================================================================================
THE NORTH CAROLINA TAX FREE BOND FUND
-------------------------------------
No Load Mutual Fund
ANNUAL REPORT
August 31, 2000
INVESTMENT ADVISOR ADMINISTRATOR
------------------ -------------
BOYS, ARNOLD & COMPANY INTEGRATED FUND SERVICES, INC.
Post Office Drawer 5255 221 East Fourth Street
1272 Hendersonville Road P.O. Box 5354
Asheville, North Carolina 28813-5255 Cincinnati, Ohio 45202
1.800.286.8038 1.800.841.0987
================================================================================
<PAGE>
September 14, 2000
To the Shareholders of the North Carolina Tax Free Bond Fund:
We are pleased to report on the progress of your Fund for the fiscal year ending
August 31, 2000.
Fiscal year 2000 was a much better period for municipal bond investors and the
Fund compared with the previous year. Although municipal bond issuance and
supply remained erratic at times during the year, the effect of rising
short-term interest rates by the Federal Reserve provided investors with greater
confidence in the long-term inflation outlook. Consequently, intermediate to
longer term interest rates declined. This had a positive impact on the Fund
since it is mostly comprised of longer-term municipal issues.
For the fiscal year ending August 31, 2000, the Fund's total return was +6.3%
(which includes both income and price change). This return compares favorably to
the average annual total return for the 40 North Carolina Municipal Debt Funds
which increased +5.2% as ranked by Lipper Analytical Services, Inc. For the same
period, the Lehman Municipal Bond Index, a national bond index with a shorter
duration and lower average quality, increased 6.8%. For the year and the last
three years ending August 31, 2000, the Fund ranked in the top quartile of the
Lipper universe of North Carolina Municipal Debt Funds.
The Fund maintains a high quality portfolio of exclusively North Carolina
municipal bonds, with an average maturity of almost 14 years and an average
credit quality of AA+ as measured by Standard and Poor's Corporation quality
ratings. The Fund's net asset value on August 31, 2000 was $10.59 and the
tax-free income and capital gains paid for the year then ended were $.46 and
$.01 per share, respectively.
The adept handling of the economy by the Federal Reserve has set the stage for
slower U.S. economic growth and an expected "soft landing". Continued modest
inflation coupled with the highest year over year productivity trends in
seventeen years leaves room for bond yields to fall further in the coming year.
These conditions have helped to offset the effects of rising oil prices that
appear to be peaking and may well begin to subside as the U.S. moves away from
the peak demand period and OPEC increases production output again. This should
continue to provide a stable to improving environment for fixed income
investors.
High quality municipal bonds continue to offer investors attractive tax-free
returns with relatively greater safety than can be found in most other
investments. They also can offer stability to a portfolio in periods of high
volatility in the stock markets. We encourage investors to take a long-term view
of their investment in the Fund and to consider a plan of dollar cost averaging
as a disciplined investment approach.
Thank you for your continued trust and support. We welcome your comments and
suggestions.
Sincerely,
/s/ John B. Kuhns /s/ Jon L. Vannice
John B. Kuhns Jon L. Vannice
<PAGE>
The North Carolina Tax Free Bond Fund
Comparison of the Change in Value of a $10,000 Investment in the North Carolina
Tax Free Bond Fund and the Lehman Brothers Municipal Bond Index
--------------------------------------------------------------------------------
THE NORTH CAROLINA TAX FREE BOND FUND
LEHMAN BROTHERS MUNICIPAL BOND INDEX: THE NORTH CAROLINA TAX FREE BOND FUND:
------------------------------------- --------------------------------------
QTRLY QTRLY
DATE RETURN BALANCE DATE RETURN BALANCE
------ ------ ------- ---- ------ -------
01/13/93 10,000 01/13/93 10,000
02/28/93 4.96% 10,496 02/28/93 3.70% 10,370
05/31/93 0.50% 10,548 05/31/93 -0.72% 10,296
08/31/93 3.92% 10,962 08/31/93 3.54% 10,660
11/30/93 0.44% 11,010 11/30/93 0.63% 10,727
02/28/94 0.60% 11,076 02/28/94 -0.06% 10,721
05/31/94 -2.42% 10,808 05/31/94 -1.25% 10,587
08/31/94 1.56% 10,977 08/31/94 1.03% 10,696
11/30/94 -4.97% 10,431 11/30/94 -4.53% 10,212
02/28/95 8.18% 11,285 02/28/95 7.94% 11,024
05/31/95 4.50% 11,792 05/31/95 4.15% 11,481
08/31/95 1.33% 11,949 08/31/95 0.76% 11,569
11/30/95 3.79% 12,402 11/30/95 3.41% 11,963
02/29/96 1.04% 12,531 02/29/96 1.17% 12,103
05/31/96 -1.59% 12,332 05/31/96 -2.46% 11,804
08/31/96 1.98% 12,576 08/31/96 2.25% 12,070
11/30/96 4.42% 13,132 11/30/96 4.56% 12,620
02/28/97 0.68% 13,221 02/28/97 0.17% 12,641
05/31/97 0.99% 13,352 05/31/97 0.09% 12,652
08/31/97 2.89% 13,738 08/31/97 2.75% 13,000
11/30/97 2.44% 14,073 11/30/97 2.33% 13,303
02/28/98 2.54% 14,431 02/28/98 3.08% 13,713
05/31/98 1.22% 14,607 05/31/98 0.75% 13,815
08/31/98 2.20% 14,928 08/31/98 2.49% 14,159
11/30/98 1.60% 15,167 11/30/98 1.27% 14,339
02/28/99 1.00% 15,318 02/28/99 0.70% 14,439
05/31/99 -0.19% 15,289 05/31/99 -0.90% 14,310
08/31/99 -1.87% 15,003 08/31/99 -2.39% 13,967
11/30/99 0.01% 15,005 11/30/99 -0.45% 13,905
02/29/00 -0.03% 15,000 02/29/00 -0.04% 13,899
05/31/00 1.05% 15,158 05/31/00 0.55% 13,975
08/31/00 5.68% 16,019 08/31/00 6.24% 14,847
Past performance is not predictive of future performance.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
The North Carolina Tax Free Bond Fund
Average Annual Total Returns
1 Year 5 Years Since Inception*
------ ------- ----------------
6.30% 5.12% 5.31%
--------------------------------------------------------------------------------
* Commencement of operations was January 13, 1993.
<PAGE>
THE NORTH CAROLINA TAX FREE BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
August 31, 2000
ASSETS:
Investment securities, at value (amortized cost
$13,686,055) (note 1) 13,799,066
Interest receivable 209,131
Receivable for capital shares sold 500
Other assets 3,238
============
TOTAL ASSETS 14,011,935
------------
LIABILITIES:
Bank overdraft 10,031
Dividends payable 18,455
Payable to Advisor (note 3) 4,293
Payable to Administrator (note 3) 4,760
Other accrued expenses and liabilities 6,489
------------
TOTAL LIABILITIES 44,028
------------
NET ASSETS $ 13,967,907
============
NET ASSETS CONSIST OF:
Paid-in capital $ 13,977,800
Accumulated net realized losses from security transactions (122,904)
Net unrealized appreciation on investments 113,011
============
NET ASSETS $ 13,967,907
============
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) 1,319,562
============
Net asset value, offering price and redemption
price per share (note 1) $ 10.59
============
<PAGE>
THE NORTH CAROLINA TAX FREE BOND FUND
STATEMENT OF OPERATIONS
For the Year Ended August 31, 2000
INVESTMENT INCOME:
Interest $ 733,362
------------
EXPENSES:
Investment advisory fees (note 3) 48,035
Shareholder servicing fees (note 3) 34,310
Accounting services fees (note 3) 24,000
Administration fees (note 3) 20,570
Transfer agent fees (note 3) 12,000
Custodian fees 11,953
Professional fees 8,400
Insurance expense 6,602
Pricing costs 6,269
Postage and supplies 6,149
Trustees' fees and expenses 5,486
Reports to shareholders 2,832
Registration fees 172
------------
TOTAL EXPENSES 186,778
Investment advisory fees waived (note 3) (35,812)
Shareholder servicing fees waived (note 3) (34,310)
------------
NET EXPENSES 116,656
------------
NET INVESTMENT INCOME 616,706
------------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS:
Net realized losses from security transactions (122,904)
Net change in unrealized appreciation/
depreciation on investments 329,262
------------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS 206,358
------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 823,064
============
<PAGE>
THE NORTH CAROLINA TAX FREE BOND FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended Year Ended
August 31, August 31,
2000 1999
============ ============
<S> <C> <C>
FROM OPERATIONS:
Net investment income $ 616,706 $ 556,018
Net realized gains (losses) from security transactions (122,904) 13,241
Net change in unrealized appreciation/depreciation on investments 329,262 (787,235)
============ ============
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS 823,064 (217,976)
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (616,706) (556,018)
From net realized gains from security transactions (13,244) (115,531)
============ ============
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (629,950) (671,549)
============ ============
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 3,376,543 3,423,074
Net asset value of shares issued in
reinvestment of distributions to shareholders 532,626 622,314
Payment for shares redeemed (4,042,163) (1,684,384)
============ ============
NET INCREASE (DECREASE) IN NET ASSETS FROM
CAPITAL SHARE TRANSACTIONS (132,994) 2,361,004
============ ============
TOTAL INCREASE IN NET ASSETS 60,120 1,471,479
NET ASSETS:
Beginning of year 13,907,787 12,436,308
============ ============
End of year $ 13,967,907 $ 13,907,787
============ ============
CAPITAL SHARE ACTIVITY:
Shares sold 327,351 311,082
Shares issued in reinvestment of distributions to shareholders 51,953 56,996
Shares redeemed (392,920) (154,228)
------------ ------------
Net increase/decrease in shares outstanding (13,616) 213,850
Shares outstanding, beginning of year 1,333,178 1,119,328
------------ ------------
Shares outstanding, end of year 1,319,562 1,333,178
============ ============
</TABLE>
<PAGE>
THE NORTH CAROLINA TAX FREE BOND FUND
FINANCIAL HIGHLIGHTS
Selected Per Share Data and Ratios for a Share Outstanding Throughout Each Year
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31,
2000 1999 1998 1997 1996
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF YEAR $ 10.43 $ 11.11 $ 10.63 $ 10.32 $ 10.36
------------ ------------ ------------ ------------ ------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.46 0.44 0.45 0.47 0.48
Net realized and unrealized gains (losses) on investment 0.17 (0.58) 0.48 0.31 (0.04)
------------ ------------ ------------ ------------ ------------
TOTAL FROM INVESTMENT OPERATIONS 0.63 (0.14) 0.93 0.78 0.44
------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.46) (0.44) (0.45) (0.47) (0.48)
From net realized gains from security transactions (0.01) (0.10) -- -- --
------------ ------------ ------------ ------------ ------------
TOTAL DISTRIBUTIONS (0.47) (0.54) (0.45) (0.47) (0.48)
------------ ------------ ------------ ------------ ------------
NET ASSET VALUE AT END OF YEAR $ 10.59 $ 10.43 $ 11.11 $ 10.63 $ 10.32
============ ============ ============ ============ ============
TOTAL RETURN 6.30% (1.36%) 8.92% 7.71% 4.33%
============ ============ ============ ============ ============
NET ASSETS AT END OF YEAR $ 13,967,907 $ 13,907,787 $ 12,436,308 $ 9,954,295 $ 6,400,507
============ ============ ============ ============ ============
RATIO OF EXPENSES TO AVERAGE NET ASSETS:
Before expense reimbursements and waived fees 1.36% 1.41% 1.42% 1.68% 2.24%
After expense reimbursements and waived fees (note 3) 0.85% 0.85% 0.83% 0.85% 0.85%
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSET 4.50% 4.08% 4.15% 4.49% 4.60%
PORTFOLIO TURNOVER RATE 19% 5% 36% 20% 10%
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE NORTH CAROLINA TAX FREE BOND FUND
PORTFOLIO OF INVESTMENTS
August 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY VALUE
AMOUNT RATE DATE (NOTE 1)
------ ---- ---- --------
($) ($)
MUNICIPAL OBLIGATIONS - 98.1%
<S> <C> <C> <C> <C>
Appalachian State University, North Carolina
Utility System Revenue 150,000 5.90% 05-15-08 160,210
Asheville, North Carolina
Water System Revenue 150,000 5.50% 08-01-11 156,741
Buncombe County, North Carolina
Certificate of Participation 500,000 5.00% 12-01-12 498,150
Buncombe County, North Carolina
Solid Waste System Special
Obligation Revenue 200,000 5.60% 03-01-11 208,572
Cabarrus County, North Carolina
General Obligation 250,000 5.40% 02-01-17 252,322
Charlotte, North Carolina
Law Enforcement Facilities Project
Series A Certificate of Participation 100,000 6.10% 12-01-15 104,307
Charlotte, North Carolina
Public Improvements 400,000 5.30% 04-01-08 416,812
Charlotte, North Carolina
Storm Water Revenue 500,000 6.00% 06-01-20 527,935
Charlotte, North Carolina
Water & Sewer General Obligation 400,000 5.60% 05-01-20 428,400
Cumberland County, North Carolina
Hospital Facilities Revenue 500,000 5.25% 10-01-11 483,665
Currituck County, North Carolina
General Obligation 300,000 5.40% 04-01-14 308,337
Duke University Hospital
Community Hospital Revenue 500,000 5.25% 06-01-17 483,730
Durham, North Carolina
General Obligation Revenue 200,000 5.80% 02-01-12 210,896
</TABLE>
<PAGE>
THE NORTH CAROLINA TAX FREE BOND FUND
PORTFOLIO OF INVESTMENTS
August 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY VALUE
AMOUNT RATE DATE (NOTE 1)
------ ---- ---- --------
($) ($)
MUNICIPAL OBLIGATIONS - 98.1%
<S> <C> <C> <C> <C>
Fayetteville, North Carolina
Public Works Revenue 500,000 5.10% 03-01-15 492,455
Gaston County, North Carolina
General Obligation 500,000 5.00% 03-01-17 483,105
Gaston, North Carolina
Memorial Hospital Project Revenue 600,000 5.50% 02-15-15 590,592
Gastonia, North Carolina
Police Station Project Certificate
of Participation 100,000 5.70% 08-01-15 102,426
Gastonia, North Carolina
Street Improvements General Obligation 200,000 5.50% 05-01-13 208,474
Gastonia, North Carolina
Street Improvements General Obligation 400,000 5.50% 05-01-16 411,852
Greensboro, North Carolina
General Obligation Unlimited 500,000 5.00% 03-01-12 505,235
Johnston County, North Carolina
General Obligation 500,000 5.00% 05-01-18 479,570
Lincolnton, North Carolina
Enterprise System Revenue 200,000 5.38% 05-01-16 201,364
Mecklenburg County, North Carolina
Public Improvement General Obligation 200,000 5.50% 04-01-11 208,194
Morganton, North Carolina
Water & Sewer General Obligation Revenue 500,000 5.70% 06-01-13 523,195
North Carolina Central University
Housing System Revenue 200,000 5.80% 11-01-17 207,402
North Carolina Educational Facilities Finance
Agency Elon College Project Revenue 100,000 6.38% 01-01-14 104,211
North Carolina Housing Finance Agency
Home Ownership Series 2-B Revenue 500,000 5.10% 07-01-17 478,610
</TABLE>
<PAGE>
THE NORTH CAROLINA TAX FREE BOND FUND
PORTFOLIO OF INVESTMENTS
August 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY VALUE
AMOUNT RATE DATE (NOTE 1)
------ ---- ---- --------
($) ($)
<S> <C> <C> <C> <C>
MUNICIPAL OBLIGATIONS - 98.1%
North Carolina Housing Finance Agency
Home Ownership Series 6-B Revenue 400,000 5.45% 01-01-11 412,236
North Carolina Housing Finance Agency
Multifamily Series A Revenue 95,000 5.80% 07-01-13 96,705
North Carolina Municipal Power Agency
Number 1 - Catawba Electric Revenue 100,000 6.00% 01-01-09 108,298
North Carolina Municipal Power Agency
Number 1 - Catawba Electric Revenue 100,000 5.75% 01-01-15 101,120
North Carolina State
Clean Water Series A General Obligation 100,000 5.80% 06-01-04 106,518
North Carolina State University
Centennial Campus Series B Revenue 500,000 5.13% 12-15-16 492,100
Piedmont Triad Airport Authority
North Carolina Series A Revenue 300,000 5.63% 07-01-14 312,456
Piedmont Triad Airport Authority
North Carolina Series A Revenue 200,000 5.88% 07-01-19 208,696
Pitt County, North Carolina
Memorial Hospital Revenue 500,000 5.25% 12-01-12 504,300
Pitt County, North Carolina
Memorial Hospital Revenue 100,000 5.50% 12-01-15 101,905
Raleigh, North Carolina
General Obligation 500,000 5.25% 06-01-13 512,590
University of North Carolina
General Obligation Revenue 500,000 5.40% 05-15-09 503,755
Wake Forest University
Finance Agency Revenue 500,000 5.00% 11-01-17 481,555
Wilmington, North Carolina
Water & Sewer System Revenue 400,000 5.40% 06-01-13 412,476
</TABLE>
<PAGE>
THE NORTH CAROLINA TAX FREE BOND FUND
PORTFOLIO OF INVESTMENTS
August 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY VALUE
AMOUNT RATE DATE (NOTE 1)
------ ---- ---- --------
($) ($)
MUNICIPAL OBLIGATIONS - 98.1%
<S> <C> <C> <C> <C>
Winston-Salem, North Carolina
General Obligation 100,000 5.50% 06-01-12 104,314
-------------
TOTAL MUNICIPAL OBLIGATIONS - 98.1% (AMORTIZED COST $13,582,775) $ 13,695,786
CASH EQUIVALENTS - 0.7%
Federated North Carolina Municipal Money Market Portfolio
(amortized cost $103,280) $ 103,280
-------------
TOTAL VALUE OF INVESTMENT SECURITIES - 98.8% (AMORTIZED COST $13,686,055) (A) $ 13,799,066
OTHER ASSETS IN EXCESS OF LIABILITIES - 1.2% 168,841
-------------
NET ASSETS - 100.0% $ 13,967,907
=============
</TABLE>
(a) As of August 31, 2000, the cost of investment securities for federal income
tax purposes was the same as that shown for financial statement purposes.
Net unrealized appreciation of $113,011 was comprised of gross unrealized
appreciation and depreciation of $285,914 and $172,903, respectively.
See accompanying notes to financial statements.
<PAGE>
THE NORTH CAROLINA TAX FREE BOND FUND
NOTES TO FINANCIAL STATEMENTS
August 31, 2000
1. SIGNIFICANT ACCOUNTING POLICIES
The North Carolina Tax Free Bond Fund (the Fund) is a no-load, non-diversified
series of Albemarle Investment Trust (the Trust), an open-end management
investment company registered under the Investment Company Act of 1940 and
organized in 1992 as a Massachusetts business trust. The Fund began operations
on January 13, 1993.
The investment objectives of the Fund are to provide current income exempt from
federal income taxes and from the personal income taxes of North Carolina, to
preserve capital and to protect the value of the portfolio against the effects
of inflation. Capital appreciation is of secondary importance. The Fund invests
primarily in debt instruments of municipal issuers within the state of North
Carolina. The issuers' abilities to meet their obligations may be affected by
economic and legislative developments in the state of North Carolina.
The following is a summary of the Fund's significant accounting policies:
SECURITIES VALUATION -- The Fund's portfolio securities are valued as of the
close of business of the regular session of trading of the New York Stock
Exchange (normally 4:00 p.m., Eastern Time). Municipal obligations are valued by
an independent pricing service which generally utilizes a computerized matrix
system with consideration given to security quality, maturity, coupon, call
features and the latest trading developments. On limited occasions, if the
valuation provided by the pricing service ignores certain market conditions
affecting the value of a security or the pricing service cannot provide a
valuation, the security is valued at fair value as determined in good faith in
accordance with consistently applied procedures established by and under the
general supervision of the Board of Trustees.
SHARE VALUATION -- The net asset value per share of the Fund is calculated daily
by dividing the total value of the Fund's assets, less liabilities, by the
number of shares outstanding. The offering price per share and the redemption
price per share are equal to the net asset value per share.
INVESTMENT INCOME -- Interest income is accrued as earned. Discounts and
premiums on securities purchased are amortized in accordance with income tax
regulations.
DISTRIBUTIONS TO SHAREHOLDERS -- Dividends arising from net investment income
are declared daily and paid on the last business day of each month. Net realized
short-term capital gains, if any, may be distributed throughout the year and net
realized long-term capital gains, if any, are distributed at least once each
year. Income distributions and capital gain distributions are determined in
accordance with income tax regulations.
SECURITY TRANSACTIONS -- Security transactions are accounted for on trade date.
Securities sold are determined on a specific identification basis. The Fund may
purchase securities on a when issued or delayed delivery basis. These
transactions involve a commitment by the Fund to purchase securities for a
predetermined price or yield with payment and delivery taking place more than
three days in the future, or after a period longer than the customary settlement
period for that type of security. No interest will be earned by the Fund on such
purchases until the securities are delivered; however, the market value may
change prior to delivery.
ESTIMATES -- The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates.
FEDERAL INCOME TAX -- It is the Fund's policy to comply with the special
provisions of the Internal Revenue Code applicable to regulated investment
companies. As provided therein, in any fiscal year in which a Fund so qualifies
and distributes at least 90% of its taxable net income, the Fund (but not the
shareholders) will be relieved of federal income tax on the income distributed.
Accordingly, no provision for income taxes has been made.
In order to avoid imposition of the excise tax applicable to regulated
investment companies, it is also the Fund's intention to declare as dividends in
each calendar year at least 98% of its net investment income (earned during the
calendar year) and 98% of its net realized capital gains (earned during the
twelve months ended October 31) plus undistributed amounts from prior years.
The Fund intends to satisfy conditions which enable it to designate the interest
income generated by its investment in municipal securities, which is exempt from
federal income tax when received by the Fund, as exempt-interest dividends upon
distribution to shareholders. For the year ended August 31, 2000, the Fund has
designated 100% of its distributions paid to shareholders from net investment
income as exempt-interest dividends for federal income tax purposes.
In addition, on November 30, 1999, the Fund declared and paid a long-term
capital gain distribution of $12,396 or $0.0093 per share. In January of 2000,
shareholders were provided with Form 1099-DIV which reported the amounts and tax
status of capital gain distributions paid during calendar year 1999.
As of August 31, 2000, the Fund had a capital loss carryforward for federal
income tax purposes of $15,622, which will expire on August 31, 2008. In
addition, during the period from November 1, 1999 through August 31, 2000, the
Fund had net realized capital losses of $107,282 which are treated for federal
income tax purposes as arising during the Fund's tax year ending August 31,
2001. These capital loss carryforwards and "post-October" losses may be utilized
in future years to offset net realized capital gains, if any, prior to
distributing such gains to shareholders.
2. INVESTMENT TRANSACTIONS
Cost of purchases and proceeds from sales and maturities of investment
securities, other than short-term investments, amounted to $2,462,766 and
$2,548,267 respectively, for the year ended August 31, 2000.
3. TRANSACTIONS WITH AFFILIATES
Certain officers of the Trust are also officers of Boys, Arnold & Company, Inc.
(the Advisor), or of Integrated Fund Services, Inc. (IFS), the administrative
services agent, shareholder servicing and transfer agent and accounting services
agent for the Fund.
INVESTMENT ADVISORY AGREEMENT
The Fund's investments are managed by the Advisor under the terms of an
Investment Advisory Agreement. Under the Investment Advisory Agreement, the Fund
pays the Advisor an investment advisory fee, which is computed and accrued daily
and paid monthly, at an annual rate of 0.35% of the Fund's average daily net
assets. The Advisor currently intends to voluntarily waive its investment
advisory fees and/or reimburse expenses of the Fund to the extent necessary to
limit the total operating expenses of the Fund to 0.85% of its average daily net
assets. For the year ended August 31, 2000, the Advisor waived $35,812 of its
investment advisory fees.
ADMINISTRATION AGREEMENT
Under the terms of an Administration Agreement with the Trust, IFS supplies
non-investment related administrative and compliance services for the Fund. IFS
supervises the preparation of tax returns, reports to shareholders, reports to
and filings with the Securities and Exchange Commission and state securities
commissions, and materials for meetings of the Board of Trustees. For these
services, IFS receives a monthly fee at an annual rate of 0.15% on the Fund's
average daily net assets up to $50 million; 0.125% on the next $50 million of
such net assets; and 0.10% on such net assets in excess of $100 million, subject
to a $1,000 minimum monthly fee.
TRANSFER AGENT AGREEMENT
Under the terms of a Transfer, Dividend Disbursing, Shareholder Service and Plan
Agency Agreement with the Trust, IFS maintains the records of each shareholder's
account, answers shareholders' inquiries concerning their accounts, processes
purchases and redemptions of the Fund's shares, acts as dividend and
distribution disbursing agent and performs other shareholder service functions.
For these services, IFS receives a monthly fee based on the number of
shareholder accounts in the Fund, subject to a $1,000 minimum monthly fee. In
addition, the Fund pays IFS out-of-pocket expenses including, but not limited
to, postage and supplies.
ACCOUNTING SERVICES AGREEMENT
Under the terms of an Accounting Services Agreement with the Trust, IFS
calculates the daily net asset value per share and maintains the financial books
and records of the Fund. For these services, IFS receives a monthly fee, based
on current asset levels, of $2,000 per month from the Fund. In addition, the
Fund pays IFS certain out-of-pocket expenses incurred by IFS in obtaining
valuations of the Fund's portfolio securities.
SHAREHOLDER SERVICING PLAN
The Trust has adopted a Shareholder Servicing Plan (the Plan) pursuant to which
the Fund may incur certain expenses for the compensation of persons providing
ongoing services and/or maintenance of the Fund's shareholder accounts, not
otherwise required to be provided by IFS. The basis for amounts paid under the
Plan must be approved by the Board of Trustees and may not exceed 0.25% of the
Fund's average daily net assets. For the year ended August 31, 2000, the Fund
incurred and waived $34,310 of shareholder servicing fees under the Plan.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees and Shareholders of
Albemarle Investment Trust:
We have audited the accompanying statement of assets and liabilities of The
North Carolina Tax Free Bond Fund (the "Fund"), a series of Albemarle Investment
Trust, including the portfolio of investments, as of August 31, 2000, and the
related statement of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the five years in the period then ended.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of August 31, 2000, by correspondence with the Fund's
custodian and broker. An audit also includes assessing the accounting principles
used and significant estimates made by management as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
North Carolina Tax Free Bond Fund as of August 31, 2000, the results of its
operations, the changes in its net assets and its financial highlights for the
respective stated periods, in conformity with accounting principles generally
accepted in the United States of America.
/s/ Deloitte & Touche LLP
Dayton, Ohio
September 29, 2000
