NOTTINGHAM INVESTMENT TRUST II, 485BPOS, 1997-07-31

NOTTINGHAM INVESTMENT TRUST II
485BPOS, 1997-07-31

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As filed with the Securities and Exchange Commission on July 31, 1997

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. 31 X

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 32 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:

C. Frank Watson III
105 North Washington Street
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069
Telephone (919) 972-9922 Ext 212

With copies to:

M. Guy Brooks, III, Esq.
Poyner & Spruill, L.L.P.
3600 Glenwood Avenue
Raleigh, North Carolina 27612

It is proposed that this filing will become effective:

|X| Immediately upon filing pursuant |_| on , 1997 pursuant
to Rule 485(b), or to Rule 485(b), or

|_| 60 days after filing pursuant |_| on , 1997 pursuant
to Rule 485(a)(1), to Rule 485(a)(1), or

|_| 75 days after filing pursuant |_| on , 1997 pursuant
to Rule 485(a)(2) to Rule 485(a)(2), or

The issuer has previously registered an indefinite number of shares of seven
classes: Capital Value Fund, Investek Fixed Income Trust, ZSA Social Conscience
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, 1997 was filed on May 29, 1997.

<PAGE>

This filing includes the Prospectuses and Statement of Additional Information of
WST Growth & Income Fund, which are incorporated herein by reference to
Post-Effective Amendment No. 30 to the Registrant's Registration Statement on
Form N-1A filed with the Commission on July 24, 1997.

<PAGE>
PART A

PROSPECTUS Cusip Number 66976M102
NASDAQ Symbol CAPVX

CAPITAL VALUE FUND
INVESTOR CLASS

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

INVESTMENT ADVISOR

Capital Investment Counsel, Inc.
Raleigh, North Carolina

The 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 (the "SEC") and is available upon
request and without charge. You may request the Statement of Additional
Information, which is incorporated in this Prospectus by reference, by writing
the Fund at Post Office Box 4365, Rocky Mount, North Carolina 27803-0365, or by
calling 1-800-525-3863. The SEC also maintains an Internet Web site
(http://www.sec.gov) that contains the Statement of Additional Information,
material incorporated by reference, and other information regarding the Fund.

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

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

The date of this Prospectus and the Statement of Additional Information is July
31, 1997.

<PAGE>

TABLE OF CONTENTS

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

FEE TABLE........................................................... 3

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

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

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

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

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

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

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

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

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

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

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

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

<PAGE>

PROSPECTUS SUMMARY

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

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

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

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

Manager. Subject to the general supervision of the Trust's Board of Trustees and
in accordance with the Fund's investment policies, Capital Investment Counsel,
Inc. of Raleigh, North Carolina (the "Advisor"), manages the Fund's investments.
The Advisor currently manages over $130 million in assets. For its advisory
services, the Advisor receives a monthly fee based on the Fund's daily net
assets at the annual rate of 0.60%. The fee is reduced on assets over $250
million. See "Management of the Fund - The Advisor."

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

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

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

FEE TABLE

The following table sets 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 load imposed on reinvested dividends........None
Maximum deferred sales load...............................None
Redemption fees*..........................................None
Exchange fee..............................................None

* The Fund in its discretion may choose to pass through to
redeeming shareholders any charges imposed by the Custodian
for wiring redemption proceeds. The Custodian currently
charges the Fund $7.00 per transaction for wiring redemption
proceeds.

Annual Fund Operating Expenses for Investor Shares2
(as a percentage of average net assets)
Investment advisory fees................................0.60%
12b-1 fees..............................................0.50%3
Other expenses..........................................1.28%
Total operating expenses................................2.38%2

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

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
$58 $107 $158 $297

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

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

2 The "Total operating expenses" shown above are based upon actual operating
expenses incurred by the Investor Shares of the Fund for the fiscal year
ended March 31, 1997, which were 2.38% of average daily net assets of the
Investor Shares. The Advisor has voluntarily agreed to a reduction in the
fees payable to it and to reimburse expenses of the Fund, if necessary, in
an amount that limits "Total operating expenses" (exclusive of interest,
taxes, brokerage fees and commissions, sales charges, and extraordinary
expenses) to not more than 2.50% of the Investor Shares' average daily net
assets. There can be no assurance that the Advisor's voluntary fee waivers
and expense reimbursements in the past 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 0.50% of the Investor Shares' average
net assets annually. See "How Shares May Be Purchased - Distribution Plan."
Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charge permitted by the National Association of
Securities Dealers.

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

FINANCIAL HIGHLIGHTS

The shares of the Fund are divided into multiple Classes representing interests
in the Fund. This Prospectus relates to Investor Shares of the Fund. See "Other
Information - Description of Shares." The financial data included in the table
below for the fiscal year ended March 31, 1997, has been audited by Deloitte &
Touche LLP, independent accountants, whose report covering such period is
included in the Statement of Additional Information. The financial data for the
prior fiscal years was audited by other independent auditors. The information in
the table below should be read in conjunction with the Fund's latest audited
financial statements and notes thereto, which are also included in the Statement
of Additional Information, a copy of which may be obtained at no charge by
calling the Fund. Further information about the performance of the Fund is
contained in the Annual Report of the Fund, a copy of which may be obtained at
no charge by calling the Fund.

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

Years ended March 31,
1997 1996 1995 1994 1993 1992
---- ---- ----- ---- ---- ----
Net Asset Value, Beginning of Period $11.92 $10.75 $10.42 $10.59 $10.05 $10.09
Income from investment operations
Net investment income 0.15 0.19 0.17 0.15 0.20 0.19
Net realized and unrealized
gain on investments 0.70 1.53 0.73 0.41 0.88 -
---- ---- ---- ---- ---- ----
Total from investment operations 0.85 1.72 0.90 0.56 1.08 0.19
---- ---- ---- ---- ---- ----
Less distributions from
Net investment income (0.15) (0.20) (0.21) (0.11) (0.20) (0.19)
Tax return of capital (0.01) 0.00 0.00 0.00 0.00 0.00
Net realized gain from
investment transactions (0.11) (0.35) (0.36) (0.62) (0.34) (0.04)
------ ------ ------ ------ ------ ------
Total distributions (0.27) (0.55) (0.57) (0.73) (0.54) (0.23)
------ ------ ----- ----- ----- -----
Net Asset Value, End of Period $12.50 $11.92 $10.75 $10.42 $10.59 $10.05
====== ====== ====== ====== ====== ======

Total return (a) 7.08% 16.16% 8.66% 5.21% 11.23% 1.44%

Ratios/supplemental data
Net assets, end of period (in thousands) $7,738 $7,552 $6,776 $6,257 $6,042 $5,384
====== ====== ====== ====== ====== ======
Ratio of expenses to average net assets
Before expense reimbursements
and waived fees 2.38% 2.56% 2.58% 2.64% 2.48% 2.96%
After expense reimbursements
and waived fees 2.38% 2.33% 2.47% 2.43% 2.48% 2.73%
Ratio of net investment income
to average net assets
Before expense reimbursements
and waived fees 1.12% 1.44% 1.55% 1.22% 1.87% 1.81%
After expense reimbursements
and waived fees 1.12% 1.66% 1.66% 1.43% 1.87% 2.04%
Portfolio turnover rate 7.31% 12.33% 24.67% 32.99% 24.79% 14.89%
Average commission rate paid (b) $0.1000
- ------------------
</TABLE>

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

(b) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged. This
disclosure was not required for fiscal years of the Fund ended prior to
March 31, 1997.

INVESTMENT OBJECTIVE AND POLICIES

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

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

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

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

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

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

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

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

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

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

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

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

Repurchase Agreements. The Fund may acquire U.S. Government Securities or
corporate debt securities subject to repurchase agreements. A repurchase
agreement transaction occurs when the Fund acquires a security and
simultaneously resells it to the vendor (normally a member bank of the Federal
Reserve or a registered Government Securities dealer) for delivery on an agreed
upon future date. The repurchase price exceeds the purchase price by an amount
that reflects an agreed upon market interest rate earned by the Fund effective
for the period of time during which the repurchase agreement is in effect.
Delivery pursuant to the resale typically will occur within one to seven 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.

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

Investment Companies. In order to achieve its investment objective, the Fund may
invest up to 10% of the value of its total assets in securities of other
investment companies whose investment objectives are consistent with the Fund's
investment objective. The Fund will not acquire securities of any one investment
company if, immediately thereafter, the Fund would own more than 3% of such
company's total outstanding voting securities, securities issued by such company
would have an aggregate value in excess of 5% of the Fund's assets, or
securities issued by such company and securities held by the Fund issued by
other investment companies would have an aggregate value in excess of 10% of the
Fund's assets. 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.

RISK FACTORS

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

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

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

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

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

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

If the Board of Trustees of the Trust determines that the Fund's investment
objective can best be achieved by a substantive change in a non-fundamental
investment limitation, the Board can make such change without shareholder
approval and will disclose any such material changes in the then current
Prospectus. Any limitation that is not specified in the Fund's Prospectus, or in
the Statement of Additional Information, as being fundamental, is
non-fundamental. If a percentage limitation is satisfied at the time of
investment, a later increase or decrease in such percentage resulting from a
change in the value of the Fund's portfolio securities will not constitute a
violation of such limitation.

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.

For the fiscal year ended March 31, 1997, the Fund was considered a "personal
holding company" under the Code since 50% of the value of the Fund's share were
owned directly or indirectly by five or fewer individuals at certain times
during the last half of the year. As a result, the Fund was unable to meet the
requirements for taxation as a regulated investment company and will be unable
to meet such requirements as long as it is classified as a personal holding
company. As a personal holding company, the Fund is subject to federal income
taxes on undistributed personal holding company income at the maximum individual
income tax rate. For the fiscal year ended March 31, 1997, however, no provision
was made for federal income taxes since substantially all taxable income was
distributed to shareholders. For the current fiscal year, the Fund anticipates
that either it will qualify as a regulated investment company under the Code or,
if still considered a personal holding company, it will distribute substantially
all of its taxable income for the current fiscal year to shareholders in order
to avoid individual income taxes.

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

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

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

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

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

DIVIDENDS AND DISTRIBUTIONS

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

Unless a shareholder elects to receive cash, dividends and capital gains will be
automatically reinvested in additional full and fractional shares of the same
Class of the Fund at the net asset value per share next determined. Reinvested
dividends and capital gains are exempt from any sales load. Shareholders wishing
to receive their dividends or capital gains in cash may make their request in
writing to the Fund at 107 North Washington Street, Post Office Box 4365, Rocky
Mount, North Carolina 27803-0365. That request must be received by the Fund
prior to the record date to be effective as to the next dividend. If cash
payment is requested, checks will be mailed within five business days after the
last day of each quarter or the Fund's fiscal year end, as applicable. Each
shareholder of the Fund will receive a quarterly summary of his or her account,
including information as to reinvested dividends from the Fund. Tax consequences
to shareholders of dividends and distributions are the same if received in cash
or in additional shares of the Fund.

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

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

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

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

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

HOW SHARES MAY BE PURCHASED

Assistance in opening accounts and a purchase application may be obtained from
the Fund by calling 1-800-525-3863, or by writing to the Fund at the address
shown below for purchases by mail. Assistance is also available through any
broker-dealer authorized to sell shares in the Fund. Payment for shares
purchased may also be made through your account at the broker-dealer processing
your application and order to purchase. Your investment will purchase shares at
the Fund's public offering price next determined after your order is received by
the Fund in proper form as indicated herein.

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

Purchases by Mail. Shares may be purchased initially by completing the
application accompanying this Prospectus and mailing it, together with a check
payable to the Fund, to the Capital Value Fund, Investor Shares, 107 North
Washington Street, Post Office Box 4365, Rocky Mount, North Carolina 27803-0365.
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 1-800-525-3863 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:

First Union National Bank of North Carolina
Charlotte, North Carolina
ABA # 053000219
For the Capital Value Fund
Acct #2000000862110
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. Investors may be charged a fee if they effect transactions
in Fund shares through a broker or agent.

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

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

The Fund is required by federal law to withhold and remit to the IRS 31% of the
dividends, capital gains distributions and, in certain cases, proceeds of
redemptions paid to any shareholder who fails to furnish the Fund with a correct
taxpayer identification number, who under-reports dividend or interest income or
who fails to provide certification of tax identification number. Instructions to
exchange or transfer shares held in established accounts will be refused until
the certification has been provided. In order to avoid this withholding
requirement, you must certify on your application, or on a separate W-9 Form
supplied by the Fund, 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>
<S> <C> <C> <C> <C> <C> <C>

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

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

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.

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 Fund or
the Distributor whenever a purchase is being made pursuant to a letter of
intent.

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

Reinvestments. Investors may reinvest, without a sales charge, proceeds
from a redemption of Investor Shares of the Fund either in Investor Shares of
the Fund or in shares of another series of the Trust affiliated with the Advisor
and sold with a sales charge, within 90 days after the redemption. If the other
class charges a sales charge higher than the sales charge the investor paid in
connection with the shares redeemed, the investor must pay the difference. In
addition, the shares of the class to be acquired must be registered for sale in
the investor's state of residence. The amount that may be so reinvested may not
exceed the amount of the redemption proceeds, and 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, Fund, Administrator, Transfer
Agent, Distributor, and Advisor, and to employees and principals of related
organizations and their families and certain parties related thereto, including
clients and related accounts of the Advisor and other investment advisors and
financial planners. The public offering price of shares of the Fund may also be
reduced to net asset value per share in connection with the acquisition of the
assets of or merger or consolidation with a personal holding company or a public
or private investment company.

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

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

The Plan may not be amended to increase materially the amount to be spent under
the Plan without shareholder approval of the Investor Shares. The continuation
of the Plan must be approved by the Board of Trustees annually. At least
quarterly the Board of Trustees must review a written report of amounts expended
pursuant to the Plan and the purposes for which such expenditures were made. For
the fiscal year ended March 31, 1997, the Fund incurred $39,206 pursuant to the
Plan, all of which the Distributor received. In addition, the Distributor
retained sales charges in the amount of $597 for the fiscal year ended March 31,
1997.

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

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

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

Automatic Investment Plan. The automatic investment plan enables shareholders to
make regular monthly or quarterly investments in shares through automatic
charges to their checking account. With shareholder authorization and bank
approval, the Fund 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 Fund.

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

HOW SHARES MAY BE REDEEMED

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

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

If you are uncertain of the requirements for redemption, please contact the
Fund, at 1-800-525-3863, or write to the address shown below.

Regular Mail Redemptions. Your request should be addressed to the Capital Value
Fund, Investor Shares, 107 North Washington Street, Post Office Box 4365, Rocky
Mount, North Carolina 27803-0365. 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.

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

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

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

1) Shareholder name and account number;

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

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

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

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

The Fund in its discretion may choose to pass through to redeeming shareholders
any charges by the Custodian for wire redemptions. The Custodian currently
charges $7.00 per transaction for wiring redemption proceeds. If this cost is
passed through to redeeming shareholders by the Fund, the charge will be
deducted automatically from the shareholder's account by redemption of shares in
the account. The shareholder's bank or brokerage firm may also impose a charge
for processing the wire. 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 1-800-525-3863. 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.

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

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

MANAGEMENT OF THE FUND

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

The Advisor. Subject to the authority of the Board of Trustees, Capital
Investment Counsel, Inc. (the "Advisor") provides the Fund with a continuous
program of supervision of the Fund's assets, including the composition of its
portfolio, and furnishes advice and recommendations with respect to investments,
investment policies and the purchase and sale of securities, pursuant to an
Investment Advisory Agreement (the "Advisory Agreement") with the Trust.

The Advisor is registered under the Investment Advisors Act of 1940, as amended.
Registration of the Advisor does not involve any supervision of management or
investment practices or policies by the Securities and Exchange Commission. The
Advisor, established as a North Carolina corporation in 1984, is controlled by
Richard K. Bryant and E.O. Edgerton, Jr. They also control the Distributor. The
Advisor currently serves as investment advisor to over $130 million in assets.
The Advisor has been rendering investment counsel, utilizing investment
strategies substantially similar to that of the Fund, to individuals, banks and
thrift institutions, pension and profit sharing plans, trusts, estates,
charitable organizations, corporations, and other business and individual
accounts since its formation. The Advisor's address is 17 Glenwood Avenue, Post
Office Box 32249, Raleigh, North Carolina 27622.

Under the Advisory Agreement with the Fund, the Advisor receives a monthly
management fee equal to an annual rate of 0.60% of the first $250 million of the
average daily net assets of the Fund and 0.50% on assets over $250 million. For
the fiscal year ended March 31, 1997, the Advisor received $47,054 as investment
advisory fees for the year (0.60% of the average daily net assets of the Fund).

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

The Advisor supervises and implements the investment activities of the Fund,
including the making of specific decisions as to the purchase and sale of
portfolio investments. Among the responsibilities of the Advisor under the
Advisory Agreement is the selection of brokers and dealers through whom
transactions in the Fund's portfolio investments will be effected. The Advisor
attempts to obtain the best execution for all such transactions. If it is
believed that more than one broker is able to provide the best execution, the
Advisor will consider the receipt of quotations and other market services and of
research, statistical and other data and the sale of shares of the Fund in
selecting a broker. The Advisor may also utilize a brokerage firm affiliated
with the Trust or the Advisor (including the Distributor, an affiliate of the
Advisor) if it believes it can obtain the best execution of transactions from
such broker. Research services obtained through Fund brokerage transactions may
be used by the Advisor for its other clients and, conversely, the Fund may
benefit from research services obtained through the brokerage transactions of
the Advisor's other clients. For further information, see "Investment Objective
and Policies - Investment Transactions" in the Statement of Additional
Information.

During the fiscal year ended March 31, 1997, the total brokerage commissions
paid by the Fund were $5,560, all of which were paid during such period to the
Distributor. Transactions in which the Fund used the Distributor as broker
involved 100% of the aggregate dollar amount of transactions involving the
payment of commissions and 100% of the aggregate broker commissions paid by the
Fund for the fiscal year ended March 31, 1997.

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

Subject to the authority of the Board of Trustees, the services the
Administrator provides to the Fund include coordinating and monitoring any third
parties furnishing services to the Fund; providing the necessary office space,
equipment and personnel to perform administrative and clerical functions for the
Fund; and preparing, filing and distributing proxy materials, periodic reports
to shareholders, registration statements and other documents. The Administrator
also performs certain accounting and pricing services for the Fund as pricing
agent, including the daily calculation of the Fund's net asset value for each
Class of Shares.

The Administrator was formed as a North Carolina corporation in 1988. Together
with its affiliates and predecessors, the Administrator has been operating as a
financial services firm since 1985. Frank P. Meadows III is the firm's Managing
Director and controlling shareholder.

The Transfer Agent. NC Shareholder Services, LLC (the "Transfer Agent") serves
as the Fund's transfer, dividend paying, and shareholder servicing agent. The
Transfer Agent, subject to the authority of the Board of Trustees, provides
transfer agency services pursuant to an agreement with the Administrator, which
has been approved by the Trust. The Transfer Agent maintains the records of each
shareholder's account, answers shareholder inquiries concerning accounts,
processes purchases and redemptions of Fund shares, acts as dividend and
distribution disbursing agent, and performs other shareholder servicing
functions. The Transfer Agent is compensated for its services by the
Administrator and not directly by the Fund.

The Transfer Agent, whose address is 107 North Washington Street, Post Office
Box 4365, Rocky Mount, North Carolina 27803-0365, was established as a North
Carolina limited liability company in 1997. John D. Marriott, Jr., is the firm's
controlling member.

The Custodian. First Union National Bank of North Carolina, Two First Union
Center, Charlotte, North Carolina 28288-1151, 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.

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

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 sales 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.

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

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

On July 22, 1997, Bryant Supply Company, Inc. (605 East Franklin Boulevard,
Gastonia, North Carolina) and its employee benefit plans owned 51.06% of the
outstanding shares of the Fund and are therefore deemed to control the Fund.

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

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 Fund will
send to each shareholder having an account directly with the Fund a quarterly
statement showing transactions in the account, the total number of shares owned
and any dividends or distributions paid. Inquiries regarding the Fund may be
directed in writing to 107 North Washington Street, Post Office Box 4365, Rocky
Mount, North Carolina 27803-0365 or by calling 1-800-525-3863.

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

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

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

<PAGE>

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

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

CAPITAL VALUE FUND
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
1-800-525-3863

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

ADMINISTRATOR & FUND ACCOUNTANT
The Nottingham Company
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069

DIVIDEND DISBURSING & TRANSFER AGENT
NC Shareholder Services, LLC
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365

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

CUSTODIAN
First Union National Bank of North Carolina
Two First Union Center
Charlotte, North Carolina 28288-1151

INDEPENDENT AUDITORS
Deloitte & Touche LLP
2500 One PPG Place
Pittsburgh, Pennsylvania 15222-5401

CAPITAL VALUE FUND
INVESTOR CLASS

PROSPECTUS

July 31, 1997

<PAGE>

PROSPECTUS

CAPITAL VALUE FUND
INSTITUTIONAL CLASS

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

INVESTMENT ADVISOR

Capital Investment Counsel, Inc.
Raleigh, North Carolina

The date of this Prospectus and the Statement of Additional Information is July
31, 1997.

<PAGE>

TABLE OF CONTENTS

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

FEE TABLE..................................................... 3

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

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

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

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

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

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

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

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

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

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

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

<PAGE>

PROSPECTUS SUMMARY

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

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

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

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

FEE TABLE

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

Shareholder Transaction Expenses for Institutional Shares
Maximum sales load imposed on purchases
(as a percentage of offering price)..................None
Maximum sales load imposed on reinvested dividends......None
Maximum deferred sales load.............................None
Redemption fees*........................................None
Exchange fee............................................None

Annual Fund Operating Expenses for Institutional Shares1
(as a percentage of average net assets)
Investment advisory fees................................0.60%
12b-1 fees...............................................None
Other expenses..........................................1.28%
Total operating expenses.............................1.88%1
=====

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

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
$19 $59 $102 $220

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

1 The "Total operating expenses" shown above are based upon actual operating
expenses incurred by the Investor Shares of the Fund for the fiscal year
ended March 31, 1997, which were 2.38% of average daily net assets of the
Investor Shares, but restated to reflect the maximum expenses anticipated to
be incurred by the Institutional Shares of the Fund for the current fiscal
year (without the payment of any distribution or service fees). Since the
Institutional Shares were not offered prior to the date of this Prospectus,
the actual operating expenses incurred by the Investor Shares of the Fund
for the fiscal year ended March 31, 1997, have been used for illustration
purposes, subject to restatement as provided above. The Advisor has
voluntarily agreed to a reduction in the fees payable to it and to reimburse
expenses of the Fund, if necessary, in an amount that limits "Total
operating expenses" (exclusive of interest, taxes, brokerage fees and
commissions, sales charges, and extraordinary expenses) to not more than
2.00% of the Institutional Shares' average daily net assets. There can be no
assurance that the Advisor's voluntary fee waivers and expense
reimbursements in the past will continue in the future.

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

FINANCIAL HIGHLIGHTS

The shares of the Fund are divided into multiple Classes representing interests
in the Fund. This Prospectus relates to Institutional Shares of the Fund. See
"Other Information - Description of Shares." Since the public offering of
Institutional Shares of the Fund had not commenced during the fiscal periods
covered by the Fund's financial statements and related Financial Highlights
pertaining to Investor Shares of the Fund, no financial statements or related
Financial Highlights are available pertaining to the Institutional 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

RISK FACTORS

Portfolio Turnover. The Fund sells portfolio securities without regard to the
length of time they have been held in order to take advantage of new investment
opportunities. Nevertheless, the Fund's portfolio turnover generally will not
exceed 75% in any one year. Portfolio turnover generally involves some expense
to the Fund, including brokerage commissions or dealer mark-ups and other
transaction costs on the sale of securities and the reinvestment in other
securities. Portfolio turnover may also have capital gains tax consequences. The
Fund's turnover ratio for the fiscal years ended March 31, 1996, and 1997, was
12.33% and 7.31%, respectively.

INVESTMENT LIMITATIONS

FEDERAL INCOME TAXES

DIVIDENDS AND DISTRIBUTIONS

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

HOW SHARES ARE VALUED

HOW SHARES MAY BE PURCHASED

Assistance in opening accounts and a purchase application may be obtained from
the Fund by calling 1-800-525-3863, or by writing to the Fund at the address
shown below for purchases by mail. Assistance is also available through any
broker-dealer authorized to sell shares in the Fund. Payment for shares
purchased may also be made through your account at the broker-dealer processing
your application and order to purchase. Your investment will purchase shares at
the Fund's net asset value next determined after your order is received by the
Fund in proper form as indicated herein.

Purchases by Mail. Shares may be purchased initially by completing the
application accompanying this Prospectus and mailing it, together with a check
payable to the Fund, to the Capital Value Fund, Institutional Shares, 107 North
Washington Street, Post Office Box 4365, Rocky Mount, North Carolina 27803-0365.
Subsequent investments in an existing account in the Fund may be made at any
time by sending a check payable to the Fund, to the address stated above. Please
enclose the stub of your account statement and include the amount of the
investment, the name of the account for which the investment is to be made and
the account number. Please remember to add a reference to "Institutional Shares"
to your check to ensure proper credit to your account.

First Union National Bank of North Carolina
Charlotte, North Carolina
ABA # 053000219
For the Capital Value Fund
Institutional Shares
Acct #2000000862110
For further credit to (shareholder's name and SS# or EIN#)

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

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

The Distributor, at its expense, may provide 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.

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

HOW SHARES MAY BE REDEEMED

If you are uncertain of the requirements for redemption, please contact the
Fund, at 1-800-525-3863, or write to the address shown below.

Regular Mail Redemptions. Your request should be addressed to the Capital Value
Fund, Institutional Shares, 107 North Washington Street, Post Office Box 4365,
Rocky Mount, North Carolina 27803-0365. Your request for redemption must
include:

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

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

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

1) Shareholder name and account number;

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

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

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

MANAGEMENT OF THE FUND

OTHER INFORMATION

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

<PAGE>

CAPITAL VALUE FUND
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
1-800-525-3863

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

ADMINISTRATOR & FUND ACCOUNTANT
The Nottingham Company
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069

DIVIDEND DISBURSING & TRANSFER AGENT
NC Shareholder Services, LLC
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365

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

CUSTODIAN
First Union National Bank of North Carolina
Two First Union Center
Charlotte, North Carolina 28288-1151

INDEPENDENT AUDITORS
Deloitte & Touche LLP
2500 One PPG Place
Pittsburgh, Pennsylvania 15222-5401

CAPITAL VALUE FUND
INSTITUTIONAL CLASS

PROSPECTUS

July 31, 1997

<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

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

The date of this Prospectus and the Statement of Additional Information is July
31, 1997.

<PAGE>

TABLE OF CONTENTS

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

FEE TABLE................................................ 3

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

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

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

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

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

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

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

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

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

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

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

<PAGE>

PROSPECTUS SUMMARY

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

Offering Price. The 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 Objective and Policies. The investment objective of the Fund is to
preserve capital and maximize total returns through active 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 Considerations. While the Fund will invest primarily in "high
quality" 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 manages over $1.3 billion in assets. For its advisory
services, the Advisor receives a monthly fee based on the Fund's daily net
assets at the annual rate of 0.45%. See "Management of the Fund - The Advisor."

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

Distributor and Distribution Fee. Capital Investment Group, Inc. (the
"Distributor") 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."

FEE TABLE

Shareholder Transaction Expenses for Investor Shares

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

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

Investment advisory fees...................0.15%2
12b-1 fees.................................0.25%3
Other expenses.............................0.75%2

Total operating expenses................1.15%2

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
$46 $70 $96 $170

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, 1997, which, after fee waivers, were 0.90% of average
daily net assets of the Institutional Shares, but restated to reflect the
expenses anticipated to be incurred by the Investor Shares of the Fund for
the current fiscal year (assuming payment of the distribution and service
fees described under footnote 3 below). Absent such waivers, the
percentages would have been 0.45% for "Investment advisory fees" and 1.20%
for "Total operating expenses" for the Institutional Shares for the fiscal
year ended March 31, 1997. 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,
1997, have been used for illustration purposes, subject to restatement as
provided above. The Advisor has voluntarily agreed to a reduction in the
fees payable to it and to reimburse expenses of the Fund, if necessary, in
an amount that limits "Total operating expenses" (exclusive of interest,
taxes, brokerage fees and commissions, sales charges, and extraordinary
expenses) to not more than 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 in the past 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.

FINANCIAL HIGHLIGHTS

The shares of the Fund are divided into multiple classes representing interests
in the Fund. This Prospectus relates to Investor Shares of the Fund. See "Other
Information -Description of Shares." Since the public offering of Investor
Shares of the Fund had not commenced during the fiscal periods covered by the
Fund's financial statements and related Financial Highlights pertaining to
Institutional Shares of the Fund, no financial statements or related Financial
Highlights are available pertaining to the Investor Shares of the Fund. Further
information about the performance of the Fund is contained in the Annual Report
of the Fund, a copy of which may be obtained at no charge by calling the Fund.

INVESTMENT OBJECTIVE AND POLICIES

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

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.

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

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

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

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

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

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

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

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

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

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

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

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

RISK FACTORS

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

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

Portfolio Turnover. The Fund sells portfolio securities without regard to the
length of time they have been held in order to take advantage of new investment
opportunities. Nevertheless, the Fund's portfolio turnover generally will not
exceed 75% in any one year. Portfolio turnover generally involves some expense
to the Fund, including brokerage commissions or dealer mark-ups and other
transaction costs on the sale of securities and the reinvestment in other
securities. Portfolio turnover may also have capital gains tax consequences. For
the fiscal years ended March 31, 1996, and 1997, the Fund's turnover ratio was
16.57% and 32.94%, respectively.

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

INVESTMENT LIMITATIONS

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

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

FEDERAL INCOME TAXES

DIVIDENDS AND DISTRIBUTIONS

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

Unless a shareholder elects to receive cash, dividends and capital gains will be
automatically reinvested in additional full and fractional shares of the same
Class of the Fund at the net asset value per share next determined. Shareholders
wishing to receive their dividends or capital gains in cash may make their
request in writing to the Fund at 107 North Washington Street, Post Office Box
4365, Rocky Mount, North Carolina 27803-0365. That request must be received by
the Fund prior to the record date to be effective as to the next dividend. If
cash payment is requested, checks will be mailed within five business days after
the last day of each month or the Fund's fiscal year end, as applicable. Each
shareholder of the Fund will receive a monthly summary of his or her account,
including information as to reinvested dividends from the Fund. Tax consequences
to shareholders of dividends and distributions are the same if received in cash
or in additional shares of the Fund.

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

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 and other assets, less all of its liabilities, divided by the
number of its outstanding shares. Net asset value is determined separately for
each Class of Shares of the Fund and reflects any liabilities allocated to a
particular Class as well as the general liabilities of the Fund.

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

HOW SHARES MAY BE PURCHASED

The minimum initial investment is $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, 107
North Washington Street, Post Office Box 4365, Rocky Mount, North Carolina
27803-0365. 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.

First Union National Bank of North Carolina
Charlotte, North Carolina
ABA # 053000219
For the Investek Fixed Income Trust
Investor Shares
Acct #2000000862107
For further credit to (shareholder's name and SS# or EIN#)

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

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

Reduced Sales Charges

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.

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 or
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.

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 Transfer
Agent, 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.

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

Redemptions from retirement plans may be subject to tax withholding. If you are
uncertain of the requirements for redemption, please contact the Fund, at
1-800-525-3863, or write to the address shown below.

Regular Mail Redemptions. Your request should be addressed to the Investek Fixed
Income Trust, Investor Shares, 107 North Washington Street, Post Office Box
4365, Rocky Mount, North Carolina 27803-0365. Your request for redemption must
include:

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

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

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

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

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

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

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

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

The Fund in its discretion may choose to pass through to redeeming shareholders
any charges by the Custodian for wire redemptions. The Custodian currently
charges $7.00 per transaction for wiring redemption proceeds. If this cost is
passed through to redeeming shareholders by the Fund, the charge will be
deducted automatically from the shareholder's account by redemption of shares in
the account. The shareholder's bank or brokerage firm may also impose a charge
for processing the wire. If wire transfer of funds is impossible or impractical,
the redemption proceeds will be sent by mail to the designated account.

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

MANAGEMENT OF THE FUND

The Advisor. Subject to the authority of the Board of Trustees, Investek Capital
Management, Inc. (the "Advisor") provides the Fund with a continuous program of
supervision of the Fund's assets, including the composition of its portfolio,
and furnishes advice and recommendations with respect to investments, investment
policies and the purchase and sale of securities, pursuant to an Investment
Advisory Agreement (the "Advisory Agreement") with the Trust.

The Advisor is registered under the Investment Advisors Act of 1940, as amended.
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
$1.3 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, 1997.
Of the $52,526 the Advisor was entitled to receive, the Advisor voluntarily
waived $35,023 of its investment advisory fees. The Advisor received $17,503 of
such advisory fee for the year (0.15% of average net assets).

The Advisor supervises and implements the investment activities of the Fund,
including the making of specific decisions as to the purchase and sale of
portfolio investments. Among the responsibilities of the Advisor under the
Advisory Agreement is the selection of brokers and dealers through whom
transactions in the Fund's portfolio investments will be effected. The Advisor
attempts to obtain the best execution for all such transactions. If it is
believed that more than one broker is able to provide the best execution, the
Advisor will consider the receipt of quotations and other market services and of
research, statistical and other data and the sale of shares of the Fund in
selecting a broker. The Advisor may also utilize a brokerage firm affiliated
with the Trust or the Advisor if it believes it can obtain the best execution of
transactions from such broker. Research services obtained through Fund brokerage
transactions may be used by the Advisor for its other clients and, conversely,
the Fund may benefit from research services obtained through the brokerage
transactions of the Advisor's other clients. For further information, see
"Investment Objective and Policies - Investment Transactions" in the Statement
of Additional Information.

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

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

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; and preparing, filing and distributing proxy materials, periodic reports
to shareholders, registration statements and other documents. 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.

The Administrator was incorporated as a North Carolina corporation in 1988.
Together with its affiliates and predecessors, the Administrator has been
operating as a financial services firm since 1985. Frank P. Meadows, III is the
firm's Managing Director and controlling shareholder.

The Custodian. 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.

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
SALES. 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.

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 Fund 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 107 North Washington Street, Post Office Box
4365, Rocky Mount, North Carolina 27803-0365 or by calling 1-800-525-3863.

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

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

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

<PAGE>

INVESTEK FIXED INCOME TRUST

INVESTOR CLASS

PROSPECTUS

July 31, 1997

INVESTEK FIXED INCOME TRUST
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
1-800-525-3863

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

ADMINISTRATOR & FUND ACCOUNTANT
The Nottingham Company
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069

DIVIDEND DISBURSING & TRANSFER AGENT
NC Shareholder Services, LLC
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365

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
Deloitte & Touche LLP
2500 One PPG Place
Pittsburgh, Pennsylvania 15222-5401

<PAGE>

PROSPECTUS

July 31, 1997

<PAGE>

PROSPECTUS Cusip Number 66976M508

INVESTEK FIXED INCOME TRUST
INSTITUTIONAL CLASS

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

INVESTMENT ADVISOR

logo placed here

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

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

The date of this Prospectus and the Statement of Additional Information is July
31, 1997.

<PAGE>

TABLE OF CONTENTS

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

FEE TABLE............................................ 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................................ 12

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

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

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

OTHER INFORMATION.................................... 19

<PAGE>

PROSPECTUS SUMMARY

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

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

FEE TABLE

Shareholder Transaction Expenses for Institutional Shares

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

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

Investment advisory fees............................0.15%1
12b-1 fees............................................None
Other expenses......................................0.75%1

Total operating expenses.........................0.90%1

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

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
$9 $29 $50 $111

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

1 The "Total operating expenses" shown above are based upon actual operating
expenses incurred by the Institutional Shares of the Fund for the fiscal
year ended March 31, 1997, which, after fee waivers, were 0.90% of average
daily net assets of the Institutional Shares. Absent such waivers, the
percentages would have been 0.45% for "Investment advisory fees" and 1.20%
for "Total operating expenses" for the Institutional Shares for the fiscal
year ended March 31, 1997. The Advisor has voluntarily agreed to a reduction
in the fees payable to it and to reimburse expenses of the Fund, if
necessary, in an amount that limits "Total operating expenses" (exclusive of
interest, taxes, brokerage fees and commissions, sales charges, and
extraordinary expenses) to not more than 0.90% of the Institutional Shares'
average daily net assets. There can be no assurance that the Advisor's
voluntary fee waivers and expense reimbursements in the past will continue
in the future.

FINANCIAL HIGHLIGHTS

The shares of the Fund are divided into multiple Classes representing interests
in the Fund. This Prospectus relates to Institutional Shares of the Fund. See
"Other Information -Description of Shares." The financial data included in the
table below for the fiscal year ended March 31, 1997, has been derived from
financial statements audited by Deloitte & Touche LLP, independent auditors,
whose report covering such period is included in the Statement of Additional
Information. The financial data for the prior fiscal years was audited by other
independent auditors. The information in the table below should be read in
conjunction with the Fund's latest audited financial statements and notes
thereto, which are also included in the Statement of Additional Information, a
copy of which may be obtained at no charge by calling the Fund. Further
information about the performance of the Fund is contained in the Annual Report
of the Fund, a copy of which may be obtained at no charge by calling the Fund.

Institutional Class

(For a Share Outstanding Throughout each Period Represented)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>

Years ended March 31,

1997 1996 1995 1994 1993 1992 (a)
---- ---- ---- ---- ---- --------

Net Asset Value, Beginning of Period $10.11 $9.74 $9.93 $10.48 $9.92 $10.00

Income (loss) from investment operations
Net investment income 0.65 0.66 0.63 0.61 0.65 0.20
Net realized and unrealized
gain (loss) on investments (0.13) 0.37 (0.19) (0.43) 0.56 (0.08)
------ ---- ------ ----- ---- ------
Total from investment operations 0.52 1.03 0.44 0.18 1.21 0.12
---- ---- ---- ---- ---- ----

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

Net Asset Value, End of Period $9.98 $10.11 $9.74 $9.93 $10.48 $9.92
===== ====== ===== ===== ====== =====

Total return 5.38% 10.70% 4.73% 1.43% 12.49% 1.22%
===== ====== ===== ===== ====== =====

Ratios/supplemental data
Net assets, end of period (000's) $11,227 $12,261 $14,983 $17,642 $5,268 $2,037
======= ======= ======= ======= ====== ======

Ratio of expenses to average net assets
Before expense reimbursements
and waived fees 1.20% 1.08% 1.08% 1.41% 1.69% 1.71% (b)
After expense reimbursements
and waived fees 0.90% 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 6.07% 6.20% 6.15% 5.45% 5.50% 5.41% (b)
After expense reimbursements
and waived fees 6.37% 6.41% 6.45% 5.82% 6.24% 6.17% (b)

Portfolio turnover rate 32.94% 16.57% 19.64% 34.42% 59.78% 0.00%
</TABLE>

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

(b) Annualized.

INVESTMENT OBJECTIVE AND POLICIES

RISK FACTORS

Portfolio Turnover. The Fund sells portfolio securities without regard to the
length of time they have been held in order to take advantage of new investment
opportunities. Nevertheless, the Fund's portfolio turnover generally will not
exceed 75% in any one year. Portfolio turnover generally involves some expense
to the Fund, including brokerage commissions or dealer mark-ups and other
transaction costs on the sale of securities and the reinvestment in other
securities. Portfolio turnover may also have capital gains tax consequences. For
the fiscal years ended March 31, 1996, and 1997, the Fund's turnover ratio was
16.57% and 32.94%, respectively.

INVESTMENT LIMITATIONS

FEDERAL INCOME TAXES

DIVIDENDS AND DISTRIBUTIONS

Unless a shareholder elects to receive cash, dividends and capital gains will be
automatically reinvested in additional full and fractional shares of the same
Class of the Fund at the net asset value per share next determined. Shareholders
wishing to receive their dividends or capital gains in cash may make their
request in writing to the Fund at 107 North Washington Street, Post Office Box
4365, Rocky Mount, North Carolina 27803-0365. That request must be received by
the Fund prior to the record date to be effective as to the next dividend. If
cash payment is requested, checks will be mailed within five business days after
the last day of each month or the Fund's fiscal year end, as applicable. Each
shareholder of the Fund will receive a monthly summary of his or her account,
including information as to reinvested dividends from the Fund. Tax consequences
to shareholders of dividends and distributions are the same if received in cash
or in additional shares of the Fund.

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

HOW SHARES ARE VALUED

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 1-800-525-3863, or by writing to the Fund at the address
shown below for purchases by mail. Assistance is also available through any
broker-dealer authorized to sell shares in the Fund. Payment for shares
purchased may also be made through your account at the broker-dealer processing
your application and order to purchase. Your investment will purchase shares at
the Fund's net asset value next determined after your order is received by the
Fund in proper form as indicated herein.

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

Purchases by Mail. Shares may be purchased initially by completing the
application accompanying this Prospectus and mailing it, together with a check
payable to the Fund, to the Investek Fixed Income Trust, Institutional Shares,
107 North Washington Street, Post Office Box 4365, Rocky Mount, North Carolina
27803-0365. Subsequent investments in an existing account in the Fund may be
made at any time by sending a check payable to the Fund, to the address stated
above. Please enclose the stub of your account statement and include the amount
of the investment, the name of the account for which the investment is to be
made and the account number. Please remember to add a reference to
"Institutional Shares" to your check to ensure proper credit to your account.

First Union National Bank of North Carolina
Charlotte, North Carolina
ABA # 053000219
For the Investek Fixed Income Trust
Institutional Shares
Acct #2000000862107
For further credit to (shareholder's name and SS# or EIN#)

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

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

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

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

HOW SHARES MAY BE REDEEMED

Regular Mail Redemptions. Your request should be addressed to the Investek Fixed
Income Trust, Institutional Shares, 107 North Washington Street, Post Office Box
4365, Rocky Mount, North Carolina 27803-0365. Your request for redemption must
include:

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

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

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

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

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

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

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

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

The Fund in its discretion may choose to pass through to redeeming shareholders
any charges by the Custodian for wire redemptions. The Custodian currently
charges $7.00 per transaction for wiring redemption proceeds. If this cost is
passed through to redeeming shareholders by the Fund, the charge will be
deducted automatically from the shareholder's account by redemption of shares in
the account. The shareholder's bank or brokerage firm may also impose a charge
for processing the wire. If wire transfer of funds is impossible or impractical,
the redemption proceeds will be sent by mail to the designated account.

MANAGEMENT OF THE FUND

The Advisor is registered under the Investment Advisors Act of 1940, as amended.
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
$1.3 billion in assets. The Advisor has been rendering investment counsel,
utilizing investment strategies substantially similar to that of the Fund, to
individuals, banks and thrift institutions, pension and profit sharing plans,
trusts, estates, charitable organizations and corporations since its formation.
The Advisor's address is 317 East Capitol Street, Post Office Box 2840, Jackson,
Mississippi 39207.

The Advisor supervises and implements the investment activities of the Fund,
including the making of specific decisions as to the purchase and sale of
portfolio investments. Among the responsibilities of the Advisor under the
Advisory Agreement is the selection of brokers and dealers through whom
transactions in the Fund's portfolio investments will be effected. The Advisor
attempts to obtain the best execution for all such transactions. If it is
believed that more than one broker is able to provide the best execution, the
Advisor will consider the receipt of quotations and other market services and of
research, statistical and other data and the sale of shares of the Fund in
selecting a broker. The Advisor may also utilize a brokerage firm affiliated
with the Trust or the Advisor if it believes it can obtain the best execution of
transactions from such broker. Research services obtained through Fund brokerage
transactions may be used by the Advisor for its other clients and, conversely,
the Fund may benefit from research services obtained through the brokerage
transactions of the Advisor's other clients. For further information, see
"Investment Objective and Policies - Investment Transactions" in the Statement
of Additional Information.

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

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; and preparing, filing and distributing proxy materials, periodic reports
to shareholders, registration statements and other documents. The Administrator
also performs certain accounting and pricing services for the Fund as pricing
agent including the daily calculation of the Fund's net asset value.

OTHER INFORMATION

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

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

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 at 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.

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 Fund 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 107 North Washington Street, Post Office Box
4365, Rocky Mount, North Carolina 27803-0365 or by calling 1-800-525-3863.

<PAGE>

INVESTEK FIXED INCOME TRUST

INSTITUTIONAL CLASS

PROSPECTUS

July 31, 1997

INVESTEK FIXED INCOME TRUST
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
1-800-525-3863

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

ADMINISTRATOR & FUND ACCOUNTANT
The Nottingham Company
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069

DIVIDEND DISBURSING & TRANSFER AGENT
NC Shareholder Services, LLC
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365

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
Deloitte & Touche LLP
2500 One PPG Place
Pittsburgh, Pennsylvania 15222-5401

<PAGE>

PROSPECTUS

July 31, 1997

<PAGE>

PROSPECTUS Cusip Number 66976M805

ZSA ASSET ALLOCATION FUND
A No Load Fund

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

INVESTMENT ADVISOR

Zaske, Sarafa & Associates, Inc.
355 South Woodward Avenue, Suite 200
Birmingham, Michigan 48009
(810) 647-5990

The Fund is a no load diversified series of The Nottingham Investment Trust II
(the "Trust"), a registered open-end management investment company. This
Prospectus sets forth concisely the information about the Fund that a
prospective investor should know before investing. Investors should read this
Prospectus and retain it for future reference. Additional information about the
Fund has been filed with the Securities and Exchange Commission (the "SEC") and
is available upon request and without charge. You may request the Statement of
Additional Information, which is incorporated in this Prospectus by reference,
by writing the Fund at Post Office Box 4365, Rocky Mount, North Carolina
27803-0365, or by calling 1-800-525-3863. The SEC also maintains an Internet Web
site (http://www.sec.gov) that contains the Statement of Additional Information,
material incorporated by reference, and other information regarding the Fund.

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

The date of this Prospectus and the Statement of Additional Information is July
31, 1997.

<PAGE>

TABLE OF CONTENTS

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

FEE TABLE..................................................................... 3

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

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

RISK FACTORS................................................................. 11

INVESTMENT LIMITATIONS....................................................... 12

FEDERAL INCOME TAXES......................................................... 13

DIVIDENDS AND DISTRIBUTIONS.................................................. 14

HOW SHARES ARE VALUED........................................................ 14

HOW SHARES MAY BE PURCHASED.................................................. 15

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

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

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

<PAGE>

PROSPECTUS SUMMARY

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

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

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

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

Manager. Subject to the general supervision of the Trust's Board of Trustees and
in accordance with the Fund's investment policies, Zaske, Sarafa & Associates,
Inc. of Birmingham, Michigan (the "Advisor"), manages the Fund's investments.
The Advisor currently manages over $350 million in assets. For its advisory
services, the Advisor receives a monthly fee based on the Fund's daily net
assets at the annual rate of 1.00%. See "Management of the Fund - The Advisor."

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

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

<PAGE>

FEE TABLE

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

Shareholder Transaction Expenses

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

Annual Fund Operating Expenses - After Fee Waivers and Expense Reimbursements1
(as a percentage of average net assets)

Investment advisory fees..............................0.59%1
12b-1 fees............................................0.25%2
Other expenses........................................1.11%1
-----
Total operating expenses...........................1.95%1
=====

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

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
$20 $61 $105 $227

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

1 The "Total operating expenses" shown above are based upon actual operating
expenses incurred by the Fund for the fiscal year ended March 31, 1997,
which, after fee waivers and expense reimbursements, were 1.95% of average
daily net assets of the Fund. Absent such waivers and reimbursements, the
percentages would have been 1.00% for "Investment advisory fees" and 2.37%
for "Total operating expenses" for the fiscal year ended March 31, 1997. The
Advisor has voluntarily agreed to a reduction in the fees payable to it and
to reimburse expenses of the Fund, if necessary, in an amount that limits
"Total operating expenses" (exclusive of interest, taxes, brokerage fees and
commissions, and extraordinary expenses) to not more than 1.95% of the
Fund's average daily net assets. There can be no assurance that the
Advisor's voluntary fee waivers and expense reimbursements in the past will
continue in the future.

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

FINANCIAL HIGHLIGHTS

The financial data included in the table below for the fiscal year ended March
31, 1997, has been audited by Deloitte & Touche, LLP, independent auditors,
whose report covering such period is included in the Statement of Additional
Information. The financial data for the prior fiscal years was audited by other
independent auditors. The information in the table below should be read in
conjunction with the Fund's latest audited financial statements and notes
thereto, which are also included in the Statement of Additional Information, a
copy of which may be obtained at no charge by calling the Fund. Further
information about the performance of the Fund is contained in the Annual Report
of the Fund, a copy of which may be obtained at no charge by calling the Fund.

(For a Share Outstanding Throughout each Period Represented)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>

Years Ended March 31,

1997 1996 1995 1994 1993 (a)
-------- -------- ------- -------- --------

Net Asset Value, Beginning of Period $12.37 $10.76 $10.92 $10.77 $10.00
Income (loss) from investment operation
Net investment income (loss) 0.29 0.30 0.15 (0.01) 0.04
Net realized and unrealized gain (loss) on
investments 1.08 1.61 (0.17) 0.31 0.77
---- ----- ------ ----- ----
Total from investment operations 1.37 1.91 (0.02) 0.30 0.81
---- ---- ------ ----- ----
Less distributions from
Net investment income (0.29) (0.30) (0.14) (0.01) (0.04)
Net realized gain from investment transactions 0.00 0.00 0.00 (0.14) 0.00
---- ----- ----- ------ ----
Total distributions (0.29) (0.30) (0.14) (0.15) (0.04)
------ ------ ------ ------ ------
Net Asset Value, End of Period $13.45 $12.37 $10.76 $10.92 $10.77
===== ====== ====== ====== ======

Total return 11.20% 17.80% (0.62)% 2.67% 7.93%

Ratios/supplemental data
Net assets, end of period (000's) $8,172 $ 9,626 $10,565 $13,555 $2,034
===== ======= ======= ======= ======
Ratio of expenses to average net assets
Before expense reimbursements and waived fees 2.37% 2.30% 2.03% 2.75% 4.11%(b)
After expense reimbursements and waived fees 1.95% 1.91% 1.95% 1.92% 1.72%(b)
Ratio of net investment income (loss) to average net assets
Before expense reimbursements and waived fees 1.77% 2.06% 1.18% (0.88)% (1.66)%(b)
After expense reimbursements and waived fees 2.18% 2.45% 1.27% (0.05)% 0.73%(b)

Portfolio turnover rate 9.57% 67.89% 130.53% 53.66% 22.26%
Average commission rate paid (c) $0.0969
</TABLE>

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

(b) Annualized.

(c) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged. This
disclosure was not required for fiscal years of the Fund ended prior to
March 31, 1997.

INVESTMENT OBJECTIVE AND POLICIES

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Payment of principal and interest on some mortgage pass-through securities (but
not the market value of the securities themselves) may be guaranteed by the full
faith and credit of the U.S. Government (in the case of securities guaranteed by
GNMA); or guaranteed by agencies or instrumentalities of the U.S. Government. In
the case of securities guaranteed by FNMA or the Federal Home Loan Mortgage
Corporation ("FHLMC"), these are supported only by the discretionary authority
of the U.S. Government to purchase the agency's obligations. Mortgage
pass-through securities created by non-governmental issuers (such as commercial
banks, savings and loan institutions, private mortgage insurance companies,
mortgage bankers and other secondary market issuers) may be supported by various
forms of insurance or guarantees, including individual loan, title, pool and
hazard insurance and letters of credit, which may be issued by governmental
entities, private issuers or the mortgage poolers. The Fund may also invest in
stripped mortgage-backed securities ("SMBS"), which are derivative multi-class
mortgage securities, usually structured with two classes that receive different
proportions of the interest and principal distributions from an underlying pool
of mortgage assets.

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

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

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

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

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

Variable and Floating Rate Securities. Variable and floating rate securities
provide for a periodic adjustment in the interest rate paid on the obligations.
The terms of such obligations must provide that interest rates are adjusted
periodically based upon some appropriate interest rate adjustment index as
provided in the respective obligations. The adjustment intervals may be regular,
with intervals ranging from daily to annually, or may be event based, such as a
change in the prime rate, indices of U.S. Treasury securities or LIBOR (London
Interbank Ordinary Rate). Variable and floating rate securities that cannot be
disposed of promptly within seven days and in the usual course of business
without taking a reduced price will be treated as illiquid and subject to the
limitation on investments in illiquid securities.

Investment Companies. In order to achieve its investment objective, the Fund may
invest up to 10% of the value of its total assets in securities of other
investment companies whose investment objectives are consistent with the Fund's
investment objective. The Fund will not acquire securities of any one investment
company if, immediately thereafter, the Fund would own more than 3% of such
company's total outstanding voting securities, securities issued by such company
would have an aggregate value in excess of 5% of the Fund's total assets, or
securities issued by such company and securities held by the Fund issued by
other investment companies would have an aggregate value in excess of 10% of the
Fund's total assets. 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.

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

RISK FACTORS

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

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

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

INVESTMENT LIMITATIONS

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

FEDERAL INCOME TAXES

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.

DIVIDENDS AND DISTRIBUTIONS

Unless a shareholder elects to receive cash, dividends and capital gains will be
automatically reinvested in additional full and fractional shares of the Fund at
the net asset value per share next determined. Shareholders wishing to receive
their dividends or capital gains in cash may make their request in writing to
the Fund at 107 North Washington Street, Post Office Box 4365, Rocky Mount,
North Carolina 27803-0365. That request must be received by the Fund prior to
the record date to be effective as to the next dividend. If cash payment is
requested, checks will be mailed within five business days after the last day of
each quarter or the Fund's fiscal year-end, as applicable. Each shareholder of
the Fund will receive a quarterly summary of his or her account, including
information as to reinvested dividends from the Fund. Tax consequences to
shareholders of dividends and distributions are the same if received in cash or
in additional shares of the Fund.

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

HOW SHARES ARE VALUED

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

HOW SHARES MAY BE PURCHASED

Assistance in opening accounts and a purchase application may be obtained from
the Fund by calling 1-800-525-3863 or from the Advisor by calling
1-800-526-6639, or by writing to the Fund at the address shown below for
purchases by mail. Assistance is also available through any broker-dealer
authorized to sell shares in the Fund. Payment for shares purchased may also be
made through your account at the broker-dealer processing your application and
order to purchase. Your investment will purchase shares at the Fund's net asset
value next determined after your order is received by the Fund in proper form as
indicated herein.

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

Purchases by Mail. Shares may be purchased initially by completing the
application accompanying this Prospectus and mailing it, together with a check
payable to the Fund, to the ZSA Asset Allocation Fund, 107 North Washington
Street, Post Office Box 4365, Rocky Mount, North Carolina 27803-0365. 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.

First Union National Bank of North Carolina
Charlotte, North Carolina
ABA # 053000219
For the ZSA Asset Allocation Fund
Acct #2000000861771
For further credit to (shareholder's name and SS# or EIN#)

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

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.

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

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

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

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

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

HOW SHARES MAY BE REDEEMED

If you are uncertain of the requirements for redemption, please contact the
Fund, at 1-800-525-3863, or write to the address shown below.

Regular Mail Redemptions. Your request should be addressed to the ZSA Asset
Allocation Fund, 107 North Washington Street, Post Office Box 4365, Rocky Mount,
North Carolina 27803-0365. Your request for redemption must include:

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

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

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

1) Shareholder name and account number;

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

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

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

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

The Fund in its discretion may choose to pass through to redeeming shareholders
any charges by the Custodian for wire redemptions. The Custodian currently
charges $7.00 per transaction for wiring redemption proceeds. If this cost is
passed through to redeeming shareholders by the Fund, the charge will be
deducted automatically from the shareholder's account by redemption of shares in
the account. The shareholder's bank or brokerage firm may also impose a charge
for processing the wire. If wire transfer of funds is impossible or impractical,
the redemption proceeds will be sent by mail to the designated account.

MANAGEMENT OF THE FUND

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

The Advisor. Subject to the authority of the Board of Trustees, Zaske, Sarafa &
Associates, Inc. (the "Advisor") provides the Fund with a continuous program of
supervision of the Fund's assets, including the composition of its portfolio,
and furnishes advice and recommendations with respect to investments, investment
policies and the purchase and sale of securities, pursuant to an Investment
Advisory Agreement (the "Advisory Agreement") with the Trust.

The Advisor is registered under the Investment Advisors Act of 1940, as amended.
Registration of the Advisor does not involve any supervision of management or
investment practices or policies by the Securities and Exchange Commission. The
Advisor, established as a Michigan corporation in 1988, is controlled by Arthur
E. Zaske and Anmar K. Sarafa. The Advisor currently serves as investment advisor
to over $350 million in assets. The Advisor has been rendering investment
counsel, utilizing investment strategies substantially similar to that of the
Fund, to individuals, banks and thrift institutions, pension and profit sharing
plans, trusts, estates, charitable organizations, corporations, and other
business and individual accounts since its formation. The Advisor's address is
355 South Woodward Avenue, Suite 200, Birmingham, Michigan 48009.

Under the Advisory Agreement with the Fund, the Advisor receives a monthly
management fee equal to an annual rate of 1.00% of the average daily net asset
value of the Fund. The Advisor voluntarily waived a portion of its advisory fee
for the fiscal year ended March 31, 1997. Of the $89,924 the Advisor was
entitled to receive, the Advisor voluntarily waived $36,588 of its investment
advisory fees. The Advisor received $53,336 of such advisory fee for the year
(0.59% of average net assets). The Advisor also reimbursed $954 of Fund expenses
for the fiscal year ended March 31, 1997.

The Advisor supervises and implements the investment activities of the Fund,
including the making of specific decisions as to the purchase and sale of
portfolio investments. Among the responsibilities of the Advisor under the
Advisory Agreement is the selection of brokers and dealers through whom
transactions in the Fund's portfolio investments will be effected. The Advisor
attempts to obtain the best execution for all such transactions. If it is
believed that more than one broker is able to provide the best execution, the
Advisor will consider the receipt of quotations and other market services and of
research, statistical and other data and the sale of shares of the Fund in
selecting a broker. The Advisor may also utilize a brokerage firm affiliated
with the Trust or the Advisor if it believes it can obtain the best execution of
transactions from such broker. Research services obtained through Fund brokerage
transactions may be used by the Advisor for its other clients and, conversely,
the Fund may benefit from research services obtained through the brokerage
transactions of the Advisor's other clients. For further information, see
"Investment Objective and Policies - Investment Transactions" in the Statement
of Additional Information.

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

In addition to managing the Fund, the Advisor and/or its principals have been
rendering investment counsel, utilizing investment strategies substantially
similar to that of the Fund, since 1981.

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

The Administrator was formed as a North Carolina corporation in 1988. With its
affiliates and predecessors, the Administrator has been operating as a financial
services firm since 1985. Frank P. Meadows III is the firm's Managing Director
and controlling shareholder.

OTHER INFORMATION

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 at 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.

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 auditors. In addition, the
Administrator, as transfer agent, will send to each shareholder having an
account directly with the Fund a quarterly statement showing transactions in the
account, the total number of shares owned and any dividends or distributions
paid. Inquiries regarding the Fund may be directed in writing to 107 North
Washington Street, Post Office Box 4365, Rocky Mount, North Carolina 27803-0365
or by calling 1-800-525-3863.

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

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

<PAGE>

ZSA ASSET ALLOCATION FUND
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
1-800-525-3863

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

ADMINISTRATOR & FUND ACCOUNTANT
The Nottingham Company
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069

DIVIDEND DISBURSING & TRANSFER AGENT
NC Shareholder Services
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365

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

CUSTODIAN
First Union National Bank of North Carolina
Two First Union Center
Charlotte, North Carolina 28288-1151

INDEPENDENT AUDITORS
Deloitte & Touche LLP
2500 One PPG Place
Pittsburgh, Pennsylvania 15222-5401

ZSA ASSET ALLOCATION FUND

A No Load Fund

PROSPECTUS

July 31, 1997

<PAGE>

PROSPECTUS

THE BROWN CAPITAL MANAGEMENT FUNDS

INVESTOR CLASS

The investment objective of The Brown Capital Management Equity Fund is to seek
capital appreciation principally through investments in equity securities, such
as common and preferred stocks and securities convertible into common stocks.
Current income will be of secondary importance. The investment objective of The
Brown Capital Management Balanced Fund is to provide its shareholders with a
maximum total return consisting of any combination of capital appreciation, both
realized and unrealized, and income. The Fund will seek to achieve this
objective by investing in a flexible portfolio of equity securities, fixed
income securities, and money market instruments. The investment objective of The
Brown Capital Management Small Company Fund is to seek capital appreciation
principally through investment in the equity securities of those companies with
operating revenues of $250 million or less at the time of the initial
investment. Current income will be of secondary importance. While there is no
assurance that any of the Funds will achieve their particular investment
objective, they endeavor to do so by following the investment policies described
herein.

This Prospectus relates to shares ("Investor Shares") representing interests in
the Funds. The Investor Shares are offered to the general public. See
"Prospectus Summary - Offering Price."

INVESTMENT ADVISOR
Brown Capital Management, Inc.
809 Cathedral Street
Baltimore, Maryland 21201

The Brown Capital Management Funds (the "Funds") are 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 Funds that a prospective investor should know before investing. Investors
should read this Prospectus and retain it for future reference. Additional
information about the Funds has been filed with the Securities and Exchange
Commission (the "SEC") and is available upon request and without charge. You may
request the Statement of Additional Information, which is incorporated in this
Prospectus by reference, by writing the Funds at Post Office Box 4365, Rocky
Mount, North Carolina 27803-0365, or by calling 1-800-525-3863. The SEC also
maintains an Internet Web site (http://www.sec.gov) that contains the Statement
of Additional Information, material incorporated by reference, and other
information regarding the Funds.

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

The date of this Prospectus and the Statement of Additional Information is July
31, 1997.

<PAGE>

TABLE OF CONTENTS

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

FEE TABLE................................................................... 3

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

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

RISK FACTORS................................................................ 10

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

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

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

HOW SHARES ARE VALUED....................................................... 13

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

HOW SHARES MAY BE REDEEMED.................................................. 16

MANAGEMENT OF THE FUNDS..................................................... 18

OTHER INFORMATION........................................................... 20

<PAGE>

PROSPECTUS SUMMARY

The Funds. The Brown Capital Management Funds (the "Funds") are 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 Funds. See "Other
Information -Description of Shares."

Offering Price. The Investor Shares of each Fund are offered to the general
public at net asset value without a sales charge. The Investor Shares are
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 $10,000 ($2,000 for IRAs and Keogh Plans). The
minimum subsequent investment is $500. See "How Shares May be Purchased."

Investment Objective and Special Risk Considerations. The investment objective
of The Brown Capital Management Equity Fund (the "Equity Fund") is to seek
capital appreciation principally through investments in equity securities, such
as common and preferred stocks and securities convertible into common stocks.
Current income will be of secondary importance. In most instances the Equity
Fund will be at least 90% invested in equity securities. The investment
objective of The Brown Capital Management Balanced Fund (the "Balanced Fund") is
to provide its shareholders with a maximum total return consisting of any
combination of capital appreciation, both realized and unrealized, and income.
The Fund will seek to achieve this objective by investing in a flexible
portfolio of equity securities, fixed income securities, and money market
instruments. Fixed income securities and money market instruments will generally
comprise not less than 25% and not more than 75% of the portfolio. The
investment objective of The Brown Capital Management Small Company Fund (the
"Small Company Fund") is to seek capital appreciation principally through
investment in the equity securities of those companies with operating revenues
of $250 million or less at the time of the initial investment ("small
companies"). Current income will be of secondary importance. In most instances
the Small Company Fund will be at least 90% invested in equity securities and at
least 65% invested in equity securities of small companies. See "Investment
Objective and Policies."

The Funds are not intended to be a complete investment program, and there can be
no assurance that any Fund will achieve its investment objective. While the
Funds will invest primarily in common stocks traded in U.S. securities markets,
some of each Fund's investments may include foreign securities (in the form
traded domestically as American Depository Receipts), illiquid securities, and
securities purchased subject to a repurchase agreement or on a "when-issued"
basis, which involve certain risks. A portion of the Balanced Fund will be
invested in fixed income securities, which will be subject to risks associated
with movements in interest rates. Since the Small Company Fund will invest
principally in small companies, it will be subject to the greater volatility and
risks associated with such investments. See "Risk Factors."

Manager. Subject to the general supervision of the Trust's Board of Trustees and
in accordance with the Funds' investment policies, Brown Capital Management,
Inc. of Baltimore, Maryland (the "Advisor"), manages the Funds' investments. The
Advisor currently manages approximately $2.8 billion in assets. For its advisory
services, the Advisor receives a monthly fee, based on each Fund's average daily
net assets, at the annual rate of 0.65% of the first $25 million of net assets
and 0.50% of all assets over $25 million for the Equity and Balanced Funds, and
at the annual rate of 1.00% for the Small Company Fund. See "Management of the
Funds - The Advisor."

Dividends. Income dividends, if any, are generally paid quarterly; capital
gains, if any, are generally 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 Distribution Fee. Capital Investment Group, Inc. (the
"Distributor") serves as distributor of shares of each Fund. Under each Fund's
Distribution Plan with respect to the Investor Shares, expenditures by each 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 -
Distribution Plan."

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

FEE TABLE

The following table sets forth certain information in connection with the
expenses of the Investor Shares of the Funds 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 Funds, and therefore
indirectly by their 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).....................None
Maximum sales load imposed on reinvested dividends.........None
Maximum deferred sales load................................None
Redemption fees*...........................................None
Exchange fee...............................................None

* The Funds in their discretion may choose to pass through to
redeeming shareholders any charges imposed by the Custodian
for wiring redemption proceeds. The Custodian currently
charges the Funds $7.00 per transaction for wiring redemption
proceeds.

Annual Fund Operating Expenses for Investor Shares - After Fee Waivers
and Expense Reimbursements1
(as a percentage of average net assets)
Small
Equity Balanced Company
Investment advisory fees......0.00% 1 0.00% 1 0.00% 1
12b-1 fees....................0.25% 2 0.25% 2 0.25% 2
Other expenses................1.20% 1 1.20% 1 1.50% 1
----- ----- -----
Total operating expenses...1.45% 1 1.45% 1 1.75% 1
===== ===== =====

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

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

Equity $15 $46 $79 $174
Balanced $15 $46 $79 $174
Small Company $18 $55 $95 $206

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

1 The "Total operating expenses" shown above are based upon contractual
amounts and actual operating expenses incurred by the Institutional Shares
of each Fund for the fiscal year ended March 31, 1997, which, after fee
waivers and expense reimbursements, were 1.20%, 1.20%, and 1.50% of average
daily net assets of the Institutional Shares of the Equity, Balanced, and
Small Company Funds, respectively, but restated to reflect the expenses
anticipated to be incurred by the Investor Shares of each Fund for the
current fiscal year (assuming payment of the distribution and service fees
described under footnote 2 below). Absent such waivers and reimbursements,
the percentages for "Investment advisory fees" and "Total operating
expenses" for the Institutional Shares for the fiscal year ended March 31,
1997, would have been 0.65% and 3.37%, respectively, for the Equity Fund,
0.65% and 2.85%, respectively, for the Balanced Fund, and 1.00% and 2.70%,
respectively, for the Small Company Fund. The Institutional Shares do not
bear the potential distribution and service fees described under footnote 2
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 each Fund for the fiscal
year ended March 31, 1997, have been used for illustration purposes, subject
to restatement as provided above. The Advisor has voluntarily agreed to a
reduction in the fees payable to it and to reimburse expenses of each Fund,
if necessary, in an amount that limits "Total operating expenses" (exclusive
of interest, taxes, brokerage fees and commissions, and extraordinary
expenses) to not more than 1.45%, 1.45%, and 1.75%, respectively, of the
Investor Shares' average daily net assets for the Equity, Balanced, and
Small Company Funds, respectively. There can be no assurance that the
Advisor's voluntary fee waivers and expense reimbursements will continue in
the future.

2 Each 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 Funds" below for more
information about the fees and costs of operating the Funds. 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 Funds; the actual rate of return for the
Funds may be greater or less than 5%.

FINANCIAL HIGHLIGHTS

The shares of each Fund are divided into multiple Classes representing interests
in the Funds. This Prospectus relates to Investor Shares. See "Other Information
- - Description of Shares." Since the public offering of Investor Shares of the
Funds had not commenced during the fiscal periods covered by the Funds'
financial statements and related Financial Highlights pertaining to the
Institutional Shares of the Funds, no financial statements or related Financial
Highlights are available pertaining to the Investor Shares of the Funds. Further
information about the performance of the Funds is contained in the Annual Report
of the Funds, a copy of which may be obtained at no charge by calling the Funds.

INVESTMENT OBJECTIVE AND POLICIES

Investment Objective. The investment objective of The Brown Capital Management
Equity Fund (the "Equity Fund") is to seek capital appreciation principally
through investments in equity securities, such as common and preferred stocks
and securities convertible into common stocks. Current income will be of
secondary importance. The investment objective of The Brown Capital Management
Balanced Fund (the "Balanced Fund") is to provide its shareholders with a
maximum total return consisting of any combination of capital appreciation, both
realized and unrealized, and income. The Fund will seek to achieve this
objective by investing in a flexible portfolio of equity securities, fixed
income securities, and money market instruments. The investment objective of The
Brown Capital Management Small Company Fund (the "Small Company Fund") is to
seek capital appreciation principally through investment in the common stock of
those companies with operating revenues of $250 million or less at the time of
the initial investment. Current income will be of secondary importance. Each
Fund's investment objective and fundamental investment limitations described
herein may not be altered without the prior approval of a majority of the Fund's
shareholders.

Investment Selection

Equity Fund. The Advisor will seek to achieve capital appreciation through
an opportunistic stock investment strategy with a growth bias. The Advisor will
seek to purchase equity securities of those companies that the Advisor feels are
undervalued relative to their growth potential in the securities markets,
because the companies are presently out of favor, not well known or possess
value that is not currently recognized by the investment community. The Advisor
will generally utilize the equity securities of large and medium capitalization
companies. The Advisor uses a "bottom up" approach to select specific
securities, while remaining cognizant of specific economic and industry
outlooks. The Advisor employs analysis that contains elements of traditional
dividend discount and earnings yield models, establishes predicted relative
valuation for equity and fixed income markets, and determines the attractiveness
of individual securities through evaluation of growth and risk characteristics
of the underlying company relative to the overall equity market.

While portfolio securities are generally acquired for the long term, they may be
sold under some of the following circumstances when the Advisor believes that:
a) the anticipated price appreciation has been achieved or is no longer
probable; b) alternative investments offer superior total return prospects; or
c) fundamentals change adversely.

The equity portion of the Fund's portfolio will be comprised of common stocks,
convertible preferred stocks, participating preferred stocks, preferred equity
redemption cumulative stocks, preferred stocks and convertible bonds traded on
domestic securities exchanges or on the over-the-counter markets. Foreign
securities, if held, will be held in the form of American Depository Receipts
("ADRs"). ADRs are foreign securities denominated in U.S. dollars and traded on
U.S. securities markets.

The Fund will invest in a variety of companies and industries as well as
economic sectors. For purposes of temporary investment of cash, and defensive
investment in certain situations, the percentage of assets invested in equities
and money market instruments will be determined by the valuation of securities
relative to alternative investments.

Money market instruments will typically represent a portion of the Fund's
portfolio, as funds awaiting investment, to accumulate cash for anticipated
purchases of portfolio securities and to provide for shareholder redemptions and
operational expenses of the Fund.

Under normal market conditions the portfolio allocation range for the Equity
Fund will be:

% of Total Assets
Equity securities 70 - 99%
Money market instruments 1 - 30%

Under certain conditions, the Advisor may choose to temporarily invest up to
100% of the Fund's assets in cash and cash equivalents as a temporary defensive
position.

Balanced Fund. The Advisor will vary the percentage of Fund assets invested
in equities, fixed income securities, and money market instruments according to
the Advisor's judgment of market and economic conditions, and based on the
Advisor's view of which asset class can best achieve the Fund's objectives. The
percentage invested in fixed income securities and money market instruments will
comprise not less than 25% and not more than 75% of the portfolio. The
investment objective will be to achieve the maximum total return, consisting of
any combination of capital appreciation, both realized and unrealized, and
income.

Selection of equity securities will be based primarily on the expected capital
appreciation potential. The expected income potential of those equity securities
is of secondary importance. Selection of fixed income securities will be
primarily for income. The capital appreciation potential of those fixed income
securities is of secondary importance.

The Advisor will continually review the macroeconomic environment and
alternative expected rates of return between fixed income securities and equity
securities in determining the asset allocation of the Fund. In structuring the
fixed income portion of the Fund, the Advisor examines spread relationships
between quality grades in determining the quality distribution, and assesses the
expected trends in inflation and interest rates in structuring the maturity
distribution. Not more than 20% of the total fixed income portion of the
portfolio (not more than 15% of the entire Fund) will be invested in bonds rated
below A by the nationally recognized securities rating organizations described
in the Statement of Additional Information.

With regards to the equity portion of the Fund, the Advisor will seek
diversification across a broad spectrum of economic sectors and industries. The
security selection approach will have an earnings growth bias, but will remain
flexible and opportunistic. The Advisor will continuously examine the portfolio,
seeking to replace those securities that may have become relatively overvalued
with securities which, in the view of the Advisor, are currently undervalued.

The Advisor will base security selection on the following factors: financial
history of the firm, consistency of earnings, return on equity, cash flow, fixed
charge coverage, strength of management, ratios such as price/book value,
price/sales, price/cash flow, price/earnings, and dividend yield, all compared
to historical valuations and future prospects of the company as judged by the
Advisor.

While portfolio securities are generally acquired for the long term, they may be
sold under some of the following circumstances when the Advisor believes that:
(a) the anticipated price appreciation has been achieved or is no longer
probable; (b) alternative investments offer superior total return prospects; or
(c) fundamentals change adversely.

Under normal market conditions the portfolio allocation range for the Balanced
Fund will be:

% of Total Assets
Equity securities 25 - 75%
Money market instruments
and fixed income securities 25 - 75%

Under certain conditions, the Advisor may choose to temporarily invest up to
100% of the Fund's assets in cash and cash equivalents as a temporary defensive
position.

Small Company Fund. The Advisor will invest primarily in the equity
securities of those companies with total operating revenues of $250 million or
less at the time of the initial investment ("small companies"). The Advisor
employs an analysis that seeks to identify those small companies whose current
price to earnings ratio is below the Advisor's projection of that company's
prospective growth rate. The Advisor's analysis includes many factors that, in
the Advisor's view, are critical to the small company sector. These factors
include the assumptions that a sustained commitment to a portfolio of
exceptional small companies will, over time, produce a significant investment
return and that an investment analysis which identifies and evaluates
successfully those few small companies with the legitimate potential to become
large companies can be a very rewarding investment strategy.

The Advisor uses a "bottom up" approach to select specific securities, while
remaining cognizant of specific economic and industry outlooks. The Advisor
employs analysis that contains elements of traditional dividend discount and
earnings yield models, establishes predicted relative valuation for equity and
fixed income markets, and determines the attractiveness of individual securities
through evaluation of growth and risk characteristics of the underlying company
relative to the overall equity market.

The Advisor identifies small companies with the potential to become successful
large companies by analyzing the potential for: a) sustainable revenue stream;
b) adequate resources to establish and defend a viable product or service
market, and market share; c) sufficient profitability to support long term
growth; and d) management skills and resources necessary to plan and execute a
long-term growth plan.

While portfolio securities are generally acquired for the long term, they may be
sold under some of the following circumstances when the Advisor believes that:
a) the anticipated price appreciation has been achieved or is no longer
probable; b) alternate investments offer superior total return prospects; or c)
fundamentals change adversely.

The equity portion of the Fund's portfolio will be comprised of common stocks,
convertible preferred stocks, participating preferred stocks, preferred equity
redemption cumulative stocks, preferred stocks and convertible bonds traded on
domestic securities exchanges or on the over-the-counter markets. Foreign
securities, if held, will be held in the form of ADRs. In most instances the
Fund will be at least 90% invested in equity securities and at least 65%
invested in equity securities of small companies. Under normal market
conditions, the Fund's investment in small companies will exceed the 65% minimum
threshold and will range between 80% and 90% of the Fund's total assets.

Under normal market conditions the portfolio allocation range for the Small
Company Fund will be:

% of Total Assets
Equity securities 70 - 99%
Money market instruments 1 - 30%

Under certain conditions, the Advisor may choose to temporarily invest up to
100% of the Fund's assets in cash and cash equivalents as a temporary defensive
position.

Money Market Instruments. Money market instruments may be purchased when the
Advisor believes interest rates are rising, the prospect for capital
appreciation in the equity and longer term fixed income securities' markets are
not attractive, or when the "yield curve" favors short-term fixed income
instruments versus longer term fixed income instruments. Money market
instruments may be purchased for temporary defensive purposes, to accumulate
cash for anticipated purchases of portfolio securities and to provide for
shareholder redemptions and operating expenses of each 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 each Fund's investment approach and assume
temporarily a defensive portfolio posture, increasing the Fund's percentage
investment in money market instruments, even to the extent that 100% of the
Fund's assets may be so invested.

U.S. Government Securities. Each Fund may invest a portion of its 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"), 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. Investment by the Equity and Small
Company Funds in U.S. Government Securities will generally be limited to money
market instruments as described above.

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

Corporate Debt Securities. The Balanced Fund may invest in U.S. dollar
denominated corporate debt securities of domestic issuers limited to corporate
debt securities (corporate bonds, debentures, notes and other similar corporate
debt instruments) that meet the minimum ratings criteria set forth for the
Balanced Fund, or, if unrated, are in the Advisor's opinion comparable in
quality to corporate debt securities in that the Fund may invest. The Equity and
Small Company Funds may invest in convertible bonds of domestic issuers meeting
such quality requirements and other corporate debt securities generally in the
form of money market instruments as described above.

Repurchase Agreements. Each 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 seven days of
the purchase. The Funds will not enter into any repurchase agreement that will
cause more than 10% of their 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 Funds will not engage in reverse repurchase transactions,
which are considered to be borrowings under the 1940 Act.

Foreign Securities. Each 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
Funds 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.

Investment Companies. In order to achieve its investment objective, each Fund
may invest up to 10% of the value of its total assets in securities of other
investment companies whose investment objectives are consistent with the Fund's
investment objective. The Fund will not acquire securities of any one investment
company if, immediately thereafter, the Fund would own more than 3% of such
company's total outstanding voting securities, securities issued by such company
would have an aggregate value in excess of 5% of the Fund's assets, or
securities issued by such company and securities held by the Fund issued by
other investment companies would have an aggregate value in excess of 10% of the
Fund's assets. To the extent a 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.

Real Estate Securities. The Funds will not invest in real estate (including
mortgage loans and limited partnership interests), but may invest in readily
marketable securities issued by companies that invest in real estate or
interests therein. The Funds may also invest in readily marketable interests in
real estate investment trusts ("REITs"). REITs are generally publicly traded on
the national stock exchanges and in the over-the-counter market and have varying
degrees of liquidity. Although the Funds are not limited in the amount of these
types of real estate securities they may acquire, it is not presently expected
that within the next 12 months the Funds will have in excess of 10% of their
assets in real estate securities.

RISK FACTORS

Fluctuations in Value. To the extent that the major portion of the Funds'
portfolios consists of common stocks, it may be expected that their net asset
value will be subject to greater fluctuation than a portfolio containing mostly
fixed income securities. The fixed income securities in which the Balanced Fund
will invest are also 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 Balanced 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 Balanced Fund's fixed income securities would
decrease in value, which would have a depressing influence on the Balanced
Fund's net asset value. Although certain of the U.S. Government Securities in
which the Funds may invest are guaranteed as to timely payment of principal and
interest, the market value of the securities, upon which the Funds' 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. Because there is risk in any investment,
there can be no assurance that the Funds will achieve their investment
objective.

Small Company Securities. To the extent that the Small Company Fund will consist
principally of companies with a smaller market capitalization, shorter operating
history, and smaller level of annual gross revenues than would be common in a
typical large capitalization growth fund, and given that such companies have
historically exhibited greater volatility of share price, the Small Company Fund
may be subject to greater fluctuation than a portfolio of larger companies or a
portfolio containing mostly fixed income securities.

Portfolio Turnover. Each Fund may sell portfolio securities without regard to
the length of time they have been held in order to take advantage of new
investment opportunities. Portfolio turnover generally involves some expense to
the Funds, 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, 1997 and 1996, the turnover ratio for the
Equity Fund was 34.21% and 48.06%, respectively, the turnover ratio for the
Balanced Fund was 45.58% and 43.59%, respectively, and the turnover ratio for
the Small Company Fund was 13.39% and 23.43%, respectively.

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

Forward Commitments and When-Issued Securities. Each Fund may purchase
when-issued securities and commit to purchase securities for a fixed price at a
future date beyond customary settlement time. Each 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 a Fund would generally purchase securities on a when-issued
or forward commitment basis with the intention of acquiring securities for its
portfolio, the Fund may dispose of a when-issued security or forward commitment
prior to settlement if the Advisor deems it appropriate to do so. The Fund may
realize short-term gains or losses upon such sales.

INVESTMENT LIMITATIONS

To limit each Fund's exposure to risk, the Funds have adopted certain
fundamental investment limitations. Some of these restrictions are that the
Funds will not: (1) issue senior securities, borrow money or pledge their
assets; (2) make loans of money or securities, except that the Funds may invest
in repurchase agreements (but repurchase agreements having a maturity of longer
than seven days, together with other not readily marketable securities, are
limited to 10% of the Funds' 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 their
total assets would be invested in such securities; (4) purchase foreign
securities, except that the Funds may purchase foreign securities sold as ADRs
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 (but the Funds may invest in readily
marketable securities of REITs or other companies that own or deal in real
estate or oil, gas, or mineral leases or exploration programs); (6) invest more
than 5% of their total assets at cost in the securities of any one issuer nor
hold more than 10% of the voting stock of any issuer; and (7) invest in
restricted securities. See "Investment Limitations" in the Fund's Statement of
Additional Information for a complete list of investment limitations.

If the Board of Trustees of the Trust determines that the Funds' investment
objectives 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 Funds' Prospectus, or in
the Statement of Additional Information, as being fundamental, is
non-fundamental. If a percentage limitation is satisfied at the time of
investment, a later increase or decrease in such percentage resulting from a
change in the value of the Funds' portfolio securities will not constitute a
violation of such limitation.

FEDERAL INCOME TAXES

Taxation of the Funds. The Internal Revenue Code of 1986, as amended (the
"Code"), treats each series in the Trust, including the Funds, as a separate
regulated investment company. Each series of the Trust, including the Funds,
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 Funds 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
Funds, 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 Funds, 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 Funds intend to
declare or distribute dividends during the calendar year in an amount sufficient
to prevent imposition of the 4% excise tax.

For the fiscal year ended March 31, 1997, the Balanced Fund was considered a
"personal holding company" under the Code since 50% of the value of the Balanced
Fund's share were owned directly or indirectly by five or fewer individuals at
certain times during the last half of the year. As a result, the Balanced Fund
was unable to meet the requirements for taxation as a regulated investment
company and will be unable to meet such requirements as long as it is classified
as a personal holding company. As a personal holding company, the Balanced Fund
is subject to federal income taxes on undistributed personal holding company
income at the maximum individual income tax rate. For the fiscal year ended
March 31, 1997, however, no provision was made for federal income taxes since
substantially all taxable income was distributed to shareholders. For the
current fiscal year, the Balanced Fund anticipates that either it will qualify
as a regulated investment company under the Code or, if still considered a
personal holding company, it will distribute substantially all of its taxable
income for the current fiscal year to shareholders in order to avoid individual
income taxes.

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 Funds or which are re-invested in additional shares will be taxable
ordinary income. If a shareholder is not required to pay a tax on income, he
will not be required to pay federal income taxes on the amounts distributed to
him. A dividend declared in October, November or December of a year and paid in
January of the following year will be considered to be paid on December 31 of
the year of declaration.

Distributions paid by the Funds 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
Funds. Capital gain distributions are made when the Funds realize net capital
gains on sales of portfolio securities during the year. Dividends and capital
gain distributions paid by the Funds 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 Funds 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 Funds 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 Funds 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 Funds has not complied with the applicable statutory and IRS
requirements, the Funds are 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

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

Unless a shareholder elects to receive cash, dividends and capital gains will be
automatically reinvested in additional full and fractional shares of the same
Class of the Funds 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 Funds at 107 North Washington Street, Post Office Box 4365, Rocky
Mount, North Carolina 27803-0365. That request must be received by the Funds
prior to the record date to be effective as to the next dividend. If cash
payment is requested, checks will be mailed within five business days after the
last day of each quarter or each Fund's fiscal year end, as applicable. Each
shareholder of the Funds will receive a quarterly summary of his or her account,
including information as to reinvested dividends from the Funds. Tax
consequences to shareholders of dividends and distributions are the same if
received in cash or in additional shares of the Funds.

In order to satisfy certain requirements of the Code, the Funds 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 Funds and received by shareholders on December 31 of the prior
year.

There is no fixed dividend rate, and there can be no assurance as to the payment
of any dividends or the realization of any gains. Each 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 each Fund's Distribution Plan.

HOW SHARES ARE VALUED

Net asset value for each Class of Shares of the Funds 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 each
Fund for purposes of pricing sales and redemptions is equal to the total market
value of its investments and other assets, 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 a 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 Funds. 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 for which market quotations are readily available are valued
at the latest quoted sales price, if available, at the time of valuation,
otherwise, at the latest quoted bid price. Temporary cash investments with
maturities of 60 days or less will be valued at amortized cost, which
approximates market value. Securities for which no current quotations are
readily available are valued at fair value as determined in good faith using
methods approved by the Board of Trustees of the Trust. Securities may be valued
on the basis of prices provided by a pricing service when such prices are
believed to reflect the fair market value of such securities.

HOW SHARES MAY BE PURCHASED

Assistance in opening accounts and a purchase application may be obtained from
the Funds by calling 1-800-525-3863, or by writing to the Funds at the address
shown below for purchases by mail. Assistance is also available through any
broker-dealer authorized to sell shares in the Funds. 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
each Fund's net asset value next determined after your order is received by the
Fund in proper form as indicated herein.

The minimum initial investment is $10,000 ($2,000 for IRAs and Keogh Plans). The
minimum subsequent investment is $500. The Funds 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 applicable Fund, to the Brown Capital Management Funds, Investor
Shares, 107 North Washington Street, Post Office Box 4365, Rocky Mount, North
Carolina 27803-0365. Subsequent investments in an existing account in the Funds
may be made at any time by sending a check payable to the applicable 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 the applicable Fund and to "Investor Shares" to your check to
ensure proper credit to your account.

Purchases by Wire. To purchase shares by wiring federal funds, each Fund must
first be notified by calling 1-800-525-3863 to request an account number and
furnish the Fund with your tax identification number. Following notification to
a Fund, federal funds and registration instructions should be wired through the
Federal Reserve System to:

First Union National Bank of North Carolina
Charlotte, North Carolina
ABA # 053000219 For credit to either:
The Brown Capital Management Equity Fund
Acct #2000000861768
OR
The Brown Capital Management Balanced Fund
Acct #2000000861917
OR
The Brown Capital Management Small Company Fund
Acct #2000000861904
For further credit to (shareholder's name and SS# or EIN#)

It is important that the wire contain all the information and that the Funds
receive prior telephone notification to ensure proper credit. A completed
application with signature(s) of registrant(s) must be mailed to the applicable
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. Each Fund reserves the right to reject any application or
investment. Orders become effective, and shares are purchased at, the next
determined net asset value per share after an investment has been received by a
Fund, which is as of 4:00 p.m., New York time, Monday through Friday, exclusive
of business holidays. Orders received by a Fund and effective prior to such 4:00
p.m. time will purchase shares at the net asset value determined at that time.
Otherwise, your order will purchase shares as of such 4:00 p.m. time on the next
business day. For orders placed through a qualified broker-dealer, such firm is
responsible for promptly transmitting purchase orders to the Funds. Investors
may be charged a fee if they effect transactions in Fund shares through a broker
or agent.

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 Funds, at their sole discretion,
may allow payment in kind for Fund shares purchased by accepting securities in
lieu of cash. Any securities so accepted would be valued on the date received
and included in the calculation of the net asset value of the applicable Fund.
See the Statement of Additional Information for additional information on
purchases in kind.

Each 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 Funds, 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.

Distribution Plan. Capital Investment Group, Inc., Post Office Box 32249,
Raleigh, North Carolina 27622 (the "Distributor"), is the national distributor
for the Funds 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 Funds.

The Trust has adopted a Distribution Plan (the "Plan") for the Investor Shares
of each Fund pursuant to Rule 12b-1 under the 1940 Act. Under the Plan each 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 each
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 for each Fund 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.

The Distributor, at its expense, may also provide additional compensation to
dealers in connection with sales of shares of the Funds. 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 Funds, 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 Funds or their shareholders.

Exchange Feature. Investors will have the privilege of exchanging shares of a
Fund for shares of another Fund or shares of any other series of the Trust
established by the Advisor. An exchange is a taxable transaction that 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. Each
series of the Trust will have a different investment objective, which may be of
interest to investors in each series. Shares of a Fund may be exchanged for
shares of another Fund or 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 a 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 Fund or other 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 any other Class of Shares
of the Funds.

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

A shareholder should consider the investment objectives and policies of any
other Fund or series into which the shareholder will be making an exchange, as
described in the prospectus for that other Fund or 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 Funds will automatically charge the checking account for the
amount specified ($100 minimum), which will be automatically invested in shares
at the net asset value on or about the 21st day of the month. The shareholder
may change the amount of the investment or discontinue the plan at any time by
writing to the Funds.

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 each 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 applicable
Fund's portfolio securities. All redemption orders received in proper form, as
indicated herein, by a 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 a Fund other than possible charges for wiring
redemption proceeds. You may also redeem your shares through a broker-dealer or
other institution, who may charge you a fee for its services.

If you are uncertain of the requirements for redemption, please contact the
Funds, at 1-800-525-3863, or write to the address shown below.

Regular Mail Redemptions. Your request should be addressed to The Brown Capital
Management Funds, Investor Shares, 107 North Washington Street, Post Office Box
4365, Rocky Mount, North Carolina 27803-0365. Your request for redemption must
include:

1) Your letter of instruction specifying the applicable Fund, 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.

Your redemption proceeds will be sent to you within seven days after receipt of
your redemption request. However, each 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. Each 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 a 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. Each Fund offers shareholders the option of
redeeming shares by telephone under certain limited conditions. A Fund will
redeem shares when requested by the shareholder if, and only if, the shareholder
confirms redemption instructions in writing.

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

1) Designation of the Equity, Balanced, or Small Company Fund;

2) Shareholder name and account number;

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

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

5) Shareholder signature as it appears on the application then on file with
the applicable 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 Funds may not be redeemed by wire on
days on 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 Funds. (See "Signature Guarantees" below.) Each Fund
reserves the right to restrict or cancel telephone and bank wire redemption
privileges for shareholders, without notice, if the Fund believes it to be in
the best interest of the shareholders to do so. During drastic economic and
market conditions, telephone redemption privileges may be difficult to
implement.

The Funds in their discretion may choose to pass through to redeeming
shareholders any charges by the Custodian for wire redemptions. The Custodian
currently charges $7.00 per transaction for wiring redemption proceeds. If this
cost is passed through to redeeming shareholders by the Funds, the charge will
be deducted automatically from the shareholder's account by redemption of shares
in the account. The shareholder's bank or brokerage firm may also impose a
charge for processing the wire. If wire transfer of funds is impossible or
impractical, the redemption proceeds will be sent by mail to the designated
account.

You may redeem shares, subject to the procedures outlined above, by calling the
Funds at 1-800-525-3863. Redemption proceeds will only be sent to the bank
account or person named in your Fund Shares Application currently on file with
the Funds. Telephone redemption privileges authorize the applicable 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. Each Fund will
employ reasonable procedures, such as requiring a form of personal
identification, to confirm that instructions are genuine, and, if it does not
follow such procedures, the Fund will be liable for any losses due to fraudulent
or unauthorized instructions. The Fund will not be liable for following
telephone instructions reasonably believed to be genuine.

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

Signature Guarantees. To protect your account and the Funds 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 FUNDS

Trustees and Officers. Each 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 Funds - 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 Funds' day-to-day operations.

The Advisor. Subject to the authority of the Board of Trustees, Brown Capital
Management, Inc. (the "Advisor") provides each 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, as amended.
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 Maryland corporation in 1983, is controlled by Eddie
C. Brown. The Advisor currently serves as investment advisor to approximately
$2.8 billion in assets. The Advisor has been rendering investment counsel,
utilizing investment strategies substantially similar to that of the Funds, 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 809 Cathedral Street, Baltimore, Maryland 21201.

Compensation of the Advisor with regard to the Equity Fund, based upon the
Fund's daily average net assets, is at the annual rate of 0.65% of the first $25
million of net assets and 0.50% of all assets over $25 million. The Advisor has
voluntarily waived its fee and reimbursed a portion of the Fund's operating
expenses for the fiscal year ended March 31, 1997. The total fees waived
amounted to $19,581 and expenses reimbursed amounted to $45,950.

Compensation of the Advisor with regards to the Balanced Fund, based upon the
Fund's daily average net assets, is at the annual rate of 0.65% of the first $25
million of net assets and 0.50% of all assets over $25 million. The Advisor has
voluntarily waived its fee and reimbursed a portion of the Fund's operating
expenses for the fiscal year ended March 31, 1997. The total fees waived
amounted to $24,852 and expenses reimbursed amounted to $38,061.

Compensation of the Advisor with regards to the Small Company Fund, based upon
the Fund's daily average net assets, is at the annual rate of 1.00%. The Advisor
has voluntarily waived substantially all of its fee and reimbursed a portion of
the Fund's operating expenses for the fiscal year ended March 31, 1997. The
total fees waived amounted to $50,549 (the Advisor received $205 of its fee) and
expenses reimbursed amounted to $10,610.

The Advisor supervises and implements the investment activities of each 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 each 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 Funds 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.

Eddie C. Brown, a director, executive officer, and controlling shareholder of
the Advisor and Trustee and executive officer of the Trust, has been responsible
for day-to-day management of each Fund's portfolio since its inception in 1992.
He has 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 0.25% of the average daily
net assets of the Fund on the first $10 million; 0.20% of the next $40 million;
0.175% on the next $50 million; and 0.15% of its average daily net assets in
excess of $100 million. In addition, the Administrator currently receives a base
monthly fee of $1,750 for accounting and recordkeeping services for the Fund and
$750 for each Class of Shares beyond the initial Class 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.

Subject to the authority of the Board of Trustees, the services the
Administrator provides to each Fund include coordinating and monitoring any
third parties furnishing services to the Fund; and providing the necessary
office space, equipment and personnel to perform administrative and clerical
functions for the Fund; and preparing, filing and distributing proxy materials,
periodic reports to shareholders, registration statements and other documents.
The Administrator also performs certain accounting and pricing services for each
Fund as pricing agent, including the daily calculation of each Fund's net asset
value.

The Administrator was incorporated as a North Carolina corporation in 1988. With
its predecessors and affiliates, the Administrator has been operating as a
financial services firm since 1985. Frank P. Meadows III is the firm's Managing
Director and controlling shareholder.

The Transfer Agent. NC Shareholder Services, LLC (the "Transfer Agent") serves
as the Funds' transfer, dividend paying, and shareholder servicing agent. The
Transfer Agent, subject to the authority of the Board of Trustees, provides
transfer agency services pursuant to an agreement with the Administrator, which
has been approved by the Trust. The Transfer Agent maintains the records of each
shareholder's account, answers shareholder inquiries concerning accounts,
processes purchases and redemptions of Fund shares, acts as dividend and
distribution disbursing agent, and performs other shareholder servicing
functions. The Transfer Agent is compensated for its services by the
Administrator and not directly by the Funds.

The Custodian. First Union National Bank of North Carolina (the "Custodian"),
Two First Union Center, Charlotte, North Carolina 28288-1151, serves as
Custodian of each Fund's assets. The Custodian acts as the depository for each
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.

Other Expenses. Each 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. Each 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
each 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 Funds 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 Funds, 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 each Fund, except that the Classes bear different expenses that
reflect the differences in services provided to them. Investor Shares bear
potential distribution expenses and service fees. Institutional Shares bear no
shareholder servicing or distribution fees. As a result of different charges,
fees, and expenses between the Classes, the total return on each 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 Funds.

THIS PROSPECTUS RELATES TO EACH FUND'S INVESTOR SHARES AND DESCRIBES ONLY THE
POLICIES, OPERATIONS, CONTRACTS, AND OTHER MATTERS PERTAINING TO THE INVESTOR
SHARES. EACH 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 FUNDS 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 FUNDS, OR ANY OTHER PERSON WHICH IS
OFFERING OR MAKING AVAILABLE TO THEM THE SECURITIES OFFERED IN THIS PROSPECTUS.

When issued, the shares of each series of the Trust, including the Funds, 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 at 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 each 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.

Reporting to Shareholders. Each Fund will send to its shareholders Annual and
Semi-Annual Reports; the financial statements appearing in Annual Reports for
each Fund will be audited by independent accountants. In addition, the Funds
will send to each shareholder having an account directly with the Funds a
quarterly statement showing transactions in the account, the total number of
shares owned and any dividends or distributions paid. Inquiries regarding the
Funds may be directed in writing to 107 North Washington Street, Post Office Box
4365, Rocky Mount, North Carolina 27803-0365 or by calling 1-800-525-3863.

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

In addition, each 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 a Fund for various
periods.

The total return of a Fund could be increased to the extent the Advisor may
waive all or a portion of its fees or may reimburse all or a portion of the
Fund's expenses. Total return figures are based on the historical performance of
the Fund, show the performance of a hypothetical investment, and are not
intended to indicate future performance. Each 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 Funds or the Advisor. This
Prospectus does not constitute an offering in any state in which an offering may
not lawfully be made.

Each 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 each Fund and are not binding
until confirmed or accepted in writing.

The Brown Capital Management Funds
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
1-800-525-3863

Investment Advisor
Brown Capital Management, Inc.
809 Cathedral Street
Baltimore, Maryland 21201

Administrator & Fund Accountant
The Nottingham Company
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069

Dividend Disbursing & Transfer Agent
NC Shareholder Services, LLC
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365

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

Custodian
First Union National Bank of North Carolina
Two First Union Center
Charlotte, North Carolina 28288-1151

Independent Auditors
Deloitte & Touche LLP
2500 One PPG Place
Pittsburgh, Pennsylvania 15222-5401

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

THE BROWN CAPITAL
MANAGEMENT FUNDS

INVESTOR CLASS

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

PROSPECTUS

July 31, 1997

<PAGE>

PROSPECTUS
THE BROWN CAPITAL MANAGEMENT FUNDS

INSTITUTIONAL CLASS

This Prospectus relates to shares ("Institutional Shares") representing
interests in the Funds. The Institutional Shares are offered to institutions and
certain other investors described herein without any sales or redemption charges
or shareholder servicing or distribution fees. See "Prospectus Summary -
Offering Price."

INVESTMENT ADVISOR
Brown Capital Management, Inc.
809 Cathedral Street
Baltimore, Maryland 21201

The date of this Prospectus and the Statement of Additional Information is July
31, 1997.

<PAGE>

TABLE OF CONTENTS

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

FEE TABLE................................................................... 3

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

INVESTMENT OBJECTIVE AND POLICIES........................................... 6

RISK FACTORS................................................................ 11

INVESTMENT LIMITATIONS...................................................... 12

FEDERAL INCOME TAXES........................................................ 13

DIVIDENDS AND DISTRIBUTIONS................................................. 14

HOW SHARES ARE VALUED....................................................... 14

HOW SHARES MAY BE PURCHASED................................................. 15

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

MANAGEMENT OF THE FUNDS..................................................... 19

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

<PAGE>

PROSPECTUS SUMMARY

The Funds. The Brown Capital Management Funds (the "Funds") are diversified
series of The Nottingham Investment Trust II (the "Trust"), a registered
open-end management investment company organized as a Massachusetts business
trust. This Prospectus relates to Institutional Shares of the Funds. See "Other
Information -Description of Shares."

Offering Price. The Institutional Shares of each Fund are offered at net asset
value without a sales charge and are not subject to any shareholder servicing or
distribution fees. The Institutional Shares are available only to the following
classes of investors: clients of the Advisor, and any other institutional
investor. The minimum initial investment is $10,000 ($2,000 for IRAs and Keogh
Plans). The minimum subsequent investment is $500. See "How Shares May be
Purchased."

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

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

FEE TABLE

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

Shareholder Transaction Expenses for Institutional Shares

Annual Fund Operating Expenses for Institutional Shares - After Fee Waivers
and Expense Reimbursements1
(as a percentage of average net assets)
Small
Equity Balanced Company
Investment advisory fees...........0.00% 1 0.00% 1 0.00% 1
12b-1 fees..........................None None None
Other expenses.....................1.20% 1 1.20% 1 1.50% 1
----- ----- -----
Total operating expenses........1.20% 1 1.20% 1 1.50% 1
===== ===== =====

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

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

Equity $12 $38 $66 $145
Balanced $12 $38 $66 $145
Small Company $15 $47 $82 $179

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

1 The "Total operating expenses" shown above are based upon actual operating
expenses incurred by the Institutional Shares of each Fund for the fiscal
year ended March 31, 1997, which, after fee waivers and expense
reimbursements, were 1.20%, 1.20%, and 1.50% of average daily net assets of
the Institutional Shares of the Equity, Balanced, and Small Company Funds,
respectively. Absent such waivers and reimbursements, the percentages for
"Investment advisory fees" and "Total operating expenses" for the
Institutional Shares for the fiscal year ended March 31, 1997 would have
been 0.65% and 3.37%, respectively, for the Equity Fund, 0.65% and 2.85%,
respectively, for the Balanced Fund, and 1.00% and 2.70%, respectively, for
the Small Company Fund. The Advisor has voluntarily agreed to a reduction in
the fees payable to it and to reimburse expenses of each 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 1.20%, 1.20%, and 1.50%, respectively, of the
Institutional Shares' average daily net assets for the Equity, Balanced, and
Small Company Funds, respectively. There can be no assurance that the
Advisor's voluntary fee waivers and expense reimbursements will continue in
the future.

See "Management of the Funds" below for more information about the fees and
costs of operating the Funds. 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
Funds; the actual rate of return for the Funds may be greater or less than 5%.

FINANCIAL HIGHLIGHTS

The shares of each Fund are divided into multiple Classes representing interests
in the Funds. This Prospectus relates to Institutional Shares. See "Other
Information - Description of Shares." The financial data included in the tables
below for the fiscal years ended March 31, 1997, has been audited by Deloitte &
Touche LLP, independent auditors, whose reports covering such period are
included in the Statement of Additional Information. The financial data for the
prior fiscal years was audited by other independent auditors. The information in
the tables below should be read in conjunction with each Fund's latest audited
financial statements and notes thereto, which are also included in the Statement
of Additional Information, a copy of which may be obtained at no charge by
calling the Funds. Further information about the performance of the Funds is
contained in the Annual Report of the Funds, a copy of which may be obtained at
no charge by calling the Funds.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>

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

EQUITY FUND
Years ended March 31,
1997 1996 1995 1994 1993(a)

Net Asset Value, Beginning of Period $15.81 $12.36 $11.48 $11.05 $10.00
Income (loss) from investment operations
Net investment income (loss) 0.05 0.00 0.00 (0.02) (0.02)
Net realized and unrealized gain on investments 1.36 3.72 1.01 0.52 1.07
---- ---- ---- ---- ----
Total from investment operations 1.41 3.72 1.01 0.50 1.05
---- ---- ---- ---- ----

Distributions to shareholders from
Net investment income (0.05) 0.00 0.00 0.00 0.00
Net realized gain from investment transactions (0.56) (0.27) (0.13) (0.07) 0.00
------ ------ ------ ------ ----
Total distributions (0.61) (0.27) (0.13) (0.07) 0.00
------ ------ ------ ------ ----

Net Asset Value, End of Period $16.61 $15.81 $12.36 $11.48 $11.05
====== ====== ====== ====== ======

Total return 8.91% 30.25% 8.90% 4.51% 10.51%

Ratios/supplemental data
Net Assets, End of Period (in thousands) $4,405 $1,966 $1,130 $718 $264
Ratio of expenses to average net assets
Before expense reimbursements and waived fees 3.37% 5.58% 8.32% 11.86% 17.97%(d)
After expense reimbursements and waived fees 1.20% 1.56% 2.00% 2.00% 1.91%(d)
Ratio of net investment income (loss) to average net assets
Before expense reimbursements and waived fees (1.85)% (4.20)% (6.41)% (10.19)% (16.47)%(d)
After expense reimbursements and waived fees 0.32% 0.01% (0.11)% (0.36)% (0.51)%(d)
Portfolio turnover rate 34.21% 48.06% 7.29% 48.05% 3.26%
Average commission rate paid (e) $0.0505

BALANCED FUND
Years ended March 31,
1997 1996 1995 1994 1993(b)

Net Asset Value, Beginning of Period $13.76 $11.56 $11.02 $10.62 $10.00
Income from investment operations
Net investment income 0.21 0.12 0.10 0.08 0.04
Net realized and unrealized gain on investments 0.76 2.98 0.77 0.43 0.62
---- ---- ---- ---- ----
Total from investment operations 0.97 3.10 0.87 0.51 0.66
---- ---- ---- ---- ----

Distributions to shareholders from
Net investment income (0.21) (0.12) (0.11) (0.08) (0.04)
Net realized gain from investment transactions (0.92) (0.78) (0.22) (0.03) 0.00
------ ------ ----- ----- ----
Total distributions (1.13) (0.90) (0.33) (0.11) (0.04)
------ ------ ----- ----- -----

Net Asset Value, End of Period $13.60 $13.76 $11.56 $11.02 $10.62
====== ====== ====== ====== ======

Total return 7.01% 27.04% 8.04% 4.78% 6.60%

Ratios/supplemental data
Net Assets, End of Period (in thousands) $3,875 $3,319 $2,296 $1,188 $762
Ratio of expenses to average net assets
Before expense reimbursements and waived fees 2.85% 3.50% 5.43% 6.44% 9.56%(d)
After expense reimbursements and waived fees 1.20% 1.59% 2.00% 2.00% 1.58%(d)
Ratio of net investment income (loss) to average net assets
Before expense reimbursements and waived fees (0.13)% (0.97)% (2.44)% (3.69)% (7.13)%(d)
After expense reimbursements and waived fees 1.51% 0.94% 1.00% 0.74% 0.85%(d)
Portfolio turnover rate 45.58% 43.59% 9.51% 28.56% 20.90%
Average commission rate paid (e) $0.0506

SMALL COMPANY FUND
Years ended March 31,
1997 1996 1995 1994 1993(c)

Net Asset Value, Beginning of Period $15.13 $12.24 $10.69 $10.67 $10.00
Income (loss) from investment operations
Net investment loss (0.03) (0.06) (0.06) (0.11) (0.03)
Net realized and unrealized gain on investments 0.27 4.00 1.86 0.59 0.70
---- ---- ---- ---- ----
Total from investment operations 0.24 3.94 1.80 0.48 0.67
---- ---- ---- ---- ----

Distributions to shareholders from
Net realized gain from investment transactions (0.36) (1.05) (0.25) (0.46) 0.00
------ ------ ----- ----- ----

Net Asset Value, End of Period $15.01 $15.13 $12.24 $10.69 $10.67
====== ====== ====== ====== ======

Total return 1.56% 33.00% 16.95% 4.39% 6.70%

Ratios/supplemental data
Net Assets, End of Period (in thousands) $6,519 $3,740 $2,609 $1,831 $1,226
Ratio of expenses to average net assets
Before expense reimbursements and waived fees 2.70% 3.49% 4.49% 4.73% 5.45% d)
After expense reimbursements and waived fees 1.50% 1.69% 2.00% 2.00% 1.89% d)
Ratio of net investment loss to average net assets
Before expense reimbursements and waived fees (1.50)% (2.29)% (3.38)% (4.03)% (4.42)%(d)
After expense reimbursements and waived fees (0.30)% (0.50)% (0.90)% (1.34)% (0.86)%(d)
Portfolio turnover rate 13.39% 23.43% 32.79% 23.47% 4.14%
Average commission rate paid (e) $0.0482
</TABLE>

(a) For the period from August 4, 1992 (commencement of operations) to March
31, 1993.

(b) For the period from August 11, 1992 (commencement of operations) to March
31, 1993.

(d) Annualized.

(e) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged. This
disclosure was not required for fiscal years of the Funds ended prior to
March 31, 1997.