As filed with the Securities and Exchange Commission on September 22, 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. 40 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 41 [X]
(Check appropriate box or boxes.)
NOTTINGHAM INVESTMENT TRUST II
------------------------------
(Exact Name of Registrant as Specified in Charter)
105 North Washington Street, P.O. Box 69, Rocky Mount, North Carolina 27801-0069
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (252) 972-9922
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C. Frank Watson, III
105 North Washington Street, P.O. Box 69, Rocky Mount, North Carolina 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 Amendment
------------------------
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>
NOTTINGHAM INVESTMENT TRUST II
Contents of Registration Statement
This registration statement consists of the following papers and documents:
Cover Sheet
Contents of Registration Statement
Capital Value Fund
-Part A - Prospectus - T Shares
-Part B - Statement of Additional Information
Part C - Other Information and Signature Page
Exhibit Index
Exhibits
<PAGE>
PART A
======
Cusip Number 66976M___ NASDAQ Symbol CAP__
________________________________________________________________________________
CAPITAL VALUE FUND
A series of the
Nottingham Investment Trust II
T SHARES
________________________________________________________________________________
PROSPECTUS
November __, 1999
The Capital Value Fund (the "Fund") seeks maximum total return consisting of any
combination of capital appreciation and income. This Prospectus relates to the T
Shares of the Fund. The Fund also offers Investor Class shares, which are
offered by another prospectus.
Investment Advisor
------------------
Capital Investment Counsel, Inc.
17 Glenwood Avenue
Post Office Box 32249
Raleigh, North Carolina 27622
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.......................................................................2
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Investment Objective........................................................2
Principal Investment Strategies.............................................2
Principal Risks Of Investing In The Fund....................................4
Bar Chart And Performance Table.............................................5
Fees And Expenses Of The Fund...............................................6
MANAGEMENT OF THE FUND.........................................................7
- ----------------------
The Investment Advisor......................................................7
The Administrator...........................................................8
The Transfer Agent..........................................................8
The Distributor.............................................................9
YOUR INVESTMENT IN THE FUND....................................................9
- ---------------------------
Minimum Investment.........................................................10
Purchase And Redemption Price..............................................10
Purchasing Shares..........................................................10
Redeeming Your Shares......................................................12
OTHER IMPORTANT INVESTMENT INFORMATION........................................14
- --------------------------------------
Dividends, Distributions And Taxes.........................................14
Year 2000..................................................................15
Financial Highlights.......................................................16
Additional Information.............................................Back Cover
<PAGE>
THE FUND
--------
INVESTMENT OBJECTIVE
The Capital Value Fund (the "Fund") seeks maximum total return consisting of any
combination of capital appreciation and income.
PRINCIPAL INVESTMENT STRATEGIES
The Fund pursues its investment objective by investing in a flexible portfolio
of:
o equity securities
o fixed income securities
o money market instruments
The capital appreciation portion of the Fund's objective will be achieved by
investing in equity securities. The income portion of the Fund's objective will
be achieved by investing in fixed income securities and money market
instruments.
Capital Investment Counsel, Inc. (the "Advisor") will vary the percentage of
Fund assets invested in equity securities, fixed income securities, and money
market instruments depending upon the Advisor's view of:
o market and economic conditions,
o trends in business environment,
o trends in yields and interest rates,
o prospects for particular industries within the overall market environment,
and
o possible changes in fiscal or monetary policy.
Equity Securities. The Advisor seeks to identify equities that are undervalued
in the securities markets. Candidates for such investment will usually include
the equity securities of domestic, established companies whose underlying value
of assets owned by the company, or "break-up value," is close to or greater than
the market valuation of those same assets.
The equity portion of the Fund's portfolio will generally be comprised of common
stocks traded on domestic securities exchanges or on the over-the-counter
market. In determining whether a company is appropriate for inclusion in the
portfolio, the Advisor considers, among other things, such factors as:
o strong asset holdings in cash,
o current market value of real estate,
o favorable debt to asset and debt to equity ratios, and
o strength of management.
2
<PAGE>
In addition to common stocks, the equity portion of the Fund's portfolio may
also include preferred stock, convertible preferred stock, and convertible
bonds.
Fixed Income Securities. The Fund's fixed income investments will include
corporate debt obligations and U.S. Government Securities. The maturity of the
fixed income securities purchased and held by the Fund will depend upon:
o the current and expected trend in interest rates;
o credit quality of the fixed income securities;
o relative attractiveness of fixed income securities versus equity securities;
and
o the overall economic situation, current and expected.
Corporate debt obligations purchased by the Fund will consist of "investment
grade" securities. Investment grade securities will include those securities
that are rated at least "Baa" by Moody's Investors Services Inc., "BBB" by
Standard & Poor's Ratings Services, Fitch Investors Services Inc., or Duff &
Phelps or, if not rated, of equivalent quality in the Advisor's opinion. While
the Advisor utilizes the ratings of the various credit rating services as one
factor in establishing creditworthiness, it relies primarily upon its own
analysis to determine whether an issuer is creditworthy. If a corporate debt
obligation held by the Fund falls below one of the credit ratings described
below and is no longer considered to be "investment grade" by any credit rating
service rating that particular security, the Advisor will re-evaluate the
issuer's credit standing to determine if the investment should continue to be
held by the Fund. If the Advisor determines that the issuer remains
creditworthy, the Advisor may retain the investment for the Fund.
The Advisor will consider a number of factors in determining when to purchase
and sell the investments of the Fund and when to invest for long, intermediate,
or short maturities. Such factors may include:
o money supply growth
o rate of unemployment
o changes in consumer, wholesale and producer prices
o prices of raw materials and commodities
o industrial prices
o capital spending statistics
o Gross National Product ("GNP")
o industrial production data
o impact of inflation
o attitudes and concerns of key officials in the Federal Reserve and U.S.
Government
Money Market Instruments. Investments may also be made in money market
instruments under circumstances when the Advisor believes the short-term, stable
nature of money market instruments is the best means of achieving the Fund's
goal of maximum total return. The Advisor may, when it believes that a temporary
or defensive investment approach is appropriate, invest without limitation in
money market instruments.
3
<PAGE>
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 and there can be no assurance that the
Fund will be successful in meeting its objective. 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 performance 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 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.
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
will cause the value of fixed income securities to decrease. The reverse is
also true. Consequently, 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. 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. The longer the term of a fixed income instrument, the more
sensitive it will be to fluctuations in value due to interest rate changes.
o Maturity Risk: Maturity risk is another factor which can effect the value of
the Fund's debt holdings. In general, the longer the maturity of a fixed
income instrument, the higher its yield and the greater its sensitivity to
changes in interest rates. Conversely, the shorter the maturity, the lower
the yield but the greater the price stability.
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 securities 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.
4
<PAGE>
o Foreign Securities: The Fund may invest up to 10% of its total assets in
foreign securities. Because investment in foreign securities presents special
circumstances not typically associated with investment in domestic securities
that may reduce the value of these securities, such as: additional foreign
taxes on dividends; currency exchange rate fluctuations; at times, less
volume and liquidity in the markets for these securities; unfavorable
differences between U.S. and foreign economies and government regulations;
and possible additional U.S. governmental regulations and taxation's imposed
on foreign investment. Also, there may be difficulty in obtaining accurate
information regarding individual securities do to lack of uniform accounting,
auditing and financial reporting standards by foreign countries; less public
information; and less regulation of foreign issuers. Additionally, some
countries have been known to expropriate or nationalize assets; and foreign
investments may be subject to political, financial or social instability or
adverse diplomatic developments. Because of some of these additional risks of
foreign securities, the Fund will generally limit foreign investments to
those traded domestically as American Depository Receipts ("ADRs"). ADRs are
receipts issued by a U.S. bank or trust company evidencing ownership of
securities of a foreign issuer. ADRs may be listed on a national securities
exchange or may trade in the over-the-counter market. The prices of ADRs are
denominated in U.S. dollars while the underlying security may be denominated
in a foreign currency.
BAR CHART AND PERFORMANCE TABLE^1
The bar chart and table shown below provide an indication of the risks of
investing in the Fund by showing (on a calendar year basis) changes in the
average annual total returns for the Fund's Investor Class shares from year to
year (adjusted to reflect the fees and expenses applicable to the T Shares) and
by showing (on a calendar year basis) how the average annual returns for the
Fund's Investor Class shares for one year, five years, and since inception
(adjusted to reflect the fees and expenses applicable to the T Shares) compare
to returns of a broad-based securities index. How the Fund has performed in the
past is not necessarily an indication of how the Fund may perform in the future.
[Bar Chart here]:
1992 5.27%
1993 10.79%
1994 0.95%
1995 21.47%
1996 9.87%
1997 21.44%
1998 21.32%
5
<PAGE>
o During the 7-year period shown in the bar chart, the highest return for a
calendar quarter was 14.94% (quarter ended December 31, 1998).
o During the 7-year period shown in the bar chart, the lowest return for a
calendar quarter was -4.79% (quarter ended September 30, 1998).
o The year-to-date return as of the most recent calendar quarter was _____%
(quarter ended September 30, 1999).
o Sales loads are not reflected in the chart above or the table below, since
they are not applicable to the T Shares.
<TABLE>
<S> <C> <C> <C>
- --------------------------------------------------------- ----------------- ---------------- ----------------
Average Annual Total Returns Since
Period ended December 31, 1998* Past 1 Year Past 5 Years Inception**
- --------------------------------------------------------- ----------------- ---------------- ----------------
Capital Value Fund Investor Class Shares 21.32% 14.69% 12.73%
- --------------------------------------------------------- ----------------- ---------------- ----------------
S&P 500 Total Return Index*** 28.58% 24.05% 19.49%
- --------------------------------------------------------- ----------------- ---------------- ----------------
Lehman Brothers Aggregate Bond Index**** 8.69% 7.27% 7.64%
- --------------------------------------------------------- ----------------- ---------------- ----------------
</TABLE>
* The maximum sales load of 3.50% for the Investor Class is not
reflected in the table above, since it is not applicable to the T
Shares.
** December 31, 1991, for the Investor Class shares.
*** 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.
**** The Lehman Brothers Aggregate Bond Index represents an unmanaged
group of securities widely regarded by investors as representative
of the bond market.
1 The performance information presented above is based upon the average annual
total returns of the Investor Class shares, recalculated to reflect the fees
and expenses of the T Shares offered by this Prospectus. That performance
information has been used for this purpose since the T Shares are a new class
of shares that have no performance history. However, the annual returns for
both classes are expected to be substantially similar because both classes of
shares are invested in the same portfolio of securities and the annual
returns would differ only to the extent that the classes do not have the same
fees and expenses.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund:
Shareholder Fees For T Shares
(fees paid directly from your investment)
-----------------------------------------
Maximum sales charge (load) imposed on purchases
(as a percentage of offering price) ...................None
Redemption fee ............................................None
Annual Fund Operating Expenses For T Shares
(expenses that are deducted from Fund assets)
---------------------------------------------
Management Fees...........................................0.60%
Distribution and/or Service (12b-1) Fees..................0.75%
Other Expenses............................................1.05%
----
Total Annual Fund Operating Expenses..................2.40%
====
6
<PAGE>
Example. This Example shows you the expenses you may pay over time by investing
in the T Shares of 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.
- -------------------- -------------- -------------- -------------- --------------
Period Invested 1 Year 3 Years 5 Years 10 Years
- -------------------- -------------- -------------- -------------- --------------
Your Costs $243 $748 $1,280 $2,736
- -------------------- -------------- -------------- -------------- --------------
MANAGEMENT OF THE FUND
----------------------
THE INVESTMENT ADVISOR
The Fund's Investment Advisor is Capital Investment Counsel, Inc., 17 Glenwood
Avenue, Post Office Box 32249, Raleigh, North Carolina 27622. Pursuant to an
investment advisory agreement with the Nottingham Investment Trust II (the
"Trust"), 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. The Advisor is also responsible for the
selection of broker-dealers through which the Fund executes portfolio
transactions, subject to the brokerage policies established by the Trustees, and
it provides certain executive personnel to the Fund.
The Advisor, organized as a North Carolina corporation in 1984, is controlled by
Richard K. Bryant and E.O. Edgerton, Jr. They also control the Distributor. The
Advisor currently serves as investment advisor to over $130 million in assets.
The Advisor has been rendering investment counsel, utilizing investment
strategies substantially similar to that of the Fund, to individuals, banks and
thrift institutions, pension and profit sharing plans, trusts, estates,
charitable organizations, corporations, and other business and individual
accounts since its formation.
7
<PAGE>
E.O. Edgerton, Jr., a principal of the Advisor and an officer of the Fund, and
W. Harold Eddins, a Portfolio Manager of the Advisor, are responsible for
day-to-day management of the Fund's portfolio. Mr. Edgerton has served in this
capacity since the inception of the Fund in 1990, while Mr. Eddins has served in
such capacity since May, 1997. Messrs. Edgerton and Eddins have been with the
Advisor since 1984 and 1987, respectively.
The Advisor's Compensation. As full compensation for the investment advisory
services provided to the Fund, the Fund pays the Advisor monthly compensation
based on the Fund's daily average net assets at the annual rate of 0.60% of the
first $250 million of the Fund's net assets and 0.50% of all assets over $250
million. As a result, during the most recent fiscal year ending March 31, 1999,
Advisory fees paid to the Advisor by the Fund as a percentage of average net
assets was 0.60%.
Brokerage Practices. In selecting brokers and dealers to execute portfolio
transactions, the Advisor may consider research and brokerage services furnished
to the Advisor or its affiliates. Subject to seeking the most favorable net
price and execution available, the Advisor may also consider sales of shares of
the Fund as a factor in the selection of brokers and dealers. Certain securities
trades will be cleared through Capital Investment Group, a registered
broker-dealer affiliate of the Advisor and Distributor of the Fund.
The Investment Company Act of 1940, as amended (the "1940 Act"), generally
prohibits the Fund from engaging in principal securities transactions with an
affiliate of the Advisor. Thus, the Fund does not engage in principal
transactions with any affiliate of the Advisor. The Fund has adopted procedures,
under Rule 17e-1 under the 1940 Act, that are reasonably designed to provide
that any brokerage commission the Fund pays to an affiliate of the Advisor does
not exceed the usual and customary broker's commission. In addition, the Fund
will adhere to Section 11(a) of the 1934 Act and any applicable rules thereunder
governing floor trading.
THE ADMINISTRATOR
The Nottingham Company, Inc. ("Administrator") serves as the Fund's
administrator and fund accounting agent for the Fund. The Administrator assists
the Trust 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 Fund pursuant
to a Fund Accounting and Compliance Administration Agreement.
THE TRANSFER AGENT
NC Shareholder Services, LLC ("NCSS") serves as the Fund's transfer agent and
dividend disbursing agent of the Fund. As indicated later in the section of this
Prospectus, "Investing in the Fund," NCSS 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 Fund pursuant to a
Dividend Disbursing and Transfer Agent Agreement.
8
<PAGE>
THE DISTRIBUTOR
Capital Investment Group, Inc. ("Distributor") is the principal underwriter and
distributor of the Fund's shares and serves as the Fund's exclusive agent for
the distribution of Fund shares. The Distributor is an affiliate of the Advisor.
The Distributor may sell the Fund's shares to or through qualified securities
dealers or others.
Distribution of the Fund's Shares. For the T Shares of the Fund, the Fund has
adopted a Distribution Plan in accordance with Rule 12b-1 (the "Distribution
Plan") under the 1940 Act. Pursuant to the Distribution Plan, the Fund
compensates the Distributor for services rendered and expenses borne in
connection with activities primarily intended to result in the sale of the
Fund's T Shares (this compensation is commonly referred to as "12b-1 fees").
The Distribution Plan provides that the Fund will pay annually 0.75% of the
average daily net assets of the Fund's T Shares for activities primarily
intended to result in the sale of those shares or servicing of shareholders
investing in those shares, including to reimburse entities for providing
distribution and shareholder servicing with respect to the Fund's T Shares. In
no event is the Fund permitted to pay annually more than 0.25% of the average
daily net assets of the Fund's T Shares for shareholder servicing activities
with respect to that class of shares of the Fund. 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 management fees and Rule 12b-1 fees for the T
Shares and Investor Class 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 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 relative net assets of each series or the nature of the
services performed and relative applicability to each series.
YOUR INVESTMENT IN THE FUND
---------------------------
Other Classes of Shares. The Fund has two classes of shares: Investor Class
Shares and T Shares available for investment. Both classes of shares are
invested in the portfolio of securities. The only difference between the two
classes of shares is that the Investor Class Shares are subject to a front-end
sales load but lower Rule 12b-1 fees and expenses than the T Shares. The T
Shares have no front-end sales load but higher Rule 12b-1 fees and expenses.
9
<PAGE>
MINIMUM INVESTMENT
T Shares are sold at the net asset value applicable to the T Shares, and do not
include any sales load. Shares are redeemed at the net asset value applicable to
the T Shares.
All shares may be purchased by any account managed by the Advisor and any
broker-dealer authorized to sell Fund shares. The minimum initial investment is
$5,000 ($1,000 for Individual Retirement Accounts ("IRAs"), Keogh Plans, 401(k)
Plans, or purchases under the Uniform Transfer to Minors Act). The minimum
additional investment is $500. The Fund may, in the Advisor's sole discretion,
waive such minimum investment amounts.
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 for that class
of shares after an order is accepted in good form. An order is considered to be
in good form if it includes a complete and accurate application and payment in
full of the purchase amount. The net asset value for each class of shares is
calculated by dividing the value of the total assets, less liabilities
(including expenses, which are accrued daily) applicable to that class of
shares, by the total number of outstanding shares of that class. The net asset
value for each class of shares 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 is closed.
Other Matters Affecting Purchases and Redemptions. Sales 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 tenders. The Fund may
suspend redemption, if permitted by the 1940 Act, for any period during which
the New York Stock Exchange ("NYSE") is closed or during which trading is
restricted by the Securities Exchange Commission ("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.
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 "Capital
Value Fund," to:
Capital Value Fund
T Shares
c/o NC Shareholder Services, LLC
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
10
<PAGE>
The application must contain your social security number or Taxpayer
Identification Number ("TIN"). If you have applied for a social security number
or TIN at the time of completing your account application but you have not
received your number, 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 to add to an existing account by wire, please call
the Fund at 1-800-525-3863, 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 Capital Value Fund T Shares
Acct. # 2000000862110
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 public offering price for that
class of shares. The minimum additional investment is $500. Before adding funds
by bank wire, please call the Fund at 1-800-525-3863 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.
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 1-800-525-3863. 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 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.
Exchange Feature. You may exchange T Shares of the Fund for T Shares of any
other series of the Trust advised by the Fund's Advisor and offered for sale in
the state in which you reside. 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. The Board of Trustees reserves the right to
suspend, terminate, or amend the terms of the exchange privilege upon 60-days'
written notice to the shareholders.
11
<PAGE>
Frequent Trading. 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.
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.
REDEEMING YOUR SHARES
Regular Mail Redemptions. Regular mail redemption request should be addressed
to:
Capital Value Fund
T 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 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 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.
12
<PAGE>
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 (T 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.
Redemption proceeds will not be distributed until written confirmation of the
redemption request is received, per the instructions above. You can choose to
have redemption proceeds mailed to you at your address of record, your bank, or
to any other authorized person, or you can have the proceeds sent by bank wire
to your bank ($5,000 minimum). Shares of the Fund may not be redeemed by wire on
days in which your bank is not open for business. You can change your redemption
instructions anytime you wish by filing a letter including your new redemption
instructions with the Fund. See "Signature Guarantees" below.
The Fund 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 $10.00 per transaction for wiring redemption
proceeds. If this cost is passed through to redeeming shareholders by the Fund,
the charge will be deducted automatically from 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 1-800-525-3863. Redemption proceeds will only be sent to the bank
account or person named in your Fund Shares Application currently on file with
the Fund. Telephone redemption privileges authorize the Fund to act on telephone
instructions from any person representing himself or herself to be the investor
and reasonably believed by the Fund to be genuine. The Fund will employ
reasonable procedures, such as requiring a form of personal identification, to
confirm that instructions are genuine, and if it does not follow such
procedures, the Fund will be liable for any losses due to fraudulent or
unauthorized instructions. The Fund will not be liable for following telephone
instructions reasonably believed to be genuine.
Systematic Withdrawal Plan. A shareholder who owns shares of the Fund valued at
$10,000 or more at 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.
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.
13
<PAGE>
Redemptions in Kind. The Fund does not intend, under normal circumstances, to
redeem its securities by payment in kind. It is possible, however, that
conditions may arise in the future, which would, in the opinion of the Trustees,
make it undesirable for the Fund to pay for all redemptions in cash. In such
case, the Board of Trustees may authorize payment to be made in readily
marketable portfolio securities of the Fund. Securities delivered in payment of
redemptions would be valued at the same value assigned to them in computing the
net asset value per share. Shareholders receiving them would incur brokerage
costs when these securities are sold. An irrevocable election has been filed
under Rule 18f-1 of the 1940 Act, wherein the Fund committed itself to pay
redemptions in cash, rather than in kind, to any shareholder of record of the
Fund who redeems during any ninety-day period, the lesser of (a) $250,000 or (b)
one percent (1%) of the Fund's net asset value at the beginning of such period.
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.
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 between
different series of the Trust may be treated as a sale.
14
<PAGE>
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.
YEAR 2000
Like other mutual funds, the Fund and the service providers for the Fund rely
heavily on the reasonably consistent operation of their computer systems. Many
software programs and certain computer hardware in use today cannot properly
process information after December 31, 1999, because of the method by which
dates are encoded and calculated in such programs and hardware. This problem,
commonly referred to as the "Year 2000 Issue," could, among other things,
negatively impact the processing of trades, the distribution of securities, the
pricing of securities, and other investment-related and settlement activities.
The Trust is currently obtaining and assessing information with respect to the
actions that have been taken and the actions that are planned to be taken by
each of its service providers to prepare their computer systems for the Year
2000. While the Trust expects that each of the Fund's service providers will
have adapted their computer systems to address the Year 2000 Issue, there can be
no assurance that this will be the case or that the steps taken by the Trust
will be sufficient to avoid any adverse impact to the Fund.
15
<PAGE>
FINANCIAL HIGHLIGHTS
The financial data included in the table below have been derived from audited
financial statements of the Investor Class shares of the Fund. Because the T
Shares is a new class and did not commence operations until XXX , 1999, there
are no financial data to be present in this Prospectus for the T Shares. The
financial data for the fiscal years ended March 31, 1999, 1998, and 1997, have
been audited by Deloitte & Touche LLP, independent auditors, whose report
covering such periods is included in the Statement of Additional Information.
The financial data for the prior fiscal years were audited by other independent
auditors. 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 also be
obtained at no charge by calling the Fund.
<TABLE>
<S> <C> <C> <C> <C> <C>
Investor Class
--------------
(For a Share Outstanding Throughout each Year)
For Fiscal Years Ended March 31,
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Net Asset Value, Beginning of Year $14.51 $12.50 $11.92 $10.75 $10.42
Income from investment operations
Net investment income 0.06 0.13 0.15 0.19 0.17
Net realized and unrealized gain
on investments 2.02 3.93 0.70 1.53 0.73
---- ---- ---- ---- ----
Total from investment operations 2.08 4.06 0.85 1.72 0.90
---- ---- ---- ---- ----
Distributions to shareholders from
Net investment income (0.06) (0.13) (0.15) (0.20) (0.21)
Tax return of capital 0.00 0.00 (0.01) 0.00 0.00
Net realized gain from investment
transactions (1.21) (1.92) (0.11) (0.35) (0.36)
------ ------ ------ ------ ------
Total distributions (1.27) (2.05) (0.27) (0.55) (0.57)
------ ------ ------ ------ -----
Net Asset Value, End of Period $15.32 $14.51 $12.50 $11.92 $10.75
====== ====== ====== ====== ======
Total return (a) 14.67% 32.89% 7.08% 16.16% 8.66%
Ratios/supplemental data
Net assets, end of year (in thousands) $11,056 $9,888 $7,738 $7,552 $6,776
======= ====== ====== ====== ======
Ratio of expenses to average net assets
Before expense reimbursements and waived fees 2.15% 2.12% 2.38% 2.56% 2.58%
After expense reimbursements and waived fees 2.15% 2.12% 2.38% 2.33% 2.47%
Ratio of net investment income to average net assets
Before expense reimbursements and waived fees 0.40% 0.91% 1.12% 1.44% 1.55%
After expense reimbursements and waived fees 0.40% 0.91% 1.12% 1.66% 1.66%
Portfolio turnover rate 70.65% 33.50% 7.31% 12.33% 24.67%
(a) Does not reflect the current maximum sales load of 3.5%, which was 4.5% prior to August 1, 1995.
</TABLE>
16
<PAGE>
ADDITIONAL INFORMATION
________________________________________________________________________________
CAPITAL VALUE FUND
T 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: Capital Value Fund
T 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 site 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>
___________________________________
CAPITAL VALUE FUND
T SHARES
___________________________________
[logo here]
PROSPECTUS
November __, 1999
<PAGE>
PART B
======
STATEMENT OF ADDITIONAL INFORMATION
CAPITAL VALUE FUND
November __, 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
-----------------
OTHER INVESTMENT POLICIES......................................................2
INVESTMENT LIMITATIONS.........................................................4
PORTFOLIO TRANSACTIONS.........................................................6
NET ASSET VALUE................................................................7
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION.................................8
DESCRIPTION OF THE TRUST......................................................10
ADDITIONAL INFORMATION CONCERNING TAXES.......................................11
MANAGEMENT AND OTHER SERVICE PROVIDERS........................................12
SPECIAL SHAREHOLDER SERVICES..................................................16
ADDITIONAL INFORMATION ON PERFORMANCE.........................................18
FINANCIAL STATEMENTS..........................................................19
APPENDIX A....................................................................20
This Statement of Additional Information (the "SAI") is meant to be read in
conjunction with the Prospectus dated August 1, 1999 relating to the Capital
Value Fund's (the "Fund") Investor Class Shares and Prospectus of the T Shares
of the Fund dated the same date as this SAI, as those Prospectuses may be
amended or supplemented from time to time, and is incorporated by reference in
its entirety into those Prospectuses. 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 Prospectuses may be obtained
at no charge by writing or calling the Fund at the address and phone number
shown above. Capitalized terms used but not defined herein have the same
meanings as in the Prospectuses.
<PAGE>
OTHER INVESTMENT POLICIES
The following policies supplement the Fund's investment objective and policies
as set forth in the Prospectuses for the Investor Class and T Shares classes of
the Fund. 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. The Fund commenced operations November 16, 1990 as a separate
diversified investment portfolio to the Nottingham Investment Trust II
("Trust").
Equity Securities. The equity portion of the Fund's portfolio will generally be
comprised of common stocks traded on domestic securities exchanges or on the
over-the-counter market. In determining whether a common stock is a strong
candidate for inclusion in the portfolio, the Advisor considers, among other
things, such factors as: research material generated by the brokerage community;
investment and business publications and general investor attitudes as perceived
by the Advisor; valuation with respect to price-to-book value, price-to-sales,
price-to-cash flow, price-to-earnings ratios, and dividend yield, all compared
to historical valuations and future prospects for the company as judged by the
Advisor. In addition to common stocks, the equity portion of the Fund's
portfolio may also include preferred stock, convertible preferred stock, and
convertible bonds.
Foreign Securities. The Fund may invest in the securities of foreign private
issuers. The Fund may invest up to 10% of its total assets in foreign securities
in order to take advantage of opportunities for growth where, as with domestic
securities, they are depressed in price because they are out of favor with most
of the investment community. The same factors would be considered in selecting
foreign securities as with domestic securities. Foreign securities investment
presents special consideration not typically associated with investment in
domestic securities. Foreign taxes may reduce income. Currency exchange rates
and regulations may cause fluctuations in the value of foreign securities.
Foreign securities are subject to different regulatory environments than in the
United States and, compared to the United States, there may be a lack of uniform
accounting, auditing and financial reporting standards, less volume and
liquidity and more volatility, less public information, and less regulation of
foreign issuers. Countries have been known to expropriate or nationalize assets,
and foreign investments may be subject to political, financial or social
instability or adverse diplomatic developments. There may be difficulties in
obtaining service of process on foreign issuers and difficulties in enforcing
judgments with respect to claims under the U.S. securities laws against such
issuers. Favorable or unfavorable differences between U.S. and foreign economies
could affect foreign securities values. The U.S. Government has, in the past,
discouraged certain foreign investments by U.S. investors through taxation or
other restrictions and it is possible that such restrictions could be imposed
again.
Because of the inherent risk of foreign securities over domestic issues, the
Fund will generally limit foreign investments to those traded domestically as
American Depository Receipts ("ADRs"). ADRs are receipts issued by a U.S. bank
or trust company evidencing ownership of securities of a foreign issuer. ADRs
may be listed on a national securities exchange or may trade in the
over-the-counter market. The prices of ADRs are denominated in U.S. dollars
while the underlying security may be denominated in a foreign currency. To the
extent the Fund invests in other foreign securities, it will generally limit
such investments to foreign securities traded on foreign securities exchanges.
Fixed Income Securities. The Fund's fixed income investments will include
corporate debt obligations and U.S. Government Securities. The maturity of the
fixed income securities purchased and held by the Fund will depend upon, among
other reasons, the current and expected trend in interest rates, credit quality
of the fixed income securities, relative attractiveness of fixed income
securities versus equity securities, and the overall economic situation, current
and expected. The Advisor will consider a number of factors in determining when
to purchase and sell the investments of the Fund and when to invest for long,
intermediate, or short maturities. Such factors may include money supply growth,
the rate of unemployment, changes in consumer, wholesale and producer prices, as
well as raw materials, commodities, and industrial prices, capital spending, the
Gross National Product ("GNP") and industrial production. The Advisor will also
consider the impact of inflation and the attitudes and concerns of key officials
in the Federal Reserve and U.S. Government.
Corporate debt obligations purchased by the Fund will consist of "investment
grade" securities -- those rated at least Baa by Moody's Investors Service, Inc.
("Moody's"), BBB by Standard & Poor's Ratings Services ("S&P"), Fitch Investors
Service, Inc. ("Fitch"), or Duff & Phelps ("D&P") or, if not rated, of
equivalent quality in the Advisor's opinion. Debt obligations rated Baa by
Moody's or BBB by S&P, Fitch, or D&P may be considered speculative. Descriptions
of the quality ratings of Moody's, S&P, Fitch, and D&P are contained in the
Statement of Additional Information. While the Advisor utilizes the ratings of
various credit rating services as one factor in establishing creditworthiness,
it relies primarily upon its own analysis of factors establishing
creditworthiness. For as long as the Fund holds a fixed income issue, the
Advisor monitors the issuer's credit standing. If following investment, a
corporate debt obligation held by the Fund is no longer considered to be
"investment grade," or is considered to be "investment grade" by one rating
agency but not by another, the Advisor will re-evaluate the issuer's credit
standing and may retain the investment if it is still determined to be
creditworthy.
U.S. Government Securities. The Fund may invest a portion of the portfolio in
U.S. Government Securities, defined to be U.S. Government obligations such as
U.S. Treasury notes, U.S. Treasury bonds, and U.S. Treasury bills, obligations
guaranteed by the U.S. Government such as Government National Mortgage
Association ("GNMA") as well as obligations of U.S. Government authorities,
agencies and instrumentalities such as Federal National Mortgage Association
("FNMA"), Federal Home Loan Mortgage Corporation ("FHLMC"), Federal Housing
Administration ("FHA"), Federal Farm Credit Bank ("FFCB"), Federal Home Loan
Bank ("FHLB"), Student Loan Marketing Association ("SLMA"), and The Tennessee
Valley Authority. U.S. Government Securities may be acquired subject to
repurchase agreements. While obligations of some U.S. Government sponsored
entities are supported by the full faith and credit of the U.S. Government (e.g.
GNMA), several are supported by the right of the issuer to borrow from the U.S.
Government (e.g. FNMA, FHLMC), and still others are supported only by the credit
of the issuer itself (e.g. SLMA, FFCB). No assurance can be given that the U.S.
Government will provide financial support to U.S. Government agencies or
instrumentalities in the future, other than as set forth above, since it is not
obligated to do so by law. The guarantee of the U.S. Government does not extend
to the yield or value of the Fund's shares.
Real Estate Securities. The Fund will not invest in real estate (including
mortgage loans and limited partnership interests), but may invest in readily
marketable securities issued by companies that invest in real estate or
interests therein. The Fund may also invest in readily marketable interests in
real estate investment trusts ("REITs"). REITs are generally publicly traded on
the national stock exchanges and in the over-the-counter market and have varying
degrees of liquidity. Although the Fund is not limited in the amount of these
types of real estate securities it may acquire, it is not presently expected
that within the next 12 months the Fund will have in excess of 5% of its assets
in real estate securities.
Investment Companies. In order to achieve its investment objective, the Fund may
invest up to 10% of the value of its total assets in securities of other
investment companies whose investment objectives are consistent with the Fund's
investment objective. The Fund will not acquire securities of any one investment
company if, immediately thereafter, the Fund would own more than 3% of such
company's total outstanding voting securities, securities issued by such company
would have an aggregate value in excess of 5% of the Fund's assets, or
securities issued by such company and securities held by the Fund issued by
other investment companies would have an aggregate value in excess of 10% of the
Fund's assets. To the extent the Fund invests in other investment companies, the
shareholders of the Fund would indirectly pay a portion of the operating costs
of the underlying investment companies. These costs include management,
brokerage, shareholder servicing and other operational expenses. Shareholders of
the Fund would then indirectly pay higher operational costs than if they owned
shares of the underlying investment companies directly.
Repurchase Agreements. The Fund may acquire U.S. Government Securities or
corporate debt securities subject to repurchase agreements. A repurchase
transaction occurs when, at the time the Fund purchases a security (normally a
U.S. Treasury obligation), it also resells it to the vendor (normally a member
bank of the Federal Reserve or a registered Government Securities dealer) and
must deliver the security (and/or securities substituted for them under the
repurchase agreement) to the vendor on an agreed upon date in the future. The
repurchase price exceeds the purchase price by an amount which reflects an
agreed upon market interest rate effective for the period of time during which
the repurchase agreement is in effect. Delivery pursuant to the resale will
occur within one to seven days of the purchase.
Repurchase agreements are considered "loans" under the Investment Company Act of
1940, as amended (the "1940 Act"), collateralized by the underlying security.
The Trust will implement procedures to monitor on a continuous basis the value
of the collateral serving as security for repurchase obligations. Additionally,
the Advisor to the Fund will consider the creditworthiness of the vendor. If the
vendor fails to pay the agreed upon resale price on the delivery date, the Fund
will retain or attempt to dispose of the collateral. The Fund's risk is that
such default may include any decline in value of the collateral to an amount
which is less than 100% of the repurchase price, any costs of disposing of such
collateral, and any loss resulting from any delay in foreclosing on the
collateral. The Fund will not enter into any repurchase agreement which will
cause more than 10% of its net assets to be invested in repurchase agreements
which extend beyond seven days.
Description of Money Market Instruments. Money market instruments may include
U.S. Government Securities or corporate debt securities (including those subject
to repurchase agreements), provided that they mature in thirteen months or less
from the date of acquisition and are otherwise eligible for purchase by the
Fund. Money market instruments also may include Banker's Acceptances and
Certificates of Deposit of domestic branches of U.S. banks, Commercial Paper and
Variable Amount Demand Master Notes ("Master Notes"). Banker's Acceptances are
time drafts drawn on and "accepted" by a bank. When a bank "accepts" such a time
draft, it assumes liability for its payment. When the Fund acquires a Banker's
Acceptance the bank which "accepted" the time draft is liable for payment of
interest and principal when due. The Banker's Acceptance carries the full faith
and credit of such bank. A Certificate of Deposit ("CD") is an unsecured,
interest-bearing debt obligation of a bank. Commercial Paper is an unsecured,
short-term debt obligation of a bank, corporation or other borrower. Commercial
Paper maturity generally ranges from two to 270 days and is usually sold on a
discounted basis rather than as an interest-bearing instrument. The Fund will
invest in Commercial Paper only if it is rated one of the top two rating
categories by Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's
Ratings Services ("S&P"), Fitch Investors Service, Inc. ("Fitch") or Duff &
Phelps ("D&P") or, if not rated, of equivalent quality in the Advisor's opinion.
Commercial Paper may include Master Notes of the same quality. Master Notes are
unsecured obligations which are redeemable upon demand of the holder and which
permit the investment of fluctuating amounts at varying rates of interest.
Master Notes are acquired by the Fund only through the Master Note program of
the Fund's custodian bank, acting as administrator thereof. The Advisor will
monitor, on a continuous basis, the earnings power, cash flow and other
liquidity ratios of the issuer of a Master Note held by the Fund.
Illiquid Investments. The Fund may invest up to 10% of its net assets in
illiquid securities, which are investments that cannot be sold or disposed of in
the ordinary course of business within seven days at approximately the prices at
which they are valued. Under the supervision of the Board of Trustees, the
Advisor determines the liquidity of the Fund's investments and, through reports
from the Advisor, the Board monitors investments in illiquid instruments. In
determining the liquidity of the Fund's investments, the Advisor may consider
various factors including (1) the frequency of trades and quotations, (2) the
number of dealers and prospective purchasers in the marketplace, (3) dealer
undertakings to make a market, (4) the nature of the security (including any
demand or tender features) and (5) the nature of the marketplace for trades
(including the ability to assign or offset the Fund's rights and obligations
relating to the investment). Investments currently considered by the Fund to be
illiquid include repurchase agreements not entitling the holder to payment of
principal and interest within seven days. If through a change in values, net
assets or other circumstances, the Fund were in a position where more than 10%
of its net assets were invested in illiquid securities, it would seek to take
appropriate steps to protect liquidity. The Fund may not purchase restricted
securities, which are securities that cannot be sold to the public without
registration under the federal securities laws.
Forward Commitments and When-Issued Securities. The Fund may purchase
when-issued securities and commit to purchase securities for a fixed price at a
future date beyond customary settlement time. The Fund is required to hold and
maintain in a segregated account until the settlement date, cash, U.S.
Government Securities or high-grade debt obligations in an amount sufficient to
meet the purchase price. Purchasing securities on a when-issued or forward
commitment basis involves a risk of loss if the value of the security to be
purchased declines prior to the settlement date, which risk is in addition to
the risk of decline in value of the Fund's other assets. In addition, no income
accrues to the purchaser of when-issued securities during the period prior to
issuance. Although the Fund would generally purchase securities on a when-issued
or forward commitment basis with the intention of acquiring securities for its
portfolio, the Fund may dispose of a when-issued security or forward commitment
prior to settlement if the Advisor deems it appropriate to do so. The Fund may
realize short-term gains or losses upon such sales.
INVESTMENT LIMITATIONS
The Fund has adopted the following fundamental investment limitations, which
cannot be changed without approval by holders of a majority of the outstanding
voting shares of the Fund. A "majority" for this purpose, means the lesser of
(i) 67% of the Fund's outstanding shares represented in person or by proxy at a
meeting at which more than 50% of its outstanding shares are represented, or
(ii) more than 50% of its outstanding shares. Unless otherwise indicated,
percentage limitations apply at the time of purchase.
As a matter of fundamental policy, the Fund may not:
(1) Invest more than 5% of the value of its total assets in the securities
of any one issuer or purchase more than 10% of the outstanding voting
securities or of any class of securities of any one issuer (except that
securities of the U.S. Government, its agencies and instrumentalities
are not subject to these limitations);
(2) Invest 25% or more of the value of its total assets in any one industry
or group of industries (except that securities of the U.S. Government,
its agencies and instrumentalities are not subject to these
limitations);
(3) Invest in the securities of any issuer if any of the officers or
trustees of the Trust or the Advisor who own beneficially more than 1/2
of 1% of the outstanding securities of such issuer together own more
than 5% of the outstanding securities of such issuer;
(4) Invest for the purpose of exercising control or management of another
issuer;
(5) Invest in interests in real estate, real estate mortgage loans, real
estate limited partnerships, oil, gas or other mineral exploration or
development programs or leases, except that the Fund may invest in the
readily marketable securities of companies which own or deal in such
things;
(6) Underwrite securities issued by others except to the extent the Fund
may be deemed to be an underwriter under the federal securities laws,
in connection with the disposition of portfolio securities;
(7) Purchase securities on margin (but the Fund may obtain such short-term
credits as may be necessary for the clearance of transactions);
(8) Make short sales of securities or maintain a short position, except
short sales "against the box" (A short sale is made by selling a
security the Fund does not own, a short sale is "against the box" to
the extent that the Fund contemporaneously owns or has the right to
obtain at no added cost securities identical to those sold short.);
(9) Write, purchase or sell puts, calls or combinations thereof, or
purchase or sell commodities, warrants, commodities contracts, futures
contracts or related options;
(10) Participate on a joint or joint and several basis in any trading
account in securities;
(11) Make loans of money or securities, except that the Fund may invest in
repurchase agreements, money market instruments, and other debt
securities;
(12) Invest more than 10% of the value of its net assets in repurchase
agreements having a maturity of longer than seven days or other not
readily marketable securities;
(13) Invest in restricted securities;
(14) Issue senior securities, borrow money or pledge its assets, except that
it may borrow from banks as a temporary measure (a) for extraordinary
or emergency purposes, in amounts not exceeding 5% of the Fund's total
assets, or (b) in order to meet redemption requests which might
otherwise require untimely disposition of portfolio securities, if,
immediately after such borrowing, the value of the Fund's assets,
including all borrowings then outstanding, less its liabilities
(excluding all borrowings), is equal to at least 300% of the aggregate
amount of borrowings then outstanding, and the Fund may pledge its
assets to secure all such borrowings;
(15) Invest in securities of issuers which have a record of less than three
years' continuous operation (including predecessors and, in the case of
bonds, guarantors), if more than 5% of its total assets would be
invested in such securities; and
(16) Invest more than 10% of the Fund's total assets in foreign securities,
including sponsored American Depository Receipts.
Percentage restrictions stated as an investment policy or investment limitation
apply at the time of investment; if a later increase or decrease in percentage
beyond the specified limits results from a change in securities values or total
assets, it will not be considered a violation. However, in the case of the
borrowing limitation (restriction (14) above), the Fund will, to the extent
necessary, reduce its existing borrowings to comply with the limitation.
PORTFOLIO 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 investment
discretion is exercised by the Advisor. Conversely, the Fund may be the primary
beneficiary of the research or services received as a result of securities
transactions effected for such other account or investment company.
The Advisor may also utilize a brokerage firm affiliated with the Trust or the
Advisor (including the Distributor, an affiliate of the Advisor) if it believes
it can obtain the best execution of transactions from such broker. The Fund will
not execute portfolio transactions through, acquire securities issued by, make
savings deposits in or enter into repurchase agreements with the Advisor or an
affiliated person of the Advisor (as such term is defined in the 1940 Act)
acting as principal, except to the extent permitted by the Securities and
Exchange Commission ("SEC"). In addition, the Fund will not purchase securities
during the existence of any underwriting or selling group relating thereto of
which the Advisor, or an affiliated person of the Advisor, is a member, except
to the extent permitted by the SEC. Under certain circumstances, the Fund may be
at a disadvantage because of these limitations in comparison with other
investment companies that have similar investment objectives but are not subject
to such limitations.
Investment decisions for the Fund will be made independently from those for any
other series of the Trust, if any, and for any other investment companies and
accounts advised or managed by the Advisor. Such other investment companies and
accounts may also invest in the same securities as the Fund. To the extent
permitted by law, the Advisor may aggregate the securities to be sold or
purchased for the Fund with those to be sold or purchased for other investment
companies or accounts in executing transactions. When a purchase or sale of the
same security is made at substantially the same time on behalf of the Fund and
another investment company or account, the transaction will be averaged as to
price and available investments allocated as to amount, in a manner which the
Advisor believes to be equitable to the Fund and such other investment company
or account. In some instances, this investment procedure may adversely affect
the price paid or received by the Fund or the size of the position obtained or
sold by the Fund.
For the fiscal years ended March 31, 1999, 1998, and 1997, the total dollar
amounts of brokerage commissions paid by the Fund were $34,633, $27,164, and
$5,560, respectively, all of which was paid during such respective periods to
the Distributor. Transactions in which the Fund used the Distributor as broker
involved 100% of the aggregate dollar amount of transactions involving the
payment of commissions and 100% of the aggregate broker commissions paid by the
Fund for the fiscal year ended March 31, 1999.
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
("NYSE") (currently 4:00 p.m., New York time), Monday through Friday, except on
business holidays when the NYSE is closed. The NYSE 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 NYSE 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 Amended and Restated
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.
In valuing the Fund's total assets, portfolio securities are generally valued at
their market value. Instruments with maturities of sixty days or less are valued
at amortized costs, which approximates market value. Securities and assets for
which representative market quotations are not readily available are valued at
fair value as determined in good faith under policies approved by the Trustees.
For the fiscal years ended March 31, 1999, 1998, and 1997, the total expenses of
the Fund after fee waivers and expense reimbursements (if applicable) were
$218,813, $190,073, and $186,235, respectively. T Shares of the Fund were not
authorized for issuance during such fiscal years.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Purchases. Shares of the Fund are offered and sold on a continuous basis and may
be purchased through authorized investment dealers or directly by contacting the
Distributor or the Fund. Selling dealers have the responsibility of transmitting
orders promptly to the Fund. The public offering price of shares of the Fund
equals net asset value for the T Shares class, and net asset value plus a sales
charge for Investor Class shares of the Fund. Capital Investment Group, Inc.
(the "Distributor"), an affiliate of the Advisor, receives the sales charge of
the Investor Class shares as Distributor and may reallow it in the form of
dealer discounts and brokerage commissions. The current schedule of sales
charges and related dealer discounts and brokerage commissions is set forth in
the Prospectus for the Investor Class, along with the information on current
purchases, rights of accumulation, and letters of intent, if applicable. See
"Your Investment in the Fund" section in the Prospectuses for more detailed
information.
Plan Under Rule 12b-1. The Trust has adopted a Plan of Distribution (the "Plan")
for the Investor Class and T Shares class of the Fund pursuant to Rule 12b-1
under the 1940 Act (see "The Distributor - Distribution of the Fund's Shares" in
the Prospectuses). Under the Plan the Fund may expend up to 0.50% of the
Investor Shares' average daily net assets and 0.75% of the T Shares' average
daily net assets annually to finance any activity which is primarily intended to
result in the sale of those classes of the Fund and the servicing of shareholder
accounts, provided the Trust's Board of Trustees has approved the category of
expenses for which payment is being made. Such expenditures paid as servicing
fees to any person who sells Investor Class or T Shares of the Fund may not
exceed 0.25% of the average annual net asset value of such shares. Potential
benefits of the Plan to the Fund and each Class of shares 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 or
T 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 T
Shares.
The Plan is known as a "compensation" plan because payments are made for
services rendered to the Fund with respect to the Investor Class shares and T
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 the Plan and concerning
their annual consideration of the 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 and T Shares class 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 and T Shares class of the Fund; (c) holding seminars and sales
meetings designed to promote the distribution of the Fund's Investor Class and T
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 and T 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 or T 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
execution, the Fund may, from time to time, buy or sell portfolio securities
from or to firms, which receive payments under the Plan.
From time to time the Distributor may pay additional amounts from its own
resources to dealers for aid in distribution or for aid in providing
administrative services to shareholders.
The Plan and the Distribution Agreement with the Distributor have been approved
by the Board of Trustees of the Trust, including a majority of the Trustees who
are not "interested persons" (as defined in the 1940 Act) of the Trust and who
have no direct or indirect financial interest in the Plan or any related
agreements, by vote cast in person or at a meeting duly called for the purpose
of voting on the Plan and such Agreement. Continuation of the Plan and the
Distribution Agreement must be approved annually by the Board of Trustees in the
same manner as specified above.
Each year the Trustees must determine whether continuation of the Plan is in the
best interest of shareholders of the Fund and that there is a reasonable
likelihood of its providing a benefit to the Fund, and the Board of Trustees has
made such a determination for the current year of operations under the Plans.
The Plan and the Distribution Agreement for each class of shares may be
terminated at any time without penalty by a majority of those trustees who are
not "interested persons" or by a majority vote of the class of shares affected
by such termination. Any amendment materially increasing the maximum percentage
payable under the Plan applicable to a specific class of shares must likewise be
approved by a majority vote of that class of shares, as well as by a majority
vote of those trustees who are not "interested persons." Also, any other
material amendment to the Plan must be approved by a majority vote of the
trustees including a majority of the noninterested Trustees of the Trust having
no interest in the Plan. In addition, in order for the Plan to remain effective,
the selection and nomination of Trustees who are not "interested persons" of the
Trust must be effected by the Trustees who themselves are not "interested
persons" and who have no direct or indirect financial interest in the Plan.
Persons authorized to make payments under the Plan must provide written reports
at least quarterly to the Board of Trustees for their review.
For the fiscal year ended March 31, 1999, the Fund incurred $50,925 for costs in
connection with the Plan for the Investor Class. Such costs were spent on
compensation to sales personnel for sale of Investor Class shares and servicing
of shareholder accounts and advertising costs. The T Shares were not offered to
the public as of the fiscal year ended March 31, 1999.
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 Prospectuses 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 Prospectuses from time to time.
DESCRIPTION OF THE TRUST
The Trust is an unincorporated business trust organized under Massachusetts law
on October 25, 1990. The Trust's Declaration of Trust authorizes the Board of
Trustees to divide shares into series, each series relating to a separate
portfolio of investments, and to classify and reclassify any unissued shares
into one or more classes of shares of each such series. The Amended and Restated
Declaration of Trust currently provides for the shares of eight series, as
follows: Capital Value Fund managed by Capital Investment Counsel, Inc. of
Raleigh, North Carolina; 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; The WST Growth
& Income Fund managed by Wilbanks, Smith & Thomas Asset Management, Inc. of
Norfolk, Virginia; and The CarolinasFund managed by Morehead Capital Advisors,
LLC of Charlotte, North Carolina and Capital Investment Counsel Inc. 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 Multiclass Plan which contains the general characteristics of, and
conditions under which the Trust may offer multiple classes of shares of each
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 series or class is affected by a
matter unless it is clear that the interests of each series or class in the
matter are substantially identical or that the matter does not affect any
interest of the series or class. Under Rule 18f-2, the approval of an investment
advisory agreement or any change in a fundamental investment policy would be
effectively acted upon with respect to a series only if approved by a majority
of the outstanding shares of such series. However, the Rule also provides that
the ratification of the appointment of independent accountants, the approval of
principal underwriting contracts and the election of Trustees may be effectively
acted upon by shareholders of the Trust voting together, without regard to a
particular series or class.
When used in the Prospectuses or this SAI, 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 Prospectuses and this SAI, shares of
the Fund will be fully paid and non-assessable.
The Amended and Restated 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 Amended and Restated 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
Prospectuses. 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
Prospectuses is not intended as a substitute for careful tax planning and is
based on tax laws and regulations that are in effect on the date hereof; such
laws and regulations may be changed by legislative, judicial, or administrative
action. Investors are advised to consult their tax advisors with specific
reference to their own tax situations.
Each series of the Trust, including the Fund, will be treated as a separate
corporate entity under the Code and intends to qualify or remain qualified as a
regulated investment company. In order to so qualify, each series must elect to
be a regulated investment company or have made such an election for a previous
year and must satisfy, in addition to the distribution requirement described in
the Prospectuses, 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 to properly
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 AND OTHER SERVICE PROVIDERS
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
Independent Trustee - New Providence
Investment Trust, Gardner Lewis
Investment Trust, Woodlawn Funds Trust,
Rocky Mount, North Carolina
- ----------------------------------------------- -------------------------------- ---------------------------------------------
Thomas W. Steed, 40 Trustee Assistant General Counsel
101 Bristol Court Hardees Food Systems, Inc., Rocky Mount, North
Rocky Mount, North Carolina 27802 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.
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
- ----------------------------------------------- -------------------------------- ---------------------------------------------
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
- ----------------------------------------------- -------------------------------- ---------------------------------------------
C. Frank Watson, III, 29 Secretary 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 27802 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 or $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
Retirement Total
Aggregate Benefits Estimated Compensation
Compensation Accrued As Annual From the Trust
Name of Person, from the Part of Fund Benefits Upon Paid to
Position Fund Expenses Retirement Trustees
-------- ---- -------- ---------- --------
Jack E. Brinson $1,250 None None $9,750
Trustee
Eddie C. Brown None None None None
Trustee
Richard K. Bryant None None None None
Trustee
Thomas W. Steed $1,250 None None $9,750
Trustee
J. Buckley Strandberg $1,250 None None $9,750
Trustee
*Figures are as of the Fund's fiscal year ended March 31, 1999.
</TABLE>
Principal Holders of Voting Securities. As of September 17, 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 the Fund. On
the same date the following shareholder owned of record more than 5% of the
outstanding shares of beneficial interest of the Investor Class shares of the
Fund. Except as provided below, no person is known by the Trust to be the
beneficial owner of more than 5% of the outstanding shares of the Fund as of
August 11, 1999. No T Shares had been issued as of September 17, 1999.
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership Percent
- ---------------- -------------------- -------
INVESTOR CLASS SHARES
Olcoba Company 375,114.736 shares 51.573%*
P.O. Box 1000
Minneapolis, Minnesota 55480-1000
* Pursuant to applicable SEC regulations, this shareholder is deemed to control
the Fund.
Investment Advisor. Information about Capital Investment Counsel, Inc. (the
"Advisor") and its duties and compensation as Advisor is contained in the
Prospectuses.
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.
The Advisor will receive a monthly management fee equal to an annual rate of
0.60% of the first $250 million of the average daily net assets of the Fund and
0.50% on assets over $250 million. For the fiscal years ended March 31, 1999,
1998, and 1997, the Fund paid the Advisor its advisory fee of $61,110, $53,764,
and $47,054, respectively.
Administrator. The Trust has entered into a Fund Accounting and Compliance
Administration Agreement with The Nottingham Company, Inc. (the
"Administrator"), 105 North Washington Street, Post Office Drawer 69, Rocky
Mount, North Carolina 27802-0069, pursuant to which the Administrator receives a
general administration fee at the annual rate of 0.175% of the average daily net
assets of the Fund on the first $50 million; 0.150% of the next $50 million;
0.125% on the next $50 million; and 0.100% of its average daily net assets in
excess of $150 million. In addition, the Administrator receives a base monthly
fund accounting fee of $2,000 for accounting and recordkeeping services for the
Fund and $750 for each Class of Shares beyond the initial Class. The
Administrator receives a minimum fee of $4,000 per month for all of its fees
listed above, taken in the aggregate, analyzed monthly. In addition, the
Administrator also charges the Fund for certain costs involved with the daily
valuation of investment securities and is reimbursed for out-of-pocket expenses.
For services to the Fund for the fiscal years ended March 31, 1999, 1998, and
1997, the Administrator received general administration fees of $21,583,
$25,103, and $21,974, respectively. For the same fiscal years, the Administrator
received fund accounting fees of $22,500, $21,000, and $21,000, respectively.
The Administrator performs the following services for the Fund: (1) coordinates
with the Custodian and monitors the services it provides to the Fund; (2)
coordinates with and monitors any other third parties furnishing services to the
Fund; (3) provides the Fund with necessary office space, telephones and other
communications facilities and personnel competent to perform administrative and
clerical functions for the Fund; (4) supervises the maintenance by third parties
of such books and records of the Fund as may be required by applicable federal
or state law; (5) prepares or supervises the preparation by third parties of all
federal, state and local tax returns and reports of the Fund required by
applicable law; (6) prepares and, after approval by the Trust, files and
arranges for the distribution of proxy materials and periodic reports to
shareholders of the Fund as required by applicable law; (7) prepares and, after
approval by the Trust, arranges for the filing of such registration statements
and other documents with the SEC and other federal and state regulatory
authorities as may be required by applicable law; (8) reviews and submits to the
officers of the Trust for their approval invoices or other requests for payment
of Fund expenses and instructs the Custodian to issue checks in payment thereof;
and (9) takes 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.
Transfer Agent. The Trust has also entered into a Dividend Disbursing and
Transfer Agent Agreement with NC Shareholder Services, LLC (the "Transfer
Agent"), a North Carolina limited liability company, 107 North Washington
Street, Post Office Box 4365, Rocky Mount, North Carolina 27803-0365 to serve as
transfer, dividend paying, and shareholder servicing agent for the Fund. For its
services, the Transfer Agent is compensated $15 per shareholder per year, with a
minimum fee of $750 per month, per class. Prior to September 15, 1998, the
Transfer Agent was compensated by the Administrator for its services to the
Fund. For the period from September 15, 1998 to March 31, 1999, the Transfer
Agent received $4,697 for its services from the 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 a
Distribution Agreement (the "Distribution Agreement") approved by the Board of
Trustees of the Trust. The Distributor is an affiliate of the Advisor.
In this regard, the Distributor has agreed at its own expense to qualify as a
broker-dealer under all applicable federal or state laws in those states which
the Fund shall from time to time identify to the Distributor as states in which
it wishes to offer its shares for sale, in order that state registrations may be
maintained for the Fund.
The Distributor is a broker-dealer registered with the Securities and Exchange
Commission and a member in good standing of the National Association of
Securities Dealers, Inc.
The Distribution Agreement may be terminated by either party upon 60-days' prior
written notice to the other party.
For the fiscal years ended March 31, 1999, 1998, and 1997, the Distributor
received aggregate commissions for the sale of Investor Class shares in the
amounts of $15,525, $16,129, and $4,464, respectively, of which the Distributor
retained $2,240, $2,316, and $597, respectively, after reallowance to
broker-dealers and sales representatives.
Custodian. First Union National Bank of North Carolina (the "Custodian"), Two
First Union Center, Charlotte, North Carolina 28288-1151, serves as custodian
for the Fund's assets. The Custodian acts as the depository for the Fund,
safekeeps its portfolio securities, collects all income and other payments with
respect to portfolio securities, disburses monies at the Fund's request and
maintains records in connection with its duties as Custodian. For its services
as Custodian, the Custodian is entitled to receive from the Fund an annual fee
based on the average net assets of the Fund held by the Custodian.
Independent Auditors. Deloitte & Touche LLP, 2500 One PPG Place, Pittsburgh,
Pennsylvania 15222-5401, serves as independent auditors for the Fund, and audits
the annual financial statements of the Fund, prepares the Fund's federal and
state tax returns, and consults with the Fund on matters of accounting and
federal and state income taxation. A copy of the most recent annual report of
the Fund will accompany this SAI whenever it is requested by a shareholder or
prospective investor.
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 Prospectuses, 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
Fund will automatically charge the checking account for the amount specified
($100 minimum) which will be automatically invested in shares at the public
offering price on or about the 21st day of the month. The shareholder may change
the amount of the investment or discontinue the plan at any time by writing to
the Fund.
Systematic Withdrawal Plan. Shareholders owning shares with a value of $10,000
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 each 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 60-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:
Capital Value Fund
[Investor Class Shares] or [T Shares] (please specify)
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
Purchases in Kind. The Fund may accept securities in lieu of cash in payment for
the purchase of shares in the Fund. The acceptance of such securities is at the
sole discretion of the Advisor based upon the suitability of the securities
accepted for inclusion as a long-term investment of the Fund, the marketability
of such securities, and other factors which the Advisor may deem appropriate. If
accepted, the securities will be valued using the same criteria and methods as
described in "Determining the Fund's Net Asset Value" in the Prospectuses.
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.
Reduced Sales Charges for Investor Class Shares
Concurrent Purchases. For purposes of qualifying for a lower sales charge,
investors have the privilege of combining concurrent purchases of the Fund and
another series of the Trust advised by the Advisor and sold with a sales charge.
For example, if a shareholder concurrently purchases shares in another series of
the Trust affiliated with the Advisor and sold with a sales charge at the total
public offering price of $50,000, and shares in the Fund at the total public
offering price of $50,000, the sales charge would be that applicable to a
$100,000 purchase as shown in the appropriate table in the Prospectus. This
privilege may be modified or eliminated at any time or from time to time by the
Trust without notice thereof.
Rights of Accumulation. Pursuant to the right of accumulation, investors are
permitted to purchase shares at the public offering price applicable to the
total of (a) the total public offering price of the shares of the Fund then
being purchased plus (b) an amount equal to the then current net asset value of
the purchaser's combined holdings of the shares of all of the series of the
Trust advised by the Advisor and sold with a sales charge. To receive the
applicable public offering price pursuant to the right of accumulation,
investors must, at the time of purchase, provide sufficient information to
permit confirmation of qualification, and confirmation of the purchase is
subject to such verification. This right of accumulation may be modified or
eliminated at any time or from time to time by the Trust without notice.
Letters of Intent. Investors may qualify for a lower sales charge by executing a
letter of intent. A letter of intent allows an investor to purchase shares of
the Fund over a 13-month period at reduced sales charges based on the total
amount intended to be purchased plus an amount equal to the then current net
asset value of the purchaser's combined holdings of the shares of all of the
series of the Trust advised by the Advisor and sold with a sales charge. Thus, a
letter of intent permits an investor to establish a total investment goal to be
achieved by any number of purchases over a 13-month period. Each investment made
during the period receives the reduced sales charge applicable to the total
amount of the intended investment.
The letter of intent does not obligate the investor to purchase, or the Fund to
sell, the indicated amount. If such amount is not invested within the period,
the investor must pay the difference between the sales charge applicable to the
purchases made and the charges previously paid. If such difference is not paid
by the investor, the Distributor is authorized by the investor to liquidate a
sufficient number of shares held by the investor to pay the amount due. On the
initial purchase of shares, if required (or subsequent purchases, if necessary)
shares equal to at least five percent of the amount indicated in the letter of
intent will be held in escrow during the 13-month period (while remaining
registered in the name of the investor) for this purpose. The value of any
shares redeemed or otherwise disposed of by the investor prior to termination or
completion of the letter of intent will be deducted from the total purchases
made under such letter of intent.
A 90-day backdating period can be used to include earlier purchases at the
investor's cost (without a retroactive downward adjustment of the sales charge);
the 13-month period would then begin on the date of the first purchase during
the 90-day period. No retroactive adjustment will be made if purchases exceed
the amount indicated in the letter of intent. Investors must notify the
Administrator or the Distributor whenever a purchase is being made pursuant to a
letter of intent.
Investors electing to purchase shares pursuant to a letter of intent should
carefully read the letter of intent, which is included in the Fund Shares
Application accompanying this Prospectus or is otherwise available from the
Administrator or the Distributor. This letter of intent option may be modified
or eliminated at any time or from time to time by the Trust without notice.
Reinvestments. Investors may reinvest, without a sales charge, proceeds from a
redemption of shares of the Fund in shares of the Fund or in shares of another
series of the Trust advised by the Advisor and sold with a sales charge, within
90 days after the redemption. If the other series charges a sales charge higher
than the sales charge the investor paid in connection with the shares redeemed,
the investor must pay the difference. In addition, the shares of the series to
be acquired must be registered for sale in the investor's state of residence.
The amount that may be so reinvested may not exceed the amount of the redemption
proceeds, and a written order for the purchase of such shares must be received
by the Fund or the Distributor within 90 days after the effective date of the
redemption.
If an investor realizes a gain on the redemption, the reinvestment will not
affect the amount of any federal capital gains tax payable on the gain. If an
investor realizes a loss on the redemption, the reinvestment may cause some or
all of the loss to be disallowed as a tax deduction, depending on the number of
shares purchased by reinvestment and the period of time that has elapsed after
the redemption, although for tax purposes, the amount disallowed is added to the
cost of the shares acquired upon the reinvestment.
ADDITIONAL INFORMATION ON PERFORMANCE
From time to time, the total return of each Class of the Fund may be quoted in
advertisements, sales literature, shareholder reports or other communications to
shareholders. The Fund computes the "average annual total return" of each Class
of the Fund by determining the average annual compounded rates of return during
specified periods that equate the initial amount invested to the ending
redeemable value of such investment. This is done by determining the ending
redeemable value of a hypothetical $1,000 initial payment. This calculation is
as follows:
P(1+T)n = ERV
Where: T = average annual total return.
ERV = ending redeemable value at the end of the period covered
by the computation of a hypothetical $1,000 payment made
at the beginning of the period.
P = hypothetical initial payment of $1,000 from which the
maximum sales load is deducted.
n = period covered by the computation, expressed in terms of
years.
The Fund may also compute the aggregate total return of each Class of the Fund,
which is calculated in a similar manner, except that the results are not
annualized.
The calculation of average annual total return and aggregate total return assume
that the maximum sales load is deducted from the initial $1,000 investment at
the time it is made and that there is a reinvestment of all dividends and
capital gain distributions on the reinvestment dates during the period. The
ending redeemable value is determined by assuming complete redemption of the
hypothetical investment and the deduction of all nonrecurring charges at the end
of the period covered by the computations. The Fund may also quote other total
return information that does not reflect the effects of the sales load.
The average annual total return quotations for the Investor Shares of the Fund
for the fiscal year ended March 31, 1999, the five years ended March 31, 1999,
and since inception (December 31, 1991, to March 31, 1999) are 10.66%, 14.76%,
and 12.11%, respectively. The cumulative total return quotation for the Investor
Shares of the Fund since inception through March 31, 1999, is 129.05%. These
performance quotations assume that the maximum 3.5% sales load for the Fund was
deducted from the initial investment. The total return of the Investor Shares of
the Fund for the fiscal year ended March 31, 1999, the five years ended March
31, 1999, and since inception through March 31, 1999, without deducting the
maximum 3.5% sales load, are 14.67%, 15.58%, and 12.66%, respectively. The
cumulative total return quotation for the Investor Shares of the Fund since
inception through March 31, 1999, without deducting the maximum 3.5% sales load,
is 137.36%. These performance quotations should not be considered as
representative of the Fund's performance for any specified period in the future.
The T Shares of the Fund were not offered during the period of such performance
quotations.
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 Prospectuses 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.
FINANCIAL STATEMENTS
The audited financial statements for the fiscal year ended March 31, 1999,
including the financial highlights appearing in the Annual Report to
shareholders, are incorporated by reference and made a part of this document.
<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). 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 Services ("S&P"), a division of the
McGraw-Hill Companies, Inc., for bonds which are deemed to be Investment-Grade
Debt Securities by the Advisor:
AAA - This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity of the obligor to meet its
financial commitment on the obligation.
AA - Debt rated AA differs from AAA issues only in a small degree. The
obligor's capacity to meet its financial commitment on the obligation is
very strong.
A - Debt rated A is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in
higher-rated categories. However, the obligor's capacity to meet its
financial commitment on the obligation is still strong.
BBB - Debt rated BBB exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to
lead to a weakened capacity of the obligor to meet its financial
commitment on the obligation.
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 having
significant speculative characteristics with respect to the obligor's capacity
to meet its financial commitment on 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 may be 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 short term notes and
indicates strong capacity to pay principal and interest. An issue determined to
possess a very strong capacity to pay debt service is given a plus (+)
designation. The rating SP-2 indicates a satisfactory capacity to pay principal
and interest, with some vulnerability to adverse financial and economic changes
over the term of the notes.
Moody's Investors Service, Inc. The following summarizes the highest four
ratings used by Moody's Investors Service, Inc. ("Moody's") for bonds which are
deemed to be Investment-Grade Debt Securities by the Advisor:
Aaa - Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred
to as "gilt edge." Interest payments are protected by a large or an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
Aa - Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high-grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there
may be other elements present which make the long-term risks appear
somewhat larger than in Aaa securities.
A - Debt which is rated A possesses many favorable investment attributes
and is to be considered as an upper medium grade obligation. Factors
giving security to principal and interest are considered adequate but
elements may be present which suggest a susceptibility to impairment
sometime in the future.
Baa - Debt which is rated Baa is considered as a medium grade obligation,
i.e., it is neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such debt lacks outstanding
investment characteristics and in fact has speculative characteristics as
well.
Moody's applies numerical modifiers (l, 2 and 3) with respect to bonds rated Aa,
A and Baa. The modifier 1 indicates that the bond being rated ranks in the
higher end of its generic rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the bond ranks in the lower end of
its generic rating category. Bonds which are rated Ba, B, Caa, Ca or C by
Moody's are not considered Investment-Grade Debt Securities by the Advisor.
Bonds rated Ba are judged to have speculative elements because their future
cannot be considered as well assured. Uncertainty of position characterizes
bonds in this class, because the protection of interest and principal payments
often may be very moderate and not well safeguarded.
Bonds which are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the security over any long period for time may be small. Bonds
which are rated Caa are of poor standing. Such securities may be in default or
there may be present elements of danger with respect to principal or interest.
Bonds which are rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.
Bonds which are rated C are the lowest rated class of bonds and issues so rated
can be regarded as having extremely poor prospects of ever attaining any real
investment standing.
The rating Prime-1 is the highest commercial paper rating assigned by Moody's.
Issuers rated Prime-1 (or supporting institutions) are considered to have a
superior ability for repayment of short-term promissory obligations. Prime-1
repayment ability will often be evidenced by many of the following
characteristics: leading market positions in well-established industries; high
rates of return on funds employed; conservative capitalization structures with
moderate reliance on debt and ample asset protection; broad margins in earning
coverage of fixed financial charges and high internal cash generation; and well
established access to a range of financial markets and assured sources of
alternative liquidity. Issuers rated Prime-2 (or supporting institutions) are
considered to have a strong ability 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 two highest ratings 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.
MIG-2; VMIG-2 - Obligations bearing these designations are of a high
quality with ample margins of protection.
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. A "ratings outlook" is used to describe the
most likely direction of any rating change over the intermediate term. It is
described as "Positive" or "Negative." The absence of a designation indicates a
stable outlook.
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 two 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+.
The term symbol "LOC" indicates that the rating is based on a letter of credit
issued by a commercial bank.
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>
________________________________________________________________________________
CAPITAL VALUE FUND
________________________________________________________________________________
a series of The Nottingham Investment Trust II
ANNUAL REPORT 1999
FOR THE YEAR ENDED MARCH 31
INVESTMENT ADVISOR
Capital Investment Counsel, Inc.
Post Office Box 32249
Raleigh, North Carolina 27622
919-831-2370
CAPITAL VALUE FUND
105 North Washington Street
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069
1-800-525-3863
This Report has been prepared for shareholders
and may be distributed to others only if preceded
or accompanied by a current prospectus.
<PAGE>
Capital Value Fund
MANAGER'S COMMENTS
In order to predict the future you must look to the past. That old saying
has served me well. 1999 is very similar to 1998. At this point in 1998, the
Capital Value Fund took advantage of high valuations in the stock market and
sold many of our holdings at a substantial profit. By August of 1998 our cash
position was in excess of 25%. This timing was fortunate in light of the markets
subsequent late summer sell off. As I write this, the cash portion in the
Capital Value Fund is 20%. Deja vu all over again?
The broad market averages have been weak over the past four weeks and I
feel this late spring weakness will provide a logical entry point into several
of our favorite sectors. In this day, the financial markets show their pleasure
and displeasure in a much more rapid and volatile fashion than even three years
ago. A drawback to these large, rapid moves is that the downside in equities can
be greater, ergo the reward for prudent management is much greater.
Rereading my comments from last November, I noted our focus on three
sectors, oil services, airlines, and financial services. Well, two out of three
isn't bad. We managed a minor 10% gain in the airlines, but have reaped gains of
50% or more in oil services and financials. We are still holding our oil service
stocks, but have sold the majority of our financial positions. The reason behind
the sale was an extremely high valuation on these stocks. For example, I know
that Citigroup is a wonderful company, but I fail to see how they can
consistently sell at 30 times earnings!
Several of our favorite technology and drug stocks have been punished
during the second quarter, and we will use continued weakness to build up our
positions. The key to this market's level remains the yield on the 30 year
Treasury bond. The yield is currently 5.70%. A move in yield significantly above
6.25% would lead me to question the stock markets' high valuation.
<PAGE>
Capital Value Fund
Performance Update - $10,000 Investment
For the period from December 31, 1991 to
March 31, 1999
[GRAPH:]
Capital 60% S&P 500 Index
Value 40% Lehman Aggregate
Fund Bond Index
---- ----------
12/31/91 9,650 10,000
3/31/92 9,541 9,797
9/30/92 9,929 10,432
3/31/93 10,616 11,213
9/30/93 10,898 11,659
3/31/94 11,099 11,418
9/30/94 11,395 11,763
3/31/95 12,084 12,711
9/30/95 13,474 14,547
3/31/96 14,037 15,767
9/30/96 14,473 16,702
3/31/97 15,031 18,098
9/30/97 18,987 21,780
3/31/98 19,975 24,773
9/30/98 19,436 23,890
3/31/99 22,905 28,597
This graph depicts the performance of the Capital Value Fund versus a combined
index of 60% S&P 500 Index and 40% Lehman Brothers Aggregate Bond Index. It is
important to note that the Capital Value 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.
Average Annual Total Return
- -------------------------------------------------------------------------------
Since Inception One Year Five Years
- -------------------------------------------------------------------------------
No Sales Load 12.66% 14.67% 15.58%
- -------------------------------------------------------------------------------
Maximum 3.5% Sales Load 12.11% 10.66% 14.76%
- -------------------------------------------------------------------------------
The graph assumes an initial $10,000 investment at December 31, 1991 ($9,650
after maximum sales load of 3.5%). All dividends and distributions are
reinvested.
At March 31, 1999, the Capital Value Fund would have grown to $22,905 - total
investment return of 129.05% since December 31, 1991. Without the deduction of
the 3.5% maximum sales load, the Capital Value Fund would have grown to $23,736
- - total investment return of 137.36% since December 31, 1991. The sales load may
be reduced or eliminated for larger purchases.
At March 31, 1999, a similar investment in a combined index of 60% S&P 500 Index
and 40% Lehman Brothers Aggregate Bond Index would have grown to $28,597 - total
investment return of 185.97% since December 31, 1991.
Past performance is not a guarantee of future performance. A mutual fund's share
price and investment return will vary with market conditions, and the principal
value of shares, when redeemed, may be worth more or less than the original
cost. Average annual returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming
reinvestments of dividends.
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
CAPITAL VALUE FUND
PORTFOLIO OF INVESTMENTS
March 31, 1999
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - 68.75%
Auto & Trucks - 3.86%
(a)DaimlerChrysler AG .................................................. 810 $ 69,508
Ford Motor Company .................................................. 4,000 226,750
General Motors Corporation .......................................... 1,500 130,500
----------
426,758
----------
Beverages - 0.71%
PepsiCo, Inc. ....................................................... 2,000 78,375
----------
Brewery - 0.98%
Adolph Coors Company ................................................ 2,000 108,000
----------
Broadcast - Radio & Television - 1.15%
(a)MediaOne Group, Inc. ................................................ 2,000 127,000
----------
Building Materials - 0.93%
Louisiana-Pacific Corporation ....................................... 5,500 102,438
----------
Commercial Services - 0.75%
Automatic Data Processing, Inc. ..................................... 2,000 82,750
----------
Computers - 8.39%
Compaq Computer Corporation ......................................... 12,000 381,000
(a)Dell Computer Corporation ........................................... 4,000 163,500
(a)EMC Corporation ..................................................... 3,000 383,250
----------
927,750
----------
Computer Software & Services - 12.28%
(a)3Com Corporation .................................................... 3,500 81,594
(a)Brooktrout Technology, Inc. ......................................... 4,300 45,150
(a)Cisco Systems, Inc. ................................................. 6,250 684,766
Hewlett-Packard Company ............................................. 3,000 203,438
(a)Novell, Inc. ........................................................ 10,500 264,469
(a)Parametric Technology Corporation ................................... 4,000 79,000
----------
1,358,417
----------
Electronics - 7.84%
(a)Cree Research, Inc. ................................................. 7,500 352,031
General Electric Company ............................................ 2,000 221,250
Motorola, Inc. ...................................................... 4,000 293,000
----------
866,281
----------
Financial - Banks, Commercial - 8.06%
BankAmerica Corporation ............................................. 3,000 211,875
BankBoston Corporation .............................................. 2,000 86,625
Bankers Trust Corporation ........................................... 1,000 88,250
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
CAPITAL VALUE FUND
PORTFOLIO OF INVESTMENTS
March 31, 1999
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Financial - Banks, Commercial - (Continued)
The Bear Stearns Companies Inc. ....................................... 5,250 $ 234,609
First Union Corporation ............................................... 2,000 106,875
Wachovia Corporation .................................................. 2,000 162,375
----------
890,609
----------
Foreign Securities - 0.91% (b)
Norsk Hydro ASA - ADR ................................................. 2,500 100,938
----------
Industrial Materials - Specialty - 0.84%
(a)The AES Corporation ................................................... 2,500 93,125
----------
Oil & Gas - Equipment & Services - 4.10%
Baker Hughes Incorporated ............................................. 8,300 201,794
Halliburton Company ................................................... 5,000 192,500
(a)Smith International, Inc. ............................................. 1,500 60,000
----------
454,294
----------
Pharmaceuticals - 3.44%
McKesson HBOC, Inc. ................................................... 1,700 112,200
Mylan Laboratories Inc. ............................................... 6,000 164,625
(a)Roberts Pharmaceutical Corporation .................................... 5,000 103,750
----------
380,575
----------
Retail - Apparel - 3.39%
Nike, Inc. ............................................................ 6,500 374,969
----------
Retail - Department Stores - 4.15%
Sears, Roebuck & Company .............................................. 7,100 320,831
Wal-Mart Stores, Inc. ................................................. 1,500 138,468
----------
459,299
----------
Telecommunications Equipment - 0.96%
PairGain Technologies, Inc. ........................................... 10,000 97,500
(a)Premisys Communications, Inc. ......................................... 1,000 8,625
----------
106,125
----------
Transportation - Air - 3.09%
(a)US Airways Group, Inc. ................................................ 7,000 341,688
----------
Utilities - Telecommunications - 2.92%
GTE Corporation ....................................................... 2,000 121,000
SBC Communications Inc. ............................................... 2,194 103,391
Sprint Corporation .................................................... 1,000 98,125
----------
322,516
----------
Total Common Stocks (Cost $4,887,614) ................................. 7,601,907
----------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
CAPITAL VALUE FUND
PORTFOLIO OF INVESTMENTS
March 31, 1999
- ------------------------------------------------------------------------------------------------------------------------------------
Interest Maturity Value
Principal Rate Date (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
CORPORATE OBLIGATIONS - 17.92%
A T & T Corporation .............................. $ 50,000 7.500% 06/01/06 $ 54,125
A T & T Corporation .............................. 50,000 8.125% 01/15/22 53,313
A T & T Corporation .............................. 50,000 8.125% 07/15/24 53,938
A T & T Corporation .............................. 100,000 8.625% 12/01/31 111,375
American Express Company ......................... 50,000 8.625% 05/15/22 53,798
Anheuser-Busch Companies, Inc. ................... 25,000 9.000% 12/01/09 30,944
Archer Daniels Midland Corporation ............... 100,000 6.250% 05/15/03 101,819
Archer Daniels Midland Corporation ............... 25,000 8.875% 04/15/11 30,948
BellSouth Telecommunications ..................... 50,000 6.250% 05/15/03 51,000
BellSouth Telecommunications ..................... 50,000 7.000% 02/01/05 53,188
BellSouth Telecommunications ..................... 25,000 7.875% 08/01/32 26,500
BellSouth Telecommunications ..................... 125,000 6.750% 10/15/33 122,031
The Boeing Company ............................... 150,000 8.750% 09/15/31 180,000
The Coca-Cola Company ............................ 70,000 8.500% 02/01/22 82,979
Du Pont (E.I.) De Nemours & Company .............. 50,000 8.125% 03/15/04 54,812
Du Pont (E.I.) De Nemours & Company .............. 50,000 7.950% 01/15/23 53,340
Duke Energy Corp ................................. 20,000 6.375% 03/01/08 20,100
Duke Energy Corp ................................. 100,000 6.750% 08/01/25 98,750
General Electric Capital Corporation ............. 100,000 8.750% 05/21/07 118,015
International Business Machines .................. 50,000 8.375% 11/01/19 59,813
Morgan Stanley Group, Inc. ....................... 75,000 7.500% 02/01/24 75,111
Pacific Bell ..................................... 100,000 6.250% 03/01/05 101,125
United Parcel Service of America ................. 50,000 8.375% 04/01/20 60,274
U S West Communications Group .................... 50,000 6.875% 09/15/33 48,117
Wachovia Corporation ............................. 75,000 6.375% 04/15/03 76,469
Wal-Mart Stores, Inc. ............................ 25,000 6.500% 06/01/03 25,778
Wal-Mart Stores, Inc. ............................ 150,000 8.875% 06/29/11 155,735
Wal-Mart Stores, Inc. ............................ 25,000 8.500% 09/15/24 27,902
----------
Total Corporate Obligations (Cost $1,795,761) .............................................................. 1,981,299
----------
Shares
----------
INVESTMENT COMPANIES - 9.08%
Evergreen Money Market Treasury Institutional Money
Market Fund Institutional Service Shares ........................................ 501,797 501,797
Evergreen Money Market Treasury Institutional Treasury Money
Market Fund Institutional Service Shares ........................................ 501,797 501,797
----------
Total Investment Companies (Cost $1,003,594) ................................................................ 1,003,594
----------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
CAPITAL VALUE FUND
PORTFOLIO OF INVESTMENTS
March 31, 1999
Total Value of Investments (Cost $7,686,969 (c)) ................................. 95.75% $10,586,800
Other Assets Less Liabilities .................................................... 4.25% 469,474
------ -----------
Net Assets .................................................................. 100.00% $11,056,274
====== ===========
(a) Non-income producing investment.
(b) Foreign securities represent securities issued in the United States markets by non-domestic companies.
(c) Aggregate cost for financial reporting and federal income tax purposes is the same. Unrealized appreciation
(depreciation) of investments for financial reporting and federal income tax purposes is as follows:
Unrealized appreciation .................................................................. $ 3,094,963
Unrealized depreciation .................................................................. (195,132)
-----------
Net unrealized appreciation ............................................... $ 2,899,831
===========
The following acronym is used in this portfolio:
ADR - American Depository Receipt
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
CAPITAL VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1999
ASSETS
Investments, at value (cost $7,686,969) ............................................................ $10,586,800
Cash ............................................................................................... 515,010
Income receivable .................................................................................. 45,375
Receivable for investments sold .................................................................... 99,314
-----------
Total assets .................................................................................. 11,246,499
-----------
LIABILITIES
Accrued expenses ................................................................................... 21,653
Payable for investment purchases ................................................................... 168,572
-----------
Total liabilities ............................................................................. 190,225
-----------
NET ASSETS
(applicable to 721,904 Investor Class Shares outstanding; unlimited
shares of no par value beneficial interest authorized) ............................................ $11,056,274
===========
NET ASSET VALUE AND REDEMPTION PRICE PER INVESTOR CLASS SHARE
($11,056,274 / 721,904 shares) ..................................................................... $15.32
===========
OFFERING PRICE PER INVESTOR CLASS SHARE
(100 / 96.5% of $15.32) ............................................................................ $15.88
===========
NET ASSETS CONSIST OF
Paid-in capital .................................................................................... $ 7,759,067
Accumulated net realized gain on investments ....................................................... 397,376
Net unrealized appreciation on investments ......................................................... 2,899,831
-----------
$11,056,274
===========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
CAPITAL VALUE FUND
STATEMENT OF OPERATIONS
Year ended March 31, 1999
INVESTMENT INCOME
Income
Interest ....................................................................................... $ 146,911
Dividends ...................................................................................... 112,411
----------
Total income ............................................................................. 259,322
----------
Expenses
Investment advisory fees (note 2) .............................................................. 61,110
Fund administration fees (note 2) .............................................................. 21,583
Distribution and service fees - Investor Class Shares (note 3) ................................. 50,925
Custody fees ................................................................................... 3,821
Registration and filing administration fees (note 2) ........................................... 2,864
Fund accounting fees (note 2) .................................................................. 22,500
Audit fees ..................................................................................... 10,100
Legal fees ..................................................................................... 15,743
Securities pricing fees ........................................................................ 6,074
Shareholder recordkeeping fees ................................................................. 5,578
Other accounting fees .......................................................................... 2,840
Shareholder servicing expenses ................................................................. 4,179
Registration and filing expenses ............................................................... 3,489
Printing expenses .............................................................................. 2,628
Trustee fees and meeting expenses .............................................................. 3,767
Other operating expenses ....................................................................... 1,612
----------
Total expenses ........................................................................... 218,813
----------
Net investment income ............................................................... 40,509
----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from investment transactions ...................................................... 1,210,654
Increase in unrealized appreciation on investments .................................................. 169,272
----------
Net realized and unrealized gain on investments ................................................ 1,379,926
----------
Net increase in net assets resulting from operations ..................................... $1,420,435
==========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
CAPITAL VALUE FUND
STATEMENTS OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
Year ended Year ended
March 31, March 31,
1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS
Operations
Net investment income .............................................. $ 40,509 $ 81,731
Net realized gain from investment transactions ..................... 1,210,654 1,175,258
Increase in unrealized appreciation on investments ................. 169,272 1,240,206
----------- -----------
Net increase in net assets resulting from operations ........... 1,420,435 2,497,195
----------- -----------
Distributions to shareholders from
Net investment income .............................................. (40,509) (81,731)
Net realized gain from investment transactions ..................... (813,281) (1,175,255)
----------- -----------
Decrease in net assets resulting from distributions ............ (853,790) (1,256,986)
----------- -----------
Capital share transactions
Increase in net assets resulting from capital share transactions (a) 601,561 909,604
----------- -----------
Total increase in net assets .............................. 1,168,206 2,149,813
NET ASSETS
Beginning of year ....................................................... 9,888,068 7,738,255
----------- -----------
End of year ............................................................. $11,056,274 $ 9,888,068
=========== ===========
(a) A summary of capital share activity follows:
------------------------------------------------------------------------
Year ended Year ended
March 31, 1999 March 31, 1998
Shares Value Shares Value
------------------------------------------------------------------------
Shares sold ............................................... 65,106 $ 969,346 59,404 $ 887,599
Shares issued for reinvestment
of distributions ..................................... 57,489 853,665 86,177 1,254,982
----------- ----------- ----------- -----------
122,595 1,823,011 145,581 2,142,581
Shares redeemed ........................................... (82,277) (1,221,450) (82,958) (1,232,977)
----------- ----------- ----------- -----------
Net increase ......................................... 40,318 $ 601,561 62,623 $ 909,604
=========== =========== =========== ===========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CAPITAL VALUE FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Year)
- ------------------------------------------------------------------------------------------------------------------------------------
Year ended Year ended Year ended Year ended Year ended
March 31, March 31, March 31, March 31, March 31,
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year ....................... $14.51 $12.50 $11.92 $10.75 $10.42
Income from investment operations
Net investment income ......................... 0.06 0.13 0.15 0.19 0.17
Net realized and unrealized gain on investments 2.02 3.93 0.70 1.53 0.73
----------- ----------- ----------- ----------- -----------
Total from investment operations ......... 2.08 4.06 0.85 1.72 0.90
----------- ----------- ----------- ----------- -----------
Distributions to shareholders from
Net investment income ......................... (0.06) (0.13) (0.15) (0.20) (0.21)
Tax return of capital ......................... 0.00 0.00 (0.01) 0.00 0.00
Net realized gain from investment transactions (1.21) (1.92) (0.11) (0.35) (0.36)
----------- ----------- ----------- ----------- -----------
Total distributions ...................... (1.27) (2.05) (0.27) (0.55) (0.57)
----------- ----------- ----------- ----------- -----------
Net asset value, end of year ............................. $15.32 $14.51 $12.50 $11.92 $10.75
=========== =========== =========== =========== ===========
Total return (a) ......................................... 14.67% 32.89% 7.08% 16.16% 8.66%
=========== =========== =========== =========== ===========
Ratios/supplemental data
Net assets, end of year ............................ $11,056,274 $ 9,888,068 $ 7,738,255 $ 7,551,803 $ 6,775,562
=========== =========== =========== =========== ===========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees 2.15% 2.12% 2.38% 2.56% 2.58%
After expense reimbursements and waived fees 2.15% 2.12% 2.38% 2.33% 2.47%
Ratio of net investment income to average net assets
Before expense reimbursements and waived fees 0.40% 0.91% 1.12% 1.44% 1.55%
After expense reimbursements and waived fees 0.40% 0.91% 1.12% 1.66% 1.66%
Portfolio turnover rate 70.65% 33.50% 7.31% 12.33% 24.67%
(a) Total return does not reflect payment of a sales charge.
See accompanying notes to financial statements
</TABLE>
<PAGE>
CAPITAL VALUE FUND
NOTES TO FINANCIAL STATEMENTS
March 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
The Capital Value Fund (the "Fund") is a diversified series of
shares of beneficial interest of The Nottingham Investment Trust
II (the "Trust"). The Trust, an open-ended 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 investment objective of the Fund is to provide its
shareholders with a maximum total return consisting of any
combination of capital appreciation, both realized and unrealized,
and income under the constantly varying market conditions by
investing in a flexible portfolio of equity securities, fixed
income securities, and money market instruments. The Fund began
operations on November 16, 1990.
Pursuant to a plan approved by the Board of Trustees of the Trust,
the existing single class of shares of the Fund was redesignated
as the Investor Class of shares of the Fund on June 15, 1995 and
an additional class of shares, the Institutional shares, was
authorized. To date, only Investor Class shares have been issued
by the Fund. The Institutional Class shares will be sold without a
sales charge and will bear no distribution and service fees. The
Investor Class shares are subject to a maximum 3.50% sales charge
and bear distribution and service fees which may not exceed 0.50%
of the Investor Class shares' average net assets annually. The
following is a summary of significant accounting policies followed
by the Fund.
A. Security Valuation - The Fund's investments in securities
are carried at value. Securities listed on an exchange or
quoted on a national market system are valued at the last
sales price as of 4:00 p.m. New York time on the day of
valuation. 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 - The Fund is considered a personal
holding company as defined under Section 542 of the Internal
Revenue Code since 50% of the value of the Fund's shares
were owned directly or indirectly by five or fewer
individuals at certain times during the last half of the
year. As a personal holding company, the Fund is subject to
federal income taxes on undistributed personal holding
company income at the maximum individual income tax rate. No
provision has been made for federal income taxes since
substantially all taxable income has been distributed to
shareholders. 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.
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 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.
(Continued)
<PAGE>
CAPITAL VALUE FUND
NOTES TO FINANCIAL STATEMENTS
March 31, 1999
C. Investment Transactions - Investment transactions are
recorded on the trade date. Realized gains and losses are
determined using the specific identification cost method.
Interest income is recorded daily on the accrual basis.
Dividend income is recorded on the ex-dividend date.
D. Distributions to Shareholders - The Fund generally declares
dividends quarterly, payable in March, June, September and
December, on a date selected by the Trust's Trustees. In
addition, distributions may be made annually in December out
of net realized gains through October 31 of that year.
Distributions to shareholders are recorded on the
ex-dividend date. 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 amount of assets, liabilities, expenses and
revenues reported in the financial statements. Actual
results could differ from those estimates.
NOTE 2 - INVESTMENT ADVISORY FEE AND OTHER RELATED PARTY TRANSACTIONS
Pursuant to an investment advisory agreement, Capital Investment
Counsel, Inc. (the "Advisor") provides the Fund with a continuous
program of supervision of the Fund's assets, including the
composition of its portfolio, and furnishes advice and
recommendations with respect to investments, investment policies
and the purchase and sale of securities. As compensation for its
services, the Advisor receives a fee at the annual rate of 0.60%
of the first $250 million of the average daily net assets of the
Fund and 0.50% of average daily net assets over $250 million.
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 a fund accounting and
compliance 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 of average daily net assets,
0.125% of the next $50 million of average daily net assets, and
0.10% of average daily net assets over $150 million. Prior to
October 1, 1998, the administration fee was at an annual rate of
0.25% of the Fund's first $10 million of average daily net assets,
0.20% of the next $40 million of average daily net assets, 0.175%
of the next $50 million of average daily net assets, and 0.15% of
average daily net assets over $100 million. The Administrator also
receives a monthly fee of $2,000 for accounting and recordkeeping
services. Prior to October 1, 1998, the fee for accounting and
recordkeeping services was $1,750. The contract with the
Administrator provides that the aggregate fees for the
aforementioned administration, accounting and recordkeeping
services shall not be less than $4,000 per month. Prior to October
1, 1998, the minimum monthly aggregate fee was $3,000 per month.
The Administrator also charges the Fund for certain expenses
involved with the daily valuation of portfolio securities.
NC Shareholder Services, LLC (the "Transfer Agent") serves as the
Funds' 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 shares, acts as
dividend and distribution disbursing agent, and performs other
shareholder servicing functions.
(Continued)
<PAGE>
CAPITAL VALUE FUND
NOTES TO FINANCIAL STATEMENTS
March 31, 1999
Capital Investment Group, Inc. (the "Distributor"), an affiliate
of the Advisor, serves as the Fund's principal underwriter and
distributor. The Distributor receives any sales charges imposed on
purchases of shares and re-allocates a portion of such charges to
dealers through whom the sale was made, if any. For the year ended
March 31, 1999, the Distributor retained sales charges in the
amount of $2,240.
Certain Trustees and officers of the Trust are also officers of
the Advisor, the Distributor or the Administrator.
NOTE 3 - DISTRIBUTION AND SERVICE FEES
The Board of Trustees, including a majority of the Trustees who
are not "interested persons" of the Trust as defined in the
Investment Company Act of 1940 (the "Act"), as amended, adopted a
distribution plan pursuant to Rule 12b-1 of the Act (the "Plan").
The Act regulates the manner in which a regulated investment
company may assume expenses of distributing and promoting the
sales of its shares and servicing of its shareholder accounts.
The Plan provides that the Fund may incur certain expenses, which
may not exceed 0.50% per annum of the Investor Class 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 of the Fund or support
servicing of shareholder accounts. Expenditures incurred as
service fees may not exceed 0.25% per annum of the Investor Class
shares' average daily net assets. The Fund incurred $50,925 of
such expenses under the Plan for the year ended March 31, 1999.
NOTE 4 - PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments, other than short-term
investments, aggregated $6,219,046 and $6,652,467, respectively,
for the year ended March 31, 1999.
NOTE 5 - DISTRIBUTIONS TO SHAREHOLDERS
For federal income tax purposes, the Fund must report
distributions from net realized gain from investment transactions
that represent long-term capital gain to its shareholders. The
total amount of $1.21 per share distributions for the year ended
March 31, 1999, was classified as long-term gain. Shareholders
should consult a tax advisor on how to report distributions for
state and local income tax purposes.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees of The Nottingham Investment Trust II and Shareholders
of Capital Value Fund:
We have audited the accompanying statement of assets and liabilities of Capital
Value Fund (the "Fund"), including the portfolio of investments, as of March 31,
1999, and the related statement of operations for the year then ended, the
statements of changes in net assets for the years ended March 31, 1999 and 1998,
and financial highlights for each of the years 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of March
31, 1999, by correspondence with the custodian and brokers; where replies were
not received from brokers, 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 audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Capital Value Fund as of March 31, 1999, the results of its operations for the
year then ended, the changes in its net assets and the financial highlights for
the respective stated years in conformity with generally accepted accounting
principles.
/s/ Deloitte & Touche LLP
Pittsburgh, Pennsylvania
April 23, 1999
<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.^18
(a)(3) Certificate of Establishment and Designation for the WST Growth &
Income Fund Class C Shares.
(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.
(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.
(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 Brown Capital Management, Inc., as Advisor to the Brown Capital
Management Equity Fund.^4
(d)(5) Investment Advisory Agreement between the Nottingham Investment Trust
II and Brown Capital Management, Inc., as Advisor to the Brown Capital
Management Balanced Fund.^4
(d)(6) Investment Advisory Agreement between the Nottingham Investment Trust
II and Brown Capital Management, Inc., as Advisor to the Brown Capital
Management Small Company Fund.^4
(d)(7) Amended and Restated Investment Advisory Agreement between the
Nottingham Investment Trust II and Brown Capital Management, Inc., as
Advisor to the Brown Capital Management Funds.^16
(d)(8) Investment Advisory Agreement between the Nottingham Investment Trust
II and Wilbanks, Smith & Thomas Asset Management, Inc., as Advisor to
the WST Growth & Income Fund.^13
(d)(9) Amended and Restated Investment Advisory Agreement between the
Nottingham Investment Trust II and Wilbanks, Smith & Thomas Asset
Management, Inc., as Advisor to the WST Growth & Income Fund.^16
(d)(10) Investment Advisory Agreement between the Nottingham Investment Trust
II and Morehead Capital Advisor, LLC, as Advisor to The
CarolinasFund.^14
(d)(11) Investment Sub-Advisory Agreement between the Nottingham Investment
Trust II and Capital Investment Counsel, Inc., as Sub-Advisor to The
CarolinasFund.^15
(e)(1) Amended and Restated Distribution Agreement between the Nottingham
Investment Trust II and Capital Investment Group, Inc., as Distributor
for the Capital Value Fund.
(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 Brown Capital
Management Equity Fund.^9
(e)(4) Distribution Agreement between the Nottingham Investment Trust II and
Capital Investment Group, Inc., as Distributor for the Brown Capital
Management Balanced Fund.^9
(e)(5) Distribution Agreement between the Nottingham Investment Trust II and
Capital Investment Group, Inc., as Distributor for the Brown Capital
Management Small Company Fund.^9
(e)(6) Amended and Restated Distribution Agreement between the Nottingham
Investment Trust II and Capital Investment Group, Inc., as Distributor
for the Brown Capital Management Funds.^16
(e)(7) Distribution Agreement between the Nottingham Investment Trust II and
Capital Investment Group, Inc., as Distributor for the WST Growth &
Income Fund.^11
(e)(8) Amended and Restated Distribution Agreement between the Nottingham
Investment Trust II and Capital Investment Group, Inc., as Distributor
for the WST Growth & Income Fund.^16
(e)(9) Distribution Agreement between the Nottingham Investment Trust II and
Capital Investment Group, Inc., as Distributor for The
CarolinasFund.^14
(f) Not Applicable.
(g) Custodian Agreement between the Nottingham Investment Trust II and
First Union National Bank of North Carolina, as Custodian.^13
(h)(1) Fund Accounting and Compliance Administration Agreement between the
Nottingham Investment Trust II and The Nottingham Company, Inc., as
Administrator.^15
(h)(2) Dividend Disbursing and Transfer Agent Agreement between Capital
Management Investment Trust and NC Shareholder Services, LLC, as
Transfer Agent.^15
(h)(3) Expense Limitation Agreement between Nottingham Investment Trust II and
Brown Capital Management, Inc.^16
(h)(4) Expense Limitation Agreement between Nottingham Investment Trust II and
Wilbanks, Smith & Thomas Asset Management, Inc.^16
(h)(5) Expense Limitation Agreement between Nottingham Investment Trust II and
Morehead Capital Advisors LLC.^17
(h)(6) Expense Limitation Agreement between Nottingham Investment Trust II and
Investek Capital Management, Inc.
(i)(1) Opinion and Consent of Counsel for the CarolinasFund.^14
(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.^15
(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.^16
(i)(4) Consent of Dechert Price & Rhoads, Counsel, with respect to The
CarolinasFund.^17
(i)(5) Opinion and Consent of Poyner & Spruill, L.L.P., Counsel, with respect
to the Capital Value Fund's Investor Class Shares.^12
(i)(6) Consent of Dechert Price & Rhoads, Counsel, with respect to the Capital
Value Fund's Investor Class of Shares.^19
(i)(7) Opinion and Consent of Dechert Price & Rhoads, Counsel, with respect to
the Capital Value Fund's T Shares.
(i)(8) Consent of Dechert Price & Rhoads, Counsel, with respect to the
Investek Fixed Income Trust.^19
(j)(1) Consent of Deloitte & Touche LLP, Independent Public Accountants, with
respect to the Capital Value Fund.
(j)(2) Consent of Deloitte & Touche LLP, Independent Public Accountants, with
respect to the Investek Fixed Income Trust.^19
(k) Not applicable.
(l) Initial Capital Agreement.^1
(m)(1) Distribution Plan under Rule 12b-1 for the Capital Value Fund Investor
Class Shares.^10
(m)(2) Form of Amended and Restated Distribution Plan under Rule 12b-1 for the
Capital Value Fund Investor Class Shares and T Shares.
(m)(3) Distribution Plan under Rule 12b-1 for the Investek Fixed Income
Trust.^11
(m)(4) Distribution Plan under Rule 12b-1 for the Brown Capital Management
Equity Fund.^9
(m)(5) Distribution Plan under Rule 12b-1 for the Brown Capital Management
Balanced Fund.^9
(m)(6) Distribution Plan under Rule 12b-1 for the Brown Capital Management
Small Company Fund.^9
(m)(7) Distribution Plan under Rule 12b-1 for the WST Growth & Income Fund's
Investor Class Shares.^13
(m)(8) Distribution Plan under Rule 12b-1 for the WST Growth & Income Fund's
Class C Shares.^16
(m)(9) Distribution Plan under Rule 12b-1 for The CarolinasFund.^14
(n) Not applicable.
(o)(1) Amended and Restated Plan Pursuant to Rule 18f-3 under the Investment
Company Act of 1940.^14
(o)(2) Amended and Restated Rule 18f-3 Multi-Class Plan.^16
(o)(3) Form of 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 Form 24f-2 filing
filed on May 29, 1997 (File No. 33-37458).
13. Incorporated herein by reference to Registrant's Registration Statement
on Form N-1A filed on July 24, 1997 (File No. 33-37458).
14. Incorporated herein by reference to Registrant's Registration Statement
on Form N-1A filed on April 20, 1998 (File No. 33-37458).
15. Incorporated herein by reference to Registrant's Registration Statement
on Form N-1A filed on February 24, 1999 (File No. 33-37458).
16. Incorporated herein by reference to Registrant's Registration Statement
on Form N-1A filed on March 16, 1999 (File No. 33-37458).
17. Incorporated herein by reference to Registrant's Registration Statement
on Form N-1A filed on April 30, 1999 (File No. 33-37458).
18. Incorporated herein by reference to Registrant's Registration Statement
on Form N-1A filed on May 28, 1999 (File No. 33-37458).
19. Incorporated herein by reference to Registrant's Registration Statement
on Form N-1A filed on June 1, 1999 (File No. 33-37458).
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, 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, The CarolinasFund, New Providence
Capital Growth Fund, Wisdom Fund, Internet 100 Fund, and Internet
100 Equal Weighted Fund.
(b)
Name and Principal Position(s) and Offices Position(s) and Offices
Business Address with Underwriter with Registrant
================ ================ ===============
Richard K. Bryant President None
17 Glenwood Ave.
Raleigh, NC 27622
E.O. Edgerton, Jr. Vice President None
17 Glenwood Ave.
Raleigh, NC 27622
(c) Not applicable
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. Box 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 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
("Securities Act"), and the Investment Company Act of 1940, as amended, the
Registrant certifies that it meets all of the requirements for effectiveness of
this registration statement under Rule 485(a)(1) under the Securities Act and
has duly caused this Post-Effective Amendment No. 40 to its Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of Rocky Mount, and State of North Carolina on this 22nd
day of September, 1999.
THE NOTTINGHAM INVESTMENT TRUST II
By: /s/ C. Frank Watson, III
_____________________________
C. Frank Watson, III
Secretary
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Post-Effective Amendment No. 40 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 September 22, 1999 Treasurer
_______________________________________________
Julian G. Winters Date
* By: /s/ C. Frank Watson, III Dated: September 22, 1999
________________________________
C. Frank Watson, III
Attorney-in-Fact
<PAGE>
INDEX TO EXHIBITS
(FOR POST-EFFECTIVE AMENDMENT NO. 40)
-------------------------------------
EXHIBIT NO.
UNDER PART C
OF FORM N-1A NAME OF EXHIBIT
- ------------ ---------------
(a)(3) Certificate of Establishment and Designation for the WST Growth
& Income Fund Class C
(d)(1) Investment Advisory Agreement between the Registrant and Capital
Investment Counsel, Inc., as Advisor to the Capital Value Fund
(d)(2) Amendment to the Investment Advisory Agreement between the
Registrant and Capital Investment Counsel, Inc., as Advisor to
the Capital Value Fund
(e)(1) Amended and Restated Distribution Agreement between the
Registrant and Capital Investment Group, Inc., as Distributor
for the Capital Value Fund
(h)(6) Expense Limitation Agreement between the Registrant and Investek
Capital Management, Inc.
(i)(7) Opinion and Consent of Dechert Price & Rhoads, Counsel, with
respect to the Capital Value Fund's T Shares
(j)(1) Consent of Deloitte & Touche LLP,Independent Public Accountants,
with respect to the Capital Value Fund
(m)(2) Form of Amended and Restated Distribution Plan under Rule 12b-1
for the Capital Value Fund Investor Class Shares and T Shares
(o)(3) Form of Amended and Restated Rule 18f-3 Multi-Class Plan
Exhibit (a)(3): Certificate of Establishment and Designation for the WST Growth
--------------- & Income Fund Class C Shares
THE NOTTINGHAM INVESTMENT TRUST II
Certificate of Designation
WST Growth & Income Fund Class C Shares
The undersigned, being the Secretary of Nottingham Investment Trust II
(hereinafter referred to as the "Trust"), a trust with transferable shares of
the type commonly called a Massachusetts business trust, DOES HEREBY CERTIFY
THAT, pursuant to the authority conferred upon the Trustees of the Trust by
Section 6.2 and Section 11.4 of the Agreement and Amended and Restated
Declaration of Trust of the Trust, as amended from time to time (hereinafter
referred to as the "Declaration of Trust"), and by the affirmative vote of a
Majority of the Trustees at a meeting duly called and held on March 15, 1999,
the Declaration of Trust is amended as follows:
(1) Designation. There is hereby established and designated as of that
date the Class C Shares to the WST Growth & Income Fund. The beneficial interest
in the Class C Shares possessing a nominal or par value of $0.01 per Share, of
which an unlimited number may be issued, which Shares shall represent interests
only in the Class C Shares of the WST Growth & Income Fund. The Class C Shares
of the WST Growth & Income Fund shall have the rights and preferences provided
in Section 6.2 of the Declaration of Trust and the Rule 18f-3 Multi-Class Plan
of the Trust, as amended from time to time.
(a) Amendment, etc. Subject to the provisions and limitations of
Section 11.4 of the Declaration of Trust and applicable law, this Certificate of
Designation may be amended by an instrument signed in writing by a Majority of
the Trustees (or by an officer of the Trust pursuant to the vote of a Majority
of the Trustees), provided that, if any amendment adversely affects the rights
of the Shareholders of the Fund, such amendment may be adopted by an instrument
signed in writing by a Majority of the Trustees (or an officer of the Trust
pursuant to the vote of a Majority of the Trustees) when authorized to do so by
the vote in accordance with Section 10.1 of the Declaration of Trust of the
holders of a majority of all the Shares of the Fund outstanding and entitled to
vote, without regard to Series.
<PAGE>
(b) Incorporation of Defined Terms. All capitalized terms which are not
defined herein shall have the same meanings as are assigned to those terms in
the Declaration of Trust filed with the Secretary of State of The Commonwealth
of Massachusetts.
The Trustees further direct that, upon the execution of this
Certificate of Designation, the Trust take all necessary action to file a copy
of this Certificate of Designation with the Secretary of State of The
Commonwealth of Massachusetts and at any other place required by law or by the
Declaration of Trust.
IN WITNESS WHEREOF, the undersigned has set his hand and seal effective as of
the 15th day of March, 1999.
/S/ C. Frank Watson, III
______________________________
C. Frank Watson, III, Secretary
<PAGE>
ACKNOWLEDGEMENT
NORTH CAROLINA
Nash March 15
_________________ County, ss.: __________________, 1999
Then personally appeared the above named C. Frank Watson, III, and
acknowledged the foregoing instrument to be his free act and deed. Before me,
Sarah W. Narron
_________________________
Notary Public
My commission expires: November 30, 2002 [Notary Seal]
_________________________
Exhibit (d)(1): Investment Advisory Agreement between the Registrant and
- --------------- Capital Investment Counsel, Inc., as Advisor to the
Capital Value Fund
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT, entered into as of the date the registration statement of
Capital Value Fund of The Nottingham Investment Trust II becomes effective with
the Securities and Exchange Commission, by and between Capital Value Fund of The
Nottingham Investment Trust II, a Massachusetts Business Trust (the "Trust"),
and Capital Investment Group, Inc., a North Carolina 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 the CAPITAL VALUE FUND series of the Trust, 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 the CAPITAL VALUE FUND (the "Fund") series of the Trust 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 has furnished the Investment 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's 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 the Fund
(herein called the "Shares") as filed with the Securities and
Exchange Commission ("SEC") and all amendments thereto;
<PAGE>
(e) The 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.
3. Management. Subject to the supervision of the Trust's Board of
Trustees, the Advisor will provide a continuous investment program for
the Fund, including investment research and management with respect to
all securities, investments, cash and cash equivalents in the Fund. The
Advisor will determine from time to time what securities and other
investments will be purchased, retained or sold by the Fund. The
Advisor will provide the services under this Agreement in accordance
with the Fund's investment objectives, policies and restrictions as
stated in its 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 of any other Federal and 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
the 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 and dealers who provide the Fund with research advice
and other services, or who recommend or sell Trust shares, and
(ii) brokers who are affiliated with the Fund 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 Fund 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 the Trust.
Notwithstanding the foregoing, the Adviser may obtain the services of
an investment counselor or sub-advisor of its choice subject to the
approval of the Board of Trustees. The cost of employing such counselor
or sub-advisor will be paid by the Adviser and not by the Trust.
<PAGE>
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 the Fund.
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 Fund are the property of the Fund and
further agrees to surrender promptly to the Fund 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 Fund.
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 the Fund. In the event that there is no
distribution plan under Rule 12b-1 of the 1940 Act in effect for the
Fund, the Advisor will pay, out of the Advisor's resources generated
from sources other than fees received from the Fund, the entire cost of
the promotion and sale of Fund shares.
Notwithstanding the foregoing, the Fund shall pay the expenses and
costs of the following:
(a) Taxes, interest charges and extraordinary expenses;
(b) Brokerage fees and commissions with regard to portfolio transaction
of the Fund;
(c) Fees and expenses of the custodian of the Fund's portfolio
securities;
(d) Fees and expenses of the Fund's administrator, transfer and
dividend disbursing agent and the Fund's fund accounting agent or,
if the Fund performs any such services without an agent, the costs
of the same;
(e) Auditing and legal expenses;
(f) Cost of maintenance of the Fund'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 the Fund.
<PAGE>
It is understood that the Trust may desire to register the Fund's
shares for sale in certain states which impose expense limitations on
mutual funds. The Trust agrees that it will register the Fund's shares
in such states only with the prior written consent of the Advisor.
7. Compensation. For the services provided and the expenses assumed by the
Adviser pursuant to this Agreement, the The Trust will pay the Adviser
and the Adviser will accept as full compensation an investment advisory
fee, based upon the daily average net assets of the Fund, computed at
the end of each month and payable within five (5) business days
thereafter, according to the following schedule:
Net Assets Annual Rate
---------- -----------
First $250 million 0.75%
on the next $250 million 0.65%
on all over $500 million 0.50%
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 Fund 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
wilful 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 Fund 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 Fund 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
judgments, in compromise or as fines or penalties), may be paid from
time to time by the Fund or Trust to which the conduct in question
related in advance of the final disposition of any such 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 Fund 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 Fund or to have been liable to the 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 Fund, and other persons may be entitled by contract or
otherwise under law, nor the power of the Fund 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 Fund 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. This Agreement shall become effective upon
the date the registration statement of the Trust containing the Fund's
prospectus is declared effective by the Securities and Exchange
Commission and, unless sooner terminated as provided herein, shall
continue in effect for two years. Thereafter, this Agreement shall be
renewable 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
the Fund.
Notwithstanding the foregoing, this Agreement may be terminated by the
Fund or by the Advisor at any time on sixty (60) days' written notice,
without the payment of any penalty, provided that termination by the
Fund must be authorized either by vote of the Board of Trustees or by
vote of a majority of the outstanding voting securities of the 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 until approved by vote of the holders
of a majority of the 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
/s/ Betty R. Smith By: /s/ Frank P. Meadows, III
__________________________________ _____________________________
Title: Assistant Secretary Title: Chairman
__________________________ __________________________
ATTEST: CAPITAL INVESTMENT COUNSEL, INC.
/s/ Simone Lambert By: /s/ Richard K. Bryant
__________________________________ _____________________________
Title: Assistant Secretary Title: Vice President
__________________________ __________________________
Exhibit (d)(2): Amendment to the Investment Advisory Agreement between the
- --------------- Registrant and Capital Investment Counsel, Inc., as
Advisor to the Capital Value Fund
AMENDMENT TO
INVESTMENT ADVISORY AGREEMENT
THIS AMENDMENT, made and entered into effective as of the 1st day of August,
1995, by and between THE NOTTINGHAM INVESTMENT TRUST II, a Massachusetts
business trust (the "Trust"), and CAPITAL INVESTMENT COUNSEL, INC., a North
Carolina corporation (the "Advisor").
WHEREAS, the parties have previously entered into that certain Investment
Advisory Agreement originally effective February 4, 1991, with respect to the
Capital Value Fund, a series of the Trust (the "Agreement").
WHEREAS, the Agreement has been continued from time to time by the parties as
provided therein;
WHEREAS, the parties desire to amend the compensation schedule thereof, all as
provided herein.
NOW THEREFORE, the Trust and the Advisor do mutually promise and agree as
follows:
1. Amendments. The Agreement is hereby amended amending the
compensation schedule set forth in Section 7 thereof and
substituting in lieu thereof a new Exhibit A in the form
attached hereto.
2. Ratification. Except as amended as provided above, the
Agreement shall continue in full force and effect.
IN WITNESS WHEREOF, the parties have caused this Amendment to be signed by their
duly authorized officers on the date first above written.
ATTEST: THE NOTTINGHAM INVESTMENT TRUST II
/S/ C. Frank Watson, III By: /s/ Frank P. Meadows, III
___________________________ ______________________________
(Seal)
ATTEST: CAPITAL INVESTMENT COUNSEL, INC.
/s/ Annelouse Brittan By: /s/ Richard K. Bryant
___________________________ ______________________________
(Seal)
<PAGE>
EXHIBIT A
INVESTMENT ADVISOR'S COMPENSATION SCHEDULE
For the services delineated in the 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 net assets according to
the following schedule.
Annual
Net Assets Fee
---------- ---
On the first $250 million 0.60%
On all assets over $500 million 0.50%
Exhibit (e)(1): Amended and Restated Distribution Agreement between the
- --------------- Registrant and Capital Investment Group, Inc., as
Distributor for the Capital Value Fund
AMENDED AND RESTATED
DISTRIBUTION AGREEMENT
AGREEMENT amended and restated effective as of the 5th day of September, 1995,
by and between THE NOTTINGHAM INVESTMENT TRUST II, an unincorporated business
trust organized under the laws of The Commonwealth of Massachusetts (the
"Trust"), and CAPITAL INVESTMENT GROUP, INC., a North Carolina corporation
("Distributor").
WITNESSETH:
WHEREAS, the Trust is engaged in business as an open-end management investment
company and is so registered under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, the Trust is authorized to issue an unlimited number of shares of
beneficial interest (the "Shares"), in separate series representing the
interests in separate funds of securities and other assets; and
WHEREAS, the Trust offers a series of such Shares representing interests in the
CAPITAL VALUE FUND (the "Fund") of the Trust, which Shares are divided into two
Classes of Investor and Institutional Shares, and has registered the Shares
under the Securities Act of 1933, as amended (the "1933 Act"), pursuant to a
registration statement on Form N-1A (the "Registration Statement"), including a
prospectus (the "Prospectus") and a statement of additional information (the
"Statement of Additional Information"); and
WHEREAS, 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 Fund, and may enter into related agreements providing for the
distribution of Investor Shares of the Fund; and
WHEREAS, Distributor has agreed to act as distributor of the Shares of the Fund
for the period of this Agreement;
NOW, THEREFORE, it is hereby agreed between the parties hereto as follows:
1. Appointment of Distributor.
(a) The Trust hereby appoints Distributor its exclusive agent for the
distribution of the Shares of the Fund in jurisdictions wherein such
Shares may be legally offered for sale; provided, however, that the
Trust in its absolute discretion may issue Shares of the Fund in
connection with (i) the payment or reinvestment of dividends or
distributions; (ii) any merger or consolidation of the Trust or of the
Fund with any other investment company or trust or any personal holding
company, or the acquisition of the assets of any such entity or another
fund of the Trust; or (iii) any offer of exchange permitted by Section
11 of the 1940 Act.
<PAGE>
(b) Distributor hereby accepts such appointment as exclusive agent for
the distribution of the Shares of the Fund and agrees that it will sell
the Shares as agent for the Trust at prices determined as hereinafter
provided and on the terms hereinafter set forth, all according to
applicable federal and state laws and regulations and to the Agreement
and Declaration of Trust of the Trust.
(c) Distributor may sell Shares of the Fund to or through qualified
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 the Fund from the Trust only to
the extent that it shall have received purchase orders therefor.
Distributor will not make, or authorize any dealers or others to make:
(i) any short sales of Shares; or (ii) any sales of Shares to any
Trustee or officer of the Trust or to any officer or director of
Distributor or of any corporation or association furnishing investment
advisory, managerial or supervisory services to the Trust, or to any
such corporation or association, unless such sales are made in
accordance with the then current Prospectus and Statement of Additional
Information.
(e) Distributor is not authorized by the Trust to give any information
or make any representations regarding the Shares of the Fund, except
such information or representations as are contained in the
Registration Statement or in the current Prospectus or Statement of
Additional Information of the Fund, or in 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 the Fund whenever, in its
sole discretion, it deems such action to be desirable.
2. Offering Price of Shares. All Fund Shares sold under this Agreement
shall be sold at the public offering price per Share in effect at the
time of the sale, as described in the then current Prospectus of the
Fund. 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 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 the Fund under this Agreement. The Trust shall also
make available a sufficient number of copies of the Fund's current
Prospectus and Statement of Additional Information for use by the
Distributor.
4. Expenses.
(a) The Trust will pay or cause to be paid the following expenses: (i)
preparation, printing and distribution to shareholders of the
Prospectus and Statement of Additional Information; (ii) preparation,
printing and distribution of reports and other communications to
shareholders; (iii) registration of the Shares under the federal
securities laws; (iv) qualification of the Shares for sale in certain
states; (v) qualification of the Trust as a dealer or broker under
state law as well as qualification of the Trust as an entity authorized
to do business in certain states; (vi) maintaining facilities for the
issue and transfer of Shares; (vii) supplying information, prices and
other data to be furnished by the Trust under this Agreement; and
(viii) certain taxes applicable to the sale or delivery of the Shares
or certificates therefor.
(b) Except to the extent such expenses are borne by the Trust pursuant
to the Distribution Plan, Distributor will pay or cause to be paid the
following expenses: (i) payments to sales representatives of the
Distributor and to securities dealers and others in respect of the sale
of Shares of the Fund; (ii) payment of compensation to and expenses of
employees of the Distributor and any of its affiliates to the extent
they engage in or support distribution of Fund Shares or render
shareholder support services not otherwise provided by the Trust's
transfer agent, administrator, or custodian, including, but not limited
to, answering routine inquiries regarding the Fund, processing
shareholder transactions, and providing such other shareholder services
as the Trust may reasonably request; (iii) formulation and
implementation of marketing and promotional activities, including, but
not limited to, direct mail promotions and television, radio,
newspaper, magazine and other mass media advertising; (iv) preparation,
printing and distribution of sales literature and of Prospectuses and
Statements of Additional Information and reports of the Trust for
recipients other than existing shareholders of the Fund; and (v)
obtaining such information, analyses and reports with respect to
marketing and promotional activities as the Trust may, from time to
time, reasonably request.
<PAGE>
(c) Distributor in connection with the Distribution Plan shall prepare
and deliver reports to the Trustees of the Trust on a regular basis, at
least quarterly, showing the expenditures with respect to the Fund
pursuant to the Distribution Plan and the purposes therefor, as well as
any supplemental reports as the Trustees of the Trust, from time to
time, may reasonably request.
5. Repurchase of Shares. Distributor as agent and for the account of
the Trust may repurchase Shares of the Fund offered for resale to it
and redeem such Shares at their net asset value.
6. Indemnification by the Trust. In absence of willful misfeasance,
bad faith, gross negligence or reckless disregard of obligations or
duties hereunder on the part of Distributor, the Trust agrees to
indemnify Distributor and its officers and partners against any and all
claims, demands, liabilities and expenses that Distributor may incur
under the 1933 Act, or common law or otherwise, arising out of or based
upon any alleged untrue statement of a material fact contained in the
Registration Statement or any Prospectus or Statement of Additional
Information of the 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 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 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 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
Fund Shares hereunder, or their sales representatives, that has not
been authorized by the Trust in any Prospectus or Statement of
Additional Information of the Fund or by this Agreement.
<PAGE>
8. Term and Termination.
(a) This Agreement shall be amended and restated effective on the date
hereof. Unless terminated as herein provided, this Agreement shall
continue in effect 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 the Fund or by Distributor,
on sixty days' written notice to the other party.
(c) This Agreement shall automatically terminate in the event of its
assignment (as defined in the 1940 Act).
9. Limitation of Liability. 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 is on file with
the Secretary of the Commonwealth of Massachusetts. The execution and
delivery of this Agreement has been authorized by the Trustees, and
this Agreement has been signed on behalf of the Trust by an authorized
officer of the Trust, acting as such and not individually, and neither
such authorization by such Trustees nor such execution and delivery by
such officer 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.
<PAGE>
IN WITNESS THEREOF, the parties hereto have caused this Agreement to be executed
as amended and restated as of the date first written above.
THE NOTTINGHAM INVESTMENT TRUST II
Attest: /s/ Julian G. Winters
_________________________ By: /s/ C. Frank Watson, III
_____________________________
CAPITAL VALUE FUND
Attest: /s/ Julian G. Winters
_________________________ By: /s/ C. Frank Watson, III
_____________________________
CAPITAL INVESTMENT GROUP, INC.
Attest: /s/ Annie D. King
_________________________ By: /s/ Richard K. Bryant
_____________________________
Exhibit (h)(6): Expense Limitation Agreement between the Registrant and Investek
- --------------- Capital Management, Inc.
EXPENSE LIMITATION AGREEMENT
NOTTINGHAM INVESTMENT TRUST II
EXPENSE LIMITATION AGREEMENT, effective as of March 31, 1999 by and
between Investek 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 Investment
Advisory Agreement dated November 15, 1991, ("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.
3. Term and Termination of Agreement.
This Agreement with respect to the Funds shall continue in effect on
March 31, 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.
<PAGE>
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: /S/ Jack E. Brinson
________________________
INVESTEK CAPITAL MANAGEMENT, INC.
By: /s/ Doug S. Folk
________________________
<PAGE>
SCHEDULE A
OPERATING EXPENSE LIMITS
This Agreement relates to the following Funds of the Trust:
Maximum Operating
Name of Fund Expense Limit
------------ -------------
Investek Fixed Income Trust 0.90%
Exhibit (i)(7): Opinion and Consent of Dechert Price & Rhoads, Counsel, with
- --------------- respect to the Capital Value Fund's T Shares
September 15, 1999
Opinion and Consent of Counsel
Nottingham Investment Trust II
105 North Washington Street
Post Office Box 69
Rocky Mount, North Carolina 27802-0069
Dear Gentlemen:
This opinion is given in connection with the filing by Nottingham
Investment Trust II, a Massachusetts business trust (the "Trust"), of
Post-Effective Amendment No. 40 to the Registration Statement on Form N-1A
("Registration Statement") under the Securities Act of 1933, as amended and
Amendment No. 41 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 a new class of shares, T Shares Class of the Capital
Value Fund, a separate series of the Trust. The authorized shares of beneficial
interest of the T Shares Class are hereinafter referred to as the "Shares."
We have examined the following Trust documents: the Declaration of
Trust; the By-Laws; Post-Effective Amendment No. 35 on Form N-1A filed on
February 24, 1999; Post-Effective Amendment No. 36 filed on March 16, 1999;
Post-Effective Amendment No. 37 filed on April 30, 1999; Post-Effective
Amendment No. 38 filed on May 28, 1999; Post-Effective Amendment No. 39 filed on
June 1, 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 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 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
Dechert Price & Rhoads
Exhibit (j)(1): Consent of Deloitte & Touche LLP, Independent Public
- --------------- Accountants, with respect to the Capital Value Fund
Exhibit 11
INDEPENDENT AUDITORS' CONSENT
To the Board of Trustees of the Nottingham Investment Trust II and Shareholders
of the Capital Value Fund:
We consent to the incorporation by reference in this Post-Effective Amendment
No. 40 to Registration Statement No. 33-37458 of the Capital Value Fund of our
report dated April 23, 1999, appearing in the Annual Report for the period ended
March 31, 1999, and to the reference to us under the heading "Financial
Highlights" in the Prospectus, which is part of such Registration Statement.
/s/ Deloitte & Touche LLP
Pittsburgh, Pennsylvania
September 20, 1999
Exhibit (m)(2): Form of Amended and Restated Distribution Plan under Rule 12b-1
- --------------- for the Capital Value Fund Investor Class and T Shares
FORM OF AMENDED AND RESTATED
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
WHEREAS, The Nottingham Investment Trust II, an unincorporated business trust
organized and existing under the laws of the Commonwealth of Massachusetts (the
"Trust"), engages in business as an open-end management investment company and
is registered as such under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Trust is authorized to issue an unlimited number of shares of
beneficial interest (the "Shares"), in separate series representing the
interests in separate funds of securities and other assets; and
WHEREAS, the Trust offers a series of such Shares representing interests in the
CAPITAL VALUE FUND (the "Fund") of the Trust, which shares are classified into
Investor Class Shares and T Shares of the Fund;
WHEREAS, the Trustees of the Trust as a whole, and the Trustees who are not
interested persons of the Trust (as defined in the 1940 Act) and who have no
direct or indirect financial interest in the operation of this Plan or in any
agreement relating hereto (the "Non-Interested Trustees"), having determined, in
the exercise of reasonable business judgment and in light of their fiduciary
duties under state law and under Section 36(a) and (b) of the 1940 Act, that
there is a reasonable likelihood that this Plan will benefit the Trust and its
shareholders, have approved this Plan by votes cast at a meeting called for the
purpose of voting hereon and on any agreements related hereto; and
NOW, THEREFORE, the Trust hereby amends, restates and readopts this Plan in
accordance with Rule 12b-1 under the 1940 Act, on the following terms and
conditions:
1. Distribution and Servicing Activities. Subject to the supervision of
the Trustees of the Trust, the Trust may, directly or indirectly, engage in any
activities primarily intended to result in the sale of Investor Shares of the
Fund or servicing of shareholder accounts, which activities may include, but are
not limited to, the following: (a) payments to the Trust's Distributor and to
securities dealers and others in respect of the sale of Investor Shares of the
Fund or the servicing of accounts of holders of Investor Shares; (b) payment of
compensation to and expenses of personnel (including personnel of organizations
with which the Trust has entered into agreements related to this Plan) who
engage in or support distribution of Investor Shares of the Fund or who render
shareholder support services not otherwise provided by the Trust's transfer
agent, administrator, or custodian, including but not limited to, answering
inquiries regarding the Trust, processing shareholder transactions, providing
personal services and/or the maintenance of shareholder accounts, providing
other shareholder liaison services, responding to shareholder inquiries,
providing information on shareholder investments in the Fund, and providing such
other shareholder services as the Trust may reasonably request; (c) formulation
and implementation of marketing and promotional activities, including, but not
limited to, direct mail promotions and television, radio, newspaper, magazine
and other mass media advertising; (d) preparation, printing and distribution of
sales literature; (e) preparation, printing and distribution of prospectuses and
statements of additional information and reports of the Trust for recipients
other than existing shareholders of the Trust; and (f) obtaining such
information, analyses and reports with respect to marketing and promotional
activities as the Trust may, from time to time, deem advisable. The Trust is
authorized to engage in the activities listed above, and in any other activities
primarily intended to result in the sale of Investor Shares of the Fund or the
servicing of accounts of holders of Investor Shares, either directly or through
other persons with which the Trust has entered into agreements related to this
Plan.
<PAGE>
2. Maximum Expenditures. The expenditures to be made by the Trust
pursuant to this Plan and the basis upon which payment of such expenditures will
be made shall be determined by the Trustees of the Trust, but in no event may
such expenditures exceed an amount calculated at the rate of 0.50% per annum of
the average daily net asset value of the Investor Shares of the Fund and 0.75%
per annum of the average daily net asset value of the T Shares for each year or
portion thereof included in the period for which the computation is being made.
Notwithstanding the foregoing, in no event may such expenditures paid by the
Trust as service fees for each of its classes of shares exceed an amount
calculated at the rate of 0.25% of the average annual net assets of each class
of shares of the Fund. Such payments for distribution and shareholder servicing
activities may be made directly by the Trust or the Fund's distributor to any
persons with whom the Trust has entered into agreements related to this Plan.
3. Term and Termination.
(a) This Plan, which was originally adopted effective with the commencement of
operations of the Fund, shall be amended and restated effective on August 1,
1995, contingent upon approval of the increase in the maximum expenditures
permitted by Section 2 hereof by a vote of the majority of the outstanding
voting securities of the Fund as defined in the 1940 Act, shall be further
amended and restated to reflect the classification of the Shares of the Fund,
effective as of September 5, 1995, and shall be further amended and restated to
reflect the addition of the T Shares on the date that the T Shares are effective
with the Securities and Exchange Commission. Unless terminated as herein
provided, this Plan shall continue in effect for one year from year, but only so
long as each such continuance is specifically approved by votes of a majority of
both (i) the Trustees of the Trust and (ii) the Non-Interested Trustees, cast at
a meeting called for the purpose of voting on such approval.
(b) This Plan may be terminated at any time with respect to any class
of shares of the Fund by a vote of a majority of the Non-Interested Trustees or
by a vote of a majority of the outstanding voting securities of the affected
class of shares of the Fund.
4. Amendments. This Plan may not be amended to materially increase the
maximum expenditures permitted by Section 2 hereof unless such amendment is
approved by a vote of the "majority of the outstanding voting securities" of the
affected class of shares of the Fund, and no material amendment to this Plan
(including to an amendment to materially increase the maximum expenditures
permitted) shall be made unless approved in the manner provided for annual
renewal of this Plan in Section 3(a) hereof.
<PAGE>
5. Selection and Nomination of Trustees. While this Plan is in effect,
the selection and nomination of the Non-Interested Trustees of the Trust shall
be committed to the discretion of such Non-Interested Trustees.
6. Quarterly Reports. The Treasurer of the Trust shall provide to the
Trustees of the Trust and the Trustees shall review quarterly a written report
of the amounts expended pursuant to this Plan and any related agreement and the
purposes for which such expenditures were made.
7. Recordkeeping. The Trust shall preserve copies of this Plan and any
related agreement and all reports made pursuant to Section 6 hereof, for a
period of not less than six years from the date of this Plan. Any such related
agreement or such reports for the first two years will be maintained in an
easily accessible place.
8. Limitation of Liability. Any obligations of the Trust hereunder
shall not be binding upon any of the Trustees, officers or shareholders of the
Trust personally, but shall bind only the assets and property of the Trust. The
term "The Nottingham Investment Trust II" means and refers to the Trustees from
time to time serving under the Agreement and Declaration of Trust of the Trust,
a copy of which is on file with the Secretary of The Commonwealth of
Massachusetts. The execution of this Plan has been authorized by the Trustees,
and this Plan has been signed on behalf of the Trust by an authorized officer of
the Trust, acting as such and not individually, and neither such authorization
by such Trustees nor such execution by such officer shall be deemed to have been
made by any of them individually or to impose any liability on any of them
personally, but shall bind only the assets and property of the Trust as provided
in the Agreement and Declaration of Trust.
IN WITNESS THEREOF, the parties hereto have caused this Plan to be re-executed
as amended and restated herein, all as of the date written above.
THE NOTTINGHAM INVESTMENT TRUST II
Attest:
By_____________________________
Attest:
CAPITAL VALUE FUND
By_____________________________
Exhibit (o)(3): Form of Amended and Restated Rule 18f-3 Multi-Class Plan
- ---------------
THE NOTTINGHAM INVESTMENT TRUST II
FORM OF 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, Class C
Shares, and T 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 plan (and related agreements) adopted for such Class of Shares
pursuant to Rule 12b-1 under the 1940 Act, 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:
<PAGE>
(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;
(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.
<PAGE>
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.
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
<PAGE>
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).
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 -- All Funds except the Capital Value
Fund.
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.
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D. T Shares -- For the Capital Value Fund only.
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, T 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: T Shares of a Fund may
be exchanged for T Shares of any other Fund
of the Trust established by the Fund's
investment adviser, as described in the
current Prospectus for each Fund.
6. Other Shareholder Services: The Trust offers
a Systematic Withdrawal Plan and Automatic
Investment Plan to holders of T 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.
