As filed with the Securities and Exchange Commission on September 29, 1998
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|
POST-EFFECTIVE AMENDMENT NO. 1
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |X|
AMENDMENT NO. 2
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:
Jane A. Kanter
Dechert Price & Rhoads
1775 Eye Street, N.W.
Washington, DC 20006-2401
It is proposed that this filing will become effective:
|X| Immediately upon filing pursuant |_| on __________, 1998 pursuant
to Rule 485(b), or to Rule 485(b), or
|_| 60 days after filing pursuant |_| on __________, 1998 pursuant
to Rule 485(a)(1), or to Rule 485(a)(1), or
|_| 75 days after filing pursuant |_| on __________, 1998 pursuant
to Rule 485(a)(2), or to Rule 485(a)(2)
________________________________________________________________________________
<PAGE>
PART A
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Cusip Number 648224103
PROSPECTUS NASDAQ Symbol NPCGX
________________________________________________________________________________
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 29, 1998.
<PAGE>
TABLE OF CONTENTS
PROSPECTUS SUMMARY............................................................ 2
FEE TABLE..................................................................... 3
FINANCIAL HIGHLIGHTS.......................................................... 4
INVESTMENT OBJECTIVE AND POLICIES............................................. 5
RISK FACTORS.................................................................. 7
INVESTMENT LIMITATIONS........................................................ 8
FEDERAL INCOME TAXES.......................................................... 8
DIVIDENDS AND DISTRIBUTIONS................................................... 9
HOW SHARES ARE VALUED........................................................ 10
HOW SHARES MAY BE PURCHASED.................................................. 10
HOW SHARES MAY BE REDEEMED................................................... 13
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 Reimbursements(1)
(as a percentage of average net assets)
Management Fees................................................0.75%(1)
12b-1 Fees.....................................................0.11%(2)
Total Other Expenses...........................................0.76%(1)
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Total Fund Operating Expenses..................................1.62%(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
------ -------
$16 $51
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 actual
operating expenses incurred by the Fund for the fiscal year ended May 31, 1998,
which, after fee waivers and expense reimbursements, were 1.62% of the average
daily net assets of the Fund. Absent such waivers and reimbursements, the
percentages for "Management Fees" and "Total Fund Operating Expenses" for the
fiscal year ended May 31, 1998, would have been 0.75% and 1.79%, respectively.
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
may be obtained at no charge by calling the Fund.
<PAGE>
FINANCIAL HIGHLIGHTS
The financial data included in the table below has been derived from audited
financial statements of the Fund. The financial data for the fiscal period ended
May 31, 1998, has been audited by Deloitte & Touche LLP, independent auditors,
whose report covering such period is incorporated by reference in the Statement
of Additional Information which is also incorporated by reference into this
prospectus. This information should be read in conjunction with the Fund's
latest audited annual financial statements and notes thereto, which are also
incorporated by reference into the Statement of Additional Information, a copy
of which may be obtained at no charge by calling the Fund. Further information
about the performance of the Fund is contained in the Annual Report of the Fund,
a copy of which may be obtained at no charge by calling the Fund.
(For a Share Outstanding Throughout the Period)
================================================================================
Period Ended
May 31,
1998*
================================================================================
Net Asset Value, Beginning of Period (a) $11.37
- --------------------------------------------------------------------------------
Income (loss) from investment operations
Net investment loss (0.08)
Net realized and unrealized gain
on investments 0.28
----
Total from investment operations 0.20
----
- --------------------------------------------------------------------------------
Distributions to shareholders
Distributions in excess of net investment income 0.00
----
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $11.57
======
- --------------------------------------------------------------------------------
Total return 1.76 %
====
================================================================================
Ratios/supplemental data
- --------------------------------------------------------------------------------
Net Assets, End of Period $23,163,777
===========
- --------------------------------------------------------------------------------
Ratio of expenses to average net assets
Before expense reimbursements and
waived fees 1.79 % (b)
After expense reimbursements and
waived fees 1.62 % (b)
- --------------------------------------------------------------------------------
Ratio of net investment loss to average net assets
Before expense reimbursements and
waived fees (1.41)% (b)
After expense reimbursements and
waived fees (1.24)% (b)
================================================================================
Portfolio turnover rate 57.27 %
================================================================================
Average commission rate paid (c) $0.0503
================================================================================
* For the period from September 29, 1997 (date of initial public investment) to
May 31, 1998.
(a) Includes undistributed net investment loss of $0.02 per share and
undistributed net realized gains and unrealized gains of $1.39 per share,
both of which were earned from July 11, 1997 (commencement of operations)
through September 29, 1997.
(b) Annualized.
(c) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
<PAGE>
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.
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 the time trading
closes on the New York Stock Exchange (currently 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 1-800-639-7768, 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
1-800-639-7768, 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 the 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 close of
trading (as defined above - see "How Shares Are Valued"), except for business
holidays, will redeem shares at the net asset value determined at that time.
Otherwise, your order will redeem shares as of close of trading (as defined
above - see "How Shares Are Valued") 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 the 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 1-800-639-7768, 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 redemption request 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 1-800-639-7768. 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. 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 aggregate
fee paid to the Advisor for the fiscal year ended May 31, 1998 was $95,545.
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
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
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 receives a
fee of $15 per shareholder per year with a minimum fee of $750 per month. For
the fiscal year ended May 31, 1998, the Transfer Agent received $7,606 in fees.
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 1-800-639-7768.
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.
<PAGE>
________________________________________________________________________________
NEW PROVIDENCE CAPITAL GROWTH FUND
A No Load Fund
________________________________________________________________________________
PROSPECTUS
September 29, 1998
New Providence Capital Growth Fund
105 North Washington Street
Post Office Box 69
Rocky Mount, North Carolina 27802-0069
1-800-639-7768
Investment Advisor
New Providence Capital Management, L.L.C.
2859 Paces Ferry Road, Suite 2125
Atlanta, Georgia 30339
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>
PART B
======
STATEMENT OF ADDITIONAL INFORMATION
NEW PROVIDENCE CAPITAL GROWTH FUND
September 29, 1998
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..........................................7
PORTFOLIO TRANSACTIONS.........................................................9
SPECIAL SHAREHOLDER SERVICES..................................................10
PURCHASE OF SHARES............................................................11
REDEMPTION OF SHARES..........................................................12
NET ASSET VALUE...............................................................12
ADDITIONAL TAX INFORMATION....................................................12
CAPITAL SHARES AND VOTING.....................................................14
CUSTODIAN.....................................................................14
INDEPENDENT AUDITORS..........................................................14
YEAR 2000.....................................................................14
APPENDIX A....................................................................15
This Statement of Additional Information (the "SAI") is meant to be read in
conjunction with the Prospectus dated September 29, 1998 and is incorporated by
reference in its entirety into the Prospectus. Because this SAI is not itself a
prospectus, no investment in shares of the Fund should be made solely upon the
information contained herein. The financial statements and notes contained in
the Annual Report are incorporated by reference into this SAI. Copies of the
Fund's Prospectus and Annual Report may be obtained at no charge by writing or
calling the Fund at the address and phone number shown above. 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 (*).
Name, Age, Position(s) with Principal Occupation(s)
Fund and/or Trust, and Address During Past 5 Years
- ------------------------------ -------------------
Jack E. Brinson, 65 President
Trustee Brinson Investment Co.;
1105 Panola Street President
Tarboro, North Carolina 27886 Brinson Chevrolet, Inc.
Tarboro, North Carolina
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
Atlanta, Georgia 30339 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
Julian G. Winters, 29 Legal and Compliance Director
Treasurer The Nottingham Company
105 North Washington Street (Administrator to the Fund)
Rocky Mount, North Carolina 27802 Rocky Mount, North Carolina,
since 1996; previously
Operations Manager
Tar Heel Medical, Inc.
Nashville, North Carolina
C. Frank Watson, III, 28 Chief Operating Officer
Secretary The Nottingham Company
105 North Washington Street (Administrator to the Fund)
Rocky Mount, North Carolina 27802 Rocky Mount, North Carolina
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.
- ------------------ -------------- ------------ -------------- ------------------
Estimated Total Compensation
Pension or Annual From Fund and Fund
Name Aggregate Retirement Benefits Upon Complex Paid to
of Person Compensation Benefits Retirement Directors
- ------------------ -------------- ------------ -------------- ------------------
- ------------------ -------------- ------------ -------------- ------------------
Jack E. Brinson $2,550 N/A N/A $5,100
- ------------------ -------------- ------------ -------------- ------------------
- ------------------ -------------- ------------ -------------- ------------------
Principal Holders of Voting Securities. As of September 22, 1998, 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 September 22, 1998.
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership* Percent
------------------- --------------------- -------
Faithfulness Ltd. 1,860,366 shares 92.515%**
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. For the period ended May 31, 1998, the Advisor
received $95,545 for such services. The Advisor has waived a portion of its fee
for the period ended May 31, 1998. The total fees waived amounted to $4,553.
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
Fund Accountant and Administrator. The Trust has entered into a Fund Accounting
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 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. For the period ended May 31, 1998, the
Adminstrator received $16,683 for such services.
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 will also provide certain accounting and
pricing services for the Fund.
Transfer Agent. The Trust 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 based upon a $15.00 fee per shareholder per year,
subject to a minimum fee of $750 per month. The address of the Transfer Agent is
107 North Washington Street, Post Office Box 4365, Rocky Mount, North Carolina
27803-0365. For the period ended May 31, 1998 the Transfer Agent received $7,606
for such services.
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. For the period
ended May 31,1998, the Fund incurred distribution and service fees under the
Plan in the amount of $15,009. This amount was substantially paid to sales
personnel for selling Fund shares and servicing shareholder accounts, with a
small amount paid for marketing expenses.
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.
For the period ended May 31, 1998, the Fund paid brokerage commissions of
$41,681, of which $33,352 was paid to the Distributor. Transactions in which the
Fund used the Distributor as broker involved 72.68% of the aggregate dollar
amount of transactions involving the payment of commissions and 80.02% of the
aggregate brokerage commissions paid 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.
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.
YEAR 2000
Like other mutual funds, the Fund and the service providers for the Fund rely
heavily on the reasonably consistent operation of their computer systems. Many
software programs and certain computer hardware in use today, cannot properly
process information after December 31, 1999 because of the method by which dates
are encoded and calculated in such programs and hardware. This problem, commonly
referred to as the "Year 2000 Issue," could, among other things, negatively
impact the processing of trades, the distribution of securities, the pricing of
securities and other investment-related and settlement activities. The Trust is
currently obtaining information with respect to the actions that have been taken
and the actions that are planned to be taken by each of its service providers to
prepare their computer systems for the Year 2000. While the Trust expects that
each of the Trust's service providers will have adapted their computer systems
to address the Year 2000 Issue, there can be no assurance that this will be the
case or that the steps taken by the Trust will be sufficient to avoid any
adverse impact to the Trust and each of its funds.
<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>
The New Providence Capital Growth Fund uses a disciplined approach to investing
that attempts to identify medium sized growth companies that are developing into
tomorrow's blue chip enterprises. Our goal is to build a focused portfolio of
companies that will provide consistent earnings growth above the market average
with stock valuations below the market average. As of 6/25/98, our portfolio had
met these guidelines: the average 5 year earnings growth rate of companies held
by the fund was approximately 40% (above the market average); the average
price/earnings ratio of these companies was 19 times 1998 earnings (below the
market average).
From 9/30/97 to 5/31/98, we under-performed the S&P 400 Index by 6.3% and the
S&P 500 Index by 13.5%. A large contributor to our below par short-term results
was our relative concentration in the oil services industry. These stocks were
negatively impacted by the large drop in oil prices which began last November. A
second contributor to our performance has been our focus on selecting smaller
sized companies--a group that we think offers more bargains than the rest of the
market. However, despite their cheap relative valuations, the performance of
small and mid-cap stocks was well below that of large-cap stocks during the past
year. We are currently focusing our investments in U.S. retail and housing
related stocks, two groups that we think have little exposure to Asian-related
problems.
New Providence will continue to follow our disciplined approach to selecting
reasonably priced growth companies and hope for improved relative performance in
the future. Thanks for the opportunity to serve you.
New Providence Capital Management, L.L.C.
Atlanta, Georgia
<PAGE>
NEW PROVIDENCE CAPITAL GROWTH FUND
Performance Update - $10,000 Investment
For the period from September 29, 1997 (Date of Initial Public Offering)
to May 31, 1998
New Providence Lipper Growth S&P 500 Total
Capital Growth Fund Fund Index Return Index
9/29/97 10,000 10,000 10,000
10/31/97 9,692 9,677 9,605
11/30/97 9,683 9,900 10,049
12/31/97 9,771 10,067 10,222
1/31/98 9,490 10,134 10,335
2/28/98 10,440 10,910 11,080
3/31/98 10,756 11,377 11,648
4/30/98 10,598 11,498 11,765
5/31/98 10,176 11,215 11,563
This graph depicts the performance of the New Providence Capital Growth Fund
versus the Lipper Growth Fund Index and the S&P 500 Total Return Index. It is
important to note that the New Providence Capital Growth Fund is a
professionally managed mutual fund while the indexes are not available for
investment and are unmanaged. The comparison is shown for illustrative purposes
only.
Cumulative Total Return
- -----------------------
Since IPO
- -----------------------
1.76%
- -----------------------
The graph assumes an initial $10,000 investment at September 29, 1997. All
dividends and distributions are reinvested.
At May 31, 1998, the New Providence Capital Growth Fund would have grown to
$10,176 - total investment return of 1.76% since September 29, 1997.
At May 31, 1998, a similar investment in the Lipper Growth Fund Index would have
grown to $11,215 - total investment return of 12.15%; and the S&P 500 Total
Return Index would have grown to $11,563 - total investment return of 15.63%,
since September 29, 1997.
Past performance is not a guarantee of future results. A mutual fund's share
price and investment return will vary with market conditions, and the principal
value of shares, when redeemed, may be worth more or less than the original
cost. Average annual returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming
reinvestments of dividends.
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
NEW PROVIDENCE CAPITAL GROWTH FUND
PORTFOLIO OF INVESTMENTS
May 31, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - 96.84%
Beverages - 1.49%
(a) Canandaigua Brands, Inc. ............................................. 7,500 $ 345,937
-----------
Computers - 5.73%
Compaq Computer Corporation .......................................... 31,800 870,525
(a) Sun Microsystems, Inc. ............................................... 11,400 456,713
-----------
1,327,238
-----------
Electronics - 6.26%
(a) Lexmark International Group, Inc. .................................... 11,300 627,150
(a) SCI Systems, Inc. .................................................... 24,100 822,412
-----------
1,449,562
-----------
Entertainment - 3.69%
(a) Rio Hotel and Casino, Inc. ........................................... 39,300 854,775
-----------
Financial Services - 6.32%
Capital One Financial Corporation .................................... 9,300 928,256
SunAmerica Inc. ...................................................... 11,000 534,875
-----------
1,463,131
-----------
Furniture & Home Appliances - 3.63%
Ethan Allen Interiors Inc. ........................................... 16,700 840,219
-----------
Holding Companies - Diversified - 2.74%
(a) Anixter International Inc. ........................................... 31,500 633,938
-----------
Homebuilders - 2.08%
Kaufman and Broad Home Corporation ................................... 18,800 482,925
-----------
Manufactured Housing - 3.17%
Oakwood Homes Corporation ............................................ 27,000 734,063
-----------
Oil & Gas - Equipment & Services - 13.97%
(a) BJ Services Company .................................................. 19,000 621,062
ENSCO International Incorporated ..................................... 35,950 907,737
Tidewater, Inc. ...................................................... 12,100 459,800
(a) EVI Weatherford, Inc. ................................................ 13,870 701,302
(a) Noble Drilling Corporation ........................................... 18,500 545,750
-----------
3,235,651
-----------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
NEW PROVIDENCE CAPITAL GROWTH FUND
PORTFOLIO OF INVESTMENTS
May 31, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Retail - Apparel - 15.22%
Intimate Brands, Inc. ................................................ 17,300 $ 496,294
Ross Stores, Inc. .................................................... 26,800 1,182,550
(a) The Gymboree Corporation ............................................. 34,300 542,369
The TJX Companies, Inc. .............................................. 27,900 1,304,325
-----------
3,525,538
-----------
Retail - Automotive Parts - 5.22%
(a) AutoZone, Inc. ....................................................... 36,400 1,210,300
-----------
Retail - Department Stores - 3.17%
(a) Proffitt's, Inc. ..................................................... 18,700 733,975
-----------
Retail - Specialty Line - 5.25%
(a) Office Depot, Inc. ................................................... 41,200 1,215,400
-----------
Telecommunications - 2.38%
Century Telephone Enterprises, Inc. .................................. 12,450 551,691
-----------
Transportation - Rail - 3.22%
Kansas City Southern Industries, Inc. ................................ 17,600 745,800
-----------
Transportation - Air - 8.70%
(a) Alaska Air Group, Inc. ............................................... 21,400 991,087
Southwest Airlines Co. ............................................... 38,400 1,024,800
-----------
2,015,887
-----------
Textiles - 4.60%
(a) Nautica Enterprises, Inc. ............................................ 36,400 1,064,700
-----------
Total Common Stocks (Cost $20,994,911) ............................... 22,430,730
-----------
INVESTMENT COMPANY - 3.10%
Evergreen Money Market Institutional Money
Market Fund Institutional Service Shares
(Cost $718,294) ...................................................... 718,294 718,294
-----------
Total Value of Investments (Cost $21,713,205 (b)) ................................ 99.94% $23,149,024
Other Assets Less Liabilities .................................................... 0.06% 14,753
------ -----------
Net Assets ................................................................ 100.00% $23,163,777
====== ===========
(a) Non-income producing investment.
(b) Aggregate cost for financial reporting and federal income tax
purposes is the same. Unrealized appreciation (depreciation) of
investments for financial reporting and federal income tax purposes
is as follows:
Unrealized appreciation ........................................................................... $2,829,484
Unrealized depreciation ........................................................................... (1,393,665)
----------
Net unrealized appreciation ....................................................... $1,435,819
==========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
NEW PROVIDENCE CAPITAL GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
May 31, 1998
ASSETS
Investments, at value (cost $21,713,205) ........................................................ $23,149,024
Cash ............................................................................................ 250
Income receivable ............................................................................... 4,865
Receivable for fund shares sold ................................................................. 584
Deferred organization expenses, net (note 4) .................................................... 27,722
-----------
Total assets ............................................................................... 23,182,445
-----------
LIABILITIES
Accrued expenses ................................................................................ 18,668
-----------
NET ASSETS
(applicable to 2,001,835 shares outstanding; unlimited
shares of no par value beneficial interest authorized) ......................................... $23,163,777
===========
NET ASSET VALUE, REDEMPTION AND OFFERING PRICE PER SHARE
($23,163,777 / 2,001,835 shares) ................................................................ $ 11.57
===========
NET ASSETS CONSIST OF
Paid-in capital ................................................................................. $21,675,010
Undistributed net realized gain on investments .................................................. 52,948
Net unrealized appreciation on investments ...................................................... 1,435,819
-----------
$23,163,777
===========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
NEW PROVIDENCE CAPITAL GROWTH FUND
STATEMENT OF OPERATIONS
For the Period from July 11, 1997
(commencement of operations)
to May 31, 1998
INVESTMENT LOSS
Income
Interest .................................................................................... $ 17,260
Dividends ................................................................................... 45,821
-----------
Total income ........................................................................... 63,081
-----------
Expenses
Investment advisory fees (note 2) ........................................................... 100,098
Fund administration fees (note 2) ........................................................... 16,683
Distribution fees (note 3) .................................................................. 33,366
Custody fees ................................................................................ 3,202
Registration and filing administration fees (note 2) ........................................ 2,812
Fund accounting fees (note 2) ............................................................... 24,155
Audit fees .................................................................................. 9,706
Legal fees .................................................................................. 7,648
Securities pricing fees ..................................................................... 1,401
Shareholder recordkeeping fees .............................................................. 7,606
Other fees .................................................................................. 1,798
Shareholder servicing expenses .............................................................. 1,682
Registration and filing expenses ............................................................ 18,944
Printing expenses ........................................................................... 2,537
Amortization of deferred organization expenses (note 4) ..................................... 4,779
Trustee fees and meeting expenses ........................................................... 2,633
Other operating expenses .................................................................... 3,054
-----------
Total expenses ......................................................................... 242,104
-----------
Less:
Investment advisory fees waived (note 2) ......................................... (4,553)
Distribution fees waived (note 3) ................................................ (18,357)
-----------
Net expenses ........................................................................... 219,194
-----------
Net investment loss .............................................................. (156,113)
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from investment transactions ................................................... 209,061
Increase in unrealized appreciation on investments ............................................... 1,435,819
-----------
Net realized and unrealized gain on investments ............................................. 1,644,880
-----------
Net increase in net assets resulting from operations ................................... $ 1,488,767
===========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
NEW PROVIDENCE CAPITAL GROWTH FUND
STATEMENTS OF CHANGES IN NET ASSETS
For the Period from July 11, 1997
(commencement of operations)
to May 31, 1998
INCREASE IN NET ASSETS
Operations
Net investment loss .............................................................................. $ (156,113)
Net realized gain from investment transactions ................................................... 209,061
Increase in unrealized appreciation on investments ............................................... 1,435,819
------------
Net increase in net assets resulting from operations ........................................ 1,488,767
------------
Capital share transactions
Increase in net assets resulting from capital share transactions (a) ............................. 21,675,010
------------
Total increase in net assets ........................................................... 23,163,777
NET ASSETS
Beginning of period .................................................................................. 0
------------
End of period ........................................................................................ $ 23,163,777
============
(a) A summary of capital share activity follows:
-----------------------------------
Shares Value
-----------------------------------
Shares sold ....................................................................... 2,002,953 $ 21,687,588
Shares redeemed ................................................................... (1,118) (12,578)
--------- ------------
Net increase ................................................................. 2,001,835 $ 21,675,010
========= ============
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
NEW PROVIDENCE CAPITAL GROWTH FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
For the Period from September 29, 1997
(date of initial public offering)
to May 31, 1998
Net asset value, beginning of period (a) ........................................................... $ 11.37
Income (loss) from investment operations
Net investment loss ..................................................................... (0.08)
Net realized and unrealized gain on investments ......................................... 0.28
------------
Total from investment operations .................................................... 0.20
------------
Net asset value, end of period ..................................................................... $ 11.57
============
Total return ....................................................................................... 1.76%
============
Ratios/supplemental data
Net assets, end of period .................................................................... $ 23,163,777
============
Ratio of expenses to average net assets
Before expense reimbursements and waived fees ................................................. 1.79 % (b)
After expense reimbursements and waived fees .................................................. 1.62 % (b)
Ratio of net investment loss to average net assets
Before expense reimbursements and waived fees ................................................. (1.41)% (b)
After expense reimbursements and waived fees .................................................. (1.24)% (b)
Portfolio turnover rate ............................................................................ 57.27 %
Average broker commissions per share (c) ........................................................... $0.0503
(a) Includes undistributed net investment loss of $0.02 per share and undistributed net realized gains and unrealized gains
of $1.39 per share, both of which were earned from July 11, 1997 (commencement of operations) through September 29, 1997.
(b) Annualized.
(c) Represents total commission paid on portfolio securities divided by total portfolio shares purchased or sold on which
commissions were charged.
See accompanying notes to financial statements
</TABLE>
<PAGE>
NEW PROVIDENCE CAPITAL GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
May 31, 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
The New Providence Capital Growth Fund (the "Fund") is a diversified
series of shares of beneficial interest of The New Providence
Investment Trust (the "Trust"). The Trust, an open-ended investment
company, was organized on July 9, 1997 as a Massachusetts Business
Trust and is registered under the Investment Company Act of 1940, as
amended. 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 investing
primarily in a portfolio of equity securities traded on domestic U.S.
exchanges or on over-the-counter markets. The Fund began operations on
July 11, 1997. The Fund had a net investment loss of $19,330, or $0.02
per share, and net realized and unrealized gains of $1,407,769, or
$1.39 per share, from the commencement of operations through the date
of initial public offering, or September 29, 1997. During this period,
there were no distributions of net investment income or net realized
gains. As of May 31, 1998, one shareholder of record owned 92.7% of the
outstanding shares of the Fund. The following is a summary of
significant accounting policies followed by the Fund.
A. Security Valuation - The Fund's investments in securities are
carried at value. Securities listed on an exchange or quoted on a
national market system are valued at the last sales price as of
4:00 p.m. New York time on the day of valuation. Other securities
traded in the over-the-counter market and listed securities for
which no sale was reported on that date are valued at the most
recent bid price. Securities for which market quotations are not
readily available, if any, are valued by using an independent
pricing service or by following procedures approved by the Board
of Trustees. Short-term investments are valued at cost which
approximates value.
B. Federal Income Taxes - The Fund is considered a personal holding
company as defined under Section 542 of the Internal Revenue Code
since 50% of the value of the Fund's shares were owned directly
or indirectly by five or fewer individuals at certain times
during the last half of the year. As a personal holding company,
the Fund is subject to federal income taxes on undistributed
personal holding company income at the maximum individual income
tax rate. No provision has been made for federal income taxes
since substantially all taxable income has been distributed to
shareholders. It is the policy of the Fund to comply with the
provisions of the Internal Revenue Code applicable to regulated
investment companies and to make sufficient distributions of
taxable income to relieve it from all federal income taxes.
C. Investment Transactions - Investment transactions are recorded on
the trade date. Realized gains and losses are determined using
the specific identification cost method. Interest income is
recorded daily on an accrual basis. Dividend income is recorded
on the ex-dividend date.
D. Distributions to Shareholders - The Fund may declare dividends
quarterly, payable in March, June, September and December, on a
date selected by the Trust's Trustees. In addition, distributions
may be made annually in December out of net realized gains
through October 31 of that year. Distributions to shareholders
are recorded on the ex-dividend date. The Fund may make a
supplemental distribution subsequent to the end of its fiscal
year ending May 31.
E. Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
amounts of assets, liabilities, expenses and revenues reported in
the financial statements. Actual results could differ from those
estimated.
(Continued)
<PAGE>
NEW PROVIDENCE CAPITAL GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
May 31, 1998
NOTE 2 - INVESTMENT ADVISORY FEE AND OTHER RELATED PARTY TRANSACTIONS
Pursuant to an investment advisory agreement, New Providence Capital
Management, Inc. (the "Advisor") provides the Fund with a continuous
program of supervision of the Fund's assets, including the portfolio,
and furnishes advice and recommendations with respect to investments,
investment policies and the purchase and sale of securities. As
compensation for its services, the Advisor receives a fee at the annual
rate of 0.75% of the Fund's average daily net assets. The Advisor
intends to voluntarily waive a portion of its fee and reimburse
expenses of the Fund to limit total Fund operating expenses to 1.75% of
the average daily net assets of the Fund. There can be no assurance
that the foregoing voluntary fee waivers or reimbursements will
continue. The Advisor has voluntarily waived a portion of its fee
amounting to $4,553 for the period ended May 31, 1998.
The Fund's administrator, The Nottingham Company (the "Administrator"),
provides administrative services to and is generally responsible for
the overall management and day-to-day operations of the Fund pursuant
to an accounting and administrative agreement with the Trust. As
compensation for its services, the Administrator receives a fee at the
annual rate of 0.125% of the Fund's first $50 million of average daily
net assets, 0.10% of the next $50 million of average daily net assets,
and 0.075% of average daily net assets over $100 million. The
Administrator also receives a monthly fee of $2,250 for accounting and
recordkeeping services. Additionally, the Administrator charges the
Fund for servicing of shareholder accounts and registration of the
Fund's shares. The contract with the Administrator provides that the
aggregate fees for the aforementioned administration, accounting and
recordkeeping services shall not be less than $50,000 per year. The
Administrator also charges the Fund for certain expenses involved with
the daily valuation of portfolio securities.
Certain Trustees and officers of the Trust are also officers of the
Advisor, the distributor or the Administrator.
NOTE 3 - DISTRIBUTION AND SERVICE FEES
The Board of Trustees, including a majority of the Trustees who are not
"interested persons" of the Trust as defined in the Investment Company
Act of 1940 (the "Act"), adopted a distribution plan pursuant to Rule
12b-1 of the Act (the "Plan"). The Act regulates the manner in which a
regulated investment company may assume expenses of distributing and
promoting the sales of its shares and servicing of its shareholder
accounts.
The Plan provides that the Fund may incur certain expenses, which may
not exceed 0.25% per annum of the Fund's average daily net assets for
each year elapsed subsequent to adoption of the Plan, for payment to
the Distributor and others for items such as advertising expenses,
selling expenses, commissions, travel or other expenses reasonably
intended to result in sales of shares of the Fund or support servicing
of shareholder accounts. Expenditures incurred as service fees may not
exceed 0.25% per annum of the Fund's average daily net assets. The Fund
waived $18,357 of such expenses under the Plan for the period ended May
31, 1998.
(Continued)
<PAGE>
NEW PROVIDENCE CAPITAL GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
May 31, 1998
NOTE 4 - DEFERRED ORGANIZATION EXPENSES
All expenses of the Fund incurred in connection with its organization
and the registration of its shares have been assumed by the Fund. The
organization expenses are being amortized over a period of sixty
months. Investors purchasing shares of the Fund bear such expenses only
as they are amortized against the Fund's investment income.
NOTE 5 - PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments, other than short-term investments,
aggregated $29,705,651 and $8,919,801, respectively, for the period
ended May 31, 1998.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees of The New Providence Investment Trust and Shareholders
of New Providence Capital Growth Fund:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of New Providence Capital Growth Fund as of May
31, 1998, and the related statements of operations and changes in net assets for
the period from July 11, 1997 (commencement of operations) to May 31, 1998, and
financial highlights for the period presented. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of the securities owned as of May 31, 1998 by
correspondence with the custodian and brokers; where replies were not received,
we performed other auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of New Providence
Capital Growth Fund as of May 31, 1998, the results of its operations and the
changes in its net assets for the period from July 11, 1997 to May 31, 1998, and
its financial highlights for the period presented, in conformity with generally
accepted accounting principles.
Deloitte & Touche LLP
Pittsburgh, Pennsylvania
June 12, 1998
<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
(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) (a) 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
(b) Form of Fund Accounting and Compliance Administration Agreement between
the Registrant and The Nottingham Company, as Administrator - Enclosed,
Exhibit 9
(c) Form of Dividend Disbursing and Transfer Agent Agreement between the
Registrant and NC Shareholder Services,LLC, as Transfer Agent- Enclosed,
Exhibit 9
(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 - Incorporated by reference; filed
on 9/25/97
(14) Not applicable
(15) Form of Distribution Plan- Incorporated by reference; filed 07/16/97
(16) Computation of Performance - Enclosed, Exhibit 16
(17) Financial Data Schedule - Enclosed, Exhibit 17
(18) Not applicable
(19) Copies of Powers of Attorney - Incorporated by reference; filed on 9/25/97
ITEM 25. Persons Controlled by or Under Common Control with Registrant
Not applicable
ITEM 26. Number of Holders of Securities
As of September 23, 1998, the number of record holders of each class
of securities of Registrant was as follows:
Number of
Title of Class Record Holders
============== ==============
New Providence Capital Growth Fund 72
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.
(b)
Name and Principal Position(s) and Offices Position(s) and Offices
Business Address with Underwriter with Registrant
================== ======================= =======================
John K. Donaldson, President None
2859 Paces Ferry Road
Suite 2125
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
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 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 Post-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 29th day of September, 1998.
NEW PROVIDENCE INVESTMENT TRUST
/s/ C. Frank Watson, III
___________________________
By: C. Frank Watson, III
Secretary
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.
*
_______________________________________
Jack E. Brinson, Trustee
/s/ C. Frank Watson, III
____________________________
By: C. Frank Watson, III
Secretary
Dated: September 29, 1998
<PAGE>
NEW PROVIDENCE INVESTMENT TRUST
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
============== ===========
EXHIBIT 9 FUND ACCOUNTING AND COMPLIANCE ADMINISTRATION AGREEMENT
DIVIDEND DISBURSING AND TRANSFER AGENT AGREEMENT
EXHIBIT 10 OPINION AND CONSENT OF COUNSEL
EXHIBIT 11 CONSENT OF AUDITORS
EXHIBIT 16 COMPUTATION OF PERFORMANCE
EXHIBIT 17 FINANCIAL DATA SCHEDULE
EXHIBIT 9
=========
FUND ACCOUNTING
AND COMPLIANCE ADMINISTRATION
AGREEMENT
THIS AGREEMENT, made and entered into as of the 9th day of SEPTEMBER, 1998, by
and between NEW PROVIDENCE INVESTMENT TRUST, a Massachusetts business trust (the
"Trust"), and THE NOTTINGHAM COMPANY, INC., a North Carolina corporation (the
"Administrator").
WHEREAS, the Trust is an open-end management investment company of the series
type which is registered under the Investment Company Act of 1940 (the "1940
Act"); and
WHEREAS, the Administrator is in the business of providing administrative
services to investment companies.
NOW THEREFORE, the Trust and the Administrator do mutually promise and agree as
follows:
1. Employment. The Trust hereby employs Administrator, The Nottingham Company
("TNC"), to act as fund accountant and fund administrator for each Fund of
the Trust. Administrator, at its own expense, shall render the services and
assume the obligations herein set forth subject to being compensated
therefore as herein provided.
2. Delivery of Documents. The Trust has furnished the Administrator with
copies properly certified or authenticated of each of the following:
a) The Trust's Declaration of Trust, as filed with the State of
Massachusetts (such Declaration, as presently in effect and as it
shall from time to time be amended, is herein called the
"Declaration");
b) The Trust's By-Laws (such By-Laws, as presently in effect and as they
shall from time to time be amended, are herein called the "By-Laws");
c) Resolutions of the Trust's Board of Trustees authorizing the
appointment of the Administrator and approving this Agreement; and
d) The Trust's Registration Statement on Form N-1A under the 1940 Act and
under the Securities Act of 1933 as amended, (the "1933 Act"),
including all exhibits, relating to shares of beneficial interest of,
and containing the Prospectus of, each Fund of the Trust (herein
called the "Shares") as filed with the Securities and Exchange
Commission and all amendments thereto.
The Trust will furnish the Administrator with copies, properly certified or
authenticated, of all amendments of or supplements to the foregoing.
3. Duties of the Administrator. Subject to the policies and direction of the
Trust's Board of Trustees, the Administrator will provide a continuous
executive management program and day to day supervision for each of the
Trust's Funds. Services to be provided shall be in accordance with the
Trust's organizational and registration documents as listed in paragraph 2
hereof and with the Prospectus of each Fund of the Trust. The Administrator
further agrees that it:
a) Will conform with all applicable Rules and Regulations of the
Securities and Exchange Commission and will in addition, conduct its
activities under this Agreement in accordance with regulations of any
other Federal and State agencies which may now or in the future have
jurisdiction over its activities;
b) Will maintain, except as may be required to be maintained by third
parties hired by the Trust under Rule 31a-3 of the 1940 Act, the
account books and records of the Trust and each Fund of the Trust as
required by Rule 31a-1 of the 1940 Act and will preserve such records
in accordance with Rule 31a-2 of the 1940 Act;
c) Will provide, at its expense the necessary non-executive personnel and
data processing equipment and software to perform the Portfolio
Accounting Services, Expense Accrual and Payment Services, Fund
Valuation and Financial Reporting Services, Tax Accounting Services,
Compliance Control Services, Registration Services, SEC Filing
Services, and Proxy Material Services shown on Exhibit A hereof;
d) Will provide, at its expense, certain executive personnel for the
Trust as may be agreed upon from time to time with the Board of
Trustees; and
e) Will provide all office space and general office equipment necessary
for the activities of the Trust except as may be provided by third
parties pursuant to separate agreements with the Trust.
Notwithstanding anything contained in this Agreement to the contrary, the
Administrator (including its directors, officers, employees and agents) shall
not be required to perform any of the duties of, assume any of the obligations
or expenses of, or be liable for any of the acts or omissions of, any investment
advisor of a Fund of the Trust or other third party subject to separate
agreements with the Trust. The Administrator shall not be responsible hereunder
for the administration of the Code of Ethics of the Trust which shall be under
the responsibility of the investment advisors, except insofar as the Code of
Ethics applies to the personnel of the Administrator. It is the express intent
of the parties hereto that the Administrator shall not have control over or be
responsible for the placement, investment or reinvestment of the assets of any
Fund of the Trust. The Administrator may from time to time, subject to the
approval of the Trustees (other than with respect to TNC), obtain at its own
expense the services of consultants or other third parties to perform part or
all of its duties hereunder, and such parties may be affiliates of the
Administrator.
4. Services Not Exclusive. The management and administrative services
furnished by the Administrator hereunder are not to be deemed exclusive,
and the Administrator shall be free to furnish similar services to others
so long as its services under this Agreement are not impaired thereby.
5. Books and Records. In compliance with the requirements of Rule 31a-3 under
the 1940 Act, the Administrator hereby agrees that all records which it
maintains for the Trust are the property of the Trust and further agrees to
surrender promptly to the Trust any of such records upon the Trust's
request.
6. Expenses. During the term of this Agreement, the Administrator will pay all
expenses incurred by it in connection with the performance of its
obligations under this Agreement.
Notwithstanding the foregoing, the Trust shall pay the expenses and costs
of the following:
a) Taxes;
b) Brokerage fees and commissions with regard to portfolio transaction of
the Funds;
c) Interest charges, fees and expenses of the custodian of the Funds'
portfolio securities;
d) Fees and expenses of the Trust's dividend disbursing and transfer
agent;
e) Fees and expenses of the Trust's fund accounting agent and
administrator, in accordance with paragraph 7 herein;
f) Costs, as may be allocable to and agreed upon in advance by the
Trustees and the Administrator, of all non-executive and clerical
personnel and all data processing equipment and software in connection
with the provision of fund accounting and recordkeeping services
functions as contemplated herein;
g) Auditing and legal expenses of the Trust;
h) Cost of maintenance of the Trust's existence as a legal entity;
i) Cost of special forms, stationery and telephone services (but not
telephone equipment) for the Trust;
j) Compensation of Independent Trustees who are not interested persons of
the Trust as that term is defined by law;
k) Costs of Trust meetings;
l) Federal and State registration fees and expenses;
m) Costs of setting in type, printing and mailing Prospectuses, reports
and notices to existing shareholders;
n) The Advisory fees payable to each Funds' Investment Advisor;
o) Direct out-of-pocket costs in connection with Trust activities, such
as the costs of long distance telephone and wire charges, postage and
the printing of special forms and stationery, copying charges,
financial publications used in connection with Trust activities, etc.,
and
p) Other actual out-of-pocket expenses of the Administrator as may be
agreed upon in writing from time to time by the Administrator and the
Trustees.
7. Compensation. For the services provided and the expenses assumed by the
Administrator pursuant to this Agreement, the Trust will pay the
Administrator and the Administrator will accept as full compensation the
administrative fees and expenses as set forth on Exhibit B attached hereto.
Special projects, not included herein and requested in writing by the
Trustees, shall be completed by the Administrator and invoiced to the Trust
as mutually agreed upon.
8.(a)Limitation of Liability. The Administrator shall not be liable for any
loss, damage or liability related to or resulting from the placement,
investment or reinvestment of assets in any Fund of the Trust or the acts
or omissions of any Fund's investment advisor or any other third party
subject to separate agreements with the Trust. Further, the Administrator
shall not be liable for any error of judgment or mistake of law or for any
loss or damage suffered by the Trust in connection with the performance of
this Agreement or any agreement with a third party, except a loss resulting
directly from (i) a breach of fiduciary duty on the part of the
Administrator with respect to the receipt of compensation for services; or
(ii) willful misfeasance, bad faith or gross negligence on the part of the
Administrator in the performance of its duties or from reckless disregard
by it of its duties under this Agreement.
8.(b)Indemnification of Administrator. Subject to the limitations set forth in
this Subsection 8(b), the Trust shall indemnify, defend and hold harmless
(from the assets of the Fund or Funds to which the conduct in question
relates) the Administrator against all loss, damage and liability,
including but not limited to amounts paid in satisfaction of judgments, in
compromise or as fines and penalties, and expenses, including reasonable
accountants' and counsel fees, incurred by the Administrator in connection
with the defense or disposition of any action, suit or other proceeding,
whether civil or criminal, before any court or administrative or
legislative body, related to or resulting from this Agreement or the
performance of services hereunder, except with respect to any matter as to
which it has been determined that the loss, damage or liability is a direct
result of (i) a breach of fiduciary duty on the part of the Administrator
with respect to the receipt of compensation for services; or (ii) willful
misfeasance, bad faith or gross negligence on the part of the Administrator
in the performance of its duties or from reckless disregard by it of its
duties under this Agreement (either and both of the conduct described in
clauses (i) and (ii) above being referred to hereinafter as "Disabling
Conduct"). A determination that the Administrator is entitled to
indemnification may be made by (i) a final decision on the merits by a
court or other body before whom the proceeding was brought that the
Administrator was not liable by reason of Disabling Conduct, (ii) dismissal
of a court action or an administrative proceeding against the Administrator
for insufficiency of evidence of Disabling Conduct, or (iii) a reasonable
determination, based upon a review of the facts, that the Administrator was
not liable by reason of Disabling Conduct by, (a) vote of a majority of a
quorum of Trustees who are neither "interested persons" of the Trust as the
quoted phrase is defined in Section 2(a)(19) of the 1940 Act nor parties to
the action, suit or other proceeding on the same or similar grounds that is
then or has been pending or threatened (such quorum of such Trustees being
referred to hereinafter as the "Independent Trustees"), or (b) an
independent legal counsel in a written opinion. Expenses, including
accountants' and counsel fees so incurred by the Administrator (but
excluding amounts paid in satisfaction of judgments, in compromise or as
fines or penalties), shall be paid from time to time by the Fund or Funds
to which the conduct in question related in advance of the final
disposition of any such action, suit or proceeding; provided, that the
Administrator shall have undertaken to repay the amounts so paid unless it
is ultimately determined that it is entitled to indemnification of such
expenses under this Subsection 8(b) and if (i) the Administrator shall have
provided security for such undertaking, (ii) the Trust shall be insured
against losses arising by reason of any lawful advances, or (iii) a
majority of the Independent Trustees, or an independent legal counsel in a
written opinion, shall have determined, based on a review of readily
available facts (as opposed to a full trial-type inquiry), that there is
reason to believe that the Administrator ultimately will be entitled to
indemnification hereunder.
As to any matter disposed of by a compromise payment by the Administrator
referred to in this Subsection 8(b), pursuant to a consent decree or
otherwise, no such indemnification either for said payment or for any other
expenses shall be provided unless such indemnification shall be approved
(i) by a majority of the Independent Trustees or (ii) by an independent
legal counsel in a written opinion. Approval by the Independent Trustees
pursuant to clause (i) shall not prevent the recovery from the
Administrator of any amount paid to the Administrator in accordance with
either of such clauses as indemnification of the Administrator is
subsequently adjudicated by a court of competent jurisdiction not to have
acted in good faith in the reasonable belief that the Administrator's
action was in or not opposed to the best interests of the Trust or to have
been liable to the Trust or its Shareholders by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in its conduct under the Agreement.
The right of indemnification provided by this Subsection 8(b) shall not be
exclusive of or affect any of the rights to which the Administrator may be
entitled. Nothing contained in this Subsection 8(b) shall affect any rights
to indemnification to which Trustees, officers or other personnel of the
Trust, and other persons may be entitled by contract or otherwise under
law, nor the power of the Trust to purchase and maintain liability
insurance on behalf of any such person.
The Board of Trustees of the Trust shall take all such action as may be
necessary and appropriate to authorize the Trust hereunder to pay the
indemnification required by this Subsection 8(b) including, without
limitation, to the extent needed, to determine whether the Administrator is
entitled to indemnification hereunder and the reasonable amount of any
indemnity due it hereunder, or employ independent legal counsel for that
purpose.
8.(c)The provisions contained in Section 8 shall survive the expiration or
other termination of this Agreement, shall be deemed to include and protect
the Administrator and its directors, officers, employees and agents and
shall inure to the benefit of its/their respective successors, assigns and
personal representatives.
9. Duration and Termination. This Agreement shall become effective as of the
date hereof and shall thereafter continue in effect unless terminated as
herein provided. This Agreement may be terminated by either party hereto
(without penalty) at any time by giving not less than 60 days' prior
written notice to the other party hereto. Upon termination of this
Agreement, the Trust shall pay to TNC such compensation as may be due as of
the date of such termination, and shall likewise reimburse TNC for any
out-of-pocket expenses and disbursements reasonably incurred by TNC to such
date.
10. Amendment. This Agreement may be amended by mutual written consent of the
parties. If, at any time during the existence of this Agreement, the Trust
deems it necessary or advisable in the best interests of the Trust that any
amendment of this Agreement be made in order to comply with the
recommendations or requirements of the Securities and Exchange Commission
or state regulatory agencies or other governmental authority, or to obtain
any advantage under state or federal laws, and shall notify the
Administrator of the form of Amendment which it deems necessary or
advisable and the reasons therefor, and if the Administrator declines to
assent to such amendment, the Trust may terminate this Agreement forthwith.
11. Notice. Any notice that is required to be given by the parties to each
other under the terms of this Agreement shall be in writing, addressed or
delivered, or mailed postpaid to the other party at the principal place of
business of such party.
12. Construction. This Agreement shall be governed and enforced in accordance
with the laws of the State of North Carolina. If any provision of this
Agreement, or portion thereof, shall be determined to be void or
unenforceable by any court of competent jurisdiction, then such
determination shall not affect any other provision of this Agreement, or
portion thereof, all of which other provisions and portions thereof shall
remain in full force and effect. If any provision of this Agreement, or
portion thereof, is capable of two interpretations, one of which would
render the provision, or portion thereof, void and the other of which would
render the provision, or portion thereof, valid, then the provision, or
portion thereof, shall have the meaning which renders it valid.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed
by their duly authorized officers effective as of the date indicated above.
NEW PROVIDENCE INVESTMENT TRUST
By: ____________________________ (SEAL)
THE NOTTINGHAM COMPANY, INC.
By: ____________________________ (SEAL)
<PAGE>
Exhibit A
FUND ACCOUNTING AND RECORDKEEPING SERVICES
Portfolio Accounting Services:
(1) Maintain portfolio records using security trade information communicated
from the investment manager on a timely basis.
(2) For each valuation date, obtain prices from a pricing source approved by
the Board of Trustees and apply those prices to the portfolio positions.
For those securities where market quotations are not readily available, the
Board of Trustees shall approve, in good faith, the method for determining
the fair market value for such securities.
(3) Identify interest and dividend accrual balances as of each valuation date
(4) Determine gain/loss on security sales. Account for periodic distributions
of gain to shareholders and maintain undistributed gain or loss balances as
of each valuation date.
Expense Accrual and Payment Services:
(5) For each valuation date, calculate the expense accrual amounts as directed
by the Trust as to methodology, rate, or dollar amount.
(6) Issue payments for Fund expenses upon receipt of funds from the Trust's
Custodian.
(7) Account for Fund expenditures and maintain expense accrual balances at the
level of accounting detail specified by the Fund.
(8) Support periodic expense accrual review, i.e., comparison of actual expense
activity versus accrual amounts.
(9) Provide expense accrual and payment reporting.
Fund Valuation and Financial Reporting Services:
(10) Account for Fund share purchases, sales, exchanges, transfers, dividend
reinvestments, and other Fund share activity, for each of the Funds, as
reported by the Trust on a timely basis.
(11) Determine net investment income (earnings) for each of the Funds as of each
valuation date. Account for periodic distributions of earnings to
shareholders and maintain undistributed net investment income balances as
of each valuation date.
(12) Maintain a general ledger for each of the Funds in the form defined by the
Trust and assist in producing a set of financial statements as may be
agreed upon from time to time as of each valuation date.
(13) For each day the Funds are opened as defined in the prospectuses, determine
the net asset value of each of the Funds according to the accounting
policies and procedures set forth in the prospectuses.
(14) Calculate per share net asset value, per share net earnings, and other per
share amounts reflective of fund operation at such time as required by the
nature and characteristics of the Funds. Perform the calculations using the
number of shares outstanding reported by the Trust to be applicable at the
time of calculation.
(15) Communicate, at an agreed upon time, the per share price for each valuation
date to parties as agreed upon from time to time.
(16) Prepare monthly reports which document the adequacy of accounting detail to
support month-end ledger balances.
Tax Accounting Services:
(17) Maintain tax accounting records for each of the Funds' investment
portfolios so as to support tax reporting required for IRS defined
regulated investment companies.
(18) Maintain tax lot detail for the investment portfolio.
(19) Calculate taxable gain/loss on security sales using the tax cost basis
defined for each Fund.
(20) Report the taxable components of income and capital gains distributions to
the Trust to support tax reporting to the shareholders.
<PAGE>
Compliance Control Services:
(21) Maintain accounting records to support compliance monitoring by the Trust.
(22) Support reporting to regulatory bodies and support financial statement
preparation by making the Fund accounting records available to the Trust,
the Securities and Exchange Commission, and the outside auditors.
(23) Maintain accounting records according to the Investment Company Act of 1940
and regulations provided thereunder.
Registration Services:
(24) Assist in the preparation of all reports and filings required to maintain
the registration and qualification of the Fund and its shares under federal
and state securities laws, including the annual amendment to its
Registration Statement on From N-1A containing an updated Prospectus and
Statement of Additional Information.
SEC Filing Services:
(25) Assist in the preparation of periodic SEC filings, including Form N-SAR,
annual and semi-annual shareholder reports, other shareholder reports, and
fidelity bond amendments but not including preparation and filing of any
sales literature and preparation of President's letter contained in
shareholder reports.
Proxy Material Services
(26) Assist in the preparation of any proxy material and related shareholder
meetings and records.
<PAGE>
Exhibit B
ADMINISTRATOR'S COMPENSATION SCHEDULE
For the services delineated in the FUND ACCOUNTING AND COMPLIANCE ADMINISTRATION
AGREEMENT, the Administrator shall be compensated monthly, as of the last day of
each month, within five business days of the month end, a base fee plus a fee
based upon net assets according to the following schedule. The fee is calculated
based upon the average daily net assets of each Fund:
Base fee: $2,250 per month
Class Fee: $ 750 per month for each additional Class
Asset based fee:
Annual
Net Assets Fee
---------- ------
On the first $50 million 0.125%
On the next $50 million 0.100%
On all assets over $100 million 0.075%
Securities pricing:
$0.20 per equity per pricing day priced
$0.70 per foreign security per pricing day
$0.20 per U.S. Treasury
$1.00 per asset backed security per pricing day
$0.40 per corporate bond per pricing day
$2.00 per equity per month for corporate action
Blue Sky administration:
$150 per registration per state per year
Minimum Aggregate Fee:
Minimum aggregate fee of $41,000 per year for all fees paid to
the Administrator (excluding securities pricing and blue sky
administration), analyzed monthly.
<PAGE>
DIVIDEND DISBURSING
AND TRANSFER AGENT
AGREEMENT
THIS AGREEMENT, made and entered into as of the 9th day of SEPTEMBER, 1998, by
and between NEW PROVIDENCE INVESTMENT TRUST, a Massachusetts business trust (the
"Trust"), and NC SHAREHOLDER SERVICES, LLC, a North Carolina limited liability
company (the "Transfer Agent").
WHEREAS, the Trust is an open-end management investment company of the series
type which is registered under the Investment Company Act of 1940 (the "1940
Act"); and
WHEREAS, the Transfer Agent is in the business of providing dividend disbursing,
transfer agent, and shareholder services to investment companies.
NOW THEREFORE, the Trust and the Transfer Agent do mutually promise and agree as
follows:
1. Employment. The Trust hereby employs Transfer Agent to act as dividend
disbursing and transfer agent for each Fund of the Trust. Transfer Agent,
at its own expense, shall render the services and assume the obligations
herein set forth subject to being compensated therefore as herein provided.
2. Delivery of Documents. The Trust has furnished the Transfer Agent with
copies properly certified or authenticated of each of the following:
a) The Trust's Declaration of Trust, as filed with the State of
Massachusetts (such Declaration, as presently in effect and as it
shall from time to time be amended, is herein called the
"Declaration");
b) The Trust's By-Laws (such By-Laws, as presently in effect and as they
shall from time to time be amended, are herein called the "By-Laws");
c) Resolutions of the Trust's Board of Trustees authorizing the
appointment of the Transfer Agent and approving this Agreement; and
d) The Trust's Registration Statement on Form N-1A under the 1940 Act and
under the Securities Act of 1933 as amended, (the "1933 Act"),
including all exhibits, relating to shares of beneficial interest of,
and containing the Prospectus of, each Fund of the Trust (herein
called the "Shares") as filed with the Securities and Exchange
Commission and all amendments thereto.
The Trust will furnish the Transfer Agent with copies, properly certified or
authenticated, of all amendments of or supplements to the foregoing.
3. Duties of the Transfer Agent. Subject to the policies and direction of the
Trust's Board of Trustees, the Transfer Agent will provide day to day
supervision for the dividend disbursing, transfer agent, and shareholder
servicing operations of each of the Trust's Funds. Services to be provided
shall be in accordance with the Trust's organizational and registration
documents as listed in paragraph 2 hereof and with the Prospectus of each
Fund of the Trust. The Transfer Agent further agrees that it:
a) Will conform with all applicable rules and regulations of the
Securities and Exchange Commission and will, in addition, conduct its
activities under this Agreement in accordance with regulations of any
other federal and state agency which may now or in the future have
jurisdiction over its activities.
b) Will provide, at its expense the non-executive personnel and data
processing equipment and software necessary to perform the Shareholder
Servicing functions shown on Exhibit A hereof; and
c) Will provide all office space and general office equipment necessary
for the dividend disbursing, transfer agent, and shareholder servicing
activities of the Trust except as may be provided by third parties
pursuant to separate agreements with the Trust.
Notwithstanding anything contained in this Agreement to the contrary, the
Transfer Agent (including its directors, officers, employees and agents)
shall not be required to perform any of the duties of, assume any of the
obligations or expenses of, or be liable for any of the acts or omissions
of, any investment advisor of a Fund of the Trust or other third party
subject to separate agreements with the Trust. The Transfer Agent shall not
be responsible hereunder for the administration of the Code of Ethics of
the Trust which shall be under the responsibility of the investment
advisors, except insofar as the Code of Ethics applies to the personnel of
the Transfer Agent. It is the express intent of the parties hereto that the
Transfer Agent shall not have control over or be responsible for the
placement (except as specifically directed by a Shareholder of the Trust),
investment or reinvestment of the assets of any Fund of the Trust. The
Transfer Agent may from time to time, subject to the approval of the
Trustees, obtain at its own expense the services of consultants or other
third parties to perform part or all of its duties hereunder, and such
parties may be affiliates of the Transfer Agent.
4. Services Not Exclusive. The services furnished by the Transfer Agent
hereunder are not to be deemed exclusive, and the Transfer Agent shall be
free to furnish similar services to others so long as its services under
this Agreement are not impaired thereby.
5. Books and Records. In compliance with the requirements of Rule 31a-3 under
the 1940 Act, the Transfer Agent hereby agrees that all records which it
maintains for the Trust are the property of the Trust and further agrees to
surrender promptly to the Trust any of such records upon the Trust's
request.
6. Expenses. During the term of this Agreement, the Transfer Agent will pay
all expenses incurred by it in connection with the performance of its
obligations under this Agreement.
7. Compensation. For the services provided and the expenses assumed by the
Transfer Agent pursuant to this Agreement, the Trust will pay the Transfer
Agent and the Transfer Agent will accept as full compensation the fees and
expenses as set forth on Exhibit B attached hereto. Special projects, not
included herein and requested in writing by the Trustees, shall be
completed by the Transfer Agent and invoiced to the Trust as mutually
agreed upon.
8.(a)Limitation of Liability. The Transfer Agent shall not be liable for any
loss, damage or liability related to or resulting from the placement
(except as specifically directed by a Shareholder of the Trust), investment
or reinvestment of assets in any Fund of the Trust or the acts or omissions
of any Fund's investment advisor or any other third party subject to
separate agreements with the Trust. Further, the Transfer Agent shall not
be liable for any error of judgment or mistake of law or for any loss or
damage suffered by the Trust in connection with the performance of this
Agreement or any agreement with a third party, except a loss resulting
directly from (i) a breach of fiduciary duty on the part of the Transfer
Agent with respect to the receipt of compensation for services; or (ii)
willful misfeasance, bad faith or gross negligence on the part of the
Transfer Agent in the performance of its duties or from reckless disregard
by it of its duties under this Agreement.
8.(b)Indemnification of Transfer Agent. Subject to the limitations set forth in
this Subsection 8(b), the Trust shall indemnify, defend and hold harmless
(from the assets of the Fund or Funds to which the conduct in question
relates) the Transfer Agent against all loss, damage and liability,
including but not limited to amounts paid in satisfaction of judgments, in
compromise or as fines and penalties, and expenses, including reasonable
accountants' and counsel fees, incurred by the Transfer Agent in connection
with the defense or disposition of any action, suit or other proceeding,
whether civil or criminal, before any court or administrative or
legislative body, related to or resulting from this Agreement or the
performance of services hereunder, except with respect to any matter as to
which it has been determined that the loss, damage or liability is a direct
result of (i) a breach of fiduciary duty on the part of the Transfer Agent
with respect to the receipt of compensation for services; or (ii) willful
misfeasance, bad faith or gross negligence on the part of the Transfer
Agent in the performance of its duties or from reckless disregard by it of
its duties under this Agreement (either and both of the conduct described
in clauses (i) and (ii) above being referred to hereinafter as "Disabling
Conduct"). A determination that the Transfer Agent is entitled to
indemnification may be made by (i) a final decision on the merits by a
court or other body before whom the proceeding was brought that the
Transfer Agent was not liable by reason of Disabling Conduct, (ii)
dismissal of a court action or an administrative proceeding against the
Transfer Agent for insufficiency of evidence of Disabling Conduct, or (iii)
a reasonable determination, based upon a review of the facts, that the
Transfer Agent was not liable by reason of Disabling Conduct by, (a) vote
of a majority of a quorum of Trustees who are neither "interested persons"
of the Trust as the quoted phrase is defined in Section 2(a)(19) of the
1940 Act nor parties to the action, suit or other proceeding on the same or
similar grounds that is then or has been pending or threatened (such quorum
of such Trustees being referred to hereinafter as the "Independent
Trustees"), or (b) an independent legal counsel in a written opinion.
Expenses, including accountants' and counsel fees so incurred by the
Transfer Agent (but excluding amounts paid in satisfaction of judgments, in
compromise or as fines or penalties), shall be paid from time to time by
the Fund or Funds to which the conduct in question related in advance of
the final disposition of any such action, suit or proceeding; provided,
that the Transfer Agent shall have undertaken to repay the amounts so paid
unless it is ultimately determined that it is entitled to indemnification
of such expenses under this Subsection 8(b) and if (i) the Transfer Agent
shall have provided security for such undertaking, (ii) the Trust shall be
insured against losses arising by reason of any lawful advances, or (iii) a
majority of the Independent Trustees, or an independent legal counsel in a
written opinion, shall have determined, based on a review of readily
available facts (as opposed to a full trial-type inquiry), that there is
reason to believe that the Transfer Agent ultimately will be entitled to
indemnification hereunder.
As to any matter disposed of by a compromise payment by the Transfer Agent
referred to in this Subsection 8(b), pursuant to a consent decree or
otherwise, no such indemnification either for said payment or for any other
expenses shall be provided unless such indemnification shall be approved
(i) by a majority of the Independent Trustees or (ii) by an independent
legal counsel in a written opinion. Approval by the Independent Trustees
pursuant to clause (i) shall not prevent the recovery from the Transfer
Agent of any amount paid to the Transfer Agent in accordance with either of
such clauses as indemnification of the Transfer Agent is subsequently
adjudicated by a court of competent jurisdiction not to have acted in good
faith in the reasonable belief that the Transfer Agent's action was in or
not opposed to the best interests of the Trust or to have been liable to
the Trust or its Shareholders by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in its
conduct under the Agreement.
The right of indemnification provided by this Subsection 8(b) shall not be
exclusive of or affect any of the rights to which the Transfer Agent may be
entitled. Nothing contained in this Subsection 8(b) shall affect any rights
to indemnification to which Trustees, officers or other personnel of the
Trust, and other persons may be entitled by contract or otherwise under
law, nor the power of the Trust to purchase and maintain liability
insurance on behalf of any such person.
The Board of Trustees of the Trust shall take all such action as may be
necessary and appropriate to authorize the Trust hereunder to pay the
indemnification required by this Subsection 8(b) including, without
limitation, to the extent needed, to determine whether the Transfer Agent
is entitled to indemnification hereunder and the reasonable amount of any
indemnity due it hereunder, or employ independent legal counsel for that
purpose.
The provisions contained in Section 8 shall survive the expiration or other
termination of this Agreement, shall be deemed to include and protect the
Transfer Agent and its directors, officers, employees and agents and shall
inure to the benefit of its/their respective successors, assigns and
personal representatives.
9. Duration and Termination. This Agreement shall become effective as of the
date hereof and shall thereafter continue in effect unless terminated as
herein provided. This Agreement may be terminated by either party hereto
(without penalty) at any time by giving not less than 60 days' prior
written notice to the other party hereto. Upon termination of this
Agreement, the Trust shall pay to NCSS such compensation as may be due as
of the date of such termination, and shall likewise reimburse NCSS for any
out-of-pocket expenses and disbursements reasonably incurred by NCSS to
such date.
10. Amendment. This Agreement may be amended by mutual written consent of the
parties. If, at any time during the existence of this Agreement, the Trust
deems it necessary or advisable in the best interests of the Trust that any
amendment of this Agreement be made in order to comply with the
recommendations or requirements of the Securities and Exchange Commission
or state regulatory agencies or other governmental authority, or to obtain
any advantage under state or federal laws, and shall notify the Transfer
Agent of the form of Amendment which it deems necessary or advisable and
the reasons therefor, and if the Transfer Agent declines to assent to such
amendment, the Trust may terminate this Agreement forthwith.
11. Notice. Any notice that is required to be given by the parties to each
other under the terms of this Agreement shall be in writing, addressed or
delivered, or mailed postpaid to the other party at the principal place of
business of such party.
12. Construction. This Agreement shall be governed and enforced in accordance
with the laws of the State of North Carolina. If any provision of this
Agreement, or portion thereof, shall be determined to be void or
unenforceable by any court of competent jurisdiction, then such
determination shall not affect any other provision of this Agreement, or
portion thereof, all of which other provisions and portions thereof shall
remain in full force and effect. If any provision of this Agreement, or
portion thereof, is capable of two interpretations, one of which would
render the provision, or portion thereof, void and the other of which would
render the provision, or portion thereof, valid, then the provision, or
portion thereof, shall have the meaning which renders it valid.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed
by their duly authorized officers effective as of the date indicated above.
NEW PROVIDENCE INVESTMENT TRUST
By: ______________________________ (SEAL)
NC SHAREHOLDER SERVICES, LLC
By: _____________________________ (SEAL)
<PAGE>
Exhibit A
SHAREHOLDER SERVICING FUNCTIONS
(1) Process new accounts.
(2) Process purchases, both initial and subsequent in accordance with
conditions set forth in the Fund's prospectus.
(3) Transfer shares of capital stock to an existing account or to a new account
upon receipt of required documentation in good order.
(4) Distribute dividends and/or capital gain distributions. This includes
disbursement as cash or reinvestment and to change the disbursement option
at the request of shareholders.
(5) Process exchanges between funds, (process and direct purchase/redemption
and initiate new account or process to existing account).
(6) Make miscellaneous changes to records, including, but not necessarily
limited to, address changes and changes in plans (such as systematic
withdrawal, dividend reinvestment, etc.).
(7) Prepare and mail a year-to-date confirmation and statement as each
transaction is recorded in a shareholder account as follows: original to
shareholder. Duplicate confirmations to be available on request within
current year.
(8) Handle telephone calls and correspondence in reply to shareholder requests
except those items otherwise set forth herein.
(9) Daily control and reconciliation of Fund shares.
(10) Prepare address labels or confirmations for four reports to shareholders
per year.
(11) Mail and tabulate proxies for one Meeting of Shareholders annually,
including preparation of certified shareholder list and daily report to
Fund management, if required.
(12) Prepare and mail annual Form 1099, Form W-2P and 5498 to shareholders to
whom dividends or distributions are paid, with a copy for the IRS.
(13) Provide readily obtainable data which may from time to time be requested
for audit purposes.
(14) Replace lost or destroyed checks.
(15) Continuously maintain all records for active and closed accounts according
to the Investment Company Act of 1940 and regulations provided thereunder.
(16) Furnish shareholder data information for a current calendar year in
connection with IRA and Keogh Plans in a format suitable for mailing to
shareholders.
<PAGE>
Exhibit B
TRANSFER AGENT'S COMPENSATION SCHEDULE
For the services delineated in the DIVIDEND DISBURSING AND TRANSFER AGENT
AGREEMENT, the Transfer Agent shall be compensated monthly, as of the last day
of each month, within five business days of the month end, a fee calculated
based upon 1/12 of the annual fee calculated using the then current number of
shareholders:
Shareholder servicing fee:
$15.00 per shareholder per year; minimum fee of $750 per month
EXHIBIT 10
September 29, 1998
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 Post-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 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,
DECHERT PRICE & RHOADS
EXHIBIT 11
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 incorporation by reference in Post-Effective Amendment No. 1
to Registration Statement (No. 333-31359) of New Providence Capital Growth Fund
of our report dated June 12, 1998, appearing in the Annual Report, which is
incorporated by reference in such Registration Statement, and to the reference
to us under the heading "Financial Highlights" in such Prospectus.
/s/ DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
September 28, 1998
EXHIBIT 16
NEW PROVIDENCE CAPITAL GROWTH FUND
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 "cumulative total return" of the Fund, which is
calculated in a similar manner, except that the results are not annualized. This
calculation is as follows:
(ERV - P)/P = TR
Where: 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
TR = total return
The calculation of average annual total return and cumulative total return
assume 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.
The cumulative total return for the Fund since inception (September 29, 1997)
through May 31, 1998 is 1.76%.
CUMULATIVE TOTAL RETURN CALCULATION
Inception through May 31, 1998:
(1,017.59 - 1,000)/1,000 = 0.0176
ERV = $1,017.59
P = $1,000
TR = 1.76%
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001041994
<NAME> New Providence Capital Growth Fund
<SERIES>
<NUMBER> 1
<NAME> New Providence Capital Growth Fund
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> May-31-1998
<PERIOD-END> May-31-1998
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 21,713,205
<INVESTMENTS-AT-VALUE> 23,149,024
<RECEIVABLES> 5,449
<ASSETS-OTHER> 27,972
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 23,182,445
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 18,668
<TOTAL-LIABILITIES> 18,668
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 21,675,010
<SHARES-COMMON-STOCK> 2,001,835
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 52,948
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,435,819
<NET-ASSETS> 23,163,777
<DIVIDEND-INCOME> 45,821
<INTEREST-INCOME> 17,260
<OTHER-INCOME> 0
<EXPENSES-NET> 219,194
<NET-INVESTMENT-INCOME> (156,113)
<REALIZED-GAINS-CURRENT> 209,061
<APPREC-INCREASE-CURRENT> 1,435,819
<NET-CHANGE-FROM-OPS> 1,488,767
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,002,953
<NUMBER-OF-SHARES-REDEEMED> 1,118
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 23,163,777
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 100,098
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 242,104
<AVERAGE-NET-ASSETS> 9,336,974
<PER-SHARE-NAV-BEGIN> 11.37
<PER-SHARE-NII> (0.08)
<PER-SHARE-GAIN-APPREC> 0.28
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.57
<EXPENSE-RATIO> 1.62
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>