As filed with the Securities and Exchange Commission on June 5, 1998
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. 33 X
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 34 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 _________, 1998 pursuant
to Rule 485(b), or to Rule 485(b), or
|_| 60 days after filing pursuant |_| on _________, 1998 pursuant
to Rule 485(a)(1), or to Rule 485(a)(1), or
|_| 75 days after filing pursuant |_| on _________, 1998 pursuant
to Rule 485(a)(2), or to Rule 485(a)(2).
<PAGE>
This filing includes the Prospectus and Statement Additional Information of each
series of the Registrant other than The CarolinasFund, which are incorporated
herein by reference to Post-Effective Amendments to the Registrant's
Registration Statement on Form N-1A previously filed with the Commission.
<PAGE>
PART A
PROSPECTUS
PROSPECTUS Cusip Number _________
The investment objective of The CAROLINASFUND (the "Fund") is to provide
long-term capital growth by investing primarily in common stocks of publicly
traded companies headquartered in North and South Carolina. 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. Two
classes of shares of the Fund are described in this Prospectus - Investor Shares
and Institutional Shares. See "Prospectus Summary - Offering Price."
INVESTMENT ADVISOR
Morehead Capital Advisors LLC
1712 East Boulevard
Charlotte, North Carolina 28203
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 1-800-773-FUND. The SEC also maintains an Internet website
(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 NOR HAS THE SECURITIES AND EXCHANGE 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 June
5, 1998.
<PAGE>
TABLE OF CONTENTS
PROSPECTUS SUMMARY............................................................2
FEE TABLE.....................................................................4
FINANCIAL HIGHLIGHTS..........................................................5
INVESTMENT OBJECTIVE AND POLICIES.............................................8
RISK FACTORS.................................................................10
INVESTMENT LIMITATIONS.......................................................11
FEDERAL INCOME TAXES.........................................................12
DIVIDENDS AND DISTRIBUTIONS..................................................13
HOW SHARES ARE VALUED........................................................14
HOW SHARES MAY BE PURCHASED..................................................14
HOW SHARES MAY BE REDEEMED...................................................20
MANAGEMENT OF THE FUND.......................................................22
OTHER INFORMATION............................................................25
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 CAROLINASFUND (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. See "Other
Information - Description of Shares."
History of the Fund. Pursuant to an Agreement and Plan of Reorganization dated
May 15, 1998, the Fund expects to succeed to the assets and liabilities of
another mutual fund of the same name (the "Predecessor Fund"), which is an
investment series of the Maplewood Investment Trust, on or about June 29, 1998.
The investment objectives, policies and restrictions of the Fund and the
Predecessor Fund are substantially identical, and the financial data and
information in this Prospectus relates to the Predecessor Fund.
Offering Price. Two classes of shares of the Fund are offered in this Prospectus
- - Investor Shares and Institutional Shares. The Investor Shares 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 Institutional Shares
are offered to institutional investors at net asset value without a sales
charge. The Investor Shares (but not the Institutional Shares) are subject to a
12b-1 distribution fee of up to 0.50% of the average net assets of the Investor
Shares annually. See "Distributor and Distribution Fee" below. The minimum
initial investment is $2,500 ($1,000 for IRA accounts). The minimum subsequent
investment is $100. See "How to Purchase Shares."
Investment Objective and Special Risk Considerations. The investment objective
of the Fund is to provide long-term capital growth by investing primarily in
common stocks of publicly traded companies headquartered in North and South
Carolina. Realization of current income is not a significant investment
consideration, and any income realized will be incidental to the Fund's
objective. See "Investment Objective and Policies." Some of the Fund's
investments may include illiquid 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, Morehead Capital Advisors LLC
of Charlotte, North Carolina (the "Advisor"), manages the Fund's investments.
The Advisor served as investment advisor to the Predecessor Fund. 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%. The Fund is a modified index fund, and
requires daily monitoring of the portfolio to insure that the Fund is properly
allocated. For this monitoring, the Advisor has selected Capital Investment
Counsel (the "Sub-Advisor") as Sub-Advisor to the Fund. The Sub-Advisor is
compensated by the Advisor out of its monthly fee and not directly by the fund.
See "Management of the Fund."
Dividends. Income dividends, if any, and net capital gains, if any, are
generally paid at least once each year. Dividends and capital gains
distributions are automatically reinvested in additional shares 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. The Distributor is
an affiliate of the Sub-Advisor. 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 direct charge for redemptions other than a $10
charge 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."
<PAGE>
FEE TABLE
The following table sets forth certain information in connection with the
expenses of the 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 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
Investor Institutional
Shares Shares
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)....................3.50% 1 None
Maximum Sales Load Imposed on Reinvested Dividends.........None None
Maximum Deferred Sales Load................................None None
Redemption Fees............................................None None
Exchange Fees..............................................None None
Wire Charges ...............................................$10 $10
Annual Fund Operating Expenses -
After Fee Waivers and Expense Reimbursements 2
(as a percentage of average net assets)
Management Fees.......................................... 0.00% 2 0.00% 2
12b-1 Fees................................................0.50% 3 None
Other Expenses............................................1.75% 2 1.75% 2
----- -----
Total Fund Operating Expenses.............................2.25% 2 1.75% 2
===== =====
EXAMPLE: You would pay the following expenses (including the maximum initial
sales charge on Investor Shares) on a $1,000 investment in Shares of the Fund,
whether or not you redeem at the end of the period, and assuming a 5% annual
return:
1 year 3 years 5 years 10 Years
-------- --------- --------- ---------
Investor Shares $57 $103 $151 $284
Institutional Shares $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 Reduced or eliminated for larger purchases. See "How Shares May Be Purchased-
Sales Charges."
2 The Total Fund Operating Expenses shown above are based upon actual operating
expenses incurred by the Predecessor Fund for the fiscal year ended February
28, 1998, which after fee waivers and expense reimbursements, were 2.25% and
1.75% of average daily net assets of the Investor Shares and Institutional
Shares, respectively, of the Predecessor Fund. Absent such waivers and
reimbursements, the percentages would have been 1.00% for Management Fees and
4.12% and 3.61% for Total Fund Operating Expenses for the Investor Shares and
Institutional Shares, respectively, of the Predecessor Fund for the fiscal
year ended February 28, 1998. 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 Fund Operating Expenses (exclusive
of interest, taxes, brokerage fees and commissions, sales charges, and
extraordinary expenses) to not more than 2.25% of the Investor Shares'
average daily net assets and 1.75% of the Institutional Shares' average daily
net assets. There can be no assurance that the Advisor's voluntary fee
waivers and expense reimbursements will continue in the future.
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 example assumes
a 5% annual return pursuant to the requirements of 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 may be
greater or lesser than 5%.
FINANCIAL HIGHLIGHTS
The Fund has two classes of shares - Investor Shares and Institutional Shares.
See "Other Information Description of Shares." The financial data included in
the table below has been derived from audited financial statements of the
Predecessor Fund. The financial data for the fiscal year ended February 28, 1998
has been derived from financial statements audited by KPMG Peat Marwick LLP,
independent accountants, whose report covering such period is included in the
Statement of Additional Information. The information in the table below should
be read in conjunction with the Predecessor 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 Predecessor Fund is
contained in the Annual Report of the Predecessor Fund, a copy of which may be
obtained at no charge by calling the Fund.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
(For a Share Outstanding Throughout Each Period)
=========================================================== -------------- -------------- -------------- --------------
INVESTOR SHARES Year Ended Year Ended Year Ended Period Ended
February 28, February 28, February 28, February 28,
1998 1997 1996 1995*
------ ------ ------ -------
=========================================================== -------------- -------------- -------------- --------------
Net Asset Value, Beginning of Period $13.36 $12.44 $10.54 $10.00
=========================================================== -------------- -------------- -------------- --------------
Income (loss) from investment operations
Net investment income (loss) (0.02) (0.02) 0.01 0.04
Net realized and unrealized gain on investments 4.14 0.94 1.95 0.50
---- ---- ---- ----
Total from investment operations 4.12 0.92 1.96 0.54
---- ---- ---- ----
=========================================================== -------------- -------------- -------------- --------------
Distributions to shareholders from
Net investment income 0.00 0.00 (0.03) 0.00
Net realized gain from investment transactions 0.00 0.00 (0.03) 0.00
---- ---- ------ ----
Total distributions 0.00 0.00 (0.06) 0.00
---- ---- ------ ----
=========================================================== -------------- -------------- -------------- --------------
Net Asset Value, End of Period $17.48 $13.36 $12.44 $10.54
====== ====== ====== ======
=========================================================== -------------- -------------- -------------- --------------
Total return (a) 30.84% 7.41% 18.59% 5.40%
=========================================================== -------------- -------------- -------------- --------------
Ratios/supplemental data
=========================================================== -------------- -------------- -------------- --------------
Net Assets, End of Period $4,125,111 $2,706,214 $1,897,814 $272,383
============== ============== ============== ==============
=========================================================== -------------- -------------- -------------- --------------
Ratio of expenses to average net assets
Before expense reimbursements and waived fees 4.12% 5.33% 9.45% 37.10% (b)
After expense reimbursements and waived fees 2.25% 2.22% 2.17% 2.21% (b)
=========================================================== -------------- -------------- -------------- --------------
Ratio of net investment income (loss) to average net assets (0.14)% (0.20)% 0.06% 2.62% (b)
=========================================================== -------------- -------------- -------------- --------------
Portfolio turnover rate 7% 5% 16% 0%
=========================================================== ============== ============== ============== ==============
Average commission rate paid (c) $0.0619 $0.0600 0.00 0.00
=========================================================== ============== ============== ============== ==============
* Represents the period from the commencement of operations (May 22, 1995) through February 29, 1996.
(a) Does not reflect the maximum sales charge of 3.00%.
(b) Annualized.
(c) Beginning with the year ended February 28, 1997, the Fund is required to
disclose its average commission rate paid per share for purchases and sales
of investments securities.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
(For a Share Outstanding Throughout Each Period)
=========================================================== ------------------ ------------------ ------------------
INSTITUTIONAL SHARES Year Ended Year Ended Period Ended
February 28, February 28, February 28,
1998 1997 1996
------ ------ ----
=========================================================== ------------------ ------------------ ------------------
Net Asset Value, Beginning of Period $13.55 $12.57 $10.72
=========================================================== ------------------ ------------------ ------------------
Income from investment operations
Net investment income 0.05 0.01 0.02
Net realized and unrealized gain on investments 4.23 0.97 1.88
---- ---- ----
Total from investment operations 4.28 0.98 1.90
---- ---- ----
=========================================================== ------------------ ------------------ ------------------
Distributions to shareholders from
Net investment income 0.00 0.00 (0.02)
Net realized gain from investment transactions 0.00 0.00 (0.03)
---- ---- ------
Total distributions 0.00 0.00 (0.05)
---- ---- ------
=========================================================== ------------------ ------------------ ------------------
Net Asset Value, End of Period $17.83 $13.55 $12.57
====== ====== ======
=========================================================== ------------------ ------------------ ------------------
Total return (a) 31.59% 7.81% 17.68%
=========================================================== ------------------ ------------------ ------------------
Ratios/supplemental data
=========================================================== ------------------ ------------------ ------------------
Net Assets, End of Period $1,172,074 $735,087 $24,576
========== ======== =======
=========================================================== ------------------ ------------------ ------------------
Ratio of expenses to average net assets
Before expense reimbursements and waived fees 3.61% 4.85% 8.40%
After expense reimbursements and waived fees 1.75% 1.73% 1.69%
=========================================================== ------------------ ------------------ ------------------
Ratio of net investment loss to average net assets 0.36% 0.22% 0.64%
============================================================= ------------------ ------------------ ------------------
Portfolio turnover rate 7% 5% 16%
============================================================= ------------------ ------------------ ------------------
Average commission rate paid (c) $0.0619 $0.0600 0.00
============================================================= ================== ================== ====================
* Represents the period from the commencement of operations (May 22, 1995) through February 29, 1996.
(a) Does not reflect the maximum sales charge of 3.00%.
(b) Annualized.
(c) Beginning with the year ended February 28, 1997, the Fund is required to
disclose its average commission rate paid per share for purchases and sales
of investment securities.
</TABLE>
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to provide long-term capital growth by
investing primarily in common stocks of publicly traded companies headquartered
in North and South Carolina. Realization of current income will not be a
significant investment consideration, and any such income realized should be
considered incidental to the Fund's objective. The Fund's investment objective
and fundamental investment limitations described herein may not be altered
without the prior approval of a majority of the Fund's shareholders.
The Advisor believes that the demographic and economic characteristics of North
and South Carolina, including population, employment, retail sales, personal
income, bank loans, bank deposits and residential construction, are such that
many companies headquartered in the two states have a greater than average
potential for capital appreciation. The economies of the two states are based
historically on agriculture and textiles. Today, they also embrace banking,
insurance, mortgage banking, finance, real estate, varied service sectors,
technology, and manufacturing.
Investment Selection. Under normal market conditions, not less than 90% of the
Fund's total assets will be invested in common stock of those companies
headquartered in the states of North and South Carolina. The Advisor intends to
limit turnover in the Fund, believing that a long term rather than short term
selection of investments is preferable.
Under normal market conditions, the Advisor will generally select common stocks
from the top 50 publicly traded companies in North and South Carolina based on
market capitalization. Companies will be included in the Fund according to their
market capitalization (number of common shares times market price). Using this
approach, the number of shares purchased by the Fund in any company, from the
largest down, is determined by its market capitalization. This "indexing"
approach enables the Fund to limit the percentage of larger companies purchased
while "overweighting" the stock of mid- and small-cap companies. Companies may
periodically move in and out of the Fund based on changes in market
capitalization. The stock allocations in the Fund are adjusted quarterly, which
means the amount of securities purchased in each company depends on its
performance. Companies may move up, down, or out of the Fund, depending on their
performance. Stocks are generally bought for the long term, using the Advisor's
buy and hold strategy.
The equity securities in which the Fund may invest include common stock,
convertible preferred stock, straight preferred stock and investment grade
convertible bonds. The Fund may also invest up to 5% of its net assets in
warrants or rights to acquire equity securities (other than those acquired in
units or attached to other securities). See "Investment Limitations."
Under normal conditions, at least 90% of the Fund's assets will be invested in
equity securities. Warrants and rights will be excluded for purposes of this
calculation. As a temporary defensive measure, however, the Fund may invest up
to 100% of the Fund's total assets in investment grade bonds, U.S. Government
Securities, repurchase agreements, or money market instruments. When the Fund
invests its assets in investment grade bonds, U.S. Government Securities,
repurchase agreements or money market instruments as a temporary defensive
measure, it is not pursuing its stated investment objective. Under normal
circumstances, however, the Fund will also hold money market or repurchase
agreement instruments for funds awaiting investment, to accumulate cash for
anticipated purchases of portfolio securities, to allow for shareholder
redemptions and to provide for Fund operating expenses.
U.S. Government Securities. The Fund may invest a portion of the portfolio in
U.S. Government Securities, defined to be U.S. Government obligations such as
U.S. Treasury notes, U.S. Treasury bonds, and U.S. Treasury bills, obligations
guaranteed by the U.S. Government such as Government National Mortgage
Association ("GNMA") as well as obligations of U.S. Government authorities,
agencies and instrumentalities such as Federal National Mortgage Association
("FNMA"), Federal Home Loan Mortgage Corporation ("FHLMC"), Federal Home
Administration ("FHA"), Federal Farm Credit Bank ("FFCB"), Federal Home Loan
Bank ("FHLB"), Student Loan Marketing Association ("SLMA"), 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 assurances 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 U.S. Government securities held by the Fund or to
the Fund's shares.
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 total assets may be so invested.
Repurchase Agreements. The Fund may acquire U.S. Government Securities or
corporate debt securities subject to repurchase agreements. A repurchase
agreement transaction occurs when a Fund acquires a security and simultaneously
resells it to the vendor (normally a member bank of the Federal Reserve or a
registered Government Securities dealer) for delivery on an agreed upon future
date. The repurchase price exceeds the purchase price by an amount which
reflects an agreed upon market interest rate earned by the Fund effective for
the period of time during which the repurchase agreement is in effect. Delivery
pursuant to the resale typically will occur within one to 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 which
extend beyond seven days or other illiquid securities. 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.
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. 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.
Real Estate Securities. The Fund will not invest in real estate (including
limited partnership interests), but may invest in readily marketable securities
secured by real estate or interests therein or 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 net assets in real estate securities.
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. A more complete discussion of
certain of these securities and investment techniques and their associated risks
is contained in the Statement of Additional Information.
Concentration. The Fund's concentration in companies headquartered in North and
South Carolina generally will tie the performance of the Fund to the economic
environment of the two states and the surrounding area. There is no assurance
that the demographic and economic characteristics and other factors that the
Advisor believes favor companies in North and South Carolina will continue in
the future. Moreover, the Fund's portfolio may include some securities of
smaller companies and companies that are not nationally recognized. The prices
of stocks of such companies generally are more volatile than those of larger or
more mature companies, their securities are generally less liquid, and they are
more likely to be negatively affected by adverse economic or market conditions.
Moreover, because of its concentration, the Fund's portfolio may be invested in
a smaller number of companies than a general equity mutual fund. This may result
in investments by the Fund in a smaller number of industry sectors. These
limitations may also restrict the Advisor from using certain traditional
analytical measures employed to select investments and also exclude some
strategies that could offer superior performance or reduce fluctuations in the
values of such assets.
Fluctuations in Value. To the extent that the major portion of the Fund's
portfolio consists 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. 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 will fluctuate due to interest rate
risks. 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 Fund will achieve its investment
objective.
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 50% in any one year. The degree of portfolio activity affects the
brokerage costs of the Fund and other transaction costs on the sale of
securities and the reinvestment in other securities. Portfolio turnover may also
have capital gain tax consequences. The Predecessor Fund's portfolio turnover
rate for its 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 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.
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 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 its total assets. The Fund
will not make any investments if borrowing exceeds 5% of its total assets; (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 subject to the limitation on investing in illiquid securities); (3)
invest more than 10% of its net assets in illiquid securities; (4) 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; (5)
purchase foreign securities; (6) purchase or sell commodities, commodities
contracts, real estate (including limited partnership interests, but excluding
readily marketable securities secured by real estate or interests therein,
readily marketable interests in real estate investment trusts, or readily
marketable securities issued by companies that invest in real estate or
interests therein) or interests in oil, gas, or other mineral exploration or
development programs or leases (although it may invest in readily marketable
securities of issuers that invest in or sponsor such programs or leases); (7)
invest more than 10% of its total assets in the securities of other investment
companies; (8) write, purchase, or sell puts, calls, straddles, spreads, or
combinations thereof, or futures contracts or related options; and (9) invest
more that 5% of its net assets in warrants. Investment restrictions (1), (2),
(5), (6), (7), and (9) are deemed fundamental, that is, they may not be changed
without shareholder approval. 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, are subject to a non-deductible 4% excise tax to the extent
they do not distribute the statutorily required amount of investment income,
determined on a calendar year basis, and capital gain net income, using an
October 31 year end measuring period. The Fund intends to declare or distribute
dividends during the calendar year in an amount sufficient to prevent imposition
of the 4% excise tax.
Taxation of Shareholders. For federal income tax purposes, any dividends and
distributions from short-term capital gains that a shareholder receives in cash
from the Fund or which are re-invested in additional shares will be taxable
ordinary income. If a shareholder is not required to pay a tax on income, he
will not be required to pay federal income taxes on the amounts distributed to
him. A dividend declared in October, November or December of a year and paid in
January of the following year will be considered to be paid on December 31 of
the year of declaration.
Distributions paid by the Fund from long-term capital gains, whether received in
cash or reinvested in additional shares, are taxable as long-term capital gains,
regardless of the length of time an investor has owned shares in the Fund.
Capital gain distributions are made when the Fund realizes net capital gains on
sales of portfolio securities during the year. Dividends and capital gain
distributions paid by the Fund shortly after shares have been purchased,
although in effect a return of investment, are subject to federal income
taxation.
The sale of shares of the Fund is a taxable event and may result in a capital
gain or loss. Capital gain or loss may be realized from an ordinary redemption
of shares or an exchange of shares between two mutual funds (or two series of a
mutual fund).
The Trust will inform shareholders of the Fund of the source of their dividends
and capital gains distributions at the time they are paid and, promptly after
the close of each calendar year, will issue an information return to advise
shareholders of the federal tax status of such distributions and dividends.
Dividends and distributions may also be subject to state and local taxes.
Shareholders should consult their tax advisors regarding specific questions as
to federal, state or local taxes.
Federal income tax law requires investors to certify that the social security
number or taxpayer identification number provided to the Fund is correct and
that the investor is not subject to 31% withholding for previous under-reporting
to the Internal Revenue Service (the "IRS"). Investors will be asked to make the
appropriate certification on their application to purchase shares. If a
shareholder of the Fund has not complied with the applicable statutory and IRS
requirements, the Fund is generally required by federal law to withhold and
remit to the IRS 31% of reportable payments (which may include dividends and
redemption amounts).
DIVIDENDS AND DISTRIBUTIONS
The Fund distributes substantially all of its net investment income, if any, in
the form of dividends. The Fund will generally pay income dividends, if any, and
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 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. 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 of the payment of
any dividends or the realization of any gains. The Fund's net investment income
available for distribution to holders of Investor Shares will be reduced by the
amount of any expenses allocated to the Investor Shares, including the
distribution and service fees under the Fund's Distribution Plan.
HOW SHARES ARE VALUED
Net asset value for each Class of Shares of the Fund is determined at the time
trading closes on the New York Stock Exchange, (currently 4:00 p.m. on a typical
business day, 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 bid price. 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 Fund by calling 1-800-773-3863, 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 (net asset value plus any applicable sales
charges) next determined after your order is received by the Fund in proper form
as indicated herein.
The minimum initial investment is $2,500 ($1,000 for IRAs). The minimum
subsequent investment is $100. 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 CAROLINASFUND, 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 in minimum amounts of $100 by sending a check payable to the Fund, to The
CAROLINASFUND, 107 North Washington Street, Post Office Box 4365, Rocky Mount,
North Carolina 27803-0365. 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 appropriate Class (either "Investor"
or "Institutional") to your check to ensure proper credit to your account.
Regular Mail Orders. Please complete and sign the Fund Shares Application
accompanying this Prospectus and mail it, with your check made payable to the
Fund, to:
CAROLINASFUND
c/o NC Shareholder Services
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
Applications must contain social security and Taxpayer Identification Numbers
("TINs"). If you have applied for a social security or TIN at the time of
completing your account application, the application should so indicate. Taxes
are not withheld from distributions to U.S. investors if certain IRS
requirements regarding TINs are met.
Bank Wire Orders. Investments can be made directly by bank wire. To establish a
new account or to add to an existing account by wire, please call the Fund at
1-800-773-3863, before wiring funds, to advise it of the investment, the dollar
amount of the investment, and the account identification number. This
notification will ensure prompt and accurate handling of your investment. Please
have your bank use the following wire instructions to purchase by wire:
First Union National Bank of North Carolina
Charlotte, North Carolina
ABA # *************
For the CAROLINASFUND
Acct. # *************
For further credit to (shareholder's name and SS# or EIN#)
It is important that the wire message contain all the relevant information and
that the Fund receive prior telephone notification to ensure proper credit. Upon
opening an account by wire order, you must, as soon as possible, complete and
mail your Fund Shares Application to the Fund as described under "Regular Mail
Orders" above. Investors should be aware that some banks might 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 received by the Fund and effective prior to the time trading
closes on the New York Stock Exchange (currently 4:00 p.m., New York time,
Monday through Friday, exclusive of business holidays) will purchase shares at
the net asset value determined at that time. Orders received by the Fund and
effective after the close of trading, or on a day when the New York Stock
Exchange is not open for business, will purchase shares at the public offering
price next determined. 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 $20.00. To recover any such loss or charge, the
Trust reserves the right, without further notice, to redeem shares of any Fund
of the Trust already owned by any purchaser whose order is cancelled, and such a
purchaser may be prohibited from placing further orders unless investments are
accompanied by full payment by wire or cashier's check.
Payment must be made by check or money order drawn on a U.S. bank and payable in
U.S. dollars. Under certain circumstances, the Fund, at its sole discretion, may
allow payment in kind for Fund shares purchased by accepting securities in lieu
of cash. Any securities so accepted would be valued on the date received and
included in the calculation of the net asset value of the Fund. See the
Statement of Additional Information for additional information on purchases in
kind.
The Fund is required by federal law to withhold and remit to the IRS 31% of the
dividends, capital gains distributions and, in certain cases, proceeds of
redemptions paid to any shareholder who fails to furnish the Fund with a correct
taxpayer identification number, who under-reports dividend or interest income or
who fails to provide certification of tax identification number. Instructions to
exchange or transfer shares held in established accounts will be refused until
the certification has been provided. In order to avoid this withholding
requirement, you must certify on your application, or on a separate W-9 Form
supplied by the 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"), Post Office Box 32249, Raleigh, North Carolina 27622, receives
this sales charge as Distributor and may reallow it in the form of dealer
discounts and brokerage commissions as follows:
Dealers
Sales Sales Discounts and
Charge As Charge As Brokerage
% of Net % of Public Commissions as
Amount of Transaction Amount Offering % of Public
At Public Offering Price Invested Price 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%
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.
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 one or more future series of the Trust affiliated with
the Advisor and sold with a sales charge. For example, if a shareholder
concurrently purchases shares in one of the future 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 Investor Shares at the public offering price
applicable to the total of (a) the total public offering price of the Investor
Shares of the Fund then being purchased plus (b) an amount equal to the then
current net asset value of the purchaser's combined holdings of the shares of
all of the series of the Trust affiliated with the Advisor and sold with a sales
charge. To receive the applicable public offering price pursuant to the right of
accumulation, investors must, at the time of purchase, provide sufficient
information to permit confirmation of qualification, and confirmation of the
purchase is subject to such verification. This right of accumulation may be
modified or eliminated at any time or from time to time by the Trust without
notice.
Letters of Intent. Investors may qualify for a lower sales charge for
Investor Shares by executing a letter of intent. A letter of intent allows an
investor to purchase Investor Shares of the Fund over a 13-month period at
reduced sales charges based on the total amount intended to be purchased plus an
amount equal to the then current net asset value of the purchaser's combined
holdings of the shares of all of the series of the Trust affiliated with the
Advisor and sold with a sales charge. Thus, a letter of intent permits an
investor to establish a total investment goal to be achieved by any number of
purchases over a 13-month period. Each investment made during the period
receives the reduced sales charge applicable to the total amount of the intended
investment.
The letter of intent does not obligate the investor to purchase, or the Fund to
sell, the indicated amount. If such amount is not invested within the period,
the investor must pay the difference between the sales charge applicable to the
purchases made and the charges previously paid. If such difference is not paid
by the investor, the Distributor is authorized by the investor to liquidate a
sufficient number of shares held by the investor to pay the amount due. On the
initial purchase of shares, if required (or subsequent purchases, if necessary)
shares equal to at least five percent of the amount indicated in the letter of
intent will be held in escrow during the 13-month period (while remaining
registered in the name of the investor) for this purpose. The value of any
shares redeemed or otherwise disposed of by the investor prior to termination or
completion of the letter of intent will be deducted from the total purchases
made under such letter of intent.
A 90-day back-dating period can be used to include earlier purchases at the
investor's cost (without a retroactive downward adjustment of the sales charge);
the 13-month period would then begin on the date of the first purchase during
the 90-day period. No retroactive adjustment will be made if purchases exceed
the amount indicated in the letter of intent. Investors must notify the
Administrator or the Distributor whenever a purchase is being made pursuant to a
letter of intent.
Investors electing to purchase shares pursuant to a letter of intent should
carefully read the letter of intent, which is included in the Fund Shares
Application accompanying this Prospectus or is otherwise available from the
Administrator or the Distributor. This letter of intent option may be modified
or eliminated at any time or from time to time by the Trust without notice.
Reinvestments. Investors may reinvest, without a sales charge, proceeds
from a redemption of Investor Shares in Investor Shares or in shares of another
series of the Trust affiliated with the Advisor and sold with a sales charge,
within 90 days after the redemption. If the other Class charges a sales charge
higher than the sales charge the investor paid in connection with the shares
redeemed, the investor must pay the difference. In addition, the shares of the
Class to be acquired must be registered for sale in the investor's state of
residence. The amount that may be so reinvested may not exceed the amount of the
redemption proceeds, and a written order for the purchase of such shares must be
received by the Fund or the Distributor within 90 days after the effective date
of the redemption.
If an investor realizes a gain on the redemption, the reinvestment will not
affect the amount of any federal capital gains tax payable on the gain. If an
investor realizes a loss on the redemption, the reinvestment may cause some or
all of the loss to be disallowed as a tax deduction, depending on the number of
shares purchased by reinvestment and the period of time that has elapsed after
the redemption, although for tax purposes, the amount disallowed is added to the
cost of the shares acquired upon the reinvestment.
Purchases by Related Parties and Groups. Reductions in sales charges apply
to purchases by a single "person," including an individual, members of a family
unit, consisting of a husband, wife and children under the age of 21 purchasing
securities for their own account, or a trustee or other fiduciary purchasing for
a single fiduciary account or single trust estate.
Reductions in sales charges also apply to purchases by individual members of a
"qualified group." The reductions are based on the aggregate dollar value of
shares purchased by all members of the qualified group and still owned by the
group plus the shares currently being purchased. For purposes of this paragraph,
a qualified group consists of a "company," as defined in the 1940 Act, which has
been in existence for more than six months and which has a primary purpose other
than acquiring shares of the Fund at a reduced sales charge, and the "related
parties" of such company. For purposes of this paragraph, a "related party" of a
company is: (i) any individual or other company who directly or indirectly owns,
controls, or has the power to vote five percent or more of the outstanding
voting securities of such company; (ii) any other company of which such company
directly or indirectly owns, controls, or has the power to vote five percent of
more of its outstanding voting securities; (iii) any other company under common
control with such company; (iv) any executive officer, director or partner of
such company or of a related party; and (v) any partnership of which such
company is a partner.
Sales at Net Asset Value. The Fund may sell shares at a purchase price
equal to the net asset value of such shares, without a sales charge, to
Trustees, officers, and employees of the Trust, the Fund and the Advisor, and to
employees and principals of related organizations and their families, and
certain parties related thereto, including clients and related accounts of the
Advisor. Clients of investment advisors and financial planners may also purchase
Investor Shares at net asset value if the investment advisor or financial
planner has made arrangements to permit them to do so with the Distributor. 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 an affiliate of the Advisor and the Sub-Advisor, controls the Distributor,
along with Elmer O. Edgerton, Jr., an officer of another series of the Trust.
The Trust has adopted a Distribution Plan (the "Plan") for the Investor Shares
of the Fund pursuant to Rule 12b-1 under the 1940 Act. Under the Plan, the Fund
may reimburse any expenditures to finance any activity primarily intended to
result in sale of the Investor Shares of the Fund or the servicing of
shareholder accounts, including, but not limited to, the following: (i) payments
to the Distributor, securities dealers, and others for the sale of Investor
Shares of the Fund; (ii) payment of compensation to and expenses of personnel
who engage in or support distribution of Investor Shares of the Fund or who
render shareholder support services not otherwise provided by the Administrator
or Custodian; and (iii) formulation and implementation of marketing and
promotional activities. The categories of expenses for which reimbursement is
made are approved by the Board of Trustees of the Trust. Expenditures by the
Fund pursuant to the Plan are accrued based on the Investor Shares' average
daily net assets and may not exceed 0.50% of the Investor Shares' average net
assets for each year elapsed subsequent to adoption of the Plan. Such
expenditures paid as service fees to any person who sells Fund shares may not
exceed 0.25% of the Investor Shares' average annual net asset value. During the
fiscal year ended February 28, 1998, the Predecessor Fund incurred $16,548 in
expenditures under the Plan. Amounts accrued under the Plan in one year but
which are not actually paid in that year may be paid in subsequent years.
Amounts not accrued under the Plan during a year may not be carried forward to
subsequent years.
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 to be established by Advisor.
An exchange involves the simultaneous redemption of shares of one series and
purchase of shares of another series at the respective closing net asset value
next determined after a request for redemption has been received plus applicable
sales charge, and is a taxable transaction. Each series of the Trust will have a
different investment objective, which may be of interest to investors in each
series. Shares of the Fund may be exchanged for shares of any other series of
the Trust affiliated with the Advisor at the net asset value plus the percentage
difference between that series' sales charge and any sales charge previously
paid in connection with the shares being exchanged. For example, if a 2% sales
charge was paid on shares that are exchanged into a series with a 3% sales
charge, there would be an additional sales charge of 1% on the exchange.
Exchanges may only be made by investors in states where shares of the other
series are qualified for sale. An investor may direct the Fund to exchange his
shares by writing to the Fund at its principal office. The request must be
signed exactly as the investor's name appears on the account, and it must also
provide the account number, number of shares to be exchanged, the name of the
series to which the exchange will take place and a statement as to whether the
exchange is a full or partial redemption of existing shares. Notwithstanding the
foregoing, exchanges of shares may only be within the same class or type of
class of shares involved. For example, Investor Shares may not be exchanged for
Institutional Shares.
A pattern of frequent exchange transactions may be deemed by the Advisor to be
an abusive practice that is not in the best interests of the shareholders of the
Fund. Such a pattern may, at the discretion of the Advisor, be limited by the
Fund's refusal to accept further purchase and/or exchange orders from an
investor, after providing the investor with 60 days prior notice. The Advisor
will consider all factors it deems relevant in determining whether a pattern of
frequent purchases, redemptions and/or exchanges by a particular investor is
abusive and not in the best interests of the Fund or its other shareholders.
A shareholder should consider the investment objectives and policies of any
series into which the shareholder will be making an exchange, as described in
the prospectus for that other series. The Board of Trustees of the Trust
reserves the right to suspend or terminate, or amend the terms of, the exchange
privilege upon 60 days written notice to the shareholders.
Automatic Investment Plan. The automatic investment plan enables shareholders to
make regular monthly or quarterly investments in shares through automatic
charges to their checking account. With shareholder authorization and bank
approval, the 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). 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 the time trading closes on the New York
Stock Exchange (currently 4:00 p.m. New York time on normal business days), will
redeem shares at the net asset value determined at that time. Redemption orders
received by the Fund in proper form after the close of trading, or on a day when
the New York Stock Exchange is not open for business, will redeem shares at the
net asset value next determined. There is no charge for redemptions from the
Fund, other than a $10 charge for wiring redemption proceeds. You may also
redeem your shares through a broker-dealer or other institution, which 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 $2,500 (due to redemptions, exchanges or
transfers, and not due to market action) upon 30 days written notice. If the
shareholder brings his account's net asset value up to $2,500 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 1-800-773-3863, or write to the address shown below.
Regular Mail Redemptions. Your request should be addressed to the CAROLINASFUND,
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) Designation of Class (Investor or Institutional);
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 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 may not be redeemed by wire on days on which
your bank, and/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.
You may redeem shares, subject to the procedures outlined above, by calling the
Fund at 1-800-773-3863. 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.
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 series of The Nottingham Investment Trust
II (the "Trust"), an investment company organized as a Massachusetts business
trust in 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, Morehead Capital
Advisors LLC (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 was established as a North Carolina limited liability company in 1994
for the purpose of managing the Predecessor Fund. The Advisor has been managing
the Predecessor Fund since 1995. The Fund is a modified index, purchasing a
fixed percentage of each of a number of identified securities. The percentage of
each investment is agreed upon by the principals of the Advisor. J.C.B.
Ehringhaus, III retains day to day responsibility for monitoring the allocation
to each security. Mr. Ehringhaus has been with the Advisor since 1994. Prior to
that he was xxxxxxxxxxx. The Advisor's address is 1712 East Boulevard,
Charlotte, North Carolina 28203.
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 may periodically voluntarily waive or reduce its
advisory fee to increase the net income of the Fund. The Advisor has voluntarily
waived its fee and reimbursed a portion of the Predecessor Fund's operating
expenses for the fiscal year ended February 28, 1998. The total fees waived
amounted to $42,295 and expenses reimbursed amounted to $36,881.
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. For further information, see "Investment
Objective and Policies - Investment Transactions" in the Statement of Additional
Information.
A management group consisting of Robert B. Thompson, J.C. Blucher Ehringhaus
III, Managing Director, and Richard K. Bryant (who also controls the Distributor
and Sub-Advisor and is a Trustee of the Trust) controls the Advisor.
Sub-Advisor. The Advisor has delegated the day to day allocation of the
portfolio among the selected investments to Capital Investment Counsel (the
"Sub-Advisor"). The Sub-Advisor is registered under the Investment Advisors Act
of 1940, as amended. The Sub-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. Mr. Bryant is also a principal of the
Advisor. The Sub-Advisor currently serves as investment advisor to over $160
million in assets. The Sub-Advisor is investment advisor to another series of
shares of the trust. The Sub-Advisor's address is 17 Glenwood Avenue, Post
Office Box 32249, Raleigh, North Carolina 27622.
Under the Sub-Advisory Agreement with the Fund, the Sub-Advisor receives a fee
directly from the Advisor based upon a negotiated scale, recognizing the efforts
and contingent liabilities associated therewith. The fee also recognizes the
expense reimbursement status of the Fund. The Sub-Advisor is not directly
compensated by the Fund.
Kurt A. Dressler will be responsible for the Sub-Advisor's role with the Fund.
He has been with the Sub-Advisor since 1996. Prior to that he was a Portfolio
Manager with Townsend Financial Services/Asset Management.
Among the responsibilities of the Sub-Advisor under the Sub-Advisory Agreement
is the selection of brokers and dealers through whom transactions in the Fund's
portfolio investments will be effected. The Sub-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 Sub-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
Sub-Advisor may also utilize a brokerage firm affiliated with the Trust or the
Sub-Advisor (including the Distributor, an affiliate of the Sub-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 Sub-Advisor for its other clients and, conversely, the Fund may benefit from
research services obtained through the brokerage transactions of the
Sub-Advisor's other clients.
Administrator. The Nottingham Company (the "Administrator") serves as the Fund's
administrator. The Administrator, subject to the authority of the Board of
Trustees, provides administrative services to and is generally responsible for
the overall management and day-to-day administrative operations of the Fund,
pursuant to an administration agreement with the Trust.
The Administrator, which was established as a North Carolina corporation in
1988, has been operating (with affiliates) as a financial services firm since
1985. Frank P. Meadows III is the firm's Managing Director and controlling
shareholder.
The Administrator, whose address is 105 North Washington Street, Post Office
Drawer 69, Rocky Mount, North Carolina 27802-0069, provides the Fund with office
space and facilities; provides certain executive personnel to the Fund;
maintains the Fund's accounting records; computes daily the Fund's net asset
value; supervises the preparation of tax returns, financial reports,
prospectuses, and proxy statements; and monitors compliance with certain
recordkeeping and regulatory requirements.
Compensation of the Administrator, based upon the average daily net assets of
the Fund, is at the following annual rates: On the first $50 million of the
Fund's net assets, 0.175%; on the next $50 million, 0.15%; on all assets over
$100 million, 0.125%. In addition, the Administrator currently receives a
monthly fee of $2,000 for the first class of the Fund and $750 for each
additional class of the Fund 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.
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 Fund pays a monthly fee for
these services based on the number of shareholders in the Fund, subject to a
monthly minimum fee of $500.
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 (the "Custodian"),
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, provides safekeeping for their portfolio securities, collects all income
and other payments with respect to portfolio securities, disburses moneys 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.
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 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.
When issued, the shares of each series of the Trust, including the Fund, 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.
Shareholders of the Trust will vote in the aggregate and not by series (fund) or
class, except as otherwise required by the 1940 Act 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
are entitled to vote on matters affecting only that series. 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.
As of the date of this Prospectus, the Predecessor Fund beneficially owned all
the outstanding shares of the Institutional Shares and Investor Shares of the
Fund and therefore may be considered to be a controlling person of each Class of
the Fund for purposes of the 1940 Act.
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 1-800-773-FUND.
Calculation of Performance Data. From time to time the Fund may advertise its
average annual total return for each Class of Fund 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 total return performance data other than
average annual total return for each Class of Fund shares. Such data would show
a percentage rate of return encompassing all elements of return (i.e. income and
capital appreciation or depreciation), and would assume reinvestment of all
dividends and capital gain distributions. Such other total return data may be
shown for the same or different periods as those used for average annual total
return. These data may consist of a cumulative percentage rate of return, actual
year-by-year rates of return, or any combination thereof. A cumulative
percentage rate of return would show 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.
Year 2000 Processing Issue. Many computer programs employed throughout the world
use two digits rather than four to identify the year. These programs, if not
adapted, will not correctly handle the change from "99" to "00" on January 1,
2000, and will not be able to perform necessary functions. The Year 2000 issue
affects virtually all companies and organizations. The CarolinasFund and its
service providers have implemented steps intended to assure that its major
computer systems and processes are capable of Year 2000 processing. We are
working with third parties to assess the adequacy of their compliance efforts
and are developing contingency plans intended to assure that third-party
noncompliance will not materially affect the CarolinasFund's operations.
Companies or governmental entities in which the CarolinasFund invest could be
affected by the Year 2000 issue, but at this time the funds cannot predict the
degree of impact. To the extent the impact on a portfolio holding is negative,
the Fund's returns could be adversely affected.
<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.
The CAROLINASFUND
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
1-800-773-FUND
Investment Advisor
Morehead Capital Advisors LLC
1712 East Boulevard
Charlotte, North Carolina 28203
1-800-934-1012
Sub-Advisor
Capital Investment Counsel
17 Glenwood Avenue
Post Office Box 32249
Raleigh, NC 27622
919-831-2370
Custodian
First Union Bank of North Carolina, NA
Two First Union Center
Charlotte, North Carolina 28288-1151
Independent Auditors
Deloitte & Touche LLP
Pittsburgh, Pennsylvania
PROSPECTUS
June 5, 1998
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
THE CAROLINASFUND
June 5, 1998
A Series of
THE NOTTINGHAM INVESTMENT TRUST II
107 North Washington Street, Post Office
Box 4365
Rocky Mount, North Carolina 27803-0365
Telephone 1-800-773-3863
Table of Contents
INVESTMENT OBJECTIVE AND POLICIES........................................... 2
INVESTMENT LIMITATIONS...................................................... 4
NET ASSET VALUE............................................................. 5
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION.............................. 6
DESCRIPTION OF THE TRUST.................................................... 7
ADDITIONAL INFORMATION CONCERNING TAXES..................................... 8
MANAGEMENT OF THE FUND ................................................... 9
SPECIAL SHAREHOLDER SERVICES................................................ 13
ADDITIONAL INFORMATION ON PERFORMANCE....................................... 14
APPENDIX A - DESCRIPTION OF RATINGS......................................... 16
ANNUAL REPORT OF THE PREDECESSOR FUND FOR FYE FEBRUARY 28, 1998....... attached
This Statement of Additional Information (the "Additional Statement") is meant
to be read in conjunction with the Prospectus, dated the same date as this
Additional Statement, for THE CAROLINASFUND (the "Fund"), as the Prospectus may
be amended or supplemented from time to time, and is incorporated by reference
in its entirety into the Prospectus. Because this Additional Statement is not
itself a prospectus, no investment in shares of the Fund should be made solely
upon the information contained herein. Copies of the Fund's Prospectus may be
obtained at no charge by writing or calling the Fund at the address and phone
number shown above. This Additional Statement is not a prospectus but is
incorporated by reference in the Prospectus in its entirety. Capitalized terms
used but not defined herein have the same meanings as in the Prospectus. All
references herein to the Predecessor Fund refer to another mutual fund of the
same name, which is an investment series of the Maplewood Investment Trusts
pursuant to an Agreement and Plan of Reorganization dated May 15, 1998, the
Fund expects to succeed to the assets and liabilities of the Predecessor Fund on
or about July 1, 1998. The investment objective, policies and restrictions of
the Fund and the Predecessor Fund are substantially identical.
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The following policies supplement the Fund's investment objective and policies
as set forth in the Prospectus for each Class of Shares of the Fund. The
Predecessor Fund commenced operations in 1995.
Additional Information on Fund Instruments. Attached to this Additional
Statement is Appendix A, which contains descriptions of the rating symbols used
by Rating Agencies for securities in which the Fund may invest.
Investment Transactions. Subject to the general supervision of the Trust's Board
of Trustees, the Advisor is responsible for, makes decisions with respect to,
and places orders for all purchases and sales of portfolio securities for the
Fund.
The annualized portfolio turnover rate for the Fund is calculated by dividing
the lesser of purchases or sales of portfolio securities for the reporting
period by the monthly average value of the portfolio securities owned during the
reporting period. The calculation excludes all securities whose maturities or
expiration dates at the time of acquisition are one year or less. Portfolio
turnover of the Fund may vary greatly from year to year as well as within a
particular year, and may be affected by cash requirements for redemption of
shares and by requirements that enable the Fund to receive favorable tax
treatment. Portfolio turnover will not be a limiting factor in making Fund
decisions, and the Fund may engage in short term trading to achieve its
investment objectives.
Purchases of money market instruments by the Fund are made from dealers,
underwriters and issuers. The Fund currently does not expect to incur any
brokerage commission expense on such transactions because money market
instruments are generally traded on a "net" basis by a dealer acting as
principal for its own account without a stated commission. The price of the
security, however, usually includes a profit to the dealer. Securities purchased
in underwritten offerings include a fixed amount of compensation to the
underwriter, generally referred to as the underwriter's concession or discount.
When securities are purchased directly from or sold directly to an issuer, no
commissions or discounts are paid.
Transactions on U.S. stock exchanges involve the payment of negotiated brokerage
commissions. On exchanges on which commissions are negotiated, the cost of
transactions may vary among different brokers. Transactions in the
over-the-counter market are generally on a net basis (i.e., without commission)
through dealers, or otherwise involve transactions directly with the issuer of
an instrument. The Fund's fixed income portfolio transactions will normally be
principal transactions executed in over-the-counter markets and will be executed
on a "net" basis, which may include a dealer markup. With respect to securities
traded only in the over-the-counter market, orders will be executed on a
principal basis with primary market makers in such securities except where
better prices or executions may be obtained on an agency basis or by dealing
with other than a primary market maker.
The Fund may participate, if and when practicable, in bidding for the purchase
of Fund securities directly from an issuer in order to take advantage of the
lower purchase price available to members of a bidding group. The Fund will
engage in this practice, however, only when the Advisor, in its sole discretion,
believes such practice to be otherwise in the Fund's interest.
In executing Fund transactions and selecting brokers or dealers, the Advisor
will seek to obtain the best overall terms available for the Fund. In assessing
the best overall terms available for any transaction, the Advisor shall consider
factors it deems relevant, including the breadth of the market in the security,
the price of the security, the financial condition and execution capability of
the broker or dealer, and the reasonableness of the spread or commission, if
any, both for the specific transaction and on a continuing basis. The sale of
Fund shares may be considered when determining the firms that are to execute
brokerage transactions for the Fund. In addition, the Advisor is authorized to
cause the Fund to pay a broker-dealer which furnishes brokerage and research
services a higher spread or commission than that which might be charged by
another broker-dealer for effecting the same transaction, provided that the
Advisor determines in good faith that such spread or commission is reasonable in
relation to the value of the brokerage and research services provided by such
broker-dealer, viewed in terms of either the particular transaction or the
overall responsibilities of the Advisor to the Fund. Such brokerage and research
services might consist of reports and statistics relating to specific companies
or industries, general summaries of groups of stocks or bonds and their
comparative earnings and yields, or broad overviews of the stock, bond and
government securities markets and the economy. Supplementary research
information so received is in addition to, and not in lieu of, services required
to be performed by the Advisor and does not reduce the advisory fees payable by
the Fund. The Trustees will periodically review any spread or commissions paid
by the Fund to consider whether the spread or commissions paid over
representative periods of time appear to be reasonable in relation to the
benefits inuring to the Fund. It is possible that certain of the supplementary
research or other services received will primarily benefit one or more other
investment companies or other accounts for which the Advisor exercises
investment discretion. Conversely, the Fund may be the primary beneficiary of
the research or services received as a result of securities transactions
effected for such other account or investment company.
The Advisor may also utilize a brokerage firm affiliated with the Trust or the
Advisor (including the Distributor), if it believes it can obtain the best
execution of transactions from such broker. The Fund will not execute portfolio
transactions through, acquire securities issued by, make savings deposits in or
enter into repurchase agreements with the Advisor or an affiliated person of the
Advisor (as such term is defined in the 1940 Act) acting as principal, except to
the extent permitted by the Securities and Exchange Commission ("SEC"). In
addition, the Fund will not purchase securities during the existence of any
underwriting or selling group relating thereto of which the Advisor, or an
affiliated person of the Advisor, is a member, except to the extent permitted by
the SEC. Under certain circumstances, the Fund may be at a disadvantage because
of these limitations in comparison with other investment companies that have
similar investment objectives but are not subject to such limitations.
Investment decisions for the Fund will be made independently from those for any
other series of the Trust, if any, and for any other investment companies and
accounts advised or managed by the Advisor. Such other investment companies and
accounts may also invest in the same securities as the Fund. To the extent
permitted by law, the Advisor may aggregate the securities to be sold or
purchased for the Fund with those to be sold or purchased for other investment
companies or accounts in executing transactions. When a purchase or sale of the
same security is made at substantially the same time on behalf of the Fund and
another investment company or account, the transaction will be averaged as to
price and available investments allocated as to amount, in a manner which the
Advisor believes to be equitable to the Fund and such other investment company
or account. In some instances, this investment procedure may adversely affect
the price paid or received by the Fund or the size of the position obtained or
sold by the Fund.
For the fiscal years ended February 28, 1998, 1997, 1996, and 1995, the total
amount of brokerage commissions paid by the Predecessor Fund were $XXXXX,
$3,449, $9,704 and $306, respectively.
Repurchase Agreements. The Fund may acquire U.S. Government Securities or
corporate debt securities subject to repurchase agreements. A repurchase
transaction occurs when, at the time the Fund purchases a security (normally a
U.S. Treasury obligation), it also resells it to the vendor (normally a member
bank of the Federal Reserve or a registered Government Securities dealer) and
must deliver the security (and/or securities substituted for them under the
repurchase agreement) to the vendor on an agreed upon date in the future. The
repurchase price exceeds the purchase price by an amount which reflects an
agreed upon market interest rate effective for the period of time during which
the repurchase agreement is in effect. Delivery pursuant to the resale will
occur within one to seven days of the purchase.
Repurchase agreements are considered "loans" under the Investment Company Act of
1940, as amended (the "1940 Act"), collateralized by the underlying security.
The Trust will implement procedures to monitor on a continuous basis the value
of the collateral serving as security for repurchase obligations. Additionally,
the Advisor to the Fund will consider the creditworthiness of the vendor. If the
vendor fails to pay the agreed upon resale price on the delivery date, the Fund
will retain or attempt to dispose of the collateral. The Fund's risk is that
such default may include any decline in value of the collateral to an amount
which is less than 100% of the repurchase price, any costs of disposing of such
collateral, and any loss resulting from any delay in foreclosing on the
collateral. The Fund will not enter into any repurchase agreement which will
cause more than 10% of its net assets to be invested in repurchase agreements
which extend beyond seven days.
Description of Money Market Instruments. Money market instruments may include
U.S. Government Securities or corporate debt securities (including those subject
to repurchase agreements), provided that they mature in thirteen months or less
from the date of acquisition and are otherwise eligible for purchase by the
Fund. Money market instruments also may include Banker's Acceptances and
Certificates of Deposit of domestic branches of U.S. banks, Commercial Paper and
Variable Amount Demand Master Notes ("Master Notes"). Banker's Acceptances are
time drafts drawn on and "accepted" by a bank. When a bank "accepts" such a time
draft, it assumes liability for its payment. When the Fund acquires a Banker's
Acceptance the bank which "accepted" the time draft is liable for payment of
interest and principal when due. The Banker's Acceptance carries the full faith
and credit of such bank. A Certificate of Deposit ("CD") is an unsecured
interest bearing debt obligation of a bank. Commercial Paper is an unsecured,
short-term debt obligation of a bank, corporation or other borrower. Commercial
Paper maturity generally ranges from two to 270 days and is usually sold on a
discounted basis rather than as an interest-bearing instrument. The Fund will
invest in Commercial Paper only if it is rated one of the top two rating
categories by Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's
Ratings Group ("S&P"), Fitch Investors Service, Inc. ("Fitch") or Duff & Phelps
("D&P") or, if not rated, of equivalent quality in the Advisor's opinion.
Commercial Paper may include Master Notes of the same quality. Master Notes are
unsecured obligations which are redeemable upon demand of the holder and which
permit the investment of fluctuating amounts at varying rates of interest.
Master Notes are acquired by the Fund only through the Master Note program of
the Fund's custodian bank, acting as administrator thereof. The Advisor will
monitor, on a continuous basis, the earnings power, cash flow and other
liquidity ratios of the issuer of a Master Note held by the Fund.
Illiquid Investments. The Fund may invest up to 10% of its net assets in
illiquid securities, which are investments that cannot be sold or disposed of in
the ordinary course of business within seven days at approximately the prices at
which they are valued. Under the supervision of the Board of Trustees, the
Advisor determines the liquidity of the Fund's investments and, through reports
from the Advisor, the Board monitors investments in illiquid instruments. In
determining the liquidity of the Fund's investments, the Advisor may consider
various factors including (1) the frequency of trades and quotations, (2) the
number of dealers and prospective purchasers in the marketplace, (3) dealer
undertakings to make a market, (4) the nature of the security (including any
demand or tender features) and (5) the nature of the marketplace for trades
(including the ability to assign or offset the Fund's rights and obligations
relating to the investment). Investments currently considered by the Fund to be
illiquid include repurchase agreements not entitling the holder to payment of
principal and interest within seven days. If through a change in values, net
assets or other circumstances, the Fund were in a position where more than 10%
of its net assets were invested in illiquid securities, it would seek to take
appropriate steps to protect liquidity.
Restricted Securities. Within its limitation on investment in illiquid
securities, the Fund may purchase restricted securities that generally can be
sold in privately negotiated transactions, pursuant to an exemption from
registration under the federal securities laws, or in a registered public
offering. Where registration is required, the Fund may be obligated to pay all
or part of the registration expense and a considerable period may elapse between
the time it decides to seek registration and the time the Fund may be permitted
to sell a security under an effective registration statement. If during such a
period, adverse market conditions were to develop, the Fund might obtain a less
favorable price than prevailed when it decided to seek registration of the
security.
INVESTMENT LIMITATIONS
The Fund has adopted the following fundamental investment limitations, which
cannot be changed without approval by holders of a majority of the outstanding
voting shares of the Fund. A "majority" for this purpose means the lesser of (i)
67% of the Fund's outstanding shares represented in person or by proxy at a
meeting at which more than 50% of its outstanding shares are represented, or
(ii) more than 50% of its outstanding shares. Unless otherwise indicated,
percentage limitations apply at the time of purchase.
As a matter of fundamental policy, the Fund may not:
1. 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 its total assets or (b)
to meet redemption requests, in amounts not exceeding 15% of its total
assets. The Fund will not make any investments if borrowing exceeds 5% of
its total assets until such time as total borrowing represents less than 5%
of Fund assets;
2. Invest 25% or more of the value of its total assets in any one industry
(except that securities of the U.S. Government, its agencies, and
instrumentalities are not subject to this limitation);
3. Purchase or sell commodities or commodities contracts; real estate
(including limited partnership interests, but excluding readily marketable
interests in real estate investment trusts or other securities secured by
real estate or interests therein or readily marketable securities issued by
companies that invest in real estate or interests therein); or interests in
oil, gas, or other mineral exploration or development programs or leases
(although it may invest in readily marketable securities of issuers that
invest in or sponsor such programs or leases);
4. Underwrite securities issued by others except to the extent that the
disposition of portfolio securities, either directly from an issuer or from
an underwriter for an issuer, may be deemed to be an underwriting under the
federal securities laws;
5. Invest in warrants, valued at the lower of cost or market, exceeding more
than 5% of the value of the Fund's net assets. Included within this amount,
but not to exceed 2% of the value of the Fund's net assets, may be warrants
which are not listed on the New York or American Stock Exchange; warrants
acquired by the Fund in units or attached to securities may be deemed to be
without value;
6. Participate on a joint or joint and several basis in any trading account in
securities;
7. Purchase foreign securities;
8. Invest more than 10% of its assets in the securities of one or more
investment companies; or
9. Make loans of money or securities, except that the Fund may (i) invest in
repurchase agreements and commercial paper; (ii) purchase a portion of an
issue of publicly distributed bonds, debentures, or other debt securities;
and (iii) acquire private issues of debt securities subject to the
limitations on investments in illiquid securities.
The following investment limitations are not fundamental and may be changed
without shareholder approval. As a matter of non-fundamental policy, the Fund
may not:
1. 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;
2. Invest more than 10% of its net assets in illiquid securities. For this
purpose, illiquid securities include, among others, (a) securities for
which no readily available market exists or which have legal or contractual
restrictions on resale, (b) fixed-time deposits that are subject to
withdrawal penalties and have maturities of more than seven days, and (c)
repurchase agreements not terminable within seven days;
3. Invest in the securities of any issuer if those officers or Trustees of the
Trust and those officers and directors of the Advisor who individually own
more than 1/2 of 1% of the outstanding securities of such issuer together
own more than 5% of such issuer's securities;
4. Write, purchase, or sell puts, calls, straddles, spreads, or combinations
thereof or futures contracts or related options;
5. Make short sales of securities or maintain a short position, except short
sales "against the box." (A short sale is made by selling a security the
Fund does not own. A short sale is "against the box" to the extent that the
Fund contemporaneously owns or has the right to obtain at no additional
cost securities identical to those sold short.) While the Fund has reserved
the right to make short sales "against the box," the Advisor has no present
intention of engaging in such transactions at this time or during the
coming year; or
6. Purchase any securities on margin except in connection with such short term
credits as may be necessary for the clearance of transactions.
NET ASSET VALUE
The net asset value per share of each Class of Shares of the Fund is determined
at the time trading closes on the New York Stock Exchange (currently 4:00 p.m.,
New York time, Monday through Friday, except on business holidays when the New
York Stock Exchange is closed). The New York Stock Exchange recognizes the
following holidays: New Year's Day, President's Day, Martin Luther King, Jr.
Day, Good Friday, Memorial Day, Fourth of July, Labor Day, Thanksgiving Day, and
Christmas Day. Any other holiday recognized by the New York Stock Exchange will
be considered a business holiday on which the net asset value of each Class of
Shares of the Fund will not be calculated.
The net asset value per share of each Class of the Fund is calculated separately
by adding the value of the Fund's securities and other assets belonging to the
Fund and attributable to that Class, subtracting the liabilities charged to the
Fund and to that Class, and dividing the result by the number of outstanding
shares of such Class. "Assets belonging to" the Fund consist of the
consideration received upon the issuance of shares of the Fund together with all
net investment income, realized gains/losses and proceeds derived from the
investment thereof, including any proceeds from the sale of such investments,
any funds or payments derived from any reinvestment of such proceeds, and a
portion of any general assets of the Trust not belonging to a particular
investment Fund. Income, realized and unrealized capital gains and losses, and
any expenses of the Fund not allocated to a particular Class of the Fund will be
allocated to each Class of the Fund on the basis of the net asset value of that
Class in relation to the net asset value of the Fund. Assets belonging to the
Fund are charged with the direct liabilities of the Fund and with a share of the
general liabilities of the Trust, which are normally allocated in proportion to
the number of or the relative net asset values of all of the Trust's series at
the time of allocation or in accordance with other allocation methods approved
by the Board of Trustees. Certain expenses attributable to a particular Class of
shares (such as the distribution and service fees attributable to Investor
Shares) will be charged against that Class of shares. Certain other expenses
attributable to a particular Class of shares (such as registration fees,
professional fees, and certain printing and postage expenses) may be charged
against that Class of shares if such expenses are actually incurred in a
different amount by that Class or if the Class receives services of a different
kind or to a different degree than other Classes, and the Board of Trustees
approves such allocation. Subject to the provisions of the Declaration of Trust,
determinations by the Board of Trustees as to the direct and allocable
liabilities, and the allocable portion of any general assets, with respect to
the Fund and the Classes of the Fund are conclusive.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Purchases. Shares of the Fund are offered and sold on a continuous basis and may
be purchased through authorized investment dealers or directly by contacting the
Distributor or the Fund. Selling dealers have the responsibility of transmitting
orders promptly to the Fund. The public offering price of shares of the Fund
equals net asset value, plus a sales charge for Investor Shares of the Fund.
Capital Investment Group, Inc. (the "Distributor") receives this sales charge as
Distributor and may reallow it in the form of dealer discounts and brokerage
commissions. The current schedule of sales charges and related dealer discounts
and brokerage commissions for the Investor Shares is set forth in the Prospectus
for the Investor Shares, along with the information on rights of accumulation
and letters of intent. See "How Shares May Be Purchased" in the Prospectus.
Plan Under Rule 12b-1. The Trust has adopted a Plan of Distribution (the "Plan")
for the Investor Shares of the Fund pursuant to Rule 12b-1 under the 1940 Act
(see "How Shares May Be Purchased - Distribution Plan" in the Prospectus). Under
the Plan the Fund may expend up to 0.50% of the Investor Shares' average net
assets annually to finance any activity which is primarily intended to result in
the sale of Investor Shares of the Fund and the servicing of shareholder
accounts, provided the Trust's Board of Trustees has approved the category of
expenses for which payment is being made. Such expenditures paid as service fees
to any person who sells Investor Shares of the Fund may not exceed 0.25% of the
average annual net asset value of such shares. Potential benefits of the Plan to
the Fund include improved shareholder servicing, savings to the Fund in transfer
agency costs, benefits to the investment process from growth and stability of
assets and maintenance of a financially healthy management organization.
All of the distribution expenses incurred by the Distributor and others, such as
broker-dealers, in excess of the amount paid by the Fund will be borne by such
persons without any reimbursement from the Fund. Subject to seeking best price
and execution, the Fund may, from time to time, buy or sell portfolio securities
from or to firms, which receive payments under the Plan.
From time to time the Distributor may pay additional amounts from its own
resources to dealers for aid in distribution or for aid in providing
administrative services to shareholders.
The Plan and the Distribution Agreement with the Distributor have been approved
by the Board of Trustees of the Trust, including a majority of the Trustees who
are not "interested persons" (as defined in the 1940 Act) of the Trust and who
have no direct or indirect financial interest in the Plan or any related
agreements, by vote cast in person or at a meeting duly called for the purpose
of voting on the Plan and such Agreement. Continuation of the Plan and the
Distribution Agreement must be approved annually by the Board of Trustees in the
same manner as specified above.
Each year the Trustees must determine whether continuation of the Plan is in the
best interest of shareholders of the Fund and that there is a reasonable
likelihood of its providing a benefit to the Fund, and the Board of Trustees has
made such a determination for the current year of operations under the Plan. The
Plan and the Distribution Agreement may be terminated at any time without
penalty by a majority of those trustees who are not "interested persons" or by a
majority vote of the Fund's outstanding Investor Shares. Any amendment
materially increasing the maximum percentage payable under the Plan must
likewise be approved by a majority vote of the Investor Shares' outstanding
voting stock, as well as by a majority vote of those trustees who are not
"interested persons." In addition, any other material amendment to the Plan must
be approved by a majority vote of the trustees including a majority of the
independent Trustees of the Trust having no interest in the Plan. In addition,
in order for the Plan to remain effective, the selection and nomination of
Trustees who are not "interested persons" of the Trust must be effected by the
Trustees who themselves are not "interested persons" and who have no direct or
indirect financial interest in the Plan. Persons authorized to make payments
under the Plan must provide written reports at least quarterly to the Board of
Trustees for their review.
For the fiscal year ended February 28, 1998, the Investor Shares of the
Predecessor Fund incurred $16,548 in expenditures under the Plan for payments to
broker-dealers and others for the sale or retention of assets.
Redemptions. Under the 1940 Act, the Fund may suspend the right of redemption or
postpone the date of payment for shares during any period when (a) trading on
the New York Stock Exchange is restricted by applicable rules and regulations of
the SEC; (b) the Exchange is closed for other than customary weekend and holiday
closings; (c) the SEC has by order permitted such suspension; or (d) an
emergency exists as determined by the SEC. The Fund may also suspend or postpone
the recordation of the transfer of shares upon the occurrence of any of the
foregoing conditions.
In addition to the situations described in the Prospectus under "How Shares May
Be Redeemed," the Fund may redeem shares involuntarily to reimburse the Fund for
any loss sustained by reason of the failure of a shareholder to make full
payment for shares purchased by the shareholder or to collect any charge
relating to a transaction effected for the benefit of a shareholder which is
applicable to Fund shares as provided in the Prospectus from time to time.
DESCRIPTION OF THE TRUST
The Trust is an unincorporated business trust organized under Massachusetts's
law on October 25, 1990. The Trust's Declaration of Trust authorizes the Board
of Trustees to divide shares into series, each series relating to a separate
portfolio of investments, and to classify and reclassify any unissued shares
into one or more classes of shares of each such series. The Declaration of Trust
currently provides for the shares of eight series, as follows: the Fund managed
by the Advisor; WST Growth & Income Fund managed by Wilbanks, Smith & Thomas
Asset Management, Inc. of Norfolk, Virginia; Capital Value Fund managed by
Capital Investment Counsel, Inc. of Raleigh, North Carolina; ZSA Asset
Allocation Fund managed by Zaske, Sarafa & Associates, Inc. of Birmingham,
Michigan; Investek Fixed Income Trust managed by Investek Capital Management of
Jackson, Mississippi; and The Brown Capital Management Equity Fund, The Brown
Capital Management Balanced Fund and The Brown Capital Management Small Company
Fund managed by Brown Capital Management of Baltimore, Maryland. The Board of
Trustees has authorized the classification of shares of all such series except
the ZSA Funds. The number of shares of each series shall be unlimited. The Trust
does not intend to issue share certificates.
In the event of a liquidation or dissolution of the Trust or an individual
series, such as the Fund, shareholders of a particular series would be entitled
to receive the assets available for distribution belonging to such series.
Shareholders of a series are entitled to participate equally in the net
distributable assets of the particular series involved on liquidation, based on
the number of shares of the series that are held by each shareholder. If there
are any assets, income, earnings, proceeds, funds or payments, that are not
readily identifiable as belonging to any particular series, the Trustees shall
allocate them among any one or more of the series as they, in their sole
discretion, deem fair and equitable.
Shareholders of all of the series of the Trust, including the Fund, will vote
together and not separately on a series-by-series or class-by-class basis,
except as otherwise required by law or when the Board of Trustees determines
that the matter to be voted upon affects only the interests of the shareholders
of a particular series or class. Rule 18f-2 under the 1940 Act provides that any
matter required to be submitted to the holders of the outstanding voting
securities of an investment company such as the Trust shall not be deemed to
have been effectively acted upon unless approved by the holders of a majority of
the outstanding shares of each series or class affected by the matter. A matter
affects a series or class unless it is clear that the interests of each series
or class in the matter are substantially identical or that the matter does not
affect any interest of the series or class. Under Rule 18f-2, the approval of an
investment advisory agreement or any change in a fundamental investment policy
would be effectively acted upon with respect to a series only if approved by a
majority of the outstanding shares of such series. However, the Rule also
provides that the ratification of the appointment of independent accountants,
the approval of principal underwriting contracts and the election of Trustees
may be effectively acted upon by shareholders of the Trust voting together,
without regard to a particular series or class.
When used in the Prospectus or this Additional Statement, a "majority" of
shareholders means the vote of the lesser of (1) 67% of the shares of the Trust
or the applicable series or class present at a meeting if the holders of more
than 50% of the outstanding shares are present in person or by proxy, or (2)
more than 50% of the outstanding shares of the Trust or the applicable series or
class.
When issued for payment as described in the Prospectus and this Additional
Statement, shares of the Fund will be fully paid and non-assessable.
The Declaration of Trust provides that the Trustees of the Trust will not be
liable in any event in connection with the affairs of the Trust, except as such
liability may arise from his or her own bad faith, willful misfeasance, gross
negligence, or reckless disregard of duties. It also provides that all third
parties shall look solely to the Trust property for satisfaction of claims
arising in connection with the affairs of the Trust. With the exceptions stated,
the Declaration of Trust provides that a Trustee or officer is entitled to be
indemnified against all liability in connection with the affairs of the Trust.
ADDITIONAL INFORMATION CONCERNING TAXES
The following summarizes certain additional tax considerations generally
affecting the Fund and its shareholders that are not described in the
Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of the Fund or its shareholders, and the discussion here and in the
Prospectus is not intended as a substitute for careful tax planning and is based
on tax laws and regulations that are in effect on the date hereof; such laws and
regulations may be changed by legislative, judicial, or administrative action.
Investors are advised to consult their tax advisors with specific reference to
their own tax situations.
Each series of the Trust, including the Fund, will be treated as a separate
corporate entity under the Code and intends to qualify or remain qualified as a
regulated investment company. In order to so qualify, each series must elect to
be a regulated investment company or have made such an election for a previous
year and must satisfy, in addition to the distribution requirement described in
the Prospectus, certain requirements with respect to the source of its income
for a taxable year. At least 90% of the gross income of each series must be
derived from dividends, interest, payments with respect to securities loans,
gains from the sale or other disposition of stocks, securities or foreign
currencies, and other income derived with respect to the series' business of
investing in such stock, securities or currencies. Any income derived by a
series from a partnership or trust is treated as derived with respect to the
series' business of investing in stock, securities or currencies only to the
extent that such income is attributable to items of income that would have been
qualifying income if realized by the series in the same manner as by the
partnership or trust.
An investment company may not qualify as a regulated investment company for any
taxable year unless it satisfies certain requirements with respect to the
diversification of its investments at the close of each quarter of the taxable
year. In general, at least 50% of the value of its total assets must be
represented by cash, cash items, government securities, securities of other
regulated investment companies and other securities which, with respect to any
one issuer, do not represent more than 5% of the total assets of the investment
company nor more than 10% of the outstanding voting securities of such issuer.
In addition, not more than 25% of the value of the investment company's total
assets may be invested in the securities (other than government securities or
the securities of other regulated investment companies) of any one issuer. The
Fund intends to satisfy all requirements on an ongoing basis for continued
qualification as a regulated investment company.
Each series of the Trust, including the Fund, will designate any distribution of
long term capital gains as a capital gain dividend in a written notice mailed to
shareholders within 60 days after the close of the series' taxable year.
Shareholders should note that, upon the sale or exchange of series shares, if
the shareholder has not held such shares for at least six months, any loss on
the sale or exchange of those shares will be treated as long term capital loss
to the extent of the capital gain dividends received with respect to the shares.
A 4% nondeductible excise tax is imposed on regulated investment companies that
fail to currently distribute an amount equal to specified percentages of their
ordinary taxable income and capital gain net income (excess of capital gains
over capital losses). Each series of the Trust, including the Fund, intends to
make sufficient distributions or deemed distributions of its ordinary taxable
income and any capital gain net income prior to the end of each calendar year to
avoid liability for this excise tax.
If for any taxable year a series does not qualify for the special federal income
tax treatment afforded regulated investment companies, all of its taxable income
will be subject to federal income tax at regular corporate rates (without any
deduction for distributions to its shareholders). In such event, dividend
distributions (whether or not derived from interest on tax-exempt securities)
would be taxable as ordinary income to shareholders to the extent of the series'
current and accumulated earnings and profits, and would be eligible for the
dividends received deduction for corporations.
Each series of the Trust, including the Fund, will be required in certain cases
to withhold and remit to the U.S. Treasury 31% of taxable dividends or 31% of
gross proceeds realized upon sale paid to shareholders who have failed to
provide a correct tax identification number in the manner required, or who are
subject to withholding by the Internal Revenue Service for failure properly to
include on their return payments of taxable interest or dividends, or who have
failed to certify to the Fund that they are not subject to backup withholding
when required to do so or that they are "exempt recipients."
Depending upon the extent of the Fund's activities in states and localities in
which its offices are maintained, in which its agents or independent contractors
are located or in which it is otherwise deemed to be conducting business, the
Fund may be subject to the tax laws of such states or localities. In addition,
in those states and localities that have income tax laws, the treatment of the
Fund and its shareholders under such laws may differ from their treatment under
federal income tax laws.
MANAGEMENT OF THE FUND
Trustees and Officers. The Trustees and executive officers of the Trust, their
ages, and their principal occupations for the last five years are as follows:
Name, Age, Position(s) Principal Occupation(s)
and Address During Past 5 Years
Jack E. Brinson, 64 President, Brinson Investment Co.
Trustee and Chairman President, Brinson Chevrolet, Inc.
1105 Panola Street Tarboro, North Carolina
Tarboro, North Carolina 27886
Eddie C. Brown, 55 President
Trustee* Brown Capital Management, Inc.
President Baltimore, Maryland
The Brown Capital Management Funds
809 Cathedral Street
Baltimore, Maryland 21201
Richard K. Bryant, 38 President
Trustee* Capital Investment Group
President Raleigh, North Carolina
Capital Value Fund Vice President
Post Office Box 32249 Capital Investment Counsel
Raleigh, North Carolina 27622 Raleigh, North Carolina
Elmer O. Edgerton, Jr., 55 President
Vice President Capital Investment Counsel
Capital Value Fund Raleigh, North Carolina
Post Office Box 32249 Vice President
Raleigh, North Carolina 27622 Capital Investment Group
Raleigh, North Carolina
R. Mark Fields, 44 Vice President
Vice President Investek Capital Management
Investek Fixed Income Trust Jackson, Mississippi
317 East Capitol
Jackson, Mississippi 39201
John M. Friedman, 53 Vice President
Vice President Investek Capital Management
Investek Fixed Income Trust Jackson, Mississippi
317 East Capitol
Jackson, Mississippi 39201
Keith A. Lee, 37 Vice President
Vice President Brown Capital Management, Inc.
The Brown Capital Management Funds Baltimore, Maryland
309 Cathedral Street
Baltimore, Maryland 21201
Michael T. McRee, 53 President
President Investek Capital Management, Inc.
Investek Fixed Income Trust Jackson, Mississippi
317 East Capitol
Jackson, Mississippi 39201
Anmar K. Sarafa, 36 President
Vice President Zaske, Sarafa & Associates, Inc.
The ZSA Funds Birmingham, Michigan
Suite 200
355 South Woodward Avenue
Birmingham, Michigan 48009
Thomas W. Steed, 39 Senior Corporate Attorney
Trustee Hardee's Food Systems
101 Bristol Court Rocky Mount, North Carolina
Rocky Mount, North Carolina 27803
J. Buckley Strandberg, 40 Vice President
Trustee Standard Insurance and Realty
Post Office Box 1375 Rocky Mount, North Carolina
Rocky Mount, North Carolina 27803
Norwood A. Thomas, Jr. 64 Executive Vice President
Executive Vice President Wilbanks, Smith & Thomas Asset Management
WST GROWTH & INCOME FUND Norfolk, Virginia
One Commercial Place, Suite 1450
Norfolk, Virginia 23510
C. Frank Watson III, 26 Vice President
Secretary The Nottingham Company
105 North Washington Street Rocky Mount, North Carolina
Rocky Mount, North Carolina 27803
Wayne F. Wilbanks, 37 President
President Wilbanks, Smith & Thomas Asset Management
WST GROWTH & INCOME FUND Norfolk, Virginia
One Commercial Place, Suite 1450
Norfolk, Virginia 23510
Julian G. Winters, 29 Legal and Compliance Director
Treasurer The Nottingham Company
105 North Washington Street (Administrator to the Fund)
Rocky Mount, North Carolina 27803 Rocky Mount, North Carolina
Since 1996; previously
Operations Manager, Tar Heel
Medical, Nashville, North Carolina
Arthur E. Zaske, 49 Chairman and Chief Investment Officer
Trustee* Zaske, Sarafa, & Associates, Inc.
President Birmingham, Michigan
The ZSA Funds
Suite 200
355 South Woodward Avenue
Birmingham, Michigan 48009
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* Indicates that Trustee is an "interested person" of the Trust for purposes of
the 1940 Act because of his position with one of the investment advisors to the
Trust.
The officers of the Trust will not receive compensation from the Trust for
performing the duties of their offices. Each Trustee who is not an "interested
person" of the Trust receives a fee of $2,000 each year plus $250 per series of
the Trust per meeting attended in person and $100 per series of the Trust per
meeting attended by telephone. All Trustees are reimbursed for any out-of-pocket
expenses incurred in connection with attendance at meetings.
Compensation Table*
Pension
Retirement Total
Aggregate Benefits Estimated Compensation
Compensation Accrued As Annual from the Trust
Name of Person, from the Part of Fund Benefits Upon Paid to
Position Trust Expenses Retirement Trustees
Jack E. Brinson $8,500 None None $8,500
Trustee
Eddie C. Brown None None None None
Trustee
Richard K. Bryant None None None None
Trustee
Thomas W. Steed $8,500 None None $8,500
Trustee
J. Buckley Strandberg $7,600 None None $7,600
Trustee
*Figures are for the fiscal year ended March 31, 1998.
Investment Advisor. Information about Morehead Capital Advisors, LLC (the
"Advisor") and its duties and compensation as Advisor are contained in the
Prospectus.
The Advisor will receive a monthly management fee equal to an annual rate of
1.00% of the average daily net assets of the Fund. For the fiscal years ended
February 28, 1998, 1997, 1996, and 1995, the Advisor waived all of the
management fee from the Predecessor Fund in the amount of $42,295, $27,685,
$11,386 and $410, respectively, and voluntarily reimbursed a portion of the
Predecessor Fund's operating expenses in the amount of $36,881, $58,459,
$69,248, and $10,548 respectively.
Under the Advisory Agreement, the Advisor is not liable for any error of
judgment or mistake of law or for any loss suffered by the Fund in connection
with the performance of such Agreement, except a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services or a
loss resulting from willful misfeasance, bad faith or gross negligence on the
part of the Advisor in the performance of its duties or from its reckless
disregard of its duties and obligations under the Agreement.
Sub-Advisor. Information about Capital Investment Counsel (the "Sub-Advisor")
and its duties and compensation are contained in the Prospectus. Under the
Sub-Advisory Agreement, the Advisor is not liable for any error of judgment or
mistake of law or for any loss suffered by the Fund in connection with the
performance of such Agreement, except a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services or a
loss resulting from willful misfeasance, bad faith or gross negligence on the
part of the Sub-Advisor in the performance of its duties or from its reckless
disregard of its duties and obligations under the Agreement.
Administrator and Transfer Agent. The Trust has entered into a Fund Accounting,
Dividend Disbursing & Transfer Agent and Administration Agreement with The
Nottingham Company (the "Administrator"), 105 North Washington Street, Post
Office Box 4365, Rocky Mount, North Carolina 27803-0365, pursuant to which the
Administrator receives a fee at the annual rate of 0.175% of the average daily
net assets of the Fund on the first $50 million; 0.15% of the next $50 million;
0.125% on the next $50 million; and 0.10% of its average daily net assets in
excess of $150 million. In addition, the Administrator currently receives a base
monthly fee of $2,000 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.
The Administrator will perform the following services for the Fund: (1)
coordinate with the Custodian and monitor the services it provides to the Fund;
(2) coordinate with and monitor any other third parties furnishing services to
the Fund; (3) provide the Fund with necessary office space, telephones and other
communications facilities and personnel competent to perform administrative and
clerical functions for the Fund; (4) supervise the maintenance by third parties
of such books and records of the Fund as may be required by applicable federal
or state law; (5) prepare or supervise the preparation by third parties of all
federal, state and local tax returns and reports of the Fund required by
applicable law; (6) prepare and, after approval by the Trust, file and arrange
for the distribution of proxy materials and periodic reports to shareholders of
the Fund as required by applicable law; (7) prepare and, after approval by the
Trust, arrange for the filing of such registration statements and other
documents with the Securities and Exchange Commission and other federal and
state regulatory authorities as may be required by applicable law; (8) review
and submit to the officers of the Trust for their approval invoices or other
requests for payment of Fund expenses and instruct the Custodian to issue checks
in payment thereof; and (9) take such other action with respect to the Fund as
may be necessary in the opinion of the Administrator to perform its duties under
the agreement. The Administrator will also provide certain accounting and
pricing services for the Fund.
With the approval of the Trust, the Administrator has contracted with NC
Shareholder Services, LLC (the "Transfer Agent"), a North Carolina limited
liability company, to serve as transfer, dividend paying, and shareholder
servicing agent for the Fund. The Transfer Agent is compensated for its services
by the Administrator and not directly by the Fund. The address of the Transfer
Agent is 107 North Washington Street, Post Office Box 4365, Rocky Mount, North
Carolina 27803-0365.
For the fiscal years ended February 1998 and 1997, the administrator to the
Predecessor Fund (Countrywide Services, Inc., Cincinnati, Ohio) received from
the Predecessor Fund transfer agent fees of $24,000 and $15,000 respectively,
accounting and pricing fees of $25,229 and $15,000 respectively, and
administrative fees of $12,000 and $7,500 respectively. Prior to June 1, 1996,
The Nottingham Company served as administrator of the Predecessor Fund. For the
fiscal years ended February 28, 1997 and 1996, The Nottingham Company received
from the Predecessor Fund aggregate fees of $10,552 and $36,000 respectively.
Distributor. Capital Investment Group, Inc. (the "Distributor"), Post Office Box
32249, Raleigh, North Carolina 27622, acts as an underwriter and distributor of
the Fund's shares for the purpose of facilitating the registration of shares of
the Fund under state securities laws and to assist in sales of Fund shares
pursuant to a Distribution Agreement (the "Distribution Agreement") approved by
the Board of Trustees of the Trust.
In this regard, the Distributor has agreed at its own expense to qualify as a
broker-dealer under all applicable federal or state laws in those states which
the Fund shall from time to time identify to the Distributor as states in which
it wishes to offer its shares for sale, in order that state registrations may be
maintained for the Fund.
The Distributor is a broker-dealer registered with the Securities and Exchange
Commission and a member in good standing of the National Association of
Securities Dealers, Inc.
Either party upon 60 days prior written notice to the other party may terminate
the Distribution Agreement.
For the fiscal years ended February 28, 1998 and 1997, the distributor to the
Predecessor Fund (Alpha and Omega, Inc.) earned $XXXXX and $5,923 respectively
in underwriting and broker commissions. Prior to June 1, 1996, Capital
Investment Group, Inc. Served as distrbituor to the Predecessor Fund. For the
fiscal year ended February 29, 1996, Capital Investment Group, Inc. earned
$5,198 in underwriting commissions.
Custodian. First Union National Bank of North Carolina (the "Custodian") serves
as custodian for the Fund's assets. The Custodian's mailing address is Two First
Union Center, Charlotte, North Carolina 28288. The Custodian acts as the
depository for the Fund, safekeeps its portfolio securities, collects all income
and other payments with respect to portfolio securities, disburses monies at the
Fund's request and maintains records in connection with its duties as Custodian.
For its services as Custodian, the Custodian is entitled to receive from the
Fund an annual fee based on the average net assets of the Fund held by the
Custodian.
Independent Auditors. The firm of Deloitte & Touche, LLP, 2500 One PPG Place,
Pittsburgh, Pennsylvania 15222-5401, serves as independent auditors for the
Fund, and will audit the annual financial statements of the Fund and prepare the
Fund's federal and state tax returns. KMPG Peat Marwick served as auditor to the
Predecessor Fund.
SPECIAL SHAREHOLDER SERVICES
The Fund offers the following shareholder services:
Regular Account. The regular account allows for voluntary investments to be made
at any time. Available to individuals, custodians, corporations, trusts,
estates, corporate retirement plans and others, investors are free to make
additions and withdrawals to or from their account as often as they wish. When
an investor makes an initial investment in the Fund, a shareholder account is
opened in accordance with the investor's registration instructions. Each time
there is a transaction in a shareholder account, such as an additional
investment or the reinvestment of a dividend or distribution, the shareholder
will receive a confirmation statement showing the current transaction and all
prior transactions in the shareholder account during the calendar year to date,
along with a summary of the status of the account as of the transaction date. As
stated in the Prospectus, share certificates are not issued.
Automatic Investment Plan. The automatic investment plan enables shareholders to
make regular monthly or quarterly investment in shares through automatic charges
to their checking account. With shareholder authorization and bank approval, the
Administrator will automatically charge the checking account for the amount
specified ($100 minimum) which will be automatically invested in shares at the
public offering price on or about the 21st day of the month. The shareholder may
change the amount of the investment or discontinue the plan at any time by
writing to the Fund.
Systematic Withdrawal Plan. Shareholders owning shares with a value of $5,000 or
more may establish a Systematic Withdrawal Plan. A shareholder may receive
monthly or quarterly payments, in amounts of not less than $100 per payment, by
authorizing the Fund to redeem the necessary number of shares periodically (each
month, or quarterly in the months of March, June, September and December) in
order to make the payments requested. The Fund has the capacity of
electronically depositing the proceeds of the systematic withdrawal directly to
the shareholder's personal bank account ($5,000 minimum per bank wire).
Instructions for establishing this service are included in the Fund Shares
Application, enclosed in the Prospectus, or available by calling the Fund. If
the shareholder prefers to receive his systematic withdrawal proceeds in cash,
or if such proceeds are less than the $5,000 minimum for a bank wire, checks
will be made payable to the designated recipient and mailed within 7 days of the
valuation date. If the designated recipient is other than the registered
shareholder, the signature of each shareholder must be guaranteed on the
application (see "Signature Guarantees" in the Prospectus). A corporation (or
partnership) must also submit a "Corporate Resolution" (or "Certification of
Partnership") indicating the names, titles and required number of signatures
authorized to act on its behalf. The application must be signed by a duly
authorized officer(s) and the corporate seal affixed. No redemption fees are
charged to shareholders under this plan. Costs in conjunction with the
administration of the plan are borne by the Fund. Shareholders should be aware
that such systematic withdrawals may deplete or use up entirely their initial
investment and may result in realized long-term or short-term capital gains or
losses. The Systematic Withdrawal Plan may be terminated at any time by the Fund
upon sixty days written notice or by a shareholder upon written notice to the
Fund. Applications and further details may be obtained by calling the Fund at
1-800-773-3863, or by writing to:
THE CAROLINASFUND
[Investor Shares] or [Institutional Shares]
105 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
Purchases in Kind. The Fund may accept securities in lieu of cash in payment for
the purchase of shares in the Fund. The acceptance of such securities is at the
sole discretion of the Advisor based upon the suitability of the securities
accepted for inclusion as a long term investment of the Fund, the marketability
of such securities, and other factors which the Advisor may deem appropriate. If
accepted, the securities will be valued using the same criteria and methods as
described in "How Shares are Valued" in the Prospectus.
Redemptions in Kind. The Fund does not intend, under normal circumstances, to
redeem its securities by payment in kind. It is possible, however, that
conditions may arise in the future which would, in the opinion of the Trustees,
make it undesirable for the Fund to pay for all redemptions in cash. In such
case, the Board of Trustees may authorize payment to be made in readily
marketable portfolio securities of the Fund. Securities delivered in payment of
redemptions would be valued at the same value assigned to them in computing the
net asset value per share. Shareholders receiving them would incur brokerage
costs when these securities are sold. An irrevocable election has been filed
under Rule 18f-1 of the 1940 Act, wherein the Fund committed itself to pay
redemptions in cash, rather than in kind, to any shareholder of record of the
Fund who redeems during any ninety-day period, the lesser of (a) $250,000 or (b)
one percent (1%) of the Fund's net asset value at the beginning of such period.
Transfer of Registration. To transfer shares to another owner, send a written
request to the Fund at the address shown herein. Your request should include the
following: (1) the Fund name and existing account registration; (2) signature(s)
of the registered owner(s) exactly as the signature(s) appear(s) on the account
registration; (3) the new account registration, address, social security or
taxpayer identification number and how dividends and capital gains are to be
distributed; (4) signature guarantees (See the Prospectus under the heading
"Signature Guarantees"); and (5) any additional documents which are required for
transfer by corporations, administrators, executors, trustees, guardians, etc.
If you have any questions about transferring shares, call or write the Fund.
ADDITIONAL INFORMATION ON PERFORMANCE
From time to time, the total return of each Class of the Fund may be quoted in
advertisements, sales literature, shareholder reports or other communications to
shareholders. The Fund computes the "average annual total return" of each Class
of the Fund by determining the average annual compounded rates of return during
specified periods that equate the initial amount invested to the ending
redeemable value of such investment. This is done by determining the ending
redeemable value of a hypothetical $1,000 initial payment. This calculation is
as follows:
P(1+T)n = ERV
Where: T = average annual total return.
ERV = ending redeemable value at the end of the period covered
by the computation of a hypothetical $1,000 payment made
at the beginning of the period.
P = hypothetical initial payment of $1,000 from which the
maximum sales load is deducted.
n = period covered by the computation, expressed in terms of
years.
The Fund may also compute the aggregate total return of each Class of the Fund,
which is calculated in a similar manner, except that the results are not
annualized.
The calculation of average annual total return and aggregate total return assume
that the maximum sales load is deducted from the initial $1,000 investment at
the time it is made and that there is a reinvestment of all dividends and
capital gain distributions on the reinvestment dates during the period. The
ending redeemable value is determined by assuming complete redemption of the
hypothetical investment and the deduction of all nonrecurring charges at the end
of the period covered by the computations. The Fund may also quote other total
return information that does not reflect the effects of the sales load.
The average annual total returns of Investor Shares of the Predecessor Fund for
the one year period ended February 28, 1998 and the period since inception
(January 3, 1995) to February 28, 1998 were 26.26% and 18.21% respectively.
Without reflecting the sales load for the Investor Shares of the Predecessor
Fund for such period, the average annual total returns of Investor Shares of the
Predecessor Fund for such periods were XXXX% and XXXX%, respectively. The
cumulative total return for the Investor Shares of the Predecessor Fund,
computed without reflecting the applicable sales load, for the period since
inception (January 3, 1995) through February 28, 1998 was 69.56%.
The average annual total returns of Institutional Shares of the Predecessor Fund
for the one year period ended February 28, 1998 and the period since inception
(May 22, 1995) to February 28, 1998 were 31.59% and 20.21% respectively. The
cumulative total return for the Institutional Shares of the Predecessor Fund for
the period since inception (May 22, 1995) through February 28, 1998 was XXXXX%.
The Fund's performance may be compared in advertisements, sales literature,
shareholder reports, and other communications to the performance of other mutual
funds having similar objectives or to standardized indices or other measures of
investment performance. In particular, the Fund may compare its performance to
the S&P 500 Index, the Lehman Aggregate Bond Index, or a combination of such
indices. Comparative performance may also be expressed by reference to a ranking
prepared by a mutual fund monitoring service or by one or more newspapers,
newsletters or financial periodicals. The Fund may also occasionally cite
statistics to reflect its volatility and risk.
The Fund's performance fluctuates on a daily basis largely because net earnings
and net asset value per share fluctuate daily. Both net earnings and net asset
value per share are factors in the computation of total return as described
above. As indicated, from time to time, the Fund may advertise its performance
compared to similar funds or portfolios using certain indices, reporting
services, and financial publications. These may include the following:
o Lipper Analytical Services, Inc. ranks funds in various fund categories
by making comparative calculations using total return. Total return
assumes the reinvestment of all capital gains distributions and income
dividends and takes into account any change in net asset value over a
specific period of time.
o Morningstar, Inc., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for
two weeks.
Investors may use such indices in addition to the Fund's Prospectus to obtain a
more complete view of the Fund's performance before investing. Of course, when
comparing the Fund's performance to any index, factors such as composition of
the index and prevailing market conditions should be considered in assessing the
significance of such comparisons. When comparing funds using reporting services,
or total return, investors should take into consideration any relevant
differences in funds such as permitted portfolio compositions and methods used
to value portfolio securities and compute offering price. Advertisements and
other sales literature for the Fund may quote total returns that are calculated
on non-standardized base periods. The total returns represent the historic
change in the value of an investment in the Fund based on monthly reinvestment
of dividends over a specified period of time.
From time to time the Fund may include in advertisements and other
communications information, charts, and illustrations relating to inflation and
the reflects of inflation on the dollar, including the purchasing power of the
dollar at various rates of inflation. The Fund may also disclose from time to
time information about its portfolio allocation and holdings at a particular
date (including ratings of securities assigned by independent rating services
such as S&P and Moody's). The Fund may also depict the historical performance of
the securities in which the Fund may invest over periods reflecting a variety of
market or economic conditions either alone or in comparison with alternative
investments, performance indices of those investments, or economic indicators.
The Fund may also include in advertisements and in materials furnished to
present and prospective shareholders statements or illustrations relating to the
appropriateness of types of securities and/or mutual funds that may be employed
to meet specific financial goals, such as saving for retirement, children's
education, or other future needs.
<PAGE>
APPENDIX A
DESCRIPTION OF RATINGS
Under normal market conditions, at least 90% of the Fund's net assets will be
invested in equities. As a temporary defensive position, however, the Fund may
invest up to 100% of its assets in fixed income securities that meet the
following minimum rating criteria ("Investment-Grade Debt Securities") or if not
rated, of equivalent quality as determined by the Advisor.
When the Fund invests in Investment Grade Debt Securities as a temporary
defensive position, it is not pursuing it investment objective. Under normal
circumstances, however, the Fund may invest in money market or repurchase
agreement instruments as described in the Prospectus. The various ratings used
by the nationally recognized securities rating services are described below.
A rating by a rating service represents the service's opinion as to the credit
quality of the security being rated. However, the ratings are general and are
not absolute standards of quality or guarantees as to the creditworthiness of an
issuer. Consequently, the Advisor believes that the quality of fixed income
securities in which the Fund may invest should be continuously reviewed and that
individual analysts give different weightings to the various factors involved in
credit analysis. A rating is not a recommendation to purchase, sell or hold a
security, because it does not take into account market value or suitability for
a particular investor. When a security has received a rating from more than one
service, each rating is evaluated independently. Ratings are based on current
information furnished by the issuer or obtained by the rating services from
other sources that they consider reliable. Ratings may be changed, suspended or
withdrawn as a result of changes in or unavailability of such information, or
for other reasons.
Standard & Poor's Ratings Group. The following summarizes the highest four
ratings used by Standard & Poor's Ratings Group ("S&P") for bonds that are
deemed to be "Investment-Grade Debt Securities" by the Advisor:
AAA - This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to pay interest and repay
principal.
AA - Debt rated AA is considered to have a very strong capacity to pay
interest and repay principal and differs from AAA issues only in a small
degree.
A - Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than debt in higher
rated categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for bonds in this category than for debt in
higher rated categories.
To provide more detailed indications of credit quality, the AA, A and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within these major rating categories.
Bonds rated BB, B, CCC, CC and C are not considered by the Advisor to be
"Investment-Grade Debt Securities" and are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and C the highest degree of speculation. While such
bonds may have some quality and protective characteristics, these are outweighed
by large uncertainties or major risk exposures to adverse conditions.
Commercial paper rated A-1 by S&P indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted A-1+. Capacity for timely payment on
commercial paper rated A-2 is satisfactory, but the relative degree of safety is
not as high as for issues designated A-1.
The rating SP-1 is the highest rating assigned by S&P to municipal notes and
indicates very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics are given a
plus (+) designation.
Moody's Investors Service, Inc. The following summarizes the highest four
ratings used by Moody's Investors Service, Inc. ("Moody's") for bonds that are
deemed to be "Investment-Grade Debt Securities" by the Advisor:
Aaa - Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred
to as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
Aa - Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high-grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there
may be other elements present which make the long-term risks appear
somewhat larger than in Aaa securities.
A - Debt that is rated A possesses many favorable investment attributes
and is to be considered as an upper medium grade obligation. Factors
giving security to principal and interest are considered adequate but
elements may be present which suggest a susceptibility to impairment
sometime in the future.
Baa - Debt, which is rated Baa, is considered as a medium grade
obligation, i.e., it is neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present
but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such debt
lacks outstanding investment characteristics and in fact has speculative
characteristics as well.
Moody's applies numerical modifiers (l, 2 and 3) with respect to bonds rated Aa,
A and Baa. The modifier 1 indicates that the bond being rated ranks in the
higher end of its generic rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the bond ranks in the lower end of
its generic rating category.
Bonds, which are rated Ba, B, Caa, Ca or C by Moody's, are not considered
"Investment-Grade Debt Securities" by the Advisor. Bonds rated Ba are judged to
have speculative elements because their future cannot be considered as well
assured. Uncertainty of position characterizes bonds in this class, because the
protection of interest and principal payments often may be very moderate and not
well safeguarded.
Bonds, which are rated B generally, lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the security over any long period for time may be small. Bonds,
which are rated Caa, are of poor standing. Such securities may be in default or
there may be present elements of danger with respect to principal or interest.
Bonds, which are rated Ca, represent obligations, which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
Bonds which are rated C are the lowest rated class of bonds and issues so rated
can be regarded as having extremely poor prospects of ever attaining any real
investment standing.
The rating Prime-1 is the highest commercial paper rating assigned by Moody's.
Issuers rated Prime-1 (or related supporting institutions) are considered to
have a superior capacity for repayment of short-term promissory obligations.
Issuers rated Prime-2 (or related supporting institutions) are considered to
have a strong capacity for repayment of short-term promissory obligations. This
will normally be evidenced by many of the characteristics of issuers rated
Prime-1 but to a lesser degree. Earnings trends and coverage ratios, while
sound, will be more subject to variation. Capitalization characteristics, while
still appropriated may be more affected by external conditions. Ample alternate
liquidity is maintained.
The following summarizes the highest rating used by Moody's for short-term notes
and variable rate demand obligations:
MIG-l; VMIG-l - Obligations bearing these designations are of the best
quality, enjoying strong protection by established cash flows, superior
liquidity support or demonstrated broad-based access to the market for
refinancing.
Duff & Phelps Credit Rating Co. The following summarizes the highest four
ratings used by Duff & Phelps Credit Rating Co. ("D&P") for bonds, which are
deemed to be "Investment-Grade Debt Securities" by the Advisor:
AAA - Bonds that are rated AAA are of the highest credit quality. The
risk factors are considered to be negligible, being only slightly more
than for risk-free U.S. Treasury debt.
AA - Bonds that are rated AA are of high credit quality. Protection
factors are strong. Risk is modest but may vary slightly from time to
time because of economic conditions.
A - Bonds rated A have average but adequate protection factors. The risk
factors are more variable and greater in periods of economic stress.
BBB - Bonds rated BBB have below average protection factors but are still
considered sufficient for prudent investment. There is considerable
variability in risk during economic cycles.
Bonds rated BB, B and CCC by D&P are not considered "Investment-Grade Debt
Securities" and are regarded, on balance, as predominantly speculative with
respect to the issuer's ability to pay interest and make principal payments in
accordance with the terms of the obligations. BB indicates the lowest degree of
speculation and CCC the highest degree of speculation.
The rating Duff l is the highest rating assigned by D&P for short-term debt,
including commercial paper. D&P employs three designations, Duff l+, Duff 1 and
Duff 1- within the highest rating category. Duff l+ indicates highest certainty
of timely payment. Short-term liquidity, including internal operating factors
and/or access to alternative sources of funds, is judged to be "outstanding, and
safety is just below risk-free U.S. Treasury short-term obligations." Duff 1
indicates very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are
considered to be minor. Duff 1- indicates high certainty of timely payment.
Liquidity factors are strong and supported by good fundamental protection
factors. Risk factors are very small.
Fitch Investors Service, Inc. The following summarizes the highest four ratings
used by Fitch Investors Service, Inc. ("Fitch") for bonds which are deemed to be
"Investment-Grade Debt Securities" by the Advisor:
AAA - Bonds are considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.
AA - Bonds are considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated AAA. Because
bonds rated in the AAA and AA categories are not significantly vulnerable
to foreseeable future developments, short-term debt of these issuers is
generally rated F-1+.
A - Bonds that are rated A are considered to be investment grade and of
high credit quality. The obligor's ability to pay interest and repay
principal is considered to be strong, but may be more vulnerable to
adverse changes in economic conditions and circumstances than bonds with
higher ratings.
BBB - Bonds rated BBB are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and
repay principal is considered to be adequate. Adverse changes in economic
conditions and circumstances, however, are more likely to have adverse
impact on these bonds, and therefore impair timely payment. The
likelihood that the ratings of these bonds will fall below investment
grade is higher than for bonds with higher ratings.
To provide more detailed indications of credit quality, the AA, A and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within a rating category.
Bonds rated BB, B and CCC by Fitch are not considered "Investment-Grade Debt
Securities" and are regarded, on balance, as predominantly speculative with
respect to the issuer's ability to pay interest and make principal payments in
accordance with the terms of the obligations. BB indicates the lowest degree of
speculation and CCC the highest degree of speculation.
The following summarizes the three highest ratings used by Fitch for short-term
notes, municipal notes, variable rate demand instruments and commercial paper:
F-1+ - Instruments assigned this rating are regarded as having the
strongest degree of assurance for timely payment.
F-1 - Instruments assigned this rating reflect an assurance of timely
payment only slightly less in degree than issues rated F-1+
F-2 - Instruments assigned this rating have satisfactory degree of
assurance for timely payment, but the margin of safety is not as great as
for issues assigned F-1+ and F-1 ratings.
<PAGE>
PART C
THE NOTTINGHAM INVESTMENT TRUST II
FORM N1-A
OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits
a) Financial Statements:
Financial Highlights are incorporated by reference to Post-
Effective Amendment 31.
Annual Reports for the fiscal year ended March 31, 1997 for each
series of the Registrant are incorporated by reference to
Post-Effective Amendment 31 under Part B.
The Financial Statements for the WST Growth & Income Fund and The
CarolinasFund will be filed by amendment.
b) Exhibits
(1) Declaration of Trust - Amended and Restated Declaration of Trust;
Incorporated by reference; filed 6/2/95
(2) By-Laws - Amended and Restated By-Laws; Incorporated by reference; filed
6/2/95
(3) Not Applicable
(4) Not Applicable - the series of the Registrant do not issue certificates
(5) (a) Investment Advisory Agreement for the Capital Value Fund - Incorporated
by reference; filed on 10/29/90; Amendment to the Investment Advisory
Agreement - Incorporated by reference; filed on 8/1/95
(b) Investment Advisory Agreement for Investek Fixed Income Trust -
Incorporated by reference; filed on 9/20/91
(c) Investment Advisory Agreement for ZSA Social Conscience Fund -
Incorporated by reference; filed on 4/26/94
(d) Investment Advisory Agreement for ZSA Asset Allocation Fund -
Incorporated by reference; filed on 5/22/92; Amendment to the Advisory
Agreement - Incorporated by reference; filed 6/2/95
(e) Investment Advisory Agreement for The Brown Capital Management Equity
Fund - Incorporated by reference; filed on 5/27/92
(f) Investment Advisory Agreement for The Brown Capital Management Balanced
Fund - Incorporated by reference; filed on 5/27/92
(g) Investment Advisory Agreement for The Brown Capital Management Small
Company Fund - Incorporated by reference; filed on 5/27/92
(h) Investment Advisory Agreement for WST Growth & Income Fund -
Incorporated by reference; filed on 7/24/97
(i) Investment Advisory Agreement for The CarolinasFund - Incorporated by
reference; filed 4/20/98
(6) (a) Distribution Agreement for Capital Value Fund - Incorporated by
reference; filed on 8/1/95
(b) Distribution Agreement for Investek Fixed Income Trust - Incorporated by
reference; filed 7/12/96
(c) Distribution Agreement for ZSA Social Conscience Fund - Incorporated by
reference; filed on 4/26/94
(d) Distribution Agreement for ZSA Asset Allocation Fund - Incorporated by
reference; filed on 7/29/94
(e) Distribution Agreement for The Brown Capital Management Equity Fund -
Incorporated by reference; filed 6/2/95
(f) Distribution Agreement for The Brown Capital Management Balanced Fund -
Incorporated by reference; filed 6/2/95
(g) Distribution Agreement for The Brown Capital Management Small Company
Fund - Incorporated by reference; filed 6/2/95
(h) Distribution Agreement for The WST Growth & Income Fund - Incorporated
by reference; filed 7/12/96
(i) Distribution Agreement for The CarolinasFund -Incorporated by reference;
filed 4/20/98
(7) Not Applicable
(8) Custodian Agreement - Incorporated by reference; filed 7/24/97
(9) (a) Fund Accounting, Dividend Disbursing & Transfer Agent and Administration
Agreement - Incorporated by reference; filed on 7/30/93
(b) Amendment to Fund Accounting, Dividend Disbursing & Transfer Agent
Administration Agreement Incorporated by reference; filed on 4/26/94
(c) Amendment to Fund Accounting, Dividend Disbursing & Transfer Agent
Administration Agreement Incorporated by reference - Incorporated by
reference; filed on 10/7/94
(d) Amendment to Fund Accounting, Dividend Disbursing & Transfer Agent
Administration Agreement Incorporated by reference - Incorporated by
reference; filed 6/2/95
(e) Amendment to Fund Accounting, Dividend Disbursing & Transfer Agent
Administration Agreement Incorporated by reference; filed 4/20/98
(10) Opinion and Consent of Counsel - Incorporated by reference; filed 5/29/97
with 24f-2 notices; filed 4/20/98 for The Carolinas Fund.
(11) Consent of Auditors - Incorporated by reference; filed on 7/31/97
(12) Not Applicable
(13) Not Applicable
(14) Not Applicable
(15) (a) Plan of Distribution under Rule 12b-1 for Capital Value Fund -
Incorporated by reference; filed on 8/1/95
(b) Plan of Distribution under Rule 12b-1 for Investek Fixed Income Trust -
Incorporated by reference; filed on 7/12/96
(c) Plan of Distribution under Rule 12b-1 for ZSA Social Conscience Fund -
Incorporated by reference; filed on 4/26/94
(d) Plan of Distribution under Rule 12b-1 for ZSA Asset Allocation Fund -
Incorporated by reference; filed on 7/29/94
(e) Plan of Distribution under Rule 12b-1 for The Brown Capital Management
Equity Fund - Incorporated by reference; filed 6/2/95
(f) Plan of Distribution under Rule 12b-1 for The Brown Capital Management
Balanced Fund - Incorporated by reference; filed 6/2/95
(g) Plan of Distribution under Rule 12b-1 for The Brown Capital Management
Small Company Fund - Incorporated by reference; filed 6/2/95
(h) Plan of Distribution under Rule 12b-1 for WST Growth & Income Fund
- Incorporated by reference; filed on 7/24/97
(i) Plan of Distribution under Rule 12b-1 for The CarolinasFund -
Incorporated by reference; filed on 4/20/98
(16) Computation of Performance - Incorporated by reference; filed on 7/31/97
(17) (a) Copies of Powers of Attorney - Incorporated by reference; filed on
10/29/90 and on 4/26/94
(b) Financial Data Schedules - Incorporated by reference; filed on 7/31/97
(18) Amended and Restated Plan Pursuant to Rule 18f-3 under the 1940 Act -
Incorporated by reference; filed on 4/20/98
ITEM 25. Persons Controlled by or Under Common Control with Registrant
No person is controlled by or under common control with Registrant.
ITEM 26. Number of Record Holders of Securities
As of May 31, 1998, the number of record holders of each class of
securities of Registrant was as follows:
Number of
Title of Class Record Holders
Capital Value Fund..................................................... 230
Investek Fixed Income Trust............................................ 72
ZSA Asset Allocation Fund.............................................. 95
The Brown Capital Management Equity Fund - Institutional Shares........ 126
The Brown Capital Management Balanced Fund - Institutional Shares...... 59
The Brown Capital Management Small Company Fund - Institutional Shares. 194
WST Growth & Income Fund - Institutional Shares........................ 104
WST Growth & Income Fund - Investor Shares............................. 61
ITEM 27. Indemnification
Reference is hereby made to the following sections of the following
documents filed or included by reference as exhibits hereto:
Article VIII, Sections 8.4 through 8.6 of the Registrant's
Declaration of Trust, Section 8(b), Section 8(b) of the
Registrant's Investment Advisory Agreements, Section 8(b) of the
Registrant's Administration Agreement, and Section (6) of the
Registrant's Distribution Agreements.
The Trustees and officers of the Registrant and the personnel of
the Registrant's administrator are insured under an errors and
omissions liability insurance policy. The Registrant and its
officers are also insured under the fidelity bond required by Rule
17g-1 under the Investment Company Act of 1940.
ITEM 28. Business and other Connections of Investment Advisor
See the Statement of Additional Information section entitled
"Trustees and Officers" for the activities and affiliations of the
officers and directors of the Investment Advisors of the
Registrant. Except as so provided, to the knowledge of Registrant,
none of the directors or executive officers of the Investment
Advisors is or has been at any time during the past two fiscal
years engaged in any other business, profession, vocation or
employment of a substantial nature. The Investment Advisors
currently serve as investment advisors to numerous institutional
and individual clients.
ITEM 29. Principal Underwriter
(a) Capital Investment Group, Inc. is underwriter and distributor for
The Chesapeake Growth Fund, The Chesapeake Fund, Capital Value
Fund, ZSA Asset Allocation Fund, The Brown Capital Management
Equity Fund, The Brown Capital Management Balanced Fund, The Brown
Capital Management Small Company Fund, GrandView Realty Growth
Fund, GrandView S&P REIT Index Fund, and The CarolinasFund.
(b)
Name and Principal Position(s) and Offices Position(s) and Offices
Business Address with Underwriter with Registrant
Richard K. Bryant President Trustee and officer of Trust; President
17 Glenwood Ave. of Capital Value Fund; no position with
Raleigh, NC other series of Trust
E.O. Edgerton, Jr. Vice President Vice President of Capital Value Fund;
17 Glenwood Ave. no position with other series of Trust
Raleigh, NC
(c) Not applicable
ITEM 30. Location of Accounts and Records
All account books and records not normally held by First Union
National Bank of North Carolina, the Custodian to the Registrant,
are held by the Registrant, in the offices of The Nottingham
Company, Fund Accountant and Administrator, NC Shareholder
Services, Transfer Agent to the Registrant, or by the Advisor to
the Registrant.
The address of The Nottingham Company is 105 North Washington
Street, P.O. Drawer 69, Rocky Mount, North Carolina 27802-0069. The
address of NC Shareholder Services is 107 North Washington Street,
Post Office Box 4365, Rocky Mount, North Carolina 27803-0365. The
address of First Union National Bank of North Carolina is Two First
Union Center, Charlotte, North Carolina 28288-1151. The address of
Capital Investment Counsel, Inc., Advisor to the Capital Value
Fund, is Glenwood Avenue, Raleigh, North Carolina 27622. The
address of Investek Capital Management, Inc., Advisor to Investek
Fixed Income Trust, is 317 East Capitol Street, Jackson,
Mississippi 39207. The address of Zaske, Sarafa, & Associates,
Inc., Advisor to the ZSA Asset Allocation Fund, is 355 South
Woodard Avenue, Birmingham, Michigan 48009. The address of Brown
Capital Management, Inc., Advisor to The Brown Capital Management
Equity Fund, The Brown Capital Management Balanced Fund and The
Brown Capital Management Small Company Fund, is 809 Catherdral
Street, Baltimore, Maryland 21201. The address of Wilbanks, Smith &
Thomas Asset Management, Inc., Advisor to the WST Growth & Income
Fund, is One Commercial Place, Suite 1450, Norfolk, Virginia 23510.
The address of Morehead Captital Advisors LLC, Advisor to The
CarolinasFund, is 1712 East Boulevard, Charlotte, North Carolina
28203.
ITEM 31. Management Services
The substantive provisions of the Fund Accounting, Dividend
Disbursing & Transfer Agent and Administration Agreement, as
amended, between the Registrant and The Nottingham Company are
discussed in Part B hereof.
ITEM 32. Undertakings
The Registrant hereby undertakes to file a post-effective amendment
to this Registration Statement, containing Financial Statements of
The CarolinasFund that need not be certified, within four to six
months following the effective date of this Registration Statement.
Registrant undertakes to furnish each person to whom a Prospectus
is delivered with a copy of the latest annual report of each series
of Registrant to shareholders upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Amendment to its
Registration Statement to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of Rocky Mount, State of North Carolina on the 5th
day of June, 1998.
THE NOTTINGHAM INVESTMENT TRUST II
By: /s/ C. FRANK WATSON III
_______________________
C. Frank Watson III
Secretary
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
__________________________* Trustee
Jack E. Brinson
__________________________* Trustee
Eddie C. Brown
__________________________* Trustee
Richard K. Bryant
__________________________* Trustee
Thomas W. Steed, III
__________________________* Trustee
J. Buckley Strandberg
* By:/s/ C. FRANK WATSON III Dated: June 5, 1998
_______________________
C. Frank Watson III
Attorney-in-Fact