________________________________________________________________________________
SCM STRATEGIC
GROWTH FUND
________________________________________________________________________________
a series of the SCM Investment Trust
Semi-Annual Report 1999
FOR THE PERIOD ENDED NOVEMBER 30
INVESTMENT ADVISOR
Shanklin Capital Management, Inc.
1420 Osborne Street
Suite B16
Humboldt, TN 38343
1-901-784-4444
SCM STRATEGIC GROWTH FUND
107 North Washington Street
Post Office Drawer 4365
Rocky Mount, North Carolina 27803-0365
1-800-525-3863
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THIS PAGE FOR NOTES AND COMPUTATIONS
<PAGE>
SCM FUNDS
Dear Fellow Shareholders:
We are pleased to provide you with this semi-annual report for the SCM Strategic
Growth Fund for the six-month period beginning May 31st and ending November
30th, 1999. Over this period, your Fund produced a total return of 1.06%,
compared to the 6.47% return of its benchmark, the Russell 3000 index, and to
the 2.79% return of its peer group represented by the Lipper Flexible Portfolio
Fund Index.
By December 31st, the Fund had increased another 3.52% to close at $10.83. In
its first full calendar year the Fund achieved a 14.94% return. This compares
favorably to the Lipper Flexible Portfolio Fund Index which tallied 9.80% during
1999, but still lags the 19.43% year-long performance of the Russell 3000 index.
(Please note: The Russell 3000 index is comprised entirely of stocks whereas the
SCM Strategic Growth Fund typically only invests between sixty-five and
ninety-five percent of net assets in stocks. The remaining assets are invested
in bonds or money market instruments.)
Portfolio and Market Thoughts
- -----------------------------
Coincidentally, the net asset value of the Fund peaked at almost the same time
in 1999 as it did in 1998 -- during mid-July. Much of the portfolio's inability
to make much headway during this last six-month reporting period is directly
related to the financial market's reactions to a series of interest rate hikes
coordinated by the Federal Reserve. An aggressive Fed has been diligently
working to maintain today's current low inflation environment. These actions
have been particularly problematic for interest-sensitive companies such as
banks, brokers, insurers, and other financial services firms. As a result, the
Fund's performance has suffered by holding stocks of this group. Included among
them are Charles Schwab & Co., First Tennessee National Corp., Net.B@nk, Inc.,
and Fannie Mae. With the continued threat of rate hikes still looming, the
short-term potential of these and similar companies is, at best, neutral.
However, due to strong business models, quality management teams, and the recent
repeal of the Glass-Steagall Act of 1933, their long-term outlooks still remain
encouraging.
Despite the late summer market swoon, high-tech companies came roaring back by
the end of November. Not only have seasoned, established technology companies
with a solid earnings history performed beyond most expectations, so have the
"dot.com" companies that have little to no earnings. The valuations on many of
these companies range from very expensive to irrationally expensive. Obviously,
the Fund benefited by holding some of the established "techs" such as Cisco
Systems, MCI Worldcom, Lucent Technologies, Scientific-Atlanta, Intel, Dell
Computer, SCI Systems, and RealNetworks. However, most remaining sectors of the
market have been largely ignored by investors resulting in decidedly anemic
returns.
Nineteen ninety-nine was arguably the best year in the nation's economic
history. The economy's top line numbers are astonishing. Real GDP growth posted
another 4% plus gain, unemployment fell to near 4% and consumer price inflation
was dormant at 2%. Living standards have never been higher. Real median
household incomes topped a record $40,000 in 1999, homeownership has surged to
over two-thirds of households, and the share of families owning stocks has
soared to over one-half. What makes 1999 particularly special is that it is the
ninth year of the current economic expansion. Come February, this expansion will
become the longest in the nation's modern economic history.
<PAGE>
Does the year 2000 offer an encore? There are many reasons to be optimistic. It
is increasingly clear that the nation's economic gains are more than simply the
result of the convergence of various fortuitous and fleeting events. Make no
mistake, luck does have something to do with it. In many respects, the U.S.
economy has benefited enormously from the economic, social and political changes
that have disrupted economies from Europe to Asia to South America. More
importantly, however, the economy is undergoing a number of structural changes
that are lifting underlying productivity growth and mitigating the development
of imbalances that historically have undermined economic expansions. The change
receiving the most attention is the seeming accelerated pace of technological
change and its commercial adoption. Nowhere is this clearer than in the
increasingly universal use of the Internet by businesses and households.
There are other structural changes driving the economy's performance that are
equally as important but receiving much less attention. These include the
ongoing globalization of the economy, deregulation of key sectors of the economy
from financial services to telecom, and the aging of the baby boom generation
into its most productive years.
As we moved into Y2k (without hardly a hitch) strong corporate profits, low
inflation and sound monetary and fiscal policy continue to support high equity
valuations. At the same time, evidence of improving world economic growth and a
tighter U.S. labor market have contributed to fears of rising inflation and
concerns that the Fed will continue to raise interest rates. Better global
economic conditions also create the risk that more investors may shift funds
away from U.S. markets into promising opportunities overseas. Abrupt shifts in
investor sentiment have increased stock price volatility as perceptions about
the prospects of various market sectors change. There may be periods of
profit-taking as some speculators on highflying stocks choose to secure their
rewards. In addition, investors will be especially sensitive to signs of
weakness, given a common perception that the market as a whole has experienced
an extended bull run and may be overvalued.
We continue to believe that domestic economic growth likely cannot maintain its
current heady pace and will eventually begin to slow. The momentum in consumer
sectors such as retailing and housing, which forecast expansion of the broad
economy, has gradually lessened in response to a higher interest rate
environment. Nevertheless, the economy remains fundamentally sound, and we
expect that fine-tuning by the Fed will prolong the current favorable
environment of low inflation, high employment and improving productivity.
To sustain growth, fundamentally sound economic theory would suggest the stock
market will need to eventually broaden. Stocks largely ignored in recent years
will again begin to benefit from one of the longest bull markets in history.
Should that be the case, broadly diversified investments like the SCM Strategic
Growth Fund are well positioned for success.
We are grateful for the opportunity to invest your capital and will be working
diligently on your behalf to achieve satisfying long-term investment results.
Sincerely,
/s/ Dan Shanklin /s/ Tim Shanklin
Dan Shanklin Tim Shanklin
Chairman Portfolio Manager
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<TABLE>
<S> <C> <C> <C> <C>
SCM STRATEGIC GROWTH FUND
PORTFOLIO OF INVESTMENTS
November 30, 1999
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - 77.84%
Auto Parts - Original Equipment - 1.75%
Detroit Diesel Corporation ............................................. 5,340 $ 98,123
Johnson Controls, Inc. ................................................. 1,700 92,862
-----------
190,985
-----------
Commercial Services - 6.39%
Central Parking Corporation ............................................ 3,700 95,738
(a)Concord EFS, Inc. ...................................................... 14,550 385,575
(a)NOVA Corporation ....................................................... 7,000 215,250
-----------
696,563
-----------
Computers - 4.24%
(a)Dell Computer Corporation .............................................. 4,050 174,150
(a)NCR Corporation ........................................................ 8,800 288,750
-----------
462,900
-----------
Computer Software & Services - 8.35%
(a)Acxiom Corporation ..................................................... 5,225 92,907
(a)Cisco Systems, Inc. .................................................... 5,100 454,856
(a)RealNetworks, Inc. ..................................................... 2,600 362,700
-----------
910,463
-----------
Electrical Equipment - 1.12%
Emerson Electric Co. ................................................... 2,150 122,550
-----------
Electronics - 3.11%
(a)SCI Systems, Inc. ...................................................... 5,000 339,375
-----------
Electronics - Semiconductor - 2.81%
Intel Corporation ...................................................... 4,000 306,750
-----------
Entertainment - 1.13%
Time Warner, Inc. ...................................................... 2,000 123,125
-----------
Financial - Banks, Commercial - 0.90%
First Tennessee National Corporation ................................... 3,000 97,688
-----------
Financial - Banks, Money Center - 2.29%
Cumberland Bancorp, Inc. ............................................... 20,000 250,000
-----------
Financial - Savings/Loans/Thrifts - 1.76%
(a)Net.B@nk, Inc. ......................................................... 8,100 192,375
-----------
(Continued)
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<TABLE>
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SCM STRATEGIC GROWTH FUND
PORTFOLIO OF INVESTMENTS
November 30, 1999
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Financial - Securities Brokers - 2.64%
The Charles Schwab Corporation ......................................... 7,600 $ 288,325
-----------
Lodging - 1.16%
(a)Fairfield Communities, Inc. ............................................ 10,800 126,225
-----------
Machine - Construction & Mining - 1.02%
(a)Ingersoll-Rand Company ................................................. 2,300 111,406
-----------
Medical Supplies - 3.67%
Medtronic, Inc. ........................................................ 3,302 128,778
(a)Renal Care Group, Inc. ................................................. 13,250 271,625
-----------
400,403
-----------
Medical - Biotechnology - 1.31%
Schering-Plough Corporation ............................................ 2,800 142,975
-----------
Miscellaneous - Manufacturing - 0.30%
(a)Denali Incorporated .................................................... 9,000 32,625
-----------
Restaurants & Food Service - 1.86%
(a)IHOP Corp. ............................................................. 6,120 94,860
(a)Sonic Corporation ...................................................... 4,000 108,000
-----------
202,860
-----------
Retail - Department Stores - 6.30%
Dayton Hudson Corporation .............................................. 1,700 119,956
(a)Saks Incorporated ...................................................... 8,000 140,000
Wal-Mart Stores, Inc. .................................................. 7,410 427,001
-----------
686,957
-----------
Retail - General Merchandise - 1.48%
(a)Dollar Tree Stores, Inc. ............................................... 3,600 161,100
-----------
Retail - Specialty Line - 2.41%
Home Depot, Inc. ....................................................... 2,250 178,172
(a)Tractor Supply Company ................................................. 5,000 84,688
-----------
262,860
-----------
Shoes - Leather - 2.53%
Nike, Inc. ............................................................. 6,000 276,000
-----------
(Continued)
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SCM STRATEGIC GROWTH FUND
PORTFOLIO OF INVESTMENTS
November 30, 1999
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Telecommunications - 4.48%
CenturyTel, Inc. ....................................................... 2,505 $ 115,073
(a)Charter Communications, Inc. ........................................... 9,000 208,688
(a)Mastec, Inc. ........................................................... 4,000 164,750
-----------
488,511
-----------
Telecommunications Equipment - 5.67%
(a)American Tower Corporation ............................................. 6,000 156,750
Lucent Technologies Inc. ............................................... 2,400 175,350
Scientific-Atlanta, Inc. ............................................... 4,900 285,731
-----------
617,831
-----------
Transportation - Air - 3.69%
(a)FDX Corporation ........................................................ 7,300 307,056
Southwest Airlines ..................................................... 5,850 95,063
-----------
402,119
-----------
Utilities - Telecommunications - 5.47%
BellSouth Corporation .................................................. 5,925 273,661
(a)MCI WorldCom, Inc. ..................................................... 3,900 322,481
-----------
596,142
-----------
Total Common Stocks (Cost $6,587,482) .......................................................... 8,489,113
-----------
- ------------------------------------------------------------------------------------------------------------------------------------
Interest Maturity
Principal Rate Date
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 14.98%
United States Treasury Note .............................. $ 60,000 5.500% 02/29/00 60,012
United States Treasury Note .............................. 120,000 5.125% 08/31/00 119,437
United States Treasury Note .............................. 150,000 5.000% 02/28/01 148,359
United States Treasury Note .............................. 150,000 5.625% 05/15/01 149,367
United States Treasury Note .............................. 150,000 6.500% 08/31/01 151,266
United States Treasury Note .............................. 175,000 6.125% 12/31/01 175,342
United States Treasury Note .............................. 175,000 6.625% 03/31/02 177,242
United States Treasury Note .............................. 175,000 6.250% 06/30/02 175,889
United States Treasury Note .............................. 175,000 6.375% 08/15/02 176,395
United States Treasury Strip ............................. 128,000 0.000% 05/15/00 124,951
United States Treasury Strip ............................. 185,000 0.000% 11/15/00 175,159
-----------
Total U.S. Government and Agency Obligations (Cost $1,647,055) ................................. 1,633,419
-----------
(Continued)
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<S> <C> <C> <C> <C>
SCM STRATEGIC GROWTH FUND
PORTFOLIO OF INVESTMENTS
November 30, 1999
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT COMPANY - 6.85%
Evergreen Money Market Treasury Institutional Money
Market Fund Institutional Service Shares.................................. 747,424 $ 747,424
(Cost $747,424) -----------
Total Value of Investments (Cost $8,981,961 (b)) ..................................... 99.67% $10,869,956
Other Assets Less Liabilities ........................................................ 0.33% 35,913
------ -----------
Net Assets .................................................................... 100.00% $10,905,869
====== ===========
(a) Non-income producing investment.
(b) Aggregate cost for financial reporting and federal income tax purposes is the same. Unrealized appreciation
(depreciation) of investments for financial reporting and federal income tax purposes is as follows:
Unrealized appreciation ............................................................................ $ 2,176,079
Unrealized depreciation ............................................................................ (288,084)
-----------
Net unrealized appreciation ............................................ $ 1,887,995
===========
See accompanying notes to financial statements
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SCM STRATEGIC GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
November 30, 1999
(Unaudited)
ASSETS
Investments, at value (cost $8,981,961) ......................................................... $10,869,956
Cash ............................................................................................ 164
Income receivable ............................................................................... 26,541
Deferred organization expenses, net (note 4) .................................................... 19,309
Other assets .................................................................................... 4,435
-----------
Total assets ............................................................................... 10,920,405
-----------
LIABILITIES
Accrued expenses ................................................................................ 14,536
-----------
NET ASSETS
(applicable to 1,041,906 shares outstanding; unlimited
shares of $0.01 par value beneficial interest authorized) ...................................... $10,905,869
===========
NET ASSET VALUE, REDEMPTION AND OFFERING PRICE PER SHARE
($10,905,869 / 1,041,906 shares) ................................................................ $10.47
===========
NET ASSETS CONSIST OF
Paid-in capital ................................................................................. $ 9,814,896
Undistributed net investment income ............................................................. 9,261
Accumulated net realized loss on investments .................................................... (806,283)
Net unrealized appreciation on investments ...................................................... 1,887,995
-----------
$10,905,869
===========
See accompanying notes to financial statements
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<TABLE>
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SCM STRATEGIC GROWTH FUND
STATEMENT OF OPERATIONS
Period ended November 30, 1999
(Unaudited)
INVESTMENT INCOME
Income
Interest ....................................................................................... $ 34,529
Dividends ...................................................................................... 25,941
--------
Total income ............................................................................. 60,470
--------
Expenses
Investment advisory fees (note 2) .............................................................. 39,706
Fund administration fees (note 2) .............................................................. 7,007
Custody fees ................................................................................... 1,885
Registration and filing administration fees (note 2) ........................................... 275
Fund accounting fees (note 2) .................................................................. 12,000
Audit fees ..................................................................................... 5,265
Legal fees ..................................................................................... 4,262
Securities pricing fees ........................................................................ 1,635
Shareholder recordkeeping fees ................................................................. 4,500
Shareholder servicing expenses ................................................................. 2,104
Registration and filing expenses ............................................................... 1,607
Printing expenses .............................................................................. 1,445
Amortization of deferred organization expenses (note 3) ........................................ 2,707
Trustee fees and meeting expenses .............................................................. 802
Other operating expenses ....................................................................... 1,088
--------
Total expenses ........................................................................... 86,288
--------
Less investment advisory fees waived (note 2) ............................................ (28,149)
--------
Net expenses ............................................................................. 58,139
--------
Net investment income ............................................................... 2,331
--------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss from investment transactions ...................................................... (394,389)
Increase in unrealized appreciation on investments .................................................. 571,184
--------
Net realized and unrealized gain on investments ................................................ 176,795
--------
Net increase in net assets resulting from operations ..................................... $179,126
========
See accompanying notes to financial statements
</TABLE>
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SCM STRATEGIC GROWTH FUND
STATEMENTS OF CHANGES IN NET ASSETS
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
For the
period from
June 1, 1998
(initial
Period ended seed date)
November 30, to May 31,
1999 1999
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS
Operations
Net investment income .............................................................. $ 2,331 $ 15,111
Net realized loss from investment transactions ..................................... (394,389) (411,894)
Increase in unrealized appreciation on investments ................................. 571,184 1,316,811
----------- -----------
Net increase in net assets resulting from operations ........................... 179,126 920,028
----------- -----------
Distributions to shareholders from
Net investment income .............................................................. 0 (8,181)
----------- -----------
Capital share transactions
Increase in net assets resulting from capital share transactions (a) ............... 2,120,168 7,694,728
----------- -----------
Total increase in net assets .............................................. 2,299,294 8,606,575
NET ASSETS
Beginning of period ..................................................................... 8,606,575 0
----------- -----------
End of period (including undistributed net investment income of ......................... $10,905,869 $ 8,606,575
$9,261 at November 30, 1999 and $6,930 at May 31, 1999) =========== ===========
(a) A summary of capital share activity follows:
-----------------------------------------------------------------------------------
Period from June 1, 1998
Period ended (initial seed date)
November 30, 1999 to May 31, 1999
Shares Value Shares Value
-----------------------------------------------------------------------------------
Shares sold .................................... 330,732 $ 3,394,287 865,908 $ 8,035,651
Shares issued for reinvestment
of distributions .......................... 0 0 878 8,181
----------- ----------- ----------- -----------
330,732 3,394,287 866,786 8,043,832
Shares redeemed ................................ (119,963) (1,274,119) (35,649) (349,104)
----------- ----------- ----------- -----------
Net increase .............................. 210,769 $ 2,120,168 831,137 $ 7,694,728
=========== =========== =========== ===========
See accompanying notes to financial statements
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SCM STRATEGIC GROWTH FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Period ended Period ended
November 30, May 31,
1999 1999 (a)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period .................................................. $10.36 $10.00
Income from investment operations
Net investment income ...................................................... 0.00 0.02 (b)
Net realized and unrealized gain on investments ............................ 0.11 0.35 (b)
----------- -----------
Total from investment operations ...................................... 0.11 0.37
----------- -----------
Distributions to shareholders from
Net investment income ...................................................... (0.00) (0.01)
----------- -----------
Net asset value, end of period ........................................................ $10.47 $10.36
=========== ===========
Total return .......................................................................... 1.06 % 3.76 %
=========== ===========
Ratios/supplemental data
Net assets, end of period ....................................................... $10,905,869 $ 8,606,575
=========== ===========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees .............................. 1.86 % (c) 2.68 % (c)
After expense reimbursements and waived fees ............................... 1.25 % (c) 1.25 % (c)
Ratio of net investment gain (loss) to average net assets
Before expense reimbursements and waived fees .............................. (0.56)% (c) (1.07)% (c)
After expense reimbursements and waived fees ............................... 0.06 % (c) 0.35 % (c)
Portfolio turnover rate ......................................................... 20.83 % 45.51 %
(a) For the period from June 29, 1998 (commencement of operations) to May 31, 1999.
(b) Includes undistributed net investment income of $0.00 per share and undistributed net realized gains and unrealized gains of
$0.00 per share from June 1, 1998 (initial seed date) through June 29, 1998 (commencement of operations).
(c) Annualized.
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SCM STRATEGIC GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
November 30, 1999
(Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
The SCM Strategic Growth Fund (the "Fund") is a diversified series of
shares of beneficial interest of The SCM Investment Trust (the
"Trust"). The Trust, an open-ended investment company, was organized on
April 18, 1998 as a Massachusetts Business Trust and is registered
under the Investment Company Act of 1940, as amended. The investment
objective of the Fund is to provide its shareholders with a maximum
total return consisting of any combination of realized and unrealized
capital appreciation. Current income is of secondary importance. The
Fund will seek to achieve this objective by investing primarily in a
flexible portfolio of equity securities, fixed income securities, and
money market instruments. The Fund was initially seeded on June 1,
1998, and commenced operations on June 29, 1998. The following is a
summary of significant accounting policies followed by the Fund.
A. Security Valuation - The Fund's investments in securities are
carried at value. Securities listed on an exchange or quoted on a
national market system are valued at the last sales price as of
4:00 p.m. New York time on the day of valuation. Other securities
traded in the over-the-counter market and listed securities for
which no sale was reported on that date are valued at the most
recent bid price. Securities for which market quotations are not
readily available, if any, are valued by using an independent
pricing service or by following procedures approved by the Board
of Trustees. Short-term investments are valued at cost which
approximates value.
B. Federal Income Taxes - 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.
The Fund has a capital loss carryforward for federal income tax
purposes of $394,389 which expires in the year 2007. It is the
intention of the Board of Trustees of the Trust not to distribute
any realized gains until the carryforwards have been offset or
expire.
C. Investment Transactions - Investment transactions are recorded on
the trade date. Realized gains and losses are determined using
the specific identification cost method. Interest income is
recorded daily on an accrual basis. Dividend income is recorded
on the ex-dividend date.
D. Distributions to Shareholders - The Fund may declare dividends
quarterly, payable in March, June, September and December, on a
date selected by the Trust's Trustees. In addition, distributions
may be made annually in December out of net realized gains
through October 31 of that year. Distributions to shareholders
are recorded on the ex-dividend date. The Fund may make a
supplemental distribution subsequent to the end of its fiscal
year ending May 31.
E. Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
amounts of assets, liabilities, expenses and revenues reported in
the financial statements. Actual results could differ from those
estimates.
(Continued)
<PAGE>
SCM STRATEGIC GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
November 30, 1999
(Unaudited)
NOTE 2 - INVESTMENT ADVISORY FEE AND OTHER RELATED PARTY TRANSACTIONS
Pursuant to an investment advisory agreement, Shanklin Capital
Management, Inc. (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 0.85% of the Fund's average daily net assets.
The Advisor intends to voluntarily waive all or a portion of its fee
and reimburse expenses of the Fund to limit total Fund operating
expenses to 1.25% of the average daily net assets of the Fund. There
can be no assurance that the foregoing voluntary fee waivers or
reimbursements will continue. The Advisor has voluntarily waived a
portion of its fee amounting to $28,149 ($0.03 per share) for the
period ended November 30, 1999.
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 0.15% of the Fund's first $100 million of average daily
net assets, and 0.125% of average daily net assets over $100 million.
The Administrator also receives a monthly fee of $2,000 for accounting
and recordkeeping services. The contract with the Administrator
provides that the aggregate fees for the aforementioned administration,
accounting and recordkeeping services shall not be less than $3,000 per
month. The Administrator also charges the Fund for certain expenses
involved with the daily valuation of portfolio securities.
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 shares, acts as dividend and
distribution disbursing agent, and performs other shareholder servicing
functions.
Certain Trustees and officers of the Trust are also officers of the
Advisor, the distributor or the Administrator.
NOTE 3 - DEFERRED ORGANIZATION EXPENSES
All expenses of the Fund incurred in connection with its organization
and the registration of its shares have been assumed by the Fund. The
organization expenses are being amortized over a period of sixty
months. Investors purchasing shares of the Fund bear such expenses only
as they are amortized against the Fund's investment income.
NOTE 4 - PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments, other than short-term investments,
aggregated $3,590,622 and $1,811,839, respectively, for the period
ended November 30, 1999.
