NOTTINGHAM INVESTMENT TRUST II, 485BPOS, 1996-08-01

NOTTINGHAM INVESTMENT TRUST II
485BPOS, 1996-08-01

Previous: CMA TREASURY MONEY FUND, 497, 1996-08-01

Next: LEGG MASON TAX FREE INCOME FUND, 485BPOS, 1996-08-01

As filed with the Securities and Exchange Commission on August 1, 1996
Securities Act File No. 33-37458

Investment Company Act File No. 811-6199

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

Post-Effective Amendment No. 29 X

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940

Amendment No. 30 X

THE NOTTINGHAM INVESTMENT TRUST II

105 North Washington Street
Post Office Drawer 69

Rocky Mount, North Carolina 27802-0069
Telephone (919) 972-9922

AGENT FOR SERVICE:

Frank P. Meadows III
105 North Washington Street

Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069

With copies to:

M. Guy Brooks, III, Esq.
Poyner & Spruill, L.L.P.

3600 Glenwood Avenue
Raleigh, North Carolina 27612

It is proposed that this filing will become effective:

X Immediately upon filing pursuant on , 1996 pursuant
-----------------
to Rule 485(b), or to Rule 485(b), or

60 days after filing pursuant on , 1996 pursuant
-----------------
to Rule 485(a)(1), to Rule 485(a)(1), or

75 days after filing pursuant on , 1996 pursuant
-----------------
to Rule 485(a)(2) to Rule 485(a)(2), or

The issuer has previously registered an indefinite number of shares of eight
classes: Capital Value Fund, Investek Fixed Income Trust, ZSA Social Conscience
Fund, ZSA Equity Fund, ZSA Asset Allocation Fund, The Brown Capital Management
Equity Fund, The Brown Capital Management Balanced Fund and The Brown Capital
Management Small Company Fund, under the Securities Act of 1933, as amended,
pursuant to Rule 24f-2 under the Investment Company Act of 1940, as amended. The
Rule 24f-2 Notice for the year ended March 31, 1996 was filed on May 30, 1996.

This filing includes the Prospectuses and Statements of Additional Information
of The Brown Capital Management Equity Fund, The Brown Capital Management
Balanced Fund and The Brown Capital Management Small Company Fund, which are
incorporated herein by reference to Post-Effective Amendment No. 28 to the
Registrant's Registration Statement on Form N-1A filed with the Commission on
July 12, 1996.

<PAGE>

PART A

<PAGE>

PROSPECTUS

CAPITAL VALUE FUND
INSTITUTIONAL CLASS

The investment objective of the Capital Value Fund (the "Fund") is to provide
its shareholders with a maximum total return consisting of any combination of
capital appreciation, both realized and unrealized, and income under the
constantly varying market conditions. The Fund will seek to achieve this
objective by investing in a flexible portfolio of equity securities, fixed
income securities, and money market instruments. While there is no assurance
that the Fund will achieve its investment objective, it endeavors to do so by
following the investment policies described in this Prospectus. The Fund has a
net asset value that will fluctuate in accordance with the value of its
portfolio securities. This Prospectus relates to shares ("Institutional Shares")
representing interests in the Fund. The Institutional Shares are offered to
institutional investors without any sales or redemption charges or shareholder
servicing or distribution fees. See "Prospectus Summary - Offering Price."

INVESTMENT ADVISOR

Capital Investment Counsel, Inc.
Raleigh, North Carolina

The Fund is a diversified series of The Nottingham Investment Trust II (the
"Trust"), a registered open-end management investment company. This Prospectus
sets forth concisely the information about the Fund that a prospective investor
should know before investing. Investors should read this Prospectus and retain
it for future reference. Additional information about the Fund has been filed
with the Securities and Exchange Commission and is available upon request and
without charge. You may request the Statement of Additional Information, as
amended from time to time, which is incorporated in this Prospectus by
reference, by writing the Fund at Post Office Drawer 69, Rocky Mount, North
Carolina 27802-0069, or by calling 1-800-525-FUND.

Investment in the Fund involves risks, including the possible loss of principal.
Shares of the Fund are not deposits or obligations of, or guaranteed or endorsed
by, any financial institution, and such shares are not federally insured by the
Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other
agency.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.

The date of this Prospectus and the Statement of Additional Information is
August 1, 1996.

<PAGE>

TABLE OF CONTENTS

PROSPECTUS SUMMARY................................................ 2

SYNOPSIS OF COSTS AND EXPENSES.................................... 3

FINANCIAL HIGHLIGHTS.............................................. 4

INVESTMENT OBJECTIVE AND POLICIES................................. 4

RISK FACTORS...................................................... 8

INVESTMENT LIMITATIONS........................................... 9

FEDERAL INCOME TAXES.............................................. 10

DIVIDENDS AND DISTRIBUTIONS....................................... 11

HOW SHARES ARE VALUED............................................. 11

HOW SHARES MAY BE PURCHASED....................................... 12

HOW SHARES MAY BE REDEEMED........................................ 14

MANAGEMENT OF THE FUND............................................ 16

OTHER INFORMATION................................................. 18

This Prospectus is not an offering of the securities herein described in any
state in which the offering is unauthorized. No sales representative, dealer or
other person is authorized to give any information or make any representations
other than those contained in this Prospectus.

<PAGE>

PROSPECTUS SUMMARY

<TABLE>
<S> <C>
The Fund The Capital Value Fund (the "Fund") is a diversified series of The Nottingham
Investment Trust II (the "Trust"), a registered open-end management investment
company organized as a Massachusetts business trust. The Fund is commonly known
as a "mutual fund." This Prospectus relates to Institutional Shares of the Fund.
See "Other Information - Description of Shares."

Offering Price The Institutional Shares are offered to institutional investors at net asset value without a sales
charge and are not subject to any shareholder servicing or distribution fees. The minimum
initial investment is $5,000 ($1,000 for IRAs and Keogh Plans). The minimum subsequent
investment is $500. See "How Shares May Be Purchased."

Investment The investment objective of the Fund is to provide its shareholders with a
Objective and maximum total return consisting of any combination of capital appreciation, both
Policies realized and unrealized, and income under the constantly varying market
conditions. In order to achieve the Fund's investment objective, the percentage
of Fund assets invested in equity securities, fixed income securities, and money
market instruments will vary according to the Advisor's judgment of market and
economic conditions, including trends in yields and interest rates, and changes
in fiscal or monetary policies. When the Advisor believes that capital
appreciation can be achieved without high levels of market risk, equity
securities will be emphasized. Equity selection will emphasize those securities
selling at or near the low end of their 2 to 5 year historical trading range.
Particular emphasis will be placed on those companies with strong asset holdings
in cash, current market value of real estate versus book value of that same real
estate, a favorable debt/asset and debt/equity ratio, and a consistent
management history of the company. See "Investment Objective and Policies." The
Fund is not intended to be a complete investment program, and there can be no
assurance that the Fund will achieve its investment objective.

Special Risk While the Fund will invest primarily in common stocks and bonds traded in U.S.
Considerations securities markets, some of the Fund's investments may include foreign
securities, illiquid securities, and securities purchased subject to a
repurchase agreement or on a "when-issued" basis, which involve certain risks.
To the extent that equity securities may comprise a major portion of its
portfolio, the Fund's net asset value will be subject to stock market
fluctuation. The Fund's net asset value may also fluctuate due to fluctuation in
the value of the fixed income securities in the portfolio as a result of changes
in the market interest rate, downgrading of the rating of a particular debt
instrument, or other changes in the interest rate and fixed income market
environment. The Fund may borrow only under certain limited conditions
(including to meet redemption requests) and not to purchase securities. It is
not the intent of the Fund to borrow except for temporary cash requirements.
Borrowing, if done, would tend to exaggerate the effects of market and interest
rate fluctuations on the Fund's net asset value until repaid. See "Risk
Factors."

Manager Subject to the general supervision of the Trust's Board of Trustees and in
accordance with the Fund's investment policies, Capital Investment Counsel, Inc.
of Raleigh, North Carolina (the "Advisor"), manages the Fund's investments. The
Advisor currently manages over $105 million in assets. For its advisory
services, the Advisor receives a monthly fee based on the Fund's daily net
assets at the annual rate of 0.60%. The fee is reduced on assets over $250
million. See "Management of the Fund - The Advisor."

Dividends Income dividends, if any, are generally paid quarterly; capital gains, if any,
are generally distributed at least once each year. Dividends and capital gains
distributions are automatically reinvested in additional shares of the same
Class of the Fund at net asset value unless the shareholder elects to receive
cash. See "Dividends and Distributions."

Distributor Capital Investment Group, Inc. (the "Distributor"), an affiliate of the Advisor, serves as
distributor of shares of the Fund. See "How Shares May Be Purchased - Distributor."

Redemption of There is no charge for redemptions (other than for wiring redemption proceeds). Shares may
Shares be redeemed at any time at the net asset value next determined after receipt of a redemption
request by the Fund. A shareholder who submits appropriate written authorization may redeem
shares by telephone. See "How Shares May Be Redeemed."
</TABLE>

SYNOPSIS OF COSTS AND EXPENSES

The following tables set forth certain information in connection with the
expenses of the Institutional Shares of the Fund for the current fiscal year.
The information is intended to assist the investor in understanding the various
costs and expenses borne by the Institutional Shares of the Fund, and therefore
indirectly by its investors, the payment of which will reduce an investor's
return on an annual basis.

Shareholder Transaction Expenses for Institutional Shares

Maximum sales load imposed on purchases
(as a percentage of offering price)...............................None
Maximum sales charge imposed on reinvested dividends.................None
Deferred sales load..................................................None
Redemption fees*.....................................................None
Exchange fee.........................................................None

* The Fund imposes a $10 charge for wiring redemption proceeds.

Annual Fund Operating Expenses for Institutional Shares - After Fee Waivers1
(as a percentage of average net assets)

Investment advisory fees.......................................0.60% (1)
12b-1 fees......................................................None
Other expenses.................................................1.40% (1)
-----
Total operating expenses....................................2.00% (1)
=====

EXAMPLE: You would pay the following expenses (including the maximum initial
sales charge) on a $1,000 investment in Institutional Shares of the Fund,
whether or not you redeem at the end of the period, assuming a 5% annual return:

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------

$20 $63 $108 $233

THE FOREGOING SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN.

1 The "Total operating expenses" shown above are based upon actual operating
expenses incurred by the Investor Shares of the Fund for the fiscal year
ended March 31, 1996, which, after fee waivers, were 2.33% of average daily
net assets of the Investor Shares, but restated to reflect the expenses
anticipated to be incurred by the Institutional Shares of the Fund for the
current fiscal year (without the payment of any distribution or service
fees). Absent such waivers, the percentage would have been 2.56% for "Total
operating expenses" for the Investor Shares for the fiscal year ended March
31, 1996. Since the Institutional Shares were not offered prior to the date
of this Prospectus, the actual operating expenses incurred by the Investor
Shares of the Fund for the fiscal year ended March 31, 1996 have been used
for illustration purposes, subject to restatement as provided above. The
Advisor has voluntarily agreed to a reduction in the fees payable to it and
to reimburse expenses of the Fund, if necessary, in an amount that limits
"Total operating expenses" (exclusive of interest, taxes, brokerage fees and
commissions, sales charges, and extraordinary expenses) to not more than
2.00% of the Institutional Shares' average daily net assets. There can be no
assurance that the Advisor's voluntary fee waivers and expense
reimbursements will continue in the future.

See "Management of the Fund" below for more information about the fees and costs
of operating the Fund. The assumed 5% annual return in the example is required
by the Securities and Exchange Commission. The hypothetical rate of return is
not intended to be representative of past or future performance of the Fund; the
actual rate of return for the Fund may be greater or less than 5%.

<PAGE>

FINANCIAL HIGHLIGHTS

INVESTMENT OBJECTIVE AND POLICIES

Investment Objective. The investment objective of the Fund is to provide its
shareholders with a maximum total return consisting of any combination of
capital appreciation, both realized and unrealized, and income under the
constantly varying market conditions. The percentage of assets invested in
equity securities, fixed income securities, and money market instruments will
vary from time to time depending upon the Advisor's judgment of general market
and economic conditions, trends in yields and interest rates, and changes in
fiscal or monetary policies. While there is no guarantee that the Fund will meet
its investment objective, it seeks to achieve its objective through the
investment policies and techniques described in this Prospectus. The Fund's
investment objective and fundamental investment limitations described herein may
not be altered without the prior approval of a majority of the Fund's
shareholders.

Investment Policies. In seeking to achieve the Fund's investment objective, the
Advisor invests in a portfolio of equity securities for growth, or a combination
of growth and income, and fixed income securities for income, or a combination
of income and growth. Investments may also be made in money market instruments
under circumstances when the Advisor believes the short term, stable nature of
money market instruments is the best means of achieving the Fund's goal of
maximum total return. Each category of securities, and the investment approach
to be used by the Fund, are described below.

The Fund will generally invest in securities traded on national securities
exchanges and on the over-the-counter market. In addition to investing in
various types of securities, the Advisor also invests in various companies,
industries, and economic sectors. When the Advisor believes the equity markets
are capable of providing capital appreciation, equity securities will be
emphasized. When equities are believed by the Advisor to be subject to high
levels of market risk, or when the Advisor believes there is a likelihood that
interest rates will decline (in which case capital appreciation would be
expected from fixed income securities), fixed income instruments will be
emphasized. The Fund may invest up to 100% of the Fund's assets in any of the
three categories of equity securities, fixed income securities, and money market
instruments. By adjusting the portfolio allocation in this manner, the Advisor
attempts to achieve the best opportunity for maximum total return.

The Fund will vary its investment allocation between equity securities, fixed
income securities, and money market instruments depending upon the Advisor's
view of the economic environment, trend in business environment, trend in
interest rates, and prospects for particular industries within the overall
market environment. In the selection of equity securities for investment in the
Fund's portfolio, the Advisor seeks to identify equities that are undervalued in
the securities markets. Candidates for such investment will usually include the
equity securities of domestic, established companies whose underlying value of
assets owned by the company, or "break up value" is close to or greater than the
market valuation of those same assets.

No assurance can be given that the Advisor will be correct in its expectations
of increased market recognition of value for the securities selected for the
Fund's portfolio. While portfolio securities are generally acquired for the long
term, they will be sold when the Advisor believes that: (a) the anticipated
price appreciation has been achieved or is no longer probable; (b) alternate
investments offer superior total return prospects; or (c) the risk of decline in
market value is increased. When a portfolio security is sold due to (a) above,
the Advisor prefers to reinvest the proceeds of the sale into two, three, or
more new securities to provide additional diversity to the portfolio. Conversely
when a portfolio security is sold due to (b) above, the Advisor prefers to
reinvest those proceeds to consolidate the diversity of the portfolio into a
larger position. In an attempt to reduce overall portfolio risk, provide
stability, generate income, and to meet the operational and cash needs of the
Fund, the Advisor allocates a portion of the Fund's assets to fixed income
securities and money market instruments.

<PAGE>

Equity Securities. The equity portion of the Fund's portfolio will generally be
comprised of common stocks traded on domestic securities exchanges or on the
over-the-counter market. In determining whether a common stock is a strong
candidate for inclusion in the portfolio, the Advisor considers, among other
things, such factors as: research material generated by the brokerage community;
investment and business publications and general investor attitudes as perceived
by the Advisor; valuation with respect to price-to-book value, price-to-sales,
price-to-cash flow, price-to-earnings ratios, and dividend yield, all compared
to historical valuations and future prospects for the company as judged by the
Advisor. In addition to common stocks, the equity portion of the Fund's
portfolio may also include preferred stock, convertible preferred stock, and
convertible bonds.

Foreign Securities. The Fund may invest in the securities of foreign private
issuers. The Fund may invest up to 10% of its total assets in foreign securities
in order to take advantage of opportunities for growth where, as with domestic
securities, they are depressed in price because they are out of favor with most
of the investment community. The same factors would be considered in selecting
foreign securities as with domestic securities. Foreign securities investment
presents special consideration not typically associated with investment in
domestic securities. Foreign taxes may reduce income. Currency exchange rates
and regulations may cause fluctuations in the value of foreign securities.
Foreign securities are subject to different regulatory environments than in the
United States and, compared to the United States, there may be a lack of uniform
accounting, auditing and financial reporting standards, less volume and
liquidity and more volatility, less public information, and less regulation of
foreign issuers. Countries have been known to expropriate or nationalize assets,
and foreign investments may be subject to political, financial or social
instability or adverse diplomatic developments. There may be difficulties in
obtaining service of process on foreign issuers and difficulties in enforcing
judgments with respect to claims under the U.S. Securities laws against such
issuers. Favorable or unfavorable differences between U.S. and foreign economies
could affect foreign securities values. The U.S. Government has, in the past,
discouraged certain foreign investments by U.S. investors through taxation or
other restrictions and it is possible that such restrictions could be imposed
again.

Because of the inherent risk of foreign securities over domestic issues, the
Fund will generally limit foreign investments to those traded domestically as
American Depository Receipts (ADRs). ADRs are receipts issued by a U.S. bank or
trust company evidencing ownership of securities of a foreign issuer. ADRs may
be listed on a national securities exchange or may trade in the over-the-counter
market. The prices of ADRs are denominated in U.S. dollars while the underlying
security may denominated in a foreign currency. To the extent the Fund invests
in other foreign securities, it will generally limit such investments to foreign
securities traded on foreign securities exchanges.

Fixed Income Securities. The Fund's fixed income investments will include
corporate debt obligations and U.S. Government Securities. The maturity of the
fixed income securities purchased and held by the Fund will depend upon, among
other reasons, the current and expected trend in interest rates, credit quality
of the fixed income securities, relative attractiveness of fixed income
securities versus equity securities, and the overall economic situation, current
and expected. The Advisor will consider a number of factors in determining when
to purchase and sell the investments of the Fund and when to invest for long,
intermediate, or short maturities. Such factors may include money supply growth,
the rate of unemployment, changes in consumer, wholesale and producer prices, as
well as raw materials, commodities, and industrial prices, capital spending, the
Gross National Product ("GNP") and industrial production. The Advisor will also
consider the impact of inflation and the attitudes and concerns of key officials
in the Federal Reserve and U.S. Government.

Corporate debt obligations purchased by the Fund will consist of "investment
grade" securities -- those rated at least Baa by Moody's Investors Service, Inc.
("Moody's"), BBB by Standard & Poor's Ratings Group ("S&P"), Fitch Investors
Service, Inc. ("Fitch"), or Duff & Phelps ("D&P") or, if not rated, of
equivalent quality in the Advisor's opinion. Debt obligations rated Baa by
Moody's or BBB by S&P, Fitch, or D&P may be considered speculative. Descriptions
of the quality ratings of Moody's, S&P, Fitch, and D&P are contained in the
Statement of Additional Information. While the Advisor utilizes the ratings of
various credit rating services as one factor in establishing creditworthiness,
it relies primarily upon its own analysis of factors establishing
creditworthiness. For as long as the Fund holds a fixed income issue, the
Advisor monitors the issuer's credit standing. If following investment, a
corporate debt obligation held by the Fund is no longer considered to be
"investment grade" by one rating agency but not by another, the Advisor will
re-evaluate the investment if it is still determined to be creditworthy.

<PAGE>

versus longer term fixed income instruments. Money market instruments will
typically represent a portion of the Fund portfolio, as funds awaiting
investment, to accumulate cash for anticipated purchases of portfolio
securities, and to provide for shareholder redemptions and operating expenses of
the Fund. Money market instruments mature in thirteen months or less from the
date of purchase and may include U.S. Government Securities, corporate debt
securities (including those subject to repurchase agreements), bankers
acceptances and certificates of deposit of domestic branches of U.S. banks, and
commercial paper (including variable amount demand master notes) rated in one of
the two highest rating categories by any of the nationally recognized
statistical rating organizations or if not rated, of equivalent quality in the
Advisor's opinion. The Advisor may, when it believes that unusually volatile or
unstable economic and market conditions exist, depart from the Fund's investment
approach and assume temporarily a defensive portfolio posture, increasing the
Fund's percentage investment in money market instruments, even to the extent
that 100% of the Fund's assets may be so invested.

U.S. Government Securities. The Fund may invest a portion of the portfolio in
U.S. Government Securities, defined to be U.S. Government obligations such as
U.S. Treasury notes, U.S. Treasury bonds, and U.S. Treasury bills, obligations
guaranteed by the U.S. Government such as Government National Mortgage
Association ("GNMA") as well as obligations of U.S. Government authorities,
agencies and instrumentalities such as Federal National Mortgage Association
("FNMA"), Federal Home Loan Mortgage Corporation ("FHLMC"), Federal Housing
Administration ("FHA"), Federal Farm Credit Bank ("FFCB"), Federal Home Loan
Bank ("FHLB"), Student Loan Marketing Association ("SLMA"), Resolution Trust
Corporation, and The Tennessee Valley Authority. U.S. Government Securities may
be acquired subject to repurchase agreements. While obligations of some U.S.
Government sponsored entities are supported by the full faith and credit of the
U.S. Government (e.g. GNMA), several are supported by the right of the issuer to
borrow from the U.S. Government (e.g. FNMA, FHLMC), and still others are
supported only by the credit of the issuer itself (e.g. SLMA, FFCB). No
assurance can be given that the U.S. Government will provide financial support
to U.S. Government agencies or instrumentalities in the future, other than as
set forth above, since it is not obligated to do so by law. The guarantee of the
U.S. Government does not extend to the yield or value of the Fund's shares.

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
that 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 any repurchase agreement which will
cause more than 10% of its net assets to be invested in repurchase agreements
that 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 (the "1940 Act").

Real Estate Securities. The Fund will not invest in real estate (including
mortgage loans and limited partnership interests), but may invest in readily
marketable securities issued by companies that invest in real estate or
interests therein. The Fund may also invest in readily marketable interests in
real estate investment trusts ("REITs"). REITs are generally publicly traded on
the national stock exchanges and in the over-the-counter market and have varying
degrees of liquidity. Although the Fund is not limited in the amount of these
types of real estate securities it may acquire, it is not presently expected
that within the next 12 months the Fund will have in excess of 5% of its assets
in real estate securities.

<PAGE>

consolidation, reorganization, or acquisition. To the extent the Fund invests in
other investment companies, the shareholders of the Fund would indirectly pay a
portion of the operating costs of the underlying investment companies. These
costs include management, brokerage, shareholder servicing and other operational
expenses. Shareholders of the Fund would then indirectly pay higher operational
costs than if they owned shares of the underlying investment companies directly.
The Advisor will waive its advisory fee for that portion of the Fund's assets
invested in other investment companies, except when such purchase is part of a
plan of merger, consolidation, reorganization, or acquisition.

RISK FACTORS

Fluctuations in Value. Because there is risk in any investment, there can be no
assurance that the Fund will meet its investment objective. To the extent that
the Fund's equity portfolio consists principally of common stocks, it may be
expected that its net asset value will be subject to greater fluctuation than a
portfolio containing mostly fixed income securities. The fixed income securities
in which the Fund will invest are subject to fluctuation in value. Such
fluctuations may be based on movements in interest rates or from changes in the
creditworthiness of the issuers, which may result from adverse business and
economic developments or proposed corporate transactions, such as a leveraged
buy-out or recapitalization of the issuer. The value of the Fund's fixed income
securities will generally vary inversely with the direction of prevailing
interest rate movements. Should interest rates increase or the creditworthiness
of an issuer deteriorate, the value of the Fund's fixed income securities would
decrease in value, which would have a depressing influence on the Fund's net
asset value. Although certain of the U.S. Government Securities in which the
Fund may invest are guaranteed as to timely payment of principal and interest,
the market value of the securities, upon which the Fund's net asset value is
based, will fluctuate due to the interest rate risks described above.
Additionally, not all U.S. Government Securities are backed by the full faith
and credit of the U.S. Government.

Portfolio Turnover. The Fund sells portfolio securities without regard to the
length of time they have been held in order to take advantage of new investment
opportunities. Nevertheless, the Fund's portfolio turnover generally will not
exceed 75% in any one year. Portfolio turnover generally involves some expense
to the Fund, including brokerage commissions or dealer mark-ups and other
transaction costs on the sale of securities and the reinvestment in other
securities. Portfolio turnover may also have capital gains tax consequences. The
Fund's turnover ratio for the fiscal years ended March 31, 1995 and 1996 was
24.67% and 12.33%, respectively.

Borrowing. The Fund may borrow, temporarily, a portion of its total assets for
extraordinary purposes and to meet redemption requests which might otherwise
require untimely disposition of portfolio holdings. See "Investment Limitations"
below. To the extent the Fund borrows for these purposes, the effects of market
price fluctuations on portfolio net asset value will be exaggerated. If, while
such borrowing is in effect, the value of the Fund's assets declines, the Fund
could be forced to liquidate portfolio securities when it is disadvantageous to
do so. The Fund would incur interest and other transaction costs in connection
with borrowing. The Fund will borrow only from a bank. The Fund will not make
any investments if the borrowing exceeds 5% of its assets until such time as
repayment has been made to bring the total borrowing below 5% of its assets.

Illiquid Investments. The Fund may invest up to 10% of its net assets in
illiquid securities. Illiquid securities are those that may not be sold or
disposed of in the ordinary course of business within seven days at
approximately the price at which they are valued. Under the supervision of the
Board of Trustees, the Advisor determines the liquidity of the Fund's
investments. The absence of a trading market can make it difficult to ascertain
a market value for illiquid investments. Disposing of illiquid securities before
maturity may be time consuming and expensive, and it may be difficult or
impossible for the Fund to sell illiquid investments promptly at an acceptable
price. The Fund may not invest in restricted securities, which are securities
that cannot be sold to the public without registration under the federal
securities laws.

<PAGE>

grade debt obligations in an amount sufficient to meet the purchase price.
Purchasing securities on a when-issued or forward commitment basis involves a
risk of loss if the value of the security to be purchased declines prior to the
settlement date, which risk is in addition to the risk of decline in value of
the Fund's other assets. In addition, no income accrues to the purchaser of
when-issued securities during the period prior to issuance. Although the Fund
would generally purchase securities on a when-issued or forward commitment basis
with the intention of acquiring securities for its portfolio, the Fund may
dispose of a when-issued security or forward commitment prior to settlement if
the Advisor deems it appropriate to do so. The Fund may realize short-term gains
or losses upon such sales.

INVESTMENT LIMITATIONS

To limit the Fund's exposure to risk, the Fund has adopted certain fundamental
investment limitations. Some of these restrictions are that the Fund will not:
(1) issue senior securities, borrow money or pledge its assets, except that it
may borrow from banks as a temporary measure: (a) for extraordinary or emergency
purposes, in amounts not exceeding 5% of the Fund's total assets or, (b) in
order to meet redemption requests which might otherwise require untimely
disposition of portfolio securities if, immediately after such borrowing, the
value of the Fund's assets, including all borrowings then outstanding, less its
liabilities (excluding all borrowings), is equal to at least 300% of the
aggregate amount of borrowings then outstanding, and the Fund may pledge its
assets to secure all such borrowings; (2) make loans of money or securities,
except that the Fund may invest in repurchase agreements (but repurchase
agreements having a maturity of longer than seven days, together with other
illiquid securities, are limited to 10% of the Fund's net assets), money market
instruments, and other debt securities; (3) invest in securities of issuers
which have a record of less than three years' continuous operation (including
predecessors and, in the case of bonds, guarantors), if more than 5% of its
total assets would be invested in such securities; (4) write, purchase or sell
puts, calls, warrants or combinations thereof, or purchase or sell commodities,
commodities contracts, futures contracts or related options; (5) invest in oil,
gas or mineral leases or exploration programs, or real estate (except the Fund
may invest in readily marketable securities of companies that own or deal in
such things); (6) invest more than 5% of its assets at cost in the securities of
any one issuer nor hold more than 10% of the voting stock of any issuer (except
that U.S. Government Securities are not subject to these limitations); (7)
invest in restricted securities; and (8) invest more than 10% of the Fund's
total assets in foreign securities, including sponsored ADRs. See "Investment
Limitations" in the Fund's Statement of Additional Information for a complete
list of investment limitations.

If the Board of Trustees of the Trust determines that the Fund's investment
objective can best be achieved by a substantive change in a non-fundamental
investment limitation, the Board can make such change without shareholder
approval and will disclose any such material changes in the then current
Prospectus. Any limitation that is not specified in the Fund's Prospectus, or in
the Statement of Additional Information, as being fundamental, is non-
fundamental. If a percentage limitation is satisfied at the time of investment,
a later increase or decrease in such percentage resulting from a change in the
value of the Fund's portfolio securities will not constitute a violation of such
limitation. In order to permit the sale of the Fund's shares in certain states,
the Fund may make commitments that are more restrictive than the investment
policies and limitations described above and in the Statement of Additional
Information. Such commitments may have an effect on the investment performance
of the Fund. Should the Fund determine that any such commitment is no longer in
the best interests of the Fund, it may revoke the commitment and terminate sales
of its shares in the state involved.

FEDERAL INCOME TAXES

Taxation of the Fund. The Internal Revenue Code of 1986, as amended (the
"Code"), treats each series in the Trust, including the Fund, as a separate
regulated investment company. Each series of the Trust, including the Fund,
intends to qualify or remain qualified as a regulated investment company under
the Code by distributing substantially all of its "net investment income" to
shareholders and meeting other requirements of the Code. For the purpose of
calculating dividends, net investment income consists of income accrued on
portfolio assets, less accrued expenses. Upon qualification, the Fund will not
be liable for federal income taxes to the extent earnings are distributed. The
Board of Trustees retains the right for any series of the Trust, including the
Fund, to determine for any particular year if it is advantageous not to qualify
as a regulated investment company. Regulated investment companies, such as each
series of the Trust, including the Fund, are subject to a non-deductible 4%
excise tax to the extent they do not distribute the statutorily required amount
of investment income, determined on a calendar year basis, and capital gain net
income, using an October 31 year end measuring period. The Fund intends to
declare or distribute dividends during the calendar year in an amount sufficient
to prevent imposition of the 4% excise tax.

<PAGE>

Taxation of Shareholders. For federal income tax purposes, any dividends and
distributions from short-term capital gains that a shareholder receives in cash
from the Fund or which are re-invested in additional shares will be taxable
ordinary income. If a shareholder is not required to pay a tax on income, he
will not be required to pay federal income taxes on the amounts distributed to
him. A dividend declared in October, November or December of a year and paid in
January of the following year will be considered to be paid on December 31 of
the year of declaration.

Distributions paid by the Fund from long-term capital gains, whether received in
cash or reinvested in additional shares, are taxable as long-term capital gains,
regardless of the length of time an investor has owned shares in the Fund.
Capital gain distributions are made when the Fund realizes net capital gains on
sales of portfolio securities during the year. Dividends and capital gain
distributions paid by the Fund shortly after shares have been purchased,
although in effect a return of investment, are subject to federal income
taxation.

The sale of shares of the Fund is a taxable event and may result in a capital
gain or loss. Capital gain or loss may be realized from an ordinary redemption
of shares or an exchange of shares between two mutual funds (or two series of a
mutual fund).

The Trust will inform shareholders of the Fund of the source of their dividends
and capital gains distributions at the time they are paid and, promptly after
the close of each calendar year, will issue an information return to advise
shareholders of the federal tax status of such distributions and dividends.
Dividends and distributions may also be subject to state and local taxes.
Shareholders should consult their tax advisors regarding specific questions as
to federal, state or local taxes.

Federal income tax law requires investors to certify that the social security
number or taxpayer identification number provided to the Fund is correct and
that the investor is not subject to 31% withholding for previous under-reporting
to the Internal Revenue Service (the "IRS"). Investors will be asked to make the
appropriate certification on their application to purchase shares. If a
shareholder of the Fund has not complied with the applicable statutory and IRS
requirements, the Fund is generally required by federal law to withhold and
remit to the IRS 31% of reportable payments (which may include dividends and
redemption amounts).

DIVIDENDS AND DISTRIBUTIONS

The Fund intends to distribute substantially all of its net investment income,
if any, in the form of dividends. The Fund will generally pay income dividends,
if any, quarterly, and will generally distribute net realized capital gains, if
any, at least annually.

Unless a shareholder elects to receive cash, dividends and capital gains will be
automatically reinvested in additional full and fractional shares of the same
Class of the Fund at the net asset value per share next determined. Reinvested
dividends and capital gains are exempt from any sales load. Shareholders wishing
to receive their dividends or capital gains in cash may make their request in
writing to the Fund at 105 North Washington Street, Post Office Drawer 69, Rocky
Mount, North Carolina 27802-0069. That request must be received by the Fund
prior to the record date to be effective as to the next dividend. If cash
payment is requested, checks will be mailed within five business days after the
last day of each quarter or the Fund's fiscal year end, as applicable. Each
shareholder of the Fund will receive a quarterly summary of his or her account,
including information as to reinvested dividends from the Fund. Tax consequences
to shareholders of dividends and distributions are the same if received in cash
or in additional shares of the Fund.

In order to satisfy certain requirements of the Code, the Fund may declare
special year-end dividend and capital gains distribution during December. Such
distributions, if received by shareholders by January 31, are deemed to have
been paid by the Fund and received by shareholders on December 31 of the prior
year.

There is no fixed dividend rate, and there can be no assurance as to the payment
of any dividends or the realization of any gains. The Fund's net investment
income available for distribution to holders of Institutional Shares will be
reduced by the amount of any expenses allocated to the Institutional Shares.

<PAGE>

HOW SHARES ARE VALUED

The net asset value for each Class of Shares of the Fund is determined at 4:00
p.m., New York time, Monday through Friday, except on business holidays when the
New York Stock Exchange is closed. The net asset value of the shares of the Fund
for purposes of pricing sales and redemptions is equal to the total market value
of its investments, less all of its liabilities, divided by the number of its
outstanding shares. Net asset value is determined separately for each Class of
Shares of the Fund and reflects any liabilities allocated to a particular Class
as well as the general liabilities of the Fund.

Securities that are listed on a securities exchange are valued at the last
quoted sales price at the time the valuation is made. Price information on
listed securities is taken from the exchange where the security is primarily
traded by the Fund. Securities that are listed on an exchange and which are not
traded on the valuation date are valued at the mean of the bid and asked prices.
Unlisted securities traded over-the-counter for which market quotations are
readily available are valued at the latest quoted sales price, if available, at
the time of valuation, otherwise, at the latest quoted bid price. Temporary cash
investments with maturities of 60 days or less will be valued at amortized cost,
which approximates market value. Securities for which no current quotations are
readily available are valued at fair value as determined in good faith using
methods approved by the Board of Trustees of the Trust. Securities may be valued
on the basis of prices provided by a pricing service when such prices are
believed to reflect the fair market value of such securities.

Fixed income securities will ordinarily be traded on the over-the-counter
market. When market quotations are not readily available, fixed income
securities may be valued based on prices provided by a pricing service. The
prices provided by the pricing service are generally determined with
consideration given to institutional bid and last sale prices and take into
account securities prices, yields, maturities, call features, ratings,
institutional trading in similar groups of securities, and developments related
to specific securities. Such fixed income securities may also be priced based
upon a matrix system of pricing similar bonds and other fixed income securities.
Such matrix system may be based upon the considerations described above used by
other pricing services and information obtained by the pricing agent from the
Advisor and other pricing sources deemed relevant by the pricing agent.

HOW SHARES MAY BE PURCHASED

Assistance in opening accounts and a purchase application may be obtained from
the Fund by calling 1-800-525- FUND, or by writing to the Fund at the address
shown below for purchases by mail. Assistance is also available through any
broker-dealer authorized to sell shares in the Fund. Payment for shares
purchased may also be made through your account at the broker-dealer processing
your application and order to purchase. Your investment will purchase shares at
the Fund's net asset value next determined after your order is received by the
Fund in proper form as indicated herein.

The minimum initial investment is $5,000 ($1,000 for Individual Retirement
Accounts ("IRAs") and Keogh Plans). The minimum subsequent investment is $500.
The Fund may, in the Advisor's sole discretion, accept certain accounts with
less than the stated minimum initial investment. You may invest in the following
ways:

Purchases by Mail. Shares may be purchased initially by completing the
application accompanying this Prospectus and mailing it, together with a check
payable to the Fund, to the Capital Value Fund, Institutional Shares, 105 North
Washington Street, Post Office Drawer 69, Rocky Mount, North Carolina
27802-0069. Subsequent investments in an existing account in the Fund may be
made at any time by sending a check payable to the Fund, to the address stated
above. Please enclose the stub of your account statement and include the amount
of the investment, the name of the account for which the investment is to be
made and the account number. Please remember to add a reference to
"Institutional Shares" to your check to ensure proper credit to your account.

Purchases by Wire. To purchase shares by wiring federal funds, the Fund must
first be notified by calling 1-800- 525-FUND to request an account number and
furnish the Fund with your tax identification number. Following notification to
the Fund, federal funds and registration instructions should be wired through
the Federal Reserve System to:

<PAGE>

Wachovia Bank of North Carolina, N.A.
Winston-Salem, North Carolina
ABA # 053100494
For credit to the Rocky Mount Office
For the Capital Value Fund
Institutional Shares
Acct #6760-020437
For further credit to (shareholder's name and SS# or EIN#)

It is important that the wire contain all the information and that the Fund
receive prior telephone notification to ensure proper credit. A completed
application with signature(s) of registrant(s) must be mailed to the Fund
immediately after the initial wire as described under "Purchases by Mail" above.
Investors should be aware that some banks may impose a wire service fee.

General. All purchases of shares are subject to acceptance and are not binding
until accepted. The Fund reserves the right to reject any application or
investment. Orders become effective, and shares are purchased at, the next
determined net asset value per share after an investment has been received by
the Fund, which is as of 4:00 p.m., New York time, Monday through Friday,
exclusive of business holidays. Orders received by the Fund and effective prior
to such 4:00 p.m. time will purchase shares at the net asset value determined at
that time. Otherwise, your order will purchase shares as of such 4:00 p.m. time
on the next business day. For orders placed through a qualified broker-dealer,
such firm is responsible for promptly transmitting purchase orders to the Fund.

If checks are returned unpaid due to nonsufficient funds, stop payment or other
reasons, the Trust will charge $20. To recover any such loss or charge, the
Trust reserves the right, without further notice, to redeem shares of any fund
of the Trust already owned by any purchaser whose order is cancelled, and such a
purchaser may be prohibited from placing further orders unless investments are
accompanied by full payment by wire or cashier's check.

Payment must be made by check or money order drawn on a U.S. bank and payable in
U.S. dollars. Under certain circumstances the Fund, at its sole discretion, may
allow payment in kind for Fund shares purchased by accepting securities in lieu
of cash. Any securities so accepted would be valued on the date received and
included in the calculation of the net asset value of the Fund. See the
Statement of Additional Information for additional information on purchases in
kind.

The Fund is required by federal law to withhold and remit to the IRS 31% of the
dividends, capital gains distributions and, in certain cases, proceeds of
redemptions paid to any shareholder who fails to furnish the Fund with a correct
taxpayer identification number, who under-reports dividend or interest income or
who fails to provide certification of tax identification number. Instructions to
exchange or transfer shares held in established accounts will be refused until
the certification has been provided. In order to avoid this withholding
requirement, you must certify on your application, or on a separate W-9 Form
supplied by the Administrator, that your taxpayer identification number is
correct and that you are not currently subject to backup withholding or you are
exempt from backup withholding.

Distributor. Capital Investment Group, Inc., Post Office Box 32249, Raleigh,
North Carolina 27622 (the "Distributor"), an affiliate of the Advisor, is the
national distributor for the Fund under a Distribution Agreement with the Trust.
The Distributor may sell Fund shares to or through qualified securities dealers
or others. Richard K. Bryant, a Trustee of the Trust and an officer of the Fund,
and Elmer O. Edgerton, Jr., an officer of the Fund, control the Distributor and
the Advisor.

The Distributor, at its expense, may provide compensation to dealers in
connection with sales of shares of the Fund. Compensation may include financial
assistance to dealers in connection with conferences, sales or training programs
for their employees, seminars for the public, advertising campaigns regarding
the Fund, and/or other dealer-sponsored special events. In some instances, this
compensation may be made available only to certain dealers whose representatives
have sold or are expected to sell a significant amount of such shares.
Compensation may include payment for travel expenses, including lodging,
incurred in connection with trips taken by invited registered representatives
and members of their families to locations within or outside of the United
States for meetings or seminars of a business nature. Dealers may not use sales
of the Fund shares to qualify for this compensation to the extent such may be
prohibited by the laws of any state or any self-regulatory agency, such as the
National Association of Securities Dealers, Inc. None of the aforementioned
compensation is paid for by the Fund or its shareholders.

<PAGE>

Exchange Feature. Investors will have the privilege of exchanging shares of the
Fund for shares of any other series of the Trust established by Advisor. An
exchange involves the simultaneous redemption of shares of one series and
purchase of shares of another series at the respective closing net asset value
next determined after a request for redemption has been received plus applicable
sales charge, and is a taxable transaction. Each series of the Trust will have a
different investment objective, which may be of interest to investors in each
series. Shares of the Fund may be exchanged for shares of any other series of
the Trust affiliated with the Advisor at the net asset value plus the percentage
difference between that series' sales charge and any sales charge previously
paid in connection with the shares being exchanged. For example, if a 2% sales
charge was paid on shares that are exchanged into a series with a 3% sales
charge, there would be an additional sales charge of 1% on the exchange.
Exchanges may only be made by investors in states where shares of the other
series are qualified for sale. An investor may direct the Fund to exchange his
shares by writing to the Fund at its principal office. The request must be
signed exactly as the investor's name appears on the account, and it must also
provide the account number, number of shares to be exchanged, the name of the
series to which the exchange will take place and a statement as to whether the
exchange is a full or partial redemption of existing shares. Notwithstanding the
foregoing, exchanges of shares may only be within the same class or type of
class of shares involved. For example, Investor Shares may not be exchanged for
Institutional Shares.

A pattern of frequent exchange transactions may be deemed by the Advisor to be
an abusive practice that is not in the best interests of the shareholders of the
Fund. Such a pattern may, at the discretion of the Advisor, be limited by the
Fund's refusal to accept further purchase and/or exchange orders from an
investor, after providing the investor with 60 days prior notice. The Advisor
will consider all factors it deems relevant in determining whether a pattern of
frequent purchases, redemptions and/or exchanges by a particular investor is
abusive and not in the best interests of the Fund or its other shareholders.

A shareholder should consider the investment objectives and policies of any
series into which the shareholder will be making an exchange, as described in
the prospectus for that other series. The Board of Trustees of the Trust
reserves the right to suspend or terminate, or amend the terms of, the exchange
privilege upon 60 days written notice to the shareholders.

Automatic Investment Plan. The automatic investment plan enables shareholders to
make regular monthly or quarterly investments in shares through automatic
charges to their checking account. With shareholder authorization and bank
approval, the Administrator will automatically charge the checking account for
the amount specified ($100 minimum), which will be automatically invested in
shares at the public offering price on or about the 21st day of the month. The
shareholder may change the amount of the investment or discontinue the plan at
any time by writing to the Administrator.

Stock Certificates. Stock certificates will not be issued for your shares.
Evidence of ownership will be given by issuance of periodic account statements
that will show the number of shares owned.

HOW SHARES MAY BE REDEEMED

Shares of the Fund may be redeemed (the Fund will repurchase them from
shareholders) by mail or telephone. Any redemption may be more or less than the
purchase price of your shares depending on the market value of the Fund's
portfolio securities. All redemption orders received in proper form, as
indicated herein, by the Fund, whether by mail or telephone, prior to 4:00 p.m.
New York time, Monday through Friday, except for business holidays, will redeem
shares at the net asset value determined at that time. Otherwise, your order
will redeem shares as of such 4:00 p.m. time on the next business day. There is
no charge for redemptions from the Fund (other than for wiring redemption
proceeds). You may also redeem your shares through a broker-dealer or other
institution, who may charge you a fee for its services.

The Board of Trustees reserves the right to involuntarily redeem any account
having a net asset value of less than $1,000 (due to redemptions, exchanges or
transfers, and not due to market action) upon 30 days written notice. If the
shareholder brings his account net asset value up to $1,000 or more during the
notice period, the account will not be redeemed. Redemptions from retirement
plans may be subject to tax withholding.

If you are uncertain of the requirements for redemption, please contact the
Fund, at 1-800-525-FUND, or write to the address shown below.

<PAGE>

Regular Mail Redemptions. Your request should be addressed to the Capital Value
Fund, Institutional Shares, 105 North Washington Street, Post Office Drawer 69,
Rocky Mount, North Carolina 27802-0069. Your request for redemption must
include:

2) Any required signature guarantees (see "Signature Guarantees" below); and

3) Other supporting legal documents, if required in the case of estates,
trusts, guardianships, custodianships, corporations, partnerships, pension
or profit sharing plans, and other organizations.

Your redemption proceeds will be sent to you within seven days after receipt of
your redemption request. However, the Fund may delay forwarding a redemption
check for recently purchased shares while it determines whether the purchase
payment will be honored. Such delay (which may take up to 15 days from the date
of purchase) may be reduced or avoided if the purchase is made by certified
check or wire transfer. In all cases the net asset value next determined after
the receipt of the request for redemption will be used in processing the
redemption. The Fund may suspend redemption privileges or postpone the date of
payment (i) during any period that the New York Stock Exchange is closed, or
trading on the New York Stock Exchange is restricted as determined by the
Securities and Exchange Commission (the "Commission"), (ii) during any period
when an emergency exists as defined by the rules of the Commission as a result
of which it is not reasonably practicable for the Fund to dispose of securities
owned by it, or to fairly determine the value of its assets, and (iii) for such
other periods as the Commission may permit.

Telephone and Bank Wire Redemptions. The Fund offers shareholders the option of
redeeming shares by telephone under certain limited conditions. The Fund will
redeem shares when requested by the shareholder if, and only if, the shareholder
confirms redemption instructions in writing.

The Fund may rely upon confirmation of redemption requests transmitted via
facsimile (FAX# 919-972-1908). The confirmation instructions must include:

1) Shareholder name and account number;
2) Number of shares or dollar amount to be redeemed;
3) Instructions for transmittal of redemption funds to the shareholder; and
4) Shareholder signature as it appears on the application then on file with
the Fund.

The net asset value used in processing the redemption will be the net asset
value next determined after the telephone request is received. Redemption
proceeds will not be distributed until written confirmation of the redemption
request is received, per the instructions above. You can choose to have
redemption proceeds mailed to you at your address of record, your bank, or to
any other authorized person, or you can have the proceeds sent by bank wire to
your bank ($5,000 minimum). Shares of the Fund may not be redeemed by wire on
days on which your bank or the Fund's Custodian is not open for business. You
can change your redemption instructions anytime you wish by filing a letter
including your new redemption instructions with the Fund. See "Signature
Guarantees" below. The Fund reserves the right to restrict or cancel telephone
and bank wire redemption privileges for shareholders, without notice, if the
Fund believes it to be in the best interest of the shareholders to do so. During
drastic economic and market conditions, telephone redemption privileges may be
difficult to implement.

There is currently a $10 charge by the Fund for wire redemptions to cover the
Fund's cost of executing the wire transfer. This charge will be automatically
deducted from the shareholder's account by redemption of shares in the account.
The shareholder's bank or brokerage firm may also impose a charge for processing
the wire. If wire transfer of funds is impossible or impractical, the redemption
proceeds will be sent by mail to the designated account.

You may redeem shares, subject to the procedures outlined above, by calling the
Fund at 1-800-525-FUND. Redemption proceeds will only be sent to the bank
account or person named in your Fund Shares Application currently on file with
the Fund. Telephone redemption privileges authorize the Fund to act on telephone
instructions from any person representing himself or herself to be the investor
and reasonably believed by the Fund to be genuine. The Fund will employ
reasonable procedures, such as requiring a form of personal identification, to
confirm that instructions are genuine, and, if it does not follow such
procedures, the Fund will be liable for any losses due to fraudulent or
unauthorized instructions. The Fund will not be liable for following telephone
instructions reasonably believed to be genuine.

<PAGE>

Systematic Withdrawal Plan. A shareholder who owns shares of the Fund valued at
$10,000 or more at current net asset value may establish a Systematic Withdrawal
Plan to receive a monthly or quarterly check in a stated amount not less than
$100. Each month or quarter as specified, the Fund will automatically redeem
sufficient shares from your account to meet the specified withdrawal amount.
Call or write the Fund for an application form. See the Statement of Additional
Information for further details.

Signature Guarantees. To protect your account and the Fund from fraud, signature
guarantees are required to be sure that you are the person who has authorized a
change in registration, or standing instructions, for your account. Signature
guarantees are required for (1) change of registration requests, (2) requests to
establish or change exchange privileges or telephone redemption service other
than through your initial account application, and (3) requests for redemptions
in excess of $50,000. Signature guarantees are acceptable from a member bank of
the Federal Reserve System, a savings and loan institution, credit union (if
authorized under state law), registered broker-dealer, securities exchange or
association clearing agency, and must appear on the written request for
redemption, establishment or change in exchange privileges, or change of
registration.

MANAGEMENT OF THE FUND

Trustees and Officers. The Fund is a diversified series of The Nottingham
Investment Trust II (the "Trust"), an investment company organized as a
Massachusetts business trust on October 25, 1990. The Board of Trustees of the
Trust is responsible for the management of the business and affairs of the
Trust. The Trustees and executive officers of the Trust and their principal
occupations for the last five years are set forth in the Statement of Additional
Information under "Management of the Fund - Trustees and Officers." The Board of
Trustees of the Trust is primarily responsible for overseeing the conduct of the
Trust's business. The Board of Trustees elects the officers of the Trust who are
responsible for its and the Fund's day-to-day operations.

The Advisor. Subject to the authority of the Board of Trustees, Capital
Investment Counsel, 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, pursuant to an
Investment Advisory Agreement (the "Advisory Agreement") with the Trust.

The Advisor is registered under the Investment Advisors Act of 1940.
Registration of the Advisor does not involve any supervision of management or
investment practices or policies by the Securities and Exchange Commission. The
Advisor, established as a North Carolina corporation in 1984, is controlled by
Richard K. Bryant and E.O. Edgerton, Jr. They also control the Distributor. The
Advisor currently serves as investment advisor to over $105 million in assets.
The Advisor has been rendering investment counsel, utilizing investment
strategies substantially similar to that of the Fund, to individuals, banks and
thrift institutions, pension and profit sharing plans, trusts, estates,
charitable organizations, corporations, and other business and individual
accounts since its formation. The Advisor's address is 17 Glenwood Avenue, Post
Office Box 32249, Raleigh, North Carolina 27622.

Under the Advisory Agreement with the Fund, the Advisor receives a monthly
management fee equal to an annual rate of 0.60% of the first $250 million of the
average daily net assets of the Fund and 0.50% on assets over $250 million. The
Advisor may periodically voluntarily waive or reduce its advisory fee to
increase the net income of the Fund. The Advisor voluntarily waived a portion of
its advisory fee for the fiscal year ended March 31, 1996. Of the $48,212 the
Advisor was entitled to receive, the Advisor voluntarily waived $14,012 of its
investment advisory fees. The Advisor received $34,200 of such advisory fee for
the year.

E.O. Edgerton, Jr., a principal of the Advisor, and an officer of the Fund, has
been responsible for day-to-day management of the Fund's portfolio since its
inception in 1990. He has been with the Advisor since its inception in 1984.

The Advisor supervises and implements 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 the Advisor under the
Advisory Agreement is the selection of brokers and dealers through whom
transactions in the Fund's portfolio investments will be effected. The Advisor
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, the
Advisor will 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. The Advisor may also utilize a brokerage firm affiliated
with the Trust or the Advisor (including the Distributor, an affiliate of the
Advisor) if it believes it can obtain the best execution of transactions

<PAGE>

from such broker. Research services obtained through Fund brokerage transactions
may be used by the Advisor for its other clients and, conversely, the Fund may
benefit from research services obtained through the brokerage transactions of
the Advisor's other clients. For further information, see "Investment Objective
and Policies Investment Transactions" in the Statement of Additional
Information.

During the fiscal year ended March 31, 1996, the total brokerage commissions
paid by the Fund were $7,225, all of which were paid during such period to the
Distributor. Transactions in which the Fund used the Distributor as broker
involved 100% of the aggregate dollar amount of transactions involving the
payment of commissions and 100% of the aggregate broker commissions paid by the
Fund for the fiscal year ended March 31, 1996.

The Administrator. The Trust has entered into an Administration Agreement with
The Nottingham Company (the "Administrator"), 105 North Washington Street, Post
Office Drawer 69, Rocky Mount, North Carolina 27802-0069, pursuant to which the
Administrator receives a fee at the annual rate of 0.25% of the average daily
net assets of the Fund on the first $10 million; 0.20% of the next $40 million;
0.175% on the next $50 million; and 0.15% of its average daily net assets in
excess of $100 million. In addition, the Administrator currently receives a base
monthly fee of $1,750 for accounting and recordkeeping services for the Fund and
$750 for each Class of Shares beyond the initial Class. The Administrator also
charges the Fund for certain costs involved with the daily valuation of
investment securities and is reimbursed for out-of-pocket expenses. The
Administrator charges a minimum fee of $3,000 per month for all of its fees
taken in the aggregate, analyzed monthly.

Subject to the authority of the Board of Trustees, the services the
Administrator provides to the Fund include coordinating and monitoring any third
parties furnishing services to the Fund; providing the necessary office space,
equipment and personnel to perform administrative and clerical functions for the
Fund; preparing, filing and distributing proxy materials, periodic reports to
shareholders, registration statements and other documents; and responding to
shareholder inquiries.

The Administrator was formed as a North Carolina corporation in 1988 and
converted to a North Carolina limited liability company in 1995. Together with
its affiliates and predecessors, the Administrator has been operating as a
financial services firm since 1985. Frank P. Meadows III, Chairman, Trustee and
Treasurer of the Trust, is the firm's Managing Director and controlling member.

The Custodian, Transfer Agent and Fund Accounting/Pricing Agent. Wachovia Bank
of North Carolina, N.A., 301 North Main Street, Winston-Salem, North Carolina
27102, serves as Custodian of the Fund's assets. The Custodian acts as the
depository for the Fund, safekeeps its portfolio securities, collects all income
and other payments with respect to portfolio securities, disburses monies at the
Fund's request and maintains records in connection with its duties.

The Administrator also serves as the Fund's transfer agent. As transfer agent,
it maintains the records of each shareholder's account, answers shareholder
inquiries concerning accounts, processes purchases and redemptions of the Fund's
shares, acts as dividend and distribution disbursing agent and performs other
shareholder services functions.

The Administrator also performs certain accounting and pricing services for the
Fund as pricing agent, including the daily calculation of the Fund's net asset
value for each Class of Shares.

Other Expenses. The Fund is responsible for the payment of its expenses. These
include, for example, the fees payable to the Advisor, or expenses otherwise
incurred in connection with the management of the investment of the Fund's
assets, the fees and expenses of the Custodian, the fees and expenses of the
Administrator, the fees and expenses of Trustees, outside auditing and legal
expenses, all taxes and corporate fees payable by the Fund, Securities and
Exchange Commission fees, state securities qualification fees, costs of
preparing and printing prospectuses for regulatory purposes and for distribution
to shareholders, costs of shareholder reports and shareholder meetings, and any
extraordinary expenses. The Fund also pays for brokerage commissions and
transfer taxes (if any) in connection with the purchase and sale of portfolio
securities. Expenses attributable to a particular series of the Trust, including
the Fund, will be charged to that series, and expenses not readily identifiable
as belonging to a particular series will be allocated by or under procedures
approved by the Board of Trustees among one or more series in such a manner as
it deems fair and equitable. Any expenses relating only to a particular Class of
Shares of the Fund will be borne solely by such Class. The Fund's expense ratio
for prior fiscal years, calculated both before and after expense reimbursements,
is indicated under "Financial Highlights" above.

<PAGE>

OTHER INFORMATION

Description of Shares. The Trust was organized as a Massachusetts business trust
on October 25, 1990 under a Declaration of Trust. The Declaration of Trust
permits the Board of Trustees to issue an unlimited number of full and
fractional shares and to create an unlimited number of series of shares. The
Board of Trustees may also classify and reclassify any unissued shares into one
or more classes of shares. The Trust currently has the number of authorized
series of shares, including the Fund, and classes of shares, described in the
Statement of Additional Information under "Description of the Trust." Pursuant
to its authority under the Declaration of Trust, the Board of Trustees has
authorized the issuance of an unlimited number of shares in each of two Classes
("Investor Shares" and "Institutional Shares") representing equal pro rata
interests in the Fund, except that the Classes bear different expenses that
reflect the differences in services provided to them. Investor Shares are sold
with a sale charge and bear potential distribution expenses and service fees.
Institutional Shares are sold without a sales charge and bear no shareholder
servicing or distribution fees. As a result of different charges, fees, and
expenses between the Classes, the total return on the Fund's Investor Shares
will generally be lower than the total return on the Institutional Shares.
Standardized total return quotations will be computed separately for each Class
of Shares of the Fund.

THIS PROSPECTUS RELATES TO THE FUND'S INSTITUTIONAL SHARES AND DESCRIBES ONLY
THE POLICIES, OPERATIONS, CONTRACTS, AND OTHER MATTERS PERTAINING TO THE
INSTITUTIONAL SHARES. THE FUND ALSO ISSUES A CLASS OF INVESTOR SHARES. SUCH
OTHER CLASS MAY HAVE DIFFERENT SALES CHARGES AND EXPENSES, WHICH MAY AFFECT
PERFORMANCE. INVESTORS MAY CALL THE FUND AT 1-800-525-3863 TO OBTAIN MORE
INFORMATION CONCERNING OTHER CLASSES AVAILABLE TO THEM THROUGH THEIR SALES
REPRESENTATIVE. INVESTORS MAY OBTAIN INFORMATION CONCERNING THOSE CLASSES FROM
THEIR SALES REPRESENTATIVE, THE DISTRIBUTOR, THE FUND, OR ANY OTHER PERSON WHICH
IS OFFERING OR MAKING AVAILABLE TO THEM THE SECURITIES OFFERED IN THIS
PROSPECTUS.

When issued, the shares of each series of the Trust, including the Fund, and
each class of shares, will be fully paid, nonassessable and redeemable. The
Trust does not intend to hold annual shareholder meetings; it may, however, hold
special shareholder meetings for purposes such as changing fundamental policies
or electing Trustees. The Board of Trustees shall promptly call a meeting for
the purpose of electing or removing Trustees when requested in writing to do so
by the record holders of a least 10% of the outstanding shares of the Trust. The
term of office of each Trustee is of unlimited duration. The holders of at least
two-thirds of the outstanding shares of the Trust may remove a Trustee from that
position either by declaration in writing filed with the Custodian or by votes
cast in person or by proxy at a meeting called for that purpose.

The Trust's shareholders will vote in the aggregate and not by series (fund) or
class, except where otherwise required by law or when the Board of Trustees
determines that the matter to be voted on affects only the interests of the
shareholders of a particular series or class. Matters affecting an individual
series, such as the Fund, include, but are not limited to, the investment
objectives, policies and restrictions of that series. Shares have no
subscription, preemptive or conversion rights. Share certificates will not be
issued. Each share is entitled to one vote (and fractional shares are entitled
to proportionate fractional votes) on all matters submitted for a vote, and
shares have equal voting rights except that only shares of a particular series
or class are entitled to vote on matters affecting only that series or class.
Shares do not have cumulative voting rights. Therefore, the holders of more than
50% of the aggregate number of shares of all series of the Trust may elect all
the Trustees.

On July 19, 1996, Bryant Supply Company, Inc. (605 East Franklin Boulevard,
Gastonia, North Carolina) and its employee benefit plans owned 48.038% of the
outstanding shares of the Fund and are therefore deemed to control the Fund.

Under Massachusetts law, shareholders of a business trust may, under certain
circumstances, be held personally liable as partners for the obligations of the
trust. The Declaration of Trust, therefore, contains provisions which are
intended to mitigate such liability. See "Description of the Trust" in the
Statement of Additional Information for further information about the Trust and
its shares.

<PAGE>

paid. Inquiries regarding the Fund may be directed in writing to 105 North
Washington Street, Post Office Drawer 69, Rocky Mount, North Carolina 27802-0069
or by calling 1-800-525-FUND.

Calculation of Performance Data. From time to time the Fund may advertise its
average annual total return for each Class of Shares. The "average annual total
return" refers to the average annual compounded rates of return over 1, 5 and 10
year periods that would equate an initial amount invested at the beginning of a
stated period to the ending redeemable value of the investment. The calculation
assumes the reinvestment of all dividends and distributions, includes all
recurring fees that are charged to all shareholder accounts and deducts all
nonrecurring charges at the end of each period. If the Fund has been operating
less than 1, 5 or 10 years, the time period during which the Fund has been
operating is substituted.

In addition, the Fund may advertise other total return performance data other
than average annual total return for each Class of Shares. This data shows as a
percentage rate of return encompassing all elements of return (i.e. income and
capital appreciation or depreciation); it assumes reinvestment of all dividends
and capital gain distributions. Such other total return data may be quoted for
the same or different periods as those for which average annual total return is
quoted. This data may consist of a cumulative percentage rate of return, actual
year-by-year rates or any combination thereof. Cumulative total return
represents the cumulative change in value of an investment in the Fund for
various periods.

The total return of the Fund could be increased to the extent the Advisor may
waive all or a portion of its fees or may reimburse all or a portion of the
Fund's expenses. Total return figures are based on the historical performance of
the Fund, show the performance of a hypothetical investment, and are not
intended to indicate future performance. The Fund's quotations may from time to
time be used in advertisements, sales literature, shareholder reports, or other
communications. For further information, see "Additional Information on
Performance" in the Statement of Additional Information.

No dealer, salesman, or other person has been authorized to give any information
or to make any representations, other than those contained in this Prospectus,
and, if given or made, such other information or representations must not be
relied upon as having been authorized by the Fund or the Advisor. This
Prospectus does not constitute an offering in any state in which an offering may
not lawfully be made.

The Fund reserves the right in its sole discretion to withdraw all or any part
of the offering made by this Prospectus or to reject purchase orders. All orders
to purchase shares are subject to acceptance by the Fund and are not binding
until confirmed or accepted in writing.

<PAGE>

CAPITAL VALUE FUND
105 North Washington Street
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069 CAPITAL VALUE FUND
1-800-525-FUND INSTITUTIONAL CLASS

INVESTMENT ADVISOR PROSPECTUS
Capital Investment Counsel, Inc.
Post Office Box 32249 August 1, 1996
Raleigh, North Carolina 27622

ADMINISTRATOR, FUND ACCOUNTANT, AND
DIVIDEND DISBURSING & TRANSFER AGENT
The Nottingham Company
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069

DISTRIBUTOR
Capital Investment Group, Inc.
Post Office Box 32249
Raleigh, North Carolina 27622

CUSTODIAN
Wachovia Bank of North Carolina, N.A.
301 North Main Street
Winston Salem, North Carolina 27102

INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
1021 East Cary Street, Suite 1900
Richmond, Virginia 23219-4023

<PAGE>

PROSPECTUS Cusip Number 66976M102
NASDAQ Symbol CAPVX

CAPITAL VALUE FUND
INVESTOR CLASS

The investment objective of the Capital Value Fund (the "Fund") is to provide
its shareholders with a maximum total return consisting of any combination of
capital appreciation, both realized and unrealized, and income under the
constantly varying market conditions. The Fund will seek to achieve this
objective by investing in a flexible portfolio of equity securities, fixed
income securities, and money market instruments. While there is no assurance
that the Fund will achieve its investment objective, it endeavors to do so by
following the investment policies described in this Prospectus. The Fund has a
net asset value that will fluctuate in accordance with the value of its
portfolio securities. This Prospectus relates to shares ("Investor Shares")
representing interests in the Fund. The Investor Shares are offered to the
general public. See "Prospectus Summary - Offering Price."

INVESTMENT ADVISOR

Capital Investment Counsel, Inc.
Raleigh, North Carolina

The date of this Prospectus and the Statement of Additional Information is
August 1, 1996.

<PAGE>

TABLE OF CONTENTS

PROSPECTUS SUMMARY.................................................. 2

SYNOPSIS OF COSTS AND EXPENSES...................................... 3

FINANCIAL HIGHLIGHTS................................................ 4

INVESTMENT OBJECTIVE AND POLICIES................................... 5

RISK FACTORS........................................................ 8

INVESTMENT LIMITATIONS.............................................. 10

FEDERAL INCOME TAXES................................................ 10

DIVIDENDS AND DISTRIBUTIONS......................................... 11

HOW SHARES ARE VALUED............................................... 12

HOW SHARES MAY BE PURCHASED......................................... 12

HOW SHARES MAY BE REDEEMED.......................................... 17

MANAGEMENT OF THE FUND.............................................. 19

OTHER INFORMATION................................................... 21

<PAGE>

PROSPECTUS SUMMARY

<TABLE>
<S> <C>
The Fund The Capital Value Fund (the "Fund") is a diversified series of The Nottingham
Investment Trust II (the "Trust"), a registered open-end management investment
company organized as a Massachusetts business trust. The Fund is commonly known
as a "mutual fund." This Prospectus relates to Investor Shares of the Fund. See
"Other Information - Description of Shares."

Offering Price The Investor Shares of the Fund are offered to the general public at net asset value plus a 3.5%
sales charge, which is reduced or eliminated on purchases involving larger amounts. The
Investor Shares are also subject to a 12b-1 distribution and shareholder servicing fee of up to
0.50% of the Investor Shares' average net assets annually. See "Distributor and Distribution
Fee" below. The minimum initial investment is $5,000 ($1,000 for IRAs and Keogh Plans). The
minimum subsequent investment is $500. See "How Shares May Be Purchased."

Distributor and Capital Investment Group, Inc. (the "Distributor"), an affiliate of the Advisor,
Distribution Fee serves as distributor of shares of the Fund. For its services, which include
payments to qualified securities dealers for sales of Fund shares, the
Distributor receives commissions consisting of the portion of the sales charge
remaining after the discounts it allows to securities dealers. Under the Fund's
Distribution Plan with respect to the Investor Shares, expenditures by the Fund
for distribution activities and service fees may not exceed 0.50% of the
Investor Shares' average net assets annually. See "How Shares May Be Purchased -
Sales Charges" and "- Distribution Plan."

Redemption of There is no charge for redemptions (other than for wiring redemption proceeds). Shares may be
Shares redeemed at any time at the net asset value next determined after receipt of a redemption request
by the Fund. A shareholder who submits appropriate written authorization may redeem shares
by telephone. See "How Shares May Be Redeemed."
</TABLE>

SYNOPSIS OF COSTS AND EXPENSES

The following tables set forth certain information in connection with the
expenses of the Investor Shares of the Fund for the current fiscal year. The
information is intended to assist the investor in understanding the various
costs and expenses borne by the Investor Shares of the Fund, and therefore
indirectly by its investors, the payment of which will reduce an investor's
return on an annual basis.

Shareholder Transaction Expenses for Investor Shares
Maximum sales load imposed on purchases
(as a percentage of offering price).........................3.50% (1)
Maximum sales charge imposed on reinvested dividends............None
Deferred sales load.............................................None
Redemption fees*................................................None
Exchange fee....................................................None

* The Fund imposes a $10 charge for wiring redemption proceeds.

Annual Fund Operating Expenses for Investor Shares - After Fee Waivers2
(as a percentage of average net assets)

Investment advisory fees........................................0.60% (2)
12b-1 fees......................................................0.50% (3)
Other expenses..................................................1.40% (2)
-----
Total operating expenses.....................................2.50% (2)
=====

EXAMPLE: You would pay the following expenses (including the maximum initial
sales charge) on a $1,000 investment in Investor Shares of the Fund, whether or
not you redeem at the end of the period, assuming a 5% annual return:

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
$58 $105 $155 $292

THE FOREGOING SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN.

1 Reduced or eliminated for larger purchases. See "How Shares May Be
Purchased - Sales Charges."

2 The "Total operating expenses" shown above are based upon actual operating
expenses incurred by the Investor Shares of the Fund for the fiscal year
ended March 31, 1996, which, after fee waivers, were 2.33% of average daily
net assets of the Investor Shares, but restated to reflect the expenses
anticipated to be incurred by the Investor Shares of the Fund for the
current fiscal year (assuming payment of the distribution and service fees
as described under footnote 3 below). Absent such waivers, the percentage
would have been 2.56% for "Total operating expenses" for the Investor
Shares for the fiscal year ended March 31, 1996. The Advisor has
voluntarily agreed to a reduction in the fees payable to it and to
reimburse expenses of the Fund, if necessary, in an amount that limits
"Total operating expenses" (exclusive of interest, taxes, brokerage fees
and commissions, sales charges, and extraordinary expenses) to not more
than 2.50% of the Investor Shares' average daily net assets. There can be
no assurance that the Advisor's voluntary fee waivers and expense
reimbursements will continue in the future.

<PAGE>

3 The Fund has adopted a Distribution Plan pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended (the "1940 Act"), which provides
that the Fund may pay certain distribution expenses and service fees with
respect to the Investor Shares up to 0.50% of the Investor Shares' average
net assets annually. See "How Shares May Be Purchased - Distribution Plan."
Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charge permitted by the National Association of
Securities Dealers.

See "How Shares May Be Purchased" and "Management of the Fund" below for more
information about the fees and costs of operating the Fund. The assumed 5%
annual return in the example is required by the Securities and Exchange
Commission. The hypothetical rate of return is not intended to be representative
of past or future performance of the Fund; the actual rate of return for the
Fund may be greater or less than 5%.

FINANCIAL HIGHLIGHTS

Pursuant to a plan approved by the Board of Trustees of the Trust, the existing
single Class of shares of the Fund was redesignated the "Investor Shares" of the
Fund and a new Class of shares, the "Institutional Shares," was created. This
Prospectus relates to Investor Shares of the Fund. See "Other Information -
Description of Shares." The financial data included in the table below has been
derived from audited financial statements of the Fund. The financial data for
the fiscal years ended March 31, 1994, 1995, and 1996 has been audited by KPMG
Peat Marwick LLP, independent accountants, whose reports covering such periods
are included in the Statement of Additional Information. The financial data for
the prior fiscal years was audited by another firm of independent accountants.
The information in the table below should be read in conjunction with the Fund's
latest audited financial statements and notes thereto, which are also included
in the Statement of Additional Information, a copy of which may be obtained at
no charge by calling the Fund. Further information about the performance of the
Fund is contained in the Annual Report of the Fund, a copy of which may be
obtained at no charge by calling the Fund.

Investor Class
(For a Share Outstanding Throughout each Period Represented)
<TABLE>
<CAPTION>

Years ended March 31,
1996 1995 1994 1993 1992
---- -------- -------- -------- ------
<S> <C>
Net Asset Value, Beginning of Period $10.75 $10.42 $10.59 $10.05 $10.09
Income from investment operations
Net investment income 0.19 0.17 0.15 0.20 0.19
Net realized and unrealized
gain on investments 1.53 0.73 0.41 0.88 -
---- ------- ------- ------- ------
Total from investment operations 1.72 0.90 0.56 1.08 0.19
---- ------- ------- ------- -------
Less distributions from
Net investment income (0.20) (0.21) (0.11) (0.20) (0.19)
Net realized gain from
investment transactions (0.35) (0.36) (0.62) (0.34) (0.04)
------ ------ ------ ------ ------
Total distributions (0.55) (0.57) (0.73) (0.54) (0.23)
------ ------- ------- ------- -------
Net Asset Value, End of Period $11.92 $10.75 $10.42 $10.59 $10.05
====== ====== ====== ====== ======
Total return (a) 16.16% 8.66% 5.21% 11.23% 1.44%

Ratios/supplemental data
Net assets, end of period $7,551,803 $6,775,562 $6,257,240 $6,042,297 $5,384,160
========== ========== ========== ========== ==========
Ratio of expenses to average net assets
Before expense reimbursements 2.56% 2.58% 2.64% 2.48% 2.96%
After expense reimbursements 2.33% 2.47% 2.43% 2.48% 2.73%
Ratio of net investment income (loss)
to average net assets
Before expense reimbursements 1.44% 1.55% 1.22% 1.87% 1.81%
After expense reimbursements 1.66% 1.66% 1.43% 1.87% 2.04%
Portfolio turnover rate 12.33% 24.67% 32.99% 24.79% 14.89%
</TABLE>

(a) Does not reflect the current maximum sales load of 3.5%, which was 4.5%
prior to August 1, 1995.

<PAGE>

INVESTMENT OBJECTIVE AND POLICIES

<PAGE>

domestic securities, they are depressed in price because they are out of favor
with most of the investment community. The same factors would be considered in
selecting foreign securities as with domestic securities. Foreign securities
investment presents special consideration not typically associated with
investment in domestic securities. Foreign taxes may reduce income. Currency
exchange rates and regulations may cause fluctuations in the value of foreign
securities. Foreign securities are subject to different regulatory environments
than in the United States and, compared to the United States, there may be a
lack of uniform accounting, auditing and financial reporting standards, less
volume and liquidity and more volatility, less public information, and less
regulation of foreign issuers. Countries have been known to expropriate or
nationalize assets, and foreign investments may be subject to political,
financial or social instability or adverse diplomatic developments. There may be
difficulties in obtaining service of process on foreign issuers and difficulties
in enforcing judgments with respect to claims under the U.S. Securities laws
against such issuers. Favorable or unfavorable differences between U.S. and
foreign economies could affect foreign securities values. The U.S. Government
has, in the past, discouraged certain foreign investments by U.S. investors
through taxation or other restrictions and it is possible that such restrictions
could be imposed again.

Corporate debt obligations purchased by the Fund will consist of "investment
grade" securities -- those rated at least Baa by Moody's Investors Service, Inc.
("Moody's"), BBB by Standard & Poor's Ratings Group ("S&P"), Fitch Investors
Service, Inc. ("Fitch"), or Duff & Phelps ("D&P") or, if not rated, of
equivalent quality in the Advisor's opinion. Debt obligations rated Baa by
Moody's or BBB by S&P, Fitch, or D&P may be considered speculative. Descriptions
of the quality ratings of Moody's, S&P, Fitch, and D&P are contained in the
Statement of Additional Information. While the Advisor utilizes the ratings of
various credit rating services as one factor in establishing creditworthiness,
it relies primarily upon its own analysis of factors establishing
creditworthiness. For as long as the Fund holds a fixed income issue, the
Advisor monitors the issuer's credit standing. If following investment, a
corporate debt obligation held by the Fund is no longer considered to be
"investment grade," or is considered to be "investment grade" by one rating
agency but not by another, the Advisor will re-evaluate the issuer's credit
standing and may retain the investment if it is still determined to be
creditworthy.

Money Market Instruments. Money market instruments may be purchased when the
Advisor believes interest rates are rising, the prospect for capital
appreciation in the equity and longer term fixed income securities' markets are
not attractive, or when the Advisor's secular view of interest rates favors
short term fixed income instruments versus longer term fixed income instruments.
Money market instruments will typically represent a portion of the Fund
portfolio, as funds awaiting investment, to accumulate cash for anticipated
purchases of portfolio securities, and to provide for shareholder redemptions
and operating expenses of the Fund. Money market instruments mature in thirteen
months or less from the date of purchase and may include U.S. Government
Securities, corporate debt securities (including those subject to repurchase
agreements), bankers acceptances and certificates of deposit of domestic
branches of U.S. banks, and commercial paper (including variable amount demand
master notes) rated in one of the two highest rating categories by any of the
nationally recognized statistical rating organizations or if not rated, of
equivalent quality in the Advisor's opinion. The Advisor may, when it believes
that unusually volatile or unstable economic and market conditions exist, depart
from the Fund's investment approach and assume

<PAGE>

temporarily a defensive portfolio posture, increasing the Fund's percentage
investment in money market instruments, even to the extent that 100% of the
Fund's assets may be so invested.

Investment Companies. In order to achieve its investment objective, the Fund may
invest up to 10% of the value of its total assets in securities of other
investment companies whose investment objectives are consistent with the Fund's
investment objective. The Fund will not acquire securities of any one investment
company if, immediately thereafter, the Fund would own more than 3% of such
company's total outstanding voting securities, securities issued by such company
would have an aggregate value in excess of 5% of the Fund's assets, or
securities issued by such company and securities held by the Fund issued by
other investment companies would have an aggregate value in excess of 10% of the
Fund's assets. The Fund will only invest in other investment companies by
purchase of such securities on the open market where no commission or profit to
a sponsor or dealer results from the purchase other than the customary broker's
commissions or when the purchase is part of a plan of merger, consolidation,
reorganization, or acquisition. To the extent the Fund invests in other
investment companies, the shareholders of the Fund would indirectly pay a
portion of the operating costs of the underlying investment companies. These
costs include management, brokerage, shareholder servicing and other operational
expenses. Shareholders of the Fund would then indirectly pay higher operational
costs than if they owned shares of the underlying investment companies directly.
The Advisor will waive its advisory fee for that portion of the Fund's assets
invested in other investment companies, except when such purchase is part of a
plan of merger, consolidation, reorganization, or acquisition.

<PAGE>

RISK FACTORS

Portfolio Turnover. The Fund sells portfolio securities without regard to the
length of time they have been held in order to take advantage of new investment
opportunities. Nevertheless, the Fund's portfolio turnover generally will not
exceed 75% in any one year. Portfolio turnover generally involves some expense
to the Fund, including brokerage commissions or dealer mark-ups and other
transaction costs on the sale of securities and the reinvestment in other
securities. Portfolio turnover may also have capital gains tax consequences. The
Fund's turnover ratio for prior fiscal years is indicated under "Financial
Highlights" above.

Forward Commitments and When-Issued Securities. The Fund may purchase
when-issued securities and commit to purchase securities for a fixed price at a
future date beyond customary settlement time. The Fund is required to hold and
maintain in a segregated account until the settlement date, cash, U.S.
Government Securities or high-grade debt obligations in an amount sufficient to
meet the purchase price. Purchasing securities on a when-issued or forward
commitment basis involves a risk of loss if the value of the security to be
purchased declines prior to the settlement date, which risk is in addition to
the risk of decline in value of the Fund's other assets. In addition, no income
accrues to the purchaser of when-issued securities during the period prior to
issuance. Although the Fund would generally purchase securities on a when-issued
or forward commitment basis with the intention of acquiring securities for its
portfolio, the Fund may dispose of a when-issued security or forward commitment
prior to settlement if the Advisor deems it appropriate to do so. The Fund may
realize short-term gains or losses upon such sales.

<PAGE>

INVESTMENT LIMITATIONS

FEDERAL INCOME TAXES

<PAGE>

Fund. Capital gain distributions are made when the Fund realizes net capital
gains on sales of portfolio securities during the year. Dividends and capital
gain distributions paid by the Fund shortly after shares have been purchased,
although in effect a return of investment, are subject to federal income
taxation.

DIVIDENDS AND DISTRIBUTIONS

There is no fixed dividend rate, and there can be no assurance as to the payment
of any dividends or the realization of any gains. The Fund's net investment
income available for distribution to holders of Investor Shares will be reduced
by the amount of any expenses allocated to the Investor Shares, including the
distribution and service fees under the Fund's Distribution Plan.

HOW SHARES ARE VALUED

<PAGE>

by the Fund. Securities that are listed on an exchange and which are not traded
on the valuation date are valued at the mean of the bid and asked prices.
Unlisted securities traded over-the-counter for which market quotations are
readily available are valued at the latest quoted sales price, if available, at
the time of valuation, otherwise, at the latest quoted bid price. Temporary cash
investments with maturities of 60 days or less will be valued at amortized cost,
which approximates market value. Securities for which no current quotations are
readily available are valued at fair value as determined in good faith using
methods approved by the Board of Trustees of the Trust. Securities may be valued
on the basis of prices provided by a pricing service when such prices are
believed to reflect the fair market value of such securities.

HOW SHARES MAY BE PURCHASED

Assistance in opening accounts and a purchase application may be obtained from
the Fund by calling 1-800-525- FUND, or by writing to the Fund at the address
shown below for purchases by mail. Assistance is also available through any
broker-dealer authorized to sell shares in the Fund. Payment for shares
purchased may also be made through your account at the broker-dealer processing
your application and order to purchase. Your investment will purchase shares at
the Fund's public offering price next determined after your order is received by
the Fund in proper form as indicated herein.

Purchases by Mail. Shares may be purchased initially by completing the
application accompanying this Prospectus and mailing it, together with a check
payable to the Fund, to the Capital Value Fund, Investor Shares, 105 North
Washington Street, Post Office Drawer 69, Rocky Mount, North Carolina
27802-0069. Subsequent investments in an existing account in the Fund may be
made at any time by sending a check payable to the Fund, to the address stated
above. Please enclose the stub of your account statement and include the amount
of the investment, the name of the account for which the investment is to be
made and the account number. Please remember to add a reference to "Investor
Shares" to your check to ensure proper credit to your account.

Wachovia Bank of North Carolina, N.A.
Winston-Salem, North Carolina
ABA # 053100494
For credit to the Rocky Mount Office
For the Capital Value Fund
Investor Shares
Acct #6760-020437
For further credit to (shareholder's name and SS# or EIN#)

<PAGE>

General. All purchases of shares are subject to acceptance and are not binding
until accepted. The Fund reserves the right to reject any application or
investment. Orders become effective, and shares are purchased at, the next
determined public offering price per share after an investment has been received
by the Fund, which is as of 4:00 p.m., New York time, Monday through Friday,
exclusive of business holidays. Orders received by the Fund and effective prior
to such 4:00 p.m. time will purchase shares at the public offering price
determined at that time. Otherwise, your order will purchase shares as of such
4:00 p.m. time on the next business day. For orders placed through a qualified
broker-dealer, such firm is responsible for promptly transmitting purchase
orders to the Fund.

Sales Charges. The public offering price of Investor Shares of the Fund equals
net asset value plus a sales charge. Capital Investment Group, Inc. (the
"Distributor") receives this sales charge as Distributor and may reallow it in
the form of dealer discounts and brokerage commissions as follows:

Sales Sales
Charge As Charge As Dealers Discounts
% of Net % of Public and Brokerage
Amount of Transaction Amount Offering Commissions as % of
At Public Offering Price Invested Price Public Offering Price

Less than $100,000.................. 3.63% 3.50% 3.00%
$100,000 but less than $250,000..... 3.09% 3.00% 2.50%
$250,000 but less than $500,000..... 2.56% 2.50% 2.00%
$500,000 or more.................... 0.00% 0.00% 0.00%

At times the Distributor may reallow the entire sales charge to dealers. From
time to time dealers who receive dealer discounts and brokerage commissions from
the Distributor may reallow all or a portion of such dealer discounts and
brokerage commissions to other dealers or brokers. Pursuant to the terms of the
Distribution Agreement, the sales charge payable to the Distributor and the
dealer discounts may be suspended, terminated or amended. Dealers who receive
90% or more of the sales charge may be deemed to be "underwriters" under the
Securities Act of 1933, as amended.

The dealer discounts and brokerage commissions schedule above applies to all
dealers who have agreements with the Distributor. The Distributor, at its
expense, may also provide additional compensation to dealers in connection with
sales of shares of the Fund. Compensation may include financial assistance to
dealers in connection with conferences, sales or training programs for their
employees, seminars for the public, advertising campaigns regarding the Fund,
and/or other dealer-sponsored special events. In some instances, this
compensation may be made available only to certain dealers whose representatives
have sold or are expected to sell a significant amount of such shares.
Compensation may include payment for travel expenses, including lodging,
incurred in connection with trips taken by invited registered representatives
and members of their families to locations within or outside of the United
States for meetings or seminars of a business nature. Dealers may not use sales
of the Fund shares

<PAGE>

to qualify for this compensation to the extent such may be prohibited by the
laws of any state or any self-regulatory agency, such as the National
Association of Securities Dealers, Inc. None of the aforementioned compensation
is paid for by the Fund or its shareholders.

Reduced Sales Charges

Concurrent Purchases. For purposes of qualifying for a lower sales
charge for Investor Shares, investors have the privilege of combining concurrent
purchases of the Fund and any other series of the Trust affiliated with the
Advisor and sold with a sales charge. For example, if a shareholder concurrently
purchases shares in another series of the Trust affiliated with the Advisor and
sold with a sales charge at the total public offering price of $50,000, and
Investor Shares in the Fund at the total public offering price of $50,000, the
sales charge would be that applicable to a $100,000 purchase as shown in the
appropriate table above. This privilege may be modified or eliminated at any
time or from time to time by the Trust without notice thereof.

Rights of Accumulation. Pursuant to the right of accumulation,
investors are permitted to purchase shares at the public offering price
applicable to the total of (a) the total public offering price of the Investor
Shares of the Fund then being purchased plus (b) an amount equal to the then
current net asset value of the purchaser's combined holdings of the shares of
all of the series of the Trust affiliated with the Advisor and sold with a sales
charge. To receive the applicable public offering price pursuant to the right of
accumulation, investors must, at the time of purchase, provide sufficient
information to permit confirmation of qualification, and confirmation of the
purchase is subject to such verification. This right of accumulation may be
modified or eliminated at any time or from time to time by the Trust without
notice.

Letters of Intent. Investors may qualify for a lower sales charge for
Investor Shares by executing a letter of intent. A letter of intent allows an
investor to purchase Investor Shares of the Fund over a 13-month period at
reduced sales charges based on the total amount intended to be purchased plus an
amount equal to the then current net asset value of the purchaser's combined
holdings of the shares of all of the series of the Trust affiliated with the
Advisor and sold with a sales charge. Thus, a letter of intent permits an
investor to establish a total investment goal to be achieved by any number of
purchases over a 13-month period. Each investment made during the period
receives the reduced sales charge applicable to the total amount of the intended
investment.

The letter of intent does not obligate the investor to purchase, or the Fund to
sell, the indicated amount. If such amount is not invested within the period,
the investor must pay the difference between the sales charge applicable to the
purchases made and the charges previously paid. If such difference is not paid
by the investor, the Distributor is authorized by the investor to liquidate a
sufficient number of shares held by the investor to pay the amount due. On the
initial purchase of shares, if required (or subsequent purchases, if necessary)
shares equal to at least five percent of the amount indicated in the letter of
intent will be held in escrow during the 13-month period (while remaining
registered in the name of the investor) for this purpose. The value of any
shares redeemed or otherwise disposed of by the investor prior to termination or
completion of the letter of intent will be deducted from the total purchases
made under such letter of intent.

A 90-day back-dating period can be used to include earlier purchases at the
investor's cost (without a retroactive downward adjustment of the sales charge);
the 13-month period would then begin on the date of the first purchase during
the 90-day period. No retroactive adjustment will be made if purchases exceed
the amount indicated in the letter of intent. Investors must notify the
Administrator or the Distributor whenever a purchase is being made pursuant to a
letter of intent.

Investors electing to purchase shares pursuant to a letter of intent should
carefully read the letter of intent, which is included in the Fund Shares
Application accompanying this Prospectus or is otherwise available from the
Administrator or the Distributor. This letter of intent option may be modified
or eliminated at any time or from time to time by the Trust without notice.

Reinvestments. Investors may reinvest, without a sales charge, proceeds
from a redemption of Investor Shares of the Fund either in Investor Shares of
the Fund or in shares of another series of the Trust affiliated with the Advisor
and sold with a sales charge, within 90 days after the redemption. If the other
class charges a sales charge higher than the sales charge the investor paid in
connection with the shares redeemed, the investor must pay the difference. In
addition, the shares of the class to be acquired must be registered for sale in
the investor's state of residence. The amount that may be so reinvested may not
exceed the amount of the redemption proceeds, and

<PAGE>

a written order for the purchase of such shares must be received by the Fund or
the Distributor within 90 days after the effective date of the redemption.

If an investor realizes a gain on the redemption, the reinvestment will not
affect the amount of any federal capital gains tax payable on the gain. If an
investor realizes a loss on the redemption, the reinvestment may cause some or
all of the loss to be disallowed as a tax deduction, depending on the number of
shares purchased by reinvestment and the period of time that has elapsed after
the redemption, although for tax purposes, the amount disallowed is added to the
cost of the shares acquired upon the reinvestment.

Purchases by Related Parties and Groups. Reductions in sales charges
apply to purchases by a single "person," including an individual, members of a
family unit, consisting of a husband, wife and children under the age of 21
purchasing securities for their own account, or a trustee or other fiduciary
purchasing for a single fiduciary account or single trust estate.

Reductions in sales charges also apply to purchases by individual members of a
"qualified group." The reductions are based on the aggregate dollar value of
shares purchased by all members of the qualified group and still owned by the
group plus the shares currently being purchased. For purposes of this paragraph,
a qualified group consists of a "company," as defined in the 1940 Act, which has
been in existence for more than six months and which has a primary purpose other
than acquiring shares of the Fund at a reduced sales charge, and the "related
parties" of such company. For purposes of this paragraph, a "related party" of a
company is: (i) any individual or other company who directly or indirectly owns,
controls, or has the power to vote five percent or more of the outstanding
voting securities of such company; (ii) any other company of which such company
directly or indirectly owns, controls, or has the power to vote five percent of
more of its outstanding voting securities; (iii) any other company under common
control with such company; (iv) any executive officer, director or partner of
such company or of a related party; and (v) any partnership of which such
company is a partner.

Sales at Net Asset Value. The Fund may sell shares at a purchase price
equal to the net asset value of such shares, without a sales charge, to
Trustees, officers, and employees of the Trust, the Fund, the Distributor, and
the Advisor, and to employees and principals of related organizations and their
families and certain parties related thereto, including clients and related
accounts of the Advisor and other investment advisors and financial planners.
The public offering price of shares of the Fund may also be reduced to net asset
value per share in connection with the acquisition of the assets of or merger or
consolidation with a personal holding company or a public or private investment
company.

Distribution Plan. Capital Investment Group, Inc., Post Office Box 32249,
Raleigh, North Carolina 27622 (the "Distributor"), an affiliate of the Advisor,
is the national distributor for the Fund under a Distribution Agreement with the
Trust. The Distributor may sell Fund shares to or through qualified securities
dealers or others. Richard K. Bryant, a Trustee of the Trust and an officer of
the Fund, and Elmer O. Edgerton, Jr., an officer of the Fund, control the
Distributor and the Advisor.

The Trust has adopted a Distribution Plan (the "Plan") for the Investor Shares
of the Fund pursuant to Rule 12b-1 under the 1940 Act. Under the Plan the Fund
may reimburse any expenditures to finance any activity primarily intended to
result in sale of the Investor Shares of the Fund or the servicing of
shareholder accounts, including, but not limited to, the following: (i) payments
to the Distributor, securities dealers, and others for the sale of Investor
Shares of the Fund; (ii) payment of compensation to and expenses of personnel
who engage in or support distribution of Investor Shares of the Fund or who
render shareholder support services not otherwise provided by the Administrator
or Custodian; and (iii) formulation and implementation of marketing and
promotional activities. The categories of expenses for which reimbursement is
made are approved by the Board of Trustees of the Trust. Expenditures by the
Fund pursuant to the Plan are accrued based on the Investor Shares' average
daily net assets and may not exceed 0.50% of the Investor Shares' average net
assets for each year elapsed subsequent to adoption of the Plan. Such
expenditures paid as service fees to any person who sells Investor Shares may
not exceed 0.25% of the average annual net asset value of such shares.

The Plan may not be amended to increase materially the amount to be spent under
the Plan without shareholder approval of the Investor Shares. The continuation
of the Plan must be approved by the Board of Trustees annually. At least
quarterly the Board of Trustees must review a written report of amounts expended
pursuant to the Plan and the purposes for which such expenditures were made. For
the fiscal year ended March 31, 1996, the Fund incurred $33,377 pursuant to the
Plan, all of which the Distributor received, except for $2,330 voluntarily
waived by the

<PAGE>

Distributor. In addition, the Distributor retained sales charges in the amount
of $401 for the fiscal year ended March 31, 1996.

Stock Certificates. Stock certificates will not be issued for your shares.
Evidence of ownership will be given by issuance of periodic account statements
that will show the number of shares owned.

HOW SHARES MAY BE REDEEMED

<PAGE>

If you are uncertain of the requirements for redemption, please contact the
Fund, at 1-800-525-FUND, or write to the address shown below under.

Regular Mail Redemptions. Your request should be addressed to the Capital Value
Fund, Investor Shares, 105 North Washington Street, Post Office Drawer 69, Rocky
Mount, North Carolina 27802-0069. Your request for redemption must include:

2) Any required signature guarantees (see "Signature Guarantees" below); and

3) Other supporting legal documents, if required in the case of estates,
trusts, guardianships, custodianships, corporations, partnerships, pension
or profit sharing plans, and other organizations.

The Fund may rely upon confirmation of redemption requests transmitted via
facsimile (FAX# 919-972-1908). The confirmation instructions must include:

The net asset value used in processing the redemption will be the net asset
value next determined after the telephone request is received. Redemption
proceeds will not be distributed until written confirmation of the redemption
request is received, per the instructions above. You can choose to have
redemption proceeds mailed to you at your address of record, your bank, or to
any other authorized person, or you can have the proceeds sent by bank wire to
your bank ($5,000 minimum). Shares of the Fund may not be redeemed by wire on
days on which you bank or the Fund's Custodian is not open for business. You can
change your redemption instructions anytime you wish by filing a letter
including your new redemption instructions with the Fund. See "Signature
Guarantees" below. The Fund reserves the right to restrict or cancel telephone
and bank wire redemption privileges for shareholders, without notice, if the
Fund believes it to be in the best interest of the shareholders to do so. During
drastic economic and market conditions, telephone redemption privileges may be
difficult to implement.

<PAGE>

confirm that instructions are genuine, and, if it does not follow such
procedures, the Fund will be liable for any losses due to fraudulent or
unauthorized instructions. The Fund will not be liable for following telephone
instructions reasonably believed to be genuine.

MANAGEMENT OF THE FUND

The Advisor is registered under the Investment Advisors Act of 1940.
Registration of the Advisor does not involve any supervision of management or
investment practices or policies by the Securities and Exchange Commission. The
Advisor, established as a North Carolina corporation in 1984, is controlled by
Richard K. Bryant and E.O. Edgerton, Jr. They also control the Distributor. The
Advisor currently serves as investment advisor to over $100 million in assets.
The Advisor has been rendering investment counsel, utilizing investment
strategies substantially similar to that of the Fund, to individuals, banks and
thrift institutions, pension and profit sharing plans, trusts, estates,
charitable organizations, corporations, and other business and individual
accounts since its formation. The Advisor's address is 17 Glenwood Avenue, Post
Office Box 32249, Raleigh, North Carolina 27622.

<PAGE>

believed that more than one broker is able to provide the best execution, the
Advisor will 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. The Advisor may also utilize a brokerage firm affiliated
with the Trust or the Advisor (including the Distributor, an affiliate of the
Advisor) if it believes it can obtain the best execution of transactions from
such broker. Research services obtained through Fund brokerage transactions may
be used by the Advisor for its other clients and, conversely, the Fund may
benefit from research services obtained through the brokerage transactions of
the Advisor's other clients. For further information, see "Investment Objective
and Policies Investment Transactions" in the Statement of Additional
Information.

The Administrator also performs certain accounting and pricing services for the
Fund as pricing agent, including the daily calculation of the Fund's net asset
value for each Class of Shares.

<PAGE>

one or more series in such a manner as it deems fair and equitable. Any expenses
relating only to a particular Class of Shares of the Fund will be borne solely
by such Class. The Fund's expense ratio for prior fiscal years, calculated both
before and after expense reimbursements, is indicated under "Financial
Highlights" above.

OTHER INFORMATION

THIS PROSPECTUS RELATES TO THE FUND'S INVESTOR SHARES AND DESCRIBES ONLY THE
POLICIES, OPERATIONS, CONTRACTS, AND OTHER MATTERS PERTAINING TO THE INVESTOR
SHARES. THE FUND ALSO ISSUES A CLASS OF INSTITUTIONAL SHARES. SUCH OTHER CLASS
MAY HAVE DIFFERENT SALES CHARGES AND EXPENSES, WHICH MAY AFFECT PERFORMANCE.
INVESTORS MAY CALL THE FUND AT 1-800-525-3863 TO OBTAIN MORE INFORMATION
CONCERNING OTHER CLASSES AVAILABLE TO THEM THROUGH THEIR SALES REPRESENTATIVE.
INVESTORS MAY OBTAIN INFORMATION CONCERNING THOSE CLASSES FROM THEIR SALES
REPRESENTATIVE, THE DISTRIBUTOR, THE FUND, OR ANY OTHER PERSON WHICH IS OFFERING
OR MAKING AVAILABLE TO THEM THE SECURITIES OFFERED IN THIS PROSPECTUS.

<PAGE>

Reporting to Shareholders. The Fund will send to its shareholders Annual and
Semi-Annual Reports; the financial statements appearing in Annual Reports for
the Fund will be audited by independent accountants. In addition, the
Administrator, as transfer agent, will send to each shareholder having an
account directly with the Fund a quarterly statement showing transactions in the
account, the total number of shares owned and any dividends or distributions
paid. Inquiries regarding the Fund may be directed in writing to 105 North
Washington Street, Post Office Drawer 69, Rocky Mount, North Carolina 27802-0069
or by calling 1-800-525-FUND.

Calculation of Performance Data. From time to time the Fund may advertise its
average annual total return for each Class of Shares. The "average annual total
return" refers to the average annual compounded rates of return over 1, 5 and 10
year periods that would equate an initial amount invested at the beginning of a
stated period to the ending redeemable value of the investment. The calculation
assumes the reinvestment of all dividends and distributions, includes all
recurring fees that are charged to all shareholder accounts and deducts all
nonrecurring charges at the end of each period. The calculation further assumes
the maximum sales load is deducted from the initial payment. If the Fund has
been operating less than 1, 5 or 10 years, the time period during which the Fund
has been operating is substituted.

<PAGE>

NO DEALER, SALESMAN, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND OR THE ADVISOR. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY STATE IN WHICH AN OFFERING MAY
NOT LAWFULLY BE MADE.

THE FUND RESERVES THE RIGHT IN ITS SOLE DISCRETION TO WITHDRAW ALL OR ANY PART
OF THE OFFERING MADE BY THIS PROSPECTUS OR TO REJECT PURCHASE ORDERS. ALL ORDERS
TO PURCHASE SHARES ARE SUBJECT TO ACCEPTANCE BY THE FUND AND ARE NOT BINDING
UNTIL CONFIRMED OR ACCEPTED IN WRITING.

CAPITAL VALUE FUND CAPITAL VALUE FUND
105 North Washington Street INVESTOR CLASS
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069 PROSPECTUS
1-800-525-FUND
August 1, 1996
INVESTMENT ADVISOR
Capital Investment Counsel, Inc.
Post Office Box 32249
Raleigh, North Carolina 27622

ADMINISTRATOR, FUND ACCOUNTANT, AND
DIVIDEND DISBURSING & TRANSFER AGENT
The Nottingham Company
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069

DISTRIBUTOR
Capital Investment Group, Inc.
Post Office Box 32249
Raleigh, North Carolina 27622

CUSTODIAN
Wachovia Bank of North Carolina, N.A.
301 North Main Street
Winston Salem, North Carolina 27102

INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
1021 East Cary Street, Suite 1900
Richmond, Virginia 23219-4023

<PAGE>

PROSPECTUS

INVESTEK FIXED INCOME TRUST
INSTITUTIONAL CLASS

The investment objective of the Investek Fixed Income Trust (the "Fund") is to
preserve capital and maximize total returns through active management of
investment grade fixed income securities. The Fund is designed primarily for
institutional investors and high net worth individuals who wish to take
advantage of the professional investment management expertise of Investek
Capital Management, Inc. (the "Advisor"), which serves as investment advisor to
the Fund. While there is no assurance that the Fund will achieve its investment
objective, it endeavors to do so by following the investment policies described
in this Prospectus. The Fund has a net asset value that will fluctuate in
accordance with the value of its portfolio securities. This Prospectus relates
to shares ("Institutional Shares") representing interests in the Fund. The
Institutional Shares are offered to institutions and certain other investors
described herein without any sales or redemption charges or shareholder
servicing or distribution fees. See "Prospectus Summary - Offering Price."

INVESTMENT ADVISOR

logo placed here

317 East Capitol Street, Post Office Box 2840
Jackson, Mississippi 39207
(601) 949-3105

The Fund is a diversified series of The Nottingham Investment Trust II (the
"Trust"), a registered open-end management investment company. This Prospectus
sets forth concisely the information about the Fund that a prospective investor
should know before investing. Investors should read this Prospectus and retain
it for future reference. Additional information about the Fund has been filed
with the Securities and Exchange Commission and is available upon request and
without charge. You may request the Statement of Additional Information dated
August 1, 1996, as amended from time to time, which is incorporated in this
Prospectus by reference, by writing the Fund at Post Office Drawer 69, Rocky
Mount, North Carolina 27802-0069, or by calling 1-800-525-FUND.

The date of this Prospectus is August 1, 1996.

<PAGE>

TABLE OF CONTENTS

PROSPECTUS SUMMARY.................................................... 2

SYNOPSIS OF COSTS AND EXPENSES........................................ 2

FINANCIAL HIGHLIGHTS.................................................. 3

INVESTMENT OBJECTIVE AND POLICIES..................................... 3

RISK FACTORS.......................................................... 6

INVESTMENT LIMITATIONS................................................ 7

FEDERAL INCOME TAXES.................................................. 8

DIVIDENDS AND DISTRIBUTIONS........................................... 9

HOW SHARES ARE VALUED................................................. 9

HOW SHARES MAY BE PURCHASED........................................... 10

HOW SHARES MAY BE REDEEMED............................................ 14

MANAGEMENT OF THE FUND................................................ 16

OTHER INFORMATION..................................................... 17

<PAGE>

PROSPECTUS SUMMARY

The Fund The Investek Fixed Income Trust (the "Fund") is a
diversified series of The Nottingham Investment Trust II
(the "Trust"), a registered open-end management investment
company organized as a Massachusetts business trust. This
Prospectus relates to Institutional Shares of the Fund. See
"Other Information - Description of Shares."

Offering Price The Institutional Shares are offered to clients of the
Advisor, and any other institutional investor, at net asset
value without a sales charge and without any shareholder
servicing or distribution fees. The minimum initial
investment is $50,000. The minimum subsequent investment is
$1,000. See "How Shares May be Purchased."

Investment The investment objective of the Fund is to preserve capital
Objective and and maximize total returns through active management of
Policies investment grade fixed income securities. The Advisor does
not engage in "market timing." To the extent practicable,
the Fund generally will remain fully invested in fixed
income securities. The Fund intends to invest generally in
investment grade bonds to maintain a portfolio duration
between 2 and 7 years, which is currently approximately
equivalent to a 3 to 12 year effective maturity. Due to its
duration and high quality standards, the Fund expects its
portfolio to exhibit less volatility than would longer
duration and lower quality portfolios. In addition, the Fund
intends to concentrate its investments in "high quality"
investment grade bonds by maintaining at least 90% of the
portfolio in bonds rated A or better as described in
"Investment Limitations - Investment Grade Securities" below
(or if not rated, of equivalent quality as determined by the
Advisor). See "Investment Objective and Policies." The Fund
is not intended to be a complete investment program, and
there can be no assurance that the Fund will achieve its
investment objective.

Special Risk While the Fund will invest primarily in "high quality"
Considerations investment grade bonds, some of the Fund's investments may
include mortgage and asset-backed securities, collateralized
mortgage obligations, other mortgage derivative products,
foreign securities, and securities purchased subject to a
repurchase agreement or on a "when-issued" basis, which
involve certain risks. The Fund may borrow only under
certain limited conditions (including to meet redemption
requests) and not to purchase securities. It is not the
intent of the Fund to borrow except for temporary cash
requirements. Borrowing, if done, would tend to exaggerate
the effects of market and interest rate fluctuations on the
Fund's net asset value until repaid. See "Risk Factors."

Manager Subject to the general supervision of the Trust's Board of
Trustees and in accordance with the Fund's investment
policies, Investek Capital Management, Inc. of Jackson,
Mississippi (the "Advisor"), manages the Fund's investments.
The Advisor currently manage over $1.75 billion in assets.
For its advisory services, the Advisor receives a monthly
fee based on the Fund's daily net assets at the annual rate
of 0.45%. See "Management of the Fund - The Advisor."

Dividends Income dividends, if any, are generally paid monthly;
capital gains, if any, are generally distributed at least
once each year. Dividends and capital gains distributions
are automatically reinvested in additional shares of the
same Class at net asset value unless the shareholder elects
to receive cash. See "Dividends and Distributions."

Distributor Capital Investment Group, Inc. (the "Distributor") serves as
distributor of shares of the Fund. See "How Shares May Be
Purchased - Distributor."

Redemption of There is no charge for redemptions (other than for wiring
Shares redemption proceeds). Shares may be redeemed at any time at
the net asset value next determined after receipt of a
redemption request by the Fund. A shareholder who submits
appropriate written authorization may redeem shares by
telephone. See "How Shares May Be Redeemed."

SYNOPSIS OF COSTS AND EXPENSES

<PAGE>

and expenses borne by the Institutional Shares of the Fund, and therefore
indirectly by its investors, the payment of which will reduce an investor's
return on an annual basis.

Shareholder Transaction Expenses for Institutional Shares

Maximum sales load imposed on purchases
(as a percentage of offering price).......................None
Maximum sales charge imposed on reinvested dividends.........None
Deferred sales load..........................................None
Redemption fees*.............................................None
Exchange fee.................................................None

*The Fund imposes a $10 charge for wiring redemption proceeds.

Annual Fund Operating Expenses for Institutional Shares - After Fee Waivers (1)
(as a percentage of average net assets)

Investment advisory fees 0.24%(1)
12b-1 fees None
Other expenses 0.63%(1)

Total operating expenses 0.87%(1)

EXAMPLE: You would pay the following expenses on a $1,000 investment in
Institutional Shares of the Fund, whether or not you redeem at the end of the
period, assuming a 5% annual return:

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
$9 $28 $48 $107

THE FOREGOING SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN.

1 The "Total operating expenses" shown above are based upon actual operating
expenses incurred by the Institutional Shares of the Fund for the fiscal
year ended March 31, 1996, which, after fee waivers, were 0.87% of average
daily net assets of the Institutional Shares. Absent such waivers, the
percentages would have been 0.45% for "Investment advisory fees" and 1.08%
for "Total operating expenses" for the Institutional Shares for the fiscal
year ended March 31, 1996. The Advisor intends to use its best efforts to
maintain "Total operating expenses" between 0.60% and 0.90% of the
Institutional Shares' average daily net assets. The Advisor has voluntarily
agreed to a reduction in the fees payable to it and to reimburse expenses of
the Fund, if necessary, in an amount that limits "Total operating expenses"
(exclusive of interest, taxes, brokerage fees and commissions, sales
charges, and extraordinary expenses) to not more than 0.90% of the
Institutional Shares' average daily net assets. There can be no assurance
that the Advisor's voluntary fee waivers and expense reimbursements will
continue in the future.

FINANCIAL HIGHLIGHTS

Pursuant to a plan approved by the Board of Trustees of the Trust, the existing
single Class of shares of the Fund was redesignated the "Institutional Shares"
of the Fund and a new Class of shares, the "Investor Shares," was created. This
Prospectus relates to Institutional Shares of the Fund. See "Other Information
- -Description of Shares." The financial data included in the table below has been
derived from audited financial statements of the Fund. The financial data for
the fiscal years ended March 31, 1994, 1995, and 1996 has been derived from
financial statements audited by KPMG Peat Marwick LLP, independent auditors,
whose reports covering such

<PAGE>

periods are included in the Statement of Additional Information. The financial
data for the prior fiscal years was derived from financial statements audited by
another firm of independent auditors. The information in the table below should
be read in conjunction with the Fund's latest audited financial statements and
notes thereto, which are also included in the Statement of Additional
Information, a copy of which may be obtained at no charge by calling the Fund.
Further information about the performance of the Fund is contained in the Annual
Report of the Fund, a copy of which may be obtained at no charge by calling the
Fund.

Institutional Class
(For a Share Outstanding Throughout each Period Represented)

Years ended March 31,
1996 1995 1994 1993 1992 (a)
---- ---- ---- -------- --------
<S> <C>
Net Asset Value, Beginning of Period $9.74 $9.93 $10.48 $9.92 $10.00

Income from investment operations

Net investment income 0.66 0.63 0.61 0.65 0.20
Net realized and unrealized
gain (loss) on investments 0.37 (0.19) (0.43) 0.56 (0.08)
---- ------ ------- ------- -------
Total from investment operations 1.03 0.44 0.18 1.21 0.12
---- ---- ---- ------- -------

Less distributions from

Net investment income (0.66) (0.63) (0.60) (0.64) (0.20)
Net realized gain from
investment transactions 0.00 0.00 (0.13) (0.01) 0.00
---- ---- ------- ------- ------
Total distributions (0.66) (0.63) (0.73) (0.65) (0.20)
------ ------ ------- ------- -------

Net Asset Value, End of Period $10.11 $9.74 $9.93 $10.48 $9.92
====== ===== ===== ====== =====

Total return 10.70% 4.73% 1.43% 12.49% 1.22%

Ratios/supplemental data

Net assets, end of period (000's) $12,261 $14,983 $17,642 $5,268 $2,037
======= ======= ======= ====== ======

Ratio of expenses to average net assets

Before expense reimbursements 1.08% 1.08% 1.41% 1.69% 1.71%(b)
After expense reimbursements 0.87% 0.77% 0.77% 0.95% 0.95%(b)

Ratio of net investment income
to average net assets

Before expense reimbursements 6.20% 6.15% 5.45% 5.50% 5.41%(b)
After expense reimbursements 6.41% 6.45% 5.82% 6.24% 6.17%(b)

Portfolio turnover rate 16.57% 19.64% 34.42% 59.78% 0.00%
</TABLE>

(a) For the period from November 15, 1991 (commencement of operations) to March
31, 1992.

(b) Annualized.

INVESTMENT OBJECTIVE AND POLICIES

<PAGE>

its investment objective, it seeks to achieve its objective through the
investment policies and techniques described in this Prospectus. The Fund's
investment objective and fundamental investment limitations described herein may
not be altered without the prior approval of a majority of the Fund's
shareholders.

Corporations and individual investors may invest in the Fund, although
investment decisions of the Fund will not be influenced by any federal tax
considerations, other than those considerations that apply to the Fund itself.

Investment Policies. The Advisor's philosophy in managing fixed income
portfolios focuses on assigning an intrinsic value to various securities/sectors
of the fixed income markets and compares these intrinsic values to actual market
yield levels for each security/sector. A difference between the Advisor's view
of intrinsic value and the market's assessment of this value, in terms of market
yields, is exploited. The Fund endeavors to invest in securities and market
sectors that the Advisor believes are undervalued due to market inefficiencies.
The selection of such undervalued securities by the Advisor is based on, among
other things, historical yield relationships, credit risk, market volatility,
absolute levels of interest rates, as well as supply and demand factors.

The Fund is designed primarily to allow investors to take advantage of the
professional investment management expertise of the Advisor. Given this purpose,
the Fund will be managed in a manner that closely resembles that of other
portfolios managed by the Advisor. The Advisor uses a wide variety of products
and techniques in managing fixed income portfolios. As the fixed income markets
evolve, the Advisor may invest in types of securities other than those
specifically identified in this Prospectus if the Advisor views these
investments to be consistent with the overall investment objective and policies
of the Fund. Some of the securities and techniques the Advisor currently expects
to utilize are described below. The Fund will invest in a broad range of
investment grade bonds and other fixed income securities in order to achieve its
investment objective.

Duration. Duration is an important concept in the Advisor's fixed income
management philosophy. `Duration' and `maturity' are different concepts and
should not be substituted for one another for purposes of understanding the
investment philosophy and limitations of the Fund. The Advisor believes that for
most fixed income securities `duration' provides a better measure of interest
rate sensitivity than maturity. Whereas maturity takes into account only the
final principal payments to determine the risk of a particular fixed income
security, duration weights all potential cash flows - principal, interest and
reinvestment income - on an expected present value basis, to determine the
`effective life' of the security.

For some securities the standard duration calculation does not accurately
reflect interest rate sensitivity. For example, mortgage pass-through
securities, collateralized mortgage obligations and asset-backed securities
require estimates of principal prepayments which are critical in determining
interest rate sensitivity. Floating rate securities, because of the interest
rate adjustment feature, are not appropriate for the standard duration
calculation. In these and other similar situations the Advisor will use more
sophisticated techniques to determine interest rate sensitivity of securities in
the Fund.

<PAGE>

Poor's Ratings Group ("S&P"), Fitch Investors Service, Inc. ("Fitch"), or Duff &
Phelps ("D&P"), or if no rating exists, of equivalent quality in the
determination of the Advisor. In addition, the Fund intends to maintain at least
90% of its assets in bonds rated A or better (or if not rated, of equivalent
quality as determined by the Advisor). This limitation is described in greater
detail in "Investment Limitations - Investment Grade Securities." The Advisor
will monitor continuously the ratings of securities held by the Fund and the
creditworthiness of their issuers. For a more complete description of the
various bond ratings for Moody's, S&P, Fitch and D&P, see Appendix A to the
Statement of Additional Information.

Mortgage Pass-Through Certificates. Obligations of GNMA, FNMA and FHLMC include
direct pass-through certificates representing undivided ownership interests in
pools of mortgages. Such certificates are guaranteed as to payment of principal
and interest (but not as to price and yield) by the issuer. For securities
issued by GNMA, the payment of principal and interest is backed by the full
faith and credit of the U.S. Government. Mortgage pass-through certificates
issued by FNMA or FHLMC are guaranteed as to payment of principal and interest
by the credit of the issuing U.S. Government agency. Securities issued by other
non-governmental entities (such as commercial banks or mortgage bankers) may
offer credit enhancement such as guarantees, insurance, or letters of credit.
Mortgage pass-through certificates are subject to more rapid prepayment than
their stated maturity date would indicate; their rate of prepayment tends to
accelerate during periods of declining interest rates or increased property
transfers and, as a result, the proceeds from such prepayments may be reinvested
in instruments which have lower yields.

Collateralized Mortgage Obligations. The Fund intends to invest in
collateralized mortgage obligations ("CMO's"), which are generally backed by
mortgage pass-through securities or whole mortgage loans. CMO's are usually
structured into classes of varying maturities and principal payment priorities.
The prepayment sensitivity of each class may or may not resemble that of the
CMO's collateral depending on the maturity and structure of that class. CMO's
pay interest and principal (including prepayments) monthly, quarterly or
semi-annually. Most CMO's are AAA rated, reflecting the credit quality of the
underlying collateral; however, some classes carry greater price risk than that
of their underlying collateral. The Advisor will invest in CMO classes only if
their characteristics and interest rate sensitivity fit the investment objective
and policies of the Fund.

Other Mortgage Related Securities. In addition to the mortgage pass-through
securities and the CMO's mentioned above, the Fund may also invest in other
mortgage derivative products if the Advisor views them to be consistent with the
overall policies and objective of the Fund.

The Advisor expects that governmental, government-related and private entities
may create other mortgage-related securities offering mortgage pass-through and
mortgage collateralized instruments in addition to those described herein. As
new types of mortgage-related securities are developed and offered to the
investment community, the Advisor will, consistent with the Fund's investment
objective, policies and quality standards, consider making investments in such
new types of mortgage-related securities.

Asset-Backed Securities. In addition to CMO's, other asset-backed securities
have been offered to investors backed by loans such as automobile loans, credit
card receivables, marine loans, recreational vehicle loans and manufactured
housing loans. Typically asset-backed securities represent undivided fractional
interests in a trust whose assets consist of a pool of loans and security
interests in the collateral securing the loans. Payments of principal and
interest on asset-backed securities are passed through monthly to certificate
holders and are usually guaranteed up to a certain amount and time period by a
letter of credit issued by a financial institution. In some cases asset-backed
securities are divided into senior and subordinated classes so as to enhance the
quality of the senior class. Underlying loans are subject to prepayment, which
may reduce the overall return to certificate holders.

If the letter of credit is exhausted and the full amounts due on underlying
loans are not received because of unanticipated costs, depreciation, damage or
loss of the collateral securing the contracts, or other factors, certificate
holders may experience delays in payment or losses on asset-backed securities.
The Fund may invest in other asset-backed securities that may be developed in
the future. The Fund will invest only in asset-backed securities rated A or
better by Moody's S&P, Fitch, or D&P, or if not rated, of equivalent quality as
determined by the Advisor.

Floating Rate Securities. The Fund may invest in variable or floating rate
securities that adjust the interest rate paid at periodic intervals based on an
interest rate index. Typically floating rate securities use as their benchmark
an index such as the 1, 3 or 6 month LIBOR, 3, 6 or 12 month Treasury bills, or
the Federal Funds rate. Resets of the rates can occur at predetermined intervals
or whenever changes in the benchmark index occur.

<PAGE>

Money Market Instruments. Money market instruments may be purchased for
temporary defensive purposes, to accumulate cash for anticipated purchases of
portfolio securities and to provide for shareholder redemptions and operating
expenses of the Fund. Money market instruments mature in thirteen months or less
from the date of purchase and may include U.S. Government Securities, corporate
debt securities (including those subject to repurchase agreements), bankers
acceptances and certificates of deposit of domestic branches of U.S. banks, and
commercial paper (including variable amount demand master notes) rated in one of
the two highest rating categories by any of the nationally recognized
statistical rating organizations or if not rated, of equivalent quality in the
Advisor's opinion. The Advisor may, when it believes that unusually volatile or
unstable economic and market conditions exist, depart from the Fund's investment
approach and assume temporarily a defensive portfolio posture, increasing the
Fund's percentage investment in money market instruments, even to the extent
that 100% of the Fund's assets may be so invested.

Foreign Securities. The Fund may invest in the securities of foreign private
issuers. The same factors would be considered in selecting foreign securities as
with domestic securities. Foreign securities investment presents special
consideration not typically associated with investment in domestic securities.
Foreign taxes may reduce income. Currency exchange rates and regulations may
cause fluctuations in the value of foreign securities. Foreign securities are
subject to different regulatory environments than in the United States and,
compared to the United States, there may be a lack of uniform accounting,
auditing and financial reporting standards, less volume and liquidity and more
volatility, less public information, and less regulation of foreign issuers.
Countries have been known to expropriate or nationalize assets, and foreign
investments may be subject to political, financial, or social instability, or
adverse diplomatic developments. There may be difficulties in obtaining service
of process on foreign issuers and difficulties in enforcing judgments with
respect to claims under the U.S. Securities laws against such issuers. Favorable
or unfavorable differences between U.S. and foreign economies could affect
foreign securities values. The U.S. Government has, in the past, discouraged
certain foreign investments by U.S. investors through taxation or other
restrictions and it is possible that such restrictions could be imposed again.

Because of the inherent risk of foreign securities over domestic issues, the
Fund will limit foreign investments to those traded domestically as American
Depository Receipts (ADRs). ADRs are receipts issued by a U.S. bank or trust
company evidencing ownership of securities of a foreign issuer. ADRs may be
listed on a national securities exchange or may trade in the over-the-counter
market. The prices of ADRs are denominated in U.S. dollars while the underlying
security may be denominated in a foreign currency. Although the Fund is not
limited in the amount of ADRs it may acquire, it is not presently anticipated
that within the next 12 months the Fund will have in excess of 5% of its assets
in ADRs.

<PAGE>

companies. These costs include management, brokerage, shareholder servicing and
other operational expenses. Shareholders of the Fund would then indirectly pay
higher operational costs than if they owned shares of the underlying investment
companies directly. The Advisor will waive its advisory fee for that portion of
the Fund's assets invested in other investment companies, except when such
purchase is part of a plan of merger, consolidation, reorganization, or
acquisition.

Real Estate Securities. The Fund will not invest in real estate (including real
estate mortgage loans or real estate limited partnerships), but may invest in
certain mortgage-backed securities described above, securities composed of
mortgages against real estate, and readily marketable securities secured by real
estate or interests therein or issued by companies that invest in real estate or
interests therein.

RISK FACTORS

Investment Policies and Techniques. Reference should be made to "Investment
Objective and Policies" above for a description of special risks presented by
the investment policies of the Fund and the specific securities and investment
techniques that may be employed by the Fund, including the risks associated with
mortgage and asset- backed securities, collateralized mortgage obligations,
other mortgage derivative products, repurchase agreements, and foreign
securities. Some of these investment products are commonly known as types of
"derivative" securities, which present certain risks. A more complete discussion
of certain of these securities and investment techniques and their associated
risks is contained in the Statement of Additional Information. The Advisor
intends to control risks, however, by investing at least 90% of the Fund's
portfolio in "high quality" investment grade bonds as described in "Investment
Limitations - Investment Grade Securities" below.

Fluctuations in Value. Because there is risk in any investment, there can be no
assurance that the Fund will meet its investment objective. The fixed income
securities in which the Fund will invest are subject to fluctuation in value.
Such fluctuations may be based on movements in interest rates or from changes in
the creditworthiness of the issuers, which may result from adverse business and
economic developments or proposed corporate transactions, such as a leveraged
buy-out or recapitalization of the issuer. The value of the Fund's fixed income
securities will generally vary inversely with the direction of prevailing
interest rate movements. Should interest rates increase or the creditworthiness
of an issuer deteriorate, the value of the Fund's fixed income securities would
decrease in value, which would have a depressing influence on the Fund's net
asset value. Although certain of the U.S. Government Securities in which the
Fund may invest are guaranteed as to timely payment of principal and interest,
the market value of the securities, upon which the Fund's net asset value is
based, will fluctuate due to the interest rate risks described above.
Additionally, not all U.S. Government Securities are backed by the full faith
and credit of the U.S. Government. Moreover, principal on the mortgages
underlying certain of the Fund's investments may be prepaid in advance of
maturity, which prepayments tend to increase when interest rates decline,
presenting the Fund with more principal to invest at lower rates.

Portfolio Turnover. The Fund sells portfolio securities without regard to the
length of time they have been held in order to take advantage of new investment
opportunities. Nevertheless, the Fund's portfolio turnover generally will not
exceed 75% in any one year. Portfolio turnover generally involves some expense
to the Fund, including brokerage commissions or dealer mark-ups and other
transaction costs on the sale of securities and the reinvestment in other
securities. Portfolio turnover may also have capital gains tax consequences. For
the fiscal years ended March 31, 1995 and 1996, the Fund's turnover ratio was
19.64% and 16.57%, respectively.

Borrowing. The Fund may borrow, temporarily, up to 5% of its total assets for
extraordinary purposes and 33% of its total assets to meet redemption requests
which might otherwise require untimely disposition of portfolio holdings. To the
extent the Fund borrows for these purposes, the effects of market price
fluctuations on portfolio net asset value will be exaggerated. If, while such
borrowing is in effect, the value of the Fund's assets declines, the Fund could
be forced to liquidate portfolio securities when it is disadvantageous to do so.
The Fund would incur interest and other transaction costs in connection with
borrowing. The Fund will borrow only from a bank. The Fund will not make any
investments if the borrowing exceeds 5% of its assets until such time as
repayment has been made to bring the total borrowing below 5% of its assets.

<PAGE>

the settlement date, which risk is in addition to the risk of decline in value
of the Fund's other assets. In addition, no income accrues to the purchaser of
when-issued securities during the period prior to issuance. Although the Fund
would generally purchase securities on a when-issued or forward commitment basis
with the intention of acquiring securities for its portfolio, the Fund may
dispose of a when-issued security or forward commitment prior to settlement if
the Advisor deems it appropriate to do so. The Fund may realize short-term gains
or losses upon such sales.

INVESTMENT LIMITATIONS

Investment Grade Securities. The Fund intends to limit its investment purchases
to high quality investment grade securities. The Fund defines investment grade
securities as obligations which, in the Advisor's opinion, have the
characteristics described by S&P, Fitch, Moody's, D&P or other recognized rating
services in their four highest rating grades. For S&P, Fitch and D&P those
ratings are AAA, AA, A and BBB. For Moody's those ratings are Aaa, Aa, A and
Baa. For a description of each rating grade, see Appendix A to the Statement of
Additional Information. The Fund requires that 90% of its assets must be rated
at least A by Moody's, S&P, Fitch or D&P, or if not rated, of equivalent quality
as determined by the Advisor. There may also be instances in which the Advisor
purchases bonds that are rated A by one rating agency and not rated or rated
lower than A by other rating agencies. The final determination of quality and
value will remain with the Advisor. Bonds rated BBB by D&P, S&P, or Fitch or Baa
by Moody's, although considered investment grade, have speculative
characteristics and may be subject to greater fluctuations in value that
higher-rated bonds. The Fund intends to purchase bonds rated BBB by D&P, S&P or
Fitch, or Baa by Moody's, only if in the Advisor's opinion these bonds have some
potential to improve in value or credit rating, and such purchase would be
within the bounds of the 90% limitation previously stated.

Other Investment Limitations. To limit the Fund's exposure to risk, the Fund has
adopted certain fundamental investment limitations. Some of these restrictions
are that the Fund will not: (1) issue senior securities, borrow money or pledge
its assets, except that it may borrow from banks as a temporary measure (a) for
extraordinary or emergency purposes, in amounts not exceeding 5% of the Fund's
total assets, or (b) in order to meet redemption requests which might otherwise
require untimely disposition of portfolio securities, in amounts not exceeding
33% of the Fund's total assets; and the Fund may pledge its assets to secure all
such borrowings; (2) make loans of money or securities, except that the Fund may
invest in repurchase agreements (but repurchase agreements having a maturity of
longer than seven days are limited to 10% of the Fund's net assets); (3) invest
in securities of issuers which have a record of less than three years'
continuous operation (including predecessors and, in the case of bonds,
guarantors), if more than 5% of its total assets would be invested in such
securities; (4) purchase foreign securities, except that the Fund may purchase
foreign securities sold as American Depository Receipts without limit; (5)
write, purchase or sell puts, calls, warrants or combinations thereof, or
purchase or sell commodities, commodities contracts, futures contracts or
related options, or invest in oil, gas or mineral leases or exploration
programs, or real estate (except the Fund may invest in certain mortgage-backed
securities described above, securities composed of mortgages against real
estate, and securities that themselves have investment in real estate or
interests in real estate); (6) invest more than 5% of its assets in the
securities of any one issuer or hold more than 10% of the voting stock of any
issuer; and (7) invest in securities other than securities which are readily
marketable. See "Investment Limitations" in the Fund's Statement of Additional
Information for a complete list of investment limitations.

FEDERAL INCOME TAXES

<PAGE>

Fund, intends to qualify or remain qualified as a regulated investment company
under the Code by distributing substantially all of its "net investment income"
to shareholders and meeting other requirements of the Code. For the purpose of
calculating dividends, net investment income consists of income accrued on
portfolio assets, less accrued expenses. Upon qualification, the Fund will not
be liable for federal income taxes to the extent earnings are distributed. The
Board of Trustees retains the right for any series of the Trust, including the
Fund, to determine for any particular year if it is advantageous not to qualify
as a regulated investment company. Regulated investment companies, such as each
series of the Trust, including the Fund, are subject to a non-deductible 4%
excise tax to the extent they do not distribute the statutorily required amount
of investment income, determined on a calendar year basis, and capital gain net
income, using an October 31 year end measuring period. The Fund intends to
declare or distribute dividends during the calendar year in an amount sufficient
to prevent imposition of the 4% excise tax.

DIVIDENDS AND DISTRIBUTIONS

The Fund intends to distribute substantially all of its net investment income,
if any, in the form of dividends. The Fund will generally pay income dividends,
if any, monthly, and will generally distribute net realized capital gains, if
any, at least annually.

Unless a shareholder elects to receive cash, dividends and capital gains will be
automatically reinvested in additional full and fractional shares of the same
Class of the Fund at the net asset value per share next determined. Shareholders
wishing to receive their dividends or capital gains in cash may make their
request in writing to the Fund at 105 North Washington Street, Post Office
Drawer 69, Rocky Mount, North Carolina 27802-0069. That request must be received
by the Fund prior to the record date to be effective as to the next dividend. If
cash payment is requested, checks will be mailed within five business days after
the last day of each month or the Fund's fiscal year end, as applicable. Each
shareholder of the Fund will receive a monthly summary of his or her account,
including information as to reinvested dividends from the Fund. Tax consequences
to shareholders of dividends and distributions are the same if received in cash
or in additional shares of the Fund.

<PAGE>

HOW SHARES ARE VALUED

Net asset value for each Class of Shares of the Fund is determined at 4:00 p.m.,
New York time, Monday through Friday, except on business holidays when the New
York Stock Exchange is closed. The net asset value of the shares of the Fund for
purposes of pricing sales and redemptions is equal to the total market value of
its investments, less all of its liabilities, divided by the number of its
outstanding shares. Net asset value is determined separately for each Class of
Shares of the Fund and reflects any liabilities allocated to a particular Class
as well as the general liabilities of the Fund.

Fixed income securities will ordinarily be traded on the over-the-counter
market. When market quotations are not readily available, fixed income
securities may be valued based on prices provided by a pricing service. The
prices provided by the pricing service are generally determined with
consideration given to institutional bid and last sale prices and take into
account securities prices, yields, maturities, call features, ratings,
institutional trading in similar groups of securities, and developments related
to specific securities. Such fixed income securities may also be priced based
upon a matrix system of pricing similar bonds and other fixed income securities.
Such matrix system may be based upon the considerations described above used by
other pricing services, including particularly the spread between yields on the
securities being valued and yields on U.S. Treasury securities with similar
remaining years to maturity, and information obtained by the pricing agent from
the Advisor and other pricing sources deemed relevant by the pricing agent.

HOW SHARES MAY BE PURCHASED

The minimum initial investment is $50,000. The minimum subsequent investment is
$1,000. The Fund may, in the Advisor's sole discretion, accept certain accounts
with less than the stated minimum initial investment. You may invest in the
following ways:

Purchases by Mail. Shares may be purchased initially by completing the
application accompanying this Prospectus and mailing it, together with a check
payable to the Fund, to the Investek Fixed Income Trust, Institutional Shares,
105 North Washington Street, Post Office Drawer 69, Rocky Mount, North Carolina
27802-0069. Subsequent investments in an existing account in the Fund may be
made at any time by sending a check payable to the Fund, to the address stated
above. Please enclose the stub of your account statement and include the amount
of the investment, the name of the account for which the investment is to be
made and the account number. Please remember to add a reference to
"Institutional Shares" to your check to ensure proper credit to your account.

<PAGE>

Wachovia Bank of North Carolina, N.A.
Winston-Salem, North Carolina
ABA # 053100494
For credit to the Rocky Mount Office
For the Investek Fixed Income Trust
Institutional Shares
Acct #
For further credit to (shareholder's name and SS# or EIN#)

If checks are returned unpaid due to nonsufficient funds, stop payment or other
reasons, the Trust will charge $20. To recover any such loss or charge, the
Trust reserves the right, without further notice, to redeem shares of any fund
of the Trust already owned by any purchaser whose order is canceled, and such a
purchaser may be prohibited from placing further orders unless investments are
accompanied by full payment by wire or cashier's check.

Distributor. Capital Investment Group, Inc., Post Office Box 32249, Raleigh,
North Carolina 27622 (the "Distributor"), is the national distributor for the
Fund under a Distribution Agreement with the Trust. The Distributor may sell
Fund shares to or through qualified securities dealers or others. Richard K.
Bryant, a Trustee of the Trust and an officer of another series of the Trust,
and Elmer O. Edgerton, Jr., an officer of another series of the Trust, control
the Distributor. Messrs Bryant and Edgerton are not officers of the Fund.

<PAGE>

for their employees, seminars for the public, advertising campaigns regarding
the Fund, and/or other dealer-sponsored special events. In some instances, this
compensation may be made available only to certain dealers whose representatives
have sold or are expected to sell a significant amount of such shares.
Compensation may include payment for travel expenses, including lodging,
incurred in connection with trips taken by invited registered representatives
and members of their families to locations within or outside of the United
States for meetings or seminars of a business nature. Dealers may not use sales
of the Fund shares to qualify for this compensation to the extent such may be
prohibited by the laws of any state or any self-regulatory agency, such as the
National Association of Securities Dealers, Inc. None of the aforementioned
compensation is paid for by the Fund or its shareholders.

Stock Certificates. Stock certificates will not be issued for your shares.
Evidence of ownership will be given by issuance of periodic account statements
that will show the number of shares owned.

HOW SHARES MAY BE REDEEMED

<PAGE>

redemption proceeds). You may also redeem your shares through a broker-dealer or
other institution, who may charge you a fee for its services.

Redemptions from retirement plans may be subject to tax withholding. If you are
uncertain of the requirements for redemption, please contact the Fund, at
1-800-525-FUND, or write to the address shown below.

Regular Mail Redemptions. Your request should be addressed to the Investek Fixed
Income Trust, Institutional Shares, 105 North Washington Street, Post Office
Drawer 69, Rocky Mount, North Carolina 27802-0069. Your request for redemption
must include:

2) Any required signature guarantees (see "Signature Guarantees" below); and

3) Other supporting legal documents, if required in the case of estates,
trusts, guardianships, custodianships, corporations, partnerships, pension
or profit sharing plans, and other organizations.

The Fund may rely upon confirmation of redemption requests transmitted via
facsimile (FAX# 919-972-1908). The confirmation instructions must include:

1) Shareholder name, account number and designation of Class (Institutional);

2) Number of shares or dollar amount to be redeemed;

3) Instructions for transmittal of redemption funds to the shareholder; and

4) Shareholder signature as it appears on the application then on file with the
Fund.

The net asset value used in processing the redemption will be the net asset
value next determined after the telephone request is received. Redemption
proceeds will not be distributed until written confirmation of the redemption
request is received, per the instructions above. You can choose to have
redemption proceeds mailed to you at your address of record, your bank, or to
any other authorized person, or you can have the proceeds sent by bank wire to
your bank ($5,000 minimum). Shares of the Fund may not be redeemed by wire on
days in which your bank or the Fund's Custodian is not open for business. You
can change your redemption instructions anytime you wish by filing a letter
including your new redemption instructions with the Fund. (See "Signature
Guarantees" below.) The Fund reserves the right to restrict or cancel telephone
and bank wire redemption privileges for shareholders, without notice, if the
Fund believes it to be in the best interest of the shareholders to do so. During
drastic economic and market changes, telephone redemption privileges may be
difficult to implement.

<PAGE>

currently on file with the Fund. Telephone redemption privileges authorize the
Fund to act on telephone instructions from any person representing himself or
herself to be the investor and reasonably believed by the Fund to be genuine.
The Fund will employ reasonable procedures, such as requiring a form of personal
identification, to confirm that instructions are genuine, and, if it does not
follow such procedures, the Fund will be liable for any losses due to fraudulent
or unauthorized instructions. The Fund will not be liable for following
telephone instructions reasonably believed to be genuine.

Systematic Withdrawal Plan. A shareholder who owns shares of the Fund valued at
$30,000 or more at current net asset value may establish a Systematic Withdrawal
Plan to receive a monthly or quarterly check in a stated amount not less than
$100. Each month or quarter as specified, the Fund will automatically redeem
sufficient shares from your account to meet the specified withdrawal amount.
Call or write the Fund for an application form. See the Statement of Additional
Information for further details.

MANAGEMENT OF THE FUND

The Advisor. Subject to the authority of the Board of Trustees, Investek 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, pursuant to an Investment
Advisory Agreement (the "Advisory Agreement") with the Trust.

The Advisor is registered under the Investment Advisors Act of 1940.
Registration of the Advisor does not involve any supervision of management or
investment practices or policies by the Securities and Exchange Commission. The
Advisor, established as a Mississippi corporation in 1989, is controlled by
Michael T. McRee. The Advisor currently serves as investment advisor to over
$1.75 billion in assets. The Advisor has been rendering investment counsel,
utilizing investment strategies substantially similar to that of the Fund, to
individuals, banks and thrift institutions, pension and profit sharing plans,
trusts, estates, charitable organizations and corporations since its formation.
The Advisor's address is 317 East Capitol Street, Post Office Box 2840, Jackson,
Mississippi 39207.

Under the Advisory Agreement with the Fund, the Advisor receives a monthly
management fee equal to an annual rate of 0.45% of the average daily net asset
value of the Fund. The Advisor may periodically voluntarily waive or reduce its
advisory fee to increase the net income of the Fund. The Advisor voluntarily
waived a portion of its advisory fee for the fiscal year ended March 31, 1996.
Of the $63,557 the Advisor was entitled to receive, the Advisor voluntarily
waived $29,700 of its investment advisory fees. The Advisor received $33,857 of
such advisory fee for the year (0.24% of average net assets).

<PAGE>

in selecting a broker. The Advisor may also utilize a brokerage firm affiliated
with the Trust or the Advisor if it believes it can obtain the best execution of
transactions from such broker. Research services obtained through Fund brokerage
transactions may be used by the Advisor for its other clients and, conversely,
the Fund may benefit from research services obtained through the brokerage
transactions of the Advisor's other clients. For further information, see
"Investment Objective and Policies - Investment Transactions" in the Statement
of Additional Information.

Michael T. McRee, a principal and controlling shareholder of the Advisor and
executive officer of the Fund, and Timothy L. Ellis, a principal of the Advisor
and executive officer of the Fund, have been responsible for day-to-day
management of the Fund's portfolio since its inception in 1991. They have been
with the Advisor since its inception.

The Administrator. The Trust has entered into an Administration Agreement with
The Nottingham Company (the "Administrator"), 105 North Washington Street, Post
Office Drawer 69, Rocky Mount, North Carolina 27802-0069, pursuant to which the
Administrator receives a fee at the annual rate of 0.15% of the average daily
net assets of the Fund. In addition, the Administrator currently receives a base
monthly fee of $1,750 for accounting and recordkeeping services for the Fund and
$750 for each Class of shares beyond the initial Class of shares of the Fund.
The Administrator also charges the Fund for certain costs involved with the
daily valuation of investment securities and is reimbursed for out-of-pocket
expenses. The Administrator charges a minimum fee of $3,000 per month for all of
its fees taken in the aggregate, analyzed monthly.

The Administrator was incorporated as a North Carolina corporation in 1988 and
converted to a North Carolina limited liability company in 1995. Together with
its affiliates and predecessors, the Administrator has been operating as a
financial services firm since 1985. Frank P. Meadows III, Chairman, Trustee and
Treasurer of the Trust, is the firm's Managing Director and controlling member.

The Custodian, Transfer Agent and Fund Accounting/Pricing Agent. Trustmark
National Bank (the "Custodian"), Post Office Box 291, Jackson, Mississippi
39205-0291, serves as Custodian of the Fund's assets. The Custodian acts as the
depository for the Fund, safekeeps its portfolio securities, collects all income
and other payments with respect to portfolio securities, disburses monies at the
Fund's request and maintains records in connection with its duties.

The Administrator also performs certain accounting and pricing services for the
Fund as pricing agent, including the daily calculation of the Fund's net asset
value.

<PAGE>

OTHER INFORMATION

THIS PROSPECTUS RELATES TO THE FUND'S INSTITUTIONAL SHARES AND DESCRIBES ONLY
THE POLICIES, OPERATIONS, CONTRACTS, AND OTHER MATTERS PERTAINING TO THE
INSTITUTIONAL SALES. THE FUND ALSO ISSUES A CLASS OF INVESTOR SHARES. SUCH OTHER
CLASS MAY HAVE DIFFERENT SALES CHARGES AND EXPENSES, WHICH MAY AFFECT
PERFORMANCE. INVESTORS MAY CALL THE FUND AT 1-800-525-3863 TO OBTAIN MORE
INFORMATION CONCERNING OTHER CLASSES AVAILABLE TO THEM THROUGH THEIR SALES
REPRESENTATIVE. INVESTORS MAY OBTAIN INFORMATION CONCERNING THOSE CLASSES FROM
THEIR SALES REPRESENTATIVE, THE DISTRIBUTOR, THE FUND, OR ANY OTHER PERSON WHICH
IS OFFERING OR MAKING AVAILABLE TO THEM THE SECURITIES OFFERED IN THIS
PROSPECTUS.

Reporting to Shareholders. The Fund will send to its shareholders Annual and
Semi-Annual Reports; the financial statements appearing in Annual Reports for
the Fund will be audited by independent accountants. In addition, the
Administrator, as transfer agent, will send to each shareholder having an
account directly with the Fund a statement not less than quarterly showing
transactions in the account, the total number of shares owned and any dividends
or distributions paid. Inquiries regarding the Fund may be directed in writing
to 105 North Washington Street, Post Office Drawer 69, Rocky Mount, North
Carolina 27802-0069 or by calling 1-800-525-FUND.

<PAGE>

Calculation of Performance Data. From time to time the Fund may advertise its
average annual total return and yield for each Class of Shares. The "average
annual total return" refers to the average annual compounded rates of return
over 1, 5 and 10 year periods that would equate an initial amount invested at
the beginning of a stated period to the ending redeemable value of the
investment. The calculation assumes the reinvestment of all dividends and
distributions, includes all recurring fees that are charged to all shareholder
accounts and deducts all nonrecurring charges at the end of each period. The
calculation further assumes the maximum sales load is deducted from the initial
payment. If the Fund has been operating less than 1, 5 or 10 years, the time
period during which the Fund has been operating is substituted.

The "yield" of the Fund is computed by dividing the net investment income per
share earned during the most recent practicable period stated in the
advertisement by the maximum offering price per share on the last day of the
period (using the average number of shares entitled to receive dividends). For
the purpose of determining net investment income, the calculation includes among
expenses of the Fund all recurring fees that are charged to all shareholder
accounts and any nonrecurring charges for the period stated.

The total return and yield of the Fund could be increased to the extent the
Advisor may waive all or a portion of its fees or may reimburse all or a portion
of the Fund's expenses. Total return and yield figures are based on the
historical performance of the Fund, show the performance of a hypothetical
investment, and are not intended to indicate future performance. The Fund's
quotations may from time to time be used in advertisements, sales literature,
shareholder reports, or other communications. For further information, see
"Additional Information on Performance" in the Statement of Additional
Information.

<PAGE>

INVESTEK FIXED INCOME TRUST INVESTEK FIXED INCOME TRUST
105 North Washington Street
Post Office Drawer 69 INSTITUTIONAL CLASS
Rocky Mount, North Carolina 27802-0069
1-800-525-FUND PROSPECTUS

INVESTMENT ADVISOR August 1, 1996
Investek Capital Management, Inc.
317 East Capitol Street
Post Office Box 2840
Jackson, Mississippi 39207

ADMINISTRATOR, FUND ACCOUNTANT, AND
DIVIDEND DISBURSING & TRANSFER AGENT
The Nottingham Company
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069

DISTRIBUTOR
Capital Investment Group, Inc.
Post Office Box 32249
Raleigh, North Carolina 27622

CUSTODIAN
Trustmark National Bank
Post Office Box 291
Jackson, Mississippi 39205-0291

INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
1021 East Cary Street, Suite 1900
Richmond, Virginia 23219-4023

<PAGE>

PROSPECTUS

INVESTEK FIXED INCOME TRUST
INVESTOR CLASS

The investment objective of the Investek Fixed Income Trust (the "Fund") is to
preserve capital and maximize total returns through active management of
investment grade fixed income securities. The Fund is designed primarily for
institutional investors and high net worth individuals who wish to take
advantage of the professional investment management expertise of Investek
Capital Management, Inc. (the "Advisor"), which serves as investment advisor to
the Fund. While there is no assurance that the Fund will achieve its investment
objective, it endeavors to do so by following the investment policies described
in this Prospectus. The Fund has a net asset value that will fluctuate in
accordance with the value of its portfolio securities. This Prospectus relates
to shares ("Investor Shares") representing interests in the Fund. The Investor
Shares are offered to the general public. See "Prospectus Summary - Offering
Price."

INVESTMENT ADVISOR

logo placed here

317 East Capitol Street, Post Office Box 2840
Jackson, Mississippi 39207
(601) 949-3105

The Fund is a diversified series of The Nottingham Investment Trust II (the
"Trust"), a registered open-end management investment company. This Prospectus
sets forth concisely the information about the Fund that a prospective investor
should know before investing. Investors should read this Prospectus and retain
it for future reference. Additional information about the Fund has been filed
with the Securities and Exchange Commission and is available upon request and
without charge. You may request the Statement of Additional Information dated
August 1, 1996, as amended from time to time, which is incorporated in this
Prospectus by reference, by writing the Fund at Post Office Drawer 69, Rocky
Mount, North Carolina 27802-0069, or by calling 1-800-525-FUND.

The date of this Prospectus is August 1, 1996.

<PAGE>

TABLE OF CONTENTS

PROSPECTUS SUMMARY...................................................... 2

SYNOPSIS OF COSTS AND EXPENSES.......................................... 2

FINANCIAL HIGHLIGHTS.................................................... 3

INVESTMENT OBJECTIVE AND POLICIES....................................... 4

RISK FACTORS............................................................ 8

INVESTMENT LIMITATIONS................................................... 9

FEDERAL INCOME TAXES.................................................... 10

DIVIDENDS AND DISTRIBUTIONS............................................. 10

HOW SHARES ARE VALUED................................................... 11

HOW SHARES MAY BE PURCHASED............................................. 11

HOW SHARES MAY BE REDEEMED.............................................. 13

MANAGEMENT OF THE FUND.................................................. 15

OTHER INFORMATION....................................................... 17

<PAGE>

PROSPECTUS SUMMARY
<TABLE>
<S> <C>
The Fund The Investek Fixed Income Trust (the "Fund") is a diversified series of The Nottingham
Investment Trust II (the "Trust"), a registered open-end management investment company
organized as a Massachusetts business trust. This Prospectus relates to Investor Shares of the
Fund. See "Other Information - Description of Shares."

Offering Price The Investor Shares are offered to the general public at net asset value plus a 3.5% sales
charge, which is reduced on purchases involving larger amounts. The Investor Shares are also
subject to a 12b-1 distribution fee of up to 0.25% of the Investor Shares' average net assets
annually. See "Distributor and Distribution Fee" below. The minimum initial investment is
$5,000. The minimum subsequent investment is $500. See "How Shares May be Purchased."

Investment The investment objective of the Fund is to preserve capital and maximize total
Objective and returns through active management of investment grade fixed income securities.
Policies The Advisor does not engage in "market timing." To the extent practicable, the
Fund generally will remain fully invested in fixed income securities. The Fund
intends to invest generally in investment grade bonds to maintain a portfolio
duration between 2 and 7 years, which is currently approximately equivalent to a
3 to 12 year effective maturity. Due to its duration and high quality standards,
the Fund expects its portfolio to exhibit less volatility than would longer
duration and lower quality portfolios. In addition, the Fund intends to
concentrate its investments in "high quality" investment grade bonds by
maintaining at least 90% of the portfolio in bonds rated A or better as
described in "Investment Limitations - Investment Grade Securities" below (or if
not rated, of equivalent quality as determined by the Advisor). See "Investment
Objective and Policies." The Fund is not intended to be a complete investment
program, and there can be no assurance that the Fund will achieve its investment
objective.

Special Risk While the Fund will invest primarily in "high quality" investment grade bonds,
Considerations some of the Fund's investments may include mortgage and asset-backed securities,
collateralized mortgage obligations, other mortgage derivative products, foreign
securities, and securities purchased subject to a repurchase agreement or on a
"when-issued" basis, which involve certain risks. The Fund may borrow only under
certain limited conditions (including to meet redemption requests) and not to
purchase securities. It is not the intent of the Fund to borrow except for
temporary cash requirements. Borrowing, if done, would tend to exaggerate the
effects of market and interest rate fluctuations on the Fund's net asset value
until repaid. See "Risk Factors."

Manager Subject to the general supervision of the Trust's Board of Trustees and in
accordance with the Fund's investment policies, Investek Capital Management,
Inc. of Jackson, Mississippi (the "Advisor"), manages the Fund's investments.
The Advisor currently manage over $1.75 billion in assets. For its advisory
services, the Advisor receives a monthly fee based on the Fund's daily net
assets at the annual rate of 0.45%. See "Management of the Fund - The Advisor."

Dividends Income dividends, if any, are generally paid monthly; capital gains, if any, are
generally distributed at least once each year. Dividends and capital gains
distributions are automatically reinvested in additional shares of the same
Class at net asset value unless the shareholder elects to receive cash. See
"Dividends and Distributions."

Distributor and Capital Investment Group, Inc. (the "Distributor") serves as distributor of
Distribution Fee shares of the Fund. For its services, which include payments to qualified
securities dealers for sales of Fund shares, the Distributor receives
commissions consisting of the portion of the sales charge remaining after the
discounts it allows to securities dealers. Under the Fund's Distribution Plan
with respect to the Investor Shares, expenditures by the Fund for distribution
activities and service fees may not exceed 0.25% of the Investor Shares' average
net assets annually. See "How Shares May Be Purchased - Sales Charges" and "-
Distribution Plan."

SYNOPSIS OF COSTS AND EXPENSES

Shareholder Transaction Expenses for Investor Shares

Maximum sales load imposed on purchases

(as a percentage of offering price)...........................3.50%(1)
Maximum sales charge imposed on reinvested dividends..............None
Deferred sales load...............................................None
Redemption fees*..................................................None
Exchange fee......................................................None

*The Fund imposes a $10 charge for wiring redemption proceeds.

Annual Fund Operating Expenses for Investor Shares - After Fee Waivers(2)
(as a percentage of average net assets)

Investment advisory fees......................................0.24% (2)
12b-1 fees....................................................0.25% (3)
Other expenses................................................0.63% (2)
-----
Total operating expenses...................................1.12% (2)
======

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
$46 $69 $95 $167

THE FOREGOING SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN.

1 Reduced for larger purchases. See "How Shares May Be Purchased - Sales
Charges."

2 The "Total operating expenses" shown above are based upon actual operating
expenses incurred by the Institutional Shares of the Fund for the fiscal
year ended March 31, 1996, which, after fee waivers, were 0.87% of average
daily net assets of the Institutional Shares, but restated to reflect the
expenses anticipated to be incurred by the Investor Shares of the Fund for
the current fiscal year (assuming payment of the distribution and service
fees described under footnote 3 below). Absent such waivers, the
percentages would have been 0.45% for "Investment advisory fees" and 1.08%
for "Total operating expenses" for the Institutional Shares for the fiscal
year ended March 31, 1996. The Institutional Shares do not bear potential
distribution and service fees described under footnote 3 below, which the
Investor Shares may bear. Since the Investor Shares were not offered prior
to the date of this Prospectus, the actual operating expenses incurred by
the Institutional Shares of the Fund for the fiscal year ended March 31,
1996 have been used for illustration purposes, subject to restatement as
provided above. The Advisor intends to use its best efforts to maintain
"Total operating expenses" at 1.15% of the Investor Shares' average daily
net assets. The Advisor has voluntarily agreed to a reduction in the fees
payable to it and to reimburse expenses of the Fund, if necessary, in an
amount that limits "Total operating expenses" (exclusive of interest,
taxes, brokerage fees and commissions, sales charges, and extraordinary
expenses) to not more than 1.15% of the Investor Shares' average daily net
assets. There can be no assurance that the Advisor's voluntary fee waivers
and expense reimbursements will continue in the future.

<PAGE>

3 The Fund has adopted a Distribution Plan pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended (the "1940 Act"), which provides
that the Fund may pay certain distribution expenses and service fees with
respect to the Investor Shares up to 0.25% of the Investor Shares' average
net assets annually. See "How Shares May Be Purchased - Distribution Plan."
Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charge permitted by the National Association of
Securities Dealers.

FINANCIAL HIGHLIGHTS

Pursuant to a plan approved by the Board of Trustees of the Trust, the existing
single Class of shares of the Fund was redesignated the "Institutional Shares"
of the Fund and a new Class of shares, the "Investor Shares," was created. This
Prospectus relates to Investor Shares of the Fund. See "Other Information
- -Description of Shares." Since the public offering of Investor Shares of the
Fund had not commenced during the fiscal periods covered by the Fund's financial
statements and related Financial Highlights pertaining to Institutional Shares
of the Fund, no financial statements or related Financial Highlights are
available pertaining to the Investor Shares of the Fund. Further information
about the performance of the Fund is contained in the Annual Report of the Fund,
a copy of which may be obtained at no charge by calling the Fund.

INVESTMENT OBJECTIVE AND POLICIES

Investment Objective. The investment objective of the Fund is to preserve
capital and maximize total returns through a portfolio of investment grade fixed
income securities. While there is no guarantee that the Fund will meet its
investment objective, it seeks to achieve its objective through the investment
policies and techniques described in this Prospectus. The Fund's investment
objective and fundamental investment limitations described herein may not be
altered without the prior approval of a majority of the Fund's shareholders.

<PAGE>

Corporate Bonds. The Fund's investments in corporate debt securities will be
based on credit analysis and value determination by the Advisor. The Advisor's
selection of bonds or industries within the corporate bond sector is determined
by, among other factors, historical yield relationships between bonds or
industries, the current and anticipated credit of the borrower, and call
features as well as supply and demand factors. All corporate securities will be
of investment grade quality as determined by Moody's Investors Service, Inc.
("Moodys"), Standard & Poor's Ratings Group ("S&P"), Fitch Investors Service,
Inc. ("Fitch"), or Duff & Phelps ("D&P"), or if no rating exists, of equivalent
quality in the determination of the Advisor. In addition, the Fund intends to
maintain at least 90% of its assets in bonds rated A or better (or if not rated,
of equivalent quality as determined by the Advisor). This limitation is
described in greater detail in "Investment Limitations - Investment Grade
Securities." The Advisor will monitor continuously the ratings of securities
held by the Fund and the creditworthiness of their issuers. For a more complete
description of the various bond ratings for Moody's, S&P, Fitch and D&P, see
Appendix A to the Statement of Additional Information.

<PAGE>

volatility, less public information, and less regulation of foreign issuers.
Countries have been known to expropriate or nationalize assets, and foreign
investments may be subject to political, financial, or social instability, or
adverse diplomatic developments. There may be difficulties in obtaining service
of process on foreign issuers and difficulties in enforcing judgments with
respect to claims under the U.S. Securities laws against such issuers. Favorable
or unfavorable differences between U.S. and foreign economies could affect
foreign securities values. The U.S. Government has, in the past, discouraged
certain foreign investments by U.S. investors through taxation or other
restrictions and it is possible that such restrictions could be imposed again.

RISK FACTORS

<PAGE>

the market value of the securities, upon which the Fund's net asset value is
based, will fluctuate due to the interest rate risks described above.
Additionally, not all U.S. Government Securities are backed by the full faith
and credit of the U.S. Government. Moreover, principal on the mortgages
underlying certain of the Fund's investments may be prepaid in advance of
maturity, which prepayments tend to increase when interest rates decline,
presenting the Fund with more principal to invest at lower rates.

Portfolio Turnover. The Fund sells portfolio securities without regard to the
length of time they have been held in order to take advantage of new investment
opportunities. Nevertheless, the Fund's portfolio turnover generally will not
exceed 75% in any one year. Portfolio turnover generally involves some expense
to the Fund, including brokerage commissions or dealer mark-ups and other
transaction costs on the sale of securities and the reinvestment in other
securities. Portfolio turnover may also have capital gains tax consequences. For
the fiscal years ended March 31, 1995 and 1996, the Fund's turnover ratio was
19.64% and 16.57%, respectively.

INVESTMENT LIMITATIONS

<PAGE>

which have a record of less than three years' continuous operation (including
predecessors and, in the case of bonds, guarantors), if more than 5% of its
total assets would be invested in such securities; (4) purchase foreign
securities, except that the Fund may purchase foreign securities sold as
American Depository Receipts without limit; (5) write, purchase or sell puts,
calls, warrants or combinations thereof, or purchase or sell commodities,
commodities contracts, futures contracts or related options, or invest in oil,
gas or mineral leases or exploration programs, or real estate (except the Fund
may invest in certain mortgage-backed securities described above, securities
composed of mortgages against real estate, and securities that themselves have
investment in real estate or interests in real estate); (6) invest more than 5%
of its assets in the securities of any one issuer or hold more than 10% of the
voting stock of any issuer; and (7) invest in securities other than securities
which are readily marketable. See "Investment Limitations" in the Fund's
Statement of Additional Information for a complete list of investment
limitations.

FEDERAL INCOME TAXES

<PAGE>

subject to state and local taxes. Shareholders should consult their tax advisors
regarding specific questions as to federal, state or local taxes.

DIVIDENDS AND DISTRIBUTIONS

Unless a shareholder elects to receive cash, dividends and capital gains will be
automatically reinvested in additional full and fractional shares of the same
Class of the Fund at the net asset value per share next determined. Reinvested
dividends and capital gains are exempt from any sales load. Shareholders wishing
to receive their dividends or capital gains in cash may make their request in
writing to the Fund at 105 North Washington Street, Post Office Drawer 69, Rocky
Mount, North Carolina 27802-0069. That request must be received by the Fund
prior to the record date to be effective as to the next dividend. If cash
payment is requested, checks will be mailed within five business days after the
last day of each month or the Fund's fiscal year end, as applicable. Each
shareholder of the Fund will receive a monthly summary of his or her account,
including information as to reinvested dividends from the Fund. Tax consequences
to shareholders of dividends and distributions are the same if received in cash
or in additional shares of the Fund.

There is no fixed dividend rate, and there can be no assurance as to the payment
of any dividends or the realization of any gains. The Fund's net investment
income available for distribution to holders of Investor Shares will be reduced
by the amount of any expenses allocated to the Investor Shares, including the
distribution and service fees under the Fund's Distribution Plan.

HOW SHARES ARE VALUED

<PAGE>

prices and take into account securities prices, yields, maturities, call
features, ratings, institutional trading in similar groups of securities, and
developments related to specific securities. Such fixed income securities may
also be priced based upon a matrix system of pricing similar bonds and other
fixed income securities. Such matrix system may be based upon the considerations
described above used by other pricing services, including particularly the
spread between yields on the securities being valued and yields on U.S. Treasury
securities with similar remaining years to maturity, and information obtained by
the pricing agent from the Advisor and other pricing sources deemed relevant by
the pricing agent.

HOW SHARES MAY BE PURCHASED

Assistance in opening accounts and a purchase application may be obtained from
the Fund by calling 1-800-525- FUND, or by writing to the Fund at the address
shown below for purchases by mail. Assistance is also available through any
broker-dealer authorized to sell shares in the Fund. Payment for shares
purchased may also be made through your account at the broker-dealer processing
your application and order to purchase. Your investment will purchase shares at
the Fund's public offering price next determined after your order is received by
the Fund in proper form as indicated herein.

The minimum initial investment is $5,000. The minimum subsequent investment is
$500. The Fund may, in the Advisor's sole discretion, accept certain accounts
with less than the stated minimum initial investment. You may invest in the
following ways:

Purchases by Mail. Shares may be purchased initially by completing the
application accompanying this Prospectus and mailing it, together with a check
payable to the Fund, to the Investek Fixed Income Trust, Investor Shares, 105
North Washington Street, Post Office Drawer 69, Rocky Mount, North Carolina
27802-0069. Subsequent investments in an existing account in the Fund may be
made at any time by sending a check payable to the Fund, to the address stated
above. Please enclose the stub of your account statement and include the amount
of the investment, the name of the account for which the investment is to be
made and the account number. Please remember to add a reference to "Investor
Shares" to your check to ensure proper credit to your account.

Wachovia Bank of North Carolina, N.A.
Winston-Salem, North Carolina
ABA # 053100494
For credit to the Rocky Mount Office
For the Investek Fixed Income Trust
Investor Shares
Acct #
For further credit to (shareholder's name and SS# or EIN#)

General. All purchases of shares are subject to acceptance and are not binding
until accepted. The Fund reserves the right to reject any application or
investment. Orders become effective, and shares are purchased at, the next
determined public offering price per share after an investment has been received
by the Fund, which is as of 4:00 p.m., New York time, Monday through Friday,
exclusive of business holidays. Orders received by the Fund and effective prior
to such 4:00 p.m. time will purchase shares at the public offering price
determined at that time. Otherwise, your order will purchase shares as of such
4:00 p.m. time on the next business day. For orders placed through a qualified
broker-dealer, such firm is responsible for promptly transmitting purchase
orders to the Fund.

<PAGE>

fund of the Trust already owned by any purchaser whose order is canceled, and
such a purchaser may be prohibited from placing further orders unless
investments are accompanied by full payment by wire or cashier's check.

Less than $100,000................... 3.63% 3.50% 3.25%
$100,000 but less than $250,000...... 3.09% 3.00% 2.75%
$250,000 but less than $500,000...... 2.56% 2.50% 2.25%
$500,000 but less than $1,000,000.... 2.04% 2.00% 1.75%
Greater than $1,000,000.............. 1.01% 1.00% 0.75%

Reduced Sales Charges

<PAGE>

series of the Trust affiliated with the Advisor and sold with a sales charge at
the total public offering price of $50,000, and Investor Shares in the Fund at
the total public offering price of $50,000, the sales charge would be that
applicable to a $100,000 purchase as shown in the appropriate table above. This
privilege may be modified or eliminated at any time or from time to time by the
Trust without notice thereof.

Reinvestments. Investors may reinvest, without a sales charge, proceeds
from a redemption of Investor Shares of the Fund in Investor Shares of the Fund
or in shares of another series of the Trust affiliated with the Advisor and sold
with a sales charge, within 90 days after the redemption. If the other class
charges a sales charge higher than the sales charge the investor paid in
connection with the shares redeemed, the investor must pay the difference. In
addition, the shares of the class to be acquired must be registered for sale in
the investor's state of residence. The amount that may be so reinvested may not
exceed the amount of the redemption proceeds, and a written order for the
purchase of such shares must be received by the Fund or the Distributor within
90 days after the effective date of the redemption.

<PAGE>

Sales at Net Asset Value. The Fund may sell shares at a purchase price
equal to the net asset value of such shares, without a sales charge, to
Trustees, officers, and employees of the Trust, the Fund, and the Advisor, and
to employees and principals of related organizations and their families and
certain parties related thereto, including clients and related accounts of the
Advisor and other investment advisors registered under the Investment Advisors
Act of 1940. The public offering price of shares of the Fund may also be reduced
to net asset value per share in connection with the acquisition of the assets of
or merger or consolidation with a personal holding company or a public or
private investment company.

Distribution Plan. Capital Investment Group, Inc., Post Office Box 32249,
Raleigh, North Carolina 27622 (the "Distributor"), is the national distributor
for the Fund under a Distribution Agreement with the Trust. The Distributor may
sell Fund shares to or through qualified securities dealers or others. Richard
K. Bryant, a Trustee of the Trust and an officer of another series of the Trust,
and Elmer O. Edgerton, Jr., an officer of another series of the Trust, control
the Distributor. Messrs Bryant and Edgerton are not officers of the Fund.

The Trust has adopted a Distribution Plan (the "Plan") for the Investor Shares
of the Fund pursuant to Rule 12b-1 under the 1940 Act. Under the Plan the Fund
may reimburse any expenditures to finance any activity primarily intended to
result in sale of the Investor Shares of the Fund or the servicing of
shareholder accounts, including, but not limited to, the following: (i) payments
to the Distributor, securities dealers, and others for the sale of Investor
Shares of the Fund; (ii) payment of compensation to and expenses of personnel
who engage in or support distribution of Investor Shares of the Fund or who
render shareholder support services not otherwise provided by the Administrator
or Custodian; and (iii) formulation and implementation of marketing and
promotional activities. The categories of expenses for which reimbursement is
made are approved by the Board of Trustees of the Trust. Expenditures by the
Fund pursuant to the Plan are accrued based on the Investor Shares' average
daily net assets and may not exceed 0.25% of the Investor Shares' average net
assets for each year elapsed subsequent to adoption of the Plan. Such
expenditures paid as service fees to any person who sells Fund shares may not
exceed 0.25% of the Investor Shares' average annual net asset value of such
shares.

The Plan may not be amended to increase materially the amount to be spent under
the Plan without shareholder approval. The continuation of the Plan must be
approved by the Board of Trustees annually. At least quarterly the Board of
Trustees must review a written report of amounts expended pursuant to the Plan
and the purposes for which such expenditures were made.

<PAGE>

investor may direct the Fund to exchange his shares by writing to the Fund at
its principal office. The request must be signed exactly as the investor's name
appears on the account, and it must also provide the account number, number of
shares to be exchanged, the name of the series to which the exchange will take
place and a statement as to whether the exchange is a full or partial redemption
of existing shares. Notwithstanding the foregoing, exchanges of shares may only
be within the same class or type of class of shares involved. For example,
Investor Shares may not be exchanged for Institutional Shares.

Stock Certificates. Stock certificates will not be issued for your shares.
Evidence of ownership will be given by issuance of periodic account statements
that will show the number of shares owned.

HOW SHARES MAY BE REDEEMED

Regular Mail Redemptions. Your request should be addressed to the Investek Fixed
Income Trust, Investor Shares, 105 North Washington Street, Post Office Drawer
69, Rocky Mount, North Carolina 27802-0069. Your request for redemption must
include:

2) Any required signature guarantees (see "Signature Guarantees" below); and

3) Other supporting legal documents, if required in the case of estates,
trusts, guardianships, custodianships, corporations, partnerships, pension
or profit sharing plans, and other organizations.

<PAGE>

suspend redemption privileges or postpone the date of payment (i) during any
period that the New York Stock Exchange is closed, or trading on the New York
Stock Exchange is restricted as determined by the Securities and Exchange
Commission (the "Commission"), (ii) during any period when an emergency exists
as defined by the rules of the Commission as a result of which it is not
reasonably practicable for the Fund to dispose of securities owned by it, or to
fairly determine the value of its assets, and (iii) for such other periods as
the Commission may permit.

The Fund may rely upon confirmation of redemption requests transmitted via
facsimile (FAX# 919-972-1908). The confirmation instructions must include:

1) Shareholder name, account number and designation of Class (Investor);

2) Number of shares or dollar amount to be redeemed;

3) Instructions for transmittal of redemption funds to the shareholder; and

4) Shareholder signature as it appears on the application then on file with the
Fund.

The net asset value used in processing the redemption will be the net asset
value next determined after the telephone request is received. Redemption
proceeds will not be distributed until written confirmation of the redemption
request is received, per the instructions above. You can choose to have
redemption proceeds mailed to you at your address of record, your bank, or to
any other authorized person, or you can have the proceeds sent by bank wire to
your bank ($5,000 minimum). Shares of the Fund may not be redeemed by wire on
days in which your bank or the Fund's Custodian is not open for business. You
can change your redemption instructions anytime you wish by filing a letter
including your new redemption instructions with the Fund. (See "Signature
Guarantees" below.) The Fund reserves the right to restrict or cancel telephone
and bank wire redemption privileges for shareholders, without notice, if the
Fund believes it to be in the best interest of the shareholders to do so. During
drastic economic and market changes, telephone redemption privileges may be
difficult to implement.

<PAGE>

MANAGEMENT OF THE FUND

The Advisor is registered under the Investment Advisors Act of 1940.
Registration of the Advisor does not involve any supervision of management or
investment practices or policies by the Securities and Exchange Commission. The
Advisor, established as a Mississippi corporation in 1989, is controlled by
Michael T. McRee. The Advisor currently serves as investment advisor to over
$1.75 billion in assets. The Advisor has been rendering investment counsel,
utilizing investment strategies substantially similar to that of the Fund, to
individuals, banks and thrift institutions, pension and profit sharing plans,
trusts, estates, charitable organizations and corporations since its formation.
The Advisor's address is 317 East Capitol Street, Post Office Box 2840, Jackson,
Mississippi 39207.

The Advisor supervises and implements 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 the Advisor under the
Advisory Agreement is the selection of brokers and dealers through whom
transactions in the Fund's portfolio investments will be effected. The Advisor
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, the
Advisor will 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. The Advisor may also utilize a brokerage firm affiliated
with the Trust or the Advisor if it believes it can obtain the best execution of
transactions from such broker. Research services obtained through Fund brokerage
transactions may be used by the Advisor for its other clients and, conversely,
the Fund may benefit from research services obtained through the brokerage
transactions of the Advisor's other clients. For further information, see
"Investment Objective and Policies - Investment Transactions" in the Statement
of Additional Information.

The Administrator. The Trust has entered into an Administration Agreement with
The Nottingham Company (the "Administrator"), 105 North Washington Street, Post
Office Drawer 69, Rocky Mount, North Carolina 27802-0069, pursuant to which the
Administrator receives a fee at the annual rate of 0.15% of the average daily
net assets of the Fund. In addition, the Administrator currently receives a base
monthly fee of $1,750 for accounting and recordkeeping services for the Fund and
$750 for each Class of shares beyond the initial Class of shares of the Fund.
The Administrator also charges the Fund for certain costs involved with the
daily valuation of investment securities and is reimbursed for out-of-pocket
expenses. The Administrator charges a minimum fee of $3,000 per month for all of
its fees taken in the aggregate, analyzed monthly.

<PAGE>

The Administrator also performs certain accounting and pricing services for the
Fund as pricing agent, including the daily calculation of the Fund's net asset
value.

OTHER INFORMATION

<PAGE>

INVESTORS MAY CALL THE FUND AT 1-800-525-3863 TO OBTAIN MORE INFORMATION
CONCERNING OTHER CLASSES AVAILABLE TO THEM THROUGH THEIR SALES REPRESENTATIVE.
INVESTORS MAY OBTAIN INFORMATION CONCERNING THOSE CLASSES FROM THEIR SALES
REPRESENTATIVE, THE DISTRIBUTOR, THE FUND, OR ANY OTHER PERSON WHICH IS OFFERING
OR MAKING AVAILABLE TO THEM THE SECURITIES OFFERED IN THIS PROSPECTUS.

Reporting to Shareholders. The Fund will send to its shareholders Annual and
Semi-Annual Reports; the financial statements appearing in Annual Reports for
the Fund will be audited by independent accountants. In addition, the
Administrator, as transfer agent, will send to each shareholder having an
account directly with the Fund a statement not less than quarterly showing
transactions in the account, the total number of shares owned and any dividends
or distributions paid. Inquiries regarding the Fund may be directed in writing
to 105 North Washington Street, Post Office Drawer 69, Rocky Mount, North
Carolina 27802-0069 or by calling 1-800-525-FUND.

<PAGE>

INVESTEK FIXED INCOME TRUST INVESTEK FIXED INCOME TRUST
105 North Washington Street
Post Office Drawer 69 INVESTOR CLASS
Rocky Mount, North Carolina 27802-0069
1-800-525-FUND PROSPECTUS

INVESTMENT ADVISOR August 1, 1996
Investek Capital Management, Inc.
317 East Capitol Street
Post Office Box 2840
Jackson, Mississippi 39207

ADMINISTRATOR, FUND ACCOUNTANT, AND
DIVIDEND DISBURSING & TRANSFER AGENT
The Nottingham Company
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069

DISTRIBUTOR
Capital Investment Group, Inc.
Post Office Box 32249
Raleigh, North Carolina 27622

CUSTODIAN
Trustmark National Bank
Post Office Box 291
Jackson, Mississippi 39205-0291

INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
1021 East Cary Street, Suite 1900
Richmond, Virginia 23219-4023

<PAGE>

PROSPECTUS Cusip Number 66976M888

ZSA EQUITY FUND

A No Load Fund

The investment objective of the ZSA Equity Fund (the "Fund") is to seek long
term capital appreciation, both realized and unrealized, with only incidental
consideration given to current income. The Fund strives to accomplish this
objective through constant supervision, careful selection, and broad
diversification of a portfolio that ordinarily consists principally of common
stock and cash equivalents. While there is no assurance that the Fund will
achieve its investment objective, it endeavors to do so by following the
investment policies described in this Prospectus. The Fund has a net asset value
that will fluctuate in accordance with the value of its portfolio securities.

INVESTMENT ADVISOR

Zaske, Sarafa & Associates, Inc.
355 South Woodward Avenue, Suite 200
Birmingham, Michigan 48009

The Fund is a no load diversified series of The Nottingham Investment Trust II
(the "Trust"), a registered open-end management investment company. This
Prospectus sets forth concisely the information about the Fund that a
prospective investor should know before investing. Investors should read this
Prospectus and retain it for future reference. Additional information about the
Fund has been filed with the Securities and Exchange Commission and is available
upon request and without charge. You may request the Statement of Additional
Information, which is incorporated in this Prospectus by reference, by writing
the Fund at Post Office Drawer 69, Rocky Mount, North Carolina 27802-0069, or by
calling 1-800-525-FUND.

INVESTMENT IN THE FUND INVOLVES RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL. SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY FINANCIAL INSTITUTION, AND SUCH SHARES ARE NOT
FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER AGENCY.

The date of this Prospectus and the Statement of Additional Information is
August 1, 1996.

<PAGE>

TABLE OF CONTENTS

PROSPECTUS SUMMARY......................................................... 2

SYNOPSIS OF COSTS AND EXPENSES............................................. 2

FINANCIAL HIGHLIGHTS....................................................... 3

INVESTMENT OBJECTIVE AND POLICIES.......................................... 4

RISK FACTORS............................................................... 7

INVESTMENT LIMITATIONS..................................................... 8

FEDERAL INCOME TAXES....................................................... 9

DIVIDENDS AND DISTRIBUTIONS................................................ 9

HOW SHARES ARE VALUED...................................................... 10

HOW SHARES MAY BE PURCHASED................................................ 10

HOW SHARES MAY BE REDEEMED................................................. 12

MANAGEMENT OF THE FUND..................................................... 14

OTHER INFORMATION.......................................................... 16

This Prospectus is not an offering of the securities herein described in any
state in which the offering is unauthorized. No sales representative, dealer or
other person is authorized to give any information or ma ke any representations
other than those contained in this Prospectus.

<PAGE>

PROSPECTUS SUMMARY

The Fund The ZSA Equity Fund (the "Fund") is a no load
diversified series of The Nottingham Investment Trust II
(the "Trust"), a registered open-end management
investment company organized as a Massachusetts business
trust. See "Other Information - Description of Shares."

Offering Price Shares of the Fund are offered at net asset value
without a sales charge. The minimum initial investment
is $10,000 ($2,000 for IRAs, Keogh Plans, 401(k) Plans,
and UTMAs). The minimum subsequent investment is $500.
See "How Shares May Be Purchased."

Investment The investment objective of the Fund is to seek long
Objective and term capital appreciation, both realized and unrealized,
Policies with only incidental consideration given to current
income. To achieve the Fund's objective, the Fund will
be governed by an investment philosophy that focuses on
participation in all the major industry groups
represented within the market (S&P 500), implying a risk
exposure approximately equivalent to the market as a
whole. See "Investment Objective and Policies." The Fund
is not intended to be a complete investment program, and
there can be no assurance that the Fund will achieve its
investment objective.

Special Risk While the Fund will invest primarily in common stocks
Considerations traded in U.S. securities markets, some of the Fund's
investments may include foreign securities, illiquid
securities, derivative securities for hedging purposes
(and not speculation), and securities purchased subject
to a repurchase agreement or on a "when-issued" basis,
which involve certain risks. The Fund may borrow only
under certain limited conditions (including to meet
redemption requests) and not to purchase securities. It
is not the intent of the Fund to borrow except for
temporary cash requirements. Borrowing, if done, would
tend to exaggerate the effects of market and interest
rate fluctuations on the Fund's net asset value until
repaid. See "Risk Factors."

Manager Subject to the general supervision of the Trust's Board
of Trustees and in accordance with the Fund's investment
policies, Zaske, Sarafa & Associates, Inc. of
Birmingham, Michigan (the "Advisor"), manages the Fund's
investments. The Advisor currently manage over $575
million in assets. For its advisory services, the
Advisor receives a monthly fee based on the Fund's daily
net assets at the annual rate of 1.00%. See "Management
of the Fund - The Advisor."

Dividends Income dividends, if any, are generally paid quarterly;
capital gains, if any, are generally distributed at
least once each year. Dividends and capital gains
distributions are automatically reinvested in additional
shares of the Fund at net asset value unless the
shareholder elects to receive cash. See "Dividends and
Distributions."

Distributor and Capital Investment Group, Inc. (the "Distributor")
Distribution Fee serves as distributor of shares of the Fund. Under the
Fund's Distribution Plan, expenditures by the Fund for
distribution activities and service fees may not exceed
0.25% of the average net assets annually. See "How
Shares May Be Purchased - Distribution Plan."

Redemption of There is no charge for redemptions (other than for
Shares wiring redemption proceeds). Shares may be redeemed at
any time at the net asset value next determined after
receipt of a redemption request by the Fund. A
shareholder who submits appropriate written
authorization may redeem shares by telephone. See "How
Shares May Be Redeemed."

SYNOPSIS OF COSTS AND EXPENSES

The following tables set forth certain information in connection with the
expenses of the Fund for the current fiscal year. The information is intended to
assist the investor in understanding the various costs and expenses borne by the
Fund, and therefore indirectly by its investors, the payment of which will
reduce an investor's return on an annual basis.

Shareholder Transaction Expenses

Maximum sales load imposed on purchases
(as a percentage of offering price)................... None

<PAGE>

Maximum sales charge imposed on reinvested dividends..... None
Deferred sales load...................................... None
Redemption fees*......................................... None
Exchange fee............................................. None

*The Fund imposes a $10 charge for wiring redemption proceeds.

Annual Fund Operating Expenses - After Fee Waivers (1)
(as a percentage of average net assets)

Investment advisory fees............................. 0.09% (1)
12b-1 fees........................................... 0.25% (2)
Other expenses....................................... 1.60% (1)
-----
Total operating expenses.......................... 1.94% (1)
=====

EXAMPLE: You would pay the following expenses on a $1,000 investment in the
Fund, whether or not you redeem at the end of the period, assuming a 5% annual
return:

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
$20 $61 $105 $226

THE FOREGOING SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN.

(1) The "Total operating expenses" shown above are based upon actual operating
expenses incurred by the Fund for the fiscal year ended March 31, 1996,
which, after fee waivers, were 1.94% of average daily net assets of the
Fund. Absent such waivers, the percentages would have been 1.00% for
"Investment advisory fees" and 2.85% for "Total operating expenses" for the
fiscal year ended March 31, 1996. The Advisor has voluntarily agreed to a
reduction in the fees payable to it and to reimburse expenses of the Fund,
if necessary, in an amount that limits "Total operating expenses" (exclusive
of interest, taxes, brokerage fees and commissions, and extraordinary
expenses) to not more than 1.95% of the Fund's average daily net assets.
There can be no assurance that the Advisor's voluntary fee waivers and
expense reimbursements in the past will continue in the future.

(2) The Fund has adopted a Distribution Plan pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended (the "1940 Act"), which provides
that the Fund may pay certain distribution expenses and service fees up to
0.25% of the Fund's average net assets annually. See "How Shares May Be
Purchased - Distribution Plan." Long-term shareholders may pay more than the
economic equivalent of the maximum front-end sales charge permitted by the
National Association of Securities Dealers.

FINANCIAL HIGHLIGHTS

The financial data included in the table below has been derived from audited
financial statements of the Fund. The financial data for the fiscal years ended
March 31, 1994, 1995, and 1996 has been derived from financial statements
audited by KPMG Peat Marwick LLP, independent auditors, whose reports covering
such periods are included in the Statement of Additional Information. The
financial data for the prior fiscal years was derived from financial statements
audited by another firm of independent auditors. The information in the table
below should be read in conjunction with the Fund's latest audited financial
statements and notes thereto, which are also included in the Statement of
Additional Information, a copy of which may be obtained at no charge by calling
the Fund. Further information about the performance of the Fund is contained in
the Annual Report of the Fund, a copy of which may be obtained at no charge by
calling the Fund.

(For a Share Outstanding Throughout each Period Represented)

<PAGE>

Years Ended March 31,
1996 1995 1994 1993 (a)
---- ---- ---- --------
<S> <C>
Net Asset Value, Beginning of Period $10.61 $10.61 $10.80 $10.00
Income from investment operations
Net investment income (loss) 0.12 0.02 (0.02) 0.02
Net realized and unrealized gain on investments 2.25 (0.02) (0.17) 0.80
------- ------- ------- ------
Total from investment operations 2.37 0.00 (0.19) 0.82
------- ------- ------- ------
Less distributions from
Net investment income (0.12) 0.00 0.00 (0.02)
Net realized gain from investment transactions (0.81) 0.00 0.00 0.00
------- ------- ------- ------
Total distributions (0.93) 0.00 (0.00) (0.02)
------- ------- ------- ------
Net Asset Value, End of Period $12.05 $10.61 $10.61 $10.80
======= ======= ======= =======

Total return 22.52 % 0.00 % (1.76)% 8.21 %

Ratios/supplemental data
Net assets, end of period (000's) $2,801 $8,273 $3,753 $ 440
======= ======= ======= ======
Ratio of expenses to average net assets
Before expense reimbursements 2.85 % 2.70 % 5.35 % 18.92 % (b)
After expense reimbursements 1.94 % 1.95 % 1.93 % 1.66 % (b)
Ratio of net investment income (loss) to average net assets
Before expense reimbursements (0.06)% (0.55)% (3.80)% (16.87)% (b)
After expense reimbursements 0.85 % 0.20 % (0.37)% 0.39 %

Portfolio turnover rate 51.97 % 196.84 % 79.52 % 24.24 %

</TABLE>

(a) For the period from September 8, 1992 (commencement of operations) to March
31, 1993.

(b) Annualized.

INVESTMENT OBJECTIVE AND POLICIES

Investment Objective. The investment objective of the Fund is to seek long term
capital appreciation, both realized and unrealized, with only incidental
consideration given to current income. The Fund strives to accomplish this
objective through constant supervision, careful selection, and broad
diversification of a portfolio that ordinarily consists principally of common
stock and cash equivalents. While there is no guarantee that the Fund will meet
its investment objective, it seeks to achieve its objective through the
investment policies and techniques described in this Prospectus. The Fund's
investment objective and fundamental investment limitations described herein may
not be altered without the prior approval of a majority of the Fund's
shareholders.

Investment Policies. The investment objective of the Fund reflects the Advisor's
feeling that equities will, if historic market cycles are repeated, offer the
best returns of all liquid asset classes; and the feeling that excessive risk
taking can defeat the equity investor. High levels of risk are to be avoided,
yet the assumption of the characteristic level of risk of the market (S&P 500)
is warranted and encouraged to provide the Fund with an opportunity to achieve
satisfactory long term results. The Advisor intends to employ a policy of broad
diversification among economic sectors and industries for the Fund, with a goal
of improving total return and reducing risk exposure. There can be no assurance
that the investment objective of the Fund will be achieved.

The Advisor expects that asset allocation policies will have some effect on
investment returns in the Fund. The Fund is expected to remain principally
invested in equities (over 80%). However, as dynamic capital markets cause
fluctuating risk/return opportunities over a three to five year period (market
cycle), the following guidelines will be used to determine the Advisor's
equity/money market allocation.

In making the determination of how to allocate the Fund's portfolio between
equities and cash equivalents, the Advisor uses a disciplined investment
strategy designed to quantify the potential returns and inherent risk in each
asset class. Probability theory is then utilized to determine the optimal
exposure that the Fund should have to equities and money market instruments.

<PAGE>

1. Equities (including preferred or convertible preferred stock, convertible
bonds, and equity equivalents) may be represented in the portfolio up to
100% of the Fund's market value, with a minimum net exposure of 50%;
however, under extreme conditions the 50% constraint could be altered.

2. Money Market Instruments may comprise 0% to 50% of the Fund's market value,
although exposure greater than 20% will be rare; however, under extreme
conditions the 50% constraint could be altered.

The Fund will also, under normal circumstances, hold money market instruments
for funds awaiting investment, to allow for shareholder redemptions, and to
provide for Fund operating expenses.

Equities. The Fund may invest in common stock, preferred or convertible
preferred stock, convertible bonds and other equity equivalents, and derivatives
and products of corporations principally headquartered in the United States. The
underlying issuers must, in the opinion of the Advisor, have a strong financial
profile. The Fund may also invest in foreign securities (in the form of ADRs
only as described below) of companies that do not have significant operations in
North America. The equity portion of the Fund is expected to exhibit
approximately the same risk level of the equity market as a whole (S&P 500
Index). The Fund will invest principally in companies that have a total market
capitalization (total common shares multiplied by current market price) of $100
million or more at the time of purchase.

The Fund may also invest in equity equivalents of U.S. corporations such as
warrants, rights, and other securities including derivative securities, which
represent ownership, are exchangeable for common shares, or which reflect or may
reflect the full or partial economic benefit of equity ownership. The Fund may
invest up to 5% of its net assets in warrants or other rights to acquire equity
securities (other than those acquired in units or attached to other securities).

The Fund may invest in preferred or convertible preferred stock and convertible
bonds with a minimum rating of A by Standard & Poor's Ratings Group ("S&P"),
Moody's Investors Service, Inc. ("Moody's"), Fitch Investor's Service, Inc.
("Fitch"), or Duff & Phelps ("D&P") (or, if not rated, of equivalent quality in
the Advisor's opinion). For a complete description of bond ratings, see the
Statement of Additional Information.

Within the above guidelines, the Advisor has full responsibility for security
selection and diversification, subject to a maximum commitment of 5% of the
Fund's total assets to the equity securities of one issuer and 25% in any one
industry group.

In managing the Fund the Advisor tries to utilize strict buy and sell
disciplines. The Advisor attempts to select high quality securities that have
passed a rigorous set of screens. The Advisor screens a database of large and
medium capitalization stocks, which are assigned to one of ten industry groups.
The stocks are then ranked within each industry group based on quantitative
analysis and expected return rankings. The Advisor then conducts a fundamental
and technical analysis of the stocks within the top tier of each industry group,
seeking four primary characteristics, niche products and services, an excellent
management team, above average financial strength, and relative price strength.
Then the Advisor selects the best value and growth stocks, on a fully
diversified basis across all the industry groups, for possible purchase by the
Fund. In selling stocks of the Fund, the Advisor also tries to look for
objective, quantifiable reasons for selling stock. The Advisor will generally
sell a stock when the stock's industry group becomes overweighted in the Fund,
the stock significantly underperforms its industry group on a price basis, or
the stock's expected return drops due to rapid price appreciation or changes in
fundamentals. In addition, the Advisor may sell a stock in the Fund if the asset
allocation changes and cash is raised.

<PAGE>

the nationally recognized statistical rating organizations or if not rated, of
equivalent quality in the Advisor's opinion. The Advisor may, when it believes
that unusually volatile or unstable economic and market conditions exist, depart
from the Fund's investment approach and assume temporarily a defensive portfolio
posture, increasing the Fund's percentage investment in money market
instruments, even to the extent that 100% of the Fund's total assets may be so
invested.

<PAGE>

would have an aggregate value in excess of 5% of the Fund's total assets, or
securities issued by such company and securities held by the Fund issued by
other investment companies would have an aggregate value in excess of 10% of the
Fund's total assets. The Fund will only invest in other investment companies by
purchase of such securities on the open market where no commission or profit to
a sponsor or dealer results from the purchase other than the customary broker's
commissions or when the purchase is part of a plan of merger, consolidation,
reorganization, or acquisition. To the extent the Fund invests in other
investment companies, the shareholders of the Fund would indirectly pay a
portion of the operating costs of the underlying investment companies. These
costs include management, brokerage, shareholder servicing and other operational
expenses. Shareholders of the Fund would then indirectly pay higher operational
costs than if they owned shares of the underlying investment companies directly.
The Advisor will waive its advisory fee for that portion of the Fund's assets
invested in other investment companies, except when such purchase is part of a
plan of merger, consolidation, reorganization, or acquisition.

Derivative Securities Used in Hedging Techniques. The Fund may, as it reaches a
level of total net assets that warrants defensive strategies to maintain
portfolio unrealized gains, employ strategies which include futures on
securities and securities indices, options on securities and securities indices,
the writing of puts and calls on individual securities, and the purchase of puts
or calls on individual securities or securities indices. Such hedging techniques
are not contemplated currently by the Advisor, but may be employed in the
future. Such techniques, if used, will be for hedging purposes only and not for
speculation. For further information regarding these hedging techniques and
their risks, see the Statement of Additional Information.

RISK FACTORS

Fluctuations in Value. Because there is risk in any investment, there can be no
assurance that the Fund will meet its investment objective. To the extent that
the Fund's portfolio consists principally of common stocks, it may be expected
that its net asset value will be subject to greater fluctuation that a portfolio
containing mostly fixed income securities.

Portfolio Turnover. The Fund sells portfolio securities without regard to the
length of time they have been held in order to take advantage of new investment
opportunities. Nevertheless, the Fund's portfolio turnover generally will not
exceed 200% in any one year. When the Fund reaches the appropriate size to
utilize the more involved hedging strategies outlined above, average portfolio
turnover is likely to increase. Portfolio turnover generally involves some
expense to the Fund, including brokerage commissions or dealer mark-ups and
other transaction costs on the sale of securities and the reinvestment in other
securities. Portfolio turnover may also have capital gains tax consequences. The
Fund's portfolio turnover rate for prior fiscal years is set forth under
"Financial Highlights" above.

Borrowing. The Fund may borrow, temporarily, up to 5% of its total assets for
extraordinary purposes and 15% of its total assets to meet redemption requests
which might otherwise require untimely disposition of portfolio holdings. To the
extent the Fund borrows for these purposes, the effects of market price
fluctuations on portfolio net asset value will be exaggerated. If, while such
borrowing is in effect, the value of the Fund's assets declines, the Fund could
be forced to liquidate portfolio securities when it is disadvantageous to do so.
The Fund would incur interest and other transaction costs in connection with
borrowing. The Fund will borrow only from a bank. The Fund will not make any
investments if the borrowing exceeds 5% of its total assets until such time as
repayment has been made to bring the total borrowing below 5% of its total
assets.

<PAGE>

Illiquid Investments. The Fund may invest up to 10% of its net assets in
illiquid securities. Illiquid securities are those that may not be sold or
disposed of in the ordinary course of business within seven days at
approximately the price at which they are valued. Under the supervision of the
Board of Trustees, the Advisor determines the liquidity of the Fund's
investments. The absence of a trading market can make it difficult to ascertain
a market value for illiquid investments. Disposing of illiquid securities before
maturity may be time consuming and expensive, and it may be difficult or
impossible for the Fund to sell illiquid investments promptly at an acceptable
price. Included within the category of illiquid securities will also be
restricted securities, which cannot be sold to the public without registration
under the federal securities laws. Unless registered for sale, these securities
can only be sold in privately negotiated transactions or pursuant to an
exemption from registration.

INVESTMENT LIMITATIONS

To limit the Fund's exposure to risk, the Fund has adopted certain fundamental
investment limitations. Some of these restrictions are that the Fund will not:
(1) issue senior securities, borrow money or pledge its assets, except that it
may borrow from banks as a temporary measure (a) for extraordinary or emergency
purposes, in amounts not exceeding 5% of the Fund's total assets, or (b) in
order to meet redemption requests which might otherwise require untimely
disposition of portfolio securities, in amounts not exceeding 15% of the Fund's
total assets; and the Fund may pledge its assets to secure all such borrowings;
(2) make loans of money or securities, except that the Fund may invest in
repurchase agreements (but repurchase agreements having a maturity of longer
than seven days, together with other not readily marketable securities, are
limited to 10% of the Fund's net assets); (3) invest in securities of issuers
which have a record of less than three years' continuous operation (including
predecessors and, in the case of bonds, guarantors), if more than 5% of its
total assets would be invested in such securities; (4) purchase foreign
securities, except that the Fund may purchase foreign securities sold as
American Depository Receipts without limit; (5) write, purchase or sell
commodities or commodities contracts, or invest in oil, gas or mineral leases or
exploration programs, or real estate (except the Fund may invest in readily
marketable securities of companies that own or deal in such things); and (6)
invest more than 5% of its total assets in the securities of any one issuer or
hold more than 10% of the voting stock of any issuer. See "Investment
Limitations" in the Fund's Statement of Additional Information for a complete
list of investment limitations.

FEDERAL INCOME TAXES

<PAGE>

calculating dividends, net investment income consists of income accrued on
portfolio assets, less accrued expenses. Upon qualification, the Fund will not
be liable for federal income taxes to the extent earnings are distributed. The
Board of Trustees retains the right for any series of the Trust, including the
Fund, to determine for any particular year if it is advantageous not to qualify
as a regulated investment company. Regulated investment companies, such as each
series of the Trust, including the Fund, are subject to a non-deductible 4%
excise tax to the extent they do not distribute the statutorily required amount
of investment income, determined on a calendar year basis, and capital gain net
income, using an October 31 year end measuring period. The Fund intends to
declare or distribute dividends during the calendar year in an amount sufficient
to prevent imposition of the 4% excise tax.

DIVIDENDS AND DISTRIBUTIONS

Unless a shareholder elects to receive cash, dividends and capital gains will be
automatically reinvested in additional full and fractional shares of the Fund at
the net asset value per share next determined. Shareholders wishing to receive
their dividends or capital gains in cash may make their request in writing to
the Fund at 105 North Washington Street, Post Office Drawer 69, Rocky Mount,
North Carolina 27802-0069. That request must be received by the Fund prior to
the record date to be effective as to the next dividend. If cash payment is
requested, checks will be mailed within five business days after the last day of
each quarter or the Fund's fiscal year end, as applicable. Each shareholder of
the Fund will receive a quarterly summary of his or her account, including
information as to reinvested dividends from the Fund. Tax consequences to
shareholders of dividends and distributions are the same if received in cash or
in additional shares of the Fund.

<PAGE>

There is no fixed dividend rate, and there can be no assurance as to the payment
of any dividends or the realization of any gains.

HOW SHARES ARE VALUED

Net asset value for each share of the Fund is determined at 4:00 p.m., New York
time, Monday through Friday, except on business holidays when the New York Stock
Exchange is closed. The net asset value of the shares of the Fund for purposes
of pricing sales and redemptions is equal to the total market value of its
investments, less all of its liabilities, divided by the number of its
outstanding shares.

HOW SHARES MAY BE PURCHASED

Assistance in opening accounts and a purchase application may be obtained from
the Fund by calling 1-800-525- FUND or from the Advisor by calling
1-800-526-6639, or by writing to the Fund at the address shown below for
purchases by mail. Assistance is also available through any broker-dealer
authorized to sell shares in the Fund. Payment for shares purchased may also be
made through your account at the broker-dealer processing your application and
order to purchase. Your investment will purchase shares at the Fund's net asset
value next determined after your order is received by the Fund in proper form as
indicated herein.

The minimum initial investment is $10,000. The minimum for Individual Retirement
Accounts ("IRAs"), Keogh Plans, 401(k) Plans or purchases under the Uniform
Transfers to Minors Act ("UTMAs") is $2,000. The minimum subsequent investment
is $500. The Fund may, in the Advisor's sole discretion, accept certain accounts
with less than the stated minimum initial investment. You may invest in the
following ways:

Purchases by Mail. Shares may be purchased initially by completing the
application accompanying this Prospectus and mailing it, together with a check
payable to the Fund, to the ZSA Equity Fund, 105 North Washington Street, Post
Office Drawer 69, Rocky Mount, North Carolina 27802-0069. Subsequent investments
in an existing account in the Fund may be made at any time by sending a check
payable to the Fund, to the address stated above. Please enclose the stub of
your account statement and include the amount of the investment, the name of the
account for which the investment is to be made and the account number.

Wachovia Bank of North Carolina, N.A.
Winston-Salem, North Carolina
ABA # 053100494

<PAGE>

For credit to the Rocky Mount Office
For the ZSA Equity Fund
Acct # 6765-061374
For further credit to (shareholder's name and SS# or EIN#)

The Trust has adopted a Distribution Plan (the "Plan") for the Fund pursuant to
Rule 12b-1 under the 1940 Act. Under the Plan the Fund may reimburse any
expenditures to finance any activity primarily intended to result in sale of
shares of the Fund or the servicing of shareholder accounts, including, but not
limited to, the following: (i) payments to the Distributor, securities dealers,
and others for the sale of shares of the Fund; (ii) payment of compensation to
and expenses of personnel who engage in or support distribution of shares of the
Fund or who render shareholder support services not otherwise provided by the
Administrator or Custodian; and (iii) formulation and implementation of
marketing and promotional activities. The categories of expenses for which
reimbursement is made are approved by the Board of Trustees of the Trust.
Expenditures by the Fund pursuant to the Plan are accrued based on the Fund's
average daily net assets and may not exceed 0.25% of the Fund's average net
assets for each year elapsed subsequent to adoption of the Plan. Such
expenditures paid as service fees to any person who sells Fund shares may not
exceed 0.25% of the average annual net asset value of such shares.

<PAGE>

and the purposes for which such expenditures were made. For the fiscal year
ended March 31, 1996, the Fund incurred $13,335 pursuant to the Plan.

The Distributor, at its expense, may also provide additional compensation to
dealers in connection with sales of shares of the Fund. Compensation may include
financial assistance to dealers in connection with conferences, sales or
training programs for their employees, seminars for the public, advertising
campaigns regarding the Fund, and/or other dealer-sponsored special events. In
some instances, this compensation may be made available only to certain dealers
whose representatives have sold or are expected to sell a significant amount of
such shares. Compensation may include payment for travel expenses, including
lodging, incurred in connection with trips taken by invited registered
representatives and members of their families to locations within or outside of
the United States for meetings or seminars of a business nature. Dealers may not
use sales of the Fund shares to qualify for this compensation to the extent such
may be prohibited by the laws of any state or any self-regulatory agency, such
as the National Association of Securities Dealers, Inc. None of the
aforementioned compensation is paid for by the Fund or its shareholders.

Exchange Feature. Investors will have the privilege of exchanging shares of the
Fund for shares of any other series of the Trust established by the Advisor. An
exchange involves the simultaneous redemption of shares of one series and
purchase of shares of another series at the respective closing net asset value
next determined after a request for redemption has been received plus applicable
sales charge, if any, and is a taxable transaction. Each series of the Trust
will have a different investment objective, which may be of interest to
investors in each series. Shares of the Fund may be exchanged for shares of any
other series of the Trust affiliated with the Advisor at net asset value.
Exchanges may only be made by investors in states where shares of the other
series are qualified for sale. An investor may direct the Fund to exchange his
shares by writing to the Fund at its principal office. The request must be
signed exactly as the investor's name appears on the account, and it must also
provide the account number, number of shares to be exchanged, the name of the
series to which the exchange will take place and a statement as to whether the
exchange is a full or partial redemption of existing shares.

Automatic Investment Plan. The automatic investment plan enables shareholders to
make regular monthly or quarterly investments in shares through automatic
charges to their checking account. With shareholder authorization and bank
approval, the Administrator will automatically charge the checking account for
the amount specified ($100 minimum), which will be automatically invested in
shares at the net asset value on or about the 21st day of the month. The
shareholder may change the amount of the investment or discontinue the plan at
any time by writing to the Administrator.

Stock Certificates. Stock certificates will not be issued for your shares.
Evidence of ownership will be given by issuance of periodic account statements
that will show the number of shares owned.

HOW SHARES MAY BE REDEEMED

<PAGE>

If you are uncertain of the requirements for redemption, please contact the
Fund, at 1-800-525-FUND, or write to the address shown below.

Regular Mail Redemptions. Your request should be addressed to the ZSA Equity
Fund, 105 North Washington Street, Post Office Drawer 69, Rocky Mount, North
Carolina 27802-0069. Your request for redemption must include:

1) Your letter of instruction specifying the account number, and the number
of shares or dollar amount to be redeemed. This request must be signed by
all registered shareholders in the exact names in which they are
registered;
2) Any required signature guarantees (see "Signature Guarantees" below); and
3) Other supporting legal documents, if required in the case of estates,
trusts, guardianships, custodianships, corporations, partnerships, pension
or profit sharing plans, and other organizations.

The Fund may rely upon confirmation of redemption requests transmitted via
facsimile (FAX# 919-972-1908). The confirmation instructions must include:

There is currently a $10 charge by the Fund for wire redemptions to cover the
Fund's cost of executing the wire transfer. This charge will be deducted
automatically from the shareholder's account by redemption of shares in the
account. The shareholder's bank or brokerage firm may also impose a charge for
processing the wire. If wire transfer of funds is impossible or impractical, the
redemption proceeds will be sent by mail to the designated account.

<PAGE>

MANAGEMENT OF THE FUND

Trustees and Officers. The Fund is a no load diversified series of The
Nottingham Investment Trust II (the "Trust"), an investment company organized as
a Massachusetts business trust on October 25, 1990. The Board of Trustees of the
Trust is responsible for the management of the business and affairs of the
Trust. The Trustees and executive officers of the Trust and their principal
occupations for the last five years are set forth in the Statement of Additional
Information under "Management of the Fund - Trustees and Officers." The Board of
Trustees of the Trust is primarily responsible for overseeing the conduct of the
Trust's business. The Board of Trustees elects the officers of the Trust who are
responsible for its and the Fund's day-to-day operations.

The Advisor. Subject to the authority of the Board of Trustees, Zaske, Sarafa &
Associates, 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, pursuant to an Investment
Advisory Agreement (the "Advisory Agreement") with the Trust.

The Advisor is registered under the Investment Advisors Act of 1940.
Registration of the Advisor does not involve any supervision of management or
investment practices or policies by the Securities and Exchange Commission. The
Advisor, established as a Michigan corporation in 1988, is controlled by Arthur
E. Zaske and Anmar K. Sarafa. The Advisor currently serves as investment advisor
to over $575 million in assets. The Advisor has been rendering investment
counsel, utilizing investment strategies substantially similar to that of the
Fund, to individuals, banks and thrift institutions, pension and profit sharing
plans, trusts, estates, charitable organizations, corporations, and other
business and individual accounts since its formation. The Advisor's address is
355 South Woodward Avenue, Suite 200, Birmingham, Michigan 48009.

Under the Advisory Agreement with the Fund, the Advisor receives a monthly
management fee equal to an annual rate of 1.00% of the average daily net asset
value of the Fund. Although the investment advisory fee is higher than that paid
by most other investment companies, the Board of Trustees believes the fee to be
comparable to advisory fees paid by many funds having similar objectives and
policies. The Advisor may periodically voluntarily waive or reduce its advisory
fee to increase the net income of the Fund. The Advisor voluntarily waived a
portion of its advisory fee for the fiscal year ended March 31, 1996. Of the
$53,330 the Advisor was entitled to receive, the Advisor voluntarily waived
$48,377 of its investment advisory fees. The Advisor received $4,953 of such
advisory fee for the year (0.09% of average net assets).

<PAGE>

The Advisor supervises and implements 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 the Advisor under the
Advisory Agreement is the selection of brokers and dealers through whom
transactions in the Fund's portfolio investments will be effected. The Advisor
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, the
Advisor will 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. The Advisor may also utilize a brokerage firm affiliated
with the Trust or the Advisor if it believes it can obtain the best execution of
transactions from such broker. Research services obtained through Fund brokerage
transactions may be used by the Advisor for its other clients and, conversely,
the Fund may benefit from research services obtained through the brokerage
transactions of the Advisor's other clients. For further information, see
"Investment Objective and Policies - Investment Transactions" in the Statement
of Additional Information.

Arthur E. Zaske, a principal and a controlling shareholder of the Advisor, and a
Trustee of the Trust and executive officer of the Fund, has been responsible for
day-to-day management of the Fund's portfolio since its inception in 1992. He
has been with the Advisor since its inception.

In addition to managing the Fund and two other separate funds, the ZSA Asset
Allocation Fund and the ZSA Social Conscience Fund, other series of the Trust,
the Advisor and/or its principals have been rendering investment counsel,
utilizing investment strategies substantially similar to that of the Fund, since
1981.

The Administrator. The Trust has entered into an Administration Agreement with
The Nottingham Company (the "Administrator"), 105 North Washington Street, Post
Office Drawer 69, Rocky Mount, North Carolina 27802-0069, pursuant to which the
Administrator receives a fee at the annual rate of 0.25% of the average daily
net assets of the Fund on the first $10 million; 0.20% of the next $40 million;
0.175% on the next $50 million; and 0.15% of its average daily net assets in
excess of $100 million. In addition, the Administrator currently receives a base
monthly fee of $1,750 for accounting and recordkeeping services for the Fund.
The Administrator also charges the Fund for certain costs involved with the
daily valuation of investment securities and is reimbursed for out-of-pocket
expenses. The Administrator charges a minimum fee of $3,000 per month for all of
its fees taken in the aggregate, analyzed monthly.

The Administrator was formed as a North Carolina corporation incorporated in
1988 and converted to a North Carolina limited liability company in 1995. With
its affiliates and predecessors, the Administrator has been operating as a
financial services firm since 1985. Frank P. Meadows III, Chairman, Trustee and
Treasurer of the Trust, is the firm's Managing Director and controlling member.

The Administrator also performs certain accounting and pricing services for the
Fund as pricing agent, including the daily calculation of the Fund's net asset
value.

<PAGE>

Exchange Commission fees, state securities qualification fees, costs of
preparing and printing prospectuses for regulatory purposes and for distribution
to shareholders, costs of shareholder reports and shareholder meetings, and any
extraordinary expenses. The Fund also pays for brokerage commissions and
transfer taxes (if any) in connection with the purchase and sale of portfolio
securities. Expenses attributable to a particular series of the Trust, including
the Fund, will be charged to that series, and expenses not readily identifiable
as belonging to a particular series will be allocated by or under procedures
approved by the Board of Trustees among one or more series in such a manner as
it deems fair and equitable.

OTHER INFORMATION

Calculation of Performance Data. From time to time the Fund may advertise its
average annual total return. The "average annual total return" refers to the
average annual compounded rates of return over 1, 5 and 10 year periods that
would equate an initial amount invested at the beginning of a stated period to
the ending redeemable value of the investment. The calculation assumes the
reinvestment of all dividends and distributions, includes all recurring fees
that are charged to all shareholder accounts and deducts all nonrecurring

<PAGE>

charges at the end of each period. If the Fund has been operating less than 1, 5
or 10 years, the time period during which the Fund has been operating is
substituted.

In addition, the Fund may advertise other total return performance data other
than average annual total return. This data shows as a percentage rate of return
encompassing all elements of return (i.e. income and capital appreciation or
depreciation); it assumes reinvestment of all dividends and capital gain
distributions. Such other total return data may be quoted for the same or
different periods as those for which average annual total return is quoted. This
data may consist of a cumulative percentage rate of return, actual year-by-year
rates or any combination thereof. Cumulative total return represents the
cumulative change in value of an investment in the Fund for various periods.

<PAGE>

NO DEALER, SALESMAN, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY T HE FUND OR THE ADVISOR. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY STATE IN WHICH AN OFFERING MAY
NOT LAWFULLY BE MADE.

ZSA EQUITY FUND
105 North Washington Street
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069
1-800-525-FUND

INVESTMENT ADVISOR
Zaske, Sarafa & Associates, Inc.
355 South Woodward Avenue, Suite 200
Birmingham, Michigan 48009

ADMINISTRATOR, FUND ACCOUNTANT, AND
DIVIDEND DISBURSING & TRANSFER AGENT
The Nottingham Company
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069

DISTRIBUTOR
Capital Investment Group, Inc.
Post Office Box 32249
Raleigh, North Carolina 27622

CUSTODIAN
Wachovia Bank of North Carolina, N.A.
301 North Main Street
Winston Salem, North Carolina 27102

INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
1021 East Cary Street, Suite 1900
Richmond, Virginia 23219-4023

------------------
ZSA EQUITY FUND
A No Load Fund
------------------

PROSPECTUS

August 1, 1996

<PAGE>

PROSPECTUS Cusip Number 66976M805

ZSA ASSET ALLOCATION FUND
A NO LOAD FUND

The investment objective of the ZSA Asset Allocation Fund (the "Fund") is to
seek total return consisting of a combination of capital appreciation, both
realized and unrealized, and current income. The Fund will seek to achieve this
objective by investing in a flexible portfolio of equity securities, real estate
equity securities, fixed income securities, and money market instruments. While
there is no assurance that the Fund will achieve its investment objective, it
endeavors to do so by following the investment policies described in this
Prospectus. The Fund has a net asset value that will fluctuate in accordance
with the value of its portfolio securities.

INVESTMENT ADVISOR

ZASKE, SARAFA & ASSOCIATES, INC.
355 SOUTH WOODWARD AVENUE, SUITE 200
BIRMINGHAM, MICHIGAN 48009

INVESTMENT IN THE FUND INVOLVES RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL. SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY FINANCIAL INSTITUTION, AND SUCH SHARES ARE NO
FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER AGENCY.

The date of this Prospectus and the Statement of Additional Information is
August 1, 1996.

<PAGE>

TABLE OF CONTENTS

PROSPECTUS SUMMARY........................................................ 2

SYNOPSIS OF COSTS AND EXPENSES............................................ 2

FINANCIAL HIGHLIGHTS...................................................... 3

INVESTMENT OBJECTIVE AND POLICIES......................................... 4

RISK FACTORS.............................................................. 9

INVESTMENT LIMITATIONS.................................................... 11

FEDERAL INCOME TAXES...................................................... 11

DIVIDENDS AND DISTRIBUTIONS............................................... 12

HOW SHARES ARE VALUED..................................................... 12

HOW SHARES MAY BE PURCHASED............................................... 13

HOW SHARES MAY BE REDEEMED................................................ 15

MANAGEMENT OF THE FUND.................................................... 17

OTHER INFORMATION......................................................... 18

<PAGE>

PROSPECTUS SUMMARY

The Fund The ZSA Asset Allocation Fund (the "Fund") is a no load
diversified series of The Nottingham Investment Trust II
(the "Trust"), a registered open-end management
investment company organized as a Massachusetts business
trust. See "Other Information - Description of Shares."

Investment The investment objective of the Fund is to seek total
Objective and return consisting of a combination of capital
Policies appreciation, both realized and unrealized, and current
income. To achieve the Fund's objectives, the Fund will
be governed by an investment philosophy which focuses on
the management of portfolio risk. Current income is
expected to be greater than the stock market as a whole
(as measured by the S&P 500 Index). See "Investment
Objective and Policies." The Fund is not intended to be
a complete investment program, and there can be no
assurance that the Fund will achieve its investment
objective.

Special Risk While the Fund will invest primarily in common stocks
Considerations and bonds traded in U.S. securities markets, some of the
Fund's investments may include foreign securities,
illiquid securities, real estate securities, mortgage
and asset-backed securities, collateralized mortgage
obligations, derivative securities for hedging purposes
(and not speculation), and securities purchased subject
to a repurchase agreement or on a "when-issued" basis,
which involve certain risks. The Fund may borrow only
under certain limited conditions (including to meet
redemption requests) and not to purchase securities. It
is not the intent of the Fund to borrow except for
temporary cash requirements. Borrowing, if done, would
tend to exaggerate the effects of market and interest
rate fluctuations on the Fund's net asset value until
repaid. See "Risk Factors."

Dividends Income dividends, if any, are generally paid quarterly;
capital gains, if any, are generally distributed at
least once each year. Dividends and capital gains
distributions are automatically reinvested in additional
shares of the Fund at net asset value unless the
shareholder elects to receive cash. See "Dividends and
Distributions."

Distributor and Capital Investment Group, Inc. (the "Distributor")
Distribution Fee serves as distributor of shares of the Fund. Under the
Fund's Distribution Plan, expenditures by the Fund for
distribution activities and service fees may not exceed
0.25% of the Fund's average net assets annually. See
"How Shares May Be Purchased - Distribution Plan."

SYNOPSIS OF COSTS AND EXPENSES

Shareholder Transaction Expenses

<PAGE>

Maximum sales load imposed on purchases
(as a percentage of offering price)............... None
Maximum sales charge imposed on reinvested dividends. None
Deferred sales load.................................. None
Redemption fees*..................................... None
Exchange fee......................................... None

*The Fund imposes a $10 charge for wiring redemption proceeds.

Annual Fund Operating Expenses - After Fee Waivers (1)
(as a percentage of average net assets)

Investment advisory fees............................. 0.61% (1)
12b-1 fees........................................... 0.25% (2)
Other expenses....................................... 1.05% (1)
-----
Total operating expenses.......................... 1.91% (1)
=====

EXAMPLE: You would pay the following expenses on a $1,000 investment in shares
of the Fund, whether or not you redeem at the end of the period, assuming a 5%
annual return:

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
$19 $60 $103 $223

THE FOREGOING SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN.

(1) The "Total operating expenses" shown above are based upon actual operating
expenses incurred by the Fund for the fiscal year ended March 31, 1996,
which, after fee waivers, were 1.91% of average daily net assets of the
Fund. Absent such waivers, the percentages would have been 1.00% for
"Investment advisory fees" and 2.30% for "Total operating expenses" for the
fiscal year ended March 31, 1996. The Advisor has voluntarily agreed to a
reduction in the fees payable to it and to reimburse expenses of the Fund,
if necessary, in an amount that limits "Total operating expenses" (exclusive
of interest, taxes, brokerage fees and commissions, and extraordinary
expenses) to not more than 1.95% of the Fund's average daily net assets.
There can be no assurance that the Advisor's voluntary fee waivers and
expense reimbursements will continue in the future.

(2) The Fund has adopted a Distribution Plan pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended (the "1940 Act"), which provides
that the Fund may pay certain distribution expenses and service fees to
0.25% of the Fund's average net assets annually. See "How Shares May Be
Purchased - Distribution Plan." Long-term shareholders may pay more than the
economic equivalent of the maximum front-end sales charge permitted by the
National Association of Securities Dealers.

FINANCIAL HIGHLIGHTS

(For a Share Outstanding Throughout each Period Represented)

<PAGE>

1996 1995 1994 1993 (a)
---- ---- ---- ----
<S> <C>
Net Asset Value, Beginning of Period $10.76 $10.92 $10.77 $10.00
Income from Investment operation
Net investment income (loss) 0.30 0.15 (0.01) 0.04
Net realized and unrealized gains on investments 1.61 (0.17) 0.31 0.77
------- ------- ------- -------
Total from investment operations 1.91 (0.02) 0.30 0.81
------- ------- ------- ------
Less distributions from
Net investment income (0.30) (0.14) (0.01) (0.04)
Net realized gain from investment transactions 0.00 0.00 (0.14) 0.00
------- ------- ------- ------
Total distributions (0.30) (0.14) (0.15) (0.04)
Net Asset Value, End of Period $12.37 $10.76 $10.92 $10.77
======= ======= ======= ======
Total return 17.80 % (0.62)% 2.67 % 7.93 %

Ratios/supplemental data
Net assets, end of period (000's) $ 9,626 $10,565 $13,555 $ 2,034
======== ======= ======= =======
Ratio of expenses to average net assets
Before expense reimbursements 2.30 % 2.03 % 2.75 % 4.11 % (b)
After expense reimbursements 1.91 % 1.95 % 1.92 % 1.72 % (b)
Ratio of net investment income (loss) to average net assets
Before expense reimbursements 2.06 % 1.18 % (0.88)% (1.66)% (b)
After expense reimbursements 2.45 % 1.27 % (0.05)% 0.73 % (b)

Portfolio turnover rate 67.89 % 130.53 % 53.66 % 22.26 %

</TABLE>

(a) For the period from August 10, 1992 (commencement of operations) to March
31, 1993.

(b) Annualized.

INVESTMENT OBJECTIVE AND POLICIES

Investment Objective. The investment objective of the Fund is to seek total
return consisting of a combination of capital appreciation, both realized and
unrealized, and current income. While there is no guarantee that the Fund will
meet its investment objective, it seeks to achieve its objective through the
investment policies and techniques described in this Prospectus. The Fund's
investment objective and fundamental investment limitations described herein may
not be altered without the prior approval of a majority of the Fund's
shareholders.

Investment Policies. The Fund attempts to combine the preservation of capital
and current income with moderate risk assumption in order to seek over the long
term total return. The Advisor recognizes that risk (i.e., the uncertainty of
future events), volatility (i.e., the potential for variability of asset
values), and the potential of loss in purchasing power (due to inflation) are
present to some degree with all types of investment vehicles. While high levels
of risk are to be avoided, the assumption of a moderate level of risk is
warranted and encouraged in order to provide the Fund the opportunity to achieve
satisfactory results consistent with the objectives and policies of the Fund.

In seeking to maximize total return, the Advisor will generally invest the Fund
in a portfolio of equity securities, real estate equity securities, and fixed
income securities. Investments may also be made in money market instruments
under circumstances when the Advisor believes the short term, stable nature of
money market instruments is the best means of achieving the Fund's goal of
maximum total return.

Total return consists of current income (including dividends, interest and, in
the case of discounted instruments, discount accruals) and capital appreciation
(including realized and unrealized capital gains and losses). There can be no
assurance that the investment objective of the Fund will be achieved.

The categories of securities, and the investment approaches to be used by the
Fund, are described below.

<PAGE>

As dynamic capital markets cause fluctuating risk/return opportunities over a
three to five year period (market cycle), the following guidelines will be used
to determine the Advisor's asset allocation mix.

In making the determination of how to allocate the Fund's portfolio between
equities, fixed income securities, real estate equity securities, and money
market instruments, the Advisor uses a disciplined, statistically driven,
investment strategy designed to quantify the potential returns and inherent
risks in each asset class.

Probability theory is then utilized to determine the optimal exposure that the
Fund's portfolio should have in equities, fixed income securities, real estate
equity securities, and money market instruments. Then, incremental shifts in
those assets are implemented in order to avoid excessive risk and capture
returns. However, to avoid high volatility, asset allocation extremes are
avoided.

The Advisor believes that total return can best be enhanced over the long term
through flexibility of investment strategies. The percentage of the Fund's
assets that may be invested at a particular time in equities, fixed income
securities, real estate equity securities, and money market instruments will
depend on management's judgment regarding economic trends and market risks.

1. Equities may be represented in the portfolio up to a net exposure of
approximately 65% of the Fund's market value, with a net exposure of
generally not less than 25%. Under market conditions when the Advisor feels
additional avoidance of risk is warranted, the equity exposure may be
reduced below 25%.

2. Fixed income securities (including preferred stocks and convertible bonds)
will generally have a minimum exposure of 20% and will not generally exceed
a maximum exposure of 60% of the Fund's total assets.

3. Real estate equity securities (primarily real estate investment trusts -
"REITs") will generally have a minimum exposure of 5% and will not
generally exceed a maximum exposure of 20% of the Fund's total assets.

4. Money market instruments will generally comprise 0%-40% of the Fund's total
assets, although net exposure greater than 20% is unlikely; however, under
extreme conditions the 40% constraint could be altered.

In addition to investing in various types of securities, the Advisor also
invests in various companies and industries involving all ten major economic
sectors. When the Advisor believes the equity markets are capable of providing
capital appreciation without subjecting the Fund to an undue level of risk,
equities will be emphasized. When equities are believed by the Advisor to be
subject to high levels of market risk, fixed income instruments or money market
instruments will be emphasized. By adjusting the portfolio allocation in this
manner, the Advisor attempts to achieve the best opportunity for total return
with risk exposure less than the market as a whole (as measured by the S&P 500
Index). Such allocation policies may mean that over certain short periods of
time, the Fund may experience lower returns than if its assets were concentrated
in fewer investment categories.

<PAGE>

In managing the equity portion of the Fund the Advisor tries to utilize strict
buy and sell disciplines. The Advisor attempts to select high quality securities
that have passed a rigorous set of screens. The Advisor screens a database of
large and medium capitalization stocks, which are assigned to one of ten
industry groups. The stocks are then ranked within each industry group based on
quantitative analysis and expected return rankings. The Advisor then conducts a
fundamental and technical analysis of the stocks within the top tier of each
industry group, seeking four primary characteristics, niche products and
services, an excellent management team, above average financial strength, and
relative price strength. Then the Advisor selects the best value and growth
stocks, on a fully diversified basis across all the industry groups, for
possible purchase by the Fund. In selling stocks of the Fund, the Advisor also
tries to look for objective, quantifiable reasons for selling stock. The Advisor
will generally sell a stock when the stock's industry group becomes overweighed
in the Fund, the stock significantly underperforms its industry group on a price
basis, or the stock's expected return drops due to rapid price appreciation or
changes in fundamentals. In addition, the Advisor may sell a stock in the Fund
if the Fund's allocation mix changes.

Money Market Instruments. Money market instruments may be purchased when the
Advisor believes the prospect for capital appreciation in the equity and longer
term fixed income securities' markets are not attractive, or when the Advisor's
secular view of interest rates favors short term fixed income instruments versus
longer term fixed income instruments. Money market instruments may be purchased
for temporary defensive purposes, to accumulate cash for anticipated purchases
of portfolio securities and to provide for shareholder redemptions and operating
expenses of the Fund. Money market instruments mature in thirteen months or less
from the date of purchase and may include U.S. Government Securities, corporate
debt securities (including those subject to repurchase agreements), bankers
acceptances and certificates of deposit of domestic branches of U.S. banks, and
commercial paper (including variable amount demand master notes) rated in one of
the two highest rating categories by any of the nationally recognized
statistical rating organizations or if not rated, of equivalent quality in the
Advisor's opinion. The Advisor may, when it believes that unusually volatile or
unstable economic and market conditions exist, depart from the Fund's investment
approach and assume temporarily a defensive portfolio posture, increasing the
Fund's percentage investment in money market instruments, even to the extent
that 100% of the Fund's total assets may be so invested.

Securities issued or guaranteed as to principal and interest by the U.S.
Government may be acquired by the Fund in the form of custodial receipts that
evidence ownership of future interest payments, principal payments or both on
certain U.S. Treasury notes or bonds. Such notes and bonds are held in custody
by a bank on behalf of the owners. These custodial receipts are known by various
names, including "Treasury Receipts," "Treasury Investment Growth Receipts"
("TIGRs"), and "Certificates of Accrual on Treasury Securities" ("CATS"). The
Fund may also invest in separately traded principal and interest components of
securities issued or guaranteed by the U.S. Treasury. The principal and interest
components of selected securities are traded independently under the Separate
Trading of Registered Interest and Principal of Securities program ("STRIPS").
Under the STRIPS program, the principal and interest components are individually
numbered and separately issued by the U.S. Treasury at the request of depository
financial institutions, which then trade the component parts independently.

Real Estate Equity Securities. The Fund may invest in securities that represent
an equity interest in real estate properties. It is anticipated that these will
be predominantly domestic equity real estate investment trusts ("REITs"). The

<PAGE>

REITs used will represent four major types of investable properties: apartments,
office, retail/commercial and industrial/warehouse. The Fund may also invest in
real estate development companies, which are large corporate property holders
that issue common stock tradable on national securities exchanges and which own
real estate for investment or development purposes. REITs are similar to closed
end investment companies. The REIT owns real estate assets and the investor,
such as the Fund, owns shares in the REIT. REITs are publicly traded on the
national stock exchanges and in the over-the-counter market and have varying
degrees of liquidity. As long as the REIT distributes at least 95% of its
ordinary income as dividends, it is not liable for federal income taxes. REITs
also pass through the taxable character of their income. Dividends paid from
earnings are taxable as investment income; dividends attributable to capital
gains are taxable as capital gains. Dividends paid from funds obtained through
depreciation are not taxable currently but reduce the original cost basis of the
REIT shares. Some REITs invest in mortgages, some in real estate development
loans, some in collateralized mortgage obligations, and some in actual
properties. The Fund may only invest in those REITs that invest in actual
properties.

Corporate Debt Securities. The Fund may invest in U.S. dollar denominated
corporate debt securities of domestic issuers limited to corporate debt
securities (corporate bonds, debentures, notes and other similar corporate debt
instruments) that meet the minimum ratings criteria set forth for the Fund, or,
if unrated, are in the Advisor's opinion comparable in quality to corporate debt
securities in which the Fund may invest.

Securities which when purchased are rated at least A by Moody's, S&P, Fitch or
D&P (generally regarded as having a strong capacity to pay interest and repay
principal, although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions) or higher may be used (or, if
unrated, of equivalent quality in the Advisor's opinion). If the rating for any
security held in the Fund's portfolio drops below the minimum acceptable rating
applicable to the Fund, such change will be considered by the Advisor as reason
to sell that security.

Mortgage-Related and Other Asset-Backed Securities. The Fund may invest in
mortgage pass-though securities, which are securities representing interests in
"pools" of mortgages in which payments of both interest and principal on the
securities are made monthly, in effect, "passing through" monthly payments made
by the individual borrowers on the residential mortgage loans that underlie the
securities (net of fees paid to the issuer or guarantor of the securities). The
total return on mortgage-related securities varies with changes in the general
level of interest rates. The maturities of mortgage-related securities are
variable and unknown when issued because their maturities depend on pre-payment
rates. Early repayment of principal on mortgage pass-though securities (arising
from prepayments of principal due to sale of the underlying property,
refinancing, or foreclosure, net of fees and costs which may be incurred) may
expose the Fund to a lower rate of return upon reinvestment of principal. Also,
if a security subject to prepayment has been purchased at a premium, in the
event of prepayment, the value of the premium would be lost. Mortgage repayments
generally increase with falling interest rates and decrease with rising interest
rates. Like other fixed income securities, when interest rates rise the value of
a mortgage-related security generally will decline; however, when interest rates
are declining, the value of mortgage-related securities with prepayment features
may not increase as much as that of other fixed income securities.

Payment of principal and interest on some mortgage pass-through securities (but
not the market value of the securities themselves) may be guaranteed by the full
faith and credit of the U.S. Government (in the case of securities guaranteed by
GNMA); or guaranteed by agencies or instrumentalities of the U.S. Government. In
the case of securities guaranteed by FNMA or the Federal Home Loan Mortgage
Corporation ("FHLMC"), these are supported only by the discretionary authority
of the U.S. Government to purchase the agency's obligations. Mortgage

<PAGE>

pass-through securities created by non-governmental issuers (such as commercial
banks, savings and loan institutions, private mortgage insurance companies,
mortgage bankers and other secondary market issuers) may be supported by various
forms of insurance or guarantees, including individual loan, title, pool and
hazard insurance and letters of credit, which may be issued by governmental
entities, private issuers or the mortgage poolers. The Fund may also invest in
stripped mortgage-backed securities ("SMBS"), which are derivative multi-class
mortgage securities, usually structured with two classes that receive different
proportions of the interest and principal distributions from an underlying pool
of mortgage assets.

Collateralized Mortgage Obligations ("CMOs") are hybrid instruments with
characteristics of both mortgage-backed bonds and mortgage pass-through
securities. Similar to a bond, interest and pre-paid principal on a CMO are
paid, in most cases, semi-annually. CMOs are usually collateralized by
portfolios of mortgage pass-through securities guaranteed by GNMA, FHLMC, or
FNMA but may be collateralized by whole mortgage loans or private mortgage
pass-through securities. CMOs are structured into multiple classes, with each
class bearing a different stated maturity. Under a common structure, monthly
payments of principal, including prepayments, are first returned to investors
holding the shortest maturity class; investors holding the longer maturity
classes receive principal only after the first class has been retired. The Fund
may also invest in parallel pay CMOs and Planned Amortization Class CMOs ("PAC
Bonds"). Parallel pay CMOs are structured to provide payments of principal on
each payment date to more than one class. PAC Bonds generally require payments
of a specified amount of principal on each payment date.

Real Estate Mortgage Investment Conduits ("REMICs") are CMO vehicles that
qualify for special tax treatment under the Internal Revenue Code and invest in
mortgages principally secured by interest in real property and other investments
permitted by the Internal Revenue Code. The Fund will not invest in residual
interests in REMICs or residual interests in CMOs.

The Advisor expects that governmental, government-related or private entities
may devise mortgage loan pools and other mortgage-related securities offering
mortgage pass-through and mortgage-collateralized investments in addition to
those described above. As new types of mortgage-related securities are developed
and offered to investors, the Advisor will, consistent with the Fund's
investment objective, policies and quality standards, consider making
investments in such new types of mortgage-related securities.

Other asset-based securities (unrelated to mortgage loans) have been offered to
investors, such as Certificates for Automobile ReceivablesSM ("CARSSM") and
interests in pools of credit card receivables. CARSSM represent undivided
fractional interests in a trust whose assets consist of a pool of motor vehicle
retail installment sales contracts and security interest in the vehicles
securing the contracts. Payments of principal and interest on CARSSM are
"passed-through" monthly to certificate holders and are guaranteed up to certain
amounts and for a certain time period by a letter of credit issued by a
financial institution unaffiliated with the trustee or originator of the trust.
Underlying sales contracts are subject to prepayment, which may reduce the
overall return to certificate holders. If the letter of credit is exhausted,
certificate holders may also experience delays in payment or losses on CARSSM if
the full amounts due on underlying sales contracts are not realized by the trust
because of unanticipated legal or administrative costs of enforcing the
contracts or because of depreciation, damage or loss of the vehicles securing
the contracts, or other factors. Certificates representing pools of credit card
receivables have similar characteristics although the underlying loans are
unsecured. CARSSM, for the purposes of the Fund, will be deemed to be illiquid
securities, and subject to the limitations on investments in illiquid
securities. If consistent with its investment objective and policies, the Fund
may invest in CARSSM interests in pools of consumer credit receivables and in
other asset-backed securities that may be developed in the future. Asset-backed
securities and mortgage-related securities, other than GNMAs, are relatively new
forms of investments. Thus, the market experience in these securities is
limited, and the market's ability to sustain liquidity through all phases of the
market cycle has not been tested.

The Fund may invest only in high quality mortgage-related (or other
asset-backed) securities either (i) issued by U.S. Government sponsored
corporations (currently GNMA, FHLMC and FNMA) or (ii) rated in one of the top
two categories by an NRSRO (Nationally Recognized Securities Rating
Organization) or, if not rated, of equivalent investment quality as determined
by the Advisor. The Advisor will monitor continuously the ratings of securities
held by the Fund and the creditworthiness of their issuers.

Variable and Floating Rate Securities. Variable and floating rate securities
provide for a periodic adjustment in the interest rate paid on the obligations.
The terms of such obligations must provide that interest rates are adjusted
periodically based upon some appropriate interest rate adjustment index as
provided in the respective obligations. The adjustment intervals may be regular,
with intervals ranging from daily to annually, or may be event based, such as a

<PAGE>

change in the prime rate, indices of U.S. Treasury securities or LIBOR (London
Interbank Ordinary Rate). Variable and floating rate securities that cannot be
disposed of promptly within seven days and in the usual course of business
without taking a reduced price will be treated as illiquid and subject to the
limitation on investments in illiquid securities.

Investment Companies. In order to achieve its investment objective, the Fund may
invest up to 10% of the value of its total assets in securities of other
investment companies whose investment objectives are consistent with the Fund's
investment objective. The Fund will not acquire securities of any one investment
company if, immediately thereafter, the Fund would own more than 3% of such
company's total outstanding voting securities, securities issued by such company
would have an aggregate value in excess of 5% of the Fund's total assets, or
securities issued by such company and securities held by the Fund issued by
other investment companies would have an aggregate value in excess of 10% of the
Fund's total assets. The Fund will only invest in other investment companies by
purchase of such securities on the open market where no commission or profit to
a sponsor or dealer results from the purchase other than the customary broker's
commissions or when the purchase is part of a plan of merger, consolidation,
reorganization, or acquisition. To the extent the Fund invests in other
investment companies, the shareholders of the Fund would indirectly pay a
portion of the operating costs of the underlying investment companies. These
costs include management, brokerage, shareholder servicing and other operational
expenses. Shareholders of the Fund would then indirectly pay higher operational
costs than if they owned shares of the underlying investment companies directly.
The Advisor will waive its advisory fee for that portion of the Fund's assets
invested in other investment companies, except when such purchase is part of a
plan of merger, consolidation, reorganization, or acquisition.

RISK FACTORS

<PAGE>

Fluctuations in Value. Because there is risk in any investment, there can be no
assurance that the Fund will meet its investment objective. To the extent that
the Fund's equity portfolio consists principally of common stocks, it may be
expected that its net asset value will be subject to greater fluctuation that a
portfolio containing mostly fixed income securities. The fixed income securities
in which the Fund will invest are subject to fluctuation in value. Such
fluctuations may be based on movements in interest rates or from changes in the
creditworthiness of the issuers, which may result from adverse business and
economic developments or proposed corporate transactions, such as a leveraged
buy-out or recapitalization of the issuer. The value of the Fund's fixed income
securities will generally vary inversely with the direction of prevailing
interest rate movements. Should interest rates increase or the creditworthiness
of an issuer deteriorate, the value of the Fund's fixed income securities would
decrease in value, which would have a depressing influence on the Fund's net
asset value. Although certain of the U.S. Government Securities in which the
Fund may invest are guaranteed as to timely payment of principal and interest,
the market value of the securities, upon which the Fund's net asset value is
based, will fluctuate due to the interest rate risks described above.
Additionally, not all U.S. Government Securities are backed by the full faith
and credit of the U.S. Government. Moreover, principal on the mortgages
underlying certain of the Fund's investments may be prepaid in advance of
maturity, which prepayments tend to increase when interest rates decline,
presenting the Fund with more principal to invest at lower rates.

Portfolio Turnover. The Fund sells portfolio securities without regard to the
length of time they have been held in order to take advantage of new investment
opportunities. Nevertheless, the Fund's portfolio turnover generally will not
exceed 150% in any one year. When the Fund reaches the appropriate size to
utilize the more involved hedging strategies outlined above, average portfolio
turnover is likely to increase. Portfolio turnover generally involves some
expense to the Fund, including brokerage commissions or dealer mark-ups and
other transaction costs on the sale of securities and the reinvestment in other
securities. Portfolio turnover may also have capital gains tax consequences. The
Fund's portfolio turnover rate for prior fiscal years is set forth under
"Financial Highlights" above.

Illiquid Investments. The Fund may invest up to 10% of its net assets in
illiquid securities. Illiquid securities are those that may not be sold or
disposed of in the ordinary course of business within seven days at
approximately the price at which they are valued. Under the supervision of the
Board of Trustees, the Advisor determines the liquidity of the Fund's
investments. The absence of a trading market can make it difficult to ascertain
a market value for illiquid investments. Disposing of illiquid securities before
maturity may be time consuming and expensive, and it may be difficult or
impossible for the Fund to sell illiquid investments promptly at an acceptable
price. Included within the category of illiquid securities will also be
restricted securities, which cannot be sold to the public without registration
under the federal securities laws. Unless registered for sale, these securities
can only be sold in privately negotiated transactions or pursuant to an
exemption from registration.

<PAGE>

INVESTMENT LIMITATIONS

To limit the Fund's exposure to risk, the Fund has adopted certain fundamental
investment limitations. Some of these restrictions are that the Fund will not:
(1) issue senior securities, borrow money or pledge its assets, except that it
may borrow from banks as a temporary measure (a) for extraordinary or emergency
purposes, in amounts not exceeding 5% of the Fund's total assets, or (b) in
order to meet redemption requests which might otherwise require untimely
disposition of portfolio securities, in amounts not exceeding 15% of the Fund's
total assets; and the Fund may pledge its assets to secure all such borrowings;
(2) make loans of money or securities, except that the Fund may invest in
repurchase agreements (but repurchase agreements having a maturity of longer
than seven days, together with other not readily marketable securities, are
limited to 10% of the Fund's net assets), money market instruments, and other
debt securities; (3) invest in securities of issuers which have a record of less
than three years' continuous operation (including predecessors and, in the case
of bonds, guarantors), if more than 5% of its total assets would be invested in
such securities; (4) purchase foreign securities, except that the Fund may
purchase foreign securities sold as American Depository Receipts without limit;
(5) write, purchase or sell commodities or commodities contracts, or invest in
oil, gas or mineral leases or exploration programs, or real estate (except the
Fund may invest in readily marketable securities of companies that own or deal
in such things and may invest in mortgage-related securities as described
above); and (6) invest more than 5% of its total assets in the securities of any
one issuer or hold more than 10% of the voting stock of any issuer. See
"Investment Limitations" in the Fund's Statement of Additional Information for a
complete list of investment limitations.

FEDERAL INCOME TAXES

<PAGE>

DIVIDENDS AND DISTRIBUTIONS

There is no fixed dividend rate, and there can be no assurance as to the payment
of any dividends or the realization of any gains.

HOW SHARES ARE VALUED

<PAGE>

HOW SHARES MAY BE PURCHASED

Purchases by Mail. Shares may be purchased initially by completing the
application accompanying this Prospectus and mailing it, together with a check
payable to the Fund, to the ZSA Asset Allocation Fund, 105 North Washington
Street, Post Office Drawer 69, Rocky Mount, North Carolina 27802-0069.
Subsequent investments in an existing account in the Fund may be made at any
time by sending a check payable to the Fund, to the address stated above. Please
enclose the stub of your account statement and include the amount of the
investment, the name of the account for which the investment is to be made and
the account number.

Wachovia Bank of North Carolina, N.A.
Winston-Salem, North Carolina
ABA # 053100494
For credit to the Rocky Mount Office
For the ZSA Asset Allocation Fund
Acct #6763-061370
For further credit to (shareholder's name and SS# or EIN#)

<PAGE>

of the Trust already owned by any purchaser whose order is cancelled, and such a
purchaser may be prohibited from placing further orders unless investments are
accompanied by full payment by wire or cashier's check.

The Trust has adopted a Distribution Plan (the "Plan") for the Fund pursuant to
Rule 12b-1 under the 1940 Act. Under the Plan the Fund may reimburse any
expenditures to finance any activity primarily intended to result in sale of the
shares of the Fund or the servicing of shareholder accounts, including, but not
limited to, the following: (i) payments to the Distributor, securities dealers,
and others for the sale of shares of the Fund; (ii) payment of compensation to
and expenses of personnel who engage in or support distribution of shares of the
Fund or who render shareholder support services not otherwise provided by the
Administrator or Custodian; and (iii) formulation and implementation of
marketing and promotional activities. The categories of expenses for which
reimbursement is made are approved by the Board of Trustees of the Trust.
Expenditures by the Fund pursuant to the Plan are accrued based on the Fund's
average daily net assets and may not exceed 0.25% of the Fund's average net
assets for each year elapsed subsequent to adoption of the Plan. Such
expenditures paid as service fees to any person who sells Fund shares may not
exceed 0.25% of the average annual net asset value of such shares.

<PAGE>

Shares of the Fund may be exchanged for shares of any other series of the Trust
affiliated with the Advisor at net asset value. Exchanges may only be made by
investors in states where shares of the other series are qualified for sale. An
investor may direct the Fund to exchange his shares by writing to the Fund at
its principal office. The request must be signed exactly as the investor's name
appears on the account, and it must also provide the account number, number of
shares to be exchanged, the name of the series to which the exchange will take
place and a statement as to whether the exchange is a full or partial redemption
of existing shares.

Automatic Investment Plan. The automatic investment plan enables shareholders to
make regular monthly or quarterly investments in shares through automatic
charges to their checking account. With shareholder authorization and bank
approval, the Administrator will automatically charge the checking account for
the amount specified ($100 minimum), which will be automatically invested in
shares at the net asset value on or about the 21st day of the month. The
shareholder may change the amount of the investment or discontinue the plan at
any time by writing to the Administrator.

Stock Certificates. Stock certificates will not be issued for your shares.
Evidence of ownership will be given by issuance of periodic account statements
that will show the number of shares owned.

HOW SHARES MAY BE REDEEMED

If you are uncertain of the requirements for redemption, please contact the
Fund, at 1-800-525-FUND, or write to the address shown below.

Regular Mail Redemptions. Your request should be addressed to the ZSA Asset
Allocation Fund, 105 North Washington Street, Post Office Drawer 69, Rocky
Mount, North Carolina 27802-0069. Your request for redemption must include:

<PAGE>

The Fund may rely upon confirmation of redemption requests transmitted via
facsimile (FAX# 919-972-1908). The confirmation instructions must include:

The net asset value used in processing the redemption will be the net asset
value next determined after the telephone request is received. Redemption
proceeds will not be distributed until written confirmation of the redemption
request is received, per the instructions above. You can choose to have
redemption proceeds mailed to you at your address of record, your bank, or to
any other authorized person, or you can have the proceeds sent by bank wire to
your bank ($5,000 minimum). Shares of the Fund may not be redeemed by wire on
days on which your bank or the Fund's Custodian is not open for business. You
can change your redemption instructions anytime you wish by filing a letter
including your new redemption instructions with the Fund. (See "Signature
Guarantees" below.) The Fund reserves the right to restrict or cancel telephone
and bank wire redemption privileges for shareholders, without notice, if the
Fund believes it to be in the best interest of the shareholders to do so. During
drastic economic and market conditions, telephone redemption privileges may be
difficult to implement.

<PAGE>

in excess of $50,000. Signature guarantees are acceptable from a member bank of
the Federal Reserve System, a savings and loan institution, credit union (if
authorized under state law), registered broker-dealer, securities exchange or
association clearing agency, and must appear on the written request for
redemption, establishment or change in exchange privileges, or change of
registration.

MANAGEMENT OF THE FUND

The Advisor is registered under the Investment Advisors Act of 1940.
Registration of the Advisor does not involve any supervision of management or
investment practices or policies by the Securities and Exchange Commission. The
Advisor, established as a Michigan corporation in 1988, is controlled by Arthur
E. Zaske and Anmar K. Sarafa. The Advisor currently serves as investment advisor
to over $575 million in assets. The Advisor has been rendering investment
counsel, utilizing investment strategies substantially similar to that of the
Fund, to individuals, banks and thrift institutions, pension and profit sharing
plans, trusts, estates, charitable organizations, corporations, and other
business and individual accounts since its formation. The Advisor's address is
355 South Woodward Avenue, Suite 200, Birmingham, Michigan 48009.

Under the Advisory Agreement with the Fund, the Advisor receives a monthly
management fee equal to an annual rate of 1.00% of the average daily net asset
value of the Fund. Although the investment advisory fee is higher than that paid
by most other investment companies, the Board of Trustees believes the fee to be
comparable to advisory fees paid by many funds having similar objectives and
policies. The Advisor may periodically voluntarily waive or reduce its advisory
fee to increase the net income of the Fund. The Advisor voluntarily waived a
portion of its advisory fee for the fiscal year ended March 31, 1996. Of the
$102,639 the Advisor was entitled to receive, the Advisor voluntarily waived
$39,922 of its investment advisory fees. The Advisor received $62,717 of such
advisory fee for the year (0.61% of average net assets).

The Advisor supervises and implements 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 the Advisor under the
Advisory Agreement is the selection of brokers and dealers through whom
transactions in the Fund's portfolio investments will be effected. The Advisor
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, the
Advisor will 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. The Advisor may also utilize a brokerage firm affiliated
with the Trust or the Advisor if it believes it can obtain the best execution of
transactions from such broker. Research services obtained through Fund brokerage
transactions may be used by the Advisor for its other clients and, conversely,
the Fund may benefit from research services obtained through the brokerage
transactions of the Advisor's other clients. For further information, see
"Investment Objective and Policies - Investment Transactions" in the Statement
of Additional Information.

In addition to managing the Fund and two other separate funds, the ZSA Equity
Fund and the ZSA Social Conscience Fund, other series of the Trust, the Advisor
and/or its principals have been rendering investment counsel, utilizing
investment strategies substantially similar to that of the Fund, since 1981.

<PAGE>

The Administrator. The Trust has entered into an Administration Agreement with
The Nottingham Company (the "Administrator"), 105 North Washington Street, Post
Office Drawer 69, Rocky Mount, North Carolina 27802-0069, pursuant to which the
Administrator receives a fee at the annual rate of 0.25% of the average daily
net assets of the Fund on the first $10 million; 0.20% of the next $40 million;
0.175% on the next $50 million; and 0.15% of its average daily net assets in
excess of $100 million. In addition, the Administrator currently receives a base
monthly fee of $1,750 for accounting and recordkeeping services for the Fund.
The Administrator also charges the Fund for certain costs involved with the
daily valuation of investment securities and is reimbursed for out-of-pocket
expenses. The Administrator charges a minimum fee of $3,000 per month for all of
its fees taken in the aggregate, analyzed monthly.

The Administrator was formed as a North Carolina corporation in 1988 and
converted to a North Carolina limited liability company in 1995. With its
affiliates and predecessors, the Administrator has been operating as a financial
services firm since 1985. Frank P. Meadows III, Chairman, Trustee and Treasurer
of the Trust, is the firm's Managing Director and controlling member.

The Administrator also performs certain accounting and pricing services for the
Fund as pricing agent, including the daily calculation of the Fund's net asset
value.

OTHER INFORMATION

<PAGE>

or electing Trustees. The Board of Trustees shall promptly call a meeting for
the purpose of electing or removing Trustees when requested in writing to do so
by the record holders of a least 10% of the outstanding shares of the Trust. The
term of office of each Trustee is of unlimited duration. The holders of at least
two-thirds of the outstanding shares of the Trust may remove a Trustee from that
position either by declaration in writing filed with the Custodian or by votes
cast in person or by proxy at a meeting called for that purpose.

<PAGE>

ZSA ASSET ALLOCATION FUND
105 North Washington Street
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069
1-800-525-FUND

INVESTMENT ADVISOR
Zaske, Sarafa & Associates, Inc.
355 South Woodward Avenue, Suite 200
Birmingham, Michigan 48009

ADMINISTRATOR, FUND ACCOUNTANT, AND
DIVIDEND DISBURSING & TRANSFER AGENT
The Nottingham Company
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069

DISTRIBUTOR
Capital Investment Group, Inc.
Post Office Box 32249
Raleigh, North Carolina 27622

CUSTODIAN
Wachovia Bank of North Carolina, N.A.
301 North Main Street
Winston Salem, North Carolina 27102

INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
1021 East Cary Street, Suite 1900
Richmond, Virginia 23219-4023

ZSA ASSET ALLOCATION FUND

A NO LOAD FUND

PROSPECTUS

August 1, 1996

PART B

<PAGE>

STATEMENT OF ADDITIONAL INFORMATION

CAPITAL VALUE FUND

August 1, 1996

A Series of
THE NOTTINGHAM INVESTMENT TRUST II
105 North Washington Street, Post Office
Drawer 69
Rocky Mount, North Carolina 27802-0069
Telephone 1-800-525-FUND

Table of Contents

INVESTMENT OBJECTIVE AND POLICIES.......................................... 2
INVESTMENT LIMITATIONS..................................................... 4
NET ASSET VALUE............................................................ 5
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION............................. 6
DESCRIPTION OF THE TRUST................................................... 7
ADDITIONAL INFORMATION CONCERNING TAXES.................................... 8
MANAGEMENT OF THE FUND..................................................... 10
SPECIAL SHAREHOLDER SERVICES............................................... 15
ADDITIONAL INFORMATION ON PERFORMANCE...................................... 16
APPENDIX A - DESCRIPTION OF RATINGS........................................ 18
ANNUAL REPORT OF THE FUND FOR THE YEAR ENDED MARCH 31, 1996.......... ATTACHED

This Statement of Additional Information (the "Additional Statement") is meant
to be read in conjunction with the Prospectus dated August 1, 1996 for the
Capital Value Fund (the "Fund") relating to the Fund's Investor Shares and
Institutional Shares, as each Prospectus may be amended or supplemented from
time to time, and is incorporated by reference in its entirety into each
Prospectus. Because this Additional Statement is not itself a prospectus, no
investment in shares of the Fund should be made solely upon the information
contained herein. Copies of the Fund's Prospectus may be obtained at no charge
by writing or calling the Fund at the address and phone number shown above. This
Additional Statement is not a prospectus but is incorporated by reference in
each Prospectus in its entirety. Capitalized terms used but not defined herein
have the same meanings as in the Prospectus.

<PAGE>

INVESTMENT OBJECTIVE AND POLICIES

The following policies supplement the Fund's investment objective and policies
as set forth in the Prospectus for each Class of Shares of the Fund. The Fund,
organized in 1990, has no prior operating history.

Additional Information on Fund Instruments. Attached to this Additional
Statement is Appendix A, which contains descriptions of the rating symbols used
by Rating Agencies for securities in which the Fund may invest.

Investment Transactions. Subject to the general supervision of the Trust's Board
of Trustees, the Advisor is responsible for, makes decisions with respect to,
and places orders for all purchases and sales of portfolio securities for the
Fund.

The annualized portfolio turnover rate for the Fund is calculated by dividing
the lesser of purchases or sales of portfolio securities for the reporting
period by the monthly average value of the portfolio securities owned during the
reporting period. The calculation excludes all securities whose maturities or
expiration dates at the time of acquisition are one year or less. Portfolio
turnover of the Fund may vary greatly from year to year as well as within a
particular year, and may be affected by cash requirements for redemption of
shares and by requirements that enable the Fund to receive favorable tax
treatment. Portfolio turnover will not be a limiting factor in making Fund
decisions, and the Fund may engage in short term trading to achieve its
investment objectives.

Purchases of money market instruments by the Fund are made from dealers,
underwriters and issuers. The Fund currently does not expect to incur any
brokerage commission expense on such transactions because money market
instruments are generally traded on a "net" basis by a dealer acting as
principal for its own account without a stated commission. The price of the
security, however, usually includes a profit to the dealer. Securities purchased
in underwritten offerings include a fixed amount of compensation to the
underwriter, generally referred to as the underwriter's concession or discount.
When securities are purchased directly from or sold directly to an issuer, no
commissions or discounts are paid.

Transactions on U.S. stock exchanges involve the payment of negotiated brokerage
commissions. On exchanges on which commissions are negotiated, the cost of
transactions may vary among different brokers. Transactions in the
over-the-counter market are generally on a net basis (i.e., without commission)
through dealers, or otherwise involve transactions directly with the issuer of
an instrument. The Fund's fixed income portfolio transactions will normally be
principal transactions executed in over-the-counter markets and will be executed
on a "net" basis, which may include a dealer markup. With respect to securities
traded only in the over-the-counter market, orders will be executed on a
principal basis with primary market makers in such securities except where
better prices or executions may be obtained on an agency basis or by dealing
with other than a primary market maker.

The Fund may participate, if and when practicable, in bidding for the purchase
of Fund securities directly from an issuer in order to take advantage of the
lower purchase price available to members of a bidding group. The Fund will
engage in this practice, however, only when the Advisor, in its sole discretion,
believes such practice to be otherwise in the Fund's interest.

In executing Fund transactions and selecting brokers or dealers, the Advisor
will seek to obtain the best overall terms available for the Fund. In assessing
the best overall terms available for any transaction, the Advisor shall consider
factors it deems relevant, including the breadth of the market in the security,
the price of the security, the financial condition and execution capability of
the broker or dealer, and the reasonableness of the spread or commission, if
any, both for the specific transaction and on a continuing basis. The sale of
Fund shares may be considered when determining the firms that are to execute
brokerage transactions for the Fund. In addition, the Advisor is authorized to
cause the Fund to pay a broker-dealer which furnishes brokerage and research
services a higher spread or commission than that which might be charged by
another broker-dealer for effecting the same transaction, provided that the
Advisor determines in good faith that such spread or commission is reasonable in
relation to the value of the brokerage and research services provided by such
broker-dealer, viewed in terms of either the particular transaction or the
overall responsibilities of the Advisor to the Fund. Such brokerage and research
services might consist of reports and statistics relating to specific companies
or industries, general summaries of groups of stocks or bonds and their
comparative earnings and yields, or broad overviews of the stock, bond and
government securities markets and the economy.

Supplementary research information so received is in addition to, and not in
lieu of, services required to be performed by the Advisor and does not reduce
the advisory fees payable by the Fund. The Trustees will periodically review any

<PAGE>

spread or commissions paid by the Fund to consider whether the spread or
commissions paid over representative periods of time appear to be reasonable in
relation to the benefits inuring to the Fund. It is possible that certain of the
supplementary research or other services received will primarily benefit one or
more other investment companies or other accounts for which investment
discretion is exercised by the Advisor. Conversely, the Fund may be the primary
beneficiary of the research or services received as a result of securities
transactions effected for such other account or investment company.

The Advisor may also utilize a brokerage firm affiliated with the Trust or the
Advisor (including the Distributor, an affiliate of the Advisor) if it believes
it can obtain the best execution of transactions from such broker. The Fund will
not execute portfolio transactions through, acquire securities issued by, make
savings deposits in or enter into repurchase agreements with the Advisor or an
affiliated person of the Advisor (as such term is defined in the 1940 Act)
acting as principal, except to the extent permitted by the Securities and
Exchange Commission ("SEC"). In addition, the Fund will not purchase securities
during the existence of any underwriting or selling group relating thereto of
which the Advisor, or an affiliated person of the Advisor, is a member, except
to the extent permitted by the SEC. Under certain circumstances, the Fund may be
at a disadvantage because of these limitations in comparison with other
investment companies that have similar investment objectives but are not subject
to such limitations.

Investment decisions for the Fund will be made independently from those for any
other series of the Trust, if any, and for any other investment companies and
accounts advised or managed by the Advisor. Such other investment companies and
accounts may also invest in the same securities as the Fund. To the extent
permitted by law, the Advisor may aggregate the securities to be sold or
purchased for the Fund with those to be sold or purchased for other investment
companies or accounts in executing transactions. When a purchase or sale of the
same security is made at substantially the same time on behalf of the Fund and
another investment company or account, the transaction will be averaged as to
price and available investments allocated as to amount, in a manner which the
Advisor believes to be equitable to the Fund and such other investment company
or account. In some instances, this investment procedure may adversely affect
the price paid or received by the Fund or the size of the position obtained or
sold by the Fund.

For the fiscal years ended March 31, 1994, 1995 and 1996, the total dollar
amounts of brokerage commissions paid by the Fund were $10,130, $12,835, and
$7,225, respectively, of which all was paid during such respective periods to
the Distributor. Transactions in which the Fund used the Distributor as broker
involved 100% of the aggregate dollar amount of transactions involving the
payment of commissions and 100% of the aggregate broker commissions paid by the
Fund for the fiscal year ended March 31, 1996.

Repurchase Agreements. The Fund may acquire U.S. Government Securities or
corporate debt securities subject to repurchase agreements. A repurchase
transaction occurs when, at the time the Fund purchases a security (normally a
U.S. Treasury obligation), it also resell it to the vendor (normally a member
bank of the Federal Reserve or a registered Government Securities dealer) and
must deliver the security (and/or securities substituted for them under the
repurchase agreement) to the vendor on an agreed upon date in the future. The
repurchase price exceeds the purchase price by an amount which reflects an
agreed upon market interest rate effective for the period of time during which
the repurchase agreement is in effect. Delivery pursuant to the resale will
occur within one to five days of the purchase.

Repurchase agreements are considered "loans" under the Investment Company Act of
1940, as amended (the "1940 Act"), collateralized by the underlying security.
The Trust will implement procedures to monitor on a continuous basis the value
of the collateral serving as security for repurchase obligations. Additionally,
the Advisor to the Fund will consider the creditworthiness of the vendor. If the
vendor fails to pay the agreed upon resale price on the delivery date, the Fund
will retain or attempt to dispose of the collateral. The Fund's risk is that
such default may include any decline in value of the collateral to an amount
which is less than 100% of the repurchase price, any costs of disposing of such
collateral, and any loss resulting from any delay in foreclosing on the
collateral. The Fund will not enter into any repurchase agreement which will
cause more than 10% of its net assets to be invested in repurchase agreements
which extend beyond seven days.

<PAGE>

the time draft is liable for payment of interest and principal when due. The
Banker's Acceptance carries the full faith and credit of such bank. A
Certificate of Deposit ("CD") is an unsecured interest bearing debt obligation
of a bank. Commercial Paper is an unsecured, short term debt obligation of a
bank, corporation or other borrower. Commercial Paper maturity generally ranges
from two to 270 days and is usually sold on a discounted basis rather than as an
interest bearing instrument. The Fund will invest in Commercial Paper only if it
is rated one of the top two rating categories by Moody's Investors Service, Inc.
("Moody's"), Standard & Poor's Ratings Group ("S&P"), Fitch Investors Service,
Inc. ("Fitch") or Duff & Phelps ("D&P") or, if not rated, of equivalent quality
in the Advisor's opinion. Commercial Paper may include Master Notes of the same
quality. Master Notes are unsecured obligations which are redeemable upon demand
of the holder and which permit the investment of fluctuating amounts at varying
rates of interest. Master Notes are acquired by the Fund only through the Master
Note program of the Fund's custodian bank, acting as administrator thereof. The
Advisor will monitor, on a continuous basis, the earnings power, cash flow and
other liquidity ratios of the issuer of a Master Note held by the Fund.

Illiquid Investments. The Fund may invest up to 10% of its net assets in
illiquid securities, which are investments that cannot be sold or disposed of in
the ordinary course of business within seven days at approximately the prices at
which they are valued. Under the supervision of the Board of Trustees, the
Advisor determines the liquidity of the Fund's investments and, through reports
from the Advisor, the Board monitors investments in illiquid instruments. In
determining the liquidity of the Fund's investments, the Advisor may consider
various factors including (1) the frequency of trades and quotations, (2) the
number of dealers and prospective purchasers in the marketplace, (3) dealer
undertakings to make a market, (4) the nature of the security (including any
demand or tender features) and (5) the nature of the marketplace for trades
(including the ability to assign or offset the Fund's rights and obligations
relating to the investment). Investments currently considered by the Fund to be
illiquid include repurchase agreements not entitling the holder to payment of
principal and interest within seven days. If through a change in values, net
assets or other circumstances, the Fund were in a position where more than 10%
of its net assets were invested in illiquid securities, it would seek to take
appropriate steps to protect liquidity. The Fund may not purchase restricted
securities, which are securities that cannot be sold to the public without
registration under the federal securities laws.

INVESTMENT LIMITATIONS

The Fund has adopted the following fundamental investment limitations, which
cannot be changed without approval by holders of a majority of the outstanding
voting shares of the Fund. A "majority" for this purpose, means the lesser of
(i) 67% of the Fund's outstanding shares represented in person or by proxy at a
meeting at which more than 50% of its outstanding shares are represented, or
(ii) more than 50% of its outstanding shares. Unless otherwise indicated,
percentage limitations apply at the time of purchase.

As a matter of fundamental policy, the Fund may not:

(1) Invest more than 5% of the value of its total assets in the securities of
any one issuer or purchase more than 10% of the outstanding voting
securities or of any class of securities of any one issuer (except that
securities of the U.S. Government, its agencies and instrumentalities are
not subject to these limitations);

(2) Invest 25% or more of the value of its total assets in any one industry or
group of industries (except that securities of the U.S. Government, its
agencies and instrumentalities are not subject to these limitations);

(3) Invest in the securities of any issuer if any of the officers or trustees
of the Trust or the Advisor who own beneficially more than 1/2 of 1% of
the outstanding securities of such issuer together own more than 5% of the
outstanding securities of such issuer;

(4) Invest for the purpose of exercising control or management of another
issuer;

(5) Invest in interests in real estate, real estate mortgage loans, real
estate limited partnerships, oil, gas or other mineral exploration or
development programs or leases, except that the Fund may invest in the
readily marketable securities of companies which own or deal in such
things;

<PAGE>

(6) Underwrite securities issued by others except to the extent the Fund may
be deemed to be an underwriter under the federal securities laws, in
connection with the disposition of portfolio securities;

(7) Purchase securities on margin (but the Fund may obtain such short term
credits as may be necessary for the clearance of transactions);

(8) Make short sales of securities or maintain a short position, except short
sales "against the box" (A short sale is made by selling a security the
Fund does not own, a short sale is "against the box" to the extent that
the Fund contemporaneously owns or has the right to obtain at no added
cost securities identical to those sold short.);

(9) Write, purchase or sell puts, calls or combinations thereof, or purchase
or sell commodities, warrants, commodities contracts, futures contracts or
related options;

(10) Participate on a joint or joint and several basis in any trading account
in securities;

(11) Make loans of money or securities, except that the Fund may invest in
repurchase agreements, money market instruments, and other debt
securities;

(12) Invest more than 10% of the value of its net assets in repurchase
agreements having a maturity of longer than seven days or other not
readily marketable securities;

(13) Invest in restricted securities;

(14) Issue senior securities, borrow money or pledge its assets, except that it
may borrow from banks as a temporary measure (a) for extraordinary or
emergency purposes, in amounts not exceeding 5% of the Fund's total
assets, or (b) in order to meet redemption requests which might otherwise
require untimely disposition of portfolio securities, if, immediately
after such borrowing, the value of the Fund's assets, including all
borrowings then outstanding, less its liabilities (excluding all
borrowings), is equal to at least 300% of the aggregate amount of
borrowings then outstanding, and the Fund may pledge its assets to secure
all such borrowings;

(15) Invest in securities of issuers which have a record of less than three
years' continuous operation (including predecessors and, in the case of
bonds, guarantors), if more than 5% of its total assets would be invested
in such securities; or

(16) Invest more than 10% of the Fund's total assets in foreign securities,
including sponsored American Depository Receipts.

Percentage restrictions stated as an investment policy or investment limitation
apply at the time of investment; if a later increase or decrease in percentage
beyond the specified limits results from a change in securities values or total
assets, it will not be considered a violation. However, in the case of the
borrowing limitation (restriction (14) above), the Fund will, to the extent
necessary, reduce its existing borrowings to comply with the limitation.

While the Fund has reserved the right to make short sales "against the box"
(restriction (8) above), the Advisor has no present intention of engaging in
such transactions at this time or during the coming year.

With respect to investments permitted in other investment companies, see
"Investment Objective and Policies-Investment Companies" in the Prospectus,
which reflects certain limitations placed on such investments, including the
Advisor's waiver of duplicative advisory fees. During any time that shares of
the Fund may be registered in the State of California, it is a fundamental
policy of the Fund that fees incurred in connection with the purchase of shares
of other investment companies will not be duplicative, management fees will not
be duplicated, and initial sales charges incurred for such purchases will not
exceed one percent (1%).

NET ASSET VALUE

The net asset value per share of each Class of Shares of the Fund is determined
at 4:00 p.m., New York time, Monday through Friday, except on business holidays
when the New York Stock Exchange is closed. The New York Stock Exchange
recognizes the following holidays: New Year's Day, President's Day, Good Friday,
Memorial Day, Fourth of July, Labor Day, Thanksgiving Day, and Christmas Day.

<PAGE>

Any other holiday recognized by the New York Stock Exchange will be considered a
business holiday on which the net asset value of each Class of Shares of the
Fund will not be calculated.

The net asset value per share of each Class of the Fund is calculated separately
by adding the value of the Fund's securities and other assets belonging to the
Fund and attributable to that Class, subtracting the liabilities charged to the
Fund and to that Class, and dividing the result by the number of outstanding
shares of such Class. "Assets belonging to" the Fund consist of the
consideration received upon the issuance of shares of the Fund together with all
net investment income, realized gains/losses and proceeds derived from the
investment thereof, including any proceeds from the sale of such investments,
any funds or payments derived from any reinvestment of such proceeds, and a
portion of any general assets of the Trust not belonging to a particular
investment Fund. Income, realized and unrealized capital gains and losses, and
any expenses of the Fund not allocated to a particular Class of the Fund will be
allocated to each Class of the Fund on the basis of the net asset value of that
Class in relation to the net asset value of the Fund. Assets belonging to the
Fund are charged with the direct liabilities of the Fund and with a share of the
general liabilities of the Trust, which are normally allocated in proportion to
the number of or the relative net asset values of all of the Trust's series at
the time of allocation or in accordance with other allocation methods approved
by the Board of Trustees. Certain expenses attributable to a particular Class of
shares (such as the distribution and service fees attributable to Investor
Shares) will be charged against that Class of shares. Certain other expenses
attributable to a particular Class of shares (such as registration fees,
professional fees, and certain printing and postage expenses) may be charged
against that Class of shares if such expenses are actually incurred in a
different amount by that Class or if the Class receives services of a different
kind or to a different degree than other Classes, and the Board of Trustees
approves such allocation. Subject to the provisions of the Declaration of Trust,
determinations by the Board of Trustees as to the direct and allocable
liabilities, and the allocable portion of any general assets, with respect to
the Fund and the Classes of the Fund are conclusive.

For the fiscal years ended March 31, 1994, 1995 and 1996, the total expenses of
the Investor Shares of the Fund after fee waivers and expense reimbursements
were $151,236, $161,133, and $172,707, respectively. Institutional Shares of the
Fund were not authorized for issuance during such period and fiscal years.

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

Purchases. Shares of the Fund are offered and sold on a continuous basis and may
be purchased through authorized investment dealers or directly by contacting the
Distributor or the Fund. Selling dealers have the responsibility of transmitting
orders promptly to the Fund. The public offering price of shares of the Fund
equals net asset value, plus a sales charge for Investor Shares of the Fund.
Capital Investment Group, Inc. (the "Distributor"), an affiliate of the Advisor,
receives this sales charge as Distributor and may reallow it in the form of
dealer discounts and brokerage commissions. The current schedule of sales
charges and related dealer discounts and brokerage commissions is set forth in
the Prospectus for the Investor Shares, along with the information on current
purchases, rights of accumulation, and letters of intent. See "How Shares May Be
Purchased" in the Prospectus.

Plan Under Rule 12b-1. The Trust has adopted a Plan of Distribution (the "Plan")
for the Investor Shares of the Fund pursuant to Rule 12b-1 under the 1940 Act
(see "How Shares May Be Purchased - Distribution Plan" in the Prospectus). Under
the Plan the Fund may expend up to 0.50% of the Investor Shares' average net
assets annually to finance any activity which is primarily intended to result in
the sale of Investor Shares of the Fund and the servicing of shareholder
accounts, provided the Trust's Board of Trustees has approved the category of
expenses for which payment is being made. Such expenditures paid as service fees
to any person who sells Investor Shares of the Fund may not exceed 0.25% of the
average annual net asset value of such shares. Potential benefits of the Plan to
the Fund include improved shareholder servicing, savings to the Fund in transfer
agency costs, benefits to the investment process from growth and stability of
assets and maintenance of a financially healthy management organization.

All of the distribution expenses incurred by the Distributor and others, such as
broker-dealers, in excess of the amount paid by the Fund will be borne by such
persons without any reimbursement from the Fund. Subject to seeking best price
and execution, the Fund may, from time to time, buy or sell portfolio securities
from or to firms which receive payments under the Plan.

<PAGE>

From time to time the Distributor may pay additional amounts from its own
resources to dealers for aid in distribution or for aid in providing
administrative services to shareholders.

The Plan and the Distribution Agreement with the Distributor have been approved
by the Board of Trustees of the Trust, including a majority of the Trustees who
are not "interested persons" (as defined in the 1940 Act) of the Trust and who
have no direct or indirect financial interest in the Plan or any related
agreements, by vote cast in person or at a meeting duly called for the purpose
of voting on the Plan and such Agreement. Continuation of the Plan and the
Distribution Agreement must be approved annually by the Board of Trustees in the
same manner as specified above.

Each year the Trustees must determine whether continuation of the Plan is in the
best interest of shareholders of the Fund and that there is a reasonable
likelihood of its providing a benefit to the Fund, and the Board of Trustees has
made such a determination for the current year of operations under the Plan. The
Plan and the Distribution Agreement may be terminated at any time without
penalty by a majority of those trustees who are not "interested persons" or by a
majority vote of the Fund's outstanding Investor Shares. Any amendment
materially increasing the maximum percentage payable under the Plan must
likewise be approved by a majority vote of the Investor Shares' outstanding
voting stock, as well as by a majority vote of those trustees who are not
"interested persons." Also, any other material amendment to the Plan must be
approved by a majority vote of the trustees including a majority of the
noninterested Trustees of the Trust having no interest in the Plan. In addition,
in order for the Plan to remain effective, the selection and nomination of
Trustees who are not "interested persons" of the Trust must be effected by the
Trustees who themselves are not "interested persons" and who have no direct or
indirect financial interest in the Plan. Persons authorized to make payments
under the Plan must provide written reports at least quarterly to the Board of
Trustees for their review.

For the fiscal year ended March 31, 1996, the Fund incurred $33,377 for costs in
connection with the Plan under Rule 12b- 1, of which $2,330 was voluntarily
waived by the Distributor. Such costs were spent on compensation to sales
personnel for sale of Investor Shares and servicing of shareholder accounts and
advertising costs.

Redemptions. Under the 1940 Act, the Fund may suspend the right of redemption or
postpone the date of payment for shares during any period when (a) trading on
the New York Stock Exchange is restricted by applicable rules and regulations of
the SEC; (b) the Exchange is closed for other than customary weekend and holiday
closings; (c) the SEC has by order permitted such suspension; or (d) an
emergency exists as determined by the SEC. The Fund may also suspend or postpone
the recordation of the transfer of shares upon the occurrence of any of the
foregoing conditions.

In addition to the situations described in the Prospectus under "How Shares May
Be Redeemed," the Fund may redeem shares involuntarily to reimburse the Fund for
any loss sustained by reason of the failure of a shareholder to make full
payment for shares purchased by the shareholder or to collect any charge
relating to a transaction effected for the benefit of a shareholder which is
applicable to Fund shares as provided in the Prospectus from time to time.

DESCRIPTION OF THE TRUST

The Trust is an unincorporated business trust organized under Massachusetts law
on October 25, 1990. The Trust's Declaration of Trust authorizes the Board of
Trustees to divide shares into series, each series relating to a separate
portfolio of investments, and to classify and reclassify any unissued shares
into one or more classes of shares of each such series. The Declaration of Trust
currently provides for the shares of eight series, as follows: Capital Value
Fund managed by Capital Investment Counsel, Inc. of Raleigh, North Carolina; ZSA
Asset Allocation Fund, ZSA Equity Fund, and ZSA Social Conscience Fund managed
by Zaske, Sarafa & Associates, Inc. of Birmingham, Michigan; Investek Fixed
Income Trust managed by Investek Capital Management of Jackson, Mississippi; and
The Brown Capital Management Equity Fund, The Brown Capital Management Balanced
Fund and The Brown Capital Management Small Company Fund managed by Brown
Capital Management of Baltimore, Maryland. The Board of Trustees has authorized
the classification of shares of all such series except the ZSA Funds. The number
of shares of each series shall be unlimited. The Trust does not intend to issue
share certificates.

In the event of a liquidation or dissolution of the Trust or an individual
series, such as the Fund, shareholders of a particular series would be entitled
to receive the assets available for distribution belonging to such series.
Shareholders of a series are entitled to participate equally in the net
distributable assets of the particular series involved on liquidation, based on
the number of shares of the series that are held by each shareholder. If there
are any assets, income, earnings, proceeds, funds or payments, that are not

<PAGE>

readily identifiable as belonging to any particular series, the Trustees shall
allocate them among any one or more of the series as they, in their sole
discretion, deem fair and equitable.

Shareholders of all of the series of the Trust, including the Fund, will vote
together and not separately on a series-by-series or class-by-class basis,
except as otherwise required by law or when the Board of Trustees determines
that the matter to be voted upon affects only the interests of the shareholders
of a particular series or class. Rule 18f-2 under the 1940 Act provides that any
matter required to be submitted to the holders of the outstanding voting
securities of an investment company such as the Trust shall not be deemed to
have been effectively acted upon unless approved by the holders of a majority of
the outstanding shares of each series or class affected by the matter. A series
or class is affected by a matter unless it is clear that the interests of each
series or class in the matter are substantially identical or that the matter
does not affect any interest of the series or class. Under Rule 18f-2, the
approval of an investment advisory agreement or any change in a fundamental
investment policy would be effectively acted upon with respect to a series only
if approved by a majority of the outstanding shares of such series. However, the
Rule also provides that the ratification of the appointment of independent
accountants, the approval of principal underwriting contracts and the election
of Trustees may be effectively acted upon by shareholders of the Trust voting
together, without regard to a particular series or class.

When used in the Prospectus or this Additional Statement, a "majority" of
shareholders means the vote of the lesser of (1) 67% of the shares of the Trust
or the applicable series or class present at a meeting if the holders of more
than 50% of the outstanding shares are present in person or by proxy, or (2)
more than 50% of the outstanding shares of the Trust or the applicable series or
class.

When issued for payment as described in the Prospectus and this Additional
Statement, shares of the Fund will be fully paid and non-assessable.

The Declaration of Trust provides that the Trustees of the Trust will not be
liable in any event in connection with the affairs of the Trust, except as such
liability may arise from his or her own bad faith, willful misfeasance, gross
negligence, or reckless disregard of duties. It also provides that all third
parties shall look solely to the Trust property for satisfaction of claims
arising in connection with the affairs of the Trust. With the exceptions stated,
the Declaration of Trust provides that a Trustee or officer is entitled to be
indemnified against all liability in connection with the affairs of the Trust.

ADDITIONAL INFORMATION CONCERNING TAXES

The following summarizes certain additional tax considerations generally
affecting the Fund and its shareholders that are not described in the
Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of the Fund or its shareholders, and the discussion here and in the
Prospectus is not intended as a substitute for careful tax planning and is based
on tax laws and regulations that are in effect on the date hereof; such laws and
regulations may be changed by legislative, judicial, or administrative action.
Investors are advised to consult their tax advisors with specific reference to
their own tax situations.

Each series of the Trust, including the Fund, will be treated as a separate
corporate entity under the Code and intends to qualify or remain qualified as a
regulated investment company. In order to so qualify, each series must elect to
be a regulated investment company or have made such an election for a previous
year and must satisfy, in addition to the distribution requirement described in
the Prospectus, certain requirements with respect to the source of its income
for a taxable year. At least 90% of the gross income of each series must be
derived from dividends, interest, payments with respect to securities loans,
gains from the sale or other disposition of stocks, securities or foreign
currencies, and other income derived with respect to the series' business of
investing in such stock, securities or currencies. Any income derived by a
series from a partnership or trust is treated as derived with respect to the
series' business of investing in stock, securities or currencies only to the
extent that such income is attributable to items of income that would have been
qualifying income if realized by the series in the same manner as by the
partnership or trust.

<PAGE>

securities (or options and futures with respect to stocks or securities).
Interest (including original issue discount and, with respect to certain debt
securities, accrued market discount) received by a series upon maturity or
disposition of a security held for less than three months will not be treated as
gross income derived from the sale or other disposition of such security within
the meaning of this requirement. However, any other income which is attributable
to realized market appreciation will be treated as gross income from the sale or
other disposition of securities for this purpose.

An investment company may not qualify as a regulated investment company for any
taxable year unless it satisfies certain requirements with respect to the
diversification of its investments at the close of each quarter of the taxable
year. In general, at least 50% of the value of its total assets must be
represented by cash, cash items, government securities, securities of other
regulated investment companies and other securities which, with respect to any
one issuer, do not represent more than 5% of the total assets of the investment
company nor more than 10% of the outstanding voting securities of such issuer.
In addition, not more than 25% of the value of the investment company's total
assets may be invested in the securities (other than government securities or
the securities of other regulated investment companies) of any one issuer. The
Fund intends to satisfy all requirements on an ongoing basis for continued
qualification as a regulated investment company.

Each series of the Trust, including the Fund, will designate any distribution of
long term capital gains as a capital gain dividend in a written notice mailed to
shareholders within 60 days after the close of the series' taxable year.
Shareholders should note that, upon the sale or exchange of series shares, if
the shareholder has not held such shares for at least six months, any loss on
the sale or exchange of those shares will be treated as long term capital loss
to the extent of the capital gain dividends received with respect to the shares.

A 4% nondeductible excise tax is imposed on regulated investment companies that
fail to currently distribute an amount equal to specified percentages of their
ordinary taxable income and capital gain net income (excess of capital gains
over capital losses). Each series of the Trust, including the Fund, intends to
make sufficient distributions or deemed distributions of its ordinary taxable
income and any capital gain net income prior to the end of each calendar year to
avoid liability for this excise tax.

If for any taxable year a series does not qualify for the special federal income
tax treatment afforded regulated investment companies, all of its taxable income
will be subject to federal income tax at regular corporate rates (without any
deduction for distributions to its shareholders). In such event, dividend
distributions (whether or not derived from interest on tax-exempt securities)
would be taxable as ordinary income to shareholders to the extent of the series'
current and accumulated earnings and profits, and would be eligible for the
dividends received deduction for corporations.

Each series of the Trust, including the Fund, will be required in certain cases
to withhold and remit to the U.S. Treasury 31% of taxable dividends or 31% of
gross proceeds realized upon sale paid to shareholders who have failed to
provide a correct tax identification number in the manner required, or who are
subject to withholding by the Internal Revenue Service for failure properly to
include on their return payments of taxable interest or dividends, or who have
failed to certify to the Fund that they are not subject to backup withholding
when required to do so or that they are "exempt recipients."

Depending upon the extent of the Fund's activities in states and localities in
which its offices are maintained, in which its agents or independent contractors
are located or in which it is otherwise deemed to be conducting business, the
Fund may be subject to the tax laws of such states or localities. In addition,
in those states and localities that have income tax laws, the treatment of the
Fund and its shareholders under such laws may differ from their treatment under
federal income tax laws.

<PAGE>

MANAGEMENT OF THE FUND

Trustees and Officers. The Trustees and executive officers of the Trust, their
ages, and their principal occupations for the last five years are as follows:

Name, Age, Position(s) Principal Occupation(s)
and Address During Past 5 Years
- -------------------------------------------------------------------------------

F. Daniel Bell, III, 41 Partner
Trustee Wyrick, Robbins, Yates & Ponton
4101 Lake Boone Trail Raleigh, North Carolina
Suite 300
Raleigh, North Carolina 27619

Jack E. Brinson, 63 President, Brinson Investment Co.
Trustee President, Brinson Chevrolet, Inc.
1105 Panola Street Tarboro, North Carolina
Tarboro, North Carolina 27886

Eddie C. Brown, 54 President
Trustee* Brown Capital Management, Inc.
President Baltimore, Maryland
The Brown Capital Management Funds
809 Cathedral Street
Baltimore, Maryland 21201

Richard K. Bryant, 37 President
Trustee* Capital Investment Group
President Raleigh, North Carolina
Capital Value Fund Vice President
Post Office Box 32249 Capital Investment Counsel
Raleigh, North Carolina 27622 Raleigh, North Carolina

Elmer O. Edgerton, Jr., 54 President
Vice President Capital Investment Counsel
Capital Value Fund Raleigh, North Carolina
Post Office Box 32249 Vice President
Raleigh, North Carolina 27622 Capital Investment Group
Raleigh, North Carolina

Timothy L. Ellis, 40 Vice President
Trustee* Investek Capital Management
Vice President Jackson, Mississippi
Investek Fixed Income Trust
317 East Capitol
Jackson, Mississippi 39201

<PAGE>

R. Mark Fields, 43 Vice President
Vice President Investek Capital Management
Investek Fixed Income Trust Jackson, Mississippi
317 East Capital
Jackson, Mississippi 39201

John M. Friedman, 52 Vice President
Vice President Investek Capital Management
Investek Fixed Income Trust Jackson, Mississippi
317 East Capital
Jackson, Mississippi 39201

H. Kel Landis, III, 39 Executive Vice President
Trustee Centura Bank
304 Stonybrook Road Rocky Mount, North Carolina
Rocky Mount, North Carolina 27803

Keith A. Lee, 35 Vice President
Vice President Brown Capital Management, Inc.
The Brown Capital Management Funds Baltimore, Maryland
309 Cathedral Street
Baltimore, Maryland 21201

Michael T. McRee, 52 President
President Investek Capital Management, Inc.
Investek Fixed Income Trust Jackson, Mississippi
317 East Capital
Jackson, Mississippi 39201

Frank P. Meadows III, 35 Managing Director
Trustee, Chairman and Treasurer* The Nottingham Company
105 North Washington Street Rocky Mount, North Carolina
Rocky Mount, North Carolina 27802

Anmar K. Sarafa, 35 Executive Vice President
Vice President Zaske, Sarafa & Associates, Inc.
The ZSA Funds Birmingham, Michigan
Suite 200
355 South Woodward Avenue
Birmingham, Michigan 48009

Thomas W. Steed, 38 Senior Corporate Attorney
Trustee Hardees Food Systems
101 Bristol Court Rocky Mount, North Carolina
Rocky Mount, North Carolina 27802

<PAGE>

J. Buckley Strandberg, 36 Vice President
Trustee Standard Insurance and Realty
Post Office Box 1375 Rocky Mount, North Carolina
Rocky Mount, North Carolina 27802

C. Frank Watson III, 25 Vice President
Secretary The Nottingham Company
105 North Washington Street Rocky Mount, North Carolina
Rocky Mount, North Carolina 27802 since 1992; previously,
Student
University of North Carolina
Chapel Hill, North Carolina

Arthur E. Zaske, 48 President
Trustee* Zaske, Sarafa, & Associates, Inc.
President Birmingham, Michigan
The ZSA Funds
Suite 200
355 South Woodward Avenue
Birmingham, Michigan 48009

- -------------------------------

* Indicates that Trustee is an "interested person" of the Trust for purposes of
the 1940 Act because of his position with one of the investment advisors or the
Administrator to the Trust.

The officers of the Trust will not receive compensation from the Trust for
performing the duties of their offices. Each Trustee who is not an "interested
person" of the Trust receives a fee of $2,000 each year plus $250 per series of
the Trust per meeting attended in person and $100 per series of the Trust per
meeting attended by telephone. All Trustees are reimbursed for any out-of-pocket
expenses incurred in connection with attendance at meetings.

Compensation Table*

Pension
Retirement Total
Aggregate Benefits Estimated Compensation
Compensation Accrued As Annual from the Trust
Name of Person, from the Part of Fund Benefits Upon Paid to
Position Trust Expenses Retirement Trustees
- -------------------- -------------- -------------- --------------- ----------------
<S> <C>
F. Daniel Bell, III $7,950 None None $7,950
Trustee

Jack E. Brinson $7,950 None None $7,950
Trustee

Eddie C. Brown None None None None
Trustee

Richard K. Bryant None None None None
Trustee

Timothy L. Ellis None None None None
Trustee

H. Kel Landis, III $7,950 None None $7,950
Trustee

Frank P. Meadows, III None None None None
Trustee

</TABLE>
12

<PAGE>

<S> <C>
Thomas W. Steed $6,200 None None $6,200
Trustee

J. Buckley Strandberg $7,950 None None $7,950
Trustee

Arthur E. Zaske None None None None
Trustee

* Figures are for the fiscal year ended March 31, 1996.

Principal Holders of Voting Securities. As of July 19, 1996, the Trustees and
Officers of the Trust as a group owned beneficially (i.e., had 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 the Fund as of July 19, 1996.

Investor Shares
--------------------

Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership* Percent
-----------------------------------------------------------------------

Bryant Electric Supply, Inc. 120,245.321 shares 19.018%**
Post Office Box 2169
Gastonia, North Carolina 28053

Bryant Supply Company, Inc. 128,330.526 shares 20.297%**
401(k) Profit Sharing Trust
Post Office Box 2169
Gastonia, North Carolina 28053

Bryant Supply Company, Inc. 55,152.090 shares 8.723%**
Rock Hill - Profit Sharing Trust
Post Office Box 2169
Gastonia, North Carolina 28053

* The Fund believes the shares indicated are owned both of record and
beneficially.

** Pursuant to applicable SEC regulations, these affiliated shareholders are
deemed to control the Fund.

Investment Advisor. Information about Capital Investment Counsel, Inc. (the
"Advisor") and its duties and compensation as Advisor is contained in the
Prospectus.

The Advisor will receive a monthly management fee equal to an annual rate of
0.60% of the first $250 million of the average daily net assets of the Fund and
0.50% on assets over $250 million. Restrictive limitations may be imposed on the
Fund as a result of changes in current state laws and regulations in those
states where the Fund has qualified its shares, or by a decision of the Trustees
to qualify the shares in other states having restrictive expense limitations.

Under the Advisory Agreement, the Advisor is not 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 the Advisor in the performance of its duties or from its reckless
disregard of its duties and obligations under the Agreement.

For the fiscal year ended March 31, 1994, the Fund paid the Advisor its advisory
fee of $46,338, while the Advisor voluntarily reimbursed a portion of the Fund's
operating expenses in the amount of $13,053. For the fiscal year ended

<PAGE>

March 31, 1995, the Fund paid the Advisor $41,825 of its advisory fee, while the
Advisor voluntarily waived the remaining portion of its fee in the amount of
$7,109. For the fiscal year ended March 31, 1996, the Fund paid the Advisor
$34,200 of its advisory fee, while the Advisor voluntarily waived the remaining
portion of its fee in the amount of $14,012.

The Administrator and Transfer Agent. The Trust has entered into a Fund
Accounting, Dividend Disbursing & Transfer Agent and Administration Agreement
with The Nottingham Company (the "Administrator"), 105 North Washington Street,
Post Office Drawer 69, Rocky Mount, North Carolina 27802-0069, pursuant to which
the Administrator receives a fee at the annual rate of 0.25% of the average
daily net assets of the Fund on the first $10 million; 0.20% of the next $40
million; 0.175% on the next $50 million; and 0.15% of its average daily net
assets in excess of $100 million. In addition, the Administrator currently
receives a base monthly fee of $1,750 for accounting and recordkeeping services
for the Fund and $750 for each Class of Shares beyond the initial Class. The
Administrator also charges the Fund for certain costs involved with the daily
valuation of investment securities and is reimbursed for out-of-pocket expenses.
The Administrator charges a minimum fee of $3,000 per month for all of its fees
taken in the aggregate, analyzed monthly.

For services to the Fund for the fiscal years ended March 31, 1994, 1995 and
1996, the Administrator received fees of $17,462, $16,437, and $18,574,
respectively. For the fiscal years ended March 31, 1994, 1995 and 1996, the
Administrator received $17,500, $21,000, and $21,000, respectively, for
accounting and recordkeeping services.

The Administrator will perform the following services for the Fund: (1)
coordinate with the Custodian and monitor the services it provides to the Fund;
(2) coordinate with and monitor any other third parties furnishing services to
the Fund; (3) provide the Fund with necessary office space, telephones and other
communications facilities and personnel competent to perform administrative and
clerical functions for the Fund; (4) supervise the maintenance by third parties
of such books and records of the Fund as may be required by applicable federal
or state law; (5) prepare or supervise the preparation by third parties of all
federal, state and local tax returns and reports of the Fund required by
applicable law; (6) prepare and, after approval by the Trust, file and arrange
for the distribution of proxy materials and periodic reports to shareholders of
the Fund as required by applicable law; (7) prepare and, after approval by the
Trust, arrange for the filing of such registration statements and other
documents with the Securities and Exchange Commission and other federal and
state regulatory authorities as may be required by applicable law; (8) review
and submit to the officers of the Trust for their approval invoices or other
requests for payment of Fund expenses and instruct the Custodian to issue checks
in payment thereof; and (9) take such other action with respect to the Fund as
may be necessary in the opinion of the Administrator to perform its duties under
the agreement.

The Administrator will also serve as the Fund's transfer agent and dividend
disbursing agent and will provide certain accounting and pricing services for
the Fund.

Distributor. Capital Investment Group, Inc. (the "Distributor"), Post Office Box
32249, Raleigh, North Carolina 27622, acts as an underwriter and distributor of
the Fund's shares for the purpose of facilitating the registration of shares of
the Fund under state securities laws and to assist in sales of Fund shares
pursuant to a Distribution Agreement (the "Distribution Agreement") approved by
the Board of Trustees of the Trust. The Distributor is an affiliate of the
Advisor.

In this regard, the Distributor has agreed at its own expense to qualify as a
broker-dealer under all applicable federal or state laws in those states which
the Fund shall from time to time identify to the Distributor as states in which
it wishes to offer its shares for sale, in order that state registrations may be
maintained for the Fund.

The Distributor is a broker-dealer registered with the Securities and Exchange
Commission and a member in good standing of the National Association of
Securities Dealers, Inc.

The Distribution Agreement may be terminated by either party upon 60 days prior
written notice to the other party.

For the fiscal years ended March 31, 1994, 1995, and 1996, the Distributor
received aggregate commissions for the sale of Fund shares in the amounts of
$10,267, $8,430, and $6,580, respectively, of which the Distributor retained
$570, $489, and $401, respectively, after reallowance to broker-dealers and
sales representatives.

<PAGE>

portfolio securities, collects all income and other payments with respect to
portfolio securities, disburses monies at the Fund's request and maintains
records in connection with its duties as Custodian. For its services as
Custodian, the Custodian is entitled to receive from the Fund an annual fee
based on the average net assets of the Fund held by the Custodian.

Independent Auditors. The firm of KPMG Peat Marwick LLP, 1021 East Cary Street,
Richmond, Virginia 23219-4023, serves as independent auditors for the Fund, and
will audit the annual financial statements of the Fund and prepare the Fund's
federal and state tax returns.

SPECIAL SHAREHOLDER SERVICES

The Fund offers the following shareholder services:

Regular Account. The regular account allows for voluntary investments to be made
at any time. Available to individuals, custodians, corporations, trusts,
estates, corporate retirement plans and others, investors are free to make
additions and withdrawals to or from their account as often as they wish. When
an investor makes an initial investment in the Fund, a shareholder account is
opened in accordance with the investor's registration instructions. Each time
there is a transaction in a shareholder account, such as an additional
investment or the reinvestment of a dividend or distribution, the shareholder
will receive a confirmation statement showing the current transaction and all
prior transactions in the shareholder account during the calendar year to date,
along with a summary of the status of the account as of the transaction date. As
stated in the Prospectus, share certificates are not issued.

Automatic Investment Plan. The automatic investment plan enables shareholders to
make regular monthly or quarterly investment in shares through automatic charges
to their checking account. With shareholder authorization and bank approval, the
Administrator will automatically charge the checking account for the amount
specified ($100 minimum) which will be automatically invested in shares at the
public offering price on or about the 21st day of the month. The shareholder may
change the amount of the investment or discontinue the plan at any time by
writing to the Administrator.

Systematic Withdrawal Plan. Shareholders owning shares with a value of $10,000
or more may establish a Systematic Withdrawal Plan. A shareholder may receive
monthly or quarterly payments, in amounts of not less than $100 per payment, by
authorizing the Fund to redeem the necessary number of shares periodically (each
month, or quarterly in the months of March, June, September and December) in
order to make the payments requested. The Fund has the capacity of
electronically depositing the proceeds of the systematic withdrawal directly to
the shareholder's personal bank account ($5,000 minimum per bank wire).
Instructions for establishing this service are included in the Fund Shares
Application, enclosed in the Prospectus, or available by calling the Fund. If
the shareholder prefers to receive his systematic withdrawal proceeds in cash,
or if such proceeds are less than the $5,000 minimum for a bank wire, checks
will be made payable to the designated recipient and mailed within 7 days of the
valuation date. If the designated recipient is other than the registered
shareholder, the signature of each shareholder must be guaranteed on the
application (see "Signature Guarantees" in the Prospectus). A corporation (or
partnership) must also submit a "Corporate Resolution" (or "Certification of
Partnership") indicating the names, titles and required number of signatures
authorized to act on its behalf. The application must be signed by a duly
authorized officer(s) and the corporate seal affixed. No redemption fees are
charged to shareholders under this plan. Costs in conjunction with the
administration of the plan are borne by the Fund. Shareholders should be aware
that such systematic withdrawals may deplete or use up entirely their initial
investment and may result in realized long-term or short-term capital gains or
losses. The Systematic Withdrawal Plan may be terminated at any time by the Fund
upon sixty days written notice or by a shareholder upon written notice to the
Fund. Applications and further details may be obtained by calling the Fund at
1-800-525-FUND, or by writing to:

Capital Value Fund
[Investor Shares] or [Institutional Shares]
105 North Washington Street
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069

<PAGE>

accepted, the securities will be valued using the same criteria and methods as
described in "How Shares are Valued" in the Prospectus. Transactions involving
the issuance of shares in the Fund for securities in lieu of cash will be
limited to acquisitions of securities (except for municipal debt securities
issued by state political subdivisions or their agencies or instrumentalities)
which: (a) meet the investment objectives and policies of the Fund; (b) are
acquired for investment and not for resale; (c) are liquid securities which are
not restricted as to transfer either by law or liquidity of market; and (d) have
a value which is readily ascertainable (and not established only by evaluation
procedures) as evidenced by a listing on the American Stock Exchange, the New
York Stock Exchange, or NASDAQ.

Redemptions in Kind. The Fund does not intend, under normal circumstances, to
redeem its securities by payment in kind. It is possible, however, that
conditions may arise in the future which would, in the opinion of the Trustees,
make it undesirable for the Fund to pay for all redemptions in cash. In such
case, the Board of Trustees may authorize payment to be made in readily
marketable portfolio securities of the Fund. Securities delivered in payment of
redemptions would be valued at the same value assigned to them in computing the
net asset value per share. Shareholders receiving them would incur brokerage
costs when these securities are sold. An irrevocable election has been filed
under Rule 18f-1 of the 1940 Act, wherein the Fund committed itself to pay
redemptions in cash, rather than in kind, to any shareholder of record of the
Fund who redeems during any ninety-day period, the lesser of (a) $250,000 or (b)
one percent (1%) of the Fund's net asset value at the beginning of such period.

Transfer of Registration. To transfer shares to another owner, send a written
request to the Fund at the address shown herein. Your request should include the
following: (1) the Fund name and existing account registration; (2) signature(s)
of the registered owner(s) exactly as the signature(s) appear(s) on the account
registration; (3) the new account registration, address, social security or
taxpayer identification number and how dividends and capital gains are to be
distributed; (4) signature guarantees (See the Prospectus under the heading
"Signature Guarantees"); and (5) any additional documents which are required for
transfer by corporations, administrators, executors, trustees, guardians, etc.
If you have any questions about transferring shares, call or write the Fund.

ADDITIONAL INFORMATION ON PERFORMANCE

From time to time, the total return of each Class of the Fund may be quoted in
advertisements, sales literature, shareholder reports or other communications to
shareholders. The Fund computes the "average annual total return" of each Class
of the Fund by determining the average annual compounded rates of return during
specified periods that equate the initial amount invested to the ending
redeemable value of such investment. This is done by determining the ending
redeemable value of a hypothetical $1,000 initial payment. This calculation is
as follows:

P(1+T)n = ERV

Where: T = average annual total return.

ERV = ending redeemable value at the end of the period
covered by the computation of a hypothetical $1,000
payment made at the beginning of the period.

P = hypothetical initial payment of $1,000 from which the
maximum sales load is deducted.

n = period covered by the computation, expressed in terms
of years.

The Fund may also compute the aggregate total return of each Class of the Fund,
which is calculated in a similar manner, except that the results are not
annualized.

The calculation of average annual total return and aggregate total return assume
that the maximum sales load is deducted from the initial $1,000 investment at
the time it is made and that there is a reinvestment of all dividends and
capital gain distributions on the reinvestment dates during the period. The
ending redeemable value is determined by assuming complete redemption of the
hypothetical investment and the deduction of all nonrecurring charges at the end
of the period covered by the computations. The Fund may also quote other total
return information that does not reflect the effects of the sales load.

The average annual total return quotations for the Investor Shares of the Fund
for the year ended March 31, 1996, the three years ended March 31, 1996, and
since inception (December 31, 1991 to March 31, 1996) are 12.06%, 8.46%, and
8.30%, respectively. The cumulative total return quotation for the Investor
Shares of the Fund since inception through March 31, 1996 is 40.37%. These
performance quotations assume the maximum 3.5% sales load for the Fund was

<PAGE>

deducted from the initial investment. The total return of the Investor Shares of
the Fund for the year ended March 31, 1996, the three years ended March 31,
1996, and since inception through March 31, 1996, without deducting the maximum
3.5% sales load, are 16.16%, 9.75%, and 9.21%, respectively. These performance
quotations should not be considered as representative of the Fund's performance
for any specified period in the future. The Institutional Shares of the Fund
were not offered during the period of such performance quotations.

The Fund's performance may be compared in advertisements, sales literature,
shareholder reports, and other communications to the performance of other mutual
funds having similar objectives or to standardized indices or other measures of
investment performance. In particular, the Fund may compare its performance to
the S&P 500 Index, the Lehman Aggregate Bond Index, or a combination of such
indices. Comparative performance may also be expressed by reference to a ranking
prepared by a mutual fund monitoring service or by one or more newspapers,
newsletters or financial periodicals. The Fund may also occasionally cite
statistics to reflect its volatility and risk.

The Fund's performance fluctuates on a daily basis largely because net earnings
and net asset value per share fluctuate daily. Both net earnings and net asset
value per share are factors in the computation of total return as described
above.

As indicated, from time to time, the Fund may advertise its performance compared
to similar funds or portfolios using certain indices, reporting services, and
financial publications. These may include the following:

o Lipper Analytical Services, Inc. ranks funds in various fund categories
by making comparative calculations using total return. Total return
assumes the reinvestment of all capital gains distributions and income
dividends and takes into account any change in net asset value over a
specific period of time.

o Morningstar, Inc., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for
two weeks.

Investors may use such indices in addition to the Fund's Prospectus to obtain a
more complete view of the Fund's performance before investing. Of course, when
comparing the Fund's performance to any index, factors such as composition of
the index and prevailing market conditions should be considered in assessing the
significance of such comparisons. When comparing funds using reporting services,
or total return, investors should take into consideration any relevant
differences in funds such as permitted portfolio compositions and methods used
to value portfolio securities and compute offering price. Advertisements and
other sales literature for the Fund may quote total returns that are calculated
on non-standardized base periods. The total returns represent the historic
change in the value of an investment in the Fund based on monthly reinvestment
of dividends over a specified period of time.

From time to time the Fund may include in advertisements and other
communications information, charts, and illustrations relating to inflation and
the reflects of inflation on the dollar, including the purchasing power of the
dollar at various rates of inflation. The Fund may also disclose from time to
time information about its portfolio allocation and holdings at a particular
date (including ratings of securities assigned by independent rating services
such as S&P and Moody's). The Fund may also depict the historical performance of
the securities in which the Fund may invest over periods reflecting a variety of
market or economic conditions either alone or in comparison with alternative
investments, performance indices of those investments, or economic indicators.
The Fund may also include in advertisements and in materials furnished to
present and prospective shareholders statements or illustrations relating to the
appropriateness of types of securities and/or mutual funds that may be employed
to meet specific financial goals, such as saving for retirement, children's
education, or other future needs.

<PAGE>

APPENDIX A

DESCRIPTION OF RATINGS

The Fund may acquire from time to time fixed income securities that meet the
following minimum rating criteria ("Investment-Grade Debt Securities") (or if
not rated, of equivalent quality as determined by the Advisor). The various
ratings used by the nationally recognized securities rating services are
described below.

A rating by a rating service represents the service's opinion as to the credit
quality of the security being rated. However, the ratings are general and are
not absolute standards of quality or guarantees as to the creditworthiness of an
issuer. Consequently, the Advisor believes that the quality of fixed income
securities in which the Fund may invest should be continuously reviewed and that
individual analysts give different weightings to the various factors involved in
credit analysis. A rating is not a recommendation to purchase, sell or hold a
security, because it does not take into account market value or suitability for
a particular investor. When a security has received a rating from more than one
service, each rating is evaluated independently. Ratings are based on current
information furnished by the issuer or obtained by the rating services from
other sources that they consider reliable. Ratings may be changed, suspended or
withdrawn as a result of changes in or unavailability of such information, or
for other reasons.

Standard & Poor's Ratings Group. The following summarizes the highest four
ratings used by Standard & Poor's Ratings Group ("S&P") for bonds which are
deemed to be "Investment-Grade Debt Securities" by the Advisor:

AAA - This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to pay interest and repay
principal.

AA - Debt rated AA is considered to have a very strong capacity to pay
interest and repay principal and differs from AAA issues only in a small
degree.

A - Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than debt in higher
rated categories.

BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for bonds in this category than for debt in
higher rated categories.

To provide more detailed indications of credit quality, the AA, A and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within these major rating categories.

Bonds rated BB, B, CCC, CC and C are not considered by the Advisor to be
"Investment-Grade Debt Securities" and are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and C the highest degree of speculation. While such
bonds may have some quality and protective characteristics, these are outweighed
by large uncertainties or major risk exposures to adverse conditions.

Commercial paper rated A-1 by S&P indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted A-1+. Capacity for timely payment on
commercial paper rated A-2 is satisfactory, but the relative degree of safety is
not as high as for issues designated A-1.

The rating SP-1 is the highest rating assigned by S&P to municipal notes and
indicates very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics are given a
plus (+) designation.

<PAGE>

Moody's Investors Service, Inc. The following summarizes the highest four
ratings used by Moody's Investors Service, Inc. ("Moody's") for bonds which are
deemed to be "Investment-Grade Debt Securities" by the Advisor:

Aaa - Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred
to as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.

Aa - Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there
may be other elements present which make the long-term risks appear
somewhat larger than in Aaa securities.

A - Debt which is rated A possesses many favorable investment attributes
and is to be considered as an upper medium grade obligation. Factors
giving security to principal and interest are considered adequate but
elements may be present which suggest a susceptibility to impairment
sometime in the future.

Baa - Debt which is rated Baa is considered as a medium grade obligation,
i.e., it is neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such debt lacks outstanding
investment characteristics and in fact has speculative characteristics as
well.

Moody's applies numerical modifiers (l, 2 and 3) with respect to bonds rated Aa,
A and Baa. The modifier 1 indicates that the bond being rated ranks in the
higher end of its generic rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the bond ranks in the lower end of
its generic rating category.

Bonds which are rated Ba, B, Caa, Ca or C by Moody's are not considered
"Investment-Grade Debt Securities" by the Advisor. Bonds rated Ba are judged to
have speculative elements because their future cannot be considered as well
assured. Uncertainty of position characterizes bonds in this class, because the
protection of interest and principal payments often may be very moderate and not
well safeguarded.

Bonds which are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the security over any long period for time may be small. Bonds
which are rated Caa are of poor standing. Such securities may be in default or
there may be present elements of danger with respect to principal or interest.
Bonds which are rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.
Bonds which are rated C are the lowest rated class of bonds and issues so rated
can be regarded as having extremely poor prospects of ever attaining any real
investment standing.

The rating Prime-1 is the highest commercial paper rating assigned by Moody's.
Issuers rated Prime-1 (or related supporting institutions) are considered to
have a superior capacity for repayment of short-term promissory obligations.
Issuers rated Prime-2 (or related supporting institutions) are considered to
have a strong capacity for repayment of short-term promissory obligations. This
will normally be evidenced by many of the characteristics of issuers rated
Prime-1 but to a lesser degree. Earnings trends and coverage ratios, while
sound, will be more subject to variation. Capitalization characteristics, while
still appropriated may be more affected by external conditions. Ample alternate
liquidity is maintained.

The following summarizes the highest rating used by Moody's for short-term notes
and variable rate demand obligations:

MIG-l; VMIG-l - Obligations bearing these designations are of the best
quality, enjoying strong protection by established cash flows, superior
liquidity support or demonstrated broad-based access to the market for
refinancing.

<PAGE>

Duff & Phelps Credit Rating Co. The following summarizes the highest four
ratings used by Duff & Phelps Credit Rating Co. ("D&P") for bonds which are
deemed to be "Investment-Grade Debt Securities" by the Advisor:

AAA - Bonds that are rated AAA are of the highest credit quality. The
risk factors are considered to be negligible, being only slightly more
than for risk-free U.S. Treasury debt.

AA - Bonds that are rated AA are of high credit quality. Protection
factors are strong. Risk is modest but may vary slightly from time to
time because of economic conditions.

A - Bonds rated A have average but adequate protection factors. The risk
factors are more variable and greater in periods of economic stress.

BBB - Bonds rated BBB have below average protection factors but are still
considered sufficient for prudent investment. There is considerable
variability in risk during economic cycles.

Bonds rated BB, B and CCC by D&P are not considered "Investment-Grade Debt
Securities" and are regarded, on balance, as predominantly speculative with
respect to the issuer's ability to pay interest and make principal payments in
accordance with the terms of the obligations. BB indicates the lowest degree of
speculation and CCC the highest degree of speculation.

The rating Duff l is the highest rating assigned by D&P for short-term debt,
including commercial paper. D&P employs three designations, Duff l+, Duff 1 and
Duff 1- within the highest rating category. Duff l+ indicates highest certainty
of timely payment. Short-term liquidity, including internal operating factors
and/or access to alternative sources of funds, is judged to be "outstanding, and
safety is just below risk-free U.S. Treasury short-term obligations." Duff 1
indicates very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are
considered to be minor. Duff 1- indicates high certainty of timely payment.
Liquidity factors are strong and supported by good fundamental protection
factors. Risk factors are very small.

Fitch Investors Service, Inc. The following summarizes the highest four ratings
used by Fitch Investors Service, Inc. ("Fitch") for bonds which are deemed to be
"Investment-Grade Debt Securities" by the Advisor:

AAA - Bonds are considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.

AA - Bonds are considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated AAA. Because
bonds rated in the AAA and AA categories are not significantly vulnerable
to foreseeable future developments, short-term debt of these issuers is
generally rated F-1+.

A - Bonds that are rated A are considered to be investment grade and of
high credit quality. The obligor's ability to pay interest and repay
principal is considered to be strong, but may be more vulnerable to
adverse changes in economic conditions and circumstances than bonds with
higher ratings.

BBB - Bonds rated BBB are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and
repay principal is considered to be adequate. Adverse changes in economic
conditions and circumstances, however, are more likely to have adverse
impact on these bonds, and therefore impair timely payment. The
likelihood that the ratings of these bonds will fall below investment
grade is higher than for bonds with higher ratings.

To provide more detailed indications of credit quality, the AA, A and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within a rating category.

Bonds rated BB, B and CCC by Fitch are not considered "Investment-Grade Debt
Securities" and are regarded, on balance, as predominantly speculative with
respect to the issuer's ability to pay interest and make principal payments in
accordance with the terms of the obligations. BB indicates the lowest degree of
speculation and CCC the highest degree of speculation.

<PAGE>

The following summarizes the three highest ratings used by Fitch for short-term
notes, municipal notes, variable rate demand instruments and commercial paper:

F-1+ - Instruments assigned this rating are regarded as having the
strongest degree of assurance for timely payment.

F-1 - Instruments assigned this rating reflect an assurance of timely
payment only slightly less in degree than issues rated F-1+

F-2 - Instruments assigned this rating have satisfactory degree of
assurance for timely payment, but the margin of safety is not as great as
for issues assigned F-1+ and F-1 ratings.

<PAGE>

MANAGEMENT'S COMMENTS

CAPITAL VALUE FUND

The twelve months ending March 31, 1996 have been very good for the
Capital Value Fund (CVF). While the market's overall trend has been positive,
the year has had its share of ups and downs. A sharp decline in fixed rate
investments in March 1996 has caused some problems; however, this decline has
been more than offset by a resurrection in technology and cyclical stocks. Our
outlook on fixed income ownership focuses on total return rather than short term
trading moves. This generally leads to holding bonds until maturity, and ignore
to some extent the price swings in the market. Additionally, the majority of our
yields in the bond portfolio would be unattainable at today's prices. We are
caught in a "Catch 22": the economy must grow strongly enough for companies to
continue expansion, yet too rapid a pace in economic growth leads to a rise in
interest rates which ultimately provides competition for the stock market and
leads to a decline in stock prices. The solution? Buy companies which have
pricing power and will benefit from a mild dose of inflation. The obvious
choices could be the metal and paper companies, but a safer and less obvious
example is the grocery stocks. This outlook is based on our core belief in
taking what the market gives you. We continue to feel that inflation fears are
overdone and remain positive about the financial markets.

Richard Bryant

<PAGE>

CAPITAL VALUE FUND
PERFORMANCE UPDATE - $10,000 INVESTMENT
FOR THE PERIOD FROM DECEMBER 31, 1991 TO
MARCH 31, 1996

Capital Value Fund 60% S&P/40% Lehman Aggregate
12/31/91 9,650 9,650
03/31/92 9,541 9,455
06/30/92 9,729 9,716
09/30/92 9,929 10,068
12/31/92 10,159 10,377
03/31/93 10,616 10,821
06/30/93 10,739 10,967
09/30/93 10,898 11,252
12/31/93 11,255 11,409
03/31/94 11,099 11,019
06/30/94 10,927 11,001
09/30/94 11,395 11,351
12/31/94 11,363 11,367
03/31/95 12,084 12,266
06/30/95 13,050 13,277
09/30/95 13,474 14,038
12/31/95 13,802 14,794
03/31/96 14,037 15,215

This graph depicts the performance of the Capital Value Fund versus a combined
index of 60% S&P 500 Index and 40% Lehman Brothers Aggregate Bond Index. It is
important to note the Capital Value Fund is a professionally managed mutual fund
while the indexes are not available for investment and are unmanaged. The
comparison is shown for illustrative purposes only.

AVERAGE ANNUAL TOTAL RETURN

</TABLE>
<TABLE>
<CAPTION>

FOR THE PERIOD OF THREE YEARS ENDED
12/31/91 THROUGH 3/31/96 ONE YEAR ENDED 3/31/96 3/31/96
<S> <C>
No sales load 9.21% 16.16% 9.75%
3.5% sales load 8.30% 12.06% 8.46%
</TABLE>

* The graph assumes an initial $10,000 investment at December 31, 1991
($9,650 after maximum sales load of 3.5%). All dividends and
distributions are reinvested.

* At March 31, 1996, the Fund would have grown to $14.037 - total
investment return of 40.37% since December 31, 1991. Without the
deduction of the 3.5% maximum sales load, the Fund would have grown to
$14,547 - total investment return of 45.47% since December 31, 1991. The
sales load is reduced or eliminated for larger purchases.

* At March 31, 1996, a similar investment in a combined index of 60% S&P
500 and 40% Lehman Brothers Aggregate Bond index (after the maximum
sales load of 3.5%) would have grown to $15,215 - total investment
return of 52.15% since December 31, 1991.

* Past performance is not a guarantee of future performance. A mutual
fund's share price and investment return will vary with market
conditions, and the principal value of shares, when redeemed, may be
worth more or less than the original cost. Average annual returns are
historical in nature and measure net investment income and capital gain
or loss from portfolio investments assuming reinvestments of dividends.

<PAGE>

CAPITAL VALUE FUND

PORTFOLIO OF INVESTMENTS

March 31, 1996

Value
Shares (note 1)
------- ----------
COMMON STOCKS - 67.91%

Aerospace & Defense - 0.78%
Rockwell International Corporation 1,000 $58,875
----------

Beverages - 0.92%
Cott Corporation 1,000 6,375
PepsiCo, Inc. 1,000 63,250
----------
69,625
----------
Brewery - 2.49%
Adolph Coors Company 3,000 53,625
Anheuser-Busch Companies, Inc. 2,000 134,750
----------
188,375
----------
Broadcast-Radio & Television - 0.91%
Coastcast Corporation 1,000 18,625
(a) US West, Inc. 2,000 41,250
(a) Valuevision International, Inc. 1,000 8,562
----------
68,437
----------
Chemicals - 1.56%
Schulman (A.), Inc. 1,000 21,125
WD-40 Company 2,000 96,500
----------
117,625
----------
Commercial Services - 1.51%
Crawford & Company 4,000 63,000
Measurex Corporation 1,000 29,000
(a) Pinkerton's, Inc. 1,000 21,750
----------
113,750
----------
Computers - 4.18%
(a) AST Research, Inc. 1,000 4,766
(a) Amdahl Corporation 1,500 12,750
(a) Compaq Computer Corporation 3,000 115,875
(a) EMC Corporation 4,500 98,438
(a) Medar, Inc. 3,750 33,281
(a) NetFrame Systems, Inc. 1,000 5,234
(a) Pinnacle Micro, Inc. 1,500 11,812
(a) Silicon Graphics, Inc. 1,000 25,000
(a) Tandem Computers, Inc. 1,000 8,875
----------
316,031
----------

(Continued)

<PAGE>

CAPITAL VALUE FUND

PORTFOLIO OF INVESTMENTS

March 31, 1996

Value
Shares (note 1)
--------- ----------
COMMON STOCKS - Continued

Computer Software & Services - 7.18%
Adobe Systems, Inc. 1,000 $32,250
(a) Artisoft, Inc. 2,500 19,687
Automatic Data Processing, Inc. 1,000 39,375
(a) Avid Technology, Inc. 500 10,500
(a) Cisco Systems, Inc. 4,000 185,500
(a) Concentra Corporation 1,000 5,250
(a) Cornerstone Imaging, Inc. 500 4,875
(a) Interleaf, Inc. 2,000 17,750
(a) Intersolv 3,000 34,875
(a) NETCOM On-Line Communication Services 500 12,000
(a) Novell, Inc. 3,000 40,125
(a) Parametric Technology Company 2,000 78,250
(a) ParcPlace Digitalk, Inc. 1,000 9,125
(a) Pyxis Corporation 500 12,844
(a) Santa Cruz Operation, Inc. 3,000 18,375
(a) Viewlogic Systems, Inc. 2,000 22,000
----------
542,781
----------
Electrical Equipment - 0.55%
(a) Level One Communications, Inc. 1,500 41,625
----------

Electronics - 5.25%
(a) Booktree Corporation 1,000 9,000
(a) Intergrated Circuit Systems, Inc. 1,000 9,750
Logicon, Inc. 4,000 127,500
(a) Mentor Graphics Corporation 1,000 14,250
Motorola, Inc. 500 26,500
National Services Industries 3,000 108,750
(a) Sonic Solutions, Inc. 2,500 17,188
(a) Verifone, Inc. 2,000 84,000
----------
396,938
----------
Electronics - Semiconductor - 1.46%
Intel Corporation 1,000 56,875
(a) LSI Logic Corporation 2,000 53,750
----------
110,625
----------
Engineering & Construction - 0.44%
Stone & Webster, Inc. 1,000 32,875
----------

Entertainment - 1.51%
(a) GTECH Holdings Corporation 1,000 31,000
(a) Walt Disney Company 1,300 83,038
----------
114,038
----------

(Continued)

<PAGE>
CAPITAL VALUE FUND

PORTFOLIO OF INVESTMENTS

March 31, 1996

Value
Shares (note 1)
------- ---------
COMMON STOCKS - Continued

Environmental Control - 0.50%
(a) Harding Lawson Associates Group 1,000 $6,000
WMX Technologies, Inc. 1,000 31,750
--------
37,750
--------
Financial - Banks, Commercial - 1.48%
Wachovia Corporation 2,500 111,875
--------

Food - Processing - 1.99%
Archer Daniels Midland 2,895 53,196
(a) Grist Mill Company 3,000 18,000
Lance, Inc. 3,000 46,688
Sara Lee Corporation 1,000 32,625
--------
150,509
--------
Food - Wholesale - 0.03%
(a) Earthgrains Company 80 2,390
--------

Foreign Securities - 5.21%
Fuji Photo Film Company, Ltd. 1,100 63,525
Glaxo PLC 2,000 50,000
(a) Grupo Embotelladoras de Mexico SA de CV 2,000 17,500
Grupo Televisa S.A. 1,000 24,875
Guinness PLC 1,500 53,340
Hanson PLC 2,000 30,000
Imperial Oil, Ltd. 1,000 39,500
Moore Corporation Limited 3,000 58,500
(a) Nintendo Company, Ltd. 2,000 15,500
Scitex Corporation 2,000 27,750
Toray Industries, Inc. 2,000 12,902
--------
393,392
--------
Forest Products & Paper - 0.38%
St. Joe Paper Company 500 28,875
--------

Furniture & Home Appliances - 0.14%
Shelby Williams Industries, Inc. 1,000 10,750
--------

Holding Companies - Diversified - 0.03%
(a) U. S. Industries, Inc. 100 2,075
--------

Household Products & Housewares - 0.38%
Rubbermaid, Inc. 1,000 28,375
--------

(Continued)

<PAGE>

CAPITAL VALUE FUND

PORTFOLIO OF INVESTMENTS

March 31, 1996

Value
Shares (note 1)
------ -----------
COMMON STOCKS - Continued

Insurance - Life & Health - 1.61%
Jefferson-Pilot Corporation 2,250 $121,219
-----------

Leisure Time - 0.27%
(a) Aldila, Inc. 2,000 9,250
(a) Topps Company, Inc. 2,000 11,000
-----------
20,250
-----------
Lodging - 0.14%
(a) John Q. Hammons Hotels, Inc. 1,000 10,875
-----------

Medical - Hospital Management & Service - 0.22%
(a) Community Psychiatric Centers 2,000 16,750
-----------

Medical Supplies - 0.52%
(a) Acuson Corporation 1,000 15,750
(a) Datascope Corporation 1,000 23,500
-----------
39,250
-----------
Miscellaneous - Manufacturing - 1.41%
(a) ACX Technologies, Inc. 2,000 36,250
Cross (A.T.) Company 1,500 23,625
Mine Safey Appliances Company 1,000 46,250
-----------
106,125
-----------
Oil & Gas - Domestic - 0.38%
Sun Company, Inc. 1,000 28,875
-----------

Oil & Gas - Equipment & Services - 1.05%
Schlumberger, Ltd. 1,000 79,125
-----------

Oil & Gas - Exploration - 0.19%
(a) Parker Drilling Company 2,000 14,000
-----------

Pharmaceuticals - 3.17%
Bristol-Myers Squibb Company 1,700 145,562
Merck & Company, Inc. 1,500 93,562
-----------
239,124
-----------
Publishing - Printing - 1.04%
Deluxe Corporation 1,000 31,375
Readers Digest Association, Inc. 1,000 47,250
-----------
78,625
-----------
Real Estate - 0.21%
(a) Price Enterprises, Inc. 1,000 15,750
-----------

(Continued)

<PAGE>

CAPITAL VALUE FUND

PORTFOLIO OF INVESTMENTS

March 31, 1996

Value
Shares (note 1)
------ ---------
COMMON STOCKS - Continued

Restaurants & Food Service - 2.64%
(a) Buffets, Inc. 1,000 $14,250
Cracker Barrel Old Country Store, Inc. 5,500 127,875
McDonald's Corporation 1,000 48,375
(a) Ryan's Family Steak Houses, Inc. 1,000 9,000
---------
199,500
---------
Retail - Apparel - 1.57%
Blair Corporation 1,000 25,250
Cato Corporation 2,000 20,250
DEB Shops, Inc. 2,000 9,000
(a) Designs, Inc. 1,000 7,000
The Limited, Inc. 3,000 57,000
---------
118,500
---------
Retail - Department Stores - 1.60%
50-OFF Stores, Inc. 4,000 6,000
Wal-Mart Stores, Inc 5,000 115,000
---------
121,000
---------
Retail - Grocery - 1.77%
Food Lion, Inc. 10,000 58,125
Weis Markets, Inc. 2,500 75,312
---------
133,437
---------
Retail - Specialty Line - 1.02%
Circuit City Stores, Inc. 2,000 59,750
(a) Gibson Greetings, Inc. 1,000 13,500
Sun Television and Appliances 1,000 4,125
---------
77,375
---------
Telecommunications - 0.11%
360 Communications Company 333 7,950
---------

Textiles - 1.86%
(a) Ashworth, Inc. 2,000 13,250
(a) Burlington Industries, Inc. 1,600 20,200
(a) Cone Mills Corporation 1,000 11,625
Liz Claiborne, Inc. 2,000 68,500
Russell Corporation 1,000 26,750
---------
140,325
---------
Tire & Rubber - 0.68%
The Goodyear Tire & Rubber Company 1,000 51,000
---------

Tobacco - 0.12%
RJR Nabisco Holdings Corporation 300 9,150
---------

(Continued)

<PAGE>

CAPITAL VALUE FUND

PORTFOLIO OF INVESTMENTS

March 31, 1996

Value
Shares (note 1)
------ ----------
COMMON STOCKS - Continued

Trucking & Leasing - 0.66%
Caliber System, Inc. 1,000 $42,875
(a) Roadway Services, Inc. 500 7,062
----------
49,937
----------
Utilities - Electric - 1.04%
Potomac Electric Power Company 3,000 78,375
----------

Utilities - Telecommunications - 5.55%
A T & T Corporation 1,000 61,125
BellSouth Corporation 2,000 74,000
Cincinnati Bell, Inc 1,000 52,000
GTE Corporation 2,000 87,750
Pacific Telesis Group 1,500 41,438
Sprint Corporation 1,000 38,000
U S West, Inc. 2,000 64,750
----------
419,063
----------
Wholesale - Special Line - 0.20%
Pomeroy Computer Resources, Inc. 1,100 14,850
----------

Total Common Stocks (Cost $4,106,081) 5,128,021
----------

PREFERRED STOCK - 0.69%
Sears, Roebuck and Company
Depository Shares, 1st Series 8.88% 2,000 51,750
(Cost $52,950)

Principal
Amount
------------
CORPORATE OBLIGATIONS - 27.54%

A T & T Corporation
7.500%, due 06/01/2006 $50,000 52,625
8.125%, due 01/15/2022 50,000 52,062
8.125%, due 07/15/2024 50,000 52,375
8.625%, due 12/01/2031 100,000 107,500
American Express Company
8.625%, due 05/15/2022 50,000 52,328
Anheuser-Busch Companies, Inc.
9.000%, due 12/01/2009 25,000 29,386
8.625%, due 12/01/2016 50,000 52,250

(Continued)

<PAGE>

CAPITAL VALUE FUND

PORTFOLIO OF INVESTMENTS

March 31, 1996

Principal Value
Amount (note 1)
---------- ----------
CORPORATE OBLIGATIONS - Continued

Archer Daniels Midland Corporation
6.250%, due 05/15/2003 $100,000 $97,688
8.875%, due 04/15/2011 25,000 28,906
BellSouth Telecommunications
6.750%, due 10/15/2033 125,000 113,594
7.000%, due 02/01/2005 50,000 51,000
Boeing Company
8.750%, due 09/15/2031 150,000 175,406
Chevron Corporation
9.375%, due 06/01/2016 50,000 52,500
Coca-Cola Company
8.500%, due 02/01/2022 70,000 78,225
Duke Power Company
6.375%, due 03/01/2008 20,000 18,825
6.750%, due 08/01/2025 100,000 89,750
Du Pont (E.I.) De Nemours & Company
6.000%, due 12/01/2001 60,000 58,500
8.125%, due 05/15/2004 50,000 53,844
7.950%, due 01/15/2023 50,000 51,345
General Electric Capital Corporation
8.750%, due 05/21/2007 100,000 114,906
International Business Machines Corporation
8.375%, due 11/01/2019 50,000 54,812
Kmart Corporation
8.250%, due 01/01/2022 50,000 39,000
Morgan Stanley Group, Inc.
7.500%, due 02/01/2024 75,000 70,890
Pacific Telesis Group
6.250%, due 03/01/2005 100,000 96,000
Sears, Roebuck and Company
9.250%, due 04/15/1998 50,000 52,688
United Parcel Service of America, Inc.
8.375%, due 04/01/2020 50,000 56,375
US West, Inc.
6.875%, due 09/15/2033 50,000 44,625
Wachovia Corporation
6.375%, due 04/15/2003 75,000 73,477
Wal-Mart Stores, Inc.
6.500%, due 06/01/2003 25,000 24,688
8.500%, due 09/15/2024 25,000 26,383
8.875%, due 06/29/2011 150,000 157,969
----------

Total Corporate Obligations (Cost $1,967,220) 2,079,922
------------
(Continued)

<PAGE>

CAPITAL VALUE FUND

PORTFOLIO OF INVESTMENTS

March 31, 1996

Principal Value
Amount (note 1)
--------- ----------

REPURCHASE AGREEMENT (b) - 3.78%
Wachovia Bank
5.38%, due April 1, 1996 $285,743 $ 285,743
(Cost $285,743) ----------

Total Value of Investments (Cost $6,411,994 (c)) 99.92% 7,545,436
Other Assets Less Liabilities 0.08% 6,367
--------- ----------
Net Assets 100.00% $7,551,803
========= ==========

(a) Non-income producing investment.

(b) Joint repurchase agreement entered into March 31, 1996, with a maturity
value of $54,221,391 collateralized by $46,275,000 U.S. Treasury Notes,
due February 15, 2020. The aggregate market value of the collateral at
March 31, 1996 was $54,871,024. The Fund's pro rata interest in the
market value of the collateral at March 31, 1996 was $289,225. The
Fund's pro rata interest in the joint repurchase agreement collateral is
taken into possession by the Fund's custodian upon entering into the
repurchase agreement.

(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 $1,460,274
Unrealized depreciation (326,832)
-------------

Net unrealized appreciation $1,133,442
============

See accompanying notes to financial statements

<PAGE>

CAPITAL VALUE FUND

STATEMENT OF ASSETS AND LIABILITIES

March 31, 1996

ASSETS
Investments, at value (cost $6,411,994) $ 7,545,436
Interest receivable 43,761
Dividends receivable 7,015
Other assets 2,350
-----------

Total assets 7,598,562
-----------

LIABILITIES
Distribution and service fees payable (note 3) 8,927
Accrued expenses 2,651
Payable for investment purchases 32,850
Due to advisor 2,331
-----------

Total liabilities 46,759
-----------

NET ASSETS
(applicable to 633,764 Investor shares outstanding; unlimited
shares of no par value beneficial interest authorized) $ 7,551,803
===========

NET ASSET VALUE AND REPURCHASE PRICE PER SHARE
($7,551,803 / 633,764 Investor shares) $ 11.92
===========

OFFERING PRICE PER SHARE
(100 / 96.5 of $11.92 ) $ 12.35
===========

NET ASSETS CONSIST OF
Paid-in capital $ 6,448,146
Accumulated net realized loss on investments (29,785)
Net unrealized appreciation on investments 1,133,442
-----------
$ 7,551,803
===========

See accompanying notes to financial statements

<PAGE>

CAPITAL VALUE FUND

STATEMENT OF OPERATIONS

Year ended March 31, 1996

INVESTMENT INCOME

Income
Interest $200,956
Dividends 94,646
------------

Total income 295,602
------------

Expenses
Investment advisory fees (note 2) 48,212
Distribution and service fees (note 3) 33,377
Fund accounting fees (note 2) 21,000
Professional fees 18,881
Fund administration fees (note 2) 18,574
Securities pricing fees 10,578
Custody fees 6,654
Shareholder recordkeeping fees 2,966
Registration and filing administration fees 1,603
Amortization of deferred organization expenses (note 4) 6,468
Shareholder servicing expenses 6,398
Trustee fees and meeting expenses 5,617
Registration and filing expenses 2,860
Printing expenses 1,407
Other operating expenses 4,454
----------

Total expenses 189,049
----------

Less:
Investment advisory fees waived (note 2) (14,012)
Distribution and service fees waived (note 3) (2,330)
---------

Net expenses 172,707
---------

Net investment income 122,895
---------

REALIZED AND UNREALIZED GAIN ON INVESTMENTS

Net realized gain from investment transactions 38,601
Increase in unrealized appreciation on investments 919,595
----------

Net realized and unrealized gain on investments 958,196
----------

Net increase in net assets resulting from operations $1,081,091
==========

See accompanying notes to financial statements

<PAGE>

CAPITAL VALUE FUND

STATEMENTS OF CHANGES IN NET ASSETS

Year ended Year ended
March 31, March 31,
INCREASE IN NET ASSETS 1996 1995

<S> <C>
Operations
Net investment income $ 122,895 $ 108,191
Net realized gain from investment transactions 38,601 238,156
Increase in unrealized appreciation on investments 919,595 219,560
----------- -----------

Net increase in net assets resulting from operations 1,081,091 565,907
----------- -----------

Distributions to shareholders from
Net investment income (127,074) (130,343)
Net realized gain from investment transactions (222,742) (221,341)
----------- -----------

Decrease in net assets resulting from distributions (349,816) (351,684)
----------- -----------

Capital share transactions
Increase in net assets resulting from
capital share transactions (a) 44,966 304,099
----------- -----------

Total increase in net assets 776,241 518,322

NET ASSETS

Beginning of year 6,775,562 6,257,240
----------- -----------

End of year $ 7,551,803 $ 6,775,562
=========== ===========
</TABLE>

(a) A summary of capital share activity follows:

Year ended Year ended
March 31, 1996 March 31, 1995

Shares Value Shares Value

<S> <C>
Shares sold 44,207 $ 517,663 44,912 $ 472,654
Shares issued for reinvestment
of distributions 29,596 348,199 34,211 351,307
--------- --------- --------- ---------

73,803 865,862 79,123 823,961

Shares redeemed (70,329) (820,896) (49,429) (519,862)
--------- --------- --------- ---------

Net increase 3,474 $ 44,966 29,694 $ 304,099
========= ========= ========= =========

</TABLE>

See accompanying notes to financial statements

<PAGE>

CAPITAL VALUE FUND

FINANCIAL HIGHLIGHTS

(For a Share Outstanding Throughout the Year)

<TABLE>
<CAPTION>
Year ended Year ended Year ended Year ended Year ended
March 31, March 31, March 31, March 31, March 31,
1996 1995 1994 1993 1992
------------ ----------- ----------- ----------- -----------
<S> <C>
Net asset value, beginning of year $10.75 $10.42 $10.59 $10.05 $10.09
Income from investment operations
Net investment income 0.19 0.17 0.15 0.20 0.19
Net realized and unrealized gain on investments 1.53 0.73 0.41 0.88 0.00
----------- ----------- ---------- ---------- ----------

Total from investment operations 1.72 0.90 0.56 1.08 0.19
----------- ----------- ---------- ---------- ----------

Distributions to shareholders from
Net investment income (0.20) (0.21) (0.11) (0.20) (0.19)
Net realized gain from investment transactions (0.35) (0.36) (0.62) (0.34) (0.04)
----------- ----------- ---------- ---------- ----------

Total distributions (0.55) (0.57) (0.73) (0.54) (0.23)
----------- ----------- ---------- ---------- ----------

Net asset value, end of year $11.92 $10.75 $10.42 $10.59 $10.05
=========== =========== ========== ========== ==========

Total return (a) 16.16% 8.66% 5.21% 11.23% 1.44%
=========== =========== ========== ========== ==========

Ratios/supplemental data
Net assets, end of year $7,551,803 $6,775,562 $6,257,240 $6,042,297 $5,384,160
=========== ========== ========== ========== ==========

Ratio of expenses to average net assets
Before expense reimbursements and waived fees 2.56% 2.58% 2.64% 2.48% 2.96%
After expense reimbursements and waived fees 2.33% 2.47% 2.43% 2.48% 2.73%

Ratio of net investment income to average net assets
Before expense reimbursements and waived fees 1.44% 1.55% 1.22% 1.87% 1.81%
After expense reimbursements and waived fees 1.66% 1.66% 1.43% 1.87% 2.04%

Portfolio turnover rate 12.33% 24.67% 32.99% 24.79% 14.89%
</TABLE>

(a) Total return does not reflect payment of a sales charge.

See accompanying notes to financial statements

<PAGE>

CAPITAL VALUE FUND

NOTES TO FINANCIAL STATEMENTS

March 31, 1996

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION

The Capital Value 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. The
Fund began operations on November 16, 1990.

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 Investor shares of the Fund on June 15, 1995 and an
additional class of shares, the Institutional shares, was
authorized. To date, only Investor shares have been issued by the
Fund. The Institutional shares will be sold without a sales charge
and will bear no distribution and service fees. The Investor
shares are subject to a maximum 3.50% sales charge and bear
distribution and service fees which may not exceed 0.50% of the
Investor 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 the last
sales price as of 4:00 p.m. New York time on the day of
valuation. Other securities traded in the over-the-counter
market and listed securities for which no sale was reported
on that date are valued at the most recent bid price.
Securities for which market quotations are not readily
available, if any, are valued by using an independent
pricing service or by following procedures approved by the
Board of Trustees. Short-term investments are valued at cost
which approximates value.

B. Federal Income Taxes - No provision has been made for
federal income taxes since 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 the 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 - Management makes a number of estimates in
the preparation of the Fund's financial statements. Actual
results could differ significantly from those estimates.

(Continued)

<PAGE>

CAPITAL VALUE FUND

NOTES TO FINANCIAL STATEMENTS

March 31, 1996

NOTE 2 - INVESTMENT ADVISORY FEE AND OTHER RELATED PARTY TRANSACTIONS

Pursuant to an investment advisory agreement, Capital Investment
Counsel, Inc. (the "Advisor") provides the Fund with a continuous
program of supervision of the Fund's assets, including the
composition of its portfolio, and furnishes advice and
recommendations with respect to investments, investment policies
and the purchase and sale of securities. As compensation for its
services, the Advisor receives a fee at the annual rate of 0.60%
of the first $250 million of the average daily net assets of the
Fund and 0.50% of average daily net assets over $250 million.
Prior to August 1, 1995 the fee was 0.75% of the first $250
million of average daily net assets, 0.65% of the next $250
million, and 0.50% of average daily net assets over $500 million.

Currently, the Fund does not offer its shares for sale in states
which require limitations to be placed on its expenses. The
Advisor currently intends to voluntarily waive all or a portion of
its fee to limit total Fund operating expenses to 2.50% of the
average daily net assets of the Fund. There can be no assurance
that the foregoing voluntary fee waiver will continue. The Advisor
has voluntarily waived a portion of its fee amounting to $14,012
($0.02 per share) for the year ended March 31, 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 investment
securities.

Capital Investment Group, Inc. (the "Distributor"), an affiliate
of the Advisor, serves as the Fund's principal underwriter and
distributor. The Distributor receives any sales charges imposed on
purchases of shares and re-allocates a portion of such charges to
dealers through whom the sale was made, if any. For the year ended
March 31, 1996, the Distributor retained sales charges in the
amount of $401.

Certain Trustees and officers of the Trust are also officers of
the Advisor, the Distributor or the Administrator.

NOTE 3 - DISTRIBUTION AND SERVICE FEES

The Board of Trustees, including a majority of the Trustees who
are not "interested persons" of the Trust as defined in the
Investment Company Act of 1940 (the "Act"), adopted a distribution
plan pursuant to Rule 12b-1 of the Act (the "Plan"). The Act
regulates the manner in which a regulated investment company may
assume expenses of distributing and promoting the sales of its
shares and servicing of its shareholder accounts.

(Continued)

<PAGE>

CAPITAL VALUE FUND

NOTES TO FINANCIAL STATEMENTS

March 31, 1996

The Plan provides that the Fund may incur certain expenses, which
may not exceed 0.50% per annum of the Investor shares' average
daily net assets for each year elapsed subsequent to adoption of
the Plan, for payment to the Distributor and others for items such
as advertising expenses, selling expenses, commissions, travel or
other expenses reasonably intended to result in sales of Investor
shares of the Fund or support servicing of shareholder accounts.
Expenditures incurred as service fees may not exceed 0.25% per
annum of the Investor shares' average daily net assets. Prior to
August 1, 1995 the amount payable under the Plan was 0.35% per
annum of the Fund's average daily net assets. The Fund incurred
$33,377 of such expenses under the Plan for the year ended March
31, 1996, of which $2,330 has been voluntarily waived by the
Distributor.

NOTE 4 - DEFERRED ORGANIZATION EXPENSES

All expenses of the Fund incurred in connection with its
organization and the registration of its shares have been assumed
by the Fund.

The organization expenses are being amortized over a period of
fifty-four months beginning six months after the Fund's
commencement of operations. Investors purchasing shares of the
Fund bear such expenses only as they are amortized against the
Fund's investment income. Organization expenses were fully
amortized as of March 31, 1996.

NOTE 5 - PURCHASES AND SALES OF INVESTMENTS

Purchases and sales of investments, other than short-term
investments, aggregated $855,350 and $853,360, respectively, for
the year ended March 31, 1996.

The Fund's prospectus provides that the Fund will limit foreign
investments to those traded domestically as sponsored American
Depository Receipts (ADR's). At March 31, 1996 Fund investments
included non-ADR foreign securities valued at $163,527 or 2.17% of
total investments at value.

The Fund's prospectus further provides that investments in
corporate debt obligations will consist of "investment grade"
securities, those rated at least Baa by Moody's Investors Service,
Inc., BBB by Standard & Poor's Corporation, Fitch Investors
Service, Inc. or Duff & Phelps or, if not rated, of equivalent
quality in the Advisor's opinion. At March 31, 1996 Fund
investments included a corporate debt obligation valued at $39,000
or 0.52% of total investments at value that was rated below Baa by
Moody's Investors Service, Inc.
(Continued)

<PAGE>

CAPITAL VALUE FUND

NOTES TO FINANCIAL STATEMENTS

March 31, 1996

NOTE 6 - DISTRIBUTIONS TO SHAREHOLDERS

For federal income tax purposes, the Fund must report
distributions from net realized gain from investment transactions
that represent long-term capital gain to its shareholders. Of the
total $0.35 per share of such distributions for the year ended
March 31, 1996, $0.24 per share represents long-term capital gain.
The remaining short-term capital gain distribution is taxable as
ordinary income to shareholders for federal income tax purposes.
Shareholders should consult a tax advisor on how to report
distributions for state and local income tax purposes.

The Fund has elected to defer the recognition of $11,768 of
post-October capital losses for federal income tax purposes. These
capital losses will be recognized during the year ending March 31,
1997. It is the intention of the Board of Trustees of the Trust
not to distribute any realized gains until these capital losses
have been offset.

<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Board of Trustees and Shareholders
The Nottingham Investment Trust II:

We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of the Capital Value Fund (the "Fund"), a series
of The Nottingham Investment Trust II, as of March 31, 1996, 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 financial
highlights for each of the three 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. The financial
statements for each of the two years in the period ended March 31, 1993 were
audited by other auditors whose report thereon dated May 6, 1993 expressed an
unqualified opinion on those statements.

We conducted our audits in accordance with generally accepted auditing
standards. 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 March
31, 1996 by correspondence with the custodian and brokers. 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, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Capital Value Fund as of March 31, 1996, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended, and financial highlights for each of the three years in the
period then ended in conformity with generally accepted accounting principles.

Richmond, Virginia
May 14, 1996

<PAGE>

STATEMENT OF ADDITIONAL INFORMATION

INVESTEK FIXED INCOME TRUST

August 1, 1996

A Series of
THE NOTTINGHAM INVESTMENT TRUST II
105 North Washington Street, Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069
Telephone 1-800-525-FUND

Table of Contents

INVESTMENT OBJECTIVE AND POLICIES......................................... 2
INVESTMENT LIMITATIONS.................................................... 4
NET ASSET VALUE........................................................... 5
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION............................ 6
DESCRIPTION OF THE TRUST.................................................. 7
ADDITIONAL INFORMATION CONCERNING TAXES................................... 8
MANAGEMENT OF THE FUND.................................................... 9
SPECIAL SHAREHOLDER SERVICES.............................................. 14
ADDITIONAL INFORMATION ON PERFORMANCE..................................... 15
APPENDIX A - DESCRIPTION OF RATINGS....................................... 18
ANNUAL REPORT OF THE FUND FOR THE YEAR ENDED MARCH 31, 1996......... ATTACHED

This Statement of Additional Information (the "Additional Statement") is meant
to be read in conjunction with the Prospectus dated August 1, 1996 for the
Investek Fixed Income Trust (the "Fund") relating to the Fund's Institutional
Shares and Investor Shares, as each Prospectus may be amended or supplemented
from time to time, and is incorporated by reference in its entirety into each
Prospectus. Because this Additional Statement is not itself a prospectus, no
investment in shares of the Fund should be made solely upon the information
contained herein. Copies of the Fund's Prospectus may be obtained at no charge
by writing or calling the Fund at the address and phone number shown above. This
Additional Statement is not a prospectus but is incorporated by reference in
each Prospectus in its entirety. Capitalized terms used but not defined herein
have the same meanings as in the Prospectus.

<PAGE>

INVESTMENT OBJECTIVE AND POLICIES

The following policies supplement the Fund's investment objective and policies
as set forth in the Prospectus for each Class of Shares of the Fund. The Fund,
organized in 1991, has no prior operating history.

<PAGE>

commissions paid by the Fund to consider whether the spread or commissions paid
over representative periods of time appear to be reasonable in relation to the
benefits inuring to the Fund. It is possible that certain of the supplementary
research or other services received will primarily benefit one or more other
investment companies or other accounts for which investment discretion is
exercised by the Advisor. Conversely, the Fund may be the primary beneficiary of
the research or services received as a result of securities transactions
effected for such other account or investment company.

The Advisor may also utilize a brokerage firm affiliated with the Trust or the
Advisor if it believes it can obtain the best execution of transactions from
such broker. The Fund will not execute portfolio transactions through, acquire
securities issued by, make savings deposits in or enter into repurchase
agreements with the Advisor or an affiliated person of the Advisor (as such term
is defined in the 1940 Act) acting as principal, except to the extent permitted
by the Securities and Exchange Commission ("SEC"). In addition, the Fund will
not purchase securities during the existence of any underwriting or selling
group relating thereto of which the Advisor, or an affiliated person of the
Advisor, is a member, except to the extent permitted by the SEC. Under certain
circumstances, the Fund may be at a disadvantage because of these limitations in
comparison with other investment companies that have similar investment
objectives but are not subject to such limitations.

For the fiscal years ended March 31, 1994, 1995, and 1996, all transactions in
the Trust were handled as principal transactions.

Description of Money Market Instruments. Money market instruments may include
U.S. Government Securities or corporate debt securities (including those subject
to repurchase agreements), provided that they mature in thirteen months or less
from the date of acquisition and are otherwise eligible for purchase by the
Fund. Money market instruments also may include Banker's Acceptances and
Certificates of Deposit of domestic branches of U.S. banks, Commercial Paper and
Variable Amount Demand Master Notes ("Master Notes"). Banker's Acceptances are
time drafts drawn on and "accepted" by a bank. When a bank "accepts" such a time
draft, it assumes liability for its payment. When the Fund acquires a Banker's
Acceptance the bank which "accepted" the time draft is liable for payment of
interest and principal when due. The Banker's Acceptance carries the full faith
and credit of such bank. A Certificate of Deposit ("CD") is an unsecured
interest bearing debt obligation of a bank. Commercial Paper is an unsecured,
short term debt obligation of a bank, corporation or other borrower. Commercial
Paper maturity generally ranges from two to 270 days and is usually sold on a
discounted basis rather than as an interest bearing instrument. The Fund will
invest in Commercial Paper only if it is rated one of the top two rating
categories by Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's
Ratings Group ("S&P"), Fitch Investors Service, Inc. ("Fitch") or Duff & Phelps
("D&P") or, if not rated, of equivalent quality in the Advisor's opinion.

<PAGE>

Commercial Paper may include Master Notes of the same quality. Master Notes are
unsecured obligations which are redeemable upon demand of the holder and which
permit the investment of fluctuating amounts at varying rates of interest.
Master Notes are acquired by the Fund only through the Master Note program of
the Fund's custodian bank, acting as administrator thereof. The Advisor will
monitor, on a continuous basis, the earnings power, cash flow and other
liquidity ratios of the issuer of a Master Note held by the Fund.

INVESTMENT LIMITATIONS

As a matter of fundamental policy, the Fund may not:

(2) Invest 25% or more of the value of its total assets in any one industry
or group of industries (except that securities of the U.S. Government,
its agencies and instrumentalities are not subject to these limitations);

(4) Invest for the purpose of exercising control or management of another
issuer;

(5) Invest in interests in real estate, real estate mortgage loans, real
estate limited partnerships, oil, gas or other mineral exploration, or
development programs or leases, except that the Fund may invest in the
readily marketable securities of companies, which own or deal in such
things, and the Fund may invest in certain mortgage backed securities as
described in the Prospectus;

(7) Purchase securities on margin (but the Fund may obtain such short term
credits as may be necessary for the clearance of transactions);

(9) Participate on a joint or joint and several basis in any trading account
in securities;

(10) Make loans of money or securities, except that the Fund may invest in
repurchase agreements (but repurchase agreements having a maturity of
longer than seven days are limited to 10% of the Fund's net assets);

(11) Purchase real estate or interests in real estate, except that securities
in which the Fund invests may themselves have investment in real estate
or interests in real estate; and the Fund may invest in securities
composed of mortgages against real estate as described in the Prospectus;

<PAGE>

(12) Invest in securities other than securities which are readily marketable
either through trading on a national securities exchange, or securities
for which an active market is made in the over the counter trading
markets;

(13) Write, purchase or sell puts, calls or combinations thereof, or purchase
or sell commodities, commodities contracts, futures contracts or related
options, or purchase, sell or write warrants;

(14) Issue senior securities, borrow money or pledge its assets, except that
it may borrow from banks as a temporary measure (a) for extraordinary or
emergency purposes, in amounts not exceeding 5% of the Fund's total
assets, or (b) in order to meet redemption requests which might otherwise
require untimely disposition of portfolio securities, in amounts not
exceeding 33% of the Fund's total assets; and the Fund may pledge its
assets to secure all such borrowings;

(16) Purchase foreign securities, except that the Fund may purchase foreign
securities sold as American Depository Receipts without limit.

NET ASSET VALUE

The net asset value per share of each Class of the Fund is determined at 4:00
p.m., New York time, Monday through Friday, except on business holidays when the
New York Stock Exchange is closed. The New York Stock Exchange recognizes the
following holidays: New Year's Day, President's Day, Good Friday, Memorial Day,
Fourth of July, Labor Day, Thanksgiving Day, and Christmas Day. Any other
holiday recognized by the New York Stock Exchange will be deemed a business
holiday on which the net asset value of each Class of the Fund will not be
calculated.

<PAGE>

postage expenses) may be charged against that Class of shares if such expenses
are actually incurred in a different amount by that Class or if the Class
receives services of a different kind or to a different degree than other
Classes, and the Board of Trustees approves such allocation. Subject to the
provisions of the Declaration of Trust, determinations by the Board of Trustees
as to the direct and allocable liabilities, and the allocable portion of any
general assets, with respect to the Fund and the Classes of the Fund are
conclusive.

For the fiscal years ended March 31, 1994, 1995, and 1996, the total expenses of
the Fund after fee waivers and expense reimbursements were $86,519 (0.77% of the
average daily net assets of the Institutional Shares), $123,464 (0.77% of the
average daily net assets of the Institutional Shares), and $122,981 (0.87% of
the average daily net assets of the Institutional Shares). Investor Shares of
the Fund were not authorized for issuance during such period and fiscal years.

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

Purchases. Shares of the Fund are offered and sold on a continuous basis and may
be purchased through authorized investment dealers or directly by contacting the
Distributor or the Fund. Selling dealers have the responsibility of transmitting
orders promptly to the Fund. The public offering price of shares of the Fund
equals net asset value, plus a sales charge for the Investor Shares. Capital
Investment Group, Inc. (the "Distributor") receives this sales charge as
Distributor and may reallow it in the form of dealer discounts and brokerage
commissions. The current schedule of sales charges and related dealer discounts
and brokerage commissions is set forth in the Prospectus for the Investor
Shares, along with the information on current purchases, rights of accumulation,
and letters of intent. See "How Shares May Be Purchased" in the Prospectus.

Plan Under Rule 12b-1. The Trust has adopted a Plan of Distribution (the "Plan")
for the Investor Shares of the Fund pursuant to Rule 12b-1 under the 1940 Act
(see "How Shares May Be Purchased - Distribution Plan" in the Prospectus). Under
the Plan the Fund may expend up to 0.25% of the Investor Shares' average net
assets annually to finance any activity which is primarily intended to result in
the sale of shares of the Investor Shares of the Fund and the servicing of
shareholder accounts, provided the Trust's Board of Trustees has approved the
category of expenses for which payment is being made. Such expenditures paid as
service fees to any person who sells shares of the Fund may not exceed 0.25% of
the average annual net asset value of such shares. Potential benefits of the
Plan to the Fund include improved shareholder servicing, savings to the Fund in
transfer agency costs, benefits to the investment process from growth and
stability of assets and maintenance of a financially healthy management
organization.

From time to time the Distributor may pay additional amounts from its own
resources to dealers for aid in distribution or for aid in providing
administrative services to shareholders.

Each year the Trustees must determine whether continuation of the Plan is in the
best interest of shareholders of the Fund and that there is a reasonable
likelihood of its providing a benefit to the Fund, and the Board of Trustees has
made such a determination for the current year of operations under the Plan. The
Plan and the Distribution Agreement may be terminated at any time without
penalty by a majority of those trustees who are not "interested persons" or by a
majority vote of the Investor Shares' outstanding voting stock. Any amendment
materially increasing the maximum percentage payable under the Plan must
likewise be approved by a majority vote of the Investor Shares' outstanding
voting stock, as well as by a majority vote of those trustees who are not
"interested persons." Also, any other material amendment to the Plan must be
approved by a majority vote of the trustees including a majority of the
noninterested Trustees of the Trust having no interest in the Plan. In addition,
in order for the Plan to remain effective, the selection and nomination of
Trustees who are not "interested persons" of the Trust must be effected by the
Trustees who themselves are not "interested persons" and who have no direct or
indirect

<PAGE>

financial interest in the Plan. Persons authorized to make payments under the
Plan must provide written reports at least quarterly to the Board of Trustees
for their review.

DESCRIPTION OF THE TRUST

The Trust is an unincorporated business trust organized under Massachusetts law
on October 25, 1990. The Trust's Declaration of Trust authorizes the Board of
Trustees to divide shares into series, each series relating to a separate
portfolio of investments, and to classify and reclassify any unissued shares
into one or more classes of shares of each such series. The Declaration of Trust
currently provides for the shares of eight series, as follows: the Investek
Fixed Income Trust managed by Investek Capital Management of Jackson,
Mississippi; Capital Value Fund managed by Capital Investment Counsel, Inc. of
Raleigh, North Carolina; ZSA Social Conscience Fund, ZSA Equity Fund, and ZSA
Asset Allocation Fund managed by Zaske, Sarafa & Associates, Inc. of Bloomfield
Hills, Michigan; and The Brown Capital Management Equity Fund, The Brown Capital
Management Balanced Fund and The Brown Capital Management Small Company Fund
managed by Brown Capital Management of Baltimore, Maryland. The Board of
Trustees has authorized the classification of shares of all such series except
the ZSA Funds. The number of shares of each series shall be unlimited. The Trust
does not intend to issue share certificates.

When issued for payment as described in the Prospectus and this Additional
Statement, shares of the Fund will be fully paid and non-assessable.

<PAGE>

ADDITIONAL INFORMATION CONCERNING TAXES

Another requirement for qualification as a regulated investment company under
the Code is that less than 30% of a series' gross income for a taxable year must
be derived from gains realized on the sale or other disposition of the following
investments held for less than three months: (l) stock and securities (as
defined in Section 2(a) (36) of the 1940 Act); (2) options, futures and forward
contracts other than those on foreign currencies; or (3) foreign currencies (or
options, futures or forward contracts on foreign currencies) that are not
directly related to a series' principal business of investing in stocks or
securities (or options and futures with respect to stocks or securities).
Interest (including original issue discount and, with respect to certain debt
securities, accrued market discount) received by a series upon maturity or
disposition of a security held for less than three months will not be treated as
gross income derived from the sale or other disposition of such security within
the meaning of this requirement. However, any other income which is attributable
to realized market appreciation will be treated as gross income from the sale or
other disposition of securities for this purpose.

<PAGE>

ordinary taxable income and any capital gain net income prior to the end of each
calendar year to avoid liability for this excise tax.

MANAGEMENT OF THE FUND

Trustees and Officers. The Trustees and executive officers of the Trust, their
ages, and their principal occupations for the last five years are as follows:

Name, Age, Position(s) Principal Occupation(s)
and Address During Past 5 Years
- -------------------------------------------------------------------------------

F. Daniel Bell, III, 41 Partner
Trustee Wyrick, Robbins, Yates & Ponton
4101 Lake Boone Trail Raleigh, North Carolina
Suite 300
Raleigh, North Carolina 27619

Jack E. Brinson, 63 President, Brinson Investment Co.
Trustee President, Brinson Chevrolet, Inc.
1105 Panola Street Tarboro, North Carolina
Tarboro, North Carolina 27886

Eddie C. Brown, 55 President
Trustee* Brown Capital Management, Inc.
President Baltimore, Maryland
The Brown Capital Management Funds
809 Cathedral Street
Baltimore, Maryland 21201

Richard K. Bryant, 36 President
Trustee* Capital Investment Group
President Raleigh, North Carolina
Capital Value Fund Vice President
Post Office Box 32249 Capital Investment Counsel
Raleigh, North Carolina 27622 Raleigh, North Carolina

Elmer O. Edgerton, Jr., 54 President
Vice President Capital Investment Counsel

<PAGE>

Capital Value Fund Raleigh, North Carolina
Post Office Box 32249 Vice President
Raleigh, North Carolina 27622 Capital Investment Group
Raleigh, North Carolina

Timothy L. Ellis, 40 Vice President
Trustee* Investek Capital Management
Vice President Jackson, Mississippi
Investek Fixed Income Trust since 1991; previously,
317 East Capitol Vice President
Jackson, Mississippi 39201 Graham Securities Company
Covington, Louisiana

R. Mark Fields, 43 Vice President
Vice President Investek Capital Management
Investek Fixed Income Trust Jackson, Mississippi
317 East Capital
Jackson, Mississippi 39201

John M. Friedman, 52 Vice President
Vice President Investek Capital Management
Investek Fixed Income Trust Jackson, Mississippi
317 East Capital
Jackson, Mississippi 39201

H. Kel Landis, III, 38 Regional Executive Vice President
Trustee Centura Bank
304 Stonybrook Road Rocky Mount, North Carolina
Rocky Mount, North Carolina 27803

Keith A. Lee, 35 Portfolio Manager/Analyst
Vice President Brown Capital Management, Inc.
The Brown Capital Management Funds Baltimore, Maryland
309 Cathedral Street
Baltimore, Maryland 21201

Michael T. McRee, 52 President
President Investek Capital Management, Inc.
Investek Fixed Income Trust Jackson, Mississippi
317 East Capital
Jackson, Mississippi 39201

Frank P. Meadows III, 35 Managing Director
Trustee, Chairman and Treasurer* The Nottingham Company
105 North Washington Street Rocky Mount, North Carolina
Rocky Mount, North Carolina 27802

Anmar K. Sarafa, 35 Executive Vice President
Vice President Zaske, Sarafa & Associates, Inc.
The ZSA Funds Bloomfield Hills, Michigan
Suite 310
1533 North Woodward Avenue
Bloomfield Hills, Michigan 48304

Thomas W. Steed, 38 Senior Corporate Attorney

<PAGE>

Trustee Hardees Food Systems
101 Bristol Court Rocky Mount, North Carolina
Rocky Mount, North Carolina 27802

J. Buckley Strandberg, 36 Vice President
Trustee Standard Insurance and Realty
Post Office Box 1375 Rocky Mount, North Carolina
Rocky Mount, North Carolina 27802

C. Frank Watson III, 25 Vice President
Secretary The Nottingham Company
105 North Washington Street Rocky Mount, North Carolina
Rocky Mount, North Carolina 27802 since 1992; previously,
Student

University of North Carolina
Chapel Hill, North Carolina

Arthur E. Zaske, 48 President
Trustee* Zaske, Sarafa, & Associates, Inc.
President Bloomfield Hills, Michigan
The ZSA Funds
Suite 310
1533 North Woodward Avenue
Bloomfield Hills, Michigan 48304

- -------------------------------

* Indicates that Trustee is an "interested person" of the Trust for purposes of
the 1940 Act because of his position with one of the investment advisors or the
Administrator to the Trust.

Compensation Table*

Pension
Retirement Total
Aggregate Benefits Estimated Compensation
Compensation Accrued As Annual from the Trust
Name of Person, from the Part of Fund Benefits Upon Paid to
Position Trust Expenses Retirement Trustees
--------------- ------------ ------------ ------------- --------------
<S> <C>
F. Daniel Bell, III $7,950 None None $7,950
Trustee

Jack E. Brinson $7,950 None None $7,950
Trustee

Eddie C. Brown None None None None
Trustee

Richard K. Bryant None None None None
Trustee

Timothy L. Ellis None None None None
Trustee

</TABLE>
33

<PAGE>

<S> <C>
H. Kel Landis, III $7,950 None None $7,950
Trustee

Frank P. Meadows, III None None None None
Trustee

Thomas W. Steed $6,200 None None $6,200
Trustee

J. Buckley Strandberg $7,950 None None $7,950
Trustee

Arthur E. Zaske None None None None
Trustee

</TABLE>

* Figures are for the fiscal year ended March 31, 1996.

Principal Holders of Voting Securities. As of July 19, 1996, the Trustees and
Officers of the Trust as a group owned beneficially (i.e., had voting and/or
investment power) <1% of the then outstanding shares of each Class of the
Fund. On the same date the following shareholders owned of record more than 5%
of the outstanding shares of beneficial interest of a Class 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 any class of the Fund as of July 19,
1996.

Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership* of Class

Michael T. McRee 67,429.470 Shares 5,430%
and Laurie H. McRee
P.O. Box 1006
Jackson, MS 39215

The Trust Company of the South 71,777.834 Shares 5.780%
P.O. Box 1898
Burlington, NC 27216

The Trust Company of the South 177,581.760 Shares 14.300%
- Cash Account
P.O. Box 1898
Burlington, NC 27216

Mississippi College 189,897.455 Shares 15.291%
Box 4085
Clinton, MS 39058

1st Presbyterian Church 81,862.160 Shares 6.592%
Lolla Boyd Parish Religious
and Educational Memorial Fund
P.O. Box 485
Greenwood, MS 38935-0485

Trustmark National Bank, Trustee 125,843.902 Shares 10.133%
RIMOR, Inc. Profit Sharing Plan
P.O. Box 291
Jackson, MS 39205-0291
34

<PAGE>

* The Fund believes the shares indicated are owned both of record and
beneficially, except shares held by The Trust Company of the South for the
benefit of its clients.

Investment Advisor. Information about Investek Capital Management, Inc., (the
"Advisor") and its duties and compensation as Advisor is contained in the
Prospectus.

The Advisor will receive a monthly management fee equal to an annual rate of
0.45% of the average daily net asset value of the Fund. Restrictive limitations
may be imposed on the Fund as a result of changes in current state laws and
regulations in those states where the Fund has qualified its shares, or by a
decision of the Trustees to qualify the shares in other states having
restrictive expense limitations.

For the fiscal year ended March 31, 1994, the Fund paid the Advisor $8,779 of
its advisory fee, while the Advisor voluntarily waived the remaining portion of
its fee in the amount of $41,310. For the fiscal year ended March 31, 1995, the
Fund paid the Advisor $23,295 of its advisory fee, while the Advisor voluntarily
waived the remaining portion of its fee in the amount of $48,725. For the fiscal
year ended March 31, 1996, the Fund paid the Advisor $33,857 of its advisory
fee, while the Advisor voluntarily waived the remaining portion of its fee in
the amount of $29,700.

The Administrator and Transfer Agent. The Trust has entered into a Fund
Accounting, Dividend Disbursing & Transfer Agent and Administration Agreement
with The Nottingham Company (the "Administrator"), 105 North Washington Street,
Post Office Drawer 69, Rocky Mount, North Carolina 27802-0069, pursuant to which
the Administrator receives a fee at the annual rate of 0.15% of the average
daily net assets of the Fund. In addition, the Administrator currently receives
a base monthly fee of $1,750 for accounting and recordkeeping services for the
Fund and $750 for each Class of Shares beyond the initial Class of Shares of the
Fund. The Administrator also charges the Fund for certain costs involved with
the daily valuation of investment securities and is reimbursed for out-of-pocket
expenses. The Administrator charges a minimum fee of $3,000 per month for all of
its fees taken in the aggregate, analyzed monthly.

For services to the Fund for the fiscal years ended March 31, 1994, 1995, and
1996, the Administrator received fees of $15,824, $24,253, and $21,199,
respectively. For the fiscal years ended March 31, 1994, 1995, and 1996, the
Administrator received $17,500, $21,000, and $21,000, respectively, for
accounting and recordkeeping services.

<PAGE>

The Administrator will also serve as the Fund's transfer agent and dividend
disbursing agent and will provide certain accounting and pricing services for
the Fund.

The Distributor is a broker-dealer registered with the Securities and Exchange
Commission and a member in good standing of the National Association of
Securities Dealers, Inc.

The Distribution Agreement may be terminated by either party upon 60 days prior
written notice to the other party.

Custodian. Trustmark National Bank (the "Custodian"), 248 E. Capitol Street,
Post Office Box 291, Jackson, Mississippi 39205-0291 serves as custodian for the
Fund's assets. The Custodian acts as the depository for the Fund, safekeeps its
portfolio securities, collects all income and other payments with respect to
portfolio securities, disburses monies at the Fund's request and maintains
records in connection with its duties as Custodian. For its services as
Custodian, the Custodian is entitled to receive from the Fund an annual fee
based on the average net assets of the Fund held by the Custodian.

SPECIAL SHAREHOLDER SERVICES

The Fund offers the following shareholder services:

Systematic Withdrawal Plan. Shareholders owning shares with a value of $50,000
or more may establish a Systematic Withdrawal Plan. A shareholder may receive
monthly or quarterly payments, in amounts of not less than $100 per payment, by
authorizing the Fund to redeem the necessary number of shares periodically (each
month, or quarterly in the months of March, June, September and December) in
order to make the payments requested. The Fund has the capacity of
electronically depositing the proceeds of the systematic withdrawal directly to
the shareholder's personal bank account ($5,000 minimum per bank wire).
Instructions for establishing this service are included in the Fund Shares
Application, enclosed in the Prospectus, or available by calling the Fund. If
the shareholder prefers to receive his systematic withdrawal proceeds in cash,
or if such proceeds are less than the $5,000 minimum for a bank wire, checks
will be made payable to the designated recipient and mailed within 7 days of the
valuation date. If the designated recipient is other than the registered
shareholder, the signature of

<PAGE>

each shareholder must be guaranteed on the application (see "Signature
Guarantees" in the Prospectus). A corporation (or partnership) must also submit
a "Corporate Resolution" (or "Certification of Partnership") indicating the
names, titles and required number of signatures authorized to act on its behalf.
The application must be signed by a duly authorized officer(s) and the corporate
seal affixed. No redemption fees are charged to shareholders under this plan.
Costs in conjunction with the administration of the plan are borne by the Fund.
Shareholders should be aware that such systematic withdrawals may deplete or use
up entirely their initial investment and may result in realized long-term or
short-term capital gains or losses. The Systematic Withdrawal Plan may be
terminated at any time by the Fund upon sixty days written notice or by a
shareholder upon written notice to the Fund. Applications and further details
may be obtained by calling the Fund at 1-800-525-FUND, or by writing to:

Investek Fixed Income Trust
[Investor Shares] or [Institutional Shares]
105 North Washington Street
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069

Purchases in Kind. The Fund may accept securities in lieu of cash in payment for
the purchase of shares in the Fund. The acceptance of such securities is at the
sole discretion of the Advisor based upon the suitability of the securities
accepted for inclusion as a long term investment of the Fund, the marketability
of such securities, and other factors which the Advisor may deem appropriate. If
accepted, the securities will be valued using the same criteria and methods as
described in "How Shares are Valued" in the Prospectus. Transactions involving
the issuance of shares in the Fund for securities in lieu of cash will be
limited to acquisitions of securities (except for municipal debt securities
issued by state political subdivisions or their agencies or instrumentalities)
which: (a) meet the investment objectives and policies of the Fund; (b) are
acquired for investment and not for resale; (c) are liquid securities which are
not restricted as to transfer either by law or liquidity of market; and (d) have
a value which is readily ascertainable (and not established only by evaluation
procedures) as evidenced by a listing on the American Stock Exchange, the New
York Stock Exchange, or NASDAQ.

ADDITIONAL INFORMATION ON PERFORMANCE

From time to time, the total return and yield of the each Class of the Fund may
be quoted in advertisements, sales literature, shareholder reports or other
communications to shareholders. The Fund computes the "average annual total
return" of each Class of the Fund by determining the average annual compounded
rates of return during specified periods that equate the initial amount invested
to the ending redeemable value of such investment. This is done by determining
the ending redeemable value of a hypothetical $1,000 initial payment. This
calculation is as follows:

<PAGE>

P(1+T)n = ERV

Where: T = average annual total return.
ERV = ending redeemable value at the end of the period
covered by the computation of a hypothetical $1,000
payment made at the beginning of the period.
P = hypothetical initial payment of $1,000 from which the
maximum sales load is deducted.
n = period covered by the computation, expressed in terms
of years.

The Fund may also compute the aggregate total return of each Class of the Fund,
which is calculated in a similar manner, except that the results are not
annualized.

The average annual total return quotations for the Institutional Shares of the
Fund for the fiscal year ended March 31, 1996, three fiscal years ended March
31, 1996, and since inception (November 15, 1991 to March 31, 1996) are 10.70%,
5.55%, and 6.87%, respectively. The cumulative total return quotation for the
Institutional Shares since inception through March 31, 1996 is 33.78%. These
performance quotations should not be considered as representative of the Fund's
performance for any specified period in the future. The Investor Shares of the
Fund were not offered during the period of such performance quotations.

The yield of the Fund is computed by dividing the net investment income per
share earned during the period stated in the advertisement by the maximum
offering price per share on the last day of the period. For the purpose of
determining net investment income, the calculation includes, among expenses of
the Fund, all recurring fees that are charged to all shareholder accounts and
any nonrecurring charges for the period stated. In particular, yield is
determined according to the following formula:

Yield =2[(A - B + 1)6-1]
-----
CD

Where: A equals dividends and interest earned during the period; B equals
expenses accrued for the period (net of reimbursements); C equals average daily
number of shares outstanding during the period that were entitled to receive
dividends; D equals the maximum offering price per share on the last day of the
period. For the thirty day period ended March 31, 1996, the yield for the
Institutional Shares of the Fund was 6.59%. The Investor Shares of the Fund were
not offered during such period.

The Fund's performance may be compared in advertisements, sales literature,
shareholder reports, and other communications to the performance of other mutual
funds having similar objectives or to standardized indices or other measures of
investment performance. In particular, the Fund may compare its performance to
the Lehman Aggregate Bond Index. Comparative performance may also be expressed
by reference to a ranking prepared by a mutual fund monitoring service or by one
or more newspapers, newsletters or financial periodicals. The Fund may also
occasionally cite statistics to reflect its volatility and risk.

<PAGE>

Comparative information about the yield of the Fund and about average rates of
return on certificates of deposits, bank money market deposit accounts, money
market mutual funds, and other similar types of investments may be included in
Fund communications. A bank certificate of deposit, unlike the Fund's shares,
pays a fixed rate of interest and entitles the depositor to receive the face
amount of the certificate at maturity. A bank money market deposit account is a
form of savings account which pays a variable rate of interest. Unlike the
Fund's shares, bank certificates of deposit and bank money market deposit
accounts are insured by the Federal Deposit Insurance Corporation. A money
market mutual fund is designed to maintain a constant value of $1.00 per share
and, thus, a money market fund's shares are subject to less price fluctuation
than the Fund's shares.

<PAGE>

APPENDIX A

DESCRIPTION OF RATINGS

The Fund intends to limit its investments to investment grade fixed income
securities ("Investment-Grade Debt Securities"). At least 90% of the Fund's
assets will be invested in Investment-Grade Debt Securities rated A or better as
described below (or if not rated, of equivalent quality as determined by the
Advisor). The various ratings used by the nationally recognized securities
rating services are described below.

Standard & Poor's Corporation. The following summarizes the highest four ratings
used by Standard & Poor's Ratings Group ("S&P") for bonds which are deemed to be
"Investment-Grade Debt Securities" by the Advisor:

AAA - This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to pay interest and repay
principal.

AA - Debt rated AA is considered to have a very strong capacity to pay
interest and repay principal and differs from AAA issues only in a small
degree.

<PAGE>

The following summarizes the highest rating used by Moody's for short-term notes
and variable rate demand obligations:

<PAGE>

AAA - Bonds that are rated AAA are of the highest credit quality. The
risk factors are considered to be negligible, being only slightly more
than for risk-free U.S. Treasury debt.

AA - Bonds that are rated AA are of high credit quality. Protection
factors are strong. Risk is modest but may vary slightly from time to
time because of economic conditions.

A - Bonds rated A have average but adequate protection factors. The risk
factors are more variable and greater in periods of economic stress.

BBB - Bonds rated BBB have below average protection factors but are still
considered sufficient for prudent investment. There is considerable
variability in risk during economic cycles.

To provide more detailed indications of credit quality, the AA, A and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within a rating category.

<PAGE>

The following summarizes the three highest ratings used by Fitch for short-term
notes, municipal notes, variable rate demand instruments and commercial paper:

F-1+ - Instruments assigned this rating are regarded as having the
strongest degree of assurance for timely payment.

F-1 - Instruments assigned this rating reflect an assurance of timely
payment only slightly less in degree than issues rated F-1+

F-2 - Instruments assigned this rating have satisfactory degree of
assurance for timely payment, but the margin of safety is not as great as
for issues assigned F-1+ and F-1 ratings.

<PAGE>

Dear Shareholders of Investek Fixed Income Trust:

Enclosed for your review is a summary of portfolio assets and the the annual
report for the fiscal year ended March 31, 1996. We are pleased to report
performance which exceeds the Lipper Index for intermediate-term investment
grade fixed income funds. During this period, the Investek Fixed Income Trust
produced a total return of 10.70%. The average total return for a fund in this
Lipper category was 9.70%.

Our fixed income management style focuses on adding value through the use of
high quality securities. Accordingly, U.S. Government guaranteed, insured and
Agency obligations make up over 71% of the portfolio.

Fiscal year 1995 was quite rewarding for fixed income investors. Interest rates
fell for most of the period in reaction to the Federal Reserve's monetary
policy. The rally stumbled into 1996 as the market became wary of the potential
for above normal economic growth and rates rose by almost 1% across most
maturities. Indeed, first quarter '96 economic data brought the dreaded word
"inflation" back into conversations mainly due to higher than expected energy
and food costs. We think these worries are unfounded and that economic growth
and the rate of inflation will decelerate throughout the course of the year. We
continue to maintain our longer term optimism regarding the bond market.

Thank you for your continued confidence in the Investek Fixed Income Trust.
Please call us if we can be of further service to you.

Very truly yours,

/s/ MICHAEL T. MCREE
Michael T. McRee
President
Investek Capital Management

/s/ TIMOTHY L. ELLIS
Timothy L. Ellis
Vice President & Trustee
Investek Fixed Income Trust

<PAGE>

INVESTEK FIXED INCOME TRUST

Performance Update - $50,000 Investment

For the period from November 15, 1991
(commencement of operations) to March 31, 1996

[GRAPH]

Investek Fixed Income Trust Lehman Aggregate
11/15/91 50,000 50,000
12/31/91 50,355 51,295
03/31/92 50,612 50,644
06/30/92 55,345 52,690
09/30/92 53,918 54,955
12/31/92 54,275 55,098
03/31/92 56,875 57,374
06/30/93 58,672 58,900
09/30/93 60,027 60,437
12/31/93 60,004 60,467
03/31/94 57,698 58,732
06/30/94 57,065 58,127
09/30/94 57,281 58,476
12/31/94 57,736 58,698
03/31/95 60,426 61,656
06/30/95 64,300 65,411
09/30/95 64,918 66,700
12/31/95 67,446 69,541
03/31/96 66,892 68,310

This graph depicts the performance of the Investek Fixed Income Trust versus the
Lehman Brothers Aggregate Bond Index. It is important to note the Investek Fixed
Income Trust is a professionally managed mutual fund while the index is not
available for investment and is unmanaged. The comparison is shown for
illustrative purposes only.

Average Annual Total Return

Commencement of One year ended Three years ended
operations through 3/31/96 3/31/96 3/31/96
6.87% 10.70% 5.55%

* The graph assumes an initial investment at November 15, 1991. All dividends
and distributions are reinvested.

* At March 31, 1996, the Fund would have grown to $66,892 - total investment
return of 33.78% since November 15, 1991.

* At March 31, 1996, a similar investment in the Lehman Brothers Aggregate Bond
Index would have grown to $68,310 - total investment return of 36.62% since
November 15, 1991.

* Past performance is not a guarantee of future performance. A mutual fund's
share price and investment return will vary with market conditions, and the
principal value of shares, when redeemed, may be worth more or less than the
original cost. Average annual returns are historical in nature and measure net
investment income and capital gain and loss from portfolio investments
assuming reinvestments of dividends.

<PAGE>

INVESTEK FIXED INCOME TRUST

PORTFOLIO OF INVESTMENTS

March 31, 1996

Interest Maturity Value
Principal Rate Date (note 1)

--------- -------- --------- ----------
<S> <C>

U. S. GOVERNMENT AND AGENCY OBLIGATIONS - 51.23%

United States Treasury Note $250,000 5.750% 08/15/03 $241,602
A.I.D. - Equador 95,122 7.050% 05/01/15 94,810
A.I.D. - Ivory Coast 313,417 8.100% 12/01/06 315,570
A.I.D. - Korea 9,250 8.250% 01/01/99 9,335
A.I.D. - Korea 402,390 8.390% 08/01/03 406,966
A.I.D. - Peru 197,828 8.350% 01/01/07 199,771
A.I.D. - Zaire 24,100 7.375% 04/01/97 24,261
B.A.L.T. Conway Partnership Title XI 145,616 10.750% 11/15/03 149,148
Chilbar Ship Co. Title XI 83,143 6.980% 07/15/01 84,499
Federal Home Loan Mortgage Corporation
Pool #240001 D 100,660 9.500% 11/01/97 101,938
REMIC 1553 Class E 500,000 6.250% 04/15/07 491,969
Federal National Mortgage Association

REMIC Trust G93-20 Class PG 243,000 6.500% 02/25/19 238,623
REMIC Trust 1992-169 Class J 250,000 6.500% 03/25/21 241,996
REMIC Trust G95-2 Class L 250,000 8.000% 05/17/04 248,159
Series SM-2004-F 100,000 7.550% 06/10/04 101,872
REMIC Trust 1992-G52 Class C 47,714 7.250% 08/25/20 47,868
Global Industries Ltd. Title XI 1,324,000 8.300% 07/15/20 1,435,172
Government National Mortgage Association
Pool #16402 276,320 8.500% 04/15/12 285,383
Pool #383137 430,564 7.750% 03/15/11 433,382
Marine Vessel Buffalo Title XI 425,626 7.270% 09/01/03 434,619
Moore McCormack Leasing - Series B 240,000 8.875% 07/15/01 241,116
Small Business Administration 115,453 7.365% 12/06/09 113,971
Small Business Administration 92-A 338,837 7.600% 01/01/12 339,791
----------
Total U. S. Government and Agency Obligations (Cost $6,168,514) 6,281,821
---------

U. S. GOVERNMENT INSURED OBLIGATIONS - 19.96%

Federal Housing Authority Project Loan

Crystal City 70,832 2.900% 01/01/06 59,823
Downtowner Apartments 175,857 8.375% 11/01/11 178,516
Juneau Village 1,074,959 6.680% 03/01/11 1,054,423
Kinswood Apartments 630,982 6.875% 10/01/14 629,426
USGI #87 429,269 7.430% 08/01/23 431,995
Wautoma Rehab 96,032 6.930% 12/01/13 93,989
---------

Total U. S. Government Insured Obligations (Cost $2,451,462) 2,448,172
----------
</TABLE>

(Continued)

<PAGE>

INVESTEK FIXED INCOME TRUST

PORTFOLIO OF INVESTMENTS

March 31, 1996

Interest Maturity Value
Principal Rate Date (note 1)

--------- ------- --------- -------------

<S> <C>

CORPORATE OBLIGATIONS - 7.86%

American Car Line Company Equipment Trust

Certificates; Series 1993-A $217,000 8.250% 04/15/08 $217,473
GG1B Funding Corporation 492,662 7.430% 01/15/11 473,050
Hugoton Capital Limited Partnership 250,000 10.820% 08/31/07 273,032
----------

Total Corporate Obligations (Cost $994,211) 963,555
----------

CONVENTIONAL MORTGAGE BACKED SECURITIES - 11.64%

GE Capital Mortgage Services, Inc.

REMIC Series 1993-17 Class A6 650,000 6.500% 11/25/23 630,181
Prudential Home Mortgage Securities
REMIC Series 1992-50 Class A5 85,000 7.625% 02/25/23 83,809
REMIC Series 1994-2 Class A8 500,000 6.750% 02/25/24 472,451
Residential Funding Corporation

REMIC Series 1993-S16 Class A6 250,000 7.000% 05/25/23 240,704
----------

Total Conventional Mortgage Backed Securities (Cost $1,445,694) 1,427,145
----------

PRIVATE MORTGAGE BACKED SECURITIES - 2.63%

Krauss/Schwartz Properties, Ltd. 156,641 7.740% 02/18/04 154,918
National Housing Partnership 168,640 9.500% 05/01/03 167,250
----------

Total Private Mortgage Backed Securities (Cost $325,281) 322,168
----------

PRIVATE PLACEMENT CORPORATE SECURITIES - 2.40%

Rosewood Care Center Capital Funding Corporation

First Mortgage Bonds 314,045 7.250% 11/01/13 294,225
----------
(Cost $305,819 )

Number of
Shares

---------
INVESTMENT COMPANY - 5.38%

Performance Funds Trust Money Market Fund "A" 659,421 659,421
--------
(Cost $659,421)

</TABLE>

(Continued)

<PAGE>

INVESTEK FIXED INCOME TRUST

PORTFOLIO OF INVESTMENTS

March 31, 1996

Total Value of Investments (Cost $12,350,402(a)) 101.10% $12,396,507
Liabilities In Excess of Other Assets (1.10%) (135,386)
------ ------------
Net Assets 100.00% $12,261,121
====== ============
</TABLE>

(a) 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 $171,655
Unrealized depreciation (125,550)
--------
Net unrealized appreciation $46,105
========

See accompanying notes to financial statements

<PAGE>

INVESTEK FIXED INCOME TRUST

STATEMENT OF ASSETS AND LIABILITIES

March 31, 1996

ASSETS

Investments, at value (cost $12,350,402) $ 12,396,507
Interest receivable 136,575
Dividend receivable 1,825
Other assets 2,697
------------
Total assets 12,537,604
------------

LIABILITIES

Accrued expenses 1,678
Payable for investment purchases 240,391
Distributions payable 29,184
Disbursements in excess of cash on demand deposit 3,137
Due to advisor 2,093
------------
Total liabilities 276,483
------------

NET ASSETS

(applicable to 1,213,275 shares outstanding; unlimited
shares of no par value beneficial interest authorized) $ 12,261,121
============

NET ASSET VALUE AND REPURCHASE PRICE PER SHARE

($12,261,121 / 1,213,275 shares) $ 10.11
============

NET ASSETS CONSIST OF

Paid-in capital $ 12,773,532
Undistributed net investment income 4,435
Accumulated net realized loss on investments (562,951)
Net unrealized appreciation on investments 46,105
------------
$ 12,261,121
============

See accompanying notes to financial statements

<PAGE>

INVESTEK FIXED INCOME TRUST

STATEMENT OF OPERATIONS

Year ended March 31, 1996

INVESTMENT INCOME

Income

Interest $ 1,015,516
Dividends 13,284
-----------

Total income 1,028,800

-----------

Expenses

Investment advisory fees (note 2) 63,557
Fund administration fees (note 2) 21,199
Fund accounting fees (note 2) 21,000
Professional fees 16,795
Custody fees 8,167
Registration and filing administration fees 1,488
Shareholder recordkeeping fees 1,199
Securities pricing fees 439
Trustee fees and meeting expenses 5,617
Shareholder servicing expenses 5,053
Registration and filing expenses 2,239
Printing expenses 998
Other operating expenses 4,930
-----------

Total expenses 152,681

-----------

Less investment advisory fees waived (note 2) (29,700)
-----------

Net expenses 122,981

-----------

Net investment income 905,819

-----------

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS

Net realized loss from investment transactions (30,968)
Decrease in unrealized depreciation on investments 660,566

-----------

Net realized and unrealized gain on investments 629,598
-----------

Net increase in net assets resulting from operations $ 1,535,417
===========

See accompanying notes to financial statements

<PAGE>

INVESTEK FIXED INCOME TRUST

STATEMENTS OF CHANGES IN NET ASSETS

Year ended Year ended
March 31, March 31,

1996 1995

DECREASE IN NET ASSETS
<S> <C>

Operations

Net investment income $ 905,819 $ 1,033,022
Net realized loss from investment transactions (30,968) (531,983)
Decrease in unrealized depreciation on investments 660,566 206,044
------------ ------------

Net increase in net assets resulting from operations 1,535,417 707,083
------------ ------------

Distributions to shareholders from

Net investment income (905,271) (1,025,722)
------------ ------------

Capital share transactions

Decrease in net assets resulting from capital share transactions (a) (3,352,499) (2,339,701)
------------ ------------

Total decrease in net assets (2,722,353) (2,658,340)

NET ASSETS

Beginning of year 14,983,474 17,641,814
------------ ------------

End of year (including undistributed net investment income $12,261,121 $ 14,983,474
============ ============
of $4,435 in 1996 and $3,887 in 1995)

</TABLE>

(a) A summary of capital share activity follows:

Year ended Year ended
March 31, 1996 March 31, 1995

Shares Value Shares Value

<S> <C>

Shares sold 148,043 $ 1,503,798 135,952 $ 1,325,801
Shares issued for reinvestment
of distributions 53,720 545,148 87,083 839,641
---------- ----------- ---------- -----------

201,763 2,048,946 223,035 2,165,442

Shares redeemed (526,499) (5,401,445) (462,346) (4,505,143)
---------- ----------- ---------- -----------

Net decrease (324,736) $(3,352,499) (239,311) $(2,339,701)
========== =========== ========== ===========

</TABLE>

See accompanying notes to financial statements

<PAGE>

INVESTEK FIXED INCOME TRUST

FINANCIAL HIGHLIGHTS

(For a Share Outstanding Throughout the Period)
<TABLE>

For the
period from

November 15, 1991
(commencement of

operations)

Year ended Year ended Year ended Year ended to
March 31, March 31, March 31, March 31, March 31,

1996 1995 1994 1993 1992
------------ ------------ ----------- ----------- ------------
<S> <C>

Net asset value, beginning of period $ 9.74 $ 9.93 $ 10.48 $ 9.92 $ 10.00
Income (loss) from investment operations
Net investment income 0.66 0.63 0.61 0.65 0.20
Net realized and unrealized gain (loss) on investments 0.37 (0.19) (0.43) 0.56 (0.08)
----------- ----------- ----------- ---------- ----------
Total from investment operations 1.03 0.44 0.18 1.21 0.12
----------- ----------- ----------- ---------- ----------
Distributions to shareholders from

Net investment income (0.66) (0.63) (0.60) (0.64) (0.20)
Net realized gain from investment transactions 0.00 0.00 (0.13) (0.01) 0.00
----------- ----------- ----------- ---------- ----------
Total distributions (0.66) (0.63) (0.73) (0.65) (0.20)
----------- ----------- ----------- ---------- ----------
Net asset value, end of period $ 10.11 $ 9.74 $ 9.93 $ 10.48 $ 9.92
=========== =========== =========== ========== ==========
Total return 10.70% 4.73% 1.43% 12.49% 1.22%(a)
=========== =========== =========== ========== ==========
Ratios/supplemental data

Net assets, end of period $12,261,121 $14,983,474 $17,641,814 $5,267,626 $2,036,541
=========== =========== =========== ========== ==========
Ratio of expenses to average net assets

Before expense reimbursements and waived fees 1.08% 1.08% 1.41% 1.69% 1.71%(b)
After expense reimbursements and waived fees 0.87% 0.77% 0.77% 0.95% 0.95%(b)
Ratio of net investment income to average net assets

Before expense reimbursements and waived fees 6.20% 6.15% 5.45% 5.50% 5.41%(b)
After expense reimbursements and waived fees 6.41% 6.45% 5.82% 6.24% 6.17%(b)
Portfolio turnover rate 16.57% 19.64% 34.42% 59.78% 0.00%
</TABLE>

(a) Annualized total return was 3.27%.

(b) Annualized.

See accompanying notes to financial statements

<PAGE>

INVESTEK FIXED INCOME TRUST

NOTES TO FINANCIAL STATEMENTS

March 31, 1996

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION

The Investek Fixed Income Trust (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. The Fund began operations on November
15, 1991. The following is a summary of significant accounting policies
followed by the Fund.

A. Security Valuation - The Fund's investments in securities are carried
at value. Securities listed on an exchange or quoted on a national
market system are valued at the last sales price as of 4:00 p.m., New
York time. Securities for which market quotations are not readily
available are valued in good faith using a method approved by the
Trust's Board of Trustees, taking into consideration institutional bid
and last sale prices, and securities prices, yields, estimated
maturities, call features, ratings, institutional trading in similar
groups of securities and developments related to specific securities.
Short-term investments are valued at cost which approximates value.

The financial statements include securities valued at $11,495,484 (94%
of net assets) whose values have been estimated using a method
approved by the Trust's Board of Trustees. Such securities are valued
by using a matrix system, which is based upon the factors described
above and particularly the spread between yields on the securities
being valued and yields on U. S. Treasury securities with similar
remaining years to maturity. Those estimated values may differ from
the values that would have resulted from actual purchase and sale
transactions.

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 the accrual basis. Distributions to shareholders are recorded on
the ex-dividend date.

D. Distributions to Shareholders - The Fund generally declares dividends
monthly, 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 - Management makes a number of estimates in the
preparation of the Fund's financial statements. Actual results could
differ significantly from these estimates.

<PAGE>

INVESTEK FIXED INCOME TRUST

NOTES TO FINANCIAL STATEMENTS

March 31, 1996

NOTE 2 - INVESTMENT ADVISORY FEE AND OTHER RELATED PARTY TRANSACTIONS

Pursuant to an investment advisory agreement, Investek Capital
Management, Inc. (the "Advisor") provides the Fund with a continuous
program of supervision of the Fund's assets, including the composition
of its portfolio, and furnishes advice and recommendations with
respect to investments, investment policies, and the purchase and sale
of securities. As compensation for its services, the Advisor receives
a fee at the annual rate of 0.45% 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
currently intends to voluntarily waive all or a portion of its fee and
reimburse expenses of the Fund to limit total Fund operating expenses
to 0.90% of the average daily net assets of the Fund. There can be no
assurance that the foregoing voluntary fee waivers or reimbursements
will continue. The Advisor has voluntarily waived a portion of its fee
amounting to $29,700 ($0.02 per share) for the year ended March 31,
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 0.15% of the Fund's average daily
net assets. 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.

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 $2,250,657 and $5,903,141, respectively, for the year ended
March 31, 1996.

The Fund's prospectus provides that the Fund will not acquire
securities of any one investment company if, immediately thereafter,
the securities would have an aggregate value in excess of 5% of the
Fund's total assets. At March 31, 1996 the Fund's investment in an
investment company of $659,421 represented 5.26% of the Fund's total
assets.

NOTE 4 - DISTRIBUTIONS TO SHAREHOLDERS

The Fund has capital loss carryforwards for federal income tax
purposes of $562,951, $492,567 of which expires in the year 2003 and
$70,384 of which expires in the year 2004. It is the intention of the
Board of Trustees of the Trust not to distribute any realized gains
until the carryforwards have been offset or expire.

<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Board of Trustees and Shareholders
The Nottingham Investment Trust II:

We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of the Investek Fixed Income Trust (the "Fund"), a
series of The Nottingham Investment Trust II, as of March 31, 1996, 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
financial highlights for each of the three 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. The financial
statements for the year ended March 31, 1993 and the period from November 15,
1991 (commencement of operations) to March 31, 1992 were audited by other
auditors whose report thereon dated May 6, 1993 expressed an unqualified opinion
on those statements.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Investek Fixed Income Trust as of March 31, 1996, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended, and financial highlights for each of the three years
in the period then ended in conformity with generally accepted accounting
principles.

Richmond, Virginia
May 14, 1996

44
<PAGE>

STATEMENT OF ADDITIONAL INFORMATION

ZSA EQUITY FUND

August 1, 1996

A Series of

THE NOTTINGHAM INVESTMENT TRUST II
105 North Washington Street, Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069
Telephone 1-800-525-FUND

Table of Contents

INVESTMENT OBJECTIVE AND POLICIES.......................................... 2
INVESTMENT VEHICLES THAT MAY BE USED IN FUTURE YEARS....................... 4
INVESTMENT LIMITATIONS..................................................... 7
NET ASSET VALUE............................................................ 8
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION............................. 9
DESCRIPTION OF THE TRUST................................................... 10
ADDITIONAL INFORMATION CONCERNING TAXES.................................... 11
MANAGEMENT OF THE FUND......................................................12
SPECIAL SHAREHOLDER SERVICES................................................17
ADDITIONAL INFORMATION ON PERFORMANCE...................................... 18
APPENDIX A - DESCRIPTION OF RATINGS........................................ 21
ANNUAL REPORT OF THE FUND FOR THE FISCAL YEAR ENDED MARCH 31, 1996....ATTACHED

This Statement of Additional Information (the "Additional Statement") is meant
to be read in conjunction with the Prospectus dated August 1, 1996 for the ZSA
Equity Fund (the "Fund"), as the Prospectus may be amended or supplemented from
time to time, and is incorporated by reference in its entirety into the
Prospectus. Because this Additional Statement is not itself a prospectus, no
investment in shares of the Fund should be made solely upon the information
contained herein. Copies of the Fund's Prospectus may be obtained at no charge
by writing or calling the Fund at the address and phone number shown above. This
Additional Statement is not a prospectus but is incorporated by reference in the
Prospectus in its entirety. Capitalized terms used but not defined herein have
the same meanings as in the Prospectus.

<PAGE>

INVESTMENT OBJECTIVE AND POLICIES

The following policies supplement the Fund's investment objective and policies
as set forth in the Prospectus of the Fund. The Fund, organized in 1992, has no
prior operating history.

<PAGE>

For the fiscal years ended March 31, 1994, 1995, and 1996, the Fund paid
brokerage commissions of $17,386, $39,842, and $28,832, respectively.

<PAGE>

an interest bearing instrument. The Fund will invest in Commercial Paper only if
it is rated one of the top two rating categories by Moody's Investors Service,
Inc. ("Moody's"), Standard & Poor's Ratings Group ("S&P"), Fitch Investors
Service, Inc. ("Fitch") or Duff & Phelps ("D&P") or, if not rated, of equivalent
quality in the Advisor's opinion. Commercial Paper may include Master Notes of
the same quality. Master Notes are unsecured obligations which are redeemable
upon demand of the holder and which permit the investment of fluctuating amounts
at varying rates of interest. Master Notes are acquired by the Fund only through
the Master Note program of the Fund's custodian bank, acting as administrator
thereof. The Advisor will monitor, on a continuous basis, the earnings power,
cash flow and other liquidity ratios of the issuer of a Master Note held by the
Fund.

Illiquid Investments. The Fund may invest up to 10% of its net assets in
illiquid securities, which are investments that cannot be sold or disposed of in
the ordinary course of business within seven days at approximately the prices at
which they are valued. Under the supervision of the Board of Trustees, the
Advisor determines the liquidity of the Fund's investments and, through reports
from the Advisor, the Board monitors investments in illiquid instruments. In
determining the liquidity of the Fund's investments, the Advisor may consider
various factors including (1) the frequency of trades and quotations, (2) the
number of dealers and prospective purchasers in the marketplace, (3) dealer
undertakings to make a market, (4) the nature of the security (including any
demand or tender features) and (5) the nature of the marketplace for trades
(including the ability to assign or offset the Fund's rights and obligations
relating to the investment). Investments currently considered by the Fund to be
illiquid include repurchase agreements not entitling the holder to payment of
principal and interest within seven days and restricted securities. If through a
change in values, net assets or other circumstances, the Fund were in a position
where more than 10% of its net assets were invested in illiquid securities, it
would seek to take appropriate steps to protect liquidity.

Restricted Securities. Within its limitation on investment in illiquid
securities, the Fund may purchase restricted securities that generally can be
sold in privately negotiated transactions, pursuant to an exemption from
registration under the federal securities laws, or in a registered public
offering. Where registration is required, the Fund may be obligated to pay all
or part of the registration expense and a considerable period may elapse between
the time it decides to seek registration and the time the Fund may be permitted
to sell a security under an effective registration statement. If during such a
period, adverse market conditions were to develop, the Fund might obtain a less
favorable price than prevailed when it decided to seek registration of the
security.

INVESTMENT VEHICLES THAT MAY BE USED IN FUTURE YEARS

When the Fund has reached a size in total net assets when hedging techniques may
be reasonably expected to add value, and preserve unrealized gains in the
portfolio, some or all of the following techniques may be used. If these
techniques become applicable, the Fund will amend the Prospectus to include a
complete description of these techniques, and forward the revised prospectus to
all shareholders of the Fund.

Options on Securities and Securities Indices. To realize greater income than
would be realized on portfolio securities transactions alone, the Fund may write
(sell) covered call and put options. A call option written by the Fund obligates
the Fund to sell specified securities to the holder of the option at a specified
price, upon exercise of the option, at any time before the expiration date. All
call options written by the Fund are covered, which means that the Fund will own
the securities subject to the option so long as the option is outstanding. By
writing covered call options, however, the Fund may forego the opportunity to
profit from an increase in the market price of the underlying security.

The purpose of writing put options is to generate additional income. A put
option written by the Fund would obligate the Fund to purchase specified
securities from the option holder at a specified price, upon exercise of the
option, at any time before the expiration date. All put options written by the
Fund will be covered, which means that the Fund will have deposited with its
custodian cash, U.S. Government Securities, or other high-grade debt liquid
securities with a value at least equal to the exercise price of the put option.
In return for the option premium, the Fund accepts the risk that it will be
required to purchase the underlying securities at a price in excess of the
securities' market value at the time of purchase.

The Fund may terminate its obligations under a call or put option by purchasing
an option identical to the one it has written. Such purchases are referred to as
"closing purchase transactions."

<PAGE>

The Fund may write and purchase put and call options on any securities in which
it may invest in options on any securities index based on securities in which
the Fund may invest. The Fund is also authorized to enter into closing sale
transactions in order to realize gains or minimize losses on options purchased
by the Fund.

The Fund would normally purchase call options to hedge against an increase in
the market value of securities of the type in which the Fund may invest. The
Fund will not engage in such transactions for speculation. The purchase of a
call option would entitle the Fund, in return for the premium paid, to purchase
specified securities at a specified price, upon exercise of the option, during
the option period. The Fund would ordinarily realize a gain if during the option
period, the value of such securities exceeds the sum of the exercise price, the
premium paid and transaction costs; otherwise, the Fund would realize a loss on
the purchase of the call option.

The Fund would normally purchase put options to hedge against a decline in the
market value of securities in its portfolio ("protective puts"). The Fund will
not engage in such transactions for speculation. The purchase of a put option
would entitle the Fund, in exchange for the premium paid, to sell specified
securities at a specified price, upon exercise of the option, during the option
period. The purchase of protective puts is designed to offset or hedge against a
decline in the market value of the Fund's securities. Gains and losses on the
purchase of protective put options would tend to be offset by countervailing
changes in the value of underlying portfolio securities. The Fund would
ordinarily realize a gain if, during the option period, the value of the
underlying securities decreases below the exercise price sufficiently to cover
the premium and transaction costs; otherwise, the Fund would realize a loss on
the purchase of the put option.

The Fund may purchase put and call options on securities indices for the same
purposes as the purchase of options on securities. Currently, only options on
stock indices are traded and only on national exchanges. Options on securities
indices are similar to options on securities, except that the exercise of
securities index options requires cash payments and does not involve the actual
purchase or sale of securities. In addition, securities index options are
designed to reflect price fluctuations in a group of securities or segment of
the securities market rather than price fluctuations in a single security. A
purchase of securities index options is subject to the risk that the value of
the Fund's portfolio securities may not change as much as an index because a
Fund's investments generally cannot exactly match the composition of an index.

There is no assurance that a liquid secondary market on a domestic options
exchange will exist for any particular exchange-traded option, or at any
particular time. If the Fund is unable to effect a closing purchase transaction
with respect to covered options it has written, the Fund will not be able to
sell the underlying securities or dispose of assets held in a segregated account
until the options expire or are exercised. Similarly, if the Fund is unable to
effect a closing sale transaction with respect to options it has purchased, the
Fund would have to exercise the options in order to realize any profit and may
incur transaction costs upon the purchase or sale of underlying securities. The
Fund expects to purchase and write only exchange traded options until such time
as the Advisor determines that the over-the-counter market in options is
sufficiently developed and appropriate disclosure is furnished to prospective
and existing shareholders.

The Fund may purchase and sell both options that are traded on United States
exchanges, and certain options traded in the over-the-counter market, including
options on GNMAs and short-term intermediate and long term Treasury securities.
The Fund may engage in over-the-counter options transactions with broker-dealers
who make markets in these options.

The ability to terminate over-the-counter option positions is more limited than
with exchange-traded option positions because the predominant market is the
issuing broker rather than an exchange, and may involve the risk that
broker-dealers participating in such transactions will not fulfill their
obligations. To reduce this risk, the Fund will purchase such options only from
broker-dealers whose debt securities are considered investment grade by the
Advisor. Moreover, until such time as the staff of the Securities and Exchange
Commission changes its position, the Fund will adhere to the staff's informal
position that purchased over-the-counter options and assets used to cover
written over-the-counter options constitute illiquid securities.

The writing and purchase of options is a highly specialized activity that
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. The Fund will pay brokerage
commissions or spreads in connection with its options transactions, as well as
for purchases and sales of underlying securities. The writing of options could
result in significant increases in the Fund's turnover rate. The Fund's
transactions in options may be limited by the requirements of the Internal
Revenue Code for qualification as a regulated investment company.

<PAGE>

Futures Contracts and Related Options. To hedge against changes in securities
prices, the Fund may purchase and sell various kinds of futures contracts, and
purchase and write (sell) call and put options on any of such futures contracts.
The futures contracts may be based on various securities (such as U.S.
Government securities), securities indices and other financial instruments and
indices. The Fund may engage in futures and related options transactions for
bona fide hedging purposes as described below. All futures contracts entered
into by the Fund are traded on U.S. exchanges or boards of trade that are
licensed and regulated by the Commodity Futures Trading Commission (the "CFTC").

A futures contract may generally be described as an agreement between two
parties to buy and sell particular financial instruments for an agreed price
during a designated month (or to deliver the final cash settlement price, in the
case of a contract relating to an index or otherwise not calling for physical
delivery at the end of trading in the contract).

When interest rates are rising or securities prices are falling, the Fund can
seek to offset a decline in the value of its current portfolio securities
through the sale of futures contracts. When interest rates are falling or
securities prices are rising, the Fund, through the purchase of futures
contracts, can attempt to secure better rates or prices than might later be
available in the market when it effects anticipated purchases.

Positions taken in the futures markets are not normally held to maturity but are
instead liquidated through offsetting transactions that may result in a profit
or a loss. A clearing corporation associated with the exchange on which futures
on securities are traded guarantees that, if still open, the sale or purchase
will be performed on the settlement date.

Hedging, by use of futures contracts, seeks to establish with more certainty the
effective price and rate of return on portfolio securities and securities that
the Fund owns or proposes to acquire. The Fund may, for example, take a "short"
position in the futures market by selling futures contracts in order to hedge
against an anticipated rise in interest rates that would adversely affect the
value of the Fund's portfolio securities. Such futures contracts may include
contracts for the future delivery of securities held by the Fund or securities
with characteristics similar to those of the Fund's portfolio securities. If, in
the opinion of the Advisor, there is a sufficient degree of correlation between
price trends for the Fund's portfolio securities and futures contracts based on
securities indices, the Fund may also enter into such futures contracts as part
of its hedging strategy. Although under some circumstances prices of securities
in the Fund's portfolio may be more or less volatile than prices of such futures
contacts, the Advisor will attempt to estimate the extent of this volatility
difference based on historical patterns and compensate for any such differential
by having the Fund enter into a greater or lesser number of futures contracts or
by attempting to achieve only a partial hedge against price changes affecting
the Fund's securities portfolio. When hedging of this character is successful,
any depreciation in the value of portfolio securities will be substantially
offset by appreciation in the value of the futures position. On the other hand,
any unanticipated appreciation in the value of the Fund's portfolio securities
would be substantially offset by a decline in the value of the futures position.

On other occasions, the Fund may take a "long" position by purchasing futures
contracts. This would be done, for example, when the Fund anticipates the
subsequent purchase of particular securities when it has the necessary cash, but
expects the prices or currency exchange rates then available in the applicable
market to be less favorable than prices or rates that are currently available.

The acquisition of put and call options on futures contracts will give a Fund
the right (but not the obligation) for a specified price to sell or to purchase,
respectively, the underlying futures contract at any time during the option
period. As the purchaser of an option on a futures contract, the Fund obtains
the benefit of the futures position if prices move in a favorable direction but
limits its risk of loss in the event of an unfavorable price movement to the
loss of the premium and transaction costs.

The writing of a call option on a futures contract generates a premium that may
partially offset a decline in the value of the Fund's assets. By writing a call
option, the Fund becomes obligated, in exchange for the premium, to sell a
futures contract, which may have a value higher than the exercise price.
Conversely, the writing of a put option on a futures contract generates a
premium that may partially offset an increase in the price of securities that
the Fund intends to purchase. However, the Fund becomes obligated to purchase a
futures contract that may have a value lower than the exercise price. Thus, the
loss incurred by the Fund in writing options on futures is potentially unlimited
and may exceed the amount of the premium received. The Fund will incur
transaction costs in connection with the writing of options on futures.

<PAGE>

The holder or writer of an option on a futures contract may terminate its
position by selling or purchasing an offsetting option on the same series. There
is no guarantee that such closing transactions can be affected. The Fund's
ability to establish and close out positions on such options will be subject to
the development and maintenance of a liquid market.

The Fund will engage in futures and related options transactions only for bona
fide hedging purposes in accordance with CFTC regulations, which permit
investment companies registered under the 1940 Act to engage in such
transactions without requiring their sponsors to be registered as commodity pool
operators. The Fund is not permitted to engage in speculative futures trading.
The Fund will determine that the price fluctuations in the futures contracts and
options on futures used for hedging purposes are substantially related to price
fluctuations in securities held by the Fund or in securities which it expects to
purchase. The Fund's futures transactions will be entered into for traditional
hedging purposes -- i.e., futures contracts will be sold to protect against a
decline in the price of securities that the Fund owns, or futures contracts will
be purchased to protect the Fund against an increase in the price of securities
it intends to purchase. In particular cases, when it is economically
advantageous for the Fund to do so, a long futures position may be terminated or
an option may expire without the corresponding purchase of securities or other
assets.

Transaction costs associated with futures contracts and related options involve
brokerage costs, require margin deposits and, in the case of contracts and
options obligating the Fund to purchase securities or currencies, require the
Fund to segregate assets to cover such contracts and options.

While transactions in futures contracts and options on futures may reduce
certain risks, such transactions themselves entail certain other risks. Thus,
while the Fund may benefit from the use of futures and options on futures,
unanticipated changes in interest rates or securities prices may result in a
poorer overall performance for the Fund than if it had not entered into any
futures contacts or options transactions. In the event of an imperfect
correlation between a futures position and a portfolio position that is intended
to be protected, the desired protection may not be obtained, and the Fund may be
exposed to risk of loss.

INVESTMENT LIMITATIONS

As a matter of fundamental policy, the Fund may not:

(2) Invest 25% or more of the value of its total assets in any one industry
or group of industries (except that securities of the U.S. Government,
its agencies and instrumentalities are not subject to these limitations);

(4) Invest for the purpose of exercising control or management of another
issuer;

<PAGE>

(7) Purchase securities on margin (but the Fund may purchase or sell futures
contracts for hedging purposes and may obtain such short term credits as
may be necessary for the clearance of transactions);

(9) Invest in warrants, valued at the lower of cost or market, exceeding more
than 5% of the value of the Fund's net assets. Included within this
amount, but not to exceed 2% of the value of the Fund's net assets, may
be warrants which are not listed on the New York or American Stock
Exchange.

(10) Participate on a joint or joint and several basis in any trading account
in securities;

(11) Make loans of money or securities, except that the Fund may invest in
repurchase agreements, money market instruments, and other debt
securities;

(12) Invest more than 10% of the value of its net assets in repurchase
agreements having a maturity of longer than seven days or other not
readily marketable securities; included in this category are "restricted"
securities and any other assets for which an active and substantial
market does not exist at the time of purchase or subsequent valuation;

(13) Purchase or sell commodities or commodities contracts;

(14) Issue senior securities, borrow money or pledge its assets, except that
it may borrow from banks as a temporary measure (a) for extraordinary or
emergency purposes, in amounts not exceeding 5% of the Fund's total
assets, or (b) in order to meet redemption requests which might otherwise
require untimely disposition of portfolio securities, in amounts not
exceeding 15% of the Fund's total assets; and the Fund may pledge its
assets to secure all such borrowings;

(16) Purchase foreign securities, except that the Fund may purchase foreign
securities sold as American Depository Receipts without limit.

NET ASSET VALUE

The net asset value per share of the Fund is determined at 4:00 p.m., New York
time, Monday through Friday, except on business holidays when the New York Stock
Exchange is closed. The New York Stock Exchange recognizes the following
holidays: New Year's Day, President's Day, Good Friday, Memorial Day, Fourth of
July, Labor Day, Thanksgiving Day,

<PAGE>

and Christmas Day. Any other holiday recognized by the New York Stock Exchange
will be deemed a business holiday on which the net asset value of the Fund will
not be calculated.

The net asset value per share of the Fund is calculated separately by adding the
value of the Fund's securities and other assets belonging to the Fund,
subtracting the liabilities charged to the Fund, and dividing the result by the
number of outstanding shares. "Assets belonging to" the Fund consist of the
consideration received upon the issuance of shares of the Fund together with all
net investment income, realized gains/losses and proceeds derived from the
investment thereof, including any proceeds from the sale of such investments,
any funds or payments derived from any reinvestment of such proceeds, and a
portion of any general assets of the Trust not belonging to a particular
investment Fund. Assets belonging to the Fund are charged with the direct
liabilities of the Fund and with a share of the general liabilities of the
Trust, which are normally allocated in proportion to the number of or the
relative net asset values of all of the Trust's series at the time of allocation
or in accordance with other allocation methods approved by the Board of
Trustees. Subject to the provisions of the Declaration of Trust, determinations
by the Board of Trustees as to the direct and allocable liabilities, and the
allocable portion of any general assets, with respect to the Fund are
conclusive.

For the fiscal years ended March 31, 1994, 1995, and 1996, the total expenses of
the Fund after fee waivers and expense reimbursements were $33,740 (1.93% of the
average daily net assets of the Fund), $108,768 (1.95% of the average daily net
assets of the Fund), and $103,203 (1.94% of the average daily net assets of the
Fund).

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

Plan Under Rule 12b-1. The Trust has adopted a Plan of Distribution (the "Plan")
for the Fund pursuant to Rule 12b-1 under the 1940 Act (see "How Shares May Be
Purchased - Distribution Plan" in the Prospectus). Under the Plan the Fund may
expend up to 0.25% of the Fund's average net assets annually to finance any
activity which is primarily intended to result in the sale of shares of the Fund
and the servicing of shareholder accounts, provided the Trust's Board of
Trustees has approved the category of expenses for which payment is being made.
Such expenditures paid as service fees to any person who sells shares of the
Fund may not exceed 0.25% of the average annual net asset value of such shares.
Potential benefits of the Plan to the Fund include improved shareholder
servicing, savings to the Fund in transfer agency costs, benefits to the
investment process from growth and stability of assets and maintenance of a
financially healthy management organization.

From time to time the Distributor may pay additional amounts from its own
resources to dealers for aid in distribution or for aid in providing
administrative services to shareholders.

<PAGE>

the trustees including a majority of the noninterested Trustees of the Trust
having no interest in the Plan. In addition, in order for the Plan to remain
effective, the selection and nomination of Trustees who are not "interested
persons" of the Trust must be effected by the Trustees who themselves are not
"interested persons" and who have no direct or indirect financial interest in
the Plan. Persons authorized to make payments under the Plan must provide
written reports at least quarterly to the Board of Trustees for their review.

For the fiscal year ended March 31, 1996 the Fund incurred $13,335 for costs in
connection with the Plan under Rule 12b-1. Such costs were spent on compensation
to sales personnel for sale of Fund shares and servicing of shareholder
accounts.

DESCRIPTION OF THE TRUST

The Trust is an unincorporated business trust organized under Massachusetts law
on October 25, 1990. The Trust's Declaration of Trust authorizes the Board of
Trustees to divide shares into series, each series relating to a separate
portfolio of investments, and to classify and reclassify any unissued shares
into one or more classes of shares of each such series. The Declaration of Trust
currently provides for the shares of eight series, as follows: ZSA Equity Fund,
ZSA Asset Allocation Fund, and ZSA Social Conscience Fund managed by Zaske,
Sarafa & Associates, Inc. of Birmingham, Michigan; Capital Value Fund managed by
Capital Investment Counsel, Inc. of Raleigh, North Carolina; Investek Fixed
Income Trust managed by Investek Capital Management, Inc. of Jackson,
Mississippi; and The Brown Capital Management Equity Fund, The Brown Capital
Management Balanced Fund and The Brown Capital Management Small Company Fund
managed by Brown Capital Management, Inc. of Baltimore, Maryland. The Board of
Trustees has authorized the classification of shares of all such series except
the ZSA Funds. The number of shares of each series shall be unlimited. The Trust
does not intend to issue share certificates.

<PAGE>

When issued for payment as described in the Prospectus and this Additional
Statement, shares of the Fund will be fully paid and non-assessable.

ADDITIONAL INFORMATION CONCERNING TAXES

<PAGE>

MANAGEMENT OF THE FUND

Trustees and Officers. The Trustees and executive officers of the Trust, their
ages, and their principal occupations for the last five years are as follows:

<TABLE>
<CAPTION>
Name, Age, Position(s) Principal Occupation(s)
and Address During Past 5 Years
<S> <C>
F. Daniel Bell, III, 41 Partner
Trustee Wyrick, Robbins, Yates & Ponton
4101 Lake Boone Trail Raleigh, North Carolina
Suite 300
Raleigh, North Carolina 27619

Jack E. Brinson, 63 President, Brinson Investment Co.
Trustee President, Brinson Chevrolet, Inc.
1105 Panola Street Tarboro, North Carolina
Tarboro, North Carolina 27886

Eddie C. Brown, 55 President
Trustee* Brown Capital Management, Inc.
President Baltimore, Maryland
The Brown Capital Management Funds
809 Cathedral Street
Baltimore, Maryland 21201
</TABLE>
55

<PAGE>

<TABLE>
<CAPTION>
Name, Age, Position(s) Principal Occupation(s)
and Address During Past 5 Years
<S> <C>
Richard K. Bryant, 36 President
Trustee* Capital Investment Group
President Raleigh, North Carolina
Capital Value Fund Vice President
Post Office Box 32249 Capital Investment Counsel
Raleigh, North Carolina 27622 Raleigh, North Carolina

Timothy L. Ellis, 40 Vice President
Trustee* Investek Capital Management
Vice President Jackson, Mississippi
Investek Fixed Income Trust
317 East Capitol
Jackson, Mississippi 39201

R. Mark Fields, 43 Vice President
Vice President Investek Capital Management
Investek Fixed Income Trust Jackson, Mississippi
317 East Capital
Jackson, Mississippi 39201

John M. Friedman, 52 Vice President
Vice President Investek Capital Management
Investek Fixed Income Trust Jackson, Mississippi
317 East Capital
Jackson, Mississippi 39201

H. Kel Landis, III, 39 Regional Executive Vice President
Trustee Centura Bank
304 Stonybrook Road Rocky Mount, North Carolina
Rocky Mount, North Carolina 27803

Keith A. Lee, 35 Vice President
Vice President Brown Capital Management, Inc.
The Brown Capital Management Funds Baltimore, Maryland
309 Cathedral Street
Baltimore, Maryland 21201

Michael T. McRee, 52 President
President Investek Capital Management, Inc.
Investek Fixed Income Trust Jackson, Mississippi
317 East Capital
Jackson, Mississippi 39201

Frank P. Meadows III, 35 Managing Director
Trustee, Chairman and Treasurer* The Nottingham Company
105 North Washington Street Rocky Mount, North Carolina
Rocky Mount, North Carolina 27802
</TABLE>
56

<PAGE>

<TABLE>
<CAPTION>
Name, Age, Position(s) Principal Occupation(s)
and Address During Past 5 Years
<S> <C>
Anmar K. Sarafa, 35 Executive Vice President
Vice President Zaske, Sarafa & Associates, Inc.
The ZSA Funds Bloomfield Hills, Michigan
Suite 310
1533 North Woodward Avenue
Bloomfield Hills, Michigan 48304

Thomas W. Steed, 38 Senior Corporate Attorney
Trustee Hardees Food Systems
101 Bristol Court Rocky Mount, North Carolina
Rocky Mount, North Carolina 27802

J. Buckley Strandberg, 36 Vice President
Trustee Standard Insurance and Realty
Post Office Box 1375 Rocky Mount, North Carolina
Rocky Mount, North Carolina 27802

Arthur E. Zaske, 48 President
Trustee* Zaske, Sarafa, & Associates, Inc.
President Bloomfield Hills, Michigan
The ZSA Funds
Suite 310
1533 North Woodward Avenue
Bloomfield Hills, Michigan 48304
</TABLE>
- -------------------------------

* Indicates that Trustee is an "interested person" of the Trust for purposes of
the 1940 Act because of his position with one of the investment advisors or the
Administrator to the Trust.

<PAGE>

Compensation Table*

<TABLE>
<CAPTION>
Pension
Retirement Total
Aggregate Benefits Estimated Compensation
Compensation Accrued As Annual from the Trust
Name of Person, from the Part of Fund Benefits Upon Paid to
Position Trust Expenses Retirement Trustees
<S> <C>
F. Daniel Bell, III $7,950 None None $7,950
Trustee

Jack E. Brinson $7,950 None None $7,950
Trustee

Eddie C. Brown None None None None
Trustee

Richard K. Bryant None None None None
Trustee

Timothy L. Ellis None None None None
Trustee

H. Kel Landis, III $7,950 None None $7,950
Trustee

Frank P. Meadows, III None None None None
Trustee

Thomas W. Steed $6,200 None None $6,200
Trustee

J. Buckley Strandberg $7,950 None None $7,950
Trustee

Arthur E. Zaske None None None None
Trustee
</TABLE>
*Figures are for the fiscal year ended March 31, 1996.

<TABLE>
<CAPTION>
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership* Percent
<S> <C>
Alan Schein 13,614.725 6.659%
1701 North Point
San Francisco, CA 94123

Trust Company of the South - 16,704.570 8.170%
Reinvest. Acct.
P.O. Box 1898
Burlington, NC 27216

Wachovia Bank of North Carolina, 12,556.564 6.141%
N.A., Cust.
Sharon Lewis IRA
5728 E. Via Los Ranchos
Paradise Valley, AZ 85253

Mayor Shanken and Sharon Lewis, Trustees 13,420.887 6.564%
The Benjamin Lewis Trust
5728 E. Via Los Ranchos
Paradise Valley, AZ 85253
</TABLE>

* The Fund believes the shares indicated are owned both of record and
beneficially, except the shares held of record by The Trust Company of the
South, which are held for the benefit of its customers.

Investment Advisor. Information about Zaske, Sarafa & Associates, Inc. (the
"Advisor") and its duties and compensation as Advisor is contained in the
Prospectus. The Advisor will receive a monthly management fee equal to an annual
rate of 1.00% of the average daily net asset value of the Fund. Restrictive
limitations may be imposed on the Fund as a result of changes in current state
laws and regulations in those states where the Fund has qualified its shares, or
by a decision of the Trustees to qualify the shares in other states having
restrictive expense limitations.

For the fiscal year ended March 31, 1994, the Advisor voluntarily waived its fee
in the amount of $15,744 and reimbursed a portion of the Fund's expenses in the
amount of $44,144. For the fiscal year ended March 31, 1995, the Fund paid the
Advisor $16,918 of its advisory fee, while the Advisor voluntarily waived the
remaining portion of its fee in the amount of $38,511. The Advisor also
reimbursed a portion of the Fund's expenses in the amount of $3,448. For the
fiscal year ended March 31, 1996, the Fund paid the Advisor $4,953 of its
advisory fee, while the Advisor voluntarily waived the remaining portion in the
amount of $48,377.

The Administrator and Transfer Agent. The Trust has entered into a Fund
Accounting, Dividend Disbursing & Transfer Agent and Administration Agreement
with The Nottingham Company (the "Administrator"), 105 North Washington Street,
Post Office Drawer 69, Rocky Mount, North Carolina 27802-0069, pursuant to which
the Administrator receives a fee at the annual rate of 0.25% of the average
daily net assets of the Fund on the first $10 million; 0.20% of the next $40
million; 0.175% on the next $50 million; and 0.15% of its average daily net
assets in excess of $100 million. In addition, the Administrator currently
receives a base monthly fee of $1,750 for accounting and recordkeeping services
for the Fund. The Administrator also charges the Fund for certain costs involved
with the daily valuation of investment securities and is reimbursed for
out-of-pocket expenses. The Administrator charges a minimum fee of $3,000 per
month for all of its fees taken in the aggregate, analyzed monthly.

For services to the Fund for the fiscal years ended March 31, 1994, 1995, and
1996, the Administrator received fees of $4,012, $14,560, and $13,335,
respectively. For the fiscal years ended March 31, 1994, 1995, and 1996, the
Administrator received $17,500, $21,000, and $21,000, respectively, for
accounting and recordkeeping services.

<PAGE>

(9) take such other action with respect to the Fund as may be necessary in the
opinion of the Administrator to perform its duties under the agreement.

The Administrator will also serve as the Fund's transfer agent and dividend
disbursing agent and will provide certain accounting and pricing services for
the Fund.

The Distributor is a broker-dealer registered with the Securities and Exchange
Commission and a member in good standing of the National Association of
Securities Dealers, Inc.

The Distribution Agreement may be terminated by either party upon 60 days prior
written notice to the other party.

Custodian. Wachovia Bank of North Carolina, N.A. (the "Custodian"), 301 N. Main
Street, Winston-Salem, North Carolina 27102, serves as custodian for the Fund's
assets. The Custodian acts as the depository for the Fund, safekeeps its
portfolio securities, collects all income and other payments with respect to
portfolio securities, disburses monies at the Fund's request and maintains
records in connection with its duties as Custodian. For its services as
Custodian, the Custodian is entitled to receive from the Fund an annual fee
based on the average net assets of the Fund held by the Custodian.

SPECIAL SHAREHOLDER SERVICES

The Fund offers the following shareholder services:

<PAGE>

($5,000 minimum per bank wire). Instructions for establishing this service are
included in the Fund Shares Application, enclosed in the Prospectus, or
available by calling the Fund. If the shareholder prefers to receive his
systematic withdrawal proceeds in cash, or if such proceeds are less than the
$5,000 minimum for a bank wire, checks will be made payable to the designated
recipient and mailed within 7 days of the valuation date. If the designated
recipient is other than the registered shareholder, the signature of each
shareholder must be guaranteed on the application (see "Signature Guarantees" in
the Prospectus). A corporation (or partnership) must also submit a "Corporate
Resolution" (or "Certification of Partnership") indicating the names, titles and
required number of signatures authorized to act on its behalf. The application
must be signed by a duly authorized officer(s) and the corporate seal affixed.
No redemption fees are charged to shareholders under this plan. Costs in
conjunction with the administration of the plan are borne by the Fund.
Shareholders should be aware that such systematic withdrawals may deplete or use
up entirely their initial investment and may result in realized long-term or
short-term capital gains or losses. The Systematic Withdrawal Plan may be
terminated at any time by the Fund upon sixty days written notice or by a
shareholder upon written notice to the Fund. Applications and further details
may be obtained by calling the Fund at 1-800-525-FUND, or by writing to:

ZSA Equity Fund
105 North Washington Street

Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069

ADDITIONAL INFORMATION ON PERFORMANCE

<PAGE>

redeemable value of such investment. This is done by determining the ending
redeemable value of a hypothetical $1,000 initial payment. This calculation is
as follows:

P(1+T)n = ERV

Where: T = average annual total return.

ERV = ending redeemable value at the end of the period
covered by the computation of a hypothetical $1,000
payment made at the beginning of the period.
P = hypothetical initial payment of $1,000 from which the
maximum sales load is deducted.
n = period covered by the computation, expressed in terms
of years.

The Fund may also compute the aggregate total return of the Fund, which is
calculated in a similar manner, except that the results are not annualized.

The calculation of average annual total return and aggregate total return assume
that there is a reinvestment of all dividends and capital gain distributions on
the reinvestment dates during the period. The ending redeemable value is
determined by assuming complete redemption of the hypothetical investment and
the deduction of all nonrecurring charges at the end of the period covered by
the computations.

The average annual total return quotations for the Fund for the fiscal year
ended March 31, 1996, the three years ended March 3l, 1996, and since inception
(September 8, 1992 to March 31, 1996) are 22.52%, 6.38%, and 7.72%,
respectively. The cumulative total return quotation for the Fund since inception
through March 31, 1996 is 30.31%. These performance quotations should not be
considered as representative of the Fund's performance for any specified period
in the future.

The Fund's performance may be compared in advertisements, sales literature,
shareholder reports, and other communications to the performance of other mutual
funds having similar objectives or to standardized indices or other measures of
investment performance. In particular, the Fund may compare its performance to
the S&P 500 Index. Comparative performance may also be expressed by reference to
a ranking prepared by a mutual fund monitoring service or by one or more
newspapers, newsletters or financial periodicals. The Fund may also occasionally
cite statistics to reflect its volatility and risk.

<PAGE>

APPENDIX A

DESCRIPTION OF RATINGS

The Fund may acquire from time to time fixed income securities rated at least A,
based on the following minimum rating criteria ("Investment-Grade Debt
Securities") (or if not rated, of equivalent quality as determined by the
Advisor). Although fixed income securities rated BBB or Baa (as described below)
are considered to be "Investment-Grade Debt Securities" by the Advisor and the
industry, the Fund will limit its investments to fixed income securities rated
at least A at the time of investment (or if not rated, of equivalent quality as
determined by the Advisor). The various ratings used by the nationally
recognized securities rating services are described below.

AAA - This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to pay interest and repay
principal.

AA - Debt rated AA is considered to have a very strong capacity to pay
interest and repay principal and differs from AAA issues only in a small
degree.

<PAGE>

The following summarizes the highest rating used by Moody's for short-term notes
and variable rate demand obligations:

<PAGE>

AAA - Bonds that are rated AAA are of the highest credit quality. The
risk factors are considered to be negligible, being only slightly more
than for risk-free U.S. Treasury debt.

AA - Bonds that are rated AA are of high credit quality. Protection
factors are strong. Risk is modest but may vary slightly from time to
time because of economic conditions.

A - Bonds rated A have average but adequate protection factors. The risk
factors are more variable and greater in periods of economic stress.

BBB - Bonds rated BBB have below average protection factors but are still
considered sufficient for prudent investment. There is considerable
variability in risk during economic cycles.

To provide more detailed indications of credit quality, the AA, A and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within a rating category.

<PAGE>

The following summarizes the three highest ratings used by Fitch for short-term
notes, municipal notes, variable rate demand instruments and commercial paper:

F-1+ - Instruments assigned this rating are regarded as having the
strongest degree of assurance for timely payment.

F-1 - Instruments assigned this rating reflect an assurance of timely
payment only slightly less in degree than issues rated F-1+

F-2 - Instruments assigned this rating have satisfactory degree of
assurance for timely payment, but the margin of safety is not as great as
for issues assigned F-1+ and F-1 ratings.

<PAGE>

[Zaske, Sarafa & Associates, Inc. logo]

Dear Shareholder:

The fiscal year ending March 31, 1996 proved to be a successful year in many
ways for the ZSA Equity Fund and disappointing in one way. The success came with
good returns for our investors. The disappointment came in the fact that we
became defensive too soon. Nevertheless, ZSA followed its discipline and lowered
its stock market exposure as it's discipline indicated.

As the ZSA Equity Fund is a conservative growth vehicle, we began to raise cash
in the summer of 1995 because the market had skyrocketed in the preceding
months. Also, there had not been a 10% correction for four years (normally
there is one each year), and we had not seen a bear market for almost eight
years (normally there is one every three years). The cautious thing to do was
to raise some cash, so we did.

The market carried higher for six more months causing our relative returns to
lag. Still, our performance within the stocks we owned was excellent (35.43%
vs S&P 500 at 32.11%). However, pure performance numbers do not tell the whole
story. ZSA has always focused on the risk in the risk/reward equation. The
stocks in the ZSA portfolio had more consistent earnings, lower leverage,
more liquidity, higher revenue growth and higher profit margins than the market
as a whole.

SO, WHEN THE RISK LEVEL OF THE PORTFOLIO IS CONSIDERED AND THE CONSERVATIVE
ALLOCATION IS FACTORED IN, ZSA TOOK A LOT LESS RISK THAN THE MARKET AS A WHOLE
AND STILL HAD BIG RETURNS.

At the beginning of April, 1996, the ZSA Equity Fund took greater steps to
produce strong returns with less risk by further diversifying the portfolio
into International Equities and Real Estate Equities (REITs). Both of these
asset classes have lagged the U.S. stock market in the last fifteen months, yet
offer comparable returns over the long term. Anytime, we can diversify a
portfolio into comparably returning assets, we should decrease the risk and
maintain or enhance the return.

ZSA firmly believes that an equity portfolio should have a lower risk profile
now than it did in April of 1995.

Remember it is not just the percentage return that is important . . . it is the
quality of that return. With big returns comes big risks, risk and return are
joined at the hip, and ultimately the risk taken in a portfolio will likely
be realized.

Please do not hesitate to call us with your questions or concerns.

Respectfully,

/s/ ARTHUR E. ZASKE
Arthur E. Zaske
Chief Investment Officer

355 SOUTH WOODWARD AVE., STE. 200 * BIRMINGHAM, MICHIGAN 48009
TELEPHONE (810) 647-5990 * FAX (810) 647-0537

<PAGE>

ZSA EQUITY FUND

Performance Update - $10,000 Investment

For the period from September 8, 1992
(commencement of operations) to March 31, 1996

[GRAPH]

ZSA Equity Fund S&P 500 Total Return Index
09/08/92 10,000 10,000
09/30/92 9,996 10,102
12/31/92 10,466 10,611
03/31/93 10,821 11,074
06/30/93 11,120 11,128
09/30/93 11,396 11,416
12/31/93 11,480 11,680
03/31/94 10,635 11,237
06/30/94 9,960 11,285
09/30/94 10,386 11,836
12/31/94 10,013 11,835
03/31/95 10,635 12,987
06/30/95 11,249 14,227
09/30/95 12,058 15,357
12/31/95 12,571 16,282
03/31/96 13,031 17,156

THIS GRAPH DEPICTS THE PERFORMANCE OF THE ZSA EQUITY FUND VERSUS THE S&P 500
INDEX. IT IS IMPORTANT TO NOTE THE ZSA EQUITY FUND IS A PROFESSIONALLY
MANAGED MUTUAL FUND WHILE THE INDEX IS NOT AVAILABLE FOR INVESTMENT AND IS
UNMANAGED. THE COMPARISON IS SHOWN FOR ILLUSTRATIVE PURPOSES ONLY.

Average Annual Total Return

Commencement of One year ended Three years ended
operations through 3/31/96 3/31/96 3/31/96

7.72% 22.52% 6.38%

* The graph assumes an initial $10,000 investment at September 8, 1992. All
dividends and distributions are reinvested.

* At March 31, 1996, the Fund would have grown to $13,031 - total investment
return of 30.31% since September 8, 1992.

* At March 31, 1996, a similar investment in the S&P 500 Index would have
grown to $17,156 - total investment return of 71.56% since September 8, 1992.

* Past performance is not a guarantee of future performance. A mutual fund's
share price and investment return will vary with market conditions, and the
principal value of shares, when redeemed, may be worth more or less than the
original cost. Average annual returns are historical in nature and measure
net investment income and capital gain or loss from portfolio investments
assuming reinvestments of dividends.

<PAGE>

ZSA EQUITY FUND

PORTFOLIO OF INVESTMENTS

March 31, 1996

<TABLE>
<CAPTION>
Number of Value
Shares (note 1)
------------------- --------------
COMMON STOCK - 2.12%
<S> <C>
Household Products & Housewares
Proctor & Gamble Company 700 $59,325
--------------
(Cost $47,095)

Principal Interest Maturity
Amount Rate Date
----------------- ------------------- ----------------

U. S. GOVERNMENT OBLIGATION - 12.45%

U. S. Treasury Bill $350,000 0.00% 04/25/96 348,645
----------------
(Cost $348,912)

REPURCHASE AGREEMENT (a) - 2.12%
Wachovia Bank 59,369 5.38% 04/01/96 59,369
----------------
(Cost $59,369)

Total Value of Investments (Cost $455,376(b)) 16.68% 467,339
Other Assets Less Liabilities 83.32% 2,333,804
---------------- -----------------
Net Assets 100.00% $2,801,143
================ =================

(a) Joint repurchase agreement entered into March 31, 1996,
with a maturity value of $54,221,391 collateralized by
$46,275,000 U.S. Treasury Notes, due February 15, 2020.
The aggregate market value of the collateral at March 31,
1996 was $54,871,024. The Fund's pro rata interest in the
market value of the collateral at March 31, 1996 was
$60,084. The Fund's pro rata interest in the joint
repurchase agreement collateral is taken into possession by
the Fund's custodian upon entering into the repurchase
agreement.

(b) Aggregate cost for financial reporting and federal income
tax purposes is the same. Unrealized appreciation
(depreciation) of investments for financial reporting and
federal income tax purposes is as follows:

Unrealized appreciation $12,230
Unrealized depreciation (267)
--------------

Net unrealized appreciation $11,963
==============

</TABLE>

See accompanying notes to financial statements

<PAGE>

ZSA EQUITY FUND

STATEMENT OF ASSETS AND LIABILITIES

March 31, 1996

ASSETS
Investments, at value (cost $455,376) $ 467,339
Dividends receivable 3,600
Interest receivable 414
Receivable for investments sold 2,325,727
Prepaid expenses 1,268
Deferred organization expenses, net (note 4) 12,307
Due from distributor 965
Other assets 1,748
----------

Total assets 2,813,368
----------

LIABILITIES
Accrued expenses 3,300
Due to advisor (note 2) 5,916
Disbursements in excess of cash on demand deposit 3,009
----------

Total liabilities 12,225
----------

NET ASSETS
(applicable to 232,453 shares outstanding; unlimited
shares of no par value beneficial interest authorized) $2,801,143
==========

NET ASSET VALUE AND REPURCHASE PRICE PER SHARE
($2,801,143 / 232,453 shares) $ 12.05
==========

NET ASSETS CONSIST OF
Paid-in capital $2,005,197
Undistributed net investment income 451
Undistributed net realized gain on investments 783,532
Net unrealized appreciation on investments 11,963
----------
$2,801,143
==========

See accompanying notes to financial statements

<PAGE>

ZSA EQUITY FUND

STATEMENT OF OPERATIONS

Year ended March 31, 1996

<S> <C>
INVESTMENT INCOME

Income
Dividends $90,046
Interest 58,602
-------------

Total income 148,648
-------------

Expenses
Investment advisory fees (note 2) 53,330
Fund accounting fees (note 2) 21,000
Professional fees 15,649
Fund administration fees (note 2) 13,334
Distribution and service fees (note 3) 13,334
Custody fees 6,327
Securities pricing fees 2,987
Registration and filing administration fees 1,805
Shareholder recordkeeping fees 1,071
Trustee fees and meeting expenses 5,617
Amortization of deferred organization expenses (note 4) 4,752
Shareholder servicing expenses 4,274
Registration and filing expenses 2,823
Printing expenses 822
Other operating expenses 4,455
-------------

Total expenses 151,580
-------------

Less investment advisory fees waived (note 2) (48,377)
-------------

Net expenses 103,203
-------------

Net investment income 45,445
-------------

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS

Net realized gain from investment transactions 1,658,144
Decrease in unrealized appreciation on investments (532,112)
-------------

Net realized and unrealized gain on investments 1,126,032
-------------

Net increase in net assets resulting from operations $1,171,477
==============

</TABLE>

See accompanying notes to financial statements

<PAGE>

ZSA EQUITY FUND

STATEMENTS OF CHANGES IN NET ASSETS

Year ended Year ended
March 31, March 31,
1996 1995
----------- -----------
INCREASE (DECREASE) IN NET ASSETS
<S> <C>
Operations
Net investment income $ 45,445 $ 11,425
Net realized gain (loss) from investment transactions 1,658,144 (576,669)
Increase (decrease) in unrealized appreciation on investments (532,112) 686,639
----------- -----------

Net increase in net assets resulting from operations 1,171,477 121,395
----------- -----------

Distributions to shareholders from
Net investment income (47,370) (2,532)
Net realized gain from investment transactions (230,406) 0
----------- -----------

Decrease in net assets resulting from distributions (277,776) (2,532)
----------- -----------

Capital share transactions
Increase (decrease) in net assets resulting from capital
share transactions (a) (6,365,787) 4,401,669
----------- -----------

Total increase (decrease) in net assets (5,472,086) 4,520,532

NET ASSETS

Beginning of year 8,273,229 3,752,697
----------- -----------

End of year (including undistributed net investment income of $451
in 1996 and $2,376 in 1995) $ 2,801,143 $ 8,273,229
=========== ===========

</TABLE>

(a) A summary of capital share activity follows:

Year ended Year ended
March 31, 1996 March 31, 1995

Shares Value Shares Value
----------- ----------- ----------- -----------
<S> <C>
Shares sold 29,236 $ 334,635 609,787 $ 6,262,716
Shares issued for reinvestment
of distributions 23,526 275,722 254 2,513
----------- ----------- ----------- -----------

52,762 610,357 610,041 6,265,229

Shares redeemed (599,841) (6,976,144) (184,052) (1,863,560)
----------- ----------- ----------- -----------

Net increase (decrease) (547,079) ($6,365,787) 425,989 $ 4,401,669
=========== =========== =========== ===========

</TABLE>

See accompanying notes to financial statements

<PAGE>

ZSA EQUITY FUND

FINANCIAL HIGHLIGHTS

(For a Share Outstanding Throughout the Period)

<TABLE>
<CAPTION>
For the
period from
September 8, 1992
(commencement
Year ended Year ended Year ended of operations)
March 31, March 31, March 31, to March 31,
1996 1995 1994 1993
------------- -------------- ------------ --------------
<S> <C>
Net asset value, beginning of period $10.61 $10.61 $10.80 $10.00

Income (loss) from investment operations
Net investment income (loss) 0.12 0.02 (0.02) 0.02
Net realized and unrealized gain (loss) on investments 2.25 (0.02) (0.17) 0.80
------------ ------------ ------------ ----------

Total from investment operations 2.37 0 (0.19) 0.82
------------ ------------ ------------ ----------

Distributions to shareholders from
Net investment income (0.12) 0 0 (0.02)
Net realized gain from investment transactions (0.81) 0 0 0
------------ ------------ ------------ ----------

Total distributions (0.93) 0 0 (0.02)
------------ ------------ ------------ ----------

Net asset value, end of period $12.05 $10.61 $10.61 $10.80
============ ============ ============ ==========

Total return 22.52% 0.00% (1.76)% 8.21%
============ ============ ============ ==========

Ratios/supplemental data

Net assets, end of period $2,801,143 $8,273,229 $3,752,697 $440,348
============ ============ ============ ==========

Ratio of expenses to average net assets
Before expense reimbursements and waived fees 2.85% 2.70% 5.35% 18.92%(a)
After expense reimbursements and waived fees 1.94% 1.95% 1.93% 1.66%(a)

Ratio of net investment income (loss) to average net assets
Before expense reimbursements and waived fees (0.06)% (0.55)% (3.80)% (16.87)%(a)
After expense reimbursements and waived fees 0.85% 0.20% (0.37)% 0.39%(a)

Portfolio turnover rate 51.97% 196.84% 79.52% 24.24%
</TABLE>

(a) Annualized

See accompanying notes to financial statements

<PAGE>

ZSA EQUITY FUND

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 1996

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION

The ZSA Equity 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. The Fund began operations
on September 8, 1992. The following is a summary of significant
accounting policies followed by the Fund.

A. SECURITY VALUATION - The Fund's investments in securities are
carried at value. Securities listed on an exchange or quoted on
a national market system are valued at the last sales price as
of 4:00 p.m., New York time on the day of valuation. Other
securities traded in the over-the-counter market and listed
securities for which no sale was reported on that date are
valued at the most recent bid price. Securities for which market
quotations are not readily available, if any, are valued by
using an independent pricing service or by following procedures
approved by the Board of Trustees. Short-term investments are
valued at cost which approximates value.

B. FEDERAL INCOME TAXES - No provision has been made for federal
income taxes since 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 the 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 - Management makes a number of estimates in the
preparation of the Fund's financial statements. Actual results
could differ significantly from those estimates.

NOTE 2 - INVESTMENT ADVISORY FEE AND OTHER RELATED PARTY TRANSACTIONS

Pursuant to an investment advisory agreement, Zaske, Sarafa &
Associates, 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.

(CONTINUED)

<PAGE>

ZSA EQUITY FUND

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 1996

Currently, the Fund does not offer its shares for sale in states
which require limitations to be placed on its expenses. The Advisor
currently intends to voluntarily waive all or a portion of its fee
and reimburse expenses of the Fund to limit total Fund operating
expenses to 1.95% of the average daily net assets of the Fund. There
can be no assurance that the foregoing voluntary fee waivers or
reimbursements will continue. The Advisor has voluntarily waived a
portion of its fee amounting to $48,377 ($0.10 per share) for the
year ended March 31, 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.

Certain Trustees and officers of the Trust are also officers of the
Advisor, the distributor or the Administrator.

NOTE 3 - DISTRIBUTION AND SERVICE FEES

The Board of Trustees, including a majority of the Trustees who are
not "interested persons" of the Trust as defined in the Investment
Company Act of 1940 (the "ACT"), adopted a distribution plan pursuant
to Rule 12b-1 of the Act (the "PLAN"). The Act regulates the manner
in which a regulated investment company may assume expenses of
distributing and promoting the sales of its shares and servicing of
its shareholder accounts.

The Plan provides that the Fund may incur certain expenses, which may
not exceed 0.25% per annum of the Fund's average daily net assets for
each year elapsed subsequent to adoption of the Plan, for payment to
the distributor and others for items such as advertising expenses,
selling expenses, commissions, travel or other expenses reasonably
intended to result in sales of shares of the Fund or support
servicing of shareholder accounts. The Fund incurred $13,334 of such
expenses under the Plan for the year ended March 31, 1996.

NOTE 4 - DEFERRED ORGANIZATION EXPENSES

All expenses of the Fund incurred in connection with its organization
and the registration of its shares have been assumed by the Fund.

(CONTINUED)

<PAGE>

ZSA EQUITY FUND

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 1996

The organization expenses are being amortized over a period of sixty
months. Investors purchasing shares of the Fund bear such expenses
only as they are amortized against the Fund's investment income.

In the event any of the initial shares of the Fund are redeemed
during the amortization period, the redemption proceeds will be
reduced by a pro rata portion of any unamortized organization
expenses in the same proportion as the number of initial shares being
redeemed bears to the number of initial shares of the Fund
outstanding at the time of the redemption.

NOTE 5 - PURCHASES AND SALES OF INVESTMENTS

Purchases and sales of investments, other than short-term
investments, aggregated $2,117,045 and $10,725,912, respectively, for
the year ended March 31, 1996.

NOTE 6 - DISTRIBUTIONS TO SHAREHOLDERS

For federal income tax purposes, the Fund must report distributions
from net realized gains from investment transactions that represent
long-term capital gain to its shareholders. Of the total $0.81 per
share of such distributions for the year ended March 31, 1996, $0.68
per share represents long-term capital gain. The remaining short-term
capital gain distribution is taxable as ordinary income to
shareholders for federal income tax purposes. Shareholders should
consult a tax advisor on how to report distributions for state and
local income tax purposes.

<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Board of Trustees and Shareholders
The Nottingham Investment Trust II:

We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of the ZSA Equity Fund (the "Fund"), a series of
The Nottingham Investment Trust II, as of March 31, 1996, 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 financial
highlights for each of the three 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. The financial
statements for the period from September 8, 1992 (commencement of operations) to
March 31, 1993 were audited by other auditors whose report thereon dated May 6,
1993 expressed an unqualified opinion on those statements.

We conducted our audits in accordance with generally accepted auditing
standards. 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 March
31, 1996 by correspondence with the custodian. 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, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
ZSA Equity Fund as of March 31, 1996, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended, and financial highlights for each of the three years in the
period then ended in conformity with generally accepted accounting principles.

Richmond, Virginia
May 14, 1996

<PAGE>

STATEMENT OF ADDITIONAL INFORMATION

ZSA ASSET ALLOCATION FUND

August 1, 1996

A Series of

THE NOTTINGHAM INVESTMENT TRUST II
105 North Washington Street, Post Office
Drawer 69
Rocky Mount, North Carolina 27802-0069
Telephone 1-800-525-FUND

Table of Contents

INVESTMENT OBJECTIVE AND POLICIES............................................ 2
INVESTMENT VEHICLES THAT MAY BE USED IN FUTURE YEARS......................... 4

INVESTMENT LIMITATIONS................................................ 7
NET ASSET VALUE....................................................... 8
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION........................ 9
DESCRIPTION OF THE TRUST.............................................. 10
ADDITIONAL INFORMATION CONCERNING TAXES............................... 11
MANAGEMENT OF THE FUND................................................ 12
SPECIAL SHAREHOLDER SERVICES.......................................... 17
ADDITIONAL INFORMATION ON PERFORMANCE................................. 18
APPENDIX A - DESCRIPTION OF RATINGS.................................. 20
ANNUAL REPORT OF THE FUND FOR THE FISCAL YEAR ENDED MARCH 31, 1996
ATTACHED

This Statement of Additional Information (the "Additional Statement") is meant
to be read in conjunction with the Prospectus dated August 1, 1996 for the ZSA
Asset Allocation Fund (the "Fund"), as the Prospectus may be amended or
supplemented from time to time, and is incorporated by reference in its entirety
into the Prospectus. Because this Additional Statement is not itself a
prospectus, no investment in shares of the Fund should be made solely upon the
information contained herein. Copies of the Fund's Prospectus may be obtained at
no charge by writing or calling the Fund at the address and phone number shown
above. This Additional Statement is not a prospectus but is incorporated by
reference in the Prospectus in its entirety. Capitalized terms used but not
defined herein have the same meanings as in the Prospectus.

<PAGE>

INVESTMENT OBJECTIVE AND POLICIES

The following policies supplement the Fund's investment objective and policies
as set forth in the Prospectus of the Fund. The Fund, organized in 1992, has no
prior operating history.

<PAGE>

For the fiscal years ended March 31, 1994, 1995, and 1996, the Fund paid
brokerage commissions of $35,699, $58,687, and $28,832, respectively.

<PAGE>

Illiquid Investments. The Fund may invest up to 10% of its net assets in
illiquid securities, which are investments that cannot be sold or disposed of in
the ordinary course of business within seven days at approximately the prices at
which they are valued. Under the supervision of the Board of Trustees, the
Advisor determines the liquidity of the Fund's investments and, through reports
from the Advisor, the Board monitors investments in illiquid instruments. In
determining the liquidity of the Fund's investments, the Advisor may consider
various factors including (1) the frequency of trades and quotations, (2) the
number of dealers and prospective purchasers in the marketplace, (3) dealer
undertakings to make a market, (4) the nature of the security (including any
demand or tender features) and (5) the nature of the marketplace for trades
(including the ability to assign or offset the Fund's rights and obligations
relating to the investment). Investments currently considered by the Fund to be
illiquid include repurchase agreements not entitling the holder to payment of
principal and interest within seven days and restricted securities. If through a
change in values, net assets or other circumstances, the Fund were in a position
where more than 10% of its net assets were invested in illiquid securities, it
would seek to take appropriate steps to protect liquidity.

INVESTMENT VEHICLES THAT MAY BE USED IN FUTURE YEARS

The Fund may terminate its obligations under a call or put option by purchasing
an option identical to the one it has written. Such purchases are referred to as
"closing purchase transactions."

<PAGE>

INVESTMENT LIMITATIONS

As a matter of fundamental policy, the Fund may not:

(2) Invest 25% or more of the value of its total assets in any one industry
or group of industries (except that securities of the U.S. Government,
its agencies and instrumentalities are not subject to these limitations);

(4) Invest for the purpose of exercising control or management of another
issuer;

<PAGE>

(10) Participate on a joint or joint and several basis in any trading account
in securities;

(11) Make loans of money or securities, except that the Fund may invest in
repurchase agreements, money market instruments, and other debt
securities;

(13) Purchase or sell commodities or commodities contracts;

(14) Issue senior securities, borrow money or pledge its assets, except that
it may borrow from banks as a temporary measure (a) for extraordinary or
emergency purposes, in amounts not exceeding 5% of the Fund's total
assets, or (b) in order to meet redemption requests which might otherwise
require untimely disposition of portfolio securities, in amounts not
exceeding 15% of the Fund's total assets; and the Fund may pledge its
assets to secure all such borrowings;

(16) Purchase foreign securities, except that the Fund may purchase foreign
securities sold as American Depository Receipts without limit.

NET ASSET VALUE

<PAGE>

and Christmas Day. Any other holiday recognized by the New York Stock Exchange
will be deemed a business holiday on which the net asset value of the Fund will
not be calculated.

For the fiscal years ended March 31, 1994, 1995, and 1996, the total expenses of
the Fund after fee waivers and expense reimbursements were $123,329 (1.92% of
the average daily net assets of the Fund), $255,393 (1.95% of the average daily
net assets of the Fund), and $195,347 (1.91% of the average daily net assets of
the Fund).

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

From time to time the Distributor may pay additional amounts from its own
resources to dealers for aid in distribution or for aid in providing
administrative services to shareholders.

<PAGE>

For the fiscal year ended March 31, 1996 the Fund incurred $25,659 for costs in
connection with the Plan under Rule 12b-1. Such costs were spent on compensation
to sales personnel for sale of Fund shares and servicing of shareholder
accounts.

DESCRIPTION OF THE TRUST

The Trust is an unincorporated business trust organized under Massachusetts law
on October 25, 1990. The Trust's Declaration of Trust authorizes the Board of
Trustees to divide shares into series, each series relating to a separate
portfolio of investments, and to classify and reclassify any unissued shares
into one or more classes of shares of each such series. The Declaration of Trust
currently provides for the shares of eight series, as follows: ZSA Equity Fund,
ZSA Asset Allocation Fund, and ZSA Social Conscience Fund managed by Zaske,
Sarafa & Associates, Inc. of Birmingham, Michigan; Capital Value Fund managed by
Capital Investment Counsel, Inc. of Raleigh, North Carolina; Investek Fixed
Income Trust managed by Investek Capital Management, Inc. of Jackson,
Mississippi; and The Brown Capital Management Equity Fund, The Brown Capital
Management Balanced Fund and The Brown Capital Management Small Company Fund
managed by Brown Capital Management, Inc. of Baltimore, Maryland. The Board of
Trustees has authorized the classification of shares of all such series except
the ZSA Funds. The number of shares of each series shall be unlimited. The Trust
does not intend to issue share certificates.

<PAGE>

When issued for payment as described in the Prospectus and this Additional
Statement, shares of the Fund will be fully paid and non-assessable.

ADDITIONAL INFORMATION CONCERNING TAXES

<PAGE>

MANAGEMENT OF THE FUND

Trustees and Officers. The Trustees and executive officers of the Trust, their
ages, and their principal occupations for the last five years are as follows:

Name, Age, Position(s) Principal Occupation(s)
and Address During Past 5 Years

F. Daniel Bell, III, 41 Partner
Trustee Wyrick, Robbins, Yates & Ponton
4101 Lake Boone Trail Raleigh, North Carolina
Suite 300
Raleigh, North Carolina 27619

Jack E. Brinson, 63 President, Brinson Investment Co.
Trustee President, Brinson Chevrolet, Inc.
1105 Panola Street Tarboro, North Carolina
Tarboro, North Carolina 27886

Eddie C. Brown, 55 President
Trustee* Brown Capital Management, Inc.
President Baltimore, Maryland
The Brown Capital Management Funds
809 Cathedral Street
Baltimore, Maryland 21201

<PAGE>

Timothy L. Ellis, 40 Vice President
Trustee* Investek Capital Management
Vice President Jackson, Mississippi
Investek Fixed Income Trust
317 East Capitol
Jackson, Mississippi 39201

R. Mark Fields, 43 Vice President
Vice President Investek Capital Management
Investek Fixed Income Trust Jackson, Mississippi
317 East Capital
Jackson, Mississippi 39201

John M. Friedman, 52 Vice President
Vice President Investek Capital Management
Investek Fixed Income Trust Jackson, Mississippi
317 East Capital
Jackson, Mississippi 39201

H. Kel Landis, III, 39 Regional Executive Vice President
Trustee Centura Bank
304 Stonybrook Road Rocky Mount, North Carolina
Rocky Mount, North Carolina 27803

Keith A. Lee, 35 Vice President
Vice President Brown Capital Management, Inc.
The Brown Capital Management Funds Baltimore, Maryland
309 Cathedral Street
Baltimore, Maryland 21201

Michael T. McRee, 52 President
President Investek Capital Management, Inc.
Investek Fixed Income Trust Jackson, Mississippi
317 East Capital
Jackson, Mississippi 39201

Frank P. Meadows III, 35 Managing Director
Trustee, Chairman and Treasurer* The Nottingham Company
105 North Washington Street Rocky Mount, North Carolina
Rocky Mount, North Carolina 27802

<PAGE>

Thomas W. Steed, 38 Senior Corporate Attorney
Trustee Hardees Food Systems
101 Bristol Court Rocky Mount, North Carolina
Rocky Mount, North Carolina 27802

J. Buckley Strandberg, 36 Vice President
Trustee Standard Insurance and Realty
Post Office Box 1375 Rocky Mount, North Carolina
Rocky Mount, North Carolina 27802

Arthur E. Zaske, 48 President
Trustee* Zaske, Sarafa, & Associates, Inc.
President Bloomfield Hills, Michigan
The ZSA Funds
Suite 310
1533 North Woodward Avenue
Bloomfield Hills, Michigan 48304

- -------------------------------

* Indicates that Trustee is an "interested person" of the Trust for purposes of
the 1940 Act because of his position with one of the investment advisors or the
Administrator to the Trust.

<PAGE>

Compensation Table*

Pension
Retirement Total
Aggregate Benefits Estimated Compensation
Compensation Accrued As Annual from the Trust
Name of Person, from the Part of Fund Benefits Upon Paid to
Position Trust Expenses Retirement Trustees
<S> <C>
F. Daniel Bell, III $7,950 None None $7,950
Trustee

Jack E. Brinson $7,950 None None $7,950
Trustee

Eddie C. Brown None None None None
Trustee

Richard K. Bryant None None None None
Trustee

Timothy L. Ellis None None None None
Trustee

H. Kel Landis, III $7,950 None None $7,950
Trustee

Frank P. Meadows, III None None None None
Trustee

Thomas W. Steed $6,200 None None $6,200
Trustee

J. Buckley Strandberg $7,950 None None $7,950
Trustee

Arthur E. Zaske None None None None
Trustee

</TABLE>

*Figures are for the fiscal year ended March 31, 1996.

Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership* Percent
<S> <C>
Ariel Parkinson 56,367.951 7.947%
1001 Cragmont Avenue
Berkeley, CA 94708
</TABLE>

* The Fund believes the shares indicated are owned both of record and
beneficially.

<PAGE>

For the fiscal year ended March 31, 1994, the Fund paid the Advisor an advisory
fee of $4,309, while the Advisor voluntarily waived the remaining portion of its
fee in the amount of $53,571. For the fiscal year ended March 31, 1995, the Fund
paid the Advisor $122,707 of its advisory fee, while the Advisor voluntarily
waived the remaining portion of its fee in the amount of $8,540. The Advisor
also reimbursed a portion of the Fund's expenses in the amount of $3,000. For
the fiscal year ended March 31, 1996, the Fund paid the Advisor $62,717 of its
advisory fee, while the Advisor voluntarily waived the remaining portion in the
amount of $39,922.

The Administrator and Transfer Agent. The Trust has entered into a Fund
Accounting, Dividend Disbursing & Transfer Agent and Administration Agreement
with The Nottingham Company (the "Administrator"), 105 North Washington Street,
Post Office Drawer 69, Rocky Mount, North Carolina 27802-0069, pursuant to which
the Administrator receives a fee at the annual rate of 0.25% of the average
daily net assets of the Fund on the first $10 million; 0.20% of the next $40
million; 0.175% on the next $50 million; and 0.15% of its average daily net
assets in excess of $100 million. In addition, the Administrator currently
receives a base monthly fee of $1,750 for accounting and recordkeeping services
for the Fund. The Administrator also charges the Fund for certain costs involved
with the daily valuation of investment securities and is reimbursed for
out-of-pocket expenses. The Administrator charges a minimum fee of $3,000 per
month for all of its fees taken in the aggregate, analyzed monthly.

For services to the Fund for the fiscal years ended March 31, 1994, 1995, and
1996, the Administrator received fees of $15,686, $31,274, and $25,545,
respectively. For the fiscal years ended March 31, 1994, 1995, and 1996, the
Administrator received $17,500, $21,000, and $21,000, respectively, for
accounting and recordkeeping services.

The Administrator will also serve as the Fund's transfer agent and dividend
disbursing agent and will provide certain accounting and pricing services for
the Fund.

<PAGE>

The Distributor is a broker-dealer registered with the Securities and Exchange
Commission and a member in good standing of the National Association of
Securities Dealers, Inc.

The Distribution Agreement may be terminated by either party upon 60 days prior
written notice to the other party.

SPECIAL SHAREHOLDER SERVICES

The Fund offers the following shareholder services:

<PAGE>

ZSA Asset Allocation Fund
105 North Washington Street
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069

ADDITIONAL INFORMATION ON PERFORMANCE

From time to time, the total return of the Fund may be quoted in advertisements,
sales literature, shareholder reports or other communications to shareholders.
The Fund computes the "average annual total return" of the Fund by determining
the average annual compounded rates of return during specified periods that
equate the initial amount invested to the ending redeemable value of such
investment. This is done by determining the ending redeemable value of a
hypothetical $1,000 initial payment. This calculation is as follows:

P(1+T) (n) = ERV

The Fund may also compute the aggregate total return of the Fund, which is
calculated in a similar manner, except that the results are not annualized.

<PAGE>

assuming complete redemption of the hypothetical investment and the deduction of
all nonrecurring charges at the end of the period covered by the computations.

The average annual total return quotations for the Fund for the fiscal year
ended March 31, 1996, the three years ended March 3l, 1996, and since inception
(August 10, 1992 to March 31, 1996) are 17.80%, 6.50%, and 7.56%, respectively.
The cumulative total return quotation for the Fund since inception through March
31, 1996 is 30.40%. These performance quotations should not be considered as
representative of the Fund's performance for any specified period in the future.

The Fund's performance may be compared in advertisements, sales literature,
shareholder reports, and other communications to the performance of other mutual
funds having similar objectives or to standardized indices or other measures of
investment performance. In particular, the Fund may compare its performance to
the S&P 500 Index and the Lehman Government/Corporate Long Term Index, or a
combination thereof. Comparative performance may also be expressed by reference
to a ranking prepared by a mutual fund monitoring service or by one or more
newspapers, newsletters or financial periodicals. The Fund may also occasionally
cite statistics to reflect its volatility and risk.

<PAGE>

APPENDIX A

DESCRIPTION OF RATINGS

AAA - This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to pay interest and repay
principal.

AA - Debt rated AA is considered to have a very strong capacity to pay
interest and repay principal and differs from AAA issues only in a small
degree.

<PAGE>

The following summarizes the highest rating used by Moody's for short-term notes
and variable rate demand obligations:

<PAGE>

AAA - Bonds that are rated AAA are of the highest credit quality. The
risk factors are considered to be negligible, being only slightly more
than for risk-free U.S. Treasury debt.

AA - Bonds that are rated AA are of high credit quality. Protection
factors are strong. Risk is modest but may vary slightly from time to
time because of economic conditions.

A - Bonds rated A have average but adequate protection factors. The risk
factors are more variable and greater in periods of economic stress.

BBB - Bonds rated BBB have below average protection factors but are still
considered sufficient for prudent investment. There is considerable
variability in risk during economic cycles.

To provide more detailed indications of credit quality, the AA, A and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within a rating category.

<PAGE>

The following summarizes the three highest ratings used by Fitch for short-term
notes, municipal notes, variable rate demand instruments and commercial paper:

F-1+ - Instruments assigned this rating are regarded as having the
strongest degree of assurance for timely payment.

F-1 - Instruments assigned this rating reflect an assurance of timely
payment only slightly less in degree than issues rated F-1+

F-2 - Instruments assigned this rating have satisfactory degree of
assurance for timely payment, but the margin of safety is not as great as
for issues assigned F-1+ and F-1 ratings.

<PAGE>

[Zaske, Sarafa & Associates, Inc. Logo]

Dear Shareholder:

The fiscal year ending March 31, 1996, proved to be a very successful year for
the ZSA Asset Allocation Fund in several ways. First, the return on this fund
was excellent given its conservative investment policy. Secondly, all sectors of
the fund had excellent returns versus their indexes. And finally, the Fund moved
a step closer to achieving a status as true "one decision fund."

There are few choices for the well diversified investor who would rather not
track the performance of six or seven funds. It is a time consuming task to
decide how much should go into International Equities, Real Estate, or how much
should be in Long Term Bonds versus Short Term Bonds...AND WHEN TO CHANGE THE
MIX. The ZSA Asset Allocation Fund does all that for its shareholders.

During the beginning of the fiscal year, the Fund had near maximum weightings in
the skyrocketing U.S. stock market. There had not been a 10% correction for four
years (normally there is one each year) and we had not seen a bear market for
almost eight years (normally there is one every three years). As the year
progressed, profits on U.S. stocks were taken and reinvested into the major
foreign stock markets which had not risen as yet, and some dollars were held
aside in cash as opportunity money.

The following is the approximate individual asset class performance for the ZSA
Asset Allocation Fund versus common benchmarks:

U.S. Equities ZSA AA 35.13% S&P 500 32.11%
Fixed Income ZSA AA 11.98% Lehman Govt/Corp 9.65%
REITs ZSA AA 20.35% NAREIT 20.00%
International ZSA AA 14.06% Dow World ex. US 7.37%
(since 7/15/95)

As you can see, we had success in each asset class. If there is one area where
we did not have as impressive performance, it was in our allocation to cash.
Unfortunately, we were a little early and missed a portion of the U.S. stock
market's tremendous returns. But, that is the nature of a conservative
approach...we will not expose the fund to ever increasing risk in hopes of
getting the last dollar in an accelerating market.

Remember, it is not just the percentage return that is important...it is the
quality and sustainability of that return. The return on any double or nothing
bet is initially great and ultimately nothing. That is why good investors will
always arrive at the party early and leave early.

For more information and analyses please call us with your questions.

Respectfully,

/s/ Arthur E. Zaske
Arthur E. Zaske
Chief Investment Officer

355 South Woodward Ave., Ste. 200 (bullet) Birmingham, Michigan 48009
Telephone (810) 647-5990 (bullet) Fax (810) 647-0537

<PAGE>

ZSA ASSET ALLOCATION FUND

Performance Update - $10,000 Investment

For the period from August 10, 1992 (commencement
of operations) to March 31, 1996

[Graph below]

ZSA Equity Fund S&P 500
08/10/92 10,000 10,000
09/30/92 10,007 10,246
12/31/92 10,286 10,502
03/31/93 10,793 10,976
06/30/93 11,449 11,168
09/30/93 11,955 11,497
12/31/93 12,009 11,612
03/31/94 11,139 11,323
06/30/94 10,551 11,275
09/30/94 10,804 11,597
12/31/94 10,475 11,617
03/31/95 11,070 12,474
06/30/95 11,816 13,479
09/30/95 12,300 14,163
12/31/95 12,821 14,926
03/31/96 13,040 15,198

This graph depicts the performance of the ZSA Asset Allocation Fund versus a
combined index of 50% S&P 500 and 50% Lehman Government/Corporate Long Term
Index. It is important to note the ZSA Asset Allocation Fund is a professionally
managed mutual fund while the indexes are not available for investment and are
unmanaged. The comparison is shown for illustrative purposes only.

AVERAGE ANNUAL TOTAL RETURN

COMMENCEMENT OF ONE YEAR ENDED THREE YEARS ENDED
OPERATIONS THROUGH 3/31/96 3/31/96 3/31/96
7.56% 17.80% 6.50%

(bullet) The graph assumes an initial $10,000 investment at August 10, 1992. All
dividends and distributions are reinvested.

(bullet) At March 31, 1996, the Fund would have grown to $13,039-total
investment return of 30.40% since August 10, 1992.

(bullet) At March 31, 1996, a similar investment in a combined index of 50% S&P
500 and 50% Lehman Government/Corporate Long Term would have grown to
$15.198-total investment return of 51.98% since August 10, 1992.

(bullet) Past performance is not a guarantee of future performance. A mutual
fund's share price and investment return will vary with market
conditions, and the principal value of shares, when redeemed, may be
worth more or less than the original cost. Average annual returns are
historical in nature and measure net investment income and capital gain
or loss from portfolio investments assuming reinvestments of dividends.

<PAGE>

ZSA ASSET ALLOCATION FUND

PORTFOLIO OF INVESTMENTS

March 31, 1996

<TABLE>
<CAPTION>
Number of Value
Shares (note 1)
-------------- --------------
<S> <C>
COMMON STOCKS - 59.72%

Auto & Trucks - 1.00%
Ford Motor Company 2,800 $96,250
--------------

Beverages - 1.38%
The Coca-Cola Company 1,600 132,400
--------------

Broadcast - Radio & Television - 0.39%
E.W. Scripps Company 900 37,688
--------------

Computer Software & Services - 1.23%
Adobe Systems, Inc. 1,600 51,600
(a) Microsoft Corporation 650 67,031
--------------
118,631
--------------
Cosmetics & Personal Care - 0.86%
Gillette Company 1,600 82,600
--------------

Electrical Equipment - 0.52%
Linear Technology Corporation 1,200 50,100
--------------

Electronics - 1.19%
General Electric Company 1,000 77,875
Philips Electronics N.V. 1,000 36,375
--------------
114,250
--------------
Electronics - Semiconductor - 1.10%
(a) Adaptec, Inc. 2,200 106,150
--------------

Engineering & Construction - 0.85%
Fluor Corporation 1,200 81,900
--------------

Entertainment - 0.80%
Walt Disney Company 1,200 76,650
--------------

Financial Services - 1.00%
Green Tree Financial Corporation 2,800 96,250
--------------

Financial - Banks, Money Center - 0.82%
Chase Manhattan Corporation 1,075 79,012
--------------

Financial - Banks, Commercial - 0.78%
First Chicago NBD Corporation 1,800 74,700
--------------

Food - Processing - 0.45%
Philip Morris Companies, Inc. 500 43,812
--------------

</TABLE>
(Continued)

<PAGE>

ZSA ASSET ALLOCATION FUND

PORTFOLIO OF INVESTMENTS

March 31, 1996
<TABLE>
<CAPTION>

Number of Value
Shares (note 1)
------------- -------------
<S> <C>
COMMON STOCKS - Continued

Foreign Securities - 15.46%
ASEA AB 400 $41,300
Banco Bilbao Vizcaya 1,300 48,263
Bass PLC 1,850 42,550
Broken Hill Proprietary Company 700 39,638
Cadbury Schweppes plc 1,300 40,462
Canon, Inc. 400 38,250
Ciba-Geigy AG 1,000 62,250
Commerzbank AG 750 34,688
Elsevier NV 1,550 47,856
Empresa Nacional de Electridad SA 700 39,900
(a) Fletcher Challenge Building 362 8,745
(a) Fletcher Challenge Energy 362 7,748
Fletcher Challenge Ltd. 191 2,602
(a) Fletcher Challenge Paper 725 13,412
Grand Metropolitan PLC 1,300 34,125
Hitachi, Ltd. 350 34,169
Hong Kong Telecommunications Ltd. 1,000 20,000
HSBC Holdings plc 200 30,100
Ito-Yokado Company Ltd. 200 47,800
Koninlijke Ahold NV 1,150 55,200
LVMH Moet Hennessy Louis Vuitton 1,000 50,250
Luxottica Group S.p. 1,000 78,125
Mannesmann AG 110 39,985
Matsushita Electric Industrial
Company Ltd. 200 33,000
Norsk Hydro AS 850 37,188
Rank Organisation plc 2,700 40,838
Rhone-Poulenc 1,450 37,519
Roche Holdings LTD 550 45,375
Royal Dutch Petroleum Company 1,100 155,375
Siemens AG-ADR 350 38,325
Telefonaktiebolaget LM Ericsson 1,850 39,544
Telefonica de Espana 1,000 47,500
Tokio Marine & Fire Insurance
Company 600 39,000
Tomkins plc 2,300 36,225
Total SA 1,200 40,800
Toyota Motor Corporation 900 40,050
---------
1,488,157
---------
Forest Products & Paper - 0.19%
Willamette Industries, Inc. 300 18,075
---------

Household Products & Housewares - 0.88%
Procter & Gamble Company 1,000 84,750
---------
</TABLE>

(Continued)

<PAGE>

ZSA ASSET ALLOCATION FUND

PORTFOLIO OF INVESTMENTS

March 31, 1996
<TABLE>
<CAPTION>

Number of Value
Shares (note 1)
------------- -------------
<S> <C>
COMMON STOCKS - Continued

Insurance - Multiline - 1.12%
American International Group,
Inc. 1,150 $107,669
-------

Lodging - 0.34%
Marriott International, Inc. 700 33,250
--------

Machine - Construction & Mining - 0.99%
Caterpillar, Inc. 1,400 95,200
--------

Manufactured Housing - 0.88%
Clayton Homes, Inc. 4,062 84,794
--------

Medical - Biotechnology - 1.18%
Medtronic, Inc. 1,900 113,288
--------

Medical - Hospital Management
& Service - 0.82%
Manor Care, Inc. 2,000 78,500
--------

Medical Supplies - 0.26%
Becton, Dickinson & Company 300 24,562
--------

Metals - Diversified - 0.78%
Phelps Dodge Corporation 1,100 75,488
--------

Mining - 0.43%
WMC Limited 1,550 41,462
--------

Oil & Gas - Domestic - 1.03%
Enron Corporation 2,700 99,562
--------

Oil & Gas - International - 1.52%
Chevron Corporation 2,600 145,925
--------

Pharmaceuticals - 0.70%
Abbott Laboratories 1,650 67,238
--------

Real Estate Investment Trust - 14.18%
Avalon Properties, Inc. 1,000 21,500
Beacon Properties Corporation 2,800 73,850
BRE Properties, Inc. 1,475 52,362
Burnham Pacific Properties, Inc. 4,800 52,800
Campden Property Trust 1,000 23,125
Carr Realty Corporation 3,300 79,200
</TABLE>

(Continued)

<PAGE>

ZSA ASSET ALLOCATION FUND

PORTFOLIO OF INVESTMENTS

March 31, 1996
<TABLE>
<CAPTION>

Number of Value
Shares (note 1)
------------- -------------
<S> <C>
COMMON STOCKS - Continued

Real Estate Investment Trust - Continued
Chateau Properties, Inc. 3,500 $79,625
Cousins Properties, Inc. 3,300 64,350
Crescent Real Estate Equities,
Inc. 1,900 63,888
Crown American Realty Trust 6,150 46,894
Developers Diversified Realty
Corporation 1,300 38,188
Duke Realty Investments, Inc. 2,750 82,844
Eastgroup Properties 2,900 63,800
Equity Residential Properties
Trust 700 21,875
Federal Realty Investment Trust 900 20,025
General Growth Properties 900 21,150
Highwoods Properties, Inc. 2,400 66,900
IRT Property Company 2,000 18,500
Kimco Realty Corporation 2,250 60,750
Liberty Property Trust 2,900 59,812
Merry Land & Investment Company,
Inc. 900 19,575
New Plan Realty Trust 900 18,562
Oasis Residential, Inc. 900 21,150
Post Properties, Inc. 650 21,125
Security Capital Pacific Trust 1,000 22,000
Spieker Properties, Inc. 2,800 71,050
Taubman Centers, Inc. 4,000 39,500
United Dominion Realty Trust 2,800 40,950
Washington Real Estate Investment
Trust 1,300 20,800
Weingarten Realty Investors 600 21,525
Wellsford Residential Property
Trust 1,825 39,922
Western Investment Real Estate
Trust 1,600 17,800
---------
1,365,397
---------
Retail - Grocery - 0.77%
Albertson's, Inc. 2,000 74,250
---------

Retail - Specialty Line - 1.48%
(a) Borders Group, Inc. 5,000 142,500
---------

Toys - 1.37%
Mattel, Inc. 4,858 131,773
---------

Transportation - Rail - 0.43%
CSX Corporation 900 41,062
---------
</TABLE>

(Continued)

<PAGE>

ZSA ASSET ALLOCATION FUND

PORTFOLIO OF INVESTMENTS

March 31, 1996
<TABLE>
<CAPTION>

Number of Value
Shares (note 1)
------------- -------------
<S> <C>
COMMON STOCKS - Continued

Utilities - Telecommunications - 2.54%
A T & T Corporation 2,500 $152,812
GTE Corporation 2,100 92,138
---------
244,950
---------

Total Common Stocks (Cost $4,746,408) 5,748,245
---------
Principal
Amount
-------------
U. S. GOVERNMENT OBLIGATIONS - 22.42%

U. S. Treasury Notes
5.75%, due 8/15/2003 $1,250,000 1,208,008
7.25%, due 5/15/2004 900,000 949,782
---------

Total U. S. Government Obligations
(Cost $2,119,012) 2,157,790
---------

REPURCHASE AGREEMENT (b) - 17.27%

Wachovia Bank
5.38%, due April 1, 1996 1,662,675 1,662,675
(Cost $1,662,675)

Total Value of Investments
(Cost $8,528,095 (c)) 99.41% 9,568,710
Other Assets Less Liabilities 0.59% 57,183
---------- ---------
Net Assets 100.00% $9,625,893
========== =========
</TABLE>

(a) Non-income producing investment.

(b) Joint repurchase agreement entered into March 31, 1996, with a maturity
value of $54,221,391 collateralized by $46,275,000 U.S. Treasury Notes,
due February 15, 2020. The aggregate market value of the collateral at
March 31, 1996 was $54,871,024. The Fund's pro rata interest in the
market value of the collateral at March 31, 1996 was $1,682,839. The
Fund's pro rata interest in the joint repurchase agreement collateral is
taken into possession by the Fund's custodian upon entering into the
repurchase agreement.

Unrealized appreciation $1,199,235
Unrealized depreciation (158,620)
----------

Net unrealized appreciation $1,040,615
==========

See accompanying notes to financial statements

<PAGE>

ZSA ASSET ALLOCATION FUND

STATEMENT OF ASSETS AND LIABILITIES

March 31, 1996

ASSETS
Investments, at value (cost $6,865,420) $ 7,906,035
Repurchase agreement (cost $1,662,675) 1,662,675
Interest receivable 39,746
Dividends receivable 18,987
Receivable for fund shares sold 3,476
Prepaid expenses 4,307
Deferred organization expenses, net (note 4) 12,307
Other assets 2,381
-----------

Total assets 9,649,914
-----------

LIABILITIES
Disbursements in excess of cash on demand deposit 15,545
Accrued expenses 7,560
Due to advisor 916
-----------

Total liabilities 24,021
-----------

NET ASSETS
(applicable to 777,936 shares outstanding; unlimited
shares of no par value beneficial interest authorized) $ 9,625,893
===========

NET ASSET VALUE AND REPURCHASE PRICE PER SHARE
($9,625,893 / 777,936 shares) $ 12.37
===========

NET ASSETS CONSIST OF
Paid-in capital $ 9,215,126
Undistributed net investment income 1,685
Accumulated net realized loss on investments (631,533)
Net unrealized appreciation on investments 1,040,615
-----------
$ 9,625,893
===========

See accompanying notes to financial statements

<PAGE>

ZSA ASSET ALLOCATION FUND

STATEMENT OF OPERATIONS

Year ended March 31, 1996

INVESTMENT INCOME

Income
Interest $246,861
Dividends 198,954
---------

Total income 445,815
---------

Expenses
Investment advisory fees (note 2) 102,639
Distribution and service fees (note 3) 25,659
Fund administration fees (note 2) 25,545
Fund accounting fees (note 2) 21,000
Professional fees 16,470
Custody fees 8,339
Securities pricing fees 6,891
Shareholder recordkeeping fees 2,194
Registration and filing administration fees 2,095
Trustee fees and meeting expenses 5,617
Shareholder servicing expenses 5,161
Amortization of deferred organization expenses (note 4) 4,752
Registration and filing expenses 3,184
Printing expenses 1,073
Other operating expenses 4,650
---------

Total expenses 235,269
---------

Less investment advisory fees waived (note 2) (39,922)
---------

Net expenses 195,347
---------

Net investment income 250,468
---------

REALIZED AND UNREALIZED GAIN ON INVESTMENTS

Net realized gain from investment transactions 986,366
Increase in unrealized appreciation on investments 460,669
---------

Net realized and unrealized gain on investments 1,447,035
---------

Net increase in net assets resulting from operations $1,697,503
==========

See accompanying notes to financial statements

<PAGE>

ZSA ASSET ALLOCATION FUND

STATEMENTS OF CHANGES IN NET ASSETS

Year ended Year ended
March 31, March 31,
1996 1995
------------ ------------
DECREASE IN NET ASSETS
<S> <C>
Operations
Net investment income $ 250,468 $ 166,480
Net realized gain (loss) from investment transactions 986,366 (1,599,897)
Increase in unrealized appreciation on investments 460,669 1,238,482
------------ ------------

Net increase (decrease) in net assets resulting from
operations 1,697,503 (194,935)
------------ ------------

Distributions to shareholders from
Net investment income (251,227) (158,526)
------------ ------------

Capital share transactions
Decrease in net assets resulting from capital share transactions (a) (2,385,161) (2,636,514)
------------ ------------

Total decrease in net assets (938,885) (2,989,975)

NET ASSETS

Beginning of year 10,564,778 13,554,753
------------ ------------

End of year (including undistributed net investment income
of $1,685 in 1996 and $2,444 in 1995) $ 9,625,893 $ 10,564,778
============ ============
</TABLE>

(a) A summary of capital share activity follows:

<TABLE>
<CAPTION>
Year ended Year ended
March 31, 1996 March 31, 1995

Shares Value Shares Value
----------- ----------- ----------- -----------
<S> <C>
Shares sold 79,653 $ 936,518 480,530 $ 5,112,044
Shares issued for reinvestment
of distributions 20,475 245,030 14,525 152,278
----------- ----------- ----------- -----------

100,128 1,181,548 495,055 5,264,322

Shares redeemed (303,697) (3,566,709) (754,696) (7,900,836)
----------- ----------- ----------- -----------

Net decrease (203,569) ($2,385,161) (259,641) ($2,636,514)
=========== =========== =========== ===========

</TABLE>

See accompanying notes to financial statements

<PAGE>

ZSA ASSET ALLOCATION FUND

FINANCIAL HIGHLIGHTS

(For a Share Outstanding Throughout the Period)

For the
period from
August 10, 1992
(commencement
Year ended Year ended Year ended of operations)
March 31, March 31, March 31, to March 31,
1996 1995 1994 1993
------------- ---------------- ----------- --------------
<S> <C>
Net asset value, beginning of period $10.76 $10.92 $10.77 $10.00

Income (loss) from investment operations
Net investment income (loss) 0.30 0.15 (0.01) 0.04
Net realized and unrealized gain (loss) on
investments 1.61 (0.17) 0.31 0.77
----------- ------------- ----------- ------------

Total from investment operations 1.91 (0.02) 0.30 0.81
----------- ------------- ------------- ------------

Distributions to shareholders from
Net investment income (0.30) (0.14) (0.01) (0.04)
Net realized gain from investment transactions 0 0 (0.14) 0
----------- ------------- ------------ ------------

Total distributions (0.30) (0.14) (0.15) (0.04)
----------- ------------- ----------- ------------

Net asset value, end of period $12.37 $10.76 $10.92 $10.77
=========== ============= ========= ============

Total return 17.80% (0.62%) 2.67% 7.93%
=========== ============= ========== ==============

Ratios/supplemental data

Net assets, end of period $9,625,893 $10,564,778 $13,554,753 $2,033,819
=========== ============= ============ ============

Ratio of expenses to average net assets
Before expense reimbursements and waived fees 2.30% 2.03% 2.75% 4.11%(a)
After expense reimbursements and waived fees 1.91% 1.95% 1.92% 1.72%(a)

Ratio of net investment income (loss) to average net assets
Before expense reimbursements and waived fees 2.06% 1.18% (0.88)% (1.66)%(a)
After expense reimbursements and waived fees 2.45% 1.27% (0.05)% 0.73%(a)

Portfolio turnover rate 67.89% 130.53% 53.66% 22.26%

(a) Annualized.

</TABLE>

See accompanying notes to financial statements

<PAGE>

ZSA ASSET ALLOCATION FUND

NOTES TO FINANCIAL STATEMENTS

March 31, 1996

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION

The ZSA Asset Allocation 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. The Fund began operations on August 10, 1992. The
following is a summary of significant accounting policies followed by the
Fund.

A. Security Valuation - The Fund's investments in securities are carried
at value. Securities listed on an exchange or quoted on a national
market system are valued at the last sales price as of 4:00 p.m., New
York time on the day of valuation. Other securities traded in the
over-the-counter market and listed securities for which no sale was
reported on that date are valued at the most recent bid price.
Securities for which market quotations are not readily available, if
any, are valued by using an independent pricing service or by following
procedures approved by the Board of Trustees. Short-term investments
are valued at cost which approximates value.

B. Federal Income Taxes - No provision has been made for federal income
taxes since 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 the 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 - Management makes a number of estimates in the
preparation of the Fund's financial statements. Actual results could
differ significantly from those estimates.

NOTE 2 - INVESTMENT ADVISORY FEE AND OTHER RELATED PARTY TRANSACTIONS

Pursuant to an investment advisory agreement, Zaske, Sarafa & Associates, 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.

(Continued)

<PAGE>

ZSA ASSET ALLOCATION FUND

NOTES TO FINANCIAL STATEMENTS

March 31, 1996

Currently, the Fund does not offer its shares for sale in states which require
limitations to be placed on its expenses. The Advisor currently intends to
voluntarily waive all or a portion of its fee and reimburse expenses of the
Fund to limit total Fund operating expenses to 1.95% of the average daily net
assets of the Fund. There can be no assurance that the foregoing voluntary
fee waivers or reimbursements will continue. The Advisor has voluntarily
waived a portion of its fee amounting to $39,922 ($0.04 per share) for the
year ended March 31, 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.

Certain Trustees and officers of the Trust are also officers of the Advisor,
the distributor or the Administrator.

NOTE 3 - DISTRIBUTION AND SERVICE FEES

The Board of Trustees, including a majority of the Trustees who are not
"interested persons" of the Trust as defined in the Investment Company Act of
1940 (the "Act"), adopted a distribution plan pursuant to Rule 12b-1 of the
Act (the "Plan"). The Act regulates the manner in which a regulated
investment company may assume expenses of distributing and promoting the sales
of its shares and servicing of its shareholder accounts.

The Plan provides that the Fund may incur certain expenses, which may not
exceed 0.25% per annum of the Fund's average daily net assets for each year
elapsed subsequent to adoption of the Plan, for payment to the distributor and
others for items such as advertising expenses, selling expenses, commissions,
travel or other expenses reasonably intended to result in sales of shares of
the Fund or support servicing of shareholder accounts. The Fund incurred
$25,659 of such expenses under the Plan for the year ended March 31, 1996.

NOTE 4 - DEFERRED ORGANIZATION EXPENSES

All expenses of the Fund incurred in connection with its organization and the
registration of its shares have been assumed by the Fund.

(Continued)

<PAGE>

ZSA ASSET ALLOCATION FUND

NOTES TO FINANCIAL STATEMENTS

March 31, 1996

The organization expenses are being amortized over a period of sixty months.
Investors purchasing shares of the Fund bear such expenses only as they are
amortized against the Fund's investment income.

In the event any of the initial shares of the Fund are redeemed during the
amortization period, the redemption proceeds will be reduced by a pro rata
portion of any unamortized organization expenses in the same proportion as the
number of initial shares being redeemed bears to the number of initial shares
of the Fund outstanding at the time of the redemption.

NOTE 5 - PURCHASES AND SALES OF INVESTMENTS

Purchases and sales of investments, other than short-term investments,
aggregated $5,843,245 and $9,505,799, respectively, for the year ended March
31, 1996.

NOTE 6 - DISTRIBUTIONS TO SHAREHOLDERS

The Fund has a capital loss carryforward for federal income tax purposes of
$631,533, which expires in the year 2003. It is the intention of the Board of
Trustees of the Trust not to distribute any realized gains until the
carryforward has been offset or expires.

<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Board of Trustees and Shareholders
The Nottingham Investment Trust II:

We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of the ZSA Asset Allocation Fund (the "Fund"), a
series of The Nottingham Investment Trust II, as of March 31, 1996, 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
financial highlights for each of the three 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. The financial
statements for the period from August 10, 1992 (commencement of operations) to
March 31, 1993 were audited by other auditors whose report thereon dated May 6,
1993 expressed an unqualified opinion on those statements.

We conducted our audits in accordance with generally accepted auditing
standards. 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 March
31, 1996 by correspondence with the custodian. 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, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
ZSA Asset Allocation Fund as of March 31, 1996, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended, and financial highlights for each of the three years
in the period then ended in conformity with generally accepted accounting
principles.

Richmond, Virginia
May 14, 1996

<PAGE>

PART C

THE NOTTINGHAM INVESTMENT TRUST II

FORM N1-A

OTHER INFORMATION

ITEM 24. Financial Statements and Exhibits

a) Financial Statements:

Financial Highlights included in Part A for each series of the
Registrant through March 31, 1996

Annual Report for the fiscal year ended March 31, 1996 included in
Part B for each series of the Registrant

b) Exhibits

(1) Declaration of Trust - Amended and Restated Declaration of Trust;
Incorporated by reference; filed 6/2/95
(2) By-Laws - Amended and Restated By-Laws; Incorporated by reference; filed
6/2/95
(3) Not Applicable
(4) Not Applicable - the series of the Registrant do not issue certificates
(5) (a) Investment Advisory Agreement for the Capital Value Fund - Incorporated
by reference; filed on 10/29/90; Amendment to the Investment Advisory
Agreement - Incorporated by reference; filed on 8/1/95
(b) Investment Advisory Agreement for Investek Fixed Income Trust -
Incorporated by reference; filed on 9/20/91
(c) Investment Advisory Agreement for ZSA Social Conscience Fund -
Incorporated by reference; filed on 4/26/94
(d) Investment Advisory Agreement for ZSA Equity Fund - Incorporated by
reference; filed on 5/22/92; Amended and Restated Investment Advisory
Agreement - Incorporated by reference; filed 6/2/95
(e) Investment Advisory Agreement for ZSA Asset Allocation Fund -
Incorporated by reference; filed on 5/22/92; Amendment to the
Advisory Agreement - Incorporated by reference; filed 6/2/95
(f) Investment Advisory Agreement for The Brown Capital Management Equity
Fund - Incorporated by reference; filed on 5/27/92
(g) Investment Advisory Agreement for The Brown Capital Management Balanced
Fund - Incorporated by reference; filed on 5/27/92
(h) Investment Advisory Agreement for The Brown Capital Management Small
Company Fund - Incorporated by reference; filed on 5/27/92
(6) (a) Distribution Agreement for Capital Value Fund - Incorporated by
reference; filed on 8/1/95
(b) Distribution Agreement for Investek Fixed Income Trust - Incorporated
by reference; filed 7/12/96
(c) Distribution Agreement for ZSA Social Conscience Fund - Incorporated by
reference; filed on 4/26/94
(d) Distribution Agreement for ZSA Equity Fund - Incorporated by reference;
filed on 7/29/94
(e) Distribution Agreement for ZSA Asset Allocation Fund - Incorporated by
reference; filed on 7/29/94
(f) Distribution Agreement for The Brown Capital Management Equity Fund -
Incorporated by reference; filed 6/2/95
(g) Distribution Agreement for The Brown Capital Management Balanced Fund -
Incorporated by reference; filed 6/2/95
(h) Distribution Agreement for The Brown Capital Management Small Company
Fund - Incorporated by reference; filed 6/2/95
(7) Not Applicable
(8) Custodian Agreement - Incorporated by reference; filed on 5/26/93
(9) (a) Fund Accounting, Dividend Disbursing & Transfer Agent and
Administration Agreement -- Incorporated by reference; filed on 7/30/93
(b) Amendment to Fund Accounting, Dividend Disbursing & Transfer Agent
Administration Agreement Incorporated by reference; filed on
4/26/94
(c) Amendment to Fund Accounting, Dividend Disbursing & Transfer Agent
Administration Agreement Incorporated by reference - Incorporated by
reference; filed on 10/7/94

<PAGE>

(d) Amendment to Fund Accounting, Dividend Disbursing & Transfer Agent
Administration Agreement Incorporated by reference - Incorporated
by reference; filed 6/2/95
(10) Opinion and Consent of Counsel - Incorporated by reference; filed
5/30/96
(11) Consent of Auditors - Enclosed Exhibit 11
(12) Not Applicable
(13) Not Applicable
(14) Not Applicable
(15)(a) Plan of Distribution under Rule 12b-1 for Capital Value Fund -
Incorporated by reference; filed on 8/1/95 (b) Plan of Distribution
under Rule 12b-1 for Investek Fixed Income Trust - Incorporated by
reference; filed on 7/12/96
(c) Plan of Distribution under Rule 12b-1 for ZSA Social Conscience Fund -
Incorporated by reference; filed on 4/26/94
(d) Plan of Distribution under Rule 12b-1 for ZSA Equity Fund - Incorporated
by reference; filed 7/29/94 (e) Plan of Distribution under Rule 12b-1
for ZSA Asset Allocation Fund - Incorporated by reference; filed on
7/29/94
(f) Plan of Distribution under Rule 12b-1 for The Brown Capital
Management Equity Fund - Incorporated by reference; filed 6/2/95
(g) Plan of Distribution under Rule 12b-1 for The Brown Capital Management
Balanced Fund - Incorporated by reference; filed 6/2/95
(h) Plan of Distribution under Rule 12b-1 for The Brown Capital Management
Small Company Fund - Incorporated by reference; filed 6/2/95
(16) Computation of Performance - Enclosed Exhibit 16
(17)(a) Copies of Powers of Attorney - Incorporated by reference; filed on
10/29/90 and on 4/26/94
(b) Financial Data Schedules - Enclosed
(18) Plan Pursuant to Rule 18f-3 under the 1940 Act - Incorporated by
reference; filed on 8/1/95

ITEM 25. Persons Controlled by or Under Common Control with Registrant

No person is controlled by or under common control with Registrant.

ITEM 26. Number of Record Holders of Securities

As of July 30, 1996, the number of record holders of each class of
securities of Registrant was as follows:
<TABLE>
<CAPTION>
Number of
Title of Class Record Holders
-------------- --------------
<S> <C>
Capital Value Fund 241
Investek Fixed Income Trust 98
ZSA Social Conscience Fund 0
ZSA Equity Fund 67
ZSA Asset Allocation Fund 128
The Brown Capital Management Equity Fund - Institutional Shares 77
The Brown Capital Management Balanced Fund - Institutional Shares 44
The Brown Capital Management Small Company Fund - Institutional Shares 139

</TABLE>

ITEM 27. Indemnification

Reference is hereby made to the following sections of the following
documents filed or included by reference as exhibits hereto:

Article VIII, Sections 8.4 through 8.6 of the Registrant's
Declaration of Trust, Section 8(b), Section 8(b) of the
Registrant's Investment Advisory Agreements, Section 8(b) of the
Registrant's Administration Agreement, and Section (6) of the
Registrant's Distribution Agreements.

<PAGE>

The Trustees and officers of the Registrant and the personnel of
the Registrant's administrator are insured under an errors and
omissions liability insurance policy. The Registrant and its
officers are also insured under the fidelity bond required by Rule
17g-1 under the Investment Company Act of 1940.

ITEM 28. Business and other Connections of Investment Advisor

See the Statement of Additional Information section entitled
"Trustees and Officers" for the activities and affiliations of the
officers and directors of the Investment Advisors of the
Registrant. Except as so provided, to the knowledge of Registrant,
none of the directors or executive officers of the Investment
Advisors is or has been at any time during the past two fiscal
years engaged in any other business, profession, vocation or
employment of a substantial nature. The Investment Advisors
currently serve as investment advisors to numerous institutional
and individual clients.

ITEM 29. Principal Underwriter

(a) Capital Investment Group, Inc. is underwriter and distributor for
The Chesapeake Growth Fund, The Chesapeake Fund, Capital Value
Fund, ZSA Equity Fund, ZSA Asset Allocation Fund, ZSA Social
Conscience Fund, The Brown Capital Management Equity Fund, The
Brown Capital Management Balanced Fund, The Brown Capital
Management Small Company Fund, GrandView Realty Growth Fund,
GrandView REIT Index Fund, and GrandView Healthcare Realty Income
Fund.

(b)

Name and Principal Position(s) and Offices Position(s) and Offices
Business Address with Underwriter with Registrant

<S> <C>
Richard K. Bryant President Trustee and officer of Trust; President of
17 Glenwood Ave. Capital Value Fund; no position with other
Raleigh, NC series of Trust

E.O. Edgerton, Jr. Vice President Vice President of Capital Value Fund; no position
17 Glenwood Ave. with other series of Trust
Raleigh, NC

</TABLE>

ITEM 30. Location of Accounts and Records

All account books and records not normally held by the Custodian
and the Investment Advisors are held by the Registrant, in the
offices of The Nottingham Company, Administrator and Transfer Agent
to the Registrant.

The address of The Nottingham Company is 105 North Washington
Street, P.O. Drawer 69, Rocky Mount, North Carolina 27802-0069.

ITEM 31. Management Services

The substantive provisions of the Fund Accounting, Dividend
Disbursing & Transfer Agent and Administration Agreement, as
amended, between the Registrant and The Nottingham Company are
discussed in Part B hereof.

ITEM 32. Undertakings

Registrant undertakes to furnish each person to whom a Prospectus
is delivered with a copy of the latest annual report of each series
of Registrant to shareholders upon request and without charge.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Amendment to Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused
this Amendment to its Registration Statement to be signed on its behalf by the
undersigned, thereto duly authorized, in the City of Rocky Mount, State of North
Carolina on the 1st day of August, 1996.

THE NOTTINGHAM INVESTMENT TRUST II

By: /s/ FRANK P. MEADOWS III
Frank P. Meadows III
Chairman, Board of Trustees

Pursuant to the requirements of the Securities Act of 1933, this Amendment to
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.

* Trustee

F. Daniel Bell, III

* Trustee

Jack E. Brinson

* Trustee

Eddie C. Brown

* Trustee

Richard K. Bryant

* Trustee

Timothy L. Ellis

* Trustee

H. Kel Landis, III

/s/ FRANK P. MEADOWS III Trustee, Principal Executive Officer,
Principal Financial Officer
Frank P. Meadows III and Principal Accounting Officer

* Trustee

Thomas W. Steed, III

* Trustee

J. Buckley Strandberg

* Trustee

Arthur E. Zaske

* By:/s/ FRANK P. MEADOWS III
Frank P. Meadows III
Attorney-in-Fact Dated: August 1, 1996

<PAGE>

THE NOTTINGHAM INVESTMENT TRUST II
EXHIBIT INDEX

SEQUENTIAL PAGE
EXHIBIT NUMBER DESCRIPTION NUMBER

EXHIBIT 11 CONSENT OF AUDITORS
EXHIBIT 16 COMPUTATION OF PERFORMACE DATA
EXHIBIT 17(B) FINANCIAL DATA SCHEDULES

EXHIBIT 11
CONSENT OF AUDITORS

Independent Auditors' Consent

The Board of Trustees and Shareholders
The Nottingham Investment Trust II

We consent to the use of our reports dated May 14, 1996 included in the
registration statement on Form N-1A of Capital Value Fund, Investek Fixed Income
Trust, ZSA Social Conscience Fund, ZSA Equity Fund and ZSA Asset Allocation
Fund, each of which is a series of the Nottingham Investment Trust II, and to
the reference to our firm under the heading "Financial Highlights" in
prospectuses.

Richmond, Virginia
JULY 26, 1996

EXHIBIT 16

COMPUTATION OF PERFORMACE DATA

CAPITAL VALUE FUND

The Fund computes the "average annual total return" of the Fund by determining
the average annual compounded rates of return during specified periods that
equate the initial amount invested to the ending redeemable value of such
investment. This is done by determining the ending redeemable value of a
hypothetical $1,000 initial payment. This calculation is as follows:

P(1+T) (n) = ERV

The Fund may also compute the aggregate total return of the Fund, which is
calculated in a similar manner, except that the results are not annualized.

The average annual total return quotations for the Fund for the fiscal year
ended March 31, 1996 and since inception (December 31, 1991 to March 31, 1996)
are 12.06% and 8.30%, respectively. The cumulative total return quotation for
the Fund since inception through March 31, 1996 is 40.37%. These performance
quotations assume the maximum 3.5% sales load for the Fund was deducted from the
initial investment. The total return of the Fund for the year ended March 31,
1996 and since inception through March 31, 1996, without deducting the maximum
3.5% sales load, are 16.16% and 45.47%, respectively.

Cumulative Total Return

(ERV - P)/P = TR

Where: ERV = ending redeemable value at the end of the period
covered by the computation of a hypothetical
$1,000 payment made at the beginning of the
period
P = hypothetical initial payment of $1,000 from which
the maximum sales load is deducted
TR = total return

Average Annual Total Return for the 12 months ended March 31, 1996 including
3.5% sales load:

1,000(1+T) (1) = 1,120.96

T = (1,120.96/1,000) (1/1) - 1
T = .1206

T = 12.06%
ERV = $1,120.96
P = $1,000
n = 1

<PAGE>

Average Annual Total Return since inception through March 31, 1996 including
3.5% sales load:

1,000(1+T) (4.25) = 1,403.75

T = (1,403.75/1,000) (1/4.25) - 1
T = .0830

T = 8.30%
ERV = $1,403.75
P = $1,000
n = 4.25

Cumulative Total Return since inception through March 31, 1996 including 3.5%
sales load:

(1,403.75-1,000)/1,000 = .4037

ERV = $1,403.75
P = $1,000
TR = 40.37%

Average Annual Total Return for the 12 months ended March 31, 1996 excluding
3.5% sales load:

1,000(1+T) (1) = 1,161.62

T = (1,161.62/1,000) (1/1) - 1
T = .1616

T = 16.16%
ERV = $1,161.62
P = $1,000
n = 1

Cumulative Total Return since inception through March 31, 1996 excluding 3.5%
sales load:

(1,454.66 - 1,000)/1,000 = .4547

ERV = $1,454.66
P = $1,000
TR = 45.47%

100

<PAGE>

INVESTEK FIXED INCOME TRUST

P(1+T) (n) = ERV

Where: T = average annual total return.

The Fund may also compute the aggregate total return of the Fund, which is
calculated in a similar manner, except that the results are not annualized.

The average annual total return quotations for the Fund for the fiscal year
ended March 31, 1996 and since inception (November 15, 1991 to March 31, 1996)
are 10.70% and 6.87%, respectively. The cumulative total return quotation since
inception through March 31, 1996 is 33.78%.

Yield =2[(A - B + 1) (6)-1]
-----
CD

Cumulative Total Return

(ERV - P)/P = TR

Average Annual Total Return for the 12 months ended March 31, 1996:

1,000(1+T) (1) = 1,107.00
T = (1,107.00/1,000) (1/1) - 1
T = 0.1070

101

<PAGE>

T = 10.70%
ERV = $1,107.00
P = $1,000
n = 1

Average Annual Total Return since inception through March 31, 1996:

1,000(1+T) (4.38) = 1,337.83
T = (1,337.83/1,000) (1/4.38) - 1
T = 0.0687

T = 6.87%
ERV = $1,337.83
P = $1,000
n = 4.38

Cumulative Total Return since inception through March 31, 1996:

(1,337.83 - 1,000)/1,000 = 0.3378

ERV = 1,337.83
P = 1,000
TR = 33.78%

Yield for the thirty day period ended March 31, 1996:

Yield =2[(A - B + 1) (6)-1]
-----
CD

A = $77,296.92
B = $8,826.75
C = 1,249,923.10
D = $10.11

Yield = 2[((77,296.92 - 8,826.75 + 1) (6)-1]
------------------------
(1,249,923.10*10.11)

Yield = 6.59%

102

<PAGE>

ZSA EQUITY FUND

P(1+T) (n) = ERV

The Fund may also compute the aggregate total return of the Fund, which is
calculated in a similar manner, except that the results are not annualized.

The average annual total return quotations for the Fund for the fiscal year
ended March 31, 1996 and since inception (September 8, 1992 to March 31, 1996)
are 22.52% and 7.72%, respectively. The cumulative total return quotation for
the Fund since inception through March 31, 1996 is 30.31%.

Cumulative Total Return

(ERV - P)/P = TR

Average Annual Total Return for the 12 months ended March 31, 1996:

1,000(1+T) (1) = 1,225.23
T = (1,225.23/1,000) (1/1) - 1
T = 0.2252

T = 22.52%
ERV = $1,225.23
P = $1,000
n = 1

103

<PAGE>

Average Annual Total Return since inception through March 31, 1996:

1,000(1+T) (3.56) = 1,303.05

T = (1,303.05/1,000) (1/3.56) - 1
T = 0.0772

T = 7.72%
ERV = $1,303.05
P = $1,000
n = 3.56

Cumulative Total Return since inception through March 31, 1996:

(1,303.05 - 1,000)/1,000 = 0.3031

ERV = $1,303.05
P = $1,000
TR = 30.31%

104

<PAGE>

ZSA ASSET ALLOCATION

P(1+T) (n) = ERV

Where: T = average annual total return.

The Fund may also compute the aggregate total return of the Fund, which is
calculated in a similar manner, except that the results are not annualized.

The average annual total return quotations for the Fund for the fiscal year
ended March 31, 1996 and since inception (August 10, 1992 to March 31, 1996) are
17.80%) and 7.56%, respectively. The cumulative total return quotation for the
Fund since inception through March 31, 1996 is 30.40%.

Cumulative Total Return

(ERV - P)/P = TR

Average Annual Total Return for the 12 months ended March 31, 1996:

1,000(1+T) (1) = 1,177.97

T = (1,177.97/1,000) (1/1) - 1
T = 0.1780

T = 17.80%
ERV = $1,177.97
P = $1,000
n = 1

105

<PAGE>

Average Annual Total Return since inception through March 31, 1996:

1,000(1+T) (3.64) = 1,303.98
T = (1,303.98/1,000) (1/3.64) - 1
T = 0.0756

T = 7.56%
ERV = $1,303.98
P = $1,000
n = 3.64

Cumulative Total Return since inception through March 31, 1996:

(1,303.98 - 1,000)/1,000 = 0.3040

ERV = $1,303.98
P = $1,000
TR = 30.40%

106

<ARTICLE> 6
<SERIES>
<NUMBER> 01
<NAME> CAPITAL VALUE FUND

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 6,411,994
<INVESTMENTS-AT-VALUE> 7,545,436
<RECEIVABLES> 50,776
<ASSETS-OTHER> 2,350
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 7,598,562
<PAYABLE-FOR-SECURITIES> 32,850
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 13,909
<TOTAL-LIABILITIES> 46,759
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 6,448,146
<SHARES-COMMON-STOCK> 633,764
<SHARES-COMMON-PRIOR> 630,290
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (29,785)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,133,442
<NET-ASSETS> 7,551,803
<DIVIDEND-INCOME> 94,646
<INTEREST-INCOME> 200,956
<OTHER-INCOME> 0
<EXPENSES-NET> 172,707
<NET-INVESTMENT-INCOME> 122,895
<REALIZED-GAINS-CURRENT> 38,601
<APPREC-INCREASE-CURRENT> 919,595
<NET-CHANGE-FROM-OPS> 1,081,091
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (127,074)
<DISTRIBUTIONS-OF-GAINS> (222,742)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 44,207
<NUMBER-OF-SHARES-REDEEMED> (70,329)
<SHARES-REINVESTED> 29,596
<NET-CHANGE-IN-ASSETS> 776,241
<ACCUMULATED-NII-PRIOR> 3,236
<ACCUMULATED-GAINS-PRIOR> 155,299
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 48,212
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 189,049
<AVERAGE-NET-ASSETS> 7,396,920
<PER-SHARE-NAV-BEGIN> 10.75
<PER-SHARE-NII> 0.19
<PER-SHARE-GAIN-APPREC> 1.53
<PER-SHARE-DIVIDEND> (0.20)
<PER-SHARE-DISTRIBUTIONS> (0.35)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.92
<EXPENSE-RATIO> 2.33
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<SERIES>
<NUMBER> 02
<NAME> INVESTEK FIXED INCOME TRUST

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 12,350,402
<INVESTMENTS-AT-VALUE> 12,396,507
<RECEIVABLES> 138,400
<ASSETS-OTHER> 2,697
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 12,537,604
<PAYABLE-FOR-SECURITIES> 240,391
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 36,092
<TOTAL-LIABILITIES> 276,483
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 12,773,532
<SHARES-COMMON-STOCK> 1,213,275
<SHARES-COMMON-PRIOR> 1,538,011
<ACCUMULATED-NII-CURRENT> 4,435
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (562,951)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 46,105
<NET-ASSETS> 12,261,121
<DIVIDEND-INCOME> 13,284
<INTEREST-INCOME> 1,015,516
<OTHER-INCOME> 0
<EXPENSES-NET> 122,981
<NET-INVESTMENT-INCOME> 905,819
<REALIZED-GAINS-CURRENT> (30,968)
<APPREC-INCREASE-CURRENT> 660,566
<NET-CHANGE-FROM-OPS> 1,535,417
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (905,271)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 148,043
<NUMBER-OF-SHARES-REDEEMED> (526,499)
<SHARES-REINVESTED> 53,720
<NET-CHANGE-IN-ASSETS> (2,722,353)
<ACCUMULATED-NII-PRIOR> 3,887
<ACCUMULATED-GAINS-PRIOR> (560,941)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 63,557
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 152,681
<AVERAGE-NET-ASSETS> 14,123,718
<PER-SHARE-NAV-BEGIN> 9.74
<PER-SHARE-NII> 0.66
<PER-SHARE-GAIN-APPREC> 0.37
<PER-SHARE-DIVIDEND> (0.66)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.11
<EXPENSE-RATIO> 0.87
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<SERIES>
<NUMBER> 03
<NAME> ZSA EQUITY FUND

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 455,376
<INVESTMENTS-AT-VALUE> 467,339
<RECEIVABLES> 4,014
<ASSETS-OTHER> 2,342,015
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,813,368
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 12,225
<TOTAL-LIABILITIES> 12,225
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,005,197
<SHARES-COMMON-STOCK> 232,453
<SHARES-COMMON-PRIOR> 779,532
<ACCUMULATED-NII-CURRENT> 451
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 783,532
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 11,963
<NET-ASSETS> 2,801,143
<DIVIDEND-INCOME> 90,046
<INTEREST-INCOME> 58,602
<OTHER-INCOME> 0
<EXPENSES-NET> 103,203
<NET-INVESTMENT-INCOME> 45,445
<REALIZED-GAINS-CURRENT> 1,658,144
<APPREC-INCREASE-CURRENT> (532,112)
<NET-CHANGE-FROM-OPS> 1,171,477
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (47,370)
<DISTRIBUTIONS-OF-GAINS> (230,406)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 29,236
<NUMBER-OF-SHARES-REDEEMED> (599,841)
<SHARES-REINVESTED> 23,526
<NET-CHANGE-IN-ASSETS> (5,472,086)
<ACCUMULATED-NII-PRIOR> 2,376
<ACCUMULATED-GAINS-PRIOR> (644,206)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 53,330
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 151,580
<AVERAGE-NET-ASSETS> 5,318,368
<PER-SHARE-NAV-BEGIN> 10.61
<PER-SHARE-NII> 0.12
<PER-SHARE-GAIN-APPREC> 2.25
<PER-SHARE-DIVIDEND> (0.12)
<PER-SHARE-DISTRIBUTIONS> (0.81)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 12.05
<EXPENSE-RATIO> 1.94
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<SERIES>
<NUMBER> 05
<NAME> ZSA ASSET ALLOCATION FUND

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 8,528,095
<INVESTMENTS-AT-VALUE> 9,568,710
<RECEIVABLES> 58,733
<ASSETS-OTHER> 22,471
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 9,649,914
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 24,021
<TOTAL-LIABILITIES> 24,021
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 9,215,126
<SHARES-COMMON-STOCK> 777,936
<SHARES-COMMON-PRIOR> 981,505
<ACCUMULATED-NII-CURRENT> 1,685
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (631,533)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,040,615
<NET-ASSETS> 9,625,893
<DIVIDEND-INCOME> 198,954
<INTEREST-INCOME> 246,861
<OTHER-INCOME> 0
<EXPENSES-NET> 195,347
<NET-INVESTMENT-INCOME> 250,468
<REALIZED-GAINS-CURRENT> 986,366
<APPREC-INCREASE-CURRENT> 460,669
<NET-CHANGE-FROM-OPS> 1,697,503
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (251,227)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 79,653
<NUMBER-OF-SHARES-REDEEMED> (303,697)
<SHARES-REINVESTED> 20,475
<NET-CHANGE-IN-ASSETS> (938,885)
<ACCUMULATED-NII-PRIOR> 2,444
<ACCUMULATED-GAINS-PRIOR> (1,699,110)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 102,639
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 235,269
<AVERAGE-NET-ASSETS> 10,235,902
<PER-SHARE-NAV-BEGIN> 10.76
<PER-SHARE-NII> 0.30
<PER-SHARE-GAIN-APPREC> 1.61
<PER-SHARE-DIVIDEND> (0.30)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 12.37
<EXPENSE-RATIO> 1.91
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>