Dear Shareholders of Investek Fixed Income Trust:
Enclosed for your review is a summary of portfolio assets and the the annual
report for the fiscal year ended March 31, 1996. We are pleased to report
performance which exceeds the Lipper Index for intermediate-term investment
grade fixed income funds. During this period, the Investek Fixed Income Trust
produced a total return of 10.70%. The average total return for a fund in this
Lipper category was 9.70%.
Our fixed income management style focuses on adding value through the use of
high quality securities. Accordingly, U.S. Government guaranteed, insured and
Agency obligations make up over 71% of the portfolio.
Fiscal year 1995 was quite rewarding for fixed income investors. Interest rates
fell for most of the period in reaction to the Federal Reserve's monetary
policy. The rally stumbled into 1996 as the market became wary of the potential
for above normal economic growth and rates rose by almost 1% across most
maturities. Indeed, first quarter '96 economic data brought the dreaded word
"inflation" back into conversations mainly due to higher than expected energy
and food costs. We think these worries are unfounded and that economic growth
and the rate of inflation will decelerate throughout the course of the year. We
continue to maintain our longer term optimism regarding the bond market.
Thank you for your continued confidence in the Investek Fixed Income Trust.
Please call us if we can be of further service to you.
Very truly yours,
/s/ MICHAEL T. MCREE
Michael T. McRee
President
Investek Capital Management
/s/ TIMOTHY L. ELLIS
Timothy L. Ellis
Vice President & Trustee
Investek Fixed Income Trust
<PAGE>
INVESTEK FIXED INCOME TRUST
Performance Update - $50,000 Investment
For the period from November 15, 1991
(commencement of operations) to March 31, 1996
[GRAPH]
Investek Fixed Income Trust Lehman Aggregate
11/15/91 50,000 50,000
12/31/91 50,355 51,295
03/31/92 50,612 50,644
06/30/92 55,345 52,690
09/30/92 53,918 54,955
12/31/92 54,275 55,098
03/31/92 56,875 57,374
06/30/93 58,672 58,900
09/30/93 60,027 60,437
12/31/93 60,004 60,467
03/31/94 57,698 58,732
06/30/94 57,065 58,127
09/30/94 57,281 58,476
12/31/94 57,736 58,698
03/31/95 60,426 61,656
06/30/95 64,300 65,411
09/30/95 64,918 66,700
12/31/95 67,446 69,541
03/31/96 66,892 68,310
This graph depicts the performance of the Investek Fixed Income Trust versus the
Lehman Brothers Aggregate Bond Index. It is important to note the Investek Fixed
Income Trust is a professionally managed mutual fund while the index is not
available for investment and is unmanaged. The comparison is shown for
illustrative purposes only.
Average Annual Total Return
Commencement of One year ended Three years ended
operations through 3/31/96 3/31/96 3/31/96
6.87% 10.70% 5.55%
* The graph assumes an initial investment at November 15, 1991. All dividends
and distributions are reinvested.
* At March 31, 1996, the Fund would have grown to $66,892 - total investment
return of 33.78% since November 15, 1991.
* At March 31, 1996, a similar investment in the Lehman Brothers Aggregate Bond
Index would have grown to $68,310 - total investment return of 36.62% since
November 15, 1991.
* Past performance is not a guarantee of future performance. A mutual fund's
share price and investment return will vary with market conditions, and the
principal value of shares, when redeemed, may be worth more or less than the
original cost. Average annual returns are historical in nature and measure net
investment income and capital gain and loss from portfolio investments
assuming reinvestments of dividends.
<PAGE>
INVESTEK FIXED INCOME TRUST
PORTFOLIO OF INVESTMENTS
March 31, 1996
<TABLE>
<CAPTION>
Interest Maturity Value
Principal Rate Date (note 1)
--------- -------- --------- ----------
<S> <C>
U. S. GOVERNMENT AND AGENCY OBLIGATIONS - 51.23%
United States Treasury Note $250,000 5.750% 08/15/03 $241,602
A.I.D. - Equador 95,122 7.050% 05/01/15 94,810
A.I.D. - Ivory Coast 313,417 8.100% 12/01/06 315,570
A.I.D. - Korea 9,250 8.250% 01/01/99 9,335
A.I.D. - Korea 402,390 8.390% 08/01/03 406,966
A.I.D. - Peru 197,828 8.350% 01/01/07 199,771
A.I.D. - Zaire 24,100 7.375% 04/01/97 24,261
B.A.L.T. Conway Partnership Title XI 145,616 10.750% 11/15/03 149,148
Chilbar Ship Co. Title XI 83,143 6.980% 07/15/01 84,499
Federal Home Loan Mortgage Corporation
Pool #240001 D 100,660 9.500% 11/01/97 101,938
REMIC 1553 Class E 500,000 6.250% 04/15/07 491,969
Federal National Mortgage Association
REMIC Trust G93-20 Class PG 243,000 6.500% 02/25/19 238,623
REMIC Trust 1992-169 Class J 250,000 6.500% 03/25/21 241,996
REMIC Trust G95-2 Class L 250,000 8.000% 05/17/04 248,159
Series SM-2004-F 100,000 7.550% 06/10/04 101,872
REMIC Trust 1992-G52 Class C 47,714 7.250% 08/25/20 47,868
Global Industries Ltd. Title XI 1,324,000 8.300% 07/15/20 1,435,172
Government National Mortgage Association
Pool #16402 276,320 8.500% 04/15/12 285,383
Pool #383137 430,564 7.750% 03/15/11 433,382
Marine Vessel Buffalo Title XI 425,626 7.270% 09/01/03 434,619
Moore McCormack Leasing - Series B 240,000 8.875% 07/15/01 241,116
Small Business Administration 115,453 7.365% 12/06/09 113,971
Small Business Administration 92-A 338,837 7.600% 01/01/12 339,791
----------
Total U. S. Government and Agency Obligations (Cost $6,168,514) 6,281,821
---------
U. S. GOVERNMENT INSURED OBLIGATIONS - 19.96%
Federal Housing Authority Project Loan
Crystal City 70,832 2.900% 01/01/06 59,823
Downtowner Apartments 175,857 8.375% 11/01/11 178,516
Juneau Village 1,074,959 6.680% 03/01/11 1,054,423
Kinswood Apartments 630,982 6.875% 10/01/14 629,426
USGI #87 429,269 7.430% 08/01/23 431,995
Wautoma Rehab 96,032 6.930% 12/01/13 93,989
---------
Total U. S. Government Insured Obligations (Cost $2,451,462) 2,448,172
----------
</TABLE>
(Continued)
<PAGE>
INVESTEK FIXED INCOME TRUST
PORTFOLIO OF INVESTMENTS
March 31, 1996
<TABLE>
<CAPTION>
Interest Maturity Value
Principal Rate Date (note 1)
--------- ------- --------- -------------
<S> <C>
CORPORATE OBLIGATIONS - 7.86%
American Car Line Company Equipment Trust
Certificates; Series 1993-A $217,000 8.250% 04/15/08 $217,473
GG1B Funding Corporation 492,662 7.430% 01/15/11 473,050
Hugoton Capital Limited Partnership 250,000 10.820% 08/31/07 273,032
----------
Total Corporate Obligations (Cost $994,211) 963,555
----------
CONVENTIONAL MORTGAGE BACKED SECURITIES - 11.64%
GE Capital Mortgage Services, Inc.
REMIC Series 1993-17 Class A6 650,000 6.500% 11/25/23 630,181
Prudential Home Mortgage Securities
REMIC Series 1992-50 Class A5 85,000 7.625% 02/25/23 83,809
REMIC Series 1994-2 Class A8 500,000 6.750% 02/25/24 472,451
Residential Funding Corporation
REMIC Series 1993-S16 Class A6 250,000 7.000% 05/25/23 240,704
----------
Total Conventional Mortgage Backed Securities (Cost $1,445,694) 1,427,145
----------
PRIVATE MORTGAGE BACKED SECURITIES - 2.63%
Krauss/Schwartz Properties, Ltd. 156,641 7.740% 02/18/04 154,918
National Housing Partnership 168,640 9.500% 05/01/03 167,250
----------
Total Private Mortgage Backed Securities (Cost $325,281) 322,168
----------
PRIVATE PLACEMENT CORPORATE SECURITIES - 2.40%
Rosewood Care Center Capital Funding Corporation
First Mortgage Bonds 314,045 7.250% 11/01/13 294,225
----------
(Cost $305,819 )
Number of
Shares
---------
INVESTMENT COMPANY - 5.38%
Performance Funds Trust Money Market Fund "A" 659,421 659,421
--------
(Cost $659,421)
</TABLE>
(Continued)
<PAGE>
INVESTEK FIXED INCOME TRUST
PORTFOLIO OF INVESTMENTS
March 31, 1996
<TABLE>
<S> <C>
Total Value of Investments (Cost $12,350,402(a)) 101.10% $12,396,507
Liabilities In Excess of Other Assets (1.10%) (135,386)
------ ------------
Net Assets 100.00% $12,261,121
====== ============
</TABLE>
(a) Aggregate cost for financial reporting and federal income tax purposes
is the same. Unrealized appreciation (depreciation) of investments for
financial reporting and federal income tax purposes is as follows:
Unrealized appreciation $171,655
Unrealized depreciation (125,550)
--------
Net unrealized appreciation $46,105
========
See accompanying notes to financial statements
<PAGE>
INVESTEK FIXED INCOME TRUST
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1996
ASSETS
Investments, at value (cost $12,350,402) $ 12,396,507
Interest receivable 136,575
Dividend receivable 1,825
Other assets 2,697
------------
Total assets 12,537,604
------------
LIABILITIES
Accrued expenses 1,678
Payable for investment purchases 240,391
Distributions payable 29,184
Disbursements in excess of cash on demand deposit 3,137
Due to advisor 2,093
------------
Total liabilities 276,483
------------
NET ASSETS
(applicable to 1,213,275 shares outstanding; unlimited
shares of no par value beneficial interest authorized) $ 12,261,121
============
NET ASSET VALUE AND REPURCHASE PRICE PER SHARE
($12,261,121 / 1,213,275 shares) $ 10.11
============
NET ASSETS CONSIST OF
Paid-in capital $ 12,773,532
Undistributed net investment income 4,435
Accumulated net realized loss on investments (562,951)
Net unrealized appreciation on investments 46,105
------------
$ 12,261,121
============
See accompanying notes to financial statements
<PAGE>
INVESTEK FIXED INCOME TRUST
STATEMENT OF OPERATIONS
Year ended March 31, 1996
INVESTMENT INCOME
Income
Interest $ 1,015,516
Dividends 13,284
-----------
Total income 1,028,800
-----------
Expenses
Investment advisory fees (note 2) 63,557
Fund administration fees (note 2) 21,199
Fund accounting fees (note 2) 21,000
Professional fees 16,795
Custody fees 8,167
Registration and filing administration fees 1,488
Shareholder recordkeeping fees 1,199
Securities pricing fees 439
Trustee fees and meeting expenses 5,617
Shareholder servicing expenses 5,053
Registration and filing expenses 2,239
Printing expenses 998
Other operating expenses 4,930
-----------
Total expenses 152,681
-----------
Less investment advisory fees waived (note 2) (29,700)
-----------
Net expenses 122,981
-----------
Net investment income 905,819
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss from investment transactions (30,968)
Decrease in unrealized depreciation on investments 660,566
-----------
Net realized and unrealized gain on investments 629,598
-----------
Net increase in net assets resulting from operations $ 1,535,417
===========
See accompanying notes to financial statements
<PAGE>
INVESTEK FIXED INCOME TRUST
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year ended Year ended
March 31, March 31,
1996 1995
DECREASE IN NET ASSETS
<S> <C>
Operations
Net investment income $ 905,819 $ 1,033,022
Net realized loss from investment transactions (30,968) (531,983)
Decrease in unrealized depreciation on investments 660,566 206,044
------------ ------------
Net increase in net assets resulting from operations 1,535,417 707,083
------------ ------------
Distributions to shareholders from
Net investment income (905,271) (1,025,722)
------------ ------------
Capital share transactions
Decrease in net assets resulting from capital share transactions (a) (3,352,499) (2,339,701)
------------ ------------
Total decrease in net assets (2,722,353) (2,658,340)
NET ASSETS
Beginning of year 14,983,474 17,641,814
------------ ------------
End of year (including undistributed net investment income $12,261,121 $ 14,983,474
============ ============
of $4,435 in 1996 and $3,887 in 1995)
</TABLE>
(a) A summary of capital share activity follows:
<TABLE>
<CAPTION>
Year ended Year ended
March 31, 1996 March 31, 1995
Shares Value Shares Value
<S> <C>
Shares sold 148,043 $ 1,503,798 135,952 $ 1,325,801
Shares issued for reinvestment
of distributions 53,720 545,148 87,083 839,641
---------- ----------- ---------- -----------
201,763 2,048,946 223,035 2,165,442
Shares redeemed (526,499) (5,401,445) (462,346) (4,505,143)
---------- ----------- ---------- -----------
Net decrease (324,736) $(3,352,499) (239,311) $(2,339,701)
========== =========== ========== ===========
</TABLE>
See accompanying notes to financial statements
<PAGE>
INVESTEK FIXED INCOME TRUST
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
<TABLE>
<CAPTION>
For the
period from
November 15, 1991
(commencement of
operations)
Year ended Year ended Year ended Year ended to
March 31, March 31, March 31, March 31, March 31,
1996 1995 1994 1993 1992
------------ ------------ ----------- ----------- ------------
<S> <C>
Net asset value, beginning of period $ 9.74 $ 9.93 $ 10.48 $ 9.92 $ 10.00
Income (loss) from investment operations
Net investment income 0.66 0.63 0.61 0.65 0.20
Net realized and unrealized gain (loss) on investments 0.37 (0.19) (0.43) 0.56 (0.08)
----------- ----------- ----------- ---------- ----------
Total from investment operations 1.03 0.44 0.18 1.21 0.12
----------- ----------- ----------- ---------- ----------
Distributions to shareholders from
Net investment income (0.66) (0.63) (0.60) (0.64) (0.20)
Net realized gain from investment transactions 0.00 0.00 (0.13) (0.01) 0.00
----------- ----------- ----------- ---------- ----------
Total distributions (0.66) (0.63) (0.73) (0.65) (0.20)
----------- ----------- ----------- ---------- ----------
Net asset value, end of period $ 10.11 $ 9.74 $ 9.93 $ 10.48 $ 9.92
=========== =========== =========== ========== ==========
Total return 10.70% 4.73% 1.43% 12.49% 1.22%(a)
=========== =========== =========== ========== ==========
Ratios/supplemental data
Net assets, end of period $12,261,121 $14,983,474 $17,641,814 $5,267,626 $2,036,541
=========== =========== =========== ========== ==========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees 1.08% 1.08% 1.41% 1.69% 1.71%(b)
After expense reimbursements and waived fees 0.87% 0.77% 0.77% 0.95% 0.95%(b)
Ratio of net investment income to average net assets
Before expense reimbursements and waived fees 6.20% 6.15% 5.45% 5.50% 5.41%(b)
After expense reimbursements and waived fees 6.41% 6.45% 5.82% 6.24% 6.17%(b)
Portfolio turnover rate 16.57% 19.64% 34.42% 59.78% 0.00%
</TABLE>
(a) Annualized total return was 3.27%.
(b) Annualized.
See accompanying notes to financial statements
<PAGE>
INVESTEK FIXED INCOME TRUST
NOTES TO FINANCIAL STATEMENTS
March 31, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
The Investek Fixed Income Trust (the "Fund") is a diversified series of
shares of beneficial interest of The Nottingham Investment Trust II (the
"Trust"). The Trust, an open-end investment company, was organized on
October 18, 1990 as a Massachusetts Business Trust and is registered under
the Investment Company Act of 1940. The Fund began operations on November
15, 1991. The following is a summary of significant accounting policies
followed by the Fund.
A. Security Valuation - The Fund's investments in securities are carried
at value. Securities listed on an exchange or quoted on a national
market system are valued at the last sales price as of 4:00 p.m., New
York time. Securities for which market quotations are not readily
available are valued in good faith using a method approved by the
Trust's Board of Trustees, taking into consideration institutional bid
and last sale prices, and securities prices, yields, estimated
maturities, call features, ratings, institutional trading in similar
groups of securities and developments related to specific securities.
Short-term investments are valued at cost which approximates value.
The financial statements include securities valued at $11,495,484 (94%
of net assets) whose values have been estimated using a method
approved by the Trust's Board of Trustees. Such securities are valued
by using a matrix system, which is based upon the factors described
above and particularly the spread between yields on the securities
being valued and yields on U. S. Treasury securities with similar
remaining years to maturity. Those estimated values may differ from
the values that would have resulted from actual purchase and sale
transactions.
B. Federal Income Taxes - No provision has been made for federal income
taxes since it is the policy of the Fund to comply with the provisions
of the Internal Revenue Code applicable to regulated investment
companies and to make sufficient distributions of taxable income to
relieve it from all federal income taxes.
C. Investment Transactions - Investment transactions are recorded on the
trade date. Realized gains and losses are determined using the
specific identification cost method. Interest income is recorded daily
on the accrual basis. Distributions to shareholders are recorded on
the ex-dividend date.
D. Distributions to Shareholders - The Fund generally declares dividends
monthly, on a date selected by the Trust's Trustees. In addition,
distributions may be made annually in December out of net realized
gains through October 31 of that year. The Fund may make a
supplemental distribution subsequent to the end of its fiscal year
ending March 31.
E. Use of Estimates - Management makes a number of estimates in the
preparation of the Fund's financial statements. Actual results could
differ significantly from these estimates.
<PAGE>
INVESTEK FIXED INCOME TRUST
NOTES TO FINANCIAL STATEMENTS
March 31, 1996
NOTE 2 - INVESTMENT ADVISORY FEE AND OTHER RELATED PARTY TRANSACTIONS
Pursuant to an investment advisory agreement, Investek Capital
Management, Inc. (the "Advisor") provides the Fund with a continuous
program of supervision of the Fund's assets, including the composition
of its portfolio, and furnishes advice and recommendations with
respect to investments, investment policies, and the purchase and sale
of securities. As compensation for its services, the Advisor receives
a fee at the annual rate of 0.45% of the Fund's average daily net
assets.
Currently, the Fund does not offer its shares for sale in states which
require limitations to be placed on its expenses. The Advisor
currently intends to voluntarily waive all or a portion of its fee and
reimburse expenses of the Fund to limit total Fund operating expenses
to 0.90% of the average daily net assets of the Fund. There can be no
assurance that the foregoing voluntary fee waivers or reimbursements
will continue. The Advisor has voluntarily waived a portion of its fee
amounting to $29,700 ($0.02 per share) for the year ended March 31,
1996.
The Fund's administrator, The Nottingham Company (the
"Administrator"), provides administrative services to and is generally
responsible for the overall management and day-to-day operations of
the Fund pursuant to an accounting and administrative agreement with
the Trust. As compensation for its services, the Administrator
receives a fee at the annual rate of 0.15% of the Fund's average daily
net assets. The Administrator also receives a monthly fee of $1,750
for accounting and recordkeeping services. Additionally, the
Administrator charges the Fund for servicing of shareholder accounts
and registration of the Fund's shares. The contract with the
Administrator provides that the aggregate fees for the aforementioned
administration, accounting and recordkeeping services shall not be
less than $3,000 per month. The Administrator also charges the Fund
for certain expenses involved with the daily valuation of portfolio
securities.
Certain Trustees and officers of the Trust are also officers of the
Advisor, the Distributor or the Administrator.
NOTE 3 - PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments, other than short-term investments,
aggregated $2,250,657 and $5,903,141, respectively, for the year ended
March 31, 1996.
The Fund's prospectus provides that the Fund will not acquire
securities of any one investment company if, immediately thereafter,
the securities would have an aggregate value in excess of 5% of the
Fund's total assets. At March 31, 1996 the Fund's investment in an
investment company of $659,421 represented 5.26% of the Fund's total
assets.
NOTE 4 - DISTRIBUTIONS TO SHAREHOLDERS
The Fund has capital loss carryforwards for federal income tax
purposes of $562,951, $492,567 of which expires in the year 2003 and
$70,384 of which expires in the year 2004. It is the intention of the
Board of Trustees of the Trust not to distribute any realized gains
until the carryforwards have been offset or expire.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees and Shareholders
The Nottingham Investment Trust II:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of the Investek Fixed Income Trust (the "Fund"), a
series of The Nottingham Investment Trust II, as of March 31, 1996, and the
related statement of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
financial highlights for each of the three years in the period then ended. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits. The financial
statements for the year ended March 31, 1993 and the period from November 15,
1991 (commencement of operations) to March 31, 1992 were audited by other
auditors whose report thereon dated May 6, 1993 expressed an unqualified opinion
on those statements.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of March
31, 1996 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Investek Fixed Income Trust as of March 31, 1996, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended, and financial highlights for each of the three years
in the period then ended in conformity with generally accepted accounting
principles.
Richmond, Virginia
May 14, 1996
