Dear Fellow Shareholders,
As we embark on the second half of 1998, many U.S. equity investors are
puzzled by their returns for the first six months of the year. While the popular
market averages have continued to make new highs, many portfolios, including
your fund, have not kept pace. How can this be, you may ask? It is because a few
large stocks drive the performance of capitalization-weighted indexes, and these
stocks have been performing well. Market fears have led investors back to bonds
and to large, liquid stocks and away from mid- and small-cap issues. For
example, in the first six months of the year the top 30 stocks in the S&P 500
contributed about 50% of the entire index's gain. In other words, the majority
of common stocks have not produced the stellar returns realized in 1997, nor
have they kept pace with the averages in the early part of 1998.
By conventional measures the U.S. stock market has been overvalued for
some time. However, this does not mean that equity prices will suddenly
collapse. History has shown that financial markets can stay overvalued for a
long period of time. Within the next six to nine months disappointing profit
performance could add a significant risk to the stock market, but lower earnings
alone may not be enough to break the market's back. The big surprise could be
higher interest rates later in the year. For now, though, the outlook for
inflation and interest rates is benign, but if the impact of Asia turns out to
be less than expected, the Federal Reserve could be forced to raise interest
rates.
In your fund our focus remains on domestically oriented companies with
reduced cyclical exposure. We believe that companies which depend on U.S. demand
will outperform those that in large measure depend on exports, especially to
Asia. We also expect the performance divergence between large- and mid-cap
stocks to narrow in the second half as weakness overseas and differences in
valuation begin to impact the shares of larger, multi-national companies.
During this turbulent time, our goal is to protect your fund's assets,
while at the same time choosing investments in the mid-cap area which offer
superior value and growth prospects.
C. Lennis Koontz II, C.F.A.
President
June 30, 1998
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
CAPITAL MANAGEMENT MID-CAP FUND
PORTFOLIO OF INVESTMENTS
May 31, 1998
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - 88.40%
Advertising - 2.77%
(a) Outdoor Systems, Inc. ................................................ 7,300 $ 219,000
----------
Broadcast - Radio & Television - 2.93%
(a) American Radio Systems Corporation ................................... 3,500 231,438
----------
Chemicals - 1.73%
M. A. Hanna Company .................................................. 6,800 136,425
----------
Commercial Services - 2.37%
National Data Corporation ............................................ 5,000 187,500
----------
Computer Software & Services - 1.51%
Autodesk, Inc. ....................................................... 2,800 119,000
----------
Diversified Operations - 2.72%
(a) Blythe Industries, Inc. .............................................. 7,000 214,812
----------
Electronics - 2.09%
(a) Littelfuse, Inc. ..................................................... 7,200 164,700
----------
Electronics - Semiconductor - 4.09%
Helix Technology Corporation ......................................... 7,000 124,687
(a) Integrated Device Technology, Inc. ................................... 8,800 82,500
(a) Lattice Semiconductor Corporation .................................... 3,000 115,875
----------
323,062
----------
Financial - Banks, Commercial - 2.81%
First Security Corporation ........................................... 9,750 221,813
----------
Food - Processing - 5.75%
Dole Food Company, Inc. .............................................. 4,750 219,391
McCormick & Company, Inc. ............................................ 7,000 234,500
----------
453,891
----------
Household Products & Housewares - 4.90%
Maytag Corporation ................................................... 3,000 151,313
Watsco, Inc. ......................................................... 8,000 235,000
----------
386,313
----------
Lodging - 2.53%
(a) Promus Hotel Corporation ............................................. 4,625 200,031
----------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
CAPITAL MANAGEMENT MID-CAP FUND
PORTFOLIO OF INVESTMENTS
May 31, 1998
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Manufactured Housing - 1.88%
Clayton Homes, Inc. .................................................. 7,900 $ 148,619
----------
Medical - Biotechnology - 2.33%
Chiron Corporation ................................................... 10,200 184,237
----------
Medical Supplies - 6.88%
C. R. Bard, Inc. ..................................................... 6,000 208,125
(a) Sola International, Inc. ............................................. 5,900 233,419
(a) Sybron International Corporation ..................................... 4,250 101,734
----------
543,278
----------
Metals - Diversified - 3.06%
Oregon Steel Mills, Inc. ............................................. 10,000 241,875
----------
Oil & Gas - Equipment & Services - 10.74%
Diamond Offshore Drilling, Inc. ...................................... 1,600 76,500
(a) EEX Corporation ...................................................... 19,100 188,612
ENSCO International Incorporated ..................................... 4,200 106,050
(a) EVI Weatherford, Inc. ................................................ 2,600 131,463
(a) Input/Output, Inc. ................................................... 8,700 191,400
Transocean Offshore, Inc. ............................................ 3,100 152,869
----------
846,894
----------
Real Estate Investment Trust - 5.48%
Crescent Real Estate Equities Company ................................ 6,700 229,475
Spieker Properties, Inc. ............................................. 5,100 203,044
----------
432,519
----------
Retail - Apparel - 2.98%
(a) Tommy Hilfiger Corporation ........................................... 3,500 235,375
----------
Retail - Specialty Line - 2.62%
(a) Office Depot, Inc. ................................................... 7,000 206,500
----------
Telecommunications Equipment - 4.96%
(a) ADC Telecommunications, Inc. ......................................... 7,400 208,125
(a) Davox Corporation .................................................... 10,000 183,750
----------
391,875
----------
Toys - 2.10%
Mattel, Inc. ......................................................... 4,375 165,703
----------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
CAPITAL MANAGEMENT MID-CAP FUND
PORTFOLIO OF INVESTMENTS
May 31, 1998
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Utilities - Electric - 6.04%
Idaho Power Company .................................................. 7,000 $ 239,312
The Washington Water Power Company ................................... 11,000 237,875
----------
477,187
----------
Utilities - Gas - 3.13%
Pacific Enterprises .................................................. 6,500 247,406
----------
Total Common Stocks (Cost $6,166,373) ..................................... 6,979,453
----------
INVESTMENT COMPANIES - 8.98%
Evergreen Money Market Treasury Institutional Money
Market Fund Institutional Service Shares ............................. 354,679 354,679
Evergreen Money Market Treasury Institutional Treasury
Money Market Fund Institutional Service Shares ....................... 354,649 354,679
----------
Total Investment Companies (Cost $709,358) ........................... 709,358
----------
Total Value of Investments (Cost $6,875,731 (b)) ............................................ 97.38% $7,688,811
Other Assets Less Liabilities ............................................................... 2.62% 206,702
------ ----------
Net Assets ........................................................................... 100.00% $7,895,513
====== ==========
(a) Non-income producing investment.
(b) 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 $1,118,965
Unrealized depreciation (305,885)
----------
Net unrealized appreciation $ 813,080
==========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
CAPITAL MANAGEMENT MID-CAP FUND
STATEMENT OF ASSETS AND LIABILITIES
May 31, 1998
(Unaudited)
ASSETS
Investments, at value (cost $6,875,731) .......................................................... $7,688,811
Cash ............................................................................................. 227,396
Income receivable ................................................................................ 12,166
Receivable for fund shares sold .................................................................. 1,951
Other assets ..................................................................................... 5,528
----------
Total assets ................................................................................ 7,935,852
----------
LIABILITIES
Accrued expenses ................................................................................. 20,186
Payable for fund shares redeemed ................................................................. 10,668
Due to investment advisor ........................................................................ 9,485
----------
Total liabilities ........................................................................... 40,339
----------
NET ASSETS .............................................................................................. $7,895,513
==========
NET ASSETS CONSIST OF
Paid-in capital .................................................................................. $6,325,792
Undistributed net realized gain on investments ................................................... 756,641
Net unrealized appreciation on investments ....................................................... 813,080
----------
$7,895,513
==========
INSTITUTIONAL CLASS
Net asset value, offering and redemption price per share ($5,602,452 / 337,623 shares outstanding) .......... $16.59
==========
INVESTOR CLASS
Net asset value, offering and redemption price per share ($2,293,061 / 140,087 shares outstanding) .......... $16.37
==========
Maximum offering price per share (100 / 97% of $16.37) ...................................................... $16.88
==========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
CAPITAL MANAGEMENT MID-CAP FUND
STATEMENT OF OPERATIONS
Period ended May 31, 1998
(Unaudited)
INVESTMENT LOSS
Income
Dividends .................................................................................... $ 52,503
Interest ..................................................................................... 12,147
--------
Total income ............................................................................ 64,650
--------
Expenses
Investment advisory fees (note 2) ............................................................ 39,819
Fund administration fees (note 2) ............................................................ 7,964
Distribution and service fees - Investor Class (note 3) ...................................... 8,899
Professional fees ............................................................................ 9,472
Fund accounting fees (note 2) ................................................................ 16,500
Custody fees ................................................................................. 1,784
Securities pricing fees ...................................................................... 1,284
Shareholder recordkeeping fees ............................................................... 763
Registration and filing administration fees .................................................. 1,620
Shareholder servicing expenses ............................................................... 2,593
Registration and filing expenses ............................................................. 3,559
Trustee fees and meeting expenses ............................................................ 3,835
Printing expenses ............................................................................ 2,091
Other operating expenses ..................................................................... 2,346
--------
Total expenses .......................................................................... 102,529
--------
Less investment advisory fees waived (note 2) ........................................... (33,875)
--------
Net expenses ............................................................................ 68,654
--------
Net investment loss ............................................................... (4,004)
--------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain from investment transactions ..................................................... 775,428
Decrease in unrealized appreciation on investments ................................................. (479,982)
--------
Net realized and unrealized gain on investments ............................................... 295,446
--------
Net increase in net assets resulting from operations ..................................... $291,442
========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
CAPITAL MANAGEMENT MID-CAP FUND
STATEMENTS OF CHANGES IN NET ASSETS
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Period ended Year ended
May 31, November 30,
1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS
Operations
Net investment loss ................................................................. $ (4,004) $ (3,104)
Net realized gain from investment transactions ...................................... 775,428 906,998
(Decrease) increase in unrealized appreciation on investments ....................... (479,982) 616,365
---------- ----------
Net increase in net assets resulting from operations ........................... 291,442 1,520,259
---------- ----------
Distributions to shareholders from
Net investment income - Institutional Class ......................................... 0 (9,510)
Net investment income - Investor Class .............................................. 0 (2,150)
Distributions in excess of net investment income - Institutional Class .............. 0 (5,509)
Distributions in excess of net investment income - Investor Class ................... 0 (1,032)
Net realized gain from investment transactions - Institutional Class ................ (678,656) (86,210)
Net realized gain from investment transactions - Investor Class ..................... (244,032) (18,266)
---------- ----------
Decrease in net assets resulting from distributions ............................ (922,688) (122,677)
---------- ----------
Capital share transactions
Increase in net assets resulting from capital share transactions (a) ................ 1,341,401 1,539,425
---------- ----------
Total increase in net assets .............................................. 710,155 2,937,007
NET ASSETS
Beginning of period ..................................................................... 7,185,358 4,248,351
---------- ----------
End of period ........................................................................... $7,895,513 $7,185,358
========== ==========
(a) A summary of capital share activity follows:
-----------------------------------------------------------------------
Period ended Year ended
May 31, 1998 November 30, 1997
Shares Value Shares Value
-----------------------------------------------------------------------
- ----------------------------------------------------------
INSTITUTIONAL CLASS
- ----------------------------------------------------------
Shares sold .............................................. 6,727 $ 116,404 34,955 $ 557,429
Shares issued for reinvestment of distributions .......... 41,056 678,656 7,367 101,229
---------- ---------- ---------- ----------
47,783 795,060 42,322 658,658
Shares redeemed .......................................... (1,993) (34,309) (757) (13,561)
---------- ---------- ---------- ----------
Net increase ........................................ 45,790 $ 760,751 41,565 $ 645,097
========== ========== ========== ==========
- ----------------------------------------------------------
INVESTOR CLASS
- ----------------------------------------------------------
Shares sold .............................................. 53,393 $ 875,234 53,642 $ 941,945
Shares issued for reinvestment of distributions .......... 14,339 234,590 1,566 21,448
---------- ---------- ---------- ----------
67,732 1,109,824 55,208 963,393
Shares redeemed .......................................... (31,498) (529,174) (4,818) (69,065)
---------- ---------- ---------- ----------
Net increase ........................................ 36,234 $ 580,650 50,390 $ 894,328
========== ========== ========== ==========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
CAPITAL MANAGEMENT MID-CAP FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
For the period
from January 27,
1995 (commencement
Period ended Year ended Year ended of operations) to
- ------------------------------- May 31, November 30, November 30, November 30,
INSTITUTIONAL CLASS 1998 1997 1996 1995
- ------------------------------- -------------------------------------------------------------------
Net asset value, beginning of period ........................... $18.20 $13.99 $12.16 $10.00
Income from investment operations
Net investment income (loss) ............................ 0.01 0.01 0.23 0.20
Net realized and unrealized gain on investments ......... 0.70 4.60 2.08 2.10
---------- ---------- ---------- ----------
Total from investment operations .................... 0.71 4.61 2.31 2.30
---------- ---------- ---------- ----------
Distributions to shareholders from
Net investment income ................................... 0.00 (0.04) (0.26) (0.14)
Distributions in excess of net investment income ........ 0.00 (0.02) 0.00 0.00
Net realized gain from investment transactions .......... (2.32) (0.34) (0.22) 0.00
---------- ---------- ---------- ----------
Total distributions ................................. (2.32) (0.40) (0.48) (0.14)
---------- ---------- ---------- ----------
Net asset value, end of period ................................. $16.59 $18.20 $13.99 $12.16
========== ========== ========== ==========
Total return (a) ............................................... 0.36 % 33.92 % 19.57 % 23.00 %
========== ========== ========== ==========
Ratios/supplemental data
Net assets, end of period ................................. $5,601,452 $5,311,416 $3,502,215 $1,832,507
========== ========== ========== ==========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees ........... 1.50 % (b) 2.92 % 3.70 % 7.20 % (b)
After expense reimbursements and waived fees ............ 1.50 % (b) 1.50 % 0.00 % 0.31 % (b)
Ratio of net investment income (loss) to average net assets
Before expense reimbursements and waived fees ........... 0.12 % (b) (1.34)% (1.77)% (4.45)% (b)
After expense reimbursements and waived fees ............ 0.12 % (b) 0.08 % 1.94 % 2.44 % (b)
Portfolio turnover rate ................................... 38.16 % 66.30 % 82.30 % 47.74 %
Average brokerage commission per share (c) ................ 0.0669 0.0607 0.0598 --
- ------------------------------
INVESTOR CLASS
- ------------------------------
Net asset value, beginning of period ........................... $18.04 $13.96 $12.09 $11.07
Income from investment operations
Net investment income (loss) ............................ (0.04) (0.05) 0.24 0.11
Net realized and unrealized gain on investments ......... 0.69 4.53 2.06 1.02
---------- ---------- ---------- ----------
Total from investment operations .................... 0.65 4.48 2.30 1.13
---------- ---------- ---------- ----------
Distributions to shareholders from
Net investment income ................................... 0.00 (0.03) (0.21) (0.11)
Distributions in excess of net investment income ........ 0.00 (0.03) 0.00 0.00
Net realized gain from investment transactions .......... (2.32) (0.34) (0.22) 0.00
---------- ---------- ---------- ----------
Total distributions ................................. (2.32) (0.40) (0.43) (0.11)
---------- ---------- ---------- ----------
Net asset value, end of period ................................. $16.37 $18.04 $13.96 $12.09
========== ========== ========== ==========
Total return (a) ............................................... 0.06 % 33.11 % 19.61 % 10.24 %
========== ========== ========== ==========
Ratios/supplemental data
Net assets, end of period ................................. $2,293,061 $1,873,942 $ 746,136 $ 550,814
========== ========== ========== ==========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees ........... 2.25 % (b) 3.71 % 4.45 % 7.18 % (b)
After expense reimbursements and waived fees ............ 2.25 % (b) 2.25 % 0.00 % 1.06 % (b)
Ratio of net investment income (loss) to average net assets
Before expense reimbursements and waived fees ........... (0.62)% (b) (2.10)% (2.50)% (4.23)% (b)
After expense reimbursements and waived fees ............ (0.62)% (b) (0.63)% 1.95 % 1.89 % (b)
Portfolio turnover rate ................................... 38.16 % 66.30 % 82.30 % 47.74 %
Average brokerage commission per share (c) ................ 0.0669 0.0607 0.0598 --
(a) Total return does not reflect payment of a sales charge.
(b) Annualized.
(c) Represents total commissions paid on portfolio securities divided by total portfolio shares purchased or sold on which
commissions were charged.
See accompanying notes to financial statements
</TABLE>
<PAGE>
CAPITAL MANAGEMENT MID-CAP FUND
NOTES TO FINANCIAL STATEMENTS
May 31, 1998
(Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
The Capital Management Mid-Cap Fund (the "Fund"), formerly known as The
Capital Management Equity 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 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. 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.
Each Fund files a tax return annually using tax accounting
methods required under provisions of the Code which may differ
from generally accepted accounting principles, the basis on
which these financial statements are prepared. Accordingly,
the character of distributions to shareholders reported in the
financial highlights may differ from that reported to
shareholders for Federal income tax purposes. Distributions
which exceed net investment income and net realized gains for
financial reporting purposes but not for tax purposes, if any,
are shown as distributions in excess of net investment income
and net realized gains in the accompanying statements.
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 is
recorded on the ex-dividend date.
(Continued)
<PAGE>
CAPITAL MANAGEMENT MID-CAP FUND
NOTES TO FINANCIAL STATEMENTS
May 31, 1998
(Unaudited)
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. Distributions to
shareholders are recorded on the ex-dividend date. In
addition, distributions may be made annually in December out
of net realized gains through October 31 of that year.
Distributions to shareholders are recorded on the ex-dividend
date. The Fund may make a supplemental distribution subsequent
to the end of its fiscal year ending November 30.
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.
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.
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 a portion of its fee
amounting to $33,875 ($0.07 per share) for the period ended May 31,
1998.
The Fund's administrator, The Nottingham Company (the "Administrator"),
provides administrative services to and is generally responsible for
the overall management and day-to-day operations of the Fund pursuant
to an accounting and administrative agreement with the Trust. As
compensation for its services, the Administrator receives a fee at the
annual rate of 0.20% of the Fund's first $50 million of average daily
net assets, 0.175% of the next $50 million, and 0.15% of average daily
net assets over $100 million. The Administrator also receives a monthly
fee of $2,000 for accounting and record-keeping services for the
initial class of shares and $750 per month for each additional class of
shares. Additionally, the Administrator charges the Fund for servicing
of shareholder accounts and registration of the Fund's shares. The
contract with the Administrator provides that the aggregate fees for
the aforementioned administration, accounting, and 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.
North Carolina Shareholder Services, LLC (the "Transfer Agent") serves
as the Fund's transfer, dividend paying, and shareholder servicing
agent. The Transfer Agent maintains the records of each shareholder's
account, answers shareholder inquiries concerning accounts, processes
purchases and redemptions of the Fund'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.
(Continued)
<PAGE>
CAPITAL MANAGEMENT MID-CAP FUND
NOTES TO FINANCIAL STATEMENTS
May 31, 1998
(Unaudited)
Shields & Company, Inc. (the "Distributor"), an affiliate of the
Advisor, serves as the Fund's principal underwriter and distributor.
The Distributor receives any sales charges imposed on purchases of
Investor Shares and re-allocates a portion of such charges to dealers
through whom the sale was made, if any. For the period ended May 31,
1998, the Distributor retained sales charges in the amount of $1,806.
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 $8,899 of such
expenses under the Plan for the period ended May 31, 1998.
NOTE 4 - PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments, other than short-term investments,
aggregated $2,822,381 and $3,049,727, respectively, for the period
ended May 31, 1998.
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. Of the total $4.65 per
share distributions for the period ended May 31, 1998, $2.56 per share
represents long-term capital gain and $2.09 per share represents
short-term capital gain. Shareholders should consult a tax advisor on
how to report distributions for state and local income tax purposes.
