________________________________________________________________________________
[LOGO]
WST GROWTH FUND
________________________________________________________________________________
a series of The Nottingham Investment Trust II
INSTITUTIONAL SHARES
ANNUAL REPORT 2000
FOR THE YEAR ENDED MARCH 31, 2000
INVESTMENT ADVISOR
Wilbanks, Smith & Thomas Asset Management, Inc.
One Commercial Place, Suite 1450
Norfolk, Virginia 23510
WST GROWTH FUND
105 North Washington Street
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069
1-800-525-3863
This Report has been prepared for shareholders
and may be distributed to others only if preceded
or accompanied by a current prospectus.
<PAGE>
[LETTERHEAD]
WST Growth Fund
Annual Report
Institutional Shares
It is our pleasure to enclose the annual report for the WST Growth Fund. This
letter highlights the progress of the Fund during the last twelve months and
outlines our expectations for the coming year. Stocks are experiencing one of
their most volatile weeks on record as we write this note so please view these
comments in the light of a highly dynamic market. We appreciate the confidence
you have placed us to manage your assets and we are working diligently to
maximize the performance of those assets.
The management team at Wilbanks, Smith & Thomas made several important decisions
regarding the Fund last year. Most importantly we shifted the investment focus
of the Fund to a pure growth orientation from the original growth and income
policy. The shift allows us to better match the strategy of the Fund with goals
of our investors. The elimination of the income objective also allows us to
align the Fund's holdings with the firm's standard equity model. We made these
changes after discussions with many shareholders and believe that by
repositioning the Fund as a pure growth portfolio we will enhance the
performance of your holdings.
Performance Analysis: Technology and Telecommunications Rule!
A review of the last year's performance data reveals that there were truly two
stock markets. Owners of technology and telecommunication stocks enjoyed another
year of watching the NASDAQ skyrocket while entire sectors including finance,
consumer cyclicals, and health care stocks traded lower throughout the year.
A number of well-publicized statistics highlight the discrepancy between tech
and all the rest in 1999. The average technology stock in the S&P 500 rose 74.5%
while the average non-technology stock was up 4.5%. 61% of the stocks on the New
York Stock Exchange declined during 1999, and approximately 25 stocks made up
100% of the return in the S&P 500. The majority of these issues were in the
technology and telecommunications sectors. When you consider that 475 of the 500
stocks in the index combined to generate a 0% return last year, it is easy to
understand our excitement at the opportunities this group of stocks presents us
now.
Your Fund enjoyed positive returns over the twelve months ending March 31st of
11.20%. This return compared favorably with the 5.42% return of the Lipper
Multi-Cap Value Index to which we are normally compared. The Fund posted strong
results during the fiscal third quarter and matched the return of the S&P 500
during the final quarter. The Fund has delivered a 14.97% annualized rate of
return since inception, outpacing the Multi-cap Value Index. Our shift in focus
to an all equity strategy will result in performance more in line with the large
cap indices with which most of our shareholders are familiar.
<PAGE>
The Fund's turnover rate was 50% last year, a figure well below the 90% turnover
rate of the average growth equity fund. More importantly the Fund generated zero
capital gains during the calendar year, a result that underlines its tax
efficiency. Our goal will continue to be minimizing realized gains wherever
possible.
The expense ratio in the Fund continued to decline as assets exceeded $21
million. The bottom line will be impacted positively as the ratio drops with
asset growth.
Fiscal 2000 In Review:
The Trend Remains the Same
When reviewing the 1999 Annual Report for the WST Growth Fund we noticed several
similarities between that year and Fiscal 2000. The interest rate driven
sell-off in growth stocks in the third quarter of 1999 was reminiscent of the
buying opportunity created in October 1998 by the collapse of the Russian
economy and the failure of Long Term Capital Management and other hedge funds.
The narrow breadth of the market discussed above was also a topic last year. By
narrow breadth we mean that a very small number of large capitalization growth
companies have generated all of the market's performance over the past two
years. This trend continued into the first calendar quarter of 2000 but began to
reverse in late March and early April. Later in this report we will discuss in
detail the difference between old and new economy stocks but it is clear that
investors have favored new economy stocks and have been willing to set
fundamentals and valuation aside in their quest for performance.
The chaotic market activity we are experiencing now is the beginning of the
unwinding of some of the performance and valuation disparities between
technology and telecommunication stocks and the rest of the market. While we
expect the market to broaden this year it will continue to be dominated by the
mid and large capitalization growth companies.
Volatility and the "New Economy"
As outlined above both the stock and bond markets endured the most violent
intra-quarter volatility in recent memory during the first quarter of 2000.
Morgan Stanley strategist Barton Biggs, a veteran market watcher, described it
as the most volatile market he has seen in his career.
The essence of the maelstrom is the war raging between Old and New economy
stocks. Old economy stocks include financial companies, capital goods producers,
"bricks and mortar" retailers and any other companies not included in the
Internet driven "TMT" sectors (Telecommunications, Media and Technology) that
make up the new economy. After the first ten weeks of the first calendar quarter
of 2000 the new economy companies appeared indomitable as they raced to a
performance edge that had many wondering if 2000 will be a replay of 1999.
Despite a 10% decline at the end of March, the NASDAQ market, which is heavily
weighted in these new economy companies, remains the driver of year to date
performance. In fact, the market narrowed further around these companies during
2000, and at one point the NASDAQ Index was up 20% year to date while the Dow
Jones Industrial Average was down 5%. Small and mid capitalization companies
continued their surge relative to large cap stocks during the quarter, finishing
with gains far outpacing their larger brethren.
<PAGE>
The volatility statistics for the past three months are amazing. The S&P 500
declined over 10% during the first two months, then posted a rally of 15% during
the subsequent three weeks. The last week of the quarter degenerated to absolute
market havoc with the end result being a gain of 2% for the S&P for the quarter.
The Dow Jones declined 4.7% while the NASDAQ increased 12.9% over the same
period.
"Hot" Money Flows to Technology
Mutual fund money flows account for much of the market's action. The massive
amounts of dollars flowing into growth and aggressive growth funds over the past
several quarters have required the managers of those funds continually to put
money to work by buying more of their stocks regardless of valuation.
Conversely, money flows out of value funds and away from value managers have
driven the forced liquidation of stocks held by these funds and resulted in the
ever-widening gap between classic growth and value.
The damage was so bad and the sentiment so negative for value investors that two
of the industry's most successful value investors retired during the first
quarter. First, Bob Sanborn stepped down as manager of the Oakmark Fund. His
retirement was driven by his frustration at the valuations of the new economy
stocks and the lack of respect paid by the market to his old economy holdings.
Next Julian Robertson, the famed manager of the $6 billion Tiger Fund, announced
that he would retire and liquidate his portfolio. In his exit interview he cited
his inability to understand the current market. Any investor with even a hint of
contrarian nature would cite these two retirements as evidence that valuations
will matter again one day, and we agree. Ironically, sanity seemed to return to
the markets shortly after these announcements as the unreasonably priced biotech
and Internet stocks imploded and old economy sectors began their rebound.
What lessons are we to learn from these events? First, our earnings growth based
stock selection process continues to work. We have avoided the pitfalls
associated with owning concept stocks with unproven business models or
inexperienced management teams, but we have participated fully in the growth of
the TMT economy by owning its "best in class" participants. Second, when the
flow of funds begins to shift out of the richly valued names and into the more
reasonably priced stocks, the price impact on the recipients of those fund flows
will be significant. For example, Fidelity's Magellan Fund holds $100 billion in
assets. A normal position in the fund is $3-4 billion. The door seems very small
when large players like Fidelity begin to establish positions in any but the
largest stocks.
The underlying fundamentals of the companies in the Fund continue to be
excellent. Although the technology stocks have posted impressive earnings gains
over the past twelve months, the reported profits of other holdings have proven
as strong as ever.
Dollar Tree Stores - A Bargain Price Every Day
A perfect example of the liquidity phenomenon addressed above is the price
action of Dollar Tree Stores over the past four months. As we have discussed at
great length, Wilbanks Smith and Thomas's goal is to buy, at reasonable prices,
great growth businesses run by highly intelligent and motivated management
teams. Dollar Tree Stores is a mid-size retailing company that fits this model.
We have researched the company extensively and spent significant time with
senior management including Macon Brock, the company's C.E.O. His team has the
experience and discipline to build their business over the next 5 - 10 years at
a pace which will rival the early growth of Wal-Mart.
Despite the company's fundamentals the stock exhibited dramatic volatility over
the past six months with relatively little trading volume. The company has
traded in a range between $32 and $54 with no change in fundamentals and an
outlook that continues to brighten. Wilbanks, Smith & Thomas has taken advantage
of the volatility to build the Fund's positions, especially as the company drops
into the $30 range. We recommended the stock on CNBC at $33 and $38 per share.
We believe that the large growth mutual funds will return to the stock
eventually and will drive it higher as they attempt to reestablish positions
liquidated during 1999.
Research: In Search of the Next Oracle
In our last update we discussed in great detail the process that led to our
investment in Oracle Corporation. The basis of that decision was our belief that
Wall Street did not recognize the magnitude of the opportunity that Larry
Ellison and his management team were trying to exploit through the design of a
complete mission critical database software system for the Internet. Surely
Oracle benefited from the massive move in technology stocks, but the stock's
performance was driven mainly by the growing recognition on Wall Street that the
company is perfectly positioned with a set of products that will lead the market
in enabling Internet commerce.
Using the Oracle investment as a model, our research team has spent countless
days on the road visiting our current holdings and potential new ones and
increasing our focus on the technology and telecommunication sectors. Our
mission is to repeat the Oracle success by uncovering other companies with the
potential to be revalued based on their association with the Internet.
A recent purchase that fits this model is Computer Associates. As in the case of
Oracle in 1998, most analysts' valuation of Computer Associates is based upon
their legacy mainframe software business, which is a relatively slow growth
business. However, the company has built large, fast growing businesses in both
data storage software and Internet security. In the past several months we met
with the senior management of the company in both New York and at their "CA
World" trade show New Orleans. The picture that has emerged is that of a company
with a truly exceptional business model that can be purchased at an
exceptionally reasonable price (21 times earnings).
CEO Sanjay Kumar is communicating to Wall Street the opportunity presented by
the several billions of dollars of revenues the company can generate from its
Internet businesses. His goal is to convince Wall Street to reclassify the
company as an Internet investment. The result will be a substantially higher
price/earnings ratio and stock price. It is difficult to predict when the
discovery will occur but we are comfortable waiting patiently for the value to
be recognized.
<PAGE>
The price of Computer Associates' stock price could double in the next six
months with no change in fundamentals. Contrast that scenario, purchasing a
solid growth company at 21 times earnings, with an investment in Cisco Systems
at a price earnings ratio of 143 times earnings. Without a doubt Cisco is the
leader in the Internet infrastructure gold rush, but perhaps Wall Streets' great
expectations for the company are already reflected in the stock price.
Historically it has been very difficult to make money in stocks purchased at 150
times earnings irrespective of even the most perfect fundamentals.
Second Quarter Technology Turmoil??
Forecasting the direction of the financial markets is a dangerous pastime and is
fraught with pitfalls. In our last quarterly update we predicted a 10% - 15%
correction in the equity markets during the first quarter with Internet stocks
leading the decline. In retrospect our market call was half correct as the Dow
Jones Industrial average declined approximately 15% by the end of February.
However, the old economy stocks led the retreat rather than Internet and tech
related issues. Our other prediction was that interest rates would peak below
7%. Ironically, and much to Alan Greenspan's dismay, long-term interest rates
declined from 6.75% to 5.9% at quarter-end. This decline flies in the face of
his restrictive monetary policy that has led to five rate hikes in the past six
months.
The most critical variable in the market now is clear: how will the NASDAQ Index
unravel its extremely overvalued condition? The answer to this question will
drive financial markets over the next six months. The NASDAQ Index is currently
almost 40% above its 200-day moving average, a condition not seen since 1991.
Although this is a sign of a powerful trend it also presents a precarious
technical condition for the strongest segment of the economy and market. The
average stock in the NASDAQ 100 Index currently trades for over 90 times
earnings, a level considered excessive under any valuation model.
The market will either digest this condition with a sharp correction as it did
in October 1998, or it will unravel slowly as it did in the first half of 1998.
Either way, investors can expect continued volatility. We expect market action
like we saw during the last three weeks of the first quarter. While certain
sectors such as biotechs collapsed, dropping 25% over a period of days, the
overall index endured a more moderate 10%- 12% correction, albeit through a
series of very violent sell-offs of 3% - 4% daily. Importantly, the money
flowing out of the NASDAQ flowed into the old economy stocks as we discussed
above, benefiting the financials and capital goods makers like Honeywell and
Tyco.
As we often point out, the Fund is full of quality companies trading at prices
comparable to those several years ago. Bank of America, Fannie Mae, New York
Times, CVS, and MCI Worldcom have all made great fundamental progress yet Wall
Street values them at the same levels it did in 1998. Like shoppers at K-Mart's
Blue Light Special, we are happy to take advantage of these discounts! In these
cases the powerful combination of a positive economic and political backdrop
coupled with good business fundamentals and strong free cash flow clearly
indicate higher stock prices down the road.
<PAGE>
New Economy or Bust!
The research team at Wilbanks, Smith & Thomas has never been more excited about
the opportunities we see the economy and market presenting us. Putting aside for
a minute the old economy/new economy debate, we recognize the importance of the
fundamental changes the Internet is causing in all areas of commerce and daily
life. Investors must make adjustments to their portfolios to take advantage of
this secular change. Our challenge is to find the future winners and buy them
while they are priced reasonably, and we see many opportunities in both the
technology and telecommunication sectors. Clearly an investment in these sectors
requires more flexibility and tolerance for short term volatility than some
investors are accustomed to. Still, we believe that managers who ignore these
trends will be left behind as the new economy streaks ahead.
Having said that, it is also a very risky time for investors who ignore
valuations. Stock charts of former favorites like eToys, Excite-at-Home or Red
Hat remind us that regardless of a company's potential there are times when its
stock is simply too expensive. To us it makes no sense to invest in companies
that have not and most likely never will earn a dollar. As we remind our
clients, only our 35 to 45 best ideas make it into the Fund. The stocks that do
make it need to be the best possible combination of growth business models,
skillful management, and attractive valuations.
Our equity research team is in the process of developing a white paper on the
technology and telecommunications sectors. This document will be posted to our
website during the next several months and should be helpful in outlining our
focus. We are spending an increasing amount of time in both Silicon Valley and
New York meeting with industry leaders and visionaries and honing our investment
process. We look forward to sharing our thoughts with you.
Thank you for your continued confidence in the WST Growth Fund. Patience and a
strong investment discipline are keys to victory in the equity markets. We are
excited about the coming year and the opportunities that will present
themselves. Please know that our interests are always aligned with yours as our
principals and employees remain among the largest shareholders in the Fund.
Wayne F. Wilbanks
L. Norfleet Smith, Jr.
Norwood A. Thomas, Jr.
T. Carl Turnage
Lawrence A. Bernert, III
<PAGE>
WST GROWTH FUND
Institutional Class Shares
Performance Update - $25,000 Investment
For the period from September 30, 1997 (Date of Initial Public Investment)
to March 31, 2000
[Line graph here]:
--------------------------------------------------------------------------------
WST Growth Fund 60% S&P 500 Index/
Institutional 20% Lehman Inter. Gov't/Corp Bond Index
Class Shares 20% Russell 2000 Index
--------------------------------------------------------------------------------
9/30/97 $25,000 $25,000
12/31/97 25,502 25,383
3/31/98 28,179 28,124
6/30/98 28,453 28,572
9/30/98 24,759 26,005
12/31/98 30,575 30,165
3/31/99 31,873 30,894
6/30/99 33,670 33,030
9/30/99 30,675 31,369
12/31/99 34,893 35,381
3/31/00 35,442 36,259
This graph depicts the performance of the WST Growth Fund Institutional Class
Shares versus the combined index of 60% S&P 500 Index, 20% Lehman Intermediate
Government/Corporate Bond Index, and 20% Russell 2000 Index. It is important to
note that the WST Growth Fund is a professionally managed mutual fund while the
indexes are not available for investment and are unmanaged. The comparison is
shown for illustrative purposes only.
Average Annual Total Returns
-----------------------------------------
One Year Since Inception
-----------------------------------------
11.20% 14.97%
-----------------------------------------
The graph assumes an initial $25,000 investment at September 30, 1997 (inception
date). All dividends and distributions are reinvested.
At March 31, 2000, the WST Growth Fund Institutional Class Shares would have
grown to $35,442 - a cumulative total investment return of 41.77% since
September 30, 1997.
At March 31, 2000, a similar investment in the combined index of 60% S&P 500
Index, 20% Lehman Intermediate Government/Corporate Bond Index, and 20% Russell
2000 Index would have grown to $36,259 - a cumulative total investment return of
45.03% since September 30, 1997. The Lipper Growth and Income 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 results. A mutual fund's share
price and investment return will vary with market conditions, and the principal
value of shares, when redeemed, may be worth more or less than the original
cost. Average annual returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming
reinvestments of dividends.
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
WST GROWTH FUND
PORTFOLIO OF INVESTMENTS
March 31, 2000
------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - 97.51%
Beverages - 2.49%
PepsiCo, Inc. .......................................................... 15,700 $ 542,631
-----------
Broadcast - Radio & Television - 2.13%
(a)Cox Communications, Inc. ............................................... 9,600 465,600
-----------
Computers - 3.60%
(a)Dell Computer Corporation .............................................. 5,000 269,687
(a)Sun Microsystems, Inc. ................................................. 5,500 515,367
-----------
785,054
-----------
Computer Software & Services - 19.06%
Computer Associates International, Inc. ................................ 12,000 710,250
First Data Corporation ................................................. 12,000 530,250
Microsoft Corporation .................................................. 4,000 425,000
(a)Novell, Inc. ........................................................... 5,000 143,125
(a)Oracle Corporation ..................................................... 28,000 2,185,750
(a)Parametric Technology Corporation ...................................... 8,000 168,500
-----------
4,162,875
-----------
Cosmetics & Personal Care - 2.20%
Colgate-Palmolive Company .............................................. 3,000 169,125
(a)Playtex Products, Inc. ................................................. 24,000 312,000
-----------
481,125
-----------
Diversified Manufacturing - 4.67%
General Electric Company ............................................... 2,500 387,969
Honeywell, Inc. ........................................................ 12,000 632,250
-----------
1,020,219
-----------
Electronics - Semiconductor - 3.63%
Intel Corporation ...................................................... 6,000 791,625
-----------
Financial - Banks, Commercial - 2.88%
Bank of America Corporation ............................................ 5,000 262,188
Citigroup Inc. ......................................................... 5,000 296,563
Resource Bankshares Corporation ........................................ 7,700 69,300
-----------
628,051
-----------
Financial Services - 3.17%
American Express Company ............................................... 2,000 297,875
Fannie Mae ............................................................. 7,000 395,063
-----------
692,938
-----------
Insurance - Life & Health - 1.67%
AFLAC INCORPORATED .................................................... 8,000 365,000
-----------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
WST GROWTH FUND
PORTFOLIO OF INVESTMENTS
March 31, 2000
------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Insurance - Multiline - 2.51%
American International Group, Inc. ..................................... 5,000 $ 547,500
-----------
Medical Supplies - 1.77%
Johnson & Johnson ...................................................... 5,500 385,687
-----------
Miscellaneous - Manufacturing - 4.40%
Tyco International Ltd. ................................................ 19,000 960,687
-----------
Oil & Gas - Equipment & Services - 2.85%
Schlumberger, Limited .................................................. 8,000 622,000
-----------
Oil & Gas - Exploration - 2.50%
Exxon Mobil Corporation ................................................ 6,996 545,688
-----------
Pharmaceuticals - 4.12%
Bristol-Myers Squibb Company ........................................... 5,000 288,750
Merck & Co., Inc. ...................................................... 6,000 374,250
Pharmacia & Upjohn, Inc. ............................................... 4,000 237,000
-----------
900,000
-----------
Publishing - Newspaper - 2.17%
The New York Times Company ............................................. 11,000 473,000
-----------
Retail - General Merchandise - 3.82%
(a)Dollar Tree Stores, Inc. ............................................... 16,000 834,000
-----------
Retail - Specialty Line - 4.20%
CVS Corporation ........................................................ 12,000 450,750
Lowe's Companies, Inc. ................................................. 8,000 467,000
-----------
917,750
-----------
Telecommunications - 19.79%
ALLTEL Corporation ..................................................... 9,000 567,562
AT&T Corporation ....................................................... 8,143 459,571
Bell Atlantic Corporation .............................................. 5,000 305,625
Lucent Technologies Inc. ............................................... 9,000 546,750
(a)MCI WorldCom, Inc. ..................................................... 20,000 906,250
(a)Qwest Communications International, Inc. ............................... 4,000 192,000
(a)Tellabs, Inc. .......................................................... 8,000 503,875
Time Warner, Inc. ...................................................... 8,500 840,969
-----------
4,322,602
-----------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
WST GROWTH FUND
PORTFOLIO OF INVESTMENTS
March 31, 2000
------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Telecommunications Equipment - 3.88%
Nokia Oyj - ADR ........................................................ 1,000 $ 217,250
Nortel Networks Corporation ............................................ 5,000 630,000
-----------
847,250
-----------
Total Common Stocks (Cost $15,811,012) ................................................... 21,291,282
-----------
------------------------------------------------------------------------------------------------------------------------------------
Interest Maturity
Principal Rate Date
------------------------------------------------------------------------------------------------------------------------------------
CORPORATE OBLIGATION - 1.48%
Macsaver Financial Services ......................... $500,000 7.875% 08/01/03 322,500
(Cost $447,292) -----------
------------------------------------------------------------------------------------------------------------------------------------
Shares
------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT COMPANIES - 6.85%
Evergreen Money Market Treasury Institutional Money
Market Fund Institutional Service Shares ............................... 949,829 949,829
Evergreen Money Market Treasury Institutional Treasury
Money Market Fund Institutional Service Shares ......................... 545,541 545,541
-----------
Total Investment Companies (Cost $1,495,370) ............................................. 1,495,370
-----------
Total Value of Investments (Cost $17,753,674%(b)) .................................. 105.84 % $23,109,152
Liabilities In Excess of Other Assets .............................................. (5.84)% (1,275,220)
------ -----------
Net Assets .................................................................. 100.00 % $21,833,932
====== ===========
(a) Non-income producing investment.
(b) Aggregate cost for federal income tax purposes is $17,818,382. Unrealized appreciation (depreciation) of investments for
federal income tax purposes is as follows:
Unrealized appreciation .................................................................. $ 6,095,086
Unrealized depreciation .................................................................. (804,316)
-----------
Net unrealized appreciation .............................................. $ 5,290,770
===========
The following acronym is used in this portfolio:
ADR - American Depository Receipt
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
WST GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
March 31, 2000
ASSETS
Investments, at value (cost $17,753,674) .......................................................... $23,109,152
Cash .............................................................................................. 3,726
Income receivable ................................................................................. 18,643
Receivable for fund shares sold ................................................................... 2,117
Deferred organization expenses, net (note 4) ...................................................... 20,525
-----------
Total assets ................................................................................. 23,154,163
-----------
LIABILITIES
Accrued expenses .................................................................................. 22,784
Payable for investment purchases .................................................................. 1,294,820
Payable for fund shares redeemed .................................................................. 1,950
Other liabilities ................................................................................. 677
-----------
Total liabilities ............................................................................ 1,320,231
-----------
NET ASSETS ............................................................................................... $21,833,932
===========
NET ASSETS CONSIST OF
Paid-in capital ................................................................................... $17,655,490
Accumulated net realized loss on investments ...................................................... (1,177,036)
Net unrealized appreciation on investments ........................................................ 5,355,478
-----------
$21,833,932
===========
CLASS C
Net asset value, redemption and maximum offering price per share
($453,984 / 32,451 shares) ................................................................... $13.99
===========
INSTITUTIONAL CLASS
Net asset value, redemption and maximum offering price per share
($16,737,026 / 1,178,752 shares) ............................................................. $14.20
===========
INVESTOR CLASS
Net asset value, redemption and offering price per share .......................................... $14.02
($4,642,922 / 331,189 shares) ===========
Maximum offering price per share (100 / 96.25 of $14.02) .......................................... $14.57
===========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
WST GROWTH FUND
STATEMENT OF OPERATIONS
Year ended March 31, 2000
INVESTMENT LOSS
Income
Interest ...................................................................................... $ 55,224
Dividends ..................................................................................... 159,931
-----------
Total income ............................................................................ 215,155
-----------
Expenses
Investment advisory fees (note 2) ............................................................. 131,567
Fund administration fees (note 2) ............................................................. 30,699
Distribution and service fees - Investor Class shares (note 3) ................................ 18,962
Distribution and service fees - Class C shares (note 3) ....................................... 1,325
Custody fees .................................................................................. 3,905
Registration and filing administration fees (note 2) .......................................... 5,655
Fund accounting fees (note 2) ................................................................. 40,500
Audit fees .................................................................................... 11,317
Legal fees .................................................................................... 7,214
Securities pricing fees ....................................................................... 3,339
Shareholder recordkeeping fees ................................................................ 9,000
Shareholder servicing expenses ................................................................ 7,605
Registration and filing expenses .............................................................. 4,516
Printing expenses ............................................................................. 21,547
Amortization of deferred organization expenses (note 4) ....................................... 8,250
Trustee fees and meeting expenses ............................................................. 3,916
Other operating expenses ...................................................................... 4,810
-----------
Total expenses .......................................................................... 314,127
-----------
Less investment advisory fees waived (note 2) ........................................... (13,785)
-----------
Net expenses ............................................................................ 300,342
-----------
Net investment loss ................................................................ (85,187)
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized loss from investment transactions ..................................................... (555,913)
Increase in unrealized appreciation on investments ................................................. 2,771,724
-----------
Net realized and unrealized gain on investments ............................................... 2,215,811
-----------
Net increase in net assets resulting from operations .................................... $ 2,130,624
===========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
WST GROWTH FUND
STATEMENTS OF CHANGES IN NET ASSETS
------------------------------------------------------------------------------------------------------------------------------------
Year ended Year ended
March 31, March 31,
2000 1999
------------------------------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS
Operations
Net investment loss ...................................................... $ (85,187) $ (8,424)
Net realized loss from investment transactions ........................... (555,913) (578,937)
Increase in unrealized appreciation on investments ....................... 2,771,724 1,853,775
----------- -----------
Net increase in net assets resulting from operations ................. 2,130,624 1,266,414
----------- -----------
Capital share transactions
Increase in net assets resulting from capital share transactions (a) .... 5,744,786 5,552,729
----------- -----------
Total increase in net assets .................................... 7,875,410 6,819,143
NET ASSETS
Beginning of year ............................................................. 13,958,522 7,139,379
----------- -----------
End of year ................................................................... $21,833,932 $13,958,522
=========== ===========
(a) A summary of capital share activity follows:
-------------------------------------------------------------------------------------
Year ended Year ended
March 31, 2000 March 31, 1999
Shares Value Shares Value
-------------------------------------------------------------------------------------
----------------------------------------------
CLASS C (a)
----------------------------------------------
Shares sold .................................. 32,451 $ 426,228 0 $ 0
Shares redeemed .............................. 0 0 0 0
----------- ----------- ----------- -----------
Net increase ............................ 32,451 $ 426,228 0 $ 0
=========== =========== =========== ===========
----------------------------------------------
INSTITUTIONAL CLASS
----------------------------------------------
Shares sold .................................. 331,219 $ 4,408,827 361,611 $ 4,344,114
Shares redeemed .............................. (46,784) (604,849) (32,095) (380,601)
----------- ----------- ----------- -----------
Net increase ............................ 284,435 $ 3,803,978 329,516 $ 3,963,513
=========== =========== =========== ===========
----------------------------------------------
INVESTOR CLASS
----------------------------------------------
Shares sold .................................. 221,528 $ 2,686,217 143,763 $ 1,721,117
Shares redeemed .............................. (90,704) (1,171,637) (11,169) (131,901)
----------- ----------- ----------- -----------
Net increase ............................ 130,824 $ 1,514,580 132,594 $ 1,589,216
=========== =========== =========== ===========
----------------------------------------------
FUND SUMMARY
----------------------------------------------
Shares sold .................................. 585,198 $ 7,521,272 505,374 $ 6,065,231
Shares redeemed .............................. (137,488) (1,776,486) (43,264) (512,502)
----------- ----------- ----------- -----------
Net increase ............................ 447,710 $ 5,744,786 462,110 $ 5,552,729
=========== =========== =========== ===========
(a) For the period beginning May 20, 1999 (date of initial public investment) through March 31, 2000.
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
WST GROWTH FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
CLASS C
------------------------------------------------------------------------------------------------------------------------------------
For the
period from
May 20, 1999
(date of initial public
investment) to
March 31,
2000
------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ......................................................... $ 13.05
Income from investment operations
Net investment loss ............................................................... (0.06)
Net realized and unrealized gain on investments ................................... 1.00
---------
Total from investment operations ............................................ 0.94
---------
Net asset value, end of period ............................................................... $ 13.99
=========
Total return (a) ............................................................................. 7.20 %
=========
Ratios/supplemental data
Net assets, end of period .............................................................. $ 453,984
=========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees ..................................... 2.45 % (b)
After expense reimbursements and waived fees ...................................... 2.34 % (b)
Ratio of net investment (loss) income to average net assets
Before expense reimbursements and waived fees ..................................... (1.30)% (b)
After expense reimbursements and waived fees ...................................... (1.19)% (b)
Portfolio turnover rate ................................................................ 50.40 %
(a) Total return does not reflect payment of a sales charge.
(b) Annualized.
See accompanying notes to financial statements (Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
WST GROWTH FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
INSTITUTIONAL CLASS
------------------------------------------------------------------------------------------------------------------------------------
For the
period from
September 30, 1997
(date of initial public
Year ended Year ended investment) to
March 31, March 31, March 31,
2000 1999 1998
------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period .......................... $ 12.77 $ 11.29 $ 10.02
Income from investment operations
Net investment loss ................................ (0.04) 0.00 0.00
Net realized and unrealized gain on investments .... 1.47 1.48 1.27
----------- ----------- -----------
Total from investment operations ............. 1.43 1.48 1.27
----------- ----------- -----------
Net asset value, end of period ................................ $ 14.20 $ 12.77 $ 11.29
=========== =========== ===========
Total return (a) .............................................. 11.20 % 13.11 % 12.72 %
=========== =========== ===========
Ratios/supplemental data
Net assets, end of period ............................... $16,737,026 $11,419,391 $ 6,376,193
=========== =========== ===========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees ...... 1.68 %(b) 2.08 % 3.15 %(b)
After expense reimbursements and waived fees ....... 1.60 %(b) 1.75 % 1.75 %(b)
Ratio of net investment loss to average net assets
Before expense reimbursements and waived fees ...... (0.45)%(b) (0.35)% (1.31)%(b)
After expense reimbursements and waived fees ....... (0.37)%(b) (0.01)% 0.09 %(b)
Portfolio turnover rate ................................. 50.40 % 31.11 % 23.64 %
(a) Total return does not reflect payment of a sales charge.
(b) Annualized.
See accompanying notes to financial statements (Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
WST GROWTH FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
INVESTOR CLASS
------------------------------------------------------------------------------------------------------------------------------------
For the
period from
October 3, 1997
(date of initial public
Year ended Year ended investment) to
March 31, March 31, March 31,
2000 1999 1998
------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period .......................... $ 12.67 $ 11.26 $ 10.22
Income from investment operations
Net investment loss ................................ (0.10) (0.04) (0.01)
Net realized and unrealized gain on investments .... 1.45 1.45 1.05
----------- ----------- -----------
Total from investment operations ............. 1.35 1.41 1.04
----------- ----------- -----------
Net asset value, end of period ................................ $ 14.02 $ 12.67 $ 11.26
=========== =========== ===========
Total return (a) .............................................. 10.66 % 12.52 % 10.52 %
=========== =========== ===========
Ratios/supplemental data
Net assets, end of period ............................... $ 4,642,922 $ 2,539,131 $ 763,186
=========== =========== ===========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees ...... 2.15 %(b) 2.56 % 3.63 %(b)
After expense reimbursements and waived fees ....... 2.10 %(b) 2.25 % 2.10 %(b)
Ratio of net investment loss to average net assets
Before expense reimbursements and waived fees ...... (0.93)%(b) (0.84)% (1.70)%(b)
After expense reimbursements and waived fees ....... (0.88)%(b) (0.53)% (0.31)%(b)
Portfolio turnover rate ................................. 50.40 % 31.11 % 23.64 %
(a) Total return does not reflect payment of a sales charge.
(b) Annualized.
See accompanying notes to financial statements
</TABLE>
<PAGE>
WST GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
March 31, 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
The WST Growth Fund (the "Fund"), formerly known as the WST Growth &
Income Fund prior to January 3, 2000, is a diversified series of shares
of beneficial interest of The Nottingham Investment Trust II (the
"Trust"). The Trust, an open-end investment company, was organized on
October 18, 1990 as a Massachusetts Business Trust and is registered
under the Investment Company Act of 1940, as amended. The Fund began
operations on September 9, 1997. The investment objective of the fund
is to provide its shareholders with a maximum total return consisting
of any combination of capital appreciation, both realized and
unrealized, and income. The Board of Trustees of the Trust approved on
March 15, 1999 a plan to authorize a new class of shares designated as
Class C Shares. On May 20, 1999, the Class C Shares became effective.
The Fund has an unlimited number of authorized shares, which are
divided into three classes - Institutional Shares, Investor Shares, and
Class C.
Each class of shares has equal rights as to assets of the Fund, and the
classes are identical except for differences in their sales charge
structures and ongoing distribution and service fees. Income, expenses
(other than distribution and service fees, which are only attributable
to the Class C and Investor Class), and realized and unrealized gains
or losses on investments are allocated to each class of shares based
upon its relative net assets. Investor Shares purchased are subject to
a maximum sales charge of 3.75%. All three classes have equal voting
privileges, except where otherwise required by law or when the Board of
Trustees determines that the matter to be voted on affects only the
interests of the shareholders of a particular class. The following is a
summary of significant accounting policies followed by the Fund.
A. Security Valuation - The Fund's investments in securities are
carried at value. Securities listed on an exchange or quoted
on a national market system are valued at 4:00 p.m., New York
time. Other securities traded in the over-the-counter market
and listed securities for which no sale was reported on that
date are valued at the most recent bid price. Securities for
which market quotations are not readily available, if any, are
valued by using an independent pricing service or by following
procedures approved by the Board of Trustees. Short-term
investments are valued at cost which approximates value.
B. Federal Income Taxes - No provision has been made for federal
income taxes since it is the policy of the Fund to comply with
the provisions of the Internal Revenue Code applicable to
regulated investment companies and to make sufficient
distributions of taxable income to relieve it from all federal
income taxes.
The Fund has capital loss carryforwards for federal income tax
purposes of $919,853, of which $42,186 expires in the year
2006, $342,266 expires in the year 2007 and $535,401 expires
in the year 2008. 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.
As a result of the Fund's operating net investment loss, a
reclassification adjustment of $85,187 has been made on the
statement of assets and liabilities to decrease accumulated
net investment loss, bringing it to zero, and decrease paid in
capital.
(Continued)
<PAGE>
WST GROWTH FUND
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 to shareholders made during the year from net
investment income or net realized gains may differ from their
ultimate characterization for federal income tax purposes.
Also, due to the timing of dividend distributions, the fiscal
year in which amounts are distributed may differ from the year
that the income or realized gains were recorded by the Fund.
C. Investment Transactions - Investment transactions are recorded
on trade date. Realized gains and losses are determined using
the specific identification cost method. Interest income is
recorded daily on an accrual basis. Dividend income is
recorded on the ex-dividend date
D. Distributions to Shareholders - The Fund may declare dividends
quarterly, payable in March, June, September, and December on
a date selected by the Trust's Trustees. In addition,
distributions may be made annually in December out of net
realized gains through October 31 of that year. The Fund may
make a supplemental distribution subsequent to the end of its
fiscal year ending March 31.
E. Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the amounts of assets, liabilities, expenses and
revenues reported in the financial statements. Actual results
could differ from those estimates.
NOTE 2 - INVESTMENT ADVISORY FEE AND OTHER RELATED PARTY TRANSACTIONS
Pursuant to an investment advisory agreement, Wilbanks, Smith & Thomas
Asset Management, Inc. (the "Advisor"), provides the fund with a
continuous program of supervision of the Fund's assets, including the
composition of its portfolio, and furnishes advice and recommendations
with respect to investments, investment policies, and the purchase and
sale of securities. As compensation for its services, the Advisor
receives a fee at the annual rate of 0.75% of the first $250 million of
the Fund's average daily net assets and 0.65% of all assets over $250
million.
The Advisor currently intends to voluntarily waive all or a portion of
its fee and to reimburse expenses of the Fund to limit total Fund
operating expenses to a maximum of 1.75% of the average daily net
assets of the Fund's Institutional Class, a maximum of 2.25% of the
average daily net assets of the Fund's Investor Class, and a maximum of
2.50% of the average daily net assets of the Fund's Class C. There can
be no assurance that the foregoing voluntary fee waivers or
reimbursements will continue. The Advisor has voluntarily waived a
portion of its fee amounting to $13,785 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 an accounting and administrative agreement with the Trust. As
compensation for its services, the Administrator receives a fee at the
annual rate of 0.175% of the Fund's first $50 million of average daily
net assets, 0.15% of the next $50 million, 0.125% of the next $50
(Continued)
<PAGE>
WST GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
March 31, 2000
million, and 0.10% of average daily net assets over $150 million. The
Administrator also receives a monthly fee of $2,000 for accounting and
record-keeping services for the initial class of shares and $750 per
month for each additional class of shares. 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.
North Carolina Shareholder Services, LLC (the "Transfer Agent") serves
as the Fund's transfer, dividend paying, and shareholder servicing
agent. The Transfer Agent maintains the records of each shareholder's
account, answers shareholder inquiries concerning accounts, processes
purchases and redemptions of the Fund's shares, acts as dividend and
distribution disbursing agent, and performs other shareholder servicing
functions.
Certain Trustees and officers of the Trust are also officers or
directors of the Advisor, the Distributor, or the Administrator.
NOTE 3 - DISTRIBUTION AND SERVICE FEES
The Board of Trustees, including the Trustees who are not "interested
persons" of the Trust as defined in the Investment Company Act of 1940
(the "Act"), adopted a distribution and service plan pursuant to Rule
12b-1 of the Act (the "Plan") applicable to the Investor and Class C
Shares. The Act regulates the manner in which a regulated investment
company may assume costs of distributing and promoting the sales of its
shares and servicing of its shareholder accounts.
The Plan provides that the Fund may incur certain costs, which may not
exceed 0.50% and 0.75% per annum of the average daily net assets of
Investor Shares and Class C Shares, respectively, for each year elapsed
subsequent to adoption of the Plan, for payment to the Distributor and
others for items such as advertising expenses, selling expenses,
commissions, travel, or other expenses reasonably intended to result in
sales of Investor Shares in the Fund or support servicing of Investor
Share shareholder accounts. Such expenditures incurred as service fees
may not exceed 0.25% per annum of the Investor Class and Class C
Shares' average daily net assets. The Fund incurred $18,962 of such
expenses for the Investor class and $1,325 of such expenses for the
Class C shares under the Plan for the year ended March 31, 2000.
NOTE 4 - DEFERRED ORGANIZATION EXPENSES
All expenses of the Fund incurred in connection with its organization
and the registration of its shares have been assumed by the Fund. The
organization expenses are being amortized over a period of sixty
months. Investors purchasing shares of the Fund bear such expenses only
as they are amortized against the Fund's investment income.
NOTE 5 - PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments, other than short-term investments,
aggregated $14,487,255 and $8,498,090, 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
WST Growth Fund:
We have audited the accompanying statement of assets and liabilities of WST
Growth Fund, 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 periods presented. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our 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
and brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of WST
Growth Fund 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 periods, in conformity with accounting principles generally
accepted in the United States of America.
/s/ Deloitte & Touche LLP
Princeton, New Jersey
April 20, 2000
<PAGE>
________________________________________________________________________________
[LOGO]
WST GROWTH FUND
________________________________________________________________________________
a series of The Nottingham Investment Trust II
INVESTOR SHARES
ANNUAL REPORT 2000
FOR THE YEAR ENDED MARCH 31, 2000
INVESTMENT ADVISOR
Wilbanks, Smith & Thomas Asset Management, Inc.
One Commercial Place, Suite 1450
Norfolk, Virginia 23510
WST GROWTH FUND
105 North Washington Street
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069
1-800-525-3863
This Report has been prepared for shareholders
and may be distributed to others only if preceded
or accompanied by a current prospectus.
<PAGE>
[LETTERHEAD]
Annual Report
WST Growth Fund
Investor Shares
It is our pleasure to enclose the annual report for the WST Growth Fund. This
letter highlights the progress of the Fund during the last twelve months and
outlines our expectations for the coming year. Stocks are experiencing one of
their most volatile weeks on record as we write this note so please view these
comments in the light of a highly dynamic market. We appreciate the confidence
you have placed us to manage your assets and we are working diligently to
maximize the performance of those assets.
The management team at Wilbanks, Smith & Thomas made several important decisions
regarding the Fund last year. Most importantly we shifted the investment focus
of the Fund to a pure growth orientation from the original growth and income
policy. The shift allows us to better match the strategy of the Fund with goals
of our investors. The elimination of the income objective also allows us to
align the Fund's holdings with the firm's standard equity model. We made these
changes after discussions with many shareholders and believe that by
repositioning the Fund as a pure growth portfolio we will enhance the
performance of your holdings.
Performance Analysis: Technology and Telecommunications Rule!
A review of the last year's performance data reveals that there were truly two
stock markets. Owners of technology and telecommunication stocks enjoyed another
year of watching the NASDAQ skyrocket while entire sectors including finance,
consumer cyclicals, and health care stocks traded lower throughout the year.
A number of well-publicized statistics highlight the discrepancy between tech
and all the rest in 1999. The average technology stock in the S&P 500 rose 74.5%
while the average non-technology stock was up 4.5%. 61% of the stocks on the New
York Stock Exchange declined during 1999, and approximately 25 stocks made up
100% of the return in the S&P 500. The majority of these issues were in the
technology and telecommunications sectors. When you consider that 475 of the 500
stocks in the index combined to generate a 0% return last year, it is easy to
understand our excitement at the opportunities this group of stocks presents us
now.
Your Fund enjoyed positive returns over the twelve months ending March 31st of
10.66%. This return compared favorably with the 5.42% return of the Lipper
Multi-Cap Value Index to which we are normally compared. The portfolio posted
strong results during the fiscal third quarter and matched the return of the S&P
500 during the final quarter. The Fund has delivered a 13.53% annualized rate of
return since inception^1, outpacing the Multi-cap Value Index. Our shift in
focus to an all equity strategy will result in performance more in line with the
large cap indices with which most of our shareholders are familiar.
<PAGE>
The Fund's turnover rate was 50% last year, a figure well below the 90% turnover
rate of the average growth equity fund. More importantly the Fund generated zero
capital gains during the calendar year, a result that underlines its tax
efficiency. Our goal will continue to be minimizing realized gains wherever
possible.
The expense ratio in the Fund continued to decline as assets exceeded $21
million. The bottom line will be impacted positively as the ratio drops with
asset growth.
Fiscal 2000 In Review:
The Trend Remains the Same
When reviewing the 1999 Annual Report for the WST Growth Fund we noticed several
similarities between that year and Fiscal 2000. The interest rate driven
sell-off in growth stocks in the third quarter of 1999 was reminiscent of the
buying opportunity created in October 1998 by the collapse of the Russian
economy and the failure of Long Term Capital Management and other hedge funds.
The narrow breadth of the market discussed above was also a topic last year. By
narrow breadth we mean that a very small number of large capitalization growth
companies have generated all of the market's performance over the past two
years. This trend continued into the first calendar quarter of 2000 but began to
reverse in late March and early April. Later in this report we will discuss in
detail the difference between old and new economy stocks but it is clear that
investors have favored new economy stocks and have been willing to set
fundamentals and valuation aside in their quest for performance.
The chaotic market activity we are experiencing now is the beginning of the
unwinding of some of the performance and valuation disparities between
technology and telecommunication stocks and the rest of the market. While we
expect the market to broaden this year it will continue to be dominated by the
mid and large capitalization growth companies.
Volatility and the "New Economy"
As outlined above both the stock and bond markets endured the most violent
intra-quarter volatility in recent memory during the first quarter of 2000.
Morgan Stanley strategist Barton Biggs, a veteran market watcher, described it
as the most volatile market he has seen in his career.
The essence of the maelstrom is the war raging between Old and New economy
stocks. Old economy stocks include financial companies, capital goods producers,
"bricks and mortar" retailers and any other companies not included in the
Internet driven "TMT" sectors (Telecommunications, Media and Technology) that
make up the new economy. After the first ten weeks of the first calendar quarter
of 2000 the new economy companies appeared indomitable as they raced to a
performance edge that had many wondering if 2000 will be a replay of 1999.
Despite a 10% decline at the end of March, the NASDAQ market, which is heavily
weighted in these new economy companies, remains the driver of year to date
performance. In fact, the market narrowed further around these companies during
2000, and at one point the NASDAQ Index was up 20% year to date while the Dow
Jones Industrial Average was down 5%. Small and mid capitalization companies
continued their surge relative to large cap stocks during the quarter, finishing
with gains far outpacing their larger brethren.
<PAGE>
The volatility statistics for the past three months are amazing. The S&P 500
declined over 10% during the first two months, then posted a rally of 15% during
the subsequent three weeks. The last week of the quarter degenerated to absolute
market havoc with the end result being a gain of 2% for the S&P for the quarter.
The Dow Jones declined 4.7% while the NASDAQ increased 12.9% over the same
period.
"Hot" Money Flows to Technology
Mutual fund money flows account for much of the market's action. The massive
amounts of dollars flowing into growth and aggressive growth funds over the past
several quarters have required the managers of those funds continually to put
money to work by buying more of their stocks regardless of valuation.
Conversely, money flows out of value funds and away from value managers have
driven the forced liquidation of stocks held by these funds and resulted in the
ever-widening gap between classic growth and value.
The damage was so bad and the sentiment so negative for value investors that two
of the industry's most successful value investors retired during the first
quarter. First, Bob Sanborn stepped down as manager of the Oakmark Fund. His
retirement was driven by his frustration at the valuations of the new economy
stocks and the lack of respect paid by the market to his old economy holdings.
Next Julian Robertson, the famed manager of the $6 billion Tiger Fund, announced
that he would retire and liquidate his portfolio. In his exit interview he cited
his inability to understand the current market. Any investor with even a hint of
contrarian nature would cite these two retirements as evidence that valuations
will matter again one day, and we agree. Ironically, sanity seemed to return to
the markets shortly after these announcements as the unreasonably priced biotech
and Internet stocks imploded and old economy sectors began their rebound.
What lessons are we to learn from these events? First, our earnings growth based
stock selection process continues to work. We have avoided the pitfalls
associated with owning concept stocks with unproven business models or
inexperienced management teams, but we have participated fully in the growth of
the TMT economy by owning its "best in class" participants. Second, when the
flow of funds begins to shift out of the richly valued names and into the more
reasonably priced stocks, the price impact on the recipients of those fund flows
will be significant. For example, Fidelity's Magellan Fund holds $100 billion in
assets. A normal position in the fund is $3-4 billion. The door seems very small
when large players like Fidelity begin to establish positions in any but the
largest stocks.
The underlying fundamentals of the companies in the Fund continue to be
excellent. Although the technology stocks have posted impressive earnings gains
over the past twelve months, the reported profits of other holdings have proven
as strong as ever.
Dollar Tree Stores - A Bargain Price Every Day
A perfect example of the liquidity phenomenon addressed above is the price
action of Dollar Tree Stores over the past four months. As we have discussed at
great length, Wilbanks Smith and Thomas's goal is to buy, at reasonable prices,
great growth businesses run by highly intelligent and motivated management
teams. Dollar Tree Stores is a mid-size retailing company that fits this model.
We have researched the company extensively and spent significant time with
senior management including Macon Brock, the company's C.E.O. His team has the
experience and discipline to build their business over the next 5 - 10 years at
a pace which will rival the early growth of Wal-Mart.
Despite the company's fundamentals the stock exhibited dramatic volatility over
the past six months with relatively little trading volume. The company has
traded in a range between $32 and $54 with no change in fundamentals and an
outlook that continues to brighten. Wilbanks, Smith & Thomas has taken advantage
of the volatility to build the Fund's positions, especially as the company drops
into the $30 range. We recommended the stock on CNBC at $33 and $38 per share.
We believe that the large growth mutual funds will return to the stock
eventually and will drive it higher as they attempt to reestablish positions
liquidated during 1999.
Research: In Search of the Next Oracle
In our last update we discussed in great detail the process that led to our
investment in Oracle Corporation. The basis of that decision was our belief that
Wall Street did not recognize the magnitude of the opportunity that Larry
Ellison and his management team were trying to exploit through the design of a
complete mission critical database software system for the Internet. Surely
Oracle benefited from the massive move in technology stocks, but the stock's
performance was driven mainly by the growing recognition on Wall Street that the
company is perfectly positioned with a set of products that will lead the market
in enabling Internet commerce.
Using the Oracle investment as a model, our research team has spent countless
days on the road visiting our current holdings and potential new ones and
increasing our focus on the technology and telecommunication sectors. Our
mission is to repeat the Oracle success by uncovering other companies with the
potential to be revalued based on their association with the Internet.
A recent purchase that fits this model is Computer Associates. As in the case of
Oracle in 1998, most analysts' valuation of Computer Associates is based upon
their legacy mainframe software business, which is a relatively slow growth
business. However, the company has built large, fast growing businesses in both
data storage software and Internet security. In the past several months we met
with the senior management of the company in both New York and at their "CA
World" trade show New Orleans. The picture that has emerged is that of a company
with a truly exceptional business model that can be purchased at an
exceptionally reasonable price (21 times earnings).
CEO Sanjay Kumar is communicating to Wall Street the opportunity presented by
the several billions of dollars of revenues the company can generate from its
Internet businesses. His goal is to convince Wall Street to reclassify the
company as an Internet investment. The result will be a substantially higher
price/earnings ratio and stock price. It is difficult to predict when the
discovery will occur but we are comfortable waiting patiently for the value to
be recognized.
<PAGE>
The price of Computer Associates' stock price could double in the next six
months with no change in fundamentals. Contrast that scenario, purchasing a
solid growth company at 21 times earnings, with an investment in Cisco Systems
at a price earnings ratio of 143 times earnings. Without a doubt Cisco is the
leader in the Internet infrastructure gold rush, but perhaps Wall Streets' great
expectations for the company are already reflected in the stock price.
Historically it has been very difficult to make money in stocks purchased at 150
times earnings irrespective of even the most perfect fundamentals.
Second Quarter Technology Turmoil??
Forecasting the direction of the financial markets is a dangerous pastime and is
fraught with pitfalls. In our last quarterly update we predicted a 10% - 15%
correction in the equity markets during the first quarter with Internet stocks
leading the decline. In retrospect our market call was half correct as the Dow
Jones Industrial average declined approximately 15% by the end of February.
However, the old economy stocks led the retreat rather than Internet and tech
related issues. Our other prediction was that interest rates would peak below
7%. Ironically, and much to Alan Greenspan's dismay, long-term interest rates
declined from 6.75% to 5.9% at quarter-end. This decline flies in the face of
his restrictive monetary policy that has led to five rate hikes in the past six
months.
The most critical variable in the market now is clear: how will the NASDAQ Index
unravel its extremely overvalued condition? The answer to this question will
drive financial markets over the next six months. The NASDAQ Index is currently
almost 40% above its 200-day moving average, a condition not seen since 1991.
Although this is a sign of a powerful trend it also presents a precarious
technical condition for the strongest segment of the economy and market. The
average stock in the NASDAQ 100 Index currently trades for over 90 times
earnings, a level considered excessive under any valuation model.
The market will either digest this condition with a sharp correction as it did
in October 1998, or it will unravel slowly as it did in the first half of 1998.
Either way, investors can expect continued volatility. We expect market action
like we saw during the last three weeks of the first quarter. While certain
sectors such as biotechs collapsed, dropping 25% over a period of days, the
overall index endured a more moderate 10%- 12% correction, albeit through a
series of very violent sell-offs of 3% - 4% daily. Importantly, the money
flowing out of the NASDAQ flowed into the old economy stocks as we discussed
above, benefiting the financials and capital goods makers like Honeywell and
Tyco.
As we often point out, the Fund is full of quality companies trading at prices
comparable to those several years ago. Bank of America, Fannie Mae, New York
Times, CVS, and MCI Worldcom have all made great fundamental progress yet Wall
Street values them at the same levels it did in 1998. Like shoppers at K-Mart's
Blue Light Special, we are happy to take advantage of these discounts! In these
cases the powerful combination of a positive economic and political backdrop
coupled with good business fundamentals and strong free cash flow clearly
indicate higher stock prices down the road.
<PAGE>
New Economy or Bust!
The research team at Wilbanks, Smith & Thomas has never been more excited about
the opportunities we see the economy and market presenting us. Putting aside for
a minute the old economy/new economy debate, we recognize the importance of the
fundamental changes the Internet is causing in all areas of commerce and daily
life. Investors must make adjustments to their portfolios to take advantage of
this secular change. Our challenge is to find the future winners and buy them
while they are priced reasonably, and we see many opportunities in both the
technology and telecommunication sectors. Clearly an investment in these sectors
requires more flexibility and tolerance for short term volatility than some
investors are accustomed to. Still, we believe that managers who ignore these
trends will be left behind as the new economy streaks ahead.
Having said that, it is also a very risky time for investors who ignore
valuations. Stock charts of former favorites like eToys, Excite-at-Home or Red
Hat remind us that regardless of a company's potential there are times when its
stock is simply too expensive. To us it makes no sense to invest in companies
that have not and most likely never will earn a dollar. As we remind our
clients, only our 35 to 45 best ideas make it into the Fund. The stocks that do
make it need to be the best possible combination of growth business models,
skillful management, and attractive valuations.
Our equity research team is in the process of developing a white paper on the
technology and telecommunications sectors. This document will be posted to our
website during the next several months and should be helpful in outlining our
focus. We are spending an increasing amount of time in both Silicon Valley and
New York meeting with industry leaders and visionaries and honing our investment
process. We look forward to sharing our thoughts with you.
Thank you for your continued confidence in the WST Growth Fund. Patience and a
strong investment discipline are keys to victory in the equity markets. We are
excited about the coming year and the opportunities that will present
themselves. Please know that our interests are always aligned with yours as our
principals and employees remain among the largest shareholders in the Fund.
Wayne F. Wilbanks
L. Norfleet Smith, Jr.
Norwood A. Thomas, Jr.
T. Carl Turnage
Lawrence A. Bernert, III
______________________
1 Footnote - Annual return for the Investor Class shares would be 6.51% net of
the 3.75% sales charge. The annualized since inception return would be 11.80%.
<PAGE>
WST GROWTH FUND
Investor Class Shares
Performance Update - $10,000 Investment
For the period from October 3, 1997 (Date of Initial Public Investment)
to March 31, 2000
[Line graph here]:
--------------------------------------------------------------------------------
WST Growth Fund 60% S&P 500 Index/
Investor 20% Lehman Inter. Gov't/Corp Bond Index
Class Shares 20% Russell 2000 Index
--------------------------------------------------------------------------------
10/3/97 $ 9,625 $10,000
12/31/97 9,607 10,015
3/31/98 10,606 11,093
6/30/98 10,701 11,268
9/30/98 9,297 10,261
12/31/98 11,463 11,895
3/31/99 11,934 12,181
6/30/99 12,593 13,021
9/30/99 11,454 12,368
12/31/99 13,017 13,946
3/31/00 13,206 14,292
This graph depicts the performance of the WST Growth Fund Investor Class Shares
versus the combined index of 60% S&P 500 Index, 20% Lehman Intermediate
Government/Corporate Bond Index, and 20% Russell 2000 Index. It is important to
note that the WST Growth Fund is a professionally managed mutual fund while the
indexes are not available for investment and are unmanaged. The comparison is
shown for illustrative purposes only.
Average Annual Total Returns
--------------------------------------------------------------------------
One Year Since Inception
--------------------------------------------------------------------------
No Sales Load 10.66% 13.53%
--------------------------------------------------------------------------
Maximum 3.75% Sales Load 6.51% 11.80%
--------------------------------------------------------------------------
The graph assumes an initial $10,000 investment ($9,625 after maximum sales load
of 3.75%) at October 3, 1997 (inception date). All dividends and distributions
are reinvested.
At March 31, 2000, the WST Growth Fund Investor Class Shares would have grown to
$13,206 - a cumulative total investment return of 32.06% since October 3, 1997.
Without the deduction of the 3.75% maximum sales load, the WST Growth Fund
Investor Class Shares would have grown to $13,720 - a cumulative total
investment return of 37.20% since October 3, 1997.
At March 31, 2000, a similar investment in the combined index of 60% S&P 500
Index, 20% Lehman Intermediate Government/Corporate Bond Index, and 20% Russell
2000 Index would have grown to $14,292 - a cumulative total investment return of
42.92% since October 3, 1997. The Lipper Growth and Income 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 results. A mutual fund's share
price and investment return will vary with market conditions, and the principal
value of shares, when redeemed, may be worth more or less than the original
cost. Average annual returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming
reinvestments of dividends.
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
WST GROWTH FUND
PORTFOLIO OF INVESTMENTS
March 31, 2000
------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - 97.51%
Beverages - 2.49%
PepsiCo, Inc. .......................................................... 15,700 $ 542,631
-----------
Broadcast - Radio & Television - 2.13%
(a)Cox Communications, Inc. ............................................... 9,600 465,600
-----------
Computers - 3.60%
(a)Dell Computer Corporation .............................................. 5,000 269,687
(a)Sun Microsystems, Inc. ................................................. 5,500 515,367
-----------
785,054
-----------
Computer Software & Services - 19.06%
Computer Associates International, Inc. ................................ 12,000 710,250
First Data Corporation ................................................. 12,000 530,250
Microsoft Corporation .................................................. 4,000 425,000
(a)Novell, Inc. ........................................................... 5,000 143,125
(a)Oracle Corporation ..................................................... 28,000 2,185,750
(a)Parametric Technology Corporation ...................................... 8,000 168,500
-----------
4,162,875
-----------
Cosmetics & Personal Care - 2.20%
Colgate-Palmolive Company .............................................. 3,000 169,125
(a)Playtex Products, Inc. ................................................. 24,000 312,000
-----------
481,125
-----------
Diversified Manufacturing - 4.67%
General Electric Company ............................................... 2,500 387,969
Honeywell, Inc. ........................................................ 12,000 632,250
-----------
1,020,219
-----------
Electronics - Semiconductor - 3.63%
Intel Corporation ...................................................... 6,000 791,625
-----------
Financial - Banks, Commercial - 2.88%
Bank of America Corporation ............................................ 5,000 262,188
Citigroup Inc. ......................................................... 5,000 296,563
Resource Bankshares Corporation ........................................ 7,700 69,300
-----------
628,051
-----------
Financial Services - 3.17%
American Express Company ............................................... 2,000 297,875
Fannie Mae ............................................................. 7,000 395,063
-----------
692,938
-----------
Insurance - Life & Health - 1.67%
AFLAC INCORPORATED .................................................... 8,000 365,000
-----------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
WST GROWTH FUND
PORTFOLIO OF INVESTMENTS
March 31, 2000
------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Insurance - Multiline - 2.51%
American International Group, Inc. ..................................... 5,000 $ 547,500
-----------
Medical Supplies - 1.77%
Johnson & Johnson ...................................................... 5,500 385,687
-----------
Miscellaneous - Manufacturing - 4.40%
Tyco International Ltd. ................................................ 19,000 960,687
-----------
Oil & Gas - Equipment & Services - 2.85%
Schlumberger, Limited .................................................. 8,000 622,000
-----------
Oil & Gas - Exploration - 2.50%
Exxon Mobil Corporation ................................................ 6,996 545,688
-----------
Pharmaceuticals - 4.12%
Bristol-Myers Squibb Company ........................................... 5,000 288,750
Merck & Co., Inc. ...................................................... 6,000 374,250
Pharmacia & Upjohn, Inc. ............................................... 4,000 237,000
-----------
900,000
-----------
Publishing - Newspaper - 2.17%
The New York Times Company ............................................. 11,000 473,000
-----------
Retail - General Merchandise - 3.82%
(a)Dollar Tree Stores, Inc. ............................................... 16,000 834,000
-----------
Retail - Specialty Line - 4.20%
CVS Corporation ........................................................ 12,000 450,750
Lowe's Companies, Inc. ................................................. 8,000 467,000
-----------
917,750
-----------
Telecommunications - 19.79%
ALLTEL Corporation ..................................................... 9,000 567,562
AT&T Corporation ....................................................... 8,143 459,571
Bell Atlantic Corporation .............................................. 5,000 305,625
Lucent Technologies Inc. ............................................... 9,000 546,750
(a)MCI WorldCom, Inc. ..................................................... 20,000 906,250
(a)Qwest Communications International, Inc. ............................... 4,000 192,000
(a)Tellabs, Inc. .......................................................... 8,000 503,875
Time Warner, Inc. ...................................................... 8,500 840,969
-----------
4,322,602
-----------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
WST GROWTH FUND
PORTFOLIO OF INVESTMENTS
March 31, 2000
------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Telecommunications Equipment - 3.88%
Nokia Oyj - ADR ........................................................ 1,000 $ 217,250
Nortel Networks Corporation ............................................ 5,000 630,000
-----------
847,250
-----------
Total Common Stocks (Cost $15,811,012) ................................................... 21,291,282
-----------
------------------------------------------------------------------------------------------------------------------------------------
Interest Maturity
Principal Rate Date
------------------------------------------------------------------------------------------------------------------------------------
CORPORATE OBLIGATION - 1.48%
Macsaver Financial Services ......................... $500,000 7.875% 08/01/03 322,500
(Cost $447,292) -----------
------------------------------------------------------------------------------------------------------------------------------------
Shares
------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT COMPANIES - 6.85%
Evergreen Money Market Treasury Institutional Money
Market Fund Institutional Service Shares ............................... 949,829 949,829
Evergreen Money Market Treasury Institutional Treasury
Money Market Fund Institutional Service Shares ......................... 545,541 545,541
-----------
Total Investment Companies (Cost $1,495,370) ............................................. 1,495,370
-----------
Total Value of Investments (Cost $17,753,674%(b)) .................................. 105.84 % $23,109,152
Liabilities In Excess of Other Assets .............................................. (5.84)% (1,275,220)
------ -----------
Net Assets .................................................................. 100.00 % $21,833,932
====== ===========
(a) Non-income producing investment.
(b) Aggregate cost for federal income tax purposes is $17,818,382. Unrealized appreciation (depreciation) of investments for
federal income tax purposes is as follows:
Unrealized appreciation .................................................................. $ 6,095,086
Unrealized depreciation .................................................................. (804,316)
-----------
Net unrealized appreciation .............................................. $ 5,290,770
===========
The following acronym is used in this portfolio:
ADR - American Depository Receipt
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
WST GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
March 31, 2000
ASSETS
Investments, at value (cost $17,753,674) .......................................................... $23,109,152
Cash .............................................................................................. 3,726
Income receivable ................................................................................. 18,643
Receivable for fund shares sold ................................................................... 2,117
Deferred organization expenses, net (note 4) ...................................................... 20,525
-----------
Total assets ................................................................................. 23,154,163
-----------
LIABILITIES
Accrued expenses .................................................................................. 22,784
Payable for investment purchases .................................................................. 1,294,820
Payable for fund shares redeemed .................................................................. 1,950
Other liabilities ................................................................................. 677
-----------
Total liabilities ............................................................................ 1,320,231
-----------
NET ASSETS ............................................................................................... $21,833,932
===========
NET ASSETS CONSIST OF
Paid-in capital ................................................................................... $17,655,490
Accumulated net realized loss on investments ...................................................... (1,177,036)
Net unrealized appreciation on investments ........................................................ 5,355,478
-----------
$21,833,932
===========
CLASS C
Net asset value, redemption and maximum offering price per share
($453,984 / 32,451 shares) ................................................................... $13.99
===========
INSTITUTIONAL CLASS
Net asset value, redemption and maximum offering price per share
($16,737,026 / 1,178,752 shares) ............................................................. $14.20
===========
INVESTOR CLASS
Net asset value, redemption and offering price per share .......................................... $14.02
($4,642,922 / 331,189 shares) ===========
Maximum offering price per share (100 / 96.25 of $14.02) .......................................... $14.57
===========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
WST GROWTH FUND
STATEMENT OF OPERATIONS
Year ended March 31, 2000
INVESTMENT LOSS
Income
Interest ...................................................................................... $ 55,224
Dividends ..................................................................................... 159,931
-----------
Total income ............................................................................ 215,155
-----------
Expenses
Investment advisory fees (note 2) ............................................................. 131,567
Fund administration fees (note 2) ............................................................. 30,699
Distribution and service fees - Investor Class shares (note 3) ................................ 18,962
Distribution and service fees - Class C shares (note 3) ....................................... 1,325
Custody fees .................................................................................. 3,905
Registration and filing administration fees (note 2) .......................................... 5,655
Fund accounting fees (note 2) ................................................................. 40,500
Audit fees .................................................................................... 11,317
Legal fees .................................................................................... 7,214
Securities pricing fees ....................................................................... 3,339
Shareholder recordkeeping fees ................................................................ 9,000
Shareholder servicing expenses ................................................................ 7,605
Registration and filing expenses .............................................................. 4,516
Printing expenses ............................................................................. 21,547
Amortization of deferred organization expenses (note 4) ....................................... 8,250
Trustee fees and meeting expenses ............................................................. 3,916
Other operating expenses ...................................................................... 4,810
-----------
Total expenses .......................................................................... 314,127
-----------
Less investment advisory fees waived (note 2) ........................................... (13,785)
-----------
Net expenses ............................................................................ 300,342
-----------
Net investment loss ................................................................ (85,187)
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized loss from investment transactions ..................................................... (555,913)
Increase in unrealized appreciation on investments ................................................. 2,771,724
-----------
Net realized and unrealized gain on investments ............................................... 2,215,811
-----------
Net increase in net assets resulting from operations .................................... $ 2,130,624
===========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
WST GROWTH FUND
STATEMENTS OF CHANGES IN NET ASSETS
------------------------------------------------------------------------------------------------------------------------------------
Year ended Year ended
March 31, March 31,
2000 1999
------------------------------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS
Operations
Net investment loss ...................................................... $ (85,187) $ (8,424)
Net realized loss from investment transactions ........................... (555,913) (578,937)
Increase in unrealized appreciation on investments ....................... 2,771,724 1,853,775
----------- -----------
Net increase in net assets resulting from operations ................. 2,130,624 1,266,414
----------- -----------
Capital share transactions
Increase in net assets resulting from capital share transactions (a) .... 5,744,786 5,552,729
----------- -----------
Total increase in net assets .................................... 7,875,410 6,819,143
NET ASSETS
Beginning of year ............................................................. 13,958,522 7,139,379
----------- -----------
End of year ................................................................... $21,833,932 $13,958,522
=========== ===========
(a) A summary of capital share activity follows:
-------------------------------------------------------------------------------------
Year ended Year ended
March 31, 2000 March 31, 1999
Shares Value Shares Value
-------------------------------------------------------------------------------------
----------------------------------------------
CLASS C (a)
----------------------------------------------
Shares sold .................................. 32,451 $ 426,228 0 $ 0
Shares redeemed .............................. 0 0 0 0
----------- ----------- ----------- -----------
Net increase ............................ 32,451 $ 426,228 0 $ 0
=========== =========== =========== ===========
----------------------------------------------
INSTITUTIONAL CLASS
----------------------------------------------
Shares sold .................................. 331,219 $ 4,408,827 361,611 $ 4,344,114
Shares redeemed .............................. (46,784) (604,849) (32,095) (380,601)
----------- ----------- ----------- -----------
Net increase ............................ 284,435 $ 3,803,978 329,516 $ 3,963,513
=========== =========== =========== ===========
----------------------------------------------
INVESTOR CLASS
----------------------------------------------
Shares sold .................................. 221,528 $ 2,686,217 143,763 $ 1,721,117
Shares redeemed .............................. (90,704) (1,171,637) (11,169) (131,901)
----------- ----------- ----------- -----------
Net increase ............................ 130,824 $ 1,514,580 132,594 $ 1,589,216
=========== =========== =========== ===========
----------------------------------------------
FUND SUMMARY
----------------------------------------------
Shares sold .................................. 585,198 $ 7,521,272 505,374 $ 6,065,231
Shares redeemed .............................. (137,488) (1,776,486) (43,264) (512,502)
----------- ----------- ----------- -----------
Net increase ............................ 447,710 $ 5,744,786 462,110 $ 5,552,729
=========== =========== =========== ===========
(a) For the period beginning May 20, 1999 (date of initial public investment) through March 31, 2000.
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
WST GROWTH FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
CLASS C
------------------------------------------------------------------------------------------------------------------------------------
For the
period from
May 20, 1999
(date of initial public
investment) to
March 31,
2000
------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ......................................................... $ 13.05
Income from investment operations
Net investment loss ............................................................... (0.06)
Net realized and unrealized gain on investments ................................... 1.00
---------
Total from investment operations ............................................ 0.94
---------
Net asset value, end of period ............................................................... $ 13.99
=========
Total return (a) ............................................................................. 7.20 %
=========
Ratios/supplemental data
Net assets, end of period .............................................................. $ 453,984
=========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees ..................................... 2.45 % (b)
After expense reimbursements and waived fees ...................................... 2.34 % (b)
Ratio of net investment (loss) income to average net assets
Before expense reimbursements and waived fees ..................................... (1.30)% (b)
After expense reimbursements and waived fees ...................................... (1.19)% (b)
Portfolio turnover rate ................................................................ 50.40 %
(a) Total return does not reflect payment of a sales charge.
(b) Annualized.
See accompanying notes to financial statements (Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
WST GROWTH FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
INSTITUTIONAL CLASS
------------------------------------------------------------------------------------------------------------------------------------
For the
period from
September 30, 1997
(date of initial public
Year ended Year ended investment) to
March 31, March 31, March 31,
2000 1999 1998
------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period .......................... $ 12.77 $ 11.29 $ 10.02
Income from investment operations
Net investment loss ................................ (0.04) 0.00 0.00
Net realized and unrealized gain on investments .... 1.47 1.48 1.27
----------- ----------- -----------
Total from investment operations ............. 1.43 1.48 1.27
----------- ----------- -----------
Net asset value, end of period ................................ $ 14.20 $ 12.77 $ 11.29
=========== =========== ===========
Total return (a) .............................................. 11.20 % 13.11 % 12.72 %
=========== =========== ===========
Ratios/supplemental data
Net assets, end of period ............................... $16,737,026 $11,419,391 $ 6,376,193
=========== =========== ===========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees ...... 1.68 %(b) 2.08 % 3.15 %(b)
After expense reimbursements and waived fees ....... 1.60 %(b) 1.75 % 1.75 %(b)
Ratio of net investment loss to average net assets
Before expense reimbursements and waived fees ...... (0.45)%(b) (0.35)% (1.31)%(b)
After expense reimbursements and waived fees ....... (0.37)%(b) (0.01)% 0.09 %(b)
Portfolio turnover rate ................................. 50.40 % 31.11 % 23.64 %
(a) Total return does not reflect payment of a sales charge.
(b) Annualized.
See accompanying notes to financial statements (Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
WST GROWTH FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
INVESTOR CLASS
------------------------------------------------------------------------------------------------------------------------------------
For the
period from
October 3, 1997
(date of initial public
Year ended Year ended investment) to
March 31, March 31, March 31,
2000 1999 1998
------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period .......................... $ 12.67 $ 11.26 $ 10.22
Income from investment operations
Net investment loss ................................ (0.10) (0.04) (0.01)
Net realized and unrealized gain on investments .... 1.45 1.45 1.05
----------- ----------- -----------
Total from investment operations ............. 1.35 1.41 1.04
----------- ----------- -----------
Net asset value, end of period ................................ $ 14.02 $ 12.67 $ 11.26
=========== =========== ===========
Total return (a) .............................................. 10.66 % 12.52 % 10.52 %
=========== =========== ===========
Ratios/supplemental data
Net assets, end of period ............................... $ 4,642,922 $ 2,539,131 $ 763,186
=========== =========== ===========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees ...... 2.15 %(b) 2.56 % 3.63 %(b)
After expense reimbursements and waived fees ....... 2.10 %(b) 2.25 % 2.10 %(b)
Ratio of net investment loss to average net assets
Before expense reimbursements and waived fees ...... (0.93)%(b) (0.84)% (1.70)%(b)
After expense reimbursements and waived fees ....... (0.88)%(b) (0.53)% (0.31)%(b)
Portfolio turnover rate ................................. 50.40 % 31.11 % 23.64 %
(a) Total return does not reflect payment of a sales charge.
(b) Annualized.
See accompanying notes to financial statements
</TABLE>
<PAGE>
WST GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
March 31, 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
The WST Growth Fund (the "Fund"), formerly known as the WST Growth &
Income Fund prior to January 3, 2000, is a diversified series of shares
of beneficial interest of The Nottingham Investment Trust II (the
"Trust"). The Trust, an open-end investment company, was organized on
October 18, 1990 as a Massachusetts Business Trust and is registered
under the Investment Company Act of 1940, as amended. The Fund began
operations on September 9, 1997. The investment objective of the fund
is to provide its shareholders with a maximum total return consisting
of any combination of capital appreciation, both realized and
unrealized, and income. The Board of Trustees of the Trust approved on
March 15, 1999 a plan to authorize a new class of shares designated as
Class C Shares. On May 20, 1999, the Class C Shares became effective.
The Fund has an unlimited number of authorized shares, which are
divided into three classes - Institutional Shares, Investor Shares, and
Class C.
Each class of shares has equal rights as to assets of the Fund, and the
classes are identical except for differences in their sales charge
structures and ongoing distribution and service fees. Income, expenses
(other than distribution and service fees, which are only attributable
to the Class C and Investor Class), and realized and unrealized gains
or losses on investments are allocated to each class of shares based
upon its relative net assets. Investor Shares purchased are subject to
a maximum sales charge of 3.75%. All three classes have equal voting
privileges, except where otherwise required by law or when the Board of
Trustees determines that the matter to be voted on affects only the
interests of the shareholders of a particular class. The following is a
summary of significant accounting policies followed by the Fund.
A. Security Valuation - The Fund's investments in securities are
carried at value. Securities listed on an exchange or quoted
on a national market system are valued at 4:00 p.m., New York
time. Other securities traded in the over-the-counter market
and listed securities for which no sale was reported on that
date are valued at the most recent bid price. Securities for
which market quotations are not readily available, if any, are
valued by using an independent pricing service or by following
procedures approved by the Board of Trustees. Short-term
investments are valued at cost which approximates value.
B. Federal Income Taxes - No provision has been made for federal
income taxes since it is the policy of the Fund to comply with
the provisions of the Internal Revenue Code applicable to
regulated investment companies and to make sufficient
distributions of taxable income to relieve it from all federal
income taxes.
The Fund has capital loss carryforwards for federal income tax
purposes of $919,853, of which $42,186 expires in the year
2006, $342,266 expires in the year 2007 and $535,401 expires
in the year 2008. 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.
As a result of the Fund's operating net investment loss, a
reclassification adjustment of $85,187 has been made on the
statement of assets and liabilities to decrease accumulated
net investment loss, bringing it to zero, and decrease paid in
capital.
(Continued)
<PAGE>
WST GROWTH FUND
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 to shareholders made during the year from net
investment income or net realized gains may differ from their
ultimate characterization for federal income tax purposes.
Also, due to the timing of dividend distributions, the fiscal
year in which amounts are distributed may differ from the year
that the income or realized gains were recorded by the Fund.
C. Investment Transactions - Investment transactions are recorded
on trade date. Realized gains and losses are determined using
the specific identification cost method. Interest income is
recorded daily on an accrual basis. Dividend income is
recorded on the ex-dividend date
D. Distributions to Shareholders - The Fund may declare dividends
quarterly, payable in March, June, September, and December on
a date selected by the Trust's Trustees. In addition,
distributions may be made annually in December out of net
realized gains through October 31 of that year. The Fund may
make a supplemental distribution subsequent to the end of its
fiscal year ending March 31.
E. Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the amounts of assets, liabilities, expenses and
revenues reported in the financial statements. Actual results
could differ from those estimates.
NOTE 2 - INVESTMENT ADVISORY FEE AND OTHER RELATED PARTY TRANSACTIONS
Pursuant to an investment advisory agreement, Wilbanks, Smith & Thomas
Asset Management, Inc. (the "Advisor"), provides the fund with a
continuous program of supervision of the Fund's assets, including the
composition of its portfolio, and furnishes advice and recommendations
with respect to investments, investment policies, and the purchase and
sale of securities. As compensation for its services, the Advisor
receives a fee at the annual rate of 0.75% of the first $250 million of
the Fund's average daily net assets and 0.65% of all assets over $250
million.
The Advisor currently intends to voluntarily waive all or a portion of
its fee and to reimburse expenses of the Fund to limit total Fund
operating expenses to a maximum of 1.75% of the average daily net
assets of the Fund's Institutional Class, a maximum of 2.25% of the
average daily net assets of the Fund's Investor Class, and a maximum of
2.50% of the average daily net assets of the Fund's Class C. There can
be no assurance that the foregoing voluntary fee waivers or
reimbursements will continue. The Advisor has voluntarily waived a
portion of its fee amounting to $13,785 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 an accounting and administrative agreement with the Trust. As
compensation for its services, the Administrator receives a fee at the
annual rate of 0.175% of the Fund's first $50 million of average daily
net assets, 0.15% of the next $50 million, 0.125% of the next $50
(Continued)
<PAGE>
WST GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
March 31, 2000
million, and 0.10% of average daily net assets over $150 million. The
Administrator also receives a monthly fee of $2,000 for accounting and
record-keeping services for the initial class of shares and $750 per
month for each additional class of shares. 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.
North Carolina Shareholder Services, LLC (the "Transfer Agent") serves
as the Fund's transfer, dividend paying, and shareholder servicing
agent. The Transfer Agent maintains the records of each shareholder's
account, answers shareholder inquiries concerning accounts, processes
purchases and redemptions of the Fund's shares, acts as dividend and
distribution disbursing agent, and performs other shareholder servicing
functions.
Certain Trustees and officers of the Trust are also officers or
directors of the Advisor, the Distributor, or the Administrator.
NOTE 3 - DISTRIBUTION AND SERVICE FEES
The Board of Trustees, including the Trustees who are not "interested
persons" of the Trust as defined in the Investment Company Act of 1940
(the "Act"), adopted a distribution and service plan pursuant to Rule
12b-1 of the Act (the "Plan") applicable to the Investor and Class C
Shares. The Act regulates the manner in which a regulated investment
company may assume costs of distributing and promoting the sales of its
shares and servicing of its shareholder accounts.
The Plan provides that the Fund may incur certain costs, which may not
exceed 0.50% and 0.75% per annum of the average daily net assets of
Investor Shares and Class C Shares, respectively, for each year elapsed
subsequent to adoption of the Plan, for payment to the Distributor and
others for items such as advertising expenses, selling expenses,
commissions, travel, or other expenses reasonably intended to result in
sales of Investor Shares in the Fund or support servicing of Investor
Share shareholder accounts. Such expenditures incurred as service fees
may not exceed 0.25% per annum of the Investor Class and Class C
Shares' average daily net assets. The Fund incurred $18,962 of such
expenses for the Investor class and $1,325 of such expenses for the
Class C shares under the Plan for the year ended March 31, 2000.
NOTE 4 - DEFERRED ORGANIZATION EXPENSES
All expenses of the Fund incurred in connection with its organization
and the registration of its shares have been assumed by the Fund. The
organization expenses are being amortized over a period of sixty
months. Investors purchasing shares of the Fund bear such expenses only
as they are amortized against the Fund's investment income.
NOTE 5 - PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments, other than short-term investments,
aggregated $14,487,255 and $8,498,090, 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
WST Growth Fund:
We have audited the accompanying statement of assets and liabilities of WST
Growth Fund, 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 periods presented. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our 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
and brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of WST
Growth Fund 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 periods, in conformity with accounting principles generally
accepted in the United States of America.
/s/ Deloitte & Touche LLP
Princeton, New Jersey
April 20, 2000
<PAGE>
________________________________________________________________________________
[LOGO]
WST GROWTH FUND
________________________________________________________________________________
a series of The Nottingham Investment Trust II
CLASS C SHARES
ANNUAL REPORT 2000
FOR THE YEAR ENDED MARCH 31, 2000
INVESTMENT ADVISOR
Wilbanks, Smith & Thomas Asset Management, Inc.
One Commercial Place, Suite 1450
Norfolk, Virginia 23510
WST GROWTH FUND
105 North Washington Street
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069
1-800-525-3863
This Report has been prepared for shareholders
and may be distributed to others only if preceded
or accompanied by a current prospectus.
<PAGE>
[LETTERHEAD]
Annual Report
WST Growth Fund
Class C Shares
It is our pleasure to enclose the annual report for the WST Growth Fund. This
letter highlights the progress of the Fund during the last twelve months and
outlines our expectations for the coming year. Stocks are experiencing one of
their most volatile weeks on record as we write this note so please view these
comments in the light of a highly dynamic market. We appreciate the confidence
you have placed us to manage your assets and we are working diligently to
maximize the performance of those assets.
The management team at Wilbanks, Smith & Thomas made several important decisions
regarding the Fund last year. Most importantly we shifted the investment focus
of the Fund to a pure growth orientation from the original growth and income
policy. The shift allows us to better match the strategy of the Fund with goals
of our investors. The elimination of the income objective also allows us to
align the Fund's holdings with the firm's standard equity model. We made these
changes after discussions with many shareholders and believe that by
repositioning the Fund as a pure growth portfolio we will enhance the
performance of your holdings.
Performance Analysis: Technology and Telecommunications Rule!
A review of the last year's performance data reveals that there were truly two
stock markets. Owners of technology and telecommunication stocks enjoyed another
year of watching the NASDAQ skyrocket while entire sectors including finance,
consumer cyclicals, and health care stocks traded lower throughout the year.
A number of well-publicized statistics highlight the discrepancy between tech
and all the rest in 1999. The average technology stock in the S&P 500 rose 74.5%
while the average non-technology stock was up 4.5%. 61% of the stocks on the New
York Stock Exchange declined during 1999, and approximately 25 stocks made up
100% of the return in the S&P 500. The majority of these issues were in the
technology and telecommunications sectors. When you consider that 475 of the 500
stocks in the index combined to generate a 0% return last year, it is easy to
understand our excitement at the opportunities this group of stocks presents us
now.
Your Fund enjoyed positive returns the quarter ended March 31st of 1.38%. This
return compared favorably with the 0.23% return of the Lipper Multi-Cap Value
Index to which we are normally compared. The Fund posted strong results during
the fiscal third quarter and matched the return of the S&P 500 during the final
quarter. The Fund has delivered a 7.20% annualized rate of return since
inception, outpacing the Multi-cap Value Index. Our shift in focus to an all
equity strategy will result in performance more in line with the large cap
indices with which most of our shareholders are familiar.
<PAGE>
The Fund's turnover rate was 50% last year, a figure well below the 90% turnover
rate of the average growth equity fund. More importantly the Fund generated zero
capital gains during the calendar year, a result that underlines its tax
efficiency. Our goal will continue to be minimizing realized gains wherever
possible.
The expense ratio in the Fund continued to decline as assets exceeded $21
million. The bottom line will be impacted positively as the ratio drops with
asset growth.
Fiscal 2000 In Review:
The Trend Remains the Same
When reviewing the 1999 Annual Report for the WST Growth Fund we noticed several
similarities between that year and Fiscal 2000. The interest rate driven
sell-off in growth stocks in the third quarter of 1999 was reminiscent of the
buying opportunity created in October 1998 by the collapse of the Russian
economy and the failure of Long Term Capital Management and other hedge funds.
The narrow breadth of the market discussed above was also a topic last year. By
narrow breadth we mean that a very small number of large capitalization growth
companies have generated all of the market's performance over the past two
years. This trend continued into the first calendar quarter of 2000 but began to
reverse in late March and early April. Later in this report we will discuss in
detail the difference between old and new economy stocks but it is clear that
investors have favored new economy stocks and have been willing to set
fundamentals and valuation aside in their quest for performance.
The chaotic market activity we are experiencing now is the beginning of the
unwinding of some of the performance and valuation disparities between
technology and telecommunication stocks and the rest of the market. While we
expect the market to broaden this year it will continue to be dominated by the
mid and large capitalization growth companies.
Volatility and the "New Economy"
As outlined above both the stock and bond markets endured the most violent
intra-quarter volatility in recent memory during the first quarter of 2000.
Morgan Stanley strategist Barton Biggs, a veteran market watcher, described it
as the most volatile market he has seen in his career.
The essence of the maelstrom is the war raging between Old and New economy
stocks. Old economy stocks include financial companies, capital goods producers,
"bricks and mortar" retailers and any other companies not included in the
Internet driven "TMT" sectors (Telecommunications, Media and Technology) that
make up the new economy. After the first ten weeks of the first calendar quarter
of 2000 the new economy companies appeared indomitable as they raced to a
performance edge that had many wondering if 2000 will be a replay of 1999.
Despite a 10% decline at the end of March, the NASDAQ market, which is heavily
weighted in these new economy companies, remains the driver of year to date
performance. In fact, the market narrowed further around these companies during
2000, and at one point the NASDAQ Index was up 20% year to date while the Dow
Jones Industrial Average was down 5%. Small and mid capitalization companies
continued their surge relative to large cap stocks during the quarter, finishing
with gains far outpacing their larger brethren.
<PAGE>
The volatility statistics for the past three months are amazing. The S&P 500
declined over 10% during the first two months, then posted a rally of 15% during
the subsequent three weeks. The last week of the quarter degenerated to absolute
market havoc with the end result being a gain of 2% for the S&P for the quarter.
The Dow Jones declined 4.7% while the NASDAQ increased 12.9% over the same
period.
"Hot" Money Flows to Technology
Mutual fund money flows account for much of the market's action. The massive
amounts of dollars flowing into growth and aggressive growth funds over the past
several quarters have required the managers of those funds continually to put
money to work by buying more of their stocks regardless of valuation.
Conversely, money flows out of value funds and away from value managers have
driven the forced liquidation of stocks held by these funds and resulted in the
ever-widening gap between classic growth and value.
The damage was so bad and the sentiment so negative for value investors that two
of the industry's most successful value investors retired during the first
quarter. First, Bob Sanborn stepped down as manager of the Oakmark Fund. His
retirement was driven by his frustration at the valuations of the new economy
stocks and the lack of respect paid by the market to his old economy holdings.
Next Julian Robertson, the famed manager of the $6 billion Tiger Fund, announced
that he would retire and liquidate his portfolio. In his exit interview he cited
his inability to understand the current market. Any investor with even a hint of
contrarian nature would cite these two retirements as evidence that valuations
will matter again one day, and we agree. Ironically, sanity seemed to return to
the markets shortly after these announcements as the unreasonably priced biotech
and Internet stocks imploded and old economy sectors began their rebound.
What lessons are we to learn from these events? First, our earnings growth based
stock selection process continues to work. We have avoided the pitfalls
associated with owning concept stocks with unproven business models or
inexperienced management teams, but we have participated fully in the growth of
the TMT economy by owning its "best in class" participants. Second, when the
flow of funds begins to shift out of the richly valued names and into the more
reasonably priced stocks, the price impact on the recipients of those fund flows
will be significant. For example, Fidelity's Magellan Fund holds $100 billion in
assets. A normal position in the fund is $3-4 billion. The door seems very small
when large players like Fidelity begin to establish positions in any but the
largest stocks.
The underlying fundamentals of the companies in the Fund continue to be
excellent. Although the technology stocks have posted impressive earnings gains
over the past twelve months, the reported profits of other holdings have proven
as strong as ever.
Dollar Tree Stores - A Bargain Price Every Day
A perfect example of the liquidity phenomenon addressed above is the price
action of Dollar Tree Stores over the past four months. As we have discussed at
great length, Wilbanks Smith and Thomas's goal is to buy, at reasonable prices,
great growth businesses run by highly intelligent and motivated management
teams. Dollar Tree Stores is a mid-size retailing company that fits this model.
We have researched the company extensively and spent significant time with
senior management including Macon Brock, the company's C.E.O. His team has the
experience and discipline to build their business over the next 5 - 10 years at
a pace which will rival the early growth of Wal-Mart.
Despite the company's fundamentals the stock exhibited dramatic volatility over
the past six months with relatively little trading volume. The company has
traded in a range between $32 and $54 with no change in fundamentals and an
outlook that continues to brighten. Wilbanks, Smith & Thomas has taken advantage
of the volatility to build the Fund's positions, especially as the company drops
into the $30 range. We recommended the stock on CNBC at $33 and $38 per share.
We believe that the large growth mutual funds will return to the stock
eventually and will drive it higher as they attempt to reestablish positions
liquidated during 1999.
Research: In Search of the Next Oracle
In our last update we discussed in great detail the process that led to our
investment in Oracle Corporation. The basis of that decision was our belief that
Wall Street did not recognize the magnitude of the opportunity that Larry
Ellison and his management team were trying to exploit through the design of a
complete mission critical database software system for the Internet. Surely
Oracle benefited from the massive move in technology stocks, but the stock's
performance was driven mainly by the growing recognition on Wall Street that the
company is perfectly positioned with a set of products that will lead the market
in enabling Internet commerce.
Using the Oracle investment as a model, our research team has spent countless
days on the road visiting our current holdings and potential new ones and
increasing our focus on the technology and telecommunication sectors. Our
mission is to repeat the Oracle success by uncovering other companies with the
potential to be revalued based on their association with the Internet.
A recent purchase that fits this model is Computer Associates. As in the case of
Oracle in 1998, most analysts' valuation of Computer Associates is based upon
their legacy mainframe software business, which is a relatively slow growth
business. However, the company has built large, fast growing businesses in both
data storage software and Internet security. In the past several months we met
with the senior management of the company in both New York and at their "CA
World" trade show New Orleans. The picture that has emerged is that of a company
with a truly exceptional business model that can be purchased at an
exceptionally reasonable price (21 times earnings).
CEO Sanjay Kumar is communicating to Wall Street the opportunity presented by
the several billions of dollars of revenues the company can generate from its
Internet businesses. His goal is to convince Wall Street to reclassify the
company as an Internet investment. The result will be a substantially higher
price/earnings ratio and stock price. It is difficult to predict when the
discovery will occur but we are comfortable waiting patiently for the value to
be recognized.
<PAGE>
The price of Computer Associates' stock price could double in the next six
months with no change in fundamentals. Contrast that scenario, purchasing a
solid growth company at 21 times earnings, with an investment in Cisco Systems
at a price earnings ratio of 143 times earnings. Without a doubt Cisco is the
leader in the Internet infrastructure gold rush, but perhaps Wall Streets' great
expectations for the company are already reflected in the stock price.
Historically it has been very difficult to make money in stocks purchased at 150
times earnings irrespective of even the most perfect fundamentals.
Second Quarter Technology Turmoil??
Forecasting the direction of the financial markets is a dangerous pastime and is
fraught with pitfalls. In our last quarterly update we predicted a 10% - 15%
correction in the equity markets during the first quarter with Internet stocks
leading the decline. In retrospect our market call was half correct as the Dow
Jones Industrial average declined approximately 15% by the end of February.
However, the old economy stocks led the retreat rather than Internet and tech
related issues. Our other prediction was that interest rates would peak below
7%. Ironically, and much to Alan Greenspan's dismay, long-term interest rates
declined from 6.75% to 5.9% at quarter-end. This decline flies in the face of
his restrictive monetary policy that has led to five rate hikes in the past six
months.
The most critical variable in the market now is clear: how will the NASDAQ Index
unravel its extremely overvalued condition? The answer to this question will
drive financial markets over the next six months. The NASDAQ Index is currently
almost 40% above its 200-day moving average, a condition not seen since 1991.
Although this is a sign of a powerful trend it also presents a precarious
technical condition for the strongest segment of the economy and market. The
average stock in the NASDAQ 100 Index currently trades for over 90 times
earnings, a level considered excessive under any valuation model.
The market will either digest this condition with a sharp correction as it did
in October 1998, or it will unravel slowly as it did in the first half of 1998.
Either way, investors can expect continued volatility. We expect market action
like we saw during the last three weeks of the first quarter. While certain
sectors such as biotechs collapsed, dropping 25% over a period of days, the
overall index endured a more moderate 10%- 12% correction, albeit through a
series of very violent sell-offs of 3% - 4% daily. Importantly, the money
flowing out of the NASDAQ flowed into the old economy stocks as we discussed
above, benefiting the financials and capital goods makers like Honeywell and
Tyco.
As we often point out, the Fund is full of quality companies trading at prices
comparable to those several years ago. Bank of America, Fannie Mae, New York
Times, CVS, and MCI Worldcom have all made great fundamental progress yet Wall
Street values them at the same levels it did in 1998. Like shoppers at K-Mart's
Blue Light Special, we are happy to take advantage of these discounts! In these
cases the powerful combination of a positive economic and political backdrop
coupled with good business fundamentals and strong free cash flow clearly
indicate higher stock prices down the road.
<PAGE>
New Economy or Bust!
The research team at Wilbanks, Smith & Thomas has never been more excited about
the opportunities we see the economy and market presenting us. Putting aside for
a minute the old economy/new economy debate, we recognize the importance of the
fundamental changes the Internet is causing in all areas of commerce and daily
life. Investors must make adjustments to their portfolios to take advantage of
this secular change. Our challenge is to find the future winners and buy them
while they are priced reasonably, and we see many opportunities in both the
technology and telecommunication sectors. Clearly an investment in these sectors
requires more flexibility and tolerance for short term volatility than some
investors are accustomed to. Still, we believe that managers who ignore these
trends will be left behind as the new economy streaks ahead.
Having said that, it is also a very risky time for investors who ignore
valuations. Stock charts of former favorites like eToys, Excite-at-Home or Red
Hat remind us that regardless of a company's potential there are times when its
stock is simply too expensive. To us it makes no sense to invest in companies
that have not and most likely never will earn a dollar. As we remind our
clients, only our 35 to 45 best ideas make it into the Fund. The stocks that do
make it need to be the best possible combination of growth business models,
skillful management, and attractive valuations.
Our equity research team is in the process of developing a white paper on the
technology and telecommunications sectors. This document will be posted to our
website during the next several months and should be helpful in outlining our
focus. We are spending an increasing amount of time in both Silicon Valley and
New York meeting with industry leaders and visionaries and honing our investment
process. We look forward to sharing our thoughts with you.
Thank you for your continued confidence in the WST Growth Fund. Patience and a
strong investment discipline are keys to victory in the equity markets. We are
excited about the coming year and the opportunities that will present
themselves. Please know that our interests are always aligned with yours as our
principals and employees remain among the largest shareholders in the Fund.
Wayne F. Wilbanks
L. Norfleet Smith, Jr.
Norwood A. Thomas, Jr.
T. Carl Turnage
Lawrence A. Bernert, III
<PAGE>
WST GROWTH FUND
Class C Shares
Performance Update - $10,000 Investment
For the period from May 20, 1999 (Date of Initial Public Investment)
to March 31, 2000
[Line graph here]:
--------------------------------------------------------------------------------
WST Growth Fund 60% S&P 500 Index/
Investor 20% Lehman Inter. Gov't/Corp Bond Index
Class C Shares 20% Russell 2000 Index
--------------------------------------------------------------------------------
5/20/99 $ 10,000 $10,000
6/30/99 10,245 10,202
7/31/99 10,008 9,951
8/31/99 9,533 9,850
9/30/99 9,310 9,708
10/31/99 9,739 10,088
11/30/99 9,923 10,333
12/31/99 10,575 10,925
1/31/00 9,969 10,547
2/29/00 9,839 10,816
3/31/00 10,720 11,225
This graph depicts the performance of the WST Growth Fund Class C Shares versus
the combined index of 60% S&P 500 Index, 20% Lehman Intermediate
Government/Corporate Bond Index, and 20% Russell 2000 Index. It is important to
note that the WST Growth Fund is a professionally managed mutual fund while the
indexes are not available for investment and are unmanaged. The comparison is
shown for illustrative purposes only.
Cumulative Total Return
-------------------------
Since Inception
-------------------------
7.20%
-------------------------
The graph assumes an initial $10,000 investment at May 20, 1999 (inception
date). All dividends and distributions are reinvested.
At March 31, 2000, the WST Growth Fund Class C Shares would have grown to
$10,720 - a cumulative total investment return of 7.20% since May 20, 1999.
At March 31, 2000, a similar investment in the combined index of 60% S&P 500
Index, 20% Lehman Intermediate Government/Corporate Bond Index, and 20% Russell
2000 Index would have grown to $11,225 - a cumulative total investment return of
12.25% since May 20, 1999.
Past performance is not a guarantee of future results. A mutual fund's share
price and investment return will vary with market conditions, and the principal
value of shares, when redeemed, may be worth more or less than the original
cost. Average annual returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming
reinvestments of dividends.
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
WST GROWTH FUND
PORTFOLIO OF INVESTMENTS
March 31, 2000
------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - 97.51%
Beverages - 2.49%
PepsiCo, Inc. .......................................................... 15,700 $ 542,631
-----------
Broadcast - Radio & Television - 2.13%
(a)Cox Communications, Inc. ............................................... 9,600 465,600
-----------
Computers - 3.60%
(a)Dell Computer Corporation .............................................. 5,000 269,687
(a)Sun Microsystems, Inc. ................................................. 5,500 515,367
-----------
785,054
-----------
Computer Software & Services - 19.06%
Computer Associates International, Inc. ................................ 12,000 710,250
First Data Corporation ................................................. 12,000 530,250
Microsoft Corporation .................................................. 4,000 425,000
(a)Novell, Inc. ........................................................... 5,000 143,125
(a)Oracle Corporation ..................................................... 28,000 2,185,750
(a)Parametric Technology Corporation ...................................... 8,000 168,500
-----------
4,162,875
-----------
Cosmetics & Personal Care - 2.20%
Colgate-Palmolive Company .............................................. 3,000 169,125
(a)Playtex Products, Inc. ................................................. 24,000 312,000
-----------
481,125
-----------
Diversified Manufacturing - 4.67%
General Electric Company ............................................... 2,500 387,969
Honeywell, Inc. ........................................................ 12,000 632,250
-----------
1,020,219
-----------
Electronics - Semiconductor - 3.63%
Intel Corporation ...................................................... 6,000 791,625
-----------
Financial - Banks, Commercial - 2.88%
Bank of America Corporation ............................................ 5,000 262,188
Citigroup Inc. ......................................................... 5,000 296,563
Resource Bankshares Corporation ........................................ 7,700 69,300
-----------
628,051
-----------
Financial Services - 3.17%
American Express Company ............................................... 2,000 297,875
Fannie Mae ............................................................. 7,000 395,063
-----------
692,938
-----------
Insurance - Life & Health - 1.67%
AFLAC INCORPORATED .................................................... 8,000 365,000
-----------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
WST GROWTH FUND
PORTFOLIO OF INVESTMENTS
March 31, 2000
------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Insurance - Multiline - 2.51%
American International Group, Inc. ..................................... 5,000 $ 547,500
-----------
Medical Supplies - 1.77%
Johnson & Johnson ...................................................... 5,500 385,687
-----------
Miscellaneous - Manufacturing - 4.40%
Tyco International Ltd. ................................................ 19,000 960,687
-----------
Oil & Gas - Equipment & Services - 2.85%
Schlumberger, Limited .................................................. 8,000 622,000
-----------
Oil & Gas - Exploration - 2.50%
Exxon Mobil Corporation ................................................ 6,996 545,688
-----------
Pharmaceuticals - 4.12%
Bristol-Myers Squibb Company ........................................... 5,000 288,750
Merck & Co., Inc. ...................................................... 6,000 374,250
Pharmacia & Upjohn, Inc. ............................................... 4,000 237,000
-----------
900,000
-----------
Publishing - Newspaper - 2.17%
The New York Times Company ............................................. 11,000 473,000
-----------
Retail - General Merchandise - 3.82%
(a)Dollar Tree Stores, Inc. ............................................... 16,000 834,000
-----------
Retail - Specialty Line - 4.20%
CVS Corporation ........................................................ 12,000 450,750
Lowe's Companies, Inc. ................................................. 8,000 467,000
-----------
917,750
-----------
Telecommunications - 19.79%
ALLTEL Corporation ..................................................... 9,000 567,562
AT&T Corporation ....................................................... 8,143 459,571
Bell Atlantic Corporation .............................................. 5,000 305,625
Lucent Technologies Inc. ............................................... 9,000 546,750
(a)MCI WorldCom, Inc. ..................................................... 20,000 906,250
(a)Qwest Communications International, Inc. ............................... 4,000 192,000
(a)Tellabs, Inc. .......................................................... 8,000 503,875
Time Warner, Inc. ...................................................... 8,500 840,969
-----------
4,322,602
-----------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
WST GROWTH FUND
PORTFOLIO OF INVESTMENTS
March 31, 2000
------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Telecommunications Equipment - 3.88%
Nokia Oyj - ADR ........................................................ 1,000 $ 217,250
Nortel Networks Corporation ............................................ 5,000 630,000
-----------
847,250
-----------
Total Common Stocks (Cost $15,811,012) ................................................... 21,291,282
-----------
------------------------------------------------------------------------------------------------------------------------------------
Interest Maturity
Principal Rate Date
------------------------------------------------------------------------------------------------------------------------------------
CORPORATE OBLIGATION - 1.48%
Macsaver Financial Services ......................... $500,000 7.875% 08/01/03 322,500
(Cost $447,292) -----------
------------------------------------------------------------------------------------------------------------------------------------
Shares
------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT COMPANIES - 6.85%
Evergreen Money Market Treasury Institutional Money
Market Fund Institutional Service Shares ............................... 949,829 949,829
Evergreen Money Market Treasury Institutional Treasury
Money Market Fund Institutional Service Shares ......................... 545,541 545,541
-----------
Total Investment Companies (Cost $1,495,370) ............................................. 1,495,370
-----------
Total Value of Investments (Cost $17,753,674%(b)) .................................. 105.84 % $23,109,152
Liabilities In Excess of Other Assets .............................................. (5.84)% (1,275,220)
------ -----------
Net Assets .................................................................. 100.00 % $21,833,932
====== ===========
(a) Non-income producing investment.
(b) Aggregate cost for federal income tax purposes is $17,818,382. Unrealized appreciation (depreciation) of investments for
federal income tax purposes is as follows:
Unrealized appreciation .................................................................. $ 6,095,086
Unrealized depreciation .................................................................. (804,316)
-----------
Net unrealized appreciation .............................................. $ 5,290,770
===========
The following acronym is used in this portfolio:
ADR - American Depository Receipt
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
WST GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
March 31, 2000
ASSETS
Investments, at value (cost $17,753,674) .......................................................... $23,109,152
Cash .............................................................................................. 3,726
Income receivable ................................................................................. 18,643
Receivable for fund shares sold ................................................................... 2,117
Deferred organization expenses, net (note 4) ...................................................... 20,525
-----------
Total assets ................................................................................. 23,154,163
-----------
LIABILITIES
Accrued expenses .................................................................................. 22,784
Payable for investment purchases .................................................................. 1,294,820
Payable for fund shares redeemed .................................................................. 1,950
Other liabilities ................................................................................. 677
-----------
Total liabilities ............................................................................ 1,320,231
-----------
NET ASSETS ............................................................................................... $21,833,932
===========
NET ASSETS CONSIST OF
Paid-in capital ................................................................................... $17,655,490
Accumulated net realized loss on investments ...................................................... (1,177,036)
Net unrealized appreciation on investments ........................................................ 5,355,478
-----------
$21,833,932
===========
CLASS C
Net asset value, redemption and maximum offering price per share
($453,984 / 32,451 shares) ................................................................... $13.99
===========
INSTITUTIONAL CLASS
Net asset value, redemption and maximum offering price per share
($16,737,026 / 1,178,752 shares) ............................................................. $14.20
===========
INVESTOR CLASS
Net asset value, redemption and offering price per share .......................................... $14.02
($4,642,922 / 331,189 shares) ===========
Maximum offering price per share (100 / 96.25 of $14.02) .......................................... $14.57
===========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
WST GROWTH FUND
STATEMENT OF OPERATIONS
Year ended March 31, 2000
INVESTMENT LOSS
Income
Interest ...................................................................................... $ 55,224
Dividends ..................................................................................... 159,931
-----------
Total income ............................................................................ 215,155
-----------
Expenses
Investment advisory fees (note 2) ............................................................. 131,567
Fund administration fees (note 2) ............................................................. 30,699
Distribution and service fees - Investor Class shares (note 3) ................................ 18,962
Distribution and service fees - Class C shares (note 3) ....................................... 1,325
Custody fees .................................................................................. 3,905
Registration and filing administration fees (note 2) .......................................... 5,655
Fund accounting fees (note 2) ................................................................. 40,500
Audit fees .................................................................................... 11,317
Legal fees .................................................................................... 7,214
Securities pricing fees ....................................................................... 3,339
Shareholder recordkeeping fees ................................................................ 9,000
Shareholder servicing expenses ................................................................ 7,605
Registration and filing expenses .............................................................. 4,516
Printing expenses ............................................................................. 21,547
Amortization of deferred organization expenses (note 4) ....................................... 8,250
Trustee fees and meeting expenses ............................................................. 3,916
Other operating expenses ...................................................................... 4,810
-----------
Total expenses .......................................................................... 314,127
-----------
Less investment advisory fees waived (note 2) ........................................... (13,785)
-----------
Net expenses ............................................................................ 300,342
-----------
Net investment loss ................................................................ (85,187)
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized loss from investment transactions ..................................................... (555,913)
Increase in unrealized appreciation on investments ................................................. 2,771,724
-----------
Net realized and unrealized gain on investments ............................................... 2,215,811
-----------
Net increase in net assets resulting from operations .................................... $ 2,130,624
===========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
WST GROWTH FUND
STATEMENTS OF CHANGES IN NET ASSETS
------------------------------------------------------------------------------------------------------------------------------------
Year ended Year ended
March 31, March 31,
2000 1999
------------------------------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS
Operations
Net investment loss ...................................................... $ (85,187) $ (8,424)
Net realized loss from investment transactions ........................... (555,913) (578,937)
Increase in unrealized appreciation on investments ....................... 2,771,724 1,853,775
----------- -----------
Net increase in net assets resulting from operations ................. 2,130,624 1,266,414
----------- -----------
Capital share transactions
Increase in net assets resulting from capital share transactions (a) .... 5,744,786 5,552,729
----------- -----------
Total increase in net assets .................................... 7,875,410 6,819,143
NET ASSETS
Beginning of year ............................................................. 13,958,522 7,139,379
----------- -----------
End of year ................................................................... $21,833,932 $13,958,522
=========== ===========
(a) A summary of capital share activity follows:
-------------------------------------------------------------------------------------
Year ended Year ended
March 31, 2000 March 31, 1999
Shares Value Shares Value
-------------------------------------------------------------------------------------
----------------------------------------------
CLASS C (a)
----------------------------------------------
Shares sold .................................. 32,451 $ 426,228 0 $ 0
Shares redeemed .............................. 0 0 0 0
----------- ----------- ----------- -----------
Net increase ............................ 32,451 $ 426,228 0 $ 0
=========== =========== =========== ===========
----------------------------------------------
INSTITUTIONAL CLASS
----------------------------------------------
Shares sold .................................. 331,219 $ 4,408,827 361,611 $ 4,344,114
Shares redeemed .............................. (46,784) (604,849) (32,095) (380,601)
----------- ----------- ----------- -----------
Net increase ............................ 284,435 $ 3,803,978 329,516 $ 3,963,513
=========== =========== =========== ===========
----------------------------------------------
INVESTOR CLASS
----------------------------------------------
Shares sold .................................. 221,528 $ 2,686,217 143,763 $ 1,721,117
Shares redeemed .............................. (90,704) (1,171,637) (11,169) (131,901)
----------- ----------- ----------- -----------
Net increase ............................ 130,824 $ 1,514,580 132,594 $ 1,589,216
=========== =========== =========== ===========
----------------------------------------------
FUND SUMMARY
----------------------------------------------
Shares sold .................................. 585,198 $ 7,521,272 505,374 $ 6,065,231
Shares redeemed .............................. (137,488) (1,776,486) (43,264) (512,502)
----------- ----------- ----------- -----------
Net increase ............................ 447,710 $ 5,744,786 462,110 $ 5,552,729
=========== =========== =========== ===========
(a) For the period beginning May 20, 1999 (date of initial public investment) through March 31, 2000.
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
WST GROWTH FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
CLASS C
------------------------------------------------------------------------------------------------------------------------------------
For the
period from
May 20, 1999
(date of initial public
investment) to
March 31,
2000
------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ......................................................... $ 13.05
Income from investment operations
Net investment loss ............................................................... (0.06)
Net realized and unrealized gain on investments ................................... 1.00
---------
Total from investment operations ............................................ 0.94
---------
Net asset value, end of period ............................................................... $ 13.99
=========
Total return (a) ............................................................................. 7.20 %
=========
Ratios/supplemental data
Net assets, end of period .............................................................. $ 453,984
=========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees ..................................... 2.45 % (b)
After expense reimbursements and waived fees ...................................... 2.34 % (b)
Ratio of net investment (loss) income to average net assets
Before expense reimbursements and waived fees ..................................... (1.30)% (b)
After expense reimbursements and waived fees ...................................... (1.19)% (b)
Portfolio turnover rate ................................................................ 50.40 %
(a) Total return does not reflect payment of a sales charge.
(b) Annualized.
See accompanying notes to financial statements (Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
WST GROWTH FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
INSTITUTIONAL CLASS
------------------------------------------------------------------------------------------------------------------------------------
For the
period from
September 30, 1997
(date of initial public
Year ended Year ended investment) to
March 31, March 31, March 31,
2000 1999 1998
------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period .......................... $ 12.77 $ 11.29 $ 10.02
Income from investment operations
Net investment loss ................................ (0.04) 0.00 0.00
Net realized and unrealized gain on investments .... 1.47 1.48 1.27
----------- ----------- -----------
Total from investment operations ............. 1.43 1.48 1.27
----------- ----------- -----------
Net asset value, end of period ................................ $ 14.20 $ 12.77 $ 11.29
=========== =========== ===========
Total return (a) .............................................. 11.20 % 13.11 % 12.72 %
=========== =========== ===========
Ratios/supplemental data
Net assets, end of period ............................... $16,737,026 $11,419,391 $ 6,376,193
=========== =========== ===========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees ...... 1.68 %(b) 2.08 % 3.15 %(b)
After expense reimbursements and waived fees ....... 1.60 %(b) 1.75 % 1.75 %(b)
Ratio of net investment loss to average net assets
Before expense reimbursements and waived fees ...... (0.45)%(b) (0.35)% (1.31)%(b)
After expense reimbursements and waived fees ....... (0.37)%(b) (0.01)% 0.09 %(b)
Portfolio turnover rate ................................. 50.40 % 31.11 % 23.64 %
(a) Total return does not reflect payment of a sales charge.
(b) Annualized.
See accompanying notes to financial statements (Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
WST GROWTH FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
INVESTOR CLASS
------------------------------------------------------------------------------------------------------------------------------------
For the
period from
October 3, 1997
(date of initial public
Year ended Year ended investment) to
March 31, March 31, March 31,
2000 1999 1998
------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period .......................... $ 12.67 $ 11.26 $ 10.22
Income from investment operations
Net investment loss ................................ (0.10) (0.04) (0.01)
Net realized and unrealized gain on investments .... 1.45 1.45 1.05
----------- ----------- -----------
Total from investment operations ............. 1.35 1.41 1.04
----------- ----------- -----------
Net asset value, end of period ................................ $ 14.02 $ 12.67 $ 11.26
=========== =========== ===========
Total return (a) .............................................. 10.66 % 12.52 % 10.52 %
=========== =========== ===========
Ratios/supplemental data
Net assets, end of period ............................... $ 4,642,922 $ 2,539,131 $ 763,186
=========== =========== ===========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees ...... 2.15 %(b) 2.56 % 3.63 %(b)
After expense reimbursements and waived fees ....... 2.10 %(b) 2.25 % 2.10 %(b)
Ratio of net investment loss to average net assets
Before expense reimbursements and waived fees ...... (0.93)%(b) (0.84)% (1.70)%(b)
After expense reimbursements and waived fees ....... (0.88)%(b) (0.53)% (0.31)%(b)
Portfolio turnover rate ................................. 50.40 % 31.11 % 23.64 %
(a) Total return does not reflect payment of a sales charge.
(b) Annualized.
See accompanying notes to financial statements
</TABLE>
<PAGE>
WST GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
March 31, 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
The WST Growth Fund (the "Fund"), formerly known as the WST Growth &
Income Fund prior to January 3, 2000, is a diversified series of shares
of beneficial interest of The Nottingham Investment Trust II (the
"Trust"). The Trust, an open-end investment company, was organized on
October 18, 1990 as a Massachusetts Business Trust and is registered
under the Investment Company Act of 1940, as amended. The Fund began
operations on September 9, 1997. The investment objective of the fund
is to provide its shareholders with a maximum total return consisting
of any combination of capital appreciation, both realized and
unrealized, and income. The Board of Trustees of the Trust approved on
March 15, 1999 a plan to authorize a new class of shares designated as
Class C Shares. On May 20, 1999, the Class C Shares became effective.
The Fund has an unlimited number of authorized shares, which are
divided into three classes - Institutional Shares, Investor Shares, and
Class C.
Each class of shares has equal rights as to assets of the Fund, and the
classes are identical except for differences in their sales charge
structures and ongoing distribution and service fees. Income, expenses
(other than distribution and service fees, which are only attributable
to the Class C and Investor Class), and realized and unrealized gains
or losses on investments are allocated to each class of shares based
upon its relative net assets. Investor Shares purchased are subject to
a maximum sales charge of 3.75%. All three classes have equal voting
privileges, except where otherwise required by law or when the Board of
Trustees determines that the matter to be voted on affects only the
interests of the shareholders of a particular class. The following is a
summary of significant accounting policies followed by the Fund.
A. Security Valuation - The Fund's investments in securities are
carried at value. Securities listed on an exchange or quoted
on a national market system are valued at 4:00 p.m., New York
time. Other securities traded in the over-the-counter market
and listed securities for which no sale was reported on that
date are valued at the most recent bid price. Securities for
which market quotations are not readily available, if any, are
valued by using an independent pricing service or by following
procedures approved by the Board of Trustees. Short-term
investments are valued at cost which approximates value.
B. Federal Income Taxes - No provision has been made for federal
income taxes since it is the policy of the Fund to comply with
the provisions of the Internal Revenue Code applicable to
regulated investment companies and to make sufficient
distributions of taxable income to relieve it from all federal
income taxes.
The Fund has capital loss carryforwards for federal income tax
purposes of $919,853, of which $42,186 expires in the year
2006, $342,266 expires in the year 2007 and $535,401 expires
in the year 2008. 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.
As a result of the Fund's operating net investment loss, a
reclassification adjustment of $85,187 has been made on the
statement of assets and liabilities to decrease accumulated
net investment loss, bringing it to zero, and decrease paid in
capital.
(Continued)
<PAGE>
WST GROWTH FUND
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 to shareholders made during the year from net
investment income or net realized gains may differ from their
ultimate characterization for federal income tax purposes.
Also, due to the timing of dividend distributions, the fiscal
year in which amounts are distributed may differ from the year
that the income or realized gains were recorded by the Fund.
C. Investment Transactions - Investment transactions are recorded
on trade date. Realized gains and losses are determined using
the specific identification cost method. Interest income is
recorded daily on an accrual basis. Dividend income is
recorded on the ex-dividend date
D. Distributions to Shareholders - The Fund may declare dividends
quarterly, payable in March, June, September, and December on
a date selected by the Trust's Trustees. In addition,
distributions may be made annually in December out of net
realized gains through October 31 of that year. The Fund may
make a supplemental distribution subsequent to the end of its
fiscal year ending March 31.
E. Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the amounts of assets, liabilities, expenses and
revenues reported in the financial statements. Actual results
could differ from those estimates.
NOTE 2 - INVESTMENT ADVISORY FEE AND OTHER RELATED PARTY TRANSACTIONS
Pursuant to an investment advisory agreement, Wilbanks, Smith & Thomas
Asset Management, Inc. (the "Advisor"), provides the fund with a
continuous program of supervision of the Fund's assets, including the
composition of its portfolio, and furnishes advice and recommendations
with respect to investments, investment policies, and the purchase and
sale of securities. As compensation for its services, the Advisor
receives a fee at the annual rate of 0.75% of the first $250 million of
the Fund's average daily net assets and 0.65% of all assets over $250
million.
The Advisor currently intends to voluntarily waive all or a portion of
its fee and to reimburse expenses of the Fund to limit total Fund
operating expenses to a maximum of 1.75% of the average daily net
assets of the Fund's Institutional Class, a maximum of 2.25% of the
average daily net assets of the Fund's Investor Class, and a maximum of
2.50% of the average daily net assets of the Fund's Class C. There can
be no assurance that the foregoing voluntary fee waivers or
reimbursements will continue. The Advisor has voluntarily waived a
portion of its fee amounting to $13,785 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 an accounting and administrative agreement with the Trust. As
compensation for its services, the Administrator receives a fee at the
annual rate of 0.175% of the Fund's first $50 million of average daily
net assets, 0.15% of the next $50 million, 0.125% of the next $50
(Continued)
<PAGE>
WST GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
March 31, 2000
million, and 0.10% of average daily net assets over $150 million. The
Administrator also receives a monthly fee of $2,000 for accounting and
record-keeping services for the initial class of shares and $750 per
month for each additional class of shares. 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.
North Carolina Shareholder Services, LLC (the "Transfer Agent") serves
as the Fund's transfer, dividend paying, and shareholder servicing
agent. The Transfer Agent maintains the records of each shareholder's
account, answers shareholder inquiries concerning accounts, processes
purchases and redemptions of the Fund's shares, acts as dividend and
distribution disbursing agent, and performs other shareholder servicing
functions.
Certain Trustees and officers of the Trust are also officers or
directors of the Advisor, the Distributor, or the Administrator.
NOTE 3 - DISTRIBUTION AND SERVICE FEES
The Board of Trustees, including the Trustees who are not "interested
persons" of the Trust as defined in the Investment Company Act of 1940
(the "Act"), adopted a distribution and service plan pursuant to Rule
12b-1 of the Act (the "Plan") applicable to the Investor and Class C
Shares. The Act regulates the manner in which a regulated investment
company may assume costs of distributing and promoting the sales of its
shares and servicing of its shareholder accounts.
The Plan provides that the Fund may incur certain costs, which may not
exceed 0.50% and 0.75% per annum of the average daily net assets of
Investor Shares and Class C Shares, respectively, for each year elapsed
subsequent to adoption of the Plan, for payment to the Distributor and
others for items such as advertising expenses, selling expenses,
commissions, travel, or other expenses reasonably intended to result in
sales of Investor Shares in the Fund or support servicing of Investor
Share shareholder accounts. Such expenditures incurred as service fees
may not exceed 0.25% per annum of the Investor Class and Class C
Shares' average daily net assets. The Fund incurred $18,962 of such
expenses for the Investor class and $1,325 of such expenses for the
Class C shares under the Plan for the year ended March 31, 2000.
NOTE 4 - DEFERRED ORGANIZATION EXPENSES
All expenses of the Fund incurred in connection with its organization
and the registration of its shares have been assumed by the Fund. The
organization expenses are being amortized over a period of sixty
months. Investors purchasing shares of the Fund bear such expenses only
as they are amortized against the Fund's investment income.
NOTE 5 - PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments, other than short-term investments,
aggregated $14,487,255 and $8,498,090, 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
WST Growth Fund:
We have audited the accompanying statement of assets and liabilities of WST
Growth Fund, 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 periods presented. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our 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
and brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of WST
Growth Fund 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 periods, in conformity with accounting principles generally
accepted in the United States of America.
/s/ Deloitte & Touche LLP
Princeton, New Jersey
April 20, 2000
<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>
----------------
EARNEST PARTNERS
----------------
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 Treasury
which stood at 5.23% in March 1999, 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 in
the first quarter of 2000.
On a total return basis, the fund was up 1.47% for the 12 months ending
March 31, 2000, while the Lehman Aggregate Bond Index was up 1.87%. Compared to
the fund's Lipper peers, the fund finished the year 87th out of 284 funds. For
the trailing three years ending March 31, 2000, the fund ranked 91st out of 203
funds; and for the trailing five years ending March 31, 2000, the fund ranked
40th out of 151 funds, which places the fund in the top quartile.
The fund's holdings have a weighted average rating of AAA, as rated by
Moody's Investor Service, Inc. or other similar rating services, and our
effective duration is 95% of the benchmark's duration. US Government and Agency
issues comprise 68% of the fund's portfolio and other AAA-rated issues comprise
another 15% of the fund's portfolio.
We have some additional 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 equity
investments and we, as you know, manage fixed-income investments, we saw this as
a good way to grow our firm and, accordingly, we accepted the offer. Please be
reassured that other than our name change, we are still the same firm and we 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
EARNEST Partners Limited, LLC
Douglas Folk, CFA
Partner
<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]:
--------------------------------------------------------------------------------
Lehman Brothers Lipper Intermediate
Investek Fixed Aggregate Investment Grade
Income Trust Bond Index Debt Fund Index
--------------------------------------------------------------------------------
11/15/91 $50,000 $50,000 $50,000
12/31/91 50,355 51,720 51,713
3/31/92 50,612 51,059 51,108
6/30/92 55,345 53,119 53,135
9/30/92 53,918 55,401 55,567
12/31/92 54,275 55,548 55,446
3/31/93 56,875 57,844 57,912
6/30/93 58,672 59,378 59,394
9/30/93 60,027 60,928 60,941
12/31/93 60,004 60,964 60,990
3/31/94 57,698 59,216 59,307
6/30/94 57,065 58,606 58,608
9/30/94 57,281 58,963 58,974
12/31/94 57,736 59,186 59,035
3/31/95 60,426 62,171 61,709
6/30/95 64,300 65,959 65,120
9/30/95 64,918 67,254 66,360
12/31/95 67,446 70,120 69,140
3/31/96 66,892 68,877 67,915
6/30/96 67,836 69,268 68,179
9/30/96 68,958 70,549 69,371
12/31/96 70,199 72,665 71,341
3/31/97 70,487 72,259 70,914
6/30/97 73,040 74,913 73,353
9/30/97 74,765 77,402 75,618
12/31/97 76,634 79,681 76,730
3/31/98 77,474 80,920 78,518
6/30/98 79,135 82,811 80,229
9/30/98 83,668 86,312 83,310
12/31/98 82,489 86,603 83,402
3/31/99 82,099 86,173 83,068
6/30/99 81,616 85,416 82,221
9/30/99 81,537 85,996 82,747
12/31/99 81,553 85,891 82,590
3/31/00 83,302 87,786 84,217
This graph depicts the performance of the Investek Fixed Income Trust versus the
Lehman Brothers Aggregate Bond Index and the Lipper Intermediate Investment
Grade Debt Fund Index. It is important to note that the Investek Fixed Income
Trust is a professionally managed mutual fund while the indexes are not
available for investment and are unmanaged. The comparison is shown for
illustrative purposes only.
Average Annual Total 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 -
cumulative 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 - cumulative total investment return of
75.57%; and the Lipper Intermediate Investment Grade Debt Fund Index would have
grown to $84,217 - cumulative total investment return of 68.43%, since November
15, 1991.
Past performance is not a guarantee of future performance. A mutual fund's share
price and investment return will vary with market conditions, and the principal
value of shares, when redeemed, may be worth more or less than the original
cost. Average annual returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming
reinvestments of dividends.
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <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>
________________________________________________________________________________
CAPITAL VALUE FUND
________________________________________________________________________________
a series of The Nottingham Investment Trust II
ANNUAL REPORT 2000
FOR THE YEAR ENDED MARCH 31
INVESTMENT ADVISOR
Capital Investment Counsel, Inc.
Post Office Box 32249
Raleigh, North Carolina 27622
919-831-2370
CAPITAL VALUE FUND
105 North Washington Street
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069
1-800-525-3863
This Report has been prepared for shareholders
and may be distributed to others only if preceded
or accompanied by a current prospectus.
<PAGE>
Capital Value Fund
Y2k has been an interesting year. For the first three months of the year, the
Capital Value Fund maintained its assets weightings from 1999. This breakdown
consisted of 75% in stocks, 15% in fixed income and 10% in cash. I have
maintained the somewhat low percentage in fixed income because of adverse rate
conditions. With bond yields at 3-year highs, I am now exploring the possibility
of committing more funds into the fixed income sector. In early April, I
increased our cash asset allocation from 10% to the current 16% level. With the
benefit of hindsight, it has turned out to be a good move. I am now also
investigating several sectors that underperformed the market. These sectors
include banking/financial services, pharmaceuticals, and the large phone
companies. The Capital Value Fund sold most of its holdings in these areas two
years ago at handsome profits. Being a contrarian at heart, I feel it is time to
revisit these companies. I commented in December 1999 that interest rates would
hold the key to the market, and given the sharp rise in the ten year treasury
note over the last six months, that is proving to be true. It is hard to escape
the comparison from our current market to that of 1994. Between February of 1994
and February of 1995 the Federal Reserve raised interest rates seven times. As
of mid May 2000, Greenspan and company had raised rates six times. The 1994
comparison is more interesting in light of the fact that the market bottomed at
the time of the sixth increase in November 1994, and was in strong rally mode by
the last rate increase in February 1995. I feel a strong case can be made that
we have seen the worst in the market. I raised 6% in cash in early April and
look to reinvest those funds over the coming month. A best case scenario for
this market would involve a final 25 basis point rate hike in June 2000. I
believe this would be the final nail in the inflation coffin. With the Federal
Reserve off our back, we can then go back to analyzing companies and their
earnings.
Hal Eddins
Fund Manager
<PAGE>
Capital Value Fund
Performance Update - $10,000 Investment
For the period from December 31, 1991 to
March 31, 2000
[Line graph here]:
--------------------------------------------------------------------------------
Capital 60% S&P 500 Index /
Value Fund 40% Lehman Brothers Aggregate Bond Index
--------------------------------------------------------------------------------
12/31/91 $ 9,650 $10,000
3/31/92 9,541 9,797
9/30/92 9,929 10,432
3/31/93 10,616 11,213
9/30/93 10,898 11,659
3/31/94 11,099 11,418
9/30/94 11,395 11,763
3/31/95 12,084 12,711
9/30/95 13,474 14,547
3/31/96 14,037 15,767
9/30/96 14,473 16,702
3/31/97 15,031 18,098
9/30/97 18,987 21,780
3/31/98 19,975 24,773
9/30/98 19,436 23,890
3/31/99 22,905 28,597
9/30/99 23,308 28,663
3/31/00 33,598 32,656
This graph depicts the performance of the Capital Value Fund versus a combined
index of 60% S&P 500 Index and 40% Lehman Brothers Aggregate Bond Index. It is
important to note that the Capital Value Fund is a professionally managed mutual
fund while the indexes are not available for investment and are unmanaged. The
comparison is shown for illustrative purposes only.
Average Annual Total Returns
--------------------------------------------------------------------------------
One Year Five Years Since Inception
--------------------------------------------------------------------------------
No Sales Load 46.68% 22.66% 16.31%
--------------------------------------------------------------------------------
Maximum 3.50% Sales Load 41.55% 21.79% 15.81%
--------------------------------------------------------------------------------
The graph assumes an initial $10,000 investment at December 31, 1991 ($9,650
after maximum sales load of 3.50%). All dividends and distributions are
reinvested.
At March 31, 2000, the Capital Value Fund would have grown to $33,598 - total
investment return of 235.98% since December 31, 1991. Without the deduction of
the 3.50% maximum sales load, the Capital Value Fund would have grown to $34,816
- total investment return of 248.16% since December 31, 1991. The sales load may
be reduced or eliminated for larger purchases.
At March 31, 2000, a similar investment in a combined index of 60% S&P 500 Index
and 40% Lehman Brothers Aggregate Bond Index would have grown to $32,656 - total
investment return of 226.56% since December 31, 1991.
Past performance is not a guarantee of future performance. A mutual fund's share
price and investment return will vary with market conditions, and the principal
value of shares, when redeemed, may be worth more or less than the original
cost. Average annual returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming
reinvestments of dividends.
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
CAPITAL VALUE FUND
PORTFOLIO OF INVESTMENTS
March 31, 2000
------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - 84.90%
Auto & Trucks - 0.75%
General Motors Corporation ................................................ 1,500 $ 124,219
-----------
Brewery - 0.58%
Adolph Coors Company ...................................................... 2,000 96,000
-----------
Broadcast - Radio & Television - 0.98%
(a)MediaOne Group, Inc. ...................................................... 2,000 162,125
-----------
Commercial Services - 1.39%
(a)Gartner Group, Inc. Class A ............................................... 14,000 229,250
-----------
Computers - 9.94%
(a)3Com Corporation .......................................................... 8,500 472,813
Compaq Computer Corporation ............................................... 25,000 665,625
(a)EMC Corporation ........................................................... 4,000 500,000
-----------
1,638,438
-----------
Computer Software & Services - 32.33%
(a)At Home Corporation ....................................................... 5,500 181,156
(a)Brooktrout Inc. ........................................................... 4,300 124,700
(a)Cisco Systems, Inc. ....................................................... 25,000 1,932,812
(a)Compuware Corporation ..................................................... 12,000 252,750
(a)Legato Systems, Inc. ...................................................... 14,000 624,750
(a)New Era of Networks, Inc. ................................................. 13,000 510,250
(a)Novell, Inc. .............................................................. 5,500 157,438
(a)Oracle Corporation ........................................................ 14,000 1,092,875
(a)Parametric Technology Corporation ......................................... 15,000 315,937
(a)Persistence Software, Inc. ................................................ 2,000 39,750
(a)Synopsis, Inc. ............................................................ 2,000 97,500
-----------
5,329,918
-----------
Electronics - 6.67%
Hewlett - Packard Company ................................................. 4,000 530,250
Motorola, Inc. ............................................................ 4,000 569,500
-----------
1,099,750
-----------
Electronics - Semiconductor - 8.22%
(a)Cree Research, Inc. ....................................................... 12,000 1,354,500
-----------
Financial - Banks, Commercial - 2.84%
Bank of America Corporation ............................................... 3,000 157,313
First Union Corporation ................................................... 6,000 223,500
FleetBoston Financial Corporation ......................................... 2,368 87,912
-----------
468,725
-----------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
CAPITAL VALUE FUND
PORTFOLIO OF INVESTMENTS
March 31, 2000
------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Financial - Securities Broker - 1.86%
(a)Knight/Trimark Group, Inc. ................................................ 6,000 $ 306,000
-----------
Financial Services - 2.56%
(a)E*TRADE Group, Inc. ....................................................... 14,000 421,750
-----------
Foreign - American Depository Receipts - 1.69% (b)
Alcatel Alsthom - ADR ..................................................... 4,200 184,012
Norsk Hydro ASA - ADR ..................................................... 2,500 95,156
-----------
279,168
-----------
Industrial Materials - Specialty - 1.19%
The AES Corporation ....................................................... 2,500 196,875
-----------
Office & Business Equipment - 1.14%
(a)Splash Technology Holdings, Inc. .......................................... 15,000 187,500
-----------
Restaurants & Food Service - 0.54%
(a)Starbucks Corporation ..................................................... 2,000 89,625
-----------
Retail - Apparel - 1.08%
NIKE, Inc. ................................................................ 4,500 178,313
-----------
Retail - Department Stores - 1.01%
Wal-Mart Stores, Inc. ..................................................... 3,000 166,500
-----------
Telecommunications - 7.15%
Lucent Technologies Inc. .................................................. 2,000 121,500
(a)PairGain Technologies, Inc. ............................................... 10,000 186,875
(a)Performance Technologies, Incorporated .................................... 3,000 130,312
(a)Qwest Communications International, Inc. .................................. 12,800 614,400
(a)Tellabs, Inc. ............................................................. 2,000 125,969
-----------
1,179,056
-----------
Transportation - Air - 1.35%
(a)US Airways Group, Inc. .................................................... 8,000 222,500
-----------
Utilities - Telecommunications - 1.63%
GTE Corporation ........................................................... 2,000 143,000
Sprint Corporation ........................................................ 2,000 126,000
-----------
269,000
-----------
Total Common Stocks (Cost $6,906,085) ........................................ 13,999,212
-----------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
CAPITAL VALUE FUND
PORTFOLIO OF INVESTMENTS
March 31, 2000
------------------------------------------------------------------------------------------------------------------------------------
Interest Maturity Value
Principal Rate Date (note 1)
------------------------------------------------------------------------------------------------------------------------------------
CORPORATE OBLIGATIONS - 11.19%
A T & T Corporation ........................... $ 50,000 7.500% 06/01/06 $ 50,438
A T & T Corporation ........................... 50,000 8.125% 01/15/22 50,000
A T & T Corporation ........................... 50,000 8.125% 07/15/24 50,250
A T & T Corporation ........................... 100,000 8.625% 12/01/31 103,375
American Express Company ...................... 50,000 8.625% 05/15/22 51,666
Anheuser-Busch Companies, Inc. ................ 25,000 9.000% 12/01/09 27,720
Archer Daniels Midland Corporation ............ 100,000 6.250% 05/15/03 96,804
Archer Daniels Midland Corporation ............ 25,000 8.875% 04/15/11 27,664
BellSouth Telecommunications .................. 50,000 6.250% 05/15/03 48,625
BellSouth Telecommunications .................. 50,000 7.000% 02/01/05 49,625
BellSouth Telecommunications .................. 25,000 7.875% 08/01/32 24,313
BellSouth Telecommunications .................. 125,000 6.750% 10/15/33 107,500
The Boeing Company ............................ 150,000 8.750% 09/15/31 169,310
The Coca-Cola Company ......................... 70,000 8.500% 02/01/22 76,644
Du Pont (E.I.) De Nemours & Company ........... 50,000 8.125% 03/15/04 51,482
Du Pont (E.I.) De Nemours & Company ........... 50,000 7.950% 01/15/23 49,518
Duke Energy Corp .............................. 20,000 6.375% 03/01/08 18,500
Duke Energy Corp .............................. 100,000 6.750% 08/01/25 85,375
General Electric Capital Corporation .......... 100,000 8.750% 05/21/07 108,710
International Business Machines ............... 50,000 8.375% 11/01/19 54,313
Morgan Stanley Group, Inc. .................... 75,000 7.500% 02/01/24 72,411
Pacific Bell .................................. 100,000 6.250% 03/01/05 95,412
United Parcel Service of America .............. 50,000 8.375% 04/01/20 54,687
U S West Communications Group ................. 50,000 6.875% 09/15/33 42,305
Wachovia Corporation .......................... 75,000 6.375% 04/15/03 72,985
Wal-Mart Stores, Inc. ......................... 25,000 6.500% 06/01/03 24,627
Wal-Mart Stores, Inc. ......................... 150,000 8.875% 06/29/11 154,366
Wal-Mart Stores, Inc. ......................... 25,000 8.500% 09/15/24 25,963
-----------
Total Corporate Obligations (Cost $1,797,498) ..................................... 1,844,588
-----------
------------------------------------------------------------------------------------------------------------------------------------
Shares
------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT COMPANIES - 5.00%
Evergreen Money Market Treasury Institutional Money
Market Fund Institutional Service Shares .................................. 749,412 749,412
Evergreen Money Market Treasury Institutional Treasury Money
Market Fund Institutional Service Shares .................................. 74,497 74,497
-----------
Total Investment Companies (Cost $823,909) ........................................ 823,909
-----------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
CAPITAL VALUE FUND
PORTFOLIO OF INVESTMENTS
March 31, 2000
Total Value of Investments (Cost $9,527,492 (c)) ..................................... 101.09 % $16,667,709
Liabilities In Excess Of Other Assets ................................................ (1.09)% (180,462)
------ -----------
Net Assets ...................................................................... 100.00 % $16,487,247
====== ============
(a) Non-income producing investment.
(b) Foreign securities represent securities issued in the United States markets by non-domestic companies.
(c) Aggregate cost for financial reporting and federal income tax purposes is the same. Unrealized appreciation
(depreciation) of investments for financial reporting and federal income tax purposes is as follows:
Unrealized appreciation .......................................................................... $ 7,538,742
Unrealized depreciation .......................................................................... (398,525)
-----------
Net unrealized appreciation ....................................................... $ 7,140,217
===========
The following acronym is used in this portfolio:
ADR - American Depository Receipt
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
CAPITAL VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
March 31, 2000
ASSETS
Investments, at value (cost $9,527,492) .......................................................... $16,667,709
Cash ............................................................................................. 395
Income receivable ................................................................................ 45,298
Receivable for fund shares sold .................................................................. 8,767
-----------
Total assets ................................................................................ 16,722,169
-----------
LIABILITIES
Accrued expenses ................................................................................. 26,227
Payable for investment purchases ................................................................. 208,695
-----------
Total liabilities ........................................................................... 234,922
-----------
NET ASSETS
(applicable to 785,781 shares outstanding; unlimited
shares of no par value beneficial interest authorized) .......................................... $16,487,247
===========
NET ASSET VALUE AND REDEMPTION PRICE PER INVESTOR CLASS SHARE
($16,487,247 / 785,781) .......................................................................... $20.98
===========
OFFERING PRICE PER INVESTOR CLASS SHARE
(100 / 96.5 of $20.98) ........................................................................... $21.74
===========
NET ASSETS CONSIST OF
Paid-in capital .................................................................................. $ 9,060,654
Undistributed net realized gain on investments ................................................... 286,376
Net unrealized appreciation on investments ....................................................... 7,140,217
-----------
$16,487,247
===========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
CAPITAL VALUE FUND
STATEMENT OF OPERATIONS
Year ended March 31, 2000
INVESTMENT INCOME
Income
Interest ........................................................................................ $ 143,717
Dividends ....................................................................................... 112,939
----------
Total income .............................................................................. 256,656
----------
Expenses
Investment advisory fees (note 2) ............................................................... 76,884
Fund administration fees (note 2) ............................................................... 22,424
Distribution and service fees - Investor Class Shares (note 3) .................................. 64,085
Custody fees .................................................................................... 3,804
Registration and filing administration fees (note 2) ............................................ 3,103
Fund accounting fees (note 2) ................................................................... 24,000
Audit fees ...................................................................................... 11,312
Legal fees ...................................................................................... 5,005
Securities pricing fees ......................................................................... 5,984
Shareholder recordkeeping fees .................................................................. 9,000
Other accounting fees (note 2) .................................................................. 2,621
Shareholder servicing expenses .................................................................. 5,656
Registration and filing expenses ................................................................ 3,503
Printing expenses ............................................................................... 3,705
Trustee fees and meeting expenses ............................................................... 3,911
Other operating expenses ........................................................................ 4,241
----------
Total expenses ............................................................................ 249,238
----------
Net investment income ................................................................ 7,418
----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from investment transactions ....................................................... 828,190
Increase in unrealized appreciation on investments ................................................... 4,240,386
----------
Net realized and unrealized gain on investments ................................................. 5,068,576
----------
Net increase in net assets resulting from operations ...................................... $5,075,994
==========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
CAPITAL VALUE FUND
STATEMENTS OF CHANGES IN NET ASSETS
------------------------------------------------------------------------------------------------------------------------------------
Year ended Year ended
March 31, March 31,
2000 1999
------------------------------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS
Operations
Net investment income ............................................................ $ 7,418 $ 40,509
Net realized gain from investment transactions ................................... 828,190 1,210,654
Increase in unrealized appreciation on investments ............................... 4,240,386 169,272
----------- -----------
Net increase in net assets resulting from operations ......................... 5,075,994 1,420,435
----------- -----------
Distributions to shareholders from
Net investment income ............................................................ (7,418) (40,509)
Net realized gain from investment transactions ................................... (939,190) (813,281)
----------- -----------
Decrease in net assets resulting from distributions .......................... (946,608) (853,790)
----------- -----------
Capital share transactions
Increase in net assets resulting from capital share transactions (a) ............. 1,301,587 601,561
----------- -----------
Total increase in net assets ............................................ 5,430,973 1,168,206
NET ASSETS
Beginning of year ..................................................................... 11,056,274 9,888,068
----------- -----------
End of year ........................................................................... $16,487,247 $11,056,274
=========== ===========
(a) A summary of capital share activity follows:
-------------------------------------------------------------------------------------
Year ended Year ended
March 31, 2000 March 31, 1999
Shares Value Shares Value
-------------------------------------------------------------------------------------
Shares sold ............................... 82,969 $ 1,479,836 65,106 $ 969,346
Shares issued for reinvestment
of distributions ..................... 49,947 944,653 57,489 853,665
----------- ----------- ----------- -----------
132,916 2,424,489 122,595 1,823,011
Shares redeemed ........................... (69,039) (1,122,902) (82,277) (1,221,450)
----------- ----------- ----------- -----------
Net increase ......................... 63,877 $ 1,301,587 40,318 $ 601,561
=========== =========== =========== ===========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CAPITAL VALUE FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Year)
------------------------------------------------------------------------------------------------------------------------------------
Year ended Year ended Year ended Year ended Year ended
March 31, March 31, March 31, March 31, March 31,
2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year ......................... $15.32 $14.51 $12.50 $11.92 $10.75
Income from investment operations
Net investment income ........................... 0.01 0.06 0.13 0.15 0.19
Net realized and unrealized gain on investments 6.99 2.02 3.93 0.70 1.53
----------- ----------- ----------- ----------- -----------
Total from investment operations ........... 7.00 2.08 4.06 0.85 1.72
----------- ----------- ----------- ----------- -----------
Distributions to shareholders from
Net investment income ........................... (0.01) (0.06) (0.13) (0.15) (0.20)
Tax return of capital ........................... 0.00 0.00 0.00 (0.01) 0.00
Net realized gain from investment transactions .. (1.33) (1.21) (1.92) (0.11) (0.35)
----------- ----------- ----------- ----------- -----------
Total distributions ........................ (1.34) (1.27) (2.05) (0.27) (0.55)
----------- ----------- ----------- ----------- -----------
Net asset value, end of year ............................... $20.98 $15.32 $14.51 $12.50 $11.92
=========== =========== =========== =========== ===========
Total return ............................................... 46.68 % 14.67 % 32.89 % 7.08 % 16.16 %
=========== =========== =========== =========== ===========
Ratios/supplemental data
Net assets, end of year .............................. $16,487,247 $11,056,274 $ 9,888,068 $ 7,738,255 $ 7,551,803
=========== =========== =========== =========== ===========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees ... 1.95 % 2.15 % 2.12 % 2.38 % 2.56 %
After expense reimbursements and waived fees .... 1.95 % 2.15 % 2.12 % 2.38 % 2.33 %
Ratio of net investment income to average net assets
Before expense reimbursements and waived fees ... 0.06 % 0.40 % 0.91 % 1.12 % 1.44 %
After expense reimbursements and waived fees .... 0.06 % 0.40 % 0.91 % 1.12 % 1.66 %
Portfolio turnover rate .............................. 34.93 % 70.65 % 33.50 % 7.31 % 12.33 %
See accompanying notes to financial statements
</TABLE>
<PAGE>
CAPITAL VALUE FUND
NOTES TO FINANCIAL STATEMENTS
March 31, 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
The Capital Value Fund (the "Fund") is a diversified series of
shares of beneficial interest of The Nottingham Investment Trust
II (the "Trust"). The Trust, an open-ended investment company, was
organized on October 18, 1990 as a Massachusetts Business Trust
and is registered under the Investment Company Act of 1940, as
amended. The investment objective of the Fund is to provide its
shareholders with a maximum total return consisting of any
combination of capital appreciation, both realized and unrealized,
and income under the constantly varying market conditions by
investing in a flexible portfolio of equity securities, fixed
income securities, and money market instruments. The Fund began
operations on November 16, 1990.
Pursuant to a plan approved by the Board of Trustees of the Trust,
the existing single class of shares of the Fund was redesignated
as the Investor Class of shares of the Fund on June 15, 1995 and
an additional class of shares, the Institutional shares, was
authorized. To date, only Investor Class shares have been issued
by the Fund. The Institutional Class shares will be sold without a
sales charge and will bear no distribution and service fees. The
Investor Class shares are subject to a maximum 3.50% sales charge
and bear distribution and service fees which may not exceed 0.50%
of the Investor Class shares' average net assets annually. The
following is a summary of significant accounting policies followed
by the Fund.
A. Security Valuation - The Fund's investments in securities
are carried at value. Securities listed on an exchange or
quoted on a national market system are valued at the last
sales price as of 4:00 p.m. New York time on the day of
valuation. Other securities traded in the over-the-counter
market and listed securities for which no sale was reported
on that date are valued at the most recent bid price.
Securities for which market quotations are not readily
available, if any, are valued by using an independent
pricing service or by following procedures approved by the
Board of Trustees. Short-term investments are valued at cost
which approximates value.
B. Federal Income Taxes - The Fund is considered a personal
holding company as defined under Section 542 of the Internal
Revenue Code since 50% of the value of the Fund's shares
were owned directly or indirectly by five or fewer
individuals at certain times during the last half of the
year. As a personal holding company, the Fund is subject to
federal income taxes on undistributed personal holding
company income at the maximum individual income tax rate. No
provision has been made for federal income taxes since
substantially all taxable income has been distributed to
shareholders. It is the policy of the Fund to comply with
the provisions of the Internal Revenue Code applicable to
regulated investment companies and to make sufficient
distributions of taxable income to relieve it from all
federal income taxes.
Net investment income and net realized gains may differ for
financial statement and income tax purposes primarily
because of losses incurred subsequent to October 31, which
are deferred for income tax purposes. The character of
distributions made during the year from net investment
income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due
to the timing of dividend distributions, the fiscal year in
which amounts are distributed may differ from the year that
the income or realized gains were recorded by the Fund.
(Continued)
<PAGE>
CAPITAL VALUE FUND
NOTES TO FINANCIAL STATEMENTS
March 31, 2000
C. Investment Transactions - Investment transactions are
recorded on the trade date. Realized gains and losses are
determined using the specific identification cost method.
Interest income is recorded daily on the accrual basis.
Dividend income is recorded on the ex-dividend date.
D. Distributions to Shareholders - The Fund generally declares
dividends quarterly, payable in March, June, September and
December, on a date selected by the Trust's Trustees. In
addition, distributions may be made annually in December out
of net realized gains through October 31 of that year.
Distributions to shareholders are recorded on the
ex-dividend date. The Fund may make a supplemental
distribution subsequent to the end of its fiscal year ending
March 31.
E. Use of Estimates - The preparation of financial statements
in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the amount of assets, liabilities, expenses and
revenues reported in the financial statements. Actual
results could differ from those estimates.
NOTE 2 - INVESTMENT ADVISORY FEE AND OTHER RELATED PARTY TRANSACTIONS
Pursuant to an investment advisory agreement, Capital Investment
Counsel, Inc. (the "Advisor") provides the Fund with a continuous
program of supervision of the Fund's assets, including the
composition of its portfolio, and furnishes advice and
recommendations with respect to investments, investment policies
and the purchase and sale of securities. As compensation for its
services, the Advisor receives a fee at the annual rate of 0.60%
of the first $250 million of the average daily net assets of the
Fund and 0.50% of average daily net assets over $250 million.
The Fund's administrator, The Nottingham Company (the
"Administrator"), provides administrative services to and is
generally responsible for the overall management and day-to-day
operations of the Fund pursuant to a fund accounting and
compliance agreement with the Trust. As compensation for its
services, the Administrator receives a fee at the annual rate of
0.175% of the Fund's first $50 million of average daily net
assets, 0.15% of the next $50 million of average daily net assets,
0.125% of the next $50 million of average daily net assets, and
0.10% of average daily net assets over $150 million. 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.
NC Shareholder Services, LLC (the "Transfer Agent") serves as the
Funds' transfer, dividend paying, and shareholder servicing agent.
The Transfer Agent maintains the records of each shareholder's
account, answers shareholder inquiries concerning accounts,
processes purchases and redemptions of the Fund shares, acts as
dividend and distribution disbursing agent, and performs other
shareholder servicing functions.
(Continued)
<PAGE>
CAPITAL VALUE FUND
NOTES TO FINANCIAL STATEMENTS
March 31, 2000
Capital Investment Group, Inc. (the "Distributor"), an affiliate
of the Advisor, serves as the Fund's principal underwriter and
distributor. The Distributor receives any sales charges imposed on
purchases of shares and re-allocates a portion of such charges to
dealers through whom the sale was made, if any. For the year ended
March 31, 2000, the Distributor retained sales charges in the
amount of $2,457.
Certain Trustees and officers of the Trust are also officers of
the Advisor, the Distributor or the Administrator.
NOTE 3 - DISTRIBUTION AND SERVICE FEES
The Board of Trustees, including a majority of the Trustees who
are not "interested persons" of the Trust as defined in the
Investment Company Act of 1940 (the "Act"), as amended, adopted a
distribution plan pursuant to Rule 12b-1 of the Act (the "Plan").
The Act regulates the manner in which a regulated investment
company may assume expenses of distributing and promoting the
sales of its shares and servicing of its shareholder accounts.
The Plan provides that the Fund may incur certain expenses, which
may not exceed 0.50% per annum of the Investor Class shares'
average daily net assets for each year elapsed subsequent to
adoption of the Plan, for payment to the Distributor and others
for items such as advertising expenses, selling expenses,
commissions, travel or other expenses reasonably intended to
result in sales of Investor shares of the Fund or support
servicing of shareholder accounts. Expenditures incurred as
service fees may not exceed 0.25% per annum of the Investor Class
shares' average daily net assets. The Fund incurred $64,085 of
such expenses under the Plan for the year ended March 31, 2000.
NOTE 4 - PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments, other than short-term
investments, aggregated $5,092,476 and $3,902,194, respectively,
for the year ended March 31, 2000.
NOTE 5 - DISTRIBUTIONS TO SHAREHOLDERS
For federal income tax purposes, the Fund must report
distributions from net realized gain from investment transactions
that represent long-term and short-term capital gain to its
shareholders. Of the total $1.33 per share distribution for the
year ended March 31, 2000, $1.29 represents long-term capital gain
and the remaining $0.04 represents the short-term capital gain.
Shareholders should consult a tax advisor on how to report
distributions for state and local income tax purposes.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees of Nottingham Investment Trust II and Shareholders of
Capital Value Fund:
We have audited the accompanying statement of assets and liabilities of Capital
Value Fund, 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
and brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Capital Value Fund as of March 31, 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>
Annual Report 2000
Balanced Fund
Equity Fund
Small Company Fund
International Equity Fund
March 31, 2000
[LOGO]
BROWN CAPITAL MANAGEMENT
<PAGE>
Table of Contents
Balanced Fund............................................................ 1
Equity Fund.............................................................. 16
Small Company Fund....................................................... 32
International Equity Fund................................................ 47
For More Information on Your Brown Capital Management (BCM) Mutual Funds:
See Our Web site @ www.browncapital.com
or
Call Our Shareholder Services Group Toll-Free at 1-877-892-4BCM,
(1-877-892-4226)
This report has been prepared for shareholders and may be distributed to others
only if preceded or accompanied by a prospectus.
<PAGE>
Balanced Fund
Market Environment
The stock market delivered its fifth consecutive year of returns in excess of
20% as reflected by the S&P 500. This unprecedented historical performance
continues to attract many investors who, might not otherwise participate in the
stock market. Considering your Brown Capital Management (BCM) Balanced Fund
retains 25% of its assets in fixed income securities and 75% in equities, such
fantastic stock market performance should likely yield above average performance
over the past twelve months, ending March 31, 2000, in your portfolio.
Conversely, given our propensity to invest in superior GARP (Growth at a
Reasonable Price) investment approach, meaning, we invest in superior growth
companies without paying too much, the 75% of your portfolio invested in
equities adversely affected the 25% invested in high quality, short to
intermediate term debt securities. As a result of this weighting, your Fund
under performed the S&P 500 Index, Lipper Balanced Universe, Lipper Flex
Universe and, our internal blended benchmark comprised of 75% S&P 500 Index and
25% Lehman Government/Corporate.
Periods Ended 3/31/00 Year to One Three Five
Date Year Years Years
BCM Balanced Fund 1.01% 8.22% 17.12% 16.91%
Standard and Poors 500 2.29% 17.94% 27.40% 26.76%
75% S&P 500 25% Lehman Corporate / Gov 2.50% 13.90% 22.30% 21.80%
Lipper Balanced Index Fund 2.98% 10.45% 15.64% 15.65%
Lipper Flex Portfolio Fund Index 2.47% 10.78% 15.88% 15.60%
Performance since 08/11/92 inception 14.00%
Performance and Benchmark Insights
We are somewhat concerned by your Fund's placement in Lipper's Flex universe.
This universe is made up of products defined, by Lipper, an independent mutual
fund rating agency, as those that allocate investments across various asset
classes, including domestic common stocks, bonds, and money market instruments
with a focus on total return. While this definition is partially correct, it is
not indicative of our true "peer" group since, historically, the Balanced Fund
invests 25% of your assets in short to intermediate term fixed income securities
and 75% in the BCM Equity Fund, comprised of medium and large (decidedly large)
capitalization equity securities. Meaning, there is always the possibility that
other asset classes and styles of management will be pitted against your
portfolio that do not resemble the aforementioned historical portfolio
characteristics.
Portfolio Review
What is accurate about Lipper's definition is that your Fund focuses on
delivering a competitive total return with a reduced level of risk.
Interestingly, this "Balanced" asset class is rarely used by investors today due
to the introduction and popularity of further diversified asset allocation or
"manager of manager" products. These funds attempt to boost diversification by
investing in numerous mutual funds representing the underlying segments of the
equity and fixed income universes. For example, a "typical" balanced fund
portfolio with 60% of the fund's assets in equities and 40% in fixed income
would find the 60% portion of the portfolio invested in, small, medium and large
equity securities from both domestic and international companies. The remaining
40% in fixed income would include short, medium and long-term debt securities,
of various qualities, and, typically, a small portion in money markets.
<PAGE>
Last year, many products in Lipper's Balanced Universe were favorably affected
by an equity component that reflected the S&P 500 Index. Your portfolio was not
as successful as its "peers" because the securities driving the market's out
performance in 1999 were not attractive given BCM's GARP approach to, unearth
superior growth companies, without paying too much (for important details on the
BCM Equity Fund, please see our fund report).
Investment Outlook
As stated in the Equity Fund report, Balanced Fund investors can expect that the
portfolio will be managed in 2000 as it has been managed historically. We
believe your Fund is favorably positioned to capitalize on an increasing
interest rate environment, geared to slowing a robust economy, while
successfully weathering volatile equity markets.
Sincerely,
Brown Capital Management
Balanced Team
/s/ Theodore M. Alexander, III
Theodore M. Alexander, III
Vice President
/s/ Eddie C. Brown
Eddie C. Brown
President
/s/ Maurice Haywood
Maurice Haywood
Vice President
/s/ Stephon A. Jackson
Stephon A. Jackson
Vice President
<PAGE>
THE BROWN CAPITAL MANAGEMENT BALANCED FUND
Performance Update - $10,000 Investment For the period from
September 30, 1992 to March 31, 2000
[Line graph here]:
--------------------------------------------------------------------------------
BCM 75% S&P 500
Balanced 25% Lehman Corp/Gov Bond Index
--------------------------------------------------------------------------------
09/30/1992 10000 10000
12/31/1992 10579 10380
03/31/1993 10774 10840
06/30/1993 10779 10959
09/30/1993 11208 11262
12/31/1993 11611 11450
03/31/1994 11297 11034
06/30/1994 11168 11036
09/30/1994 11644 11459
12/31/1994 11468 11467
03/31/1995 12195 12456
06/30/1995 13417 13559
09/30/1995 14593 14456
12/31/1995 14880 15285
03/31/1996 15493 15859
06/30/1996 15887 16445
09/30/1996 16339 16912
12/31/1996 16938 18159
03/31/1997 16579 18529
06/30/1997 18557 21312
09/30/1997 20114 22773
12/31/1997 20136 23439
03/31/1998 22582 26259
06/30/1998 23352 27101
09/30/1998 20940 24966
12/31/1998 25050 29446
03/31/1999 24611 30669
06/30/1999 25871 32512
09/30/1999 23986 30744
12/31/1999 26369 34724
03/31/2000 26635 35311
This graph depicts the performance of The Brown Capital Management Balanced Fund
versus a combined index of 75% S&P 500 Total Return Index and 25% Lehman
Government/Corporate Bond Index. It is important to note that The Brown Capital
Management Balanced Fund is a professionally managed mutual fund while the
indexes are not available for investment and are unmanaged. The comparison is
shown for illustrative purposes only. Average Annual Total Returns
Average Annual Total Returns
-------------------------------------------------------
One Year Five Years Since Inception
-------------------------------------------------------
8.22% 16.89% 13.95%
-------------------------------------------------------
The graph assumes an initial $10,000 investment at September 30, 1992. All
dividends and distributions are reinvested.
At March 31, 2000, The Brown Capital Management Balanced Fund would have grown
to $26,635 - total investment return of 166.35% since September 30, 1992.
At March 31, 2000, a similar investment in a combined index of 75% S&P 500 Total
Return Index and 25% Lehman Government/Corporate Bond Index would have grown to
$35,311 - total investment return of 253.11% since September 30, 1992.
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>
THE BROWN CAPITAL MANAGEMENT BALANCED FUND
PORTFOLIO OF INVESTMENTS
March 31, 2000
------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - 68.55%
Commercial Services - 1.68%
Equifax Inc. ............................................................. 9,525 $240,506
--------
Computer Software & Services - 6.56%
(a)Compuware Corporation .................................................... 8,900 187,456
(a)Fiserv, Inc. ............................................................. 4,880 181,475
(a)Microsoft Corporation .................................................... 2,200 233,750
(a)Network Associates, Inc. ................................................. 4,650 149,962
(a)Sterling Software, Inc. .................................................. 5,600 184,450
--------
937,093
--------
Computers - 5.92%
(a)Dell Computer Corporation ................................................ 2,800 151,025
(a)EMC Corporation .......................................................... 2,150 268,750
International Business Machines Corporation .............................. 3,600 424,800
--------
844,575
--------
Cosmetics & Personal Care - 0.77%
The Dial Corporation ..................................................... 8,100 109,856
--------
Diversified Operations - 1.22%
Corning Incorporated ..................................................... 900 174,600
--------
Electronics - 5.33%
(a)Altera Corporation ....................................................... 2,700 240,975
General Electric Company ................................................. 1,955 303,392
(a)Solectron Corporation .................................................... 5,400 216,337
--------
760,704
--------
Electronics - Semiconductor - 3.30%
Intel Corporation ........................................................ 2,000 263,875
(a)Xilinx, Inc. ............................................................. 2,500 207,031
--------
470,906
--------
Entertainment - 1.73%
Carnival Corporation ..................................................... 9,975 246,881
--------
Financial - Banks, Money Center - 3.72%
Citigroup Inc. ........................................................... 2,850 169,041
Mellon Financial Corporation ............................................. 5,450 160,775
The Chase Manhattan Corporation .......................................... 2,313 201,665
--------
531,481
--------
Financial Services - 3.56%
SLM Holding Corporation .................................................. 5,475 183,755
T. Rowe Price Associates, Inc. ........................................... 8,225 324,887
--------
508,642
--------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
THE BROWN CAPITAL MANAGEMENT BALANCED FUND
PORTFOLIO OF INVESTMENTS
March 31, 2000
------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Financial - Securities Brokers - 0.94%
Franklin Resources, Inc. ................................................. 4,000 $133,750
--------
Hand & Machine Tools - 1.34%
Danaher Corporation ...................................................... 3,750 191,250
--------
Industrial Materials - Specialty - 1.76%
Fastenal Company ......................................................... 5,250 251,344
--------
Insurance - Life & Health - 2.08%
AFLAC INCORPORATED ....................................................... 6,510 297,019
--------
Leisure Time - 2.08%
Harley-Davidson, Inc. .................................................... 3,675 296,756
--------
Manufacturing - 0.89%
Illinois Tool Works Inc. ................................................. 2,225 126,825
--------
Medical - Biotechnology - 1.08%
PE Corp-PE Biosystems Group .............................................. 1,600 154,400
--------
Medical - Hospital Management & Services - 1.46%
(a)Health Management Associates, Inc. ....................................... 14,600 208,050
--------
Medical Supplies - 0.85%
Johnson & Johnson ........................................................ 1,725 120,966
--------
Oil & Gas - Equipment & Services - 1.14%
Schlumberger Limited ..................................................... 2,100 163,275
--------
Pharmaceuticals - 3.40%
Cardinal Health, Inc. .................................................... 7,058 323,786
Merck & Co., Inc. ........................................................ 2,600 162,175
--------
485,961
--------
Retail - Apparel - 1.57%
The TJX Companies, Inc. .................................................. 10,100 224,725
--------
Retail - Department Stores - 1.52%
Dollar General Corporation ............................................... 8,091 217,446
--------
Retail - General Merchandise - 1.62%
(a)Staples, Inc. ............................................................ 11,575 231,500
--------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
THE BROWN CAPITAL MANAGEMENT BALANCED FUND
PORTFOLIO OF INVESTMENTS
March 31, 2000
------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Retail - Specialty Lines - 2.47%
(a)AutoZone, Inc. ....................................................... 825 $ 23,100
The Home Depot, Inc. ................................................. 5,062 329,030
----------
352,130
----------
Telecommunications Equipment - 8.03%
(a)ADC Telecommunications, Inc. ......................................... 6,800 366,350
Lucent Technologies Inc. ............................................. 2,600 157,950
(a)MCI WorldCom, Inc. ................................................... 7,200 326,250
(a)Tellabs, Inc. ........................................................ 4,700 296,027
----------
1,146,577
----------
Utilities - Telecommunications - 2.53%
AT&T Corp. ........................................................... 4,300 242,681
(a)The AES Corporation .................................................. 1,500 118,125
----------
360,806
----------
Total Common Stocks (Cost $7,836,068) ................................ 9,788,024
----------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Interest Maturity
Principal Rate Date
------------ --------------- ----------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 1.84%
United States Treasury Note........................ $20,000 6.250% 08/15/23 20,297
United States Treasury Note........................ 20,000 8.000% 11/15/21 24,366
United States Treasury Note........................ 90,000 6.375% 08/15/02 89,831
United States Treasury Note........................ 100,000 7.500% 02/15/05 104,656
Federal Home Loan Bank Strip....................... 100,000 0.000% 07/14/17 23,719
--------------
Total U.S. Government and Agency Obligations (Cost $254,256) 262,869
--------------
CORPORATE OBLIGATIONS - 8.02%
Alabama Power Company.............................. 35,000 7.750% 02/01/23 33,609
AMR Corporation.................................... 10,000 10.000% 02/01/01 10,166
AT&T Corporation................................... 75,000 5.625% 03/15/04 70,875
Boston Edison Company.............................. 60,000 7.800% 05/15/10 60,308
Chase Manhattan Corporation........................ 45,000 6.500% 08/01/05 42,637
Chesapeake & Potomac Telephone of Virginia......... 90,000 7.250% 06/01/12 84,150
Citicorp........................................... 25,000 7.125% 06/01/03 24,775
Dow Chemical Capital Debentures.................... 15,000 9.200% 06/01/10 16,643
Ford Motor Credit.................................. 55,000 7.250% 09/01/10 54,952
ITT Corporation.................................... 95,000 7.375% 11/15/15 80,410
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
THE BROWN CAPITAL MANAGEMENT BALANCED FUND
PORTFOLIO OF INVESTMENTS
March 31, 2000
Interest Maturity Value
Principal Rate Date (note 1)
------------ --------------- ---------------- --------------
CORPORATE OBLIGATIONS - (Continued)
Merrill Lynch.................................. $160,000 7.150% 07/30/12 $ 151,247
Monsanto Company............................... 95,000 6.210% 02/05/08 88,563
Nalco Chemical................................. 50,000 6.250% 05/15/08 46,345
Nationsbank Corporation........................ 15,000 6.875% 02/15/05 14,605
RJ Reynolds Tobacco Corp....................... 30,000 8.750% 04/15/04 21,075
The Rouse Company.............................. 35,000 8.500% 01/15/03 35,079
The Walt Disney Company........................ 100,000 7.750% 09/30/11 100,516
Time Warner, Inc............................... 35,000 9.150% 02/01/23 37,844
U. S. F. & G. Corporation...................... 90,000 7.125% 06/01/05 86,998
Wal-Mart Stores................................ 80,000 8.070% 12/21/12 84,751
--------------
Total Corporate Obligations (Cost $1,204,562) 1,145,548
--------------
INVESTMENT COMPANIES - 8.93%
Evergreen Money Market Treasury Institutional Money
Market Fund Institutional Service Shares 637,411 637,411
Evergreen Money Market Treasury Institutional Treasury
Money Market Fund Institutional Shares 637,411 637,411
--------------
Total Investment Companies (Cost $1,274,822) 1,274,822
--------------
Total Value of Investments (Cost $10,569,708 (b)) 87.34% $ 12,471,263
Other Assets Less Liabilities 12.66% 1,807,209
---------------- --------------
Net Assets 100.00% $ 14,278,472
================ ==============
(a) Non-income producing investment.
(b) Aggregate cost for financial reporting and federal income tax purposes is the same. Unrealized appreciation
(depreciation) of investments for financial reporting and federal income tax purposes is as follows:
Unrealized appreciation $ 2,344,764
Unrealized depreciation (443,209)
--------------
Net unrealized appreciation $ 1,901,555
==============
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
THE BROWN CAPITAL MANAGEMENT BALANCED FUND
STATEMENT OF ASSETS AND LIABILITIES
March 31, 2000
ASSETS
Investments, at value (cost $10,569,708) ........................................................ $12,471,263
Cash ............................................................................................ 1,818,748
Income receivable ............................................................................... 37,661
Receivable for investments sold ................................................................. 45,572
-----------
Total assets ............................................................................... 14,373,244
-----------
LIABILITIES
Accrued expenses ................................................................................ 6,957
Payable for investment purchases ................................................................ 87,815
-----------
Total liabilities .......................................................................... 94,772
-----------
NET ASSETS
(applicable to 784,739 shares outstanding; unlimited
shares of no par value beneficial interest authorized) ......................................... $14,278,472
===========
NET ASSET VALUE, REDEMPTION AND OFFERING PRICE
PER INSTITUTIONAL CLASS SHARE
($14,278,472 / 784,739 shares) .................................................................. $ 18.20
===========
NET ASSETS CONSIST OF
Paid-in capital ................................................................................. $11,997,350
Undistributed net investment oincome ............................................................ 1,967
Accumulated net realized ogain on investments ................................................... 377,600
Net unrealized oappreciation on investments ..................................................... 1,901,555
-----------
$14,278,472
===========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
THE BROWN CAPITAL MANAGEMENT BALANCED FUND
STATEMENT OF OPERATIONS
Year ended March 31, 2000
INVESTMENT INCOME
Income
Interest ..................................................................................... $ 103,435
Dividends .................................................................................... 106,478
-----------
Total income ........................................................................... 209,913
-----------
Expenses
Investment advisory fees (note 2) ............................................................ 75,855
Fund administration fees (note 2) ............................................................ 20,479
Custody fees ................................................................................. 4,204
Registration and filing administration fees (note 2) ......................................... 4,652
Fund accounting fees (note 2) ................................................................ 24,000
Audit fees ................................................................................... 10,707
Legal fees ................................................................................... 5,003
Securities pricing fees ...................................................................... 5,991
Shareholder recordkeeping fees ............................................................... 9,000
Other accounting fees (note 2) ............................................................... 3,553
Shareholder servicing expenses ............................................................... 2,637
Registration and filing expenses ............................................................. 8,517
Printing expenses ............................................................................ 3,112
Trustee fees and meeting expenses ............................................................ 3,916
Other operating expenses ..................................................................... 3,496
-----------
Total expenses ......................................................................... 185,122
-----------
Less investment advisory fees waived (note 2) .......................................... (44,989)
-----------
Net expenses ........................................................................... 140,133
-----------
Net investment income ............................................................. 69,780
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realizedo gain from investment transactions ................................................... 853,186
Increase in unrealized appreciation on investments ................................................ 192,375
-----------
Net realized and unrealized gain on investments .............................................. 1,045,561
-----------
Net oincrease in net assets resulting from operations .................................. $ 1,115,341
===========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
THE BROWN CAPITAL MANAGEMENT BALANCED FUND
STATEMENTS OF CHANGES IN NET ASSETS
------------------------------------------------------------------------------------------------------------------------------------
Year ended Year ended
March 31, March 31,
2000 1999
------------------------------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS
Operations
Net investment income ................................................... $ 69,780 $ 50,874
Net realized gain from investment transactions .......................... 853,186 338,978
Increase in unrealized appreciation on investments ..................... 192,375 195,131
------------ ------------
Net increase in net assets resulting from operations ............... 1,115,341 584,983
------------ ------------
Distributions to shareholders from
Net investment income ................................................... (67,826) (50,801)
Net realized gain from investment transactions .......................... (670,268) (161,031)
------------ ------------
Decrease in net assets resulting from distributions ................ (738,094) (211,832)
------------ ------------
Capital share transactions
Increase in net assets resulting from capital share transactions (a) .... 4,298,321 3,152,016
------------ ------------
Total increase in net assets .................................. 4,675,568 3,525,167
NET ASSETS
Beginning of year ........................................................... 9,602,904 6,077,737
------------ ------------
End of year ................................................................. $ 14,278,472 $ 9,602,904
============ ============
(including undistributed net investment income of $1,967 in 2000 and $13 in 1999)
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
(a) A summary of capital share activity follows:
Year ended Year ended
March 31, 2000 March 31, 1999
Shares Value Shares Value
------------- ------------- ------------- -------------
Shares sold 273,858 $ 4,834,949 220,097 $ 3,825,498
Shares issued for reinvestment
of distributions 41,152 737,421 11,926 210,991
------------- ------------- ------------- -------------
315,010 5,572,370 232,023 4,036,489
Shares redeemed (70,482) (1,274,049) (52,851) (884,473)
------------- ------------- ------------- -------------
Net increase 244,528 $ 4,298,321 179,172 $ 3,152,016
============= ============= ============= =============
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
THE BROWN CAPITAL MANAGEMENT BALANCED FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Year)
Year ended Year ended Year ended Year ended Year ended
March 31, March 31, March 31, March 31, March 31,
2000 1999 1998 1997 1996
------------ ----------- ----------- ------------ -----------
Net asset value, beginning of year $17.78 $16.83 $13.60 $13.76 $11.56
Income from investment operations
Net investment income 0.10 0.13 0.17 0.21 0.12
Net realized and unrealized gain on investments 1.34 1.39 4.65 0.76 2.98
------------ ----------- ----------- ------------ -----------
Total from investment operations 1.44 1.52 4.82 0.97 3.10
------------ ----------- ----------- ------------ -----------
Distributions to shareholders from
Net investment income (0.10) (0.13) (0.17) (0.21) (0.12)
Net realized gain from investment transactions (0.92) (0.44) (1.42) (0.92) (0.78)
------------ ----------- ----------- ------------ -----------
Total distributions (1.02) (0.57) (1.59) (1.13) (0.90)
------------ ----------- ----------- ------------ -----------
Net asset value, end of year $18.20 $17.78 $16.83 $13.60 $13.76
============ =========== =========== ============ ===========
Total return 8.22 % 8.99 % 36.19 % 7.01 % 27.04 %
============ =========== =========== ============ ===========
Ratios/supplemental data
Net assets, end of year $14,278,472 $9,602,904 $6,077,737 $3,874,653 $3,319,314
============ =========== =========== ============ ===========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees 1.59 % 2.11 % 2.22 % 2.85 % 3.50 %
After expense reimbursements and waived fees 1.20 % 1.20 % 1.20 % 1.20 % 1.59 %
Ratio of net investment income to average net assets
Before expense reimbursements and waived fees 0.21 % (0.17)% 0.05 % (0.13)% (0.97)%
After expense reimbursements and waived fees 0.60 % 0.74 % 1.08 % 1.51 % 0.94 %
Portfolio turnover rate 45.01 % 58.38 % 33.54 % 45.58 % 43.59 %
See accompanying notes to financial statements
</TABLE>
<PAGE>
THE BROWN CAPITAL MANAGEMENT BALANCED FUND
NOTES TO FINANCIAL STATEMENTS
March 31, 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
The Brown Capital Management Balanced Fund (the "Fund") is a
diversified series of shares of beneficial interest of The
Nottingham Investment Trust II (the "Trust"). The Trust, an
open-ended investment company, was organized on October 18, 1990
as a Massachusetts Business Trust and is registered under the
Investment Company Act of 1940, as amended. The investment
objective of the Fund is to provide its shareholders with a
maximum total return consisting of any combination of capital
appreciation by investing in a flexible portfolio of equity
securities, fixed income securities and money market instruments.
The Fund began operations on August 11, 1992.
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 Class shares of the Fund on June 15, 1995 and
an additional class of shares, the Investor Class shares, was
authorized. To date, only Institutional Class shares have been
issued by the Fund. The Institutional Class shares are sold
without a sales charge and bear no distribution and service fees.
The Investor Class shares will be subject to a maximum 3.50% sales
charge and will bear distribution and service fees which may not
exceed 0.50% of the Investor Class shares' average net assets
annually. The following is a summary of significant accounting
policies followed by the Fund.
A. Security Valuation - The Fund's investments in securities
are carried at value. Securities listed on an exchange or
quoted on a national market system are valued at the last
sales price as of 4:00 p.m. New York time on the day of
valuation. Other securities traded in the over-the-counter
market and listed securities for which no sale was reported
on that date are valued at the most recent bid price.
Securities for which market quotations are not readily
available, if any, are valued by using an independent
pricing service or by following procedures approved by the
Board of Trustees. Short-term investments are valued at cost
which approximates value.
B. Federal Income Taxes - The Fund is considered a personal
holding company as defined under Section 542 of the Internal
Revenue Code since 50% of the value of the Fund's shares
were owned directly or indirectly by five or fewer
individuals at certain times during the last half of the
year. As a personal holding company, the Fund is subject to
federal income taxes on undistributed personal holding
company income at the maximum individual income tax rate. No
provision has been made for federal income taxes since
substantially all taxable income has been distributed to
shareholders. It is the policy of the Fund to comply with
the provisions of the Internal Revenue Code applicable to
regulated investment companies and to make sufficient
distributions of taxable income to relieve it from all
federal income taxes.
Net investment income (loss) and net realized gains (losses)
may differ for financial statement and income tax purposes
primarily because of losses incurred subsequent to October
31, which are deferred for income tax purposes. The
character of distributions made during the year from net
investment income or net realized gains may differ from
their ultimate characterization for federal income tax
purposes. Also, due to the timing of dividend distributions,
the fiscal year in which amounts are distributed may differ
from the year that the income or realized gains were
recorded by the Fund.
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 on an accrual basis. Dividend
income is recorded on the ex-dividend date.
(Continued)
<PAGE>
THE BROWN CAPITAL MANAGEMENT BALANCED FUND
NOTES TO FINANCIAL STATEMENTS
March 31, 2000
D. Distributions to Shareholders - The Fund may declare
dividends quarterly, payable in March, June, September and
December, on a date selected by the Trust's Trustees. 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, Brown Capital
Management, Inc. (the "Advisor") provides the Fund with a
continuous program of supervision of the Fund's assets, including
the composition of its portfolio, and furnishes advice and
recommendations with respect to investments, investment policies
and the purchase and sale of securities. As compensation for its
services, the Advisor receives a fee at the annual rate of 0.65%
of the Fund's first $25 million of average daily net assets and
0.50% of average daily net assets over $25 million.
The Advisor intends to voluntarily waive all or a portion of its
fee and reimburse expenses of the Fund to limit total Fund
operating expenses to 1.20% 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 a portion of its fee amounting to $44,989
($0.06 per share) 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 received a fee at the annual rate of
0.175% of the Fund's first $50 million of average daily net
assets, 0.15% of the next $50 million of average daily net assets,
0.125% of the next $50 million of average daily net assets, and
0.10% of average daily net assets over $150 million. 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.
North Carolina Shareholder Services, LLC (the "Transfer Agent")
serves as the Fund's transfer, dividend paying, and shareholder
servicing agent. The Transfer Agent maintains the records of each
shareholder's account, answers shareholder inquiries concerning
accounts, processes purchases and redemptions of the Fund 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.
(Continued)
<PAGE>
THE BROWN CAPITAL MANAGEMENT BALANCED FUND
NOTES TO FINANCIAL STATEMENTS
March 31, 2000
NOTE 3 - PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments, other than short-term
investments, aggregated $6,167,939 and $4,273,754, respectively,
for the year ended March 31, 2000.
NOTE 4 - DISTRIBUTIONS TO SHAREHOLDERS
For federal income tax purposes, the Fund must report
distributions from net realized gain from investment transactions
that represent long-term capital gain to its shareholders. The
fund paid a total amount of $1.00 per share distributions for the
year ended March 31, 2000, including $0.92 that is classified as
long term gain. Shareholders should consult a tax advisor on how
to report distributions for state and local income tax purposes.
<PAGE>
To the Board of Trustees of Nottingham Investment Trust II and Shareholders of
The Brown Capital Management Balanced Fund:
We have audited the accompanying statement of assets and liabilities of The
Brown Capital Management Balanced Fund, 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 each of the years presented. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with 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
and brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Brown Capital Management Balanced Fund 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>
Equity Fund
Market Environment
On the heels of a 5th consecutive year of unprecedented performance for the U.S
Stock market, the S&P 500 Stock Index, returning over 20% in 1999, is beginning
2000 with more conservative returns. For many money managers, this large
capitalization index is, and continues to be, difficult to outpace or duplicate
given its sizeable weighting in technology and even greater weighting in a
select group of companies that dominate the index's performance.
Periods Ended 3/31/00 Year to One Three Five
Date Year Years Years
BCM Equity Fund 2.32% 13.41% 21.51% 20.54%
Standard and Poors 500 2.29% 17.94% 27.40% 26.76%
Russell 1000 3.91% 19.55% 26.06% 24.56%
Russell 1000 Growth 7.13% 34.12% 36.94% 31.83%
Lipper Large-Cap Growth Fund Index 1.30% 35.07% 36.67% 30.95%
Lipper Large-Cap Core Fund Index 4.27% 19.27% 26.50% 24.47%
Lipper Multicap Growth Fund Index 14.36% 57.39% 38.51% 30.39%
Performance since 08/14/92 inception 16.90%
The Brown Capital Management (BCM) Equity Fund was no different, experiencing
one of its most challenging years in recent history. At the Fund's year-end,
March 31, 2000, the Equity Fund trailed the unmanaged S&P 500 Index,
capitalization and style indexes, the Russell 1000 and Russell 1000 Growth, and
the Fund's new Lipper peer group, the Multi-Cap Growth Fund Index. Despite
respectable performance in the first quarter of 2000, the challenges faced in
1999 are reflected most in critical, long-term, performance periods.
Benchmarking Insights
Unfortunately, an absolute number does not adequately explain the leading
contributors to your Fund's under performance. In reality, there were two: 1)
your fund's historical propensity to unearth superior medium and large
companies, resulting in a portfolio of both types of stocks, and 2) our
commitment to GARP (Growth at a Reasonable Price) investing, defined as, in over
simplified terms, an approach that seeks to invest in superior growth companies,
without paying too much.
This unique combination of variables ensures that BCM remains a prudent,
long-term investment manager, but it makes your Equity Fund difficult to compare
to any particular benchmark and to categorize in a growing world of mutual fund
products. Considering its weighted average market capitalization of nearly $89
billion (large capitalization stocks are typically defined as those with market
capitalization greater than $10 billion, it appears the fund is decidedly
large-cap. Conversely, Lipper Inc., a mutual fund rating agency, recently
instituted new categories based on major characteristics of each fund's
portfolio holdings such as market capitalization, price/earnings ratios and
other valuation measures. The most pertinent component of the new guideline
states: "Multi-Cap Growth Funds [are] Funds that, by portfolio practice, invest
in a variety of market capitalization ranges, without concentrating 75% of their
equity assets in any one market capitalization range over an extended period of
time." Your fund's inclusion of nine medium sized companies, with weighting of
18% in the portfolio prevents the fund from being compared to other large-cap
products in the Lipper universe. As seen in the table, the Equity Fund is
clearly more competitive when compared to traditional large-cap benchmarks and
peer groups, but that still does not explain the balance of its under
performance.
<PAGE>
Portfolio Review
Last year, stocks with historically traditional valuations, delivering superior
performance were difficult to find. We observed three critical variables in the
market that resulted in this trend: 1) a clear preference for mega market cap,
very liquid stocks; 2) investors were not very discriminating as to how much
they were willing to pay for these companies; and 3) there was an extreme
penalty being accessed if a company reported earnings that fell short of
expectations. In short, overall market performance in 1999 was driven by a very
narrow group of companies that satisfied these criteria. During that period, the
top 5% of companies in the S&P 500 Index at year-end accounted for 69% of the
index's return. Talk about the tail wagging the dog! For example, from June 30,
1999 to August 31, 1999, the top 5% of that same index advanced 0.4% while the
other 475 stocks declined more than 4%. Though you might expect a return below
4%, the return for the quarter was only -3.6%. Clearly, this select group of
securities supported the Index as a whole. Our real dilemma surfaced when
considering the valuation metrics (how much investors are willing to pay for a
stock) of these companies. During the same period, that same group of
"performers'" weighted P/E on twelve months forward estimated earnings was
39.1x. Your Equity Fund for the same time period (June 30, 1999 to August 31,
1999), consistent with our GARP approach, had a weighted P/E of 29.6x twelve
months forward estimated earnings. We understand conceptually the need to "pay
to play," but we do not believe in purchasing these securities to capture
performance during what, we consider to be, a temporary condition in the market.
Your portfolio is best suited for long-term investors with, at the very least, a
three to five year investment horizon. Paying such a premium for these
securities exposes investors to a great deal of risk when, in the words of the
Federal Reserve Chairman, Mr. Allan Greenspan, we might be experiencing a period
of "irrational exuberance" in the stock market.
During this turbulent year, instead of "changing our stripes" and chasing
performance, we remained committed to the GARP approach that earned past
success. Throughout the year, we redoubled our efforts in your portfolio to
update and revisit the fundamentals of each holding to ensure our conviction
level remained strong. Companies that are an indication of this conviction are
long-term positions such as Fastenal, ADC Technologies, Citicorp and Home Depot.
In addition, newer ideas such as, Corning, Oracle and Lucent were unearthed as a
result of this process.
Investment Outlook
What should be most evident since our last report is that little in your
portfolio changed. Certainly, we are concerned about the implications of last
year's significant under performance on the long-term results of your Fund, but
our unwavering commitment to the fundamental research that earned us past
success remains intact. As you know, markets are cyclical, some might say that
your Fund has already been vindicated considering the volatility of the first
four months of 2000. Importantly, we remain constructive on equities and the
market overall, long term, for several reasons. The economy and supporting
productivity gains remain strong, as does the level of consumer sentiment. We
view the current lack of market breadth and the associated investor focus on a
narrow group of stocks, as an opportunity. Most of all, experience suggests that
investors always come back to fundamentals. When they do, the market's breadth
should increase substantially. At some point, the valuations in these "Old
Economy" or otherwise "ignored" stocks, relative to their solid fundamentals,
will be too attractive, even for "New Economy" investors. In preparation for
this day, we remain focused on unearthing attractive GARP securities. Through a
consistent, disciplined investment approach in this very risky and volatile
environment.
<PAGE>
Sincerely,
Brown Capital Management
Mid/Large Team
/s/ Theodore M. Alexander, III
Theodore M. Alexander, III
Vice President
/s/ Eddie C. Brown
Eddie C. Brown
President
/s/ Maurice Haywood
Maurice Haywood
Vice President
/s/ Stephon A. Jackson
Stephon A. Jackson
Vice President
<PAGE>
THE BROWN CAPITAL MANAGEMENT EQUITY FUND
Performance Update - $10,000 Investment For the period from
September 30, 1992 to March 31, 2000
[LINE GRAPH HERE]:
--------------------------------------------------------------------------------
BCM
Equity S&P 500
Fund w/Income
--------------------------------------------------------------------------------
09/30/1992 $10000 $10000
12/31/1992 11063 10504
03/31/1993 11122 10962
06/30/1993 10962 11016
09/30/1993 11427 11300
12/31/1993 11817 11562
03/31/1994 11623 11124
06/30/1994 11445 11171
09/30/1994 11972 11717
12/31/1994 11727 11715
03/31/1995 12657 12855
06/30/1995 13988 14083
09/30/1995 15374 15202
12/31/1995 15485 16117
03/31/1996 16486 16982
06/30/1996 17018 17744
09/30/1996 17591 18293
12/31/1996 18433 19818
03/31/1997 17955 20349
06/30/1997 20615 23901
09/30/1997 22658 25692
12/31/1997 22608 26429
03/31/1998 25978 30116
06/30/1998 26988 31111
09/30/1998 23056 28016
12/31/1998 29198 33983
03/31/1999 28404 35676
06/30/1999 30433 38190
09/30/1999 27572 35806
12/31/1999 31482 41133
03/31/2000 32212 42076
This graph depicts the performance of The Brown Capital Management Equity Fund
versus the S&P 500 Total Return Index. It is important to note that The Brown
Capital Management Equity Fund 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
-------------------------------------------------------
13.41% 20.52% 16.87%
-------------------------------------------------------
The graph assumes an initial $10,000 investment at September 30, 1992. All
dividends and distributions are reinvested.
At March 31, 2000, The Brown Capital Management Equity Fund would have grown to
$32,212 - total investment return of 222.12% since September 30, 1992.
At March 31, 2000, a similar investment in the S&P 500 Total Return Index would
have grown to $42,076 - total investment return of 320.76% since September 30,
1992.
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>
THE BROWN CAPITAL MANAGEMENT EQUITY FUND
PORTFOLIO OF INVESTMENTS
March 31, 2000
------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - 97.46%
Biopharmaceuticals - 1.39%
PE Corp-PE Biosystems Group .............................................. 1,500 $144,750
--------
Building Materials - 1.32%
Illinois Tool Works Inc. ................................................. 2,400 136,800
--------
Computer Software & Services - 7.41%
(a)Fiserv, Inc. ............................................................. 4,500 167,344
(a)Microsoft Corporation .................................................... 2,600 276,250
(a)Network Associates, Inc. ................................................. 4,600 148,350
(a)Sterling Software, Inc. .................................................. 5,400 177,863
--------
769,807
--------
Computers - 8.27%
(a)Dell Computer Corporation ................................................ 2,700 145,631
(a)EMC Corporation .......................................................... 2,500 312,500
International Business Machines Corporation .............................. 3,400 401,200
--------
859,331
--------
Cosmetics & Personal Care - 0.56%
The Dial Corporation ..................................................... 4,300 58,319
--------
Diversified Manufacturing - 1.68%
Corning Incorporated ..................................................... 900 174,600
--------
Electric - Generation - 1.14%
The AES Corporation ...................................................... 1,500 118,125
--------
Electronic Components - Semiconductor - 6.63%
(a)Altera Corporation ....................................................... 3,000 267,750
Intel Corporation ........................................................ 2,000 263,875
(a)Xilinx, Inc. ............................................................. 1,900 157,344
--------
688,969
--------
Electronics - 4.09%
General Electric Company ................................................. 1,400 217,262
(a)Solectron Corporation .................................................... 5,200 208,325
--------
425,587
--------
Enterprise Software & Services - 1.68%
(a)Compuware Corporation .................................................... 8,300 174,819
--------
Entertainment - 2.22%
Carnival Corporation ..................................................... 9,320 230,670
--------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
THE BROWN CAPITAL MANAGEMENT EQUITY FUND
PORTFOLIO OF INVESTMENTS
March 31, 2000
------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Financial - Banks, Money Center - 4.36%
Citigroup Inc. ........................................................... 4,050 $240,216
The Chase Manhattan Corporation .......................................... 2,440 212,737
--------
452,953
--------
Financial - Savings/Loans/Thrifts - 1.99%
Mellon Financial Corporation ............................................. 7,000 206,500
--------
Financial - Securities Brokers - 2.23%
SLM Holding Corporation .................................................. 6,900 231,581
--------
Financial Services - 5.52%
Equifax Inc. ............................................................. 9,250 233,562
T. Rowe Price Associates, Inc. ........................................... 8,600 339,700
--------
573,262
--------
Hand & Machine Tools - 0.83%
Danaher Corporation ...................................................... 1,700 86,700
--------
Household Products & Housewares - 0.84%
Newell Rubbermaid Inc. ................................................... 3,500 87,063
--------
Human Resources - 1.74%
Robert Half International Inc. ........................................... 3,800 180,500
--------
Insurance - Life & Health - 2.91%
AFLAC INCORPORATED ....................................................... 6,624 302,220
--------
Investment Management & Advisory Services - 1.25%
Franklin Resources, Inc. ................................................. 3,900 130,406
--------
Leisure Time - 2.49%
Harley-Davidson, Inc. .................................................... 3,200 258,400
--------
Medical - Biotechnology - 1.50%
Merck & Co., Inc. ........................................................ 2,500 155,938
--------
Medical - Hospital Management & Services - 3.63%
(a)Guidant Corporation ...................................................... 2,000 117,625
(a)Health Management Associates, Inc. ....................................... 18,200 259,350
--------
376,975
--------
Medical Supplies - 1.35%
Johnson & Johnson ........................................................ 2,000 140,250
--------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
THE BROWN CAPITAL MANAGEMENT EQUITY FUND
PORTFOLIO OF INVESTMENTS
March 31, 2000
------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Oil & Gas - Equipment & Services - 1.57%
Schlumberger Limited ................................................. 2,100 $ 163,275
----------
Pharmaceuticals - 3.43%
Cardinal Health, Inc. ................................................ 7,762 356,082
----------
Retail - Building Products - 2.35%
Fastenal Company ..................................................... 5,100 244,162
----------
Retail - Department Stores - 2.86%
Dollar General Corporation ........................................... 11,078 297,720
----------
Retail - Discount - 1.41%
The TJX Companies, Inc. .............................................. 6,600 146,850
----------
Retail - General Merchandise - 2.46%
(a)Staples, Inc. ........................................................ 12,800 256,000
----------
Retail - Specialty - 3.00%
The Home Depot, Inc. ................................................. 4,800 312,000
----------
Telecommunications Equipment - 8.27%
(a)ADC Telecommunications, Inc. ......................................... 6,400 344,800
Lucent Technologies Inc. ............................................. 3,600 218,700
(a)Tellabs, Inc. ........................................................ 4,700 296,027
----------
859,527
----------
Utilities - Telecommunications - 5.08%
AT&T Corp. ........................................................... 4,200 237,037
(a)MCI WorldCom, Inc. ................................................... 6,450 292,266
----------
529,303
----------
Total Common Stocks (Cost $7,681,712) ................................ 10,129,444
----------
INVESTMENT COMPANY - 2.53%
Evergreen Money Market Institutional Money
Market Fund Institutional Service Shares ............................. 263,921 263,921
----------
(Cost $263,921)
(Continued)
<PAGE>
</TABLE>
<TABLE>
<S> <C> <C> <C>
THE BROWN CAPITAL MANAGEMENT EQUITY FUND
PORTFOLIO OF INVESTMENTS
March 31, 2000
Total Value of Investments (Cost $7,945,633 (b)) 99.99 % $ 10,393,365
Other Assets Less Liabilities 0.01 % 828
------------ --------------
Net Assets 100.00 % $ 10,394,193
============ ==============
(a) Non-income producing investment.
(b) Aggregate cost for financial reporting and federal income tax purposes is the same. Unrealized appreciation
(depreciation) of investments for financial reporting and federal income tax purposes is as follows:
Unrealized appreciation $ 2,822,332
Unrealized depreciation (374,600)
--------------
Net unrealized appreciation $ 2,447,732
==============
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
THE BROWN CAPITAL MANAGEMENT EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
March 31, 2000
ASSETS
Investments, at value (cost $7,945,633) ......................................................... $10,393,365
Cash ............................................................................................ 1,388
Income receivable ............................................................................... 7,392
Receivable for investments sold ................................................................. 39,502
-----------
Total assets ............................................................................... 10,441,647
-----------
LIABILITIES
Accrued expenses ................................................................................ 7,540
Payable for investment purchases ................................................................ 39,914
-----------
Total liabilities .......................................................................... 47,454
-----------
NET ASSETS
(applicable to 428,439 shares outstanding; unlimited
shares of no par value beneficial interest authorized) ......................................... $10,394,193
===========
NET ASSET VALUE, REDEMPTION AND OFFERING PRICE
PER INSTITUTIONAL CLASS SHARE
($10,394,193 / 428,439 shares) ................................................................. $ 24.26
===========
0
NET ASSETS CONSIST OF
Paid-in capital ................................................................................. $ 7,130,261
Undistributed net realized gain on investments .................................................. 816,200
Net unrealized appreciation on investments ...................................................... 2,447,732
-----------
$10,394,193
==============
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
THE BROWN CAPITAL MANAGEMENT EQUITY FUND
STATEMENT OF OPERATIONS
Year ended March 31, 2000
INVESTMENT LOSS
Income
Dividends .................................................................................... $ 78,780
-----------
Expenses
Investment advisory fees (note 2) ............................................................ 64,007
Fund administration fees (note 2) ............................................................ 17,233
Custody fees ................................................................................. 3,916
Registration and filing administration fees (note 2) ......................................... 4,813
Fund accounting fees (note 2) ................................................................ 24,000
Audit fees ................................................................................... 10,716
Legal fees ................................................................................... 5,007
Securities pricing fees ...................................................................... 3,271
Shareholder recordkeeping fees ............................................................... 9,000
Other accounting fees (note 2) ............................................................... 6,625
Shareholder servicing expenses ............................................................... 3,705
Registration and filing expenses ............................................................. 7,015
Printing expenses ............................................................................ 5,236
Trustee fees and meeting expenses ............................................................ 3,911
Other operating expenses ..................................................................... 3,794
-----------
Total expenses ......................................................................... 172,249
-----------
Less investment advisory fees waived (note 2) .......................................... (54,071)
-----------
Net expenses ........................................................................... 118,178
-----------
Net investment loss ............................................................... (39,398)
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from investment transactions .................................................... 1,393,611
Decrease in unrealized appreciation on investments ................................................ (80,452)
-----------
Net realized and unrealized gain on investments .............................................. 1,313,159
-----------
Net increase in net assets resulting from operations ................................... $ 1,273,761
===========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
THE BROWN CAPITAL MANAGEMENT EQUITY FUND
STATEMENTS OF CHANGES IN NET ASSETS
------------------------------------------------------------------------------------------------------------------------------------
Year ended Year ended
March 31, March 31,
2000 1999
------------------------------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS
Operations
Net investment loss ....................................................... $ (39,398) $ (32,585)
Net realized gain from investment transactions ............................ 1,393,611 528,673
(Decrease) increase in unrealized appreciation on investments ............. (80,452) 343,908
------------ ------------
Net increase in net assets resulting from operations ................. 1,273,761 839,996
------------ ------------
Distributions to shareholders from
Net realized gain from investment transactions ............................ (830,681) (261,668)
------------ ------------
Capital share transactions
Increase in net assets resulting from capital share transactions (a) ...... 128,944 1,094,071
------------ ------------
Total increase in net assets .................................... 572,024 1,672,399
NET ASSETS
Beginning of year ............................................................. 9,822,169 8,149,770
------------ ------------
End of year ................................................................... $ 10,394,193 $ 9,822,169
============ ============
</TABLE>
(a) A summary of capital share activity follows:
<TABLE>
<S> <C> <C> <C> <C>
Year ended Year ended
March 31, 2000 March 31, 1999
Shares Value Shares Value
------------- ------------- ------------- -------------
Shares sold 52,085 $ 1,201,520 83,530 $ 1,844,436
Shares issued for reinvestment
of distributions 35,138 825,028 11,017 259,788
------------- ------------- ------------- -------------
87,223 2,026,548 94,547 2,104,224
Shares redeemed (81,386) (1,897,604) (44,515) (1,010,153)
------------- ------------- ------------- -------------
Net increase 5,837 $ 128,944 50,032 $ 1,094,071
============= ============= ============= =============
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
THE BROWN CAPITAL MANAGEMENT EQUITY FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Year)
------------------------------------------------------------------------------------------------------------------------------------
Year ended Year ended Year ended Year ended Year ended
March 31, March 31, March 31, March 31, March 31,
2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year $23.24 $21.87 $16.61 $15.81 $12.36
Income from investment operations
Net investment (loss) gain (0.09) (0.08) (0.03) 0.05 0.00
Net realized and unrealized gain on investments 3.13 2.14 7.31 1.36 3.72
------------- ----------- ----------- ----------- ------------
Total from investment operations 3.04 2.06 7.28 1.41 3.72
------------- ----------- ----------- ----------- ------------
Distributions to shareholders from
Net investment income (0.00) 0.00 0.00 (0.05) 0.00
Net realized gain from investment transactions (2.02) (0.69) (1.98) (0.56) (0.27)
Distributions in excess of net realized gains 0.00 0.00 (0.04) 0.00 0.00
------------- ----------- ----------- ----------- ------------
Total distributions (2.02) (0.69) (2.02) (0.61) (0.27)
------------- ----------- ----------- ----------- ------------
Net asset value, end of year $24.26 $23.24 $21.87 $16.61 $15.81
============= =========== =========== =========== ============
Total return 13.41 % 9.34 % 44.68 % 8.91 % 30.25%
============= =========== =========== =========== ============
Ratios/supplemental data
Net assets, end of year $10,394,193 $9,822,169 $8,149,770 $4,405,020 $1,965,862
============= =========== =========== =========== ============
Ratio of expenses to average net assets
Before expense reimbursements and waived fees 1.75 % 1.88 % 1.98 % 3.37 % 5.58 %
After expense reimbursements and waived fees 1.20 % 1.20 % 1.20 % 1.20 % 1.56 %
Ratio of net investment loss to average net assets
Before expense reimbursements and waived fees (0.95)% (1.07)% (0.94)% (1.85)% (4.20)%
After expense reimbursements and waived fees (0.40)% (0.39)% (0.16)% (0.32)% (0.01)%
Portfolio turnover rate 52.09 % 67.43 % 38.42 % 34.21 % 48.06 %
See accompanying notes to financial statements
</TABLE>
<PAGE>
THE BROWN CAPITAL MANAGEMENT EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
March 31, 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
The Brown Capital Management Equity Fund (the "Fund") is a diversified
series of shares of beneficial interest of The Nottingham Investment Trust
II (the "Trust"). The Trust, an open-ended investment company, was
organized on October 18, 1990 as a Massachusetts Business Trust and is
registered under the Investment Company Act of 1940, as amended. The
investment objective of the Fund is to seek capital appreciation
principally through investments in equity securities, such as common and
preferred stocks and securities convertible into common stocks. The Fund
began operations on August 11, 1992.
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 Class shares of the Fund on June 15, 1995 and an additional
class of shares, the Investor Class shares, was authorized. To date, only
Institutional Class shares have been issued by the Fund. The Institutional
Class shares are sold without a sales charge and bear no distribution and
service fees. The Investor Class shares will be subject to a maximum 3.50%
sales charge and will bear distribution and service fees which may not
exceed 0.50% of the Investor Class shares' average net assets annually. The
following is a summary of significant accounting policies followed by the
Fund.
A. Security Valuation - The Fund's investments in securities are carried
at value. Securities listed on an exchange or quoted on a national
market system are valued at the last sales price as of 4:00 p.m. New
York time on the day of valuation. Other securities traded in the
over-the-counter market and listed securities for which no sale was
reported on that date are valued at the most recent bid price.
Securities for which market quotations are not readily available, if
any, are valued by using an independent pricing service or by
following procedures approved by the Board of Trustees. Short-term
investments are valued at cost which approximates value.
B. Federal Income Taxes - The Fund is considered a personal holding
company as defined under Section 542 of the Internal Revenue Code
since 50% of the value of the Fund's shares were owned directly or
indirectly by five or fewer individuals at certain times during the
last half of the year. As a personal holding company, the Fund is
subject to federal income taxes on undistributed personal holding
company income at the maximum individual income tax rate. No provision
has been made for federal income taxes since substantially all taxable
income has been distributed to shareholders. It is the policy of the
Fund to comply with the provisions of the Internal Revenue Code
applicable to regulated investment companies and to make sufficient
distributions of taxable income to relieve it from all federal income
taxes.
As a result of the Fund's operating net investment loss, a
reclassification adjustment of $39,398 has been made on the statement
of assets and liabilities to decrease accumulated net investment loss,
bringing it to zero, and decrease paid-in capital.
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. Dividend income is recorded on the ex-dividend
date.
D. Distributions to Shareholders - The Fund may declare dividends
quarterly, payable in March, June, September and December, on a date
selected by the Trust's Trustees. 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.
(Continued)
<PAGE>
THE BROWN CAPITAL MANAGEMENT EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
March 31, 2000
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, Brown Capital Management,
Inc. (the "Advisor") provides the Fund with a continuous program of
supervision of the Fund's assets, including the composition of its
portfolio, and furnishes advice and recommendations with respect to
investments, investment policies and the purchase and sale of securities.
As compensation for its services, the Advisor receives a fee at the annual
rate of 0.65% of the Fund's first $25 million of average daily net assets
and 0.50% of average daily net assets over $25 million.
The Advisor intends to voluntarily waive all or a portion of its fee and
reimburse expenses of the Fund to limit total Fund operating expenses to
1.20% 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 a portion of its fee amounting
to $54,071 ($0.13 per share) 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 0.175% of
the Fund's first $50 million of average daily net assets, 0.15% of the next
$50 million of average daily net assets, 0.125% of the next $50 million of
average daily net assets, and 0.10% of average daily net assets over $150
million. 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.
NC Shareholder Services, LLC (the "Transfer Agent") serves as the Funds'
transfer, dividend paying, and shareholder servicing agent. The Transfer
Agent maintains the records of each shareholder's account, answers
shareholder inquiries concerning accounts, processes purchases and
redemptions of the Fund shares, acts as dividend and distribution
disbursing agent, and performs other shareholder servicing functions.
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 $4,969,066 and $5,495,503, respectively, for the year ended
March 31, 2000.
(Continued)
<PAGE>
THE BROWN CAPITAL MANAGEMENT EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
March 31, 2000
NOTE 4 - DISTRIBUTIONS TO SHAREHOLDERS
For federal income tax purposes, the Fund must report distributions from
net realized gain from investment transactions that represent long-term
capital gain to its shareholders. The total amount of $2.02 per share
distributions for the year ended March 31, 2000, was classified as
long-term gain. Shareholders should consult a tax advisor on how to report
distributions for state and local income tax purposes.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees of Nottingham Investment Trust II and Shareholders of
The Brown Capital Management Equity Fund:
We have audited the accompanying statement of assets and liabilities of The
Brown Capital Management Equity Fund, 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
and brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Brown Capital Management Equity Fund 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>
Small Company Fund
Market Environment
The broad market, represented by the S&P 500, posted its 5th consecutive year of
record, 20%+ returns in 1999. While this incredible trend continues, we, once
again, still opine that investment performance in the broad market indexes will
return to historical levels of 10%-12%.
Periods Ended 3/31/00 Year to One Three Five
Date Year Years Years
BCM Small Company Fund 13.00% 78.85% 33.44% 26.25%
Standard and Poors 500 2.29% 17.94% 27.40% 26.76%
Russell 2000 6.80% 35.57% 16.32% 15.63%
Russell 2000 Growth 9.28% 59.04% 25.94% 19.83%
Lipper Small-Cap Growth Fund Indax 17.91% 96.42% 34.31% 26.33%
Performance since 12/31/92 inception 20.54%
Your Brown Capital Management Small Company Fund delivered strong performance
over the past year despite small companies, in general, being out of favor. Mega
large capitalization stocks, and/or technology oriented companies accounted for
the vast majority of growth indexe returns last year. As of March 31, 2000, your
Fund's year-end, the Small Company Fund outperformed the S&P 500 Index, Russell
2000 and Russell 2000 Growth, but underperformed its new Lipper peer group,
Small Capitalization Growth Funds. Both over and under performance can be best
explained when considering the make up of these indexes.
Benchmark Insights
While your Small Company Fund is pitted against many different benchmarks, we
believe the most appropriate performance comparisons are with the Russell 2000
and Russell 2000 Growth Indices. The overall long-term portfolio characteristics
of these two indices are more closely aligned with the portfolio characteristics
of your Fund. The Russell 2000 Index is comprised of the bottom 2000 companies,
based on capitalization (shares outstanding multiplied by stock price), in the
Russell 3000 Index. The Russell 2000 Growth Index, a sub-set of the Russell 2000
Index, comprised of "growth oriented" companies, or those companies exhibiting
faster than average gains in revenues and earnings. Historically, the returns of
these two indices converge over the long-term. However, the Russell 2000 Growth
Index displayed phenomenal performance during 1999, outpacing the Russell 2000
Index by 15 percentage points. This variance in performance is explained
primarily by the difference in weightings of Technology, Biotechnology, and
Internet-related companies.
Portfolio Review
We remain committed to our unique approach to small company investing. We
continue to unearth and invest in exceptional small companies that have the
wherewithal of becoming exceptional large companies. We seek to latch on to
value creating engines, companies that save lives, time, money and headaches. As
you are aware, we define smallness in terms of operating revenues of $250
million or less at the time of initial investment. This definition differs from
the more traditional view of small cap investing, which is determined by the
capitalization of a company, generally defined as $1.5 billion or less, but our
definition, we believe, provides a better indicator of an organization's stage
in the corporate life cycle. For example, the rapid rise in stock price of many
Internet-related companies prevent many "small-cap" managers from investing in
these companies, although most of these companies do not have any earnings and
do not generate revenues. Our approach also differs in that we do not use the
traditional Russell sectors that are reflected in the report section labeled
Portfolio of Investments. Instead, we think of small companies in six broad
sectors: Business Services, Consumer Related, Information/Knowledge Management,
Medical/Health Care, and the all encompassing Miscellaneous.
<PAGE>
With regards to your Fund, not much changed since our last communication this
time last year. The Fund's superior performance is the result of a sustained
commitment to those companies that provide solutions to institutions and
individuals problems. Many of the names in your Fund are familiar to you, since
your Fund's turnover for the year was only 29%. The average and median turnover
among all small capitalization funds in the Lipper Universe was 123% and 108%,
respectively, for the same time period.
Indeed the Fund benefited from our strong company selection across the board,
but company holdings in Information/Knowledge Management and Medical/Health Care
contributed significantly to your Fund's performance. Within the Medical/Health
Care sector, our holdings in genomics based companies such as Affymetrix, Human
Genome Sciences, and Incyte Pharmaceuticals provide the bulk of returns in this
sector. These three companies provide a good illustration of our process of
identifying companies early and in this case the early identification of a new
industry. All of these companies have been in your Fund for several years. While
we early identified and understood the importance of human genome mapping, we
did not know how, or the direction in which the industry would evolve. As such,
we purposely sought companies that we thought could do well, regardless of how
the industry developed. We identified these three companies, and invested a
small amount in each. By utilizing this basket approach, we gained significant
representation in a new, dynamic area without relying upon the success of one
company or direction.
Investment Outlook
The genomics area, in our opinion, represents enormous potential, and these
companies have bright futures, but we do not expect them to realize this
potential without faltering along the way. Similarly, we think that our approach
to small company investing remains quite appealing, and continue to find
attractively valued companies, but we also expect the markets to remain
volatile. Therefore, stock prices in the short-term, may not accurately reflect
the inherent values of these companies. With these factors in mind, you can
expect that we will remain committed to our unique approach to small company
investing to ensure your Fund invests in exceptional small companies with the
wherewithal to become exceptional large companies.
<PAGE>
Sincerely,
Brown Capital Management
Small Company Team
/s/ Eddie C. Brown
Eddie C. Brown
President
/s/ Robert E. Hall
Robert E. Hall
Senior Vice President
/s/ Keith A. Lee
Keith A. Lee
Senior Vice President
<PAGE>
THE BROWN CAPITAL MANAGEMENT
SMALL COMPANY FUND
Performance Update - $10,000 Investment For the period from
December 31, 1992 to March 31, 2000
[LINE GRAPH HERE]:
--------------------------------------------------------------------------------
BCM Small Russell Russell
Company 2000 2000
Fund Index Growth Index
--------------------------------------------------------------------------------
12/31/1992 $10000 $10000 $10000
12/31/1992 10000 10000 10000
03/31/1993 9877 10371 9821
06/30/1993 9855 10558 10104
09/30/1993 10325 11445 11047
12/31/1993 10574 11700 11337
03/31/1994 10311 11340 10875
06/30/1994 9680 10872 10190
09/30/1994 10307 11589 11142
12/31/1994 11077 11328 11062
03/31/1995 12066 11816 11669
06/30/1995 13037 12882 12826
09/30/1995 14266 14164 14285
12/31/1995 14839 14453 14496
03/31/1996 16048 15188 15329
06/30/1996 16706 15968 16224
09/30/1996 17098 16020 16086
12/31/1996 17374 16838 16129
03/31/1997 16299 15973 14437
06/30/1997 18742 18550 16971
09/30/1997 20860 21300 19843
12/31/1997 20116 20577 18216
03/31/1998 23119 22695 20381
06/30/1998 23306 21658 19210
09/30/1998 19841 17275 14915
12/31/1998 23816 20112 18440
03/31/1999 21670 19020 18131
06/30/1999 26240 21970 20804
09/30/1999 25539 20579 19781
12/31/1999 34299 24406 26387
03/31/2000 38757 26137 28836
This graph depicts the performance of The Brown Capital Management Small Company
Fund versus the Russell 2000 Index and the Russell 2000 Growth Index. It is
important to note that The Brown Capital Management Small Company Fund is a
professionally managed mutual fund while the indexes are not available for
investment and are unmanaged. The comparison is shown for illustrative purposes
only.
Average Annual Total Returns
-------------------------------------------------------
One Year Five Years Since Inception
-------------------------------------------------------
78.85% 26.25% 20.54%
-------------------------------------------------------
The graph assumes an initial $10,000 investment at December 31, 1992. All
dividends and distributions are reinvested.
At March 31, 2000, The Brown Capital Management Small Company Fund would have
grown to $38,757 - total investment return of 287.57% since December 31, 1992.
At March 31, 2000, a similar investment in the Russell 2000 Index would have
grown to $26,137 - total investment return of 161.37%; and the similar
investment in the Russell 2000 Growth Index would have grown to $28,836 - total
investment return of 188.36% since December 31, 1992. The Russell 2000 Growth
Index is used in the graph above because the Investment Advisor feels that the
Russell 2000 Growth Index is a more accurate comparison to The Brown Captital
Management Small Company Fund's investment strategy than the NASDAQ Industrials
Index. The Russell 2000 Growth Index replaces the NASDAQ Industrials Index used
for illustrative purposes in prior annual reports. For the fiscal year ended
March 31, 2000, the investment in The Brown Capital Management Small Company
Fund would have increased in value by $17,123; the similar investment in the
Russell 2000 Growth Index would have increased in value by $10,705; while the
similar investment in the NASDAQ Industrials Index would have increased in value
by $14,630.
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>
THE BROWN CAPITAL MANAGEMENT SMALL COMPANY FUND
PORTFOLIO OF INVESTMENTS
March 31, 2000
------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - 80.65%
Biopharmaceuticals - 0.28%
(a)Gene Logic Inc. ...................................................... 4,100 $ 172,456
-----------
Chemicals - 0.31%
(a)Synthetech, Inc. ..................................................... 44,700 187,181
-----------
Commercial Services - 15.56%
(a)Acxiom Corporation ................................................... 36,700 1,220,275
(a)Dendrite International, Inc. ......................................... 51,150 1,070,953
Fair, Isaac and Company, Incorporated ................................ 38,900 1,514,668
(a)Harbinger Corporation ................................................ 50,300 1,464,987
(a)infoUSA Inc. ......................................................... 70,100 639,663
(a)Manugistics Group, Inc. .............................................. 40,900 2,055,225
(a)NetScout Systems, Inc. ............................................... 26,300 440,525
(a)QRS Corporation ...................................................... 13,050 982,013
(a)Quintiles Transnational Corp. ........................................ 6,200 105,788
-----------
9,494,097
-----------
Computers - 2.93%
(a)Landmark Systems Corporation ......................................... 44,181 220,905
(a)RadiSys Corporation .................................................. 26,100 1,569,262
-----------
1,790,167
-----------
Computer Software & Services - 18.83%
(a)Advent Software, Inc. ................................................ 27,800 1,275,325
(a)American Software, Inc. .............................................. 150,300 2,104,200
(a)Concord Communications, Inc. ......................................... 29,100 1,034,869
(a)Datastream Systems, Inc. ............................................. 80,100 2,322,900
(a)Engineering Animation, Inc. .......................................... 44,500 586,844
(a)Hyperion Solutions Corporation ....................................... 13,710 445,575
(a)Network Associates, Inc. ............................................. 7,287 235,006
(a)SPSS Inc. ............................................................ 48,100 1,527,175
(a)Structural Dynamics Research Corporation ............................. 73,200 988,200
(a)Transaction Systems Architects, Inc. ................................. 33,600 970,200
-----------
11,490,294
-----------
Electronics - Semiconductor - 0.81%
(a)Medialink Worldwide Incorporated ..................................... 76,400 496,600
-----------
Financial Services - 3.04%
(a)BISYS Group, Inc. (the) .............................................. 17,100 1,137,150
(a)CFI ProServices, Inc. ................................................ 44,900 305,881
T. Rowe Price Associates, Inc. ....................................... 10,400 410,800
-----------
1,853,831
-----------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
THE BROWN CAPITAL MANAGEMENT SMALL COMPANY FUND
PORTFOLIO OF INVESTMENTS
March 31, 2000
------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Foreign Securities - 0.97%
Cordiant Communications Group plc .................................... 91,843 $ 594,222
-----------
Hand & Machine Tools - 1.33%
(a)Flow International Corporation ....................................... 69,000 810,750
-----------
Machine - Diversified - 1.62%
(a)Cognex Corporation ................................................... 17,100 986,456
-----------
Medical - Biotechnology - 13.10%
(a)Affymetrix, Inc. ..................................................... 6,600 979,687
(a)BioReliance Corporation .............................................. 51,100 274,663
(a)Cerner Corporation ................................................... 32,200 869,400
(a)ChiRex Inc. .......................................................... 62,913 1,211,075
(a)Human Genome Sciences, Inc. .......................................... 8,200 681,113
(a)Incyte Pharmaceuticals, Inc. ......................................... 5,800 504,600
(a)Pharmacopeia, Inc. ................................................... 48,600 2,381,400
(a)Synbiotics Corporation ............................................... 12,400 43,400
(a)Tripos, Inc. ......................................................... 39,800 1,049,725
-----------
7,995,063
-----------
Medical Supplies - 7.69%
Diagnostic Products Corporation ...................................... 67,900 1,659,307
(a)Eclipse Surgical Technologies, Inc. .................................. 85,827 638,338
(a)Techne Corporation ................................................... 34,700 2,394,300
-----------
4,691,945
-----------
Pharmaceuticals - 7.25%
(a)Albany Molecular Research, Inc. ...................................... 23,100 1,348,462
(a)Applied Analytical Industries, Inc. .................................. 89,900 938,331
Jones Pharma Incorporated ............................................ 12,750 387,281
(a)Kendle International Inc. ............................................ 73,400 798,225
(a)King Pharmaceuticals, Inc. ........................................... 8,400 264,600
(a)Lynx Therapeutics, Inc. .............................................. 81 2,410
(a)Professional Detailing, Inc. ......................................... 27,400 685,000
-----------
4,424,309
-----------
Real Estate Investment Trust - 0.25%
Post Properties, Inc. ................................................ 3,800 153,188
-----------
Restaurants & Food Services - 5.01%
(a)Panera Bread Company ................................................. 115,200 864,000
(a)The Cheesecake Factory Incorporated .................................. 52,400 2,181,150
-----------
3,045,150
-----------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
THE BROWN CAPITAL MANAGEMENT SMALL COMPANY FUND
PORTFOLIO OF INVESTMENTS
March 31, 2000
------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Retail - General Merchandise - 0.55%
(a)Restoration Hardware, Inc. ........................................... 64,500 $ 338,625
-----------
Retail - Specialty Line - 1.12%
Fastenal Company ..................................................... 14,300 684,612
-----------
Total Common Stocks (Cost $32,387,480) ........................................................ 49,208,946
-----------
INVESTMENT COMPANIES - 8.95%
Evergreen Money Market Treasury Institutional Money
Market Fund Institutional Service Shares ............................. 2,730,946 2,730,946
Evergreen Money Market Treasury Institutional Treasury
Money Market Fund Institutional Service Shares ....................... 2,730,946 2,730,946
-----------
Total Investment Companies (Cost $5,461,892) .................................................. 5,461,892
-----------
Total Value of Investments (Cost $37,849,372 (b)) ................................ 89.60 % $54,670,838
Other Assets Less Liabilities .................................................... 10.40 % 6,348,795
------ -----------
Net Assets ................................................................ 100.00 % $61,019,633
====== ===========
(a) Non-income producing investment.
(b) Aggregate cost for financial reporting and federal income tax purposes is the same. Unrealized appreciation
(depreciation) of investments for financial reporting and federal income tax purposes is as follows:
Unrealized appreciation ....................................................................... $19,433,510
Unrealized depreciation ....................................................................... (2,612,043)
-----------
Net unrealized appreciation ................................................... $16,821,466
===========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
THE BROWN CAPITAL MANAGEMENT SMALL COMPANY FUND
STATEMENT OF ASSETS AND LIABILITIES
March 31, 2000
ASSETS
Investments, at value (cost $37,849,372) ......................................................... $54,670,838
Cash ............................................................................................. 8,031,387
Income receivable ................................................................................ 32,266
-----------
Total assets ................................................................................ 62,734,491
-----------
LIABILITIES
Accrued expenses ................................................................................. 15,154
Payable for investment purchases ................................................................. 1,696,411
Other liabilities ................................................................................ 3,293
-----------
Total liabilities ........................................................................... 1,714,858
-----------
NET ASSETS
(applicable to 1,881,760 shares outstanding; unlimited
shares of no par value beneficial interest authorized) .......................................... $61,019,633
===========
NET ASSET VALUE, REDEMPTION AND OFFERING PRICE
PER INSTITUTIONAL CLASS SHARE
($61,019,633 / 1,881,760 shares) ................................................................. $32.43
===========
NET ASSETS CONSIST OF
Paid-in capital .................................................................................. $41,177,987
Undistributed net realized gain on investments ................................................... 3,020,180
Net unrealized appreciation on investments ....................................................... 16,821,466
-----------
$61,019,633
===========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
THE BROWN CAPITAL MANAGEMENT SMALL COMPANY FUND
STATEMENT OF OPERATIONS
Year ended March 31, 2000
INVESTMENT LOSS
Income
Dividends .................................................................................... $ 173,327
------------
Expenses
Investment advisory fees (note 2) ............................................................ 351,173
Fund administration fees (note 2) ............................................................ 61,455
Custody fees ................................................................................. 5,731
Registration and filing administration fees (note 2) ......................................... 8,262
Fund accounting fees (note 2) ................................................................ 24,000
Audit fees ................................................................................... 10,413
Legal fees ................................................................................... 5,297
Securities pricing fees ...................................................................... 3,815
Shareholder recordkeeping fees ............................................................... 9,000
Shareholder servicing expenses ............................................................... 5,016
Registration and filing expenses ............................................................. 18,586
Printing expenses ............................................................................ 9,388
Trustee fees and meeting expenses ............................................................ 3,911
Other operating expenses ..................................................................... 4,972
------------
Total expenses ......................................................................... 521,019
------------
Less investment advisory fees waived (note 2) .......................................... (18,220)
------------
Net expenses ........................................................................... 502,799
------------
Net investment loss ............................................................... (329,472)
------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from investment transactions .................................................... 4,978,403
Increase in unrealized appreciation on investments ................................................ 15,894,471
------------
Net realized and unrealized gain on investments .............................................. 20,872,874
------------
Net increase in net assets resulting from operations ................................... $ 20,543,402
============
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
THE BROWN CAPITAL MANAGEMENT SMALL COMPANY FUND
STATEMENTS OF CHANGES IN NET ASSETS
------------------------------------------------------------------------------------------------------------------------------------
Year ended Year ended
March 31, March 31,
2000 1999
------------------------------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS
Operations
Net investment loss ....................................................... $ (329,472) $ (148,904)
Net realized gain from investment transactions ............................ 4,978,403 1,615,338
Increase (decrease) in unrealized appreciation on investments ............. 15,894,471 (3,101,684)
----------- -----------
Net increase (decrease) in net assets resulting from operations ...... 20,543,402 (1,635,250)
----------- -----------
Distributions to shareholders from
Net realized gain from investment transactions ............................ (3,150,167) (170,496)
----------- -----------
Capital share transactions
Increase in net assets resulting from capital share transactions (a) ...... 19,548,813 14,317,387
----------- -----------
Total increase in net assets .................................... 36,942,048 12,511,641
NET ASSETS
Beginning of year ............................................................. 24,077,585 11,565,944
----------- -----------
End of year ................................................................... $61,019,633 $24,077,585
=========== ===========
(a) A summary of capital share activity follows:
-----------------------------------------------------------------------------------------
Year ended Year ended
March 31, 2000 March 31, 1999
Shares Value Shares Value
-----------------------------------------------------------------------------------------
Shares sold .............................. 938,827 $27,362,789 805,203 $16,718,958
Shares issued for reinvestment
of distributions .................... 89,749 2,538,093 8,148 169,715
----------- ----------- ----------- -----------
1,028,576 29,900,882 813,351 16,888,673
Shares redeemed .......................... (382,550) (10,352,069) (127,744) (2,571,286)
----------- ----------- ----------- -----------
Net increase ........................ 646,026 $19,548,813 685,607 $14,317,387
=========== =========== =========== ===========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
THE BROWN CAPITAL MANAGEMENT SMALL COMPANY FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Year)
------------------------------------------------------------------------------------------------------------------------------------
Year ended Year ended Year ended Year ended Year ended
March 31, March 31, March 31, March 31, March 31,
2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year ....................... $19.48 $21.02 $15.01 $15.13 $12.24
Income (loss) from investment operations
Net investment loss ........................... (0.18) (0.12) (0.11) (0.03) (0.06)
Net realized and unrealized gain (loss)
on investments .............................. 15.25 (1.19) 6.36 0.27 4.00
----------- ----------- ----------- ----------- -----------
Total from investment operations ......... 15.07 (1.31) 6.25 0.24 3.94
----------- ----------- ----------- ----------- -----------
Distributions to shareholders from
Net realized gain from investment transactions (2.12) (0.23) (0.24) (0.36) (1.05)
----------- ----------- ----------- ----------- -----------
Net asset value, end of year ............................. $32.43 $19.48 $21.02 $15.01 $15.13
=========== =========== =========== =========== ===========
Total return ............................................. 78.85 % (6.27)% 41.84 % 1.56 % 33.00 %
=========== =========== =========== =========== ===========
Ratios/supplemental data
Net assets, end of year ............................ $61,019,633 $24,077,585 $11,565,944 $ 6,518,687 $ 3,740,208
=========== =========== =========== =========== ===========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees . 1.48 % 1.85 % 2.05 % 2.70 % 3.49 %
After expense reimbursements and waived fees .. 1.43 % 1.50 % 1.50 % 1.50 % 1.69 %
Ratio of net investment income to average net assets
Before expense reimbursements and waived fees . (0.99)% (1.33)% (1.23)% (1.50)% (2.29)%
After expense reimbursements and waived fees .. (0.94)% (0.98)% (0.68)% (0.30)% (0.50)%
Portfolio turnover rate ............................ 28.26 % 29.45 % 11.64 % 13.39 % 23.43 %
See accompanying notes to financial statements
</TABLE>
<PAGE>
THE BROWN CAPITAL MANAGEMENT SMALL COMPANY FUND
NOTES TO FINANCIAL STATEMENTS
March 31, 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
The Brown Capital Management Small Company Fund (the "Fund") is a
diversified series of shares of beneficial interest of The
Nottingham Investment Trust II (the "Trust"). The Trust, an
open-ended investment company, was organized on October 18, 1990
as a Massachusetts Business Trust and is registered under the
Investment Company Act of 1940, as amended. The investment
objective of the Fund is to seek capital appreciation principally
through investments in equity securities of those companies with
operating revenues of $250 million or less at the time of initial
investment. The Fund began operations on July 23, 1992.
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 Class shares of the Fund on June 15, 1995 and
an additional class of shares, the Investor Class shares, was
authorized. To date, only Institutional Class shares have been
issued by the Fund. The Institutional Class shares are sold
without a sales charge and bear no distribution and service fees.
The Investor Class shares will be subject to a maximum 3.50% sales
charge and will bear distribution and service fees which may not
exceed 0.50% of the Investor Class shares' average net assets
annually. The following is a summary of significant accounting
policies followed by the Fund.
A. Security Valuation - The Fund's investments in securities
are carried at value. Securities listed on an exchange or
quoted on a national market system are valued at the last
sales price as of 4:00 p.m. New York time on the day of
valuation. Other securities traded in the over-the-counter
market and listed securities for which no sale was reported
on that date are valued at the most recent bid price.
Securities for which market quotations are not readily
available, if any, are valued by using an independent
pricing service or by following procedures approved by the
Board of Trustees. Short-term investments are valued at cost
which approximates value.
B. Federal Income Taxes - The Fund is considered a personal
holding company as defined under Section 542 of the Internal
Revenue Code since 50% of the value of the Fund's shares
were owned directly or indirectly by five or fewer
individuals at certain times during the last half of the
year. As a personal holding company, the Fund is subject to
federal income taxes on undistributed personal holding
company income at the maximum individual income tax rate. No
provision has been made for federal income taxes since
substantially all taxable income has been distributed to
shareholders. It is the policy of the Fund to comply with
the provisions of the Internal Revenue Code applicable to
regulated investment companies and to make sufficient
distributions of taxable income to relieve it from all
federal income taxes.
Net investment income (loss) and net realized gains (losses)
may differ for financial statement and income tax purposes
primarily because of losses incurred subsequent to October
31, which are deferred for income tax purposes. The
character of distributions made during the year from net
investment income or net realized gains may differ from
their ultimate characterization for federal income tax
purposes. Also, due to the timing of dividend distributions,
the fiscal year in which amounts are distributed may differ
from the year that the income or realized gains were
recorded by the Fund.
As a result of the Fund's operating net investment loss, a
reclassification adjustment of $329,472 has been made on the
statement of assets and liabilities to decrease accumulated
net investment loss, bringing it to zero, and decrease net
short-term realized gains.
(Continued)
<PAGE>
THE BROWN CAPITAL MANAGEMENT SMALL COMPANY FUND
NOTES TO FINANCIAL STATEMENTS
March 31, 2000
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.
Dividend income is recorded on the ex-dividend date.
D. Distributions to Shareholders - The Fund may declare
dividends quarterly, payable in March, June, September and
December, on a date selected by the Trust's Trustees. 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, Brown Capital
Management, Inc. (the "Advisor") provides the Fund with a
continuous program of supervision of the Fund's assets, including
the composition of its portfolio, and furnishes advice and
recommendations with respect to investments, investment policies
and the purchase and sale of securities. As compensation for its
services, the Advisor receives a fee at the annual rate of 1.00%
of the Fund's average daily net assets.
The Advisor intends to voluntarily waive all or a portion of its
fee and reimburse expenses of the Fund to limit total Fund
operating expenses to 1.50% 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 a portion of its fee amounting to $18,220,
($.01 per share) 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 theFund pursuant to a fund accounting and compliance
agreement with the Trust. As compensation for its services, the
Administrator receives a fee at the annual rate of 0.175% of the
Fund's first $50 million of average daily net assets, 0.15% of the
next $50 million of average daily net assets, 0.125% of the next
$50 million of average daily net assets, and 0.10% of average
daily net assets over $150 million. 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 investment
securities.
North Carolina Shareholder Services, LLC (the "Transfer Agent")
serves as the Fund's transfer, dividend paying, and shareholder
servicing agent. The Transfer Agent maintains the records of each
shareholder's account, answers shareholder inquiries concerning
accounts, processes purchases and redemptions of the Fund shares,
acts as dividend and distribution disbursing agent, and performs
other shareholder servicing functions.
(Continued)
<PAGE>
THE BROWN CAPITAL MANAGEMENT SMALL COMPANY FUND
NOTES TO FINANCIAL STATEMENTS
March 31, 2000
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 $15,808,025 and $8,885,003, respectively,
for the year ended March 31, 2000.
NOTE 4 - DISTRIBUTIONS TO SHAREHOLDERS
For federal income tax purposes, the Fund must report
distributions from net realized gain from investment transactions
that represent long-term capital gain to its shareholders. The
Fund paid a total amount of $2.12 per share distributions for the
year ended March 31, 2000, including $1.88 that is classified as
long term gain. Shareholders should consult a tax advisor on how
to report distributions for state and local income tax purposes.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees of Nottingham Investment Trust II and Shareholders of
The Brown Capital Management Small Company Fund:
We have audited the accompanying statement of assets and liabilities of The
Brown Capital Management Small Company Fund, 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
and brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Brown Capital Management Small Company Fund 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>
International Equity Fund
Market Environment
While US investors and the media are enthralled with the tribulations and
reverberations of the US market, it seems significant gains overseas are
increasingly overlooked. In fact, after four consecutive years where the broad
US market outperformed those overseas, the tide changed in the twelve months
ending March 31, 2000. International markets performed better than those in the
U.S. over that period rising 23.5% as reflected by the Morgan Stanley EAFE index
versus 16.5% for the S&P 500. The biggest contributors to this solid performance
came from Hong Kong, Japan and Switzerland, which rose 58%, 49% and 78%
respectively. Additionally, outstanding performances in emerging markets were
evident as the Morgan Stanley Emerging Markets Free Index roared upward with a
49% gain in the last twelve months.
Periods Ended 3/31/00 Year to One Three Five
Date Year Years Years
Brown International Equity Fund 5.43%
Standard and Poors 500 2.29% 17.94% 27.40% 26.76%
MSCI* EAFE* -0.39% 23.50% 14.66% 10.74%
MSCI* All Country World Ex-US 0.27% 25.04% 15.01% 11.13%
Lipper International Fund Index 0.62% 36.93% 17.81% 16.99%
Performance since 05/28/99 inception 18.56%
Although most of these gains were rather widespread, benefiting many overseas
sectors, the international markets are far from immune to worldwide technology
prosperity. Without question, the most successful investment strategy over the
past year was an overweight stance at the "hyper-growth" end of the market,
particularly in the technology, media and telecommunication sectors (now
commonly referred to as "TMT"). In fact, this collection of stocks in Europe
outperformed the rest of the market by an average of 18% in each of the last
four months alone, for a compounded premium of over 90%! These "new economy
stocks" accounted for all of the market returns in three developed regions of
the world in the first quarter of this year. However, this performance is not
necessarily correlated with improving short-term earnings expectations. Unlike
the US, "old economy" stocks overseas experienced superior earnings revision
trends for most of the past year. Despite that fact, valuation factors in the
first quarter this year suffered their worst performance in over 30 years, as
price trend-following factors registered favorably. Although the global
technology phenomena currently appears to be the driving force in the world
economy for the 21st century, it overshadows profitable investments with an
exposure to the recovering global business cycle, such as global commodities,
European and Asian cyclicals and the overall Japanese market. Your Fund keeps
these variables in mind when investing.
At Brown Capital Management (BCM), we feel that the last 12 months are not
anomalous and that overseas markets should be capable of sustaining attractive
gains. Since inception, your Fund trails the, commonly used, broad international
MSCI EAFE Index, its preferred benchmark, MSCI All Country World Free Ex-USA
Index and, peer group, the Lipper International Funds. Like many, we believe
rating performance against established indexes with only a 10 month track record
is not necessarily an "apples to apples" comparison. With that in mind, your
Fund is off to a great start year-to-date, outperforming all the aforementioned
indexes and the domestic S&P 500 Index.
<PAGE>
Benchmark Insights
While the MSCI EAFE Index and Lipper International Fund Universe are more
popular, we prefer the MSCI All Country World Ex-USA Index due to its exposure
to emerging markets (your portfolio's exposure to these economies can reside
from 0% to 15%, at cost, as stated in your prospectus). Unfortunately, the MSCI
EAFE Index represents only developed countries in the Western Hemisphere with
sizable weightings in European and Japanese economies. We believe fantastic
opportunities exist beyond these borders in less developed emerging markets.
Historically, these markets experience greater growth than more mature
economies. Since so little attention is dedicated to these markets, when strong
fundamental research is applied, there is a greater chance that a manager can
unearth superior, "undiscovered" companies. Consistent with those outcomes and
our firm-wide commitment to identify superior GARP securities (Growth at a
Reasonable Price - superior growth companies without paying too much), emerging
markets are uniquely suited for your Fund's needs and improves its
diversification characteristics while providing strong upside potential.
Portfolio Insights
While the US economy seems poised to register more moderate gains after five
consecutive years of prosperity, overseas economies in Europe, Japan and
emerging Asia & Latin America will continue their upward trajectories. As an
additional kicker, such a relative movement would also see an attractive
strengthening of foreign currencies versus the U.S. dollar to boost returns.
The same GARP approach of selecting stocks triumphed for BCM over the course of
the last 17 years is diligently being applied to the international arena.
Geographically, this bottom-up approach leads us to a 62% weighting in developed
Europe, a 15% position in developed Asia, and a reasonable 13% weighting in the
emerging markets.
Many of the European companies held in your Fund will benefit from the region's
low absolute interest rates, low real yields and inexpensive currency. We
believe these characteristics drive economic growth for an upside surprise in
2000. Financial services companies, such as Skandinaviska Enskilda Banken and
ABN-AMRO will benefit short term from the lower yields and long term from the
region's move toward more equity investing. Technology equipment and
telecommunications providers, such as Alcatel, Philips Electronics and Portugal
Telecom, will continue accelerating their growth trajectories both domestically
and internationally.
In the Asian region, most of the companies that are held in the portfolio will
grow rather handsomely with the continued economic recovery. Relative to the
MSCI EAFE Index however, the Fund's 5% weighting in Japan is low versus the
index's 28% weighting. Using BCM's GARP approach to investing, it is very
difficult to encounter attractive valuations in this recovering market. As of
the end of the quarter, Japan's Nikkei 225 Index was trading at 69.3x its
prospective earnings (for comparison purposes, the S&P 500 Index was trading at
28.6x). While we undoubtedly believe that the Japanese economy is in a recovery
mode, we also feel just as strongly that the stock market roared upward at an
accelerated pace prematurely. A full recovery in this part of the world is very
much dependent on improved consumer spending, and with relatively higher
unemployment rates, layoffs and corporate bankruptcies taking place in corporate
Japan, a full path to recovery is not a foregone conclusion. Any sustained
pullback in the Japanese market may provide us the opportunity to increase our
exposure to this part of Asia.
<PAGE>
Recently, the emerging markets stopped appearing in the financial headlines,
which is probably a good thing. As US investors, we often hear about the
disasters that take place in the emerging markets, such as the Mexican tequila
crisis, the Asian financial crisis, the Brazilian real devaluation, or the
Russian collapse. Lately however, these same markets are benefiting from a
global economic recovery along with improved domestic financial disciplines. The
powerful, inevitable long-term demographic trends that are invariably taking
place in these markets make it a very difficult investment proposition to
ignore. Although the companies in these exciting markets do provide some
individual stock risk, because of their lower correlation to developed markets,
they also tend to lower your overall portfolio risk while providing excess
returns. Leading Latin American telecommunications providers in the fund such as
Telefonica del Peru and Telecomunicacoes de Sao Paulo are being bought out by
Spain's Telefonica, S.A. Cementos de Mexico evolved into the world's 3rd largest
cement company. Teva Pharmaceuticals, the Israeli generic drug manufacturer, is
now the 2nd largest generic prescriptions company in the United States.
Portfolio Outlook
As a general rule, despite the US market's stellar performance in the last five
years, international markets still offer diversification and performance,
assuming you retain a long-term investment horizon (defined as at least 3-5
years at BCM). The more recent sector rotation that is taking place in the
global markets brought with it some rationality into the market. At BCM, we feel
we properly position your international portfolio to take advantage of those
global growth opportunities that will provide attractive returns while paying
what, we feel, is a reasonable price.
Later this month, your Fund will celebrate its first anniversary. We remain
confident that the Fund is well positioned to capitalize on geographical and
economic trends that favor fundamentally strong companies capable of delivering
superior value to clients and prospective clients. Importantly, given the
increasing volatility in US markets, we anticipate a renewed attention to
markets abroad. We are working diligently to ensure as investors look beyond US
boundaries, that your Fund remains a superior diversification tool with a
consistent investment approach.
Sincerely,
Brown Capital Management
International Team
/s/ Eddie C. Brown
Eddie C. Brown
President
/s/ Eddie Ramos
Eddie Ramos
Vice President
<PAGE>
THE BROWN CAPITAL MANAGEMENT
INTERNATIONAL EQUITY FUND
Performance Update - $10,000 Investment
For the period from May 28, 1999 (Commencement of Operations)
to March 31, 2000
[LINE GRAPH HERE]:
--------------------------------------------------------------------------------
BCM MSCI MSCI EAFE
International All Country International
Equity World Free Index
Fund EX USA Index
--------------------------------------------------------------------------------
05/28/1999 $10000 $10000 $10000
06/30/1999 10040 10394 10323
07/31/1999 9950 10623 10617
08/31/1999 9930 10646 10644
09/30/1999 9840 10704 10739
10/31/1999 9970 11088 11129
11/30/1999 10440 11518 11504
12/31/1999 11245 12603 12525
01/31/2000 10834 11904 11718
02/29/2000 11465 12213 12022
03/31/2000 11856 12657 12476
This graph depicts the performance of The Brown Capital Management International
Equity Fund versus the MSCI All Country World Free EX USA Index and the MSCI
EAFE International Index. It is important to note that The Brown Capital
Management International Equity Fund is a professionally managed mutual fund
while the indexes are not available for investment and are unmanaged. The
comparison is shown for illustrative purposes only.
Cumulative Total Return
-------------------
Since Inception
-------------------
18.56%
-------------------
The graph assumes an initial $10,000 investment at May 28, 1999. All dividends
and distributions are reinvested.
At March 31, 2000, The Brown Capital Management International Equity Fund would
have grown to $11,856 - total investment return of 18.56% since May 28, 1999.
At March 31, 2000, a similar investment in the MSCI All Country World Free EX
USA Index would have grown to $12,657 - total investment return of 26.57%; and
the similar investment in the MSCI EAFE International Index would have grown to
$12,476 - total investment return of 24.76% since May 28, 1999.
Past performance is not a guarantee of future performance. A mutual fund's share
price and investment return will vary with market conditions, and the principal
value of shares, when redeemed, may be worth more or less than the original
cost. Average annual returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming
reinvestments of dividends.
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
THE BROWN CAPITAL MANAGEMENT INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS
March 31, 2000
------------------------------------------------------------------------------------------------------------------------------------
Value in US$
Shares (note 1)
------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - 96.26%
Austrian Equity - 0.93%
OMV AG ............................................................... 200 $ 15,275
--------
Australian Equities - 3.79%
Goodman Fielder Limited .............................................. 16,100 11,745
National Australia Bank Limited ...................................... 1,400 18,027
Pioneer International Limited ........................................ 6,700 18,289
Westpac Banking Corporation Limited .................................. 2,300 14,420
--------
62,481
--------
Belgium Equity - 1.70%
Dexia ................................................................ 203 28,060
--------
British Equities - 16.24%
Allied Zurich Plc .................................................... 2,700 29,650
Amvescap Plc ......................................................... 4,000 54,389
J Sainsbury plc ...................................................... 4,400 19,861
Man (E D & F) Group plc .............................................. 3,000 25,193
Morgan Crucible Company plc .......................................... 3,500 13,705
PowerGen plc ......................................................... 1,400 8,190
Rolls-Royce plc ...................................................... 7,100 23,017
(a)Shire Pharmaceuticals Group PLC ...................................... 1,500 25,623
Unigate plc .......................................................... 5,400 27,605
United News & Media plc .............................................. 1,800 23,671
United Utilities plc ................................................. 1,600 16,716
--------
267,620
--------
Canadian Equity - 0.57%
Noranda, Inc. ........................................................ 900 9,378
--------
Danish Equities - 2.05%
Den Danske Bank Group ................................................ 200 20,921
Unidanmark A/S ....................................................... 200 12,810
--------
33,731
--------
French Equities - 6.55%
Alcatel .............................................................. 100 21,913
Alstom ............................................................... 1,100 30,485
Aventis S. A ......................................................... 400 21,866
Pechiney SA .......................................................... 400 19,591
Scor ................................................................. 300 14,068
--------
107,923
--------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
THE BROWN CAPITAL MANAGEMENT INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS
March 31, 2000
------------------------------------------------------------------------------------------------------------------------------------
Value in US$
Shares (note 1)
------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (Continued)
German Equities - 6.42%
Adidas-Salomon AG ........................................................ 500 $ 27,714
DaimlerChrysler AG ....................................................... 300 19,561
ProSieben Media AG ....................................................... 300 34,404
Rhoen-Klinikum AG ........................................................ 600 24,083
--------
105,762
--------
Hong Kong Equities - 1.38%
CLP Holdings Limited ..................................................... 2,000 8,964
Esprit Holdings Limited .................................................. 14,000 13,665
--------
22,629
--------
Japanese Equities - 5.31%
Coca-Cola West Japan Company Limited ..................................... 900 23,647
Daito Trust Construction Co., Ltd. ....................................... 2,000 34,196
House Foods Corporation .................................................. 2,000 29,584
--------
87,427
--------
Luxembourg Equity - 1.11%
Societe Europeene des Satellites ......................................... 100 18,253
--------
Mexican Equities - 2.19%
Cemex SA de CV ........................................................... 2,800 12,830
(a)Wal-Mart de Mexico SA de CV .............................................. 9,300 23,268
--------
36,098
--------
Netherlands Equities - 7.70%
ABN AMRO Holding NV ...................................................... 700 15,580
Akzo Nobel N.V ........................................................... 500 21,311
Buhrmann NV .............................................................. 800 20,260
DSM NV ................................................................... 600 21,388
Koninklijke (Royal) Philips Electronics N.V .............................. 200 33,563
Vendex KBB N. V .......................................................... 900 14,793
--------
126,895
--------
New Zealand Equity - 1.40%
Telecom Corporation of New Zealand Limited ............................... 5,100 23,066
--------
Norwegian Equity - 0.81%
(a)Storebrand ASA ........................................................... 2,200 13,379
--------
Portugal Equity - 1.94%
Portugal Telecom SA - rights attached .................................... 2,500 32,015
--------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
THE BROWN CAPITAL MANAGEMENT INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS
March 31, 2000
------------------------------------------------------------------------------------------------------------------------------------
Value in US$
Shares (note 1)
------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (Continued)
Spanish Equities - 4.58%
Endesa S.A ................................................................. 1,100 $ 25,198
Repsol-YPF, S.A ............................................................ 800 17,515
Union Electrica Fenosa, S.A ................................................ 1,600 32,813
---------
75,526
---------
Swedish Equities - 3.61%
Holmen AB - B Shares ....................................................... 600 17,382
Skandinaviska Enskilda Banken .............................................. 1,920 20,610
Volvo AB ................................................................... 800 21,515
---------
59,507
---------
Swiss Equities - 5.77%
ABB Ltd. ................................................................... 178 20,430
(a)Distefora Holding AG ....................................................... 110 55,526
Swisscom AG ................................................................ 50 19,169
---------
95,125
---------
U. S. Domestic Equities - 22.21%
Ace Limited ................................................................ 600 13,725
(a)Asia Pulp & Paper Company Ltd. - ADR ....................................... 1,800 13,275
CNH Global N.V ............................................................. 1,510 14,911
Creative Technology Limited ................................................ 1,400 44,404
Dairy Farm International Holdings Limited .................................. 27,700 17,728
Fomento Economico Mexicano, S.A. de C.V. - ADR ............................. 500 22,531
Industrie Natuzzi SpA - ADR ................................................ 1,200 14,100
Korea Telecom Corporation - ADR ............................................ 400 17,525
Magyar Tavkozlesi Rt - ADR ................................................. 400 17,850
Partners Communications Company Ltd. - ADR ................................. 900 14,963
Petroleo Brasileiro S.A. - ADR ............................................. 600 15,975
Royal Bank of Canada ....................................................... 800 38,450
Telefonica del Peru S.A.A. - ADR ........................................... 1,500 25,500
Teva Pharmaceutical Industries Ltd. ........................................ 600 22,388
The Toronto-Dominion Bank .................................................. 1,200 32,025
Videsh Sanchar Nigam Ltd. - GDR ............................................ 900 23,805
XL Capital Ltd. - Class A .................................................. 300 16,613
---------
365,768
---------
Total Common Stocks (Cost $1,382,812) ............................. 1,585,918
---------
INVESTMENT COMPANY - 3.08%
Evergreen Money Market Treasury Institutional Money
Market Fund Institutional Service Shares .......................... 50,810 50,810
(Cost $50,810) ---------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
THE BROWN CAPITAL MANAGEMENT INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS
March 31, 2000
------------------------------------------------------------------------------------------------------------------------------------
Value in US$
(note 1)
------------------------------------------------------------------------------------------------------------------------------------
Total Value of Investments (Cost $1,433,622 (b)) 99.34 % $ 1,636,728
Other Assets less Liabilities 0.66 % 10,809
--------------- ----------------
Net Assets 100.00 % $ 1,647,537
=============== ================
(a) Non-income producing investment.
(b) Aggregate cost for financial reporting and federal income tax purposes is the same. Unrealized appreciation
(depreciation) of investments for financial reporting and federal income tax purposes is as follows:
Unrealized appreciation $ 296,753
Unrealized depreciation (93,647)
----------------
Net unrealized appreciation $ 203,106
================
The following acronyms are used in this portfolio:
AB - Aktiebolag (Swedish)
ADR - American Depository Receipt
AG - Aktiengesellschaft (German)
NV - Naamloze Vennootschap (Dutch)
PLC - Public Limited Company (British)
SA - Socieded Anonima (Spanish)
SA - Societe Anonyme (French)
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
THE BROWN CAPITAL MANAGEMENT INTERNATIONAL EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
March 31, 2000
ASSETS
Investments, at value (cost $1,433,622) ................................................................ $1,636,728
Income receivable ...................................................................................... 4,912
Receivable for investments sold ........................................................................ 54,437
Due from advisor (note 2) .............................................................................. 11,877
----------
Total assets ...................................................................................... 1,707,954
----------
LIABILITIES
Accrued expenses ....................................................................................... 15,873
Payable for investment purchases ....................................................................... 34,324
Other liabilities ...................................................................................... 117
Disbursements in excess of cash on demand deposit ...................................................... 10,103
----------
Total liabilities ................................................................................. 60,417
----------
NET ASSETS
(applicable to 139,288 shares outstanding; unlimited
shares of no par value beneficial interest authorized) ................................................ $1,647,537
==========
NET ASSET VALUE, REDEMPTION AND OFFERING PRICE PER SHARE
($1,647,537 / 139,288 shares) .......................................................................... $ 11.83
==========
NET ASSETS CONSIST OF
Paid-in capital ........................................................................................ $1,399,869
Accumulated net realized gain from investments and foreign currency transactions ....................... 44,546
Net unrealized appreciation on investments and translation of assets
and liabilities in foreign currencies ............................................................. 203,122
----------
$1,647,537
==========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
THE BROWN CAPITAL MANAGEMENT INTERNATIONAL EQUITY FUND
STATEMENT OF OPERATIONS
For the period from May 28, 1999
(commencement of operations) to
March 31, 2000
INVESTMENT INCOME
Income
Dividends (net of withholding taxes of $2,040) ................................................... $ 23,533
---------
Expenses
Investment advisory fees (note 2) ................................................................ 11,074
Fund administration fees (note 2) ................................................................ 1,938
Custody fees ..................................................................................... 5,993
Registration and filing administration fees (note 2) ............................................. 414
Fund accounting fees (note 2) .................................................................... 20,000
Audit fees ....................................................................................... 11,208
Legal fees ....................................................................................... 5,004
Securities pricing fees .......................................................................... 10,043
Shareholder recordkeeping fees ................................................................... 7,500
Other accounting fees (note 2) ................................................................... 18,066
Shareholder servicing expenses ................................................................... 1,707
Registration and filing expenses ................................................................. 3,025
Printing expenses ................................................................................ 1,400
Trustee fees and meeting expenses ................................................................ 3,908
Other operating expenses ......................................................................... 986
---------
Total expenses ............................................................................. 102,266
---------
Less:
Expense reimbursements (note 2) ....................................................... (65,007)
Investment advisory fees waived (note 2) .............................................. (11,074)
Fund administration fees waived (note 2) .............................................. (304)
Other accounting fees waived (note 2) ................................................. (3,687)
---------
Net expenses ............................................................................... 22,194
---------
Net investment income ................................................................. 1,339
---------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from investments and foreign currency transactions .................................. 45,215
Increase in unrealized appreciation on investments and translation of assets
and liabilities in foreign currencies ............................................................ 203,122
---------
Net realized and unrealized gain on investments .................................................. 248,337
---------
Net increase in net assets resulting from operations ....................................... $ 249,676
=========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
THE BROWN CAPITAL MANAGEMENT INTERNATIONAL EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
For the period from May 28, 1999
(commencement of operations) to
March 31, 2000
INCREASE IN NET ASSETS
Operations
Net investment income .............................................................................. $ 1,339
Net realized gain from investments and foreign currency transactions ............................... 45,215
Increase in unrealized appreciation on investments and translation of assets
and liabilities in foreign currencies ......................................................... 203,122
-----------
Net increase in net assets resulting from operations .......................................... 249,676
-----------
Distributions to shareholders from
Net investment income .............................................................................. (1,339)
Tax distribution in excess of net investment income ................................................ (669)
-----------
Decrease in net assets resulting from distributions ........................................... (2,008)
-----------
Capital share transactions
Increase in net assets resulting from capital share transactions (a) ............................... 1,399,869
-----------
Total increase in net assets ............................................................. 1,647,537
NET ASSETS
Beginning of period .................................................................................... 0
-----------
End of period .......................................................................................... $ 1,647,537
===========
(a) A summary of capital share activity follows:
</TABLE>
<TABLE>
<S> <C> <C>
Shares Value
------------ -------------
Shares sold 139,161 $ 1,398,376
Shares issued for reinvestment of distributions 179 2,008
------------ -------------
139,340 1,400,384
Shares redeemed (52) (515)
------------ -------------
Net increase 139,288 $ 1,399,869
============ =============
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
THE BROWN CAPITAL MANAGEMENT INTERNATIONAL EQUITY FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
For the period from May 28, 1999
(commencement of operations) to
March 31, 2000
Net asset value, beginning of period $10.00
Income from investment operations
Net investment income 0.02
Net realized and unrealized gain on investments and translation of
assets and liabilities in foreign currencies 1.83
--------------
Total from investment operations 1.85
--------------
Distributions to shareholders from
Net investment income (0.02)
--------------
Net asset value, end of period $11.83
==============
Total return 18.56 %
==============
Ratios/supplemental data
Net assets, end of period $1,647,537
==============
Ratio of expenses to average net assets
Before expense reimbursements and waived fees 9.23 % (a)
After expense reimbursements and waived fees 2.00 % (a)
Ratio of net investment income (loss) to average net assets
Before expense reimbursements and waived fees (7.11)% (a)
After expense reimbursements and waived fees 0.12 % (a)
Portfolio turnover rate 23.61 %
(a) Annualized.
See accompanying notes to financial statements
</TABLE>
<PAGE>
THE BROWN CAPITAL MANAGEMENT INTERNATIONAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
March 31, 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
The Brown Capital Management International Equity Fund (the "Fund") is a
diversified series of shares of beneficial interest of the Nottingham
Investment Trust II (the "Trust"). The Trust, an open-ended investment
company, was organized on October 18, 1990 as a Massachusetts Business
Trust and is registered under the Investment Company Act of 1940, as
amended. The investment objective of the Fund is to provide its
shareholders with long-term capital growth, consisting of both realized and
unrealized capital gains, through investment in a diversified international
portfolio of marketable securities, primarily equity securities, including
common stock, preferred stocks and debt securities convertible into common
stocks. The Fund invests on a worldwide basis in equity securities of
companies which are incorporated in foreign countries. The Fund began
operations on May 28, 1999. The following is a summary of significant
accounting policies followed by the Fund.
A. Security Valuation - The Fund's investments in securities are carried
at value. Securities listed on an exchange or quoted on a national
market system are valued at the last sales price as of 4:00 p.m. New
York time on the day of valuation. Other securities traded in the
over-the-counter market and listed securities for which no sale was
reported on that date are valued at the most recent bid price.
Securities for which market quotations are not readily available, if
any, are valued by using an independent pricing service or by
following procedures approved by the Board of Trustees. Short-term
investments are valued at cost which approximates value.
B. Federal Income Taxes - The Fund is considered a personal holding
company as defined under Section 542 of the Internal Revenue Code
since 50% of the value of the Fund's shares were owned directly or
indirectly by five or fewer individuals at certain times during the
last half of the year. As a personal holding company, the Fund is
subject to federal income taxes on undistributed personal holding
company income at the maximum individual income tax rate. No provision
has been made for federal income taxes since substantially all taxable
income has been distributed to shareholders. It is the policy of the
Fund to comply with the provisions of the Internal Revenue Code
applicable to regulated investment companies and to make sufficient
distributions of taxable income to relieve it from all federal income
taxes.
C. Investment Transactions - Investment transactions are recorded on the
trade date. Realized gains and losses are determined using the
specific identification cost method. Interest income is recorded daily
on the accrual basis. Dividend income is recorded on the ex-dividend
date.
D. Distributions to Shareholders - The Fund will made a determination
each year as to the distribution of its net investment income, if any,
and of its realized capital gains, if any, based upon tax
considerations both at the Fund level, and the tax considerations of
its shareholders. There is no fixed dividend rate, and there can be no
assurance as to the payment of any dividends or the realization of any
gains.
E. Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amount of
assets, liabilities, expenses and revenues reported in the financial
statements. Actual results could differ from those estimates.
(Continued)
<PAGE>
THE BROWN CAPITAL MANAGEMENT INTERNATIONAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
March 31, 2000
F. Foreign Currency Translation - Portfolio securities and other assets
and liabilities denominated in foreign currencies are translated into
U.S. dollars based on the exchange rate of such currencies against
U.S. dollars on the date of valuation. Purchases and sales of
securities and income items denominated in foreign currencies are
translated into U.S. dollars at the exchange rate in effect on the
transaction date.
The Fund does not separately report the effect of changes in foreign
exchange rates from changes in market prices on securities held. Such
changes are included in net realized and unrealized gain or loss from
investments.
Realized foreign exchange gains or losses arise from sales of foreign
currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions and the difference between
the recorded amounts of dividends, interest, and foreign withholding
taxes, and the U.S. dollar equivalent of the amounts actually received
or paid. Net unrealized foreign exchange gains and losses arise from
changes in foreign exchange rates on foreign denominated assets and
liabilities other than investments in securities held at the end of
the reporting period.
NOTE 2 - INVESTMENT ADVISORY FEE AND OTHER RELATED PARTY TRANSACTIONS
Pursuant to an investment advisory agreement, Brown Capital
Management, Inc. (the "Advisor") provides the Fund with a continuous
program of supervision of the Fund's assets, including the composition
of its portfolio, and furnishes advice and recommendations with
respect to investments, investment policies and the purchase and sale
of securities. As compensation for its services, the Advisor receives
a fee at the annual rate of 1.00% on the first $100 million of the
average daily net assets of the Fund and 0.75% of the average daily
net assets over $100 million.
The Advisor intends to voluntarily waive all or a portion of its fee
and reimburse expenses of the Fund to limit total Fund operating
expenses to 2.00% 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 $11,074 ($0.09 per share) and has voluntarily agreed
to reimburse $65,007 of the Fund's operating expenses 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 an accounting and administrative agreement with
the Trust. As compensation for its services, the Administrator
receives a fee at the annual rate of 0.175% of the Fund's first $50
million of average daily net assets, 0.15% of the next $50 million of
average daily net assets, 0.125% of the next $50 million of average
daily net assets, and 0.10% of average daily net assets over $150
million. The Administrator also received a monthly fee of $2,000 for
accounting and recordkeeping services during this time period. The
contract with the Administrator provides that the aggregate fees for
the aforementioned administration fees 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.
For the year ended March 31, 2000, the administrator has voluntarily
waived a portion of its fees totaling $3,991 ($0.03 per share).
North Carolina Shareholder Services, LLC (the "Transfer Agent") serves
as the Fund's transfer, dividend paying, and shareholder servicing
agent. The Transfer Agent maintains the records of each shareholder's
account, answers shareholder inquiries concerning accounts, processes
purchases and redemptions of the Fund shares, acts as dividend and
distribution disbursing agent, and performs other shareholder
servicing functions.
(Continued)
<PAGE>
THE BROWN CAPITAL MANAGEMENT INTERNATIONAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
March 31, 2000
Capital Investment Group, Inc. (the "Distributor"), an affiliate of
the Advisor, serves as the Fund's principal underwriter and
distributor. The Distributor receives any sales charges imposed on
purchases of shares and re-allocates a portion of such charges to
dealers through whom the sale was made, if any.
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 $1,639,233 and $301,384, 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
The Brown Capital Management International Equity Fund:
We have audited the accompanying statement of assets and liabilities of The
Brown Capital Management International Equity Fund, including the portfolio of
investments, as of March 31, 2000, and the related statements of operations,
changes in net assets and financial highlights for the period May 28, 1999
(commencement of operations) to March 31, 2000. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit.
We conducted our audit in accordance with 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
and brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides 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 The
Brown Capital Management International Equity Fund as of March 31, 2000, the
results of its operations, changes in its net assets and the financial
highlights for the above stated period, in conformity with accounting principles
generally accepted in the United States of America.
/S/ Deloitte & Touche LLP
Princeton, New Jersey
April 20, 2000
<PAGE>
The Brown Capital Management
Mutual Funds are a series of
The Nottingham Investment Trust II
For Shareholder Service Inquiries: For Investment Advisor Inquiries:
Documented: Documented:
The Nottingham Company Brown Capital Management
105 North Washington Street 1201 North Calvert Street
Post Office Drawer 69 Baltimore, Maryland 21202
Rocky Mount, North Carolina 27802-0069
Toll-Free Telephone: Toll-Free Telephone:
1-800-525-3863 1-877-892-4BCM, 1-877-892-4226
World Wide Web @: World Wide Web @:
ncfunds.com browncapital.com
[LOGO]
BROWN CAPITAL MANAGEMENT
