[CAPITAL MANAGEMENT ASSOCIATES LETTERHEAD]
June 26, 1996
Dear Fellow Shareholders,
As we approach mid-year, I would like to review with you what has
occurred in the financial markets thus far in 1996, and more importantly,
what we foresee in the months ahead.
The stock market started 1996 with three basic assumptions:
1. The economy was weak.
2. The Federal Reserve would lower interest rates.
3. Corporate earnings would likely be sluggish.
Presently, investors believe the economy is healthy; interest rates will
not be cut, and earnings will advance. However, there is a major divergence
of opinion on inflation, but recent reports would seem to support the more
optimistic view that inflation remains subdued.
Stocks have significantly outperformed bonds this year. It is noted that
these superior equity results are a reflection of the public's participation
in mutual funds and corporations flush with cash buying back their shares or
making acquisitions. Perhaps the most important element has been a neutral
stance by the Federal Reserve. Short-term interest rates are about where
they were at year end; whereas, long-term rates have risen from below 6% to
just above 7%. Current conditions are in marked contrast to the first half
of 1994 when both short- and long-term rates had risen by mid-year, and
stocks had declined between 5 and 10%.
Looking ahead to year end, we expect economic activity to moderate in
view of consumer debt levels and the increase in long rates that has already
occurred. We do not expect the Federal Reserve to raise short-term rates
in the near future, but this assumption must be watched carefully. Should
the economy prove stronger that we now expect or should inflation pick up,
the Fed would tighten, and the stock market would suffer.
In the meantime, your fund is invested in companies which should be
able to increase earnings and dividends even in a period of moderating
economic activity. The largest group of holdings is in the oil service
sector, specifically offshore exploration where a worldwide boom is occurring.
We are starting to explore opportunities in the technology area given the
drubbing suffered by many of these stocks in the past few months, and we
continue to search for companies that have dominate positions in unique
areas such as AptarGroup, Harman International, Sola International, and Helix
Technology. To damp portfolio risk, we have also invested in banks and
utilities which provide above-market income and will add stability in periods
of market nervousness.
Our long-term goal is to grow your fund's assets in a prudent manner while
operating in the very dynamic mid-cap area of the equity market.
/s/ C. Lennis Koontz, II, CFA
C. Lennis Koontz, II, CFA
President
June 26, 1996
<PAGE>
<TABLE>
<CAPTION>
CAPITAL MANAGEMENT EQUITY FUND
PORTFOLIO OF INVESTMENTS
May 31, 1996
(Unaudited)
Number of Value
Shares (note 1)
------------------ -------------------
<S> <C>
COMMON STOCKS - 95.81%
Auto parts - replacement equipment - 2.48%
Echlin, Inc. 2,575 $88,516
-------------------
Chemicals - 7.46%
Air Products and Chemicals, Inc. 1,000 59,500
Hanna (M.A.) Company 3,800 130,625
Rohm & Haas Company 1,125 76,219
-------------------
266,344
-------------------
Computer software and services - 2.17%
Reynolds & Reynolds Company 1,550 77,306
-------------------
Electrical equipment - 2.13%
Belden, Inc. 2,375 76,000
-------------------
Electronics - 5.19%
Harman International Industries, Inc. 2,225 116,812
Varian Associates, Inc. 1,200 68,400
-------------------
185,212
-------------------
Electronics - semiconductor - 2.05%
Helix Technology Corporation 2,000 73,000
-------------------
Entertainment - 1.98%
(a) Harrah's Entertainment, Inc. 2,100 70,612
-------------------
Environmental control - 2.22%
Browning-Ferris Industries, Inc. 2,600 79,300
-------------------
Financial - banks, commercial - 9.28%
Barnett Banks, Inc. 1,600 100,000
First Security Corporation 2,600 61,750
Summit Bancorp 2,700 98,212
US Bancorp 2,000 71,250
-------------------
331,212
-------------------
Food -wholesale - 2.61%
Richfood Holdings, Inc. 2,775 92,962
-------------------
Food processing - 1.80%
Dole Food Company 1,700 64,175
-------------------
Homebuilders - 1.97%
Pulte Corporation 1,275 35,700
(a) U. S. Home Corporation 1,350 34,762
-------------------
70,462
-------------------
Machine - construction and mining - 1.97%
Case Corporation 1,400 70,175
-------------------
(Continued)
</TABLE>
CAPITAL MANAGEMENT EQUITY FUND
PORTFOLIO OF INVESTMENTS
May 31, 1996
(Unaudited)
<TABLE>
<CAPTION> Number of Value
Shares (note 1)
------------------ -------------------
<S> <C>
COMMON STOCKS (Continued)
Machine - diversified - 2.22%
York International Corporation 1,500 $79,312
-------------------
Manufactured housing - 1.08%
Clayton Homes, Inc. 2,000 38,500
-------------------
Medical - hospital managment and service - 2.46%
Caremark International, Inc. 3,200 87,600
-------------------
Medical supplies - 1.82%
(a) Sola International, Inc. 2,150 65,038
-------------------
Metals - diversified - 2.05%
Freeport-McMoRan Copper & Gold, Inc. 2,200 73,150
-------------------
Miscellaneous - manufacturing - 3.12%
Fisher Scientific International 2,725 111,384
-------------------
Office and business equipment - 1.95%
Pitney-Bowes, Inc. 1,400 69,475
-------------------
Oil and gas - domestic - 2.64%
Quaker State Corporation 6,125 94,172
-------------------
Oil and gas - equipment and services - 13.37%
(a) Diamond Offshore Drilling, Inc. 2,000 95,750
(a) ENSCO International, Inc. 2,100 63,788
(a) Global Marine, Inc. 5,375 65,844
(a) Rowan Companies, Inc 4,450 67,862
(a) Varco International, Inc. 6,900 114,713
Sonat Offshore Drilling Company 1,300 68,900
-----------------
476,857
-----------------
Packaging and containers - 0.36%
Aptargroup, Inc. 300 12,712
-----------------
Publishing - printing - 5.05%
McGraw-Hill Companies, Inc. 1,550 72,656
R.R. Donnelley & Sons Company 2,925 107,494
------------------
180,150
------------------
Retail - department stores - 2.98%
(a) Federated Department Stores, Inc. 3,075 106,472
------------------
(Continued)
</TABLE>
CAPITAL MANAGEMENT EQUITY FUND
PORTFOLIO OF INVESTMENTS
May 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
Number of Value
Shares (note 1)
----------- -----------
COMMON STOCKS (Continued)
<S> <C>
Toys - 3.04%
Mattel, Inc. 3,975 $108,319
----------
Transportation - rail - 3.06%
Illinois Central Corporation 3,650 109,044
----------
Utilities - electric - 3.63%
Houston Industries, Inc. 2,850 62,344
Idaho Power Company 2,300 67,275
----------
129,619
----------
Utilities - gas - 3.68%
Brooklyn Union Gas Company 2,450 65,538
Pacific Enterprises 2,500 65,938
----------
131,476
----------
Total Common Stocks (Cost $3,023,471) 3,418,556
----------
Principal
Amount
----------------
REPURCHASE AGREEMENT (b) - 3.45%
Wachovia Bank $123,110 123,110
5.25%, due June 3, 1996 ----------
(Cost $123,110)
Total Value of Investments (Cost $3,146,581) 99.26% 3,541,666
Other Assets Less Liabilities 0.74% 26,226
--------- -----------
Net Assets 100.00% $3,567,892
========= ===========
(a) Non-income producing investment.
(b) Joint repurchase agreement entered into May 31, 1996, with a
maturity value of $10,917,288 collateralized by $10,945,000 U.S.
Treasury Bonds, due March 31, 1997. The aggregate market value
of the collateral at May 31, 1996 was $11,141,098. The Fund's
pro rata interest in the market value of the collateral at May
31, 1996 was $125,683. 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 financial reporting and federal income tax
purposes is the same. Unrealized appreciation (depreciation) of
investments for financial reporting and federal income tax
purposes is as follows:
Unrealized appreciation $437,965
Unrealized depreciation (42,880)
---------
Net unrealized appreciation $395,085
===========
</TABLE>
See accompanying notes to financial statements
<PAGE>
CAPITAL MANAGEMENT EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
May 31, 1996
(Unaudited)
ASSETS
Investments at value (Cost $3,146,581) $3,541,666
Interest receivable 237
Dividends receivable 5,254
Receivable for investments sold 29,681
Receivable for fund shares sold 5,585
Prepaid expenses 160
Due from advisor (note 2) 3,720
Other asset 201
-----------
Total assets 3,586,504
-----------
LIABILITIES
Accrued expenses 6,317
Payable for investment purchases 12,295
-----------
Total liabilities 18,612
-----------
NET ASSETS $3,567,892
===========
NET ASSETS CONSIST OF
Paid-in capital $3,074,195
Undistributed net investment income 11,524
Undistributed net realized gain on investments 87,088
Net unrealized appreciation on investments 395,085
-----------
$3,567,892
===========
INSTITUTIONAL CLASS
Net asset value and offering price per share ($2,920,427 /
224,532 shares outstanding) $13.01
===========
INVESTOR CLASS
Net asset value ($647,465 / 49,911 shares outstanding) $12.97
===========
Maximum offering price per share (100 / 97.0% of $12.97) $13.37
===========
See accompanying notes to financial statements
<PAGE>
CAPITAL MANAGEMENT EQUITY FUND
STATEMENT OF OPERATIONS
For the period ended May 31, 1996
(Unaudited)
INVESTMENT INCOME
Income
Dividends $ 27,046
Interest 6,302
---------
Total income 33,348
---------
Expenses
Fund accounting fees (note 2) 16,500
Investment advisory fees (note 2) 15,595
Professional fees 12,475
Custody fees 6,755
Other fees 4,560
Fund administration fees (note 2) 3,119
Securities pricing fees 1,657
Distribution and service fees - Investor Class (note 3) 1,577
Registration and filing administration fees 983
Shareholder recordkeeping fees 78
Trustee fees and meeting expenses 12,769
Registration and filing expenses 4,695
Shareholder servicing expenses 2,115
Printing expenses 1,268
Operating expenses 422
---------
Total expenses 84,568
---------
Less:
Expense reimbursements (note 2) (68,966)
Investment advisory fees waived (note 2) (15,595)
---------
Net expenses 7
---------
Net investment income 33,341
---------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from investment transactions 96,923
Increase in unrealized appreciation on investments 196,087
---------
Net realized and unrealized gain on investments 293,010
---------
Net increase in net assets resulting from operations $326,351
=========
See accompanying notes to financial statements
<PAGE>
CAPITAL MANAGEMENT EQUITY FUND
STATEMENTS OF CHANGES IN NET ASSETS
(Unaudited)
<TABLE>
<CAPTION>
For the
period from
January 27, 1995
(commencement
Period ended of operations) to
May 31, November 30,
1996 1995
-------------- --------------------
<S> <C>
INCREASE IN NET ASSETS
Operations
Net investment income $ 33,341 $ 29,772
Net realized gain from investment transactions 96,923 33,755
Increase in unrealized appreciation on investments 196,087 198,998
---------- ----------
Net increase in net assets resulting from operations 326,351 262,525
---------- ----------
Distributions to shareholders from
Net investment income - Institutional Class (27,577) (19,101)
Net investment income - Investor Class (4,492) (419)
Net realized gain from investment transactions - Institutional Class (33,645) 0
Net realized gain from investment transactions - Investor Class (9,945) 0
---------- ----------
Decrease in net assets resulting from distributions (75,659) (19,520)
---------- ----------
Capital share transactions
Increase in net assets resulting from capital share transactions (a) 933,879 2,140,316
---------- ----------
Total increase in net assets 1,184,571 2,383,321
NET ASSETS
Beginning of period 2,383,321 0
---------- ----------
End of period $3,567,892 $2,383,321
========== ==========
</TABLE>
(a) A summary of capital share activity follows:
<TABLE>
<CAPTION>
INSTITUTIONAL CLASS INVESTOR CLASS
For the For the
period from period from
January 27, 1995 January 27, 1995
(commencement (commencement
Period ended of operations) to Period ended of operations) to
May 31, 1996 November 30, May 31, 1996 November 30,
1995 1995
Shares Value Shares Value Shares Value Shares Value
------ ----- ------ ----- ------ ----- ------ -----
<S> <C>
Shares sold 68,757 $819,477 149,099 $1,574,589 4,451 $54,718 45,533 $546,342
Shares issued for reinvestment
of distribution 5,051 61,221 1,626 19,101 1,201 14,437 35 419
------ -------- ------- ---------- ----- ------- ------ --------
73,803 880,698 150,725 1,593,690 5,652 69,155 45,568 546,761
Shares redeemed (1) (10) 0 0 (1,298) (15,964) (11) (135)
------ -------- ------- ---------- ----- ------- ------ --------
Net increase 73,807 $880,688 150,725 $1,593,690 4,354 $53,191 45,557 $546,626
====== ======== ======== ========== ===== ======= ====== ========
</TABLE>
See accompanying notes to financial statements
<PAGE>
CAPITAL MANAGEMENT EQUITY FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
(Unaudited)
<TABLE>
<CAPTION>
---------------------------------- -----------------------------
INSTITUTIONAL CLASS INVESTOR CLASS
---------------------------------- -----------------------------
For the For the
period from period from
January 27, 1995 January 27, 1995
For the (commencement For the (commencement
period ended of operations) to period ended of operations) to
May 31, November 30, May 31, November 30,
1996 1995 1996 1995
--------------- ------------------ ------------- --------------
<S> <C>
Net asset value, beginning of period $12.16 $10.00 $12.09 $11.07
Income from investment operations
Net investment income 0.11 0.20 0.13 0.11
Net realized and unrealized gain on investments 1.06 2.10 1.11 1.02
------------- ---------------- -------------- --------------
Total from investment operations 1.17 2.30 1.24 1.13
------------- ---------------- -------------- --------------
Distributions to shareholders from
Net investment income (0.14) (0.14) (0.10) (0.11)
Net realized gain from investment transactions (0.22) 0.00 (0.22) 0.00
------------- --------------- -------------- --------------
Total distributions (0.36) (0.14) (0.32) (0.11)
------------- ---------------- -------------- --------------
Net asset value, end of period $12.97 $12.16 $13.01 $12.09
============= ================ ============== ==============
Total return 10.22 %(a) 23.00 %(b) 9.04 %(c) 10.24 %(d)
============= ================ ============== ==============
Ratios/supplemental data
Net assets, end of period $2,920,427 $1,832,507 $647,465 $550,814
============= ================ ============== ==============
Ratio of expenses to average net assets
Before expense reimbursements and waived fees 1.39 %(e) 7.20 %(e) 2.14 %(e) 7.18 %(e)
After expense reimbursements and waived fees 0.00 %(e) 0.31 %(e) 0.00 %(e) 1.06 %(e)
Ratio of net investment income to average net assets
Before expense reimbursements and waived fees 0.77 %(e) (4.45)%(e) 0.03 %(e) (4.23)%(e)
After expense reimbursements and waived fees 2.15 %(e) 2.44 %(e) 2.17 %(e) 1.89 %(e)
Portfolio turnover rate 53.52 % 47.74 % 53.52 % 47.74 %
</TABLE>
(a) Annualized total return is 21.41%.
(b) Annualized total return is 27.91%.
(c) Total return does not reflect payment of a sales charge. Annualized
total return is 18.44%.
(d) Total return does not reflect payment of a sales charge. Annualized
total return is 16.20%.
(e) Annualized.
See accompanying notes to financial statements
<PAGE>
CAPITAL MANAGEMENT EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
May 31, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
The Capital Management Equity Fund (the "Fund") is a diversified
series of shares of beneficial interest of the Capital Management
Investment Trust (the "Trust"). The Trust, an open-end investment
company, was organized on October 18, 1994 as a Massachusetts Business
Trust and is registered under the Investment Company Act of 1940. The
Fund began operations on January 27, 1995. The Fund has an unlimited
number of authorized shares, which are divided into two classes -
Institutional Shares and Investor Shares. Only Institutional Shares
were offered by the Fund prior to April 7, 1995.
Each class of shares has equal rights as to assets of the Fund, and
the classes are identical except for differences in their sales charge
structures and ongoing distribution and service fees. Income, expenses
(other than distribution and service fees, which are only attributable
to the Investor Class), and realized and unrealized gains or losses on
investments are allocated to each class of shares based upon its
relative net assets. Investor Shares purchased are subject to a
maximum sales charge of three percent. Both classes have equal voting
privileges, except where otherwise required by law or when the Board
of Trustees determines that the matter to be voted on affects only the
interests of the shareholders of a particular class. The following is
a summary of significant accounting policies followed by the Fund.
A. Security Valuation - The Fund's investments in securities are
carried at value. Securities listed on an exchange or quoted on
a national market system are valued at 4:00 p.m. New York time.
Other securities traded in the over-the-counter market and listed
securities for which no sale was reported on that date are valued
at the most recent bid price. Securities for which market
quotations are not readily available, if any, are valued by using
an independent pricing service or by following procedures
approved by the Board of Trustees. Short-term investments are
valued at cost which approximates value.
B. Federal Income Taxes - No provision has been made for federal
income taxes since it is the policy of the Fund to comply with
the provisions of the Internal Revenue Code applicable to
regulated investment companies and to make sufficient
distributions of taxable income to relieve it from all federal
income taxes.
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 November 30.
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.
(continued)
CAPITAL MANAGEMENT EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
May 31, 1996
NOTE 2 - INVESTMENT ADVISORY FEE AND OTHER RELATED PARTY TRANSACTIONS
Pursuant to an investment advisory agreement, Capital Management
Associates, 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 first $100 million of the
Fund's average daily net assets, 0.90% of the next $150 million, 0.85%
of the next $250 million, and 0.80% of all assets over $500 million.
Currently, the Fund does not offer its shares for sale in states which
require limitations to be placed on its expenses. The Advisor
currently intends to voluntarily waive all or a portion of its fee and
reimburse expenses of the Fund to limit total Fund operating expenses
to a maximum of 1.50% of the average daily net assets of the Fund's
Institutional Class and a maximum of 2.25% of the average daily net
assets of the Fund's Investor Class. There can be no assurance that
the foregoing voluntary fee waivers or reimbursements will continue.
The Advisor has voluntarily waived its fee amounting to $15,595 ($0.06
per share) and has voluntarily agreed to reimburse $68,966 of the
operating expenses incurred by the Fund for the period ended May 31,
1996.
All organization expenses of the Fund were incurred and paid by the
Advisor. At May 31, 1996, the Advisor owned 10,421 Institutional Shares
and 112 Investor Shares of the Fund.
The Fund's administrator, The Nottingham Company (the "Administrator"),
provides administrative services to and is generally responsible for the
overall management and day-to-day operations of the Fund pursuant to an
accounting and administrative agreement with the Trust. As compensation
for its services, the Administrator receives a fee at the annual rate of
0.20% of the Fund's first $50 million of average daily net assets, 0.175%
of the next $50 million, and 0.15% of average daily net assets over $100
million. The Administrator also receives a monthly fee of $2,000 for
accounting and record keeping services for the initial class of shares and
$750 per month for each additional class of shares. 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 record keeping 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.
Shields & Company, Inc. (the "Distributor"), an affiliate of the
Advisor, serves as the Fund's principal underwriter and distributor.
The Distributor receives any sales charges imposed on purchases of
Investor Shares and re-allocates a portion of such charges to dealers
through whom the sale was made, if any. For the period ended May 31,
1996, the Distributor retained sales charges in the amount of $112.
At May 31, 1996, the Distributor owned 128,116 Institutional Shares of
the Fund.
Certain Trustees and officers of the Trust are also officers or
directors of the Advisor, the Distributor, or the Administrator.
(continued)
CAPITAL MANAGEMENT EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
May 31, 1996
NOTE 3 - DISTRIBUTION AND SERVICE FEES
The Board of Trustees, including the Trustees who are not "interested
persons" of the Trust as defined in the Investment Company Act of 1940
(the "Act"), adopted a distribution and service plan pursuant to Rule
12b-1 of the Act (the "Plan") applicable to the Investor Shares. The
Act regulates the manner in which a regulated investment company may
assume costs of distributing and promoting the sales of its shares and
servicing of its shareholder accounts.
The Plan provides that the Fund may incur certain costs, which may not
exceed 0.75% per annum of the Investor Shares' average daily net
assets for each year elapsed subsequent to adoption of the Plan, for
payment to the Distributor and others for items such as advertising
expenses, selling expenses, commissions, travel, or other expenses
reasonably intended to result in sales of Investor Shares in the Fund
or support servicing of Investor Share shareholder accounts. Such
expenditures incurred as service fees may not exceed 0.25% per annum
of the Investor Shares' average daily net assets. The Fund incurred
$1,577 of such expenses under the Plan for the period ended May 31,
1996.
NOTE 4 - PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments, other than short-term investments,
aggregated $2,965,792 and $1,509,831, respectively, for the period ended
May 31, 1996.
