[The Nottingham Investment Trust Letterhead]
LEGACY EQUITY FUND COMMENTARY
QUARTER ENDED FEBRUARY 29, 1996
In its first full fiscal year ended February 29, 1996, the Legacy Equity Fund
provided a satisfactory return of 26.47%, but lagged the S&P 500 which provided
a 31.40% total return during the same fiscal year.
The Fund experienced a slow start in the first quarter, did well overall in the
second and third quarters, but sharply underperformed in the last couple of
months of 1995 when the technology sector began to underperform and the focus of
the market became very narrow in the last quarter of 1995.
Feeling that corporate profit growth would slow considerably for most
corporations in the first half of 1996, we have maintained the heaviest exposure
to industries which would continue to show the best relative earnings gains in
this environment, i.e., financial services, health care and consumer staples.
The easing actions by the Federal Reserve in late 1995 and early 1996 should
help the economy begin to improve in the second half of 1996 and into 1997.
Therefore, selected economically sensitive issues such as autos, retailers,
industrial equipment and depressed technology stocks have been purchased to give
the portfolio more balance in what will probably be a very volatile transition
from a slow stumbling period of economic activity to a time of better economic
comparisons.
The impending economic weakness and subsequent earnings difficulties will lead
to the long anticipated correction. However, the magnitude should be confined to
rolling industry-by-industry adjustments, and not a significant sell-off due to
the enormous amounts of cash that corporations and individuals have available to
put into the equity markets.
<PAGE>
LEGACY EQUITY FUND
Performance Update - $10,000 Investment
For the period from January 2, 1995 (commencement of
operations) to February 29, 1996
[GRAPH APPEARS HERE]
LEGACY EQUITY FUND S&P 500
03-Jan-95 9700 9700
28-Feb-95 10048 10298
31-May-95 11012 11270
31-Aug-95 11650 11871
30-Nov-95 12203 12790
29-Feb-96 12708 13531
THIS GRAPH DEPICTS THE PERFORMANCE OF THE LEGACY EQUITY FUND VERSUS THE
S&P 500 INDEX. IT IS IMPORTANT TO NOTE THAT THE LEGACY 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.
ANNUALIZED TOTAL RETURN
Commencement One Year ended
of operations 2/29/96
through 2/29/96
Maximum 3% Sales Load 23.03% 22.60%
No Sales Load 26.31% 26.47%
(bullet) The graph assumes an initial $10,000 investment at January 2, 1995
($9,700 after maximum sales load of 3%). All dividends and
distributions are reinvested.
(bullet) At February 29, 1996, the Fund would have grown to $12,708 - total
investment return of 27.08% since January 2, 1995. Without the
deduction of the 3% maximum sales load, the Fund would have grown
to $13,101 - total investment return of 31.01% since January 2, 1995.
The sales load may be reduced or eliminated for larger purchases.
(bullet) At February 29, 1996, a similar investment in the S&P 500 Index
(after maximum sales load of 3%) would have grown to $13,531 - total
investment return of 35.31% since January 2, 1995.
(bullet) 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>
<CAPTION>
LEGACY EQUITY FUND
PORTFOLIO OF INVESTMENTS
FEBRUARY 29, 1996
NUMBER OF VALUE
SHARES (NOTE 1)
------------- -------------
<S> <C> <C>
COMMON STOCKS - 91.94%
AUTO & TRUCKS - 2.71%
Ford Motor Company 1,400 $43,750
-------------
BEVERAGES - 6.85%
Coca-Cola Enterprises, Inc. 2,000 56,750
PepsiCo, Inc. 850 53,763
-------------
110,513
-------------
CHEMICALS - 4.97%
Mallinckrodt Group, Inc. 1,100 43,175
PPG Industries, Inc. 800 37,100
-------------
80,275
-------------
COMPUTER SOFTWARE & SERVICES - 4.79%
General Motors Corporation Class E 750 42,844
(a) Microsoft Corporation 350 34,541
-------------
77,385
-------------
COMPUTERS - 2.67%
(a) Compaq Computer Corporation 850 43,031
-------------
ELECTRONICS - 4.70%
General Electric Company 500 37,750
Motorola, Inc. 700 38,062
-------------
75,812
-------------
ELECTRONICS - SEMICONDUCTOR - 2.19%
Intel Corporation 600 35,288
-------------
FINANCIAL - BANKS, COMMERCIAL - 2.43%
Banc One Corporation 1,100 39,188
-------------
FINANCIAL SERVICES - 9.11%
Federal National Mortgage Association 1,400 44,275
Protective Life Corporation 1,300 45,662
Sunamerica, Inc. 1,050 57,225
-------------
147,162
-------------
FOOD - PROCESSING - 2.57%
CPC International, Inc. 600 41,550
-------------
HOLDING COMPANIES - DIVERSIFIED - 2.93%
Textron, Inc. 600 47,250
-------------
HOUSEHOLD PRODUCTS & HOUSEWARES - 2.67%
Colgate-Palmolive Company 550 43,038
-------------
</TABLE>
(CONTINUED)
<TABLE>
<CAPTION>
LEGACY EQUITY FUND
PORTFOLIO OF INVESTMENTS
FEBRUARY 29, 1996
NUMBER OF VALUE
SHARES (NOTE 1)
------------- -------------
COMMON STOCKS (CONTINUED)
<S> <C> <C>
INSURANCE - MULTILINE - 4.59%
Aetna Life and Casualty Company 500 $37,812
American International Group, Inc. 375 36,234
-------------
74,046
-------------
MEDICAL - HOSPITAL MANAGEMENT & SERVICE - 2.54%
Columbia/HCA Healthcare Corporation 750 41,062
-------------
MEDICAL SUPPLIES - 2.69%
Baxter International, Inc. 950 43,462
-------------
METAL FABRICATION & HARDWARE - 3.01%
Kennametal, Inc. 1,500 48,563
-------------
MISCELLANEOUS - DISTRIBUTION & WHOLESALE - 3.25%
(a) ProNet, Inc. 2,000 52,500
-------------
OIL & GAS - INTERNATIONAL - 2.58%
Chevron Corporation 750 41,719
-------------
PHARMACEUTICALS - 11.18%
Johnson & Johnson 450 42,075
Merck & Company, Inc. 700 46,375
Mylan Laboratories 2,400 46,800
Schering-Plough Corporation 800 45,400
-------------
180,650
-------------
RESTAURANTS & FOOD SERVICE - 2.25%
Wendy's International, Inc. 2,000 36,250
-------------
TEXTILES - 2.27%
Pillowtex 3,300 36,712
-------------
TRANSPORTATION - AIR - 2.29%
Southwest Airlines Company 1,200 36,900
-------------
TRUCKING & LEASING - 1.90%
(a) Celadon Group Inc. 3,000 30,750
-------------
</TABLE>
<TABLE>
<CAPTION>
(CONTINUED)
LEGACY EQUITY FUND
PORTFOLIO OF INVESTMENTS
FEBRUARY 29, 1996
NUMBER OF VALUE
SHARES (NOTE 1)
------------- -------------
COMMON STOCKS (CONTINUED)
<S> <C> <C>
UTILITIES - TELECOMMUNICATIONS - 4.80%
A T & T Corporation 600 $38,175
U S West, Inc. 1,200 39,300
-------------
77,475
-------------
TOTAL COMMON STOCKS (COST $1,261,443) 1,484,331
-------------
PRINCIPAL
AMOUNT
-------------
REPURCHASE AGREEMENT (B) - 13.46%
Wachovia Bank
5.32%, due March 1, 1996 $217,295 217,295
(COST $217,295) -------------
TOTAL VALUE OF INVESTMENTS (COST $1,478,738 (C)) 105.40% 1,701,626
Liabilities In Excess of Other Assets (5.40)% (87,147)
------------- -------------
NET ASSETS 100.00% $1,614,479
============= =============
</TABLE>
(a) Non-income producing investment.
(b) Joint repurchase agreement entered into February 29, 1996, with a
maturity value of $68,302,116 collateralized by $71,660,000 U.S.
Treasury Bills, due September 19, 1996. The aggregate market value of
the collateral at February 29, 1996 was $69,697,130. The Fund's pro
rata interest in the market value of the collateral at February 29,
1996 was $221,776. The Fund's pro rata interest in the joint
repurchase agreement collateral is taken into possession by the
Fund's custodian upon entering into the repurchase agreement. The
collateral is marked to market daily to ensure its market value is at
least 102 percent of the sales price of the repurchase agreement.
(c) Aggregate cost for federal income tax purposes is the same as for
financial reporting purposes. Unrealized appreciation (depreciation)
of investments for financial reporting and federal income tax
purposes is as follows:
Unrealized appreciation $253,135
Unrealized depreciation (30,247)
-------------
NET UNREALIZED APPRECIATION $222,888
=============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
<PAGE>
LEGACY EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
February 29, 1996
<TABLE>
<S> <C>
ASSETS
Investments in common stocks at value (cost $1,261,443) $1,484,331
Repurchase agreement 217,295
Cash 400
Dividends receivable 1,911
Interest receivable 409
Due from advisor (note 2) 23,406
Other assets 252
-------------
Total assets 1,728,004
-------------
LIABILITIES
Accrued expenses 16,160
Payable for investment purchases 97,365
-------------
Total liabilities 113,525
-------------
NET ASSETS
(applicable to 126,045 shares outstanding; unlimited
shares of no par value beneficial interest authorized) $1,614,479
=============
NET ASSET VALUE AND REPURCHASE PRICE PER SHARE
($1,614,479 net assets / 126,045 shares) $12.81
=============
OFFERING PRICE PER SHARE
(100 / 97 of $12.81) $13.21
=============
NET ASSETS CONSIST OF:
Paid-in capital $1,388,077
Undistributed net investment income 113
Undistributed net realized gain on investments 3,401
Net unrealized appreciation on investments 222,888
-------------
$1,614,479
=============
</TABLE>
See accompanying notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
LEGACY EQUITY FUND
STATEMENT OF OPERATIONS
YEAR ENDED FEBRUARY 29, 1996
INVESTMENT INCOME
<S> <C>
INCOME
Dividends $17,521
Interest 3,240
------------
TOTAL INCOME 20,761
------------
EXPENSES
Fund accounting fees (note 2) 24,000
Professional fees 11,920
Investment advisory fees (note 2) 10,328
Fund administration fees (note 2) 9,115
Distribution and service fees (note 3) 5,164
Custody fees 3,889
Registration and filing administration fees 2,821
Securities pricing fees 2,290
Shareholder recordkeeping fees 64
Trustee fees and meeting expenses 7,236
Registration and filing expenses 3,958
Shareholder servicing expenses 3,459
Printing expenses 312
Other operating expenses 4,066
------------
TOTAL EXPENSES 88,622
------------
Less:
Expense reimbursements (note 2) (73,223)
Investment advisory fees waived (note 2) (10,328)
Distribution and service fees waived (note 3) (5,071)
------------
NET EXPENSES 0
------------
NET INVESTMENT INCOME 20,761
------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from investment transactions 5,857
Increase in unrealized appreciation on investments 209,288
------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 215,145
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $235,906
============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
<PAGE>
<TABLE>
<CAPTION>
LEGACY EQUITY FUND
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE
PERIOD FROM
JANUARY 2, 1995
(COMMENCEMENT
YEAR ENDED OF OPERATIONS) TO
FEBRUARY 29, FEBRUARY 28,
1996 1995
------------- ---------------
INCREASE IN NET ASSETS
<S> <C> <C>
OPERATIONS
Net investment income $20,761 $621
Net realized gain (loss) from investment transactions 5,857 (2,456)
Increase in unrealized appreciation on investments 209,288 13,600
------------- ---------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 235,906 11,765
------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income (21,269) 0
------------- ---------------
CAPITAL SHARE TRANSACTIONS
Increase in net assets resulting from
capital share transactions (a) 778,274 609,803
------------- ---------------
TOTAL INCREASE IN NET ASSETS 992,911 621,568
NET ASSETS
Beginning of period 621,568 0
------------- ---------------
End of period (including undistributed net investment income
of $113 in 1996) $1,614,479 $621,568
============= ===============
</TABLE>
<TABLE>
<CAPTION>
(a) A summary of capital share activity follows: FOR THE PERIOD FROM JANUARY 2, 1995
YEAR ENDED (COMMENCEMENT OF OPERATIONS) TO
FEBRUARY 29, 1996 FEBRUARY 28, 1995
SHARES VALUE SHARES VALUE
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 114,039 $1,388,319 60,001 $609,803
Shares issued for reinvestment
of distributions 1,743 21,269 0 0
------------- ------------- ------------- ---------------
115,782 1,409,588 60,001 609,803
Shares redeemed (49,738) (631,314) 0 0
------------- ------------- ------------- ---------------
Net increase 66,044 $778,274 60,001 $609,803
============= ============= ============= ===============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
<PAGE>
<TABLE>
<CAPTION>
LEGACY EQUITY FUND
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
FOR THE
PERIOD FROM
JANUARY 2, 1995
(COMMENCEMENT
YEAR ENDED OF OPERATIONS) TO
FEBRUARY 29, FEBRUARY 28,
1996 1995
------------- -------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.36 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.28 0.01
Net realized and unrealized gain on investments 2.46 0.35
------------- ------------
TOTAL FROM INVESTMENT OPERATIONS 2.74 0.36
------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income (0.29) 0.00
------------- ------------
NET ASSET VALUE, END OF PERIOD $12.81 $10.36
============= ============
TOTAL RETURN (a) 26.47% 3.60% (b)
============= ============
RATIOS/SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD $1,614,479 $621,568
============= ============
RATIO OF EXPENSES TO AVERAGE NET ASSETS
Before expense reimbursements and waived fees 8.60% 19.58% (c)
After expense reimbursements and waived fees 0.00% 1.47% (c)
RATIO OF NET INVESTMENT INCOME(LOSS) TO AVERAGE NET ASSETS
Before expense reimbursements and waived fees (6.59)% (17.14)% (c)
After expense reimbursements and waived fees 2.02% 0.98% (c)
PORTFOLIO TURNOVER RATE 43.22% 8.53%
</TABLE>
(a) Total return does not reflect payment of a sales charge.
(b) Annualized total return was 23.05%.
(c) Annualized.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
<PAGE>
LEGACY EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
February 29, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
Legacy Equity Fund (the "Fund") is a diversified series of shares of beneficial
interest of The Nottingham Investment Trust (the "Trust"). The Trust, an
open-end investment company, was organized on August 12, 1992 as a Massachusetts
Business Trust and is registered under the Investment Company Act of 1940. The
Fund began operations on January 2, 1995. 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, 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 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 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 and distributions to shareholders are 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 February 29th.
E. Use of Estimates - Management makes a number of estimates in
the preparation of the Fund's financial statements. Actual
results could differ significantly from those estimates.
NOTE 2 - INVESTMENT ADVISORY FEE, RELATED PARTY AND OTHER TRANSACTIONS
Pursuant to an investment advisory agreement, Legacy Advisors, 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
Investment Advisor receives a fee at the annual rate of 1.00% of the Fund's
average daily net assets.
(Continued)
<PAGE>
LEGACY EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
February 29, 1996
The Advisor has voluntarily agreed to waive all or a portion of its fee and
reimburse expenses of the Fund to limit total Fund operating expenses, exclusive
of interest, taxes, brokerage commissions, sales charges and extraordinary
expenses, to a maximum of 2.00% of the Fund's average daily net assets for any
fiscal year, or the limits set by applicable state securities laws or other
applicable laws if such limits are lower.
Currently, the Fund does not offer its shares for sale in states which require
limitations to be placed on its expenses. The Advisor has voluntarily waived its
fee amounting to $10,328 ($0.12 per share) and agreed to reimburse $73,223 of
the Fund's operating expenses for the year ended February 29, 1996. There can be
no assurance that the foregoing voluntary fee waiver or expense reimbursements
will continue.
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 0.20% of the Fund's first $50 million of average daily
net assets, 0.175% of the next $50 million of average daily net assets, and
0.15% of average daily net assets over $100 million. The Administrator also
receives a monthly fee of $2,000 for accounting and recordkeeping services.
Additionally, the Administrator charges the Fund for servicing of shareholder
accounts and registration of the Fund's shares. The contract with the
Administrator provides that the aggregate fees for the aforementioned
administration, accounting and recordkeeping services shall not be less than
$3,000 per month. The Administrator also charges the Fund for certain expenses
involved with the daily valuation of portfolio securities.
At February 29, 1996 the Advisor and its officers held 36,021 shares or 29% of
the Fund shares outstanding. Another shareholder held 47,085 shares or 37% of
the Fund shares outstanding.
Capital Investment Group, Inc. (the "Distributor") 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
February 29, 1996, the Distributor retained sales charges in the amount of $96.
Certain Trustees and officers of the Trust are also officers or directors of the
Advisor 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"), adopted a distribution plan pursuant to Rule 12b-1 of the Act
(the "Plan"). Rule 12b-1 regulates the manner in which a regulated investment
company may assume costs of distributing and promoting the sales of its shares
and servicing of its shareholder accounts.
The Plan provides that the Fund may incur certain costs, which may not exceed
0.50% per annum of the Fund's average daily net assets for each year elapsed
subsequent to adoption of the Plan, for payment to the Distributor for items
such as advertising expenses, selling expenses, commissions, travel, or other
expenses reasonably intended to result in sales of shares of the Fund or support
servicing of shareholder accounts. Expenditures paid as service fees to any
person who sells Fund shares may not exceed 0.25% per annum of the Fund's
average daily net assets. The Fund incurred $5,164 in distribution and service
fees for the year ended February 29, 1996, of which $5,071 ($0.06 per share) has
been voluntarily waived by the Distributor.
NOTE 4 - PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments, other than short-term investments,
aggregated $1,096,465 and $421,166, respectively, for the year ended February
29, 1996.
<PAGE>
[KPMG PEAT MARWICK LLP LETTERHEAD]
Independent Auditors' Report
To the Board of Trustees and Shareholders
The Nottingham Investment Trust:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of the Legacy Equity Fund (the "Fund"), a series
of The Nottingham Investment Trust, as of February 29, 1996, the related
statement of operations for the year then ended, and the statements of changes
in net assets and financial highlights for the year ended February 29, 1996 and
the period from January 2, 1995 (commencement of operations) to February 28,
1995. These financial statements and financial highlights are the responsibility
of the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
February 29, 1996 by correspondence with the custodian and brokers. 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
Legacy Equity Fund as of February 29, 1996, the results of its operations for
the year then ended, and the changes in its net assets and financial highlights
for the year ended February 29, 1996 and the period from January 2, 1995
(commencement of operations) to February 28, 1995 in conformity with generally
accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
Richmond, Virginia
April 5, 1996
<PAGE>
