SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive
Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
ALBEMARLE INVESTMENT TRUST
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
ALBEMARLE INVESTMENT TRUST
P.O. Drawer 69
Rocky Mount, North Carolina 27802-0069
(800) 525-3863
January 30, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders of The
North Carolina Tax Free Bond Fund (the "Fund"), a series of the Albemarle
Investment Trust (the "Trust"), to be held on Friday, February 27, 1998, at
10:00 a.m., local time, at the offices of Poyner & Spruill, L.L.P., 3600
Glenwood Avenue, Raleigh, North Carolina.
The Special Meeting has been called because of a transaction (the "Transaction")
effectuated on December 31, 1997 in which Thomas C. Arnold, the controlling
shareholder of Boys, Arnold & Company, Inc. ("BAC"), the investment advisor to
the Fund, transferred a portion of his shares in BAC to BAC's Employee Stock
Ownership Plan (the "ESOP"). Following the Transaction, the ESOP now holds a
controlling interest in BAC. BAC established the ESOP to facilitate employee
ownership of BAC. The management of BAC feels that placing employees in the role
of owners increases motivation and helps BAC attract top quality people.
Following the Transaction, Mr. Arnold still continues to be the largest
shareholder of BAC (other than the ESOP) and serves as a trustee of the ESOP
along with other employees of BAC. Of the individuals at BAC who own shares in
BAC, Mr. Arnold continues to be the largest direct shareholder. Mr. Arnold
remains committed to maintaining his leadership role in the investment and
administrative management of BAC on a long term basis. Moreover, there has been
no change in the personnel comprising the investment committee that manages the
portfolio of the Fund.
Under the Investment Company Act of 1940, the Transaction may be considered an
assignment of the investment advisory agreement between BAC and the Trust for
the Fund, resulting in the termination of the investment advisory agreement.
Because of a number of tax and other administrative reasons, it was beneficial
for BAC to effectuate the Transaction on December 31, 1997, before a new
investment advisory agreement could be submitted to shareholders of the Fund for
consideration.
Accordingly, the Trustees of the Trust have approved a new investment advisory
agreement with BAC, effective January 1, 1998 for a one year term, subject to
shareholder approval. Except for the term, the provisions of the new investment
advisory agreement, including the compensation provisions, are identical to
those in the old agreement. The Trustees have also approved the service of BAC
as investment advisor to the Fund between January 1, 1998 and until the new
investment advisory agreement is approved by shareholders. During this interim
period, BAC has agreed to waive compensation for its investment advisory
services. Since January 1, 1998, BAC has continued to manage the Fund in the
same manner as prior to that date with the same investment personnel.
At the Special Meeting you will be asked to (i) approve the new investment
advisory agreement with BAC and (ii) ratify the service, without compensation,
of BAC as investment advisor to the Fund between January 1, 1998 and until the
new investment advisory agreement is approved by shareholders.
The Board of Trustees of the Trust has given full and careful consideration to
the matters being presented to shareholders and has concluded that the proposals
are in the best interests of the Fund and its shareholders. The Board of
Trustees therefore recommends that you vote "FOR" each of the matters discussed
herein.
Regardless of the number of shares you own, it is important that they are
represented and voted. Whether or not you plan to attend the Special Meeting, we
would appreciate your promptly voting, signing, and returning the enclosed proxy
in the postage-paid envelope provided.
Very truly yours,
Jon L. Vannice, Chairman and Trustee
<PAGE>
ALBEMARLE INVESTMENT TRUST
P.O. Drawer 69
Rocky Mount, North Carolina 27802-0069
(800) 525-3863
January 30, 1998
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To the Shareholders of the Albemarle Investment Trust:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of The North
Carolina Tax Free Bond Fund (the "Fund"), a series of the Albemarle Investment
Trust, an unincorporated business trust organized under the laws of The
Commonwealth of Massachusetts (the "Trust"), will be held at the offices of
Poyner & Spruill, L.L.P., 3600 Glenwood Avenue, Raleigh, North Carolina, on
Friday, February 27, 1998, at 10:00 a.m., local time, for the following
purposes:
(1) To approve or disapprove a new investment advisory agreement with Boys,
Arnold & Company, Inc. ("BAC"), effective January 1, 1998, whereby BAC
will continue to serve as investment advisor to the Fund;
(2) To ratify or reject the service, without compensation, of BAC as
investment advisor to the Fund between January 1, 1998 and until the
new investment advisory agreement is approved by shareholders;
(3) To ratify or reject the selection of Deloitte & Touche LLP as the
Trust's independent accountants for the Fund for the current fiscal
year; and
(4) To transact such other business, not currently contemplated, as may
properly come before the meeting or any adjournment thereof in the
discretion of the proxies or their substitutes.
Shareholders of record as of the close of business on January 15, 1998 are
entitled to notice of and to vote at the meeting and at any and all adjournments
thereof.
By order of the Trustees,
C. Frank Watson III, Secretary
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE AND RETURN THE
ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED
IN THE UNITED STATES. TO AVOID UNNECESSARY EXPENSE AND DELAY, PLEASE RETURN YOUR
PROXY NO MATTER HOW LARGE OR SMALL YOUR HOLDING MAY BE.
<PAGE>
ALBEMARLE INVESTMENT TRUST
P.O. Drawer 69
Rocky Mount, North Carolina 27802-0069
(800) 525-3863
SPECIAL MEETING OF SHAREHOLDERS
PROXY STATEMENT
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation of proxies
by the Albemarle Investment Trust, an unincorporated business trust organized
under the laws of The Commonwealth of Massachusetts (the "Trust"), for use at
the Special Meeting of Shareholders of The North Carolina Tax Free Bond Fund
(the "Fund"), a series of the Trust, to be held at the offices of Poyner &
Spruill, L.L.P., 3600 Glenwood Avenue, Raleigh, North Carolina, on Friday,
February 27, 1998, at 10:00 a.m., local time, and at any and all adjournments
thereof. This Proxy Statement and the accompanying form of proxy will first be
sent to shareholders on or about January 30, 1998.
At the meeting, shareholders of the Fund will vote on a proposal to approve or
disapprove a new investment advisory agreement with Boys, Arnold & Company, Inc.
("BAC"), the current investment advisor to the Fund, effective January 1, 1998.
Shareholders of the Fund will also vote on a proposal to ratify or reject the
service, without compensation, of BAC as investment advisor to the Fund between
January 1, 1998 and until the new investment advisory agreement is approved by
shareholders. Finally, shareholders of the Fund will vote on a proposal to
ratify or reject the selection of independent accountants for the Fund. Proxies
are being solicited by the Board of Trustees of the Trust, which recommends an
affirmative vote on the proposals.
If the accompanying form of proxy is properly executed and returned in time to
be voted at the meeting, the shares covered thereby will be voted in accordance
with the instructions marked thereon by the shareholder. Executed proxies that
are unmarked will be voted FOR the proposals. Any proxy may be revoked at any
time prior to its exercise by written notice of revocation addressed to and
received by the Secretary of the Trust, by delivering a duly executed proxy
bearing a later date, or by attending the meeting and voting in person.
The Annual Report of the Fund for the period ended August 31, 1997, including
financial statements, has previously been mailed to shareholders of the Fund.
The Fund will furnish, without charge, a copy of its Annual Report and its most
recent Semi-Annual Report succeeding the Annual Report, if any, to a shareholder
upon request. Requests should be directed to the Fund by writing the Fund at
Post Office Drawer 69, Rocky Mount, North Carolina 27802-0069, or by calling the
Fund at 1-800-525-3863.
The Trustees have fixed the close of business on January 15, 1998 as the record
date for the determination of shareholders entitled to notice of and to vote at
the meeting or any adjournment thereof. At the record date, 966,311.228 shares
of beneficial interest of the Fund were outstanding. There are no other series
of shares of the Trust. See "Additional Information - Principal Holders of
Voting Securities" below for information concerning the principal holders of
voting securities of the Fund. Each share of the Fund is entitled to one vote,
and each fractional share is entitled to a proportionate vote, on each matter
submitted to a vote at the meeting.
The costs of the meeting, including the solicitation of proxies, will be paid
for by BAC. Solicitation of proxies may be made in person or by mail, or by
telephone or facsimile transmission, by Trustees, officers, and regular
employees of the Trust, none of whom will be specially compensated therefor.
Persons holding shares as nominees will be reimbursed by BAC, upon request, for
their reasonable expenses in sending soliciting material to the principals of
the accounts. Failure of a quorum to be present in person or by proxy at the
meeting will necessitate adjournment of the meeting and will result in
additional expense and delay. Accordingly, shareholders are urged to complete
and return their proxies promptly, no matter how large or small their holdings
may be.
The principal executive offices of the Trust and the Fund are located at 105
North Washington Street, Rocky Mount, North Carolina 27802, which is the address
of The Nottingham Company (the "Administrator"), which serves as administrator
and fund accounting/pricing agent for the Trust and the Fund. The Fund's
investment advisor is Boys, Arnold & Company, Inc. ("BAC"), whose address is
P.O. Drawer 5255, 1272 Hendersonville Road, Asheville, North Carolina 28813. The
Fund's transfer agent is NC Shareholder Services, LLC, whose address is 107
North Washington Street, Rocky Mount, North Carolina 27802.
APPROVAL OR DISAPPROVAL OF NEW INVESTMENT ADVISORY AGREEMENT WITH BAC AND
RATIFICATION OR REJECTION OF INTERIM SERVICE OF BAC AS ADVISOR TO FUND
(ITEMS 1 AND 2)
Prior Advisory Agreement
Prior to January 1, 1998, the Trust retained BAC to manage the Fund's
investments pursuant to an Investment Advisory Agreement between the Trust and
BAC (the "Prior Advisory Agreement"). The Prior Advisory Agreement was
originally effective April 1, 1994 and was last approved by the Board of
Trustees, including a majority of the Trustees who are not interested persons,
as defined in the Investment Company Act of 1940, as amended (the "1940 Act"),
of BAC or of the Trust (the "Independent Trustees"), on March 5, 1997. The Prior
Advisory Agreement was approved by shareholders of the Fund on February 14,
1994.
Change in Control of BAC
Prior to December 31, 1997, BAC was controlled by Thomas C. Arnold. Effective
December 31, 1997, Mr. Arnold transferred a portion of his shares in BAC to
BAC's Employee Stock Ownership Plan (the ESOP")(the "Transaction"). The ESOP was
established by BAC to facilitate employee ownership of BAC. Following the
Transaction, the ESOP now controls BAC. For purposes of this discussion,
"control" of BAC refers to the ownership of record of more than 50% of its
capital stock.
Prior to the Transaction, Mr. Arnold was the sole trustee of the ESOP. Following
the Transaction, Mr. Arnold, Jon L. Vannice, an officer of BAC and Chairman and
Trustee of the Trust and an officer of the Fund, and John B. Kuhns, an officer
of BAC and the Fund, now serve as trustees of the ESOP.
Despite the Transaction, Mr. Arnold remains a significant shareholder of BAC and
active in the leadership of the investment and administrative management of BAC
and its advisory clients, including the Fund. Management of BAC has not changed.
Moreover, there has been no change in personnel of the investment committee that
manages the portfolio of the Fund.
The Transaction could be viewed as constituting a "change in control" of BAC for
purposes of the 1940 Act, and a transaction that results in a change in control
of an investment advisor may be deemed an "assignment" of its investment
advisory agreement. The 1940 Act further provides that an investment advisory
agreement will terminate automatically upon its assignment. Accordingly, to the
extent such an assignment occurred, the Prior Advisory Agreement terminated
automatically on December 31, 1997.
Because of a number of tax and other administrative reasons, it was beneficial
for BAC to effectuate the Transaction on December 31, 1997, before a new
investment advisory agreement could be submitted to shareholders of the Fund for
consideration.
The Transaction was effectuated by a bank loan to purchase the shares from Mr.
Arnold for the ESOP. The amount of the loan will be carried as a negative amount
in the capital section of BAC's financial statements until the debt is repaid by
the ESOP. Accordingly, BAC anticipates that its financial statements will show a
negative net worth until the loan is repaid. BAC does not believe this debt will
impair in any way its financial ability to fulfill its commitment to the Fund
under the new investment advisory agreement.
New Advisory Agreement and Continued Service of BAC
In anticipation of the Transaction, on December 23, 1997, the Board of Trustees
of the Trust, including all of the Independent Trustees, approved a new
investment advisory agreement between the Trust and BAC for the Fund, effective
January 1, 1998 for a one year term (the "New Advisory Agreement"), subject to
approval by the shareholders of the Fund.
In addition, on December 23, 1997, after fully and carefully considering the
circumstances, the Board of Trustees, including all of the Independent Trustees,
approved the service of BAC as investment advisor to the Fund between January 1,
1998 and until the New Advisory Agreement is approved by shareholders. Such
service will be in accordance with the provisions of the New Advisory Agreement.
During this interim period, however, BAC has agreed to waive compensation for
its investment advisory services.
The Board of Trustees, including the Independent Trustees, further reviewed
these matters on January 15, 1998, unanimously ratifying their previous actions
taken on December 23, 1997 and approving these proxy materials.
Since January 1, 1998, BAC has continued to manage the Fund in the same manner
as prior to that date with the same investment personnel. The employees of BAC
who provide portfolio management services to the Fund have not changed following
the Transaction, and there have been no changes in their responsibilities with
respect to the Fund following the Transaction. Further, no changes in BAC's
current method of operations are currently contemplated. BAC will take all
appropriate actions to ensure that the scope and quality of advisory and other
services provided to the Fund under the New Advisory Agreement will be at least
equivalent, in the judgment of the Board of Trustees, including the Independent
Trustees, to the scope and quality of services provided under the Prior Advisory
Agreement. If any material change occurs in the personnel providing services
under the New Advisory Agreement, BAC will apprise and consult the Board of
Trustees to assure that the Board and the Independent Trustees are satisfied
that the services provided by BAC will not be diminished in scope or quality.
Terms of the New Advisory Agreement
A copy of the New Advisory Agreement is attached hereto as Appendix A and
incorporated herein by reference. The terms and conditions of the New Advisory
Agreement are identical to those of the Prior Advisory Agreement with the
exception of the effective date.
Under the New Advisory Agreement, BAC will provide the Fund with a continuous
program of supervision of the Fund's assets, including the composition of its
portfolio, and furnish advice and recommendations with respect to investments,
investment policies, and the purchase and sale of securities. An investment
committee of BAC will continue to have primary responsibility for the day-to-day
management of the Fund's portfolio, like it has since BAC entered into the Prior
Advisory Agreement, effective April 1, 1994.
Under the New Advisory Agreement, BAC will supervise and implement the
investment activities of the Fund, including the making of specific decisions as
to the purchase and sale of portfolio investments. Among the responsibilities of
BAC under the New Advisory Agreement will be the selection of brokers and
dealers through whom transactions in the Fund's portfolio investments will be
effected. BAC attempts to obtain the best execution for all such transactions.
If it is believed that more than one broker is able to provide the best
execution, BAC is authorized to consider the receipt of quotations and other
market services and of research, statistical, and other data and the sale of
shares of the Fund in selecting a broker. Research services obtained through
Fund brokerage transactions may be used by BAC for its other clients and,
conversely, the Fund may benefit from research services obtained through the
brokerage transactions of BAC's other clients. Most securities transactions of
the Fund will be handled on a principal, rather than agency, basis. For the
fiscal year ended August 31, 1997, no brokerage commissions were paid by the
Fund.
Under the New Advisory Agreement, BAC will receive a monthly management fee
equal to an annual rate of 0.35% of the average daily net asset value of the
Fund. This is the same fee as provided in the Prior Advisory Agreement. BAC may
periodically voluntarily waive or reduce its advisory fee and reimburse expenses
of the Fund to increase the net income of the Fund. BAC voluntarily waived its
advisory fee in the amount of $26,663 for the fiscal year ended August 31, 1997.
BAC also voluntarily reimbursed the Fund the amount of $9,244 for expenses of
the Fund incurred during the fiscal year. BAC has agreed to waive any
compensation for its investment advisory services between January 1, 1998 and
until the New Advisory Agreement is approved by shareholders. BAC has also
voluntarily agreed to waive all or a portion of its advisory fee and to
reimburse other expenses of the Fund, if necessary, in an amount that limits the
Fund's operating expenses (exclusive of extraordinary expenses) to not more than
0.85% of the average daily net assets of the Fund. There can be no assurance
that BAC's voluntary fee waivers and expense reimbursements will continue in the
future.
If the New Advisory Agreement is approved by the Fund's shareholders, it will be
effective from January 1, 1998 for a one year term and from year to year
thereafter, subject to annual approval by (a) the Board of Trustees or (b) a
vote of a majority (as defined in the 1940 Act) of the outstanding voting
securities of the Fund; provided that in either event continuance is also
approved by a majority of the Independent Trustees, by a vote cast in person at
a meeting called for the purpose of voting on such approval. The New Advisory
Agreement may be terminated at any time, on sixty days' written notice, without
the payment of any penalty, by the Board of Trustees, by a vote of a majority of
the outstanding voting securities of the Fund, or by BAC. The New Advisory
Agreement automatically terminates in the event of its assignment (as defined by
the 1940 Act).
Under the New Advisory Agreement, BAC will not be liable for any error of
judgment or mistake of law or for any loss suffered by the Fund in connection
with the performance of such Agreement, except a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services or a
loss resulting from willful misfeasance, bad faith, or gross negligence on the
part of BAC in the performance of its duties or from its reckless disregard of
its duties and obligations under the Agreement.
The New Advisory Agreement is attached as Appendix A. The description of the New
Advisory Agreement set forth in this Proxy Statement is qualified in its
entirety by reference to Appendix A.
If the shareholders of the Fund do not approve the New Advisory Agreement, the
Board of Trustees will promptly seek to obtain for the Fund interim advisory
services either from BAC or from another advisory firm. Thereafter, the Board of
Trustees would either negotiate a new investment advisory agreement with an
advisory firm selected by the Board or make other appropriate arrangements, in
either event subject to approval by the shareholders of the Fund.
Information about BAC
BAC was founded in 1977 as the G. Waring Boys Company. In 1983, Thomas C. Arnold
joined the firm, and in 1989, the name was changed to Boys, Arnold & Company. In
addition to acting as advisor to the Fund, BAC focuses on management of
balanced, equity, and fixed income portfolios for a limited number of retirement
plan sponsors, non-profit organizations, and high-net worth individuals. While
it has no prior experience advising an investment company other than the Fund,
BAC has been rendering investment counsel utilizing investment strategies
similar to that of the Fund, to numerous other clients since inception. BAC
currently manages over $500 million in 175 client accounts for individuals and
organizations in 10 states, mainly in the Southeast. BAC is registered under the
Investment Advisors Act of 1940, as amended.
As indicated above, BAC is currently controlled by its employees through its
ESOP. The names and principal occupations of the principal executive officers
and directors of BAC are as follows:
Thomas C. Arnold--Director, Chairman, President, and Treasurer
John B. Kuhns--Director and Senior Vice President
Jon L. Vannice--Director, Vice President, and Secretary
John P. Rhodin--Director and Vice President
Each such person's address is the same as BAC's address, P.O. Drawer 5255, 1272
Hendersonville Road, Asheville, North Carolina 28813. Mr. Vannice is also
Chairman and Trustee of the Trust and an officer of the Fund, while Mr. Kuhns is
an officer of the Fund.
Evaluation by Board of Trustees
In considering approval of the New Advisory Agreement and the interim service of
BAC as investment advisor to the Fund, the Board of Trustees carefully evaluated
information it deemed necessary to enable it to determine whether the New
Advisory Agreement and such service would be in the best interests of the Fund
and its shareholders. In making the recommendation to approve the New Advisory
Agreement and the interim service of BAC to the Fund, the Trustees evaluated all
factors deemed to be relevant to the Fund, including, but not limited to, the
history, reputation, qualification, and background of BAC, as well as the
qualifications and experience of BAC's advisory personnel, the nature and
quality of services provided by BAC in the past and anticipated in the future,
the performance of the Fund while managed by BAC, the compensation proposed to
be paid to BAC under the New Advisory Agreement (which will be at the same rate
as under the Prior Advisory Agreement and which will be waived in the interim
period), the willingness of BAC to waive its fee in the past and to reimburse
the Fund for normal operating expenses above the agreed-upon expense limitation,
the fees, expense ratios, and performance of comparable mutual funds, the
distinct investment objectives and policies of the Fund and the experience of
BAC with North Carolina municipal obligations, that the terms of the New
Advisory Agreement are identical to those of the Prior Advisory Agreement
(except for the different commencement date), the financial condition of BAC
after the Transaction, and the willingness of BAC to pay or reimburse the Fund
for expenses incurred in connection with the Transaction.
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS APPROVE THE NEW ADVISORY
AGREEMENT (ITEM 1) AND ALSO RATIFY THE SERVICE, WITHOUT COMPENSATION, OF BAC AS
INVESTMENT ADVISOR TO THE FUND BETWEEN JANUARY 1, 1998 AND UNTIL THE NEW
ADVISORY AGREEMENT IS APPROVED BY SHAREHOLDERS (ITEM 2).
RATIFICATION OR REJECTION OF SELECTION OF
INDEPENDENT ACCOUNTANTS
(ITEM 3)
The Board of Trustees, including the Independent Trustees of the Trust, has
selected Deloitte & Touche LLP as independent accountants to audit the financial
statements of the Fund for the current fiscal year ending August 31, 1998. The
employment of Deloitte & Touche LLP is conditioned upon the right of the Trust,
by a vote of a majority of its outstanding shares, to terminate the employment
without any penalty. Deloitte & Touche LLP has informed the Trust that no member
of Deloitte & Touche LLP has any direct financial interest or material indirect
financial interest in the Trust.
Deloitte & Touche LLP served as the Trust's independent accountants and audited
the financial statements of the Fund for the fiscal years ended August 31, 1996
and 1997. The reports of Deloitte & Touche LLP on the financial statements of
the Fund for such fiscal years contained no adverse opinion or a disclaimer of
opinion and were not qualified or modified as to uncertainty, audit scope, or
accounting principles. Deloitte & Touche LLP was selected as the Trust's
independent accountants on November 11, 1996.
KPMG Peat Marwick LLP served as the Trust's independent accountants and audited
the financial statements of the Fund for the fiscal years ended August 31, 1994
and 1995. The reports of KPMG Peat Marwick LLP on the financial statements of
the Fund for such fiscal years contained no adverse opinion or a disclaimer of
opinion and was not qualified or modified as to uncertainty, audit scope, or
accounting principles. The Trust is not aware of any disagreements with KPMG
Peat Marwick LLP on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which disagreements, if
not resolved to the satisfaction of KPMG Peat Marwick LLP would have caused it
to make reference to the subject matter of the disagreements in connection with
its reports.
The selection of Deloitte & Touche LLP as the Trust's independent accountants
for the current fiscal year ending August 31, 1998 (and for the previous fiscal
years that Deloitte & Touche LLP served as the Trust's independent accountants
and audited the financial statements of the Fund) was recommended to the Board
of Trustees by its Audit Committee, which consists of the Independent Trustees.
Such selection was approved by the Trustees, subject to receipt of a
satisfactory engagement letter from Deloitte & Touche LLP.
The selection of Deloitte & Touche LLP as the Trust's independent accountants
for the Fund's current fiscal year is being submitted to shareholders for
ratification or rejection. If the Fund's shareholders do not ratify the
selection of Deloitte & Touche LLP, other certified public accountants may be
considered for selection by the Board of Trustees.
Representatives of Deloitte & Touche LLP are not expected to be present at the
shareholders' meeting but will be available should any matter arise requiring
their presence. If such representatives are present at the meeting, they will
have the opportunity to make a statement if they desire to do so and will be
expected to be available to respond to appropriate questions.
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS APPROVE THE RATIFICATION OF
THE SELECTION OF DELOITTE & TOUCHE LLP AS THE TRUST'S INDEPENDENT ACCOUNTANTS
(ITEM 3).
<PAGE>
ADDITIONAL INFORMATION
Required Vote
Items 1 and 2, the approval of the New Advisory Agreement and the ratification
of the service by BAC as investment advisor to the Fund, each requires the
approval of a majority of the outstanding shares of the Fund, which, under the
1940 Act, means (i) more than 50% of the outstanding shares of the Fund, or (ii)
67% or more of the shares present or represented by proxy at the meeting, if
more than 50% of the outstanding shares of the Fund are present in person or
represented by proxy, whichever is less. Item 3, ratification or rejection of
selection of independent accountants, requires the approval of a majority of the
votes cast entitled to vote thereon, provided a quorum of shareholders is
present.
The Declaration of Trust of the Trust provides that 50% of the shares entitled
to vote shall be a quorum for the transaction of business at a meeting of
shareholders, but any lesser number shall be sufficient for adjournments. Any
adjourned session or sessions may be held within a reasonable time after the
date set for the original meeting without the necessity of further notice.
With respect to Items 1, 2, and 3, abstentions may be specified on the proxy. In
tallying shareholder votes, abstentions and broker non-votes will be counted as
present for purposes of determining the existence of a quorum and in determining
the shares present or represented at the meeting with respect to the proposal.
Since the approval of Items 1 and 2 requires the approval of a majority of the
outstanding shares of the Fund, abstentions and broker non-votes will have the
effect of a negative vote. Since the approval of Item 3 requires the approval of
a majority of the votes cast at the meeting entitled to vote thereon,
abstentions and broker non-votes will have no effect.
A broker non-vote occurs when a nominee holding shares for a beneficial owner
does not vote on a particular proposal because the nominee does not have
discretionary voting power with respect to that proposal and has not received
instructions from the beneficial owner (despite voting on at least one other
proposal for which it does have discretionary authority or for which it has
received instructions). For example, brokers will generally have no
discretionary authority to vote shares of the Fund with respect to Items 1 or 2,
relating to the New Advisory Agreement and the service of BAC as investment
advisor to the Fund, without receiving voting instructions from beneficial
owners, but will have discretionary authority to vote in the selection of
independent accountants if voting instructions are not received from beneficial
owners.
<PAGE>
The Board of Trustees recommends an affirmative vote on the proposals.
Principal Holders of Voting Securities
As of January 15, 1998, the record date for the Special Meeting, the Trustees
and executive officers of the Trust individually and as a group owned
beneficially (i.e., voting and/or investment power) less than 1% of the then
outstanding shares of the Fund. On the same date, the following shareholders
owned of record more than 5% of the outstanding shares of beneficial interest of
the Fund. Except as provided below, no person is known by the Trust to be the
beneficial owner of more than 5% of the outstanding shares of beneficial
interest of the Fund as of such date.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
============================== ---------------------------- ------------------------ ========================
Name of Fund Name and Address of Amount and Nature Percent of Class
Beneficial Owner of Beneficial
Ownership *
============================== ============================ ======================== ========================
The North Carolina Tax Free Charles Schwab & Co., Inc. 382,719.498 shares 39.61%**
Bond Fund 100 Montgomery Street
San Francisco, California
94104
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</TABLE>
* The Fund believes the shares indicated are owned of record for the benefit of
the indicated shareholder's clients.
** Pursuant to applicable SEC regulations, this shareholder is deemed to control
the Fund.
Proposals of Shareholders
As a Massachusetts business trust, the Trust is not required to hold annual
shareholder meetings, but will hold shareholder meetings of the Trust or a
particular series of the Trust, such as the Fund, when required or deemed
desirable. Since the Trust does not hold regular shareholder meetings, the
anticipated date of the next shareholder meeting cannot be provided. Any
shareholder proposal which may properly be included in the proxy solicitation
material for a shareholder meeting must be received by the Trust at a reasonable
time before the solicitation of proxies for the meeting is made.
Other Matters
The Trustees know of no other matters to be presented at the meeting other than
those specified in the attached notice of meeting or other matters in connection
with or for the purpose of effecting the same. However, if any other matters
properly come before the meeting, it is intended that the persons named in the
enclosed proxy will vote thereon in their discretion and best judgment.
If a quorum is present at the meeting but sufficient votes in favor of any of
the items set forth in the notice of meeting are not received at the meeting,
the persons named as proxies may propose one or more adjournments of the meeting
to permit further solicitation of proxies. Any such adjournment will require the
affirmative vote of a majority of the shares present in person or represented by
proxy at the commencement of the meeting to be adjourned. A shareholder vote may
be taken on one or more of the proposals in this Proxy Statement prior to any
such adjournment if sufficient votes have been received. The persons named as
proxies will vote in favor of such adjournment those shares which they are
entitled to vote in favor of the matters set forth in the notice of meeting.
They will vote against any such adjournment those shares required to be voted
against any of such matters.
January 30, 1998 By order of the Trustees,
C. Frank Watson III, Secretary
TO AVOID ADDITIONAL EXPENSE AND DELAY, PLEASE EXECUTE AND RETURN THE ENCLOSED
PROXY PROMPTLY TO ENSURE THAT A QUORUM IS PRESENT AT THE MEETING. A
SELF-ADDRESSED, POSTAGE-PAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
<PAGE>
APPENDIX A
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT, entered into as of the 1st day of January, 1998, by and between
the ALBEMARLE INVESTMENT TRUST (the "Trust"), a Massachusetts Business Trust,
and BOYS, ARNOLD & COMPANY, INC., a North Carolina corporation (the "Advisor"),
registered as an investment advisor under the Investment Advisors Act of 1940,
as amended (the "Advisors Act").
WHEREAS, the Trust is registered as a diversified, open-end management
investment company of the series type under the Investment Company Act of 1940,
as amended (the "1940 Act"); and
WHEREAS, the Trust desires to retain the Advisor to furnish investment advisory
and administrative services to THE NORTH CAROLINA TAX FREE BOND FUND series of
the Trust, and the Advisor is willing to so furnish such services;
NOW THEREFORE, in consideration of the promises and mutual covenants herein
contained, it is agreed between the parties hereto as follows:
1. Appointment. The Trust hereby appoints the Advisor to act as investment
advisor to THE NORTH CAROLINA TAX FREE BOND FUND (the "Fund") series of
the Trust for the period and on the terms set forth in this Agreement.
The Advisor accepts such appointment and agrees to furnish the services
herein set forth, for the compensation herein provided.
2. Delivery of Documents. The Trust has furnished the Advisor with copies
properly certified or authenticated of each of the following:
(a) The Trust's Declaration of Trust, as filed with the State of
Massachusetts (such Declaration, as presently in effect and as
it shall from time to time be amended, is herein called the
"Declaration");
(b) The Trust's By-Laws (such By-Laws, as presently in effect and as
they shall from time to time be amended, are herein called the
"By-Laws");
(c) Resolutions of the Trust's Board of Trustees and the resolution
approved by a majority of the outstanding shares of the Fund
authorizing the appointment of the Advisor and approving this
Agreement;
(d) The Trust's Registration Statement on Form N-1A under the 1940
Act and under the Securities Act of 1933, as amended (the "1933
Act"), relating to shares of beneficial interest of the Fund
(herein called the "Shares") as filed with the Securities and
Exchange Commission ("SEC") and all amendments thereto;
(e) The Fund's Prospectus (such Prospectus, as presently in effect
and all amendments and supplements thereto are herein called the
"Prospectus").
The Trust will furnish the Advisor from time to time with copies,
properly certified or authenticated, of all amendments of or
supplements to the foregoing at the same time as such documents are
required to be filed with the SEC.
3. Management. Subject to the supervision of the Trust's Board of
Trustees, the Advisor will provide a continuous investment program for
the Fund, including investment research and management with respect to
all securities, investments, cash and cash equivalents in the Fund. The
Advisor will also monitor the performance and investment policies of
any Sub-Advisor and will recommend from time to time whether the
Sub-Advisor should be retained or removed by the Fund. The Advisor will
determine from time to time what securities and other investments will
be purchased, retained or sold by the Fund. The Advisor will provide
the services under this Agreement in accordance with the Fund's
investment objectives, policies and restrictions as stated in its
Prospectus. The Advisor further agrees that it:
(a) Will conform its activities to all applicable Rules and
Regulations of the Securities and Exchange Commission and will,
in addition, conduct its activities under this Agreement in
accordance with regulations of any other Federal and State
agencies which may now or in the future have jurisdiction over
its activities under this Agreement;
(b) Will place orders pursuant to its investment determinations for
the Fund either directly with the issuer or with any broker or
dealer. In placing orders with brokers or dealers, the Advisor
will attempt to obtain the best net price and the most favorable
execution of its orders. Consistent with this obligation, when
the Advisor believes two or more brokers or dealers are
comparable in price and execution, the Advisor may prefer: (i)
brokers and dealers who provide the Fund with research advice
and other services, or who recommend or sell Trust shares, and
(ii) brokers who are affiliated with the Fund or its Advisor;
provided, however, that in no instance will portfolio securities
be purchased from or sold to the Advisor or any affiliated
person of the Advisor in principal transactions;
(c) Will provide certain executive personnel for the Fund as may be
mutually agreed upon from time to time with the Board of
Trustees, the salaries and expenses of such personnel to be
borne by the Advisor unless otherwise mutually agreed upon; and
(d) Will provide, at its own cost, all office space, facilities and
equipment necessary for the conduct of its advisory activities
on behalf of the Fund.
4. Services Not Exclusive. The advisory services furnished by the Advisor
hereunder are not to be deemed exclusive, and the Advisor shall be free
to furnish similar services to others so long as its services under
this Agreement are not impaired thereby; provided, however, that
without the written consent of the Trustees, the Advisor will not serve
as investment advisor to any other investment company having a similar
investment objective to that of the Fund.
5. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Advisor hereby agrees that all records which it
maintains for the benefit of the Fund are the property of the Fund and
further agrees to surrender promptly to the Fund any of such records
upon the Fund's request. The Advisor further agrees to preserve for the
periods prescribed by Rule 31a-2 under the 1940 Act the records
required to be maintained by it pursuant to Rule 31a-1 under the 1940
Act that are not maintained by others on behalf of the Fund.
6. Expenses. During the term of this Agreement, the Advisor will pay all
expenses incurred by it in connection with its investment advisory
services pertaining to the Fund. In the event that there is no
distribution plan under Rule 12b-1 of the 1940 Act in effect for the
Fund, the Advisor will pay, out of the Advisor's resources generated
from sources other than fees received from the Fund, the entire cost of
the promotion and sale of Trust shares.
Notwithstanding the foregoing, the Fund shall pay the expenses and
costs of the following:
(a) Taxes, interest charges and extraordinary expenses;
(b) Brokerage fees and commissions with regard to portfolio
transactions of the Fund;
(c) Fees and expenses of the custodian of the Fund's portfolio
securities;
(d) Fees and expenses of the Fund's administrator, transfer and
dividend disbursing agent and the Fund's fund accounting agent
or, if the Fund performs any such services without an agent,
the costs of the same;
(e) Auditing and legal expenses;
(f) Cost of maintenance of the Fund's existence as a legal entity;
(g) Compensation of trustees who are not interested persons of the
Advisor as that term is defined by law;
(h) Costs of Trust meetings;
(i) Federal and State registration or qualification fees and
expenses;
(j) Costs of setting in type, printing and mailing Prospectuses,
reports and notices to existing shareholders;
(k) The investment advisory fee payable to the Advisor, as
provided in paragraph 7 herein; and
(l) Plan of Distribution expenses, but only in accordance with the
Plan of Distribution as approved by the shareholders of the
Fund.
It is understood that the Trust may desire to register the Fund's
shares for sale in certain states which impose expense limitations on
mutual funds. The Trust agrees that it will register the Fund's shares
in such states only with the prior written consent of the Advisor.
7. Compensation. The Trust will pay the Advisor and the Advisor will
accept as full compensation an investment advisory fee, based upon the
daily average net assets of each Fund, computed at the end of each
month and payable within five (5) business days thereafter, based upon
the schedule attached hereto as Exhibit A.
8.(a) Limitation of Liability. The Advisor shall not be liable for any error
of judgment, mistake of law or for any other loss whatsoever suffered
by the Fund in connection with the performance of this Agreement,
except a loss resulting from a breach of fiduciary duty with respect to
the receipt of compensation for services or a loss resulting from
wilful misfeasance, bad faith or gross negligence on the part of the
Advisor in the performance of its duties or from reckless disregard by
it of its obligations and duties under this Agreement.
8.(b) Indemnification of Advisor. Subject to the limitations set forth in
this Subsection 8(b), the Fund shall indemnify, defend and hold
harmless (from the assets of the Trust or Trusts to which the conduct
in question relates) the Advisor against all loss, damage and
liability, including but not limited to amounts paid in satisfaction of
judgments, in compromise or as fines and penalties, and expenses,
including reasonable accountants' and counsel fees, incurred by the
Advisor in connection with the defense or disposition of any action,
suit or other proceeding, whether civil or criminal, before any court
or administrative or legislative body, related to or resulting from
this Agreement or the performance of services hereunder, except with
respect to any matter as to which it has been determined that the loss,
damage or liability is a direct result of (i) a breach of fiduciary
duty with respect to the receipt of compensation for services; or (ii)
willful misfeasance, bad faith or gross negligence on the part of the
Advisor in the performance of its duties or from reckless disregard by
it of its duties under this Agreement (either and both of the conduct
described in clauses (i) and (ii) above being referred to hereinafter
as "Disabling Conduct"). A determination that the Advisor is entitled
to indemnification may be made by (i) a final decision on the merits by
a court or other body before whom the proceeding was brought that the
Advisor was not liable by reason of Disabling Conduct, (ii) dismissal
of a court action or an administrative proceeding against the Advisor
for insufficiency of evidence of Disabling Conduct, or (iii) a
reasonable determination, based upon a review of the facts, that the
Advisor was not liable by reason of Disabling Conduct by, (a) vote of a
majority of a quorum of Trustees who are neither "interested persons"
of the Fund as the quoted phrase is defined in Section 2(a)(19) of the
1940 Act nor parties to the action, suit or other proceeding on the
same or similar grounds that is then or has been pending or threatened
(such quorum of such Trustees being referred to hereinafter as the
"Independent Trustees"), or (b) an independent legal counsel in a
written opinion. Expenses, including accountants' and counsel fees so
incurred by the Advisor (but excluding amounts paid in satisfaction of
judgments, in compromise or as fines or penalties), may be paid from
time to time by the Fund or Trust to which the conduct in question
related in advance of the final disposition of any such action, suit or
proceeding; provided, that the Advisor shall have undertaken to repay
the amounts so paid if it is ultimately determined that indemnification
of such expenses is not authorized under this Subsection 8(b) and if
(i) the Advisor shall have provided security for such undertaking, (ii)
the Fund shall be insured against losses arising by reason of any
lawful advances, or (iii) a majority of the Independent Trustees, or an
independent legal counsel in a written opinion, shall have determined,
based on a review of readily available facts (as opposed to a full
trial-type inquiry), that there is reason to believe that the Advisor
ultimately will be entitled to indemnification hereunder.
As to any matter disposed of by a compromise payment by the Advisor
referred to in this Subsection 8(b), pursuant to a consent decree or
otherwise, no such indemnification either for said payment or for any
other expenses shall be provided unless such indemnification shall be
approved (i) by a majority of the Independent Trustees or (ii) by an
independent legal counsel in a written opinion. Approval by the
Independent Trustees pursuant to clause (i) shall not prevent the
recovery from the Advisor of any amount paid to the Advisor in
accordance with either of such clauses as indemnification of the
Advisor is subsequently adjudicated by a court of competent
jurisdiction not to have acted in good faith in the reasonable belief
that the Advisor's action was in or not opposed to the best interest of
the Fund or to have been liable to the Fund or its Shareholders by
reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in its conduct under the Agreement.
The right of indemnification provided by this Subsection 8(b) shall not
be exclusive of or affect any of the rights to which the Advisor may be
entitled. Nothing contained in this Subsection 8(b) shall affect any
rights to indemnification to which Trustees, officers or other
personnel of the Fund, and other persons may be entitled by contract or
otherwise under law, nor the power of the Fund to purchase and maintain
liability insurance on behalf of any such person.
The Board of Trustees of the Trust shall take all such action as may be
necessary and appropriate to authorize the Fund hereunder to pay the
indemnification required by this Subsection 8(b) including, without
limitation, to the extent needed, to determine whether the Advisor is
entitled to indemnification hereunder and the reasonable amount of any
indemnity due it hereunder, or employ independent legal counsel for
that purpose.
8.(c) The provisions contained in Section 8 shall survive the expiration or
other termination of this Agreement, shall be deemed to include and
protect the Advisor and its directors, officers, employees and agents
and shall inure to the benefit of its/their respective successors,
assigns and personal representatives.
9. Duration and Termination. This Agreement shall become effective on
January 1, 1998 and, unless sooner terminated as provided herein, shall
continue in effect for one year. Thereafter, this Agreement shall be
renewable for successive periods of one year each, provided such
continuance is specifically approved annually:
(a) By the vote of a majority of those members of the Board of
Trustees who are not parties to this Agreement or interested
persons of any such party (as that term is defined in the 1940
Act), cast in person at a meeting called for the purpose of
voting on such approval; and
(b) By vote of either the Board of Trustees or a majority (as that
term is defined in the 1940 Act) of the outstanding voting
securities of the Fund.
Notwithstanding the foregoing, this Agreement may be terminated by the
Fund or by the Advisor at any time on sixty (60) days' written notice,
without the payment of any penalty, provided that termination by the
Fund must be authorized either by vote of the Board of Trustees or by
vote of a majority of the outstanding voting securities of the Fund.
This Agreement will automatically terminate in the event of its
assignment (as that term is defined in the 1940 Act).
10. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by a written
instrument signed by the party against which enforcement of the change,
waiver, discharge or termination is sought. No material amendment of
this Agreement shall be effective until approved by vote of the holders
of a majority of the Fund's outstanding voting securities (as defined
in the 1940 Act).
11. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect. If
any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby. This Agreement shall be
binding and shall inure to the benefit of the parties hereto and their
respective successors.
12. Applicable Law. This Agreement shall be construed in accordance with,
and governed by, the laws of the State of North Carolina.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
ATTEST: ALBEMARLE INVESTMENT TRUST
By: By:
Title: Title:
ATTEST: BOYS, ARNOLD & COMPANY, INC.
By: By:
Title: Title:
<PAGE>
EXHIBIT A
INVESTMENT ADVISOR'S COMPENSATION SCHEDULE
For the services delineated in the INVESTMENT ADVISORY AGREEMENT, the Investment
Advisor shall be compensated monthly, as of the last day of each month, within
five business days of the month end, a fee based upon net assets according to
the following schedule.
Annual
Net Assets Fee
---------------- --------
On all assets 0.35%
<PAGE>
THE NORTH CAROLINA TAX FREE BOND FUND
PROXY
The undersigned shareholder of The North Carolina Tax Free Bond Fund (the
"Fund"), an investment series of the Albemarle Investment Trust, an
unincorporated business trust organized under the laws of The Commonwealth of
Massachusetts (the "Trust"), hereby constitutes and appoints Jon L. Vannice, M.
Guy Brooks III, and C. Frank Watson III, and each of them singly, to serve as
proxy and attorney for the undersigned, with full power of substitution, for and
in the name of the undersigned to vote and act upon all matters (unless and
except as expressly limited below) at the Special Meeting of Shareholders to be
held on Friday, February 27, 1998 at the offices of Poyner & Spruill, L.L.P.,
3600 Glenwood Avenue, Raleigh, North Carolina, at 10:00 a.m., local time, and at
any and all adjournments thereof, in respect of all shares of the Fund held by
the undersigned or in respect of which the undersigned would be entitled to vote
or act, with all the powers the undersigned would possess if personally present.
All proxies heretofore given by the undersigned in respect of said meeting are
hereby revoked.
ITEM 1. To approve or disapprove a new investment advisory agreement with Boys,
Arnold & Company, Inc. ("BAC"), effective January 1, 1998, whereby BAC will
continue to serve as investment advisor to the Fund.
/ /FOR / /AGAINST / /ABSTAIN
ITEM 2. To ratify or reject the service, without compensation, of BAC as
investment advisor to the Fund between January 1, 1998 and until the new
investment advisory agreement is approved by shareholders.
/ /FOR / /AGAINST / /ABSTAIN
ITEM 3. To ratify or reject the selection of Deloitte & Touche LLP as the
Trust's independent accountants for the Fund for the fiscal year ending August
31, 1998.
/ /FOR / /AGAINST / /ABSTAIN
Specify desired action by check marks in the appropriate spaces. This Proxy will
be voted as specified. If no specification is made, the Proxy will be voted FOR
the items referred to above. The persons named proxies have discretionary
authority, which they intend to exercise in favor of the proposals referred to
and according to their best judgment as to any other matters which properly come
before the meeting.
PLEASE COMPLETE, SIGN, DATE, AND RETURN THIS PROXY IN THE ENCLOSED ENVELOPE AS
SOON AS POSSIBLE.
Date _____________ Signature(s) of Shareholder(s):
-------------------------------
-------------------------------
The signature(s) on this Proxy should
correspond exactly with the shareholder's
name as printed hereon.
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES
