The New Providence Capital Growth Fund uses a disciplined approach to investing
that attempts to identify medium sized growth companies that are developing into
tomorrow's blue chip enterprises. Our goal is to build a focused portfolio of
companies that will provide consistent earnings growth above the market average
with stock valuations below the market average. As of 6/25/98, our portfolio had
met these guidelines: the average 5 year earnings growth rate of companies held
by the fund was approximately 40% (above the market average); the average
price/earnings ratio of these companies was 19 times 1998 earnings (below the
market average).
From 9/30/97 to 5/31/98, we under-performed the S&P 400 Index by 6.3% and the
S&P 500 Index by 13.5%. A large contributor to our below par short-term results
was our relative concentration in the oil services industry. These stocks were
negatively impacted by the large drop in oil prices which began last November. A
second contributor to our performance has been our focus on selecting smaller
sized companies--a group that we think offers more bargains than the rest of the
market. However, despite their cheap relative valuations, the performance of
small and mid-cap stocks was well below that of large-cap stocks during the past
year. We are currently focusing our investments in U.S. retail and housing
related stocks, two groups that we think have little exposure to Asian-related
problems.
New Providence will continue to follow our disciplined approach to selecting
reasonably priced growth companies and hope for improved relative performance in
the future. Thanks for the opportunity to serve you.
New Providence Capital Management, L.L.C.
Atlanta, Georgia
<PAGE>
NEW PROVIDENCE CAPITAL GROWTH FUND
Performance Update - $10,000 Investment
For the period from September 29, 1997 (Date of Initial Public Offering)
to May 31, 1998
New Providence Lipper Growth S&P 500 Total
Capital Growth Fund Fund Index Return Index
9/29/97 10,000 10,000 10,000
10/31/97 9,692 9,677 9,605
11/30/97 9,683 9,900 10,049
12/31/97 9,771 10,067 10,222
1/31/98 9,490 10,134 10,335
2/28/98 10,440 10,910 11,080
3/31/98 10,756 11,377 11,648
4/30/98 10,598 11,498 11,765
5/31/98 10,176 11,215 11,563
This graph depicts the performance of the New Providence Capital Growth Fund
versus the Lipper Growth Fund Index and the S&P 500 Total Return Index. It is
important to note that the New Providence Capital Growth Fund is a
professionally managed mutual fund while the indexes are not available for
investment and are unmanaged. The comparison is shown for illustrative purposes
only.
Cumulative Total Return
- -----------------------
Since IPO
- -----------------------
1.76%
- -----------------------
The graph assumes an initial $10,000 investment at September 29, 1997. All
dividends and distributions are reinvested.
At May 31, 1998, the New Providence Capital Growth Fund would have grown to
$10,176 - total investment return of 1.76% since September 29, 1997.
At May 31, 1998, a similar investment in the Lipper Growth Fund Index would have
grown to $11,215 - total investment return of 12.15%; and the S&P 500 Total
Return Index would have grown to $11,563 - total investment return of 15.63%,
since September 29, 1997.
Past performance is not a guarantee of future results. A mutual fund's share
price and investment return will vary with market conditions, and the principal
value of shares, when redeemed, may be worth more or less than the original
cost. Average annual returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming
reinvestments of dividends.
<PAGE>
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NEW PROVIDENCE CAPITAL GROWTH FUND
PORTFOLIO OF INVESTMENTS
May 31, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - 96.84%
Beverages - 1.49%
(a) Canandaigua Brands, Inc. ............................................. 7,500 $ 345,937
-----------
Computers - 5.73%
Compaq Computer Corporation .......................................... 31,800 870,525
(a) Sun Microsystems, Inc. ............................................... 11,400 456,713
-----------
1,327,238
-----------
Electronics - 6.26%
(a) Lexmark International Group, Inc. .................................... 11,300 627,150
(a) SCI Systems, Inc. .................................................... 24,100 822,412
-----------
1,449,562
-----------
Entertainment - 3.69%
(a) Rio Hotel and Casino, Inc. ........................................... 39,300 854,775
-----------
Financial Services - 6.32%
Capital One Financial Corporation .................................... 9,300 928,256
SunAmerica Inc. ...................................................... 11,000 534,875
-----------
1,463,131
-----------
Furniture & Home Appliances - 3.63%
Ethan Allen Interiors Inc. ........................................... 16,700 840,219
-----------
Holding Companies - Diversified - 2.74%
(a) Anixter International Inc. ........................................... 31,500 633,938
-----------
Homebuilders - 2.08%
Kaufman and Broad Home Corporation ................................... 18,800 482,925
-----------
Manufactured Housing - 3.17%
Oakwood Homes Corporation ............................................ 27,000 734,063
-----------
Oil & Gas - Equipment & Services - 13.97%
(a) BJ Services Company .................................................. 19,000 621,062
ENSCO International Incorporated ..................................... 35,950 907,737
Tidewater, Inc. ...................................................... 12,100 459,800
(a) EVI Weatherford, Inc. ................................................ 13,870 701,302
(a) Noble Drilling Corporation ........................................... 18,500 545,750
-----------
3,235,651
-----------
(Continued)
</TABLE>
<PAGE>
<TABLE>
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NEW PROVIDENCE CAPITAL GROWTH FUND
PORTFOLIO OF INVESTMENTS
May 31, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Retail - Apparel - 15.22%
Intimate Brands, Inc. ................................................ 17,300 $ 496,294
Ross Stores, Inc. .................................................... 26,800 1,182,550
(a) The Gymboree Corporation ............................................. 34,300 542,369
The TJX Companies, Inc. .............................................. 27,900 1,304,325
-----------
3,525,538
-----------
Retail - Automotive Parts - 5.22%
(a) AutoZone, Inc. ....................................................... 36,400 1,210,300
-----------
Retail - Department Stores - 3.17%
(a) Proffitt's, Inc. ..................................................... 18,700 733,975
-----------
Retail - Specialty Line - 5.25%
(a) Office Depot, Inc. ................................................... 41,200 1,215,400
-----------
Telecommunications - 2.38%
Century Telephone Enterprises, Inc. .................................. 12,450 551,691
-----------
Transportation - Rail - 3.22%
Kansas City Southern Industries, Inc. ................................ 17,600 745,800
-----------
Transportation - Air - 8.70%
(a) Alaska Air Group, Inc. ............................................... 21,400 991,087
Southwest Airlines Co. ............................................... 38,400 1,024,800
-----------
2,015,887
-----------
Textiles - 4.60%
(a) Nautica Enterprises, Inc. ............................................ 36,400 1,064,700
-----------
Total Common Stocks (Cost $20,994,911) ............................... 22,430,730
-----------
INVESTMENT COMPANY - 3.10%
Evergreen Money Market Institutional Money
Market Fund Institutional Service Shares
(Cost $718,294) ...................................................... 718,294 718,294
-----------
Total Value of Investments (Cost $21,713,205 (b)) ................................ 99.94% $23,149,024
Other Assets Less Liabilities .................................................... 0.06% 14,753
------ -----------
Net Assets ................................................................ 100.00% $23,163,777
====== ===========
(a) Non-income producing investment.
(b) Aggregate cost for financial reporting and federal income tax
purposes is the same. Unrealized appreciation (depreciation) of
investments for financial reporting and federal income tax purposes
is as follows:
Unrealized appreciation ........................................................................... $2,829,484
Unrealized depreciation ........................................................................... (1,393,665)
----------
Net unrealized appreciation ....................................................... $1,435,819
==========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
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NEW PROVIDENCE CAPITAL GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
May 31, 1998
ASSETS
Investments, at value (cost $21,713,205) ........................................................ $23,149,024
Cash ............................................................................................ 250
Income receivable ............................................................................... 4,865
Receivable for fund shares sold ................................................................. 584
Deferred organization expenses, net (note 4) .................................................... 27,722
-----------
Total assets ............................................................................... 23,182,445
-----------
LIABILITIES
Accrued expenses ................................................................................ 18,668
-----------
NET ASSETS
(applicable to 2,001,835 shares outstanding; unlimited
shares of no par value beneficial interest authorized) ......................................... $23,163,777
===========
NET ASSET VALUE, REDEMPTION AND OFFERING PRICE PER SHARE
($23,163,777 / 2,001,835 shares) ................................................................ $ 11.57
===========
NET ASSETS CONSIST OF
Paid-in capital ................................................................................. $21,675,010
Undistributed net realized gain on investments .................................................. 52,948
Net unrealized appreciation on investments ...................................................... 1,435,819
-----------
$23,163,777
===========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
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NEW PROVIDENCE CAPITAL GROWTH FUND
STATEMENT OF OPERATIONS
For the Period from July 11, 1997
(commencement of operations)
to May 31, 1998
INVESTMENT LOSS
Income
Interest .................................................................................... $ 17,260
Dividends ................................................................................... 45,821
-----------
Total income ........................................................................... 63,081
-----------
Expenses
Investment advisory fees (note 2) ........................................................... 100,098
Fund administration fees (note 2) ........................................................... 16,683
Distribution fees (note 3) .................................................................. 33,366
Custody fees ................................................................................ 3,202
Registration and filing administration fees (note 2) ........................................ 2,812
Fund accounting fees (note 2) ............................................................... 24,155
Audit fees .................................................................................. 9,706
Legal fees .................................................................................. 7,648
Securities pricing fees ..................................................................... 1,401
Shareholder recordkeeping fees .............................................................. 7,606
Other fees .................................................................................. 1,798
Shareholder servicing expenses .............................................................. 1,682
Registration and filing expenses ............................................................ 18,944
Printing expenses ........................................................................... 2,537
Amortization of deferred organization expenses (note 4) ..................................... 4,779
Trustee fees and meeting expenses ........................................................... 2,633
Other operating expenses .................................................................... 3,054
-----------
Total expenses ......................................................................... 242,104
-----------
Less:
Investment advisory fees waived (note 2) ......................................... (4,553)
Distribution fees waived (note 3) ................................................ (18,357)
-----------
Net expenses ........................................................................... 219,194
-----------
Net investment loss .............................................................. (156,113)
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from investment transactions ................................................... 209,061
Increase in unrealized appreciation on investments ............................................... 1,435,819
-----------
Net realized and unrealized gain on investments ............................................. 1,644,880
-----------
Net increase in net assets resulting from operations ................................... $ 1,488,767
===========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
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NEW PROVIDENCE CAPITAL GROWTH FUND
STATEMENTS OF CHANGES IN NET ASSETS
For the Period from July 11, 1997
(commencement of operations)
to May 31, 1998
INCREASE IN NET ASSETS
Operations
Net investment loss .............................................................................. $ (156,113)
Net realized gain from investment transactions ................................................... 209,061
Increase in unrealized appreciation on investments ............................................... 1,435,819
------------
Net increase in net assets resulting from operations ........................................ 1,488,767
------------
Capital share transactions
Increase in net assets resulting from capital share transactions (a) ............................. 21,675,010
------------
Total increase in net assets ........................................................... 23,163,777
NET ASSETS
Beginning of period .................................................................................. 0
------------
End of period ........................................................................................ $ 23,163,777
============
(a) A summary of capital share activity follows:
-----------------------------------
Shares Value
-----------------------------------
Shares sold ....................................................................... 2,002,953 $ 21,687,588
Shares redeemed ................................................................... (1,118) (12,578)
--------- ------------
Net increase ................................................................. 2,001,835 $ 21,675,010
========= ============
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
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NEW PROVIDENCE CAPITAL GROWTH FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
For the Period from September 29, 1997
(date of initial public offering)
to May 31, 1998
Net asset value, beginning of period (a) ........................................................... $ 11.37
Income (loss) from investment operations
Net investment loss ..................................................................... (0.08)
Net realized and unrealized gain on investments ......................................... 0.28
------------
Total from investment operations .................................................... 0.20
------------
Net asset value, end of period ..................................................................... $ 11.57
============
Total return ....................................................................................... 1.76%
============
Ratios/supplemental data
Net assets, end of period .................................................................... $ 23,163,777
============
Ratio of expenses to average net assets
Before expense reimbursements and waived fees ................................................. 1.79 % (b)
After expense reimbursements and waived fees .................................................. 1.62 % (b)
Ratio of net investment loss to average net assets
Before expense reimbursements and waived fees ................................................. (1.41)% (b)
After expense reimbursements and waived fees .................................................. (1.24)% (b)
Portfolio turnover rate ............................................................................ 57.27 %
Average broker commissions per share (c) ........................................................... $0.0503
(a) Includes undistributed net investment loss of $0.02 per share and undistributed net realized gains and unrealized gains
of $1.39 per share, both of which were earned from July 11, 1997 (commencement of operations) through September 29, 1997.
(b) Annualized.
(c) Represents total commission paid on portfolio securities divided by total portfolio shares purchased or sold on which
commissions were charged.
See accompanying notes to financial statements
</TABLE>
<PAGE>
NEW PROVIDENCE CAPITAL GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
May 31, 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
The New Providence Capital Growth Fund (the "Fund") is a diversified
series of shares of beneficial interest of The New Providence
Investment Trust (the "Trust"). The Trust, an open-ended investment
company, was organized on July 9, 1997 as a Massachusetts Business
Trust and is registered under the Investment Company Act of 1940, as
amended. The investment objective of the Fund is to provide
shareholders with long-term capital growth, consisting of both realized
and unrealized capital gains. Current income is of secondary
importance. The Fund will seek to achieve this objective by investing
primarily in a portfolio of equity securities traded on domestic U.S.
exchanges or on over-the-counter markets. The Fund began operations on
July 11, 1997. The Fund had a net investment loss of $19,330, or $0.02
per share, and net realized and unrealized gains of $1,407,769, or
$1.39 per share, from the commencement of operations through the date
of initial public offering, or September 29, 1997. During this period,
there were no distributions of net investment income or net realized
gains. As of May 31, 1998, one shareholder of record owned 92.7% of the
outstanding shares of the Fund. The following is a summary of
significant accounting policies followed by the Fund.
A. Security Valuation - The Fund's investments in securities are
carried at value. Securities listed on an exchange or quoted on a
national market system are valued at the last sales price as of
4:00 p.m. New York time on the day of valuation. Other securities
traded in the over-the-counter market and listed securities for
which no sale was reported on that date are valued at the most
recent bid price. Securities for which market quotations are not
readily available, if any, are valued by using an independent
pricing service or by following procedures approved by the Board
of Trustees. Short-term investments are valued at cost which
approximates value.
B. Federal Income Taxes - The Fund is considered a personal holding
company as defined under Section 542 of the Internal Revenue Code
since 50% of the value of the Fund's shares were owned directly
or indirectly by five or fewer individuals at certain times
during the last half of the year. As a personal holding company,
the Fund is subject to federal income taxes on undistributed
personal holding company income at the maximum individual income
tax rate. No provision has been made for federal income taxes
since substantially all taxable income has been distributed to
shareholders. It is the policy of the Fund to comply with the
provisions of the Internal Revenue Code applicable to regulated
investment companies and to make sufficient distributions of
taxable income to relieve it from all federal income taxes.
C. Investment Transactions - Investment transactions are recorded on
the trade date. Realized gains and losses are determined using
the specific identification cost method. Interest income is
recorded daily on an accrual basis. Dividend income is recorded
on the ex-dividend date.
D. Distributions to Shareholders - The Fund may declare dividends
quarterly, payable in March, June, September and December, on a
date selected by the Trust's Trustees. In addition, distributions
may be made annually in December out of net realized gains
through October 31 of that year. Distributions to shareholders
are recorded on the ex-dividend date. The Fund may make a
supplemental distribution subsequent to the end of its fiscal
year ending May 31.
E. Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
amounts of assets, liabilities, expenses and revenues reported in
the financial statements. Actual results could differ from those
estimated.
(Continued)
<PAGE>
NEW PROVIDENCE CAPITAL GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
May 31, 1998
NOTE 2 - INVESTMENT ADVISORY FEE AND OTHER RELATED PARTY TRANSACTIONS
Pursuant to an investment advisory agreement, New Providence Capital
Management, Inc. (the "Advisor") provides the Fund with a continuous
program of supervision of the Fund's assets, including the portfolio,
and furnishes advice and recommendations with respect to investments,
investment policies and the purchase and sale of securities. As
compensation for its services, the Advisor receives a fee at the annual
rate of 0.75% of the Fund's average daily net assets. The Advisor
intends to voluntarily waive a portion of its fee and reimburse
expenses of the Fund to limit total Fund operating expenses to 1.75% of
the average daily net assets of the Fund. There can be no assurance
that the foregoing voluntary fee waivers or reimbursements will
continue. The Advisor has voluntarily waived a portion of its fee
amounting to $4,553 for the period ended May 31, 1998.
The Fund's administrator, The Nottingham Company (the "Administrator"),
provides administrative services to and is generally responsible for
the overall management and day-to-day operations of the Fund pursuant
to an accounting and administrative agreement with the Trust. As
compensation for its services, the Administrator receives a fee at the
annual rate of 0.125% of the Fund's first $50 million of average daily
net assets, 0.10% of the next $50 million of average daily net assets,
and 0.075% of average daily net assets over $100 million. The
Administrator also receives a monthly fee of $2,250 for accounting and
recordkeeping services. Additionally, the Administrator charges the
Fund for servicing of shareholder accounts and registration of the
Fund's shares. The contract with the Administrator provides that the
aggregate fees for the aforementioned administration, accounting and
recordkeeping services shall not be less than $50,000 per year. The
Administrator also charges the Fund for certain expenses involved with
the daily valuation of portfolio securities.
Certain Trustees and officers of the Trust are also officers of the
Advisor, the distributor or the Administrator.
NOTE 3 - DISTRIBUTION AND SERVICE FEES
The Board of Trustees, including a majority of the Trustees who are not
"interested persons" of the Trust as defined in the Investment Company
Act of 1940 (the "Act"), adopted a distribution plan pursuant to Rule
12b-1 of the Act (the "Plan"). The Act regulates the manner in which a
regulated investment company may assume expenses of distributing and
promoting the sales of its shares and servicing of its shareholder
accounts.
The Plan provides that the Fund may incur certain expenses, which may
not exceed 0.25% per annum of the Fund's average daily net assets for
each year elapsed subsequent to adoption of the Plan, for payment to
the Distributor and others for items such as advertising expenses,
selling expenses, commissions, travel or other expenses reasonably
intended to result in sales of shares of the Fund or support servicing
of shareholder accounts. Expenditures incurred as service fees may not
exceed 0.25% per annum of the Fund's average daily net assets. The Fund
waived $18,357 of such expenses under the Plan for the period ended May
31, 1998.
(Continued)
<PAGE>
NEW PROVIDENCE CAPITAL GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
May 31, 1998
NOTE 4 - DEFERRED ORGANIZATION EXPENSES
All expenses of the Fund incurred in connection with its organization
and the registration of its shares have been assumed by the Fund. The
organization expenses are being amortized over a period of sixty
months. Investors purchasing shares of the Fund bear such expenses only
as they are amortized against the Fund's investment income.
NOTE 5 - PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments, other than short-term investments,
aggregated $29,705,651 and $8,919,801, respectively, for the period
ended May 31, 1998.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees of The New Providence Investment Trust and Shareholders
of New Providence Capital Growth Fund:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of New Providence Capital Growth Fund as of May
31, 1998, and the related statements of operations and changes in net assets for
the period from July 11, 1997 (commencement of operations) to May 31, 1998, and
financial highlights for the period presented. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of the securities owned as of May 31, 1998 by
correspondence with the custodian and brokers; where replies were not received,
we performed other auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of New Providence
Capital Growth Fund as of May 31, 1998, the results of its operations and the
changes in its net assets for the period from July 11, 1997 to May 31, 1998, and
its financial highlights for the period presented, in conformity with generally
accepted accounting principles.
Deloitte & Touche LLP
Pittsburgh, Pennsylvania
June 12, 1998
