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THE BROWN CAPITAL MANAGEMENT SMALL COMPANY FUND
PORTFOLIO OF INVESTMENTS
September 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Value
Shares (note 1)
---------------------- ----------------------
<S> <C>
COMMON STOCKS - 85.89%
Advertising - 1.80%
Catalina Marketing Corporation 1,900 $101,175
----------------------
Chemicals - 1.14%
(a) Synthetech, Inc. 8,100 63,787
----------------------
Commercial Services - 2.84%
(a) Medaphis Corporation 2,800 42,000
(a) Quintiles Transnational Corporation 1,600 117,200
----------------------
159,200
----------------------
Computers - 4.89%
(a) Bay Networks 3,250 88,562
Fair Isaac & Company, Inc. 4,800 186,000
----------------------
274,562
----------------------
Computer Software & Services - 39.20%
(a) Acxiom Corporation 3,000 123,375
(a) Advent Software, Inc. 3,500 104,562
(a) American Business Information, Inc. 8,200 147,600
BGS Systems, Inc. 1,200 51,900
(a) BISYS Group, Inc. 3,900 161,606
(a) BMC Software, Inc. 2,400 190,800
(a) CFI Proservices, Inc. 5,500 108,625
(a) Cerner Corporation 6,100 95,313
(a) Cheyenne Software, Inc. 4,700 100,462
(a) GMIS, Inc. 4,500 108,562
(a) Hyperion Software Corporation 7,500 115,312
(a) MDL Information Systems, Inc. 2,600 82,225
(a) Marcam Corporation 5,500 64,625
(a) Network General Corporation 5,700 130,388
(a) Ovid Technologies, Inc. 200 2,050
Paychex, Inc. 1,050 60,900
(a) Parametric Technolog Company 1,600 79,000
(a) Platinum Technology, Inc. 5,600 70,700
(a) Quick Response Services, Inc. 2,800 104,300
(a) SPS Transaction Services, Inc. 5,100 79,688
(a) SPSS, Inc. 4,100 113,775
(a) Structural Dynamics Research Corporation 4,400 105,050
----------------------
2,200,818
----------------------
Electronics - 2.44 %
Sanmina Corporation 3,400 136,850
----------------------
Financial Services - 3.01 %
T. Rowe Price Associates 5,200 169,000
----------------------
</TABLE>
(Continued)
<PAGE>
THE BROWN CAPITAL MANAGEMENT SMALL COMPANY FUND
PORTFOLIO OF INVESTMENTS
September 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Value
Shares (note 1)
---------------------- ----------------------
<S> <C>
COMMON STOCKS - (Continued)
Furniture & Home Appliances - 1.90 %
Juno Lighting, Incorporated 6,400 $106,400
----------------------
Industrial Materials - Specialty - 0.35%
(a) Arden Industrial Products 4,000 19,500
----------------------
Machine - Diversified - 2.70%
(a) Cognex Corporation 9,200 151,800
----------------------
Medical Supplies - 10.50%
(a) Ballard Medical Products 5,800 113,100
Biomet, Inc. 6,300 103,163
Diagnostic Products Corporation 2,300 86,538
Life Technologies, Inc. 4,200 94,500
(a) Lynx Therapeutics Inc. 81 243
(a) Molecular Dynamics, Inc. 3,900 30,225
(a) PerSeptive Biosystems 5,400 37,800
(a) TECNOL Medical Products, Inc. 3,400 48,875
(a) Techne Corporation 3,200 74,800
----------------------
589,244
----------------------
Medical - Hospital Management & Service - 2.95%
(a) ABR Information Services, Inc. 2,300 165,600
----------------------
Pharmaceuticals - 3.03%
(a) Alza Corporation 6,300 168,525
(a) Alza Corporation - Warrants 150 19
(a) Therapeutic Discovery Corp. 150 1,406
----------------------
169,950
----------------------
Real Estate Investment Trust - 3.59%
General Growth Properties 2,500 62,500
Post Properties, Inc. 3,800 139,175
----------------------
201,675
----------------------
Restaurants & Food Service - 4.70%
(a) Au Bon Pain Company, Inc. 15,100 107,588
(a) The Cheesecake Factory 6,800 156,400
----------------------
263,988
----------------------
Retail - Specialty Line - 0.85%
(a) Cosmetic Center, Inc. 6,600 47,850
----------------------
Total Common Stocks (Cost $3,601,369) 4,821,399
----------------------
</TABLE>
(Continued)
<PAGE>
THE BROWN CAPITAL MANAGEMENT SMALL COMPANY FUND
PORTFOLIO OF INVESTMENTS
September 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Value
Shares (note 1)
-------------------- ----------------------
<S> <C>
REPURCHASE AGREEMENT - 15.47%(b)
Wachovia Bank 868,337 $868,337
----------------------
5.75%, due October 1, 1996
(Cost $868,337)
Total Value of Investments (Cost $4,469,706(c)) 101.36 % 5,689,736
Liabilities in Excess of Other Assets (1.36)% (76,317)
--------------------- ----------------------
Net Assets 100.00 % $5,613,419
===================== ======================
</TABLE>
(a) Non-income producing investment.
(b) The repurchase agreement is fully collateralized by U.S.
Government and/or agency obligations based on market prices at
the date of the portfolio. The investment in the repurchase
agreement is through participation in a joint account with other
funds administered by The Nottingham Company.
(c) Aggregate cost for financial reporting and federal income tax
purposes is the same. Unrealized appreciation (depreciation) of
investments for financial reporting and federal income tax
purposes is as follows:
Unrealized appreciation $1,378,136
Unrealized depreciation (158,106)
----------------
Net unrealized appreciation $1,220,030
================
See accompanying notes to financial statements
<PAGE>
THE BROWN CAPITAL MANAGEMENT SMALL COMPANY FUND
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1996
(Unaudited)
<TABLE>
<S> <C>
ASSETS
Investments, at value (cost $3,601,369) $4,821,399
Repurchase agreement (cost $868,337) 868,337
Cash 2,772
Interest receivable 4,773
Dividends receivable 4,310
Reserve premium 1,569
Prepaid expenses 7,624
Due from advisor (note 2) 91
-------------------
Total assets 5,710,875
-------------------
LIABILITIES
Accrued expenses 718
Payable for investment purchases 96,738
-------------------
Total liabilities 97,456
-------------------
NET ASSETS
(applicable to 348,126 Institutional Class shares outstanding
shares of no par value beneficial interest authorized) $5,613,419
===================
NET ASSET VALUE AND REPURCHASE PRICE PER INSTITUTIONAL CLASS SHARE
($5,613,419 divided by 348,126 shares) $16.12
===================
NET ASSETS CONSIST OF
Paid-in capital $4,245,271
Undistributed net investment loss (6,741)
Undistributed net realized gain on investments 154,859
Net unrealized appreciation on investments 1,220,030
-------------------
$5,613,419
===================
</TABLE>
See accompanying notes to financial statements
<PAGE>
THE BROWN CAPITAL MANAGEMENT SMALL COMPANY FUND
STATEMENT OF OPERATIONS
Period ended September 30, 1996
(Unaudited)
<TABLE>
<S> <C>
INVESTMENT LOSS
Income
Interest $17,243
Dividends 9,608
Miscellaneous 50
----------------------
Total income 26,901
----------------------
Expenses
Investment advisory fees (note 2) 22,468
Fund accounting fees (note 2) 10,528
Professional fees 5,432
Fund administration fees (note 2) 5,617
Custody fees 2,408
Registration and filing administration fees 2,190
Securities pricing fees 1,962
Shareholder recordkeeping fees 538
Registration and filing expenses 2,747
Trustee fees and meeting expenses 2,816
Other operating expenses 2,119
Shareholder servicing expenses 2,050
Printing expenses 591
----------------------
Total expenses 61,466
----------------------
Less:
Expense reimbursements (note 2) (5,392)
Investment advisory fees waived (note 2) (22,432)
----------------------
Net expenses 33,642
----------------------
Net investment loss (6,741)
----------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from investment transactions 32,513
Increase in unrealized appreciation on investments 325,600
----------------------
Net realized and unrealized gain on investments 358,113
----------------------
Net increase in net assets resulting from operations $351,372
======================
</TABLE>
See accompanying notes to financial statements
<PAGE>
THE BROWN CAPITAL MANAGEMENT SMALL COMPANY FUND
STATEMENTS OF CHANGES IN NET ASSETS
(Unaudited)
<TABLE>
<CAPTION>
Period ended Year ended
September 30, March 31,
1996 1996
------------------ ------------------
<S> <C>
INCREASE IN NET ASSETS
Operations
Net investment loss $(6,741) (15,288)
Net realized gain from investment transactions 32,513 310,770
Increase in unrealized appreciation on investments 325,600 591,974
------------------ ------------------
Net increase in net assets resulting from operations 351,372 887,456
Distributions to shareholders from
Net realized gain from investment transactions 0 (232,386)
------------------ ------------------
Capital share transactions
Increase in net assets resulting from capital share transactions (a) 1,521,839 475,777
------------------ ------------------
Total increase in net assets 1,873,211 1,130,847
NET ASSETS
Beginning of period 3,740,208 2,609,361
------------------ ------------------
End of period $5,613,419 3,740,208
================== ==================
</TABLE>
(a) A summary of capital share activity follows:
<TABLE>
<CAPTION>
Period ended Year ended
September 30, 1996 March 31, 1996
Shares Value Shares Value
<S> <C> ------- ------- ------- ------
Shares sold 111,876 $1,691,224 21,823 $309,573
Shares issued for reinvestment
of distributions 0 0 16,876 232,386
--------- ---------- ------- --------
111,876 1,691,224 38,699 541,959
Shares redeemed (10,913) (169,385) (4,737) (66,182)
--------- ---------- ------- ---------
Net increase 100,963 $1,521,839 33,962 475,777
========= =========== ====== =========
</TABLE>
See accompanying notes to financial statements
<PAGE>
THE BROWN CAPITAL MANAGEMENT SMALL COMPANY FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
(Unaudited)
<TABLE>
<CAPTION>
For the
period from
July 23, 1992
(commencement
Period ended Year ended Year ended Year ended of operations)
September 30, March 31, March 31, March 31, to March 31,
1996 1996 1995 1994 1993
------------- ----------- ---------- ---------- -------------
<S> <C>
Net asset value, beginning of period $15.13 $12.24 $10.69 $10.67 $10.00
Income from investment operations
Net investment loss (0.02) (0.06) (0.06) (0.11) (0.03)
Net realized and unrealized gain on investments 1.01 4.00 1.86 0.59 0.70
------------ ------------ ---------- ----------- ------------
Total from investment operations 0.99 3.94 1.80 0.48 0.67
------------ ------------ ---------- ----------- ------------
Distributions to shareholders from
Net realized gain from investment transactions 0.00 (1.05) (0.25) (0.46) 0.00
------------ ------------ ---------- ----------- ------------
Net asset value, end of period $16.12 $15.13 $12.24 $10.69 $10.67
============ ============ ========== =========== ============
Total return 6.54% 33.00 % 16.95 % 4.39% 6.70 %
============ ============ ========== =========== ============
Ratios/supplemental data
Net assets, end of period $5,613,419 $3,740,208 $2,609,361 $1,830,924 $1,225,645
============= =========== ============ =========== ==============
Ratio of expenses to average net assets
Before expense reimbursements and waived fees 2.73 %(a) 3.49 % 4.49%% 4.73% 5.45 %(a)
After expense reimbursements and waived fees 1.50 %(a) 1.69 % 2.00%% 2.00% 1.89 %(a)
Ratio of net investment loss to average net assets
Before expense reimbursements and waived fees (1.54)%(a) (2.29)% (3.38)% (4.03)% (4.42)%(a)
After expense reimbursements and waived fees (0.30)%(a) (0.50)% (0.90)% (1.34)% (0.86)%(a)
Portfolio turnover rate 4.64% 23.43 % 32.79 % 23.47% 4.14 %
</TABLE>
(a) Annualized See accompanying notes to financial statements
<PAGE>
THE BROWN CAPITAL MANAGEMENT SMALL COMPANY FUND
NOTES TO FINANCIAL STATEMENTS
September 30, 1996
(Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
The Brown Capital Management Small Company Fund (the "Fund") is a
diversified series of shares of beneficial interest of The
Nottingham Investment Trust II (the "Trust"). The Trust, an
open-end investment company, was organized on October 18, 1990 as
a Massachusetts Business Trust and is registered under the
Investment Company Act of 1940, as amended. The Fund began
operations on July 23, 1992.
Pursuant to a plan approved by the Board of Trustees of the Trust,
the existing single class of shares of the Fund was redesignated
as the Institutional Class shares of the Fund on June 15, 1995 and
an additional class of shares, the Investor Class shares, was
authorized. To date, only Institutional Class shares have been
issued by the Fund. The Institutional Class shares are sold
without a sales charge and bear no distribution and service fees.
The Investor Class shares will be subject to a maximum 3.50% sales
charge and will bear distribution and service fees which may not
exceed 0.50% of the Investor Class shares' average net assets
annually. The following is a summary of significant accounting
policies followed by the Fund.
A. Security Valuation - The Fund's investments in securities
are carried at value. Securities listed on an exchange or
quoted on a national market system are valued at 4:00 p.m.,
New York time on the day of valuation. Other securities
traded in the over-the-counter market and listed securities
for which no sale was reported on that date are valued at
the most recent bid price. Securities for which market
quotations are not readily available, if any, are valued by
using an independent pricing service or by following
procedures approved by the Board of Trustees. Short-term
investments are valued at cost which approximates value.
B. Federal Income Taxes - No provision has been made for
federal income taxes since it is the policy of the Fund to
comply with the provisions of the Internal Revenue Code
applicable to regulated investment companies and to make
sufficient distributions of taxable income to relieve it
from all federal income taxes.
C. Investment Transactions - Investment transactions are
recorded on the trade date. Realized gains and losses are
determined using the specific identification cost method.
Interest income is recorded daily on an accrual basis.
Dividend income and distributions to shareholders are
recorded on the ex-dividend date.
D. Distributions to Shareholders - The Fund generally declares
dividends quarterly, payable in March, June, September and
December, on a date selected by the Trust's Trustees. In
addition, distributions may be made annually in December out
of net realized gains through October 31 of that year. The
Fund may make a supplemental distribution subsequent to the
end of its fiscal year ending March 31.
E. Use of Estimates - The preparation of financial statements
in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the amounts of assets, liabilities, expenses and
revenues reported in the financial statements. Actual
results could differ from those estimated.
(Continued)
<PAGE>
THE BROWN CAPITAL MANAGEMENT SMALL COMPANY FUND
NOTES TO FINANCIAL STATEMENTS
September 30, 1996
(Unaudited)
F. Repurchase Agreements - The fund may acquire U.S. Government
Securities or corporate debt securities subject to
repurchase agreements. A repurchase agreement transaction
occurs when the Fund acquires a security and simultaneously
resells it to the vendor (normally a member bank of the
Federal Reserve or a registered Government Securities
dealer) for delivery on an agreed upon future date. The
repurchase price exceeds the purchase price by an amount
which reflects an agreed upon market interest rate earned by
the Fund effective for the period of time during which the
repurchase agreement is in effect. Delivery pursuant to the
resale typically will occur within one to five days of the
purchase. The Fund will not enter into a repurchase
agreement which will cause more than 10% of its net assets
to be invested in repurchase agreements which extend beyond
seven days. In the event of the bankruptcy of the other
party to a repurchase agreement, the Fund could experience
delays in recovering its cash or the securities lent. To the
extent that in the interim the value of the securities
purchased may have declined, the Fund could experience a
loss. In all cases, the creditworthiness of the other party
to a transaction is reviewed and found satisfactory by the
Advisor. Repurchase agreements are, in effect, loans of Fund
assets. The Fund will not engage in reverse repurchase
transactions, which are considered to be borrowings under
the Investment Company Act of 1940, as amended.
NOTE 2 - INVESTMENT ADVISORY FEE AND OTHER RELATED PARTY TRANSACTIONS
Pursuant to an investment advisory agreement, Brown Capital
Management, Inc. (the "Advisor") provides the Fund with a
continuous program of supervision of the Fund's assets, including
the composition of its portfolio, and furnishes advice and
recommendations with respect to investments, investment policies
and the purchase and sale of securities. As compensation for its
services, the Advisor receives a fee at the annual rate of 1.00%
of the Fund's average daily net assets.
Currently, the Fund does not offer its shares for sale in states
which require limitations to be placed on its expenses. The
Advisor intends to voluntarily waive all or a portion of its fee
and reimburse expenses of the Fund to limit total Fund operating
expenses to 1.50% of the average daily net assets of the Fund in
future years. There can be no assurance that the foregoing
voluntary fee waivers or reimbursements will continue. The Advisor
has voluntarily waived its fee amounting to $22,416 ($0.08 per
share) and has voluntarily agreed to reimburse $5,408 of the
Fund's operating expenses for the period ended September 30, 1996.
The Fund's administrator, The Nottingham Company
(the"Administrator"), provides administrative services to and is
generally responsible for the overall management and day-to-day
operations of the Fund pursuant to an accounting and
administrative agreement with the Trust. As compensation for its
services, the Administrator receives a fee at the annual rate of
0.25% of the Fund's first $10 million of average daily net assets,
0.20% of the next $40 million of average daily net assets, 0.175%
of the next $50 million of average daily net assets, and 0.15% of
average daily net assets over $100 million. The Administrator also
receives a monthly fee of $1,750 for accounting and recordkeeping
services. Additionally, the Administrator charges the Fund for
servicing of shareholder accounts and registration of the Fund's
shares. The contract with the Administrator provides that the
aggregate fees for the aforementioned administration, accounting
and recordkeeping services shall not be less than $3,000 per
month. The Administrator also charges the Fund for certain
expenses involved with the daily valuation of portfolio
securities.
(Continued)
<PAGE>
THE BROWN CAPITAL MANAGEMENT SMALL COMPANY FUND
NOTES TO FINANCIAL STATEMENTS
September 30, 1996
(Unaudited)
Certain Trustees and officers of the Trust are also officers of
the Advisor, the Distributor or the Administrator.
NOTE 3 - PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments, other than short-term
investments, aggregated $1,466,045 and $180,460 respectively, for
the period ended September 30, 1996.
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