As filed with the Securities and Exchange Commission on March 16, 1999
Securities Act File No. 33-37458
Investment Company Act File No. 811-06199
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. ____ [ ]
Post-Effective Amendment No. 36 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 37 [X]
(Check appropriate box or boxes.)
NOTTINGHAM INVESTMENT TRUST II
------------------------------
(Exact Name of Registrant as Specified in Charter)
105 North Washington Street, Rocky Mount, North Carolina 27801-0069
-------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (252) 972-9922
--------------
C. Frank Watson, III
105 North Washington Street, P.O. Drawer 69, Rocky Mount, NC 27801-0069
-----------------------------------------------------------------------
(Name and Address of Agent for Service)
With Copies to:
---------------
Jane A. Kanter
Dechert Price & Rhoads
1775 Eye Street, N.W.
Washington, DC 20006-2401
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this filing
-----------------------------
It is proposed that this filing will become effective: (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[X] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of rule 485.
<PAGE>
PART A
======
Cusip Number Class C Shares 66976M___ [Ticker Symbol]
________________________________________________________________________________
WST GROWTH & INCOME FUND
A series of the
Nottingham Investment Trust II
CLASS C SHARES
________________________________________________________________________________
PROSPECTUS
May 17, 1999
The WST Growth & Income Fund (the "Fund") seeks total return from a combination
of capital appreciation and current income. This Prospectus relates to the Class
C Shares of the Fund. The Fund also offers two additional classes of shares:
Institutional Class Shares and Investor Class Shares, both of which are offered
by another prospectus.
Advisor
-------
Wilbanks, Smith & Thomas Asset Management, Inc.
One Commercial Place, Suite 1450
Norfolk, Virginia 23510
1-800-525-3863
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation to
the contrary is a criminal offense.
<PAGE>
TABLE OF CONTENTS
Page
----
THE FUND.......................................................................1
- --------
Investment Objective.....................................................1
Principal Investment Strategies..........................................1
Principal Risks Of Investing In The Fund.................................4
Bar Chart and Performance Table..........................................6
Fees And Expenses Of The Fund............................................7
MANAGEMENT OF THE FUND.........................................................8
- ----------------------
The Investment Advisor...................................................8
The Administrator.......................................................10
The Transfer Agent......................................................10
The Distributor.........................................................10
INVESTING IN THE FUND.........................................................11
- ---------------------
Minimum Investment......................................................11
Purchase And Redemption Price...........................................11
Purchasing Shares.......................................................12
Redeeming Your Shares...................................................14
OTHER IMPORTANT INVESTMENT INFORMATION........................................16
- --------------------------------------
Dividends, Distributions And Taxes......................................16
Financial Highlights....................................................17
Additional Information..........................................Back Cover
<PAGE>
THE FUND
--------
INVESTMENT OBJECTIVE
The WST Growth & Income Fund (the "Fund") seeks total return from a combination
of capital appreciation and current income.
PRINCIPAL INVESTMENT STRATEGIES
The Fund will seek to achieve its objective by investing primarily in a flexible
portfolio of:
o equity securities
o fixed income securities
o money market instruments
The Advisor will vary the percentage of Fund assets invested in equities, fixed
income securities, and money market instruments according to the Advisor's
judgment of market and economic conditions, and based on the Advisor's view of
which asset class can best achieve the Fund's objectives.
Equity Securities
Selection of equity securities will be based primarily on the expected capital
appreciation potential. The expected income potential of those equity securities
is of secondary importance.
The percentage invested in equity securities will generally comprise not less
than 70% and not more than 90% of the portfolio.
The equity portion of the Fund's portfolio will consist generally of common
stocks, convertible preferred stocks, participating preferred stocks, preferred
equity redemption cumulative stocks, preferred stocks and convertible bonds
traded on domestic securities exchanges or on the over-the-counter markets.
Foreign equity securities will be limited to those available on domestic U.S.
exchanges and denominated in U.S. dollars.
<PAGE>
The Advisor utilizes a 'top down' approach to equity selection.
----------------------------------------------------------------------
Macroeconomic Analysis and Projected Trends
Research consisting of four primary areas
(market interest rates, Federal Reserve policy,
inflation, and economic growth,
as typically measured by gross domestic product)
----------------------------------------------------------------------
--------------------------------------------------------
Sector Analysis
Research and analysis of sectors within the Russell 1000
--------------------------------------------------------
---------------------------------------
Industry Analysis
Industry analysis of companies
within each sector
---------------------------------------
From an initial research universe of approximately 5,400 companies, a "screen"
is performed to identify securities with a projected earnings per share growth
rate of 12% or more, market capitalization of not less than $750 million, price
earnings' ratios within appropriate relative ranges compared to comparable
sector and industry companies, and a projection of increasing earnings
estimates.
At this point, the Advisor utilizes a philosophy known as "GARP," growth at
reasonable price, as its underlying equity investment selection philosophy. The
screens, referred to in the paragraph above, result in a universe of
approximately 400 companies, which then receive active research by the Advisor's
Investment Committee. From this universe of 400 companies the Advisor reduces
the equity universe to approximately 75 companies which, depending upon the then
current price in the equities markets for that company, are eligible for
purchase by in the Fund.
The Advisor will base security selection on the following factors:
o financial history of the company
o consistency of earnings
o return on equity
o cash flow
o strength of management
o ratios such as price/earnings, price/book value, price/sales, and
price/cash flow
o historical valuations and future prospects of the company
Depending upon the timing of cash flows into the Fund and the relative
attractiveness of each company as that attractiveness may vary (given daily
fluctuations in market prices), a portfolio of 25-45 companies will generally be
included in the Fund's portfolio at any given point in time.
The Advisor performs rigorous research on individual companies in the final
equity universe through direct contact with senior management in addition to
Wall Street research analysis. The Advisor's research analysts construct
financial models based upon the data gathered from various sources, to assist in
each securities' qualification under the Advisor's security selection criteria.
<PAGE>
While portfolio securities are generally acquired for the long term, they may be
sold under some of the following circumstances when the Advisor believes that:
o the anticipated price appreciation has been achieved or is no longer
probable;
o alternative investments offer superior total return prospects; or
o fundamentals change adversely.
Fixed Income Securities
Selection of fixed income securities will be primarily for income. The capital
appreciation potential of those fixed income securities is of secondary
importance.
The percentage invested in fixed income securities and money market instruments,
in the aggregate, will generally comprise not less than 10% and not more than
30% of the portfolio.
The Advisor is considered a "core" bond manager, allocating approximately 50% of
the fixed income portion of the Fund to duration strategies using U.S. Treasury
securities. The remaining 50% of fixed income securities are selected based upon
investment analysis by the Advisor, attempting to identify securities that are
undervalued. Fixed income securities are identified as undervalued in
circumstances, for instance, where the Advisor believes the credit rating of the
company is subject to an increase, which has the potential to reduce the price
spread to a comparable maturity U.S. Treasury security, and in turn increase in
price. Fixed income securities may also be identified as undervalued if the
spread for a particular security is too large relative to similar fixed income
securities within similar maturities and similar credit quality.
The strategy of attempting to identify undervalued fixed income securities may
result, if successful, in a larger component of total return being the result of
capital gains than may be typical for fixed income investment strategies.
The Fund may invest in fixed income securities that may be rated below Baa by
Moody's Investors Service, Inc. ("Moody's") or BBB by Standard & Poor's Ratings
Groups ("Standard & Poor's") or Fitch Investors Service, Inc. ("Fitch") or
which, if unrated, are of comparable quality as determined by the Advisor
(so-called "junk bonds"). The Fund will not invest more than 50% of the total
fixed income portion of its portfolio (and not more that 15% of the Fund's total
assets) in junk bonds. The Fund will not invest in junk bonds rated lower than
Caa by Moody's or CCC by Standard & Poor's or Fitch or equivalent unrated
securities.
<PAGE>
Money Market Instruments
Money market instruments will typically represent a portion of the Fund's
portfolio as a method to: (1) temporarily invest monies received by the Fund
prior to investing in equity or fixed income securities; (2) accumulate cash for
anticipated purchases of portfolio securities; and (3) provide for shareholder
redemptions and the payment of operating expenses of the Fund.
Under certain conditions, the Advisor may choose to temporarily invest up to
100% of the Fund's assets in cash and cash equivalents, investment grade bonds,
U.S. Government Securities, repurchase agreements, or money market instruments
as a temporary defensive position, when the Advisor determines that market
conditions warrant such investments. When the Fund invests in these investments
as a temporary defensive measure, it is not pursuing its stated investment
objective.
PRINCIPAL RISKS OF INVESTING IN THE FUND
An investment in the Fund is subject to investment risks, including the possible
loss of the principal amount invested. Generally, the Fund will be subject to
the following risks:
o Market Risk: Market risk refers to the risk related to investments in
securities in general and the daily fluctuations in the securities markets.
The Fund's performances per share will change daily based on many factors,
including fluctuation in interest rates, the quality of the instruments in
the Fund's investment portfolio, national and international economic
conditions and general market conditions.
o Year 2000 Risk: Like other mutual funds, financial and business
organizations and individuals around the world, the Trust and the Fund
could be adversely affected if the computer systems used by the Advisor,
other service providers, or persons with whom they deal, do not properly
process and calculate date-related information and data dated on and after
January 1, 2000. This possibility is commonly known as the "Year 2000
Problem." Virtually all operations of the Trust and the Fund are computer
reliant. The Advisor, administrator, transfer agent, distributor and
custodian have informed the Trust that they are actively taking steps to
address the Year 2000 Problem with regard to their respective computer
systems and the interfaces between their respective computer systems. The
Trust and the Fund are also taking measures to obtain assurances from
necessary persons that comparable steps are being taken by the key service
providers to the Advisor, administrator, transfer agent, distributor, and
custodian. There can be no assurance that the Trust and the Fund's key
service providers will be year 2000 compliant. If not adequately addressed,
the Year 2000 Problem could result in the inability of the Trust and the
Fund to perform its mission critical functions, including trading and
settling trades of the Fund's securities, pricing of portfolio securities
and processing shareholder transactions, and the net asset value of the
Fund's shares may be materially affected.
In addition, because the Year 2000 Problem affects virtually all issuers in
which the Fund may invest also could be adversely impacted by the Year 2000
Problem. For example, issuers may incur substantial costs to address the
Year 2000 Problem. The extent of such impact cannot be predicted and there
can be no assurances that the Year 2000 Problem will not have an adverse
effect on the issuers whose securities are held by the Fund.
<PAGE>
o Credit Risk: Credit risk is the risk that the issuer or guarantor of a debt
security or counterparty to the Fund's transactions will be unable or
unwilling to make timely principal and/or interest payments, or otherwise
will be unable or unwilling to honor its financial obligations. The Fund
may be subject to credit risk to the extent that it invests in debt
securities or engages in transactions, such as securities loans, which
involve a promise by a third party to honor an obligation to the Fund.
Credit risk is particularly significant to the Fund when investing a
portion of its assets in "junk bonds" or lower-rated securities.
o Interest Rate Risk: The price of a fixed income security is dependent upon
interest rates. Therefore, the share price and total return of the Fund,
when investing a significant portion of its assets in fixed income
securities, will vary in response to changes in interest rates. A rise in
interest rates causes the value of fixed income securities to decrease, and
vice versa. There is the possibility that the value of the Fund's
investment in fixed income securities may fall because fixed income
securities generally fall in value when interest rates rise. The longer the
term of a fixed income instrument, the more sensitive it will be to
fluctuations in value from interest rate changes. Changes in interest rates
may have a significant effect on the Fund holding a significant portion of
its assets in fixed income securities with long term maturities.
o Investment-Grade Securities Risk: Fixed income securities are rated by
national bond ratings agencies. Fixed income securities rated BBB by
Standard & Poor's or Baa by Moody's are considered investment grade
securities, but are somewhat riskier than higher rated investment-grade
obligations because they are regarded as having only an adequate capacity
to pay principal and interest, and are considered to lack outstanding
investment characteristics and may be speculative.
o Junk Bonds or Lower rated Securities Risk: Fixed income secretaries rated
below BBB and Baa by S&P or Moody's, respectively, are speculative in
nature and may be subject to certain risks with respect to the issuing
entity and to greater market fluctuations than higher rate fixed-income
securities. They are usually issued by companies without long track records
of sales and earnings, or by those companies with questionable credit
strength. These fixed income securities are considered "below investment
grade." The retail secondary market for these "junk bonds" may be less
liquid than that of higher rated securities and adverse conditions could
make it difficult at times to sell certain securities or could result in
lower prices than those used in calculating the Fund's net asset value.
<PAGE>
BAR CHART AND PERMORMANCE TABLE^*
The bar chart and table shown below provide an indication of the risks of
investing in the WST Growth & Income Fund by showing (on a calendar year basis)
changes in the Fund's average annual total returns during the last calendar year
and since the Fund's inception and by showing (on a calendar year basis) how the
Fund's average annual returns compare to those of a broad-based securities
market index. How the Fund has performed in the past is not necessarily an
indication of how the Fund will perform in the future. The bar chart is based on
the performance of the Institutional Class Shares whose fees and expenses are
the same as the Class C Shares except that the Class C Shares pay a 12b-1 fee of
0.75%.
[Bar Chart Presented Here]:
Calendar Year Returns
Institutional Class Shares
--------------------------
1998 19.89%
o During the 1-year period shown in the bar chart, the highest return for a
quarter was 23.49% (calendar quarter ended December 31, 1998).
o During the 1-year period shown in the bar chart, the lowest return for a
quarter was -12.98% (calendar quarter ended September 30, 1998).
- ---------------------------------------- ---------------- -----------------
Average Annual Total Returns Past 1 Since
Period ended December 31, 1998 Year Inception^**
- ---------------------------------------- ---------------- -----------------
WST Growth & Income Fund 19.89% 17.44%
- ---------------------------------------- ---------------- -----------------
S&P 500 Total Return Index^*** 28.58% 25.03%
- ---------------------------------------- ---------------- -----------------
* The returns shown in the bar chart and the table are for the Institutional
Class Shares which are not offered by this Prospectus. Class C Shares may
have annual returns that are substantially similar to the Institutional
Class Shares because each Class of Shares are invested in the same
portfolio of securities. The annual returns of the Class C Shares, as
compared to the Institutional Class Shares, will differ from those of the
Institutioanl Class Shares because the Class C Shares are subject to a
12b-1 fee of 0.75%.
** The Fund commenced operations on September 30, 1997.
*** The S&P 500 Total Return Index is the Standard & Poor's Composite Stock
Price Index of 500 stocks and is a widely recognized, unmanaged index of
common stock prices.
<PAGE>
FEES AND EXPENSES OF THE FUND
The table below describes the fees and expenses that you may pay if you buy and
hold shares of the Fund.
- --------------------------------------------------------------- --------------
Shareholder Fees for Class C Shares
- --------------------------------------------------------------- --------------
Maximum sales charge (load) imposed on purchases None
(as a percentage of offering price)
- --------------------------------------------------------------- --------------
Maximum deferred sales charge (load) None
- --------------------------------------------------------------- --------------
Maximum imposed sales charge (load) on reinvested dividends None
- --------------------------------------------------------------- --------------
Redemption fee None
- --------------------------------------------------------------- --------------
Exchange fee None
- --------------------------------------------------------------- --------------
---------------------------------------------------------------------------
Annual Fund Operating Expenses For Class C Shares
(expenses that are deducted from Fund assets)
---------------------------------------------
Management Fees 0.75%
Distribution and/or Service (12b-1) Fees 0.75%
Other Expenses 2.38%^1
-----
Total Annual Fund Operating Expenses 3.88%
Fee Waiver and/or Expense Reimbursement (1.38)%
-----
Net Expenses 2.50%
=====
---------------------------------------------------------------------------
1. Because the Class C Shares have only been offered since May 17, 1999,
"Other Expenses" and "Total Annual Operating Expenses" are based on amounts
estimated for the current fiscal year. The Advisor has entered into an
Expense Limitation Agreement with the Trust under which it has agreed to
waive or reduce its fees and to assume other expenses of the Fund, if
necessary, in an amount that limits "Total Fund Operating Expenses"
(exclusive of interest, taxes, brokerage fees and commissions,
extraordinary expenses, and payments, if any, under a Rule 12b-1 Plan) to
not more than 1.75% of the average daily net asset each Class of Shares.
See "Expense Limitation Agreement" for more detailed information.
<PAGE>
Example: This Example shows you the expenses you may pay over time by investing
in the Fund. Since all funds use the same hypothetical conditions, it should
help you compare the costs of investing in the Fund versus other funds. The
Example assumes the following conditions:
(1) You invest $10,000 in the Fund for the periods shown;
(2) You reinvest all dividends and distributions;
(3) You redeem all of your shares at the end of those periods;
(4) You earn a 5% total return; and
(5) The Fund's expenses remain the same.
Although your actual costs may be higher or lower, the following table shows you
what your costs may be under the conditions listed above as well as those upon
redemption.
- ---------------------------- ------------ ------------ ------------ ------------
1 Year 3 Years 5 Years 10 Years
- ---------------------------- ------------ ------------ ------------ ------------
Class C Shares $253 $779 $1,331 $2,836
- ---------------------------- ------------ ------------ ------------ ------------
MANAGEMENT OF THE FUND
----------------------
THE INVESTMENT ADVISOR
Subject to the authority of the Board of Trustees, Wilbanks, Smith & Thomas
Asset Management, Inc., (the "Advisor"), One Commercial Place, Suite 1450,
Norfolk, Virginia 23510, 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 Amended and
Restated Investment Advisory Agreement with the Trust (the "Advisory
Agreement").
The Advisor is registered under the Investment Advisers 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
("SEC"). The Advisor was established as a Virginia corporation in 1990, and is
controlled by: Wayne F. Wilbanks CFA, L. Norfleet Smith, Jr. and Norwood A.
Thomas, Jr.
The Advisor currently serves as investment advisor to approximately $650 million
in assets. The Advisor has been rendering investment counsel, utilizing
investment strategies substantially similar to that of the Fund, to individuals,
banks and thrift institutions, pension and profit sharing plans, trusts,
estates, charitable organizations and corporations since its formation.
<PAGE>
The Advisor supervises and implements the investment activities of the Fund,
including the making of specific decisions as to the purchase and sale of
portfolio investments. Among the responsibilities of the Advisor under the
Advisory Agreement is the selection of brokers and dealers through whom
transactions in the Fund's portfolio investments will be effected. The Advisor
attempts to obtain the best execution for all such transactions. If it is
believed that more than one broker is able to provide the best execution, the
Advisor will consider the receipt of quotations and other market services and of
research, statistical and other data and the sale of shares of the Fund in
selecting a broker. Research services obtained through Fund brokerage
transactions may be used by the Advisor for its other clients and, conversely,
the Fund may benefit from research services obtained through the brokerage
transactions of the Advisor's other clients. For further information, see
"Investment Objective and Policies - Investment Transactions" in the Statement
of Additional Information.
The Investment Committee of the Advisor, composed of Wayne F. Wilbanks, CFA, L.
Norfleet Smith, Jr., and Norwood A. Thomas, Jr. (all control persons of the
Advisor) is responsible for day-to-day management of the Fund's portfolio. Mr.
Wilbanks has been with the Advisor since its formation in 1990. Messrs. Smith
and Thomas have been with the Advisor since 1992. Messrs. Wilbanks and Thomas
serve as executive officers of the Trust and will represent the Advisor at Board
of Trustees meetings.
The Advisor's Compensation. Compensation of the Advisor with regard to the Fund,
based upon the Fund's daily average net assets, is at the annual rate of 0.75%
of the first $250 million of net assets and 0.65% of all assets over $250
million. Since the Fund commenced operations on September 30, 1997, through the
fiscal period ending March 31, 1998, the Advisor voluntarily waived $18,741 of
its advisory fee and reimbursed $5,047 of the Fund's operating expenses. As a
result, the amount of compensation received by the Advisor as a percentage of
assets of the Fund during the last fiscal year was .02015%.
Expense Limitation Agreement. In the interest of limiting expenses of the Fund,
on March 15, 1999 the Advisor entered into an expense limitation agreement with
the Trust, with respect to the Fund (the "Expense Limitation Agreement"),
pursuant to which the Advisor has agreed to waive or limit its fees and to
assume other expenses so that the total annual operating expenses of the Fund
(other than interest, taxes, brokerage commissions, other expenditures which are
capitalized in accordance with generally accepted accounting principles, other
extraordinary expenses not incurred in the ordinary course of the Fund's
business, and amounts, if any, payable pursuant to a Rule 12b-1 Plan) are
limited to 1.75% of the average net assets of each Class of Shares.
The Fund may at a later date reimburse the Advisor the fees waived or limited
and other expenses assumed and paid by the Advisor pursuant to the Expense
Limitation Agreement, provided the Fund has reached a sufficient asset size to
permit such reimbursement to be made without causing the total annual expense
ratio of the Fund to exceed the percentage limits stated above. Consequently, no
reimbursement by the Fund will be made unless: (i) the Fund's assets exceed $20
million; (ii) the Fund's total annual expense ratio is less than the percentage
stated above; and (iii) the payment of such reimbursement has been approved by
the Trust's Board of Trustees on a quarterly basis.
<PAGE>
THE ADMINISTRATOR
The Nottingham Company, Inc. (the "Administrator") serves as the administrator
and fund accounting agent for the Fund. The Administrator assists the Advisor in
the performance of its administrative responsibilities to the Fund, coordinates
the services of each vendor of services to the Fund, and provides the Fund with
other necessary administrative, fund accounting and compliance services. In
addition, the Administrator makes available the office space, equipment,
personnel and facilities required to provide such services to the Fund. For
these services, the Administrator is compensated by the Trust pursuant to a Fund
Accounting and Compliance Administration Agreement
THE TRANSFER AGENT
NC Shareholder Services, LLC (the "Transfer Agent") serves as the Fund's
transfer, dividend paying, and shareholder servicing agent. As indicated later
in the section of this Prospectus, "Investing in the Fund," the Transfer Agent
will handle your orders to purchase and redeem shares of the Fund, and will
disburse dividends paid by the Fund. The Transfer Agent is compensated for its
services by the Trust pursuant to a Dividend Disbursing and Transfer Agent
Agreement.
THE DISTRIBUTOR
Capital Investment Group, Inc. ("Distributor") serves as the distributor of the
Fund's shares. The Distributor may sell Fund shares to or through qualified
securities dealers or others.
Distribution Plan. For the Class C Shares of the Fund, the Fund has adopted a
Distribution Plan in accordance with Rule 12b-1 ("Distribution Plan") under the
Investment Company Act of 1940, as amended ("1940 Act"). The Distribution Plan
provides that the Fund will annually pay the Distributor up to 0.75% of the
average daily net assets of the Fund's Class C Shares for activities primarily
intended to result in the sale of those Class C Shares or the servicing of those
shares, including to compensate entities for providing distribution and
shareholder servicing with respect to the Fund's Class C Shares (this
compensation is commonly referred to as "12b-1 fees"). Because the 12b-1 fees
are paid out of the Fund's assets on an on-going basis, these fees, over time,
will increase the cost of your investment and may cost you more than paying
other types of sales loads.
Other Expenses. In addition to the advisory fees and 12b-1 fees for the Class C
Shares, the Fund pays all expenses not assumed by the Fund's Advisor, including,
without limitation: the fees and expenses of its administrator, custodian,
transfer and dividend dispursing agent independent accountants and legal
counsel; the costs of printing and mailing to shareholders annual and
semi-annual reports, proxy statements, prospectuses, statements of additional
information and supplements thereto; the costs of printing registration
statements; bank transaction charges and custodian's fees; any proxy solicitors'
fees and expenses; filing fees; any federal, state or local income or other
taxes; any interest; any membership fees of the Investment Company Institute and
similar organizations; fidelity bond and Trustees' liability insurance premiums;
and any extraordinary expenses, such as indemnification payments or damages
awarded in litigation or settlements made. All general Trust expenses are
allocated among and charged to the assets of each separate series of the Trust,
such as the Fund, on a basis that the Trustees deem fair and equitable, which
may be on the basis of the relative net assets of each series or the nature of
the services performed and relative applicability to each series.
<PAGE>
INVESTING IN THE FUND
---------------------
MINIMUM INVESTMENT
Class C Shares are sold and redeemed at net asset value. Shares may be purchased
by any account managed by the Advisor and any other broker-dealer authorized to
sell shares in the Fund. The minimum initial investment is $5,000 ($2,000 for
Individual Retirement Accounts ("IRAs"), Keogh Plans, 401(k) Plans, or purchases
under the Uniform Gifts to Minors Act). The Fund may, in the Advisor's sole
discretion, accept certain accounts with less than the minimum investment.
PURCHASE AND REDEMPTION PRICE
Determining the Fund's Net Asset Value. The price at which you purchase or
redeem shares is based on the next calculation of net asset value after an order
is accepted in good form. The Fund's net asset value per share is calculated by
dividing the value of the Fund's total assets, less liabilities (including Fund
expenses, which are accrued daily), by the total number of outstanding shares of
that Fund. The net asset value per share of the Fund is normally determined at
the time regular trading closes on the New York Stock Exchange (currently 4:00
p.m. Eastern time, Monday through Friday), except on business holidays when the
New York Stock Exchange ("NYSE") is closed.
In valuing the Fund's total assets, portfolio securities are generally valued at
their market value. Instruments with maturities of 60 days or less are valued at
amortized cost, which approximates market value. Securities for which
representative market quotations are not readily available are valued at fair
value as determined in good faith under policies approved by the Board of
Trustees of the Trust.
Other Matters. Purchases and redemptions of shares of the same class by the same
shareholder on the same day will be netted for the Fund. All redemption requests
will be processed and payment with respect thereto will normally be made within
seven days after the redemption order is received. The Fund may suspend
redemption, if permitted by the 1940 Act, for any period during which the NYSE
is closed or during which trading is restricted by the SEC or if the SEC
declares that an emergency exists. Redemptions may also be suspended during
other periods permitted by the SEC for the protection of the Fund's
shareholders. Additionally, during drastic economic and market changes,
telephone redemption privileges may be difficult to implement. Also, if the
Trustees determine that it would be detrimental to the best interest of the
Fund's remaining shareholders to make payment in cash, the Fund may pay
redemption proceeds in whole or in part by a distribution-in-kind of readily
marketable securities.
<PAGE>
PURCHASING SHARES
Regular Mail Orders. Payment for shares must be made by check or money order
from a U.S. bank and payable in U.S. dollars. If checks are returned due to
insufficient funds or other reasons, the Fund will charge a $20 fee or may
redeem shares of the Fund already owned by the purchaser to recover any such
loss. For regular mail orders, please complete the attached Fund Shares
Application and mail it, along with your check made payable to the "WST Growth &
Income Fund," to:
WST Growth & Income Fund
Class C Shares
c/o NC Shareholder Services, LLC
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
The application must contain your social security number and Taxpayer
Identification Number ("TIN"). If you have applied for a social security number
or TIN at the time of completing your account application but do not have such
number yet, please indicate this on the application. Taxes are not withheld from
distributions to U.S. investors if certain IRS requirements regarding the TIN
are met.
Bank Wire Orders. Purchases may also be made through bank wire orders. To
establish a new account or add to an existing account by wire, please call the
Fund at 1-800-773-3863, before wiring funds, to advise the Fund of the
investment, dollar amount, and the account identification number. Additionally,
please have your bank use the following wire instructions:
First Union National Bank of North Carolina
Charlotte, North Carolina
ABA # 053000219
For the WST Growth & Income Fund - Class C Shares
Acct. # 2000001068081
For further credit to (shareholder's name and SS# or TIN#)
Additional Investments. You may also add to your account by mail or wire at any
time by purchasing shares at the then current net asset value. The minimum
additional investment is $500. Before adding funds by bank wire, please call the
Fund at 1-800-773-3863 and follow the above directions for wire purchases. Mail
orders should include, if possible, the "Invest by Mail" stub which is attached
to your Fund confirmation statement. Otherwise, please identify your account in
a letter accompanying your purchase payment.
<PAGE>
Additional Purchases By Phone (Telephone Purchase Authorization). If you have
made this election on your Account Application, you may purchase additional
shares by telephoning the Fund at 1-800-773-3863. The minimum telephone purchase
is $100 and the maximum is one (1) times the net asset value of shares held by
the shareholder on the day preceding such telephone purchase for which payment
has been received. The telephone purchase will be made at the net asset value
next computed after the receipt of the telephone call by the Fund. Payment for
the telephone purchase must be received by the Fund within five (5) days. If
payment is not received within five (5) days, you will be liable for all losses
incurred as a result of the cancellation of such purchase.
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
fund will automatically charge the checking account for the amount specified
($100 minimum), which will be automatically invested in shares at the net asset
value on or about the 21st day of the month. The shareholder may change the
amount of the investment or discontinue the plan at any time by writing to the
Fund. Investors who establish an Automatic Investment Plan may open an account
with a minimum balance of $1,000. This Automatic Investment Plan must be
established on your account at least fifteen (15) days prior to the intended
date of your first automatic investment.
Exchange Feature. You may exchange shares of the Fund for shares any other
series of the Trust advised by the Advisor and offered for sale in the state in
which you reside. Shares may be exchanged for shares of any other series of the
Trust at the net asset value plus the percentage difference between that series'
sales charge and any sales charge, previously paid by you in connection with the
shares being exchanged. Prior to making an investment decision or giving us your
instructions to exchange shares, please read the prospectus for the series in
which you wish to invest.
A pattern of frequent purchase and redemption transactions is considered by the
Advisor to not be in the best interest 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 Board of Trustees reserves the right to suspend or terminate, or amend the
terms of, the exchange privilege upon 60 days written notice to the
shareholders.
Stock Certificates. You do not have the option of receiving stock certificates
for your shares. Evidence of ownership will be given by issuance of periodic
account statements that will show the number of shares owned.
<PAGE>
REDEEMING YOUR SHARES
Regular Mail Redemptions. Regular mail redemption request should be addressed
to:
WST Growth & Income Fund
Class C Shares
c/o NC Shareholder Services, LLC
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
Regular mail redemption request should include:
1) Your letter of instruction specifying the account number and number of
shares, or the 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 normally will be sent to you within seven (7) 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 fifteen (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 receipt of the request for redemption will be used in
processing the redemption request.
Telephone and Bank Wire Redemptions. You may also redeem shares by telephone and
bank wire under certain limited conditions. The Fund will redeem shares in this
manner when so requested by the shareholder only if the shareholder confirms
redemption instructions in writing.
The Fund may rely upon confirmation of redemption requests transmitted via
facsimile (FAX# 252-972-1908). The confirmation instructions must include:
1) The name of the Fund and the designation of Class of Shares,
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.
<PAGE>
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 ($1,000 minimum). Shares of the Fund may not be redeemed by wire on
days in which your bank is not open for business. You can change your redemption
instructions anytime you wish by filing a letter including your new redemption
instructions with the Fund. See "Signature Guarantees" below.
The Fund in its discretion may choose to pass through to redeeming shareholders
any charges imposed by the Custodian for wire redemptions. The Custodian
currently charges the Fund $10 per transaction for wiring redemption proceeds.
If this cost is passed through to redeeming shareholders by the Fund, the charge
will be deducted automatically from your account by redemption of shares in your
account. Your bank or brokerage firm may also impose a charge for processing the
wire. If wire transfer of funds is impossible or impractical, the redemption
proceeds will be sent by mail to the designated account.
You may redeem shares, subject to the procedures outlined above, by calling the
Fund at 1-800-773-3863. 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.
Small Accounts. All shares are purchased and redeemed in accordance with the
Fund's Amended and Restated Declaration of Trust and By-Laws. The Board of
Trustees reserves the right to redeem involuntarily any account having a net
asset value of less than $5,000 ($2,000 for IRAs, Keogh Plans, 401(k) Plans or
purchases under the Uniform Gifts to Minors Act) (due to redemptions, exchanges,
or transfers, and not due to market action) upon 60-days written notice. If the
shareholder brings his account net asset value up to at least $5,000 ($2,000 for
IRAs, Keogh Plans, 401(k) Plans or purchases under the Uniform Gifts to Minors
Act) during the notice period, the account will not be redeemed. Redemptions
from retirement plans may be subject to federal income tax withholding.
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 90-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.
<PAGE>
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 to change exchange privileges or telephone and bank wire redemption
service other than through your initial account application, and (3) redemption
requests 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 change
of registration, establishment or change in exchange privileges, or redemption
request.
Systematic Withdrawal Plan. A shareholder who owns shares of the Fund valued at
$5,000 or more at the current offering price may establish a Systematic
Withdrawal Plan to receive a monthly or quarterly check in a stated amount not
less than $100. Each month or quarter, as specified, the Fund will automatically
redeem sufficient shares from your account to meet the specified withdrawal
amount. The shareholder may establish this service whether dividends and
distributions are reinvested in shares of the Fund or paid in cash. Call or
write the Fund for a Fund Share Application form.
OTHER IMPORTANT INVESTMENT INFORMATION
--------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES
The following information is meant as a general summary for U.S. taxpayers.
Additional tax information appears in the SAI. Shareholders should rely their
own tax advisers for advice about the particular federal, state and local tax
consequences to them of investing in the Fund.
The Fund will distribute most of its income and gains to its shareholders every
year. Income dividends, if any, will be paid quarterly and capital gains
distributions, if any, will be made at least annually. Although the Fund will
not be taxed on amounts it distributes, shareholders will generally be taxed,
regardless of whether distributions are received in cash or are reinvested in
additional Fund shares. A particular distribution generally will be taxable as
either ordinary income or long-term capital gains. If a Fund designates a
distribution as a capital gain distribution, it will be taxable to shareholders
as long-term capital gains, regardless of how long they have held their Fund
shares.
<PAGE>
If the Fund declares a dividend in October, November or December but pays it in
January, it may be taxable to shareholders as if they received it in the year it
was declared. Each year each shareholder will receive a statement detailing the
tax status of any Fund distributions for that year.
Distributions may be subject to state and local taxes, as well as federal taxes.
Shareholders who hold Fund shares in a tax-deferred account, such as a
retirement plan, generally will not have to pay tax on Fund distributions until
they receive distributions from the account.
A shareholder who sells or redeems shares will generally realize a capital gain
or loss, which will be long-term or short-term, generally depending upon the
shareholder's holding period for the Fund shares. An exchange of shares may be
treated as a sale.
As with all mutual funds, the Fund may be required to withhold U.S. federal
income tax at the rate of 31% of all taxable distributions payable to
shareholders who fail to provide the Fund with their correct taxpayer
identification numbers or to make required certifications, or who have been
notified by the IRS that they are subject to backup withholding. Backup
withholding is not an additional tax; rather, it is a way in which the IRS
ensures it will collect taxes otherwise due. Any amounts withheld may be
credited against a shareholder's U.S. federal income tax liability.
FINANCIAL HIGHLIGHTS
The financial data included in the table below has been derived from audited
financial statements of the WST Growth & Income Fund Institutional Class Shares
for the fiscal period ended March 31, 1998. Because the Class C Shares of the
WST Growth & Income Fund were not offered to the pubic until May 17, 1999, there
are no financial statements for that Class. The financial data for the fiscal
period ended March 31, 1998, has been audited by Deloitte & Touche LLP,
independent auditors, whose report covering such period is included in the
Statement of Additional Information. This information should be read in
conjunction with the Fund's latest audited annual financial statements and notes
thereto, which are also included in the Statement of Additional Information, a
copy of which may be obtained at no charge by calling the Fund. Further
information about the performance of the Fund is contained in the Annual Report
of the Fund, a copy of which may be obtained at no charge by calling the Fund.
<PAGE>
INSTITUTIONAL CLASS SHARES
(For a Share Outstanding Throughout the Period)
- ------------------------------------------------------ -------------------------
Period from September 30,
1997 (commencement of
operations) to March 31,
1998
- ------------------------------------------------------ -------------------------
Net Asset Value, Beginning of Period $10.02
- ------------------------------------------------------ -------------------------
Income from investment operations
Net investment loss 0.00
Net realized and unrealized gain (loss)
on investments 1.27
----
Total from investment operations 1.27
----
- ------------------------------------------------------ -------------------------
Distributions to shareholders from
Net investment income 0.00
----
- ------------------------------------------------------ -------------------------
Net Asset Value, End of Period $11.29
======
- ------------------------------------------------------ -------------------------
Total return (a) 12.72%
- ------------------------------------------------------ -------------------------
Ratios/supplemental data
- ------------------------------------------------------ -------------------------
Net Assets, End of Period $6,376,193
==========
- ------------------------------------------------------ -------------------------
Ratio of expenses to average net assets
Before expense reimbursements and waived fees 3.15 %(b)
After expense reimbursements and waived fees 1.75 %(b)
- ------------------------------------------------------ -------------------------
Ratio of net investment loss to average net assets
Before expense reimbursements and waived fees (1.31)%(b)
After expense reimbursements and waived fees 0.09 %(b)
- ------------------------------------------------------ -------------------------
Portfolio turnover rate 23.64 %
- ------------------------------------------------------ -------------------------
Average broker commission per share (c) $0.0778
- ------------------------------------------------------ -------------------------
(a) Total return does not reflect payment of sales load.
(b) Annualized.
(c) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
<PAGE>
ADDITIONAL INFORMATION
________________________________________________________________________________
WST GROWTH & INCOME FUND
CLASS C SHARES
________________________________________________________________________________
Additional information about the Fund is available in the Fund's Statement of
Additional Information. The Fund's Annual and Semi-annual Reports include a
discussion of market conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal year.
These Reports and the Statement of Additional Information are available free of
charge upon request by contacting us:
By telephone: 1-800-525-3863
By mail: WST Growth & Income Fund
Class C Shares
c/o NC Shareholder Services, LLC
107 North Washington Street
Post Office Box 4365
Rocky Mount, NC 27803-0365
By e-mail: [email protected]
On the Internet: www.ncfunds.com
---------------
Information about the Fund can also be reviewed and copied at the SEC's Public
Reference Room in Washington, D.C. Inquiries on the operations of the public
reference room may be made by calling the SEC at 1-800-SEC-0330. Reports and
other information about the Fund are available on the SEC's Internet sit at
http://www.sec.gov and copies of this information may be obtained, upon payment
of a duplicating fee, by writing the Public Reference Section of the SEC,
Washington, D.C. 20549-6009.
Investment Company Act file number 811-06199
<PAGE>
PART B
======
STATEMENT OF ADDITIONAL INFORMATION
WST GROWTH & INCOME FUND
May 17, 1999
A Series of
THE NOTTINGHAM INVESTMENT TRUST II
107 North Washington Street, Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
Telephone 1-800-525-3863
TABLE OF CONTENTS
-----------------
Page
----
INVESTMENT OBJECTIVE AND POLICIES............................................B-1
INVESTMENT LIMITATIONS.......................................................B-5
NET ASSET VALUE..............................................................B-7
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION...............................B-7
DESCRIPTION OF THE TRUST.....................................................B-9
ADDITIONAL INFORMATION CONCERNING TAXES.....................................B-10
MANAGEMENT OF THE FUNDS.....................................................B-11
SPECIAL SHAREHOLDER SERVICES................................................B-16
ADDITIONAL INFORMATION ON PERFORMANCE.......................................B-17
APPENDIX A..................................................................B-19
ANNUAL REPORT OF THE FUND FOR THE FISCAL PERIOD
ENDED MARCH 31, 1998.................................................ATTACHED
This Statement of Additional Information ("SAI") is meant to be read in
conjunction with the Prospectus dated May 17, 1999, for the WST Growth & Income
Fund ("Fund") relating to the Fund's Class C Shares and with the Prospectuses
dated August 1, 1998 for the Fund's Institutional Class Shares and Investor
Class Shares, as each Prospectus may be amended or supplemented from time to
time, and is incorporated by reference in its entirety into each Prospectus.
Because this SAI 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 SAI is not a prospectus but is
incorporated by reference in each Prospectus in its entirety. Capitalized terms
used but not defined herein have the same meanings as in the Prospectus.
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The following policies supplement the Fund's investment objective and investment
strategies as set forth in the Prospectus for each Class of Shares of the Fund.
Additional Information on Fund Instruments. Attached to this SAI 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, if it believes it can obtain the best execution of transactions from
such broker; however, at this time the Advisor has not utilized the affiliated
brokerage firm's services. 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 Investment Company Act of 1940, as amended
("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, 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.
Since the Fund commenced operation on September 30, 1997, through the fiscal
period ended March 31, 1998, the Fund paid brokerage commissions of $15,215.
Repurchase Agreements. The Fund may acquire U.S. Government Securities or
corporate debt securities subject to repurchase agreements. A repurchase
transaction occurs when, at the time the Fund purchases a security (normally a
U.S. Treasury obligation), it also resell it to the vendor (normally a member
bank of the Federal Reserve or a registered Government Securities dealer) and
must deliver the security (and/or securities substituted for them under the
repurchase agreement) to the vendor on an agreed upon date in the future. The
repurchase price exceeds the purchase price by an amount which reflects an
agreed upon market interest rate effective for the period of time during which
the repurchase agreement is in effect. Delivery pursuant to the resale will
occur within one to five days of the purchase.
Repurchase agreements are considered "loans" under the 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. As a result, 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. 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.
Options Trading. The Fund may also purchase or sell certain put and call options
for hedging purposes. This is a highly specialized activity that entails greater
than ordinary investment risks. Regardless of how much the market price of the
underlying security increases or decreases, the option buyer's risk is limited
to the amount of the original investment for the purchase of the option.
However, options may be more volatile than the underlying securities, and
therefore, on a percentage basis, an investment in options may be subject to
greater fluctuation than an investment in the underlying securities. A listed
call option gives the purchaser of the option the right to buy from a clearing
corporation, and a writer has the obligation to sell to the clearing
corporation, the underlying security at the stated exercise price at any time
prior to the expiration of the option, regardless of the market price of the
security. The premium paid to the writer is in consideration for undertaking the
obligations under the option contract. A listed put option gives the purchaser
the right to sell to a clearing corporation the underlying security at the
stated exercise price at any time prior to the expiration date of the option,
regardless of the market price of the security. Put and call options purchased
by the Fund will be valued at the last sale price or, in the absence of such a
price, at the mean between bid and asked prices.
The obligation of the Fund to sell a security subject to a covered call option
written by it, or to purchase a security subject to a secured put option written
by it, may be terminated prior to the expiration date of the option by the Fund
executing a closing purchase transaction, which is effected by purchasing on an
exchange an option of the same series (i.e., same underlying security, exercise
price and expiration date) as the option previously written. Such a purchase
does not result in the ownership of an option. A closing purchase transaction
will ordinarily be effected to realize a profit on an outstanding option, to
prevent an underlying security from being called, to permit the sale of the
underlying security or to permit the writing of a new option containing
different terms on such underlying security. The cost of such a liquidation
purchase plus transaction costs may be greater than the premium received upon
the original option, in which event the Fund will have incurred a loss in the
transaction. An option position may be closed out only on an exchange that
provides a secondary market for an option of the same series. There is no
assurance that a liquid secondary market on an exchange will exist for any
particular option. A covered call option writer, unable to effect a closing
purchase transaction, will not be able to sell the underlying security until the
option expires or the underlying security is delivered upon exercise with the
result that the writer in such circumstances will be subject to the risk of
market decline in the underlying security during such period. The Fund will
write an option on a particular security only if the Advisor believes that a
liquid secondary market will exist on an exchange for options of the same series
which will permit the Fund to make a closing purchase transaction in order to
close out its position.
When the Fund writes a covered call option, an amount equal to the net premium
(the premium less the commission) received by the Fund is included in the
liability section of the Fund's statement of assets and liabilities as a
deferred credit. The amount of the deferred credit will be subsequently
marked-to-market to reflect the current value of the option written. The current
value of the traded option is the last sale price or, in the absence of a sale,
the average of the closing bid and asked prices. If an option expires on the
stipulated expiration date or if the Fund enters into a closing purchase
transaction, it will realize a gain (or loss if the cost of a closing purchase
transaction exceeds the net premium received when the option is sold), and the
deferred credit related to such option will be eliminated. Any gain on a covered
call option may be offset by a decline in the market price of the underlying
security during the option period. If a covered call option is exercised, the
Fund may deliver the underlying security held by it or purchase the underlying
security in the open market. In either event, the proceeds of the sale will be
increased by the net premium originally received, and the Fund will realize a
gain or loss. If a secured put option is exercised, the amount paid by the Fund
for the underlying security will be partially offset by the amount of the
premium previously paid to the Fund. Premiums from expired options written by
the Fund and net gains from closing purchase transactions are treated as
short-term capital gains for federal income tax purposes, and losses on closing
purchase transactions are short-term capital losses.
Stock Index Options. The Fund may purchase or sell put and call stock index
options for hedging purposes. Stock index options are put options and call
options on various stock indexes. In most respects, they are identical to listed
options on common stocks. The primary difference between stock options and index
options occurs when index options are exercised. In the case of stock options,
the underlying security, common stock, is delivered. However, upon the exercise
of an index option, settlement does not occur by delivery of the securities
comprising the index. The option holder who exercises the index option receives
an amount of cash if the closing level of the stock index upon which the option
is based is greater than, in the case of a call, or less than, in the case of a
put, the exercise price of the option. This amount of cash is equal to the
difference between the closing price of the stock index and the exercise price
of the option expressed in dollars times a specified multiple. A stock index
fluctuates with changes in the market values of the stocks included in the
index.
The Fund may purchase call and put stock index options in an attempt to either
hedge against the risk of unfavorable price movements adversely affecting the
value of the Fund's securities, or securities the Fund intends to buy, or
otherwise in furtherance of the Fund's investment objectives. The Fund will sell
(write) stock index options for hedging purposes or in order to close out
positions in stock index options which the Fund has purchased.
The Fund's use of stock index options is subject to certain risks. Successful
use by the Fund of options on stock indexes will be subject to the ability of
the Advisor to correctly predict movements in the directions of the stock
market. This requires different skills and techniques than predicting changes in
the prices of individual securities. In addition, the Fund's ability to
effectively hedge all or a portion of the securities in its portfolio, in
anticipation of or during a market decline through transactions in put options
on stock indexes, depends on the degree to which price movements in the
underlying index correlate with the price movements in the Fund's portfolio
securities. Inasmuch as the Fund's portfolio securities will not duplicate the
components of an index, the correlation will not be perfect. Consequently, the
Fund will bear the risk that the prices of its portfolio securities being hedged
will not move in the same amount as the prices of the Fund's put options on the
stock indexes. It is also possible that there may be a negative correlation
between the index and the Fund's portfolio securities that would result in a
loss on both such portfolio securities and the options on stock indexes acquired
by the Fund.
Lower Rated Debt Securities. The Fund may invest in debt securities which are
rated Caa or higher by Moody's or CCC or higher by S&P or Fitch or equivalent
unrated securities. However, the Fund may not invest more than 15% of its assets
in debt securities rated lower than Baa by Moody's or BBB by S&P or Fitch or
securities not rated by Moody's, S&P or Fitch which the Advisor deems to be of
equivalent quality. Bonds rated BB or Ba or below (or comparable unrated
securities) are commonly referred to as "junk bonds" and are considered
speculative and may be questionable as to principal and interest payments. In
some cases, such bonds may be highly speculative, have poor prospects for
reaching investment standing, and be in default. As a result, investment in such
bonds will entail greater risks than those associated with investment in
investment-grade bonds (i.e., bonds rated BBB or better by S&P or Fitch or Baa
or better by Moody's).
An economic downturn could severely affect the ability of highly leveraged
issuers to service their debt obligations or to repay their obligations upon
maturity. Factors having an adverse impact on the market value of lower rated
securities will have an adverse effect on the Fund's net asset value to the
extent it invests in such securities. In addition, the Fund may incur additional
expenses to the extent it is required to seek recovery upon a default in payment
of principal or interest on its portfolio holdings.
The secondary market for junk bond securities, which is concentrated in
relatively few market makers, may not be as liquid as the secondary market for
more highly rated securities, a factor which may have an adverse effect on the
Fund's ability to dispose of a particular security when necessary to meet its
liquidity needs. Under adverse market or economic conditions, the secondary
market for junk bond securities could contract further, independent of any
specific adverse changes in the condition of a particular issuer. As a result,
the Advisor could find it more difficult to sell these securities or may be able
to sell the securities only at prices lower than if such securities were widely
traded. Prices realized upon the sale of such lower rated or unrated securities,
under these circumstances, may be less than the prices used in calculating the
Fund's net asset value.
Since investors generally perceive that there are greater risks associated with
the medium to lower rated securities of the type in which the Fund may invest,
the yields and prices of such securities may tend to fluctuate more than those
for higher rated securities. In the lower quality segments of the fixed-income
securities market, changes in perceptions of issuers' creditworthiness tend to
occur more frequently and in a more pronounced manner than do changes in higher
quality segments of the fixed-income securities market resulting in greater
yield and price volatility.
Another factor which causes fluctuations in the prices of fixed-income
securities is the supply and demand for similarly rated securities. In addition,
the prices of fixed-income securities fluctuate in response to the general level
of interest rates. Fluctuations in the prices of portfolio securities subsequent
to their acquisition will not affect cash income from such securities but will
be reflected in a Fund's net asset value.
Medium to lower rated and comparable non-rated securities tend to offer higher
yields than higher rated securities with the same maturities because the
historical financial condition of the issuers of such securities may not have
been as strong as that of other issuers. In addition to the risk of default,
there are the related costs of recovery on defaulted issues. The Advisor will
attempt to reduce these risks through diversification of the Fund's portfolio
and by analysis of each issuer and its ability to make timely payments of income
and principal, as well as broad economic trends in corporate developments.
Borrowing. The Fund may borrow, temporarily, up to 5% of its total assets for
extraordinary or emergency 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 the portfolio's 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 further investments if the borrowing exceeds 5%
of its total assets until such time as repayment has been made to bring the
total borrowing below 5% of its total assets.
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, appropriate
securities in an amount sufficient to meet the purchase price. Purchasing
securities on a when-issued or forward commitment basis involves a risk of loss
if the value of the security to be purchased declines prior to the settlement
date, which risk is in addition to the risk of decline in value of the Fund's
other assets. In addition, no income accrues to the purchaser of when-issued
securities during the period prior to issuance. Although a fund would generally
purchase securities on a when-issued or forward commitment basis with the
intention of acquiring securities for its portfolio, the Fund may dispose of a
when-issued security or forward commitment prior to settlement if the Advisor
deems it appropriate to do so. The Fund may realize short-term gains or losses
upon such sales.
INVESTMENT LIMITATIONS
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. With respect to 75% of its total assets, invest more than 5% of the
value of its total assets in the securities of any one issuer or
purchase more than 10% of the outstanding voting securities of any
class of securities of any one issuer (except that securities of the
U.S. government, its agencies, and instrumentalities are not subject to
this limitation);
3. 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);
4. Invest for the purpose of exercising control or management of another
issuer;
5. 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);
6. 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;
7. Participate on a joint or joint and several basis in any trading
account in securities;
8. Invest its assets in the securities of one or more investment companies
except to the extent permitted by the 1940 Act; or
9. Make loans of money or securities, except that the Fund may invest in
repurchase agreements, money market instruments, and other debt
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 (except
that the Fund may engage in options transactions to the extent
described in the Prospectus);
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 foreign securities other than those traded on domestic U.S.
exchanges and other foreign debt securities as described in the
Prospectus.
NET ASSET VALUE
The net asset value per share of each Class of Shares of the Fund is normally
determined at the time regular 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, Martin Luther King, Jr. Day,
President's Day, Good Friday, Memorial Day, Fourth of July, Labor Day,
Thanksgiving Day, and Christmas Day. Any other holiday recognized by the New
York Stock Exchange will be 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.
Since the Fund commenced operations on September 30, 1997, through the fiscal
period ended March 31, 1998, the total expenses of the Fund, after fee waivers
of $30,497 and expense reimbursements of $5,047, were $45,193.
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 any applicable sales charge for that Class of
shares.
Capital Investment Group, Inc. ("Distributor"), receives this sales charge as
Distributor and may reallow it in the form of dealer discounts and brokerage
commissions.
Sales Charges. The public offering price of Investor Class Shares of the Fund
equals its net asset value plus a front-end sales charge.
<TABLE>
<S> <C> <C> <C>
Sales Sales
Charge As Charge As Dealers Discounts
% of Net % of Public and Brokerage
Amount of Transaction Amount Offering Commissions as % of
At Public Offering Price Invested Price Public Offering Price
------------------------ -------- ----- ---------------------
Less than $250,000 3.93% 3.75% 3.65%
$250,000 but less than $500,000 2.04% 2.00% 1.90%
$500,000 or more 1.01% 1.00% 0.90%
</TABLE>
At times the Distributor may reallow the entire sales charge to dealers. From
time to time dealers who receive dealer discounts and brokerage commissions from
the Distributor may reallow all or a portion of such dealer discounts and
brokerage commissions to other dealers or brokers. Pursuant to the terms of the
Amended and Restated Distribution Agreement, the sales charge payable to the
Distributor and the dealer discounts may be suspended, terminated or amended.
Dealers who receive 90% or more of the sales charge may be deemed to be
"underwriters" under the federal securities laws.
The dealer discounts and brokerage commissions schedule above applies to all
dealers who have agreements with the Distributor. The Distributor, at its
expense, may also provide additional compensation to dealers in connection with
sales of shares of the Fund. Compensation may include financial assistance to
dealers in connection with conferences, sales or training programs for its
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 to
locations within or outside of the United States for meetings or seminars of a
business nature. Dealers may only pay cash and non-cash compensation to the
extent that it is permitted 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.
There are no sales charges associated with the Institutional Class Shares or the
Class C Shares of the Fund.
Plan Under Rule 12b-1. The Trust has adopted Plans of Distribution (each a
"Plan" and collectively, the "Plans") for the Investor Class and Class C Shares
of the Fund pursuant to Rule 12b-1 under the 1940 Act (see "Distribution Plan"
in the Prospectus). Under the Plan, the Fund will pay 0.50% of the Investor
Class Shares' average net assets annually and 0.75% of the Class C Shares'
average net assets annually to finance any activity which is primarily intended
to result in the sale of Investor Class Shares and Class C 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.
Potential benefits of the Plans 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.
It is anticipated that a portion of the 12b-1 fees received by the Distributor
will be used to defray various costs incurred or paid by the Distributor in
connection with the printing and mailing to potential investors of Fund
prospectuses, statements of additional information, any supplements thereto, and
shareholder reports, and holding seminars and sales meetings with wholesale and
retail sales personnel designed to promote the sale of Investor Class Shares and
Class C Shares. The Distributor may also use a portion of the 12b-1 fees
received to provide compensation to financial intermediaries and third-party
broker-dealers for their services in connection with the sale of Investor Class
Shares and Class C Shares.
Each Plan is known as a "compensation" plan because payments are made for
services rendered to the Fund with respect to the Investor Class Shares or the
Class C Shares regardless of the level of expenditures made by the Distributor.
The Board of Trustees of the Trust will, however, take into account such
expenditures for purposes of reviewing operations under each Plan and concerning
their annual consideration of each Plan's renewal. The Distributor has indicated
that it expects its expenditures to include, without limitation: (a) the
printing and mailing to prospective investors of Fund prospectuses, statements
of additional information, any supplements thereto and shareholder reports with
respect to the Investor Class Shares and Class C Shares of the Fund; (b) those
relating to the development, preparation, printing and mailing of
advertisements, sales literature and other promotional materials describing
and/or relating to the Investor Class Shares and Class C Shares of the Fund; (c)
holding seminars and sales meetings designed to promote the distribution of the
Fund's Investor Class Shares and Class C Shares; (d) obtaining information and
providing explanations to wholesale and retail distributors of the Fund's
investment objectives and policies and other information about the Fund; (e)
training sales personnel regarding the Investor Class Shares and Class C Shares
of the Fund; and (f) financing any other activity that the Distributor
determines is primarily intended to result in the sale of Investor Class Shares
and Class C Shares.
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 Plans.
From time to time the Distributor may pay additional amounts from its own
resources to dealers for aid in distribution or for aid in providing
administrative services to shareholders.
Each Plan and the Amended and Restated 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 Plans or any related agreements ("Rule 12b-1 Trustees"), by vote cast in
person or at a meeting duly called for the purpose of voting on each of the
Plans and the Amended and Restated Distribution Agreement. Continuation of each
Plan and the Amended and Restated 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 each of the Plans
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 Plans. Each Plan and the Amended and Restated Distribution Agreement may be
terminated at any time without penalty by a majority of the Rule 12b-1 Trustees
or by a majority vote of the shareholders of a particular Class of the Fund. Any
material amendment, including an increase in the maximum percentage payable
under a Plan, must likewise be approved by a majority vote of the outstanding
voting shares of the affected Class, as well as by a majority vote of the Rule
12b-1 Trustees. Also, any other material amendment to a Plan must be approved by
a majority vote of the trustees including a majority of the Rule 12b-1 Trustees.
In addition, in order for each of the Plans to remain effective, the selection
and nomination of the Rule 12b-1 Trustees must be effected by the Trustees who
themselves are Rule 12b-1 Trustees. Persons authorized to make payments under
each of the Plans must provide written reports at least quarterly to the Board
of Trustees for their review.
Since the Fund commenced operations on September 30, 1997 through the fiscal
period ended March 31, 1998, the Fund expended $847 under the Plan for the
Investor Class Shares. Such costs were spent primarily on compensation to sales
personnel for the sale of Investor Class Shares.
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, which is an open-end management investment company, 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 Trust currently consists of the
following nine series: 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,
Inc. of Jackson, Mississippi; The Brown Capital Management Equity Fund, The
Brown Capital Management Balanced Fund, The Brown Capital Management Small
Company Fund, and the Brown Capital Management International Equity Fund managed
by Brown Capital Management, Inc. of Baltimore, Maryland, and The CarolinasFund
managed by Morehead Capital Advisors, L.L.C. of Charlotte, North Carolina. 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. The Trust has adopted an Amended and Restated
Rule 18f-3 Plan Multi-Class Plan which contains the general characteristics of,
and conditions under which the Trust may offer, multiple Classes of Shares of
each of its series. 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 federal, state, local, and foreign 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."
Dividends paid by the Fund derived from net investment income or net short-term
capital gains are taxable to shareholders as ordinary income, whether received
in cash or reinvested in additional shares. Long-term capital gains
distributions, if any, are taxable as long-term capital gains, whether received
in cash or reinvested in additional shares, regardless of how long Fund shares
have been held.
The Fund will send shareholders information each year on the tax status of
dividends and disbursements. A dividend or capital gains distribution paid
shortly after shares have been purchased, although in effect a return of
investment, is subject to federal income taxation. Dividends from net investment
income, along with capital gains, will be taxable to shareholders, whether
received in cash or shares and no matter how long you have held Fund shares,
even if they reduce the net asset value of shares below your cost and thus, in
effect, result in a return of a part of your investment.
MANAGEMENT OF THE FUNDS
Trustees and Officers. The Trustees and executive officers of the Trust, their
addresses and ages, and their principal occupations for the last five years are
as follows:
<TABLE>
<S> <C> <C>
TRUSTEES
- ----------------------------------------------- -------------------------------- ---------------------------------------------
Principal Occupation(s)
Name, Age and Address Position During Past 5 Years
- ----------------------------------------------- -------------------------------- ---------------------------------------------
Jack E. Brinson, 65 Trustee and Chairman President, Brinson Investment Co.,
1105 Panola Street President, Brinson Chevrolet, Inc.,
Tarboro, North Carolina 27886 Tarboro, North Carolina
- ----------------------------------------------- -------------------------------- ---------------------------------------------
Thomas W. Steed, 40 Trustee Senior Corporate Attorney
101 Bristol Court Hardees Food Systems,
Rocky Mount, North Carolina 27802 Rocky Mount, North Carolina
- ----------------------------------------------- -------------------------------- ---------------------------------------------
J. Buckley Strandberg, 38 Trustee Vice President, Standard Insurance and
Post Office Box 1375 Realty, Rocky Mount, North Carolina
Rocky Mount, North Carolina 27802
- ----------------------------------------------- -------------------------------- ---------------------------------------------
Eddie C. Brown, 58 Trustee* President, Brown Capital Management, Inc.,
809 Cathedral Street Baltimore, Maryland
Baltimore, Maryland 21201
- ----------------------------------------------- -------------------------------- ---------------------------------------------
Richard K. Bryant, 39 Trustee* President, Capital Investment Group,
Post Office Box 32249 Raleigh, North Carolina; Vice President
Raleigh, North Carolina 27622 Capital Investment Counsel, Raleigh, North
Carolina
- ----------------------------------------------- -------------------------------- ---------------------------------------------
______________
*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.
OFFICERS
- ----------------------------------------------- -------------------------------- ---------------------------------------------
Principal Occupation(s)
Name, Age and Address Position During Past 5 Years
- ----------------------------------------------- -------------------------------- ---------------------------------------------
Michael T. McRee, 55 President, Investek Fixed President, Investek Capital Management,
317 East Capitol Income Trust Inc., Jackson, Mississippi
Jackson, Mississippi 39201
- ----------------------------------------------- -------------------------------- ---------------------------------------------
Wayne F. Wilbanks, 38 President, The WST Growth & President, Wilbanks, Smith & Thomas
One Commercial Place, Suite 1150 Income Fund Asset Management, Inc., Norfolk, Virginia
Norfolk, Virginia 25510
- ----------------------------------------------- -------------------------------- ---------------------------------------------
Eddie C. Brown, 58 President, The Brown Capital President, Brown Capital Management, Inc.,
809 Cathedral Street Management Funds Baltimore, Maryland
Baltimore, Maryland 21201
- ----------------------------------------------- -------------------------------- ---------------------------------------------
Richard K. Bryant, 39 President, Capital Value Fund; President, Capital Investment Group,
Post Office Box 32249 Vice President, The Raleigh, North Carolina, Vice President,
Raleigh, North Carolina 27622 CarolinasFund Capital Investment Counsel, Raleigh, North
Carolina
- ----------------------------------------------- -------------------------------- ---------------------------------------------
Arthur E. Zaske, 51 President, The ZSA Funds Chairman/Chief Investment Officer, Zaske,
Suite 200, 355 South Woodward Avenue Sarafa, & Associates, Inc., Birmingham,
Birmingham, Michigan 48009 Michigan
- ----------------------------------------------- -------------------------------- ---------------------------------------------
Elmer O. Edgerton, Jr., 57 Vice President, Capital Value President, Capital Investment Counsel
Post Office Box 32249 Fund Raleigh, North Carolina; Vice President
Raleigh, North Carolina 27622 Capital Investment Group, Raleigh, North
Carolina
- ----------------------------------------------- -------------------------------- ---------------------------------------------
Doug S. Folk, 38 Vice President, Investek Fixed Vice President, Investek Capital
317 East Capitol Income Trust Investment, Inc., Jackson, Mississippi,
Jackson, Mississippi 39201 since 1996; previously, Portfolio Manager,
Southern Farm Bureau Life Insurance
Company, Jackson, Mississippi
- ----------------------------------------------- -------------------------------- ---------------------------------------------
R. Mark Fields, 46 Vice President, Investek Fixed Vice President, Investek Capital
317 East Capitol Income Trust Management, Inc., Jackson, Mississippi
Jackson, Mississippi 39201
- ----------------------------------------------- -------------------------------- ---------------------------------------------
John M. Friedman, 55 Vice President, Investek Fixed Vice President, Investek Capital
317 East Capitol Income Trust Management, Inc., Jackson, Mississippi
Jackson, Mississippi 39201
- ----------------------------------------------- -------------------------------- ---------------------------------------------
Keith A. Lee, 38 Vice President, The Brown Vice President, Brown Capital Management,
309 Cathedral Street Capital Management Funds Inc., Baltimore, Maryland
Baltimore, Maryland 21201
- ----------------------------------------------- -------------------------------- ---------------------------------------------
Anmar K. Sarafa, 38 Vice President, The ZSA Funds President, Zaske, Sarafa & Associates, Inc.
Suite 200, 355 South Woodward Avenue Birmingham, Michigan
Birmingham, Michigan 48009
- ----------------------------------------------- -------------------------------- ---------------------------------------------
C. Frank Watson, III, 28 Secretary Vice President, The Nottingham Company
105 North Washington Street Rocky Mount, North Carolina
Rocky Mount, North Carolina 27802
- ----------------------------------------------- -------------------------------- ---------------------------------------------
Julian G. Winters, 30 Treasurer and Assistant Legal and Compliance Director, The
105 North Washington Street Secretary Nottingham Company, Rocky Mount, North
Rocky Mount, North Carolina Carolina, since 1996; previously Operations
Manager, Tar Heel Medical, Nashville, North
Carolina
- ----------------------------------------------- -------------------------------- ---------------------------------------------
</TABLE>
Compensation. 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.
<TABLE>
<S> <C> <C> <C> <C>
Compensation Table
Pension Total
Retirement Compensation
Aggregate Benefits Estimated from the
Compensation Accrued As Annual Trust
Name of Person, from the Part of Fund Benefits Upon Paid to
Position Trust Expenses Retirement Trustees
-------- ----- -------- ---------- --------
Eddie C. Brown
Trustee None None None None
Richard K. Bryant
Trustee None None None None
Jack E. Brinson
Trustee $8,500 None None $8,500
Thomas W. Steed
Trustee $8,500 None None $8,500
J. Buckley Strandberg
Trustee $7,600 None None $7,600
Figures are for the fiscal year ended March 31, 1998.
</TABLE>
Principal Holders of Voting Securities. As of February 26, 1999, the Trustees
and Officers of the Trust as a group owned beneficially (i.e., had voting and/or
investment power) less than 1% of the then outstanding shares of each Class of
the Fund. On the same date the following shareholders owned of record more than
5% of the outstanding shares of beneficial interest of a Class of the Fund.
Except as provided below, no person is known by the Trust to be the beneficial
owner of more than 5% of the outstanding shares of a Class of the Fund as of
February 26, 1999.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership Percent of Class
=================== ==================== ================
INSTITUTIONAL SHARES
Koochekzadeh Partnership 155,664.385 shares 18.431%
5600 Wisconsin Ave., Apt. 19C
Chevy Chase, MD 20815
Charles Schwab & Co., Inc. 141,263.313 shares 16.726%
fbo Our Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
Wheat First Securities, Inc. 59,822.676 shares 7.083%
Birdsong Charitable Foundation, Inc.
Attn: George Y. Birdsong
612 Madison Ave.
Suffolk, VA 23434
Wilbanks, Smith and Thomas Asset Management, Inc. 43,069.427 shares 5.099%
Employee Profit Sharing Plan
P.O. Box 3550
Norfolk, VA 23514-3550
INVESTOR SHARES
R. Dean Irwin Ltd. Employees Pension Plan 10,602.116 shares 5.564%
350 North Clark Street
Chicago, IL 60610-4796
</TABLE>
Investment Advisor. Information about Wilbanks, Smith & Thomas Asset Management,
Inc. (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
0.75% of the first $250 million of the average daily net assets of the Fund and
0.65% on assets over $250 million. Since the Fund commenced on September 30
1997, through the fiscal period ended March 31, 1998, the Advisor waived $18,741
of its $19,204 advisory fee and reimbursed $5,047 of the Fund's operating
expenses.
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.
Administrator. The Trust has entered into a Fund Accounting and Compliance
Administration Agreement with The Nottingham Company (the "Administrator"), a
North Carolina corporation, whose address is 105 North Washington Street, Post
Office Drawer 69, Rocky Mount, North Carolina 27802-0069.
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.
Compensation of the Administrator, based upon the average daily net assets of an
equity or balanced fund, is at the following annual rates: 0.175% of the Fund's
first $50 million, 0.150% on the next $50 million, 0.125% on the next $50
million, and 0.100% on average daily net assets over $150 million. In addition,
the Administrator currently receives a monthly fee of $2,000 per Fund and $750
for each additional Class of Shares (although the fees are allocated equally as
an expense to each Class) for accounting and recordkeeping services. The
Administrator charges a minimum fee of $4,000 per month per Fund for all of its
fees taken in the aggregate, analyzed monthly. The Administrator also charges
the Trust for certain costs involved with the daily valuation of investment
securities and is reimbursed for out-of-pocket expenses.
Transfer Agent. The Trust has entered into a Dividend Disbursing and Transfer
Agent Agreement 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 address of the Transfer Agent
is 107 North Washington Street, Post Office Box 4365, Rocky Mount, North
Carolina 27803-0365. The Transfer Agent is compensated for its services based
upon a $15 fee per shareholder per year, subject to a minimum fee of $750 per
month, per fund.
Distributor. Capital Investment Group, Inc., 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 an
Amended and Restated 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 SEC 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 Amended and Restated Distribution Agreement.
Since the Fund commenced operations on September 30, 1997, through the fiscal
period ended March 31, 1998, the aggregate dollar amount of sales charges on the
sale of Investor Class Shares of the Fund was $16,467, of which the Distributor
retained sales charges of $434.
Custodian. First Union National Bank of North Carolina ("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 audits the annual financial statements and prepares federal and state
tax returns for the Fund.
The audited financial statements of the Fund for the fiscal year ended March 31,
1998, including the financial highlights, appearing in the Fund's Annual Report
to shareholders are incorporated by reference and made a part of this document.
Legal Counsel. Dechert Price & Rhoads serves as legal counsel to the Nottingham
Investment Trust II and the 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
1-800-525-3863, or by writing to:
WST Growth & Income Fund
[Investor Class Shares], [Class C Shares] or [Institutional Shares]
105 North Washington Street
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069
Purchases in Kind. The Fund may accept securities in lieu of cash in payment for
the purchase of shares in the Fund. The acceptance of such securities is at the
sole discretion of the Advisor based upon the suitability of the securities
accepted for inclusion as a long term investment of the Fund, the marketability
of such securities, and other factors which the Advisor may deem appropriate. If
accepted, the securities will be valued using the same criteria and methods as
described in "How Shares are Valued" in the Prospectus.
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 aggregate total return of the Institutional Shares of the Fund for the
period from September 30, 1997 (date of initial public investment) through March
31, 1998 was 12.72%. The aggregate total return of the Investor Class Shares of
the Fund for the period from October 3, 1997 (date of initial public investment)
through March 31, 1998 was 10.52% without reflecting the maximum 3.75% sales
load and 6.37% after reflecting such sales load.
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 effects of inflation on the dollar, including the purchasing power of the
dollar at various rates of inflation. The Fund may also disclose from time to
time information about its portfolio allocation and holdings at a particular
date (including ratings of securities assigned by independent rating services
such as S&P and Moody's). The Fund may also depict the historical performance of
the securities in which the Fund may invest over periods reflecting a variety of
market or economic conditions either alone or in comparison with alternative
investments, performance indices of those investments, or economic indicators.
The Fund may also include in advertisements and in materials furnished to
present and prospective shareholders statements or illustrations relating to the
appropriateness of types of securities and/or mutual funds that may be employed
to meet specific financial goals, such as saving for retirement, children's
education, or other future needs.
<PAGE>
APPENDIX A
DESCRIPTION OF RATINGS
The Fund may acquire from time to time fixed income securities that meet the
following minimum rating criteria ("Investment-Grade Debt Securities") (or if
not rated, of equivalent quality as determined by the Advisor). Not more than
50% of the total fixed income portion of the portfolio (not more than 15% of
total assets of the entire Fund) will be invested in fixed income securities
that are not Investment-Grade Debt Securities. 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(R) Ratings Services. The following summarizes the highest four
ratings used by Standard & Poor's Ratings Group ("S&P"), a division of the
McGraw-Hill Companies, Inc., 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>
May 20, 1998
Dear Shareholder:
It is our pleasure to report the results of the WST Growth & Income Fund for the
fiscal year ending March 31, 1998. This is the Fund's first annual report, and
we hope you have received the quarterly portfolio reviews. The Fund is off to a
successful start with a total return since inception of 12.72% versus the 12.58%
return of the Lipper Growth & Income Fund Index. We are especially pleased with
these returns as the Fund held an above average level of money market funds. The
average equity exposure was approximately 80% over this period versus the index
of 91%, so risk adjusted performance was quite strong.
The Fund ended the quarter with approximately $7 million in assets. Interest in
the Fund has increased as word has spread regarding its availability. The Fund
is designed to produce long term appreciation with lower volatility using the
firm's "Growth at a Reasonable Price" investment philosophy. Security selection
is driven by the firm's exhaustive research efforts which have been strengthened
recently with the addition of several new analysts. Research will drive returns
during the future. Intelligent decisions allow the Fund's managers to purchase
great businesses and sell companies which do not meet expectations.
Wilbanks, Smith & Thomas Asset Management Inc.'s view towards the financial
markets remains positive although our internal indicators suggest a market
correction is possible during the next several months. Rumors of a pending Fed
rate increase is the "raison du jour" for a concern, but the Fund holds a stable
of great businesses bought at reasonable prices with the majority of these
companies posting record profits. We remain very positive about the outlook for
your holdings for the next several years.
Interest rates will follow inflation and oil prices as they have historically.
Both of these indicators remain at levels which suggest that no change in Fed
policy is required. We continue to focus on our research efforts and will use
market weakness to add to our favorite positions.
We would like to thank our shareholders for their support and confidence in the
Fund. The principals of Wilbanks, Smith & Thomas remain among the largest
shareholders of the Fund, so our interests are truly aligned with yours. The
firm continues to invest in both personnel and technology so that we can
maintain our edge in the research process. We anticipate a gradual shift in
market leadership and managers will have an opportunity to more easily
outperform the indices as the market becomes more selective. Again, performance
will still be driven by strong research, and we are excited about the
opportunities that lay ahead.
Please visit our website at wstam.com as you are "surfing the net". We welcome
your comments and suggestions.
/s/ Wayne F. Wilbanks
/s/ L. Norfleet Smith, Jr.
/s/ Norwood A. Thomas, Jr.
/s/ T. Carl Turnage
/s/ Lawrence A. Bernert, III
<PAGE>
May 20, 1998
Dear Shareholder:
It is our pleasure to report the results of the WST Growth & Income Fund for the
fiscal year ending March 31, 1998. This is the Fund's first annual report, and
we hope you have received the quarterly portfolio reviews. The Fund is off to a
successful start with a total return since inception of 6.37% (net after 3.75%
sales charge). Without the deduction of the maximum sales load, the total return
of the Fund was 10.52%. We are especially pleased with these returns as the Fund
held an above average level of money market funds. The average equity exposure
was approximately 80% over this period versus the index of 91%, so risk adjusted
performance was quite strong.
The Fund ended the quarter with approximately $7 million in assets. Interest in
the Fund has increased as word has spread regarding its availability. The Fund
is designed to produce long term appreciation with lower volatility using the
firm's "Growth at a Reasonable Price" investment philosophy. Security selection
is driven by the firm's exhaustive research efforts which have been strengthened
recently with the addition of several new analysts. Research will drive returns
during the future. Intelligent decisions allow the Fund's managers to purchase
great businesses and sell companies which do not meet expectations.
Wilbanks, Smith & Thomas Asset Management Inc.'s view towards the financial
markets remains positive although our internal indicators suggest a market
correction is possible during the next several months. Rumors of a pending Fed
rate increase is the "raison du jour" for a concern, but the Fund holds a stable
of great businesses bought at reasonable prices with the majority of these
companies posting record profits. We remain very positive about the outlook for
your holdings for the next several years.
Interest rates will follow inflation and oil prices as they have historically.
Both of these indicators remain at levels which suggest that no change in Fed
policy is required. We continue to focus on our research efforts and will use
market weakness to add to our favorite positions.
We would like to thank our shareholders for their support and confidence in the
Fund. The principals of Wilbanks, Smith & Thomas remain among the largest
shareholders of the Fund, so our interests are truly aligned with yours. The
firm continues to invest in both personnel and technology so that we can
maintain our edge in the research process. We anticipate a gradual shift in
market leadership and managers will have an opportunity to more easily
outperform the indices as the market becomes more selective. Again, performance
will still be driven by strong research, and we are excited about the
opportunities that lay ahead.
Please visit our website at wstam.com as you are "surfing the net". We welcome
your comments and suggestions.
/s/ Wayne F. Wilbanks
/s/ L. Norfleet Smith, Jr.
/s/ Norwood A. Thomas, Jr.
/s/ T. Carl Turnage
/s/ Lawrence A. Bernert, III
<PAGE>
WST GROWTH & INCOME FUND
Institutional Shares
Performance Update - $25,000 Investment
For the period from September 30, 1997 to March 31, 1998
WST Growth & 70% S&P 500 Index
Income Fund 20% Lehman Inter Gov/Corp Bond Lipper Growth &
Inst. Shares 10% Russell 2000 Index Income Fund Index
9/30/97 25,000 25,000 25,000
10/31/97 24,202 24,367 24,170
11/30/97 24,775 25,147 24,844
12/31/97 25,502 25,539 25,264
1/31/98 25,428 25,778 25,312
2/28/98 27,000 27,264 26,899
3/31/98 28,180 28,390 28,145
This graph depicts the performance of the WST Growth & Income Fund Institutional
Shares versus the Lipper Growth and Income Fund Index and a combined index of
70% S&P 500 Index, 20% Lehman Intermediate Government/Corporate Bond Index, and
10% Russell 2000 Index. It is important to note that the WST Growth & Income
Fund is a professionally managed mutual fund while the indexes are not available
for investment and are unmanaged. The comparison is shown for illustrative
purposes only.
Cumulative Total Return
- -----------------------
Since Inception
- -----------------------
12.72%
- -----------------------
The graph assumes an initial $25,000 investment at September 30, 1997. All
dividends and distributions are reinvested.
At March 31, 1998, the WST Growth & Income Fund Institutional Shares would have
grown to $28,180 - total investment return of 12.72% since September 30, 1997.
At March 31, 1998, a similar investment in the Lipper Growth and Income Fund
Index would have grown to $28,145 - total investment return of 12.58%; a
combined index of 70% S&P 500 Index, 20% Lehman Intermediate
Government/Corporate Bond Index, and 10% Russell 2000 Index would have grown to
$28,390 - total investment return of 13.56%; since September 30, 1997.
Past performance is not a guarantee of future results. A mutual fund's share
price and investment return will vary with market conditions, and the principal
value of shares, when redeemed, may be worth more or less than the original
cost. Average annual returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming
reinvestments of dividends.
<PAGE>
WST GROWTH & INCOME FUND
Investor Shares
Performance Update - $10,000 Investment
For the period from October 3, 1997 to March 31, 1998
WST Growth & 70% S&P 500 Index
Income Fund 20% Lehman Inter Gov/Corp Bond Lipper Growth &
Inv. Shares 10% Russell 2000 Index Income Fund Index
10/3/97 9,625 10,000 10,000
10/31/97 9,153 9,610 9,507
11/30/97 9,370 9,916 9,772
12/31/97 9,636 10,070 9,937
1/31/98 9,607 10,164 9,956
2/28/98 10,193 10,748 10,580
3/31/98 10,637 11,191 11,070
This graph depicts the performance of the WST Growth & Income Fund Investor
Shares versus the Lipper Growth and Income Fund Index and a combined index of
70% S&P 500 Index, 20% Lehman Intermediate Government/Corporate Bond Index, and
10% Russell 2000 Index. It is important to note that the WST Growth & Income
Fund is a professionally managed mutual fund while the indexes are not available
for investment and are unmanaged. The comparison is shown for illustrative
purposes only.
Cumulative Total Return
- -------------------------------------------------
Since Inception
- -------------------------------------------------
No Sales Load 10.52%
- -------------------------------------------------
Maximum 3.75% Sales Load 6.37%
- -------------------------------------------------
The graph assumes an initial $10,000 investment at October 3, 1997 ($9,625 after
maximum sales load of 3.75%). All dividends and distributions are reinvested.
At March 31, 1998, the WST Growth & Income Fund Investor Shares would have grown
to $10,637 - total investment return of 6.37% since October 3, 1997. Without the
deduction of the 3.75% maximum sales load, the WST Growth & Income Fund Investor
Shares would have grown to $11,052 - total investment return of 10.52% since
October 3, 1997.
At March 31, 1998, a similar investment in the Lipper Growth and Income Fund
Index would have grown to $11,070 - total investment return of 10.70%; a
combined index of 70% S&P 500 Index, 20% Lehman Intermediate
Government/Corporate Bond Index, and 10% Russell 2000 Index would have grown to
$11,191 - total investment return of 11.91%; since October 3, 1997.
Past performance is not a guarantee of future results. A mutual fund's share
price and investment return will vary with market conditions, and the principal
value of shares, when redeemed, may be worth more or less than the original
cost. Average annual returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming
reinvestments of dividends.
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
WST GROWTH & INCOME FUND
PORTFOLIO OF INVESTMENTS
March 31, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - 77.35%
Aerospace & Defense - 4.43%
AlliedSignal, Inc. ................................................... 4,300 $ 180,600
The Boeing Company ................................................... 2,600 135,525
----------
316,125
----------
Beverages - 2.99%
PepsiCo, Inc. ........................................................ 5,000 213,437
----------
Chemicals - Specialty - 1.93%
Morton International ................................................. 4,200 137,812
----------
Computers - 2.22%
Hewlett-Packard Co. .................................................. 2,500 158,437
----------
Computer Software & Services - 0.66%
(a) Oracle Corporation ................................................... 1,500 47,344
----------
Cosmetics & Personal Care - 2.07%
(a) Playtex Products, Inc. ............................................... 10,000 147,500
----------
Direct Marketing - 2.53%
(a) TeleSpectrum Worldwide Inc. .......................................... 25,000 181,250
----------
Diversified Manufacturing - 0.60%
General Electric Company ............................................. 500 43,000
----------
Electronics - Semiconductor - 2.72%
Motorola, Inc. ....................................................... 3,200 194,000
----------
Financial - Banks, Commercial - 6.42%
NationsBank Corporation .............................................. 2,600 189,637
Resource Bank ........................................................ 6,400 268,800
----------
458,437
----------
Financial - Banks, Money Center - 2.12%
CCB Financial Corporation ............................................ 1,000 110,625
Chase Manhattan Corporation .......................................... 300 40,462
----------
151,087
----------
Financial Services - 3.02%
Equifax, Inc. ........................................................ 3,300 120,450
Fannie Mae ........................................................... 1,500 94,875
----------
215,325
----------
Holding Companies - Diversified - 3.23%
Mobil Corporation .................................................... 1,600 122,700
Travelers Group, Inc. ................................................ 1,800 108,000
----------
230,700
----------
Insurance - Life & Health - 1.87%
Jefferson-Pilot Corporation .......................................... 1,500 133,406
----------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
WST GROWTH & INCOME FUND
PORTFOLIO OF INVESTMENTS
March 31, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Insurance - Multiline - 2.29%
American International Group, Inc. ................................... 1,300 $ 163,719
-----------
Manufactured Housing - 2.26%
Oakwood Homes Corporation ............................................ 4,400 161,150
-----------
Manufacturing - Miscellaneous - 2.83%
Tyco International Ltd. .............................................. 3,700 202,112
-----------
Medical Supplies - 2.05%
Johnson & Johnson .................................................... 2,000 146,125
-----------
Multimedia - 7.31%
The Walt Disney Company .............................................. 1,500 160,125
(a) Tele-Communications, Inc. ............................................ 7,000 217,657
Time Warner, Inc. .................................................... 2,000 144,000
-----------
521,782
-----------
Oil & Gas - Equipment & Services - 4.21%
Baker Hughes, Incorporated ........................................... 2,200 88,550
ENSCO International, Incorporated .................................... 4,000 111,500
Halliburton Company .................................................. 2,000 100,250
-----------
300,300
-----------
Pharmaceuticals - 5.22%
American Home Products Corporation ................................... 2,300 218,788
Merck & Co., Inc. .................................................... 1,200 154,050
-----------
372,838
-----------
Retail - Specialty Line - 2.46%
Lowe's Companies, Inc. ............................................... 2,500 175,469
-----------
Telecommunications - 6.23%
(a) 3Com Corporation ..................................................... 2,000 71,875
(a) LCI International, Inc. .............................................. 4,100 157,850
(a) WorldCom, Inc. ....................................................... 5,000 215,313
-----------
445,038
-----------
Tobacco - 3.31%
Philip Morris Companies, Inc. ........................................ 3,000 125,063
(a) Standard Commercial Corporation ...................................... 7,000 111,563
-----------
236,626
-----------
Utilities - Electric - 2.37%
(a) CalEnergy Company, Inc. .............................................. 6,000 169,500
-----------
Total Common Stocks (Cost $4,787,719) ................................ 5,522,519
-----------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
WST GROWTH & INCOME FUND
PORTFOLIO OF INVESTMENTS
March 31, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS - 3.92%
Insurance - Multiline - 1.96%
AICI CAPITAL TRUST, 9.00% ............................................ 5,500 $ 140,250
----------
Telecommunications - 1.96%
TCI Communications, 8.72% ............................................ 5,500 139,563
----------
Total Preferred Stocks (Cost $281,974) 279,813
----------
- ------------------------------------------------------------------------------------------------------------------------------------
Interest Maturity
Principal Rate Date
- ------------------------------------------------------------------------------------------------------------------------------------
CORPORATE OBLIGATION - 2.04%
Macsaver Financial Services ................... $150,000 7.875% 8/01/03 145,500
----------
(Cost $145,941)
US GOVERNMENT OBLIGATION - 3.63%
US Government National Strip ................... 400,000 0.000% 11/15/05 258,996
----------
(Cost $261,215)
- ------------------------------------------------------------------------------------------------------------------------------------
Shares
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT COMPANIES - 7.48%
Evergreen Money Market Treasury Institutional Money
Market Fund Institutional Service Shares ............................. 318,762 318,762
Evergreen Money Market Treasury Institutional Treasury Money
Market Fund Institutional Service Shares ............................. 215,583 215,583
----------
Total Investment Companies (Cost $534,345) ........................... 534,345
----------
Total Value of Investments (Cost $6,011,194 (b)) ................................. 94.42% $6,741,173
Other Assets Less Liabilities .................................................... 5.58% 398,206
------ ----------
Net Assets ................................................................ 100.00% $7,139,379
====== ==========
(a) Non-income producing investment.
(b) Aggregate cost for financial reporting and federal income tax
purposes is the same. Unrealized appreciation (depreciation) of
investments for financial reporting and federal income taxes
purposes is as follows:
Unrealized appreciation $ 847,634
Unrealized depreciation (117,655)
----------
Net unrealized appreciation $ 729,979
==========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
WST GROWTH & INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1998
ASSETS
Investments, at value (cost $6,011,194) ...................................................... $6,741,173
Cash ......................................................................................... 17,801
Income receivable ............................................................................ 8,610
Receivable for investments sold .............................................................. 197,638
Receivable for fund shares sold .............................................................. 144,854
Due from advisor (note 2) .................................................................... 1,006
Deferred organization expense (note 4) ....................................................... 37,002
Other assets ................................................................................. 3,309
----------
Total assets ............................................................................ 7,151,393
----------
LIABILITIES
Accrued expenses ............................................................................. 12,014
----------
NET ASSETS $7,139,379
==========
NET ASSETS CONSIST OF
Paid-in capital .............................................................................. $ 6,451,586
Accumulated net realized loss on investments ................................................. (42,186)
Net unrealized appreciation on investments ................................................... 729,979
-----------
$ 7,139,379
===========
INSTITUTIONAL CLASS
Net asset value, redemption and maximum offering price per share
($6,376,193 / 564,801 shares outstanding) ............................................... $ 11.29
===========
INVESTOR CLASS
Net asset value, redemption and offering price per share ..................................... $ 11.26
===========
($763,186 / 67,770 shares outstanding)
Maximum offering price per share (100 / 96.25% of $11.26) .................................... $ 11.70
===========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
WST GROWTH & INCOME FUND
STATEMENT OF OPERATIONS
For the period from September 9, 1997
(commencement of operations) to March 31, 1998
INVESTMENT INCOME
Income
Interest ........................................................................................... $ 7,087
Dividends .......................................................................................... 39,673
---------
Total income .................................................................................. 46,760
---------
Expenses
Investment advisory fees (note 2) .................................................................. 19,204
Fund administration fees (note 2) .................................................................. 4,481
Distribution fees and service fees - Investor Class (note 3) ....................................... 847
Custody fees ....................................................................................... 3,073
Registration and filing administration fees (note 2) ............................................... 1,484
Fund accounting fees (note 2) ...................................................................... 17,861
Audit fees ......................................................................................... 8,552
Legal fees ......................................................................................... 3,470
Securities pricing fees ............................................................................ 1,274
Shareholder recordkeeping fees ..................................................................... 3,031
Other fees ......................................................................................... 682
Shareholder servicing expenses ..................................................................... 1,148
Registration and filing expenses ................................................................... 6,135
Printing expenses .................................................................................. 1,889
Amortization of deferred organization expenses (note 4) ............................................ 2,998
Trustee fees and meeting expenses .................................................................. 2,424
Other operating expenses ........................................................................... 2,184
---------
Total expenses ................................................................................ 80,737
---------
Less:
Expense reimbursements (note 2) ......................................................... (5,047)
Investment advisory fees waived (note 2) ................................................ (18,741)
Fund administration fees waived (note 2) ................................................ (182)
Fund accounting fees waived (note 2) .................................................... (9,861)
Shareholder recordkeeping fees waived (note 2) .......................................... (1,031)
Other fees waived (note 2) .............................................................. (682)
---------
Net expenses .................................................................................. 45,193
---------
Net investment income ................................................................... 1,567
---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss from investment transactions .......................................................... (42,186)
Increase in unrealized appreciation on investments ...................................................... 729,979
---------
Net realized and unrealized gain on investments .................................................... 687,793
---------
Net increase in net assets resulting from operations .......................................... $ 689,360
=========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
WST GROWTH & INCOME FUND
STATEMENTS OF CHANGES IN NET ASSETS
For the period from September 9, 1997
(commencement of operations) to March 31, 1998
INCREASE IN NET ASSETS
Operations
Net investment income ............................................................................ $ 1,567
Net realized loss from investment transactions ................................................... (42,186)
Increase in unrealized appreciation on investments ............................................... 729,979
-----------
Net increase in net assets resulting from operations ........................................ 689,360
-----------
Distributions to shareholders from
Net investment income - Institutional Class ...................................................... (2,096)
Net investment income - Investor Class ........................................................... (40)
-----------
Decrease in net assets resulting from distributions ......................................... (2,136)
-----------
Capital share transactions
Increase in net assets resulting from capital share transactions (a) ............................. 6,452,155
-----------
Total increase in net assets ........................................................... 7,139,379
NET ASSETS
Beginning of period .................................................................................. 0
-----------
End of period ........................................................................................ $ 7,139,379
============
----------------------------------
(a) A summary of capital share activity follows: Shares Value
----------------------------------
- ------------------------------------------------------------
INSTITUTIONAL CLASS
- ------------------------------------------------------------
Shares sold ....................................................................... 564,741 $ 5,750,088
Shares issued for reinvestment of distributions ................................... 191 2,096
----------- -----------
564,932 5,752,184
Shares redeemed ................................................................... (131) (1,395)
----------- -----------
Net increase ................................................................. 564,801 $ 5,750,789
=========== ===========
- ------------------------------------------------------------
INVESTOR CLASS
- ------------------------------------------------------------
Shares sold ....................................................................... 67,766 $701,326
Shares issued for reinvestment of distributions ................................... 4 40
----------- -----------
67,770 701,366
Shares redeemed ................................................................... 0 0
----------- -----------
Net increase ................................................................. 67,770 $ 701,366
=========== ===========
- ------------------------------------------------------------
FUND SUMMARY
- ------------------------------------------------------------
Shares sold ....................................................................... 632,507 $ 6,451,414
Shares issued for reinvestment of distributions ................................... 195 2,136
----------- -----------
632,702 6,453,550
Shares redeemed ................................................................... (131) (1,395)
----------- -----------
Net increase ................................................................. 632,571 $ 6,452,155
=========== ===========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
WST GROWTH & INCOME FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
----------------------- -----------------------
INSTITUTIONAL INVESTOR
CLASS CLASS
----------------------- -----------------------
For the For the
period from period from
September 30, 1997 October 3, 1997
(date of initial public (date of initial public
investment) to investment) to
March 31, March 31,
1998 1998
----------------------- -----------------------
Net asset value, beginning of period .................................. $ 10.02 $ 10.22
Income from investment operations
Net investment income (loss) .................................. 0.00 (0.01)
Net realized and unrealized gain on investments ............... 1.27 1.05
----------------------- -----------------------
Total from investment operations ........................ 1.27 1.04
----------------------- -----------------------
Distributions to shareholders from
Net investment income ......................................... (0.00) (0.00)
----------------------- -----------------------
Net asset value, end of period ........................................ $ 11.29 $ 11.26
======================= =======================
Total return (a) ...................................................... 12.72 % 10.52 %
======================= =======================
Ratios/supplemental data
Net assets, end of period ........................................ $6,376,193 $ 763,186
======================= =======================
Ratio of expenses to average net assets
Before expense reimbursements and waived fees ................. 3.15 %(b) 3.63 %(b)
After expense reimbursements and waived fees .................. 1.75 %(b) 2.25 %(b)
Ratio of net investment income (loss) to average net assets
Before expense reimbursements and waived fees ................. (1.31)%(b) (1.70)%(b)
After expense reimbursements and waived fees .................. 0.09 %(b) (0.31)%(b)
Portfolio turnover rate .......................................... 23.64 % 23.64 %
Average broker commission per share (c) .......................... $ 0.0778 $ 0.0778
(a) Total return does not reflect payment of a sales charge
(b) Annualized.
(c) Represents total commission paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
See accompanying notes to financial statements
</TABLE>
<PAGE>
WST GROWTH & INCOME FUND
NOTES TO FINANCIAL STATEMENTS
March 31, 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
The WST Growth & Income Fund (the "Fund") is a diversified series of
shares of beneficial interest of The Nottingham Investment Trust II
(the "Trust"). The Trust, an open-end investment company, was organized
on October 18, 1990 as a Massachusetts Business Trust and is registered
under the Investment Company Act of 1940, as amended. The Fund began
operations on September 9, 1997. The investment objective of the fund
is to provide its shareholders with a maximum total return consisting
of any combination of capital appreciation, both realized and
unrealized, and income. The Fund has an unlimited number of authorized
shares, which are divided into two classes - Institutional Shares and
Investor Shares.
Each class of shares has equal rights as to assets of the Fund, and the
classes are identical except for differences in their sales charge
structures and ongoing distribution and service fees. Income, expenses
(other than distribution and service fees, which are only attributable
to the Investor Class), and realized and unrealized gains or losses on
investments are allocated to each class of shares based upon its
relative net assets. Investor Shares purchased are subject to a maximum
sales charge of three and three-quarters percent. Both classes have
equal voting privileges, except where otherwise required by law or when
the Board of Trustees determines that the matter to be voted on affects
only the interests of the shareholders of a particular class. The
following is a summary of significant accounting policies followed by
the Fund.
A. Security Valuation - The Fund's investments in securities are
carried at value. Securities listed on an exchange or quoted
on a national market system are valued at 4:00 p.m., New York
time. Other securities traded in the over-the-counter market
and listed securities for which no sale was reported on that
date are valued at the most recent bid price. Securities for
which market quotations are not readily available, if any, are
valued by using an independent pricing service or by following
procedures approved by the Board of Trustees. Short-term
investments are valued at cost which approximates value.
B. Federal Income Taxes - No provision has been made for federal
income taxes since it is the policy of the Fund to comply with
the provisions of the Internal Revenue Code applicable to
regulated investment companies and to make sufficient
distributions of taxable income to relieve it from all federal
income taxes.
The Fund has capital loss carryforwards for federal income tax
purposes of $42,186, which expire in the year 2006. It is the
intention of the Board of Trustees of the Trust not to
distribute any realized gains until the carryforwards have
been offset or expire.
Net investment income (loss) and net realized gains (losses)
may differ for financial statement and income tax purposes
primarily because of losses incurred subsequent to October 31,
which are deferred for income tax purposes. The character of
distributions to shareholders made during the year from net
investment income or net realized gains may differ from their
ultimate characterization for federal income tax purposes.
Also, due to the timing of dividend distributions, the fiscal
year in which amounts are distributed may differ from the year
that the income or realized gains were recorded by the Fund.
C. Investment Transactions - Investment transactions are recorded
on trade date. Realized gains and losses are determined using
the specific identification cost method. Interest income is
recorded daily on an accrual basis. Dividend income is
recorded on the ex-dividend date.
(Continued)
<PAGE>
WST GROWTH & INCOME FUND
NOTES TO FINANCIAL STATEMENTS
March 31, 1998
D. Distributions to Shareholders - The Fund may declare dividends
quarterly, payable in March, June, September, and December on
a date selected by the Trust's Trustees. Distributions to
shareholders are recorded on the ex-dividend date. In
addition, distributions may be made annually in December out
of net realized gains through October 31 of that year. The
Fund may make a supplemental distribution subsequent to the
end of its fiscal year ending March 31.
E. Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the amounts of assets, liabilities, expenses and
revenues reported in the financial statements. Actual results
could differ from those estimated.
NOTE 2 - INVESTMENT ADVISORY FEE AND OTHER RELATED PARTY TRANSACTIONS
Pursuant to an investment advisory agreement, Wilbanks, Smith & Thomas
Asset Management, Inc. (the "Advisor"), provides the fund with a
continuous program of supervision of the Fund's assets, including the
composition of its portfolio, and furnishes advice and recommendations
with respect to investments, investment policies, and the purchase and
sale of securities. As compensation for its services, the Advisor
receives a fee at the annual rate of 0.75% of the first $250 million of
the Fund's average daily net assets and 0.65% of all assets over $250
million.
The Advisor currently intends to voluntarily waive all or a portion of
its fee and to reimburse expenses of the Fund to limit total Fund
operating expenses to a maximum of 1.75% of the average daily net
assets of the Fund's Institutional Class and a maximum of 2.25% of the
average daily net assets of the Fund's Investor Class. There can be no
assurance that the foregoing voluntary fee waivers or reimbursements
will continue. The Advisor has voluntarily waived a portion of its fee
amounting to $18,741 ($0.04 per share) and reimbursed $5,047 of the
operating expenses incurred by the Fund for the period ended March 31,
1998.
The Fund's administrator, The Nottingham Company (the "Administrator"),
provides administrative services to and is generally responsible for
the overall management and day-to-day operations of the Fund pursuant
to an accounting and administrative agreement with the Trust. As
compensation for its services, the Administrator receives a fee at the
annual rate of 0.175% of the Fund's first $50 million of average daily
net assets, 0.15% of the next $50 million, 0.125% of the next $50
million, and 0.10% of average daily net assets over $150 million. The
Administrator also receives a monthly fee of $2,000 for accounting and
record-keeping services for the initial class of shares and $750 per
month for each additional class of shares. Additionally, the
Administrator charges the Fund for servicing of shareholder accounts
and registration of the Fund's shares. The contract with the
Administrator provides that the aggregate fees for the aforementioned
administration, accounting, and recordkeeping services shall not be
less than $3,000 per month. The Administrator also charges the Fund for
certain expenses involved with the daily valuation of portfolio
securities.
North Carolina Shareholder Services, LLC (the "Transfer Agent") serves
as the Fund's transfer, dividend paying, and shareholder servicing
agent. The Transfer Agent maintains the records of each shareholder's
account, answers shareholder inquiries concerning accounts, processes
purchases and redemptions of the Fund's shares, acts as dividend and
distribution disbursing agent, and performs other shareholder servicing
functions. The Transfer Agent is compensated for its services by the
Administrator and not directly by the Fund.
(Continued)
<PAGE>
WST GROWTH & INCOME FUND
NOTES TO FINANCIAL STATEMENTS
March 31, 1998
Certain Trustees and officers of the Trust are also officers or
directors of the Advisor, the Distributor, or the Administrator.
NOTE 3 - DISTRIBUTION AND SERVICE FEES
The Board of Trustees, including the Trustees who are not "interested
persons" of the Trust as defined in the Investment Company Act of 1940
(the "Act"), adopted a distribution and service plan pursuant to Rule
12b-1 of the Act (the "Plan") applicable to the Investor Shares. The
Act regulates the manner in which a regulated investment company may
assume costs of distributing and promoting the sales of its shares and
servicing of its shareholder accounts.
The Plan provides that the Fund may incur certain costs, which may not
exceed 0.50% per annum of the Investor Shares' average daily net assets
for each year elapsed subsequent to adoption of the Plan, for payment
to the Distributor and others for items such as advertising expenses,
selling expenses, commissions, travel, or other expenses reasonably
intended to result in sales of Investor Shares in the Fund or support
servicing of Investor Share shareholder accounts. Such expenditures
incurred as service fees may not exceed 0.25% per annum of the Investor
Shares' average daily net assets. The Fund incurred $847 of such
expenses under the Plan for the period ended March 31, 1998.
NOTE 4 - DEFERRED ORGANIZATION EXPENSES
All expenses of the Fund incurred in connection with its organization
and the registration of its shares have been assumed by the Fund. The
organization expenses are being amortized over a period of sixty
months. Investors purchasing shares of the Fund bear such expenses only
as they are amortized against the Fund's investment income.
NOTE 5 - PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments, other than short-term investments,
aggregated $6,507,371 and $991,675, respectively, for the period ended
March 31, 1998.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees of The Nottingham Investment Trust II and Shareholders
of WST Growth & Income Fund:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of WST Growth & Income Fund (a portfolio of The
Nottingham Investment Trust II) as of March 31, 1998, and the related statements
of operations and changes in net assets, for the period from September 9, 1997
(commencement of operations) to March 31, 1998 and financial highlights for the
periods presented. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of the securities owned as of March 31, 1998 by
correspondence with the custodian and brokers; where replies were not received,
we performed other auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of WST Growth & Income
Fund as of March 31, 1998, the results of its operations, the changes in its net
assets and its financial highlights for the respective stated periods in
conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Pittsburgh, Pennsylvania
April 24, 1998
<PAGE>
PART C
======
FORM N-1A
OTHER INFORMATION
ITEM 23. Exhibits
--------
(a)(1) Amended and Restated Declaration of Trust.^9
(a)(2) Certificate of Establishment and Designation for the Brown Capital
Management International Equity Fund.^15
(a)(3) Certificate of Establishment and Designation for the WST Growth &
Income Fund Class C Shares.^15
(b) Amended and Restated By-Laws.^9
(c) Certificates for shares are not issued. Articles V, VI, VIII, IX and X
of the Amended and Restated Declaration of Trust, previously filed as
Exhibit (a)(1) hereto, define the rights of holders of Shares.^9
(d)(1) Investment Advisory Agreement between the Nottingham Investment Trust
II and Capital Investment Counsel, Inc., as Advisor to the Capital
Value Fund.^1
(d)(2) Amendment to the Investment Advisory Agreement between the Nottingham
Investment Trust II and Capital Investment Counsel, Inc., as Advisor
to the Capital Value Fund.^10
(d)(3) Investment Advisory Agreement between the Nottingham Investment Trust
II and Investek Capital Management, Inc., as Advisor to the Investek
Fixed Income Trust.^2
(d)(4) Investment Advisory Agreement between the Nottingham Investment Trust
II and Zaske, Sarafa, & Associates, Inc., as Advisor to the ZSA Asset
Allocation Fund.^3
(d)(5) Investment Advisory Agreement between the Nottingham Investment Trust
II and Zaske, Sarafa, & Associates, Inc., as Advisor to the ZSA Social
Conscience Fund.^6
(d)(6) Amendment to the Investment Advisory Agreement between the Nottingham
Investment Trust II and Zaske, Sarafa, & Associates, Inc., as Advisor
to the ZSA Asset Allocation Fund.^9
(d)(7) Investment Advisory Agreement for the Brown Capital Management Equity
Fund.^4
(d)(8) Investment Advisory Agreement for the Brown Capital Management
Balanced Fund.^4
(d)(9) Investment Advisory Agreement for the Brown Capital Management Small
Company Fund.^4
(d)(10) Amended and Restated Investment Advisory Agreement between the
Nottingham Investment Trust II and Brown Capital Management, Inc. for
the Brown Capital Management Funds.
(d)(11) Investment Advisory Agreement for the WST Growth & Income Fund.^12
(d)(12) Amended and Restated Investment Advisory Agreement between the
Nottingham Investment Trust II and Wilbanks, Smith & Thomas Asset
Management, Inc. for the WST Growth & Income Fund.
(d)(13) Investment Advisory Agreement between the Nottingham Investment Trust
II and Morehead Capital Advisor, LLC, as Advisor to The
CarolinasFund.^13
(d)(14) Investment Sub-Advisory Agreement between the Nottingham Investment
Trust II and Capital Investment Counsel, Inc., as Sub-Advisor to The
CarolinasFund.^14
<PAGE>
(e)(1) Distribution Agreement between the Nottingham Investment Trust II and
Capital Investment Group, Inc., as Distributor for the Capital Value
Fund.^10
(e)(2) Distribution Agreement between the Nottingham Investment Trust II and
Capital Investment Group, Inc., as Distributor for the Investek Fixed
Income Trust.^11
(e)(3) Distribution Agreement between the Nottingham Investment Trust II and
Capital Investment Group, Inc., as Distributor for the ZSA Asset
Allocation Fund.^7
(e)(4) Distribution Agreement between the Nottingham Investment Trust II and
Capital Investment Group, Inc., as Distributor for the ZSA Social
Conscience Fund Fund.^6
(e)(5) Distribution Agreement for the Brown Capital Management Equity Fund.^9
(e)(6) Distribution Agreement for the Brown Capital Management Balanced
Fund.^9
(e)(7) Distribution Agreement for the Brown Capital Management Small Company
Fund.^9
(e)(8) Amended and Restated Distribution Agreement between the Nottingham
Investment Trust II and Capital Investment Group, Inc., as Distributor
for the Brown Capital Management Funds.
(e)(9) Distribution Agreement for the WST Growth & Income Fund.^11
(e)(10) Amended and Restated Distribution Agreement between the Nottingham
Investment Trust II and Capital Investment Group, Inc., as Distributor
for the WST Growth & Income Fund.
(e)(11) Distribution Agreement between the Nottingham Investment Trust II and
Capital Investment Group, Inc., as Distributor for The
CarolinasFund.^13
(f) Not Applicable.
(g) Custodian Agreement between the Nottingham Investment Trust II and
First Union National Bank of North Carolina, as Custodian.^12
(h)(1) Fund Accounting and Compliance Administration Agreement between the
Nottingham Investment Trust II and The Nottingham Company, Inc., as
Administrator.^14
(h)(2) Dividend Disbursing and Transfer Agent Agreement between Capital
Management Investment Trust and NC Shareholder Services, LLC, as
Transfer Agent.^14
(h)(3) Expense Limitation Agreement between Nottingham Investment Trust II
and Brown Capital Management, Inc.
(h)(4) Expense Limitation Agreement between Nottingham Investment Trust II
and Wilbanks Smith & Thomas Asset Management, Inc.
(i)(1) Opinion and Consent of Counsel for the CarolinasFund.^13
(i)(2) Opinion and Consent of Dechert Price & Rhoads regarding the legality
of the securities being registered with respect to the Brown Capital
Management International Equity Fund.^14
(i)(3) Opinion and Consent of Dechert Price & Rhoads regarding the legality
of the securities being registered with respect to the WST Growth &
Income Fund's Class C Shares.
(j) Consent of Deloitte & Touche LLP, Independent Public Accountants.
(k) Not applicable.
(l) Initial Capital Agreement.^1
<PAGE>
(m)(1) Distribution Plan under Rule 12b-1 for the Capital Value Fund.^10
(m)(2) Distribution Plan under Rule 12b-1 for the Investek Fixed Income
Trust.^11
(m)(3) Distribution Plan under Rule 12b-1 for the ZSA Asset Allocation
Fund.^7
(m)(4) Distribution Plan under Rule 12b-1 for the ZSA Social Conscience
Fund.^6
(m)(5) Distribution Plan under Rule 12b-1 for the Brown Capital Management
Equity Fund.^9
(m)(6) Distribution Plan under Rule 12b-1 for the Brown Capital Management
Balanced Fund.^9
(m)(7) Distribution Plan under Rule 12b-1 for the Brown Capital Management
Small Company Fund.^9
(m)(8) Distribution Plan under Rule 12b-1 for the WST Growth & Income Fund's
Investor Class Shares.^12
(m)(9) Distribution Plan under Rule 12b-1 for the WST Growth & Income Fund's
Class C Shares.
(m)(10) Distribution Plan under Rule 12b-1 for The CarolinasFund.^13
(n) Financial Data Schedules.
(o)(1) Amended and Restated Plan Pursuant to Rule 18f-3 under the Investment
Company Act of 1940.^13
(o)(2) Amended and Restated Rule 18f-3 Multi-Class Plan.
(p) Copy of Power of Attorney.^6
- -----------------------
1. Incorporated herein by reference to Registrant's Registration Statement
on Form N-1A filed on October 29, 1990 (File No. 33-37458).
2. Incorporated herein by reference to Registrant's Registration Statement
on Form N-1A filed on September 20, 1991 (File No. 33-37458).
3. Incorporated herein by reference to Registrant's Registration Statement
on Form N-1A filed on May 22, 1992 (File No. 33-37458).
4. Incorporated herein by reference to Registrant's Registration Statement
on Form N-1A filed on May 27, 1992 (File No. 33-37458).
5. Incorporated herein by reference to Registrant's Registration Statement
on Form N-1A filed on July 30, 1993 (File No. 33-37458).
6. Incorporated herein by reference to Registrant's Registration Statement
on Form N-1A filed on April 26, 1994 (File No. 33-37458).
7. Incorporated herein by reference to Registrant's Registration Statement
on Form N-1A filed on July 29, 1994 (File No. 33-37458).
8. Incorporated herein by reference to Registrant's Registration Statement
on Form N-1A filed on October 7, 1994 (File No. 33-37458).
9. Incorporated herein by reference to Registrant's Registration Statement
on Form N-1A filed on June 2, 1995 (File No. 33-37458).
10. Incorporated herein by reference to Registrant's Registration Statement
on Form N-1A filed on August 1, 1995 (File No. 33-37458).
11. Incorporated herein by reference to Registrant's Registration Statement
on Form N-1A filed on July 12, 1996 (File No. 33-37458).
12. Incorporated herein by reference to Registrant's Registration Statement
on Form N-1A filed on July 24, 1997 (File No. 33-37458).
13. Incorporated herein by reference to Registrant's Registration Statement
on Form N-1A filed on April 20, 1998 (File No. 33-37458).
14. Incorporated herein by reference to Registrant's Registration Statement
on Form N-1A filed on February 24, 1999 (File No. 33-37458).
15. To be filed by Amendment.
<PAGE>
ITEM 24. Persons Controlled by or Under Common Control with the Registrant
-----------------------------------------------------------------
No person is controlled by or under common control with the
Registrant.
ITEM 25. Indemnification
---------------
Reference is hereby made to the following sections of the following
documents filed or included by reference as exhibits hereto:
Article V, Sections 5.1 through 5.4 of the Registrant's Declaration
of Trust, 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, as amended.
ITEM 26. Business and other Connections of the 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 advisers of the
Registrant. Except as so provided, to the knowledge of Registrant,
none of the directors or executive officers of the investment
advisers 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 advisers
currently serve as investment advisers to numerous institutional
and individual clients.
ITEM 27. Principal Underwriter
---------------------
(a) Capital Investment Group, Inc. is underwriter and distributor for
The Chesapeake Aggressive Growth Fund, The Chesapeake Growth Fund,
The Chesapeake Core Growth Fund, Capital Value Fund, Investek Fixed
Income Trust, ZSA Asset Allocation Fund, The Brown Capital
Management Equity Fund, The Brown Capital Management Balanced Fund,
The Brown Capital Management Small Company Fund, The Brown Capital
Management International Equity Fund, WST Growth & Income Fund,
Blue Ridge Total Return Fund, SCM Strategic Growth Fund, and The
CarolinasFund.
(b)
Name and Principal Position(s) and Offices Position(s) and Offices
Business Address with Underwriter with Fund
================== ======================= =======================
Richard K. Bryant President Trustee and officer of Trust;
17 Glenwood Ave. President of Capital Value Fund;
Raleigh, NC no position with other series of
Trust
E.O. Edgerton, Jr. Vice President Vice President of Capital Value
17 Glenwood Ave. Fund; no position with other
Raleigh, NC series of the Trust
(c) Not applicable
<PAGE>
ITEM 28. 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 Nottingham
Investment Trust II, are held by the Nottingham Investment Trust
II, in the offices of The Nottingham Company, Inc., Fund Accountant
and Administrator, NC Shareholder Services, LLC, Transfer Agent to
the Nottingham Investment Trust II, or by each of the Advisors to
the Nottingham Investment Trust II.
The address of The Nottingham Company, Inc. is 105 North Washington
Street, P.O. Drawer 69, Rocky Mount, North Carolina 27802-0069. The
address of NC Shareholder Services, LLC 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 and Sub-Advisor to The
CarolinasFund, 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, The Brown
Capital Management Small Company Fund, and The Brown Capital
Management International Equity Fund is 809 Cathedral Street,
Baltimore, Maryland 21201. The address of Wilbanks, Smith and
Thomas Asset Management, Inc., Advisor to the WST Growth & Income
Fund, is One Commercial Place, Suite 1450, Norfolk, Virginia 23510.
The address of Morehead Capital Advisors LLC, Advisor to The
CarolinasFund, is 1712 East Boulevard, Charlotte, North Carolina,
28203.
ITEM 29. Management Services
-------------------
None.
ITEM 30. Undertakings
------------
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended ("1933
Act") and the Investment Company Act of 1940, as amended, the Registrant has
duly caused this Amendment to its Registration Statement to be signed on its
behalf by the undersigned, duly authorized, in the City of Rocky Mount, and
State of North Carolina on the 16th day of March, 1999.
THE NOTTINGHAM INVESTMENT TRUST II
By: /s/ C. Frank Watson, III
_______________________________
C. Frank Watson, III
Secretary
Pursuant to the requirements of the 1933 Act, this Amendment to the Registration
Statement has been signed below by the following persons in the capacities and
on the date indicated.
* Trustee
______________________________________________________________
Jack E. Brinson Date
* Trustee
_______________________________________________________________
Eddie C. Brown Date
* Trustee
_______________________________________________________________
Richard K. Bryant Date
* Trustee
_______________________________________________________________
Thomas W. Steed, III Date
* Trustee
_______________________________________________________________
J. Buckley Strandberg Date
/s/ Julian G. Winters March 16, 1999 Treasurer
_______________________________________________________________
Julian G. Winters Date
* By: /s/ C. Frank Watson, III Dated: March 16, 1999
_________________________________________
C. Frank Watson, III
Attorney-in-Fact
<PAGE>
INDEX TO EXHIBITS
(FOR POST-EFFECTIVE AMENDMENT NO. 36)
-------------------------------------
EXHIBIT NO.
UNDER PART C
OF FORM N-1A NAME OF EXHIBIT
- ------------ ---------------
(d)(10) Amended and Restated Investment Advisory Agreement between the
Nottingham Investment Trust II and Brown Capital Management,
Inc. for the Brown Capital Management Funds.
(d)(12) Amended and Restated Investment Advisory Agreement between the
Nottingham Investment Trust II and Wilbanks, Smith & Thomas
Asset Management, Inc.
(e)(8) Amended and Restated Distribution Agreement between the
Nottingham Investment Trust II and Capital Investment Group,
Inc., as Distributor for the Brown Capital Management Funds.
(e)(10) Amended and Restated Distribution Agreement between the
Nottingham Investment Trust II and Capital Investment Group,
Inc., as Distributor for the WST Growth & Income Fund.
(h)(3) Expense Limitation Agreement between Nottingham Investment
Trust II and Brown Capital Management, Inc.
(h)(4) Expense Limitation Agreement between Nottingham Investment
Trust II and Wilbanks, Smith & Thomas Asset Management, Inc.
(i)(3) Opinion and Consent of Dechert Price & Rhoads regarding
the legality of the securities being registered with respect
to the WST Growth & Income Fund's Class C Shares.
(j) Consent of Deloitte & Touche LLP, Independent Public
Accountants.
(m)(9) Distribution Plan under Rule 12b-1 for the WST Growth & Income
Fund's Class C Shares.
(n) Financial Data Schedules.
(o)(2) Amended and Restated Rule 18f-3 Multi-Class Plan.
AMENDED AND RESTATED
INVESTMENT ADVISORY AGREEMENT
THIS AMENDED AND RESTATED AGREEMENT, entered into as of the 15th day of March,
1999, by and between THE NOTTINGHAM INVESTMENT TRUST II (the "Trust"), a
Massachusetts business trust, and BROWN CAPITAL MANAGEMENT, INC., a Maryland
corporation (the "Advisor"), registered as an investment advisor under the
Investment Advisors Act of 1940, as amended (the "Advisors Act").
WHEREAS, the Trust is registered as a diversified, open-end management
investment company of the series type under the Investment Company Act of 1940,
as amended (the "1940 Act"); and
WHEREAS, the Trust desires to retain the Advisor to furnish investment advisory
and administrative services to each series of the Trust set forth in Exhibit A
(each a "Fund," collectively the "Funds"), as amended from time to time, and the
Advisor is willing to so furnish such services;
NOW THEREFORE, in consideration of the promises and mutual covenants herein
contained, it is agreed between the parties hereto as follows:
1. Appointment. The Trust hereby appoints the Advisor to act as Investment
Advisor to each Fund for the period and on the terms set forth in this
Agreement. The Advisor accepts such appointment and agrees to furnish
the services herein set forth, for the compensation herein provided.
2. Delivery of Documents. The Trust will furnish the Advisor with copies
properly certified or authenticated of each of the following:
(a) The Trust's Declaration of Trust, as filed with the State of
Massachusetts (such Declaration, as presently in effect and as
it shall from time to time be amended, is herein called the
"Declaration");
(b) The Trust's By-Laws (such By-Laws, as presently in effect and
as they shall from time to time be amended, are herein called
the "By-Laws");
(c) Resolutions of the Trust's Board of Trustees authorizing the
appointment of the Advisor and approving this Agreement;
(d) The Trust' Registration Statement on Form N-1A under the 1940
Act and under the Securities Act of 1933 as amended, (the
"1933 Act"), relating to shares of beneficial interest of each
Fund (herein called the "Shares") as filed with the Securities
and Exchange Commission ("SEC") and all amendments thereto;
(e) The Funds' Prospectus (such Prospectus, as presently in effect
and all amendment and supplements thereto are herein called
the "Prospectus").
<PAGE>
The Trust will furnish the Advisor from time to time with copies,
properly certified or authenticated, of all amendments of or
supplements to the foregoing at the same time as such documents are
required to be filed with the SEC.
3. Management. Subject to the supervision of the Trust's Board of
Trustees, the Advisor will provide a continuous investment program for
each Fund, including investment research and management with respect to
all securities, investments, cash and cash equivalents in each Fund.
The Advisor will determine from time to time what securities and other
investments will be purchased, retained or sold by each Fund. The
Advisor will provide the services under this Agreement in accordance
with the Fund's investment objectives, policies and restrictions as
stated in the Prospectus. The Advisor further agrees that it:
(a) Will conform its activities to all applicable Rules and
Regulations of the Securities and Exchange Commission and
will, in addition, conduct its activities under this Agreement
in accordance with regulations or any other Federal or State
agencies which may now or in the future have jurisdiction over
its activities under this Agreement.
(b) Will place orders pursuant to its investment determination for
each Fund either directly with the issuer or with any broker
or dealer. In placing orders with brokers or dealers, the
Advisor will attempt to obtain the best net price and the most
favorable execution of its orders. Consistent with this
obligation, when the Advisor believes two or more brokers or
dealers are comparable in price and execution, the Advisor may
prefer: (i) brokers or dealers who provide research advice and
other services for each Fund, or who recommend or sell shares
of each Fund, and (ii) brokers who are affiliated with the
Trust or its Advisor(s), provided, however, that in no
instance will portfolio securities be purchased from or sold
to the Advisor or any affiliated person of the Advisor in
principal transactions;
(c) Will provide certain executive personnel for the Trust as may
be mutually agreed upon from time to time with the Board of
Trustees, the salaries and expenses of such personnel to be
borne by the Advisor unless otherwise mutually agreed upon;
and
(d) Will provide, at its own cost, all office space, facilities
and equipment necessary for the conduct of its advisory
activities on behalf of each Fund.
4. Services Not Exclusive. The advisory services furnished by the Advisor
hereunder are not to be deemed exclusive, and the Advisor shall be free
to furnish similar services to others so long as its services under
this Agreement are not impaired thereby provided, however, that without
the written consent of the Trustees, the Advisor will not serve as
investment Advisor to any other investment company having a similar
investment object to that of each Fund.
<PAGE>
5. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Advisor hereby agrees that all records which it
maintains for the benefit of the Trust are the property of the Trust
and further agrees to surrender promptly to the Trust any of such
records upon the Fund's request. The Advisor further agrees to preserve
for the periods prescribed by Rule 31a-2 under the 1940 Act the records
required to be maintained by it pursuant to Rule 31a-1 under the Act
that are not maintained by others on behalf of the Trust.
6. Expenses. During the term of this Agreement, the Advisor will pay all
expenses incurred by it in connection with its investment advisory
services pertaining to each Fund. In the event that there is no
distribution plan under Rule 12b-1 of the 1940 Act in effect for a
particular Fund, the Advisor will pay, out of the Advisor's resources
generated from sources other than fees received from the Trust, the
entire cost of the promotion and sale of that Fund's shares.
Notwithstanding the foregoing, the Trust shall pay the expenses and
costs of the following (as they pertain to the Funds):
(a) Taxes, interest charges and extraordinary expenses;
(b) Brokerage fees and commissions with regard to portfolio transaction
of each Fund;
(c) Fees and expenses of the custodian of each Fund's portfolio
securities;
(d) Fees and expenses of the Trust's administrator, transfer and
dividend disbursing agent and the Trust's fund accounting agent or,
if the Trust performs any such services without an agent, the costs
of the same;
(e) Auditing and legal expenses;
(f) Cost of maintenance of the Trust's existence as a legal entity;
(g) Compensation of trustees who are not interested persons of the
Advisor as that term is defined by law;
(h) Costs of Trust meetings;
(i) Federal and State registration or qualification fees and expenses;
(j) Costs of setting in type, printing and mailing Prospectuses,
reports and notices to existing shareholders;
(k) The investment advisory fee payable to the Advisor, as provided in
paragraph 7 herein; and
(l) Plan of Distribution expenses, but only in accordance with the Plan
of Distribution as approved by the shareholders of each Fund.
It is understood that the Trust may desire to register each Fund's
shares for sale in certain states which impose expense limitations on
mutual funds. The Trust agrees that it will register each Fund's shares
in such states only with the prior written consent of the Advisor.
<PAGE>
7. Compensation. The Trust will pay the Advisor and the Advisor will
accept as full compensation an investment advisory fee, based upon the
average daily net assets of each Fund, computed at the end of each
month and payable within five (5) business days thereafter, based upon
the schedule attached hereto as Exhibit A.
8(a) Limitation of Liability. The Advisor shall not be liable for any error
of judgment, mistake of law or for any other loss whatsoever suffered
by the Trust in connection with the performance of this 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 reckless disregard by
it of its obligations and duties under this Agreement.
8(b) Indemnification of Advisor. Subject to the limitations set forth in
this Subsection 8(b), the Trust shall indemnify, defend and hold
harmless (from the assets of the Trust or Trusts to which the conduct
in question relates) the Advisor against all loss, damage and
liability, including reasonable accountants' and counsel fees, incurred
by the Advisor in connection with the defense or disposition of any
action, suit or other proceeding, whether civil or criminal, before any
court or administrative or legislative body, related to or resulting
from this Agreement or the performance of services hereunder, except
with respect to any matter as to which it has been determined that the
loss, damage or liability is a direct result of (i) a breach of
fiduciary duty with respect to the receipt of compensation for
services, or (ii) willful misfeasance, bad faith or gross negligence on
the part of the Advisor in the performance of its duties or from
reckless disregard by it of its duties under this Agreement (either and
both of the conduct described in clauses (i) and (ii) above being
referred to hereinafter as "Disabling Conduct"). A determination that
the Advisor is entitled to indemnification may be made by (i) a final
decision on the merits by a court or other body before whom the
proceeding was brought that the Advisor was not liable by reason of
Disabling Conduct, (ii) dismissal of a court action or an
administrative proceeding against the Advisor for insufficiency of
evidence of Disabling Conduct, or (iii) a reasonable determination,
based upon a review of the facts, that the Advisor was not liable by
reason of Disabling Conduct by, (a) vote of a majority of a quorum of
Trustees who are neither "interested persons" of the Trust as the
quoted phrase is defined in Section 2(a)(19) of the 1940 Act nor
parties to the action, suit or other proceeding on the same or similar
grounds that is then or has been pending or threatened (such quorum of
such Trustees being referred to hereinafter as the "Independent
Trustees"), or (b) an independent legal counsel in a written opinion.
Expenses, including accountants' and counsel fees so incurred by the
Advisor (but excluding amounts paid in satisfaction of judgment, in
compromise or as fines or penalties), may be paid from time to time by
the Fund or Funds to which the conduct in question related in advance
of the final disposition of any action, suit or proceeding; provided,
that the Advisor shall have undertaken to repay the amounts so paid if
it is ultimately determined that indemnification of such expenses is
not authorized under this Subsection 8(b) and if (i) the Advisor shall
have provided security for such undertaking, (ii) the Trust shall be
insured against losses arising by reason of any lawful advances, or
(iii) a majority of the Independent Trustees, or an independent legal
counsel in a written opinion, shall have determined, based on a review
of readily available facts (as opposed to a full trial-type inquiry),
that there is reason to believe that the Advisor ultimately will be
entitled to indemnification hereunder.
<PAGE>
As to any matter disposed of by a compromise payment by the Advisor
referred to in this Subsection 8(b), pursuant to a consent decree or
otherwise, no such indemnification either for said payment or for any
other expenses shall be provided unless such indemnification shall be
approved (i) by a majority of the Independent Trustees or (ii) by an
independent legal counsel in a written opinion. Approval by the
Independent Trustees pursuant to clause (i) shall not prevent the
recovery from the Advisor of any amount paid to the Advisor in
accordance with either of such clauses as indemnification of the
Advisor is subsequently adjudicated by a court of competent
jurisdiction not to have acted in good faith in the reasonable belief
that the Advisor's action was in or not opposed to the best interests
of the Funds or to have been liable to the Funds or its Shareholders by
reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in its conduct under the Agreement.
The right of indemnification provided by this Subsection 8(b) shall not
be exclusive of or affect any of the rights to which the Advisor may be
entitled. Nothing contained in this Subsection 8(b) shall affect any
rights to indemnification to which Trustees, officers or other
personnel of the Trust, and other persons may be entitled by contract
or otherwise under law, nor the power of the Trust to purchase and
maintain liability insurance on behalf of any such person.
The Board of Trustees of the Trust shall take all such action as may be
necessary and appropriate to authorize the Trust hereunder to pay the
indemnification required by this Subsection 8(b) including, without
limitation, to the extent needed, to determine whether the Advisor is
entitled to indemnification hereunder and the reasonable amount of any
indemnity due it hereunder, or employ independent legal counsel for
that purpose.
8(c) The provisions contained in Section 8 shall survive the expiration or
other termination of this Agreement, shall be deemed to include and
protect the Advisor and its directors, officers, employees and agents
and shall inure to the benefit of its/their respective successors,
assigns and personal representatives.
9. Duration and Termination. With respect to any new series of the Trust
that is advised by the Advisor, this Agreement shall continue in effect
for an initial two year period from the date such new series is added
to this Agreement, as set forth in Exhibit A, unless sooner terminated
as provided herein. Unless terminated as herein provided, this
Agreement shall continue in effect, with respect to each Fund (after
its initial two year term), for successive periods of one year each,
provided such continuance is specifically approved annually:
a. By the vote of a majority of those members of the Board of
Trustees who are not parties to this Agreement or interested
persons of any such party (as that term is defined in the 1940
Act), cast in person at a meeting called for the purpose of
voting on such approval; and
b. By vote of either the Board or a majority (as that term is
defined in the 1940 Act) of the outstanding voting securities
of each Fund.
<PAGE>
Notwithstanding the foregoing, this Agreement may be terminated, with
respect to any series, by The Trust or by the Advisor at any time on
sixty (60) days' written notice, without the payment of any penalty,
provided that termination by The Trust must be authorized either by
vote of the Board of Trustees or by vote of a majority of the
outstanding voting securities of each Fund. This Agreement will
automatically terminate in the event of its assignment (as that term is
defined in the 1940 Act).
10. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by a written
instrument signed by the party against which enforcement of the change,
waiver, discharge or termination is sought. No material amendment of
this Agreement shall be effective as to any Fund until approved by vote
of the holders of a majority of that Fund's outstanding voting
securities (as defined in the 1940 Act).
11. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect. If
any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby. This Agreement shall be
binding and shall inure to the benefit of the parties hereto and their
respective successors.
12. Applicable Law. This Agreement shall be construed in accordance with,
and governed by, the laws of the State of North Carolina.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
ATTEST: THE NOTTINGHAM INVESTMENT TRUST II
By: __________________________ By: __________________________
Title: _______________________ Title: _______________________
ATTEST: BROWN CAPITAL MANAGEMENT, INC.
By: __________________________ By: __________________________
Title: _______________________ Title: _______________________
<PAGE>
EXHIBIT A
to the
AMENDED AND RESTATED
INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISOR'S COMPENSATION SCHEDULE
For the services set forth in the AMENDED AND RESTATED INVESTMENT ADVISORY
AGREEMENT, the Investment Advisor shall be compensated monthly, as of the last
day of each month, within five business days of the month end, a fee based upon
average daily net assets according to the following schedule.
The Brown Capital Management Equity Fund
Date added to this Agreement - December 10, 1992
Net Assets Annual Fee
---------- ----------
On the first $25 million 0.65%
On all assets over 25 million 0.50%
The Brown Capital Management Balanced Fund
Date added to this Agreement - December 10, 1992
Net Assets Annual Fee
---------- ----------
On the first $25 million 0.65%
On all assets over 25 million 0.50%
The Brown Capital Management Small Company Fund
Date added to this Agreement - December 10, 1992
Net Assets Annual Fee
---------- ----------
On all assets 1.00%
The Brown Capital Management International Equity Fund
Date added to this Agreement - Date Fund becomes effective with the SEC
Net Assets Annual Fee
---------- ----------
On the first $100 million 1.00%
On all assets over $100 million 0.75%
AMENDED AND RESTATED
INVESTMENT ADVISORY AGREEMENT
THIS AMENDED AND RESTATED AGREEMENT, entered into as of the 15th day of March,
1999, by and between THE NOTTINGHAM INVESTMENT TRUST II (the "Trust"), a
Massachusetts business trust, and WILBANKS, SMITH & THOMAS ASSET MANAGEMENT,
INC., a Virginia corporation (the "Advisor"), registered as an investment
adviser under the Investment Advisers Act of 1940, as amended.
WHEREAS, the Trust is registered as a diversified, open-end management
investment company of the series type under the Investment Company Act of 1940,
as amended (the "1940 Act"); and
WHEREAS, the Trust desires to retain the Advisor to furnish investment advisory
and administrative services to each series of the Trust set forth in Exhibit A
(each a "Fund," collectively the "Funds"), as amended from time to time, and the
Advisor is willing to so furnish such services;
NOW THEREFORE, in consideration of the promises and mutual covenants herein
contained, it is agreed between the parties hereto as follows:
1. Appointment. The Trust hereby appoints the Advisor to act as Investment
Advisor to each Fund for the period and on the terms set forth in this
Agreement. The Advisor accepts such appointment and agrees to furnish
the services herein set forth, for the compensation herein provided.
2. Delivery of Documents. The Trust will furnish the Advisor with copies
properly certified or authenticated of each of the following:
(a) The Trust's Declaration of Trust, as filed with the State of
Massachusetts (such Declaration, as presently in effect and as
it shall from time to time be amended, is herein called the
"Declaration");
(b) The Trust's By-Laws (such By-Laws, as presently in effect and
as they shall from time to time be amended, are herein called
the "By-Laws");
(c) Resolutions of the Trust's Board of Trustees authorizing the
appointment of the Advisor and approving this Agreement;
(d) The Trust' Registration Statement on Form N-1A under the 1940
Act and under the Securities Act of 1933 as amended, (the
"1933 Act"), relating to shares of beneficial interest of each
Fund (herein called the "Shares") as filed with the Securities
and Exchange Commission ("SEC") and all amendments thereto;
(e) Each Fund's Prospectus (such Prospectus, as presently in
effect and all amendments and supplements thereto are herein
called the "Prospectus").
The Trust will furnish the Advisor from time to time with copies,
properly certified or authenticated, of all amendments of or
supplements to the foregoing at the same time as such documents are
required to be filed with the SEC.
<PAGE>
3. Management. Subject to the supervision of the Trust's Board of
Trustees, the Advisor will provide a continuous investment program for
each Fund, including investment research and management with respect to
all securities, investments, cash and cash equivalents in each Fund.
The Advisor will determine from time to time what securities and other
investments will be purchased, retained or sold by each Fund. The
Advisor will provide the services under this Agreement in accordance
with each Fund's investment objectives, policies and restrictions as
stated in the Prospectus. The Advisor further agrees that it:
(a) Will conform its activities to all applicable Rules and
Regulations of the Securities and Exchange Commission and
will, in addition, conduct its activities under this Agreement
in accordance with regulations or any other Federal or State
agencies which may now or in the future have jurisdiction over
its activities under this Agreement.
(b) Will place orders pursuant to its investment determinations
for each Fund either directly with the issuer or with any
broker or dealer. In placing orders with brokers or dealers,
the Advisor will attempt to obtain the best net price and the
most favorable execution of its orders. Consistent with this
obligation, when the Advisor believes two or more brokers or
dealers are comparable in price and execution, the Advisor may
prefer: (i) brokers or dealers who provide research advice and
other services for each Fund, or who recommend or sell shares
of each Fund, and (ii) brokers who are affiliated with the
Trust or its Advisor(s), provided, however, that in no
instance will portfolio securities be purchased from or sold
to the Advisor or any affiliated person of the Advisor in
principal transactions;
(c) Will provide certain executive personnel for the Trust as may
be mutually agreed upon from time to time with the Board of
Trustees, the salaries and expenses of such personnel to be
borne by the Advisor unless otherwise mutually agreed upon;
and
(d) Will provide, at its own cost, all office space, facilities
and equipment necessary for the conduct of its advisory
activities on behalf of each Fund.
4. Services Not Exclusive. The advisory services furnished by the Advisor
hereunder are not to be deemed exclusive, and the Advisor shall be free
to furnish similar services to others so long as its services under
this Agreement are not impaired thereby provided, however, that without
the written consent of the Trustees, the Advisor will not serve as
investment advisor to any other investment company having a similar
investment objective to that of any Fund.
<PAGE>
5. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Advisor hereby agrees that all records which it
maintains for the benefit of the Trust are the property of the Trust
and further agrees to surrender promptly to the Trust any of such
records upon the Fund's request. The Advisor further agrees to preserve
for the periods prescribed by Rule 31a-2 under the 1940 Act the records
required to be maintained by it pursuant to Rule 31a-1 under the Act
that are not maintained by others on behalf of the Trust.
6. Expenses. During the term of this Agreement, the Advisor will pay all
expenses incurred by it in connection with its investment advisory
services pertaining to each Fund. In the event that there is no
distribution plan under Rule 12b-1 of the 1940 Act in effect for a
particular Fund, the Advisor will pay, out of the Advisor's resources
generated from sources other than fees received from the Trust, the
entire cost of the promotion and sale of that Fund's shares.
Notwithstanding the foregoing, the Trust shall pay the expenses and
costs of the following (as they pertain to each Fund):
(a) Taxes, interest charges and extraordinary expenses;
(b) Brokerage fees and commissions with regard to portfolio
transactions of each Fund;
(c) Fees and expenses of the custodian of each Fund's portfolio
securities;
(d) Fees and expenses of the Trust's administrator, transfer and
dividend disbursing agent and the Trust's fund accounting
agent or, if the Trust performs any such services without an
agent, the costs of the same;
(e) Auditing and legal expenses;
(f) Cost of maintenance of the Trust's existence as a legal
entity;
(g) Compensation of trustees who are not interested persons of the
Advisor as that term is defined by applicable laws;
(h) Costs of Trust meetings;
(i) Federal and State registration or qualification fees and
expenses;
(j) Costs of setting in type, printing and mailing Prospectuses,
reports and notices to existing shareholders;
(k) The investment advisory fee payable to the Advisor, as
provided in paragraph 7 herein; and
(l) Plan of Distribution expenses, but only in accordance with the
Plan of Distribution as approved by the shareholders of each
Fund.
7. Compensation. The Trust will pay the Advisor and the Advisor will
accept as full compensation an investment advisory fee, based upon the
average daily net assets of each Fund, computed at the end of each
month and payable within five (5) business days thereafter, based upon
the schedule attached hereto as Exhibit A.
8(a) Limitation of Liability. The Advisor shall not be liable for any error
of judgment, mistake of law or for any other loss whatsoever suffered
by the Trust in connection with the performance of this 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 reckless disregard by
it of its obligations and duties under this Agreement.
<PAGE>
8(b) Indemnification of Advisor. Subject to the limitations set forth in
this Subsection 8(b), the Trust shall indemnify, defend and hold
harmless (from the assets of the Trust or Trusts to which the conduct
in question relates) the Advisor against all loss, damage and
liability, including but not limited to amounts paid in satisfaction of
judgments, in compromise or as fines and penalties, and expenses,
including reasonable accountants' and counsel fees, incurred by the
Advisor in connection with the defense or disposition of any action,
suit or other proceeding, whether civil or criminal, before any court
or administrative or legislative body, related to or resulting from
this Agreement or the performance of services hereunder, except with
respect to any matter as to which it has been determined that the loss,
damage or liability is a direct result of (i) a breach of fiduciary
duty with respect to the receipt of compensation for services, or (ii)
willful misfeasance, bad faith or gross negligence on the part of the
Advisor in the performance of its duties or from reckless disregard by
it of its duties under this Agreement (either and both of the conduct
described in clauses (i) and (ii) above being referred to hereinafter
as "Disabling Conduct"). A determination that the Advisor is entitled
to indemnification may be made by (i) a final decision on the merits by
a court or other body before whom the proceeding was brought that the
Advisor was not liable by reason of Disabling Conduct, (ii) dismissal
of a court action or an administrative proceeding against the Advisor
for insufficiency of evidence of Disabling Conduct, or (iii) a
reasonable determination, based upon a review of the facts, that the
Advisor was not liable by reason of Disabling Conduct by, (a) vote of a
majority of a quorum of Trustees who are neither "interested persons"
of the Trust as the quoted phrase is defined in Section 2(a)(19) of the
1940 Act nor parties to the action, suit or other proceeding on the
same or similar grounds that is then or has been pending or threatened
(such quorum of such Trustees being referred to hereinafter as the
"Independent Trustees"), or (b) an independent legal counsel in a
written opinion. Expenses, including accountants and counsel fees so
incurred by the Advisor (but excluding amounts paid in satisfaction of
judgment, in compromise or as fines or penalties), may be paid from
time to time by the Fund or Funds to which the conduct in question
related in advance of the final disposition of any action, suit or
proceeding; provided, that the Advisor shall have undertaken to repay
the amounts so paid if it is ultimately determined that indemnification
of such expenses is not authorized under this Subsection 8(b) and if
(i) the Advisor shall have provided security for such undertaking, (ii)
the Trust shall be insured against losses arising by reason of any
lawful advances, or (iii) a majority of the Independent Trustees, or an
independent legal counsel in a written opinion, shall have determined,
based on a review of readily available facts (as opposed to a full
trial-type inquiry), that there is reason to believe that the Advisor
ultimately will be entitled to indemnification hereunder.
<PAGE>
As to any matter disposed of by a compromise payment by the Advisor
referred to in this Subsection 8(b), pursuant to a consent decree or
otherwise, no such indemnification either for said payment or for any
other expenses shall be provided unless such indemnification shall be
approved (i) by a majority of the Independent Trustees or (ii) by an
independent legal counsel in a written opinion. Approval by the
Independent Trustees pursuant to clause (i) shall not prevent the
recovery from the Advisor of any amount paid to the Advisor in
accordance with either of such clauses as indemnification of the
Advisor is subsequently adjudicated by a court of competent
jurisdiction not to have acted in good faith in the reasonable belief
that the Advisor's action was in or not opposed to the best interest of
a Fund or to have been liable to a Fund or its Shareholders by reason
of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in its conduct under the Agreement.
The right of indemnification provided by this Subsection 8(b) shall not
be exclusive of or affect any of the rights to which the Advisor may be
entitled. Nothing contained in this Subsection 8(b) shall affect any
rights to indemnification to which Trustees, officers or other
personnel of the Trust, and other persons may be entitled by contract
or otherwise under law, nor the power of the Trust to purchase and
maintain liability insurance on behalf of any such person.
The Board of Trustees of the Trust shall take all such action as may be
necessary and appropriate to authorize the Trust hereunder to pay the
indemnification required by this Subsection 8(b) including, without
limitation, to the extent needed, to determine whether the Advisor is
entitled to indemnification hereunder and the reasonable amount of any
indemnity due it hereunder, or employ independent legal counsel for
that purpose.
8(c) The provisions contained in Section 8 shall survive the expiration or
other termination of this Agreement, shall be deemed to include and
protect the Advisor and its directors, officers, employees and agents
and shall inure to the benefit of its/their respective successors,
assigns and personal representatives.
9. Duration and Termination. With respect to any new Fund of the Trust
that is advised by the Advisor, this Agreement shall continue in effect
for an initial two year period from the date such new Fund is added to
this Agreement, as set forth in Exhibit A, unless sooner terminated as
provided herein. Unless terminated as herein provided, this Agreement
shall continue in effect, with respect to each Fund (after its initial
two year term), for successive periods of one year each, provided such
continuance is specifically approved annually:
a. By the vote of a majority of those members of the Board of
Trustees who are not parties to this Agreement or interested
persons of any such party (as that term is defined in the 1940
Act), cast in person at a meeting called for the purpose of
voting on such approval; and
b. By vote of either the Board of Trustees or a majority (as that
term is defined in the 1940 Act) of the outstanding voting
securities of each Fund.
Notwithstanding the foregoing, this Agreement may be terminated, with
respect to any Fund, by The Trust or by the Advisor at any time on
sixty (60) days' written notice, without the payment of any penalty,
provided that termination by The Trust must be authorized either by
vote of the Board of Trustees or by vote of a majority of the
outstanding voting securities of each Fund. This Agreement will
automatically terminate in the event of its assignment (as that term is
defined in the 1940 Act).
<PAGE>
10. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by a written
instrument signed by the party against which enforcement of the change,
waiver, discharge or termination is sought. No material amendment of
this Agreement shall be effective as to any Fund until approved by vote
of the holders of a majority of that Fund's outstanding voting
securities (as defined in the 1940 Act).
11. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect. If
any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby. This Agreement shall be
binding and shall inure to the benefit of the parties hereto and their
respective successors.
12. Applicable Law. This Agreement shall be construed in accordance with,
and governed by, the laws of the State of North Carolina.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
ATTEST: THE NOTTINGHAM INVESTMENT TRUST II
By: ______________________________ By: ______________________________
Title: ___________________________ Title: ___________________________
ATTEST: WILBANKS, SMITH & THOMAS ASSET
MANAGEMENT, INC
By: ______________________________ By: ______________________________
Title: ___________________________ Title: ___________________________
<PAGE>
EXHIBIT A
to the
AMENDED AND RESTATED
INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISOR'S COMPENSATION SCHEDULE
For the services set forth in the AMENDED AND RESTATED INVESTMENT ADVISORY
AGREEMENT, the Advisor shall be compensated monthly, as of the last day of each
month, within five business days of the month end, a fee based upon average
daily net assets of each Fund specified below according to the following
schedule.
WST Growth and Income Fund
March 15, 1999 (date added to this Agreement)
Net Assets Annual Fee
---------- ----------
On the first $250 million 0.75%
On all assets over $250 million 0.65%
ATTEST: THE NOTTINGHAM INVESTMENT TRUST II
By: ______________________________ By: ______________________________
Title: ___________________________ Title: ___________________________
ATTEST: WILBANKS, SMITH & THOMAS ASSET
MANAGEMENT, INC
By: ______________________________ By: ______________________________
Title: ___________________________ Title: ___________________________
AMENDED AND RESTATED
DISTRIBUTION AGREEMENT
THIS AMENDED AND RESTATED AGREEMENT, entered into as of March 15, 1999, by and
between Nottingham Investment Trust II (the "Trust"), an unincorporated business
trust organized under the laws of The Commonwealth of Massachusetts and Capital
Investment Group, Inc., a North Carolina corporation ("Distributor").
WITNESSETH:
WHEREAS, the Trust is engaged in business as an open-end management investment
company and is so registered under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, the Trust is authorized to issue an unlimited number of shares of
beneficial interest (the "Shares"), in separate series representing the
interests in separate funds of securities and other assets; and
WHEREAS, the Shares of the Trust are registered under the Securities Act of
1933, as amended (the "1933 Act"), pursuant to a registration statement on Form
N-1A (the "Registration Statement"), including a prospectus (the "Prospectus")
and a statement of additional information (the "Statement of Additional
Information"); and
WHEREAS, the Trust offers separate series of shares (the "Shares") representing
interests in the Trust; and
WHEREAS, the separate series of the Trust advised by Brown Capital Management,
Inc., which are set forth in Schedule A, as amended from time to time, (each a
"Fund" and collectively the "Funds") consists, of two classes of Shares (the
Institutional Class Shares and the Investor Class Shares); and
WHEREAS, the Trust has adopted a Plan of Distribution Pursuant to Rule 12b-1
under the 1940 Act (the "Distribution Plan") with respect to the Investor Shares
of the Funds; and
WHEREAS, Distributor has agreed to act as distributor of the Shares of each Fund
for the period of this Agreement;
NOW, THEREFORE, it is hereby agreed between the parties hereto as follows:
1. Appointment of Distributor.
(a) The Trust hereby appoints Distributor its exclusive agent for the
distribution of the Shares of each Fund in jurisdictions wherein such Shares may
be legally offered for sale; provided, however, that the Trust in its absolute
discretion may issue Shares of each Fund in connection with (i) the payment or
reinvestment of dividends or distributions; (ii) any merger or consolidation of
the Trust or of each Fund with any other investment company or trust or any
personal holding company, or the acquisition of the assets of any such entity or
another fund of the Trust; or (iii) any offer of exchange permitted by Section
11 of the 1940 Act.
<PAGE>
(b) Distributor hereby accepts such appointment as exclusive agent for
the distribution of the Shares of each Fund and agrees that it will sell the
Shares as agent for the trust at prices determined as hereinafter provided and
on the terms hereinafter set forth, all according to applicable federal and
state laws and regulations and to the Agreement and Declaration of Trust of the
Trust.
(c) Distributor may sell Shares of each Fund to or through qualified
securities dealers or others. Distributor will require each dealer or other such
party to conform to the provisions hereof, the Registration Statement and the
Prospectus and Statement of Additional Information, and applicable law; and
neither Distributor nor any such dealers or others shall withhold the placing of
purchase orders for Shares so as to make a profit thereby.
(d) Distributor shall order Shares of each Fund from the Trust only to
the extent that it shall have received purchase orders therefor. Distributor
will not make, or authorize any dealers or others to make: (i) any short sales
of Shares; or (ii) any sales of Shares to any Trustee or officer of the Trust or
to any officer or director of Distributor or of any corporation or association
furnishing investment advisory, managerial or supervisory services to the Trust,
or to any such corporation or association, unless such sales are made in
accordance with the then current Prospectus and Statement of Additional
Information.
(e) Distributor is not authorized by the Trust to give any information
or make any representations regarding the Shares of each Fund, except such
information or representations as are contained in the Registration Statement or
in the current Prospectus or Statement of Additional Information of the Funds,
or in advertisements and sales literature prepared by or on behalf of the Trust
for Distributor's use.
(f) Notwithstanding any provision hereof, the Trust may terminate,
suspend or withdraw the offering of Shares of each Fund whenever, in its sole
discretion, it deems such action to be desirable.
2. Offering Price of Shares. All Shares of each Fund sold under
this Agreement shall be sold at the public offering price per Share in effect at
the time of the sale, as described in the then current Prospectus of the Funds.
The excess, if any, of the public offering price over the net asset value of the
Shares sold by Distributor as agent shall be retained by Distributor as a
commission for its services hereunder. Out of such commission Distributor may
allow commissions or concessions to dealers and my allow them to others in its
discretion in such amounts as Distributor shall determine from time to time.
Except as may be otherwise determined by Distributor from time to time, such
commissions or concessions shall be uniform to all dealers. At no time shall the
Trust receive less than the full net asset value of the Shares, determined in
the manner set forth in the then current Prospectus and Statement of Additional
Information. Distributor shall also be entitled to such commissions and other
fees and payments as may be authorized by the Trustees of the Trust from time to
time under the Distribution Plan.
<PAGE>
3. Furnishing of Information. The Trust shall furnish to
Distributor copies of any information, financial statements and other documents
that Distributor may reasonably request for use in connection with the sale of
Shares of each Fund under this Agreement. The Trust shall also make available a
sufficient number of copies of the Funds' current prospectus and Statement of
Additional Information for use by the Distributor.
4. Expenses.
(a) The Trust will pay or cause to be paid the following expenses: (i)
preparation, printing and distribution to shareholders of the Prospectus and
Statement of Additional Information; (ii) preparation, printing and distribution
of reports and other communications to shareholders; (iii) registration of the
Shares under the federal securities laws; (iv) qualification of the Shares for
sale in certain states; (v) qualification of the Trust as a dealer or broker
under state law as well as qualification of the Trust as an entity authorized to
do business in certain states; (vi) maintaining facilities for the issue and
transfer of Shares; (vii) supplying information, prices and other data to be
furnished by the Trust under this Agreement; and (viii) certain taxes applicable
to the sale or delivery of the Shares or certificates therefor.
(b) Except to the extent such expenses are borne by the Trust pursuant
to the Distribution Plan, Distributor will pay or cause to be paid the following
expenses: (i) payments to sales representatives of the Distributor and to
securities dealers and others in respect of the sale of Shares of each Fund;
(ii) payment of compensation to and expenses of employees of the Distributor and
any of its affiliates to the extent they engage in or support distribution of
each Fund's Shares or render shareholder support services not otherwise provided
by the Trust's transfer agent, administrator, or custodian, including, but not
limited to, answering routine inquiries regarding each Fund, processing
shareholder transactions, and providing such other shareholder services as the
Trust may reasonably request; (iii) formulation and implementation of marketing
and promotional activities, including, but not limited to, direct mail
promotions and television, radio, newspaper, magazine and other mass media
advertising; (iv) preparation, printing and distribution of sales literature and
of Prospectuses and Statements of Additional Information and reports of the
Trust for recipients other than existing shareholders of each Fund; and (v)
obtaining such information, analyses and reports with respect to marketing and
promotional activities as the Trust may, from time to time, reasonably request.
(c) Distributor in connection with the Distribution Plan shall prepare
and deliver reports to the Trustees of the Trust on a regular basis, at least
quarterly, showing the expenditures with respect to each Fund pursuant to the
Distribution Plan and the purposes therefor, as well as any supplemental reports
as the Trustees of the Trust, from time to time, may reasonably request.
5. Repurchase of Shares. Distributor as agent and for the account
of the Trust may repurchase Shares of each Fund offered for resale to it and
redeem such Shares at their net asset value.
<PAGE>
6. Indemnification by the Trust. In absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of obligations or
duties hereunder on the part of Distributor, the Trust agrees to indemnify
Distributor and its officers and partners against any and all claims, demands,
liabilities and expenses that Distributor may incur under the 1933 Act, or
common law or otherwise, arising out of or based upon any alleged untrue
statement of a material fact contained in the Registration Statement or any
Prospectus or Statement of Additional Information of the Funds, or in any
advertisements or sales literature prepared by or on behalf of the Trust for
Distributor's use, or any omission to state a material fact therein, the
omission of which makes any statement contained therein misleading, unless such
statement or omission was made in reliance upon and in conformity with
information furnished to the Trust in connection therewith by or on behalf of
Distributor. Nothing herein contained shall require the Trust to take any action
contrary to any provision of its Agreement and Declaration of Trust or any
applicable statute or regulation.
7. Indemnification by Distributor. Distributor agrees to
indemnify the Trust and its officers and Trustees against any and all claims,
demands, liabilities and expenses which the Trust may incur under the 1933 Act,
or common law or otherwise, arising out of or based upon (i) any alleged untrue
statement of a material fact contained in the Registration Statement or any
Prospectus or Statement of Additional Information of the Funds, or in any
advertisements or sales literature prepared by or on behalf of the Trust for
Distributor's use, or any omission to state a material fact therein, the
omission of which makes any statement contained therein misleading, if such
statement or omission was made in reliance upon and in conformity with
information furnished to the trust in connection therewith by or on behalf of
Distributor; or (ii) any act or deed of Distributor or its sales
representatives, or securities dealers and others authorized to sell Shares of
each Fund hereunder, or their sales representatives, that has not been
authorized by the Trust in any Prospectus or Statement of Additional Information
of the Funds or by this Agreement.
8. Term and Termination.
(a) With respect to any new Fund of the Trust that is advised by Brown
Capital Management, Inc., this Agreement shall continue in effect for an initial
two year period from the date such new Fund is added to this Agreement, as set
forth in Exhibit A, unless sooner terminated as provided herein. Unless
terminated as herein provided, this Agreement shall continue in effect, with
respect to each Fund (after its initial two year term), for one year from the
date hereof and shall continue in full force and effect for successive periods
of one year thereafter, but only so long as each such continuance is approved
(i) by either the Trustees of the Trust or by vote of a majority of the
outstanding voting securities (as defined in the 1940 Act) of the Fund and, in
either event, (ii) by vote of a majority of the Trustees of the Trust who are
not parties to this Agreement or interested persons (as defined in the 1940 Act)
of any such party and who have no direct or indirect financial interest in this
Agreement or in the operation of the Distribution Plan or in any agreement
related thereto ("Independent Trustees"), cast at a meeting called for the
purpose of voting on such approval.
(b) This Agreement may be terminated at any time without the payment of
any penalty by vote of the Trustees of the Trust or a majority of the
Independent Trustees or by vote of a majority of the outstanding voting
securities (as defined in the 1940 Act) of any of the Funds or by Distributor,
on sixty days' written notice to the other party.
(c) This Agreement shall automatically terminate in the event of its
assignment (as defined in the 1940 Act).
<PAGE>
9. Limitation of Liability. The obligations of the Trust
hereunder shall not be binding upon any of the Trustees, officers or
shareholders of the Trust personally, but shall bind only the assets and
property of the Trust. The term "The Nottingham Investment Trust II" means and
refers to the Trustees from time to time serving under the Agreement and
Declaration of Trust of the Trust, a copy of which in on file with the Secretary
of the Commonwealth of Massachusetts. The execution and delivery of this
Agreement has been authorized by the Trustees, and this Agreement has been
signed on behalf of the Trust by an authorized officer of the Trust, acting as
such and not individually, and neither such authorization by such Trustees nor
such execution and delivery by such officer shall be deemed to have been made by
any of them individually or to impose any liability on any of them personally,
but shall bind only the assets and property of the Trust as provided in the
Agreement and Declaration of Trust.
IN WITNESS THEREOF, the parties hereto have caused this Agreement to be executed
as of the date first written above.
THE NOTTINGHAM INVESTMENT TRUST II
Attest: _________________________
By: __________________________
CAPITAL INVESTMENT GROUP, INC.
Attest: __________________________
By: __________________________
<PAGE>
SCHEDULE A
The list below, which shall be amended from time to time, sets forth
the Funds of the Nottingham Trust II which are advised by Brown Capital
Management, Inc., and the shares of which are distributed by Capital Investment
Group, Inc.
- ---------------------------------------------- ---------------------------------
FUNDS DATE ADDED TO THE AGREEMENT
- ----- ---------------------------
- ---------------------------------------------- ---------------------------------
The Brown Capital Management Equity Fund March 15, 1999
- ---------------------------------------------- ---------------------------------
The Brown Capital Management Balanced March 15, 1999
Fund
- ---------------------------------------------- ---------------------------------
The Brown Capital Management Small March 15, 1999
Company Fund
- ---------------------------------------------- ---------------------------------
The Brown Capital Management International Date Fund becomes effective with
Equity Fund the SEC
- ---------------------------------------------- ---------------------------------
AMENDED AND RESTATED
DISTRIBUTION AGREEMENT
THIS AMENDED AND RESTATED DISTRIBUTION AGREEMENT, entered into as of March 15,
1999, by and between Nottingham Investment Trust II (the "Trust"), an
unincorporated business trust organized under the laws of The Commonwealth of
Massachusetts and Capital Investment Group, Inc., a North Carolina corporation
("Distributor").
WITNESSETH:
WHEREAS, the Trust is engaged in business as an open-end management investment
company and is so registered under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, the Trust is authorized to issue an unlimited number of shares of
beneficial interest (the "Shares"), in separate series representing interests in
separate funds of securities and other assets; and
WHEREAS, the Trust is authorized to issue interest in separate classes of Shares
for each of its series now or in the future existing; and
WHEREAS, the Shares of the Trust are registered under the Securities Act of
1933, as amended (the "1933 Act"), pursuant to a registration statement on Form
N-1A (the "Registration Statement"), including a prospectus (the "Prospectus")
and a statement of additional information (the "Statement of Additional
Information"); and
WHEREAS, the separate series of the Trust advised by Wilbanks, Smith & Thomas
Asset Management, Inc. which are set forth in Schedule A (each a "Designated
Fund"), as amended from time to time, consists of three classes of Shares (the
Institutional Class Shares, the Investor Class Shares and the Class C Shares);
and
WHEREAS, the Trust has adopted a Distribution Plan pursuant to Rule 12b-1 under
the 1940 Act (the "Distribution Plan") with respect to the Investor Class Shares
and the Class C Shares of the series designated in Schedule A, and may enter
into related agreements providing for the distribution of such Shares of each
Designated Fund; and
WHEREAS, Distributor has agreed to act as distributor of the Shares of the Funds
for the period of this Agreement;
NOW, THEREFORE, it is hereby agreed between the parties hereto as follows:
1. Appointment of Distributor.
(a) The Trust hereby appoints Distributor its exclusive agent for the
distribution of the Shares of each Designated Fund in jurisdictions wherein such
Shares may be legally offered for sale; provided, however, that the Trust in its
absolute discretion may issue Shares of each Designated Fund in connection with
(i) the payment or reinvestment of dividends or distributions, (ii) any merger
or consolidation of the Trust or of each Designated Fund with any other
investment company or trust or any personal holding company, or the acquisition
of the assets of any such entity or another fund of the Trust; or (iii) any
offer of exchange permitted by Section 11 of the 1940 Act.
<PAGE>
(b) Distributor hereby accepts such appointment as exclusive agent for
the distribution of the Shares of each Designated Fund and agrees that it will
sell the Shares as agent for the Trust at prices determined as hereinafter
provided and on the terms hereinafter set forth, all according to applicable
federal and state laws and regulations and to the Agreement and Declaration of
Trust of the Trust.
(c) Distributor may sell Shares of each Designated Fund to or through
qualified dealers or others. Distributor will require each dealer to conform to
the provisions hereof, the Registration Statement and the Prospectus and
Statement of Additional Information, and applicable law; and neither Distributor
nor any such dealers shall withhold the placing of purchase orders for Shares so
as to make a profit thereby.
(d) Distributor shall order Shares of each Designated Fund from the
Trust only to the extent that it shall have received purchase orders therefor.
Distributor will not make, or authorize any dealers or others to make: (i) any
short sales of Shares; or (ii) any sales of Shares to any Trustee or officer of
the Trust or to any officer or director of Distributor or of any corporation or
association furnishing investment advisory, managerial or supervisory services
to the Trust, or to any such corporation or association, unless such sales are
made in accordance with the then current Prospectus and Statement of Additional
Information.
(e) Distributor is not authorized by the Trust to give any information
or make any representations regarding the Shares of each Designated Fund, except
such information or representations as are contained in the Registration
Statement or in the current Prospectus or Statement of Additional Information of
each Designated Fund, or in sales literature prepared by or on behalf of the
Trust for Distributor's use.
(f) Notwithstanding any provision hereof, the Trust may terminate,
suspend or withdraw the offering of Shares of each Designated Fund whenever, in
its sole discretion, it deems such action to be desirable.
2. Offering Price of Shares. All Designated Fund Shares sold under this
Agreement shall be sold at the public offering price per Share in effect at the
time of the sale, as described in the then current Prospectus for the Designated
Fund. The excess, if any, of the public offering price over the net asset value
of the Shares sold by Distributor as agent shall be retained by Distributor as a
commission for its services hereunder. Out of such commission Distributor may
allow commissions or concessions to dealers and may allow them to others in its
discretion in such amounts as Distributor shall determine from time to time.
Except as may be otherwise determined by Distributor from time to time, such
commissions or concessions shall be uniform to all dealers. At no time shall the
Trust receive less than the full net asset value of the Shares, determined in
the manner set forth in the then current Prospectus and Statement of Additional
Information. Distributor shall also be entitled to such commissions and other
fees and payments as may be authorized by the Trustees of the Trust from time to
time under any Distribution Plan adopted by the Trust.
<PAGE>
3. Furnishing of Information. The Trust shall furnish to Distributor
copies of any information, financial statements and other documents that
Distributor may reasonably request for use in connection with the sale of shares
of each Designated Fund under this Agreement. The Trust shall also make
available a sufficient number of copies of each Designated Fund's current
Prospectus and Statement of Additional Information for use by the Distributor.
4. Expenses.
(a) The Trust will pay or cause to be paid the following expenses: (i)
preparation, printing and distribution to shareholders of the Prospectus and
Statement of Additional Information; (ii) preparation, printing and distribution
of reports and other communications to shareholders; (iii) registration of the
Shares under the federal securities laws; (iv) qualification of the Shares for
sale in certain states; (v) qualification of the Trust as a dealer or broker
under state law as well as qualification of the Trust as an entity authorized to
do business in certain states; (vi) maintaining facilities for the issue and
transfer of Shares; (vii) supplying information, prices and other data to be
furnished by the Trust under this Agreement; and (viii) certain taxes applicable
to the sale or delivery of the Shares or certificates therefor.
(b) Except to the extent such expenses are borne by the Trust pursuant
to any Distribution Plan adopted by the Trust with respect to any Class of
Shares issued by any Designated Fund, Distributor will pay or cause to be paid
the following expenses: (i) payments to sales representatives of the Distributor
and to securities dealers and others in respect of the sale of Shares of each
Designated Fund; (ii) payment of compensation to and expenses of employees of
the Distributor and any of its affiliates to the extent they engage in or
support distribution of each Designated Fund's Shares or render shareholder
support services not otherwise provided by the Trust's transfer agent,
administrator, or custodian, including, but not limited to, office space and
equipment, telephone facilities and expenses, answering routine inquiries
regarding each Designated Fund, processing shareholder transactions, and
providing such other shareholder services as the Trust may reasonably request;
(iii) formulation and implementation of marketing and promotional activities,
including, but not limited to, direct mail promotions and television, radio,
newspaper, magazine and other mass media advertising; (iv) preparation, printing
and distribution of sales literature and of Prospectuses and Statements of
Additional Information and reports of the Trust for recipients other than
existing shareholders of each Designated Fund; and (v) obtaining such
information, analyses and reports with respect to marketing and promotional
activities as the Trust may, from time to time, reasonably request.
(c) Distributor in connection with any Distribution Plan adopted by
the Trust shall prepare and deliver reports to the Trustees of the Trust on a
regular basis, at least quarterly, showing the expenditures with respect to each
Designated Fund pursuant to the Distribution Plan and the purposes therefor, as
well as any supplemental reports as the Trustees of the Trust, from time to
time, may reasonably request.
<PAGE>
5. Redemption of Shares. Distributor as agent and for the account of
the Trust may redeem Shares at their net asset value plus any applicable sales
load or redemption fee as specified in the Trust's current Prospectus and
Statement of Additional Information.
6. Indemnification by the Trust. The distributor shall exercise
reasonable care in connection with its responsibilities under this Agreement. In
absence of misfeasance, bad faith, negligence or reckless disregard of
obligations or duties hereunder on the part of Distributor, the Trust agrees to
indemnify Distributor and its officers and partners and to hold them harmless
against any and all claims, demands, liabilities and expenses that Distributor
may incur under the 1933 Act, the 1940 Act, common law or otherwise arising out
of or based upon any alleged untrue statement of a material fact contained in
the Registration Statement or any Prospectus or Statement of Additional
Information of each Designated Fund, or in any advertisements or sales
literature prepared by or on behalf of the Trust for Distributor's use, or any
omission to state a material fact therein, the omission of which makes any
statement contained therein misleading, unless such statement or omission was
made in reliance upon and in conformity with information furnished to the Trust
in connection therewith by or on behalf of Distributor. Nothing herein contained
shall require the Trust to take any action contrary to any provision of its
Agreement and Declaration of Trust or any applicable statute or regulation.
7. Indemnification by Distributor. Distributor agrees to indemnify the
Trust and its officers and Trustees and to hold them harmless against any and
all claims, demands, liabilities and expenses which the Trust may incur under
the 1933 Act, the 1940 Act, common law or otherwise arising out of or based upon
(i) any untrue statement of a material fact or alleged untrue statement of a
material fact contained in the Registration Statement or any Prospectus or
Statement of Additional Information of each Designated Fund, or in any
advertisements or sales literature prepared by or on behalf of the Trust for
Distributor's use, or any omission to state a material fact therein, the
omission of which makes any statement contained therein misleading, if such
statement or omission to state a material fact was made in reliance upon and in
conformity with information furnished to the Trust in connection therewith by or
on behalf of Distributor; (ii) any act or deed of Distributor or its sales
representatives, or securities dealers and others authorized to sell Shares
hereunder or their sales representatives that has not been specifically
authorized in advance by the Trust in any Prospectus or Statement of Additional
Information of each Designated Fund or by this Agreement or other written
instrument; or (iii) any misfeasance, bad faith or negligence by the Distributor
or reckless disregard by the Distributor of its obligations or duties hereunder.
<PAGE>
8. Term and Termination.
(a) With respect to any new Designated Fund of the Trust that is
advised by Wilbanks, Smith & Thomas Asset Management, Inc., this Agreement shall
continue in effect for an initial two year period from the date such Designated
Fund is added to this Agreement, as set forth in Schedule A, unless sooner
terminated as provided herein. Unless terminated as herein provided, this
Agreement shall continue in effect, with respect to each Designated Fund (after
its initial two year term), for one year from the date hereof and shall continue
in full force and effect for successive periods of one year thereafter, but only
so long as each such continuance is approved (i) by either the Trustees of the
Trust or by vote of a majority of the outstanding voting securities (as defined
in the 1940 Act) of the Designated Fund and, in either event, (ii) by vote of a
majority of the Trustees of the Trust who are not parties to this Agreement or
interested persons (as defined in the 1940 Act) of any such party and who have
no direct or indirect financial interest in this Agreement or in the operation
of the Distribution Plan or in any agreement related thereto ("Independent
Trustees"), cast at a meeting called for the purpose of voting on such approval.
(b) This Agreement may be terminated with respect to any Fund, at any
time without the payment of any penalty by vote of the Trustees of the Trust or
a majority of the Independent Trustees or by vote of a majority of the
outstanding voting securities (as defined in the 1940 Act) of each Fund or by
Distributor, on sixty days' written notice to the other party.
(c) This Agreement shall automatically terminate in the event of its
assignment (as defined in the 1940 Act).
9. Limitation of Liability. It is expressly agreed that the obligations
of the Trust hereunder shall not be binding upon any of the Trustees, officers
or shareholders of the Trust personally, but shall bind only the assets and
property of the Trust. The term "Nottingham Investment Trust II" means and
refers to the Trustees from time to time serving under the Agreement and the
Declaration of Trust of the Trust dated October 25, 1990, and amended and
restated on the 17th of April 1995 ("Amended and Restated Declaration of
Trust"). The execution and delivery of this Agreement has been authorized by the
Trustees, and this Agreement has been signed on behalf of the Trust by an
authorized officer of the Trust, acting as such and not individually, and
neither such authorization by such Trustees nor such execution and delivery by
such officer shall be deemed to have been made by any of them individually or to
impose any liability on any of them personally, but shall bind only the assets
and property of the Trust as provided in the Agreement and Amended and Restated
Declaration of Trust and by Massachusetts Business Trust or other applicable
law.
<PAGE>
IN WITNESS THEREOF, the parties hereto have caused this Agreement to be executed
as of the date first written above.
NOTTINGHAM INVESTMENT TRUST II
Attest: ____________________
By: __________________________
CAPITAL INVESTMENT GROUP, INC.
Attest: ____________________
By: __________________________
<PAGE>
SCHEDULE A
The list below, which may be amended from time to time, sets forth the
Funds of the Nottingham Trust II that are advised by Wilbanks, Smith and Thomas
Asset Management, Inc., and the shares of which are distributed by Capital
Investment Group, Inc. as provided in the Amended and Restated Distribution
Agreement:
- ----------------------------------------- -------------------------------------
FUNDS DATE ADDED TO THE AGREEMENT
- ----- ---------------------------
- ----------------------------------------- -------------------------------------
WST Growth & Income Fund March 15, 1999
- ----------------------------------------- -------------------------------------
EXPENSE LIMITATION AGREEMENT
NOTTINGHAM INVESTMENT TRUST II
EXPENSE LIMITATION AGREEMENT, effective as of March 15, 1999 by and
between Brown Capital Management, Inc. (the "Advisor") and Nottingham Investment
Trust II (the "Trust"), on behalf of each series of the Trust set forth in
Schedule A attached hereto (each a "Fund," and collectively, the "Funds").
WHEREAS, the Trust is a Massachusetts business trust organized under
the Amended and Restated Agreement and Declaration of Trust ("Declaration of
Trust"), and is registered under the Investment Company Act of 1940, as amended
(the "1940 Act"), as an open-end management company of the series type, and each
Fund is a series of the Trust; and
WHEREAS, the Trust and the Advisor have entered into an Amended and
Restated Investment Advisory Agreement dated March 15, 1999, as amended
("Advisory Agreement"), pursuant to which the Advisor provides investment
advisory services to each Fund listed in Schedule A, which may be amended from
time to time, for compensation based on the value of the average daily net
assets of each such Fund; and
WHEREAS, the Trust and the Advisor have determined that it is
appropriate and in the best interests of each Fund and its shareholders to
maintain the expenses of each Fund, and, therefore, have entered into this
Expense Limitation Agreement, in order to maintain each Fund's expense ratios at
the levels specified Schedule A attached hereto; and
NOW THEREFORE, the parties hereto agree that the Expense Limitation
Agreement provides as follows:
1. Expense Limitation.
1.1. Applicable Expense Limit. To the extent that the aggregate expenses
of every character incurred by a Fund in any fiscal year, including but not
limited to investment advisory fees of the Advisor (but excluding interest,
taxes, brokerage commissions, other expenditures which are capitalized in
accordance with generally accepted accounting principles, other extraordinary
expenses not incurred in the ordinary course of such Fund's business, and
amounts, if any, payable pursuant to a plan adopted in accordance with Rule
12b-1 under the 1940 Act) ("Fund Operating Expenses"), exceed the Operating
Expense Limit, as defined in Section 1.2 below, such excess amount (the "Excess
Amount") shall be the liability of the Advisor.
1.2. Operating Expense Limit. The maximum Operating Expense Limit in any
year with respect to each Fund shall be the amount specified in Schedule A based
on a percentage of the average daily net assets of each Fund.
1.3. Method of Computation. To determine the Advisor's liability with
respect to the Excess Amount, each month the Fund Operating Expenses for each
Fund shall be annualized as of the last day of the month. If the annualized Fund
Operating Expenses for any month of a Fund exceed the Operating Expense Limit of
such Fund, the Advisor shall first waive or reduce its investment advisory fee
for such month by an amount sufficient to reduce the annualized Fund Operating
Expenses to an amount no higher than the Operating Expense Limit. If the amount
of the waived or reduced investment advisory fee for any such month is
insufficient to pay the Excess Amount, the Advisor may also remit to the
appropriate Fund or Funds an amount that, together with the waived or reduced
investment advisory fee, is sufficient to pay such Excess Amount.
<PAGE>
1.4. Year-End Adjustment. If necessary, on or before the last day of the
first month of each fiscal year, an adjustment payment shall be made by the
appropriate party in order that the amount of the investment advisory fees
waived or reduced and other payments remitted by the Advisor to the Fund or
Funds with respect to the previous fiscal year shall equal the Excess Amount.
2. Reimbursement of Fee Waivers and Expense Reimbursements.
2.1. Reimbursement. If in any year during which the total assets of a Fund
are greater than $20 million and in which the Advisory Agreement is still in
effect, the estimated aggregate Fund Operating Expenses of such Fund for the
fiscal year are less than the Operating Expense Limit for that year, subject to
quarterly approval by the Trust's Board of Trustees as provided in Section 2.2
below, the Advisor shall be entitled to reimbursement by such Fund, in whole or
in part as provided below, of the investment advisory fees waived or reduced and
other payments remitted by the Advisor to such Fund pursuant to Section 1
hereof. The total amount of reimbursement to which the Advisor may be entitled
(the "Reimbursement Amount") shall equal, at any time, the sum of all investment
advisory fees previously waived or reduced by the Advisor and all other payments
remitted by the Advisor to the Fund, pursuant to Section 1 hereof, during any of
the previous five (5) fiscal years, less any reimbursement previously paid by
such Fund to the Advisor, pursuant to Sections 2.2 or 2.3 hereof, with respect
to such waivers, reductions, and payments. The Reimbursement Amount shall not
include any additional charges or fees whatsoever, including, e.g., interest
accruable on the Reimbursement Amount.
2.2. Board Approval. No reimbursement shall be paid to the Advisor with
respect to any Fund pursuant to this provision in any fiscal quarter, unless the
Trust's Board of Trustees has determined that the payment of such reimbursement
is in the best interests of such Fund and its shareholders. The Trust's Board of
Trustees shall determine quarterly in advance whether any reimbursement may be
paid to the Advisor with respect to any Fund in such quarter.
2.3. Method of Computation. To determine each Fund's payments, if any, to
reimburse the Advisor for the Reimbursement Amount, each month the Fund
Operating Expenses of each Fund shall be annualized as of the last day of the
month. If the annualized Fund Operating Expenses of a Fund for any month are
less than the Operating Expense Limit of such Fund, such Fund, only with the
prior approval of the Trust's Board of Trustees, shall pay to the Advisor an
amount sufficient to increase the annualized Fund Operating Expenses of that
Fund to an amount no greater than the Operating Expense Limit of that Fund,
provided that such amount paid to the Advisor will in no event exceed the total
Reimbursement Amount.
2.4. Year-End Adjustment. If necessary, on or before the last day of the
first month of each fiscal year, an adjustment payment shall be made by the
appropriate party in order that the actual Fund Operating Expenses of a Fund for
the prior fiscal year (including any reimbursement payments hereunder with
respect to such fiscal year) do not exceed the Operating Expense Limit.
<PAGE>
3. Term and Termination of Agreement.
This Agreement with respect to the Funds shall continue in effect on March
15, 1999, and from year to year thereafter provided each such continuance is
specifically approved by a majority of the Trustees of the Trust who (i) are not
"interested persons" of the Trust or any other party to this Agreement, as
defined in the 1940 Act, and (ii) have no direct or indirect financial interest
in the operation of this Agreement ("Non-Interested Trustees"). Nevertheless,
this Agreement may be terminated by either party hereto, without payment of any
penalty, upon ninety (90) days' prior written notice to the other party at its
principal place of business; provided that, in the case of termination by the
Trust, such action shall be authorized by resolution of a majority of the
Non-Interested Trustees of the Trust or by a vote of a majority of the
outstanding voting securities of the Trust.
4. Miscellaneous.
4.1. Captions. The captions in this Agreement are included for convenience
of reference only and in no other way define or delineate any of the provisions
hereof or otherwise affect their construction or effect.
4.2. Interpretation. Nothing herein contained shall be deemed to require
the Trust or the Funds to take any action contrary to the Trust's Declaration of
Trust or By-Laws, or any applicable statutory or regulatory requirement to which
it is subject or by which it is bound, or to relieve or deprive the Trust's
Board of Trustees of its responsibility for and control of the conduct of the
affairs of the Trust or the Funds.
4.3. Definitions. Any question of interpretation of any term or provision
of this Agreement, including but not limited to the investment advisory fee, the
computations of net asset values, and the allocation of expenses, having a
counterpart in or otherwise derived from the terms and provisions of the
Advisory Agreement or the 1940 Act, shall have the same meaning as and be
resolved by reference to such Advisory Agreement or the 1940 Act.
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by
their respective officers thereunto duly authorized and their respective
corporate seals to be hereunto affixed, as of the day and year first above
written.
NOTTINGHAM INVESTMENT TRUST II
ON BEHALF OF EACH OF ITS SERIES LISTED IN SCHEDULE A
By: _________________________________
BROWN CAPITAL MANAGEMENT, INC.
By: _________________________________
<PAGE>
SCHEDULE A
OPERATING EXPENSE LIMITS
This Agreement relates to the following Funds of the Trust:
Maximum Operating
Name of Fund Expense Limit
------------ -----------------
Brown Capital Management Equity Fund 1.20%
Brown Capital Management Balanced Fund 1.20%
Brown Capital Management Small Company Fund 1.50%
Brown Capital Management International Equity Fund 2.00%
EXPENSE LIMITATION AGREEMENT
NOTTINGHAM INVESTMENT TRUST II
EXPENSE LIMITATION AGREEMENT, effective as of March 15, 1999 by and
between Wilbanks, Smith & Thomas Asset Management, Inc. (the "Advisor") and
Nottingham Investment Trust II (the "Trust"), on behalf of each series of the
Trust set forth in Schedule A attached hereto (each a "Fund," and collectively,
the "Funds").
WHEREAS, the Trust is a Massachusetts business trust organized under
the Amended and Restated Agreement and Declaration of Trust ("Declaration of
Trust"), and is registered under the Investment Company Act of 1940, as amended
(the "1940 Act"), as an open-end management company of the series type, and each
Fund is a series of the Trust; and
WHEREAS, the Trust and the Advisor have entered into an Amended and
Restated Investment Advisory Agreement dated March 15, 1999, as amended
("Advisory Agreement"), pursuant to which the Advisor provides investment
advisory services to each Fund listed in Schedule A, which may be amended from
time to time, for compensation based on the value of the average daily net
assets of each such Fund; and
WHEREAS, the Trust and the Advisor have determined that it is
appropriate and in the best interests of each Fund and its shareholders to
maintain the expenses of each Fund, and, therefore, have entered into this
Expense Limitation Agreement, in order to maintain each Fund's expense ratios at
the levels specified Schedule A attached hereto; and
NOW THEREFORE, the parties hereto agree that the Expense Limitation
Agreement provides as follows:
1. Expense Limitation.
1.1. Applicable Expense Limit. To the extent that the aggregate expenses
of every character incurred by a Fund in any fiscal year, including but not
limited to investment advisory fees of the Advisor (but excluding interest,
taxes, brokerage commissions, other expenditures which are capitalized in
accordance with generally accepted accounting principles, other extraordinary
expenses not incurred in the ordinary course of such Fund's business, and
amounts, if any, payable pursuant to a plan adopted in accordance with Rule
12b-1 under the 1940 Act) ("Fund Operating Expenses"), exceed the Operating
Expense Limit, as defined in Section 1.2 below, such excess amount (the "Excess
Amount") shall be the liability of the Advisor.
1.2. Operating Expense Limit. The maximum Operating Expense Limit in any
year with respect to each Fund shall be the amount specified in Schedule A based
on a percentage of the average daily net assets of each Fund.
<PAGE>
1.3. Method of Computation. To determine the Advisor's liability with
respect to the Excess Amount, each month the Fund Operating Expenses for each
Fund shall be annualized as of the last day of the month. If the annualized Fund
Operating Expenses for any month of a Fund exceed the Operating Expense Limit of
such Fund, the Advisor shall first waive or reduce its investment advisory fee
for such month by an amount sufficient to reduce the annualized Fund Operating
Expenses to an amount no higher than the Operating Expense Limit. If the amount
of the waived or reduced investment advisory fee for any such month is
insufficient to pay the Excess Amount, the Advisor may also remit to the
appropriate Fund or Funds an amount that, together with the waived or reduced
investment advisory fee, is sufficient to pay such Excess Amount.
1.4. Year-End Adjustment. If necessary, on or before the last day of the
first month of each fiscal year, an adjustment payment shall be made by the
appropriate party in order that the amount of the investment advisory fees
waived or reduced and other payments remitted by the Advisor to the Fund or
Funds with respect to the previous fiscal year shall equal the Excess Amount.
2. Reimbursement of Fee Waivers and Expense Reimbursements.
2.1. Reimbursement. If in any year during which the total assets of a Fund
are greater than $20 million and in which the Advisory Agreement is still in
effect, the estimated aggregate Fund Operating Expenses of such Fund for the
fiscal year are less than the Operating Expense Limit for that year, subject to
quarterly approval by the Trust's Board of Trustees as provided in Section 2.2
below, the Advisor shall be entitled to reimbursement by such Fund, in whole or
in part as provided below, of the investment advisory fees waived or reduced and
other payments remitted by the Advisor to such Fund pursuant to Section 1
hereof. The total amount of reimbursement to which the Advisor may be entitled
(the "Reimbursement Amount") shall equal, at any time, the sum of all investment
advisory fees previously waived or reduced by the Advisor and all other payments
remitted by the Advisor to the Fund, pursuant to Section 1 hereof, during any of
the previous five (5) fiscal years, less any reimbursement previously paid by
such Fund to the Advisor, pursuant to Sections 2.2 or 2.3 hereof, with respect
to such waivers, reductions, and payments. The Reimbursement Amount shall not
include any additional charges or fees whatsoever, including, e.g., interest
accruable on the Reimbursement Amount.
2.2. Board Approval. No reimbursement shall be paid to the Advisor with
respect to any Fund pursuant to this provision in any fiscal quarter, unless the
Trust's Board of Trustees has determined that the payment of such reimbursement
is in the best interests of such Fund and its shareholders. The Trust's Board of
Trustees shall determine quarterly in advance whether any reimbursement may be
paid to the Advisor with respect to any Fund in such quarter.
2.3. Method of Computation. To determine each Fund's payments, if any, to
reimburse the Advisor for the Reimbursement Amount, each month the Fund
Operating Expenses of each Fund shall be annualized as of the last day of the
month. If the annualized Fund Operating Expenses of a Fund for any month are
less than the Operating Expense Limit of such Fund, such Fund, only with the
prior approval of the Trust's Board of Trustees, shall pay to the Advisor an
amount sufficient to increase the annualized Fund Operating Expenses of that
Fund to an amount no greater than the Operating Expense Limit of that Fund,
provided that such amount paid to the Advisor will in no event exceed the total
Reimbursement Amount.
2.4. Year-End Adjustment. If necessary, on or before the last day of the
first month of each fiscal year, an adjustment payment shall be made by the
appropriate party in order that the actual Fund Operating Expenses of a Fund for
the prior fiscal year (including any reimbursement payments hereunder with
respect to such fiscal year) do not exceed the Operating Expense Limit.
<PAGE>
3. Term and Termination of Agreement.
This Agreement with respect to the Funds shall continue in effect on March
15, 1999, and from year to year thereafter provided each such continuance is
specifically approved by a majority of the Trustees of the Trust who (i) are not
"interested persons" of the Trust or any other party to this Agreement, as
defined in the 1940 Act, and (ii) have no direct or indirect financial interest
in the operation of this Agreement ("Non-Interested Trustees"). Nevertheless,
this Agreement may be terminated by either party hereto, without payment of any
penalty, upon ninety (90) days' prior written notice to the other party at its
principal place of business; provided that, in the case of termination by the
Trust, such action shall be authorized by resolution of a majority of the
Non-Interested Trustees of the Trust or by a vote of a majority of the
outstanding voting securities of the Trust.
4. Miscellaneous.
4.1. Captions. The captions in this Agreement are included for convenience
of reference only and in no other way define or delineate any of the provisions
hereof or otherwise affect their construction or effect.
4.2. Interpretation. Nothing herein contained shall be deemed to require
the Trust or the Funds to take any action contrary to the Trust's Declaration of
Trust or By-Laws, or any applicable statutory or regulatory requirement to which
it is subject or by which it is bound, or to relieve or deprive the Trust's
Board of Trustees of its responsibility for and control of the conduct of the
affairs of the Trust or the Funds.
4.3. Definitions. Any question of interpretation of any term or provision
of this Agreement, including but not limited to the investment advisory fee, the
computations of net asset values, and the allocation of expenses, having a
counterpart in or otherwise derived from the terms and provisions of the
Advisory Agreement or the 1940 Act, shall have the same meaning as and be
resolved by reference to such Advisory Agreement or the 1940 Act.
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed
by their respective officers thereunto duly authorized and their respective
corporate seals to be hereunto affixed, as of the day and year first above
written.
NOTTINGHAM INVESTMENT TRUST II
ON BEHALF OF EACH OF ITS SERIES LISTED IN SCHEDULE A
By: _____________________________
WILBANKS, SMITH & THOMAS ASSET MANAGEMENT, INC.
By: _____________________________
<PAGE>
SCHEDULE A
OPERATING EXPENSE LIMITS
This Agreement relates to the following Funds of the Trust:
Maximum Operating
Name of Fund Expense Limit
------------ -----------------
WST Growth & Income Fund 1.75%
March 1, 1999
Opinion and Consent of Counsel
Nottingham Investment Trust II
105 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
Dear Gentlemen:
This opinion is given in connection with the filing by Nottingham
Investment Trust II, a Massachusetts business trust ("Trust"), of Post-Effective
Amendment No. 36 to the Registration Statement on Form N-1A ("Registration
Statement") under the Securities Act of 1933, as amended, and Amendment No. 37
under the Investment Company Act of 1940, as amended, relating to an indefinite
amount of authorized shares of beneficial interest, at par value of $.01 per
share, of the Class C Shares of the separate series of the Trust, the WST Growth
and Income Fund ("Fund"). The authorized shares of beneficial interest of the
Fund are hereinafter referred to as the "Class C Shares."
We have examined the following Trust documents: the Amended and
Restated Declaration of Trust; the Amended and Restated By-Laws; Post-Effective
Amendment No. 34 on Form N-1A filed on July 31, 1998; Post Effective Amendment
No. 35 on Form N-1A filed on February 24, 1999; pertinent provisions of the laws
of the Commonwealth of Massachusetts; and such other corporate records,
certificates, documents and statutes that we have deemed relevant in order to
render the opinion expressed herein.
Based on such examination, we are of the opinion that:
1. The Trust is a Massachusetts business trust duly organized, validly
existing, and in good standing under the laws of the Commonwealth of
Massachusetts; and
2. The Class C Shares to be offered for sale by the Trust, when issued in
the manner contemplated by the Registration Statement, will be legally
issued, fully-paid and non-assessable.
This letter expresses our opinion as to the Massachusetts business
trust law governing matters such as the due organization of the Trust and the
authorization and issuance of the Class C Shares, but does not extend to the
securities or "Blue Sky" laws of the Commonwealth of Massachusetts or to federal
securities or other laws.
We consent to the use of this opinion as an exhibit to the Registration
Statement and to the reference to Dechert Price & Rhoads under the caption
"Legal Counsel" in the Statement of Additional Information, which is
incorporated by reference into the Prospectus comprising a part of the
Registration Statement.
Very truly yours,
/s/ DECHERT PRICE & RHOADS
Exhibit 11
INDEPENDENT AUDITORS' CONSENT
To the Board of Trustees of The Nottingham Investment Trust II and Shareholders
of the WST Growth & Income Fund:
We consent to the incorporation by reference in Post-Effective Amendment No. 36
to Registration Statement (No. 33-37458) of the WST Growth & Income Fund of our
report dated April 24, 1998, appearing in the Prospectus, which is incorporated
by reference in such Registration Statement, and to the reference to us under
the heading "Financial Highlights" in such Prospectus.
/s/ Deloitte & Touche LLP
Pittsburgh, Pennsylvania
March 10, 1999
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
CLASS C SHARES
WHEREAS, The Nottingham Investment Trust II, an unincorporated business trust
organized and existing under the laws of the Commonwealth of Massachusetts (the
"Trust"), engages in business as an open-end management investment company and
is registered as such under the Investment company Act of 1940, as amended
("1940 Act");
WHEREAS, the Trust is authorized to issue an unlimited number of shares of
beneficial interest (the "Shares"), in separate series representing the
interests in separate portfolios of securities and other assets ("Funds");
WHEREAS, the Trust has authorized each of its separate Funds in multiple classes
of its shares;
WHEREAS, the Trust has established and designated a class of shares as the Class
C Shares;
WHEREAS, the Trust desires to adopt a Plan of Distribution ("Plan") pursuant to
Rule 12b-1 under the 1940 Act with respect to the Class C Shares of the WST
Growth and Income Fund and any future Funds established and designated by the
Trust and advised by Wilbanks, Smith and Thomas Asset Management, Inc. (the
"Advisor");
WHEREAS, the Board of Trustees of the Trust as a whole, and the Trustees who are
not "interested persons" of the Trust (as that term is defined in the 1940 Act)
and have no direct or indirect financial interest in the operation of the Plan,
which is a compensation type rule 12b-1 Plan, or in any agreement relating
hereto ("Rule 12b-1 Trustees"), having determined, in the exercise of reasonable
business judgment and in light of their fiduciary duties under Section 36(a) and
(b) of the 1940 Act, that there is a reasonable likelihood that this Plan will
benefit the Trust and its shareholders, have approved this Plan by votes cast at
a meeting called for the purpose of voting hereon and on any agreements related
hereto; and
NOW, THEREFORE, in consideration of the foregoing, the Trust hereby adopts this
Plan on the following terms and conditions:
1. Distribution and Servicing Activities. Subject to the supervision of
the Board of Trustees, a Fund is authorized directly or indirectly, to engage in
any activities primarily intended to result in the sale of Class C Shares or the
servicing of shareholders purchasing Class C Shares, which activities may
include, but are not limited to, the following: (a) payment of compensation to
the Trust's distributor, securities dealers and other appropriate persons in
respect of the sale of Class C Shares of a Fund; (b) payment of compensation to
and expenses of personnel (including personnel of organizations with whom the
Trust has entered into agreements that may be deemed to be related to this Plan)
that engage in or support distribution of Class C Shares of a Fund or who render
shareholder support services not otherwise provided by the Trust's transfer
agent, administrator or custodian, including but not limited to, answering
inquiries regarding the Trust, processing shareholder transactions, providing
personal services and/or the maintenance of shareholder accounts, providing
other shareholder liaison services, responding to shareholder inquiries,
providing information on shareholder investments in a Fund, and providing such
other shareholder services as the Trust may reasonably request; (c) formulation
and implementation of marketing promotional activities with respect to the sale
of Class C shares of a Fund, including, but not limited to, direct mail
promotions and television, radio, newspaper, magazine and other mass media
advertising; (d) preparation, printing and distribution of sales literature with
respect to the sale of Class C shares of a Fund; (e) preparation, printing and
distribution of prospectuses and statements of additional information and
reports of a Fund for potential and existing Class C Shareholders of a Fund; and
(f) obtaining such information, analyses and reports with respect to marketing
and promotional activities as a Fund may, from time to time, deem advisable with
respect to the sale of Class C shares of a Fund. A Fund is authorized to engage
in the activities listed above, and in any other activities primarily intended
to result in the sale of Class C Shares, either directly or through other
persons with which the Trust has entered into agreements related to this Plan.
<PAGE>
2. Expenditures. A Fund shall pay a fee for distribution of its Class C
Shares and servicing of shareholders of the Class C Shares at the annual rate of
0.75% of the average daily net asset value of a Fund attributable to its Class C
Shares. Notwithstanding the foregoing, in no event may such expenditures paid by
a Fund as servicing fees exceed an amount calculated at the rate of 0.25% of the
average annual net assets of a Fund attributable to its Class C Shares. Such
payments for distribution and shareholder servicing activities may be made
directly to a Fund for payment to appropriate persons or directly to other
persons with which a Fund has entered into agreements related to this Plan.
3. Term and Termination.
(a) This Plan shall become effective as of the 15th day of March, 1999.
Unless terminated as herein provided, this Plan shall continue in effect for one
year from the effective date hereof and shall continue in effect for successive
periods of one year thereafter, but only so long as each such continuance is
specifically approved by votes of a majority of both (i) the Trustees of the
Trust and (ii) the Rule 12b-1 Trustees, cast in person at a meeting called for
the purpose of voting on such approval.
(b) This Plan may be terminated at any time with respect to any Fund by a
vote of the majority of the Rule 12b-1 Trustees or by a vote of a majority of
the outstanding voting securities of a Fund's Class C shareholders, as defined
in the 1940 Act.
4. Amendments. This Plan may not be amended to materially increase the
distribution and servicing fees and expenses authorized by Section 2 hereof
unless such proposed increase is approved by a vote of the majority of the
outstanding voting securities of a Fund's Class C shareholders, as defined in
the 1940 Act, and no material amendment to this Plan shall be made unless
approved in the manner provided for annual renewal of this Plan in Section 3(a)
hereof.
5. Selection and Nomination of Trustees. While this Plan is in effect, the
selection and nomination of the Rule 12b-1 Trustees of the Trust shall be
committed to the discretion of such Rule 12b-1 Trustees.
<PAGE>
6. Quarterly Reports. The Treasurer of the Trust shall provide to the
Trustees of the Trust and the Trustees shall review quarterly a written report
of all amounts expended pursuant to this Plan and any related agreement and the
purposes for which such expenditures were made.
7. Recordkeeping. The Trust shall preserve copies of this Plan, any
related agreement and all information and reports provided to the Board of
Trustees pursuant to Section 6 hereof, for a period of not less than six years
from the date of this Plan. All such information shall, for the first two years,
be maintained in an easily accessible place.
8. Agreements. All agreements with any person relating to implementation
of this Plan with respect to the Class C shares of any Portfolio shall be in
writing, and any agreement related to this Plan with respect to the Class C
shares of any Portfolio shall provide:
(a) That such agreement may be terminated at any time, without payment of
any penalty, by vote of a majority of the Independent Trustees or by vote of a
majority of the outstanding voting securities representing the Class C shares of
such Portfolio, on not more than 60 days' written notice to any other party to
the agreement; and
(b) That such agreement shall terminate automatically in the event of its
assignment.
9. Limitation of Liability. Any obligations of the Trust hereunder shall
not be binding upon any of the Trustees, officers or shareholders of the Trust
personally, but shall bind only the assets and property of the Trust. The term
"The Nottingham Investment Trust II" means and refers to the Trustees from time
to time serving under the Agreement and Declaration of Trust of the Trust, a
copy of which is on file with the Secretary of The Commonwealth of
Massachusetts. The execution of this Plan has been authorized by the Trustees,
and this Plan has been signed on behalf of the Trust by an authorized officer of
the Trust, acting as such and not individually, and neither such authorization
by such Trustees nor such execution by such officer shall be deemed to have been
made by any of them individually or to impose any liability on any of them
personally, but shall bind only the assets and property of the Trust as provided
in the Agreement and Declaration of Trust.
IN WITNESS THEREOF, the undersigned has caused this Plan to be executed
as of the date written above.
THE NOTTINGHAM INVESTMENT TRUST II
By ____________________________
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000869351
<NAME> NOTTINGHAM INVESTMENT TRUST II
<SERIES>
<NUMBER> 1
<NAME> WST GROWTH & INCOME INST
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> Mar-31-1998
<PERIOD-END> Mar-31-1998
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 6,011,194
<INVESTMENTS-AT-VALUE> 6,741,173
<RECEIVABLES> 352,108
<ASSETS-OTHER> 58,112
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 7,151,393
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 12,014
<TOTAL-LIABILITIES> 12,014
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 6,451,586
<SHARES-COMMON-STOCK> 564,801
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (42,186)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 729,979
<NET-ASSETS> 7,139,379
<DIVIDEND-INCOME> 39,673
<INTEREST-INCOME> 7,087
<OTHER-INCOME> 0
<EXPENSES-NET> 45,193
<NET-INVESTMENT-INCOME> 1,567
<REALIZED-GAINS-CURRENT> (42,186)
<APPREC-INCREASE-CURRENT> 729,979
<NET-CHANGE-FROM-OPS> 689,360
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,096
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 564,741
<NUMBER-OF-SHARES-REDEEMED> 131
<SHARES-REINVESTED> 191
<NET-CHANGE-IN-ASSETS> 7,139,379
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 19,204
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 80,737
<AVERAGE-NET-ASSETS> 4,582,611
<PER-SHARE-NAV-BEGIN> 10.02
<PER-SHARE-NII> 0.00
<PER-SHARE-GAIN-APPREC> 1.27
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.29
<EXPENSE-RATIO> 1.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000869351
<NAME> NOTTINGHAM INVESTMENT TRUST II
<SERIES>
<NUMBER> 2
<NAME> WST GROWTH & INCOME INV
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> Mar-31-1998
<PERIOD-END> Mar-31-1998
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 6,011,194
<INVESTMENTS-AT-VALUE> 6,741,173
<RECEIVABLES> 352,108
<ASSETS-OTHER> 58,112
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 7,151,393
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 12,014
<TOTAL-LIABILITIES> 12,014
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 6,451,586
<SHARES-COMMON-STOCK> 67,770
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (42,186)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 729,979
<NET-ASSETS> 7,139,379
<DIVIDEND-INCOME> 39,673
<INTEREST-INCOME> 7,087
<OTHER-INCOME> 0
<EXPENSES-NET> 45,193
<NET-INVESTMENT-INCOME> 1,567
<REALIZED-GAINS-CURRENT> (42,186)
<APPREC-INCREASE-CURRENT> 729,979
<NET-CHANGE-FROM-OPS> 689,360
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 40
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 67,766
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 4
<NET-CHANGE-IN-ASSETS> 7,139,379
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 19,204
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 80,737
<AVERAGE-NET-ASSETS> 4,582,611
<PER-SHARE-NAV-BEGIN> 10.22
<PER-SHARE-NII> (0.01)
<PER-SHARE-GAIN-APPREC> 1.05
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.26
<EXPENSE-RATIO> 2.25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
THE NOTTINGHAM INVESTMENT TRUST II
AMENDED AND RESTATED
RULE 18f-3 MULTI-CLASS PLAN
I. Introduction.
Pursuant to Rule 18f-3 under the Investment Company Act of
1940, as amended ("1940 Act"), this Rule 18f-3 Multi-Class Plan ("Plan") sets
forth the general characteristics of, and conditions under which the Nottingham
Investment Trust II ("Trust") may offer, multiple Classes of Shares of each
existing series of the Trust (each a "Fund" or collectively the "Funds"), and
such other Funds as the Trust may establish and designate in the future. In
addition, the Plan sets forth the shareholder servicing arrangements,
distribution arrangements, conversion features, exchange privileges, and other
shareholder services of each Class of Shares in such Fund. The Plan is intended
to allow each Fund of the Trust to offer multiple Classes of Shares to the
fullest extent and manner permitted by Rule 18f-3 under the 1940 Act, subject to
the requirements and conditions imposed by the Rule. This Plan may be revised or
amended from time to time as provided below.
Each Fund is authorized, as indicated below in the section
"Class Arrangements," to issue the following Classes of Shares representing
interests in each such Fund: Institutional Shares, Investor Shares and Class C
Shares. Each Class of Shares of a particular Fund will represent interests in
the same portfolio of that Fund and, except as described herein, shall have the
same rights and obligations as each other Class of that Fund. Each Class of
Shares shall be subject to such investment minimums and other conditions of
eligibility as are set forth in the applicable Fund's Prospectus or Statement of
Additional Information, as amended from time to time.
II. Allocation of Expenses.
Pursuant to Rule 18f-3 under the 1940 Act, the Trust shall
allocate to each Class of Shares in a Fund (i) any fees and expenses incurred by
the Trust in connection with the distribution of such Class of Shares under a
distribution and shareholder servicing plan (and related agreements) adopted for
such Class of Shares pursuant to Rule 12b-1, and (ii) any fees and expenses
incurred by the Trust under a shareholder servicing plan (and related
agreements) in connection with the provision of shareholder services to the
holders of such Class of Shares. In addition, pursuant to Rule 18f-3, the Trust
may allocate the following fees and expenses to a particular Class of Shares in
a single Fund:
(i) transfer agency fees identified by the transfer
agent as being attributable to such Class of
Shares;
(ii) printing and postage expenses related to preparing
and distributing materials such as shareholder
reports, notices, prospectuses, reports, and
proxies to current shareholders of such Class of
Shares or to regulatory agencies with respect to
such Class of Shares;
<PAGE>
(iii) blue sky registration or qualification fees
incurred by such Class of Shares;
(iv) Securities and Exchange Commission registration
fees incurred by such Class of Shares;
(v) the expense of administrative and personnel
services (including, but not limited to, those of
a portfolio accountant or dividend paying agent
charged with calculating net asset values or
determining or paying dividends) as required to
support the shareholders of such Class of Shares;
(vi) litigation or other legal expenses relating solely
to such Class of Shares;
(vii) fees of the Trustees of the Trust incurred as a
result of issues particularly relating to such
Class of Shares; and
(viii) independent accountants' fees relating solely to
such Class of Shares.
(ix) any additional expenses, other than advisory or
custodial fees or other expenses relating to the
management of a Fund's assets, if such expenses
are actually incurred in a different amount with
respect to a Class that are of a different kind or
to a different degree than with respect to one or
more other Classes.
The initial determination of the Class expenses that will be
allocated by the Trust to a particular Class of Shares and any subsequent
changes thereto will be reviewed by the Board of Trustees of the Trust and
approved by a vote of the Trustees of the Trust, including a majority of the
Trustees who are not interested persons of the Trust.
Income, realized and unrealized capital gains and losses, and
any expenses of a Fund not allocated to a particular Class of such Fund pursuant
to this Plan shall 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.
III. Dividends.
Dividends paid by the Trust with respect to each Class of
Shares of a Fund, to the extent any dividends are paid, will be calculated in
the same manner, at the same time and will be in the same amount, except that
any fees and expenses that are properly allocated to a particular Class of
Shares of a Fund will be borne by that Class of Shares.
<PAGE>
IV. Voting Rights.
Each share of each Fund entitles the shareholder of record to
one vote. Each Class of Shares of a Fund will vote separately as a Class with
respect to: (i) the adoption of, or material amendment to any Rule 12b-1
distribution plan, applicable to that Class of Shares, and (ii) any other
matters for which voting on a Class by Class basis is required under applicable
law or interpretative positions of the staff of the Securities and Exchange
Commission.
V. Class Arrangements.
The following summarizes the front-end sales charges,
contingent deferred sales charges, Rule 12b-1 fees, shareholder servicing fees,
conversion features, exchange privileges, and other shareholder services
applicable to each Class of Shares of the Funds. Additional details regarding
such fees and services are set forth in each Fund's current Prospectus and
Statement of Additional Information.
A. Institutional Shares -- All Funds.
1. Initial Sales Load: None
2. Contingent Deferred Sales Charge: None
3. Rule 12b-1 Distribution Fees: None
4. Shareholder Servicing Fees: None
5. Conversion Features: None
6. Exchange Privileges: Institutional Shares of
a Fund may be exchanged for Institutional
Shares of any other Fund of the Trust
established by the Fund's investment adviser.
7. Other Shareholder Services: None
B. Investor Shares -- All Funds.
1. Maximum Initial Sales Load (as a percentage
of offering price): 3.50% (except the Brown
Capital Management Funds)
2. Contingent Deferred Sales Charge: None
3. Rule 12b-1 Distribution/Shareholder
Servicing Fees: Pursuant to a Distribution
Plan adopted under Rule 12b-1, Investor
Shares of the Funds may pay distribution and
shareholder servicing fees of up to 0.50% of
the average daily net assets of any such
Fund attributable to such Class of Shares
(except for the Investor Shares of the
Investek Fixed Income Trust and the Brown
Capital Management Funds, which pay
distribution and shareholder servicing fees
of 0.25% of the average daily net assets of
such Funds attributable to that Class of
Shares).
<PAGE>
4. Conversion Features: None
5. Exchange Privileges: Investor Shares of a
Fund may be exchanged for Investor Shares of
any other Fund of the Trust established by
the Fund's investment adviser or the Class C
Shares of any Fund of the Trust established
by the Fund's investment adviser, provided
that any difference in sales loads as
described in the current Prospectus for each
Fund are paid by such shareholder.
6. Other Shareholder Services: The Trust offers
a Systematic Withdrawal Plan and Automatic
Investment Plan to holders of Investor
Shares of the Funds.
C. Class C Shares.
1. Maximum Initial Sales Load (as a percentage
of offering price): None
2. Contingent Deferred Sales Charge: None
3. Rule 12b-1 Distribution/Shareholder
Servicing Fees: Pursuant to a Distribution
Plan adopted under Rule 12b-1, Class C
Shares of the Funds may pay distribution and
shareholder servicing fees of up to 0.75% of
the average daily net assets of any such
Fund attributable to such Class of Shares.
4. Conversion Features: None
5. Exchange Privileges: Class C Shares of a
Fund may be exchanged for Class C Shares of
any other Fund of the Trust established by
the Fund's investment adviser or the
Investor Shares of any Fund of the Trust
established by the Fund's investment
adviser, provided that any differences in
sales loads, as described in the current
Prospectus for each Fund are paid by the
Class C shareholder.
6. Other Shareholder Services: The Trust offers
a Systematic Withdrawal Plan and Automatic
Investment Plan to holders of Class C Shares
of the Funds.
VI. Board Review.
The Board of Trustees of the Trust shall review this
Plan as frequently as they deem necessary. Prior to any material amendment(s) to
this Plan, the Trust's Board of Trustees, including a majority of the Trustees
that are not interested persons of the Trust, shall find that the Plan, as
proposed to be amended (including any proposed amendments to the method of
allocating Class and/or Fund expenses), is in the best interest of each Class of
Shares of each Fund individually and the Trust as a whole. In considering
whether to approve any proposed amendment(s) to the Plan, the Trustees of the
Trust shall request and evaluate such information as they consider reasonably
necessary to evaluate the proposed amendment(s) to the Plan.
