N-CSR 1 ncsr0903.txt HILLMAN CAPITAL MANAGEMENT INVESTMENT TRUST UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-10085 --------- Hillman Capital Management Investment Trust ------------------------------------------- (Exact name of registrant as specified in charter) 116 South Franklin Street, Post Office Box 69, Rocky Mount, North Carolina 27802 -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) C. Frank Watson III 116 South Franklin Street, Post Office Box 69, Rocky Mount, North Carolina 27802 -------------------------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: 252-972-9922 ------------ Date of fiscal year end: September 30, 2003 ------------------ Date of reporting period: September 30, 2003 ------------------ Item 1. Reports to Stockholders. ------------------------ ________________________________________________________________________________ THE HILLMAN AGGRESSIVE EQUITY FUND ________________________________________________________________________________ a series of the Hillman Capital Management Investment Trust Annual Report FOR THE YEAR ENDED SEPTEMBER 30, 2003 INVESTMENT ADVISOR Hillman Capital Management, Inc. 613 Third Street Eastport Maritime Building Annapolis, Maryland 21403 THE HILLMAN AGGRESSIVE EQUITY FUND 116 South Franklin Street Post Office Drawer 4365 Rocky Mount, North Carolina 27803-0365 1-800-773-3863 This report and the financial statements contained herein are submitted for the general information of the shareholders of The Hillman Aggressive Equity Fund (the "Fund"). This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus. Mutual fund shares are not deposits or obligations of, or guaranteed by, any depository institution. Shares are not insured by the FDIC, Federal Reserve Board or any other agency, and are subject to investment risks, including possible loss of principal amount invested. Neither the Fund nor the Fund's distributor is a bank. For more information about the Fund, including charges and expenses, call the Fund for a free prospectus. You should read the prospectus carefully before you invest or send money. Distributor: Capital Investment Group, Inc., Post Office Drawer 4365, Rocky Mount, North Carolina 27803, Phone 1-800-773-3863 [Company Logo Here] Mark A. Hillman President November 18, 2003 Dear Shareholder of The Hillman Aggressive Equity Fund: Enclosed please find the annual report for The Hillman Aggressive Equity Fund (the "Fund") for the fiscal year ended September 30, 2003. Encouraged by an improving economic outlook and an accommodative Federal Reserve Bank, investors pushed the S&P 500 Total Return Index up 24.30%1. Corporate profits began to improve, mostly driven by cost cutting. During this period of advancing stock prices we continued to follow our core discipline, selling holdings as they became overvalued. We replaced overvalued holdings with undervalued securities of companies that we believe have competitive advantage in their industries. The Fund performed well, appreciating 47.60%2 from September 30, 2002 to September 30, 2003 versus 24.30% for the S&P 500 Total Return Index over the same period1. The Fund outperformed this index during that period due to the fact that, among other things, we adhered to our discipline of investing in companies we believe have a competitive advantage in their industries at times when their securities were undervalued. We believe that our bedrock of value investing will continue to help our clients to participate in market advances without unreasonable exposure to excessive risk. Of course, volatility should be expected from a fully invested non-diversified portfolio. We urge our investors to take care and to invest prudently. As is characteristic of market rallies, many stocks will appreciate based solely on speculation and price momentum. The long-term value of an investment is not defined by investor sentiment but by sound principals of finance, such as the present value of the cash flows, dividends, or earnings an underlying asset can produce. We believe that our disciplined focus on quality companies with competitive advantage will continue to be a favorable investment strategy into the future. We appreciate the opportunity to serve as your Fund's Investment Adviser. Sincerely yours, /s/ Mark A. Hillman ^1 Source: Bloomberg L.P., 499 Park Avenue, New York, NY 10022-1240. ^2 See the attached Performance Update and financial statements for detailed information regarding the Fund's historical performance. Statements in this Annual Report that reflect projections or expectations of future financial or economic performance of the Fund and of the market in general and statements of the Fund's plans and objectives for future operations are forward-looking statements. No assurance can be given that actual results or events will not differ materially from those projected, estimated, assumed or anticipated in any such forward-looking statements. Important factors that could result in such differences, in addition to the other factors noted with such forward-looking statements, include general economic conditions such as inflation, recession and interest rates. Past performance is not a guarantee of future results. THE HILLMAN AGGRESSIVE EQUITY FUND Performance Update - $10,000 Investment For the period from December 29, 2000 (Date of Initial Public Investment) to September 30, 2003 [Line Graph Here] -------------------------------------------------------------------------------- The Hillman Aggressive S&P 500 Total Equity Fund Return Index -------------------------------------------------------------------------------- 12/29/2000 $10,000 $10,000 3/31/2001 8,390 8,814 6/30/2001 9,570 9,330 9/30/2001 7,500 7,961 12/31/2001 8,950 8,811 3/31/2002 9,450 8,836 6/30/2002 8,610 7,652 9/30/2002 6,550 6,330 12/31/2002 7,070 6,864 3/31/2003 7,060 6,648 6/30/2003 9,080 7,671 9/30/2003 9,668 7,874 This graph depicts the performance of The Hillman Aggressive Equity Fund (the "Fund") versus the S&P 500 Total Return Index. It is important to note that the 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 --------------- ---------------------------- Since Date of Initial Public One Year Investment (12/29/00) --------------- ---------------------------- 47.60% (1.22)% --------------- ---------------------------- >> The graph assumes an initial $10,000 investment at December 29, 2000 (date of initial public investment). All dividends and distributions are reinvested. >> At September 30, 2003, the value of the Fund would have decreased to $9,668 - a cumulative total investment return of (3.32)% since December 29, 2000. >> At September 30, 2003, the value of a similar investment in the S&P 500 Total Return Index would have decreased to $7,874 - a cumulative total investment return of (21.26)% since December 29, 2000. >> 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. The graph and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Average annual total returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestments of dividends. THE HILLMAN AGGRESSIVE EQUITY FUND PORTFOLIO OF INVESTMENTS September 30, 2003 ------------------------------------------------------------------------------------------------------------------------------------ Value Shares (note 1) ------------------------------------------------------------------------------------------------------------------------------------ COMMON STOCKS - 99.44% Aerospace / Defense - 9.70% Goodrich Corporation ........................................................ 10,300 $ 249,672 The Boeing Company .......................................................... 7,300 250,609 ----------- 500,281 ----------- Auto Manufacturers - 9.62% Ford Motor Company .......................................................... 22,500 242,325 General Motors Corporation .................................................. 6,200 253,766 ----------- 496,091 ----------- Commercial Services - 5.03% (a)Cendant Corporation ......................................................... 13,900 259,791 ----------- Computers - 9.41% (a)EMC Corporation ............................................................. 18,800 237,444 Hewlett-Packard Company ..................................................... 12,800 247,808 ----------- 485,252 ----------- Diversified Financial Services - 5.12% Citigroup Inc. .............................................................. 5,800 263,958 ----------- Electric - 5.18% American Electric Power Co, Inc. ............................................ 8,900 267,000 ----------- Healthcare Services - 5.21% Aetna Inc. .................................................................. 4,400 268,532 ----------- Media - 4.78% (a)AOL Time Warner Inc. ........................................................ 16,300 246,293 ----------- Lodging - Hotels - 5.29% (a)Host Marriott Corporation ................................................... 25,400 272,542 ----------- Miscellaneous Manufacturing - 4.80% General Electric Co. ........................................................ 8,300 247,423 ----------- Real Estate Investment Trusts - 5.19% Apartment Investment & Management Company ................................... 6,800 267,648 ----------- Retail - 14.74% (a)Finlay Enterprises Inc. ..................................................... 17,400 252,822 Sears, Roebuck and Company .................................................. 5,800 253,634 The May Department Stores Company ........................................... 10,300 253,689 ----------- 760,145 ----------- (Continued)
THE HILLMAN AGGRESSIVE EQUITY FUND PORTFOLIO OF INVESTMENTS September 30, 2003 ------------------------------------------------------------------------------------------------------------------------------------ Value Shares (note 1) ------------------------------------------------------------------------------------------------------------------------------------ COMMON STOCKS - (Continued) Telecommunications - 15.37% (a)Corning Incorporated .................................................. 28,300 $ 266,586 Motorola Incorporated ................................................. 23,900 286,083 Verizon Communications Inc. ........................................... 7,400 240,056 ----------- 792,725 ----------- Total Common Stocks (Cost $4,634,828) .......................................................... 5,127,681 ----------- INVESTMENT COMPANY - 1.01% Evergreen Select Money Market Fund Class I #495 ............................ 52,163 52,163 (Cost $52,163) ----------- Total Value of Investments (Cost $4,686,991 (b)) ................................. 100.45 % $ 5,179,844 Liabilities in Excess of Other Assets ............................................ (0.45)% (23,163) -------- ----------- Net Assets ................................................................. 100.00 % $ 5,156,681 ======== =========== (a) Non-income producing investment (b) Aggregate cost for federal income tax purposes is $4,683,617. Unrealized appreciation/(depreciation) of investments for federal income tax purposes is as follows: Unrealized appreciation ........................................................................ $ 890,166 Unrealized depreciation ........................................................................ (393,939) ----------- Net unrealized appreciation ......................................................... $ 496,227 =========== See accompanying notes to financial statements
THE HILLMAN AGGRESSIVE EQUITY FUND STATEMENT OF ASSETS AND LIABILITIES September 30, 2003 ASSETS Investments, at value (cost $4,686,991) ......................................................... $ 5,179,844 Income receivable ............................................................................... 7,674 Prepaid expenses ................................................................................ 1,014 ----------- Total assets ............................................................................... 5,188,532 ----------- LIABILITIES Accrued expenses ................................................................................ 21,661 Disbursements in excess of cash on demand deposit ............................................... 10,190 ----------- Total liabilities .......................................................................... 31,851 ----------- NET ASSETS (applicable to 535,601 shares outstanding; unlimited shares of no par value beneficial interest authorized) ......................................... $ 5,156,681 =========== NET ASSET VALUE, REDEMPTION AND OFFERING PRICE PER SHARE ($5,156,681 / 535,601 shares) ................................................................... $ 9.63 =========== NET ASSETS CONSIST OF Paid-in capital ................................................................................. $ 4,841,461 Undistributed net investment income ............................................................. 133 Accumulated net realized loss on investments .................................................... (177,766) Net unrealized appreciation on investments ...................................................... 492,853 ----------- $ 5,156,681 =========== See accompanying notes to financial statements
THE HILLMAN AGGRESSIVE EQUITY FUND STATEMENT OF OPERATIONS Year ended September 30, 2003 NET INVESTMENT INCOME Income Dividends ..................................................................................... $ 101,746 ----------- Expenses Investment advisory fees (note 2) ............................................................. 38,788 Fund administration fees (note 2) ............................................................. 4,848 Distribution and service fees (note 3) ........................................................ 9,697 Custody fees .................................................................................. 4,755 Fund accounting fees (note 2) ................................................................. 27,388 Audit fees .................................................................................... 13,523 Legal fees .................................................................................... 11,998 Securities pricing fees ....................................................................... 1,755 Other accounting fees (note 2) ................................................................ 19,152 Shareholder servicing expenses ................................................................ 2,012 Registration and filing expenses .............................................................. 9,257 Printing expenses ............................................................................. 93 Trustee fees and meeting expenses ............................................................. 5,981 Other operating expenses ...................................................................... 2,998 ----------- Total expenses ............................................................................ 152,245 ----------- Less: Investment advisory fees waived (note 2) ............................................. (19,557) Fund administration fees waived (note 2) ............................................. (4,848) Fund accounting fees waived (note 2) ................................................. (27,388) Other accounting fees waived (note 2) ................................................ (19,152) ----------- Net expenses .............................................................................. 81,300 ----------- Net investment income ................................................................ 20,446 ----------- REALIZED AND UNREALIZED GAIN ON INVESTMENTS Net realized loss from investment transactions ..................................................... (87,727) Change in unrealized appreciation / (depreciation) on investments .................................. 1,567,764 ----------- Net realized and unrealized gain on investments ............................................... 1,480,037 ----------- Net increase in net assets resulting from operations ...................................... $ 1,500,483 =========== See accompanying notes to financial statements
THE HILLMAN AGGRESSIVE EQUITY FUND STATEMENTS OF CHANGES IN NET ASSETS For the Years ended September 30, ------------------------------------------------------------------------------------------------------------------------------------ 2003 2002 ------------------------------------------------------------------------------------------------------------------------------------ INCREASE IN NET ASSETS Operations Net investment income (loss) ............................................ $ 20,446 $ (16,847) Net realized (loss) gain from investment transactions ................... (87,727) 80,363 Change in unrealized appreciation / (depreciation) on investments ....... 1,567,764 (617,720) ----------- ----------- Net increase (decrease) in net assets resulting from operations .... 1,500,483 (554,204) ----------- ----------- Distributions to shareholders from Net investment income ................................................... (20,313) 0 ----------- ----------- Capital share transactions Increase in net assets resulting from capital share transactions (a) .... 699,170 667,637 ----------- ----------- Total increase in net assets ................................ 2,179,340 113,433 NET ASSETS Beginning of year ........................................................... 2,977,341 2,863,908 ----------- ----------- End of year (including undistributed net investment income of $133 in 2003).. $ 5,156,681 $ 2,977,341 =========== =========== (a) A summary of capital share activity follows: --------------------------------------------------------------- 2003 2002 Shares Value Shares Value ---------------------------------------------------------------- Shares sold ....................................................... 103,376 $ 865,373 93,205 $ 841,466 Shares redeemed ................................................... (22,651) (166,203) (19,904) (173,829) ----------- ----------- ----------- ----------- Net increase ................................................. 80,725 $ 699,170 73,301 $ 667,637 =========== =========== =========== =========== See accompanying notes to financial statements
THE HILLMAN AGGRESSIVE EQUITY FUND FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period) For the Periods ended September 30, ------------------------------------------------------------------------------------------------------------------------------------ 2003 2002 2001 (a) ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period ................................... $ 6.55 $ 7.51 $ 10.00 Income (loss) from investment operations Net investment income (loss) ................................ 0.04 (0.04) (0.12) Net realized and unrealized gain (loss) on investments ...... 3.08 (0.92) (2.37) ----------- ----------- ----------- Total from investment operations ........................ 3.12 (0.96) (2.49) ----------- ----------- ----------- Distributions to shareholders from Net investment income ....................................... (0.04) 0.00 0.00 ----------- ----------- ----------- Net asset value, end of period ......................................... $ 9.63 $ 6.55 $ 7.51 =========== =========== =========== Total return ........................................................... 47.60 % (12.67)% (25.00)% =========== =========== =========== Ratios/supplemental data Net assets, end of period ........................................ $ 5,156,681 $ 2,977,341 $ 2,863,908 =========== =========== =========== Ratio of expenses to average net assets Before expense reimbursements and waived fees .................... 3.93 % 4.06 % 6.32 %(b) After expense reimbursements and waived fees ..................... 2.10 % 2.12 % 3.90 %(b) Ratio of net investment (loss) income to average net assets Before expense reimbursements and waived fees .................... (1.30)% (2.41)% (4.96)%(b) After expense reimbursements and waived fees ..................... 0.53 % (0.46)% (2.53)%(b) Portfolio turnover rate ............................................... 41.37 % 67.29 % 52.56 % (a) For the period from December 29, 2000 (date of initial public investment) to September 30, 2001. (b) Annualized. See accompanying notes to financial statements
THE HILLMAN AGGRESSIVE EQUITY FUND NOTES TO FINANCIAL STATEMENTS September 30, 2003 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION The Hillman Aggressive Equity Fund (the "Fund") is a non-diversified series of shares of beneficial interest of the Hillman Capital Management Investment Trust (the "Trust"), an open-end management investment company. The Trust was organized on July 14, 2000 as a Delaware Business Trust and is registered under the Investment Company Act of 1940, as amended (the "Act"). The Fund received its initial public investment on December 29, 2000 and began operations on January 2, 2001. 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 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. Eastern 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 or which cannot be accurately valued using the Fund's normal pricing procedures, if any, are valued following procedures approved by the Board of Trustees of the Trust (the "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 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 a capital loss carryforward for federal income tax purposes of $61,754, which expires in the year 2009. It is the intention of the Trustees not to distribute any realized gains until the carryforwards have been offset or expire. 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 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. E. Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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. (Continued) THE HILLMAN AGGRESSIVE EQUITY FUND NOTES TO FINANCIAL STATEMENTS September 30, 2003 NOTE 2 - INVESTMENT ADVISORY FEE AND OTHER RELATED PARTY TRANSACTIONS Pursuant to an investment advisory agreement, Hillman 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 has voluntarily waived a portion of its fee in the amount of $19,557 ($0.04 per share) for the year ended September 30, 2003. There can be no assurance that the foregoing voluntary fee waiver will continue. 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 first $50 million of average daily net assets, 0.10% of the next $50 million of average daily net assets, and 0.075% of average daily net assets over $100 million. The contract with the Administrator provides that the aggregate fees for the aforementioned administration services shall not be less than $2,000 per month. The Administrator also receives a monthly fee of $2,250 for accounting and record-keeping services, plus 0.01% of the average annual net assets. The Administrator also received the following to procure and pay the custodian for the Trust: 0.002% on the first $100 million of the Fund's net assets and 0.009% on all assets over $100 million, plus transaction fees, with a minimum aggregate annual fee of $4,800. The Administrator also charges the Fund for certain expenses involved with the daily valuation of portfolio securities, which are believed to be immaterial in amount. The Administrator has voluntarily waived a portion of these fees amounting to $51,388 ($0.11 per share) for the year ended September 30, 2003. There can be no assurance that the foregoing voluntary fee waivers will continue. 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 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 - DISTRIBUTION AND SERVICE FEES The Trustees, including a majority of the Trustees who are not "interested persons" of the Trust as defined in the Act, adopted a distribution plan with respect to all shares 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 0.25%, 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 shares of the Fund or support servicing of shareholder accounts. The Fund incurred $9,697 in distribution and service fees under the Plan for the year ended September 30, 2003. (Continued) THE HILLMAN AGGRESSIVE EQUITY FUND NOTES TO FINANCIAL STATEMENTS September 30, 2003 NOTE 4 - PURCHASES AND SALES OF INVESTMENTS Purchases and sales of investments, other than short-term investments, aggregated $2,240,429 and $1,554,361, respectively, for the year ended September 30, 2003. (Continued) THE HILLMAN AGGRESSIVE EQUITY FUND ADDITIONAL INFORMATION ABOUT TRUSTEES AND OFFICERS September 30, 2003 (Unaudited) The business and affairs of the Fund and the Trust are managed under the direction of the Trustees. Information concerning the Trustees and officers of the Trust and Fund is set forth below. Generally, each Trustee and officer serves an indefinite term or until certain circumstances such as their resignation, death, or otherwise as specified in the Trust's organizational documents. Any Trustee may be removed at a meeting of shareholders by a vote meeting the requirements of the Trust's organizational documents. The Statement of Additional Information of the Fund includes additional information about the Trustees and officers and is available, without charge, upon request by calling the Fund toll-free at 1-800-773-3863. The address of each Trustee and officer, unless otherwise indicated below, is 116 South Franklin Street, Rocky Mount, North Carolina 27802. The Independent Trustees received aggregate compensation of $4,200 during the fiscal year ended September 30, 2003 from the Fund for their services to the Fund and Trust. The Interested Trustee and officers did not receive compensation from the Fund for their services to the Fund and Trust. --------------------------- ----------- --------- ------------------------------------ ------------- ------------------------------- Number of Portfolios in Fund Position(s) Length Complex Name, Age, held with of Time Principal Occupation(s) Overseen by Other Directorships and Address Fund/Trust Served During Past 5 Years Trustee Held by Trustee --------------------------- ----------- --------- ------------------------------------ ------------- ------------------------------- Independent Trustees --------------------------- ----------- --------- ------------------------------------ ------------- ------------------------------- Jack E. Brinson, 71 Trustee Since Retired; Previously, President, 2 Independent Trustee - Gardner 12/2000 Brinson Investment Co. (personal Lewis Investment Trust for the investments) and President, three series of that trust; Brinson Chevrolet, Inc. (auto The Nottingham Investment dealership) Trust II for the eight series of that trust; New Providence Investment Trust for the one series of that trust; and de Leon Funds Trust for the one series of that trust (all registered investment companies) --------------------------- ----------- --------- ------------------------------------ ------------- ------------------------------- Theo H. Pitt, Jr., 67 Trustee Since Senior Partner, Community Financial 2 Independent Trustee - Gardner and 12/2000 Institutions Consulting, Rocky Lewis Investment Trust for Chairman Mount, North Carolina the three series of that trust (registered investment company) --------------------------- ----------- --------- ------------------------------------ ------------- ------------------------------- Interested Trustee --------------------------- ----------- --------- ------------------------------------ ------------- ------------------------------- Mark A. Hillman, 41 Trustee Since President, Hillman Capital 2 None 613 Third Street and 12/2000 Management, Inc. (investment Eastport Maritime Building President advisor to the Fund); previously, Annapolis, MD 21403 (Principal Chief Investment Officer, Menocal Executive Capital Management, Inc. Officer) ------------------------------------------------------------------------------------------------------------------------------------ Basis of Interestedness. Mr. Hillman is a Interested Trustee because he is an officer of Hillman Capital Management, Inc., the investment advisor of the Fund ------------------------------------------------------------------------------------------------------------------------------------ (Continued)
THE HILLMAN AGGRESSIVE EQUITY FUND ADDITIONAL INFORMATION ABOUT TRUSTEES AND OFFICERS September 30, 2003 (Unaudited) --------------------------- ----------- --------- ------------------------------------ ------------- ------------------------------- Number of Portfolios in Fund Position(s) Length Complex Name, Age, held with of Time Principal Occupation(s) Overseen by Other Directorships and Address Fund/Trust Served During Past 5 Years Trustee Held by Trustee --------------------------- ----------- --------- ------------------------------------ ------------- ------------------------------- Other Officers --------------------------- ----------- --------- ------------------------------------ ------------- ------------------------------- Fletcher D. Perkins, 25 Treasurer Since Analyst, Hillman Capital n/a n/a 613 Third Street (Principal 12/2002 Management, Inc., since 2002; Eastport Maritime Building Financial Account Manager, Netivity Solutions Annapolis, MD 21403 Officer) (computer network service) from 01/2001 to 10/2001; previously, student, Saint Mary's College --------------------------- ----------- --------- ------------------------------------ ------------- ------------------------------- C. Frank Watson III, 33 Secretary Since President and Chief Operating n/a n/a 12/2000 Officer, The Nottingham Company (administrator to the Fund); previously, Chief Operating Officer, The Nottingham Company --------------------------- ----------- --------- ------------------------------------ ------------- ------------------------------- Julian G. Winters, 34 Assistant Assistant Vice President-Compliance n/a n/a Secretary Secretary Administration, The Nottingham and since Company, since 1998; previously, Assistant 12/2000; Fund Accountant, The Nottingham Treasurer Assistant Company Treasurer since 12/2002 --------------------------- ----------- --------- ------------------------------------ ------------ -------------------------------
Deloitte & Touche LLP Two World Financial Center New York, New York 10281-1414 Tel: (212) 436-2000 Fax: (212) 436-5000 www.deloitte.com Deloitte & Touche INDEPENDENT AUDITORS' REPORT To the Board of Trustees of Hillman Capital Management Investment Trust and Shareholders of The Hillman Aggressive Equity Fund: We have audited the accompanying statement of assets and liabilities of The Hillman Aggressive Equity Fund (the "Fund"), including the portfolio of investments, as of September 30, 2003, and the related statement of operations for the year then ended, the statements of changes in net assets for the years ended September 30, 2003 and 2002, and the financial highlights for each of 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 securities owned as of September 30, 2003, 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 Hillman Aggressive Equity Fund as of September 30, 2003, the results of its operations for the year then ended, the changes in net assets for the years ended September 30, 2003 and 2002, and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. /s/ Deloitte & Touche LLP October 24, 2003 _____________ Deloitte Touche Tohmatsu _____________ ________________________________________________________________________________ THE HILLMAN AGGRESSIVE EQUITY FUND ________________________________________________________________________________ a series of the Hillman Capital Management Investment Trust This Report has been prepared for shareholders and may be distributed to others only if preceded or accompanied by a current prospectus. ________________________________________________________________________________ THE HILLMAN TOTAL RETURN FUND ________________________________________________________________________________ a series of the Hillman Capital Management Investment Trust Annual Report FOR THE YEAR ENDED SEPTEMBER 30, 2003 INVESTMENT ADVISOR Hillman Capital Management, Inc. 613 Third Street Eastport Maritime Building Annapolis, Maryland 21403 THE HILLMAN TOTAL RETURN FUND 116 South Franklin Street Post Office Drawer 4365 Rocky Mount, North Carolina 27803-0365 1-800-773-3863 This report and the financial statements contained herein are submitted for the general information of the shareholders of The Hillman Total Return Fund (the "Fund"). This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus. Mutual fund shares are not deposits or obligations of, or guaranteed by, any depository institution. Shares are not insured by the FDIC, Federal Reserve Board or any other agency, and are subject to investment risks, including possible loss of principal amount invested. Neither the Fund nor the Fund's distributor is a bank. For more information about the Fund, including charges and expenses, call the Fund for a free prospectus. You should read the prospectus carefully before you invest or send money. Distributor: Capital Investment Group, Inc., Post Office Drawer 4365, Rocky Mount, North Carolina 27803, Phone 1-800-773-3863 [Company Logo Here] Mark A. Hillman President November 18, 2003 Dear Shareholder of The Hillman Total Return Fund: Enclosed please find the annual report for The Hillman Total Return Fund (the "Fund") for the fiscal year ended September 30, 2003. Encouraged by an improving economic outlook and an accommodative Federal Reserve Bank, investors pushed the S&P 500 Total Return Index up 24.30%1. Corporate profits began to improve, mostly driven by cost cutting. During this period of advancing stock prices we continued to follow our core discipline, selling holdings as they became overvalued. We replaced overvalued holdings with undervalued securities of companies that we believe have competitive advantage in their industries. The Fund performed well, appreciating 23.46%2 from September 30, 2002 to September 30, 2003 versus 24.30% for the S&P 500 Total Return Index over the same period1. The variation in the Fund's return compared with the S&P 500 Total Return Index for that period was due to the fact that, among other things, we believe the Fund prudently invested in a variety of asset classes as opportunities to purchase undervalued securities of companies with competitive advantage in their industries became available. We believe that our bedrock of value investing paired with the opportunistic use of debt instruments and other asset classes will continue to help our clients to participate in market advances while dampening portfolio volatility versus the S&P 500. We urge our investors to take care and to invest prudently. As is characteristic of market rallies, many stocks will appreciate based solely on speculation and price momentum. The long-term value of an investment is not defined by investor sentiment but by sound principals of finance, such as the present value of the cash flows, dividends, or earnings an underlying asset can produce. We believe that our disciplined focus on quality companies with competitive advantage will continue to be a favorable investment strategy into the future. We appreciate the opportunity to serve as your Fund's Investment Adviser. Sincerely yours, /s/ Mark A. Hillman ^1 Source: Bloomberg L.P., 499 Park Avenue, New York, NY 10022-1240. ^2 See the attached Performance Update and financial statements for detailed information regarding the Fund's historical performance. Statements in this Annual Report that reflect projections or expectations of future financial or economic performance of the Fund and of the market in general and statements of the Fund's plans and objectives for future operations are forward-looking statements. No assurance can be given that actual results or events will not differ materially from those projected, estimated, assumed or anticipated in any such forward-looking statements. Important factors that could result in such differences, in addition to the other factors noted with such forward-looking statements, include general economic conditions such as inflation, recession and interest rates. Past performance is not a guarantee of future results. THE HILLMAN TOTAL RETURN FUND Performance Update - $10,000 Investment For the period from December 29, 2000 (Date of Initial Public Investment) to September 30, 2003 [Line Graph Here] -------------------------------------------------------------------------------- The Hillman Total S&P 500 Total Return Fund Return Index -------------------------------------------------------------------------------- 12/29/2000 $10,000 $10,000 3/31/2001 9,250 8,814 6/30/2001 9,930 9,330 9/30/2001 8,750 7,961 12/31/2001 9,902 8,811 3/31/2002 10,475 8,836 6/30/2002 10,063 7,652 9/30/2002 8,614 6,330 12/31/2002 9,136 6,864 3/31/2003 9,053 6,648 6/30/2003 10,313 7,671 9/30/2003 10,635 7,874 This graph depicts the performance of The Hillman Total Return Fund (the "Fund") versus the S&P 500 Total Return Index. It is important to note that the 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 --------------- ---------------------------- Since Date of Initial Public One Year Investment (12/29/00) --------------- ---------------------------- 23.46% 2.26% --------------- ---------------------------- >> The graph assumes an initial $10,000 investment at December 29, 2000 (date of initial public investment). All dividends and distributions are reinvested. >> At September 30, 2003, the value of the Fund would have increased to $10,635 - a cumulative total investment return of 6.35% since December 29, 2000. >> At September 30, 2003, the value of a similar investment in the S&P 500 Total Return Index would have decreased to $7,874 - a cumulative total investment return of (21.26)% since December 29, 2000. >> 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. The graph and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Average annual total returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestments of dividends. THE HILLMAN TOTAL RETURN FUND PORTFOLIO OF INVESTMENTS September 30, 2003 ------------------------------------------------------------------------------------------------------------------------------------ Value Shares (note 1) ------------------------------------------------------------------------------------------------------------------------------------ COMMON STOCKS - 64.04% Aerospace / Defense - 3.08% Goodrich Corporation ........................................................ 8,300 $ 201,192 The Boeing Company .......................................................... 4,700 161,351 ----------- 362,543 ----------- Apparel - 1.40% Nike Inc. ................................................................... 2,700 164,214 ----------- Auto Manufacturers - 2.49% Ford Motor Company .......................................................... 13,200 142,164 General Motors Corporation .................................................. 3,700 151,441 ----------- 293,605 ----------- Biotechnology - 1.21% (a)Amgen Inc. .................................................................. 2,200 142,054 ----------- Chemicals - 1.19% E.I. Du Pont de Nemours & Company ........................................... 3,500 140,035 ----------- Commercial Services - 1.40% (a)Cendant Corporation ......................................................... 8,800 164,472 ----------- Computers - 2.67% (a)EMC Corporation ............................................................. 13,000 164,190 Hewlett-Packard Company ..................................................... 7,700 149,072 ----------- 313,262 ----------- Electric Companies - 2.83% American Electric Power Company, Inc. ....................................... 5,700 171,000 The Southern Company ........................................................ 5,500 161,260 ----------- 332,260 ----------- Financial Services - 2.48% Allied Capital Corporation .................................................. 11,865 291,760 ----------- Food - 4.43% Campbell Soup Company ....................................................... 6,600 174,900 Kellogg Company ............................................................. 4,900 163,415 (a)Whole Foods Market Inc. ..................................................... 3,300 182,094 ----------- 520,409 ----------- Hand / Machine Tools - 1.31% Black & Decker Corporation .................................................. 3,800 154,090 ----------- Healthcare Services - 3.64% Aetna Inc. .................................................................. 4,000 244,120 (a)Sunrise Senior Assisted Living, Inc. ........................................ 7,000 183,610 ----------- 427,730 ----------- (Continued)
THE HILLMAN TOTAL RETURN FUND PORTFOLIO OF INVESTMENTS September 30, 2003 ------------------------------------------------------------------------------------------------------------------------------------ Value Shares (note 1) ------------------------------------------------------------------------------------------------------------------------------------ COMMON STOCKS - (Continued) Lodging - Hotels - 1.46% (a)Host Marriott Corporation ................................................... 16,000 $ 171,680 ----------- Media - 2.61% (a)AOL Time Warner Inc. ........................................................ 9,900 149,589 Walt Disney Company ......................................................... 7,800 157,326 ----------- 306,915 ----------- Miscellaneous Manufacturing - 2.75% 3M Co. ...................................................................... 2,400 165,768 General Electric Company .................................................... 5,300 157,993 ----------- 323,761 ----------- Pharmaceutical - 1.27% Pfizer Inc. ................................................................. 4,900 148,862 ----------- Real Estate Investment Trusts - 6.15% Apartment Investment & Management Company ................................... 4,100 161,376 Correctional Properties Trust ............................................... 9,400 234,530 Equity Office Properties Trust .............................................. 5,900 162,427 Equity Residential .......................................................... 5,600 163,968 ----------- 722,301 ----------- Retail - 14.25% (a)Finlay Enterprises .......................................................... 22,400 325,472 Home Depot Inc. ............................................................. 5,100 162,435 McDonald's Corporation ...................................................... 7,600 178,904 Outback Steakhouse Inc. ..................................................... 4,300 162,841 Sears Roebuck and Co. ....................................................... 4,700 205,531 (a)Staples Inc. ................................................................ 7,300 173,375 The May Department Stores Co. ............................................... 6,100 150,243 Wal-Mart Stores Inc. ........................................................ 3,000 167,550 Wendy's International Inc. .................................................. 4,600 148,580 ----------- 1,674,931 ----------- Telecommunications - 6.21% (a)Corning Incorporated ........................................................ 22,400 211,008 Motorola Incorporated ....................................................... 16,500 197,505 SBC Communications Inc. ..................................................... 8,200 182,450 Verizon Communications Inc. ................................................. 4,300 139,492 ----------- 730,455 ----------- Transportation - 1.21% FedEx Corporation ........................................................... 2,200 141,746 ----------- Total Common Stocks (Cost $6,925,791) ................................................................. 7,527,085 ----------- (Continued)
THE HILLMAN TOTAL RETURN FUND PORTFOLIO OF INVESTMENTS September 30, 2003 ------------------------------------------------------------------------------------------------------------------------------------ Interest Maturity Value Principal Rate Date (note 1) ------------------------------------------------------------------------------------------------------------------------------------ U.S. GOVERNMENT OBLIGATIONS - 8.90% United States Treasury Note .................................... $ 50,000 6.875% 05/15/06 $ 56,516 United States Treasury Note .................................... 500,000 2.625% 05/15/08 498,691 United States Treasury Note .................................... 500,000 3.625% 05/15/13 490,761 ----------- Total U.S. Government Obligations (Cost $1,040,073) ................................................. 1,045,968 ----------- CORPORATE OBLIGATIONS - 13.55% DaimlerChrysler NA Holdings Corp. .............................. 140,000 8.500% 01/18/31 163,100 Ford Motor Credit Co. .......................................... 420,000 6.875% 02/01/06 446,799 General Motors Acceptance Corp. ................................ 200,000 7.500% 07/15/05 215,083 Merrill Lynch & Co., Inc. ...................................... 40,000 0.000% 03/20/28 7,178 Motorola Inc. .................................................. 200,000 6.750% 02/01/06 216,250 Toys R US Inc. ................................................. 500,000 5.000% 08/01/11 544,362 ----------- Total Corporate Obligations (Cost $1,524,890) ....................................................... 1,592,772 ----------- INVESTMENT COMPANIES - 3.94% Shares -------- BlackRock Broad Investment Grade 2009 Term Trust .................................... 20,000 324,000 Putnam Master Income Trust .......................................................... 20,600 138,844 ----------- Total Investment Companies (Cost $432,267) ..................................................... 462,844 ----------- Total Value of Investments (Cost $9,923,021 (b)) .......................................... 90.43 % $10,628,669 Other Assets Less Liabilities ............................................................. 9.57 % 1,125,424 ------- ----------- Net Assets .......................................................................... 100.00 % $11,754,093 ======= =========== (a) Non-income producing investment. (b) Aggregate cost for federal income tax purposes is $9,901,663. Unrealized appreciation/(depreciation) of investments for federal income tax purposes is as follows: Unrealized appreciation ................................................................................... $ 1,250,223 Unrealized depreciation ................................................................................... (523,217) ----------- Net unrealized appreciation ................................................................... $ 727,006 =========== See accompanying notes to financial statements
THE HILLMAN TOTAL RETURN FUND STATEMENT OF ASSETS AND LIABILITIES September 30, 2003 ASSETS Investments, at value (cost $9,923,021) ......................................................... $10,628,669 Cash ............................................................................................ 1,665,714 Income receivable ............................................................................... 43,953 Prepaid expenses ................................................................................ 3,266 ----------- Total assets ............................................................................... 12,341,602 ----------- LIABILITIES Accrued expenses ................................................................................ 25,979 Payable for investments purchased ............................................................... 561,520 Payable for fund shares redeemed ................................................................ 10 ----------- Total liabilities .......................................................................... 587,509 ----------- NET ASSETS (applicable to 1,146,843 shares outstanding; unlimited shares of no par value beneficial interest authorized) ......................................... $11,754,093 =========== NET ASSET VALUE, REDEMPTION AND OFFERING PRICE PER SHARE ($11,754,093 / 1,146,843 shares) ................................................................ $ 10.25 =========== NET ASSETS CONSIST OF Paid-in capital ................................................................................. $11,168,035 Undistributed net investment income ............................................................. 798 Accumulated net realized loss on investments .................................................... (120,388) Net unrealized appreciation on investments ...................................................... 705,648 ----------- $11,754,093 =========== See accompanying notes to financial statements
THE HILLMAN TOTAL RETURN FUND STATEMENT OF OPERATIONS Year ended September 30, 2003 NET INVESTMENT INCOME Income Interest ...................................................................................... $ 91,649 Dividends ..................................................................................... 199,596 ----------- Total income .............................................................................. 291,245 ----------- Expenses Investment advisory fees (note 2) ............................................................. 84,483 Fund administration fees (note 2) ............................................................. 10,560 Distribution and service fees (note 3) ........................................................ 21,121 Custody fees .................................................................................. 4,628 Fund accounting fees (note 2) ................................................................. 27,820 Audit fees .................................................................................... 13,275 Legal fees .................................................................................... 11,998 Securities pricing fees ....................................................................... 4,579 Shareholder recordkeeping fees (note 2) ....................................................... 7,016 Other accounting fees (note 2) ................................................................ 13,457 Shareholder servicing expenses ................................................................ 2,139 Registration and filing expenses .............................................................. 10,001 Printing expenses ............................................................................. 124 Trustee fees and meeting expenses ............................................................. 5,981 Other operating expenses ...................................................................... 3,713 ----------- Total expenses ............................................................................ 220,895 ----------- Less: Investment advisory fees waived (note 2) ............................................. (22,564) Fund administration fees waived (note 2) ............................................. (10,560) Fund accounting fees waived (note 2) ................................................. (18,820) Shareholder recordkeeping fees waived (note 2) ....................................... (1,016) Other accounting fees waived (note 2) ................................................ (13,457) ----------- Net expenses .............................................................................. 154,478 ----------- Net investment income ................................................................ 136,767 ----------- REALIZED AND UNREALIZED GAIN ON INVESTMENTS Net realized loss from investment transactions ..................................................... (119,864) Change in unrealized appreciation / (depreciation) on investments .................................. 1,718,571 ----------- Net realized and unrealized gain on investments ............................................... 1,598,707 ----------- Net increase in net assets resulting from operations ...................................... $ 1,735,474 =========== See accompanying notes to financial statements
THE HILLMAN TOTAL RETURN FUND STATEMENTS OF CHANGES IN NET ASSETS For the Years ended September 30, ------------------------------------------------------------------------------------------------------------------------------------ 2003 2002 ------------------------------------------------------------------------------------------------------------------------------------ INCREASE IN NET ASSETS Operations Net investment income ................................................... $ 136,767 $ 74,773 Net realized (loss) gain from investment transactions ................... (119,864) 65,196 Change in unrealized appreciation / (depreciation) on investments ....... 1,718,571 (368,388) ----------- ----------- Net increase (decrease) in net assets resulting from operations..... 1,735,474 (228,419) ----------- ----------- Distributions to shareholders from Net investment income ................................................... (140,116) (78,487) Net realized gain from investment transactions .......................... (65,194) (1,499) ----------- ----------- Decrease in net assets resulting from distributions ................ (205,310) (79,986) ----------- ----------- Capital share transactions Increase in net assets resulting from capital share transactions (a) 3,936,359 670,179 ----------- ----------- Total increase in net assets ................................ 5,466,523 361,774 NET ASSETS Beginning of year ............................................................ 6,287,570 5,925,796 ----------- ----------- End of year (including undistributed investment income $11,754,093 $ 6,287,570 of $798 in 2003 and $4,147 in 2002) =========== =========== (a) A summary of capital share activity follows: ------------------------------------------------------------ 2003 2002 Shares Value Shares Value ------------------------------------------------------------ Shares sold .......................................................... 433,509 $ 4,147,763 153,200 $ 1,557,781 Shares issued for reinvestment of distributions ...................... 16,936 158,126 1,549 14,149 ----------- ----------- ----------- ----------- 450,445 4,305,889 154,749 1,571,930 Shares redeemed ...................................................... (42,340) (369,530) (92,005) (901,751) ----------- ----------- ----------- ----------- Net increase .................................................... 408,105 $ 3,936,359 62,744 $ 670,179 =========== =========== =========== =========== See accompanying notes to financial statements
THE HILLMAN TOTAL RETURN FUND FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period) For the Periods ended September 30, ------------------------------------------------------------------------------------------------------------------------------------ 2003 2002 2001 (b) ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period ................................... $ 8.51 $ 8.77 $ 10.00 Income (loss) from investment operations Net investment income ....................................... 0.14 0.10 0.01 Net realized and unrealized gain (loss) on investments ...... 1.83 (0.25) (1.24) ----------- ----------- ----------- Total from investment operations ........................ 1.97 (0.15) (1.23) ----------- ----------- ----------- Distributions to shareholders from Net investment income ....................................... (0.15) (0.11) 0.00 Net realized loss from investment transactions .............. (0.08) 0.00 0.00 ----------- ----------- ----------- Total distributions ..................................... (0.23) (0.11) 0.00 ----------- ----------- ----------- Net asset value, end of period ......................................... $ 10.25 $ 8.51 $ 8.77 =========== =========== =========== Total return ........................................................... 23.46 % (1.56)% (12.50)% =========== =========== =========== Ratios/supplemental data Net assets, end of period ........................................ $11,754,093 $ 6,287,570 $ 5,925,796 =========== =========== =========== Ratio of expenses to average net assets Before expense reimbursements and waived fees ............... 2.61 % 2.83 % 4.22 %(a) After expense reimbursements and waived fees ................ 1.83 % 1.80 % 2.78 %(a) Ratio of net investment income (loss) to average net assets Before expense reimbursements and waived fees ............... 0.83 % 0.08 % (1.17)%(a) After expense reimbursements and waived fees ................ 1.62 % 1.11 % 0.27 %(a) Portfolio turnover rate .......................................... 19.71 % 40.37 % 6.03 % (a) Annualized (b) For the period from December 29, 2000 (date of initial public investment) to September 30, 2001. See accompanying notes to financial statements
THE HILLMAN TOTAL RETURN FUND NOTES TO FINANCIAL STATEMENTS September 30, 2003 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION The Hillman Total Return Fund (the "Fund") is a diversified series of shares of beneficial interest of the Hillman Capital Management Investment Trust (the "Trust"), an open-end management investment company. The Trust was organized on July 14, 2000 as a Delaware Business Trust and is registered under the Investment Company Act of 1940, as amended (the "Act"). The Fund received its initial public investment on December 29, 2000 and began operations on January 2, 2001. 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 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. Eastern 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 or which cannot be accurately valued using the Fund's normal pricing procedures, if any, are valued following procedures approved by the Board of Trustees of the Trust (the "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 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 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 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. E. Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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, Hillman 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. (Continued) THE HILLMAN TOTAL RETURN FUND NOTES TO FINANCIAL STATEMENTS September 30, 2003 The Advisor has voluntarily waived a portion of its fee in the amount of $22,564 ($0.03 per share) for the year ended September 30, 2003. There can be no assurance that the foregoing voluntary fee waiver will continue. 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 first $50 million of average daily net assets, 0.10% of the next $50 million of average daily net assets, and 0.075% of average daily net assets over $100 million. The contract with the Administrator provides that the aggregate fees for the aforementioned administration services shall not be less than $2,000 per month. The Administrator also receives a monthly fee of $2,250 for accounting and record-keeping services, plus 0.01% of the average annual net assets. The Administrator also receives the following to procure and pay the custodian for the Trust: 0.002% on the first $100 million of the Fund's net assets and 0.009% on all assets over $100 million, plus transaction fees, with a minimum aggregate annual fee of $4,800. The Administrator also charges the Fund for certain expenses involved with the daily valuation of portfolio securities, which are believed to be immaterial in amount. The Administrator has voluntarily waived a portion of these fees amounting to $42,837 ($0.05 per share) for the year ended September 30, 2003. There can be no assurance that the foregoing voluntary fee waivers will continue. 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 the Fund shares, acts as dividend and distribution disbursing agent, and performs other shareholder servicing functions. The Transfer Agent is compensated based upon a $15 fee per shareholder per year, subject to a minimum fee of $1,750 per month per fund, which began June 1, 2003. The Transfer Agent has voluntarily waived a portion of this fee amounting to $1,016 for the year ended September 30, 2003. 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 Trustees, including a majority of the Trustees who are not "interested persons" of the Trust as defined in the Act, adopted a distribution plan with respect to all shares 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 0.25%, 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 shares of the Fund or support servicing of shareholder accounts. The Fund incurred $21,121 in distribution and service fees under the Plan for the year ended September 30, 2003. (Continued) THE HILLMAN TOTAL RETURN FUND NOTES TO FINANCIAL STATEMENTS September 30, 2003 NOTE 4 - PURCHASES AND SALES OF INVESTMENTS Purchases and sales of investments, other than short-term investments, aggregated $4,444,468 and $1,518,739, respectively, for the year ended September 30, 2003. NOTE 5 - DISTRIBUTIONS TO SHAREHOLDERS - (UNAUDITED) For federal income tax purposes, the Fund must report distributions from net realized gains from investment transactions that represent long-term and short-term capital gains to its shareholders. Of the total $0.08 per share in capital gain distributions for the year ended September 30, 2003, $0.04 represents long-term capital gains and $0.04 represents short-term capital gains. Shareholders should consult a tax advisor on how to report distributions for state and local income tax purposes. (Continued) THE HILLMAN TOTAL RETURN FUND ADDITIONAL INFORMATION ABOUT TRUSTEES AND OFFICERS September 30, 2003 (Unaudited) The business and affairs of the Fund and the Trust are managed under the direction of the Trustees. Information concerning the Trustees and officers of the Trust and Fund is set forth below. Generally, each Trustee and officer serves an indefinite term or until certain circumstances such as their resignation, death, or otherwise as specified in the Trust's organizational documents. Any Trustee may be removed at a meeting of shareholders by a vote meeting the requirements of the Trust's organizational documents. The Statement of Additional Information of the Fund includes additional information about the Trustees and officers and is available, without charge, upon request by calling the Fund toll-free at 1-800-773-3863. The address of each Trustee and officer, unless otherwise indicated below, is 116 South Franklin Street, Rocky Mount, North Carolina 27802. The Independent Trustees received aggregate compensation of $4,200 during the fiscal year ended September 30, 2003 from the Fund for their services to the Fund and Trust. The Interested Trustee and officers did not receive compensation from the Fund for their services to the Fund and Trust. --------------------------- ----------- --------- ------------------------------------ ------------- ------------------------------- Number of Portfolios in Fund Position(s) Length Complex Name, Age, held with of Time Principal Occupation(s) Overseen by Other Directorships and Address Fund/Trust Served During Past 5 Years Trustee Held by Trustee --------------------------- ----------- --------- ------------------------------------ ------------- ------------------------------- Independent Trustees --------------------------- ----------- --------- ------------------------------------ ------------- ------------------------------- Jack E. Brinson, 71 Trustee Since Retired; Previously, President, 2 Independent Trustee - Gardner 12/2000 Brinson Investment Co. (personal Lewis Investment Trust for the investments) and President, three series of that trust; Brinson Chevrolet, Inc. (auto The Nottingham Investment dealership) Trust II for the eight series of that trust; New Providence Investment Trust for the one series of that trust; and de Leon Funds Trust for the one series of that trust (all registered investment companies) --------------------------- ----------- --------- ------------------------------------ ------------- ------------------------------- Theo H. Pitt, Jr., 67 Trustee Since Senior Partner, Community Financial 2 Independent Trustee - Gardner and 12/2000 Institutions Consulting, Rocky Lewis Investment Trust for Chairman Mount, North Carolina the three series of that trust (registered investment company) --------------------------- ----------- --------- ------------------------------------ ------------- ------------------------------- Interested Trustee --------------------------- ----------- --------- ------------------------------------ ------------- ------------------------------- Mark A. Hillman, 41 Trustee Since President, Hillman Capital 2 None 613 Third Street and 12/2000 Management, Inc. (investment Eastport Maritime Building President advisor to the Fund); previously, Annapolis, MD 21403 (Principal Chief Investment Officer, Menocal Executive Capital Management, Inc. Officer) ------------------------------------------------------------------------------------------------------------------------------------ Basis of Interestedness. Mr. Hillman is a Interested Trustee because he is an officer of Hillman Capital Management, Inc., the investment advisor of the Fund ------------------------------------------------------------------------------------------------------------------------------------ (Continued)
THE HILLMAN TOTAL RETURN FUND ADDITIONAL INFORMATION ABOUT TRUSTEES AND OFFICERS September 30, 2003 (Unaudited) --------------------------- ----------- --------- ------------------------------------ ------------- ------------------------------- Number of Portfolios in Fund Position(s) Length Complex Name, Age, held with of Time Principal Occupation(s) Overseen by Other Directorships and Address Fund/Trust Served During Past 5 Years Trustee Held by Trustee --------------------------- ----------- --------- ------------------------------------ ------------- ------------------------------- Other Officers --------------------------- ----------- --------- ------------------------------------ ------------- ------------------------------- Fletcher D. Perkins, 25 Treasurer Since Analyst, Hillman Capital n/a n/a 613 Third Street (Principal 12/2002 Management, Inc., since 2002; Eastport Maritime Building Financial Account Manager, Netivity Solutions Annapolis, MD 21403 Officer) (computer network service) from 01/2001 to 10/2001; previously, student, Saint Mary's College --------------------------- ----------- --------- ------------------------------------ ------------- ------------------------------- C. Frank Watson III, 33 Secretary Since President and Chief Operating n/a n/a 12/2000 Officer, The Nottingham Company (administrator to the Fund); previously, Chief Operating Officer, The Nottingham Company --------------------------- ----------- --------- ------------------------------------ ------------- ------------------------------- Julian G. Winters, 34 Assistant Assistant Vice President-Compliance n/a n/a Secretary Secretary Administration, The Nottingham and since Company, since 1998; previously, Assistant 12/2000; Fund Accountant, The Nottingham Treasurer Assistant Company Treasurer since 12/2002 --------------------------- ----------- --------- ------------------------------------ ------------ -------------------------------
Deloitte & Touche LLP Two World Financial Center New York, New York 10281-1414 Tel: (212) 436-2000 Fax: (212) 436-5000 www.deloitte.com Deloitte & Touche INDEPENDENT AUDITORS' REPORT To the Board of Trustees of Hillman Capital Management Investment Trust and Shareholders of The Hillman Total Return Fund: We have audited the accompanying statement of assets and liabilities of The Hillman Total Return Fund (the "Fund"), including the portfolio of investments, as of September 30, 2003, and the related statement of operations for the year then ended, the statements of changes in net assets for the years ended September 30, 2003 and 2002, and the financial highlights for each of 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 securities owned as of September 30, 2003, 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 Hillman Total Return Fund as of September 30, 2003, the results of its operations for the year then ended, the changes in net assets for the years ended September 30, 2003 and 2002, and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. /s/ Deloitte & Touche LLP October 24, 2003 _____________ Deloitte Touche Tohmatsu _____________ (This page was intentionally left blank.) (This page was intentionally left blank.) ________________________________________________________________________________ THE HILLMAN TOTAL RETURN FUND ________________________________________________________________________________ a series of the Hillman Capital Management Investment Trust This Report has been prepared for shareholders and may be distributed to others only if preceded or accompanied by a current prospectus. Item 2. Code of Ethics. -------------- (a) The registrant, as of the end of the period covered by this report, has adopted a code of ethics that applies to its Principal Executive Officer, Principal Financial Officer, and Principal Accounting Officer(s), or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. (c) There have been no amendments during the period covered by this report. (d) The registrant has not granted, during the period covered by this report, any waivers, including an implicit waiver. (f)(1) A copy of the code of ethics that applies to the registrant's Principal Executive Officer and Principal Financial Officer is filed pursuant to Item 10.(a)(1) below. Item 3. Audit Committee Financial Expert. -------------------------------- (a)(1) The registrant does not have an audit committee financial expert serving on its audit committee. (a)(2) Not applicable. (a)(3) The registrant believes that the registrant's current audit committee has sufficient knowledge and experience to meet its obligations as an audit committee of the registrant, but the registrant's Board of Trustees has determined that it would consider naming or finding a qualified candidate who meets the requirements of an audit committee financial expert should there be a need or desire to appoint such a person in the future. Item 4. Principal Accountant Fees and Services. -------------------------------------- Not applicable. Item 5. Audit Committee of Listed Registrants. ------------------------------------- Not applicable. Item 6. [Reserved] Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. ----------------------------------------------------------------------- Not applicable. Item 8. [Reserved] Item 9. Controls and Procedures. ----------------------- (a) The registrant's principal executive officer and principal financial officer have concluded that the registrant's disclosure controls and procedures are effective based on their evaluation of these disclosure controls and procedures as of a date within 90 days of the filing of this report. (b) There were no changes in the registrant's internal control over financial reporting that occurred during the registrant's second fiscal half-year that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 10. Exhibits. -------- (a)(1) Code of Ethics required by Item 2 of Form N-CSR is filed herewith as Exhibit 10.(a)(1). (a)(2) Certifications required by Item 10.(a)(2) of Form N-CSR are filed herewith as Exhibit 10.(a)(2). (b) Certifications required by Item 10.(b) of Form N-CSR are filed herewith as Exhibit 10.(b). SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Hillman Capital Management Investment Trust By: (Signature and Title) /s/ Mark A. Hillman ________________________________ Mark A. Hillman, Trustee, President and Principal Executive Officer Date: November 18, 2003 _________________ Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: (Signature and Title) /s/ Mark A. Hillman ________________________________ Mark A. Hillman, Trustee, President and Principal Executive Officer Date: November 18, 2003 _________________ By: (Signature and Title) /s/ Fletcher D. Perkins ________________________________ Fletcher D. Perkins, Treasurer and Principal Financial Officer Date: November 18, 2003 _________________