer, unless management of Holland expressly determines that
such amendment shall become effective on an earlier date or shall not be
adopted. Any material change to this Code shall be approved by the Board in
accordance with Section VII.
XII. ACKNOWLEDGEMENT OF RECEIPT
The undersigned has read, understands, and agrees to abide by the
guidelines set forth in this Code.
Name: Date:
------------------------ -----------------------
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APPENDIX A
EXAMPLES OF BENEFICIAL OWNERSHIP
1. Securities held by an Employee for his own benefit, whether such
securities are in bearer form, registered in his own name, or otherwise;
2. Securities held by others for the Employee's benefit (regardless of
whether or how such securities are registered), such as, for example,
securities held for the Employee by custodians, brokers, relatives,
executors or administrators;
3. Securities held by a pledgee for an Employee's account;
4. Securities held by a trust in which an Employee has an income or
remainder interest unless the Employee's only interest is to receive
principal (a) if some other remainderman dies before distribution or (b) if
some other person can direct by will a distribution of trust property or
income to the Employee;
5. Securities held by an Employee as trustee or co-trustee, where
either the Employee or any member of the Employee's immediate family (i.e.,
spouse, children or their descendants, stepchildren, parents and their
ancestors, and stepparents, in each case treating a legal adoption as blood
relationship) has an income or remainder interest in the trust.
6. Securities held by a trust of which the Employee is the settler, if
the Employee has the power to revoke the trust without obtaining the
consent of all the beneficiaries;
7. Securities held by any non-public partnership in which the Employee
is a partner;
8. Securities held by a personal holding company controlled by the
Employee alone or jointly with others;
9. Securities held in the name of the Employee's spouse unless legally
separated;
10. Securities held in the name of minor children of the Employee or
in the name of any relative of the Employee or of their spouse (including
an adult child) who is presently sharing the Employee's home. This applies
even if the securities were not received from the Employee and the
dividends are not actually used for the maintenance of the Employee's home;
11. Securities held in the name of any person other than the Employee
and those listed in (9) and (10), above, if by reason of any contract,
understanding, relationship, agreement, or other arrangement the Employee
obtains benefits substantially equivalent to those of ownership;
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12. Securities held in the name of any person other than the Employee,
even though the Employee does not obtain benefits substantially equivalent
to those of ownership (as described in (11), above), if the Employee can
vest or revest title in himself.
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APPENDIX B
PROCEDURES FOR THE ENFORCEMENT OF THE
CODE OF ETHICS OF
HOLLAND CAPITAL MANAGEMENT, L.P.
1. Upon the commencement of employment, each Employee of Holland is
provided with a copy of the Code. Each Employee is at that time also
scheduled to discuss the Code with our Compliance Officer. The Employee is
required to acknowledge his understanding of the Code's prohibitions and
requirements by signing it and returning it to our Compliance Officer for
retention in Holland's files. Employees are encouraged to direct any
questions that may arise concerning the Code and its prohibitions to our
Compliance Officer. Each year Holland recirculates the Code to its
Employees and requires that each Employee sign and return the executed copy
to our Compliance Officer.
2. A list of all Employees is maintained and updated by our Compliance
Officer.
3. Before an Employee can place an order to effect a securities
transaction for any account in which the Employee has a direct or indirect
beneficial interest or for which the Employee exercises influence or
control over investment decisions, the Employee must obtain prior written
approval from Holland's trading desk on a standard Personal Trading Request
and Authorization Form ("Authorization Form") supplied by Holland.
Holland's trading desk, when appropriate, may inquire as to the reason for
the personal securities transaction and record that reason on the
Authorization Form. The original or a copy of the Authorization Form will
be provided to our Compliance Officer so that it can be matched at a later
time with the information reported on the Employee's Quarterly Transaction
Report.
4. Holland's Code requires all Employees to report on the Quarterly
Transaction Report any securities transaction for the prior quarter for
accounts in which they have or will acquire a direct or indirect beneficial
interest or for accounts over which they exercise influence or control.
Employees are also asked to instruct the brokerage firm through which the
transaction is executed to send a duplicate confirmation to our Compliance
Officer. Upon receiving a confirmation, our Compliance Officer will match
the confirmation with the Authorization Form. If the confirmation on its
face reveals a violative trade, appropriate disciplinary action will be
taken.
In the event that a Quarterly Transaction Report or confirmation
discloses a securities transaction for which no prior written approval was
obtained, our Compliance Officer will discuss the circumstances of the
transaction and the reason for the failure to follow required procedures
with the Employee and a written record will be made of the matter. A copy
of that record will be attached to the Employee's Quarterly Transaction
Report, which is retained in that Employee's personal securities
transactions file. Our Compliance Officer will warn
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Employees that violations of Holland's Code may result in disciplinary
action including reduction in salary, censure, suspension or termination
of employment.
5. On a monthly basis each Employee's personal transactions files will
be reviewed by our Compliance Officer to identify and mark day trades and
situations where a personal trade in a security preceded a client trade, by
one or more days. Our Compliance Officer will also review the files for
scalping, front-running, misuse of confidential information, or other
abusive personal securities transactions.
6. Our Compliance Officer will discuss any such questionable
transactions with the Employee who effected the trade. Our Compliance
Officer will make a written record of any determination indicating whether
there has been a violation of law or Holland's Code and the reasons
underlying that determination. In the event that our Compliance Officer
determines that there has been a securities law violation or a violation of
Holland's Code, appropriate disciplinary action will be taken and a report
made to Holland's management.
7. These procedures, in conjunction with those procedures designed to
prevent the use of material nonpublic information, as contained in
Holland's Policies and Procedures Concerning the Misuse of Material
Non-Public Information, will be reviewed by Holland's management on an
annual basis to assess their effectiveness in preventing improper and
illegal personal securities trading by Employees.
<PAGE>
THE LOU HOLLAND TRUST
A DELAWARE BUSINESS TRUST
AND
HCM INVESTMENTS, INC.
A DELAWARE CORPORATION
CODE OF ETHICS WITH RESPECT TO
SECURITIES TRANSACTIONS OF ACCESS PERSONS
Rule 17j-1 under the Investment Company Act of 1940 ("1940 Act")
requires investment companies, as well as their investment advisers and
principal underwriters, to adopt written codes of ethics containing provisions
reasonably necessary to prevent "access persons" from engaging in any act,
practice, or course of business prohibited under the anti-fraud provisions of
Rule 17j-1(b). Pursuant to the requirements of Rule 17j-1, The Lou Holland Trust
(the "Trust") and HCM Investments, Inc. (the "Distributor") each have adopted,
and the Board of Trustees of the Trust (the "Board"), including a majority of
the Disinterested Trustees, has approved, this Code of Ethics (the "Code") with
respect to securities transactions of officers, trustees, directors, managers
and certain of the employees of the Trust and the Distributor that come within
the term "Access Person," as defined below. Pursuant to the requirements of Rule
17j-1, Holland Capital Management, L.P., the Trust's investment adviser (the
"Adviser"), has adopted, and the Board, including a majority of the
Disinterested Trustees, has approved, a separate code of ethics.
This Code is intended to provide guidance to such Access Persons of the
Trust and the Distributor in the conduct of their investments in order to
eliminate the possibility of securities transactions occurring that place, or
appear to place, such persons in conflict with the interests of the Trust or the
Trust's shareholders.
A. RULE 17j-1 -- GENERAL ANTI-FRAUD PROVISIONS.
Rule 17j-1 under the 1940 Act provides that it is unlawful for any
affiliated person of or principal underwriter for a registered investment
company, or any affiliated person of such company's investment adviser or
principal underwriter, in connection with the purchase or sale, directly or
indirectly, by such person of a Security Held or to be Acquired by such
investment company, to engage in any of the following acts, practices or courses
of business:
1. employ any device, scheme, or artifice to defraud such investment
company;
2. make to such investment company any untrue statement of a material
fact or omit to state to such investment company a material fact
necessary in order to make the statements made, in light of the
circumstances under which they are made, not misleading;
<PAGE>
3. engage in any act, practice, or course of business which operates or
would operate as a fraud or deceit upon any such investment company;
and
4. engage in any manipulative practice with respect to such investment
company.
B. DEFINITIONS.
1. Access Persons. The term "Access Person" means any officer, director,
trustee, manager or Advisory Employee of the Trust or the Distributor.
2. Advisory Employee. The term "Advisory Employee" means (a) any employee
of the Trust, the Adviser or the Distributor who, in connection with
his* regular functions or duties, makes, participates in, or obtains
information regarding the purchase or sale of Covered Securities by or
on behalf of the Trust or (b) any employee of the Trust or the
Distributor whose functions relate to the making of any
recommendations with respect to such purchases or sales. In the event
that any individual or company is in a control relationship with the
Trust or the Distributor, the term "Advisory Employee" would include
such an individual or any employee of such a company to the same
extent as an employee of the Trust or the Distributor.
3. Beneficial Ownership. "Beneficial Ownership" has the same meaning as
would be used in determining whether an Access Person is subject to
the provisions of Section 16 of the Securities Exchange Act of 1934
and the rules and regulations thereunder, except that the
determination of direct or indirect beneficial interest will apply to
all securities that an Access Person has or acquires. "Beneficial
Ownership" includes accounts of a spouse, minor children who reside in
an Access Person's home and any other relatives (parents, adult
children, brothers, sisters, etc.) whose investments the Access Person
directs or controls, whether the person lives with him or not, as well
as accounts of another person (individual, trustee, corporation,
trust, custodian, or other entity) if, by reason of any contract,
understanding, relationship, agreement or other arrangement, the
Access Person obtains or may obtain therefrom benefits substantially
equivalent to those of ownership. A person does not derive a
beneficial interest by virtue of serving as a trustee or executor
unless he or a member of his immediate family has a vested interest in
the income or corpus of the trust or estate. A copy of a Release
issued by the Securities and Exchange Commission on the meaning of the
term "Beneficial Ownership" is available upon request, and should be
studied carefully by any Access Person concerned with this definition
before preparing any report required hereunder.
4. Being Considered for Purchase or Sale. A security is "Being Considered
for
- --------------------
* The use of the masculine pronoun is for convenience of reference only
and is intended to include the feminine in all cases, unless the context
requires otherwise.
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Purchase or Sale" by the Trust when a recommendation to purchase or
sell such security has been made and communicated by an Advisory
Employee, in the course of his duties and, with respect to the person
making the recommendation, when such person seriously considers making
such a recommendation.
5. Control. The term "Control" has the same meaning as that set forth in
Section 2(a)(9) of the 1940 Act.
6. Covered Security. The term "Covered Security" has the same meaning as
the term "security" as set forth in Section 2(a)(36) of the 1940 Act,
except that it shall not include shares of registered open-end
investment companies, direct obligations of the Government of the
United States, bankers' acceptances, bank certificates of deposit,
commercial paper, and high quality short-term debt instruments,
including repurchase agreements. For these purposes, "high quality
short-term debt instruments" means any instrument that has a maturity
at issuance of less than 366 days and that is rated in one of the two
highest rating categories by a nationally recognized statistical
rating organization.
7. Disinterested Trustee. The term "Disinterested Trustee" means a
trustee of the Trust who is not an "interested person" of the Trust,
the Adviser, or the Distributor within the meaning of Section 2(a)(19)
of the 1940 Act.
8. Initial Public Offering. The term "Initial Public Offering" means an
offering of securities registered under the Securities Act of 1933,
the issuer of which, immediately before the registration, was not
subject to the reporting requirements of Sections 13 or 15(d) of the
Securities Exchange Act of 1934.
9. Limited Offering. The term "Limited Offering" means an offering that
is exempt from registration under the Securities Act of 1933 pursuant
to Section 4(2) or Section 4(6) or pursuant to Rule 504, Rule 505, or
Rule 506 under the Securities Act of 1933.
10. Security Held or to be Acquired. The phrase "Security Held or to be
Acquired" by the Trust means:
i. any Covered Security which, within the most recent fifteen (15)
calendar days has been or is:
a. held by the Trust; or
b. Being Considered for Purchase; and
ii. any option to purchase or sell, and any security convertible into
or exchangeable for, a Covered Security described in paragraph i.
of this Section B.10.
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C. PROHIBITED TRANSACTIONS.
1. Prohibited Transactions as to Access Persons Other Than
Disinterested Trustees. No Access Person shall purchase or sell,
directly or indirectly, any security in which he has, or by
reason of such transaction acquires, any direct or indirect
Beneficial Ownership without obtaining prior clearance as
described in Section D. of this Code, provided that this
prohibition shall not apply to any transaction that:
a. is exempt under Section E. of this Code; or
b. does not involve (i) a Covered Security; (ii) a security to
be made available in an Initial Public Offering; or (iii) a
security to be made available in a Limited Offering.
2. Prohibited Transactions as to Disinterested Trustees. No
Disinterested Trustee shall purchase or sell, directly or
indirectly, any security in which he has, or by reason of such
transaction acquires, any direct or indirect Beneficial Ownership
if such Disinterested Trustee knows, or in the ordinary course of
fulfilling his duties as a trustee of the Trust should know, that
the security is Being Considered for Purchase or Sale or the
security has been purchased or sold by the Trust two (2) days
prior to the date of the Disinterested Trustee's transaction,
provided that this prohibition shall not apply to any transaction
that:
a. is exempt under Section E. of this Code; or
b does not involve (i) a Covered Security; (ii) a security to
be made available in an Initial Public Offering; or (iii) a
security to be made available in a Limited Offering.
D. PRIOR CLEARANCE OF TRANSACTIONS.
1. GeneralRequirement. Every Access Person (other than a Disinterested
Trustee) shall obtain prior written clearance from the Compliance
Officer before directly or indirectly initiating, recommending, or in
any other way participating in the purchase or sale of a Covered
Security, or directly or indirectly acquiring any security made
available in an Initial Public Offering or in a Limited Offering, in
which the Access Person has, or by reason of the transaction may
acquire, direct or indirect Beneficial Ownership. When requesting
prior clearance, each Access Person should be aware that:
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a. all requests for prior clearance must be set forth in writing on
the standard Personal Request and Trading Authorization Form (a
copy of each such Form submitted by an Access Person should be
retained by the Access Person for personal recordkeepng
purposes);
b. prior clearance of a securities transaction is effective for
three (3) business days from and including the date clearance is
granted; and
c. the Adviser's trading desk will promptly provide copies of the
Personal Trading Request and Authorization Form it receives to
the Compliance Officer for the Trust or the Distributor, as
appropriate.
2. Bases for Denial of Prior Clearance. The Compliance Officer shall deny
a request for prior clearance if he determines that the security at
issue is a Covered Security or is being made available in an Initial
Public Offering or Limited Offering and:
a. the Access Person has actual knowledge that such security is
Being Considered for Purchase or Sale; or
b. the Access Person has actual knowledge that such security has
been purchased or sold by the Trust within the prior seven (7)
business days; or
c. the Access Person has actual knowledge that such security is
being purchased or sold on behalf of the Trust. In this instance,
"sold" includes an order to sell that has been entered but not
executed; or
d. with respect to Initial Public Offerings:
(i) the number of shares to be purchased is not commensurate
with the normal size and activity of the Access Person's
brokerage or other account; or
(ii) an order for the purchase of such securities has been placed
by the Adviser for any of its client accounts, including the
Trust; or
e. the transaction would be potentially harmful to the Trust; or
f. the transaction would likely affect the market in which the
Trust's portfolio securities are traded; or
g. the decision to purchase or sell the security appears to be the
result of material non-public information obtained in the course
of the Access Person's relationship with the Trust, the Adviser
or the Distributor; or
h. the granting of prior clearance would, in the judgment of the
Compliance
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Officer, be inconsistent with the purposes of this Code. If a
prior clearance request is denied under this Section D.2.g, the
Compliance Officer shall explain in writing the reasons therefor.
E. EXEMPT TRANSACTIONS.
The prohibitions of Section C. of this Code and the preclearance
procedures described in Section D of this Code shall not apply to:
1. purchases or sales effected in any account over which the Access
Person has no direct or indirect influence or control, or in any
account of the Access Person which is managed on a discretionary basis
by a person other than the Access Person and, with respect to which
the Access Person does not in fact influence or control purchase or
sale transactions;
2. purchases or sales of securities which are not eligible for purchase
or sale by the Trust;
3. purchases or sales which are non-volitional on the part of the Access
Person;
4. purchases which are part of an automatic dividend reinvestment plan;
and
5. purchases effected upon the exercise of rights issued by the issuer
pro rata to all holders of a class of its securities, to the extent
such rights were acquired from such issuer, and sales of such rights
so acquired.
F. REPORTING REQUIREMENTS OF ACCESS PERSONS.
1. Content and Timing of Access Person Reports. Every Access Person shall
make the following reports to the Compliance Officer for the Trust and
the Distributor (as appropriate):
a. Initial Holdings Report. No later than ten (10) days after
becoming an Access Person, such Access Person shall report the
following information:
i. the title, number of shares and principal amount of each
Covered Security in which the Access Person had any direct
or indirect Beneficial Ownership when the person became an
Access Person;
ii. the name of any broker, dealer or bank with whom the Access
Person maintained an account in which any securities were
held for the direct or indirect benefit of the Access Person
as of the date the person became an Access Person; and
iii. the date that the report is submitted by the Access Person.
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b. Quarterly Transaction Reports. No later than ten (10) days after
the end of a calendar quarter, the Access Person shall report the
following information:
i. With respect to any transaction during the quarter in a
Covered Security in which the Access Person had any direct
or indirect Beneficial Ownership:
A. the date of the transaction, the title, the interest
rate and maturity date (if applicable), the number of
shares and the principal amount of each Covered
Security involved;
B. the nature of the transaction (i.e., purchase, sale or
any other type of acquisition or disposition);
C. the price of the Covered Security at which the
transaction was effected;
D. the name of the broker, dealer, or bank with or through
whom the transaction was effected; and
E. the date that the report is submitted by the Access
Person.
iii. With respect to any account established by the Access Person
in which any securities were held during the quarter for the
direct or indirect benefit of the Access Person:
A. the name of the broker, dealer or bank with whom the
Access Person established the account;
B. the date the account was established; and
C. the date that the report was submitted by the Access
Person.
c. Annual Holding Reports. No later than twenty (20) days after the
end of every calendar year, the Access Person shall report the
following information (which information must be current as of
December 31 of the calendar year for which the report is being
submitted):
i. the title, number of shares and principal amount of each
Covered Security in which the Access Person has any direct
or indirect beneficial ownership;
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ii. the name of any broker, dealer or bank with whom the Access
Person maintains an account in which any securities are held
for the direct or indirect benefit of the Access Person; and
iii. the date that the report is being submitted by the Access
Person.
d. Conflict of Interest Reports. Every Access Person shall
immediately report in writing to the Compliance Officer for the
Trust or the Distributor (as appropriate) any factors of which he
or she is aware that would be relevant to a conflict of interest
analysis, including the existence of any substantial economic
relationship between the Access Person's transactions and
securities held or to be acquired by the Trust. These factors may
include, for example, officerships or directorships with
companies or beneficial ownership of more than 1/2 of 1% of the
total outstanding shares of any company whose shares are publicly
traded or that may be made available in an Initial Public
Offering or Limited Offering in the foreseeable future.
2. No Holdings or Transactions to Report. If an Access Person has no
holdings to report on either an Initial Holdings Report or any Annual
Holdings Report nor transactions to report on any Quarterly
Transaction Report, that Access Person shall nevertheless submit the
appropriate Report stating that the Access Person had no holdings or
transactions (as appropriate) to report and the date the report is
submitted by the Access Person.
3. Copies of Confirmations and Period Account Statements. Each Access
Person shall direct every broker or dealer through whom the Access
Person effects any securities transactions to deliver to the
Compliance Officer, on a timely basis, duplicate copies of
confirmations of all Access Person securities transactions, including
Initial Public Offerings and Limited Offerings, and copies of periodic
statements for all Access Person securities accounts.
4. Exceptions From Reporting Requirements.
a. A person need not make a report under this Section F. with
respect to transactions for, and Covered Securities held in, any
account over which the person has no direct or indirect influence
or control.
b. A Disinterested Trustee who would be required to make a report
solely by reason of being a trustee of the Trust need not make:
i. An Initial Holdings Report under Section F.1.a or an Annual
Holdings Report under Section F.1.c; and
ii. A Quarterly Transaction Report under Section F.1.b, unless
such
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Disinterested Trustee knew or, in the ordinary course
of fulfilling his or her official duties as a trustee of the
Trust, should have known that during the 15-day period
immediately before or after the Disinterested Trustee's
transaction in a Covered Security, (A) the Trust purchased
or sold the Covered Security, or (B) the Covered Security
was Being Considered for Purchase or Sale.
c. An Access Person need not make a Quarterly Transaction Report
under Section F.1.b. if the confirmations or periodic account
statements delivered to the Compliance Officer under Section F.3
are received within the time period required by Section F.1.b.,
provided that all information required by Section F.1.b. is
contained in such confirmations or account statements.
d. An Access Person need not make a Quarterly Transaction Report
with respect to the "exempt transactions" described in Section E.
e. An Access Person need not make an Initial Holdings Report, Annual
Holdings Reports, or Quarterly Transaction Reports under this
Code if such Access Person makes such reports under the Adviser's
code of ethics.
5. Review of Reports. The Compliance Officer for the Trust and the
Distributor (as appropriate) shall review all reports submitted
pursuant to Section F.1 for the purpose of detecting and preventing a
potential or actual violation of this Code.
a. The Compliance Officer shall review an Initial Holdings Report
within fifteen (15) days of the date such Report is submitted by
an Access Person.
b. The Compliance Officer shall review all Quarterly Transaction
Reports and all Annual Holding Reports within thirty (30) days of
the date such a Report is submitted by an Access Person.
c. The Compliance Officer shall review all Conflict of Interest
Reports promptly after receipt of such a Report.
d. The Compliance Officer shall maintain a record of each report
reviewed and the date such review was completed. Such record
shall indicate whether the Compliance Officer's review detected a
potential or actual violation of this Code. If the Compliance
Officer detects a potential or actual material violation of this
Code, the Compliance Officer shall promptly inform management of
the Trust or the Distributor (as applicable) in writing.
e. The Compliance Officer promptly after furnishing such written
notification of a potential or actual material violation of this
Code, shall take those
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measures the Compliance Officer deems necessary and appropriate
to remedy such violation, including, but not limited to,
requiring the Access Person to divest any inappropriate
securities holdings and recommending sanctions to the Board.
f. The Compliance Officer shall take such other actions and measures
as he deems necessary and appropriate to carry out his duties
with respect to the review of reports required under this Code.
6. Notification of Reporting Obligation. The Compliance Officer for the
Trust and the Distributor (as appropriate) shall identify all Access
Persons who are required to make reports under Section F.1. and shall
inform those Access Persons of their reporting obligation. Once
informed of the duty to file reports, an Access Person has a
continuing obligation to file such reports in a timely manner.
7. Disclaimer of Beneficial Ownership. No report required to be made
under Section F.1 shall be construed as an admission by the person
making such report that he or she has any direct or indirect
Beneficial Ownership in the security to which the report relates.
8. Form of Reports. All reports required to be filed under Section F.1.
shall be prepared by Access Persons using the forms attached to this
Code.
G. ANNUAL CERTIFICATION OF COMPLIANCE.
At the time of submission of Annual Holding Reports, all Access Persons
must certify that they have read, understand and are subject to this Code, and
have complied at all times with this Code, including the execution of personal
securities transactions disclosures in connection with obtaining prior clearance
of securities transactions and the submission of all required reports. When a
person becomes an Access Person, that person shall be given a copy of the Code.
Within 72 hours after being given the Code, that person shall certify that he or
she has had an opportunity to ask questions, and has read and understands the
Code, and agrees to comply with the Code. All Access Persons shall be given a
copy of any amendment to the Code. Within three months after the amendment
becomes effective, all Access Persons shall certify that they have received a
copy of the amendment, that they have had an opportunity to ask questions, and
that they understand the amendment and agree to comply with the amendment.
H. OTHER DUTIES OF AND RESTRICTIONS ON ACCESS PERSONS.
1. Limited Offerings. Any Access Person who has purchased or sold any
securities in a Limited Offering is required to disclose that
transaction at the time such Access Person is seeking preclearance of
future transactions involving the securities of that issuer.
Independent investment personnel with no personal interest in the
issuer shall make the decision of whether to permit such an Access
Person to purchase securities from that issuer.
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2. Gratuities. No Access Person shall receive any gift or gratuity, other
than one of de minimis value, from any person who does business with
or on behalf of the Trust.
3. Service as a Director or Trustee. No Access Person shall serve on the
board of a publicly traded company without prior authorization. Any
such authorization shall be supported by a determination that such
service is consistent with the interests of the Trust and the Trust's
shareholders.
4. Confidentiality. No Access Person shall reveal to any other person
(except in the normal course of his duties on behalf of the Trust or
the Distributor) any information regarding securities transactions
made or being considered by or on behalf of the Trust.
I. REPORTS TO THE BOARD
1. No less than thirty (30) days prior to the final regular meeting of
the Board for each fiscal year of the TRUST, the Compliance Officer
for the Trust, the Adviser and the Distributor shall furnish to the
Board, and the Board shall consider, a written report that:
a. Describes any issues arising under this Code since the last
report to the Board, including, but not limited to, information
about material violations of this Code and the sanctions, if any,
imposed in response to the material violations; and
b. Certifies that the Trust and the Distributor have adopted
procedures reasonably necessary to prevent Access Persons from
violating the Code.
2. In considering the written report, the Board shall determine whether
any action is required in response to the report.
3. To the extent that immaterial violations of this Code (such as late
filings of required reports) may collectively indicate material
problems with the implementation and enforcement of this Code, the
written report shall describe any violations that are material in the
aggregate.
J. SANCTIONS.
The Compliance Officer of the Trust shall furnish to the Audit
Committee of the Board reports regarding the administration hereof and
summarizing any forms or reports filed hereunder. If any such report indicates
that any changes hereto are advisable, the Audit Committee shall make an
appropriate recommendation to the Board. The Audit Committee also shall inquire
into any apparent violations of this Code and shall report any apparent material
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violations to the Board. Upon finding of a material violation of this Code,
including the filing of false, incomplete, or untimely required reports, or the
failure to obtain prior clearance of personal securities transactions, the Board
may impose such sanctions as it deems appropriate, which may include censure,
suspension, or termination of the employment of the violator. No Trustee shall
participate in a determination of whether he has committed a violation of this
Code or of the imposition of any sanction against himself.
Similarly, it shall be the responsibility of the Distributor's
Compliance Officer to receive and maintain all reports submitted by Access
Persons and to use reasonable diligence and institute procedures reasonably
necessary to monitor the adequacy of such reports and to otherwise prevent or
detect violations of this Code. Upon discovering a material violation of this
Code involving any Access Person, such as those noted in the prior paragraph, it
shall be the responsibility of the Distributor's Compliance Officer to report
such violation to the management of the Distributor. The Distributor's
management may impose such sanctions against the Access Person determined to
have violated this Code as it deems appropriate, including inter alia, a letter
of censure or suspension or termination of the employment, officership, or other
position of the violator with the Distributor. No officer or director of the
Distributor shall participate in a determination of whether he has committed a
violation of this Code or of the imposition of any sanction against himself.
K. MATERIAL CHANGES TO THE CODE.
1. The Board, including a majority of the Disinterested Trustees, shall
approve any material change made to this Code no later than the next
regularly scheduled Board meeting after adoption of the material
change.
2. The Board shall base its approval of any material change to the Code
on a determination that the Code contains provisions reasonably
necessary to prevent Access Persons from engaging in any conduct
described in Section A of this Code.
L. RECORD RETENTION.
The Trust and the Distributor shall maintain records in the manner and
to the extent set forth below, which records may be maintained on microfilm
under the conditions described in Rule 31a-2(f)(1) under the 1940 Act, and shall
be available for examination by representatives of the Securities and Exchange
Commission:
1. Retention of Code. A copy of this Code and any Code that was in effect
at any time within the past five years shall be preserved in an easily
accessible place.
2. Record of Violations. A record of any violation of this Code and of
any action taken as a result of such violation shall be preserved in
an easily accessible place for a period of not less than five years
following the end of the fiscal year in which the violation occurs.
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3. Copy of Forms and Reports. A copy of each Personal Trading Request and
Authorization Form and each Initial Holdings Report, Quarterly
Transaction Report, Annual Holdings Report and Conflict of Interest
Report prepared and submitted by an Access Person pursuant to this
Code must be preserved by the Compliance Officer for the Trust or the
Distributor, as appropriate, for a period of not less than five years
from the end of the fiscal year in which such report is made, the
first two years in an easily accessible place.
4. List of Access Persons. A list of all persons who are, or within the
past five years of business have been, required to file Personal
Trading Request and Authorization Forms and Initial Holdings Reports,
Quarterly Transaction Reports, Annual Holdings Reports and Conflict of
Interest Reports pursuant to this Code and a list of those persons who
are or were responsible for reviewing such Forms and Reports shall be
maintained in an easily accessible place.
5. Written Reports to the Board. A copy of each written report furnished
to the Board under Section I. of this Code shall be maintained for at
least five years after the end of the Trust's fiscal year in which it
is made, the first two years in an easily accessible place.
6. Records Relating to Decisions Involving Initial Public Offerings and
Limited Offerings. A record of any decision, and the reasons
supporting the decision, to approve the acquisition by Access Persons
of securities made available in an Initial Public Offering or Limited
Offering shall be maintained for at least five years after the end of
the Trust's fiscal year in which the approval is granted.
7. Sites of Records to be Kept. All such records and/or documents
required to be maintained pursuant to this Code and/or Rule 17j-1
under the 1940 Act shall be kept at the offices of the Trust at Suite
3260, 35 West Wacker Drive, Chicago, Illinois 60601.
M. CONFIDENTIAL TREATMENT.
All reports and other records required to be filed or maintained under
this Code shall be treated as confidential.
N. INTERPRETATION OF PROVISIONS.
The Board and management of the Distributor may, from time to time,
adopt such interpretations of this Code as such Board and management deem
appropriate, provided that the Board shall approve any material changes to this
Code in accordance with Section K.
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O. AMENDMENTS TO THE CODE.
Any amendment to the Code shall be effective thirty (30) calendar days
after written notice of such amendment shall have been received by the
Compliance Officer of the Trust and the Distributor, unless the Board or
management of the Distributor (as appropriate) expressly determines that such
amendment shall become effective on an earlier date or shall not be adopted. Any
material change to this Code shall be approved by the Board in accordance with
Section K.
* * * * * *
I have read the above Code and understand it. I agree to comply fully
with all of the above provisions.
Date: Signed:
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WDC #69575
