As filed with the Securities and Exchange Commission on March 31, 1998
Securities Act File No. 33-85242
Investment Company Act File No. 811-8822
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 o
Post-Effective Amendment No. 5 x
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 o
Amendment No. 6 x
CAPITAL MANAGEMENT INVESTMENT TRUST
140 Broadway
Suite 2201
New York, New York 10005
Telephone (212) 509-1111
AGENT FOR SERVICE:
C. Frank Watson III, Secretary
105 North Washington Street
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069
With copies to:
M. Guy Brooks, III, Esq.
Poyner & Spruill, L.L.P.
3600 Glenwood Avenue
Raleigh, North Carolina 27612
It is proposed that this filing will become effective:
x Immediately upon filing pursuant o on ______________, 1998 pursuant
to Rule 485(b), or to Rule 485(b), or
o 60 days after filing pursuant o on ______________, 1998 pursuant
to Rule 485(a)(1), to Rule 485(a)(1), or
o 75 days after filing pursuant o on ______________, 1998 pursuant
to Rule 485(a)(2) to Rule 485(a)(2)
<PAGE>
PART A
PROSPECTUS
Prospectus Cusip Number 140296104
Nasdaq Symbol CMEIX
CAPITAL MANAGEMENT MID-CAP FUND
INSTITUTIONAL SHARES
The investment objective of the Capital Management Mid-Cap Fund (the "Fund") is
to seek capital appreciation principally through investments in equity
securities, consisting of common and preferred stocks and securities convertible
into common stocks. The Fund will focus on equity securities of
medium-capitalization companies. While there is no assurance that the Fund will
achieve its investment objective, it endeavors to do so by following the
investment policies described in this Prospectus.
This Prospectus relates to shares ("Institutional Shares") representing
interests in the Fund. The Institutional Shares are available only to certain
institutions and other investors described herein. See "Prospectus Summary -
Offering Price." Institutional Shares are sold and redeemed at net asset value
without any sales or redemption charges or shareholder servicing or distribution
fees.
INVESTMENT ADVISOR
Capital Management Associates, Inc.
New York, New York
The Fund is a diversified series of the Capital Management Investment Trust, a
registered, open-end management, investment company. This Prospectus sets forth
concisely the basic information you should know before investing in the Fund.
You should read it and keep it for future reference. A Statement of Additional
Information dated April 1, 1998, containing additional information about the
Fund has been filed with the Securities and Exchange Commission (the "SEC") and
is incorporated by reference in this Prospectus in its entirety. The Fund's
address is 140 Broadway, New York, New York 10005, and its telephone number is
1-888-626-3863. A copy of the Statement of Additional Information may be
obtained at no charge by calling or writing the Fund. The SEC maintains an
Internet Web site (http://www.sec.gov) that contains the Statement of Additional
Information, material incorporated by reference, and other information regarding
the Fund.
Shares of the Fund are not deposits or obligations of, or guaranteed or endorsed
by, any financial institution, and Fund shares are not federally insured by the
Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other
agency. Investment in the Fund involves risks, including the possible loss of
principal.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
April 1, 1998
<PAGE>
TABLE OF CONTENTS
PROSPECTUS SUMMARY............................................................2
FEE TABLE.....................................................................3
FINANCIAL HIGHLIGHTS..........................................................4
INVESTMENT OBJECTIVE AND POLICIES.............................................5
RISK FACTORS..................................................................7
INVESTMENT LIMITATIONS........................................................8
HOW NET ASSET VALUE IS DETERMINED.............................................8
PERFORMANCE DATA..............................................................9
MANAGEMENT OF THE FUND........................................................9
HOW TO PURCHASE SHARES.......................................................12
HOW TO REDEEM SHARES.........................................................14
DIVIDENDS AND DISTRIBUTIONS..................................................16
FEDERAL INCOME TAX INFORMATION...............................................16
ORGANIZATION AND CAPITAL SHARES..............................................17
VOTING RIGHTS................................................................17
OTHER INFORMATION............................................................18
This Prospectus is not an offering of the securities herein described in any
state in which the offering is unauthorized. No sales representative, dealer, or
other person is authorized to give any information or to make any
representations other than those contained in this Prospectus.
<PAGE>
PROSPECTUS SUMMARY
The Fund. The Capital Management Mid-Cap Fund (the "Fund") is a diversified
series of the Capital Management Investment Trust (the "Trust"), a registered,
open-end management, investment company organized as a Massachusetts business
trust. This Prospectus relates to Institutional Shares of the Fund. See
"Organization and Capital Shares."
Offering Price. The Institutional Shares are offered at net asset value without
a sales charge. The Institutional Shares are available only to the following
classes of investors: any account managed by the Advisor, and any other
institutional investor with a minimum investment in the Fund of at least
$250,000. The minimum initial investment is $250,000 unless otherwise approved
by the Advisor. The minimum subsequent investment is $500. See "How to Purchase
Shares."
Investment Objective. The investment objective of the Fund is to seek capital
appreciation principally through investments in equity securities, consisting of
common and preferred stocks and securities convertible into common stocks.
Realization of current income is not a significant investment consideration, and
any income realized will be incidental to the Fund's objective. The Fund will
focus on equity securities of medium-capitalization companies. See "Investment
Objective and Policies."
Advisor. Subject to the general supervision of the Trust's Board of Trustees and
in accordance with the Fund's investment policies, Capital Management
Associates, Inc., of New York, New York (the "Advisor"), manages the Fund's
investments. The Advisor manages over $1 billion in assets. Its clients include
individuals, corporations, pension and profit-sharing plans, and endowments. For
its services, the Advisor receives a monthly fee based on the Fund's daily net
assets at the annual rate of 1.00% of the first $100 million of Fund assets,
0.90% of the next $150 million, 0.85% of the next $250 million, and 0.80% of all
assets over $500 million. See "Management of the Fund - Investment Advisor."
Dividends. The Fund may pay income dividends, if any, quarterly; capital gains,
if any, are paid at least once each year. Dividend and capital gain
distributions are automatically reinvested in additional Institutional Shares at
net asset value unless the shareholder elects to receive cash. See "Dividends
and Distributions."
Distributor. Shields & Company (the "Distributor") serves as distributor of the
Fund's shares. The Distributor is affiliated with the Advisor. See "Management
of the Fund - Distributor."
Redemption of Shares. There is no charge for redemptions other than possible
charges associated with wire transfers of redemption proceeds. Shares may be
redeemed at any time at the net asset value next determined after receipt of a
redemption request by the Fund. A shareholder who submits appropriate written
authorization may redeem shares by telephone. See "How to Redeem Shares."
Special Risk Considerations. The Fund is not intended to provide a complete
investment program, and there can be no assurance that the Fund will achieve its
investment objective. To the extent that equities comprise a major portion of
the Fund's portfolio, the Fund's net asset value will be subject to stock market
fluctuation. While the Fund will invest primarily in common stocks traded in
U.S. securities markets, some of the Fund's investments may include illiquid
securities, foreign securities, and securities purchased subject to a repurchase
agreement or on a "when-issued" basis, which involve certain risks. The Fund's
portfolio will also contain a significant amount of securities of
medium-capitalization companies, which may exhibit more volatility than
large-capitalization companies. The Fund may borrow only under certain limited
conditions (including to meet redemption requests) and not to purchase
securities. It is not the intent of the Fund to borrow except for temporary cash
requirements. Borrowing, if done, would tend to exaggerate the effects of market
and interest rate fluctuations on the Fund's net asset value until repaid. See
"Risk Factors."
FEE TABLE
The following table sets forth certain information in connection with the
expenses of the Institutional Shares of the Fund for the current fiscal year.
The information is intended to assist the investor in understanding the various
costs and expenses borne by the Institutional Shares of the Fund, and therefore
indirectly by its investors, the payment of which will reduce an investor's
return on an annual basis.
Shareholder Transaction Expenses for Institutional Shares
Maximum Sales Charge Imposed on Purchases.................................None
(as a percentage of offering price)
Maximum Sales Charge Imposed on Reinvested Dividends......................None
Deferred Sales Load.......................................................None
Redemption Fees*..........................................................None
Exchange Fees.............................................................None
* The Fund in its discretion may choose to pass through to redeeming
shareholders any charges imposed by the Custodian for wiring redemption
proceeds. The Custodian currently charges the Fund $10.00 per transaction
for wiring redemption proceeds.
Annual Fund Operating Expenses
for Institutional Shares
(as a percentage of average net assets)
Management Fees..........................................................0.00% 1
12b-1 Fees................................................................None
Total Other Expenses.....................................................1.50% 1
-----
Total Fund Operating Expenses............................................1.50% 1
=====
EXAMPLE: You would pay the following expenses on a $1,000 investment in
Institutional Shares of the Fund, whether or not you redeem at the end of the
period, and assuming a 5% annual return:
1 year 3 years 5 years 10 years
-------- --------- --------- ---------
$15 $47 $82 $199
THE FOREGOING SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
1 The Total Fund Operating Expenses shown above are based on actual operating
expenses incurred by the Institutional Shares of the Fund for the fiscal
year ended November 30, 1997, which, after fee waivers and expense
reimbursements, were 1.50% of average daily net assets of the Institutional
Shares of the Fund. Absent such waivers and reimbursements, the percentages
would have been 1.00% for Management Fees and 2.92% for Total Fund
Operating Expenses for the Institutional Shares of the Fund for the fiscal
year ended November 30, 1997. The Advisor has voluntarily agreed to a
reduction in the fees payable to it and to reimburse expenses of the Fund,
if necessary, in an amount that limits Total Fund Operating Expenses
(exclusive of interest, taxes, brokerage fees and commissions, and
extraordinary expenses) to not more than 1.50% of the Institutional Shares'
average daily net assets. There can be no assurance that the Advisor's
voluntary fee waivers and expense reimbursements will continue in the
future.
See "Management of the Fund" below for more information about the fees and costs
of operating the Fund. The example shown above assumes a 5% annual return
pursuant to the requirements of the Securities and Exchange Commission. The
hypothetical rate of return is not intended to be representative of past or
future performance of the Fund. The annual rate of return may be greater or less
than 5%.
FINANCIAL HIGHLIGHTS
The Fund has two classes of shares - Investor Shares and Institutional Shares.
See "Organization and Capital Shares." This Prospectus relates to Institutional
Shares. The financial data included in the table below have been derived from
audited financial statements of the Fund. The financial data for the fiscal year
ended November 30, 1997 have been audited by Deloitte & Touche LLP, independent
auditors, whose report covering such fiscal year is included in the Statement of
Additional Information. The financial data for the prior fiscal year and period
were audited by other independent auditors. The information in the table below
should be read in conjunction with the Fund's latest audited financial
statements and notes thereto, which are included in the Statement of Additional
Information, a copy of which may be obtained at no charge by calling the Fund.
Further information about the performance of the Fund is contained in the Annual
Report of the Fund, a copy of which may be obtained at no charge by calling the
Fund.
<TABLE>
<S> <C> <C> <C>
Institutional Class
(For a Share Outstanding Throughout the Fiscal Period)
- -------------------------------------------------------------------------------------------------------------------
Year ended Year ended Period Ended
November 30, November 30, November 30,
1997 1996 1995*
- -------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ...................... $13.99 $12.16 $10.00
Income from investment operations
Net investment income (loss) .......................... 0.01 0.23 0.20
Net realized and unrealized gain on investments ....... 4.60 2.08 2.10
--------------- --------------- -------------
Total from investment operations .................... 4.61 2.31 2.30
--------------- --------------- -------------
Distributions to shareholders from
Net investment income .................................. (0.04) (0.26) (0.14)
Distributions in excess of net investment income ....... (0.02) 0.00 0.00
Net realized gain from investment transactions ......... (0.34) 0.22 0.00
--------------- --------------- -------------
Total distributions .................................. (0.40) (0.48) (0.14)
--------------- --------------- -------------
Net asset value, end of period ............................ $18.20 $13.99 $12.16
=============== =============== =============
Total return .............................................. 33.92 % 19.57 % 23.00 %
=============== =============== =============
Ratios/supplemental data
Net assets, end of period ............................. $ 5,311,416 $ 3,502,215 $ 1,832,507
=============== =============== =============
Ratio of expenses to average net assets
Before expense reimbursements and waived fees ...... 2.92 % 3.70 % 7.20 %(a)
After expense reimbursements and waived fees ....... 1.50 % 0.00 % 0.31 %(a)
Ratio of net investment income (loss) to average net assets
Before expense reimbursements and waived fees ...... (1.34)% (1.77)% (4.45)%(a)
After expense reimbursements and waived fees ....... 0.08 % 1.94 % 2.44 %(a)
Portfolio turnover rate ............................... 66.30 % 2.30 % 47.74 %
Average commission rate paid (b) ...................... $0.0607 $0.0598 N/A
</TABLE>
* For the period from January 27, 1995, (commencement of operations) to
November 30, 1995.
(a) Annualized.
(b) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged. This
disclosure was not required for the fiscal period of the Fund prior to
November 30, 1996.
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to seek capital appreciation principally
through investments in equity securities, consisting of common and preferred
stocks and securities convertible into common stocks. Realization of current
income is not a significant investment consideration, and any income realized
will be incidental to the Fund's objective. The Fund's investment objective and
fundamental investment limitations described herein may not be altered without
the prior approval of a majority of the Fund's shareholders.
Under normal market conditions, at least 90% of the Fund's total assets will be
invested in equity securities and at least 65% of the Fund's total assets will
be invested in equity securities of medium-capitalization companies, which are
defined as those whose market capitalization range is from $300 million to $6
billion. However, as a temporary defensive measure, when the Advisor determines
that market conditions warrant such investments, the Fund may invest up to 100%
of its total assets in investment grade bonds, U.S. Government Securities,
repurchase agreements, or money market instruments. When the Fund invests its
assets in investment grade bonds, U.S. Government Securities, repurchase
agreements, or money market instruments as a temporary defensive measure, it is
not pursuing its stated investment objective. Under normal circumstances,
however, the Fund will also hold money market or repurchase agreement
instruments for funds awaiting investment, to accumulate cash for anticipated
purchases of portfolio securities, to allow for shareholder redemptions, and to
provide for Fund operating expenses.
Equity Selection Criteria. The Advisor will manage the Fund's assets by
utilizing an investment philosophy which has been employed by the Advisor since
the firm's inception. Under normal market conditions, the Fund will invest in
equity securities consisting of common stocks and securities convertible into
common stocks. The Fund intends to invest in a diversified group of common
stocks and will not concentrate its investments in any one industry or group.
The Fund will focus on medium-capitalization companies. This
market-capitalization range includes a universe of over 1,700 companies. Stocks
held in the portfolio will generally be traded on either the New York Stock
Exchange, American Stock Exchange, or the over-the-counter market. Foreign
securities, if held, will generally be traded on foreign securities exchanges.
Foreign securities may be held in the form of American Depository Receipts
("ADRs"). ADRs are foreign securities denominated in U.S. dollars and traded on
U.S. securities markets. See "Foreign Securities" below.
An economic forecast is developed by the Advisor's Investment Committee to guide
industry allocation decisions. Medium-capitalization equities in industries
where the outlook is favorable relative to current price levels are then
subjected to additional screening and are finally selected through fundamental
security analysis to identify value. This process most often includes visits
with company management and contacts with industry experts and suppliers. The
results of this research are presented at meetings of the Advisor's investment
professionals. Final investment decisions are made by the Advisor's Investment
Committee (identified below under "Management of the Fund -Investment Advisor").
U.S. Government Securities. The Fund may invest a portion of the portfolio in
U.S. Government Securities, defined to be U.S. Government obligations such as
U.S. Treasury notes, U.S. Treasury bonds, and U.S. Treasury bills; obligations
guaranteed by the U.S. Government such as obligations issued by the Government
National Mortgage Association ("GNMA"); as well as obligations of U.S.
Government authorities, agencies, and instrumentalities such as Federal National
Mortgage Association ("FNMA"), Federal Home Loan Mortgage Corporation ("FHLMC"),
Federal Home Administration ("FHA"), Federal Farm Credit Bank ("FFCB"), Federal
Home Loan Bank ("FHLB"), Student Loan Marketing Association ("SLMA"), and The
Tennessee Valley Authority. U.S. Government Securities may be acquired subject
to repurchase agreements. While obligations of some U.S. Government-sponsored
entities are supported by the full faith and credit of the U.S. Government
(e.g., GNMA), several are supported by the right of the issuer to borrow from
the U.S. Government (e.g., FNMA, FHLMC), and still others are supported only by
the credit of the issuer itself (e.g., SLMA, FFCB). No assurances can be given
that the U.S. Government will provide financial support to U.S. Government
agencies or instrumentalities in the future, other than as set forth above,
since it is not obligated to do so by law. The guarantee of the U.S. Government
does not extend to the yield or value of the Fund's shares.
Money Market Instruments. Money market instruments may be purchased for
temporary defensive purposes, to accumulate cash for anticipated purchases of
portfolio securities, and to provide for shareholder redemptions and operating
expenses of the Fund. Money market instruments mature in thirteen months or less
from the date of purchase and may include U.S. Government Securities, corporate
debt securities (including those subject to repurchase agreements), bankers
acceptances and certificates of deposit of domestic branches of U.S. banks, and
commercial paper (including variable amount demand master notes) rated in one of
the two highest rating categories by any of the nationally recognized
statistical rating organizations, or if not rated, of equivalent quality in the
Advisor's opinion. The Advisor may, when it believes that unusually volatile or
unstable economic and market conditions exist, depart from the Fund's investment
approach and assume temporarily a defensive portfolio posture, increasing the
Fund's percentage investment in money market instruments, even to the extent
that 100% of the Fund's total assets may be so invested.
Repurchase Agreements. The Fund may acquire U.S. Government Securities or
corporate debt securities subject to repurchase agreements. A repurchase
agreement transaction occurs when a Fund acquires a security and simultaneously
resells it to the vendor (normally a member bank of the Federal Reserve or a
registered Government Securities dealer) for delivery on an agreed upon future
date. The repurchase price exceeds the purchase price by an amount which
reflects an agreed upon market interest rate earned by the Fund effective for
the period of time during which the repurchase agreement is in effect. Delivery
pursuant to the resale typically will occur within one to seven days of the
purchase. The Fund will not enter into any repurchase agreement which will cause
more than 10% of its net assets to be invested in repurchase agreements which
extend beyond seven days or other illiquid securities. In the event of the
bankruptcy of the other party to a repurchase agreement, the Fund could
experience delays in recovering its cash or the securities lent. To the extent
that in the interim the value of the securities purchased may have declined, the
Fund could experience a loss. In all cases, the creditworthiness of the other
party to a transaction is reviewed and found satisfactory by the Advisor.
Repurchase agreements are, in effect, loans of Fund assets. The Fund will not
engage in reverse repurchase transactions, which are considered to be borrowings
under the 1940 Act.
Foreign Securities. The Fund may invest in the securities of foreign private
issuers. The same factors would be considered in selecting foreign securities as
with domestic securities. Foreign securities' investment presents special
considerations not typically associated with investment in domestic securities.
Foreign taxes may reduce income. Currency exchange rates and regulations may
cause fluctuations in the value of foreign securities. Foreign securities are
subject to different regulatory environments than in the United States, and
compared to the United States, there may be a lack of uniform accounting,
auditing, and financial reporting standards; less volume and liquidity and more
volatility; less public information; and less regulation of foreign issuers.
Countries have been known to expropriate or to nationalize assets, and foreign
investments may be subject to political, financial, or social instability or to
adverse diplomatic developments. There may be difficulties in obtaining service
of process on foreign issuers and difficulties in enforcing judgments with
respect to claims under the U.S. securities' laws against such issuers.
Favorable or unfavorable differences between U.S. and foreign economies could
affect foreign securities' values. The U.S. Government has, in the past,
discouraged certain foreign investments by U.S. investors through taxation or
other restrictions, and it is possible that such restrictions could be imposed
again.
Because of the inherent risk of foreign securities over domestic issues, the
Fund will generally limit foreign investments to those traded domestically as
American Depository Receipts ("ADRs"). ADRs are receipts issued by a U.S. bank
or trust company evidencing ownership of securities of a foreign issuer. ADRs
may be listed on a national securities exchange or may trade in the
over-the-counter market. The prices of ADRs are denominated in U.S. dollars
while the underlying security may be denominated in a foreign currency. To the
extent the Fund invests in other foreign securities, it will generally limit
such investments to foreign securities traded on foreign securities exchanges.
Investment Companies. To achieve its investment objective, the Fund may invest
its total assets in securities of other investment companies whose investment
objectives are consistent with the Fund's investment objective, to the limited
extent permitted by the 1940 Act. The Fund will not acquire securities of any
one investment company if, immediately thereafter, the Fund would own more than
3% of such company's total outstanding voting securities, securities issued by
such company would have an aggregate value in excess of 5% of the Fund's total
assets, or securities issued by such company and securities held by the Fund
issued by other investment companies would have an aggregate value in excess of
10% of the Fund's total assets. To the extent the Fund invests in other
investment companies, the shareholders of the Fund would indirectly pay a
portion of the operating costs of the underlying investment companies. These
costs include management, brokerage, shareholder servicing, and other
operational expenses. Shareholders of the Fund would then indirectly pay higher
operational costs than if they owned shares of the underlying investment
companies directly.
Real Estate Securities. The Fund will not invest in real estate (including
limited partnership interests), but may invest in readily marketable securities
secured by real estate or securities interests therein or securities issued by
companies that invest in real estate or interests therein. The Fund may also
invest in readily marketable interests in real estate investment trusts
("REITs"). REITs are generally publicly traded on the national stock exchanges
and in the over-the-counter market and have varying degrees of liquidity.
Although the Fund is not limited in the amount of these types of real estate
securities it may acquire, it is not presently expected that within the next 12
months the Fund will have in excess of 5-10% of its total assets in real estate
securities.
RISK FACTORS
Investment Policies and Techniques. Reference should be made to "Investment
Objective and Policies" above for a description of special risks presented by
the investment policies of the Fund and the specific securities and investment
techniques that may be employed by the Fund, including the risks associated with
repurchase agreements and foreign securities. A more complete discussion of
certain of these securities and investment techniques and their associated risks
is contained in the Statement of Additional Information.
Fluctuations in Value. To the extent that the major portion of the Fund's
portfolio consists of common stocks, it may be expected that its net asset value
will be subject to greater fluctuation than a portfolio containing mostly
fixed-income securities. Although certain of the U.S. Government Securities in
which the Fund may invest are guaranteed as to timely payment of principal and
interest, the market value of the securities will fluctuate due to interest rate
risks. Additionally, not all U.S. Government Securities are backed by the full
faith and credit of the U.S. Government. Given the Fund's limitation primarily
to securities which are commonly defined as `mid-capitalization' securities, the
Fund may be expected to exhibit more volatility than an equity fund investing in
larger-capitalization securities. Because there is risk in any investment, there
can be no assurance that the Fund will meet its objective.
Portfolio Turnover. The Fund sells portfolio securities without regard to the
length of time they have been held to take advantage of new investment
opportunities. Nevertheless, the Fund's portfolio turnover generally will not
exceed 100% in any one year. The degree of portfolio activity affects the
brokerage costs of the Fund and other transaction costs related to the sale of
securities and the reinvestment in other securities. Portfolio turnover may also
have capital gain tax consequences. The Fund's portfolio turnover rate for its
prior fiscal years and fiscal period is set forth under "Financial Highlights"
above.
Borrowing. The Fund may borrow, temporarily, up to 5% of its total assets for
extraordinary purposes and 15% of its total assets to meet redemption requests
which might otherwise require untimely disposition of portfolio holdings. To the
extent the Fund borrows for these purposes, the effects of market price
fluctuations on the portfolio's net asset value will be exaggerated. If, while
such borrowing is in effect, the value of the Fund's assets declines, the Fund
could be forced to liquidate portfolio securities when it is disadvantageous to
do so. The Fund would incur interest and other transaction costs in connection
with borrowing. The Fund will borrow only from a bank. The Fund will not make
any further investments if the borrowing exceeds 5% of its total assets until
such time as repayment has been made to bring the total borrowing below 5% of
its total assets.
Illiquid Investments. The Fund may invest up to 10% of its net assets in
illiquid securities. Illiquid securities are those that may not be sold or
disposed of in the ordinary course of business within seven days at
approximately the price at which they are valued. Under the supervision of the
Board of Trustees, the Advisor determines the liquidity of the Fund's
investments. The absence of a trading market can make it difficult to ascertain
a market value for illiquid investments. Disposing of illiquid securities before
maturity may be time consuming and expensive, and it may be difficult or
impossible for the Fund to sell illiquid investments promptly at an acceptable
price. Included within the category of illiquid securities will also be
restricted securities, which cannot be sold to the public without registration
under the federal securities laws. Unless registered for sale, these securities
can only be sold in privately negotiated transactions or pursuant to an
exemption from registration.
Forward Commitments and When-Issued Securities. The Fund may purchase
when-issued securities and commit to purchase securities for a fixed price at a
future date beyond customary settlement time. The Fund is required to hold and
to maintain in a segregated account until the settlement date cash, U.S.
Government Securities, or high-grade debt obligations in an amount sufficient to
meet the purchase price. Purchasing securities on a when-issued or forward
commitment basis involves a risk of loss if the value of the security to be
purchased declines prior to the settlement date; this risk is in addition to the
risk of decline in value of the Fund's other assets. In addition, no income
accrues to the purchaser of when-issued securities during the period prior to
issuance. Although the Fund would generally purchase securities on a when-issued
or forward commitment basis with the intention of acquiring securities for its
portfolio, the Fund may dispose of a when-issued security or forward commitment
prior to settlement if the Advisor deems it appropriate to do so. The Fund may
realize short-term gains or losses upon such sales.
INVESTMENT LIMITATIONS
To limit exposure to risk, the Fund has adopted certain investment limitations.
Some of these limitations are that the Fund will not: (1) issue senior
securities, borrow money, or pledge its assets, except that it may borrow from
banks as a temporary measure (a) for extraordinary or emergency purposes, in
amounts not exceeding 5% of the Fund's total assets, or (b) to meet redemption
requests which might otherwise require untimely disposition of portfolio
securities in amounts not exceeding 15% of its total assets (the Fund will not
make any investments if borrowing exceeds 5% of its total assets); (2) make
loans of money or securities, except that the Fund may invest in repurchase
agreements (but repurchase agreements having a maturity of longer than seven
days are subject to the limitation on investing in illiquid securities); (3)
invest more than 10% of its net assets in illiquid securities; (4) invest in
securities of issuers which have a record of less than three years' continuous
operation (including predecessors and, in the case of bonds, guarantors), if
more than 5% of its total assets would be invested in such securities; (5)
purchase or sell commodities, commodities' contracts, real estate (including
limited partnership interests, but excluding readily marketable interests in
real estate investment trusts or other securities secured by real estate or
interests therein or readily marketable securities issued by companies that
invest in real estate or interests therein), or interests in oil, gas, or other
mineral exploration or development programs or leases (although it may invest in
readily marketable securities of issuers that invest in or sponsor such programs
or leases); (6) with respect to 75% of Fund assets, invest more than 5% at cost
of its total assets in the securities of any one issuer or purchase more than
10% of the outstanding voting stock of any one issuer; and (7) write, purchase,
or sell puts, calls, straddles, spreads, or combinations thereof, or futures
contracts or related options. Investment limitations (1), (5), (6), and (7) are
deemed fundamental; that is, they may not be changed without shareholder
approval. See "Investment Limitations" in the Fund's Statement of Additional
Information for a complete list of investment limitations.
If the Board of Trustees of the Trust determines that the Fund's investment
objective can best be achieved by a substantive change in a non-fundamental
investment limitation, the Board can make such change without shareholder
approval and will disclose any such material changes in the then current
Prospectus. Any limitation that is not specified in the Fund's Prospectus, or in
the Statement of Additional Information, as being fundamental, is
non-fundamental. If a percentage limitation is satisfied at the time of
investment, a later increase or decrease in such percentage resulting from a
change in the value of the Fund's portfolio securities will not constitute a
violation of such limitation.
HOW NET ASSET VALUE IS DETERMINED
The net asset value for each Institutional Share of the Fund is determined at
the time trading closes on the New York Stock Exchange ("NYSE") (currently 4:00
p.m., New York time, Monday through Friday), except on business holidays when
the NYSE is closed. The net asset value of the shares of the Fund for purposes
of pricing sales and redemptions is equal to the total market value of its
investments and other assets, less all of its liabilities, divided by the number
of its outstanding shares.
Securities that are listed on a securities exchange are valued at the last
quoted sales price at the time the valuation is made. Price information on
listed securities is taken from the exchange where the security is primarily
traded by the Fund. Securities that are listed on an exchange and which are not
traded on the valuation date are valued at the bid price. Prices for securities
traded on foreign exchanges will be converted to the equivalent price in U.S.
currency using the published currency exchange rates available at the time of
valuation. Unlisted securities for which market quotations are readily available
are valued at the latest quoted sales price, if available, otherwise, at the
latest quoted bid price. Temporary cash investments with maturities of 60 days
or less will be valued at amortized cost, which approximates market value.
Securities for which no current quotations are readily available are valued at
fair value as determined in good faith using methods approved by the Board of
Trustees of the Trust. Securities may be valued on the basis of prices provided
by a pricing service when such prices are believed to reflect the fair market
value of such securities.
PERFORMANCE DATA
From time to time the Fund may advertise its average annual total return for
each Class of Fund shares. The average annual total return refers to the average
annual compounded rates of return over 1-, 3-, 5-, and 10-year periods that
would equate an initial amount invested at the beginning of a stated period to
the ending redeemable value of the investment. The calculation assumes the
reinvestment of all dividends and distributions, includes all recurring fees
that are charged to all shareholder accounts, and deducts all nonrecurring
charges at the end of each period. If the Fund has been operating less than 1,
3, 5, or 10 years, the time period during which the Fund has been operating is
substituted.
In addition, the Fund may advertise total return performance data other than
average annual total return for each Class of Fund shares. Such data would show
a percentage rate of return encompassing all elements of return (i.e., income
and capital appreciation or depreciation) and would assume reinvestment of all
dividends and capital gain distributions. Such other total return data may be
shown for the same or different periods as those used for average annual total
return. These data may consist of a cumulative percentage rate of return, actual
year-by-year rates of return, or any combination thereof. A cumulative
percentage rate of return would show the cumulative change in value of an
investment in the Fund for various periods.
The total return of the Fund could be increased to the extent the Advisor may
waive all or a portion of its fees or reimburse all or a portion of the Fund's
expenses. It is not currently contemplated that the Advisor will waive portions
of its fees or reimburse Fund expenses except as provided under "Fee Table."
Total return figures are based on the historical performance of the Fund, show
the performance of a hypothetical investment, and are not intended to indicate
future performance. The Fund's quotations may from time to time be used in
advertisements, sales literature, shareholder reports, or other communications
to shareholders. For further information, see "Additional Information on
Performance" in the Statement of Additional Information.
MANAGEMENT OF THE FUND
Trustees and Officers. The Fund is a diversified series of the Capital
Management Investment Trust (the "Trust"), a registered, open-end management,
investment company organized as a Massachusetts business trust on October 18,
1994. The Board of Trustees has overall responsibility for management of the
Fund under the laws of Massachusetts and the Declaration of Trust. The Statement
of Additional Information identifies the Trustees and officers of the Trust and
the Fund and provides information about them. The Trustees of the Trust and
executive officers of the Fund and their principal occupations for the last five
years are set forth below:
TRUSTEES
Lucius E. Burch Mr. Burch is Chairman and Chief Executive Officer of Massey
Trustee Burch Investment Group, Inc., a large, southeastern venture
capital firm based in Nashville, Tennessee. After working as
a commercial banker at Morgan Guaranty Trust Co. in New York
City, he joined Massey Investment Company, the predecessor
of Massey Burch Investment Group, as a financial analyst and
portfolio manager in 1968. He has extensive experience in
management consulting, corporate finance, and mergers and
acquisitions. Mr. Burch currently serves on the Board of
Directors of QMS, Inc., a NYSE-listed company; Bio-Safe
Systems, Inc.; and several private companies. He is a
graduate of the University of North Carolina.
Thomas A. Mr. Saunders is a Partner of Saunders Karp & Co., L.P., a
Sauders III New York-based merchant bank. From 1974 to 1989 he was a
Trustee Managing Director of Morgan Stanley & Co., Incorporated, and
from 1987 to 1989 he was Chairman of Morgan Stanley's
Leveraged Equity Fund II, L.P. Mr. Saunders received a B.S.
degree in Electrical Engineering from the Virginia Military
Institute and an M.B.A. degree from the University of
Virginia's Darden Graduate School of Business
Administration. He is Chairman of the Board of Trustees of
the Darden Graduate School, as well as a member of the Board
of Visitors of the Virginia Military Institute. Mr. Saunders
is also a member of the Board of Trustees of the Cold Spring
Harbor Laboratory. He serves as a Director to numerous
industrial, consumer, and healthcare companies in the
Saunders Karp portfolio.
David A. Shields Mr. Shields is a Managing Director of the Advisor and the
Trustee Distributor. He has been a member of the New York Stock
Exchange since 1968, specializing in institutional
brokerage. Mr. Shields served on the Board of Directors of
the NYSE from 1986 to 1992, having served as Governor prior
to that time. He has served on various NYSE committees
including the Audit, Market Performance, and the Committee
for Review. He is past director of the Alliance of Floor
Brokers of the NYSE and served as its President from 1980 to
1986. Mr. Shields has acted in various advisory capacities
on capital markets in Russia, Estonia, and Norway. He holds
a B.S. degree in Economics from the Wharton School of the
University of Pennsylvania and a Graduate Certificate from
the London School of Economics.
J.V.Shields,Jr. Mr. Shields is a Managing Director and Chairman of the
Trustee Advisor and the Distributor. He previously had been the
Director of Corporate Finance at H.N. Whitney, Goadby &
Company. He is responsible for development of the Advisor's
corporate policy. He currently serves as Chairman of the
Board of Trustees of the 59 Wall Street Trust, the Brown
Brothers Harriman & Co. mutual fund group, and serves on the
Board of Directors of Flowers Industries, Inc., a
NYSE-listed, diversified, food manufacturer. He received his
B.S.B.A. degree in Finance and Economics from Georgetown
University.
Anthony J. Mr. Walton is President of Armstrong Holdings Corporation, a
Walton private investment company and corporate finance advisory
Trustee firm. He is also Vice Chairman of Petsec Energy, Inc., a
U.S. exploration and production company based in Sydney,
Australia, and Lafayette, Louisiana. Previously, he was
Chief Executive Officer of the Llama Company, a regional
investment bank in Fayetteville, Arkansas, which is owned by
members of the Walton family, founders of Wal-Mart Stores,
Inc. Prior to joining Llama, he was a Director of Westpac
Banking Corporation of Sydney, Australia, and served as
Chief General Manager of the combined Americas & Europe
Group in New York. From 1968 to 1983, Mr. Walton was with
The Chase Manhattan Bank, NA, in New York and London in
various executive positions. He holds a B.A. degree from
Haverford College and an M.B.A. degree in International
Finance from the University of Pennsylvania's Wharton
Graduate School of Finance.
EXECUTIVE
OFFICERS
C.Lennis Mr. Koontz joined the Advisor in 1992. From 1987 to 1992, he
Koontz, II was associated with Smith Barney Capital Management as a
President senior portfolio manager and analyst. From 1976 until 1987,
he was with Scudder, Stevens & Clark in New York where he
was a Managing Director, member of the stock strategy group,
and head of the employee benefit plans group. At the Advisor
he serves as a portfolio manager/analyst. Mr. Koontz
received both his B.S. and M.S. degrees from the University
of Tennessee, majoring in industrial management. He is a
Chartered Financial Analyst and member of the New York
Society of Security Analysts.
Joseph A .Zock Mr. Zock joined the Advisor when the firm was founded in
Vice President 1982. Prior to that he worked closely with the founders of
the Advisor at H.N. Whitney, Goadby & Company, where he had
served as portfolio manager and research analyst beginning
in 1980. He serves as a portfolio manager/analyst. He
received his BA degree in Political Science/Economics from
the University of New Hampshire, his J.D. degree from the
University of San Diego Law School, and a Certificate of
International Law from the University of London, Kings
College School of Law.
Investment Advisor. The Fund is advised by Capital Management Associates, Inc.
(the "Advisor"), pursuant to an advisory contract. Subject to the authority of
the Board of Trustees, the Advisor provides guidance and policy direction in
connection with its daily management of the Fund's assets. The Advisor manages
the investment and reinvestment of the Fund's assets in a manner consistent with
the investment objective and policies of the Fund. The Advisor is also
responsible for the selection of broker-dealers through which the Fund executes
portfolio transactions, subject to the brokerage policies established by the
Trustees, and it provides certain executive personnel to the Fund.
The Advisor, organized as a New York corporation in 1982, is controlled by its
officers and directors, with the principal shareholders being J.V. Shields, Jr.;
David V. Shields; C. Lennis Koontz, II, CFA; and Joseph A. Zock. An investment
team headed by Messrs. Koontz and Zock and consisting of seven full-time
analysts 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 in a style identical to that
of the Fund to individuals, corporations, pension and profit sharing plans,
endowments, and other business and private accounts since 1982. The Advisor
currently serves as investment advisor to over $1 billion in assets, most of
which is managed using similar investment objectives to those employed by the
Fund.
The Advisor's address is 140 Broadway, New York, New York 10005.
As full compensation for the investment advisory services provided to the Fund,
the Fund pays the Advisor monthly compensation based on the Fund's daily average
net assets at the annual rate of 1.00% of the first $100 million of the Fund's
net assets, 0.90% of the next $150 million, 0.85% of the next $250 million and
0.80% of all assets over $500 million. The Advisor has voluntarily waived
substantially all of its fee and reimbursed a portion of the Fund's operating
expenses for the fiscal year ended November 30, 1997. The total fees waived
amounted to $52,043 (the Advisor received $1,921 of its fees) and expenses
reimbursed amounted to $25,031.
Administrator. The Nottingham Company (the "Administrator") serves as the Fund's
administrator. The Administrator, subject to the authority of the Board of
Trustees, provides administrative services to and is generally responsible for
the overall management and day-to-day administrative operations of the Fund,
pursuant to an administration agreement with the Trust.
The Administrator, which was established as a North Carolina corporation in
1988, has been operating (with affiliates) as a financial services firm since
1985. Frank P. Meadows III is the firm's Managing Director and controlling
shareholder.
The Administrator, whose address is 105 North Washington Street, Post Office
Drawer 69, Rocky Mount, North Carolina 27802-0069, provides the Fund with office
space and facilities; provides certain executive personnel to the Fund;
maintains the Fund's accounting records; computes daily the Fund's net asset
value; supervises the preparation of tax returns, financial reports,
prospectuses, and proxy statements; and monitors compliance with certain
recordkeeping and regulatory requirements.
Compensation of the Administrator, based upon the average daily net assets of
the Fund, is at the following annual rates: On the first $50 million of the
Fund's net assets, 0.20%; on the next $50 million, 0.175%; on all assets over
$100 million, 0.15%. In addition, the Administrator currently receives a monthly
fee of $2,000 for the first class of the Fund and $750 for each additional class
of the Fund for accounting and recordkeeping services for the Fund. The
Administrator also charges the Fund for certain costs involved with the daily
valuation of investment securities and is reimbursed for out-of-pocket expenses.
The Administrator charges a minimum fee of $3,000 per month for all of its fees
taken in the aggregate, analyzed monthly.
Transfer Agent. NC Shareholder Services, LLC (the "Transfer Agent") serves as
the Fund's transfer, dividend paying, and shareholder servicing agent. The
Transfer Agent, subject to the authority of the Board of Trustees, provides
transfer agency services pursuant to an agreement with the Administrator, which
has been approved by the Trust.
The Transfer Agent, whose address is 107 North Washington Street, Post Office
Box 4365, Rocky Mount, North Carolina 27803-0365, was established as a North
Carolina limited liability company in 1997. John D. Marriott, Jr., is the firm's
controlling member.
The Transfer Agent maintains the records of each shareholder's account, answers
shareholder inquiries concerning accounts, processes purchases and redemptions
of the Fund's shares, acts as dividend and distribution disbursing agent, and
performs other shareholder servicing functions. The Transfer Agent is
compensated for its services by the Administrator and not directly by the Fund.
Distributor. Shields & Company (the "Distributor"), a New York corporation, is
the principal underwriter and distributor of the shares of the Fund pursuant to
a Distribution Agreement between the Trust and the Distributor. The Distributor
may sell Fund shares to or through qualified securities dealers and others.
J.V. Shields, Jr.; David V. Shields; and Richard B. Thatcher, affiliated persons
of the Fund, are also affiliated persons of the Advisor and the Distributor.
The principal business address of the Distributor is 140 Broadway, New York, New
York 10005.
Custodian. The custodian of the Fund's assets is First Union National Bank of
North Carolina (the "Custodian"). The Custodian's mailing address is Two First
Union Center, Charlotte, North Carolina 28288-1151. The Advisor, Administrator,
Transfer Agent, Distributor, or interested persons thereof, may have banking
relationships with the Custodian.
Other Fund Costs. The Fund pays all expenses not assumed by the Advisor or the
Administrator. Fund expenses include the fees and expenses, if any, of the
Trustees and officers who are not affiliated persons of the Advisor; fees of the
Custodian; interest expense, taxes, brokerage fees, and commissions; fees and
expenses of the Fund's shareholder servicing operations; fees and expenses of
qualifying and registering the Fund's shares under federal and state securities
laws; expenses of preparing, printing, and distributing prospectuses and reports
to existing shareholders; auditing and legal expenses; insurance expense;
association dues; and the expense of shareholders' meetings and proxy
solicitations. The Fund is also liable for any nonrecurring expenses as may
arise such as litigation to which the Fund may be a party. The Fund may be
obligated to indemnify the Trustees and officers with respect to such
litigation. Any expenses relating only to a particular Class of shares of the
Fund will be borne solely by such Class of shares.
Brokerage. The Fund has adopted brokerage policies that allow the Advisor to (a)
prefer brokers which provide research services to the Advisor or (b) utilize a
brokerage firm affiliated with the Advisor or the Trust, including the
Distributor, an affiliate of the Advisor and the Trust. In all cases, the
primary consideration for selection of broker-dealers will be to obtain the best
overall terms available for the Fund. Research services obtained through Fund
brokerage transactions may be used by the Advisor for its other clients, and
conversely, the Fund may benefit from research services obtained through the
brokerage transactions of the Advisor's other clients. During the fiscal year
ended November 30, 1997, the total brokerage commissions paid by the Fund were
$16,311, of which $15,789 was paid to the Distributor. More information about
the brokerage practices of the Fund is contained in the Statement of Additional
Information under the heading "Portfolio Transactions."
HOW TO PURCHASE SHARES
Shares in the Fund may be purchased through members of the National Association
of Securities Dealers, Inc., who are registered in the state where the purchase
is made and who have a sales agreement with the Distributor. After a shareholder
account is established and the investment dealer is recorded, subsequent orders
for shares may be mailed directly to the Fund.
Assistance in opening accounts and Fund Shares Applications may be obtained from
the Fund by calling 1-888-626-3863, or by writing to the Fund at the address
shown below for regular mail orders. Institutional Shares may be purchased by
any account managed by the Advisor and any other institutional investor with a
minimum investment in the Fund of at least $250,000. Assistance is also
available through any broker-dealer authorized to sell shares in the Fund.
Payment for shares purchased may be made through your account at the
broker-dealer processing your application and order to purchase. The Fund's
shares are offered at the net asset value next determined after your order is
received by the Fund in proper order as indicated herein. The minimum initial
investment, unless stated otherwise herein, is $250,000. The Fund may, in the
Advisor's sole discretion, accept certain accounts with less than the stated
minimum initial investment.
Payment must be made by check or money order drawn on a U.S. bank and payable in
U.S. dollars. Under certain circumstances the Fund, at the sole discretion of
the Advisor, may allow payment in kind for Fund shares purchased, by accepting
securities in lieu of cash. Any securities so accepted would be valued on the
date received and included in the calculation of net asset value of the Fund.
See the Statement of Additional Information for additional information on
purchases in kind.
If checks are returned unpaid due to nonsufficient funds, stop payment, or other
reasons, the Fund will charge $20. To recover any such loss or charge, the Fund
reserves the right, without further notice, to redeem shares of the Fund already
owned by any purchaser whose order is canceled, and such a purchaser may be
prohibited from placing further orders unless investments are accompanied by
full payment by wire or cashier's check.
Orders received by the Fund, whether by mail, bank wire, or facsimile order from
a qualified broker-dealer, and effective prior to the time trading closes on the
NYSE (currently 4:00 p.m. New York time, Monday through Friday), will purchase
shares at the net asset value determined at that time. Orders received by the
Fund and effective after the close of trading, or on a day when the NYSE is not
open for business, will purchase shares at the net asset value next determined.
For orders placed through a qualified broker-dealer, such firm is responsible
for promptly transmitting purchase orders to the Fund. All purchases of shares
are subject to acceptance and are not binding until accepted. The Fund reserves
the right to reject any application or investment.
The Fund may enter into agreements with one or more brokers or other agents,
including discount brokers and other brokers associated with investment
programs, including mutual fund "supermarkets," and agents for qualified
employee benefit plans, pursuant to which such brokers or other agents may be
authorized to accept on the Fund's behalf purchase and redemption orders that
are in "good form." Such brokers or other agents may be authorized to designate
other intermediaries to accept purchase and redemption orders on the Fund's
behalf. Under such circumstances, the Fund will be deemed to have received a
purchase or redemption order when an authorized broker, agent, or, if
applicable, other designee, accepts the order. Such orders will be priced at the
Fund's net asset value next determined after they are accepted by an authorized
broker, agent, or other designee. The Fund may pay fees to such brokers or other
agents for their services, including without limitation, administrative,
accounting, and recordkeeping services.
Regular Mail Orders. Please complete and sign the Fund Shares Application
accompanying this Prospectus and mail it, with your check made payable to the
Fund, to:
Capital Management Mid-Cap Fund
Institutional Shares
c/o NC Shareholder Services
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
Applications must contain social security and Taxpayer Identification Numbers
("TINs"). If you have applied for a social security or TIN at the time of
completing your account application, the application should so indicate. Taxes
are not withheld from distributions to U.S. investors if certain IRS
requirements regarding TINs are met.
Bank Wire Orders. Investments can be made directly by bank wire. To establish a
new account or to add to an existing account by wire, please call the Fund at
1-888-626-3863, before wiring funds, to advise it of the investment, the dollar
amount of the investment, and the account identification number. This
notification will ensure prompt and accurate handling of your investment. Please
have your bank use the following wire instructions to purchase by wire:
First Union National Bank of North Carolina
Charlotte, North Carolina
ABA # 053000219
For the Capital Management Mid-Cap Fund - Institutional Shares
Acct. # 2000000861878
For further credit to (shareholder's name and SS# or EIN#)
It is important that the wire message contain all the relevant information and
that the Fund receive prior telephone notification to ensure proper credit. Upon
opening an account by wire order, you must, as soon as possible, complete and
mail your Fund Shares Application to the Fund as described under "Regular Mail
Orders" above. Investors should be aware that some banks may impose a wire
service fee.
Additional Investments. You may add to your account by mail or wire at any time
by purchasing shares at the then current net asset value. The minimum additional
investment is $500. Before adding funds by bank wire, please alert the Fund by
telephone at 1-888-626-3863. Follow the wire order instructions set forth above
to send your wire order. When calling for any reason, please have your account
number ready, if known. Mail orders should include, when possible, the "Invest
by Mail" stub which is attached to your Fund confirmation statement. Otherwise,
be sure to identify your account in your letter.
Employees and Affiliates of the Fund. The minimum purchase requirement is not
applicable to accounts of Trustees, officers, or employees of the Fund or
certain parties related thereto. The minimum initial investment for such
accounts is $1,000. See the Statement of Additional Information for further
details.
Stock Certificates. Stock certificates will not be issued for your shares.
Evidence of ownership will be given by issuance of periodic account statements
which will show the number of shares owned.
Automatic Investment Plan. The automatic investment plan enables shareholders to
make regular monthly or quarterly investments in shares through automatic
charges to their checking account. With shareholder authorization and bank
approval, the Fund will automatically charge the checking account for the amount
specified ($100 minimum), which will be automatically invested in shares at the
public offering price on or about the 21st day of the month. The shareholder may
change the amount of the investment or discontinue the plan at any time by
writing to the Fund.
HOW TO REDEEM SHARES
Shares of the Fund may be redeemed (the Fund will repurchase them from
shareholders) by mail or telephone. Any redemption proceeds may be more or less
than the purchase price of your shares, depending on the market value of the
Fund's portfolio securities. Redemption orders received in proper form, as
indicated herein, by the Fund, whether by mail or telephone, prior to the time
trading closes on the NYSE (currently 4:00 p.m. New York time, Monday through
Friday), will be made at the net asset value determined at that time. Redemption
orders received in proper form by the Fund after the close of trading or on a
day when the NYSE is not open for business, will be made at the net asset value
next determined. There is no charge for redemptions from the Fund other than
possible charges for wiring redemption proceeds. You may also redeem your shares
through a broker-dealer, which may charge a fee for its services.
The Board of Trustees reserves the right to redeem involuntarily any account
having a net asset value of less than $250,000 (due to redemptions, exchanges,
or transfers, and not due to market action) upon 60-days' written notice. If the
shareholder brings his account net asset value up to at least $250,000 during
the notice period, the account will not be redeemed. Redemptions from retirement
plans may be subject to federal income tax withholding.
If you are uncertain of the requirements for redemption, please contact the Fund
at 1-888-626-3863 or write to the address shown below.
Regular Mail Redemptions. Your request should be addressed to Capital Management
Mid-Cap Fund, c/o NC Shareholder Services, 107 North Washington Street, Post
Office Box 4365, Rocky Mount, North Carolina 27803-0365. Your request for
redemption must include:
1) Your letter of instruction specifying the account number and the
number of shares, or the dollar amount, to be redeemed. This request
must be signed by all registered shareholders in the exact names in
which they are registered;
2) Any required signature guarantees (see "Signature Guarantees" below);
and
3) Other supporting legal documents, if required in the case of estates,
trusts, guardianships, custodianships, corporations, partnerships,
pension or profit sharing plans, and other organizations.
Your redemption proceeds will be sent to you within seven days after receipt of
your redemption request. However, the Fund may delay forwarding a redemption
check for recently purchased shares while it determines whether the purchase
payment will be honored. Such delay (which may take up to fifteen days from the
date of purchase) may be reduced or avoided if the purchase is made by certified
check or wire transfer. In all cases, the net asset value next determined after
receipt of the request for redemption will be used in processing the redemption
request. The Fund may suspend redemption privileges or postpone the date of
payment (i) during any period that the NYSE is closed, or trading on the NYSE is
restricted as determined by the Securities and Exchange Commission (the
"Commission"); (ii) during any period when an emergency exists as defined by the
rules of the Commission, as a result of which it is not reasonably practicable
for the Fund to dispose of securities owned by it or to determine fairly the
value of its assets; and (iii) for such other periods as the Commission may
permit.
Telephone and Bank Wire Redemptions. The Fund offers shareholders the option of
redeeming shares by telephone and bank wire under certain limited conditions.
The Fund will redeem shares in this manner when so requested by the shareholder
only if the shareholder confirms redemption instructions in writing.
The Fund may rely upon confirmation of redemption requests transmitted via
facsimile (FAX# 919-972-1908). The confirmation instructions must include:
1) Designation of Class (Institutional or Investor),
2) Shareholder name and account number,
3) Number of shares or dollar amount to be redeemed,
4) Instructions for transmittal of redemption funds to the shareholder,
and
5) Shareholder signature as it appears on the application then on file
with the Fund.
The net asset value used in processing the redemption request will be the net
asset value next determined after the telephone or bank wire request is
received. Redemption proceeds will not be distributed until written confirmation
of the redemption request is received, per the instructions above. You can
choose to have redemption proceeds mailed to you at your address of record, your
bank, or to any other authorized person, or you can have the proceeds sent by
bank wire to your bank ($5,000 minimum). Shares of the Fund may not be redeemed
by wire on days in which your bank is not open for business. You can change your
redemption instructions anytime you wish by filing a letter including your new
redemption instructions with the Fund. See "Signature Guarantees" below. The
Fund reserves the right to restrict or to cancel telephone and bank wire
redemption privileges for shareholders, without notice, if the Trustees believe
it to be in the best interest of the shareholders to do so. During drastic
economic and market changes, telephone redemption privileges may be difficult to
implement.
The Fund in its discretion may choose to pass through to redeeming shareholders
any charges imposed by the Custodian for wire redemptions. The Custodian
currently charges the Fund $10.00 per transaction for wiring redemption
proceeds. If this cost is passed through to redeeming shareholders by the Fund,
the charge will be deducted automatically from your account by redemption of
shares in your account. Your bank or brokerage firm may also impose a charge for
processing the wire. If wire transfer of funds is impossible or impractical, the
redemption proceeds will be sent by mail to the designated account.
You may redeem shares, subject to the procedures outlined above, by calling the
Fund at 1-888-626-3863. 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.
Signature Guarantees. To protect your account and the Fund from fraud, signature
guarantees are required to be sure that you are the person who has authorized a
change in registration or standing instructions for your account. Signature
guarantees are required for (1) change of registration requests, (2) requests to
establish or to change exchange privileges or telephone and bank wire redemption
service other than through your initial account application, and (3) redemption
requests in excess of $50,000. Signature guarantees are acceptable from a member
bank of the Federal Reserve System, a savings and loan institution, credit union
(if authorized under state law), registered broker-dealer, securities exchange,
or association clearing agency and must appear on the written request for change
of registration, establishment or change in exchange privileges, or redemption
request.
Systematic Withdrawal Plan. A shareholder who owns shares of the Fund valued at
$250,000 or more at the current offering price may establish a Systematic
Withdrawal Plan to receive a monthly or quarterly check in a stated amount not
less than $100. Each month or quarter, as specified, the Fund will automatically
redeem sufficient shares from your account to meet the specified withdrawal
amount. The shareholder may establish this service whether dividends and
distributions are reinvested in shares of the Fund or paid in cash. Call or
write the Fund for an application form. See the Statement of Additional
Information for further details.
DIVIDENDS AND DISTRIBUTIONS
The Fund distributes substantially all of its net investment income, if any, in
the form of dividends. The Fund may pay dividends, if any, quarterly and will
distribute net realized capital gains, if any, at least annually.
Unless a shareholder elects to receive cash, dividends and capital gains will be
reinvested automatically in additional full and fractional Institutional Shares
of the Fund at the net asset value per share next determined. Shareholders
wishing to receive their dividends or capital gains in cash may make their
request in writing to the Fund, c/o NC Shareholder Services at 107 North
Washington Street, Post Office Box 4365, Rocky Mount, North Carolina 27803-0365.
That request must be received by the Fund prior to the record date to be
effective for the next dividend. If cash payment is requested, checks will be
mailed within five business days after the last day of each quarter or the
Fund's fiscal year end, as applicable. Each shareholder of the Fund will receive
a quarterly summary of his or her account, including information regarding
reinvested dividends from the Fund. Tax consequences to shareholders of
dividends and distributions are the same if received in cash or in additional
shares of the Fund.
To satisfy certain requirements of the Code, the Fund may declare special
year-end dividend and capital gains distributions during December. Such
distributions, if received by shareholders by January 31, are deemed to have
been paid by the Fund and received by shareholders on December 31 of the prior
year.
There is no fixed dividend rate, and there can be no assurance regarding the
payment of any dividends or the realization of any gains. The Fund's net
investment income available for distribution to holders of Institutional Shares
will be reduced by the amount of any expenses allocated to the Institutional
Shares.
FEDERAL INCOME TAX INFORMATION
Taxation of the Fund. The Internal Revenue Code of 1986, as amended (the
"Code"), treats the Fund, and any other series of the Trust, as a separate,
regulated investment company. The Fund intends to remain qualified as a
regulated investment company under the Code by distributing substantially all of
its "net investment income" to shareholders and meeting other requirements of
the Code. For the purpose of calculating dividends, net investment income
consists of income accrued on portfolio assets, less accrued expenses. Upon
qualification, the Fund will not be liable for federal income taxes to the
extent earnings are distributed. The Board of Trustees retains the right for the
Fund, or any other series of the Trust, to determine for any particular year if
it is advantageous not to qualify as a regulated investment company. Regulated
investment companies, such as the Fund, are subject to a non-deductible 4%
excise tax to the extent they do not distribute the statutorily required amount
of investment income, determined on a calendar year basis, and capital gain net
income, using an October 31 year end measuring period. The Fund intends to
declare or distribute dividends during the calendar year in an amount sufficient
to prevent imposition of the 4% excise tax.
Taxation of Shareholders. For federal income tax purposes, any dividends and
distributions from short-term capital gains that a shareholder receives in cash
from the Fund or which are re-invested in additional shares will be taxable
ordinary income. If a shareholder is not required to pay a tax on income, he
will not be required to pay federal income taxes on the amounts distributed to
him. A dividend declared in October, November, or December of a year and paid in
January of the following year will be considered to be paid on December 31 of
the year of declaration.
Distributions paid by the Fund from long-term capital gains, whether received in
cash or reinvested in additional shares, are taxable as long-term capital gains,
regardless of the length of time an investor has owned shares in the Fund.
Capital gain distributions are made when the Fund realizes net capital gains on
sales of portfolio securities during the year. Dividends and capital gain
distributions paid by the Fund shortly after shares have been purchased,
although in effect a return of investment, are subject to federal income
taxation.
The sale of shares of the Fund is a taxable event and may result in a capital
gain or loss. Capital gain or loss may be realized from an ordinary redemption
of shares or an exchange of shares between two mutual funds (or two series of a
mutual fund).
The Trust will inform shareholders of the Fund of the source of their dividends
and capital gains distributions at the time they are paid and, promptly after
the close of each calendar year, will issue an information return to advise
shareholders of the federal tax status of such distributions and dividends.
Dividends and distributions may also be subject to state and local taxes.
Shareholders should consult their tax advisors regarding specific questions as
to federal, state or local taxes.
The Fund is required by federal law to withhold and to remit to the IRS 31% of
the dividends, capital gains distributions, and in certain cases, proceeds of
redemptions paid to any shareholder who fails to furnish the Fund with a correct
taxpayer identification number, who under-reports dividend or interest income or
who fails to provide certification of tax identification number. Instructions to
exchange or to transfer shares held in established accounts will be refused
until the certification has been provided. To avoid this withholding
requirement, you must certify on your application, or on a separate W-9 Form
supplied by the Fund, that your taxpayer identification number is correct and
that you are not currently subject to backup withholding, or you are exempt from
backup withholding. For individuals, your taxpayer identification number is your
social security number.
ORGANIZATION AND CAPITAL SHARES
The Fund is a series of the Capital Management Investment Trust (the "Trust"),
an open-end investment company that was organized in 1994 as a Massachusetts
business trust. The Trust is currently offering one series of shares,
representing the Fund, which shares are divided into two classes as described
below. The Board of Trustees may, in the future, authorize the issuance of other
series of capital shares (or classes of such shares) representing shares of
additional funds. All shares of the Trust, when issued, will be fully paid and
non-assessable.
The Declaration of Trust authorizes the Board of Trustees to classify and
reclassify any unissued shares into one or more classes of shares. Pursuant to
such authority, the Board of Trustees has authorized the issuance of an
unlimited number of shares in each of two classes ("Investor Shares" and
"Institutional Shares") representing equal pro rata interests in the Fund,
except that the classes bear different expenses that reflect the difference in
services provided to them.
Investor Shares of the Fund are offered to the public as an investment vehicle
for individuals, institutions, corporations, and fiduciaries. Holders of
Investor Shares bear an initial sales charge and potential ongoing shareholder
servicing and distribution fees described in the prospectus for such shares.
Institutional Shares are sold without an initial sales charge and bear no
shareholder servicing or distribution fees. As a result of these different
charges and fees, the total return on the Fund's Institutional Shares will
generally be higher than the total return on the Investor Shares. Standardized
total return quotations are computed separately for each Class of shares of the
Fund.
THIS PROSPECTUS RELATES TO THE FUND'S INSTITUTIONAL SHARES AND DESCRIBES ONLY
THE POLICIES, OPERATIONS, CONTRACTS, AND OTHER MATTERS PERTAINING TO THE
INSTITUTIONAL SHARES. THE FUND ALSO ISSUES A CLASS OF INVESTOR SHARES. SUCH
OTHER CLASS MAY HAVE DIFFERENT SALES CHARGES AND EXPENSES, WHICH MAY AFFECT
PERFORMANCE. INVESTORS MAY CALL THE FUND AT 1-888-626-3863 TO OBTAIN MORE
INFORMATION CONCERNING OTHER CLASSES AVAILABLE TO THEM. INVESTORS MAY OBTAIN
INFORMATION CONCERNING OTHER CLASSES FROM THEIR SALES REPRESENTATIVE, THE
DISTRIBUTOR, THE FUND, OR ANY OTHER PERSON WHICH IS OFFERING OR MAKING AVAILABLE
TO THEM THE SECURITIES OFFERED IN THIS PROSPECTUS.
Under Massachusetts law, shareholders of a business trust may, under certain
circumstances, be held personally liable as partners for the obligations of the
trust. The Declaration of Trust of the Trust, therefore, contains provisions
that are intended to mitigate such liability.
VOTING RIGHTS
Each outstanding share of the Trust is entitled to one vote for each full share
and a fractional vote for each fractional share on all matters which concern the
Trust as a whole. The Trust's shareholders will vote in the aggregate and not by
fund or class, except where otherwise required by law or when the Board of
Trustees determines that the matter to be voted on affects only the interests of
the shareholders of a particular fund or class. Examples of matters that would
affect only a particular fund are any proposed change in the fundamental
investment objective or policies of that fund or a proposed change in the
investment advisory agreement for a fund. The shares of the Trust will have
noncumulative voting rights, which means that the holders of more than 50% of
the shares voting for the election of Trustees can elect all of the Trustees if
they so choose. The Trust may dispense with the annual meeting of shareholders
in any year in which it is not to call a meeting of shareholders for purposes of
voting on the removal of a Trustee or Trustees. Thus, there will normally be no
meeting of shareholders for the purpose of electing Trustees, and the Fund is
not expected to have an annual meeting of shareholders.
Shareholders representing 10 percent or more of the Trust's shares then
outstanding may call a meeting for the purpose of removing one or more of the
Trustees. If shareholders desire to call a meeting to consider the removal of
one or more Trustees, they will be assisted in communicating with other
shareholders. See "Capital Shares and Voting" in the Statement of Additional
Information for more information. Shareholder inquiries may be made in writing,
addressed to the Fund at the address shown on the cover of this document.
As of March 6, 1998, the following persons owned of record or beneficially more
than 25% of the Institutional Shares of the Fund: Shields Capital Corporation
401(k), 140 Broadway, New York, New York 10005, record owner with respect to
45.60% of the Institutional Shares. Accordingly this person is deemed to be a
"controlling person" of the Institutional Shares of the Fund within the meaning
of the 1940 Act.
OTHER INFORMATION
Accountants. Deloitte & Touche LLP currently serves as independent auditors for
the Fund. Its address is 2500 One PPG Place, Pittsburgh, Pennsylvania
15222-5401.
Information on the Fund. The Fund provides annual and semi-annual reports to all
shareholders. The annual reports contain audited financial statements and other
information about the Fund.
<PAGE>
No dealer, salesman, or other person has been authorized to give any information
or to make any representations, other than those contained in this Prospectus,
and if given or made, such other information or representations must not be
relied upon as having been authorized by the Fund or the Advisor. This
Prospectus does not constitute an offering in any state in which an offering may
not lawfully be made.
The Fund reserves the right in its sole discretion to withdraw all or any part
of the offering made by this Prospectus or to reject purchase orders. All orders
to purchase shares are subject to acceptance by the Fund and are not binding
until confirmed or accepted in writing.
Investment Advisor
Capital Management Associates, Inc.
New York, New York
Distributor
Shields & Company
Member NYSE
New York, New York
Administrator
The Nottingham Company
Rocky Mount, North Carolina
Transfer Agent and Shareholder Servicing Agent
NC Shareholder Services
Rocky Mount, North Carolina
1-888-626-3863
Custodian
First Union National Bank of North Carolina
Charlotte, North Carolina
CAPITAL MANAGEMENT
MID-CAP FUND
INSTITUTIONAL SHARES
PROSPECTUS
April 1, 1998
<PAGE>
Prospectus Cusip Number 140296203
Nasdaq Symbol CMCIX
CAPITAL MANAGEMENT MID-CAP FUND
INVESTOR SHARES
The investment objective of the Capital Management Mid-Cap Fund (the "Fund") is
to seek capital appreciation principally through investments in equity
securities, consisting of common and preferred stocks and securities convertible
into common stocks. The Fund will focus on equity securities of
medium-capitalization companies. While there is no assurance that the Fund will
achieve its investment objective, it endeavors to do so by following the
investment policies described in this Prospectus.
This Prospectus relates to shares ("Investor Shares") representing interests in
the Fund. The Investor Shares are sold to the public as an investment vehicle
for individuals, institutions, corporations, and fiduciaries. See "Prospectus
Summary - Offering Price."
INVESTMENT ADVISOR
Capital Management Associates, Inc.
New York, New York
The Fund is a diversified series of the Capital Management Investment Trust, a
registered, open-end management, investment company. This Prospectus sets forth
concisely the basic information you should know before investing in the Fund.
You should read it and keep it for future reference. A Statement of Additional
Information dated April 1, 1998, containing additional information about the
Fund has been filed with the Securities and Exchange Commission (the "SEC") and
is incorporated by reference in this Prospectus in its entirety. The Fund's
address is 140 Broadway, New York, New York 10005, and its telephone number is
1-888-626-3863. A copy of the Statement of Additional Information may be
obtained at no charge by calling or writing the Fund. The SEC maintains an
Internet Web site (http://www.sec.gov) that contains the Statement of Additional
Information, material incorporated by reference, and other information regarding
the Fund.
Shares of the Fund are not deposits or obligations of, or guaranteed or endorsed
by, any financial institution, and Fund shares are not federally insured by the
Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other
agency. Investment in the Fund involves risks, including the possible loss of
principal.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
April 1, 1998
<PAGE>
TABLE OF CONTENTS
PROSPECTUS SUMMARY...........................................................2
FEE TABLE....................................................................3
FINANCIAL HIGHLIGHTS.........................................................4
INVESTMENT OBJECTIVE AND POLICIES............................................6
RISK FACTORS.................................................................8
INVESTMENT LIMITATIONS.......................................................9
HOW NET ASSET VALUE IS DETERMINED............................................9
PERFORMANCE DATA............................................................10
MANAGEMENT OF THE FUND......................................................10
HOW TO PURCHASE SHARES......................................................14
HOW TO REDEEM SHARES........................................................19
DIVIDENDS AND DISTRIBUTIONS.................................................21
FEDERAL INCOME TAX INFORMATION..............................................21
ORGANIZATION AND CAPITAL SHARES.............................................22
VOTING RIGHTS...............................................................22
OTHER INFORMATION...........................................................23
This Prospectus is not an offering of the securities herein described in any
state in which the offering is unauthorized. No sales representative, dealer, or
other person is authorized to give any information or to make any
representations other than those contained in this Prospectus.
<PAGE>
PROSPECTUS SUMMARY
The Fund. The Capital Management Mid-Cap Fund (the "Fund") is a diversified
series of the Capital Management Investment Trust (the "Trust"), a registered,
open-end management, investment company organized as a Massachusetts business
trust. This Prospectus relates to Investor Shares of the Fund. See "Organization
and Capital Shares."
Offering Price. The Investor Shares are offered at net asset value plus a 3%
sales charge, which is reduced on purchases involving larger amounts. The
Investor Shares are sold to the public as an investment vehicle for individuals,
institutions, corporations, and fiduciaries. Investor Shares bear certain
expenses relating to their distribution. See "Distributor and Distribution Fee"
below. The minimum initial investment is $2,500 ($1,000 for IRA accounts). The
minimum subsequent investment is $500. See "How to Purchase Shares."
Investment Objective. The investment objective of the Fund is to seek capital
appreciation principally through investments in equity securities, consisting of
common and preferred stocks and securities convertible into common stocks.
Realization of current income is not a significant investment consideration, and
any income realized will be incidental to the Fund's objective. The Fund will
focus on equity securities of medium-capitalization companies. See "Investment
Objective and Policies."
Advisor. Subject to the general supervision of the Trust's Board of Trustees and
in accordance with the Fund's investment policies, Capital Management
Associates, Inc., of New York, New York (the "Advisor"), manages the Fund's
investments. The Advisor manages over $1 billion in assets. Its clients include
individuals, corporations, pension and profit-sharing plans, and endowments. For
its services, the Advisor receives a monthly fee based on the Fund's daily net
assets at the annual rate of 1.00% of the first $100 million of Fund assets,
0.90% of the next $150 million, 0.85% of the next $250 million, and 0.80% of all
assets over $500 million. See "Management of the Fund - Investment Advisor."
Dividends. The Fund may pay income dividends, if any, quarterly; capital gains,
if any, are paid at least once each year. Dividend and capital gain
distributions are automatically reinvested in additional Investor Shares at net
asset value unless the shareholder elects to receive cash. See "Dividends and
Distributions."
Distributor and Distribution Fee. Shields & Company (the "Distributor") serves
as distributor of the Fund's shares. For its services, which include payments to
qualified securities dealers for sales of Fund shares, the Distributor receives
commissions consisting of the portion of the sales charge on sales of Investor
Shares remaining after the discounts it allows to securities dealers. Under the
Fund's Distribution Plan applicable to the Investor Shares, payments of up to
0.75% annually of the Investor Shares' average net assets may be made to the
Distributor and others to compensate them and to reimburse them for activities
intended to result in the sale of Investor Shares and the servicing of accounts
of holders of Investor Shares. The Distributor is affiliated with the Advisor.
See "Management of the Fund - Distributor" and "- Distribution Plan."
Redemption of Shares. There is no charge for redemptions other than possible
charges associated with wire transfers of redemption proceeds. Shares may be
redeemed at any time at the net asset value next determined after receipt of a
redemption request by the Fund. A shareholder who submits appropriate written
authorization may redeem shares by telephone. See "How to Redeem Shares."
Special Risk Considerations. The Fund is not intended to provide a complete
investment program, and there can be no assurance that the Fund will achieve its
investment objective. To the extent that equities comprise a major portion of
the Fund's portfolio, the Fund's net asset value will be subject to stock market
fluctuation. While the Fund will invest primarily in common stocks traded in
U.S. securities markets, some of the Fund's investments may include illiquid
securities, foreign securities, and securities purchased subject to a repurchase
agreement or on a "when-issued" basis, which involve certain risks. The Fund's
portfolio will also contain a significant amount of securities of
medium-capitalization companies, which may exhibit more volatility than
large-capitalization companies. The Fund may borrow only under certain limited
conditions (including to meet redemption requests) and not to purchase
securities. It is not the intent of the Fund to borrow except for temporary cash
requirements. Borrowing, if done, would tend to exaggerate the effects of market
and interest rate fluctuations on the Fund's net asset value until repaid. See
"Risk Factors."
FEE TABLE
The following table sets forth certain information in connection with the
expenses of the Investor Shares of the Fund for the current fiscal year. The
information is intended to assist the investor in understanding the various
costs and expenses borne by the Investor Shares of the Fund, and therefore
indirectly by its investors, the payment of which will reduce an investor's
return on an annual basis.
Shareholder Transaction Expenses for Investor Shares
Maximum Sales Charge Imposed on Purchases................................3.00%1
(as a percentage of offering price)
Maximum Sales Charge Imposed on Reinvested Dividends......................None
Deferred Sales Load.......................................................None
Redemption Fees*..........................................................None
Exchange Fees.............................................................None
* The Fund in its discretion may choose to pass through to redeeming
shareholders any charges imposed by the Custodian for wiring redemption
proceeds. The Custodian currently charges the Fund $10.00 per transaction
for wiring redemption proceeds.
Annual Fund Operating Expenses
for Investor Shares
(as a percentage of average net assets)
Management Fees..........................................................0.00% 3
12b-1 Fees...............................................................0.75% 2
Total Other Expenses.....................................................1.50% 3
-----
Total Fund Operating Expenses............................................2.25% 3
=====
EXAMPLE: You would pay the following expenses (including the maximum initial
sales charge) on a $1,000 investment in Investor Shares of the Fund, whether or
not you redeem at the end of the period, and assuming a 5% annual return:
1 year 3 years 5 years 10 years
-------- --------- --------- ---------
$52 $98 $147 $281
THE FOREGOING SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
1 Reduced for larger purchases. See "How to Purchase Shares - Sales Charges."
2 The Fund, with respect to the Investor Shares, has adopted a Distribution
and Service Plan pursuant to Rule 12b-1 under the Investment Company Act of
1940, as amended (the "1940 Act"), which provides that the Investor Shares
may pay distribution and service fees up to 0.75% of average net assets of
the Investor Shares annually. See "Management of the Fund - Distribution
Plan" below. Long-term shareholders may pay more than the economic
equivalent of the maximum front-end sales charge permitted by the National
Association of Securities Dealers.
3 The Total Fund Operating Expenses shown above are based on actual operating
expenses incurred by the Investor Shares of the Fund for the fiscal year
ended November 30, 1997, which, after fee waivers and expense
reimbursements, were 2.25% of average daily net assets of the Investor
Shares of the Fund, but restated to reflect the proportions for the expenses
anticipated to be incurred by the Investor Shares of the Fund for the
current fiscal year. Absent such waivers and reimbursements, the percentages
would have been 1.00% for Management Fees and 3.71% for Total Fund Operating
Expenses for the Investor Shares of the Fund for the fiscal year ended
November 30, 1997. The Advisor has voluntarily agreed to a reduction in the
fees payable to it and to reimburse expenses of the Fund, if necessary, in
an amount that limits Total Fund Operating Expenses (exclusive of interest,
taxes, brokerage fees and commissions, sales charges, and extraordinary
expenses) to not more than 2.25% of the Investor Shares' average daily net
assets. There can be no assurance that the Advisor's voluntary fee waivers
and expense reimbursements will continue in the future.
See "How to Purchase Shares" and "Management of the Fund" below for more
information about the fees and costs of operating the Fund. The example shown
above assumes a 5% annual return pursuant to the requirements of the Securities
and Exchange Commission. The hypothetical rate of return is not intended to be
representative of past or future performance of the Fund. The annual rate of
return may be greater or less than 5%.
FINANCIAL HIGHLIGHTS
The Fund has two classes of shares - Investor Shares and Institutional Shares.
See "Organization and Capital Shares." This Prospectus relates to Investor
Shares. The financial data included in the table below have been derived from
audited financial statements of the Fund. The financial data for the fiscal year
ended November 30, 1997 have been audited by Deloitte & Touche LLP, independent
auditors, whose report covering such fiscal year is included in the Statement of
Additional Information. The financial data for the prior fiscal year and period
were audited by other independent auditors. The information in the table below
should be read in conjunction with the Fund's latest audited financial
statements and notes thereto, which are included in the Statement of Additional
Information, a copy of which may be obtained at no charge by calling the Fund.
Further information about the performance of the Fund is contained in the Annual
Report of the Fund, a copy of which may be obtained at no charge by calling the
Fund.
<PAGE>
<TABLE>
<S> <C> <C> <C>
Investor Class
(For a Share Outstanding Throughout the Fiscal Period)
- -------------------------------------------------------------------------------------------------------------
Year ended Year ended Period ended
November 30, November 30, November 30,
1997 1996 1995*
- -------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ................. $13.96 $12.09 $11.07
--------------- ------------- -----------
Income from investment operations
Net investment income (loss) ..................... (0.05) 0.24 0.11
Net realized and unrealized gain on investments .. 4.53 2.06 1.02
--------------- ------------- -----------
Total from investment operations ............... 4.48 2.30 1.13
--------------- ------------- -----------
Distributions to shareholders from
Net investment income ............................ (0.03) (0.21) (0.11)
Distributions in excess of net investment income . (0.03) 0.00 0.00
Net realized gain from investment transactions ... (0.34) (0.22) 0.00
--------------- ------------- -----------
Total distributions ............................ (0.40) (0.43) (0.11)
--------------- ------------- -----------
Net asset value, end of period ....................... $18.04 $13.96 $12.09
=============== ============= ===========
Total return (a) ..................................... 33.11 % 19.61 % 10.24 %
=============== ============= ===========
Ratios/supplemental data
Net assets, end of period .......................... $1,873,942 $746,136 $550,814
============== ============= ===========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees .... 3.71 % 4.45 % 7.18 %(b)
After expense reimbursements and waived fees ..... 2.25 % 0.00 % 1.06 %(b)
Ratio of net investment income (loss) to average net assets
Before expense reimbursements and waived fees .... (2.10)% (2.50)% (4.23)%(b)
After expense reimbursements and waived fees ..... (0.63)% 1.95 % 1.89 %(b)
Portfolio turnover rate ............................ 66.30 % 82.30 % 47.74 %
Average commission rate paid(c) .................... $0.0607 $0.0598 N/A
</TABLE>
* For the period from April 7, 1995, (commencement of operations) to November
30, 1995.
(a) Total return does not reflect payment of a sales charge.
(b) Annualized.
(c) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged. This
disclosure was not required for the fiscal period of the Fund prior to
November 30, 1996.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to seek capital appreciation principally
through investments in equity securities, consisting of common and preferred
stocks and securities convertible into common stocks. Realization of current
income is not a significant investment consideration, and any income realized
will be incidental to the Fund's objective. The Fund's investment objective and
fundamental investment limitations described herein may not be altered without
the prior approval of a majority of the Fund's shareholders.
Under normal market conditions, at least 90% of the Fund's total assets will be
invested in equity securities and at least 65% of the Fund's total assets will
be invested in equity securities of medium-capitalization companies, which are
defined as those whose market capitalization range is from $300 million to $6
billion. However, as a temporary defensive measure, when the Advisor determines
that market conditions warrant such investments, the Fund may invest up to 100%
of its total assets in investment grade bonds, U.S. Government Securities,
repurchase agreements, or money market instruments. When the Fund invests its
assets in investment grade bonds, U.S. Government Securities, repurchase
agreements, or money market instruments as a temporary defensive measure, it is
not pursuing its stated investment objective. Under normal circumstances,
however, the Fund will also hold money market or repurchase agreement
instruments for funds awaiting investment, to accumulate cash for anticipated
purchases of portfolio securities, to allow for shareholder redemptions, and to
provide for Fund operating expenses.
Equity Selection Criteria. The Advisor will manage the Fund's assets by
utilizing an investment philosophy which has been employed by the Advisor since
the firm's inception. Under normal market conditions, the Fund will invest in
equity securities consisting of common stocks and securities convertible into
common stocks. The Fund intends to invest in a diversified group of common
stocks and will not concentrate its investments in any one industry or group.
The Fund will focus on medium-capitalization companies. This
market-capitalization range includes a universe of over 1,700 companies. Stocks
held in the portfolio will generally be traded on either the New York Stock
Exchange, American Stock Exchange, or the over-the-counter market. Foreign
securities, if held, will generally be traded on foreign securities exchanges.
Foreign securities may be held in the form of American Depository Receipts
("ADRs"). ADRs are foreign securities denominated in U.S. dollars and traded on
U.S. securities markets. See "Foreign Securities" below.
An economic forecast is developed by the Advisor's Investment Committee to guide
industry allocation decisions. Medium-capitalization equities in industries
where the outlook is favorable relative to current price levels are then
subjected to additional screening and are finally selected through fundamental
security analysis to identify value. This process most often includes visits
with company management and contacts with industry experts and suppliers. The
results of this research are presented at meetings of the Advisor's investment
professionals. Final investment decisions are made by the Advisor's Investment
Committee (identified below under "Management of the Fund -Investment Advisor").
U.S. Government Securities. The Fund may invest a portion of the portfolio in
U.S. Government Securities, defined to be U.S. Government obligations such as
U.S. Treasury notes, U.S. Treasury bonds, and U.S. Treasury bills; obligations
guaranteed by the U.S. Government such as obligations issued by the Government
National Mortgage Association ("GNMA"); as well as obligations of U.S.
Government authorities, agencies, and instrumentalities such as Federal National
Mortgage Association ("FNMA"), Federal Home Loan Mortgage Corporation ("FHLMC"),
Federal Home Administration ("FHA"), Federal Farm Credit Bank ("FFCB"), Federal
Home Loan Bank ("FHLB"), Student Loan Marketing Association ("SLMA"), and The
Tennessee Valley Authority. U.S. Government Securities may be acquired subject
to repurchase agreements. While obligations of some U.S. Government-sponsored
entities are supported by the full faith and credit of the U.S. Government
(e.g., GNMA), several are supported by the right of the issuer to borrow from
the U.S. Government (e.g., FNMA, FHLMC), and still others are supported only by
the credit of the issuer itself (e.g., SLMA, FFCB). No assurances can be given
that the U.S. Government will provide financial support to U.S. Government
agencies or instrumentalities in the future, other than as set forth above,
since it is not obligated to do so by law. The guarantee of the U.S. Government
does not extend to the yield or value of the Fund's shares.
Money Market Instruments. Money market instruments may be purchased for
temporary defensive purposes, to accumulate cash for anticipated purchases of
portfolio securities, and to provide for shareholder redemptions and operating
expenses of the Fund. Money market instruments mature in thirteen months or less
from the date of purchase and may include U.S. Government Securities, corporate
debt securities (including those subject to repurchase agreements), bankers
acceptances and certificates of deposit of domestic branches of U.S. banks, and
commercial paper (including variable amount demand master notes) rated in one of
the two highest rating categories by any of the nationally recognized
statistical rating organizations, or if not rated, of equivalent quality in the
Advisor's opinion. The Advisor may, when it believes that unusually volatile or
unstable economic and market conditions exist, depart from the Fund's investment
approach and assume temporarily a defensive portfolio posture, increasing the
Fund's percentage investment in money market instruments, even to the extent
that 100% of the Fund's total assets may be so invested.
Repurchase Agreements. The Fund may acquire U.S. Government Securities or
corporate debt securities subject to repurchase agreements. A repurchase
agreement transaction occurs when a Fund acquires a security and simultaneously
resells it to the vendor (normally a member bank of the Federal Reserve or a
registered Government Securities dealer) for delivery on an agreed upon future
date. The repurchase price exceeds the purchase price by an amount which
reflects an agreed upon market interest rate earned by the Fund effective for
the period of time during which the repurchase agreement is in effect. Delivery
pursuant to the resale typically will occur within one to seven days of the
purchase. The Fund will not enter into any repurchase agreement which will cause
more than 10% of its net assets to be invested in repurchase agreements which
extend beyond seven days or other illiquid securities. In the event of the
bankruptcy of the other party to a repurchase agreement, the Fund could
experience delays in recovering its cash or the securities lent. To the extent
that in the interim the value of the securities purchased may have declined, the
Fund could experience a loss. In all cases, the creditworthiness of the other
party to a transaction is reviewed and found satisfactory by the Advisor.
Repurchase agreements are, in effect, loans of Fund assets. The Fund will not
engage in reverse repurchase transactions, which are considered to be borrowings
under the 1940 Act.
Foreign Securities. The Fund may invest in the securities of foreign private
issuers. The same factors would be considered in selecting foreign securities as
with domestic securities. Foreign securities' investment presents special
considerations not typically associated with investment in domestic securities.
Foreign taxes may reduce income. Currency exchange rates and regulations may
cause fluctuations in the value of foreign securities. Foreign securities are
subject to different regulatory environments than in the United States, and
compared to the United States, there may be a lack of uniform accounting,
auditing, and financial reporting standards; less volume and liquidity and more
volatility; less public information; and less regulation of foreign issuers.
Countries have been known to expropriate or to nationalize assets, and foreign
investments may be subject to political, financial, or social instability or to
adverse diplomatic developments. There may be difficulties in obtaining service
of process on foreign issuers and difficulties in enforcing judgments with
respect to claims under the U.S. securities' laws against such issuers.
Favorable or unfavorable differences between U.S. and foreign economies could
affect foreign securities' values. The U.S. Government has, in the past,
discouraged certain foreign investments by U.S. investors through taxation or
other restrictions, and it is possible that such restrictions could be imposed
again.
Because of the inherent risk of foreign securities over domestic issues, the
Fund will generally limit foreign investments to those traded domestically as
American Depository Receipts ("ADRs"). ADRs are receipts issued by a U.S. bank
or trust company evidencing ownership of securities of a foreign issuer. ADRs
may be listed on a national securities exchange or may trade in the
over-the-counter market. The prices of ADRs are denominated in U.S. dollars
while the underlying security may be denominated in a foreign currency. To the
extent the Fund invests in other foreign securities, it will generally limit
such investments to foreign securities traded on foreign securities exchanges.
Investment Companies. To achieve its investment objective, the Fund may invest
its total assets in securities of other investment companies whose investment
objectives are consistent with the Fund's investment objective, to the limited
extent permitted by the 1940 Act. The Fund will not acquire securities of any
one investment company if, immediately thereafter, the Fund would own more than
3% of such company's total outstanding voting securities, securities issued by
such company would have an aggregate value in excess of 5% of the Fund's total
assets, or securities issued by such company and securities held by the Fund
issued by other investment companies would have an aggregate value in excess of
10% of the Fund's total assets. To the extent the Fund invests in other
investment companies, the shareholders of the Fund would indirectly pay a
portion of the operating costs of the underlying investment companies. These
costs include management, brokerage, shareholder servicing, and other
operational expenses. Shareholders of the Fund would then indirectly pay higher
operational costs than if they owned shares of the underlying investment
companies directly.
Real Estate Securities. The Fund will not invest in real estate (including
limited partnership interests), but may invest in readily marketable securities
secured by real estate or securities interests therein or securities issued by
companies that invest in real estate or interests therein. The Fund may also
invest in readily marketable interests in real estate investment trusts
("REITs"). REITs are generally publicly traded on the national stock exchanges
and in the over-the-counter market and have varying degrees of liquidity.
Although the Fund is not limited in the amount of these types of real estate
securities it may acquire, it is not presently expected that within the next 12
months the Fund will have in excess of 5-10% of its total assets in real estate
securities.
RISK FACTORS
Investment Policies and Techniques. Reference should be made to "Investment
Objective and Policies" above for a description of special risks presented by
the investment policies of the Fund and the specific securities and investment
techniques that may be employed by the Fund, including the risks associated with
repurchase agreements and foreign securities. A more complete discussion of
certain of these securities and investment techniques and their associated risks
is contained in the Statement of Additional Information.
Fluctuations in Value. To the extent that the major portion of the Fund's
portfolio consists of common stocks, it may be expected that its net asset value
will be subject to greater fluctuation than a portfolio containing mostly
fixed-income securities. Although certain of the U.S. Government Securities in
which the Fund may invest are guaranteed as to timely payment of principal and
interest, the market value of the securities will fluctuate due to interest rate
risks. Additionally, not all U.S. Government Securities are backed by the full
faith and credit of the U.S. Government. Given the Fund's limitation primarily
to securities which are commonly defined as `mid-capitalization' securities, the
Fund may be expected to exhibit more volatility than an equity fund investing in
larger-capitalization securities. Because there is risk in any investment, there
can be no assurance that the Fund will meet its objective.
Portfolio Turnover. The Fund sells portfolio securities without regard to the
length of time they have been held to take advantage of new investment
opportunities. Nevertheless, the Fund's portfolio turnover generally will not
exceed 100% in any one year. The degree of portfolio activity affects the
brokerage costs of the Fund and other transaction costs related to the sale of
securities and the reinvestment in other securities. Portfolio turnover may also
have capital gain tax consequences. The Fund's portfolio turnover rate for its
prior fiscal years and fiscal period is set forth under "Financial Highlights"
above.
Borrowing. The Fund may borrow, temporarily, up to 5% of its total assets for
extraordinary purposes and 15% of its total assets to meet redemption requests
which might otherwise require untimely disposition of portfolio holdings. To the
extent the Fund borrows for these purposes, the effects of market price
fluctuations on the portfolio's net asset value will be exaggerated. If, while
such borrowing is in effect, the value of the Fund's assets declines, the Fund
could be forced to liquidate portfolio securities when it is disadvantageous to
do so. The Fund would incur interest and other transaction costs in connection
with borrowing. The Fund will borrow only from a bank. The Fund will not make
any further investments if the borrowing exceeds 5% of its total assets until
such time as repayment has been made to bring the total borrowing below 5% of
its total assets.
Illiquid Investments. The Fund may invest up to 10% of its net assets in
illiquid securities. Illiquid securities are those that may not be sold or
disposed of in the ordinary course of business within seven days at
approximately the price at which they are valued. Under the supervision of the
Board of Trustees, the Advisor determines the liquidity of the Fund's
investments. The absence of a trading market can make it difficult to ascertain
a market value for illiquid investments. Disposing of illiquid securities before
maturity may be time consuming and expensive, and it may be difficult or
impossible for the Fund to sell illiquid investments promptly at an acceptable
price. Included within the category of illiquid securities will also be
restricted securities, which cannot be sold to the public without registration
under the federal securities laws. Unless registered for sale, these securities
can only be sold in privately negotiated transactions or pursuant to an
exemption from registration.
Forward Commitments and When-Issued Securities. The Fund may purchase
when-issued securities and commit to purchase securities for a fixed price at a
future date beyond customary settlement time. The Fund is required to hold and
to maintain in a segregated account until the settlement date cash, U.S.
Government Securities, or high-grade debt obligations in an amount sufficient to
meet the purchase price. Purchasing securities on a when-issued or forward
commitment basis involves a risk of loss if the value of the security to be
purchased declines prior to the settlement date; this risk is in addition to the
risk of decline in value of the Fund's other assets. In addition, no income
accrues to the purchaser of when-issued securities during the period prior to
issuance. Although the Fund would generally purchase securities on a when-issued
or forward commitment basis with the intention of acquiring securities for its
portfolio, the Fund may dispose of a when-issued security or forward commitment
prior to settlement if the Advisor deems it appropriate to do so. The Fund may
realize short-term gains or losses upon such sales.
INVESTMENT LIMITATIONS
To limit exposure to risk, the Fund has adopted certain investment limitations.
Some of these limitations are that the Fund will not: (1) issue senior
securities, borrow money, or pledge its assets, except that it may borrow from
banks as a temporary measure (a) for extraordinary or emergency purposes, in
amounts not exceeding 5% of the Fund's total assets, or (b) to meet redemption
requests which might otherwise require untimely disposition of portfolio
securities in amounts not exceeding 15% of its total assets (the Fund will not
make any investments if borrowing exceeds 5% of its total assets); (2) make
loans of money or securities, except that the Fund may invest in repurchase
agreements (but repurchase agreements having a maturity of longer than seven
days are subject to the limitation on investing in illiquid securities); (3)
invest more than 10% of its net assets in illiquid securities; (4) invest in
securities of issuers which have a record of less than three years' continuous
operation (including predecessors and, in the case of bonds, guarantors), if
more than 5% of its total assets would be invested in such securities; (5)
purchase or sell commodities, commodities' contracts, real estate (including
limited partnership interests, but excluding readily marketable interests in
real estate investment trusts or other securities secured by real estate or
interests therein or readily marketable securities issued by companies that
invest in real estate or interests therein), or interests in oil, gas, or other
mineral exploration or development programs or leases (although it may invest in
readily marketable securities of issuers that invest in or sponsor such programs
or leases); (6) with respect to 75% of Fund assets, invest more than 5% at cost
of its total assets in the securities of any one issuer or purchase more than
10% of the outstanding voting stock of any one issuer; and (7) write, purchase,
or sell puts, calls, straddles, spreads, or combinations thereof, or futures
contracts or related options. Investment limitations (1), (5), (6), and (7) are
deemed fundamental; that is, they may not be changed without shareholder
approval. See "Investment Limitations" in the Fund's Statement of Additional
Information for a complete list of investment limitations.
If the Board of Trustees of the Trust determines that the Fund's investment
objective can best be achieved by a substantive change in a non-fundamental
investment limitation, the Board can make such change without shareholder
approval and will disclose any such material changes in the then current
Prospectus. Any limitation that is not specified in the Fund's Prospectus, or in
the Statement of Additional Information, as being fundamental, is
non-fundamental. If a percentage limitation is satisfied at the time of
investment, a later increase or decrease in such percentage resulting from a
change in the value of the Fund's portfolio securities will not constitute a
violation of such limitation.
HOW NET ASSET VALUE IS DETERMINED
The net asset value for each Investor Share of the Fund is determined at the
time trading closes on the New York Stock Exchange ("NYSE") (currently 4:00
p.m., New York time, Monday through Friday), except on business holidays when
the NYSE is closed. The net asset value of the shares of the Fund for purposes
of pricing sales and redemptions is equal to the total market value of its
investments and other assets, less all of its liabilities, divided by the number
of its outstanding shares.
Securities that are listed on a securities exchange are valued at the last
quoted sales price at the time the valuation is made. Price information on
listed securities is taken from the exchange where the security is primarily
traded by the Fund. Securities that are listed on an exchange and which are not
traded on the valuation date are valued at the bid price. Prices for securities
traded on foreign exchanges will be converted to the equivalent price in U.S.
currency using the published currency exchange rates available at the time of
valuation. Unlisted securities for which market quotations are readily available
are valued at the latest quoted sales price, if available, otherwise, at the
latest quoted bid price. Temporary cash investments with maturities of 60 days
or less will be valued at amortized cost, which approximates market value.
Securities for which no current quotations are readily available are valued at
fair value as determined in good faith using methods approved by the Board of
Trustees of the Trust. Securities may be valued on the basis of prices provided
by a pricing service when such prices are believed to reflect the fair market
value of such securities.
PERFORMANCE DATA
From time to time the Fund may advertise its average annual total return for
each Class of Fund shares. The average annual total return refers to the average
annual compounded rates of return over 1-, 3-, 5-, and 10-year periods that
would equate an initial amount invested at the beginning of a stated period to
the ending redeemable value of the investment. The calculation assumes the
reinvestment of all dividends and distributions, includes all recurring fees
that are charged to all shareholder accounts, and deducts all nonrecurring
charges at the end of each period. The calculation further assumes the maximum
sales load is deducted from the initial payment. If the Fund has been operating
less than 1, 3, 5, or 10 years, the time period during which the Fund has been
operating is substituted.
In addition, the Fund may advertise total return performance data other than
average annual total return for each Class of Fund shares. Such data would show
a percentage rate of return encompassing all elements of return (i.e., income
and capital appreciation or depreciation) and would assume reinvestment of all
dividends and capital gain distributions. Such other total return data may be
shown for the same or different periods as those used for average annual total
return. These data may consist of a cumulative percentage rate of return, actual
year-by-year rates of return, or any combination thereof. A cumulative
percentage rate of return would show the cumulative change in value of an
investment in the Fund for various periods.
The total return of the Fund could be increased to the extent the Advisor may
waive all or a portion of its fees or reimburse all or a portion of the Fund's
expenses. It is not currently contemplated that the Advisor will waive portions
of its fees or reimburse Fund expenses except as provided under "Fee Table."
Total return figures are based on the historical performance of the Fund, show
the performance of a hypothetical investment, and are not intended to indicate
future performance. The Fund's quotations may from time to time be used in
advertisements, sales literature, shareholder reports, or other communications
to shareholders. For further information, see "Additional Information on
Performance" in the Statement of Additional Information.
MANAGEMENT OF THE FUND
Trustees and Officers. The Fund is a diversified series of the Capital
Management Investment Trust (the "Trust"), a registered, open-end management,
investment company organized as a Massachusetts business trust on October 18,
1994. The Board of Trustees has overall responsibility for management of the
Fund under the laws of Massachusetts and the Declaration of Trust. The Statement
of Additional Information identifies the Trustees and officers of the Trust and
the Fund and provides information about them. The Trustees of the Trust and
executive officers of the Fund and their principal occupations for the last five
years are set forth below:
TRUSTEES
Lucius E. Burch Mr. Burch is Chairman and Chief Executive Officer of Massey
Trustee Burch Investment Group, Inc., a large, southeastern venture
capital firm based in Nashville, Tennessee. After working as
a commercial banker at Morgan Guaranty Trust Co. in New York
City, he joined Massey Investment Company, the predecessor
of Massey Burch Investment Group, as a financial analyst and
portfolio manager in 1968. He has extensive experience in
management consulting, corporate finance, and mergers and
acquisitions. Mr. Burch currently serves on the Board of
Directors of QMS, Inc., a NYSE-listed company; Bio-Safe
Systems, Inc.; and several private companies. He is a
graduate of the University of North Carolina.
Thomas A. Mr. Saunders is a Partner of Saunders Karp & Co., L.P., a
Sauders III New York-based merchant bank. From 1974 to 1989 he was a
Trustee Managing Director of Morgan Stanley & Co., Incorporated, and
from 1987 to 1989 he was Chairman of Morgan Stanley's
Leveraged Equity Fund II, L.P. Mr. Saunders received a B.S.
degree in Electrical Engineering from the Virginia Military
Institute and an M.B.A. degree from the University of
Virginia's Darden Graduate School of Business
Administration. He is Chairman of the Board of Trustees of
the Darden Graduate School, as well as a member of the Board
of Visitors of the Virginia Military Institute. Mr. Saunders
is also a member of the Board of Trustees of the Cold Spring
Harbor Laboratory. He serves as a Director to numerous
industrial, consumer, and healthcare companies in the
Saunders Karp portfolio.
David A. Shields Mr. Shields is a Managing Director of the Advisor and the
Trustee Distributor. He has been a member of the New York Stock
Exchange since 1968, specializing in institutional
brokerage. Mr. Shields served on the Board of Directors of
the NYSE from 1986 to 1992, having served as Governor prior
to that time. He has served on various NYSE committees
including the Audit, Market Performance, and the Committee
for Review. He is past director of the Alliance of Floor
Brokers of the NYSE and served as its President from 1980 to
1986. Mr. Shields has acted in various advisory capacities
on capital markets in Russia, Estonia, and Norway. He holds
a B.S. degree in Economics from the Wharton School of the
University of Pennsylvania and a Graduate Certificate from
the London School of Economics.
J.V.Shields,Jr. Mr. Shields is a Managing Director and Chairman of the
Trustee Advisor and the Distributor. He previously had been the
Director of Corporate Finance at H.N. Whitney, Goadby &
Company. He is responsible for development of the Advisor's
corporate policy. He currently serves as Chairman of the
Board of Trustees of the 59 Wall Street Trust, the Brown
Brothers Harriman & Co. mutual fund group, and serves on the
Board of Directors of Flowers Industries, Inc., a
NYSE-listed, diversified, food manufacturer. He received his
B.S.B.A. degree in Finance and Economics from Georgetown
University.
Anthony J. Mr. Walton is President of Armstrong Holdings Corporation, a
Walton private investment company and corporate finance advisory
Trustee firm. He is also Vice Chairman of Petsec Energy, Inc., a
U.S. exploration and production company based in Sydney,
Australia, and Lafayette, Louisiana. Previously, he was
Chief Executive Officer of the Llama Company, a regional
investment bank in Fayetteville, Arkansas, which is owned by
members of the Walton family, founders of Wal-Mart Stores,
Inc. Prior to joining Llama, he was a Director of Westpac
Banking Corporation of Sydney, Australia, and served as
Chief General Manager of the combined Americas & Europe
Group in New York. From 1968 to 1983, Mr. Walton was with
The Chase Manhattan Bank, NA, in New York and London in
various executive positions. He holds a B.A. degree from
Haverford College and an M.B.A. degree in International
Finance from the University of Pennsylvania's Wharton
Graduate School of Finance.
EXECUTIVE
OFFICERS
C.Lennis Mr. Koontz joined the Advisor in 1992. From 1987 to 1992, he
Koontz, II was associated with Smith Barney Capital Management as a
President senior portfolio manager and analyst. From 1976 until 1987,
he was with Scudder, Stevens & Clark in New York where he
was a Managing Director, member of the stock strategy group,
and head of the employee benefit plans group. At the Advisor
he serves as a portfolio manager/analyst. Mr. Koontz
received both his B.S. and M.S. degrees from the University
of Tennessee, majoring in industrial management. He is a
Chartered Financial Analyst and member of the New York
Society of Security Analysts.
Joseph A .Zock Mr. Zock joined the Advisor when the firm was founded in
Vice President 1982. Prior to that he worked closely with the founders of
the Advisor at H.N. Whitney, Goadby & Company, where he had
served as portfolio manager and research analyst beginning
in 1980. He serves as a portfolio manager/analyst. He
received his BA degree in Political Science/Economics from
the University of New Hampshire, his J.D. degree from the
University of San Diego Law School, and a Certificate of
International Law from the University of London, Kings
College School of Law.
Investment Advisor. The Fund is advised by Capital Management Associates, Inc.
(the "Advisor"), pursuant to an advisory contract. Subject to the authority of
the Board of Trustees, the Advisor provides guidance and policy direction in
connection with its daily management of the Fund's assets. The Advisor manages
the investment and reinvestment of the Fund's assets in a manner consistent with
the investment objective and policies of the Fund. The Advisor is also
responsible for the selection of broker-dealers through which the Fund executes
portfolio transactions, subject to the brokerage policies established by the
Trustees, and it provides certain executive personnel to the Fund.
The Advisor, organized as a New York corporation in 1982, is controlled by its
officers and directors, with the principal shareholders being J.V. Shields, Jr.;
David V. Shields; C. Lennis Koontz, II, CFA; and Joseph A. Zock. An investment
team headed by Messrs. Koontz and Zock and consisting of seven full-time
analysts 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 in a style identical to that
of the Fund to individuals, corporations, pension and profit sharing plans,
endowments, and other business and private accounts since 1982. The Advisor
currently serves as investment advisor to over $1 billion in assets, most of
which is managed using similar investment objectives to those employed by the
Fund.
The Advisor's address is 140 Broadway, New York, New York 10005.
As full compensation for the investment advisory services provided to the Fund,
the Fund pays the Advisor monthly compensation based on the Fund's daily average
net assets at the annual rate of 1.00% of the first $100 million of the Fund's
net assets, 0.90% of the next $150 million, 0.85% of the next $250 million and
0.80% of all assets over $500 million. The Advisor has voluntarily waived
substantially all of its fee and reimbursed a portion of the Fund's operating
expenses for the fiscal year ended November 30, 1997. The total fees waived
amounted to $52,043 (the Advisor received $1,921 of its fees) and expenses
reimbursed amounted to $25,031.
Administrator. The Nottingham Company (the "Administrator") serves as the Fund's
administrator. The Administrator, subject to the authority of the Board of
Trustees, provides administrative services to and is generally responsible for
the overall management and day-to-day administrative operations of the Fund,
pursuant to an administration agreement with the Trust.
The Administrator, which was established as a North Carolina corporation in
1988, has been operating (with affiliates) as a financial services firm since
1985. Frank P. Meadows III is the firm's Managing Director and controlling
shareholder.
The Administrator, whose address is 105 North Washington Street, Post Office
Drawer 69, Rocky Mount, North Carolina 27802-0069, provides the Fund with office
space and facilities; provides certain executive personnel to the Fund;
maintains the Fund's accounting records; computes daily the Fund's net asset
value; supervises the preparation of tax returns, financial reports,
prospectuses, and proxy statements; and monitors compliance with certain
recordkeeping and regulatory requirements.
Compensation of the Administrator, based upon the average daily net assets of
the Fund, is at the following annual rates: On the first $50 million of the
Fund's net assets, 0.20%; on the next $50 million, 0.175%; on all assets over
$100 million, 0.15%. In addition, the Administrator currently receives a monthly
fee of $2,000 for the first class of the Fund and $750 for each additional class
of the Fund for accounting and recordkeeping services for the Fund. The
Administrator also charges the Fund for certain costs involved with the daily
valuation of investment securities and is reimbursed for out-of-pocket expenses.
The Administrator charges a minimum fee of $3,000 per month for all of its fees
taken in the aggregate, analyzed monthly.
Transfer Agent. NC Shareholder Services, LLC (the "Transfer Agent") serves as
the Fund's transfer, dividend paying, and shareholder servicing agent. The
Transfer Agent, subject to the authority of the Board of Trustees, provides
transfer agency services pursuant to an agreement with the Administrator, which
has been approved by the Trust.
The Transfer Agent, whose address is 107 North Washington Street, Post Office
Box 4365, Rocky Mount, North Carolina 27803-0365, was established as a North
Carolina limited liability company in 1997. John D. Marriott, Jr., is the firm's
controlling member.
The Transfer Agent maintains the records of each shareholder's account, answers
shareholder inquiries concerning accounts, processes purchases and redemptions
of the Fund's shares, acts as dividend and distribution disbursing agent, and
performs other shareholder servicing functions. The Transfer Agent is
compensated for its services by the Administrator and not directly by the Fund.
Distributor. Shields & Company (the "Distributor"), a New York corporation, is
the principal underwriter and distributor of the shares of the Fund pursuant to
a Distribution Agreement between the Trust and the Distributor. The Distributor
may sell Fund shares to or through qualified securities dealers and others. The
Distributor receives commissions consisting of that portion of the sales charge
for the sale of Investor Shares remaining after the discounts which it allows to
investment dealers. The Distributor may also receive payments from the Fund with
respect to Investor Shares pursuant to the Distribution and Service Plan
described below under "Distribution Plan."
J.V. Shields, Jr.; David V. Shields; and Richard B. Thatcher, affiliated persons
of the Fund, are also affiliated persons of the Advisor and the Distributor.
The principal business address of the Distributor is 140 Broadway, New York, New
York 10005.
Distribution Plan. The Fund has adopted a Distribution and Service Plan (the
"Plan") pursuant to Rule 12b-1 under the 1940 Act for the Investor Shares. Under
the Plan, the Trustees may authorize the periodic payment of up to 0.75%
annually of the Investor Shares' average daily net asset value for each year
elapsed subsequent to adoption of the Plan. Such expenditures paid as service
fees to any person who sells Investor Shares may not exceed 0.25% of the
Investor Shares' average annual net asset value. Payments under the Plan will be
made to the Distributor and others to finance activities primarily intended to
result in the sale of Investor Shares, including but not limited to, the
servicing of shareholder accounts. The Plan may not be amended to increase
materially the amount to be spent for distribution and service fees without
approval of the shareholders of the Investor Shares. The continuation of the
Plan must be considered by the Board of Trustees annually. At least quarterly,
the Board of Trustees must review a written report of amounts expended pursuant
to the Plan and the purposes for which such expenditures were made. The Fund
incurred $7,969 pursuant to the Plan for the fiscal year ended November 30,
1997.
Custodian. The custodian of the Fund's assets is First Union National Bank of
North Carolina (the "Custodian"). The Custodian's mailing address is Two First
Union Center, Charlotte, North Carolina 28288-1151. The Advisor, Administrator,
Transfer Agent, Distributor, or interested persons thereof, may have banking
relationships with the Custodian.
Other Fund Costs. The Fund pays all expenses not assumed by the Advisor or the
Administrator. Fund expenses include the fees and expenses, if any, of the
Trustees and officers who are not affiliated persons of the Advisor; fees of the
Custodian; interest expense, taxes, brokerage fees, and commissions; fees and
expenses of the Fund's shareholder servicing operations; fees and expenses of
qualifying and registering the Fund's shares under federal and state securities
laws; expenses of preparing, printing, and distributing prospectuses and reports
to existing shareholders; auditing and legal expenses; insurance expense;
association dues; and the expense of shareholders' meetings and proxy
solicitations. The Fund is also liable for any nonrecurring expenses as may
arise such as litigation to which the Fund may be a party. The Fund may be
obligated to indemnify the Trustees and officers with respect to such
litigation. Any expenses relating only to a particular Class of shares of the
Fund will be borne solely by such Class of shares.
Brokerage. The Fund has adopted brokerage policies that allow the Advisor to (a)
prefer brokers which provide research services to the Advisor or (b) utilize a
brokerage firm affiliated with the Advisor or the Trust, including the
Distributor, an affiliate of the Advisor and the Trust. In all cases, the
primary consideration for selection of broker-dealers will be to obtain the best
overall terms available for the Fund. Research services obtained through Fund
brokerage transactions may be used by the Advisor for its other clients, and
conversely, the Fund may benefit from research services obtained through the
brokerage transactions of the Advisor's other clients. During the fiscal year
ended November 30, 1997, the total brokerage commissions paid by the Fund were
$16,311, of which $15,789 was paid to the Distributor. More information about
the brokerage practices of the Fund is contained in the Statement of Additional
Information under the heading "Portfolio Transactions."
HOW TO PURCHASE SHARES
Shares in the Fund may be purchased through members of the National Association
of Securities Dealers, Inc., who are registered in the state where the purchase
is made and who have a sales agreement with the Distributor. After a shareholder
account is established and the investment dealer is recorded, subsequent orders
for shares may be mailed directly to the Fund. Such purchases of shares are made
at the public offering price.
Assistance in opening accounts and Fund Shares Applications may be obtained from
the Fund by calling 1-888-626-3863, or by writing to the Fund at the address
shown below for regular mail orders. Investor Shares may be purchased by
individuals or organizations and may be appropriate for use in tax-sheltered
retirement plans and systematic withdrawal plans. Assistance is also available
through any broker-dealer authorized to sell shares in the Fund. Payment for
shares purchased may be made through your account at the broker-dealer
processing your application and order to purchase. The Fund's shares are offered
at the public offering price next determined after your order is received by the
Fund in proper order as indicated herein. The minimum initial investment, unless
stated otherwise herein, is $2,500. The minimum for Individual Retirement
Accounts ("IRAs"), Keogh Plans, 401(k) Plans, or purchases under the Uniform
Transfers to Minors Act is $1,000. The Fund may, in the Advisor's sole
discretion, accept certain accounts with less than the stated minimum initial
investment.
Payment must be made by check or money order drawn on a U.S. bank and payable in
U.S. dollars. Under certain circumstances the Fund, at the sole discretion of
the Advisor, may allow payment in kind for Fund shares purchased, by accepting
securities in lieu of cash. Any securities so accepted would be valued on the
date received and included in the calculation of net asset value of the Fund.
See the Statement of Additional Information for additional information on
purchases in kind.
If checks are returned unpaid due to nonsufficient funds, stop payment, or other
reasons, the Fund will charge $20. To recover any such loss or charge, the Fund
reserves the right, without further notice, to redeem shares of the Fund already
owned by any purchaser whose order is canceled, and such a purchaser may be
prohibited from placing further orders unless investments are accompanied by
full payment by wire or cashier's check.
Orders received by the Fund, whether by mail, bank wire, or facsimile order from
a qualified broker-dealer, and effective prior to the time trading closes on the
NYSE (currently 4:00 p.m. New York time, Monday through Friday) will purchase
shares at the public offering price determined at that time. Orders received by
the Fund and effective after the close of trading, or on a day when the NYSE is
not open for business, will purchase shares at the public offering price next
determined. For orders placed through a qualified broker-dealer, such firm is
responsible for promptly transmitting purchase orders to the Fund. All purchases
of shares are subject to acceptance and are not binding until accepted. The Fund
reserves the right to reject any application or investment.
The Fund may enter into agreements with one or more brokers or other agents,
including discount brokers and other brokers associated with investment
programs, including mutual fund "supermarkets," and agents for qualified
employee benefit plans, pursuant to which such brokers or other agents may be
authorized to accept on the Fund's behalf purchase and redemption orders that
are in "good form." Such brokers or other agents may be authorized to designate
other intermediaries to accept purchase and redemption orders on the Fund's
behalf. Under such circumstances, the Fund will be deemed to have received a
purchase or redemption order when an authorized broker, agent, or, if
applicable, other designee, accepts the order. Such orders will be priced at the
Fund's public offering price next determined after they are accepted by an
authorized broker, agent, or other designee. The Fund may pay fees to such
brokers or other agents for their services, including without limitation,
administrative, accounting, and recordkeeping services.
Regular Mail Orders. Please complete and sign the Fund Shares Application
accompanying this Prospectus and mail it, with your check made payable to the
Fund, to:
Capital Management Mid-Cap Fund
Investor Shares
c/o NC Shareholder Services
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
Applications must contain social security and Taxpayer Identification Numbers
("TINs"). If you have applied for a social security or TIN at the time of
completing your account application, the application should so indicate. Taxes
are not withheld from distributions to U.S. investors if certain IRS
requirements regarding TINs are met.
Bank Wire Orders. Investments can be made directly by bank wire. To establish a
new account or to add to an existing account by wire, please call the Fund at
1-888-626-3863, before wiring funds, to advise it of the investment, the dollar
amount of the investment, and the account identification number. This
notification will ensure prompt and accurate handling of your investment. Please
have your bank use the following wire instructions to purchase by wire:
First Union National Bank of North Carolina
Charlotte, North Carolina
ABA # 053000219
For the Capital Management Mid-Cap Fund - Investor Shares Acct. # 2000000861878
For further credit to (shareholder's name and SS# or EIN#)
It is important that the wire message contain all the relevant information and
that the Fund receive prior telephone notification to ensure proper credit. Upon
opening an account by wire order, you must, as soon as possible, complete and
mail your Fund Shares Application to the Fund as described under "Regular Mail
Orders" above. Investors should be aware that some banks may impose a wire
service fee.
Additional Investments. You may add to your account by mail or wire at any time
by purchasing shares at the then current public offering price. The minimum
additional investment is $500. Before adding funds by bank wire, please alert
the Fund by telephone at 1-888-626-3863. Follow the wire order instructions set
forth above to send your wire order. When calling for any reason, please have
your account number ready, if known. Mail orders should include, when possible,
the "Invest by Mail" stub which is attached to your Fund confirmation statement.
Otherwise, be sure to identify your account in your letter.
Sales Charges. The public offering price per share for Investor Shares of the
Fund equals net asset value plus a sales charge, which is reduced on purchases
involving larger amounts as described below. The Distributor receives this sales
charge as Distributor and may reallow it in the form of dealer discounts and
brokerage commissions as follows:
<TABLE>
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
Sales Sales
Charge As Charge As Dealers Discounts
% of Net % of Public and Brokerage
Amount of Transaction Amount Offering Commissions as % of
At Public Offering Price Invested Price Public Offering Price
- ----------------------------------------------------------------------------------------------------------
Less than $250,000........................... 3.09% 3.00% 2.80%
$250,000 but less than $500,000.............. 2.56% 2.50% 2.30%
$500,000 or more............................. 2.04% 2.00% 1.80%
</TABLE>
Investor Shares are subject to 12b-1 fees. See "Management of the Fund -
Distribution Plan" above.
At times the Distributor may reallow the entire sales charge to dealers. From
time to time dealers who receive dealer discounts and brokerage commissions from
the Distributor may reallow all or a portion of such dealer discounts and
brokerage commissions to other dealers or brokers. Pursuant to the terms of the
Distribution Agreement, the sales charge payable to the Distributor and the
dealer discounts may be suspended, terminated, or amended. Dealers who receive
90% or more of the sales charge may be deemed to be "underwriters" under the
federal securities laws.
The dealer discounts and brokerage commissions schedule above applies to all
dealers who have agreements with the Distributor. The Distributor, at its
expense, may also provide additional compensation to dealers in connection with
sales of shares of the Fund. Compensation may include financial assistance to
dealers in connection with conferences, sales, or training programs for their
employees; seminars for the public; advertising campaigns regarding the Fund;
and/or other dealer-sponsored special events. In some instances, this
compensation may be made available only to certain dealers whose representatives
have sold or are expected to sell a significant amount of such shares.
Compensation may include payment for travel expenses, including lodging,
incurred in connection with trips taken by invited registered representatives
and members of their families to locations within or outside of the United
States for meetings or seminars of a business nature. Dealers may not use sales
of the Fund shares to qualify for this compensation to the extent such may be
prohibited by the laws of any state or any self-regulatory agency, such as the
National Association of Securities Dealers, Inc. None of the aforementioned
compensation is paid for by the Fund or its shareholders.
Reduced Sales Charges
Concurrent Purchases. For purposes of qualifying for a lower sales
charge for Investor Shares, investors have the privilege of combining concurrent
purchases of the Fund and one or more future series of the Trust affiliated with
the Advisor and sold with a sales charge. For example, if a shareholder
concurrently purchases shares in one of the future series of the Trust
affiliated with the Advisor and sold with a sales charge at the total public
offering price of $250,000, and Investor Shares in the Fund at the total public
offering price of $250,000, the sales charge would be that applicable to a
$500,000 purchase as shown in the appropriate table above. This privilege may be
modified or eliminated at any time or from time to time by the Trust without
notice thereof.
Rights of Accumulation. Pursuant to the right of accumulation,
investors are permitted to purchase Investor Shares at the public offering price
applicable to the total of (a) the total public offering price of the Investor
Shares of the Fund then being purchased plus (b) an amount equal to the then
current net asset value of the purchaser's combined holdings of the shares of
all of the series of the Trust affiliated with the Advisor and sold with a sales
charge. To receive the applicable public offering price pursuant to the right of
accumulation, investors must, at the time of purchase, provide sufficient
information to permit confirmation of qualification, and confirmation of the
purchase is subject to such verification. This right of accumulation may be
modified or eliminated at any time or from time to time by the Trust without
notice.
Letters of Intent. Investors may qualify for a lower sales charge for
Investor Shares by executing a letter of intent. A letter of intent allows an
investor to purchase Investor Shares of the Fund over a 13-month period at
reduced sales charges based on the total amount intended to be purchased plus an
amount equal to the then current net asset value of the purchaser's combined
holdings of the shares of all of the series of the Trust affiliated with the
Advisor and sold with a sales charge. Thus, a letter of intent permits an
investor to establish a total investment goal to be achieved by any number of
purchases over a 13-month period. Each investment made during the period
receives the reduced sales charge applicable to the total amount of the intended
investment.
The letter of intent does not obligate the investor to purchase, or the Fund to
sell, the indicated amount. If such amount is not invested within the period,
the investor must pay the difference between the sales charge applicable to the
purchases made and the charges previously paid. If such difference is not paid
by the investor, the Distributor is authorized by the investor to liquidate a
sufficient number of shares held by the investor to pay the amount due. On the
initial purchase of shares, if required (or subsequent purchases, if necessary),
shares equal to at least 5 percent of the amount indicated in the letter of
intent will be held in escrow during the 13-month period (while remaining
registered in the name of the investor) for this purpose. The value of any
shares redeemed or otherwise disposed of by the investor prior to termination or
completion of the letter of intent will be deducted from the total purchases
made under such letter of intent.
A 90-day back-dating period can be used to include earlier purchases at the
investor's cost (without a retroactive downward adjustment of the sales charge);
the 13-month period would then begin on the date of the first purchase during
the 90-day period. No retroactive adjustment will be made if purchases exceed
the amount indicated in the letter of intent. Investors must notify the Fund or
the Distributor whenever a purchase is being made pursuant to a letter of
intent.
Investors electing to purchase shares pursuant to a letter of intent should
carefully read the letter of intent, which is included in the Fund Shares
Application accompanying this Prospectus, or is otherwise available from the
Fund or the Distributor. This letter of intent option may be modified or
eliminated at any time or from time to time by the Trust without notice.
Reinvestments. Investors may reinvest, without a sales charge, proceeds
from a redemption of Investor Shares of the Fund in Investor Shares of the Fund
or in shares of another series of the Trust affiliated with the Advisor and sold
with a sales charge, within 90 days after the redemption. If the other series
charges a sales charge higher than the sales charge the investor paid in
connection with the shares redeemed, the investor must pay the difference. In
addition, the shares of the series to be acquired must be registered for sale in
the investor's state of residence. The amount that may be so reinvested may not
exceed the amount of the redemption proceeds, and a written order for the
purchase of such shares must be received by the Fund or the Distributor within
90 days after the effective date of the redemption.
If an investor realizes a gain on the redemption, the reinvestment will not
affect the amount of any federal capital gains tax payable on the gain. If an
investor realizes a loss on the redemption, the reinvestment may cause some or
all of the loss to be disallowed as a tax deduction, depending on the number of
shares purchased by reinvestment and the period of time that has elapsed after
the redemption; although for tax purposes, the amount disallowed is added to the
cost of the shares acquired upon the reinvestment.
Purchases by Related Parties and Groups. Reductions in sales charges
apply to purchases by a single "person," including an individual; members of a
family unit, consisting of a husband, wife, and children under the age of 21
purchasing securities for their own account; or a trustee or other fiduciary
purchasing for a single fiduciary account or single trust estate.
Reductions in sales charges also apply to purchases by individual members of a
"qualified group." The reductions are based on the aggregate dollar value of
shares purchased by all members of the qualified group and still owned by the
group plus the shares currently being purchased. For purposes of the paragraph,
a qualified group consists of a "company," as defined in the 1940 Act, which has
been in existence for more than six months and which has a primary purpose other
than acquiring Investor Shares of the Fund at a reduced sales charge, and the
"related parties" of such company. For purposes of this paragraph, a "related
party" of a company is: (i) any individual or other company who directly or
indirectly owns, controls, or has the power to vote 5 percent or more of the
outstanding voting securities of such company; (ii) any other company of which
such company directly or indirectly owns, controls, or has the power to vote 5
percent or more of its outstanding voting securities; (iii) any other company
under common control with such company; (iv) any executive officer, director, or
partner of such company or of a related party; and (v) any partnership of which
such company is a partner.
Sales at Net Asset Value. The Fund may sell Investor Shares at a
purchase price equal to the net asset value of such shares, without a sales
charge, to Trustees, officers, and employees of the Trust, the Fund, and the
Advisor, and to employees and principals of related organizations and their
families, and certain parties related thereto, including clients and related
accounts of the Advisor. The public offering price of Investor Shares of the
Fund may also be reduced to net asset value per share in connection with the
acquisition of the assets of or merger or consolidation with a personal holding
company or a public or private investment company.
Employees and Affiliates of the Fund. The minimum purchase requirement is not
applicable to accounts of Trustees, officers, or employees of the Fund or
certain parties related thereto. The minimum initial investment for such
accounts is $1,000. Investor Shares may also be sold to such persons at net
asset value without a sales charge. See the Statement of Additional Information
for further details.
Stock Certificates. Stock certificates will not be issued for your shares.
Evidence of ownership will be given by issuance of periodic account statements
which will show the number of shares owned.
Automatic Investment Plan. The automatic investment plan enables shareholders to
make regular monthly or quarterly investments in shares through automatic
charges to their checking account. With shareholder authorization and bank
approval, the Fund will automatically charge the checking account for the amount
specified ($100 minimum), which will be automatically invested in shares at the
public offering price on or about the 21st day of the month. The shareholder may
change the amount of the investment or discontinue the plan at any time by
writing to the Fund.
HOW TO REDEEM SHARES
Shares of the Fund may be redeemed (the Fund will repurchase them from
shareholders) by mail or telephone. Any redemption proceeds may be more or less
than the purchase price of your shares, depending on the market value of the
Fund's portfolio securities. Redemption orders received in proper form, as
indicated herein, by the Fund, whether by mail or telephone, prior to the time
trading closes on the NYSE (currently 4:00 p.m. New York time, Monday through
Friday), will be made at the net asset value determined at that time. Redemption
orders received in proper form by the Fund after the close of trading, or on a
day when the NYSE is not open for business, will be made at the net asset value
next determined. There is no charge for redemptions from the Fund other than
possible charges for wiring redemption proceeds. You may also redeem your shares
through a broker-dealer, which may charge a fee for its services.
The Board of Trustees reserves the right to redeem involuntarily any account
having a net asset value of less than $1,000 (due to redemptions, exchanges, or
transfers, and not due to market action) upon 60-days' written notice. If the
shareholder brings his account net asset value up to at least $1,000 during the
notice period, the account will not be redeemed. Redemptions from retirement
plans may be subject to federal income tax withholding.
If you are uncertain of the requirements for redemption, please contact the Fund
at 1-888-626-3863 or write to the address shown below.
Regular Mail Redemptions. Your request should be addressed to Capital Management
Mid-Cap Fund, c/o NC Shareholder Services, 107 North Washington Street, Post
Office Box 4365, Rocky Mount, North Carolina 27803-0365. Your request for
redemption must include:
1) Your letter of instruction specifying the account number and the
number of shares, or the dollar amount, to be redeemed. This request
must be signed by all registered shareholders in the exact names in
which they are registered;
2) Any required signature guarantees (see "Signature Guarantees" below);
and
3) Other supporting legal documents, if required in the case of estates,
trusts, guardianships, custodianships, corporations, partnerships,
pension or profit sharing plans, and other organizations.
Your redemption proceeds will be sent to you within seven days after receipt of
your redemption request. However, the Fund may delay forwarding a redemption
check for recently purchased shares while it determines whether the purchase
payment will be honored. Such delay (which may take up to fifteen days from the
date of purchase) may be reduced or avoided if the purchase is made by certified
check or wire transfer. In all cases, the net asset value next determined after
receipt of the request for redemption will be used in processing the redemption
request. The Fund may suspend redemption privileges or postpone the date of
payment (i) during any period that the NYSE is closed, or trading on the NYSE is
restricted as determined by the Securities and Exchange Commission (the
"Commission"); (ii) during any period when an emergency exists as defined by the
rules of the Commission, as a result of which it is not reasonably practicable
for the Fund to dispose of securities owned by it or to determine fairly the
value of its assets; and (iii) for such other periods as the Commission may
permit.
Telephone and Bank Wire Redemptions. The Fund offers shareholders the option of
redeeming shares by telephone and bank wire under certain limited conditions.
The Fund will redeem shares in this manner when so requested by the shareholder
only if the shareholder confirms redemption instructions in writing.
The Fund may rely upon confirmation of redemption requests transmitted via
facsimile (FAX# 919-972-1908). The confirmation instructions must include:
1) Designation of Class (Institutional or Investor),
2) Shareholder name and account number,
3) Number of shares or dollar amount to be redeemed,
4) Instructions for transmittal of redemption funds to the shareholder,
and
5) Shareholder signature as it appears on the application then on file
with the Fund.
The net asset value used in processing the redemption request will be the net
asset value next determined after the telephone or bank wire request is
received. Redemption proceeds will not be distributed until written confirmation
of the redemption request is received, per the instructions above. You can
choose to have redemption proceeds mailed to you at your address of record, your
bank, or to any other authorized person, or you can have the proceeds sent by
bank wire to your bank ($5,000 minimum). Shares of the Fund may not be redeemed
by wire on days in which your bank is not open for business. You can change your
redemption instructions anytime you wish by filing a letter including your new
redemption instructions with the Fund. See "Signature Guarantees" below. The
Fund reserves the right to restrict or to cancel telephone and bank wire
redemption privileges for shareholders, without notice, if the Trustees believe
it to be in the best interest of the shareholders to do so. During drastic
economic and market changes, telephone redemption privileges may be difficult to
implement.
The Fund in its discretion may choose to pass through to redeeming shareholders
any charges imposed by the Custodian for wire redemptions. The Custodian
currently charges the Fund $10.00 per transaction for wiring redemption
proceeds. If this cost is passed through to redeeming shareholders by the Fund,
the charge will be deducted automatically from your account by redemption of
shares in your account. Your bank or brokerage firm may also impose a charge for
processing the wire. If wire transfer of funds is impossible or impractical, the
redemption proceeds will be sent by mail to the designated account.
You may redeem shares, subject to the procedures outlined above, by calling the
Fund at 1-888-626-3863. 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.
Signature Guarantees. To protect your account and the Fund from fraud, signature
guarantees are required to be sure that you are the person who has authorized a
change in registration or standing instructions for your account. Signature
guarantees are required for (1) change of registration requests, (2) requests to
establish or to change exchange privileges or telephone and bank wire redemption
service other than through your initial account application, and (3) redemption
requests in excess of $50,000. Signature guarantees are acceptable from a member
bank of the Federal Reserve System, a savings and loan institution, credit union
(if authorized under state law), registered broker-dealer, securities exchange,
or association clearing agency and must appear on the written request for change
of registration, establishment or change in exchange privileges, or redemption
request.
Systematic Withdrawal Plan. A shareholder who owns shares of the Fund valued at
$10,000 or more at the current offering price may establish a Systematic
Withdrawal Plan to receive a monthly or quarterly check in a stated amount not
less than $100. Each month or quarter, as specified, the Fund will automatically
redeem sufficient shares from your account to meet the specified withdrawal
amount. The shareholder may establish this service whether dividends and
distributions are reinvested in shares of the Fund or paid in cash. Call or
write the Fund for an application form. See the Statement of Additional
Information for further details.
DIVIDENDS AND DISTRIBUTIONS
The Fund distributes substantially all of its net investment income, if any, in
the form of dividends. The Fund may pay dividends, if any, quarterly and will
distribute net realized capital gains, if any, at least annually.
Unless a shareholder elects to receive cash, dividends and capital gains will be
reinvested automatically in additional full and fractional Investor Shares of
the Fund at the net asset value per share next determined. Reinvested dividends
and capital gains are exempt from any sales load. Shareholders wishing to
receive their dividends or capital gains in cash may make their request in
writing to the Fund, c/o NC Shareholder Services at 107 North Washington Street,
Post Office Box 4365, Rocky Mount, North Carolina 27803-0365. That request must
be received by the Fund prior to the record date to be effective for the next
dividend. If cash payment is requested, checks will be mailed within five
business days after the last day of each quarter or the Fund's fiscal year end,
as applicable. Each shareholder of the Fund will receive a quarterly summary of
his or her account, including information regarding reinvested dividends from
the Fund. Tax consequences to shareholders of dividends and distributions are
the same if received in cash or in additional shares of the Fund.
To satisfy certain requirements of the Code, the Fund may declare special
year-end dividend and capital gains distributions during December. Such
distributions, if received by shareholders by January 31, are deemed to have
been paid by the Fund and received by shareholders on December 31 of the prior
year.
There is no fixed dividend rate, and there can be no assurance regarding the
payment of any dividends or the realization of any gains. The Fund's net
investment income available for distribution to holders of Investor Shares will
be reduced by the amount of any expenses allocated to the Investor Shares,
including the distribution and service fees payable under the Fund's
Distribution and Service Plan.
FEDERAL INCOME TAX INFORMATION
Taxation of the Fund. The Internal Revenue Code of 1986, as amended (the
"Code"), treats the Fund, and any other series of the Trust, as a separate,
regulated investment company. The Fund intends to remain qualified as a
regulated investment company under the Code by distributing substantially all of
its "net investment income" to shareholders and meeting other requirements of
the Code. For the purpose of calculating dividends, net investment income
consists of income accrued on portfolio assets, less accrued expenses. Upon
qualification, the Fund will not be liable for federal income taxes to the
extent earnings are distributed. The Board of Trustees retains the right for the
Fund, or any other series of the Trust, to determine for any particular year if
it is advantageous not to qualify as a regulated investment company. Regulated
investment companies, such as the Fund, are subject to a non-deductible 4%
excise tax to the extent they do not distribute the statutorily required amount
of investment income, determined on a calendar year basis, and capital gain net
income, using an October 31 year end measuring period. The Fund intends to
declare or distribute dividends during the calendar year in an amount sufficient
to prevent imposition of the 4% excise tax.
Taxation of Shareholders. For federal income tax purposes, any dividends and
distributions from short-term capital gains that a shareholder receives in cash
from the Fund or which are re-invested in additional shares will be taxable
ordinary income. If a shareholder is not required to pay a tax on income, he
will not be required to pay federal income taxes on the amounts distributed to
him. A dividend declared in October, November, or December of a year and paid in
January of the following year will be considered to be paid on December 31 of
the year of declaration.
Distributions paid by the Fund from long-term capital gains, whether received in
cash or reinvested in additional shares, are taxable as long-term capital gains,
regardless of the length of time an investor has owned shares in the Fund.
Capital gain distributions are made when the Fund realizes net capital gains on
sales of portfolio securities during the year. Dividends and capital gain
distributions paid by the Fund shortly after shares have been purchased,
although in effect a return of investment, are subject to federal income
taxation.
The sale of shares of the Fund is a taxable event and may result in a capital
gain or loss. Capital gain or loss may be realized from an ordinary redemption
of shares or an exchange of shares between two mutual funds (or two series of a
mutual fund).
The Trust will inform shareholders of the Fund of the source of their dividends
and capital gains distributions at the time they are paid and, promptly after
the close of each calendar year, will issue an information return to advise
shareholders of the federal tax status of such distributions and dividends.
Dividends and distributions may also be subject to state and local taxes.
Shareholders should consult their tax advisors regarding specific questions as
to federal, state or local taxes.
The Fund is required by federal law to withhold and to remit to the IRS 31% of
the dividends, capital gains distributions, and in certain cases, proceeds of
redemptions paid to any shareholder who fails to furnish the Fund with a correct
taxpayer identification number, who under-reports dividend or interest income or
who fails to provide certification of tax identification number. Instructions to
exchange or to transfer shares held in established accounts will be refused
until the certification has been provided. To avoid this withholding
requirement, you must certify on your application, or on a separate W-9 Form
supplied by the Fund, that your taxpayer identification number is correct and
that you are not currently subject to backup withholding, or you are exempt from
backup withholding. For individuals, your taxpayer identification number is your
social security number.
ORGANIZATION AND CAPITAL SHARES
The Fund is a series of the Capital Management Investment Trust (the "Trust"),
an open-end investment company that was organized in 1994 as a Massachusetts
business trust. The Trust is currently offering one series of shares,
representing the Fund, which shares are divided into two classes as described
below. The Board of Trustees may, in the future, authorize the issuance of other
series of capital shares (or classes of such shares) representing shares of
additional funds. All shares of the Trust, when issued, will be fully paid and
non-assessable.
The Declaration of Trust authorizes the Board of Trustees to classify and
reclassify any unissued shares into one or more classes of shares. Pursuant to
such authority, the Board of Trustees has authorized the issuance of an
unlimited number of shares in each of two classes ("Investor Shares" and
"Institutional Shares") representing equal pro rata interests in the Fund,
except that the classes bear different expenses that reflect the difference in
services provided to them.
Institutional Shares of the Fund are offered to certain institutions and other
investors described in the prospectus for such shares. Holders of Institutional
Shares will not be subject to an initial sales charge and bear no shareholder
servicing or distribution fees. Holders of Investor Shares bear an initial sales
charge and the distribution and service fees described under "Management of the
Fund - Distribution Plan" above. As a result of these different charges and
fees, the total return on the Fund's Investor Shares will generally be lower
than the total return on the Institutional Shares. Standardized total return
quotations are computed separately for each Class of shares of the Fund.
THIS PROSPECTUS RELATES TO THE FUND'S INVESTOR SHARES AND DESCRIBES ONLY THE
POLICIES, OPERATIONS, CONTRACTS, AND OTHER MATTERS PERTAINING TO THE INVESTOR
SHARES. THE FUND ALSO ISSUES A CLASS OF INSTITUTIONAL SHARES. SUCH OTHER CLASS
MAY HAVE DIFFERENT SALES CHARGES AND EXPENSES, WHICH MAY AFFECT PERFORMANCE.
INVESTORS MAY CALL THE FUND AT 1-888-626-3863 TO OBTAIN MORE INFORMATION
CONCERNING OTHER CLASSES AVAILABLE TO THEM. INVESTORS MAY OBTAIN INFORMATION
CONCERNING OTHER CLASSES FROM THEIR SALES REPRESENTATIVE, THE DISTRIBUTOR, THE
FUND, OR ANY OTHER PERSON WHICH IS OFFERING OR MAKING AVAILABLE TO THEM THE
SECURITIES OFFERED IN THIS PROSPECTUS.
Under Massachusetts law, shareholders of a business trust may, under certain
circumstances, be held personally liable as partners for the obligations of the
trust. The Declaration of Trust of the Trust, therefore, contains provisions
that are intended to mitigate such liability.
VOTING RIGHTS
Each outstanding share of the Trust is entitled to one vote for each full share
and a fractional vote for each fractional share on all matters which concern the
Trust as a whole. The Trust's shareholders will vote in the aggregate and not by
fund or class, except where otherwise required by law or when the Board of
Trustees determines that the matter to be voted on affects only the interests of
the shareholders of a particular fund or class. Examples of matters that would
affect only a particular fund are any proposed change in the fundamental
investment objective or policies of that fund or a proposed change in the
investment advisory agreement for a fund. The shares of the Trust will have
noncumulative voting rights, which means that the holders of more than 50% of
the shares voting for the election of Trustees can elect all of the Trustees if
they so choose. The Trust may dispense with the annual meeting of shareholders
in any year in which it is not to call a meeting of shareholders for purposes of
voting on the removal of a Trustee or Trustees. Thus, there will normally be no
meeting of shareholders for the purpose of electing Trustees, and the Fund is
not expected to have an annual meeting of shareholders.
Shareholders representing 10 percent or more of the Trust's shares then
outstanding may call a meeting for the purpose of removing one or more of the
Trustees. If shareholders desire to call a meeting to consider the removal of
one or more Trustees, they will be assisted in communicating with other
shareholders. See "Capital Shares and Voting" in the Statement of Additional
Information for more information. Shareholder inquiries may be made in writing,
addressed to the Fund at the address shown on the cover of this document.
OTHER INFORMATION
Accountants. Deloitte & Touche LLP currently serves as independent auditors for
the Fund. Its address is 2500 One PPG Place, Pittsburgh, Pennsylvania
15222-5401.
Information on the Fund. The Fund provides annual and semi-annual reports to all
shareholders. The annual reports contain audited financial statements and other
information about the Fund.
<PAGE>
No dealer, salesman, or other person has been authorized to give any information
or to make any representations, other than those contained in this Prospectus,
and if given or made, such other information or representations must not be
relied upon as having been authorized by the Fund or the Advisor. This
Prospectus does not constitute an offering in any state in which an offering may
not lawfully be made.
The Fund reserves the right in its sole discretion to withdraw all or any part
of the offering made by this Prospectus or to reject purchase orders. All orders
to purchase shares are subject to acceptance by the Fund and are not binding
until confirmed or accepted in writing.
Investment Advisor
Capital Management Associates, Inc.
New York, New York
Distributor
Shields & Company
Member NYSE
New York, New York
Administrator
The Nottingham Company
Rocky Mount, North Carolina
Transfer Agent and Shareholder Servicing Agent
NC Shareholder Services
Rocky Mount, North Carolina
1-888-626-3863
Custodian
First Union National Bank of North Carolina
Charlotte, North Carolina
CAPITAL MANAGEMENT
MID-CAP FUND
INVESTOR SHARES
PROSPECTUS
April 1, 1998
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
CAPITAL MANAGEMENT MID-CAP FUND
April 1, 1998
A series of
CAPITAL MANAGEMENT INVESTMENT TRUST
Capital Management Associates, Inc.
140 Broadway
New York, New York 10005
Telephone 1-888-626-3863
Table of Contents
INVESTMENT OBJECTIVE AND POLICIES.............................................2
INVESTMENT LIMITATIONS........................................................3
MANAGEMENT....................................................................4
ADDITIONAL INFORMATION ON PERFORMANCE.........................................9
PORTFOLIO TRANSACTIONS.......................................................11
SPECIAL SHAREHOLDER SERVICES.................................................12
PURCHASE OF SHARES...........................................................13
REDEMPTION OF SHARES.........................................................14
NET ASSET VALUE..............................................................14
ADDITIONAL TAX INFORMATION...................................................15
CAPITAL SHARES AND VOTING....................................................16
CUSTODIAN....................................................................16
INDEPENDENT AUDITORS.........................................................17
APPENDIX A...................................................................17
ANNUAL REPORT OF THE FUND FOR
THE FISCAL YEAR ENDED NOVEMBER 30, 1997..............................ATTACHED
This Statement of Additional Information is not a prospectus and should only be
read in conjunction with the Prospectuses of the Capital Management Mid-Cap Fund
(formerly named the Capital Management Equity Fund) (the "Fund") dated April 1,
1998, relating to the Fund's Institutional Shares and Investor Shares. The
Prospectus for each such Class of shares of the Fund may be obtained from the
Fund at the address and phone shown above at no charge.
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The investment objective and policies of the Fund are described in the
Prospectus for each Class of shares of the Fund. Supplemental information about
these policies is set forth below. Certain capitalized terms used herein are
defined in the Prospectus. The Fund, organized on October 18, 1994, has no prior
operating history.
Repurchase Agreements. The Fund may acquire U.S. Government obligations or
corporate debt securities subject to repurchase agreements. A repurchase
transaction occurs when, at the time the Fund purchases a security (normally a
U.S. Treasury obligation), it also resell it to the vendor (normally a member
bank of the Federal Reserve or a registered Government Securities dealer) and
must deliver the security (and/or securities substituted for them under the
repurchase agreement) to the vendor on an agreed upon date in the future. The
repurchase price exceeds the purchase price by an amount which reflects an
agreed upon market interest rate effective for the period of time during which
the repurchase agreement is in effect. Delivery pursuant to the resale will
occur within one to seven days of the purchase.
Repurchase agreements are considered "loans" under the Investment Company Act of
1940, as amended (the "1940 Act"), collateralized by the underlying security.
The Trust will implement procedures to monitor on a continuous basis the value
of the collateral serving as security for repurchase obligations. Additionally,
the Advisor to the Fund will consider the creditworthiness of the vendor. If the
vendor fails to pay the agreed upon resale price on the delivery date, the Fund
will retain or attempt to dispose of the collateral. The Fund's risk is that
such default may include any decline in value of the collateral to an amount
which is less than 100% of the repurchase price, any costs of disposing of such
collateral, and any loss resulting from any delay in foreclosing on the
collateral. The Fund will not enter into any repurchase agreement which will
cause more than 10% of its net assets to be invested in repurchase agreements
which extend beyond seven days and other illiquid securities.
Description of Money Market Instruments. Money market instruments may include
U.S. Government obligations or corporate debt obligations (including those
subject to repurchase agreements), provided that they mature in thirteen months
or less from the date of acquisition and are otherwise eligible for purchase by
the Fund. Money market instruments also may include Banker's Acceptances and
Certificates of Deposit of domestic branches of U.S. banks, Commercial Paper,
and Variable Amount Demand Master Notes ("Master Notes"). Banker's Acceptances
are time drafts drawn on and "accepted" by a bank. When a bank "accepts" such a
time draft, it assumes liability for its payment. When the Fund acquires a
Banker's Acceptance, the bank which "accepted" the time draft is liable for
payment of interest and principal when due. The Banker's Acceptance carries the
full faith and credit of such bank. A Certificate of Deposit ("CD") is an
unsecured, interest bearing debt obligation of a bank. Commercial Paper is an
unsecured, short-term debt obligation of a bank, corporation, or other borrower.
Commercial Paper maturity generally ranges from two to 270 days and is usually
sold on a discounted basis rather than as an interest bearing instrument. The
Fund will invest in Commercial Paper only if it is rated in one of the top two
rating categories by Moody's Investors Service, Inc. ("Moody's"), Standard &
Poor's Ratings Group ("S&P"), Fitch Investors Service, Inc. ("Fitch"), or Duff &
Phelps ("D&P"), or if not rated, of equivalent quality in the Advisor's opinion.
Commercial Paper may include Master Notes of the same quality. Master Notes are
unsecured obligations which are redeemable upon demand of the holder and which
permit the investment of fluctuating amounts at varying rates of interest.
Master Notes are acquired by the Fund only through the Master Note program of
the Fund's custodian bank, acting as administrator thereof. The Advisor will
monitor, on a continuous basis, the earnings' power, cash flow, and other
liquidity ratios of the issuer of a Master Note held by the Fund.
Illiquid Investments. The Fund may invest up to 10% of its net assets in
illiquid securities, which are investments that cannot be sold or disposed of in
the ordinary course of business within seven days at approximately the prices at
which they are valued. Under the supervision of the Board of Trustees, the
Advisor determines the liquidity of the Fund's investments, and through reports
from the Advisor, the Board monitors investments in illiquid instruments. In
determining the liquidity of the Fund's investments, the Advisor may consider
various factors including (1) the frequency of trades and quotations, (2) the
number of dealers and prospective purchasers in the marketplace, (3) dealer
undertakings to make a market, (4) the nature of the security (including any
demand or tender features), and (5) the nature of the marketplace for trades
(including the ability to assign or offset the Fund's rights and obligations
relating to the investment). If through a change in values, net assets, or other
circumstances, the Fund were in a position where more than 10% of its net assets
were invested in illiquid securities, it would seek to take appropriate steps to
protect liquidity.
Restricted Securities. Within its limitation on investment in illiquid
securities, the Fund may purchase restricted securities that generally can be
sold in privately negotiated transactions, pursuant to an exemption from
registration under the federal securities laws, or in a registered public
offering. Where registration is required, the Fund may be obligated to pay all
or part of the registration expense and a considerable period may elapse between
the time it decides to seek registration and the time the Fund may be permitted
to sell a security under an effective registration statement. If during such a
period adverse market conditions were to develop, the Fund might obtain a less
favorable price than prevailed when it decided to seek registration of the
security.
Forward Commitment & When-Issued Securities. The Fund may purchase securities on
a when-issued basis or for settlement at a future date if the Fund holds
sufficient assets to meet the purchase price. In such purchase transactions, the
Fund will not accrue interest on the purchased security until the actual
settlement. Similarly, if a security is sold for a forward date, the Fund will
accrue the interest until the settlement of the sale. When-issued security
purchase and forward commitments have a higher degree of risk of price movement
before settlement due to the extended time period between the execution and
settlement of the purchase or sale. As a result, the exposure to the
counterparty of the purchase or sale is increased. Although the Fund would
generally purchase securities on a forward commitment or when-issued basis with
the intention of taking delivery, the Fund may sell such a security prior to the
settlement date if the Advisor felt such action was appropriate. In such a case,
the Fund could incur a short-term gain or loss.
INVESTMENT LIMITATIONS
The Fund has adopted the following investment limitations, which cannot be
changed without approval by holders of a majority of the outstanding voting
shares of the Fund. A "majority" for this purpose means the lesser of (i) 67% of
the Fund's outstanding shares represented in person or by proxy at a meeting at
which more than 50% of its outstanding shares are represented, or (ii) more than
50% of its outstanding shares. Unless otherwise indicated, percentage
limitations apply at the time of purchase.
As a matter of fundamental policy, the Fund may not:
(1) Issue senior securities, borrow money, or pledge its assets, except
that it may borrow from banks as a temporary measure (a) for
extraordinary or emergency purposes, in amounts not exceeding 5% of its
total assets or (b) to meet redemption requests in amounts not
exceeding 15% of its total assets. The Fund will not make any
investments if borrowing exceeds 5% of its total assets until such time
as total borrowing represents less than 5% of Fund assets;
(2) With respect to 75% of its total assets, invest more than 5% of the
value of its total assets in the securities of any one issuer or
purchase more than 10% of the outstanding voting securities of any
class of securities of any one issuer (except that securities of the
U.S. government, its agencies, and instrumentalities are not subject to
this limitation);
(3) Invest 25% or more of the value of its total assets in any one industry
or group of industries (except that securities of the U.S. Government,
its agencies, and instrumentalities are not subject to this
limitation);
(4) Invest for the purpose of exercising control or management of another
issuer;
(5) Purchase or sell commodities or commodities contracts; real estate
(including limited partnership interests, but excluding readily
marketable interests in real estate investment trusts or other
securities secured by real estate or interests therein or readily
marketable securities issued by companies that invest in real estate or
interests therein); or interests in oil, gas, or other mineral
exploration or development programs or leases (although it may invest
in readily marketable securities of issuers that invest in or sponsor
such programs or leases);
(6) Underwrite securities issued by others except to the extent that the
disposition of portfolio securities, either directly from an issuer or
from an underwriter for an issuer, may be deemed to be an underwriting
under the federal securities laws;
(7) Invest in warrants, valued at the lower of cost or market, exceeding
more than 5% of the value of the Fund's net assets. Included within
this amount, but not to exceed 2% of the value of the Fund's net
assets, may be warrants which are not listed on the New York or
American Stock Exchange;
(8) Participate on a joint or joint and several basis in any trading
account in securities;
(9) Invest its assets in the securities of one or more investment companies
except to the extent permitted by the 1940 Act; or
(10) Write, purchase, or sell puts, calls, straddles, spreads, or
combinations thereof or futures contracts or related options.
The following investment limitations are not fundamental and may be changed
without shareholder approval. As a matter of non-fundamental policy, the Fund
may not:
(1) Invest in securities of issuers which have a record of less than three
years' continuous operation (including predecessors and, in the case of
bonds, guarantors) if more than 5% of its total assets would be
invested in such securities;
(2) Invest more than 10% of its net assets in illiquid securities. For this
purpose, illiquid securities include, among others, (a) securities for
which no readily available market exists or which have legal or
contractual restrictions on resale, (b) fixed-time deposits that are
subject to withdrawal penalties and have maturities of more than seven
days, and (c) repurchase agreements not terminable within seven days;
(3) Invest in the securities of any issuer if those officers or Trustees of
the Trust and those officers and directors of the Advisor who
individually own more than 1/2 of 1% of the outstanding securities of
such issuer together own more than 5% of such issuer's securities;
(4) Make loans of money or securities, except that the Fund may invest in
repurchase agreements;
(5) Make short sales of securities or maintain a short position, except
short sales "against the box." (A short sale is made by selling a
security the Fund does not own. A short sale is "against the box" to
the extent that the Fund contemporaneously owns or has the right to
obtain at no additional cost securities identical to those sold short.)
While the Fund has reserved the right to make short sales "against the
box," the Advisor has no present intention of engaging in such
transactions at this time or during the coming year.
MANAGEMENT
Trustees and Officers. Following are the Trustees and Officers of the Capital
Management Investment Trust (the "Trust"), their age, their present position
with the Trust or the Fund, and their principal occupation during the past five
years. Those Trustees who are "interested persons" (as defined in the 1940 Act)
by virtue of their affiliation with either the Trust or the Advisor, are
indicated by an asterisk (*). Messrs. David V. Shields and Joseph V. Shields,
Jr. are brothers.
Name, Age, Position(s) with Principal Occupation(s)
Fund and/or Trust, and Address During Past 5 Years
- ------------------------------ -------------------
Lucius E. Burch, III 56 Chairman and Chief Executive Officer
Trustee Massey Burch Investment Group, Inc.
438 Rosemeade Lane (venture capital firm)
Naples, Florida 33999 Nashville, Tennessee
C. Lennis Koontz, II 55 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 General Partner
Trustee Saunders Karp & Company
667 Madison Avenue (merchant bank)
21st Floor New York, New York
New York, New York 10021
David V. Shields 58 Managing Director
Trustee* Capital Management Associates, Inc.
140 Broadway (Advisor to the Fund)
New York, New York 10005 New York, New York;
Managing Director
Shields & Company
(Distributor of the Fund)
New York, New York
Joseph V. Shields, Jr. 59 Chairman and Chief Executive Officer
Chairman and Trustee* Capital Management Associates, Inc.
140 Broadway (Advisor to the Fund)
New York, New York 10005 New York, New York;
Managing Director
Shields & Company
(Distributor to the Fund)
New York, New York
Anthony J. Walton 55 Chief Executive Officer
Trustee Armstrong Holdings Corporation
230 Park Avenue (investment and corporate finance
Suite 1440 advisory firm)
New York, New York 10169 New York, New York,
since 1995;
Vice Chairman
Petsec Energy, Inc.
(exploration and production
company),
Sydney, Australia, and
Lafayette, Louisiana,
since 1995; previously
Chief Executive Officer
Llama Company
Fayetteville, Arkansas
C. Frank Watson, III 27 Vice President
Secretary The Nottingham Company
105 North Washington Street (Administrator to the Fund)
Rocky Mount, North Carolina 27802 Rocky Mount, North Carolina
Julian G. Winters 29 Legal and Compliance Director
Treasurer The Nottingham Company
105 North Washington Street (Administrator to the Fund)
Rocky Mount, North Carolina 27802 Rocky Mount, North Carolina
since 1996; previously
Operations Manager, Tar Heel
Medical, Nashville, North Carolina
Joseph A. Zock 45 Senior Vice President
Vice President Capital Management Associates, Inc.
140 Broadway (Advisor to the Fund)
New York, New York 10005 New York, New York
Compensation. Trustees and Officers of the Trust who are interested persons of
the Trust or the Advisor will receive no salary or fees from the Trust. Other
Trustees will receive $2,000 each year plus $250 per Fund per meeting attended
in person and $100 per Fund per meeting attended by telephone. The Trust will
also reimburse each Trustee for his or her travel and other expenses relating to
attendance at such meetings.
COMPENSATION TABLE*
<TABLE>
<S> <C> <C> <C> <C>
Pension Total
Retirement Compensation
Aggregate Benefits Estimated from the
Compensation Accrued As Annual Trust
Name of Person, from the Part of Fund Benefits Upon Paid to
Position Trust Expenses Retirement Trustees
Lucius E. Burch, III $2,450 None None $2,450
Trustee
Thomas A. Saunders, III $2,600 None None $2,600
Trustee
David V. Shields None None None None
Trustee
Joseph V. Shields, Jr. None None None None
Trustee
Anthony J. Walton $2,700 None None $2,700
Trustee
*Figures are for the fiscal period ended November 30, 1997.
</TABLE>
Principal Holders of Voting Securities. As of March 6, 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 the following shareholders owned of record more than
5% of the outstanding shares of beneficial interest of each Class of the Fund.
Except as provided below, no person is known by the Trust to be the beneficial
owner of more than 5% of the outstanding shares of any Class of the Fund as of
March 6, 1998.
Institutional Class
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership* Percent
Shields Capital Corporation 401(k) 151,767.513 45.60%**
140 Broadway,
New York, New York 10005
SBC Warburg Dillon Read, Inc. 21,505.865 6.46%
Sub A/C 03123157
120 Wall Street
New York, New York 10006
Brookwood Endowment Fund 19,773.121 5.94%
120 Wall Street
New York, New York 10006
Estate of R. T. Muggridge, Jr. 17,732.969 5.33%
120 Wall Street
New York, New York 10006
Investor Class
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership* Percent
SBC Warburg Dillon Read, Inc. 24,857.072 16.55%
Sub A/C 03123222
120 Wall Street
New York, New York 10006
Cm. Chapin Ryan Thomas 8,072.077 5.37%
120 Wall Street
New York, New York 10006
* The shares indicated are believed by the Trust to be owned beneficially
by the indicated parties and held in sub-accounts by the record holder,
SBC Warburg Dillon Read, Inc., 120 Wall Street, New York, New York
10006.
** Pursuant to applicable SEC regulations, this shareholder is deemed to
control this Class of shares of the Fund.
Investment Advisor. Information about Capital Management Associates, Inc. (the
"Advisor"), 140 Broadway, New York, New York 10005 and its duties and
compensation as Advisor is contained in the Prospectus. The Advisor supervises
the Fund's investments pursuant to an Investment Advisory Agreement (the
"Advisory Agreement"). The Advisory Agreement is effective for a one-year period
and will be renewed thereafter only so long as such renewal and continuance is
specifically approved at least annually by the Board of Trustees or by vote of a
majority of the Fund's outstanding voting securities, provided the continuance
is also approved by a majority of the Trustees who are not parties to the
Advisory Agreement or interested persons of any such party. The Advisory
Agreement is terminable without penalty on 60-days' notice by the Board of
Trustees of the Trust or by vote of a majority of the outstanding voting
securities of the Fund. The Advisory Agreement provides that it will terminate
automatically in the event of its assignment.
The Advisor will receive a monthly management fee equal to an annual rate of
1.00% of the first $100 million of the Fund's net assets, 0.90% of the next $150
million, 0.85% of the next $250 million and 0.80% of all assets over $500
million. The Advisor has voluntarily waived all or substantially all of its fee
and reimbursed all or a portion of the Fund's operating expenses for the fiscal
years and period ended November 30, 1997, 1996, and 1995. The total fees waived
amounted to $52,043 (the Advisor received $1,921 of its fees), $34,561, and
$12,413, respectively, and expenses reimbursed amounted to $25,031, $97,598, and
$72,059, respectively.
Under the Advisory Agreement, the Advisor is not liable for any error of
judgment or mistake of law or for any loss suffered by the Fund in connection
with the performance of such Agreement, except a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services; or a
loss resulting from willful misfeasance, bad faith, or gross negligence on the
part of the Advisor in the performance of its duties; or from its reckless
disregard of its duties and obligations under the Agreement.
The employees of the Advisor control the Advisor. Affiliates of the Advisor also
control the Distributor.
The Administrator and Transfer Agent. The Trust has entered into a Fund
Accounting, Dividend Disbursing & Transfer Agent and Administration Agreement
with The Nottingham Company (the "Administrator"), 105 North Washington Street,
Post Office Drawer 69, Rocky Mount, North Carolina 27802-0069, pursuant to which
the Administrator receives a fee at the following annual rates: on the first $50
million of the Fund's net assets, 0.20%; on the next $50 million, 0.175%; on all
assets over $100 million, 0.15%. For the fiscal years and period ended November
30, 1997, 1996, and 1995, the Fund paid an administrative fee of $10,796,
$6,912, and $7,352, respectively. In addition, the Administrator currently
receives a monthly fee of $2,000 for the first class of the Fund and $750 for
each additional class of the Fund for accounting and recordkeeping services for
the Fund. For the fiscal years and period ended November 30, 1997, 1996, and
1995, the Administrator received $33,000 $33,000, and $23,500, respectively, for
such services. The Administrator also charges the Fund for certain costs
involved with the daily valuation of investment securities and is reimbursed for
out-of-pocket expenses. The Administrator charges a minimum fee of $3,000 per
month for all of its fees taken in the aggregate, analyzed monthly.
The Administrator will perform the following services for the Fund: (1)
coordinate with the Custodian and monitor the services it provides to the Fund;
(2) coordinate with and monitor any other third parties furnishing services to
the Fund; (3) provide the Fund with necessary office space, telephones, and
other communications facilities and personnel competent to perform
administrative and clerical functions for the Fund; (4) supervise the
maintenance by third parties of such books and records of the Fund as may be
required by applicable federal or state law; (5) prepare or supervise the
preparation by third parties of all federal, state, and local tax returns and
reports of the Fund required by applicable law; (6) prepare and, after approval
by the Trust, file and arrange for the distribution of proxy materials and
periodic reports to shareholders of the Fund as required by applicable law; (7)
prepare and, after approval by the Trust, arrange for the filing of such
registration statements and other documents with the Securities and Exchange
Commission and other federal and state regulatory authorities as may be required
by applicable law; (8) review and submit to the officers of the Trust for their
approval invoices or other requests for payment of Fund expenses and instruct
the Custodian to issue checks in payment thereof; and (9) take such other action
with respect to the Fund as may be necessary in the opinion of the Administrator
to perform its duties under the agreement. The Administrator also provides
certain accounting and pricing services for the Fund.
With the approval of the Trust, the Administrator has contracted with North
Carolina Shareholder Services, LLC (the "Transfer Agent"), a North Carolina
limited liability company, to serve as transfer, dividend paying, and
shareholder servicing agent for the Fund. The Transfer Agent is compensated for
its services by the Administrator and not directly by the Fund. The address of
the Transfer Agent is 107 North Washington Street, Post Office Box 4365, Rocky
Mount, North Carolina 27803-0365.
Distributor. Shields & Company (the "Distributor") is the principal underwriter
and distributor of Fund shares pursuant to a Distribution Agreement with the
Trust. The Distributor, which is affiliated with the Advisor, serves as
exclusive agent for the distribution of the shares of the Fund. The Distributor
may sell such shares to or through qualified securities dealers or others. The
Distributor receives commissions consisting of that portion of the sales charge
for Investor Shares remaining after the discounts which it allows to dealers.
For the fiscal years and period ended November 30, 1997, 1996, and 1995, the
aggregate dollar amount of sales charges paid on the sale of Investor Shares was
$29,130, $15,356, and $4,094, respectively, of which the Distributor retained
$1,941, $303, and $1,109, respectively, after reallowances to broker-dealers and
sales representatives.
J.V. Shields, Jr., David V. Shields, and Richard B. Thatcher, affiliated persons
of the Fund, are also affiliated persons of the Advisor and the Distributor.
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1 of
the 1940 Act for the Investor Shares (see "Management of the Fund - Distribution
Plan" in the Prospectus for the Investor Shares). As required by Rule 12b-1, the
Plan (together with the Distribution Agreement) has been approved by the Board
of Trustees and separately by a majority of the Trustees who are not interested
persons of the Trust and who have no direct or indirect financial interest in
the operation of the Plan and the Distribution Agreement.
Potential benefits of the Plan to the Fund include improved shareholder
services, savings to the Fund in transfer agency costs, savings to the Fund in
advisory fees and other expenses, benefits to the investment process through
growth and stability of assets, and maintenance of a financially healthy
management organization. The continuation of the Plan must be considered by the
Board of Trustees annually.
Under the Plan the Fund may expend up to 0.75% of the Investor Shares' average
daily net assets annually to finance any activity primarily intended to result
in the sale of Investor Shares and the servicing of shareholder accounts,
provided the Trust's Board of Trustees has approved the category of expenses for
which payment is being made. Such expenditures paid as service fees to any
person who sells Investor Shares may not exceed 0.25% of the Investor Shares'
average annual net asset value. For the fiscal year ended November 30, 1997, the
Fund incurred distribution and service fees under the Plan in the amount of
$7,969. This amount was substantially paid to sales personnel for selling Fund
shares and servicing shareholder accounts, with a small amount paid for
marketing expenses.
ADDITIONAL INFORMATION ON PERFORMANCE
From time to time, the total return of each Class of the Fund may be quoted in
advertisements, sales literature, shareholder reports, or other communications
to shareholders. The Fund computes the "average annual total return" of each
Class of the Fund by determining the average annual compounded rates of return
during specified periods that equate the initial amount invested to the ending
redeemable value of such investment. This is done by determining the ending
redeemable value of a hypothetical $1,000 initial payment. This calculation is
as follows:
P(1+T)n = ERV
Where: T = average annual total return.
ERV = ending redeemable value at the end of the period
covered by the computation of a hypothetical $1,000
payment made at the beginning of the period.
P = hypothetical initial payment of $1,000 from which
the maximum sales load is deducted.
n = period covered by the computation, expressed in terms
of years.
The Fund may also compute the aggregate total return of each Class of the Fund,
which is calculated in a similar manner, except that the results are not
annualized.
The calculation of average annual total return and aggregate total return assume
that the maximum sales load is deducted from the initial $1,000 investment at
the time it is made and that there is a reinvestment of all dividends and
capital gain distributions on the reinvestment dates during the period. The
ending redeemable value is determined by assuming complete redemption of the
hypothetical investment and the deduction of all nonrecurring charges at the end
of the period covered by the computations. The Fund may also quote other total
return information that does not reflect the effects of the sales load.
The average annual total return for the Investor Shares of the Fund for the
fiscal year ended November 30, 1997, and for the period from the inception of
the Investor Shares of the Fund (April 7, 1995) through November 30, 1997, was
29.12% and 22.22%, respectively. The cumulative total return for the Investor
Shares of the Fund since inception through November 30, 1997, was 70.25%. These
quotations assume the maximum 3% sales load was deducted from the initial
investment. Without reflecting the effects of the maximum 3% sales load, the
average annual total return for the Investor Shares for the fiscal year ended
November 30, 1997, and for the period since inception through November 30, 1997,
was 33.11% and 23.63%, respectively. The cumulative total return for the
Investor Shares of the Fund since inception through November 30, 1997, without
deducting the maximum 3% sales load, was 75.51%.
The average annual total return for the Institutional Shares of the Fund for the
fiscal year ended November 30, 1997, and for the period from the inception of
the Institutional Shares of the Fund (January 27, 1995) through November 30,
1997, was 33.92% and 26.92%, respectively. The cumulative total return for the
Institutional Shares of the Fund since inception through November 30, 1997, was
96.96%.
These performance quotations should not be considered as representative of the
Fund's performance for any specified period in the future.
The Fund's performance may be compared in advertisements, sales literature,
shareholder reports, and other communications to the performance of other mutual
funds having similar objectives or to standardized indices or other measures of
investment performance. In particular, the Fund may compare its performance to
the S&P 500 Index, which is generally considered to be representative of the
performance of unmanaged common stocks that are publicly traded in the United
States securities markets. The Fund may also compare its performance to the S&P
MidCap 400 Index, which is designed to measure the investment performance of
medium-capitalization equities such as those in which the Fund invests, and the
Lipper Capital Appreciation Index, which ranks the performance of mutual funds
that have an objective of growth of capital. Comparative performance may also be
expressed by reference to a ranking prepared by a mutual fund monitoring service
or by one or more newspapers, newsletters, or financial periodicals. The Fund
may also occasionally cite statistics to reflect its volatility and risk. The
Fund may also compare its performance to other published reports of the
performance of unmanaged portfolios of companies. The performance of such
unmanaged portfolios generally does not reflect the effects of dividends or
dividend reinvestment. Of course, there can be no assurance the Fund will
experience the same results. Performance comparisons may be useful to investors
who wish to compare the Fund's past performance to that of other mutual funds
and investment products. Of course, past performance is not a guarantee of
future results.
The Fund's performance fluctuates on a daily basis largely because net earnings
and net asset value per share fluctuate daily. Both net earnings and net asset
value per share are factors in the computation of total return as described
above.
As indicated, from time to time the Fund may advertise its performance compared
to similar funds or portfolios using certain indices, reporting services, and
financial publications. These may include the following:
o Lipper Analytical Services, Inc., ranks funds in various fund categories
by making comparative calculations using total return. Total return
assumes the reinvestment of all capital gains distributions and income
dividends and takes into account any change in net asset value over a
specific period of time.
o Morningstar, Inc., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for
two weeks.
Investors may use such indices in addition to the Fund's Prospectus to obtain a
more complete view of the Fund's performance before investing. Of course, when
comparing the Fund's performance to any index, factors such as composition of
the index and prevailing market conditions should be considered in assessing the
significance of such comparisons. When comparing funds using reporting services,
or total return, investors should take into consideration any relevant
differences in funds such as permitted portfolio compositions and methods used
to value portfolio securities and to compute offering price. Advertisements and
other sales literature for the Fund may quote total returns that are calculated
on non-standardized base periods. The total returns represent the historic
change in the value of an investment in the Fund based on monthly reinvestment
of dividends over a specified period of time.
From time to time, the Fund may include in advertisements and other
communications charts and illustrations relating to inflation and the effects of
inflation on the dollar, including the purchasing power of the dollar at various
rates of inflation. The Fund may also disclose from time to time information
about its portfolio allocation and holdings at a particular date (including
ratings of securities assigned by independent rating services such as S&P and
Moody's). The Fund may also depict the historical performance of the securities
in which the Fund may invest over periods reflecting a variety of market or
economic conditions either alone or in comparison with alternative investments,
performance indices of those investments, or economic indicators. The Fund may
also include in advertisements and in materials furnished to present and
prospective shareholders statements or illustrations relating to the
appropriateness of types of securities and/or mutual funds that may be employed
to meet specific financial goals, such as saving for retirement, children's
education, or other future needs.
From time to time, the Fund may include in advertisements and other
communications information on the value of investing in mid-cap stocks,
including without limitation their performance over time, their characteristics,
and the case for mid-cap stock investing. These factors include their superior
long-term investment returns versus large-cap stocks (having outperformed
large-cap stocks in every decade since the 1930s); lower volatility/less risk
than small-cap stocks with nearly as much growth potential; more favorable
opportunities than large-cap stocks (with more companies meaning more
opportunities, less coverage by Wall Street, and less focus by investment
managers, meaning more overlooked values); better fundamentals than large-cap
stocks (higher earnings' growth, less leverage, less bureaucracy); better
liquidity than small-cap stocks (with lower volatility meaning less potential
loss at sale and greater trading volume meaning more potential buyers); and good
price value relative to expected earnings' growth rate. These factors were cited
by the University of Chicago Center for Research in Security Prices and the
Advisor.
PORTFOLIO TRANSACTIONS
Subject to the general supervision of the Trust's Board of Trustees, the Advisor
is responsible for, makes decisions with respect to, and places orders for all
purchases and sales of portfolio securities for the Fund.
The annualized portfolio turnover rate for the Fund is calculated by dividing
the lesser of purchases or sales of portfolio securities for the reporting
period by the monthly average value of the portfolio securities owned during the
reporting period. The calculation excludes all securities whose maturities or
expiration dates at the time of acquisition are one year or less. Portfolio
turnover of the Fund may vary greatly from year to year as well as within a
particular year, and may be affected by cash requirements for redemption of
shares and by requirements that enable the Fund to receive favorable tax
treatment. Portfolio turnover will not be a limiting factor in making Fund
decisions, and the Fund may engage in short-term trading to achieve its
investment objectives.
Purchases of money market instruments by the Fund are made from dealers,
underwriters, and issuers. The Fund currently does not expect to incur any
brokerage commission expense on such transactions because money market
instruments are generally traded on a "net" basis by a dealer acting as
principal for its own account without a stated commission. The price of the
security, however, usually includes a profit to the dealer. Securities purchased
in underwritten offerings include a fixed amount of compensation to the
underwriter, generally referred to as the underwriter's concession or discount.
When securities are purchased directly from or sold directly to an issuer, no
commissions or discounts are paid.
Transactions on U.S. stock exchanges involve the payment of negotiated brokerage
commissions. On exchanges on which commissions are negotiated, the cost of
transactions may vary among different brokers. Transactions in the
over-the-counter market are generally on a net basis (i.e., without commission)
through dealers, or otherwise involve transactions directly with the issuer of
an instrument.
The Fund may participate, if and when practicable, in bidding for the purchase
of Fund securities directly from an issuer in order to take advantage of the
lower purchase price available to members of a bidding group. The Fund will
engage in this practice, however, only when the Advisor, in its sole discretion,
believes such practice to be otherwise in the Fund's interest.
In executing Fund transactions and selecting brokers or dealers, the Advisor
will seek to obtain the best overall terms available for the Fund. In assessing
the best overall terms available for any transaction, the Advisor shall consider
factors it deems relevant, including the breadth of the market in the security,
the price of the security, the financial condition and execution capability of
the broker or dealer, and the reasonableness of the commission, if any, both for
the specific transaction and on a continuing basis. The sale of Fund shares may
be considered when determining the firms that are to execute brokerage
transactions for the Fund. In addition, the Advisor is authorized to cause the
Fund to pay a broker-dealer which furnishes brokerage and research services a
higher commission than that which might be charged by another broker-dealer for
effecting the same transaction, provided that the Advisor determines in good
faith that such commission is reasonable in relation to the value of the
brokerage and research services provided by such broker-dealer, viewed in terms
of either the particular transaction or the overall responsibilities of the
Advisor to the Fund. Such brokerage and research services might consist of
reports and statistics relating to specific companies or industries; general
summaries of groups of stocks or bonds and their comparative earnings and
yields; or broad overviews of the stock, bond, and government securities
markets; and the economy.
Supplementary research information so received is in addition to, and not in
lieu of, services required to be performed by the Advisor and does not reduce
the advisory fees payable by the Fund. The Trustees will periodically review any
commissions paid by the Fund to consider whether the commissions paid over
representative periods of time appear to be reasonable in relation to the
benefits inuring to the Fund. It is possible that certain of the supplementary
research or other services received will primarily benefit one or more other
investment companies or other accounts for which investment discretion is
exercised by the Advisor. Conversely, the Fund may be the primary beneficiary of
the research or services received as a result of securities transactions
effected for such other account or investment company.
The Advisor may also utilize a brokerage firm affiliated with the Trust or the
Advisor (including the Distributor, an affiliate of the Advisor) if it believes
it can obtain the best execution of transactions from such broker. The Fund will
not execute portfolio transactions through, acquire securities issued by, make
savings deposits in, or enter into repurchase agreements with the Advisor or an
affiliated person of the Advisor (as such term is defined in the 1940 Act)
acting as principal, except to the extent permitted by the Securities and
Exchange Commission ("SEC"). In addition, the Fund will not purchase securities
during the existence of any underwriting or selling group relating thereto of
which the Advisor, or an affiliated person of the Advisor, is a member, except
to the extent permitted by the SEC. Under certain circumstances, the Fund may be
at a disadvantage because of these limitations in comparison with other
investment companies that have similar investment objectives but are not subject
to such limitations.
Investment decisions for the Fund will be made independently from those for any
other series of the Trust, if any, and for any other investment companies and
accounts advised or managed by the Advisor. Such other investment companies and
accounts may also invest in the same securities as the Fund. To the extent
permitted by law, the Advisor may aggregate the securities to be sold or
purchased for the Fund with those to be sold or purchased for other investment
companies or accounts in executing transactions. When a purchase or sale of the
same security is made at substantially the same time on behalf of the Fund and
another investment company or account, the transaction will be averaged as to
price and available investments allocated as to amount in a manner which the
Advisor believes to be equitable to the Fund and such other investment company
or account. In some instances, this investment procedure may adversely affect
the price paid or received by the Fund or the size of the position obtained or
sold by the Fund.
For the fiscal years and period ended November 30, 1997, 1996, and 1995, the
Fund paid brokerage commissions of $16,311, $14,523, and $7,588, respectively,
of which $15,789, $14,367, and $1,665, respectively, was paid during such
periods to the Distributor. For the fiscal year ended November 30, 1997,
transactions in which the Fund used the Distributor as broker involved 97.05% of
the aggregate dollar amount of transactions involving the payment of commissions
and 96.80% of the aggregate brokerage commissions paid by the Fund.
SPECIAL SHAREHOLDER SERVICES
The Fund offers the following shareholder services:
Regular Account. The regular account allows for voluntary investments to be made
at any time. Available to individuals, custodians, corporations, trusts,
estates, corporate retirement plans, and others, investors are free to make
additions and withdrawals to or from their account as often as they wish. When
an investor makes an initial investment in the Fund, a shareholder account is
opened in accordance with the investor's registration instructions. Each time
there is a transaction in a shareholder account, such as an additional
investment or the reinvestment of a dividend or distribution, the shareholder
will receive a confirmation statement showing the current transaction and all
prior transactions in the shareholder account during the calendar year to date,
along with a summary of the status of the account as of the transaction date. As
stated in the Prospectus, share certificates are not issued.
Automatic Investment Plan. The automatic investment plan enables shareholders to
make regular monthly or quarterly investments in shares through automatic
charges to their checking account. With shareholder authorization and bank
approval, the Administrator will automatically charge the checking account for
the amount specified ($100 minimum) which will be automatically invested in
shares at the public offering price on or about the 21st day of the month. The
shareholder may change the amount of the investment or discontinue the plan at
any time by writing to the Fund.
Shareholders owning shares with a value of $10,000 or more for Investor Shares
and $250,000 or more for Institutional Shares may establish a Systematic
Withdrawal Plan. A shareholder may receive monthly or quarterly payments, in
amounts of not less than $100 per payment, by authorizing the Fund to redeem the
necessary number of shares periodically (each month, or quarterly in the months
of March, June, September, and December) in order to make the payments
requested. The Fund has the capability of electronically depositing the proceeds
of the systematic withdrawal directly to the shareholder's personal bank account
($5,000 minimum per bank wire). Instructions for establishing this service are
included in the Fund Shares Application, enclosed in the Prospectus, or are
available by calling the Fund. If the shareholder prefers to receive his
systematic withdrawal proceeds in cash, or if such proceeds are less than the
$5,000 minimum for a bank wire, checks will be made payable to the designated
recipient and mailed within seven days of the valuation date. If the designated
recipient is other than the registered shareholder, the signature of each
shareholder must be guaranteed on the application (see "Signature Guarantees" in
the Prospectus). A corporation (or partnership) must also submit a "Corporate
Resolution" (or "Certification of Partnership") indicating the names, titles,
and required number of signatures authorized to act on its behalf. The
application must be signed by a duly authorized officer(s) and the corporate
seal affixed. No redemption fees are charged to shareholders under this plan.
Costs in conjunction with the administration of the plan are borne by the Fund.
Shareholders should be aware that such systematic withdrawals may deplete or use
up entirely their initial investment and may result in realized long-term or
short-term capital gains or losses. The Systematic Withdrawal Plan may be
terminated at any time by the Fund upon 60-days' written notice or by a
shareholder upon written notice to the Fund. Applications and further details
may be obtained by calling the Fund at 1-800-773-3863 or by writing to:
Capital Management Mid-Cap Fund
c/o NC Shareholder Services
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
Purchases in Kind. The Fund may accept securities in lieu of cash in payment for
the purchase of shares in the Fund. The acceptance of such securities is at the
sole discretion of the Advisor based upon the suitability of the securities
accepted for inclusion as a long-term investment of the Fund, the marketability
of such securities, and other factors which the Advisor may deem appropriate. If
accepted, the securities will be valued using the same criteria and methods as
described in "How Net Asset Value is Determined" in the Prospectus.
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.
To transfer shares to another owner, send a written request to the Fund at the
address shown above. Your request should include the following: (1) the Fund
name and existing account registration; (2) signature(s) of the registered
owner(s) exactly as the signature(s) appear(s) on the account registration; (3)
the new account registration, address, social security or taxpayer
identification number, and how dividends and capital gains are to be
distributed; (4) signature guarantees (See the Prospectus under the heading
"Signature Guarantees"); and (5) any additional documents which are required for
transfer by corporations, administrators, executors, trustees, guardians, etc.
If you have any questions about transferring shares, call or write the Fund.
PURCHASE OF SHARES
The purchase price of shares of the Fund is the net asset value next determined
after the order is received, plus a sales charge for the Investor Shares as more
fully described in the Prospectus for Investor Shares. The basis for determining
the sales charge applicable to a purchase of Investor Shares and how the sales
charge is distributed between the Distributor and other dealers is described in
the Prospectus for the Investor Shares under "How to Purchase Shares."
The Fund reserves the right in its sole discretion (i) to suspend the offering
of its shares, (ii) to reject purchase orders when in the judgment of management
such rejection is in the best interest of the Fund and its shareholders, and
(iii) to reduce or to waive the minimum for initial and subsequent investments
under circumstances where certain economies can be achieved in sales of Fund
shares.
Employees and Affiliates of the Fund. The Fund has adopted initial investment
minimums for the purpose of reducing the cost to the Fund (and consequently to
the shareholders) of communicating with and servicing its shareholders. In
keeping with this purpose, a reduced minimum initial investment of $1,000
applies to Trustees, officers, and employees of the Fund; the Advisor and
certain parties related thereto; including clients of the Advisor or any
sponsor, officer, committee member thereof, or the immediate family of any of
them. The Fund may also sell shares at net asset value without a sales charge to
such persons. In addition, accounts having the same mailing address may be
aggregated for purposes of the minimum investment if they consent in writing to
sharing a single mailing of shareholder reports, proxy statements (but each such
shareholder would receive his/her own proxy) and other Fund literature.
REDEMPTION OF SHARES
The Fund may suspend redemption privileges or postpone the date of payment (i)
during any period that the New York Stock Exchange (the "NYSE") is closed for
other than customary weekend and holiday closings, or that trading on the NYSE
is restricted as determined by the Securities and Exchange Commission (the
"Commission"); (ii) during any period when an emergency exists as defined by the
rules of the Commission as a result of which it is not reasonably practicable
for the Fund to dispose of securities owned by it, or to determine fairly the
value of its assets; and (iii) for such other periods as the Commission may
permit. The Fund may also suspend or postpone the recordation of the transfer of
shares upon the occurrence of any of the foregoing conditions. Any redemption
may be more or less than the shareholder's cost depending on the market value of
the securities held by the Fund. No charge is made by the Fund for redemptions
other than the possible charge for wiring redemption proceeds.
In addition to the situations described in the Prospectus under "How to Redeem
Shares," the Fund may redeem shares involuntarily to reimburse the Fund for any
loss sustained by reason of the failure of a shareholder to make full payment
for shares purchased by the shareholder or to collect any charge relating to a
transaction effected for the benefit of a shareholder which is applicable to
Fund shares as provided in the Prospectus from time to time.
NET ASSET VALUE
The net asset value per share of each Class of Shares of the Fund is determined
at 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.
For the fiscal years and period ended November 30, 1997, 1996, and 1995, the
total expenses of the Fund, after voluntary fee waivers and expense
reimbursements, were $88,915 (1.50% of the average daily net assets of the
Intitutional Shares of the Fund and 2.25% of the average daily net assets of the
Investor Shares of the Fund), $0 (0.00% of the average daily net assets of each
Class of the Fund), and $4,149 (0.31% of the average daily net assets of the
Institutional Shares of the Fund and 1.06% of the average daily net assets of
the Investor Shares of the Fund), respectively.
ADDITIONAL TAX INFORMATION
The following summarizes certain additional tax considerations generally
affecting the Fund and its shareholders that are not described in the
Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of the Fund or its shareholders. The discussion here and in the
Prospectus is not intended as a substitute for careful tax planning and is based
on tax laws and regulations that are in effect on the date hereof; such laws and
regulations may be changed by legislative, judicial, or administrative action.
Investors are advised to consult their tax advisors with specific reference to
their own tax situations.
The Fund, and any other series of the Trust, will be treated as a separate
corporate entity under the Code. The Fund intends to qualify and to remain
qualified as a regulated investment company. To so qualify, the Fund must elect
to be a regulated investment company or have made such an election for a
previous year and must satisfy, in addition to the distribution requirement
described in the Prospectus, certain requirements with respect to the source of
its income for a taxable year. At least 90% of the gross income of the Fund must
be derived from dividends; interest; payments with respect to securities loans,
gains from the sale or other disposition of stocks, securities, or foreign
currencies; and other income derived with respect to the Fund's business of
investing in such stock, securities, or currencies. Any income derived by the
Fund from a partnership or trust is treated as derived with respect to the
Fund's business of investing in stock, securities, or currencies only to the
extent that such income is attributable to items of income that would have been
qualifying income if realized by the Fund in the same manner as by the
partnership or trust.
An investment company may not qualify as a regulated investment company for any
taxable year unless it satisfies certain requirements with respect to the
diversification of its investments at the close of each quarter of the taxable
year. In general, at least 50% of the value of its total assets must be
represented by cash, cash items, government securities, securities of other
regulated investment companies, and other securities which, with respect to any
one issuer, do not represent more than 5% of the total assets of the investment
company nor more than 10% of the outstanding voting securities of such issuer.
In addition, not more than 25% of the value of the investment company's total
assets may be invested in the securities (other than government securities or
the securities of other regulated investment companies) of any one issuer. The
Fund intends to satisfy all requirements on an ongoing basis for continued
qualification as a regulated investment company.
The Fund will designate any distribution of long-term capital gains as a capital
gain dividend in a written notice mailed to shareholders within 60 days after
the close of the Fund's taxable year. Shareholders should note that upon the
sale or exchange of Fund shares, if the shareholder has not held such shares for
at least six months, any loss on the sale or exchange of those shares will be
treated as long-term capital loss to the extent of the capital gain dividends
received with respect to the shares.
A 4% nondeductible excise tax is imposed on regulated investment companies that
fail to distribute currently an amount equal to specified percentages of their
ordinary taxable income and capital gain net income (excess of capital gains
over capital losses). The Fund intends to make sufficient distributions or
deemed distributions of its ordinary taxable income and any capital gain net
income prior to the end of each calendar year to avoid liability for this excise
tax.
If for any taxable year the Fund does not qualify for the special federal income
tax treatment afforded regulated investment companies, all of its taxable income
will be subject to federal income tax at regular corporate rates (without any
deduction for distributions to its shareholders). In such event, dividend
distributions (whether or not derived from interest on tax-exempt securities)
would be taxable as ordinary income to shareholders to the extent of the Fund's
current and accumulated earnings and profits.
The Fund will be required in certain cases to withhold and remit to the U.S.
Treasury 31% of taxable dividends or 31% of gross proceeds realized upon sale
paid to shareholders who have failed to provide a correct tax identification
number in the manner required, or who are subject to withholding by the Internal
Revenue Service for failure to include properly on their return payments of
taxable interest or dividends, or who have failed to certify to the Fund that
they are not subject to backup withholding when required to do so, or that they
are "exempt recipients."
Depending upon the extent of the Fund's activities in states and localities in
which its offices are maintained, in which its agents or independent contractors
are located, or in which it is otherwise deemed to be conducting business, the
Fund may be subject to the tax laws of such states or localities. In addition,
in those states and localities that have income tax laws, the treatment of the
Fund and its shareholders under such laws may differ from their treatment under
federal income tax laws.
Dividends paid by the Fund derived from net investment income or net short-term
capital gains are taxable to shareholders as ordinary income, whether received
in cash or reinvested in additional shares. Long-term capital gains
distributions, if any, are taxable as long-term capital gains, whether received
in cash or reinvested in additional shares, regardless of how long Fund shares
have been held.
Under current tax law, certain types of expenses incurred by the Fund must be
proportionately allocated as additional income to shareholders. As a result, the
amounts reportable by the Fund as taxable income, if any, may exceed the
dividends actually paid. Such proportionate allocation of Fund expenses, if any,
will be identified when tax information is distributed by the Fund. The Fund
will send shareholders information each year on the tax status of dividends and
disbursements. A dividend or capital gains distribution paid shortly after
shares have been purchased, although in effect a return of investment, is
subject to federal income taxation. Dividends from net investment income, along
with capital gains, will be taxable to shareholders, whether received in cash or
shares and no matter how long you have held Fund shares, even if they reduce the
net asset value of shares below your cost and thus, in effect, result in a
return of a part of your investment.
CAPITAL SHARES AND VOTING
The Trust's Declaration of Trust currently authorizes the issuance of shares in
one series: the Capital Management Mid-Cap Fund. These shares are divided into
two Classes ("Institutional Shares" and "Investor Shares") as described in the
Prospectus. Shares of the Fund, when issued, are fully paid and non-assessable
and have no preemptive or conversion rights. Shareholders are entitled to one
vote for each full share and a fractional vote for each fractional share held.
Shares have non-cumulative voting rights, which means that the holders of more
than 50% of the shares voting for the election of Trustees can elect 100% of the
Trustees, and in this event, the holders of the remaining shares voting will not
be able to elect any Trustees. The Trustees will hold office indefinitely,
except that: (1) any Trustee may resign or retire; and (2) any Trustee may be
removed: (a) any time by written instrument signed by at least two-thirds of the
number of Trustees prior to such removal; (b) at any meeting of shareholders of
the Trust by a vote of two-thirds of the outstanding shares of the Trust; or (c)
by a written declaration signed by shareholders holding not less than two-thirds
of the outstanding shares of the Trust and filed with the Trust's custodian.
Shareholders have certain rights, as set forth in the Declaration of Trust,
including the right to call a meeting of the shareholders. Shareholders holding
not less than 10% of the shares then outstanding may require the Trustees to
call a meeting, and the Trustees are obligated to provide certain assistance to
shareholders desiring to communicate with other shareholders in such regard
(e.g., providing access to shareholder lists, etc.). In case a vacancy or an
anticipated vacancy on the Board of Trustees shall for any reason exist, the
vacancy shall be filled by the affirmative vote of a majority of the remaining
Trustees, subject to certain restrictions under the 1940 Act. Otherwise, there
will normally be no meeting of shareholders for the purpose of electing
Trustees, and the Trust does not expect to have an annual meeting of
shareholders.
CUSTODIAN
First Union National Bank of North Carolina (the "Custodian"), Two First Union
Center, Charlotte, North Carolina 28288-1151, serves as custodian for the Fund.
The Custodian holds all cash and securities of the Fund (either in its
possession or in its favor through "book entry systems" authorized by the
Trustees in accordance with the 1940 Act).
INDEPENDENT AUDITORS
The firm of Deloitte & Touche LLP, 2500 One PPG Place, Pittsburgh, Pennsylvania
15222-5401, currently serves as independent auditors for the Fund to audit the
annual financial statements of the Fund, prepare the Fund's federal and state
tax returns, and consult with the Fund on matters of accounting and federal and
state income taxation.
The financial statements of the Fund are audited at least once each year by
independent auditors. Shareholders will receive annual audited and semi-annual
(unaudited) reports when published and written confirmation of all transactions
in their account. A copy of the most recent Annual Report will accompany the
Statement of Additional Information whenever it is requested by a shareholder or
a prospective investor.
APPENDIX A
DESCRIPTION OF RATINGS
The Fund will normally be at least 90% invested in equities. As a temporary
defensive position, however, when the Advisor determines that market conditions
warrant such investments, the Fund may invest up to 100% of its assets in
investment grade bonds, U.S. Government Securities, repurchase agreements, or
money market instruments ("Investment-Grade Debt Securities"). When the Fund
invests in Investment-Grade Debt Securities as a temporary defensive measure, it
is not pursuing its investment objective. Under normal circumstances, however,
the Fund may invest in money market instruments as described in the Prospectus.
The various ratings used by the nationally recognized securities rating services
are described below.
A rating by a rating service represents the service's opinion as to the credit
quality of the security being rated. However, the ratings are general and are
not absolute standards of quality or guarantees as to the creditworthiness of an
issuer. Consequently, the Advisor believes that the quality of fixed-income
securities in which the Fund may invest should be continuously reviewed and that
individual analysts give different weightings to the various factors involved in
credit analysis. A rating is not a recommendation to purchase, sell, or hold a
security because it does not take into account market value or suitability for a
particular investor. When a security has received a rating from more than one
service, each rating is evaluated independently. Ratings are based on current
information furnished by the issuer or obtained by the rating services from
other sources that they consider reliable. Ratings may be changed, suspended, or
withdrawn as a result of changes in or unavailability of such information, or
for other reasons.
Standard & Poor's Ratings Services. The following summarizes the highest four
ratings used by Standard & Poor's Ratings Services ("S&P") for bonds which are
deemed to be "Investment-Grade Debt Securities" by the Advisor:
AAA - This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity of the obligor to meet its
financial commitment on the obligation.
AA - Debt rated AA differs from AAA issues only in a small degree. The
obligor's capacity to meet its financial commitment on the obligation is
very strong.
A - Debt rated A is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in
higher-rated categories. However, the obligor's capacity to meet its
financial commitment on the obligation is still strong.
BBB - Debt rated BBB exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to
lead to a weakened capacity of the obligor to meet its financial
commitment on the obligation.
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 having
significant speculative characteristics with respect to the obligor's capacity
to meet its financial commitment on 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 may be 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 short term notes and
indicates strong capacity to pay principal and interest. An issue determined to
possess a very strong capacity to pay debt service is given a plus (+)
designation. The rating SP-2 indicates a satisfactory capacity to pay principal
and interest, with some vulnerability to adverse financial and economic changes
over the term of the notes.
Moody's Investors Service, Inc. The following summarizes the highest four
ratings used by Moody's Investors Service, Inc. ("Moody's") for bonds which are
deemed to be "Investment-Grade Debt Securities" by the Advisor:
Aaa - Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred
to as "gilt edge." Interest payments are protected by a large or an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
Aa - Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there
may be other elements present which make the long-term risks appear
somewhat larger than in Aaa securities.
A - Debt which is rated A possesses many favorable investment attributes
and is to be considered as an upper medium grade obligation. Factors
giving security to principal and interest are considered adequate but
elements may be present which suggest a susceptibility to impairment
sometime in the future.
Baa - Debt which is rated Baa is considered as a medium grade obligation,
i.e., it is neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such debt lacks outstanding
investment characteristics and in fact has speculative characteristics as
well.
Moody's applies numerical modifiers (l, 2 and 3) with respect to bonds rated Aa,
A and Baa. The modifier 1 indicates that the bond being rated ranks in the
higher end of its generic rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the bond ranks in the lower end of
its generic rating category. Bonds which are rated Ba, B, Caa, Ca or C by
Moody's are not considered "Investment-Grade Debt Securities" by the Advisor.
Bonds rated Ba are judged to have speculative elements because their future
cannot be considered as well assured. Uncertainty of position characterizes
bonds in this class, because the protection of interest and principal payments
often may be very moderate and not well safeguarded.
Bonds which are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the security over any long period for time may be small. Bonds
which are rated Caa are of poor standing. Such securities may be in default or
there may be present elements of danger with respect to principal or interest.
Bonds which are rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.
Bonds which are rated C are the lowest rated class of bonds and issues so rated
can be regarded as having extremely poor prospects of ever attaining any real
investment standing.
The rating Prime-1 is the highest commercial paper rating assigned by Moody's.
Issuers rated Prime-1 (or supporting institutions) are considered to have a
superior ability for repayment of short-term promissory obligations. Prime-1
repayment ability will often be evidenced by many of the following
characteristics: leading market positions in well-established industries; high
rates of return on funds employed; conservative capitalization structures with
moderate reliance on debt and ample asset protection; broad margins in earning
coverage of fixed financial charges and high internal cash generation; and well
established access to a range of financial markets and assured sources of
alternative liquidity. Issuers rated Prime-2 (or supporting institutions) are
considered to have a strong ability 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 appropriated may be more affected by external
conditions. Ample alternate liquidity is maintained.
The following summarizes the two highest ratings 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.
MIG-2; VMIG-2 - Obligations bearing these designations are of a high
quality with ample margins of protection.
Duff & Phelps Credit Rating Co. The following summarizes the highest four
ratings used by Duff & Phelps Credit Rating Co. ("D&P") for bonds which are
deemed to be "Investment-Grade Debt Securities" by the Advisor:
AAA - Bonds that are rated AAA are of the highest credit quality. The
risk factors are considered to be negligible, being only slightly more
than for risk-free U.S. Treasury debt.
AA - Bonds that are rated AA are of high credit quality. Protection
factors are strong. Risk is modest but may vary slightly from time to
time because of economic conditions.
A - Bonds rated A have average but adequate protection factors. The risk
factors are more variable and greater in periods of economic stress.
BBB - Bonds rated BBB have below-average protection factors but are still
considered sufficient for prudent investment. There is considerable
variability in risk during economic cycles.
Bonds rated BB, B and CCC by D&P are not considered "Investment-Grade Debt
Securities" and are regarded, on balance, as predominantly speculative with
respect to the issuer's ability to pay interest and make principal payments in
accordance with the terms of the obligations. BB indicates the lowest degree of
speculation and CCC the highest degree of speculation.
The rating Duff l is the highest rating assigned by D&P for short-term debt,
including commercial paper. D&P employs three designations, Duff l+, Duff 1 and
Duff 1- within the highest rating category. Duff l+ indicates highest certainty
of timely payment. Short-term liquidity, including internal operating factors
and/or access to alternative sources of funds, is judged to be "outstanding, and
safety is just below risk-free U.S. Treasury short-term obligations." Duff 1
indicates very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are
considered to be minor. Duff 1- indicates high certainty of timely payment.
Liquidity factors are strong and supported by good fundamental protection
factors. Risk factors are very small.
Fitch Investors Service, Inc. The following summarizes the highest four ratings
used by Fitch Investors Service, Inc. ("Fitch") for bonds which are deemed to be
"Investment-Grade Debt Securities" by the Advisor:
AAA - Bonds are considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability to pay
interest and 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 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 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
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. A "ratings outlook" is used to describe the
most likely direction of any rating change over the intermediate term. It is
described as "Positive" or "Negative". The absence of a designation indicates a
stable outlook.
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 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 two 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+.
The term symbol "LOC" indicates that the rating is based on a letter of credit
issued by a commercial bank.
<PAGE>
Capital Management Associates
Dear Fellow Shareholders,
I am pleased to report that your fund achieved another year of
above-average results with a total return in excess of 30%, but will the past be
repeated, and what will the New Year likely bring for investors? The year-end is
traditionally a time for both reflection and anticipation. In this spirit we
have two messages to convey. First, the returns from U.S. stocks in recent years
have indeed been extraordinary but are unlikely to be repeated in 1998. Second,
in spite of any short-term turbulence, the long-term outlook for equity
investors in U.S.-domiciled companies is very favorable, notwithstanding the
high level of the U.S. stock market today.
Presently, it appears to us that the domestic economy and corporate
profits will be somewhat softer in 1998, but no outright recession is in sight.
Such conditions will likely result in a more challenging and difficult market
than we have enjoyed over the past three years. Recent developments in Asia
reinforce this prospect. One likely outcome from the Far East is that the U.S.
trade deficit will increase, but the positive aspect of this development is that
inflation in the U.S. will be held down. In turn, upward pressures on interest
rates should be slight.
The reasons why stock investors have fared so well recently are easy to
identify. Inflation is low, and corporate profits have not declined. U.S.
industry has become more competitive; business globalization is creating new
investment opportunities, and compared to most of the Twentieth Century, the
world is relatively free of economic, military, and political strife. What makes
us so optimistic on the future of U.S. equities is that we believe economic
expansion can occur without significant inflation. The powerful influences of
new technologies are impacting every industry by driving down the costs of
production, distribution, and servicing. Investors have not experienced a
similar environment since the late 1800s.
We realize that many investors today may be hard pressed to focus on
the long term if they are worried about near-term price levels. Reality is that
U.S. stocks will decline at some point. Nevertheless, investment opportunities
are always present, and it has been our experience that investors who maintain a
level of common stocks appropriate for their objectives and
circumstances--regardless of market levels--fare better than market timers who
attempt to sell stocks at market peaks and buy at lows.
Thank you for your support of the Capital Management Mid-Cap Fund, and
we look forward to serving you in the coming investment year.
C. Lennis Koontz, II, C.F.A.
President
December 31, 1997
<PAGE>
CAPITAL MANAGEMENT MID-CAP FUND
INSTITUTIONAL CLASS
Performance Update - $250,000 Investment
For the period from January 27, 1995 to November 30, 1997
- --------------------------------------------------------------------------------
Institutional S&P 400 S&P 500 Lipper
Shares MID CAP Total Return Capital
Index Appreciation
- --------------------------------------------------------------------------------
27-Jan-95 ....... 250,000.00 250,000.00 250,000.00 250,000.00
31-Jan-95 ....... 251,675.00 249,302.00 250,131.00 249,356.50
28-Feb-95 ....... 260,950.00 262,369.00 259,875.00 258,453.75
31-Mar-95 ....... 276,275.00 266,938.00 267,545.00 265,288.25
30-Apr-95 ....... 275,424.25 272,310.00 275,422.00 269,862.25
31-May-95 ....... 280,704.00 278,878.00 286,433.00 276,617.00
30-Jun-95 ....... 290,262.75 290,238.00 293,086.00 290,110.00
31-Jul-95 ....... 300,584.25 305,359.00 302,805.00 307,212.75
31-Aug-95 ....... 304,612.25 310,987.00 303,568.00 310,605.75
30-Sep-95 ....... 306,752.00 318,542.00 316,378.00 318,703.00
31-Oct-95 ....... 294,360.50 310,343.00 315,247.00 312,471.00
30-Nov-95 ....... 307,510.75 323,827.00 329,083.00 324,000.00
31-Dec-95 ....... 312,872.75 323,022.00 335,423.00 326,344.75
31-Jan-96 ....... 313,390.75 327,711.00 346,840.00 332,552.50
29-Feb-96 ....... 313,390.75 338,624.00 350,054.25 340,828.00
31-Mar-96 ....... 321,471.50 342,686.00 353,425.25 344,322.25
30-Apr-96 ....... 333,455.25 353,157.00 358,634.25 358,892.50
31-May-96 ....... 338,926.00 357,925.00 367,883.25 369,406.75
30-Jun-96 ....... 339,447.00 352,555.00 369,289.25 359,495.00
31-Jul-96 ....... 316,172.00 328,762.00 352,972.00 333,169.50
31-Aug-96 ....... 332,124.50 347,749.00 360,417.00 348,052.75
30-Sep-96 ....... 342,454.35 362,908.00 380,706.50 368,228.25
31-Oct-96 ....... 349,287.67 363,969.00 391,205.00 363,512.25
30-Nov-96 ....... 367,685.00 384,443.00 419,634.00 379,306.50
31-Dec-96 ....... 371,743.00 384,862.00 412,439.00 375,125.00
31-Jan-97 ....... 386,082.00 399,303.00 438,204.00 390,553.00
29-Feb-97 ....... 375,531.00 396,031.00 441,639.00 378,294.00
31-Mar-97 ....... 362,003.00 379,171.00 423,500.00 358,097.00
30-Apr-97 ....... 376,342.00 388,997.00 448,774.00 365,226.00
31-May-97 ....... 414,220.00 423,012.00 476,098.00 395,891.00
30-Jun-97 ....... 435,053.00 434,884.00 497,429.00 413,240.00
31-Jul-97 ....... 464,814.00 480,933.00 537,009.00 443,204.00
31-Aug-97 ....... 474,283.00 477,328.00 506,924.00 434,883.00
30-Sep-97 ....... 509,726.00 504,752.00 534,684.00 460,748.00
31-Oct-97 ....... 495,387.00 482,801.00 516,830.00 442,382.00
30-Nov-97 ....... 492,411.00 489,952.00 538,610.00 443,105.00
This graph depicts the performance of the Capital Management Mid-Cap Fund
Institutional Shares versus the S&P Midcap 400 Index, the Lipper Capital
Appreciation Index, and the S&P 500 Index. It is important to note Capital
Management Mid-Cap Fund is a professionally managed mutual fund while the
indexes are not available for investment and are unmanaged. The comparison is
shown for illustrative purposes only.
Average Annual Total Return
- ------------------------------------------------------
Since Inception One Year
- ------------------------------------------------------
No Sales Load 26.92% 33.92%
- ------------------------------------------------------
The graph assumes an initial $250,000 investment at January 27, 1995. All
dividends and distributions are reinvested.
At November 30, 1997, the value of the Institutional Shares would have grown to
$492,411 - total investment return of 96.96% since January 27, 1995.
At November 30, 1997, a similar investment in the S&P Midcap 400 Index would
have been worth $489,952 - total investment return of 95.98% since January 27,
1995; a similar investment in the Lipper Capital Appreciation Index would have
been worth $443,105 - total investment return of 77.24%; and a similar
investment in the S&P 500 Index would have been worth $538,610 - total
investment return of 115.44%.
Past performance is not a guarantee of future results. A mutual fund's share
price and investment return will vary with market conditions, and the principal
value of shares, when redeemed, may be worth more or less than the original
cost. Average annual total returns are historical in nature and measure net
investment income and capital gain or loss from portfolio investments assuming
reinvestments of dividends.
<PAGE>
CAPITAL MANAGEMENT MID-CAP FUND
INVESTOR CLASS
Performance Update - $10,000 Investment
For the period from April 7, 1995 to November 30, 1997
- --------------------------------------------------------------------------------
Investor S&P 400 S&P 500 Lipper
Shares MID CAP Total Return Capital
Index Appreciation
- --------------------------------------------------------------------------------
7-Apr-95 .......... 10,000.00 10,000.00 10,000.00 10,000.00
30-Apr-95 .......... 9,645.00 10,188.00 10,171.00 10,154.00
31-May-95 .......... 9,825.00 10,433.00 10,577.00 10,408.00
30-Jun-95 .......... 10,135.00 10,858.00 10,823.00 10,916.00
31-Jul-95 .......... 10,486.00 11,424.00 11,182.00 11,559.00
31-Aug-95 .......... 10,619.00 11,635.00 11,210.00 11,687.00
30-Sep-95 .......... 10,693.00 11,917.00 11,683.00 11,991.00
31-Oct-95 .......... 10,251.00 11,610.00 11,641.00 11,757.00
30-Nov-95 .......... 10,693.00 12,115.00 12,152.00 12,191.00
31-Dec-95 .......... 10,878.00 12,085.00 12,386.00 12,279.00
31-Jan-96 .......... 10,887.00 12,260.00 12,808.00 12,512.00
29-Feb-96 .......... 10,878.00 12,669.00 12,927.00 12,824.00
31-Mar-96 .......... 11,151.00 12,820.00 13,051.00 12,955.00
30-Apr-96 .......... 11,560.00 13,212.00 13,244.00 13,504.00
31-May-96 .......... 11,750.00 13,391.00 13,585.00 13,899.00
30-Jun-96 .......... 11,760.00 13,190.00 13,637.00 13,526.00
31-Jul-96 .......... 10,994.00 12,300.00 13,035.00 12,536.00
31-Aug-96 .......... 11,541.00 13,010.00 13,309.00 13,096.00
30-Sep-96 .......... 11,901.00 13,577.00 14,059.00 13,855.00
31-Oct-96 .......... 12,148.00 13,617.00 14,446.00 13,677.00
30-Nov-96 .......... 12,790.00 14,383.00 15,496.00 14,272.00
31-Dec-96 .......... 12,922.00 14,398.00 15,231.00 14,114.00
31-Jan-97 .......... 13,422.00 14,939.00 16,182.00 14,695.00
29-Feb-97 .......... 13,063.00 14,816.00 16,309.00 14,234.00
31-Mar-97 .......... 12,582.00 14,185.00 15,639.00 13,474.00
30-Apr-97 .......... 13,082.00 14,553.00 16,572.00 13,742.00
31-May-97 .......... 14,393.00 15,826.00 17,581.00 14,896.00
30-Jun-97 .......... 15,119.00 16,270.00 18,369.00 15,548.00
31-Jul-97 .......... 16,138.00 17,993.00 19,831.00 16,676.00
31-Aug-97 .......... 16,440.00 17,858.00 18,720.00 16,363.00
30-Sep-97 .......... 17,638.00 18,884.00 19,745.00 17,336.00
31-Oct-97 .......... 17,128.00 18,062.00 19,085.00 16,645.00
30-Nov-97 .......... 17,025.00 18,330.00 19,890.00 16,672.00
This graph depicts the performance of the Capital Management Mid-Cap Fund
Investor Shares versus the S&P Midcap 400 Index, the Lipper Capital Appreciation
Index, and the S&P 500 Index. It is important to note Capital Management Mid-Cap
Fund is a professionally managed mutual fund while the indexes are not available
for investment and are unmanaged. The comparison is shown for illustrative
purposes only.
Average Annual Total Return
Since Inception One Year
- ----------------------------------------------------------------
No Sales Load 23.63% 33.11%
- ----------------------------------------------------------------
Maximum 3.0% Sales Load 22.22% 29.12%
- ----------------------------------------------------------------
The graph assumes an initial $10,000 investment at April 7, 1995. All dividends
and distributions are reinvested.
At November 30, 1997, the value of the Investor Shares would have grown to
$17,025 - total investment return of 70.25% since April 7, 1995. Without the
deduction of the 3% maximum sales load, the value of the Investor Shares would
have grown to $17,551 - total investment return of 75.51% since April 7, 1995.
The sales load may be reduced or eliminated for larger purchases.
At November 30, 1997, a similar investment in the S&P Midcap 400 Index would
have been worth $18,330 - total investment return of 83.30% since April 7, 1995;
a similar investment in the Lipper Capital Appreciation Index would have grown
to $16,672 - total investment return of 66.72%; and a similar investment in the
S&P 500 Index would have grown to $19,890 - total investment return of 98.90%.
Past performance is not a guarantee of future results. A mutual fund's share
price and investment return will vary with market conditions, and the principal
value of shares, when redeemed, may be worth more or less than the original
cost. Average annual total returns are historical in nature and measure net
investment income and capital gain or loss from portfolio investments assuming
reinvestments of dividends.
<PAGE>
<TABLE>
<S> <C> <C>
CAPITAL MANAGEMENT MID-CAP FUND
PORTFOLIO OF INVESTMENTS
November 30, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - 96.19%
Advertising - 3.01%
(a) Outdoor Systems, Inc. ................................................ 7,000 $216,125
--------
Broadcast - Radio & Television - 4.78%
(a) American Radio Systems Corporation ................................... 3,500 174,125
(a) Clear Channel Communications, Inc. ................................... 2,500 169,375
--------
343,500
--------
Chemicals - 4.44%
M.A. Hanna Company ................................................... 6,800 167,875
IMC Global Inc. ...................................................... 4,800 151,200
--------
319,075
--------
Computers - 0.88%
(a) Hutchinson Technology, Inc. .......................................... 2,650 62,937
--------
Computer Software & Services - 3.25%
Autodesk, Inc. ....................................................... 2,800 107,625
(a) Legato Systems, Inc. ................................................. 3,300 125,812
--------
233,437
--------
Electronics - 2.23%
(a) Littelfuse, Inc. ..................................................... 5,800 160,225
--------
Electronics - Semiconductor - 5.95%
Helix Technology Corporation ......................................... 3,000 70,688
(a) Integrated Device Technology, Inc. ................................... 8,800 89,650
(a) Lattice Semiconductor Corporation .................................... 1,300 73,368
(a) Photronics, Inc. ..................................................... 2,200 105,050
(a) PRI Automation, Inc. ................................................. 2,600 88,725
--------
427,481
--------
Financial - Banks, Commercial - 3.06%
First Security Corporation ........................................... 6,500 220,187
--------
Food - Processing - 5.85%
Dole Food Company, Inc. .............................................. 4,750 234,531
McCormick & Company, Inc. ............................................ 7,000 185,500
--------
420,031
--------
Food - Wholesale - 3.27%
Richfood Holdings, Inc. .............................................. 8,612 235,215
--------
Household Products & Housewares - 9.13%
Leggett & Platt, Inc. ................................................ 3,950 169,850
Maytag Corporation ................................................... 7,000 226,188
Watsco, Inc. ......................................................... 10,000 260,000
--------
656,038
--------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
CAPITAL MANAGEMENT MID-CAP FUND
PORTFOLIO OF INVESTMENTS
November 30, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Lodging - 2.89%
(a) Promus Hotel Corporation ............................................... 5,000 $ 207,500
---------
Machine - Agricultural - 2.10%
AGCO Corporation ....................................................... 2,350 64,331
Case Corporation ....................................................... 1,400 86,800
---------
151,131
---------
Manufactured Housing - 2.83%
(a) Champion Enterprises, Inc. ............................................. 3,800 73,625
Clayton Homes, Inc. .................................................... 7,900 129,856
---------
203,481
---------
Medical Supplies - 5.16%
(a) Sola International, Inc. ............................................... 6,000 181,500
(a) Sybron International Corporation ....................................... 4,300 189,200
---------
370,700
---------
Oil & Gas - Equipment & Services - 13.67%
Diamond Offshore Drilling, Inc. ........................................ 1,600 79,800
(a) EEX Corporation ........................................................ 19,100 159,963
ENSCO International Incorporated ....................................... 4,200 150,938
(a) EVI, Inc. .............................................................. 2,600 133,738
(a) Nabors Industries, Inc. ................................................ 4,600 161,288
Transocean Offshore Inc. ............................................... 3,100 147,056
(a) Weatherford Enterra, Inc. .............................................. 3,300 148,706
---------
981,489
---------
Real Estate Investment Trust - 5.99%
Crescent Real Estate Equities Company .................................. 5,800 223,300
Spieker Properties, Inc. ............................................... 5,100 207,188
---------
430,488
---------
Toys - 2.77%
Mattel, Inc. ........................................................... 4,975 199,311
---------
Transportation - Rail - 2.53%
Illinois Central Corporation ........................................... 5,050 182,116
---------
Utilities - Electric - 9.20%
(a) AES Corporation ........................................................ 5,200 190,450
Idaho Power Company .................................................... 7,000 235,375
The Washington Water Power Company ..................................... 11,000 235,125
---------
660,950
---------
Utilities - Gas - 3.20%
Pacific Enterprises .................................................... 6,500 229,937
---------
Total Common Stocks (Cost $5,618,292) ....................................... 6,911,354
---------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
CAPITAL MANAGEMENT MID-CAP FUND
PORTFOLIO OF INVESTMENTS
November 30, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT COMPANY - 4.02%
Evergreen Money Market Treasury Institutional Money
Market Fund Institutional Service Shares
(Cost $289,108) ........................................................... 289,108 $ 289,108
-----------
Total Value of Investments (Cost $5,907,400 (b)) ...................................... 100.21 % $ 7,200,462
Liabilities In Excess of Other Assets ................................................. (0.21)% (15,104)
------- -----------
Net Assets ..................................................................... 100.00 $ 7,185,358
======= ===========
(a) Non-income producing investment.
(b) Aggregate cost for financial reporting and federal income tax
purposes is the same. Unrealized appreciation (depreciation) of
investments for financial reporting and federal income taxes
purposes is as follows:
Unrealized appreciation $1,395,330
Unrealized depreciation (102,268)
-----------
Net unrealized appreciation $1,293,062
===========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C>
CAPITAL MANAGEMENT MID-CAP FUND
STATEMENT OF ASSETS AND LIABILITIES
November 30, 1997
ASSETS
Investments, at value (cost $5,907,400) ................................................................... $ 7,200,462
Cash ...................................................................................................... 630
Income receivable ......................................................................................... 10,387
-----------
Total assets ......................................................................................... 7,211,479
-----------
LIABILITIES
Accrued expenses .......................................................................................... 16,459
Due to advisor ............................................................................................ 9,610
Other liabilities ......................................................................................... 52
-----------
Total liabilities .................................................................................... 26,121
-----------
NET ASSETS ....................................................................................................... $ 7,185,358
===========
NET ASSETS CONSIST OF
Paid-in capital ........................................................................................... $ 4,984,391
Distributions in excess of net investment income .......................................................... (6,541)
Undistributed net realized gain on investments ............................................................ 914,446
Net unrealized appreciation on investments ................................................................ 1,293,062
-----------
$ 7,185,358
===========
INSTITUTIONAL CLASS
Net asset value, offering and redemption price per share ($5,311,416 / 291,833 shares outstanding) ........ $ 18.20
===========
INVESTOR CLASS
Net asset value, offering and redemption price per share ($1,873,942 / 103,853 shares outstanding) ........ $ 18.04
===========
Maximum offering price per share (100 / 97 of $18.04) ..................................................... $ 18.60
===========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C>
CAPITAL MANAGEMENT MID-CAP EQUITY
STATEMENT OF OPERATIONS
Year ended November 30, 1997
INVESTMENT LOSS
Income
Dividends ................................................................................... $ 68,479
Interest .................................................................................... 17,312
Miscellaneous ............................................................................... 20
-----------
Total income ........................................................................... 85,811
-----------
Expenses
Investment advisory fees (note 2) ........................................................... 53,964
Fund administration fees (note 2) ........................................................... 10,796
Distribution and service fees - Investor Class (note 3) ..................................... 7,969
Custody fees ................................................................................ 5,821
Registration and filing administration fees (note 2) ........................................ 3,499
Fund accounting fees (note 2) ............................................................... 33,000
Audit fees .................................................................................. 8,950
Legal fees .................................................................................. 11,681
Securities pricing fees ..................................................................... 3,466
Shareholder recordkeeping fees .............................................................. 746
Shareholder servicing expenses .............................................................. 3,424
Registration and filing expenses ............................................................ 5,725
Printing expenses ........................................................................... 4,905
Trustee fees and meeting expenses ........................................................... 9,157
Other operating expenses .................................................................... 2,886
-----------
Total expenses ......................................................................... 165,989
-----------
Less:
Expense reimbursements (note 2) .................................................. (25,031)
Investment advisory fees waived (note 2) ......................................... (52,043)
-----------
Net expenses ........................................................................... 88,915
-----------
Net investment loss .............................................................. (3,104)
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from investment transactions ................................................... 906,998
Increase in unrealized appreciation on investments ............................................... 616,365
-----------
Net realized and unrealized gain on investments ............................................. 1,523,363
-----------
Net increase in net assets resulting from operations ................................... $ 1,520,259
===========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
CAPITAL MANAGEMENT MID-CAP FUND
STATEMENTS OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
Year ended Year ended
November 30, November 30,
1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS
Operations
Net investment income (loss) ........................................................ $(3,104) $66,810
Net realized gain from investment transactions ........................................ 906,998 124,864
Increase in unrealized appreciation on investments .................................... 616,365 477,699
------- -------
Net increase in net assets resulting from operations ............................... 1,520,259 669,373
--------- -------
Distributions to shareholders from
Net investment income - Institutional Class ........................................... (9,510) (55,272)
Net investment income - Investor Class ................................................ (2,150) (10,130)
Distributions in excess of net investment income - Institutional Class ................ (5,509) 0
Distributions in excess of net investment income - Investor Class ..................... (1,032) 0
Net realized gain from investment transactions - Institutional Class .................. (86,210) (33,645)
Net realized gain from investment transactions - Investor Class ....................... (18,266) (9,945)
------- ------
Decrease in net assets resulting from distributions ................................ (122,677) (108,992)
-------- -------
Capital share transactions
Increase in net assets resulting from capital share transactions (a) .................. 1,539,425 1,304,649
--------- ---------
Total increase in net assets .................................................... 2,937,007 1,865,030
NET ASSETS
Beginning of year ........................................................................ 4,248,351 2,383,321
---------- ----------
End of year (includes undistributed net investment income of ............................. $7,185,358 $4,248,351
$11,660 at November 30, 1996) ========== ==========
(a) A summary of capital share activity follows:
-------------------------------------------------------------
Year ended Year ended
November 30, 1997 November 30, 1996
-------------------------------------------------------------
Shares Value Shares Value
INSTITUTIONAL CLASS -------------------------------------------------------------
Shares sold ................................................ 34,955 $557,429 98,149 $1,190,936
Shares issued for reinvestment of distributions ............ 7,367 101,229 7,179 88,917
----- ------- ----- ------
42,322 658,658 105,328 1,279,853
Shares redeemed ............................................ (757) (13,561) (5,786) (76,867)
---- ------- ------ -------
Net increase ............................................. 41,565 $645,097 99,542 $1,202,986
====== ======= ====== =========
INVESTOR CLASS
Shares sold ................................................ 53,642 $941,945 11,424 $148,294
Shares issued for reinvestment of distributions ............ 1,566 21,448 1,635 20,075
----- ------ ----- ------
55,208 963,393 13,059 168,369
Shares redeemed ............................................ (4,818) (69,065) (5,154) (66,706)
------ ------- ------ -------
Net increase ............................................. 50,390 $894,328 7,905 $101,663
====== ======= ===== =======
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
CAPITAL MANAGEMENT MID-CAP FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
-------------------------------------------------------
INSTITUTIONAL CLASS
-------------------------------------------------------
For the
period from
January 27, 1995
(commencement
Year ended Year ended of operations) to
November 30, November 30, November 30,
1997 1996 1995
---------------- ---------------- ----------------
Net asset value, beginning of period .................................. $ 13.99 $ 12.16 $ 10.00
Income from investment operations
Net investment income (loss) ................................. 0.01 0.23 0.20
Net realized and unrealized gain on investments .............. 4.60 2.08 2.10
--------------- --------------- -------------
Total from investment operations .......................... 4.61 2.31 2.30
--------------- --------------- -------------
Distributions to shareholders from
Net investment income ........................................ (0.04) (0.26) (0.14)
Distributions in excess of net investment income ............. (0.02) 0.00 0.00
Net realized gain from investment transactions ............... (0.34) (0.22) 0.00
--------------- --------------- -------------
Total distributions ....................................... (0.40) (0.48) (0.14)
--------------- --------------- -------------
Net asset value, end of period ........................................ $ 18.20 $ 13.99 $ 12.16
=============== =============== =============
Total return (a) ...................................................... 33.92% 19.57% 23.00%
=============== =============== =============
Ratios/supplemental data
Net assets, end of period ........................................ $ 5,311,416 $ 3,502,215 $ 1,832,507
=============== =============== =============
Ratio of expenses to average net assets
Before expense reimbursements and waived fees ................ 2.92 % 3.70 % 7.20 %(b)
After expense reimbursements and waived fees ................. 1.50 % 0.00 % 0.31 %(b)
Ratio of net investment income (loss) to average net assets
Before expense reimbursements and waived fees ................ (1.34)% (1.77)% (4.45)%(b)
After expense reimbursements and waived fees ................. 0.08 % 1.94 % 2.44 %(b)
Portfolio turnover rate .......................................... 66.30 % 82.30 % 47.74 %
Average brokerage commission per share (c) ....................... 0.0607 0.0598 --
------------------------------------------------------------
INVESTOR CLASS
------------------------------------------------------------
For the
period from
April 7, 1995
(commencement
Year ended Year ended of operations) to
November 30, November 30, November 30,
1997 1996 1995
---------------- ---------------- ---------------
Net asset value, beginning of period ................................... $ 13.96 $ 12.09 $ 11.07
Income from investment operations
Net investment income (loss) .................................. (0.05) 0.24 0.11
Net realized and unrealized gain on investments ............... 4.53 2.06 1.02
--------------- ------------- -----------
Total from investment operations ........................... 4.48 2.30 1.13
--------------- ------------- -----------
Distributions to shareholders from
Net investment income ......................................... (0.03) (0.21) (0.11)
Distributions in excess of net investment income .............. (0.03) 0.00 0.00
Net realized gain from investment transactions ................ (0.34) (0.22) 0.00
--------------- ------------- -----------
Total distributions ........................................ (0.40) (0.43) (0.11)
--------------- ------------- -----------
Net asset value, end of period ......................................... $ 18.04 $ 13.96 $ 12.09
=============== ============= ===========
Total return (a) ....................................................... 33.11% 19.61% 10.24%
=============== ============= ===========
Ratios/supplemental data
Net assets, end of period ......................................... $ 1,873,942 $ 746,136 $ 550,814
=============== ============= ===========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees ................. 3.71% 4.45% 7.18% (b)
After expense reimbursements and waived fees .................. 2.25% 0.00% 1.06% (b)
Ratio of net investment income (loss) to average net assets
Before expense reimbursements and waived fees ................. (2.10)% (2.50)% (4.23)%(b)
After expense reimbursements and waived fees .................. (0.63)% 1.95% 1.89% (b)
Portfolio turnover rate ........................................... 66.30% 82.30% 47.74%
Average brokerage commission per share (c) ........................ 0.0607 0.0598 --
(a) Total return does not reflect payment of a sales charge
(b) Annualized.
(c) Represents total commissions paid on portfolio securities divided by total portfolio shares purchased or sold on which
commissions were charged.
</TABLE>
<PAGE>
CAPITAL MANAGEMENT MID-CAP FUND
NOTES TO FINANCIAL STATEMENTS
November 30, 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
The Capital Management Mid-Cap Fund (the "Fund"), formerly known as The Capital
Management Equity Fund, is a diversified series of shares of beneficial interest
of the Capital Management Investment Trust (the "Trust"). The Trust, an open-end
investment company, was organized on October 18, 1994 as a Massachusetts
Business Trust and is registered under the Investment Company Act of 1940, as
amended. The Fund began operations on January 27, 1995. The investment objective
of the fund is to seek capital appreciation principally through investments in
equity securities, consisting of common and preferred stocks and securities
convertible into common stocks. The Fund has an unlimited number of authorized
shares, which are divided into two classes - Institutional Shares and Investor
Shares. Only Institutional Shares were offered by the Fund prior to April 7,
1995.
Each class of shares has equal rights as to assets of the Fund, and the classes
are identical except for differences in their sales charge structures and
ongoing distribution and service fees. Income, expenses (other than distribution
and service fees, which are only attributable to the Investor Class), and
realized and unrealized gains or losses on investments are allocated to each
class of shares based upon its relative net assets. Investor Shares purchased
are subject to a maximum sales charge of three percent. Both classes have equal
voting privileges, except where otherwise required by law or when the Board of
Trustees determines that the matter to be voted on affects only the interests of
the shareholders of a particular class. The following is a summary of
significant accounting policies followed by the Fund.
A. Security Valuation - The Fund's investments in securities are carried
at value. Securities listed on an exchange or quoted on a national
market system are valued at 4:00 p.m., New York time. Other securities
traded in the over-the-counter market and listed securities for which
no sale was reported on that date are valued at the most recent bid
price. Securities for which market quotations are not readily
available, if any, are valued by using an independent pricing service
or by following procedures approved by the Board of Trustees.
Short-term investments are valued at cost which approximates value.
B. Federal Income Taxes - No provision has been made for federal income
taxes since it is the policy of the Fund to comply with the provisions
of the Internal Revenue Code applicable to regulated investment
companies and to make sufficient distributions of taxable income to
relieve it from all federal income taxes.
The Fund files a tax return annually using tax accounting methods
required under provisions of the Code which may differ from generally
accepted accounting principles, the basis on which these financial
statements are prepared. Accordingly, the character of distributions to
shareholders reported in the financial highlights may differ from that
reported to shareholders for Federal income tax purposes. Distributions
which exceed net investment income and net realized gains for financial
reporting purposes but not for tax purposes, if any, are shown as
distributions in excess of net investment income and net realized gains
in the accompanying statements.
C. Investment Transactions - Investment transactions are recorded on trade
date. Realized gains and losses are determined using the specific
identification cost method. Interest income is recorded daily on an
accrual basis. Dividend income is recorded on the ex-dividend date.
<PAGE>
CAPITAL MANAGEMENT MID-CAP FUND
NOTES TO FINANCIAL STATEMENTS
November 30, 1997
D. Distributions to Shareholders - The Fund may declare dividends
quarterly, payable in March, June, September, and December on a date
selected by the Trust's Trustees. Distributions to shareholders are
recorded on the ex-dividend date. In addition, distributions may be
made annually in December out of net realized gains through October 31
of that year. Distributions to shareholders are recorded on the
ex-dividend date. The Fund may make a supplemental distribution
subsequent to the end of its fiscal year ending November 30.
E. Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts of
assets, liabilities, expenses and revenues reported in the financial
statements. Actual results could differ from those estimated.
F. Repurchase Agreements - The fund may acquire U.S. Government Securities
or corporate debt securities subject to repurchase agreements. A
repurchase agreement transaction occurs when the Fund acquires a
security and simultaneously resells it to the vendor (normally a member
bank of the Federal Reserve or a registered Government Securities
dealer) for delivery on an agreed upon future date. The repurchase
price exceeds the purchase price by an amount which reflects an agreed
upon market interest rate earned by the Fund effective for the period
of time during which the repurchase agreement is in effect. Delivery
pursuant to the resale typically will occur within one to five days of
the purchase. The Fund will not enter into a repurchase agreement which
will cause more than 10% of its net assets to be invested in repurchase
agreements which extend beyond seven days. In the event of the
bankruptcy of the other party to a repurchase agreement, the Fund could
experience delays in recovering its cash or the securities lent. To the
extent that in the interim the value of the securities purchased may
have declined, the Fund could experience a loss. In all cases, the
creditworthiness of the other party to a transaction is reviewed and
found satisfactory by the Advisor. Repurchase agreements are, in
effect, loans of Fund assets. The Fund will not engage in reverse
repurchase transactions, which are considered to be borrowings under
the Investment Company Act of 1940, as amended.
NOTE 2 - INVESTMENT ADVISORY FEE AND OTHER RELATED PARTY TRANSACTIONS
Pursuant to an investment advisory agreement, Capital Management Associates,
Inc. (the "Advisor"), provides the fund with a continuous program of supervision
of the Fund's assets, including the composition of its portfolio, and furnishes
advice and recommendations with respect to investments, investment policies, and
the purchase and sale of securities. As compensation for its services, the
Advisor receives a fee at the annual rate of 1.00% of the first $100 million of
the Fund's average daily net assets, 0.90% of the next $150 million, 0.85% of
the next $250 million, and 0.80% of all assets over $500 million.
The Advisor currently intends to voluntarily waive all or a portion of its fee
and to reimburse expenses of the Fund to limit total Fund operating expenses to
a maximum of 1.50% of the average daily net assets of the Fund's Institutional
Class and a maximum of 2.25% of the average daily net assets of the Fund's
Investor Class. There can be no assurance that the foregoing voluntary fee
waivers or reimbursements will continue. The advisor has voluntarily waived a
<PAGE>
CAPITAL MANAGEMENT MID-CAP FUND
NOTES TO FINANCIAL STATEMENTS
November 30, 1997
portion of its fee amounting to $52,043 ($0.15 per share) and reimbursed $25,031
of the operating expenses incurred by the Fund for the year ended November 30,
1997.
All organization expenses of the Fund were incurred and paid by the Advisor. At
November 30, 1997, the Advisor owned 12,331 Institutional Shares and 117
Investor Shares of the Fund.
The Fund's administrator, The Nottingham Company (the "Administrator"), provides
administrative services to and is generally responsible for the overall
management and day-to-day operations of the Fund pursuant to an accounting and
administrative agreement with the Trust. As compensation for its services, the
Administrator receives a fee at the annual rate of 0.20% of the Fund's first $50
million of average daily net assets, 0.175% of the next $50 million, and 0.15%
of average daily net assets over $100 million. The Administrator also receives a
monthly fee of $2,000 for accounting and record-keeping services for the initial
class of shares and $750 per month for each additional class of shares.
Additionally, the Administrator charges the Fund for servicing of shareholder
accounts and registration of the Fund's shares. The contract with the
Administrator provides that the aggregate fees for the aforementioned
administration, accounting, and recordkeeping services shall not be less than
$3,000 per month. The Administrator also charges the Fund for certain expenses
involved with the daily valuation of portfolio securities.
North Carolina Shareholder Services, LLC (the "Transfer Agent") serves as the
Fund's transfer, dividend paying, and shareholder servicing agent. The Transfer
Agent maintains the records of each shareholder's account, answers shareholder
inquiries concerning accounts, processes purchases and redemptions of the Fund's
shares, acts as dividend and distribution disbursing agent, and performs other
shareholder servicing functions. The Transfer Agent is compensated for its
services by the Administrator and not directly by the Fund.
Shields & Company, Inc. (the "Distributor"), an affiliate of the Advisor, serves
as the Fund's principal underwriter and distributor. The Distributor receives
any sales charges imposed on purchases of Investor Shares and re-allocates a
portion of such charges to dealers through whom the sale was made, if any. For
the year ended November 30, 1997, the Distributor retained sales charges in the
amount of $1,941. At November 30, 1997, the Distributor owned 2,865
Institutional Shares of the Fund.
Certain Trustees and officers of the Trust are also officers or directors of the
Advisor, the Distributor, or the Administrator.
NOTE 3 - DISTRIBUTION AND SERVICE FEES
The Board of Trustees, including the Trustees who are not "interested persons"
of the Trust as defined in the Investment Company Act of 1940 (the "Act"),
adopted a distribution and service plan pursuant to Rule 12b-1 of the Act (the
"Plan") applicable to the Investor Shares. The Act regulates the manner in which
a regulated investment company may assume costs of distributing and promoting
the sales of its shares and servicing of its shareholder accounts.
<PAGE>
CAPITAL MANAGEMENT MID-CAP FUND
NOTES TO FINANCIAL STATEMENTS
November 30, 1997
The Plan provides that the Fund may incur certain costs, which may not exceed
0.75% per annum of the Investor Shares' average daily net assets for each year
elapsed subsequent to adoption of the Plan, for payment to the Distributor and
others for items such as advertising expenses, selling expenses, commissions,
travel, or other expenses reasonably intended to result in sales of Investor
Shares in the Fund or support servicing of Investor Share shareholder accounts.
Such expenditures incurred as service fees may not exceed 0.25% per annum of the
Investor Shares' average daily net assets. The Fund incurred $7,969 of such
expenses under the Plan for the year ended November 30, 1997.
NOTE 4 - PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments, other than short-term investments,
aggregated $4,677,007 and $3,359,778, respectively, for the year ended November
30, 1997.
NOTE 5 - DISTRIBUTIONS TO SHAREHOLDERS
For federal income tax purposes, the Fund must report distributions from net
realized gain from investment transactions that represent long-term capital gain
to its shareholders. Of the total $0.34 per share distributions for the year
ended November 30, 1997, $0.17 per share represents long-term capital gain and
$0.17 per share represents short-term capital gain. Shareholders should consult
a tax advisor on how to report distributions for state and local income tax
purposes.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees of Capital Management Investment Trust and Shareholders
of Capital Management Mid-Cap Fund:
We have audited the accompanying statement of assets and liabilities of Capital
Management Mid-Cap Fund (formerly, Capital Management Equity Fund), (a portfolio
of Capital Management Investment Trust), including the portfolio of investments,
as of November 30, 1997, and the related statements of operations and changes in
net assets and financial highlights for the year then ended. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit. The statement of changes
for the year ended November 30, 1996 and financial highlights for the two years
ended November 30, 1996 were audited by other auditors, whose reports thereon
dated December 13, 1996, expressed an unqualified opinion.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of the securities owned as of November 30, 1997
by correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the 1997 financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Capital Management Mid-Cap Fund as of November 30, 1997, the results of its
operations, the changes in its net assets and its financial highlights for the
year then ended in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Pittsburgh, Pennsylvania
January 9, 1998
<PAGE>
PART C
CAPITAL MANAGEMENT INVESTMENT TRUST
FORM N-1A
OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits
a) Financial Statements: The Annual Report for the Fiscal Year Ended
November 30, 1997 for the Capital Management Mid-Cap Fund is
included in Part B, with related Financial Highlights included in
Part A
b) Exhibits
(1) Declaration of Trust - Incorporated by reference; filed 3/26/96
(2) By-Laws - Incorporated by reference; filed 3/26/96
(3) Voting Trust Agreement - Not Applicable
(4) Specimens - Not Applicable - the series of the Registrant do not issue
certificates (see Exhibits 1 and 2 for the relevant portions of the
Declaration of Trust and By-Laws)
(5) Investment Advisory Agreement - Incorporated by reference; filed 3/26/96
(6) Distribution Agreement - Incorporated by reference; filed 3/26/96
(7) Retirement Plans Sponsored by Registrant - Not Applicable
(8) Custody Agreement - Incorporated by reference; filed 3/31/97
(9) (a)Fund Accounting, Dividend Disbursing & Transfer Agent, and Administration
Agreement - Incorporated by reference; filed 3/26/96
(b)Amendment to the Fund Accounting, Dividend Disbursing & Transfer Agent,
and Administration Agreement dated October 1, 1995 - Incorporated by
reference; filed 3/26/96
(10) Opinion and Consent of Counsel - Incorporated by reference; filed 3/26/96
and 1/28/97; Enclosed Exhibit 10
(11) Opinion and Consent of Auditors - Enclosed Exhibit 11
(12) Financial Statements Omitted - Not Applicable
(13) Initial Capital Agreement - Incorporated by reference; filed 3/26/96
(14) Prototype Plans - Not Applicable
(15) Plan of Distribution pursuant to Rule 12b-1 - Incorporated by reference;
filed 3/26/96
(16) Computation of Performance - Enclosed Exhibit 16
(17) Copies of Powers of Attorney - Incorporated by reference; filed 3/31/97
(18) Copies of Rule 18f-3 Multi-Class Plan - Incorporated by reference; filed
3/26/96
(19) Financial Data Schedule - Enclosed Exhibit 27
ITEM 25. Persons Controlled by or Under Common Control with Registrant
No person is controlled by or under common control with Registrant.
ITEM 26. Number of Record Holders of Securities
As of March 24, 1998, the number of record holders of each class of
securities of Registrant was as follows:
Number of
Title of Class Record Holders
Capital Management Mid-Cap Fund - Institutional Shares 75
Capital Management Mid-Cap Fund - Investor Shares 127
ITEM 27. Indemnification
The Trust's Declaration of Trust, Investment Advisory Agreements,
Administration Agreement, and Distribution Agreements provide for
indemnification of certain persons acting on behalf of the Trust.
Article V, Section 5.4 of the Trust's Declaration of Trust states:
1. Subject only to the provisions hereof, every person who is or
has been a Trustee, officer, employee or agent of the Trust and
every person who serves at the Trustees request as director,
officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise shall be indemnified by
the Trust to the fullest extent permitted by law against all
liabilities and against all expenses reasonably incurred or paid
by him in connection with any debt, claim, action, demand, suit,
proceeding, judgment, decree, liability or obligation of any
kind in which he becomes involved as a party or otherwise or is
threatened by virtue of his being or having been a Trustee,
officer, employee or agent of the Trust or of another
corporation, partnership, joint venture, trust or other
enterprise at the request of the Trust and against amounts paid
or incurred by him in the compromise or settlement thereof.
2. The words "claim", "action", "suit", or "proceeding" shall apply
to all claims, actions, suits or proceedings (civil, criminal,
administrative, legislative, investigative or other, including
appeals), actual or threatened, and the words "liabilities" and
"expenses" shall include, without limitation, attorneys' fees,
costs, judgments, amounts paid in settlement, fines, penalties
and other liabilities.
3. No indemnification shall be provided hereunder to a Trustee or
officer:
a. against any liability to the Trust or the Shareholders by
reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of
his office ("disabling conduct");
b. with respect to any matter as to which he shall, by the court
or other body by or before which the proceeding was brought
or engaged, have been finally adjudicated to be liable by
reason of disabling conduct;
c. in the absence of a final adjudication on the merits that
such Trustee or officer did not engage in disabling conduct,
unless a reasonable determination, based upon a review of the
facts that the person to be indemnified is not liable by
reason of such conduct, is made:
(A) by vote of a majority of a quorum of the Trustees who
are neither Interested Persons nor parties to the
proceedings; or
(B) by independent legal counsel, in a written opinion.
4. The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable,
shall not affect any other rights to which any Trustee, officer,
employee or agent may now or hereafter be entitled, shall
continue as to a person who has ceased to be such Trustee,
officer, employee, or agent and shall inure to the benefit of
the heirs, executors and administrators of such a person;
provided, however, that no person may satisfy any right of
indemnity or reimbursement granted herein except out of the
property of the Trust, and no other person shall be personally
liable to provide indemnity or reimbursement hereunder (except
an insurer or surety or person otherwise bound by contract).
5. Expenses in connection with the preparation and presentation of
a defense to any claim, action, suit or proceeding of the
character described in paragraph (a) of this Section 5.4 may be
paid by the Trust prior to final disposition thereof upon
receipt of a written undertaking by or on behalf of the Trustee,
officer, employee or agent to reimburse the Trust if it is
ultimately determined under this Section 5.4 that he is not
entitled to indemnification. Such undertaking shall be secured
by a surety bond or other suitable insurance or such security as
the Trustees shall require unless a majority of a quorum of the
Trustees who are neither Interested Persons nor parties to the
proceeding, or independent legal counsel in a written opinion,
shall have determined, based on readily available facts, that
there is reason to believe that the indemnitee ultimately will
be found to be entitled to indemnification.
Section 8(b) of the Investment Advisory Agreements states:
"Subject to the limitations set forth in this Section 8(b),
the Trust shall indemnify, defend and hold harmless (from the
assets of the Fund or Funds to which the conduct in question
relates) the Advisor against all loss, damage and liability,
including but not limited to amounts paid in satisfaction of
judgments, in compromise or as fines and penalties, and
expenses, including reasonable accountants' and counsel fees,
incurred by the Advisor in connection with the defense or
disposition of any action, suit or other proceeding, whether
civil or criminal, before any court or administrative or
legislative body, related to or resulting from this Agreement
or the performance of services hereunder, except with respect
to any matter as to which it has been determined that the
loss, damage or liability is a direct result of (i) a breach
of fiduciary duty on the part of the Advisor with respect to
the receipt of compensation for services; or (ii) willful
misfeasance, bad faith or gross negligence on the part of the
Advisor in the performance of its duties or from reckless
disregard by it of its duties under this Agreement (either and
both of the conduct described in clauses (i) and (ii) above
being referred to hereinafter as "Disabling Conduct"). A
determination that the Advisor is entitled to indemnification
may be made by (i) a final decision on the merits by a court
or other body before whom the proceeding was brought that the
Advisor was not liable by reason of Disabling Conduct, (ii)
dismissal of a court action or an administrative proceeding
against the Advisor for insufficiency of evidence of Disabling
Conduct, or (iii) a reasonable determination, based upon a
review of the facts, that the Advisor was not liable by reason
of Disabling Conduct by, (a) vote of a majority of a quorum of
Trustees who are neither "interested persons" of the Trust as
the quoted phrase is defined in Section 2(a)(19) of the 1940
Act nor parties to the action, suit or other proceeding on the
same or similar grounds that is then or has been pending or
threatened (such quorum of such Trustees being referred to
hereinafter as the "Independent Trustees"), or (b) an
independent legal counsel in a written opinion. Expenses,
including accountants' and counsel fees so incurred by the
Advisor (but excluding amounts paid in satisfaction of
judgments, in compromise or as fines or penalties), shall be
paid from time to time by the Fund or Funds to which the
conduct in question related in advance of the final
disposition of any such action, suit or proceeding; provided,
that the Advisor shall have undertaken to repay the amounts so
paid unless it is ultimately determined that it is entitled to
indemnification of such expenses under this Section 8(b) and
if (i) the Advisor shall have provided security for such
undertaking, (ii) the Trust shall be insured against losses
arising by reason of any lawful advances, or (iii) a majority
of the Independent Trustees, or an independent legal counsel
in a written opinion, shall have determined, based on a review
of readily available facts (as opposed to a full trial-type
inquiry), that there is reason to believe that the Advisor
ultimately will be entitled to indemnification hereunder.
As to any matter disposed of by a compromise payment by the
Advisor referred to in this Section 8(b), pursuant to a
consent decree or otherwise, no such indemnification either
for said payment or for any other expenses shall be provided
unless such indemnification shall be approved (i) by a
majority of the Independent Trustees or (ii) by an independent
legal counsel in a written opinion. Approval by the
Independent Trustees pursuant to clause (i) shall not prevent
the recovery from the Advisor of any amount paid to the
Advisor in accordance with either of such clauses as
indemnification of the Advisor is subsequently adjudicated by
a court of competent jurisdiction not to have acted in good
faith in the reasonable belief that the Advisor's action was
in or not opposed to the best interests of the Trust or to
have been liable to the Trust or its Shareholders by reason of
willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in its conduct under the
Agreement.
The right of indemnification provided by this Section 8(b)
shall not be exclusive of or affect any of the rights to which
the Advisor may be entitled. Nothing contained in this Section
8(b) shall affect any rights to indemnification to which
Trustees, officers or other personnel of the Trust, and other
persons may be entitled by contract or otherwise under law,
nor the power of the Trust to purchase and maintain liability
insurance on behalf of any such person.
The Board of Trustees of the Trust shall take all such action
as may be necessary and appropriate to authorize the Trust
hereunder to pay the indemnification required by this Section
8(b) including, without limitation, to the extent needed, to
determine whether the Advisor is entitled to indemnification
hereunder and the reasonable amount of any indemnity due it
hereunder, or employ independent legal counsel for that
purpose."
Section 8(b) of the Administration Agreement states:
"Indemnification of Administrator. Subject to the limitations
set forth in this Subsection 8(b), the Trust shall indemnify,
defend and hold harmless (from the assets of the Fund or Funds
to which the conduct in question relates) the Administrator
against all loss, damage and liability, including but not
limited to amounts paid in satisfaction of judgments, in
compromise or as fines and penalties, and expenses, including
reasonable accountants' and counsel fees, incurred by the
Administrator in connection with the defense or disposition of
any action, suit or other proceeding, whether civil or
criminal, before any court or administrative or legislative
body, related to or resulting from this Agreement or the
performance of services hereunder, except with respect to any
matter as to which it has been determined that the loss,
damage or liability is a direct result of (i) a breach of
fiduciary duty on the part of the Administrator with respect
to the receipt of compensation for services; or (ii) willful
misfeasance, bad faith or gross negligence on the part of the
Administrator in the performance of its duties or from
reckless disregard by it of its duties under this Agreement
(either and both of the conduct described in clauses (i) and
(ii) above being referred to hereinafter as "Disabling
Conduct"). A determination that the Administrator is entitled
to indemnification may be made by (i) a final decision on the
merits by a court or other body before whom the proceeding was
brought that the Administrator was not liable by reason of
Disabling Conduct, (ii) dismissal of a court action or an
administrative proceeding against the Administrator for
insufficiency of evidence of Disabling Conduct, or (iii) a
reasonable determination, based upon a review of the facts,
that the Administrator was not liable by reason of Disabling
Conduct by, (a) vote of a majority of a quorum of Trustees who
are neither "interested persons" of the Trust as the quoted
phrase is defined in Section 2(a)(19) of the 1940 Act nor
parties to the action, suit or other proceeding on the same or
similar grounds that is then or has been pending or threatened
(such quorum of such Trustees being referred to hereinafter as
the "Independent Trustees"), or (b) an independent legal
counsel in a written opinion. Expenses, including accountants'
and counsel fees so incurred by the Administrator (but
excluding amounts paid in satisfaction of judgments, in
compromise or as fines or penalties), shall be paid from time
to time by the Fund or Funds to which the conduct in question
related in advance of the final disposition of any such
action, suit or proceeding; provided, that the Administrator
shall have undertaken to repay the amounts so paid unless it
is ultimately determined that it is entitled to
indemnification of such expenses under this Subsection 8(b)
and if (i) the Administrator shall have provided security for
such undertaking, (ii) the Trust shall be insured against
losses arising by reason of any lawful advances, or (iii) a
majority of the Independent Trustees, or an independent legal
counsel in a written opinion, shall have determined, based on
a review of readily available facts (as opposed to a full
trial-type inquiry), that there is reason to believe that the
Administrator ultimately will be entitled to indemnification
hereunder.
As to any matter disposed of by a compromise payment by the
Administrator referred to in this Subsection 8(b), pursuant to
a consent decree or otherwise, no such indemnification either
for said payment or for any other expenses shall be provided
unless such indemnification shall be approved (i) by a
majority of the Independent Trustees or (ii) by an independent
legal counsel in a written opinion. Approval by the
Independent Trustees pursuant to clause (i) shall not prevent
the recovery from the Administrator of any amount paid to the
Administrator in accordance with either of such clauses as
indemnification of the Administrator is subsequently
adjudicated by a court of competent jurisdiction not to have
acted in good faith in the reasonable belief that the
Administrator's action was in or not opposed to the best
interests of the Trust or to have been liable to the Trust or
its Shareholders by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved
in its conduct under the Agreement.
The right of indemnification provided by this Subsection 8(b)
shall not be exclusive of or affect any of the rights to which
the Administrator may be entitled. Nothing contained in this
Subsection 8(b) shall affect any rights to indemnification to
which Trustees, officers or other personnel of the Trust, and
other persons may be entitled by contract or otherwise under
law, nor the power of the Trust to purchase and maintain
liability insurance on behalf of any such person.
The Board of Trustees of the Trust shall take all such action
as may be necessary and appropriate to authorize the Trust
hereunder to pay the indemnification required by this
Subsection 8(b) including, without limitation, to the extent
needed, to determine whether the Administrator is entitled to
indemnification hereunder and the reasonable amount of any
indemnity due it hereunder, or employ independent legal
counsel for that purpose."
Section (6) of the Distribution Agreements states:
"that in absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or duties
hereunder on the part of the Distributor, the Trust agrees to
indemnify Distributor and its officers and partners against
any and all claims, demands, liabilities and expenses which
Distributor may incur under the 1933 Act, or common law or
otherwise, arising out of or based upon any alleged untrue
statement of a material fact contained in any registration
statement or prospectus (except a prospectus of the Funds
prepared for use under Rule 482 under the 1933 Act) or
statement of additional information of the Funds, or any
omission to state a material fact therein, the omission of
which makes any statement contained therein misleading, unless
such statement or omission was made in reliance upon and in
conformity with information furnished to the Trust in
connection therewith by or on behalf of Distributor. Nothing
herein contained shall require the Trust to take any action
contrary to any provision of its Agreement and Declaration of
Trust or any applicable statute or regulation."
ITEM 28. Business and other Connections of Investment Advisor
See the Statement of Additional Information section entitled "Management"
and the Investment Advisor's Form ADV filed with the Commission for the
activities and affiliations of the officers and directors of the
Investment Advisor of the Registrant. Except as so provided, to the
knowledge of Registrant, none of the directors or executive officers of
the Investment Advisor is or has been at any time during the past two
fiscal years engaged in any other business, profession, vocation or
employment of a substantial nature. The Investment Advisor currently
serve as investment advisor to numerous institutional and individual
clients.
ITEM 29. Principal Underwriter
(a) Shields & Company is underwriter and distributor for the Capital
Management Mid-Cap Fund.
(b) Name and Principal Position(s) and Offices Position(s) and Offices
Business Address with Underwriter with Registrant
Joseph V. Shields, Jr. Chairman Trustee
140 Broadway
New York, New York 10005
David V. Shields President Trustee
140 Broadway
New York, New York 10005
Richard B. Thatcher Vice President, Secretary None
140 Broadway Treasurer
New York, New York 10005
Joseph A. Zock Vice President None
140 Broadway
New York, New York 10005
Bruce L. Graham, CFA Vice President None
140 Broadway
New York, New York 10005
Brian Keep Vice President None
140 Broadway
New York, New York 10005
(c) Not applicable
ITEM 30. Location of Accounts and Records
All account books and records not normally held by the Custodian are held
by the Trust, in the offices of The Nottingham Company or North Carolina
Shareholder Services, Administrator and Transfer Agent, respectively, to
the Trust, or in the offices of Capital Management Associates, Inc., the
Advisor.
The address of The Nottingham Company is 105 North Washington Street,
P.O. Drawer 69, Rocky Mount, North Carolina 27802-0069. The address of
North Carolina Shareholder Services is 107 North Washington Street, P.O.
Drawer 4365, Rocky Mount, North Carolina 27802-0365. The address of
Capital Management Associates, Inc. is 140 Broadway, New York, New York
10005.
ITEM 31. Management Services
The substantive provisions of the Fund Accounting, Dividend Disbursing
& Transfer Agent and Administration Agreement between the Registrant and
The Nottingham Company are discussed in Part B hereof.
ITEM 32. Undertakings
a. Registrant undertakes to furnish each person to whom a Prospectus
is delivered with a copy of the latest annual report of each series
of Registrant to shareholders upon request and without charge.
b. Registrant undertakes to hold a special meeting of its shareholders
for the purpose of voting on the question of removal of a Trustee or
Trustees if requested in writing by the holders of at least 10% of
the Trust's outstanding voting securities, and to assist in
communicating with other shareholders as required by Section 16(c) of
the Investment Company Act of 1940.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Amendment to Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused
this Amendment to its Registration Statement to be signed on its behalf by the
undersigned, thereto duly authorized, in the City of Rocky Mount, State of North
Carolina on the 31st day of March 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 on Form N-1A has been signed below by the following
persons in the capacities and on the date indicated.
*
________________________ Trustee
Lucius E. Burch, III
*
________________________ Trustee
Thomas A. Saunders, III
*
________________________ Trustee
David V. Shields
*
________________________ Trustee and Chairman,
J.V. Shields (Principal Executive
Officer)
*
________________________ Trustee
Anthony J. Walton
*By: /s/ C. Frank Watson III Dated: March 31, 1998
_______________________
C. Frank Watson III
Attorney-in-Fact
<PAGE>
CAPITAL MANAGEMENT INVESTMENT TRUST
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
EXHIBIT 99.B.10 Opinion and Consent of Counsel
EXHIBIT 99.B.11 Opinion and Consent of Auditors
EXHIBIT 99.B.16 Computation of Performance Data
EXHIBIT 99.B.27 Financial Data Schedule
EXHIBIT 10
OPINION AND CONSENT OF COUNSEL
POYNER & SPRUILL, L.L.P.
3600 Glenwood Avenue, Raleigh, NC 27612
March 31, 1998
Capital Management Investment Trust
105 North Washington Street
P.O. Box 69
Rocky Mount, North Carolina 27804-0069
Ladies and Gentlemen:
This opinion is being delivered to you in connection with your Post
Effective Amendment No. 5 to the Registration Statement on Form N-1A under the
Securities Act of 1933, as amended (SEC File No. 33-85242; 811-8822) (the
"Registration Statement"), under which you have registered an indefinite number
of shares of beneficial interest (the "Shares"), relating to the Capital
Management Mid-Cap Fund, pursuant to Rule 24f-2 under the Investment Company Act
of 1940, as amended.
We have made such inquiry of your officers and trustees and have
examined such corporate documents, records and certificates and other documents
and such questions of law as we have deemed necessary for the purposes of this
opinion. In rendering this opinion, we have relied, with your approval, as to
all questions of fact material to this opinion, upon certificates of public
officials and of your officers and have assumed, with your approval, that the
signatures on all documents examined by us are genuine, which facts we have not
independently verified.
Based upon and subject to the foregoing, we are of the opinion that the
Shares, when issued for valid consideration, will be legally and validly issued,
fully paid and nonassessable.
We hereby consent to your filing this opinion as an exhibit to the
Registration Statement. In giving such consent, we do not thereby admit that we
come within the category of persons whose consent is required under Section 7 of
the Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder.
Very truly yours,
POYNER & SPRUILL, L.L.P.
EXHIBIT 11
OPINION AND CONSENT OF AUDITORS
INDEPENDENT AUDITORS' CONSENT
To the Board of Trustees and Shareholders of
Capital Management Mid-Cap Fund:
We consent to the incorporation by reference in Post-Effective Amendment No. 5
to Registration Statement (No. 33- 85242) of Capital Management Mid-Cap Fund of
our report dated January 9, 1998, appearing in the Prospectus, which is
incorporated by reference in such Registration Statement, and to the reference
to us under the heading "Financial Highlights" in such Prospectus.
Deloitte & Touche LLP
Pittsburgh, Pennsylvania
March 27, 1998
EXHIBIT 16
COMPUTATION OF PERFORMANCE DATA
CAPITAL MANAGEMENT MID-CAP FUND
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 "cumulative total return" of the Fund, which is
calculated in a similar manner, except that the results are not annualized. This
calculation is as follows:
(ERV - P)/P = TR
Where: ERV = ending redeemable value at the end of the period covered
by the computation of a hypothetical $1,000 payment made
at the beginning of the period
P = hypothetical initial payment of $1,000 from which the
maximum sales load is deducted
TR = total return
The calculation of average annual total return and aggregate total return assume
that the maximum sales load is deducted from the initial $1,000 investment at
the time it is made and that there is a reinvestment of all dividends and
capital gain distributions on the reinvestment dates during the period. The
ending redeemable value is determined by assuming complete redemption of the
hypothetical investment and the deduction of all nonrecurring charges at the end
of the period covered by the computations. The Fund may also quote other total
return information that does not reflect the effects of the sales load.
The average annual total return for the Institutional Shares of the Fund for the
year ended November 30, 1997 and since inception (January 27, 1995 to November
30, 1997) was 33.92% and 26.92%, respectively. The cumulative total return for
the Institutional Shares of the Fund since inception through November 30, 1997
was 96.96%. The average annual total return for the Investor Shares of the Fund
for the year ended November 30, 1997 and since inception (April 7, 1995 to
November 30, 1997) was 29.12% and 22.22%, respectively. Without reflecting the
effects of the maximum sales load, the average annual total return for the
Investor Shares for the year ended November 30, 1997 and since inception was
33.11% and 23.63%, respectively. The cumulative total return for the Investor
Shares of the Fund since inception through November 30, 1997 was 70.25%. Without
reflecting the effects off the maximum sales load, the cumulative total return
for the Investor Shares since inception through November 30, 1997 was 75.51%.
Institutional Shares
Average Annual Total Return for the 12 months ended November 30, 1997:
1,000(1+T)1 = 1,339.22
T = .3392
T = 33.92%
ERV = $1,339.22
P = $1,000
n = 1
Average Annual Total Return since inception (January 27,1995) through November
30, 1997:
1,000(1+T)2.84= 1,969.64
T = .2692
T = 26.92%
ERV = $1,969.63
P = $1,000
n = 2.84
Cumulative Total Return since inception (January 27,1995) through November 30,
1997:
(1,969.64-1,000)/1,000 = .9696
ERV = $1,969.64
P = $1,000
TR = 96.96%
Investor Shares
Average Annual Total Return for the 12 months ended November 30, 1997 excluding
3.0% sales load:
1,000(1+T)1 = 1,331.15
T = .3311
T = 33.11%
ERV = $1,331.15
P = $1,000
n = 1
Average Annual Total Return since inception (April 7, 1995) through November 30,
1997 excluding 3.0% sales load:
1,000(1+T)2.65= 1,755.12
T = .2363
T = 23.63%
ERV = $1,755.12
P = $1,000
n = 2.65
Cumulative Total Return since inception (April 7, 1995) through November 30,
1997 excluding 3.0% sales load:
(1,755.12 - 1,000)/1,000 = .7551
ERV = $1,755.12
P = $1,000
TR = 75.51%
Average Annual Total Return for the 12 months ended November 30, 1997 including
3.0% sales load:
1,000(1+T)1 = 1,291.21
T = .2912
T = 29.12%
ERV = $1,291.21
P = $1,000
n = 1
Average Annual Total Return since inception (April 7, 1995) through November 30,
1997 including 3.0% sales load:
1,000(1+T)2.65 = 1,702.47
T = .2222
T = 22.22%
ERV = $1,702.47
P = $1,000
n = 2.65
Cumulative Total Return since inception (April 7, 1995) through November 30,
1997 including 3.0% sales load:
(1,702.47 - 1,000)/1,000 = .7025
ERV = $1,702.47
P = $1,000
TR = 70.25%
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<NAME> Capital Management Investment Trust
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<EXPENSES-NET> 88,915
<NET-INVESTMENT-INCOME> (3,104)
<REALIZED-GAINS-CURRENT> 906,998
<APPREC-INCREASE-CURRENT> 616,365
<NET-CHANGE-FROM-OPS> 1,520,259
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (9,510)
<DISTRIBUTIONS-OF-GAINS> (86,210)
<DISTRIBUTIONS-OTHER> (5,509)
<NUMBER-OF-SHARES-SOLD> 34,955
<NUMBER-OF-SHARES-REDEEMED> (757)
<SHARES-REINVESTED> 7,367
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<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 53,964
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 165,989
<AVERAGE-NET-ASSETS> 4,333,818
<PER-SHARE-NAV-BEGIN> 13.99
<PER-SHARE-NII> 0.01
<PER-SHARE-GAIN-APPREC> 4.60
<PER-SHARE-DIVIDEND> (0.06)
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<PER-SHARE-NAV-END> 18.20
<EXPENSE-RATIO> 1.50
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<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
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<NAME> Capital Management Investment Trust
<SERIES>
<NUMBER> 2
<NAME> Investor
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> Nov-30-1997
<PERIOD-END> Nov-30-1997
<EXCHANGE-RATE> 1.000
<INVESTMENTS-AT-COST> 5,907,400
<INVESTMENTS-AT-VALUE> 7,200,462
<RECEIVABLES> 10,387
<ASSETS-OTHER> 630
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<TOTAL-ASSETS> 7,211,479
<PAYABLE-FOR-SECURITIES> 0
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<OTHER-ITEMS-LIABILITIES> 26,121
<TOTAL-LIABILITIES> 26,121
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,984,391
<SHARES-COMMON-STOCK> 103,853
<SHARES-COMMON-PRIOR> 53,463
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (6,541)
<ACCUMULATED-NET-GAINS> 914,446
<OVERDISTRIBUTION-GAINS> 0
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<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,150)
<DISTRIBUTIONS-OF-GAINS> (18,266)
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<NUMBER-OF-SHARES-REDEEMED> (4,818)
<SHARES-REINVESTED> 1,566
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<AVERAGE-NET-ASSETS> 1,062,565
<PER-SHARE-NAV-BEGIN> 13.96
<PER-SHARE-NII> (0.05)
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<PER-SHARE-DIVIDEND> (0.06)
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<PER-SHARE-NAV-END> 18.04
<EXPENSE-RATIO> 2.25
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<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
