As filed with the Securities and Exchange Commission on October 22, 1998
Securities Act File No. 333-31359
Investment Company Act File No. 811-08295
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No.___ [ ]
Post-Effective Amendment No. 2 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 3 [X]
(Check appropriate box or boxes.)
NEW PROVIDENCE INVESTMENT TRUST
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(Exact Name of Registrant as Specified in Charter)
105 North Washington Street, P.O. Drawer 69, Rocky Mount, NC 27802-0069
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (252) 972-9922
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C. Frank Watson, III
105 North Washington Street, P.O. Drawer 69, Rocky Mount, NC 27802-0069
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(Name and Address of Agent for Service)
With copies to:
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Jane A. Kanter
Dechert Price & Rhoads
1775 Eye Street, N.W.
Washington, DC 20006-2401
Approximate Date of Proposed Public Offering: As soon as practicable after the
Effective date of this Amendment
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It is proposed that this filing will become effective: (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[X] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of rule 485.
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
<PAGE>
PART A
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The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.
INTRINSIC VALUE FUND
INSTITUTIONAL CLASS
Prospectus
January 1, 1999
The Intrinsic Value Fund seeks to provide investors with a maximum total return
consisting of any combination of capital appreciation, realized and unrealized,
and income under the constantly varying market conditions. The Fund offers two
classes of shares: an Investor Class of shares offered by another prospectus and
the Institutional Class of shares described in this prospectus.
Neither the Securities and Exchange Commission nor any other regulatory body has
approved the securities being offered by this prospectus or determined whether
this prospectus is accurate and complete. It is unlawful for anyone to make any
representation to the contrary.
<PAGE>
TABLE OF CONTENTS
INVESTMENT OBJECTIVE..................................................2
PRINCIPAL INVESTMENT STRATEGIES.......................................2
PRINCIPAL RISKS OF INVESTING IN THE FUND..............................3
FEES AND EXPENSES OF THE FUND.........................................3
MANAGEMENT OF THE FUND................................................4
THE ADMINISTRATOR.....................................................5
THE TRANSFER AGENT....................................................5
BROKERAGE PRACTICES...................................................5
YEAR 2000.............................................................6
PURCHASE AND REDEMPTION OF SHARES.....................................6
DISTRIBUTION OF THE FUND'S SHARES....................................10
TAX CONSIDERATIONS...................................................11
PERFORMANCE INFORMATION..............................................12
<PAGE>
Investment Objective
The Intrinsic Value Fund (the "Fund") seeks to provide investors with a maximum
total return consisting of any combination of capital appreciation, realized and
unrealized, and income under the constantly varying market conditions.
Principal Investment Strategies
The Fund invests primarily in a non-diversified portfolio of common stocks of
domestic companies. Under normal conditions, at least 65% of the Fund's total
assets will be invested in such securities. The Fund may also invest in
investment-grade fixed-income securities, money market instruments, real estate
securities, precious metals securities, and futures to the extent permitted
under the Investment Company Act of 1940, as amended ("1940 Act") and consistent
with the investment restrictions of the Fund as described in the Statement of
Additional Information ("SAI").
It is expected that the Fund will contain from 15 to 20 companies in its
portfolio at any given time. These companies will be selected for their ability
to deliver investment returns as close as possible to those securities owned by
Berkshire Hathaway Holdings ("BHC"). The securities generally held by BHC are
known to be chosen for their underlying intrinsic value, either because the
company has net hard balance sheet assets which, if liquidated, would exceed the
total market valuation of the company's stock, or because the company is deemed
to possess the ability to achieve consistent, above market earnings and earnings
growth, which at the time of purchase, is not reflected in the market valuation
for the company.
The Fund will emulate, as closely as is practicable, the investment portfolio of
BHC. An investor in the Intrinsic Value Fund should not expect that the
investment performance of the Fund will be able to track identically the
investment performance of BHC. First, the assets in the Fund will likely never
be identical to the assets in the portfolio of BHC. BHC has acquired several
companies in their entirety, and has purchased companies which were never
publicly available. The Fund will, therefore, seek to identify alternate
investments which have similar investment characteristics, market volatility,
and can reasonably be expected to respond to generate a correlated investment
return.
In addition, there is no guarantee that the Fund's investment advisor will have
the ability to purchase the securities on behalf of the Fund on terms as
favorable as BHC has been able to purchase the same securities. Investment
decisions made by BHC are not always known to the public even immediately after
those decisions are made. The reputation which BHC enjoys in the investment
community often results in price movement in securities selected for inclusion
in the BHC portfolio, resulting in price appreciation. The price of the security
will likely be different by the time the Fund enters its purchase order, and its
brokerage arrangements may result in different commissions being paid for the
purchase of the same securities.
BHC is a corporation subject to income taxes. The Fund, if it qualifies and
remains qualified under Subchapter M of the Internal Revenue Code, will not be
subject to tax. Thus, the effect of income taxes paid by BHC is likely to be a
divergence of long-term investment performance between BHC and the Fund. Certain
investment decisions of BHC may be strongly guided by tax considerations not
applicable to the Fund. Accordingly, to the extent the Fund emulates BHC's
investment strategy, the Fund may enter into certain securities transactions, or
fail to sell certain securities, that would not necessarily be entered into if
the Fund were actively managed.
The Fund will be valued at net asset value, using the total of the securities
valued in the portfolio less the Fund's accrued liabilities, as a determinant of
total and per share value. BHC is a corporation, and its stock is traded on the
New York Stock Exchange. The investment return of the Fund will be dependent
solely upon the direct investments held by the Fund (i.e. net asset value). The
share price of BHC, in contrast, is based upon the market valuation of BHC as
that company's stock is traded on the NYSE. Factors taken into account by
investors buying and selling BHC shares may be dependent upon many factors (as
with any common stock), which will not necessarily be limited to the investments
held by BHC in its own portfolio.
Principal Risks of Investing in the Fund
While the Fund will invest primarily in common stocks and bonds traded in U.S.
securities markets, some of the Fund's investments may include foreign
securities, illiquid securities, and securities purchased subject to a
repurchase agreement or on a "when-issued" basis, which involve certain risks.
To the extent that equity securities will generally comprise the primary portion
of the Fund's portfolio, the Fund's net asset value will be subject to stock
market fluctuation, and a decline in the amount of your principal investment is
a risk of investing in the Fund. The Fund's net asset value may also fluctuate
due to fluctuation in the value of the fixed-income securities in the portfolio
as a result of changes in the market interest rate, downgrading of the rating of
a particular debt instrument, or other changes in the interest rate and fixed
income market environment. The Fund may borrow only under certain limited
conditions (including 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.
The Fund is a non-diversified portfolio under the 1940 Act, which means that it
may invest a greater proportion of its assets in the securities of a small
number of issuers than a diversified investment company. In this regard, the
Fund is not subject to the general limitation that it not invest more than 5% of
its total assets in the securities of a single issuer. As a result, because the
Fund is permitted greater flexibility to invest its assets in the obligations of
a single issuer it is exposed to increased risk of loss if such an investment
underperforms expectations. However, the Fund intends to limit its investments
so as to comply with diversification requirements imposed by the Internal
Revenue Code of 1986, as amended (the "Code"), for qualification as a "regulated
investment company." The Fund spreads investment risk by limiting its holdings
in any one company or industry. Nevertheless, the Fund will experience price
volatility, the extent of which will be affected by the types of securities and
techniques the Fund uses. The Advisor may use various investment techniques to
hedge risks, including derivatives, but there is no guarantee that these
strategies will work as intended.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund:
Shareholder Fees (fees paid directly from your investment)
Maximum sales charge (load) imposed on purchases
(as a percentage of offering price) ..............................None
Redemption fee .......................................................None
Annual Fund Operating Expenses (expenses that are
deducted from Fund assets) (as a percentage
of average daily net assets)
Management Fees..........................................................0.50%
Distribution and/or Service (12b-1) Fees.................................0.00%
Other Expenses...........................................................0.65%1
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Total ...................................................................1.15%
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1 Estimated amounts for the current fiscal year are based on an estimated
average annual total net assets of at least $10 million. If the Fund does
not achieve this asset total, fund operating expenses could be higher.
EXAMPLE: This example shows you the expenses you may pay over time by investing
in the fund. It should help you compare the costs of investing in this fund
versus other funds. The conditions are that: (i) you invest $10,000 in the fund
for the period shown; (ii) you earn a 5% total return; and (iii) the fund's
expenses remain the same. Your actual costs may be higher or lower.
----------------------------- ------------------ ------------------
1 YEAR 3 YEAR
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Fees $117 $365
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MANAGEMENT OF THE FUND
The Fund is a series of New Providence Investment Trust (the "Trust"), which is
a registered open-end management investment company organized as a Massachusetts
business trust on July 9, 1997. The Trust currently operates one other series,
the New Providence Capital Growth Fund, which is managed by an affiliate of the
Fund's investment advisor. Series of the Trust are authorized to offer multiple
classes of shares, and the Fund offers both an Investor Class, the shares of
which are offered by another prospectus, and an Institutional Class of shares.
The Fund's investment advisor is Atlanta Investment Counsel, LLC ("AIC" or the
"Advisor") which, subject to the supervision and direction of the Trustees of
the Fund, has overall responsibility for the general management of the Fund. AIC
is an investment advisor registered under the Investment Advisers Act of 1940,
as amended, and a broker-dealer registered under the Securities Exchange Act of
1934, as amended ("1934 Act"). AIC is located at 2859 Paces Ferry Road, Suite
2125, Atlanta, Georgia 30339. Besides its activities with respect to the Fund,
AIC currently furnishes investment advice to other clients, including
individuals, pension and profit sharing plans, charitable organizations,
corporations, and other business entities.
A team of portfolio managers will be responsible for selecting investments on
behalf of the Fund. John K. Donaldson (controlling member of the Advisor), Kyle
Tomlin, CFA, and Shannon D. Coogle are responsible for day-to-day management of
the Fund. Mr. Donaldson is also the controlling member of another investment
advisor, New Providence Capital Management, L.L.C., an affiliate of AIC that
serves as investment advisor to the Trust's other series, the New Providence
Capital Growth Fund. Messrs. Donaldson and Tomlin have been with the Advisor
since its formation. Mr. Donaldson has been involved with that advisor and its
predecessors since 1987. Mr. Tomlin has served in portfolio management for the
firms since 1994 and a business associate of an investment company service
provider in 1993. Ms. Coogle has been associated with New Providence Capital
Management, L.L.C. since 1997.
As compensation for managing the Fund, the Fund pays AIC a monthly fee at the
annual rate of 0.50% of the first $500 million of the average daily net assets
of the Fund and 0.40% on assets over $500 million.
In addition to the management fees, the Fund pays all expenses not assumed by
AIC, including, without limitation: the fees and expenses of its independent
accountants and of its legal counsel; the costs of printing and mailing annual
and semi-annual reports to shareholders, proxy statements, prospectuses,
prospectus supplements, and statements of additional information; the costs of
printing registration statements; bank transaction charges and custodian's fees;
any proxy solicitors' fees and expenses; registration and/or filing fees; any
federal, state or local income or other taxes; any interest; any membership fees
of the Investment Company Institute and similar organizations; fidelity bond and
Trustees' liability insurance premiums; and any extraordinary expenses, such as
indemnification payments or damages awarded in litigation or settlements made.
All general Trust expenses are allocated among and charged to the assets of the
Trust's series on a basis that the Board of Trustees deems fair and equitable,
which may be on the basis of relative net assets of each series or the nature of
the services performed and relative applicability to each series.
THE ADMINISTRATOR
Pursuant to an agreement, The Nottingham Company (the "Administrator") assists
the Trust in the performance of its administrative responsibilities to the Fund,
coordinates the services of each vendor of services to the Fund, and provides
the Fund with other necessary administrative, fund accounting and compliance
services. In addition, the Administrator makes available the office space,
equipment, personnel and facilities required to provide such services to the
Fund.
THE TRANSFER AGENT
NC Shareholder Services, LLC ("NCSS") serves as the transfer agent and
dividend-disbursing agent of the Fund. NCSS's address is the same as the address
of the Fund.
BROKERAGE PRACTICES
In selecting brokers and dealers, AIC may consider research and brokerage
services furnished to either company or their affiliates. Subject to seeking the
most favorable net price and execution available, AIC and each Advisor may also
consider sales of shares of the Fund as a factor in the selection of brokers and
dealers. Certain securities trades will be cleared through Atlanta Investment
Group, a registered broker dealer affiliate of AIC and Distributor of this Fund.
The Trustees review the brokerage policies and rates regularly.
The 1940 Act generally prohibits the Fund from engaging in principal securities
transactions with an affiliate of AIC unless pursuant to an exemptive order from
the SEC. The Fund may apply for such exemptive relief. The Fund does not
consider broker-dealer affiliates of an investment advisor to one fund to be an
affiliate of the investment advisors to other funds for which the investment
advisor does not provide investment advice. The Fund has adopted procedures,
prescribed by Section 17(e)(2)(A) of the 1940 Act and Rule 17e-1 thereunder,
which are reasonably designed to provide that any commission it pays to
affiliates of AIC does not exceed the usual and customary broker's commission.
In addition, the Fund will adhere to Section 11(a) of the 1934 Act and any
applicable rules thereunder governing floor trading. The Fund has adopted
procedures permitting it to purchase securities, under certain restrictions
prescribed by a rule under the 1940 Act, in a public offering in which an
affiliate of AIC or Advisors is an underwriter.
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.
PURCHASING FUND SHARES
Institutional Class shares are sold and redeemed at net asset value. Shares may
be purchased by any account managed by the Advisor and any other broker-dealer
authorized to sell shares in the Fund. The minimum initial investment is
$25,000. The minimum additional investment is $250. The Fund may, in the
Advisor's sole discretion, accept certain accounts with less than the minimum
investment. The price at which a purchase or redemption is effected is based on
the next calculation of net asset value after an order is placed by a
shareholder investing in or redeeming from the Fund. Net asset value per share
is calculated for purchases and redemption of shares of the Fund by dividing the
value of total Fund assets, less liabilities (including Fund expenses, which are
accrued daily), by the total number of outstanding shares of that Fund. The net
asset value per share of the Fund is determined at the time trading closes on
the New York Stock Exchange (currently 4:00 p.m. Eastern time, Monday through
Friday), except on business holidays when the New York Stock Exchange is closed.
Regular Mail Orders. Payment for shares must be made by check or money order
from a U.S. bank and payable in U.S. dollars. If checks are returned due to
insufficient funds or other reasons, the Fund will charge a $20 fee or may
redeem shares of the Fund already owned by the purchaser to recover any such
loss. For regular mail orders, please complete the attached Fund Shares
Application and mail it, with your check made payable to the Fund, to:
Intrinsic Value Fund
Institutional Class shares
c/o NC Shareholder Services, LLC
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
The application must contain your social security and Taxpayer Identification
Numbers ("TINs"). If you have applied for a social security number or TIN at the
time of completing your account application, please indicate this on the
application. Taxes are not withheld from distributions to U.S. investors if
certain IRS requirements regarding TINs are met.
Bank Wire Orders. Purchases may also be made through bank wire orders. To
establish a new account or add to an existing account by wire, please call the
Fund at 1-800-773-3863, before wiring funds, to advise it of the investment,
dollar amount, and the account identification number. Additionally, please have
your bank use the following wire instructions to:
First Union National Bank of North Carolina
Charlotte, North Carolina
ABA # 05300219
For the Intrinsic Value Fund - Institutional Class
Acct. # 2000001______
For further credit to (shareholder's name and SS# or EIN#)
Additional Investments. You may also add to your account by mail or wire at any
time by purchasing shares at the then current public offering price. The minimum
additional investment is $250. Before adding funds by bank wire, please alert
the Fund by telephone at 1-800-773-3863 and following the above directions for
wire purchases. Mail orders should include, when possible, the "Invest by Mail"
stub which is attached to your Fund confirmation statement. Otherwise, please
identify your account in your letter.
Exchange Feature. You may exchange shares of the Fund for shares of any other
series of the Trust offered for sale in the state in which you reside. Shares
may be exchanged for shares of any other series of the Trust 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. Prior to making an investment decision or giving us your instructions
to exchange shares, please read the prospectus for the series in which you wish
to invest.
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 form 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.
The Board of Trustees 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 investment 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. You do not have the option of receiving stock certificates
for your shares. Evidence of ownership will be given by issuance of periodic
account statements that will show the number of shares owned.
HOW TO REDEEM SHARES
Regular Mail Redemptions. Your request should be addressed to the Intrinsic
Value Fund, c/o NC Shareholder Services, LLC, 107 North Washington Street, Post
Office Box 4365, Rocky Mount, North Carolina 27803-0365. Your request for
redemption should include:
o Your letter of instruction specifying the account number and number of
shares, or the dollar amount, to be redeemed. This request must be signed
by all registered shareholders in the exact names in which they are
registered;
o Any required signature guarantees (see "Signature Guarantees" below); and
o 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 fifteen 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
receipt of the request for redemption will be used in processing the redemption
request.
Telephone and Bank Wire Redemptions. You may also redeem shares by telephone and
bank wire under certain limited conditions. The Fund will redeem shares in this
manner when so requested by the shareholder only if the shareholder confirms
redemption instructions in writing.
The Fund may rely upon confirmation of redemption requests transmitted via
facsimile (FAX# 919-972-1908). The confirmation instructions must include:
1) Designation of Class (Institutional or Investor),
2) Shareholder name and account number,
3) Number of shares or dollar amount to be redeemed,
4) Instructions for transmittal of redemption funds to the shareholder,
and
5) Shareholder signature as it appears on the application then on file
with the Fund.
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 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 in its discretion may choose to pass through to redeeming shareholders
any charges imposed by the Custodian for wire redemptions. The Custodian
currently charges the Fund $10.00 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 your account by redemption of
shares in your account. Your 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 account.
You may redeem shares, subject to the procedures outlined above, by calling the
Fund at 1-888-773-3863. Redemption proceeds will only be sent to the bank
account or person named in your Fund Shares Application currently on file with
the Fund. Telephone redemption privileges authorize the Fund to act on telephone
instructions from any person representing himself 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.
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 to change exchange privileges or telephone and bank wire redemption
service other than through your initial account application, and (3) redemption
requests 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 change
of registration, establishment or change in exchange privileges, or redemption
request.
Systematic Withdrawal Plan. A shareholder who owns shares of the Fund valued at
$2,500 or more at the current offering price 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. The shareholder may establish this service whether dividends and
distributions are reinvested in shares of the Fund or paid in cash. Call or
write the Fund for an application form.
All shares are purchased and redeemed in accordance with the Fund's Amended and
Restated Declaration of Trust and By-Laws. The Board of Trustees reserves the
right to redeem involuntarily 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 60-days written notice. If the shareholder brings his account net
asset value up to at least $1,000 during the notice period, the account will not
be redeemed. Redemptions from retirement plans may be subject to federal income
tax withholding.
Sales and redemptions of shares of the same class by the same shareholder on the
same day will be netted for the Fund. All redemption requests will be processed
and payment with respect thereto will normally be made within seven days after
tenders. The Fund may suspend redemption, if permitted by the 1940 Act, for any
period during which the New York Stock Exchange is closed or during which
trading is restricted by the Securities Exchange Commission ("SEC") or if the
SEC declares that an emergency exists. Redemptions may also be suspended during
other periods permitted by the SEC for the protection of the Fund's
shareholders. Additionally, during drastic economic and market changes,
telephone redemption privileges may be difficult to implement. Also, if the
Board of Trustees determines that it would be detrimental to the best interest
of the Fund's remaining shareholders to make payment in cash, the Fund may pay
redemption proceeds in whole or in part by a distribution-in-kind of readily
marketable securities.
TAX CONSIDERATIONS
Under current federal income tax law, the Fund believes that the Fund is
entitled, and the Fund intends that the Fund shall be treated as a regulated
investment company ("RIC") under Subchapter M of the Code. As a RIC, a Fund will
not be subject to federal tax on its net investment income and net realized
capital gains to the extent such income and gains are timely distributed to its
shareholders. Accordingly, the Fund intends to distribute all of its net
investment income and net realized capital gains to its shareholders. Unless
otherwise requested by shareholders, dividend distributions will be reinvested
in full and fractional shares of the Fund. An exchange of the Fund's shares for
shares of another fund will be treated as a sale of the Fund's shares and any
gain on the transaction may be subject to federal income tax.
Although the Trust intends that it and the funds will be operated so that they
will have no federal income or excise tax liability, if any such liability is,
nevertheless, incurred, the investment performance of the Fund or funds
incurring such liability will be adversely affected. In addition, funds
investing in foreign securities and currencies may be subject to foreign taxes
which could reduce the investment performance of such fund.
Certain additional tax information appears in the Statement of Additional
Information.
PERFORMANCE INFORMATION
From time to time, the Fund may advertise the "average annual or cumulative
total return" and may compare the performance of the Funds with that of other
mutual Funds with similar investment objectives as listed in rankings prepared
by Lipper Analytical Services, Inc., or similar independent services monitoring
mutual Fund performance, and with appropriate securities or other relevant
indices. The "average annual total return" of a Fund refers to the average
annual compounded rate of return over the stated period that would equate an
initial investment in that Fund at the beginning of the period to its ending
redeemable value, assuming reinvestment of all dividends and distributions and
deduction of all recurring charges, other than charges and deductions which may
be imposed under the Contracts. Performance figures will be given for the recent
one, five and ten year periods and for the life of the Fund if it has not been
in existence for any such periods. When considering "average annual total
return" figures for periods longer than one year, it is important to note that a
Fund's annual total return for any given year might have been greater or less
than its average for the entire period. "Cumulative total return" represents the
total change in value of an investment in a Fund for a specified period (again
reflecting changes in Fund share prices and assuming reinvestment of Fund
distributions). The methods used to calculate "average annual and cumulative
total return" are described further in the Statement of Additional Information.
<PAGE>
INTRINSIC VALUE FUND
INSTITUTIONAL CLASS
Additional Information
Additional information about the Fund is available in the Fund's Statement of
Additional Information and in the Fund's Annual and Semiannual Report. The
Fund's Annual and Semiannual Reports include a discussion of market conditions
and investment strategies that significantly affected the Fund's performance
during its last fiscal year. Note: Since the Intrinsic Value Fund is a new
series of New Providence Investment Trust, the annual and semi-annual reports do
not yet contain information relating to the Intrinsic Value Fund.
The Annual and Semiannual Reports and the Statement of Additional Information
are available free of charge upon request by contacting us:
By telephone: 1-800-525-3863
By mail: Intrinsic Value Fund
Post Office Box 4365
Rocky Mount, NC 27803-4365
By e-mail: [email protected]
On the Internet: http://www.npcm.com/index.html
Information about the Fund can also be reviewed and copied at the Securities
Exchange Commission's ("Commission") Public Reference Room in Washington, D.C.
Inquiries on the operations of the public reference room may be made by calling
the Commission at 1-800-SEC-0330. Reports and other information about the Fund
are available on the Commission's Internet sit at http:\\www.sec.gov and copies
of this information may be obtained, upon payment of a duplicating fee, by
writing the Public Reference Section of the Commission, Washington, D.C.
20549-6009.
Investment Company Act file number 811-08295
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.
INTRINSIC VALUE FUND
INVESTOR CLASS
Prospectus
January 1, 1999
The Intrinsic Value Fund seeks to provide investors with a maximum total return
consisting of any combination of capital appreciation, realized and unrealized,
and income under the constantly varying market conditions. The Fund offers two
classes of shares: an Institutional Class of shares offered by another
prospectus and the Investor Class of shares described in this prospectus.
Neither the Securities and Exchange Commission nor any other regulatory body has
approved the securities being offered by this prospectus or determined whether
this prospectus is accurate and complete. It is unlawful for anyone to make any
representation to the contrary.
<PAGE>
TABLE OF CONTENTS
INVESTMENT OBJECTIVE...........................................................2
PRINCIPAL INVESTMENT STRATEGIES................................................2
PRINCIPAL RISKS OF INVESTING IN THE FUND.......................................3
FEES AND EXPENSES OF THE FUND..................................................3
MANAGEMENT OF THE FUND.........................................................4
THE ADMINISTRATOR..............................................................5
THE TRANSFER AGENT.............................................................5
BROKERAGE PRACTICES............................................................5
YEAR 2000......................................................................6
PURCHASE AND REDEMPTION OF SHARES..............................................6
DISTRIBUTION OF THE FUND'S SHARES.............................................10
TAX CONSIDERATIONS............................................................11
PERFORMANCE INFORMATION.......................................................12
<PAGE>
Investment Objective
The Intrinsic Value Fund (the "Fund") seeks to provide investors with a maximum
total return consisting of any combination of capital appreciation, realized and
unrealized, and income under the constantly varying market conditions.
Principal Investment Strategies
The Fund invests primarily in a non-diversified portfolio of common stocks of
domestic companies. Under normal conditions, at least 65% of the Fund's total
assets will be invested in such securities. The Fund may also invest in
investment-grade fixed-income securities, money market instruments, real estate
securities, precious metals securities, and futures to the extent permitted
under the Investment Company Act of 1940, as amended ("1940 Act") and consistent
with the investment restrictions of the Fund as described in the Statement of
Additional Information ("SAI").
It is expected that the Fund will contain from 15 to 20 companies in its
portfolio at any given time. These companies will be selected for their ability
to deliver investment returns as closely as possible to those securities owned
by Berkshire Hathaway Holdings ("BHC"). The securities generally held by BHC are
known to be chosen for their underlying intrinsic value, either because the
company has net hard balance sheet assets which, if liquidated, would exceed the
total market valuation of the company's stock, or because the company is deemed
to possess the ability to achieve consistent, above market earnings and earnings
growth, which at the time of purchase, is not reflected in the market valuation
for the company.
The Fund will emulate, as closely as is practicable, the investment portfolio of
BHC. An investor in the Intrinsic Value Fund should not expect that the
investment performance of the Fund will be able to track identically the
investment performance of BHC. First, the assets in the Fund will likely never
be identical to the assets in the portfolio of BHC. BHC has acquired several
companies in their entirety, and has purchased companies which were never
publicly available. The Fund will, therefore, seek to identify alternate
investments which have similar investment characteristics, market volatility,
and can reasonably be expected to respond to generate a correlated investment
return.
In addition, there is no guarantee that the Fund's investment advisor will have
the ability to purchase the securities on behalf of the Fund on terms as
favorable as BHC has been able to purchase the same securities. Investment
decisions made by BHC are not always known to the public even immediately after
those decisions are made. The reputation which BHC enjoys in the investment
community often results in price movement in securities selected for inclusion
in the BHC portfolio, resulting in price appreciation. The price of the security
will likely be different by the time the Fund enters its purchase order, and its
brokerage arrangements may result in different commissions being paid for the
purchase of the same securities.
BHC is a corporation subject to income taxes. The Fund, if it qualifies and
remains qualified under Subchapter M of the Internal Revenue Code, will not be
subject to tax. Thus, the effect of income taxes paid by BHC is likely to be a
divergence of long-term investment performance between BHC and the Fund. Certain
investment decisions of BHC may be strongly guided by tax considerations not
applicable to the Fund. Accordingly, to the extent the Fund emulates BHC's
investment strategy, the Fund may enter into certain securities transactions, or
fail to sell certain securities, that would not necessarily be entered into if
the Fund were actively managed.
The Fund will be valued at net asset value, using the total of the securities
valued in the portfolio less the Fund's accrued liabilities, as a determinant of
total and per share value. BHC is a corporation, and its stock is traded on the
New York Stock Exchange. The investment return of the Fund will be dependent
solely upon the direct investments held by the Fund (i.e. net asset value). The
share price of BHC, in contrast, is based upon the market valuation of BHC as
that company's stock is traded on the NYSE. Factors taken into account by
investors buying and selling BHC shares may be dependent upon many factors (as
with any common stock), which will not necessarily be limited to the investments
held by BHC in its own portfolio.
Principal Risks of Investing in the Fund
While the Fund will invest primarily in common stocks and bonds traded in U.S.
securities markets, some of the Fund's investments may include foreign
securities, illiquid securities, and securities purchased subject to a
repurchase agreement or on a "when-issued" basis, which involve certain risks.
To the extent that equity securities will generally comprise the primary portion
of the Fund's portfolio, the Fund's net asset value will be subject to stock
market fluctuation, and a decline in the amount of your principal investment is
a risk of investing in the Fund. The Fund's net asset value may also fluctuate
due to fluctuation in the value of the fixed-income securities in the portfolio
as a result of changes in the market interest rate, downgrading of the rating of
a particular debt instrument, or other changes in the interest rate and fixed
income market environment. The Fund may borrow only under certain limited
conditions (including 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.
The Fund is a non-diversified portfolio under the 1940 Act, which means that it
may invest a greater proportion of its assets in the securities of a small
number of issuers than a diversified investment company. In this regard, the
Fund is not subject to the general limitation that it not invest more than 5% of
its total assets in the securities of a single issuer. As a result, because the
Fund is permitted greater flexibility to invest its assets in the obligations of
a single issuer it is exposed to increased risk of loss if such an investment
underperforms expectations. However, the Fund intends to limit its investments
so as to comply with diversification requirements imposed by the Internal
Revenue Code of 1986, as amended (the "Code"), for qualification as a "regulated
investment company." The Fund spreads investment risk by limiting its holdings
in any one company or industry. Nevertheless, the Fund will experience price
volatility, the extent of which will be affected by the types of securities and
techniques the Fund uses. The Advisor may use various investment techniques to
hedge risks, including derivatives, but there is no guarantee that these
strategies will work as intended.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund:
Shareholder Fees (fees paid directly from your investment)
Maximum sales charge (load) imposed on purchases
(as a percentage of offering price) ....................................4.50%
Redemption fee ...........................................................None
Annual Fund Operating Expenses (expenses that are
deducted from Fund assets) (as a percentage
of average daily net assets)
Management Fees...........................................................0.50%
Distribution and/or Service (12b-1) Fees..................................0.50%
Other Expenses............................................................0.65%1
----
Total ....................................................................1.65%
====
1 Estimated amounts for the current fiscal year are based on an estimated
average annual total net assets of at least $10 million. If the Fund does
not achieve this asset total, fund operating expenses could be higher.
EXAMPLE: This example shows you the expenses you may pay over time by investing
in the fund. It should help you compare the costs of investing in this fund
versus other funds. The conditions are that: (i) you invest $10,000 in the fund
for the period shown; (ii) you earn a 5% total return; and (iii) the fund's
expenses remain the same. Your actual costs may be higher or lower.
- ----------------------------- ------------------ -------------------
1 YEAR 3 YEAR
- ----------------------------- ------------------ -------------------
Fees $610 $947
- ----------------------------- ------------------ -------------------
MANAGEMENT OF THE FUND
The Fund is a series of New Providence Investment Trust (the "Trust"), which is
a registered open-end management investment company organized as a Massachusetts
business trust on July 9, 1997. The Trust currently operates one other series,
the New Providence Capital Growth Fund, which is managed by an affiliate of the
Fund's investment advisor. Series of the Trust are authorized to offer multiple
classes of shares, and the Fund offers both an Investor Class, the shares of
which are offered by this prospectus, and an Institutional Class of shares.
The Fund's investment advisor is Atlanta Investment Counsel, LLC ("AIC" or the
"Advisor") which, subject to the supervision and direction of the Trustees of
the Fund, has overall responsibility for the general management of the Fund. AIC
is an investment advisor registered under the Investment Advisers Act of 1940,
as amended, and a broker-dealer registered under the Securities Exchange Act of
1934, as amended ("1934 Act"). AIC is located at 2859 Paces Ferry Road, Suite
2125, Atlanta, Georgia 30339. Besides its activities with respect to the Fund,
AIC currently furnishes investment advice to other clients, including
individuals, pension and profit sharing plans, charitable organizations,
corporations, and other business entities.
A team of portfolio managers will be responsible for selecting investments on
behalf of the Fund. John K. Donaldson (controlling member of the Advisor), Kyle
Tomlin, CFA, and Shannon D. Coogle are responsible for day-to-day management of
the Fund. Mr. Donaldson is also the controlling member of another investment
advisor, New Providence Capital Management, L.L.C., an affiliate of AIC that
serves as investment advisor to the Trust's other series, the New Providence
Capital Growth Fund. Messrs. Donaldson and Tomlin have been with the Advisor
since its formation. Mr. Donaldson has been involved with that advisor and its
predecessors since 1987. Mr. Tomlin has served in portfolio management for the
firms since 1994 and a business associate of an investment company service
provider in 1993. Ms. Coogle has been associated with New Providence Capital
Management, L.L.C. since 1997.
As compensation for managing the Fund, the Fund pays AIC a monthly fee at the
annual rate of 0.50% of the first $500 million of the average daily net assets
of the Fund and 0.40% on assets over $500 million.
In addition to the management fees, the Fund pays all expenses not assumed by
AIC, including, without limitation: the fees and expenses of its independent
accountants and of its legal counsel; the costs of printing and mailing annual
and semi-annual reports to shareholders, proxy statements, prospectuses,
prospectus supplements, and statements of additional information; the costs of
printing registration statements; bank transaction charges and custodian's fees;
any proxy solicitors' fees and expenses; registration and/or filing fees; any
federal, state or local income or other taxes; any interest; any membership fees
of the Investment Company Institute and similar organizations; fidelity bond and
Trustees' liability insurance premiums; and any extraordinary expenses, such as
indemnification payments or damages awarded in litigation or settlements made.
All general Trust expenses are allocated among and charged to the assets of the
Trust's series on a basis that the Board of Trustees deems fair and equitable,
which may be on the basis of relative net assets of each series or the nature of
the services performed and relative applicability to each series.
As discussed in greater detail below under "Distribution of the Fund's Shares,"
the Investor Class shares may pay for certain distribution-related expenses in
connection with activities primarily intended to result in the sale of its
shares under a plan adopted under Rule 12b-1 of the 1940 Act.
THE ADMINISTRATOR
Pursuant to an agreement, The Nottingham Company (the "Administrator") assists
the Trust in the performance of its administrative responsibilities to the Fund,
coordinates the services of each vendor of services to the Fund, and provides
the Fund with other necessary administrative, fund accounting and compliance
services. In addition, the Administrator makes available the office space,
equipment, personnel and facilities required to provide such services to the
Fund.
THE TRANSFER AGENT
NC Shareholder Services, LLC ("NCSS") serves as the transfer agent and
dividend-disbursing agent of the Fund. NCSS's address is the same as the address
of the Fund.
BROKERAGE PRACTICES
In selecting brokers and dealers, AIC may consider research and brokerage
services furnished to either company or their affiliates. Subject to seeking the
most favorable net price and execution available, AIC and each Advisor may also
consider sales of shares of the Fund as a factor in the selection of brokers and
dealers. Certain securities trades will be cleared through Atlanta Investment
Group, a registered broker dealer affiliate of AIC and Distributor of this Fund.
The Trustees review the brokerage policies and rates regularly.
The 1940 Act generally prohibits the Fund from engaging in principal securities
transactions with an affiliate of AIC unless pursuant to an exemptive order from
the SEC. The Fund may apply for such exemptive relief. The Fund does not
consider broker-dealer affiliates of an investment advisor to one fund to be an
affiliate of the investment advisors to other funds for which the investment
advisor does not provide investment advice. The Fund has adopted procedures,
prescribed by Section 17(e)(2)(A) of the 1940 Act and Rule 17e-1 thereunder,
which are reasonably designed to provide that any commission it pays to
affiliates of AIC does not exceed the usual and customary broker's commission.
In addition, the Fund will adhere to Section 11(a) of the 1934 Act and any
applicable rules thereunder governing floor trading. The Fund has adopted
procedures permitting it to purchase securities, under certain restrictions
prescribed by a rule under the 1940 Act, in a public offering in which an
affiliate of AIC or Advisors is an underwriter.
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.
PURCHASING FUND SHARES
Investor Class shares are sold subject to a sales charge of 4.5%, so that the
term "offering price" includes the front-end sales load. Shares are redeemed at
net asset value. Shares may be purchased by any account managed by the Advisor
and any other broker-dealer authorized to sell shares in the Fund. The minimum
initial investment is $2,500 ($1,000 for Individual Retirement Accounts
("IRAs"), Keogh Plans, 401(k) Plans, or purchases under the Uniform Transfer to
Minors Act). The minimum additional investment is $250. The Fund may, in the
Advisor's sole discretion, accept certain accounts with less than the minimum
investment. The price at which a purchase or redemption is effected is based on
the next calculation of net asset value after an order is placed by a
shareholder investing in or redeeming from the Fund. Net asset value per share
is calculated for purchases and redemption of shares of the Fund by dividing the
value of total Fund assets, less liabilities (including Fund expenses, which are
accrued daily), by the total number of outstanding shares of that Fund. The net
asset value per share of the Fund is determined at the time trading closes on
the New York Stock Exchange (currently 4:00 p.m. Eastern time, Monday through
Friday), except on business holidays when the New York Stock Exchange is closed.
Regular Mail Orders. Payment for shares must be made by check or money order
from a U.S. bank and payable in U.S. dollars. If checks are returned due to
insufficient funds or other reasons, the Fund will charge a $20 fee or may
redeem shares of the Fund already owned by the purchaser to recover any such
loss. For regular mail orders, please complete the attached Fund Shares
Application and mail it, with your check made payable to the Fund, to:
Intrinsic Value Fund
Investor Class shares
c/o NC Shareholder Services, LLC
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
The application must contain your social security and Taxpayer Identification
Numbers ("TINs"). If you have applied for a social security number or TIN at the
time of completing your account application, please indicate this on the
application. Taxes are not withheld from distributions to U.S. investors if
certain IRS requirements regarding TINs are met.
Bank Wire Orders. Purchases may also be made through bank wire orders. To
establish a new account or add to an existing account by wire, please call the
Fund at 1-888-773-3863, before wiring funds, to advise it of the investment,
dollar amount, and the account identification number. Additionally, please have
your bank use the following wire instructions to:
First Union National Bank of North Carolina
Charlotte, North Carolina
ABA # 05300219
For the Intrinsic Value Fund - Investor Class shares
Acct. # 2000001______
For further credit to (shareholder's name and SS# or EIN#)
Additional Investments. You may also add to your account by mail or wire at any
time by purchasing shares at the then current public offering price. The minimum
additional investment is $250. Before adding funds by bank wire, please alert
the Fund by telephone at 1-800-773-3863 and following the above directions for
wire purchases. Mail orders should include, when possible, the "Invest by Mail"
stub which is attached to your Fund confirmation statement. Otherwise, please
identify your account in your letter.
Exchange Feature. You may exchange shares of the Fund for shares of any other
series of the Trust offered for sale in the state in which you reside. Shares
may be exchanged for shares of any other series of the Trust 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. Prior to making an investment decision or giving us your instructions
to exchange shares, please read the prospectus for the series in which you wish
to invest.
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 form 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.
The Board of Trustees 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 investment 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.
Rights of Accumulation. The sales charge applicable to a current purchase of
shares of the Fund by a person listed above is determined by adding the purchase
price of shares to be purchased to the aggregate value (at current offering
price) of shares of the Funds previously purchased and then owned, provided the
Distributor is notified by such person or his or her broker-dealer each time a
purchase is made which would so qualify. For example, a person who is purchasing
Intrinsic Value Fund shares with an aggregate value of $50,000 and who currently
owns shares of the Funds with a value of $50,000 would pay a sales charge of
3.75% of the offering price on the new investment.
Letter of Intent. Sales charges may also be reduced through an agreement to
purchase a specified quantity of shares over a designated thirteen-month period
by completing the "Letter of Intent" section of the Account Application.
Information about the "Letter of Intent" procedure, including its terms, is
contained on the back of the Account Application.
Group Plans. Shares of the Funds may be sold at a reduced or eliminated sales
charge to certain Group Plans under which a sponsoring organization makes
recommendations to, permits group solicitation of, or otherwise facilitates
purchases by, its employees, members or participants. Information about such
arrangements is available from the Distributor.
Stock Certificates. You do not have the option of receiving stock certificates
for your shares. Evidence of ownership will be given by issuance of periodic
account statements that will show the number of shares owned.
HOW TO REDEEM SHARES
Regular Mail Redemptions. Your request should be addressed to the Intrinsic
ValueFund, c/o NC Shareholder Services, LLC, 107 North Washington Street, Post
Office Box 4365, Rocky Mount, North Carolina 27803-0365. Your request for
redemption should include:
o Your letter of instruction specifying the account number and number of
shares, or the dollar amount, to be redeemed. This request must be signed
by all registered shareholders in the exact names in which they are
registered;
o Any required signature guarantees (see "Signature Guarantees" below); and
o 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 fifteen 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
receipt of the request for redemption will be used in processing the redemption
request.
Telephone and Bank Wire Redemptions. You may also redeem shares by telephone and
bank wire under certain limited conditions. The Fund will redeem shares in this
manner when so requested by the shareholder only if the shareholder confirms
redemption instructions in writing.
The Fund may rely upon confirmation of redemption requests transmitted via
facsimile (FAX# 919-972-1908). The confirmation instructions must include:
1) Designation of Class (Institutional or Investor),
2) Shareholder name and account number,
3) Number of shares or dollar amount to be redeemed,
4) Instructions for transmittal of redemption funds to the shareholder,
and
5) Shareholder signature as it appears on the application then on file
with the Fund.
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 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 in its discretion may choose to pass through to redeeming shareholders
any charges imposed by the Custodian for wire redemptions. The Custodian
currently charges the Fund $10.00 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 your account by redemption of
shares in your account. Your 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 account.
You may redeem shares, subject to the procedures outlined above, by calling the
Fund at 1-888-773-3863. Redemption proceeds will only be sent to the bank
account or person named in your Fund Shares Application currently on file with
the Fund. Telephone redemption privileges authorize the Fund to act on telephone
instructions from any person representing himself 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.
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 to change exchange privileges or telephone and bank wire redemption
service other than through your initial account application, and (3) redemption
requests 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 change
of registration, establishment or change in exchange privileges, or redemption
request.
Systematic Withdrawal Plan. A shareholder who owns shares of the Fund valued at
$2,500 or more at the current offering price 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. The shareholder may establish this service whether dividends and
distributions are reinvested in shares of the Fund or paid in cash. Call or
write the Fund for an application form.
All shares are purchased and redeemed in accordance with the Fund's Amended and
Restated Declaration of Trust and By-Laws. The Board of Trustees reserves the
right to redeem involuntarily 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 60-days written notice. If the shareholder brings his account net
asset value up to at least $1,000 during the notice period, the account will not
be redeemed. Redemptions from retirement plans may be subject to federal income
tax withholding.
Sales and redemptions of shares of the same class by the same shareholder on the
same day will be netted for the Fund. All redemption requests will be processed
and payment with respect thereto will normally be made within seven days after
tenders. The Fund may suspend redemption, if permitted by the 1940 Act, for any
period during which the New York Stock Exchange is closed or during which
trading is restricted by the Securities Exchange Commission ("SEC") or if the
SEC declares that an emergency exists. Redemptions may also be suspended during
other periods permitted by the SEC for the protection of the Fund's
shareholders. Additionally, during drastic economic and market changes,
telephone redemption privileges may be difficult to implement. Also, if the
Board of Trustees determines that it would be detrimental to the best interest
of the Fund's remaining shareholders to make payment in cash, the Fund may pay
redemption proceeds in whole or in part by a distribution-in-kind of readily
marketable securities.
DISTRIBUTION OF THE FUND'S SHARES
The Fund has adopted the Distribution Plan following Rule 12b-1 under the 1940
Act for the Investor Class shares of the Fund. Pursuant to the Distribution
Plan, the Fund compensates the Distributors from assets attributable to the
Investor Class shares for services rendered and expenses borne in connection
with activities primarily intended to result in the sale of the Fund's Investor
Class shares. It is anticipated that a portion of the amounts received by the
Distributors will be used to defray various costs incurred or paid by the
Distributors in connection with the printing and mailing of Fund prospectuses,
statements of additional information, any supplements thereto and shareholder
reports and holding seminars and sales meetings with wholesale and retail sales
personnel designed to promote the distribution of Investor Class shares. The
Distributors may also use a portion of the amounts received to provide
compensation to financial intermediaries and third-party broker-dealers for
their services in connection with the distribution of Investor Class shares.
Because the fees paid pursuant to Rule 12b-1 are paid out of the Fund's assets
on an on-going basis, these fees, over time, will increase the cost of your
investment and may cost you more than paying other types of sales loads.
The Distribution Plan provides that the Fund may pay annually up to 0.50% of the
average daily net assets of a Fund attributable to its Investor Class shares in
respect of activities primarily intended to result in the sale of Investor Class
shares. Under terms of the Distribution Plan and the Distribution Agreements,
the Fund is authorized to make payments monthly to the Distributors which may be
used to pay or reimburse entities providing distribution and shareholder
servicing with respect to the Investor Class shares for such entities' fees or
expenses incurred or paid in that regard.
The Distribution Plan is of a type known as a "compensation" plan because
payments are made for services rendered to the Fund with respect to Investor
Class shares regardless of the level of expenditures by the Distributors. The
Trustees will, however, take into account such expenditures for purposes of
reviewing operations under the Distribution Plan and concerning their annual
consideration of the Plan's renewal. The Distributors have indicated that they
expect their expenditures to include, without limitation: (a) the printing and
mailing of Fund prospectuses, statements of additional information, any
supplements thereto and shareholder reports for prospective Contract owners with
respect to the Investor Class shares of the Fund; (b) those relating to the
development, preparation, printing and mailing of advertisements, sales
literature and other promotional materials describing and/or relating to the
Investor Class shares of the Fund; (c) holding seminars and sales meetings
designed to promote the distribution of Fund Investor Class shares; (d)
obtaining information and providing explanations to wholesale and retail
distributors of Contracts regarding Fund investment objectives and policies and
other information about the Fund and its Funds, including the performance of the
Funds; (e) training sales personnel regarding the Investor Class shares of the
Fund; and (f) financing any other activity that the Distributors determine is
primarily intended to result in the sale of Investor Class shares.
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.
TAX CONSIDERATIONS
Under current federal income tax law, the Fund believes that the Fund is
entitled, and the Fund intends that the Fund shall be treated as a regulated
investment company ("RIC") under Subchapter M of the Code. As a RIC, a Fund will
not be subject to federal tax on its net investment income and net realized
capital gains to the extent such income and gains are timely distributed to its
shareholders. Accordingly, the Fund intends to distribute all of its net
investment income and net realized capital gains to its shareholders. Unless
otherwise requested by shareholders, dividend distributions will be reinvested
in full and fractional shares of the Fund. An exchange of the Fund's shares for
shares of another fund will be treated as a sale of the Fund's shares and any
gain on the transaction may be subject to federal income tax.
Although the Trust intends that it and the funds will be operated so that they
will have no federal income or excise tax liability, if any such liability is,
nevertheless, incurred, the investment performance of the Fund or funds
incurring such liability will be adversely affected. In addition, funds
investing in foreign securities and currencies may be subject to foreign taxes
which could reduce the investment performance of such fund.
Certain additional tax information appears in the Statement of Additional
Information.
PERFORMANCE INFORMATION
From time to time, the Fund may advertise the "average annual or cumulative
total return" and may compare the performance of the Funds with that of other
mutual Funds with similar investment objectives as listed in rankings prepared
by Lipper Analytical Services, Inc., or similar independent services monitoring
mutual Fund performance, and with appropriate securities or other relevant
indices. The "average annual total return" of a Fund refers to the average
annual compounded rate of return over the stated period that would equate an
initial investment in that Fund at the beginning of the period to its ending
redeemable value, assuming reinvestment of all dividends and distributions and
deduction of all recurring charges, other than charges and deductions which may
be imposed under the Contracts. Performance figures will be given for the recent
one, five and ten year periods and for the life of the Fund if it has not been
in existence for any such periods. When considering "average annual total
return" figures for periods longer than one year, it is important to note that a
Fund's annual total return for any given year might have been greater or less
than its average for the entire period. "Cumulative total return" represents the
total change in value of an investment in a Fund for a specified period (again
reflecting changes in Fund share prices and assuming reinvestment of Fund
distributions). The methods used to calculate "average annual and cumulative
total return" are described further in the Statement of Additional Information.
<PAGE>
INTRINSIC VALUE FUND
INVESTOR CLASS
Additional Information
Additional information about the Fund is available in the Fund's Statement of
Additional Information and in the Fund's Annual and Semiannual Report. The
Fund's Annual and Semiannual Reports include a discussion of market conditions
and investment strategies that significantly affected the Fund's performance
during its last fiscal year. Note: Since the Intrinsic Value Fund is a new
series of New Providence Investment Trust, the annual and semi-annual reports do
not yet contain information relating to the Intrinsic Value Fund.
The Annual and Semiannual Reports and the Statement of Additional Information
are available free of charge upon request by contacting us:
By telephone: 1-800-525-3863
By mail: Intrinsic Value Fund
Post Office Box 4365
Rocky Mount, NC 27803-4365
By e-mail: [email protected]
On the Internet: http://www.npcm.com/index.html
Information about the Fund can also be reviewed and copied at the Securities
Exchange Commission's ("Commission") Public Reference Room in Washington, D.C.
Inquiries on the operations of the public reference room may be made by calling
the Commission at 1-800-SEC-0330. Reports and other information about the Fund
are available on the Commission's Internet sit at http:\\www.sec.gov and copies
of this information may be obtained, upon payment of a duplicating fee, by
writing the Public Reference Section of the Commission, Washington, D.C.
20549-6009.
Investment Company Act file number 811-08295
<PAGE>
PART B
======
STATEMENT OF ADDITIONAL INFORMATION
INTRINSIC VALUE FUND
January 1, 1999
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
INVESTMENT ADVISOR..........................................................6
FUND ACCOUNTANT AND ADMINISTRATOR...........................................6
TRANSFER AGENT..............................................................6
CUSTODIAN...................................................................6
INDEPENDENT AUDITORS........................................................7
LEGAL COUNSEL...............................................................7
DISTRIBUTOR.................................................................7
ADDITIONAL INFORMATION ON PERFORMANCE..........................................8
PORTFOLIO TRANSACTIONS.........................................................9
SPECIAL SHAREHOLDER SERVICES..................................................10
PURCHASE OF SHARES............................................................11
REDEMPTION OF SHARES..........................................................14
NET ASSET VALUE...............................................................14
ADDITIONAL TAX INFORMATION....................................................15
CAPITAL SHARES AND VOTING.....................................................16
APPENDIX A....................................................................18
This Statement of Additional Information (the "SAI") is meant to be read in
conjunction with the Prospectus, dated January 1, 1999, and hereby incorporates
by reference the Prospectus in its entirety. 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 OBJECTIVES AND POLICIES
The Intrinsic Value Fund (the "Fund") is a non-diversified series of the Trust,
a registered open-end management company. The Trust was organized as a
Massachusetts business trust on July 9, 1997, under a Declaration of Trust. 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.
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 15% 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 15% of its net assets
were invested in illiquid securities, it would seek to take appropriate steps to
protect liquidity.
Historically, illiquid securities have included securities subject to
contractual or legal restrictions on resale because they have not been
registered under the 1933 Act, securities which are otherwise not readily
marketable and repurchase agreements having a maturity of longer than seven
days. Securities which have not been registered under the 1933 Act are referred
to as private placements or restricted securities and are purchased directly
from the issuer or in the secondary market. Mutual funds do not typically hold a
significant amount of these restricted or other illiquid securities because of
the potential for delays on resale and uncertainty in valuation. Limitations on
resale may have an adverse effect on the marketability of portfolio securities
and a mutual fund might be unable to dispose of restricted or other illiquid
securities promptly or at reasonable prices and might thereby experience
difficulty satisfying redemptions within seven days. A mutual fund might also
have to register such restricted securities in order to dispose of them
resulting in additional expense and delay. Adverse market conditions could
impede such a public offering of securities.
In recent years, however, a large institutional market has developed for certain
securities that are not registered under the 1933 Act including repurchase
agreements, commercial paper, foreign securities, municipal securities and
corporate bonds and notes. Institutional investors depend on an efficient
institutional market in which the unregistered security can be readily resold or
on an issuer's ability to honor a demand for repayment. The fact that there are
contractual or legal restrictions on resale to the general public or to certain
institutions may not be indicative of the liquidity of such investments.
Rule 144A Securities will be considered illiquid and therefore subject to a
Portfolio's limit on the purchase of illiquid securities unless the Board or its
delegates determines that the Rule 144A Securities are liquid. In reaching
liquidity decisions, the Board of Trustees and its delegates may consider, inter
alia, the following factors: (i) the unregistered nature of the security; (ii)
the frequency of trades and quotes for the security; (iii) the number of dealers
wishing to purchase or sell the security and the number of other potential
purchasers; (iv) dealer undertakings to make a market in the security; and (v)
the nature of the security and the nature of the marketplace trades (e.g., the
time needed to dispose of the security, the method of soliciting offers and the
mechanics of the transfer).
Futures Contracts
Futures Transactions. A futures contract is a bilateral agreement to buy or sell
a security (or deliver a cash settlement price, in the case of a contract
relating to an index or otherwise not calling for physical delivery at the end
of trading in the contracts) for a set price in the future. Futures contracts
are designated by boards of trade which have been designated "contracts markets"
by the Commodities Futures Trading Commission ("CFTC"). No purchase price is
paid or received when the contract is entered into. Instead, the Fund upon
entering into a futures contract (and to maintain the Fund's open positions in
futures contracts) would be required to deposit with its custodian in a
segregated account in the name of the futures broker an amount of cash, United
States Government securities, suitable money market instruments, or liquid,
high-grade debt securities, known as "initial margin." The margin required for a
particular futures contract is set by the exchange on which the contract is
traded, and may be significantly modified from time to time by the exchange
during the term of the contract. Futures contracts are customarily purchased and
sold on margin that may range upward from less than 5% of the value of the
contract being traded. By using futures contracts as a risk management
technique, given the greater liquidity in the futures market than in the cash
market, it may be possible to accomplish certain results more quickly and with
lower transaction costs.
If the price of an open futures contract changes (by increase in the case of a
sale or by decrease in the case of a purchase) so that the loss on the futures
contract reaches a point at which the margin on deposit does not satisfy margin
requirements, the broker will require an increase in the margin. However, if the
value of a position increases because of favorable price changes in the futures
contract so that the margin deposit exceeds the required margin, the broker will
pay the excess to the Fund. These subsequent payments called "variation margin,"
to and from the futures broker, are made on a daily basis as the price of the
underlying assets fluctuate making the long and short positions in the futures
contract more or less valuable, a process known as "marking to the market." The
Fund expects to earn interest income on their initial and variation margin
deposits.
The Fund will incur brokerage fees when it purchases and sells futures
contracts. Positions taken in the futures markets are not normally held until
delivery or cash settlement is required, but are instead liquidated through
offsetting transactions which may result in a gain or a loss. While futures
positions taken by the Fund will usually be liquidated in this manner, the Fund
may instead make or take delivery of underlying securities whenever it appears
economically advantageous for the Fund to do so. A clearing organization
associated with the exchange on which futures are traded assumes responsibility
for closing out transactions and guarantees that as between the clearing members
of an exchange, the sale and purchase obligations will be performed with regard
to all positions that remain open at the termination of the contract. Securities
Index Futures Contracts. Purchases or sales of securities index futures
contracts may be used in an attempt to protect the Fund's current or intended
investments from broad fluctuations in securities prices. A securities index
futures contract does not require the physical delivery of securities, but
merely provides for profits and losses resulting from changes in the market
value of the contract to be credited or debited at the close of each trading day
to the respective accounts of the parties to the contract. On the contract's
expiration date a final cash settlement occurs and the futures positions are
simply closed out. Changes in the market value of a particular index futures
contract reflect changes in the specified index of securities on which the
future is based.
By establishing an appropriate "short" position in index futures, the Fund may
also seek to protect the value of its portfolio against an overall decline in
the market for such securities. Alternatively, in anticipation of a generally
rising market, the Fund can seek to avoid losing the benefit of apparently low
current prices by establishing a "long" position in securities index futures and
later liquidating that position as particular securities are in fact acquired.
To the extent that these hedging strategies are successful, the Fund will be
affected to a lesser degree by adverse overall market price movements than would
otherwise be the case.
Options on Futures Contracts. The Fund may purchase exchange-traded call and put
options on futures contracts and write exchange-traded call options on futures
contracts. These options are traded on exchanges that are licensed and regulated
by the CFTC for the purpose of options trading. A call option on a futures
contract gives the purchaser the right, in return for the premium paid, to
purchase a futures contract (assume a "long" position) at a specified exercise
price at any time before the option expires. A put option gives the purchaser
the right, in return for the premium paid, to sell a futures contract (assume a
"short" position), for a specified exercise price, at any time before the option
expires.
The Fund will write only options on futures contracts which are "covered." The
Fund will be considered "covered" with respect to a put option it has written
if, so long as it is obligated as a writer of the put, the Fund segregates with
its custodian cash, United States Government securities or liquid securities at
all times equal to or greater than the aggregate exercise price of the puts it
has written (less any related margin deposited with the futures broker). The
Fund will be considered "covered" with respect to a call option it has written
on a debt security future if, so long as it is obligated as a writer of the
call, the Fund owns a security deliverable under the futures contract. The Fund
will be considered "covered" with respect to a call option it has written on a
securities index future if the Fund owns, so long as the Fund is obligated as
the writer of the call, the Fund of securities the price changes of which are,
in the opinion of the Manager, expected to replicate substantially the movement
of the index upon which the futures contract is based.
Upon the exercise of a call option, the writer of the option is obligated to
sell the futures contract (to deliver a "long" position to the option holder) at
the option exercise price, which will presumably be lower than the current
market price of the contract in the futures market. Upon exercise of a put, the
writer of the option is obligated to purchase the futures contract (deliver a
"short" position to the option holder) at the option exercise price which will
presumably be higher than the current market price of the contract in the
futures market. When the holder of an option exercises it and assumes a long
futures position, in the case of a call, or a short futures position, in the
case of a put, its gain will be credited to its futures margin account, while
the loss suffered by the writer of the option will be debited to its account and
must be immediately paid by the writer. However, as with the trading of futures,
most participants in the options markets do not seek to realize their gains or
losses by exercise of their option rights. Instead, the holder of an option will
usually realize a gain or loss by buying or selling an offsetting option at a
market price that will reflect an increase or a decrease from the premium
originally paid. If the Fund writes options on futures contracts, the Fund will
receive a premium but will assume a risk of adverse movement in the price of the
underlying futures contract comparable to that involved in holding a futures
position. If the option is not exercised, the Fund will realize a gain in the
amount of the premium, which may partially offset unfavorable changes in the
value of securities held in or to be acquired for the Fund. If the option is
exercised, the Fund will incur a loss in the option transaction, which will be
reduced by the amount of the premium it has received, but which will offset any
favorable changes in the value of its portfolio securities or, in the case of a
put, lower prices of securities it intends to acquire.
Options on futures contracts can be used by the Fund to hedge substantially the
same risks as might be addressed by the direct purchase or sale of the
underlying futures contracts. If the Fund purchases an option on a futures
contract, it may obtain benefits similar to those that would result if it held
the futures position itself. Purchases of options on futures contracts may
present less risk in hedging than the purchase and sale of the underlying
futures contracts since the potential loss is limited to the amount of the
premium plus related transaction costs.
The purchase of put options on futures contracts is a means of hedging the Fund
of securities against a general decline in market prices. The purchase of a call
option on a futures contract represents a means of hedging against a market
advance when the Fund is not fully invested.
The writing of a call option on a futures contract constitutes a partial hedge
against declining prices of the underlying securities. If the futures price at
expiration is below the exercise price, the Fund will retain the full amount of
the option premium, which provides a partial hedge against any decline that may
have occurred in the value of the Fund's holdings of securities. The writing of
a put option on a futures contract is analogous to the purchase of a futures
contract in that it hedges against an increase in the price of securities the
Fund intends to acquire. However, the hedge is limited to the amount of premium
received for writing the put.
Limitations on Purchase and Sale of Futures Contracts and Options on Futures
Contracts. The Fund will not engage in transactions in futures contracts and
related options for speculation. In addition, the Fund will not purchase or sell
futures contracts or related options unless either (1) the futures contracts or
options thereon are purchased for "bona fide hedging" purposes (as that term is
defined under the CFTC regulations) or (2) if purchased for other purposes, the
sum of the amounts of initial margin deposits on the Fund's existing futures and
premiums required to establish non-hedging positions, less the amount by which
any such options positions are "in-the-money" (as defined under CFTC
regulations) would not exceed 5% of the liquidation value of the Fund's total
assets. In instances involving the purchase of futures contracts or the writing
of put options thereon by the Fund, an amount of cash and cash equivalents,
equal to the cost of such futures contracts or options written (less any related
margin deposits), will be deposited in a segregated account with its custodian,
thereby insuring that the use of such futures contracts and options is
unleveraged. In instances involving the sale of futures contracts or the writing
of call options thereon by the Fund, the securities underlying such futures
contracts or options will at all times be maintained by the Fund or, in the case
of index futures and related options, the Fund will own securities the price
changes of which are, in the opinion of the Manager, expected to replicate
substantially the movement of the index upon which the futures contract or
option is based.
Options
Writing Call Options. A call option is a contract which gives the purchaser of
the option (in return for a premium paid) the right to buy, and the writer of
the option (in return for a premium received) the obligation to sell, the
underlying security at the exercise price at any time prior to the expiration of
the option, regardless of the market price of the security during the option
period. A call option on a security is covered, for example, when the writer of
the call option owns the security on which the option is written (or on a
security convertible into such a security without additional consideration)
throughout the option period.
The Fund will write covered call options both to reduce the risks associated
with certain of its investments and to increase total investment return through
the receipt of premiums. In return for the premium income, the Fund will give up
the opportunity to profit from an increase in the market price of the underlying
security above the exercise price so long as its obligations under the contract
continue, except insofar as the premium represents a profit. Moreover, in
writing the call option, the Fund will retain the risk of loss should the price
of the security decline. The premium is intended to offset that loss in whole or
in part. Unlike the situation in which the Fund owns securities not subject to a
call option, the Fund, in writing call options, must assume that the call may be
exercised at any time prior to the expiration of its obligation as a writer, and
that in such circumstances the net proceeds realized from the sale of the
underlying securities pursuant to the call may be substantially below the
prevailing market price.
The Fund may terminate its obligation under an option it has written by buying
an identical option. Such a transaction is called a "closing purchase
transaction." The Fund will realize a gain or loss from a closing purchase
transaction if the amount paid to purchase a call option is less or more than
the amount received from the sale of the corresponding call option. Also,
because increases in the market price of a call option will generally reflect
increases in the market price of the underlying security, any loss resulting
from the exercise or closing out of a call option is likely to be offset in
whole or part by unrealized appreciation of the underlying security owned by the
Fund. When an underlying security is sold from the Fund's securities portfolio,
the Fund will effect a closing purchase transaction so as to close out any
existing covered call option on that underlying security.
Writing Put Options. The writer of a put option becomes obligated to purchase
the underlying security at a specified price during the option period if the
buyer elects to exercise the option before its expiration date. If the Fund
writes a put option, the Fund will be required to "cover" it, for example, by
depositing and maintaining in a segregated account with its custodian cash, U.S.
Government securities or other liquid securities having a value equal to or
greater than the exercise price of the option.
The Fund may write put options either to earn additional income in the form of
option premiums (anticipating that the price of the underlying security will
remain stable or rise during the option period and the option will therefore not
be exercised) or to acquire the underlying security at a net cost below the
current value (e.g., the option is exercised because of a decline in the price
of the underlying security, but the amount paid by the Fund, offset by the
option premium, is less than the current price). The risk of either strategy is
that the price of the underlying security may decline by an amount greater than
the premium received. The premium which the Fund receives from writing a put
option will reflect, among other things, the current market price of the
underlying security, the relationship of the exercise price to that market
price, the historical price volatility of the underlying security, the option
period, supply and demand and interest rates. The Fund may effect a closing
purchase transaction to realize a profit on an outstanding put option or to
prevent an outstanding put option from being exercised.
Purchasing Put and Call Options. The Fund may purchase put options on securities
to protect their holdings against a substantial decline in market value. The
purchase of put options on securities will enable the Fund to preserve, at least
partially, unrealized gains in an appreciated security in its portfolio without
actually selling the security. In addition, the Fund will continue to receive
interest or dividend income on the security. The Fund may also purchase call
options on securities to close out positions. The Fund may sell put or call
options they have previously purchased, which could result in a net gain or loss
depending on whether the amount received on the sale is more or less than the
premium and other transaction costs paid on the put or call option which was
bought.
Securities Index Options. The Fund may write covered put and call options and
purchase call and put options on securities indexes for the purpose of hedging
against the risk of unfavorable price movements adversely affecting the value of
the Fund's securities or securities it intends to purchase. The Fund writes only
"covered" options. A call option on a securities index is considered covered,
for example, if, so long as the Fund is obligated as the writer of the call, it
holds securities the price changes of which are, in the opinion of the Manager,
expected to replicate substantially the movement of the index or indexes upon
which the options written by the Fund are based. A put on a securities index
written by the Fund will be considered covered if, so long as it is obligated as
the writer of the put, the Fund segregates with its custodian cash, United
States Government securities or other liquid high-grade debt obligations having
a value equal to or greater than the exercise price of the option. Unlike a
stock option, which gives the holder the right to purchase or sell a specified
stock at a specified price, an option on a securities index gives the holder the
right to receive a cash "exercise settlement amount" equal to (i) the difference
between the exercise price of the option and the value of the underlying stock
index on the exercise date, multiplied by (ii) a fixed "index multiplier."
A securities index fluctuates with changes in the market value of the securities
so included. For example, some securities index options are based on a broad
market index such as the S&P 500 Index or the NYSE Composite Index, or a
narrower market index such as the S&P 100 Index. Indexes may also be based on an
industry or market segment such as the AMEX Oil and Gas Index or the Computer
and Business Equipment Index.
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. 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);
3. Invest for the purpose of exercising control or management of another
issuer;
4. 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);
5. 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;
6. Participate on a joint or joint and several basis in any trading account in
securities;
7. Invest its assets in the securities of one or more investment companies
except to the extent permitted by the 1940 Act; or
8. 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 15% 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; or
6. Write, purchase, or sell puts, calls, straddles, spreads, or combinations
thereof or futures contracts or related options, except to the extent
permitted by the Fund's prospectus and Statement of Additional Information
as may be amended from time to time.
MANAGEMENT
Trustees and Officers. Following are the Trustees and Officers of the Trust,
their age, their present position with the Trust or the Fund, and their
principal occupation during the past five years. There are no "interested
persons" (as defined in the 1940 Act) by virtue of their affiliation with either
the Trust or the Advisor (*) who serve as trustees.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------- ------------------------- ---------------------------------------------------------
- ------------------------------------------- ------------------------- ---------------------------------------------------------
Jack E. Brinson, 64 Trustee President
1105 Panola Street Brinson Investment Co.;
Tarboro, North Carolina 27886 President
Brinson Chevrolet, Inc.
Tarboro, North Carolina
- ------------------------------------------- ------------------------- ---------------------------------------------------------
Kyle A. Tomlin, CFA, 27 Portfolio Manager Portfolio Management
2859 Paces Ferry Road, Suite 2125 New Providence Capital Management, L.L.C.
Atlanta, Georgia 30339 (Advisor to the Fund)
Atlanta, Georgia since 1996;
Previously, Portfolio Management and Client Services
Donaldson & Co., Incorporated
(Distributor to the Fund)
Atlanta, Georgia 1994-1996;
Previously, Business Associate, Investment Advisory Group
SEI Corporation
Wayne, Pennsylvania 1993-1994;
Previously, Student
Georgia Institute of Technology
Atlanta, Georgia
- ------------------------------------------- ------------------------- ---------------------------------------------------------
Shannon D. Coogle, 29 Research Analyst Research / Client Services
2859 Paces Ferry Road, Suite 2125 New Providence Capital Management, L.L.C.
Atlanta, Georgia 30339 (Advisor to the Fund)
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 Treasurer Legal and Compliance Director
105 North Washington Street The Nottingham Company
Rocky Mount, North Carolina 27802 (Administrator to the Fund)
Rocky Mount, North Carolina, since 1995;
Previously,
Operations Manager
Tar Heel Medical, Inc.
Nashville, North Carolina
- ------------------------------------------- ------------------------- ---------------------------------------------------------
C. Frank Watson, III, 28 Secretary Chief Operating Officer
105 North Washington Street The Nottingham Company
Rocky Mount, North Carolina 27802 (Administrator to the Fund)
Rocky Mount, North Carolina
- ------------------------------------------- ------------------------- ---------------------------------------------------------
</TABLE>
Compensation. Trustees and Officers of the Trust who are interested persons of
the Trust or the Advisor will receive no salary or fees from the Trust. Other
Trustees will receive $2,000 each year plus $250 per Fund per meeting attended
in person and $100 per Fund per meeting attended by telephone. The Trust will
also reimburse each Trustee for his or her travel and other expenses relating to
attendance at such meetings.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- --------------------------- ------------------------ ------------------------ ------------------------ ------------------------
Name of Person Aggregate Compensation Pension or Retirement Estimated Annual Total Compensation
Benefits Benefits Upon From Fund and Fund
Retirement Complex Paid to
Directors
- --------------------------- ------------------------ ------------------------ ------------------------ ------------------------
Jack E. Brinson $2,550 N/A N/A $2,550
- --------------------------- ------------------------ ------------------------ ------------------------ ------------------------
</TABLE>
Principal Holders of Voting Securities. As of October 20, 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 there were no shareholders who owned of record more than 5% of the
outstanding shares of beneficial interest of the Fund.
Investment Advisor. Information about Atlanta Investment Counsel, L.L.C. (the
"Advisor"), 2859 Paces Ferry Road, Suite 2125, Atlanta, Georgia 30339, and its
duties and compensation as Advisor is contained in the Prospectus. The Advisor
supervises the Fund's investments pursuant to an Investment Advisory Agreement
(the "Advisory Agreement"). The Advisory Agreement is effective for a two-year
period and will be renewed thereafter only so long as such renewal and
continuance is specifically approved at least annually by the Board of Trustees
or by vote of a majority of the Fund's outstanding voting securities, provided
the continuance is also approved by a majority of the Trustees who are not
parties to the Advisory Agreement or interested persons of any such party. The
Advisory Agreement is terminable without penalty on 60-days' notice by the Board
of Trustees of the Trust or by vote of a majority of the outstanding voting
securities of the Fund. The Advisory Agreement provides that it will terminate
automatically in the event of its assignment.
The Advisor will receive a monthly management fee equal to an annual rate of
0.75% of the Fund's net assets.
Under the Advisory Agreement, the Advisor is not liable for any error of
judgment or mistake of law or for any loss suffered by the Fund in connection
with the performance of such Agreement, except a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services; or a
loss resulting from willful misfeasance, bad faith, or gross negligence on the
part of the Advisor in the performance of its duties; or from its reckless
disregard of its duties and obligations under the Agreement.
John K. Donaldson controls the Advisor. Mr. Donaldson also controls the
Distributor and serves as its president. Mr. Donaldson is also the controlling
member of another Investment Advisor, New Providence Capital Management, advisor
to the New Providence Capital Growth Fund. Mr. Kyle A. Tomlin is an affiliate of
the Fund and the Advisor. Mr. Tomlin serves as the Portfolio Manager to the Fund
and as a member of Portfolio Management to the Advisor.
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.
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.
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.
Legal Counsel. Dechert Price & Rhoads serves as legal counsel to the New
Providence Investment Trust and the Fund.
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 0.50% 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.
The Distribution Plan is of a type known as a "compensation" plan because
payments are made for services rendered to the Fund with respect to Investor
Class shares regardless of the level of expenditures by the Distributors. The
Trustees will, however, take into account such expenditures for purposes of
reviewing operations under the Distribution Plan and in connection with their
annual consideration of the Plan's renewal. The Distributors have indicated that
they expect their expenditures to include, without limitation: (a) the printing
and mailing of Fund prospectuses, statements of additional information, any
supplements thereto and shareholder reports for prospective Contract owners with
respect to the Investor Class shares of the Fund; (b) those relating to the
development, preparation, printing and mailing of advertisements, sales
literature and other promotional materials describing and/or relating to the
Investor Class shares of the Fund; (c) holding seminars and sales meetings
designed to promote the distribution of Fund Investor Class shares; (d)
obtaining information and providing explanations to wholesale and retail
distributors of Contracts regarding Fund investment objectives and policies and
other information about the Fund and its Funds, including the performance of the
Funds; (e) training sales personnel regarding the Investor Class shares of the
Fund; and (f) financing any other activity that the Distributors determine is
primarily intended to result in the sale of Investor Class shares.
ADDITIONAL INFORMATION ON PERFORMANCE
From time to time, the total return of the Fund may be quoted in advertisements,
sales literature, shareholder reports, or other communications to shareholders.
The Fund computes the "average annual total return" of the Fund by determining
the average annual compounded rates of return during specified periods that
equate the initial amount invested to the ending redeemable value of such
investment. This is done by determining the ending redeemable value of a
hypothetical $1,000 initial payment. This calculation is as follows:
P(1+T)n = ERV
Where: T = average annual total return.
ERV = ending redeemable value at the end of the period
covered by the computation of a hypothetical $1,000
payment made at the beginning of the period.
P = hypothetical initial payment of $1,000 from which the
maximum sales load is deducted.
n = period covered by the computation, expressed in terms
of years.
The Fund may also compute the aggregate total return of the Fund, which is
calculated in a similar manner, except that the results are not annualized.
The calculation of average annual total return and aggregate total return assume
an initial $1,000 investment and that there is a reinvestment of all dividends
and capital gain distributions on the reinvestment dates during the period. The
ending redeemable value is determined by assuming complete redemption of the
hypothetical investment and the deduction of all nonrecurring charges at the end
of the period covered by the computations.
These performance quotations should not be considered as representative of the
Fund's performance for any specified period in the future.
The Fund's performance may be compared in advertisements, sales literature,
shareholder reports, and other communications to the performance of other mutual
funds having similar objectives or to standardized indices or other measures of
investment performance. In particular, the Fund may compare its performance to
the S&P 500 Index, which is generally considered to be representative of the
performance of unmanaged common stocks that are publicly traded in the United
States securities markets. The Fund may also measure its performance against the
Lipper Growth Fund Index, which ranks the performance of mutual funds that have
an objective of growth of capital. Comparative performance may also be expressed
by reference to a ranking prepared by a mutual fund monitoring service or by one
or more newspapers, newsletters, or financial periodicals. The Fund may also
occasionally cite statistics to reflect its volatility and risk. The Fund may
also compare its performance to other published reports of the performance of
unmanaged portfolios of companies. The performance of such unmanaged portfolios
generally does not reflect the effects of dividends or dividend reinvestment.
The Fund may also compare its performance to other reports of the performance of
managed accounts of the Advisor, such as the Capital Growth Account, as more
fully described in the Prospectus under "Other Information - Prior Performance
of Advisor." Of course, there can be no assurance the Fund will experience the
same results. Performance comparisons may be useful to investors who wish to
compare the Fund's past performance to that of other mutual funds and investment
products. Of course, past performance is not a guarantee of future results.
The Fund's performance fluctuates on a daily basis largely because net earnings
and net asset value per share fluctuate daily. Both net earnings and net asset
value per share are factors in the computation of total return as described
above.
As indicated, from time to time the Fund may advertise its performance compared
to similar funds or portfolios using certain indices, reporting services, and
financial publications. These may include the following:
o Lipper Analytical Services, Inc., ranks funds in various fund
categories by making comparative calculations using total return. Total
return assumes the reinvestment of all capital gains distributions and
income dividends and takes into account any change in net asset value
over a specific period of time.
o Morningstar, Inc., an independent rating service, is the publisher of
the bi-weekly Mutual Fund Values. Mutual Fund Values rates more than
1,000 NASDAQ-listed mutual funds of all types according to their
risk-adjusted returns. The maximum rating is five stars, and ratings
are effective for two weeks.
Investors may use such indices in addition to the Fund's Prospectus to obtain a
more complete view of the Fund's performance before investing. Of course, when
comparing the Fund's performance to any index, factors such as composition of
the index and prevailing market conditions should be considered in assessing the
significance of such comparisons. When comparing funds using reporting services,
or total return, investors should take into consideration any relevant
differences in funds such as permitted portfolio compositions and methods used
to value portfolio securities and to compute offering price. Advertisements and
other sales literature for the Fund may quote total returns that are calculated
on non-standardized base periods. The total returns represent the historic
change in the value of an investment in the Fund based on monthly reinvestment
of dividends over a specified period of time.
From time to time the Fund may include in advertisements and other
communications charts and illustrations relating to inflation and the effects of
inflation on the dollar, including the purchasing power of the dollar at various
rates of inflation. The Fund may also disclose from time to time information
about its portfolio allocation and holdings at a particular date (including
ratings of securities assigned by independent rating services such as S&P and
Moody's). The Fund may also depict the historical performance of the securities
in which the Fund may invest over periods reflecting a variety of market or
economic conditions either alone or in comparison with alternative investments,
performance indices of those investments, or economic indicators. The Fund may
also include in advertisements and in materials furnished to present and
prospective shareholders statements or illustrations relating to the
appropriateness of types of securities and/or mutual funds that may be employed
to meet specific financial goals, such as saving for retirement, children's
education, or other future needs.
PORTFOLIO TRANSACTIONS
Subject to the general supervision of the Trust's Board of Trustees, the Advisor
is responsible for, makes decisions with respect to, and places orders for all
purchases and sales of portfolio securities for the Fund.
The annualized portfolio turnover rate for the Fund is calculated by dividing
the lesser of purchases or sales of portfolio securities for the reporting
period by the monthly average value of the portfolio securities owned during the
reporting period. The calculation excludes all securities whose maturities or
expiration dates at the time of acquisition are one year or less. Portfolio
turnover of the Fund may vary greatly from year to year as well as within a
particular year, and may be affected by cash requirements for redemption of
shares and by requirements that enable the Fund to receive favorable tax
treatment. Portfolio turnover will not be a limiting factor in making Fund
decisions, and the Fund may engage in short-term trading to achieve its
investment objectives.
Purchases of money market instruments by the Fund are made from dealers,
underwriters, and issuers. The Fund currently does not expect to incur any
brokerage commission expense on such transactions because money market
instruments are generally traded on a "net" basis by a dealer acting as
principal for its own account without a stated commission. The price of the
security, however, usually includes a profit to the dealer. Securities purchased
in underwritten offerings include a fixed amount of compensation to the
underwriter, generally referred to as the underwriter's concession or discount.
When securities are purchased directly from or sold directly to an issuer, no
commissions or discounts are paid.
Transactions on U.S. stock exchanges involve the payment of negotiated brokerage
commissions. On exchanges on which commissions are negotiated, the cost of
transactions may vary among different brokers. Transactions in the
over-the-counter market are generally on a net basis (i.e., without commission)
through dealers, or otherwise involve transactions directly with the issuer of
an instrument.
The Fund may participate, if and when practicable, in bidding for the purchase
of Fund securities directly from an issuer in order to take advantage of the
lower purchase price available to members of a bidding group. The Fund will
engage in this practice, however, only when the Advisor, in its sole discretion,
believes such practice to be otherwise in the Fund's interest.
In executing Fund transactions and selecting brokers or dealers, the Advisor
will seek to obtain the best overall terms available for the Fund. In assessing
the best overall terms available for any transaction, the Advisor shall consider
factors it deems relevant, including the breadth of the market in the security,
the price of the security, the financial condition and execution capability of
the broker or dealer, and the reasonableness of the commission, if any, both for
the specific transaction and on a continuing basis. The sale of Fund shares may
be considered when determining the firms that are to execute brokerage
transactions for the Fund. In addition, the Advisor is authorized to cause the
Fund to pay a broker-dealer which furnishes brokerage and research services a
higher commission than that which might be charged by another broker-dealer for
effecting the same transaction, provided that the Advisor determines in good
faith that such commission is reasonable in relation to the value of the
brokerage and research services provided by such broker-dealer, viewed in terms
of either the particular transaction or the overall responsibilities of the
Advisor to the Fund. Such brokerage and research services might consist of
reports and statistics relating to specific companies or industries; general
summaries of groups of stocks or bonds and their comparative earnings and
yields; or broad overviews of the stock, bond, and government securities
markets; and the economy.
Supplementary research information so received is in addition to, and not in
lieu of, services required to be performed by the Advisor and does not reduce
the advisory fees payable by the Fund. The Trustees will periodically review any
commissions paid by the Fund to consider whether the commissions paid over
representative periods of time appear to be reasonable in relation to the
benefits inuring to the Fund. It is possible that certain of the supplementary
research or other services received will primarily benefit one or more other
investment companies or other accounts for which the Advisor exercises
investment discretion. Conversely, the Fund may be the primary beneficiary of
the research or services received as a result of securities transactions
effected for such other account or investment company.
The Advisor may also utilize a brokerage firm affiliated with the Trust or the
Advisor (including the Distributor, an affiliate of the Advisor) if it believes
it can obtain the best execution of transactions from such broker. The Fund will
not execute portfolio transactions through, acquire securities issued by, make
savings deposits in, or enter into repurchase agreements with the Advisor or an
affiliated person of the Advisor (as such term is defined in the 1940 Act)
acting as principal, except to the extent permitted by the Securities and
Exchange Commission ("SEC"). In addition, the Fund will not purchase securities
during the existence of any underwriting or selling group relating thereto of
which the Advisor, or an affiliated person of the Advisor, is a member, except
to the extent permitted by the SEC. Under certain circumstances, the Fund may be
at a disadvantage because of these limitations in comparison with other
investment companies that have similar investment objectives but are not subject
to such limitations.
Investment decisions for the Fund will be made independently from those for any
other series of the Trust, if any, and for any other investment companies and
accounts advised or managed by the Advisor. Such other investment companies and
accounts may also invest in the same securities as the Fund. To the extent
permitted by law, the Advisor may aggregate the securities to be sold or
purchased for the Fund with those to be sold or purchased for other investment
companies or accounts in executing transactions. When a purchase or sale of the
same security is made at substantially the same time on behalf of the Fund and
another investment company or account, the transaction will be averaged as to
price and available investments allocated as to amount in a manner which the
Advisor believes to be equitable to the Fund and such other investment company
or account. In some instances, this investment procedure may adversely affect
the price paid or received by the Fund or the size of the position obtained or
sold by the Fund.
SPECIAL SHAREHOLDER SERVICES
The Fund offers the following shareholder services:
Regular Account. The regular account allows for voluntary investments to be made
at any time. Available to individuals, custodians, corporations, trusts,
estates, corporate retirement plans, and others, investors are free to make
additions and withdrawals to or from their account as often as they wish. When
an investor makes an initial investment in the Fund, a shareholder account is
opened in accordance with the investor's registration instructions. Each time
there is a transaction in a shareholder account, such as an additional
investment or the reinvestment of a dividend or distribution, the shareholder
will receive a confirmation statement showing the current transaction and all
prior transactions in the shareholder account during the calendar year to date,
along with a summary of the status of the account as of the transaction date. As
stated in the Prospectus, share certificates are not issued.
Automatic Investment Plan. The automatic investment plan enables shareholders to
make regular monthly or quarterly investments in shares through automatic
charges to their checking account. With shareholder authorization and bank
approval, the Fund will automatically charge the checking account for the amount
specified ($100 minimum) which will be automatically invested in shares at the
public offering price on or about the 21st day of the month. The shareholder may
change the amount of the investment or discontinue the plan at any time by
writing to the Fund.
Systematic Withdrawal Plan. Shareholders owning shares with a value of $2,500 or
more may establish a Systematic Withdrawal Plan. A shareholder may receive
monthly or quarterly payments, in amounts of not less than $100 per payment, by
authorizing the Fund to redeem the necessary number of shares periodically (each
month, or quarterly in the months of March, June, September, and December) in
order to make the payments requested. The Fund has the capability of
electronically depositing the proceeds of the systematic withdrawal directly to
the shareholder's personal bank account ($5,000 minimum per bank wire).
Instructions for establishing this service are included in the Fund Shares
Application, enclosed in the Prospectus, or are available by calling the Fund.
If the shareholder prefers to receive his systematic withdrawal proceeds in
cash, or if such proceeds are less than the $5,000 minimum for a bank wire,
checks will be made payable to the designated recipient and mailed within seven
days of the valuation date. If the designated recipient is other than the
registered shareholder, the signature of each shareholder must be guaranteed on
the application (see "Signature Guarantees" in the Prospectus). A corporation
(or partnership) must also submit a "Corporate Resolution" (or "Certification of
Partnership") indicating the names, titles, and required number of signatures
authorized to act on its behalf. The application must be signed by a duly
authorized officer(s) and the corporate seal affixed. No redemption fees are
charged to shareholders under this plan. Costs in conjunction with the
administration of the plan are borne by the Fund. Shareholders should be aware
that such systematic withdrawals may deplete or use up entirely their initial
investment and may result in realized long-term or short-term capital gains or
losses. The Systematic Withdrawal Plan may be terminated at any time by the Fund
upon 60-days' written notice or by a shareholder upon written notice to the
Fund. Applications and further details may be obtained by calling the Fund at
1-800-525-3863 or by writing to:
Intrinsic Value Fund
c/o NC Shareholder Services, LLC
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.
Sales Charges. The public offering price of Investor Class shares of the Fund
equals net asset value plus a sales charge. Capital Investment Group, Inc. (the
"Distributor"), Post Office Box 32249, Raleigh, North Carolina 27622, receives
this sales charge as Distributor and may reallow it in the form of dealer
discounts and brokerage commissions as follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
Sales Sales
Charge As Charge As Dealers Discounts
% of Net % of Public and Brokerage
Amount of Transaction Amount Offering Commissions as % of
At Public Offering Price Invested Price Public Offering Price
- -----------------------------------------------------------------------------------------------------
Less than $100,000.................... 4.71% 4.50% 4.00%
=====================================================================================================
</TABLE>
From time to time dealers who receive dealer discounts and brokerage commissions
from the Distributor may reallow all or a portion of such dealer discounts and
brokerage commissions to other dealers or brokers. Pursuant to the terms of the
Distribution Agreement, the sales charge payable to the Distributor and the
dealer discounts may be suspended, terminated or amended.
The dealer discounts and brokerage commissions schedule above applies to all
dealers who have agreements with the Distributor. The Distributor, at its
expense, may also 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. None of the aforementioned
compensation is paid for by the Fund or its shareholders.
Reduced Sales Charges
Concurrent Purchases. For purposes of qualifying for a lower sales charge
for Investor Class shares, investors have the privilege of combining concurrent
purchases of the Fund and one or more future series of the Trust affiliated with
the Advisor and sold with a sales charge. For example, if a shareholder
concurrently purchases shares in one of the future series of the Trust
affiliated with the Advisor and sold with a sales charge at the total public
offering price of $50,000, and Investor Shares in the Fund at the total public
offering price of $50,000, the sales charge would be that applicable to a
$100,000 purchase as shown in the appropriate table above. This privilege may be
modified or eliminated at any time or from time to time by the Trust without
notice thereof.
Rights of Accumulation. Pursuant to the right of accumulation, investors
are permitted to purchase Investor Class shares at the public offering price
applicable to the total of (a) the total public offering price of the Investor
Shares of the Fund then being purchased plus (b) an amount equal to the then
current net asset value of the purchaser's combined holdings of the shares of
all of the series of the Trust affiliated with the Advisor and sold with a sales
charge. To receive the applicable public offering price pursuant to the right of
accumulation, investors must, at the time of purchase, provide sufficient
information to permit confirmation of qualification, and confirmation of the
purchase is subject to such verification. This right of accumulation may be
modified or eliminated at any time or from time to time by the Trust without
notice.
Letters of Intent. Investors may qualify for a lower sales charge for
Investor Class shares by executing a letter of intent. A letter of intent allows
an investor to purchase Investor Class shares of the Fund over a 13-month period
at reduced sales charges based on the total amount intended to be purchased plus
an amount equal to the then current net asset value of the purchaser's combined
holdings of the shares of all of the series of the Trust affiliated with the
Advisor and sold with a sales charge. Thus, a letter of intent permits an
investor to establish a total investment goal to be achieved by any number of
purchases over a 13-month period. Each investment made during the period
receives the reduced sales charge applicable to the total amount of the intended
investment.
The letter of intent does not obligate the investor to purchase, or the Fund to
sell, the indicated amount. If such amount is not invested within the period,
the investor must pay the difference between the sales charge applicable to the
purchases made and the charges previously paid. If such difference is not paid
by the investor, the Distributor is authorized by the investor to liquidate a
sufficient number of shares held by the investor to pay the amount due. On the
initial purchase of shares, if required (or subsequent purchases, if necessary)
shares equal to at least five percent of the amount indicated in the letter of
intent will be held in escrow during the 13-month period (while remaining
registered in the name of the investor) for this purpose. The value of any
shares redeemed or otherwise disposed of by the investor prior to termination or
completion of the letter of intent will be deducted from the total purchases
made under such letter of intent.
A 90-day back-dating period can be used to include earlier purchases at the
investor's cost (without a retroactive downward adjustment of the sales charge);
the 13-month period would then begin on the date of the first purchase during
the 90-day period. No retroactive adjustment will be made if purchases exceed
the amount indicated in the letter of intent. Investors must notify the
Administrator or the Distributor whenever a purchase is being made pursuant to a
letter of intent.
Investors electing to purchase shares pursuant to a letter of intent should
carefully read the letter of intent, which is included in the Fund Shares
Application accompanying this Prospectus or is otherwise available from the
Administrator or the Distributor. This letter of intent option may be modified
or eliminated at any time or from time to time by the Trust without notice.
Reinvestments. Investors may reinvest, without a sales charge, proceeds
from a redemption of Investor Shares in Investor Shares or in shares of another
series of the Trust affiliated with the Advisor and sold with a sales charge,
within 90 days after the redemption. If the other Class charges a sales charge
higher than the sales charge the investor paid in connection with the shares
redeemed, the investor must pay the difference. In addition, the shares of the
Class to be acquired must be registered for sale in the investor's state of
residence. The amount that may be so reinvested may not exceed the amount of the
redemption proceeds, and a written order for the purchase of such shares must be
received by the Fund or the Distributor within 90 days after the effective date
of the redemption.
If an investor realizes a gain on the redemption, the reinvestment will not
affect the amount of any federal capital gains tax payable on the gain. If an
investor realizes a loss on the redemption, the reinvestment may cause some or
all of the loss to be disallowed as a tax deduction, depending on the number of
shares purchased by reinvestment and the period of time that has elapsed after
the redemption, although for tax purposes, the amount disallowed is added to the
cost of the shares acquired upon the reinvestment.
Purchases by Related Parties and Groups. Reductions in sales charges apply
to purchases by a single "person," including an individual, members of a family
unit, consisting of a husband, wife and children under the age of 21 purchasing
securities for their own account, or a trustee or other fiduciary purchasing for
a single fiduciary account or single trust estate.
Reductions in sales charges also apply to purchases by individual members of a
"qualified group." The reductions are based on the aggregate dollar value of
shares purchased by all members of the qualified group and still owned by the
group plus the shares currently being purchased. For purposes of this paragraph,
a qualified group consists of a "company," as defined in the 1940 Act, which has
been in existence for more than six months and which has a primary purpose other
than acquiring shares of the Fund at a reduced sales charge, and the "related
parties" of such company. For purposes of this paragraph, a "related party" of a
company is: (i) any individual or other company who directly or indirectly owns,
controls, or has the power to vote five percent or more of the outstanding
voting securities of such company; (ii) any other company of which such company
directly or indirectly owns, controls, or has the power to vote five percent of
more of its outstanding voting securities; (iii) any other company under common
control with such company; (iv) any executive officer, director or partner of
such company or of a related party; and (v) any partnership of which such
company is a partner.
Sales at Net Asset Value. The Fund may sell shares at a purchase price
equal to the net asset value of such shares, without a sales charge, to
Trustees, officers, and employees of the Trust, the Fund and the Advisor, and to
employees and principals of related organizations and their families, and
certain parties related thereto, including clients and related accounts of the
Advisor. Clients of investment advisors and financial planners may also purchase
Investor Shares at net asset value if the investment advisor or financial
planner has made arrangements to permit them to do so with the Distributor. The
public offering price of shares of the Fund may also be reduced to net asset
value per share in connection with the acquisition of the assets of or merger or
consolidation with a personal holding company or a public or private investment
company.
Exchange Feature. Investors will have the privilege of exchanging shares of the
Fund for shares of any other series of the Trust to be established by Advisor.
An exchange 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, and is a taxable transaction. 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 previously
paid in connection with the shares being exchanged. For example, if a 2% sales
charge was paid on shares that are exchanged into a series with a 3% sales
charge, there would be an additional sales charge of 1% on the exchange.
Exchanges may only be made by investors in states where shares of the other
series are qualified for sale. An investor may direct the Fund to exchange his
shares by writing to the Fund at its principal office. The request must be
signed exactly as the investor's name appears on the account, and it must also
provide the account number, number of shares to be exchanged, the name of the
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. Notwithstanding the
foregoing, exchanges of shares may only be within the same class or type of
class of shares involved. For example, Investor Shares may not be exchanged for
Institutional 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
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.
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 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 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.
Values are determined according to accepted accounting practices and all laws
and regulations that apply. The assets of the Fund are valued as follows:
o 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.
o Securities that are listed on an exchange and which are not traded on the
valuation date are valued at the bid price.
o 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.
o Temporary cash investments with maturities of 60 days or less will be
valued at amortized cost, which approximates market value.
o 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.
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 was organized as a Massachusetts business trust on July 9, 1997 under
a Declaration of Trust. The Declaration of Trust currently authorizes the
issuance of shares in two series: The New Providence Capital Growth Fund and The
Intrinsic Value Fund. Shares of The Intrinsic Value 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.
<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>
PART C
======
THE NEW PROVIDENCE INVESTMENT TRUST
FORM N-1A
OTHER INFORMATION
ITEM 23. Exhibits
--------
(a) Declaration of Trust.(1)
(b) By-Laws.(1)
(c) Not Applicable.
(d)(1) Investment Advisory Agreement between the New Providence Capital Growth
Fund and New Providence Capital Management, L.L.C., as Advisor.
(d)(2) Form of Investment Advisory Agreement between the Intrinsic Value Fund
and Atlanta Investment Counsel, L.L.C., as Advisor.
(e)(1) Distribution Agreement between the Registrant and Donaldson & Co.,
Inc., as Distributor.
(e)(2) Form of Amended and Restated Distribution Agreement between the
Registrant and Donaldson & Co., Inc., as Distributor.
(f) Not Applicable.
(g) Custodian Agreement between the Registrant and First Union National
Bank of North Carolina, as Custodian.
(h)(1) Fund Accounting and Compliance Administration Agreement between the
Registrant and The Nottingham Company, Inc., as Administrator.
(h)(2) Dividend Disbursing and Transfer Agent Agreement between the New
Providence Investment Trust and NC Shareholder Services, LLC, as
Transfer Agent.
(i) Opinion and Consent of Dechert Price & Rhoads regarding the legality of
the securities being registered with respect to the Intrinsic Value
Fund.
(j) Consent of Deloitte & Touche LLP, Independent Public Accountants.
(k) Not applicable.
(l) Initial Capital Agreements.(2)
(m)(1) Plan of Distribution Pursuant to Rule 12b-1 Plan for the New Providence
Capital Growth Fund.
(m)(2) Form of Plan of Distribution Pursuant to Rule 12b-1 Plan for the
Intrinsic Value Fund.
(n) Financial Data Schedules.(3)
(o) Form of Rule 18f-3 Plan.
(p) Copy of Power of Attorney.(2)
- -----------------------
(1) Incorporated herein by reference to Registrant's Registration Statement
on Form N-1A filed July 16, 1997 (File No. 333-31359).
(2) Incorporated herein by reference to Registrant's Registration Statement
on Form N-1A Pre-Effective Amendment No. 1 filed September 25, 1997
(File No. 333-31359).
(3) Incorporated herein by reference to Registrant's Registration Statement
on Form N-1A Post-Effective Amendment No. 1 filed September 29, 1998
(File No. 333-31359).
ITEM 24. Persons Controlled by or Under Common Control with the Registrant
-----------------------------------------------------------------
No person is controlled by or under common control with the Registrant.
<PAGE>
ITEM 25. 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 26. Business and other Connections of the Investment Advisor
--------------------------------------------------------
See the Statements of Additional Information section entitled
"Management" of the Fund and the Investment Advisors' Form ADV filed
with the Commission, which is hereby incorporated by reference, for the
activities and affiliations of the officers and directors of the
Investment Advisors of the Registrant. Except as so provided, to the
knowledge of Registrant, none of the directors or executive officers of
the Investment Advisors are 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 Advisors currently
serve as investment advisors to numerous institutional and individual
clients.
<PAGE>
ITEM 27. Principal Underwriter
---------------------
(a) Donaldson & Co., Inc. is underwriter and distributor for The New
Providence Capital Growth Fund and the Intrinsic Value 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
(c) Not applicable
ITEM 28. 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, NC Shareholder Services, LLC Transfer
Agent to the Registrant, New Providence Capital Management, L.L.C.,
Advisor to the New Providence Capital Growth Fund, or by Atlanta
Investment Counsel, L.L.C., Advisor to the Intrinsic Value Fund.
The address of The Nottingham Company is 105 North Washington Street,
Post Office Drawer 69, Rocky Mount, North Carolina 27802-0069. The
address of NC Shareholder Services, LLC 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 Atlanta
Investment Counsel, L.L.C. is 2859 Paces Ferry Road, Suite 2125,
Atlanta, GA 30339. The address of First Union National Bank of North
Carolina is Two First Union Center, Charlotte, North Carolina
28288-1151.
ITEM 29. Management Services
-------------------
Not Applicable.
ITEM 30. Undertakings
------------
Registrant undertakes:
To furnish each person to whom a Prospectus is delivered with a copy
of the latest annual report of each series of Registrant to
shareholders upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, the Registrant has duly caused this
Post-Effective Amendment No. 2 to its Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized, in the City of Rocky Mount,
and State of North Carolina on this 22nd day of October, 1998.
NEW PROVIDENCE INVESTMENT TRUST
By: /s/ C. Frank Watson, III
_____________________________
C. Frank Watson, III
Secretary
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Post-Effective Amendment No. 2 to the Registration Statement has been signed
below by the following persons in the capacities and on the date indicated.
Signature Title Date
- --------- ----- ----
*
_______________________ Trustee October 22, 1998
Jack E. Brinson
*
_______________________ Treasurer October 22, 1998
Julian G. Winters
* By: /s/ C. Frank Watson, III
__________________________ Dated: October 22, 1998
C. Frank Watson, III
Attorney-in-Fact
<PAGE>
NEW PROVIDENCE INVESTMENT TRUST
EXHBIT INDEX
Exhibit Description
- ------- -----------
Exhibit (d)(1) Investment Advisory Agreement between the New Providence
Capital Growth Fund and New Providence Capital Management,
L.L.C.
Exhibit (d)(2) Form of Investment Advisory Agreement between the Intrinsic
Value Fund and Atlanta Investment Counsel, L.L.C.
Exhibit (e)(1) Distribution Agreement between Registrant and Donaldson &
Co., Inc.
Exhibit (e)(2) Form of Amended and Restated Distribution Agreement between
Registrant and Donaldson & Co., Inc.
Exhibit (g) Custodian Agreement between the Registrant and First Union
National Bank of North Carolina, as Custodian.
Exhibit (h)(1) Fund Accounting and Compliance Administration Agreement
between the Registrant and The Nottingham Company, Inc., as
Administrator.
Exhibit (h)(2) Dividend Disbursing and Transfer Agent Agreement between the
New Providence Investment Trust and NC Shareholder Services,
LLC, as Transfer Agent.
Exhibit (i) Opinion and Consent of Dechert Price & Rhoads.
Exhibit (j) Consent of Deloitte & Touche LLP, Independent Public
Accountants.
Exhibit (m)(1) Plan of Distribution Pursuant to Rule 12b-1 Plan for the New
Providence Capital Growth Fund.
Exhibit (m)(2) Form of Plan of Distribution Pursuant to Rule 12b-1 Plan for
the Intrinsic Value Fund.
Exhibit (o) Form of Rule 18f-3 Plan.
EXHIBIT (d)(1)
==============
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT, entered into as of the date the registration statement of the
New Providence Capital Growth Fund of the New Providence Investment Trust
becomes effective with the Securities and Exchange Commission, by and between
NEW PROVIDENCE INVESTMENT TRUST (the "Trust"), a Massachusetts Business Trust,
and NEW PROVIDENCE CAPITAL MANAGEMENT, LLC, a Georgia Limited Liability Company
(the "Advisor"), registered as an investment advisor under the Investment
Advisors Act of 1940, as amended (the "Advisors Act").
WHEREAS, the Trust is registered as a diversified, open-end management
investment company of the series type under the Investment Company Act of 1940,
as amended (the "1940 Act"); and
WHEREAS, the Trust desires to retain the Advisor to furnish investment advisory
and administrative services to NEW PROVIDENCE CAPITAL GROWTH FUND series of the
Trust, and the Advisor is willing to so furnish such services;
NOW THEREFORE, in consideration of the promises and mutual covenants herein
contained, it is agreed between the parties hereto as follows:
1. Appointment. The Trust hereby appoints the Advisor to act as Investment
Advisor to NEW PROVIDENCE CAPITAL GROWTH FUND (the "Fund") series of
the Trust for the period and on the terms set forth in this Agreement.
The Advisor accepts such appointment and agrees to furnish the services
herein set forth, for the compensation herein provided.
2. Delivery of Documents. The Trust has furnished the Investment Advisor
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 and the resolution
approved by a majority of the outstanding shares of the Fund
authorizing the appointment of the Advisor and approving this
Agreement;
(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"), relating to shares of beneficial interest of the Fund
(herein called the "Shares") as filed with the Securities and
Exchange Commission ("SEC") and all amendments thereto;
(e) The Fund's Prospectus (such Prospectus, as presently in effect
and all amendments and supplements thereto are herein called the
"Prospectus").
The Trust will furnish the Advisor from time to time with copies,
properly certified or authenticated, of all amendments of or
supplements to the foregoing at the same time as such documents are
required to be filed with the SEC.
3. Management. Subject to the supervision of the Trust's Board of
Trustees, the Advisor will provide a continuous investment program for
the Fund, including investment research and management with respect to
all securities, investments, cash and cash equivalents in the Fund. The
Advisor will determine from time to time what securities and other
investments will be purchased, retained or sold by the Fund. The
Advisor will provide the services under this Agreement in accordance
with the Fund's investment objectives, policies and restrictions as
stated in its Prospectus. The Advisor further agrees that it:
<PAGE>
(a) Will conform its activities to 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 under this Agreement;
(b) Will place orders pursuant to its investment determinations for
the Fund either directly with the issuer or with any broker or
dealer. In placing orders with brokers or dealers, the Advisor
will attempt to obtain the best net price and the most favorable
execution of its orders. Consistent with this obligation, when
the Advisor believes two or more brokers or dealers are
comparable in price and execution, the Advisor may prefer: (i)
brokers and dealers who provide the Fund with research advice
and other services, or who recommend or sell Trust shares, and
(ii) brokers who are affiliated with the Fund or its Advisor;
provided, however, that in no instance will portfolio securities
be purchased from or sold to the Advisor or any affiliated
person of the Advisor in principal transactions;
(c) Will provide certain executive personnel for the Fund as may be
mutually agreed upon from time to time with the Board of
Trustees, the salaries and expenses of such personnel to be
borne by the Advisor unless otherwise mutually agreed upon; and
(d) Will provide, at its own cost, all office space, facilities and
equipment necessary for the conduct of its advisory activities
on behalf of the Fund.
4. Services Not Exclusive. The advisory services furnished by the Advisor
hereunder are not to be deemed exclusive, and the Advisor shall be free
to furnish similar services to others so long as its services under
this Agreement are not impaired thereby; provided, however, that
without the written consent of the Trustees, the Advisor will not serve
as investment advisor to any other investment company having a similar
investment objective to that of the Fund.
5. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Advisor hereby agrees that all records which it
maintains for the benefit of the Fund are the property of the Fund and
further agrees to surrender promptly to the Fund any of such records
upon the Fund's request. The Advisor further agrees to preserve for the
periods prescribed by Rule 31a-2 under the 1940 Act the records
required to be maintained by it pursuant to Rule 31a-1 under the 1940
Act that are not maintained by others on behalf of the Fund.
6. Expenses. During the term of this Agreement, the Advisor will pay all
expenses incurred by it in connection with its investment advisory
services pertaining to the Fund. In the event that there is no
distribution plan under Rule 12b-1 of the 1940 Act in effect for the
Fund, the Advisor will pay, out of the Advisor's resources generated
from sources other than fees received from the Fund, the entire cost of
the promotion and sale of Trust shares.
Notwithstanding the foregoing, the Fund shall pay the expenses and
costs of the following:
(a) Taxes, interest charges and extraordinary expenses;
(b) Brokerage fees and commissions with regard to portfolio
transactions of the Fund;
(c) Fees and expenses of the custodian of the Fund's portfolio
securities;
(d) Fees and expenses of the Fund's administrator, transfer and
dividend disbursing agent and the Fund's fund accounting agent
or, if the Fund performs any such services without an agent,
the costs of the same;
<PAGE>
(e) Auditing and legal expenses;
(f) Cost of maintenance of the Fund's existence as a legal entity;
(g) Compensation of trustees who are not interested persons of the
Advisor as law defines that term;
(h) Costs of Trust meetings;
(i) Federal and State registration or qualification fees and
expenses;
(j) Costs of setting in type, printing and mailing Prospectuses,
reports and notices to existing shareholders;
(k) The investment advisory fee payable to the Advisor, as
provided in paragraph 7 herein; and
(l) Plan of Distribution expenses, but only in accordance with the
Plan of Distribution as approved by the shareholders of the
Fund.
7. Compensation. The Trust will pay the Advisor and the Advisor will
accept as full compensation an investment advisory fee, based upon the
daily average net assets of each Fund, computed at the end of each
month and payable within five (5) business days thereafter, based upon
the schedule attached hereto as Exhibit A.
8.(a) Limitation of Liability. The Advisor shall not be liable for any error
of judgment, mistake of law or for any other loss whatsoever suffered
by the Fund in connection with the performance of this 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 reckless disregard by
it of its obligations and duties under this Agreement.
8.(b) Indemnification of Advisor. Subject to the limitations set forth in
this Subsection 8(b), the Fund shall indemnify, defend and hold
harmless (from the assets of the Trust or Trusts to which the conduct
in question relates) the Advisor 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
Advisor 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 with respect to the receipt of compensation for services; or (ii)
willful misfeasance, bad faith or gross negligence on the part of the
Advisor 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 Advisor 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
Advisor was not liable by reason of Disabling Conduct, (ii) dismissal
of a court action or an administrative proceeding against the Advisor
for insufficiency of evidence of Disabling Conduct, or (iii) a
reasonable determination, based upon a review of the facts, that the
Advisor 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 Fund 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 Advisor (but excluding amounts paid in satisfaction of
judgments, in compromise or as fines or penalties), may be paid from
time to time by the Fund or Trust to which the conduct in question
related in advance of the final disposition of any such action, suit or
proceeding; provided, that the Advisor shall have undertaken to repay
the amounts so paid if it is ultimately determined that indemnification
of such expenses is not authorized under this Subsection 8(b) and if
(i) the Advisor shall have provided security for such undertaking, (ii)
the Fund 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 Advisor
ultimately will be entitled to indemnification hereunder.
<PAGE>
As to any matter disposed of by a compromise payment by the Advisor
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 Advisor of any amount paid to the Advisor in
accordance with either of such clauses as indemnification of the
Advisor is subsequently adjudicated by a court of competent
jurisdiction not to have acted in good faith in the reasonable belief
that the Advisor's action was in or not opposed to the best interest of
the Fund or to have been liable to the Fund 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 Advisor 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 Fund, and other persons may be entitled by contract or
otherwise under law, nor the power of the Fund 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 Fund hereunder to pay the
indemnification required by this Subsection 8(b) including, without
limitation, to the extent needed, to determine whether the Advisor 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 Advisor 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 upon
the date the registration statement of the Trust containing the Fund's
Prospectus is declared effective by the Securities and Exchange
Commission and, unless sooner terminated as provided herein, shall
continue in effect for two years. Thereafter, this Agreement shall be
renewable for successive periods of one year each, provided such
continuance is specifically approved annually:
(a) By the vote of a majority of those members of the Board of
Trustees who are not parties to this Agreement or interested
persons of any such party (as that term is defined in the 1940
Act), cast in person at a meeting called for the purpose of
voting on such approval; and
(b) By vote of either the Board of Trustees or a majority (as that
term is defined in the 1940 Act) of the outstanding voting
securities of the Fund.
Notwithstanding the foregoing, this Agreement may be terminated by the
Fund or by the Advisor at any time on sixty (60) days' written notice,
without the payment of any penalty, provided that termination by the
Fund must be authorized either by vote of the Board of Trustees or by
vote of a majority of the outstanding voting securities of the Fund.
This Agreement will automatically terminate in the event of its
assignment (as that term is defined in the 1940 Act).
<PAGE>
10. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by a written
instrument signed by the party against which enforcement of the change,
waiver, discharge or termination is sought. No material amendment of
this Agreement shall be effective until approved by vote of the holders
of a majority of the Fund's outstanding voting securities (as defined
in the 1940 Act).
11. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect. If
any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby. This Agreement shall be
binding and shall inure to the benefit of the parties hereto and their
respective successors.
12. Applicable Law. This Agreement shall be construed in accordance with,
and governed by, the laws of the State of North Carolina.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
ATTEST: NEW PROVIDENCE INVESTMENT TRUST
By: /s/ C. Frank Watson, III By: /s/ Jack Brinson
___________________________ __________________________
Title: Secretary Title: Chairman
________________________ _______________________
ATTEST: NEW PROVIDENCE CAPITAL MANAGEMENT, INC.
By: /s/ Kyle Tomlin By: /s/ John K. Donaldson
___________________________ __________________________
Title: Portfolio Manager Title: President
________________________ _______________________
<PAGE>
EXHIBIT A
INVESTMENT ADVISOR'S COMPENSATION SCHEDULE
For the services delineated in the INVESTMENT ADVISORY AGREEMENT, the Investment
Advisor shall be compensated monthly, as of the last day of each month, within
five business days of the month end, a fee based upon the daily average net
assets of the Fund according to the following schedule.
Annual
Net Assets Fee
---------- ------
On all Assets 0.75%
EXHIBIT (d)(2)
==============
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT, entered into as of the _________________________, by and between
NEW PROVIDENCE INVESTMENT TRUST (the "Trust"), a Massachusetts Business Trust,
and Atlanta Investment Counsel, LLC, a Georgia Limited Liability Company (the
"Advisor"), registered as an investment advisor under the Investment Advisors
Act of 1940, as amended (the "Advisors Act").
WHEREAS, the Trust is registered as an open-end management investment company of
the series type under the Investment Company Act of 1940, as amended (the "1940
Act"); and
WHEREAS, the Trust desires to retain the Advisor to furnish investment advisory
and administrative services to the series of the Trust identified in Appendix A
(each a "Fund"), and the Advisor is willing to so furnish such services;
NOW THEREFORE, in consideration of the promises and mutual covenants herein
contained, it is agreed between the parties hereto as follows:
1. Appointment. The Trust hereby appoints the Advisor to act as Investment
Advisor to the Intrinsic Value Fund (the "Fund"), a series of the Trust
for the period and on the terms set forth in this Agreement. The
Advisor accepts such appointment and agrees to furnish the services set
forth herein, for the compensation as indicated in Appendix A.
2. Delivery of Documents. The Trust has furnished the Investment Advisor
with copies properly certified or authenticated of each of the
following:
(a) The Trust's Declaration of Trust, as filed with the Commonwealth
of Massachusetts (the "Declaration");
(b) The Trust's By-Laws (the "By-Laws"");
(c) Resolutions of the Trust's Board of Trustees and the resolution
approved by a majority of the outstanding shares of the Fund
authorizing the appointment of the Advisor and approving this
Agreement;
(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"), relating to shares of beneficial interest of the Fund
(the "Shares") as filed with the Securities and Exchange
Commission ("SEC") and all amendments thereto;
(e) The Fund's Prospectus (the "Prospectus").
The Trust will furnish the Advisor from time to time with copies,
properly certified or authenticated, of all amendments of or
supplements to the foregoing at the same time as such documents are
required to be filed with the SEC.
3. Management. Subject to the supervision of the Trust's Board of
Trustees, the Advisor will provide a continuous investment program for
the Fund, including investment research and management with respect to
all securities, investments, cash and cash equivalents in the Fund. The
Advisor will determine from time to time what securities and other
investments will be purchased, retained or sold by the Fund. The
Advisor will provide the services under this Agreement in accordance
with the Fund's investment objectives, policies and restrictions as
stated in its Prospectus. The Advisor further agrees that it:
<PAGE>
(a) Will conform its activities to 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 under this Agreement;
(b) Will place orders pursuant to its investment determinations for
the Fund either directly with the issuer or with any broker or
dealer. In placing orders with brokers or dealers, the Advisor
will attempt to obtain the best net price and the most favorable
execution of its orders. Consistent with this obligation, when
the Advisor believes two or more brokers or dealers are
comparable in price and execution, the Advisor may prefer: (i)
brokers and dealers who provide the Fund with research advice
and other services, or who recommend or sell Trust shares, and
(ii) brokers who are affiliated with the Fund or its Advisor;
provided, however, that in no instance will portfolio securities
be purchased from or sold to the Advisor or any affiliated
person of the Advisor in principal transactions;
(c) Will provide certain executive personnel for the Fund as may be
mutually agreed upon from time to time with the Board of
Trustees, the salaries and expenses of such personnel to be
borne by the Advisor unless otherwise mutually agreed upon; and
(d) Will provide, at its own cost, all office space, facilities and
equipment necessary for the conduct of its advisory activities
on behalf of the Fund.
4. Services Not Exclusive. The advisory services furnished by the Advisor
hereunder are not to be deemed exclusive, and the Advisor shall be free
to furnish similar services to others so long as its services under
this Agreement are not impaired thereby; provided, however, that
without the written consent of the Trustees, the Advisor will not serve
as investment advisor to any other investment company having a similar
investment objective to that of the Fund.
5. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Advisor hereby agrees that all records which it
maintains for the benefit of the Fund are the property of the Fund and
further agrees to surrender promptly to the Fund any of such records
upon the Fund's request. The Advisor further agrees to preserve for the
periods prescribed by Rule 31a-2 under the 1940 Act the records
required to be maintained by it pursuant to Rule 31a-1 under the 1940
Act that are not maintained by others on behalf of the Fund.
6. Expenses. During the term of this Agreement, the Advisor will pay all
expenses incurred by it in connection with its investment advisory
services pertaining to the Fund. The Advisor will pay, out of the
Advisor's resources, the entire cost of the promotion and sale of Trust
shares, including the preparation of the prospectus and other
documents. The Advisor will provide other information and services,
other than services of outside counsel or independent accountants or
investment advisory services to be provided by any Adviser under an
Advisory Agreement, required in connection with the preparation of all
registration statements and Prospectuses, Prospectus supplements, SAIs,
all annual, semiannual, and periodic reports to shareholders of the
Trust, regulatory authorities, or others, and all notices and proxy
solicitation materials, furnished to shareholders of the Trust or
regulatory authorities, and all tax returns.
Notwithstanding the foregoing, the Fund shall pay the expenses and
costs of the following:
(a) Taxes, interest charges and extraordinary expenses;
(b) Brokerage fees and commissions with regard to portfolio
transactions of the Fund;
(c) Fees and expenses of the custodian of the Fund's portfolio
securities;
(d) Fees and expenses of the Fund's administrator, transfer and
dividend disbursing agent and the Fund's fund accounting agent
or, if the Fund performs any such services without an agent,
the costs of the same;
(e) Auditing and legal expenses;
(f) Cost of maintenance of the Fund's existence as a legal entity;
(g) Compensation of trustees who are not interested persons of the
Advisor as law defines that term;
(h) Costs of Trust meetings;
(i) Federal and State registration or qualification fees and
expenses;
(j) Costs of setting in type, printing and mailing Prospectuses,
reports and notices to existing shareholders;
(k) The investment advisory fee payable to the Advisor, as
provided in paragraph 7 herein; and
(l) Plan of Distribution expenses, but only in accordance with the
Plan of Distribution as approved by the shareholders of the
Fund.
<PAGE>
7. Compensation. The Trust will pay the Advisor and the Advisor will
accept as full compensation an investment advisory fee, based upon the
daily average net assets of each Fund, computed at the end of each
month and payable within five (5) business days thereafter, based upon
the schedule attached hereto as Appendix A.
8.(a) Limitation of Liability. The Advisor shall not be liable for any error
of judgment, mistake of law or for any other loss whatsoever suffered
by the Fund in connection with the performance of this 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 reckless disregard by
it of its obligations and duties under this Agreement.
8.(b) Indemnification of Advisor. Subject to the limitations set forth in
this Subsection 8(b), the Fund shall indemnify, defend and hold
harmless (from the assets of the Trust or Trusts to which the conduct
in question relates) the Advisor 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
Advisor 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 with respect to the receipt of compensation for services; or (ii)
willful misfeasance, bad faith or gross negligence on the part of the
Advisor 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 Advisor 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
Advisor was not liable by reason of Disabling Conduct, (ii) dismissal
of a court action or an administrative proceeding against the Advisor
for insufficiency of evidence of Disabling Conduct, or (iii) a
reasonable determination, based upon a review of the facts, that the
Advisor 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 Fund 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 Advisor (but excluding amounts paid in satisfaction of
judgments, in compromise or as fines or penalties), may be paid from
time to time by the Fund or Trust to which the conduct in question
related in advance of the final disposition of any such action, suit or
proceeding; provided, that the Advisor shall have undertaken to repay
the amounts so paid if it is ultimately determined that indemnification
of such expenses is not authorized under this Subsection 8(b) and if
(i) the Advisor shall have provided security for such undertaking, (ii)
the Fund 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 Advisor
ultimately will be entitled to indemnification hereunder.
<PAGE>
As to any matter disposed of by a compromise payment by the Advisor
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 Advisor of any amount paid to the Advisor in
accordance with either of such clauses as indemnification of the
Advisor is subsequently adjudicated by a court of competent
jurisdiction not to have acted in good faith in the reasonable belief
that the Advisor's action was in or not opposed to the best interest of
the Fund or to have been liable to the Fund 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 Advisor 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 Fund, and other persons may be entitled by contract or
otherwise under law, nor the power of the Fund 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 Fund hereunder to pay the
indemnification required by this Subsection 8(b) including, without
limitation, to the extent needed, to determine whether the Advisor 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 Advisor 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 upon
the date the registration statement of the Trust containing the Fund's
Prospectus is declared effective by the Securities and Exchange
Commission and, unless sooner terminated as provided herein, shall
continue in effect for two years. Thereafter, this Agreement shall be
renewable for successive periods of one year each, provided such
continuance is specifically approved annually:
(a) By the vote of a majority of those members of the Board of
Trustees who are not parties to this Agreement or interested
persons of any such party (as that term is defined in the 1940
Act), cast in person at a meeting called for the purpose of
voting on such approval; and
(b) By vote of either the Board of Trustees or a majority (as that
term is defined in the 1940 Act) of the outstanding voting
securities of the Fund.
Notwithstanding the foregoing, this Agreement may be terminated by the
Fund or by the Advisor at any time on sixty (60) days' written notice,
without the payment of any penalty, provided that termination by the
Fund must be authorized either by vote of the Board of Trustees or by
vote of a majority of the outstanding voting securities of the Fund.
This Agreement will automatically terminate in the event of its
assignment (as that term is defined in the 1940 Act).
<PAGE>
10. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by a written
instrument signed by the party against which enforcement of the change,
waiver, discharge or termination is sought. No material amendment of
this Agreement shall be effective until approved by vote of the holders
of a majority of the Fund's outstanding voting securities (as defined
in the 1940 Act).
11. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect. If
any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby. This Agreement shall be
binding and shall inure to the benefit of the parties hereto and their
respective successors.
12. Applicable Law. This Agreement shall be construed in accordance with,
and governed by, the laws of the Commonwealth of North Carolina.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
ATTEST: NEW PROVIDENCE INVESTMENT TRUST
By: ___________________________ By: ___________________________
Title: ________________________ Title: ________________________
ATTEST: ATLANTA INVESTMENT COUNSEL, LLC
By: ___________________________ By: ___________________________
Title: ________________________ Title: ________________________
<PAGE>
APPENDIX A
SERIES OF THE TRUST TO WHICH ADVISOR PROVIDES SERVICES AND
INVESTMENT ADVISOR'S COMPENSATION SCHEDULE
For the services delineated in the INVESTMENT ADVISORY AGREEMENT, the Investment
Advisor shall be compensated monthly by the Intrinsic Value Fund, as of the last
day of each month, within five business days of the month end, a fee based upon
the daily average net assets of the Fund according to the following schedule.
Annual
Net Assets Fee
---------- ------
$500 Million and Less .50%
Greater than $500 Million .40%
EXHIBIT (e)(1)
==============
DISTRIBUTION AGREEMENT
AGREEMENT made effective as of the 29th of September, 1997, by and between NEW
PROVIDENCE INVESTMENT TRUST, an unincorporated business trust organized under
the laws of The Commonwealth of Massachusetts (the "Trust"), and DONALDSON &
CO., a Georgia corporation ("Distributor").
WITNESSETH:
WHEREAS, the Trust is engaged in business as an open-end management investment
company and is so registered under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, the Trust is authorized to issue an unlimited number of shares of
beneficial interest (the "Shares"), in separate series representing the
interests in separate funds of securities and other assets; and
WHEREAS, the Trust offers a series of such Shares representing interests in the
NEW PROVIDENCE GROWTH FUND (the "Fund") of the Trust, and has registered the
Shares under the Securities Act of 1933, as amended (the "1933 Act"), pursuant
to a registration statement on Form N-1A (the "Registration Statement"),
including a prospectus (the "Prospectus") and a statement of additional
information (the "Statement of Additional Information"); and
WHEREAS, the Trust has adopted a Plan of Distribution Pursuant to Rule 12b-1
under the 1940 Act (the "Distribution Plan") with respect to the Institutional
Shares of the Fund, and may enter into related agreements providing for the
distribution of Institutional Shares of the Fund; and
WHEREAS, Distributor has agreed to act as distributor of the Shares of the Fund
for the period of this Agreement;
NOW, THEREFORE, it is hereby agreed between the parties hereto as follows:
1. Appointment of Distributor.
(a) The Trust hereby appoints Distributor its exclusive agent for the
distribution of the Shares of the Fund in jurisdictions wherein such
Shares may be legally offered for sale; provided, however, that the
Trust in its absolute discretion may issue Shares of the Fund in
connection with (i) the payment or reinvestment of dividends or
distributions; (ii) any merger or consolidation of the Trust or of the
Fund with any other investment company or trust or any personal holding
company, or the acquisition of the assets of any such entity or another
fund of the Trust; or (iii) any offer of exchange permitted by Section
11 of the 1940 Act.
(b) Distributor hereby accepts such appointment as exclusive agent for
the distribution of the Shares of the Fund and agrees that it will sell
the Shares as agent for the Trust at prices determined as hereinafter
provided and on the terms hereinafter set forth, all according to
applicable federal and state laws and regulations and to the Agreement
and Declaration of Trust of the Trust.
<PAGE>
(c) Distributor may sell Shares of the Fund to or through qualified
securities dealers or others. Distributor will require each dealer or
other such party to conform to the provisions hereof, the Registration
Statement and the Prospectus and Statement of Additional Information,
and applicable law; and neither Distributor nor any such dealers or
others shall withhold the placing of purchase orders for Shares so as
to make a profit thereby.
(d) Distributor shall order Shares of the Fund from the Trust only to
the extent that it shall have received purchase orders therefor.
Distributor will not make, or authorize any dealers or others to make:
(i) any short sales of Shares; or (ii) any sales of Shares to any
Trustee or officer of the Trust or to any officer or director of
Distributor or of any corporation or association furnishing investment
advisory, managerial or supervisory services to the Trust, or to any
such corporation or association, unless such sales are made in
accordance with the then current Prospectus and Statement of Additional
Information.
(e) Distributor is not authorized by the Trust to give any information
or make any representations regarding the Shares of the Fund, except
such information or representations as are contained in the
Registration Statement or in the current Prospectus or Statement of
Additional Information of the Fund, or in advertisements and sales
literature prepared by or on behalf of the Trust for Distributor's use.
(f) Notwithstanding any provision hereof, the Trust may terminate,
suspend or withdraw the offering of Shares of the Fund whenever, in its
sole discretion, it deems such action to be desirable.
2. Offering Price of Shares. All Fund Shares sold under this Agreement
shall be sold at the public offering price per Share in effect at the
time of the sale, as described in the then current Prospectus of the
Fund. The excess, if any, of the public offering price over the net
asset value of the Shares sold by Distributor as agent shall be
retained by Distributor as a commission for its services hereunder. Out
of such commission Distributor may allow commissions or concessions to
dealers and may allow them to others in its discretion in such amounts
as Distributor shall determine from time to time. Except as may be
otherwise determined by Distributor from time to time, such commissions
or concessions shall be uniform to all dealers. At no time shall the
Trust receive less than the full net asset value of the Shares,
determined in the manner set forth in the then current Prospectus and
Statement of Additional Information. Distributor shall also be entitled
to such commissions and other fees and payments as may be authorized by
the Trustees of the Trust from time to time under the Distribution
Plan.
3. Furnishing of Information. The Trust shall furnish to Distributor
copies of any information, financial statements and other documents
that Distributor may reasonably request for use in connection with the
sale of Shares of the Fund under this Agreement. The Trust shall also
make available a sufficient number of copies of the Fund's current
Prospectus and Statement of Additional Information for use by the
Distributor.
<PAGE>
4. Expenses.
(a) The Trust will pay or cause to be paid the following expenses: (i)
preparation, printing and distribution to shareholders of the
Prospectus and Statement of Additional Information; (ii) preparation,
printing and distribution of reports and other communications to
shareholders; (iii) registration of the Shares under the federal
securities laws; (iv) qualification of the Shares for sale in certain
states; (v) qualification of the Trust as a dealer or broker under
state law as well as qualification of the Trust as an entity authorized
to do business in certain states; (vi) maintaining facilities for the
issue and transfer of Shares; (vii) supplying information, prices and
other data to be furnished by the Trust under this Agreement; and
(viii) certain taxes applicable to the sale or delivery of the Shares
or certificates therefor.
(b) Except to the extent such expenses are borne by the Trust pursuant
to the Distribution Plan, Distributor will pay or cause to be paid the
following expenses: (i) payments to sales representatives of the
Distributor and to securities dealers and others in respect of the sale
of Shares of the Fund; (ii) payment of compensation to and expenses of
employees of the Distributor and any of its affiliates to the extent
they engage in or support distribution of Fund Shares or render
shareholder support services not otherwise provided by the Trust's
transfer agent, administrator, or custodian, including, but not limited
to, answering routine inquiries regarding the Fund, processing
shareholder transactions, and providing such other shareholder services
as the Trust may reasonably request; (iii) formulation and
implementation of marketing and promotional activities, including, but
not limited to, direct mail promotions and television, radio,
newspaper, magazine and other mass media advertising; (iv) preparation,
printing and distribution of sales literature and of Prospectuses and
Statements of Additional Information and reports of the Trust for
recipients other than existing shareholders of the Fund; and (v)
obtaining such information, analyses and reports with respect to
marketing and promotional activities as the Trust may, from time to
time, reasonably request.
(c) Distributor in connection with the Distribution Plan shall prepare
and deliver reports to the Trustees of the Trust on a regular basis, at
least quarterly, showing the expenditures with respect to the Fund
pursuant to the Distribution Plan and the purposes therefor, as well as
any supplemental reports as the Trustees of the Trust, from time to
time, may reasonably request.
5. Repurchase of Shares. Distributor as agent and for the account of
the Trust may repurchase Shares of the Fund offered for resale to it
and redeem such Shares at their net asset value.
6. Indemnification by the Trust. In absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of obligations or duties
hereunder on the part of Distributor, the Trust agrees to indemnify
Distributor and its officers and partners against any and all claims,
demands, liabilities and expenses that Distributor may incur under the
1933 Act, or common law or otherwise, arising out of or based upon any
alleged untrue statement of a material fact contained in the
Registration Statement or any Prospectus or Statement of Additional
Information of the Fund, or in any advertisements or sales literature
prepared by or on behalf of the Trust for Distributor's use, or any
omission to state a material fact therein, the omission of which makes
any statement contained therein misleading, unless such statement or
omission was made in reliance upon and in conformity with information
furnished to the Trust in connection therewith by or on behalf of
Distributor. Nothing herein contained shall require the Trust to take
any action contrary to any provision of its Agreement and Declaration
of Trust or any applicable statute or regulation.
<PAGE>
7. Indemnification by Distributor. Distributor agrees to indemnify the
Trust and its officers and Trustees against any and all claims,
demands, liabilities and expenses which the Trust may incur under the
1933 Act, or common law or otherwise, arising out of or based upon (i)
any alleged untrue statement of a material fact contained in the
Registration Statement or any Prospectus or Statement of Additional
Information of the Fund, or in any advertisements or sales literature
prepared by or on behalf of the Trust for Distributor's use, or any
omission to state a material fact therein, the omission of which makes
any statement contained therein misleading, if such statement or
omission was made in reliance upon and in conformity with information
furnished to the Trust in connection therewith by or on behalf of
Distributor; or (ii) any act or deed of Distributor or its sales
representatives, or securities dealers and others authorized to sell
Fund Shares hereunder, or their sales representatives, that has not
been authorized by the Trust in any Prospectus or Statement of
Additional Information of the Fund or by this Agreement.
8. Term and Termination.
(a) This Agreement shall become effective on the date hereof. Unless
terminated as herein provided, this Agreement shall continue in effect
for one year from the date hereof and shall continue in full force and
effect for successive periods of one year thereafter, but only so long
as each such continuance is approved (i) by either the Trustees of the
Trust or by vote of a majority of the outstanding voting securities (as
defined in the 1940 Act) of the Fund and, in either event, (ii) by vote
of a majority of the Trustees of the Trust who are not parties to this
Agreement or interested persons (as defined in the 1940 Act) of any
such party and who have no direct or indirect financial interest in
this Agreement or in the operation of the Distribution Plan or in any
agreement related thereto ("Independent Trustees"), cast at a meeting
called for the purpose of voting on such approval.
(b) This Agreement may be terminated at any time without the payment of
any penalty by vote of the Trustees of the Trust or a majority of the
Independent Trustees or by vote of a majority of the outstanding voting
securities (as defined in the 1940 Act) of the Fund or by Distributor,
on sixty days' written notice to the other party.
(c) This Agreement shall automatically terminate in the event of its
assignment (as defined in the 1940 Act).
9. Limitation of Liability. The obligations of the Trust hereunder
shall not be binding upon any of the Trustees, officers or shareholders
of the Trust personally, but shall bind only the assets and property of
the Trust. The term "New Providence Investment Trust" means and refers
to the Trustees from time to time serving under the Agreement and
Declaration of Trust of the Trust, a copy of which is on file with the
Secretary of the Commonwealth of Massachusetts. The execution and
delivery of this Agreement has been authorized by the Trustees, and
this Agreement has been signed on behalf of the Trust by an authorized
officer of the Trust, acting as such and not individually, and neither
such authorization by such Trustees nor such execution and delivery by
such officer shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally, but
shall bind only the assets and property of the Trust as provided in the
Agreement and Declaration of Trust.
<PAGE>
IN WITNESS THEREOF, the parties hereto have caused this Agreement to be executed
as of the date first written above.
NEW PROVIDENCE INVESTMENT TRUST
Attest: /s/ C. Frank Watson, III
__________________________
By: /s/ Jack Brinson
_____________________________
NEW PROVIDENCE CAPITAL GROWTH FUND
Attest: /s/ Shannon Coogle
__________________________
By: /s/ Kyle Tomlin
_____________________________
DONALDSON & CO.
Attest: /s/ Shannon Coogle
__________________________
By: /s/ John K. Donaldson
_____________________________
EXHIBIT (e)(2)
==============
AMENDED AND RESTATED
DISTRIBUTION AGREEMENT
This AGREEMENT, dated as of _____________________________, 199__, is by and
between NEW PROVIDENCE INVESTMENT TRUST, an unincorporated business trust
organized under the laws of The Commonwealth of Massachusetts (the "Trust"), and
DONALDSON & CO., a Georgia corporation ("Distributor").
WITNESSETH:
WHEREAS, the Trust is engaged in business as an open-end management investment
company and is so registered under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, the Trust is authorized to issue an unlimited number of shares of
beneficial interest ("Shares") representing interests in separate series of
securities and other assets, as identified in Appendix A (each a "Fund"); and
WHEREAS, the Trust offers the Shares of such Funds and has registered the Shares
under the Securities Act of 1933, as amended (the "1933 Act"), pursuant to a
registration statement on Form N-1A (the "Registration Statement"), including a
prospectus (the "Prospectus") and a statement of additional information (the
"Statement of Additional Information"); and
WHEREAS, the Trust has adopted a Plan of Distribution Pursuant to Rule 12b-1
under the 1940 Act (the "Distribution Plan") with respect to Shares of certain
of the Funds, and may enter into related agreements providing for the
distribution of such Shares; and
WHEREAS, Distributor has agreed to act as distributor of the Shares of the Funds
for the period of this Agreement;
NOW, THEREFORE, it is hereby agreed between the parties hereto as follows:
1. Appointment of Distributor.
(a) The Trust hereby appoints Distributor its exclusive agent for the
distribution of the Shares of each Fund in jurisdictions wherein such
Shares may be legally offered for sale; provided, however, that the
Trust in its absolute discretion may issue Shares of each Fund in
connection with (i) the payment or reinvestment of dividends or
distributions; (ii) any merger or consolidation of the Trust or of a
Fund with any other investment company or trust or any personal holding
company, or the acquisition of the assets of any such entity or another
fund of the Trust; or (iii) any offer of exchange permitted by Section
11 of the 1940 Act, or any other applicable provision.
(b) Distributor hereby accepts such appointment as exclusive agent for
the distribution of the Shares of each Fund and agrees that it will
sell the Shares as agent for the Trust at prices determined as
hereinafter provided and on the terms hereinafter set forth, all
according to applicable federal and state laws and regulations and to
the Agreement and Declaration of Trust of the Trust.
(c) Distributor may sell Shares of each Fund to or through qualified
securities dealers or others. Distributor will require each dealer or
other such party to conform to the provisions hereof, the Registration
Statement and the Prospectus and Statement of Additional Information,
and applicable law; and neither Distributor nor any such dealers or
others shall withhold the placing of purchase orders for Shares so as
to make a profit thereby.
<PAGE>
(d) Distributor shall order Shares of each Fund from the Trust only to
the extent that it shall have received purchase orders therefor.
Distributor will not make, or authorize any dealers or others to make:
(i) any short sales of Shares; or (ii) any sales of Shares to any
Trustee or officer of the Trust or to any officer or director of
Distributor or of any corporation or association furnishing investment
advisory, managerial or supervisory services to the Trust, or to any
such corporation or association, unless such sales are made in
accordance with the then current Prospectus and Statement of Additional
Information.
(e) Distributor is not authorized by the Trust to give any information
or make any representations regarding the Shares of any Fund, except
such information or representations as are contained in the
Registration Statement or in the current Prospectus or Statement of
Additional Information of each Fund, or in advertisements and sales
literature prepared by or on behalf of the Trust for Distributor's use.
(f) Notwithstanding any provision hereof, the Trust may terminate,
suspend or withdraw the offering of Shares of any Fund whenever, in its
sole discretion, it deems such action to be desirable.
2. Offering Price of Shares. All Funds Shares sold under this Agreement
shall be sold at the public offering price per Share in effect at the
time of the sale, as described in the then current Prospectus of each
Fund. The excess, if any, of the public offering price over the net
asset value of the Shares sold by Distributor as agent shall be
retained by Distributor as a commission for its services hereunder. Out
of such commission Distributor may allow commissions or concessions to
dealers and may allow them to others in its discretion in such amounts
as Distributor shall determine from time to time. Except as may be
otherwise determined by Distributor from time to time, such commissions
or concessions shall be uniform to all dealers. At no time shall the
Trust receive less than the full net asset value of the Shares,
determined in the manner set forth in the then current Prospectus and
Statement of Additional Information. Distributor shall also be entitled
to such commissions and other fees and payments as may be authorized by
the Trustees of the Trust from time to time under the Distribution
Plan.
3. Furnishing of Information. The Trust shall furnish to Distributor
copies of any information, financial statements and other documents
that Distributor may reasonably request for use in connection with the
sale of Shares of each Fund under this Agreement. The Trust shall also
make available a sufficient number of copies of each Fund's current
Prospectus and Statement of Additional Information for use by the
Distributor.
4. Expenses.
(a) The Trust will pay or cause to be paid the following expenses: (i)
preparation, printing and distribution to shareholders of the
Prospectus and Statement of Additional Information; (ii) preparation,
printing and distribution of reports and other communications to
shareholders; (iii) registration of the Shares under the federal
securities laws; (iv) qualification of the Shares for sale in certain
states; (v) qualification of the Trust as a dealer or broker under
state law as well as qualification of the Trust as an entity authorized
to do business in certain states; (vi) maintaining facilities for the
issue and transfer of Shares; (vii) supplying information, prices and
other data to be furnished by the Trust under this Agreement; and
(viii) certain taxes applicable to the sale or delivery of the Shares
or certificates therefor.
(b) Except to the extent such expenses are borne by the Trust pursuant
to the Distribution Plan, Distributor will pay or cause to be paid the
following expenses: (i) payments to sales representatives of the
Distributor and to securities dealers and others in respect of the sale
of Shares of each Fund; (ii) payment of compensation to and expenses of
employees of the Distributor and any of its affiliates to the extent
they engage in or support distribution of Funds Shares or render
shareholder support services not otherwise provided by the Trust's
transfer agent, administrator, or custodian, including, but not limited
to, answering routine inquiries regarding a Fund, processing
shareholder transactions, and providing such other shareholder services
as the Trust may reasonably request; (iii) formulation and
implementation of marketing and promotional activities, including, but
not limited to, direct mail promotions and television, radio,
newspaper, magazine and other mass media advertising; (iv) preparation,
printing and distribution of sales literature and of Prospectuses and
Statements of Additional Information and reports of the Trust for
recipients other than existing shareholders of a Fund; and (v)
obtaining such information, analyses and reports with respect to
marketing and promotional activities as the Trust may, from time to
time, reasonably request.
<PAGE>
(c) Distributor in connection with the Distribution Plan shall prepare
and deliver reports to the Trustees of the Trust on a regular basis, at
least quarterly, showing the expenditures with respect to each Fund
pursuant to the Distribution Plan and the purposes therefor, as well as
any supplemental reports as the Trustees of the Trust, from time to
time, may reasonably request.
5. Repurchase of Shares. Distributor as agent and for the account of
the Trust may repurchase Shares of each Fund offered for resale to it
and redeem such Shares at their net asset value.
6. Indemnification by the Trust. In absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of obligations or duties
hereunder on the part of Distributor, the Trust agrees to indemnify
Distributor and its officers and partners against any and all claims,
demands, liabilities and expenses that Distributor may incur under the
1933 Act, or common law or otherwise, arising out of or based upon any
alleged untrue statement of a material fact contained in the
Registration Statement or any Prospectus or Statement of Additional
Information of a Fund, or in any advertisements or sales literature
prepared by or on behalf of the Trust for Distributor's use, or any
omission to state a material fact therein, the omission of which makes
any statement contained therein misleading, unless such statement or
omission was made in reliance upon and in conformity with information
furnished to the Trust in connection therewith by or on behalf of
Distributor. Nothing herein contained shall require the Trust to take
any action contrary to any provision of its Agreement and Declaration
of Trust or any applicable statute or regulation.
7. Indemnification by Distributor. Distributor agrees to indemnify the
Trust and its officers and Trustees against any and all claims,
demands, liabilities and expenses which the Trust may incur under the
1933 Act, or common law or otherwise, arising out of or based upon (i)
any alleged untrue statement of a material fact contained in the
Registration Statement or any Prospectus or Statement of Additional
Information of any Fund, or in any advertisements or sales literature
prepared by or on behalf of the Trust for Distributor's use, or any
omission to state a material fact therein, the omission of which makes
any statement contained therein misleading, if such statement or
omission was made in reliance upon and in conformity with information
furnished to the Trust in connection therewith by or on behalf of
Distributor; or (ii) any act or deed of Distributor or its sales
representatives, or securities dealers and others authorized to sell
Funds Shares hereunder, or their sales representatives, that has not
been authorized by the Trust in any Prospectus or Statement of
Additional Information of any Fund or by this Agreement.
8. Term and Termination.
(a) This Agreement shall become effective on the date hereof. Unless
terminated as herein provided, this Agreement shall continue in effect
for one year from the date hereof and shall continue in full force and
effect for successive periods of one year thereafter, but only so long
as each such continuance is approved (i) by either the Trustees of the
Trust or by vote of a majority of the outstanding voting securities (as
defined in the 1940 Act) of each Fund and, in either event, (ii) by
vote of a majority of the Trustees of the Trust who are not parties to
this Agreement or interested persons (as defined in the 1940 Act) of
any such party and who have no direct or indirect financial interest in
this Agreement or in the operation of the Distribution Plan or in any
agreement related thereto ("Independent Trustees"), cast at a meeting
called for the purpose of voting on such approval.
(b) This Agreement may be terminated at any time without the payment of
any penalty by vote of the Trustees of the Trust or a majority of the
Independent Trustees or by vote of a majority of the outstanding voting
securities (as defined in the 1940 Act) of each Fund or by Distributor,
on sixty days' written notice to the other party.
(c) This Agreement shall automatically terminate in the event of its
assignment (as defined in the 1940 Act).
<PAGE>
9. Limitation of Liability. The obligations of the Trust hereunder
shall not be binding upon any of the Trustees, officers or shareholders
of the Trust personally, but shall bind only the assets and property of
the Trust. The term "New Providence Investment Trust" means and refers
to the Trustees from time to time serving under the Agreement and
Declaration of Trust of the Trust, a copy of which is on file with the
Secretary of the Commonwealth of Massachusetts. The execution and
delivery of this Agreement has been authorized by the Trustees, and
this Agreement has been signed on behalf of the Trust by an authorized
officer of the Trust, acting as such and not individually, and neither
such authorization by such Trustees nor such execution and delivery by
such officer shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally, but
shall bind only the assets and property of the Trust as provided in the
Agreement and Declaration of Trust.
IN WITNESS THEREOF, the parties hereto have caused this Agreement to be executed
as of the date first written above.
NEW PROVIDENCE INVESTMENT TRUST
Attest: _____________________________
By: ___________________________
DONALDSON & CO.
Attest: _____________________________
By: ___________________________
<PAGE>
APPENDIX A
Dated as of ___________________, 199__
o Capital Growth Fund
o Intrinsic Value Fund
EXHIBIT (g)
===========
CUSTODY AGREEMENT
(Mutual Funds)
THIS AGREEMENT is made as of July 10, 1997, by and between NEW PROVIDENCE
INVESTMENT TRUST (the "Trust"), a Massachusetts business trust, with respect to
its existing series as of the date of this Agreement, and such other series as
shall be designated from time to time by the Trust (the "Fund" or "Funds"), and
FIRST UNION NATIONAL BANK OF NORTH CAROLINA, a national banking association (the
"Custodian").
The Trust desires that its securities and funds shall be hereafter held and
administered by the Custodian pursuant to the terms of this Agreement, and,
pursuant to a separate agreement, The Nottingham Company, Inc., a North Carolina
corporation ("Nottingham"), has agreed to perform the duties of Transfer Agent,
Accounting Services Agent, Dividend Disbursing Agent and Administrator for the
Fund.
In consideration of the mutual agreements herein, the Trust and the Custodian
agree as follows:
1. DEFINITIONS.
As used herein, the following words and phrases shall have the meanings
shown in this Section 1:
"Securities" includes stocks, shares, bonds, debentures, bills, notes,
mortgages, certificates of deposit, bank time deposits, bankers'
acceptances, commercial paper, scrip, warrants, participation
certificates, evidences of indebtedness, or other obligations and any
certificates, receipts, warrants or other instruments representing
rights to receive, purchase, or subscribe for the same, or evidencing
or representing any other rights or interests therein, or in any
property or assets.
"Oral Instructions" shall mean an authorization, instruction, approval,
item or set of data, or information of any kind transmitted to the
Custodian in person or by telephone, telegram, telecopy or other
mechanical or documentary means lacking original signature, by an
officer or employee of the Trust or an employee of Nottingham in its
capacity as Transfer Agent, Accounting Services Agent, Administrator
and Dividend Disbursing Agent who has been authorized by a resolution
of the Board of Trustees of the Trust or the Board of Directors of
Nottingham, as the case may be, to give Written Instructions on behalf
of the Trust.
"Written Instructions" shall mean an authorization, instruction,
approval, item or set of data, or information of any kind transmitted
to the Custodian containing original signatures or a copy of such
document transmitted by telecopy including transmission of such
signature, reasonably believed by the Custodian to be the signature of
an officer or employee of the Trust or an employee of Nottingham in its
capacity as Transfer Agent, Accounting Services Agent, Administrator or
Dividend Disbursing Agent who has been authorized by a resolution of
the Board of Trustees of the Trust or Board of Directors of Nottingham,
as the case may be, to give Written Instructions on behalf of the
Trust.
"Securities Depository" shall mean a system for the central handling of
securities where all securities of any particular class or series of
any issuer deposited within the system are treated as fungible and may
be transferred or pledged by bookkeeping entry without physical
delivery of securities.
"Officers' Certificate" shall mean a direction, instruction or
certification in writing signed in the name of the Trust by the
President, Secretary or Assistant Secretary, or the Treasurer or
Assistant Treasurer of the Trust, or any other persons duly authorized
to sign by the Board of Trustees or the Executive Committee of the
Trust.
"Book-Entry Securities" shall mean securities issued by the Treasury of
the United States of America and federal agencies of the United States
of America which are maintained in the book-entry system as provided in
Subpart O of Treasury Circular No. 300, 31 CFR 306, Subpart B of 31 CFR
Part 350, and the book-entry regulations of federal agencies
substantially in the form of Subpart O, and the term Book-Entry Account
shall mean an account maintained by a Federal Reserve Bank in
accordance with the aforesaid Circular and regulations.
<PAGE>
2. DOCUMENTS TO BE FILED BY TRUST.
The Trust shall from time to time file with the Custodian a certified
copy of each resolution of its Board of Trustees authorizing execution
of Written Instructions and the number of signatories required,
together with certified signatures of the officers and other
signatories authorized to sign, which shall constitute conclusive
evidence of the authority of the officers and other signatories
designated therein to act, and shall be considered in full force and
effect and the Custodian shall be fully protected in acting in reliance
thereon until it receives a new certified copy of a resolution adding
or deleting a person or persons with authority to give Written
Instructions. If the certifying officer is authorized to sign Written
Instructions, the certification shall also be signed by a second
officer of the Trust. The Trust also agrees that the Custodian may rely
on Written Instructions received from Nottingham as Agent for the Trust
if those Written Instructions are given by persons having authority
pursuant to resolutions of the Board of Trustees of the Trust.
The Trust shall from time to time file with the Custodian a certified
copy of each resolution of the Board of Trustees authorizing the
transmittal of Oral Instructions and specifying the person or persons
authorized to give Oral Instructions in accordance with this Agreement.
The Trust agrees that the Custodian may rely on Oral Instructions
received from Nottingham, as agent for the Trust, if those instructions
are given by persons reasonably believed by the Custodian to have such
authority. Any resolution so filed with the Custodian shall be
considered in full force and effect and the Custodian shall be fully
protected in acting in reliance thereon until it actually receives a
new certified copy of a resolution adding or deleting a person or
persons with authority to give Oral Instructions. If the certifying
officer is authorized to give Oral Instructions, the certification
shall also be signed by a second officer of the Trust.
3. RECEIPT AND DISBURSEMENT OF FUNDS.
(a) The Custodian shall open and maintain a separate account or
accounts in the name of each Fund of the Trust, subject only to
draft or order by the Custodian acting pursuant to the terms of
this Agreement. The Custodian shall hold in safekeeping in such
account or accounts, subject to the provisions hereof, all funds
received by it from or for the account of the Trust. The Trust
will deliver or cause to be delivered to the Custodian all funds
owned by the Trust, including cash received for the issuance of
its shares during the period of this Agreement. The Custodian
shall make payments of funds to, or for the account of, the Trust
from such funds only:
(i) for the purchase of securities for the portfolio of the
Trust upon the delivery of such securities to the Custodian
(or to any bank, banking firm or trust company doing
business in the United States and designated by the
Custodian as its sub-custodian or agent for this purpose or
any foreign bank qualified under Rule 17f-5 of the
Investment Company Act of 1940 and acting as sub-custodian),
registered (if registerable) in the name of the Trust or of
the nominee of the Custodian referred to in Section 8 or in
proper form for transfer, or, in the case of repurchase
agreements entered into between the Trust and the Custodian
or other bank or broker dealer (A) against delivery of the
securities either in certificate form or through an entity
crediting the Custodian's account at the Federal Reserve
Bank with such securities or (B) upon delivery of the
receipt evidencing purchase by the Trust of securities owned
by the Custodian along with written evidence of the
agreement by the Custodian bank to repurchase such
securities from the Trust;
<PAGE>
(ii) for the payment of interest, dividends, taxes, management or
supervisory fees, or operating expenses (including, without
limitation, Board of Trustees' fees and expenses, and fees
for legal, accounting and auditing services) and for
redemption or repurchase of shares of the Trust;
(iii)for payments in connection with the conversion, exchange or
surrender of securities owned or subscribed to by the Trust
held by or to be delivered to the Custodian;
(iv) for the payment to any bank of interest on all or any
portion of the principal of any loan made by such bank to
the Trust;
(v) for the payment to any person, firm or corporation who has
borrowed the Trust's portfolio securities the amount
deposited with the Custodian as collateral for such
borrowing upon the delivery of such securities to the
Custodian, registered (if registerable) in the name of the
Trust or of the nominee of the Custodian referred to in
Section 8 or in proper form for transfer; or
(vi) for other proper purposes of the Trust.
Before making any such payment the Custodian shall receive (and
may rely upon) Written Instructions or Oral Instructions
directing such payment and stating that it is for a purpose
permitted under the terms of this subsection (a). In respect of
item (vi), the Custodian will take such action only upon receipt
of an Officers' Certificate and a certified copy of a resolution
of the Board of Trustees or the Executive Committee of the Trust
signed by an officer of the Trust and certified by the Secretary
or an Assistant Secretary, specifying the amount of such payment,
setting forth the purpose for which such payment is to be made.
In respect of item (v), the Custodian shall make payment to the
borrower of securities loaned by the Trust of part of the
collateral deposited with the Custodian upon receipt of Written
Instructions from the Trust or Nottingham stating that the market
value of the securities loaned has declined and specifying the
amount to be paid by the Custodian without receipt or return of
any of the securities loaned by the Trust. In respect of item
(i), in the case of repurchase agreements entered into with a
bank which is a member of the Federal Reserve System, the
Custodian may transfer funds to the account of such bank, which
may be itself, prior to receipt of written evidence that the
securities subject to such repurchase agreement have been
transferred by book-entry to the Custodian's non-proprietary
account at the Federal Reserve Bank, or in the case of repurchase
agreements entered into with the Custodian, of the safekeeping
receipt and repurchase agreement, provided that such securities
have in fact been so transferred by book-entry, or in the case of
repurchase agreements entered into with the Custodian, the
safekeeping receipt is received prior to the close of business on
the same day.
(b) Notwithstanding anything herein to the contrary, the Custodian
may at any time or times with the written approval of the Board
of Trustees, appoint (and may at any time remove without the
written approval of the Trust) any other bank or trust company as
its sub-custodian or agent to carry out such of the provisions of
Subsection (a) of this Section 3 as instructions from the Trust
may from time to time request; provided, however, that the
appointment of such sub-custodian or agent shall not relieve the
Custodian of any of its responsibilities hereunder; and provided,
further, that the Custodian shall not enter into any arrangement
with any subcustodian unless such sub-custodian meets the
requirements of Section 26 of the Investment Company Act of 1940
and Rule 17f-5 thereunder, if applicable.
<PAGE>
(c) The Custodian is hereby authorized to endorse and collect all
checks, drafts or other orders for the payment of money received
by the Custodian for the accounts of the Trust.
4. RECEIPT OF SECURITIES.
(a) The Custodian shall hold in safekeeping in a separate account,
and physically segregated at all times from those of any other
persons, firms, corporations or trusts or any other series of the
Trust, pursuant to the provisions hereof, all securities received
by it from or for the account of each series of the Trust, and
the Trust will deliver or cause to be delivered to the Custodian
all securities owned by the Trust. All such securities are to be
held or disposed of by the Custodian under, and subject at all
times to the instructions pursuant to, the terms of this
Agreement. The Custodian shall have no power or authority to
assign, hypothecate, pledge, lend or otherwise dispose of any
such securities and investments, except pursuant to instructions
and only for the account of the Trust as set forth in Section 5
of this Agreement.
(b) Notwithstanding anything herein to the contrary, the Custodian
may at any time or times with the written approval of the Board
of Trustees, appoint (and may at any time without the written
approval of such Board of Trustees remove) any other bank or
trust company as its sub-custodian or agent to carry out such of
the provisions of Subsection (a) of this Section 4 and of Section
5 of this Agreement, as instructions may from time to time
request, provided, however, that the appointment of such
sub-custodian or agent shall not relieve the Custodian of any of
its responsibilities hereunder, and provided, further, that the
Custodian shall not enter into arrangement with any sub-custodian
unless such sub-custodian meets the requirements of Section 26 of
the Investment Company Act of 1940 or Rule 17f-5 thereunder, if
applicable.
5. TRANSFER, EXCHANGE, REDELIVERY, ETC. OF SECURITIES.
The Custodian shall have sole power to release or deliver any
Securities of the Trust held by it pursuant to this Agreement. The
Custodian agrees to transfer, exchange or deliver Securities held by it
on behalf of the Trust hereunder only:
(a) for sales of such Securities for the account of the Trust upon
receipt by the Custodian of Payment therefor;
(b) when such securities mature or are called, redeemed or retired or
otherwise become payable;
(c) for examination by any broker selling any such securities in
accordance with "street delivery" custom;
(d) in exchange for or upon conversion into other Securities alone or
other securities and cash whether pursuant to any plan of merger,
consolidation, reorganization, recapitalization or readjustment,
or otherwise;
(e) upon conversion of such Securities pursuant to their terms into
other Securities;
(f) upon exercise of subscription, purchase or other similar rights
represented by such Securities;
(g) for the purpose of exchanging interim receipts for temporary
Securities for definitive securities;
<PAGE>
(h) for the purpose of effecting a loan of the portfolio Securities
to any person, firm, corporation or trust upon the receipt by the
Custodian of cash or cash equivalent collateral at least equal to
the market value of the securities loaned;
(i) to any bank for the purpose of collateralizing the obligation of
the Trust to repay any moneys borrowed by the Trust from such
bank; provided, however, that the Custodian may at the option of
such lending bank keep such collateral in its possession, subject
to the rights of such bank given to it by virtue of any
promissory note or agreement executed and delivered by the Trust
to such bank; or
(j) for other proper purposes of the Trust.
As to any deliveries made by the Custodian pursuant to items (a), (b),
(c), (d), (e), (f), (g) and (h), Securities or funds receivable in
exchange therefor shall be deliverable to the Custodian. Before making
any such transfer, exchange or delivery, the Custodian shall receive
(and may rely upon) instructions requesting such transfer, exchange, or
delivery and stating that it is for a purpose permitted under the terms
(a), (b), (c), (d), (e), (f), (g), (h), or (i) of this Section 5, and,
in respect of item (j), upon receipt of instructions of a certified
copy of a resolution of the Board of Trustees of the Trust, signed by
an officer of the Trust and certified by its Secretary or an Assistant
Secretary, specifying the Securities to be delivered, setting forth the
purpose for which such delivery is to be made, declaring such purpose
to be a proper purpose of the Trust, and naming the person or persons
to whom delivery of such Securities shall be made. In respect of item
(h), the instructions shall state the market value of the Securities to
be loaned and the corresponding amount of collateral to be deposited
with the Custodian; thereafter, upon receipt of instructions stating
that the market value of the Securities loaned has increased and
specifying the amount of increase, the Custodian shall collect from the
borrower additional cash collateral in such amount.
6. FEDERAL RESERVE BOOK-ENTRY SYSTEM.
Notwithstanding any other provisions of this Agreement, it is expressly
understood and agreed that the Custodian is authorized in the
performance of its duties hereunder to deposit in the book-entry
deposit system operated by the Federal Reserve Bank (the "System"),
United States government, instrumentality and agency securities and any
other Securities deposited in the System and to use the facilities of
the System, as permitted by Rule 17f-4 under the Investment Company Act
of 1940, in accordance with the following terms and provisions:
(a) The Custodian may keep Securities of the Trust in the System
provided that such Securities are represented in an account
("Account") of the Custodian's in the System which shall not
include any assets of the Custodian other than assets held in a
fiduciary or custodian capacity.
(b) The records of the Custodian with respect to the participation in
the System through the Custodian shall identify by Book-Entry
Securities belonging to the Trust which are included with other
Securities deposited in the Account and shall at all times during
the regular business hours of the Custodian be open for
inspection by duly authorized officers, employees or agents of
the Trust and employees and agents of the Securities and Exchange
Commission.
(c) The Custodian shall pay for Securities purchased for the account
of the Trust upon:
(i) receipt of advice from the System that such Securities have
been transferred to the Account; and
<PAGE>
(ii) the making of an entry on the records of the Custodian to
reflect such payment and transfer for the account of the
Trust. The Custodian shall transfer Securities sold for the
account of the Trust upon:
(1) receipt of advice from the System that
payment for such Securities has been
transferred to the Account; and
(2) the making of an entry on the records of the
Custodian to reflect such transfer and
payment for the account of the Trust. The
Custodian shall send the Trust a
confirmation of any transfers to or from the
account of the Trust.
(d) The Custodian will provide the Trust with any report obtained by
the Custodian on the System's accounting system, internal
accounting control and procedures for safeguarding Securities
deposited in the System. The Custodian will provide the Trust
with reports by independent public accountants on the accounting
system, internal accounting control and procedures for
safeguarding Securities, including Securities deposited in the
System relating to the services provided by the Custodian under
this Agreement; such reports shall detail material inadequacies
disclosed by such examination, and, if there are no such
inadequacies, shall so state, and shall be of such scope and in
such detail as the Trust may reasonably require and shall be of
sufficient scope to provide reasonable assurance that any
material inadequacies would be disclosed.
7. USE OF CLEARING FACILITIES.
Notwithstanding any other provisions of the Agreement, the Custodian
may, in connection with transactions in portfolio Securities by the
Trust, use the facilities of the Depository Trust Company ("DTC"), and
the Participants Trust Company ("PTC"), as permitted by Rule 17f-4
under the Investment Company Act of 1940, if such facilities have been
approved by the Board of Trustees of the Trust in accordance with the
following:
(a) DTC and PTC may be used to receive and hold eligible Securities
owned by the Trust;
(b) payment for Securities purchased may be made through the clearing
medium employed by DTC and PTC for transactions of participants
acting through them;
(c) Securities of the Trust deposited in DTC and PTC will at all
times be segregated from any assets and cash controlled by the
Custodian in other than a fiduciary or custodian capacity but may
be commingled with other assets held in such capacities. Subject
to the provisions of the Agreement with regard to instructions,
the Custodian will pay out money only upon receipt of Securities
or notification thereof and will deliver Securities only upon the
receipt of money or notification thereof;
(d) all books and records maintained by the Custodian which relate to
the participation in DTC and PTC shall identify by Book-Entry
Securities belonging to the Trust which are deposited in DTC and
PTC and shall at all times during the Custodian's regular
business hours be open to inspection by the duly authorized
officers, employees, agents and auditors, and the Trust will be
furnished with all the information in respect of the services
rendered to it as it may require;
(e) the Custodian will make available to the Trust copies of any
internal control reports concerning DTC and PTC delivered to it
by either internal or external auditors within ten days after
receipt of such a report by the Custodian; and
(f) confirmations of transactions using the facilities of DTC and PTC
shall be provided as set forth in Rule 17f-4 of the Investment
Company Act of 1940.
<PAGE>
8. CUSTODIAN'S ACTS WITHOUT INSTRUCTIONS.
Unless and until the Custodian receives instructions to the contrary,
the Custodian shall on behalf of the Trust:
(a) Present for payment all coupons and other income items held by
it for the account of the Trust which call for payment upon
presentation and hold the funds received by it upon such
payment for the Trust;
(b) collect interest and cash dividends received, with notice to
the Trust, for the accounts of the Trust;
(c) hold for the accounts of the Trust hereunder all stock
dividends, rights and similar Securities issued with respect
to any securities held by it hereunder;
(d) execute as agent on behalf of the Trust all necessary
ownership certificates required by the Internal Revenue Code
or the Income Tax Regulations of the United States Treasury
Department or under the laws of any state now or hereafter in
effect, inserting the name of such certificates as the owner
of the Securities covered thereby, to the extent it may
lawfully do so;
(e) transmit promptly to the Trust all reports, notices and other
written information received by the Custodian from or
concerning issuers of the portfolio Securities; and
(f) collect from the borrower the Securities loaned and delivered
by the Custodian pursuant to item (h) of Section 5 hereof, any
interest or cash dividends paid on such Securities, and all
stock dividends, rights and similar Securities issued with
respect to any such loaned Securities.
With respect to Securities of foreign issuers, it is expected that the
Custodian will use its best efforts to effect collection of dividends,
interest and other income, and to notify the Trust of any call for
redemption, offer of exchange, right of subscription, reorganization,
or other proceedings affecting such Securities, or any default in
payments due thereon. It is understood, however, that the Custodian
shall be under no responsibility for any failure or delay in effecting
such collections or giving such notice with respect to Securities of
foreign issuers, regardless of whether or not the relevant information
is published in any financial service available to it unless (a) such
failure or delay is due to the Custodians' or any sub-custodians'
negligence or (b) any relevant sub-custodian has acted in accordance
with established industry practices. Collections of income in foreign
currency are, to the extent possible, to be converted into United
States dollars unless otherwise instructed in writing, and in effecting
such conversion the Custodian may use such methods or agencies as it
may see fit, including the facilities of its own foreign division at
customary rates. All risk and expenses incident to such collection and
conversion is for the accounts of the Trust and the Custodian shall
have no responsibility for fluctuations in exchange rates affecting any
such conversion.
9. REGISTRATION OF SECURITIES.
Except as otherwise directed by instructions, the Custodian shall
register all Securities, except such as are in bearer form, in the name
of a registered nominee of the Custodian, as defined in the Internal
Revenue Code and any Regulation of the Treasury Department issued
thereunder or in any provision of any subsequent Federal tax law
exempting such transaction from liability for stock transfer taxes, and
shall execute and deliver all such certificates in connection therewith
as may be required by such laws or Regulations or under the laws of any
State. The Custodian shall use its best efforts to the end that the
specific securities held by it hereunder shall be at all times
identifiable in its records.
The Trust or Nottingham shall from time to time furnish to the
Custodian appropriate instruments to enable the Custodian to hold or
deliver in proper form for transfer, or to register in the name of its
registered nominee, any securities which it may hold for the accounts
of the Trust and which may from time to time be registered in the name
of the Trust.
<PAGE>
10. SEGREGATED ACCOUNT.
The Custodian shall upon receipt of written instructions from the Trust
or Nottingham establish and maintain a segregated account or accounts
for and on behalf of the Trust, into which account or accounts may be
transferred cash and/or Securities, including Securities maintained in
an account by the Custodian pursuant to Section 4 hereof,
(i) in accordance with the provisions of any agreement
among the Trust, the Custodian and a broker-dealer
registered under the Securities and Exchange Act of
1934 and a member of the NASD (or any futures
commission merchant registered under the Commodity
Exchange Act), relating to compliance with the rules
of The Options Clearing Corporation and of any
registered national securities exchange (or the
commodity Futures Trading Commission or any
registered contract market), or of any similar
organization or organizations, regarding escrow or
other arrangements in connection with transactions by
the Trust;
(ii) for purposes of segregating cash or government
securities in connection with options purchased, sold
or written by the Trust or commodity futures
contracts or options thereon purchased or sold by the
Trust;
(iii) for the purposes of compliance by the Trust with the
procedures required by the Investment Company Act
Release No. 10666, or any subsequent release or
releases of the Securities and Exchange Commission
relating to the maintenance of segregated accounts by
registered investment companies; and
(iv) for other proper corporate purposes, but only, in the
case of clause (iv), upon receipt of, in addition to
an Officer's Certificate, a certified copy of a
resolution of the Board of Trustees signed by an
officer of the Trust and certified by the Secretary
or an Assistant Secretary, setting forth the purpose
or purposes of such segregated account and declaring
such purposes to be proper corporate purposes.
11. VOTING AND OTHER ACTIONS.
Neither the Custodian nor any nominee of the Custodian shall vote any
of the Securities held hereunder by or for the accounts of the Trust,
except in accordance with instructions. The Custodian shall execute and
deliver, or cause to be executed and delivered, to the appropriate
investment advisor of each series of the Trust, all notices, proxies
and proxy soliciting materials with relation to such Securities
(excluding any Securities loaned and delivered by the Custodian
pursuant to item (h) of Section 5 hereof), such proxies to be executed
by the registered holder of such Securities (if registered otherwise
than in the name of the Trust), but without indicating the manner in
which such proxies are to be voted. Such proxies shall be delivered by
regular mail to the appropriate investment advisor of each series of
the Trust.
<PAGE>
12. TRANSFER TAX AND OTHER DISBURSEMENTS.
The Trust shall pay or reimburse the Custodian from time to time for
any transfer taxes payable upon transfers of securities made hereunder
and for all other necessary and proper disbursements and expenses made
or incurred by the Custodian in the performance of this Agreement. The
Custodian shall execute and deliver such certificates in connection
with Securities delivered to it or by it under this Agreement as may be
required under the provisions of the Internal Revenue Code and any
Regulations of the Treasury Department issued thereunder, or under the
laws of any State, to exempt from taxation any exemptible transfers
and/or deliveries of any such securities.
13. CONCERNING THE CUSTODIAN.
(a) The Custodian's compensation shall be paid by the Trust. The
Custodian shall not be liable for any action taken in good faith
upon receipt of instructions as herein defined or a certified
copy of any resolution of the Board of Trustees, and may rely on
the genuineness of any such document which it may in good faith
believe to have been validly executed.
(b) The Custodian shall not be liable for any loss or damage,
resulting from its action or omission to act or otherwise, except
for any such loss or damage arising out of its own negligence or
willful misconduct and except that the Custodian shall be
responsible for the acts of any sub-custodian, or agent appointed
hereunder and approved by the Board of Trustees of the Trust. At
any time, the Custodian may seek advice from legal counsel for
the Trust whose legal fees shall be paid at the sole expense of
the Trust, with respect to any matter arising in connection with
this Agreement, and it shall not be liable for any action taken
or not taken or suffered by it in good faith in accordance with
the opinion of counsel for the Trust. The Trust and not the
Custodian shall be responsible for any fee or charges by counsel
for the Trust in connection with any such opinion rendered to the
Custodian.
(c) Without limiting the generality of the foregoing, the Custodian
shall be under no duty or obligation to inquire into, and shall
not be liable for:
(i) The validity of the issue of any Securities purchased
by or for the Trust, the legality of the purchase
thereof, or the propriety of the amount paid
therefor;
(ii) The legality of the issue or sale of any Securities
by or for the Trust, or the propriety of the amount
for which the same are sold;
(iii) The legality of the issue or sale of any shares of
the Trust, or the sufficiency of the amount to be
received therefor;
(iv) The legality of the redemption of any shares of the
Trust, or the propriety of the amount to be paid
therefor;
(v) The legality of the declaration of any dividend or
distribution by the Trust, or the legality of the
issue of any Securities of the Trust in payment of
any dividend or distribution in shares;
(vi) The legality of the delivery of any Securities held
for the Trust for the purpose of collateralizing the
obligation of the Trust to repay any moneys borrowed
by the Trust; or
(vii) The legality of the delivery of any Securities held
for the Trust for the purpose of lending said
securities to any person, firm or corporation.
<PAGE>
(d) The Custodian shall not be under any duty or obligation to take
action to effect collection of any amount, if the Securities upon
which such amount is payable are in default, or if payment is
refused after due demand or presentation by the Custodian on
behalf of the Trust, unless and until
(i) the Custodian shall be directed to take such action
by written instructions signed in the name of the
Trust on behalf of the Trust by one of its executive
officers; and
(ii) the Custodian shall be assured to its satisfaction of
reimbursement of its costs and expenses in connection
with any such action.
(e) The Custodian shall not be under any duty or obligation to
ascertain whether any securities at any time delivered to or held
by it for the account of the Trust, are such as may properly be
held by the Trust under the provisions of the Trust's Declaration
of Trust or By-Laws as amended from time to time.
(f) The Trust agrees to indemnify and hold harmless the Custodian and
its nominees, sub-custodians, depositories and agent from all
taxes, charges, expenses, assessments, liabilities, and losses
(including counsel fees) incurred or assessed against it or its
nominees, sub-custodians, depositories and agents in connection
with the performance of this Agreement, except such as may arise
from its or its nominee's, sub-custodian's, depositories' and
agent's own negligent action, negligent failure to act, breach of
this agreement or willful misconduct. The Custodian is authorized
to charge any account of the Trust for such items; provided,
however, that, except for overdrafts as to which the Custodian
shall have the immediate right of offset, prior to charging any
such account for such items, the Custodian shall first have
forwarded an invoice for such item to the Trust and 30 days shall
have elapsed from the date of such invoice to the Trust without
payment of the same having been received by the Custodian. In the
event of any advance of funds for any purpose made by the
Custodian resulting from orders or instructions of the Trust, or
in the event that the Custodian or its nominees, sub-custodians,
depositories and agents shall incur or be assessed any taxes,
charges, expenses, assessments, claims or liabilities in
connection with the performance of this Agreement, except such as
may arise from its or its nominee's own negligent action,
negligent failure to act or willful misconduct any property at
any time held for the accounts of the Trust shall be security
therefor. Nothing in this paragraph, however, shall be deemed to
apply to transaction and asset holding fees or out of pocket
expenses of the Custodian which are payable by Nottingham, and as
to such fees and expenses the Custodian shall have no right of
offset or security under this paragraph.
(g) The Custodian agrees to indemnify and hold harmless the Trust and
Trust's Trustees and officers from all taxes, charges, expenses,
assessments, claims liabilities, and losses (including counsel
fees) incurred or assumed against any of them as a result of any
breach or violation of this Agreement by the Custodian or any act
or omission by the Custodian or its Trustees, officers, employees
and agents and resulting from their negligence or willful
misconduct.
(h) In the event that, pursuant to this Agreement, instructions
direct the Custodian to pay for securities on behalf of the
Trust, the Trust hereby grants to the Custodian a security
interest in such Securities, until the Custodian has been
reimbursed by the Trust in immediately available funds. The
instructions designating the Securities to be paid for shall be
considered the requisite description and designation of the
Securities pledged to the Custodian for purposes of the
requirements of the Uniform Commercial Code.
(i) The Custodian represents that it is qualified to act
as such under section 26(a) of the Investment Company
Act of 1940.
<PAGE>
14. REPORTS BY THE CUSTODIAN.
(a) The Custodian shall furnish the Trust and the appropriate
investment advisor of each series of the Trust, daily with a
statement summarizing all transactions and entries for the
accounts of the Trust. The Custodian shall furnish the Trust
at the end of every month with a list of the portfolio
Securities held by it as Custodian for the Trust, adjusted for
all commitments confirmed by instructions as of such time. The
books and records of the Custodian pertaining to its actions
under this Agreement shall be open to inspection and audit at
reasonable times by officers of the Trust, its independent
public accountants and officers of its investment advisers.
(b) The Custodian will maintain such books and records relating to
transactions effected by it as are required by the Investment
Company Act of 1940, as amended, and any rule or regulation
thereunder; or by any other applicable provision of the law to
be maintained by the Trust or its Custodian, with respect to
such transactions, and preserving or causing to be preserved,
any such books and records for such periods as may be required
by any such rule or regulation.
15. TERMINATION OR ASSIGNMENT.
This agreement may be terminated by the Trust, or by the Custodian, on
sixty (60) days' notice, given in writing and sent by registered mail
to the Custodian, or to the Trust, as the case may be, at the address
hereinafter set forth. Upon any termination of this Agreement, pending
appointment by the Trust of a successor to the Custodian or a vote of
the shareholders of the Trust to dissolve or to function without a
Custodian of its funds, the Custodian shall not deliver funds,
Securities or other property of the Trust to the Trust, but may deliver
them to a bank or trust company of its own selection having an
aggregate capital, surplus, and undivided profits, as shown by its last
published report of not less than ten million dollars ($10,000,000) and
otherwise qualified to act as a custodian to a registered investment
company as a Custodian for the Trust to be held under terms similar to
those of this Agreement; provided, however, that the Custodian shall
not be required to make any such delivery or payment until full payment
shall have been made to the Custodian of all its contractual fees,
compensations, costs and expenses, except for fees and expenses all as
set forth in Section 13 of this Agreement.
16. MISCELLANEOUS.
(a) Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Custodian, shall
be sufficiently given if addressed to the Custodian and mailed
or delivered to it at its office at First Union National Bank
of North Carolina, 401 South Tryon Street, Charlotte, North
Carolina 28288, or at such other place as the Custodian may
from time to time designate in writing.
(b) Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Trust, shall be
sufficiently given if addressed to the Trust and mailed or
delivered to it at 105 N. Washington Street, Rocky Mount,
North Carolina 27802, or at-such other place as the Trust may
from time to time designate in writing.
(c) This Agreement may not be amended or modified in any manner
except by a written agreement executed by both parties with
the same formality as this Agreement, and authorized or
approved by a resolution of the Board of Trustees of the
Trust.
<PAGE>
(d) This Agreement shall extend to and shall be binding upon the
parties hereto and their respective successors and assigns,
provided, however, that this Agreement shall not be assignable
by the Trust without the written consent of the Custodian or
by the Custodian without the written consent of the Trust,
authorized or approved by a resolution of its Board of
Trustees.
(e) This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, but such
counterparts shall, together, constitute but one instrument.
(f) This Agreement and the rights and obligations of the Trust and
the Custodian hereunder shall be construed and interpreted in
accordance with the laws of the State of North Carolina.
(g) The Declaration of Trust of the Trust has been filed with the
Secretary of State of the Commonwealth of Massachusetts. The
obligations of the Trust on behalf of the Funds are not
personally binding upon, nor shall resort be had to the
private property of any of the Trustees, shareholders,
officers, employees or agents of the Trust, but only the
Trust's property shall be bound.
IN WITNESS WHEREOF, the Trust and the Custodian have caused this Agreement to be
signed and witnessed by duly authorized persons as of the date first written
above. Executed in several counterparts, each of which is an original.
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
Attest: /S/ David Grissett
______________________ By: /s/ Mike Biscardi
_______________________________
Title: Group Vice President
____________________________
NEW PROVIDENCE INVESTMENT TRUST
Attest: /s/ C. Frank Watson, III
_________________________ By: /s/ Frank P. Meadows, III
Title: Trustee
____________________________
EXHIBIT (h)(1)
==============
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.
<PAGE>
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 ofthe 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.
<PAGE>
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.
(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.
<PAGE>
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.
<PAGE>
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: /s/ Jack Brinson (SEAL)
___________________________
THE NOTTINGHAM COMPANY, INC.
By: /s/ Frank P. Meadows, III (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.
<PAGE>
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.
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.
EXHIBIT (h)(2)
==============
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.
<PAGE>
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.
<PAGE>
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: /s/ Jack Brinson (SEAL)
__________________________
NC SHAREHOLDER SERVICES, LLC
By: /s/ John Marriott (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 (i)
===========
October 20, 1998
Opinion and Consent of Counsel
New Providence Investment Trust
105 North Washington Street
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069
Ladies and Gentlemen:
This opinion is given in connection with the filing by New
Providence Investment Trust, a Massachusetts business trust ("Trust"), of
Post-Effective Amendment No. 2 to the Registration Statement on Form N-1A
("Registration Statement") under the Securities Act of 1933 ("1933 Act") and
Amendment No. 3 under the Investment Company Act of 1940 ("1940 Act"), relating
to an indefinite amount of authorized shares of beneficial interest of the
separate series of the Trust, Intrinsic Value Fund. The authorized shares of
beneficial interest of the Intrinsic Value Fund are hereinafter referred to as
the "Shares."
We have examined the following Trust documents: Declaration of
Trust; By-Laws; Registration Statement on Form N-1A filed on July 1, 1997;
Pre-Effective Amendment No. 1 to the Registration Statement filed on September
25, 1997; Post-Effective Amendment No 1 to the Registration Statement filed on
September 29, 1998; pertinent provisions of the laws of the Commonwealth of
Massachusetts; and such other corporate records, certificates, documents and
statutes that we have deemed relevant in order to render the opinion expressed
herein.
Based on such examination, we are of the opinion that:
1. New Providence Investment Trust is a Massachusetts business trust duly
organized, validly existing, and in good standing under the laws of the
Commonwealth of Massachusetts; and
2. The Shares to be offered for sale by New Providence Investment Trust, when
issued in the manner contemplated by the Registration Statement, will be
legally issued, fully-paid and non-assessable.
This letter expresses our opinion as to the Massachusetts
business trust law governing matters such as the due organization of New
Providence Investment Trust and the authorization and issuance of the Shares,
but does not extend to the securities or "Blue Sky" laws of the Commonwealth of
Massachusetts or to federal securities or other laws.
We consent to the use of this opinion as an exhibit to the
Registration Statement and to the reference to Dechert Price & Rhoads under the
caption "Legal Matters" in the Statement of Additional Information, which is
incorporated by reference into the Prospectus comprising a part of the
Registration Statement.
Very truly yours,
DECHERT PRICE & RHOADS
EXHIBIT (j)
===========
Exhibit 11
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Post-Effective Amendment
No. 2 to Registration Statement No. 333-31359 of Intrinsic Value Fund (a series
of New Providence Investment Trust) of our report dated June 12, 1998, relating
to New Providence Capital Growth Fund incorporated by reference in the Statement
of Additional Information, which is part of such Registration Statement, and to
the reference to us under the caption "Independent Auditors" in such
Registration Statement.
/s/ Deloitte & Touche LLP
Pittsburgh, Pennsylvania
October 21, 1998
EXHIBIT (m)(1)
==============
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
WHEREAS, New Providence Investment Trust, an unincorporated business trust
organized and existing under the laws of the Commonwealth of Massachusetts (the
"Trust"), engages in business as an open-end management investment company and
is registered as such under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Trust is authorized to issue an unlimited number of shares of
beneficial interest (the "Shares"), in separate series representing the
interests in separate funds of securities and other assets; and
WHEREAS, the Trust offers a series of such Shares representing interests in the
NEW PROVIDENCE GROWTH CAPITAL FUND (the "Fund") of the Trust;
WHEREAS, the Trustees of the Trust as a whole, and the Trustees who are not
interested persons of the Trust (as defined in the 1940 Act) and who have no
direct or indirect financial interest in the operation of this Plan or in any
agreement relating hereto (the "Non-Interested Trustees"), having determined, in
the exercise of reasonable business judgment and in light of their fiduciary
duties under state law and under Section 36(a) and (b) of the 1940 Act, that
there is a reasonable likelihood that this Plan will benefit the Trust and its
shareholders, have approved this Plan by votes cast at a meeting called for the
purpose of voting hereon and on any agreements related hereto; and
NOW, THEREFORE, the Trust hereby adopts this Plan in accordance with Rule 12b-1
under the 1940 Act, on the following terms and conditions:
1. Distribution and Servicing Activities. Subject to the supervision of the
Trustees of the Trust, the Trust may, directly or indirectly, engage in any
activities primarily intended to result in the sale of Institutional Shares of
the Fund, which activities may include, but are not limited to, the following:
(a) payments to the Trust's Distributor and to securities dealers and others in
respect of the sale of Institutional Shares of the Fund; (b) payment of
compensation to and expenses of personnel (including personnel of organizations
with which the Trust has entered into agreements related to this Plan) who
engage in or support distribution of Institutional Shares of the Fund or who
render shareholder support services not otherwise provided by the Trust's
transfer agent, administrator, or custodian, including but not limited to,
answering inquiries regarding the Trust, processing shareholder transactions,
providing personal services and/or the maintenance of shareholder accounts,
providing other shareholder liaison services, responding to shareholder
inquiries, providing information on shareholder investments in the Fund, and
providing such other shareholder services as the Trust may reasonably request;
(c) formulation and implementation of marketing and promotional activities,
including, but not limited to, direct mail promotions and television, radio,
newspaper, magazine and other mass media advertising; (d) preparation, printing
and distribution of sales literature; (e) preparation, printing and distribution
of prospectuses and statements of additional information and reports of the
Trust for recipients other than existing shareholders of the Trust; and (f)
obtaining such information, analyses and reports with respect to marketing and
promotional activities as the Trust may, from time to time, deem advisable. The
Trust is authorized to engage in the activities listed above, and in any other
activities primarily intended to result in the sale of Institutional Shares of
the Fund, either directly or through other persons with which the Trust has
entered into agreements related to this Plan.
2. Maximum Expenditures. The expenditures to be made by the Trust pursuant
to this Plan and the basis upon which payment of such expenditures will be made
shall be determined by the Trustees of the Trust, but in no event may such
expenditures exceed an amount calculated at the rate of 0.25% per annum of the
average daily net asset value of the Institutional Shares of the Fund for each
year or portion thereof included in the period for which the computation is
being made, elapsed since the inception of this Plan to the date of such
expenditures. Notwithstanding the foregoing, in no event may such expenditures
paid by the Trust as service fees exceed an amount calculated at the rate of
0.25% of the average annual net assets of the Institutional Shares of the Fund,
nor may such expenditures paid as service fees to any person who sells
Institutional Shares of the Fund exceed an amount calculated at the rate of
0.25% of the average annual net asset value of such shares. Such payments for
distribution and shareholder servicing activities may be made directly by the
Trust or to other persons with which the Trust has entered into agreements
related to this Plan.
3. Term and Termination. (a) This Plan shall become effective as of
September 29,1997. Unless terminated as herein provided, this Plan shall
continue in effect for one year from the date hereof and shall continue in
effect for successive periods of one year thereafter, but only so long as each
such continuance is specifically approved by votes of a majority of both (i) the
Trustees of the Trust and (ii) the Non-Interested Trustees, cast at a meeting
called for the purpose of voting on such approval.
(b) This Plan may be terminated at any time with respect to the Fund
by a vote of a majority of the Non-Interested Trustees or by a vote of a
majority of the outstanding voting securities of the Investor Class of the
Fund as defined in the 1940 Act.
4. Amendments. This Plan may not be amended to increase materially the
maximum expenditures permitted by Section 2 hereof unless such amendment is
approved by a vote of the majority of the outstanding voting securities of the
Investor Class of the Fund as defined in the 1940 Act with respect to which a
material increase in the amount of expenditures is proposed, and no material
amendment to this Plan shall be made unless approved in the manner provided for
annual renewal of this Plan in Section 3(a) hereof.
5. Selection and Nomination of Trustees. While this Plan is in effect, the
selection and nomination of the Non-Interested Trustees of the Trust shall be
committed to the discretion of such Non-Interested Trustees.
6. Quarterly Reports. The Treasurer of the Trust shall provide to the
Trustees of the Trust and the Trustees shall review quarterly a written report
of the amounts expended pursuant to this Plan and any related agreement and the
purposes for which such expenditures were made.
7. Recordkeeping. The Trust shall preserve copies of this Plan and any
related agreement and all reports made pursuant to Section 6 hereof, for a
period of not less than six years from the date of this Plan. Any such related
agreement or such reports for the first two years will be maintained in an
easily accessible place.
8. Limitation of Liability. Any obligations of the Trust hereunder shall
not be binding upon any of the Trustees, officers or shareholders of the Trust
personally, but shall bind only the assets and property of the Trust. The term
"New Providence Investment Trust" means and refers to the Trustees from time to
time serving under the Agreement and Declaration of Trust of the Trust, a copy
of which is on file with the Secretary of The Commonwealth of Massachusetts. The
execution of this Plan has been authorized by the Trustees, and this Plan has
been signed on behalf of the Trust by an authorized officer of the Trust, acting
as such and not individually, and neither such authorization by such Trustees
nor such execution by such officer shall be deemed to have been made by any of
them individually or to impose any liability on any of them personally, but
shall bind only the assets and property of the Trust as provided in the
Agreement and Declaration of Trust.
*
*
*
*
*
*
*
IN WITNESS THEREOF, the parties hereto have caused this Plan to be executed as
of the date written above.
NEW PROVIDENCE INVESTMENT TRUST
By /s/ Jack Brinson
____________________________
NEW PROVIDENCE GROWTH CAPITAL FUND
By /s/ John K. Donaldson
____________________________
EXHIBIT (m)(2)
==============
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
WHEREAS, New Providence Investment Trust, an unincorporated business trust
organized and existing under the laws of the Commonwealth of Massachusetts (the
"Trust"), engages in business as an open-end management investment company and
is registered as such under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Trust is authorized to issue an unlimited number of shares of
beneficial interest (the "Shares"), in separate series representing the
interests in separate funds of securities and other assets; and
WHEREAS, the Trust offers a series of such Shares representing interests in the
INTRINSIC VALUE FUND (the "Fund") of the Trust;
WHEREAS, the Trustees of the Trust as a whole, and the Trustees who are not
interested persons of the Trust (as defined in the 1940 Act) and who have no
direct or indirect financial interest in the operation of this Plan or in any
agreement relating hereto (the "Non-Interested Trustees"), having determined, in
the exercise of reasonable business judgment and in light of their fiduciary
duties under state law and under Section 36(a) and (b) of the 1940 Act, that
there is a reasonable likelihood that this Plan will benefit the Fund and its
shareholders, have approved this Plan by votes cast at a meeting held in person
and called for the purpose of voting hereon and on any agreements related
hereto; and
NOW, THEREFORE, the Trust hereby adopts this Plan in accordance with Rule 12b-1
under the 1940 Act, on the following terms and conditions:
1. Distribution and Servicing Activities. Subject to the supervision of
the Trustees of the Trust, the Trust may, directly or indirectly, engage in any
activities primarily intended to result in the sale of Shares of the Fund, which
activities may include, but are not limited to, the following: (a) payments to
the Trust's Distributor and to securities dealers and others in respect of the
sale of Shares of the Fund; (b) payment of compensation to and expenses of
personnel (including personnel of organizations with which the Trust has entered
into agreements related to this Plan) who engage in or support distribution of
Shares of the Fund or who render shareholder support services not otherwise
provided by the Trust's transfer agent, administrator, or custodian, including
but not limited to, answering inquiries regarding the Trust, processing
shareholder transactions, providing personal services and/or the maintenance of
shareholder accounts, providing other shareholder liaison services, responding
to shareholder inquiries, providing information on shareholder investments in
the Fund, and providing such other shareholder services as the Trust may
reasonably request; (c) formulation and implementation of marketing and
promotional activities, including, but not limited to, direct mail promotions
and television, radio, newspaper, magazine and other mass media advertising; (d)
preparation, printing and distribution of sales literature; (e) preparation,
printing and distribution of prospectuses and statements of additional
information and reports of the Trust for recipients other than existing
shareholders of the Trust; and (f) obtaining such information, analyses and
reports with respect to marketing and promotional activities as the Trust may,
from time to time, deem advisable. The Trust is authorized to engage in the
activities listed above, and in any other activities primarily intended to
result in the sale of Shares of the Fund, either directly or through other
persons with which the Trust has entered into agreements related to this Plan.
2. Maximum Expenditures. The expenditures to be made by the Fund
pursuant to this Plan and the basis upon which payment of such expenditures will
be made shall be determined by the Trustees of the Trust, but in no event may
such expenditures exceed an amount calculated at the rate of 0.50% per annum of
the average daily net asset value of the Shares of the Fund for each year or
portion thereof included in the period for which the computation is being made,
elapsed since the inception of this Plan to the date of such expenditures.
Notwithstanding the foregoing, in no event may such expenditures paid by the
Fund as service fees exceed an amount calculated at the rate of 0.25% of the
average annual net assets of the Shares of the Fund, nor may such expenditures
paid as service fees to any person who sells Shares of the Fund exceed an amount
calculated at the rate of 0.25% of the average annual net asset value of such
shares. Such payments for distribution and shareholder servicing activities may
be made directly by the Trust or to other persons with which the Trust has
entered into agreements related to this Plan.
3. Term and Termination. (a) This Plan shall become effective as of the
date the Fund becomes effective with the Securities and Exchange Commission.
Unless terminated as herein provided, this Plan shall continue in effect for one
year from the date hereof and shall continue in effect for successive periods of
one year thereafter, but only so long as each such continuance is specifically
approved by votes of a majority of both (i) the Trustees of the Trust and (ii)
the Non-Interested Trustees, cast at a meeting called for the purpose of voting
on such approval.
(b) This Plan may be terminated at any time with respect to the Fund by
a vote of a majority of the Non-Interested Trustees or by a vote of a majority
of the outstanding voting securities of the Fund as defined in the 1940 Act.
4. Amendments. This Plan may not be amended to increase materially the
maximum expenditures permitted by Section 2 hereof unless such amendment is
approved by a vote of the majority of the outstanding voting securities of the
Fund as defined in the 1940 Act with respect to which a material increase in the
amount of expenditures is proposed, and no material amendment to this Plan shall
be made unless approved in the manner provided for annual renewal of this Plan
in Section 3(a) hereof.
5. Selection and Nomination of Trustees. While this Plan is in effect,
the selection and nomination of the Non-Interested Trustees of the Trust shall
be committed to the discretion of such Non-Interested Trustees.
6. Quarterly Reports. The Treasurer of the Trust shall provide to the
Trustees of the Trust and the Trustees shall review quarterly a written report
of the amounts expended pursuant to this Plan and any related agreement and the
purposes for which such expenditures were made.
7. Recordkeeping. The Trust shall preserve copies of this Plan and any
related agreement and all reports made pursuant to Section 6 hereof, for a
period of not less than six years from the date of this Plan. Any such related
agreement or such reports for the first two years will be maintained in an
easily accessible place.
8. Limitation of Liability. Any obligations of the Trust hereunder
shall not be binding upon any of the Trustees, officers or shareholders of the
Trust personally, but shall bind only the assets and property of the Trust. The
term "New Providence Investment Trust" means and refers to the Trustees from
time to time serving under the Agreement and Declaration of Trust of the Trust,
a copy of which is on file with the Secretary of The Commonwealth of
Massachusetts. The execution of this Plan has been authorized by the Trustees,
and this Plan has been signed on behalf of the Trust by an authorized officer of
the Trust, acting as such and not individually, and neither such authorization
by such Trustees nor such execution by such officer shall be deemed to have been
made by any of them individually or to impose any liability on any of them
personally, but shall bind only the assets and property of the Trust as provided
in the Agreement and Declaration of Trust.
EXHIBIT (o)
===========
NEW PROVIDENCE INVESTMENT TRUST
PLAN PURSUANT TO RULE 18f-3 UNDER THE
INVESTMENT COMPANY ACT OF 1940
This Plan (the "Plan") is adopted by the New Providence Investment
Trust (the "Trust") pursuant to Rule 18f-3 under the Investment Company Act of
1940, as amended (the "1940 Act"), and sets forth the general characteristics
of, and the general conditions under which the Trust may offer, multiple classes
of shares of its now existing and hereafter created series. This Plan is
intended to allow the Trust to offer multiple classes of shares to the full
extent and in the manner permitted by Rule 18f-3 under the 1940 Act, subject to
the requirements and conditions imposed by that rule. This Plan may be revised
or amended from time to time as provided below.
CLASS DESIGNATIONS
Each of the Trust's constituent series (the "Series"), as identified in
Appendix A, as amended from time to time, may issue Institutional and/or
Investor classes of shares with the characteristics identified below. Each of
the two classes of shares will represent interests in the same portfolio of
investments of the Series and, except as described herein, shall have the same
rights and obligations as each other class. Each class shall be subject to such
investment minimums and other conditions of eligibility as are set forth in the
Series' prospectus or statement of additional information, as amended from time
to time (the "Prospectus").
CLASS CHARACTERISTICS
Investor Class shares are offered at net asset value plus a front-end
sales charge, as set forth in the Investor Class Prospectus. Investor Class
shares are subject to a fee imposed in accordance with Rule 12b-1 under the Act,
which may include a service fee. Investor Class Prospectus.
Institutional Class shares are offered at net asset value.
Institutional Class shares are not subject to service fees or distribution fees.
As set forth in the Institutional Class Prospectus, Institutional Class shares
are offered only to certain categories of institutional customers and are
subject to minimum initial and subsequent investments.
ALLOCATIONS TO EACH CLASS
Expense Allocations
The following expenses shall be allocated, to the extent practicable,
on a class-by-class basis: (i) Rule 12b-1 fees payable by the Trust to the
distributor or principal underwriter of the Series' Investor Class (the
"Investor Class Distributor"),1 and (ii) transfer agency costs attributable to
Investor and Institutional Class shares. Subject to the approval of a majority
of the Trust's Board of Trustees, including a majority of the Independent
Trustees (as defined in the Investor Class Distribution Plan), the following
expenses ("Class Expenses") may, to the extent such expenses are not required to
be borne by the investment adviser (the "Adviser") of a particular Series
pursuant to Investment Advisory Agreement for that Series, be allocated on a
class-by-class basis: (a) printing and postage expenses related to preparing and
distributing materials such as shareholder reports, prospectuses and proxy
statements to current shareholders of a specific class; (b) SEC registration
fees incurred with respect to a specific class; (c) state blue sky and foreign
registration fees and expenses incurred with respect to a specific class; (d)
the expenses of administrative personnel and services required to support
shareholders of a specific class; (e) litigation and other legal expenses
relating to a specific class; (f) Series' fees or expenses incurred as a result
of issues relating to a specific class of shares; (g) accounting and consulting
expenses relating to a specific class; (h) any fees imposed pursuant to a
non-Rule 12b-1 shareholder services plan that relate to a specific class; and
(i) any additional expenses, not including advisory or custodial fees or other
expenses relating to the management of the Series' assets, if such expenses are
actually incurred in a different amount with respect to a class that are of a
different kind or to a different degree than with respect to one or more other
classes.
All expenses not hereafter designated as Class Expenses will be
allocated to each class on the basis of the net asset value of that class in
relation to the net asset value of the Series ("Series Expenses").
However, notwithstanding the above, the Trust may allocate all expenses
other than Class Expenses on the basis of the relative net assets (settled
shares) of each class, as permitted by Rule 18f-3(c)(2) under the 1940 Act.
Waivers and Reimbursements
The Investor or Institutional Class Distributor may choose to waive or
reimburse Rule 12b-1 fees, transfer agency fees or any Class Expenses, as
applicable, on a voluntary basis. Such waiver or reimbursement may be applicable
to some or all of the classes and may be in different amounts for one or more
classes.
Income, Gains and Losses
Income and realized and unrealized capital gains and losses shall be
allocated to each class on the basis of the net asset value of that class in
relation to the net asset value of the Series.
The Series may allocate income and realized and unrealized capital
gains and losses to each share based on relative net assets (settled shares) of
each class, as permitted by Rule 18f- 3(c)(2) under the 1940 Act.
Conversion and Exchange
Neither Institutional nor Investor Class of Shares shall convert into
the other. Subsequent classes of shares (each a "Converting Class") may
automatically convert into another class of shares (the "Conversion Class"),
subject to such terms as may be approved by the Trustees.
In the event of any material increase in payments authorized under the
Distribution Plan (or, if presented to shareholders, any material increase in
payments authorized by a non-Rule 12b-1 shareholder services plan) applicable to
any Conversion Class, existing Converting Class shares will not be permitted to
convert into Conversion Class shares unless the Converting Class shareholders,
voting separately as a class, approve the material increase in such payments.
Pending approval of such increase, or if such increase is not approved, the
Trustees shall take such action as is necessary to ensure that existing
Converting Class shares are exchanged or converted into a new class of shares
("New Conversion Class") identical in all material respects to the Conversion
Class shares as they existed prior to the implementation of the material
increase in payments, no later than the time such shares were scheduled to
convert to the Conversion Class shares. Converting Class shares sold after the
implementation of the fee increase may convert into Conversion Class shares
subject to the higher maximum payment, provided that the material features of
the Conversion Class plan and the relationship of such plan to the Converting
Class shares were disclosed in an effective registration statement.
Exchange Features
Shares of each class generally will be permitted to be exchanged only
for shares of a class with similar characteristics in another Series. All
exchange features applicable to each class will be described in the Prospectus.
DIVIDENDS
Dividends paid by the Trust with respect to its Investor and
Institutional Class shares, to the extent any dividends are paid, will be
calculated in the same manner, at the same time and will be in the same amount,
except that any Rule 12b-1 fee payments relating to Investor Class shares will
be borne exclusively by that class, and any incremental transfer agency costs
or, if applicable, Class Expenses relating to a class shall be borne exclusively
by that class.
VOTING RIGHTS
Each share of each Series entitles the shareholder of record to one
vote. Each class of shares of the Series will vote separately as a class with
respect to any Distribution Plan, as defined herein, applicable to that class
and on other matters for which class voting is required under applicable law.
Investor Class shareholders will vote separately as a class to approve any
material increase in payments authorized under the Distribution Plan applicable
to Investor Class shares.
RESPONSIBILITIES OF THE TRUSTEES
On an ongoing basis, the Trustees will monitor the Trust and each
Series for the existence of any material conflicts among the interests of the
two classes of shares. The Trustees shall further monitor on an ongoing basis
the use of waivers or reimbursement by the Adviser and the Investor Class
Distributor of expenses to guard against cross-subsidization between classes.
The Trustees, including a majority of the Independent Trustees, shall take such
action as is reasonably necessary to eliminate any such conflict that may
develop. If a conflict arises, the Adviser and Investor Class Distributor and
the distributor of the Institutional Class shares (collectively, the
"Distributors"), at their own cost, will remedy such conflict up to and
including establishing one or more new registered management investment
companies.
REPORTS TO THE TRUSTEES
The Adviser and the Distributors will be responsible for reporting any
potential or existing conflicts among the two classes of shares to the Trustees.
In addition, the Trustees will receive quarterly and annual statements
concerning distributions and shareholder servicing expenditures complying with
paragraph (b)(3)(ii) of Rule 12b-1. In the statements, only expenditures
properly attributable to the direct or indirect sale or servicing of a
particular class of shares shall be used to justify any distribution or service
fee charged to that class. The statements, including the allocations upon which
they are based, will be subject to the review of the Independent Trustees in the
exercise of their fiduciary duties.
AMENDMENTS
The Plan may be amended from time to time in accordance with the
provisions and requirements of Rule 18f-3 under the 1940 Act.
Adopted this ___ day of October, 1998.
<PAGE>
Appendix A
Series
------
The Intrinsic Value Fund
- --------
1. Rule 12b-1 fees are payable only to the extent the Trust has adopted a
Distribution Plan pursuant to Rule 12b-1 under the 1940 Act ("Distribution
Plan") on behalf of the Series to which the class belongs. As of the date
of this Rule 18f-3 Plan, only the Instrinsic Value Fund has adopted a
Distribution Plan.
