As filed with the Securities and Exchange Commission on December 29, 2000
Securities Act File No. 333-44568
Investment Company Act File No. 811-10085
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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. 2 [X]
Post-Effective Amendment No. [ ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 2 [X]
(Check appropriate box or boxes.)
HILLMAN CAPITAL MANAGEMENT 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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This Registration Statement shall hereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933, as amended, or shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
shall determine.
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HILLMAN CAPITAL MANAGEMENT INVESTMENT TRUST
Contents of Registration Statement
This registration statement consists of the following papers and documents:
Cover Sheet
Contents of Registration Statement
Hillman Capital Management Funds
-Part A - Prospectus
-Part B - Statement of Additional Information
Part C - Other Information and Signature Page
Exhibit Index
Exhibits
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PART A
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HILLMAN CAPITAL MANAGEMENT INVESTMENT TRUST
FORM N-1A
PROSPECTUS
The Hillman Aggressive Equity Fund - Cusip Number _________
The Hillman Total Return Fund - Cusip Number _________
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HILLMAN CAPITAL MANAGEMENT FUNDS
Each a series of the
Hillman Capital Management Investment Trust
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PROSPECTUS
December __, 2000
This prospectus includes information about the two Hillman Capital Management
Funds - The Hillman Aggressive Equity Fund and The Hillman Total Return Fund
(each a "Fund" and, collectively, the "Funds"). The Hillman Aggressive Equity
Fund seeks long-term capital appreciation. The Hillman Total Return Fund seeks
maximum total return consisting of capital appreciation and current income.
Investment Advisor
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Hillman Capital Management, Inc.
613 Third Street, Eastport Maritime Building
Annapolis, Maryland 21403
www.hillmancapital.com
1-800-525-3863
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 Funds nor the Funds'
distributor is a bank. You should read the prospectus carefully before you
invest or send money.
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TABLE OF CONTENTS
Page
THE FUNDS..................................................................2
Investment Objectives.............................................2
Principal Investment Strategies...................................2
The Hillman Aggressive Equity Fund...........................2
The Hillman Total Return Fund................................3
Principal Risks of Investing in the Funds.........................4
Both Funds...................................................5
Total Return Fund ...........................................5
Performance Information...........................................6
Fees and Expenses of the Funds....................................4
MANAGEMENT OF THE FUNDS....................................................4
The Investment Advisor............................................4
The Administrator.................................................4
The Transfer Agent................................................4
The Distributor...................................................4
INVESTING IN THE FUNDS.....................................................4
Minimum Investment................................................4
Purchase and Redemption Price.....................................4
Purchasing Shares.................................................4
Redeeming Your Shares.............................................4
OTHER IMPORTANT INVESTMENT INFORMATION.....................................4
Dividends, Distributions, and Taxes..............................16
Financial Highlights.............................................17
Additional Information...................................Back Cover
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THE FUNDS
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INVESTMENT OBJECTIVES
The Hillman Aggressive Equity Fund ("Aggressive Equity Fund") seeks long-term
capital appreciation. The Aggressive Equity Fund is a non-diversified series of
the Hillman Capital Management Investment Trust ("Trust"). The Hillman Total
Return Fund ("Total Return Fund") seeks maximum total return through a
combination of capital appreciation and current income. The Total Return Fund is
a diversified series of the Trust.
PRINCIPAL INVESTMENT STRATEGIES
The Hillman Aggressive Equity Fund
In seeking to achieve its objective, the Aggressive Equity Fund normally invests
at least 70% of total assets in common stocks of companies whose value Hillman
Capital Management, Inc. ("Advisor") believes has temporarily fallen out of
favor for reasons that are considered non-recurring or short-term; whose value
is not currently well known; or whose value is not fully recognized by the
public.
In selecting investments for the Aggressive Equity Fund, the Advisor first looks
at qualitative measures of a company. Qualitative measures of a company include:
o dominance in a particular industry or niche market;
o management style and adaptability;
o strength of pricing and purchasing power;
o barriers to industry competition;
o strength of brand or franchise with commensurate brand loyalty; and
o quality of products and services.
If certain companies meet most or all of the qualitative measures, the Advisor
then seeks to identify which of those companies possess certain positive
quantitative measures and which the Advisor feels show superior prospects for
growth. These companies may, in the view of the Advisor, exhibit positive
changes such as a promising new product, new distribution strategy, new
manufacturing technology, new management team or management philosophy. These
companies may also be responsible for technological breakthroughs and/or unique
solutions to market needs. The quantitative measures of a company include:
o price-to-earnings ratio;
o cash flow;
o balance sheet strength; and
o dividend growth potential.
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The Advisor allocates a target percentage of total portfolio value to each
security it purchases. Under normal market conditions, the Advisor intends to be
fully invested in equities with the portfolio comprised of 12 to 20 stocks. From
time to time, the Aggressive Equity Fund may also focus the Fund's assets in
securities of one or more particular sectors of the economy. The sectors in
which the Aggressive Equity Fund may focus its investments are the financial,
healthcare, retail, and technology sectors.
The Advisor expects to sell a particular security when its market value exceeds
15% of total portfolio market value. The Advisor may also sell a portfolio
holding if the Advisor believes that the price of the security is overvalued or
to rebalance the security to the Advisor's targeted percentage of total
portfolio value for that security.
When the Advisor believes that market or financial conditions warrant or to meet
liquidity, redemption, and short-term investing needs, the Aggressive Equity
Fund may also invest in U.S. Government and agency securities, cash, money
market securities, and other high quality, investment-grade fixed-income
securities. Such investment strategies are inconsistent with the Aggressive
Equity Fund's investment objective and could result in the Aggressive Equity
Fund not achieving its investment objective.
The Hillman Total Return Fund
The Total Return Fund seeks maximum total return through a combination of
capital appreciation and current income. The Total Return Fund is a diversified
series of the Trust. In seeking to achieve its objective, Total Return Fund
allocates its assets among stocks, bonds, and short-term instruments. Stocks
include equity securities of all types. Bonds include all varieties of
fixed-income securities including investment-grade and lower-quality debt
securities maturing in more than one year. Short term/money market instruments
include all types of short-term and money market instruments.
The Advisor has the ability to allocate the Total Return Fund's assets in
stocks, bonds, and short-term instruments within various ranges.
The Advisor will vary the percentage of the Fund's assets allocated to each of
the above categories based on the Advisor's judgment of market and economic
conditions. The Advisor regularly reviews the Total Return Fund's allocation and
makes changes gradually to favor investments that it believes will provide the
most favorable outlook for achieving the Total Return Fund's investment
objective.
In selecting stocks for the Total Return Fund, the Advisor first looks at
qualitative measures of a company. Qualitative measures of a company include:
o dominance in a particular industry or niche market;
o management style and adaptability;
o strength of pricing and purchasing power;
o barriers to industry competition;
o strength of brand or franchise with commensurate brand loyalty; and
o quality of products and services.
3
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If certain companies meet most or all of the qualitative measures, the Advisor
then seeks to identify which of those companies possess certain positive
quantitative measures. Quantitative measures of a company include:
o price-to-earnings ratio;
o cash flow;
o balance sheet strength; and
o dividend growth potential.
In selecting bonds for the Total Return Fund, the Advisor examines the spread
relationships of investment-grade bonds in determining the quality distribution;
and expected trends in inflation and interest rates in structuring the maturity
distributions.
The Advisor may invest no more than 15% of the Total Return Fund's assets in
bonds that have credit ratings lower than Baa by Moody's Investor Service, Inc.
or an equivalent rating by a nationally recognized securities rating
organization described in the Statement of Additional Information ("SAI"), as
determined by the Advisor. These securities are also referred to as "junk
bonds."
The Total Return Fund may also make short sales if the Advisor has the
expectation that the market price for a particular security will drop in the
future. A "short sale" is the sale by the Total Return Fund of a security that
has been borrowed from a third party that will be replaced at a later date in
the future. The Advisor does not intend to utilize short sales on a regular
basis; however, the Total Return Fund may commit up to 25% of the Total Return
Fund's assets to the short sales investment practice if the Advisor feels that
market conditions justify the commitment.
PRINCIPAL RISKS OF INVESTING IN THE FUNDS
Both Funds
An investment in the Funds is subject to investment risks, including the
possible loss of some or all of the principal amount invested. There can be no
assurance that either of the Funds will be successful in meeting its investment
objective.
Generally, the Funds will be subject to the following additional risks:
o Market Risk: Market risk refers to the risk related to investments in
securities in general and the daily fluctuations in the securities markets.
The Funds' performances per share will change daily based on many factors,
including fluctuation in interest rates, the quality of the instruments in
each Fund's investment portfolio, national and international economic
conditions and general market conditions.
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Aggressive Equity Fund
In addition to the risks outlined above, which may affect both the Aggressive
Equity Fund and the equity portion of the Total Return Fund, the Aggressive
Equity Fund will be subject to additional risks:
o Management style risk. Different types of securities tend to shift into and
out of favor with stock market investors depending on market and economic
conditions. Because the Fund may invest in growth-style stocks, the Fund's
performance may at times be better or worse than the performance of stock
funds that focus on other types of stocks, or that have a broader
investment style, which may adversely affect the Fund's net asset value.
o Non-diversified status. The Aggressive Equity Fund is considered a
non-diversified fund and therefore can invest a greater portion of assets
in securities of individual issuers than a diversified fund. As a result,
changes in the market value of a single issuer could cause greater
fluctuation in share price than would occur in a more diversified fund.
o Sector Focus. Another area of risk involves the potential focus of the
Fund's assets in securities of particular sectors. These sectors include
the financial sector, healthcare sector, retail sector, and the technology
sector. Because the Fund's investments may, from time to time, be more
heavily invested in particular sectors, the value of its shares may be
especially sensitive to factors and economic risks that specifically affect
those sectors. 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 sectors in which the Fund
may invest could be subject to greater government regulation than other
sectors and, therefore, changes in regulatory policies for those sectors
may have a material effect on the value of securities issued by companies
in those sectors. The specific risks for each of the sectors in which the
Fund may focus its investments include additional risks as describe below:
o Financial Sector. Companies in this sector are subject to risks
including extensive governmental regulation; decreased profits
resulting from changes in interest rates and loans losses which
usually increase in economic downturns; severe price competition; and
increased inter-industry consolidation and competition; all of which
may adversely affect the value of those holdings.
o Healthcare Sector. Companies in this sector are subject to extensive
litigation based on product liability and similar claims; dependence
on patent protection and expiration of patents; competitive forces
that make it difficult to raise prices; long and costly regulatory
processes; and product obsolescence.
o Retail Sector. Companies in this sector may be adversely affected by
negative changes in the domestic and international economies, interest
rates, competition, consumer confidence, disposable household income,
and consumer spending. These companies are also subject to severe
competition and changes in demographics and consumer tastes, which may
have an adverse effect on the performance of these companies.
5
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o Technology Sector. Companies in this sector may be adversely affected
due to the intense competition both domestically and internationally;
limited product lines, markets, financial resources or personnel,
rapid product obsolescence and frequent new product introduction;
dramatic and unpredictable changes in growth rates; and dependence on
patent and intellectual property rights.
Total Return Fund
In addition to the risks outlined above, which may affect both the Aggressive
Equity Fund and the equity portion of the Total Return Fund, there will be
additional risks for the fixed income portion of the Total Return Fund
portfolio. These risks include:
o Credit Risk: Credit risk is the risk that the issuer or guarantor of a debt
security or counterparty to the Total Return Fund's transactions will be
unable or unwilling to make timely principal and/or interest payments, or
otherwise will be unable or unwilling to honor its financial obligations.
The Total Return Fund may be subject to credit risk to the extent that it
invests in debt securities or engages in transactions, such as securities
loans, which involve a promise by a third party to honor an obligation to
the Total Return Fund. Credit risk is particularly significant to the Total
Return Fund when investing a portion of its assets in "junk bonds" or
lower-rated securities.
o Interest Rate Risk: The price of a bond or a fixed income security is
dependent upon interest rates. Therefore, the share price and total return
of the Total Return Fund, when investing a significant portion of its
assets in bonds or fixed income securities, will vary in response to
changes in interest rates. A rise in interest rates causes the value of a
bond to decrease, and vice versa. There is the possibility that the value
of the Total Return Fund's investment in bonds or fixed income securities
may fall because bonds or fixed income securities generally fall in value
when interest rates rise. The longer the term of a bond or fixed income
instrument, the more sensitive it will be to fluctuations in value from
interest rate changes. Changes in interest rates may have a significant
effect if the Total Return Fund is then holding a significant portion of
its assets in fixed income securities with long-term maturities.
In the case of mortgage-backed securities, rising interest rates tend to
extend the term to maturity of the securities, making them even more
susceptible to interest rate changes. When interest rates drop, not only
can the value of fixed income securities drop, but also the yield can drop,
particularly where the yield is tied to changes in interest rates, such as
adjustable mortgages. Also when interest rates drop, the holdings of
mortgage-backed securities by the Total Return Fund can reduce returns if
the owners of the underlying mortgages pay off their mortgages sooner than
expected since the funds prepaid must be reinvested at the then lower
prevailing rates. This is known as prepayment risk. When interest rates
rise, the holdings of mortgage-backed securities by the Total Return Fund
can reduce returns if the owners of the underlying mortgages pay off their
mortgages later than anticipated. This is known as extension risk.
6
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o Maturity Risk: Maturity risk is another factor that can affect the value of
the Total Return Fund's debt holdings. The Total Return Fund does not have
a limitation policy regarding the length of maturity of its debt holdings.
In general, the longer the maturity of a debt obligation, the higher its
yield and the greater its sensitivity to changes in interest rates.
Conversely, the shorter the maturity, the lower the yield, but the greater
the price stability.
o Investment-Grade Securities Risk: Debt securities are rated by national
bond ratings agencies. Securities rated BBB by Standard & Poor's ("S&P") or
Baa by Moody's Investors Services, Inc. ("Moody's") are considered
investment grade securities, but are somewhat riskier than more highly
rated investment-grade obligations (those rated A or better by S&P and Aa
or better by Moody's) because they are regarded as having only an adequate
capacity to pay principal and interest, are considered to lack outstanding
investment characteristics, and may be speculative.
o Short Sales: In a short sale, the Total Return Fund will sell a security it
does not own anticipating that the price will decline. To complete a short
sale, the Total Return Fund must borrow the security to make delivery and
must then replace the security borrowed by buying it at the prevailing
market price, which may be higher or lower than the price at which the
Total Return Fund sold the security short. If the price of the security
rises, the Total Return Fund may have to cover its short position at a
higher price than the short sale price, resulting in a loss. Short sales
involve leverage, which may exaggerate a gain or loss.
PERFORMANCE INFORMATION
Because the Funds have no operating histories, there is no performance
information for the Funds to be presented here. However, you may request a copy
of the Funds' Annual and Semi-annual Reports once they become available, at no
charge, by calling the Funds.
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FEES AND EXPENSES OF THE FUNDS
These tables describe the fees and expenses that you may pay if you buy and hold
shares of the Funds:
Shareholder Fees For the Funds
(fees paid directly from your investment)
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Maximum sales charge (load) imposed on purchases
(as a percentage of offering price) ..........................None
Redemption fee ..................................................None
Annual Fund Operating Expenses For the Funds
(expenses that are deducted from Fund assets)
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Aggressive Equity Total Return
Fund Fund
Management Fees.............................. 1.00% 1.00%
Distribution and/or Service (12b-1) Fees..... 0.25% 0.25%
Other Expenses............................... 0.95%* 0.95%*
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Total Annual Fund Operating Expenses......... 2.20%* 2.20%*
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* Since the Funds will commence operations after December __, 2000,
"Other Expenses" and "Total Annual Fund Operating Expenses" for the
Funds are based on amounts estimated for the current fiscal year and
with average net assets of $6 million per Fund. The Administrator has
agreed to voluntarily waive its fund accounting and administration fees
for each of the Funds' initial fiscal year to end August 31, 2001.
Example: This example shows you the expenses you may pay over time by investing
in each of the Funds. Since all mutual funds use the same hypothetical
conditions, it should help you compare the costs of investing in the Funds
versus other funds. The example assumes the following conditions:
(1) You invest $10,000 in one of the Funds for the periods shown;
(2) You reinvest all dividends and distributions;
(3) You redeem all of your shares at the end of those periods;
(4) You earn a 5% total return; and
(5) The Funds' expenses remain the same.
Although your actual costs may be higher or lower, the following table shows you
what your costs may be under the conditions listed above.
1 YEAR 3 YEARS
------------------------ -------------- ---------------
Aggressive Equity $223 $688
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Total Return $223 $688
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MANAGEMENT OF THE FUNDS
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THE INVESTMENT ADVISOR
The Funds' Investment Advisor is Hillman Capital Management, Inc., 613 Third
Street, Annapolis, Maryland 21403. The Advisor serves in that capacity pursuant
to an advisory contract with the Trust on behalf of the Funds. Subject to the
authority of the Trustees, the Advisor provides guidance and policy direction in
connection with its daily management of the Funds' assets. The Advisor manages
the investment and reinvestment of the Funds' assets. The Advisor is also
responsible for the selection of broker-dealers through which the Funds execute
portfolio transactions, subject to the brokerage policies established by the
Trustees, and it provides certain executive personnel to the Funds.
The Advisor has not previously served as an investment advisor to any other
registered investment companies. However, the executives and members of the
advisory staff of the Advisor have extensive experience in other capacities in
managing investments for clients, including individuals, corporations,
non-taxable entities, and other business and private accounts since the firm was
founded in 1998. The Advisor currently has approximately $20 million in assets
under management.
The Funds will be managed primarily by Mark A. Hillman, who will have overall
responsibility for the general management of the Funds. Mr. Hillman is the
founder and controlling shareholder of the Advisor. Mr. Hillman has served as
President of the Advisor since 1998. Prior to 1998, Mr. Hillman served as Chief
Investment Officer of Custom Asset Management, Inc. and Menocal Capital
Management, Inc.
The Advisor's Compensation. As full compensation for the investment advisory
services provided to the Funds, the Advisor receives monthly compensation based
on each Fund's average daily net assets at the annual rate of 1.00%.
Brokerage Practices. In selecting brokers and dealers to execute portfolio
transactions, the Advisor may consider research and brokerage services furnished
to the Advisor or its affiliates. Subject to seeking the most favorable net
price and execution available, the Advisor may also consider sales of shares of
the Funds as a factor in the selection of brokers and dealers.
The Investment Company Act of 1940, as amended ("1940 Act") generally prohibits
the Funds from engaging in principal securities transactions with an affiliate
of the Advisor. Thus, the Funds do not engage in principal transactions with any
affiliate of the Advisor. The Funds have adopted procedures, under Rule 17e-1
under the 1940 Act, that are reasonably designed to provide that any brokerage
commission the Funds pay to an affiliate of the Advisor does not exceed the
usual and customary broker's commission. In addition, the Funds will adhere to
Section 11(a) of the Securities Exchange Act of 1934, as amended, and any
applicable rules thereunder governing floor trading.
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THE ADMINISTRATOR
The Nottingham Company, Inc. ("Administrator") assists the Trust in the
performance of its administrative responsibilities to the Funds, coordinates the
services of each vendor of the Funds, and provides the Funds 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 services to the Funds.
THE TRANSFER AGENT
NC Shareholder Services, LLC ("NCSS") serves as the transfer agent and
dividend-disbursing agent of the Funds. As indicated later in the section of
this Prospectus, "Investing in the Funds," NCSS will handle your orders to
purchase and redeem shares of the Funds, and will disburse dividends paid by the
Funds.
THE DISTRIBUTOR
Capital Investment Group, Inc. ("Distributor") is the principal underwriter and
distributor of the Funds' shares and serves as the Funds' exclusive agent for
the distribution of Fund's shares. The Distributor may sell the Funds' shares to
or through qualified securities dealers or others.
Distribution Plan. The Funds have adopted a distribution plan in accordance with
Rule 12b-1 under the 1940 Act ("Distribution Plan"). The Distribution Plan
provides that each of the Funds will annually pay the Distributor up to 0.25% of
the average daily net assets of the Funds' shares for activities primarily
intended to result in the sale of those shares or the servicing of those shares,
including to compensate entities for providing distribution and shareholder
servicing with respect to the Funds' shares (this compensation is commonly
referred to as "12b-1 fees"). Because the 12b-1 fees are paid out of the Funds'
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.
Other Expenses. In addition to the 12b-1 fees and the investment advisory fees,
the Funds pay all expenses not assumed by the Funds' Advisor or Administrator,
including, without limitation: the fees and expenses of its independent
accountants and of its legal counsel; the costs of printing and mailing to
shareholders annual and semi-annual reports, proxy statements, prospectuses,
statements of additional information and supplements thereto; the costs of
printing registration statements; bank transaction charges and custodian's fees;
any proxy solicitors' fees and expenses; 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 each
separate series of the Trust, such as the Funds, on a basis that the Trustees
deem 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.
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INVESTING IN THE FUNDS
MINIMUM INVESTMENT
The Funds' shares are sold and redeemed at net asset value. Shares may be
purchased by any account managed by the Advisor and any other institutional
investor or any broker-dealer authorized to sell shares in the Funds. The
minimum initial investment is $5,000 ($2,000 for IRA and Keogh Plans) and the
minimum additional investment is $500. Each of the Funds may, in the Advisor's
sole discretion, accept certain accounts with less than the minimum investment.
PURCHASE AND REDEMPTION PRICE
Determining a Fund's Net Asset Value. The price at which you purchase or redeem
shares is based on the next calculation of net asset value after an order is
accepted in good form. An order is considered to be in good form if it includes
a complete and accurate application and payment in full of the purchase amount.
A Fund's net asset value per share is calculated by dividing the value of the
Fund's total 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 each of the Funds is normally determined at the time
regular trading closes on the New York Stock Exchange (currently 4:00 p.m.
Eastern time, Monday through Friday), except on business holidays when the New
York Stock Exchange is closed.
In valuing a Fund's total assets, portfolio securities are generally valued at
their market value. Instruments with maturities of 60 days or less are valued at
amortized cost, which approximates market value. Securities and assets for which
representative market quotations are not readily available are valued at fair
value as determined in good faith under policies approved by the Board of
Trustees.
Other Matters. Purchases and redemptions of shares of the same class by the same
shareholder on the same day will be netted for each of the Funds. All redemption
requests will be processed and payment with respect thereto will normally be
made within seven days after tenders. Each of the Funds may suspend redemption,
if permitted by the 1940 Act, for any period during which the New York Stock
Exchange is closed or during which trading is restricted by the Securities 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 each of the Funds' shareholders. Additionally, during drastic
economic and market changes, telephone redemption privileges may be difficult to
implement. Also, if the Trustees determine that it would be detrimental to the
best interest of the Funds' remaining shareholders to make payment in cash, each
of the Funds may pay redemption proceeds in whole or in part by a
distribution-in-kind of readily marketable securities.
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PURCHASING SHARES
The Funds have authorized one or more brokers to accept purchase and redemption
orders on its behalf and such brokers are authorized to designate intermediaries
to accept orders on behalf of the Funds. In addition, orders will be deemed to
have been received by the Funds when an authorized broker, or broker authorized
designee, accepts the order. The orders will be priced at the particular fund's
net asset value next computed after the orders are received by the authorized
broker, or broker authorized designee. Investors may also be charged a fee if
they effect transactions through a broker or agent.
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, your purchase will be canceled. You will
also be responsible for any losses or expenses incurred by the Fund,
Administrator, and Transfer Agent. The Fund(s) will charge a $20 fee and may
redeem shares of the Fund(s) own by the purchaser or another identically
registered Hillman account to recover any such losses. For regular mail orders,
please complete the attached Fund Shares Application and mail it, along with
your check made payable to the applicable Fund to:
Hillman Capital Management Funds
c/o NC Shareholder Services
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
Please remember to add a reference to the applicable Fund to your check to
ensure proper credit to your account. 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 but
you have not received your number, please indicate this on the application.
Taxes are not withheld from distributions to U.S. investors if certain IRS
requirements regarding the SSN and TIN 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
Funds at 1-800-773-3863, before wiring funds, to advise the Funds of the
investment, dollar amount, and the account identification number. Additionally,
please have your bank use the following wire instructions:
First Union National Bank of North Carolina
Charlotte, North Carolina
ABA # 053000219
For credit to either: (please specify)
The Hillman Aggressive Equity Fund
Account # 2000003961005
The Hillman Total Return Fund
Account # 2000008667799
For further credit to (shareholder's name and SSN or TIN)
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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 $500. Before adding funds by bank wire, please call the
Funds at 1-800-773-3863 and follow the above directions for wire purchases. Mail
orders should include, if possible, the "Invest by Mail" stub that is attached
to your confirmation statement. Otherwise, please identify your account in a
letter accompanying your purchase payment.
Purchases In Kind. You may, if the Funds approve, purchase shares of the Funds
with securities that are eligible for purchase by the Funds (consistent with
that particular Fund's investment restrictions, policies, and goal) and that
have a value that is readily ascertainable in accordance with the particular
Fund's valuation policies. Prior to investing in the Fund, potential investors
should consult with the Advisor to ascertain whether their securities would
qualify to be accepted as a purchase in kind for the particular Fund.
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,
each of the Funds will automatically charge the shareholder's 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 the appropriate Fund.
Exchange Feature. You may exchange shares of any of The Hillman Capital
Management Funds for shares of any other series of the Trust advised by the
Advisor and offered for sale in the state in which you reside. Shares may be
exchanged for shares of any other series of the Trust at the net asset value.
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
Advisor to not be in the best interest of the shareholders of the Funds. Such a
pattern may, at the discretion of the Advisor, be limited by the Funds' refusal
to accept further purchase and/or exchange orders from an investor, after
providing the investor with 60-days' prior notice.
The Board of Trustees reserves the right to suspend, terminate, or amend the
terms of the exchange privilege upon 60-days' written notice to the
shareholders.
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.
13
<PAGE>
REDEEMING YOUR SHARES
Regular Mail Redemptions. Regular mail redemption request should be addressed
to:
Hillman Capital Management Funds
c/o NC Shareholder Services
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
Regular mail redemption requests should include:
(1) Your letter of instruction specifying the applicable Fund, account number
and umber 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;
(2) Any required signature guarantees (see "Signature Guarantees" below); and
(3) Other supporting legal documents, if required in the case of estates,
trusts, guardianships, custodianships, corporations, partnerships, pension
or profit sharing plans, and other entities.
Your redemption proceeds normally will be sent to you within 7 days after
receipt of your redemption request. However, the Funds may delay forwarding a
redemption check for recently purchased shares while it determines whether the
purchase payment will be honored. Such delay (which may take up to 15 days from
the date of purchase) may be reduced or avoided if the purchase is made by
certified check or wire transfer. In all cases, the net asset value next
determined after 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. Each of the Funds will redeem shares
in this manner when so requested by the shareholder only if the shareholder
confirms redemption instructions in writing.
Each of the Funds may rely upon confirmation of redemption requests transmitted
via facsimile (FAX# 252-972-1908). The confirmation instructions must include:
(1) Name of Fund;
(2) Shareholder name and account number;
(3) Number of shares or dollar amount to be redeemed;
(4) Instructions for transmittal of redemption funds to the shareholder; and
(5) Shareholder signature as it appears on the application then on file with
the Funds.
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 each of the Funds may not be redeemed
by wire on days in which your bank is not open for business. You can change your
redemption instructions anytime you wish by filing a letter including your new
redemption instructions with the Funds. See "Signature Guarantees" below.
14
<PAGE>
Each of the Funds, in its discretion, may choose to pass through to redeeming
shareholders any charges imposed by the Custodian for wire redemptions. The
Custodian currently charges each of the Funds $10.00 per transaction for wiring
redemption proceeds. If this cost is passed through to redeeming shareholders by
the Funds, 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
Funds at 1-773-525-3863. Redemption proceeds will only be sent to the bank
account or person named in your Fund Shares Application currently on file with
the Funds. Telephone redemption privileges authorize the Funds to act on
telephone instructions from any person representing himself or herself to be the
investor and reasonably believed by the Funds to be genuine. Each of the Funds
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, each of the Funds will be liable for any losses due to
fraudulent or unauthorized instructions. The Funds will not be liable for
following telephone instructions reasonably believed to be genuine.
Redemptions In Kind. The Funds do not intend, under normal circumstances, to
redeem their shares 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 a 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 a 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 each Fund committed itself to pay redemptions in
cash, rather than in kind, to any shareholder of record of that Fund who redeems
during any 90-day period, the lesser of (a) $250,000 or (b) 1% of the Fund's net
asset value at the beginning of such period.
Signature Guarantees. To protect your account and each of the Funds 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.
15
<PAGE>
Systematic Withdrawal Plan. A shareholder who owns shares of one or more of the
Funds valued at $10,000 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 particular
Fund(s) 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 Funds or
paid in cash. Call or write the Funds for an application form.
OTHER IMPORTANT INVESTMENT INFORMATION
--------------------------------------
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 Funds.
The Funds will distribute most of their respective 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 Funds will not be taxed on amounts they distribute, 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 one of
the Funds 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 one of the Funds 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 prior 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 between
other series of the Trust may be treated as a sale and subject to federal income
taxes.
16
<PAGE>
As with all mutual funds, the Funds 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 Funds 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.
FINANCIAL HIGHLIGHTS
Because the Funds are new funds, there is no financial or performance
information included in this prospectus. Once the information becomes available,
you may request this information at no charge by calling the Funds at
1-800-773-3863.
17
<PAGE>
ADDITIONAL INFORMATION
________________________________________________________________________________
HILLMAN CAPITAL MANAGEMENT FUNDS
________________________________________________________________________________
Additional information about the Funds is available in the Funds' SAI, which is
incorporated by reference into this prospectus. Additional information about the
Funds' investments will also be available in the Funds' Annual and Semi-annual
Reports to shareholders. The Funds' Annual Report will include a discussion of
market conditions and investment strategies that significantly affected the
Funds' 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 Funds or make
shareholder inquiries) by contacting us:
By telephone: 1-800-525-3863
By mail: Hillman Capital Management Funds
c/o NC ShareholderServices
107 North Washington Street
Post Office Box 4365
Rocky Mount, NC 27803-0365
By e-mail: [email protected]
On the Internet: www.hillmancapital.com
Information about the Funds 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 Funds 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 811-10085
<PAGE>
PART B
======
HILLMAN CAPITAL MANAGEMENT INVESTMENT TRUST
FORM N-1A
STATEMENT OF ADDITIONAL INFORMATION
HILLMAN CAPITAL MANAGEMENT FUNDS
December __, 2000
Each a series of the
HILLMAN CAPITAL MANAGEMENT INVESTMENT TRUST
105 North Washington Street, Post Office Box 69
Rocky Mount, North Carolina 27802-0069
Telephone 1-800-525-3863
Table of Contents
OTHER INVESTMENT POLICIES....................................................2
INVESTMENT LIMITATIONS.......................................................6
PORTFOLIO TRANSACTIONS.......................................................8
NET ASSET VALUE..............................................................9
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION...............................9
DESCRIPTION OF THE TRUST....................................................10
ADDITIONAL INFORMATION CONCERNING TAXES.....................................11
MANAGEMENT AND OTHER SERVICE PROVIDERS......................................12
SPECIAL SHAREHOLDER SERVICES................................................16
ADDITIONAL INFORMATION ON PERFORMANCE.......................................17
FINANCIAL STATEMENTS........................................................18
APPENDIX A - DESCRIPTION OF RATINGS.........................................19
This Statement of Additional Information ("SAI") is meant to be read in
conjunction with the Prospectus, dated December __, 2000, for The Hillman
Aggressive Equity Fund and The Hillman Total Return Fund (each a "Fund" and
collectively, the "Funds") and is incorporated by reference in its entirety into
the Prospectus. Because this SAI is not itself a prospectus, no investment in
shares of the Funds should be made solely upon the information contained herein.
Copies of the Funds' Prospectus may be obtained at no charge by writing or
calling the Funds at the address and phone number shown above. Capitalized terms
used but not defined herein have the same meanings as in the Prospectus.
<PAGE>
OTHER INVESTMENT POLICIES
The Hillman Capital Management Investment Trust was organized on July 14, 2000
as a Delaware business trust. The Hillman Aggressive Equity Fund ("Aggressive
Equity Fund") intends to qualify as a non-diversified, open-end management
company and The Hillman Total Return Fund ("Total Return Fund") intends to
qualify as a diversified, open-end management company. The following policies
supplement the Funds' investment objectives and policies as set forth in the
Prospectus for the Funds. Attached to this SAI is Appendix A, which contains
descriptions of the rating symbols used by Rating Agencies for securities in
which the Funds may invest.
Repurchase Agreements. Each Fund may acquire U.S. Government Securities 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 generally
will occur within one to seven 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,
Hillman Capital Management, Inc. ("Advisor"), the investment advisor to the
Funds, 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. A 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 Funds will
not enter into any repurchase agreement which will cause more than 10% of their
net assets to be invested in repurchase agreements which extend beyond seven
days and other illiquid securities.
Money Market Instruments. The Funds may invest in money market instruments which
may include U.S. Government Securities or corporate debt securities (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 Funds. 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 a
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 maturities generally range from two to 270 days and
is usually sold on a discounted basis rather than as an interest-bearing
instrument. The Funds will invest in Commercial Paper only if it is rated 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 Advisor's opinion. Commercial Paper may include Master Notes of the same
quality. Master Notes are unsecured obligations which are redeemable upon demand
of the holder and which permit the investment of fluctuating amounts at varying
rates of interest. Master Notes are acquired by the Funds only through the
Master Note program of the Funds' custodian bank, acting as administrator
thereof. The Advisor will monitor, on an ongoing basis, the earnings power, cash
flow and other liquidity ratios of the issuer of a Master Note held by the
Funds.
Illiquid Investments. Each Fund may invest up to 15% of its net assets in
illiquid securities, which are investments that cannot be sold or disposed of in
the ordinary course of business within seven days at approximately the prices at
which they are valued. Under the supervision of the Board of Trustees, the
Advisor determines the liquidity of a Fund's investments and, through reports
from the Advisor, the Board monitors investments in illiquid instruments. In
determining the liquidity of a Fund's investments, the Advisor may consider
various factors including (1) the frequency of trades and quotations, (2) the
number of dealers and prospective purchasers in the marketplace, (3) dealer
undertakings to make a market, (4) the nature of the security (including any
demand or tender features) and (5) the nature of the marketplace for trades
(including the ability to assign or offset the Fund's rights and obligations
relating to the investment). Investments currently considered by the Funds to be
illiquid include repurchase agreements not entitling the holder to payment of
principal and interest within seven days. If, through a change in values, net
assets or other circumstances, a Fund were in a position where more than 10% of
its net assets were invested in illiquid securities, it would seek to take
appropriate steps to protect liquidity. The Funds may not purchase restricted
securities, which are securities that cannot be sold to the public without
registration under the federal securities laws.
Short Sales. The Total Return Fund may sell securities short (1) to hedge
unrealized gains on portfolio securities or (2) if it covers such short sale
with liquid assets as required by the current rules and positions of the SEC or
its staff. Both Funds may short sell "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 a Fund contemporaneously owns or has the right to obtain at no
additional cost securities identical to those sold short.) Selling securities
short against the box involves selling a security that the Fund owns or has the
right to acquire, for delivery at a specified date in the future. If the Fund
sells securities short against the box, it may protect unrealized gains, but
will lose the opportunity to profit on such securities if the price rises. The
Advisor does not intend to utilize short sales "against the box" on a regular
basis. However, under no circumstances will the Advisor commit more than 25% of
the Fund's assets to short sales "against the box."
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, a 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 fluctuates, making the long and short positions in the
futures contract more or less valuable, a process known as "marking to the
market." The Funds expect to earn interest income on their initial and variation
margin deposits.
The Funds will incur brokerage fees when they purchase and sell 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 that may result in a gain or a loss. While futures
positions taken by a 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 Funds' 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, a 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, a 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 Funds 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 Funds will write only options on futures contracts that are "covered." A
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). A 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. A 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, securities the price changes of which are, in the
opinion of the Advisor, 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 a 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 particular 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 Funds to hedge substantially the
same risks as might be addressed by the direct purchase or sale of the
underlying futures contracts. If a 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 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
particular 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 Funds will not engage in transactions in futures contracts and
related options for speculation. In addition, the Funds 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
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 a Fund's total
assets. In instances involving the purchase of futures contracts or the writing
of put options thereon by a 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 the Fund's
custodian, thereby ensuring 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 a 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 Advisor, 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 Funds will write covered call options both to reduce
the risks associated with certain of their investments and to increase total
investment return through the receipt of premiums. In return for the premium
income, a 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, a 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
a 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.
A 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 a 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 a 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.
A 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 a 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. A Fund may purchase put options on securities
to protect its 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. A Fund may also purchase call
options on securities to close out positions. A Fund may sell put or call
options it has 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. A Fund may write covered put and call options and
purchase put and call 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 Funds write 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 Advisor,
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 a 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 Funds may purchase securities
on a when-issued basis or for settlement at a future date if a 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 Funds would
generally purchase securities on a forward commitment or when-issued basis with
the intention of taking delivery, a Fund may sell such a security prior to the
settlement date if the Advisor feels such action is appropriate. In such a case,
the Fund could incur a short-term gain or loss.
INVESTMENT LIMITATIONS
Each 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, with respect to
a Fund, 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.
With respect to 75% of its total assets, the Total Return Fund will not invest
more than 5% of the value of its total assets in the securities of any one
issuer or purchase more than 10% of the outstanding voting securities or of any
class of securities of any one issuer (except that securities of the U.S.
Government, its agencies and instrumentalities are not subject to these
limitations).
In addition, as a matter of fundamental policy, neither the Aggresive Equity
Fund nor the Total Return Fund may:
(1) Invest for the purpose of exercising control or management of another
issuer;
(2) Invest in interests in real estate, real estate mortgage loans, real estate
limited partnerships, oil, gas or other mineral exploration or development
programs or leases, except that the Funds may invest in the readily
marketable securities of companies which own or deal in such things;
(3) Underwrite securities issued by others except to the extent the Funds may
be deemed to be an underwriter under the federal securities laws, in
connection with the disposition of portfolio securities;
(4) Purchase securities on margin (but the Funds may obtain such short-term
credits as may be necessary for the clearance of transactions);
(5) Participate on a joint or joint and several basis in any trading account in
securities;
(6) Invest 25% or more of the value of its total assets in any one industry or
group of industries (except that securities of the U.S. Government, its
agencies and instrumentalities are not subject to these limitations), but
the Aggressive Equity Fund MAY invest more than 25% of the value of its
total assets in one or more sectors as described under the non-fundamental
operating restrictions below.
(6) Make loans of money or securities, except that the Funds may invest in
repurchase agreements; or
(7) Issue senior securities, borrow money, or pledge its assets.
The Funds also have adopted a number of non-fundamental operating restrictions.
These restrictions may be changed by the Board of Trustees without shareholder
approval.
Under these non-fundamental operating restrictions, the Aggressive Equity Fund
may not 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.)
The Aggressive Equity Fund may not invest more than 25% of the value of its
total assets in any one sector EXCEPT that the Aggressive Equity Fund may invest
more than 25% of the value of its total assets in one or more of the follwing
sectors: financial sector, healthcare sector, retail sector, and technology
sector.
In addition, under the Funds' non-fundamental operating restrictions, neither
the Aggressive Equity Fund nor the Total Return Fund may:
(1) Invest in the securities of any issuer if any of the officers or trustees
of the Trust or its investment advisor own beneficially more than 1/2 of 1%
of the outstanding securities of such issuer or together own more than 5%
of the outstanding securities of such issuer;
(2) 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;
(3) Invest more than 10% of the value of its net assets in repurchase
agreements having a maturity of longer than seven days or other not readily
marketable securities; included in this category are any assets for which
an active and substantial market does not exist at the time of purchase or
subsequent valuation;
(4) Invest in restricted securities; or
(5) Purchase foreign securities (except the Funds may purchase foreign
securities sold as American Depository Receipts without limit).
Percentage restrictions stated as an investment policy or investment limitation
apply at the time of investment; if a later increase or decrease in percentage
beyond the specified limits results from a change in securities values or total
assets, it will not be considered a violation.
PORTFOLIO TRANSACTIONS
Subject to the general supervision of the Trust's Board of Trustees, the Advisor
is responsible for, makes decisions with respect to, and places orders for all
purchases and sales of portfolio securities for the Funds.
The annualized portfolio turnover rate for each 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 each 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 each Fund may engage in short-term trading to achieve its
investment objectives.
Purchases of money market instruments by the Funds are made from dealers,
underwriters and issuers. The Funds currently do 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, which may include a dealer mark-up, or otherwise involve
transactions directly with the issuer of an instrument.
Normally, most of the Funds' fixed income portfolio transactions will be
principal transactions executed in over-the-counter markets and will be executed
on a "net" basis, which may include a dealer mark-up. With respect to securities
traded only in the over-the-counter market, orders will be executed on a
principal basis with primary market makers in such securities except where
better prices or executions may be obtained on an agency basis or by dealing
with other than a primary market maker.
The Funds 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. A Fund will engage
in this practice, however, only when the Advisor, in its sole discretion,
believes such practice to be otherwise in the Fund's interest.
In executing Fund transactions and selecting brokers or dealers, the Advisor
will seek to obtain the best overall terms available for each Fund. In assessing
the best overall terms available for any transaction, the Advisor shall consider
factors it deems relevant, including the breadth of the market in the security,
the price of the security, the financial condition and execution capability of
the broker or dealer, and the reasonableness of the commission, if any, both for
the specific transaction and on a continuing basis. The sale of Fund shares may
be considered when determining the firms that are to execute brokerage
transactions for the Funds. In addition, the Advisor is authorized to cause the
Funds to pay a broker-dealer which furnishes brokerage and research services a
higher commission than that which might be charged by another broker-dealer for
effecting the same transaction, provided that the Advisor determines in good
faith that such commission is reasonable in relation to the value of the
brokerage and research services provided by such broker-dealer, viewed in terms
of either the particular transaction or the overall responsibilities of the
Advisor to the Funds. Such brokerage and research services might consist of
reports and statistics relating to specific companies or industries, general
summaries of groups of stocks or bonds and their comparative earnings and
yields, or broad overviews of the stock, bond and government securities markets
and the economy.
Supplementary research information so received is in addition to, and not in
lieu of, services required to be performed by the Advisor and does not reduce
the advisory fees payable by the Funds. The Trustees will periodically review
any commissions paid by the Funds to consider whether the commissions paid over
representative periods of time appear to be reasonable in relation to the
benefits inuring to the Funds. 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 investment discretion is
exercised by the Advisor. Conversely, the Funds may be the primary beneficiary
of the research or services received as a result of securities transactions
effected for such other account or investment company.
The Advisor may also utilize a brokerage firm affiliated with the Trust or the
Advisor if it believes it can obtain the best execution of transactions from
such broker. The Funds will not execute portfolio transactions through, acquire
securities issued by, make savings deposits in or enter into repurchase
agreements with the Advisor or an affiliated person of the Advisor (as such term
is defined in the 1940 Act) acting as principal, except to the extent permitted
by the Securities and Exchange Commission ("SEC"). In addition, the Funds will
not purchase securities during the existence of any underwriting or selling
group relating thereto of which the Advisor, or an affiliated person of the
Advisor, is a member, except to the extent permitted by the SEC. Under certain
circumstances, the Funds 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 each of the Funds will be made independently from those
for the other Fund and any other series of the Trust, and for any other
investment companies and accounts advised or managed by the Advisor. Such other
investment companies and accounts may also invest in the same securities as a
Fund. To the extent permitted by law, the Advisor may aggregate the securities
to be sold or purchased for a Fund with those to be sold or purchased for
another Fund or 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 a Fund and another investment company
or account, the transaction will be averaged as to price and available
investments allocated as to amount, in a manner which the Advisor believes to be
equitable to the Fund and such other investment company or account. In some
instances, this investment procedure may adversely affect the price paid or
received by a Fund or the size of the position obtained or sold by a Fund.
NET ASSET VALUE
The net asset value per share of each class of each Fund is determined at the
time normal trading closes on the New York Stock Exchange ("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., Day, 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 deemed a business holiday on which the
net asset value of each class of the Funds' Shares will not be calculated.
The net asset value per share of each Fund is calculated separately by adding
the value of the Fund's securities and other assets belonging to the Fund,
subtracting the liabilities charged to the Fund, and dividing the result by the
number of outstanding shares. "Assets belonging to" a Fund consist of the
consideration received upon the issuance of shares of the Fund together with all
net investment income, realized gains/losses and proceeds derived from the
investment thereof, including any proceeds from the sale of such investments,
any funds or payments derived from any reinvestment of such proceeds, and a
portion of any general assets of the Trust not belonging to a particular Fund.
Assets belonging to a Fund are charged with the direct liabilities of the Fund
and with a share of the general liabilities of the Trust, which are normally
allocated in proportion to the number or the relative net asset values of all of
the Trust's series at the time of allocation or in accordance with other
allocation methods approved by the Board of Trustees. Subject to the provisions
of the Trust Instrument, determinations by the Board of Trustees as to the
direct and allocable liabilities, and the allocable portion of any general
assets, with respect to a Fund are conclusive.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Purchases. Shares of each Fund are offered and sold on a continuous basis and
may be purchased through authorized investment dealers or directly by contacting
the Funds' distributor, Capital Investment Group, Inc. ("Distributor"), or the
Funds directly. Selling dealers have the responsibility of transmitting orders
promptly to the Funds. The public offering price of shares of each Fund equals
net asset value.
Plan Under Rule 12b-1. The Trust has adopted a Plan of Distribution pursuant to
Rule 12b-1 Under the 1940 Act ("Plan") for each of the Funds (see "Management of
the Funds - The Distributor - Distribution Plan" in the Funds' Prospectus).
Under the Plan, the Funds annually may expend a percentage of the average net
asset value of the Funds' shares to finance any activity which is primarily
intended to result in the sale of shares of the Funds 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. The current fee paid under
the Plan are 0.25% of the average net assets of each Fund's shares. Such
expenditures paid as service fees to any person who sells shares of a Fund may
not exceed 0.25% of the average annual net asset value of such shares. Potential
benefits of the Plan to a Fund include improved shareholder servicing, savings
to the Fund in transfer agency costs, benefits to the investment process from
growth and stability of assets and maintenance of a financially healthy
management organization.
All of the distribution expenses incurred by the Distributor and others, such as
broker-dealers, in excess of the amount paid by a Fund will be borne by such
persons without any reimbursement from the Fund. Subject to seeking best
execution, a Fund may, from time to time, buy or sell portfolio securities from
or to firms which receive payments under the Plan.
From time to time, the Distributor may pay additional amounts from its own
resources to dealers for aid in distribution or for aid in providing
administrative services to shareholders.
The Plan and the Distribution Agreement with the Distributor have been approved
by the Board of Trustees of the Trust, including a majority of the Trustees who
are not "interested persons" (as defined in the 1940 Act) of the Trust and who
have no direct or indirect financial interest in the Plan or any related
agreements, by vote cast in person or at a meeting duly called for the purpose
of voting on the Plan and such Agreement. Continuation of the Plan and the
Distribution Agreement must be approved annually by the Board of Trustees in the
same manner as specified above.
Each year the Trustees must determine whether continuation of the Plan is in the
best interest of shareholders of the Funds and that there is a reasonable
likelihood of its providing a benefit to the Funds, and the Board of Trustees
has made such a determination for the current year of operations under the Plan.
The Plan, the Distribution Agreement, and any Dealer Agreement with any
broker/dealers may be terminated at any time without penalty by a majority of
those Trustees who are not "interested persons" or, with respect to a particular
Fund, by a majority vote of that Fund's outstanding voting stock. Any amendment
materially increasing the maximum percentage payable under the Plan, with
respect to a particular Fund must likewise be approved by a majority vote of the
outstanding shares of that Fund, as well as by a majority vote of those Trustees
who are not "interested persons." Also, any other material amendment to the Plan
must be approved by a majority vote of the Trustees including a majority of the
noninterested Trustees of the Trust having no interest in the Plan. In addition,
in order for the Plan to remain effective, the selection and nomination of
Trustees who are not "interested persons" of the Trust must be effected by the
Trustees who themselves are not "interested persons" and who have no direct or
indirect financial interest in the Plan. Persons authorized to make payments
under the Plan must provide written reports at least quarterly to the Board of
Trustees for their review.
Redemptions. Under the 1940 Act, each Fund may suspend the right of redemption
or postpone the date of payment for shares during any period when (a) trading on
the NYSE is restricted by applicable rules and regulations of the SEC; (b) the
NYSE is closed for other than customary weekend and holiday closings; (c) the
SEC has by order permitted such suspension; or (d) an emergency exists as
determined by the SEC. Each Fund may also suspend or postpone the recordation of
the transfer of shares upon the occurrence of any of the foregoing conditions.
In addition to the situations described in the Prospectus under "Redeeming Your
Shares," each 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.
DESCRIPTION OF THE TRUST
The Trust, which is an unincorporated business trust organized under Delaware
law on July 14, 2000, is an open-end diversified investment management company.
The Trust's Trust Document 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 Trust Document currently provides for the shares of two
series, The Hillman Aggressive Equity Fund and The Hillman Total Return Fund,
both managed by Hillman Capital Management, Inc. of Annapolis, Maryland. 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 each 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 Funds, will vote
together and not separately on a series-by-series 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. 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.
When issued for payment as described in the Prospectus and this SAI, shares of
each Fund will be fully paid and non-assessable.
The Trust Document 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 a Trustee's 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 Trust Document
provides that a Trustee or officer is entitled to be indemnified against all
liability in connection with the affairs of the Trust.
ADDITIONAL INFORMATION CONCERNING TAXES
The following summarizes certain additional tax considerations generally
affecting each 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 each Fund or its shareholders, and the discussion here and in the
Prospectus is not intended as a substitute for careful tax planning. This
discussion 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.
Each series of the Trust, including each Fund, will be treated as a separate
corporate entity under the Internal Revenue Code and intends to qualify or
remain qualified as a regulated investment company. In order to so qualify, each
series 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
each series 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 series'
business of investing in such stock, securities or currencies. Any income
derived by a series from a partnership or trust is treated as derived with
respect to the series' 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 series 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. Each
Fund intends to satisfy all requirements on an ongoing basis for continued
qualification as a regulated investment company.
Each series of the Trust, including each 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 series' taxable year.
Shareholders should note that, upon the sale or exchange of series 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 currently distribute an amount equal to specified percentages of their
ordinary taxable income and capital gain net income (excess of capital gains
over capital losses). Each series of the Trust, including each 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 a series does not qualify for the special federal income
tax treatment afforded 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 series'
current and accumulated earnings and profits, and would be eligible for the
dividends received deduction for corporations.
Each series of the Trust, including each 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 any shareholders who has failed to
provide a correct tax identification number in the manner required, or who is
subject to withholding by the Internal Revenue Service for failure properly to
include on his or her return payments of taxable interest or dividends, or who
have failed to certify to the relevant Fund that he or she is not subject to
backup withholding when required to do so or that they are "exempt recipients."
Dividends paid by the Funds 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 Funds 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.
MANAGEMENT AND OTHER SERVICE PROVIDERS
The Board of Trustees of the Trust ("Trustees") is responsible for the
management and supervision of the Funds. The Trustees approve all significant
agreements between the Trust, on behalf of the Funds, and those companies that
furnish services to the Funds. This section of the SAI provides information
about the persons who serve as Trustees and officers to the Trust and Funds,
respectively, as well as the entities that provide services to the Funds.
Trustees and Officers. The Trustees and executive officers of the Trust, their
addresses, their ages, and their principal occupations for the last five years
are as follows:
TRUSTEES
<TABLE>
<S> <C> <C>
----------------------------------------------- -------------------------------- ---------------------------------------------
Principal Occupation(s)
Name, Address and Age Position During Past 5 Years
----------------------------------------------- -------------------------------- ---------------------------------------------
Jack E. Brinson, 68 Trustee Retired; Independent Trustee - New
1105 Panola Street Providence Investment Trust, Gardner Lewis
Tarboro, North Carolina 27886 Investment Trust, and Nottingham Investment
Trust II, Rocky Mount, North Carolina;
previously, President, Brinson Chevrolet,
Tarboro, North Carolina; and President,
Brinson Investment Company, Tarboro, North
Carolina
----------------------------------------------- -------------------------------- ---------------------------------------------
Mark A. Hillman, 38 Trustee* President, Hillman Capital Management,
613 Third Street Inc., Annapolis, Maryland, since 1998;
Eastport Maritime Building previously, Chief Investment Officer,
Annapolis, Maryland 21403 Menocal Capital Management, Inc.
----------------------------------------------- -------------------------------- ---------------------------------------------
Theo H. Pitt, Jr., 64 Trustee and Chairman Senior Partner, Community Financial
116 Candlewood Road Institutions Consulting,
Rocky Mount, North Carolina 27804 Rocky Mount, North Carolina, since 1997;
previously, Chairman & CEO, Standard
Insurance & Realty Corporation,
Rocky Mount, North Carolina, 1992-1997
----------------------------------------------- -------------------------------- ---------------------------------------------
* Indicates that Trustee is an "interested person" of the Trust for purposes of
the 1940 Act because of his position with one of the investment advisors to
the Trust.
</TABLE>
OFFICERS
<TABLE>
<S> <C> <C>
----------------------------------------------- -------------------------------- ---------------------------------------------
Name, Address and Age Position Principal Occupation(s)
During Past 5 Years
----------------------------------------------- -------------------------------- ---------------------------------------------
Mark A. Hillman, 38 President President, Hillman Capital Management,
613 Third Street Inc., Annapolis, Maryland, since 1998;
Eastport Maritime Building previously, Chief Investment Officer,
Annapolis, Maryland 21403 Menocal Capital Management, Inc.
----------------------------------------------- -------------------------------- ---------------------------------------------
C. Frank Watson, III, 30 Secretary and Assistant President, The Nottingham Company, Inc.
105 North Washington Street Treasurer (Administrator of the Funds), Rocky Mount,
Rocky Mount, North Carolina 27802 North Carolina
----------------------------------------------- -------------------------------- ---------------------------------------------
Julian G. Winters, 31 Treasurer and Assistant Legal and Compliance Director, The
105 North Washington Street Secretary Nottingham Company, Inc. (Administrator of
Rocky Mount, North Carolina 27802 the Funds), Rocky Mount, North Carolina,
since 1996; previously Operations Manager,
Tar Heel Medical, Nashville, North Carolina
----------------------------------------------- -------------------------------- ---------------------------------------------
</TABLE>
Compensation. The officers of the Trust will not receive compensation from the
Trust for performing the duties of their offices. Each Trustee who is not an
"interested person" of the Trust receives a fee of $2,000 each year plus $250
per series of the Trust per meeting attended in person and $100 per series of
the Trust per meeting attended by telephone. All Trustees are reimbursed for any
out-of-pocket expenses incurred in connection with attendance at meetings.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Compensation Table *
Name of Person, Aggregate Pension Retirement Estimated Annual Total Compensation
Compensation Benefits Accrued As
from each of the Part of Fund Benefits Upon from the Trust Paid
Position Funds ** Expenses Retirement to Trustees**
---------------- --------------- ---------------- ---------- -----------
Jack E. Brinson $1,550 None None $3,100
Theo H. Pitt, Jr. $1,550 None None $3,100
</TABLE>
* Figures are based on estimates for the fiscal year ending August 31, 2001.
** Each of the Trustees serves as a Trustee to the two Funds of the Trust.
Principal Holders of Voting Securities. As of November 21, 2000, the Trustees
and officers of the Trust, as a group owned beneficially (i.e., had voting
and/or investment power) none of the then outstanding shares of the Aggressive
Equity Fund and none of the Total Return Fund, respectively. On that same date,
the following shareholder(s) owned of record more than 5% of the outstanding
shares of the Funds. Except as provided below, no person is known by the Trust
to be the beneficial owner of more than 5% of the outstanding shares of the
Funds as of November 21, 2000.
<TABLE>
<S> <C> <C>
AGGRESSIVE EQUITY FUND
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership Percent
---------------- -------------------- -------
NONE
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL RETURN FUND
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership Percent
---------------- -------------------- -------
Sheldon & Willa Hillman 10,000.000 shares 100.00%
901 Mallard Circle
Arnold, MD 21012
</TABLE>
Investment Advisor. Information about Hillman Capital Management, Inc., 613
Third Street, Eastport Maritime Building, Annapolis, Maryland 21403 ("Advisor")
and its duties and compensation as Advisor is contained in the Prospectus. The
Advisor is controlled by Mark A. Hillman who owns approximately 75% of the
Advisor's outstanding voting securities.
Compensation of the Advisor with regards to the Aggressive Equity Fund, based
upon the Fund's average daily net assets, is at the annual rate of 1.00%.
Compensation of the Advisor with regards to the Total Return Fund, based upon
the Fund's average daily net assets, is at the annual rate of 1.00%.
The Advisor manages each Fund's investments in accordance with the stated
policies of each Fund, subject to the approval of the Trust's Trustees. The
Advisor 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 manager for the Aggressive Equity Fund and
the Total Return Fund is Mark A. Hillman, President of the Advisor. The Trust,
the Advisor, 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 a Fund. The
Advisor'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 Advisor. In that regard, portfolio managers
and other investment personnel of the Advisor 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 Agreements, the Advisor is not liable for any error of
judgment or mistake of law or for any loss suffered by the Funds in connection
with the performance of such Agreement, except a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services or a
loss resulting from willful misfeasance, bad faith or gross negligence on the
part of the Advisor in the performance of its duties or from its reckless
disregard of its duties and obligations under the Agreement.
Administrator. The Trust has entered into a Fund Accounting and Compliance
Administration Agreement with The Nottingham Company, Inc. ("Administrator"), a
North Carolina corporation, whose address is 105 North Washington Street, Post
Office Box 69, Rocky Mount, North Carolina 27802-0069.
The Administrator performs the following services for the Funds: (1) coordinates
with the Custodian and monitors the services it provides to the Funds; (2)
coordinates with and monitors any other third parties furnishing services to the
Funds; (3) provide the Funds with necessary office space, telephones and other
communications facilities, and personnel competent to perform administrative and
clerical functions for the Funds; (4) supervises the maintenance by third
parties of such books and records of the Funds as may be required by applicable
federal or state law; (5) prepares or supervises the preparation by third
parties of all federal, state, and local tax returns and reports of the Funds
required by applicable law; (6) prepares and, after approval by the Trust, files
and arranges for the distribution of proxy materials and periodic reports to
shareholders of the Funds as required by applicable law; (7) prepares and, after
approval by the Trust, arranges for the filing of such registration statements
and other documents with the SEC and other federal and state regulatory
authorities as may be required by applicable law; (8) reviews and submits to the
officers of the Trust for their approval invoices or other requests for payment
of the Funds expenses and instruct the custodian to issue checks in payment
thereof; and (9) takes such other action with respect to the Funds 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 Funds.
Compensation of the Administrator, based upon the average daily net assets of
the Aggressive Equity Fund and the Total Return Fund for administration fees is
at the annual rate of 0.125% on the first $50 million of each of the Funds' net
assets; 0.10% on the next $50 million; and 0.075% on all assets over $100
million with a minimum administration fee of $2,000 per month per fund. The
Administrator also will receive a monthly fund accounting fee of $2,250 for
accounting and recordkeeping services for each of the Funds, with an additional
$750 per month for each additional class of shares of the Funds, and an annual
base fee of one basis point of each of the Funds' net asets. The Administrator
also charges the Funds for certain costs involved with the daily valuation of
investment securities and is reimbursed for out-of-pocket expenses.
The Administrator has agreed to voluntarily waive its fund administration fees
for each of the Funds' initial fiscal year to end August 31, 2001.
Transfer Agent. The Administrator has entered into a Dividend Disbursing and
Transfer Agent Agreement 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 Funds. 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 $1,500 per month per fund,
plus an additional $500 per month for each additional class of shares. Because
the Transfer Agent owns in excess of 5% of the Advisor, the Transfer Agent is
considered an affilate of the Advisor.
Distributor. Capital Investment Group, Inc., Post Office Box 32249, Raleigh,
North Carolina 27622, acts as an underwriter and distributor of each Fund's
shares for the purpose of facilitating the registration of shares of the Funds
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
either 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 that 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.
The Distribution Agreement may be terminated by either party upon 60 days prior
written notice to the other party.
Custodian. First Union National Bank ("Custodian"), 123 South Broad Street,
Philadelphia, Pennsylvania 19109, serves as custodian for each Fund's assets.
The Custodian acts as the depository for each 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 each Fund an annual fee based on the
average net assets of the Fund held by the Custodian.
Independent Auditors. Deloitte & Touche LLP, Princeton Forrestal Village,
116-300 Village Boulevard, Princeton, New Jersey 08540, serves as independent
auditors for the Funds, audits the annual financial statements of the Funds,
prepares each Fund's federal and state tax returns, and consults with each Fund
on matters of accounting and federal and state income taxation. A copy of the
most recent annual report of the Fund will accompany this SAI whenever it is
requested by a shareholder or prospective investor.
Legal Counsel. Dechert serves as legal counsel to the Trust and the Funds.
Code of Ethics. The Trust and the Advisor each had adopted a code of ethics, as
required by applicable law, which is designed to prevent affiliated persons of
the Trust and the Advisor from engaging in deceptive, manipulative, or
fraudulent activities in connection with securities held or to be acquired by
the Funds (which may also be held by persons subject to a code). There can be no
assurance that the codes will be effective in preventing such activities.
SPECIAL SHAREHOLDER SERVICES
Each 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 accounts as often as they wish. When
an investor makes an initial investment in a 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 accounts. With shareholder authorization and bank
approval, the relevant 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 $10,000
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 a 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. Each Fund has the capacity to
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 available by calling the Funds. 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 Funds. 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
Funds upon 60 days written notice or by a shareholder upon written notice to the
Funds. Applications and further details may be obtained by calling the Funds at
1-800-773-3863, or by writing to:
Hillman Capital Management Funds
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
Purchases in Kind. Each Fund may accept securities in lieu of cash in payment
for the purchase of shares in the particular Fund. The acceptance of such
securities is at the sole discretion of the Advisor, based upon the suitability
of the securities accepted for inclusion as a long term investment of the Fund,
the marketability of such securities, and other factors which the Advisor may
deem appropriate. If accepted, the securities will be valued using the same
criteria and methods as described in "Determining a Fund's Net Asset Value" in
the Prospectus.
Redemptions in Kind. The Funds do not intend, under normal circumstances, to
redeem their 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 a 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 securities would incur brokerage costs
when these securities are sold. An irrevocable election has been filed under
Rule 18f-1 of the 1940 Act, wherein each 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) 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 applicable Fund at the address shown herein. Your request should
include the following: (1) the Fund's 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 Funds.
ADDITIONAL INFORMATION ON PERFORMANCE
From time to time, the total return of each class of each Fund may be quoted in
advertisements, sales literature, shareholder reports or other communications to
shareholders. Each Fund computes the "average annual total return" of each class
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.
Each Fund may also compute the aggregate total return of each class 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
assumes that the maximum sales load is deducted from the initial $1,000
investment at the time it is made 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. Each Fund may also
quote other total return information that does not reflect the effects of the
sales load.
Each 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, each Fund may compare its performance to
the S&P 500 Total Return Index. 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. Each Fund may also
occasionally cite statistics to reflect its volatility and risk. Each 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. Of
course, there can be no assurance that any Fund will experience the same
results. Performance comparisons may be useful to investors who wish to compare
a Fund's past performance to that of other mutual funds and investment products.
Of course, past performance is not a guarantee of future results.
Each 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, each 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 Funds' Prospectus to obtain a
more complete view of each Fund's performance before investing. Of course, when
comparing a 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 compute offering price. Advertisements and
other sales literature for each Fund may quote total returns that are calculated
on nonstandardized 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 each Fund may include in advertisements and other
communications information, charts, and illustrations relating to inflation and
the reflects of inflation on the dollar, including the purchasing power of the
dollar at various rates of inflation. Each 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). Each 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.
Each 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 Statement of Assets and Liabilities as of October 27, 2000 for The
Hillman Total Return Fund is incorporated and made a part of this document.
<PAGE>
APPENDIX A
DESCRIPTION OF RATINGS
The Funds may acquire from time to time fixed income securities that meet the
following minimum rating criteria ("Investment-Grade Debt Securities") or, if
unrated, are in the Advisor's opinion comparable in quality to Investment Grade
Debt Securities. The various ratings used by the nationally recognized
securities rating services are described below.
A rating by a rating service represents the service's opinion as to the credit
quality of the security being rated. However, the ratings are general and are
not absolute standards of quality or guarantees as to the creditworthiness of an
issuer. Consequently, the Advisor believes that the quality of fixed income
securities in which the Funds may invest should be reviewed quarterly 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 Services. The following summarizes the highest four
ratings used by Standard & Poor's Ratings Services ("S&P") for bonds which are
deemed to be Investment-Grade Debt Securities by the Advisor:
AAA - This is the highest rating assigned by S&P to a debt obligation
and indicates an extremely strong capacity of the obligor to meet its
financial commitment on the obligation.
AA - Debt rated AA differs from AAA issues only in a small degree. The
obligor's capacity to meet its financial commitment on the obligation
is very strong.
A - Debt rated A is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in
higher-rated categories. However, the obligor's capacity to meet its
financial commitment on the obligation is still strong.
BBB - Debt rated BBB exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity of the obligor to meet its financial
commitment on the obligation.
To provide more detailed indications of credit quality, the AA, A and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within these major rating categories.
Bonds rated BB, B, CCC, CC and C are not considered by the Advisor to be
Investment-Grade Debt Securities and are regarded, on balance, as having
significant speculative characteristics with respect to the obligor's capacity
to meet its financial commitment on 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 may be 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 short term notes and
indicates strong capacity to pay principal and interest. An issue determined to
possess a very strong capacity to pay debt service is given a plus (+)
designation. The rating SP-2 indicates a satisfactory capacity to pay principal
and interest, with some vulnerability to adverse financial and economic changes
over the term of the notes.
Moody's Investors Service, Inc. The following summarizes the highest four
ratings used by Moody's Investors Service, Inc. ("Moody's") for bonds which are
deemed to be Investment-Grade Debt Securities by the Advisor:
Aaa - Bonds that are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a large
or 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 which 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 (1, 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. Bonds which are rated Ba, B, Caa, Ca or C by
Moody's are not considered "Investment-Grade Debt Securities" by the Advisor.
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 which 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
which 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 which are rated Ca represent obligations which 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 supporting institutions) are considered to have a
superior ability for repayment of short-term promissory obligations. Prime-1
repayment ability will often be evidenced by many of the following
characteristics: leading market positions in well-established industries; high
rates of return on funds employed; conservative capitalization structures with
moderate reliance on debt and ample asset protection; broad margins in earning
coverage of fixed financial charges and high internal cash generation; and well
established access to a range of financial markets and assured sources of
alternative liquidity. Issuers rated Prime-2 (or supporting institutions) are
considered to have a strong ability 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 appropriated may be more affected by external
conditions. Ample alternate liquidity is maintained.
The following summarizes the two highest ratings used by Moody's for short-term
notes and variable rate demand obligations:
MIG-1; VMIG-1 - 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.
MIG-2; VMIG-2 - Obligations bearing these designations are of a high
quality with ample margins of protection.
Duff & Phelps Credit Rating Co. The following summarizes the highest four
ratings used by Duff & Phelps Credit Rating Co. ("D&P") for bonds which are
deemed to be Investment-Grade Debt Securities by the Advisor:
AAA - Bonds that are rated AAA are of the highest credit quality. The
risk factors are considered to be negligible, being only slightly more
than for risk-free U.S. Treasury debt.
AA - Bonds that are rated AA are of high credit quality. Protection
factors are strong. Risk is modest but may vary slightly from time to
time because of economic conditions.
A - Bonds rated A have average but adequate protection factors. The
risk factors are more variable and greater in periods of economic
stress.
BBB - Bonds rated BBB have below-average protection factors but are
still considered sufficient for prudent investment. There is
considerable variability in risk during economic cycles.
Bonds rated BB, B and CCC by D&P are not considered Investment-Grade Debt
Securities and are regarded, on balance, as predominantly speculative with
respect to the issuer's ability to pay interest and 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 1 is the highest rating assigned by D&P for short-term debt,
including commercial paper. D&P employs three designations, Duff 1+, Duff 1 and
Duff 1- within the highest rating category. Duff 1+ 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 l- 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 which are deemed to be
Investment-Grade Debt Securities by the Advisor:
AAA - Bonds are considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability to pay
interest and 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 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 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
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. A "ratings outlook" is used to describe the
most likely direction of any rating change over the intermediate term. It is
described as "Positive" or "Negative." The absence of a designation indicates a
stable outlook.
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 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 two 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+.
The term symbol "LOC" indicates that the rating is based on a letter of credit
issued by a commercial bank.
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 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-l+
F-2 - Instruments assigned this rating have satisfactory degree of
assurance for timely payment, but the margin of safety is not as great
as for issues assigned F-1+ and F-1 ratings.
<PAGE>
The Hillman Total Return Fund
Statement of Assets and Liabilities
October 27, 2000
--------------------------------------------------------------------------------
Assets:
---------------------------------------------------------
Cash $ 100,000
--------------------------------------------------------- ---------
Total Assets 100,000
---------------------------------------------------------
Liabilities: -
--------------------------------------------------------- ---------
Net Assets for 10,000 shares outstanding $ 100,000
--------------------------------------------------------- =========
Net Assets Consist of:
---------------------------------------------------------
Paid in Capital $ 100,000
--------------------------------------------------------- =========
Net Asset Value, Offering Price and Redemption Proceeds
Per Share:
---------------------------------------------------------
$100,000 / 10,000 shares outstanding $ 10.00
--------------------------------------------------------- =========
Notes:
(1) The Hillman Total Return Fund (the "Fund") is an open-end management
investment company (a mutual fund) in a diversified series of the Hillman
Capital Management Investment Trust (the "Trust"). The Trust was
established as a Delaware business trust under a Declaration of Trust on
July 14, 2000 and is registered under the investment company Act of 1940,
as amended. The Fund has had no operations since that date other than those
relating to organizational matters, including the issuance of 10,000 shares
at $10.00 per share.
(2) Reference is made to the "Management of the Fund" (on page 8),
"Administration of the Fund" (on page 9) and Tax Information (on page 16)
in the prospectus for descriptions of the investmentadvisory fee,
administrative and other services and federal tax aspects of the Fund.
(3) Certain Officers and Trustees of the Trust are Officers and Directors or
Trustees of the Advisor and the Administrator.
(4) Investment Valuations - Short-term securities are valued at cost which
approximates fair market value.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees of the Hillman Capital Management Investment Trust and
the Shareholder of The Hillman Total Return Fund:
We have audited the accompanying statement of assets and liabilities of The
Hillman Total Return Fund (the "Fund") as of October 27, 2000. This financial
statement is the responsibility of the Fund's management. Our responsibility is
to express an opinion on this financial statement based on our audit.
We conducted our audit 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
statement is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statement. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, such statement of assets and liabilities presents fairly, in all
material respects, the financial position of The Hillman Total Return Fund as of
October 27, 2000, in conformity with accounting principles generally accepted in
the United States of America.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Princeton, New Jersey
November 13, 2000
<PAGE>
PART C
======
HILLMAN CAPITAL MANAGEMENT INVESTMENT TRUST
FORM N-1A
OTHER INFORMATION
ITEM 23. Exhibits
--------
(a) Trust Instrument.^1
(b) Bylaws.^1
(c) Certificates for shares are not issued. Articles II and VII of the
Trust Instrument, previously filed as Exhibit (a) hereto, define the
rights of holders of Shares.^1
(d) Investment Advisory Agreement between the Hillman Capital Management
Investment Trust and Hillman Capital Management, Inc., as Advisor.
(e) Distribution Agreement between the Hillman Capital Management
Investment Trust and Capital Investment Group, Inc., as Distributor.
(f) Not Applicable.
(g) Custodian Agreement between the Hillman Capital Management Investment
Trust and First Union National Bank, as Custodian.
(h)(1) Fund Accounting and Compliance Administration Agreement between the
Hillman Capital Management Investment Trust and The Nottingham Company,
Inc., as Administrator.
(h)(2) Dividend Disbursing and Transfer Agent Agreement between the Hillman
Capital Management Investment Trust and NC Shareholder Services, LLC,
as Transfer Agent.
(i) Opinion and Consent of Dechert, Counsel, regarding the legality of
securities registered.
(j) Consent of Deloitte & Touche LLP, Independent Public Accountants.
(k) Balance Sheet.
(l) Initial Subscription Agreement.
(m)(1) Distribution Plan pursuant to Rule 12b-1 for The Hillman Aggressive
Equity Fund.
(m)(2) Distribution Plan pursuant to Rule 12b-1 for The Hillman Total Return
Fund.
(n) Not applicable.
(p)(1) Code of Ethics for the Hillman Capital Management Investment Trust.
(p)(2) Code of Ethics for Hillman Capital Management, Inc.
(q) Copy of Power of Attorney.
-----------------------
1. Incorporated herein by reference to Registrant's Registration Statement
on Form N-1A filed August 25, 2000 (File No. 333-44568).
ITEM 24. Persons Controlled by or Under Common Control with the Registrant
-----------------------------------------------------------------
No person is controlled by or under common control with the Hillman
Capital Management Investment Trust.
ITEM 25. Indemnification
---------------
Reference is made to Article X of the Registrant's Trust Instrument.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Act") may be permitted to trustees, officers and
controlling persons of the Registrant by the Registrant pursuant to the Trust
Instrument or otherwise, the Registrant is aware that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Act and, therefore, is unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by trustees, officers or
controlling persons of the Registrant in connection with the successful defense
of any act, suit or proceeding) is asserted by such trustees, officers or
controlling persons in connection with the shares being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issues.
ITEM 26. Business and other Connections of the Investment Advisor
--------------------------------------------------------
The description of Hillman Capital Management, Inc. under the caption
of "The Investment Advisor" in the Prospectus and under the caption "Investment
Advisor" in the Statement of Additional Information constituting Parts A and B,
respectively, of this Registration Statement are incorporated by reference
herein. Information concerning the directors and officers of Hillman Capital
Management, Inc. as set forth in Hillman Capital Management, Inc.'s Form ADV
filed with the Securities and Exchange Commission on August 23, 2000 (File No.
801-57921), and amended through the date hereof, is incorporated by reference
herein.
ITEM 27. Principal Underwriter
---------------------
(a) Capital Investment Group, Inc., the Registrant's distributor, is
also the underwriter and distributor for the Chesapeake Aggressive Growth Fund,
Chesapeake Growth Fund, Chesapeake Core Growth Fund, WST 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, Blue Ridge Total Return Fund, and SCM Strategic Growth Fund.
(b) Set forth below is certain information regarding the directors and
officers of Capital Investment Group, Inc.
POSITION(S) AND OFFICE(S) POSITION(S)
NAME AND PRINCIPAL WITH CAPITAL AND 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 of Pennsylvania, the Custodian to the Hillman Capital Management Investment
Trust, are held by the Hillman Capital Management Investment Trust, in the
offices of The Nottingham Company, Inc., Fund Accountant and Administrator to
the Hillman Capital Management Investment Trust; NC Shareholder Services, LLC,
Transfer Agent to the Hillman Capital Management Investment Trust; or Hillman
Capital Management, Inc., Investment Advisor to the Hillman Capital Management
Investment Trust.
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 Hillman Capital
Management, Inc. is 613 Third Street, Eastport Maritime Building, Annapolis,
Maryland 21403. The address of First Union National Bank of Pennsylvania is 123
South Broad Street, Philadelphia, Pennsylvania 19109.
ITEM 29. Management Services
-------------------
None.
ITEM 30. Undertakings
------------
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, the Registrant has duly caused this
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 December, 2000.
HILLMAN CAPITAL MANAGEMENT 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
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
Signature Title Date
--------- ----- ----
* Trustee December 29, 2000
_______________________________
Jack E. Brinson
* Trustee, December 29, 2000
_______________________________ Chairman
Theo H. Pitt, Jr.
* Trustee, December 29, 2000
_______________________________ President
Mark A. Hillman
/s/ Julian G. Winters Treasurer December 29, 2000
_______________________________
Julian G. Winters
* By: /s/ C. Frank Watson, III Dated: December 29, 2000
___________________________
C. Frank Watson, III
Attorney-in-Fact
<PAGE>
INDEX TO EXHIBITS
(FOR REGISTRATION STATEMENT)
----------------------------
EXHIBIT NO.
UNDER PART C
OF FORM N-1A NAME OF EXHIBIT
------------ ------------------------------
(d) Investment Advisory Agreement between the Registrant and
Hillman Capital Management, Inc.
(e) Distribution Agreement between the Registrant and Capital
Investment Group, Inc.
(g) Custodian Agreement between the Registrant and First Union
National Bank
(h)(1) Fund Accounting and Compliance Administration Agreement
between the Registrant and The Nottingham Company, Inc.
(h)(2) Dividend Disbursing and Transfer Agent Agreement between the
Registrant and NC Shareholder Services, LLC
(i) Opinion and Consent of Dechert, Counsel
(j) Consent of Deloitte & Touche LLP, Independent Public
Accountants
(k) Balance Sheet
(l) Initial Subscription Agreement
(m)(1) Distribution Plan pursuant to Rule 12b-1 for The Hillman
Aggressive Equity Fund
(m)(2) Distribution Plan pursuant to Rule 12b-1 for The Hillman
Total Return Fund
(p)(1) Code of Ethics for the Registrant
(p)(2) Code of Ethics for Hillman Capital Management, Inc.
(q) Copy of Power of Attorney
