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>
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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>
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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>
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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>
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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>
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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>
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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>
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<TABLE>
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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
<PAGE>
CAPITAL MANAGEMENT MID-CAP FUND
NOTES TO FINANCIAL STATEMENTS
November 30, 1997
will continue. The Advisor has voluntarily waived a 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
