As filed with the Securities and Exchange Commission on March 31, 1997
Securities Act File No. 33-85242
Investment Company Act File No. 811-8822
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |_|
Post-Effective Amendment No. 4 |X|
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |_|
Amendment No. 5 |X|
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CAPITAL MANAGEMENT INVESTMENT TRUST
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140 Broadway
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Suite 2201
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New York, New York 10005
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Telephone (212) 509-1111
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AGENT FOR SERVICE:
C. Frank Watson III, Secretary
105 North Washington Street
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069
With copies to:
M. Guy Brooks, III, Esq.
Poyner & Spruill, L.L.P.
3600 Glenwood Avenue
Raleigh, North Carolina 27612
It is proposed that this filing will become effective:
|X| Immediately upon filing pursuant |_| on , 1997 pursuant
to Rule 485(b), or to Rule 485(b), or
|_| 60 days after filing pursuant |_| on , 1997 pursuant
to Rule 485(a)(1), to Rule 485(a)(1), or
|_| 75 days after filing pursuant |_| on , 1997 pursuant
to Rule 485(a)(2) to Rule 485(a)(2), or
The issuer has previously registered an indefinite number of shares of two
classes of one series: Capital Management Mid-Cap Fund, under the Securities Act
of 1933, as amended, pursuant to Rule 24f-2 under the Investment Company Act of
1940, as amended. The Rule 24f-2 Notice for the year ended November 30, 1996 was
filed on January 28, 1997.
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Prospectus Cusip Number 140296203
CAPITAL MANAGEMENT MID-CAP FUND
INVESTOR SHARES
The investment objective of the Capital Management Mid-Cap Fund (formerly named
the Capital Management Equity Fund) (the "Fund") is to seek capital appreciation
principally through investments in equity securities, consisting of common and
preferred stocks and securities convertible into common stocks. The Fund will
focus on equity securities of medium-capitalization companies. While there is no
assurance that the Fund will achieve its investment objective, it endeavors to
do so by following the investment policies described in this Prospectus.
This Prospectus relates to shares ("Investor Shares") representing interests in
the Fund. The Investor Shares are sold to the public as an investment vehicle
for individuals, institutions, corporations, and fiduciaries.
See "Prospectus Summary - Offering Price."
INVESTMENT ADVISOR
Capital Management Associates, Inc.
New York, New York
The Fund is a diversified series of the Capital Management Investment Trust, a
registered, open-end management, investment company. This Prospectus sets forth
concisely the basic information you should know before investing in the Fund.
You should read it and keep it for future reference. A Statement of Additional
Information dated April 1, 1997, containing additional information about the
Fund has been filed with the Securities and Exchange Commission (the "SEC") and
is incorporated by reference in this Prospectus in its entirety. The Fund's
address is 140 Broadway, New York, New York 10005, and its telephone number is
1-800-773-3863. A copy of the Statement of Additional Information may be
obtained at no charge by calling or writing the Fund. The SEC maintains an
Internet Web site (http://www.sec.gov) that contains the Statement of Additional
Information, material incorporated by reference, and other information regarding
the Fund.
Shares of the Fund are not deposits or obligations of, or guaranteed or endorsed
by, any financial institution, and Fund shares are not federally insured by the
Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other
agency. Investment in the Fund involves risks, including the possible loss of
principal.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION,
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
April 1, 1997
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TABLE OF CONTENTS
PROSPECTUS SUMMARY......................................................... 2
FEE TABLE.................................................................. 3
FINANCIAL HIGHLIGHTS....................................................... 4
INVESTMENT OBJECTIVE AND POLICIES.......................................... 5
RISK FACTORS............................................................... 8
INVESTMENT LIMITATIONS..................................................... 9
HOW NET ASSET VALUE IS DETERMINED.......................................... 10
PERFORMANCE DATA........................................................... 10
MANAGEMENT OF THE FUND..................................................... 11
HOW TO PURCHASE SHARES..................................................... 15
HOW TO REDEEM SHARES....................................................... 19
DIVIDENDS AND DISTRIBUTIONS................................................ 21
FEDERAL INCOME TAX INFORMATION............................................. 21
ORGANIZATION AND CAPITAL SHARES............................................ 22
VOTING RIGHTS.............................................................. 23
OTHER INFORMATION.......................................................... 23
This Prospectus is not an offering of the securities herein described in any
state in which the offering is unauthorized. No sales representative, dealer, or
other person is authorized to give any information or to make any
representations other than those contained in this Prospectus.
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PROSPECTUS SUMMARY
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The Fund. The Capital Management Mid-Cap Fund (formerly named the Capital
Management Equity Fund) (the "Fund") is a diversified series of the Capital
Management Investment Trust (the "Trust"), a registered, open-end management,
investment company organized as a Massachusetts business trust. This Prospectus
relates to Investor Shares of the Fund. See "Organization and Capital Shares."
Offering Price. The Investor Shares are offered at net asset value plus a 3%
sales charge, which is reduced on purchases involving larger amounts. The
Investor Shares are sold to the public as an investment vehicle for individuals,
institutions, corporations, and fiduciaries. Investor Shares bear certain
expenses relating to their distribution. See "Distributor and Distribution Fee"
below. The minimum initial investment is $2,500 ($1,000 for IRA accounts). The
minimum subsequent investment is $500. See "How to Purchase Shares."
Investment Objective. The investment objective of the Fund is to seek capital
appreciation principally through investments in equity securities, consisting of
common and preferred stocks and securities convertible into common stocks.
Realization of current income is not a significant investment consideration, and
any income realized will be incidental to the Fund's objective. The Fund will
focus on equity securities of medium-capitalization companies. See "Investment
Objective and Policies."
Advisor. Subject to the general supervision of the Trust's Board of Trustees and
in accordance with the Fund's investment policies, Capital Management
Associates, Inc., of New York, New York (the "Advisor"), manages the Fund's
investments. The Advisor manages over $1 billion in assets. Its clients include
individuals, corporations, pension and profit-sharing plans, and endowments. For
its services, the Advisor receives a monthly fee based on the Fund's daily net
assets at the annual rate of 1.00% of the first $100 million of Fund assets,
0.90% of the next $150 million, 0.85% of the next $250 million, and 0.80% of all
assets over $500 million. See "Management of the Fund - Investment Advisor."
Dividends. The Fund may pay income dividends, if any, quarterly; capital gains,
if any, are paid at least once each year. Dividend and capital gain
distributions are automatically reinvested in additional Investor Shares at net
asset value unless the shareholder elects to receive cash. See "Dividends and
Distributions."
Distributor and Distribution Fee. Shields & Company (the "Distributor") serves
as distributor of the Fund's shares. For its services, which include payments to
qualified securities dealers for sales of Fund shares, the Distributor receives
commissions consisting of the portion of the sales charge on sales of Investor
Shares remaining after the discounts it allows to securities dealers. Under the
Fund's Distribution Plan applicable to the Investor Shares, payments of up to
0.75% annually of the Investor Shares' average net assets may be made to the
Distributor and others to compensate them and to reimburse them for activities
intended to result in the sale of Investor Shares and the servicing of accounts
of holders of Investor Shares. The Distributor is affiliated with the Advisor.
See "Management of the Fund - Distributor" and "- Distribution Plan."
Redemption of Shares. There is no charge for redemptions other than possible
charges associated with wire transfers of redemption proceeds. Shares may be
redeemed at any time at the net asset value next determined after receipt of a
redemption request by the Fund. A shareholder who submits appropriate written
authorization may redeem shares by telephone. See "How to Redeem Shares."
Special Risk Considerations. The Fund is not intended to provide a complete
investment program, and there can be no assurance that the Fund will achieve its
investment objective. To the extent that equities comprise a major portion of
the Fund's portfolio, the Fund's net asset value will be subject to stock market
fluctuation. While the Fund will invest primarily in common stocks traded in
U.S. securities markets, some of the Fund's investments may include illiquid
securities, foreign securities, and securities purchased subject to a repurchase
agreement or on a "when-issued" basis, which involve certain risks. The Fund's
portfolio will also contain a significant amount of securities of
medium-capitalization companies, which may exhibit more volatility than
large-capitalization companies. The Fund may borrow only under certain limited
conditions (including to meet redemption requests) and not to purchase
securities. It is not the intent of the Fund to borrow except for temporary cash
requirements. Borrowing, if done, would tend to exaggerate the effects of market
and interest rate fluctuations on the Fund's net asset value until repaid. See
"Risk Factors."
FEE TABLE
The following table sets forth certain information in connection with the
expenses of the Investor Shares of the Fund for the current fiscal year. The
information is intended to assist the investor in understanding the various
costs and expenses borne by the Investor Shares of the Fund, and therefore
indirectly by its investors, the payment of which will reduce an investor's
return on an annual basis.
Shareholder Transaction Expenses for Investor Shares
Maximum Sales Charge Imposed on Purchases...........................3.00% 1
(as a percentage of offering price)
Maximum Sales Charge Imposed on Reinvested Dividends.................None
Deferred Sales Load..................................................None
Redemption Fees*.....................................................None
Exchange Fees........................................................None
* The Fund in its discretion may choose to pass through to redeeming
shareholders any charges imposed by the Custodian for wiring redemption
proceeds. The Custodian currently charges the Fund $10.00 per transaction
for wiring redemption proceeds.
Annual Fund Operating Expenses
for Investor Shares
(as a percentage of average net assets)
Management Fees....................................................0.00% 3
12b-1 Fees.........................................................0.75% 2
Total Other Expenses...............................................1.50% 3
Total Fund Operating Expenses......................................2.25% 3
EXAMPLE: You would pay the following expenses (including the maximum initial
sales charge) on a $1,000 investment in Investor Shares of the Fund, whether or
not you redeem at the end of the period, and assuming a 5% annual return:
1 year 3 years 5 years 10 years
-------- --------- --------- ---------
$52 $98 $147 $281
THE FOREGOING SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
1 Reduced for larger purchases. See "How to Purchase Shares - Sales Charges."
2 The Fund, with respect to the Investor Shares, has adopted a Distribution
and Service Plan pursuant to Rule 12b-1 under the Investment Company Act of
1940, as amended (the "1940 Act"), which provides that the Investor Shares
may pay distribution and service fees up to 0.75% of average net assets of
the Investor Shares annually. See "Management of the Fund - Distribution
Plan" below. Long-term shareholders may pay more than the economic
equivalent of the maximum front-end sales charge permitted by the National
Association of Securities Dealers.
3 The Total Fund Operating Expenses shown above are based on actual operating
expenses incurred by the Investor Shares of the Fund for the fiscal year
ended November 30, 1996, which, after fee waivers and expense
reimbursements, were 0.00% of average daily net assets of the Investor
Shares of the Fund, but restated to reflect the expenses anticipated to be
incurred by the Investor Shares of the Fund for the current fiscal year.
Absent such waivers and reimbursements, the percentages would have been
1.00% for Management Fees and 4.45% for Total Fund Operating Expenses for
the Investor Shares of the Fund for the fiscal year ended November 30,
1996. The Advisor has voluntarily agreed to a reduction in the fees payable
to it and to reimburse expenses of the Fund, if necessary, in an amount
that limits Total Fund Operating Expenses (exclusive of interest, taxes,
brokerage fees and commissions, sales charges, and extraordinary expenses)
to not more than 2.25% of the Investor Shares' average daily net assets.
There can be no assurance that the Advisor's voluntary fee waivers and
expense reimbursements will continue in the future.
See "How to Purchase Shares" and "Management of the Fund" below for more
information about the fees and costs of operating the Fund. The example shown
above assumes a 5% annual return pursuant to the requirements of the Securities
and Exchange Commission. The hypothetical rate of return is not intended to be
representative of past or future performance of the Fund. The annual rate of
return may be greater or less than 5%.
FINANCIAL HIGHLIGHTS
The Fund has two classes of shares - Investor Shares and Institutional Shares.
See "Organization and Capital Shares." This Prospectus relates to Investor
Shares. The financial data included in the table below was obtained from audited
financial statements of the Fund. The financial data have been audited by KPMG
Peat Marwick LLP, independent auditors, whose report covering such fiscal year
and period is included in the Statement of Additional Information. The
information in the table below should be read in conjunction with the Fund's
latest audited financial statements and notes thereto, which are included in the
Statement of Additional Information, a copy of which may be obtained at no
charge by calling the Fund. Further information about the performance of the
Fund is contained in the Annual Report of the Fund, a copy of which may be
obtained at no charge by calling the Fund.
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<S> <C> <C> <C> <C> <C> <C>
Investor Class
(For a Share Outstanding Throughout the Fiscal Period)
For the period from
April 7, 1995,
Year ended (commencement of operations)
November 30, 1996 to November 30, 1995
Net asset value, beginning of period $12.09 $11.07
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Income from investment operations
Net investment income 0.24 0.11
Net realized and unrealized gain on investments 2.06 1.02
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Total from investment operations 2.30 1.13
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Distributions to shareholders from
Net investment income (0.21) (0.11)
Net realized gain from investment transactions (0.22) 0.00
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Total distributions (0.43) (0.11)
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Net asset value, end of period $13.96 $12.09
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Total return (a) 19.61% 10.24%
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Ratios/supplemental data
Net assets, end of period $746,136 $550,814
Ratio of expenses to average net assets
Before expense reimbursements and waived fees 4.45% 7.18%(b)
After expense reimbursements and waived fees 0.00% 1.06%(b)
Ratio of net investment income (loss) to average net assets
Before expense reimbursements and waived fees (2.50)% (4.23)%(b)
After expense reimbursements and waived fees 1.95% 1.89%(b)
Portfolio turnover rate 82.30% 47.74%
Average commission rate paid $0.0598 N/A
(a) Total return does not reflect payment of a sales charge.
(b) Annualized.
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INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to seek capital appreciation principally
through investments in equity securities, consisting of common and preferred
stocks and securities convertible into common stocks. Realization of current
income is not a significant investment consideration, and any income realized
will be incidental to the Fund's objective. The Fund's investment objective and
fundamental investment limitations described herein may not be altered without
the prior approval of a majority of the Fund's shareholders.
Under normal market conditions, at least 90% of the Fund's total assets will be
invested in equity securities and at least 65% of the Fund's total assets will
be invested in equity securities of medium-capitalization companies, which are
defined as those whose market capitalization range is from $300 million to $6
billion. However, as a temporary defensive measure, when the Advisor determines
that market conditions warrant such investments, the Fund may invest up to 100%
of its total assets in investment grade bonds, U.S. Government Securities,
repurchase agreements, or money market instruments. When the Fund invests its
assets in investment grade bonds, U.S. Government Securities, repurchase
agreements, or money market instruments as a temporary defensive measure, it is
not pursuing its stated investment objective. Under normal circumstances,
however, the Fund will also hold money market or repurchase agreement
instruments for funds awaiting investment, to accumulate cash for anticipated
purchases of portfolio securities, to allow for shareholder redemptions, and to
provide for Fund operating expenses.
Equity Selection Criteria. The Advisor will manage the Fund's assets by
utilizing an investment philosophy which has been employed by the Advisor since
the firm's inception. Under normal market conditions, the Fund will invest in
equity securities consisting of common stocks and securities convertible into
common stocks. The Fund intends to invest in a diversified group of common
stocks and will not concentrate its investments in any one industry or group.
The Fund will focus on medium-capitalization companies. This
market-capitalization range includes a universe of approximately 1,700
companies. Stocks held in the portfolio will generally be traded on either the
New York Stock Exchange, American Stock Exchange, or the over-the-counter
market. Foreign securities, if held, will generally be traded on foreign
securities exchanges. Foreign securities may be held in the form of American
Depository Receipts ("ADRs"). ADRs are foreign securities denominated in U.S.
dollars and traded on U.S. securities markets. See "Foreign Securities" below.
An economic forecast is developed by the Advisor's Investment Committee to guide
industry allocation decisions. Medium-capitalization equities in industries
where the outlook is favorable relative to current price levels are then
subjected to additional screening and are finally selected through fundamental
security analysis to identify value. This process most often includes visits
with company management and contacts with industry experts and suppliers. The
results of this research are presented at meetings of the Advisor's investment
professionals. Final investment decisions are made by the Advisor's Investment
Committee (identified below under "Management of the Fund -Investment Advisor").
U.S. Government Securities. The Fund may invest a portion of the portfolio in
U.S. Government Securities, defined to be U.S. Government obligations such as
U.S. Treasury notes, U.S. Treasury bonds, and U.S. Treasury bills; obligations
guaranteed by the U.S. Government such as obligations issued by the Government
National Mortgage Association ("GNMA"); as well as obligations of U.S.
Government authorities, agencies, and instrumentalities such as Federal National
Mortgage Association ("FNMA"), Federal Home Loan Mortgage Corporation ("FHLMC"),
Federal Home Administration ("FHA"), Federal Farm Credit Bank ("FFCB"), Federal
Home Loan Bank ("FHLB"), Student Loan Marketing Association ("SLMA"), and The
Tennessee Valley Authority. U.S. Government Securities may be acquired subject
to repurchase agreements. While obligations of some U.S. Government-sponsored
entities are supported by the full faith and credit of the U.S. Government
(e.g., GNMA), several are supported by the right of the issuer to borrow from
the U.S. Government (e.g., FNMA, FHLMC), and still others are supported only by
the credit of the issuer itself (e.g., SLMA, FFCB). No assurances can be given
that the U.S. Government will provide financial support to U.S. Government
agencies or instrumentalities in the future, other than as set forth above,
since it is not obligated to do so by law. The guarantee of the U.S. Government
does not extend to the yield or value of the Fund's shares.
Money Market Instruments. Money market instruments may be purchased for
temporary defensive purposes, to accumulate cash for anticipated purchases of
portfolio securities, and to provide for shareholder redemptions and operating
expenses of the Fund. Money market instruments mature in thirteen months or less
from the date of purchase and may include U.S. Government Securities, corporate
debt securities (including those subject to repurchase agreements), bankers
acceptances and certificates of deposit of domestic branches of U.S. banks, and
commercial paper (including variable amount demand master notes) rated in one of
the two highest rating categories by any of the nationally recognized
statistical rating organizations, or if not rated, of equivalent quality in the
Advisor's opinion. The Advisor may, when it believes that unusually volatile or
unstable economic and market conditions exist, depart from the Fund's investment
approach and assume temporarily a defensive portfolio posture, increasing the
Fund's percentage investment in money market instruments, even to the extent
that 100% of the Fund's total assets may be so invested.
Repurchase Agreements. The Fund may acquire U.S. Government Securities or
corporate debt securities subject to repurchase agreements. A repurchase
agreement transaction occurs when a Fund acquires a security and simultaneously
resells it to the vendor (normally a member bank of the Federal Reserve or a
registered Government Securities dealer) for delivery on an agreed upon future
date. The repurchase price exceeds the purchase price by an amount which
reflects an agreed upon market interest rate earned by the Fund effective for
the period of time during which the repurchase agreement is in effect. Delivery
pursuant to the resale typically will occur within one to seven days of the
purchase. The Fund will not enter into any repurchase agreement which will cause
more than 10% of its net assets to be invested in repurchase agreements which
extend beyond seven days or other illiquid securities. In the event of the
bankruptcy of the other party to a repurchase agreement, the Fund could
experience delays in recovering its cash or the securities lent. To the extent
that in the interim the value of the securities purchased may have declined, the
Fund could experience a loss. In all cases, the creditworthiness of the other
party to a transaction is reviewed and found satisfactory by the Advisor.
Repurchase agreements are, in effect, loans of Fund assets. The Fund will not
engage in reverse repurchase transactions, which are considered to be borrowings
under the 1940 Act.
Foreign Securities. The Fund may invest in the securities of foreign private
issuers. The same factors would be considered in selecting foreign securities as
with domestic securities. Foreign securities' investment presents special
considerations not typically associated with investment in domestic securities.
Foreign taxes may reduce income. Currency exchange rates and regulations may
cause fluctuations in the value of foreign securities. Foreign securities are
subject to different regulatory environments than in the United States, and
compared to the United States, there may be a lack of uniform accounting,
auditing, and financial reporting standards; less volume and liquidity and more
volatility; less public information; and less regulation of foreign issuers.
Countries have been known to expropriate or to nationalize assets, and foreign
investments may be subject to political, financial, or social instability or to
adverse diplomatic developments. There may be difficulties in obtaining service
of process on foreign issuers and difficulties in enforcing judgments with
respect to claims under the U.S. securities' laws against such issuers.
Favorable or unfavorable differences between U.S. and foreign economies could
affect foreign securities' values. The U.S. Government has, in the past,
discouraged certain foreign investments by U.S. investors through taxation or
other restrictions, and it is possible that such restrictions could be imposed
again.
Because of the inherent risk of foreign securities over domestic issues, the
Fund will generally limit foreign investments to those traded domestically as
American Depository Receipts ("ADRs"). ADRs are receipts issued by a U.S. bank
or trust company evidencing ownership of securities of a foreign issuer. ADRs
may be listed on a national securities exchange or may trade in the
over-the-counter market. The prices of ADRs are denominated in U.S. dollars
while the underlying security may be denominated in a foreign currency. To the
extent the Fund invests in other foreign securities, it will generally limit
such investments to foreign securities traded on foreign securities exchanges.
Investment Companies. To achieve its investment objective, the Fund may invest
its total assets in securities of other investment companies whose investment
objectives are consistent with the Fund's investment objective, to the limited
extent permitted by the 1940 Act. The Fund will not acquire securities of any
one investment company if, immediately thereafter, the Fund would own more than
3% of such company's total outstanding voting securities, securities issued by
such company would have an aggregate value in excess of 5% of the Fund's total
assets, or securities issued by such company and securities held by the Fund
issued by other investment companies would have an aggregate value in excess of
10% of the Fund's total assets. To the extent the Fund invests in other
investment companies, the shareholders of the Fund would indirectly pay a
portion of the operating costs of the underlying investment companies. These
costs include management, brokerage, shareholder servicing, and other
operational expenses. Shareholders of the Fund would then indirectly pay higher
operational costs than if they owned shares of the underlying investment
companies directly.
Real Estate Securities. The Fund will not invest in real estate (including
limited partnership interests), but may invest in readily marketable securities
secured by real estate or securities interests therein or securities issued by
companies that invest in real estate or interests therein. The Fund may also
invest in readily marketable interests in real estate investment trusts
("REITs"). REITs are generally publicly traded on the national stock exchanges
and in the over-the-counter market and have varying degrees of liquidity.
Although the Fund is not limited in the amount of these types of real estate
securities it may acquire, it is not presently expected that within the next 12
months the Fund will have in excess of 5% of its total assets in real estate
securities.
RISK FACTORS
Investment Policies and Techniques. Reference should be made to "Investment
Objective and Policies" above for a description of special risks presented by
the investment policies of the Fund and the specific securities and investment
techniques that may be employed by the Fund, including the risks associated with
repurchase agreements and foreign securities. A more complete discussion of
certain of these securities and investment techniques and their associated risks
is contained in the Statement of Additional Information.
Fluctuations in Value. To the extent that the major portion of the Fund's
portfolio consists of common stocks, it may be expected that its net asset value
will be subject to greater fluctuation than a portfolio containing mostly
fixed-income securities. Although certain of the U.S. Government Securities in
which the Fund may invest are guaranteed as to timely payment of principal and
interest, the market value of the securities will fluctuate due to interest rate
risks. Additionally, not all U.S. Government Securities are backed by the full
faith and credit of the U.S. Government. Given the Fund's limitation primarily
to securities which are commonly defined as `mid-capitalization' securities, the
Fund may be expected to exhibit more volatility than an equity fund investing in
larger-capitalization securities. Because there is risk in any investment, there
can be no assurance that the Fund will meet its objective.
Portfolio Turnover. The Fund sells portfolio securities without regard to the
length of time they have been held to take advantage of new investment
opportunities. Nevertheless, the Fund's portfolio turnover generally will not
exceed 100% in any one year. The degree of portfolio activity affects the
brokerage costs of the Fund and other transaction costs related to the sale of
securities and the reinvestment in other securities. Portfolio turnover may also
have capital gain tax consequences. The Fund's portfolio turnover rate for its
prior fiscal year and fiscal period is set forth under "Financial Highlights"
above.
Borrowing. The Fund may borrow, temporarily, up to 5% of its total assets for
extraordinary purposes and 15% of its total assets to meet redemption requests
which might otherwise require untimely disposition of portfolio holdings. To the
extent the Fund borrows for these purposes, the effects of market price
fluctuations on the portfolio's net asset value will be exaggerated. If, while
such borrowing is in effect, the value of the Fund's assets declines, the Fund
could be forced to liquidate portfolio securities when it is disadvantageous to
do so. The Fund would incur interest and other transaction costs in connection
with borrowing. The Fund will borrow only from a bank. The Fund will not make
any further investments if the borrowing exceeds 5% of its total assets until
such time as repayment has been made to bring the total borrowing below 5% of
its total assets.
Illiquid Investments. The Fund may invest up to 10% of its net assets in
illiquid securities. Illiquid securities are those that may not be sold or
disposed of in the ordinary course of business within seven days at
approximately the price at which they are valued. Under the supervision of the
Board of Trustees, the Advisor determines the liquidity of the Fund's
investments. The absence of a trading market can make it difficult to ascertain
a market value for illiquid investments. Disposing of illiquid securities before
maturity may be time consuming and expensive, and it may be difficult or
impossible for the Fund to sell illiquid investments promptly at an acceptable
price. Included within the category of illiquid securities will also be
restricted securities, which cannot be sold to the public without registration
under the federal securities laws. Unless registered for sale, these securities
can only be sold in privately negotiated transactions or pursuant to an
exemption from registration.
Forward Commitments and When-Issued Securities. The Fund may purchase
when-issued securities and commit to purchase securities for a fixed price at a
future date beyond customary settlement time. The Fund is required to hold and
to maintain in a segregated account until the settlement date cash, U.S.
Government Securities, or high-grade debt obligations in an amount sufficient to
meet the purchase price. Purchasing securities on a when-issued or forward
commitment basis involves a risk of loss if the value of the security to be
purchased declines prior to the settlement date; this risk is in addition to the
risk of decline in value of the Fund's other assets. In addition, no income
accrues to the purchaser of when-issued securities during the period prior to
issuance. Although the Fund would generally purchase securities on a when-issued
or forward commitment basis with the intention of acquiring securities for its
portfolio, the Fund may dispose of a when-issued security or forward commitment
prior to settlement if the Advisor deems it appropriate to do so. The Fund may
realize short-term gains or losses upon such sales.
INVESTMENT LIMITATIONS
To limit exposure to risk, the Fund has adopted certain investment limitations.
Some of these limitations are that the Fund will not: (1) issue senior
securities, borrow money, or pledge its assets, except that it may borrow from
banks as a temporary measure (a) for extraordinary or emergency purposes, in
amounts not exceeding 5% of the Fund's total assets, or (b) to meet redemption
requests which might otherwise require untimely disposition of portfolio
securities in amounts not exceeding 15% of its total assets (the Fund will not
make any investments if borrowing exceeds 5% of its total assets); (2) make
loans of money or securities, except that the Fund may invest in repurchase
agreements (but repurchase agreements having a maturity of longer than seven
days are subject to the limitation on investing in illiquid securities); (3)
invest more than 10% of its net assets in illiquid securities; (4) invest in
securities of issuers which have a record of less than three years' continuous
operation (including predecessors and, in the case of bonds, guarantors), if
more than 5% of its total assets would be invested in such securities; (5)
purchase or sell commodities, commodities' contracts, real estate (including
limited partnership interests, but excluding readily marketable interests in
real estate investment trusts or other securities secured by real estate or
interests therein or readily marketable securities issued by companies that
invest in real estate or interests therein), or interests in oil, gas, or other
mineral exploration or development programs or leases (although it may invest in
readily marketable securities of issuers that invest in or sponsor such programs
or leases); (6) with respect to 75% of Fund assets, invest more than 5% at cost
of its total assets in the securities of any one issuer or purchase more than
10% of the outstanding voting stock of any one issuer; and (7) write, purchase,
or sell puts, calls, straddles, spreads, or combinations thereof, or futures
contracts or related options. Investment limitations (1), (5), (6), and (7) are
deemed fundamental; that is, they may not be changed without shareholder
approval. See "Investment Limitations" in the Fund's Statement of Additional
Information for a complete list of investment limitations.
If the Board of Trustees of the Trust determines that the Fund's investment
objective can best be achieved by a substantive change in a non-fundamental
investment limitation, the Board can make such change without shareholder
approval and will disclose any such material changes in the then current
Prospectus. Any limitation that is not specified in the Fund's Prospectus, or in
the Statement of Additional Information, as being fundamental, is
non-fundamental. If a percentage limitation is satisfied at the time of
investment, a later increase or decrease in such percentage resulting from a
change in the value of the Fund's portfolio securities will not constitute a
violation of such limitation.
HOW NET ASSET VALUE IS DETERMINED
The net asset value for each Investor Share of the Fund is determined at 4:00
p.m., New York time, Monday through Friday, except on business holidays when the
New York Stock Exchange ("NYSE") is closed. The net asset value of the shares of
the Fund for purposes of pricing sales and redemptions is equal to the total
market value of its investments, less all of its liabilities, divided by the
number of its outstanding shares.
Securities that are listed on a securities exchange are valued at the last
quoted sales price at the time the valuation is made. Price information on
listed securities is taken from the exchange where the security is primarily
traded by the Fund. Securities that are listed on an exchange and which are not
traded on the valuation date are valued at the mean of the bid and asked prices.
Prices for securities traded on foreign exchanges will be converted to the
equivalent price in U.S. currency using the published currency exchange rates
available at the time of valuation. Unlisted securities for which market
quotations are readily available are valued at the latest quoted sales price, if
available, otherwise, at the latest quoted bid price. Temporary cash investments
with maturities of 60 days or less will be valued at amortized cost, which
approximates market value. Securities for which no current quotations are
readily available are valued at fair value as determined in good faith using
methods approved by the Board of Trustees of the Trust. Securities may be valued
on the basis of prices provided by a pricing service when such prices are
believed to reflect the fair market value of such securities.
PERFORMANCE DATA
From time to time the Fund may advertise its average annual total return for
each Class of Fund shares. The average annual total return refers to the average
annual compounded rates of return over 1-, 3-, 5-, and 10-year periods that
would equate an initial amount invested at the beginning of a stated period to
the ending redeemable value of the investment. The calculation assumes the
reinvestment of all dividends and distributions, includes all recurring fees
that are charged to all shareholder accounts, and deducts all nonrecurring
charges at the end of each period. The calculation further assumes the maximum
sales load is deducted from the initial payment. If the Fund has been operating
less than 1, 3, 5, or 10 years, the time period during which the Fund has been
operating is substituted.
In addition, the Fund may advertise total return performance data other than
average annual total return for each Class of Fund shares. Such data would show
a percentage rate of return encompassing all elements of return (i.e., income
and capital appreciation or depreciation) and would assume reinvestment of all
dividends and capital gain distributions. Such other total return data may be
shown for the same or different periods as those used for average annual total
return. These data may consist of a cumulative percentage rate of return, actual
year-by-year rates of return, or any combination thereof. A cumulative
percentage rate of return would show the cumulative change in value of an
investment in the Fund for various periods.
The total return of the Fund could be increased to the extent the Advisor may
waive all or a portion of its fees or reimburse all or a portion of the Fund's
expenses. It is not currently contemplated that the Advisor will waive portions
of its fees or reimburse Fund expenses except as provided under "Fee Table."
Total return figures are based on the historical performance of the Fund, show
the performance of a hypothetical investment, and are not intended to indicate
future performance. The Fund's quotations may from time to time be used in
advertisements, sales literature, shareholder reports, or other communications
to shareholders. For further information, see "Additional Information on
Performance" in the Statement of Additional Information.
MANAGEMENT OF THE FUND
Trustees and Officers. The Fund is a diversified series of the Capital
Management Investment Trust (the "Trust"), a registered, open-end management,
investment company organized as a Massachusetts business trust on October 18,
1994. The Board of Trustees has overall responsibility for management of the
Fund under the laws of Massachusetts and the Declaration of Trust. The Statement
of Additional Information identifies the Trustees and officers of the Trust and
the Fund and provides information about them. The Trustees of the Trust and
executive officers of the Fund and their principal occupations for the last five
years are set forth below:
TRUSTEES
Lucius E. Mr. Burch is Chairman and Chief Executive Officer of Massey
Burch, III Burch Investment Group, Inc., a large, southeastern venture
Trustee capital firm based in Nashville, Tennessee. After working as
a commercial banker at Morgan Guaranty Trust Co. in New York
City, he joined Massey Investment Company, the predecessor
of Massey Burch Investment Group, as a financial analyst and
portfolio manager in 1968. He has extensive experience in
management consulting, corporate finance, and mergers and
acquisitions. Mr. Burch currently serves on the Board of
Directors of QMS, Inc., a NYSE-listed company; Bio-Safe
Systems, Inc.; and several private companies. He is a
graduate of the University of North Carolina.
Thomas A. Mr. Saunders is a Partner of Saunders Karp & Co., L.P., a
Saunders, III New York-based merchant bank. From 1974 to 1989 he was a
Trustee Managing Director of Morgan Stanley & Co., Incorporated, and
from 1987 to 1989 he was Chairman of Morgan Stanley's
Leveraged Equity Fund II, L.P. Mr. Saunders received a B.S.
degree in Electrical Engineering from the Virginia Military
Institute and an M.B.A. degree from the University of
Virginia's Darden Graduate School of Business
Administration. He is Chairman of the Board of Trustees of
the Darden Graduate School, as well as a member of the Board
of Visitors of the Virginia Military Institute. Mr. Saunders
is also a member of the Board of Trustees of the Cold Spring
Harbor Laboratory. He serves as a Director to numerous
industrial, consumer, and healthcare companies in the
Saunders Karp portfolio.
David V. Shields Mr. Shields is a Managing Director of the Advisor and the
Trustee Distributor. He has been a member of the New York Stock
Exchange since 1968, specializing in institutional
brokerage. Mr. Shields served on the Board of Directors of
the NYSE from 1986 to 1992, having served as Governor prior
to that time. He has served on various NYSE committees
including the Audit, Market Performance, and the Committee
for Review. He is past director of the Alliance of Floor
Brokers of the NYSE and served as its President from 1980 to
1986. Mr. Shields has acted in various advisory capacities
on capital markets in Russia, Estonia, and Norway. He holds
a B.S. degree in Economics from the Wharton School of the
University of Pennsylvania and a Graduate Certificate from
the London School of Economics.
J.V. Shields, Jr. Mr. Shields is a Managing Director and Chairman of the
Trustee Advisor and the Distributor. He previously had been the
Director of Corporate Finance at H.N. Whitney, Goadby &
Company. He is responsible for development of the Advisor's
corporate policy and serves on the Investment Committee. He
currently serves as Chairman of the Board of Trustees of the
59 Wall Street Trust, the Brown Brothers Harriman & Co.
mutual fund group, and serves on the Board of Directors of
Flowers Industries, Inc., a NYSE-listed, diversified, food
manufacturer. He received his B.S.B.A. degree in Finance and
Economics from Georgetown University.
Anthony J. Mr. Walton is President of Armstrong Holdings Corporation, a
Walton private investment company and corporate finance advisory
Trustee firm. He is also Vice Chairman of Petsec Energy, Inc., a
U.S. exploration and production company based in Sydney,
Australia, and Lafayette, Louisiana. Previously, he was
Chief Executive Officer of the Llama Company, a regional
investment bank in Fayetteville, Arkansas, which is owned by
members of the Walton family, founders of Wal-Mart Stores,
Inc. Prior to joining Llama, he was a Director of Westpac
Banking Corporation of Sydney, Australia, and served as
Chief General Manager of the combined Americas & Europe
Group in New York. From 1968 to 1983, Mr. Walton was with
The Chase Manhattan Bank, NA, in New York and London in
various executive positions. He holds a B.A. degree from
Haverford College and an M.B.A. degree in International
Finance from the University of Pennsylvania's Wharton
Graduate School of Finance.
EXECUTIVE
OFFICERS
C. Lennis Mr. Koontz joined the Advisor in 1992. From 1987 to 1992, he
Koontz, II was associated with Smith Barney Capital Management as a
President senior portfolio manager and analyst. From 1976 until 1987,
he was with Scudder, Stevens & Clark in New York where he
was a Managing Director, member of the stock strategy group,
and head of the employee benefit plans group. At the Advisor
he serves as a portfolio manager/analyst and sits on the
Investment Committee. Mr. Koontz received both his B.S. and
M.S. degrees from the University of Tennessee, majoring in
industrial management. He is a Chartered Financial Analyst
and member of the New York Society of Security Analysts.
Joseph A. Zock Mr. Zock joined the Advisor when the firm was founded in
Vice President 1982. Prior to that he worked closely with the founders of
the Advisor at H.N. Whitney, Goadby & Company, where he had
served as portfolio manager and research analyst beginning
in 1980. He serves as a portfolio manager/analyst and sits
on the advisor's Investment Committee. He received his BA
degree in Political Science/Economics from the University of
New Hampshire, his J.D. degree from the University of San
Diego Law School, and a Certificate of International Law
from the University of London, Kings College School of Law.
Investment Advisor. The Fund is advised by Capital Management Associates, Inc.
(the "Advisor"), pursuant to an advisory contract. Subject to the authority of
the Board of Trustees, the Advisor provides guidance and policy direction in
connection with its daily management of the Fund's assets. The Advisor manages
the investment and reinvestment of the Fund's assets in a manner consistent with
the investment objective and policies of the Fund. The Advisor is also
responsible for the selection of broker-dealers through which the Fund executes
portfolio transactions, subject to the brokerage policies established by the
Trustees, and it provides certain executive personnel to the Fund.
The Advisor, organized as a New York corporation in 1982, is controlled by its
officers and directors, with the principal shareholders being J.V. Shields, Jr.;
David V. Shields; and Richard B. Thatcher, who also comprise the Board of
Directors. An Investment Committee of the Advisor, comprised of J.V. Shields,
Jr.; Dimitri H. Kuriloff; Richard B. Thatcher; Joseph A. Zock; and C. Lennis
Koontz, II, CFA, select the investments for the Fund. Messrs. Shields, Thatcher,
and Zock have been affiliated with the Advisor since the firm's inception in
1982. Mr. Kuriloff has been affiliated with the Advisor since 1982. Mr. Koontz
has been affiliated with the Advisor since 1992. While the Advisor has no
previous experience in managing investment companies, the Advisor has been
providing investment advice in a style identical to that of the Fund to
individuals, corporations, pension and profit sharing plans, endowments, and
other business and private accounts since 1982. The Advisor currently serves as
investment advisor to over $1 billion in assets, most of which is managed using
similar investment objectives to those employed by the Fund.
The Advisor's address is 140 Broadway, New York, New York 10005.
As full compensation for the investment advisory services provided to the Fund,
the Fund pays the Advisor monthly compensation based on the Fund's daily average
net assets at the annual rate of 1.00% of the first $100 million of the Fund's
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. The Advisor has voluntarily waived its
fee and reimbursed all of the Fund's operating expenses for the fiscal year
ended November 30, 1996. The total fees waived amounted to $34,561, and expenses
reimbursed amounted to $97,598.
Administrator. The Nottingham Company (the "Administrator") serves as the Fund's
administrator. The Administrator, subject to the authority of the Board of
Trustees, provides administrative services to and is generally responsible for
the overall management and day-to-day administrative operations of the Fund,
pursuant to an administration agreement with the Trust.
The Administrator, which was established as a North Carolina corporation in
1988, has been operating (with affiliates) as a financial services firm since
1985. Frank P. Meadows III is the firm's Managing Director and controlling
shareholder.
The Administrator, whose address is 105 North Washington Street, Post Office
Drawer 69, Rocky Mount, North Carolina 27802-0069, provides the Fund with office
space and facilities; provides certain executive personnel to the Fund;
maintains the Fund's accounting records; computes daily the Fund's net asset
value; supervises the preparation of tax returns, financial reports,
prospectuses, and proxy statements; and monitors compliance with certain
recordkeeping and regulatory requirements.
Compensation of the Administrator, based upon the average daily net assets of
the Fund, is at the following annual rates: On the first $50 million of the
Fund's net assets, 0.20%; on the next $50 million, 0.175%; on all assets over
$100 million, 0.15%. In addition, the Administrator currently receives a monthly
fee of $2,000 for the first class of the Fund and $750 for each additional class
of the Fund for accounting and recordkeeping services for the Fund. The
Administrator also charges the Fund for certain costs involved with the daily
valuation of investment securities and is reimbursed for out-of-pocket expenses.
The Administrator charges a minimum fee of $3,000 per month for all of its fees
taken in the aggregate, analyzed monthly.
Transfer Agent. North Carolina Shareholder Services, LLC (the "Transfer Agent")
serves as the Fund's transfer, dividend paying, and shareholder servicing agent.
The Transfer Agent, subject to the authority of the Board of Trustees, provides
transfer agency services pursuant to an agreement with the Administrator, which
has been approved by the Trust.
The Transfer Agent, whose address is 107 North Washington Street, Post Office
Box 4365, Rocky Mount, North Carolina 27803-0365, was established as a North
Carolina limited liability company in 1997. John D. Marriott, Jr., is the firm's
controlling member.
The Transfer Agent maintains the records of each shareholder's account, answers
shareholder inquiries concerning accounts, processes purchases and redemptions
of the Fund's shares, acts as dividend and distribution disbursing agent, and
performs other shareholder servicing functions. The Transfer Agent is
compensated for its services by the Administrator and not directly by the Fund.
Distributor. Shields & Company (the "Distributor"), a New York corporation, is
the principal underwriter and distributor of the shares of the Fund pursuant to
a Distribution Agreement between the Trust and the Distributor. The Distributor
may sell Fund shares to or through qualified securities dealers and others. The
Distributor receives commissions consisting of that portion of the sales charge
for the sale of Investor Shares remaining after the discounts which it allows to
investment dealers. The Distributor may also receive payments from the Fund with
respect to Investor Shares pursuant to the Distribution and Service Plan
described below under "Distribution Plan."
J.V. Shields, Jr.; David V. Shields; and Richard B. Thatcher, affiliated persons
of the Fund, are also affiliated persons of the Advisor and the Distributor.
The principal business address of the Distributor is 140 Broadway, New York, New
York 10005.
Distribution Plan. The Fund has adopted a Distribution and Service Plan (the
"Plan") pursuant to Rule 12b-1 under the 1940 Act for the Investor Shares. Under
the Plan, the Trustees may authorize the periodic payment of up to 0.75%
annually of the Investor Shares' average daily net asset value for each year
elapsed subsequent to adoption of the Plan. Such expenditures paid as service
fees to any person who sells Investor Shares may not exceed 0.25% of the
Investor Shares' average annual net asset value. Payments under the Plan will be
made to the Distributor and others to finance activities primarily intended to
result in the sale of Investor Shares, including but not limited to, the
servicing of shareholder accounts. The Plan may not be amended to increase
materially the amount to be spent for distribution and service fees without
approval of the shareholders of the Investor Shares. The continuation of the
Plan must be considered by the Board of Trustees annually. At least quarterly,
the Board of Trustees must review a written report of amounts expended pursuant
to the Plan and the purposes for which such expenditures were made. The Fund
incurred $4,613 pursuant to the Plan for the fiscal year ended November 30,
1996.
Custodian. The custodian of the Fund's assets is First Union National Bank of
North Carolina (the "Custodian"). The Custodian's mailing address is Two First
Union Center, Charlotte, North Carolina 28288-1151. The Advisor, Administrator,
Transfer Agent, Distributor, or interested persons thereof, may have banking
relationships with the Custodian.
Other Fund Costs. The Fund pays all expenses not assumed by the Advisor or the
Administrator. Fund expenses include the fees and expenses, if any, of the
Trustees and officers who are not affiliated persons of the Advisor; fees of the
Custodian; interest expense, taxes, brokerage fees, and commissions; fees and
expenses of the Fund's shareholder servicing operations; fees and expenses of
qualifying and registering the Fund's shares under federal and state securities
laws; expenses of preparing, printing, and distributing prospectuses and reports
to existing shareholders; auditing and legal expenses; insurance expense;
association dues; and the expense of shareholders' meetings and proxy
solicitations. The Fund is also liable for any nonrecurring expenses as may
arise such as litigation to which the Fund may be a party. The Fund may be
obligated to indemnify the Trustees and officers with respect to such
litigation. Any expenses relating only to a particular Class of shares of the
Fund will be borne solely by such Class of shares.
Brokerage. The Fund has adopted brokerage policies that allow the Advisor to (a)
prefer brokers which provide research services to the Advisor or (b) utilize a
brokerage firm affiliated with the Advisor or the Trust, including the
Distributor, an affiliate of the Advisor and the Trust. In all cases, the
primary consideration for selection of broker-dealers will be to obtain the best
overall terms available for the Fund. Research services obtained through Fund
brokerage transactions may be used by the Advisor for its other clients, and
conversely, the Fund may benefit from research services obtained through the
brokerage transactions of the Advisor's other clients. During the fiscal year
ended November 30, 1996, the total brokerage commissions paid by the Fund were
$14,523, of which $14,367 was paid to the Distributor. More information about
the brokerage practices of the Fund is contained in the Statement of Additional
Information under the heading "Portfolio Transactions."
HOW TO PURCHASE SHARES
Shares in the Fund may be purchased through members of the National Association
of Securities Dealers, Inc., who are registered in the state where the purchase
is made and who have a sales agreement with the Distributor. After a shareholder
account is established and the investment dealer is recorded, subsequent orders
for shares may be mailed directly to the Fund. Such purchases of shares are made
at the public offering price.
Assistance in opening accounts and Fund Shares Applications may be obtained from
the Fund by calling 1-800-773-3863, or by writing to the Fund at the address
shown below for regular mail orders. Investor Shares may be purchased by
individuals or organizations and may be appropriate for use in tax-sheltered
retirement plans and systematic withdrawal plans. Assistance is also available
through any broker-dealer authorized to sell shares in the Fund. Payment for
shares purchased may be made through your account at the broker-dealer
processing your application and order to purchase. The Fund's shares are offered
at the public offering price next determined after your order is received by the
Fund in proper order as indicated herein. The minimum initial investment, unless
stated otherwise herein, is $2,500. The minimum for Individual Retirement
Accounts ("IRAs"), Keogh Plans, 401(k) Plans, or purchases under the Uniform
Transfers to Minors Act is $1,000. The Fund may, in the Advisor's sole
discretion, accept certain accounts with less than the stated minimum initial
investment.
Payment must be made by check or money order drawn on a U.S. bank and payable in
U.S. dollars. Under certain circumstances the Fund, at the sole discretion of
the Advisor, may allow payment in kind for Fund shares purchased, by accepting
securities in lieu of cash. Any securities so accepted would be valued on the
date received and included in the calculation of net asset value of the Fund.
See the Statement of Additional Information for additional information on
purchases in kind.
If checks are returned unpaid due to nonsufficient funds, stop payment, or other
reasons, the Fund will charge $20. To recover any such loss or charge, the Fund
reserves the right, without further notice, to redeem shares of the Fund already
owned by any purchaser whose order is canceled, and such a purchaser may be
prohibited from placing further orders unless investments are accompanied by
full payment by wire or cashier's check.
All orders received by the Fund, whether by mail, bank wire, or facsimile order
from a qualified broker-dealer, prior to 4:00 p.m. New York time will purchase
shares at the public offering price determined at that time. Otherwise, your
order will purchase shares as of 4:00 p.m. New York time on the next business
day. For orders placed through a qualified broker-dealer, such firm is
responsible for promptly transmitting purchase orders to the Fund. All purchases
of shares are subject to acceptance and are not binding until accepted. The Fund
reserves the right to reject any application or investment.
Regular Mail Orders. Please complete and sign the Fund Shares Application
accompanying this Prospectus and mail it, with your check made payable to the
Fund, to:
Capital Management Mid-Cap Fund
Investor Shares
c/o North Carolina Shareholder Services
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
Applications must contain social security and Taxpayer Identification Numbers
("TINs"). If you have applied for a social security or TIN at the time of
completing your account application, the application should so indicate. Taxes
are not withheld from distributions to U.S. investors if certain IRS
requirements regarding TINs are met.
Bank Wire Orders. Investments can be made directly by bank wire. To establish a
new account or to add to an existing account by wire, please call the Fund at
1-800-773-3863, before wiring funds, to advise it of the investment, the dollar
amount of the investment, and the account identification number. This
notification will ensure prompt and accurate handling of your investment. Please
have your bank use the following wire instructions to purchase by wire:
First Union National Bank of North Carolina
ABA # 053000219
Reference GL 465946
Further Credit Acct # 1028783753
Attn: Custody
For the Capital Management Mid-Cap Fund - Investor
Shares For further credit to (shareholder's name
and SS# or EIN#)
It is important that the wire message contain all the relevant information and
that the Fund receive prior telephone notification to ensure proper credit. Upon
opening an account by wire order, you must, as soon as possible, complete and
mail your Fund Shares Application to the Fund as described under "Regular Mail
Orders" above. Investors should be aware that some banks may impose a wire
service fee.
Additional Investments. You may add to your account by mail or wire at any time
by purchasing shares at the then current public offering price. The minimum
additional investment is $500. Before adding funds by bank wire, please alert
the Fund by telephone at 1-800-773-3863. Follow the wire order instructions set
forth above to send your wire order. When calling for any reason, please have
your account number ready, if known. Mail orders should include, when possible,
the "Invest by Mail" stub which is attached to your Fund confirmation statement.
Otherwise, be sure to identify your account in your letter.
Sales Charges. The public offering price per share for Investor Shares of the
Fund equals net asset value plus a sales charge, which is reduced on purchases
involving larger amounts as described below. The Distributor receives this sales
charge as Distributor and may reallow it in the form of dealer discounts and
brokerage commissions as follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Sales Sales
Charge As Charge As Dealers Discounts
% of Net % of Public and Brokerage
Amount of Transaction Amount Offering Commissions as % of
At Public Offering Price Invested Price Public Offering Price
Less than $250,000.................. 3.09% 3.00% 2.80%
$250,000 but less than $500,000..... 2.56% 2.50% 2.30%
$500,000 or more.................... 2.04% 2.00% 1.80%
Investor Shares are subject to 12b-1 fees. See "Management of the Fund - Distribution Plan" above.
</TABLE>
At times the Distributor may reallow the entire sales charge to dealers. From
time to time dealers who receive dealer discounts and brokerage commissions from
the Distributor may reallow all or a portion of such dealer discounts and
brokerage commissions to other dealers or brokers. Pursuant to the terms of the
Distribution Agreement, the sales charge payable to the Distributor and the
dealer discounts may be suspended, terminated, or amended. Dealers who receive
90% or more of the sales charge may be deemed to be "underwriters" under the
federal securities laws.
The dealer discounts and brokerage commissions schedule above applies to all
dealers who have agreements with the Distributor. The Distributor, at its
expense, may also provide additional compensation to dealers in connection with
sales of shares of the Fund. Compensation may include financial assistance to
dealers in connection with conferences, sales, or training programs for their
employees; seminars for the public; advertising campaigns regarding the Fund;
and/or other dealer-sponsored special events. In some instances, this
compensation may be made available only to certain dealers whose representatives
have sold or are expected to sell a significant amount of such shares.
Compensation may include payment for travel expenses, including lodging,
incurred in connection with trips taken by invited registered representatives
and members of their families to locations within or outside of the United
States for meetings or seminars of a business nature. Dealers may not use sales
of the Fund shares to qualify for this compensation to the extent such may be
prohibited by the laws of any state or any self-regulatory agency, such as the
National Association of Securities Dealers, Inc. None of the aforementioned
compensation is paid for by the Fund or its shareholders.
Reduced Sales Charges
Concurrent Purchases. For purposes of qualifying for a lower sales charge
for Investor Shares, investors have the privilege of combining concurrent
purchases of the Fund and one or more future series of the Trust affiliated with
the Advisor and sold with a sales charge. For example, if a shareholder
concurrently purchases shares in one of the future series of the Trust
affiliated with the Advisor and sold with a sales charge at the total public
offering price of $250,000, and Investor Shares in the Fund at the total public
offering price of $250,000, the sales charge would be that applicable to a
$500,000 purchase as shown in the appropriate table above. This privilege may be
modified or eliminated at any time or from time to time by the Trust without
notice thereof.
Rights of Accumulation. Pursuant to the right of accumulation, investors are
permitted to purchase Investor Shares at the public offering price applicable to
the total of (a) the total public offering price of the Investor Shares of the
Fund then being purchased plus (b) an amount equal to the then current net asset
value of the purchaser's combined holdings of the shares of all of the series of
the Trust affiliated with the Advisor and sold with a sales charge. To receive
the applicable public offering price pursuant to the right of accumulation,
investors must, at the time of purchase, provide sufficient information to
permit confirmation of qualification, and confirmation of the purchase is
subject to such verification. This right of accumulation may be modified or
eliminated at any time or from time to time by the Trust without notice.
Letters of Intent. Investors may qualify for a lower sales charge for
Investor Shares by executing a letter of intent. A letter of intent allows an
investor to purchase Investor Shares of the Fund over a 13-month period at
reduced sales charges based on the total amount intended to be purchased plus an
amount equal to the then current net asset value of the purchaser's combined
holdings of the shares of all of the series of the Trust affiliated with the
Advisor and sold with a sales charge. Thus, a letter of intent permits an
investor to establish a total investment goal to be achieved by any number of
purchases over a 13-month period. Each investment made during the period
receives the reduced sales charge applicable to the total amount of the intended
investment.
The letter of intent does not obligate the investor to purchase, or the Fund to
sell, the indicated amount. If such amount is not invested within the period,
the investor must pay the difference between the sales charge applicable to the
purchases made and the charges previously paid. If such difference is not paid
by the investor, the Distributor is authorized by the investor to liquidate a
sufficient number of shares held by the investor to pay the amount due. On the
initial purchase of shares, if required (or subsequent purchases, if necessary),
shares equal to at least 5 percent of the amount indicated in the letter of
intent will be held in escrow during the 13-month period (while remaining
registered in the name of the investor) for this purpose. The value of any
shares redeemed or otherwise disposed of by the investor prior to termination or
completion of the letter of intent will be deducted from the total purchases
made under such letter of intent.
A 90-day back-dating period can be used to include earlier purchases at the
investor's cost (without a retroactive downward adjustment of the sales charge);
the 13-month period would then begin on the date of the first purchase during
the 90-day period. No retroactive adjustment will be made if purchases exceed
the amount indicated in the letter of intent. Investors must notify the Fund or
the Distributor whenever a purchase is being made pursuant to a letter of
intent.
Investors electing to purchase shares pursuant to a letter of intent should
carefully read the letter of intent, which is included in the Fund Shares
Application accompanying this Prospectus, or is otherwise available from the
Fund or the Distributor. This letter of intent option may be modified or
eliminated at any time or from time to time by the Trust without notice.
Reinvestments. Investors may reinvest, without a sales charge, proceeds from
a redemption of Investor Shares of the Fund in Investor Shares of the Fund or in
shares of another series of the Trust affiliated with the Advisor and sold with
a sales charge, within 90 days after the redemption. If the other series charges
a sales charge higher than the sales charge the investor paid in connection with
the shares redeemed, the investor must pay the difference. In addition, the
shares of the series to be acquired must be registered for sale in the
investor's state of residence. The amount that may be so reinvested may not
exceed the amount of the redemption proceeds, and a written order for the
purchase of such shares must be received by the Fund or the Distributor within
90 days after the effective date of the redemption.
If an investor realizes a gain on the redemption, the reinvestment will not
affect the amount of any federal capital gains tax payable on the gain. If an
investor realizes a loss on the redemption, the reinvestment may cause some or
all of the loss to be disallowed as a tax deduction, depending on the number of
shares purchased by reinvestment and the period of time that has elapsed after
the redemption; although for tax purposes, the amount disallowed is added to the
cost of the shares acquired upon the reinvestment.
Purchases by Related Parties and Groups. Reductions in sales charges apply
to purchases by a single "person," including an individual; members of a family
unit, consisting of a husband, wife, and children under the age of 21 purchasing
securities for their own account; or a trustee or other fiduciary purchasing for
a single fiduciary account or single trust estate.
Reductions in sales charges also apply to purchases by individual members of a
"qualified group." The reductions are based on the aggregate dollar value of
shares purchased by all members of the qualified group and still owned by the
group plus the shares currently being purchased. For purposes of the paragraph,
a qualified group consists of a "company," as defined in the 1940 Act, which has
been in existence for more than six months and which has a primary purpose other
than acquiring Investor Shares of the Fund at a reduced sales charge, and the
"related parties" of such company. For purposes of this paragraph, a "related
party" of a company is: (i) any individual or other company who directly or
indirectly owns, controls, or has the power to vote 5 percent or more of the
outstanding voting securities of such company; (ii) any other company of which
such company directly or indirectly owns, controls, or has the power to vote 5
percent or more of its outstanding voting securities; (iii) any other company
under common control with such company; (iv) any executive officer, director, or
partner of such company or of a related party; and (v) any partnership of which
such company is a partner.
Sales at Net Asset Value. The Fund may sell Investor Shares at a purchase
price equal to the net asset value of such shares, without a sales charge, to
Trustees, officers, and employees of the Trust, the Fund, and the Advisor, and
to employees and principals of related organizations and their families, and
certain parties related thereto, including clients and related accounts of the
Advisor. The public offering price of Investor Shares of the Fund may also be
reduced to net asset value per share in connection with the acquisition of the
assets of or merger or consolidation with a personal holding company or a public
or private investment company.
Employees and Affiliates of the Fund. The minimum purchase requirement is not
applicable to accounts of Trustees, officers, or employees of the Fund or
certain parties related thereto. The minimum initial investment for such
accounts is $1,000. Investor Shares may also be sold to such persons at net
asset value without a sales charge. See the Statement of Additional Information
for further details.
Stock Certificates. Stock certificates will not be issued for your shares.
Evidence of ownership will be given by issuance of periodic account statements
which will show the number of shares owned.
Automatic Investment Plan. The automatic investment plan enables shareholders to
make regular monthly or quarterly investments in shares through automatic
charges to their checking account. With shareholder authorization and bank
approval, the Fund will automatically charge the checking account for the amount
specified ($100 minimum), which will be automatically invested in shares at the
public offering price on or about the 21st day of the month. The shareholder may
change the amount of the investment or discontinue the plan at any time by
writing to the Fund.
HOW TO REDEEM SHARES
Shares of the Fund may be redeemed (the Fund will repurchase them from
shareholders) by mail or telephone. Any redemption proceeds may be more or less
than the purchase price of your shares, depending on the market value of the
Fund's portfolio securities. All redemption orders received in proper form, as
indicated herein, by the Fund, whether by mail or telephone, prior to 4:00 p.m.
New York time, will be made at the net asset value determined at that time.
Otherwise, your redemption order will be made as of 4:00 p.m. New York time on
the next business day. There is no charge for redemptions from the Fund other
than possible charges for wiring redemption proceeds. You may also redeem your
shares through a broker-dealer, which may charge a fee for its services.
The Board of Trustees reserves the right to redeem involuntarily any account
having a net asset value of less than $1,000 (due to redemptions, exchanges, or
transfers, and not due to market action) upon 60-days' written notice. If the
shareholder brings his account net asset value up to at least $1,000 during the
notice period, the account will not be redeemed. Redemptions from retirement
plans may be subject to federal income tax withholding.
If you are uncertain of the requirements for redemption, please contact the Fund
at 1-800-773-3863 or write to the address shown below.
Regular Mail Redemptions. Your request should be addressed to Capital Management
Mid-Cap Fund, c/o North Carolina Shareholder Services, 107 North Washington
Street, Post Office Box 4365, Rocky Mount, North Carolina 27803-0365. Your
request for redemption must include:
1) Your letter of instruction specifying the account number and the
number of shares, or the dollar amount, to be redeemed. This request
must be signed by all registered shareholders in the exact names in
which they are registered;
2) Any required signature guarantees (see "Signature Guarantees" below);
and
3) Other supporting legal documents, if required in the case of estates,
trusts, guardianships, custodianships, corporations, partnerships,
pension or profit sharing plans, and other organizations.
Your redemption proceeds will be sent to you within seven days after receipt of
your redemption request. However, the Fund may delay forwarding a redemption
check for recently purchased shares while it determines whether the purchase
payment will be honored. Such delay (which may take up to fifteen days from the
date of purchase) may be reduced or avoided if the purchase is made by certified
check or wire transfer. In all cases, the net asset value next determined after
receipt of the request for redemption will be used in processing the redemption
request. The Fund may suspend redemption privileges or postpone the date of
payment (i) during any period that the NYSE is closed, or trading on the NYSE is
restricted as determined by the Securities and Exchange Commission (the
"Commission"); (ii) during any period when an emergency exists as defined by the
rules of the Commission, as a result of which it is not reasonably practicable
for the Fund to dispose of securities owned by it or to determine fairly the
value of its assets; and (iii) for such other periods as the Commission may
permit.
Telephone and Bank Wire Redemptions. The Fund offers shareholders the option of
redeeming shares by telephone and bank wire under certain limited conditions.
The Fund will redeem shares in this manner when so requested by the shareholder
only if the shareholder confirms redemption instructions in writing.
The Fund may rely upon confirmation of redemption requests transmitted via
facsimile (FAX# 919-972-1908). The confirmation instructions must include:
1) Designation of Class (Institutional or Investor),
2) Shareholder name and account number,
3) Number of shares or dollar amount to be redeemed,
4) Instructions for transmittal of redemption funds to the shareholder, and
5) Shareholder signature as it appears on the application then on file with
the Fund.
The net asset value used in processing the redemption request will be the net
asset value next determined after the telephone or bank wire request is
received. Redemption proceeds will not be distributed until written confirmation
of the redemption request is received, per the instructions above. You can
choose to have redemption proceeds mailed to you at your address of record, your
bank, or to any other authorized person, or you can have the proceeds sent by
bank wire to your bank ($5,000 minimum). Shares of the Fund may not be redeemed
by wire on days in which your bank is not open for business. You can change your
redemption instructions anytime you wish by filing a letter including your new
redemption instructions with the Fund. See "Signature Guarantees" below. The
Fund reserves the right to restrict or to cancel telephone and bank wire
redemption privileges for shareholders, without notice, if the Trustees believe
it to be in the best interest of the shareholders to do so. During drastic
economic and market changes, telephone redemption privileges may be difficult to
implement.
The Fund in its discretion may choose to pass through to redeeming shareholders
any charges imposed by the Custodian for wire redemptions. The Custodian
currently charges the Fund $10.00 per transaction for wiring redemption
proceeds. If this cost is passed through to redeeming shareholders by the Fund,
the charge will be deducted automatically from your account by redemption of
shares in your account. Your bank or brokerage firm may also impose a charge for
processing the wire. If wire transfer of funds is impossible or impractical, the
redemption proceeds will be sent by mail to the designated account.
You may redeem shares, subject to the procedures outlined above, by calling the
Fund at 1-800-773-3863. Redemption proceeds will only be sent to the bank
account or person named in your Fund Shares Application currently on file with
the Fund. Telephone redemption privileges authorize the Fund to act on telephone
instructions from any person representing himself or herself to be the investor
and reasonably believed by the Fund to be genuine. The Fund will employ
reasonable procedures, such as requiring a form of personal identification, to
confirm that instructions are genuine, and if it does not follow such
procedures, the Fund will be liable for any losses due to fraudulent or
unauthorized instructions. The Fund will not be liable for following telephone
instructions reasonably believed to be genuine.
Signature Guarantees. To protect your account and the Fund from fraud, signature
guarantees are required to be sure that you are the person who has authorized a
change in registration or standing instructions for your account. Signature
guarantees are required for (1) change of registration requests, (2) requests to
establish or to change exchange privileges or telephone and bank wire redemption
service other than through your initial account application, and (3) redemption
requests in excess of $50,000. Signature guarantees are acceptable from a member
bank of the Federal Reserve System, a savings and loan institution, credit union
(if authorized under state law), registered broker-dealer, securities exchange,
or association clearing agency and must appear on the written request for change
of registration, establishment or change in exchange privileges, or redemption
request.
Systematic Withdrawal Plan. A shareholder who owns shares of the Fund valued at
$10,000 or more at the current offering price may establish a Systematic
Withdrawal Plan to receive a monthly or quarterly check in a stated amount not
less than $100. Each month or quarter, as specified, the Fund will automatically
redeem sufficient shares from your account to meet the specified withdrawal
amount. The shareholder may establish this service whether dividends and
distributions are reinvested in shares of the Fund or paid in cash. Call or
write the Fund for an application form. See the Statement of Additional
Information for further details.
DIVIDENDS AND DISTRIBUTIONS
The Fund distributes substantially all of its net investment income, if any, in
the form of dividends. The Fund may pay dividends, if any, quarterly and will
distribute net realized capital gains, if any, at least annually.
Unless a shareholder elects to receive cash, dividends and capital gains will be
reinvested automatically in additional full and fractional Investor Shares of
the Fund at the net asset value per share next determined. Reinvested dividends
and capital gains are exempt from any sales load. Shareholders wishing to
receive their dividends or capital gains in cash may make their request in
writing to the Fund, c/o North Carolina Shareholder Services at 107 North
Washington Street, Post Office Box 4365, Rocky Mount, North Carolina 27803-0365.
That request must be received by the Fund prior to the record date to be
effective for the next dividend. If cash payment is requested, checks will be
mailed within five business days after the last day of each quarter or the
Fund's fiscal year end, as applicable. Each shareholder of the Fund will receive
a quarterly summary of his or her account, including information regarding
reinvested dividends from the Fund. Tax consequences to shareholders of
dividends and distributions are the same if received in cash or in additional
shares of the Fund.
To satisfy certain requirements of the Code, the Fund may declare special
year-end dividend and capital gains distributions during December. Such
distributions, if received by shareholders by January 31, are deemed to have
been paid by the Fund and received by shareholders on December 31 of the prior
year.
There is no fixed dividend rate, and there can be no assurance regarding the
payment of any dividends or the realization of any gains. The Fund's net
investment income available for distribution to holders of Investor Shares will
be reduced by the amount of any expenses allocated to the Investor Shares,
including the distribution and service fees payable under the Fund's
Distribution and Service Plan.
FEDERAL INCOME TAX INFORMATION
Taxation of the Fund. The Internal Revenue Code of 1986, as amended (the
"Code"), treats the Fund, and any other series of the Trust, as a separate,
regulated investment company. The Fund intends to remain qualified as a
regulated investment company under the Code by distributing substantially all of
its "net investment income" to shareholders and meeting other requirements of
the Code. For the purpose of calculating dividends, net investment income
consists of income accrued on portfolio assets, less accrued expenses. Upon
qualification, the Fund will not be liable for federal income taxes to the
extent earnings are distributed. The Board of Trustees retains the right for the
Fund, or any other series of the Trust, to determine for any particular year if
it is advantageous not to qualify as a regulated investment company. Regulated
investment companies, such as the Fund, are subject to a non-deductible 4%
excise tax to the extent they do not distribute the statutorily required amount
of investment income, determined on a calendar year basis, and capital gain net
income, using an October 31 year end measuring period. The Fund intends to
declare or distribute dividends during the calendar year in an amount sufficient
to prevent imposition of the 4% excise tax.
Taxation of Shareholders. For federal income tax purposes, any dividends and
distributions from short-term capital gains that a shareholder receives in cash
from the Fund or which are re-invested in additional shares will be taxable
ordinary income. If a shareholder is not required to pay a tax on income, he
will not be required to pay federal income taxes on the amounts distributed to
him. A dividend declared in October, November, or December of a year and paid in
January of the following year will be considered to be paid on December 31 of
the year of declaration.
Distributions paid by the Fund from long-term capital gains, whether received in
cash or reinvested in additional shares, are taxable as long-term capital gains,
regardless of the length of time an investor has owned shares in the Fund.
Capital gain distributions are made when the Fund realizes net capital gains on
sales of portfolio securities during the year. Dividends and capital gain
distributions paid by the Fund shortly after shares have been purchased,
although in effect a return of investment, are subject to federal income
taxation.
The sale of shares of the Fund is a taxable event and may result in a capital
gain or loss. Capital gain or loss may be realized from an ordinary redemption
of shares or an exchange of shares between two mutual funds (or two series of a
mutual fund).
The Trust will inform shareholders of the Fund of the source of their dividends
and capital gains distributions at the time they are paid and, promptly after
the close of each calendar year, will issue an information return to advise
shareholders of the federal tax status of such distributions and dividends.
Dividends and distributions may also be subject to state and local taxes.
Shareholders should consult their tax advisors regarding specific questions as
to federal, state or local taxes.
The Fund is required by federal law to withhold and to remit to the IRS 31% of
the dividends, capital gains distributions, and in certain cases, proceeds of
redemptions paid to any shareholder who fails to furnish the Fund with a correct
taxpayer identification number, who under-reports dividend or interest income or
who fails to provide certification of tax identification number. Instructions to
exchange or to transfer shares held in established accounts will be refused
until the certification has been provided. To avoid this withholding
requirement, you must certify on your application, or on a separate W-9 Form
supplied by the Fund, that your taxpayer identification number is correct and
that you are not currently subject to backup withholding, or you are exempt from
backup withholding. For individuals, your taxpayer identification number is your
social security number.
ORGANIZATION AND CAPITAL SHARES
The Fund is a series of the Capital Management Investment Trust (the "Trust"),
an open-end investment company that was organized in 1994 as a Massachusetts
business trust. The Trust is currently offering one series of shares,
representing the Fund, which shares are divided into two classes as described
below. The Board of Trustees may, in the future, authorize the issuance of other
series of capital shares (or classes of such shares) representing shares of
additional funds. All shares of the Trust, when issued, will be fully paid and
non-assessable.
The Declaration of Trust authorizes the Board of Trustees to classify and
reclassify any unissued shares into one or more classes of shares. Pursuant to
such authority, the Board of Trustees has authorized the issuance of an
unlimited number of shares in each of two classes ("Investor Shares" and
"Institutional Shares") representing equal pro rata interests in the Fund,
except that the classes bear different expenses that reflect the difference in
services provided to them.
Institutional Shares of the Fund are offered to certain institutions and other
investors described in the prospectus for such shares. Holders of Institutional
Shares will not be subject to an initial sales charge and bear no shareholder
servicing or distribution fees. Holders of Investor Shares bear an initial sales
charge and the distribution and service fees described under "Management of the
Fund - Distribution Plan" above. As a result of these different charges and
fees, the total return on the Fund's Investor Shares will generally be lower
than the total return on the Institutional Shares. Standardized total return
quotations are computed separately for each Class of shares of the Fund.
THIS PROSPECTUS RELATES TO THE FUND'S INVESTOR SHARES AND DESCRIBES ONLY THE
POLICIES, OPERATIONS, CONTRACTS, AND OTHER MATTERS PERTAINING TO THE INVESTOR
SHARES. THE FUND ALSO ISSUES A CLASS OF INSTITUTIONAL SHARES. SUCH OTHER CLASS
MAY HAVE DIFFERENT SALES CHARGES AND EXPENSES, WHICH MAY AFFECT PERFORMANCE.
INVESTORS MAY CALL THE FUND AT 1-800-773-3863 TO OBTAIN MORE INFORMATION
CONCERNING OTHER CLASSES AVAILABLE TO THEM. INVESTORS MAY OBTAIN INFORMATION
CONCERNING OTHER CLASSES FROM THEIR SALES REPRESENTATIVE, THE DISTRIBUTOR, THE
FUND, OR ANY OTHER PERSON WHICH IS OFFERING OR MAKING AVAILABLE TO THEM THE
SECURITIES OFFERED IN THIS PROSPECTUS.
Under Massachusetts law, shareholders of a business trust may, under certain
circumstances, be held personally liable as partners for the obligations of the
trust. The Declaration of Trust of the Trust, therefore, contains provisions
that are intended to mitigate such liability.
VOTING RIGHTS
Each outstanding share of the Trust is entitled to one vote for each full share
and a fractional vote for each fractional share on all matters which concern the
Trust as a whole. The Trust's shareholders will vote in the aggregate and not by
fund or class, 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 fund or class. Examples of matters that would
affect only a particular fund are any proposed change in the fundamental
investment objective or policies of that fund or a proposed change in the
investment advisory agreement for a fund. The shares of the Trust will have
noncumulative voting rights, which means that the holders of more than 50% of
the shares voting for the election of Trustees can elect all of the Trustees if
they so choose. The Trust may dispense with the annual meeting of shareholders
in any year in which it is not to call a meeting of shareholders for purposes of
voting on the removal of a Trustee or Trustees. Thus, there will normally be no
meeting of shareholders for the purpose of electing Trustees, and the Fund is
not expected to have an annual meeting of shareholders.
Shareholders representing 10 percent or more of the Trust's shares then
outstanding may call a meeting for the purpose of removing one or more of the
Trustees. If shareholders desire to call a meeting to consider the removal of
one or more Trustees, they will be assisted in communicating with other
shareholders. See "Capital Shares and Voting" in the Statement of Additional
Information for more information. Shareholder inquiries may be made in writing,
addressed to the Fund at the address shown on the cover of this document.
OTHER INFORMATION
Accountants. KPMG Peat Marwick LLP, 1021 East Cary Street, Richmond, Virginia
23219-4023 served as independent auditors for the Fund for the fiscal year and
period ended November 30, 1996 and 1995. The Board of Trustees of the Trust has
selected Deloitte & Touche LLP to serve as independent auditors for the Fund for
the current fiscal year. Its address is 2500 One PPG Place, Pittsburgh,
Pennsylvania 15222-5401.
Information on the Fund. The Fund provides annual and semi-annual reports to all
shareholders. The annual reports contain audited financial statements and other
information about the Fund.
<PAGE>
No dealer, salesman, or other person has been authorized to give any information
or to make any representations, other than those contained in this Prospectus,
and if given or made, such other information or representations must not be
relied upon as having been authorized by the Fund or the Advisor. This
Prospectus does not constitute an offering in any state in which an offering may
not lawfully be made.
The Fund reserves the right in its sole discretion to withdraw all or any part
of the offering made by this Prospectus or to reject purchase orders. All orders
to purchase shares are subject to acceptance by the Fund and are not binding
until confirmed or accepted in writing.
Investment Advisor
Capital Management Associates, Inc.
New York, New York
Distributor
Shields & Company
Member NYSE
New York, New York
Administrator
The Nottingham Company
Rocky Mount, North Carolina
Transfer Agent and Shareholder Servicing Agent
North Carolina Shareholder Services
Rocky Mount, North Carolina
1-800-773-3863
Custodian
First Union National Bank of North Carolina
Charlotte, North Carolina
CAPITAL MANAGEMENT
MID-CAP FUND
INVESTOR SHARES
PROSPECTUS
April 1, 1997
<PAGE>
Prospectus Cusip Number 140296104
CAPITAL MANAGEMENT MID-CAP FUND
INSTITUTIONAL SHARES
The investment objective of the Capital Management Mid-Cap Fund (formerly named
the Capital Management Equity Fund) (the "Fund") is to seek capital appreciation
principally through investments in equity securities, consisting of common and
preferred stocks and securities convertible into common stocks. The Fund will
focus on equity securities of medium-capitalization companies. While there is no
assurance that the Fund will achieve its investment objective, it endeavors to
do so by following the investment policies described in this Prospectus.
This Prospectus relates to shares ("Institutional Shares") representing
interests in the Fund. The Institutional Shares are available only to certain
institutions and other investors described herein. See "Prospectus Summary -
Offering Price." Institutional Shares are sold and redeemed at net asset value
without any sales or redemption charges or shareholder servicing or distribution
fees.
INVESTMENT ADVISOR
Capital Management Associates, Inc.
New York, New York
The Fund is a diversified series of the Capital Management Investment Trust, a
registered, open-end management, investment company. This Prospectus sets forth
concisely the basic information you should know before investing in the Fund.
You should read it and keep it for future reference. A Statement of Additional
Information dated April 1, 1997, containing additional information about the
Fund has been filed with the Securities and Exchange Commission (the "SEC") and
is incorporated by reference in this Prospectus in its entirety. The Fund's
address is 140 Broadway, New York, New York 10005, and its telephone number is
1-800-773-3863. A copy of the Statement of Additional Information may be
obtained at no charge by calling or writing the Fund. The SEC maintains an
Internet Web site (http://www.sec.gov) that contains the Statement of Additional
Information, material incorporated by reference, and other information regarding
the Fund.
Shares of the Fund are not deposits or obligations of, or guaranteed or endorsed
by, any financial institution, and Fund shares are not federally insured by the
Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other
agency. Investment in the Fund involves risks, including the possible loss of
principal.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
April 1, 1997
<PAGE>
TABLE OF CONTENTS
PROSPECTUS SUMMARY........................................................ 2
FEE TABLE................................................................. 3
FINANCIAL HIGHLIGHTS...................................................... 4
INVESTMENT OBJECTIVE AND POLICIES......................................... 5
RISK FACTORS.............................................................. 7
INVESTMENT LIMITATIONS.................................................... 9
HOW NET ASSET VALUE IS DETERMINED......................................... 9
PERFORMANCE DATA.......................................................... 10
MANAGEMENT OF THE FUND.................................................... 10
HOW TO PURCHASE SHARES.................................................... 14
HOW TO REDEEM SHARES...................................................... 16
DIVIDENDS AND DISTRIBUTIONS............................................... 18
FEDERAL INCOME TAX INFORMATION............................................ 18
ORGANIZATION AND CAPITAL SHARES........................................... 19
VOTING RIGHTS............................................................. 20
OTHER INFORMATION......................................................... 20
This Prospectus is not an offering of the securities herein described in any
state in which the offering is unauthorized. No sales representative, dealer, or
other person is authorized to give any information or to make any
representations other than those contained in this Prospectus.
<PAGE>
PROSPECTUS SUMMARY
The Fund. The Capital Management Mid-Cap Fund (formerly named the Capital
Management Equity Fund) (the "Fund") is a diversified series of the Capital
Management Investment Trust (the "Trust"), a registered, open-end management,
investment company organized as a Massachusetts business trust. This Prospectus
relates to Institutional Shares of the Fund. See "Organization and Capital
Shares."
Offering Price. The Institutional Shares are offered at net asset value without
a sales charge. The Institutional Shares are available only to the following
classes of investors: any account managed by the Advisor, and any other
institutional investor with a minimum investment in the Fund of at least
$250,000. The minimum initial investment is $250,000 unless otherwise approved
by the Advisor. The minimum subsequent investment is $500. See "How to Purchase
Shares."
Investment Objective. The investment objective of the Fund is to seek capital
appreciation principally through investments in equity securities, consisting of
common and preferred stocks and securities convertible into common stocks.
Realization of current income is not a significant investment consideration, and
any income realized will be incidental to the Fund's objective. The Fund will
focus on equity securities of medium-capitalization companies. See "Investment
Objective and Policies."
Advisor. Subject to the general supervision of the Trust's Board of Trustees and
in accordance with the Fund's investment policies, Capital Management
Associates, Inc., of New York, New York (the "Advisor"), manages the Fund's
investments. The Advisor manages over $1 billion in assets. Its clients include
individuals, corporations, pension and profit-sharing plans, and endowments. For
its services, the Advisor receives a monthly fee based on the Fund's daily net
assets at the annual rate of 1.00% of the first $100 million of Fund assets,
0.90% of the next $150 million, 0.85% of the next $250 million, and 0.80% of all
assets over $500 million. See "Management of the Fund - Investment Advisor."
Dividends. The Fund may pay income dividends, if any, quarterly; capital gains,
if any, are paid at least once each year. Dividend and capital gain
distributions are automatically reinvested in additional Institutional Shares at
net asset value unless the shareholder elects to receive cash. See "Dividends
and Distributions."
Distributor. Shields & Company (the "Distributor") serves as distributor of the
Fund's shares. The Distributor is affiliated with the Advisor. See "Management
of the Fund - Distributor."
Redemption of Shares. There is no charge for redemptions other than possible
charges associated with wire transfers of redemption proceeds. Shares may be
redeemed at any time at the net asset value next determined after receipt of a
redemption request by the Fund. A shareholder who submits appropriate written
authorization may redeem shares by telephone. See "How to Redeem Shares."
Special Risk Considerations. The Fund is not intended to provide a complete
investment program, and there can be no assurance that the Fund will achieve its
investment objective. To the extent that equities comprise a major portion of
the Fund's portfolio, the Fund's net asset value will be subject to stock market
fluctuation. While the Fund will invest primarily in common stocks traded in
U.S. securities markets, some of the Fund's investments may include illiquid
securities, foreign securities, and securities purchased subject to a repurchase
agreement or on a "when-issued" basis, which involve certain risks. The Fund's
portfolio will also contain a significant amount of securities of
medium-capitalization companies, which may exhibit more volatility than
large-capitalization companies. The Fund may borrow only under certain limited
conditions (including to meet redemption requests) and not to purchase
securities. It is not the intent of the Fund to borrow except for temporary cash
requirements. Borrowing, if done, would tend to exaggerate the effects of market
and interest rate fluctuations on the Fund's net asset value until repaid. See
"Risk Factors."
FEE TABLE
The following table sets forth certain information in connection with the
expenses of the Institutional Shares of the Fund for the current fiscal year.
The information is intended to assist the investor in understanding the various
costs and expenses borne by the Institutional Shares of the Fund, and therefore
indirectly by its investors, the payment of which will reduce an investor's
return on an annual basis.
Shareholder Transaction Expenses for Institutional Shares
Maximum Sales Charge Imposed on Purchases.................................None
(as a percentage of offering price)
Maximum Sales Charge Imposed on Reinvested Dividends......................None
Deferred Sales Load.......................................................None
Redemption Fees*..........................................................None
Exchange Fees.............................................................None
* The Fund in its discretion may choose to pass through to redeeming
shareholders any charges imposed by the Custodian for wiring
redemption proceeds. The Custodian currently charges the Fund $10.00
per transaction for wiring redemption proceeds.
Annual Fund Operating Expenses
for Institutional Shares
(as a percentage of average net assets)
Management Fees..........................................................0.00%1
12b-1 Fees................................................................None
Total Other Expenses.....................................................1.50%1
Total Fund Operating Expenses............................................1.50%1
EXAMPLE: You would pay the following expenses on a $1,000 investment in
Institutional Shares of the Fund, whether or not you redeem at the end of the
period, and assuming a 5% annual return:
1 year 3 years 5 years 10 years
-------- --------- --------- ---------
$15 $47 $82 $199
THE FOREGOING SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
1 The Total Fund Operating Expenses shown above are based on actual
operating expenses incurred by the Institutional Shares of the Fund
for the fiscal year ended November 30, 1996, which, after fee waivers
and expense reimbursements, were 0.00% of average daily net assets of
the Institutional Shares of the Fund, but restated to reflect the
expenses anticipated to be incurred by the Institutional Shares of the
Fund for the current fiscal year. Absent such waivers and
reimbursements, the percentages would have been 1.00% for Management
Fees and 3.70% for Total Fund Operating Expenses for the Institutional
Shares of the Fund for the fiscal year ended November 30, 1996. The
Advisor has voluntarily agreed to a reduction in the fees payable to
it and to reimburse expenses of the Fund, if necessary, in an amount
that limits Total Fund Operating Expenses (exclusive of interest,
taxes, brokerage fees and commissions, and extraordinary expenses) to
not more than 1.50% of the Institutional Shares' average daily net
assets. There can be no assurance that the Advisor's voluntary fee
waivers and expense reimbursements will continue in the future.
See "Management of the Fund" below for more information about the fees and costs
of operating the Fund. The example shown above assumes a 5% annual return
pursuant to the requirements of the Securities and Exchange Commission. The
hypothetical rate of return is not intended to be representative of past or
future performance of the Fund. The annual rate of return may be greater or less
than 5%.
FINANCIAL HIGHLIGHTS
The Fund has two classes of shares - Investor Shares and Institutional Shares.
See "Organization and Capital Shares." This Prospectus relates to Institutional
Shares. The financial data included in the table below was obtained from audited
financial statements of the Fund. The financial data have been audited by KPMG
Peat Marwick LLP, independent auditors, whose report covering such fiscal year
and period is included in the Statement of Additional Information. The
information in the table below should be read in conjunction with the Fund's
latest audited financial statements and notes thereto, which are included in the
Statement of Additional Information, a copy of which may be obtained at no
charge by calling the Fund. Further information about the performance of the
Fund is contained in the Annual Report of the Fund, a copy of which may be
obtained at no charge by calling the Fund.
Institutional Class
(For a Share Outstanding Throughout the Fiscal Period)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
For the period from
January 27, 1995,
Year ended (commencement of operations)
November 30, 1996 to November 30, 1995
Net asset value, beginning of period $12.16 $10.00
------ ------
Income from investment operations
Net investment income 0.23 0.20
Net realized and unrealized gain on investments 2.08 2.10
---- ----
Total from investment operations 2.31 2.30
---- ----
Distributions to shareholders from
Net investment income (0.26) (0.14)
Net realized gain from investment transactions (0.22) 0.00
---- ----
Total distributions (0.48) (0.14)
------ -----
Net asset value, end of period $13.99 $12.16
====== ======
Total return 19.57% 23.00%
===== =====
<PAGE>
Ratios/supplemental data
Net assets, end of period $3,502,215 $1,832,507
Ratio of expenses to average net assets
Before expense reimbursements and waived fees 3.70% 7.20%(a)
After expense reimbursements and waived fees 0.00% 0.31%(a)
Ratio of net investment income (loss) to average
net assets
Before expense reimbursements and waived fees (1.77)% (4.45)%(a)
After expense reimbursements and waived fees 1.94% 2.44%(a)
Portfolio turnover rate 82.30% 47.74%
Average commission rate paid $0.0598 N/A
(a) Annualized.
</TABLE>
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to seek capital appreciation principally
through investments in equity securities, consisting of common and preferred
stocks and securities convertible into common stocks. Realization of current
income is not a significant investment consideration, and any income realized
will be incidental to the Fund's objective. The Fund's investment objective and
fundamental investment limitations described herein may not be altered without
the prior approval of a majority of the Fund's shareholders.
Under normal market conditions, at least 90% of the Fund's total assets will be
invested in equity securities and at least 65% of the Fund's total assets will
be invested in equity securities of medium-capitalization companies, which are
defined as those whose market capitalization range is from $300 million to $6
billion. However, as a temporary defensive measure, when the Advisor determines
that market conditions warrant such investments, the Fund may invest up to 100%
of its total assets in investment grade bonds, U.S. Government Securities,
repurchase agreements, or money market instruments. When the Fund invests its
assets in investment grade bonds, U.S. Government Securities, repurchase
agreements, or money market instruments as a temporary defensive measure, it is
not pursuing its stated investment objective. Under normal circumstances,
however, the Fund will also hold money market or repurchase agreement
instruments for funds awaiting investment, to accumulate cash for anticipated
purchases of portfolio securities, to allow for shareholder redemptions, and to
provide for Fund operating expenses.
Equity Selection Criteria. The Advisor will manage the Fund's assets by
utilizing an investment philosophy which has been employed by the Advisor since
the firm's inception. Under normal market conditions, the Fund will invest in
equity securities consisting of common stocks and securities convertible into
common stocks. The Fund intends to invest in a diversified group of common
stocks and will not concentrate its investments in any one industry or group.
The Fund will focus on medium-capitalization companies. This
market-capitalization range includes a universe of approximately 1,700
companies. Stocks held in the portfolio will generally be traded on either the
New York Stock Exchange, American Stock Exchange, or the over-the-counter
market. Foreign securities, if held, will generally be traded on foreign
securities exchanges. Foreign securities may be held in the form of American
Depository Receipts ("ADRs"). ADRs are foreign securities denominated in U.S.
dollars and traded on U.S. securities markets. See "Foreign Securities" below.
An economic forecast is developed by the Advisor's Investment Committee to guide
industry allocation decisions. Medium-capitalization equities in industries
where the outlook is favorable relative to current price levels are then
subjected to additional screening and are finally selected through fundamental
security analysis to identify value. This process most often includes visits
with company management and contacts with industry experts and suppliers. The
results of this research are presented at meetings of the Advisor's investment
professionals. Final investment decisions are made by the Advisor's Investment
Committee (identified below under "Management of the Fund -Investment Advisor").
U.S. Government Securities. The Fund may invest a portion of the portfolio in
U.S. Government Securities, defined to be U.S. Government obligations such as
U.S. Treasury notes, U.S. Treasury bonds, and U.S. Treasury bills; obligations
guaranteed by the U.S. Government such as obligations issued by the Government
National Mortgage Association ("GNMA"); as well as obligations of U.S.
Government authorities, agencies, and instrumentalities such as Federal National
Mortgage Association ("FNMA"), Federal Home Loan Mortgage Corporation ("FHLMC"),
Federal Home Administration ("FHA"), Federal Farm Credit Bank ("FFCB"), Federal
Home Loan Bank ("FHLB"), Student Loan Marketing Association ("SLMA"), and The
Tennessee Valley Authority. U.S. Government Securities may be acquired subject
to repurchase agreements. While obligations of some U.S. Government-sponsored
entities are supported by the full faith and credit of the U.S. Government
(e.g., GNMA), several are supported by the right of the issuer to borrow from
the U.S. Government (e.g., FNMA, FHLMC), and still others are supported only by
the credit of the issuer itself (e.g., SLMA, FFCB). No assurances can be given
that the U.S. Government will provide financial support to U.S. Government
agencies or instrumentalities in the future, other than as set forth above,
since it is not obligated to do so by law. The guarantee of the U.S. Government
does not extend to the yield or value of the Fund's shares.
Money Market Instruments. Money market instruments may be purchased for
temporary defensive purposes, to accumulate cash for anticipated purchases of
portfolio securities, and to provide for shareholder redemptions and operating
expenses of the Fund. Money market instruments mature in thirteen months or less
from the date of purchase and may include U.S. Government Securities, corporate
debt securities (including those subject to repurchase agreements), bankers
acceptances and certificates of deposit of domestic branches of U.S. banks, and
commercial paper (including variable amount demand master notes) rated in one of
the two highest rating categories by any of the nationally recognized
statistical rating organizations, or if not rated, of equivalent quality in the
Advisor's opinion. The Advisor may, when it believes that unusually volatile or
unstable economic and market conditions exist, depart from the Fund's investment
approach and assume temporarily a defensive portfolio posture, increasing the
Fund's percentage investment in money market instruments, even to the extent
that 100% of the Fund's total assets may be so invested.
Repurchase Agreements. The Fund may acquire U.S. Government Securities or
corporate debt securities subject to repurchase agreements. A repurchase
agreement transaction occurs when a Fund acquires a security and simultaneously
resells it to the vendor (normally a member bank of the Federal Reserve or a
registered Government Securities dealer) for delivery on an agreed upon future
date. The repurchase price exceeds the purchase price by an amount which
reflects an agreed upon market interest rate earned by the Fund effective for
the period of time during which the repurchase agreement is in effect. Delivery
pursuant to the resale typically will occur within one to seven days of the
purchase. The Fund will not enter into any repurchase agreement which will cause
more than 10% of its net assets to be invested in repurchase agreements which
extend beyond seven days or other illiquid securities. In the event of the
bankruptcy of the other party to a repurchase agreement, the Fund could
experience delays in recovering its cash or the securities lent. To the extent
that in the interim the value of the securities purchased may have declined, the
Fund could experience a loss. In all cases, the creditworthiness of the other
party to a transaction is reviewed and found satisfactory by the Advisor.
Repurchase agreements are, in effect, loans of Fund assets. The Fund will not
engage in reverse repurchase transactions, which are considered to be borrowings
under the 1940 Act.
Foreign Securities. The Fund may invest in the securities of foreign private
issuers. The same factors would be considered in selecting foreign securities as
with domestic securities. Foreign securities' investment presents special
considerations not typically associated with investment in domestic securities.
Foreign taxes may reduce income. Currency exchange rates and regulations may
cause fluctuations in the value of foreign securities. Foreign securities are
subject to different regulatory environments than in the United States, and
compared to the United States, there may be a lack of uniform accounting,
auditing, and financial reporting standards; less volume and liquidity and more
volatility; less public information; and less regulation of foreign issuers.
Countries have been known to expropriate or to nationalize assets, and foreign
investments may be subject to political, financial, or social instability or to
adverse diplomatic developments. There may be difficulties in obtaining service
of process on foreign issuers and difficulties in enforcing judgments with
respect to claims under the U.S. securities' laws against such issuers.
Favorable or unfavorable differences between U.S. and foreign economies could
affect foreign securities' values. The U.S. Government has, in the past,
discouraged certain foreign investments by U.S. investors through taxation or
other restrictions, and it is possible that such restrictions could be imposed
again.
Because of the inherent risk of foreign securities over domestic issues, the
Fund will generally limit foreign investments to those traded domestically as
American Depository Receipts ("ADRs"). ADRs are receipts issued by a U.S. bank
or trust company evidencing ownership of securities of a foreign issuer. ADRs
may be listed on a national securities exchange or may trade in the
over-the-counter market. The prices of ADRs are denominated in U.S. dollars
while the underlying security may be denominated in a foreign currency. To the
extent the Fund invests in other foreign securities, it will generally limit
such investments to foreign securities traded on foreign securities exchanges.
Investment Companies. To achieve its investment objective, the Fund may invest
its total assets in securities of other investment companies whose investment
objectives are consistent with the Fund's investment objective, to the limited
extent permitted by the 1940 Act. The Fund will not acquire securities of any
one investment company if, immediately thereafter, the Fund would own more than
3% of such company's total outstanding voting securities, securities issued by
such company would have an aggregate value in excess of 5% of the Fund's total
assets, or securities issued by such company and securities held by the Fund
issued by other investment companies would have an aggregate value in excess of
10% of the Fund's total assets. To the extent the Fund invests in other
investment companies, the shareholders of the Fund would indirectly pay a
portion of the operating costs of the underlying investment companies. These
costs include management, brokerage, shareholder servicing, and other
operational expenses. Shareholders of the Fund would then indirectly pay higher
operational costs than if they owned shares of the underlying investment
companies directly.
Real Estate Securities. The Fund will not invest in real estate (including
limited partnership interests), but may invest in readily marketable securities
secured by real estate or securities interests therein or securities issued by
companies that invest in real estate or interests therein. The Fund may also
invest in readily marketable interests in real estate investment trusts
("REITs"). REITs are generally publicly traded on the national stock exchanges
and in the over-the-counter market and have varying degrees of liquidity.
Although the Fund is not limited in the amount of these types of real estate
securities it may acquire, it is not presently expected that within the next 12
months the Fund will have in excess of 5% of its total assets in real estate
securities.
RISK FACTORS
Investment Policies and Techniques. Reference should be made to "Investment
Objective and Policies" above for a description of special risks presented by
the investment policies of the Fund and the specific securities and investment
techniques that may be employed by the Fund, including the risks associated with
repurchase agreements and foreign securities. A more complete discussion of
certain of these securities and investment techniques and their associated risks
is contained in the Statement of Additional Information.
Fluctuations in Value. To the extent that the major portion of the Fund's
portfolio consists of common stocks, it may be expected that its net asset value
will be subject to greater fluctuation than a portfolio containing mostly
fixed-income securities. Although certain of the U.S. Government Securities in
which the Fund may invest are guaranteed as to timely payment of principal and
interest, the market value of the securities will fluctuate due to interest rate
risks. Additionally, not all U.S. Government Securities are backed by the full
faith and credit of the U.S. Government. Given the Fund's limitation primarily
to securities which are commonly defined as `mid-capitalization' securities, the
Fund may be expected to exhibit more volatility than an equity fund investing in
larger-capitalization securities. Because there is risk in any investment, there
can be no assurance that the Fund will meet its objective.
Portfolio Turnover. The Fund sells portfolio securities without regard to the
length of time they have been held to take advantage of new investment
opportunities. Nevertheless, the Fund's portfolio turnover generally will not
exceed 100% in any one year. The degree of portfolio activity affects the
brokerage costs of the Fund and other transaction costs related to the sale of
securities and the reinvestment in other securities. Portfolio turnover may also
have capital gain tax consequences. The Fund's portfolio turnover rate for its
prior fiscal year and fiscal period is set forth under "Financial Highlights"
above.
Borrowing. The Fund may borrow, temporarily, up to 5% of its total assets for
extraordinary purposes and 15% of its total assets to meet redemption requests
which might otherwise require untimely disposition of portfolio holdings. To the
extent the Fund borrows for these purposes, the effects of market price
fluctuations on the portfolio's net asset value will be exaggerated. If, while
such borrowing is in effect, the value of the Fund's assets declines, the Fund
could be forced to liquidate portfolio securities when it is disadvantageous to
do so. The Fund would incur interest and other transaction costs in connection
with borrowing. The Fund will borrow only from a bank. The Fund will not make
any further investments if the borrowing exceeds 5% of its total assets until
such time as repayment has been made to bring the total borrowing below 5% of
its total assets.
Illiquid Investments. The Fund may invest up to 10% of its net assets in
illiquid securities. Illiquid securities are those that may not be sold or
disposed of in the ordinary course of business within seven days at
approximately the price at which they are valued. Under the supervision of the
Board of Trustees, the Advisor determines the liquidity of the Fund's
investments. The absence of a trading market can make it difficult to ascertain
a market value for illiquid investments. Disposing of illiquid securities before
maturity may be time consuming and expensive, and it may be difficult or
impossible for the Fund to sell illiquid investments promptly at an acceptable
price. Included within the category of illiquid securities will also be
restricted securities, which cannot be sold to the public without registration
under the federal securities laws. Unless registered for sale, these securities
can only be sold in privately negotiated transactions or pursuant to an
exemption from registration.
Forward Commitments and When-Issued Securities. The Fund may purchase
when-issued securities and commit to purchase securities for a fixed price at a
future date beyond customary settlement time. The Fund is required to hold and
to maintain in a segregated account until the settlement date cash, U.S.
Government Securities, or high-grade debt obligations in an amount sufficient to
meet the purchase price. Purchasing securities on a when-issued or forward
commitment basis involves a risk of loss if the value of the security to be
purchased declines prior to the settlement date; this risk is in addition to the
risk of decline in value of the Fund's other assets. In addition, no income
accrues to the purchaser of when-issued securities during the period prior to
issuance. Although the Fund would generally purchase securities on a when-issued
or forward commitment basis with the intention of acquiring securities for its
portfolio, the Fund may dispose of a when-issued security or forward commitment
prior to settlement if the Advisor deems it appropriate to do so. The Fund may
realize short-term gains or losses upon such sales.
INVESTMENT LIMITATIONS
To limit exposure to risk, the Fund has adopted certain investment limitations.
Some of these limitations are that the Fund will not: (1) issue senior
securities, borrow money, or pledge its assets, except that it may borrow from
banks as a temporary measure (a) for extraordinary or emergency purposes, in
amounts not exceeding 5% of the Fund's total assets, or (b) to meet redemption
requests which might otherwise require untimely disposition of portfolio
securities in amounts not exceeding 15% of its total assets (the Fund will not
make any investments if borrowing exceeds 5% of its total assets); (2) make
loans of money or securities, except that the Fund may invest in repurchase
agreements (but repurchase agreements having a maturity of longer than seven
days are subject to the limitation on investing in illiquid securities); (3)
invest more than 10% of its net assets in illiquid securities; (4) invest in
securities of issuers which have a record of less than three years' continuous
operation (including predecessors and, in the case of bonds, guarantors), if
more than 5% of its total assets would be invested in such securities; (5)
purchase or sell commodities, commodities' contracts, real estate (including
limited partnership interests, but excluding readily marketable interests in
real estate investment trusts or other securities secured by real estate or
interests therein or readily marketable securities issued by companies that
invest in real estate or interests therein), or interests in oil, gas, or other
mineral exploration or development programs or leases (although it may invest in
readily marketable securities of issuers that invest in or sponsor such programs
or leases); (6) with respect to 75% of Fund assets, invest more than 5% at cost
of its total assets in the securities of any one issuer or purchase more than
10% of the outstanding voting stock of any one issuer; and (7) write, purchase,
or sell puts, calls, straddles, spreads, or combinations thereof, or futures
contracts or related options. Investment limitations (1), (5), (6), and (7) are
deemed fundamental; that is, they may not be changed without shareholder
approval. See "Investment Limitations" in the Fund's Statement of Additional
Information for a complete list of investment limitations.
If the Board of Trustees of the Trust determines that the Fund's investment
objective can best be achieved by a substantive change in a non-fundamental
investment limitation, the Board can make such change without shareholder
approval and will disclose any such material changes in the then current
Prospectus. Any limitation that is not specified in the Fund's Prospectus, or in
the Statement of Additional Information, as being fundamental, is
non-fundamental. If a percentage limitation is satisfied at the time of
investment, a later increase or decrease in such percentage resulting from a
change in the value of the Fund's portfolio securities will not constitute a
violation of such limitation.
HOW NET ASSET VALUE IS DETERMINED
The net asset value for each Institutional Share of the Fund is determined at
4:00 p.m., New York time, Monday through Friday, except on business holidays
when the New York Stock Exchange ("NYSE") is closed. The net asset value of the
shares of the Fund for purposes of pricing sales and redemptions is equal to the
total market value of its investments, less all of its liabilities, divided by
the number of its outstanding shares.
Securities that are listed on a securities exchange are valued at the last
quoted sales price at the time the valuation is made. Price information on
listed securities is taken from the exchange where the security is primarily
traded by the Fund. Securities that are listed on an exchange and which are not
traded on the valuation date are valued at the mean of the bid and asked prices.
Prices for securities traded on foreign exchanges will be converted to the
equivalent price in U.S. currency using the published currency exchange rates
available at the time of valuation. Unlisted securities for which market
quotations are readily available are valued at the latest quoted sales price, if
available, otherwise, at the latest quoted bid price. Temporary cash investments
with maturities of 60 days or less will be valued at amortized cost, which
approximates market value. Securities for which no current quotations are
readily available are valued at fair value as determined in good faith using
methods approved by the Board of Trustees of the Trust. Securities may be valued
on the basis of prices provided by a pricing service when such prices are
believed to reflect the fair market value of such securities.
PERFORMANCE DATA
From time to time the Fund may advertise its average annual total return for
each Class of Fund shares. The average annual total return refers to the average
annual compounded rates of return over 1-, 3-, 5-, and 10-year periods that
would equate an initial amount invested at the beginning of a stated period to
the ending redeemable value of the investment. The calculation assumes the
reinvestment of all dividends and distributions, includes all recurring fees
that are charged to all shareholder accounts, and deducts all nonrecurring
charges at the end of each period. If the Fund has been operating less than 1,
3, 5, or 10 years, the time period during which the Fund has been operating is
substituted.
In addition, the Fund may advertise total return performance data other than
average annual total return for each Class of Fund shares. Such data would show
a percentage rate of return encompassing all elements of return (i.e., income
and capital appreciation or depreciation) and would assume reinvestment of all
dividends and capital gain distributions. Such other total return data may be
shown for the same or different periods as those used for average annual total
return. These data may consist of a cumulative percentage rate of return, actual
year-by-year rates of return, or any combination thereof. A cumulative
percentage rate of return would show the cumulative change in value of an
investment in the Fund for various periods.
The total return of the Fund could be increased to the extent the Advisor may
waive all or a portion of its fees or reimburse all or a portion of the Fund's
expenses. It is not currently contemplated that the Advisor will waive portions
of its fees or reimburse Fund expenses except as provided under "Fee Table."
Total return figures are based on the historical performance of the Fund, show
the performance of a hypothetical investment, and are not intended to indicate
future performance. The Fund's quotations may from time to time be used in
advertisements, sales literature, shareholder reports, or other communications
to shareholders. For further information, see "Additional Information on
Performance" in the Statement of Additional Information.
MANAGEMENT OF THE FUND
Trustees and Officers. The Fund is a diversified series of the Capital
Management Investment Trust (the "Trust"), a registered, open-end management,
investment company organized as a Massachusetts business trust on October 18,
1994. The Board of Trustees has overall responsibility for management of the
Fund under the laws of Massachusetts and the Declaration of Trust. The Statement
of Additional Information identifies the Trustees and officers of the Trust and
the Fund and provides information about them. The Trustees of the Trust and
executive officers of the Fund and their principal occupations for the last five
years are set forth below:
TRUSTEES
Lucius E. Mr. Burch is Chairman and Chief Executive Officer of Massey
Burch, III Burch Investment Group, Inc., a large, southeastern venture
Trustee capital firm based in Nashville, Tennessee. After working as
a commercial banker at Morgan Guaranty Trust Co. in New York
City, he joined Massey Investment Company, the predecessor
of Massey Burch Investment Group, as a financial analyst and
portfolio manager in 1968. He has extensive experience in
management consulting, corporate finance, and mergers and
acquisitions. Mr. Burch currently serves on the Board of
Directors of QMS, Inc., a NYSE-listed company; Bio-Safe
Systems, Inc.; and several private companies. He is a
graduate of the University of North Carolina.
Thomas A. Mr. Saunders is a Partner of Saunders Karp & Co., L.P., a
Saunders, III New York-based merchant bank. From 1974 to 1989 he was a
Trustee Managing Director of Morgan Stanley & Co., Incorporated, and
from 1987 to 1989 he was Chairman of Morgan Stanley's
Leveraged Equity Fund II, L.P. Mr. Saunders received a B.S.
degree in Electrical Engineering from the Virginia Military
Institute and an M.B.A. degree from the University of
Virginia's Darden Graduate School of Business
Administration. He is Chairman of the Board of Trustees of
the Darden Graduate School, as well as a member of the Board
of Visitors of the Virginia Military Institute. Mr. Saunders
is also a member of the Board of Trustees of the Cold Spring
Harbor Laboratory. He serves as a Director to numerous
industrial, consumer, and healthcare companies in the
Saunders Karp portfolio.
David V. Shields Mr. Shields is a Managing Director of the Advisor and the
Trustee Distributor. He has been a member of the New York Stock
Exchange since 1968, specializing in institutional
brokerage. Mr. Shields served on the Board of Directors of
the NYSE from 1986 to 1992, having served as Governor prior
to that time. He has served on various NYSE committees
including the Audit, Market Performance, and the Committee
for Review. He is past director of the Alliance of Floor
Brokers of the NYSE and served as its President from 1980 to
1986. Mr. Shields has acted in various advisory capacities
on capital markets in Russia, Estonia, and Norway. He holds
a B.S. degree in Economics from the Wharton School of the
University of Pennsylvania and a Graduate Certificate from
the London School of Economics.
J.V. Shields, Jr. Mr. Shields is a Managing Director and Chairman of the
Trustee Advisor and the Distributor. He previously had been the
Director of Corporate Finance at H.N. Whitney, Goadby &
Company. He is responsible for development of the Advisor's
corporate policy and serves on the Investment Committee. He
currently serves as Chairman of the Board of Trustees of the
59 Wall Street Trust, the Brown Brothers Harriman & Co.
mutual fund group, and serves on the Board of Directors of
Flowers Industries, Inc., a NYSE-listed, diversified, food
manufacturer. He received his B.S.B.A. degree in Finance and
Economics from Georgetown University.
Anthony J. Mr. Walton is President of Armstrong Holdings Corporation, a
Walton private investment company and corporate finance advisory
Trustee firm. He is also Vice Chairman of Petsec Energy, Inc., a
U.S. exploration and production company based in Sydney,
Australia, and Lafayette, Louisiana. Previously, he was
Chief Executive Officer of the Llama Company, a regional
investment bank in Fayetteville, Arkansas, which is owned by
members of the Walton family, founders of Wal-Mart Stores,
Inc. Prior to joining Llama, he was a Director of Westpac
Banking Corporation of Sydney, Australia, and served as
Chief General Manager of the combined Americas & Europe
Group in New York. From 1968 to 1983, Mr. Walton was with
The Chase Manhattan Bank, NA, in New York and London in
various executive positions. He holds a B.A. degree from
Haverford College and an M.B.A. degree in International
Finance from the University of Pennsylvania's Wharton
Graduate School of Finance.
EXECUTIVE
OFFICERS
C. Lennis Mr. Koontz joined the Advisor in 1992. From 1987 to 1992, he
Koontz, II was associated with Smith Barney Capital Management as a
President senior portfolio manager and analyst. From 1976 until 1987,
he was with Scudder, Stevens & Clark in New York where he
was a Managing Director, member of the stock strategy group,
and head of the employee benefit plans group. At the Advisor
he serves as a portfolio manager/analyst and sits on the
Investment Committee. Mr. Koontz received both his B.S. and
M.S. degrees from the University of Tennessee, majoring in
industrial management. He is a Chartered Financial Analyst
and member of the New York Society of Security Analysts.
Joseph A. Zock Mr. Zock joined the Advisor when the firm was founded in
Vice President 1982. Prior to that he worked closely with the founders of
the Advisor at H.N. Whitney, Goadby & Company, where he had
served as portfolio manager and research analyst beginning
in 1980. He serves as a portfolio manager/analyst and sits
on the advisor's Investment Committee. He received his BA
degree in Political Science/Economics from the University of
New Hampshire, his J.D. degree from the University of San
Diego Law School, and a Certificate of International Law
from the University of London, Kings College School of Law.
Investment Advisor. The Fund is advised by Capital Management Associates, Inc.
(the "Advisor"), pursuant to an advisory contract. Subject to the authority of
the Board of Trustees, the Advisor provides guidance and policy direction in
connection with its daily management of the Fund's assets. The Advisor manages
the investment and reinvestment of the Fund's assets in a manner consistent with
the investment objective and policies of the Fund. The Advisor is also
responsible for the selection of broker-dealers through which the Fund executes
portfolio transactions, subject to the brokerage policies established by the
Trustees, and it provides certain executive personnel to the Fund.
The Advisor, organized as a New York corporation in 1982, is controlled by its
officers and directors, with the principal shareholders being J.V. Shields, Jr.;
David V. Shields; and Richard B. Thatcher, who also comprise the Board of
Directors. An Investment Committee of the Advisor, comprised of J.V. Shields,
Jr.; Dimitri H. Kuriloff; Richard B. Thatcher; Joseph A. Zock; and C. Lennis
Koontz, II, CFA, select the investments for the Fund. Messrs. Shields, Thatcher,
and Zock have been affiliated with the Advisor since the firm's inception in
1982. Mr. Kuriloff has been affiliated with the Advisor since 1982. Mr. Koontz
has been affiliated with the Advisor since 1992. While the Advisor has no
previous experience in managing investment companies, the Advisor has been
providing investment advice in a style identical to that of the Fund to
individuals, corporations, pension and profit sharing plans, endowments, and
other business and private accounts since 1982. The Advisor currently serves as
investment advisor to over $1 billion in assets, most of which is managed using
similar investment objectives to those employed by the Fund.
The Advisor's address is 140 Broadway, New York, New York 10005.
As full compensation for the investment advisory services provided to the Fund,
the Fund pays the Advisor monthly compensation based on the Fund's daily average
net assets at the annual rate of 1.00% of the first $100 million of the Fund's
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. The Advisor has voluntarily waived its
fee and reimbursed all of the Fund's operating expenses for the fiscal year
ended November 30, 1996. The total fees waived amounted to $34,561, and expenses
reimbursed amounted to $97,598.
Administrator. The Nottingham Company (the "Administrator") serves as the Fund's
administrator. The Administrator, subject to the authority of the Board of
Trustees, provides administrative services to and is generally responsible for
the overall management and day-to-day administrative operations of the Fund,
pursuant to an administration agreement with the Trust.
The Administrator, which was established as a North Carolina corporation in
1988, has been operating (with affiliates) as a financial services firm since
1985. Frank P. Meadows III is the firm's Managing Director and controlling
shareholder.
The Administrator, whose address is 105 North Washington Street, Post Office
Drawer 69, Rocky Mount, North Carolina 27802-0069, provides the Fund with office
space and facilities; provides certain executive personnel to the Fund;
maintains the Fund's accounting records; computes daily the Fund's net asset
value; supervises the preparation of tax returns, financial reports,
prospectuses, and proxy statements; and monitors compliance with certain
recordkeeping and regulatory requirements.
Compensation of the Administrator, based upon the average daily net assets of
the Fund, is at the following annual rates: On the first $50 million of the
Fund's net assets, 0.20%; on the next $50 million, 0.175%; on all assets over
$100 million, 0.15%. In addition, the Administrator currently receives a monthly
fee of $2,000 for the first class of the Fund and $750 for each additional class
of the Fund for accounting and recordkeeping services for the Fund. The
Administrator also charges the Fund for certain costs involved with the daily
valuation of investment securities and is reimbursed for out-of-pocket expenses.
The Administrator charges a minimum fee of $3,000 per month for all of its fees
taken in the aggregate, analyzed monthly.
Transfer Agent. North Carolina Shareholder Services, LLC (the "Transfer Agent")
serves as the Fund's transfer, dividend paying, and shareholder servicing agent.
The Transfer Agent, subject to the authority of the Board of Trustees, provides
transfer agency services pursuant to an agreement with the Administrator, which
has been approved by the Trust.
The Transfer Agent, whose address is 107 North Washington Street, Post Office
Box 4365, Rocky Mount, North Carolina 27803-0365, was established as a North
Carolina limited liability company in 1997. John D. Marriott, Jr., is the firm's
controlling member.
The Transfer Agent maintains the records of each shareholder's account, answers
shareholder inquiries concerning accounts, processes purchases and redemptions
of the Fund's shares, acts as dividend and distribution disbursing agent, and
performs other shareholder servicing functions. The Transfer Agent is
compensated for its services by the Administrator and not directly by the Fund.
Distributor. Shields & Company (the "Distributor"), a New York corporation, is
the principal underwriter and distributor of the shares of the Fund pursuant to
a Distribution Agreement between the Trust and the Distributor. The Distributor
may sell Fund shares to or through qualified securities dealers and others.
J.V. Shields, Jr.; David V. Shields; and Richard B. Thatcher, affiliated persons
of the Fund, are also affiliated persons of the Advisor and the Distributor.
The principal business address of the Distributor is 140 Broadway, New York, New
York 10005.
Custodian. The custodian of the Fund's assets is First Union National Bank of
North Carolina (the "Custodian"). The Custodian's mailing address is Two First
Union Center, Charlotte, North Carolina 28288-1151. The Advisor, Administrator,
Transfer Agent, Distributor, or interested persons thereof, may have banking
relationships with the Custodian.
Other Fund Costs. The Fund pays all expenses not assumed by the Advisor or the
Administrator. Fund expenses include the fees and expenses, if any, of the
Trustees and officers who are not affiliated persons of the Advisor; fees of the
Custodian; interest expense, taxes, brokerage fees, and commissions; fees and
expenses of the Fund's shareholder servicing operations; fees and expenses of
qualifying and registering the Fund's shares under federal and state securities
laws; expenses of preparing, printing, and distributing prospectuses and reports
to existing shareholders; auditing and legal expenses; insurance expense;
association dues; and the expense of shareholders' meetings and proxy
solicitations. The Fund is also liable for any nonrecurring expenses as may
arise such as litigation to which the Fund may be a party. The Fund may be
obligated to indemnify the Trustees and officers with respect to such
litigation. Any expenses relating only to a particular Class of shares of the
Fund will be borne solely by such Class of shares.
Brokerage. The Fund has adopted brokerage policies that allow the Advisor to (a)
prefer brokers which provide research services to the Advisor or (b) utilize a
brokerage firm affiliated with the Advisor or the Trust, including the
Distributor, an affiliate of the Advisor and the Trust. In all cases, the
primary consideration for selection of broker-dealers will be to obtain the best
overall terms available for the Fund. Research services obtained through Fund
brokerage transactions may be used by the Advisor for its other clients, and
conversely, the Fund may benefit from research services obtained through the
brokerage transactions of the Advisor's other clients. During the fiscal year
ended November 30, 1996, the total brokerage commissions paid by the Fund were
$14,523, of which $14,367 was paid to the Distributor. More information about
the brokerage practices of the Fund is contained in the Statement of Additional
Information under the heading "Portfolio Transactions."
HOW TO PURCHASE SHARES
Shares in the Fund may be purchased through members of the National Association
of Securities Dealers, Inc., who are registered in the state where the purchase
is made and who have a sales agreement with the Distributor. After a shareholder
account is established and the investment dealer is recorded, subsequent orders
for shares may be mailed directly to the Fund.
Assistance in opening accounts and Fund Shares Applications may be obtained from
the Fund by calling 1-800-773-3863, or by writing to the Fund at the address
shown below for regular mail orders. Institutional Shares may be purchased by
any account managed by the Advisor and any other institutional investor with a
minimum investment in the Fund of at least $250,000. Assistance is also
available through any broker-dealer authorized to sell shares in the Fund.
Payment for shares purchased may be made through your account at the
broker-dealer processing your application and order to purchase. The Fund's
shares are offered at the net asset value next determined after your order is
received by the Fund in proper order as indicated herein. The minimum initial
investment, unless stated otherwise herein, is $250,000. The Fund may, in the
Advisor's sole discretion, accept certain accounts with less than the stated
minimum initial investment.
Payment must be made by check or money order drawn on a U.S. bank and payable in
U.S. dollars. Under certain circumstances the Fund, at the sole discretion of
the Advisor, may allow payment in kind for Fund shares purchased, by accepting
securities in lieu of cash. Any securities so accepted would be valued on the
date received and included in the calculation of net asset value of the Fund.
See the Statement of Additional Information for additional information on
purchases in kind.
If checks are returned unpaid due to nonsufficient funds, stop payment, or other
reasons, the Fund will charge $20. To recover any such loss or charge, the Fund
reserves the right, without further notice, to redeem shares of the Fund already
owned by any purchaser whose order is canceled, and such a purchaser may be
prohibited from placing further orders unless investments are accompanied by
full payment by wire or cashier's check.
All orders received by the Fund, whether by mail, bank wire, or facsimile order
from a qualified broker-dealer, prior to 4:00 p.m. New York time will purchase
shares at the net asset value determined at that time. Otherwise, your order
will purchase shares as of 4:00 p.m. New York time on the next business day. For
orders placed through a qualified broker-dealer, such firm is responsible for
promptly transmitting purchase orders to the Fund. All purchases of shares are
subject to acceptance and are not binding until accepted. The Fund reserves the
right to reject any application or investment.
Regular Mail Orders. Please complete and sign the Fund Shares Application
accompanying this Prospectus and mail it, with your check made payable to the
Fund, to:
Capital Management Mid-Cap Fund
Institutional Shares
c/o North Carolina Shareholder Services
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
Applications must contain social security and Taxpayer Identification Numbers
("TINs"). If you have applied for a social security or TIN at the time of
completing your account application, the application should so indicate. Taxes
are not withheld from distributions to U.S. investors if certain IRS
requirements regarding TINs are met.
Bank Wire Orders. Investments can be made directly by bank wire. To establish a
new account or to add to an existing account by wire, please call the Fund at
1-800-773-3863, before wiring funds, to advise it of the investment, the dollar
amount of the investment, and the account identification number. This
notification will ensure prompt and accurate handling of your investment. Please
have your bank use the following wire instructions to purchase by wire:
First Union National Bank of North Carolina
ABA # 053000219
Reference GL 465946
Further Credit Acct # 1028783753
Attn: Custody
For the Capital Management Mid-Cap Fund -
Institutional Shares For further credit to
(shareholder's name and SS# or EIN#)
It is important that the wire message contain all the relevant information and
that the Fund receive prior telephone notification to ensure proper credit. Upon
opening an account by wire order, you must, as soon as possible, complete and
mail your Fund Shares Application to the Fund as described under "Regular Mail
Orders" above. Investors should be aware that some banks may impose a wire
service fee.
Additional Investments. You may add to your account by mail or wire at any time
by purchasing shares at the then current net asset value. The minimum additional
investment is $500. Before adding funds by bank wire, please alert the Fund by
telephone at 1-800-773-3863. Follow the wire order instructions set forth above
to send your wire order. When calling for any reason, please have your account
number ready, if known. Mail orders should include, when possible, the "Invest
by Mail" stub which is attached to your Fund confirmation statement.
Otherwise, be sure to identify your account in your letter.
Employees and Affiliates of the Fund. The minimum purchase requirement is not
applicable to accounts of Trustees, officers, or employees of the Fund or
certain parties related thereto. The minimum initial investment for such
accounts is $1,000. See the Statement of Additional Information for further
details.
Stock Certificates. Stock certificates will not be issued for your shares.
Evidence of ownership will be given by issuance of periodic account statements
which will show the number of shares owned.
Automatic Investment Plan. The automatic investment plan enables shareholders to
make regular monthly or quarterly investments in shares through automatic
charges to their checking account. With shareholder authorization and bank
approval, the Fund will automatically charge the checking account for the amount
specified ($100 minimum), which will be automatically invested in shares at the
public offering price on or about the 21st day of the month. The shareholder may
change the amount of the investment or discontinue the plan at any time by
writing to the Fund.
HOW TO REDEEM SHARES
Shares of the Fund may be redeemed (the Fund will repurchase them from
shareholders) by mail or telephone. Any redemption proceeds may be more or less
than the purchase price of your shares, depending on the market value of the
Fund's portfolio securities. All redemption orders received in proper form, as
indicated herein, by the Fund, whether by mail or telephone, prior to 4:00 p.m.
New York time, will be made at the net asset value determined at that time.
Otherwise, your redemption order will be made as of 4:00 p.m. New York time on
the next business day. There is no charge for redemptions from the Fund other
than possible charges for wiring redemption proceeds. You may also redeem your
shares through a broker-dealer, which may charge a fee for its services.
The Board of Trustees reserves the right to redeem involuntarily any account
having a net asset value of less than $250,000 (due to redemptions, exchanges,
or transfers, and not due to market action) upon 60-days' written notice. If the
shareholder brings his account net asset value up to at least $250,000 during
the notice period, the account will not be redeemed. Redemptions from retirement
plans may be subject to federal income tax withholding.
If you are uncertain of the requirements for redemption, please contact the Fund
at 1-800-773-3863 or write to the address shown below.
Regular Mail Redemptions. Your request should be addressed to Capital Management
Mid-Cap Fund, c/o North Carolina Shareholder Services, 107 North Washington
Street, Post Office Box 4365, Rocky Mount, North Carolina 27803-0365. Your
request for redemption must include:
1) Your letter of instruction specifying the account number and the
number of shares, or the dollar amount, to be redeemed. This request
must be signed by all registered shareholders in the exact names in
which they are registered;
2) Any required signature guarantees (see "Signature Guarantees" below);
and
3) Other supporting legal documents, if required in the case of estates,
trusts, guardianships, custodianships, corporations, partnerships,
pension or profit sharing plans, and other organizations.
Your redemption proceeds will be sent to you within seven days after receipt of
your redemption request. However, the Fund may delay forwarding a redemption
check for recently purchased shares while it determines whether the purchase
payment will be honored. Such delay (which may take up to fifteen days from the
date of purchase) may be reduced or avoided if the purchase is made by certified
check or wire transfer. In all cases, the net asset value next determined after
receipt of the request for redemption will be used in processing the redemption
request. The Fund may suspend redemption privileges or postpone the date of
payment (i) during any period that the NYSE is closed, or trading on the NYSE is
restricted as determined by the Securities and Exchange Commission (the
"Commission"); (ii) during any period when an emergency exists as defined by the
rules of the Commission, as a result of which it is not reasonably practicable
for the Fund to dispose of securities owned by it or to determine fairly the
value of its assets; and (iii) for such other periods as the Commission may
permit.
Telephone and Bank Wire Redemptions. The Fund offers shareholders the option of
redeeming shares by telephone and bank wire under certain limited conditions.
The Fund will redeem shares in this manner when so requested by the shareholder
only if the shareholder confirms redemption instructions in writing.
The Fund may rely upon confirmation of redemption requests transmitted via
facsimile (FAX# 919-972-1908). The confirmation instructions must include:
1) Designation of Class (Institutional or Investor),
2) Shareholder name and account number,
3) Number of shares or dollar amount to be redeemed,
4) Instructions for transmittal of redemption funds to the shareholder, and
5) Shareholder signature as it appears on the application then on file with
the Fund.
The net asset value used in processing the redemption request will be the net
asset value next determined after the telephone or bank wire request is
received. Redemption proceeds will not be distributed until written confirmation
of the redemption request is received, per the instructions above. You can
choose to have redemption proceeds mailed to you at your address of record, your
bank, or to any other authorized person, or you can have the proceeds sent by
bank wire to your bank ($5,000 minimum). Shares of the Fund may not be redeemed
by wire on days in which your bank is not open for business. You can change your
redemption instructions anytime you wish by filing a letter including your new
redemption instructions with the Fund. See "Signature Guarantees" below. The
Fund reserves the right to restrict or to cancel telephone and bank wire
redemption privileges for shareholders, without notice, if the Trustees believe
it to be in the best interest of the shareholders to do so. During drastic
economic and market changes, telephone redemption privileges may be difficult to
implement.
The Fund in its discretion may choose to pass through to redeeming shareholders
any charges imposed by the Custodian for wire redemptions. The Custodian
currently charges the Fund $10.00 per transaction for wiring redemption
proceeds. If this cost is passed through to redeeming shareholders by the Fund,
the charge will be deducted automatically from your account by redemption of
shares in your account. Your bank or brokerage firm may also impose a charge for
processing the wire. If wire transfer of funds is impossible or impractical, the
redemption proceeds will be sent by mail to the designated account.
You may redeem shares, subject to the procedures outlined above, by calling the
Fund at 1-800-773-3863. Redemption proceeds will only be sent to the bank
account or person named in your Fund Shares Application currently on file with
the Fund. Telephone redemption privileges authorize the Fund to act on telephone
instructions from any person representing himself or herself to be the investor
and reasonably believed by the Fund to be genuine. The Fund will employ
reasonable procedures, such as requiring a form of personal identification, to
confirm that instructions are genuine, and if it does not follow such
procedures, the Fund will be liable for any losses due to fraudulent or
unauthorized instructions. The Fund will not be liable for following telephone
instructions reasonably believed to be genuine.
Signature Guarantees. To protect your account and the Fund from fraud, signature
guarantees are required to be sure that you are the person who has authorized a
change in registration or standing instructions for your account. Signature
guarantees are required for (1) change of registration requests, (2) requests to
establish or to change exchange privileges or telephone and bank wire redemption
service other than through your initial account application, and (3) redemption
requests in excess of $50,000. Signature guarantees are acceptable from a member
bank of the Federal Reserve System, a savings and loan institution, credit union
(if authorized under state law), registered broker-dealer, securities exchange,
or association clearing agency and must appear on the written request for change
of registration, establishment or change in exchange privileges, or redemption
request.
Systematic Withdrawal Plan. A shareholder who owns shares of the Fund valued at
$250,000 or more at the current offering price may establish a Systematic
Withdrawal Plan to receive a monthly or quarterly check in a stated amount not
less than $100. Each month or quarter, as specified, the Fund will automatically
redeem sufficient shares from your account to meet the specified withdrawal
amount. The shareholder may establish this service whether dividends and
distributions are reinvested in shares of the Fund or paid in cash. Call or
write the Fund for an application form. See the Statement of Additional
Information for further details.
DIVIDENDS AND DISTRIBUTIONS
The Fund distributes substantially all of its net investment income, if any, in
the form of dividends. The Fund may pay dividends, if any, quarterly and will
distribute net realized capital gains, if any, at least annually.
Unless a shareholder elects to receive cash, dividends and capital gains will be
reinvested automatically in additional full and fractional Institutional Shares
of the Fund at the net asset value per share next determined. Shareholders
wishing to receive their dividends or capital gains in cash may make their
request in writing to the Fund, c/o North Carolina Shareholder Services at 107
North Washington Street, Post Office Box 4365, Rocky Mount, North Carolina
27803-0365. That request must be received by the Fund prior to the record date
to be effective for the next dividend. If cash payment is requested, checks will
be mailed within five business days after the last day of each quarter or the
Fund's fiscal year end, as applicable. Each shareholder of the Fund will receive
a quarterly summary of his or her account, including information regarding
reinvested dividends from the Fund. Tax consequences to shareholders of
dividends and distributions are the same if received in cash or in additional
shares of the Fund.
To satisfy certain requirements of the Code, the Fund may declare special
year-end dividend and capital gains distributions during December. Such
distributions, if received by shareholders by January 31, are deemed to have
been paid by the Fund and received by shareholders on December 31 of the prior
year.
There is no fixed dividend rate, and there can be no assurance regarding the
payment of any dividends or the realization of any gains. The Fund's net
investment income available for distribution to holders of Institutional Shares
will be reduced by the amount of any expenses allocated to the Institutional
Shares.
FEDERAL INCOME TAX INFORMATION
Taxation of the Fund. The Internal Revenue Code of 1986, as amended (the
"Code"), treats the Fund, and any other series of the Trust, as a separate,
regulated investment company. The Fund intends to remain qualified as a
regulated investment company under the Code by distributing substantially all of
its "net investment income" to shareholders and meeting other requirements of
the Code. For the purpose of calculating dividends, net investment income
consists of income accrued on portfolio assets, less accrued expenses. Upon
qualification, the Fund will not be liable for federal income taxes to the
extent earnings are distributed. The Board of Trustees retains the right for the
Fund, or any other series of the Trust, to determine for any particular year if
it is advantageous not to qualify as a regulated investment company. Regulated
investment companies, such as the Fund, are subject to a non-deductible 4%
excise tax to the extent they do not distribute the statutorily required amount
of investment income, determined on a calendar year basis, and capital gain net
income, using an October 31 year end measuring period. The Fund intends to
declare or distribute dividends during the calendar year in an amount sufficient
to prevent imposition of the 4% excise tax.
Taxation of Shareholders. For federal income tax purposes, any dividends and
distributions from short-term capital gains that a shareholder receives in cash
from the Fund or which are re-invested in additional shares will be taxable
ordinary income. If a shareholder is not required to pay a tax on income, he
will not be required to pay federal income taxes on the amounts distributed to
him. A dividend declared in October, November, or December of a year and paid in
January of the following year will be considered to be paid on December 31 of
the year of declaration.
Distributions paid by the Fund from long-term capital gains, whether received in
cash or reinvested in additional shares, are taxable as long-term capital gains,
regardless of the length of time an investor has owned shares in the Fund.
Capital gain distributions are made when the Fund realizes net capital gains on
sales of portfolio securities during the year. Dividends and capital gain
distributions paid by the Fund shortly after shares have been purchased,
although in effect a return of investment, are subject to federal income
taxation.
The sale of shares of the Fund is a taxable event and may result in a capital
gain or loss. Capital gain or loss may be realized from an ordinary redemption
of shares or an exchange of shares between two mutual funds (or two series of a
mutual fund).
The Trust will inform shareholders of the Fund of the source of their dividends
and capital gains distributions at the time they are paid and, promptly after
the close of each calendar year, will issue an information return to advise
shareholders of the federal tax status of such distributions and dividends.
Dividends and distributions may also be subject to state and local taxes.
Shareholders should consult their tax advisors regarding specific questions as
to federal, state or local taxes.
The Fund is required by federal law to withhold and to remit to the IRS 31% of
the dividends, capital gains distributions, and in certain cases, proceeds of
redemptions paid to any shareholder who fails to furnish the Fund with a correct
taxpayer identification number, who under-reports dividend or interest income or
who fails to provide certification of tax identification number. Instructions to
exchange or to transfer shares held in established accounts will be refused
until the certification has been provided. To avoid this withholding
requirement, you must certify on your application, or on a separate W-9 Form
supplied by the Fund, that your taxpayer identification number is correct and
that you are not currently subject to backup withholding, or you are exempt from
backup withholding. For individuals, your taxpayer identification number is your
social security number.
ORGANIZATION AND CAPITAL SHARES
The Fund is a series of the Capital Management Investment Trust (the "Trust"),
an open-end investment company that was organized in 1994 as a Massachusetts
business trust. The Trust is currently offering one series of shares,
representing the Fund, which shares are divided into two classes as described
below. The Board of Trustees may, in the future, authorize the issuance of other
series of capital shares (or classes of such shares) representing shares of
additional funds. All shares of the Trust, when issued, will be fully paid and
non-assessable.
The Declaration of Trust authorizes the Board of Trustees to classify and
reclassify any unissued shares into one or more classes of shares. Pursuant to
such authority, the Board of Trustees has authorized the issuance of an
unlimited number of shares in each of two classes ("Investor Shares" and
"Institutional Shares") representing equal pro rata interests in the Fund,
except that the classes bear different expenses that reflect the difference in
services provided to them.
Investor Shares of the Fund are offered to the public as an investment vehicle
for individuals, institutions, corporations, and fiduciaries. Holders of
Investor Shares bear an initial sales charge and potential ongoing shareholder
servicing and distribution fees described in the prospectus for such shares.
Institutional Shares are sold without an initial sales charge and bear no
shareholder servicing or distribution fees. As a result of these different
charges and fees, the total return on the Fund's Institutional Shares will
generally be higher than the total return on the Investor Shares. Standardized
total return quotations are computed separately for each Class of shares of the
Fund.
THIS PROSPECTUS RELATES TO THE FUND'S INSTITUTIONAL SHARES AND DESCRIBES ONLY
THE POLICIES, OPERATIONS, CONTRACTS, AND OTHER MATTERS PERTAINING TO THE
INSTITUTIONAL SHARES. THE FUND ALSO ISSUES A CLASS OF INVESTOR SHARES. SUCH
OTHER CLASS MAY HAVE DIFFERENT SALES CHARGES AND EXPENSES, WHICH MAY AFFECT
PERFORMANCE. INVESTORS MAY CALL THE FUND AT 1-800-773-3863 TO OBTAIN MORE
INFORMATION CONCERNING OTHER CLASSES AVAILABLE TO THEM. INVESTORS MAY OBTAIN
INFORMATION CONCERNING OTHER CLASSES FROM THEIR SALES REPRESENTATIVE, THE
DISTRIBUTOR, THE FUND, OR ANY OTHER PERSON WHICH IS OFFERING OR MAKING AVAILABLE
TO THEM THE SECURITIES OFFERED IN THIS PROSPECTUS.
Under Massachusetts law, shareholders of a business trust may, under certain
circumstances, be held personally liable as partners for the obligations of the
trust. The Declaration of Trust of the Trust, therefore, contains provisions
that are intended to mitigate such liability.
VOTING RIGHTS
Each outstanding share of the Trust is entitled to one vote for each full share
and a fractional vote for each fractional share on all matters which concern the
Trust as a whole. The Trust's shareholders will vote in the aggregate and not by
fund or class, 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 fund or class. Examples of matters that would
affect only a particular fund are any proposed change in the fundamental
investment objective or policies of that fund or a proposed change in the
investment advisory agreement for a fund. The shares of the Trust will have
noncumulative voting rights, which means that the holders of more than 50% of
the shares voting for the election of Trustees can elect all of the Trustees if
they so choose. The Trust may dispense with the annual meeting of shareholders
in any year in which it is not to call a meeting of shareholders for purposes of
voting on the removal of a Trustee or Trustees. Thus, there will normally be no
meeting of shareholders for the purpose of electing Trustees, and the Fund is
not expected to have an annual meeting of shareholders.
Shareholders representing 10 percent or more of the Trust's shares then
outstanding may call a meeting for the purpose of removing one or more of the
Trustees. If shareholders desire to call a meeting to consider the removal of
one or more Trustees, they will be assisted in communicating with other
shareholders. See "Capital Shares and Voting" in the Statement of Additional
Information for more information. Shareholder inquiries may be made in writing,
addressed to the Fund at the address shown on the cover of this document.
As of March 6, 1997, the following persons owned of record or beneficially more
than 25% of the Institutional Shares of the Fund: Shields Capital Corporation
401(k), 140 Broadway, New York, New York 10005, record owner with respect to
51.20% of the Institutional Shares. Accordingly this person is deemed to be a
"controlling person" of the Institutional Shares of the Fund within the meaning
of the 1940 Act.
OTHER INFORMATION
Accountants. KPMG Peat Marwick LLP, 1021 East Cary Street, Richmond, Virginia
23219-4023 served as independent auditors for the Fund for the fiscal year and
period ended November 30, 1996 and 1995. The Board of Trustees of the Trust has
selected Deloitte & Touche LLP to serve as independent auditors for the Fund for
the current fiscal year. Its address is 2500 One PPG Place, Pittsburgh,
Pennsylvania 15222-5401.
Information on the Fund. The Fund provides annual and semi-annual reports to all
shareholders. The annual reports contain audited financial statements and other
information about the Fund.
No dealer, salesman, or other person has been authorized to give any information
or to make any representations, other than those contained in this Prospectus,
and if given or made, such other information or representations must not be
relied upon as having been authorized by the Fund or the Advisor. This
Prospectus does not constitute an offering in any state in which an offering may
not lawfully be made.
The Fund reserves the right in its sole discretion to withdraw all or any part
of the offering made by this Prospectus or to reject purchase orders. All orders
to purchase shares are subject to acceptance by the Fund and are not binding
until confirmed or accepted in writing.
Investment Advisor
Capital Management Associates, Inc.
New York, New York
Distributor
Shields & Company
Member NYSE
New York, New York
Administrator
The Nottingham Company
Rocky Mount, North Carolina
Transfer Agent and Shareholder Servicing Agent
North Carolina Shareholder Services
Rocky Mount, North Carolina
1-800-773-3863
Custodian
First Union National Bank of North Carolina
Charlotte, North Carolina
CAPITAL MANAGEMENT
MID-CAP FUND
INSTITUTIONAL SHARES
PROSPECTUS
April 1, 1997
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
CAPITAL MANAGEMENT MID-CAP FUND
April 1, 1997
A series of
CAPITAL MANAGEMENT INVESTMENT TRUST
Capital Management Associates, Inc.
140 Broadway
New York, New York 10005
Telephone 1-800-773-3863
Table of Contents
INVESTMENT OBJECTIVE AND POLICIES......................................... 2
INVESTMENT LIMITATIONS.................................................... 3
MANAGEMENT................................................................ 4
ADDITIONAL INFORMATION ON PERFORMANCE..................................... 10
PORTFOLIO TRANSACTIONS.................................................... 11
SPECIAL SHAREHOLDER SERVICES.............................................. 13
PURCHASE OF SHARES........................................................ 14
REDEMPTION OF SHARES...................................................... 14
NET ASSET VALUE........................................................... 15
ADDITIONAL TAX INFORMATION................................................ 15
CAPITAL SHARES AND VOTING................................................. 17
CUSTODIAN................................................................. 17
INDEPENDENT AUDITORS...................................................... 17
APPENDIX A - DESCRIPTION OF RATINGS..................................... 18
ANNUAL REPORT OF THE FUND FOR
THE FISCAL YEAR ENDED NOVEMBER 30, 1996............................ATTACHED
This Statement of Additional Information is not a prospectus and should only be
read in conjunction with the Prospectuses of the Capital Management Mid-Cap Fund
(formerly named the Capital Management Equity Fund) (the "Fund") dated April 1,
1997, relating to the Fund's Institutional Shares and Investor Shares. The
Prospectus for each such Class of shares of the Fund may be obtained from the
Fund at the address and phone shown above at no charge.
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The investment objective and policies of the Fund are described in the
Prospectus for each Class of shares of the Fund. Supplemental information about
these policies is set forth below. Certain capitalized terms used herein are
defined in the Prospectus. The Fund, organized on October 18, 1994, has no prior
operating history.
Repurchase Agreements. The Fund may acquire U.S. Government obligations or
corporate debt securities subject to repurchase agreements. A repurchase
transaction occurs when, at the time the Fund purchases a security (normally a
U.S. Treasury obligation), it also resell it to the vendor (normally a member
bank of the Federal Reserve or a registered Government Securities dealer) and
must deliver the security (and/or securities substituted for them under the
repurchase agreement) to the vendor on an agreed upon date in the future. The
repurchase price exceeds the purchase price by an amount which reflects an
agreed upon market interest rate effective for the period of time during which
the repurchase agreement is in effect. Delivery pursuant to the resale will
occur within one to five days of the purchase.
Repurchase agreements are considered "loans" under the Investment Company Act of
1940, as amended (the "1940 Act"), collateralized by the underlying security.
The Trust will implement procedures to monitor on a continuous basis the value
of the collateral serving as security for repurchase obligations. Additionally,
the Advisor to the Fund will consider the creditworthiness of the vendor. If the
vendor fails to pay the agreed upon resale price on the delivery date, the Fund
will retain or attempt to dispose of the collateral. The Fund's risk is that
such default may include any decline in value of the collateral to an amount
which is less than 100% of the repurchase price, any costs of disposing of such
collateral, and any loss resulting from any delay in foreclosing on the
collateral. The Fund will not enter into any repurchase agreement which will
cause more than 10% of its net assets to be invested in repurchase agreements
which extend beyond seven days and other illiquid securities.
Description of Money Market Instruments. Money market instruments may include
U.S. Government obligations or corporate debt obligations (including those
subject to repurchase agreements), provided that they mature in thirteen months
or less from the date of acquisition and are otherwise eligible for purchase by
the Fund. Money market instruments also may include Banker's Acceptances and
Certificates of Deposit of domestic branches of U.S. banks, Commercial Paper,
and Variable Amount Demand Master Notes ("Master Notes"). Banker's Acceptances
are time drafts drawn on and "accepted" by a bank. When a bank "accepts" such a
time draft, it assumes liability for its payment. When the Fund acquires a
Banker's Acceptance, the bank which "accepted" the time draft is liable for
payment of interest and principal when due. The Banker's Acceptance carries the
full faith and credit of such bank. A Certificate of Deposit ("CD") is an
unsecured, interest bearing debt obligation of a bank. Commercial Paper is an
unsecured, short-term debt obligation of a bank, corporation, or other borrower.
Commercial Paper maturity generally ranges from two to 270 days and is usually
sold on a discounted basis rather than as an interest bearing instrument. The
Fund will invest in Commercial Paper only if it is rated in one of the top two
rating categories by Moody's Investors Service, Inc. ("Moody's"), Standard &
Poor's Ratings Group ("S&P"), Fitch Investors Service, Inc. ("Fitch"), or Duff &
Phelps ("D&P"), or if not rated, of equivalent quality in the Advisor's opinion.
Commercial Paper may include Master Notes of the same quality. Master Notes are
unsecured obligations which are redeemable upon demand of the holder and which
permit the investment of fluctuating amounts at varying rates of interest.
Master Notes are acquired by the Fund only through the Master Note program of
the Fund's custodian bank, acting as administrator thereof. The Advisor will
monitor, on a continuous basis, the earnings' power, cash flow, and other
liquidity ratios of the issuer of a Master Note held by the Fund.
Illiquid Investments. The Fund may invest up to 10% of its net assets in
illiquid securities, which are investments that cannot be sold or disposed of in
the ordinary course of business within seven days at approximately the prices at
which they are valued. Under the supervision of the Board of Trustees, the
Advisor determines the liquidity of the Fund's investments, and through reports
from the Advisor, the Board monitors investments in illiquid instruments. In
determining the liquidity of the Fund's investments, the Advisor may consider
various factors including (1) the frequency of trades and quotations, (2) the
number of dealers and prospective purchasers in the marketplace, (3) dealer
undertakings to make a market, (4) the nature of the security (including any
demand or tender features), and (5) the nature of the marketplace for trades
(including the ability to assign or offset the Fund's rights and obligations
relating to the investment). If through a change in values, net assets, or other
circumstances, the Fund were in a position where more than 10% of its net assets
were invested in illiquid securities, it would seek to take appropriate steps to
protect liquidity.
Restricted Securities. Within its limitation on investment in illiquid
securities, the Fund may purchase restricted securities that generally can be
sold in privately negotiated transactions, pursuant to an exemption from
registration under the federal securities laws, or in a registered public
offering. Where registration is required, the Fund may be obligated to pay all
or part of the registration expense and a considerable period may elapse between
the time it decides to seek registration and the time the Fund may be permitted
to sell a security under an effective registration statement. If during such a
period adverse market conditions were to develop, the Fund might obtain a less
favorable price than prevailed when it decided to seek registration of the
security.
Forward Commitment & When-Issued Securities. The Fund may purchase securities on
a when-issued basis or for settlement at a future date if the Fund holds
sufficient assets to meet the purchase price. In such purchase transactions, the
Fund will not accrue interest on the purchased security until the actual
settlement. Similarly, if a security is sold for a forward date, the Fund will
accrue the interest until the settlement of the sale. When-issued security
purchase and forward commitments have a higher degree of risk of price movement
before settlement due to the extended time period between the execution and
settlement of the purchase or sale. As a result, the exposure to the
counterparty of the purchase or sale is increased. Although the Fund would
generally purchase securities on a forward commitment or when-issued basis with
the intention of taking delivery, the Fund may sell such a security prior to the
settlement date if the Advisor felt such action was appropriate. In such a case,
the Fund could incur a short-term gain or loss.
INVESTMENT LIMITATIONS
The Fund has adopted the following investment limitations, which cannot be
changed without approval by holders of a majority of the outstanding voting
shares of the Fund. A "majority" for this purpose means the lesser of (i) 67% of
the Fund's outstanding shares represented in person or by proxy at a meeting at
which more than 50% of its outstanding shares are represented, or (ii) more than
50% of its outstanding shares. Unless otherwise indicated, percentage
limitations apply at the time of purchase.
As a matter of fundamental policy, the Fund may not:
(1) Issue senior securities, borrow money, or pledge its assets, except that it
may borrow from banks as a temporary measure (a) for extraordinary or
emergency purposes, in amounts not exceeding 5% of its total assets or (b)
to meet redemption requests in amounts not exceeding 15% of its total
assets. The Fund will not make any investments if borrowing exceeds 5% of
its total assets until such time as total borrowing represents less than 5%
of Fund assets;
(2) With respect to 75% of its total assets, invest more than 5% of the value
of its total assets in the securities of any one issuer or purchase more
than 10% of the outstanding voting securities of any class of securities of
any one issuer (except that securities of the U.S. government, its
agencies, and instrumentalities are not subject to this limitation);
(3) Invest 25% or more of the value of its total assets in any one industry or
group of industries (except that securities of the U.S. Government, its
agencies, and instrumentalities are not subject to this limitation);
(4) Invest for the purpose of exercising control or management of another
issuer;
(5) Purchase or sell commodities or commodities contracts; real estate
(including limited partnership interests, but excluding readily marketable
interests in real estate investment trusts or other securities secured by
real estate or interests therein or readily marketable securities issued by
companies that invest in real estate or interests therein); or interests in
oil, gas, or other mineral exploration or development programs or leases
(although it may invest in readily marketable securities of issuers that
invest in or sponsor such programs or leases);
(6) Underwrite securities issued by others except to the extent that the
disposition of portfolio securities, either directly from an issuer or from
an underwriter for an issuer, may be deemed to be an underwriting under the
federal securities laws;
(7) Invest in warrants, valued at the lower of cost or market, exceeding more
than 5% of the value of the Fund's net assets. Included within this amount,
but not to exceed 2% of the value of the Fund's net assets, may be warrants
which are not listed on the New York or American Stock Exchange;
(8) Participate on a joint or joint and several basis in any trading account in
securities;
(9) Invest its assets in the securities of one or more investment companies
except to the extent permitted by the 1940 Act; or
(10) Write, purchase, or sell puts, calls, straddles, spreads, or combinations
thereof or futures contracts or related options.
The following investment limitations are not fundamental and may be changed
without shareholder approval. As a matter of non-fundamental policy, the Fund
may not:
(1) Invest in securities of issuers which have a record of less than three
years' continuous operation (including predecessors and, in the case of
bonds, guarantors) if more than 5% of its total assets would be invested in
such securities;
(2) Invest more than 10% of its net assets in illiquid securities. For this
purpose, illiquid securities include, among others, (a) securities for
which no readily available market exists or which have legal or contractual
restrictions on resale, (b) fixed-time deposits that are subject to
withdrawal penalties and have maturities of more than seven days, and (c)
repurchase agreements not terminable within seven days;
(3) Invest in the securities of any issuer if those officers or Trustees of the
Trust and those officers and directors of the Advisor who individually own
more than 1/2 of 1% of the outstanding securities of such issuer together
own more than 5% of such issuer's securities;
(4) Make loans of money or securities, except that the Fund may invest in
repurchase agreements;
(5) Make short sales of securities or maintain a short position, except short
sales "against the box." (A short sale is made by selling a security the
Fund does not own. A short sale is "against the box" to the extent that the
Fund contemporaneously owns or has the right to obtain at no additional
cost securities identical to those sold short.) While the Fund has reserved
the right to make short sales "against the box," the Advisor has no present
intention of engaging in such transactions at this time or during the
coming year.
MANAGEMENT
Trustees and Officers. Following are the Trustees and Officers of the Capital
Management Investment Trust (the "Trust"), their age, their present position
with the Trust or the Fund, and their principal occupation during the past five
years. Those Trustees who are "interested persons" (as defined in the 1940 Act)
by virtue of their affiliation with either the Trust or the Advisor, are
indicated by an asterisk (*). Messrs. David V. Shields and Joseph V. Shields,
Jr. are brothers.
Name, Age, Position(s) with Principal Occupation(s)
Fund and/or Trust, and Address During Past 5 Years
- ------------------------------ -------------------
Lucius E. Burch, III 55 Chairman and Chief Executive Officer
Trustee Massey Burch Investment Group, Inc.
438 Rosemeade Lane (venture capital firm)
Naples, Florida 33999 Nashville, Tennessee
C. Lennis Koontz, II 54 Senior Vice President
President Capital Management Associates, Inc.
140 Broadway (Advisor to the Fund)
New York, New York 10005 New York, New York,
since 1992; previously,
Portfolio Manager
Smith Barney Capital Management
New York, New York
J. Hope Reese 36 Comptroller
Treasurer The Nottingham Company
105 North Washington Street (Administrator to the Fund)
Rocky Mount, North Carolina 27802 Rocky Mount, North Carolina,
since 1995; previously
Cash Manager
Law Companies Group
Atlanta, Georgia,
since 1993; previously
Financial Manager
MGR Food Services
Atlanta, Georgia,
since 1992; previously
Accounts Receivable Manager
Atlanta Coca-Cola Bottling Co.
Atlanta, Georgia
Thomas A. Saunders, III 60 General Partner
Trustee Saunders Karp & Company
667 Madison Avenue (merchant bank)
21st Floor New York, New York
New York, New York 10021
David V. Shields 57 Managing Director
Trustee* Capital Management Associates, Inc.
140 Broadway (Advisor to the Fund)
New York, New York 10005 New York, New York;
Managing Director
Shields & Company
(Distributor of the Fund)
New York, New York
Joseph V. Shields, Jr. 58 Chairman and Chief Executive Officer
Chairman and Trustee* Capital Management Associates, Inc.
140 Broadway (Advisor to the Fund)
New York, New York 10005 New York, New York;
Managing Director
Shields & Company
(Distributor to the Fund)
New York, New York
Anthony J. Walton 54 Chief Executive Officer
Trustee Armstrong Holdings Corporation
230 Park Avenue (investment and corporate finance
Suite 1440 advisory firm)
New York, New York 10169 New York, New York,
since 1995;
Vice Chairman
Petsec Energy, Inc.
(exploration and production
company),
Sydney, Australia, and
Lafayette, Louisiana,
since 1995; previously
Chief Executive Officer
Llama Company
Fayetteville, Arkansas
C. Frank Watson, III 26 Vice President
Secretary The Nottingham Company
105 North Washington Street (Administrator to the Fund)
Rocky Mount, North Carolina 27802 Rocky Mount, North Carolina,
since 1992; previously,
Student University of North Carolina
Chapel Hill, North Carolina
Joseph A. Zock 44 Senior Vice President
Vice President Capital Management Associates, Inc.
140 Broadway (Advisor to the Fund)
New York, New York 10005 New York, New York
Compensation. Trustees and Officers of the Trust who are interested persons of
the Trust or the Advisor will receive no salary or fees from the Trust. Other
Trustees will receive $2,000 each year plus $250 per Fund per meeting attended
in person and $100 per Fund per meeting attended by telephone. The Trust will
also reimburse each Trustee for his or her travel and other expenses relating to
attendance at such meetings.
COMPENSATION TABLE*
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Pension Total
Retirement Compensation
Aggregate Benefits Estimated from the
Compensation Accrued As Annual Trust
Name of Person, from the Part of Fund Benefits Upon Paid to
Position Trust Expenses Retirement Trustees
Lucius E. Burch, III $2,500 None None $2,500
Trustee
Thomas A. Saunders, III $2,500 None None $2,500
Trustee
David V. Shields None None None None
Trustee
Joseph V. Shields, Jr. None None None None
Trustee
Anthony J. Walton $2,350 None None $2,350
Trustee
*Figures are for the fiscal period ended November 30, 1996.
</TABLE>
Principal Holders of Voting Securities. As of March 6, 1997, the Trustees and
Officers of the Trust as a group owned beneficially (i.e., had voting and/or
investment power) less than 1% of the then outstanding shares of each Class of
the Fund. On the same date the following shareholders owned of record more than
5% of the outstanding shares of beneficial interest of each Class of the Fund.
Except as provided below, no person is known by the Trust to be the beneficial
owner of more than 5% of the outstanding shares of any Class of the Fund as of
March 6, 1997.
Institutional Class
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership* Percent
Shields Capital Corporation 401(k) 133,055.273 51.20%**
140 Broadway,
New York, New York 10005
Brookwood Endowment Fund 17,335.186 6.67%
120 Wall Street
New York, New York 10006
Estate of Rt. Muggridge, Jr. 15,319.539 5.90%
120 Wall Street
New York, New York 10006
Investor Class
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership* Percent
Cm. Chapin Ryan Thomas 7,103.358 13.12%
120 Wall Street
New York, New York 10006
Cm. Chapin Ryan, Jr. 6,026.147 11.13%
120 Wall Street
New York, New York 10006
DR/Pantrade Inc. 5,166.783 9.54%
120 Wall Street
New York, New York 10006
Cyr. A. Ryan, Tte Ryan, Jr. C. 3,804.725 7.03%
120 Wall Street
New York, New York 10006
Cyr. A. Ryan, Tte Ryan Thom. 3,804.725 7.03%
120 Wall Street
New York, New York 10006
Cyr. A. Ryan, Tte Ryan Nath. 3,804.725 7.03%
120 Wall Street
New York, New York 10006
Cyr. A. Ryan, Tte Ryan, Jean 3,804.725 7.03%
120 Wall Street
New York, New York 10006
Cm. Chapin Ryan Jean 3,320.502 6.13%
120 Wall Street
New York, New York 10006
* The shares indicated are believed by the Trust to be owned beneficially by the
indicated parties and held in sub-accounts by the record holder, Dillon Read &
Company, 120 Wall Street, New York, New York 10006.
** Pursuant to applicable SEC regulations, this shareholder is deemed to control
this Class of shares of the Fund.
</TABLE>
Investment Advisor. Information about Capital Management Associates, Inc. (the
"Advisor"), 140 Broadway, New York, New York 10005 and its duties and
compensation as Advisor is contained in the Prospectus. The Advisor supervises
the Fund's investments pursuant to an Investment Advisory Agreement (the
"Advisory Agreement"). The Advisory Agreement is effective for a one-year period
and will be renewed thereafter only so long as such renewal and continuance is
specifically approved at least annually by the Board of Trustees or by vote of a
majority of the Fund's outstanding voting securities, provided the continuance
is also approved by a majority of the Trustees who are not parties to the
Advisory Agreement or interested persons of any such party. The Advisory
Agreement is terminable without penalty on 60-days' notice by the Board of
Trustees of the Trust or by vote of a majority of the outstanding voting
securities of the Fund. The Advisory Agreement provides that it will terminate
automatically in the event of its assignment.
The Advisor will receive a monthly management fee equal to an annual rate of
1.00% of the first $100 million of the Fund's 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. The Advisor has voluntarily waived its fee and reimbursed all or a
portion of the Fund's operating expenses for the fiscal year and period ended
November 30, 1996 and 1995. The total fees waived amounted to $34,561 and
$12,413, respectively, and expenses reimbursed amounted to $97,598 and $72,059,
respectively.
Under the Advisory Agreement, the Advisor is not liable for any error of
judgment or mistake of law or for any loss suffered by the Fund in connection
with the performance of such Agreement, except a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services; or a
loss resulting from willful misfeasance, bad faith, or gross negligence on the
part of the Advisor in the performance of its duties; or from its reckless
disregard of its duties and obligations under the Agreement.
The employees of the Advisor control the Advisor. Affiliates of the Advisor also
control the Distributor.
The Administrator and Transfer Agent. The Trust has entered into a Fund
Accounting, Dividend Disbursing & Transfer Agent and Administration Agreement
with The Nottingham Company (the "Administrator"), 105 North Washington Street,
Post Office Drawer 69, Rocky Mount, North Carolina 27802-0069, pursuant to which
the Administrator receives a fee at the following annual rates: on the first $50
million of the Fund's net assets, 0.20%; on the next $50 million, 0.175%; on all
assets over $100 million, 0.15%. For the fiscal year and period ended November
30, 1996 and 1995, the Fund paid an administrative fee of $6,912 and $7,352,
respectively. In addition, the Administrator currently receives a monthly fee of
$2,000 for the first class of the Fund and $750 for each additional class of the
Fund for accounting and recordkeeping services for the Fund. For the fiscal year
and period ended November 30, 1996 and 1995, the Administrator received $33,000
and $23,500, respectively, for such services. The Administrator also charges the
Fund for certain costs involved with the daily valuation of investment
securities and is reimbursed for out-of-pocket expenses. The Administrator
charges a minimum fee of $3,000 per month for all of its fees taken in the
aggregate, analyzed monthly.
The Administrator will perform the following services for the Fund: (1)
coordinate with the Custodian and monitor the services it provides to the Fund;
(2) coordinate with and monitor any other third parties furnishing services to
the Fund; (3) provide the Fund with necessary office space, telephones, and
other communications facilities and personnel competent to perform
administrative and clerical functions for the Fund; (4) supervise the
maintenance by third parties of such books and records of the Fund as may be
required by applicable federal or state law; (5) prepare or supervise the
preparation by third parties of all federal, state, and local tax returns and
reports of the Fund required by applicable law; (6) prepare and, after approval
by the Trust, file and arrange for the distribution of proxy materials and
periodic reports to shareholders of the Fund as required by applicable law; (7)
prepare and, after approval by the Trust, arrange for the filing of such
registration statements and other documents with the Securities and Exchange
Commission and other federal and state regulatory authorities as may be required
by applicable law; (8) review and submit to the officers of the Trust for their
approval invoices or other requests for payment of Fund expenses and instruct
the Custodian to issue checks in payment thereof; and (9) take such other action
with respect to the Fund as may be necessary in the opinion of the Administrator
to perform its duties under the agreement. The Administrator also provides
certain accounting and pricing services for the Fund.
With the approval of the Trust, the Administrator has contracted with North
Carolina Shareholder Services, LLC (the "Transfer Agent"), a North Carolina
limited liability company, to serve as transfer, dividend paying, and
shareholder servicing agent for the Fund. The Transfer Agent is compensated for
its services by the Administrator and not directly by the Fund. The address of
the Transfer Agent is 107 North Washington Street, Post Office Box 4365, Rocky
Mount, North Carolina 27803-0365.
Distributor. Shields & Company (the "Distributor") is the principal underwriter
and distributor of Fund shares pursuant to a Distribution Agreement with the
Trust. The Distributor, which is affiliated with the Advisor, serves as
exclusive agent for the distribution of the shares of the Fund. The Distributor
may sell such shares to or through qualified securities dealers or others. The
Distributor receives commissions consisting of that portion of the sales charge
for Investor Shares remaining after the discounts which it allows to dealers.
For the fiscal year and period ended November 30, 1996 and 1995, the aggregate
dollar amount of sales charges paid on the sale of Investor Shares was $15,356
and $4,094, respectively, of which the Distributor retained $303 and $1,109,
respectively, after reallowances to broker-dealers and sales representatives.
J.V. Shields, Jr., David V. Shields, and Richard B. Thatcher, affiliated persons
of the Fund, are also affiliated persons of the Advisor and the Distributor.
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1 of
the 1940 Act for the Investor Shares (see "Management of the Fund - Distribution
Plan" in the Prospectus for the Investor Shares). As required by Rule 12b-1, the
Plan (together with the Distribution Agreement) has been approved by the Board
of Trustees and separately by a majority of the Trustees who are not interested
persons of the Trust and who have no direct or indirect financial interest in
the operation of the Plan and the Distribution Agreement.
Potential benefits of the Plan to the Fund include improved shareholder
services, savings to the Fund in transfer agency costs, savings to the Fund in
advisory fees and other expenses, benefits to the investment process through
growth and stability of assets, and maintenance of a financially healthy
management organization. The continuation of the Plan must be considered by the
Board of Trustees annually.
Under the Plan the Fund may expend up to 0.75% of the Investor Shares' average
daily net assets annually to finance any activity primarily intended to result
in the sale of Investor Shares and the servicing of shareholder accounts,
provided the Trust's Board of Trustees has approved the category of expenses for
which payment is being made. Such expenditures paid as service fees to any
person who sells Investor Shares may not exceed 0.25% of the Investor Shares'
average annual net asset value. For the fiscal year ended November 30, 1996, the
Fund paid distribution and service fees under the Plan in the amount of $4,613.
This amount was paid to sales personnel for selling Fund shares and servicing
shareholder accounts.
ADDITIONAL INFORMATION ON PERFORMANCE
From time to time, the total return of each Class of the Fund may be quoted in
advertisements, sales literature, shareholder reports, or other communications
to shareholders. The Fund computes the "average annual total return" of each
Class of the Fund by determining the average annual compounded rates of return
during specified periods that equate the initial amount invested to the ending
redeemable value of such investment. This is done by determining the ending
redeemable value of a hypothetical $1,000 initial payment. This calculation is
as follows:
P(1+T)n = ERV
Where: T = average annual total return.
ERV = ending redeemable value at the end of the period
covered by the computation of a hypothetical $1,000
payment made at the beginning of the period.
P = hypothetical initial payment of $1,000 from which
the maximum sales load is deducted.
n = period covered by the computation, expressed in terms
of years.
The Fund may also compute the aggregate total return of each Class of the Fund,
which is calculated in a similar manner, except that the results are not
annualized.
The calculation of average annual total return and aggregate total return assume
that the maximum sales load is deducted from the initial $1,000 investment at
the time it is made and that there is a reinvestment of all dividends and
capital gain distributions on the reinvestment dates during the period. The
ending redeemable value is determined by assuming complete redemption of the
hypothetical investment and the deduction of all nonrecurring charges at the end
of the period covered by the computations. The Fund may also quote other total
return information that does not reflect the effects of the sales load.
The average annual total return for the Investor Shares of the Fund for the
fiscal year ended November 30, 1996, and for the period from the inception of
the Investor Shares of the Fund (April 7, 1995) through November 30, 1996, was
16.02% and 16.06%, respectively. The cumulative total return for the Investor
Shares of the Fund since inception through November 30, 1996 was 27.90%. These
quotations assume the maximum 3% sales load was deducted from the initial
investment. Without reflecting the effects of the maximum 3% sales load, the
average annual total return for the Investor Shares for the fiscal year ended
November 30, 1996 and for the period since inception through November 30, 1996,
was 19.61% and 18.22%, respectively. The cumulative total return for the
Investor Shares of the Fund since inception through November 30, 1996, without
deducting the maximum 3% sales load, was 31.85%.
The average annual total return for the Institutional Shares of the Fund for the
fiscal year ended November 30, 1996, and for the period from the inception of
the Institutional Shares of the Fund (January 27, 1995) through November 30,
1996, was 19.57% and 23.27%, respectively. The cumulative total return for the
Institutional Shares of the Fund since inception through November 30, 1996, was
47.07%.
These performance quotations should not be considered as representative of the
Fund's performance for any specified period in the future.
The Fund's performance may be compared in advertisements, sales literature,
shareholder reports, and other communications to the performance of other mutual
funds having similar objectives or to standardized indices or other measures of
investment performance. In particular, the Fund may compare its performance to
the S&P 500 Index, which is generally considered to be representative of the
performance of unmanaged common stocks that are publicly traded in the United
States securities markets. The Fund may also compare its performance to the S&P
MidCap 400 Index, which is designed to measure the investment performance of
medium-capitalization equities such as those in which the Fund invests, and the
Lipper Capital Appreciation Index, which ranks the performance of mutual funds
that have an objective of growth of capital. Comparative performance may also be
expressed by reference to a ranking prepared by a mutual fund monitoring service
or by one or more newspapers, newsletters, or financial periodicals. The Fund
may also occasionally cite statistics to reflect its volatility and risk. The
Fund may also compare its performance to other published reports of the
performance of unmanaged portfolios of companies. The performance of such
unmanaged portfolios generally does not reflect the effects of dividends or
dividend reinvestment. Of course, there can be no assurance the Fund will
experience the same results. Performance comparisons may be useful to investors
who wish to compare the Fund's past performance to that of other mutual funds
and investment products. Of course, past performance is not a guarantee of
future results.
The Fund's performance fluctuates on a daily basis largely because net earnings
and net asset value per share fluctuate daily. Both net earnings and net asset
value per share are factors in the computation of total return as described
above.
As indicated, from time to time the Fund may advertise its performance compared
to similar funds or portfolios using certain indices, reporting services, and
financial publications. These may include the following:
o Lipper Analytical Services, Inc., ranks funds in various fund categories
by making comparative calculations using total return. Total return
assumes the reinvestment of all capital gains distributions and income
dividends and takes into account any change in net asset value over a
specific period of time.
o Morningstar, Inc., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for
two weeks.
Investors may use such indices in addition to the Fund's Prospectus to obtain a
more complete view of the Fund's performance before investing. Of course, when
comparing the Fund's performance to any index, factors such as composition of
the index and prevailing market conditions should be considered in assessing the
significance of such comparisons. When comparing funds using reporting services,
or total return, investors should take into consideration any relevant
differences in funds such as permitted portfolio compositions and methods used
to value portfolio securities and to compute offering price. Advertisements and
other sales literature for the Fund may quote total returns that are calculated
on non-standardized base periods. The total returns represent the historic
change in the value of an investment in the Fund based on monthly reinvestment
of dividends over a specified period of time.
From time to time the Fund may include in advertisements and other
communications charts and illustrations relating to inflation and the effects of
inflation on the dollar, including the purchasing power of the dollar at various
rates of inflation. The Fund may also disclose from time to time information
about its portfolio allocation and holdings at a particular date (including
ratings of securities assigned by independent rating services such as S&P and
Moody's). The Fund may also depict the historical performance of the securities
in which the Fund may invest over periods reflecting a variety of market or
economic conditions either alone or in comparison with alternative investments,
performance indices of those investments, or economic indicators. The Fund may
also include in advertisements and in materials furnished to present and
prospective shareholders statements or illustrations relating to the
appropriateness of types of securities and/or mutual funds that may be employed
to meet specific financial goals, such as saving for retirement, children's
education, or other future needs.
PORTFOLIO TRANSACTIONS
Subject to the general supervision of the Trust's Board of Trustees, the Advisor
is responsible for, makes decisions with respect to, and places orders for all
purchases and sales of portfolio securities for the Fund.
The annualized portfolio turnover rate for the Fund is calculated by dividing
the lesser of purchases or sales of portfolio securities for the reporting
period by the monthly average value of the portfolio securities owned during the
reporting period. The calculation excludes all securities whose maturities or
expiration dates at the time of acquisition are one year or less. Portfolio
turnover of the Fund may vary greatly from year to year as well as within a
particular year, and may be affected by cash requirements for redemption of
shares and by requirements that enable the Fund to receive favorable tax
treatment. Portfolio turnover will not be a limiting factor in making Fund
decisions, and the Fund may engage in short-term trading to achieve its
investment objectives.
Purchases of money market instruments by the Fund are made from dealers,
underwriters, and issuers. The Fund currently does not expect to incur any
brokerage commission expense on such transactions because money market
instruments are generally traded on a "net" basis by a dealer acting as
principal for its own account without a stated commission. The price of the
security, however, usually includes a profit to the dealer. Securities purchased
in underwritten offerings include a fixed amount of compensation to the
underwriter, generally referred to as the underwriter's concession or discount.
When securities are purchased directly from or sold directly to an issuer, no
commissions or discounts are paid.
Transactions on U.S. stock exchanges involve the payment of negotiated brokerage
commissions. On exchanges on which commissions are negotiated, the cost of
transactions may vary among different brokers. Transactions in the
over-the-counter market are generally on a net basis (i.e., without commission)
through dealers, or otherwise involve transactions directly with the issuer of
an instrument.
The Fund may participate, if and when practicable, in bidding for the purchase
of Fund securities directly from an issuer in order to take advantage of the
lower purchase price available to members of a bidding group. The Fund will
engage in this practice, however, only when the Advisor, in its sole discretion,
believes such practice to be otherwise in the Fund's interest.
In executing Fund transactions and selecting brokers or dealers, the Advisor
will seek to obtain the best overall terms available for the Fund. In assessing
the best overall terms available for any transaction, the Advisor shall consider
factors it deems relevant, including the breadth of the market in the security,
the price of the security, the financial condition and execution capability of
the broker or dealer, and the reasonableness of the commission, if any, both for
the specific transaction and on a continuing basis. The sale of Fund shares may
be considered when determining the firms that are to execute brokerage
transactions for the Fund. In addition, the Advisor is authorized to cause the
Fund to pay a broker-dealer which furnishes brokerage and research services a
higher commission than that which might be charged by another broker-dealer for
effecting the same transaction, provided that the Advisor determines in good
faith that such commission is reasonable in relation to the value of the
brokerage and research services provided by such broker-dealer, viewed in terms
of either the particular transaction or the overall responsibilities of the
Advisor to the Fund. Such brokerage and research services might consist of
reports and statistics relating to specific companies or industries; general
summaries of groups of stocks or bonds and their comparative earnings and
yields; or broad overviews of the stock, bond, and government securities
markets; and the economy.
Supplementary research information so received is in addition to, and not in
lieu of, services required to be performed by the Advisor and does not reduce
the advisory fees payable by the Fund. The Trustees will periodically review any
commissions paid by the Fund to consider whether the commissions paid over
representative periods of time appear to be reasonable in relation to the
benefits inuring to the Fund. It is possible that certain of the supplementary
research or other services received will primarily benefit one or more other
investment companies or other accounts for which investment discretion is
exercised by the Advisor. Conversely, the Fund may be the primary beneficiary of
the research or services received as a result of securities transactions
effected for such other account or investment company.
The Advisor may also utilize a brokerage firm affiliated with the Trust or the
Advisor (including the Distributor, an affiliate of the Advisor) if it believes
it can obtain the best execution of transactions from such broker. The Fund will
not execute portfolio transactions through, acquire securities issued by, make
savings deposits in, or enter into repurchase agreements with the Advisor or an
affiliated person of the Advisor (as such term is defined in the 1940 Act)
acting as principal, except to the extent permitted by the Securities and
Exchange Commission ("SEC"). In addition, the Fund will not purchase securities
during the existence of any underwriting or selling group relating thereto of
which the Advisor, or an affiliated person of the Advisor, is a member, except
to the extent permitted by the SEC. Under certain circumstances, the Fund may be
at a disadvantage because of these limitations in comparison with other
investment companies that have similar investment objectives but are not subject
to such limitations.
Investment decisions for the Fund will be made independently from those for any
other series of the Trust, if any, and for any other investment companies and
accounts advised or managed by the Advisor. Such other investment companies and
accounts may also invest in the same securities as the Fund. To the extent
permitted by law, the Advisor may aggregate the securities to be sold or
purchased for the Fund with those to be sold or purchased for other investment
companies or accounts in executing transactions. When a purchase or sale of the
same security is made at substantially the same time on behalf of the Fund and
another investment company or account, the transaction will be averaged as to
price and available investments allocated as to amount in a manner which the
Advisor believes to be equitable to the Fund and such other investment company
or account. In some instances, this investment procedure may adversely affect
the price paid or received by the Fund or the size of the position obtained or
sold by the Fund.
For the fiscal year and period ended November 30, 1996 and 1995, the Fund paid
brokerage commissions of $14,523 and $7,588, respectively, of which $14,367 and
$1,665, respectively, was paid during such periods to the Distributor. For the
fiscal year ended November 30, 1996, transactions in which the Fund used the
Distributor as broker involved 99.01% of the aggregate dollar amount of
transactions involving the payment of commissions and 98.93% of the aggregate
brokerage commissions paid by the Fund.
SPECIAL SHAREHOLDER SERVICES
The Fund offers the following shareholder services:
Regular Account. The regular account allows for voluntary investments to be made
at any time. Available to individuals, custodians, corporations, trusts,
estates, corporate retirement plans, and others, investors are free to make
additions and withdrawals to or from their account as often as they wish. When
an investor makes an initial investment in the Fund, a shareholder account is
opened in accordance with the investor's registration instructions. Each time
there is a transaction in a shareholder account, such as an additional
investment or the reinvestment of a dividend or distribution, the shareholder
will receive a confirmation statement showing the current transaction and all
prior transactions in the shareholder account during the calendar year to date,
along with a summary of the status of the account as of the transaction date. As
stated in the Prospectus, share certificates are not issued.
Automatic Investment Plan. The automatic investment plan enables shareholders to
make regular monthly or quarterly investments in shares through automatic
charges to their checking account. With shareholder authorization and bank
approval, the Administrator will automatically charge the checking account for
the amount specified ($100 minimum) which will be automatically invested in
shares at the public offering price on or about the 21st day of the month. The
shareholder may change the amount of the investment or discontinue the plan at
any time by writing to the Fund.
Systematic Withdrawal Plan. Shareholders owning shares with a value of $10,000
or more for Investor Shares and $250,000 or more for Institutional Shares may
establish a Systematic Withdrawal Plan. A shareholder may receive monthly or
quarterly payments, in amounts of not less than $100 per payment, by authorizing
the Fund to redeem the necessary number of shares periodically (each month, or
quarterly in the months of March, June, September, and December) in order to
make the payments requested. The Fund has the capability of electronically
depositing the proceeds of the systematic withdrawal directly to the
shareholder's personal bank account ($5,000 minimum per bank wire). Instructions
for establishing this service are included in the Fund Shares Application,
enclosed in the Prospectus, or are available by calling the Fund. If the
shareholder prefers to receive his systematic withdrawal proceeds in cash, or if
such proceeds are less than the $5,000 minimum for a bank wire, checks will be
made payable to the designated recipient and mailed within seven days of the
valuation date. If the designated recipient is other than the registered
shareholder, the signature of each shareholder must be guaranteed on the
application (see "Signature Guarantees" in the Prospectus). A corporation (or
partnership) must also submit a "Corporate Resolution" (or "Certification of
Partnership") indicating the names, titles, and required number of signatures
authorized to act on its behalf. The application must be signed by a duly
authorized officer(s) and the corporate seal affixed. No redemption fees are
charged to shareholders under this plan. Costs in conjunction with the
administration of the plan are borne by the Fund. Shareholders should be aware
that such systematic withdrawals may deplete or use up entirely their initial
investment and may result in realized long-term or short-term capital gains or
losses. The Systematic Withdrawal Plan may be terminated at any time by the Fund
upon 60-days' written notice or by a shareholder upon written notice to the
Fund. Applications and further details may be obtained by calling the Fund at
1-800-773-3863 or by writing to:
Capital Management Mid-Cap Fund
c/o North Carolina Shareholder Services
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
Purchases in Kind. The Fund may accept securities in lieu of cash in payment for
the purchase of shares in the Fund. The acceptance of such securities is at the
sole discretion of the Advisor based upon the suitability of the securities
accepted for inclusion as a long-term investment of the Fund, the marketability
of such securities, and other factors which the Advisor may deem appropriate. If
accepted, the securities will be valued using the same criteria and methods as
described in "How Net Asset Value is Determined" in the Prospectus.
Redemptions in Kind. The Fund does not intend, under normal circumstances, to
redeem its securities by payment in kind. It is possible, however, that
conditions may arise in the future which would, in the opinion of the Trustees,
make it undesirable for the Fund to pay for all redemptions in cash. In such
case the Board of Trustees may authorize payment to be made in readily
marketable portfolio securities of the Fund. Securities delivered in payment of
redemptions would be valued at the same value assigned to them in computing the
net asset value per share. Shareholders receiving them would incur brokerage
costs when these securities are sold. An irrevocable election has been filed
under Rule 18f-1 of the 1940 Act, wherein the Fund committed itself to pay
redemptions in cash, rather than in kind, to any shareholder of record of the
Fund who redeems during any 90-day period, the lesser of (a) $250,000 or (b) one
percent (1%) of the Fund's net asset value at the beginning of such period.
Transfer of Registration. To transfer shares to another owner, send a written
request to the Fund at the address shown above. Your request should include the
following: (1) the Fund name and existing account registration; (2) signature(s)
of the registered owner(s) exactly as the signature(s) appear(s) on the account
registration; (3) the new account registration, address, social security or
taxpayer identification number, and how dividends and capital gains are to be
distributed; (4) signature guarantees (See the Prospectus under the heading
"Signature Guarantees"); and (5) any additional documents which are required for
transfer by corporations, administrators, executors, trustees, guardians, etc.
If you have any questions about transferring shares, call or write the Fund.
PURCHASE OF SHARES
The purchase price of shares of the Fund is the net asset value next determined
after the order is received, plus a sales charge for the Investor Shares as more
fully described in the Prospectus for Investor Shares. An order received prior
to 4:00 p.m. New York time will be executed at the price computed as of 4:00
p.m. on the date of receipt, and an order received after 4:00 p.m. New York time
will be executed at the price computed as of that time on the next business day.
The basis for determining the sales charge applicable to a purchase of Investor
Shares and how the sales charge is distributed between the Distributor and other
dealers is described in the Prospectus for the Investor Shares under "How to
Purchase Shares."
The Fund reserves the right in its sole discretion (i) to suspend the offering
of its shares, (ii) to reject purchase orders when in the judgment of management
such rejection is in the best interest of the Fund and its shareholders, and
(iii) to reduce or to waive the minimum for initial and subsequent investments
under circumstances where certain economies can be achieved in sales of Fund
shares.
Employees and Affiliates of the Fund. The Fund has adopted initial investment
minimums for the purpose of reducing the cost to the Fund (and consequently to
the shareholders) of communicating with and servicing its shareholders. In
keeping with this purpose, a reduced minimum initial investment of $1,000
applies to Trustees, officers, and employees of the Fund; the Advisor and
certain parties related thereto; including clients of the Advisor or any
sponsor, officer, committee member thereof, or the immediate family of any of
them. The Fund may also sell shares at net asset value without a sales charge to
such persons. In addition, accounts having the same mailing address may be
aggregated for purposes of the minimum investment if they consent in writing to
sharing a single mailing of shareholder reports, proxy statements (but each such
shareholder would receive his/her own proxy) and other Fund literature.
REDEMPTION OF SHARES
The Fund may suspend redemption privileges or postpone the date of payment (i)
during any period that the New York Stock Exchange (the "NYSE") is closed for
other than customary weekend and holiday closings, or that trading on the NYSE
is restricted as determined by the Securities and Exchange Commission (the
"Commission"); (ii) during any period when an emergency exists as defined by the
rules of the Commission as a result of which it is not reasonably practicable
for the Fund to dispose of securities owned by it, or to determine fairly the
value of its assets; and (iii) for such other periods as the Commission may
permit. The Fund may also suspend or postpone the recordation of the transfer of
shares upon the occurrence of any of the foregoing conditions. Any redemption
may be more or less than the shareholder's cost depending on the market value of
the securities held by the Fund. No charge is made by the Fund for redemptions
other than the possible charge for wiring redemption proceeds.
In addition to the situations described in the Prospectus under "How to Redeem
Shares," the Fund may redeem shares involuntarily to reimburse the Fund for any
loss sustained by reason of the failure of a shareholder to make full payment
for shares purchased by the shareholder or to collect any charge relating to a
transaction effected for the benefit of a shareholder which is applicable to
Fund shares as provided in the Prospectus from time to time.
NET ASSET VALUE
The net asset value per share of each Class of Shares of the Fund is determined
at 4:00 p.m., New York time, Monday through Friday, except on business holidays
when the NYSE is closed. The NYSE recognizes the following holidays: New Year's
Day, President's Day, Good Friday, Memorial Day, Fourth of July, Labor Day,
Thanksgiving Day, and Christmas Day. Any other holiday recognized by the NYSE
will be considered a business holiday on which the net asset value of each Class
of Shares of the Fund will not be calculated.
The net asset value per share of each Class of the Fund is calculated separately
by adding the value of the Fund's securities and other assets belonging to the
Fund and attributable to that Class, subtracting the liabilities charged to the
Fund and to that Class, and dividing the result by the number of outstanding
shares of such Class. "Assets belonging to" the Fund consist of the
consideration received upon the issuance of shares of the Fund together with all
net investment income; realized gains/losses and proceeds derived from the
investment thereof, including any proceeds from the sale of such investments;
any funds or payments derived from any reinvestment of such proceeds; and a
portion of any general assets of the Trust not belonging to a particular
investment Fund. Income, realized and unrealized capital gains and losses, and
any expenses of the Fund not allocated to a particular Class of the Fund will be
allocated to each Class of the Fund on the basis of the net asset value of that
Class in relation to the net asset value of the Fund. Assets belonging to the
Fund are charged with the direct liabilities of the Fund and with a share of the
general liabilities of the Trust, which are normally allocated in proportion to
the number of or the relative net asset values of all of the Trust's series at
the time of allocation or in accordance with other allocation methods approved
by the Board of Trustees. Certain expenses attributable to a particular Class of
shares (such as the distribution and service fees attributable to Investor
Shares) will be charged against that Class of shares. Certain other expenses
attributable to a particular Class of shares (such as registration fees,
professional fees, and certain printing and postage expenses) may be charged
against that Class of shares if such expenses are actually incurred in a
different amount by that Class, or if the Class receives services of a different
kind or to a different degree than other Classes, and the Board of Trustees
approves such allocation. Subject to the provisions of the Declaration of Trust,
determinations by the Board of Trustees as to the direct and allocable
liabilities, and the allocable portion of any general assets, with respect to
the Fund and the Classes of the Fund are conclusive.
For the fiscal year and period ended November 30, 1996 and 1995, the total
expenses of the Fund, after voluntary fee waivers and expense reimbursements,
were $0 (0.00% of the average daily net assets of each Class of the Fund) and
$4,149 (0.31% of the average daily net assets of the Institutional Shares of the
Fund and 1.06% of the average daily net assets of the Investor Shares of the
Fund), respectively.
ADDITIONAL TAX INFORMATION
The following summarizes certain additional tax considerations generally
affecting the Fund and its shareholders that are not described in the
Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of the Fund or its shareholders. The discussion here and in the
Prospectus is not intended as a substitute for careful tax planning and is based
on tax laws and regulations that are in effect on the date hereof; such laws and
regulations may be changed by legislative, judicial, or administrative action.
Investors are advised to consult their tax advisors with specific reference to
their own tax situations.
The Fund, and any other series of the Trust, will be treated as a separate
corporate entity under the Code. The Fund intends to qualify and to remain
qualified as a regulated investment company. To so qualify, the Fund must elect
to be a regulated investment company or have made such an election for a
previous year and must satisfy, in addition to the distribution requirement
described in the Prospectus, certain requirements with respect to the source of
its income for a taxable year. At least 90% of the gross income of the Fund must
be derived from dividends; interest; payments with respect to securities loans,
gains from the sale or other disposition of stocks, securities, or foreign
currencies; and other income derived with respect to the Fund's business of
investing in such stock, securities, or currencies. Any income derived by the
Fund from a partnership or trust is treated as derived with respect to the
Fund's business of investing in stock, securities, or currencies only to the
extent that such income is attributable to items of income that would have been
qualifying income if realized by the Fund in the same manner as by the
partnership or trust.
Another requirement for qualification as a regulated investment company under
the Code is that less than 30% of the Fund's gross income for a taxable year
must be derived from gains realized on the sale or other disposition of the
following investments held for less than three months: (l) stock and securities
(as defined in Section 2(a) (36) of the 1940 Act); (2) options, futures, and
forward contracts other than those on foreign currencies; or (3) foreign
currencies (or options, futures, or forward contracts on foreign currencies)
that are not directly related to the Fund's principal business of investing in
stocks or securities (or options and futures with respect to stocks or
securities). Interest (including original issue discount and, with respect to
certain debt securities, accrued market discount) received by the Fund upon
maturity or disposition of a security held for less than three months will not
be treated as gross income derived from the sale or other disposition of such
security within the meaning of this requirement. However, any other income which
is attributable to realized market appreciation will be treated as gross income
from the sale or other disposition of securities for this purpose.
An investment company may not qualify as a regulated investment company for any
taxable year unless it satisfies certain requirements with respect to the
diversification of its investments at the close of each quarter of the taxable
year. In general, at least 50% of the value of its total assets must be
represented by cash, cash items, government securities, securities of other
regulated investment companies, and other securities which, with respect to any
one issuer, do not represent more than 5% of the total assets of the investment
company nor more than 10% of the outstanding voting securities of such issuer.
In addition, not more than 25% of the value of the investment company's total
assets may be invested in the securities (other than government securities or
the securities of other regulated investment companies) of any one issuer. The
Fund intends to satisfy all requirements on an ongoing basis for continued
qualification as a regulated investment company.
The Fund will designate any distribution of long-term capital gains as a capital
gain dividend in a written notice mailed to shareholders within 60 days after
the close of the Fund's taxable year. Shareholders should note that upon the
sale or exchange of Fund shares, if the shareholder has not held such shares for
at least six months, any loss on the sale or exchange of those shares will be
treated as long-term capital loss to the extent of the capital gain dividends
received with respect to the shares.
A 4% nondeductible excise tax is imposed on regulated investment companies that
fail to distribute currently an amount equal to specified percentages of their
ordinary taxable income and capital gain net income (excess of capital gains
over capital losses). The Fund intends to make sufficient distributions or
deemed distributions of its ordinary taxable income and any capital gain net
income prior to the end of each calendar year to avoid liability for this excise
tax.
If for any taxable year the Fund does not qualify for the special federal income
tax treatment afforded regulated investment companies, all of its taxable income
will be subject to federal income tax at regular corporate rates (without any
deduction for distributions to its shareholders). In such event, dividend
distributions (whether or not derived from interest on tax-exempt securities)
would be taxable as ordinary income to shareholders to the extent of the Fund's
current and accumulated earnings and profits.
The Fund will be required in certain cases to withhold and remit to the U.S.
Treasury 31% of taxable dividends or 31% of gross proceeds realized upon sale
paid to shareholders who have failed to provide a correct tax identification
number in the manner required, or who are subject to withholding by the Internal
Revenue Service for failure to include properly on their return payments of
taxable interest or dividends, or who have failed to certify to the Fund that
they are not subject to backup withholding when required to do so, or that they
are "exempt recipients."
Depending upon the extent of the Fund's activities in states and localities in
which its offices are maintained, in which its agents or independent contractors
are located, or in which it is otherwise deemed to be conducting business, the
Fund may be subject to the tax laws of such states or localities. In addition,
in those states and localities that have income tax laws, the treatment of the
Fund and its shareholders under such laws may differ from their treatment under
federal income tax laws.
Dividends paid by the Fund derived from net investment income or net short-term
capital gains are taxable to shareholders as ordinary income, whether received
in cash or reinvested in additional shares. Long-term capital gains
distributions, if any, are taxable as long-term capital gains, whether received
in cash or reinvested in additional shares, regardless of how long Fund shares
have been held.
Under current tax law, certain types of expenses incurred by the Fund must be
proportionately allocated as additional income to shareholders. As a result, the
amounts reportable by the Fund as taxable income, if any, may exceed the
dividends actually paid. Such proportionate allocation of Fund expenses, if any,
will be identified when tax information is distributed by the Fund. The Fund
will send shareholders information each year on the tax status of dividends and
disbursements. A dividend or capital gains distribution paid shortly after
shares have been purchased, although in effect a return of investment, is
subject to federal income taxation. Dividends from net investment income, along
with capital gains, will be taxable to shareholders, whether received in cash or
shares and no matter how long you have held Fund shares, even if they reduce the
net asset value of shares below your cost and thus, in effect, result in a
return of a part of your investment.
CAPITAL SHARES AND VOTING
The Trust's Declaration of Trust currently authorizes the issuance of shares in
one series: the Capital Management Mid-Cap Fund. These shares are divided into
two Classes ("Institutional Shares" and "Investor Shares") as described in the
Prospectus. Shares of the Fund, when issued, are fully paid and non-assessable
and have no preemptive or conversion rights. Shareholders are entitled to one
vote for each full share and a fractional vote for each fractional share held.
Shares have non-cumulative voting rights, which means that the holders of more
than 50% of the shares voting for the election of Trustees can elect 100% of the
Trustees, and in this event, the holders of the remaining shares voting will not
be able to elect any Trustees. The Trustees will hold office indefinitely,
except that: (1) any Trustee may resign or retire; and (2) any Trustee may be
removed: (a) any time by written instrument signed by at least two-thirds of the
number of Trustees prior to such removal; (b) at any meeting of shareholders of
the Trust by a vote of two-thirds of the outstanding shares of the Trust; or (c)
by a written declaration signed by shareholders holding not less than two-thirds
of the outstanding shares of the Trust and filed with the Trust's custodian.
Shareholders have certain rights, as set forth in the Declaration of Trust,
including the right to call a meeting of the shareholders. Shareholders holding
not less than 10% of the shares then outstanding may require the Trustees to
call a meeting, and the Trustees are obligated to provide certain assistance to
shareholders desiring to communicate with other shareholders in such regard
(e.g., providing access to shareholder lists, etc.). In case a vacancy or an
anticipated vacancy on the Board of Trustees shall for any reason exist, the
vacancy shall be filled by the affirmative vote of a majority of the remaining
Trustees, subject to certain restrictions under the 1940 Act. Otherwise, there
will normally be no meeting of shareholders for the purpose of electing
Trustees, and the Trust does not expect to have an annual meeting of
shareholders.
CUSTODIAN
First Union National Bank of North Carolina (the "Custodian"), Two First Union
Center, Charlotte, North Carolina 28288-1151, serves as custodian for the Fund.
The Custodian holds all cash and securities of the Fund (either in its
possession or in its favor through "book entry systems" authorized by the
Trustees in accordance with the 1940 Act).
INDEPENDENT AUDITORS
The firm of KPMG Peat Marwick LLP, 1021 East Cary Street, Richmond, Virginia
23219-4023 served as independent auditors for the Fund for the fiscal year and
period ended November 30, 1996 and 1995. The Board of Trustees of the Trust has
selected the firm of Deloitte & Touche LLP, 2500 One PPG Place, Pittsburgh,
Pennsylvania 15222-5401, to serve as independent auditors for the Fund for the
current fiscal year and to audit the annual financial statements of the Fund,
prepare the Fund's federal and state tax returns, and consult with the Fund on
matters of accounting and federal and state income taxation.
The financial statements of the Fund are audited at least once each year by
independent auditors. Shareholders will receive annual audited and semi-annual
(unaudited) reports when published and written confirmation of all transactions
in their account. A copy of the most recent Annual Report will accompany the
Statement of Additional Information whenever it is requested by a shareholder or
a prospective investor.
APPENDIX A
DESCRIPTION OF RATINGS
The Fund will normally be at least 90% invested in equities. As a temporary
defensive position, however, when the Advisor determines that market conditions
warrant such investments, the Fund may invest up to 100% of its assets in
investment grade bonds, U.S. Government Securities, repurchase agreements, or
money market instruments ("Investment-Grade Debt Securities"). When the Fund
invests in Investment-Grade Debt Securities as a temporary defensive measure, it
is not pursuing its investment objective. Under normal circumstances, however,
the Fund may invest in money market instruments as described in the Prospectus.
The various ratings used by the nationally recognized securities rating services
are described below.
A rating by a rating service represents the service's opinion as to the credit
quality of the security being rated. However, the ratings are general and are
not absolute standards of quality or guarantees as to the creditworthiness of an
issuer. Consequently, the Advisor believes that the quality of fixed-income
securities in which the Fund may invest should be continuously reviewed and that
individual analysts give different weightings to the various factors involved in
credit analysis. A rating is not a recommendation to purchase, sell, or hold a
security because it does not take into account market value or suitability for a
particular investor. When a security has received a rating from more than one
service, each rating is evaluated independently. Ratings are based on current
information furnished by the issuer or obtained by the rating services from
other sources that they consider reliable. Ratings may be changed, suspended, or
withdrawn as a result of changes in or unavailability of such information, or
for other reasons.
Standard & Poor's Ratings Group. The following summarizes the highest four
ratings used by Standard & Poor's Ratings Group ("S&P") for bonds which are
deemed to be "Investment-Grade Debt Securities" by the Advisor:
AAA - This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to pay interest and to repay
principal.
AA - Debt rated AA is considered to have a very strong capacity to pay
interest and to repay principal and differs from AAA issues only in a
small degree.
A - Debt rated A has a strong capacity to pay interest and to repay
principal although it is somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than debt in
higher-rated categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and to repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and to repay principal for bonds in this category than for debt
in higher rated categories.
To provide more detailed indications of credit quality, the AA, A, and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within these major rating categories.
Bonds rated BB, B, CCC, CC, and C are not considered by the Advisor to be
"Investment-Grade Debt Securities" and are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and C the highest degree of speculation. While such
bonds may have some quality and protective characteristics, these are outweighed
by large uncertainties or major risk exposures to adverse conditions.
Commercial paper rated A-1 by S&P indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted A-1+. Capacity for timely payment on
commercial paper rated A-2 is satisfactory, but the relative degree of safety is
not as high as for issues designated A-1.
The rating SP-1 is the highest rating assigned by S&P to municipal notes and
indicates very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics are given a
plus (+) designation.
Moody's Investors Service, Inc. The following summarizes the highest four
ratings used by Moody's Investors Service, Inc., ("Moody's") for bonds which are
deemed to be "Investment-Grade Debt Securities" by the Advisor:
Aaa - Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred
to as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin, and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
Aa - Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high-grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities,
or fluctuation of protective elements may be of greater amplitude, or
there may be other elements present which make the long-term risks appear
somewhat larger than in Aaa securities.
A - Debt which is rated A possesses many favorable investment attributes
and is to be considered as an upper-medium-grade obligation. Factors
giving security to principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to impairment
sometime in the future.
Baa - Debt which is rated Baa is considered as a medium-grade obligation,
i.e., it is neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present, but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such debt lacks outstanding
investment characteristics and, in fact, has speculative characteristics
as well.
Moody's applies numerical modifiers (l, 2 and 3) with respect to bonds rated Aa,
A, and Baa. The modifier 1 indicates that the bond being rated ranks in the
higher end of its generic rating category; the modifier 2 indicates a mid-range
ranking, and the modifier 3 indicates that the bond ranks in the lower end of
its generic rating category.
Bonds which are rated Ba, B, Caa, Ca, or C by Moody's are not considered
"Investment-Grade Debt Securities" by the Advisor. Bonds rated Ba are judged to
have speculative elements because their future cannot be considered as well
assured. Uncertainty of position characterizes bonds in this class because the
protection of interest and principal payments often may be very moderate and not
well safeguarded.
Bonds which are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the security over any long period for time may be small. Bonds
which are rated Caa are of poor standing. Such securities may be in default, or
there may be present elements of danger with respect to principal or interest.
Bonds which are rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.
Bonds which are rated C are the lowest rated class of bonds, and issues so rated
can be regarded as having extremely poor prospects of ever attaining any real
investment standing.
The rating Prime-1 is the highest commercial paper rating assigned by Moody's.
Issuers rated Prime-1 (or related supporting institutions) are considered to
have a superior capacity for repayment of short-term promissory obligations.
Issuers rated Prime-2 (or related supporting institutions) are considered to
have a strong capacity for repayment of short-term promissory obligations. This
will normally be evidenced by many of the characteristics of issuers rated
Prime-1 but to a lesser degree. Earnings' trends and coverage ratios, while
sound, will be more subject to variation. Capitalization characteristics, while
still appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
The following summarizes the highest rating used by Moody's for short-term notes
and variable-rate, demand obligations:
MIG-l; VMIG-l - Obligations bearing these designations are of the best
quality, enjoying strong protection by established cash flows, superior
liquidity support, or demonstrated broad-based access to the market for
refinancing.
Duff & Phelps Credit Rating Co. The following summarizes the highest four
ratings used by Duff & Phelps Credit Rating Co. ("D&P") for bonds which are
deemed to be "Investment-Grade Debt Securities" by the Advisor:
AAA - Bonds that are rated AAA are of the highest credit quality. The
risk factors are considered to be negligible, being only slightly more
than for risk-free U.S. Treasury debt.
AA - Bonds that are rated AA are of high credit quality. Protection
factors are strong. Risk is modest but may vary slightly from time to
time because of economic conditions.
A - Bonds rated A have average but adequate protection factors. The risk
factors are more variable and greater in periods of economic stress.
BBB - Bonds rated BBB have below-average protection factors but are still
considered sufficient for prudent investment. There is considerable
variability in risk during economic cycles.
Bonds rated BB, B, and CCC by D&P are not considered "Investment-Grade Debt
Securities" and are regarded, on balance, as predominantly speculative with
respect to the issuer's ability to pay interest and to make principal payments
in accordance with the terms of the obligations. BB indicates the lowest degree
of speculation and CCC the highest degree of speculation.
The rating Duff l is the highest rating assigned by D&P for short-term debt,
including commercial paper. D&P employs three designations, Duff l+, Duff 1, and
Duff 1- within the highest rating category. Duff l+ indicates highest certainty
of timely payment. Short-term liquidity, including internal operating factors
and/or access to alternative sources of funds, is judged to be "outstanding, and
safety is just below risk-free U.S. Treasury short-term obligations." Duff 1
indicates very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are
considered to be minor. Duff 1- indicates high certainty of timely payment.
Liquidity factors are strong and supported by good fundamental protection
factors. Risk factors are very small.
Fitch Investors Service, Inc. The following summarizes the highest four ratings
used by Fitch Investors Service, Inc., ("Fitch") for bonds which are deemed to
be "Investment-Grade Debt Securities" by the Advisor:
AAA - Bonds are considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability to pay
interest and to repay principal, which is unlikely to be affected by
reasonably foreseeable events.
AA - Bonds are considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and to repay principal is
very strong, although not quite as strong as bonds rated AAA. Because
bonds rated in the AAA and AA categories are not significantly vulnerable
to foreseeable future developments, short-term debt of these issuers is
generally rated F-1+.
A - Bonds that are rated A are considered to be investment grade and of
high credit quality. The obligor's ability to pay interest and to repay
principal is considered to be strong, but may be more vulnerable to
adverse changes in economic conditions and circumstances than bonds with
higher ratings.
BBB - Bonds rated BBB are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and to
repay principal is considered to be adequate. Adverse changes in economic
conditions and circumstances, however, are more likely to have adverse
impact on these bonds and, therefore, impair timely payment. The
likelihood that the ratings of these bonds will fall below investment
grade is higher than for bonds with higher ratings.
To provide more detailed indications of credit quality, the AA, A, and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within a rating category.
Bonds rated BB, B, and CCC by Fitch are not considered "Investment-Grade Debt
Securities" and are regarded, on balance, as predominantly speculative with
respect to the issuer's ability to pay interest and to make principal payments
in accordance with the terms of the obligations. BB indicates the lowest degree
of speculation and CCC the highest degree of speculation.
The following summarizes the three highest ratings used by Fitch for short-term
notes, municipal notes, variable rate demand instruments, and commercial paper:
F-1+ - Instruments assigned this rating are regarded as having the
strongest degree of assurance for timely payment.
F-1 - Instruments assigned this rating reflect an assurance of timely
payment only slightly less in degree than issues rated F-1+
F-2 - Instruments assigned this rating have a satisfactory degree of
assurance for timely payment, but the margin of safety is not as great as
for issues assigned F-1+ and F-1 ratings.
<PAGE>
[Capital Management Investment Trust Letterhead]
Dear Fellow Shareholders,
As the calendar year 1996 Draws to a close, it appears that the equity
markets have once again provided investors with above-average returns, and your
fund has been invested to participate fully in this favorable environment.
One must ask, however, has the public become overly infatuated with the stock
market? Over the past fifteen years total returns from stocks have averaged in
the mid-teens, which is above the historic norm of about 10% per year. During
the two-year period 1995 and 1996, approximately $2.7 trillion in shareholder
wealth has been created. Direct holdings of stocks and mutual funds by the
public now stand at 27% of financial assets, but to put this figure in
perspective, the peak direct ownership of stocks was in 1968 when equities
represented 45% of households' financial assets. Based on direct ownership
statistics, the public is not over-exposed to the stock market. Does this mean
one should not be concerned about market declines? Of course not, but investment
programs must be focused on long-term goals and be diversified across several
alternatives. As I have stated to you before, our long term goal for your fund
is to grow its assets in a prudent manner while focusing on the very dynamic
mid-cap area of the equity market.
Currently, the underpinnings of the financial markets suggest that the
coming year should be good for stocks; returns are not likely to reach the level
of 1996, but they should be OK. The great worry of the financial markets, rising
inflation, is not foreseen to be a problem; therefore, interest rates should
remain close to current levels. Corporate profits will continue to grow (our
guess is 6% to 8%), even though the rate of increase will be less than that of
the past five years.
Since late 1995, the heavy mutual fund cash inflows have been concentrated
primarily in large capitalization stocks for purposes of expedience. as a
result, many mid-cap stocks are now relatively under-valued. We have increased
exposure to the technology group given the favorable impact product advances
from many of these companies are having on the competitive structure of U.S.
industry and our daily lives, and we continue to favor regional banking
institutions and energy exploration/service companies.
Thank you for your interest in the Capital Management Equity Fund, and we
look forward to another exiting investment year.
C. Lennis Koontz, II, C.F.A.
President
December 28, 1996
<PAGE>
CAPITAL MANAGEMENT EQUITY FUND
INSTITUTIONAL CLASS
Performance Update - $250,000 Investment
For the period from January 27, 1995 to November 30, 1996
[graph]
Instit S&P 400 S&P 500 Lipper
Shares MID CAP Total Return Capital
Index Appreciation
01/27/95 250,000 250,000 250,000 250,000
01/31/95 251,675 249,292 250,125 249,357
02/28/95 260,950 262,359 259,880 258,454
03/31/95 276,275 266,925 267,546 265,288
04/30/95 275,424 272,284 275,412 269,862
05/31/95 280,704 278,853 286,429 276,617
06/30/95 290,263 289,798 293,074 290,110
07/31/95 300,584 305,344 302,804 307,213
08/31/95 304,612 310,991 303,561 310,606
09/30/95 306,752 318,530 316,371 318,703
10/31/95 294,361 310,333 315,232 312,471
11/30/95 307,511 323,887 329,071 324,000
12/31/95 312,873 323,081 335,423 326,345
01/31/96 313,391 327,768 346,840 332,553
02/29/96 313,391 338,908 350,054 340,828
03/31/96 321,472 342,969 353,425 344,322
04/30/96 333,455 353,445 358,634 358,893
05/31/96 338,926 358,225 367,883 369,407
06/30/96 339,447 352,850 369,289 359,495
07/31/96 316,172 328,978 352,972 333,170
08/31/96 332,125 347,951 360,417 348,053
09/30/96 342,454 363,122 380,707 368,228
10/31/96 349,288 364,178 391,205 363,512
11/30/96 367,685 384,999 419,634 379,307
This graph depicts the performance of the Capital Management Equity Fund -
Institutional Shares versus the S&P Mid Cap 400 Index, the Lipper Capital
Appreciation Index, and the S&P 500 Index. It is important to note Capital
Management Equity Fund is a professionally managed mutual fund while the indexes
are not available for investment and are unmanaged. The comparison is shown for
illustrative purposes only.
The graph assumes an initial $250,000 investment at January 27, 1995. All
dividends and distributions are reinvested.
At November 30, 1996, the value of the Institutional Shares would have
grown to $367,685 - total investment return of 47.07% since January 27,
1995.
At November 30, 1996, a similar investment in the S&P Mid Cap 400 Index
would have been worth $384,999 - total investment return of 54.00% since
January 27, 1995; a similar investment in the Lipper
Capital Appreciation Index would have been worth $379,307 - total
investment return of 51.72%; and a similar investment in the S&P 500 Index
would have been worth $419,634 - total investment return of 67.85%.
Past performance is not a guarantee of future results. A mutual fund's share
price and investment return will vary with market conditions, and the principal
value of shares, when redeemed, may be worth more or less than the original
cost. Average annual total returns are historical in nature and measure net
investment income and capital gain or loss from portfolio investments assuming
reinvestments of dividends.
Average Annual Total Return
- -------------------------------------------------
Since Inception One Year
- -------------------------------------------------
No Sales Load 23.27% 19.57%
- -------------------------------------------------
<PAGE>
CAPITAL MANAGEMENT EQUITY FUND
INVESTOR CLASS
Performance Update - $10,000 Investment
For the period from April 7, 1996 to November 30, 1996
[graph]
Institut S&P 400 S&P 500 Lipper
Shares MID CAP Total Return Capital
Index Appreciation
04/07/95 9,700 9,700 9,700 9,700
04/30/95 9,641 9,880 9,866 9,849
05/31/95 9,822 10,118 10,260 10,096
06/30/95 10,131 10,515 10,498 10,588
07/31/95 10,482 11,079 10,847 11,212
08/31/95 10,614 11,284 10,874 11,336
09/30/95 10,689 11,558 11,333 11,632
10/31/95 10,247 11,260 11,292 11,404
11/30/95 10,689 11,752 11,788 11,825
12/31/95 10,874 11,723 12,015 11,911
01/31/96 10,883 11,893 12,424 12,137
02/29/96 10,874 12,297 12,539 12,439
03/31/96 11,147 12,444 12,660 12,567
04/30/96 11,556 12,824 12,846 13,098
05/31/96 11,746 12,998 13,178 13,482
06/30/96 10,755 12,803 13,228 13,120
07/31/96 10,990 11,937 12,643 12,160
08/31/96 11,537 12,625 12,910 12,703
09/30/96 11,897 13,176 13,637 13,439
10/31/96 12,144 13,214 14,013 13,267
11/30/96 12,785 13,969 15,031 13,843
This graph depicts the performance of the Capital Management Equity Fund -
Investor Shares versus the S&P Mid Cap 400 Index, the Lipper Capital
Appreciation Index, and the S&P 500 Index. It is important to note the Capital
Management Equity Fund is a professionally managed mutual fund while the indexes
are not available for investment and are unmanaged. The comparison is shown for
illustrative purposes only.
The graph assumes an initial $10,000 investment at April 7, 1995. All
dividends and distributions are reinvested.
At November 30, 1996, the value of the Investor Shares would have grown to
$12,790 - total investment return of 27.90% since April 7, 1995. Without
the deduction of the 3% maximum sales load, the value of the Investor
Shares would have grown to $13,185 - total investment return of 31.85%
since April 7, 1995. The sales load may be reduced or eliminated for larger
purchases.
At November 30, 1996, a similar investment in the S&P Mid Cap 400 Index
would have been worth $13,969 - total investment return of 39.69% since
April 7, 1995; a similar investment in the Lipper Capital Appreciation
Index would have grown to $13,843 - total investment return of 38.43%; and
a similar investment in the S&P 500 Index would have grown to $15,031 -
total investment return of 50.31%.
Past performance is not a guarantee of future results. A mutual fund's share
price and investment return will vary with market conditions, and the principal
value of shares, when redeemed, may be worth more or less than the original
cost. Average annual total returns are historical in nature and measure net
investment income and capital gain or loss from portfolio investments assuming
reinvestments of dividends.
Average Annual Total Return
- -----------------------------------------------------------
Since Inception One Year
- -----------------------------------------------------------
No Sales Load 18.22% 19.61%
With 3% Sales Load 16.06% 16.02%
- -----------------------------------------------------------
<PAGE>
CAPITAL MANAGEMENT EQUITY FUND
PORTFOLIO OF INVESTMENTS
November 30, 1996
- --------------------------------------------------------------------------------
Value
Shares (note 1)
- --------------------------------------------------------------------------------
COMMON STOCKS - 95.82%
Auto Parts - Replacement Equipment - 1.15%
(a)AutoZone, Inc. 2,000 $49,250
Chemicals - 8.32%
Air Products and Chemicals, Inc. 2,000 139,250
Hanna (M.A.) Company 5,700 120,412
IMC Global, Inc. 2,600 93,925
----- ------
353,587
Computers - 5.74%
(a)Hutchinson Technology, Inc. 2,200 116,050
Reynolds & Reynolds Company 4,600 127,650
----- -------
243,700
Electrical Equipment - 2.55%
Belden, Inc. 3,175 108,347
Electronics - 4.03%
Varian Associates, Inc. 1,500 73,875
(a)Waters Corporation 3,600 97,650
----- ------
171,525
Financial - Banks, Commercial - 11.50%
Barnett Banks, Inc. 2,400 105,600
First Security Corporation 4,050 131,119
Summit Bancorp 2,900 130,137
US Bancorp 2,850 121,837
----- -------
488,693
Food - Wholesale - 5.26%
Dole Food Company 2,650 103,350
Richfood Holdings, Inc. 4,612 119,912
----- -------
223,262
Homebuilders - 4.80%
(a)Champion Enterprises, Inc. 2,400 50,100
Clayton Homes, Inc. 2,850 46,312
Leggett & Platt, Inc. 3,500 107,625
----- -------
204,037
Industrial Materials - Specialty - 0.81%
(a)AES Corporation 700 34,212
Lodging - 1.29%
(a)Promus Hotel Corporation 1,700 54,825
(Continued)
<PAGE>
CAPITAL MANAGEMENT EQUITY FUND
PORTFOLIO OF INVESTMENTS
November 30, 1996
- --------------------------------------------------------------------------------
Value
Shares (note 1)
- --------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Machine - Construction and Mining - 1.73%
Case Corporation 1,400 $73,500
Machine - Diversified - 7.20%
AGCO Corporation 2,350 65,506
Helix Technology Corporation 3,500 111,563
York International Corporation 2,450 128,625
----- -------
305,694
Miscellaneous - Manufacturing - 3.26%
Fisher Scientific International 3,025 138,394
Medical Supplies - 5.07%
(a)Sola International, Inc. 3,100 108,888
(a)Sybron International Corporation 3,500 106,313
----- -------
215,201
Oil & Gas - Domestic - 2.67%
Quaker State Corporation 6,625 113,453
Oil & Gas - Equipment & Services - 9.34%
(a)Diamond Offshore Drilling, Inc. 2,300 146,625
(a)ENSCO International, Inc. 2,100 92,137
(a)Varco International, Inc. 6,900 157,838
----- -------
396,600
Oil & Gas - Exploration - 3.12%
Transocean Offshore, Inc. 2,200 132,550
Packaging & Containers - 1.30%
Aptargroup, Inc. 1,600 55,200
Retail - Department Stores - 2.55%
(a)Federated Department Stores, Inc. 3,175 108,347
Toys - 3.18%
Mattel, Inc. 4,375 135,078
Transportation - Rail - 2.92%
Illinois Central Corporation 3,650 124,100
Utilities - Electric - 2.44%
Idaho Power Company 3,350 103,850
(Continued)
<PAGE>
CAPITAL MANAGEMENT EQUITY FUND
PORTFOLIO OF INVESTMENTS
November 30, 1996
- --------------------------------------------------------------------------------
Value
Shares (note 1)
- --------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Utilities - Gas - 5.59%
Brooklyn Union Gas Company 4,100 $128,638
Pacific Enterprises 3,550 108,719
----- -------
237,357
Total Common Stocks (Cost $3,394,065) 4,070,762
Principal
Amount
----------
REPURCHASE AGREEMENT (b) - 4.13%
Wachovia Bank $175,265 175,265
-------- -------
5.66%, due December 2, 1996
(Cost $175,265)
Total Value of Investments (Cost $3,569,330 (c)) 99.95% 4,246,027
Other Assets Less Liabilities 0.05% 2,324
---- -----
Net Assets 100.00% $4,248,351
====== ==========
(a) Non-income producing investment.
(b) The repurchase agreement is fully collateralized by U. S. government
and/or agency obligations based on market prices at the date of the
portfolio. The investment in the repurchase agreement is through
participation in a joint account with other funds administered by The
Nottingham Company.
(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 $716,839
Unrealized depreciation (40,142)
--------
Net unrealized appreciation $676,697
See accompanying notes to financial statements
<PAGE>
CAPITAL MANAGEMENT EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
November 30, 1996
ASSETS
Investments, at value (cost $3,569,330) $4,246,027
Interest receivable 707
Dividends receivable 2,901
Due from advisor (note 2) 16,758
Other asset 201
----------
Total assets 4,266,594
LIABILITIES
Accrued expenses 13,657
Disbursements in excess of cash on demand deposit 4,586
----------
Total liabilities 18,243
NET ASSETS $4,248,351
==========
NET ASSETS CONSIST OF
Paid-in capital $3,444,966
Undistributed net investment income 11,660
Undistributed net realized gain on investments 115,028
Net unrealized appreciation on investments 676,697
----------
$4,248,351
INSTITUTIONAL CLASS
Net asset value and offering price per share $13.99
($3,502,215 / 250,268 shares outstanding)
INVESTOR CLASS
Net asset value ($746,136 / 53,463 shares outstanding) $13.96
======
Maximum offering price per share (100 / 97 of $13.96) $14.39
======
See accompanying notes to financial statements
<PAGE>
CAPITAL MANAGEMENT EQUITY FUND
STATEMENT OF OPERATIONS
Year ended November 30, 1996
INVESTMENT INCOME
Income
Dividends $55,196
Interest 11,614
---------
Total income 66,810
---------
Expenses
Investment advisory fees (note 2) 34,561
Fund accounting fees (note 2) 33,000
Professional fees 14,096
Fund administration fees (note 2) 6,912
Custody fees 7,654
Registration and filing administration fees 5,441
Distribution and service fees - Investor Class (note 3) 4,613
Securities pricing fees 2,854
Shareholder recordkeeping fees 638
Trustee fees and meeting expenses 8,793
Registration and filing expenses 7,170
Shareholder servicing expenses 3,499
Other operating expenses 1,875
Printing expenses 1,053
---------
Total expenses 132,159
---------
Less:
Expense reimbursements (note 2) (97,598)
Investment advisory fees waived (note 2) (34,561)
---------
Net expenses 0
---------
Net investment income 66,810
---------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from investment transactions 124,863
Increase in unrealized appreciation on investments 477,699
---------
Net realized and unrealized gain on investments 602,562
---------
Net increase in net assets resulting from operations $669,372
=========
See accompanying notes to financial statements
<PAGE>
CAPITAL MANAGEMENT EQUITY FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<S> <C> <C>
Period from
January 27, 1995
(commencement
Year ended of operations) to
November 30, November 30,
1996 1995
INCREASE IN NET ASSETS
Operations
Net investment income $66,810 $29,772
Net realized gain from investment transactions 124,863 33,755
Increase in unrealized appreciation on investments 477,699 198,998
---------- ----------
Net increase in net assets resulting from operations 669,372 262,525
Distributions to shareholders from
Net investment income - Institutional Class (55,272) (19,101)
Net investment income - Investor Class (10,130) (419)
Net realized gain from investment transactions - Institut (33,645) 0
Net realized gain from investment transactions - Investor (9,945) 0
---------- ----------
Decrease in net assets resulting from distributions (108,992) (19,520)
---------- ----------
Capital share transactions
Increase in net assets resulting from cap share transations 1,304,649 2,140,316
---------- ----------
Total increase in net assets 1,865,028 2,383,321
NET ASSETS
Beginning of period 2,383,321 0
---------- ----------
End of period (including undistributed net investment income $4,248,351 $2,383,321
of $11,660 in 1996 and $10,252 in 1995) ---------- ----------
(a) A summary of capital share activity follows:
- ----------------------------------------------------------------------------------------------
Period from
Year ended January 27, 1995 to
November 30, 1996 November 30, 1995
Shares Value Shares Value
- ----------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS
Shares sold 98,149 $1,190,936 149,099 $1,574,589
Shares issued for reinvestment 7,179 88,917 1,626 19,101
-------- ---------- -------- ----------
105,328 1,279,853 150,725 1,593,690
-------- ---------- -------- ----------
Shares redeemed (5,786) (76,867) 0 0
-------- ---------- -------- ----------
Net increase 99,542 $1,202,986 150,725 $1,593,690
======== ========== ======== ==========
- ----------------------------------------------------------------------------------------------
Period from
Year ended April 7, 1995 to
November 30, 1996 November 30, 1995
Shares Value Shares Value
- ----------------------------------------------------------------------------------------------
INVESTOR CLASS
Shares sold 11,424 $148,294 45,533 $546,342
Shares issued for reinvestment 1,635 20,075 35 419
-------- ---------- -------- ----------
13,059 168,369 45,568 546,761
-------- ---------- -------- ----------
Shares redeemed (5,154) (66,706) (11) (135)
-------- ---------- -------- ----------
Net increase 7,906 $101,663 45,557 $546,626
======== ========== ======== ==========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
CAPITAL MANAGEMENT EQUITY FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
INSTITUTIONAL CLASS INVESTOR CLASS
- ------------------------------------------------------------------------------------------------
Period from Period from
January 27, 1995 April 7, 1995
(commencement (commencement
Year ended of operations Year ended of operations
November 30 November 30 November 30 November 30,
1996 1995 1996 1995
- ------------------------------------------------------------------------------------------------
Net asset value, beginning of period $12.16 $10.00 $12.09 $11.07
Income from investment operations
Net investment income 0.23 0.20 0.24 0.11
Net realized and unrealized gain
on investments 2.08 2.10 2.06 1.02
---- ---- ---- ----
Total from investment operations 2.31 2.30 2.30 1.13
---- ---- ---- ----
Distributions to shareholders from
Net investment income (0.26) (0.14) (0.21) (0.11)
Net realized gain from investment
transactions (0.22) 0.00 (0.22) 0.00
----- ---- ----- ----
Total distributions (0.48) (0.14) (0.43) (0.11)
----- ----- ----- -----
Net asset value, end of period $13.99 $12.16 $13.96 $12.09
====== ====== ====== ======
Total return (a) 19.57 % 23.00 % 19.61 % 10.24 %
Ratios/supplemental data
Net assets, end of period $3,502,215 $1,832,507 $746,136 $550,814
========== ========== ======== ========
Ratio of expenses to average net assets
Before expense reimbursements and waived 3.70 % 7.20 %(b) 4.45 % 7.18 %(b)
After expense reimbursements and waived 0.00 % 0.31 %(b) 0.00 % 1.06 %(b)
Ratio of net investment income (loss) to average net assets
Before expense reimbursements and waived (1.77)% (4.45)%(b) (2.50)% (4.23)%(b)
After expense reimbursements and waived 1.94 % 2.44 %(b) 1.95 % 1.89 %(b)
Portfolio turnover rate 82.30 % 47.74 % 82.30 % 47.74 %
Average brokerage commission per share $0.06 N/A $0.06 N/A
(a) Total return does not reflect payment of a sales charge.
(b) Annualized.
See accompanying notes to financial statements
</TABLE>
<PAGE>
CAPITAL MANAGEMENT EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
November 30, 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, as amended. 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
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 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 ended November 30.
<PAGE>
CAPITAL MANAGEMENT EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
November 30, 1996
E. Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts
of assets, liabilities, expenses and revenues reported in the
financial statements. Actual results could differ from those
estimated.
F. Repurchase Agreements - The fund may acquire U.S. Government
Securities or corporate debt securities subject to repurchase
agreements. A repurchase agreement transaction occurs when the Fund
acquires a security and simultaneously resells it to the vendor
(normally a member bank of the Federal Reserve or a registered
Government Securities dealer) for delivery on an agreed upon future
date. The repurchase price exceeds the purchase price by an amount
which reflects an agreed upon market interest rate earned by the Fund
effective for the period of time during which the repurchase agreement
is in effect. Delivery pursuant to the resale typically will occur
within one to five days of the purchase. The Fund will not enter into
a repurchase agreement which will cause more than 10% of its net
assets to be invested in repurchase agreements which extend beyond
seven days. In the event of the bankruptcy of the other party to a
repurchase agreement, the Fund could experience delays in recovering
its cash or the securities lent. To the extent that in the interim the
value of the securities purchased may have declined, the Fund could
experience a loss. In all cases, the creditworthiness of the other
party to a transaction is reviewed and found satisfactory by the
Advisor. Repurchase agreements are, in effect, loans of Fund assets.
The Fund will not engage in reverse repurchase transactions, which are
considered to be borrowings under the Investment Company Act of 1940,
as amended.
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 to 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 $34,561 ($0.13 per share) and reimbursed $97,598 of the
operating expenses incurred by the Fund for the fiscal year ended November
30, 1996.
All organization expenses of the Fund were incurred and paid by the
Advisor. At November 30, 1996, the Advisor owned 10,513 Institutional
Shares and 113 Investor Shares of the Fund.
<PAGE>
CAPITAL MANAGEMENT EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
November 30, 1996
The Fund's administrator, The Nottingham Company, L.L.C. (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 recordkeeping services shall
not be less than $3,000 per month. The Administrator also charges the Fund
for certain expenses involved with the daily valuation of portfolio
securities.
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 fiscal year ended November 30, 1996, the Distributor
retained sales charges in the amount of $303. At November 30, 1996, the
Distributor owned 129,251 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.
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 $4,613 of such expenses under the Plan for
the fiscal year ended November 30, 1996.
NOTE 4 - PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments, other than short-term investments,
aggregated $4,471,711 and $2,673,096, respectively, for the fiscal year
ended November 30, 1996.
<PAGE>
CAPITAL MANAGEMENT EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
November 30, 1996
NOTE 5 - DISTRIBUTIONS TO SHAREHOLDERS
For federal income tax purposes, the Fund must report distributions from
net realized gain from investment transactions that represent long-term
capital gain to its shareholders. The total $0.22 per share of such
distributions for the fiscal year ended November 30, 1996, represents
short-term capital gain. This gain is taxable as ordinary income to
shareholders for federal income tax purposes. Shareholders should consult a
tax advisor on how to report distributions for state and local income tax
purposes.
<PAGE>
[KPMG Peat Marwick LLP letterhead]
Independent Auditors Report
To the Board of Trustees and Shareholders
Capital Management Investment Trust:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Capital Management Equity Fund (the Fund), a
series of the Capital Management Investment Trust, as of November 30, 1996, the
related statement of operations for the year then ended, and the statements of
changes in net assets and financial highlights for the year ended November 30,
1996 and the period from January 27, 1995 (commencement of operations) to
November 30, 1995. These financial statements and financial highlights are the
responsibility of the Funds management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures include confirmation of securities owned as of
November 30, 1996 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Capital Management Equity Fund as of November 30, 1996, the results of its
operations for the year then ended , and the changes in its net assets and
financial highlights for the year ended November 30, 1996 and the period from
January 27, 1995 (commencement of operations) to November 30, 1995 in conformity
with generally accepted accounting principles.
Richmond, Virginia \s\ KPMG PEAT MARWICK LLP
December 13, 1996
<PAGE>
PART C
CAPITAL MANAGEMENT INVESTMENT TRUST
FORM N1-A
OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits
a) Financial Statements: The Annual Report for the Fiscal Year Ended
November 30, 1997 for the Capital Management Mid-Cap Fund is included
in Part B, with related Financial Highlights included in Part A
b) Exhibits
(1) Declaration of Trust - Incorporated by reference; filed 3/26/96
(2) By-Laws - Incorporated by reference; filed 3/26/96
(3) Voting Trust Agreement - Not Applicable
(4) Specimens - Not Applicable - the series of the Registrant do not issue
certificates (see Exhibit 1 and 2 for the relevant portions of the
Declaration of Trust and By-Laws)
(5) Investment Advisory Agreement - Incorporated by reference; filed 3/26/96
(6) Distribution Agreement - Incorporated by reference; filed 3/26/96
(7) Retirement Plans Sponsored by Registrant - Not Applicable
(8) Custody Agreement - Enclosed Exhibit 8
(9) (a) Fund Accounting, Dividend Disbursing & Transfer Agent, and
Administration Agreement - Incorporated by reference; filed 3/26/96
(b) Amendment to the Fund Accounting, Dividend Disbursing & Transfer
Agent, and Administration Agreement dated October 1, 1995 -
Incorporated by reference; filed 3/26/96
(10) Opinion and Consent of Counsel - Incorporated by reference; filed 3/26/96
and 1/28/97
(11) Opinion and Consent of Auditors - Enclosed Exhibit 11
(12) Financial Statements Omitted - Not Applicable
(13) Initial Capital Agreement -Incorporated by reference; filed 3/26/96
(14) Prototype Plans - Not Applicable
(15) Plan of Distribution pursuant to Rule 12b-1 - Incorporated by reference;
filed 3/26/96
(16) Computation of Performance - Enclosed Exhibit 16
(17) Copies of Powers of Attorney - Enclosed Exhibit 24
(18) Copies of Rule 18f-3 Multi-Class Plan - Incorporated by reference; filed
3/26/96
(19) Financial Data Schedule - Enclosed Exhibit 27
ITEM 25. Persons Controlled by or Under Common Control with Registrant
No person is controlled by or under common control with Registrant.
ITEM 26. Number of Record Holders of Securities
As of March 31, 1997, the number of record holders of each class of
securities of Registrant was as follows:
Number of
Title of Class Record Holders
Capital Management Mid-Cap Fund - Institutional Shares 33
Capital Management Mid-Cap Fund - Investor Shares 29
ITEM 27. Indemnification
The Trust's Declaration of Trust, Investment Advisory Agreements, Administration
Agreement, and Distribution Agreements provide for indemnification of certain
persons acting on behalf of the Trust.
Article V, Section 5.4 of the Trust's Declaration of Trust states:
1. Subject only to the provisions hereof, every person who is or has been
a Trustee, officer, employee or agent of the Trust and every person
who serves at the Trustees request as director, officer, employee or
agent of another corporation, partnership, joint venture, trust or
other enterprise shall be indemnified by the Trust to the fullest
extent permitted by law against all liabilities and against all
expenses reasonably incurred or paid by him in connection with any
debt, claim, action, demand, suit, proceeding, judgment, decree,
liability or obligation of any kind in which he becomes involved as a
party or otherwise or is threatened by virtue of his being or having
been a Trustee, officer, employee or agent of the Trust or of another
corporation, partnership, joint venture, trust or other enterprise at
the request of the Trust and against amounts paid or incurred by him
in the compromise or settlement thereof.
2. The words "claim", "action", "suit", or "proceeding" shall apply to
all claims, actions, suits or proceedings (civil, criminal,
administrative, legislative, investigative or other, including
appeals), actual or threatened, and the words "liabilities" and
"expenses" shall include, without limitation, attorneys' fees, costs,
judgments, amounts paid in settlement, fines, penalties and other
liabilities.
3. No indemnification shall be provided hereunder to a Trustee or
officer: a. against any liability to the Trust or the Shareholders by
reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office
("disabling conduct"); b. with respect to any matter as to which he
shall, by the court or other body by or before which the proceeding
was brought or engaged, have been finally adjudicated to be liable by
reason of disabling conduct; c. in the absence of a final adjudication
on the merits that such Trustee or officer did not engage in disabling
conduct, unless a reasonable determination, based upon a review of the
facts that the person to be indemnified is not liable by reason of
such conduct, is made: (A) by vote of a majority of a quorum of the
Trustees who are neither Interested Persons nor parties to the
proceedings; or (B) by independent legal counsel, in a written
opinion.
4. The rights of indemnification herein provided may be insured against
by policies maintained by the Trust, shall be severable, shall not
affect any other rights to which any Trustee, officer, employee or
agent may now or hereafter be entitled, shall continue as to a person
who has ceased to be such Trustee, officer, employee, or agent and
shall inure to the benefit of the heirs, executors and administrators
of such a person; provided, however, that no person may satisfy any
right of indemnity or reimbursement granted herein except out of the
property of the Trust, and no other person shall be personally liable
to provide indemnity or reimbursement hereunder (except an insurer or
surety or person otherwise bound by contract).
5. Expenses in connection with the preparation and presentation of a
defense to any claim, action, suit or proceeding of the character
described in paragraph (a) of this Section 5.4 may be paid by the
Trust prior to final disposition thereof upon receipt of a written
undertaking by or on behalf of the Trustee, officer, employee or agent
to reimburse the Trust if it is ultimately determined under this
Section 5.4 that he is not entitled to indemnification. Such
undertaking shall be secured by a surety bond or other suitable
insurance or such security as the Trustees shall require unless a
majority of a quorum of the Trustees who are neither Interested
Persons nor parties to the proceeding, or independent legal counsel in
a written opinion, shall have determined, based on readily available
facts, that there is reason to believe that the indemnitee ultimately
will be found to be entitled to indemnification.
Section 8(b) of the Investment Advisory Agreements states:
"Subject to the limitations set forth in this Section 8(b), the Trust
shall indemnify, defend and hold harmless (from the assets of the Fund
or Funds to which the conduct in question relates) the Advisor against
all loss, damage and liability, including but not limited to amounts
paid in satisfaction of judgments, in compromise or as fines and
penalties, and expenses, including reasonable accountants' and counsel
fees, incurred by the Advisor in connection with the defense or
disposition of any action, suit or other proceeding, whether civil or
criminal, before any court or administrative or legislative body,
related to or resulting from this Agreement or the performance of
services hereunder, except with respect to any matter as to which it
has been determined that the loss, damage or liability is a direct
result of (i) a breach of fiduciary duty on the part of the Advisor
with respect to the receipt of compensation for services; or (ii)
willful misfeasance, bad faith or gross negligence on the part of the
Advisor in the performance of its duties or from reckless disregard by
it of its duties under this Agreement (either and both of the conduct
described in clauses (i) and (ii) above being referred to hereinafter
as "Disabling Conduct"). A determination that the Advisor is entitled
to indemnification may be made by (i) a final decision on the merits
by a court or other body before whom the proceeding was brought that
the Advisor was not liable by reason of Disabling Conduct, (ii)
dismissal of a court action or an administrative proceeding against
the Advisor for insufficiency of evidence of Disabling Conduct, or
(iii) a reasonable determination, based upon a review of the facts,
that the Advisor was not liable by reason of Disabling Conduct by, (a)
vote of a majority of a quorum of Trustees who are neither "interested
persons" of the Trust as the quoted phrase is defined in Section
2(a)(19) of the 1940 Act nor parties to the action, suit or other
proceeding on the same or similar grounds that is then or has been
pending or threatened (such quorum of such Trustees being referred to
hereinafter as the "Independent Trustees"), or (b) an independent
legal counsel in a written opinion. Expenses, including accountants'
and counsel fees so incurred by the Advisor (but excluding amounts
paid in satisfaction of judgments, in compromise or as fines or
penalties), shall be paid from time to time by the Fund or Funds to
which the conduct in question related in advance of the final
disposition of any such action, suit or proceeding; provided, that the
Advisor shall have undertaken to repay the amounts so paid unless it
is ultimately determined that it is entitled to indemnification of
such expenses under this Section 8(b) and if (i) the Advisor shall
have provided security for such undertaking, (ii) the Trust shall be
insured against losses arising by reason of any lawful advances, or
(iii) a majority of the Independent Trustees, or an independent legal
counsel in a written opinion, shall have determined, based on a review
of readily available facts (as opposed to a full trial-type inquiry),
that there is reason to believe that the Advisor ultimately will be
entitled to indemnification hereunder.
As to any matter disposed of by a compromise payment by the Advisor
referred to in this Section 8(b), pursuant to a consent decree or
otherwise, no such indemnification either for said payment or for any
other expenses shall be provided unless such indemnification shall be
approved (i) by a majority of the Independent Trustees or (ii) by an
independent legal counsel in a written opinion. Approval by the
Independent Trustees pursuant to clause (i) shall not prevent the
recovery from the Advisor of any amount paid to the Advisor in
accordance with either of such clauses as indemnification of the
Advisor is subsequently adjudicated by a court of competent
jurisdiction not to have acted in good faith in the reasonable belief
that the Advisor's action was in or not opposed to the best interests
of the Trust or to have been liable to the Trust or its Shareholders
by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in its conduct under the
Agreement.
The right of indemnification provided by this Section 8(b) shall not
be exclusive of or affect any of the rights to which the Advisor may
be entitled. Nothing contained in this Section 8(b) shall affect any
rights to indemnification to which Trustees, officers or other
personnel of the Trust, and other persons may be entitled by contract
or otherwise under law, nor the power of the Trust to purchase and
maintain liability insurance on behalf of any such person.
The Board of Trustees of the Trust shall take all such action as may
be necessary and appropriate to authorize the Trust hereunder to pay
the indemnification required by this Section 8(b) including, without
limitation, to the extent needed, to determine whether the Advisor is
entitled to indemnification hereunder and the reasonable amount of any
indemnity due it hereunder, or employ independent legal counsel for
that purpose."
Section 8(b) of the Administration Agreement states:
"Indemnification of Administrator. Subject to the limitations set
forth in this Subsection 8(b), the Trust shall indemnify, defend and
hold harmless (from the assets of the Fund or Funds to which the
conduct in question relates) the Administrator against all loss,
damage and liability, including but not limited to amounts paid in
satisfaction of judgments, in compromise or as fines and penalties,
and expenses, including reasonable accountants' and counsel fees,
incurred by the Administrator in connection with the defense or
disposition of any action, suit or other proceeding, whether civil or
criminal, before any court or administrative or legislative body,
related to or resulting from this Agreement or the performance of
services hereunder, except with respect to any matter as to which it
has been determined that the loss, damage or liability is a direct
result of (i) a breach of fiduciary duty on the part of the
Administrator with respect to the receipt of compensation for
services; or (ii) willful misfeasance, bad faith or gross negligence
on the part of the Administrator in the performance of its duties or
from reckless disregard by it of its duties under this Agreement
(either and both of the conduct described in clauses (i) and (ii)
above being referred to hereinafter as "Disabling Conduct"). A
determination that the Administrator is entitled to indemnification
may be made by (i) a final decision on the merits by a court or other
body before whom the proceeding was brought that the Administrator was
not liable by reason of Disabling Conduct, (ii) dismissal of a court
action or an administrative proceeding against the Administrator for
insufficiency of evidence of Disabling Conduct, or (iii) a reasonable
determination, based upon a review of the facts, that the
Administrator was not liable by reason of Disabling Conduct by, (a)
vote of a majority of a quorum of Trustees who are neither "interested
persons" of the Trust as the quoted phrase is defined in Section
2(a)(19) of the 1940 Act nor parties to the action, suit or other
proceeding on the same or similar grounds that is then or has been
pending or threatened (such quorum of such Trustees being referred to
hereinafter as the "Independent Trustees"), or (b) an independent
legal counsel in a written opinion. Expenses, including accountants'
and counsel fees so incurred by the Administrator (but excluding
amounts paid in satisfaction of judgments, in compromise or as fines
or penalties), shall be paid from time to time by the Fund or Funds to
which the conduct in question related in advance of the final
disposition of any such action, suit or proceeding; provided, that the
Administrator shall have undertaken to repay the amounts so paid
unless it is ultimately determined that it is entitled to
indemnification of such expenses under this Subsection 8(b) and if (i)
the Administrator shall have provided security for such undertaking,
(ii) the Trust shall be insured against losses arising by reason of
any lawful advances, or (iii) a majority of the Independent Trustees,
or an independent legal counsel in a written opinion, shall have
determined, based on a review of readily available facts (as opposed
to a full trial-type inquiry), that there is reason to believe that
the Administrator ultimately will be entitled to indemnification
hereunder.
As to any matter disposed of by a compromise payment by the
Administrator referred to in this Subsection 8(b), pursuant to a
consent decree or otherwise, no such indemnification either for said
payment or for any other expenses shall be provided unless such
indemnification shall be approved (i) by a majority of the Independent
Trustees or (ii) by an independent legal counsel in a written opinion.
Approval by the Independent Trustees pursuant to clause (i) shall not
prevent the recovery from the Administrator of any amount paid to the
Administrator in accordance with either of such clauses as
indemnification of the Administrator is subsequently adjudicated by a
court of competent jurisdiction not to have acted in good faith in the
reasonable belief that the Administrator's action was in or not
opposed to the best interests of the Trust or to have been liable to
the Trust or its Shareholders by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved
in its conduct under the Agreement.
The right of indemnification provided by this Subsection 8(b) shall
not be exclusive of or affect any of the rights to which the
Administrator may be entitled. Nothing contained in this Subsection
8(b) shall affect any rights to indemnification to which Trustees,
officers or other personnel of the Trust, and other persons may be
entitled by contract or otherwise under law, nor the power of the
Trust to purchase and maintain liability insurance on behalf of any
such person.
The Board of Trustees of the Trust shall take all such action as may
be necessary and appropriate to authorize the Trust hereunder to pay
the indemnification required by this Subsection 8(b) including,
without limitation, to the extent needed, to determine whether the
Administrator is entitled to indemnification hereunder and the
reasonable amount of any indemnity due it hereunder, or employ
independent legal counsel for that purpose."
Section (6) of the Distribution Agreements states:
"that in absence of willful misfeasance, bad faith, gross negligence
or reckless disregard of obligations or duties hereunder on the part
of the Distributor, the Trust agrees to indemnify Distributor and its
officers and partners against any and all claims, demands, liabilities
and expenses which Distributor may incur under the 1933 Act, or common
law or otherwise, arising out of or based upon any alleged untrue
statement of a material fact contained in any registration statement
or prospectus (except a prospectus of the Funds prepared for use under
Rule 482 under the 1933 Act) or statement of additional information of
the Funds, or any omission to state a material fact therein, the
omission of which makes any statement contained therein misleading,
unless such statement or omission was made in reliance upon and in
conformity with information furnished to the Trust in connection
therewith by or on behalf of Distributor. Nothing herein contained
shall require the Trust to take any action contrary to any provision
of its Agreement and Declaration of Trust or any applicable statute or
regulation."
ITEM 28. Business and other Connections of Investment Advisor
See the Statement of Additional Information section entitled "Management"
and the Investment Advisor's Form ADV filed with the Commission for the
activities and affiliations of the officers and directors of the Investment
Advisor of the Registrant. Except as so provided, to the knowledge of
Registrant, none of the directors or executive officers of the Investment
Advisor is or has been at any time during the past two fiscal years engaged
in any other business, profession, vocation or employment of a substantial
nature. The Investment Advisor currently serve as investment advisor to
numerous institutional and individual clients.
ITEM 29. Principal Underwriter
(a) Shields & Company is underwriter and distributor for the Capital
Management Mid-Cap Fund.
(b)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Name and Principal Position(s) and Offices Position(s) and Offices
Business Address with Underwriter with Registrant
Joseph V. Shields, Jr. Chairman Trustee
140 Broadway
New York, New York 10005
David V. Shields President Trustee
140 Broadway
New York, New York 10005
Richard B. Thatcher Vice President, Secretary None
140 Broadway Treasurer
New York, New York 10005
Joseph A. Zock Vice President None
140 Broadway
New York, New York 10005
Bruce L. Graham, CFA Vice President None
140 Broadway
New York, New York 10005
Brian Keep Vice President None
140 Broadway
New York, New York 10005
(c) Not applicable
</TABLE>
ITEM 30. Location of Accounts and Records
All account books and records not normally held by the Custodian are
held by the Trust, in the offices of The Nottingham Company or North
Carolina Shareholder Services, Administrator and Transfer Agent,
respectively, to the Trust, or in the offices of Capital Management
Associates, Inc., the Advisor.
The address of The Nottingham Company is 105 North Washington Street,
P.O. Drawer 69, Rocky Mount, North Carolina 27802-0069. The address of
North Carolina Shareholder Services is 107 North Washington Street,
P.O. Drawer 4365, Rocky Mount, North Carolina 27802-0365. The address
of Capital Management Associates, Inc. is 140 Broadway, New York, New
York 10005.
ITEM 31. Management Services
The substantive provisions of the Fund Accounting, Dividend Disbursing
& Transfer Agent and Administration Agreement between the Registrant
and The Nottingham Company are discussed in Part B hereof.
ITEM 32. Undertakings
a. Registrant undertakes to furnish each person to whom a Prospectus is
delivered with a copy of the latest annual report of each series of
Registrant to shareholders upon request and without charge.
b. Registrant undertakes to hold a special meeting of its shareholders
for the purpose of voting on the question of removal of a Trustee or
Trustees if requested in writing by the holders of at least 10% of the
Trust's outstanding voting securities, and to assist in communicating
with other shareholders as required by Section 16(c) of the Investment
Company Act of 1940.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Amendment to Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused
this Amendment to its Registration Statement to be signed on its behalf by the
undersigned, thereto duly authorized, in the City of Rocky Mount, State of North
Carolina on the 31st day of March 1997.
CAPITAL MANAGEMENT INVESTMENT TRUST
By: /s/ C. Frank Watson III
------------------------
C. Frank Watson III
Asst. Treasurer and Secretary
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
Registration Statement on Form N-1A has been signed below by the following
persons in the capacities and on the date indicated.
/s/Lucius E. Burch, III*
- ------------------------
Lucius E. Burch, III Trustee
/s/ J. Hope Reese
- ------------------------
J. Hope Reese Treasurer
/s/ Thomas A. Saunders, III*
- ------------------------
Thomas A. Saunders, III Trustee
/s/ David V. Shields*
- ------------------------
David V. Shields Trustee
/s/ J.V. Sheilds*
- ------------------------
J.V. Sheilds Trustee and Chairman,
(Principal Executive Officer)
/s/ Anthony J. Walton*
- ------------------------
Anthony J. Walton Trustee
* By:/s/ C. Frank Watson III Dated: March 31, 1997
-----------------------
C. Frank Watson III
Attorney-in-Fact
<PAGE>
CAPITAL MANAGEMENT INVESTMENT TRUST
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
EXHIBIT 99.B.8 Custody Agreement
EXHIBIT 99.B.11 Opinion and Consent of Auditors
EXHIBIT 99.B.16 Computation of Performance Data
EXHIBIT 99.B.24 Copies of Power of Attorney
EXHIBIT 99.B.27 Financial Data Schedule
EXHIBIT 8
CUSTODY AGREEMENT
(Mutual Funds)
THIS AGREEMENT is made as of __________________, 199__, by and between CAPITAL
MANAGEMENT INVESTMENT TRUST (the "Trust"), a Massachusetts business trust, with
respect to its existing series as of the date of this Agreement, and such other
series as shall be designated from time to time by the Trust (the "Fund" or
"Funds"), and FIRST UNION NATIONAL BANK OF NORTH CAROLINA, a national banking
association (the "Custodian").
The Trust desires that its securities and funds shall be hereafter held and
administered by the Custodian pursuant to the terms of this Agreement, and,
pursuant to a separate agreement, The Nottingham Company, Inc., a North Carolina
corporation ("Nottingham"), has agreed to perform the duties of Transfer Agent,
Accounting Services Agent, Dividend Disbursing Agent and Administrator for the
Fund.
In consideration of the mutual agreements herein, the Trust and the Custodian
agree as follows:
1. DEFINITIONS.
As used herein, the following words and phrases shall have the meanings
shown in this Section 1:
"Securities" includes stocks, shares, bonds, debentures, bills, notes,
mortgages, certificates of deposit, bank time deposits, bankers'
acceptances, commercial paper, scrip, warrants, participation certificates,
evidences of indebtedness, or other obligations and any certificates,
receipts, warrants or other instruments representing rights to receive,
purchase, or subscribe for the same, or evidencing or representing any
other rights or interests therein, or in any property or assets.
"Oral Instructions" shall mean an authorization, instruction, approval,
item or set of data, or information of any kind transmitted to the
Custodian in person or by telephone, telegram, telecopy or other mechanical
or documentary means lacking original signature, by an officer or employee
of the Trust or an employee of Nottingham in its capacity as Transfer
Agent, Accounting Services Agent, Administrator and Dividend Disbursing
Agent who has been authorized by a resolution of the Board of Trustees of
the Trust or the Board of Directors of Nottingham, as the case may be, to
give Written Instructions on behalf of the Trust.
"Written Instructions" shall mean an authorization, instruction, approval,
item or set of data, or information of any kind transmitted to the
Custodian containing original signatures or a copy of such document
transmitted by telecopy including transmission of such signature,
reasonably believed by the Custodian to be the signature of an officer or
employee of the Trust or an employee of Nottingham in its capacity as
Transfer Agent, Accounting Services Agent, Administrator or Dividend
Disbursing Agent who has been authorized by a resolution of the Board of
Trustees of the Trust or Board of Directors of Nottingham, as the case may
be, to give Written Instructions on behalf of the Trust.
"Securities Depository" shall mean a system for the central handling of
securities where all securities of any particular class or series of any
issuer deposited within the system are treated as fungible and may be
transferred or pledged by bookkeeping entry without physical delivery of
securities.
"Officers' Certificate" shall mean a direction, instruction or
certification in writing signed in the name of the Trust by the President,
Secretary or Assistant Secretary, or the Treasurer or Assistant Treasurer
of the Trust, or any other persons duly authorized to sign by the Board of
Trustees or the Executive Committee of the Trust.
"Book-Entry Securities" shall mean securities issued by the Treasury of the
United States of America and federal agencies of the United States of
America which are maintained in the book-entry system as provided in
Subpart O of Treasury Circular No. 300, 31 CFR 306, Subpart B of 31 CFR
Part 350, and the book-entry regulations of federal agencies substantially
in the form of Subpart O, and the term Book-Entry Account shall mean an
account maintained by a Federal Reserve Bank in accordance with the
aforesaid Circular and regulations.
2. DOCUMENTS TO BE FILED BY TRUST.
The Trust shall from time to time file with the Custodian a certified copy
of each resolution of its Board of Trustees authorizing execution of
Written Instructions and the number of signatories required, together with
certified signatures of the officers and other signatories authorized to
sign, which shall constitute conclusive evidence of the authority of the
officers and other signatories designated therein to act, and shall be
considered in full force and effect and the Custodian shall be fully
protected in acting in reliance thereon until it receives a new certified
copy of a resolution adding or deleting a person or persons with authority
to give Written Instructions. If the certifying officer is authorized to
sign Written Instructions, the certification shall also be signed by a
second officer of the Trust. The Trust also agrees that the Custodian may
rely on Written Instructions received from Nottingham as Agent for the
Trust if those Written Instructions are given by persons having authority
pursuant to resolutions of the Board of Trustees of the Trust.
The Trust shall from time to time file with the Custodian a certified copy
of each resolution of the Board of Trustees authorizing the transmittal of
Oral Instructions and specifying the person or persons authorized to give
Oral Instructions in accordance with this Agreement. The Trust agrees that
the Custodian may rely on Oral Instructions received from Nottingham, as
agent for the Trust, if those instructions are given by persons reasonably
believed by the Custodian to have such authority. Any resolution so filed
with the Custodian shall be considered in full force and effect and the
Custodian shall be fully protected in acting in reliance thereon until it
actually receives a new certified copy of a resolution adding or deleting a
person or persons with authority to give Oral Instructions. If the
certifying officer is authorized to give Oral Instructions, the
certification shall also be signed by a second officer of the Trust.
3. RECEIPT AND DISBURSEMENT OF FUNDS.
(a) The Custodian shall open and maintain a separate account or accounts
in the name of each Fund of the Trust, subject only to draft or order
by the Custodian acting pursuant to the terms of this Agreement. The
Custodian shall hold in safekeeping in such account or accounts,
subject to the provisions hereof, all funds received by it from or for
the account of the Trust. The Trust will deliver or cause to be
delivered to the Custodian all funds owned by the Trust, including
cash received for the issuance of its shares during the period of this
Agreement. The Custodian shall make payments of funds to, or for the
account of, the Trust from such funds only:
(i) for the purchase of securities for the portfolio of the Trust
upon the delivery of such securities to the Custodian (or to any
bank, banking firm or trust company doing business in the United
States and designated by the Custodian as its sub-custodian or
agent for this purpose or any foreign bank qualified under Rule
17f-5 of the Investment Company Act of 1940 and acting as
sub-custodian), registered (if registerable) in the name of the
Trust or of the nominee of the Custodian referred to in Section 8
or in proper form for transfer, or, in the case of repurchase
agreements entered into between the Trust and the Custodian or
other bank or broker dealer (A) against delivery of the
securities either in certificate form or through an entity
crediting the Custodian's account at the Federal Reserve Bank
with such securities or (B) upon delivery of the receipt
evidencing purchase by the Trust of securities owned by the
Custodian along with written evidence of the agreement by the
Custodian bank to repurchase such securities from the Trust;
(ii) for the payment of interest, dividends, taxes, management or
supervisory fees, or operating expenses (including, without
limitation, Board of Trustees' fees and expenses, and fees for
legal, accounting and auditing services) and for redemption or
repurchase of shares of the Trust;
(iii)for payments in connection with the conversion, exchange or
surrender of securities owned or subscribed to by the Trust held
by or to be delivered to the Custodian;
(iv) for the payment to any bank of interest on all or any portion of
the principal of any loan made by such bank to the Trust;
(v) for the payment to any person, firm or corporation who has
borrowed the Trust's portfolio securities the amount deposited
with the Custodian as collateral for such borrowing upon the
delivery of such securities to the Custodian, registered (if
registerable) in the name of the Trust or of the nominee of the
Custodian referred to in Section 8 or in proper form for
transfer; or
(vi) for other proper purposes of the Trust.
Before making any such payment the Custodian shall receive (and
may rely upon) Written Instructions or Oral Instructions
directing such payment and stating that it is for a purpose
permitted under the terms of this subsection (a). In respect of
item (vi), the Custodian will take such action only upon receipt
of an Officers' Certificate and a certified copy of a resolution
of the Board of Trustees or the Executive Committee of the Trust
signed by an officer of the Trust and certified by the Secretary
or an Assistant Secretary, specifying the amount of such payment,
setting forth the purpose for which such payment is to be made.
In respect of item (v), the Custodian shall make payment to the
borrower of securities loaned by the Trust of part of the
collateral deposited with the Custodian upon receipt of Written
Instructions from the Trust or Nottingham stating that the market
value of the securities loaned has declined and specifying the
amount to be paid by the Custodian without receipt or return of
any of the securities loaned by the Trust. In respect of item
(i), in the case of repurchase agreements entered into with a
bank which is a member of the Federal Reserve System, the
Custodian may transfer funds to the account of such bank, which
may be itself, prior to receipt of written evidence that the
securities subject to such repurchase agreement have been
transferred by book-entry to the Custodian's non-proprietary
account at the Federal Reserve Bank, or in the case of repurchase
agreements entered into with the Custodian, of the safekeeping
receipt and repurchase agreement, provided that such securities
have in fact been so transferred by book-entry, or in the case of
repurchase agreements entered into with the Custodian, the
safekeeping receipt is received prior to the close of business on
the same day.
(b) Notwithstanding anything herein to the contrary, the Custodian may at
any time or times with the written approval of the Board of Trustees,
appoint (and may at any time remove without the written approval of
the Trust) any other bank or trust company as its sub-custodian or
agent to carry out such of the provisions of Subsection (a) of this
Section 3 as instructions from the Trust may from time to time
request; provided, however, that the appointment of such sub-custodian
or agent shall not relieve the Custodian of any of its
responsibilities hereunder; and provided, further, that the Custodian
shall not enter into any arrangement with any subcustodian unless such
sub-custodian meets the requirements of Section 26 of the Investment
Company Act of 1940 and Rule 17f-5 thereunder, if applicable.
(c) The Custodian is hereby authorized to endorse and collect all checks,
drafts or other orders for the payment of money received by the
Custodian for the accounts of the Trust.
4. RECEIPT OF SECURITIES.
(a) The Custodian shall hold in safekeeping in a separate account, and
physically segregated at all times from those of any other persons,
firms, corporations or trusts or any other series of the Trust,
pursuant to the provisions hereof, all securities received by it from
or for the account of each series of the Trust, and the Trust will
deliver or cause to be delivered to the Custodian all securities owned
by the Trust. All such securities are to be held or disposed of by the
Custodian under, and subject at all times to the instructions pursuant
to, the terms of this Agreement. The Custodian shall have no power or
authority to assign, hypothecate, pledge, lend or otherwise dispose of
any such securities and investments, except pursuant to instructions
and only for the account of the Trust as set forth in Section 5 of
this Agreement.
(b) Notwithstanding anything herein to the contrary, the Custodian may at
any time or times with the written approval of the Board of Trustees,
appoint (and may at any time without the written approval of such
Board of Trustees remove) any other bank or trust company as its
sub-custodian or agent to carry out such of the provisions of
Subsection (a) of this Section 4 and of Section 5 of this Agreement,
as instructions may from time to time request, provided, however, that
the appointment of such sub-custodian or agent shall not relieve the
Custodian of any of its responsibilities hereunder, and provided,
further, that the Custodian shall not enter into arrangement with any
sub-custodian unless such sub-custodian meets the requirements of
Section 26 of the Investment Company Act of 1940 or Rule 17f-5
thereunder, if applicable.
5. TRANSFER, EXCHANGE, REDELIVERY, ETC. OF SECURITIES.
The Custodian shall have sole power to release or deliver any Securities of the
Trust held by it pursuant to this Agreement. The Custodian agrees to transfer,
exchange or deliver Securities held by it on behalf of the Trust hereunder only:
(a) for sales of such Securities for the account of the Trust upon receipt
by the Custodian of Payment therefor;
(b) when such securities mature or are called, redeemed or retired or
otherwise become payable;
(c) for examination by any broker selling any such securities in
accordance with "street delivery" custom;
(d) in exchange for or upon conversion into other Securities alone or
other securities and cash whether pursuant to any plan of merger,
consolidation, reorganization, recapitalization or readjustment, or
otherwise;
(e) upon conversion of such Securities pursuant to their terms into other
Securities;
(f) upon exercise of subscription, purchase or other similar rights
represented by such Securities;
(g) for the purpose of exchanging interim receipts for temporary
Securities for definitive securities;
(h) for the purpose of effecting a loan of the portfolio Securities to any
person, firm, corporation or trust upon the receipt by the Custodian
of cash or cash equivalent collateral at least equal to the market
value of the securities loaned;
(i) to any bank for the purpose of collateralizing the obligation of the
Trust to repay any moneys borrowed by the Trust from such bank;
provided, however, that the Custodian may at the option of such
lending bank keep such collateral in its possession, subject to the
rights of such bank given to it by virtue of any promissory note or
agreement executed and delivered by the Trust to such bank; or
(j) for other proper purposes of the Trust.
As to any deliveries made by the Custodian pursuant to items (a), (b),
(c), (d), (e), (f), (g) and (h), Securities or funds receivable in
exchange therefor shall be deliverable to the Custodian. Before making
any such transfer, exchange or delivery, the Custodian shall receive
(and may rely upon) instructions requesting such transfer, exchange,
or delivery and stating that it is for a purpose permitted under the
terms (a), (b), (c), (d), (e), (f), (g), (h), or (i) of this Section
5, and, in respect of item (j), upon receipt of instructions of a
certified copy of a resolution of the Board of Trustees of the Trust,
signed by an officer of the Trust and certified by its Secretary or an
Assistant Secretary, specifying the Securities to be delivered,
setting forth the purpose for which such delivery is to be made,
declaring such purpose to be a proper purpose of the Trust, and naming
the person or persons to whom delivery of such Securities shall be
made. In respect of item (h), the instructions shall state the market
value of the Securities to be loaned and the corresponding amount of
collateral to be deposited with the Custodian; thereafter, upon
receipt of instructions stating that the market value of the
Securities loaned has increased and specifying the amount of increase,
the Custodian shall collect from the borrower additional cash
collateral in such amount.
6. FEDERAL RESERVE BOOK-ENTRY SYSTEM.
Notwithstanding any other provisions of this Agreement, it is expressly
understood and agreed that the Custodian is authorized in the performance of its
duties hereunder to deposit in the book-entry deposit system operated by the
Federal Reserve Bank (the "System"), United States government, instrumentality
and agency securities and any other Securities deposited in the System and to
use the facilities of the System, as permitted by Rule 17f-4 under the
Investment Company Act of 1940, in accordance with the following terms and
provisions:
(a) The Custodian may keep Securities of the Trust in the System provided
that such Securities are represented in an account ("Account") of the
Custodian's in the System which shall not include any assets of the
Custodian other than assets held in a fiduciary or custodian capacity.
(b) The records of the Custodian with respect to the participation in the
System through the Custodian shall identify by Book-Entry Securities
belonging to the Trust which are included with other Securities
deposited in the Account and shall at all times during the regular
business hours of the Custodian be open for inspection by duly
authorized officers, employees or agents of the Trust and employees
and agents of the Securities and Exchange Commission.
(c) The Custodian shall pay for Securities purchased for the account of
the Trust upon:
(i) receipt of advice from the System that such Securities have been
transferred to the Account; and
(ii) the making of an entry on the records of the Custodian to reflect
such payment and transfer for the account of the Trust. The
Custodian shall transfer Securities sold for the account of the
Trust upon:
(1) receipt of advice from the System that payment for such
Securities has been transferred to the Account; and
(2) the making of an entry on the records of the Custodian to
reflect such transfer and payment for the account of the
Trust. The Custodian shall send the Trust a confirmation of
any transfers to or from the account of the Trust.
(d) The Custodian will provide the Trust with any report obtained by the
Custodian on the System's accounting system, internal accounting
control and procedures for safeguarding Securities deposited in the
System. The Custodian will provide the Trust with reports by
independent public accountants on the accounting system, internal
accounting control and procedures for safeguarding Securities,
including Securities deposited in the System relating to the services
provided by the Custodian under this Agreement; such reports shall
detail material inadequacies disclosed by such examination, and, if
there are no such inadequacies, shall so state, and shall be of such
scope and in such detail as the Trust may reasonably require and shall
be of sufficient scope to provide reasonable assurance that any
material inadequacies would be disclosed.
7. USE OF CLEARING FACILITIES.
Notwithstanding any other provisions of the Agreement, the Custodian may, in
connection with transactions in portfolio Securities by the Trust, use the
facilities of the Depository Trust Company ("DTC"), and the Participants Trust
Company ("PTC"), as permitted by Rule 17f-4 under the Investment Company Act of
1940, if such facilities have been approved by the Board of Trustees of the
Trust in accordance with the following:
(a) DTC and PTC may be used to receive and hold eligible Securities owned
by the Trust;
(b) payment for Securities purchased may be made through the clearing
medium employed by DTC and PTC for transactions of participants acting
through them;
(c) Securities of the Trust deposited in DTC and PTC will at all times be
segregated from any assets and cash controlled by the Custodian in
other than a fiduciary or custodian capacity but may be commingled
with other assets held in such capacities. Subject to the provisions
of the Agreement with regard to instructions, the Custodian will pay
out money only upon receipt of Securities or notification thereof and
will deliver Securities only upon the receipt of money or notification
thereof;
(d) all books and records maintained by the Custodian which relate to the
participation in DTC and PTC shall identify by Book-Entry Securities
belonging to the Trust which are deposited in DTC and PTC and shall at
all times during the Custodian's regular business hours be open to
inspection by the duly authorized officers, employees, agents and
auditors, and the Trust will be furnished with all the information in
respect of the services rendered to it as it may require;
(e) the Custodian will make available to the Trust copies of any internal
control reports concerning DTC and PTC delivered to it by either
internal or external auditors within ten days after receipt of such a
report by the Custodian; and
(f) confirmations of transactions using the facilities of DTC and PTC
shall be provided as set forth in Rule 17f-4 of the Investment Company
Act of 1940.
8. CUSTODIAN'S ACTS WITHOUT INSTRUCTIONS.
Unless and until the Custodian receives instructions to the contrary, the
Custodian shall on behalf of the Trust:
(a) Present for payment all coupons and other income items held by it for
the account of the Trust which call for payment upon presentation and
hold the funds received by it upon such payment for the Trust;
(b) collect interest and cash dividends received, with notice to the
Trust, for the accounts of the Trust;
(c) hold for the accounts of the Trust hereunder all stock dividends,
rights and similar Securities issued with respect to any securities
held by it hereunder;
(d) execute as agent on behalf of the Trust all necessary ownership
certificates required by the Internal Revenue Code or the Income Tax
Regulations of the United States Treasury Department or under the laws
of any state now or hereafter in effect, inserting the name of such
certificates as the owner of the Securities covered thereby, to the
extent it may lawfully do so;
(e) transmit promptly to the Trust all reports, notices and other written
information received by the Custodian from or concerning issuers of
the portfolio Securities; and
(f) collect from the borrower the Securities loaned and delivered by the
Custodian pursuant to item (h) of Section 5 hereof, any interest or
cash dividends paid on such Securities, and all stock dividends,
rights and similar Securities issued with respect to any such loaned
Securities.
With respect to Securities of foreign issuers, it is expected that the Custodian
will use its best efforts to effect collection of dividends, interest and other
income, and to notify the Trust of any call for redemption, offer of exchange,
right of subscription, reorganization, or other proceedings affecting such
Securities, or any default in payments due thereon. It is understood, however,
that the Custodian shall be under no responsibility for any failure or delay in
effecting such collections or giving such notice with respect to Securities of
foreign issuers, regardless of whether or not the relevant information is
published in any financial service available to it unless (a) such failure or
delay is due to the Custodians' or any sub-custodians' negligence or (b) any
relevant sub-custodian has acted in accordance with established industry
practices. Collections of income in foreign currency are, to the extent
possible, to be converted into United States dollars unless otherwise instructed
in writing, and in effecting such conversion the Custodian may use such methods
or agencies as it may see fit, including the facilities of its own foreign
division at customary rates. All risk and expenses incident to such collection
and conversion is for the accounts of the Trust and the Custodian shall have no
responsibility for fluctuations in exchange rates affecting any such conversion.
9. REGISTRATION OF SECURITIES.
Except as otherwise directed by instructions, the Custodian shall register all
Securities, except such as are in bearer form, in the name of a registered
nominee of the Custodian, as defined in the Internal Revenue Code and any
Regulation of the Treasury Department issued thereunder or in any provision of
any subsequent Federal tax law exempting such transaction from liability for
stock transfer taxes, and shall execute and deliver all such certificates in
connection therewith as may be required by such laws or Regulations or under the
laws of any State. The Custodian shall use its best efforts to the end that the
specific securities held by it hereunder shall be at all times identifiable in
its records.
The Trust or Nottingham shall from time to time furnish to the Custodian
appropriate instruments to enable the Custodian to hold or deliver in proper
form for transfer, or to register in the name of its registered nominee, any
securities which it may hold for the accounts of the Trust and which may from
time to time be registered in the name of the Trust.
10. SEGREGATED ACCOUNT.
The Custodian shall upon receipt of written instructions from the Trust or
Nottingham establish and maintain a segregated account or accounts for and on
behalf of the Trust, into which account or accounts may be transferred cash
and/or Securities, including Securities maintained in an account by the
Custodian pursuant to Section 4 hereof,
(i) in accordance with the provisions of any agreement among the Trust,
the Custodian and a broker-dealer registered under the Securities and
Exchange Act of 1934 and a member of the NASD (or any futures
commission merchant registered under the Commodity Exchange Act),
relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities exchange (or the
commodity Futures Trading Commission or any registered contract
market), or of any similar organization or organizations, regarding
escrow or other arrangements in connection with transactions by the
Trust;
(ii) for purposes of segregating cash or government securities in
connection with options purchased, sold or written by the Trust or
commodity futures contracts or options thereon purchased or sold by
the Trust;
(iii)for the purposes of compliance by the Trust with the procedures
required by the Investment Company Act Release No. 10666, or any
subsequent release or releases of the Securities and Exchange
Commission relating to the maintenance of segregated accounts by
registered investment companies; and
(iv) for other proper corporate purposes, but only, in the case of clause
(iv), upon receipt of, in addition to an Officer's Certificate, a
certified copy of a resolution of the Board of Trustees signed by an
officer of the Trust and certified by the Secretary or an Assistant
Secretary, setting forth the purpose or purposes of such segregated
account and declaring such purposes to be proper corporate purposes.
11. VOTING AND OTHER ACTIONS.
Neither the Custodian nor any nominee of the Custodian shall vote any of the
Securities held hereunder by or for the accounts of the Trust, except in
accordance with instructions. The Custodian shall execute and deliver, or cause
to be executed and delivered, to the appropriate investment advisor of each
series of the Trust, all notices, proxies and proxy soliciting materials with
relation to such Securities (excluding any Securities loaned and delivered by
the Custodian pursuant to item (h) of Section 5 hereof), such proxies to be
executed by the registered holder of such Securities (if registered otherwise
than in the name of the Trust), but without indicating the manner in which such
proxies are to be voted. Such proxies shall be delivered by regular mail to the
appropriate investment advisor of each series of the Trust.
12. TRANSFER TAX AND OTHER DISBURSEMENTS.
The Trust shall pay or reimburse the Custodian from time to time for any
transfer taxes payable upon transfers of securities made hereunder and for all
other necessary and proper disbursements and expenses made or incurred by the
Custodian in the performance of this Agreement. The Custodian shall execute and
deliver such certificates in connection with Securities delivered to it or by it
under this Agreement as may be required under the provisions of the Internal
Revenue Code and any Regulations of the Treasury Department issued thereunder,
or under the laws of any State, to exempt from taxation any exemptible transfers
and/or deliveries of any such securities.
13. CONCERNING THE CUSTODIAN.
(a) The Custodian's compensation shall be paid by the Trust. The Custodian
shall not be liable for any action taken in good faith upon receipt of
instructions as herein defined or a certified copy of any resolution
of the Board of Trustees, and may rely on the genuineness of any such
document which it may in good faith believe to have been validly
executed.
(b) The Custodian shall not be liable for any loss or damage, resulting
from its action or omission to act or otherwise, except for any such
loss or damage arising out of its own negligence or willful misconduct
and except that the Custodian shall be responsible for the acts of any
sub-custodian, or agent appointed hereunder and approved by the Board
of Trustees of the Trust. At any time, the Custodian may seek advice
from legal counsel for the Trust whose legal fees shall be paid at the
sole expense of the Trust, with respect to any matter arising in
connection with this Agreement, and it shall not be liable for any
action taken or not taken or suffered by it in good faith in
accordance with the opinion of counsel for the Trust. The Trust and
not the Custodian shall be responsible for any fee or charges by
counsel for the Trust in connection with any such opinion rendered to
the Custodian.
(c) Without limiting the generality of the foregoing, the Custodian shall
be under no duty or obligation to inquire into, and shall not be
liable for:
(i) The validity of the issue of any Securities purchased by or for
the Trust, the legality of the purchase thereof, or the propriety
of the amount paid therefor;
(ii) The legality of the issue or sale of any Securities by or for the
Trust, or the propriety of the amount for which the same are
sold;
(iii)The legality of the issue or sale of any shares of the Trust, or
the sufficiency of the amount to be received therefor;
(iv) The legality of the redemption of any shares of the Trust, or the
propriety of the amount to be paid therefor;
(v) The legality of the declaration of any dividend or distribution
by the Trust, or the legality of the issue of any Securities of
the Trust in payment of any dividend or distribution in shares;
(vi) The legality of the delivery of any Securities held for the Trust
for the purpose of collateralizing the obligation of the Trust to
repay any moneys borrowed by the Trust; or
(vii)The legality of the delivery of any Securities held for the
Trust for the purpose of lending said securities to any person,
firm or corporation.
(d) The Custodian shall not be under any duty or obligation to take action
to effect collection of any amount, if the Securities upon which such
amount is payable are in default, or if payment is refused after due
demand or presentation by the Custodian on behalf of the Trust, unless
and until
(i) the Custodian shall be directed to take such action by written
instructions signed in the name of the Trust on behalf of the
Trust by one of its executive officers; and
(ii) the Custodian shall be assured to its satisfaction of
reimbursement of its costs and expenses in connection with any
such action.
(e) The Custodian shall not be under any duty or obligation to ascertain
whether any securities at any time delivered to or held by it for the
account of the Trust, are such as may properly be held by the Trust
under the provisions of the Trust's Declaration of Trust or By-Laws as
amended from time to time.
(f) The Trust agrees to indemnify and hold harmless the Custodian and its
nominees, sub-custodians, depositories and agent from all taxes,
charges, expenses, assessments, liabilities, and losses (including
counsel fees) incurred or assessed against it or its nominees,
sub-custodians, depositories and agents in connection with the
performance of this Agreement, except such as may arise from its or
its nominee's, sub-custodian's, depositories' and agent's own
negligent action, negligent failure to act, breach of this agreement
or willful misconduct. The Custodian is authorized to charge any
account of the Trust for such items; provided, however, that, except
for overdrafts as to which the Custodian shall have the immediate
right of offset, prior to charging any such account for such items,
the Custodian shall first have forwarded an invoice for such item to
the Trust and 30 days shall have elapsed from the date of such invoice
to the Trust without payment of the same having been received by the
Custodian. In the event of any advance of funds for any purpose made
by the Custodian resulting from orders or instructions of the Trust,
or in the event that the Custodian or its nominees, sub-custodians,
depositories and agents shall incur or be assessed any taxes, charges,
expenses, assessments, claims or liabilities in connection with the
performance of this Agreement, except such as may arise from its or
its nominee's own negligent action, negligent failure to act or
willful misconduct any property at any time held for the accounts of
the Trust shall be security therefor. Nothing in this paragraph,
however, shall be deemed to apply to transaction and asset holding
fees or out of pocket expenses of the Custodian which are payable by
Nottingham, and as to such fees and expenses the Custodian shall have
no right of offset or security under this paragraph.
(g) The Custodian agrees to indemnify and hold harmless the Trust and
Trust's Trustees and officers from all taxes, charges, expenses,
assessments, claims liabilities, and losses (including counsel fees)
incurred or assumed against any of them as a result of any breach or
violation of this Agreement by the Custodian or any act or omission by
the Custodian or its Trustees, officers, employees and agents and
resulting from their negligence or willful misconduct.
(h) In the event that, pursuant to this Agreement, instructions direct the
Custodian to pay for securities on behalf of the Trust, the Trust
hereby grants to the Custodian a security interest in such Securities,
until the Custodian has been reimbursed by the Trust in immediately
available funds. The instructions designating the Securities to be
paid for shall be considered the requisite description and designation
of the Securities pledged to the Custodian for purposes of the
requirements of the Uniform Commercial Code.
(i) The Custodian represents that it is qualified to act as such
under section 26(a) of the Investment Company Act of 1940.
14. REPORTS BY THE CUSTODIAN.
(a) The Custodian shall furnish the Trust and the appropriate investment
advisor of each series of the Trust, daily with a statement
summarizing all transactions and entries for the accounts of the
Trust. The Custodian shall furnish the Trust at the end of every month
with a list of the portfolio Securities held by it as Custodian for
the Trust, adjusted for all commitments confirmed by instructions as
of such time. The books and records of the Custodian pertaining to its
actions under this Agreement shall be open to inspection and audit at
reasonable times by officers of the Trust, its independent public
accountants and officers of its investment advisers.
(b) The Custodian will maintain such books and records relating to
transactions effected by it as are required by the Investment Company
Act of 1940, as amended, and any rule or regulation thereunder; or by
any other applicable provision of the law to be maintained by the
Trust or its Custodian, with respect to such transactions, and
preserving or causing to be preserved, any such books and records for
such periods as may be required by any such rule or regulation.
15. TERMINATION OR ASSIGNMENT.
This agreement may be terminated by the Trust, or by the Custodian, on sixty
(60) days' notice, given in writing and sent by registered mail to the
Custodian, or to the Trust, as the case may be, at the address hereinafter set
forth. Upon any termination of this Agreement, pending appointment by the Trust
of a successor to the Custodian or a vote of the shareholders of the Trust to
dissolve or to function without a Custodian of its funds, the Custodian shall
not deliver funds, Securities or other property of the Trust to the Trust, but
may deliver them to a bank or trust company of its own selection having an
aggregate capital, surplus, and undivided profits, as shown by its last
published report of not less than ten million dollars ($10,000,000) and
otherwise qualified to act as a custodian to a registered investment company as
a Custodian for the Trust to be held under terms similar to those of this
Agreement; provided, however, that the Custodian shall not be required to make
any such delivery or payment until full payment shall have been made to the
Custodian of all its contractual fees, compensations, costs and expenses, except
for fees and expenses all as set forth in Section 13 of this Agreement.
16. MISCELLANEOUS.
(a) Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Custodian, shall be sufficiently
given if addressed to the Custodian and mailed or delivered to it at
its office at First Union National Bank of North Carolina, 401 South
Tryon Street, Charlotte, North Carolina 28288, or at such other place
as the Custodian may from time to time designate in writing.
(b) Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Trust, shall be sufficiently given
if addressed to the Trust and mailed or delivered to it at 105 N.
Washington Street, Rocky Mount, North Carolina 27802, or at-such other
place as the Trust may from time to time designate in writing.
(c) This Agreement may not be amended or modified in any manner except by
a written agreement executed by both parties with the same formality
as this Agreement, and authorized or approved by a resolution of the
Board of Trustees of the Trust.
(d) This Agreement shall extend to and shall be binding upon the parties
hereto and their respective successors and assigns, provided, however,
that this Agreement shall not be assignable by the Trust without the
written consent of the Custodian or by the Custodian without the
written consent of the Trust, authorized or approved by a resolution
of its Board of Trustees.
(e) This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but such counterparts shall,
together, constitute but one instrument.
(f) This Agreement and the rights and obligations of the Trust and the
Custodian hereunder shall be construed and interpreted in accordance
with the laws of the State of North Carolina.
(g) The Declaration of Trust of the Trust has been filed with the
Secretary of State of the Commonwealth of Massachusetts. The
obligations of the Trust on behalf of the Funds are not personally
binding upon, nor shall resort be had to the private property of any
of the Trustees, shareholders, officers, employees or agents of the
Trust, but only the Trust's property shall be bound.
IN WITNESS WHEREOF, the Trust and the Custodian have caused this Agreement to be
signed and witnessed by duly authorized persons as of the date first written
above. Executed in several counterparts, each of which is an original.
Attest: FIRST UNION NATIONAL BANK OF NORTH CAROLINA
- ----------------------------
By:________________________________________
Title:_____________________________________
Attest: CAPITAL MANAGEMENT INVESTMENT TRUST
- ----------------------------
By:________________________________________
Title:_____________________________________
EXHIBIT 11
OPINION AND CONSENT OF AUDITORS
Independent Auditors' Consent
The Board of Trustees and Shareholders
Capital Management Investment Trust
We consent to the use of our report dated December 13, 1996 included in the
registration statement on Form N-1A of the Capital Management Mid-Cap Fund
(formerly named the Capital Management Equity Fund), a series of the Capital
Management Investment Trust, and to the reference to our firm under the heading
"Financial Highlights" in the prospectus.
\s\ KPMG Peat Marwick
Richmond, Virginia
March 26, 1997
CAPITAL MANAGEMENT EQUITY FUND
COMPUTATION OF PERFORMANCE DATA
The Fund computes the "average annual total return" of each Class of the Fund by
determining the average annual compounded rates of return during specified
periods that equate the initial amount invested to the ending redeemable value
of such investment. This is done by determining the ending redeemable value of a
hypothetical $1,000 initial payment. This calculation is as follows:
P(1+T)n = ERV
Where: T = average annual total return.
ERV = ending redeemable value at the end of the period
covered by the computation of a hypothetical $1,000
payment made at the beginning of the period.
P = hypothetical initial payment of $1,000 from which the
maximum sales load is deducted.
n = period covered by the computation, expressed in terms
of years.
The Fund may also compute the aggregate total return of each Class of the Fund,
which is calculated in a similar manner, except that the results are not
annualized.
The calculation of average annual total return and aggregate total return assume
that the maximum sales load is deducted from the initial $1,000 investment at
the time it is made and that there is a reinvestment of all dividends and
capital gain distributions on the reinvestment dates during the period. The
ending redeemable value is determined by assuming complete redemption of the
hypothetical investment and the deduction of all nonrecurring charges at the end
of the period covered by the computations. The Fund may also quote other total
return information that does not reflect the effects of the sales load.
The average annual total return for the Institutional Shares of the Fund for the
year ended November 30, 1996 and since inception (January 27, 1995 to November
30, 1996) was 19.57% and 23.27%, respectively. The cumulative total return for
the Institutional Shares of the Fund since inception through November 30, 1996
was 47.07%. The average annual total return for the Investor Shares of the Fund
for the year ended November 30, 1996 and since inception (April 7, 1995 to
November 30, 1996) was 16.02% and 16.06%, respectively. Without reflecting the
effects of the maximum sales load, the average annual total return for the
Investor Shares for the year ended November 30, 1996 and since inception was
19.61% and 18.22%, respectively. The cumulative total return for the Investor
Shares of the Fund since inception through November 30, 1996 was 27.90%. Without
reflecting the effects off the maximum sales load, the cumulative total return
for the Investor Shares since inception through November 30, 1996 was 31.85%.
Average Annual Total Return - Institutional Shares:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Inception through November 30, 1996 Year ended November 30, 1996
1,000(1+T)1.84 = 1,470.74 1,000(1+T)1 = 1,195.68
T = (1,470.04/1,000)1.84 - 1 T = (1,195.68/1,000)1 - 1
T = 0.2327 T = 0.1957
T = 23.27% T = 19.57%
ERV = 1,470.74 ERV = 1,195.68
P = 1,000 P = 1,000
n = 1.84 n = 1
Average Annual Total Return - Investor Shares:
With Sales Load
Inception through November 30, 1996 Year ended November 30, 1996
1,000(1+T)1.65 = 1,278.95 1,000(1+T)1 = 1,160.18
T = (1,278.95/1,000)1.65 - 1 T = (1,160.18/1,000)1 - 1
T = 0.1606 T = 0.1602
T = 16.06% T = 16.02%
ERV = 1,278.95 ERV = 1,160.18
P = 1,000 P = 1,000
n = 1.65 n = 1
Without Sales Load
Inception through November 30, 1996 Year ended November 30, 1996
1,000(1+T)1.65 = 1,318.51 1,000(1+T)1 = 1,196.06
T = (1,318.51/1,000)1.65 - 1 T = (1,196.06/1,000)1 - 1
T = 0.1822 T = 0.1961
T = 18.22% T = 19.61%
ERV = 1,318.51 ERV = 1,196.06
P = 1,000 P = 1,000
n = 1.65 n = 1
</TABLE>
Cumulative Total Return
(ERV - P)/P = TR
Where: ERV = ending redeemable value at the end of the period
covered by the computation of a hypothetical
$1,000 payment made at the beginning of the period
P = hypothetical initial payment of $1,000 from which
the maximum sales load is deducted
TR = total return
Inception through November 30, 1996 - Institutional Shares
(1,470.74 - 1,000)/1,000 = 0.4707
ERV = 1,470.74
P = 1,000
TR = 47.07%
Inception through November 30, 1996 - Investor Shares - with sales load
(1,278.95 - 1,000)/1,000 = 0.2790
ERV = 1,278.95
P = 1,000
TR = 27.90%
Inception through Novebmer 30, 1996 without sales load
(1,318.51 - 1,000)/1,000 = 0.3185
ERV = 1,318.51
P = 1,000
TR = 31.85%
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned officer and/or trustee of
Capital Management Investment Trust hereby appoints J. Hope Reese and/or C.
Frank Watson, III, with full power of substitution, his true and lawful attorney
to execute in his name, place and stead and on his behalf a registration
statement on Form N-1A for the registration, pursuant to the Securities Act of
1933 and the Investment Company Act of 1940, of said Trust's shares of
beneficial interest, and any and all amendments to said Registration Statement
(including post-effective amendments), and all instruments necessary or
incidental in connection therewith and to file the same with the U.S. Securities
and Exchange Commission. Said attorneys shall have full power and authority,
with full power of substitution, to do and perform in the name and on behalf of
the undersigned every act whatsoever requisite or desirable to be done in the
premises, as fully and to all intents and purposes as the undersigned might or
could do, the undersigned hereby ratifying and approving all such acts of such
attorneys.
IN WITNESS WHEREOF, the undersigned has executed this
instrument this _______ day of _____________, 1997.
/s/ Lucius E. Burch, III
- ------------------------
Lucius E. Burch, III
/s/ Thomas A. Saunders, III
- ------------------------
Thomas A. Saunders, III
/s/ Anthony J. Walton
- ------------------------
Anthony J. Walton
/s/ David V. Shields
- ------------------------
David V. Shields
/s/ Joseph V. Shields, Jr.
- ------------------------
Joseph V. Shields, Jr.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000931491
<NAME> Institutional Shares
<SERIES>
<NUMBER> 1
<NAME> Instituional Shares
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 3,569,330
<INVESTMENTS-AT-VALUE> 4,246,027
<RECEIVABLES> 20,366
<ASSETS-OTHER> 201
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4,266,594
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 18,243
<TOTAL-LIABILITIES> 18,243
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,444,966
<SHARES-COMMON-STOCK> 250,268
<SHARES-COMMON-PRIOR> 150,726
<ACCUMULATED-NII-CURRENT> 11,660
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 115,028
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 676,697
<NET-ASSETS> 4,248,351
<DIVIDEND-INCOME> 55,196
<INTEREST-INCOME> 11,614
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 66,810
<REALIZED-GAINS-CURRENT> 124,863
<APPREC-INCREASE-CURRENT> 477,699
<NET-CHANGE-FROM-OPS> 669,372
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 55,272
<DISTRIBUTIONS-OF-GAINS> 33,645
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 98,149
<NUMBER-OF-SHARES-REDEEMED> 5,786
<SHARES-REINVESTED> 7,179
<NET-CHANGE-IN-ASSETS> 1,865,028
<ACCUMULATED-NII-PRIOR> 10,252
<ACCUMULATED-GAINS-PRIOR> 33,755
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 34,561
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 132,159
<AVERAGE-NET-ASSETS> 2,840,907
<PER-SHARE-NAV-BEGIN> 12.16
<PER-SHARE-NII> 0.23
<PER-SHARE-GAIN-APPREC> 2.08
<PER-SHARE-DIVIDEND> 0.26
<PER-SHARE-DISTRIBUTIONS> 0.22
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.99
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000931491
<NAME> Investor Shares
<SERIES>
<NUMBER> 2
<NAME> Investor Shares
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 3,569,330
<INVESTMENTS-AT-VALUE> 4,246,027
<RECEIVABLES> 20,366
<ASSETS-OTHER> 201
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4,266,594
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 18,243
<TOTAL-LIABILITIES> 18,243
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,444,966
<SHARES-COMMON-STOCK> 53,463
<SHARES-COMMON-PRIOR> 45,557
<ACCUMULATED-NII-CURRENT> 11,660
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 115,028
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 676,697
<NET-ASSETS> 4,248,351
<DIVIDEND-INCOME> 55,196
<INTEREST-INCOME> 11,614
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 66,810
<REALIZED-GAINS-CURRENT> 124,863
<APPREC-INCREASE-CURRENT> 477,699
<NET-CHANGE-FROM-OPS> 669,372
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 10,130
<DISTRIBUTIONS-OF-GAINS> 9,945
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 11,424
<NUMBER-OF-SHARES-REDEEMED> 5,154
<SHARES-REINVESTED> 1,635
<NET-CHANGE-IN-ASSETS> 1,865,028
<ACCUMULATED-NII-PRIOR> 10,252
<ACCUMULATED-GAINS-PRIOR> 33,755
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 34,561
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 132,159
<AVERAGE-NET-ASSETS> 615,113
<PER-SHARE-NAV-BEGIN> 12.09
<PER-SHARE-NII> 0.24
<PER-SHARE-GAIN-APPREC> 2.06
<PER-SHARE-DIVIDEND> 0.21
<PER-SHARE-DISTRIBUTIONS> 0.22
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.96
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
