[letterhead]
Capital Management Associates
Incorporated
140 Broadway New York, N.Y. 10005
tel: (212) 320 2000
fax: (212) 320 2040
Investment Advisors
Dear Fellow Shareholders,
The year just ended has been the second most interesting in my
thirty-year investment career, the other being 1972. Not since the mid 1970s
have recent world events been so extraordinary. In no particular order these
would include:
1. Impeachment 8. European monetary union
2. Iraq bombing 9. Deflation
3. Russian crisis 10. Record long expansion
4. Japan crisis 11. Record low inflation
5. Asian crisis 12. Record bull market
6. Weather problems 13. Internet stocks.
7. Year 2000
And, as the results of your fund indicate, the financial markets,
particularly small- and mid-cap stocks, have not been immune to the tugs and
pulls of these different influences as 1998 unfolded.
At the end of the third quarter the S&P 500 index had declined -14.3%
from its peak, but by equal-weighting this index, which removes the impact of a
few very large companies, the average decline was -26.6%. For the broader market
of 6,452 stocks, the average decline was far larger at -35%. These are declines
which are equivalent to the famed crash of 1987. Then, in early October the
Federal Reserve began to lower short-term interest rates, and the stock market
exploded. The Dow Jones Industrial Average surged 23% in just thirty-seven days,
a feat accomplished just four times in the past thirty years.
These prior surges were all in financial crisis economic environments
similar to the present: weakening global activity, declining corporate profits,
Federal Reserve easing, accelerating money growth, and slowing inflation. The
years were 1975, 1982, 1986, and 1991, and the stock market continued to move up
over the next few months after the initial burst. The point is that economic and
market dislocations create opportunities, and today, investors are being
presented with record-setting bargains in the mid- and small-cap sectors of the
U.S. stock market.
We at Capital Management Associates think there is sufficient evidence
to remain bullish on the future investment potential for mid-cap companies. The
recent market recovery, while extraordinary by every measure, only recoups the
losses inflicted on the group during the six-month hazing of mid-cap investors
leading up to the early October meltdown. For the year dedicated mid-cap stock
portfolios still remain under the breakeven waterline. Yet, many mid-cap
companies derive their earnings largely from the U.S. and are less exposed to
problems overseas than the larger, multinational giants such as Coca-Cola, and
despite the strong gains over the past two months, valuations for mid-cap stocks
are still close to their historical lows.
<PAGE>
Effectively, the prior period of underperformance reduced valuations to
a multi-decade low, and the recent rally, no matter how powerful, cannot easily
repair such damage. Simply put, now is not the time to abandon this market
segment. Stay the course and think about taking advantage of this opportunity by
increasing exposure. We expect 1999 to be a good year for the mid-cap investor.
Your continued support is appreciated, and we look forward to serving
you in the coming investment year.
C. Lennis Koontz, II, C.F.A.
President
December 31, 1998
<PAGE>
CAPITAL MANAGEMENT MID-CAP FUND
INSTITUTIONAL SHARES
Performance Update - $250,000 Investment
For the period from January 27, 1995 to November 30, 1998
Lipper
Capital
Institutional S&P 400 MID CAP Russell 2500 Appreciation
Shares Index Index Index
1/27/95 250,000.00 250,000.00 250,000.00 250,000.00
2/28/95 260,950.00 262,369.00 262,480.00 258,453.75
5/31/95 280,704.00 278,878.00 279,504.00 276,617.00
8/31/95 304,612.25 310,987.00 315,156.00 310,605.75
11/30/95 307,510.75 323,827.00 324,294.00 324,000.00
2/29/96 313,390.75 338,624.00 342,173.00 340,828.00
5/31/96 338,926.00 357,925.00 375,203.00 369,406.75
8/31/96 332,124.50 347,749.00 356,438.00 348,052.75
11/30/96 367,685.00 384,443.00 387,294.00 379,306.50
2/28/97 375,531.00 396,031.00 397,455.00 378,294.00
5/31/97 414,220.00 423,012.00 419,630.00 395,891.00
8/31/97 474,283.00 477,328.00 468,817.00 434,883.00
30-Nov-97 492,411.00 489,952.00 479,159.00 443,105.00
28-Feb-98 526,789.00 540,574.00 515,674.00 484,314.00
31-May-98 511,976.00 549,380.00 515,243.00 495,453.00
31-Aug-98 384,830.00 432,544.00 389,794.00 415,338.00
30-Nov-98 438,528.00 540,789.00 462,105.00 494,599.00
This graph depicts the performance of the Capital Management Mid-Cap Fund
Institutional Shares versus the S&P 400 Midcap Index, the Lipper Capital
Appreciation Index, and the Russell 2500 Index. It is important to note that the
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
- -------------------------------------------------------
One Year Three Years Since Inception
- -------------------------------------------------------
(10.94)% 12.56% 15.74%
- -------------------------------------------------------
The graph assumes an initial $250,000 investment at January 27, 1995. All
dividends and distributions are reinvested.
At November 30, 1998, the value of the Institutional Shares would have grown to
$438,528 - total investment return of 74.41% since January 27, 1995.
At November 30, 1998, a similar investment in the S&P 400 Midcap Index would
have been worth $540,789 - total investment return of 116.32% since January 27,
1995; a similar investment in the Lipper Capital Appreciation Index would have
been worth $494,599 - total investment return of 97.84%; and a similar
investment in the Russell 2500 Index would have been worth $462,105 - total
investment return of 84.84%.
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 SHARES
Performance Update - $10,000 Investment
For the period from April 7, 1995 to November 30, 1998
Lipper
Capital
Institutional S&P 400 MID CAP Russell 2500 Appreciation
Shares Index Index Index
4/7/95 10,000.00 10,000.00 10,000.00 10,000.00
5/31/95 9,825.00 10,433.00 10,350.00 10,408.00
8/31/95 10,619.00 11,635.00 11,671.00 11,687.00
11/30/95 10,693.00 12,115.00 12,009.00 12,191.00
2/29/96 10,878.00 12,669.00 12,671.00 12,824.00
5/31/96 11,750.00 13,391.00 13,894.00 13,899.00
8/31/96 11,541.00 13,010.00 13,199.00 13,096.00
11/30/96 12,790.00 14,383.00 14,342.00 14,272.00
2/28/97 13,063.00 14,816.00 14,718.00 14,234.00
5/31/97 14,393.00 15,826.00 15,540.00 14,896.00
8/31/97 16,440.00 17,858.00 17,361.00 16,363.00
11/30/97 17,025.00 18,330.00 17,744.00 16,672.00
28-Feb-98 18,173.00 20,224.00 19,096.00 18,223.00
31-May-98 17,634.00 20,553.00 19,080.00 18,642.00
31-Aug-98 13,228.00 16,182.00 14,435.00 15,627.00
30-Nov-98 15,038.00 20,232.00 17,112.00 18,610.00
This graph depicts the performance of the Capital Management Mid-Cap Fund
Investor Shares versus the S&P 400 Midcap Index, the Lipper Capital Appreciation
Index, and the Russell 2500 Index. It is important to note that the 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
- --------------------------------------------------------------------------------
One Year Three Years Since Inception
- --------------------------------------------------------------------------------
No Sales Load (11.67)% 12.04% 12.76%
- --------------------------------------------------------------------------------
Maximum 3.0% Sales Load (14.32)% 10.91% 11.82%
- --------------------------------------------------------------------------------
The graph assumes an initial $10,000 investment at April 7, 1995. All dividends
and distributions are reinvested.
At November 30, 1998, the value of the Investor Shares would have grown to
$15,038 - total investment return of 50.38% since April 7, 1995. Without the
deduction of the 3% maximum sales load, the value of the Investor Shares would
have grown to $15,503 - total investment return of 55.03% since April 7, 1995.
The sales load may be reduced or eliminated for larger purchases.
At November 30, 1998, a similar investment in the S&P 400 Midcap Index would
have been worth $20,232 - total investment return of 102.32% since April 7,
1995; a similar investment in the Lipper Capital Appreciation Index would have
grown to $18,610 - total investment return of 86.10%; and a similar investment
in the Russell 2500 Index would have grown to $17,112 - total investment return
of 71.12%.
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, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - 85.81%
Advertising - 4.42%
(a) Outdoor Systems, Inc. .................................................. 10,950 $295,650
--------
Airlines - 2.73%
Southwest Airlines Co. ................................................. 8,500 182,750
--------
Chemicals - 2.69%
M. A. Hanna Company .................................................... 12,800 180,000
--------
Commercial Services - 5.65%
Deluxe Corporation ..................................................... 5,500 191,125
National Data Corporation .............................................. 5,000 186,875
--------
378,000
--------
Computer Software & Services - 11.04%
(a) BMC Software, Inc. ..................................................... 2,000 102,125
(a) Comverse Technology, Inc. .............................................. 3,500 201,250
(a) Legato Systems, Inc. ................................................... 3,900 186,469
(a) Network Associates, Inc. ............................................... 2,000 101,750
(a) Peregrine Systems, Inc. ................................................ 4,000 147,750
--------
739,344
--------
Diversified Operations - 3.54%
(a) Blyth Industries, Inc. ................................................. 7,000 237,125
--------
Electronics - Semiconductor - 6.75%
(a) Applied Materials, Inc. ................................................ 1,500 58,125
Helix Technology Corporation ........................................... 11,000 134,750
(a) KLA-Tencor Corporation ................................................. 2,500 85,156
(a) LSI Logic Corporation .................................................. 5,000 77,500
(a) Teradyne, Inc. ......................................................... 3,000 96,188
--------
451,719
--------
Financial - Banks, Commercial - 0.94%
Summit Bancorp ......................................................... 1,500 62,718
--------
Food - Processing - 3.49%
McCormick & Company, Incorporated ...................................... 7,000 233,625
--------
Machinery - Construction & Mining - 1.45%
Case Corporation ....................................................... 4,000 97,000
--------
Medical - Biotechnology - 3.45%
(a) Chiron Corporation ..................................................... 10,200 230,775
--------
(Continued)
</TABLE>
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<TABLE>
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CAPITAL MANAGEMENT MID-CAP FUND
PORTFOLIO OF INVESTMENTS
November 30, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Medical Supplies - 4.10%
C. R. Bard, Inc. ....................................................... 6,000 $ 274,875
---------
Oil & Gas - Equipment & Services - 4.44%
Apache Corporation ..................................................... 6,900 158,700
(a) Cooper Cameron Corporation ............................................. 5,700 138,938
---------
297,638
---------
Real Estate Investment Trust - 2.50%
Crescent Real Estate Equities Company .................................. 6,700 167,500
---------
Retail - Restaurants - 1.25%
(a) Brinker International, Inc. ............................................ 3,300 83,944
---------
Retail - Specialty Line - 6.16%
(a) Borders Group, Inc. .................................................... 6,000 145,500
(a) Office Depot, Inc. ..................................................... 8,200 267,012
---------
412,512
---------
Steel - Specialty - 3.11%
Texas Industries, Inc. ................................................. 7,200 208,350
---------
Telecommunications Equipment - 3.30%
(a) ADC Telecommunications, Inc. ........................................... 7,400 221,075
---------
Utilities - Electric - 11.14%
Idacorp Inc. ........................................................... 7,000 244,125
IPALCO Enterprises, Inc. ............................................... 6,000 300,750
Washington Water Power Company ......................................... 11,000 201,437
---------
746,312
---------
Utilities - Gas - 3.66%
Sempra Energy .......................................................... 9,774 244,961
---------
Total Common Stocks (Cost $5,247,917) .................................. 5,745,873
---------
(Continued)
</TABLE>
<PAGE>
<TABLE>
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CAPITAL MANAGEMENT MID-CAP FUND
PORTFOLIO OF INVESTMENTS
November 30, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT COMPANIES - 9.14%
Evergreen Money Market Treasury Institutional Money
Market Fund Institutional Service Shares ..................................... 306,161 $306,161
Evergreen Money Market Treasury Institutional Treasury
Money Market Fund Institutional Service Shares ............................... 306,161 306,161
--------
Total Investment Companies (Cost $612,322) ................................... 612,322
--------
Total Value of Investments (Cost $5,860,239 (b)) 94.95% $ 6,358,195
Other Assets Less Liabilities 5.05% 338,223
--------- ------------
Net Assets 100.00% $ 6,696,418
========= ============
(a) Non-income producing investment.
(b) Aggregate cost for financial reporting and federal income tax purposes is the same. Unrealized appreciation
(depreciation) of investments for financial reporting and federal income tax purposes is as follows:
Unrealized appreciation $ 731,636
Unrealized depreciation (233,680)
-----------
Net unrealized appreciation $ 497,956
===========
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, 1998
ASSETS
Investments, at value (cost $5,860,239) ................................................................... $ 6,358,195
Cash ...................................................................................................... 198,918
Receivable for investments sold ........................................................................... 153,983
Income receivable ......................................................................................... 5,841
Due from advisor (note 2) ................................................................................. 1,205
Other assets .............................................................................................. 135
-----------
Total assets ......................................................................................... 6,718,277
-----------
LIABILITIES
Accrued expenses .......................................................................................... 21,859
-----------
NET ASSETS ....................................................................................................... $ 6,696,418
===========
NET ASSETS CONSIST OF
Paid-in capital ........................................................................................... $ 6,287,488
Accumulated net realized loss on investments .............................................................. (89,026)
Net unrealized appreciation on investments ................................................................ 497,956
-----------
$ 6,696,418
===========
INSTITUTIONAL CLASS
Net asset value, offering and redemption price per share ($4,929,525 / 346,974 shares outstanding) ........ $ 14.21
===========
INVESTOR CLASS
Net asset value, offering and redemption price per share ($1,766,893 / 126,551 shares outstanding) ........ $ 13.96
===========
Maximum offering price per share (100 / 97% of $13.96) .................................................... $ 14.39
===========
See accompanying notes to financial statements
</TABLE>
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<TABLE>
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CAPITAL MANAGEMENT MID-CAP FUND
STATEMENT OF OPERATIONS
Year ended November 30, 1998
INVESTMENT LOSS
Income
Dividends ......................................................................................... $ 124,030
---------
Expenses
Investment advisory fees (note 2) ................................................................. 74,249
Fund administration fees (note 2) ................................................................. 14,440
Distribution and service fees - Investor Class (note 3) ........................................... 16,078
Audit fees ........................................................................................ 8,150
Legal fees ........................................................................................ 17,235
Fund accounting fees (note 2) ..................................................................... 33,250
Custody fees ...................................................................................... 2,548
Securities pricing fees ........................................................................... 2,645
Shareholder recordkeeping fees .................................................................... 1,796
Registration and filing administration fees ....................................................... 3,404
Other fees ........................................................................................ 182
Shareholder servicing expenses .................................................................... 4,888
Registration and filing expenses .................................................................. 13,329
Trustee fees and meeting expenses ................................................................. 6,810
Printing expenses ................................................................................. 7,264
Other operating expenses .......................................................................... 2,663
---------
Total expenses .............................................................................. 208,931
---------
Less:
Expense reimbursements (note 2) ........................................................ (14,704)
Investment advisory fees waived (note 2) ............................................... (66,709)
Distribution and service fees waived - Investor Class (note 3) ......................... (72)
---------
Net expenses ................................................................................ 127,446
---------
Net investment loss .................................................................... (3,416)
---------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized loss from investment transactions ......................................................... (70,827)
Decrease in unrealized appreciation on investments ..................................................... (795,106)
---------
Net realized and unrealized loss on investments ................................................... (865,933)
---------
Net decrease in net assets resulting from operations ........................................ $(869,349)
=========
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,
1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
(DECREASE) INCREASE IN NET ASSETS
Operations
Net investment loss .................................................................... $ (3,416) $ (3,104)
Net realized (loss) gain from investment transactions .................................. (70,827) 906,998
(Decrease) increase in unrealized appreciation on investments .......................... (795,106) 616,365
---------- ----------
Net (decrease) increase in net assets resulting from operations .................... (869,349) 1,520,259
---------- ----------
Distributions to shareholders from
Net investment income - Institutional Class ............................................ 0 (9,510)
Net investment income - Investor Class ................................................. 0 (2,150)
Distributions in excess of net investment income - Institutional Class ................. 0 (5,509)
Distributions in excess of net investment income - Investor Class ...................... 0 (1,032)
Net realized gain from investment transactions - Institutional Class.................... (678,656) (86,210)
Net realized gain from investment transactions - Investor Class ........................ (244,032) (18,266)
---------- ----------
Decrease in net assets resulting from distributions ................................ (922,688) (122,677)
---------- ----------
Capital share transactions
Increase in net assets resulting from capital share transactions (a) 1,303,097 1,539,425
---------- ----------
Total (decrease) increase in net assets ....................................... (488,940) 2,937,007
NET ASSETS
Beginning of period ......................................................................... 7,185,358 4,248,351
---------- ----------
End of period ............................................................................... $6,696,418 $7,185,358
========== ==========
(a) A summary of capital share activity follows:
Year ended Year ended
November 30, 1998 November 30, 1997
Shares Value Shares Value
----------- ----------- ----------- -----------
INSTITUTIONAL CLASS
Shares sold ............................................ 18,735 $ 299,573 34,955 $ 557,429
Shares issued for reinvestment of distributions ........ 41,056 678,656 7,367 101,229
----------- ----------- ----------- -----------
59,791 978,229 42,322 658,658
Shares redeemed ........................................ (4,650) (73,195) (757) (13,561)
----------- ----------- ----------- -----------
Net increase ...................................... 55,141 $ 905,034 41,565 $ 645,097
=========== =========== =========== ===========
INVESTOR CLASS
Shares sold ............................................ 57,629 $ 941,702 53,642 $ 941,945
Shares issued for reinvestment of distributions ........ 14,339 234,590 1,566 21,448
----------- ----------- ----------- -----------
71,968 1,176,292 55,208 963,393
Shares redeemed ........................................ (49,270) (778,229) (4,818) (69,065)
----------- ----------- ----------- -----------
Net increase ...................................... 22,698 $ 398,063 50,390 $ 894,328
=========== =========== =========== ===========
See accompanying notes to financial statements
</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 Year ended of operations) to
November 30, November 30, November 30, November 30,
1998 1997 1996 1995
------------ ------------ ------------ -----------
Net asset value, beginning of period $18.20 $13.99 $12.16 $10.00
Income from investment operations
Net investment income (loss) 0.03 0.01 0.23 0.20
Net realized and unrealized gain on investments (1.70) 4.60 2.08 2.10
------------ ------------ ------------ -----------
Total from investment operations (1.67) 4.61 2.31 2.30
------------ ------------ ------------ -----------
Distributions to shareholders from
Net investment income 0.00 (0.04) (0.26) (0.14)
Distributions in excess of net investment income (0.00) (0.02) 0.00 0.00
Net realized gain from investment transactions (2.32) (0.34) (0.22) 0.00
------------ ------------ ------------ -----------
Total distributions (2.32) (0.40) (0.48) (0.14)
------------ ------------ ------------ -----------
Net asset value, end of period $14.21 $18.20 $13.99 $12.16
============ ============ ============ ===========
Total return (a) (10.94)% 33.92% 19.57% 23.00%
============ ============ ============ ===========
Ratios/supplemental data
Net assets, end of period $4,929,525 $5,311,416 $3,502,215 $1,832,507
============ ============ ============ ===========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees 2.60 % 2.92 % 3.70 % 7.20 %(b)
After expense reimbursements and waived fees 1.50 % 1.50 % 0.00 % 0.31 %(b)
Ratio of net investment income (loss) to average net assets
Before expense reimbursements and waived fees (0.93)% (1.34)% (1.77)% (4.45)%(b)
After expense reimbursements and waived fees 0.17 % 0.08 % 1.94 % 2.44 %(b)
Portfolio turnover rate 89.04 % 66.30 % 82.30 % 47.74 %
Average brokerage commission per share (c) $0.0626 $0.0607 $0.0598 -
(a) Total return does not reflect payment of a sales charge.
(b) Annualized.
(c) Represents total commissions paid on portfolio securities divided by total portfolio shares purchased or sold on which
commissions were charged.
See accompanying notes to financial statements
</TABLE>
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CAPITAL MANAGEMENT MID-CAP FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
-------------------------------------------------------------------
INVESTOR CLASS
-------------------------------------------------------------------
For the
period from
April 7, 1995
(commencement of
Year ended Year ended Year ended operations) to
November 30, November 30, November 30, November 30,
1998 1997 1996 1995
--------------- -------------- -------------- --------------
Net asset value, beginning of period $18.04 $13.96 $12.09 $11.07
Income from investment operations
Net investment income (loss) (0.09) (0.05) 0.24 0.11
Net realized and unrealized gain on investments (1.67) 4.53 2.06 1.02
--------------- -------------- -------------- --------------
Total from investment operations (1.76) 4.48 2.30 1.13
--------------- -------------- -------------- --------------
Distributions to shareholders from
Net investment income 0.00 (0.03) (0.21) (0.11)
Distributions in excess of net investment income 0.00 (0.03) 0.00 0.00
Net realized gain from investment transactions (2.32) (0.34) (0.22) 0.00
--------------- -------------- -------------- --------------
Total distributions (2.32) (0.40) (0.43) (0.11)
--------------- -------------- -------------- --------------
Net asset value, end of period $13.96 $18.04 $13.96 $12.09
=============== ============== ============== ==============
Total return (a) (11.67)% 33.11% 19.61% 10.24%
=============== ============== ============== ==============
Ratios/supplemental data
Net assets, end of period $1,766,893 $1,873,942 $746,136 $550,814
=============== ============== ============== ==============
Ratio of expenses to average net assets
Before expense reimbursements and waived fees 3.35 % 3.71 % 4.45 % 7.18% (b)
After expense reimbursements and waived fees 2.25 % 2.25 % 0.00 % 1.06% (b)
Ratio of net investment income (loss) to average net assets
Before expense reimbursements and waived fees (1.67)% (2.10)% (2.50)% (4.23)%(b)
After expense reimbursements and waived fees (0.57)% (0.63)% 1.95 % 1.89% (b)
Portfolio turnover rate 89.04 % 66.30 % 82.30 % 47.74%
Average brokerage commission per share (c) $0.0626 $0.0607 $0.0598 -
(a) Total return does not reflect payment of a sales charge.
(b) Annualized.
(c) Represents total commissions paid on portfolio securities divided by total portfolio shares purchased or sold on which
commissions were charged.
See accompanying notes to financial statements
</TABLE>
<PAGE>
CAPITAL MANAGEMENT MID-CAP FUND
NOTES TO FINANCIAL STATEMENTS
November 30, 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
The Capital Management Mid-Cap Fund (the "Fund"), formerly known as The
Capital Management Equity Fund, is a diversified series of shares of
beneficial interest of the Capital Management Investment Trust (the
"Trust"). The Trust, an open-end investment company, was organized on
October 18, 1994 as a Massachusetts Business Trust and is registered
under the Investment Company Act of 1940, as amended. The Fund began
operations on January 27, 1995. The investment objective of the fund is
to seek capital appreciation principally through investments in equity
securities, consisting of common and preferred stocks and securities
convertible into common stocks. The Fund has an unlimited number of
authorized shares, which are divided into two classes - Institutional
Shares and Investor Shares. Only Institutional Shares were offered by
the Fund prior to April 7, 1995.
Each class of shares has equal rights as to assets of the Fund, and the
classes are identical except for differences in their sales charge
structures and ongoing distribution and service fees. Income, expenses
(other than distribution and service fees, which are only attributable
to the Investor Class), and realized and unrealized gains or losses on
investments are allocated to each class of shares based upon its
relative net assets. Investor Shares purchased are subject to a maximum
sales charge of three percent. Both classes have equal voting
privileges, except where otherwise required by law or when the Board of
Trustees determines that the matter to be voted on affects only the
interests of the shareholders of a particular class. The following is a
summary of significant accounting policies followed by the Fund.
A. Security Valuation - The Fund's investments in securities are carried
at value. Securities listed on an exchange or quoted on a national
market system are valued at 4:00 p.m., New York time. Other securities
traded in the over-the-counter market and listed securities for which
no sale was reported on that date are valued at the most recent bid
price. Securities for which market quotations are not readily
available, if any, are valued by using an independent pricing service
or by following procedures approved by the Board of Trustees.
Short-term investments are valued at cost which approximates value.
B. Federal Income Taxes - No provision has been made for federal income
taxes since it is the policy of the Fund to comply with the provisions
of the Internal Revenue Code applicable to regulated investment
companies and to make sufficient distributions of taxable income to
relieve it from all federal income taxes.
Each Fund files a tax return annually using tax accounting methods
required under provisions of the Code which may differ from generally
accepted accounting principles, the basis on which these financial
statements are prepared. Accordingly, the character of distributions to
shareholders reported in the financial highlights may differ from that
reported to shareholders for Federal income tax purposes. Distributions
which exceed net investment income and net realized gains for financial
reporting purposes but not for tax purposes, if any, are shown as
distributions in excess of net investment income and net realized gains
in the accompanying statements.
C. Investment Transactions - Investment transactions are recorded on trade
date. Realized gains and losses are determined using the specific
identification cost method. Interest income is recorded daily on an
accrual basis. Dividend income is recorded on the ex-dividend date.
<PAGE>
CAPITAL MANAGEMENT MID-CAP FUND
NOTES TO FINANCIAL STATEMENTS
November 30, 1998
D. Distributions to Shareholders - The Fund may declare dividends
quarterly, payable in March, June, September, and December on a date
selected by the Trust's Trustees. Distributions to shareholders are
recorded on the ex-dividend date. In addition, distributions may be
made annually in December out of net realized gains through October 31
of that year. Distributions to shareholders are recorded on the
ex-dividend date. The Fund may make a supplemental distribution
subsequent to the end of its fiscal year ending November 30.
E. Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts of
assets, liabilities, expenses and revenues reported in the financial
statements. Actual results could differ from those estimated.
NOTE 2 - INVESTMENT ADVISORY FEE AND OTHER RELATED PARTY TRANSACTIONS
Pursuant to an investment advisory agreement, Capital Management
Associates, Inc. (the "Advisor"), provides the fund with a continuous
program of supervision of the Fund's assets, including the composition
of its portfolio, and furnishes advice and recommendations with respect
to investments, investment policies, and the purchase and sale of
securities. As compensation for its services, the Advisor receives a
fee at the annual rate of 1.00% of the first $100 million of the Fund's
average daily net assets, 0.90% of the next $150 million, 0.85% of the
next $250 million, and 0.80% of all assets over $500 million.
The Advisor currently intends to voluntarily waive all or a portion of
its fee and to reimburse expenses of the Fund to limit total Fund
operating expenses to a maximum of 1.50% of the average daily net
assets of the Fund's Institutional Class and a maximum of 2.25% of the
average daily net assets of the Fund's Investor Class. There can be no
assurance that the foregoing voluntary fee waivers or reimbursements
will continue. The Advisor has voluntarily waived a portion of its fee
amounting to $66,709 ($0.14 per share) and reimbursed $14,704 of the
operating expenses incurred by the Fund for the year ended November 30,
1998.
The Fund's administrator, The Nottingham Company (the "Administrator"),
provides administrative services to and is generally responsible for
the overall management and day-to-day operations of the Fund pursuant
to an accounting and administrative agreement with the Trust. For the
period from December 1, 1997 through October 31, 1998 the Administrator
received 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 as compensation
for its services. The Administrator also received 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.
Effective November 1, 1998, the Administrator receives a fee at the
annual rate of 0.125% of the Fund's first $50 million of average daily
net assets, 0.100% of the next $50 million, and 0.075% of average daily
net assets over $100 million as well as a monthly fee of $2,250 for
accounting and record-keeping services for the initial class of shares
and $750 per month for each additional class of 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 for the period from December 1,
1997 through October 31, 1998 and $4,000 per month beginning November
1, 1998. 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
<PAGE>
CAPITAL MANAGEMENT MID-CAP FUND
NOTES TO FINANCIAL STATEMENTS
November 30, 1998
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,
1998, the Distributor retained sales charges in the amount of $1,951.
Certain Trustees and officers of the Trust are also officers or
directors of the Advisor, the Distributor, or the Administrator.
NOTE 3 - DISTRIBUTION AND SERVICE FEES
The Board of Trustees, including the Trustees who are not "interested
persons" of the Trust as defined in the Investment Company Act of 1940
(the "Act"), adopted a distribution and service plan pursuant to Rule
12b-1 of the Act (the "Plan") applicable to the Investor Shares. The
Act regulates the manner in which a regulated investment company may
assume costs of distributing and promoting the sales of its shares and
servicing of its shareholder accounts.
The Plan provides that the Fund may incur certain costs, which may not
exceed 0.75% per annum of the Investor Shares' average daily net assets
for each year elapsed subsequent to adoption of the Plan, for payment
to the Distributor and others for items such as advertising expenses,
selling expenses, commissions, travel, or other expenses reasonably
intended to result in sales of Investor Shares in the Fund or support
servicing of Investor Share shareholder accounts. Such expenditures
incurred as service fees may not exceed 0.25% per annum of the Investor
Shares' average daily net assets. The Fund incurred $16,078 of such
expenses under the Plan for the year ended November 30, 1998. The
Distributor has waived a portion of its fee amounting to $72.
NOTE 4 - PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments, other than short-term investments,
aggregated $5,970,242 and $6,115,790, respectively, for the year ended
November 30, 1998.
NOTE 5 - DISTRIBUTIONS TO SHAREHOLDERS
For federal income tax purposes, the Fund must report distributions
from net realized gain from investment transactions that represent
long-term capital gain to its shareholders. Of the total $2.32 per
share distributions for the year ended November 30, 1998, $1.04 per
share represents long-term capital gain and $1.28 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 (a portfolio of Capital Management Investment Trust),
including the schedule of investments, as of November 30, 1998, and the related
statements of operations for the year then ended, the statements of changes in
net assets and the financial highlights for each of the two years 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 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 audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned as of
November 30, 1998, by correspondence with the custodian and brokers; where
replies were not received from brokers, we performed other auditing procedures.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Capital Management Mid-Cap Fund as of November 30, 1998, the results of its
operations for the year then ended, the changes in its net assets and the
financial highlights for each of the two years then ended, in conformity with
generally accepted accounting principles.
/S/ Deloitte & Touche LLP
Deloitte & Touche LLP
Pittsburgh, Pennsylvania
December 18, 1998
