As filed with the Securities and Exchange Commission on October 29, 1998
Securities Act File No. 33-85242
Investment Company Act File No. 811-08822
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. ___ [ ]
Post-Effective Amendment No. 6 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 7 [X]
(Check appropriate box or boxes.)
CAPITAL MANAGEMENT INVESTMENT TRUST
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(Exact Name of Registrant as Specified in Charter)
140 Broadway, Suite 2201, New York, New York 10005
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (212) 509-1111
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C. Frank Watson, III
105 North Washington Street, P.O. Drawer 69, Rocky Mount, NC 27802-0069
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(Name and Address of Agent for Service)
With Copies to:
Jane A. Kanter
Dechert Price & Rhoads.
1775 Eye Street, N.W.
Washington, DC 20006-2401
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this filing
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It is proposed that this filing will become effective: (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[X] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of rule 485.
<PAGE>
Capital Management Investment Trust
Contents of Registration Statement
This registration statement consists of the following papers and documents:
Cover Sheet
Contents of Registration Statement
Part A
-Capital Management Small-Cap Fund - Investor Prospectus
-Capital Management Small-Cap Fund - Institutional Prospectus
-Capital Management Energy Fund - Investor Prospectus
-Capital Management Energy Fund - Institutional Prospectus
Part B
-Capital Management Small-Cap Fund - Statement of Additional Information
-Capital Management Energy Fund - Statement of Additional Information
Part C - Other Information and Signature Page
Exhibit Index
Exhibits
Cover Letter
<PAGE>
PART A
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Cusip Number 140296___ NASDAQ Symbol CM___
________________________________________________________________________________
CAPITAL MANAGEMENT SMALL-CAP FUND
A series of the
Capital Management Investment Trust
INVESTOR SHARES
________________________________________________________________________________
Prospectus
January 15, 1999
The Capital Management Small-Cap Fund seeks long-term capital appreciation.
Current income is a secondary consideration in selecting portfolio investments.
In seeking to achieve its objective, this Fund will invest primarily in
equity-related securities of small capitalization companies. This Fund offers
two classes of shares: the Investor Class of shares described in this prospectus
and the Institutional Class of shares offered by another prospectus.
Advisor
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Capital Management Associates, Inc.
140 Broadway
New York, New York 10005
Telephone: (888) 626-3863
Neither the Securities and Exchange Commission nor any other regulatory body has
approved the securities being offered by this prospectus or determined whether
this prospectus is accurate and complete. It is unlawful for anyone to make any
representation to the contrary.
<PAGE>
TABLE OF CONTENTS
THE FUND.....................................................................1
Investment Objective......................................................1
Principal Investment......................................................1
Principal Risks Of Investing In The Fund..................................1
Fees And Expenses Of The Fund.............................................2
MANAGEMENT OF THE FUND.......................................................3
Investment Advisor........................................................3
The Administrator.........................................................4
The Transfer Agent........................................................4
The Distributor...........................................................4
YOUR INVESTMENT IN THE FUND..................................................6
Minimum Investment........................................................6
Purchase And RedemptionPrice..............................................6
Purchasing Shares.........................................................7
Redeeming Your Shares.....................................................8
OTHER IMPORTANT INVESTMENT INFORMATION......................................10
Dividends, Distributions And Taxes.......................................10
Year 2000................................................................10
Additional Information...........................................Back Cover
<PAGE>
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The Fund
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INVESTMENT OBJECTIVE
The investment objective of the Capital Management Small-Cap Fund (the "Fund")
is to seek long-term capital appreciation. Current income is a secondary
consideration in selecting portfolio investments.
PRINCIPAL INVESTMENT
The Fund, which is a separate investment portfolio of Capital Management
Investment Trust (the "Trust"), pursues its investment objective by investing
primarily in equity-related securities of small capitalization ("small-cap")
companies. The Fund considers a small-cap company to be one that has market
capitalization, measured at the time the Fund purchases the security, within
the range of $100 million to $1 billion.
The Fund's investments in small-cap companies will be primarily in
equity-related securities of such companies, such as common and preferred
stocks and securities convertible into common stocks. The Fund intends to
invest in a diversified group of small-cap companies and will not concentrate
it investments in any one industry or group.
Under normal market conditions, the Fund will invest at least 90% of its total
assets in equity securities, of which at least 65% of its total assets will be
invested in the equity securities of small-cap companies. In selecting
portfolio securities, the Fund's Advisor, Capital Management Associates, Inc.,
uses various screens and proprietary models that begin with a potential
universe of over 3,500 companies and seeks to select from that group companies
whose current share price is relatively undervalued. This process often
includes visits with company management and contacts with industry experts and
suppliers. Final investment decisions are made by the Advisor's Portfolio
Management Team.
PRINCIPAL RISKS OF INVESTING IN THE FUND
The Fund is intended for aggressive investors seeking above-average gains and
willing to accept the risks involved in investing in the securities of small-cap
companies.
Investing in the securities of small-cap companies generally involves greater
risk than investing in larger, more established companies. This greater risk is,
in part, attributable to the fact that the securities of small-cap companies
usually have more limited marketability and therefore, may be more volatile than
securities of larger, more established companies or the market averages in
general. Because small-cap companies normally have fewer shares outstanding than
larger companies, it may be more difficult to buy or sell significant amounts of
such shares without an unfavorable impact on prevailing prices. Another risk
factor is that small-cap companies often have limited product lines, markets or
financial resources and may lack management depth. Additionally, small-cap
companies are typically subject to greater changes in earnings and business
prospects than are larger, more established companies and there typically is
less publicly available information concerning small-cap companies than for
larger, more established companies.
Although investing in securities of small companies offers potential
above-average returns if the companies are successful, the risk exists that the
companies will not succeed and the prices of the companies' shares could
significantly decline in value. Therefore, an investment in the Fund may involve
a greater degree of risk than an investment in other mutual funds that seek
capital growth by investing in more established, larger companies.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund:
Shareholder Fees For Investor Shares
(fees paid directly from your investment)
Maximum sales charge (load) imposed on purchases (as a
percentage of offering price) .....................................3.00%
Redemption fee .........................................................None
Annual Fund Operating Expenses For Investor Shares
(as a percentage of average daily net assets)
Management Fees..........................................................1.00%
Distribution and/or Service (12b-1) Fees.................................0.75%
Other Expenses...........................................................0.50%1
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Total ...................................................................2.25%
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1. Since the Fund commenced operations on ___________, Other Expenses are
based on amounts estimated for the current fiscal year. The Advisor has
voluntarily agreed to a reduction of 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.
Example: This example shows you the expenses you may pay over time by investing
in the Fund. Since all funds use the same hypothetical conditions, it should
help you compare the costs of investing in the Fund versus other funds. The
example assumes the following conditions:
(1) You invest $10,000 in the Fund for the periods shown
(2) You reinvest all dividends and distributions
(3) You redeem all of your shares at the end of those periods
(4) You earn a 5% total return; and
(5) The Fund's expenses remain the same.
Although your actual costs may be higher or lower, the following table shows you
what your costs may be under the conditions listed above as well as those upon
redemption.
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1 year 3 years
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Your Costs $521 $982
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Management of The Fund
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INVESTMENT ADVISOR
The Fund's Advisor is Capital Management Associates, Inc., 140 Broadway, New
York, New York 10005. The Advisor serves in that capacity pursuant to an
advisory contract with the Trust on behalf of the Fund. Subject to the authority
of the 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. 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; C. Lennis Koontz, II, CFA; and Joseph A. Zock. Mr. Zock and
seven full-time analysts serve as the Portfolio Management Team that selects the
investments for the Fund. The Shields brothers and Mr. Zock have been affiliated
with the Advisor since 1982. Mr. Koontz has been affiliated with the Advisor
since 1992. The Advisor has been managing the Fund since its inception and has
been providing investment advice to investment companies, individuals,
corporations, pension and profit sharing plans, endowments, and other business
and private accounts since 1982. The Advisor currently has approximately $1
billion in assets under management.
The Advisor's Compensation. 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.
Brokerage Practices. In selecting brokers and dealers to execute portfolio
transactions, the Advisor may consider research and brokerage services furnished
to the Advisor or its affiliates. Subject to seeking the most favorable net
price and execution available, the Advisor may also consider sales of shares of
the Fund as a factor in the selection of brokers and dealers. Certain securities
trades will be cleared through Shields & Company, a registered broker-dealer
affiliate of the Advisor and Distributor of the Fund.
The Investment Company Act of 1940, as amended (the "1940 Act"), generally
prohibits the Fund from engaging in principal securities transactions with an
affiliate of the Advisor. Thus, the Fund does not engage in principal
transactions with any affiliate of the Advisor. The Fund has adopted procedures,
under Rule 17e-1 under the 1940 Act, that are reasonably designed to provide
that any brokerage commission the Fund pays to an affiliate of the Advisor does
not exceed the usual and customary broker's commission. In addition, the Fund
will adhere to Section 11(a) of the 1934 Act and any applicable rules thereunder
governing floor trading.
THE ADMINISTRATOR
The Nottingham Company, Inc. (the "Administrator") assists the Trust in the
performance of its administrative responsibilities to the Fund, coordinates the
services of each vendor of services to the Fund, and provides the Fund with
other necessary administrative, fund accounting and compliance services. In
addition, the Administrator makes available the office space, equipment,
personnel and facilities required to provide such services to the Fund.
THE TRANSFER AGENT
NC Shareholder Services, LLC ("NCSS") serves as the transfer agent and dividend
disbursing agent of the Fund. As indicated later in the section of this
Prospectus, "Investing in the Fund," NCSS will handle your orders to purchase
and redeem shares of the Fund, and will disburse dividends paid by the Fund.
THE DISTRIBUTOR
Shields & Company is the principal underwriter and distributor of the Fund's
shares and serves as the Fund's exclusive agent for the distribution of Fund
shares. Shields & Company may sell the Fund's shares to or through qualified
securities dealers or others.
Distribution of the Fund's Shares. For the Investor Class shares of the Fund,
the Fund has adopted a Distribution Plan in accordance with Rule 12b-1 (the
"Distribution Plan") under the 1940 Act. Pursuant to the Distribution Plan, the
Fund compensates its distributor, Shields & Company (the "Distributor"), for
services rendered and expenses borne in connection with activities primarily
intended to result in the sale of the Fund's Investor Class shares (this
compensation is commonly referred to as "12b-1 fees"). It is anticipated that a
portion of the 12b-1 fees received by the Distributor will be used to defray
various costs incurred or paid by the Distributor in connection with the
printing and mailing to potential investors of Fund prospectuses, statements of
additional information, any supplements thereto, and shareholder reports, and
holding seminars and sales meetings with wholesale and retail sales personnel
designed to promote the sale of Investor Class shares. The Distributor may also
use a portion of the 12b-1 fees received to provide compensation to financial
intermediaries and third-party broker-dealers for their services in connection
with the sale of Investor Class shares. Because the 12b-1 fees are paid out of
the Fund's assets on an on-going basis, these fees, over time, will increase the
cost of your investment and may cost you more than paying other types of sales
loads.
The Distribution Plan provides that the Fund may pay annually up to 0.75% of the
average daily net assets of the Fund's Investor Class shares for activities
primarily intended to result in the sale of those shares, including to reimburse
entities for providing distribution and shareholder servicing with respect to
the Fund's Investor Class shares.
The Distribution Plan is known as a "compensation" plan because payments are
made for services rendered to the Fund with respect to Investor Class shares
regardless of the level of expenditures made by the Distributor. The Board of
Trustees of the Trust will, however, take into account such expenditures for
purposes of reviewing operations under the Distribution Plan and concerning
their annual consideration of the Plan's renewal. The Distributor has indicated
that it expects its expenditures to include, without limitation: (a) the
printing and mailing to prospective investors of Fund prospectuses, statements
of additional information, any supplements thereto and shareholder reports with
respect to the Investor Class shares of the Fund; (b) those relating to the
development, preparation, printing and mailing of advertisements, sales
literature and other promotional materials describing and/or relating to the
Investor Class shares of the Fund; (c) holding seminars and sales meetings
designed to promote the distribution of the Fund's Investor Class shares; (d)
obtaining information and providing explanations to wholesale and retail
distributors of the Fund's investment objectives and policies and other
information about the Fund; (e) training sales personnel regarding the Investor
Class shares of the Fund; and (f) financing any other activity that the
Distributor determines is primarily intended to result in the sale of Investor
Class shares.
Other Expenses. In addition to the management fees and Rule 12b-1 fees for the
Investor Class shares, the Fund pays all expenses not assumed by the Fund's
Advisor, including, without limitation: the fees and expenses of its independent
accountants and of its legal counsel; the costs of printing and mailing to
shareholders annual and semi-annual reports, proxy statements, prospectuses,
statements of additional information and supplements thereto; the costs of
printing registration statements; bank transaction charges and custodian's fees;
any proxy solicitors' fees and expenses; filing fees; any federal, state or
local income or other taxes; any interest; any membership fees of the Investment
Company Institute and similar organizations; fidelity bond and Trustees'
liability insurance premiums; and any extraordinary expenses, such as
indemnification payments or damages awarded in litigation or settlements made.
All general Trust expenses are allocated among and charged to the assets of each
separate series of the Trust, such as the Fund, on a basis that the Trustees
deem fair and equitable, which may be on the basis of relative net assets of
each series or the nature of the services performed and relative applicability
to each series.
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YOUR INVESTMENT IN THE FUND
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MINIMUM INVESTMENT
Investor Class shares are sold subject to a sales charge of 3.00%, so that the
term "offering price" includes the front-end sales load. Shares are redeemed at
net asset value. Shares may be purchased by any account managed by the Advisor
and any broker-dealer authorized to sell Fund shares.
The minimum initial investment is $2,500 ($1,000 for Individual Retirement
Accounts ("IRAs")), Keogh Plans, 401(k) Plans, or purchases under the Uniform
Transfer to Minors Act. The minimum additional investment is $500. The Fund may,
in the Advisor's sole discretion, waive such minimum investment amounts.
PURCHASE AND REDEMPTION PRICE
Determining the Fund's Net Asset Value. The price at which you purchase or
redeem shares is based on the next calculation of net asset value after an order
is placed. The Fund's net asset value per share is calculated by dividing the
value of the Fund's total assets, less liabilities (including Fund expenses,
which are accrued daily), by the total number of outstanding shares of that
Fund. The net asset value per share of the Fund is normally determined at the
time regular trading closes on the New York Stock Exchange (currently 4:00 p.m.
Eastern time, Monday through Friday), except on business holidays when the New
York Stock Exchange is closed.
In valuing the Fund's total assets, portfolio securities are generally valued at
their market value. Instruments with maturities of 60 days or less are valued at
amortized cost, which approximates market value. Securities and assets for which
representative market quotations are not readily available are valued at fair
value as determined in good faith under policies approved by the Board of
Trustees.
Other Matters. Purchases and redemptions of shares of the same class by the same
shareholder on the same day will be netted for the Fund. All redemption requests
will be processed and payment with respect thereto will normally be made within
seven days after tenders. The Fund may suspend redemption, if permitted by the
1940 Act, for any period during which the New York Stock Exchange is closed or
during which trading is restricted by the Securities Exchange Commission ("SEC")
or if the SEC declares that an emergency exists. Redemptions may also be
suspended during other periods permitted by the SEC for the protection of the
Fund's shareholders. Additionally, during drastic economic and market changes,
telephone redemption privileges may be difficult to implement. Also, if the
Trustees determine that it would be detrimental to the best interest of the
Fund's remaining shareholders to make payment in cash, the Fund may pay
redemption proceeds in whole or in part by a distribution-in-kind of readily
marketable securities.
PURCHASING SHARES
Regular Mail Orders. Payment for shares must be made by check or money order
from a U.S. bank and payable in U.S. dollars. If checks are returned due to
insufficient funds or other reasons, the Fund will charge a $20 fee or may
redeem shares of the Fund already owned by the purchaser to recover any such
loss. For regular mail orders, please complete the attached Fund Shares
Application and mail it, along with your check made payable to the "Capital
Management Small-Cap Fund," to:
Capital Management Small-Cap Fund
Investor Class Shares
c/o NC Shareholder Services, LLC
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
The application must contain your social security number and Taxpayer
Identification Number ("TIN"). If you have applied for a social security number
or TIN at the time of completing your account application but do not have such
number yet, please indicate this on the application. Taxes are not withheld from
distributions to U.S. investors if certain IRS requirements regarding the TIN
are met.
Bank Wire Orders. Purchases may also be made through bank wire orders. To
establish a new account or add to an existing account by wire, please call the
Fund at 1-888-626-3863, before wiring funds, to advise the Fund of the
investment, dollar amount, and the account identification number. Additionally,
please have your bank use the following wire instructions:
First Union National Bank of North Carolina
Charlotte, North Carolina
ABA # 053000219
For the Capital Management Small-Cap Fund - Investor Shares
Acct. # 2000001292938
For further credit to (shareholder's name and SS# or TIN#)
Additional Investments. You may also 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 call the
Fund at 1-888-626-3863 and follow the above directions for wire purchases. Mail
orders should include, if possible, the "Invest by Mail" stub which is attached
to your Fund confirmation statement. Otherwise, please identify your account in
a letter accompanying your purchase payment.
Automatic Investment Plan. The automatic investment plan enables shareholders to
make regular monthly or quarterly investment 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.
Exchange Feature. You may exchange shares of the Fund for shares of any other
series of the Trust offered for sale in the state in which you reside. Shares
may be exchanged for shares of any other series of the Trust at the net asset
value plus the percentage difference between that series' sales charge and any
sales charge, if any, previously paid in connection with the shares being
exchanged. Prior to making an investment decision or giving us your instructions
to exchange shares, please read the prospectus for the series in which you wish
to invest.
A pattern of frequent exchange transactions may be deemed by the Advisor to be
an abusive practice that is not in the best interests of the shareholders of the
fund. Such a pattern may, at the discretion of the Advisor, be limited by the
Fund's refusal to accept further purchase and/or exchange orders form an
investor, after providing the investor with 60 days prior notice. The Advisor
will consider all factors it deems relevant in determining whether a pattern of
frequent purchases, redemptions and/or exchanges by a particular investor is
abusive and not in the best interests of the Fund or its other shareholders.
The Board of Trustees reserves the right to suspend or terminate, or amend the
terms of, the exchange privilege upon 60 days written notice to the
shareholders.
Rights of Accumulation. The sales charge applicable to a current purchase of
shares of the Fund by a person listed above is determined by adding the purchase
price of shares to be purchased to the aggregate value (at current offering
price) of shares of the Funds previously purchased and then owned, provided the
Distributor is notified by such person or his or her broker-dealer each time a
purchase is made which would so qualify. For example, a person who is purchasing
Small-Cap shares with an aggregate value of $50,000 and who currently owns
shares of the Funds with a value of $200,000 would pay a sales charge of 2.50%
of the offering price on the new investment.
Letter of Intent. Sales charges may also be reduced through an agreement to
purchase a specified quantity of shares over a designated thirteen-month period
by completing the "Letter of Intent" section of the Account Application.
Information about the "Letter of Intent" procedure, including its terms, is
contained on the back of the Account Application.
Group Plans. Shares of the Funds may be sold at a reduced or eliminated sales
charge to certain Group Plans under which a sponsoring organization makes
recommendations to, permits group solicitation of, or otherwise facilitates
purchases by, its employees, members or participants. Information about such
arrangements is available from the Distributor.
Stock Certificates. You do not have the option of receiving stock certificates
for your shares. Evidence of ownership will be given by issuance of periodic
account statements that will show the number of shares owned.
REDEEMING YOUR SHARES
Regular Mail Redemptions. Regular mail redemption request should be addressed
to:
Capital Management Small-Cap Fund Investor Class Shares
c/o NC Shareholder Services, LLC
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365.
Regular mail redemption request should include:
1) Your letter of instruction specifying the account number and 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 normally will be sent to you within 7 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 15 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.
Telephone and Bank Wire Redemptions. You may also redeem 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# 252-972-1908). 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.
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 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 1-888-626-3863. 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.
Small Accounts. All shares are purchased and redeemed in accordance with the
Fund's Amended and Restated Declaration of Trust and By-Laws. The Trustees
reserve 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.
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.
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Other Important Investment Information
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DIVIDENDS, DISTRIBUTIONS AND TAXES
Under current federal income tax law, the Fund believes that it is entitled, and
the Fund intends that it shall be treated as a regulated investment company
("RIC") under Subchapter M of the Code. As a RIC, a Fund will not be subject to
federal tax on its net investment income and net realized capital gains to the
extent such income and gains are timely distributed to its shareholders.
Accordingly, the Fund intends to distribute all of its net investment income and
net realized capital gains to its shareholders. Unless otherwise instructed by
shareholders, all dividend distributions will be reinvested in full and
fractional shares of the Fund to which they relate.
Although the Fund intends that it will be operated so that there will be no
federal income or excise tax liability, if any such liability is incurred as a
result of failing to qualify as a RIC, the investment performance will be
adversely affected by the tax liability incurred and paid. In addition,
investing in foreign securities and currencies may be subject to foreign taxes
which could reduce the investment performance of the Fund.
Certain additional tax information appears in the Statement of Additional
Information.
YEAR 2000
Like other mutual funds, the Fund and the service providers for the Fund rely
heavily on the reasonably consistent operation of their computer systems. Many
software programs and certain computer hardware in use today, cannot properly
process information after December 31, 1999, because of the method by which
dates are encoded and calculated in such programs and hardware. This problem,
commonly referred to as the "Year 2000 Issue," could, among other things,
negatively impact the processing of trades, the distribution of securities, the
pricing of securities and other investment-related and settlement activities.
The Trust is currently obtaining and assessing information with respect to the
actions that have been taken and the actions that are planned to be taken by
each of its service providers to prepare their computer systems for the Year
2000. While the Trust expects that each of the Trust's service providers will
have adapted their computer systems to address the Year 2000 Issue, there can be
no assurance that this will be the case or that the steps taken by the Trust
will be sufficient to avoid any adverse impact to the Trust and each of its
funds.
<PAGE>
ADDITIONAL INFORMATION
CAPITAL MANAGEMENT SMALL-CAP FUND
INVESTOR SHARES
Additional information about the Fund is available in the Fund's Statement of
Additional Information. The Fund's Annual and Semi-annual Reports include a
discussion of market conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal year.
These reports are available free of charge upon request by contacting us:
By telephone: 1-888-626-3863
By mail: Capital Management Small-Cap Fund
Investor Class Shares
c/o NC Shareholder Services, LLC
107 North Washington Street
Post Office Box 4365
Rocky Mount, NC 27803-0365
By e-mail: [email protected]
On the Internet: www.ncfunds.com
Information about the Fund can also be reviewed and copied at the Securities
Exchange Commission's ("Commission") Public Reference Room in Washington, D.C.
Inquiries on the operations of the public reference room may be made by calling
the Commission at 1-800-SEC-0330. Reports and other information about the Fund
are available on the Commission's Internet sit at http://www.sec.gov and copies
of this information may be obtained, upon payment of a duplicating fee, by
writing the Public Reference Section of the Commission, Washington, D.C.
20549-6009.
Investment Company Act file number 811-08822.
<PAGE>
Cusip Number 140296___ NASDAQ Symbol CM___
________________________________________________________________________________
CAPITAL MANAGEMENT SMALL-CAP FUND
A series of the
Capital Management Investment Trust
INSTITUTIONAL SHARES
________________________________________________________________________________
Prospectus
January 15, 1999
The Capital Management Small-Cap Fund seeks long-term capital appreciation.
Current income is a secondary consideration in selecting portfolio investments.
In seeking to achieve its objective, this Fund will invest primarily in
equity-related securities of small capitalization companies. This fund offers
two classes of shares: the Institutional Class of shares described in this
prospectus and Investor Class of shares offered by another prospectus.
Advisor
-------
Capital Management Associates, Inc.
140 Broadway
New York, New York 10005
Telephone: (888) 626-3863
Neither the Securities and Exchange Commission nor any other regulatory body has
approved the securities being offered by this prospectus or determined whether
this prospectus is accurate and complete. It is unlawful for anyone to make any
representation to the contrary.
<PAGE>
TABLE OF CONTENTS
THE FUND......................................................................1
Investment Objective....................................................1
Principal Investment Strategies.........................................1
Principal Risks Of Investing In The Fund................................1
Fees And Expenses Of The Fund...........................................2
MANAGEMENT OF THE FUND........................................................3
Investment Advisor......................................................3
The Administrator.......................................................4
The Transfer Agent......................................................4
The Distributor.........................................................4
INVESTING IN THE FUND.........................................................5
Minimum Investment......................................................5
Purchase And Redemption Price...........................................5
Purchasing Shares.......................................................6
Redeeming Your Shares...................................................7
OTHER IMPORTANT INVESTMENT INFORMATION........................................9
Dividends, Distributions And Taxes......................................9
Year 2000...............................................................9
Additional Information.........................................Back Cover
<PAGE>
- --------------------------------------------------------------------------------
The Fund
- --------------------------------------------------------------------------------
Investment Objective
The investment objective of the Capital Management Small-Cap Fund (the "Fund")
is to seek long-term capital appreciation. Current income is a secondary
consideration in selecting portfolio investments.
Principal Investment Strategies
The Fund, which is a separate investment portfolio of Capital Management
Investment Trust (the "Trust"), pursues its investment objective by investing
primarily in equity-related securities of small capitalization ("small-cap")
companies. The Fund considers a small-cap company to be one that has market
capitalization, measured at the time the Fund purchases the security, within
the range of $100 million to $1 billion.
The Fund's investments in small-cap companies will be primarily in
equity-related securities of such companies, such as common and preferred
stocks and securities convertible into common stocks. The Fund intends to
invest in a diversified group of small-cap companies and will not concentrate
it investments in any one industry or group.
Under normal market conditions, the Fund will invest at least 90% of its total
assets in equity securities, of which at least 65% of its total assets will be
invested in the equity securities of small-cap companies. In selecting
portfolio securities, the Fund's Advisor, Capital Management Associates, Inc.,
uses various screens and proprietary models that begin with a potential
universe of over 3,500 companies and seeks to select from that group companies
whose current share price is relatively undervalued. This process often
includes visits with company management and contacts with industry experts and
suppliers. Final investment decisions are made by the Advisor's Portfolio
Management Team.
Principal Risks of Investing in the Fund
The Fund is intended for aggressive investors seeking above-average gains and
willing to accept the risks involved in investing in the securities of small-cap
companies.
Investing in the securities of small-cap companies generally involves greater
risk than investing in larger, more established companies. This greater risk is,
in part, attributable to the fact that the securities of small-cap companies
usually have more limited marketability and therefore, may be more volatile than
securities of larger, more established companies or the market averages in
general. Because small-cap companies normally have fewer shares outstanding than
larger companies, it may be more difficult to buy or sell significant amounts of
such shares without an unfavorable impact on prevailing prices. Another risk
factor is that small-cap companies often have limited product lines, markets or
financial resources and may lack management depth. Additionally, small-cap
companies are typically subject to greater changes in earnings and business
prospects than are larger, more established companies and there typically is
less publicly available information concerning small-cap companies than for
larger, more established companies.
Although investing in securities of small companies offers potential
above-average returns if the companies are successful, the risk exists that the
companies will not succeed and the prices of the companies' shares could
significantly decline in value. Therefore, an investment in the Fund may involve
a greater degree of risk than an investment in other mutual funds that seek
capital growth by investing in more established, larger companies.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund:
Shareholder Fees For Institutional Shares
(fees paid directly from your investment)
Maximum sales charge (load) imposed on purchases (as a
percentage of offering price) ......................................None
Redemption fee ..........................................................None
Annual Fund Operating Expenses For Institutional Shares
(as a percentage of average daily net assets)
Management Fees.........................................................1.00%
Distribution and/or Service (12b-1) Fees................................None
Other Expenses..........................................................0.50%1
-----
Total ..................................................................1.50%
=====
1. Since the Fund commenced operations on ___________, Other Expenses are
based on amounts estimated for the current fiscal year. The Advisor has
voluntarily agreed to a reduction of 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.
Example: This example shows you the expenses you may pay over time by investing
in the Fund. Since all funds use the same hypothetical conditions, it should
help you compare the costs of investing in the Fund versus other funds. The
example assumes the following conditions:
(1) You invest $250,000 in the Fund for the periods shown (2) You reinvest all
dividends and distributions (3) You redeem all of your shares at the end of
those periods (4) You earn a 5% total return; and (5) The Fund's expenses remain
the same.
Although your actual costs may be higher or lower, the following table shows you
what your costs may be under the conditions listed above as well as those upon
redemption.
- --------------------------------------------------------------------------------
1 Year 3 Years
- ----------------------------- --------------------- ----------------------------
Your Costs $3,816 $11,852
- ----------------------------- --------------------- ----------------------------
- --------------------------------------------------------------------------------
Management of the Fund
- --------------------------------------------------------------------------------
INVESTMENT ADVISOR
The Fund's Advisor is Capital Management Associates, Inc., 140 Broadway, New
York, New York 10005. The Advisor serves in that capacity pursuant to an
advisory contract with the Trust on behalf of the Fund. Subject to the authority
of the 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. 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; C. Lennis Koontz, II, CFA; and Joseph A. Zock. Mr. Zock and
seven full-time analysts serve as the Portfolio Management Team that selects the
investments for the Fund. The Shields brothers and Mr. Zock have been affiliated
with the Advisor since 1982. Mr. Koontz has been affiliated with the Advisor
since 1992. The Advisor has been managing the Fund since its inception and has
been providing investment advice to investment companies, individuals,
corporations, pension and profit sharing plans, endowments, and other business
and private accounts since 1982. The Advisor currently has approximately $1
billion in assets under management.
The Advisor's Compensation. 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.
Brokerage Practices. In selecting brokers and dealers to execute portfolio
transactions, the Advisor may consider research and brokerage services furnished
to the Advisor or its affiliates. Subject to seeking the most favorable net
price and execution available, the Advisor may also consider sales of shares of
the Fund as a factor in the selection of brokers and dealers. Certain securities
trades will be cleared through Shields & Company, a registered broker-dealer
affiliate of the Advisor and Distributor of the Fund.
The Investment Company act of 1940, as amended ("1940 Act") generally prohibits
the Fund from engaging in principal securities transactions with an affiliate of
the Advisor. Thus, the Fund does not engage in principal transactions with any
affiliate of the Advisor. The Fund has adopted procedures, under Rule 17e-1
under the 1940 Act, that are reasonably designed to provide that any brokerage
commission the Fund pays to an affiliate of the Advisor does not exceed the
usual and customary broker's commission. In addition, the Fund will adhere to
Section 11(a) of the 1934 Act and any applicable rules thereunder governing
floor trading.
THE ADMINISTRATOR
The Nottingham Company, Inc. (the "Administrator") assists the Trust in the
performance of its administrative responsibilities to the Fund, coordinates the
services of each vendor of services to the Fund, and provides the Fund with
other necessary administrative, fund accounting and compliance services. In
addition, the Administrator makes available the office space, equipment,
personnel and facilities required to provide such services to the Fund.
THE TRANSFER AGENT
NC Shareholder Services, LLC ("NCSS") serves as the transfer agent and dividend
disbursing agent of the Fund. As indicated later in the section of this
Prospectus, "Investing in the Fund," NCSS will handle your orders to purchase
and redeem shares of the Fund, and will disburse dividends paid by the Fund.
THE DISTRIBUTOR
Shields & Company is the principal underwriter and distributor of the Fund's
shares and serves as the Fund's exclusive agent for the distribution of Fund
shares. Shields & Company may sell the Fund's shares to or through qualified
securities dealers or others.
Other Expenses. In addition to the management fees and Rule 12b-1 fees for the
Investor Class shares, the Fund pays all expenses not assumed by the Fund's
Advisor, including, without limitation: the fees and expenses of its independent
accountants and of its legal counsel; the costs of printing and mailing to
shareholders annual and semi-annual reports, proxy statements, prospectuses,
statements of additional information and supplements thereto; the costs of
printing registration statements; bank transaction charges and custodian's fees;
any proxy solicitors' fees and expenses; filing fees; any federal, state or
local income or other taxes; any interest; any membership fees of the Investment
Company Institute and similar organizations; fidelity bond and Trustees'
liability insurance premiums; and any extraordinary expenses, such as
indemnification payments or damages awarded in litigation or settlements made.
All general Trust expenses are allocated among and charged to the assets of each
separate series of the Trust, such as the Fund, on a basis that the Trustees
deem fair and equitable, which may be on the basis of relative net assets of
each series or the nature of the services performed and relative applicability
to each series.
- --------------------------------------------------------------------------------
Investing in The Fund
- --------------------------------------------------------------------------------
MINIMUM INVESTMENT
Institutional Class shares are sold and redeemed at net asset value. Shares may
be purchased by any account managed by the Advisor and any other institutional
investor or any broker-dealer authorized to sell shares in the Fund. The minimum
initial investment is $250,000 and the minimum additional investment is $500.
The Fund may, in the Advisor's sole discretion, accept certain accounts with
less than the minimum investment.
Purchase and redemption price
Determining the Fund's Net Asset Value. The price at which you purchase or
redeem shares is based on the next calculation of net asset value after an order
is placed. The Fund's net asset value per share is calculated by dividing the
value of the Fund's total assets, less liabilities (including Fund expenses,
which are accrued daily), by the total number of outstanding shares of that
Fund. The net asset value per share of the Fund is normally determined at the
time regular trading closes on the New York Stock Exchange (currently 4:00 p.m.
Eastern time, Monday through Friday), except on business holidays when the New
York Stock Exchange is closed.
In valuing the Fund's total assets, portfolio securities are generally valued at
their market value. Instruments with maturities of 60 days or less are valued at
amortized cost, which approximates market value. Securities and assets for which
representative market quotations are not readily available are valued at fair
value as determined in good faith under policies approved by the Board of
Trustees.
Other Matters. Purchases and redemptions of shares of the same class by the same
shareholder on the same day will be netted for the Fund. All redemption requests
will be processed and payment with respect thereto will normally be made within
seven days after tenders. The Fund may suspend redemption, if permitted by the
1940 Act, for any period during which the New York Stock Exchange is closed or
during which trading is restricted by the Securities Exchange Commission ("SEC")
or if the SEC declares that an emergency exists. Redemptions may also be
suspended during other periods permitted by the SEC for the protection of the
Fund's shareholders. Additionally, during drastic economic and market changes,
telephone redemption privileges may be difficult to implement. Also, if the
Trustees determine that it would be detrimental to the best interest of the
Fund's remaining shareholders to make payment in cash, the Fund may pay
redemption proceeds in whole or in part by a distribution-in-kind of readily
marketable securities.
Purchasing Shares
Regular Mail Orders. Payment for shares must be made by check or money order
from a U.S. bank and payable in U.S. dollars. If checks are returned due to
insufficient funds or other reasons, the Fund will charge a $20 fee or may
redeem shares of the Fund already owned by the purchaser to recover any such
loss. For regular mail orders, please complete the attached Fund Shares
Application and mail it, along with your check made payable to the "Capital
Management Small-Cap Fund," to:
Capital Management Small-Cap Fund
Institutional Class Shares
c/o NC Shareholder Services, LLC
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
The application must contain your social security number and Taxpayer
Identification Number ("TIN"). If you have applied for a social security number
or TIN at the time of completing your account application but do not have such
number yet, please indicate this on the application. Taxes are not withheld from
distributions to U.S. investors if certain IRS requirements regarding the TIN
are met.
Bank Wire Orders. Purchases may also be made through bank wire orders. To
establish a new account or add to an existing account by wire, please call the
Fund at 1-888-626-3863, before wiring funds, to advise the Fund of the
investment, dollar amount, and the account identification number. Additionally,
please have your bank use the following wire instructions:
First Union National Bank of North Carolina
Charlotte, North Carolina
ABA # 053000219
For the Capital Management Small-Cap Fund - Institutional Shares
Acct. # 2000001292938
For further credit to (shareholder's name and SS# or TIN#)
Additional Investments. You may also 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 call the
Fund at 1-888-626-3863 and follow the above directions for wire purchases. Mail
orders should include, if possible, the "Invest by Mail" stub which is attached
to your Fund confirmation statement. Otherwise, please identify your account in
a letter accompanying your purchase payment.
Automatic Investment Plan. The automatic investment plan enables shareholders to
make regular monthly or quarterly investment 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.
Exchange Feature. You may exchange shares of the Fund for shares of any other
series of the Trust offered for sale in the state in which you reside. Shares
may be exchanged for shares of any other series of the Trust at the net asset
value plus the percentage difference between that series' sales charge and any
sales charge, if any, previously paid in connection with the shares being
exchanged. Prior to making an investment decision or giving us your instructions
to exchange shares, please read the prospectus for the series in which you wish
to invest.
A pattern of frequent exchange transactions may be deemed by the Advisor to be
an abusive practice that is not in the best interests of the shareholders of the
fund. Such a pattern may, at the discretion of the Advisor, be limited by the
Fund's refusal to accept further purchase and/or exchange orders form an
investor, after providing the investor with 60 days prior notice. The Advisor
will consider all factors it deems relevant in determining whether a pattern of
frequent purchases, redemptions and/or exchanges by a particular investor is
abusive and not in the best interests of the Fund or its other shareholders.
The Board of Trustees reserves the right to suspend or terminate, or amend the
terms of, the exchange privilege upon 60 days written notice to the
shareholders.
Stock Certificates. You do not have the option of receiving stock certificates
for your shares. Evidence of ownership will be given by issuance of periodic
account statements that will show the number of shares owned.
Redeeming Your Shares
Regular Mail Redemptions. Regular mail redemption request should be addressed
to:
Capital Management Small-Cap Fund Institutional Class Shares
c/o NC Shareholder Services, LLC
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365.
Regular mail redemption request should include:
1) Your letter of instruction specifying the account number and 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 normally will be sent to you within 7 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 15 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.
Telephone and Bank Wire Redemptions. You may also redeem 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# 252-972-1908). 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.
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 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 1-888-626-3863. 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.
Small Accounts. All shares are purchased and redeemed in accordance with the
Fund's Amended and Restated Declaration of Trust and By-Laws. 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.
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.
- --------------------------------------------------------------------------------
Other Important Investment Information
- --------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES
Under current federal income tax law, the Fund believes that it is entitled, and
the Fund intends that it shall be treated as a regulated investment company
("RIC") under Subchapter M of the Code. As a RIC, a Fund will not be subject to
federal tax on its net investment income and net realized capital gains to the
extent such income and gains are timely distributed to its shareholders.
Accordingly, the Fund intends to distribute all of its net investment income and
net realized capital gains to its shareholders. Unless otherwise instructed by
shareholders, all dividend distributions will be reinvested in full and
fractional shares of the Fund to which they relate.
Although the Fund intends that it will be operated so that there will be no
federal income or excise tax liability, if any such liability is incurred as a
result of failing to qualify as a RIC, the investment performance will be
adversely affected by the tax liability incurred and paid. In addition,
investing in foreign securities and currencies may be subject to foreign taxes
which could reduce the investment performance of the Fund.
Certain additional tax information appears in the Statement of Additional
Information.
YEAR 2000
Like other mutual funds, the Fund and the service providers for the Fund rely
heavily on the reasonably consistent operation of their computer systems. Many
software programs and certain computer hardware in use today, cannot properly
process information after December 31, 1999, because of the method by which
dates are encoded and calculated in such programs and hardware. This problem,
commonly referred to as the "Year 2000 Issue," could, among other things,
negatively impact the processing of trades, the distribution of securities, the
pricing of securities and other investment-related and settlement activities.
The Trust is currently obtaining and assessing information with respect to the
actions that have been taken and the actions that are planned to be taken by
each of its service providers to prepare their computer systems for the Year
2000. While the Trust expects that each of the Trust's service providers will
have adapted their computer systems to address the Year 2000 Issue, there can be
no assurance that this will be the case or that the steps taken by the Trust
will be sufficient to avoid any adverse impact to the Trust and each of its
funds.
<PAGE>
ADDITIONAL INFORMATION
CAPITAL MANAGEMENT SMALL-CAP FUND
INSTITUTIONAL SHARES
Additional information about the Fund is available in the Fund's Statement of
Additional Information. The Fund's Annual and Semi-annual Reports include a
discussion of market conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal year.
These reports are available free of charge upon request by contacting us:
By telephone: 1-888-626-3863
By mail: Capital Management Small-Cap Fund
Institutional Class Shares
c/o NC Shareholder Services, LLC
107 North Washington Street
Post Office Box 4365
Rocky Mount, NC 27803-0365
By e-mail: [email protected]
On the Internet: www.ncfunds.com
Information about the Fund can also be reviewed and copied at the Securities
Exchange Commission's ("Commission") Public Reference Room in Washington, D.C.
Inquiries on the operations of the public reference room may be made by calling
the Commission at 1-800-SEC-0330. Reports and other information about the Fund
are available on the Commission's Internet sit at http://www.sec.gov and copies
of this information may be obtained, upon payment of a duplicating fee, by
writing the Public Reference Section of the Commission, Washington, D.C.
20549-6009.
Investment Company Act file number 811-08822.
<PAGE>
Cusip Number 140296___ NASDAQ Symbol CM___
________________________________________________________________________________
CAPITAL MANAGEMENT ENERGY FUND
A series of the
Capital Management Investment Trust
INVESTOR SHARES
________________________________________________________________________________
Prospectus
January 15, 1999
The Capital Management Energy Fund seeks long-term capital appreciation. Current
income is a secondary consideration in selecting portfolio investments. In
seeking to achieve its objective, this fund will focus on companies involved in
the energy field, including the areas of oil, gas, electricity, coal and all new
or emerging sources of energy. The Fund offers two classes of shares: the
Investor Class of shares described in this Prospectus and an Institutional Class
of shares offered by another prospectus.
Advisor
-------
Capital Management Associates, Inc.
140 Broadway
New York, New York 10005
Telephone: (888) 626-3863
Neither the Securities and Exchange Commission nor any other regulatory body has
approved the securities being offered by this prospectus or determined whether
this prospectus is accurate and complete. It is unlawful for anyone to make any
representation to the contrary.
<PAGE>
TABLE OF CONTENTS
THE FUND.............................................................2
Investment Objective...........................................2
Principal Investment Strategies................................2
Principal Risks Of Investing In The Fund.......................3
Fees And Expenses Of The Fund..................................4
MANAGEMENT OF THE FUND...............................................4
Investment Advisor.............................................4
The Administrator..............................................5
The Transfer Agent.............................................6
The Distributor................................................6
YOUR INVESTMENT IN THE FUND..........................................7
Minimum Investment.............................................7
Purchase And RedemptionPrice...................................8
Purchasing Shares..............................................8
Redeeming Your Shares..........................................9
OTHER IMPORTANT INVESTMENT INFORMATION..............................12
Dividends, Distributions And Taxes............................12
Year 2000.....................................................12
Additional Information................................Back cover
<PAGE>
- --------------------------------------------------------------------------------
THE FUND
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Capital Management Energy Fund (the "Fund") is
to seek long-term capital appreciation. Current income is a secondary
consideration in selecting portfolio investments.
PRINCIPAL INVESTMENT STRATEGIES
The Fund, which is a diversified separate investment portfolio of the Capital
Management Investment Trust (the "Trust"), pursues its investment objective by
investing primarily in the securities of companies involved in the energy field
("energy-related companies"), including companies whose business focuses on or
involves oil, gas, electricity, coal and all new or emerging sources of energy.
These energy-related companies are generally engaged in the discovery,
development, production or distribution of energy or other natural resources,
the development of technologies for the production or efficient use of energy
and other natural resources, or the furnishing of related supplies or services.
Energy-related companies may:
o participate in the discovery and development of natural resources;
o own or produce natural resources;
o provide natural resources transportation, distribution or processing
services;
o contribute new technologies for the production or efficient use of
natural resources;
o own or control oil, gas, or other mineral leases (which may or may not
produce recoverable energy or resources), rights or royalty interests;
or
o provide services or supplies related to natural resources, such as
drilling, well servicing, chemicals, parts and equipment.
The Fund's investment in securities of energy-related companies will be
primarily in equity securities of such companies. Equity-related securities
include common and preferred stocks and securities convertible into common
stocks. Under normal market conditions, at least 90% of the Fund's total assets
will be invested in equity securities, and at least 80% of the Fund's total
assets will be invested in equity securities of energy-related companies.
In selecting securities of energy-related companies, the Fund's Advisor, Capital
Management Associates, Inc. (the "Advisor"), uses its basic, value-oriented
investment philosophy. This approach involves the Advisor developing an economic
forecast for each of over 500 energy-related companies. This process usually
includes visits with company management and contacts with industry experts and
suppliers.
PRINCIPAL RISKS OF INVESTING IN THE FUND
Small-Cap Stocks. Many major U.S. corporations are involved in the energy and
natural resources industries; however, smaller and less seasoned companies
represent a substantial portion of this field. In this regard, while the Fund's
portfolio will normally include securities of established suppliers of
traditional products and services, the fund may also invest in smaller companies
that may benefit from the development of new products and services. These
smaller companies may present greater opportunities for capital appreciation,
but may also involve greater risks.
Investing in the securities of small-cap companies generally involves greater
risk than investing in larger, more established companies. This greater risk is,
in part, attributable to the fact that the securities of small-cap companies
usually have more limited marketability and therefore, may be more volatile than
securities of larger, more established companies or the market averages in
general. Because small-cap companies normally have fewer shares outstanding than
larger companies, it may be more difficult to buy or sell significant amounts of
such shares without an unfavorable impact on prevailing prices. Another risk
factor is that small-cap companies often have limited product lines, markets or
financial resources and may lack management depth. Additionally, small-cap
companies are typically subject to greater changes in earnings and business
prospects than are larger, more established companies and there typically is
less publicly available information concerning small-cap companies than for
larger, more established companies.
Concentration. Another area of risk involves the concentration of the Fund's
assets in securities of energy related companies. Because the Fund's investments
are concentrated in the energy and natural resources industries, the value of
its shares is especially sensitive to factors relating to those industries and
may fluctuate more widely than the value of shares of a fund which invests in a
broader range of industries. For example, changes in crude oil prices may affect
both those industries which produce, refine and distribute petroleum products
and industries which supply alternate sources of energy. Thus, the Fund's
investments in energy related companies affected by the crude oil prices would
be substantially affected. Whereas, a fund with only limited exposure to this
particular area would not be as significantly affected.
Some of energy related industries are subject to greater government regulation
than many other industries. Therefore, changes in regulatory policies may have a
material effect on the business of companies in these industries.
Finally, investing in securities of companies in the energy industry is subject
to particular economic risks. Generally, capital expenditures necessary to
compete in the energy sector are significant. In this regard, the ability or
inability of energy related companies to obtain financial resources to fund
their operations may significantly affect any investment in these companies.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund:
Shareholder Fees For Investor Shares
(fees paid directly from your investment)
Maximum sales charge (load) imposed on purchases (as a
percentage of offering price) ............................3.00%
Redemption fee .................................................None
Annual Fund Operating Expenses For Investor Shares
(as a percentage of average daily net assets)
Management Fees................................................1.00%
Distribution and/or Service (12b-1) Fees.......................0.75%
Other Expenses............................................ ....0.50%1
----
Total .........................................................2.25%
====
1. Since the Fund commenced operations on ___________, Other Expenses
are based on amounts estimated for the current fiscal year. The
Advisor has voluntarily agreed to a reduction of 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 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.
Example: This example shows you the expenses you may pay over time by investing
in the Fund. Since all funds use the same hypothetical conditions, it should
help you compare the costs of investing in the Fund versus other funds. The
example assumes the following conditions:
(1) You invest $10,000 in the Fund for the periods shown; (2) You reinvest all
dividends and distributions (3) You redeem all of your shares at the end of
those periods (4) You earn a 5% total return; and (5) The Fund's expenses remain
the same.
Although your actual costs may be higher or lower, the following table shows you
what your costs may be under the conditions listed above as well as those upon
redemption.
------------------ --------------------- --------------------------
One Year Three Years
------------------ --------------------- --------------------------
Your Costs $521 $982
------------------ --------------------- --------------------------
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MANAGEMENT OF THE FUND
- --------------------------------------------------------------------------------
INVESTMENT ADVISOR
The Fund's Advisor is Capital Management Associates, Inc., 140 Broadway, New
York, New York 10005. The Advisor serves in that capacity pursuant to an
advisory contract with the Trust on behalf of the Fund. Subject to the authority
of the 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. 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; C. Lennis Koontz, II, CFA; and Joseph A. Zock. Mr. Zock and
seven full-time analysts serve as the Portfolio Management Team that selects the
investments for the Fund. The Shields brothers and Mr. Zock have been affiliated
with the Advisor since 1982. Mr. Koontz has been affiliated with the Advisor
since 1992. The Advisor has been managing the Fund since its inception and has
been providing investment advice to investment companies, individuals,
corporations, pension and profit sharing plans, endowments, and other business
and private accounts since 1982. The Advisor currently has approximately $1
billion in assets under management.
The Advisor's Compensation. 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.
Brokerage Practices. In selecting brokers and dealers to execute portfolio
transactions, the Advisor may consider research and brokerage services furnished
to the Advisor or its affiliates. Subject to seeking the most favorable net
price and execution available, the Advisor may also consider sales of shares of
the Fund as a factor in the selection of brokers and dealers. Certain securities
trades will be cleared through Shields & Company, a registered broker-dealer
affiliate of the Advisor and Distributor of the Fund.
The Investment Company Act of 1940 as amended ("1940 Act"), generally prohibits
the Fund from engaging in principal securities transactions with an affiliate of
the Advisor. Thus, the Fund does not engage in principal transactions with any
affiliate of the Advisor. The Fund has adopted procedures, under Rule 17e-1
under the 1940 Act, that are reasonably designed to provide that any brokerage
commission the Fund pays to an affiliate of the Advisor does not exceed the
usual and customary broker's commission. In addition, the Fund will adhere to
Section 11(a) of the 1934 Act and any applicable rules thereunder governing
floor trading.
THE ADMINISTRATOR
The Nottingham Company, Inc. (the "Administrator") assists the Trust in the
performance of its administrative responsibilities to the Fund, coordinates the
services of each vendor of services to the Fund, and provides the Fund with
other necessary administrative, fund accounting and compliance services. In
addition, the Administrator makes available the office space, equipment,
personnel and facilities required to provide such services to the Fund.
THE TRANSFER AGENT
NC Shareholder Services, LLC ("NCSS") serves as the transfer agent and dividend
disbursing agent of the Fund. As indicated later in the section of this
Prospectus, "Investing in the Fund," NCSS will handle your orders to purchase
and redeem shares of the Fund, and will disburse dividends paid by the Fund.
THE DISTRIBUTOR
Shields & Company is the principal underwriter and distributor of the Fund's
shares and serves as the Fund's exclusive agent for the distribution of Fund
shares. Shields & Company may sell the Fund's shares to or through qualified
securities dealers or others.
Distribution of the Fund's Shares. For the Investor Class shares of the Fund,
the Fund has adopted a Distribution Plan in accordance with Rule 12b-1 (the
"Distribution Plan") under the 1940 Act. Pursuant to the Distribution Plan, the
Fund compensates its distributor, Shields & Company (the "Distributor"), for
services rendered and expenses borne in connection with activities primarily
intended to result in the sale of the Fund's Investor Class shares (this
compensation is commonly referred to as "12b-1 fees"). It is anticipated that a
portion of the 12b-1 fees received by the Distributor will be used to defray
various costs incurred or paid by the Distributor in connection with the
printing and mailing to potential investors of Fund prospectuses, statements of
additional information, any supplements thereto, and shareholder reports, and
holding seminars and sales meetings with wholesale and retail sales personnel
designed to promote the sale of Investor Class shares. The Distributor may also
use a portion of the 12b-1 fees received to provide compensation to financial
intermediaries and third-party broker-dealers for their services in connection
with the sale of Investor Class shares. Because the 12b-1 fees are paid out of
the Fund's assets on an on-going basis, these fees, over time, will increase the
cost of your investment and may cost you more than paying other types of sales
loads.
The Distribution Plan provides that the Fund may pay annually up to 0.75% of the
average daily net assets of the Fund's Investor Class shares for activities
primarily intended to result in the sale of those shares, including to reimburse
entities for providing distribution and shareholder servicing with respect to
the Fund's Investor Class shares.
The Distribution Plan is known as a "compensation" plan because payments are
made for services rendered to the Fund with respect to Investor Class shares
regardless of the level of expenditures made by the Distributor. The Board of
Trustees of the Trust will, however, take into account such expenditures for
purposes of reviewing operations under the Distribution Plan and concerning
their annual consideration of the Plan's renewal. The Distributor has indicated
that it expects its expenditures to include, without limitation: (a) the
printing and mailing to prospective investors of Fund prospectuses, statements
of additional information, any supplements thereto and shareholder reports with
respect to the Investor Class shares of the Fund; (b) those relating to the
development, preparation, printing and mailing of advertisements, sales
literature and other promotional materials describing and/or relating to the
Investor Class shares of the Fund; (c) holding seminars and sales meetings
designed to promote the distribution of the Fund's Investor Class shares; (d)
obtaining information and providing explanations to wholesale and retail
distributors of the Fund's investment objectives and policies and other
information about the Fund; (e) training sales personnel regarding the Investor
Class shares of the Fund; and (f) financing any other activity that the
Distributor determines is primarily intended to result in the sale of Investor
Class shares.
Other Expenses. In addition to the management fees and Rule 12b-1 fees for the
Investor Class shares, the Fund pays all expenses not assumed by the Fund's
Advisor, including, without limitation: the fees and expenses of its independent
accountants and of its legal counsel; the costs of printing and mailing to
shareholders annual and semi-annual report, proxy statements, prospectuses,
statements of additional information and supplements thereto; the costs of
printing registration statements; bank transaction charges and custodian's fees;
any proxy solicitors' fees and expenses; filing fees; any federal, state or
local income or other taxes; any interest; any membership fees of the Investment
Company Institute and similar organizations; fidelity bond and Trustees'
liability insurance premiums; and any extraordinary expenses, such as
indemnification payments or damages awarded in litigation or settlements made.
All general Trust expenses are allocated among and charged to the assets of each
separate series of the Trust, such as the Fund, on a basis that the Trustees
deem fair and equitable, which may be on the basis of relative net assets of
each series or the nature of the services performed and relative applicability
to each series.
- --------------------------------------------------------------------------------
YOUR INVESTMENT IN THE FUND
- --------------------------------------------------------------------------------
MINIMUM INVESTMENT
Investor Class shares are sold subject to a sales charge of 3.00%, so that the
term "offering price" includes the front-end sales load. Shares are redeemed at
net asset value. Shares may be purchased by any account managed by the Advisor
and any broker-dealer authorized to sell Fund shares.
The minimum initial investment is $2,500 ($1,000 for Individual Retirement
Accounts ("IRAs"), Keogh Plans, 401(k) Plans, or purchases under the Uniform
Transfer to Minors Act). The minimum additional investment is $500. The Fund
may, in the Advisor's sole discretion, waive such minimum investment amounts.
Purchase and Redemption Price
Determining the Fund's Net Asset Value. The price at which you purchase or
redeem shares is based on the next calculation of net asset value after an order
is placed. The Fund's net asset value per share is calculated by dividing the
value of the Fund's total assets, less liabilities (including Fund expenses,
which are accrued daily), by the total number of outstanding shares of that
Fund. The net asset value per share of the Fund is normally determined at the
time regular trading closes on the New York Stock Exchange (currently 4:00 p.m.
Eastern time, Monday through Friday), except on business holidays when the New
York Stock Exchange is closed.
In valuing the Fund's total assets, portfolio securities are generally valued at
their market value. Instruments with maturities of 60 days or less are valued at
amortized cost, which approximates market value. Securities and assets for which
representative market quotations are not readily available are valued at fair
value as determined in good faith under policies approved by the Board of
Trustees.
Other Matters. Purchases and redemptions of shares of the same class by the same
shareholder on the same day will be netted for the Fund. All redemption requests
will be processed and payment with respect thereto will normally be made within
seven days after tenders. The Fund may suspend redemption, if permitted by the
1940 Act, for any period during which the New York Stock Exchange is closed or
during which trading is restricted by the Securities Exchange Commission ("SEC")
or if the SEC declares that an emergency exists. Redemptions may also be
suspended during other periods permitted by the SEC for the protection of the
Fund's shareholders. Additionally, during drastic economic and market changes,
telephone redemption privileges may be difficult to implement. Also, if the
Trustees determine that it would be detrimental to the best interest of the
Fund's remaining shareholders to make payment in cash, the Fund may pay
redemption proceeds in whole or in part by a distribution-in-kind of readily
marketable securities.
PURCHASING SHARES
Regular Mail Orders. Payment for shares must be made by check or money order
from a U.S. bank and payable in U.S. dollars. If checks are returned due to
insufficient funds or other reasons, the Fund will charge a $20 fee or may
redeem shares of the Fund already owned by the purchaser to recover any such
loss. For regular mail orders, please complete the attached Fund Shares
Application and mail it, along with your check made payable to the "Capital
Management Energy Fund," to:
Capital Management Energy Fund
Investor Class Shares
c/o NC Shareholder Services, LLC
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
The application must contain your social security number and Taxpayer
Identification Number ("TIN"). If you have applied for a social security number
or TIN at the time of completing your account application but do not have such
number yet, please indicate this on the application. Taxes are not withheld from
distributions to U.S. investors if certain IRS requirements regarding the TIN
are met.
Bank Wire Orders. Purchases may also be made through bank wire orders. To
establish a new account or add to an existing account by wire, please call the
Fund at 1-888-626-3863, before wiring funds, to advise the Fund of the
investment, dollar amount, and the account identification number. Additionally,
please have your bank use the following wire instructions:
First Union National Bank of North Carolina
Charlotte, North Carolina
ABA # 053000219
For the Capital Management Energy Fund - Investor Shares
Acct. # 2000001292954
For further credit to (shareholder's name and SS# or TIN#)
Additional Investments. You may also 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 call the
Fund at 1-888-626-3863 and follow the above directions for wire purchases. Mail
orders should include, if possible, the "Invest by Mail" stub which is attached
to your Fund confirmation statement. Otherwise, please identify your account in
a letter accompanying your purchase payment.
Automatic Investment Plan. The automatic investment plan enables shareholders to
make regular monthly or quarterly investment 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.
Exchange Feature. You may exchange shares of the Fund for shares of any other
series of the Trust offered for sale in the state in which you reside. Shares
may be exchanged for shares of any other series of the Trust at the net asset
value plus the percentage difference between that series' sales charge and any
sales charge, if any, previously paid in connection with the shares being
exchanged. Prior to making an investment decision or giving us your instructions
to exchange shares, please read the prospectus for the series in which you wish
to invest.
A pattern of frequent exchange transactions may be deemed by the Advisor to be
an abusive practice that is not in the best interests of the shareholders of the
fund. Such a pattern may, at the discretion of the Advisor, be limited by the
Fund's refusal to accept further purchase and/or exchange orders form an
investor, after providing the investor with 60 days prior notice. The Advisor
will consider all factors it deems relevant in determining whether a pattern of
frequent purchases, redemptions and/or exchanges by a particular investor is
abusive and not in the best interests of the Fund or its other shareholders.
The Board of Trustees reserves the right to suspend or terminate, or amend the
terms of, the exchange privilege upon 60 days written notice to the
shareholders.
Rights of Accumulation. The sales charge applicable to a current purchase of
shares of the Fund by a person listed above is determined by adding the purchase
price of shares to be purchased to the aggregate value (at current offering
price) of shares of the Funds previously purchased and then owned, provided the
Distributor is notified by such person or his or her broker-dealer each time a
purchase is made which would so qualify. For example, a person who is purchasing
Energy Fund shares with an aggregate value of $50,000 and who currently owns
shares of the Funds with a value of $200,000 would pay a sales charge of 2.50%
of the offering price on the new investment.
Letter of Intent. Sales charges may also be reduced through an agreement to
purchase a specified quantity of shares over a designated thirteen-month period
by completing the "Letter of Intent" section of the Account Application.
Information about the "Letter of Intent" procedure, including its terms, is
contained on the back of the Account Application.
Group Plans. Shares of the Funds may be sold at a reduced or eliminated sales
charge to certain Group Plans under which a sponsoring organization makes
recommendations to, permits group solicitation of, or otherwise facilitates
purchases by, its employees, members or participants. Information about such
arrangements is available from the Distributor.
Stock Certificates. You do not have the option of receiving stock certificates
for your shares. Evidence of ownership will be given by issuance of periodic
account statements that will show the number of shares owned.
REDEEMING YOUR SHARES
Regular Mail Redemptions. Regular mail redemption request should be addressed
to:
Capital Management Energy Fund Investor Class Shares
c/o NC Shareholder Services, LLC
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365.
Regular mail redemption request should include:
1) Your letter of instruction specifying the account number and 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 normally will be sent to you within 7 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 15 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.
Telephone and Bank Wire Redemptions. You may also redeem 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# 252-972-1908). 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.
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 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 1-888-626-3863. 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.
Small Accounts. All shares are purchased and redeemed in accordance with the
Fund's Amended and Restated Declaration of Trust and By-Laws. The Trustees
reserve 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.
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.
- --------------------------------------------------------------------------------
Other Important Investment Information
- --------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES
Under current federal income tax law, the Fund believes that it is entitled, and
the Fund intends that it shall be treated as a regulated investment company
("RIC") under Subchapter M of the Code. As a RIC, a Fund will not be subject to
federal tax on its net investment income and net realized capital gains to the
extent such income and gains are timely distributed to its shareholders.
Accordingly, the Fund intends to distribute all of its net investment income and
net realized capital gains to its shareholders. Unless otherwise instructed by
shareholders, all dividend distributions will be reinvested in full and
fractional shares of the Fund to which they relate.
Although the Fund intends that it will be operated so that there will be no
federal income or excise tax liability, if any such liability is incurred as a
result of failing to qualify as a RIC, the investment performance will be
adversely affected by the tax liability incurred and paid. In addition,
investing in foreign securities and currencies may be subject to foreign taxes
which could reduce the investment performance of the Fund.
Certain additional tax information appears in the Statement of Additional
Information.
YEAR 2000
Like other mutual funds, the Fund and the service providers for the Fund rely
heavily on the reasonably consistent operation of their computer systems. Many
software programs and certain computer hardware in use today, cannot properly
process information after December 31, 1999, because of the method by which
dates are encoded and calculated in such programs and hardware. This problem,
commonly referred to as the "Year 2000 Issue," could, among other things,
negatively impact the processing of trades, the distribution of securities, the
pricing of securities and other investment-related and settlement activities.
The Trust is currently obtaining and assessing information with respect to the
actions that have been taken and the actions that are planned to be taken by
each of its service providers to prepare their computer systems for the Year
2000. While the Trust expects that each of the Trust's service providers will
have adapted their computer systems to address the Year 2000 Issue, there can be
no assurance that this will be the case or that the steps taken by the Trust
will be sufficient to avoid any adverse impact to the Trust and each of its
funds.
<PAGE>
ADDITIONAL INFORMATION
CAPITAL MANAGEMENT ENERGY FUND
INVESTOR SHARES
Additional information about the Fund is available in the Fund's Statement of
Additional Information. The Fund's Annual and Semi-annual Reports include a
discussion of market conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal year.
These reports are available free of charge upon request by contacting us:
By telephone: 1-888-626-3863
By mail: Capital Management Energy Fund
Investor Class Shares
c/o NC Shareholder Services, LLC
107 North Washington Street
Post Office Box 4365
Rocky Mount, NC 27803-0365
By e-mail: [email protected]
On the Internet: www.ncfunds.com
Information about the Fund can also be reviewed and copied at the Securities
Exchange Commission's ("Commission") Public Reference Room in Washington, D.C.
Inquiries on the operations of the public reference room may be made by calling
the Commission at 1-800-SEC-0330. Reports and other information about the Fund
are available on the Commission's Internet sit at http://www.sec.gov and copies
of this information may be obtained, upon payment of a duplicating fee, by
writing the Public Reference Section of the Commission, Washington, D.C.
20549-6009.
Investment Company Act file number 811-08822.
<PAGE>
Cusip Number 140296___ NASDAQ Symbol CM___
________________________________________________________________________________
CAPITAL MANAGEMENT ENERGY FUND
A series of the
Capital Management Investment Trust
INSTITUTIONAL SHARES
________________________________________________________________________________
Prospectus
January 15, 1999
The Capital Management Energy Fund seeks long-term capital appreciation. Current
income is a secondary consideration in selecting portfolio investments. In
seeking to achieve its objective, this fund will focus on companies involved in
the energy field, including the areas of oil, gas, electricity, coal and all new
or emerging sources of energy. The Fund offers two classes of shares: the
Institutional Class of shares described in this Prospectus and an Investor Class
of shares offered by another prospectus.
Advisor
-------
Capital Management Associates, Inc.
140 Broadway
New York, New York 10005
Telephone: (888) 626-3863
Neither the Securities and Exchange Commission nor any other regulatory body has
approved the securities being offered by this prospectus or determined whether
this prospectus is accurate and complete. It is unlawful for anyone to make any
representation to the contrary.
<PAGE>
TABLE OF CONTENTS
Page
THE FUND...............................................................1
Investment Objective.............................................1
Principal Investment Strategies..................................1
Principal Risks Of Investing In The Fund.........................2
Fees And Expenses Of The Fund....................................3
MANAGEMENT OF THE FUND.................................................3
Investment Advisor...............................................3
The Administrator................................................4
The Transfer Agent...............................................5
The Distributor..................................................5
INVESTING IN THE FUND..................................................5
Minimum Investment...............................................5
Purchase And Redemption Price....................................6
Purchasing Shares................................................6
Redeeming Your Shares............................................7
OTHER IMPORTANT INVESTMENT INFORMATION................................10
Dividends, Distributions And Taxes..............................10
Year 2000 ....................................................10
Additional Information..................................Back Cover
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THE FUND
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INVESTMENT OBJECTIVE
The investment objective of the Capital Management Energy Fund (the "Fund") is
to seek long-term capital appreciation. Current income is a secondary
consideration in selecting portfolio investments.
PRINCIPAL INVESTMENT STRATEGIES
The Fund, which is a diversified separate investment portfolio of the Capital
Management Investment Trust (the "Trust"), pursues its investment objective by
investing primarily in the securities of companies involved in the energy field
("energy-related companies"), including companies whose business focuses on or
involves oil, gas, electricity, coal and all new or emerging sources of energy.
These energy-related companies are generally engaged in the discovery,
development, production or distribution of energy or other natural resources,
the development of technologies for the production or efficient use of energy
and other natural resources, or the furnishing of related supplies or services.
Energy-related companies may:
o participate in the discovery and development of natural resources;
o own or produce natural resources;
o provide natural resources transportation, distribution or processing
services;
o contribute new technologies for the production or efficient use of
natural resources;
o own or control oil, gas, or other mineral leases (which may or may not
produce recoverable energy or resources), rights or royalty interests;
or
o provide services or supplies related to natural resources, such as
drilling, well servicing, chemicals, parts and equipment.
The Fund's investment in securities of energy-related companies will be
primarily in equity securities of such companies. Equity-related securities
include common and preferred stocks and securities convertible into common
stocks. Under normal market conditions, at least 90% of the Fund's total assets
will be invested in equity securities, and at least 80% of the Fund's total
assets will be invested in equity securities of energy-related companies.
In selecting securities of energy-related companies, the Fund's Advisor, Capital
Management Associates, Inc. (the "Advisor"), uses its basic, value-oriented
investment philosophy. This approach involves the Advisor developing an economic
forecast for each of over 500 energy-related companies. This process usually
includes visits with company management and contacts with industry experts and
suppliers.
PRINCIPAL RISKS OF INVESTING IN THE FUND
Small-Cap Stocks. Many major U.S. corporations are involved in the energy and
natural resources industries; however, smaller and less seasoned companies
represent a substantial portion of this field. In this regard, while the Fund's
portfolio will normally include securities of established suppliers of
traditional products and services, the fund may also invest in smaller companies
that may benefit from the development of new products and services. These
smaller companies may present greater opportunities for capital appreciation,
but may also involve greater risks.
Investing in the securities of small-cap companies generally involves greater
risk than investing in larger, more established companies. This greater risk is,
in part, attributable to the fact that the securities of small-cap companies
usually have more limited marketability and therefore, may be more volatile than
securities of larger, more established companies or the market averages in
general. Because small-cap companies normally have fewer shares outstanding than
larger companies, it may be more difficult to buy or sell significant amounts of
such shares without an unfavorable impact on prevailing prices. Another risk
factor is that small-cap companies often have limited product lines, markets or
financial resources and may lack management depth. Additionally, small-cap
companies are typically subject to greater changes in earnings and business
prospects than are larger, more established companies and there typically is
less publicly available information concerning small-cap companies than for
larger, more established companies.
Concentration. Another area of risk involves the concentration of the Fund's
assets in securities of energy related companies. Because the Fund's investments
are concentrated in the energy and natural resources industries, the value of
its shares is especially sensitive to factors relating to those industries and
may fluctuate more widely than the value of shares of a fund which invests in a
broader range of industries. For example, changes in crude oil prices may affect
both those industries which produce, refine and distribute petroleum products
and industries which supply alternate sources of energy. Thus, the Fund's
investments in energy related companies affected by the crude oil prices would
be substantially affected. Whereas, a fund with only limited exposure to this
particular area would not be as significantly affected.
Some of energy related industries are subject to greater government regulation
than many other industries. Therefore, changes in regulatory policies may have a
material effect on the business of companies in these industries.
Finally, investing in securities of companies in the energy industry is subject
to particular economic risks. Generally, capital expenditures necessary to
compete in the energy sector are significant. In this regard, the ability or
inability of energy related companies to obtain financial resources to fund
their operations may significantly affect any investment in these companies.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund:
Shareholder Fees For Institutional Shares
(fees paid directly from your investment)
Maximum sales charge (load) imposed on purchases (as a
percentage of offering price) ....................................None
Redemption fee ........................................................None
Annual Fund Operating Expenses For Institutional Shares
(as a percentage of average daily net assets)
Management Fees........................................................1.00%
Distribution and/or Service (12b-1) Fees................................None
Other Expenses.........................................................0.50%1
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Total .................................................................1.50%
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1. Since the Fund commenced operations on ___________, Other Expenses are
based on amounts estimated for the current fiscal year. The Advisor has
voluntarily agreed to a reduction of 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.
Example: This example shows you the expenses you may pay over time by investing
in the Fund. Since all funds use the same hypothetical conditions, it should
help you compare the costs of investing in the Fund versus other funds. The
example assumes the following conditions:
(1) You invest $250,000 in the Fund for the periods shown
(2) You reinvest all dividends and distributions
(3) You redeem all of your shares at the end of those periods
(4) You earn a 5% total return; and
(5) The Fund's expenses remain the same.
Although your actual costs may be higher or lower, the following table shows you
what your costs may be under the conditions listed above as well as those upon
redemption.
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1 year 3 years
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Your Costs $3,816 $11,852
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MANAGEMENT OF THE FUND
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INVESTMENT ADVISOR
The Fund's Advisor is Capital Management Associates, Inc., 140 Broadway, New
York, New York 10005. The Advisor serves in that capacity pursuant to an
advisory contract with the Trust on behalf of the Fund. Subject to the authority
of the 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. 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; C. Lennis Koontz, II, CFA; and Joseph A. Zock. Mr. Zock and
seven full-time analysts serve as the Portfolio Management Team that selects the
investments for the Fund. The Shields brothers and Mr. Zock have been affiliated
with the Advisor since 1982. Mr. Koontz has been affiliated with the Advisor
since 1992. The Advisor has been managing the Fund since its inception and has
been providing investment advice to investment companies, individuals,
corporations, pension and profit sharing plans, endowments, and other business
and private accounts since 1982. The Advisor currently has approximately $1
billion in assets under management.
The Advisor's Compensation. 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.
Brokerage Practices. In selecting brokers and dealers to execute portfolio
transactions, the Advisor may consider research and brokerage services furnished
to the Advisor or its affiliates. Subject to seeking the most favorable net
price and execution available, the Advisor may also consider sales of shares of
the Fund as a factor in the selection of brokers and dealers. Certain securities
trades will be cleared through Shields & Company, a registered broker-dealer
affiliate of the Advisor and Distributor of the Fund.
The Investment Company Act of 1940, as amended ("1940 Act") generally prohibits
the Fund from engaging in principal securities transactions with an affiliate of
the Advisor. Thus, the Fund does not engage in principal transactions with any
affiliate of the Advisor. The Fund has adopted procedures, under Rule 17e-1
under the 1940 Act, that are reasonably designed to provide that any brokerage
commission the Fund pays to an affiliate of the Advisor does not exceed the
usual and customary broker's commission. In addition, the Fund will adhere to
Section 11(a) of the 1934 Act and any applicable rules thereunder governing
floor trading.
THE ADMINISTRATOR
The Nottingham Company, Inc. (the "Administrator") assists the Trust in the
performance of its administrative responsibilities to the Fund, coordinates the
services of each vendor of services to the Fund, and provides the Fund with
other necessary administrative, fund accounting and compliance services. In
addition, the Administrator makes available the office space, equipment,
personnel and facilities required to provide such services to the Fund.
THE TRANSFER AGENT
NC Shareholder Services, LLC ("NCSS") serves as the transfer agent and dividend
disbursing agent of the Fund. As indicated later in the section of this
Prospectus, "Investing in the Fund," NCSS will handle your orders to purchase
and redeem shares of the Fund, and will disburse dividends paid by the Fund.
THE DISTRIBUTOR
Shields & Company is the principal underwriter and distributor of the Fund's
shares and serves as the Fund's exclusive agent for the distribution of Fund
shares. Shields & Company may sell the Fund's shares to or through qualified
securities dealers or others.
Other Expenses. In addition to the management fees and Rule 12b-1 fees for the
Investor Class shares, the Fund pays all expenses not assumed by the Fund's
Advisor, including, without limitation: the fees and expenses of its independent
accountants and of its legal counsel; the costs of printing and mailing to
shareholders annual and semi-annual reports, proxy statements, prospectuses,
statements of additional information and supplements thereto; the costs of
printing registration statements; bank transaction charges and custodian's fees;
any proxy solicitors' fees and expenses; filing fees; any federal, state or
local income or other taxes; any interest; any membership fees of the Investment
Company Institute and similar organizations; fidelity bond and Trustees'
liability insurance premiums; and any extraordinary expenses, such as
indemnification payments or damages awarded in litigation or settlements made.
All general Trust expenses are allocated among and charged to the assets of each
separate series of the Trust, such as the Fund, on a basis that the Trustees
deem fair and equitable, which may be on the basis of relative net assets of
each series or the nature of the services performed and relative applicability
to each series.
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INVESTING IN THE FUND
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MINIMUM INVESTMENT
Institutional Class shares are sold and redeemed at net asset value. Shares may
be purchased by any account managed by the Advisor and any other institutional
investor or any broker-dealer authorized to sell shares in the Fund. The minimum
initial investment is $250,000 and the minimum additional investment is $500.
The Fund may, in the Advisor's sole discretion, accept certain accounts with
less than the minimum investment.
Purchase and redemption price
Determining the Fund's Net Asset Value. The price at which you purchase or
redeem shares is based on the next calculation of net asset value after an order
is placed. The Fund's net asset value per share is calculated by dividing the
value of the Fund's total assets, less liabilities (including Fund expenses,
which are accrued daily), by the total number of outstanding shares of that
Fund. The net asset value per share of the Fund is normally determined at the
time regular trading closes on the New York Stock Exchange (currently 4:00 p.m.
Eastern time, Monday through Friday), except on business holidays when the New
York Stock Exchange is closed.
In valuing the Fund's total assets, portfolio securities are generally valued at
their market value. Instruments with maturites of 60 days or less are valued at
amortized cost, which approximates market value. Securities and assets for which
representative market quotations are not readily available are valued at fair
value as determined in good faith under policies approved by the Board of
Trustees.
Other Matters. Purchases and redemptions of shares of the same class by the same
shareholder on the same day will be netted for the Fund. All redemption requests
will be processed and payment with respect thereto will normally be made within
seven days after tenders. The Fund may suspend redemption, if permitted by the
1940 Act, for any period during which the New York Stock Exchange is closed or
during which trading is restricted by the Securities Exchange Commission ("SEC")
or if the SEC declares that an emergency exists. Redemptions may also be
suspended during other periods permitted by the SEC for the protection of the
Fund's shareholders. Additionally, during drastic economic and market changes,
telephone redemption privileges may be difficult to implement. Also, if the
Trustees determine that it would be detrimental to the best interest of the
Fund's remaining shareholders to make payment in cash, the Fund may pay
redemption proceeds in whole or in part by a distribution-in-kind of readily
marketable securities.
Purchasing Shares
Regular Mail Orders. Payment for shares must be made by check or money order
from a U.S. bank and payable in U.S. dollars. If checks are returned due to
insufficient funds or other reasons, the Fund will charge a $20 fee or may
redeem shares of the Fund already owned by the purchaser to recover any such
loss. For regular mail orders, please complete the attached Fund Shares
Application and mail it, along with your check made payable to the "Capital
Management Energy Fund," to:
Capital Management Energy Fund
Institutional Class Shares
c/o NC Shareholder Services, LLC
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
The application must contain your social security number and Taxpayer
Identification Number ("TIN"). If you have applied for a social security number
or TIN at the time of completing your account application but do not have such
number yet, please indicate this on the application. Taxes are not withheld from
distributions to U.S. investors if certain IRS requirements regarding the TIN
are met.
Bank Wire Orders. Purchases may also be made through bank wire orders. To
establish a new account or add to an existing account by wire, please call the
Fund at 1-888-626-3863, before wiring funds, to advise the Fund of the
investment, dollar amount, and the account identification number. Additionally,
please have your bank use the following wire instructions:
First Union National Bank of North Carolina
Charlotte, North Carolina
ABA # 053000219
For the Capital Management Energy Fund - Institutional Shares
Acct. # 2000001292954
For further credit to (shareholder's name and SS# or TIN#)
Additional Investments. You may also 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 call the
Fund at 1-888-626-3863 and follow the above directions for wire purchases. Mail
orders should include, if possible, the "Invest by Mail" stub which is attached
to your Fund confirmation statement. Otherwise, please identify your account in
a letter accompanying your purchase payment.
Automatic Investment Plan. The automatic investment plan enables shareholders to
make regular monthly or quarterly investment 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.
Exchange Feature. You may exchange shares of the Fund for shares of any other
series of the Trust offered for sale in the state in which you reside. Shares
may be exchanged for shares of any other series of the Trust at the net asset
value plus the percentage difference between that series' sales charge and any
sales charge, if any, previously paid in connection with the shares being
exchanged. Prior to making an investment decision or giving us your instructions
to exchange shares, please read the prospectus for the series in which you wish
to invest.
A pattern of frequent exchange transactions may be deemed by the Advisor to be
an abusive practice that is not in the best interests of the shareholders of the
fund. Such a pattern may, at the discretion of the Advisor, be limited by the
Fund's refusal to accept further purchase and/or exchange orders form an
investor, after providing the investor with 60 days prior notice. The Advisor
will consider all factors it deems relevant in determining whether a pattern of
frequent purchases, redemptions and/or exchanges by a particular investor is
abusive and not in the best interests of the Fund or its other shareholders.
The Board of Trustees reserves the right to suspend or terminate, or amend the
terms of, the exchange privilege upon 60 days written notice to the
shareholders.
Stock Certificates. You do not have the option of receiving stock certificates
for your shares. Evidence of ownership will be given by issuance of periodic
account statements that will show the number of shares owned.
Redeeming YOUR Shares
Regular Mail Redemptions. Regular mail redemption request should be addressed
to:
Capital Management Energy Fund
Institutional Class Shares
c/o NC Shareholder Services, LLC
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365.
Regular mail redemption request should include:
1) Your letter of instruction specifying the account number and 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 normally will be sent to you within 7 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 15 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.
Telephone and Bank Wire Redemptions. You may also redeem 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# 252-972-1908). 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.
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 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 1-888-626-3863. 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.
Small Accounts. All shares are purchased and redeemed in accordance with the
Fund's Amended and Restated Declaration of Trust and By-Laws. 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.
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.
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OTHER IMPORTANT INVESTMENT INFORMATION
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DIVIDENDS, DISTRIBUTIONS AND TAXES
Under current federal income tax law, the Fund believes that it is entitled, and
the Fund intends that it shall be treated as a regulated investment company
("RIC") under Subchapter M of the Code. As a RIC, a Fund will not be subject to
federal tax on its net investment income and net realized capital gains to the
extent such income and gains are timely distributed to its shareholders.
Accordingly, the Fund intends to distribute all of its net investment income and
net realized capital gains to its shareholders. Unless otherwise instructed by
shareholders, all dividend distributions will be reinvested in full and
fractional shares of the Fund to which they relate.
Although the Fund intends that it will be operated so that there will be no
federal income or excise tax liability, if any such liability is incurred as a
result of failing to qualify as a RIC, the investment performance will be
adversely affected by the tax liability incurred and paid. In addition,
investing in foreign securities and currencies may be subject to foreign taxes
which could reduce the investment performance of the Fund.
Certain additional tax information appears in the Statement of Additional
Information.
YEAR 2000
Like other mutual funds, the Fund and the service providers for the Fund rely
heavily on the reasonably consistent operation of their computer systems. Many
software programs and certain computer hardware in use today, cannot properly
process information after December 31, 1999, because of the method by which
dates are encoded and calculated in such programs and hardware. This problem,
commonly referred to as the "Year 2000 Issue," could, among other things,
negatively impact the processing of trades, the distribution of securities, the
pricing of securities and other investment-related and settlement activities.
The Trust is currently obtaining and assessing information with respect to the
actions that have been taken and the actions that are planned to be taken by
each of its service providers to prepare their computer systems for the Year
2000. While the Trust expects that each of the Trust's service providers will
have adapted their computer systems to address the Year 2000 Issue, there can be
no assurance that this will be the case or that the steps taken by the Trust
will be sufficient to avoid any adverse impact to the Trust and each of its
funds.
<PAGE>
ADDITIONAL INFORMATION
CAPITAL MANAGEMENT ENERGY FUND
INSTITUTIONAL SHARES
Additional information about the Fund is available in the Fund's Statement of
Additional Information. The Fund's Annual and Semi-annual Reports include a
discussion of market conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal year.
These reports are available free of charge upon request by contacting us:
By telephone: 1-888-626-3863
By mail: Capital Management Energy Fund
Institution Class Shares
c/o NC Shareholder Services, LLC
107 North Washington Street
Post Office Box 4365
Rocky Mount, NC 27803-0365
By e-mail: [email protected]
On the Internet: www.ncfunds.com
Information about the Fund can also be reviewed and copied at the Securities
Exchange Commission's ("Commission") Public Reference Room in Washington, D.C.
Inquiries on the operations of the public reference room may be made by calling
the Commission at 1-800-SEC-0330. Reports and other information about the Fund
are available on the Commission's Internet sit at http://www.sec.gov and copies
of this information may be obtained, upon payment of a duplicating fee, by
writing the Public Reference Section of the Commission, Washington, D.C.
20549-6009.
Investment Company Act file number 811-08822
<PAGE>
PART B
======
STATEMENT OF ADDITIONAL INFORMATION
CAPITAL MANAGEMENT SMALL-CAP FUND
January 15, 1999
A series of the
CAPITAL MANAGEMENT INVESTMENT TRUST
Capital Management Associates, Inc.
140 Broadway
New York, New York 10005
Telephone 1-888-626-3863
TABLE OF CONTENTS
Page
INVESTMENT OBJECTIVE AND POLICIES...........................................B-1
INVESTMENT LIMITATIONS......................................................B-2
MANAGEMENT AND SERVICE PROVIDERS............................................B-4
Trustees and Officers..............................................B-4
Investment Advisor.................................................B-5
Administrator......................................................B-6
Transfer Agent.....................................................B-6
Distributor........................................................B-6
Custodian..........................................................B-7
Independent Auditors...............................................B-7
Legal Counsel......................................................B-7
ADDITIONAL INFORMATION ON PERFORMANCE.......................................B-7
PORTFOLIO TRANSACTIONS......................................................B-9
SPECIAL SHAREHOLDER SERVICES...............................................B-10
PURCHASE OF SHARES.........................................................B-11
REDEMPTION OF SHARES.......................................................B-14
NET ASSET VALUE............................................................B-14
ADDITIONAL TAX INFORMATION.................................................B-15
CAPITAL SHARES AND VOTING..................................................B-16
APPENDIX A.................................................................B-18
This Statement of Additional Information (the "SAI") is meant to be read in
conjunction with the Prospectuses of the Capital Management Small-Cap Fund (the
"Fund"), dated January 15, 1999, relating to the Fund's Institutional Shares and
Investor Shares and hereby incorporates by reference the Prospectus in its
entirety. Because this SAI is not itself a prospectus, no investment in shares
of the Fund should be made solely upon the information contained herein. Copies
of the Prospectus for Investor Class and Institutional Class Shares of the Fund
and Annual Reports may be obtained at no charge by writing or calling the Fund
at the address or phone number shown above. Capitalized terms used but not
defined herein have the same meanings as in each Prospectus.
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The Capital Management Small-Cap Fund (the "Fund") is a diversified series of
the Capital Management Investment Trust (the "Trust"), a registered open-end
management company. The Trust was organized on October 18, 1994, as a
Massachusetts business trust. The primary investment strategies and risks of the
Fund are described in the Prospectus for each Class of shares of the Fund. In
addition to the principal investment strategies discussed in the Fund's
Prospectus, the Fund may also employ the use of the financial instruments
described below in order to achieve its objective. The strategies set forth
below are not principle strategies of the Fund.
Repurchase Agreements. The Fund may acquire U.S. Government obligations or
corporate debt securities subject to repurchase agreements. A repurchase
agreement involves the purchase by the Fund of a security (normally a U.S.
Treasury obligation) and an agreement to resell the security at the same price,
plus specified interest to the counter-party (normally a member bank of the
Federal Reserve or a registered Government Securities dealer). 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, Capital Management Associates, Inc., will consider the
creditworthiness of the counter-parties with which it transacts these repurchase
agreements. If the counter-party 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 that will cause more than 15% of its net assets to be invested in
repurchase agreements extending beyond seven days, to the extent such agreements
are deemed illiquid securities.
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 15% 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 15% of its net assets
were invested in illiquid securities, it would seek to take appropriate steps to
protect liquidity.
The investments in illiquid securities may involve a high degree of business and
financial risk and may result in substantial losses. Because of the illiquid
nature of these securities, the Fund may take longer to liquidate these
positions than would be the case for other more liquid securities. The Fund's
investment in these illiquid securities is subject to the risk that should the
Fund desire to sell any of these securities when a ready buyer is not available
at a price that is deemed to be representative of their fair market value, the
value of the Fund's net assets could be adversely affected.
Historically, illiquid securities have included securities subject to
contractual or legal restrictions on resale because they have not been
registered under the 1933 Act, securities which are otherwise not readily
marketable and repurchase agreements having a maturity of longer than seven
days. Securities which have not been registered under the 1933 Act are referred
to as private placements or restricted securities and are purchased directly
from the issuer or in the secondary market. Mutual funds do not typically hold a
significant amount of these restricted or other illiquid securities because of
the potential for delays on resale and uncertainty in valuation. Limitations on
resale may have an adverse effect on the marketability of portfolio securities
and a mutual fund might be unable to dispose of restricted or other illiquid
securities promptly or at reasonable prices and might thereby experience
difficulty satisfying redemptions within seven days. A mutual fund might also
have to register such restricted securities in order to dispose of them
resulting in additional expense and delay. Adverse market conditions could
impede such a public offering of securities.
In recent years, however, a large institutional market has developed for certain
securities that are not registered under the 1933 Act including repurchase
agreements, commercial paper, foreign securities, municipal securities and
corporate bonds and notes. Institutional investors depend on an efficient
institutional market in which the unregistered security can be readily resold or
on an issuer's ability to honor a demand for repayment. The fact that there are
contractual or legal restrictions on resale to the general public or to certain
institutions may not be indicative of the liquidity of such investments.
Rule 144A Securities will be considered illiquid and therefore subject to a
Portfolio's limit on the purchase of illiquid securities unless the Board or its
delegates determines that the Rule 144A Securities are liquid. In reaching
liquidity decisions, the Board of Trustees and its delegates may consider, inter
alia, the following factors: (i) the unregistered nature of the security; (ii)
the frequency of trades and quotes for the security; (iii) the number of dealers
wishing to purchase or sell the security and the number of other potential
purchasers; (iv) dealer undertakings to make a market in the security; and (v)
the nature of the security and the nature of the marketplace trades (e.g., the
time needed to dispose of the security, the method of soliciting offers and the
mechanics of the transfer).
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
purchases 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 fundamental 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 33 1/3% 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);
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. Participate on a joint or joint and several basis in any trading
account in securities;
8. Invest its assets in the securities of one or more investment companies
except to the extent permitted by the 1940 Act; or
9. Make loans of money or securities, except that the Fund may invest in
repurchase agreements, money market instruments, and other debt
securities.
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 of 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 15% 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 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;
5. Purchase foreign securities other than those traded on domestic U.S.
exchanges;
6. Write, purchase, or sell puts, calls, straddles, spreads, or
combinations thereof or futures contracts or related options, except to
the extent permitted by the Fund's prospectus or Statement of
Additional Information, as may be amended from time to time; or
7. Purchase or sell 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), except to the extent permitted by the Fund's
prospectus or Statement of Additional Information, as may be amended
from time to time.
MANAGEMENT AND SERVICE PROVIDERS
The Trust's Board of Trustees (the "Trustees") are responsible for the
management and supervision of the Fund. The Trustees approve all significant
agreements between the Trust, on behalf of the Fund, and those companies that
furnish services to the Fund. This section of the Statement of Additional
Information provides the persons who serve as Trustees and Officers to the Trust
and Fund, respectively, as well as the entities that provide services to the
Fund.
Trustees and Officers. Following are the Trustees and Officers of 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 noted by an asterisk (*). Messrs.
David V. Shields and Joseph V. Shields, Jr. are brothers.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------- ----------------------- ---------------------------------------------------
Name, Age, Position(s) with Position with Principal Occupation(s)
Fund and/or Trust, and Address The Fund During Past 5 Years
- --------------------------------------------------- ----------------------- ---------------------------------------------------
Lucius E. Burch, III 56 Trustee Chairman and Chief Executive Officer
438 Rosemeade Lane Massey Burch Investment Group, Inc.
Naples, Florida 33999 (venture capital firm)
Nashville, Tennessee
- --------------------------------------------------- ----------------------- ---------------------------------------------------
C. Lennis Koontz, II 55 President Senior Vice President
President Capital Management Associates, Inc.
140 Broadway (Advisor to the Fund)
New York, New York 10005 New York, New York
- --------------------------------------------------- ----------------------- ---------------------------------------------------
Thomas A. Saunders, III 61 Trustee General Partner
667 Madison Avenue Saunders Karp & Company
21st Floor (merchant bank)
New York, New York 10021 New York, New York
- --------------------------------------------------- ----------------------- ---------------------------------------------------
David V. Shields 58 Trustee* Managing Director
140 Broadway Capital Management Associates, Inc.
New York, New York 10005 (Advisor to the Fund)
New York, New York;
Managing Director
Shields & Company
(Distributor of the Fund)
New York, New York
- --------------------------------------------------- ----------------------- ---------------------------------------------------
Joseph V. Shields, Jr. 59 Chairman & Trustee* Chairman and Chief Executive Officer
140 Broadway Capital Management Associates, Inc.
New York, New York 10005 (Advisor to the Fund)
New York, New York;
Managing Director
Shields & Company
(Distributor to the Fund)
New York, New York
- --------------------------------------------------- ----------------------- ---------------------------------------------------
Anthony J. Walton 55 Trustee Chief Executive Officer
230 Park Avenue Armstrong Holdings Corporation
Suite 1440 (investment and corporate finance 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 27 Secretary Vice President
105 North Washington Street The Nottingham Company
Rocky Mount, North Carolina 27802 (Administrator to the Fund)
Rocky Mount, North Carolina
- --------------------------------------------------- ----------------------- ---------------------------------------------------
Julian G. Winters 29 Treasurer Legal and Compliance Director
105 North Washington Street The Nottingham Company
Rocky Mount, North Carolina 27802 (Administrator to the Fund)
Rocky Mount, North Carolina since 1996; previously
Operations Manager, Tar Heel
Medical, Nashville, North Carolina
- --------------------------------------------------- ----------------------- ---------------------------------------------------
Joseph A. Zock 45 Vice-President Senior Vice President
140 Broadway Capital Management Associates, Inc.
New York, New York 10005 (Advisor to the Fund)
New York, New York
- --------------------------------------------------- ----------------------- ---------------------------------------------------
</TABLE>
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.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------- -------------------- ------------------------ ---------------------- ---------------------------
Name of Person Aggregate Pension or Retirement Estimated Annual Total Compensation From
Compensation Benefits Benefits Upon Fund and Fund Complex
Retirement Paid to Directors
- ------------------------------- -------------------- ------------------------ ---------------------- ---------------------------
Lucius E. Burch, III $2,450 None None $2,450
- ------------------------------- -------------------- ------------------------ ---------------------- ---------------------------
Thomas A. Saunders, III $2,600 None None $2,600
- ------------------------------- -------------------- ------------------------ ---------------------- ---------------------------
David V. Shields None None None None
- ------------------------------- -------------------- ------------------------ ---------------------- ---------------------------
Joseph V. Shields, Jr. None None None None
- ------------------------------- -------------------- ------------------------ ---------------------- ---------------------------
Anthony J. Walton $2,700 None None $2,700
- ------------------------------- -------------------- ------------------------ ---------------------- ---------------------------
</TABLE>
Principal Holders of Voting Securities. As of October 26, 1998, 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, there were no shareholders who owned more than 5% of
the outstanding shares of beneficial interest of the Fund.
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.
As compensation for its services to the Fund, the Advisor will receive a monthly
management fee based on the Fund's daily 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.
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.
Administrator. The Trust has entered into a Fund Accounting and Compliance
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%. 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.
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.
Transfer Agent. The Trust has entered into a Dividend Disbursing and Transfer
Agent Agreement with NC 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 based upon a $15.00 fee per shareholder per year, subject to a
minimum fee of $750 per month. 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.
J.V. Shields, Jr. and David V. Shields, 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.
The Distribution Plan is of a type known as a "compensation" plan because
payments are made for services rendered to the Fund with respect to Investor
Class shares regardless of the level of expenditures by the Distributors. The
Trustees will, however, take into account such expenditures for purposes of
reviewing operations under the Distribution Plan and in connection with their
annual consideration of the Plan's renewal. The Distributors have indicated that
they expect their expenditures to include, without limitation: (a) the printing
and mailing of Fund prospectuses, statements of additional information, any
supplements thereto and shareholder reports for prospective Contract owners with
respect to the Investor Class shares of the Fund; (b) those relating to the
development, preparation, printing and mailing of advertisements, sales
literature and other promotional materials describing and/or relating to the
Investor Class shares of the Fund; (c) holding seminars and sales meetings
designed to promote the distribution of Fund Investor Class shares; (d)
obtaining information and providing explanations to wholesale and retail
distributors of Contracts regarding Fund investment objectives and policies and
other information about the Fund and its Funds, including the performance of the
Funds; (e) training sales personnel regarding the Investor Class shares of the
Fund; and (f) financing any other activity that the Distributors determine is
primarily intended to result in the sale of Investor Class shares.
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's assets. The Custodian acts as the depository for the Fund,
safekeeps its portfolio securities, collects all income and other payments with
respect to portfolio securities, disburses monies at the Fund's request and
maintains records in connection with its duties as Custodian. For its services
as Custodian, the Custodian is entitled to receive from the Fund an annual fee
based on the average net assets of the Fund held by the Custodian.
Independent Auditors. 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.
Independent auditors audit the financial statements of the Fund at least once
each year. 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 a shareholder or a prospective investor requests
it.
Legal Counsel. Dechert Price & Rhoads serves as legal counsel to the Capital
Management Investment Trust and the Fund.
ADDITIONAL INFORMATION ON PERFORMANCE
From time to time, the total return 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 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 $1,000from 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 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
an initial $1,000 investment 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.
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 measure its performance against the
Lipper Growth Fund 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.
The Fund may also compare its performance to other reports of the performance of
managed accounts of the Advisor, such as the Capital Management Mid-Cap Fund,
another series of the Trust. 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 the Advisor exercises
investment discretion. 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.
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 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.
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
1-888-626-3863 or by writing to:
Capital Management Small-Cap Fund
c/o NC Shareholder Services, LLC
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. Net asset value per share is calculated for
purchases and redemption of shares of the Fund by dividing the value of total
Fund assets, less liabilities (including Fund expenses, which are accrued
daily), by the total number of outstanding shares of that Fund. The net asset
value per share of the Fund is determined at the time trading closes on the New
York Stock Exchange (currently 4:00 p.m. Eastern time, Monday through Friday),
except on business holidays when the New York Stock Exchange is closed.
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.
Sales Charges. The public offering price of Investor Class shares of the Fund
equals net asset value plus a sales charge. The Distributor receives this sales
charge and may reallow it in the form of dealer discounts and brokerage
commissions as follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------- ------------------------- ------------------------- -----------------------------------
Amount of Transaction At Public Charge As % of Net Sales Charge As % of Sales Dealers Discounts and
Offering Price Amount Invested Public Offering Price Brokerage Commissions as % of
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%
- ------------------------------------- ------------------------- ------------------------- -----------------------------------
</TABLE>
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.
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 Class 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 Class 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 Class shares by executing a letter of intent. A letter of intent allows
an investor to purchase Investor Class 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 five 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 backdating 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
Administrator 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
Administrator 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 in Investor Shares 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 Class 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
Class 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 this 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 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 five 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 five percent of
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 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. Clients of investment advisors and financial planners may also purchase
Investor Shares at net asset value if the investment advisor or financial
planner has made arrangements to permit them to do so with the Distributor. The
public offering price of 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.
Exchange Feature
Investors may exchange shares of the Fund for shares of any other comparable
series of the Trust. Shares of the Fund may be exchanged at the net asset value
plus the percentage difference between that series' sales charge and any sales
charge previously paid in connection with the shares being exchanged. For
example, if a 2% sales charge was paid on shares that are exchanged into a
series with a 3% sales charge, there would be an additional sales charge of 1%
on the exchange. Exchanges may only be made by investors in states where shares
of the other series are qualified for sale. An investor may direct the Fund to
exchange his shares by writing to the Fund at its principal office. The request
must be signed exactly as the investor's name appears on the account, and it
must also provide the account number, number of shares to be exchanged, the name
of the series to which the exchange will take place and a statement as to
whether the exchange is a full or partial redemption of existing shares.
Notwithstanding the foregoing, exchanges of shares may only be within the same
class or type of class of shares involved. For example, Investor Shares may not
be exchanged for Institutional Shares.
A pattern of frequent exchange transactions may be deemed by the Advisor to be
an abusive practice that is not in the best interests of the shareholders of the
Fund. Such a pattern may, at the discretion of the Advisor, be limited by the
Fund's refusal to accept further purchase and/or exchange orders from an
investor, after providing the investor with 60 days prior notice. The Board of
Trustees of the Trust also reserves the right to suspend or terminate, or amend
the terms of, the exchange privilege upon 60 days written notice to the
shareholders.
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 practical 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 the time trading closes on the NYSE (currently 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, Martin
Luther King, Jr. 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.
In valuing the Fund's total assets, portfolio securities are generally valued at
their market value. Instruments with maturities of sixty days or less are valued
at amortized costs, which approximates market value. Securities and assets for
which representative market quotations are not readily available are valued at
fair value as determined in good faith under policies approved by the Trustees.
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.
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 to 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
three series: the Capital Management Mid-Cap Fund, the Capital Management
Small-Cap Fund, and the Capital Management Energy Fund. Each series of 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.
<PAGE>
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 that 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 that 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 that 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.
The Advisor does not consider bonds that are rated Ba, B, Caa, Ca, or C by
Moody's "Investment-Grade Debt Securities." 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 that 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 that 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 that are
rated Ca represent obligations that 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 that 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 that 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>
STATEMENT OF ADDITIONAL INFORMATION
CAPITAL MANAGEMENT ENERGY FUND
January 15, 1999
A series of the
CAPITAL MANAGEMENT INVESTMENT TRUST
Capital Management Associates, Inc.
140 Broadway
New York, New York 10005
Telephone 1-888-626-3863
TABLE OF CONTENTS
Page
INVESTMENT OBJECTIVE AND POLICIES..........................................B-1
INVESTMENT LIMITATIONS.....................................................B-2
MANAGEMENT AND SERVICE PROVIDERS...........................................B-4
Trustees and Officers.............................................B-4
Investment Advisor................................................B-5
Administrator.....................................................B-6
Transfer Agent....................................................B-6
Distributor.......................................................B-6
Custodian.........................................................B-7
Independent Auditors..............................................B-7
Legal Counsel.....................................................B-7
ADDITIONAL INFORMATION ON PERFORMANCE......................................B-7
PORTFOLIO TRANSACTIONS.....................................................B-9
SPECIAL SHAREHOLDER SERVICES..............................................B-10
PURCHASE OF SHARES........................................................B-11
REDEMPTION OF SHARES......................................................B-14
NET ASSET VALUE...........................................................B-14
ADDITIONAL TAX INFORMATION................................................B-15
CAPITAL SHARES AND VOTING.................................................B-16
APPENDIX A................................................................B-18
This Statement of Additional Information (the "SAI") is meant to be read in
conjunction with the Prospectuses of the Capital Management Energy Fund (the
"Fund"), dated January 15, 1999, relating to the Fund's Institutional Shares and
Investor Shares and hereby incorporates by reference the Prospectus in its
entirety. Because this SAI is not itself a prospectus, no investment in shares
of the Fund should be made solely upon the information contained herein. Copies
of the Prospectus for Investor Class and Institutional Class Shares of the Fund
and Annual Reports may be obtained at no charge by writing or calling the Fund
at the address or phone number shown above. Capitalized terms used but not
defined herein have the same meanings as in each Prospectus.
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The Capital Management Energy Fund (the "Fund") is a diversified series of the
Capital Management Investment Trust (the "Trust"), a registered open-end
management company. The Trust was organized on October 18, 1994, as a
Massachusetts business trust. The primary investment strategies and risks of the
Fund are described in the Prospectus for each Class of shares of the Fund. In
addition to the principal investment strategies discussed in the Fund's
Prospectus, the Fund may also employ the use of the financial instruments
described below in order to achieve its objective. The strategies set forth
below are not principle strategies of the Fund.
Repurchase Agreements. The Fund may acquire U.S. Government obligations or
corporate debt securities subject to repurchase agreements. A repurchase
agreement involves the purchase by the Fund of a security (normally a U.S.
Treasury obligation) and an agreement to resell the security at the same price,
plus specified interest to the counter-party (normally a member bank of the
Federal Reserve or a registered Government Securities dealer). 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, Capital Management Associates, Inc., will consider the
creditworthiness of the counter-parties with which it transacts these repurchase
agreements. If the counter-party 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 that will cause more than 15% of its net assets to be invested in
repurchase agreements extending beyond seven days, to the extent such agreements
are deemed illiquid securities.
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 15% 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 15% of its net assets
were invested in illiquid securities, it would seek to take appropriate steps to
protect liquidity.
The investments in illiquid securities may involve a high degree of business and
financial risk and may result in substantial losses. Because of the illiquid
nature of these securities, the Fund may take longer to liquidate these
positions than would be the case for other more liquid securities. The Fund's
investment in these illiquid securities is subject to the risk that should the
Fund desire to sell any of these securities when a ready buyer is not available
at a price that is deemed to be representative of their fair market value, the
value of the Fund's net assets could be adversely affected.
Historically, illiquid securities have included securities subject to
contractual or legal restrictions on resale because they have not been
registered under the 1933 Act, securities which are otherwise not readily
marketable and repurchase agreements having a maturity of longer than seven
days. Securities which have not been registered under the 1933 Act are referred
to as private placements or restricted securities and are purchased directly
from the issuer or in the secondary market. Mutual funds do not typically hold a
significant amount of these restricted or other illiquid securities because of
the potential for delays on resale and uncertainty in valuation. Limitations on
resale may have an adverse effect on the marketability of portfolio securities
and a mutual fund might be unable to dispose of restricted or other illiquid
securities promptly or at reasonable prices and might thereby experience
difficulty satisfying redemptions within seven days. A mutual fund might also
have to register such restricted securities in order to dispose of them
resulting in additional expense and delay. Adverse market conditions could
impede such a public offering of securities.
In recent years, however, a large institutional market has developed for certain
securities that are not registered under the 1933 Act including repurchase
agreements, commercial paper, foreign securities, municipal securities and
corporate bonds and notes. Institutional investors depend on an efficient
institutional market in which the unregistered security can be readily resold or
on an issuer's ability to honor a demand for repayment. The fact that there are
contractual or legal restrictions on resale to the general public or to certain
institutions may not be indicative of the liquidity of such investments.
Rule 144A Securities will be considered illiquid and therefore subject to a
Portfolio's limit on the purchase of illiquid securities unless the Board or its
delegates determines that the Rule 144A Securities are liquid. In reaching
liquidity decisions, the Board of Trustees and its delegates may consider, inter
alia, the following factors: (i) the unregistered nature of the security; (ii)
the frequency of trades and quotes for the security; (iii) the number of dealers
wishing to purchase or sell the security and the number of other potential
purchasers; (iv) dealer undertakings to make a market in the security; and (v)
the nature of the security and the nature of the marketplace trades (e.g., the
time needed to dispose of the security, the method of soliciting offers and the
mechanics of the transfer).
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
purchases 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 fundamental 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 33 1/3% 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 for the purpose of exercising control or management of another
issuer;
4. 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);
5. 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;
6. Participate on a joint or joint and several basis in any trading
account in securities;
7. Invest its assets in the securities of one or more investment companies
except to the extent permitted by the 1940 Act; or
8. Make loans of money or securities, except that the Fund may invest in
repurchase agreements, money market instruments, and other debt
securities.
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 of 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 15% 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 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;
5. Purchase foreign securities other than those traded on domestic U.S.
exchanges;
6. Write, purchase, or sell puts, calls, straddles, spreads, or
combinations thereof or futures contracts or related options, except to
the extent permitted by the Fund's prospectus or Statement of
Additional Information, as may be amended from time to time; or
7. Purchase or sell 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), except to the extent permitted by the Fund's
prospectus or Statement of Additional Information, as may be amended
from time to time.
MANAGEMENT AND SERVICE PROVIDERS
The Trust's Board of Trustees (the "Trustees") are responsible for the
management and supervision of the Fund. The Trustees approve all significant
agreements between the Trust, on behalf of the Fund, and those companies that
furnish services to the Fund. This section of the Statement of Additional
Information provides the persons who serve as Trustees and Officers to the Trust
and Fund, respectively, as well as the entities that provide services to the
Fund.
Trustees and Officers. Following are the Trustees and Officers of 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 noted by an asterisk (*). Messrs.
David V. Shields and Joseph V. Shields, Jr. are brothers.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------- ----------------------- ---------------------------------------------------
Name, Age, Position(s) with Position with Principal Occupation(s)
Fund and/or Trust, and Address The Fund During Past 5 Years
- --------------------------------------------------- ----------------------- ---------------------------------------------------
- --------------------------------------------------- ----------------------- ---------------------------------------------------
Lucius E. Burch, III 56 Trustee Chairman and Chief Executive Officer
438 Rosemeade Lane Massey Burch Investment Group, Inc.
Naples, Florida 33999 (venture capital firm)
Nashville, Tennessee
- --------------------------------------------------- ----------------------- ---------------------------------------------------
C. Lennis Koontz, II 55 President Senior Vice President
President Capital Management Associates, Inc.
140 Broadway (Advisor to the Fund)
New York, New York 10005 New York, New York
- --------------------------------------------------- ----------------------- ---------------------------------------------------
Thomas A. Saunders, III 61 Trustee General Partner
667 Madison Avenue Saunders Karp & Company
21st Floor (merchant bank)
New York, New York 10021 New York, New York
- --------------------------------------------------- ----------------------- ---------------------------------------------------
David V. Shields 58 Trustee* Managing Director
140 Broadway Capital Management Associates, Inc.
New York, New York 10005 (Advisor to the Fund)
New York, New York;
Managing Director
Shields & Company
(Distributor of the Fund)
New York, New York
- --------------------------------------------------- ----------------------- ---------------------------------------------------
Joseph V. Shields, Jr. 59 Chairman & Trustee* Chairman and Chief Executive Officer
140 Broadway Capital Management Associates, Inc.
New York, New York 10005 (Advisor to the Fund)
New York, New York;
Managing Director
Shields & Company
(Distributor to the Fund)
New York, New York
- --------------------------------------------------- ----------------------- ---------------------------------------------------
Anthony J. Walton 55 Trustee Chief Executive Officer
230 Park Avenue Armstrong Holdings Corporation
Suite 1440 (investment and corporate finance 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 27 Secretary Vice President
105 North Washington Street The Nottingham Company
Rocky Mount, North Carolina 27802 (Administrator to the Fund)
Rocky Mount, North Carolina
- --------------------------------------------------- ----------------------- ---------------------------------------------------
Julian G. Winters 29 Treasurer Legal and Compliance Director
105 North Washington Street The Nottingham Company
Rocky Mount, North Carolina 27802 (Administrator to the Fund)
Rocky Mount, North Carolina since 1996; previously
Operations Manager, Tar Heel
Medical, Nashville, North Carolina
- --------------------------------------------------- ----------------------- ---------------------------------------------------
Joseph A. Zock 45 Vice-President Senior Vice President
140 Broadway Capital Management Associates, Inc.
New York, New York 10005 (Advisor to the Fund)
New York, New York
- --------------------------------------------------- ----------------------- ---------------------------------------------------
</TABLE>
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.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------- -------------------- ------------------------ ---------------------- ---------------------------
Name of Person Aggregate Pension or Retirement Estimated Annual Total Compensation From
Compensation Benefits Benefits Upon Fund and Fund Complex
Retirement Paid to Directors
- ------------------------------- -------------------- ------------------------ ---------------------- ---------------------------
Lucius E. Burch, III $2,450 None None $2,450
- ------------------------------- -------------------- ------------------------ ---------------------- ---------------------------
Thomas A. Saunders, III $2,600 None None $2,600
- ------------------------------- -------------------- ------------------------ ---------------------- ---------------------------
David V. Shields None None None None
- ------------------------------- -------------------- ------------------------ ---------------------- ---------------------------
Joseph V. Shields, Jr. None None None None
- ------------------------------- -------------------- ------------------------ ---------------------- ---------------------------
Anthony J. Walton $2,700 None None $2,700
- ------------------------------- -------------------- ------------------------ ---------------------- ---------------------------
</TABLE>
Principal Holders of Voting Securities. As of October 26, 1998, 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, there were no shareholders who owned more than 5% of
the outstanding shares of beneficial interest of the Fund.
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.
As compensation for its services to the Fund, the Advisor will receive a monthly
management fee based on the Fund's daily 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.
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.
Administrator. The Trust has entered into a Fund Accounting and Compliance
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%. 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.
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.
Transfer Agent. The Trust has entered into a Dividend Disbursing and Transfer
Agent Agreement with NC 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 based upon a $15.00 fee per shareholder per year, subject to a
minimum fee of $750 per month. 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.
J.V. Shields, Jr. and David V. Shields, 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.
The Distribution Plan is of a type known as a "compensation" plan because
payments are made for services rendered to the Fund with respect to Investor
Class shares regardless of the level of expenditures by the Distributors. The
Trustees will, however, take into account such expenditures for purposes of
reviewing operations under the Distribution Plan and in connection with their
annual consideration of the Plan's renewal. The Distributors have indicated that
they expect their expenditures to include, without limitation: (a) the printing
and mailing of Fund prospectuses, statements of additional information, any
supplements thereto and shareholder reports for prospective Contract owners with
respect to the Investor Class shares of the Fund; (b) those relating to the
development, preparation, printing and mailing of advertisements, sales
literature and other promotional materials describing and/or relating to the
Investor Class shares of the Fund; (c) holding seminars and sales meetings
designed to promote the distribution of Fund Investor Class shares; (d)
obtaining information and providing explanations to wholesale and retail
distributors of Contracts regarding Fund investment objectives and policies and
other information about the Fund and its Funds, including the performance of the
Funds; (e) training sales personnel regarding the Investor Class shares of the
Fund; and (f) financing any other activity that the Distributors determine is
primarily intended to result in the sale of Investor Class shares.
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's assets. The Custodian acts as the depository for the Fund,
safekeeps its portfolio securities, collects all income and other payments with
respect to portfolio securities, disburses monies at the Fund's request and
maintains records in connection with its duties as Custodian. For its services
as Custodian, the Custodian is entitled to receive from the Fund an annual fee
based on the average net assets of the Fund held by the Custodian.
Independent Auditors. 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.
Independent auditors audit the financial statements of the Fund at least once
each year. 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 a shareholder or a prospective investor requests
it.
Legal Counsel. Dechert Price & Rhoads serves as legal counsel to the Capital
Management Investment Trust and the Fund.
ADDITIONAL INFORMATION ON PERFORMANCE
From time to time, the total return 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 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 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
an initial $1,000 investment 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.
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 measure its performance against the
Lipper Growth Fund 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.
The Fund may also compare its performance to other reports of the performance of
managed accounts of the Advisor, such as the Capital Management Mid-Cap Fund,
another series of the Trust. 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 the Advisor exercises
investment discretion. 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.
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 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.
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
1-888-626-3863 or by writing to:
Capital Management Energy Fund
c/o NC Shareholder Services, LLC
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. Net asset value per share is calculated for
purchases and redemption of shares of the Fund by dividing the value of total
Fund assets, less liabilities (including Fund expenses, which are accrued
daily), by the total number of outstanding shares of that Fund. The net asset
value per share of the Fund is determined at the time trading closes on the New
York Stock Exchange (currently 4:00 p.m. Eastern time, Monday through Friday),
except on business holidays when the New York Stock Exchange is closed.
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.
Sales Charges. The public offering price of Investor Class shares of the Fund
equals net asset value plus a sales charge. The Distributor receives this sales
charge and may reallow it in the form of dealer discounts and brokerage
commissions as follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------- ------------------------- ------------------------- -----------------------------------
Amount of Transaction At Public Charge As % of Net Sales Charge As % of Sales Dealers Discounts and
Offering Price Amount Invested Public Offering Price Brokerage Commissions as % of
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%
- ------------------------------------- ------------------------- ------------------------- -----------------------------------
</TABLE>
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.
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 Class 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 Class 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 Class shares by executing a letter of intent. A letter of intent allows
an investor to purchase Investor Class 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 five 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 backdating 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
Administrator 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
Administrator 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 in Investor Shares 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 Class 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
Class 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 this 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 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 five 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 five percent of
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 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. Clients of investment advisors and financial planners may also purchase
Investor Shares at net asset value if the investment advisor or financial
planner has made arrangements to permit them to do so with the Distributor. The
public offering price of 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.
Exchange Feature
Investors may exchange shares of the Fund for shares of any other comparable
series of the Trust. Shares of the Fund may be exchanged at the net asset value
plus the percentage difference between that series' sales charge and any sales
charge previously paid in connection with the shares being exchanged. For
example, if a 2% sales charge was paid on shares that are exchanged into a
series with a 3% sales charge, there would be an additional sales charge of 1%
on the exchange. Exchanges may only be made by investors in states where shares
of the other series are qualified for sale. An investor may direct the Fund to
exchange his shares by writing to the Fund at its principal office. The request
must be signed exactly as the investor's name appears on the account, and it
must also provide the account number, number of shares to be exchanged, the name
of the series to which the exchange will take place and a statement as to
whether the exchange is a full or partial redemption of existing shares.
Notwithstanding the foregoing, exchanges of shares may only be within the same
class or type of class of shares involved. For example, Investor Shares may not
be exchanged for Institutional Shares.
A pattern of frequent exchange transactions may be deemed by the Advisor to be
an abusive practice that is not in the best interests of the shareholders of the
Fund. Such a pattern may, at the discretion of the Advisor, be limited by the
Fund's refusal to accept further purchase and/or exchange orders from an
investor, after providing the investor with 60 days prior notice. The Board of
Trustees of the Trust also reserves the right to suspend or terminate, or amend
the terms of, the exchange privilege upon 60 days written notice to the
shareholders.
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 practical 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 the time trading closes on the NYSE (currently 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, Martin
Luther King, Jr. 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.
In valuing the Fund's total assets, portfolio securities are generally valued at
their market value. Instruments with maturities of sixty days or less are valued
at amortized costs, which approximates market value. Securities and assets for
which representative market quotations are not readily available are valued at
fair value as determined in good faith under policies approved by the Trustees.
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.
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 to 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
three series: the Capital Management Mid-Cap Fund, the Capital Management
Small-Cap Fund, and the Capital Management Energy Fund. Each series of 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.
<PAGE>
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 that 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 that 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 that 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.
The Advisor does not consider bonds that are rated Ba, B, Caa, Ca, or C by
Moody's "Investment-Grade Debt Securities." 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 that 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 that 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 that are
rated Ca represent obligations that 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 that 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 that 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 have
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>
PART C
======
FORM N1-A
OTHER INFORMATION
ITEM 23. Exhibits
(a) Declaration of Trust.(1)
(b) By-Laws.(1)
(c) Not Applicable.
(d)(1) Investment Advisory Agreement between the Capital Management Investment
Trust and Capital Management Associates, Inc., as Advisor.
(d)(2) Form of amended and restated Investment Advisory Agreement between the
Capital Management Investment Trust and Capital Management Associates,
Inc., as Advisor.
(e)(1) Distribution Agreement between the Capital Management Investment Trust
and Shields and Company, as Distributor.
(e)(2) Form of amended and restated Distribution Agreement between the Capital
Management Investment Trust and Shields & Company, as Distributor.
(f) Not Applicable.
(g) Custodian Agreement between the Registrant and First Union National
Bank of North Carolina, as Custodian.
(h)(1) Fund Accounting, Dividend Disbursing & Transfer Agent, and
Administration Agreement.
(h)(2) Amendment to the Fund Accounting, Dividend Disbursing & Transfer Agent,
and Administration Agreement dated October 1, 1995.
(h)(3) Form of Fund Accounting and Compliance Administration Agreement between
the Registrant and The Nottingham Company, Inc., as Administrator.
(h)(4) Form of Dividend Disbursing and Transfer Agent Agreement between
Capital Management Investment Trust and NC Shareholder Services, LLC,
as Transfer Agent.
(i) Opinion and Consent of Dechert Price & Rhoads regarding the legality of
the securities being registered with respect to the Capital Management
Small-Cap Fund and the Capital Management Energy Fund.
(j) Consent of Deloitte & Touche LLP, Independent Public Accountants.
(k) Not applicable.
(l) Not applicable.
(m) Distribution Plan under Rule 12b-1 for the Capital Management
Investment Trust.1
(n) Financial Data Schedules.3
(o) Rule 18f-3 Multi-Class Plan.1
(p) Copy of Powers of Attorney.2
- -----------------------
1. Incorporated herein by reference to Registrant's Registration Statement
on Form N-1A filed on March 26, 1996 (File No. 33-85242).
2. Incorporated herein by reference to Registrant's Registration Statement
Post-Effective Amendment No. 4 on Form N-1A filed on March 31, 1997
(File No. 33-85242).
3. Incorporated herein by reference to Registrant's Registration Statement
Post-Effective Amendment No. 5 on Form N-1A filed on March 31, 1998
(File No. 33-85242).
ITEM 24. Persons Controlled by or Under Common Control with the Registrant
No person is controlled by or under common control with the Registrant.
ITEM 25. 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.
ITEM 26. Business and other Connections of the Investment Advisor
See the Statement of Additional Information section entitled "Management" of the
Fund and the Investment Advisor's Form ADV filed with the Commission, which is
hereby incorporated by reference, 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 serves as
investment advisor to numerous institutional and individual clients.
ITEM 27. Principal Underwriter
(a) Shields & Company is underwriter and distributor for the Capital
Management Mid-Cap Fund, Capital Management Small-Cap Fund, and Capital
Management Energy Fund.
(b)
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 None
140 Broadway Secretary
New York, New York 10005 Treasurer
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
ITEM 28. 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 NC Shareholder Services, LLC,
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 NC Shareholder
Services, LLC 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. The address of First Union National Bank
of North Carolina is Two First Union Center, Charlotte, North Carolina
28288-1151.
ITEM 29. 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 30. Undertakings
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.
<PAGE>
SIGNATURES
Pursuant to the requirements of (the Securities Act of 1933 and) the Investment
Company Act of 1940, the Registrant 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, and State of North Carolina on the
29th day of October, 1998.
CAPITAL MANAGEMENT INVESTMENT TRUST
By: /s/ C. Frank Watson, III
______________________________
C. Frank Watson, III
Secretary
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
*
_________________________________________________________ Trustee
Lucius E. Burch, III Date
*
_________________________________________________________ Trustee
Thomas A. Saunders, III Date
*
_________________________________________________________ Trustee
David V. Shields Date
*
_________________________________________________________ Trustee and Chairman,
J.V. Shields Date (Principal Executive
Officer)
*
_________________________________________________________ Trustee
Anthony J. Walton Date
/s/ Julian G. Winters October 29, 1998 Treasurer
_________________________________________________________
Julian G. Winters Date
* By: /s/ C. Frank Watson, III Dated: October 29, 1998
_______________________________________________
C. Frank Watson, III
Attorney-in-Fact
<PAGE>
CAPITAL MANAGEMENT INVESTMENT TRUST
EXHIBIT INDEX
===================================
EXHIBIT DESCRIPTION
- ------- -----------
Exhibit (d)(1) Investment Advisory Agreement
Exhibit (d)(2) Form of Amended and Restated Investment Advisory
Agreement
Exhibit (e)(1) Distribution Agreement
Exhibit (e)(2) Form of Amended and Restated Distribution Agreement
Exhibit (g) Custodian Agreement
Exhibit (h)(1) Fund Accounting, Dividend Disbursing & Transfer Agent,
and Administration Agreement
Exhibit (h)(2) Amendment to the Fund Accounting, Dividend Disbursing
& Transfer Agent, and Administration Agreement
Exhibit (h)(3) Form of Fund Accounting and Compliance Administration
Agreement
Exhibit (h)(4) Form of Dividend Disbursing and Transfer Agent
Agreement
Exhibit (i) Opinion and Consent of Counsel
Exhibit (j) Consent of Auditor
Exhibit (d)(1): Investment Advisory Agreement
--------------
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT, entered into as of the date the registration statement of the
Capital Management Equity Fund of the Capital Management Investment Trust
becomes effective with the Securities and Exchange Commission, by and between
CAPITAL MANAGEMENT INVESTMENT TRUST (the "Trust"), a Massachusetts Business
Trust, and CAPITAL MANAGEMENT ASSOCIATES, INC., a New York corporation (the
"Advisor"), registered as an investment advisor under the Investment Advisors
Act of 1940, as amended (the "Advisors Act").
WHEREAS, the Trust is registered as a diversified, open-end management
investment company of the series type under the Investment Company Act of 1940,
as amended (the "1940 Act"); and
WHEREAS, the Trust desires to retain the Advisor to furnish investment advisory
and administrative services to CAPITAL MANAGEMENT EQUITY FUND series of the
Trust, and the Advisor is willing to so furnish such services;
NOW THEREFORE, in consideration of the promises and mutual covenants herein
contained, it is agreed between the parties hereto as follows:
1. Appointment. The Trust hereby appoints the Advisor to act as Investment
Advisor to CAPITAL MANAGEMENT EQUITY FUND (the "Fund") series of the
Trust for the period and on the terms set forth in this Agreement. The
Advisor accepts such appointment and agrees to furnish the services
herein set forth, for the compensation herein provided.
2. Delivery of Documents. The Trust has furnished the Investment Advisor
with copies properly certified or authenticated of each of the
following:
(a) The Trust's Declaration of Trust, as filed with the State of
Massachusetts (such Declaration, as presently in effect and as
it shall from time to time be amended, is herein called the
"Declaration");
(b) The Trust's By-Laws (such By-Laws, as presently in effect and as
they shall from time to time be amended, are herein called the
"By-Laws");
(c) Resolutions of the Trust's Board of Trustees and the resolution
approved by a majority of the outstanding shares of the Fund
authorizing the appointment of the Advisor and approving this
Agreement;
(d) The Trust's Registration Statement on Form N-1A under the 1940
Act and under the Securities Act of 1933 as amended, (the "1933
Act"), relating to shares of beneficial interest of the Fund
(herein called the "Shares") as filed with the Securities and
Exchange Commission ("SEC") and all amendments thereto;
(e) The Fund's Prospectus (such Prospectus, as presently in effect
and all amendments and supplements thereto are herein called the
"Prospectus").
The Trust will furnish the Advisor from time to time with copies,
properly certified or authenticated, of all amendments of or
supplements to the foregoing at the same time as such documents are
required to be filed with the SEC.
3. Management. Subject to the supervision of the Trust's Board of
Trustees, the Advisor will provide a continuous investment program for
the Fund, including investment research and management with respect to
all securities, investments, cash and cash equivalents in the Fund. The
Advisor will determine from time to time what securities and other
investments will be purchased, retained or sold by the Fund. The
Advisor will provide the services under this Agreement in accordance
with the Fund's investment objectives, policies and restrictions as
stated in its Prospectus. The Advisor further agrees that it:
<PAGE>
(a) Will conform its activities to all applicable Rules and
Regulations of the Securities and Exchange Commission and will,
in addition, conduct its activities under this Agreement in
accordance with regulations of any other Federal and State
agencies which may now or in the future have jurisdiction over
its activities under this Agreement;
(b) Will place orders pursuant to its investment determinations for
the Fund either directly with the issuer or with any broker or
dealer. In placing orders with brokers or dealers, the Advisor
will attempt to obtain the best net price and the most favorable
execution of its orders. Consistent with this obligation, when
the Advisor believes two or more brokers or dealers are
comparable in price and execution, the Advisor may prefer: (i)
brokers and dealers who provide the Fund with research advice
and other services, or who recommend or sell Trust shares, and
(ii) brokers who are affiliated with the Fund or its Advisor;
provided, however, that in no instance will portfolio securities
be purchased from or sold to the Advisor or any affiliated
person of the Advisor in principal transactions;
(c) Will provide certain executive personnel for the Fund as may be
mutually agreed upon from time to time with the Board of
Trustees, the salaries and expenses of such personnel to be
borne by the Advisor unless otherwise mutually agreed upon; and
(d) Will provide, at its own cost, all office space, facilities and
equipment necessary for the conduct of its advisory activities
on behalf of the Fund.
4. Services Not Exclusive. The advisory services furnished by the Advisor
hereunder are not to be deemed exclusive, and the Advisor shall be free
to furnish similar services to others so long as its services under
this Agreement are not impaired thereby; provided, however, that
without the written consent of the Trustees, the Advisor will not serve
as investment advisor to any other investment company having a similar
investment objective to that of the Fund.
5. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Advisor hereby agrees that all records which it
maintains for the benefit of the Fund are the property of the Fund and
further agrees to surrender promptly to the Fund any of such records
upon the Fund's request. The Advisor further agrees to preserve for the
periods prescribed by Rule 31a-2 under the 1940 Act the records
required to be maintained by it pursuant to Rule 31a-1 under the 1940
Act that are not maintained by others on behalf of the Fund.
6. Expenses. During the term of this Agreement, the Advisor will pay all
expenses incurred by it in connection with its investment advisory
services pertaining to the Fund. In the event that there is no
distribution plan under Rule 12b-1 of the 1940 Act in effect for the
Fund, the Advisor will pay, out of the Advisor's resources generated
from sources other than fees received from the Fund, the entire cost of
the promotion and sale of Trust shares.
Notwithstanding the foregoing, the Fund shall pay the expenses and
costs of the following:
(a) Taxes, interest charges and extraordinary expenses;
(b) Brokerage fees and commissions with regard to portfolio
transactions of the Fund;
(c) Fees and expenses of the custodian of the Fund's portfolio
securities;
(d) Fees and expenses of the Fund's administrator, transfer and
dividend disbursing agent and the Fund's fund accounting agent
or, if the Fund performs any such services without an agent, the
costs of the same;
(e) Auditing and legal expenses;
(f) Cost of maintenance of the Fund's existence as a legal entity;
(g) Compensation of trustees who are not interested persons of the
Advisor as that term is defined by law;
(h) Costs of Trust meetings;
(i) Federal and State registration or qualification fees and
expenses;
<PAGE>
(j) Costs of setting in type, printing and mailing Prospectuses,
reports and notices to existing shareholders;
(k) The investment advisory fee payable to the Advisor, as provided
in paragraph 7 herein; and
(l) Plan of Distribution expenses, but only in accordance with the
Plan of Distribution as approved by the shareholders of the
Fund.
It is understood that the Trust may desire to register the Fund's
shares for sale in certain states which impose expense limitations on
mutual funds. The Trust agrees that it will register the Fund's shares
in such states only with the prior written consent of the Advisor.
7. Compensation. The Trust will pay the Advisor and the Advisor will
accept as full compensation an investment advisory fee, based upon the
daily average net assets of each Fund, computed at the end of each
month and payable within five (5) business days thereafter, based upon
the schedule attached hereto as Exhibit A.
8.(a) Limitation of Liability. The Advisor shall not be liable for any error
of judgment, mistake of law or for any other loss whatsoever suffered
by the Fund in connection with the performance of this 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
wilful 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 obligations and duties under this Agreement.
8.(b) Indemnification of Advisor. Subject to the limitations set forth in
this Subsection 8(b), the Fund shall indemnify, defend and hold
harmless (from the assets of the Trust or Trusts 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 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 Fund 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), may be paid from
time to time by the Fund or Trust 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 if it is ultimately determined that indemnification
of such expenses is not authorized under this Subsection 8(b) and if
(i) the Advisor shall have provided security for such undertaking, (ii)
the Fund 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.
<PAGE>
As to any matter disposed of by a compromise payment by the Advisor
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 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 interest of
the Fund or to have been liable to the Fund 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 Advisor 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 Fund, and other persons may be entitled by contract or
otherwise under law, nor the power of the Fund 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 Fund hereunder to pay the
indemnification required by this Subsection 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.
8.(c) The provisions contained in Section 8 shall survive the expiration or
other termination of this Agreement, shall be deemed to include and
protect the Advisor and its directors, officers, employees and agents
and shall inure to the benefit of its/their respective successors,
assigns and personal representatives.
9. Duration and Termination. This Agreement shall become effective upon
the date the registration statement of the Trust containing the Fund's
Prospectus is declared effective by the Securities and Exchange
Commission and, unless sooner terminated as provided herein, shall
continue in effect for two years. Thereafter, this Agreement shall be
renewable for successive periods of one year each, provided such
continuance is specifically approved annually:
(a) By the vote of a majority of those members of the Board of
Trustees who are not parties to this Agreement or interested
persons of any such party (as that term is defined in the 1940
Act), cast in person at a meeting called for the purpose of
voting on such approval; and
(b) By vote of either the Board of Trustees or a majority (as that
term is defined in the 1940 Act) of the outstanding voting
securities of the Fund.
Notwithstanding the foregoing, this Agreement may be terminated by the
Fund or by the Advisor at any time on sixty (60) days' written notice,
without the payment of any penalty, provided that termination by the
Fund must be authorized either by vote of the Board of Trustees or by
vote of a majority of the outstanding voting securities of the Fund.
This Agreement will automatically terminate in the event of its
assignment (as that term is defined in the 1940 Act).
10. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by a written
instrument signed by the party against which enforcement of the change,
waiver, discharge or termination is sought. No material amendment of
this Agreement shall be effective until approved by vote of the holders
of a majority of the Fund's outstanding voting securities (as defined
in the 1940 Act).
<PAGE>
11. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect. If
any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby. This Agreement shall be
binding and shall inure to the benefit of the parties hereto and their
respective successors.
12. Applicable Law. This Agreement shall be construed in accordance with,
and governed by, the laws of the State of North Carolina.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
ATTEST: CAPITAL MANAGEMENT INVESTMENT TRUST
By: /S/ C. Lennis Koontz, II By: /s/ J.V. Shields, Jr.
_________________________ ____________________________
Title: President Title: Chairman
_______________________ _________________________
ATTEST: CAPITAL MANAGEMENT ASSOCIATES, INC.
By: /s/ C. Lennis Koontz, II By: /s/ Richard B. Thatcher
_________________________ __________________________
Title: Senior Vice President Title: President
_______________________ _________________________
<PAGE>
EXHIBIT A
INVESTMENT ADVISOR'S COMPENSATION SCHEDULE
For the services delineated in the INVESTMENT ADVISORY AGREEMENT, the Investment
Advisor shall be compensated monthly, as of the last day of each month, within
five business days of the month end, a fee based upon net assets according to
the following schedule.
Annual
Net Assets Fee
---------- ------
On the first $100 million 1.00%
On the next $150 million 0.90%
On the next $250 million 0.85%
On all assets over $500 million 0.80%
Exhibit (d)(2): Form of amended and restated Investment Advisory Agreement
--------------
AMENDED AND RESTATED
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT, dates as of ________________, 199__ between CAPITAL MANAGEMENT
INVESTMENT TRUST (the "Trust"), a Massachusetts Business Trust, and CAPITAL
MANAGEMENT ASSOCIATES, INC, a New York corporation (the "Advisor"), registered
as an investment advisor under the Investment Advisors Act of 1940, as amended
(the "Advisors Act").
WHEREAS, the Trust is registered as an open-end management investment company of
the series type under the Investment Company Act of 1940, as amended (the "1940
Act"); and
WHEREAS, the Trust desires to retain the Advisor to furnish investment advisory
and administrative services to the series of the Trust as described in the
schedules attached to this Agreement (each a "Fund"), and the Advisor is willing
to furnish such services;
NOW, THEREFORE, in consideration of the promises and mutual covenants herein
contained, it is agreed between the parties hereto as follows:
1. Appointment. The Trust hereby appoints the Advisor to act as Investment
Advisor to each Fund for the period and on the terms set forth in this
Agreement. The Advisor accepts such appointment and agrees to furnish
the services set forth herein, for the compensation provided in the
attached schedules.
2. Delivery of Documents. The Trust has furnished the Investment Advisor
with copies properly certified or authenticated of each of the
following:
(a) The Trust's Declaration of Trust, as filed with the Commonwealth
of Massachusetts (the "Declaration");
(b) The Trust's By-Laws (the "By-Laws");
(c) Resolutions of the Trust's Board of Trustees and the resolution
approved by a majority of the outstanding shares of the Fund
authorizing the appointment of the Advisor and approving this
Agreement;
(d) The Trust's Registration Statement on Form N-1A under the 1940
Act and under the Securities Act of 1933 as amended, (the "1933
Act"), relating to shares of beneficial interest of the Fund
(the "Shares") as filed with the Securities and Exchange
Commission ("SEC") and all amendments thereto;
(e) The Fund's Prospectus (the "Prospectus").
The Trust will furnish the Advisor from time to time with copies,
properly certified or authenticated, of all amendments of or
supplements to the foregoing at the same time as such documents are
required to be filed with the SEC.
3. Management. Subject to the supervision of the Trust's Board of
Trustees, the Advisor will provide a continuous investment program for
the Fund, including investment research and management with respect to
all securities, investments, cash and cash equivalents in the Fund. The
Advisor will determine from time to time what securities and other
investments will be purchased, retained or sold by the Fund. The
Advisor will provide the services under this Agreement in accordance
with the Fund's investment objectives, policies and restrictions as
stated in its Prospectus. The Advisor further agrees that it:
(a) Will conform its activities to all applicable Rules and
Regulations of the Securities and Exchange Commission and will,
in addition, conduct its activities under this Agreement in
accordance with regulations of any other Federal and State
agencies which may now or in the future have jurisdiction over
its activities under this Agreement;
<PAGE>
(b) Will place orders pursuant to its investment determinations for
the Fund either directly with the issuer or with any broker or
dealer. In placing orders with brokers or dealers, the Advisor
will attempt to obtain the best net price and the most favorable
execution of its orders. Consistent with this obligation, when
the Advisor believes two or more brokers or dealers are
comparable in price and execution, the Advisor may prefer: (i)
brokers and dealers who provide the Fund with research advice
and other services, or who recommend or sell Trust shares, and
(ii) brokers who are affiliated with the Fund or its Advisor;
provided, however, that in no instance will portfolio securities
be purchased from or sold to the Advisor or any affiliated
person of the Advisor in principal transactions;
(c) Will provide certain executive personnel for the Fund as may be
mutually agreed upon from time to time with the Board of
Trustees, the salaries and expenses of such personnel to be
borne by the Advisor unless otherwise mutually agreed upon; and
(d) Will provide, at its own cost, all office space, facilities and
equipment necessary for the conduct of its advisory activities
on behalf of the Fund.
4. Services Not Exclusive. The advisory services furnished by the Advisor
hereunder are not to be deemed exclusive, and the Advisor shall be free
to furnish similar services to others so long as its services under
this Agreement are not impaired thereby; provided, however, that
without the written consent of the Trustees, the Advisor will not serve
as investment advisor to any other investment company having a similar
investment objective to that of the Fund.
5. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Advisor hereby agrees that all records which it
maintains for the benefit of the Fund are the property of the Fund and
further agrees to surrender promptly to the Fund any of such records
upon the Fund's request. The Advisor further agrees to preserve for the
periods prescribed by Rule 31a-2 under the 1940 Act the records
required to be maintained by it pursuant to Rule 31a-1 under the 1940
Act that are not maintained by others on behalf of the Fund.
6. Expenses. During the term of this Agreement, the Advisor will pay all
expenses incurred by it in connection with its investment advisory
services pertaining to the Fund. The Advisor will pay, out of the
Advisor's resources, the entire cost of the promotion and sale of Trust
shares, including the preparation of the prospectus and other
documents. The Advisor will provide other information and services,
other than services of outside counsel or independent accountants or
investment advisory services to be provided by any Adviser under an
Advisory Agreement, required in connection with the preparation of all
registration statements and Prospectuses, Prospectus supplements, SAIs,
all annual, semiannual, and periodic reports to shareholders of the
Trust, regulatory authorities, or others, and all notices and proxy
solicitation materials, furnished to shareholders of the Trust or
regulatory authorities, and all tax returns.
Notwithstanding the foregoing, the Fund shall pay the expenses and
costs of the following:
(a) Taxes, interest charges and extraordinary expenses;
(b) Brokerage fees and commissions with regard to portfolio
transactions of the Fund;
(c) Fees and expenses of the custodian of the Fund's portfolio
securities;
(d) Fees and expenses of the Fund's administrator, transfer and
dividend disbursing agent and the Fund's fund accounting agent
or, if the Fund performs any such services without an agent, the
costs of the same;
(e) Auditing and legal expenses;
(f) Cost of maintenance of the Fund's existence as a legal entity;
(g) Compensation of trustees who are not interested persons of the
Advisor as law defines that term;
(h) Costs of Trust meetings;
(i) Federal and State registration or qualification fees and
expenses;
(j) Costs of setting in type, printing and mailing Prospectuses,
reports and notices to existing shareholders;
<PAGE>
(k) The investment advisory fee payable to the Advisor, as provided
in paragraph 7 herein; and
(l) Plan of Distribution expenses, but only in accordance with the
Plan of Distribution as approved by the shareholders of the
Fund.
7. Compensation. The Trust will pay the Advisor and the Advisor will
accept as full compensation an investment advisory fee, based upon the
daily average net assets of each Fund, computed at the end of each
month and payable within five (5) business days thereafter, based upon
the schedules attached hereto.
8.(a) Limitation of Liability. The Advisor shall not be liable for any error
of judgment, mistake of law or for any other loss whatsoever suffered
by the Fund in connection with the performance of this 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 reckless disregard by
it of its obligations and duties under this Agreement.
8.(b) Indemnification of Advisor. Subject to the limitations set forth in
this Subsection 8(b), the Fund shall indemnify, defend and hold
harmless (from the assets of the Trust or Trusts 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 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 Fund 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), may be paid from
time to time by the Fund or Trust 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 if it is ultimately determined that indemnification
of such expenses is not authorized under this Subsection 8(b) and if
(i) the Advisor shall have provided security for such undertaking, (ii)
the Fund 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.
<PAGE>
As to any matter disposed of by a compromise payment by the Advisor
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 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 interest of
the Fund or to have been liable to the Fund 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 Advisor 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 Fund, and other persons may be entitled by contract or
otherwise under law, nor the power of the Fund 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 Fund hereunder to pay the
indemnification required by this Subsection 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.
8.(c) The provisions contained in Section 8 shall survive the expiration or
other termination of this Agreement, shall be deemed to include and
protect the Advisor and its directors, officers, employees and agents
and shall inure to the benefit of its/their respective successors,
assigns and personal representatives.
9. Duration and Termination. This Agreement shall become effective upon
the date the registration statement of the Trust containing the Fund's
Prospectus is declared effective by the Securities and Exchange
Commission and, unless sooner terminated as provided herein, shall
continue in effect for two years. Thereafter, this Agreement shall be
renewable for successive periods of one year each, provided such
continuance is specifically approved annually:
(a) By the vote of a majority of those members of the Board of
Trustees who are not parties to this Agreement or interested
persons of any such party (as that term is defined in the 1940
Act), cast in person at a meeting called for the purpose of
voting on such approval; and
(b) By vote of either the Board of Trustees or a majority (as that
term is defined in the 1940 Act) of the outstanding voting
securities of the Fund.
Notwithstanding the foregoing, this Agreement may be terminated by the
Fund or by the Advisor at any time on sixty (60) days' written notice,
without the payment of any penalty, provided that termination by the
Fund must be authorized either by vote of the Board of Trustees or by
vote of a majority of the outstanding voting securities of the Fund.
This Agreement will automatically terminate in the event of its
assignment (as that term is defined in the 1940 Act).
<PAGE>
10. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by a written
instrument signed by the party against which enforcement of the change,
waiver, discharge or termination is sought. No material amendment of
this Agreement shall be effective until approved by vote of the holders
of a majority of the Fund's outstanding voting securities (as defined
in the 1940 Act).
11. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect. If
any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby. This Agreement shall be
binding and shall inure to the benefit of the parties hereto and their
respective successors.
12. Applicable Law. This Agreement shall be construed in accordance with,
and governed by, the laws of the Commonwealth of North Carolina.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
ATTEST: CAPITAL MANAGEMENT INVESTMENT TRUST
By: ____________________________ By: __________________________
Title: _________________________ Title: _______________________
ATTEST: CAPITAL MANAGEMENT ASSOCIATES, INC.
By: ____________________________ By: __________________________
Title: _________________________ Title: _______________________
<PAGE>
SCHEDULE A
INVESTMENT ADVISOR'S COMPENSATION SCHEDULE
For the services delineated in the INVESTMENT ADVISORY AGREEMENT and rendered to
the CAPITAL MANAGEMENT MID-CAP FUND, the Advisor shall be compensated monthly,
as of the last day of each month, within five business days of the month end, a
fee based upon the daily average net assets of the Fund according to the
following schedule.
Annual
Net Assets Fee
---------- ------
On the first $100 million 1.00%
On the next $150 million .90%
On the next $250 million .85%
On all assets over $500 million .80%
<PAGE>
SCHEDULE B
INVESTMENT ADVISOR'S COMPENSATION SCHEDULE
For the services delineated in the INVESTMENT ADVISORY AGREEMENT and rendered to
the CAPITAL MANAGEMENT SMALL-CAP FUND, the Advisor shall be compensated monthly,
as of the last day of each month, within five business days of the month end, a
fee based upon the daily average net assets of the Fund according to the
following schedule.
Annual
Net Assets Fee
---------- ------
On the first $100 million 1.00%
On the next $150 million .90%
On the next $250 million .85%
On all assets over $500 million .80%
<PAGE>
SCHEDULE C
INVESTMENT ADVISOR'S COMPENSATION SCHEDULE
For the services delineated in the INVESTMENT ADVISORY AGREEMENT and rendered to
the CAPITAL MANAGEMENT ENERGY FUND, the Advisor shall be compensated monthly, as
of the last day of each month, within five business days of the month end, a fee
based upon the daily average net assets of the Fund according to the following
schedule.
Annual
Net Assets Fee
---------- ------
On the first $100 million 1.00%
On the next $150 million .90%
On the next $250 million .85%
On all assets over $500 million .80%
Exhibit (e)(1): Distribution Agreement
--------------
DISTRIBUTION AGREEMENT
AGREEMENT entered into as of the date the registration statement of the Capital
Management Equity Fund of Capital Management Investment Trust becomes effective
with the Securities and Exchange Commission, by and between Capital Management
Investment Trust, an unincorporated business trust organized under the laws of
The Commonwealth of Massachusetts (the "Trust"), and Shields & Company, Inc., a
New York corporation ("Distributor").
WITNESSETH:
WHEREAS, the Trust is engaged in business as an open-end management investment
company and is so registered under the Investment Company Act of 1940, as
amended (the "1940 Act") ; and
WHEREAS, the Trust is authorized to issue an unlimited number of shares of
beneficial interest, par value $0 per share, in separate series representing the
interests in separate funds of securities and other assets; and
WHEREAS, the Trust intends to offer a series of shares (the "Shares")
representing interests in the Capital Management Equity Fund (the "Fund") of
the Trust and is registering the Shares under the Securities Act of 1933, as
amended (the "1933 Act"), pursuant to a registration statement on Form N-1A (the
"Registration Statement"), including a prospectus (the "Prospectus") and a
statement of additional information (the "Statement of Additional Information");
and
WHEREAS, the Trust has adopted a Distribution Plan pursuant to Rule 12b-1 under
the 1940 Act (the "Distribution Plan") and may enter into related agreements
providing for the distribution of Shares of the Fund; and
WHEREAS, Distributor has agreed to act as distributor of the shares of the Fund
for the period of this Agreement;
NOW, THEREFORE, it is hereby agreed between the parties hereto as follows:
1. Appointment of Distributor.
(a) The Trust hereby appoints Distributor its exclusive agent for the
distribution of the Shares of the Fund in jurisdictions wherein such Shares may
be legally offered for sale; provided, however, that the Trust in its absolute
discretion may issue Shares of the Fund in connection with (i) the payment or
reinvestment of dividends or distributions, (ii) any merger or consolidation of
the Trust or of the Fund with any other investment company or trust or any
personal holding company, or the acquisition of the assets of any such entity or
another fund of the Trust; or (iii) any offer of exchange permitted by Section
11 of the 1940 Act.
(b) Distributor hereby accepts such appointment as exclusive agent for
the distribution of the Shares of the Fund and agrees that it will sell the
Shares as agent for the Trust at prices determined as hereinafter provided and
on the terms hereinafter set forth, all according to applicable federal and
state laws and regulations and to the Agreement and Declaration of Trust of the
Trust.
<PAGE>
(c) Distributor may sell Shares of the Fund to or through qualified
dealers or others. Distributor will require each dealer to conform to the
provisions hereof, the Registration Statement and the Prospectus and Statement
of Additional Information, and applicable law; and neither Distributor nor any
such dealers shall withhold the placing of purchase orders for Shares so as to
make a profit thereby.
(d) Distributor shall order Shares of the Fund from the Trust only to
the extent that it shall have received purchase orders therefor. Distributor
will not make, or authorize any dealers or others to make: (i) any short sales
of Shares; or (ii) any sales of Shares to any Trustee or officer of the Trust or
to any officer or director of Distributor or of any corporation or association
furnishing investment advisory, managerial or supervisory services to the Trust,
or to any such corporation or association, unless such sales are made in
accordance with the then current Prospectus and Statement of Additional
Information.
(e) Distributor is not authorized by the Trust to give any information
or make any representations regarding the Shares of the Fund, except such
information or representations as are contained in the Registration Statement or
in the current Prospectus or Statement of Additional Information of the Fund, or
in sales literature prepared by or on behalf of the Trust for Distributor's use.
(f) Notwithstanding any provision hereof, the Trust may terminate,
suspend or withdraw the offering of Shares of the Fund whenever, in its sole
discretion, it deems such action to be desirable.
2. Offering Price of Shares. All Fund Shares sold under this Agreement
shall be sold at the public offering price per Share in effect at the time of
the sale, as described in the then current Prospectus of the Fund; provided,
however, that any public offering price for the Shares shall be the net asset
value per Share. Distributor shall be entitled to commissions and other fees and
payments under the Distribution Plan. At no time shall the Trust receive less
than the full net asset value of the Shares, determined in the manner set forth
in the then current Prospectus and Statement of Additional Information.
3. Furnishing of Information. The Trust shall furnish to Distributor
copies of any information, financial statements and other documents that
Distributor may reasonably request for use in connection with the sale of shares
of the Fund under this Agreement. The Trust shall also make available a
sufficient number of copies of the Fund's current Prospectus and Statement of
Additional Information for use by the Distributor.
<PAGE>
4. Expenses.
(a) The Trust will pay or cause to be paid the following expenses: (i)
preparation, printing and distribution to shareholders of the Prospectus and
Statement of Additional Information; (ii) preparation, printing and distribution
of reports and other communications to shareholders; (iii) registration of the
Shares under the federal securities laws; (iv) qualification of the Shares for
sale in certain states; (v) qualification of the Trust as a dealer or broker
under state law as well as qualification of the Trust as an entity authorized to
do business in certain states; (vi) maintaining facilities for the issue and
transfer of Shares; (vii) supplying information, prices and other data to be
furnished by the Trust under this Agreement; and (viii) certain taxes applicable
to the sale or delivery of the Shares or certificates therefor.
(b) Except to the extent such expenses are borne by the Trust pursuant
to the Distribution Plan, Distributor will pay or cause to be paid the following
expenses: (i) payments to sales representatives of the Distributor and to
securities dealers and others in respect of the sale of Shares of the Fund; (ii)
payment of compensation to and expenses of employees of the Distributor and any
of its affiliates to the extent they engage in or support distribution of Fund
Shares or render shareholder support services not otherwise provided by the
Trust's transfer agent, including, but not limited to, office space and
equipment, telephone facilities and expenses, answering routine inquiries
regarding the Fund, processing shareholder transactions, and providing such
other shareholder services as the Trust may reasonably request; (iii)
formulation and implementation of marketing and promotional activities,
including, but not limited to, direct mail promotions and television, radio,
newspaper, magazine and other mass media advertising; (iv) preparation, printing
and distribution of sales literature and of Prospectuses and Statements of
Additional Information and reports of the Trust for recipients other than
existing shareholders of the Fund; and (v) obtaining such information, analyses
and reports with respect to marketing and promotional activities as the Trust
may, from time to time, reasonably request.
(c) Distributor in connection with the Distribution Plan shall prepare
and deliver reports to the Trustees of the Trust on a regular basis, at least
quarterly, showing the expenditures with respect to the Fund pursuant to the
Distribution Plan and the purposes therefor, as well as any supplemental reports
as the Trustees of the Trust, from time to time, may reasonably request.
5. Repurchase of Shares. Distributor as agent and for the account of
the Trust may repurchase Shares of the Fund offered for resale to it and redeem
such Shares at their net asset value.
6. Indemnification by the Trust. In absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of obligations or duties hereunder
on the part of Distributor, the Trust agrees to indemnify Distributor and its
officers and partners against any and all claims, demands, liabilities and
expenses that 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 Fund prepared for use under Rule 482 under the 1933 Act) or
statement of additional information of the Fund, 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.
<PAGE>
7. Indemnification by Distributor. Distributor agrees to indemnify the
Trust and its officers and Trustees against any and all claims, demands,
liabilities and expenses which the Trust may incur under the 1933 Act, or common
law or otherwise, arising out of or based upon (i) any alleged untrue statement
of a material fact contained in any registration statement or prospectus or
statement of additional information of the Fund, or any omission to state a
material fact therein if 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; (ii) any act or deed of Distributor or
its sales representatives which has not been authorized by the Trust in any
prospectus or statement of additional information of the Fund or by this
Agreement ; or (iii) any alleged untrue statement of a material fact contained
in any prospectus of the Fund prepared for use under Rule 482 under the 1933
Act, or any omission to state a material fact therein.
8. Term and Termination.
(a) This Agreement shall become effective upon the date the
registration statement of the Trust containing the Fund's Prospectus is declared
effective by the Securities and Exchange Commission and, unless sooner
terminated as provided herein, shall continue in effect for two years thereafter
and shall continue in full force and effect for successive periods of one year
thereafter, but only so long as each such continuance is approved (i) by either
the Trustees of the Trust or by vote of a majority of the outstanding voting
securities (as defined in the 1940 Act) of the Fund and, in either event, (ii)
by vote of a majority of the Trustees of the Trust who are not parties to this
Agreement or interested persons (as defined in the 1940 Act) of any such party
and who have no direct or indirect financial interest in this Agreement or in
the operation of the Distribution Plan or in any agreement related thereto
("Independent Trustees"), cast at a meeting called for the purpose of voting on
such approval.
(b) This Agreement may be terminated at any time without the payment of
any penalty by vote of the Trustees of the Trust or a majority of the
Independent Trustees or by vote of a majority of the outstanding voting
securities (as defined in the 1940 Act) of the Fund or by Distributor, on sixty
days' written notice to the other party.
(c) This Agreement shall automatically terminate in the event of its
assignment (as defined in the 1940 Act).
9. Limitation of Liability. It is expressly agreed that the obligations
of the Trust hereunder shall not be binding upon any of the Trustees, officers
or shareholders of the Trust personally, but shall bind only the assets and
property of the Trust. The term "Capital Management Investment Trust" means and
refers to the Trustees from time to time serving under the Agreement and
Declaration of Trust of the Trust dated October 8, 1990, a copy of which is on
file with the Secretary of The Commonwealth of Massachusetts. The execution and
delivery of this Agreement has been authorized by the Trustees, and this
Agreement has been signed on behalf of the Trust by an authorized officer of the
Trust, acting as such and not individually, and neither such authorization by
such Trustees nor such execution and delivery by such officer shall be deemed to
have been made by any of them individually or to impose any liability on any of
them personally, but shall bind only the assets and property of the Trust as
provided in the Agreement and Declaration of Trust.
<PAGE>
IN WITNESS THEREOF, the parties hereto have caused this Agreement to be executed
as of the date first written above.
CAPITAL MANAGEMENT INVESTMENT TRUST
Attest: /s/ C. Lennis Koontz, II
__________________________
By: /s/ J.V. Shields, Jr.
_____________________________
SHIELDS & COMPANY
Attest: /s/ C. Lennis Koontz, II
__________________________
By: /s/ David V. Shields
_____________________________
Exhibit (e)(2): Form of Amended and Restated Distribution Agreement
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AMENDED AND RESTATED
DISTRIBUTION AGREEMENT
This AGREEMENT, dated as of _____________, 199__, is by and between CAPITAL
MANAGEMENT INVESTMENT TRUST, an unincorporated business trust organized under
the laws of The Commonwealth of Massachusetts (the "Trust"), and SHIELDS & CO.,
a New York corporation ("Distributor").
WITNESSETH:
WHEREAS, the Trust is engaged in business as an open-end management investment
company and is so registered under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, the Trust is authorized to issue an unlimited number of shares of
beneficial interest ("Shares") representing interests in separate series of
securities and other assets, as identified in Appendix A (each a "Fund"); and
WHEREAS, the Trust offers the Shares of such Funds and has registered the Shares
under the Securities Act of 1933, as amended (the "1933 Act"), pursuant to a
registration statement on Form N-1A (the "Registration Statement"), including a
prospectus (the "Prospectus") and a statement of additional information (the
"Statement of Additional Information"); and
WHEREAS, the Trust has adopted a Plan of Distribution Pursuant to Rule 12b-1
under the 1940 Act (the "Distribution Plan") with respect to Shares of certain
of the Funds, and may enter into related agreements providing for the
distribution of such Shares; and
WHEREAS, Distributor has agreed to act as distributor of the Shares of the Funds
for the period of this Agreement;
NOW, THEREFORE, it is hereby agreed between the parties hereto as follows:
1. Appointment of Distributor.
(a) The Trust hereby appoints Distributor its exclusive agent for the
distribution of the Shares of each Fund in jurisdictions wherein such
Shares may be legally offered for sale; provided, however, that the
Trust in its absolute discretion may issue Shares of each Fund in
connection with (i) the payment or reinvestment of dividends or
distributions; (ii) any merger or consolidation of the Trust or of a
Fund with any other investment company or trust or any personal holding
company, or the acquisition of the assets of any such entity or another
fund of the Trust; or (iii) any offer of exchange permitted by Section
11 of the 1940 Act, or any other applicable provision.
(b) Distributor hereby accepts such appointment as exclusive agent for
the distribution of the Shares of each Fund and agrees that it will
sell the Shares as agent for the Trust at prices determined as
hereinafter provided and on the terms hereinafter set forth, all
according to applicable federal and state laws and regulations and to
the Agreement and Declaration of Trust of the Trust.
(c) Distributor may sell Shares of each Fund to or through qualified
securities dealers or others. Distributor will require each dealer or
other such party to conform to the provisions hereof, the Registration
Statement and the Prospectus and Statement of Additional Information,
and applicable law; and neither Distributor nor any such dealers or
others shall withhold the placing of purchase orders for Shares so as
to make a profit thereby.
<PAGE>
(d) Distributor shall order Shares of each Fund from the Trust only to
the extent that it shall have received purchase orders therefor.
Distributor will not make, or authorize any dealers or others to make:
(i) any short sales of Shares; or (ii) any sales of Shares to any
Trustee or officer of the Trust or to any officer or director of
Distributor or of any corporation or association furnishing investment
advisory, managerial or supervisory services to the Trust, or to any
such corporation or association, unless such sales are made in
accordance with the then current Prospectus and Statement of Additional
Information.
(e) Distributor is not authorized by the Trust to give any information
or make any representations regarding the Shares of any Fund, except
such information or representations as are contained in the
Registration Statement or in the current Prospectus or Statement of
Additional Information of each Fund, or in advertisements and sales
literature prepared by or on behalf of the Trust for Distributor's use.
(f) Notwithstanding any provision hereof, the Trust may terminate,
suspend or withdraw the offering of Shares of any Fund whenever, in its
sole discretion, it deems such action to be desirable.
2. Offering Price of Shares. All Funds Shares sold under this Agreement
shall be sold at the public offering price per Share in effect at the
time of the sale, as described in the then current Prospectus of each
Fund. The excess, if any, of the public offering price over the net
asset value of the Shares sold by Distributor as agent shall be
retained by Distributor as a commission for its services hereunder. Out
of such commission Distributor may allow commissions or concessions to
dealers and may allow them to others in its discretion in such amounts
as Distributor shall determine from time to time. Except as may be
otherwise determined by Distributor from time to time, such commissions
or concessions shall be uniform to all dealers. At no time shall the
Trust receive less than the full net asset value of the Shares,
determined in the manner set forth in the then current Prospectus and
Statement of Additional Information. Distributor shall also be entitled
to such commissions and other fees and payments as may be authorized by
the Trustees of the Trust from time to time under the Distribution
Plan.
3. Furnishing of Information. The Trust shall furnish to Distributor
copies of any information, financial statements and other documents
that Distributor may reasonably request for use in connection with the
sale of Shares of each Fund under this Agreement. The Trust shall also
make available a sufficient number of copies of each Fund's current
Prospectus and Statement of Additional Information for use by the
Distributor.
4. Expenses.
(a) The Trust will pay or cause to be paid the following expenses: (i)
preparation, printing and distribution to shareholders of the
Prospectus and Statement of Additional Information; (ii) preparation,
printing and distribution of reports and other communications to
shareholders; (iii) registration of the Shares under the federal
securities laws; (iv) qualification of the Shares for sale in certain
states; (v) qualification of the Trust as a dealer or broker under
state law as well as qualification of the Trust as an entity authorized
to do business in certain states; (vi) maintaining facilities for the
issue and transfer of Shares; (vii) supplying information, prices and
other data to be furnished by the Trust under this Agreement; and
(viii) certain taxes applicable to the sale or delivery of the Shares
or certificates therefor.
<PAGE>
(b) Except to the extent such expenses are borne by the Trust pursuant
to the Distribution Plan, Distributor will pay or cause to be paid the
following expenses: (i) payments to sales representatives of the
Distributor and to securities dealers and others in respect of the sale
of Shares of each Fund; (ii) payment of compensation to and expenses of
employees of the Distributor and any of its affiliates to the extent
they engage in or support distribution of Funds Shares or render
shareholder support services not otherwise provided by the Trust's
transfer agent, administrator, or custodian, including, but not limited
to, answering routine inquiries regarding a Fund, processing
shareholder transactions, and providing such other shareholder services
as the Trust may reasonably request; (iii) formulation and
implementation of marketing and promotional activities, including, but
not limited to, direct mail promotions and television, radio,
newspaper, magazine and other mass media advertising; (iv) preparation,
printing and distribution of sales literature and of Prospectuses and
Statements of Additional Information and reports of the Trust for
recipients other than existing shareholders of a Fund; and (v)
obtaining such information, analyses and reports with respect to
marketing and promotional activities as the Trust may, from time to
time, reasonably request.
(c) Distributor in connection with the Distribution Plan shall prepare
and deliver reports to the Trustees of the Trust on a regular basis, at
least quarterly, showing the expenditures with respect to each Fund
pursuant to the Distribution Plan and the purposes therefor, as well as
any supplemental reports as the Trustees of the Trust, from time to
time, may reasonably request.
5. Repurchase of Shares. Distributor as agent and for the account of
the Trust may repurchase Shares of each Fund offered for resale to it
and redeem such Shares at their net asset value.
6. Indemnification by the Trust. In absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of obligations or duties
hereunder on the part of Distributor, the Trust agrees to indemnify
Distributor and its officers and partners against any and all claims,
demands, liabilities and expenses that 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 the
Registration Statement or any Prospectus or Statement of Additional
Information of a Fund, or in any advertisements or sales literature
prepared by or on behalf of the Trust for Distributor's use, 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.
7. Indemnification by Distributor. Distributor agrees to indemnify the
Trust and its officers and Trustees against any and all claims,
demands, liabilities and expenses which the Trust may incur under the
1933 Act, or common law or otherwise, arising out of or based upon (i)
any alleged untrue statement of a material fact contained in the
Registration Statement or any Prospectus or Statement of Additional
Information of any Fund, or in any advertisements or sales literature
prepared by or on behalf of the Trust for Distributor's use, or any
omission to state a material fact therein, the omission of which makes
any statement contained therein misleading, if 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; or (ii) any act or deed of Distributor or its sales
representatives, or securities dealers and others authorized to sell
Funds Shares hereunder, or their sales representatives, that has not
been authorized by the Trust in any Prospectus or Statement of
Additional Information of any Fund or by this Agreement.
<PAGE>
8. Term and Termination.
(a) This Agreement shall become effective on the date indicated above.
Unless terminated as provided in this paragraph, this Agreement shall
continue in effect for one year from its effective date and shall
continue in full force and effect for successive periods of one year
thereafter, but only so long as each such continuance is approved (i)
by either the Trustees of the Trust or by vote of a majority of the
outstanding voting securities (as defined in the 1940 Act) of each Fund
and, in either event, (ii) by vote of a majority of the Trustees of the
Trust who are not parties to this Agreement or interested persons (as
defined in the 1940 Act) of any such party and who have no direct or
indirect financial interest in this Agreement or in the operation of
the Distribution Plan or in any agreement related thereto ("Independent
Trustees"), cast at a meeting called for the purpose of voting on such
approval.
(b) This Agreement may be terminated at any time without the payment of
any penalty by vote of the Trustees of the Trust or a majority of the
Independent Trustees or by vote of a majority of the outstanding voting
securities (as defined in the 1940 Act) of each Fund or by Distributor,
on sixty days' written notice to the other party.
(c) This Agreement shall automatically terminate in the event of its
assignment (as defined in the 1940 Act).
9. Limitation of Liability. The obligations of the Trust hereunder
shall not be binding upon any of the Trustees, officers or shareholders
of the Trust personally, but shall bind only the assets and property of
the Trust. The term "Capital Management Investment Trust" means and
refers to the Trustees from time to time serving under the Agreement
and Declaration of Trust of the Trust, a copy of which is on file with
the Secretary of the Commonwealth of Massachusetts. The execution and
delivery of this Agreement has been authorized by the Trustees, and
this Agreement has been signed on behalf of the Trust by an authorized
officer of the Trust, acting as such and not individually, and neither
such authorization by such Trustees nor such execution and delivery by
such officer shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally, but
shall bind only the assets and property of the Trust as provided in the
Agreement and Declaration of Trust.
IN WITNESS THEREOF, the parties hereto have caused this Agreement to be executed
as of the date first written above.
CAPITAL MANAGEMENT INVESTMENT TRUST
Attest: ____________________________
By:________________________________
SHIELDS & CO.
Attest: ____________________________
By:________________________________
<PAGE>
APPENDIX A
___________________, 199__
The Amended and Restated Distribution Agreement between Capital Management
Investment Trust (the "Trust") and Shields & Co. applies to the following series
of the Trust:
o Capital Management Mid-Cap Fund
o Capital Management Small-Cap Fund
o Capital Management Energy Fund
Exhibit (g): Custodian Agreement
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CUSTODY AGREEMENT
(Mutual Funds)
THIS AGREEMENT is made as of January 30, 1997, 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.
<PAGE>
"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:
<PAGE>
(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.
<PAGE>
(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;
<PAGE>
(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.
<PAGE>
(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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
(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.
<PAGE>
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.
<PAGE>
(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
/s/ Mark L. Futulia
____________________________
By: /s/ Michael L. Biscardi
___________________________________
Title: General Vice President
________________________________
Attest: CAPITAL MANAGEMENT INVESTMENT TRUST
/s/ C. Frank Watson, III
_____________________________
By: /s/ J. Hope Reese
___________________________________
Title: Treasurer
________________________________
Exhibit (h)(1): Fund Accounting, Dividend Disbursing & Transfer Agent,
-------------- and Administration Agreement
FUND ACCOUNTING,
DIVIDEND DISBURSING & TRANSFER AGENT,
AND ADMINISTRATION AGREEMENT
THIS AGREEMENT, made and entered into as of the date the registration statement
of the Capital Management Equity Fund of the Capital Management Investment Trust
becomes effective with the Securities and Exchange Commission, by and between
CAPITAL MANAGEMENT INVESTMENT TRUST, a Massachusetts business trust (the
"Trust"), and THE NOTTINGHAM COMPANY, INC., a North Carolina corporation (the
"Administrator").
WHEREAS, the Trust is an open-end management investment company of the series
type which is registered under the Investment Company Act of 1940 (the "1940
Act"); and
WHEREAS, the Administrator is in the business of providing administrative
services to investment companies.
NOW THEREFORE, the Trust and the Administrator do mutually promise and agree as
follows:
1. Employment. The Trust hereby employs Administrator to act as fund accountant,
dividend disbursing and transfer agent and fund administrator for each Fund of
the Trust, unless the Administrator and an individual Fund of the Trust
determine it is in the best interests of that individual Fund to negotiate a
separate Schedule of Compensation under Exhibit C. Administrator, at its own
expense, shall render the services and assume the obligations herein set forth
subject to being compensated therefore as herein provided.
2. Delivery of Documents. The Trust has furnished the Administrator with copies
properly certified or authenticated of each of the following:
(a) The Trust's Declaration of Trust, as filed with the State of
Massachusetts (such Declaration, as presently in effect and as
it shall from time to time be amended, is herein called the
"Declaration");
(b) The Trust's By-Laws (such By-Laws, as presently in effect and
as they shall from time to time be amended, are herein called
the "By-Laws");
(c) Resolutions of the Trust's Board of Trustees authorizing the
appointment of the Administrator and approving this Agreement;
and
(d) The Trust's Registration Statement on Form N-1A under the 1940
Act and under the Securities Act of 1933 as amended, (the
"1933 Act"), including all exhibits, relating to shares of
beneficial interest of, and containing the Prospectus of, each
Fund of the Trust (herein called the "Shares") as filed with
the Securities and Exchange Commission and all amendments
thereto.
The Trust will furnish the Administrator with copies, properly certified or
authenticated, of all amendments of or supplements to the foregoing.
3. Duties of the Administrator. Subject to the policies and direction of the
Trust's Board of Trustees, the Administrator will provide a continuous executive
management program and day to day supervision for each of the Trust's Funds.
Services to be provided shall be in accordance with the Trust's organizational
and registration documents as listed in paragraph 2 hereof and with the
Prospectus of each Fund of the Trust. The Administrator further agrees that it:
(a) Will conform with all applicable Rules and Regulations of the
Securities and Exchange Commission and will, in addition,
conduct its activities under this Agreement in accordance with
regulations of any other Federal and State agencies which may
now or in the future have jurisdiction over its activities;
(b) Will maintain, except as may be required to be maintained by
third parties hired by the Trust under Rule 31a-3 of the 1940
Act, the account books and records of the Trust and each Fund
of the Trust as required by Rule 31a-1 of the 1940 Act and
will preserve such records in accordance with Rule 31a-2 of
the 1940 Act;
<PAGE>
(c) Will provide, at its expense the necessary non-executive
personnel and data processing equipment and software to
perform the Portfolio Accounting Services, Expense Accrual and
Payment Services, Fund Valuation and Financial Reporting
Services, Tax Accounting Services, Compliance Control Services
Registration Services, SEC Filing Services, Drafting of Board
of Trustee Meeting Minutes, and Proxy Material Services shown
on Exhibit A hereof;
(d) Will provide, at its expense the non-executive personnel and
data processing equipment and software necessary to perform
the Shareholder Servicing functions shown on Exhibit B hereof;
(e) Will provide, at its expense, certain executive personnel for
the Trust as may be agreed upon from time to time with the
Board of Trustees; and
(f) Will provide all office space and general office equipment
necessary for the activities of the Trust except as may be
provided by third parties pursuant to separate agreements with
the Trust.
Notwithstanding anything contained in this Agreement to the contrary, the
Administrator (including its directors, officers, employees and agents) shall
not be required to perform any of the duties of, assume any of the obligations
or expenses of, or be liable for any of the acts or omissions of, any investment
advisor of a Fund of the Trust or other third party subject to separate
agreements with the Trust. The Administrator shall not be responsible hereunder
for the administration of the Code of Ethics of the Trust which shall be under
the responsibility of the investment advisors, except insofar as the Code of
Ethics applies to the personnel of the Administrator. It is the express intent
of the parties hereto that the Administrator shall not have control over or be
responsible for the placement (except as specifically directed by a Shareholder
of the Trust), investment or reinvestment of the assets of any Fund of the
Trust. The Administrator may from time to time, subject to the approval of the
Trustees, obtain at its own expense the services of consultants or other third
parties to perform part or all of its duties hereunder, and such parties may be
affiliates of the Administrator.
4. Services Not Exclusive. The management and administrative services furnished
by the Administrator hereunder are not to be deemed exclusive, and the
Administrator shall be free to furnish similar services to others so long as its
services under this Agreement are not impaired thereby.
5. Books and Records. In compliance with the requirements of Rule 31a-3 under
the 1940 Act, the Administrator hereby agrees that all records which it
maintains for the Trust are the property of the Trust and further agrees to
surrender promptly to the Trust any of such records upon the Trust's request.
6. Expenses. During the term of this Agreement, the Administrator will pay all
expenses incurred by it in connection with the performance of its obligations
under this Agreement.
Notwithstanding the foregoing, the Trust shall pay the expenses and costs of the
following:
(a) Taxes;
(b) Brokerage fees and commissions with regard to portfolio
transaction of the Funds;
(c) Interest charges, fees and expenses of the custodian of the
Funds' portfolio securities;
(d) Fees and expenses of the Trust's dividend disbursing and
transfer agent, fund accounting agent and administrator, in
accordance with paragraph 7 herein;
(e) Costs, as may be allocable to and agreed upon in advance by
the Trustees and the Administrator, of all non-executive and
clerical personnel and all data processing equipment and
software in connection with the provision of fund accounting
and recordkeeping services and shareholder servicing functions
as contemplated herein;
(f) Auditing and legal expenses of the Trust;
(g) Cost of maintenance of the Trust's existence as a legal
entity;
(h) Cost of special forms, stationery and telephone services (but
not telephone equipment) for the Trust;
(i) Compensation of Independent Trustees who are not interested
persons of the Trust as that term is defined by law;
(j) Costs of Trust meetings;
(k) Federal and State registration fees and expenses;
<PAGE>
(l) Costs of setting in type, printing and mailing Prospectuses,
reports and notices to existing shareholders;
(m) The Advisory fees payable to each Funds' Investment Advisor;
(o) Direct out-of-pocket costs in connection with Trust
activities, such as the costs of long distance telephone and
wire charges, postage and the printing of special forms and
stationery, copying charges, financial publications used in
connection with Trust activities, etc., and
(p) Other actual out-of-pocket expenses of the Administrator as
may be agreed upon in writing from time to time by the
Administrator and the Trustees.
7. Compensation. For the services provided and the expenses assumed by the
Administrator pursuant to this Agreement, the Trust will pay the Administrator
and the Administrator will accept as full compensation the administrative fees
and expenses as set forth on Exhibit C attached hereto. Special projects, not
included herein and requested in writing by the Trustees, shall be completed by
the Administrator and invoiced to the Trust as mutually agreed upon.
8.(a) Limitation of Liability. The Administrator shall not be liable for any
loss, damage or liability related to or resulting from the placement (except as
specifically directed by a Shareholder of the Trust), investment or reinvestment
of assets in any Fund of the Trust or the acts or omissions of any Fund's
investment advisor or any other third party subject to separate agreements with
the Trust. Further, the Administrator shall not be liable for any error of
judgment or mistake of law or for any loss or damage suffered by the Trust in
connection with the performance of this Agreement or any agreement with a third
party, except a loss resulting directly from (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.
8.(b) 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.
<PAGE>
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.
8.(c) The provisions contained in Section 8 shall survive the expiration or
other termination of this Agreement, shall be deemed to include and protect the
Administrator and its directors, officers, employees and agents and shall inure
to the benefit of its/their respective successors, assigns and personal
representatives.
9. Duration and Termination. This Agreement shall become effective as of the
date of the registration statement of the Trust containing the Fund's Prospectus
is declared effective by the Securities and Exchange Commission, and shall
continue in force and effect for a period of two year thereafter and shall be
continued on its terms from year to year thereafter unless sooner terminated as
permitted herein. This Agreement may be terminated at any time, without payment
of any penalty, by the Trust or the Administrator upon ninety days' written
notice to the other party.
10. Amendment. This Agreement may be amended by mutual written consent of the
parties. If, at any time during the existence of this Agreement, the Trust deems
it necessary or advisable in the best interests of the Trust that any amendment
of this Agreement be made in order to comply with the recommendations or
requirements of the Securities and Exchange Commission or state regulatory
agencies or other governmental authority, or to obtain any advantage under state
or federal laws, and shall notify the Administrator of the form of Amendment
which it deems necessary or advisable and the reasons therefor, and if the
Administrator declines to assent to such amendment, the Trust may terminate this
Agreement forthwith.
11. Notice. Any notice that is required to be given by the parties to each other
under the terms of this Agreement shall be in writing, addressed or delivered,
or mailed postpaid to the other party at the principal place of business of such
party.
<PAGE>
12. Construction. This Agreement shall be governed and enforced in accordance
with the laws of the State of North Carolina. If any provision of this
Agreement, or portion thereof, shall be determined to be void or unenforceable
by any court of competent jurisdiction, then such determination shall not affect
any other provision of this Agreement, or portion thereof, all of which other
provisions and portions thereof shall remain in full force and effect. If any
provision of this Agreement, or portion thereof, is capable of two
interpretations, one of which would render the provision, or portion thereof,
void and the other of which would render the provision, or portion thereof,
valid, then the provision, or portion thereof, shall have the meaning which
renders it valid.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed
by their duly authorized officers effective as of the date indicated above.
Attest: CAPITAL MANAGEMENT INVESTMENT TRUST
/s/ C. Lennis Koontz, II By: /s/ J.V. Shields, Jr.
______________________________ ____________________________
(SEAL)
Attest: THE NOTTINGHAM COMPANY, INC.
/s/ Diane W. Hayes By: /s/ Frank P. Meadows, III
______________________________ ____________________________
(SEAL)
<PAGE>
Exhibit A
---------
FUND ACCOUNTING AND RECORDKEEPING SERVICES
Portfolio Accounting Services:
- -----------------------------
(1) Maintain portfolio records on a trade date basis using
security trade information communicated from the investment
manager on a timely basis.
(2) For each valuation date, obtain prices from a pricing source
approved by the Board of Trustees and apply those prices to
the portfolio positions. For those securities where market
quotations are not readily available, the Board of Trustees
shall approve, in good faith, the method for determining the
fair market value for such securities.
(3) Identify interest and dividend accrual balances as of each
valuation date and calculate gross earnings on investments for
the accounting period.
(4) Determine gain/loss on security sales and identify them as to
short-short, short or long term status. Account for periodic
distributions of gain to shareholders and maintain
undistributed gain or loss balances as of each valuation date.
Expense Accrual and Payment Services:
- ------------------------------------
(5) For each valuation date, calculate the expense accrual amounts
as directed by the Trust as to methodology, rate, or dollar
amount.
(6) Issue payments for Fund expenses upon receipt of funds from
the Trust's Custodian.
(7) Account for Fund expenditures and maintain expense accrual
balances at the level of accounting detail specified by the
Fund.
(8) Support periodic expense accrual review, i.e., comparison of
actual expense activity versus accrual amounts.
(9) Provide expense accrual and payment reporting.
Fund Valuation and Financial Reporting Services:
- -----------------------------------------------
(10) Account for Fund share purchases, sales, exchanges, transfers,
dividend reinvestments, and other Fund share activity, for
each of the Funds, as reported by the Trust on a timely basis.
(11) Determine net investment income (earnings) for each of the
Funds as of each valuation date. Account for periodic
distributions of earnings to shareholders and maintain
undistributed net investment income balances as of each
valuation date.
(12) Maintain a general ledger for each of the Funds in the form
defined by the Trust and produce a set of financial statements
as may be agreed upon from time to time as of each valuation
date.
(13) For each day the Funds are opened as defined in the
prospectuses, determine the net asset value of each of the
Funds according to the accounting policies and procedures set
forth in the prospectuses.
(14) Calculate per share net asset value, per share net earnings,
and other per share amounts reflective of fund operation at
such time as required by the nature and characteristics of the
Funds. Perform the calculations using the number of shares
outstanding reported by the Trust to be applicable at the time
of calculation.
(15) Communicate, at an agreed upon time, the per share price for
each valuation date to parties as agreed upon from time to
time.
(16) Prepare monthly reports which document the adequacy of
accounting detail to support month-end ledger balances.
<PAGE>
Tax Accounting Services:
- -----------------------
(17) Maintain tax accounting records for each of the Funds'
investment portfolio so as to support tax reporting required
for IRS defined regulated investment companies.
(18) Maintain tax lot detail for the investment portfolio.
(19) Calculate taxable gain/loss on security sales using the tax
cost basis defined for each Fund.
(20) Report the taxable components of income and capital gains
distributions to the Trust to support tax reporting to the
shareholders.
Compliance Control Services:
- ---------------------------
(21) Maintain accounting records to support compliance monitoring
by the Trust.
(22) Support reporting to regulatory bodies and support financial
statement preparation by making the Fund accounting records
available to the Trust, the Securities and Exchange
Commission, and the outside auditors.
(23) Maintain accounting records according to the Investment
Company Act of 1940 and regulations provided thereunder.
Registration Services:
- ---------------------
(24) Prepare all reports and filings required to maintain the
registration and qualification of the Fund and its shares
under federal and state securities laws, including the annual
amendment to its Registration Statement on From N-1A
containing an updated a Prospectus and Statement of Additional
Information.
SEC Filing Services:
- -------------------
(25) Prepare and make periodic SEC filings, including From N-SAR,
annual and semi-annual shareholder reports, other shareholder
reports, and fidelity bond amendments but not including
preparation and filing of any sales literature and preparation
of President's letter contained in shareholder reports.
Minutes, Proxy Material Services:
- --------------------------------
(26) Preparation of minutes and other records of meetings of the
Board of Trustees.
(27) Preparation of any proxy material and related shareholder
meetings and records.
<PAGE>
Exhibit B
---------
SHAREHOLDER SERVICING FUNCTIONS
(1) Process new accounts.
(2) Process purchases, both initial and subsequent in accordance
with conditions set forth in the Fund's prospectus.
(3) Transfer shares of capital stock to an existing account or to
a new account upon receipt of required documentation in good
order.
(4) Distribute dividends and/or capital gain distributions. This
includes disbursement as cash or reinvestment and to change
the disbursement option at the request of shareholders.
(5) Process exchanges between funds, (process and direct
purchase/redemption and initiate new account or process to
existing account).
(6) Make miscellaneous changes to records, including, but not
necessarily limited to, address changes and changes in plans
(such as systematic withdrawal, dividend reinvestment, etc.).
(7) Prepare and mail a year-to-date confirmation and statement as
each transaction is recorded in a shareholder account as
follows: original to shareholder. Duplicate confirmations to
be available on request within current year.
(8) Handle telephone calls and correspondence in reply to
shareholder requests except those items otherwise set forth
herein.
(9) Daily control and reconciliation of Fund shares.
(10) Prepare address labels or confirmations for four reports to
shareholders per year.
(11) Mail and tabulate proxies for one Meeting of Shareholders
annually, including preparation of certified shareholder list
and daily report to Fund management, if required.
(12) Prepare and mail annual Form 1099, Form W-2P and 5498 to
shareholders to whom dividends or distributions are paid, with
a copy for the IRS.
(13) Provide readily obtainable data which may from time to time be
requested for audit purposes.
(14) Replace lost or destroyed checks.
(15) Continuously maintain all records for active and closed
accounts according to the Investment Company Act of 1940 and
regulations provided thereunder.
(16) Furnish shareholder data information for a current calendar
year in connection with IRA and Keogh Plans in a format
suitable for mailing to shareholders.
<PAGE>
Exhibit C
---------
ADMINISTRATOR'S COMPENSATION SCHEDULE
For the services delineated in the FUND ACCOUNTING, DIVIDEND DISBURSING &
TRANSFER AGENT AND ADMINISTRATION AGREEMENT, the Administrator shall be
compensated monthly, as of the last day of each month, within five business days
of the month end, a base fee plus a fee based upon net assets according to the
following schedule. The fee is calculated based upon the average daily net
assets of each Fund:
Base Fee: $2,000 per month
--------
Equity and Balanced Funds
Annual
Net Assets Fee
---------- ------
On the first $50 million 0.20%
On the next $50 million 0.175%
On all assets over $100 million 0.15%
Fixed Income Funds
Annual
Net Assets Fee
---------- ------
On all assets 0.15%
Shareholder Fee
---------------
$9.00 per shareholder per year
Securities Pricing
------------------
$0.20 per equity per pricing day
$0.20 per corporate bond, government bond, medium-term bond
and mortgage-backed security per pricing day
$0.40 per asset backed security per pricing day priced
$2.00 per equity per month for corporate action
Blue Sky Administration
-----------------------
$100 per fund per state registration per year
Minimum fee per year
--------------------
Minimum fee of $3,000 per Fund of the Trust per month for all fees
taken in the aggregate as outlined above, analyzed monthly.
Exhibit (h)(2): Amendment to Fund Accounting, Dividend Disbursing & Transfer
-------------- Agent, and Administration Agreement
AMENDMENT TO FUND ACCOUNTING,
DIVIDEND DISBURSING & TRANSFER AGENT
AND ADMINISTRATION AGREEMENT
THIS AMENDMENT, made and entered into effective as of the 1st day of October,
1995, by and between CAPITAL MANAGEMENT INVESTMENT TRUST, a Massachusetts
business trust (the "Trust"), and THE NOTTINGHAM COMPANY, INC., a North Carolina
corporation (the "Administrator").
WHEREAS, the parties have previously entered into that certain Amended and
Restated Fund Accounting, Dividend Disbursing & Transfer Agent and
Administration Agreement dated January 26, 1995 with respect to all series of
the Trust (the "Agreement").
WHEREAS, the parties desire amend Exhibit C thereof, all as provided herein.
NOW THEREFORE, the Trust and the Administrator do mutually promise and agree as
follows:
1. Amendments. The Agreement is hereby amended by deleting
Exhibit C thereof and substituting in lieu thereof a new
Exhibit C in the form attached hereto.
2. Ratification. Except as continued and provided above, the
Agreement shall continue in full force and effect.
IN WITNESS WHEREOF, the parties have caused this Amendment to be signed by their
duly authorized officers on the date first above written.
ATTEST: CAPITAL MANAGEMENT INVESTMENT TRUST
/s/ C. Lennis Koontz, II By: /s/ D.V. Shields
_____________________________ ____________________________
(Seal)
ATTEST: THE NOTTINGHAM COMPANY, INC.
/s/ Betty R. Smith By: /s/ Frank P. Meadows, III
_____________________________ ____________________________
(Seal)
<PAGE>
Exhibit C
---------
ADMINISTRATOR'S COMPENSATION SCHEDULE
For the services delineated in the FUND ACCOUNTING, DIVIDEND DISBURSING &
TRANSFER AGENT AND ADMINISTRATION AGREEMENT, the Administrator shall be
compensated monthly, as of the last day of each month, within five business days
of the month end, a base fee plus a fee based upon net assets according to the
following schedule. The fee is calculated based upon the average daily net
assets of each Fund:
Base Fee: $2,000 per month
- --------
Class Fee: $750 per month for each additional
- ---------
Equity and Balanced Funds
Annual
Net Assets Fee
---------- ------
On the first $50 million 0.20%
On the next $50 million 0.175%
On all assets over $100 million 0.15%
Fixed Income Funds
Annual
Net Assets Fee
---------- ------
On all assets 0.15%
Blue Sky Administration
- -----------------------
$100 per fund per state registration per year
Shareholder Fee
- ---------------
$9.00 per shareholder per year
Minimum fee per year
- --------------------
Minimum fee of $3,000 per Fund of the Trust per month for all fees taken in the
aggregate as outlined above, analyzed monthly.
Securities Pricing
- ------------------
$0.20 per equity security per pricing day
$0.20 per corporate bond, government bond,medium-term bond or mortgage backed
security per pricing day
$0.40 per CMO or asset backed securities per pricing day
$0.40 per municipal security per pricing day
$2.00 per equity per month for corporate action coverage
Exhibit (h)(3): Form of Fund Accounting and Compliance Administration Agreement
--------------
FUND ACCOUNTING
AND COMPLIANCE ADMINISTRATION
AGREEMENT
THIS AGREEMENT, made and entered into as of _______________, 199__, by and
between CAPITAL MANAGEMENT INVESTMENT TRUST, a Massachusetts business trust (the
"Trust"), and THE NOTTINGHAM COMPANY, INC., a North Carolina corporation (the
"Administrator").
WHEREAS, the Trust is an open-end management investment company of the series
type which is registered under the Investment Company Act of 1940 (the "1940
Act"); and
WHEREAS, the Administrator is in the business of providing administrative
services to investment companies.
NOW THEREFORE, the Trust and the Administrator do mutually promise and agree as
follows:
1. Employment. The Trust hereby employs Administrator to act as fund
accountant and fund administrator for each series of the Trust (each a
"Fund"). Administrator, at its own expense, shall render the services
and assume the obligations herein set forth subject to being
compensated therefore as herein provided.
2. Delivery of Documents. The Trust has furnished the Administrator with
copies properly certified or authenticated of each of the following:
a) The Trust's Declaration of Trust, as filed with the State of
Massachusetts (such Declaration, as presently in effect and as
it shall from time to time be amended, is herein called the
"Declaration");
b) The Trust's By-Laws (such By-Laws, as presently in effect and
as they shall from time to time be amended, are herein called
the "By-Laws");
c) Resolutions of the Trust's Board of Trustees authorizing the
appointment of the Administrator and approving this Agreement;
and
d) The Trust's Registration Statement on Form N-1A under the 1940
Act and under the Securities Act of 1933 as amended, (the
"1933 Act"), including all exhibits, relating to shares of
beneficial interest of, and containing the Prospectus of, each
Fund of the Trust (herein called the "Shares") as filed with
the Securities and Exchange Commission and all amendments
thereto.
The Trust will furnish the Administrator with copies, properly certified or
authenticated, of all amendments of or supplements to the foregoing.
3. Duties of the Administrator. Subject to the policies and direction of
the Trust's Board of Trustees, the Administrator will provide a
continuous executive management program and day to day supervision for
each of the Trust's Funds. Services to be provided shall be in
accordance with the Trust's organizational and registration documents
as listed in paragraph 2 hereof and with the Prospectus of each Fund of
the Trust. The Administrator further agrees that it:
a) Will conform with all applicable Rules and Regulations of the
Securities and Exchange Commission and will in addition,
conduct its activities under this Agreement in accordance with
regulations of any other Federal and State agencies which may
now or in the future have jurisdiction over its activities;
b) Will maintain, except as may be required to be maintained by
third parties hired by the Trust under Rule 31a-3 of the 1940
Act, the account books and records of the Trust and each Fund
of the Trust as required by Rule 31a-1 of the 1940 Act and
will preserve such records in accordance with Rule 31a-2 of
the 1940 Act;
<PAGE>
c) Will provide, at its expense the necessary non-executive
personnel and data processing equipment and software to
perform the Portfolio Accounting Services, Expense Accrual and
Payment Services, Fund Valuation and Financial Reporting
Services, Tax Accounting Services, Compliance Control
Services, Registration Services, SEC Filing Services, and
Proxy Material Services shown on Exhibit A hereof;
d) Will provide, at its expense, certain executive personnel for
the Trust as may be agreed upon from time to time with the
Board of Trustees; and
e) Will provide all office space and general office equipment
necessary for the activities of the Trust except as may be
provided by third parties pursuant to separate agreements with
the Trust.
Notwithstanding anything contained in this Agreement to the contrary, the
Administrator (including its directors, officers, employees and agents) shall
not be required to perform any of the duties of, assume any of the obligations
or expenses of, or be liable for any of the acts or omissions of, any investment
advisor of a Fund of the Trust or other third party subject to separate
agreements with the Trust. The Administrator shall not be responsible hereunder
for the administration of the Code of Ethics of the Trust which shall be under
the responsibility of the investment advisors, except insofar as the Code of
Ethics applies to the personnel of the Administrator. It is the express intent
of the parties hereto that the Administrator shall not have control over or be
responsible for the placement, investment or reinvestment of the assets of any
Fund of the Trust. The Administrator may from time to time, subject to the
approval of the Trustees, obtain at its own expense the services of consultants
or other third parties to perform part or all of its duties hereunder, and such
parties may be affiliates of the Administrator.
4. Services Not Exclusive. The management and administrative services
furnished by the Administrator hereunder are not to be deemed
exclusive, and the Administrator shall be free to furnish similar
services to others so long as its services under this Agreement are not
impaired thereby.
5. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Administrator hereby agrees that all records
which it maintains for the Trust are the property of the Trust and
further agrees to surrender promptly to the Trust any of such records
upon the Trust's request.
6. Expenses. During the term of this Agreement, the Administrator will pay
all expenses incurred by it in connection with the performance of its
obligations under this Agreement.
Notwithstanding the foregoing, the Trust shall pay the expenses and
costs of the following:
a) Taxes;
b) Brokerage fees and commissions with regard to portfolio
transaction of the Funds;
c) Interest charges, fees and expenses of the custodian of the
Funds' portfolio securities;
d) Fees and expenses of the Trust's dividend disbursing and
transfer agent;
e) Fees and expenses of the Trust's fund accounting agent and
administrator, in accordance with paragraph 7 herein;
f) Costs, as may be allocable to and agreed upon in advance by
the Trustees and the Administrator, of all non-executive and
clerical personnel and all data processing equipment and
software in connection with the provision of fund accounting
and recordkeeping services functions as contemplated herein;
g) Auditing and legal expenses of the Trust;
h) Cost of maintenance of the Trust's existence as a legal
entity;
i) Cost of special forms, stationery and telephone services (but
not telephone equipment) for the Trust;
j) Compensation of Independent Trustees who are not interested
persons of the Trust as that term is defined by law;
k) Costs of Trust meetings;
l) Federal and State registration fees and expenses;
m) Costs of setting in type, printing and mailing Prospectuses,
reports and notices to existing shareholders;
<PAGE>
n) The Advisory fees payable to each Funds' Investment Advisor;
o) Direct out-of-pocket costs in connection with Trust
activities, such as the costs of long distance telephone and
wire charges, postage and the printing of special forms and
stationery, copying charges, financial publications used in
connection with Trust activities, etc., and
p) Other actual out-of-pocket expenses of the Administrator as
may be agreed upon in writing from time to time by the
Administrator and the Trustees.
7. Compensation. For the services provided and the expenses assumed by the
Administrator pursuant to this Agreement, the Trust will pay the
Administrator and the Administrator will accept as full compensation
the administrative fees and expenses as set forth on Exhibit B attached
hereto. Special projects, not included herein and requested in writing
by the Trustees, shall be completed by the Administrator and invoiced
to the Trust as mutually agreed upon.
8.(a) Limitation of Liability. The Administrator shall not be liable for
any loss, damage or liability related to or resulting from the
placement, investment or reinvestment of assets in any Fund of the
Trust or the acts or omissions of any Fund's investment advisor or any
other third party subject to separate agreements with the Trust.
Further, the Administrator shall not be liable for any error of
judgment or mistake of law or for any loss or damage suffered by the
Trust in connection with the performance of this Agreement or any
agreement with a third party, except a loss resulting directly from (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.
(b) 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.
8.(c) The provisions contained in Section 8 shall survive the expiration or
other termination of this Agreement, shall be deemed to include and
protect the Administrator and its directors, officers, employees and
agents and shall inure to the benefit of its/their respective
successors, assigns and personal representatives.
<PAGE>
9. Duration and Termination. This Agreement shall become effective as of
the date hereof and shall thereafter continue in effect unless
terminated as herein provided. This Agreement may be terminated by
either party hereto (without penalty) at any time by giving not less
than 60 days' prior written notice to the other party hereto. Upon
termination of this Agreement, the Trust shall pay to the Administrator
such compensation as may be due as of the date of such termination, and
shall likewise reimburse the Administrator for any out-of-pocket
expenses and disbursements reasonably incurred by the Administrator to
such date.
10. Amendment. This Agreement may be amended by mutual written consent of
the parties. If, at any time during the existence of this Agreement,
the Trust deems it necessary or advisable in the best interests of the
Trust that any amendment of this Agreement be made in order to comply
with the recommendations or requirements of the Securities and Exchange
Commission or state regulatory agencies or other governmental
authority, or to obtain any advantage under state or federal laws, and
shall notify the Administrator of the form of Amendment which it deems
necessary or advisable and the reasons therefor, and if the
Administrator declines to assent to such amendment, the Trust may
terminate this Agreement forthwith.
11. Notice. Any notice that is required to be given by the parties to each
other under the terms of this Agreement shall be in writing, addressed
or delivered, or mailed postpaid to the other party at the principal
place of business of such party.
12. Construction. This Agreement shall be governed and enforced in
accordance with the laws of the State of North Carolina. If any
provision of this Agreement, or portion thereof, shall be determined to
be void or unenforceable by any court of competent jurisdiction, then
such determination shall not affect any other provision of this
Agreement, or portion thereof, all of which other provisions and
portions thereof shall remain in full force and effect. If any
provision of this Agreement, or portion thereof, is capable of two
interpretations, one of which would render the provision, or portion
thereof, void and the other of which would render the provision, or
portion thereof, valid, then the provision, or portion thereof, shall
have the meaning which renders it valid.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed
by their duly authorized officers effective as of the date indicated above.
CAPITAL MANAGEMENT INVESTMENT TRUST
By: _____________________________ (SEAL)
THE NOTTINGHAM COMPANY, INC.
By: _____________________________ (SEAL)
<PAGE>
Exhibit A
---------
FUND ACCOUNTING AND RECORDKEEPING SERVICES
Portfolio Accounting Services:
- -----------------------------
(1) Maintain portfolio records using security trade information
communicated from the investment manager on a timely basis.
(2) For each valuation date, obtain prices from a pricing source approved
by the Board of Trustees and apply those prices to the portfolio
positions. For those securities where market quotations are not readily
available, the Board of Trustees shall approve, in good faith, the
method for determining the fair market value for such securities.
(3) Identify interest and dividend accrual balances as of each valuation
date
(4) Determine gain/loss on security sales. Account for periodic
distributions of gain to shareholders and maintain undistributed gain
or loss balances as of each valuation date.
Expense Accrual and Payment Services:
- ------------------------------------
(5) For each valuation date, calculate the expense accrual amounts as
directed by the Trust as to methodology, rate, or dollar amount.
(6) Issue payments for Fund expenses upon receipt of funds from the Trust's
Custodian.
(7) Account for Fund expenditures and maintain expense accrual balances at
the level of accounting detail specified by the Fund.
(8) Support periodic expense accrual review, i.e., comparison of actual
expense activity versus accrual amounts.
(9) Provide expense accrual and payment reporting.
Fund Valuation and Financial Reporting Services:
- -----------------------------------------------
(10) Account for Fund share purchases, sales, exchanges, transfers, dividend
reinvestments, and other Fund share activity, for each of the Funds, as
reported by the Trust on a timely basis.
(11) Determine net investment income (earnings) for each of the Funds as of
each valuation date. Account for periodic distributions of earnings to
shareholders and maintain undistributed net investment income balances
as of each valuation date.
(12) Maintain a general ledger for each of the Funds in the form defined by
the Trust and assist in producing a set of financial statements as may
be agreed upon from time to time as of each valuation date.
(13) For each day the Funds are opened as defined in the prospectuses,
determine the net asset value of each of the Funds according to the
accounting policies and procedures set forth in the prospectuses.
(14) Calculate per share net asset value, per share net earnings, and other
per share amounts reflective of fund operation at such time as required
by the nature and characteristics of the Funds. Perform the
calculations using the number of shares outstanding reported by the
Trust to be applicable at the time of calculation.
(15) Communicate, at an agreed upon time, the per share price for each
valuation date to parties as agreed upon from time to time.
(16) Prepare monthly reports which document the adequacy of accounting
detail to support month-end ledger balances.
Tax Accounting Services:
- -----------------------
(17) Maintain tax accounting records for each of the Funds' investment
portfolios so as to support tax reporting required for IRS defined
regulated investment companies.
(18) Maintain tax lot detail for the investment portfolio.
(19) Calculate taxable gain/loss on security sales using the tax cost basis
defined for each Fund.
(20) Report the taxable components of income and capital gains distributions
to the Trust to support tax reporting to the shareholders.
<PAGE>
Compliance Control Services:
- ---------------------------
(21) Maintain accounting records to support compliance monitoring by the
Trust.
(22) Support reporting to regulatory bodies and support financial statement
preparation by making the Fund accounting records available to the
Trust, the Securities and Exchange Commission, and the outside
auditors.
(23) Maintain accounting records according to the Investment Company Act of
1940 and regulations provided thereunder.
Registration Services
- ---------------------
(24) Assist in the preparation of all reports and filings required to
maintain the registration and qualification of the Fund and its shares
under federal and state securities laws, including the annual amendment
to its Registration Statement on From N-1A containing an updated
Prospectus and Statement of Additional Information.
SEC Filing Services
- -------------------
(25) Assist in the preparation of periodic SEC filings, including Form
N-SAR, annual and semi-annual shareholder reports, other shareholder
reports, and fidelity bond amendments but not including preparation and
filing of any sales literature and preparation of President's letter
contained in shareholder reports.
Proxy Material Services
- -----------------------
(26) Assist in the preparation of any proxy material and related shareholder
meetings and records.
<PAGE>
Exhibit B
---------
ADMINISTRATOR'S COMPENSATION SCHEDULE
For the services delineated in the FUND ACCOUNTING AND COMPLIANCE ADMINISTRATION
AGREEMENT, the Administrator shall be compensated monthly, as of the last day of
each month, within five business days of the month end, a base fee plus a fee
based upon net assets according to the following schedule. The fee is calculated
based upon the average daily net assets of each Fund:
Base fee: $2,250 per month
--------
Class Fee: $ 750 per month for each additional Class
---------
Asset based fee:
---------------
Annual
Net Assets Fee
---------- ------
On the first $50 million 0.125%
On the next $50 million 0.100%
On all assets over $100 million 0.075%
Securities pricing
------------------
$0.20 per equity per pricing day priced
$0.70 per foreign security per pricing day
$0.20 per U.S. Treasury
$1.00 per asset backed security per pricing day
$0.40 per corporate bond per pricing day
$2.00 per equity per month for corporate action
Blue Sky administration
-----------------------
$150 per registration per state per year
Minimum Aggregate Fee
---------------------
Minimum aggregate fee of $41,000 per year for all fees paid to the
Administrator (excluding securities pricing and blue sky
administration), analyzed monthly.
Exhibit (h)(4): Form of Dividend Disbursing and Transfer Agent Agreement
--------------
DIVIDEND DISBURSING
AND TRANSFER AGENT
AGREEMENT
THIS AGREEMENT, made and entered into as of _________________, 199__, by and
between CAPITAL MANAGEMENT INVESTMENT TRUST, a Massachusetts business trust (the
"Trust"), and NC SHAREHOLDER SERVICES, LLC, a North Carolina limited liability
company (the "Transfer Agent").
WHEREAS, the Trust is an open-end management investment company of the series
type which is registered under the Investment Company Act of 1940 (the "1940
Act"); and
WHEREAS, the Transfer Agent is in the business of providing dividend disbursing,
transfer agent, and shareholder services to investment companies.
NOW THEREFORE, the Trust and the Transfer Agent do mutually promise and agree as
follows:
1. Employment. The Trust hereby employs Transfer Agent to act as dividend
disbursing and transfer agent for each series of the Trust (each a
"Fund"). Transfer Agent, at its own expense, shall render the services
and assume the obligations herein set forth subject to being
compensated therefore as herein provided.
2. Delivery of Documents. The Trust has furnished the Transfer Agent with
copies properly certified or authenticated of each of the following:
a) The Trust's Declaration of Trust, as filed with the State of
Massachusetts (such Declaration, as presently in effect and as
it shall from time to time be amended, is herein called the
"Declaration");
b) The Trust's By-Laws (such By-Laws, as presently in effect and
as they shall from time to time be amended, are herein called
the "By-Laws");
c) Resolutions of the Trust's Board of Trustees authorizing the
appointment of the Transfer Agent and approving this
Agreement; and
d) The Trust's Registration Statement on Form N-1A under the 1940
Act and under the Securities Act of 1933 as amended, (the
"1933 Act"), including all exhibits, relating to shares of
beneficial interest of, and containing the Prospectus of, each
Fund of the Trust (herein called the "Shares") as filed with
the Securities and Exchange Commission and all amendments
thereto.
The Trust will furnish the Transfer Agent with copies, properly certified or
authenticated, of all amendments of or supplements to the foregoing.
3. Duties of the Transfer Agent. Subject to the policies and direction of
the Trust's Board of Trustees, the Transfer Agent will provide day to
day supervision for the dividend disbursing, transfer agent, and
shareholder servicing operations of each of the Trust's Funds. Services
to be provided shall be in accordance with the Trust's organizational
and registration documents as listed in paragraph 2 hereof and with the
Prospectus of each Fund of the Trust. The Transfer Agent further agrees
that it:
a) Will conform with all applicable rules and regulations of the
Securities and Exchange Commission and will, in addition,
conduct its activities under this Agreement in accordance with
regulations of any other federal and state agency which may
now or in the future have jurisdiction over its activities.
b) Will provide, at its expense the non-executive personnel and
data processing equipment and software necessary to perform
the Shareholder Servicing functions shown on Exhibit A hereof;
and
c) Will provide all office space and general office equipment
necessary for the dividend disbursing, transfer agent, and
shareholder servicing activities of the Trust except as may be
provided by third parties pursuant to separate agreements with
the Trust.
<PAGE>
Notwithstanding anything contained in this Agreement to the contrary,
the Transfer Agent (including its directors, officers, employees and
agents) shall not be required to perform any of the duties of, assume
any of the obligations or expenses of, or be liable for any of the acts
or omissions of, any investment advisor of a Fund of the Trust or other
third party subject to separate agreements with the Trust. The Transfer
Agent shall not be responsible hereunder for the administration of the
Code of Ethics of the Trust which shall be under the responsibility of
the investment advisors, except insofar as the Code of Ethics applies
to the personnel of the Transfer Agent. It is the express intent of the
parties hereto that the Transfer Agent shall not have control over or
be responsible for the placement (except as specifically directed by a
Shareholder of the Trust), investment or reinvestment of the assets of
any Fund of the Trust. The Transfer Agent may from time to time,
subject to the approval of the Trustees, obtain at its own expense the
services of consultants or other third parties to perform part or all
of its duties hereunder, and such parties may be affiliates of the
Transfer Agent.
4. Services Not Exclusive. The services furnished by the Transfer Agent
hereunder are not to be deemed exclusive, and the Transfer Agent shall
be free to furnish similar services to others so long as its services
under this Agreement are not impaired thereby.
5. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Transfer Agent hereby agrees that all records
which it maintains for the Trust are the property of the Trust and
further agrees to surrender promptly to the Trust any of such records
upon the Trust's request.
6. Expenses. During the term of this Agreement, the Transfer Agent will
pay all expenses incurred by it in connection with the performance of
its obligations under this Agreement.
7. Compensation. For the services provided and the expenses assumed by the
Transfer Agent pursuant to this Agreement, the Trust will pay the
Transfer Agent and the Transfer Agent will accept as full compensation
the fees and expenses as set forth on Exhibit B attached hereto.
Special projects, not included herein and requested in writing by the
Trustees, shall be completed by the Transfer Agent and invoiced to the
Trust as mutually agreed upon.
8.(a) Limitation of Liability. The Transfer Agent shall not be liable for any
loss, damage or liability related to or resulting from the placement
(except as specifically directed by a Shareholder of the Trust),
investment or reinvestment of assets in any Fund of the Trust or the
acts or omissions of any Fund's investment advisor or any other third
party subject to separate agreements with the Trust. Further, the
Transfer Agent shall not be liable for any error of judgment or mistake
of law or for any loss or damage suffered by the Trust in connection
with the performance of this Agreement or any agreement with a third
party, except a loss resulting directly from (i) a breach of fiduciary
duty on the part of the Transfer Agent with respect to the receipt of
compensation for services; or (ii) willful misfeasance, bad faith or
gross negligence on the part of the Transfer Agent in the performance
of its duties or from reckless disregard by it of its duties under this
Agreement.
<PAGE>
8.(b) Indemnification of Transfer Agent. 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 Transfer Agent 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
Transfer Agent 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 Transfer Agent with respect to the
receipt of compensation for services; or (ii) willful misfeasance, bad
faith or gross negligence on the part of the Transfer Agent 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 Transfer Agent 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 Transfer Agent was not liable by reason of Disabling Conduct,
(ii) dismissal of a court action or an administrative proceeding
against the Transfer Agent for insufficiency of evidence of Disabling
Conduct, or (iii) a reasonable determination, based upon a review of
the facts, that the Transfer Agent 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 Transfer Agent (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
Transfer Agent 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 Transfer Agent 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 Transfer
Agent ultimately will be entitled to indemnification hereunder.
As to any matter disposed of by a compromise payment by the Transfer
Agent 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 Transfer Agent of any amount paid to the Transfer
Agent in accordance with either of such clauses as indemnification of
the Transfer Agent is subsequently adjudicated by a court of competent
jurisdiction not to have acted in good faith in the reasonable belief
that the Transfer Agent'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.
<PAGE>
The right of indemnification provided by this Subsection 8(b) shall not
be exclusive of or affect any of the rights to which the Transfer Agent
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 Transfer
Agent is entitled to indemnification hereunder and the reasonable
amount of any indemnity due it hereunder, or employ independent legal
counsel for that purpose.
The provisions contained in Section 8 shall survive the expiration or
other termination of this Agreement, shall be deemed to include and
protect the Transfer Agent and its directors, officers, employees and
agents and shall inure to the benefit of its/their respective
successors, assigns and personal representatives.
9. Duration and Termination. This Agreement shall become effective as of
the date hereof and shall thereafter continue in effect unless
terminated as herein provided. This Agreement may be terminated by
either party hereto (without penalty) at any time by giving not less
than 60 days' prior written notice to the other party hereto. Upon
termination of this Agreement, the Trust shall pay to NCSS such
compensation as may be due as of the date of such termination, and
shall likewise reimburse NCSS for any out-of-pocket expenses and
disbursements reasonably incurred by NCSS to such date.
10. Amendment. This Agreement may be amended by mutual written consent of
the parties. If, at any time during the existence of this Agreement,
the Trust deems it necessary or advisable in the best interests of the
Trust that any amendment of this Agreement be made in order to comply
with the recommendations or requirements of the Securities and Exchange
Commission or state regulatory agencies or other governmental
authority, or to obtain any advantage under state or federal laws, and
shall notify the Transfer Agent of the form of Amendment which it deems
necessary or advisable and the reasons therefor, and if the Transfer
Agent declines to assent to such amendment, the Trust may terminate
this Agreement forthwith.
11. Notice. Any notice that is required to be given by the parties to each
other under the terms of this Agreement shall be in writing, addressed
or delivered, or mailed postpaid to the other party at the principal
place of business of such party.
12. Construction. This Agreement shall be governed and enforced in
accordance with the laws of the State of North Carolina. If any
provision of this Agreement, or portion thereof, shall be determined to
be void or unenforceable by any court of competent jurisdiction, then
such determination shall not affect any other provision of this
Agreement, or portion thereof, all of which other provisions and
portions thereof shall remain in full force and effect. If any
provision of this Agreement, or portion thereof, is capable of two
interpretations, one of which would render the provision, or portion
thereof, void and the other of which would render the provision, or
portion thereof, valid, then the provision, or portion thereof, shall
have the meaning which renders it valid.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed
by their duly authorized officers effective as of the date indicated above.
CAPITAL MANAGEMENT INVESTMENT TRUST
By: _____________________________ (SEAL)
NC SHAREHOLDER SERVICES, LLC
By: _____________________________ (SEAL)
<PAGE>
Exhibit A
---------
SHAREHOLDER SERVICING FUNCTIONS
(1) Process new accounts.
(2) Process purchases, both initial and subsequent in accordance with
conditions set forth in the Fund's prospectus.
(3) Transfer shares of capital stock to an existing account or to a new
account upon receipt of required documentation in good order.
(4) Distribute dividends and/or capital gain distributions. This includes
disbursement as cash or reinvestment and to change the disbursement
option at the request of shareholders.
(5) Process exchanges between funds, (process and direct purchase/redemption
and initiate new account or process to existing account).
(6) Make miscellaneous changes to records, including, but not necessarily
limited to, address changes and changes in plans (such as systematic
withdrawal, dividend reinvestment, etc.).
(7) Prepare and mail a year-to-date confirmation and statement as each
transaction is recorded in a shareholder account as follows: original to
shareholder. Duplicate confirmations to be available on request within
current year.
(8) Handle telephone calls and correspondence in reply to shareholder
requests except those items otherwise set forth herein.
(9) Daily control and reconciliation of Fund shares.
(10) Prepare address labels or confirmations for four reports to shareholders
per year.
(11) Mail and tabulate proxies for one Meeting of Shareholders annually,
including preparation of certified shareholder list and daily report to
Fund management, if required.
(12) Prepare and mail annual Form 1099, Form W-2P and 5498 to shareholders to
whom dividends or distributions are paid, with a copy for the IRS.
(13) Provide readily obtainable data which may from time to time be requested
for audit purposes.
(14) Replace lost or destroyed checks.
(15) Continuously maintain all records for active and closed accounts
according to the Investment Company Act of 1940 and regulations provided
thereunder.
(16) Furnish shareholder data information for a current calendar year in
connection with IRA and Keogh Plans in a format suitable for mailing to
shareholders.
<PAGE>
Exhibit B
---------
TRANSFER AGENT'S COMPENSATION SCHEDULE
For the services delineated in the DIVIDEND DISBURSING AND TRANSFER AGENT
AGREEMENT, the Transfer Agent shall be compensated monthly, as of the last day
of each month, within five business days of the month end, a fee calculated
based upon 1/12 of the annual fee calculated using the then current number of
shareholders:
Shareholder servicing fee
-------------------------
$15.00 per shareholder per year; minimum fee of $750 per month
Exhibit (i): Opinion and Consent of Counsel
-----------
October 28, 1998
Opinion and Consent of Counsel
Capital Management Investment Trust
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
Ladies and Gentlemen:
This opinion is given in connection with the filing by Capital
Management Investment Trust, a Massachusetts business trust ("Trust"), of
Post-Effective Amendment No. 6 to the Registration Statement on Form N-1A
("Registration Statement") under the Securities Act of 1933 ("1933 Act") and
Amendment No. 7 under the Investment Company Act of 1940 ("1940 Act"), relating
to an indefinite amount of authorized shares of beneficial interest of the
separate series of the Trust, Capital Management Small-Cap Fund and Capital
Management Energy Fund. The authorized shares of beneficial interest of the
Capital Management Small-Cap Fund and the Capital Management Energy Fund are
hereinafter referred to as the "Shares."
We have examined the following Trust documents: Declaration of Trust;
By-Laws; Post-Effective Amendment No. 3 on Form N-1A filed on March 26, 1996;
Post-Effective Amendment No. 4 to the Registration Statement filed on March 31,
1997; Post-Effective Amendment No. 5 to the Registration Statement filed on
March 31, 1998; pertinent provisions of the laws of the Commonwealth of
Massachusetts; and such other corporate records, certificates, documents and
statutes that we have deemed relevant in order to render the opinion expressed
herein.
Based on such examination, we are of the opinion that:
1. Capital Management Investment Trust is a Massachusetts business trust duly
organized, validly existing, and in good standing under the laws of the
Commonwealth of Massachusetts; and
2. The Shares to be offered for sale by Capital Management Investment Trust,
when issued in the manner contemplated by the Registration Statement, will
be legally issued, fully-paid and non-assessable.
This letter expresses our opinion as to the Massachusetts business
trust law governing matters such as the due organization of Capital Management
Investment Trust and the authorization and issuance of the Shares, but does not
extend to the securities or "Blue Sky" laws of the Commonwealth of Massachusetts
or to federal securities or other laws.
We consent to the use of this opinion as an exhibit to the Registration
Statement and to the reference to Dechert Price & Rhoads under the caption
"Legal Matters" in the Statement of Additional Information, which is
incorporated by reference into the Prospectus comprising a part of the
Registration Statement.
Very truly yours,
DECHERT PRICE & RHOADS
Exhibit (j): Consent of Auditor
-----------
Exhibit 11
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Post-Effective Amendment
No. 6 to Registration Statement No. 33-85242 of Capital Management Small-Cap
Fund, Capital Management Mid-Cap Fund and Capital Management Energy Fund (each a
series of Capital Management Investment Trust) of our report dated January 9,
1998, relating to Capital Management Mid-Cap Fund incorporated by reference in
the Statement of Additional Information, which is part of such Registration
Statement, and to the reference to us under the caption "Independent Auditors"
in such Registration Statement.
/s/ Deloitte & Touche LLP
Pittsburgh, Pennsylvania
October 29, 1998
