As filed with the Securities and Exchange Commission on September 29, 2000
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. 9 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 10 [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. Box 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. Box 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
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)
[X] immediately upon filing pursuant to paragraph (b);
[ ] on ________ (date) pursuant to paragraph (b);
[ ] 60 days after filing pursuant to paragraph (a)(1);
[ ] on ________ (date) pursuant to paragraph (a)(1);
[ ] 75 days after filing pursuant to paragraph (a)(2); or
[ ] on ________ (date) pursuant to paragraph (a)(2), of rule 485.
<PAGE>
NEW PROVIDENCE INVESTMENT TRUST
Contents of Registration Statement
This registration statement consists of the following papers and documents:
Cover Sheet
Contents of Registration Statement
Wisdom Fund
-Part A - Institutional Class Shares Prospectus
-Part A - Investor Class Shares, Class B Shares, and Class C Shares Prospectus
-Part B - Statement of Additional Information
Part C - Other Information and Signature Page
Exhibit Index
Exhibits
<PAGE>
PART A
======
CUSIP Number 648224202
________________________________________________________________________________
WISDOM FUND
A series of the
NEW PROVIDENCE INVESTMENT TRUST
INSTITUTIONAL CLASS SHARES
________________________________________________________________________________
Prospectus
September 29, 2000
The Wisdom Fund ("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 will seek to
achieve this objective by investing as closely as possible in the securities
known to be owned by Berkshire Hathaway Holdings.
This Fund is NOT affiliated in any way with Berkshire Hathaway. There is no
connection in any manner between the management of Berkshire Hathaway Holdings,
the public corporation, and that of the Wisdom Fund, a registered investment
company. The Wisdom Fund simply seeks to emulate as closely as possible the
investment management policies of Berkshire Hathaway Holdings.
Investment Adviser
------------------
Atlanta Investment Counsel, LLC
2771 Carmon-on-Wesley, NW
Suite 100
Atlanta, Georgia 30327
1-877-352-0020
www.wisdomfund.com
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation to
the contrary is a criminal offense.
Mutual fund shares are not deposits or obligations of, or guaranteed by, any
depository institution. Shares are not insured by the FDIC, Federal Reserve
Board, or any other agency and are subject to investment risks including
possible loss of principal amount invested. Neither the Fund nor the Fund's
distributor is a bank. You should read the prospectus carefully before you
invest or send money.
<PAGE>
TABLE OF CONTENTS
Page
INVESTMENT OBJECTIVE........................................................2
PRINCIPAL INVESTMENT STRATEGIES.............................................2
PRINCIPAL RISKS OF INVESTING IN THE FUND....................................3
FEES AND EXPENSES OF THE FUND...............................................4
MANAGEMENT OF THE FUND......................................................5
THE ADMINISTRATOR...........................................................6
THE TRANSFER AGENT..........................................................6
BROKERAGE PRACTICES.........................................................6
PURCHASING FUND SHARES......................................................7
REDEEMING FUND SHARES.......................................................9
DIVIDENDS, DISTRIBUTIONS, AND TAXES........................................11
ADDITIONAL RISK DISCLOSURE.................................................11
PERFOrMANCE INFORMATION....................................................12
FINANCIAL HIGHLIGHTS.......................................................13
ADDITIONAL INFORMATION.............................................Back Cover
<PAGE>
INVESTMENT OBJECTIVE
The Wisdom 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 Wisdom Fund seeks to emulate as closely as possible the investment
management policies of Berkshire Hathaway Holdings ("BHH"). The Fund will seek
to achieve this objective by investing as closely as possible in the securities
known to be owned by BHH. BHH generally holds investments in common stocks of
both publicly traded and privately held companies. The Fund's holdings will be
primarily comprised of both securities substantially identical to those publicly
traded securities owned by BHH, and securities which the adviser believes
possess similar characteristics to those of the privately held companies owned
by Berkshire Hathaway, to the extent those investments by Berkshire Hathaway are
publicly known. It is the intent of the Fund to own each security in the same
relative percentage as that security represents the total investment portfolio
of BHH.
The Fund will be invested primarily in equity securities. The Fund may also
invest in investment-grade fixed-income securities, money market instruments,
real estate securities, precious metals securities, futures and options 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").
In attempting to achieve its objective, the Fund may, from time to time,
concentrate its investments in the securities of certain industries that are
known to be owned by BHH. Under such circumstances, the Fund may invest in
excess of 25% of its total assets in one or more industries. At other times, the
Fund's concentration in any particular industry may amount to less than 25% of
its total assets. It is important for investors to realize that the Fund's
decision to concentrate or not to concentrate at any given time is not
discretionary and will, in all cases, be as a direct result of the investments
known to be made by BHH.
The Fund will be guided by the following portfolio allocation principles:
o To the extent public information is available, the Fund will seek to invest
in securities that are substantially identical to securities held by BHH;
o Due to inefficiency in publicly available information concerning the
securities held by BHH, it will not be possible at all times for the Fund
to own 100% of the publicly traded securities held by BHH. The Fund will,
however, seek to hold, at all times, not less than 65% of the Fund's assets
in those securities. It is also the intention of the Fund to own each such
security in the same relative percentage as that security is held by BHH;
o It will not be possible to invest in the privately held companies owned by
BHH. The Fund will, however, attempt to identify and invest in publicly
traded companies with similar investment characteristics to those companies
privately held by BHH;
2
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o The Fund will seek to manage its portfolio in a manner that will allow the
Fund to qualify as a regulated investment company ("RIC") under the
Internal Revenue Code of 1986, as amended ("Code"), and so that it will not
be subject to taxation as a corporation and will receive "pass through" tax
treatment. Classification as a RIC is central to the objective of the Fund
and will adversely affect the performance of the Fund if such qualification
is not achieved; and
o It is expected that the Fund will have securities of between 10 to 20
companies in its portfolio at any given time.
PRINCIPAL RISKS OF INVESTING IN THE FUND
o The Fund will not be able to own the same portfolio as BHH (as some BHH
holdings are not publicly traded).
o For a number of reasons, an investor in the Wisdom Fund should not expect
that the investment performance of the Fund will be able to track the
investment performance of BHH.
1. The assets in the Fund will likely never be identical to the assets in
the portfolio of BHH because BHH has, in many cases, acquired several
companies in their entirety and has purchased companies that 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 similar investment return.
2. There are fees and expenses related to the management and distribution
of the Fund that are not paid by individuals who invest directly in
BHH. See the "Fees and Expenses of the Fund" section for more detailed
information.
3. There is no guarantee that the Fund's investment adviser will have the
ability to purchase the securities on behalf of the Fund on terms as
favorable as BHH has been able to purchase the same securities.
4. Investment decisions made by BHH are not always known to the public
even immediately after those decisions are made. The reputation that
BHH enjoys in the investment community often results in price movement
in securities selected for inclusion in the BHH 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.
5. BHH is a corporation subject to income taxes. The Fund, if it
qualifies as a RIC for tax purposes, will not be subject to tax. Thus,
the effect of income taxes paid by BHH is likely to be a divergence of
long-term investment performance between BHH and the Fund, although it
will be a divergence in favor of the Fund. Nevertheless, in order to
qualify as a RIC, the Fund will need to comply with certain tax
requirements that will limit the Fund's investments.
6. Certain investment decisions of BHH may be strongly guided by tax
considerations not applicable to the Fund. Accordingly, to the extent
the Fund emulates BHH'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.
3
<PAGE>
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 with respect to 75% of its assets,
that it will 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.
Concentration. Another area of risk involves the potential concentration of the
Fund's assets in securities of particular industries. Because the Fund's
investments may, from time to time, be concentrated in particular industries,
the value of its shares may be especially sensitive to factors and economic
risks that specifically affect those industries and, as a result, the Fund's
share price may fluctuate more widely than the value of shares of a mutual fund
that invests in a broader range of industries. Additionally, some of the
industries in which the Fund may invest could be subject to greater government
regulation than other industries and, therefore, changes in regulatory policies
for those industries may have a material effect on the value of securities
issued by companies in those industries.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and hold
Institutional Class Shares of the Fund:
Shareholder Fees for Institutional Class Shares
(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 for the Institutional Class Shares
(expenses that are deducted from Fund assets)
---------------------------------------------
Management Fees...................................................0.50%
Distribution and/or Service (12b-1) Fees..........................None
Other Expenses....................................................4.55%
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Total Annual Fund Operating Expenses*.............................5.05%
Fee Waivers and/or Expense Reimbursements.....................(3.55)%
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Net Expenses...................................................1.50%
=====
* "Total Annual Fund Operating Expenses" are based upon actual expenses
incurred by the Institutional Class Shares of the Fund for the fiscal year
ended May 31, 2000. The Adviser has entered into a contractual agreement
with the Fund under which it has agreed to waive or reduce its fees and to
assume other expenses of the Fund, if necessary, in an amount that limits
"Total Annual Fund Operating Expenses" (exclusive of interest, taxes,
brokerage fees and commissions, extraordinary expenses, and payments, if
any, under a Rule 12b-1 Plan) to not more than 1.50% of the average daily
net assets of the Institutional Class Shares of the Fund for the fiscal
year ending May 31, 2001. It is expected that the contractual agreement
will continue from year-to-year provided such continuance is approved by
the Board of Trustees. See the "Expense Limitation Agreement" section below
for more detailed information.
4
<PAGE>
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 the Fund
versus other funds. The projections are based upon a hypothetical investment of
$10,000. The projection assumes a 5% total investment return, and assumes that
the Fund's expenses will remain exactly the same, although fee waivers and
reimbursements made in accordance with the Expense Limitation Agreement are not
reflected in the three, five, and ten years examples. Both scenarios are
unlikely to occur simultaneously, so the projection should be considered only an
estimate. Your actual costs will almost certainly be higher or lower.
-------------------- -------------- -------------- -------------- --------------
Number of Years 1 Year 3 Years 5 Years 10 Years
-------------------- -------------- -------------- -------------- --------------
Fees $153 $1,197 $2,241 $4,846
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MANAGEMENT OF THE FUND
The Fund is a series of New Providence Investment Trust ("Trust"), which is a
registered open-end management investment company organized as a Massachusetts
business trust on July 9, 1997. The Fund is currently the only series of the
Trust. Series of the Trust are authorized to offer multiple classes of shares.
In addition to the Institutional Class Shares of the Fund, the Fund also offers
Investor Class Shares, Class B Shares, and Class C Shares, all of which are
offered by other prospectuses.
The Fund's investment adviser is Atlanta Investment Counsel, LLC ("AIC" or
"Adviser") which, subject to the supervision and direction of the Trustees of
the Fund, has overall responsibility for the general management of the Fund and
provides the Fund with a continuous program of supervision of the Fund's assets,
including the composition of its portfolio, and furnishes advice and
recommendations with respect to investments, investment policies, and the
purchase and sale of securities pursuant to an Investment Advisory Agreement
with the Trust.. AIC is an investment adviser registered under the Investment
Advisers Act of 1940, as amended. AIC is located at 2771 Carmon-on-Wesley, NW,
Suite 100, Atlanta, Georgia 30327.
A team of portfolio managers will be responsible for selecting investments on
behalf of the Fund. C. Douglas Davenport, J.D., John K. Donaldson (controlling
member of the Adviser), and Kyle Tomlin, CFA are responsible for day-to-day
management of the Fund. Mr. Davenport has been involved with the Adviser since
its inception. Previously, Mr. Davenport served as a stockbroker and held
advisory positions with various investment company service providers. Mr.
Donaldson is also the controlling member of another investment adviser, New
Providence Capital Management, L.L.C., an affiliate of AIC. Messrs. Donaldson
and Tomlin have been with the Adviser since its formation. Mr. Donaldson has
been involved with that adviser and its predecessors since 1987. Mr. Tomlin
served in portfolio management for Donaldson & Co., Incorporated from 1994 to
1997, and 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. AIC waived all of its
investment advisory fees for the fiscal year ended May 31, 2000.
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.
5
<PAGE>
Expense Limitation Agreement. In the interest of limiting expenses of the Fund,
the Adviser has entered into an expense limitation agreement with the Trust
("Expense Limitation Agreement"), pursuant to which the Adviser has agreed to
waive or limit its fees and to assume other expenses so that the total annual
operating expenses of the Fund (other than interest, taxes, brokerage
commissions, other expenditures which are capitalized in accordance with
generally accepted accounting principles, other extraordinary expenses not
incurred in the ordinary course of each Fund's business, and amounts, if any,
payable pursuant to a Rule 12b-1 Plan) are limited to 1.50% of the average daily
net assets of the Institutional Class Shares of the Fund for the fiscal year to
end May 31, 2001. The Expense Limitation Agreement shall continue from
year-to-year provided such continuance is specifically approved by a majority of
the Trustees of the Trust who (i) are not "interested persons" of the Trust or
any other party to this Expense Limitation Agreement, as defined in the 1940
Act, and (ii) have no direct or indirect financial interest in the operation of
this Expense Limitation Agreement.
The Fund may at a later date reimburse the Adviser for the management fees
waived or limited, and/or other expenses assumed and paid by the Adviser
pursuant to the Expense Limitation Agreement during any of the previous five (5)
fiscal years, provided that the Fund has reached a sufficient asset size to
permit such reimbursement to be made without causing the total annual expense
ratio of the Fund to exceed the percentage limits stated above. Consequently, no
reimbursement by the Fund will be made unless: (i) the Fund's assets exceed $20
million; (ii) the Fund's total annual expense ratio is less than the percentage
stated above; and (iii) the payment of such reimbursement has been approved by
the Trust's Board of Trustees on a quarterly basis.
THE ADMINISTRATOR
Pursuant to an agreement, The Nottingham Company, Inc. ("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 Adviser 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 Donaldson & Co.,
Incorporated, a registered broker-dealer affiliate of AIC. The Trustees review
the brokerage policies and rates regularly.
6
<PAGE>
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 adviser to one fund to be an
affiliate of the investment advisers to other funds for which the investment
adviser 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 Adviser is an underwriter.
PURCHASING FUND SHARES
Institutional Class Shares are sold and redeemed at net asset value. Shares may
be purchased by any account managed by the Adviser 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
Adviser'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 received in good form
from 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 ("NYSE"), currently 4:00 p.m.
Eastern time, Monday through Friday, except on business holidays when the NYSE
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 "Wisdom Fund," to:
Wisdom Fund
Institutional Class Shares
c/o NC Shareholder Services
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
The application must contain your Social Security Number ("SSN") and Taxpayer
Identification Number ("TIN"). If you have applied for a SSN 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 SSNs and TINs are met.
7
<PAGE>
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 the Fund 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 # 053000219
For the Wisdom Fund - Institutional Class Shares
Acct. # 2000001293241
For further credit to (shareholder's name and SSN or TIN)
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 notify
the Fund 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 Institutional Class
Shares of any other series of the Trust offered for sale in the state in which
you reside. 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 purchase and redemption transactions is considered by the
Adviser to not be in the best interest of the shareholders of the Fund. Such a
pattern may, at the discretion of the Adviser, 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 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.
Frequent Trading. A pattern of frequent purchase and redemption transactions is
considered by the Adviser to not be in the best interest of the shareholders of
the Fund. Such a pattern may, at the discretion of the Adviser, 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.
8
<PAGE>
REDEEMING FUND SHARES
Regular Mail Redemptions. Your request should be addressed to the Wisdom Fund,
c/o NC Shareholder Services, 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 # 252-972-1908). The confirmation instructions must include:
o Designation of Class (Institutional Class Shares),
o Shareholder name and account number,
o Number of shares or dollar amount to be redeemed,
o Instructions for transmittal of redemption funds to the shareholder, and
o 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.
9
<PAGE>
You may redeem shares, subject to the procedures outlined above, by calling the
Fund at 1-800-773-3863. Redemption proceeds will only be sent to the bank
account or person named in your Fund Shares Application currently on file with
the Fund. Unless you specifically decline telephone redemption privileges on you
Fund Share Application, you may redeem Fund shares over the telephone. 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. In
general, if the Fund sends written transaction confirmations and if you do not
specifically decline telephone redemption privileges on the Fund Shares
Application, the Fund will not be liable for following telephone instructions
reasonably believed to be genuine. Therefore, you have the risk of loss due to
unauthorized or fraudulent instructions.
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. 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 NYSE is closed or during which trading is restricted by
the Securities and 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.
Minimum Account Size. 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.
10
<PAGE>
DIVIDENDS, DISTRIBUTIONS, AND TAXES
The following information is meant as a general summary for U.S. taxpayers.
Additional tax information appears in the SAI. Shareholders should rely their
own tax advisors for advice about the particular federal, state, and local tax
consequences to them of investing in the Fund.
The Fund will distribute most of its income and gains to its shareholders every
year. Income dividends, if any, will be paid quarterly and capital gains
distributions, if any, will be made at least annually. Although the Fund will
not be taxed on amounts it distributes, shareholders will generally be taxed,
regardless of whether distributions are received in cash or are reinvested in
additional Fund shares. A particular distribution generally will be taxable as
either ordinary income or long-term capital gains. If a Fund designates a
distribution as a capital gain distribution, it will be taxable to shareholders
as long-term capital gains, regardless of how long they have held their Fund
shares.
If the Fund declares a dividend in October, November, or December but pays it in
January, it may be taxable to shareholders as if they received it in the year it
was declared. Each year each shareholder will receive a statement detailing the
tax status of any Fund distributions for that year.
Distributions may be subject to state and local taxes, as well as federal taxes.
Shareholders who hold Fund shares in a tax-deferred account, such as a
retirement plan, generally will not have to pay tax on Fund distributions until
they receive distributions from the account.
A shareholder who sells or redeems shares will generally realize a capital gain
or loss, which will be long-term or short-term, generally depending upon the
shareholder's holding period for the Fund shares. An exchange of shares may be
treated as a sale and subject to federal income taxes.
As with all mutual funds, the Fund may be required to withhold U.S. federal
income tax at the rate of 31% of all taxable distributions payable to
shareholders who fail to provide the Fund with their correct taxpayer
identification numbers or to make required certifications, or who have been
notified by the IRS that they are subject to backup withholding. Backup
withholding is not an additional tax; rather, it is a way in which the IRS
ensures it will collect taxes otherwise due. Any amounts withheld may be
credited against a shareholder's U.S. federal income tax liability.
ADDITIONAL RISK DISCLOSURE
The Trustees, Adviser, and Administrator to this Fund feel that certain
additional information should be available to the shareholder, as part of the
fiduciary responsibility implied and required of these parties. The following
information falls into that category, and is provided here for those who feel it
is helpful in their investment decision-making process:
o 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. BHH is a corporation, and its
stock is traded on the NYSE. The investment return of the Fund will be
dependent solely upon the direct investments held by the Fund. The share
price of BHH, in contrast, is based upon the market valuation of BHH as
that company's stock is traded on the NYSE. Factors taken into account by
investors buying and selling BHH shares may be dependent upon many factors
(as with any common stock), which will not necessarily be limited to the
investments held by BHH in its own portfolio.
11
<PAGE>
o 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.
o The Fund intends to limit its investments so as to comply with
diversification requirements for RIC's imposed by the Code, for
qualification as a RIC. 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 Adviser may use
various investment techniques to hedge risks, including derivatives, but
there is no guarantee that these strategies will work as intended.
PERFORMANCE INFORMATION
Because the Fund has not been in operation for an entire calendar year, there is
no performance information to report for an annual period. However, the
financial highlights for the fiscal year ended May 31, 2000 for the
Institutional Class Shares of the Fund are included under "Financial
Highlights."
12
<PAGE>
FINANCIAL HIGHLIGHTS
The financial data included in the table below for the Institutional Class
Shares have been derived from audited financial statements of the Fund. The
financial data for the fiscal year ended May 31, 2000 and the fiscal period
ended May 31, 1999, have been audited by Deloitte & Touche LLP, independent
auditors, whose report covering such year and period is incorporated by
reference into the SAI. This information should be read in conjunction with the
Fund's latest audited annual financial statements and notes thereto, which are
also incorporated by reference into the SAI, a copy of which may be obtained at
no charge by calling the Fund. Further information about the performance of the
Fund is contained in the Annual Report of the Fund, a copy of which may also be
obtained at no charge by calling the Fund at 1-800-773-3863.
INSTITUTIONAL CLASS SHARES
(For a Share Outstanding Throughout each Period)
<TABLE>
<S> <C> <C>
===================================================================== ===================== =====================
Year ended Period ended
May 31, 2000 May 31, 1999 (a)
===================================================================== ===================== =====================
Net asset value, beginning of period $9.91 $10.00
Income from investment operations
Net investment income 0.18 0.04
Net realized and unrealized (loss) gain on investments (0.01) (0.09)
------ ------
Total from investment operations 0.17 (0.05)
---- ------
Distributions to shareholders from
Net investment income (0.18) (0.04)
------ ------
Net asset value, end of period $9.90 $9.91
===== =====
Total return 1.64 % (0.45)% (b)
==== ======
Ratios/supplemental data
Net assets, end of period $2,710,312 $498,213
========== ========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees 5.05 % 23.94 % (c)
After expense reimbursements and waived fees 0.00 % 0.00 % (c)
Ratio of net investment (loss) income to average net assets
Before expense reimbursements and waived fees (2.87)% (22.69)% (c)
After expense reimbursements and waived fees 2.18 % 1.26 % (c)
Portfolio turnover rate 41.69 % 7.04 %
(a) For the period from February 16, 1999 (commencement of operations) to May
31, 1999.
(b) Not annualized.
(c) Annualized.
</TABLE>
13
<PAGE>
________________________________________________________________________________
WISDOM FUND
INSTITUTIONAL CLASS SHARES
________________________________________________________________________________
ADDITIONAL INFORMATION
Additional information about the Fund is available in the Fund's SAI, which is
incorporated by reference into this prospectus. Additional information about the
Fund's investments is also available in the Fund's Annual and Semi-annual
Reports to shareholders. The Fund's Annual Report will include a discussion of
market conditions and investment strategies that significantly affected the
Fund's performance during its last fiscal year.
The SAI and the Annual and Semi-annual Reports will be available free of charge
upon request (you may also request other information about the Fund or make
shareholder inquiries) by contacting the Fund:
By telephone: 1-800-773-3863
By mail: Wisdom Fund
Institutional Class Shares
c/o NC Shareholder Services
107 North Washington Street
Post Office Box 4365
Rocky Mount, NC 27803-0365
By e-mail: [email protected]
On the Internet: www.wisdomfund.com
Information about the Fund can also be reviewed and copied at the SEC's Public
Reference Room in Washington, D.C. Inquiries on the operations of the public
reference room may be made by calling the SEC at 1-202-942-8090. Reports and
other information about the Fund are available on the SEC's Internet site at
http://www.sec.gov, and copies of this information may be obtained, upon payment
of a duplicating fee, by electronic request at the following e-mail address:
[email protected], or by writing the SEC's Public Reference Section,
Washington, D.C. 20549-0102.
Investment Company Act file number 811-08295
<PAGE>
Class B Shares CUSIP Number 648224400
Class C Shares CUSIP Number 648224509
Investor Class Shares CUSIP Number 648224301
________________________________________________________________________________
WISDOM FUND
A series of the
NEW PROVIDENCE INVESTMENT TRUST
CLASS B SHARES
CLASS C SHARES
INVESTOR CLASS SHARES
________________________________________________________________________________
Prospectus
September 29, 2000
The Wisdom Fund ("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 will seek to
achieve this objective by investing as closely as possible in the securities
known to be owned by Berkshire Hathaway Holdings.
This Fund is NOT affiliated in any way with Berkshire Hathaway. There is no
connection in any manner between the management of Berkshire Hathaway Holdings,
the public corporation, and that of the Wisdom Fund, a registered investment
company. The Wisdom Fund simply seeks to emulate as closely as possible the
investment management policies of Berkshire Hathaway Holdings.
Investment Adviser
------------------
Atlanta Investment Counsel, LLC
2771 Carmon-on-Wesley, NW
Suite 100
Atlanta, Georgia 30327
1-877-352-0020
www.wisdomfund.com
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation to
the contrary is a criminal offense.
Mutual fund shares are not deposits or obligations of, or guaranteed by, any
depository institution. Shares are not insured by the FDIC, Federal Reserve
Board, or any other agency and are subject to investment risks including
possible loss of principal amount invested. Neither the Fund nor the Fund's
distributor is a bank. You should read the prospectus carefully before you
invest or send money.
<PAGE>
TABLE OF CONTENTS
Page
INVESTMENT OBJECTIVE.......................................................2
PRINCIPAL INVESTMENT STRATEGIES............................................2
PRINCIPAL RISKS OF INVESTING IN THE FUND...................................3
FEES AND EXPENSES OF THE FUND..............................................4
MANAGEMENT OF THE FUND.....................................................5
THE ADMINISTRATOR..........................................................6
THE TRANSFER AGENT.........................................................6
BROKERAGE PRACTICES........................................................6
PURCHASING FUND SHARES.....................................................7
REDEEMING FUND SHARES.....................................................12
DISTRIBUTION OF THE FUND'S SHARES.........................................14
DIVIDENDS, DISTRIBUTIONS AND TAXES........................................15
ADDITIONAL RISK DISCLOSURE................................................15
PERFORMANCE INFORMATION...................................................16
FINANCIAL HIGHLIGHTS......................................................17
ADDITIONAL INFORMATION............................................Back Cover
<PAGE>
INVESTMENT OBJECTIVE
The Wisdom 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 Wisdom Fund seeks to emulate as closely as possible the investment
management policies of Berkshire Hathaway Holdings ("BHH"). The Fund will seek
to achieve this objective by investing as closely as possible in the securities
known to be owned by BHH. BHH generally holds investments in common stocks of
both publicly traded and privately held companies. The Fund's holdings will be
primarily comprised of both securities substantially identical to those publicly
traded securities owned by BHH, and securities which the adviser believes
possess similar characteristics to those of the privately held companies owned
by Berkshire Hathaway, to the extent those investments by Berkshire Hathaway are
publicly known. It is the intent of the Fund to own each security in the same
relative percentage as that security represents the total investment portfolio
of BHH.
The Fund will be invested primarily in equity securities. The Fund may also
invest in investment-grade fixed-income securities, money market instruments,
real estate securities, precious metals securities, futures and options 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").
In attempting to achieve its objective, the Fund may, from time to time,
concentrate its investments in the securities of certain industries that are
known to be owned by BHH. Under such circumstances, the Fund may invest in
excess of 25% of its total assets in one or more industries. At other times, the
Fund's concentration in any particular industry may amount to less than 25% of
its total assets. It is important for investors to realize that the Fund's
decision to concentrate or not to concentrate at any given time is not
discretionary and will, in all cases, be as a direct result of the investments
known to be made by BHH.
The Fund will be guided by the following portfolio allocation principles:
o To the extent public information is available, the Fund will seek to invest
in securities that are substantially identical to securities held by BHH;
o Due to inefficiency in publicly available information concerning the
securities held by BHH, it will not be possible at all times for the Fund
to own 100% of the publicly traded securities held by BHH. The Fund will,
however, seek to hold, at all times, not less than 65% of the Fund's assets
in those securities. It is also the intention of the Fund to own each such
security in the same relative percentage as that security is held by BHH;
o It will not be possible to invest in the privately held companies owned by
BHH. The Fund will, however, attempt to identify and invest in publicly
traded companies with similar investment characteristics to those companies
privately held by BHH;
o The Fund will seek to manage its portfolio in a manner that will allow the
Fund to qualify as a regulated investment company ("RIC") under the
Internal Revenue Code of 1986, as amended ("Code"), and so that it will not
be subject to taxation as a corporation and will receive "pass through" tax
treatment. Classification as a RIC is central to the objective of the Fund
and will adversely affect the performance of the Fund if such qualification
is not achieved; and
o It is expected that the Fund will have securities of between 10 to 20
companies in its portfolio at any given time. Principal Risks of Investing
in the Fund
2
<PAGE>
o The Fund will not be able to own the same portfolio as BHH (as some BHH
holdings are not publicly traded).
o For a number of reasons, an investor in the Fund should not expect that the
investment performance of the Fund will be able to track the investment
performance of BHH.
1. The assets in the Fund will likely never be identical to the assets in
the portfolio of BHH because BHH has, in many cases, acquired several
companies in their entirety and has purchased companies that 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 similar investment return.
2. There are fees and expenses related to the management and distribution
of the Fund that are not paid by individuals who invest directly in
BHH. See the "Fees and Expenses of the Fund" section for more detailed
information.
3. There is no guarantee that the Fund's investment adviser will have the
ability to purchase the securities on behalf of the Fund on terms as
favorable as BHH has been able to purchase the same securities.
4. Investment decisions made by BHH are not always known to the public
even immediately after those decisions are made. The reputation that
BHH enjoys in the investment community often results in price movement
in securities selected for inclusion in the BHH 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.
5. BHH is a corporation subject to income taxes. The Fund, if it
qualifies as a RIC for tax purposes, will not be subject to tax. Thus,
the effect of income taxes paid by BHH is likely to be a divergence of
long-term investment performance between BHH and the Fund, although it
will be a divergence in favor of the Fund. Nevertheless, in order to
qualify as a RIC, the Fund will need to comply with certain tax
requirements that will limit the Fund's investments.
6. Certain investment decisions of BHH may be strongly guided by tax
considerations not applicable to the Fund. Accordingly, to the extent
the Fund emulates BHH'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 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 with respect to 75% of its assets,
that it will 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.
Concentration. Another area of risk involves the potential concentration of the
Fund's assets in securities of particular industries. Because the Fund's
investments may, from time to time, be concentrated in particular industries,
the value of its shares may be especially sensitive to factors and economic
risks that specifically affect those industries and, as a result, the Fund's
share price may fluctuate more widely than the value of shares of a mutual fund
that invests in a broader range of industries. Additionally, some of the
industries in which the Fund may invest could be subject to greater government
regulation than other industries and, therefore, changes in regulatory policies
for those industries may have a material effect on the value of securities
issued by companies in those industries.
3
<PAGE>
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)
-----------------------------------------
---------------------------------------- ------------ ------------ -----------
Investor
Class B Class C Class
Shares Shares Shares
---------------------------------------- ------------ ------------ -----------
Maximum Sales Charge (Load)
imposed on purchases
(as a percentage of offering price) 0.00% 0.00% 5.75%
---------------------------------------- ------------ ------------ -----------
Maximum Deferred Sales Charge
(as a percentage of purchase
amount or redemption proceeds, 4.00%^1 1.00%^2 None^3
whichever is lower)
---------------------------------------- ------------ ------------ -----------
Redemption Fee None None None
---------------------------------------- ------------ ------------ -----------
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets)
---------------------------------------------
--------------------------------------------- ---------- ---------- ----------
Investor
Class B Class C Class
Shares Shares Shares
--------------------------------------------- ---------- ---------- ----------
Management Fees 0.50% 0.50% 0.50%
--------------------------------------------- ---------- ---------- ----------
Distribution and/or Service (12b-1) Fees 1.00% 1.00% 0.25%
--------------------------------------------- ---------- ---------- ----------
Other Expenses 2.59% 2.57% 3.54%
---- ---- ----
--------------------------------------------- ---------- ---------- ----------
Total Annual Fund Operating Expenses^4 4.09% 4.07% 4.29%
--------------------------------------------- ---------- ---------- ----------
Fee Waiver and/or Expense Reimbursements (1.59)% (1.57)% (2.54)%
---- ---- ----
--------------------------------------------- ---------- ---------- ----------
Net Expenses^5 2.50% 2.50% 1.75%
==== ==== ====
--------------------------------------------- ---------- ---------- ----------
1 Maximum deferred sales charge or "Contingent deferred sales charge" for the
Class B Shares is imposed on proceeds redeemed within a six year period at the
following rates: 4.00% the first and second years, 3.00% the third and fourth
years, 2.00% the fifth year, and 1.00% the sixth year. Class B Shares will
convert automatically to Investor Class Shares after the eighth year, without
the imposition of any sales load. The charge is a percentage of net asset value
at the time of purchase or redemption, whichever is less.
2 Maximum deferred sales charge or "Contingent deferred sales charge" for the
Class C Shares is imposed on proceeds redeemed within one year of the purchase
date. The charge is a percentage of net asset value at the time of purchase or
redemption, whichever is less.
3 The Investor Class Shares imposes a 1.00% "Contingent deferred sales charge"
for transactions over $1,000,000 on proceeds that are redeemed within one year
of the purchase date.
4 "Total Annual Fund Operating Expenses" are based upon actual expenses incurred
by the Fund for the fiscal year ended May 31, 2000. The Adviser has entered into
a contractual agreement with the Fund under which it has agreed to waive or
reduce its fees and to assume other expenses of the Fund, if necessary, in an
amount that limits "Total Annual Fund Operating Expenses" (exclusive of
interest, taxes, brokerage fees and commissions, extraordinary expenses, and
payments, if any, under a Rule 12b-1 Plan) to not more than 1.50% of the average
daily net assets of each class of shares of the Fund for the fiscal year ending
May 31, 2001. It is expected that the contractual agreement will continue from
year-to-year provided such continuance is approved by the Board of Trustees. See
the "Expense Limitation Agreement" section below for more detailed information.
5 After additional voluntary waivers and reimbursements of a portion of the fees
and expenses of the Fund by the Adviser and other service providers, Total
Annual Fund Operating Expenses were 1.00%, 1.00%, and 0.25% of the average daily
net assets of the Class B Shares, Class C Shares, and Investor Class Shares,
respectively, of the Fund for the fiscal year ended May 31, 2000.
4
<PAGE>
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 projections are based upon a hypothetical investment of
$10,000 in each of Class B Shares, Class C Shares, and Investor Class Shares of
the Fund for the periods indicated and that the full amount invested is redeemed
at the end of each period. The projection assumes a 5% total investment return,
and assumes that the Fund's expenses will remain exactly the same, although fee
waivers and reimbursements made in accordance with the Expense Limitation
Agreement are not reflected in the three, five, and ten years examples. Both
scenarios are unlikely to occur simultaneously, so the projection should be
considered only an estimate. Your actual costs, which may be higher or lower,
based on these assumptions would be:
------------------------- ------------ -------------- ------------- ------------
1 Year 3 Years 5 Years 10 Years
------------------------- ------------ -------------- ------------- ------------
Class B Shares $653 $1,399 $2,161 $4,184
------------------------- ------------ -------------- ------------- ------------
Class C Shares $353 $1,095 $1,953 $4,169
------------------------- ------------ -------------- ------------- ------------
Investor Class Shares $743 $1,584 $2,436 $4,622
------------------------- ------------ -------------- ------------- ------------
MANAGEMENT OF THE FUND
The Fund is a series of the New Providence Investment Trust ("Trust"), which is
a registered open-end management investment company organized as a Massachusetts
business trust on July 9, 1997. The Fund is currently the only series of the
Trust. Series of the Trust are authorized to offer multiple classes of shares.
In addition to the Class B Shares, Class C Shares, and Investor Class Shares of
the Fund, the Fund also offers Institutional Class Shares that is offered by
another prospectus.
The Fund's investment adviser is Atlanta Investment Counsel, LLC ("AIC" or the
"Adviser") which, subject to the supervision and direction of the Trustees of
the Fund, has overall responsibility for the general management of the Fund and
provides the Fund with a continuous program of supervision of the Fund's assets,
including the composition of its portfolio, and furnishes advice and
recommendations with respect to investments, investment policies, and the
purchase and sale of securities pursuant to an Investment Advisory Agreement
with the Trust. AIC is an investment adviser registered under the Investment
Advisers Act of 1940, as amended. AIC is located at 2771 Carmon-on-Wesley, NW,
Suite 100, Atlanta, Georgia 30327.
A team of portfolio managers will be responsible for selecting investments on
behalf of the Fund. C. Douglas Davenport, J.D., John K. Donaldson (controlling
member of the Adviser), and Kyle Tomlin, CFA are responsible for day-to-day
management of the Fund. Mr. Davenport has been involved with the Adviser since
its inception. Previously, Mr. Davenport served as a stockbroker and held
advisory positions with various investment company service providers. Mr.
Donaldson is also the controlling member of another investment adviser, New
Providence Capital Management, L.L.C., an affiliate of AIC. Messrs. Donaldson
and Tomlin have been with the Adviser since its formation. Mr. Donaldson has
been involved with that adviser and its predecessors since 1987. Mr. Tomlin
served in portfolio management for Donaldson & Co., Incorporated from 1994 to
1997, and 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. AIC waived all of its
investment advisory fees for the fiscal year ended May 31, 2000.
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.
5
<PAGE>
As discussed in greater detail below under "Distribution of the Fund's Shares,"
the Class B Shares, Class C Shares, and Investor Class Shares will be subject to
certain distribution-related expenses in connection with activities primarily
intended to result in the sale of those shares under separate plans for each
class of shares adopted under Rule 12b-1 of the 1940 Act.
Expense Limitation Agreement. In the interest of limiting expenses of the Fund,
the Adviser has entered into an expense limitation agreement with the Trust
("Expense Limitation Agreement"), pursuant to which the Adviser has agreed to
waive or limit its fees and to assume other expenses so that the total annual
operating expenses of the Fund (other than interest, taxes, brokerage
commissions, other expenditures which are capitalized in accordance with
generally accepted accounting principles, other extraordinary expenses not
incurred in the ordinary course of each Fund's business, and amounts, if any,
payable pursuant to a Rule 12b-1 Plan) are limited to 1.50% of the average daily
net assets of the Class B Shares, Class C Shares, and Investor Class Shares of
the Fund for the fiscal year to end May 31, 2001. The Expense Limitation
Agreement shall continue from year-to-year provided such continuance is
specifically approved by a majority of the Trustees of the Trust who (i) are not
"interested persons" of the Trust or any other party to this Expense Limitation
Agreement, as defined in the 1940 Act, and (ii) have no direct or indirect
financial interest in the operation of this Expense Limitation Agreement.
The Fund may at a later date reimburse the Adviser for the management fees
waived or limited, and/or other expenses assumed and paid by the Adviser
pursuant to the Expense Limitation Agreement during any of the previous five (5)
fiscal years, provided that the Fund has reached a sufficient asset size to
permit such reimbursement to be made without causing the total annual expense
ratio of the Fund to exceed the percentage limits stated above. Consequently, no
reimbursement by the Fund will be made unless: (i) the Fund's assets exceed $20
million; (ii) the Fund's total annual expense ratio is less than the percentage
stated above; and (iii) the payment of such reimbursement has been approved by
the Trust's Board of Trustees on a quarterly basis.
THE ADMINISTRATOR
Pursuant to an agreement, The Nottingham Company, Inc. ("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 Adviser 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 Donaldson & Co.,
Incorporated, a registered broker-dealer affiliate of AIC. The Trustees review
the brokerage policies and rates regularly.
6
<PAGE>
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 adviser to one fund to be an
affiliate of the investment advisers to other funds for which the investment
adviser 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 Advisers is an underwriter.
PURCHASING FUND SHARES
PURCHASE OPTIONS
You may select from three separate classes of shares of the Wisdom Fund.
Class B Shares
o No front-end sales charges.
o Distribution and service plan (Rule 12b-1) fees of 1.00%.
o A contingent deferred sales charge ("CDSC"), as described below.
Class C Shares
o No front-end sales charge.
o Distribution and service plan (Rule 12b-1) fees of 1.00%.
o A 1.00% CDSC on shares sold within one year of purchase.
Investor Class Shares
o A 5.75% front-end sales charge.
o Distribution and service plan (Rule 12b-1) fees of 0.25%.
o A 1.00% CDSC on shares sold within one year of purchase for
shareholder transactions over $1,000,000.
There is no CDSC on shares acquired through the reinvestment of dividends and
distributions.
In order to keep any applicable CDSC as low as possible, each time that you
place a redemption request, the Fund will first redeem any shares in your
account that are not subject to a CDSC and then will sell shares that have the
lowest CDSC.
CLASS B SHARES
Class B Shares are sold at net asset value. 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 Adviser'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 received in good form from a shareholder
investing in or redeeming from the Fund. Net asset value per share for the Fund
and each class of shares is calculated for purchases and redemption of shares of
the Fund by dividing the value of total Fund assets attributable to that class,
less liabilities (including Fund expenses, which are accrued daily) attributable
to that class, by the total number of outstanding shares of that Fund
attributable to that class. The net asset value per share of the Fund and each
class of shares is determined at the time trading closes on the New York Stock
Exchange ("NYSE"), currently 4:00 p.m. Eastern time, Monday through Friday,
except on business holidays when the NYSE is closed.
7
<PAGE>
Contingent Deferred Sales Charges
If you redeem your shares within the first six years of purchase you may be
subject to a contingent deferred sales charge.
The CDSC is imposed on the redemption proceeds according to the following
schedule:
--------------------------------------------- -------------------------
Contingent Deferred Sales
Year of Redemption After Purchase Charge
--------------------------------------------- -------------------------
First 4%
--------------------------------------------- -------------------------
Second 4%
--------------------------------------------- -------------------------
Third 3%
--------------------------------------------- -------------------------
Fourth 3%
--------------------------------------------- -------------------------
Fifth 2%
--------------------------------------------- -------------------------
Sixth 1%
--------------------------------------------- -------------------------
Seventh and following 0%
--------------------------------------------- -------------------------
The CDSC is calculated as a percentage of the net asset value of the Class B
shares at the time of purchase or redemption by first determining whichever
value is lower and then multiplying that value by the applicable CDSC. Capital
Investment Group, Inc. ("Distributor"), 17 Glenwood Avenue, Raleigh, North
Carolina 27612, receives this CDSC as Distributor.
If you hold Class B Shares for approximately eight years, they will
automatically convert to Investor Class Shares of the Fund without the payment
of a sales load. Purchases of Class B Shares made on any day during a calendar
month will age one year at the close of business on the last day of that month
in the following calendar year, and each subsequent year.
Amounts withdrawn in accordance with a Systematic Withdrawal Plan will not be
subject to a CDSC.
CLASS C SHARES
Class C Shares are sold at net asset value. 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 Adviser'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 received in good form from a shareholder
investing in or redeeming from the Fund. Net asset value per share for the Fund
and each class of shares is calculated for purchases and redemption of shares of
the Fund by dividing the value of total Fund assets attributable to that class,
less liabilities (including Fund expenses, which are accrued daily) attributable
to that class, by the total number of outstanding shares of that Fund
attributable to that class. The net asset value per share for the Fund and each
class of shares is determined at the time trading closes on the NYSE, currently
4:00 p.m. Eastern time, Monday through Friday, except on business holidays when
the NYSE is closed.
8
<PAGE>
Contingent Deferred Sales Charges
If you redeem your shares within the first year of purchase you may be subject
to a CDSC.
The CDSC is imposed on the redemption proceeds according to the following
schedule:
--------------------------------------------- -------------------------------
Contingent Deferred Sales
Year of Redemption After Purchase Charge
--------------------------------------------- -------------------------------
First 1%
--------------------------------------------- -------------------------------
Second and following 0%
--------------------------------------------- -------------------------------
The CDSC is calculated as a percentage of the net asset value of the Class C
shares at the time of purchase or redemption by first determining whichever
value is lower and then multiplying that value by 1%. The Distributor receives
this CDSC as Distributor.
CDSC Waivers
The CDSC on Class B Shares and Class C Shares will be waived in the following
circumstances:
o Redemption upon the death or permanent disability of the shareholder
if made within one year of the death or the initial determination of
permanent disability. The waiver is available only for shares held at
the time of death or initial determination of permanent disability.
o For Class B Shares, redemptions pursuant to a Systematic Withdrawal
Plan, up to a maximum of 12% per year of a shareholder's account value
based on the value of the account at the time the Systematic
Withdrawal Plan is established and annually thereafter, provided all
dividends and distributions are reinvested and the total redemptions
do not exceed 12% annually.
o Mandatory distributions from a tax-deferred retirement plan or IRA.
Reinstatement Privilege. If you sell Class B Shares or Class C Shares of the
Fund, you may reinvest some or all of the proceeds in the same share class
within 90 days without a sales charge. Reinstated Class B Shares or Class C
Shares will retain their original cost and purchase date for purposes of the
CDSC. This privilege can be used only once per calendar year. If you want to use
the Reinstatement Privilege, contact your financial representative or
broker-dealer.
Amounts withdrawn in accordance with a Systematic Withdrawal Plan will not be
subject to a CDSC.
INVESTOR CLASS SHARES
Investor Class Shares are sold subject to a maximum sales charge of 5.75%, 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 Adviser 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 Adviser'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 received
in good form from 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 NYSE, currently 4:00 p.m. Eastern time, Monday
through Friday, except on business holidays when the NYSE is closed.
9
<PAGE>
Sales Charges. The public offering price of Investor Class Shares of the Fund
equals net asset value plus a sales charge. The Distributor receives this sales
charge as Distributor and may reallow it in the form of dealer discounts and
brokerage commissions as follows:
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 $50,000............... 6.10% 5.75% 5.00%
$50,000 to $99,999.............. 4.71% 4.50% 3.75%
$100,000 to $249,999............ 3.63% 3.50% 2.80%
$250,000 to $499,999............ 2.56% 2.50% 2.00%
$500,000 to $999,999............ 2.04% 2.00% 1.60%
$1,000,000 to $1,999,999........ 1.01%* 1.00%* 0.75%
$2,000,000 to $2,999,999:
On the first $1,999,999.... 1.01%* 1.00%* 0.75%
On the next $1,000,000..... 0.81%* 0.80%* 0.65%
$3,000,000 or more:
On the first $1,999,999.... 1.01%* 1.00%* 0.75%
On the next $1,000,000..... 0.81%* 0.80%* 0.65%
$3,000,000 and over........ 0.50%* 0.50%* 0.40%
* A one-year, 1.00% contingent deferred sales charge is imposed on these
accounts.
Reduced Sales Charges
Rights of Accumulation. The sales charge applicable to a current purchase of
Investor Class 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 Fund 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 Fund shares with an aggregate value of $50,000 and
who currently owns shares of the Fund with a value of $50,000 would pay a sales
charge of 3.50% 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 Fund Shares Application.
Information about the "Letter of Intent" procedure, including its terms, is
contained on the back of the Fund Shares 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.
10
<PAGE>
INVESTMENT OPTIONS
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 "Wisdom Fund," to:
Wisdom Fund
Class B Shares, Class C Shares, or Investor Class Shares (please specify)
c/o NC Shareholder Services
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
The application must contain your Social Security Number ("SSN") or Taxpayer
Identification Number ("TIN"). If you have applied for a SSN 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 SSNs and 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 # 053000219
For the Wisdom Fund - Class B Shares, Class C Shares OR Investor Class Shares
(please specify)
Acct. # 2000001293241
For further credit to (shareholder's name and SSN or TIN)
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 follow 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.
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.
Frequent Trading. A pattern of frequent purchase and redemption transactions is
considered by the Adviser to not be in the best interest of the shareholders of
the Fund. Such a pattern may, at the discretion of the Adviser, 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.
11
<PAGE>
REDEEMING FUND SHARES
Regular Mail Redemptions. Your request should be addressed to the Wisdom Fund,
c/o NC Shareholder Services, 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 # 252-972-1908). The confirmation instructions must include:
o Designation of Class (Class B Shares, Class C Shares, OR Investor Class
Shares),
o Shareholder name and account number,
o Number of shares or dollar amount to be redeemed,
o Instructions for transmittal of redemption funds to the shareholder, and
o 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 1-800-773-3863. Redemption proceeds will only be sent to the bank
account or person named in your Fund Shares Application currently on file with
the Fund. Unless you specifically decline telephone redemption privileges on you
Fund Share Application, you may redeem Fund shares over the telephone. 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. In
general, if the Fund sends written transaction confirmations and if you do not
specifically decline telephone redemption privileges on the Fund Shares
Application, the Fund will not be liable for following telephone instructions
reasonably believed to be genuine. Therefore, you have the risk of loss due to
unauthorized or fraudulent instructions.
12
<PAGE>
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. You will
incur no CDSC fees for shares redeemed under this plan; however, for Class B
Shares, redemptions pursuant to a Systematic Withdrawal Plan shall be subject to
an annual limit (See "CDSC Waivers" above). 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. 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 redemptions, if permitted by the 1940 Act, for any
period during which the NYSE is closed or during which trading is restricted by
the Securities and 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.
Minimum Account Size. 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/her account net asset value up to
at least $1,000 during the notice period, the account will not be redeemed.
13
<PAGE>
DISTRIBUTION OF THE FUND'S SHARES
The Fund has adopted separate Distribution Plans following Rule 12b-1 under the
1940 Act for the Class B Shares, Class C Shares, and Investor Class Shares of
the Fund. Pursuant to each Distribution Plan, the Fund compensates the
Distributor from assets attributable to the Class B Shares, Class C Shares, or
Investor Class Shares for services rendered and expenses borne in connection
with activities primarily intended to result in the sale of the Fund's Class B
shares, Class C Shares, and Investor Class Shares. It is anticipated that a
portion of the amounts received by the Distributor will be used to defray
various costs incurred or paid by the Distributor 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 Class B Shares, Class C Shares, and Investor Class Shares. The
Distributor may also use all or a portion of the amount received under each
Distribution Plan to provide compensation to financial intermediaries and
third-party broker-dealers for their services in connection with the
distribution of Class B Shares, Class C Shares, or 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 Plans provides that the Fund may pay annually up to 1.00% of
the average daily net assets of a Fund attributable to its Class B Shares or
Class C Shares and 0.25% of Investor Class Shares in respect of activities
primarily intended to result in the sale of Class B Shares, Class C Shares, or
Investor Class Shares or servicing of shareholders investing in those shares.
This 1.00% fee is comprised of a 0.25% service fee and a 0.75% distribution fee
for the Class B Shares and Class C Shares. Under terms of each Distribution Plan
and the Distribution Agreements, the Fund is authorized to make monthly payments
to the Distributor which may be retained by the Distributor or may be used to
pay or reimburse entities providing distribution and shareholder servicing with
respect to the Class B Shares, Class C Shares, and Investor Class Shares for
such entities' fees or expenses incurred or paid in that regard.
Each Distribution Plan is of a type known as a "compensation" plan because
payments are made for services rendered to the Fund with respect to Class B
shares, Class C Shares, or Investor Class Shares regardless of the level of
expenditures by the Distributor. The Trustees will, however, take into account
such expenditures for purposes of reviewing operations under the Distribution
Plan and concerning their annual consideration of each Plan's renewal. The
Distributor has indicated that it expects its 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 shareholders with respect to the Class B Shares, Class C Shares, or
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 Class B Shares, Class C
Shares, or Investor Class Shares of the Fund; (c) holding seminars and sales
meetings designed to promote the distribution of Fund's Class B Shares, Class C
Shares, or 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 Class B Shares, Class C Shares, or Investor Class Shares of the
Fund; and (f) financing any other activity that the Distributor determines is
primarily intended to result in the sale of Class B Shares, Class C Shares, or
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.
14
<PAGE>
DIVIDENDS, DISTRIBUTIONS, AND TAXES
The following information is meant as a general summary for U.S. taxpayers.
Additional tax information appears in the SAI. Shareholders should rely on their
own tax advisers for advice about the particular federal, state, and local tax
consequences to them of investing in the Fund.
The Fund will distribute most of its income and gains to its shareholders every
year. Income dividends, if any, will be paid quarterly and capital gains
distributions, if any, will be made at least annually. Although the Fund will
not be taxed on amounts it distributes, shareholders will generally be taxed,
regardless of whether distributions are received in cash or are reinvested in
additional Fund shares. A particular distribution generally will be taxable as
either ordinary income or long-term capital gains. If a Fund designates a
distribution as a capital gain distribution, it will be taxable to shareholders
as long-term capital gains, regardless of how long they have held their Fund
shares.
If the Fund declares a dividend in October, November, or December but pays it in
January, it may be taxable to shareholders as if they received it in the year it
was declared. Each year each shareholder will receive a statement detailing the
tax status of any Fund distributions for that year.
Distributions may be subject to state and local taxes, as well as federal taxes.
Shareholders who hold Fund shares in a tax-deferred account, such as a
retirement plan, generally will not have to pay tax on Fund distributions until
they receive distributions from the account.
A shareholder who sells or redeems shares will generally realize a capital gain
or loss, which will be long-term or short-term, generally depending upon the
shareholder's holding period for the Fund shares. An exchange of shares may be
treated as a sale and subject to federal income taxes.
As with all mutual funds, the Fund may be required to withhold U.S. federal
income tax at the rate of 31% of all taxable distributions payable to
shareholders who fail to provide the Fund with their correct taxpayer
identification numbers or to make required certifications, or who have been
notified by the IRS that they are subject to backup withholding. Backup
withholding is not an additional tax; rather, it is a way in which the IRS
ensures it will collect taxes otherwise due. Any amounts withheld may be
credited against a shareholder's U.S. federal income tax liability.
ADDITIONAL RISK DISCLOSURE
The Trustees, Adviser, and Administrator to this Fund feel that certain
additional information should be available to the shareholder, as part of the
fiduciary responsibility implied and required of these parties. The following
information falls into that category, and is provided here for those who feel it
is helpful in their investment decision-making process:
o 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. BHH is a corporation, and its
stock is traded on the NYSE. The investment return of the Fund will be
dependent solely upon the direct investments held by the Fund. The share
price of BHH, in contrast, is based upon the market valuation of BHH as
that company's stock is traded on the NYSE. Factors taken into account by
investors buying and selling BHH shares may be dependent upon many factors
(as with any common stock), which will not necessarily be limited to the
investments held by BHH in its own portfolio.
o 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.
15
<PAGE>
o The Fund intends to limit its investments so as to comply with
diversification requirements for RIC's imposed by the Code, for
qualification as a RIC. 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 Adviser may use
various investment techniques to hedge risks, including derivatives, but
there is no guarantee that these strategies will work as intended.
PERFORMANCE INFORMATION
Because the Fund has not been in operation for an entire calendar year, there is
no performance information to report for an annual period. However, the
financial highlights for the fiscal year ended May 31, 2000 for the Class B
Shares, Class C Shares, and Investor Class Shares of the Fund are included under
"Financial Highlights."
16
<PAGE>
FINANCIAL HIGHLIGHTS
The financial data included in the table below for the Class B Shares, Class C
Shares and Investor Class Shares have been derived from audited financial
statements of the Fund. The financial data for the fiscal year ended May 31,
2000 and the fiscal period ended May 31, 1999, have been audited by Deloitte &
Touche LLP, independent auditors, whose report covering such year and period is
incorporated by reference into the SAI. This information should be read in
conjunction with the Fund's latest audited annual financial statements and notes
thereto, which are also incorporated by reference into the SAI, a copy of which
may be obtained at no charge by calling the Fund. Further information about the
performance of the Fund is contained in the Annual Report of the Fund, a copy of
which may also be obtained at no charge by calling the Fund at 1-800-773-3863.
(For a Share Outstanding Throughout each Period)
<TABLE>
<S> <C> <C> <C> <C>
============================================================== ================ ============== ================ ===============
Investor Class Class B Class C
Shares Shares Shares
============================================================== ================ ============== ================ ===============
Year ended Period ended Period ended Period ended
May 31, May 31, May 31, May 31,
2000 1999 (a) 2000 (b) 2000 (b)
-------------------------------------------------------------- ---------------- -------------- ---------------- ---------------
Net asset value, beginning of period $9.92 $10.00 $10.20 $10.20
-------------------------------------------------------------- ---------------- -------------- ---------------- ---------------
Income from investment operations 0.12 0.02 0.04 0.03
Net investment income 0.01 (0.08) (0.23) (0.22)
----- ------ ----- ------
Net realized and unrealized (loss) gain on investments 0.13 (0.06) (0.19) (0.19)
----- ------ ----- ------
Total from investment operations
Distributions to shareholders from net investment income (0.12) (0.02) (0.04) (0.03)
----- ------ ------ ------
Net asset value, end of period $9.93 $9.92 $9.97 $9.98
===== ====== ====== ======
Total return (c) 1.36 % (0.58)% (1.85) % (1.86)%
==== ====== ====== ======
Ratios/supplemental data
Net assets, end of period $656,212 $99 $1,168,374 $173,395
======== ====== ========== ========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees 4.29 % 15.49 % (d) 4.09 % (d) 4.07 % (d)
After expense reimbursements and waived fees 0.25 % 0.00 % (d) 1.00 % (d) 1.00 % (d)
Ratio of net investment (loss)income to average net assets
Before expense reimbursements and waived fees (1.96)% (14.68)% (d) (1.78)% (d) (1.77)% (d)
After expense reimbursements and waived fees 2.08 % 0.81 % (d) 1.31 % (d) 1.30 % (d)
Portfolio turnover rate 41.69 % 7.04 % 41.69 % 41.69 %
(a) For the period from February 16, 1999 (commencement of operations) to May 31, 1999.
(b) For the period from November 16, 1999 (commencement of operations) to May 31, 2000.
(c) Total return does not reflect payment of a sales charge and is for the period indicated and not annualized.
(d) Annualized.
</TABLE>
17
<PAGE>
________________________________________________________________________________
WISDOM FUND
CLASS B SHARES
CLASS C SHARES
INVESTOR CLASS SHARES
________________________________________________________________________________
ADDITIONAL INFORMATION
Additional information about the Fund is available in the Fund's SAI, which is
incorporated by reference into this prospectus. Additional information about the
Fund's investments is also available in the Fund's Annual and Semi-annual
Reports to shareholders. The Fund's Annual Report will include a discussion of
market conditions and investment strategies that significantly affected the
Fund's performance during its last fiscal year.
The SAI and the Annual and Semi-annual Reports will be available free of charge
upon request (you may also request other information about the Fund or make
shareholder inquiries) by contacting the Fund:
By telephone: 1-800-773-3863
By mail: Wisdom Fund
Class B Shares, Class C Shares, or Investor Class Shares
c/o NC Shareholder Services
107 North Washington Street
Post Office Box 4365
Rocky Mount, NC 27803-0365
By e-mail: [email protected]
On the Internet: www.wisdomfund.com
Information about the Fund can also be reviewed and copied at the SEC's Public
Reference Room in Washington, D.C. Inquiries on the operations of the public
reference room may be made by calling the SEC at 1-202-942-8090. Reports and
other information about the Fund are available on the SEC's Internet site at
http://www.sec.gov, and copies of this information may be obtained, upon payment
of a duplicating fee, by electronic request at the following e-mail address:
[email protected], or by writing the SEC's Public Reference Section,
Washington, D.C. 20549-0102.
Investment Company Act file number 811-08295
<PAGE>
PART B
======
STATEMENT OF ADDITIONAL INFORMATION
WISDOM FUND
September 29, 2000
A series of the
NEW PROVIDENCE INVESTMENT TRUST
107 North Washington Street, Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
Telephone 1-877-352-0020
TABLE OF CONTENTS
Page
OTHER INVESTMENT POLICIES................................................... 2
INVESTMENT LIMITATIONS...................................................... 6
PORTFOLIO TRANSACTIONS.......................................................7
DESCRIPTION OF THE TRUST.....................................................9
MANAGEMENT and OTHER service providers..................................... 10
SPECIAL SHAREHOLDER SERVICES............................................... 15
ADDITIONAL PERCHASE AND REDEMPTION INFORMATION............................. 16
NET ASSET VALUE ........................................................... 19
ADDITIONAL TAX INFORMATION................................................. 20
ADDITIONAL INFORMATION ON PERFORMANCE...................................... 21
FINANCIAL STATEMENTS........................................................23
APPENDIX A................................................................. 24
This Statement of Additional Information ("SAI") is meant to be read in
conjunction with the Prospectuses for the Wisdom Fund ("Fund"), dated September
29, 2000, relating to the Fund's Institutional Class Shares, Class B Shares,
Class C Shares, and Investor Class Shares, and hereby incorporates by reference
those Prospectuses in their 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 Prospectuses 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>
OTHER INVESTMENT POLICIES
The Wisdom Fund is a non-diversified series of the New Providence Investment
Trust ("Trust"), an open-end management company registered with the Securities
and Exchange Commission ("SEC"). 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 Prospectuses 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 ("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,
Atlanta Investment Counsel, LLC ("Adviser" 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.
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 Services
("S&P"), Fitch Investors Service, Inc. ("Fitch"), or Duff & Phelps ("D&P"), or
if not rated, of equivalent quality in the Adviser'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 Adviser 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
Adviser determines the liquidity of the Fund's investments, and through reports
from the Adviser, the Board monitors investments in illiquid instruments. In
determining the liquidity of the Fund's investments, the Adviser 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. 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. 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.
Writing Call Options. 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 Adviser 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. Concentrate its investments by investing 25% or more of its total assets in
any one industry, unless such concentration of investments in any one
industry or group of industries would be necessary, from time to time, in
order for the Fund to achieve its objective of investing, as closely as
possible, in the same securities know to be owned by Berkshire Hathaway
Holdings;
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; and
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 Adviser 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 Adviser has no present
intention of engaging in such transactions at this time or during the
coming year;
5. Purchase foreign securities other than those traded on domestic U.S.
exchanges; and
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.
PORTFOLIO TRANSACTIONS
Subject to the general supervision of the Trust's Board of Trustees, the Adviser
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 Adviser, 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 Adviser
will seek to obtain the best overall terms available for the Fund. In assessing
the best overall terms available for any transaction, the Adviser 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 Adviser 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 Adviser 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
Adviser 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 Adviser 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 Adviser 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 Adviser may also utilize a brokerage firm affiliated with the Trust or the
Adviser 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 Adviser or an affiliated person of the Adviser (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 Adviser, or an affiliated person of the
Adviser, 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 Adviser. Such other investment companies and
accounts may also invest in the same securities as the Fund. To the extent
permitted by law, the Adviser 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
Adviser believes to be equitable to the Fund and such other investment company
or account. In some instances, this investment procedure may adversely affect
the price paid or received by the Fund or the size of the position obtained or
sold by the Fund.
For the fiscal year ended May 31, 2000, the total amount of brokerage
commissions paid by the Fund was $4,747. For the fiscal period ended May 31,
1999, the total amount of brokerage commissions paid by the Fund was $353.
DESCRIPTION OF THE TRUST
The Trust is an unincorporated business trust organized under Massachusetts law
on July 9, 1997. The Trust's Declaration of Trust authorizes the Board of
Trustees to divide shares into series, each series relating to a separate
portfolio of investments, and to classify and reclassify any unissued shares
into one or more classes of shares of each such series. The Declaration of Trust
currently provides for the shares of one series, the Fund. The number of shares
of each series shall be unlimited. The Trust does not intend to issue share
certificates.
In the event of a liquidation or dissolution of the Trust or an individual
series, such as the Fund, shareholders of a particular series would be entitled
to receive the assets available for distribution belonging to such series.
Shareholders of a series are entitled to participate equally in the net
distributable assets of the particular series involved on liquidation, based on
the number of shares of the series that are held by each shareholder. If there
are any assets, income, earnings, proceeds, funds or payments, that are not
readily identifiable as belonging to any particular series, the Trustees shall
allocate them among any one or more of the series as they, in their sole
discretion, deem fair and equitable.
Shareholders of all of the series of the Trust, including the Fund, will vote
together and not separately on a series-by-series or class-by-class basis,
except as otherwise required by law or when the Board of Trustees determines
that the matter to be voted upon affects only the interests of the shareholders
of a particular series or class. The Trust has adopted an Amended and Restated
Rule 18f-3 Multi-class Plan that contains the general characteristics of, and
conditions under which the Trust may offer multiple classes of shares of each
series. Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted to the holders of the outstanding voting securities of an investment
company such as the Trust shall not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding shares of
each series or class affected by the matter. A series or class is affected by a
matter unless it is clear that the interests of each series or class in the
matter are substantially identical or that the matter does not affect any
interest of the series or class. Under Rule 18f-2, the approval of an investment
advisory agreement or any change in a fundamental investment policy would be
effectively acted upon with respect to a series only if approved by a majority
of the outstanding shares of such series. However, the Rule also provides that
the ratification of the appointment of independent accountants, the approval of
principal underwriting contracts and the election of Trustees may be effectively
acted upon by shareholders of the Trust voting together, without regard to a
particular series or class.
When used in the Prospectus or this SAI, a "majority" of shareholders means the
vote of the lesser of (1) 67% of the shares of the Trust or the applicable
series or class present at a meeting if the holders of more than 50% of the
outstanding shares are present in person or by proxy, or (2) more than 50% of
the outstanding shares of the Trust or the applicable series or class. 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.
When issued for payment as described in the Prospectus and this SAI, shares of
the Fund will be fully paid and non-assessable.
The Declaration of Trust provides that the Trustees of the Trust will not be
liable in any event in connection with the affairs of the Trust, except as such
liability may arise from his or her own bad faith, willful misfeasance, gross
negligence, or reckless disregard of duties. It also provides that all third
parties shall look solely to the Trust property for satisfaction of claims
arising in connection with the affairs of the Trust. With the exceptions stated,
the Declaration of Trust provides that a Trustee or officer is entitled to be
indemnified against all liability in connection with the affairs of the Trust.
MANAGEMENT AND OTHER SERVICE PROVIDERS
The Board of Trustees of the Trust ("Trustees") is responsible for the
management and supervision of the Fund. The Trustees approve all significant
agreements between the Trust, on behalf of the Fund, and those companies that
furnish services to the Fund. This section of the SAI provides information about
the persons who serve as Trustees and officers to the Trust and Fund,
respectively, as well as the entities that provide services to the Fund.
Trustees and Officers. The 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) with either the Trust or the Adviser who
serve as trustees.
<TABLE>
<S> <C> <C>
----------------------------------------- ------------------------ -------------------------------------------------------
Position(s) with Fund Principal Occupation(s)
Name, Age, and Address and/or Trust During Past 5 Years
----------------------------------------- ------------------------ -------------------------------------------------------
Jack E. Brinson, 68 Trustee President
1105 Panola Street Brinson Investment Co.;
Tarboro, North Carolina 27886 President
Brinson Chevrolet, Inc.
Tarboro, North Carolina
Independent Trustee - Nottingham Investment Trust II,
Gardner Lewis Investment Trust, and Woodlawn Funds
Trust
Rocky Mount, North Carolina
----------------------------------------- ------------------------ -------------------------------------------------------
C. Frank Watson, III, 30 Secretary President
105 North Washington Street The Nottingham Company
Rocky Mount, North Carolina 27802 (Administrator to the Fund)
Rocky Mount, North Carolina
----------------------------------------- ------------------------ -------------------------------------------------------
Julian G. Winters, 31 Treasurer Legal and Compliance Director
105 North Washington Street The Nottingham Company The Nottingham Company
(Administrator to the Fund) (Administrator to the Fund)
Rocky Mount, North Carolina 27802 Rocky Mount, North Carolina, since 1996;
Rocky Mount, North Carolina, Previously, Operations Manager
Tar Heel Medical, Inc.
Nashville, North Carolina
----------------------------------------- ------------------------ -------------------------------------------------------
</TABLE>
Compensation. Trustees and Officers of the Trust who are interested persons of
the Trust or the Adviser 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.
Compensation Table*
<TABLE>
<S> <C> <C> <C> <C>
---------------------- ----------------------- ------------------------ --------------------- -------------------------
Total Compensation From
Aggregate Estimated Annual Fund and Fund Complex
Compensation From the Pension or Retirement Benefits Upon Paid to Directors**
Name of Trustee Fund Benefits Retirement
---------------------- ----------------------- ------------------------ --------------------- -------------------------
Jack E. Brinson $2,250 N/A N/A $4,250
---------------------- ----------------------- ------------------------ --------------------- -------------------------
</TABLE>
* The figures in the table above are for the fiscal year ended May 31, 2000.
** Mr. Brinson currently serves as Trustee for the one fund of the Trust.
Principal Holders of Voting Securities. As of September 14, 2000, the Trustees
and Officers of the Trust as a group owned beneficially (i.e., had voting and/or
investment power) less than 1% of the then outstanding shares of the Fund. On
the same date the following shareholders owned of record more than 5% of the
outstanding shares of beneficial interest of each Class of the Fund. Except as
provided below, no person is known by the Trust to be the beneficial owner of
more than 5% of the outstanding shares of a Class of the Fund as of September
14, 2000.
<TABLE>
<S> <C> <C>
------------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
------------------------------------------------------------------------------------------------------------------------------------
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership Percent
------------------------------------------------------------------------------------------------------------------------------------
John M. Templeton Jr. 119,833.389 shares 43.660%*
601 Pembroke Road
Brynmawr, PA 19010
John Ezra Irrevocable Trust 100,533.504 shares 36.638%*
Gail J. Zimmerman, Trustee
2361 Trojan Drive
Casper, WY 82609
Anne D. Zimmerman 17,068.063 shares 6.219%
& Gail J. Zimmerman JTWROS
2361 Trojan Drive
Casper, WY 82609
John K. Donaldson 17,068.063 shares 6.219%
2859 Paces Ferry Road
Suite 2125
Atlanta, GA 30339
* Pursuant to applicable SEC regulations, these shareholders are deemed to control the Fund.
Additionally, Mr. Templeton is a control person of the Adviser.
</TABLE>
<TABLE>
<S> <C> <C>
------------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
------------------------------------------------------------------------------------------------------------------------------------
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership Percent
------------------------------------------------------------------------------------------------------------------------------------
Anne C. Rymer 52,192.067 shares 30.311%*
100 Scenic Highway #28
Lookout Mountain, TN 37350
Richard A. Hoefs 49,701.789 shares 28.865%*
2993 Woods Edge Way
Fitchburg, WI 53711
S. B. Rymer, Jr. 31,315.240 shares 18.187%
100 Scenic Highway #28
Lookout Mountain, TN 37350
James A. Labrie Trust 23,017.388 shares 13.368%
Post Office Box 6808
Portsmouth, NH 03802-6808
Susan Segerstrom Perry & 10,596.271 shares 6.154%
Seven Lee Perry Family Trust
25222 Derbyhill Drive
Laguana Hills, CA 92653
</TABLE>
<TABLE>
<S> <C> <C>
------------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
------------------------------------------------------------------------------------------------------------------------------------
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership Percent
------------------------------------------------------------------------------------------------------------------------------------
JoAnn Travis McLean 6,310.381 shares 18.274%
2306 Jasmine Street
Monroe, LA 71201
Donaldson Lufkin Jenrette 2,515.091 shares 7.283%
Fbo Securities Corporation Inc.
Post Office Box 2052
Jersey City, NJ 07303-9998
Bernard & Clara Grannemann 1,968.504 shares 5.700%
Family Trust
638 West 700th Avenue
Helper, KS 66746
First Clearing Corporation 1,888.574 shares 5.469%
Fbo John Nepote
613 W. Leighton
Frontenac, KS 66763-2125
</TABLE>
<TABLE>
<S> <C> <C>
------------------------------------------------------------------------------------------------------------------------------------
INVESTOR CLASS SHARES
------------------------------------------------------------------------------------------------------------------------------------
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership Percent
------------------------------------------------------------------------------------------------------------------------------------
Robert Scott Zimmer 10,100.917 shares 22.468%
1343 Main Street
Suite 400
Sarasota, FL 34236
M & C Heinrich Family 9,216.590 shares 20.501%
Limited Partnership
3611 Wimbledon Drive
Lake Mary, FL 32746
Joanne Kollar & Richard Wolfe, JTWROS 2,376.827 shares 5.287%
123 N. Harding Street
Greenville, NC 27858-1325
</TABLE>
Investment Adviser. Information about Atlanta Investment Counsel, LLC
("Adviser"), 2771 Carmon-on-Wesley, NW, Suite 100, Atlanta, Georgia 30327, and
its duties and compensation as Adviser is contained in the Prospectus. The
Adviser supervises the Fund's investments pursuant to an Investment Advisory
Agreement ("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 Adviser will receive a monthly management fee equal to an annual rate of
0.50% of the Fund's net assets of $500 million and less, and 0.40% of the Fund's
net assets greater then $500 million. For the fiscal year ended May 31, 2000,
the Adviser waived all of the management fee from the Fund in the amount of
$12,914, and voluntarily reimbursed a portion of the Fund's operating expenses
in the amount of $110,174. For the fiscal period ended May 31, 1999, the Adviser
waived all of the management fee from the Fund in the amount of $700, and
voluntarily reimbursed a portion of the Fund's operating expenses in the amount
of $31,681.
The Adviser manages the Fund's investments in accordance with the stated
policies of the Fund, subject to the approval of the Trust's Trustees. The
Adviser is responsible for investment decisions, and provides the Fund with
portfolio managers who are authorized by the Trustees to execute purchases and
sales of securities. The portfolio managers for the Fund are C. Douglas
Davenport, J.D., John K. Donaldson (controlling member of the Adviser), and Kyle
Tomlin, CFA. The Trust, the Adviser, and the Distributor each have adopted a
Code of Ethics that permits its personnel, subject to such respective Code of
Ethics, to invest in securities, including securities that may be purchased or
held by the Fund. The Adviser's Code of Ethics subjects its employees' personal
securities transactions to various restrictions to ensure that such trading does
not disadvantage any Fund advised by the Adviser. In that regard, portfolio
managers and other investment personnel of the Adviser must report their
personal securities transactions and holdings, which are reviewed for compliance
with the Code of Ethics. Portfolio managers and other investment personnel who
comply with the Code of Ethics' procedures may be permitted to purchase, sell or
hold securities which also may be or are held in fund(s) they manage or for
which they otherwise provide investment advice.
Under the Advisory Agreement, the Adviser 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 Adviser in the performance of its duties; or from its reckless
disregard of its duties and obligations under the Agreement.
John K. Donaldson controls the Adviser. Mr. Donaldson is also the controlling
member of another Investment Adviser, New Providence Capital Management, L.L.C.,
an affiliate of the Adviser.
Fund Accountant and Administrator. The Trust has entered into a Fund Accounting
and Administration Agreement with The Nottingham Company, Inc.
("Administrator"), 105 North Washington Street, Post Office Box 69, Rocky Mount,
North Carolina 27802-0069. Compensation of the Administrator, based upon the
average daily net assets of the Fund for fund administration fees, 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 fund accounting fee of
$2,250 for accounting and recordkeeping services for the Fund and an additional
$750 per month for each additional Class. The Administrator charges a minimum
annual fee of $41,000 for all of its fees taken in the aggregate, analyzed
monthly. 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.
For the fiscal year ended May 31, 2000, the Administrator received for its
services fund accounting fees of $45,000 and received fund administration fees
in the amount of $3,367 after waiving $132 of those fees. For the fiscal period
ended May 31, 1999, the Administrator received fund accounting fees of $10,500
and waived all its fund administration fees in the amount of $175.
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
("Transfer Agent"), a North Carolina limited liability company, to serve as
transfer, dividend paying, and shareholder servicing agent for the Fund. The
address of the Transfer Agent is 107 North Washington Street, Post Office Box
4365, Rocky Mount, North Carolina 27803-0365. The Transfer Agent is compensated
based upon a $15.00 fee per shareholder per year, subject to a minimum fee of
$750 per month.
For the fiscal year ended May 31, 2000, the Transfer Agent received $8,950 in
shareholder recordkeeping fees. For the fiscal period ended May 31, 1999, the
Transfer Agent received shareholder recordkeeping fees of $3,050.
Distributor. Capital Investment Group, Inc. ("Distributor"), Post Office Box
32249, Raleigh, North Carolina 27622, acts as an underwriter and distributor of
the Fund's shares for the purpose of facilitating the registration of shares of
the Fund under state securities laws and to assist in sales of Fund shares
pursuant to a Distribution Agreement ("Distribution Agreement") approved by the
Board of Trustees of the Trust.
In this regard, the Distributor has agreed at its own expense to qualify as a
broker-dealer under all applicable federal or state laws in those states which
the Fund shall from time to time identify to the Distributor as states in which
it wishes to offer its shares for sale, in order that state registrations may be
maintained for the Fund.
The Distributor is a broker-dealer registered with the SEC and a member in good
standing of the National Association of Securities Dealers, Inc.
Either party upon 60-days' prior written notice to the other party may terminate
the Distribution Agreement.
Prior to July 15, 1999, Donaldson & Co., Incorporated, served as the principal
underwriter and distributor of Fund shares pursuant to a Distribution Agreement
with the Trust. Donaldson & Co., Incorporated is affiliated with the Adviser.
John K. Donaldson, affiliated person of the Fund, is also an affiliated person
of the Adviser and owner of the Donaldson & Co., Incorporated.
Sales charges from the sale of Fund shares for the fiscal year ended May 31,
2000 was $41,531 of which $6,011 was paid to the Distributor. There were no
sales charges from the sale of Fund shares for the fiscal period ended May 31,
1999.
Custodian. First Union National Bank ("Custodian"), 123 South Broad Street,
Philadelphia, Pennsylvania 19109 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, Princeton Forrestal Village, 116-300 Village
Boulevard, Princeton, New Jersey 08540, 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 serves as legal counsel to the Trust and 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
1-800-773-3863 or by writing to:
Wisdom Fund
c/o NC Shareholder Services
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
Purchases in Kind. The Fund may accept securities in lieu of cash in payment for
the purchase of shares in the Fund. The acceptance of such securities is at the
sole discretion of the Adviser 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 Adviser 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.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Purchases. 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. The Distributor receives this sales
charge as Distributor and may reallow it in the form of dealer discounts and
brokerage commissions as follows:
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 $50,000................ 6.10% 5.75% 5.00%
$50,000 to $99,999............... 4.71% 4.50% 3.75%
$100,000 to $249,999............. 3.63% 3.50% 2.80%
$250,000 to $499,999............. 2.56% 2.50% 2.00%
$500,000 to $999,999............. 2.04% 2.00% 1.60%
$1,000,000 to $1,999,999......... 1.01%* 1.00%* 0.75%
$2,000,000 to $2,999,999:
On the first $1,999,999..... 1.01%* 1.00%* 0.75%
On the next $1,000,000...... 0.81%* 0.80%* 0.65%
$3,000,000 or more:
On the first $1,999,999..... 1.01%* 1.00%* 0.75%
On the next $1,000,000...... 0.81%* 0.80%* 0.65%
$3,000,000 and over......... 0.50%* 0.50%* 0.40%
* A one-year, 1.00% contingent deferred sales charge is imposed on these
accounts.
The Distributor may pay to broker-dealers out of its own resources and assets
commissions on shares sold in Class B Shares and Class C Shares, at net asset
value, which at the time of investment would have been subject to the imposition
of a contingent deferred sales charge ("CDSC") if redeemed. The Distributor will
pay such broker-dealers a commission of 4% of the amount invested in Class B
Shares subject to a CDSC. For purchases of Class C Shares, the Distributor may
pay out of its own resources a commission of 1% of the amount invested in the
Fund.
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.
Plan Under Rule 12b-1. The Fund has adopted separate Distribution Plans pursuant
to Rule 12b-1 of the 1940 Act for the Investor Class Shares, Class B Shares, and
Class C Shares (see "Distribution of the Fund's Shares" in the respective
Prospectuses for the Investor Shares, Class B Shares, and Class C Shares).
As required by Rule 12b-1, each Distribution 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
each Distribution Plan and the Distribution Agreement.
Potential benefits of each Distribution 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 each Distribution Plan, the Fund may expend up to 0.25% of the Fund's
average daily net assets of the Investor Class Shares and 1.00% of the Fund's
average daily net assets of the Class B Shares and Class C Shares 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 service Shareholders may not
exceed 0.25% of the average annual net asset value of each class of shares.
Each Distribution Plan is of a type known as a "compensation" plan because
payments are made for services rendered to the Fund with respect to each 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 each Distribution Plan and in connection with their annual
consideration of renewal of each Distribution Plan. 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
shareholders with respect to each class of 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 each class of shares of the Fund; (c) holding seminars and
sales meetings designed to promote the distribution of each class of 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 each class of shares of the
Fund; and (f) financing any other activity that the Distributors determine is
primarily intended to result in the sale of each class of shares.
Payments under the Fund's 12b-1 Plans for the fiscal year ended May 31, 2000
total $2,157, $180, and $712 for the Class B Shares, Class C Shares, and
Investor Class Shares, respectively. There were no payments made under the
Fund's 12b-1 Plans for the fiscal period ended May 31, 1999.
Reduced Sales Charges
Concurrent Purchases. For purposes of qualifying for a lower front-end
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 Adviser 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 Adviser and sold with a sales charge at the total
public offering price of $50,000, and Investor Class 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
Class 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 Adviser 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
Adviser 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 backdating 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 Class Shares in Investor Class Shares or in shares
of another series of the Trust affiliated with the Adviser 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 front-end 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 Adviser, and to
employees and principals of related organizations and their families, and
certain parties related thereto, including clients and related accounts of the
Adviser. Clients of investment advisers and financial planners may also purchase
Investor Shares at net asset value if the investment adviser 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.
Redemptions. The Fund may suspend redemption privileges or postpone the date of
payment (i) during any period that the New York Stock Exchange ("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
("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 "Redeeming Your
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 and offering price of each class of the Fund shares is
normally determined at the time regular trading closes on the NYSE, 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.
In computing a class of a Fund's net asset value, all class specific liabilities
incurred or accrued are deducted from the net assets of that class. The
resulting net assets are divided by the number of shares of the class
outstanding at the time of the valuation and the result is the net asset value
per share of that class.
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.
For the fiscal year ended May 31, 2000, net expenses of the Fund were $3,049
after fee waivers and expense reimbursements. For the fiscal period ended May
31, 1999, after fee waivers and expense reimbursements, there were no net
expenses to the Fund.
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.
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.
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 "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 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.
The cumulative total return for the Investor Shares of the Fund for the period
from February 16, 1999 (commencement of operations) through May 31, 1999, was
(6.30)%. The cumulative total return for the Investor Shares of the Fund,
computed without reflecting the applicable sales load, for such period was
(0.58)%.
The total return for the fiscal year ended May 31, 2000 for the Institutional
Class Shares of the Fund was 1.64%. The average annual return for the
Institutional Class Shares of the Fund for the period February 16, 1999
(commencement of operations) to May 31, 2000 was 0.92%. The cumulative total
return for the Institutional Class Shares of the Fund for the period February
16, 1999 (commencement of operations) through May 31, 2000 was 1.18%. The total
return for the fiscal year ended May 31, 2000 for the Investor Class Shares of
the Fund was 1.36% (-4.47% with the maximum sales load). The average annual
return for the Investor Class Shares of the Fund for the period February 16,
1999 (commencement of operations) to May 31, 2000 was 0.60% (-3.92% with the
maximum sales load). The cumulative total return for the Investor Class Shares
of the Fund for the period February 16, 1999 (commencement of operations)
through May 31, 2000 was 0.77% (-5.02% with the maximum sales load). The
cumulative total return for the Investor Class B Shares for the fiscal period
November 16, 1999 (commencement of operations) to May 31, 2000 was -1.85%
(-5.78% with the maximum CDSC). The cumulative total return for the Investor
Class C Shares for the fiscal period November 16, 1999 (commencement of
operations) to May 31, 2000 was -1.86% (-2.84% with the maximum CDSC).
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 Adviser, such as the Capital Growth Account, as more
fully described in the Prospectus under "Other Information - Prior Performance
of Adviser." 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.
FINANCIAL STATEMENTS
The audited financial statements for the fiscal year ended May 31, 2000,
including the financial highlights appearing in the Annual Report to
shareholders, are incorporated by reference and made a part of this document.
<PAGE>
________________________________________________________________________________
WISDOM FUND
________________________________________________________________________________
a series of the New Providence Investment Trust
INSTITUTIONAL CLASS SHARES
ANNUAL REPORT 2000
FOR THE YEAR ENDED MAY 31
INVESTMENT ADVISOR
Atlanta Investment Counsel, LLC
2771 Carmon-on-Wesley, NW
Suite 100
Atlanta, Georgia 30327
WISDOM FUND
105 North Washington Street
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069
1-800-525-3863
This report and the financial statements contained herein are
submitted for the general information of the shareholders of the
Fund. This report is not authorized for distribution to prospective
investors in the Fund unless preceded or accompanied by an effective
prospectus. Mutual fund shares are not deposits or obligations of,
or guaranteed by, any depository institution. Shares are not insured
by the FDIC, Federal Reserve Board or any other agency, and are
subject to investment risks, including possible loss of principal
amount invested. Neither the fund nor the fund's distributor is a bank.
For more information about the Wisdom Fund, including charges
and expenses, call the fund for a free prospectus. You should
read the prospectus carefully before you invest or send money.
<PAGE>
ATLANTA INVSETMENT COUNSEL, L.L.C.
Manager of the Wisdom Fund
June 1, 2000
Dear Shareholders,
"Success in investing doesn't correlate with IQ once you're above the level of
25. Once you have ordinary intelligence, what you need is the temperament to
control the urges that get other people into trouble in investing." Warren
Buffet, 1996 Shareholder Meeting. We couldn't agree more!
The past ten weeks have seen a shift in market sentiment that has so far been
very favorable to our portfolio and to value investing. We have been asked how
and why such shifts occur. We have tried to come up with several reasons that
sound logical. Many times we don't understand what's really happened until much
later. Here are some possible signs of, and reasons for, the shift:
The Dow was down dramatically by February 25, while the NASDAQ was up
substantially, underscoring the popular, but meaningless, Old Economy / New
Economy split.
The anxiety suffered by New Economy adherents as Microsoft was unable to settle
with the Justice Department.
The retirement of Tiger Fund's Julian Robertson and the replacement of Oakmark's
Robert Sanborn--sure signs of intense frustration from serious value investors.
[Letterhead]
<PAGE>
In Contrast to years past, Berkshire Hathaway's 1999 Annual Report received
barely a mention in the financial press. We read it with great interest, of
course!
When you buy a stock or mutual fund, it's important not to lose sight of the
fact that you're really buying a fractional interest in a business, and not a
lottery ticket.
For about two years now, we have been in a market where valuation hasn't
mattered one darn bit. In fact, the more that investors focused on valuation,
the worse returns have been. While the laws of economic gravity were temporarily
suspended, we do not believe they have been fundamentally altered.
Looking back over the last year, the Wisdom Fund under performed the general
market and outperformed Berkshire Hathaway Holdings, the portfolio that we
attempt to emulate. Berkshire's stock price fell in 1999 for several reasons:
1. Since last summer, Alan Greenspan has raised interest rates because he is
worried that the economy is expanding so fast that it will cause a resurgence of
inflation. In theory, the prospect of higher interest rates should hurt growth
stocks the most. But in today's market, exactly the opposite has occurred.
Fearing that higher rates would hit Old Economy stocks the hardest, investors
have been dumping those stocks and piling into tech stocks instead,
<PAGE>
2. Three of the Wisdom Fund's and Berkshire Hathaway's largest
holdings--Coca-cola, Gillette, and Freddie Mac--fell in calendar year 1999 (13%,
14% and 27%, respectively). These stocks have been great investments over a
long-term horizon,
3. The Wisdom Fund holds about 26% of its assets in low-return short-term fixed
income securities as does Berkshire Hathaway. Due to high valuations in the
markets, Berkshire Hathaway has not seen fit to put its cash to work, and
4. Since the Wisdom Fund and Berkshire Hathaway have very little exposure to
technology stocks, we feel our holdings have been dragged down by the general
devaluation of non-tech stocks.
At Berkshire Hathaway's annual meeting this spring, Warren Buffet scornfully
compared the technology sector's breathtaking runup to a "chain letter," in
which early participants reap rich rewards at the expense of those who follow.
Of course, we do not like to under perform the S&P 500 stock index. We can say
with certainty that there will always be a category or class of investments that
will post results greater than ours. For our part, we will continue to implement
our investment strategy of emulating the investment portfolio of Berkshire
Hathaway which has produced a thirty-year track record second to none.
<PAGE>
Warren Buffet said in 1996, "Your goal as an investor should be to purchase, at
a rational price, a part interest in an easily understandable business with
whose earnings are virtually certain to be materially higher five, ten, and
twenty years from now. Over time, you will find only a few companies that meet
these standards---so when you see one that qualifies, you should buy a
meaningful amount of stock. You must also resist the temptation to stray from
your guidelines: If you aren't willing to own a stock for ten years, don't even
thing about owning it for ten minutes. Put together a portfolio of companies
whose aggregate earnings march upward over the years, and so also will the
portfolio's market value."
And that is the "wisdom" of the Wisdom Fund!
/s/ C. Douglas Davenport
C. Douglas Davenport, J.D.
President, Atlanta Investment Counsel, LLC
<PAGE>
WISDOM FUND
INSTITUTIONAL CLASS SHARES
Performance Update - $25,000 Investment
For the period from February 16, 1999 (Commencement of Operations)
to May 31, 2000
[LINE GRAPH HERE]:
--------------------------------------------------------------------------------
Wisdom Fund S&P 500
Institutional Class Shares Total Return Index
--------------------------------------------------------------------------------
02/16/99 $25,000 $25,000
02/28/99 25,000 24,941
03/31/99 24,425 25,939
04/30/99 25,275 26,943
05/31/99 24,889 26,307
06/30/99 24,587 27,767
07/31/99 24,713 26,900
08/31/99 24,437 26,767
09/30/99 22,630 25,742
10/31/99 25,223 27,681
11/30/99 25,340 28,243
12/31/99 24,997 29,907
01/31/00 24,314 28,404
02/29/00 22,113 27,867
03/31/00 24,491 30,593
04/30/00 24,415 29,672
05/31/00 25,295 29,063
This graph depicts the performance of the Wisdom Fund - Institutional Class
Shares versus the S&P 500 Total Return Index. It is important to note that the
Wisdom Fund is a professionally managed mutual fund while the index is not
available for investment and is unmanaged. The comparison is shown for
illustrative purposes only.
Average Annual Total Returns
-------------------- -------------------------
Since Commencement
One Year of Operations
-------------------- -------------------------
1.64 % 0.92 %
-------------------- -------------------------
>> The graph assumes an initial $25,000 investment at February 16, 1999
(commencement of operations). All dividends and distributions are
reinvested.
>> At May 31, 2000, the value of the Wisdom Fund - Institutional Class Shares
would have grown to $25,295 - a cumulative total investment return of 1.18%
since February 16, 1999.
>> At May 31, 2000, the value of a similar investment in the S&P 500 Total
Return Index would have grown to $29,063 - a cumulative total investment
return of 16.25% since February 16, 1999.
>> 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 total returns are historical in nature
and measure net investment income and capital gain or loss from portfolio
investments assuming reinvestments of dividends.
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
WISDOM FUND
PORTFOLIO OF INVESTMENTS
May 31, 2000
------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - 62.39%
Apparel Manufacturing - 1.33%
(a)Jones Apparel Group, Inc. .................................................. 1,750 $ 46,922
Liz Claiborne, Inc. ........................................................ 400 15,725
----------
62,647
----------
Beverages - 10.15%
The Coca-Cola Company ...................................................... 8,950 477,706
----------
Chemicals - 0.74%
Great Lakes Chemical Corporation ........................................... 1,250 34,844
----------
Cosmetics and Personal Care - 3.05%
The Gillette Company ....................................................... 4,300 143,512
----------
Financial Services - 16.09%
American Express Company ................................................... 6,750 362,813
AXA Financial, Inc. ........................................................ 1,825 71,061
Freddie Mac ................................................................ 2,675 119,037
Marsh & McLennan Companies, Inc. ........................................... 600 66,000
MGIC Investment Corporation ................................................ 1,150 56,997
The Dun & Bradstreet Corporation ........................................... 2,650 81,487
----------
757,395
----------
Financial - Banks, Commercial - 2.83%
Wells Fargo & Company ...................................................... 2,950 133,488
----------
Insurance - Life and Health - 2.56%
CIGNA Corporation .......................................................... 700 62,169
Torchmark Corporation ...................................................... 2,150 58,453
----------
120,622
----------
Insurance - Multiline - 17.37%
AFLAC INCORPORATED ......................................................... 1,400 72,363
Allmerica Financial Corporation ............................................ 1,150 66,341
Ambac Financial Group, Inc. ................................................ 1,200 60,600
American International Group, Inc. ......................................... 537 60,446
American National Insurance Company ........................................ 950 51,300
Cincinnati Financial Corporation ........................................... 1,950 78,274
(a)CNA Financial Corporation .................................................. 1,650 58,884
Financial Security Assurance Holdings Ltd. ................................. 1,325 99,458
Loews Corporation .......................................................... 1,000 65,875
PartnerRe Ltd. ............................................................. 2,025 75,178
The PMI Group, Inc. ........................................................ 1,250 63,359
The St. Paul Companies, Inc. ............................................... 1,750 65,625
----------
817,703
----------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
WISDOM FUND
PORTFOLIO OF INVESTMENTS
May 31, 2000
------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Insurance - Property & Casualty - 2.78%
Erie Indemnity Company ..................................................... 1,950 $ 53,625
Everest Re Group, Ltd. ..................................................... 2,275 77,350
----------
130,975
----------
Publishing - Newspapers - 0.87%
The Washington Post Company ................................................ 82 41,041
----------
Real Estate Investment Trust - 1.59%
First Industrial Realty Trust, Inc. ........................................ 875 25,430
Tanger Factory Outlet Centers, Inc. ........................................ 1,150 26,594
Town & Country Trust ....................................................... 1,400 22,925
----------
74,949
----------
Transportation - Miscellaneous - 0.90%
GATX Corporation ........................................................... 1,250 42,187
----------
Utilities - Electric - 2.13%
FPL Group, Inc. ............................................................ 875 43,313
Northern States Power Company .............................................. 1,500 33,187
The Montana Power Company .................................................. 625 23,672
----------
100,172
----------
Total Common Stocks (Cost $2,817,159) ............................................................ 2,937,241
----------
------------------------------------------------------------------------------------------------------------------------------------
Interest Maturity
Principal Rate Date
------------------------------------------------------------------------------------------------------------------------------------
U. S. GOVERNMENT OBLIGATION - 16.03%
United States Treasury Bill ..................... $760,000 0% 07/20/00 754,775
(Cost $754,479) ----------
------------------------------------------------------------------------------------------------------------------------------------
Shares
------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT COMPANIES - 8.97%
Evergreen Money Market Treasury Institutional Money
Market Fund Institutional Service Shares ................................... 211,257 211,257
Evergreen Money Market Treasury Institutional Treasury Money
Market Fund Institutional Service Shares ................................... 211,256 211,256
----------
Total Investment Companies (Cost $422,513) ....................................................... 422,513
----------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
WISDOM FUND
PORTFOLIO OF INVESTMENTS
May 31, 2000
------------------------------------------------------------------------------------------------------------------------------------
Value
(note 1)
------------------------------------------------------------------------------------------------------------------------------------
Total Value of Investments (Cost $3,994,151 (b)) ....................................... 87.39% $4,114,529
Other Assets Less Liabilities .......................................................... 12.61% 593,764
------ ----------
Net Assets ...................................................................... 100.00% $4,708,293
====== ==========
(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 .......................................................................... $ 267,843
Unrealized depreciation .......................................................................... (147,465)
----------
Net unrealized appreciation ...................................................... $ 120,378
==========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
WISDOM FUND
STATEMENT OF ASSETS AND LIABILITIES
May 31, 2000
ASSETS
Investments, at value (cost $3,994,151) ............................................................. $4,114,529
Cash ................................................................................................ 563,217
Income receivable ................................................................................... 6,327
Receivable for fund shares sold ..................................................................... 29,791
Due from advisor (note 2) ........................................................................... 11,118
----------
Total assets ................................................................................... 4,724,982
----------
LIABILITIES
Accrued expenses .................................................................................... 16,689
----------
NET ASSETS ................................................................................................. $4,708,293
==========
NET ASSETS CONSIST OF
Paid-in capital ..................................................................................... $4,647,581
Undistributed net investment income ................................................................. 219
Accumulated net realized loss on investments ........................................................ (59,885)
Net unrealized appreciation on investments .......................................................... 120,378
----------
$4,708,293
==========
INSTITUTIONAL CLASS
Net asset value, redemption and maximum offering price per share
($2,710,312 / 273,814 shares : unlimited shares of $0.01 par value
beneficial interest authorized) .................................................................. $ 9.90
==========
INVESTOR CLASS
Net asset value, redemption and offering price per share
($656,212 / 66,077 shares : unlimited shares of $0.01 par value
beneficial interest authorized) .................................................................. $ 9.93
==========
Maximum offering price per share (100 / 95.50% of $9.93) ............................................ $10.40
==========
CLASS B
Net asset value, redemption and maximum offering price per share
($1,168,374 / 117,131 shares : unlimited shares of $0.01 par value
beneficial interest authorized) .................................................................. $ 9.97
==========
CLASS C
Net asset value, redemption and maximum offering price per share
($173,395 / 17,369 shares : unlimited shares of $0.01 par value
beneficial interest authorized) .................................................................. $ 9.98
==========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
WISDOM FUND
STATEMENT OF OPERATIONS
Year ended May 31, 2000
INVESTMENT INCOME
Income
Interest ....................................................................................... $ 21,539
Dividends ...................................................................................... 35,889
---------
Total income ............................................................................. 57,428
---------
Expenses
Investment advisory fees (note 2) .............................................................. 12,914
Fund administration fees (note 2) .............................................................. 3,499
Distribution and service fees - Class B (note 3) ............................................... 2,157
Distribution and service fees - Class C (note 3) ............................................... 180
Distribution and service fees - Investor Class (note 3) ........................................ 712
Custody fees ................................................................................... 3,216
Registration and filing administration fees (note 2) ........................................... 2,190
Fund accounting fees (note 2) .................................................................. 45,000
Audit fees ..................................................................................... 10,530
Legal fees ..................................................................................... 10,027
Securities pricing fees ........................................................................ 1,779
Shareholder recordkeeping fees ................................................................. 8,950
Other accounting fees (note 2) ................................................................. 1,399
Shareholder servicing expenses ................................................................. 2,634
Registration and filing expenses ............................................................... 8,143
Printing expenses .............................................................................. 7,308
Trustee fees and meeting expenses .............................................................. 3,180
Other operating expenses ....................................................................... 3,145
---------
Total expenses ........................................................................... 126,963
---------
Less:
Expense reimbursements (note 2) ..................................................... (110,174)
Investment advisory fees waived (note 2) ............................................ (12,914)
Fund administration fees waived (note 2) ............................................ (132)
Other accounting fees waived (note 2) ............................................... (694)
---------
Net expenses ............................................................................. 3,049
---------
Net investment income ............................................................... 54,379
---------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized loss from investment transactions ...................................................... (58,004)
Increase in unrealized appreciation on investments .................................................. 123,160
---------
Net realized and unrealized gain on investments ................................................ 65,156
---------
Net increase in net assets resulting from operations ..................................... $ 119,535
=========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
WISDOM FUND
STATEMENTS OF CHANGES IN NET ASSETS
------------------------------------------------------------------------------------------------------------------------------------
Period ended Period ended
May 31, May 31,
2000 1999 (a)
------------------------------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS
Operations
Net investment income ..................................................... $ 54,379 $ 1,775
Net realized loss from investment transactions ............................ (58,004) (1,881)
Increase (decrease) in unrealized appreciation on investments ............. 123,160 (2,782)
---------- ----------
Net increase (decrease) in net assets resulting from operations ....... 119,535 (2,888)
---------- ----------
Distributions to shareholders from
Net investment income - Institutional Class ............................... (45,278) (1,775)
Net investment income - Investor Class .................................... (5,847) 0 (b)
Net investment income - Class B ........................................... (2,809) 0
Net investment income - Class C ........................................... (226) 0
---------- ----------
Decrease in net assets resulting from distributions ................... (54,160) (1,775)
---------- ----------
Capital share transactions
Increase in net assets resulting from capital share transactions (d) ...... 4,144,606 502,975
---------- ----------
Total increase in net assets .............................. 4,209,981 498,312
NET ASSETS
Beginning of period ............................................................. 498,312 0
---------- ----------
End of period ................................................................... $4,708,293 $ 498,312
========== ==========
(d) A summary of capital share activity follows:
--------------------------------------------------------------------------------
Period ended Period ended
May 31, 2000 May 31, 1999 (a)
Shares Value Shares Value
--------------------------------------------------------------------------------
--------------------------------------------------
INSTITUTIONAL CLASS
--------------------------------------------------
Shares sold ...................................... 218,824 $2,185,791 50,110 $ 501,100
Shares issued for reinvestment of distributions .. 4,701 45,278 179 1,775
Shares redeemed .................................. 0 0 0 0
---------- ---------- ---------- ----------
Net increase ............................ 223,525 $2,231,069 50,289 $ 502,875
========== ========== ========== ==========
--------------------------------------------------
INVESTOR CLASS
--------------------------------------------------
Shares sold ...................................... 87,208 $ 839,421 10 $ 100
Shares issued for reinvestment of distributions .. 598 5,846 0 0
Shares redeemed .................................. (21,739) (200,724) 0 0
---------- ---------- ---------- ----------
Net increase ............................ 66,067 $ 644,543 10 $ 100
========== ========== ========== ==========
--------------------------------------------------
CLASS B (c)
--------------------------------------------------
Shares sold ...................................... 117,050 $1,100,100 0 $ 0
Shares issued for reinvestment of distributions .. 81 805 0 0
Shares redeemed .................................. 0 0 0 0
---------- ---------- ---------- ----------
Net increase ............................ 117,131 $1,100,905 0 $ 0
========== ========== ========== ==========
--------------------------------------------------
CLASS C (c)
--------------------------------------------------
Shares sold ...................................... 17,347 $ 167,863 0 $ 0
Shares issued for reinvestment of distributions .. 22 226 0 0
Shares redeemed .................................. 0 0 0 0
---------- ---------- ---------- ----------
Net increase ............................ 17,369 $ 168,089 0 $ 0
========== ========== ========== ==========
--------------------------------------------------
FUND SUMMARY
--------------------------------------------------
Shares sold ...................................... 440,429 $4,293,175 50,120 $ 501,200
Shares issued for reinvestment of distributions .. 5,402 52,155 179 1,775
Shares redeemed .................................. (21,739) (200,724) 0 0
---------- ---------- ---------- ----------
Net increase ............................ 424,092 $4,144,606 50,299 $ 502,975
========== ========== ========== ==========
(a) For the period from February 16, 1999 (commencement of operations) to May 31, 1999.
(b) A distribution from Investor Class income was paid in the amount of $0.22.
(c) For the period from November 16, 1999 (commencement of operations) to May 31, 2000.
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
WISDOM FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
-------------------------------- -----------------------------------
Institutional Class Investor Class
-------------------------------- -----------------------------------
Year ended Period ended Year ended Period ended
May 31, May 31, May 31, May 31,
2000 1999 (a) 2000 1999 (a)
-------------------------------- -----------------------------------
Net asset value, beginning of period ....................... $ 9.91 $ 10.00 $ 9.92 $10.00
Income from investment operations
Net investment income ........................... 0.18 0.04 0.12 0.02
Net realized and unrealized (loss) gain
on investments .............................. (0.01) (0.09) 0.01 (0.08)
---------- ---------- ---------- ----------
Total from investment operations ............ 0.17 (0.05) 0.13 (0.06)
---------- ---------- ---------- ----------
Distributions to shareholders from
Net investment income ........................... (0.18) (0.04) (0.12) (0.02)
---------- ---------- ---------- ----------
Net asset value, end of period ............................. $ 9.90 $ 9.91 $ 9.93 $ 9.92
========== ========== ========== ==========
Total return (b) ........................................... 1.64 % (0.45)% 1.36 % (0.58)%
========== ========== ========== ==========
Ratios/supplemental data
Net assets, end of period ........................... $2,710,312 $ 498,213 $ 656,212 $ 99
========== ========== ========== ==========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees ... 5.05 % 23.94 % (c) 4.29 % 15.49 %(c)
After expense reimbursements and waived fees .... 0.00 % 0.00 % (c) 0.25 % 0.00 %(c)
Ratio of net investment (loss) income to average net assets
Before expense reimbursements and waived fees ... (2.87)% (22.69)% (c) (1.96)% (14.68)%(c)
After expense reimbursements and waived fees .... 2.18 % 1.26 % (c) 2.08 % 0.81 %(c)
Portfolio turnover rate ............................. 41.69 % 7.04 % 41.69 % 7.04 %
(a) For the period from February 16, 1999 (commencement of operations) to May 31, 1999.
(b) Total return does not reflect payment of a sales charge.
(c) Annualized.
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
WISDOM FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
-------------------- ------------------
Class B Class C
-------------------- ------------------
Period ended Period ended
May 31, May 31,
2000 (a) 2000 (a)
-------------------- ------------------
Net asset value, beginning of period ............................................... $10.20 $10.20
Income from investment operations
Net investment income ................................................... 0.04 0.03
Net realized and unrealized (loss) gain on investments .................. (0.23) (0.22)
---------- ----------
Total from investment operations .................................... (0.19) (0.19)
---------- ----------
Distributions to shareholders from
Net investment income ................................................... (0.04) (0.03)
---------- ----------
Net asset value, end of period ..................................................... $ 9.97 $ 9.98
========== ==========
Total return (b) ................................................................... (1.85)% (1.86)%
========== ==========
Ratios/supplemental data
Net assets, end of period ................................................... $1,168,374 $ 173,395
========== ==========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees ........................... 4.09 %(c) 4.07 %(c)
After expense reimbursements and waived fees ............................ 1.00 %(c) 1.00 %(c)
Ratio of net investment (loss) income to average net assets
Before expense reimbursements and waived fees ........................... (1.78)%(c) (1.77)%(c)
After expense reimbursements and waived fees ............................ 1.31 %(c) 1.30 %(c)
Portfolio turnover rate ..................................................... 41.69 % 41.69 %
(a) For the period from November 16, 1999 (commencement of operations) to May 31, 2000.
(b) Total return does not reflect payment of a sales charge.
(c) Annualized.
See accompanying notes to financial statements
</TABLE>
<PAGE>
WISDOM FUND
NOTES TO FINANCIAL STATEMENTS
May 31, 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
The Wisdom Fund (the "Fund"), an open-ended investment company, is a
diversified series of shares of beneficial interest of the New
Providence Investment Trust (the "Trust"). The Trust was organized on
July 9, 1997 as a Massachusetts Business Trust and is registered under
the Investment Company Act of 1940, as amended. The Fund began
operations on February 16, 1999. The investment objective of the fund
is to seek maximum total return consisting of any combination of
capital appreciation, realized and unrealized, and income under the
constantly varying market conditions. The Board of Trustees of the
Trust approved on October 7, 1999 a plan to authorize two new classes
of shares designated as Class B Shares and Class C Shares. On November
16, 1999, the Class B Shares and Class C Shares became effective. The
Fund has an unlimited number of authorized shares, which are divided
into four classes - Institutional Class Shares, Investor Class Shares,
Class B shares and Class C shares.
Each class of shares has equal rights as to assets of the Fund, and the
classes are identical except for differences in their sales charge
structures and ongoing distribution and service fees. Income, expenses
(other than distribution and service fees, which are not attributable
to the Institutional Class Shares), and realized and unrealized gains
or losses on investments are allocated to each class of shares based
upon its relative net assets. All classes have equal voting privileges,
except where otherwise required by law or when the Board of Trustees
determines that the matter to be voted on affects only the interests of
the shareholders of a particular class. 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 4:00 p.m., New York
time. 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.
Net investment income (loss) and net realized gains (losses)
may differ for financial statement and income tax purposes
primarily because of losses incurred subsequent to October 31,
which are deferred for income tax purposes. The character of
distributions made during the year from net investment income
or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to
the timing of dividend distributions, the fiscal year in which
amounts are distributed may differ from the year that the
income or realized gains were recorded by the Fund.
(Continued)
<PAGE>
WISDOM FUND
NOTES TO FINANCIAL STATEMENTS
May 31, 2000
C. Investment Transactions - Investment transactions are recorded
on 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. Distributions to
shareholders are recorded on the ex-dividend date. 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 estimates.
NOTE 2 - INVESTMENT ADVISORY FEE AND OTHER RELATED PARTY TRANSACTIONS
Pursuant to an investment advisory agreement, Atlanta Investment
Council, LLC (the "Advisor"), provides the Fund with a continuous
program of supervision of the Fund's assets, including the composition
of its portfolio, and furnishes advice and recommendations with respect
to investments, investment policies, and the purchase and sale of
securities. As compensation for its services, the Advisor receives a
fee at the annual rate of 0.50% of the first $500 million of the Fund's
average daily net assets and 0.40% of all assets over $500 million.
The Advisor currently intends to voluntarily waive all or a portion of
its fee and to reimburse expenses of the Fund to limit total Fund
operating expenses to a maximum of 1.15% of the average daily net
assets of the Fund's Institutional Class, a maximum of 1.40% of the
average daily net assets of the Fund's Investor Class, and a maximum of
2.15% of the average daily net assets of the Fund's Class B and Class C
Shares. 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 $12,914 ($0.05 per share) and
reimbursed $110,174 of the operating expenses incurred by the Fund for
the year ended May 31, 2000.
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, 0.100% of the next $50 million, and 0.075% of average daily
net assets over $100 million as well as a monthly fee of $2,250 for
accounting and record-keeping services for the initial class of shares
and $750 per month for each additional class of shares. The contract
with the Administrator provides that the aggregate fees for the
aforementioned administration, accounting, and recordkeeping services
shall not be less than $41,000 per year. The Administrator also charges
the Fund for certain expenses involved with the daily valuation of
portfolio securities. The Administrator voluntarily waived a portion of
its fees amounting to $826 for the year ended May 31, 2000.
(Continued)
<PAGE>
WISDOM FUND
NOTES TO FINANCIAL STATEMENTS
May 31, 2000
North Carolina Shareholder Services, LLC (the "Transfer Agent") serves
as the Fund's transfer, dividend paying, and shareholder servicing
agent. The Transfer Agent maintains the records of each Shareholder's
account, answers shareholder inquiries concerning accounts, processes
purchases and redemptions of the Fund's shares, acts as dividend and
distribution disbursing agent, and performs other shareholder servicing
functions.
Capital Investment Group, Inc. (the "Distributor") serves as the Fund's
principal underwriter and distributor. Prior to July 14, 1999,
Donaldson & Co., Inc., an affiliate of the Advisor, served as the
principal underwriter and distributor. The Distributor receives any
sales charges imposed on purchases of shares and re-allocates a portion
of such charges to dealers through whom the sale was made, if any. For
the year ended March 31, 2000, the Distributor retained sales charges
in the amount of $6,011.
Certain Trustees and officers of the Trust are also officers or
directors of the Advisor, the Distributor, or the Administrator.
NOTE 3 - DISTRIBUTION AND SERVICE FEES
The Board of Trustees, including the Trustees who are not "interested
persons" of the Trust as defined in the Investment Company Act of 1940
(the "Act"), adopted a distribution and service plan pursuant to Rule
12b-1 of the Act (the "Plan") applicable to the Investor Shares, Class
B Shares, and Class C Shares. The Act regulates the manner in which a
regulated investment company may assume costs of distributing and
promoting the sales of its shares and servicing of its shareholder
accounts.
The Plan provides that the Fund may incur certain costs, which may not
exceed 0.25% per annum of the Investor Class Shares' average daily net
assets or 1.00% per annum of the Class B Shares or Class C Shares 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 Investor Class Shares, Class B Shares
and Class C Shares in the Fund or support servicing of those classes'
shareholder accounts. The Fund incurred $2,157, $180 and $712, net of
waived fees, in distribution and service fees under the Plan with
respect to Class B Shares, Class C Shares and Investor Class Shares,
respectively, for the fiscal year ended May 31, 2000.
NOTE 4 - PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments, other than short-term investments,
aggregated $3,323,538 and $753,580, respectively, for the fiscal year
ended May 31, 2000.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees and Shareholders of New Providence Investment Trust and
Shareholders of Wisdom Fund:
We have audited the accompanying statement of assets and liabilities of Wisdom
Fund, including the portfolio of investments, as of May 31, 2000, and the
related statement of operations for the period then ended, the statements of
changes in net assets for the periods ended May 31, 2000 and 1999, and financial
highlights for each of the periods 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 audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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, 2000, by correspondence with the Fund's
custodian and brokers. 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
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Wisdom
Fund as of May 31, 2000, the results of its operations for the year ended, and
the changes in its net assets and the financial highlights for the respective
stated periods, in conformity with accounting principles generally accepted in
the United States of America.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Princeton, New Jersey
June 23, 2000
<PAGE>
________________________________________________________________________________
WISDOM FUND
________________________________________________________________________________
a series of the New Providence Investment Trust
INVESTOR CLASS SHARES
ANNUAL REPORT 2000
FOR THE YEAR ENDED MAY 31
INVESTMENT ADVISOR
Atlanta Investment Counsel, LLC
2771 Carmon-on-Wesley, NW
Suite 100
Atlanta, Georgia 30327
WISDOM FUND
105 North Washington Street
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069
1-800-525-3863
This report and the financial statements contained herein are
submitted for the general information of the shareholders of the
Fund. This report is not authorized for distribution to prospective
investors in the Fund unless preceded or accompanied by an effective
prospectus. Mutual fund shares are not deposits or obligations of,
or guaranteed by, any depository institution. Shares are not insured
by the FDIC, Federal Reserve Board or any other agency, and are
subject to investment risks, including possible loss of principal
amount invested. Neither the fund nor the fund's distributor is a bank.
For more information about the Wisdom Fund, including charges
and expenses, call the fund for a free prospectus. You should
read the prospectus carefully before you invest or send money.
<PAGE>
ATLANTA INVSETMENT COUNSEL, L.L.C.
Manager of the Wisdom Fund
June 1, 2000
Dear Shareholders,
"Success in investing doesn't correlate with IQ once you're above the level of
25. Once you have ordinary intelligence, what you need is the temperament to
control the urges that get other people into trouble in investing." Warren
Buffet, 1996 Shareholder Meeting. We couldn't agree more!
The past ten weeks have seen a shift in market sentiment that has so far been
very favorable to our portfolio and to value investing. We have been asked how
and why such shifts occur. We have tried to come up with several reasons that
sound logical. Many times we don't understand what's really happened until much
later. Here are some possible signs of, and reasons for, the shift:
The Dow was down dramatically by February 25, while the NASDAQ was up
substantially, underscoring the popular, but meaningless, Old Economy / New
Economy split.
The anxiety suffered by New Economy adherents as Microsoft was unable to settle
with the Justice Department.
The retirement of Tiger Fund's Julian Robertson and the replacement of Oakmark's
Robert Sanborn--sure signs of intense frustration from serious value investors.
[Letterhead]
<PAGE>
In Contrast to years past, Berkshire Hathaway's 1999 Annual Report received
barely a mention in the financial press. We read it with great interest, of
course!
When you buy a stock or mutual fund, it's important not to lose sight of the
fact that you're really buying a fractional interest in a business, and not a
lottery ticket.
For about two years now, we have been in a market where valuation hasn't
mattered one darn bit. In fact, the more that investors focused on valuation,
the worse returns have been. While the laws of economic gravity were temporarily
suspended, we do not believe they have been fundamentally altered.
Looking back over the last year, the Wisdom Fund under performed the general
market and outperformed Berkshire Hathaway Holdings, the portfolio that we
attempt to emulate. Berkshire's stock price fell in 1999 for several reasons:
1. Since last summer, Alan Greenspan has raised interest rates because he is
worried that the economy is expanding so fast that it will cause a resurgence of
inflation. In theory, the prospect of higher interest rates should hurt growth
stocks the most. But in today's market, exactly the opposite has occurred.
Fearing that higher rates would hit Old Economy stocks the hardest, investors
have been dumping those stocks and piling into tech stocks instead,
<PAGE>
2. Three of the Wisdom Fund's and Berkshire Hathaway's largest
holdings--Coca-cola, Gillette, and Freddie Mac--fell in calendar year 1999 (13%,
14% and 27%, respectively). These stocks have been great investments over a
long-term horizon,
3. The Wisdom Fund holds about 26% of its assets in low-return short-term fixed
income securities as does Berkshire Hathaway. Due to high valuations in the
markets, Berkshire Hathaway has not seen fit to put its cash to work, and
4. Since the Wisdom Fund and Berkshire Hathaway have very little exposure to
technology stocks, we feel our holdings have been dragged down by the general
devaluation of non-tech stocks.
At Berkshire Hathaway's annual meeting this spring, Warren Buffet scornfully
compared the technology sector's breathtaking runup to a "chain letter," in
which early participants reap rich rewards at the expense of those who follow.
Of course, we do not like to under perform the S&P 500 stock index. We can say
with certainty that there will always be a category or class of investments that
will post results greater than ours. For our part, we will continue to implement
our investment strategy of emulating the investment portfolio of Berkshire
Hathaway which has produced a thirty-year track record second to none.
<PAGE>
Warren Buffet said in 1996, "Your goal as an investor should be to purchase, at
a rational price, a part interest in an easily understandable business with
whose earnings are virtually certain to be materially higher five, ten, and
twenty years from now. Over time, you will find only a few companies that meet
these standards---so when you see one that qualifies, you should buy a
meaningful amount of stock. You must also resist the temptation to stray from
your guidelines: If you aren't willing to own a stock for ten years, don't even
thing about owning it for ten minutes. Put together a portfolio of companies
whose aggregate earnings march upward over the years, and so also will the
portfolio's market value."
And that is the "wisdom" of the Wisdom Fund!
/s/ C. Douglas Davenport
C. Douglas Davenport, J.D.
President, Atlanta Investment Counsel, LLC
<PAGE>
WISDOM FUND
INVESTOR CLASS SHARES
Performance Update - $10,000 Investment
For the period from February 16, 1999 (Commencement of Operations)
to May 31, 2000
[LINE GRAPH HERE]:
--------------------------------------------------------------------------------
Wisdom Fund S&P 500
Investor Class Shares Total Return Index
--------------------------------------------------------------------------------
02/16/99 $9,425 $10,000
02/28/99 9,425 9,976
03/31/99 9,199 10,376
04/30/99 9,519 10,777
05/31/99 9,370 10,523
06/30/99 9,266 11,107
07/31/99 9,304 10,760
08/31/99 9,191 10,707
09/30/99 8,520 10,297
10/31/99 9,494 11,073
11/30/99 9,551 11,297
12/31/99 9,402 11,963
01/31/00 9,145 11,362
02/29/00 8,311 11,147
03/31/00 9,202 12,237
04/30/00 9,174 11,869
05/31/00 9,498 11,625
This graph depicts the performance of the Wisdom Fund - Investor Class Shares
versus the S&P 500 Total Return Index. It is important to note that the Wisdom
Fund is a professionally managed mutual fund while the index is not available
for investment and is unmanaged. The comparison is shown for illustrative
purposes only.
Average Annual Total Returns
------------------------------ ------------- -----------------------
Since Commencement
One Year Of Operations
------------------------------ ------------- -----------------------
No Sales Load 1.36 % 0.60 %
------------------------------ ------------- -----------------------
5.75% Maximum Sales Load (4.47)% (3.92)%
------------------------------ ------------- -----------------------
>> The graph assumes an initial $10,000 investment ($9,425 after maximum sales
load of 5.75%) at February 16, 1999 (commencement of operations). All
dividends and distributions are reinvested.
>> At May 31, 2000, the value of the Wisdom Fund - Investor Class Shares would
have decreased to $9,498 - a cumulative total investment return of (5.02)%
since February 16, 1999. Without the deduction of the 5.75% maximum sales
load, the value of the Wisdom Fund - Investor Class Shares would have grown
to $10,077 - a cumulative total investment return of 0.77 % since February
16, 1999. The sales load may be reduced or eliminated for larger purchases.
>> At May 31, 2000, the value of a similar investment in the S&P 500 Total
Return Index would have grown to $11,625 - a cumulative total investment
return of 16.25% since February 16, 1999.
>> 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 total returns are historical in nature
and measure net investment income and capital gain or loss from portfolio
investments assuming reinvestments of dividends.
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
WISDOM FUND
PORTFOLIO OF INVESTMENTS
May 31, 2000
------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - 62.39%
Apparel Manufacturing - 1.33%
(a)Jones Apparel Group, Inc. .................................................. 1,750 $ 46,922
Liz Claiborne, Inc. ........................................................ 400 15,725
----------
62,647
----------
Beverages - 10.15%
The Coca-Cola Company ...................................................... 8,950 477,706
----------
Chemicals - 0.74%
Great Lakes Chemical Corporation ........................................... 1,250 34,844
----------
Cosmetics and Personal Care - 3.05%
The Gillette Company ....................................................... 4,300 143,512
----------
Financial Services - 16.09%
American Express Company ................................................... 6,750 362,813
AXA Financial, Inc. ........................................................ 1,825 71,061
Freddie Mac ................................................................ 2,675 119,037
Marsh & McLennan Companies, Inc. ........................................... 600 66,000
MGIC Investment Corporation ................................................ 1,150 56,997
The Dun & Bradstreet Corporation ........................................... 2,650 81,487
----------
757,395
----------
Financial - Banks, Commercial - 2.83%
Wells Fargo & Company ...................................................... 2,950 133,488
----------
Insurance - Life and Health - 2.56%
CIGNA Corporation .......................................................... 700 62,169
Torchmark Corporation ...................................................... 2,150 58,453
----------
120,622
----------
Insurance - Multiline - 17.37%
AFLAC INCORPORATED ......................................................... 1,400 72,363
Allmerica Financial Corporation ............................................ 1,150 66,341
Ambac Financial Group, Inc. ................................................ 1,200 60,600
American International Group, Inc. ......................................... 537 60,446
American National Insurance Company ........................................ 950 51,300
Cincinnati Financial Corporation ........................................... 1,950 78,274
(a)CNA Financial Corporation .................................................. 1,650 58,884
Financial Security Assurance Holdings Ltd. ................................. 1,325 99,458
Loews Corporation .......................................................... 1,000 65,875
PartnerRe Ltd. ............................................................. 2,025 75,178
The PMI Group, Inc. ........................................................ 1,250 63,359
The St. Paul Companies, Inc. ............................................... 1,750 65,625
----------
817,703
----------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
WISDOM FUND
PORTFOLIO OF INVESTMENTS
May 31, 2000
------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Insurance - Property & Casualty - 2.78%
Erie Indemnity Company ..................................................... 1,950 $ 53,625
Everest Re Group, Ltd. ..................................................... 2,275 77,350
----------
130,975
----------
Publishing - Newspapers - 0.87%
The Washington Post Company ................................................ 82 41,041
----------
Real Estate Investment Trust - 1.59%
First Industrial Realty Trust, Inc. ........................................ 875 25,430
Tanger Factory Outlet Centers, Inc. ........................................ 1,150 26,594
Town & Country Trust ....................................................... 1,400 22,925
----------
74,949
----------
Transportation - Miscellaneous - 0.90%
GATX Corporation ........................................................... 1,250 42,187
----------
Utilities - Electric - 2.13%
FPL Group, Inc. ............................................................ 875 43,313
Northern States Power Company .............................................. 1,500 33,187
The Montana Power Company .................................................. 625 23,672
----------
100,172
----------
Total Common Stocks (Cost $2,817,159) ............................................................ 2,937,241
----------
------------------------------------------------------------------------------------------------------------------------------------
Interest Maturity
Principal Rate Date
------------------------------------------------------------------------------------------------------------------------------------
U. S. GOVERNMENT OBLIGATION - 16.03%
United States Treasury Bill ..................... $760,000 0% 07/20/00 754,775
(Cost $754,479) ----------
------------------------------------------------------------------------------------------------------------------------------------
Shares
------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT COMPANIES - 8.97%
Evergreen Money Market Treasury Institutional Money
Market Fund Institutional Service Shares ................................... 211,257 211,257
Evergreen Money Market Treasury Institutional Treasury Money
Market Fund Institutional Service Shares ................................... 211,256 211,256
----------
Total Investment Companies (Cost $422,513) ....................................................... 422,513
----------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
WISDOM FUND
PORTFOLIO OF INVESTMENTS
May 31, 2000
------------------------------------------------------------------------------------------------------------------------------------
Value
(note 1)
------------------------------------------------------------------------------------------------------------------------------------
Total Value of Investments (Cost $3,994,151 (b)) ....................................... 87.39% $4,114,529
Other Assets Less Liabilities .......................................................... 12.61% 593,764
------ ----------
Net Assets ...................................................................... 100.00% $4,708,293
====== ==========
(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 .......................................................................... $ 267,843
Unrealized depreciation .......................................................................... (147,465)
----------
Net unrealized appreciation ...................................................... $ 120,378
==========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
WISDOM FUND
STATEMENT OF ASSETS AND LIABILITIES
May 31, 2000
ASSETS
Investments, at value (cost $3,994,151) ............................................................. $4,114,529
Cash ................................................................................................ 563,217
Income receivable ................................................................................... 6,327
Receivable for fund shares sold ..................................................................... 29,791
Due from advisor (note 2) ........................................................................... 11,118
----------
Total assets ................................................................................... 4,724,982
----------
LIABILITIES
Accrued expenses .................................................................................... 16,689
----------
NET ASSETS ................................................................................................. $4,708,293
==========
NET ASSETS CONSIST OF
Paid-in capital ..................................................................................... $4,647,581
Undistributed net investment income ................................................................. 219
Accumulated net realized loss on investments ........................................................ (59,885)
Net unrealized appreciation on investments .......................................................... 120,378
----------
$4,708,293
==========
INSTITUTIONAL CLASS
Net asset value, redemption and maximum offering price per share
($2,710,312 / 273,814 shares : unlimited shares of $0.01 par value
beneficial interest authorized) .................................................................. $ 9.90
==========
INVESTOR CLASS
Net asset value, redemption and offering price per share
($656,212 / 66,077 shares : unlimited shares of $0.01 par value
beneficial interest authorized) .................................................................. $ 9.93
==========
Maximum offering price per share (100 / 95.50% of $9.93) ............................................ $10.40
==========
CLASS B
Net asset value, redemption and maximum offering price per share
($1,168,374 / 117,131 shares : unlimited shares of $0.01 par value
beneficial interest authorized) .................................................................. $ 9.97
==========
CLASS C
Net asset value, redemption and maximum offering price per share
($173,395 / 17,369 shares : unlimited shares of $0.01 par value
beneficial interest authorized) .................................................................. $ 9.98
==========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
WISDOM FUND
STATEMENT OF OPERATIONS
Year ended May 31, 2000
INVESTMENT INCOME
Income
Interest ....................................................................................... $ 21,539
Dividends ...................................................................................... 35,889
---------
Total income ............................................................................. 57,428
---------
Expenses
Investment advisory fees (note 2) .............................................................. 12,914
Fund administration fees (note 2) .............................................................. 3,499
Distribution and service fees - Class B (note 3) ............................................... 2,157
Distribution and service fees - Class C (note 3) ............................................... 180
Distribution and service fees - Investor Class (note 3) ........................................ 712
Custody fees ................................................................................... 3,216
Registration and filing administration fees (note 2) ........................................... 2,190
Fund accounting fees (note 2) .................................................................. 45,000
Audit fees ..................................................................................... 10,530
Legal fees ..................................................................................... 10,027
Securities pricing fees ........................................................................ 1,779
Shareholder recordkeeping fees ................................................................. 8,950
Other accounting fees (note 2) ................................................................. 1,399
Shareholder servicing expenses ................................................................. 2,634
Registration and filing expenses ............................................................... 8,143
Printing expenses .............................................................................. 7,308
Trustee fees and meeting expenses .............................................................. 3,180
Other operating expenses ....................................................................... 3,145
---------
Total expenses ........................................................................... 126,963
---------
Less:
Expense reimbursements (note 2) ..................................................... (110,174)
Investment advisory fees waived (note 2) ............................................ (12,914)
Fund administration fees waived (note 2) ............................................ (132)
Other accounting fees waived (note 2) ............................................... (694)
---------
Net expenses ............................................................................. 3,049
---------
Net investment income ............................................................... 54,379
---------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized loss from investment transactions ...................................................... (58,004)
Increase in unrealized appreciation on investments .................................................. 123,160
---------
Net realized and unrealized gain on investments ................................................ 65,156
---------
Net increase in net assets resulting from operations ..................................... $ 119,535
=========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
WISDOM FUND
STATEMENTS OF CHANGES IN NET ASSETS
------------------------------------------------------------------------------------------------------------------------------------
Period ended Period ended
May 31, May 31,
2000 1999 (a)
------------------------------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS
Operations
Net investment income ..................................................... $ 54,379 $ 1,775
Net realized loss from investment transactions ............................ (58,004) (1,881)
Increase (decrease) in unrealized appreciation on investments ............. 123,160 (2,782)
---------- ----------
Net increase (decrease) in net assets resulting from operations ....... 119,535 (2,888)
---------- ----------
Distributions to shareholders from
Net investment income - Institutional Class ............................... (45,278) (1,775)
Net investment income - Investor Class .................................... (5,847) 0 (b)
Net investment income - Class B ........................................... (2,809) 0
Net investment income - Class C ........................................... (226) 0
---------- ----------
Decrease in net assets resulting from distributions ................... (54,160) (1,775)
---------- ----------
Capital share transactions
Increase in net assets resulting from capital share transactions (d) ...... 4,144,606 502,975
---------- ----------
Total increase in net assets .............................. 4,209,981 498,312
NET ASSETS
Beginning of period ............................................................. 498,312 0
---------- ----------
End of period ................................................................... $4,708,293 $ 498,312
========== ==========
(d) A summary of capital share activity follows:
--------------------------------------------------------------------------------
Period ended Period ended
May 31, 2000 May 31, 1999 (a)
Shares Value Shares Value
--------------------------------------------------------------------------------
--------------------------------------------------
INSTITUTIONAL CLASS
--------------------------------------------------
Shares sold ...................................... 218,824 $2,185,791 50,110 $ 501,100
Shares issued for reinvestment of distributions .. 4,701 45,278 179 1,775
Shares redeemed .................................. 0 0 0 0
---------- ---------- ---------- ----------
Net increase ............................ 223,525 $2,231,069 50,289 $ 502,875
========== ========== ========== ==========
--------------------------------------------------
INVESTOR CLASS
--------------------------------------------------
Shares sold ...................................... 87,208 $ 839,421 10 $ 100
Shares issued for reinvestment of distributions .. 598 5,846 0 0
Shares redeemed .................................. (21,739) (200,724) 0 0
---------- ---------- ---------- ----------
Net increase ............................ 66,067 $ 644,543 10 $ 100
========== ========== ========== ==========
--------------------------------------------------
CLASS B (c)
--------------------------------------------------
Shares sold ...................................... 117,050 $1,100,100 0 $ 0
Shares issued for reinvestment of distributions .. 81 805 0 0
Shares redeemed .................................. 0 0 0 0
---------- ---------- ---------- ----------
Net increase ............................ 117,131 $1,100,905 0 $ 0
========== ========== ========== ==========
--------------------------------------------------
CLASS C (c)
--------------------------------------------------
Shares sold ...................................... 17,347 $ 167,863 0 $ 0
Shares issued for reinvestment of distributions .. 22 226 0 0
Shares redeemed .................................. 0 0 0 0
---------- ---------- ---------- ----------
Net increase ............................ 17,369 $ 168,089 0 $ 0
========== ========== ========== ==========
--------------------------------------------------
FUND SUMMARY
--------------------------------------------------
Shares sold ...................................... 440,429 $4,293,175 50,120 $ 501,200
Shares issued for reinvestment of distributions .. 5,402 52,155 179 1,775
Shares redeemed .................................. (21,739) (200,724) 0 0
---------- ---------- ---------- ----------
Net increase ............................ 424,092 $4,144,606 50,299 $ 502,975
========== ========== ========== ==========
(a) For the period from February 16, 1999 (commencement of operations) to May 31, 1999.
(b) A distribution from Investor Class income was paid in the amount of $0.22.
(c) For the period from November 16, 1999 (commencement of operations) to May 31, 2000.
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
WISDOM FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
-------------------------------- -----------------------------------
Institutional Class Investor Class
-------------------------------- -----------------------------------
Year ended Period ended Year ended Period ended
May 31, May 31, May 31, May 31,
2000 1999 (a) 2000 1999 (a)
-------------------------------- -----------------------------------
Net asset value, beginning of period ....................... $ 9.91 $ 10.00 $ 9.92 $10.00
Income from investment operations
Net investment income ........................... 0.18 0.04 0.12 0.02
Net realized and unrealized (loss) gain
on investments .............................. (0.01) (0.09) 0.01 (0.08)
---------- ---------- ---------- ----------
Total from investment operations ............ 0.17 (0.05) 0.13 (0.06)
---------- ---------- ---------- ----------
Distributions to shareholders from
Net investment income ........................... (0.18) (0.04) (0.12) (0.02)
---------- ---------- ---------- ----------
Net asset value, end of period ............................. $ 9.90 $ 9.91 $ 9.93 $ 9.92
========== ========== ========== ==========
Total return (b) ........................................... 1.64 % (0.45)% 1.36 % (0.58)%
========== ========== ========== ==========
Ratios/supplemental data
Net assets, end of period ........................... $2,710,312 $ 498,213 $ 656,212 $ 99
========== ========== ========== ==========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees ... 5.05 % 23.94 % (c) 4.29 % 15.49 %(c)
After expense reimbursements and waived fees .... 0.00 % 0.00 % (c) 0.25 % 0.00 %(c)
Ratio of net investment (loss) income to average net assets
Before expense reimbursements and waived fees ... (2.87)% (22.69)% (c) (1.96)% (14.68)%(c)
After expense reimbursements and waived fees .... 2.18 % 1.26 % (c) 2.08 % 0.81 %(c)
Portfolio turnover rate ............................. 41.69 % 7.04 % 41.69 % 7.04 %
(a) For the period from February 16, 1999 (commencement of operations) to May 31, 1999.
(b) Total return does not reflect payment of a sales charge.
(c) Annualized.
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
WISDOM FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
----------------- -----------------
Class B Class C
----------------- -----------------
Period ended Period ended
May 31, May 31,
2000 (a) 2000 (a)
-------------------- ------------------
Net asset value, beginning of period ............................................... $10.20 $10.20
Income from investment operations
Net investment income ................................................... 0.04 0.03
Net realized and unrealized (loss) gain on investments .................. (0.23) (0.22)
---------- ----------
Total from investment operations .................................... (0.19) (0.19)
---------- ----------
Distributions to shareholders from
Net investment income ................................................... (0.04) (0.03)
---------- ----------
Net asset value, end of period ..................................................... $ 9.97 $ 9.98
========== ==========
Total return (b) ................................................................... (1.85)% (1.86)%
========== ==========
Ratios/supplemental data
Net assets, end of period ................................................... $1,168,374 $ 173,395
========== ==========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees ........................... 4.09 %(c) 4.07 %(c)
After expense reimbursements and waived fees ............................ 1.00 %(c) 1.00 %(c)
Ratio of net investment (loss) income to average net assets
Before expense reimbursements and waived fees ........................... (1.78)%(c) (1.77)%(c)
After expense reimbursements and waived fees ............................ 1.31 %(c) 1.30 %(c)
Portfolio turnover rate ..................................................... 41.69 % 41.69 %
(a) For the period from November 16, 1999 (commencement of operations) to May 31, 2000.
(b) Total return does not reflect payment of a sales charge.
(c) Annualized.
See accompanying notes to financial statements
</TABLE>
<PAGE>
WISDOM FUND
NOTES TO FINANCIAL STATEMENTS
May 31, 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
The Wisdom Fund (the "Fund"), an open-ended investment company, is a
diversified series of shares of beneficial interest of the New
Providence Investment Trust (the "Trust"). The Trust was organized on
July 9, 1997 as a Massachusetts Business Trust and is registered under
the Investment Company Act of 1940, as amended. The Fund began
operations on February 16, 1999. The investment objective of the fund
is to seek maximum total return consisting of any combination of
capital appreciation, realized and unrealized, and income under the
constantly varying market conditions. The Board of Trustees of the
Trust approved on October 7, 1999 a plan to authorize two new classes
of shares designated as Class B Shares and Class C Shares. On November
16, 1999, the Class B Shares and Class C Shares became effective. The
Fund has an unlimited number of authorized shares, which are divided
into four classes - Institutional Class Shares, Investor Class Shares,
Class B shares and Class C shares.
Each class of shares has equal rights as to assets of the Fund, and the
classes are identical except for differences in their sales charge
structures and ongoing distribution and service fees. Income, expenses
(other than distribution and service fees, which are not attributable
to the Institutional Class Shares), and realized and unrealized gains
or losses on investments are allocated to each class of shares based
upon its relative net assets. All classes have equal voting privileges,
except where otherwise required by law or when the Board of Trustees
determines that the matter to be voted on affects only the interests of
the shareholders of a particular class. 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 4:00 p.m., New York
time. 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.
Net investment income (loss) and net realized gains (losses)
may differ for financial statement and income tax purposes
primarily because of losses incurred subsequent to October 31,
which are deferred for income tax purposes. The character of
distributions made during the year from net investment income
or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to
the timing of dividend distributions, the fiscal year in which
amounts are distributed may differ from the year that the
income or realized gains were recorded by the Fund.
(Continued)
<PAGE>
WISDOM FUND
NOTES TO FINANCIAL STATEMENTS
May 31, 2000
C. Investment Transactions - Investment transactions are recorded
on 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. Distributions to
shareholders are recorded on the ex-dividend date. 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 estimates.
NOTE 2 - INVESTMENT ADVISORY FEE AND OTHER RELATED PARTY TRANSACTIONS
Pursuant to an investment advisory agreement, Atlanta Investment
Council, LLC (the "Advisor"), provides the Fund with a continuous
program of supervision of the Fund's assets, including the composition
of its portfolio, and furnishes advice and recommendations with respect
to investments, investment policies, and the purchase and sale of
securities. As compensation for its services, the Advisor receives a
fee at the annual rate of 0.50% of the first $500 million of the Fund's
average daily net assets and 0.40% of all assets over $500 million.
The Advisor currently intends to voluntarily waive all or a portion of
its fee and to reimburse expenses of the Fund to limit total Fund
operating expenses to a maximum of 1.15% of the average daily net
assets of the Fund's Institutional Class, a maximum of 1.40% of the
average daily net assets of the Fund's Investor Class, and a maximum of
2.15% of the average daily net assets of the Fund's Class B and Class C
Shares. 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 $12,914 ($0.05 per share) and
reimbursed $110,174 of the operating expenses incurred by the Fund for
the year ended May 31, 2000.
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, 0.100% of the next $50 million, and 0.075% of average daily
net assets over $100 million as well as a monthly fee of $2,250 for
accounting and record-keeping services for the initial class of shares
and $750 per month for each additional class of shares. The contract
with the Administrator provides that the aggregate fees for the
aforementioned administration, accounting, and recordkeeping services
shall not be less than $41,000 per year. The Administrator also charges
the Fund for certain expenses involved with the daily valuation of
portfolio securities. The Administrator voluntarily waived a portion of
its fees amounting to $826 for the year ended May 31, 2000.
(Continued)
<PAGE>
WISDOM FUND
NOTES TO FINANCIAL STATEMENTS
May 31, 2000
North Carolina Shareholder Services, LLC (the "Transfer Agent") serves
as the Fund's transfer, dividend paying, and shareholder servicing
agent. The Transfer Agent maintains the records of each Shareholder's
account, answers shareholder inquiries concerning accounts, processes
purchases and redemptions of the Fund's shares, acts as dividend and
distribution disbursing agent, and performs other shareholder servicing
functions.
Capital Investment Group, Inc. (the "Distributor") serves as the Fund's
principal underwriter and distributor. Prior to July 14, 1999,
Donaldson & Co., Inc., an affiliate of the Advisor, served as the
principal underwriter and distributor. The Distributor receives any
sales charges imposed on purchases of shares and re-allocates a portion
of such charges to dealers through whom the sale was made, if any. For
the year ended March 31, 2000, the Distributor retained sales charges
in the amount of $6,011.
Certain Trustees and officers of the Trust are also officers or
directors of the Advisor, the Distributor, or the Administrator.
NOTE 3 - DISTRIBUTION AND SERVICE FEES
The Board of Trustees, including the Trustees who are not "interested
persons" of the Trust as defined in the Investment Company Act of 1940
(the "Act"), adopted a distribution and service plan pursuant to Rule
12b-1 of the Act (the "Plan") applicable to the Investor Shares, Class
B Shares, and Class C Shares. The Act regulates the manner in which a
regulated investment company may assume costs of distributing and
promoting the sales of its shares and servicing of its shareholder
accounts.
The Plan provides that the Fund may incur certain costs, which may not
exceed 0.25% per annum of the Investor Class Shares' average daily net
assets or 1.00% per annum of the Class B Shares or Class C Shares 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 Investor Class Shares, Class B Shares
and Class C Shares in the Fund or support servicing of those classes'
shareholder accounts. The Fund incurred $2,157, $180 and $712, net of
waived fees, in distribution and service fees under the Plan with
respect to Class B Shares, Class C Shares and Investor Class Shares,
respectively, for the fiscal year ended May 31, 2000.
NOTE 4 - PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments, other than short-term investments,
aggregated $3,323,538 and $753,580, respectively, for the fiscal year
ended May 31, 2000.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees and Shareholders of New Providence Investment Trust and
Shareholders of Wisdom Fund:
We have audited the accompanying statement of assets and liabilities of Wisdom
Fund, including the portfolio of investments, as of May 31, 2000, and the
related statement of operations for the period then ended, the statements of
changes in net assets for the periods ended May 31, 2000 and 1999, and financial
highlights for each of the periods 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 audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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, 2000, by correspondence with the Fund's
custodian and brokers. 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
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Wisdom
Fund as of May 31, 2000, the results of its operations for the year ended, and
the changes in its net assets and the financial highlights for the respective
stated periods, in conformity with accounting principles generally accepted in
the United States of America.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Princeton, New Jersey
June 23, 2000
<PAGE>
________________________________________________________________________________
WISDOM FUND
________________________________________________________________________________
a series of the New Providence Investment Trust
CLASS B SHARES
ANNUAL REPORT 2000
FOR THE YEAR ENDED MAY 31
INVESTMENT ADVISOR
Atlanta Investment Counsel, LLC
2771 Carmon-on-Wesley, NW
Suite 100
Atlanta, Georgia 30327
WISDOM FUND
105 North Washington Street
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069
1-800-525-3863
This report and the financial statements contained herein are
submitted for the general information of the shareholders of the
Fund. This report is not authorized for distribution to prospective
investors in the Fund unless preceded or accompanied by an effective
prospectus. Mutual fund shares are not deposits or obligations of,
or guaranteed by, any depository institution. Shares are not insured
by the FDIC, Federal Reserve Board or any other agency, and are
subject to investment risks, including possible loss of principal
amount invested. Neither the fund nor the fund's distributor is a bank.
For more information about the Wisdom Fund, including charges
and expenses, call the fund for a free prospectus. You should
read the prospectus carefully before you invest or send money.
<PAGE>
ATLANTA INVSETMENT COUNSEL, L.L.C.
Manager of the Wisdom Fund
June 1, 2000
Dear Shareholders,
"Success in investing doesn't correlate with IQ once you're above the level of
25. Once you have ordinary intelligence, what you need is the temperament to
control the urges that get other people into trouble in investing." Warren
Buffet, 1996 Shareholder Meeting. We couldn't agree more!
The past ten weeks have seen a shift in market sentiment that has so far been
very favorable to our portfolio and to value investing. We have been asked how
and why such shifts occur. We have tried to come up with several reasons that
sound logical. Many times we don't understand what's really happened until much
later. Here are some possible signs of, and reasons for, the shift:
The Dow was down dramatically by February 25, while the NASDAQ was up
substantially, underscoring the popular, but meaningless, Old Economy / New
Economy split.
The anxiety suffered by New Economy adherents as Microsoft was unable to settle
with the Justice Department.
The retirement of Tiger Fund's Julian Robertson and the replacement of Oakmark's
Robert Sanborn--sure signs of intense frustration from serious value investors.
[Letterhead]
<PAGE>
In Contrast to years past, Berkshire Hathaway's 1999 Annual Report received
barely a mention in the financial press. We read it with great interest, of
course!
When you buy a stock or mutual fund, it's important not to lose sight of the
fact that you're really buying a fractional interest in a business, and not a
lottery ticket.
For about two years now, we have been in a market where valuation hasn't
mattered one darn bit. In fact, the more that investors focused on valuation,
the worse returns have been. While the laws of economic gravity were temporarily
suspended, we do not believe they have been fundamentally altered.
Looking back over the last year, the Wisdom Fund under performed the general
market and outperformed Berkshire Hathaway Holdings, the portfolio that we
attempt to emulate. Berkshire's stock price fell in 1999 for several reasons:
1. Since last summer, Alan Greenspan has raised interest rates because he is
worried that the economy is expanding so fast that it will cause a resurgence of
inflation. In theory, the prospect of higher interest rates should hurt growth
stocks the most. But in today's market, exactly the opposite has occurred.
Fearing that higher rates would hit Old Economy stocks the hardest, investors
have been dumping those stocks and piling into tech stocks instead,
<PAGE>
2. Three of the Wisdom Fund's and Berkshire Hathaway's largest
holdings--Coca-cola, Gillette, and Freddie Mac--fell in calendar year 1999 (13%,
14% and 27%, respectively). These stocks have been great investments over a
long-term horizon,
3. The Wisdom Fund holds about 26% of its assets in low-return short-term fixed
income securities as does Berkshire Hathaway. Due to high valuations in the
markets, Berkshire Hathaway has not seen fit to put its cash to work, and
4. Since the Wisdom Fund and Berkshire Hathaway have very little exposure to
technology stocks, we feel our holdings have been dragged down by the general
devaluation of non-tech stocks.
At Berkshire Hathaway's annual meeting this spring, Warren Buffet scornfully
compared the technology sector's breathtaking runup to a "chain letter," in
which early participants reap rich rewards at the expense of those who follow.
Of course, we do not like to under perform the S&P 500 stock index. We can say
with certainty that there will always be a category or class of investments that
will post results greater than ours. For our part, we will continue to implement
our investment strategy of emulating the investment portfolio of Berkshire
Hathaway which has produced a thirty-year track record second to none.
<PAGE>
Warren Buffet said in 1996, "Your goal as an investor should be to purchase, at
a rational price, a part interest in an easily understandable business with
whose earnings are virtually certain to be materially higher five, ten, and
twenty years from now. Over time, you will find only a few companies that meet
these standards---so when you see one that qualifies, you should buy a
meaningful amount of stock. You must also resist the temptation to stray from
your guidelines: If you aren't willing to own a stock for ten years, don't even
thing about owning it for ten minutes. Put together a portfolio of companies
whose aggregate earnings march upward over the years, and so also will the
portfolio's market value."
And that is the "wisdom" of the Wisdom Fund!
/s/ C. Douglas Davenport
C. Douglas Davenport, J.D.
President, Atlanta Investment Counsel, LLC
<PAGE>
WISDOM FUND
CLASS B SHARES
Performance Update - $10,000 Investment
For the period from November 16, 1999 (Commencement of Operations)
to May 31, 2000
[LINE GRAPH HERE]:
--------------------------------------------------------------------------------
Wisdom Fund S&P 500
Class B Shares Total Return Index
--------------------------------------------------------------------------------
11/16/99 $10,000 $10,000
11/30/99 9,902 9,785
12/31/99 9,742 10,362
01/31/00 9,467 9,841
02/29/00 8,613 9,655
03/31/00 9,526 10,599
04/30/00 9,487 10,281
05/31/00 9,422 10,070
This graph depicts the performance of the Wisdom Fund - Class B Shares versus
the S&P 500 Total Return Index. It is important to note that the Wisdom Fund is
a professionally managed mutual fund while the index is not available for
investment and is unmanaged. The comparison is shown for illustrative purposes
only.
Cumulative Total Return
------------------------------ -----------------------
Since Commencement
Of Operations
------------------------------ -----------------------
No Sales Charges (1.85)%
------------------------------ -----------------------
4% Maximum Sales Charge (5.78)%
------------------------------ -----------------------
>> The graph assumes an initial $10,000 investment at November 16, 1999
(commencement of operations) and reflects the deduction of the maximum
contingent deferred sales charge ("CDSC"), taken on the last day of the
most recently completed fiscal year. The CDSC for the Class B Shares
declines from 4% to 0% over seven years; and the Class B Shares are
converted to Investor Class Shares of the Wisdom Fund after eight years,
without the imposition of any sales charges. All dividends and
distributions are reinvested.
>> At May 31, 2000, the value of the Wisdom Fund - Class B Shares would have
decreased to $9,422 - a cumulative total investment return of (5.78)% since
November 16, 1999. Without the deduction of the 4% maximum CDSC, the value
of the Wisdom Fund - Class B Shares would have decreased to $9,815 - a
cumulative total investment return of (1.85)% since November 16, 1999. The
CDSC may be waived or reduced under certain circumstances.
>> At May 31, 2000, a similar investment in the S&P 500 Total Return Index
would have grown to $10,070 - a cumulative total investment return of 0.70%
since November 16, 1999.
>> 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 total returns are historical in nature
and measure net investment income and capital gain or loss from portfolio
investments assuming reinvestments of dividends.
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
WISDOM FUND
PORTFOLIO OF INVESTMENTS
May 31, 2000
------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - 62.39%
Apparel Manufacturing - 1.33%
(a)Jones Apparel Group, Inc. .................................................. 1,750 $ 46,922
Liz Claiborne, Inc. ........................................................ 400 15,725
----------
62,647
----------
Beverages - 10.15%
The Coca-Cola Company ...................................................... 8,950 477,706
----------
Chemicals - 0.74%
Great Lakes Chemical Corporation ........................................... 1,250 34,844
----------
Cosmetics and Personal Care - 3.05%
The Gillette Company ....................................................... 4,300 143,512
----------
Financial Services - 16.09%
American Express Company ................................................... 6,750 362,813
AXA Financial, Inc. ........................................................ 1,825 71,061
Freddie Mac ................................................................ 2,675 119,037
Marsh & McLennan Companies, Inc. ........................................... 600 66,000
MGIC Investment Corporation ................................................ 1,150 56,997
The Dun & Bradstreet Corporation ........................................... 2,650 81,487
----------
757,395
----------
Financial - Banks, Commercial - 2.83%
Wells Fargo & Company ...................................................... 2,950 133,488
----------
Insurance - Life and Health - 2.56%
CIGNA Corporation .......................................................... 700 62,169
Torchmark Corporation ...................................................... 2,150 58,453
----------
120,622
----------
Insurance - Multiline - 17.37%
AFLAC INCORPORATED ......................................................... 1,400 72,363
Allmerica Financial Corporation ............................................ 1,150 66,341
Ambac Financial Group, Inc. ................................................ 1,200 60,600
American International Group, Inc. ......................................... 537 60,446
American National Insurance Company ........................................ 950 51,300
Cincinnati Financial Corporation ........................................... 1,950 78,274
(a)CNA Financial Corporation .................................................. 1,650 58,884
Financial Security Assurance Holdings Ltd. ................................. 1,325 99,458
Loews Corporation .......................................................... 1,000 65,875
PartnerRe Ltd. ............................................................. 2,025 75,178
The PMI Group, Inc. ........................................................ 1,250 63,359
The St. Paul Companies, Inc. ............................................... 1,750 65,625
----------
817,703
----------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
WISDOM FUND
PORTFOLIO OF INVESTMENTS
May 31, 2000
------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Insurance - Property & Casualty - 2.78%
Erie Indemnity Company ..................................................... 1,950 $ 53,625
Everest Re Group, Ltd. ..................................................... 2,275 77,350
----------
130,975
----------
Publishing - Newspapers - 0.87%
The Washington Post Company ................................................ 82 41,041
----------
Real Estate Investment Trust - 1.59%
First Industrial Realty Trust, Inc. ........................................ 875 25,430
Tanger Factory Outlet Centers, Inc. ........................................ 1,150 26,594
Town & Country Trust ....................................................... 1,400 22,925
----------
74,949
----------
Transportation - Miscellaneous - 0.90%
GATX Corporation ........................................................... 1,250 42,187
----------
Utilities - Electric - 2.13%
FPL Group, Inc. ............................................................ 875 43,313
Northern States Power Company .............................................. 1,500 33,187
The Montana Power Company .................................................. 625 23,672
----------
100,172
----------
Total Common Stocks (Cost $2,817,159) ............................................................ 2,937,241
----------
------------------------------------------------------------------------------------------------------------------------------------
Interest Maturity
Principal Rate Date
------------------------------------------------------------------------------------------------------------------------------------
U. S. GOVERNMENT OBLIGATION - 16.03%
United States Treasury Bill ..................... $760,000 0% 07/20/00 754,775
(Cost $754,479) ----------
------------------------------------------------------------------------------------------------------------------------------------
Shares
------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT COMPANIES - 8.97%
Evergreen Money Market Treasury Institutional Money
Market Fund Institutional Service Shares ................................... 211,257 211,257
Evergreen Money Market Treasury Institutional Treasury Money
Market Fund Institutional Service Shares ................................... 211,256 211,256
----------
Total Investment Companies (Cost $422,513) ....................................................... 422,513
----------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
WISDOM FUND
PORTFOLIO OF INVESTMENTS
May 31, 2000
------------------------------------------------------------------------------------------------------------------------------------
Value
(note 1)
------------------------------------------------------------------------------------------------------------------------------------
Total Value of Investments (Cost $3,994,151 (b)) ....................................... 87.39% $4,114,529
Other Assets Less Liabilities .......................................................... 12.61% 593,764
------ ----------
Net Assets ...................................................................... 100.00% $4,708,293
====== ==========
(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 .......................................................................... $ 267,843
Unrealized depreciation .......................................................................... (147,465)
----------
Net unrealized appreciation ...................................................... $ 120,378
==========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
WISDOM FUND
STATEMENT OF ASSETS AND LIABILITIES
May 31, 2000
ASSETS
Investments, at value (cost $3,994,151) ............................................................. $4,114,529
Cash ................................................................................................ 563,217
Income receivable ................................................................................... 6,327
Receivable for fund shares sold ..................................................................... 29,791
Due from advisor (note 2) ........................................................................... 11,118
----------
Total assets ................................................................................... 4,724,982
----------
LIABILITIES
Accrued expenses .................................................................................... 16,689
----------
NET ASSETS ................................................................................................. $4,708,293
==========
NET ASSETS CONSIST OF
Paid-in capital ..................................................................................... $4,647,581
Undistributed net investment income ................................................................. 219
Accumulated net realized loss on investments ........................................................ (59,885)
Net unrealized appreciation on investments .......................................................... 120,378
----------
$4,708,293
==========
INSTITUTIONAL CLASS
Net asset value, redemption and maximum offering price per share
($2,710,312 / 273,814 shares : unlimited shares of $0.01 par value
beneficial interest authorized) .................................................................. $ 9.90
==========
INVESTOR CLASS
Net asset value, redemption and offering price per share
($656,212 / 66,077 shares : unlimited shares of $0.01 par value
beneficial interest authorized) .................................................................. $ 9.93
==========
Maximum offering price per share (100 / 95.50% of $9.93) ............................................ $10.40
==========
CLASS B
Net asset value, redemption and maximum offering price per share
($1,168,374 / 117,131 shares : unlimited shares of $0.01 par value
beneficial interest authorized) .................................................................. $ 9.97
==========
CLASS C
Net asset value, redemption and maximum offering price per share
($173,395 / 17,369 shares : unlimited shares of $0.01 par value
beneficial interest authorized) .................................................................. $ 9.98
==========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
WISDOM FUND
STATEMENT OF OPERATIONS
Year ended May 31, 2000
INVESTMENT INCOME
Income
Interest ....................................................................................... $ 21,539
Dividends ...................................................................................... 35,889
---------
Total income ............................................................................. 57,428
---------
Expenses
Investment advisory fees (note 2) .............................................................. 12,914
Fund administration fees (note 2) .............................................................. 3,499
Distribution and service fees - Class B (note 3) ............................................... 2,157
Distribution and service fees - Class C (note 3) ............................................... 180
Distribution and service fees - Investor Class (note 3) ........................................ 712
Custody fees ................................................................................... 3,216
Registration and filing administration fees (note 2) ........................................... 2,190
Fund accounting fees (note 2) .................................................................. 45,000
Audit fees ..................................................................................... 10,530
Legal fees ..................................................................................... 10,027
Securities pricing fees ........................................................................ 1,779
Shareholder recordkeeping fees ................................................................. 8,950
Other accounting fees (note 2) ................................................................. 1,399
Shareholder servicing expenses ................................................................. 2,634
Registration and filing expenses ............................................................... 8,143
Printing expenses .............................................................................. 7,308
Trustee fees and meeting expenses .............................................................. 3,180
Other operating expenses ....................................................................... 3,145
---------
Total expenses ........................................................................... 126,963
---------
Less:
Expense reimbursements (note 2) ..................................................... (110,174)
Investment advisory fees waived (note 2) ............................................ (12,914)
Fund administration fees waived (note 2) ............................................ (132)
Other accounting fees waived (note 2) ............................................... (694)
---------
Net expenses ............................................................................. 3,049
---------
Net investment income ............................................................... 54,379
---------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized loss from investment transactions ...................................................... (58,004)
Increase in unrealized appreciation on investments .................................................. 123,160
---------
Net realized and unrealized gain on investments ................................................ 65,156
---------
Net increase in net assets resulting from operations ..................................... $ 119,535
=========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
WISDOM FUND
STATEMENTS OF CHANGES IN NET ASSETS
------------------------------------------------------------------------------------------------------------------------------------
Period ended Period ended
May 31, May 31,
2000 1999 (a)
------------------------------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS
Operations
Net investment income ..................................................... $ 54,379 $ 1,775
Net realized loss from investment transactions ............................ (58,004) (1,881)
Increase (decrease) in unrealized appreciation on investments ............. 123,160 (2,782)
---------- ----------
Net increase (decrease) in net assets resulting from operations ....... 119,535 (2,888)
---------- ----------
Distributions to shareholders from
Net investment income - Institutional Class ............................... (45,278) (1,775)
Net investment income - Investor Class .................................... (5,847) 0 (b)
Net investment income - Class B ........................................... (2,809) 0
Net investment income - Class C ........................................... (226) 0
---------- ----------
Decrease in net assets resulting from distributions ................... (54,160) (1,775)
---------- ----------
Capital share transactions
Increase in net assets resulting from capital share transactions (d) ...... 4,144,606 502,975
---------- ----------
Total increase in net assets .............................. 4,209,981 498,312
NET ASSETS
Beginning of period ............................................................. 498,312 0
---------- ----------
End of period ................................................................... $4,708,293 $ 498,312
========== ==========
(d) A summary of capital share activity follows:
--------------------------------------------------------------------------------
Period ended Period ended
May 31, 2000 May 31, 1999 (a)
Shares Value Shares Value
--------------------------------------------------------------------------------
--------------------------------------------------
INSTITUTIONAL CLASS
--------------------------------------------------
Shares sold ...................................... 218,824 $2,185,791 50,110 $ 501,100
Shares issued for reinvestment of distributions .. 4,701 45,278 179 1,775
Shares redeemed .................................. 0 0 0 0
---------- ---------- ---------- ----------
Net increase ............................ 223,525 $2,231,069 50,289 $ 502,875
========== ========== ========== ==========
--------------------------------------------------
INVESTOR CLASS
--------------------------------------------------
Shares sold ...................................... 87,208 $ 839,421 10 $ 100
Shares issued for reinvestment of distributions .. 598 5,846 0 0
Shares redeemed .................................. (21,739) (200,724) 0 0
---------- ---------- ---------- ----------
Net increase ............................ 66,067 $ 644,543 10 $ 100
========== ========== ========== ==========
--------------------------------------------------
CLASS B (c)
--------------------------------------------------
Shares sold ...................................... 117,050 $1,100,100 0 $ 0
Shares issued for reinvestment of distributions .. 81 805 0 0
Shares redeemed .................................. 0 0 0 0
---------- ---------- ---------- ----------
Net increase ............................ 117,131 $1,100,905 0 $ 0
========== ========== ========== ==========
--------------------------------------------------
CLASS C (c)
--------------------------------------------------
Shares sold ...................................... 17,347 $ 167,863 0 $ 0
Shares issued for reinvestment of distributions .. 22 226 0 0
Shares redeemed .................................. 0 0 0 0
---------- ---------- ---------- ----------
Net increase ............................ 17,369 $ 168,089 0 $ 0
========== ========== ========== ==========
--------------------------------------------------
FUND SUMMARY
--------------------------------------------------
Shares sold ...................................... 440,429 $4,293,175 50,120 $ 501,200
Shares issued for reinvestment of distributions .. 5,402 52,155 179 1,775
Shares redeemed .................................. (21,739) (200,724) 0 0
---------- ---------- ---------- ----------
Net increase ............................ 424,092 $4,144,606 50,299 $ 502,975
========== ========== ========== ==========
(a) For the period from February 16, 1999 (commencement of operations) to May 31, 1999.
(b) A distribution from Investor Class income was paid in the amount of $0.22.
(c) For the period from November 16, 1999 (commencement of operations) to May 31, 2000.
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
WISDOM FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
-------------------------------- -----------------------------------
Institutional Class Investor Class
-------------------------------- -----------------------------------
Year ended Period ended Year ended Period ended
May 31, May 31, May 31, May 31,
2000 1999 (a) 2000 1999 (a)
-------------------------------- -----------------------------------
Net asset value, beginning of period ....................... $ 9.91 $ 10.00 $ 9.92 $10.00
Income from investment operations
Net investment income ........................... 0.18 0.04 0.12 0.02
Net realized and unrealized (loss) gain
on investments .............................. (0.01) (0.09) 0.01 (0.08)
---------- ---------- ---------- ----------
Total from investment operations ............ 0.17 (0.05) 0.13 (0.06)
---------- ---------- ---------- ----------
Distributions to shareholders from
Net investment income ........................... (0.18) (0.04) (0.12) (0.02)
---------- ---------- ---------- ----------
Net asset value, end of period ............................. $ 9.90 $ 9.91 $ 9.93 $ 9.92
========== ========== ========== ==========
Total return (b) ........................................... 1.64 % (0.45)% 1.36 % (0.58)%
========== ========== ========== ==========
Ratios/supplemental data
Net assets, end of period ........................... $2,710,312 $ 498,213 $ 656,212 $ 99
========== ========== ========== ==========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees ... 5.05 % 23.94 % (c) 4.29 % 15.49 %(c)
After expense reimbursements and waived fees .... 0.00 % 0.00 % (c) 0.25 % 0.00 %(c)
Ratio of net investment (loss) income to average net assets
Before expense reimbursements and waived fees ... (2.87)% (22.69)% (c) (1.96)% (14.68)%(c)
After expense reimbursements and waived fees .... 2.18 % 1.26 % (c) 2.08 % 0.81 %(c)
Portfolio turnover rate ............................. 41.69 % 7.04 % 41.69 % 7.04 %
(a) For the period from February 16, 1999 (commencement of operations) to May 31, 1999.
(b) Total return does not reflect payment of a sales charge.
(c) Annualized.
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
WISDOM FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
----------------- -----------------
Class B Class C
----------------- -----------------
Period ended Period ended
May 31, May 31,
2000 (a) 2000 (a)
-------------------- ------------------
Net asset value, beginning of period ............................................... $10.20 $10.20
Income from investment operations
Net investment income ................................................... 0.04 0.03
Net realized and unrealized (loss) gain on investments .................. (0.23) (0.22)
---------- ----------
Total from investment operations .................................... (0.19) (0.19)
---------- ----------
Distributions to shareholders from
Net investment income ................................................... (0.04) (0.03)
---------- ----------
Net asset value, end of period ..................................................... $ 9.97 $ 9.98
========== ==========
Total return (b) ................................................................... (1.85)% (1.86)%
========== ==========
Ratios/supplemental data
Net assets, end of period ................................................... $1,168,374 $ 173,395
========== ==========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees ........................... 4.09 %(c) 4.07 %(c)
After expense reimbursements and waived fees ............................ 1.00 %(c) 1.00 %(c)
Ratio of net investment (loss) income to average net assets
Before expense reimbursements and waived fees ........................... (1.78)%(c) (1.77)%(c)
After expense reimbursements and waived fees ............................ 1.31 %(c) 1.30 %(c)
Portfolio turnover rate ..................................................... 41.69 % 41.69 %
(a) For the period from November 16, 1999 (commencement of operations) to May 31, 2000.
(b) Total return does not reflect payment of a sales charge.
(c) Annualized.
See accompanying notes to financial statements
</TABLE>
<PAGE>
WISDOM FUND
NOTES TO FINANCIAL STATEMENTS
May 31, 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
The Wisdom Fund (the "Fund"), an open-ended investment company, is a
diversified series of shares of beneficial interest of the New
Providence Investment Trust (the "Trust"). The Trust was organized on
July 9, 1997 as a Massachusetts Business Trust and is registered under
the Investment Company Act of 1940, as amended. The Fund began
operations on February 16, 1999. The investment objective of the fund
is to seek maximum total return consisting of any combination of
capital appreciation, realized and unrealized, and income under the
constantly varying market conditions. The Board of Trustees of the
Trust approved on October 7, 1999 a plan to authorize two new classes
of shares designated as Class B Shares and Class C Shares. On November
16, 1999, the Class B Shares and Class C Shares became effective. The
Fund has an unlimited number of authorized shares, which are divided
into four classes - Institutional Class Shares, Investor Class Shares,
Class B shares and Class C shares.
Each class of shares has equal rights as to assets of the Fund, and the
classes are identical except for differences in their sales charge
structures and ongoing distribution and service fees. Income, expenses
(other than distribution and service fees, which are not attributable
to the Institutional Class Shares), and realized and unrealized gains
or losses on investments are allocated to each class of shares based
upon its relative net assets. All classes have equal voting privileges,
except where otherwise required by law or when the Board of Trustees
determines that the matter to be voted on affects only the interests of
the shareholders of a particular class. 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 4:00 p.m., New York
time. 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.
Net investment income (loss) and net realized gains (losses)
may differ for financial statement and income tax purposes
primarily because of losses incurred subsequent to October 31,
which are deferred for income tax purposes. The character of
distributions made during the year from net investment income
or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to
the timing of dividend distributions, the fiscal year in which
amounts are distributed may differ from the year that the
income or realized gains were recorded by the Fund.
(Continued)
<PAGE>
WISDOM FUND
NOTES TO FINANCIAL STATEMENTS
May 31, 2000
C. Investment Transactions - Investment transactions are recorded
on 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. Distributions to
shareholders are recorded on the ex-dividend date. 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 estimates.
NOTE 2 - INVESTMENT ADVISORY FEE AND OTHER RELATED PARTY TRANSACTIONS
Pursuant to an investment advisory agreement, Atlanta Investment
Council, LLC (the "Advisor"), provides the Fund with a continuous
program of supervision of the Fund's assets, including the composition
of its portfolio, and furnishes advice and recommendations with respect
to investments, investment policies, and the purchase and sale of
securities. As compensation for its services, the Advisor receives a
fee at the annual rate of 0.50% of the first $500 million of the Fund's
average daily net assets and 0.40% of all assets over $500 million.
The Advisor currently intends to voluntarily waive all or a portion of
its fee and to reimburse expenses of the Fund to limit total Fund
operating expenses to a maximum of 1.15% of the average daily net
assets of the Fund's Institutional Class, a maximum of 1.40% of the
average daily net assets of the Fund's Investor Class, and a maximum of
2.15% of the average daily net assets of the Fund's Class B and Class C
Shares. 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 $12,914 ($0.05 per share) and
reimbursed $110,174 of the operating expenses incurred by the Fund for
the year ended May 31, 2000.
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, 0.100% of the next $50 million, and 0.075% of average daily
net assets over $100 million as well as a monthly fee of $2,250 for
accounting and record-keeping services for the initial class of shares
and $750 per month for each additional class of shares. The contract
with the Administrator provides that the aggregate fees for the
aforementioned administration, accounting, and recordkeeping services
shall not be less than $41,000 per year. The Administrator also charges
the Fund for certain expenses involved with the daily valuation of
portfolio securities. The Administrator voluntarily waived a portion of
its fees amounting to $826 for the year ended May 31, 2000.
(Continued)
<PAGE>
WISDOM FUND
NOTES TO FINANCIAL STATEMENTS
May 31, 2000
North Carolina Shareholder Services, LLC (the "Transfer Agent") serves
as the Fund's transfer, dividend paying, and shareholder servicing
agent. The Transfer Agent maintains the records of each Shareholder's
account, answers shareholder inquiries concerning accounts, processes
purchases and redemptions of the Fund's shares, acts as dividend and
distribution disbursing agent, and performs other shareholder servicing
functions.
Capital Investment Group, Inc. (the "Distributor") serves as the Fund's
principal underwriter and distributor. Prior to July 14, 1999,
Donaldson & Co., Inc., an affiliate of the Advisor, served as the
principal underwriter and distributor. The Distributor receives any
sales charges imposed on purchases of shares and re-allocates a portion
of such charges to dealers through whom the sale was made, if any. For
the year ended March 31, 2000, the Distributor retained sales charges
in the amount of $6,011.
Certain Trustees and officers of the Trust are also officers or
directors of the Advisor, the Distributor, or the Administrator.
NOTE 3 - DISTRIBUTION AND SERVICE FEES
The Board of Trustees, including the Trustees who are not "interested
persons" of the Trust as defined in the Investment Company Act of 1940
(the "Act"), adopted a distribution and service plan pursuant to Rule
12b-1 of the Act (the "Plan") applicable to the Investor Shares, Class
B Shares, and Class C Shares. The Act regulates the manner in which a
regulated investment company may assume costs of distributing and
promoting the sales of its shares and servicing of its shareholder
accounts.
The Plan provides that the Fund may incur certain costs, which may not
exceed 0.25% per annum of the Investor Class Shares' average daily net
assets or 1.00% per annum of the Class B Shares or Class C Shares 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 Investor Class Shares, Class B Shares
and Class C Shares in the Fund or support servicing of those classes'
shareholder accounts. The Fund incurred $2,157, $180 and $712, net of
waived fees, in distribution and service fees under the Plan with
respect to Class B Shares, Class C Shares and Investor Class Shares,
respectively, for the fiscal year ended May 31, 2000.
NOTE 4 - PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments, other than short-term investments,
aggregated $3,323,538 and $753,580, respectively, for the fiscal year
ended May 31, 2000.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees and Shareholders of New Providence Investment Trust and
Shareholders of Wisdom Fund:
We have audited the accompanying statement of assets and liabilities of Wisdom
Fund, including the portfolio of investments, as of May 31, 2000, and the
related statement of operations for the period then ended, the statements of
changes in net assets for the periods ended May 31, 2000 and 1999, and financial
highlights for each of the periods 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 audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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, 2000, by correspondence with the Fund's
custodian and brokers. 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
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Wisdom
Fund as of May 31, 2000, the results of its operations for the year ended, and
the changes in its net assets and the financial highlights for the respective
stated periods, in conformity with accounting principles generally accepted in
the United States of America.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Princeton, New Jersey
June 23, 2000
<PAGE>
________________________________________________________________________________
WISDOM FUND
________________________________________________________________________________
a series of the New Providence Investment Trust
CLASS C SHARES
ANNUAL REPORT 2000
FOR THE YEAR ENDED MAY 31
INVESTMENT ADVISOR
Atlanta Investment Counsel, LLC
2771 Carmon-on-Wesley, NW
Suite 100
Atlanta, Georgia 30327
WISDOM FUND
105 North Washington Street
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069
1-800-525-3863
This report and the financial statements contained herein are
submitted for the general information of the shareholders of the
Fund. This report is not authorized for distribution to prospective
investors in the Fund unless preceded or accompanied by an effective
prospectus. Mutual fund shares are not deposits or obligations of,
or guaranteed by, any depository institution. Shares are not insured
by the FDIC, Federal Reserve Board or any other agency, and are
subject to investment risks, including possible loss of principal
amount invested. Neither the fund nor the fund's distributor is a bank.
For more information about the Wisdom Fund, including charges
and expenses, call the fund for a free prospectus. You should
read the prospectus carefully before you invest or send money.
<PAGE>
ATLANTA INVSETMENT COUNSEL, L.L.C.
Manager of the Wisdom Fund
June 1, 2000
Dear Shareholders,
"Success in investing doesn't correlate with IQ once you're above the level of
25. Once you have ordinary intelligence, what you need is the temperament to
control the urges that get other people into trouble in investing." Warren
Buffet, 1996 Shareholder Meeting. We couldn't agree more!
The past ten weeks have seen a shift in market sentiment that has so far been
very favorable to our portfolio and to value investing. We have been asked how
and why such shifts occur. We have tried to come up with several reasons that
sound logical. Many times we don't understand what's really happened until much
later. Here are some possible signs of, and reasons for, the shift:
The Dow was down dramatically by February 25, while the NASDAQ was up
substantially, underscoring the popular, but meaningless, Old Economy / New
Economy split.
The anxiety suffered by New Economy adherents as Microsoft was unable to settle
with the Justice Department.
The retirement of Tiger Fund's Julian Robertson and the replacement of Oakmark's
Robert Sanborn--sure signs of intense frustration from serious value investors.
[Letterhead]
<PAGE>
In Contrast to years past, Berkshire Hathaway's 1999 Annual Report received
barely a mention in the financial press. We read it with great interest, of
course!
When you buy a stock or mutual fund, it's important not to lose sight of the
fact that you're really buying a fractional interest in a business, and not a
lottery ticket.
For about two years now, we have been in a market where valuation hasn't
mattered one darn bit. In fact, the more that investors focused on valuation,
the worse returns have been. While the laws of economic gravity were temporarily
suspended, we do not believe they have been fundamentally altered.
Looking back over the last year, the Wisdom Fund under performed the general
market and outperformed Berkshire Hathaway Holdings, the portfolio that we
attempt to emulate. Berkshire's stock price fell in 1999 for several reasons:
1. Since last summer, Alan Greenspan has raised interest rates because he is
worried that the economy is expanding so fast that it will cause a resurgence of
inflation. In theory, the prospect of higher interest rates should hurt growth
stocks the most. But in today's market, exactly the opposite has occurred.
Fearing that higher rates would hit Old Economy stocks the hardest, investors
have been dumping those stocks and piling into tech stocks instead,
<PAGE>
2. Three of the Wisdom Fund's and Berkshire Hathaway's largest
holdings--Coca-cola, Gillette, and Freddie Mac--fell in calendar year 1999 (13%,
14% and 27%, respectively). These stocks have been great investments over a
long-term horizon,
3. The Wisdom Fund holds about 26% of its assets in low-return short-term fixed
income securities as does Berkshire Hathaway. Due to high valuations in the
markets, Berkshire Hathaway has not seen fit to put its cash to work, and
4. Since the Wisdom Fund and Berkshire Hathaway have very little exposure to
technology stocks, we feel our holdings have been dragged down by the general
devaluation of non-tech stocks.
At Berkshire Hathaway's annual meeting this spring, Warren Buffet scornfully
compared the technology sector's breathtaking runup to a "chain letter," in
which early participants reap rich rewards at the expense of those who follow.
Of course, we do not like to under perform the S&P 500 stock index. We can say
with certainty that there will always be a category or class of investments that
will post results greater than ours. For our part, we will continue to implement
our investment strategy of emulating the investment portfolio of Berkshire
Hathaway which has produced a thirty-year track record second to none.
<PAGE>
Warren Buffet said in 1996, "Your goal as an investor should be to purchase, at
a rational price, a part interest in an easily understandable business with
whose earnings are virtually certain to be materially higher five, ten, and
twenty years from now. Over time, you will find only a few companies that meet
these standards---so when you see one that qualifies, you should buy a
meaningful amount of stock. You must also resist the temptation to stray from
your guidelines: If you aren't willing to own a stock for ten years, don't even
thing about owning it for ten minutes. Put together a portfolio of companies
whose aggregate earnings march upward over the years, and so also will the
portfolio's market value."
And that is the "wisdom" of the Wisdom Fund!
/s/ C. Douglas Davenport
C. Douglas Davenport, J.D.
President, Atlanta Investment Counsel, LLC
<PAGE>
WISDOM FUND
CLASS C SHARES
Performance Update - $10,000 Investment
For the period from November 16, 1999 (Commencement of Operations)
to May 31, 2000
[LINE GRAPH HERE]:
--------------------------------------------------------------------------------
Wisdom Fund S&P 500
Class C Shares Total Return Index
--------------------------------------------------------------------------------
11/16/99 $10,000 $10,000
11/30/99 9,902 9,785
12/31/99 9,742 10,362
01/31/00 9,467 9,841
02/29/00 8,613 9,655
03/31/00 9,526 10,599
04/30/00 9,487 10,281
05/31/00 9,716 10,070
This graph depicts the performance of the Wisdom Fund - Class C Shares versus
the S&P 500 Total Return Index. It is important to note that the Wisdom Fund is
a professionally managed mutual fund while the index is not available for
investment and is unmanaged. The comparison is shown for illustrative purposes
only.
Cumulative Total Return
------------------------------ -----------------------
Since Commencement
Of Operations
------------------------------ -----------------------
No Sales Charges (1.86)%
------------------------------ -----------------------
1% Maximum Sales Charge (2.84)%
------------------------------ -----------------------
>> The graph assumes an initial $10,000 investment at November 16, 1999
(commencement of operations) and reflects the deduction of the maximum
contingent deferred sales charge ("CDSC"), taken on the last day of the
most recently completed fiscal year. The CDSC for the Class C Shares
declines from 1% to 0% over two years. All dividends and distributions are
reinvested.
>> At May 31, 2000, the value of the Wisdom Fund - Class C Shares would have
decreased to $9,716 - a cumulative total investment return of (2.84)% since
November 16, 1999. Without the deduction of the 1% maximum CDSC, the value
of the Wisdom Fund - Class C Shares would have decreased to $9,814 - a
cumulative total investment return of (1.86)% since November 16, 1999. The
CDSC may be waived or reduced under certain circumstances.
>> At May 31, 2000, a similar investment in the S&P 500 Total Return Index
would have grown to $10,070 - a cumulative total investment return of 0.70%
since November 16, 1999.
>> 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 total returns are historical in nature
and measure net investment income and capital gain or loss from portfolio
investments assuming reinvestments of dividends.
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
WISDOM FUND
PORTFOLIO OF INVESTMENTS
May 31, 2000
------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - 62.39%
Apparel Manufacturing - 1.33%
(a)Jones Apparel Group, Inc. .................................................. 1,750 $ 46,922
Liz Claiborne, Inc. ........................................................ 400 15,725
----------
62,647
----------
Beverages - 10.15%
The Coca-Cola Company ...................................................... 8,950 477,706
----------
Chemicals - 0.74%
Great Lakes Chemical Corporation ........................................... 1,250 34,844
----------
Cosmetics and Personal Care - 3.05%
The Gillette Company ....................................................... 4,300 143,512
----------
Financial Services - 16.09%
American Express Company ................................................... 6,750 362,813
AXA Financial, Inc. ........................................................ 1,825 71,061
Freddie Mac ................................................................ 2,675 119,037
Marsh & McLennan Companies, Inc. ........................................... 600 66,000
MGIC Investment Corporation ................................................ 1,150 56,997
The Dun & Bradstreet Corporation ........................................... 2,650 81,487
----------
757,395
----------
Financial - Banks, Commercial - 2.83%
Wells Fargo & Company ...................................................... 2,950 133,488
----------
Insurance - Life and Health - 2.56%
CIGNA Corporation .......................................................... 700 62,169
Torchmark Corporation ...................................................... 2,150 58,453
----------
120,622
----------
Insurance - Multiline - 17.37%
AFLAC INCORPORATED ......................................................... 1,400 72,363
Allmerica Financial Corporation ............................................ 1,150 66,341
Ambac Financial Group, Inc. ................................................ 1,200 60,600
American International Group, Inc. ......................................... 537 60,446
American National Insurance Company ........................................ 950 51,300
Cincinnati Financial Corporation ........................................... 1,950 78,274
(a)CNA Financial Corporation .................................................. 1,650 58,884
Financial Security Assurance Holdings Ltd. ................................. 1,325 99,458
Loews Corporation .......................................................... 1,000 65,875
PartnerRe Ltd. ............................................................. 2,025 75,178
The PMI Group, Inc. ........................................................ 1,250 63,359
The St. Paul Companies, Inc. ............................................... 1,750 65,625
----------
817,703
----------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
WISDOM FUND
PORTFOLIO OF INVESTMENTS
May 31, 2000
------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Insurance - Property & Casualty - 2.78%
Erie Indemnity Company ..................................................... 1,950 $ 53,625
Everest Re Group, Ltd. ..................................................... 2,275 77,350
----------
130,975
----------
Publishing - Newspapers - 0.87%
The Washington Post Company ................................................ 82 41,041
----------
Real Estate Investment Trust - 1.59%
First Industrial Realty Trust, Inc. ........................................ 875 25,430
Tanger Factory Outlet Centers, Inc. ........................................ 1,150 26,594
Town & Country Trust ....................................................... 1,400 22,925
----------
74,949
----------
Transportation - Miscellaneous - 0.90%
GATX Corporation ........................................................... 1,250 42,187
----------
Utilities - Electric - 2.13%
FPL Group, Inc. ............................................................ 875 43,313
Northern States Power Company .............................................. 1,500 33,187
The Montana Power Company .................................................. 625 23,672
----------
100,172
----------
Total Common Stocks (Cost $2,817,159) ............................................................ 2,937,241
----------
------------------------------------------------------------------------------------------------------------------------------------
Interest Maturity
Principal Rate Date
------------------------------------------------------------------------------------------------------------------------------------
U. S. GOVERNMENT OBLIGATION - 16.03%
United States Treasury Bill ..................... $760,000 0% 07/20/00 754,775
(Cost $754,479) ----------
------------------------------------------------------------------------------------------------------------------------------------
Shares
------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT COMPANIES - 8.97%
Evergreen Money Market Treasury Institutional Money
Market Fund Institutional Service Shares ................................... 211,257 211,257
Evergreen Money Market Treasury Institutional Treasury Money
Market Fund Institutional Service Shares ................................... 211,256 211,256
----------
Total Investment Companies (Cost $422,513) ....................................................... 422,513
----------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
WISDOM FUND
PORTFOLIO OF INVESTMENTS
May 31, 2000
------------------------------------------------------------------------------------------------------------------------------------
Value
(note 1)
------------------------------------------------------------------------------------------------------------------------------------
Total Value of Investments (Cost $3,994,151 (b)) ....................................... 87.39% $4,114,529
Other Assets Less Liabilities .......................................................... 12.61% 593,764
------ ----------
Net Assets ...................................................................... 100.00% $4,708,293
====== ==========
(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 .......................................................................... $ 267,843
Unrealized depreciation .......................................................................... (147,465)
----------
Net unrealized appreciation ...................................................... $ 120,378
==========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
WISDOM FUND
STATEMENT OF ASSETS AND LIABILITIES
May 31, 2000
ASSETS
Investments, at value (cost $3,994,151) ............................................................. $4,114,529
Cash ................................................................................................ 563,217
Income receivable ................................................................................... 6,327
Receivable for fund shares sold ..................................................................... 29,791
Due from advisor (note 2) ........................................................................... 11,118
----------
Total assets ................................................................................... 4,724,982
----------
LIABILITIES
Accrued expenses .................................................................................... 16,689
----------
NET ASSETS ................................................................................................. $4,708,293
==========
NET ASSETS CONSIST OF
Paid-in capital ..................................................................................... $4,647,581
Undistributed net investment income ................................................................. 219
Accumulated net realized loss on investments ........................................................ (59,885)
Net unrealized appreciation on investments .......................................................... 120,378
----------
$4,708,293
==========
INSTITUTIONAL CLASS
Net asset value, redemption and maximum offering price per share
($2,710,312 / 273,814 shares : unlimited shares of $0.01 par value
beneficial interest authorized) .................................................................. $ 9.90
==========
INVESTOR CLASS
Net asset value, redemption and offering price per share
($656,212 / 66,077 shares : unlimited shares of $0.01 par value
beneficial interest authorized) .................................................................. $ 9.93
==========
Maximum offering price per share (100 / 95.50% of $9.93) ............................................ $10.40
==========
CLASS B
Net asset value, redemption and maximum offering price per share
($1,168,374 / 117,131 shares : unlimited shares of $0.01 par value
beneficial interest authorized) .................................................................. $ 9.97
==========
CLASS C
Net asset value, redemption and maximum offering price per share
($173,395 / 17,369 shares : unlimited shares of $0.01 par value
beneficial interest authorized) .................................................................. $ 9.98
==========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
WISDOM FUND
STATEMENT OF OPERATIONS
Year ended May 31, 2000
INVESTMENT INCOME
Income
Interest ....................................................................................... $ 21,539
Dividends ...................................................................................... 35,889
---------
Total income ............................................................................. 57,428
---------
Expenses
Investment advisory fees (note 2) .............................................................. 12,914
Fund administration fees (note 2) .............................................................. 3,499
Distribution and service fees - Class B (note 3) ............................................... 2,157
Distribution and service fees - Class C (note 3) ............................................... 180
Distribution and service fees - Investor Class (note 3) ........................................ 712
Custody fees ................................................................................... 3,216
Registration and filing administration fees (note 2) ........................................... 2,190
Fund accounting fees (note 2) .................................................................. 45,000
Audit fees ..................................................................................... 10,530
Legal fees ..................................................................................... 10,027
Securities pricing fees ........................................................................ 1,779
Shareholder recordkeeping fees ................................................................. 8,950
Other accounting fees (note 2) ................................................................. 1,399
Shareholder servicing expenses ................................................................. 2,634
Registration and filing expenses ............................................................... 8,143
Printing expenses .............................................................................. 7,308
Trustee fees and meeting expenses .............................................................. 3,180
Other operating expenses ....................................................................... 3,145
---------
Total expenses ........................................................................... 126,963
---------
Less:
Expense reimbursements (note 2) ..................................................... (110,174)
Investment advisory fees waived (note 2) ............................................ (12,914)
Fund administration fees waived (note 2) ............................................ (132)
Other accounting fees waived (note 2) ............................................... (694)
---------
Net expenses ............................................................................. 3,049
---------
Net investment income ............................................................... 54,379
---------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized loss from investment transactions ...................................................... (58,004)
Increase in unrealized appreciation on investments .................................................. 123,160
---------
Net realized and unrealized gain on investments ................................................ 65,156
---------
Net increase in net assets resulting from operations ..................................... $ 119,535
=========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
WISDOM FUND
STATEMENTS OF CHANGES IN NET ASSETS
------------------------------------------------------------------------------------------------------------------------------------
Period ended Period ended
May 31, May 31,
2000 1999 (a)
------------------------------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS
Operations
Net investment income ..................................................... $ 54,379 $ 1,775
Net realized loss from investment transactions ............................ (58,004) (1,881)
Increase (decrease) in unrealized appreciation on investments ............. 123,160 (2,782)
---------- ----------
Net increase (decrease) in net assets resulting from operations ....... 119,535 (2,888)
---------- ----------
Distributions to shareholders from
Net investment income - Institutional Class ............................... (45,278) (1,775)
Net investment income - Investor Class .................................... (5,847) 0 (b)
Net investment income - Class B ........................................... (2,809) 0
Net investment income - Class C ........................................... (226) 0
---------- ----------
Decrease in net assets resulting from distributions ................... (54,160) (1,775)
---------- ----------
Capital share transactions
Increase in net assets resulting from capital share transactions (d) ...... 4,144,606 502,975
---------- ----------
Total increase in net assets .............................. 4,209,981 498,312
NET ASSETS
Beginning of period ............................................................. 498,312 0
---------- ----------
End of period ................................................................... $4,708,293 $ 498,312
========== ==========
(d) A summary of capital share activity follows:
--------------------------------------------------------------------------------
Period ended Period ended
May 31, 2000 May 31, 1999 (a)
Shares Value Shares Value
--------------------------------------------------------------------------------
--------------------------------------------------
INSTITUTIONAL CLASS
--------------------------------------------------
Shares sold ...................................... 218,824 $2,185,791 50,110 $ 501,100
Shares issued for reinvestment of distributions .. 4,701 45,278 179 1,775
Shares redeemed .................................. 0 0 0 0
---------- ---------- ---------- ----------
Net increase ............................ 223,525 $2,231,069 50,289 $ 502,875
========== ========== ========== ==========
--------------------------------------------------
INVESTOR CLASS
--------------------------------------------------
Shares sold ...................................... 87,208 $ 839,421 10 $ 100
Shares issued for reinvestment of distributions .. 598 5,846 0 0
Shares redeemed .................................. (21,739) (200,724) 0 0
---------- ---------- ---------- ----------
Net increase ............................ 66,067 $ 644,543 10 $ 100
========== ========== ========== ==========
--------------------------------------------------
CLASS B (c)
--------------------------------------------------
Shares sold ...................................... 117,050 $1,100,100 0 $ 0
Shares issued for reinvestment of distributions .. 81 805 0 0
Shares redeemed .................................. 0 0 0 0
---------- ---------- ---------- ----------
Net increase ............................ 117,131 $1,100,905 0 $ 0
========== ========== ========== ==========
--------------------------------------------------
CLASS C (c)
--------------------------------------------------
Shares sold ...................................... 17,347 $ 167,863 0 $ 0
Shares issued for reinvestment of distributions .. 22 226 0 0
Shares redeemed .................................. 0 0 0 0
---------- ---------- ---------- ----------
Net increase ............................ 17,369 $ 168,089 0 $ 0
========== ========== ========== ==========
--------------------------------------------------
FUND SUMMARY
--------------------------------------------------
Shares sold ...................................... 440,429 $4,293,175 50,120 $ 501,200
Shares issued for reinvestment of distributions .. 5,402 52,155 179 1,775
Shares redeemed .................................. (21,739) (200,724) 0 0
---------- ---------- ---------- ----------
Net increase ............................ 424,092 $4,144,606 50,299 $ 502,975
========== ========== ========== ==========
(a) For the period from February 16, 1999 (commencement of operations) to May 31, 1999.
(b) A distribution from Investor Class income was paid in the amount of $0.22.
(c) For the period from November 16, 1999 (commencement of operations) to May 31, 2000.
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
WISDOM FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
-------------------------------- -----------------------------------
Institutional Class Investor Class
-------------------------------- -----------------------------------
Year ended Period ended Year ended Period ended
May 31, May 31, May 31, May 31,
2000 1999 (a) 2000 1999 (a)
-------------------------------- -----------------------------------
Net asset value, beginning of period ....................... $ 9.91 $ 10.00 $ 9.92 $10.00
Income from investment operations
Net investment income ........................... 0.18 0.04 0.12 0.02
Net realized and unrealized (loss) gain
on investments .............................. (0.01) (0.09) 0.01 (0.08)
---------- ---------- ---------- ----------
Total from investment operations ............ 0.17 (0.05) 0.13 (0.06)
---------- ---------- ---------- ----------
Distributions to shareholders from
Net investment income ........................... (0.18) (0.04) (0.12) (0.02)
---------- ---------- ---------- ----------
Net asset value, end of period ............................. $ 9.90 $ 9.91 $ 9.93 $ 9.92
========== ========== ========== ==========
Total return (b) ........................................... 1.64 % (0.45)% 1.36 % (0.58)%
========== ========== ========== ==========
Ratios/supplemental data
Net assets, end of period ........................... $2,710,312 $ 498,213 $ 656,212 $ 99
========== ========== ========== ==========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees ... 5.05 % 23.94 % (c) 4.29 % 15.49 %(c)
After expense reimbursements and waived fees .... 0.00 % 0.00 % (c) 0.25 % 0.00 %(c)
Ratio of net investment (loss) income to average net assets
Before expense reimbursements and waived fees ... (2.87)% (22.69)% (c) (1.96)% (14.68)%(c)
After expense reimbursements and waived fees .... 2.18 % 1.26 % (c) 2.08 % 0.81 %(c)
Portfolio turnover rate ............................. 41.69 % 7.04 % 41.69 % 7.04 %
(a) For the period from February 16, 1999 (commencement of operations) to May 31, 1999.
(b) Total return does not reflect payment of a sales charge.
(c) Annualized.
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
WISDOM FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
----------------- -----------------
Class B Class C
----------------- -----------------
Period ended Period ended
May 31, May 31,
2000 (a) 2000 (a)
-------------------- ------------------
Net asset value, beginning of period ............................................... $10.20 $10.20
Income from investment operations
Net investment income ................................................... 0.04 0.03
Net realized and unrealized (loss) gain on investments .................. (0.23) (0.22)
---------- ----------
Total from investment operations .................................... (0.19) (0.19)
---------- ----------
Distributions to shareholders from
Net investment income ................................................... (0.04) (0.03)
---------- ----------
Net asset value, end of period ..................................................... $ 9.97 $ 9.98
========== ==========
Total return (b) ................................................................... (1.85)% (1.86)%
========== ==========
Ratios/supplemental data
Net assets, end of period ................................................... $1,168,374 $ 173,395
========== ==========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees ........................... 4.09 %(c) 4.07 %(c)
After expense reimbursements and waived fees ............................ 1.00 %(c) 1.00 %(c)
Ratio of net investment (loss) income to average net assets
Before expense reimbursements and waived fees ........................... (1.78)%(c) (1.77)%(c)
After expense reimbursements and waived fees ............................ 1.31 %(c) 1.30 %(c)
Portfolio turnover rate ..................................................... 41.69 % 41.69 %
(a) For the period from November 16, 1999 (commencement of operations) to May 31, 2000.
(b) Total return does not reflect payment of a sales charge.
(c) Annualized.
See accompanying notes to financial statements
</TABLE>
<PAGE>
WISDOM FUND
NOTES TO FINANCIAL STATEMENTS
May 31, 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
The Wisdom Fund (the "Fund"), an open-ended investment company, is a
diversified series of shares of beneficial interest of the New
Providence Investment Trust (the "Trust"). The Trust was organized on
July 9, 1997 as a Massachusetts Business Trust and is registered under
the Investment Company Act of 1940, as amended. The Fund began
operations on February 16, 1999. The investment objective of the fund
is to seek maximum total return consisting of any combination of
capital appreciation, realized and unrealized, and income under the
constantly varying market conditions. The Board of Trustees of the
Trust approved on October 7, 1999 a plan to authorize two new classes
of shares designated as Class B Shares and Class C Shares. On November
16, 1999, the Class B Shares and Class C Shares became effective. The
Fund has an unlimited number of authorized shares, which are divided
into four classes - Institutional Class Shares, Investor Class Shares,
Class B shares and Class C shares.
Each class of shares has equal rights as to assets of the Fund, and the
classes are identical except for differences in their sales charge
structures and ongoing distribution and service fees. Income, expenses
(other than distribution and service fees, which are not attributable
to the Institutional Class Shares), and realized and unrealized gains
or losses on investments are allocated to each class of shares based
upon its relative net assets. All classes have equal voting privileges,
except where otherwise required by law or when the Board of Trustees
determines that the matter to be voted on affects only the interests of
the shareholders of a particular class. 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 4:00 p.m., New York
time. 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.
Net investment income (loss) and net realized gains (losses)
may differ for financial statement and income tax purposes
primarily because of losses incurred subsequent to October 31,
which are deferred for income tax purposes. The character of
distributions made during the year from net investment income
or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to
the timing of dividend distributions, the fiscal year in which
amounts are distributed may differ from the year that the
income or realized gains were recorded by the Fund.
(Continued)
<PAGE>
WISDOM FUND
NOTES TO FINANCIAL STATEMENTS
May 31, 2000
C. Investment Transactions - Investment transactions are recorded
on 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. Distributions to
shareholders are recorded on the ex-dividend date. 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 estimates.
NOTE 2 - INVESTMENT ADVISORY FEE AND OTHER RELATED PARTY TRANSACTIONS
Pursuant to an investment advisory agreement, Atlanta Investment
Council, LLC (the "Advisor"), provides the Fund with a continuous
program of supervision of the Fund's assets, including the composition
of its portfolio, and furnishes advice and recommendations with respect
to investments, investment policies, and the purchase and sale of
securities. As compensation for its services, the Advisor receives a
fee at the annual rate of 0.50% of the first $500 million of the Fund's
average daily net assets and 0.40% of all assets over $500 million.
The Advisor currently intends to voluntarily waive all or a portion of
its fee and to reimburse expenses of the Fund to limit total Fund
operating expenses to a maximum of 1.15% of the average daily net
assets of the Fund's Institutional Class, a maximum of 1.40% of the
average daily net assets of the Fund's Investor Class, and a maximum of
2.15% of the average daily net assets of the Fund's Class B and Class C
Shares. 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 $12,914 ($0.05 per share) and
reimbursed $110,174 of the operating expenses incurred by the Fund for
the year ended May 31, 2000.
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, 0.100% of the next $50 million, and 0.075% of average daily
net assets over $100 million as well as a monthly fee of $2,250 for
accounting and record-keeping services for the initial class of shares
and $750 per month for each additional class of shares. The contract
with the Administrator provides that the aggregate fees for the
aforementioned administration, accounting, and recordkeeping services
shall not be less than $41,000 per year. The Administrator also charges
the Fund for certain expenses involved with the daily valuation of
portfolio securities. The Administrator voluntarily waived a portion of
its fees amounting to $826 for the year ended May 31, 2000.
(Continued)
<PAGE>
WISDOM FUND
NOTES TO FINANCIAL STATEMENTS
May 31, 2000
North Carolina Shareholder Services, LLC (the "Transfer Agent") serves
as the Fund's transfer, dividend paying, and shareholder servicing
agent. The Transfer Agent maintains the records of each Shareholder's
account, answers shareholder inquiries concerning accounts, processes
purchases and redemptions of the Fund's shares, acts as dividend and
distribution disbursing agent, and performs other shareholder servicing
functions.
Capital Investment Group, Inc. (the "Distributor") serves as the Fund's
principal underwriter and distributor. Prior to July 14, 1999,
Donaldson & Co., Inc., an affiliate of the Advisor, served as the
principal underwriter and distributor. The Distributor receives any
sales charges imposed on purchases of shares and re-allocates a portion
of such charges to dealers through whom the sale was made, if any. For
the year ended March 31, 2000, the Distributor retained sales charges
in the amount of $6,011.
Certain Trustees and officers of the Trust are also officers or
directors of the Advisor, the Distributor, or the Administrator.
NOTE 3 - DISTRIBUTION AND SERVICE FEES
The Board of Trustees, including the Trustees who are not "interested
persons" of the Trust as defined in the Investment Company Act of 1940
(the "Act"), adopted a distribution and service plan pursuant to Rule
12b-1 of the Act (the "Plan") applicable to the Investor Shares, Class
B Shares, and Class C Shares. The Act regulates the manner in which a
regulated investment company may assume costs of distributing and
promoting the sales of its shares and servicing of its shareholder
accounts.
The Plan provides that the Fund may incur certain costs, which may not
exceed 0.25% per annum of the Investor Class Shares' average daily net
assets or 1.00% per annum of the Class B Shares or Class C Shares 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 Investor Class Shares, Class B Shares
and Class C Shares in the Fund or support servicing of those classes'
shareholder accounts. The Fund incurred $2,157, $180 and $712, net of
waived fees, in distribution and service fees under the Plan with
respect to Class B Shares, Class C Shares and Investor Class Shares,
respectively, for the fiscal year ended May 31, 2000.
NOTE 4 - PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments, other than short-term investments,
aggregated $3,323,538 and $753,580, respectively, for the fiscal year
ended May 31, 2000.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees and Shareholders of New Providence Investment Trust and
Shareholders of Wisdom Fund:
We have audited the accompanying statement of assets and liabilities of Wisdom
Fund, including the portfolio of investments, as of May 31, 2000, and the
related statement of operations for the period then ended, the statements of
changes in net assets for the periods ended May 31, 2000 and 1999, and financial
highlights for each of the periods 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 audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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, 2000, by correspondence with the Fund's
custodian and brokers. 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
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Wisdom
Fund as of May 31, 2000, the results of its operations for the year ended, and
the changes in its net assets and the financial highlights for the respective
stated periods, in conformity with accounting principles generally accepted in
the United States of America.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Princeton, New Jersey
June 23, 2000
<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 Adviser 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 Adviser 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 Adviser:
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 Adviser 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 Adviser:
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 Adviser 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 Adviser:
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 Adviser:
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
======
NEW PROVIDENCE INVESTMENT TRUST
FORM N-1A
OTHER INFORMATION
ITEM 23. Exhibits
--------
(a) Declaration of Trust.^1
(b) By-Laws.^1
(c) Certificates for shares not issued. Articles V, VI, VIII, IX and X of
the Declaration of Trust, previously filed as Exhibit (1) hereto,
define the rights of shareholders.^1
(d) Investment Advisory Agreement between the Registrant and Atlanta
Investment Counsel, L.L.C., as Advisor, with respect to the Wisdom
Fund.^5
(e) Distribution Agreement between the Registrant and Capital Investment
Group, Inc., as Distributor.^5
(f) Not Applicable.
(g) Custodian Agreement between the Registrant and First Union National
Bank, as Custodian.^4
(h)(1) Fund Accounting and Compliance Administration Agreement between the
Registrant and The Nottingham Company, Inc., as Administrator.^4
(h)(2) Dividend Disbursing and Transfer Agent Agreement between the Registrant
and NC Shareholder Services, LLC, as Transfer Agent.^4
(h)(3) Expense Limitation Agreement between the Registrant and Atlanta
Investment Counsel, L.L.C.
(i)(1) Opinion and Consent of Dechert, Counsel, regarding the legality of the
securities being registered with respect to the Institutional Class
Shares and Investor Class Shares of the Wisdom Fund.^4
(i)(2) Opinion and Consent of Dechert, Counsel, regarding the legality of the
securities being registered with respect to the Class B Shares and the
Class C Shares of the Wisdom Fund.^6
(i)(3) Consent of Dechert, Counsel, with respect to the Wisdom Fund.
(j) Consent of Deloitte & Touche LLP, Independent Public Accountants, with
respect to the Wisdom Fund.
(k) Not applicable.
(l) Initial Capital Agreements.^2
(m)(1) Plan of Distribution Pursuant to Rule 12b-1 for the Wisdom Fund
Investor Class Shares.^5
(m)(2) Plan of Distribution Pursuant to Rule 12b-1 for the Wisdom Fund Class B
Shares.
(m)(3) Plan of Distribution Pursuant to Rule 12b-1 for the Wisdom Fund Class C
Shares.
(n)(1) Plan Pursuant to Rule 18f-3.^5
(n)(2) Amended and Restated Multiple Class Plan Pursuant to Rule 18f-3.
(p)(1) Code of Ethics for the New Providence Investment Trust.
(p)(2) Code of Ethics for Atlanta Investment Counsel, L.L.C.
(q) 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).
4. Incorporated herein by reference to Registrant's Registration Statement
on Form N-1A Post-Effective Amendment No. 2 filed October 22, 1998
(File No. 333-31359).
5. Incorporated herein by reference to Registrant's Registration Statement
on Form N-1A Post-Effective Amendment No. 6 filed August 2, 1999 (File
No. 333-31359).
6. Incorporated herein by reference to Registrant's Registration Statement
on Form N-1A Post-Effective Amendment No. 7 filed September 9, 1999
(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.
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 Statement of Additional Information section entitled
"Management and Other Service Providers" for Trust 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.
ITEM 27. Principal Underwriter
---------------------
(a) Capital Investment Group, Inc. is underwriter and distributor for The
Chesapeake Aggressive Growth Fund, The Chesapeake Growth Fund, The
Chesapeake Core Growth Fund, Capital Value Fund, EARNEST Partners Fixed
Income Trust, The Brown Capital Management Equity Fund, The Brown
Capital Management Balanced Fund, The Brown Capital Management Small
Company Fund, The Brown Capital Management International Equity Fund,
WST Growth Fund, Blue Ridge Total Return Fund, SCM Strategic Growth
Fund, de Leon Internet 100 Fund, and the Wisdom Fund.
(b)
POSITION(S) AND POSITION(S) AND
NAME AND PRINCIPAL OFFICE(S) WITH CAPITAL OFFICE(S)
BUSINESS ADDRESS INVESTMENT GROUP, INC. WITH REGISTRANT
================ ====================== ===============
Richard K. Bryant President None
17 Glenwood Avenue
Raleigh, N.C. 27622
E.O. Edgerton, Jr. Vice President None
17 Glenwood Avenue
Raleigh, N.C. 27622
Delia Zimmerman Secretary None
17 Glenwood Avenue
Raleigh, N.C. 27622
Con T. McDonald Assistant Vice-President None
17 Glenwood Avenue
Raleigh, N.C. 27622
W. Harold Eddins, Jr. Assistant Vice-President None
17 Glenwood Avenue
Raleigh, N.C. 27622
Richard S. Battle Assistant Vice-President None
17 Glenwood Avenue
Raleigh, N.C. 27622
(c) Not applicable
ITEM 28. Location of Accounts and Records
--------------------------------
All account books and records not normally held by First Union National
Bank, the Custodian to the Registrant, are held by the Registrant, in the
offices of The Nottingham Company, Inc., Fund Accountant and Administrator to
the Registrant; NC Shareholder Services, LLC, Transfer Agent to the Registrant;
or by Atlanta Investment Counsel, L.L.C., Advisor to the Wisdom Fund.
The address of The Nottingham Company, Inc. is 105 North Washington
Street, Post Office Box 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 Atlanta Investment
Counsel, L.L.C. is 2771 Carmon-on-Wesley, NW, Suite 100, Atlanta, Georgia 30327.
The address of First Union National Bank is 123 S. Broad Street, Philadelphia
Pennsylvania 19109.
ITEM 29. Management Services
-------------------
Not Applicable.
ITEM 30. Undertakings
------------
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended
("Securities Act"), and the Investment Company Act of 1940, as amended, the
Registrant certifies that it meets all of the requirements for effectiveness of
this registration statement under Rule 485(b) under the Securities Act and has
duly caused this Post-Effective Amendment No. 9 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 29th day of September, 2000.
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. 9 to the Registration Statement has been signed
below by the following persons in the capacities and on the date indicated.
Signature Title Date
--------- ----- ----
* Trustee September 29, 2000
_________________________________
Jack E. Brinson
/s/ Julian G. Winters Treasurer September 29, 2000
__________________________________
Julian G. Winters
* By: /s/ C. Frank Watson, III Dated: September 29, 2000
____________________________
C. Frank Watson, III
Attorney-in-Fact
<PAGE>
INDEX TO EXHIBITS
(FOR POST-EFFECTIVE AMENDMENT NO. 9)
------------------------------------
EXHIBIT NO.
UNDER PART C
OF FORM N-1A NAME OF EXHIBIT
------------ -------------------------------
(h)(3) Expense Limitation Agreement
(i)(3) Consent of Dechert, Counsel
(j) Consent of Deloitte & Touche LLP, Independent Public Accountants
(m)(2) Plan of Distribution Pursuant to Rule 12b-1 for the Wisdom Fund
Class B Shares
(m)(3) Plan of Distribution Pursuant to Rule 12b-1 for the Wisdom Fund
Class C Shares
(n)(2) Amended and Restated Multiple Class Plan Pursuant to Rule 18f-3.
(p)(1) Code of Ethics for the New Providence Investment Trust
(p)(2) Code of Ethics for Atlanta Investment Counsel, L.L.C.
