[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
