As filed with the Securities and Exchange Commission on May 31, 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. 27 X
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 28 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:
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Immediately upon filing pursuant on , 1996 pursuant
to Rule 485(b), or -----------------
to Rule 485(b), or
X 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 26, 1996.
CALCULATION OF REGISTRATION FEE
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- ------------------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF SECURITIES NUMBER OF SHARES OFFERING PRICE AGGREGATE OFFERING REGISTRATION
BEING REGISTERED BEING REGISTERED PER SHARE PRICE FEE
<S> <C>
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Shares of beneficial interest $991,487 $10.01 $290,000 $100
(10.00 par value)
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Registrant elects to calculate the maximum aggregate offering price pursuant to
Rule 24e-2. 1,525,876 shares were redeemed during the fiscal year ended March
31, 1996. 563,360 shares were used for reductions pursuant to paragraph (c) of
Rule 24f-2 during the current fiscal year. 962,516 shares is the amount of
redeemed shares used for reduction in this Amendment. Pursuant to Rule 457(d)
under the Securities Act of 1933, the maximum public offering price at $10.01
per share (for Shares of Investek Fixed Income Trust) on May 29, 1996 is the
price used as the basis for calculating the registration fee. While no fee is
required for the 962,516 shares, the Registrant has elected to register, for
$100, an additional $290,000 of shares (28,971 shares at 10.01 per share).
<PAGE>
This filing includes the Prospectuses and Statements of Additional Information
of Capital Value Fund, 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,
which are incorporated herein by reference to Post-Effective Amendment Nos. 21,
23, 24, 25 and 26 to the Registrant's Registration Statement on Form N-1A filed
with the Commission on September 9,1994, June 2, 1995, July 5,1995 and August 1,
1995.
<PAGE>
THE NOTTINGHAM INVESTMENT TRUST II
Investek Fixed Income Trust
Cross Reference Sheet
Pursuant to Rule 481(a) Under the Securities Act of 1933
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Form N-1A Item No. Prospectus Caption
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PART A
Item 1 Cover Page Cover Page
Item 2 Synopsis Synopsis of Costs and Expenses
Item 3 Condensed Financial Information Financial Highlights
Other Information - Calculation of Performance Data
Item 4 General Description of Registrant Investment Objective and Policies
Risk Factors
Investment Limitations
Item 5 Management of the Fund Management of the Fund
Item 6 Capital Stock and Other Securities Federal Income Taxes
Dividends and Distributions
Other Information - Description of Shares
Item 7 Purchase of Securities Being Offered How Shares Are Valued
How Shares May Be Purchased
Item 8 Redemption or Repurchase How Shares May Be Redeemed
Item 9 Pending Legal Proceedings Not Applicable
PART B
Statement of Additional
Information Caption
Item 10 Cover Page Cover Page
Item 11 Table of Contents Cover Page
Item 12 General Information and History Investment Objective and Policies
Investment Limitations
Description of the Trust
Management of the Fund
Item 13 Investment Objectives and Policies Investment Objective and Policies
Investment Limitations
Appendix A - Description of Ratings
Item 14 Management of the Fund Management of the Fund
Item 15 Control Persons and Principal Management of the Fund - Trustees and Officers
Holders of Securities Management of the Fund - Principal Holders of Voting Securities
Item 16 Investment Advisory and Other Management of the Fund - Investment Advisor
Services
Item 17 Brokerage Allocation and Other Special Shareholder Services
Practices
Item 18 Capital Stock and Other Securities Description of the Trust
Item 19 Purchase, Redemption and Pricing Net Asset Value
of Securities Being Offered Additional Purchase and Redemption Information
Item 20 Tax Status Additional Information Concerning Taxes
Item 21 Underwriters Management of the Fund - Distributor
Item 22 Calculation of Performance Data Additional Information on Performance
Item 23 Financial Statements Attached to the Statement of Additional Information
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PART C
Information required to be included in Part C is set forth under the appropriate
Item, so numbered, in Part C to this Registration Statement.
<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 **, 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.
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 is August *, 1996.
<PAGE>
TABLE OF CONTENTS
PROSPECTUS SUMMARY................................................ 2
SYNOPSIS OF COSTS AND EXPENSES.................................... 3
FINANCIAL HIGHLIGHTS.............................................. 4
INVESTMENT OBJECTIVE AND POLICIES................................. 5
RISK FACTORS...................................................... 9
INVESTMENT LIMITATIONS............................................ 10
FEDERAL INCOME TAXES.............................................. 11
DIVIDENDS AND DISTRIBUTIONS....................................... 12
HOW SHARES ARE VALUED............................................. 13
HOW SHARES MAY BE PURCHASED....................................... 13
HOW SHARES MAY BE REDEEMED........................................ 19
MANAGEMENT OF THE FUND............................................ 21
OTHER INFORMATION................................................. 23
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.
1
<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 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
Objective capital and maximize total and returns through active
Policies management of 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 paid monthly; capital
gains, if any, are paid 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")
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 0.25% 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. 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."
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
ANNUAL FUND OPERATING EXPENSES FOR INVESTOR SHARES - AFTER FEE WAIVERS
AND EXPENSE REIMBURSEMENTS (2)
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Investment advisory fees.........................................****%(2)
12b-1 fees.......................................................0.25%(3)
Other expenses...................................................****%(2)
-----
Total operating expenses......................................****%(2)
=====
2
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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
- ------ ------- ------- --------
$*** $*** $*** $***
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 and expense reimbursements,
were ****% 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 and reimbursements, the percentages would have been 0.45% for
"Investment advisory fees" and ****% 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" between 0.85% and
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.
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.
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 "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."
3
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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.
The Fund is designed for tax-exempt institutional investors such as pension and
profit-sharing plans, endowments, foundations, employee benefit trusts, and high
net worth individuals. 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.
4
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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 Home
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.
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 Rating 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.
5
<PAGE>
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.
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.
6
<PAGE>
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 1940 Act.
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.
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
7
<PAGE>
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.
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 assetbacked 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
***% and ***%.
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.
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<PAGE>
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.
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; (7) invest in securities other than securities which are readily
marketable; and (8) invest more than 10% of its total assets in the securities
of one or more investment companies. See "Investment Limitations" in the Fund's
Statement of Additional Information for a complete list of investment
limitations.
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<PAGE>
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
nonfundamental. 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.
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
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<PAGE>
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 distributes substantially all of its net investment income, if any, in
the form of dividends. The Fund will pay income dividends, if any, monthly, and
will 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 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.
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.
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<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. 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
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, 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.
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<PAGE>
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.
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:
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#)
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 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.
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
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<PAGE>
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. For individuals, your taxpayer identification
number is your social security number.
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:
<TABLE>
<CAPTION>
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
<S> <C> <C> <C>
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 but less than $1,000,000.... 2.04% 2.00% 1.50%
Greater than $1,000,000.............. 1.01% 1.00% 0.50%
</TABLE>
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 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.
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<PAGE>
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.
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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 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.
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, 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.
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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.
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
17
<PAGE>
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. 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 $15,000 (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 $15,000 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.
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:
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.
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<PAGE>
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, account number and designation of Class (Institutional or
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 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. Shareholders would be given at
least 60 days written notice prior to imposing any fees with respect to
telephone redemptions and bank wires.
There is currently no charge by the Administrator for wire redemptions. The
Administrator reserves, however, the right, upon thirty days' written notice, to
make reasonable charges for wire redemptions. All charges will be 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.
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<PAGE>
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.
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, 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 $***** the Advisor was entitled to receive, the Advisor voluntarily
waived $***** of its investment advisory fees. The Advisor received $***** of
such advisory fee for the year (***% of average net assets).
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<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.
Michael T. McRee, a principal and controlling shareholder of the Advisor and
executive officer of the Fund, and John M. Friedman, 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. [BLUESKY AND RECORDKEEPING]
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 incorporated as a North Carolina corporation and converted
to a 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.
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<PAGE>
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.
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.
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 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.
22
<PAGE>
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.
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.
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.
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.
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<PAGE>
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 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>
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.
INVESTEK FIXED INCOME TRUST
105 North Washington Street
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069
1-800-525-FUND
INVESTMENT ADVISOR
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
INVESTEK FIXED INCOME TRUST
INVESTOR CLASS
PROSPECTUS
August *, 1996
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
INVESTEK FIXED INCOME TRUST
August *, 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................................................ 13
ADDITIONAL INFORMATION ON PERFORMANCE....................................... 15
APPENDIX A - DESCRIPTION OF RATINGS......................................... 17
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 *, 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.
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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.
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
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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
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 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 fiscal years ended March 31, 1994, 1995, and 1996, all transactions in the
Trust were handled as principal transactions.
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.
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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.
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
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, and
the Fund may invest in certain mortgage backed securities as described in
the Prospectus;
(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);
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(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) 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;
(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;
(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;
(16) Purchase foreign securities, except that the Fund may purchase foreign
securities sold as American Depository Receipts without limit; or
(17) Invest more than 10% of its total assets in the securities of one or more
investment companies.
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 PoliciesInvestment 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 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,
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Labor Day, Thanksgiving Day, 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.
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 fiscal years ended March 31, 1994, 1995, and 1996, the total expenses of the
Fund after 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 $***** (***% 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.
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.
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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 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 agreement,
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 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 financial interest in the Plan. Persons authorized to make payments
under the Plan must provide written reports at least quarterly to the Board of
Trustees for their review.
REDEMPTIONS. Under the 1940 Act, 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: 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 Social Conscience Fund. 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
readily identifiable as belonging to any
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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.
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
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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.
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.
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MANAGEMENT OF THE FUND
TRUSTEES AND OFFICERS. The Trustees and executive officers of the Trust 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
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
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
35
<PAGE>
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
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, 26 Vice President
Secretary The Nottingham Company, Inc.
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
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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.
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.
PRINCIPAL HOLDERS OF VOTING SECURITIES. As of August **, 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 August *, 1996.
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership* Percent
* 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.
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 $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 $***** of its advisory fee,
while the Advisor voluntarily waived the remaining portion of its fee in the
amount of $*****
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-
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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 $*****
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.
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.
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.
INDEPENDENT ACCOUNTANTS. The firm of KPMG Peat Marwick LLP, 1021 East Cary
Street, Richmond, Virginia 23219-4023, serves as independent accountants for the
Fund, and will audit the annual financial statements of the Fund, prepare the
Fund's federal and state tax returns, and consult with the Fund on matters of
accounting and federal and state income taxation.
SPECIAL SHAREHOLDER SERVICES
The Fund offers the following shareholder services:
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<PAGE>
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 $30,000
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:
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.
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<PAGE>
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 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:
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 Institutional Shares of the
Fund for the fiscal year ended March 31, 1996 and since inception (November 15,
1991 to March 31, 1996) are ***% and ***%, respectively. The cumulative total
return quotation for the Institutional Shares since inception through March 31,
1996 is ***%. 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:
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<PAGE>
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 ***. 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.
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:
(bullet) 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.
(bullet) 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
riskadjusted 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.
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
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<PAGE>
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.
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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.
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 Corporation ("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.
43
<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.
44
<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.
45
<PAGE>
Bonds rated BB, B and CCC by Fitch are not considered "Investment-Grade Debt
Securities" and are regarded, on balance, as predominantly speculative with
respect to the issuer's ability to pay interest and make principal payments in
accordance with the terms of the obligations. BB indicates the lowest degree of
speculation and CCC the highest degree of speculation.
The following summarizes the three highest ratings used by Fitch for short-term
notes, municipal notes, variable rate demand instruments and commercial paper:
F-1+ - Instruments assigned this rating are regarded as having the
strongest degree of assurance for timely payment.
F-1 - Instruments assigned this rating reflect an assurance of timely
payment only slightly less in degree than issues rated F-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.
46
<PAGE>
PART C
THE NOTTINGHAM INVESTMENT TRUST II
FORM N1-A
OTHER INFORMATION
47
<PAGE>
ITEM 24. Financial Statements and Exhibits
a) Financial Statements:
Financial Highlights included in Part A for each series of the
Registrant through March 31, 1995
Annual Report for the fiscal year ended March 31, 1995 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 - Enclosed
Exhibit 6(b)
(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
(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 5/26/95
(11) Consent of Auditors - Incorporated by reference; filed on 8/1/95
48
<PAGE>
(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 -
Enclosed Exhibit 15(b)
(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 - Incorporated by reference; filed on 8/1/95
(17) Copies of Powers of Attorney - Incorporated by reference; filed on 10/29/90
and on 4/26/94 (18) Plan Pursuant to Rule 18f-3 under the 1940 Act -
Incorporated by reference; filed on 8/1/95 18
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 May 30, 1995, 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 244
Investek Fixed Income Trust 100
ZSA Social Conscience Fund 0
ZSA Equity Fund 82
ZSA Asset Allocation Fund 168
The Brown Capital Management Equity Fund - Institutional Shares 39
The Brown Capital Management Balanced Fund - Institutional Shares 34
The Brown Capital Management Small Company Fund - Institutional Shares 76
</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.
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.
49
<PAGE>
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)
<TABLE>
<CAPTION>
Name and Principal Position(s) and Offices Position(s) and Offices
Business Address with Underwriter with Registrant
<S> <C> <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>
(c) Not applicable
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.
50
<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 27th day of July 1995.
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.
<TABLE>
<S> <C>
* 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
Frank P. Meadows III Financial Officer 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: May 31, 1996
</TABLE>
51
<PAGE>
THE NOTTINGHAM INVESTMENT TRUST II
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIAL PAGE
EXHIBIT NUMBER DESCRIPTION NUMBER
<S> <C> <C
EXHIBIT 6(B) DISTRIBUTION AGREEMENT FOR INVESTEK FIXED INCOME TRUST
EXHIBIT 15(B) PLAN OF DISTRIBUTION UNDER RULE 12B-1
FOR INVESTEK FIXED INCOME TRUST
</TABLE>
52
DISTRIBUTION AGREEMENT
AGREEMENT entered into as of April 17, 1995, by and between The Nottingham
Investment Trust II, an unincorporated business trust organized under the laws
of The Commonwealth of Massachusetts (the "Trust"), and Capital Investment
Group, Inc., a North Carolina corporation ("Distributor").
WITNESSETH:
WHEREAS, the Trust is engaged in business as an open-end management investment
company and is so registered under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, the Trust is authorized to issue an unlimited number of shares of
beneficial interest, par value $0 per share, in separate series representing the
interests in separate funds of securities and other assets; and
WHEREAS, the Trust intends to offer a series of shares (the "Shares")
representing interests in the Investek Fixed Income Trust (the "Fund") of the
Trust and is registering the Shares under the Securities Act of 1933, as amended
(the "1933 Act"), pursuant to a registration statement on Form N-1A (the
"Registration Statement"), including a prospectus (the "Prospectus") and a
statement of additional information (the "Statement of Additional Information");
and
WHEREAS, Distributor has agreed to act as distributor of the shares
of the Fund for the period of this Agreement;
NOW, THEREFORE, it is hereby agreed between the parties hereto as follows:
1. APPOINTMENT OF DISTRIBUTOR.
(a) The Trust hereby appoints Distributor its exclusive agent for the
distribution of the Shares of the Fund in jurisdictions wherein such Shares may
be legally offered for sale; provided, however, that the Trust in its absolute
discretion may issue Shares of the Fund in connection with (i) the payment or
reinvestment of dividends or distributions, (ii) any merger or consolidation of
the Trust or of the Fund with any other investment company or trust or any
personal holding company, or the acquisition of the assets of any such entity or
another fund of the Trust; or (iii) any offer of exchange permitted by Section
11 of the 1940 Act.
(b) Distributor hereby accepts such appointment as exclusive agent for
the distribution of the Shares of the Fund and agrees that it will sell the
Shares as agent for the Trust at prices determined as hereinafter provided and
on the terms hereinafter set forth, all according to applicable federal and
state laws and regulations and to the Agreement and Declaration of Trust of the
Trust.
(c) Distributor may sell Shares of the Fund to or through qualified
dealers or others. Distributor will require each dealer to conform to the
provisions hereof, the Registration Statement and the Prospectus and Statement
of Additional Information, and applicable law; and neither Distributor nor any
such dealers shall
53
<PAGE>
withhold the placing of purchase orders for Shares so as to make a
profit thereby.
(d) Distributor shall order Shares of the Fund from the Trust only to
the extent that it shall have received purchase orders therefor. Distributor
will not make, or authorize any dealers or others to make: (i) any short sales
of Shares; or (ii) any sales of Shares to any Trustee or officer of the Trust or
to any officer or director of Distributor or of any corporation or association
furnishing investment advisory, managerial or supervisory services to the Trust,
or to any such corporation or association, unless such sales are made in
accordance with the then current Prospectus and Statement of Additional
Information.
(e) Distributor is not authorized by the Trust to give any information
or make any representations regarding the Shares of the Fund, except such
information or representations as are contained in the Registration Statement or
in the current Prospectus or Statement of Additional Information of the Fund, or
in sales literature prepared by or on behalf of the Trust for Distributor's use.
(f) Notwithstanding any provision hereof, the Trust may terminate,
suspend or withdraw the offering of Shares of the Fund whenever, in its sole
discretion, it deems such action to be desirable.
2. OFFERING PRICE OF SHARES. All Fund Shares sold under this Agreement
shall be sold at the public offering price per Share in effect at the time of
the sale, as described in the then current Prospectus of the Fund; provided,
however, that any public offering price for the Shares shall be the net asset
value per Share. Distributor shall be entitled to commissions and other fees and
payments under the Distribution Plan. At no time shall the Trust receive less
than the full net asset value of the Shares, determined in the manner set forth
in the then current Prospectus and Statement of Additional Information.
3. FURNISHING OF INFORMATION. The Trust shall furnish to Distributor
copies of any information, financial statements and other documents that
Distributor may reasonably request for use in connection with the sale of shares
of the Fund under this Agreement. The Trust shall also make available a
sufficient number of copies of the Fund's current Prospectus and Statement of
Additional Information for use by the Distributor.
4. EXPENSES. (a) The Trust will pay or cause to be paid the following
expenses: (i) preparation, printing and distribution to shareholders of the
Prospectus and Statement of Additional Information; (ii) preparation, printing
and distribution of reports and other communications to shareholders; (iii)
registration of the Shares under the federal securities laws; (iv) qualification
of the Shares for sale in certain states; (v) qualification of the Trust as a
dealer or broker under state law as well as qualification of the Trust as an
entity authorized to do business in certain states; (vi) maintaining facilities
for the issue and transfer of Shares; (vii) supplying information, prices and
other data to be furnished by the Trust under this Agreement; and (viii) certain
taxes
54
<PAGE>
applicable to the sale or delivery of the Shares or certificates therefor.
(b) Except to the extent such expenses are borne by the Trust pursuant
to the Distribution Plan, Distributor will pay or cause to be paid the following
expenses: (i) payments to sales representatives of the Distributor and to
securities dealers and others in respect of the sale of Shares of the Fund; (ii)
payment of compensation to and expenses of employees of the Distributor and any
of its affiliates to the extent they engage in or support distribution of Fund
Shares or render shareholder support services not otherwise provided by the
Trust's transfer agent, including, but not limited to, office space and
equipment, telephone facilities and expenses, answering routine inquiries
regarding the Fund, processing shareholder transactions, and providing such
other shareholder services as the Trust may reasonably request; (iii)
formulation and implementation of marketing and promotional activities,
including, but not limited to, direct mail promotions and television, radio,
newspaper, magazine and other mass media advertising; (iv) preparation, printing
and distribution of sales literature and of Prospectuses and Statements of
Additional Information and reports of the Trust for recipients other than
existing shareholders of the Fund; and (v) obtaining such information, analyses
and reports with respect to marketing and promotional activities as the Trust
may, from time to time, reasonably request.
(c) Distributor in connection with the Distribution Plan shall prepare
and deliver reports to the Trustees of the Trust on a regular basis, at least
quarterly, showing the expenditures with respect to the Fund pursuant to the
Distribution Plan and the purposes therefor, as well as any supplemental reports
as the Trustees of the Trust, from time to time, may reasonably request.
5. REPURCHASE OF SHARES. Distributor as agent and for the
account of the Trust may repurchase Shares of the Fund offered for
resale to it and redeem such Shares at their net asset value.
6. INDEMNIFICATION BY THE TRUST. In absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of obligations or duties hereunder
on the part of Distributor, the Trust agrees to indemnify Distributor and its
officers and partners against any and all claims, demands, liabilities and
expenses that Distributor may incur under the 1933 Act, or common law or
otherwise, arising out of or based upon any alleged untrue statement of a
material fact contained in any registration statement or prospectus (except a
prospectus of the Fund prepared for use under Rule 482 under the 1933 Act) or
statement of additional information of the Fund, or any omission to state a
material fact therein, the omission of which makes any statement contained
therein misleading, unless such statement or omission was made in reliance upon
and in conformity with information furnished to the Trust in connection
therewith by or on behalf of Distributor. Nothing herein contained shall require
the Trust to take any action contrary to any provision of its Agreement and
Declaration of Trust or any applicable statute or regulation.
55
<PAGE>
7. INDEMNIFICATION BY DISTRIBUTOR. Distributor agrees to indemnify the
Trust and its officers and Trustees against any and all claims, demands,
liabilities and expenses which the Trust may incur under the 1933 Act, or common
law or otherwise, arising out of or based upon (i) any alleged untrue statement
of a material fact contained in any registration statement or prospectus or
statement of additional information of the Fund, or any omission to state a
material fact therein if such statement or omission was made in reliance upon
and in conformity with information furnished to the Trust in connection
therewith by or on behalf of Distributor; (ii) any act or deed of Distributor or
its sales representatives which has not been authorized by the Trust in any
prospectus or statement of additional information of the Fund or by this
Agreement ; or (iii) any alleged untrue statement of a material fact contained
in any prospectus of the Fund prepared for use under Rule 482 under the 1933
Act, or any omission to state a material fact therein.
8. TERM AND TERMINATION.
(a) This Agreement shall become effective on April 17, 1995 and, unless
sooner terminated as provided herein, shall continue in effect for two years
thereafter and shall continue in full force and effect for successive periods of
one year thereafter, but only so long as each such continuance is approved (i)
by either the Trustees of the Trust or by vote of a majority of the outstanding
voting securities (as defined in the 1940 Act) of the Fund and, in either event,
(ii) by vote of a majority of the Trustees of the Trust who are not parties to
this Agreement or interested persons (as defined in the 1940 Act) of any such
party and who have no direct or indirect financial interest in this Agreement or
in the operation of the Distribution Plan or in any agreement related thereto
("Independent Trustees"), cast at a meeting called for the purpose of voting on
such approval.
(b) This Agreement may be terminated at any time without the payment of
any penalty by vote of the Trustees of the Trust or a majority of the
Independent Trustees or by vote of a majority of the outstanding voting
securities (as defined in the 1940 Act) of the Fund or by Distributor, on sixty
days' written notice to the other party.
(c) This Agreement shall automatically terminate in the event of its
assignment (as defined in the 1940 Act).
9. LIMITATION OF LIABILITY. It is expressly agreed that the obligations
of the Trust hereunder shall not be binding upon any of the Trustees, officers
or shareholders of the Trust personally, but shall bind only the assets and
property of the Trust. The term "The Nottingham Investment Trust II" means and
refers to the Trustees from time to time serving under the Agreement and
Declaration of Trust of the Trust dated August 12, 1992, a copy of which is on
file with the Secretary of The Commonwealth of Massachusetts. The execution and
delivery of this Agreement has been authorized by the Trustees, and this
Agreement has been signed on behalf of the Trust by an authorized officer of the
Trust, acting as such and not individually, and neither such authorization by
such Trustees nor such execution and delivery by such officer
56
<PAGE>
shall be deemed to have been made by any of them individually or to impose any
liability on any of them personally, but shall bind only the assets and property
of the Trust as provided in the Agreement and Declaration of Trust.
IN WITNESS THEREOF, the parties hereto have caused this Agreement to be executed
as of the date first written above.
THE NOTTINGHAM INVESTMENT TRUST II
Attest:
By:
CAPITAL INVESTMENT GROUP, INC.
Attest:
By:
57
AMENDED AND RESTATED
PLAN OF DISTRIBUTION PURSUANT TO RULE 12B-1
WHEREAS, The Nottingham Investment Trust II, an unincorporated business trust
organized and existing under the laws of the Commonwealth of Massachusetts (the
"Trust"), engages in business as an open-end management investment company and
is registered as such under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Trust is authorized to issue an unlimited number of shares of
beneficial interest (the "Shares"), in separate series representing the
interests in separate funds of securities and other assets; and
WHEREAS, the Trust offers a series of such Shares representing interests in the
INVESTEK FIXED INCOME TRUST (the "Fund") of the Trust, which shares are
classified into Investor Shares and Institutional Shares of the Fund;
WHEREAS, the Trustees of the Trust as a whole, and the Trustees who are not
interested persons of the Trust (as defined in the 1940 Act) and who have no
direct or indirect financial interest in the operation of this Plan or in any
agreement relating hereto (the "Non-Interested Trustees"), having determined, in
the exercise of reasonable business judgment and in light of their fiduciary
duties under state law and under Section 36(a) and (b) of the 1940 Act, that
there is a reasonable likelihood that this Plan will benefit the Trust and its
shareholders, have approved this Plan by votes cast at a meeting called for the
purpose of voting hereon and on any agreements related hereto; and
NOW, THEREFORE, the Trust hereby amends and restates and readopts this Plan in
accordance with Rule 12b-1 under the 1940 Act, on the following terms and
conditions:
1. DISTRIBUTION AND SERVICING ACTIVITIES. Subject to the supervision of the
Trustees of the Trust, the Trust may, directly or indirectly, engage in any
activities primarily intended to result in the sale of Investor Shares of the
Fund or servicing of shareholder accounts, which activities may include, but are
not limited to, the following: (a) payments to the Trust's Distributor and to
securities dealers and others in respect of the sale of Investor Shares of the
Fund or the servicing of accounts of holders of Investor Shares; (b) payment of
compensation to and expenses of personnel (including personnel of organizations
with which the Trust has entered into agreements related to this Plan) who
engage in or support distribution of Investor Shares of the Fund or who render
shareholder support services not otherwise provided by the Trust's transfer
agent, administrator, or custodian, including but not limited to, answering
inquiries regarding the Trust, processing shareholder transactions, providing
personal services and/or the maintenance of shareholder accounts, providing
other shareholder liaison services, responding to shareholder inquiries,
providing information on shareholder investments in the Fund, and providing such
other shareholder services as the Trust may reasonably request; (c) formulation
and implementation of marketing and promotional activities, including, but not
limited to, direct mail promotions and television, radio, newspaper, magazine
and other mass media advertising; (d) preparation, printing and distribution
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of sales literature; (e) preparation, printing and distribution of prospectuses
and statements of additional information and reports of the Trust for recipients
other than existing shareholders of the Trust; and (f) obtaining such
information, analyses and reports with respect to marketing and promotional
activities as the Trust may, from time to time, deem advisable. The Trust is
authorized to engage in the activities listed above, and in any other activities
primarily intended to result in the sale of Investor Shares of the Fund or the
servicing of accounts of holders of Investor Shares, either directly or through
other persons with which the Trust has entered into agreements related to this
Plan.
2. MAXIMUM EXPENDITURES. The expenditures to be made by the Trust pursuant to
this Plan and the basis upon which payment of such expenditures will be made
shall be determined by the Trustees of the Trust, but in no event may such
expenditures exceed an amount calculated at the rate of 0.50% per annum of the
average daily net asset value of the Investor Shares of the Fund for each year
or portion thereof included in the period for which the computation is being
made, elapsed since the amendment and restatement of this Plan to the date of
such expenditures (prior to the amendment and restatement of this Plan the
foregoing amount of expenditures permitted under this Plan was 0.35% per annum
of the average daily net asset value of the Investor Shares of the Fund for each
year or portion thereof included in the period for which the computation was
being made, elapsed since the inception of this Plan to the date of such
expenditures and prior to the amendment and restatement of this Plan).
Notwithstanding the foregoing, in no event may such expenditures paid by the
Trust as service fees exceed an amount calculated at the rate of 0.25% of the
average annual net assets of the Investor Shares of the Fund, nor may such
expenditures paid as service fees to any person who sells Investor Shares of the
Fund exceed an amount calculated at the rate of 0.25% of the average annual net
asset value of such shares. Such payments for distribution and shareholder
servicing activities may be made directly by the Trust or to other persons with
which the Trust has entered into agreements related to this Plan.
3. TERM AND TERMINATION. (a) This Plan, which was originally adopted effective
with the commencement of operations of the Fund, shall be amended and restated
effective on the 1st day of August, 1995, contingent upon approval of the
increase in the maximum expenditures permitted by Section 2 hereof by a vote of
the majority of the outstanding voting securities of the Fund as defined in the
1940 Act, and further amended and restated to reflect the classification of the
Shares of the Fund, effective as of the 5th day of September, 1995. Unless
terminated as herein provided, this Plan shall continue in effect for one year
from September 15, 1995 and shall continue in effect for successive periods of
one year thereafter, but only so long as each such continuance is specifically
approved by votes of a majority of both (i) the Trustees of the Trust and (ii)
the Non-Interested Trustees, cast at a meeting called for the purpose of voting
on such approval.
(b) This Plan may be terminated at any time with respect to
the Fund by a vote of a majority of the Non-Interested Trustees or
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by a vote of a majority of the outstanding voting securities of the Investor
Shares of the Fund as defined in the 1940 Act.
4. AMENDMENTS. This Plan may not be amended to increase materially the maximum
expenditures permitted by Section 2 hereof unless such amendment is approved by
a vote of the majority of the outstanding voting securities of the Investor
Shares of the Fund as defined in the 1940 Act with respect to which a material
increase in the amount of expenditures is proposed, and no material amendment to
this Plan shall be made unless approved in the manner provided for annual
renewal of this Plan in Section 3(a) hereof.
5. SELECTION AND NOMINATION OF TRUSTEES. While this Plan is in
effect, the selection and nomination of the Non-Interested Trustees
of the Trust shall be committed to the discretion of such Non-Interested
Trustees.
6. QUARTERLY REPORTS. The Treasurer of the Trust shall provide
to the Trustees of the Trust and the Trustees shall review
quarterly a written report of the amounts expended pursuant to this
Plan and any related agreement and the purposes for which such
expenditures were made.
7. RECORDKEEPING. The Trust shall preserve copies of this Plan and any related
agreement and all reports made pursuant to Section 6 hereof, for a period of not
less than six years from the date of this Plan. Any such related agreement or
such reports for the first two years will be maintained in an easily accessible
place.
8. LIMITATION OF LIABILITY. Any obligations of the Trust hereunder shall not be
binding upon any of the Trustees, officers or shareholders of the Trust
personally, but shall bind only the assets and property of the Trust. The term
"The Nottingham Investment Trust II" means and refers to the Trustees from time
to time serving under the Agreement and Declaration of Trust of the Trust, a
copy of which is on file with the Secretary of The Commonwealth of
Massachusetts. The execution of this Plan has been authorized by the Trustees,
and this Plan has been signed on behalf of the Trust by an authorized officer of
the Trust, acting as such and not individually, and neither such authorization
by such Trustees nor such execution by such officer shall be deemed to have been
made by any of them individually or to impose any liability on any of them
personally, but shall bind only the assets and property of the Trust as provided
in the Agreement and Declaration of Trust.
IN WITNESS THEREOF, the parties hereto have caused this Plan to be re-executed
as amended and restated herein, all as of the date written above.
THE NOTTINGHAM INVESTMENT TRUST II
Attest:
By__________________________________
INVESTEK FIXED INCOME TRUST
Attest:
By__________________________________
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