As filed with the Securities and Exchange Commission on May 2, 2000
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. 41 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 42 [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); or
[ ] 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
Investek Fixed Income Trust
-Part A - Prospectus
-Part B - Statement of Additional Information
Part C - Other Information and Signature Page
Exhibit Index
Exhibits
<PAGE>
PART A
======
Cusip Number 66976M508 NASDAQ Symbol IVFTX
________________________________________________________________________________
INVESTEK FIXED INCOME TRUST
A series of the
Nottingham Investment Trust II
INSTITUTIONAL CLASS SHARES
________________________________________________________________________________
PROSPECTUS
June 30, 2000
The Investek Fixed Income Trust seeks to preserve capital and maximize total
returns through active management of investment-grade fixed income securities.
Investment Advisor
------------------
[logo placed here]
EARNEST Partners Limited, LLC
317 East Capitol Street
Post Office Box 2840
Jackson, Mississippi 39207
1-800-525-3863
The Securities and Exchange Commission has not approved or disapproved the
securities being offered by this prospectus 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
- --------
Investment Objective.....................................................2
Principal Investment Strategies..........................................2
Principal Risks of Investing in the Fund.................................3
Bar Chart and Performance Table..........................................4
Fees and Expenses of the Fund............................................5
MANAGEMENT OF THE FUND.........................................................6
- ----------------------
The Investment Advisor...................................................6
The Administrator........................................................7
The Transfer Agent.......................................................7
The Distributor..........................................................7
INVESTING IN THE FUND..........................................................8
- ---------------------
Minimum Investment.......................................................8
Purchase and Redemption Price............................................8
Purchasing Shares........................................................8
Redeeming Your Shares...................................................10
OTHER IMPORTANT INVESTMENT INFORMATION........................................12
- --------------------------------------
Dividends, Distributions, and Taxes.....................................12
Financial Highlights ...................................................13
Additional Information..........................................Back Cover
<PAGE>
THE FUND
--------
INVESTMENT OBJECTIVE
The Investek Fixed Income Trust ("Fund") seeks to preserve capital and maximize
total returns through active management of investment-grade fixed-income
securities.
PRINCIPAL INVESTMENT STRATEGIES
The Fund pursues its investment objective by investing in market sectors or
particular securities that EARNEST Partners Limited, LLC ("Advisor") believes
are undervalued due to market inefficiencies.
The Advisor implements this strategy by calculating an expected yield for
various market sectors and securities and comparing the results to actual market
yield levels. The expected yield is calculated using such factors as quality,
duration, liquidity, and the relationship between price and yield. Investment
decisions are made based upon opportunities the Advisor perceives to exist as a
result of the differences in the expected yield and the actual market level
yield.
The Advisor also considers the following when selecting securities:
o historical yield relationship between a security and a corresponding
benchmark,
o credit risk,
o market volatility,
o interest rate levels relative to historical interest rate levels, and
o supply and demand factors (i.e. spreads tend to widen when supply for a
security exceeds demand).
An example for such an investment might be a particular security guaranteed by
the U.S. government, which may be too small for many fixed-income dealers. With
fewer buyers in the marketplace for such a security, a lower price and higher
yield may be available, without any increase in credit risk.
In managing the Fund, the following additional restrictions are used:
o The Fund will not engage in "market timing."
o Portfolio duration will vary between 2 and 7 years, which is currently
approximately equivalent to a 3- to 12-year average life. Duration is a
measure of the weighted average maturity of the fixed-income instruments held
by the Fund and can be used by the Advisor as a measure of the sensitivity of
the market value of the Fund to changes in interest rates. Generally, the
longer the duration of the Fund, the more sensitive its market value will be
to changes in interest rates.
o At least 90% of the portfolio will be in bonds rated "A" or better at all
times by a nationally recognized securities rating organizations ("NRSRO").
o The Fund will not invest in any Bonds rated below investment-grade by any
NRSRO.
2
<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. 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 fluctuations 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 other 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 generally rated
by NRSROs. Fixed income securities rated BBB by Standard & Poor's(R)Rating
Services or Baa by Moody's Investor Services, Inc. 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.
3
<PAGE>
BAR CHART AND PERFORMANCE TABLE
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
Fund's average annual total return from year to year for the Fund's Shares and
by showing (on a calendar year basis) how the Fund's Shares average annual
returns for one year, five years, and since inception compare to those of a
broad-based securities market index. How the Fund has performed in the past is
not necessarily an indication of how the Fund will perform in the future.
[BAR CHART HERE]:
Year to Year Total Returns (as of December 31)
1992 7.78%
1993 10.56%
1994 -3.78%
1995 16.82%
1996 4.08%
1997 9.17%
1998 7.64%
1999 -1.13%
o During the 8-year period shown in the bar chart, the highest return for a
calendar quarter was 6.41% (quarter ended June 30, 1995).
o During the 8-year period shown in the bar chart, the lowest return for a
calendar quarter was -3.84% (quarter ended March 31, 1994).
o The year-to-date return as of the most recent calendar quarter was 1.47%
(quarter ended March 31, 2000).
- -------------------------------------- ------------- ------------- -------------
Average Annual Total Returns Past 1 Past 5 Since
Period ended December 31, 1999 Year Years Inception*
- -------------------------------------- ------------- ------------- -------------
Investek Fixed Income Trust -1.13% 7.15% 6.20%
- -------------------------------------- ------------- ------------- -------------
Lehman Brothers Aggregate Bond Index** -0.82% 7.73% 6.88%
- -------------------------------------- ------------- ------------- -------------
* November 15, 1991 (inception date of the Fund's Institutional
Class Shares).
** The Lehman Brothers Aggregate Bond Index represents an unmanaged
group of securities widely regarded by investors as representative
of the bond market.
4
<PAGE>
FEES AND EXPENSES OF THE FUND
The tables below describe the fees and expenses that you may pay if you buy and
hold Institutional Class Shares of the Fund:
Shareholder Fees for Institutional Class 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 Institutional Class Shares
(expenses that are deducted from Fund assets)
---------------------------------------------
Management Fees....................................... 0.45%
Distribution and/or Service (12b-1) Fees.............. None
Other Expenses........................................ 1.12%
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Total Annual Fund Operating Expenses...................... 1.57%*
Fee Waivers and/or Expense Reimbursement..................(0.67%)
----
Net Expenses...............................................0.90%
====
* "Total Annual Fund Operating Expenses" are based upon actual
expenses incurred by the Institutional Class Shares of the
Fund for the fiscal year ended March 31, 2000. The Advisor
has entered into a contractual agreement with the Nottingham
Investment Trust II under which it has agreed to waive or
reduce its fees and to assume other expenses of the Fund, if
necessary, in an amount that limits "Total Fund Operating
Expenses" (exclusive of interest, taxes, brokerage fees and
commissions, extraordinary expenses, and payments, if any,
under a Rule 12b-1 Plan) to not more than 0.90% of the
average daily net asset of the Institutional Class Shares of
the Fund for the fiscal year ending March 31, 2001. The
contractual agreement may continue from year-to-year
thereafter, provided such continuation is approved by the
Board of Trustees. See "Expense Limitation Agreement" for
more detailed information.
Example. This Example shows you the expenses you may pay over time by investing
in the Fund. Since all funds use the same hypothetical conditions, it should
help you compare the costs of investing in the Fund versus other funds. The
Example assumes the following conditions:
(1) You invest $10,000 in the Fund for the periods shown;
(2) You reinvest all dividends and distributions;
(3) You redeem all of your shares at the end of those periods;
(4) You earn a 5% total return; and
(5) The Fund's expenses remain the same.
Although your actual costs may be higher or lower, the following table shows you
what your costs may be under the conditions listed above.
- -------------------------- ------------ ------------ ------------- -------------
Period Invested 1 Year 3 Years 5 Years 10 Years
- -------------------------- ------------ ------------ ------------- -------------
Your Costs $92 $431 $797 $1,853
- -------------------------- ------------ ------------ ------------- -------------
5
<PAGE>
MANAGEMENT OF THE FUND
----------------------
THE INVESTMENT ADVISOR
On December 20, 1999, EARNEST Partners Limited, LLC became the investment
adviser of the Fund pursuant to an Interim Investment Advisory Agreement
approved by the Board of Trustees of the Nottingham Investment Trust II
("Trust") at a meeting held on December 20, 1999. That agreement was superceded
by a new Investment Advisory Agreement that was approved by shareholders of the
Fund at a meeting held on May 25, 2000. Under the new Investment Advisory
Agreement, the Advisor will receive the same management fee as the Fund's
previous advisor, Investek Capital Management, Inc. ("ICM"). The new Investment
Advisory Agreement has an initial two-year period that began May 25, 2000, and
will be in effect until May 25, 2002. Thereafter, the Investment Advisory
Agreement may be renewed on an annual basis subject to an appropriate review and
approval by the Trustees.
EARNEST Partners Limited, LLC, 317 East Capitol Street, Post Office Box 2840,
Jackson, Mississippi 39207, was established in 1999 as a limited liability
company organized under the laws of Delaware and is a wholly owned subsidiary of
EARNEST Partners II, LLC, also a Delaware limited liability company. The Advisor
was formed as a result of the acquisition of the Fund's former investment
advisor by EARNEST Partners II, LLC. That acquisition was completed on December
31, 1999. The Advisor has approximately $900 million in assets under management
and provides investment counsel, utilizing investment strategies substantially
similar to that of the Fund, to individuals, banks and thrift institutions,
pension and profit sharing plans, trusts, estates, charitable organizations, and
corporations. The Advisor is managed by Michael T. McRee and the Fund is
primarily managed by an investment team consisting of Mr. McRee, Douglas S.
Folk, CFA, and John M. Friedman, who are responsible for the day-to-day
management of the Fund's portfolio. Mr. McRee has been a member of the Advisor
since its inception in 1999 and President of the Fund since its inception in
1991. Prior to that time, Mr. McRee was President of the Fund's former adviser,
ICM. Mr. Folk has been a Partner of the Advisor since its inception and became a
portfolio manager of the Fund in 1998. Mr. Folk was also Vice President of the
Fund's former adviser from 1996 until the acquisition in 1999. Previous to that,
Mr. Folk was a portfolio manager with Southern Farm Bureau Life Insurance
Company. Mr. Friedman has been a Partner of the Advisor since its inception in
1999 and portfolio manager of the Fund since its inception in 1991. Prior to
that time, Mr. Friedman was Vice President of the Fund's former adviser.
Pursuant to the Investment Advisory Agreement with the Trust, the Advisor
provides the Fund with a continuous supervision program of the Fund's assets,
including developing 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'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 0.45%.
However, to limit expenses of the Fund, the Advisor and previous advisor
voluntarily waived all of their advisory fees for the fiscal year ended March
31, 2000.
Expense Limitation Agreement. In the interest of limiting expenses of the Fund,
the Advisor entered into an expense limitation agreement with the Trust, with
respect to the Fund (the "Expense Limitation Agreement"), pursuant to which the
Advisor has agreed to waive or limit its fees and to assume other expenses so
that the total annual operating expenses of the Fund (other than interest,
taxes, brokerage commissions, other expenditures which are capitalized in
accordance with generally accepted accounting principles, other extraordinary
expenses not incurred in the ordinary course of the Fund's business, and
amounts, if any, payable pursuant to a Rule 12b-1 Plan) are limited to 0.90% of
the average net assets of the Fund for the fiscal year ending March 31, 2001.
The Expense Limitation Agreement shall continue from year-to-year provided 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 Investment Company Act of 1940, as amended, and
(ii) have no direct or indirect financial interest in the operation of the
Expense Limitation Agreement.
6
<PAGE>
The Fund may at a later date reimburse the Advisor the fees waived or limited
and other expenses assumed and paid by the Advisor pursuant to the Expense
Limitation Agreement during any of the previous five (5) fiscal years, provided
the Fund has reached a sufficient asset size to permit such reimbursement to be
made without causing the total annual expense ratio of the Fund to exceed the
percentage limits stated above. Consequently, no reimbursement by the Fund will
be made unless: (i) the Fund's assets exceed $20 million; (ii) the Fund's total
annual expense ratio is less than the percentage stated above; and (iii) the
payment of such reimbursement has been approved by the Trust's Board of Trustees
on a quarterly basis.
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.
THE ADMINISTRATOR
The Nottingham Company, Inc. ("Administrator") assists the Trust in the
performance of its administrative responsibilities to the Fund, coordinates the
services of each vendor 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 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.
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 Trust.
Capital Investment Group, Inc. may sell the Fund's shares to or through
qualified securities dealers or others.
Other Expenses. In addition to the management fee, the Fund pays all expenses
not assumed by the Fund's Advisor, including, without limitation: the fees and
expenses of its independent auditors and of its 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.
7
<PAGE>
INVESTING IN THE FUND
---------------------
MINIMUM INVESTMENT
Institutional Class Shares of the Fund are sold and redeemed at net asset value.
Shares may be purchased by any account managed by the Advisor and any other
institutional investor or any broker-dealer authorized to sell shares of the
Fund. The minimum initial investment is $50,000 and the minimum additional
investment is $1,000 ($100 for those participating in the automatic investment
plan). The Fund may, in the Advisor's sole discretion, accept certain accounts
with less than the minimum investment.
PURCHASE AND REDEMPTION PRICE
Determining the Fund's Net Asset Value. The price at which you purchase or
redeem shares is based on the next calculation of net asset value after an order
is received 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 Fund's net asset value per share is calculated by dividing the value
of the Fund's total assets, less liabilities (including Fund expenses, which are
accrued daily), by the total number of outstanding shares of the Fund. The net
asset value per share of the Fund is normally determined at the time regular
trading closes on the New York Stock Exchange (currently 4:00 p.m. Eastern time,
Monday through Friday), except on business holidays when the New York Stock
Exchange is closed.
Other Matters. 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 is closed or during which trading is
restricted by the Securities and 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 "Investek Fixed
Income Trust," to:
Investek Fixed Income Trust
c/o NC Shareholder Services
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
The application must contain your Social Security Number ("SSN") or Taxpayer
Identification Number ("TIN"). If you have applied for a SSN 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.
8
<PAGE>
Bank Wire Orders. Purchases may also be made through bank wire orders. To
establish a new account or add to an existing account by wire, please call the
Fund at 1-800-773-3863, before wiring funds, to advise the Fund of the
investment, dollar amount, and the account identification number. Additionally,
please have your bank use the following wire instructions:
First Union National Bank of North Carolina
Charlotte, North Carolina
ABA # 053000219
For: Investek Fixed Income Trust - Institutional Class Shares
Acct. # 2000000862107
For further credit to (shareholder's name and SSN 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. The minimum
additional investment is $1,000. Before adding funds by bank wire, please call
the Fund at 1-800-773-3863 and follow the above directions for wire purchases.
Mail orders should include, if possible, the "Invest by Mail" stub which is
attached to your fund confirmation statement. Otherwise, please identify your
account in a letter accompanying your purchase payment.
Additional Purchases By Phone (Telephone Purchase Authorization). If you have
made this election on your Account Application, you may purchase additional
shares by telephoning the Fund at 1-800-773-3863. The minimum telephone purchase
is $100 and the maximum is one (1) times the net asset value of shares held by
the shareholder on the day preceding such telephone purchase for which payment
has been received. The telephone purchase will be made at the net asset value
next computed after the receipt of the telephone call by the Fund. Payment for
the telephone purchase must be received by the Fund within five (5) days. If
payment is not received within five (5) days, you will be liable for all losses
incurred as a result of the cancellation of such purchase.
Automatic Investment Plan. The automatic investment plan enables shareholders to
make regular monthly or quarterly investments in shares through automatic
charges to their checking account. With shareholder authorization and bank
approval, the Fund will automatically charge the checking account for the amount
specified ($100 minimum), which will be automatically invested in shares at the
public offering price on or about the 21st day of the month. The shareholder may
change the amount of the investment or discontinue the plan at any time by
writing to the Fund.
Exchange Feature. You may exchange shares of the Fund for shares of any other
series of the Trust advised by the Advisor and offered for sale in the state in
which you reside. Shares may be exchanged for shares of any other series or
class of the Trust at the net asset value plus the percentage difference between
that series' sales charge and any sales charge, previously paid by you in
connection with the shares being exchanged. Prior to making an investment
decision or giving us your instructions to exchange shares, please read the
prospectus for the series in which you wish to invest.
A pattern of frequent purchase and redemption transactions is considered by the
Advisor to not be in the best interest of the shareholders of the Fund. Such a
pattern may, at the discretion of the Advisor, be limited by the Fund's refusal
to accept further purchase and/or exchange orders from an investor, after
providing the investor with 60-days' prior notice.
The Board of Trustees reserves the right to suspend, terminate, or amend the
terms of the exchange privilege upon 60-days' written notice to the
shareholders.
An investor may direct the Fund to exchange his shares by writing to the Fund at
its principal office. The request must be signed exactly as the investor's name
appears on the account, and it must also provide the account number, number of
shares to be exchanged, the name of the series to which the exchange will take
place and a statement as to whether the exchange is a full or partial redemption
of existing shares. Notwithstanding the foregoing, exchanges of shares may only
be within the same class or type of class of shares involved. For example,
Investor Shares may not be exchanged for Institutional or Super-Institutional
Shares, and Investor Shares may not be exchanged among the various Classes of
Investor Shares (i.e., Class C Shares may not be exchanged for Class A Shares or
Class D Shares and Class D Shares may not be exchanged for Class A Shares).
9
<PAGE>
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 requests should be addressed
to:
Investek Fixed Income Trust
c/o NC Shareholder Services
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
Regular mail redemption requests should include:
(1) Your letter of instruction specifying the account number and number of
shares, or the dollar amount, to be redeemed. This request must be
signed by all registered shareholders in the exact names in which they
are registered;
(2) Any required signature guarantees (see "Signature Guarantees" below);
and
(3) Other supporting legal documents, if required in the case of estates,
trusts, guardianships, custodianships, corporations, partnerships,
pension or profit sharing plans, and other organizations.
Your redemption proceeds normally will be sent to you within seven (7) days
after receipt of your redemption request. However, the Fund may delay forwarding
a redemption check for recently purchased shares while it determines whether the
purchase payment will be honored. Such delay (which may take up to fifteen (15)
days from the date of purchase) may be reduced or avoided if the purchase is
made by certified check or wire transfer. In all cases, the net asset value next
determined after receipt of the request for redemption will be used in
processing the redemption request.
Telephone and Bank Wire Redemptions. You may also redeem shares by telephone and
bank wire under certain limited conditions. The Fund will redeem shares in this
manner when so requested by the shareholder only if the shareholder confirms
redemption instructions in writing.
The Fund may rely upon confirmation of redemption requests transmitted via
facsimile (FAX# 252-972-1908). The confirmation instructions must include:
(1) The Funds' name,
(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). Redemption proceeds can not be wired 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.
10
<PAGE>
The Fund, in its discretion, may choose to pass through to redeeming
shareholders any charges imposed by the Custodian for wire redemptions. The
Custodian currently charges the Fund $10 per transaction for wiring redemption
proceeds. If this cost is passed through to redeeming shareholders by the Fund,
the charge will be deducted automatically from your account by redemption of
shares in your account. Your bank or brokerage firm may also impose a charge for
processing the wire. If wire transfer of funds is impossible or impractical, the
redemption proceeds will be sent by mail to the designated account.
You may redeem shares, subject to the procedures outlined above, by calling the
Fund at 1-800-773-3863. Redemption proceeds will only be sent to the bank
account or person named in your Fund Shares Application currently on file with
the Fund. Telephone redemption privileges authorize the Fund to act on telephone
instructions from any person representing himself or herself to be the investor
and reasonably believed by the Fund to be genuine. The Fund will employ
reasonable procedures, such as requiring a form of personal identification, to
confirm that instructions are genuine, and if it does not follow such
procedures, the Fund will be liable for any losses due to fraudulent or
unauthorized instructions. The Fund will not be liable for following telephone
instructions reasonably believed to be genuine.
Systematic Withdrawal Plan. A shareholder who owns shares of the Fund valued at
$50,000 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 an 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.
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.
11
<PAGE>
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 Statement of Additional Information
(the "SAI"). Shareholders should rely on 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 gains 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. Every year, each shareholder will receive a statement detailing
the tax status of any Fund distributions for that year.
Distributions may be subject to state and local taxes, as well as federal taxes.
Shareholders who hold Fund shares in a tax-deferred account, such as a
retirement plan, generally will not have to pay tax on Fund distributions until
they receive distributions from the account.
A shareholder who sells or redeems shares will generally realize a capital gain
or loss, which will be long-term or short-term, generally depending upon the
shareholder's holding period for the Fund shares. An exchange of shares may be
treated as a sale.
As with all mutual funds, the Fund may be required to withhold U.S. federal
income tax at the rate of 31% of all taxable distributions payable to
shareholders who fail to provide the Fund with their correct taxpayer
identification numbers or to make required certifications, or who have been
notified by the IRS that they are subject to backup withholding. Backup
withholding is not an additional tax; rather, it is a way in which the IRS
ensures it will collect taxes otherwise due. Any amounts withheld may be
credited against a shareholder's U.S. federal income tax liability.
12
<PAGE>
FINANCIAL HIGHLIGHTS
The financial data included in the table below have been derived from audited
financial statements of the Fund. The financial data for the fiscal years ended
March 31, 2000, 1999, 1998, and 1997, have been audited by Deloitte & Touche
LLP, independent auditors, whose report covering such periods is incorporated by
reference into the SAI. The financial data for the fiscal year ended March 31,
1996 was 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 incorporated by reference into the SAI, 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> <C> <C>
INSTITUTIONAL CLASS SHARES
(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,
2000 1999 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year .................. $10.30 $10.31 $ 9.98 $10.11 $ 9.74
Income from investment operations
Net investment income .................... 0.60 0.62 0.64 0.65 0.66
Net realized and unrealized (loss) gain
on investments ......................... (0.46) (0.01) 0.33 (0.13) 0.37
----------- ----------- ----------- ----------- -----------
Total from investment operations .... 0.14 0.61 0.97 0.52 1.03
----------- ----------- ----------- ----------- -----------
Distributions to shareholders from
Net investment income .................... (0.60) (0.62) (0.64) (0.65) (0.66)
----------- ----------- ----------- ----------- -----------
Net asset value, end of year ........................ $ 9.84 $10.30 $10.31 $ 9.98 $10.11
=========== =========== =========== =========== ===========
Total return ........................................ 1.47% 5.97% 9.91% 5.38% 10.70%
=========== =========== =========== =========== ===========
Ratios/supplemental data
Net assets, end of year ....................... $ 8,193,248 $11,466,770 $13,899,229 $11,227,141 $12,261,121
=========== =========== =========== =========== ===========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees 1.57% 1.22% 1.10% 1.20% 1.08%
After expense reimbursements and waived fees 0.90% 0.90% 0.90% 0.90% 0.87%
Ratio of net investment income to average net assets
Before expense reimbursements and waived fees 5.26% 5.53% 6.01% 6.07% 6.20%
After expense reimbursements and waived fees 5.93% 5.85% 6.21% 6.37% 6.41%
Portfolio turnover rate 15.41% 50.90% 38.46% 32.94% 16.57%
See accompanying notes to financial statements
</TABLE>
13
<PAGE>
ADDITIONAL INFORMATION
________________________________________________________________________________
INVESTEK FIXED INCOME TRUST
INSTITUTIONAL CLASS 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 are available free of charge upon request by contacting us:
By telephone: 1-800-525-3863
By mail: Investek Fixed Income Trust
c/o NC Shareholder Services
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 1-202-942-8090. 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 electronic request at the following e-mail address:
[email protected], or by writing the SEC's Public Reference Section,
Washington, D.C. 20549-0102.
Investment Company Act file number 811-06199
<PAGE>
PART B
======
STATEMENT OF ADDITIONAL INFORMATION
INVESTEK FIXED INCOME TRUST
June 30, 2000
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..................................................... 8
ADDITIONAL INFORMATION CONCERNING TAXES...................................... 9
MANAGEMENT AND OTHER SERVICE PROVIDERS...................................... 10
SPECIAL SHAREHOLDER SERVICES................................................ 14
ADDITIONAL INFORMATION ON PERFORMANCE....................................... 16
FINANCIAL STATEMENTS........................................................ 17
APPENDIX A - DESCRIPTION OF RATINGS......................................... 18
This Statement of Additional Information ("SAI") is meant to be read in
conjunction with the Prospectus, dated the same date as this SAI, for the
Investek Fixed Income Trust ("Fund") relating to the Fund's Institutional Class
Shares, and is incorporated by reference in its entirety into the Prospectus.
Because this SAI is not itself a prospectus, no investment in shares of the Fund
should be made solely upon the information contained herein. Copies of the
Fund's Prospectus may be obtained at no charge by writing or calling the Fund at
the address and phone number shown above. Capitalized terms used but not defined
herein have the same meanings as in the Prospectus.
<PAGE>
OTHER INVESTMENT POLICIES
The following policies supplement the Fund's investment objective and policies
as set forth in the Prospectus 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 on
November 15, 1991 as a separate diversified investment portfolio of the
Nottingham Investment Trust II ("Trust").
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 that will
cause more than 10% of its net assets to be invested in repurchase agreements
that 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 that "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.
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.
Corporate Bonds. The Fund's investments in corporate debt securities will be
based on credit analysis and value determination by the Advisor. The Advisor's
selection of bonds or industries within the corporate bond sector is determined
by, among other factors, historical yield relationships between bonds or
industries, the current and anticipated credit of the borrower, and call
features as well as supply and demand factors. All corporate securities will be
of investment grade quality as determined by Moody's Investors Service, Inc.
("Moodys"), Standard & Poor's Ratings Services ("S&P"), Fitch Investors Service,
Inc. ("Fitch"), or Duff & Phelps ("D&P"), or if no rating exists, of equivalent
quality in the determination of the Advisor. In addition, the Fund intends to
maintain at least 90% of its assets in bonds rated A or better (or if not rated,
of equivalent quality as determined by the Advisor). This limitation is
described in greater detail in "Investment Limitations - Investment Grade
Securities." The Advisor will monitor continuously the ratings of securities
held by the Fund and the creditworthiness of their issuers. For a more complete
description of the various bond ratings for Moody's, S&P, Fitch and D&P, see
Appendix A to the Statement of Additional Information.
Mortgage Pass-Through Certificates. Obligations of GNMA, FNMA and FHLMC include
direct pass-through certificates representing undivided ownership interests in
pools of mortgages. Such certificates are guaranteed as to payment of principal
and interest (but not as to price and yield) by the issuer. For securities
issued by GNMA, the payment of principal and interest is backed by the full
faith and credit of the U.S. Government. Mortgage pass-through certificates
issued by FNMA or FHLMC are guaranteed as to payment of principal and interest
by the credit of the issuing U.S. Government agency. Securities issued by other
non-governmental entities (such as commercial banks or mortgage bankers) may
offer credit enhancement such as guarantees, insurance, or letters of credit.
Mortgage pass-through certificates are subject to more rapid prepayment than
their stated maturity date would indicate; their rate of prepayment tends to
accelerate during periods of declining interest rates or increased property
transfers and, as a result, the proceeds from such prepayments may be reinvested
in instruments which have lower yields.
Collateralized Mortgage Obligations. The Fund intends to invest in
collateralized mortgage obligations ("CMO's"), which are generally backed by
mortgage pass-through securities or whole mortgage loans. CMO's are usually
structured into classes of varying maturities and principal payment priorities.
The prepayment sensitivity of each class may or may not resemble that of the
CMO's collateral depending on the maturity and structure of that class. CMO's
pay interest and principal (including prepayments) monthly, quarterly or
semi-annually. Most CMO's are AAA rated, reflecting the credit quality of the
underlying collateral; however, some classes carry greater price risk than that
of their underlying collateral. The Advisor will invest in CMO classes only if
their characteristics and interest rate sensitivity fit the investment objective
and policies of the Fund.
Other Mortgage Related Securities. In addition to the mortgage pass-through
securities and the CMO's mentioned above, the Fund may also invest in other
mortgage derivative products if the Advisor views them to be consistent with the
overall policies and objective of the Fund.
The Advisor expects that governmental, government-related and private entities
may create other mortgage-related securities offering mortgage pass-through and
mortgage collateralized instruments in addition to those described herein. As
new types of mortgage-related securities are developed and offered to the
investment community, the Advisor will, consistent with the Fund's investment
objective, policies and quality standards, consider making investments in such
new types of mortgage-related securities.
Asset-Backed Securities. In addition to CMO's, other asset-backed securities
have been offered to investors backed by loans such as automobile loans, credit
card receivables, marine loans, recreational vehicle loans and manufactured
housing loans. Typically asset-backed securities represent undivided fractional
interests in a trust whose assets consist of a pool of loans and security
interests in the collateral securing the loans. Payments of principal and
interest on asset-backed securities are passed through monthly to certificate
holders and are usually guaranteed up to a certain amount and time period by a
letter of credit issued by a financial institution. In some cases asset-backed
securities are divided into senior and subordinated classes so as to enhance the
quality of the senior class. Underlying loans are subject to prepayment, which
may reduce the overall return to certificate holders.
If the letter of credit is exhausted and the full amounts due on underlying
loans are not received because of unanticipated costs, depreciation, damage or
loss of the collateral securing the contracts, or other factors, certificate
holders may experience delays in payment or losses on asset-backed securities.
The Fund may invest in other asset-backed securities that may be developed in
the future. The Fund will invest only in asset-backed securities rated A or
better by Moody's, S&P, Fitch, or D&P, or if not rated, of equivalent quality as
determined by the Advisor.
Floating Rate Securities. The Fund may invest in variable or floating rate
securities that adjust the interest rate paid at periodic intervals based on an
interest rate index. Typically floating rate securities use as their benchmark
an index such as the 1-, 3- or 6-month LIBOR, 3-, 6- or 12-month Treasury bills,
or the Federal Funds rate. Resets of the rates can occur at predetermined
intervals or whenever changes in the benchmark index occur.
Foreign Securities. The Fund may invest in the securities of foreign private
issuers. The same factors would be considered in selecting foreign securities as
with domestic securities. Foreign securities investment presents special
consideration not typically associated with investment in domestic securities.
Foreign taxes may reduce income. Currency exchange rates and regulations may
cause fluctuations in the value of foreign securities. Foreign securities are
subject to different regulatory environments than in the United States and,
compared to the United States, there may be a lack of uniform accounting,
auditing and financial reporting standards, less volume and liquidity and more
volatility, less public information, and less regulation of foreign issuers.
Countries have been known to expropriate or nationalize assets, and foreign
investments may be subject to political, financial, or social instability, or
adverse diplomatic developments. There may be difficulties in obtaining service
of process on foreign issuers and difficulties in enforcing judgments with
respect to claims under the U.S. securities laws against such issuers. Favorable
or unfavorable differences between U.S. and foreign economies could affect
foreign securities values. The U.S. Government has, in the past, discouraged
certain foreign investments by U.S. investors through taxation or other
restrictions and it is possible that such restrictions could be imposed again.
Because of the inherent risk of foreign securities over domestic issues, the
Fund will limit foreign investments to those traded domestically as American
Depository Receipts ("ADRs"). ADRs are receipts issued by a U.S. bank or trust
company evidencing ownership of securities of a foreign issuer. ADRs may be
listed on a national securities exchange or may trade in the over-the-counter
market. The prices of ADRs are denominated in U.S. dollars while the underlying
security may be denominated in a foreign currency. Although the Fund is not
limited in the amount of ADRs it may acquire, it is not presently anticipated
that within the next 12 months the Fund will have in excess of 5% of its assets
in ADRs.
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.
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, and the Fund may invest in certain mortgage-backed securities
as described in the Prospectus;
(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) Participate on a joint or joint and several basis in any trading
account in securities;
(10) Make loans of money or securities, except that the Fund may invest in
repurchase agreements (but repurchase agreements having a maturity of
longer than seven days are limited to 10% of the Fund's net assets);
(11) Purchase real estate or interests in real estate, except that
securities in which the Fund invests may themselves have investment in
real estate or interests in real estate; and the Fund may invest in
securities composed of mortgages against real estate as described in
the Prospectus;
(12) Invest in securities other than securities that are readily marketable
either through trading on a national securities exchange, or securities
for which an active market is made in the over-the-counter trading
markets;
(13) Write, purchase or sell puts, calls or combinations thereof, or
purchase or sell commodities, commodities contracts, futures contracts
or related options, or purchase, sell or write warrants;
(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, in
amounts not exceeding 33% of the Fund's total assets; 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) Purchase foreign securities, except that the Fund may purchase foreign
securities sold as American Depository Receipts without limit.
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 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, 2000, 1999, and 1998, all portfolio
transactions of the Fund were handled as principal transactions. Accordingly,
there were no brokerage commissions paid during those years.
NET ASSET VALUE
The net asset value per share of each Class of the Fund is normally determined
at the time regular trading closes on the New York Stock Exchange (currently
4:00 p.m., New York time, Monday through Friday), except on business holidays
when the New York Stock Exchange is closed. The New York Stock Exchange
recognizes the following holidays: New Year's Day, Martin Luther King, Jr. Day,
President's Day, Good Friday, Memorial Day, Fourth of July, Labor Day,
Thanksgiving Day, and Christmas Day. Any other holiday recognized by the New
York Stock Exchange will be deemed a business holiday on which the net asset
value of each Class 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 Class
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, 2000, 1999, and 1998, the net expenses of
the Fund after fee waivers and expense reimbursements were $81,615 (0.90% of the
average daily net assets of the Institutional Class Shares), $118,804 (0.90% of
the average daily net assets of the Institutional Class Shares), and $111,015
(0.90% of the average daily net assets of the Institutional Class Shares),
respectively. Investor Class 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, plus a sales charge for the Investor Class Shares.
Capital Investment Group, Inc. (the "Distributor") receives this sales charge as
Distributor and may reallow it in the form of dealer discounts and brokerage
commissions. However, the Investor Class Shares are not currently available for
investment.
Redemptions. Under the 1940 Act, the Fund may suspend the right of redemption or
postpone the date of payment for shares during any period when (a) trading on
the New York Stock Exchange is restricted by applicable rules and regulations of
the SEC; (b) the Exchange is closed for other than customary weekend and holiday
closings; (c) the SEC has by order permitted such suspension; or (d) an
emergency exists as determined by the SEC. The Fund may also suspend or postpone
the recordation of the transfer of shares upon the occurrence of any of the
foregoing conditions.
In addition to the situations described in the Prospectus under "Investing in
the Fund - Redeeming Your Shares," the Fund may redeem shares involuntarily to
reimburse the Fund for any loss sustained by reason of the failure of a
shareholder to make full payment for shares purchased by the shareholder or to
collect any charge relating to a transaction effected for the benefit of a
shareholder which is applicable to Fund shares as provided in the Prospectus
from time to time.
DESCRIPTION OF THE TRUST
The Trust is an unincorporated business trust organized under Massachusetts law
on October 25, 1990. The Trust's Amended and Restated 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
seven active series, as follows: the Investek Fixed Income Trust managed by
EARNEST Partners Limited, LLC of Jackson, Mississippi; the Capital Value Fund
managed by Capital Investment Counsel, Inc. of Raleigh, North Carolina; The
Brown Capital Management Equity Fund, The Brown Capital Management Balanced
Fund, The Brown Capital Management Small Company Fund, and The Brown Capital
Management International Equity Fund managed by Brown Capital Management, Inc.
of Baltimore, Maryland; and the WST Growth Fund managed by Wilbanks, Smith &
Thomas Asset Management, Inc. of Norfolk, Virginia. 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 that contains the general characteristics of, and
conditions under which the Trust may offer multiple classes of shares of each of
its series. Rule 18f-2 under the 1940 Act provides that any matter required to
be submitted to the holders of the outstanding voting securities of an
investment company such as the Trust shall not be deemed to have been
effectively acted upon unless approved by the holders of a majority of the
outstanding shares of each series or class affected by the matter. A 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 Prospectus 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 Prospectus 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
Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of the Fund or its shareholders, and the discussion here and in the
Prospectus is not intended as a substitute for careful tax planning and is based
on tax laws and regulations that are in effect on the date hereof; such laws and
regulations may be changed by legislative, judicial, or administrative action.
Investors are advised to consult their tax advisors with specific reference to
their own tax situations.
Each series of the Trust, including the Fund, will be treated as a separate
corporate entity under the Code and intends to qualify or remain qualified as a
regulated investment company. In order to so qualify, each series must elect to
be a regulated investment company or have made such an election for a previous
year and must satisfy, in addition to the distribution requirement described in
the Prospectus, certain requirements with respect to the source of its income
for a taxable year. At least 90% of the gross income of each series must be
derived from dividends, interest, payments with respect to securities loans,
gains from the sale or other disposition of stocks, securities or foreign
currencies, and other income derived with respect to the series' business of
investing in such stock, securities or currencies. Any income derived by a
series from a partnership or trust is treated as derived with respect to the
series' business of investing in stock, securities or currencies only to the
extent that such income is attributable to items of income that would have been
qualifying income if realized by the series in the same manner as by the
partnership or trust.
An investment company may not qualify as a regulated investment company for any
taxable year unless it satisfies certain requirements with respect to the
diversification of its investments at the close of each quarter of the taxable
year. In general, at least 50% of the value of its total assets must be
represented by cash, cash items, government securities, securities of other
regulated investment companies and other securities which, with respect to any
one issuer, do not represent more than 5% of the total assets of the investment
company nor more than 10% of the outstanding voting securities of such issuer.
In addition, not more than 25% of the value of the investment company's total
assets may be invested in the securities (other than government securities or
the securities of other regulated investment companies) of any one issuer. The
Fund intends to satisfy all requirements on an ongoing basis for continued
qualification as a regulated investment company.
Each series of the Trust, including the Fund, will designate any distribution of
long-term capital gains as a capital gain dividend in a written notice mailed to
shareholders within 60 days after the close of the series' taxable year.
Shareholders should note that, upon the sale or exchange of series shares, if
the shareholder has not held such shares for at least six months, any loss on
the sale or exchange of those shares will be treated as long-term capital loss
to the extent of the capital gain dividends received with respect to the shares.
A 4% nondeductible excise tax is imposed on regulated investment companies that
fail to currently distribute an amount equal to specified percentages of their
ordinary taxable income and capital gain net income (excess of capital gains
over capital losses). Each series of the Trust, including the Fund, intends to
make sufficient distributions or deemed distributions of its ordinary taxable
income and any capital gain net income prior to the end of each calendar year to
avoid liability for this excise tax.
If for any taxable year a series does not qualify for the special federal income
tax treatment afforded regulated investment companies, all of its taxable income
will be subject to federal income tax at regular corporate rates (without any
deduction for distributions to its shareholders). In such event, dividend
distributions (whether or not derived from interest on tax-exempt securities)
would be taxable as ordinary income to shareholders to the extent of the series'
current and accumulated earnings and profits, and would be eligible for the
dividends received deduction for corporations.
Each series of the Trust, including the Fund, will be required in certain cases
to withhold and remit to the U.S. Treasury 31% of taxable dividends or 31% of
gross proceeds realized upon sale paid to shareholders who have failed to
provide a correct tax identification number in the manner required, or who are
subject to withholding by the Internal Revenue Service for failure properly to
include on their return payments of taxable interest or dividends, or who have
failed to certify to the Fund that they are not subject to backup withholding
when required to do so or that they are "exempt recipients."
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, 66 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, 41 Trustee Assistant General Counsel
101 Bristol Court Hardees Food Systems, Inc., Rocky Mount, North
Rocky Mount, North Carolina 27802 Carolina
- ----------------------------------------------- -------------------------------- ---------------------------------------------
J. Buckley Strandberg, 39 Trustee Vice President, Standard Insurance and
Post Office Box 1375 Realty, Rocky Mount, North Carolina
Rocky Mount, North Carolina 27802
- ----------------------------------------------- -------------------------------- ---------------------------------------------
Eddie C. Brown, 59 Trustee* President, Brown Capital Management, Inc.,
1201 N. Calvert Street Baltimore, Maryland
Baltimore, Maryland 21202
- ----------------------------------------------- -------------------------------- ---------------------------------------------
Richard K. Bryant, 40 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, 56 President, Investek Fixed Partner and Manager, EARNERST Partners Limited, LLC
317 East Capitol Income Trust previously, President, Investek Capital Management,
Jackson, Mississippi 39201 Inc. (former advisor to the Fund),
Jackson, Mississippi
- ----------------------------------------------- -------------------------------- ---------------------------------------------
Wayne F. Wilbanks, 39 President, The WST Growth Fund President, Wilbanks, Smith & Thomas
One Commercial Place, Suite 1150 Asset Management, Inc., Norfolk, Virginia
Norfolk, Virginia 25510
- ----------------------------------------------- -------------------------------- ---------------------------------------------
Eddie C. Brown, 59 President, The Brown Capital President, Brown Capital Management, Inc.,
1201 N. Calvert Street Management Funds Baltimore, Maryland
Baltimore, Maryland 21202
- ----------------------------------------------- -------------------------------- ---------------------------------------------
Richard K. Bryant, 40 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., 58 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, 39 Vice President, Investek Fixed Partner and Portfolio Manager, EARNERST Partners
317 East Capitol Income Trust Limited, LLC; previously, Vice President, Investek
Jackson, Mississippi 39201 Capital Management, Inc. (former advisor to the
Fund),Jackson, Mississippi, since 1996; Portfolio
Manager, Southern Farm Bureau Life Insurance
Company, Jackson, Mississippi
- ----------------------------------------------- -------------------------------- ---------------------------------------------
R. Mark Fields, 47 Vice President, Investek Fixed Partner and Director of Marketing, EARNERST
317 East Capitol Income Trust Partners Limited, LLC; previously, Vice President,
Jackson, Mississippi 39201 Investek Capital Management, Inc. (former advisor
to the Fund), Jackson, Mississippi
- ----------------------------------------------- -------------------------------- ---------------------------------------------
John M. Friedman, 56 Vice President, Investek Fixed Partner and Portfolio Manager, EARNERST Partners
317 East Capitol Income Trust Limited, LLC; previously, Vice President, Investek
Jackson, Mississippi 39201 Capital Management, Inc. (former advisor to the
Fund),Jackson, Mississippi
- ----------------------------------------------- -------------------------------- ---------------------------------------------
Keith A. Lee, 39 Vice President, The Brown Vice President, Brown Capital Management,
1201 N. Calvert Street Capital Management Funds Inc., Baltimore, Maryland
Baltimore, Maryland 21202
- ----------------------------------------------- -------------------------------- ---------------------------------------------
C. Frank Watson, III, 30 Secretary President, The Nottingham Company
105 North Washington Street Rocky Mount, North Carolina
Rocky Mount, North Carolina 27802
- ----------------------------------------------- -------------------------------- ---------------------------------------------
Julian G. Winters, 31 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.
Compensation Table*
<TABLE>
<S> <C> <C> <C> <C>
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, Trustee $1,250 None None $10,000
Eddie C. Brown, Trustee None None None None
Richard K. Bryant, Trustee None None None None
Thomas W. Steed, Trustee $1,250 None None $10,000
J. Buckley Strandberg, Trustee $1,250 None None $10,000
* Figures are as of the Fund's fiscal year ended March 31, 2000.
</TABLE>
Principal Holders of Voting Securities. As of April 4, 2000, the Trustees and
Officers of the Trust as a group owned beneficially (i.e., had voting and/or
investment power) 12.043% of the then outstanding shares of the Fund. On the
same date the following shareholders owned of record more than 5% of the
outstanding shares of beneficial interest 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 April 4, 2000.
Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership of Fund
- ---------------- -------------------- -------
Michael & Laurie McRee 100,393.949 Shares 12.043%
Post Office Box 1006
Jackson, MS 39215
Trustmark National Bank, Trustee 96,950.716 Shares 11.630%
for Puckett Machinery
P.O. Box 291
Jackson, MS 39205-0291
1st Presbyterian Church 85,519.988 Shares 10.258%
Lolla Boyd Parish Religious
and Educational Memorial Fund
P.O. Box 485
Greenwood, MS 38935-0485
Nancy S. Speed 58,230.126 Shares 6.985%
1220 Luse Road
Benton, MS 39039
SEI Company 57,285.250 Shares 6.872%
c/o Lincoln Bank
One Freedom Valley Dr.
Oaks, PA 19456
Investment Advisor. Investek Capital Management, Inc. ("Former Advisor") served
as the investment adviser to the Fund pursuant to an investment advisory
agreement with the Trust from commencement of operations (November 15, 1991) to
December 31, 1999. On December 31, 1999, EARNEST Partners Limited, LLC became
the investment advisor pursuant to an Interim Investment Advisory Agreement
approved by the Board of Trustees of the Trust at a meeting held on December 20,
1999. On May 25, 2000, shareholders approved a new Investment Advisory Agreement
("Advisory Agreement") for the Fund that is substantially the same as the
previous investment advisory agreement between the Trust and the Former Advisor.
Detailed information about the agreements and the Advisor and its duties and
compensation as Advisor is contained in the Prospectus.
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
0.45% of the average daily net asset value of the Fund. For the fiscal year
ended March 31, 2000, the Former Advisor and the Advisor voluntarily waived all
of their fees in the amount of $40,766. For the fiscal year ended March 31,
1999, the Fund paid the Former Advisor $20,377 of its advisory fee, while the
Former Advisor voluntarily waived the remaining portion of its fee in the amount
of $39,038. For the fiscal year ended March 31, 1998, the Fund paid the Former
Advisor $30,477 of its advisory fee, while the Former Advisor voluntarily waived
the remaining portion of its fee in the amount of $25,063.
Administrator. The Trust has entered into a Fund Accounting and Compliance
Administration Agreement with The Nottingham Company (the "Administrator"), 105
North Washington Street, Post Office Box 69, Rocky Mount, North Carolina
27802-0069, pursuant to which the Administrator receives a general
administration fee at the annual rate of 0.125% of the average daily net assets
of the Fund. 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 of Shares of the
Fund. The Administrator charges a minimum fee of $4,000 per month for all of its
fees taken in the aggregate, analyzed monthly. 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, 2000, 1999, and
1998, the Administrator received general administration fees of $11,324,
$18,159, and $21,082, respectively. For the fiscal years ended March 31, 2000,
1999, and 1998, the Administrator received fund accounting fees of $24,000,
$22,500, and $21,000, respectively.
The Administrator performs the following services for the Fund: (1) coordinates
with the Custodian and monitor the services it provides to the Fund; (2)
coordinates with and monitor 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 instruct 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 also provides 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 ("Transfer Agent"), a
North Carolina limited liability company, 107 North Washington Street, P.O. Box
4365, Rocky Mount, North Carolina 27803-0365, to serve as transfer, dividend
paying, and shareholder servicing agent for the Fund. 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 $4,551 for its services
from the Fund. For the fiscal year ended March 31, 2000, the Transfer Agent
received $9,000 for its services from the Fund.
Distributor. Capital Investment Group, Inc. (the "Distributor"), Post Office Box
32249, Raleigh, North Carolina 27622, acts as an underwriter and distributor of
the Fund's shares for the purpose of facilitating the registration of shares of
the Fund under state securities laws and to assist in sales of Fund shares
pursuant to a Distribution Agreement (the "Distribution Agreement") approved by
the Board of Trustees of the Trust. The Distributor is an affiliated person of
the Trust and another investment adviser to one of the Trust's other series.
In this regard, the Distributor has agreed at its own expense to qualify as a
broker-dealer under all applicable federal or state laws in those states which
the Fund shall from time to time identify to the Distributor as states in which
it wishes to offer its shares for sale, in order that state registrations may be
maintained for the Fund.
The Distributor is a broker-dealer registered with the SEC and is 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.
Custodian. Trustmark National Bank (the "Custodian"), 248 E. Capitol Street,
Post Office Box 291, Jackson, Mississippi 39205-0291, 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, Princeton Forrestal Village,
116-300 Village Boulevard, Princeton, New Jersey 08540, serves as independent
auditors for the Fund, 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.
Legal Counsel. Dechert Price & Rhoads serves as legal counsel to The Nottingham
Investment Trust II and the Fund.
Code of Ethics. The Trust, the Advisor, and the Distributor each have adopted a
code of ethics, as required by applicable law, which is designed to prevent
affiliated persons of the Trust, the Advisor, and the Distributor from engaging
in deceptive, manipulative, or fraudulent activities in connection with
securities held or to be acquired by the Fund (which may also be held by persons
subject to a code). There can be no assurance that the codes will be effective
in preventing such activities.
SPECIAL SHAREHOLDER SERVICES
The Fund offers the following shareholder services:
Regular Account. The regular account allows for voluntary investments to be made
at any time. Available to individuals, custodians, corporations, trusts,
estates, corporate retirement plans and others, investors are free to make
additions and withdrawals to or from their account as often as they wish. When
an investor makes an initial investment in the Fund, a shareholder account is
opened in accordance with the investor's registration instructions. Each time
there is a transaction in a shareholder account, such as an additional
investment or the reinvestment of a dividend or distribution, the shareholder
will receive a confirmation statement showing the current transaction and all
prior transactions in the shareholder account during the calendar year-to-date,
along with a summary of the status of the account as of the transaction date. As
stated in the Prospectus, share certificates are not issued.
Automatic Investment Plan. The automatic investment plan enables shareholders to
make regular monthly or quarterly investment in shares through automatic charges
to their checking account. With shareholder authorization and bank approval, the
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 $50,000
or more may establish a Systematic Withdrawal Plan. A shareholder may receive
monthly or quarterly payments, in amounts of not less than $100 per payment, by
authorizing the Fund to redeem the necessary number of shares periodically (each
month, or quarterly in the months of March, June, September and December) in
order to make the payments requested. The Fund has the capacity of
electronically depositing the proceeds of the systematic withdrawal directly to
the shareholder's personal bank account ($5,000 minimum per bank wire).
Instructions for establishing this service are included in the Fund Shares
Application, enclosed in the Prospectus, or available by calling the Fund. If
the shareholder prefers to receive his systematic withdrawal proceeds in cash,
or if such proceeds are less than the $5,000 minimum for a bank wire, checks
will be made payable to the designated recipient and mailed within 7 days of the
valuation date. If the designated recipient is other than the registered
shareholder, the signature of each shareholder must be guaranteed on the
application (see "Signature Guarantees" in the Prospectus). A corporation (or
partnership) must also submit a "Corporate Resolution" (or "Certification of
Partnership") indicating the names, titles and required number of signatures
authorized to act on its behalf. The application must be signed by a duly
authorized officer(s) and the corporate seal affixed. No redemption fees are
charged to shareholders under this plan. Costs in conjunction with the
administration of the plan are borne by the Fund. Shareholders should be aware
that such systematic withdrawals may deplete or use up entirely their initial
investment and may result in realized long-term or short-term capital gains or
losses. The Systematic Withdrawal Plan may be terminated at any time by the Fund
upon 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:
Investek Fixed Income Trust
c/o NC Shareholder Services
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 that the Advisor may deem appropriate. If
accepted, the securities will be valued using the same criteria and methods as
described in "How Shares are Valued" in the Prospectus.
Redemptions in Kind. The Fund does not intend, under normal circumstances, to
redeem its securities by payment in kind. It is possible, however, that
conditions may arise in the future which would, in the opinion of the Trustees,
make it undesirable for the Fund to pay for all redemptions in cash. In such
case, the Board of Trustees may authorize payment to be made in readily
marketable portfolio securities of the Fund. Securities delivered in payment of
redemptions would be valued at the same value assigned to them in computing the
net asset value per share. Shareholders receiving them would incur brokerage
costs when these securities are sold. An irrevocable election has been filed
under Rule 18f-1 of the 1940 Act, wherein the Fund committed itself to pay
redemptions in cash, rather than in kind, to any shareholder of record of the
Fund who redeems during any ninety-day period, the lesser of (a) $250,000 or (b)
one percent (1%) of the Fund's net asset value at the beginning of such period.
Transfer of Registration. To transfer shares to another owner, send a written
request to the Fund at the address shown herein. Your request should include the
following: (1) the Fund name and existing account registration; (2) signature(s)
of the registered owner(s) exactly as the signature(s) appear(s) on the account
registration; (3) the new account registration, address, social security or
taxpayer identification number and how dividends and capital gains are to be
distributed; (4) signature guarantees (See the Prospectus under the heading
"Signature Guarantees"); and (5) any additional documents which are required for
transfer by corporations, administrators, executors, trustees, guardians, etc.
If you have any questions about transferring shares, call or write the Fund.
ADDITIONAL INFORMATION ON PERFORMANCE
From time to time, the total return and yield of the 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 Institutional Class Shares of
the Fund for the fiscal year ended March 31, 2000, five years ended March 31,
2000, and since inception (November 15, 1991) to March 31, 2000 are 1.47%,
6.62%, and 6.28%, respectively. The cumulative total return quotation for the
Institutional Class Shares since inception through March 31, 2000 is 66.60%.
These performance quotations should not be considered as representative of the
Fund's performance for any specified period in the future. The Investor Class
Shares of the Fund were not offered during such periods.
The yield of the Fund is computed by dividing the net investment income per
share earned during the period stated in the advertisement by the maximum
offering price per share on the last day of the period. For the purpose of
determining net investment income, the calculation includes, among expenses of
the Fund, all recurring fees that are charged to all shareholder accounts and
any nonrecurring charges for the period stated. In particular, yield is
determined according to the following formula:
Yield =2[(A - B + 1)^6-1]
-----
CD
Where: A equals dividends and interest earned during the period; B equals
expenses accrued for the period (net of reimbursements); C equals average daily
number of shares outstanding during the period that were entitled to receive
dividends; D equals the maximum offering price per share on the last day of the
period. The thirty-day yield for the period ended March 31, 2000 for the
Institutional Class Shares of the Fund was 6.2851%. The Investor Class Shares of
the Fund were not offered during such period.
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 Lehman Aggregate Bond Index. Comparative performance may also be expressed
by reference to a ranking prepared by a mutual fund monitoring service or by one
or more newspapers, newsletters or financial periodicals. The Fund may also
occasionally cite statistics to reflect its volatility and risk.
The Fund's performance fluctuates on a daily basis largely because net earnings
and net asset value per share fluctuate daily. Both net earnings and net asset
value per share are factors in the computation of total return as described
above. As indicated, from time to time, the Fund may advertise its performance
compared to similar funds or portfolios using certain indices, reporting
services, and financial publications. These may include the following:
o Lipper Analytical Services, Inc. ranks funds in various fund categories
by making comparative calculations using total return. Total return
assumes the reinvestment of all capital gains distributions and income
dividends and takes into account any change in net asset value over a
specific period of time.
o Morningstar, Inc., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for
two weeks.
Investors may use such indices in addition to the Fund's Prospectus to obtain a
more complete view of the Fund's performance before investing. Of course, when
comparing the Fund's performance to any index, factors such as composition of
the index and prevailing market conditions should be considered in assessing the
significance of such comparisons. When comparing funds using reporting services,
or total return, investors should take into consideration any relevant
differences in funds such as permitted portfolio compositions and methods used
to value portfolio securities and compute offering price. Advertisements and
other sales literature for the Fund may quote total returns that are calculated
on non-standardized base periods. The total returns represent the historic
change in the value of an investment in the Fund based on monthly reinvestment
of dividends over a specified period of time.
From time to time the Fund may include in advertisements and other
communications information, charts, and illustrations relating to inflation and
the effects of inflation on the dollar, including the purchasing power of the
dollar at various rates of inflation. The Fund may also disclose from time to
time information about its portfolio allocation and holdings at a particular
date (including ratings of securities assigned by independent rating services
such as S&P and Moody's). The Fund may also depict the historical performance of
the securities in which the Fund may invest over periods reflecting a variety of
market or economic conditions either alone or in comparison with alternative
investments, performance indices of those investments, or economic indicators.
The Fund may also include in advertisements and in materials furnished to
present and prospective shareholders statements or illustrations relating to the
appropriateness of types of securities and/or mutual funds that may be employed
to meet specific financial goals, such as saving for retirement, children's
education, or other future needs.
Comparative information about the yield of the Fund and about average rates of
return on certificates of deposits, bank money market deposit accounts, money
market mutual funds, and other similar types of investments may be included in
Fund communications. A bank certificate of deposit, unlike the Fund's shares,
pays a fixed rate of interest and entitles the depositor to receive the face
amount of the certificate at maturity. A bank money market deposit account is a
form of savings account that pays a variable rate of interest. Unlike the Fund's
shares, bank certificates of deposit and bank money market deposit accounts are
insured by the Federal Deposit Insurance Corporation. A money market mutual fund
is designed to maintain a constant value of $1.00 per share and, thus, a money
market fund's shares are subject to less price fluctuation than the Fund's
shares.
FINANCIAL STATEMENTS
The audited financial statements for the fiscal year ended March 31, 2000,
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 intends to limit its investments to investment grade fixed income
securities ("Investment-Grade Debt Securities"). At least 90% of the Fund's
assets will be invested in Investment-Grade Debt Securities rated A or better as
described below (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 that is rated A possesses many favorable investment attributes
and is to be considered as an upper medium grade obligation. Factors
giving security to principal and interest are considered adequate but
elements may be present which suggest a susceptibility to impairment
sometime in the future.
Baa - Debt that 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 that 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 that 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 that are
rated Ca represent obligations that are speculative in a high degree. Such
issues are often in default or have other marked shortcomings. Bonds that 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>
________________________________________________________________________________
INVESTEK FIXED INCOME TRUST
________________________________________________________________________________
a series of The Nottingham Investment Trust II
ANNUAL REPORT 2000
FOR THE YEAR ENDED MARCH 31
INVESTMENT ADVISOR
EARNEST Partners Limited, LLC
317 East Capitol Street
Post Office Box 2840
Jackson, Mississippi 39207
601-949-3105
INVESTEK FIXED INCOME TRUST
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>
[Letterhead]
Dear Shareholders of Investek Fixed Income Trust:
Enclosed for your review is the annual report for the fiscal year ended
31 March 2000, our first report for the new millennium. The last 12 months were
mixed for bonds, with interest rates generally rising. The 10-year stood at
5.23% last March, rose to a high of 6.78% by January 20th of this year, but
declined to 6.02% by March 31st, for a total rise of 79 basis points.
Shorter-term rates rose more, with the three-month Treasury bill rising 142
basis points and the 2-year Treasury note rising 151 basis points. All of this
is generally due to increased inflation expectations by market participants
stemming from economic reports that show continued strength in the domestic
economy. Spreads were tightening in 1999, but have widened out considerably this
last quarter, the first of 2000.
On a total return basis, the fund was up 1.47% for the last 12 months,
while the Lehman Aggregate bond index was up 1.87%. Versus the fund's Lipper
peers, the fund finished the year 87th out of 284 funds. For the trailing three
years, the fund ranked 91st out of 203 funds; and for the trailing five years,
the fund ranked 40th out of 151 funds, right at the top quartile.
The fund's holdings have a weighted average rating of AAA and our
effective duration is 95% of the benchmark's duration. US Government and Agency
issues comprise 68% of the fund, while AAA-rated issues another 15%.
We have some news to report. Last December, a firm in Atlanta named
EARNEST Partners approached our firm about combining forces. Because our firms
manage distinctly different products, they manage equities and we, as you know,
fixed-income, we saw this as a good way to grow our firm and accepted the offer.
Please be reassured that other than our name change, we are still the same firm
and are committed to the best fixed-income management possible. We have not
changed our focus. If anything, this combination strengthens our resources and
that is good for our clients.
As always, thank you for your continued confidence in the fund. Please
do not hesitate to call us at anytime if we can be of service to you.
Very truly yours,
/s/ Douglas Folk, CFA
Douglas Folk, CFA
Partner
EARNEST Partners Limited, LLC
<PAGE>
INVESTEK FIXED INCOME TRUST
Performance Update - $50,000 Investment
For the period from November 15, 1991
(Commencement of Operations) to March 31, 2000
[LINE GRAPH HERE]:
- --------------------------------------------------------------------------------
Investek Fixed Lehman Brothers
Income Trust Aggregate Bond Index
- --------------------------------------------------------------------------------
11/15/91 $50,000 $50,000
12/31/91 50,355 51,720
3/31/92 50,612 51,059
6/30/92 55,345 53,119
9/30/92 53,918 55,401
12/31/92 54,275 55,548
3/31/93 56,875 57,844
6/30/93 58,672 59,378
9/30/93 60,027 60,928
12/31/93 60,004 60,964
3/31/94 57,698 59,216
6/30/94 57,065 58,606
9/30/94 57,281 58,963
12/31/94 57,736 59,186
3/31/95 60,426 62,171
6/30/95 64,300 65,959
9/30/95 64,918 67,254
12/31/95 67,446 70,120
3/31/96 66,892 68,877
6/30/96 67,836 69,268
9/30/96 68,958 70,549
12/31/96 70,199 72,665
3/31/97 70,487 72,259
6/30/97 73,040 74,913
9/30/97 74,765 77,402
12/31/97 76,634 79,681
3/31/98 77,474 80,920
6/30/98 79,135 82,811
9/30/98 83,668 86,312
12/31/98 82,489 86,603
3/31/99 82,099 86,173
6/30/99 81,616 85,416
9/30/99 81,537 85,996
12/31/99 81,553 85,891
3/31/00 83,302 87,786
This graph depicts the performance of the Investek Fixed Income Trust versus the
Lehman Brothers Aggregate Bond Index. It is important to note that the Investek
Fixed Income Trust is a professionally managed mutual fund while the index is
not available for investment and is unmanaged. The comparison is shown for
illustrative purposes only.
Average Annual Total Returns
- -------------------------------------------------------
One Year Five Years Since Inception
- -------------------------------------------------------
1.47% 6.62% 6.28%
- -------------------------------------------------------
The graph assumes an initial $50,000 investment at November 15, 1991. All
dividends and distributions are reinvested.
At March 31, 2000, the Investek Fixed Income Trust would have grown to $83,302 -
total investment return of 66.60% since November 15, 1991.
At March 31, 2000, a similar investment in the Lehman Brothers Aggregate Bond
Index would have grown to $87,786 - total investment return of 75.57%. The
Lipper Intermediate Investment Grade Debt Fund Index that was used in previous
years' graphs for illustrative purposes is not used in this year's graph because
of modifications made to Lipper's fund classification structure.
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> <C> <C>
INVESTEK FIXED INCOME TRUST
PORTFOLIO OF INVESTMENTS
March 31, 2000
- ------------------------------------------------------------------------------------------------------------------------------------
Interest Maturity Value
Principal Rate Date (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
U. S. GOVERNMENT AND AGENCY OBLIGATIONS - 54.88%
United States Treasury Note ....................................... $400,000 4.250% 11/15/03 $ 373,188
A.I.D. - Equador .................................................. 75,610 7.050% 05/01/15 75,797
A.I.D. - Ivory Coast .............................................. 234,785 8.100% 12/01/06 235,817
A.I.D. - Peru ..................................................... 146,401 8.350% 01/01/07 147,503
Attransco Title XI ................................................ 449,521 6.120% 04/01/08 430,279
B.A.L.T. Conway Partnership Title XI .............................. 114,689 10.750% 11/15/03 115,121
Chilbar Ship Co. Title XI ......................................... 28,965 6.980% 07/15/01 28,816
Federal Agricultural Mortgage Corporation
Series AM-1003 ................................................ 641,190 6.820% 04/25/13 618,595
Federal National Mortgage Association
Pool #73401 ................................................... 479,359 6.440% 03/01/06 463,736
Pool #380484 .................................................. 982,893 6.390% 07/01/16 921,024
Lawrence Steamship Company Title XI ............................... 232,598 7.270% 09/01/03 231,167
Small Business Administration 98-B ................................ 913,333 6.150% 02/01/18 856,247
----------
Total U. S. Government and Agency Obligations (Cost $4,698,814) ................................ 4,497,290
----------
U. S. GOVERNMENT INSURED OBLIGATIONS - 12.09%
Federal Housing Authority Project Loan
Downtowner Apartments ......................................... 148,681 8.375% 11/01/11 151,559
GMAC 32 ....................................................... 83,503 7.430% 12/01/21 82,622
Reilly #046 ................................................... 370,598 6.970% 06/01/14 358,602
USGI #87 ...................................................... 405,571 7.430% 08/01/23 397,460
----------
Total U. S. Government Insured Obligations (Cost $1,015,732) ................................... 990,243
----------
CORPORATE OBLIGATIONS - 22.57%
California Infrastructure SDG&E Series 1997-1 ..................... 500,000 6.370% 12/26/09 456,479
Continental Airlines Inc. ......................................... 452,637 7.750% 07/02/14 456,517
Burlington North Santa Fe ......................................... 676,000 2.625% 01/01/10 454,610
Union Pacific Corporation ......................................... 477,163 7.280% 04/30/15 481,677
----------
Total Corporate Obligations (Cost $1,973,864) .................................................. 1,849,283
----------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
INVESTEK FIXED INCOME TRUST
PORTFOLIO OF INVESTMENTS
March 31, 2000
- ------------------------------------------------------------------------------------------------------------------------------------
Interest Maturity Value
Principal Rate Date (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
CONVENTIONAL MORTGAGE BACKED SECURITIES - 5.94%
Prudential Home Mortgage Securities
REMIC Series 1994-2 Class A8 .................................. $500,000 6.750% 02/25/24 $ 486,342
(Cost $489,338) ----------
PRIVATE MORTGAGE BACKED SECURITIES - 0.37%
National Housing Partnership ...................................... 30,090 9.500% 05/01/03 30,078
(Cost $30,090) ----------
INVESTMENT COMPANY - 3.14%
AIM Short Term Prime Fund A ....................................... 257,227 257,227
(Cost $257,227) ----------
Total Value of Investments (Cost $8,465,065 (a)) ............................................... 98.99% $8,110,463
Other Assets in Excess of Liabilities .......................................................... 1.01% 82,785
------ ----------
Net Assets ................................................................................ 100.00% $8,193,248
====== ==========
(a) Aggregate cost for financial reporting and federal income tax purposes is the same. Unrealized appreciation (depreciation)
of investments for financial reporting and federal income tax purposes is as follows:
Unrealized appreciation ............................................................... $ 7,642
Unrealized depreciation ............................................................... (362,244)
---------
Net unrealized depreciation............................................ $(354,602)
=========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
INVESTEK FIXED INCOME TRUST
STATEMENT OF ASSETS AND LIABILITIES
March 31, 2000
ASSETS
Investments, at value (cost $8,465,065) ......................................................... $8,110,463
Income receivable ............................................................................... 96,170
Due from advisor (note 2) ....................................................................... 4,068
----------
Total assets ............................................................................... 8,210,701
----------
LIABILITIES
Accrued expenses ................................................................................ 6,988
Disbursements in excess of cash on demand deposit ............................................... 10,465
----------
Total liabilities .......................................................................... 17,453
----------
NET ASSETS
(applicable to 832,514 shares outstanding; unlimited
shares of no par value beneficial interest authorized) ......................................... $8,193,248
==========
NET ASSET VALUE, REDEMPTION AND OFFERING PRICE PER SHARE
($8,193,248 / 832,514 shares) ................................................................... $9.84
==========
NET ASSETS CONSIST OF
Paid-in capital ................................................................................. $8,870,320
Undistributed net investment income ............................................................. 575
Accumulated net realized loss on investments .................................................... (323,045)
Net unrealized depreciation on investments ...................................................... (354,602)
----------
$8,193,248
==========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
INVESTEK FIXED INCOME TRUST
STATEMENT OF OPERATIONS
Year ended March 31, 2000
INVESTMENT INCOME
Income
Interest ....................................................................................... $606,806
Dividends ...................................................................................... 12,329
--------
Total income ............................................................................. 619,135
--------
Expenses
Investment advisory fees (note 2) .............................................................. 40,766
Fund administration fees (note 2) .............................................................. 11,324
Custody fees ................................................................................... 6,006
Registration and filing administration fees (note 2) ........................................... 2,861
Fund accounting fees (note 2) .................................................................. 24,000
Audit fees ..................................................................................... 11,637
Legal fees ..................................................................................... 5,005
Securities pricing fees ........................................................................ 2,258
Shareholder recordkeeping fees ................................................................. 9,000
Other accounting fees (note 2) ................................................................. 12,769
Shareholder servicing expenses ................................................................. 2,714
Registration and filing expenses ............................................................... 1,269
Printing expenses .............................................................................. 3,390
Trustee fees and meeting expenses .............................................................. 3,911
Other operating expenses ....................................................................... 5,306
--------
Total expenses ........................................................................... 142,216
--------
Less:
Expense reimbursements (note 2) ..................................................... (19,835)
Investment advisory fees waived (note 2) ............................................ (40,766)
--------
Net expenses ............................................................................. 81,615
--------
Net investment income ............................................................... 537,520
--------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized gain from investment transactions ...................................................... 14,373
Decrease in unrealized appreciation on investments .................................................. (438,418)
---------
Net realized and unrealized loss on investments ................................................ (424,045)
--------
Net increase in net assets resulting from operations ..................................... $113,475
========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
INVESTEK FIXED INCOME TRUST
STATEMENTS OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
Year ended Year ended
March 31, March 31,
2000 1999
- ------------------------------------------------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS
Operations
Net investment income ..................................................... $ 537,520 $ 772,074
Net realized gain from investment transactions ............................ 14,373 174,228
Decrease in unrealized appreciation on investments ........................ (438,418) (137,045)
----------- -----------
Net increase in net assets resulting from operations .................. 113,475 809,257
----------- -----------
Distributions to shareholders from
Net investment income ..................................................... (537,002) (775,430)
----------- -----------
Capital share transactions
Decrease in net assets resulting from capital share transactions (a) ...... (2,849,995) (2,466,286)
----------- -----------
Total decrease in net assets ..................................... (3,273,522) (2,432,459)
NET ASSETS
Beginning of year .............................................................. 11,466,770 13,899,229
----------- -----------
End of year (including undistributed net investment income
of $575 in 2000 and $57 in 1999) ................................... $ 8,193,248 $11,466,770
=========== ===========
(a) A summary of capital share activity follows:
---------------------------------------------------------------------------------
Year ended Year ended
March 31, 2000 March 31, 1999
Shares Value Shares Value
---------------------------------------------------------------------------------
Shares sold ....................................... 133,527 $ 1,336,147 158,434 $ 1,670,902
Shares issued for reinvestment
of distributions ............................. 32,346 321,053 50,406 526,027
----------- ----------- ----------- -----------
165,873 1,657,200 208,840 2,196,929
Shares redeemed ................................... (447,049) (4,507,195) (442,853) (4,663,215)
----------- ----------- ----------- -----------
Net decrease ................................. (281,176) $(2,849,995) (234,013) $(2,466,286)
=========== =========== =========== ===========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTEK FIXED INCOME TRUST
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,
2000 1999 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year .................. $10.30 $10.31 $ 9.98 $10.11 $ 9.74
Income from investment operations
Net investment income .................... 0.60 0.62 0.64 0.65 0.66
Net realized and unrealized (loss) gain
on investments ......................... (0.46) (0.01) 0.33 (0.13) 0.37
----------- ----------- ----------- ----------- -----------
Total from investment operations .... 0.14 0.61 0.97 0.52 1.03
----------- ----------- ----------- ----------- -----------
Distributions to shareholders from
Net investment income .................... (0.60) (0.62) (0.64) (0.65) (0.66)
----------- ----------- ----------- ----------- -----------
Net asset value, end of year ........................ $ 9.84 $10.30 $10.31 $ 9.98 $10.11
=========== =========== =========== =========== ===========
Total return ........................................ 1.47% 5.97% 9.91% 5.38% 10.70%
=========== =========== =========== =========== ===========
Ratios/supplemental data
Net assets, end of year ....................... $ 8,193,248 $11,466,770 $13,899,229 $11,227,141 $12,261,121
=========== =========== =========== =========== ===========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees 1.57% 1.22% 1.10% 1.20% 1.08%
After expense reimbursements and waived fees 0.90% 0.90% 0.90% 0.90% 0.87%
Ratio of net investment income to average net assets
Before expense reimbursements and waived fees 5.26% 5.53% 6.01% 6.07% 6.20%
After expense reimbursements and waived fees 5.93% 5.85% 6.21% 6.37% 6.41%
Portfolio turnover rate 15.41% 50.90% 38.46% 32.94% 16.57%
See accompanying notes to financial statements
</TABLE>
<PAGE>
INVESTEK FIXED INCOME TRUST
NOTES TO FINANCIAL STATEMENTS
March 31, 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
The Investek Fixed Income Trust (the "Fund") is a diversified series of
shares of beneficial interest of The Nottingham Investment Trust II
(the "Trust"). The Trust, an open-end investment company, was organized
on October 18, 1990 as a Massachusetts Business Trust and is registered
under the Investment Company Act of 1940, as amended. The investment
objective of the Fund is to preserve capital and maximize total returns
through active management of investment grade fixed income securities.
The Fund began operations on November 15, 1991.
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
Institutional Shares of the Fund on August 1, 1996, and an additional
class of shares, the Investor Shares, was authorized. To date, only
Institutional Shares have been issued by the Fund. The Investor Shares
will be sold with a sales charge and will bear potential distribution
expenses and service fees. The Institutional Shares are sold without a
sales charge and bear no shareholder servicing or distribution fees.
The following is a summary of significant accounting policies followed
by the Fund.
A. Security Valuation - The Fund's investments in securities are
carried at value. Securities listed on an exchange or quoted
on a national market system are valued at the last sales price
as of 4:00 p.m., New York time. Securities for which market
quotations are not readily available are valued in good faith
using a method approved by the Trust's Board of Trustees,
taking into consideration institutional bid and last sale
prices, and securities prices, yields, estimated maturities,
call features, ratings, institutional trading in similar
groups of securities and developments related to specific
securities. Short-term investments are valued at cost which
approximates value.
The financial statements include securities valued at
$4,280,920 (52.25% of net assets) whose values have been
estimated using a method approved by the Trust's Board of
Trustees. Such securities are valued by using a matrix system,
which is based upon the factors described above and
particularly the spread between yields on the securities being
valued and yields on U. S. Treasury securities with similar
remaining years to maturity. Those estimated values may differ
from the values that would have resulted from actual purchase
and sale transactions.
B. Federal Income Taxes - 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.
The Fund has capital loss carryforwards for federal income tax
purposes of $323,045, $305,012 of which expires in the year
2003 and $18,033 of which expires in the year 2004. It is the
intention of the Board of Trustees of the Trust not to
distribute any realized gains until the carryforwards have
been offset or expire.
(Continued)
<PAGE>
INVESTEK FIXED INCOME TRUST
NOTES TO FINANCIAL STATEMENTS
March 31, 2000
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.
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 an accrual basis.
D. Distributions to Shareholders - The Fund generally declares
dividends monthly, on a date selected by the Trust's Trustees.
In addition, distributions may be made annually in December
out of net realized gains through October 31 of that year.
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 amounts 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, the investment 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 an annual
rate of 0.45% of the Fund's average daily net assets. Through December
31, 1999, Investek Capital Management, Inc. served as the investment
advisor. On December 31, 1999, Investek Capital Managements, Inc. was
acquired by EARNEST Partners Ltd, LLC. Beginning January 1, 2000,
EARNEST Partners Ltd, LLC became the investment advisor (the
"Advisor").
The Advisor currently intends to voluntarily waive all or a portion of
its fee and reimburse expenses of the Fund to limit total Fund
operating expenses to 0.90% of the average daily net assets of the
Fund. There can be no assurance that the foregoing voluntary fee
waivers or reimbursements will continue. The Advisor has voluntarily
waived its fee amounting to $40,766 ($0.04 per share) and reimbursed
expenses totaling $19,835 for the year ended March 31, 2000.
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 0.125% of the Fund's average daily net assets. The
Administrator also receives a monthly fee of $2,000 for accounting and
recordkeeping services. 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. The Administrator also charges the Fund for certain expenses
involved with the daily valuation of portfolio securities.
(Continued)
<PAGE>
INVESTEK FIXED INCOME TRUST
NOTES TO FINANCIAL STATEMENTS
March 31, 2000
NC Shareholder Services, LLC (the "Transfer Agent") serves as the
Fund's transfer, dividend paying, and shareholder servicing agent. The
Transfer Agent maintains the records of each shareholder's account,
answers shareholder inquiries concerning accounts, processes purchases
and redemptions of Fund shares, acts as dividend and distribution
disbursing agent, and performs other shareholder servicing functions.
Certain Trustees and officers of the Trust are also officers of the
Advisor, the Distributor or the Administrator.
NOTE 3 - PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments, other than short-term investments,
aggregated $1,366,854 and $4,293,729, respectively, for the year ended
March 31, 2000.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees of Nottingham Investment Trust II and Shareholders of
Investek Fixed Income Trust:
We have audited the accompanying statement of assets and liabilities of Investek
Fixed Income Trust, including the portfolio of investments, as of March 31,
2000, and the related statement of operations for the year then ended, the
statements of changes in net assets for the years ended March 31, 2000 and 1999,
and financial highlights for 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 auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
the securities owned as of March 31, 2000, by correspondence with the custodian.
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
Investek Fixed Income Trust as of March 31, 2000, the results of its operations
for the year ended, and the changes in its net assets and the financial
highlights for the respective stated years, in conformity with accounting
principles generally accepted in the United States of America.
/s/ Deloitte & Touche LLP
Princeton, New Jersey
April 20, 2000
<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 Fund
Class C Shares.^20
(a)(4) Certificate of Establishment and Designation for the Capital Value T
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.^20
(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.^20
(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) Interim Investment Advisory Agreement between the Nottingham Investment
Trust II and EARNEST Partners Limited, LLC, as Advisor to the Investek
Fixed Income Trust.
(d)(5) Form of Investment Advisory Agreement between the Nottingham Investment
Trust II and EARNEST Partners Limited, LLC, as Advisor to the Investek
Fixed Income Trust.
(d)(6) 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)(7) 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)(8) 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)(9) 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)(10) Investment Advisory Agreement between the Nottingham Investment Trust
II and Wilbanks, Smith & Thomas Asset Management, Inc., as Advisor to
the WST Growth Fund.^13
(d)(11) 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 Fund.^16
(d)(12) Investment Advisory Agreement between the Nottingham Investment Trust
II and Morehead Capital Advisor, LLC, as Advisor to The
CarolinasFund.^14
(d)(13) 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.^20
(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
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 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
EARNEST Partners Limited, LLC.
(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 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.^20
(i)(8) Consent of Dechert Price & Rhoads, Counsel, with respect to the
Investek Fixed Income Trust.
(j)(1) Consent of Deloitte & Touche LLP, Independent Public Accountants, with
respect to the Capital Value Fund.^20
(j)(2) Consent of Deloitte & Touche LLP, Independent Public Accountants, with
respect to the Investek Fixed Income Trust.
(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) 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 Fund's Investor
Class Shares.^13
(m)(8) Distribution Plan under Rule 12b-1 for the WST Growth Fund's Class C
Shares.^16
(m)(9) Distribution Plan under Rule 12b-1 for The CarolinasFund.^14
(n)(1) Amended and Restated Plan Pursuant to Rule 18f-3 under the Investment
Company Act of 1940.^14
(n)(2) Amended and Restated Rule 18f-3 Multi-Class Plan.^16
(n)(3) Amended and Restated Rule 18f-3 Multi-Class Plan.
(p)(1) Code of Ethics for the Nottingham Investment Trust II.
(p)(2) Code of Ethics for Capital Investment Group, Inc.^21
(q) 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).
20. Incorporated herein by reference to Registrant's Registration Statement on
Form N-1A filed on September 22, 1999 (File No. 33-37458).
21. To be filed by Amendment.
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 Fund, Blue Ridge Total Return Fund, SCM Strategic Growth Fund,
The CarolinasFund, Wisdom Fund, Internet 100 Fund, and Internet 100
Equal Weighted Fund.
(b)
POSITION(S) AND
NAME AND PRINCIPAL OFFICE(S) WITH CAPITAL POSITION(S) AND OFFICE(S)
BUSINESS ADDRESS INVESTMENT GROUP, INC. WITH REGISTRANT
================ ====================== =========================
Richard K. Bryant President Trustee and officer of
17 Glenwood Avenue Trust; President of Capital
Raleigh, N.C. 27622 Value Fund; no position with
other series of the Trust
E.O. Edgerton, Jr. Vice President Vice President of Capital
17 Glenwood Avenue Value Fund; no position with
Raleigh, N.C. 27622 other series of the Trust
Delia Zimmerman Secretary None
17 Glenwood Avenue
Raleigh, N.C. 27622
Con T. McDonald Assistant Vice-President None
17 Glenwood Avenue
Raleigh, N.C. 27622
W. Harold Eddins, Jr. Assistant Vice-President None
17 Glenwood Avenue
Raleigh, N.C. 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, Post Office 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 17 Glenwood Avenue, Raleigh, North
Carolina 27622. The address of EARNEST Partners Limited, LLC, 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
1201 N. Calvert Street, Baltimore, Maryland 21202. The address of
Wilbanks, Smith and Thomas Asset Management, Inc., Advisor to the WST
Growth 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. 41 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 2nd
day of May, 2000.
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. 41 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 May 2, 2000 Treasurer
_______________________________________________
Julian G. Winters Date
* By: /s/ C. Frank Watson, III Dated: May 2, 2000
________________________________
C. Frank Watson, III
Attorney-in-Fact
*
<PAGE>
INDEX TO EXHIBITS
(FOR POST-EFFECTIVE AMENDMENT NO. 41)
-------------------------------------
EXHIBIT NO.
UNDER PART C
OF FORM N-1A NAME OF EXHIBIT
- ------------ ---------------
(a)(4) Certificate of Establishment and Designation for the Capital
Value T Shares
(d)(4) Interim Investment Advisory Agreement between the Registrant and
EARNEST Partners Limited, LLC as Advisor to the Investek Fixed
Income Trust
(d)(5) Form of Investment Advisory Agreement between the Registrant and
EARNEST Partners Limited, LLC as Advisor to the Investek Fixed
Income Trust
(h)(6) Expense Limitation Agreement between the Registrant and EARNEST
Partners Limited, LLC
(i)(8) Consent of Dechert Price & Rhoads, Counsel, with respect to the
Investek Fixed Income Trust
(j)(2) Consent of Deloitte & Touche LLP, Independent Public Accountants
with respect to the Investek Fixed Income Trust
(m)(2) Amended and Restated Distribution Plan under Rule 12b-1 for the
Capital Value Fund's Investor Class Shares and T Shares
(n)(3) Amended and Restated Rule 18f-3 Multi-Class Plan
(p)(1) Code of Ethics for the Nottingham Investment Trust II
Exhibit (a)(4): Certificate of Establishment and Designation for the
-------------- Capital Value T Shares
THE NOTTINGHAM INVESTMENT TRUST II
Certificate of Designation
Capital Value Fund T 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 September 27,
1999, the Declaration of Trust is amended as follows:
(1) Designation. There is hereby established and designated as of that
date the T Shares to the Capital Value Fund. The beneficial interest in the T
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 T Shares of the Capital Value Fund. The T Shares of the Capital Value Fund
shall have the rights and preferences provided in Section 6.2 of the Declaration
of Trust and the Amended and Restated 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 27th day of September, 1999.
/s/ C. Frank Watson, III
__________________________________
C. Frank Watson, III, Secretary
<PAGE>
ACKNOWLEDGEMENT
NORTH CAROLINA
Nash County, ss.: September 27, 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 Seal] _____________________________
Notary Public
My commission expires: November, 30, 2002
_________________________
Exhibit (d)(4): Interim Investment Advisory Agreement between the Registrant
-------------- and EARNEST Partners Limited, LLC as Advisor to the Investek
Fixed Income Trust
INTERIM INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT, dated December 31, 1999, is between NOTTINGHAM INVESTMENT TRUST
II (the "Trust"), a Massachusetts Business Trust, and EARNEST PARTNERS LIMITED,
LLC (the "Advisor"), a Mississippi limited liability corporation and registered
as an investment adviser under the Investment Advisers Act of 1940, as amended.
WHEREAS, the Trust is registered as an 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 on an interim basis pursuant to
Rule 15a-4(b)(2) under the 1940 Act to furnish investment advisory and
administrative services to the series of the Trust as described in the
schedule(s) attached to this Agreement (each a "Fund"), and the Advisor is
willing to furnish such services; and
WHEREAS, the Trustees of the Trust, including a majority of Trustees who are not
parties to this Agreement or any "interested person" of such party (as that term
is defined in the 1940 Act), have found that the scope and quality of the
services to be provided under this Interim Investment Advisory Agreement are at
least equivalent to the scope and quality of services provided under the Trust's
investment advisory contract with Investek Capital Management, Inc.; and
WHEREAS, the compensation that may be earned under this Agreement is no greater
than the compensation the Advisor would have received under the investment
advisory agreement between the Trust and Investek Capital Management, Inc.; and
WHEREAS, the Trustees have determined that this Interim Investment Advisory
Agreement in all respects complies with the provisions of Rule 15a-4(b)(2) under
the 1940 Act;
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 Advisor to
each Fund for the period and on the terms set forth in this Agreement.
The Advisor accepts such appointment and agrees to furnish the services
set forth herein, for the compensation provided in the attached
schedule(s).
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 Amended and Restated Declaration of Trust, as filed
with the State of Massachusetts (the "Declaration");
(b) The Trust's By-Laws (the "By-Laws");
(c) Resolutions of the Trust's Board of Trustees and the resolution
approved by a majority of the outstanding shares of the Fund
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, relating to
shares of beneficial interest of the Fund (the "Shares") as
filed with the Securities and Exchange Commission ("SEC") and
all amendments thereto;
(e) The Fund's Prospectus (the "Prospectus").
<PAGE>
The Trust will furnish the Advisor from time to time with copies,
properly certified or authenticated, of all amendments of or
supplements to the foregoing at the same time as such documents are
required to be filed with the SEC.
3. Management. Subject to the supervision of the Trust's Board of
Trustees, the Advisor will provide a continuous investment program for
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;
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 Fund.
4. Services Not Exclusive. The advisory services furnished by the Advisor
hereunder are not to be deemed exclusive, and the Advisor shall be free
to furnish similar services to others so long as its services under
this Agreement are not impaired thereby; provided, however, that
without the written consent of the Trustees, the Advisor will not serve
as investment advisor to any other investment company having a similar
investment objective to that of 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 1940
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. The Advisor will pay, out of the
Advisor's resources, the entire cost of the promotion and sale of Trust
shares, including the preparation of the prospectus and other
documents. The Advisor will provide other information and services,
other than services of outside counsel or independent accountants or
investment advisory services to be provided by any Adviser under an
Advisory Agreement, required in connection with the preparation of all
registration statements and Prospectuses, Prospectus supplements, SAIs,
all annual, semiannual, and periodic reports to shareholders of the
Trust, regulatory authorities, or others, and all notices and proxy
solicitation materials, furnished to shareholders of the Trust or
regulatory authorities, and all tax returns.
2
<PAGE>
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
transactions 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 law defines that term;
(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) Distribution expenses, but only in accordance with the Plan of
Distribution adopted in accordance with Rule 12b-1 under the
1940 Act.
7. Compensation. The Advisor may earn an investment advisory fee, based
upon the daily average net assets of each Fund, computed at the end of
each month based upon the schedule(s) attached hereto. Any compensation
earned by the Advisor pursuant to this Section 7 will be held in an
interest-bearing escrow account with the Trust's custodian. With
respect to each Fund, any amounts held in the escrow account (including
interest earned) will be paid to the Advisor, provided a majority of
the outstanding voting securities of such Fund approves a new
investment advisory agreement with the Advisor prior to the termination
of this Agreement. With respect to any Fund of which a majority of
outstanding voting securities do not approve a new investment advisory
agreement with the Advisor prior to the termination of this Agreement,
the Advisor will be paid, out of the escrow account, the lesser of: (i)
any costs incurred in performing this Interim Agreement (plus interest
earned on that amount while in escrow); or (ii) the total amount in the
escrow account (plus interest earned).
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
willful misfeasance, bad faith or gross negligence on the part of the
Advisor in the performance of its duties or from reckless disregard by
it of its obligations and duties under this Agreement.
8.(b) Indemnification of Advisor. Subject to the limitations set forth in
this Subsection 8(b), the 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
3
<PAGE>
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.
As to any matter disposed of by a compromise payment by the Advisor
referred to in this Subsection 8(b), pursuant to a consent decree or
otherwise, no such indemnification either for said payment or for any
other expenses shall be provided unless such indemnification shall be
approved (i) by a majority of the Independent Trustees or (ii) by an
independent legal counsel in a written opinion. Approval by the
Independent Trustees pursuant to clause (i) shall not prevent the
recovery from the Advisor of any amount paid to the Advisor in
accordance with either of such clauses as indemnification of the
Advisor is subsequently adjudicated by a court of competent
jurisdiction not to have acted in good faith in the reasonable belief
that the Advisor's action was in or not opposed to the best interest of
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) Indemnification of Fund. The Adviser agrees to indemnify and hold
harmless the Trust and Trust's Trustees and officers from 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 Trust in connection with the defense or disposition of any body,
related to or resulting from (i) any breach or violation of this
Agreement by the Adviser; (ii) any breach of fiduciary duty with
respect to the receipt of compensation for services; and (iii) any
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.
8.(d) Failure to Perform; Force Majeure. No failure or omission by either
party hereto in the performance of any obligation of this Agreement
(other than payment obligations) shall be deemed a breach of this
Agreement or create any liability if the same shall arise from any
cause or causes beyond the control of the party, including but not
limited to, the following: acts of God, acts or omissions of any
governmental agency; any rules, regulations, or orders issued by any
governmental authority or by any officer, department, agency or
instrumentality thereof; fire; storm; flood; earthquake, war;
rebellion; insurrection; riot; and invasion and provided that such
failure or omission resulting from one of the above causes is cured as
soon as is practicable after the occurrence of one or more of the
above-mentioned causes.
4
<PAGE>
8.(e) 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 written above and, unless sooner terminated as provided
herein, shall continue in effect for no more than 150 days. This
Agreement shall automatically terminate during that 150 day period upon
the approval of another investment advisory agreement by the
shareholders of each Fund described in the schedule(s) attached hereto
and a majority of the Trustees, including a majority of the Trustees
who are not a party to such agreement or an "interested person" of such
party (as that term is defined in the 1940 Act) at a meeting, in
person, called for the purpose of voting on such approval.
Notwithstanding the foregoing, this Agreement may be terminated by the
Board of Trustees at any time on ten (10) days written notice without
the payment of any penalty. This Agreement will automatically terminate
in the event of its assignment (as that term is defined in the 1940
Act).
10. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by a written
instrument signed by the party against which enforcement of the change,
waiver, discharge or termination is sought. No material amendment of
this Agreement shall be effective until approved by vote of the holders
of a majority of the Fund's outstanding voting securities (as defined
in the 1940 Act).
11. Year 2000 Preparedness. The Advisor warrants and represents that the
Advisor has adopted a written plan for Year 2000 compliance for the
correct operation of the Adviser's computer systems because of the
approaching millennium (the "Plan"), that the Plan provides for the
identification, testing and, where appropriate, upgrading of the
Advisor's computer systems, in accordance with reasonable industry
standards, so that both the Advisor's computer systems and their
interfaces with third party computer systems will function accurately
and without interruption before, during and after December 31, 1999 and
that the Advisor is actively in the process of implementing the Plan
and presently has no reason to believe that the Advisor's computer
systems and their interfaces with third party computer systems will not
be able to function accurately and without interruption before, during
and after such date. The Advisor will continue to implement the Plan
and take such other steps as may be necessary and appropriate to be
Year 2000 compliant in a timely and efficient manner and will notify
the Trust promptly of any Year 2000 compliance problems and the nature
thereof if the Advisor determines that it is not or is not likely to be
Year 2000 compliant in a timely and efficient manner. The failure of
the Advisor to be Year 2000 compliant shall not be deemed to be a force
majeure event or provide a defense to performance hereunder.
12. 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.
13. Applicable Law. This Agreement shall be construed in accordance with,
and governed by, the laws of the State of North Carolina.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
ATTEST: NOTTINGHAM INVESTMENT TRUST II
By: _____________________________ By: ____________________________
Title: __________________________ Title: _________________________
ATTEST: EARNEST PARTNERS LIMITED, LLC
By: _____________________________ By: ____________________________
Title: __________________________ Title: _________________________
6
<PAGE>
SCHEDULE A
INVESTMENT ADVISOR'S COMPENSATION SCHEDULE
For the services delineated in the INTERIM INVESTMENT ADVISORY AGREEMENT and
rendered to the INVESTEK FIXED INCOME TRUST ("Fund"), the Advisor may earn a
fee, calculated on a monthly basis, based upon the average daily net assets of
the Fund according to the following schedule:
Annual
Net Assets Fee
------------ ------
On all assets 0.45%
7
Exhibit (d)(5): Form of Investment Advisory Agreement between the Registrant
-------------- and EARNEST Partners Limited, LLC as Advisor to the Investek
Fixed Income Trust
FORM OF NEW INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT, dated May 25, 2000, between NOTTINGHAM INVESTMENT TRUST II (the
"Trust"), a Massachusetts Business Trust, and EARNEST PARTNERS LIMITED, LLC (the
"Advisor"), a Mississippi limited liability corporation and registered as an
investment advisor under the Investment Advisers Act of 1940, as amended.
WHEREAS, the Trust is registered as an 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 series of the Trust as described in the
schedules attached to this Agreement (each a "Fund"), and the Advisor is willing
to 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
adviser to each Fund for the period and on the terms set forth in this
Agreement. The Advisor accepts such appointment and agrees to furnish
the services set forth herein, for the compensation provided in the
attached schedules.
2. Delivery of Documents. The Trust has furnished the Advisor with copies
properly certified or authenticated of each of the following:
(a) The Trust's Amended and Restated Declaration of Trust, as filed
with the State of Massachusetts (the "Declaration");
(b) The Trust's By-Laws (the "By-Laws");
(c) Resolutions of the Trust's Board of Trustees and the resolution
approved by a majority of the outstanding shares of the Fund
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, relating
to shares of beneficial interest of the Fund (the "Shares") as
filed with the Securities and Exchange Commission ("SEC") and
all amendments thereto;
(e) The Fund's Prospectus (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 SEC 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;
<PAGE>
(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;
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 Fund.
4. Services Not Exclusive. The advisory services furnished by the Advisor
hereunder are not to be deemed exclusive, and the Advisor shall be free
to furnish similar services to others so long as its services under
this Agreement are not impaired thereby; provided, however, that
without the written consent of the Trustees, the Advisor will not serve
as investment advisor to any other investment company having a similar
investment objective to that of 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 1940
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. The Advisor will pay, out of the
Advisor's resources, the entire cost of the promotion and sale of Trust
shares, including the preparation of the prospectus and other
documents. The Advisor will provide other information and services,
other than services of outside counsel or independent accountants or
investment advisory services to be provided by any sub-adviser to the
Adviser for the Fund, required in connection with the preparation of
all registration statements and Prospectuses, Prospectus supplements,
SAIs, all annual, semiannual, and periodic reports to shareholders of
the Trust, regulatory authorities, or others, and all notices and proxy
solicitation materials, furnished to shareholders of the Trust or
regulatory authorities, and all tax returns.
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
transactions 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 law defines that term;
(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) Distribution expenses, but only in accordance with a Plan of
Distribution adopted in accordance with Rule 12b-1 under the
1940 Act, if any.
2
<PAGE>
7. Compensation. The Trust will pay the Advisor and the Advisor will
accept as full compensation an investment advisory fee, based upon the
daily average net assets of each Fund, computed at the end of each
month and payable within five (5) business days thereafter, based upon
the schedules attached hereto.
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
willful misfeasance, bad faith or gross negligence on the part of the
Advisor in the performance of its duties or from reckless disregard by
it of its obligations and duties under this Agreement.
8.(b) Indemnification of Advisor. Subject to the limitations set forth in
this Subsection 8(b), the 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.
3
<PAGE>
As to any matter disposed of by a compromise payment by the Advisor
referred to in this Subsection 8(b), pursuant to a consent decree or
otherwise, no such indemnification either for said payment or for any
other expenses shall be provided unless such indemnification shall be
approved (i) by a majority of the Independent Trustees or (ii) by an
independent legal counsel in a written opinion. Approval by the
Independent Trustees pursuant to clause (i) shall not prevent the
recovery from the Advisor of any amount paid to the Advisor in
accordance with either of such clauses as indemnification of the
Advisor is subsequently adjudicated by a court of competent
jurisdiction not to have acted in good faith in the reasonable belief
that the Advisor's action was in or not opposed to the best interest of
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) Indemnification of Fund. The Adviser agrees to indemnify and hold
harmless the Trust and Trust's Trustees and officers from 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 Trust in connection with the defense or disposition of any body,
related to or resulting from (i) any breach or violation of this
Agreement by the Adviser; (ii) any breach of fiduciary duty with
respect to the receipt of compensation for services; and (iii) any
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.
8.(d) Failure to Perform; Force Majeure. No failure or omission by either
party hereto in the performance of any obligation of this Agreement
(other than payment obligations) shall be deemed a breach of this
Agreement or create any liability if the same shall arise from any
cause or causes beyond the control of the party, including but not
limited to, the following: acts of God, acts or omissions of any
governmental agency; any rules, regulations, or orders issued by any
governmental authority or by any officer, department, agency or
instrumentality thereof; fire; storm; flood; earthquake, war;
rebellion; insurrection; riot; and invasion and provided that such
failure or omission resulting from one of the above causes is cured as
soon as is practicable after the occurrence of one or more of the
above-mentioned causes.
8.(e) 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 written above 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 of Trustees or a majority (as that
term is defined in the 1940 Act) of the outstanding voting
securities of the Fund.
4
<PAGE>
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).
10. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, except 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: NOTTINGHAM INVESTMENT TRUST II
By: _____________________________ By: ____________________________
Title: __________________________ Title: _________________________
ATTEST: EARNEST PARTNERS LIMITED, LLC
By: _____________________________ By: ____________________________
Title: __________________________ Title: _________________________
5
<PAGE>
SCHEDULE A
INVESTMENT ADVISOR'S COMPENSATION SCHEDULE
For the services delineated in the INVESTMENT ADVISORY AGREEMENT and rendered to
the INVESTEK FIXED INCOME TRUST, the Advisor shall be compensated monthly, as of
the last day of each month, within five business days of the month end, a fee
based upon the daily average net assets of the Fund according to the following
schedule:
Annual
Net Assets Fee
------------------- -----
On all assets 0.45%
6
Exhibit (h)(6): Expense Limitation Agreement between the Registrant and
-------------- EARNEST Partners Limited, LLC
EXPENSE LIMITATION AGREEMENT
NOTTINGHAM INVESTMENT TRUST II
EXPENSE LIMITATION AGREEMENT, effective as of December 31, 1999, by and
between the Earnest Partners Limited, LLC (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 Interim
Investment Advisory Agreement dated December 31, 1999 ("Interim Advisory
Agreement"), pursuant to which the Advisor provides investment advisory services
to each Fund listed in Schedule A, for a period of no more than 150 days and for
compensation based on the value of the average daily net assets of each such
Fund; and
WHEREAS, the Board of Trustees of the Fund has approved an Investment
Advisory Agreement ("Advisory Agreement") between the Advisor and the Trust
which shall become effective upon shareholder approval; 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 Interim Advisory Agreement or
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
<PAGE>
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 until
March 31, 2000 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 Interim Advisory Agreement, the Advisory Agreement or the 1940
Act, shall have the same meaning as and be resolved by reference to such Interim
Advisory Agreement, Advisory Agreement or the 1940 Act.
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed
by their respective officers thereunto duly authorized and their respective
corporate seals to be hereunto affixed, as of the day and year first above
written.
NOTTINGHAM INVESTMENT TRUST II
ON BEHALF OF EACH OF ITS SERIES LISTED IN SCHEDULE A
By: ___________________________
EARNEST PARTNERS LIMITED, LLC
By: ___________________________
3
<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%
4
Exhibit (i)(8): Consent of Dechert Price & Rhoads, Counsel, with respect
-------------- to the Investek Fixed Income Trust
[LETTERHEAD]
Law Offices of
DECHERT PRICE & RHOADS
1775 Eye St., N.W.
Washington, DC 20006-2401
Telephone: (202) 261-3300
Fax: (202) 261-3333
May 2, 2000
Nottingham Investment Trust II
107 North Washington Street
Post Office Box 4365
Rocky Mount, NC 27803-0365
Re: Post-Effective Amendment No. 41 to Registration Statement on Form N-1A
for Nottingham Investment Trust II ("Trust") (File Nos. 33-37458 and
811-06199)
Dear Sirs and Madams:
We hereby consent to the reference in the Trust's Statement of
Additional Information to Dechert Price & Rhoads as counsel to the Trust and to
the inclusion of this consent as an exhibit to Post-Effective Amendment No. 41
to the Trust's Registration Statement.
Very truly yours,
/s/ Dechert Price & Rhoads
Exhibit (j)(2): Consent of Deloitte & Touche LLP, Independent Public Accountants
- -------------- with respect to the Investek Fixed Income Trust
Exhibit 23.0
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Post-Effective Amendment
No. 41 to Registration Statement No. 33-37458 of Investek Fixed Income Trust (a
series of Nottingham Investment Trust II) of our report dated April 20, 2000,
incorporated by reference in the Annual Report for the year ended March 31,
2000, 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
Princeton, New Jersey
April 25, 2000
Exhibit (m)(2): Amended and Restated Distribution Plan under Rule 12b-1 for the
-------------- Capital Value Fund's Investor Class and T Shares
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 (n)(3): Amended and Restated Rule 18f-3 Multi-Class Plan
--------------
THE NOTTINGHAM INVESTMENT TRUST II
AMENDED AND RESTATED
RULE 18f-3 MULTI-CLASS PLAN
I. Introduction.
Pursuant to Rule 18f-3 under the Investment Company Act of
1940, as amended ("1940 Act"), this Rule 18f-3 Multi-Class Plan ("Plan") sets
forth the general characteristics of, and conditions under which the Nottingham
Investment Trust II ("Trust") may offer, multiple Classes of Shares of each
existing series of the Trust (each a "Fund" or collectively the "Funds"), and
such other Funds as the Trust may establish and designate in the future. In
addition, the Plan sets forth the shareholder servicing arrangements,
distribution arrangements, conversion features, exchange privileges, and other
shareholder services of each Class of Shares in such Fund. The Plan is intended
to allow each Fund of the Trust to offer multiple Classes of Shares to the
fullest extent and manner permitted by Rule 18f-3 under the 1940 Act, subject to
the requirements and conditions imposed by the Rule. This Plan may be revised or
amended from time to time as provided below.
Each Fund is authorized, as indicated below in the section
"Class Arrangements," to issue the following Classes of Shares representing
interests in each such Fund: Institutional Shares, Investor Shares, 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.
<PAGE>
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.
Exhibit (p)(1): Code of Ethics for the Nottingham Investment Trust II
--------------
CODE OF ETHICS
WHEREAS, Nottingham Investment Trust II (the "Trust"), is a registered
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"), which is authorized to issue its shares of beneficial interest in
separate series representing the interests in separate funds of securities and
other assets (each a "Fund");
WHEREAS, Rule 17j-1 under the 1940 Act makes it unlawful for certain
persons, including Trustees, officers, and other investment personnel of the
Trust and any Fund of the Trust, to engage in fraudulent, manipulative, or
deceptive conduct in connection with their personal trading of securities "held
or to be acquired" by any Fund of the Trust;
WHEREAS, Rule 17j-1 under the 1940 Act requires the Trust, and the
investment adviser of and principal underwriter for each Fund of the Trust, to
adopt a Code of Ethics and procedures reasonably designed to prevent trading
prohibited by the Rule and to use reasonable diligence to prevent violations of
such Code;
WHEREAS, the Investment Company Institute (the "ICI") has also
suggested that investment companies adopt additional measures to obviate
conflicts, prevent and detect abusive practices, and preserve the confidence of
investors; and
WHEREAS, the policies, restrictions, and procedures included in this
Code of Ethics are designed to prevent violations of Rule 17j-1 under the 1940
Act and to conform in substantial part to the additional measures suggested by
the ICI;
NOW, THEREFORE, the Trust hereby adopts this Code of Ethics for the
Trust and each Fund of the Trust to read in its entirety as follows:
I. RULES APPLICABLE TO TRUSTEES, OFFICERS, AND OTHER ACCESS PERSONS OF THE TRUST
1. Definitions
a. "Access Person" shall mean (i) any trustee, director, officer,
general partner, or advisory person (as defined below) of the
Trust or any Fund of the Trust or an investment adviser thereof,
or (ii) any director, officer, or general partner of a principal
underwriter for the Trust or any Fund of the Trust who, in the
ordinary course of his or her business, makes, participates in,
or obtains information regarding the purchase or sale of
securities for any Fund of the Trust for which the principal
underwriter so acts or whose functions or duties as part of the
ordinary course of his or her business relate to the making of
any recommendation to any Fund of the Trust regarding the
purchase and sale of securities, or (iii) notwithstanding the
provisions of clause (i) above, where an investment adviser is
primarily engaged in a business or businesses other than advising
registered investment companies or other advisory clients, any
director, officer, general partner, or advisory person of the
investment adviser who, with respect to any Fund of the Trust,
makes any recommendation, participates in the determination of
which recommendation shall be made, or whose principal function
or duties relate to the determination of which recommendation
shall be made to any Fund of the Trust, or who, in connection
with his or her duties, obtains any information concerning
securities recommendations being made by such investment adviser
to any Fund of the Trust.
b. An "Advisory Person" is any employee of the Trust or any Fund of
the Trust or of an investment adviser thereof (or of any company
in a control relationship thereto) who, in connection with his or
her regular functions or duties, makes, participates in, or
obtains information regarding the purchase or sale of securities
for any Fund of the Trust or whose functions relate to the making
of any recommendations with respect to such purchases or sales,
and any natural person in a control relationship with the Trust
or any Fund of the Trust or an adviser thereof who obtains
information concerning recommendations made to any Fund of the
Trust regarding the purchase or sale of securities.
c. "Beneficial Ownership" shall be interpreted subject to the
provisions of Rule 16a-1(a)(exclusive of Section (a)(1) of such
Rule) of the Securities Exchange Act of 1934, as amended, which
generally speaking, encompasses those situations in which the
beneficial owner has the right to enjoy some direct or indirect
"pecuniary interest" (i.e., some economic benefit) from the
ownership of a security. A direct pecuniary interest is the
opportunity, directly or indirectly, to profit, or share in any
profit, from the transaction. An indirect pecuniary interest is
any indirect financial interest in the transaction. For example,
a person is normally regarded as the beneficial owner of
securities held in the name of a member of his or her immediate
family living in his or her household. Moreover, a person is
normally regarded as the beneficial owner of securities held by a
partnership to the extent he or she is a general partner or of
securities held by a trust of which the person is settlor of the
trust with the power to revoke the trust without the consent of
another person, or is a beneficiary of the trust, in both cases
if the person also has or shares investment control over the
securities in the trust. A person may also have an indirect
pecuniary interest in securities that such person may acquire
upon exercise of an option or other right or through conversion
of a security. A report of beneficial ownership hereunder may
disclaim such beneficial ownership.
d. "Control" shall have the meaning set forth in Section 2(a)(9) of
the 1940 Act.
e. "Disinterested Trustee" of the Trust means a Trustee who is not
an "interested person" of the Trust within the meaning of Section
2(a)(19) of the 1940 Act. An "interested person" of the Trust
includes any person who is a trustee, director, officer,
employee, or owner of 5% or more of the outstanding stock of an
investment adviser of or principal underwriter, if any, for any
Fund of the Trust. Affiliates of brokers or dealers are also
"interested persons" of the Trust, except as provided in Rule
2a19-1 under the 1940 Act.
f. "Portfolio Manager" means the person or persons who have or share
direct responsibility and authority to make investment decisions
affecting any Fund of the Trust.
g. "Purchase or sale of a security" includes, among other things,
the writing of an option to purchase or sell a security or the
purchase or sale of a future or index on a security or option
thereon.
h. "Review Officer" means, with respect to the Trust, the Secretary
of the Trust or such other person(s) as may be designated by the
Board of Trustees of the Trust. In this regard, each investment
adviser of and principal underwriter for each Fund of the Trust
shall appoint a compliance officer of each such adviser or
underwriter, which person shall be designated by the Board of
Trustees of the Trust as the "Review Officer" with respect to
such adviser or underwriter. The purpose of this arrangement is
for each such compliance officer to monitor compliance with this
Code of Ethics in connection with all persons covered hereunder
associated with such compliance officer's particular associated
adviser or underwriter. For example, the investment adviser of
each Fund of the Trust shall appoint a compliance officer of such
adviser to serve as the Review Officer hereunder with respect to
that adviser and Fund, who shall approve transactions, receive
reports, and otherwise monitor compliance with this Code of
Ethics in connection with all Access Persons associated with such
adviser and Fund. In turn each such compliance officer shall
report at least quarterly to the Secretary of the Trust all
violations of this Code that occurred during the past quarter. As
Review Officer with respect to the Trust, the Secretary of the
Trust shall approve transactions, receive reports, and otherwise
monitor compliance with this Code of Ethics in connection with
all Access Persons not otherwise associated with an investment
adviser of or principal underwriter to any Fund of the Trust;
receive reports from all other Review Officers designated
hereunder; report at least quarterly to the Board of Trustees of
the Trust all violations of this Code that occurred during the
past quarter; and report at least annually to the Board of
Trustees the information listed under Section II-F below.
i. "Security" shall have the meaning as set forth in Section
2(a)(36) of the 1940 Act, except that it shall not include
securities issued by the U.S. Government (or any other "U.S.
Government security" as the term is defined in the 1940 Act),
bankers acceptances, bank certificates of deposit, commercial
paper, and shares of registered open-end investment companies
(i.e., other mutual funds generally).
j. A security is "held or to be acquired" by any Fund of the Trust
if within the most recent 15 days it (i) is or has been held by a
Fund of the Trust or (ii) is being held or has been considered by
a Fund of the Trust or its investment adviser for purchase by the
Fund.
k. A security is "being considered for purchase or sale" when, among
other circumstances, the assigned analyst or Portfolio Manager is
seriously considering a change in the rating of the security.
l. All references herein to an "investment adviser" of a Fund of the
Trust shall be deemed to include any "co-adviser" or
"sub-adviser" of such Fund as the case may be.
2. Statement of General Principles on Personal Investment Activities
NO ACCESS PERSON OF THE TRUST OR ANY FUND OF THE TRUST SHALL ENGAGE IN ANY
ACT, PRACTICE, OR COURSE OF CONDUCT THAT VIOLATES THE PROVISIONS OF RULE
17j-1 OF THE 1940 ACT. IN ORDER TO EFFECTUATE THIS PROHIBITION, THE
FOLLOWING GENERAL PRINCIPLES AND SPECIFIC PROHIBITED ACTIVITIES, AND
RELATED COMPLIANCE PROCEDURES, SHALL GOVERN THE PERSONAL INVESTMENT
ACTIVITIES OF SUCH PERSONS.
PERSONAL INVESTMENT ACTIVITIES ENGAGED IN BY AN ACCESS PERSON SHALL BE
SUBJECT TO THE FOLLOWING GENERAL PRINCIPLES:
a. NO PERSONAL INVESTMENT ACTIVITIES SHALL CONFLICT WITH THE DUTY TO
PLACE THE INTERESTS OF THE INVESTMENT COMPANY BEFORE ANY PERSONAL
INTERESTS;
b. ALL PERSONAL INVESTMENT ACTIVITIES SHALL BE CONDUCTED CONSISTENT WITH
THE REQUIREMENTS AND STANDARDS SET FORTH IN THIS CODE AND IN SUCH A
MANNER AS TO AVOID ANY ACTUAL OR POTENTIAL CONFLICT OF INTEREST OR ANY
ABUSE OF AN INDIVIDUAL'S POSITION OF TRUST AND RESPONSIBILITY; AND
c. NO ACCESS PERSON SHALL, DIRECTLY OR INDIRECTLY, OTHERWISE TAKE
INAPPROPRIATE ADVANTAGE OF HIS OR HER POSITION WITH THE INVESTMENT
COMPANY.
3. Avoiding Conflicts of Interest
WITHOUT LIMITING THE FOREGOING SECTION I-B, NO TRUSTEE, OFFICER, OR OTHER
ACCESS PERSON SHALL ENTER INTO OR ENGAGE IN A SECURITY TRANSACTION OR
BUSINESS ACTIVITY OR RELATIONSHIP THAT MAY RESULT IN ANY FINANCIAL OR OTHER
CONFLICT OF INTEREST BETWEEN SUCH PERSON AND THE INVESTMENT COMPANY, AND
EACH SUCH PERSON SHALL AT ALL TIMES AND IN ALL MATTERS ENDEAVOR TO PLACE
THE INTERESTS OF THE INVESTMENT COMPANY BEFORE HIS OR HER PERSONAL
INTERESTS.
4. Prohibited Activities
a. Interested Transactions: No Trustee, officer, or other Access Person
shall recommend any securities transactions by any Fund of the Trust
without having disclosed his or her interest, if any, in such
securities or the issuer thereof, including without limitation:
1. any direct or indirect Beneficial Ownership of any securities of
such issuer;
2. any contemplated transaction by such person in such securities;
3. any position with such issuer or its affiliates; and
4. any present or proposed business relationship between such issuer
or its affiliates and such person or any party in which such
person has a significant interest.
b. Blackout Periods: No Trustee, officer, or other Access Person shall
purchase or sell, directly or indirectly, any security in which he or
she has, or by reason of such transaction acquires, any direct or
indirect Beneficial Ownership:
1. and which to his or her knowledge at the time of such purchase or
sale is being considered for purchase or sale by any Fund of the
Trust; or
2. and which to his or her knowledge at the time of such purchase or
sale is being purchased or sold by any Fund of the Trust; or
3. on a day during which, to his or her knowledge, any Fund of the
Trust has a pending "buy" or "sell" order in that same security
until that order is executed or withdrawn.
No Portfolio Manager shall purchase or sell, directly or indirectly,
any security in which he or she has, or by reason of such transaction
acquires, any direct or indirect Beneficial Ownership within three (3)
business days before or after any Fund of the Trust that he or she
manages trades in that security.
Unless the Trust's Board approves otherwise, any trades made in
violation of this Section I-D(2) shall be unwound or, if that is not
practical, any profit so realized shall be paid over to the affected
Fund of the Trust or to a charitable organization of the Access
Person's choosing.
c. Initial Public Offerings: No Advisory Person who is an employee of an
investment adviser of any Fund of the Trust shall acquire any
securities in an initial public offering for his or her personal
account.
d. Private Placements: No Advisory Person who is an employee of an
investment adviser of any Fund of the Trust shall acquire, directly or
indirectly, Beneficial Ownership of any securities in a private
placement without the prior approval of the Review Officer, who has
been provided by such Advisory Person with full details of the
proposed transaction (including written certification that the
investment opportunity did not arise by virtue of the Advisory
Person's activities on behalf of such Fund of the Trust) and has
concluded after consultation with other investment advisory personnel
of such Fund of the Trust (who have no personal interest in the issuer
involved in the private placement) that such Fund of the Trust has no
foreseeable interest in purchasing such securities.
e. Gifts: No Advisory Person who is an employee of an investment adviser
of any Fund of the Trust shall receive any gift or other things of
more than de minimis value from any person or entity that does
business with or on behalf of such Fund of the Trust; provided,
however, that the foregoing shall not prohibit receipt of:
1. an occasional breakfast, luncheon, dinner, or reception, ticket
to a sporting event or the theater, or comparable entertainment,
attended in the company of the giver of the entertainment in
question, that is not so frequent, costly, or extensive as to
raise any question of impropriety;
2. a breakfast, luncheon, dinner, reception, or cocktail party in
conjunction with a bona fide business meeting;
3. a promotional item, such as a mug, pen, or other article bearing
the logo or advertising of any such person or entity, having a
value not in excess of $100; or
4. a gift approved in writing by the Review Officer.
5. Service as a Director: No Advisory Person who is an employee of
an investment adviser of any Fund of the Trust shall serve on the
board of directors of any publicly traded company without prior
authorization from the Review Officer based upon a determination
that such board service would be consistent with the interests of
such Fund of the Trust and its shareholders.
5. Exempted Transactions:
The prohibitions of Sections I-D(2) through I-D(4) above shall not apply to:
a. purchases or sales effected in any account over which such person has
no direct or indirect influence or control;
b. purchases or sales that are nonvolitional on the part of the person or
any Fund of the Trust;
c. purchases that are part of an automatic dividend reinvestment plan;
d. purchases effected upon the exercise of rights issued by an issuer pro
rata to all holders of a class of its securities, to the extent such
rights were acquired from such issuer, and sales of such rights so
acquired;
e. sales effected pursuant to a tender offer or similar transaction
involving an offer to acquire all or a significant portion of a class
of securities;
f. purchases and sales previously approved in writing by the Review
Officer (a) as only remotely potentially harmful to a Fund of the
Trust because they would be very unlikely to affect a highly
institutional market or because they clearly are not economically
related to the securities to be purchased or sold or held by such Fund
of the Trust or (b) as not representing any danger of the abuses
proscribed by Rule 17j-1 under the 1940 Act;
g. purchases or sales of securities that are not eligible for purchase or
sale by a Fund of the Trust. In this regard, this exemption shall be
applied on a Fund-by-Fund basis, since the Trust may have separate
series of Funds, with unaffiliated investment advisers, that are
affiliated only by virtue of their affiliation with the Trust or a
common underwriter. For example, an Advisory Person who is an employee
of an investment adviser of one Fund of the Trust shall not otherwise
be restricted in trading securities that are not eligible for trading
by that Fund merely because another otherwise unaffiliated Fund of the
Trust is entitled to trade such securities, provided that, at the time
of each such transaction, the Advisory Person has no actual knowledge
that the same security is being purchased or sold or considered for
purchase or sale by such other Fund of the Trust.
II. COMPLIANCE PROCEDURES
1. Preclearance
An Advisory Person who is an employee of an investment adviser of any Fund of
the Trust may directly or indirectly, acquire or dispose of Beneficial Ownership
of a security only if (1) such purchase or sale has been approved by the Review
Officer, (2) the approved transaction is completed within three (3) business
days of the day approval is received, and (3) the Review Officer has not
rescinded such approval prior to execution of the transaction. The requirements
of this Section II-A shall not apply to (i) transactions described in Sections
I-E(l), (2), and (3), and (ii) transactions involving purchases or sales of
capital stock of issuers with aggregate market capitalizations of at least $5
billion or of investment grade debt securities, provided that the aggregate
amount of such transactions by the Advisory Person in any one calendar week does
not exceed $10,000 and provided further that, at the time of each such
transaction, the Advisory Person has no actual knowledge that the same security
is being purchased or sold or considered for purchase or sale by any Fund of the
Trust.
2. Quarterly Reporting Requirements for all Trustees, Executive Officers, and
Other Access Persons (Other than Disinterested Trustees)
a. Coverage. All Trustees, executive officers, and other Access Persons,
other than Disinterested Trustees, shall file with the Review Officer
confidential quarterly reports containing the information required in
this Code with respect to all transactions during the preceding
quarter in any securities in which such person has, or by reason of
such transaction acquires, any direct or indirect Beneficial
Ownership, except for exempted transactions listed under Section
I-E(l) above. However, an Access Person who is an Access Person of an
investment adviser of any Fund of the Trust shall file such Access
Person's reports with the investment adviser unless such reports would
duplicate information recorded pursuant to Rules 204-2(a)(12) or
204-2(a)(13) of the Investment Advisers Act of 1940, in which case no
such reports need be filed by such Access Person pursuant to this
Code, and an Access Person who is an Access Person of a principal
underwriter of the Trust shall file such Access Person's reports with
the principal underwriter.
b. Filings: Every report shall be made no later than 10 days after the
end of the calendar quarter in which the transaction being reported
was effected, and shall contain the following information:
1. the date of the transaction, the title and the number of shares
and the principal amount of each security involved;
2. the nature of the transaction (i.e., purchase, sale, or any other
type of acquisition or disposition);
3. the price at which the transaction was effected; and
4. the name of the broker, dealer, or bank with or through whom the
transaction was effected.
Such report shall be in the form attached hereto as Exhibit A, or if
the Access Person is an Access Person of an investment adviser of or
principal underwriter for any Fund of the Trust, in such form as is
provided by such adviser or underwriter if it contains the information
requested herein. In lieu of providing such quarterly reports, an
Access Person may arrange for duplicate confirmations and account
statements to be provided directly to the Review Officer.
c. Disclaimer of Beneficial Ownership: Any report may contain a statement
that it shall not be construed as an admission by the person making
the report that he or she has any direct or indirect Beneficial
Ownership in the security to which the report relates.
d. Brokerage Statements: Each Advisory Person who is an employee of an
investment adviser of any Fund of the Trust shall cause copies of all
of such person's brokerage statements and confirmations to be
furnished to the Review Officer on at least a quarterly basis.
3. Quarterly Reporting Requirements for Disinterested Trustees
a. Every Disinterested Trustee shall file with the Review Officer a
report containing the information required by Section II-B(2) above
with respect to transactions in any securities in which such person
has, or by reason of such transactions acquires, any direct or
indirect Beneficial Ownership, except for exempted transactions listed
under Section I-E(l) above, if such Trustee, at the time of that
transaction, knew or, in the ordinary course of fulfilling his or her
official duties as Trustee, should have known, that during the 15 day
period immediately preceding or after the date of the transaction by
the Trustee:
1. such security is or was being purchased or sold by any Fund of
the Trust; or
2. such security is or was being considered by of any Fund of the
Trust or its investment adviser for purchase or sale.
3. Notwithstanding the preceding sentence, any Disinterested Trustee
may, at his or her option, report the information described in
Section II-B(2) with respect to any one or more transactions and
may include a statement that the report shall not be construed as
an admission that the person knew or should have known of
portfolio transactions by any Fund of the Trust in such
securities.
4. Disclosure of Personal Holdings
Upon commencement of employment and annually thereafter, each Advisory
Person who is an employee of an investment adviser of any Fund of the Trust
shall be required to disclose his or her current personal securities
holdings.
5. Certification of Compliance
Each Access Person is required to certify annually that he or she has read
and understands this Code and recognizes that he or she is subject to this
Code. Further, each Access Person is required to certify annually that he
or she has complied with all the requirements of the Code and that he or
she has disclosed or reported all personal securities transactions required
to be disclosed or reported pursuant to the requirements of the Code. Such
certification shall be in the form attached hereto as Exhibit B, which
shall be delivered annually to the Review Officer. This requirement applies
to all Trustees, including Disinterested Trustees.
6. Review by the Board of Trustees
At least quarterly, the Review Officer shall report to the Board of
Trustees all violations or apparent violations of this Code that occurred
during the past quarter. Upon discovery of a violation of this Code, the
Board of Trustees may impose such sanctions as it deems appropriate. At
least annually, the Review Officer shall report to the Board of Trustees:
a. All existing procedures concerning Access Persons' personal investing
activities and any procedural changes made during the past year;
b. Any recommended changes to this Code or procedures; and
c. A summary of any violations that occurred during the past year
requiring significant remedial action.
7. Notice by Review Officer
The Review Officer shall notify each Access Person who may be required to
preclear transactions and/or make reports pursuant to this Code of Ethics
that such person is subject to this Code and shall deliver a copy of this
Code to each such person. Any amendments to the Code shall be similarly
furnished to each such person.
III. REVIEW
In reviewing transactions, the Review Officer shall take into account the
exemptions allowed under Section I-E above. Before making a determination
that a violation or apparent violation has been committed by a Trustee, the
Review Officer shall give such person an opportunity to supply additional
information regarding the transaction in question.
IV. SANCTIONS
1. Sanctions for Violations by Trustees, Executive Officers, and Other Access
Persons (Other than Disinterested Trustees)
If the Review Officer determines that a violation or apparent violation of
this Code has occurred, he or she shall so advise the Board of Trustees of
the Trust, and if a violation is determined, such persons may be subject to
sanctions, including, inter alia, a letter of censure or suspension or
termination of the employment of the violator. As provided in Section
I-D(2) above, any financial profits realized by an Access Person or
Advisory Person through the prohibited personal trading activities
described in such Section may be required to be disgorged. All material
violations of the Code and any sanctions imposed as a result thereto shall
be reported periodically to the Board of Trustees.
2. Sanctions for Violations by Disinterested Trustees
If the Review Officer determines that any Disinterested Trustee, has
violated or apparently violated this Code, he or she shall so advise the
Chairman of the Trust, the President of any affected Fund of the Trust, and
also the Disinterested Trustees (other than the person whose transaction is
at issue) and shall provide such persons with the report, the record of
pertinent actual or contemplated portfolio transactions of any affected
Fund of the Trust, and any additional information supplied by such person.
If a violation is determined, the Disinterested Trustees, at their option,
shall either impose such sanctions as they deem appropriate or refer the
matter to the full Board of Trustees of the Trust, which shall impose such
sanctions as it deems appropriate.
V. MISCELLANEOUS
1. Records
The administrator of the Trust shall maintain records in the manner and to
the extent set forth below, which records may be maintained on microfilm
under the conditions described in Rule 31a-2(f) under the 1940 Act, and
shall be available for examination by representatives of the Securities and
Exchange Commission:
a. a copy of this Code and any other code that is, or at any time within
the past five years has been, in effect shall be preserved in an
easily accessible place;
b. a record of any violation of this Code, and of any action taken as a
result of such violation, shall be preserved in an easily accessible
place for a period of not less than five years following the end of
the fiscal year in which the violation occurs;
c. a copy of each report made pursuant to this Code shall be preserved
for a period of not less than five years from the end of the fiscal
year in which it is made, the first two years in an easily accessible
place; and
d. a list of all persons who are required, or within the past five years
have been required, to make reports pursuant to this Code shall be
maintained in an easily accessible place.
2. Confidentiality
All reports of securities transactions and any other information filed
pursuant to this Code shall be treated as confidential, except that the
same may be disclosed to the Board of Trustees of the Trust, to any
regulatory or self-regulatory authority or agency upon its request, or as
required by law or court or administrative order.
3. Interpretation of Provisions
The Board of Trustees of the Trust may from time to time adopt such
interpretations of this Code as it deems appropriate.
<PAGE>
EXHIBIT A
CODE OF ETHICS
SECURITIES TRANSACTION REPORT
For the Calendar Quarter Ended: _______________________________
(mo./day/yr.)
During the quarter referred to above, the following transactions were
effected in securities of which I had, or by reason of such transaction
acquired, direct or indirect Beneficial Ownership, and which are required to be
reported pursuant to the Trust's Code of Ethics:
========= ============ =========== ============= ============= ======= =========
Broker,
Dealer
No. of or
Shares Nature of Bank
or Dollar Transaction Through
Date of Principal Amount of (Purchase, Whom
Security Transaction Amount Transaction Sale, Other) Price Effected
- --------- ------------ ----------- ------------- ------------- ------- ---------
========= ============ =========== ============= ============= ======= =========
This report (i) excludes transactions with respect to which I had no direct or
indirect influence or control, (ii) excludes other transactions in securities
not required to be reported because such securities are excluded from the
definition of "security" under the Code of Ethics, and (iii) is not an admission
that I have or had any direct or indirect Beneficial Ownership in the securities
listed above.
Date: _________________________ Signature: _______________________________
<PAGE>
EXHIBIT B
CODE OF ETHICS
ANNUAL CERTIFICATE OF COMPLIANCE
For the Calendar Year Ended December 31, 1998
As an Access Person as defined in Section I-A(1) of the Trust's Code of Ethics
adopted pursuant to Rule 17j-1 under the Investment Company Act of 1940, as
amended (the "Code"), I hereby certify that I have read and understand the Code,
recognize that I am subject to the Code, and intend to comply with the Code. I
further certify that, during the calendar year specified above, and since my
last Certificate of Compliance under the Code, I have complied with the
requirements of the Code and have disclosed or reported all personal securities
transactions required to be disclosed or reported pursuant to the requirements
of the Code.
______________________________
Signature
______________________________
Name (Please Print)
______________________________
Date
