As filed with the Securities and Exchange Commission on September 25,1997
Securities Act File No. 333-31359
Investment Company Act File No. 811-08295
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933|X|
PRE-EFFECTIVE AMENDMENT NO. 1
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940|X|
AMENDMENT NO. 1
NEW PROVIDENCE INVESTMENT TRUST
105 North Washington Street
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069
Telephone (919) 972-9922
AGENT FOR SERVICE:
C. Frank Watson III, Secretary
105 North Washington Street
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069
With copies to:
M. Guy Brooks, III, Esq.
Poyner & Spruill, L.L.P.
3600 Glenwood Avenue
Raleigh, North Carolina 27612
Approximate Date of Proposed Public Offering:
As soon as possible after the effectiveness of the Registration Statement
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission acting pursuant to said Section 8(a),
may determine.
Pursuant to the provisions of Rule 24f-2 of the Investment Company Act of 1940,
as amended, Registrant hereby elects to register an indefinite number of shares
of Registrant and any series thereof hereinafter created.
<PAGE>
PROSPECTUS
NEW PROVIDENCE CAPITAL GROWTH FUND
A No Load Fund
The investment objective of the New Providence Capital Growth Fund (the "Fund")
is to provide shareholders with long-term capital growth, consisting of both
realized and unrealized capital gains. Current income is of secondary
importance. The Fund will seek to achieve this objective by investing primarily
in a portfolio of equity securities traded on domestic U.S. exchanges or on
over-the-counter markets. While there is no assurance that the Fund will achieve
its investment objective, it endeavors to do so by following the investment
policies described herein. The Fund has a net asset value that will fluctuate in
accordance with the value of its portfolio securities. An investor may invest,
reinvest or redeem shares at any time.
INVESTMENT ADVISOR
New Providence Capital Management, L.L.C.
2859 Paces Ferry Road, Suite 2125
Atlanta, Georgia 30339
The Fund is a no load diversified series of the New Providence Investment Trust
(the "Trust"), a registered open-end management investment company. This
Prospectus sets forth concisely the information about the Fund that a
prospective investor should know before investing. Investors should read this
Prospectus and retain it for future reference. Additional information about the
Fund has been filed with the Securities and Exchange Commission (the "SEC") and
is available upon request and without charge. You may request the Statement of
Additional Information, which is incorporated in this Prospectus by reference,
by writing the Fund at Post Office Box 4365, Rocky Mount, North Carolina
27803-0365, or by calling 1-800-525-3863. The SEC also maintains an Internet Web
site (http://www.sec.gov) that contains the Statement of Additional Information,
material incorporated by reference, and other information regarding the Fund.
Investment in the Fund involves risks, including the possible loss of principal.
Shares of the Fund are not deposits or obligations of, or guaranteed or endorsed
by, any financial institution, and such shares are not federally insured by the
Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other
agency.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED ON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus and the Statement of Additional Information is
September __, 1997.
<PAGE>
TABLE OF CONTENTS
PROSPECTUS SUMMARY.................................................... 2
FEE TABLE............................................................. 3
INVESTMENT OBJECTIVE AND POLICIES..................................... 4
RISK FACTORS.......................................................... 6
INVESTMENT LIMITATIONS................................................ 7
FEDERAL INCOME TAXES.................................................. 8
DIVIDENDS AND DISTRIBUTIONS........................................... 9
HOW SHARES ARE VALUED................................................. 9
HOW SHARES MAY BE PURCHASED.......................................... 10
HOW SHARES MAY BE REDEEMED........................................... 12
MANAGEMENT OF THE FUND............................................... 14
OTHER INFORMATION.................................................... 16
This Prospectus is not an offering of the securities herein described in any
state in which the offering is unauthorized. No sales representative, dealer or
other person is authorized to give any information or make any representations
other than those contained in this Prospectus.
The Fund reserves the right in its sole discretion to withdraw all or any part
of the offering made by this Prospectus or to reject purchase orders. All orders
to purchase shares are subject to acceptance by the fund and are not binding
until confirmed or accepted in writing.
<PAGE>
PROSPECTUS SUMMARY
The Fund. The New Providence Capital Growth Fund (the "Fund") is a no load
diversified series of the New Providence Investment Trust (the "Trust"), a
registered open-end management investment company organized as a Massachusetts
business trust. See "Other Information - Description of Shares."
Offering Price. Shares of the Fund are offered at net asset value without a
sales charge. The minimum initial investment is $2,500 ($1,000 for IRAs and
Keogh Plans). The minimum subsequent investment is $250 ($100 for those
participating in the Automatic Investment Plan). See "How Shares May be
Purchased."
Investment Objective and Policies. The investment objective of the Fund is to
provide shareholders with long-term capital growth, consisting of both realized
and unrealized capital gains. Current income is of secondary importance. The
Fund will seek to achieve this objective by normally remaining fully invested in
a portfolio of equity securities traded on domestic U.S. exchanges or on
over-the-counter markets. Cash, money market, and other short-term instruments
will generally comprise less than 10% of the portfolio. See "Investment
Objective and Policies." The Fund is not intended to be a complete investment
program, and there can be no assurance that the Fund will achieve its investment
objective.
Special Risk Considerations. While the Fund will invest primarily in common
stocks traded in U.S. securities markets, some of the Fund's investments may
include foreign securities (in the form traded on domestic U.S. exchanges),
illiquid securities, real estate securities, and securities purchased subject to
a repurchase agreement or on a "when issued" basis, which involve certain risks.
The Fund may borrow only under certain limited conditions (included to meet
redemption requests) and not to purchase securities. It is not the intent of the
Fund to borrow except for temporary cash requirements. Borrowing, if done, would
tend to exaggerate the effects of market and interest rate fluctuations on the
Fund's net asset value until repaid. See "Risk Factors."
Manager. Subject to the general supervision of the Trust's Board of Trustees and
in accordance with the Fund's investment policies, New Providence Capital
Management, L.L.C., of Atlanta, Georgia (the "Advisor"), manages the Fund's
investments. The Advisor currently manages approximately $100 million in assets.
For its advisory services, the Advisor receives a monthly fee, based on the
Fund's average daily net assets, at the annual rate of 0.75%. John K. Donaldson
controls the Advisor. Mr. Donaldson also controls the Distributor. See
"Management of the Fund - The Advisor."
Dividends. Income dividends, if any, are generally paid quarterly; capital
gains, if any, are generally distributed at least once each year. Dividends and
capital gains distributions are automatically reinvested in additional shares of
the Fund at net asset value unless the shareholder elects to receive cash. See
"Dividends and Distributions."
Distributor and Distribution Fee. Donaldson & Co., Incorporated (the
"Distributor") serves as distributor of shares of the Fund. Under the Fund's
Distribution Plan, expenditures by the Fund for distribution activities and
service fees may not exceed 0.25% of the Fund's average net assets annually. See
"How Shares May Be Purchased - Distribution Plan."
Redemption of Shares. There is no charge for redemptions other than possible
charges associated with wire transfers of redemption proceeds. Shares may be
redeemed at any time at the net asset value next determined after receipt of a
redemption request by the Fund. A shareholder that submits appropriate written
authorization may redeem shares by telephone. See "How Shares May Be Redeemed."
<PAGE>
FEE TABLE
The following table sets forth certain information in connection with the
expenses of the Fund anticipated for the current fiscal year. The information is
intended to assist the investor in understanding the various costs and expenses
borne by the Fund, and therefore indirectly by its investors, the payment of
which will reduce an investor's return on an annual basis.
Shareholder Transaction Expenses
Maximum sales load imposed on purchases
(as a percentage of offering price)....................................None
Maximum sales load imposed on reinvested dividends.......................None
Maximum deferred sales load..............................................None
Redemption fees*.........................................................None
Exchange fee.............................................................None
* The Fund in its discretion may choose to pass through to redeeming
shareholders any charges imposed by the Custodian for wiring redemption
proceeds. The Custodian currently charges the Fund $7.00 per transaction
for wiring redemption proceeds.
Annual Fund Operating Expenses
After Fee Waivers and Expense Reimbursements1
(as a percentage of average net assets)
Management Fees...........................................................0.75%1
12b-1 Fees................................................................0.25%2
Total Other Expenses......................................................0.75%1
Total Fund Operating Expenses.............................................1.75%1
EXAMPLE: You would pay the following expenses on a $1,000 investment in the
Fund, whether or not you redeem at the end of the period, and assuming a 5%
annual return:
1 Year 3 Years
------ -------
$18 $56
THE FOREGOING SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
1 The "Total Fund Operating Expenses" shown above are based upon contractual
amounts and other operating expenses estimated to be incurred by the Fund
for the current fiscal year. The Advisor has voluntarily agreed to a
reduction in the fees payable to it and to reimburse expenses of the Fund,
if necessary, in an amount that limits "Total Fund Operating Expenses"
(other than taxes, brokerage fees and commissions, and extraordinary
expenses) to not more than 1.75% of the Fund's average daily net assets.
There can be no assurance that the Advisor's voluntary fee waivers and
expense reimbursements will continue in the future.
2 The Fund has adopted a Distribution Plan pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended (the "1940 Act"), which provides
that the Fund may pay certain distribution expenses and service fees up to
0.25% of the Fund's average net assets annually. See "How Shares May Be
Purchased - Distribution Plan" below.
See "How Shares May Be Purchased" and "Management of the Fund" below for more
information about the fees and costs of operating the Fund. The assumed 5%
annual return in the example is required by the Securities and Exchange
Commission. The hypothetical rate of return is not intended to be representative
of past or future performance of the Fund; the actual rate of return for the
Fund may be greater or less than 5%. Further information about the performance
of the Fund will be contained in the Annual Report of the Fund, a copy of which,
when available, may be obtained at no charge by calling the Fund.
INVESTMENT OBJECTIVE AND POLICIES
Investment Objective. The investment objective of the Fund is to provide
shareholders with long-term capital growth, consisting of both realized and
unrealized capital gains. Current income is of secondary importance. While there
is no guarantee that the Fund will meet its investment objective, it seeks to
achieve its objective through the investment policies and techniques described
herein. The Fund's investment objective and fundamental investment limitations
may not be altered without the prior approval of a majority of the Fund's
shareholders.
Investment Policies. The Fund strives to achieve its investment objective by
investing primarily in equity securities traded on domestic U.S. exchanges or on
over-the-counter markets. Cash, money market, and other short-term instruments
will generally comprise less than 10% of the portfolio. The Fund's portfolio
will generally include a limited number of equity securities of those companies
that, in the opinion of the Advisor, offer superior prospects for growth.
In selecting portfolio companies, the Advisor relies heavily on both
quantitative and fundamental analysis, focused primarily on quality earnings
growth at a reasonable price. The Advisor begins the process by `screening' the
universe of equity securities to be considered for the portfolio. This universe
comprises approximately 1,700 equities with a history of positive earnings'
characteristics, and with minimum market capitalization of approximately $500
million. The initial universe closely approximates the universe followed by
Value Line. Using a quantitative earnings and momentum ranking model, the
Advisor screens the universe to identify the most attractive 5%-7% of those
stocks with attributes of successful long-term growth, such as long-term
earnings growth consistency, positive earnings surprises, upward earnings
estimate revisions and accelerating sales and earnings growth.
The resulting universe of 80-120 stocks is subjected to fundamental analysis,
including research obtained from Wall Street firms. Such fundamental analysis
typically includes, but is not limited to, qualitative assessments of company
management, projected earnings per share growth, projected company revenue
growth, and projected price to earnings ratio. As a result of this `screen',
approximately 2.5% of the original universe are selected for further analysis.
Of these remaining companies, the Advisor attempts to identify the most
attractive 20-30 stocks using what can best be described as `common sense
valuation', focusing substantially on price to future expected earnings, price
to current earnings, price to sales and price to cash flow.
While portfolio securities are generally acquired for the long term, they may be
sold under any of the following circumstances:
a) the anticipated price appreciation has been achieved or is no longer
probable;
b) the company's fundamentals appear, in the analysis of the Advisor, to be
deteriorating;
c) general market expectations regarding the company's future performance, as
reflected by the security's market price, exceed those expectations held by
the Advisor;
d) alternative investments offer, in the view of the Advisor, superior
potential for appreciation.
The equity securities in which the Fund may invest will generally be comprised
of common stocks traded on domestic U.S. exchanges or on over-the-counter
markets. The Fund may also invest in preferred stock, convertible preferred
stock, convertible bonds, and other equity equivalents.
Cash, money market, and other short-term instruments will typically represent a
portion of the Fund's portfolio, as funds awaiting investment, to accumulate
cash for anticipated purchases of portfolio securities, and to provide for
shareholder redemptions and operating expenses of the Fund.
Under normal market conditions the portfolio allocation range for the Fund will
be:
% of Total Assets
-----------------
Equity securities 90 - 100%
Cash, money market, and
other short-term instruments 0 - 10%
Under certain conditions, the Advisor may choose to temporarily invest up to
100% of the Fund's assets in cash and cash equivalents, investment grade bonds,
U.S. Government Securities, repurchase agreements, or money market instruments
as a temporary defensive position, when the Advisor determines that market
conditions warrant such investments. When the Fund invests in these investments
as a temporary defensive measure, it is not pursuing its stated investment
objective.
Money Market Instruments. Money market instruments may be purchased when the
Advisor believes interest rates are rising, the prospect for capital
appreciation in the equity and longer term fixed income securities' markets are
not attractive, or when the "yield curve" favors short-term fixed income
instruments versus longer term fixed income instruments. Money market
instruments may be purchased for temporary defensive purposes, to accumulate
cash for anticipated purchases of portfolio securities and to provide for
shareholder redemptions and operating expenses of the Fund. Money market
instruments mature in thirteen months or less from the date of purchase and may
include U.S. Government Securities, corporate debt securities (including those
subject to repurchase agreements), bankers acceptances and certificates of
deposit of domestic branches of U.S. banks, and commercial paper (including
variable amount demand master notes) rated in one of the two highest rating
categories by any of the nationally recognized statistical rating organizations
or if not rated, of equivalent quality in the Advisor's opinion. The Advisor
may, when it believes that unusually volatile or unstable economic and market
conditions exist, depart from the Fund's investment approach and assume
temporarily a defensive portfolio posture, increasing the Fund's percentage
investment in money market instruments, even to the extent that 100% of the
Fund's assets may be so invested.
U.S. Government Securities. The Fund may invest a portion of the portfolio in
U.S. Government Securities, defined to be U.S. Government obligations such as
U.S. Treasury notes, U.S. Treasury bonds, and U.S. Treasury bills, obligations
guaranteed by the U.S. Government such as Government National Mortgage
Association ("GNMA") as well as obligations of U.S. Government authorities,
agencies and instrumentalities such as Federal National Mortgage Association
("FNMA"), Federal Home Loan Mortgage Corporation ("FHLMC"), Federal Home
Administration ("FHA"), Federal Farm Credit Bank ("FFCB"), Federal Home Loan
Bank ("FHLB"), Student Loan Marketing Association ("SLMA"), and The Tennessee
Valley Authority. U.S. Government Securities may be acquired subject to
repurchase agreements. While obligations of some U.S. Government sponsored
entities are supported by the full faith and credit of the U.S. Government (e.g.
GNMA), several are supported by the right of the issuer to borrow from the U.S.
Government (e.g. FNMA, FHLMC), and still others are supported only by the credit
of the issuer itself (e.g. SLMA, FFCB). No assurances can be given that the U.S.
Government will provide financial support to U.S. Government agencies or
instrumentalities in the future, other than as set forth above, since it is not
obligated to do so by law. The guarantee of the U.S. Government does not extend
to the yield or value of the Fund's shares.
Repurchase Agreements. The Fund may acquire U.S. Government Securities or
corporate debt securities subject to repurchase agreements. A repurchase
agreement transaction occurs when the Fund acquires a security and
simultaneously resells it to the vendor (normally a member bank of the Federal
Reserve or a registered Government Securities dealer) for delivery on an agreed
upon future date. The repurchase price exceeds the purchase price by an amount
that reflects an agreed upon market interest rate earned by the Fund effective
for the period of time during which the repurchase agreement is in effect.
Delivery pursuant to the resale typically will occur within one to seven days of
the purchase. The Fund will not enter into any repurchase agreement that will
cause more than 10% of its net assets to be invested in repurchase agreements
that extend beyond seven days. In the event of the bankruptcy of the other party
to a repurchase agreement, the Fund could experience delays in recovering its
cash or the securities lent. To the extent that in the interim the value of the
securities purchased may have declined, the Fund could experience a loss. In all
cases, the creditworthiness of the other party to a transaction is reviewed and
found satisfactory by the Advisor. Repurchase agreements are, in effect, loans
of Fund assets. The Fund will not engage in reverse repurchase transactions,
which are considered to be borrowings under the 1940 Act.
Foreign Securities. The Fund may invest in the securities of foreign private
issuers. The same factors would be considered in selecting foreign securities as
with domestic securities. Foreign securities investment presents special
consideration not typically associated with investment in domestic securities.
Foreign taxes may reduce income. Currency exchange rates and regulations may
cause fluctuations in the value of foreign securities. Foreign securities are
subject to different regulatory environments than in the United States and,
compared to the United States, there may be a lack of uniform accounting,
auditing and financial reporting standards, less volume and liquidity and more
volatility, less public information, and less regulation of foreign issuers.
Countries have been known to expropriate or nationalize assets, and foreign
investments may be subject to political, financial, or social instability, or
adverse diplomatic developments. There may be difficulties in obtaining service
of process on foreign issuers and difficulties in enforcing judgments with
respect to claims under the U.S. securities laws against such issuers. Favorable
or unfavorable differences between U.S. and foreign economies could affect
foreign securities values. The U.S. Government has, in the past, discouraged
certain foreign investments by U.S. investors through taxation or other
restrictions and it is possible that such restrictions could be imposed again.
Because of the inherent risk of foreign securities over domestic issues, the
Fund will limit foreign investments to those traded on domestic U.S. exchanges,
including American Depository Receipts ("ADRs"). The prices of such securities
are denominated in U.S. dollars. ADRs are receipts issued by a U.S. bank or
trust company evidencing ownership of securities of a foreign issuer. ADRs may
be listed on a national securities exchange or may trade in the over-the-counter
market. The prices of ADRs are denominated in U.S. dollars while the underlying
security may be denominated in a foreign currency. To the extent the Fund
invests in other foreign securities, it will limit such investments to foreign
securities traded on domestic U.S. securities exchanges. Although the Fund is
not limited in the amount of these types of foreign securities it may acquire,
it is not presently expected that within the next 12 months the Fund will have
in excess of 10% of its assets in foreign securities.
Investment Companies. In order to achieve its investment objective, the Fund may
invest up to 10% of the value of its total assets in securities of other
investment companies whose investment objectives are consistent with the Fund's
investment objective. The Fund will not acquire securities of any one investment
company if, immediately thereafter, the Fund would own more than 3% of such
company's total outstanding voting securities, securities issued by such company
would have an aggregate value in excess of 5% of the Fund's assets, or
securities issued by such company and securities held by the Fund issued by
other investment companies would have an aggregate value in excess of 10% of the
Fund's assets. To the extent that a Fund invests in other investment companies,
the shareholders of the Fund would indirectly pay a portion of the operating
costs of the underlying investment companies. These costs include management,
brokerage, shareholder servicing and other operational expenses. Shareholders of
the Fund would then indirectly pay higher operational costs than if they owned
shares of the underlying investment companies directly.
Real Estate Securities. The Fund will not invest in real estate (including
mortgage loans and limited partnership interests), but may invest in readily
marketable securities issued by companies that invest in real estate or
interests therein. The Fund may also invest in readily marketable interests in
real estate investment trusts ("REITs"). REITs are generally publicly traded on
the national stock exchanges and in the over-the-counter market and have varying
degrees of liquidity. Although the Fund is not limited in the amount of these
types of real estate securities it may acquire, it is not presently expected
that within the next 12 months the Fund will have in excess of 10% of its assets
in real estate securities.
RISK FACTORS
Investment Policies and Techniques. Reference should be made to "Investment
Objective and Policies" above for a description of special risks presented by
the investment policies of the Fund and the specific securities and investment
techniques that may be employed by the Fund, including the risks associated with
repurchase agreements and foreign securities. A more complete discussion of
certain of these securities and investment techniques and their associated risks
is contained in the Statement of Additional Information.
Fluctuations in Value. To the extent that the major portion of the Fund's
portfolio consists of common stocks, it may be expected that its net asset value
will be subject to greater fluctuation than a portfolio containing mostly fixed
income securities. Because there is risk in any investment, there can be no
assurance that the Fund will achieve its investment objective.
Portfolio Turnover. The Fund may sell portfolio securities without regard to the
length of time they have been held in order to take advantage of new investment
opportunities. Portfolio turnover generally involves some expense to the Fund,
including brokerage commissions or dealer mark-ups and other transaction costs
on the sale of securities and the reinvestment in other securities. Portfolio
turnover may also have capital gains tax consequences. The Fund's portfolio
turnover rate is not expected to exceed 150% per year.
Borrowing. The Fund may borrow, temporarily, up to 5% of its total assets for
extraordinary or emergency purposes and 15% of its total assets to meet
redemption requests, which might otherwise require untimely disposition of
portfolio holdings. To the extent the Fund borrows for these purposes, the
effects of market price fluctuations on the portfolio's net asset value will be
exaggerated. If, while such borrowing is in effect, the value of the Fund's
assets declines, the Fund could be forced to liquidate portfolio securities when
it is disadvantageous to do so. The Fund would incur interest and other
transaction costs in connection with borrowing. The Fund will borrow only from a
bank. The Fund will not make any further investments if the borrowing exceeds 5%
of its total assets until such time as repayment has been made to bring the
total borrowing below 5% of its total assets.
Illiquid Investments. The Fund may invest up to 10% of its net assets in
illiquid securities. Illiquid securities are those that may not be sold or
disposed of in the ordinary course of business within seven days at
approximately the price at which they are valued. Under the supervision of the
Board of Trustees, the Advisor determines the liquidity of the Fund's
investments. The absence of a trading market can make it difficult to ascertain
a market value for illiquid investments. Disposing of illiquid securities before
maturity may be time consuming and expensive, and it may be difficult or
impossible for the Fund to sell illiquid investments promptly at an acceptable
price. The Fund may not invest in restricted securities, which are securities
that cannot be sold to the public without registration under the federal
securities laws.
Forward Commitments and When-Issued Securities. The Fund may purchase
when-issued securities and commit to purchase securities for a fixed price at a
future date beyond customary settlement time. The Fund is required to hold and
to maintain in a segregated account until the settlement date cash, U.S.
Government Securities, or high-grade debt obligations in an amount sufficient to
meet the purchase price. Purchasing securities on a when-issued or forward
commitment basis involves a risk of loss if the value of the security to be
purchased declines prior to the settlement date; this risk is in addition to the
risk of decline in value of the Fund's other assets. In addition, no income
accrues to the purchaser of when-issued securities during the period prior to
issuance. Although the Fund would generally purchase securities on a when-issued
or forward commitment basis with the intention of acquiring securities for its
portfolio, the Fund may dispose of a when-issued security or forward commitment
prior to settlement if the Advisor deems it appropriate to do so. The Fund may
realize short-term gains or losses upon such sales.
Advisor Experience. The Fund, organized in 1997, has no prior operating history.
The assets of the Fund are managed by the Advisor, a limited liability company
formed in 1996. While the Advisor has no previous experience managing the Fund,
the Advisor and its controlling member (through the Distributor) have been
rendering investment counsel, utilizing investment strategies substantially
similar to that of the Fund, to other investment companies, individuals, banks
and thrift institutions, pension and profit-sharing plans, trusts, estates,
charitable organizations, and corporations since 1996 and 1987, respectively.
The Advisor was formed in 1996 to succeed to the investment advisory business
previously maintained by the Distributor since 1987. See "Other Information -
Prior Performance of Advisor."
INVESTMENT LIMITATIONS
To limit the Fund's exposure to risk, the Fund has adopted certain investment
limitations. Some of these restrictions are that the Fund will not: (1) issue
senior securities, borrow money or pledge its assets, except that it may borrow
from banks as a temporary measure (a) for extraordinary or emergency purposes,
in amounts not exceeding 5% of the Fund's total assets, or (b) to meet
redemption requests, in amounts not exceeding 15% of its total assets (the Fund
will not make any investments if borrowing exceeds 5% of its total assets); (2)
make loans of money or securities, except that the Fund may invest in repurchase
agreements (but repurchase agreements having a maturity of longer than seven
days, together with other not readily marketable securities, are limited to 10%
of the Fund's net assets), money market instruments, and other debt securities;
(3) invest in securities of issuers which have a record of less than three
years' continuous operation (including predecessors and, in the case of bonds,
guarantors), if more than 5% of its total assets would be invested in such
securities; (4) purchase foreign securities other than those traded on domestic
U.S. exchanges; (5) with respect to 75% of its total assets, invest more than 5%
of its total assets at cost in the securities of any one issuer nor hold more
than 10% of the voting stock of any issuer; and (6) write, purchase, or sell
puts, calls, straddles, spreads, or combinations thereof, or purchase or sell
commodities, commodity contracts, futures contracts, or related options.
Investment restrictions (1), (2), (5), and (6) are fundamental investment
limitations that cannot be altered without the prior approval of a majority of
the Fund's shareholders. The other investment restrictions listed above are
non-fundamental and can be changed without shareholder approval. See "Investment
Limitations" in the Fund's Statement of Additional Information for a complete
list of investment limitations.
If the Board of Trustees of the Trust determines that the Fund's investment
objectives can best be achieved by a substantive change in a non-fundamental
investment limitation, the Board can make such change without shareholder
approval and will disclose any such material changes in the then current
Prospectus. Any limitation that is not specified in the Fund's Prospectus, or in
the Statement of Additional Information, as being fundamental, is
non-fundamental. If a percentage limitation is satisfied at the time of
investment, a later increase or decrease in such percentage resulting from a
change in the value of the Fund's portfolio securities will not constitute a
violation of such limitation.
FEDERAL INCOME TAXES
Taxation of the Fund. The Internal Revenue Code of 1986, as amended (the
"Code"), treats each series in the Trust as a separate regulated investment
company. Each series of the Trust (the Fund, and any additional fund or funds
that may be added at a later date) intends to qualify or remain qualified as a
regulated investment company under the Code by distributing substantially all of
its "net investment income" to shareholders and meeting other requirements of
the Code. For the purpose of calculating dividends, net investment income
consists of income accrued on portfolio assets, less accrued expenses. Upon
qualification, the Fund will not be liable for federal income taxes to the
extent earnings are distributed. The Board of Trustees retains the right for any
series of the Trust to determine for any particular year if it is advantageous
not to qualify as a regulated investment company. Regulated investment
companies, such as each series of the Trust, including the Fund, are subject to
a non-deductible 4% excise tax to the extent they do not distribute the
statutorily required amount of investment income, determined on a calendar year
basis, and capital gain net income, using an October 31 year-end measuring
period. The Fund intends to declare or distribute dividends during the calendar
year in an amount sufficient to prevent imposition of the 4% excise tax.
Taxation of Shareholders. For federal income tax purposes, any dividends and
distributions from short-term capital gains that a shareholder receives in cash
from the Fund or which are re-invested in additional shares will be taxable
ordinary income. If a shareholder is not required to pay a tax on income, he
will not be required to pay federal income taxes on the amounts distributed to
him. A dividend declared in October, November or December of a year and paid in
January of the following year will be considered to be paid on December 31 of
the year of declaration.
Distributions paid by the Fund from long-term capital gains, whether received in
cash or reinvested in additional shares, are taxable as long-term capital gains,
regardless of the length of time an investor has owned shares in the Fund.
Capital gain distributions are made when the Fund realizes net capital gains on
sales of portfolio securities during the year. Dividends and capital gain
distributions paid by the Fund shortly after shares have been purchased,
although in effect a return of investment, are subject to federal income
taxation.
The sale of shares of the Fund is a taxable event and may result in a capital
gain or loss. Capital gain or loss may be realized from an ordinary redemption
of shares or an exchange of shares between two mutual funds (or two series of a
mutual fund).
The Trust will inform shareholders of the Fund of the source of its dividends
and capital gains distributions at the time they are paid and, promptly after
the close of each calendar year, will issue an information return to advise
shareholders of the federal tax status of such distributions and dividends.
Dividends and distributions may also be subject to state and local taxes.
Shareholders should consult their tax advisors regarding specific questions as
to federal, state or local taxes.
Federal income tax law requires investors to certify that the social security
number or taxpayer identification number provided to the Fund is correct and
that the investor is not subject to 31% withholding for previous under-reporting
to the Internal Revenue Service (the "IRS"). Investors will be asked to make the
appropriate certification on their application to purchase shares. If a
shareholder of the Fund has not complied with the applicable statutory and IRS
requirements, the Fund is generally required by federal law to withhold and
remit to the IRS 31% of reportable payments (which may include dividends and
redemption amounts).
DIVIDENDS AND DISTRIBUTIONS
The Fund intends to distribute substantially all of its net investment income,
if any, in the form of dividends. The Fund will generally pay income dividends,
if any, quarterly, and will generally distribute net realized capital gains, if
any, at least annually.
Unless a shareholder elects to receive cash, dividends and capital gains will be
automatically reinvested in additional full and fractional shares of the Fund at
the net asset value per share next determined. Shareholders wishing to receive
their dividends or capital gains in cash may make their request in writing to
the Fund at 107 North Washington Street, Post Office Box 4365, Rocky Mount,
North Carolina 27803-0365. That request must be received by the Fund prior to
the record date to be effective as to the next dividend. If cash payment is
requested, checks will be mailed within five business days after the last day of
each quarter or the Fund's fiscal year end, as applicable. Each shareholder of
the Fund will receive a quarterly summary of his or her account, including
information as to reinvested dividends from the Fund. Tax consequences to
shareholders of dividends and distributions are the same if received in cash or
in additional shares of the Fund.
In order to satisfy certain requirements of the Code, the Fund may declare
special year-end dividend and capital gains distribution during December. Such
distributions, if received by shareholders by January 31, are deemed to have
been paid by the Fund and received by shareholders on December 31 of the prior
year.
There is no fixed dividend rate, and there can be no assurance as to the payment
of any dividends or the realization of any gains.
HOW SHARES ARE VALUED
Net asset value for each share of the Fund is determined at 4:00 p.m., New York
time, Monday through Friday, except on business holidays when the New York Stock
Exchange is closed. The net asset value of the shares of the Fund for purposes
of pricing sales and redemptions is equal to the total market value of its
investments and other assets, less all of its liabilities, divided by the number
of its outstanding shares.
Securities that are listed on a securities exchange are valued at the last
quoted sales price at the time the valuation is made. Price information on
listed securities is taken from the exchange where the security is primarily
traded by the Fund. Securities that are listed on an exchange and which are not
traded on the valuation date are valued at the mean of the bid and asked prices.
Unlisted securities for which market quotations are readily available are valued
at the latest quoted sales price, if available, at the time of valuation,
otherwise, at the latest quoted bid price. Temporary cash investments with
maturities of 60 days or less will be valued at amortized cost, which
approximates market value. Securities for which no current quotations are
readily available are valued at fair value as determined in good faith using
methods approved by the Board of Trustees of the Trust. Securities may be valued
on the basis of prices provided by a pricing service when such prices are
believed to reflect the fair market value of such securities.
HOW SHARES MAY BE PURCHASED
Assistance in opening accounts and a purchase application may be obtained from
the Fund by calling 1-800-525-3863, or by writing to the Fund at the address
shown below for purchases by mail. Assistance is also available through any
broker-dealer authorized to sell shares in the Fund. Payment for shares
purchased may also be made through your account at the broker-dealer processing
your application and order to purchase. Your investment will purchase shares at
the Fund's net asset value next determined after your order is received by the
Fund in proper form as indicated herein.
The minimum initial investment is $2,500 ($1,000 for IRAs and Keogh Plans). The
minimum subsequent investment is $250 ($100 for those participating in the
Automatic Investment Plan). The Fund may, in the Advisor's sole discretion,
accept certain accounts with less than the stated minimum initial investment.
You may invest in the following ways:
Regular Mail Orders. Please complete and sign the Fund Shares Application
accompanying this Prospectus and mail it, with your check made payable to the
Fund, to:
New Providence Capital Growth Fund
c/o NC Shareholder Services
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
Applications must contain social security and Taxpayer Identification Numbers
("TINs"). If you have applied for a social security or TIN at the time of
completing your account application, the application should so indicate. Taxes
are not withheld from distributions to U.S. investors if certain IRS
requirements regarding TINs are met.
Bank Wire Orders. Investments can be made directly by bank wire. To establish a
new account or to add to an existing account by wire, please call the Fund at
1-800-525-3863, before wiring funds, to advise it of the investment, the dollar
amount of the investment, and the account identification number. This
notification will ensure prompt and accurate handling of your investment. Please
have your bank use the following wire instructions to purchase by wire:
First Union National Bank of North Carolina
Charlotte, North Carolina
ABA # 053000219
For the New Providence Capital Growth Fund
Acct. # 2000001068078
For further credit to (shareholder's name and SS# or EIN#)
It is important that the wire message contain all the relevant information and
that the Fund receive prior telephone notification to ensure proper credit. Upon
opening an account by wire order, you must, as soon as possible, complete and
mail your Fund Shares Application to the Fund as described under "Regular Mail
Orders" above. Investors should be aware that some banks might impose a wire
service fee.
General. All purchases of shares are subject to acceptance and are not binding
until accepted. The Fund reserves the right to reject any application or
investment. Orders become effective, and shares are purchased at, the next
determined net asset value per share after an investment has been received by
the Fund, which is as of 4:00 p.m., New York time, Monday through Friday,
exclusive of business holidays. Orders received by a Fund and effective prior to
such 4:00 p.m. time will purchase shares at the net asset value determined at
that time. Otherwise, your order will purchase shares as of such 4:00 p.m. time
on the next business day. For orders placed through a qualified broker-dealer,
such firm is responsible for promptly transmitting purchase orders to the Fund.
Investors may be charged a fee if they effect transactions in Fund shares
through a broker or agent.
The Fund may enter into agreements with one or more brokers, including discount
brokers and other brokers associated with investment programs, including mutual
fund "supermarkets," pursuant to which such brokers may be authorized to accept
on the Fund's behalf purchase and redemption orders that are in "good form."
Such brokers may be authorized to designate other intermediaries to accept
purchase and redemption orders on the Fund's behalf. Under such circumstances,
the Fund will be deemed to have received a purchase or redemption order when an
authorized broker or, if applicable, a broker's authorized designee, accepts the
order. Such orders will be priced at the Fund's net asset value next determined
after they are accepted by an authorized broker or the broker's designee.
If checks are returned unpaid due to insufficient funds, stop payment or other
reasons, the Trust will charge $20. To recover any such loss or charge, the
Trust reserves the right, without further notice, to redeem shares of any fund
of the Trust already owned by any purchaser whose order is canceled, and such a
purchaser may be prohibited from placing further orders unless investments are
accompanied by full payment by wire or cashier's check.
Payment must be made by check or money order drawn on a U.S. bank and payable in
U.S. dollars. Under certain circumstances the Fund, at its sole discretion, may
allow payment in kind for Fund shares purchased by accepting securities in lieu
of cash. Any securities so accepted would be valued on the date received and
included in the calculation of the net asset value of the Fund. See the
Statement of Additional Information for additional information on purchases in
kind.
The Fund is required by federal law to withhold and remit to the IRS 31% of the
dividends, capital gains distributions and, in certain cases, proceeds of
redemptions paid to any shareholder who fails to furnish the Fund with a correct
taxpayer identification number, who under-reports dividend or interest income or
who fails to provide certification of tax identification number. Instructions to
exchange or transfer shares held in established accounts will be refused until
the certification has been provided. In order to avoid this withholding
requirement, you must certify on your application, or on a separate W-9 Form
supplied by the Fund, that your taxpayer identification number is correct and
that you are not currently subject to backup withholding or you are exempt from
backup withholding. For individuals, your taxpayer identification number is your
social security number.
Distribution Plan. Donaldson & Co., Incorporated., 2859 Paces Ferry Road, Suite
2125, Atlanta, Georgia 30339 (the "Distributor"), is the national distributor
for the Fund under a Distribution Agreement with the Trust. The Distributor may
sell Fund shares to or through qualified securities dealers or others. John K.
Donaldson, a Trustee of the Trust and an officer of the Fund, controls the
Distributor and the Advisor.
The Trust has adopted a Distribution Plan (the "Plan") for the Fund pursuant to
Rule 12b-1 under the 1940 Act. Under the Plan the Fund may reimburse any
expenditures to finance any activity primarily intended to result in sale of the
shares of the Fund or the servicing of shareholder accounts, including, but not
limited to, the following: (i) payments to the Distributor, securities dealers,
and others for the sale of shares of the Fund; (ii) payment of compensation to
and expenses of personnel who engage in or support distribution of shares of the
Fund or who render shareholder support services not otherwise provided by the
Transfer Agent, Administrator, or Custodian; and (iii) formulation and
implementation of marketing and promotional activities. The Board of Trustees of
the Trust approves the categories of expenses for which reimbursement is made.
Expenditures by the Fund pursuant to the Plan are accrued based on the Fund's
average daily net assets and may not exceed 0.25% of the Fund's average net
assets for each year elapsed subsequent to adoption of the Plan. Such
expenditures paid as service fees to any person who sells Fund shares may not
exceed 0.25% of the Fund's average annual net asset value of such shares.
The Plan for the Fund may not be amended to increase materially the amount to be
spent under the Plan without shareholder approval. The Board of Trustees must
approve the continuation of the Plan annually. At least quarterly the Board of
Trustees must review a written report of amounts expended pursuant to the Plan
and the purposes for which such expenditures were made.
The Distributor, at its expense, may provide additional compensation to dealers
in connection with sales of shares of the Fund. Compensation may include
financial assistance to dealers in connection with conferences, sales or
training programs for their employees, seminars for the public, advertising
campaigns regarding the Fund, and/or other dealer-sponsored special events. In
some instances, this compensation may be made available only to certain dealers
whose representatives have sold or are expected to sell a significant amount of
such shares. Compensation may include payment for travel expenses, including
lodging, incurred in connection with trips taken by invited registered
representatives and members of their families to locations within or outside of
the United States for meetings or seminars of a business nature. Dealers may not
use sales of the Fund shares to qualify for this compensation to the extent such
may be prohibited by the laws of any state or any self-regulatory agency, such
as the National Association of Securities Dealers, Inc. (the "NASD"). None of
the aforementioned compensation is paid for by the Fund or its shareholders.
Exchange Feature. Investors will have the privilege of exchanging shares of the
Fund for shares of any other series of the Trust established by the Advisor. An
exchange is a taxable transaction that involves the simultaneous redemption of
shares of one series and purchase of shares of another series at the respective
closing net asset value next determined after a request for redemption has been
received plus applicable sales charge, if any. Each series of the Trust will
have a different investment objective, which may be of interest to investors in
each series. Shares of the Fund may be exchanged for shares of any other series
of the Trust affiliated with the Advisor at the net asset value plus the
percentage difference between that series' sales charge and any sales charge, if
any, previously paid in connection with the shares being exchanged. Investors in
states where shares of the other series are qualified for sale may only make
exchanges. An investor may direct the Fund to exchange his shares by writing to
the Fund at its principal office. The request must be signed exactly as the
investor's name appears on the account, and it must also provide the account
number, number of shares to be exchanged, the name of the fund or other series
to which the exchange will take place and a statement as to whether the exchange
is a full or partial redemption of existing shares.
A pattern of frequent exchange transactions may be deemed by the Advisor to be
an abusive practice that is not in the best interests of the shareholders of the
Fund. Such a pattern may, at the discretion of the Advisor, be limited by the
Fund's refusal to accept further purchase and/or exchange orders from an
investor, after providing the investor with 60 days prior notice. The Advisor
will consider all factors it deems relevant in determining whether a pattern of
frequent purchases, redemptions and/or exchanges by a particular investor is
abusive and not in the best interests of the Fund or its other shareholders.
A shareholder should consider the investment objectives and policies of any
other series into which the shareholder will be making an exchange, as described
in the prospectus for that other series. The Board of Trustees of the Trust
reserves the right to suspend or terminate, or amend the terms of, the exchange
privilege upon 60 days written notice to the shareholders.
Automatic Investment Plan. The automatic investment plan enables shareholders to
make regular monthly or quarterly investments in shares through automatic
charges to their checking account. With shareholder authorization and bank
approval, the Fund will automatically charge the checking account for the amount
specified ($100 minimum), which will be automatically invested in shares at the
public offering price on or about the 21st day of the month. The shareholder may
change the amount of the investment or discontinue the plan at any time by
writing to the Fund.
Stock Certificates. Stock certificates will not be issued for your shares.
Evidence of ownership will be given by issuance of periodic account statements
that will show the number of shares owned.
HOW SHARES MAY BE REDEEMED
Shares of the Fund may be redeemed (the Fund will repurchase them from
shareholders) by mail or telephone. Any redemption may be more or less than the
purchase price of your shares depending on the market value of the Fund's
portfolio securities. All redemption orders received in proper form, as
indicated herein, by the Fund, whether by mail or telephone, prior to 4:00 p.m.
New York time, Monday through Friday, except for business holidays, will redeem
shares at the net asset value determined at that time. Otherwise, your order
will redeem shares as of such 4:00 p.m. time on the next business day. There is
no charge for redemptions from the Fund other than possible charges for wiring
redemption proceeds. You may also redeem your shares through a broker-dealer or
other institution, which may charge you a fee for its services.
The Board of Trustees reserves the right to involuntarily redeem any account
having a net asset value of less than $1,000 (due to redemptions, exchanges or
transfers, and not due to market action) upon 30 days written notice. If the
shareholder brings his account net asset value up to $1,000 or more during the
notice period, the account will not be redeemed. Redemptions from retirement
plans may be subject to tax withholding.
If you are uncertain of the requirements for redemption, please contact the
Fund, at 1-800-525-3863, or write to the address shown below.
Regular Mail Redemptions. Your request should be addressed to the New Providence
Capital Growth Fund, 107 North Washington Street, Post Office Box 4365, Rocky
Mount, North Carolina 27803-0365. Your request for redemption must include:
1) Your letter of instruction specifying the Fund, the account number, and the
number of shares or dollar amount to be redeemed. This request must be
signed by all registered shareholders in the exact names in which they are
registered;
2) Any required signature guarantees (see "Signature Guarantees" below); and
3) Other supporting legal documents, if required in the case of estates,
trusts, guardianships, custodianships, corporations, partnerships, pension
or profit sharing plans, and other organizations.
Your redemption proceeds will be sent to you within seven days after receipt of
your redemption request. However, the Fund may delay forwarding a redemption
check for recently purchased shares while it determines whether the purchase
payment will be honored. Such delay (which may take up to 15 days from the date
of purchase) may be reduced or avoided if the purchase is made by certified
check or wire transfer. In all cases the net asset value next determined after
the receipt of the request for redemption will be used in processing the
redemption. The Fund may suspend redemption privileges or postpone the date of
payment (i) during any period that the New York Stock Exchange is closed, or
trading on the New York Stock Exchange is restricted as determined by the
Securities and Exchange Commission (the "Commission"), (ii) during any period
when an emergency exists as defined by the rules of the Commission as a result
of which it is not reasonably practicable for a Fund to dispose of securities
owned by it, or to fairly determine the value of its assets, and (iii) for such
other periods as the Commission may permit.
Telephone and Bank Wire Redemptions. The Fund offers shareholders the option of
redeeming shares by telephone under certain limited conditions. A Fund will
redeem shares when requested by the shareholder if, and only if, the shareholder
confirms redemption instructions in writing.
A Fund may rely upon confirmation of redemption requests transmitted via
facsimile (FAX# 919-972-1908). The confirmation instructions must include:
1) Designation of the Fund name;
2) Shareholder names and account number;
3) Number of shares or dollar amount to be redeemed;
4) Instructions for transmittal of redemption fund to the shareholder; and 5)
Shareholder signature as it appears on the application then on file with
the Fund.
The net asset value used in processing the redemption will be the net asset
value next determined after the telephone request is received. Redemption
proceeds will not be distributed until written confirmation of the redemption
request is received, per the instructions above. You can choose to have
redemption proceeds mailed to you at your address of record, your bank, or to
any other authorized person, or you can have the proceeds sent by bank wire to
your bank ($5,000 minimum). Shares of the Fund may not be redeemed by wire on
days on which your bank is not open for business. You can change your redemption
instructions anytime you wish by filing a letter including your new redemption
instructions with the Fund. (See "Signature Guarantees" below). The Fund
reserves the right to restrict or cancel telephone and bank wire redemption
privileges for shareholders, without notice, if the Fund believes it to be in
the best interest of the shareholders to do so. During drastic economic and
market conditions, telephone redemption privileges may be difficult to
implement.
The Fund in its discretion may choose to pass through to redeeming shareholders
any charges by the Custodian for wire redemptions. The Custodian currently
charges $7.00 per transaction for wiring redemption proceeds. If this cost is
passed through to redeeming shareholders by the Fund, the charge will be
deducted automatically from the shareholder's account by redemption of shares in
the account. The shareholder's bank or brokerage firm may also impose a charge
for processing the wire. If wire transfer of funds is impossible or impractical,
the redemption proceeds will be sent by mail to the designated address of
record.
You may redeem shares, subject to the procedures outlined above, by calling the
Fund at 1-800-525-3863. Redemption proceeds will only be sent to the bank
account or person named in your Fund Shares Application currently on file with
the Fund. Telephone redemption privileges authorize the Fund to act on telephone
instructions from any person representing him or herself to be the investor and
reasonably believed by the Fund to be genuine. The Fund will employ reasonable
procedures, such as requiring a form of personal identification, to confirm that
instructions are genuine, and, if it does not follow such procedures, the Fund
will be liable for any losses due to fraudulent or unauthorized instructions.
The Fund will not be liable for following telephone instructions reasonably
believed to be genuine.
Systematic Withdrawal Plan. A shareholder who owns shares of a Fund valued at
$2,500 or more at current net asset value may establish a Systematic Withdrawal
Plan to receive a monthly or quarterly check in a stated amount not less than
$100. Each month or quarter as specified, the Fund will automatically redeem
sufficient shares from your account to meet the specified withdrawal amount.
Call or write the Fund for an application form. See the Statement of Additional
Information for further details.
Signature Guarantees. To protect your account and the Fund from fraud, signature
guarantees are required to be sure that you are the person who has authorized a
change in registration, or standing instructions, for your account. Signature
guarantees are required for (1) change of registration requests, (2) requests to
establish or change exchange privileges or telephone redemption service other
than through your initial account application, and (3) requests for redemptions
in excess of $50,000. Signature guarantees are acceptable from a member bank of
the Federal Reserve System, a savings and loan institution, credit union (if
authorized under state law), registered broker-dealer, securities exchange or
association clearing agency, and must appear on the written request for
redemption, establishment or change in exchange privileges, or change of
registration.
MANAGEMENT OF THE FUND
Trustees and Officers. The Fund is a no load diversified series of New
Providence Investment Trust (the "Trust"), an investment company organized as a
Massachusetts business trust on July 9, 1997. The Board of Trustees of the Trust
is responsible for the management of the business and affairs of the Trust. The
Trustees and executive officers of the Trust and their principal occupations for
the last five years are set forth in the Statement of Additional Information
under "Management - Trustees and Officers." The Board of Trustees of the Trust
is primarily responsible for overseeing the conduct of the Trust's business. The
Board of Trustees elects the officers of the Trust who are responsible for its
and the Fund's day-to-day operations.
The Advisor. Subject to the authority of the Board of Trustees, New Providence
Capital Management, L.L.C. (the "Advisor") provides the Fund with a continuous
program of supervision of the Fund's assets, including the composition of its
portfolio, and furnishes advice and recommendations with respect to investments,
investment policies and the purchase and sale of securities, pursuant to an
Investment Advisory Agreement (the "Advisory Agreement") with the Trust.
The Advisor is registered under the Investment Advisors Act of 1940, as amended.
Registration of the Advisor does not involve any supervision of management or
investment practices or policies by the Securities and Exchange Commission. John
K. Donaldson controls the Advisor, which was established as a Georgia limited
liability company in 1996. The Advisor currently serves as investment advisor to
approximately $100 million in assets. The Advisor has been rendering investment
counsel, utilizing investment strategies substantially similar to that of the
Fund, to individuals, banks and thrift institutions, pension and profit sharing
plans, trusts, estates, charitable organizations and corporations since its
formation. The Advisor was formed in 1996 to succeed to the investment
management business previously maintained by the Distributor since 1987. See
"Other Information - Prior Performance of Advisor." The Advisor's address is
2859 Paces Ferry Road, Suite 2125, Atlanta, Georgia 30339.
Compensation of the Advisor, based upon the Fund's average daily net assets, is
at the annual rate of 0.75%. The Advisor may periodically voluntarily waive or
reduce its advisory fee to increase the net income of the Fund.
The Advisor supervises and implements the investment activities of the Fund,
including the making of specific decisions as to the purchase and sale of
portfolio investments. Among the responsibilities of the Advisor under the
Advisory Agreement is the selection of brokers and dealers through whom
transactions in the Fund's portfolio investments will be effected. The Advisor
attempts to obtain the best execution for all such transactions. The Distributor
has trade execution arrangements with a number of brokers, including Merrill
Lynch, PaineWebber, Pershing, Robertson Stephens, Herzog Heine Geduld, and
Sherwood Securities. If it is believed that more than one broker is able to
provide the best execution, the Advisor will consider the receipt of quotations
and other market services and of research, statistical and other data and the
sale of shares of the Fund in selecting a broker. The Advisor may also utilize a
brokerage firm affiliated with the Trust or the Advisor (such as the
Distributor) if the Advisor believes it can obtain the best execution of
transactions from such broker. Research services obtained through Fund brokerage
transactions may be used by the Advisor for its other clients and, conversely,
the Fund may benefit from research services obtained through the brokerage
transactions of the Advisor's other clients. For further information, see
"Investment Objective and Policies Investment Transactions" in the Statement of
Additional Information.
John K. Donaldson (control member of the Advisor), Kyle A. Tomlin, CFA, and
Shannon D. Coogle are responsible for day-to-day management of the Fund's
portfolio. Messrs. Donaldson and Tomlin have been with the Advisor since its
formation. Ms. Coogle has been with the Advisor since 1997. The Advisor was
formed in 1996 to succeed to the investment management business previously
maintained by the Distributor (and controlled by Mr. Donaldson) since 1987. Mr.
Tomlin served in portfolio management for the Distributor from 1994-97. Mr.
Tomlin served in portfolio management for the Distributor from 1994-1997.
Administrator. The Nottingham Company (the "Administrator") serves as the Fund's
administrator. The Administrator, subject to the authority of the Board of
Trustees, provides administrative services to and is generally responsible for
the overall management and day-to-day administrative operations of the Fund,
pursuant to an administration agreement with the Trust.
The Administrator, which was established as a North Carolina corporation in
1988, has been operating (with affiliates) as a financial services firm since
1985. Frank P. Meadows III is the firm's Managing Director and controlling
shareholder.
The Administrator, whose address is 105 North Washington Street, Post Office
Drawer 69, Rocky Mount, North Carolina 27802-0069, provides the Fund with office
space and facilities; provides certain executive personnel to the Fund;
maintains the Fund's accounting records; computes daily the Fund's net asset
value; supervises the preparation of tax returns, financial reports,
prospectuses, and proxy statements; and monitors compliance with certain
recordkeeping and regulatory requirements.
Compensation of the Administrator, based upon the average daily net assets of
the Fund, is at the annual rate of 0.125% on the first $50 million of the Fund's
net assets; 0.10% on the next $50 million; and 0.075% on all assets over $100
million. In addition, the Administrator currently receives a monthly fee of
$2,250 for accounting and recordkeeping services for the Fund. The Administrator
charges $15 per shareholder per year with a minimum of $750 per month for
transfer agency and shareholder services. The Administrator also charges the
Fund for certain costs involved with the daily valuation of investment
securities and is reimbursed for out-of-pocket expenses. The Administrator
charges a minimum annual fee of $50,000 for all of its fees taken in the
aggregate, analyzed monthly.
Transfer Agent. NC Shareholder Services, LLC (the "Transfer Agent") serves as
the Fund's transfer, dividend disbursing, and shareholder servicing agent. The
Transfer Agent, subject to the authority of the Board of Trustees, provides
transfer agency services pursuant to an agreement with the Administrator, which
has been approved by the Trust.
The Transfer Agent, whose address is 107 North Washington Street, Post Office
Box 4365, Rocky Mount, North Carolina 27803-0365, was established as a North
Carolina limited liability company in 1997. John D. Marriott, Jr., is the firm's
controlling member.
The Transfer Agent maintains the records of each shareholder's account, answers
shareholder inquiries concerning accounts, processes purchases and redemptions
of the Fund's shares, acts as dividend and distribution disbursing agent, and
performs other shareholder servicing functions. The Transfer Agent is
compensated for its services by the Administrator and not directly by the Fund.
The Custodian. First Union National Bank of North Carolina (the "Custodian"),
Two First Union Center, Charlotte, North Carolina 28288-1151, serves as
Custodian of the Fund's assets. The Custodian acts as the depository for the
Fund, safekeeps its portfolio securities, collects all income and other payments
with respect to portfolio securities, disburses monies at the Fund's request and
maintains records in connection with its duties. The Advisor, Administrator,
Transfer Agent, Distributor, or interested persons thereof, may have banking
relationships with the Custodian.
Other Expenses. The Fund is responsible for the payment of its expenses. These
include, for example, the fees payable to the Advisor, or expenses otherwise
incurred in connection with the management of the investment of the Fund's
assets, the fees and expenses of the Custodian, the fees and expenses of the
Administrator, the fees and expenses of Trustees, outside auditing and legal
expenses, all taxes and corporate fees payable by the Fund, Securities and
Exchange Commission fees, state securities qualification fees, costs of
preparing and printing prospectuses for regulatory purposes and for distribution
to shareholders, costs of shareholder reports and shareholder meetings, and any
extraordinary expenses. The Fund also pays for brokerage commissions and
transfer taxes (if any) in connection with the purchase and sale of portfolio
securities. Expenses attributable to a particular series of the Trust, such as
the Fund, will be charged to that series, and expenses not readily identifiable
as belonging to a particular series will be allocated by or under procedures
approved by the Board of Trustees among one or more series in such a manner as
it deems fair and equitable.
OTHER INFORMATION
Description of Shares. The Trust was organized as a Massachusetts business trust
on July 9, 1997 under a Declaration of Trust. The Declaration of Trust permits
the Board of Trustees to issue an unlimited number of full and fractional shares
and to create an unlimited number of series of shares. The Board of Trustees may
also classify and reclassify any unissued shares into one or more classes of
shares. The Trust currently has the number of authorized series of shares,
including the Fund, described in the Statement of Additional Information under
"Description of the Trust." Pursuant to its authority under the Declaration of
Trust, the Board of Trustees has authorized the issuance of an unlimited number
of shares representing equal pro rata interests in the Fund.
When issued, the shares of each series of the Trust, such as the Fund, will be
fully paid, nonassessable and redeemable. The Trust does not intend to hold
annual shareholder meetings; it may, however, hold special shareholder meetings
for purposes such as changing fundamental policies or electing Trustees. The
Board of Trustees shall promptly call a meeting for the purpose of electing or
removing Trustees when requested in writing to do so by the record holders of at
least 10% of the outstanding shares of the Trust. The term of office of each
Trustee is of unlimited duration. The holders of at least two-thirds of the
outstanding shares of the Trust may remove a Trustee from that position either
by declaration in writing filed with the Custodian or by votes cast in person or
by proxy at a meeting called for that purpose.
The Trust's shareholders will vote in the aggregate and not by series (fund) or
class, except where otherwise required by law or when the Board of Trustees
determines that the matter to be voted on affects only the interests of the
shareholders of a particular series or class. Matters affecting an individual
series, such as the Fund, include, but are not limited to, the investment
objectives, policies and restrictions of that series. Shares have no
subscription, preemptive or conversion rights. Share certificates will not be
issued. Each share is entitled to one vote (and fractional shares are entitled
to proportionate fractional votes) on all matters submitted for a vote, and
shares have equal voting rights except that only shares of a particular series
or class are entitled to vote on matters affecting only that series or class.
Shares do not have cumulative voting rights. Therefore, the holders of more than
50% of the aggregate number of shares of all series of the Trust may elect all
the Trustees.
Under Massachusetts's law, shareholders of a business trust may, under certain
circumstances, be held personally liable as partners for the obligations of the
trust. The Declaration of Trust, therefore, contains provisions that are
intended to mitigate such liability. See "Description of the Trust" in the
Statement of Additional Information for further information about the Trust and
its shares.
Reporting to Shareholders. The Fund will send to its shareholders Annual and
Semi-Annual Reports; the financial statements appearing in Annual Reports for
the Fund will be audited by independent accountants. In addition, the Fund will
send to each shareholder having an account directly with the Fund a quarterly
statement showing transactions in the account, the total number of shares owned
and any dividends or distributions paid. Inquiries regarding the Fund may be
directed in writing to 107 North Washington Street, Post Office Box 4365, Rocky
Mount, North Carolina 27803-0365, or by calling 1-800-525-3863.
Calculation of Performance Data. From time to time the Fund may advertise its
average annual total return. The "average annual total return" refers to the
average annual compounded rates of return over 1-, 5- and 10-year periods that
would equate an initial amount invested at the beginning of a stated period to
the ending redeemable value of the investment. The calculation assumes the
reinvestment of all dividends and distributions, includes all recurring fees
that are charged to all shareholder accounts and deducts all nonrecurring
charges at the end of each period. If the Fund has been operating less than 1, 5
or 10 years, the time period during which the Fund has been operating is
substituted.
In addition, the Fund may advertise other total return performance data other
than average annual total return. This data shows as a percentage rate of return
encompassing all elements of return (i.e. income and capital appreciation or
depreciation); it assumes reinvestment of all dividends and capital gain
distributions. Such other total return data may be quoted for the same or
different periods as those for which average annual total return is quoted. This
data may consist of a cumulative percentage rate of return, actual year-by-year
rates or any combination thereof. Cumulative total return represents the
cumulative change in value of an investment in a Fund for various periods.
The total return of a Fund could be increased to the extent the Advisor may
waive all or a portion of its fees or may reimburse all or a portion of the
Fund's expenses. Total return figures are based on the historical performance of
the Fund, show the performance of a hypothetical investment, and are not
intended to indicate future performance. The Fund's quotations may from time to
time be used in advertisements, sales literature, shareholder reports, or other
communications. For further information, see "Additional Information on
Performance" in the Statement of Additional Information.
Prior Performance of Advisor. While the Fund and the Advisor have only been
formed since 1997 and 1996, respectively, the Advisor has been rendering
investment counsel to its clients, utilizing investment strategies substantially
similar to that of the Fund, since its formation. Moreover, John K. Donaldson
(controlling member of the Advisor), through the Distributor, has been rendering
investment advice to clients, using such same investment strategies, since 1987.
The Advisor was formed in 1996 to succeed to the investment management business
previously maintained by the Distributor since 1987, when it registered as an
investment advisor. When the Distributor transferred all of its investment
management business to the Advisor in 1996, all the Distributor's employees who
performed investment management functions became employees of the Advisor. The
Advisor currently manages approximately $100 million of discretionary assets for
numerous clients, including investment companies, qualified corporate and public
pension plans, foundations, and individuals.
In particular, the Advisor currently manages an account called the Growth Fund
Account (the "Growth Fund Account"), one of eighteen investment accounts of Best
Investments, an open-end investment company organized in Panama in 1978. Best
Investments is not a U.S. registered investment company. Best International
Management, Inc. ("Best International") serves as fund manager to Best
Investments, providing general administrative services and facilities.
Investment advice is provided to each of the eighteen investment accounts of
Best Investments by an investment advisor selected by Best International. Best
International's sole function with respect to the investment management of Best
Investments has been to select the investment advisor for each account, such as
the Growth Fund Account.
Through Mr. Donaldson, the controlling person of the Advisor and Distributor,
the Distributor provided investment advice to the Growth Fund Account from its
inception in 1988 until its transfer to the Advisor in 1996. The Advisor has
provided investment advice to the Growth Fund Account since 1996.
The Growth Fund Account is not a U.S. registered open-end management investment
company like the Fund. Accordingly, it is not subject to all the restrictions
imposed by the 1940 Act upon the Fund and other registered investment companies.
Moreover, an investor cannot invest directly in the Growth Fund Account.
However, the assets of the Growth Fund Account are segregated and managed
completely independent from the other investment accounts of Best Investments.
The Account is denominated in U.S. dollars. As of July 31, 1997, the Growth Fund
Account had assets of approximately $43.3 million.
Since the Fund has investment objectives, policies, and strategies that are
substantially similar to those of the Growth Fund Account, the Fund intends to
provide certain performance information concerning the Growth Fund Account in
this Prospectus. The Fund may also provide similar performance information
concerning the Growth Fund Account in the Fund's advertisements, sales
literature, shareholder reports, and other communications, subject to any
applicable restrictions provided by the SEC and the NASD. The Growth Fund
Account is the only other account managed by the Advisor with investment
objectives and policies substantially similar to those of the Fund.
Investors are cautioned that the Growth Fund Account is separate and distinct
from the Fund; an investment in the Fund is not an investment in the Growth Fund
Account. Accordingly, the Growth Fund Account's performance is not the Fund's
own performance and should not be considered indicative of the past or future
performance of the Fund. Moreover, the Growth Fund Account's performance should
not be considered a substitute for the Fund's performance.
When the Fund's performance information, calculated in the manner described
above under "Calculation of Performance Data," becomes available, the Fund will
include such information in this Prospectus (and with any advertisement, sales
literature, and other communication that includes performance information
concerning the Growth Fund Account). The Fund will also compare in this
Prospectus the Growth Fund Account's performance with the performance of an
appropriate broad-based securities index, such as the S&P 500 Index, which is
generally considered to be representative of the performance of unmanaged common
stocks that are publicly traded in the U.S. securities markets.
The performance information concerning the Growth Fund Account will be presented
merely as additional information to provide potential investors with more
complete data on which to base their investment decisions. Specifically, the
information is intended to enable potential investors to make a more informed
assessment of the Advisor's ability to manage portfolios with capital growth as
their primary objective. A potential investor should not confuse the performance
of the Growth Fund Account with that of the Fund. The data is provided to
illustrate the past performance of the Advisor in managing the Growth Fund
Account as measured against the S&P 500 Index and does not represent the
performance of the Fund.
Among other differences, the Growth Fund Account is not subject to the same type
of expenses to which the Fund is subject nor to certain investment limitations,
diversification requirements, and other restrictions imposed by the 1940 Act and
the Code on registered investment companies like the Fund. If such expenses or
limitations, requirements, and restrictions had been applicable to the Growth
Fund Account, they might have adversely affected the performance results of the
Growth Fund Account. The Advisor believes, however, that while the Growth Fund
Account is not subject to the 1940 Act and the Code restrictions, the Advisor
has managed the portfolio of the Growth Fund Account in a manner substantially
similar to the manner in which it is required to manage the portfolio of the
Fund under the 1940 Act and the Code. Moreover, the Fund has investment
objectives, policies, and strategies that are substantially similar to those of
the Growth Fund Account.
The performance of the Growth Fund Account is calculated net of fees payable to
the Advisor and brokerage commissions involved in management of such account.
Since inception of the Growth Fund Account on July 25, 1988, through July 31,
1997, the Advisor's fees from the Growth Fund Account have been at the
annualized rate of 1.15%. The Advisor's management fee from the Fund is at the
annual rate of 0.75% of net assets of the Fund. Investors in Best Investments,
of which the Growth Fund Account is one of eighteen investment portfolios, are
charged additional management and administrative fees separate from the fees
payable to the Advisor. These fees are not reflected in the performance of the
Growth Fund Account. If these fees had been reflected, the performance of the
Growth Fund Account would have been lower. There are no fees or expenses charged
to the Growth Fund Account at the portfolio level other than the Advisor's
management fee and brokerage commissions for trade execution. Thus, except for
such commissions, the total operating expenses of the Growth Fund Account,
including the Advisor's management fees, have been at the annualized rate of
1.15% since inception. For the Fund, the Advisor has voluntarily agreed to
reduce its fees and to reimburse expenses of the Fund, if necessary, in an
amount that generally limits the total operating expenses of the Fund to not
more than 1.75% of the Fund's average daily net assets. See "Fee Table." If
expenses at this level had been used in calculating the performance of the
Growth Fund Account, such performance would have been lower.
The total return of the Growth Fund Account and the S&P 500 Index for various
annual fiscal and calendar periods through July 31, 1997 is set forth below:
Annualized Returns
- ------------------------------------------------------------------------------
Growth Fund S&P 500
Period (through 7/31/97) Account(1)(2) Index(2)(3)
- ------------------------------------------------------------------------------
One Year: 77.78% 52.14%
Three Year: 32.60 30.78
Five Year: 26.58 20.66
Seven Year: 23.51 18.35
Nine Year: 21.67 18.39
Since 7/25/88: 21.74 18.72
Calendar Year Returns
- ------------------------------------------------------------------------------
Growth Fund S&P 500
Period (Calendar Year) Account(1)(2) Index(2)(3)
- ------------------------------------------------------------------------------
1997 (through 7/31/97) 44.13% 30.21%
1996 37.79 22.96
1995 13.61 37.58
1994 1.81 1.32
1993 25.38 10.08
1992 13.29 7.62
1991 37.25 30.47
1990 2.66 -3.10
1989 32.16 31.69
7/25-12/31/88 -3.02 6.76
- --------------
(1) The total return of the Growth Fund Account is presented in accordance
with Association for Investment and Management Research ("AIMR")
recommended performance presentation standards, retroactively applied
to all time periods, except that the information is calculated on a
net, rather than gross, basis. The information is calculated with all
dividends and distributions being reinvested. Performance is calculated
by geometric linking of month-end market values, which include
dividends. AIMR is a non-profit membership and education organization
with more than 60,000 members worldwide that, among other things, has
formulated a set of performance presentation standards for investment
advisors. The AIMR performance presentation standards are intended to
(i) promote full and fair presentations by investment advisors of their
performance results; and (ii) ensure uniformity in reporting so that
performance results of investment advisers are directly comparable. The
Advisor has received an Independent Accountants' Report dated September
2, 1997, from Royster Smith Shelton & Company, P.C., Winston-Salem,
North Carolina, Certified Public Accountants, which stated that in
their opinion the investment performance of the Advisor's growth
composite (which included only the Growth Fund Account) for the periods
from July 25, 1988 (performance inception date) through July 31, 1997
was presented in compliance with the "level II" verification
presentation standards of AIMR. AIMR was not involved with the
preparation or review of this Report.
(2) Past performance is not a guarantee of future performance. The
performance indicated does not represent the historical performance of
the Fund and should not be considered indicative of the future
performance of the Fund. The share price and investment return of a
mutual fund, like the Fund, will vary with market conditions, and the
principal value of such shares, when redeemed, may be more or less than
the original cost.
(3) The S&P 500 Index is an unmanaged index containing common stocks of 500
industrial, transportation, utility, and financial companies regarded
as generally representative of the U.S. stock market. The Index
reflects the reinvestment of income dividends and capital gain
distributions, if any, but does not reflect fees, brokerage
commissions, or other expenses of investing.
<PAGE>
NEW PROVIDENCE CAPITAL GROWTH FUND
A No Load Fund
PROSPECTUS
September __, 1997
New Providence Capital Growth Fund
105 North Washington Street
Post Office Box 69
Rocky Mount, North Carolina 27802-0069
1-800-525-3863
Investment Advisor
New Providence Capital Management, L.L.C.
2859 Paces Ferry Road, Suite 2125
Atlanta, Georgia 30339
Administrator & Fund Accountant
The Nottingham Company
105 North Washington Street
Post Office Box 69
Rocky Mount, North Carolina 27802-0069
Transfer Agent and Shareholder Servicing Agent
NC Shareholder Services, LLC
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina
1-800-525-3863
Custodian
First Union National Bank of North Carolina
Two First Union Center
Charlotte, North Carolina 28288-1151
Distributor
Donaldson & Co., Incorporated
2859 Paces Ferry Road, Suite 2125
Atlanta, Georgia
Independent Auditors
Deloitte & Touche LLP
2500 One PPG Place
Pittsburgh, Pennsylvania 15222-5401
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
NEW PROVIDENCE CAPITAL GROWTH FUND
September __, 1997
A series of
NEW PROVIDENCE INVESTMENT TRUST
107 North Washington Street, Post Office Box 4365
Rocky Mount, North Carolina 27803-4365
Telephone 1-800-525-3863
Table of Contents
INVESTMENT OBJECTIVE AND POLICIES.................................. 2
INVESTMENT LIMITATIONS............................................. 3
MANAGEMENT......................................................... 4
ADDITIONAL INFORMATION ON PERFORMANCE.............................. 8
PORTFOLIO TRANSACTIONS............................................. 9
SPECIAL SHAREHOLDER SERVICES...................................... 10
PURCHASE OF SHARES................................................. 12
REDEMPTION OF SHARES............................................... 12
NET ASSET VALUE.................................................... 12
ADDITIONAL TAX INFORMATION......................................... 13
CAPITAL SHARES AND VOTING.......................................... 14
CUSTODIAN.......................................................... 14
INDEPENDENT AUDITORS............................................... 15
APPENDIX A - DESCRIPTION OF RATINGS................................ 16
This Statement of Additional Information (the "Additional Statement") is meant
to be read in conjunction with the Prospectus, dated the same date as this
Additional Statement, and is incorporated by reference in its entirety into the
Prospectus. Because this Additional Statement is not itself a prospectus, no
investment in shares of the Fund should be made solely upon the information
contained herein. Copies of the Fund's Prospectus may be obtained at no charge
by writing or calling the Fund at the address and phone number shown above. This
Additional Statement is not a prospectus but is incorporated by reference in
each Prospectus in its entirety. Capitalized terms used but not defined herein
have the same meanings as in each Prospectus.
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The investment objective and policies of the Fund are described in the
Prospectus for the Fund. Supplemental information about these policies is set
forth below. The Fund has no prior operating history.
Repurchase Agreements. The Fund may acquire U.S. Government obligations or
corporate debt securities subject to repurchase agreements. A repurchase
transaction occurs when, at the time the Fund purchases a security (normally a
U.S. Treasury obligation), it also resells it to the vendor (normally a member
bank of the Federal Reserve or a registered Government Securities dealer) and
must deliver the security (and/or securities substituted for them under the
repurchase agreement) to the vendor on an agreed upon date in the future. The
repurchase price exceeds the purchase price by an amount which reflects an
agreed upon market interest rate effective for the period of time during which
the repurchase agreement is in effect. Delivery pursuant to the resale will
occur within one to five days of the purchase.
Repurchase agreements are considered "loans" under the Investment Company Act of
1940, as amended (the "1940 Act"), collateralized by the underlying security.
The Trust will implement procedures to monitor on a continuous basis the value
of the collateral serving as security for repurchase obligations. Additionally,
the Advisor to the Fund will consider the creditworthiness of the vendor. If the
vendor fails to pay the agreed upon resale price on the delivery date, the Fund
will retain or attempt to dispose of the collateral. The Fund's risk is that
such default may include any decline in value of the collateral to an amount
which is less than 100% of the repurchase price, any costs of disposing of such
collateral, and any loss resulting from any delay in foreclosing on the
collateral. The Fund will not enter into any repurchase agreement, which will
cause more than 10% of its net assets to be invested in repurchase agreements,
which extend beyond seven days and other illiquid securities.
Description of Money Market Instruments. Money market instruments may include
U.S. Government obligations or corporate debt obligations (including those
subject to repurchase agreements), provided that they mature in thirteen months
or less from the date of acquisition and are otherwise eligible for purchase by
the Fund. Money market instruments also may include Banker's Acceptances and
Certificates of Deposit of domestic branches of U.S. banks, Commercial Paper,
and Variable Amount Demand Master Notes ("Master Notes"). Banker's Acceptances
are time drafts drawn on and "accepted" by a bank. When a bank "accepts" such a
time draft, it assumes liability for its payment. When the Fund acquires a
Banker's Acceptance, the bank which "accepted" the time draft is liable for
payment of interest and principal when due. The Banker's Acceptance carries the
full faith and credit of such bank. A Certificate of Deposit ("CD") is an
unsecured, interest bearing debt obligation of a bank. Commercial Paper is an
unsecured, short-term debt obligation of a bank, corporation, or other borrower.
Commercial Paper maturity generally ranges from two to 270 days and is usually
sold on a discounted basis rather than as an interest-bearing instrument. The
Fund will invest in Commercial Paper only if it is rated in one of the top two
rating categories by Moody's Investors Service, Inc. ("Moody's"), Standard &
Poor's Ratings Group ("S&P"), Fitch Investors Service, Inc. ("Fitch"), or Duff &
Phelps ("D&P"), or if not rated, of equivalent quality in the Advisor's opinion.
Commercial Paper may include Master Notes of the same quality. Master Notes are
unsecured obligations which are redeemable upon demand of the holder and which
permit the investment of fluctuating amounts at varying rates of interest.
Master Notes are acquired by the Fund only through the Master Note program of
the Fund's custodian bank, acting as administrator thereof. The Advisor will
monitor, on a continuous basis, the earnings' power, cash flow, and other
liquidity ratios of the issuer of a Master Note held by the Fund.
Illiquid Investments. The Fund may invest up to 10% of its net assets in
illiquid securities, which are investments that cannot be sold or disposed of in
the ordinary course of business within seven days at approximately the prices at
which they are valued. Under the supervision of the Board of Trustees, the
Advisor determines the liquidity of the Fund's investments, and through reports
from the Advisor, the Board monitors investments in illiquid instruments. In
determining the liquidity of the Fund's investments, the Advisor may consider
various factors including (1) the frequency of trades and quotations, (2) the
number of dealers and prospective purchasers in the marketplace, (3) dealer
undertakings to make a market, (4) the nature of the security (including any
demand or tender features), and (5) the nature of the marketplace for trades
(including the ability to assign or offset the Fund's rights and obligations
relating to the investment). If through a change in values, net assets, or other
circumstances, the Fund were in a position where more than 10% of its net assets
were invested in illiquid securities, it would seek to take appropriate steps to
protect liquidity.
Forward Commitment & When-Issued Securities The Fund may purchase securities on
a when-issued basis or for settlement at a future date if the Fund holds
sufficient assets to meet the purchase price. In such purchase transactions, the
Fund will not accrue interest on the purchased security until the actual
settlement. Similarly, if a security is sold for a forward date, the Fund will
accrue the interest until the settlement of the sale. When-issued security
purchases and forward commitments have a higher degree of risk of price movement
before settlement due to the extended time period between the execution and
settlement of the purchase or sale. As a result, the exposure to the
counterparty of the purchase or sale is increased. Although the Fund would
generally purchase securities on a forward commitment or when-issued basis with
the intention of taking delivery, the Fund may sell such a security prior to the
settlement date if the Advisor felt such action was appropriate. In such a case,
the Fund could incur a short-term gain or loss.
INVESTMENT LIMITATIONS
The Fund has adopted the following fundamental investment limitations, which
cannot be changed without approval by holders of a majority of the outstanding
voting shares of the Fund. A "majority" for this purpose means the lesser of (i)
67% of the Fund's outstanding shares represented in person or by proxy at a
meeting at which more than 50% of its outstanding shares are represented, or
(ii) more than 50% of its outstanding shares. Unless otherwise indicated,
percentage limitations apply at the time of purchase.
As a matter of fundamental policy, the Fund may not:
1. Issue senior securities, borrow money, or pledge its assets, except that it
may borrow from banks as a temporary measure (a) for extraordinary or
emergency purposes, in amounts not exceeding 5% of its total assets or (b)
to meet redemption requests in amounts not exceeding 15% of its total
assets. The Fund will not make any investments if borrowing exceeds 5% of
its total assets until such time as total borrowing represents less than 5%
of Fund assets;
2. With respect to 75% of its total assets, invest more than 5% of the value
of its total assets in the securities of any one issuer or purchase more
than 10% of the outstanding voting securities of any class of securities of
any one issuer (except that securities of the U.S. government, its
agencies, and instrumentalities are not subject to this limitation);
3. Invest 25% or more of the value of its total assets in any one industry
(except that securities of the U.S. Government, its agencies, and
instrumentalities are not subject to this limitation);
4. Invest for the purpose of exercising control or management of another
issuer;
5. Purchase or sell commodities or commodities contracts; real estate
(including limited partnership interests, but excluding readily marketable
interests in real estate investment trusts or other securities secured by
real estate or interests therein or readily marketable securities issued by
companies that invest in real estate or interests therein); or interests in
oil, gas, or other mineral exploration or development programs or leases
(although it may invest in readily marketable securities of issuers that
invest in or sponsor such programs or leases);
6. Underwrite securities issued by others except to the extent that the
disposition of portfolio securities, either directly from an issuer or from
an underwriter for an issuer, may be deemed to be an underwriting under the
federal securities laws;
7. Participate on a joint or joint and several basis in any trading account in
securities;
8. Invest its assets in the securities of one or more investment companies
except to the extent permitted by the 1940 Act;
9. Write, purchase, or sell puts, calls, straddles, spreads, or combinations
thereof or futures contracts or related options; or
10. Make loans of money or securities, except that the Fund may invest in
repurchase agreements, money market instruments, and other debt securities.
The following investment limitations are not fundamental and may be changed
without shareholder approval. As a matter of non-fundamental policy, the Fund
may not:
1. Invest in securities of issuers which have a record of less than three
years' continuous operation (including predecessors and, in the case of
bonds, guarantors) if more than 5% of its total assets would be invested in
such securities;
2. Invest more than 10% of its net assets in illiquid securities. For this
purpose, illiquid securities include, among others, (a) securities for
which no readily available market exists or which have legal or contractual
restrictions on resale, (b) fixed-time deposits that are subject to
withdrawal penalties and have maturities of more than seven days, and (c)
repurchase agreements not terminable within seven days;
3. Invest in the securities of any issuer if those officers or Trustees of the
Trust and those officers and directors of the Advisor who individually own
more than 1/2 of 1% of the outstanding securities of such issuer together
own more than 5% of such issuer's securities;
4. Make short sales of securities or maintain a short position, except short
sales "against the box." (A short sale is made by selling a security the
Fund does not own. A short sale is "against the box" to the extent that the
Fund contemporaneously owns or has the right to obtain at no additional
cost securities identical to those sold short.) While the Fund has reserved
the right to make short sales "against the box," the Advisor has no present
intention of engaging in such transactions at this time or during the
coming year; or
5. Purchase foreign securities other than those traded on domestic U.S.
exchanges.
MANAGEMENT
Trustees and Officers. Following are the Trustees and Officers of the New
Providence Investment Trust (the "Trust"), their age, their present position
with the Trust or the Fund, and their principal occupation during the past five
years. An asterisk indicates those Trustees who are "interested persons" (as
defined in the 1940 Act) by virtue of their affiliation with either the Trust or
the Advisor (*).
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Name, Age, Position(s) with Principal Occupation(s)
Fund and/or Trust, and Address During Past 5 Years
- ------------------------------ -------------------
Jack E. Brinson, 64 President
Trustee Brinson Investment Co.;
1105 Panola Street President
Tarboro, North Carolina 27886 Brinson Chevrolet, Inc.
Tarboro, North Carolina
Keith O. Cowan, 41 Corporate Development Officer
Trustee (effective May 1, 1998) BellSouth Corporation
1155 Peachtree Street, N.E. Suite 1710 Atlanta, Georgia
Atlanta, Georgia 30309-3610 since 1996; previously
Partner, Alston & Bird
John K. Donaldson, 56 President & Chief Investment Officer
President & Chairman New Providence Capital Management, L.L.C.
Trustee* (effective May 1, 1998) (Advisor to the Fund)
2859 Paces Ferry Road, Suite 2125 Atlanta, Georgia
Atlanta, Georgia 30339 since 1996;
President
Donaldson & Co., Incorporated
(Distributor to the Fund)
Atlanta, Georgia, since 1984
Kyle A. Tomlin, CFA, 27 Portfolio Management
Portfolio Manager New Providence Capital Management, L.L.C.
2859 Paces Ferry Road, Suite 2125 (Advisor to the Fund)Atlanta, Georgia 30339 Atlanta, Georgia
since 1996;
previously Portfolio Management and Client
Services Donaldson & Co., Incorporated
(Distributor to the Fund) Atlanta,
Georgia 1994-1996; previously Business
Associate, Investment Advisory Group SEI
Corporation Wayne, Pennsylvania
1993-1994; previously Student Georgia
Institute of Technology Atlanta, Georgia
Shannon D. Coogle, 29 Research / Client Services
Research Analyst New Providence Capital Management, L.L.C.
2859 Paces Ferry Road, Suite 2125 (Advisor to the Fund)
Atlanta, Georgia 30339 Atlanta, Georgia
since 1997; previously
Student
Georgia State University
Atlanta, Georgia 1994-1997; previously
Client Services
J.O. Patterson & Company
Atlanta, Georgia
J. Hope Reese, 36 Comptroller
Treasurer The Nottingham Company
105 North Washington Street (Administrator to the Fund)
Rocky Mount, North Carolina 27802 Rocky Mount, North Carolina,
since 1995; previously
Cash Manager
Law Companies Group
Atlanta, Georgia,
since 1993; previously
Financial Manager
MGR Food Services
Atlanta, Georgia
C. Frank Watson, III, 26 Vice President
Secretary The Nottingham Company
105 North Washington Street (Administrator to the Fund)
Rocky Mount, North Carolina 27802 Rocky Mount, North Carolina
</TABLE>
Compensation. Trustees and Officers of the Trust who are interested persons of
the Trust or the Advisor will receive no salary or fees from the Trust. Other
Trustees will receive $2,000 each year plus $250 per Fund per meeting attended
in person and $100 per Fund per meeting attended by telephone. The Trust will
also reimburse each Trustee for his or her travel and other expenses relating to
attendance at such meetings.
Principal Holders of Voting Securities. As of August 26, 1997, the Trustees and
Officers of the Trust as a group owned beneficially (i.e., had voting and/or
investment power) less than 1% of the then outstanding shares of the Fund. On
the same date the following shareholders owned of record more than 5% of the
outstanding shares of beneficial interest of the Fund. Except as provided below,
no person is known by the Trust to be the beneficial owner of more than 5% of
the outstanding shares of the Fund as of August 26, 1997.
------------------------------------------------------------------------
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership* Percent
------------------------------------------------------------------------
Faithfulness Ltd. 1,000,000 shares 99.179%**
P.O. Box N7776
Lyford Cay
Nassau, Bahamas
* The Fund believes the shares indicated are owned both of record and
beneficially.
** Pursuant to applicable SEC regulations, this shareholder is deemed to
control the Fund.
Investment Advisor. Information about New Providence Capital Management, L.L.C.
(the "Advisor"), 2859 Paces Ferry Road, Suite 2125, Atlanta, Georgia 30339, and
its duties and compensation as Advisor is contained in the Prospectus. The
Advisor supervises the Fund's investments pursuant to an Investment Advisory
Agreement (the "Advisory Agreement"). The Advisory Agreement is effective for a
two-year period and will be renewed thereafter only so long as such renewal and
continuance is specifically approved at least annually by the Board of Trustees
or by vote of a majority of the Fund's outstanding voting securities, provided
the continuance is also approved by a majority of the Trustees who are not
parties to the Advisory Agreement or interested persons of any such party. The
Advisory Agreement is terminable without penalty on 60-days' notice by the Board
of Trustees of the Trust or by vote of a majority of the outstanding voting
securities of the Fund. The Advisory Agreement provides that it will terminate
automatically in the event of its assignment.
The Advisor will receive a monthly management fee equal to an annual rate of
0.75% of the Fund's net assets.
Under the Advisory Agreement, the Advisor is not liable for any error of
judgment or mistake of law or for any loss suffered by the Fund in connection
with the performance of such Agreement, except a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services; or a
loss resulting from willful misfeasance, bad faith, or gross negligence on the
part of the Advisor in the performance of its duties; or from its reckless
disregard of its duties and obligations under the Agreement.
John K. Donaldson controls the Advisor. Mr. Donaldson also controls the
Distributor.
Administrator and Transfer Agent. The Trust has entered into a Fund Accounting,
Dividend Disbursing & Transfer Agent and Administration Agreement with The
Nottingham Company (the "Administrator"), 105 North Washington Street, Post
Office Drawer 69, Rocky Mount, North Carolina 27802-0069. Compensation of the
Administrator, based upon the average daily net assets of the Fund, is at the
annual rate of 0.125% on the first $50 million of the Fund's net assets; 0.10%
on the next $50 million; and 0.075% on all assets over $100 million. In
addition, the Administrator currently receives a monthly fee of $2,250 for
accounting and recordkeeping services for the Fund. The Administrator charges
$15 per shareholder per year with a minimum of $750 per month for transfer
agency and shareholder services. The Administrator also charges the Fund for
certain costs involved with the daily valuation of investment securities and is
reimbursed for out-of-pocket expenses. The Administrator charges a minimum
annual fee of $50,000 for all of its fees taken in the aggregate, analyzed
monthly.
The Administrator will perform the following services for the Fund: (1)
coordinate with the Custodian and monitor the services it provides to the Fund;
(2) coordinate with and monitor any other third parties furnishing services to
the Fund; (3) provide the Fund with necessary office space, telephones, and
other communications facilities and personnel competent to perform
administrative and clerical functions for the Fund; (4) supervise the
maintenance by third parties of such books and records of the Fund as may be
required by applicable federal or state law; (5) prepare or supervise the
preparation by third parties of all federal, state, and local tax returns and
reports of the Fund required by applicable law; (6) prepare and, after approval
by the Trust, file and arrange for the distribution of proxy materials and
periodic reports to shareholders of the Fund as required by applicable law; (7)
prepare and, after approval by the Trust, arrange for the filing of such
registration statements and other documents with the Securities and Exchange
Commission and other federal and state regulatory authorities as may be required
by applicable law; (8) review and submit to the officers of the Trust for their
approval invoices or other requests for payment of Fund expenses and instruct
the Custodian to issue checks in payment thereof; and (9) take such other action
with respect to the Fund as may be necessary in the opinion of the Administrator
to perform its duties under the agreement. The Administrator also provides
certain accounting and pricing services for the Fund.
With the approval of the Trust, the Administrator has contracted with NC
Shareholder Services, LLC (the "Transfer Agent"), a North Carolina limited
liability company, to serve as transfer, dividend paying, and shareholder
servicing agent for the Fund. The Transfer Agent is compensated for its services
by the Administrator and not directly by the Fund. The address of the Transfer
Agent is 107 North Washington Street, Post Office Box 4365, Rocky Mount, North
Carolina 27803-0365.
Distributor. Donaldson & Co., Incorporated (the "Distributor") is the principal
underwriter and distributor of Fund shares pursuant to a Distribution Agreement
with the Trust. The Distributor, which is affiliated with the Advisor, serves as
exclusive agent for the distribution of the shares of the Fund.
John K. Donaldson, affiliated person of the Fund, is also an affiliated person
of the Advisor and the Distributor.
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1 of
the 1940 Act (see "How Shares May Be Purchased - Distribution Plan" in the
Prospectus). As required by Rule 12b-1, the Plan (together with the Distribution
Agreement) has been approved by the Board of Trustees and separately by a
majority of the Trustees who are not interested persons of the Trust and who
have no direct or indirect financial interest in the operation of the Plan and
the Distribution Agreement.
Potential benefits of the Plan to the Fund include improved shareholder
services, savings to the Fund in transfer agency costs, savings to the Fund in
advisory fees and other expenses, benefits to the investment process through
growth and stability of assets, and maintenance of a financially healthy
management organization. The Board of Trustees must consider the continuation of
the Plan annually.
Under the Plan the Fund may expend up to 0.25% of the Fund's average daily net
assets annually to finance any activity primarily intended to result in the sale
of shares and the servicing of shareholder accounts, provided the Trust's Board
of Trustees has approved the category of expenses for which payment is being
made. Such expenditures paid as service fees to any person who sells shares may
not exceed 0.25% of the shares' average annual net asset value.
ADDITIONAL INFORMATION ON PERFORMANCE
From time to time, the total return of the Fund may be quoted in advertisements,
sales literature, shareholder reports, or other communications to shareholders.
The Fund computes the "average annual total return" of the Fund by determining
the average annual compounded rates of return during specified periods that
equate the initial amount invested to the ending redeemable value of such
investment. This is done by determining the ending redeemable value of a
hypothetical $1,000 initial payment. This calculation is as follows:
P(1+T)n = ERV
Where: T = average annual total return.
ERV = ending redeemable value at the end of the period covered
by the computation of a hypothetical $1,000 payment made
at the beginning of the period.
P = hypothetical initial payment of $1,000 from which the
maximum sales load is deducted. n = period covered by
the computation, expressed in terms of years.
The Fund may also compute the aggregate total return of the Fund, which is
calculated in a similar manner, except that the results are not annualized.
The calculation of average annual total return and aggregate total return assume
an initial $1,000 investment and that there is a reinvestment of all dividends
and capital gain distributions on the reinvestment dates during the period. The
ending redeemable value is determined by assuming complete redemption of the
hypothetical investment and the deduction of all nonrecurring charges at the end
of the period covered by the computations.
These performance quotations should not be considered as representative of the
Fund's performance for any specified period in the future.
The Fund's performance may be compared in advertisements, sales literature,
shareholder reports, and other communications to the performance of other mutual
funds having similar objectives or to standardized indices or other measures of
investment performance. In particular, the Fund may compare its performance to
the S&P 500 Index, which is generally considered to be representative of the
performance of unmanaged common stocks that are publicly traded in the United
States securities markets. The Fund may also measure its performance against the
Lipper Growth Fund Index, which ranks the performance of mutual funds that have
an objective of growth of capital. Comparative performance may also be expressed
by reference to a ranking prepared by a mutual fund monitoring service or by one
or more newspapers, newsletters, or financial periodicals. The Fund may also
occasionally cite statistics to reflect its volatility and risk. The Fund may
also compare its performance to other published reports of the performance of
unmanaged portfolios of companies. The performance of such unmanaged portfolios
generally does not reflect the effects of dividends or dividend reinvestment.
The Fund may also compare its performance to other reports of the performance of
managed accounts of the Advisor, such as the Capital Growth Account, as more
fully described in the Prospectus under "Other Information - Prior Performance
of Advisor." Of course, there can be no assurance the Fund will experience the
same results. Performance comparisons may be useful to investors who wish to
compare the Fund's past performance to that of other mutual funds and investment
products. Of course, past performance is not a guarantee of future results.
The Fund's performance fluctuates on a daily basis largely because net earnings
and net asset value per share fluctuate daily. Both net earnings and net asset
value per share are factors in the computation of total return as described
above.
As indicated, from time to time the Fund may advertise its performance compared
to similar funds or portfolios using certain indices, reporting services, and
financial publications. These may include the following:
o Lipper Analytical Services, Inc., ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes
the reinvestment of all capital gains distributions and income dividends
and takes into account any change in net asset value over a specific period
of time.
o Morningstar, Inc., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for
two weeks.
Investors may use such indices in addition to the Fund's Prospectus to obtain a
more complete view of the Fund's performance before investing. Of course, when
comparing the Fund's performance to any index, factors such as composition of
the index and prevailing market conditions should be considered in assessing the
significance of such comparisons. When comparing funds using reporting services,
or total return, investors should take into consideration any relevant
differences in funds such as permitted portfolio compositions and methods used
to value portfolio securities and to compute offering price. Advertisements and
other sales literature for the Fund may quote total returns that are calculated
on non-standardized base periods. The total returns represent the historic
change in the value of an investment in the Fund based on monthly reinvestment
of dividends over a specified period of time.
From time to time the Fund may include in advertisements and other
communications charts and illustrations relating to inflation and the effects of
inflation on the dollar, including the purchasing power of the dollar at various
rates of inflation. The Fund may also disclose from time to time information
about its portfolio allocation and holdings at a particular date (including
ratings of securities assigned by independent rating services such as S&P and
Moody's). The Fund may also depict the historical performance of the securities
in which the Fund may invest over periods reflecting a variety of market or
economic conditions either alone or in comparison with alternative investments,
performance indices of those investments, or economic indicators. The Fund may
also include in advertisements and in materials furnished to present and
prospective shareholders statements or illustrations relating to the
appropriateness of types of securities and/or mutual funds that may be employed
to meet specific financial goals, such as saving for retirement, children's
education, or other future needs.
PORTFOLIO TRANSACTIONS
Subject to the general supervision of the Trust's Board of Trustees, the Advisor
is responsible for, makes decisions with respect to, and places orders for all
purchases and sales of portfolio securities for the Fund.
The annualized portfolio turnover rate for the Fund is calculated by dividing
the lesser of purchases or sales of portfolio securities for the reporting
period by the monthly average value of the portfolio securities owned during the
reporting period. The calculation excludes all securities whose maturities or
expiration dates at the time of acquisition are one year or less. Portfolio
turnover of the Fund may vary greatly from year to year as well as within a
particular year, and may be affected by cash requirements for redemption of
shares and by requirements that enable the Fund to receive favorable tax
treatment. Portfolio turnover will not be a limiting factor in making Fund
decisions, and the Fund may engage in short-term trading to achieve its
investment objectives.
Purchases of money market instruments by the Fund are made from dealers,
underwriters, and issuers. The Fund currently does not expect to incur any
brokerage commission expense on such transactions because money market
instruments are generally traded on a "net" basis by a dealer acting as
principal for its own account without a stated commission. The price of the
security, however, usually includes a profit to the dealer. Securities purchased
in underwritten offerings include a fixed amount of compensation to the
underwriter, generally referred to as the underwriter's concession or discount.
When securities are purchased directly from or sold directly to an issuer, no
commissions or discounts are paid.
Transactions on U.S. stock exchanges involve the payment of negotiated brokerage
commissions. On exchanges on which commissions are negotiated, the cost of
transactions may vary among different brokers. Transactions in the
over-the-counter market are generally on a net basis (i.e., without commission)
through dealers, or otherwise involve transactions directly with the issuer of
an instrument.
The Fund may participate, if and when practicable, in bidding for the purchase
of Fund securities directly from an issuer in order to take advantage of the
lower purchase price available to members of a bidding group. The Fund will
engage in this practice, however, only when the Advisor, in its sole discretion,
believes such practice to be otherwise in the Fund's interest.
In executing Fund transactions and selecting brokers or dealers, the Advisor
will seek to obtain the best overall terms available for the Fund. In assessing
the best overall terms available for any transaction, the Advisor shall consider
factors it deems relevant, including the breadth of the market in the security,
the price of the security, the financial condition and execution capability of
the broker or dealer, and the reasonableness of the commission, if any, both for
the specific transaction and on a continuing basis. The sale of Fund shares may
be considered when determining the firms that are to execute brokerage
transactions for the Fund. In addition, the Advisor is authorized to cause the
Fund to pay a broker-dealer which furnishes brokerage and research services a
higher commission than that which might be charged by another broker-dealer for
effecting the same transaction, provided that the Advisor determines in good
faith that such commission is reasonable in relation to the value of the
brokerage and research services provided by such broker-dealer, viewed in terms
of either the particular transaction or the overall responsibilities of the
Advisor to the Fund. Such brokerage and research services might consist of
reports and statistics relating to specific companies or industries; general
summaries of groups of stocks or bonds and their comparative earnings and
yields; or broad overviews of the stock, bond, and government securities
markets; and the economy.
Supplementary research information so received is in addition to, and not in
lieu of, services required to be performed by the Advisor and does not reduce
the advisory fees payable by the Fund. The Trustees will periodically review any
commissions paid by the Fund to consider whether the commissions paid over
representative periods of time appear to be reasonable in relation to the
benefits inuring to the Fund. It is possible that certain of the supplementary
research or other services received will primarily benefit one or more other
investment companies or other accounts for which the Advisor exercises
investment discretion. Conversely, the Fund may be the primary beneficiary of
the research or services received as a result of securities transactions
effected for such other account or investment company.
The Advisor may also utilize a brokerage firm affiliated with the Trust or the
Advisor (including the Distributor, an affiliate of the Advisor) if it believes
it can obtain the best execution of transactions from such broker. The Fund will
not execute portfolio transactions through, acquire securities issued by, make
savings deposits in, or enter into repurchase agreements with the Advisor or an
affiliated person of the Advisor (as such term is defined in the 1940 Act)
acting as principal, except to the extent permitted by the Securities and
Exchange Commission ("SEC"). In addition, the Fund will not purchase securities
during the existence of any underwriting or selling group relating thereto of
which the Advisor, or an affiliated person of the Advisor, is a member, except
to the extent permitted by the SEC. Under certain circumstances, the Fund may be
at a disadvantage because of these limitations in comparison with other
investment companies that have similar investment objectives but are not subject
to such limitations.
Investment decisions for the Fund will be made independently from those for any
other series of the Trust, if any, and for any other investment companies and
accounts advised or managed by the Advisor. Such other investment companies and
accounts may also invest in the same securities as the Fund. To the extent
permitted by law, the Advisor may aggregate the securities to be sold or
purchased for the Fund with those to be sold or purchased for other investment
companies or accounts in executing transactions. When a purchase or sale of the
same security is made at substantially the same time on behalf of the Fund and
another investment company or account, the transaction will be averaged as to
price and available investments allocated as to amount in a manner which the
Advisor believes to be equitable to the Fund and such other investment company
or account. In some instances, this investment procedure may adversely affect
the price paid or received by the Fund or the size of the position obtained or
sold by the Fund.
SPECIAL SHAREHOLDER SERVICES
The Fund offers the following shareholder services:
Regular Account. The regular account allows for voluntary investments to be made
at any time. Available to individuals, custodians, corporations, trusts,
estates, corporate retirement plans, and others, investors are free to make
additions and withdrawals to or from their account as often as they wish. When
an investor makes an initial investment in the Fund, a shareholder account is
opened in accordance with the investor's registration instructions. Each time
there is a transaction in a shareholder account, such as an additional
investment or the reinvestment of a dividend or distribution, the shareholder
will receive a confirmation statement showing the current transaction and all
prior transactions in the shareholder account during the calendar year to date,
along with a summary of the status of the account as of the transaction date. As
stated in the Prospectus, share certificates are not issued.
Automatic Investment Plan. The automatic investment plan enables shareholders to
make regular monthly or quarterly investments in shares through automatic
charges to their checking account. With shareholder authorization and bank
approval, the Fund will automatically charge the checking account for the amount
specified ($100 minimum) which will be automatically invested in shares at the
public offering price on or about the 21st day of the month. The shareholder may
change the amount of the investment or discontinue the plan at any time by
writing to the Fund.
Systematic Withdrawal Plan. Shareholders owning shares with a value of $2,500 or
more may establish a Systematic Withdrawal Plan. A shareholder may receive
monthly or quarterly payments, in amounts of not less than $100 per payment, by
authorizing the Fund to redeem the necessary number of shares periodically (each
month, or quarterly in the months of March, June, September, and December) in
order to make the payments requested. The Fund has the capability of
electronically depositing the proceeds of the systematic withdrawal directly to
the shareholder's personal bank account ($5,000 minimum per bank wire).
Instructions for establishing this service are included in the Fund Shares
Application, enclosed in the Prospectus, or are available by calling the Fund.
If the shareholder prefers to receive his systematic withdrawal proceeds in
cash, or if such proceeds are less than the $5,000 minimum for a bank wire,
checks will be made payable to the designated recipient and mailed within seven
days of the valuation date. If the designated recipient is other than the
registered shareholder, the signature of each shareholder must be guaranteed on
the application (see "Signature Guarantees" in the Prospectus). A corporation
(or partnership) must also submit a "Corporate Resolution" (or "Certification of
Partnership") indicating the names, titles, and required number of signatures
authorized to act on its behalf. The application must be signed by a duly
authorized officer(s) and the corporate seal affixed. No redemption fees are
charged to shareholders under this plan. Costs in conjunction with the
administration of the plan are borne by the Fund. Shareholders should be aware
that such systematic withdrawals may deplete or use up entirely their initial
investment and may result in realized long-term or short-term capital gains or
losses. The Systematic Withdrawal Plan may be terminated at any time by the Fund
upon 60-days' written notice or by a shareholder upon written notice to the
Fund. Applications and further details may be obtained by calling the Fund at
1-800-525-3863 or by writing to:
New Providence Capital Growth Fund
c/o NC Shareholder Services
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
Purchases in Kind. The Fund may accept securities in lieu of cash in payment for
the purchase of shares in the Fund. The acceptance of such securities is at the
sole discretion of the Advisor based upon the suitability of the securities
accepted for inclusion as a long-term investment of the Fund, the marketability
of such securities, and other factors which the Advisor may deem appropriate. If
accepted, the securities will be valued using the same criteria and methods as
described in "How Net Asset Value is Determined" in the Prospectus.
Redemptions in Kind. The Fund does not intend, under normal circumstances, to
redeem its securities by payment in kind. It is possible, however, that
conditions may arise in the future which would, in the opinion of the Trustees,
make it undesirable for the Fund to pay for all redemptions in cash. In such
case the Board of Trustees may authorize payment to be made in readily
marketable portfolio securities of the Fund. Securities delivered in payment of
redemptions would be valued at the same value assigned to them in computing the
net asset value per share. Shareholders receiving them would incur brokerage
costs when these securities are sold. An irrevocable election has been filed
under Rule 18f-1 of the 1940 Act, wherein the Fund committed itself to pay
redemptions in cash, rather than in kind, to any shareholder of record of the
Fund who redeems during any 90-day period, the lesser of (a) $250,000 or (b) one
percent (1%) of the Fund's net asset value at the beginning of such period.
Transfer of Registration. To transfer shares to another owner, send a written
request to the Fund at the address shown above. Your request should include the
following: (1) the Fund name and existing account registration; (2) signature(s)
of the registered owner(s) exactly as the signature(s) appear(s) on the account
registration; (3) the new account registration, address, social security or
taxpayer identification number, and how dividends and capital gains are to be
distributed; (4) signature guarantees (See the Prospectus under the heading
"Signature Guarantees"); and (5) any additional documents which are required for
transfer by corporations, administrators, executors, trustees, guardians, etc.
If you have any questions about transferring shares, call or write the Fund.
PURCHASE OF SHARES
The purchase price of shares of the Fund is the net asset value next determined
after the order is received. An order received prior to 4:00 p.m. New York time
will be executed at the price computed as of 4:00 p.m. on the date of receipt,
and an order received after 4:00 p.m. New York time will be executed at the
price computed as of that time on the next business day.
The Fund reserves the right in its sole discretion (i) to suspend the offering
of its shares, (ii) to reject purchase orders when in the judgment of management
such rejection is in the best interest of the Fund and its shareholders, and
(iii) to reduce or to waive the minimum for initial and subsequent investments
under circumstances where certain economies can be achieved in sales of Fund
shares.
REDEMPTION OF SHARES
The Fund may suspend redemption privileges or postpone the date of payment (i)
during any period that the New York Stock Exchange (the "NYSE") is closed for
other than customary weekend and holiday closings, or that trading on the NYSE
is restricted as determined by the Securities and Exchange Commission (the
"Commission"); (ii) during any period when an emergency exists as defined by the
rules of the Commission as a result of which it is not reasonably practical for
the Fund to dispose of securities owned by it, or to determine fairly the value
of its assets; and (iii) for such other periods as the Commission may permit.
The Fund may also suspend or postpone the recordation of the transfer of shares
upon the occurrence of any of the foregoing conditions. Any redemption may be
more or less than the shareholder's cost depending on the market value of the
securities held by the Fund. No charge is made by the Fund for redemptions other
than the possible charge for wiring redemption proceeds.
In addition to the situations described in the Prospectus under "How to Redeem
Shares," the Fund may redeem shares involuntarily to reimburse the Fund for any
loss sustained by reason of the failure of a shareholder to make full payment
for shares purchased by the shareholder or to collect any charge relating to a
transaction effected for the benefit of a shareholder which is applicable to
Fund shares as provided in the Prospectus from time to time.
NET ASSET VALUE
The net asset value per share of the Fund is determined at 4:00 p.m., New York
time, Monday through Friday, except on business holidays when the NYSE is
closed. The NYSE recognizes the following holidays: New Year's Day, Martin
Luther King, Jr.'s Birthday, President's Day, Good Friday, Memorial Day, Fourth
of July, Labor Day, Thanksgiving Day, and Christmas Day. Any other holiday
recognized by the NYSE will be considered a business holiday on which the net
asset value of the Fund will not be calculated.
The net asset value per share of the Fund is calculated separately by adding the
value of the Fund's securities and other assets belonging to the Fund,
subtracting the liabilities charged to the Fund, and dividing the result by the
number of outstanding shares. "Assets belonging to" the Fund consist of the
consideration received upon the issuance of shares of the Fund together with all
net investment income, realized gains/losses and proceeds derived from the
investment thereof, including any proceeds from the sale of such investments,
any funds or payments derived from any reinvestment of such proceeds, and a
portion of any general assets of the Trust not belonging to a particular
investment Fund. Assets belonging to a Fund are charged with the direct
liabilities of the Fund and with a share of the general liabilities of the
Trust, which are normally allocated in proportion to the number of or the
relative net asset values of all of the Trust's series at the time of allocation
or in accordance with other allocation methods approved by the Board of
Trustees. Subject to the provisions of the Declaration of Trust, determinations
by the Board of Trustees as to the direct and allocable liabilities, and the
allocable portion of any general assets, with respect to a Fund are conclusive.
ADDITIONAL TAX INFORMATION
The following summarizes certain additional tax considerations generally
affecting the Fund and its shareholders that are not described in the
Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of the Fund or its shareholders. The discussion here and in the
Prospectus is not intended as a substitute for careful tax planning and is based
on tax laws and regulations that are in effect on the date hereof; such laws and
regulations may be changed by legislative, judicial, or administrative action.
Investors are advised to consult their tax advisors with specific reference to
their own tax situations.
The Fund, and any other series of the Trust, will be treated as a separate
corporate entity under the Code. The Fund intends to qualify and to remain
qualified as a regulated investment company. To so qualify, the Fund must elect
to be a regulated investment company or have made such an election for a
previous year and must satisfy, in addition to the distribution requirement
described in the Prospectus, certain requirements with respect to the source of
its income for a taxable year. At least 90% of the gross income of the Fund must
be derived from dividends; interest; payments with respect to securities loans,
gains from the sale or other disposition of stocks, securities, or foreign
currencies; and other income derived with respect to the Fund's business of
investing in such stock, securities, or currencies. Any income derived by the
Fund from a partnership or trust is treated as derived with respect to the
Fund's business of investing in stock, securities, or currencies only to the
extent that such income is attributable to items of income that would have been
qualifying income if realized by the Fund in the same manner as by the
partnership or trust.
Another requirement for qualification as a regulated investment company under
the Code is that less than 30% of the Fund's gross income for a taxable year
must be derived from gains realized on the sale or other disposition of the
following investments held for less than three months: (l) stock and securities
(as defined in Section 2(a) (36) of the 1940 Act); (2) options, futures, and
forward contracts other than those on foreign currencies; or (3) foreign
currencies (or options, futures, or forward contracts on foreign currencies)
that are not directly related to the Fund's principal business of investing in
stocks or securities (or options and futures with respect to stocks or
securities). Interest (including original issue discount and, with respect to
certain debt securities, accrued market discount) received by the Fund upon
maturity or disposition of a security held for less than three months will not
be treated as gross income derived from the sale or other disposition of such
security within the meaning of this requirement. However, any other income that
is attributable to realized market appreciation will be treated as gross income
from the sale or other disposition of securities for this purpose.
An investment company may not qualify as a regulated investment company for any
taxable year unless it satisfies certain requirements with respect to the
diversification of its investments at the close of each quarter of the taxable
year. In general, at least 50% of the value of its total assets must be
represented by cash, cash items, government securities, securities of other
regulated investment companies, and other securities which, with respect to any
one issuer, do not represent more than 5% of the total assets of the investment
company nor more than 10% of the outstanding voting securities of such issuer.
In addition, not more than 25% of the value of the investment company's total
assets may be invested in the securities (other than government securities or
the securities of other regulated investment companies) of any one issuer. The
Fund intends to satisfy all requirements on an ongoing basis for continued
qualification as a regulated investment company.
The Fund will designate any distribution of long-term capital gains as a capital
gain dividend in a written notice mailed to shareholders within 60 days after
the close of the Fund's taxable year. Shareholders should note that upon the
sale or exchange of Fund shares, if the shareholder has not held such shares for
at least six months, any loss on the sale or exchange of those shares will be
treated as long-term capital loss to the extent of the capital gain dividends
received with respect to the shares.
A 4% nondeductible excise tax is imposed on regulated investment companies that
fail to distribute currently an amount equal to specified percentages of their
ordinary taxable income and capital gain net income (excess of capital gains
over capital losses). The Fund intends to make sufficient distributions or
deemed distributions of its ordinary taxable income and any capital gain net
income prior to the end of each calendar year to avoid liability for this excise
tax.
If for any taxable year the Fund does not qualify for the special federal income
tax treatment afforded to regulated investment companies, all of its taxable
income will be subject to federal income tax at regular corporate rates (without
any deduction for distributions to its shareholders). In such event, dividend
distributions (whether or not derived from interest on tax-exempt securities)
would be taxable as ordinary income to shareholders to the extent of the Fund's
current and accumulated earnings and profits.
The Fund will be required in certain cases to withhold and remit to the U.S.
Treasury 31% of taxable dividends or 31% of gross proceeds realized upon sale
paid to shareholders who have failed to provide a correct tax identification
number in the manner required, or who are subject to withholding by the Internal
Revenue Service for failure to include properly on their return payments of
taxable interest or dividends, or who have failed to certify to the Fund that
they are not subject to backup withholding when required to do so, or that they
are "exempt recipients."
Depending upon the extent of the Fund's activities in states and localities in
which its offices are maintained, in which its agents or independent contractors
are located, or in which it is otherwise deemed to be conducting business, the
Fund may be subject to the tax laws of such states or localities. In addition,
in those states and localities that have income tax laws, the treatment of the
Fund and its shareholders under such laws may differ from their treatment under
federal income tax laws.
Dividends paid by the Fund derived from net investment income or net short-term
capital gains are taxable to shareholders as ordinary income, whether received
in cash or reinvested in additional shares. Long-term capital gains
distributions, if any, are taxable as long-term capital gains, whether received
in cash or reinvested in additional shares, regardless of how long Fund shares
have been held.
Under current tax law, certain types of expenses incurred by the Fund must be
proportionately allocated as additional income to shareholders. As a result, the
amounts reportable by the Fund as taxable income, if any, may exceed the
dividends actually paid. Such proportionate allocation of Fund expenses, if any,
will be identified when tax information is distributed by the Fund. The Fund
will send shareholders information each year on the tax status of dividends and
disbursements. A dividend or capital gains distribution paid shortly after
shares have been purchased, although in effect a return of investment, is
subject to federal income taxation. Dividends from net investment income, along
with capital gains, will be taxable to shareholders, whether received in cash or
shares and no matter how long you have held Fund shares, even if they reduce the
net asset value of shares below your cost and thus, in effect, result in a
return of a part of your investment.
CAPITAL SHARES AND VOTING
The Trust's Declaration of Trust currently authorizes the issuance of shares in
one series: the New Providence Capital Growth Fund. Shares of the Fund, when
issued, are fully paid and non-assessable and have no preemptive or conversion
rights. Shareholders are entitled to one vote for each full share and a
fractional vote for each fractional share held. Shares have non-cumulative
voting rights, which means that the holders of more than 50% of the shares
voting for the election of Trustees can elect 100% of the Trustees, and in this
event, the holders of the remaining shares voting will not be able to elect any
Trustees. The Trustees will hold office indefinitely, except that: (1) any
Trustee may resign or retire; and (2) any Trustee may be removed: (a) any time
by written instrument signed by at least two-thirds of the number of Trustees
prior to such removal; (b) at any meeting of shareholders of the Trust by a vote
of two-thirds of the outstanding shares of the Trust; or (c) by a written
declaration signed by shareholders holding not less than two-thirds of the
outstanding shares of the Trust and filed with the Trust's custodian.
Shareholders have certain rights, as set forth in the Declaration of Trust,
including the right to call a meeting of the shareholders. Shareholders holding
not less than 10% of the shares then outstanding may require the Trustees to
call a meeting, and the Trustees are obligated to provide certain assistance to
shareholders desiring to communicate with other shareholders in such regard
(e.g., providing access to shareholder lists, etc.). In case a vacancy or an
anticipated vacancy on the Board of Trustees shall for any reason exist, the
vacancy shall be filled by the affirmative vote of a majority of the remaining
Trustees, subject to certain restrictions under the 1940 Act. Otherwise, there
will normally be no meeting of shareholders for the purpose of electing
Trustees, and the Trust does not expect to have an annual meeting of
shareholders.
CUSTODIAN
First Union National Bank of North Carolina (the "Custodian"), Two First Union
Center, Charlotte, North Carolina 28288-1151, serves as custodian for the Fund's
assets. The Custodian acts as the depository for the Fund, safekeeps its
portfolio securities, collects all income and other payments with respect to
portfolio securities, disburses monies at the Fund's request and maintains
records in connection with its duties as Custodian. For its services as
Custodian, the Custodian is entitled to receive from the Fund an annual fee
based on the average net assets of the Fund held by the Custodian.
INDEPENDENT AUDITORS
The Board of Trustees of the Trust has selected the firm of Deloitte & Touche
LLP, 2500 One PPG Place, Pittsburgh, Pennsylvania 15222-5401, to serve as
independent auditors for the Fund for the current fiscal year and to audit the
annual financial statements of the Fund, prepare the Fund's federal and state
tax returns, and consult with the Fund on matters of accounting and federal and
state income taxation.
Independent auditors audit the financial statements of the Fund at least once
each year. Shareholders will receive annual audited and semi-annual (unaudited)
reports when published and written confirmation of all transactions in their
account. A copy of the most recent Annual Report will accompany the Statement of
Additional Information whenever a shareholder or a prospective investor requests
it.
<PAGE>
APPENDIX A
DESCRIPTION OF RATINGS
The Fund will normally be at least 90% invested in equities. As a temporary
defensive position, however, when the Advisor determines that market conditions
warrant such investments, the Fund may invest up to 100% of its assets in
investment grade bonds, U.S. Government Securities, repurchase agreements, or
money market instruments ("Investment-Grade Debt Securities"). When the Fund
invests in Investment-Grade Debt Securities as a temporary defensive measure, it
is not pursuing its investment objective. Under normal circumstances, however,
the Fund may invest in money market instruments as described in the Prospectus.
The various ratings used by the nationally recognized securities rating services
are described below.
A rating by a rating service represents the service's opinion as to the credit
quality of the security being rated. However, the ratings are general and are
not absolute standards of quality or guarantees as to the creditworthiness of an
issuer. Consequently, the Advisor believes that the quality of fixed-income
securities in which the Fund may invest should be continuously reviewed and that
individual analysts give different weightings to the various factors involved in
credit analysis. A rating is not a recommendation to purchase, sell, or hold a
security because it does not take into account market value or suitability for a
particular investor. When a security has received a rating from more than one
service, each rating is evaluated independently. Ratings are based on current
information furnished by the issuer or obtained by the rating services from
other sources that they consider reliable. Ratings may be changed, suspended, or
withdrawn as a result of changes in or unavailability of such information, or
for other reasons.
Standard & Poor's Ratings Group. The following summarizes the highest four
ratings used by Standard & Poor's Ratings Group ("S&P") for bonds that are
deemed to be "Investment-Grade Debt Securities" by the Advisor:
AAA - This is the highest rating assigned by S&P to a debt obligation
and indicates an extremely strong capacity to pay interest and to repay
principal.
AA - Debt rated AA is considered to have a very strong capacity to pay
interest and to repay principal and differs from AAA issues only in a
small degree.
A - Debt rated A has a strong capacity to pay interest and to repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt
in higher-rated categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and to repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and to repay principal for bonds in this category than for
debt in higher rated categories.
To provide more detailed indications of credit quality, the AA, A, and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within these major rating categories.
Bonds rated BB, B, CCC, CC, and C are not considered by the Advisor to be
"Investment-Grade Debt Securities" and are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and C the highest degree of speculation. While such
bonds may have some quality and protective characteristics, these are outweighed
by large uncertainties or major risk exposures to adverse conditions.
Commercial paper rated A-1 by S&P indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted A-1+. Capacity for timely payment on
commercial paper rated A-2 is satisfactory, but the relative degree of safety is
not as high as for issues designated A-1.
The rating SP-1 is the highest rating assigned by S&P to municipal notes and
indicates very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics are given a
plus (+) designation.
Moody's Investors Service, Inc. The following summarizes the highest four
ratings used by Moody's Investors Service, Inc., ("Moody's") for bonds that are
deemed to be "Investment-Grade Debt Securities" by the Advisor:
Aaa - Bonds that 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 most unlikely to impair the fundamentally strong
position of such issues.
Aa - Bonds that 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,
or 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.
A - Debt that is rated A possesses many favorable investment attributes
and is to be considered as an upper-medium-grade obligation. Factors
giving security to principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to impairment
sometime in the future.
Baa - Debt which is rated Baa is considered as a medium-grade
obligation, i.e., it is neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the
present, but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such debt
lacks outstanding investment characteristics and, in fact, has
speculative characteristics as well.
Moody's applies numerical modifiers (l, 2 and 3) with respect to bonds rated Aa,
A, and Baa. The modifier 1 indicates that the bond being rated ranks in the
higher end of its generic rating category; the modifier 2 indicates a mid-range
ranking, and the modifier 3 indicates that the bond ranks in the lower end of
its generic rating category.
The Advisor does not consider bonds that are rated Ba, B, Caa, Ca, or C by
Moody's "Investment-Grade Debt Securities". Bonds rated Ba are judged to have
speculative elements because their future cannot be considered as well assured.
Uncertainty of position characterizes bonds in this class because the protection
of interest and principal payments often may be very moderate and not well
safeguarded.
Bonds that are rated B generally lack characteristics of a desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the security over any long period for time may be small. Bonds that are rated
Caa are of poor standing. Such securities may be in default, or there may be
present elements of danger with respect to principal or interest. Bonds that are
rated Ca represent obligations that are speculative in a high degree. Such
issues are often in default or have other marked shortcomings. Bonds which are
rated C are the lowest rated class of bonds, and issues so rated can be regarded
as having extremely poor prospects of ever attaining any real investment
standing.
The rating Prime-1 is the highest commercial paper rating assigned by Moody's.
Issuers rated Prime-1 (or related supporting institutions) are considered to
have a superior capacity for repayment of short-term promissory obligations.
Issuers rated Prime-2 (or related supporting institutions) are considered to
have a strong capacity for repayment of short-term promissory obligations. This
will normally be evidenced by many of the characteristics of issuers rated
Prime-1 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.
The following summarizes the highest rating used by Moody's for short-term notes
and variable-rate, demand obligations:
MIG-l; VMIG-l - Obligations bearing these designations are of the best
quality, enjoying strong protection by established cash flows, superior
liquidity support, or demonstrated broad-based access to the market for
refinancing.
Duff & Phelps Credit Rating Co. The following summarizes the highest four
ratings used by Duff & Phelps Credit Rating Co. ("D&P") for bonds that are
deemed to be "Investment-Grade Debt Securities" by the Advisor:
AAA - Bonds that are rated AAA are of the highest credit quality. The
risk factors are considered to be negligible, being only slightly more
than for risk-free U.S. Treasury debt.
AA - Bonds that are rated AA are of high credit quality. Protection
factors are strong. Risk is modest but may vary slightly from time to
time because of economic conditions.
A - Bonds rated A have average but adequate protection factors. The
risk factors are more variable and greater in periods of economic
stress.
BBB - Bonds rated BBB have below-average protection factors but are
still considered sufficient for prudent investment. There is
considerable variability in risk during economic cycles.
Bonds rated BB, B, and CCC by D&P are not considered "Investment-Grade Debt
Securities" and are regarded, on balance, as predominantly speculative with
respect to the issuer's ability to pay interest and to make principal payments
in accordance with the terms of the obligations. BB indicates the lowest degree
of speculation and CCC the highest degree of speculation.
The rating Duff l is the highest rating assigned by D&P for short-term debt,
including commercial paper. D&P employs three designations, Duff l+, Duff 1, and
Duff 1- within the highest rating category. Duff l+ indicates highest certainty
of timely payment. Short-term liquidity, including internal operating factors
and/or access to alternative sources of funds, is judged to be "outstanding, and
safety is just below risk-free U.S. Treasury short-term obligations." Duff 1
indicates very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are
considered to be minor. Duff 1- indicates high certainty of timely payment.
Liquidity factors are strong and supported by good fundamental protection
factors. Risk factors are very small.
Fitch Investors Service, Inc. The following summarizes the highest four ratings
used by Fitch Investors Service, Inc., ("Fitch") for bonds that are deemed to be
"Investment-Grade Debt Securities" by the Advisor:
AAA - Bonds are considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability to pay
interest and to repay principal, which is unlikely to be affected by
reasonably foreseeable events.
AA - Bonds are considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and to repay
principal is very strong, although not quite as strong as bonds rated
AAA. Because bonds rated in the AAA and AA categories are not
significantly vulnerable to foreseeable future developments, short-term
debt of these issuers is generally rated F-1+.
A - Bonds that are rated A are considered to be investment grade and of
high credit quality. The obligor's ability to pay interest and to repay
principal is considered to be strong, but may be more vulnerable to
adverse changes in economic conditions and circumstances than bonds
with higher ratings.
BBB - Bonds rated BBB are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and
to repay principal is considered to be adequate. Adverse changes in
economic conditions and circumstances, however, are more likely to have
adverse impact on these bonds and, therefore, impair timely payment.
The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.
To provide more detailed indications of credit quality, the AA, A, and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within a rating category.
Bonds rated BB, B, and CCC by Fitch are not considered "Investment-Grade Debt
Securities" and are regarded, on balance, as predominantly speculative with
respect to the issuer's ability to pay interest and to make principal payments
in accordance with the terms of the obligations. BB indicates the lowest degree
of speculation and CCC the highest degree of speculation.
The following summarizes the three highest ratings used by Fitch for short-term
notes, municipal notes, variable rate demand instruments, and commercial paper:
F-1+ - Instruments assigned this rating are regarded as having the
strongest degree of assurance for timely payment.
F-1 - Instruments assigned this rating reflect an assurance of timely
payment only slightly less in degree than issues rated F-1+
F-2 - Instruments assigned this rating have a satisfactory degree of
assurance for timely payment, but the margin of safety is not as great
as for issues assigned F-1+ and F-1 ratings.
<PAGE>
New Providence Growth Fund
Statement of Assets and Liabilities
July 11, 1997
Assets:
Investment in Evergreen Money Market Treasury Institutional
Market Fund Institutional Service Shares, at cost.............. $10,000,000
Cash ............................................................ 100
-----------
Total Assets ................................................ 10,000,100
Liabilities: .................................................... --
-----------
Net Assets for 1,000,010 Institutional shares outstanding........ $10,000,100
===========
Net Assets Consist of:
Paid in Capital ................................................. $10,000,100
===========
Net Asset Value, Offering Price and Redemption Proceeds Per Share
$10,000,100 / 1,000,010 shares outstanding ...................... $ 10.00
===========
Notes:
(1) New Providence Capital Growth Fund (the "Fund") is the only existing
open-end management investment company (a mutual fund) in a diversified
series of New Providence Investment Trust (the "Trust"). The Trust was
established as a Massachusetts business trust under a Declaration of Trust
dated July 9, 1997 and is registered under the investment company Act of
1940, as amended. The Fund has had no operations since that date other than
those relating to organizational matters, including the issuance on July
11, 1997, of 1,000,010 Institutional shares at $10.00 per share, the
proceeds of which were used to purchase shares in a money market fund.
Organizational expenses totalling $38,500 were borne initially by the
Advisor. The Fund has agreed to reimburse the Advisor for the
organizational expenses during the five year period following the date the
Fund's registration statement became first effective.
(2) Reference is made to the "Management of the Fund" (on page 12),
"Administration of the Fund" (on page 13) and Tax Information (on page 7)
in the prospectus for descriptions of the investment advisory fee,
administrative and other services and federal tax aspects of the Fund.
(3) Certain Officers and Trustees of the Trust are Officers and Directors or
Trustees of the Advisor and the Administrator.
(4) Investment Valuations - Short-term securities are valued at cost which
approximates fair market value.
<PAGE>
PART C
NEW PROVIDENCE INVESTMENT TRUST
FORM N-1A
OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits
a) Financial Statements: Financial Statements for the Registrant are
included under Part B.
b) Exhibits:
(1) Declaration of Trust of Registrant - Incorporated by reference; filed
07/16/97
(2) By-Laws - Incorporated by reference; filed 07/16/97
(3) Not applicable
(4) Not applicable - the series of the Registrant do not issue certificates
(see Exhibit 1 and 2 for the relevant portions of the Declaration of Trust
and By-Laws)
(5) Form of Investment Advisory Agreement between the Registrant and New
Providence Capital Management, L.L.C., as Advisor- Incorporated by
reference; filed 07/16/97
(6) Form of Distribution Agreement between the Registrant and Donaldson & Co.,
Inc., as distributor- Incorporated by reference; filed 07/16/97
(7) Not applicable
(8) Form of Custody Agreement between the Registrant and First Union National
Bank of North Carolina, as Custodian - Incorporated by reference; filed
07/16/97
(9) Form of Fund Accounting, Dividend Disbursing and Transfer Agent and
Administration Agreement Between the Registrant and The Nottingham Company,
as administrator.- Incorporated by reference; filed 07/16/97
(10) Opinion and Consent of Counsel - Enclosed Exhibit 10
(11) Consent of Auditors - Enclosed Exhibit 11
(12) Not Applicable
(13) Form of Initial Share Purchase Agreement - Enclosed Exhibit 13
(14) Not applicable
(15) Form of Distribution Plan- Incorporated by reference; filed 07/16/97
(16) Computation of Performance - To be filed by amendment
(17) Financial Data Schedule - To be filed by amendment
(18) Not applicable
(24) Copies of Powers of Attorney - Enclosed Exhibit 24
ITEM 25. Persons Controlled by or Under Common Control with Registrant
Not applicable
ITEM 26. Number of Holders of Securities
- -----------------------------------------------------------------------------
Number of
Title of Class Record Holders
- -----------------------------------------------------------------------------
New Providence Capital Growth Fund..............................9
ITEM 27. Indemnification
The Declaration of Trust and Bylaws of the Registrant contain
provisions covering indemnification of the officers and trustees. The
following are summaries of the applicable provisions.
The Registrant's Declaration of Trust provides that every person who
is or has been a trustee, officer, employee or agent of the Registrant
and every person who serves at the trustees' request as director,
officer, employee or agent of another enterprise will be indemnified
by the Registrant to the fullest extent permitted by law against all
liabilities and against all expenses reasonably incurred or paid by
him in connection with any debt, claim, action, demand, suit,
proceeding, judgment, decree, liability or obligation of any kind in
which he becomes involved as a party or otherwise or is threatened by
virtue of his being or having been a trustee, officer, employee or
agent of the Registrant or of another enterprise at the request of the
Registrant and against amounts paid or incurred by him in the
compromise or settlement thereof.
No indemnification will be provided to a trustee or officer: (i)
against any liability to the Registrant or its shareholders by reason
of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office
("disabling conduct"); (ii) with respect to any matter as to which he
shall, by the court or other body by or before which the proceeding
was brought or engaged, have been finally adjudicated to be liable by
reason of disabling conduct; (iii) in the absence of a final
adjudication on the merits that such trustee or officer did not engage
in disabling conduct, unless a reasonable determination, based upon a
review of the facts that the person to be indemnified is not liable by
reason of such conduct, is made by vote of a majority of a quorum of
the trustees who are neither interested persons nor parties to the
proceedings, or by independent legal counsel, in a written opinion.
The rights of indemnification may be insured against by policies
maintained by the Registrant, will be severable, will not affect any
other rights to which any trustee, officer, employee or agent may now
or hereafter be entitled, will continue as to a person who has ceased
to be such trustee, officer, employee, or agent and will inure to the
benefit of the heirs, executors and administrators of such a person;
provided, however, that no person may satisfy any right of indemnity
or reimbursement except out of the property of the Registrant, and no
other person will be personally liable to provide indemnity or
reimbursement (except an insurer or surety or person otherwise bound
by contract).
Article XIV of the Registrant's Bylaws provides that the Registrant
will indemnify each trustee and officer to the full extent permitted
by applicable federal, state and local statutes, rules and regulations
and the Declaration of Trust, as amended from time to time. With
respect to a proceeding against a trustee or officer brought by or on
behalf of the Registrant to obtain a judgment or decree in its favor,
the Registrant will provide the officer or trustee with the same
indemnification, after the same determination, as it is required to
provide with respect to a proceeding not brought by or on behalf of
the Registrant.
This indemnification will be provided with respect to an action, suit
proceeding arising from an act or omission or alleged act or omission,
whether occurring before or after the adoption of Article XIV of the
Registrant's Bylaws.
ITEM 28. Business and other Connections of Investment Advisor
See the Statement of Additional Information section entitled
"Management" of the Fund and the Investment Advisor's Form ADV filed
with the Commission for the activities and affiliations of the
officers and directors of the Investment Advisor of the Registrant.
Except as so provided, to the knowledge of Registrant, none of the
directors or executive officers of the Investment Advisor is or has
been at any time during the past two fiscal years engaged in any other
business, profession, vocation or employment of a substantial nature.
The Investment Advisor currently serves as investment advisor to
numerous institutional and individual clients.
ITEM 29. Principal Underwriter
(a) Donaldson & Co., Inc. is underwriter and distributor for The New
Providence Capital Growth Fund.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
Name and Principal Position(s) and Offices Position(s) and Offices
Business Address with Underwriter with Registrant
- --------------------------------------------------------------------------------------------------------------------
John K. Donaldson, President Trustee*, President, and Chairman*
2859 Paces Ferry Road, Suite 2125 (*effective May, 1998)
Atlanta, Georgia
Joanne Masellino Managing Director None
2859 Paces Ferry Road, Suite 2125
Atlanta, Georgia
John B. Withers Managing Director None
2859 Paces Ferry Road, Suite 2125
Atlanta, Georgia
</TABLE>
ITEM 30. Location of Accounts and Records
All account books and records not normally held by First Union National
Bank of North Carolina, the Custodian to the Registrant, are held by the
Registrant, in the offices of The Nottingham Company, Fund Accountant and
Administrator, North Carolina Shareholder Services, Transfer Agent to the
Registrant,. or by New Providence Capital Management, L.L.C., the Advisor
to the Registrant.
The address of The Nottingham Company is 105 North Washington Street, Post
Office Drawer 69, Rocky Mount, North Carolina 27802-0069. The address of
North Carolina Shareholder Services is 107 North Washington Street, Post
Office Box 4365, Rocky Mount, North Carolina 27803-0365. The address of New
Providence Capital Management, L.L.C. is 2859 Paces Ferry Road, Suite 2125,
Atlanta, Georgia 30339 . The address of First Union National Bank of North
Carolina is Two First Union Center, Charlotte, North Carolina 28288-1151.
ITEM 31. Management Services
Not Applicable
ITEM 32. Undertakings
The Registrant hereby undertakes to file a post-effective amendment to this
Registration Statement, using financial statements that need not be
certified, within four to six months following the effective date of this
Registration Statement.
The Registrant hereby undertakes to comply with Section 16(c) of the
Investment Company Act of 1940.
The 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.
NOTICE
A copy of the Declaration of Trust for New Providence Investment Trust is on
file with the Secretary of State of The Commonwealth of Massachusetts and notice
is hereby given that this Registration Statement has been executed on behalf of
the Trust by an officer of the Trust as an officer and by its Trustee as trustee
and not individually and the obligations of or arising out of this Registrations
Statement are not binding upon any of the Trustees, officers, or Shareholders
individually but are binding only upon the assets and property of the Trust.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Pre-Effective Amendment
No. 1 to Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of Rocky Mount, State of North Carolina on
the 25th day of September, 1997.
NEW PROVIDENCE INVESTMENT TRUST
/s/ Jack E. Brinson
----------------------------------
By: Jack E. Brinson
Trustee and Chief Executive Officer
/s/ C. Frank Watson III
----------------------------------
C. Frank Watson III
Secretary
/s/ J. Hope Reese
----------------------------------
J. Hope Reese
Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the date indicated.
/s/ Jack E. Brinson
- ---------------------------------------
Jack E. Brinson, Trustee
Dated: September 25, 1997
<PAGE>
NEW PROVIDENCE INVESTMENT TRUST
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
EXHIBIT 10 OPINION OF COUNSEL
EXHIBIT 11 CONSENT OF AUDITORS
EXHIBIT 13 INITIAL SHARE PURCHASE AGREEMENT
EXHIBIT 24 POWER OF ATTORNEY
EXHIBIT 1O
OPINION OF COUNSEL
September 25, 1997
New Providence Investment Trust
105 North Washington Street
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069
Ladies and Gentlemen:
This opinion is being delivered to you in connection with your Pre-effective
Amendment No. 1 to the Registration Statement (the "Registration Statement") on
Form N-lA under the Securities Act of 1933, as amended, under which you have
registered an indefinite number of shares (the "Shares") of beneficial interest,
relating to the New Providence Capital Growth Fund, pursuant to Rule 24f-2 under
the Investment Company Act of 1940, as amended.
We have made such inquiry of your officers and trustees and have examined such
corporate documents, records and certificates and other documents and such
questions of law as we have deemed necessary for the purposes of this opinion.
In rendering this opinion, we have relied, with your approval, as to all
questions of fact material to this opinion, upon certificates of public
officials and of your officers and have assumed, with your approval, that the
signatures on all documents examined by us are genuine, which facts we have not
independently verified.
Based upon and subject to the foregoing, we are of the opinion that the Shares,
when issued for valid consideration in the accordance with the Registration
Statement, will be legally and validly issued, fully paid and non-assessable.
With respect to the opinion stated above, we wish to point out that the
shareholders of a Massachusetts business trust may, under some circumstances, be
subject to assessment at the instance of creditors to pay the obligations of
such trust in the event that its assets are insufficient for the purpose.
We hereby consent to your filing this opinion as an exhibit to the Registration
Statement. In giving such consent, we do not thereby admit that we come within
the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder.
Very truly yours,
POYNER & SPRUILL, L.L.P.
EXHIBIT 11
CONSENT OF AUDITORS
INDEPENDENT AUDITORS' CONSENT
To the Board of Trustees of the NEW PROVIDENCE INVESTMENT TRUST And the
Shareholders of NEW PROVIDENCE CAPITAL GROWTH FUND:
We consent to the use in Pre-Effective Amendment No. 1 to Registration Statement
(No. 333-31359) of New Providence Capital Growth Fund of our report dated July
25, 1997, appearing in the Statement of Additional Information, which is a part
of such Registration Statement.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Pittsburgh, Pennsylvania
September 25, 1997
EXHIBIT 13
SUBSCRIPTION LETTER
Board of Trustees
New Providence Investment Trust
105 North Washington Street
Rocky Mount, North Carolina 27804
Gentlemen:
This letter will serve to advise you that New Providence Capital Management,
L.L.C. ("NPCM") hereby subscribes for the purchase of the initial organizational
shares of the New Providence Capital Growth Fund (the "Fund") in the amount of
$10.00 per share, for an aggregate investment of $100, and agrees to advance all
registration and organization costs of the Fund to the Trust upon the Trust's
demand. In connection with its subscription for shares of the Fund, NPCM
acknowledges that the shares have not been registered under federal or state
securities laws an that the transfer of such shares is restricted. NPCM further
represents that it is acquiring such shares for investment purposes and without
any intention to redeem or dispose of such shares. Payment for such shares shall
be made in cash prior to the effective date of the Trust's Registration
Statement with the SEC with respect to the Fund. As initial subscriber for
shares, NPCM hereby approves the actions of the Trust in the organization of the
Fund, including the approval of the Investment Advisory Agreement,
Administration Agreement, Plan of Distribution Pursuant to Rule 12b-1,
Distribution Agreement, and Multi-Class Plan.
If the terms and conditions as stated herein are acceptable to the Board of
Trustees, please so signify by having an authorized officer or trustee sign a
copy of this letter.
Very truly yours,
Date: July 11, 1997 NEW PROVIDENCE CAPITAL MANAGEMENT
By: /s/ John Donaldson
Title: President
Accepted this 11th day of July, 1997.
NEW PROVIDENCE INVESTMENT TRUST
By: /s/ C. Frank Watson III
Title: Secretary
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned officer and/or trustee of
New Providence Investment Trust hereby appoints J. Hope Reese and/or C. Frank
Watson, III, with full power of substitution, his true and lawful attorney to
execute in his name, place and stead and on his behalf a registration statement
on Form N-1A for the registration, pursuant to the Securities Act of 1933 and
the Investment Company Act of 1940, of said Trust's shares of beneficial
interest, and any and all amendments to said Registration Statement (including
post-effective amendments), and all instruments necessary or incidental in
connection therewith and to file the same with the U.S. Securities and Exchange
Commission. Said attorneys shall have full power and authority, with full power
of substitution, to do and perform in the name and on behalf of the undersigned
every act whatsoever requisite or desirable to be done in the premises, as fully
and to all intents and purposes as the undersigned might or could do, the
undersigned hereby ratifying and approving all such acts of such attorneys.
IN WITNESS WHEREOF, the undersigned has executed this instrument this 15th day
of September, 1997.
/s/ Frank P. Meadows III /s/ Jack E. Brinson
Witness Jack E. Brinson, Trustee and Chairman
