As filed with the Securities and Exchange Commission on March 31, 2000
Securities Act File No. 33-85242
Investment Company Act File No. 811-08822
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. ___ [ ]
Post-Effective Amendment No. 8 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 9 [X]
(Check appropriate box or boxes.)
CAPITAL MANAGEMENT INVESTMENT TRUST
-----------------------------------
(Exact Name of Registrant as Specified in Charter)
140 Broadway, Suite 2201, New York, New York 10005
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (212) 509-1111
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C. Frank Watson, III
105 North Washington Street, P.O. Drawer 69, Rocky Mount, NC 27802-0069
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(Name and Address of Agent for Service)
With Copies to:
---------------
Jane A. Kanter
Dechert Price & Rhoads.
1775 Eye Street, N.W.
Washington, DC 20006-2401
Approximate Date of Proposed Public Offering: As soon as practicable after the
Effective Date of this Amendment
--------------------------------
It is proposed that this filing will become effective: (check appropriate box)
[X] immediately upon filing pursuant to paragraph (b);
[ ] on (date) pursuant to paragraph (b);
[ ] 60 days after filing pursuant to paragraph (a)(1);
[ ] on (date) pursuant to paragraph (a)(1);
[ ] 75 days after filing pursuant to paragraph (a)(2); or
[ ] on (date) pursuant to paragraph (a)(2) of rule 485.
<PAGE>
CAPITAL MANAGEMENT INVESTMENT TRUST
Contents of Registration Statement
This registration statement consists of the following papers and documents:
Cover Sheet
Contents of Registration Statement
Capital Management Mid-Cap Fund
-Part A - Institutional Shares Prospectus
-Part A - Investor Shares Prospectus
-Part B - Statement of Additional Information
Capital Management Small-Cap Fund
-Part A - Institutional Shares Prospectus
-Part A - Investor Shares Prospectus
-Part B - Statement of Additional Information
Part C - Other Information and Signature Page
Exhibit Index
Exhibits
<PAGE>
PART A
======
Cusip Number 140296104 NASDAQ Symbol CMEIX
CAPITAL MANAGEMENT MID-CAP FUND
A series of the
CAPITAL MANAGEMENT INVESTMENT TRUST
INSTITUTIONAL SHARES
PROSPECTUS
MARCH 31, 2000
The CAPITAL MANAGEMENT MID-CAP FUND seeks long-term capital appreciation. This
Prospectus relates to the Institutional Shares. The Fund also offers an
additional class of shares, Investor Shares, which are offered by another
prospectus.
INVESTMENT ADVISOR
CAPITAL MANAGEMENT ASSOCIATES, INC.
140 Broadway
New York, New York 10005
1-888-626-3863
The Securities and Exchange Commission has not approved the securities being
offered by this prospectus or determined whether this prospectus is accurate and
complete. It is unlawful for anyone to make any representation to the contrary.
<PAGE>
TABLE OF CONTENTS
PAGE
THE FUND......................................................................2
- --------
Investment Objective.......................................................2
Principal Investment Strategies............................................2
Principal Risks Of Investing In The Fund...................................2
Bar Chart And Performance Table............................................4
Fees And Expenses Of The Fund..............................................5
MANAGEMENT OF THE FUND........................................................6
- ----------------------
The Investment Advisor.....................................................6
The Administrator..........................................................8
The Transfer Agent.........................................................8
The Distributor............................................................8
YOUR INVESTMENT IN THE FUND...................................................9
- ---------------------------
Minimum Investment.........................................................9
Purchase And Redemption Price..............................................9
Purchasing Shares.........................................................10
Redeeming Your Shares.....................................................11
OTHER IMPORTANT INVESTMENT INFORMATION.......................................14
- --------------------------------------
Dividends, Distributions, And Taxes.......................................14
Financial Highlights......................................................15
Additional Information............................................Back Cover
<PAGE>
THE FUND
INVESTMENT OBJECTIVE
The investment objective of the CAPITAL MANAGEMENT MID-CAP FUND (the "Fund") is
to seek long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
The Fund, which is a diversified separate investment portfolio of the Capital
Management Investment Trust (the "Trust"), pursues its investment objective by
investing primarily in equity securities of medium-capitalization ("mid-cap")
companies. The Fund considers a mid-cap company to be one that has market
capitalization, measured at the time the Fund purchases the security, within the
range of $1 billion to $10 billion.
The Fund's investments in mid-cap companies will be primarily in equity
securities of such companies, such as common and preferred stocks and securities
convertible into common stocks. The Fund intends to invest in a diversified
group of mid-cap companies and will not concentrate it investments in any one
industry or group.
Under normal market conditions, the Fund will invest at least 90% of its total
assets in equity securities, of which at least 65% of its total assets will be
invested in the equity securities of mid-cap companies. In selecting portfolio
securities, the Fund's Investment Advisor, Capital Management Associates, Inc.
(the "Advisor"), uses various screens and proprietary models that begin with a
potential universe of over 1,700 companies and then through fundamental research
seeks to select from that group companies whose current share price is
relatively undervalued. This process often includes visits with company
management and contacts with industry experts and suppliers. Final investment
decisions are made by the Advisor's Portfolio Management Team.
PRINCIPAL RISKS OF INVESTING IN THE FUND
The Fund is intended for aggressive investors seeking above-average gains and
willing to accept the risks involved in investing in the securities of mid-cap
companies. There can be no assurance that the Fund will be successful in meeting
its objective.
Since the Fund may invest in both equity securities, concentrating on mid-cap
company securities, and short-term investment instruments, the Fund has some
exposure to the risks of both equity securities and short-term investment
instruments.
<PAGE>
MID-CAP SECURITIES
Investments in equity securities (i.e., common stocks and preferred stocks) are
particularly subject to the risk of changing economic, stock market, industry,
and company conditions which can adversely affect the value of the Fund's equity
holdings.
Investing in the securities of mid-cap companies generally involves greater risk
than investing in larger, more established companies. This greater risk is, in
part, attributable to the fact that the securities of mid-cap companies usually
have more limited marketability and, therefore, may be more volatile than
securities of larger, more established companies or the market averages in
general. Because mid-cap companies normally have fewer shares outstanding than
larger companies, it may be more difficult to buy or sell significant amounts of
such shares without an unfavorable impact on prevailing prices. Another risk
factor is that mid-cap companies often have limited product lines, markets, or
financial resources and may lack management depth. Additionally, mid-cap
companies are typically subject to greater changes in earnings and business
prospects than are larger, more established companies, and there typically is
less publicly available information concerning mid-cap companies than for
larger, more established companies.
Although investing in securities of medium-sized companies offers potential
above-average returns if the companies are successful, the risk exists that the
companies will not succeed and the prices of the companies' shares could
significantly decline in value. Therefore, an investment in the Fund may involve
a greater degree of risk than an investment in other mutual funds that seek
capital growth by investing in more established, larger companies.
SHORT-TERM INVESTMENTS
As a temporary defensive position, the Advisor may determine that market
conditions warrant investing in investment-grade bonds, U.S. Government
Securities, repurchase agreements, money market instruments, and to the extent
permitted by applicable law and the Fund's investment restriction, shares of
other investment companies. Under such circumstances, the Advisor may invest up
to 100% of the Fund's assets in these investments. Since investment companies
investing in other investment companies pay management fees and other expenses
relating to those investment companies, shareholders of the Fund would
indirectly pay both the Fund's expenses and the expenses relating to those other
investment companies with respect to the Fund's assets invested in such
investment companies. To the extent the Fund is invested in short-term
investments, it will not be pursuing its investment objective.
<PAGE>
BAR CHART AND PERFORMANCE TABLE
The bar chart and table shown below provide an indication of the risks of
investing in the Fund by showing (on a calendar year basis) changes in the
Fund's annual total return from year to year and by showing (on a calendar year
basis) how the Fund's average annual returns for one year, three years, and
since inception compare to those of a broad-based securities market index. How
the Fund has performed in the past is not necessarily an indication of how the
Fund will perform in the future.
[Bar Chart Here]:
Year to Year Total Returns (as of December 31)
----------------------------------------------
1996 18.82%
1997 37.22%
1998 -6.99%
1999 17.24%
o During the 4-year period shown in the bar chart, the highest return for a
calendar quarter was 23.69% (quarter ended December 31, 1998).
o During the 4-year period shown in the bar chart, the lowest return for a
calendar quarter was -25.61% (quarter ended September 30, 1998).
o The year-to-date return of the Fund as of the most recent calendar quarter
was 7.13% (quarter ended December 31, 1999).
- ----------------------------------------- ----------- ------------- ------------
Average Annual Total Returns for the Past 1 Past 3 Years Since
Period ended December 31, 1999 Year Inception*
- ----------------------------------------- ----------- ------------- ------------
Capital Management
Mid-Cap Fund
Institutional Shares 17.24% 14.38% 17.62%
- ----------------------------------------- ----------- ------------- ------------
- ----------------------------------------- ----------- ------------- ------------
S&P 400 Mid-Cap Index** 14.73% 21.79% 23.06%
- ----------------------------------------- ----------- ------------- ------------
* January 27, 1995.
** The S&P 400 Mid-Cap Index is the Standard & Poor's unmanaged,
capitalization-weighted index of 400 stocks in the mid-range
sector of the U.S. stock market.
<PAGE>
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund:
SHAREHOLDER FEES FOR INSTITUTIONAL SHARES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Maximum sales charge (load) imposed on purchases
(as a percentage of offering price) ..........................None
Redemption fee ...................................................None
ANNUAL FUND OPERATING EXPENSES FOR INSTITUTIONAL SHARES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
---------------------------------------------
Management Fees..............................................1.00%
Distribution and/or Service (12b-1) Fees.....................None
Other Expenses...............................................1.81%
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TOTAL ANNUAL FUND OPERATING EXPENSES.....................2.81%*
Fee Waiver and/or Expense Reimbursement......................(1.31%)
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NET EXPENSES..................................................1.50%
=====
* "Total Annual Fund Operating Expenses" are based upon actual expenses
incurred by the Institutional Shares of the Fund for the fiscal year ended
November 30, 1999. The Advisor has entered into a contractual agreement
with the Fund under which it has agreed to waive or reduce its fees and to
assume other expenses of the Fund, if necessary, in an amount that limits
"Total Annual Fund Operating Expenses" (exclusive of interest, taxes,
brokerage fees and commissions, extraordinary expenses, and payments, if
any, under a Rule 12b-1 Plan) to not more than 1.50% of the Institutional
Shares average daily net assets for the fiscal year ending November 30,
2000. The contractual agreement may continue from year-to-year thereafter,
provided such continuation is approved by the Board of Trustees. See
"Expense Limitation Agreement" below for more detailed information.
EXAMPLE. This Example shows you the expenses you may pay over time by investing
in the Fund. Since all funds use the same hypothetical conditions, it should
help you compare the costs of investing in the Fund versus other funds. The
Example assumes the following conditions:
(1) You invest $10,000 in the Fund for the periods shown;
(2) You reinvest all dividends and distributions;
(3) You redeem all of your shares at the end of those periods;
(4) You earn a 5% total return; and
(5) The Fund's expenses remain the same.
<PAGE>
Although your actual costs may be higher or lower, the following table shows you
what your costs may be under the conditions listed above.
- ------------------ --------------- -------------- ------------ ---------------
PERIOD INVESTED 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------ --------------- -------------- ------------ ---------------
- ------------------ --------------- -------------- ------------ ---------------
Your Costs $153 $871 $1,484 $3,138
- ------------------ --------------- -------------- ------------ ---------------
MANAGEMENT OF THE FUND
THE INVESTMENT ADVISOR
The Fund's Investment Advisor is Capital Management Associates, Inc., 140
Broadway, New York, New York 10005. The Advisor serves in that capacity pursuant
to an advisory contract with the Trust on behalf of the Fund. Subject to the
authority of the Trustees, the Advisor provides guidance and policy direction in
connection with its daily management of the Fund's assets. The Advisor manages
the investment and reinvestment of the Fund's assets. The Advisor is also
responsible for the selection of broker-dealers through which the Fund executes
portfolio transactions, subject to the brokerage policies established by the
Trustees, and it provides certain executive personnel to the Fund.
The Advisor, organized as a New York corporation in 1982, is controlled by its
officers and directors, with the principal shareholders being J.V. Shields, Jr.;
David V. Shields; and Joseph A. Zock. Mr. Zock and seven full-time analysts
serve as the Portfolio Management Team that selects the investments for the
Fund. The Shields brothers and Mr. Zock have been affiliated with the Advisor
since 1982. The Advisor has been managing the Fund since its inception and has
been providing investment advice to investment companies, individuals,
corporations, pension and profit sharing plans, endowments, and other business
and private accounts since 1982. The Advisor currently has approximately $1
billion in assets under management.
THE ADVISOR'S COMPENSATION. As full compensation for the investment advisory
services provided to the Fund, the Fund pays the Advisor monthly compensation
based on the Fund's daily average net assets at the annual rate of 1.00% of the
first $100 million of the Fund's net assets, 0.90% of the next $150 million,
0.85% of the next $250 million, and 0.80% of all assets over $500 million. For
the fiscal year ended November 30, 1999, the Advisor voluntarily waived all of
its advisory fees.
<PAGE>
EXPENSE LIMITATION AGREEMENT. In the interest of limiting expenses of the Fund,
the Advisor has entered into an expense limitation agreement with the Trust,
with respect to the Fund ("Expense Limitation Agreement"), pursuant to which the
Advisor has agreed to waive or limit its fees and to assume other expenses so
that the total annual operating expenses of the Fund (other than interest,
taxes, brokerage commissions, other expenditures which are capitalized in
accordance with generally accepted accounting principles, other extraordinary
expenses not incurred in the ordinary course of the Fund's business, and
amounts, if any, payable pursuant to a Rule 12b-1 Plan) are limited to 1.50% of
the average daily net assets of the Institutional Shares of the Fund for the
fiscal year ending November 30, 2000. The Expense Limitation Agreement shall
continue from year-to-year provided such continuance is specifically approved by
a majority of the Trustees of the Trust who (i) are not "interested persons" of
the Trust or any other party to this agreement, as defined in the Investment
Company Act of 1940, as amended (the "1940 Act"), and (ii) have no direct or
indirect financial interest in the operation of the Expense Limitation
Agreement.
The Fund may, at a later date, reimburse the Advisor the management fees waived
or limited and other expenses assumed and paid by the Advisor pursuant to the
Expense Limitation Agreement during any of the previous five (5) fiscal years,
provided the Fund has reached a sufficient asset size to permit such
reimbursement to be made without causing the total annual expense ratio of the
Fund to exceed the percentage limits stated above. Consequently, no
reimbursement by the Fund will be made unless: (i) the Fund's assets exceed $10
million; (ii) the Fund's total annual expense ratio is less than the percentage
stated above; and (iii) the payment of such reimbursement has been approved by
the Trust's Board of Trustees on a quarterly basis.
BROKERAGE PRACTICES. In selecting brokers and dealers to execute portfolio
transactions, the Advisor may consider research and brokerage services furnished
to the Advisor or its affiliates. Subject to seeking the most favorable net
price and execution available, the Advisor may also consider sales of shares of
the Fund as a factor in the selection of brokers and dealers. Certain securities
trades will be cleared through Shields & Company, a registered broker-dealer
affiliate of the Advisor and distributor of the Fund.
The 1940 Act generally prohibits the Fund from engaging in principal securities
transactions with an affiliate of the Advisor. Thus, the Fund does not engage in
principal transactions with any affiliate of the Advisor. The Fund has adopted
procedures, under Rule 17e-1 under the 1940 Act, that are reasonably designed to
provide that any brokerage commission the Fund pays to an affiliate of the
Advisor does not exceed the usual and customary broker's commission. In
addition, the Fund will adhere to Section 11(a) of the 1934 Act and any
applicable rules thereunder governing floor trading.
<PAGE>
THE ADMINISTRATOR
The Nottingham Company, Inc., (the "Administrator") assists the Trust in the
performance of its administrative responsibilities to the Fund, coordinates the
services of each vendor of services to the Fund, and provides the Fund with
other necessary administrative, fund accounting, and compliance services. In
addition, the Administrator makes available the office space, equipment,
personnel, and facilities required to provide such services to the Fund.
THE TRANSFER AGENT
NC Shareholder Services, LLC, ("NCSS") serves as the transfer agent and dividend
disbursing agent of the Fund. As indicated later in the section "Investing in
the Fund", NCSS will handle your orders to purchase and redeem shares of the
Fund and will disburse dividends paid by the Fund.
THE DISTRIBUTOR
Shields & Company is the principal underwriter and distributor of the Fund's
shares and serves as the Fund's exclusive agent for the distribution of Fund
shares. Shields & Company may sell the Fund's shares to or through qualified
securities dealers or others.
OTHER EXPENSES. In addition to the management fees and Rule 12b-1 fees for the
Investor Shares, the Fund pays all expenses not assumed by the Fund's Advisor,
including, without limitation: the fees and expenses of its administrator,
custodian, transfer agent, independent accountants, and legal counsel; the costs
of printing and mailing to shareholders annual and semi-annual reports, proxy
statements, prospectuses, statements of additional information, and supplements
thereto; the costs of printing registration statements; bank transaction charges
and custodian's fees; any proxy solicitors' fees and expenses; filing fees; any
federal, state, or local income or other taxes; any interest; any membership
fees of the Investment Company Institute and similar organizations; fidelity
bond and Trustees' liability insurance premiums; and any extraordinary expenses,
such as indemnification payments or damages awarded in litigation or settlements
made. All general Trust expenses are allocated among and charged to the assets
of each separate series of the Trust, such as the Fund, on a basis that the
Trustees deem fair and equitable, which may be on the basis of relative net
assets of each series or the nature of the services performed and relative
applicability to each series.
<PAGE>
YOUR INVESTMENT IN THE FUND
MINIMUM INVESTMENT
Institutional Shares are sold and redeemed at net asset value. Shares may be
purchased by any account managed by the Advisor and any other institutional
investor or any broker-dealer authorized to sell shares in the Fund. The minimum
initial investment is $250,000 and the minimum additional investment is $500.
The Fund may, in the Advisor's sole discretion, accept certain accounts with
less than the minimum investment.
PURCHASE AND REDEMPTION PRICE
DETERMINING THE FUND'S NET ASSET VALUE. The price at which you purchase or
redeem shares is based on the next calculation of net asset value after an order
is accepted in good form. Good form includes providing a complete and accurate
application and payment in full of the purchase amount. The Fund's net asset
value per share is calculated by dividing the value of the Fund's total assets,
less liabilities (including Fund expenses, which are accrued daily), by the
total number of outstanding shares of that Fund. The net asset value per share
of the Fund is normally determined at the time regular trading closes on the New
York Stock Exchange (currently 4:00 p.m. Eastern time, Monday through Friday),
except on business holidays when the New York Stock Exchange is closed.
OTHER MATTERS. All redemption requests will be processed and payment with
respect thereto will normally be made within seven days after tenders. The Fund
may suspend redemption, if permitted by the 1940 Act, for any period during
which the New York Stock Exchange is closed or during which trading is
restricted by the Securities and Exchange Commission ("SEC") or if the SEC
declares that an emergency exists. Redemptions may also be suspended during
other periods permitted by the SEC for the protection of the Fund's
shareholders. Additionally, during drastic economic and market changes,
telephone redemption privileges may be difficult to implement. Also, if the
Trustees determine that it would be detrimental to the best interest of the
Fund's remaining shareholders to make payment in cash, the Fund may pay
redemption proceeds in whole or in part by a distribution-in-kind of readily
marketable securities.
<PAGE>
PURCHASING SHARES
REGULAR MAIL ORDERS. Payment for shares must be made by check or money order
from a U.S. bank and payable in U.S. dollars. If checks are returned due to
insufficient funds or other reasons, the Fund will charge a $20 fee or may
redeem shares of the Fund already owned by the purchaser to recover any such
loss. For regular mail orders, please complete the attached Fund Shares
Application and mail it, along with your check made payable to the "CAPITAL
MANAGEMENT MID-CAP 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
The application must contain your Social Security Number ("SSN") or Taxpayer
Identification Number ("TIN"). If you have applied for a SSN or TIN at the time
of completing your account application but you have not received your number,
please indicate this on the application. Taxes are not withheld from
distributions to U.S. investors if certain IRS requirements regarding the TIN
are met.
BANK WIRE ORDERS. Purchases may also be made through bank wire orders. To
establish a new account or to add to an existing account by wire, please call
the Fund at 1-888-626-3863, before wiring funds, to advise the Fund of the
investment, dollar amount, and the account identification number. Additionally,
please have your bank use the following wire instructions:
First Union National Bank of North Carolina
Charlotte, North Carolina
ABA # 053000219
For the CAPITAL MANAGEMENT MID-CAP FUND - INSTITUTIONAL SHARES
Acct. # 2000000861878
For further credit to (shareholder's name and SSN or TIN)
ADDITIONAL INVESTMENTS. You may also add to your account by mail or wire at any
time by purchasing shares at the then current public offering price. The minimum
additional investment is $500. Before adding funds by bank wire, please call the
Fund at 1-888-626-3863 and follow the above directions for wire purchases. Mail
orders should include, if possible, the "Invest by Mail" stub that is attached
to your Fund confirmation statement. Otherwise, please identify your account in
a letter accompanying your purchase payment.
AUTOMATIC INVESTMENT PLAN. The automatic investment plan enables shareholders to
make regular monthly or quarterly 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.
EXCHANGE FEATURE. You may exchange shares of the Fund for shares of any other
series of the Trust offered for sale in the state in which you reside. Shares
may be exchanged for shares of any other series of the Trust at the net asset
value. Prior to making an investment decision or giving us your instructions to
exchange shares, please read the prospectus for the series in which you wish to
invest.
A pattern of frequent purchase and redemption transactions is considered by the
Advisor to not be in the best interest of the shareholders of the Fund. Such a
pattern may, at the discretion of the Advisor, be limited by the Fund's refusal
to accept further purchase and/or exchange orders from an investor, after
providing the investor with 60-days' prior notice.
The Board of Trustees reserves the right to suspend, terminate, or amend the
terms of the exchange privilege upon 60-days' written notice to the
shareholders.
STOCK CERTIFICATES. You do not have the option of receiving stock certificates
for your shares. Evidence of ownership will be given by issuance of periodic
account statements that will show the number of shares owned.
REDEEMING YOUR SHARES
REGULAR MAIL REDEMPTIONS. Regular mail redemption request should be addressed
to:
CAPITAL MANAGEMENT MID-CAP FUND
Institutional Shares
c/o NC Shareholder Services, LLC
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
<PAGE>
Regular mail redemption request should include:
(1) Your letter of instruction specifying the account number and number of
shares, or the dollar amount, to be redeemed. This request must be
signed by all registered shareholders in the exact names in which they
are registered;
(2) Any required signature guarantees (see "Signature Guarantees" below);
and
(3) Other supporting legal documents, if required in the case of estates,
trusts, guardianships, custodianships, corporations, partnerships,
pension or profit sharing plans, and other organizations.
Your redemption proceeds normally will be sent to you within 7 days after
receipt of your redemption request. However, the Fund may delay forwarding a
redemption check for recently purchased shares while it determines whether the
purchase payment will be honored. Such delay (which may take up to 15 days from
the date of purchase) may be reduced or avoided if the purchase is made by
certified check or wire transfer. In all cases, the net asset value next
determined after receipt of the request for redemption will be used in
processing the redemption request.
TELEPHONE AND BANK WIRE REDEMPTIONS. You may also redeem shares by telephone and
bank wire under certain limited conditions. The Fund will redeem shares in this
manner when so requested by the shareholder only if the shareholder confirms
redemption instructions in writing.
The Fund may rely upon confirmation of redemption requests transmitted via
facsimile (FAX# 252-972-1908). The confirmation instructions must include:
(1) The name of the Fund and the designation of class (Institutional),
(2) Shareholder name and account number,
(3) Number of shares or dollar amount to be redeemed,
(4) Instructions for transmittal of redemption funds to the shareholder,
and
(5) Shareholder signature as it appears on the application then on file
with the Fund.
Redemption proceeds will not be distributed until written confirmation of the
redemption request is received, per the instructions above. You can choose to
have redemption proceeds mailed to you at your address of record, your bank, or
to any other authorized person, or you can have the proceeds sent by bank wire
to your bank ($5,000 minimum). Shares of the Fund may not be redeemed by wire on
days in which your bank is not open for business. You can change your redemption
instructions anytime you wish by filing a letter including your new redemption
instructions with the Fund. See "Signature Guarantees" below.
<PAGE>
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 per transaction for wiring redemption proceeds.
If this cost is passed through to redeeming shareholders by the Fund, the charge
will be deducted automatically from your account by redemption of shares in your
account. Your bank or brokerage firm may also impose a charge for processing the
wire. If wire transfer of funds is impossible or impractical, the redemption
proceeds will be sent by mail to the designated account.
You may redeem shares, subject to the procedures outlined above, by calling the
Fund at 1-888-626-3863. Redemption proceeds will only be sent to the bank
account or person named in your Fund Shares Application currently on file with
the Fund. Telephone redemption privileges authorize the Fund to act on telephone
instructions from any person representing himself or herself to be the investor
and reasonably believed by the Fund to be genuine. The Fund will employ
reasonable procedures, such as requiring a form of personal identification, to
confirm that instructions are genuine, and if it does not follow such
procedures, the Fund will be liable for any losses due to fraudulent or
unauthorized instructions. The Fund will not be liable for following telephone
instructions reasonably believed to be genuine.
SMALL ACCOUNTS. All shares are purchased and redeemed in accordance with the
Fund's Amended and Restated Declaration of Trust and By-Laws. The Trustees
reserve the right to redeem involuntarily any account having a net asset value
of less than $250,000 (due to redemptions, exchanges, or transfers, and not due
to market action) upon 60-days' written notice. If the shareholder brings his
account net asset value up to at least $250,000 during the notice period, the
account will not be redeemed. Redemptions from retirement plans may be subject
to federal income tax withholding.
SIGNATURE GUARANTEES. To protect your account and the Fund from fraud, signature
guarantees are required to be sure that you are the person who has authorized a
change in registration or standing instructions for your account. Signature
guarantees are required for (1) change of registration requests, (2) requests to
establish or to change exchange privileges or telephone and bank wire redemption
service other than through your initial account application, and (3) redemption
requests in excess of $50,000. Signature guarantees are acceptable from a member
bank of the Federal Reserve System, a savings and loan institution, credit union
(if authorized under state law), registered broker-dealer, securities exchange,
or association clearing agency and must appear on the written request for change
of registration, establishment or change in exchange privileges, or redemption
request.
SYSTEMATIC WITHDRAWAL PLAN. A shareholder who owns shares of the Fund valued at
$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.
<PAGE>
OTHER IMPORTANT INVESTMENT INFORMATION
DIVIDENDS, DISTRIBUTIONS, AND TAXES
The following information is meant as a general summary for U.S. taxpayers.
Additional tax information appears in the Statement of Additional Information
(the "SAI"). Shareholders should rely on their own tax advisers for advice about
the particular federal, state, and local tax consequences to them of investing
in the Fund.
The Fund will distribute most of its income and gains to its shareholders every
year. Income dividends, if any, will be paid quarterly and capital gains
distributions, if any, will be made at least annually. Although the Fund will
not be taxed on amounts it distributes, shareholders will generally be taxed,
regardless of whether distributions are received in cash or are reinvested in
additional Fund shares. A particular distribution generally will be taxable as
either ordinary income or long-term capital gains. If a Fund designates a
distribution as a capital gains distribution, it will be taxable to shareholders
as long-term capital gains, regardless of how long they have held their Fund
shares.
If the Fund declares a dividend in October, November, or December but pays it in
January, it may be taxable to shareholders as if they received it in the year it
was declared. Every year, each shareholder will receive a statement detailing
the tax status of any Fund distributions for that year.
Distributions may be subject to state and local taxes, as well as federal taxes.
Shareholders who hold Fund shares in a tax-deferred account, such as a
retirement plan, generally will not have to pay tax on Fund distributions until
they receive distributions from the account.
A shareholder who sells or redeems shares will generally realize a capital gain
or loss, which will be long-term or short-term, generally depending upon the
shareholder's holding period for the Fund shares. An exchange of shares may be
treated as a sale.
As with all mutual funds, the Fund may be required to withhold U.S. federal
income tax at the rate of 31% of all taxable distributions payable to
shareholders who fail to provide the Fund with their correct taxpayer
identification numbers or to make required certifications, or who have been
notified by the IRS that they are subject to backup withholding. Backup
withholding is not an additional tax; rather, it is a way in which the IRS
ensures it will collect taxes otherwise due. Any amounts withheld may be
credited against a shareholder's U.S. federal income tax liability.
FINANCIAL HIGHLIGHTS
The financial data included in the table below have been derived from audited
financial statements of the Fund. The financial data for the fiscal years ended
November 30, 1999, 1998, and 1997, have been audited by Deloitte & Touche LLP,
independent auditors, whose report covering such periods is incorporated by
reference into the SAI. The financial data for the prior fiscal year and period
were audited by other independent auditors. This information should be read in
conjunction with the Fund's latest audited annual financial statements and notes
thereto, which are also incorporated by reference into the SAI, 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 also be obtained at no charge by calling the Fund.
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
INSTITUTIONAL SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
FOR FISCAL PERIODS ENDED NOVEMBER 30,
1999 1998 1997 1996 1995(A)
---- ---- ---- ---- -------
NET ASSET VALUE, BEGINNING OF PERIOD $14.21 $18.20 $13.99 $12.16 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.03 0.03 0.01 0.23 0.20
Net realized and unrealized gain (loss) on investments 2.58 (1.70) 4.60 2.08 2.10
---- ----- ---- ---- ----
TOTAL FROM INVESTMENT OPERATIONS 2.61 (1.67) 4.61 2.31 2.30
---- ----- ---- ---- ----
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income (0.02) 0.00 (0.04) (0.26) (0.14)
Distributions in excess of net investment income 0.00 0.00 (0.02) 0.00 (0.00)
Net realized gain from investment transactions 0.00 (2.32) (0.34) (0.22) 0.00
---- ------ ----- ----- ----
TOTAL DISTRIBUTIONS (0.02) (2.32) (0.40) (0.48) (0.14)
---- ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $16.80 $14.21 $18.20 $13.99 $12.16
====== ====== ====== ====== ======
TOTAL RETURN 18.41% (10.94)% 33.92% 19.57% 23.00%
====== ======= ====== ====== ======
RATIOS/SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000'S) $5,796 $4,930 $5,311 $3,502 $1,833
====== ====== ====== ====== ======
RATIO OF EXPENSES TO AVERAGE NET ASSETS
Before expense reimbursements and waived fees 2.81 % 2.60 % 2.92 % 3.70 % 7.20 % (b)
After expense reimbursements and waived fees 1.50 % 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 (1.07)% (0.93)% (1.34)% (1.77)% (4.45)% (b)
After expense reimbursements and waived fees 0.24 % 0.17 % 0.08 % 1.94 % 2.44 % (b)
PORTFOLIO TURNOVER RATE 114.00 % 89.04 % 66.30 % 82.30 % 47.74 %
(a) For the period from January 27, 1995, (commencement of operations) to November 30, 1995.
(b) Annualized.
</TABLE>
<PAGE>
ADDITIONAL INFORMATION
------------------------------------------------------
CAPITAL MANAGEMENT
MID-CAP FUND
INSTITUTIONAL SHARES
-------------------------------------------------------
Additional information about the Fund is available in the Fund's Statement of
Additional Information. The Fund's Annual and Semi-annual Reports include a
discussion of market conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal year.
These reports and the Statement of Additional Information are available free of
charge upon request by contacting us:
BY TELEPHONE: 1-888-626-3863
BY MAIL: CAPITAL MANAGEMENT MID-CAP FUND Institutional Shares
c/o NC Shareholder Services
107 North Washington Street
Post Office Box 4365
Rocky Mount, NC 27803-0365
BY E-MAIL: [email protected]
----------------
ON THE INTERNET: WWW.NCFUNDS.COM
Information about the Fund can also be reviewed and copied at the SEC's Public
Reference Room in Washington, D.C. Inquiries on the operations of the public
reference room may be made by calling the SEC at 1-202-942-8090. Reports and
other information about the Fund are available on the SEC's Internet site at
http://www.sec.gov, and copies of this information may be obtained, upon payment
of a duplicating fee, by electronic request at the following e-mail address:
[email protected], or by writing the SEC's Public Reference Section,
Washington, D.C. 20549-0102.
Investment Company Act file number 811-08822
<PAGE>
-----------------------------------------------
CAPITAL MANAGEMENT
MID-CAP FUND
INSTITUTIONAL SHARES
-----------------------------------------------
PROSPECTUS
March 31, 2000
<PAGE>
Cusip Number 140296203 NASDAQ Symbol CMCIX
CAPITAL MANAGEMENT MID-CAP FUND
A series of the
CAPITAL MANAGEMENT INVESTMENT TRUST
INVESTOR SHARES
PROSPECTUS
MARCH 31, 2000
The CAPITAL MANAGEMENT MID-CAP FUND seeks long-term capital appreciation. This
Prospectus relates to the Investor Shares. The Fund also offers an additional
class of shares, Institutional Shares, which are offered by another prospectus.
INVESTMENT ADVISOR
CAPITAL MANAGEMENT ASSOCIATES, INC.
140 Broadway
New York, New York 10005
1-888-626-3863
The Securities and Exchange Commission has not approved the securities being
offered by this prospectus or determined whether this prospectus is accurate and
complete. It is unlawful for anyone to make any representation to the contrary.
<PAGE>
TABLE OF CONTENTS
PAGE
THE FUND......................................................................2
- --------
Investment Objective.......................................................2
Principal Investment Strategies............................................2
Principal Risks Of Investing In The Fund...................................2
Bar Chart And Performance Table............................................4
Fees And Expenses Of The Fund..............................................5
MANAGEMENT OF THE FUND........................................................6
- ----------------------
The Investment Advisor.....................................................6
The Administrator..........................................................8
The Transfer Agent.........................................................8
The Distributor............................................................8
YOUR INVESTMENT IN THE FUND...................................................9
- ---------------------------
Minimum Investment.........................................................9
Purchase And Redemption Price.............................................10
Purchasing Shares.........................................................11
Redeeming Your Shares.....................................................13
OTHER IMPORTANT INVESTMENT INFORMATION.......................................15
- --------------------------------------
Dividends, Distributions, And Taxes.......................................15
Financial Highlights......................................................16
Additional Information............................................Back Cover
<PAGE>
THE FUND
INVESTMENT OBJECTIVE
The investment objective of the CAPITAL MANAGEMENT MID-CAP FUND (the "Fund") is
to seek long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
The Fund, which is a diversified separate investment portfolio of the Capital
Management Investment Trust (the "Trust"), pursues its investment objective by
investing primarily in equity securities of medium-capitalization ("mid-cap")
companies. The Fund considers a mid-cap company to be one that has market
capitalization, measured at the time the Fund purchases the security, within the
range of $1 billion to $10 billion.
The Fund's investments in mid-cap companies will be primarily in equity
securities of such companies, such as common and preferred stocks and securities
convertible into common stocks. The Fund intends to invest in a diversified
group of mid-cap companies and will not concentrate it investments in any one
industry or group.
Under normal market conditions, the Fund will invest at least 90% of its total
assets in equity securities, of which at least 65% of its total assets will be
invested in the equity securities of mid-cap companies. In selecting portfolio
securities, the Fund's Investment Advisor, Capital Management Associates, Inc.
(the "Advisor"), uses various screens and proprietary models that begin with a
potential universe of over 1,700 companies and then through fundamental research
seeks to select from that group companies whose current share price is
relatively undervalued. This process often includes visits with company
management and contacts with industry experts and suppliers. Final investment
decisions are made by the Advisor's Portfolio Management Team.
PRINCIPAL RISKS OF INVESTING IN THE FUND
The Fund is intended for aggressive investors seeking above-average gains and
willing to accept the risks involved in investing in the securities of mid-cap
companies. There can be no assurance that the Fund will be successful in meeting
its objective.
Since the Fund may invest in both equity securities, concentrating on mid-cap
company securities, and short-term investment instruments, the Fund has some
exposure to the risks of both equity securities and short-term investment
instruments.
<PAGE>
MID-CAP SECURITIES
Investments in equity securities (i.e., common stocks and preferred stocks) are
particularly subject to the risk of changing economic, stock market, industry,
and company conditions which can adversely affect the value of the Fund's equity
holdings.
Investing in the securities of mid-cap companies generally involves greater risk
than investing in larger, more established companies. This greater risk is, in
part, attributable to the fact that the securities of mid-cap companies usually
have more limited marketability and, therefore, may be more volatile than
securities of larger, more established companies or the market averages in
general. Because mid-cap companies normally have fewer shares outstanding than
larger companies, it may be more difficult to buy or sell significant amounts of
such shares without an unfavorable impact on prevailing prices. Another risk
factor is that mid-cap companies often have limited product lines, markets, or
financial resources and may lack management depth. Additionally, mid-cap
companies are typically subject to greater changes in earnings and business
prospects than are larger, more established companies, and there typically is
less publicly available information concerning mid-cap companies than for
larger, more established companies.
Although investing in securities of medium-sized companies offers potential
above-average returns if the companies are successful, the risk exists that the
companies will not succeed and the prices of the companies' shares could
significantly decline in value. Therefore, an investment in the Fund may involve
a greater degree of risk than an investment in other mutual funds that seek
capital growth by investing in more established, larger companies.
SHORT-TERM INVESTMENTS
As a temporary defensive position, the Advisor may determine that market
conditions warrant investing in investment-grade bonds, U.S. Government
Securities, repurchase agreements, money market instruments, and to the extent
permitted by applicable law and the Fund's investment restriction, shares of
other investment companies. Under such circumstances, the Advisor may invest up
to 100% of the Fund's assets in these investments. Since investment companies
investing in other investment companies pay management fees and other expenses
relating to those investment companies, shareholders of the Fund would
indirectly pay both the Fund's expenses and the expenses relating to those other
investment companies with respect to the Fund's assets invested in such
investment companies. To the extent the Fund is invested in short-term
investments, it will not be pursuing its investment objective.
<PAGE>
BAR CHART AND PERFORMANCE TABLE
The bar chart and table shown below provide an indication of the risks of
investing in the Fund by showing (on a calendar year basis) changes in the
Fund's annual total return from year to year and by showing (on a calendar year
basis) how the Fund's average annual returns for one year, three years, and
since inception compare to those of a broad-based securities market index. How
the Fund has performed in the past is not necessarily an indication of how the
Fund will perform in the future.
[Bar Chart Here]:
Year to Year Total Returns (as of December 31)
----------------------------------------------
1996 18.79%
1997 38.38%
1998 -7.70%
1999 16.40%
o During the 4-year period shown in the bar chart, the highest return for a
calendar quarter was 23.47% (quarter ended December 31, 1998).
o During the 4-year period shown in the bar chart, the lowest return for a
calendar quarter was -25.74% (quarter ended September 30, 1998).
o The year-to-date return of the Fund as of the most recent calendar quarter
was 7.11% (quarter ended December 31, 1999).
o Sales loads are not reflected in the chart above. If these amounts were
reflected, returns would be less than those shown.
- --------------------------------------- ------------ ------------ -------------
Average Annual Total Returns for the Past 1 Past 3 Since
Period ended December 31, 1998 Year Years Inception*
- --------------------------------------- ------------ ------------ -------------
Capital Management
Mid-Cap Fund Investor Shares** 12.91% 12.43% 14.43%
- --------------------------------------- ------------ ------------ -------------
S&P 400 Mid-Cap Index *** 14.73% 21.79% 22.36%
- --------------------------------------- ------------ ------------ -------------
* April 7, 1995.
** Maximum sales loads are reflected in the table above.
** The S&P 400 Mid-Cap Index is Standard & Poor's unmanaged,
capitalization-weighted index of 400 stocks in the mid-range sector of the
U.S. stock market.
<PAGE>
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund:
SHAREHOLDER FEES FOR INVESTOR SHARES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Maximum sales charge (load) imposed on purchases
(as a percentage of offering price) ...............................3.00%
Redemption fee ........................................................None
ANNUAL FUND OPERATING EXPENSES FOR INVESTOR SHARES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
Management Fees...................................................1.00%
Distribution and/or Service (12b-1) Fees..........................0.75%
Other Expenses....................................................1.81%
-----
TOTAL ANNUAL FUND OPERATING EXPENSES...............................3.56%*
Fee Waiver and/or Expense Reimbursement...........................(1.31%)
-----
NET EXPENSES.................................................. ....2.25%
=====
* "Total Annual Fund Operating Expenses" are based upon actual expenses
incurred by the Investor Shares of the Fund for the fiscal year ended
November 30, 1999. The Advisor has entered into a contractual agreement
with the Fund under which it has agreed to waive or reduce its fees and to
assume other expenses of the Fund, if necessary, in an amount that limits
"Total Annual Fund Operating Expenses" (exclusive of interest, taxes,
brokerage fees and commissions, extraordinary expenses, and payments, if
any, under a Rule 12b-1 Plan) to not more than 1.50% of the Investor Shares
average daily net assets for the fiscal year ending November 30, 2000. The
contractual agreement may continue from year-to-year thereafter, provided
such continuation is approved by the Board of Trustees. See "Expense
Limitation Agreement" below for more detailed information.
EXAMPLE. This Example shows you the expenses you may pay over time by investing
in the Fund. Since all funds use the same hypothetical conditions, it should
help you compare the costs of investing in the Fund versus other funds. The
Example assumes the following conditions:
(1) You invest $10,000 in the Fund for the periods shown;
(2) You reinvest all dividends and distributions;
(3) You redeem all of your shares at the end of those periods;
(4) You earn a 5% total return; and
(5) The Fund's expenses remain the same.
<PAGE>
Although your actual costs may be higher or lower, the following table shows you
what your costs may be under the conditions listed above.
- ------------------------ -------------- ------------- ------------ ------------
PERIOD INVESTED 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------ -------------- ------------- ------------ ------------
- ------------------------ -------------- ------------- ------------ ------------
Your Costs $521 $1,359 $2,090 $4,012
- ------------------------ -------------- ------------- ------------ ------------
MANAGEMENT OF THE FUND
THE INVESTMENT ADVISOR
The Fund's Investment Advisor is Capital Management Associates, Inc., 140
Broadway, New York, New York 10005. The Advisor serves in that capacity pursuant
to an advisory contract with the Trust on behalf of the Fund. Subject to the
authority of the Trustees, the Advisor provides guidance and policy direction in
connection with its daily management of the Fund's assets. The Advisor manages
the investment and reinvestment of the Fund's assets. The Advisor is also
responsible for the selection of broker-dealers through which the Fund executes
portfolio transactions, subject to the brokerage policies established by the
Trustees, and it provides certain executive personnel to the Fund.
The Advisor, organized as a New York corporation in 1982, is controlled by its
officers and directors, with the principal shareholders being J.V. Shields, Jr.;
David V. Shields; and Joseph A. Zock. Mr. Zock and seven full-time analysts
serve as the Portfolio Management Team that selects the investments for the
Fund. The Shields brothers and Mr. Zock have been affiliated with the Advisor
since 1982. The Advisor has been managing the Fund since its inception and has
been providing investment advice to investment companies, individuals,
corporations, pension and profit sharing plans, endowments, and other business
and private accounts since 1982. The Advisor currently has approximately $1
billion in assets under management.
THE ADVISOR'S COMPENSATION. As full compensation for the investment advisory
services provided to the Fund, the Fund pays the Advisor monthly compensation
based on the Fund's daily average net assets at the annual rate of 1.00% of the
first $100 million of the Fund's net assets, 0.90% of the next $150 million,
0.85% of the next $250 million, and 0.80% of all assets over $500 million. For
the fiscal year ended November 30, 1999, the Advisor voluntarily waived all of
its advisory fees.
<PAGE>
EXPENSE LIMITATION AGREEMENT. In the interest of limiting expenses of the Fund,
the Advisor has entered into an expense limitation agreement with the Trust,
with respect to the Fund (the "Expense Limitation Agreement"), pursuant to which
the Advisor has agreed to waive or limit its fees and to assume other expenses
so that the total annual operating expenses of the Fund (other than interest,
taxes, brokerage commissions, other expenditures which are capitalized in
accordance with generally accepted accounting principles, other extraordinary
expenses not incurred in the ordinary course of the Fund's business, and amounts
payable pursuant to a Rule 12b-1 Plan) are limited to 1.50% of the average daily
assets of the Investor Shares of the Fund for the fiscal year ending November
30, 2000. The Expense Limitation Agreement shall continue from year-to-year
provided such continuance is specifically approved by a majority of the Trustees
of the Trust who (i) are not "interested persons" of the Trust or any other
party to this agreement, as defined in the Investment Company Act of 1940, as
amended (the "1940 Act"), and (ii) have no direct or indirect financial interest
in the operation of the Expense Limitation Agreement.
The Fund may, at a later date, reimburse the Advisor the management fees waived
or limited and other expenses assumed and paid by the Advisor pursuant to the
Expense Limitation Agreement during any of the previous five (5) fiscal years,
provided the Fund has reached a sufficient asset size to permit such
reimbursement to be made without causing the total annual expense ratio of the
Fund to exceed the percentage limits stated above. Consequently, no
reimbursement by the Fund will be made unless: (i) the Fund's assets exceed $10
million; (ii) the Fund's total annual expense ratio is less than the percentage
stated above, and (iii) the payment of such reimbursement has been approved by
the Trust's Board of Trustees on a quarterly basis.
BROKERAGE PRACTICES. In selecting brokers and dealers to execute portfolio
transactions, the Advisor may consider research and brokerage services furnished
to the Advisor or its affiliates. Subject to seeking the most favorable net
price and execution available, the Advisor may also consider sales of shares of
the Fund as a factor in the selection of brokers and dealers. Certain securities
trades will be cleared through Shields & Company, a registered broker-dealer
affiliate of the Advisor and Distributor of the Fund.
The 1940 Act generally prohibits the Fund from engaging in principal securities
transactions with an affiliate of the Advisor. Thus, the Fund does not engage in
principal transactions with any affiliate of the Advisor. The Fund has adopted
procedures, under Rule 17e-1 under the 1940 Act, that are reasonably designed to
provide that any brokerage commission the Fund pays to an affiliate of the
Advisor does not exceed the usual and customary broker's commission. In
addition, the Fund will adhere to Section 11(a) of the 1934 Act and any
applicable rules thereunder governing floor trading.
<PAGE>
THE ADMINISTRATOR
The Nottingham Company, Inc., (the "Administrator") assists the Trust in the
performance of its administrative responsibilities to the Fund, coordinates the
services of each vendor to the Fund, and provides the Fund with other necessary
administrative, fund accounting, and compliance services. In addition, the
Administrator makes available the office space, equipment, personnel, and
facilities required to provide such services to the Fund.
THE TRANSFER AGENT
NC Shareholder Services, LLC, ("NCSS") serves as the transfer agent and dividend
disbursing agent of the Fund. As indicated later in the section "Investing in
the Fund," NCSS will handle your orders to purchase and redeem shares of the
Fund and will disburse dividends paid by the Fund.
THE DISTRIBUTOR
Shields & Company (the "Distributor") is the principal underwriter and
distributor of the Fund's shares and serves as the Fund's exclusive agent for
the distribution of Fund shares. Shields & Company may sell the Fund's shares to
or through qualified securities dealers or others.
DISTRIBUTION OF THE FUND'S SHARES. For the Investor Shares of the Fund, the Fund
has adopted a Distribution Plan in accordance with Rule 12b-1 (the "Distribution
Plan") under the 1940 Act. Pursuant to the Distribution Plan, the Fund
compensates the Distributor for services rendered and expenses borne in
connection with activities primarily intended to result in the sale of the
Fund's Investor Shares (this compensation is commonly referred to as "12b-1
fees"). It is anticipated that a portion of the 12b-1 fees received by the
Distributor will be used to defray various costs incurred or paid by the
Distributor in connection with the printing and mailing to potential investors
of Fund prospectuses, statements of additional information, any supplements
thereto, and shareholder reports, and holding seminars and sales meetings with
wholesale and retail sales personnel designed to promote the sale of Investor
Shares. The Distributor may also use a portion of the 12b-1 fees received to
provide compensation to financial intermediaries and third-party broker-dealers
for their services in connection with the sale of Investor Shares. Because the
12b-1 fees are paid out of the Fund's assets on an on-going basis, these fees,
over time, will increase the cost of your investment and may cost you more than
paying other types of sales loads.
The Distribution Plan provides that the Fund will pay annually 0.75% of the
average daily net assets of the Fund's Investor Shares for activities primarily
intended to result in the sale of those shares, including to reimburse entities
for providing distribution and shareholder servicing with respect to the Fund's
Investor Shares.
<PAGE>
The Distribution Plan is known as a "compensation" plan because payments are
made for services rendered to the Fund with respect to Investor Shares
regardless of the level of expenditures made by the Distributor. The Board of
Trustees of the Trust will, however, take into account such expenditures for
purposes of reviewing operations under the Distribution Plan and concerning
their annual consideration of the Distribution Plan's renewal. The Distributor
has indicated that it expects its expenditures to include, without limitation:
(a) the printing and mailing to prospective investors of Fund prospectuses,
statements of additional information, any supplements thereto and shareholder
reports with respect to the Investor Shares of the Fund; (b) those relating to
the development, preparation, printing, and mailing of advertisements, sales
literature, and other promotional materials describing and/or relating to the
Investor Shares of the Fund; (c) holding seminars and sales meetings designed to
promote the distribution of the Fund's Investor Shares; (d) obtaining
information and providing explanations to wholesale and retail distributors of
the Fund's investment objectives and policies and other information about the
Fund; (e) training sales personnel regarding the Investor Shares of the Fund;
and (f) financing any other activity that the Distributor determines is
primarily intended to result in the sale of Investor Shares.
OTHER EXPENSES. In addition to the management fees and Rule 12b-1 fees for the
Investor Shares, the Fund pays all expenses not assumed by the Fund's Advisor,
including, without limitation: the fees and expenses of its administrator,
custodian, transfer agent, independent accountants, and legal counsel; the costs
of printing and mailing to shareholders annual and semi-annual reports, proxy
statements, prospectuses, statements of additional information, and supplements
thereto; the costs of printing registration statements; bank transaction charges
and custodian's fees; any proxy solicitors' fees and expenses; filing fees; any
federal, state, or local income or other taxes; any interest; any membership
fees of the Investment Company Institute and similar organizations; fidelity
bond and Trustees' liability insurance premiums; and any extraordinary expenses,
such as indemnification payments or damages awarded in litigation or settlements
made. All general Trust expenses are allocated among and charged to the assets
of each separate series of the Trust, such as the Fund, on a basis that the
Trustees deem fair and equitable, which may be on the basis of relative net
assets of each series or the nature of the services performed and relative
applicability to each series.
<PAGE>
YOUR INVESTMENT IN THE FUND
MINIMUM INVESTMENT
Investor Shares are sold subject to a sales charge of 3.00%, so that the term
"offering price" includes the front-end sales load. Shares are redeemed at net
asset value. Shares may be purchased by any account managed by the Advisor and
any broker-dealer authorized to sell Fund shares. The minimum initial investment
is $2,500 ($1,000 for Individual Retirement Accounts ("IRAs"), Keogh Plans,
401(k) Plans, or purchases under the Uniform Transfer to Minors Act). The
minimum additional investment is $500. The Fund may, in the Advisor's sole
discretion, waive such minimum investment amounts.
PURCHASE AND REDEMPTION PRICE
SALES CHARGES. The public offering price of Investor Shares of the Fund equals
net asset value plus a sales charge. The Distributor receives this sales charge
and may reallow it in the form of dealer discounts and brokerage commissions as
follows:
<TABLE>
<S> <C> <C> <C>
- ------------------------------------ --------------------- ----------------------- -----------------------------
Sales Dealers Discounts and
Amount of Transaction At Public Charge As % of Net Sales Charge As % of Brokerage Commissions as %
Offering Price Amount Invested Public Offering Price of Public Offering Price
- ------------------------------------ --------------------- ----------------------- -----------------------------
Less than $250,000 3.09% 3.00% 2.80%
- ------------------------------------ --------------------- ----------------------- -----------------------------
$250,000 but less than $500,000 2.56% 2.50% 2.30%
- ------------------------------------ --------------------- ----------------------- -----------------------------
$500,000 or more 2.04% 2.00% 1.80%
- ------------------------------------ --------------------- ----------------------- -----------------------------
</TABLE>
From time to time, dealers who receive dealer discounts and brokerage
commissions from the Distributor may reallow all or a portion of such dealer
discounts and brokerage commissions to other dealers or brokers. Pursuant to the
terms of the Distribution Agreement, the sales charge payable to the Distributor
and the dealer discounts may be suspended, terminated, or amended. The
Distributor, at its expense, may, from time to time, provide additional
promotional incentives to dealers who sell Fund shares.
DETERMINING THE FUND'S NET ASSET VALUE. The price at which you purchase or
redeem shares is based on the next calculation of net asset value after an order
is accepted in good form. Good form includes providing a complete and accurate
application and payment in full of the purchase amount. The Fund's net asset
value per share is calculated by dividing the value of the Fund's total assets,
less liabilities (including Fund expenses, which are accrued daily), by the
total number of outstanding shares of that Fund. The net asset value per share
of the Fund is normally determined at the time regular trading closes on the New
York Stock Exchange (currently 4:00 p.m. Eastern time, Monday through Friday),
except on business holidays when the New York Stock Exchange is closed.
OTHER MATTERS. All redemption requests will be processed and payment with
respect thereto will normally be made within seven days after tenders. The Fund
may suspend redemption, if permitted by the 1940 Act, for any period during
which the New York Stock Exchange is closed or during which trading is
restricted by the Securities and Exchange Commission ("SEC") or if the SEC
declares that an emergency exists. Redemptions may also be suspended during
other periods permitted by the SEC for the protection of the Fund's
shareholders. Additionally, during drastic economic and market changes,
telephone redemption privileges may be difficult to implement. Also, if the
Trustees determine that it would be detrimental to the best interest of the
Fund's remaining shareholders to make payment in cash, the Fund may pay
redemption proceeds in whole or in part by a distribution-in-kind of readily
marketable securities.
<PAGE>
PURCHASING SHARES
REGULAR MAIL ORDERS. Payment for shares must be made by check or money order
from a U.S. bank and payable in U.S. dollars. If checks are returned due to
insufficient funds or other reasons, the Fund will charge a $20 fee or may
redeem shares of the Fund already owned by the purchaser to recover any such
loss. For regular mail orders, please complete the attached Fund Shares
Application and mail it, along with your check made payable to the "CAPITAL
MANAGEMENT MID-CAP 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
The application must contain your Social Security Number ("SSN") or Taxpayer
Identification Number ("TIN"). If you have applied for a SSN or TIN at the time
of completing your account application but you have not received your number,
please indicate this on the application. Taxes are not withheld from
distributions to U.S. investors if certain IRS requirements regarding the TIN
are met.
BANK WIRE ORDERS. Purchases may also be made through bank wire orders. To
establish a new account or to add to an existing account by wire, please call
the Fund at 1-888-626-3863, before wiring funds, to advise the Fund of the
investment, dollar amount, and the account identification number. Additionally,
please have your bank use the following wire instructions:
First Union National Bank of North Carolina
Charlotte, North Carolina
ABA # 053000219
For the CAPITAL MANAGEMENT MID-CAP FUND - INVESTOR SHARES
Acct. # 2000000861878
For further credit to (shareholder's name and SSN or TIN)
ADDITIONAL INVESTMENTS. You may also add to your account by mail or wire at any
time by purchasing shares at the then current public offering price. The minimum
additional investment is $500. Before adding funds by bank wire, please call the
Fund at 1-888-626-3863 and follow the above directions for wire purchases. Mail
orders should include, if possible, the "Invest by Mail" stub which is attached
to your Fund confirmation statement. Otherwise, please identify your account in
a letter accompanying your purchase payment.
<PAGE>
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.
EXCHANGE FEATURE. You may exchange shares of the Fund for shares of any other
series of the Trust offered for sale in the state in which you reside. Shares
may be exchanged for shares of any other series of the Trust at the net asset
value plus the percentage difference between that series' sales charge and any
sales charge, if any, previously paid in connection with the shares being
exchanged. Prior to making an investment decision or giving us your instructions
to exchange shares, please read the prospectus for the series in which you wish
to invest.
A pattern of frequent purchase and redemption transactions is considered by the
Advisor to not be in the best interest of the shareholders of the Fund. Such a
pattern may, at the discretion of the Advisor, be limited by the Fund's refusal
to accept further purchase and/or exchange orders from an investor, after
providing the investor with 60-days' prior notice.
The Board of Trustees reserves the right to suspend, terminate, or amend the
terms of the exchange privilege upon 60-days' written notice to the
shareholders.
STOCK CERTIFICATES. You do not have the option of receiving stock certificates
for your shares. Evidence of ownership will be given by issuance of periodic
account statements that will show the number of shares owned.
REDUCED SALES CHARGES
RIGHTS OF ACCUMULATION. The sales charge applicable to a current purchase of
shares of the Fund by a person listed above is determined by adding the purchase
price of shares to be purchased to the aggregate value (at current offering
price) of shares of the Fund previously purchased and then owned, provided the
Distributor is notified by such person or his or her broker-dealer each time a
purchase is made which would so qualify. For example, a person who is purchasing
Mid-Cap shares with an aggregate value of $50,000 and who currently owns shares
of the Funds with a value of $200,000 would pay a sales charge of 2.50% of the
offering price on the new investment.
LETTER OF INTENT. Sales charges may also be reduced through an agreement to
purchase a specified quantity of shares over a designated thirteen-month period
by completing the "Letter of Intent" section of the Account Application.
Information about the "Letter of Intent" procedure, including its terms, is
contained on the back of the Account Application.
<PAGE>
GROUP PLANS. Shares of the Fund may be sold at a reduced or eliminated sales
charge to certain Group Plans under which a sponsoring organization makes
recommendations to, permits group solicitation of, or otherwise facilitates
purchases by, its employees, members or participants. Information about such
arrangements is available from the Distributor.
REDEEMING YOUR SHARES
REGULAR MAIL REDEMPTIONS. Regular mail redemption request should be addressed
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
Regular mail redemption request should include:
(1) Your letter of instruction specifying the account number and number of
shares, or the dollar amount, to be redeemed. This request must be
signed by all registered shareholders in the exact names in which they
are registered;
(2) Any required signature guarantees (see "Signature Guarantees" below);
and
(3) Other supporting legal documents, if required in the case of estates,
trusts, guardianships, custodianships, corporations, partnerships,
pension or profit sharing plans, and other organizations.
Your redemption proceeds normally will be sent to you within 7 days after
receipt of your redemption request. However, the Fund may delay forwarding a
redemption check for recently purchased shares while it determines whether the
purchase payment will be honored. Such delay (which may take up to 15 days from
the date of purchase) may be reduced or avoided if the purchase is made by
certified check or wire transfer. In all cases, the net asset value next
determined after receipt of the request for redemption will be used in
processing the redemption request.
TELEPHONE AND BANK WIRE REDEMPTIONS. You may also redeem shares by telephone and
bank wire under certain limited conditions. The Fund will redeem shares in this
manner when so requested by the shareholder only if the shareholder confirms
redemption instructions in writing.
<PAGE>
The Fund may rely upon confirmation of redemption requests transmitted via
facsimile (FAX# 252-972-1908). The confirmation instructions must include:
(1) The name of the Fund and the designation of class (Investor),
(2) Shareholder name and account number,
(3) Number of shares or dollar amount to be redeemed,
(4) Instructions for transmittal of redemption funds to the shareholder,
and
(5) Shareholder signature as it appears on the application then on file
with the Fund.
Redemption proceeds will not be distributed until written confirmation of the
redemption request is received, per the instructions above. You can choose to
have redemption proceeds mailed to you at your address of record, your bank, or
to any other authorized person, or you can have the proceeds sent by bank wire
to your bank ($5,000 minimum). Shares of the Fund may not be redeemed by wire on
days in which your bank is not open for business. You can change your redemption
instructions anytime you wish by filing a letter including your new redemption
instructions with the Fund. See "Signature Guarantees" below.
The Fund in its discretion may choose to pass through to redeeming shareholders
any charges imposed by the Custodian for wire redemptions. The Custodian
currently charges the Fund $10 per transaction for wiring redemption proceeds.
If this cost is passed through to redeeming shareholders by the Fund, the charge
will be deducted automatically from your account by redemption of shares in your
account. Your bank or brokerage firm may also impose a charge for processing the
wire. If wire transfer of funds is impossible or impractical, the redemption
proceeds will be sent by mail to the designated account.
You may redeem shares, subject to the procedures outlined above, by calling the
Fund at 1-888-626-3863. Redemption proceeds will only be sent to the bank
account or person named in your Fund Shares Application currently on file with
the Fund. Telephone redemption privileges authorize the Fund to act on telephone
instructions from any person representing himself or herself to be the investor
and reasonably believed by the Fund to be genuine. The Fund will employ
reasonable procedures, such as requiring a form of personal identification, to
confirm that instructions are genuine, and if it does not follow such
procedures, the Fund will be liable for any losses due to fraudulent or
unauthorized instructions. The Fund will not be liable for following telephone
instructions reasonably believed to be genuine.
SMALL ACCOUNTS. All shares are purchased and redeemed in accordance with the
Fund's Amended and Restated Declaration of Trust and By-Laws. The Trustees
reserve the right to redeem involuntarily any account having a net asset value
of less than $1,000 (due to redemptions, exchanges, or transfers, and not due to
market action) upon 60-days' written notice. If the shareholder brings his
account net asset value up to at least $1,000 during the notice period, the
account will not be redeemed. Redemptions from retirement plans may be subject
to federal income tax withholding.
<PAGE>
SIGNATURE GUARANTEES. To protect your account and the Fund from fraud, signature
guarantees are required to be sure that you are the person who has authorized a
change in registration or standing instructions for your account. Signature
guarantees are required for (1) change of registration requests, (2) requests to
establish or to change exchange privileges or telephone and bank wire redemption
service other than through your initial account application, and (3) redemption
requests in excess of $50,000. Signature guarantees are acceptable from a member
bank of the Federal Reserve System, a savings and loan institution, credit union
(if authorized under state law), registered broker-dealer, securities exchange,
or association clearing agency and must appear on the written request for change
of registration, establishment or change in exchange privileges, or redemption
request.
SYSTEMATIC WITHDRAWAL PLAN. A shareholder who owns shares of the Fund valued at
$10,000 or more at the current offering price may establish a Systematic
Withdrawal Plan to receive a monthly or quarterly check in a stated amount not
less than $100. Each month or quarter, as specified, the Fund will automatically
redeem sufficient shares from your account to meet the specified withdrawal
amount. The shareholder may establish this service whether dividends and
distributions are reinvested in shares of the Fund or paid in cash. Call or
write the Fund for an application form.
OTHER IMPORTANT INVESTMENT INFORMATION
DIVIDENDS, DISTRIBUTIONS, AND TAXES
The following information is meant as a general summary for U.S. taxpayers.
Additional tax information appears in the Statement of Additional Information
(the "SAI"). Shareholders should rely on their own tax advisers for advice about
the particular federal, state, and local tax consequences to them of investing
in the Fund.
The Fund will distribute most of its income and gains to its shareholders every
year. Income dividends, if any, will be paid quarterly and capital gains
distributions, if any, will be made at least annually. Although the Fund will
not be taxed on amounts it distributes, shareholders will generally be taxed,
regardless of whether distributions are received in cash or are reinvested in
additional Fund shares. A particular distribution generally will be taxable as
either ordinary income or long-term capital gains. If a Fund designates a
distribution as a capital gains distribution, it will be taxable to shareholders
as long-term capital gains, regardless of how long they have held their Fund
shares.
If the Fund declares a dividend in October, November, or December but pays it in
January, it may be taxable to shareholders as if they received it in the year it
was declared. Every year, each shareholder will receive a statement detailing
the tax status of any Fund distributions for that year.
Distributions may be subject to state and local taxes, as well as federal taxes.
Shareholders who hold Fund shares in a tax-deferred account, such as a
retirement plan, generally will not have to pay tax on Fund distributions until
they receive distributions from the account.
A shareholder who sells or redeems shares will generally realize a capital gain
or loss, which will be long-term or short-term, generally depending upon the
shareholder's holding period for the Fund shares. An exchange of shares may be
treated as a sale.
<PAGE>
As with all mutual funds, the Fund may be required to withhold U.S. federal
income tax at the rate of 31% of all taxable distributions payable to
shareholders who fail to provide the Fund with their correct taxpayer
identification numbers or to make required certifications, or who have been
notified by the IRS that they are subject to backup withholding. Backup
withholding is not an additional tax; rather, it is a way in which the IRS
ensures it will collect taxes otherwise due. Any amounts withheld may be
credited against a shareholder's U.S. federal income tax liability.
FINANCIAL HIGHLIGHTS
The financial data included in the table below have been derived from audited
financial statements of the Fund. The financial data for the fiscal years ended
November 30, 1999, 1998, and 1997, have been audited by Deloitte & Touche LLP,
independent auditors, whose report covering such periods is incorporated by
reference into the SAI. The financial data for the prior fiscal year and period
were audited by other independent auditors. This information should be read in
conjunction with the Fund's latest audited annual financial statements and notes
thereto, which are also incorporated by reference into the SAI, 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 also be obtained at no charge by calling the Fund.
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
INVESTOR SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
FOR FISCAL PERIODS ENDED NOVEMBER 30,
1999 1998 1997 1996 1995(A)
---- ---- ---- ---- -------
NET ASSET VALUE, BEGINNING OF PERIOD $13.96 $18.04 $13.96 $12.09 $11.07
INCOME FROM INVESTMENT OPERATIONS
Net investment (loss) income (0.11) (0.09) (0.05) 0.24 0.11
Net realized and unrealized gain (loss) on investments 2.56 (1.67) 4.53 2.06 1.02
---- ---- ---- ---- ----
TOTAL FROM INVESTMENT OPERATIONS 2.45 (1.76) 4.48 2.30 1.13
---- ---- ---- ---- ----
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income 0.00 0.00 (0.03) (0.21) (0.11)
Distributions in excess of net investment income 0.00 0.00 (0.03) 0.00 0.00
Net realized gain from investment transactions 0.00 (2.32) (0.34) (0.22) 0.00
---- ---- ---- ---- ----
TOTAL DISTRIBUTIONS 0.00 (2.32) (0.40) (0.43) (0.11)
---- ---- ---- ---- ----
NET ASSET VALUE, END OF PERIOD $16.41 $13.96 $18.04 $13.96 $12.09
====== ====== ====== ====== ======
TOTAL RETURN (B) 17.55 % (11.67)% 33.11 % 19.61 % 10.24 %
===== ===== ===== ===== =====
RATIOS/SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000'S) $1,032 $1,767 $1,874 $746 $551
====== ====== ======= ==== ====
RATIO OF EXPENSES TO AVERAGE NET ASSETS
Before expense reimbursements and waived fees 3.56 % 3.35 % 3.71 % 4.45 % 7.18 %(c)
After expense reimbursements and waived fees 2.25 % 2.25 % 2.25 % 0.00 % 1.06 %(c)
RATIO OF NET INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS
Before expense reimbursements and waived fees (1.82)% (1.67)% (2.10)% (2.50)% (4.23)%(c)
After expense reimbursements and waived fees (0.51)% (0.57)% (0.63)% 1.95 % 1.89 %(c)
PORTFOLIO TURNOVER RATE 114.00 % 89.04 % 66.30 % 82.30 % 47.74 %
(a) For the period from April 7, 1995, (commencement of operations) to
November 30, 1995.
(b) Total return does not reflect payment of a sales charge.
(c) Annualized.
</TABLE>
<PAGE>
ADDITIONAL INFORMATION
-----------------------------------------------------
CAPITAL MANAGEMENT
MID-CAP FUND
INVESTOR SHARES
------------------------------------------------------
Additional information about the Fund is available in the Fund's Statement of
Additional Information. The Fund's Annual and Semi-annual Reports include a
discussion of market conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal year.
These reports and the Statement of Additional Information are available free of
charge upon request by contacting us:
BY TELEPHONE: 1-888-626-3863
BY MAIL: CAPITAL MANAGEMENT MID-CAP FUND Investor Shares
c/o NC Shareholder Services
107 North Washington Street
Post Office Box 4365
Rocky Mount, NC 27803-0365
BY E-MAIL: [email protected]
----------------
ON THE INTERNET: WWW.NCFUNDS.COM
Information about the Fund can also be reviewed and copied at the SEC's Public
Reference Room in Washington, D.C. Inquiries on the operations of the public
reference room may be made by calling the SEC at 1-202-942-8090. Reports and
other information about the Fund are available on the SEC's Internet site at
http://www.sec.gov, and copies of this information may be obtained, upon payment
of a duplicating fee, by electronic request at the following e-mail address:
[email protected], or by writing the SEC's Public Reference Section,
Washington, D.C. 20549-0102.
Investment Company Act file number 811-08822
<PAGE>
-----------------------------------------------
CAPITAL MANAGEMENT
MID-CAP FUND
INVESTOR SHARES
-----------------------------------------------
PROSPECTUS
March 31, 2000
<PAGE>
Cusip Number 140296609
CAPITAL MANAGEMENT SMALL-CAP FUND
A series of the
CAPITAL MANAGEMENT INVESTMENT TRUST
INSTITUTIONAL SHARES
PROSPECTUS
MARCH 31, 2000
The CAPITAL MANAGEMENT SMALL-CAP FUND seeks long-term capital appreciation.
Current income is a secondary consideration in selecting portfolio investments.
In seeking to achieve its objective, this Fund will invest primarily in equity
securities of small- capitalization companies.
INVESTMENT ADVISOR
CAPITAL MANAGEMENT ASSOCIATES, INC.
140 Broadway
New York, New York 10005
1-888-626-3863
The Securities and Exchange Commission has not approved the securities being
offered by this prospectus or determined whether this prospectus is accurate and
complete. It is unlawful for anyone to make any representation to the contrary.
<PAGE>
TABLE OF CONTENTS
PAGE
THE FUND....................................................................2
Investment Objective..................................................2
Principal Investment Strategies.......................................2
Principal Risks Of Investing In The Fund..............................2
Performance Information...............................................3
Fees And Expenses Of The Fund.........................................3
MANAGEMENT OF THE FUND......................................................4
- ----------------------
The Investment Advisor................................................4
The Administrator.....................................................6
The Transfer Agent....................................................6
The Distributor.......................................................6
INVESTING IN THE FUND.......................................................7
- ---------------------
Minimum Investment....................................................7
Purchase And Redemption Price.........................................7
Purchasing Shares.....................................................7
Redeeming Your Shares.................................................9
OTHER IMPORTANT INVESTMENT INFORMATION.....................................11
- --------------------------------------
Dividends, Distributions, And Taxes..................................11
Financial Highlights.................................................12
Additional Information.......................................Back Cover
<PAGE>
THE FUND
INVESTMENT OBJECTIVE
The investment objective of the CAPITAL MANAGEMENT SMALL-CAP FUND (the "Fund")
is to seek long-term capital appreciation. Current income is a secondary
consideration in selecting portfolio investments.
PRINCIPAL INVESTMENT STRATEGIES
The Fund pursues its investment objective by investing primarily in equity
securities of small-capitalization ("small-cap") companies. The Fund considers a
small-cap company to be one that has market capitalization, measured at the time
the Fund purchases the security, within the range of $100 million to $1 billion.
The Fund's investments in small-cap companies will be primarily in equity
securities of such companies, such as common and preferred stocks and securities
convertible into common stocks. The Fund intends to invest in a diversified
group of small-cap companies and will not concentrate it investments in any one
industry or group.
<PAGE>
Under normal market conditions, the Fund will invest at least 90% of its total
assets in equity securities, of which at least 65% of its total assets will be
invested in the equity securities of small-cap companies. In selecting portfolio
securities, the Fund's Advisor, Capital Management Associates, Inc. (the
"Advisor"), uses various screens and proprietary models that begin with a
potential universe of over 3,500 companies and then through fundamental research
seeks to select from that group companies whose current share price is
relatively undervalued. This process often includes visits with company
management and contacts with industry experts and suppliers. Final investment
decisions are made by the Advisor's Portfolio Management Team.
PRINCIPAL RISKS OF INVESTING IN THE FUND
The Fund is intended for aggressive investors seeking above-average gains and
willing to accept the risks involved in investing in the securities of small-cap
companies.
Investing in the securities of small-cap companies generally involves
substantially greater risk than investing in larger, more established companies.
This greater risk is, in part, attributable to the fact that the securities of
small-cap companies usually have more limited marketability and, therefore, may
be more volatile than securities of larger, more established companies or the
market averages in general. Because small-cap companies normally have fewer
shares outstanding than larger companies, it may be more difficult to buy or
sell significant amounts of such shares without an unfavorable impact on
prevailing prices. Another risk factor is that small-cap companies often have
limited product lines, markets, or financial resources and may lack management
depth. Additionally, small-cap companies are typically subject to greater
changes in earnings and business prospects than are larger, more established
companies. Small-cap companies may not be well-known to the investing public,
may not be followed by the financial press or industry analysts, and may not
have institutional ownership. Small-cap companies may be more vulnerable than
larger companies to adverse business or economic developments.
Although investing in securities of small companies offers potential
above-average returns if the companies are successful, the risk exists that the
companies will not succeed, and the prices of the companies' shares could
dramatically decline in value. Therefore, an investment in the Fund may involve
a substantially greater degree of risk than an investment in other mutual funds
that seek capital growth by investing in more established, larger companies.
PERFORMANCE INFORMATION
Because the Fund did not commence operations until January 12, 1999, there is no
calendar year performance information for the Fund to be presented here.
However, you may request a copy of the latest audited Annual Report for the
period ended November 30, 1999, at no charge by calling the Fund.
<PAGE>
FEES AND EXPENSES OF THE FUND
The table below describes the fees and expenses that you may pay if you buy and
hold shares of the Fund:
SHAREHOLDER FEES FOR INSTITUTIONAL SHARES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
-----------------------------------------
Maximum sales charge (load) imposed on purchases
(as a percentage of offering price) ..................................None
Redemption fee ...........................................................None
ANNUAL FUND OPERATING EXPENSES FOR INSTITUTIONAL SHARES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
Management Fees....................................................1.00%
Distribution and/or Service (12b-1) Fees...........................None
Other Expenses....................................................54.71%
------
TOTAL ANNUAL FUND OPERATING EXPENSES.................................55.71%*
Fee Waiver and/or Expense Reimbursement.............................(54.21%)
------
NET EXPENSES..........................................................1.50%
======
* "Total Annual Fund Operating Expenses" are based upon actual expenses
incurred by the Institutional Shares of the Fund for the fiscal year ended
November 30, 1999. The Advisor has entered into a contractual agreement
with the Fund under which it has agreed to waive or reduce its fees and to
assume other expenses of the Fund, if necessary, in an amount that limits
"Total Annual Fund Operating Expenses" (exclusive of interest, taxes,
brokerage fees and commissions, extraordinary expenses, and payments, if
any, under a Rule 12b-1 Plan) to not more than 1.50% of the Institutional
Shares average daily net assets for each of the next three fiscal years
ending November 30, 2000, 2001, and 2002. The contractual agreement may
continue from year-to-year thereafter, provided such continuation is
approved by the Board of Trustees. See "Expense Limitation Agreement" below
for more detailed information.
EXAMPLE: This Example shows you the expenses you may pay over time by investing
in the Fund. Since all funds use the same hypothetical conditions, it should
help you compare the costs of investing in the Fund versus other funds. The
Example assumes the following conditions:
(1) You invest $10,000 in the Fund for the periods shown;
(2) You reinvest all dividends and distributions;
(3) You redeem all of your shares at the end of those periods;
(4) You earn a 5% total return; and
(5) The Fund's expenses remain the same.
Although your actual costs may be higher or lower, the following table shows you
what your costs may be under the conditions listed above as well as those upon
redemption.
- ----------------------- ------------ -------------- ------------- --------------
Period Invested 1 Year 3 Years 5 Years 10 Years
- ----------------------- ------------ -------------- ------------- --------------
Your Costs $153 $474 $7,357 $9,502
- ----------------------- ------------ -------------- ------------- --------------
MANAGEMENT OF THE FUND
THE INVESTMENT ADVISOR
The Fund's Investment Advisor is Capital Management Associates, Inc., 140
Broadway, New York, New York 10005. The Advisor serves in that capacity pursuant
to an advisory contract with the Trust on behalf of the Fund. Subject to the
authority of the Trustees, the Advisor provides guidance and policy direction in
connection with its daily management of the Fund's assets. The Advisor manages
the investment and reinvestment of the Fund's assets. The Advisor is also
responsible for the selection of broker-dealers through which the Fund executes
portfolio transactions, subject to the brokerage policies established by the
Trustees, and it provides certain executive personnel to the Fund.
<PAGE>
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; and Joseph A. Zock. Mr. Zock and seven full-time analysts
serve as the Portfolio Management Team that selects the investments for the
Fund. The Shields brothers and Mr. Zock have been affiliated with the Advisor
since 1982. The Advisor has been managing the Fund since its inception and has
been providing investment advice to investment companies, individuals,
corporations, pension and profit sharing plans, endowments, and other business
and private accounts since 1982. The Advisor currently has approximately $1
billion in assets under management.
THE ADVISOR'S COMPENSATION. As full compensation for the investment advisory
services provided to the Fund, the Fund pays the Advisor monthly compensation
based on the Fund's daily average net assets at the annual rate of 1.00% of the
first $100 million of the Fund's net assets, 0.90% of the next $150 million,
0.85% of the next $250 million, and 0.80% of all assets over $500 million. For
the fiscal period ended November 30, 1999, the Advisor voluntarily waived all of
its advisory fees.
EXPENSE LIMITATION AGREEMENT. In the interest of limiting expenses of the Fund,
the Advisor has entered into an expense limitation agreement with the Trust,
with respect to the Fund ("Expense Limitation Agreement"), pursuant to which the
Advisor has agreed to waive or limit its fees and to assume other expenses so
that the total annual operating expenses of the Fund (other than interest,
taxes, brokerage commissions, other expenditures which are capitalized in
accordance with generally accepted accounting principles, other extraordinary
expenses not incurred in the ordinary course of the Fund's business, and
amounts, if any, payable pursuant to a Rule 12b-1 Plan) are limited to 1.50% of
the average daily assets of the Institutional Shares of the Fund for the fiscal
years to end November 30, 2000, 2001, and 2002. The Expense Limitation Agreement
shall continue from year-to-year thereafter, provided such continuance is
specifically approved by a majority of the Trustees of the Trust who (i) are not
"interested persons" of the Trust or any other party to this agreement, as
defined in the Investment Company Act of 1940, as amended (the "1940 Act"), and
(ii) have no direct or indirect financial interest in the operation of the
Expense Limitation Agreement.
The Fund may at a later date reimburse the Advisor the management fees waived or
limited and other expenses assumed and paid by the Advisor pursuant to the
Expense Limitation Agreement, provided the Fund has reached a sufficient asset
size to permit such reimbursement to be made without causing the total annual
expense ratio of the Fund to exceed the percentage limits stated above.
Consequently, no reimbursement by the Fund will be made unless: (i) the Fund's
assets exceed $10 million; (ii) the Fund's total annual expense ratio is less
than the percentage stated above; and (iii) the payment of such reimbursement
has been approved by the Trust's Board of Trustees on a quarterly basis.
BROKERAGE PRACTICES. In selecting brokers and dealers to execute portfolio
transactions, the Advisor may consider research and brokerage services furnished
to the Advisor or its affiliates. Subject to seeking the most favorable net
price and execution available, the Advisor may also consider sales of shares of
the Fund as a factor in the selection of brokers and dealers. Certain securities
trades will be cleared through Shields & Company, a registered broker-dealer
affiliate of the Advisor and Distributor of the Fund.
<PAGE>
The 1940 Act generally prohibits the Fund from engaging in principal securities
transactions with an affiliate of the Advisor. Thus, the Fund does not engage in
principal transactions with any affiliate of the Advisor. The Fund has adopted
procedures, under Rule 17e-1 under the 1940 Act, that are reasonably designed to
provide that any brokerage commission the Fund pays to an affiliate of the
Advisor does not exceed the usual and customary broker's commission. In
addition, the Fund will adhere to Section 11(a) of the 1934 Act and any
applicable rules thereunder governing floor trading.
THE ADMINISTRATOR
The Nottingham Company, Inc., (the "Administrator") assists the Trust in the
performance of its administrative responsibilities to the Fund, coordinates the
services of each vendor to the Fund, and provides the Fund with other necessary
administrative, fund accounting, and compliance services. In addition, the
Administrator makes available the office space, equipment, personnel, and
facilities required to provide such services to the Fund.
THE TRANSFER AGENT
NC Shareholder Services, LLC, ("NCSS") serves as the transfer agent and dividend
disbursing agent of the Fund. As indicated later in the section of this
Prospectus, "Investing in the Fund," NCSS will handle your orders to purchase
and redeem shares of the Fund and will disburse dividends paid by the Fund.
THE DISTRIBUTOR
Shields & Company is the principal underwriter and distributor of the Fund's
shares and serves as the Fund's exclusive agent for the distribution of Fund
shares. Shields & Company may sell the Fund's shares to or through qualified
securities dealers or others.
OTHER EXPENSES. In addition to the management fees and Rule 12b-1 fees for the
Investor Shares, the Fund pays all expenses not assumed by the Fund's Advisor,
including, without limitation: the fees and expenses of its independent
accountants and of its legal counsel; the costs of printing and mailing to
shareholders annual and semi-annual reports, proxy statements, prospectuses,
statements of additional information, and supplements thereto; the costs of
printing registration statements; bank transaction charges and custodian's fees;
any proxy solicitors' fees and expenses; filing fees; any federal, state, or
local income or other taxes; any interest; any membership fees of the Investment
Company Institute and similar organizations; fidelity bond and Trustees'
liability insurance premiums; and any extraordinary expenses, such as
indemnification payments or damages awarded in litigation or settlements made.
All general Trust expenses are allocated among and charged to the assets of each
separate series of the Trust, such as the Fund, on a basis that the Trustees
deem fair and equitable, which may be on the basis of relative net assets of
each series or the nature of the services performed and relative applicability
to each series.
<PAGE>
INVESTING IN THE FUND
MINIMUM INVESTMENT
Institutional Shares are sold and redeemed at net asset value. Shares may be
purchased by any account managed by the Advisor and any other institutional
investor or any broker-dealer authorized to sell shares in the Fund. The minimum
initial investment is $250,000 and the minimum additional investment is $500.
The Fund may, in the Advisor's sole discretion, accept certain accounts with
less than the minimum investment.
PURCHASE AND REDEMPTION PRICE
DETERMINING THE FUND'S NET ASSET VALUE. The price at which you purchase or
redeem shares is based on the next calculation of net asset value after an order
is accepted in good form. The Fund's net asset value per share is calculated by
dividing the value of the Fund's total assets, less liabilities (including Fund
expenses, which are accrued daily), by the total number of outstanding shares of
the Fund. The net asset value per share of the Fund is normally determined at
the time regular trading closes on the New York Stock Exchange (currently 4:00
p.m. Eastern time, Monday through Friday), except on business holidays when the
New York Stock Exchange is closed.
In valuing the Fund's total assets, portfolio securities are generally valued at
their market value. Instruments with maturities of 60 days or less are valued at
amortized cost, which approximates market value. Securities and assets for which
representative market quotations are not readily available are valued at fair
value as determined in good faith under policies approved by the Board of
Trustees.
OTHER MATTERS. Purchases and redemptions of shares of the same class by the same
shareholder on the same day will be netted for the Fund. All redemption requests
will be processed and payment with respect thereto will normally be made within
seven days after tenders. The Fund may suspend redemption, if permitted by the
1940 Act, for any period during which the New York Stock Exchange is closed or
during which trading is restricted by the Securities and Exchange Commission
(the "SEC") or if the SEC declares that an emergency exists. Redemptions may
also be suspended during other periods permitted by the SEC for the protection
of the Fund's shareholders. Additionally, during drastic economic and market
changes, telephone redemption privileges may be difficult to implement. Also, if
the Trustees determine that it would be detrimental to the best interest of the
Fund's remaining shareholders to make payment in cash, the Fund may pay
redemption proceeds in whole or in part by a distribution-in-kind of readily
marketable securities.
PURCHASING SHARES
REGULAR MAIL ORDERS. Payment for shares must be made by check or money order
from a U.S. bank and payable in U.S. dollars. If checks are returned due to
insufficient funds or other reasons, the Fund will charge a $20 fee or may
redeem shares of the Fund already owned by the purchaser to recover any such
loss. For regular mail orders, please complete the attached Fund Shares
Application and mail it, along with your check made payable to the "CAPITAL
MANAGEMENT SMALL-CAP FUND," to:
<PAGE>
CAPITAL MANAGEMENT SMALL-CAP FUND
Institutional Shares
c/o NC Shareholder Services
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
The application must contain your Social Security Number ("SSN") or Taxpayer
Identification Number ("TIN"). If you have applied for a SSN or TIN at the time
of completing your account application but you have not received your number,
please indicate this on the application. Taxes are not withheld from
distributions to U.S. investors if certain IRS requirements regarding the TIN
are met.
BANK WIRE ORDERS. Purchases may also be made through bank wire orders. To
establish a new account or add to an existing account by wire, please call the
Fund at 1-888-626-3863, before wiring funds, to advise the Fund of the
investment, dollar amount, and the account identification number. Additionally,
please have your bank use the following wire instructions:
First Union National Bank of North Carolina
Charlotte, North Carolina
ABA # 053000219
For the CAPITAL MANAGEMENT SMALL-CAP FUND - INSTITUTIONAL SHARES
Acct. # 2000001292938
For further credit to (shareholder's name and SSN or TIN)
ADDITIONAL INVESTMENTS. You may also add to your account by mail or wire at any
time by purchasing shares at the then current public offering price. The minimum
additional investment is $500. Before adding funds by bank wire, please call the
Fund at 1-888-626-3863 and follow the above directions for wire purchases. Mail
orders should include, if possible, the "Invest by Mail" stub that is attached
to your Fund confirmation statement. Otherwise, please identify your account in
a letter accompanying your purchase payment.
AUTOMATIC INVESTMENT PLAN. The automatic investment plan enables shareholders to
make regular monthly or quarterly 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.
EXCHANGE FEATURE. You may exchange shares of the Fund for shares of any other
series of the Trust offered for sale in the state in which you reside. Shares
may be exchanged for shares of any other series of the Trust at the net asset
value plus the percentage difference between that series' sales charge and any
sales charge, if any, previously paid in connection with the shares being
exchanged. Prior to making an investment decision or giving us your instructions
to exchange shares, please read the prospectus for the series in which you wish
to invest.
<PAGE>
A pattern of frequent purchase and redemption transactions is considered by the
Advisor to not be in the best interest of the shareholders of the Fund. Such a
pattern may, at the discretion of the Advisor, be limited by the Fund's refusal
to accept further purchase and/or exchange orders form an investor, after
providing the investor with 60-days' prior notice.
The Board of Trustees reserves the right to suspend, terminate, or amend the
terms of the exchange privilege upon 60-days' written notice to the
shareholders.
STOCK CERTIFICATES. You do not have the option of receiving stock certificates
for your shares. Evidence of ownership will be given by issuance of periodic
account statements that will show the number of shares owned.
REDEEMING YOUR SHARES
REGULAR MAIL REDEMPTIONS. Regular mail redemption requests should be addressed
to:
CAPITAL MANAGEMENT SMALL-CAP FUND
Institutional Shares
c/o NC Shareholder Services
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
Regular mail redemption requests should include:
(1) Your letter of instruction specifying the account number and number of
shares, or the dollar amount, to be redeemed. This request must be
signed by all registered shareholders in the exact names in which they
are registered;
(2) Any required signature guarantees (see "Signature Guarantees" below);
and
(3) Other supporting legal documents, if required in the case of estates,
trusts, guardianships, custodianships, corporations, partnerships,
pension or profit sharing plans, and other organizations.
Your redemption proceeds normally will be sent to you within 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.
<PAGE>
TELEPHONE AND BANK WIRE REDEMPTIONS. You may also redeem shares by telephone and
bank wire under certain limited conditions. The Fund will redeem shares in this
manner when so requested by the shareholder only if the shareholder confirms
redemption instructions in writing.
The Fund may rely upon confirmation of redemption requests transmitted via
facsimile (FAX# 252-972-1908). The confirmation instructions must include:
(1) Designation of class (Institutional),
(2) Shareholder name and account number,
(3) Number of shares or dollar amount to be redeemed,
(4) Instructions for transmittal of redemption funds to the shareholder,
and
(5) Shareholder signature as it appears on the application then on file
with the Fund.
Redemption proceeds will not be distributed until written confirmation of the
redemption request is received, per the instructions above. You can choose to
have redemption proceeds mailed to you at your address of record, your bank, or
to any other authorized person, or you can have the proceeds sent by bank wire
to your bank ($5,000 minimum). Shares of the Fund may not be redeemed by wire on
days in which your bank is not open for business. You can change your redemption
instructions anytime you wish by filing a letter including your new redemption
instructions with the Fund. See "Signature Guarantees" below.
The Fund, in its discretion, may choose to pass through to redeeming
shareholders any charges imposed by the Custodian for wire redemptions. The
Custodian currently charges the Fund $10 per transaction for wiring redemption
proceeds. If this cost is passed through to redeeming shareholders by the Fund,
the charge will be deducted automatically from your account by redemption of
shares in your account. Your bank or brokerage firm may also impose a charge for
processing the wire. If wire transfer of funds is impossible or impractical, the
redemption proceeds will be sent by mail to the designated account.
You may redeem shares, subject to the procedures outlined above, by calling the
Fund at 1-888-626-3863. Redemption proceeds will only be sent to the bank
account or person named in your Fund Shares Application currently on file with
the Fund. Telephone redemption privileges authorize the Fund to act on telephone
instructions from any person representing himself or herself to be the investor
and reasonably believed by the Fund to be genuine. The Fund will employ
reasonable procedures, such as requiring a form of personal identification, to
confirm that instructions are genuine, and if it does not follow such
procedures, the Fund will be liable for any losses due to fraudulent or
unauthorized instructions. The Fund will not be liable for following telephone
instructions reasonably believed to be genuine.
SMALL ACCOUNTS. All shares are purchased and redeemed in accordance with the
Fund's Amended and Restated Declaration of Trust and By-Laws. The Board of
Trustees reserves the right to redeem involuntarily any account having a net
asset value of less than $250,000 (due to redemptions, exchanges, or transfers,
and not due to market action) upon 60-days' written notice. If the shareholder
brings his account net asset value up to at least $250,000 during the notice
period, the account will not be redeemed. Redemptions from retirement plans may
be subject to federal income tax withholding.
<PAGE>
SIGNATURE GUARANTEES. To protect your account and the Fund from fraud, signature
guarantees are required to be sure that you are the person who has authorized a
change in registration or standing instructions for your account. Signature
guarantees are required for (1) change of registration requests, (2) requests to
establish or to change exchange privileges or telephone and bank wire redemption
service other than through your initial account application, and (3) redemption
requests in excess of $50,000. Signature guarantees are acceptable from a member
bank of the Federal Reserve System, a savings and loan institution, credit union
(if authorized under state law), registered broker-dealer, securities exchange,
or association clearing agency and must appear on the written request for change
of registration, establishment or change in exchange privileges, or redemption
request.
SYSTEMATIC WITHDRAWAL PLAN. A shareholder who owns shares of the Fund valued at
$250,000 or more at the current offering price may establish a Systematic
Withdrawal Plan to receive a monthly or quarterly check in a stated amount not
less than $100. Each month or quarter, as specified, the Fund will automatically
redeem sufficient shares from your account to meet the specified withdrawal
amount. The shareholder may establish this service whether dividends and
distributions are reinvested in shares of the Fund or paid in cash. Call or
write the Fund for an application form.
OTHER IMPORTANT INVESTMENT INFORMATION
DIVIDENDS, DISTRIBUTIONS, AND TAXES
The following information is meant as a general summary for U.S. taxpayers.
Additional tax information appears in the Statement of Additional Information
(the "SAI"). Shareholders should rely on their own tax advisers for advice about
the particular federal, state, and local tax consequences to them of investing
in the Fund.
The Fund will distribute most of its income and gains to its shareholders every
year. Income dividends, if any, will be paid quarterly and capital gains
distributions, if any, will be made at least annually. Although the Fund will
not be taxed on amounts it distributes, shareholders will generally be taxed,
regardless of whether distributions are received in cash or are reinvested in
additional Fund shares. A particular distribution generally will be taxable as
either ordinary income or long-term capital gains. If a Fund designates a
distribution as a capital gains distribution, it will be taxable to shareholders
as long-term capital gains, regardless of how long they have held their Fund
shares.
If the Fund declares a dividend in October, November, or December but pays it in
January, it may be taxable to shareholders as if they received it in the year it
was declared. Every year, each shareholder will receive a statement detailing
the tax status of any Fund distributions for that year.
Distributions may be subject to state and local taxes, as well as federal taxes.
Shareholders who hold Fund shares in a tax-deferred account, such as a
retirement plan, generally will not have to pay tax on Fund distributions until
they receive distributions from the account.
A shareholder who sells or redeems shares will generally realize a capital gain
or loss, which will be long-term or short-term, generally depending upon the
shareholder's holding period for the Fund shares. An exchange of shares may be
treated as a sale.
<PAGE>
As with all mutual funds, the Fund may be required to withhold U.S. federal
income tax at the rate of 31% of all taxable distributions payable to
shareholders who fail to provide the Fund with their correct taxpayer
identification numbers or to make required certifications, or who have been
notified by the IRS that they are subject to backup withholding. Backup
withholding is not an additional tax; rather, it is a way in which the IRS
ensures it will collect taxes otherwise due. Any amounts withheld may be
credited against a shareholder's U.S. federal income tax liability.
FINANCIAL HIGHLIGHTS
The financial data included in the table below have been derived from audited
financial statements of the Fund. The financial data for the fiscal period ended
November 30, 1999 have been audited by Deloitte & Touche LLP, independent
auditors, whose report covering such period is incorporated by reference into
the SAI. This information should be read in conjunction with the Fund's latest
audited annual financial statements and notes thereto, which are also
incorporated by reference into the SAI, 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 also be
obtained at no charge by calling the Fund.
CAPITAL MANAGEMENT SMALL-CAP FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
Institutional
Class
- --------------------------------------------------------------------------------
Period ended
November 30,
1999 (a)
--------------
Net asset value, beginning of period ...................... $10.99
Income from investment operations
Net investment loss ............................... (0.01)
Net realized and unrealized gain on investments ... 2.93
--------
Total from investment operations .............. 2.92
--------
Net asset value, end of period ............................ $13.91
========
Total return (b) .......................................... 26.57 %
========
Ratios/supplemental data
Net assets, end of period ............................ $158,754
========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees ..... 55.71 % (c)
After expense reimbursements and waived fees ...... 1.50 % (c)
Ratio of net investment loss to average net assets
Before expense reimbursements and waived fees ..... (54.36)% (c)
After expense reimbursements and waived fees ...... (0.15)% (c)
Portfolio turnover rate .............................. 145.58 %
(a) For the period beginning January 12, 1999 (commencement of operations) to
November 30, 1999.
(b) Total return does not reflect payment of a sales charge.
(c) Annualized.
<PAGE>
ADDITIONAL INFORMATION
-------------------------------------------------------
CAPITAL MANAGEMENT
SMALL-CAP FUND
INSTITUTIONAL SHARES
--------------------------------------------------------
Additional information about the Fund is available in the Fund's Statement of
Additional Information. The Fund's Annual and Semi-annual Reports include a
discussion of market conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal year.
These reports and the Statement of Additional Information are available free of
charge upon request by contacting us:
BY TELEPHONE: 1-888-626-3863
BY MAIL: CAPITAL MANAGEMENT SMALL-CAP FUND
Institutional Shares
c/o NC Shareholder Services
107 North Washington Street
Post Office Box 4365
Rocky Mount, NC 27803-0365
BY E-MAIL: [email protected]
----------------
ON THE INTERNET: WWW.NCFUNDS.COM
Information about the Fund can also be reviewed and copied at the SEC's Public
Reference Room in Washington, D.C. Inquiries on the operations of the public
reference room may be made by calling the SEC at 1-202-942-8090. Reports and
other information about the Fund are available on the SEC's Internet site at
http://www.sec.gov, and copies of this information may be obtained, upon payment
of a duplicating fee, by electronic request at the following e-mail address:
[email protected], or by writing the SEC's Public Reference Section,
Washington, D.C. 20549-0102.
Investment Company Act file number 811-08822
<PAGE>
-----------------------------------------------
CAPITAL MANAGEMENT
SMALL-CAP FUND
INSTITUTIONAL SHARES
-----------------------------------------------
PROSPECTUS
March 31, 2000
<PAGE>
Cusip Number 140296500
CAPITAL MANAGEMENT SMALL-CAP FUND
A series of the
CAPITAL MANAGEMENT INVESTMENT TRUST
INVESTOR SHARES
PROSPECTUS
MARCH 31, 2000
The CAPITAL MANAGEMENT SMALL-CAP FUND seeks long-term capital appreciation.
Current income is a secondary consideration in selecting portfolio investments.
In seeking to achieve its objective, this Fund will invest primarily in equity
securities of small- capitalization companies.
INVESTMENT ADVISOR
CAPITAL MANAGEMENT ASSOCIATES, INC.
140 Broadway
New York, New York 10005
1-888-626-3863
The Securities and Exchange Commission has not approved the securities being
offered by this prospectus or determined whether this prospectus is accurate and
complete. It is unlawful for anyone to make any representation to the contrary.
<PAGE>
TABLE OF CONTENTS
PAGE
THE FUND..................................................................2
- --------
Investment Objective...................................................2
Principal Investment Strategies........................................2
Principal Risks Of Investing In The Fund...............................2
Performance Information................................................3
Fees And Expenses Of The Fund..........................................3
MANAGEMENT OF THE FUND....................................................5
- ----------------------
The Investment Advisor.................................................5
The Administrator......................................................6
The Transfer Agent.....................................................6
The Distributor........................................................6
YOUR INVESTMENT IN THE FUND...............................................8
- ---------------------------
Minimum Investment.....................................................8
Purchase And Redemption Price..........................................8
Purchasing Shares......................................................9
Redeeming Your Shares.................................................11
OTHER IMPORTANT INVESTMENT INFORMATION...................................13
- --------------------------------------
Dividends, Distributions, And Taxes...................................13
Financial Highlights..................................................15
Additional Information........................................Back Cover
<PAGE>
THE FUND
INVESTMENT OBJECTIVE
The investment objective of the CAPITAL MANAGEMENT SMALL-CAP FUND (the "Fund")
is to seek long-term capital appreciation. Current income is a secondary
consideration in selecting portfolio investments.
PRINCIPAL INVESTMENT STRATEGIES
The Fund pursues its investment objective by investing primarily in equity
securities of small-capitalization ("small-cap") companies. The Fund considers a
small-cap company to be one that has market capitalization, measured at the time
the Fund purchases the security, within the range of $100 million to $1 billion.
The Fund's investments in small-cap companies will be primarily in equity
securities of such companies, such as common and preferred stocks and securities
convertible into common stocks. The Fund intends to invest in a diversified
group of small-cap companies and will not concentrate it investments in any one
industry or group.
Under normal market conditions, the Fund will invest at least 90% of its total
assets in equity securities, of which at least 65% of its total assets will be
invested in the equity securities of small-cap companies. In selecting portfolio
securities, the Fund's Advisor, Capital Management Associates, Inc., uses
various screens and proprietary models that begin with a potential universe of
over 3,500 companies then through fundamental research seeks to select from that
group companies whose current share price is relatively undervalued. This
process often includes visits with company management and contacts with industry
experts and suppliers. Final investment decisions are made by the Advisor's
Portfolio Management Team.
PRINCIPAL RISKS OF INVESTING IN THE FUND
The Fund is intended for aggressive investors seeking above-average gains and
willing to accept the risks involved in investing in the securities of small-cap
companies.
Investing in the securities of small-cap companies generally involves
substantially greater risk than investing in larger, more established companies.
This greater risk is, in part, attributable to the fact that the securities of
small-cap companies usually have more limited marketability and, therefore, may
be more volatile than securities of larger, more established companies or the
market averages in general. Because small-cap companies normally have fewer
shares outstanding than larger companies, it may be more difficult to buy or
sell significant amounts of such shares without an unfavorable impact on
prevailing prices. Another risk factor is that small-cap companies often have
limited product lines, markets, or financial resources and may lack management
depth. Additionally, small-cap companies are typically subject to greater
changes in earnings and business prospects than are larger, more established
companies. Small-cap companies may not be well-known to the investing public,
may not be followed by the financial press or industry analysts, and may not
have institutional ownership. Small-cap companies may be more vulnerable than
larger companies to adverse business or economic developments.
<PAGE>
Although investing in securities of small companies offers potential
above-average returns if the companies are successful, the risk exists that the
companies will not succeed, and the prices of the companies' shares could
dramatically decline in value. Therefore, an investment in the Fund may involve
a substantially greater degree of risk than an investment in other mutual funds
that seek capital growth by investing in more established, larger companies.
PERFORMANCE INFORMATION
Because the Fund did not commence operations until January 12, 1999, there is no
calendar year performance information for the Fund to be presented here.
However, you may request a copy of the latest audited Annual Report for the
period ended November 30, 1999, at no charge by calling the Fund.
FEES AND EXPENSES OF THE FUND
The table below describes the fees and expenses that you may pay if you buy and
hold shares of the Fund:
SHAREHOLDER FEES FOR INVESTOR SHARES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
-----------------------------------------
Maximum sales charge (load) imposed on purchases
(as a percentage of offering price) ..................................3.00%
Redemption fee ...........................................................None
ANNUAL FUND OPERATING EXPENSES FOR INVESTOR SHARES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
---------------------------------------------
Management Fees....................................................1.00%
Distribution and/or Service (12b-1) Fees...........................0.75%
Other Expenses....................................................54.70%
------
TOTAL ANNUAL FUND OPERATING EXPENSES.................................56.45%*
Fee Waiver and/or Expense Reimbursement.............................(54.20%)
-------
NET EXPENSES..........................................................2.25%
=======
* "Total Annual Fund Operating Expenses" are based upon actual expenses
incurred by the Investor Shares of the Fund for the fiscal year ended
November 30, 1999. The Advisor has entered into a contractual agreement
with the Fund under which it has agreed to waive or reduce its fees and to
assume other expenses of the Fund, if necessary, in an amount that limits
"Total Annual Fund Operating Expenses" (exclusive of interest, taxes,
brokerage fees and commissions, extraordinary expenses, and payments, if
any, under a Rule 12b-1 Plan) to not more than 1.50% of the Investor Shares
average daily net assets for each of the next three fiscal years ending
November 30, 2000, 2001, and 2002. The contractual agreement may continue
from year-to-year thereafter, provided such continuation is approved by the
Board of Trustees. See "Expense Limitation Agreement" below for more
detailed information.
<PAGE>
EXAMPLE: This Example shows you the expenses you may pay over time by investing
in the Fund. Since all funds use the same hypothetical conditions, it should
help you compare the costs of investing in the Fund versus other funds. The
Example assumes the following conditions:
(1) You invest $10,000 in the Fund for the periods shown; (2) You
reinvest all dividends and distributions; (3) You redeem all of your
shares at the end of those periods; (4) You earn a 5% total return; and
(5) The Fund's expenses remain the same.
Although your actual costs may be higher or lower, the following table shows you
what your costs may be under the conditions listed above as well as those upon
redemption.
----------------- ------------ -------------- ------------- --------------
Period Invested 1 Year 3 Years 5 Years 10 Years
----------------- ------------ -------------- ------------- --------------
Your Costs $521 $982 $7,536 $9,503
----------------- ------------ -------------- ------------- --------------
<PAGE>
MANAGEMENT OF THE FUND
THE INVESTMENT ADVISOR
The Fund's Investment Advisor is Capital Management Associates, Inc., 140
Broadway, New York, New York 10005. The Advisor serves in that capacity pursuant
to an advisory contract with the Trust on behalf of the Fund. Subject to the
authority of the Trustees, the Advisor provides guidance and policy direction in
connection with its daily management of the Fund's assets. The Advisor manages
the investment and reinvestment of the Fund's assets. The Advisor is also
responsible for the selection of broker-dealers through which the Fund executes
portfolio transactions, subject to the brokerage policies established by the
Trustees, and it provides certain executive personnel to the Fund.
The Advisor, organized as a New York corporation in 1982, is controlled by its
officers and directors, with the principal shareholders being J.V. Shields, Jr.;
David V. Shields; and Joseph A. Zock. Mr. Zock and seven full-time analysts
serve as the Portfolio Management Team that selects the investments for the
Fund. The Shields brothers and Mr. Zock have been affiliated with the Advisor
since 1982. The Advisor has been managing the Fund since its inception and has
been providing investment advice to investment companies, individuals,
corporations, pension and profit sharing plans, endowments, and other business
and private accounts since 1982. The Advisor currently has approximately $1
billion in assets under management.
THE ADVISOR'S COMPENSATION. As full compensation for the investment advisory
services provided to the Fund, the Fund pays the Advisor monthly compensation
based on the Fund's daily average net assets at the annual rate of 1.00% of the
first $100 million of the Fund's net assets, 0.90% of the next $150 million,
0.85% of the next $250 million, and 0.80% of all assets over $500 million. For
the fiscal period ended November 30, 1999, the Advisor voluntarily waived all of
its advisory fees.
EXPENSE LIMITATION AGREEMENT. In the interest of limiting expenses of the Fund,
the Advisor has entered into an expense limitation agreement with the Trust,
with respect to the Fund ("Expense Limitation Agreement"), pursuant to which the
Advisor has agreed to waive or limit its fees and to assume other expenses so
that the total annual operating expenses of the Fund (other than interest,
taxes, brokerage commissions, other expenditures which are capitalized in
accordance with generally accepted accounting principles, other extraordinary
expenses not incurred in the ordinary course of the Fund's business, and
amounts, if any, payable pursuant to a Rule 12b-1 Plan) are limited to 1.50% of
the average daily assets of the Investor Shares of the Fund for the fiscal years
to end November 30, 2000, 2001, 2002. The Expense Limitation Agreement shall
continue from year-to-year thereafter, provided such continuance is specifically
approved by a majority of the Trustees of the Trust who (i) are not "interested
persons" of the Trust or any other party to this agreement, as defined in the
Investment Company Act of 1940, as amended (the "1940 Act"), and (ii) have no
direct or indirect financial interest in the operation of the Expense Limitation
Agreement.
The Fund may at a later date reimburse the Advisor the management fees waived or
limited and other expenses assumed and paid by the Advisor pursuant to the
Expense Limitation Agreement, provided the Fund has reached a sufficient asset
size to permit such reimbursement to be made without causing the total annual
expense ratio of the Fund to exceed the percentage limits stated above.
Consequently, no reimbursement by the Fund will be made unless: (i) the Fund's
assets exceed $10 million; (ii) the Fund's total annual expense ratio is less
than the percentage stated above; and (iii) the payment of such reimbursement
has been approved by the Trust's Board of Trustees on a quarterly basis.
<PAGE>
BROKERAGE PRACTICES. In selecting brokers and dealers to execute portfolio
transactions, the Advisor may consider research and brokerage services furnished
to the Advisor or its affiliates. Subject to seeking the most favorable net
price and execution available, the Advisor may also consider sales of shares of
the Fund as a factor in the selection of brokers and dealers. Certain securities
trades will be cleared through Shields & Company, a registered broker-dealer
affiliate of the Advisor and Distributor of the Fund.
The 1940 Act generally prohibits the Fund from engaging in principal securities
transactions with an affiliate of the Advisor. Thus, the Fund does not engage in
principal transactions with any affiliate of the Advisor. The Fund has adopted
procedures, under Rule 17e-1 under the 1940 Act, that are reasonably designed to
provide that any brokerage commission the Fund pays to an affiliate of the
Advisor does not exceed the usual and customary broker's commission. In
addition, the Fund will adhere to Section 11(a) of the 1934 Act and any
applicable rules thereunder governing floor trading.
THE ADMINISTRATOR
The Nottingham Company, Inc., (the "Administrator") assists the Trust in the
performance of its administrative responsibilities to the Fund, coordinates the
services of each vendor to the Fund, and provides the Fund with other necessary
administrative, fund accounting, and compliance services. In addition, the
Administrator makes available the office space, equipment, personnel, and
facilities required to provide such services to the Fund.
THE TRANSFER AGENT
NC Shareholder Services, LLC, ("NCSS") serves as the transfer agent and dividend
disbursing agent of the Fund. As indicated later in the section of this
Prospectus, "Investing in the Fund," NCSS will handle your orders to purchase
and redeem shares of the Fund and will disburse dividends paid by the Fund.
<PAGE>
THE DISTRIBUTOR
Shields & Company (the "Distributor") is the principal underwriter and
distributor of the Fund's shares and serves as the Fund's exclusive agent for
the distribution of Fund shares. Shields & Company may sell the Fund's shares to
or through qualified securities dealers or others.
DISTRIBUTION OF THE FUND'S SHARES. For the Investor Shares of the Fund, the Fund
has adopted a Distribution Plan in accordance with Rule 12b-1 (the "Distribution
Plan") under the 1940 Act. Pursuant to the Distribution Plan, the Fund
compensates the Distributor, for services rendered and expenses borne in
connection with activities primarily intended to result in the sale of the
Fund's Investor Shares (this compensation is commonly referred to as "12b-1
fees"). It is anticipated that a portion of the 12b-1 fees received by the
Distributor will be used to defray various costs incurred or paid by the
Distributor in connection with the printing and mailing to potential investors
of Fund prospectuses, statements of additional information, any supplements
thereto, and shareholder reports, and holding seminars and sales meetings with
wholesale and retail sales personnel designed to promote the sale of Investor
Shares. The Distributor may also use a portion of the 12b-1 fees received to
provide compensation to financial intermediaries and third-party broker-dealers
for their services in connection with the sale of Investor Shares. Because the
12b-1 fees are paid out of the Fund's assets on an on-going basis, these fees,
over time, will increase the cost of your investment and may cost you more than
paying other types of sales loads.
The Distribution Plan provides that the Fund may pay annually up to 0.75% of the
average daily net assets of the Fund's Investor Shares for activities primarily
intended to result in the sale of those shares, including reimbursing entities
for providing distribution and shareholder servicing with respect to the Fund's
Investor Shares.
The Distribution Plan is known as a "compensation" plan because payments are
made for services rendered to the Fund with respect to Investor Shares
regardless of the level of expenditures made by the Distributor. The Board of
Trustees of the Trust will, however, take into account such expenditures for
purposes of reviewing operations under the Distribution Plan and concerning
their annual consideration of the Plan's renewal. The Distributor has indicated
that it expects its expenditures to include, without limitation: (a) the
printing and mailing to prospective investors of Fund prospectuses, statements
of additional information, any supplements thereto, and shareholder reports with
respect to the Investor Shares of the Fund; (b) those relating to the
development, preparation, printing and mailing of advertisements, sales
literature, and other promotional materials describing and/or relating to the
Investor Shares of the Fund; (c) holding seminars and sales meetings designed to
promote the distribution of the Fund's Investor Shares; (d) obtaining
information and providing explanations to wholesale and retail distributors of
the Fund's investment objectives and policies and other information about the
Fund; (e) training sales personnel regarding the Investor Shares of the Fund;
and (f) financing any other activity that the Distributor determines is
primarily intended to result in the sale of Investor Shares.
OTHER EXPENSES. In addition to the management fees and Rule 12b-1 fees for the
Investor Shares, the Fund pays all expenses not assumed by the Fund's Advisor,
including, without limitation: the fees and expenses of its independent
accountants and of its legal counsel; the costs of printing and mailing to
shareholders annual and semi-annual reports, proxy statements, prospectuses,
statements of additional information, and supplements thereto; the costs of
printing registration statements; bank transaction charges and custodian's fees;
any proxy solicitors' fees and expenses; filing fees; any federal, state or
local income or other taxes; any interest; any membership fees of the Investment
Company Institute and similar organizations; fidelity bond and Trustees'
liability insurance premiums; and any extraordinary expenses, such as
indemnification payments or damages awarded in litigation or settlements made.
All general Trust expenses are allocated among and charged to the assets of each
separate series of the Trust, such as the Fund, on a basis that the Trustees
deem fair and equitable, which may be on the basis of relative net assets of
each series or the nature of the services performed and relative applicability
to each series.
<PAGE>
YOUR INVESTMENT IN THE FUND
MINIMUM INVESTMENT
Investor Shares are sold subject to a maximum sales charge of 3.00%, so that the
term "offering price" includes the front-end sales load. Shares are redeemed at
net asset value. Shares may be purchased by any account managed by the Advisor
and any broker-dealer authorized to sell Fund shares.
The minimum initial investment is $2,500 ($1,000 for Individual Retirement
Accounts ("IRAs")), Keogh Plans, 401(k) Plans, or purchases under the Uniform
Transfer to Minors Act. The minimum additional investment is $500. The Fund may,
in the Advisor's sole discretion, waive such minimum investment amounts.
PURCHASE AND REDEMPTION PRICE
SALES CHARGES. The public offering price of Investor Shares of the Fund equals
net asset value plus a sales charge. The Distributor receives this sales charge
and may reallow it in the form of dealer discounts and brokerage commissions as
follows:
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------ -------------------- ----------------------- ----------------------------------
Charge As % of Net Sales Charge As % of Sales Dealers Discounts and
Amount of Transaction At Public Offering Amount Invested Public Offering Price Brokerage Commissions as % of
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>
From time to time, dealers who receive dealer discounts and brokerage
commissions from the Distributor may reallow all or a portion of such dealer
discounts and brokerage commissions to other dealers or brokers. Pursuant to the
terms of the Distribution Agreement, the sales charge payable to the Distributor
and the dealer discounts may be suspended, terminated, or amended. The
Distributor, at its expense, may, from time to time, provide additional
promotional incentives to dealers who sell Fund shares.
<PAGE>
DETERMINING THE FUND'S NET ASSET VALUE. The price at which you purchase or
redeem shares is based on the next calculation of net asset value after an order
is accepted in good form. The Fund's net asset value per share is calculated by
dividing the value of the Fund's total assets, less liabilities (including Fund
expenses, which are accrued daily), by the total number of outstanding shares of
the Fund. The net asset value per share of the Fund is normally determined at
the time regular trading closes on the New York Stock Exchange (currently 4:00
p.m. Eastern time, Monday through Friday), except on business holidays when the
New York Stock Exchange is closed.
In valuing the Fund's total assets, portfolio securities are generally valued at
their market value. Instruments with maturities of 60 days or less are valued at
amortized cost, which approximates market value. Securities and assets for which
representative market quotations are not readily available are valued at fair
value as determined in good faith under policies approved by the Board of
Trustees.
OTHER MATTERS. Purchases and redemptions of shares of the same class by the same
shareholder on the same day will be netted for the Fund. All redemption requests
will be processed and payment with respect thereto will normally be made within
seven days after tenders. The Fund may suspend redemption, if permitted by the
1940 Act, for any period during which the New York Stock Exchange is closed or
during which trading is restricted by the Securities and Exchange Commission
("SEC") or if the SEC declares that an emergency exists. Redemptions may also be
suspended during other periods permitted by the SEC for the protection of the
Fund's shareholders. Additionally, during drastic economic and market changes,
telephone redemption privileges may be difficult to implement. Also, if the
Trustees determine that it would be detrimental to the best interest of the
Fund's remaining shareholders to make payment in cash, the Fund may pay
redemption proceeds in whole or in part by a distribution-in-kind of readily
marketable securities.
PURCHASING SHARES
REGULAR MAIL ORDERS. Payment for shares must be made by check or money order
from a U.S. bank and payable in U.S. dollars. If checks are returned due to
insufficient funds or other reasons, the Fund will charge a $20 fee or may
redeem shares of the Fund already owned by the purchaser to recover any such
loss. For regular mail orders, please complete the attached Fund Shares
Application and mail it, along with your check made payable to the "CAPITAL
MANAGEMENT SMALL-CAP Fund," to:
CAPITAL MANAGEMENT SMALL-CAP FUND
Investor Shares
c/o NC Shareholder Services
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
<PAGE>
The application must contain your Social Security Number ("SSN") or Taxpayer
Identification Number ("TIN"). If you have applied for a SSN or TIN at the time
of completing your account application but you have not received your number,
please indicate this on the application. Taxes are not withheld from
distributions to U.S. investors if certain IRS requirements regarding the TIN
are met.
BANK WIRE ORDERS. Purchases may also be made through bank wire orders. To
establish a new account or to add to an existing account by wire, please call
the Fund at 1-888-626-3863, before wiring funds, to advise the Fund of the
investment, dollar amount, and the account identification number. Additionally,
please have your bank use the following wire instructions:
First Union National Bank of North Carolina
Charlotte, North Carolina
ABA # 053000219
For the CAPITAL MANAGEMENT SMALL-CAP FUND - INVESTOR SHARES
Acct. # 2000001292938
For further credit to (shareholder's name and SSN or TIN)
ADDITIONAL INVESTMENTS. You may also add to your account by mail or wire at any
time by purchasing shares at the then current public offering price. The minimum
additional investment is $500. Before adding funds by bank wire, please call the
Fund at 1-888-626-3863 and follow the above directions for wire purchases. Mail
orders should include, if possible, the "Invest by Mail" stub that is attached
to your Fund confirmation statement. Otherwise, please identify your account in
a letter accompanying your purchase payment.
AUTOMATIC INVESTMENT PLAN. The automatic investment plan enables shareholders to
make regular monthly or quarterly 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.
EXCHANGE FEATURE. You may exchange shares of the Fund for shares of any other
series of the Trust offered for sale in the state in which you reside. Shares
may be exchanged for shares of any other series of the Trust at the net asset
value plus the percentage difference between that series' sales charge and any
sales charge, if any, previously paid in connection with the shares being
exchanged. Prior to making an investment decision or giving us your instructions
to exchange shares, please read the prospectus for the series in which you wish
to invest.
A pattern of frequent purchase and redemption transactions is considered by the
Advisor to not be in the best interest of the shareholders of the Fund. Such a
pattern may, at the discretion of the Advisor, be limited by the Fund's refusal
to accept further purchase and/or exchange orders form an investor, after
providing the investor with 60-days' prior notice.
<PAGE>
The Board of Trustees reserves the right to suspend, terminate, or amend the
terms of the exchange privilege upon 60-days' written notice to the
shareholders.
STOCK CERTIFICATES. You do not have the option of receiving stock certificates
for your shares. Evidence of ownership will be given by issuance of periodic
account statements that will show the number of shares owned.
REDUCED SALES CHARGES
RIGHTS OF ACCUMULATION. The sales charge applicable to a current purchase of
shares of the Fund by a person listed above is determined by adding the purchase
price of shares to be purchased to the aggregate value (at current offering
price) of shares of the Funds previously purchased and then owned, provided the
Distributor is notified by such person or his or her broker-dealer each time a
purchase is made which would so qualify. For example, a person who is purchasing
Small-Cap shares with an aggregate value of $50,000 and who currently owns
shares of the Funds with a value of $200,000 would pay a sales charge of 2.50%
of the offering price on the new investment.
LETTER OF INTENT. Sales charges may also be reduced through an agreement to
purchase a specified quantity of shares over a designated thirteen-month period
by completing the "Letter of Intent" section of the Account Application.
Information about the "Letter of Intent" procedure, including its terms, is
contained on the back of the Account Application.
GROUP PLANS. Shares of the Funds may be sold at a reduced or eliminated sales
charge to certain Group Plans under which a sponsoring organization makes
recommendations to, permits group solicitation of, or otherwise facilitates
purchases by, its employees, members, or participants. Information about such
arrangements is available from the Distributor.
REDEEMING YOUR SHARES
REGULAR MAIL REDEMPTIONS.
Regular mail redemption requests should be addressed to:
CAPITAL MANAGEMENT SMALL-CAP FUND
Investor Shares
c/o NC Shareholder Services
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
<PAGE>
Regular mail redemption requests should include:
(1) Your letter of instruction specifying the account number and number of
shares, or the dollar amount, to be redeemed. This request must be
signed by all registered shareholders in the exact names in which they
are registered;
(2) Any required signature guarantees (see "Signature Guarantees" below);
and
(3) Other supporting legal documents, if required in the case of estates,
trusts, guardianships, custodianships, corporations, partnerships,
pension or profit sharing plans, and other organizations.
Your redemption proceeds normally will be sent to you within 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.
TELEPHONE AND BANK WIRE REDEMPTIONS. You may also redeem shares by telephone and
bank wire under certain limited conditions. The Fund will redeem shares in this
manner when so requested by the shareholder only if the shareholder confirms
redemption instructions in writing.
The Fund may rely upon confirmation of redemption requests transmitted via
facsimile (FAX# 252-972-1908). The confirmation instructions must include:
(1) Designation of class (Investor),
(2) Shareholder name and account number,
(3) Number of shares or dollar amount to be redeemed,
(4) Instructions for transmittal of redemption funds to the shareholder,
and
(5) Shareholder signature as it appears on the application then on file
with the Fund.
Redemption proceeds will not be distributed until written confirmation of the
redemption request is received, per the instructions above. You can choose to
have redemption proceeds mailed to you at your address of record, your bank, or
to any other authorized person, or you can have the proceeds sent by bank wire
to your bank ($5,000 minimum). Shares of the Fund may not be redeemed by wire on
days in which your bank is not open for business. You can change your redemption
instructions anytime you wish by filing a letter including your new redemption
instructions with the Fund. See "Signature Guarantees" below.
The Fund, in its discretion, may choose to pass through to redeeming
shareholders any charges imposed by the Custodian for wire redemptions. The
Custodian currently charges the Fund $10 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.
<PAGE>
You may redeem shares, subject to the procedures outlined above, by calling the
Fund at 1-888-626-3863. Redemption proceeds will only be sent to the bank
account or person named in your Fund Shares Application currently on file with
the Fund. Telephone redemption privileges authorize the Fund to act on telephone
instructions from any person representing himself or herself to be the investor
and reasonably believed by the Fund to be genuine. The Fund will employ
reasonable procedures, such as requiring a form of personal identification, to
confirm that instructions are genuine, and if it does not follow such
procedures, the Fund will be liable for any losses due to fraudulent or
unauthorized instructions. The Fund will not be liable for following telephone
instructions reasonably believed to be genuine.
SMALL ACCOUNTS. All shares are purchased and redeemed in accordance with the
Fund's Amended and Restated Declaration of Trust and By-Laws. The Trustees
reserve the right to redeem involuntarily any account having a net asset value
of less than $1,000 (due to redemptions, exchanges, or transfers, and not due to
market action) upon 60-days' written notice. If the shareholder brings his
account net asset value up to at least $1,000 during the notice period, the
account will not be redeemed. Redemptions from retirement plans may be subject
to federal income tax withholding.
SIGNATURE GUARANTEES. To protect your account and the Fund from fraud, signature
guarantees are required to be sure that you are the person who has authorized a
change in registration or standing instructions for your account. Signature
guarantees are required for (1) change of registration requests, (2) requests to
establish or to change exchange privileges or telephone and bank wire redemption
service other than through your initial account application, and (3) redemption
requests in excess of $50,000. Signature guarantees are acceptable from a member
bank of the Federal Reserve System, a savings and loan institution, credit union
(if authorized under state law), registered broker-dealer, securities exchange,
or association clearing agency and must appear on the written request for change
of registration, establishment or change in exchange privileges, or redemption
request.
SYSTEMATIC WITHDRAWAL PLAN. A shareholder who owns shares of the Fund valued at
$10,000 or more at the current offering price may establish a Systematic
Withdrawal Plan to receive a monthly or quarterly check in a stated amount not
less than $100. Each month or quarter, as specified, the Fund will automatically
redeem sufficient shares from your account to meet the specified withdrawal
amount. The shareholder may establish this service whether dividends and
distributions are reinvested in shares of the Fund or paid in cash. Call or
write the Fund for an application form.
<PAGE>
OTHER IMPORTANT INVESTMENT INFORMATION
DIVIDENDS, DISTRIBUTIONS, AND TAXES
The following information is meant as a general summary for U.S. taxpayers.
Additional tax information appears in the Statement of Additional Information
(the "SAI"). Shareholders should rely on their own tax advisers for advice about
the particular federal, state, and local tax consequences to them of investing
in the Fund.
The Fund will distribute most of its income and gains to its shareholders every
year. Income dividends, if any, will be paid quarterly and capital gains
distributions, if any, will be made at least annually. Although the Fund will
not be taxed on amounts it distributes, shareholders will generally be taxed,
regardless of whether distributions are received in cash or are reinvested in
additional Fund shares. A particular distribution generally will be taxable as
either ordinary income or long-term capital gains. If a Fund designates a
distribution as a capital gains distribution, it will be taxable to shareholders
as long-term capital gains, regardless of how long they have held their Fund
shares.
If the Fund declares a dividend in October, November, or December but pays it in
January, it may be taxable to shareholders as if they received it in the year it
was declared. Every year, each shareholder will receive a statement detailing
the tax status of any Fund distributions for that year.
Distributions may be subject to state and local taxes, as well as federal taxes.
Shareholders who hold Fund shares in a tax-deferred account, such as a
retirement plan, generally will not have to pay tax on Fund distributions until
they receive distributions from the account.
A shareholder who sells or redeems shares will generally realize a capital gain
or loss, which will be long-term or short-term, generally depending upon the
shareholder's holding period for the Fund shares. An exchange of shares may be
treated as a sale.
As with all mutual funds, the Fund may be required to withhold U.S. federal
income tax at the rate of 31% of all taxable distributions payable to
shareholders who fail to provide the Fund with their correct taxpayer
identification numbers or to make required certifications, or who have been
notified by the IRS that they are subject to backup withholding. Backup
withholding is not an additional tax; rather, it is a way in which the IRS
ensures it will collect taxes otherwise due. Any amounts withheld may be
credited against a shareholder's U.S. federal income tax liability.
<PAGE>
FINANCIAL HIGHLIGHTS
The financial data included in the table below have been derived from audited
financial statements of the Fund. The financial data for the fiscal period ended
November 30, 1999 have been audited by Deloitte & Touche LLP, independent
auditors, whose report covering such period is incorporated by reference into
the SAI. This information should be read in conjunction with the Fund's latest
audited annual financial statements and notes thereto, which are also
incorporated by reference into the SAI, 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 also be
obtained at no charge by calling the Fund.
<TABLE>
<S> <C>
CAPITAL MANAGEMENT SMALL-CAP FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
- -------------------------------------------------------------------------------
Investor
Class
- -------------------------------------------------------------------------------
Period ended
November 30,
1999 (a)
-------------
Net asset value, beginning of period ......................... $10.99
Income from investment operations
Net investment loss .................................. (0.10)
Net realized and unrealized gain on investments ...... 2.93
--------
Total from investment operations ................. 2.83
--------
Net asset value, end of period ............................... $13.82
========
Total return (b) ............................................. 25.75 %
========
Ratios/supplemental data
Net assets, end of period ............................... $ 62,854
========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees ........ 56.45 % (c)
After expense reimbursements and waived fees ......... 2.25 % (c)
Ratio of net investment loss to average net assets
Before expense reimbursements and waived fees ........ (55.11)% (c)
After expense reimbursements and waived fees ......... (0.91)% (c)
Portfolio turnover rate ................................. 145.58 %
(a) For the period beginning January 12, 1999 (commencement of operations) to
November 30, 1999.
(b) Total return does not reflect payment of a sales charge.
(c) Annualized.
</TABLE>
<PAGE>
ADDITIONAL INFORMATION
-------------------------------------------
CAPITAL MANAGEMENT
SMALL-CAP FUND
INVESTOR SHARES
------------------------------------------
Additional information about the Fund is available in the Fund's Statement of
Additional Information. The Fund's Annual and Semi-annual Reports include a
discussion of market conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal year.
These reports are available free of charge upon request by contacting us:
BY TELEPHONE: 1-888-626-3863
BY MAIL: CAPITAL MANAGEMENT SMALL-CAP FUND
Investor Shares
c/o NC Shareholder Services
107 North Washington Street
Post Office Box 4365
Rocky Mount, NC 27803-0365
BY E-MAIL: [email protected]
ON THE INTERNET: WWW.NCFUNDS.COM
Information about the Fund can also be reviewed and copied at the Securities
Exchange Commission's ("Commission") Public Reference Room in Washington, D.C.
Inquiries on the operations of the public reference room may be made by calling
the Commission at 1-202-942-8090. Reports and other information about the Fund
are available on the SEC's Internet site at http://www.sec.gov, and copies of
this information may be obtained, upon payment of a duplicating fee, by
electronic request at the following e-mail address: [email protected], or by
writing the SEC's Public Reference Section, Washington, D.C. 20549-0102.
Investment Company Act file number 811-08822
<PAGE>
-------------------------------------
CAPITAL MANAGEMENT
SMALL-CAP FUND
INVESTOR SHARES
------------------------------------
PROSPECTUS
March 31, 2000
<PAGE>
PART B
======
STATEMENT OF ADDITIONAL INFORMATION
CAPITAL MANAGEMENT MID-CAP FUND
March 31, 2000
A series of the
CAPITAL MANAGEMENT INVESTMENT TRUST
Capital Management Associates, Inc.
140 Broadway
New York, New York 10005
Telephone 1-888-626-3863
TABLE OF CONTENTS
PAGE
INVESTMENT OBJECTIVE AND POLICIES..........................................2
INVESTMENT LIMITATIONS.....................................................3
MANAGEMENT AND OTHER SERVICE PROVIDERS.....................................4
ADDITIONAL INFORMATION ON PERFORMANCE......................................9
PORTFOLIO TRANSACTIONS....................................................11
SPECIAL SHAREHOLDER SERVICES..............................................12
PURCHASE OF SHARES........................................................13
REDEMPTION OF SHARES......................................................16
NET ASSET VALUE...........................................................16
ADDITIONAL TAX INFORMATION................................................17
CAPITAL SHARES AND VOTING.................................................18
FINANCIAL STATEMENTS......................................................18
APPENDIX A................................................................19
This Statement of Additional Information (the "SAI") is meant to be read in
conjunction with the Prospectuses of the Capital Management Mid-Cap Fund (the
"Fund"), dated March 31, 2000, relating to the Fund's Institutional Shares and
Investor Shares, and hereby incorporates by reference the Prospectuses in their
entirety. Because this SAI is not itself a prospectus, no investment in shares
of the Fund should be made solely upon the information contained herein. Copies
of the Prospectus for the Investor Shares and Institutional Shares of the Fund
and Annual Reports may be obtained at no charge by writing or calling the Fund
at the address or phone number shown above. Capitalized terms used but not
defined herein have the same meanings as in each Prospectus.
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The 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.
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 resells 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 generally
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 that will
cause more than 10% of its net assets to be invested in repurchase agreements
that extend beyond seven days and other illiquid securities.
DESCRIPTION OF MONEY MARKET INSTRUMENTS. The Fund may invest in 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 that "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 AND OTHER SERVICE PROVIDERS
The Trust's Board of Trustees (the "Trustees") is responsible for the management
and supervision of the Fund. The Trustees approve all significant agreements
between the Trust, on behalf of the Fund, and those companies that furnish
services to the Fund. This section of the Statement of Additional Information
provides the persons who serve as Trustees and Officers to the Trust and Fund,
respectively, as well as the entities that provide services to the Fund.
TRUSTEES AND OFFICERS. Following are the Trustees and Officers of the Trust,
their age, their present position with the Trust or the Fund, and their
principal occupation during the past five years. Those Trustees who are
"interested persons" (as defined in the 1940 Act) by virtue of their affiliation
with either the Trust or the Advisor, are noted by an asterisk (*). Messrs.
David V. Shields and Joseph V. Shields, Jr. are brothers.
<TABLE>
<S> <C> <C>
- --------------------------------------------------- ----------------------- ---------------------------------------------------
Name, Age, Position(s) with Position with Principal Occupation(s)
Fund and/or Trust, and Address The Fund During Past 5 Years
- --------------------------------------------------- ----------------------- ---------------------------------------------------
Lucius E. Burch, III, 57 Trustee Chairman and Chief Executive Officer
438 Rosemeade Lane Massey Burch Investment Group, Inc.
Naples, Florida 33999 (venture capital firm)
Nashville, Tennessee
- --------------------------------------------------- ----------------------- ---------------------------------------------------
George S. Reichenbach, 70 Trustee Managing Director
123 West Street Advent International Corporation
Carlisle, Massachusetts 01741 (venture capital firm)
Boston, Massachusetts
- --------------------------------------------------- ----------------------- ---------------------------------------------------
Thomas A. Saunders, III, 62 Trustee General Partner
667 Madison Avenue Saunders Karp & Company
21st Floor (merchant bank)
New York, New York 10021 New York, New York
- --------------------------------------------------- ----------------------- ---------------------------------------------------
David V. Shields, 59 Trustee* Managing Director
140 Broadway Capital Management Associates, Inc.
New York, New York 10005 (Advisor to the Fund)
New York, New York;
Managing Director
Shields & Company
(Distributor of the Fund)
New York, New York
- --------------------------------------------------- ----------------------- ---------------------------------------------------
Joseph V. Shields, Jr., 60 Chairman & Trustee* Chairman and Chief Executive Officer
140 Broadway Capital Management Associates, Inc.
New York, New York 10005 (Advisor to the Fund)
New York, New York;
Managing Director
Shields & Company
(Distributor to the Fund)
New York, New York
- --------------------------------------------------- ----------------------- ---------------------------------------------------
Anthony J. Walton 56 Trustee Chief Executive Officer
230 Park Avenue Armstrong Holdings Corporation
Suite 1440 (investment and corporate finance advisory firm)
New York, New York 10169 New York, New York, since 1995;
Vice Chairman
Petsec Energy, Inc.
(exploration and production company), Sydney,
Australia, and Lafayette, Louisiana, since
1995; previously
Chief Executive Officer
Llama Company
Fayetteville, Arkansas
- --------------------------------------------------- ----------------------- ---------------------------------------------------
C. Frank Watson, III, 29 Secretary President
105 North Washington Street The Nottingham Company
Rocky Mount, North Carolina 27802 (Administrator to the Fund)
Rocky Mount, North Carolina
- --------------------------------------------------- ----------------------- ---------------------------------------------------
Julian G. Winters, 31 Treasurer Legal and Compliance Director
105 North Washington Street The Nottingham Company
Rocky Mount, North Carolina 27802 (Administrator to the Fund)
Rocky Mount, North Carolina since 1996; previously
Operations Manager, Tar Heel
Medical, Nashville, North Carolina
- --------------------------------------------------- ----------------------- ---------------------------------------------------
Joseph A. Zock, 45 Vice-President Senior Vice President
140 Broadway Capital Management Associates, Inc.
New York, New York 10005 (Advisor to the Fund)
New York, New York
- --------------------------------------------------- ----------------------- ---------------------------------------------------
</TABLE>
COMPENSATION. Trustees and Officers of the Trust who are interested persons of
the Trust or the Advisor will receive no salary or fees from the Trust. Other
Trustees 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 reimburses
each Trustee for his or her travel and other expenses relating to attendance at
such meetings.*
<TABLE>
<S> <C> <C> <C> <C>
- ------------------------------- -------------------- ------------------------ ---------------------- ---------------------------
Total Compensation From
Aggregate Estimated Annual Fund and Fund Complex
Compensation Pension or Retirement Benefits Upon Paid to Directors
Name of Person From the Fund Benefits Retirement
- ------------------------------- -------------------- ------------------------ ---------------------- ---------------------------
Lucius E. Burch, III $2,200 None None $4,600
- ------------------------------- -------------------- ------------------------ ---------------------- ---------------------------
George S. Reichenbach $1,450 None None $3,100
- ------------------------------- -------------------- ------------------------ ---------------------- ---------------------------
Thomas A. Saunders, III $2,350 None None $4,800
- ------------------------------- -------------------- ------------------------ ---------------------- ---------------------------
David V. Shields None None None None
- ------------------------------- -------------------- ------------------------ ---------------------- ---------------------------
Joseph V. Shields, Jr. None None None None
- ------------------------------- -------------------- ------------------------ ---------------------- ---------------------------
Anthony J. Walton $2,450 None None $5,100
- ------------------------------- -------------------- ------------------------ ---------------------- ---------------------------
</TABLE>
*Figures are for the fiscal period ended November 30, 1999.
PRINCIPAL HOLDERS OF VOTING SECURITIES. As of March 17, 2000, 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 17, 2000.
INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
Name and Address of Amount and Nature of
BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT
- --------------------------------------------------------------------------------
BT Alex Brown, Inc. 136,253.471 shares 37.200%*
FBO 873-20604-16
P.O. Box 1346
Baltimore, Maryland 21203
BT Alex Brown, Inc. 32,895.321 shares 8.981%
FBO 874-21261-17
P.O. Box 1346
Baltimore, Maryland 21203
BT Alex Brown, Inc. 32,895.321 shares 8.981%
FBO 874-21261-18
P.O. Box 1346
Baltimore, Maryland 21203
BT Alex Brown, Inc. 26,766.123 shares 7.308%
FBO 876-01389-10
P.O. Box 1346
Baltimore, Maryland 21203
BT Alex Brown, Inc. 21,353.901 shares 5.830%
FBO 876-01174-19
P.O. Box 1346
Baltimore, Maryland 21203
BT Alex Brown, Inc. 19,232.363 shares 5.251%
FBO 876-01128-16
P.O. Box 1346
Baltimore, Maryland 21203
INVESTOR SHARES
- --------------------------------------------------------------------------------
Name and Address of Amount and Nature of
BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT
- --------------------------------------------------------------------------------
BT Alex Brown, Inc. 4,691.318 shares 9.723%
FBO 873-22426-18
P.O. Box 1346
Baltimore, Maryland 21203
BT Alex Brown, Inc. 3,133.496 shares 6.494%
FBO 873-20000-16
P.O. Box 1346
Baltimore, Maryland 21203
BT Alex Brown, Inc. 3,063.338 shares 6.349%
FBO 873-23548-19
P.O. Box 1346
Baltimore, Maryland 21203
* Deemed a "control person" of the Fund as defined by applicable SEC
regulations.
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 ended November 30, 1999, 1998, and 1997. The total fees waived amounted to
$67,423, $66,709 (the Advisor received 7,540 of its fee), and $52,043 (the
Advisor received $1,921 of its fees), respectively, and expenses reimbursed
amounted to $21,045, $14,704, and $25,031, 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.
ADMINISTRATOR. The Trust has entered into a Fund Accounting and Compliance
Administration Agreement with The Nottingham Company (the "Administrator"), 105
North Washington Street, Post Office Box 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, 0.125%; on the
next $50 million, 0.100%; on all assets over $100 million, 0.075%. In addition,
the Administrator currently receives a monthly fee of $2,250 for the first class
of the Fund and $750 for each additional class of the Fund (although the fees
are allocated equally as an expense to each class) 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 $4,000 per month for all of its fees taken in the aggregate, analyzed
monthly.
The Administrator will perform the following services for the Fund: (1)
coordinate with the Custodian and monitor the services it provides to the Fund;
(2) coordinate with and monitor any other third parties furnishing services to
the Fund; (3) provide the Fund with necessary office space, telephones, and
other communications facilities and personnel competent to perform
administrative and clerical functions for the Fund; (4) supervise the
maintenance by third parties of such books and records of the Fund as may be
required by applicable federal or state law; (5) prepare or supervise the
preparation by third parties of all federal, state, and local tax returns and
reports of the Fund required by applicable law; (6) prepare and, after approval
by the Trust, file and arrange for the distribution of proxy materials and
periodic reports to shareholders of the Fund as required by applicable law; (7)
prepare and, after approval by the Trust, arrange for the filing of such
registration statements and other documents with the Securities and Exchange
Commission and other federal and state regulatory authorities as may be required
by applicable law; (8) review and submit to the officers of the Trust for their
approval invoices or other requests for payment of Fund expenses and instruct
the Custodian to issue checks in payment thereof; and (9) take such other action
with respect to the Fund as may be necessary in the opinion of the Administrator
to perform its duties under the agreement. The Administrator also provides
certain accounting and pricing services for the Fund.
TRANSFER AGENT. The Trust has entered into a Dividend Disbursing and Transfer
Agent Agreement with NC Shareholder Services, LLC (the "Transfer Agent"), a
North Carolina limited liability company, to serve as transfer, dividend paying,
and shareholder servicing agent for the Fund. The Transfer Agent is compensated
for its services based upon a $15 fee per shareholder per year, subject to a
minimum fee of $750 per month. The address of the Transfer Agent is 107 North
Washington Street, Post Office Box 4365, Rocky Mount, North Carolina 27803-0365.
DISTRIBUTOR. Shields & Company (the "Distributor") is the principal underwriter
and distributor of Fund shares pursuant to a Distribution Agreement with the
Trust. The Distributor, which is affiliated with the Advisor, serves as
exclusive agent for the distribution of the shares of the Fund. The Distributor
may sell such shares to or through qualified securities dealers or others. The
Distributor receives commissions consisting of that portion of the sales charge
for Investor Shares remaining after the discounts that it allows to dealers. For
the fiscal years ended November 30, 1999, 1998, and 1997, the aggregate dollar
amount of sales charges paid on the sale of Investor Shares was $2,519, $25,113,
and $29,130, respectively, of which the Distributor retained $168, $1,951, and
$1,941, respectively, after reallowances to broker-dealers and sales
representatives.
J.V. Shields, Jr. and David V. Shields, affiliated persons of the Fund, are also
affiliated persons of the Advisor and the Distributor.
The Fund has adopted an Amended and Restated 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. It is expected that the Plan will be approved by shareholders at a
shareholder meeting to be held on April 27, 2000.
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, 1999, the
Fund incurred distribution and service fees under the Plan in the amount of
$10,519. This amount was substantially paid to sales personnel for selling Fund
shares and servicing shareholder accounts, with a small amount paid for
marketing expenses.
LEGAL COUNSEL. Dechert Price & Rhoads serves as legal counsel to the Trust and
the Fund.
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, Princeton Forrestal
Village, 116-300 Village Boulevard, Princeton, New Jersey 08540, 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.
CODE OF ETHICS. The Trust, the Advisor, and the Distributor each have adopted a
code of ethics, as required by applicable law, which is designed to prevent
affiliated persons of the Trust, the Advisor, and the Distributor from engaging
in deceptive, manipulative, or fraudulent activities in connection with
securities held or to be acquired by the Fund (which may also be held by persons
subject to a code). There can be no assurance that the codes will be effective
in preventing such activities.
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 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
Mid-Cap 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 average annual total returns for the Institutional Shares of the Fund for
the fiscal year ended November 30, 1999, the three year period ended November
30, 1999, and the period from the inception of the Institutional Shares of the
Fund (January 27, 1995) through November 30, 1999, were 18.41%, 12.19%, and
16.29%, respectively. The cumulative total return for the Institutional Shares
of the Fund since inception through November 30, 1999 was 107.70%.
The average annual total returns for the Investor Shares of the Fund for the
fiscal year ended November 30, 1998, the three year period ended November 30,
1999, and the period from the inception of the Investor Shares of the Fund
(April 7, 1995) through November 30, 1999, were 14.02%, 10.27%, and 13.03%,
respectively. The cumulative total return for the Investor Shares of the Fund
since inception through November 30, 1999, was 76.77%. 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
returns for the Investor Shares for the fiscal year ended November 30, 1999, the
three year period ended November 30, 1999, and the period since inception
through November 30, 1999, were 17.55%, 11.39%, and 13.77%, respectively. The
cumulative total return for the Investor Shares of the Fund since inception
through November 30, 1999, without deducting the maximum 3% sales load, was
82.24%.
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 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.
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
affected 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 ended November 30, 1999, 1998, and 1997, the Fund paid
brokerage commissions of $29,212, $29,234, and $16,311, respectively, of which
$29,212, $29,234, and $15,789, respectively, were paid during such periods to
the Distributor. For the fiscal years ended November 30, 1999 and 1998,
transactions in which the Fund used the Distributor as broker involved 100% of
the aggregate dollar amount of transactions involving the payment of commissions
and 100% 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.
SYSTEMATIC WITHDRAWAL PLAN. Shareholders owning shares with a value of $10,000
or more for Investor Shares and $250,000 or more for Institutional Shares may
establish a Systematic Withdrawal Plan. A shareholder may receive monthly or
quarterly payments, in amounts of not less than $100 per payment, by authorizing
the Fund to redeem the necessary number of shares periodically (each month, or
quarterly in the months of March, June, September, and December) in order to
make the payments requested. The Fund has the capability of electronically
depositing the proceeds of the systematic withdrawal directly to the
shareholder's personal bank account ($5,000 minimum per bank wire). Instructions
for establishing this service are included in the Fund Shares Application,
enclosed in the Prospectus, or are available by calling the Fund. If the
shareholder prefers to receive his systematic withdrawal proceeds in cash, or if
such proceeds are less than the $5,000 minimum for a bank wire, checks will be
made payable to the designated recipient and mailed within seven days of the
valuation date. If the designated recipient is other than the registered
shareholder, the signature of each shareholder must be guaranteed on the
application (see "Signature Guarantees" in the Prospectus). A corporation (or
partnership) must also submit a "Corporate Resolution" (or "Certification of
Partnership") indicating the names, titles, and required number of signatures
authorized to act on its behalf. The application must be signed by a duly
authorized officer(s) and the corporate seal affixed. No redemption fees are
charged to shareholders under this plan. Costs in conjunction with the
administration of the plan are borne by the Fund. Shareholders should be aware
that such systematic withdrawals may deplete or use up entirely their initial
investment and may result in realized long-term or short-term capital gains or
losses. The Systematic Withdrawal Plan may be terminated at any time by the Fund
upon 60-days' written notice or by a shareholder upon written notice to the
Fund. Applications and further details may be obtained by calling the Fund at
1-888-626-3863 or by writing to:
CAPITAL MANAGEMENT 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 that the Advisor may deem appropriate. If
accepted, the securities will be valued using the same criteria and methods as
described in "How Net Asset Value is Determined" in the Prospectus.
REDEMPTIONS IN KIND. The Fund does not intend, under normal circumstances, to
redeem its securities by payment in kind. It is possible, however, that
conditions may arise in the future which would, in the opinion of the Trustees,
make it undesirable for the Fund to pay for all redemptions in cash. In such
case the Board of Trustees may authorize payment to be made in readily
marketable portfolio securities of the Fund. Securities delivered in payment of
redemptions would be valued at the same value assigned to them in computing the
net asset value per share. Shareholders receiving them would incur brokerage
costs when these securities are sold. An irrevocable election has been filed
under Rule 18f-1 of the 1940 Act, wherein the Fund committed itself to pay
redemptions in cash, rather than in kind, to any shareholder of record of the
Fund who redeems during any 90-day period, the lesser of (a) $250,000 or (b) one
percent (1%) of the Fund's net asset value at the beginning of such period.
TRANSFER OF REGISTRATION. To transfer shares to another owner, send a written
request to the Fund at the address shown above. Your request should include the
following: (1) the Fund name and existing account registration; (2) signature(s)
of the registered owner(s) exactly as the signature(s) appear(s) on the account
registration; (3) the new account registration, address, social security or
taxpayer identification number, and how dividends and capital gains are to be
distributed; (4) signature guarantees (See the Prospectus under the heading
"Signature Guarantees"); and (5) any additional documents which are required for
transfer by corporations, administrators, executors, trustees, guardians, etc.
If you have any questions about transferring shares, call or write the Fund.
PURCHASE OF SHARES
The purchase price of shares of the Fund is the net asset value next determined
after the order is received, 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.
DEALERS. The Distributor, at its expense, may provide additional compensation in
addition to dealer discounts and brokerage commissions 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 five percent of the amount indicated in the letter of
intent will be held in escrow during the 13-month period (while remaining
registered in the name of the investor) for this purpose. The value of any
shares redeemed or otherwise disposed of by the investor prior to termination or
completion of the letter of intent will be deducted from the total purchases
made under such letter of intent.
A 90-day backdating period can be used to include earlier purchases at the
investor's cost (without a retroactive downward adjustment of the sales charge);
the 13-month period would then begin on the date of the first purchase during
the 90-day period. No retroactive adjustment will be made if purchases exceed
the amount indicated in the letter of intent. Investors must notify the
Administrator or the Distributor whenever a purchase is being made pursuant to a
letter of intent.
Investors electing to purchase shares pursuant to a letter of intent should
carefully read the letter of intent, which is included in the Fund Shares
Application accompanying this Prospectus or is otherwise available from the
Administrator or the Distributor. This letter of intent option may be modified
or eliminated at any time or from time to time by the Trust without notice.
REINVESTMENTS. Investors may reinvest, without a sales charge, proceeds
from a redemption of Investor Shares in Investor Shares or in shares of another
series of the Trust affiliated with the Advisor and sold with a sales charge,
within 90 days after the redemption. If the other Class or Fund charges a sales
charge higher than the sales charge the investor paid in connection with the
shares redeemed, the investor must pay the difference. In addition, the shares
of the Class or Fund to be acquired must be registered for sale in the
investor's state of residence. The amount that may be so reinvested may not
exceed the amount of the redemption proceeds, and a written order for the
purchase of such shares must be received by the Fund or the Distributor within
90 days after the effective date of the redemption.
If an investor realizes a gain on the redemption, the reinvestment will not
affect the amount of any federal capital gains tax payable on the gain. If an
investor realizes a loss on the redemption, the reinvestment may cause some or
all of the loss to be disallowed as a tax deduction, depending on the number of
shares purchased by reinvestment and the period of time that has elapsed after
the redemption, although for tax purposes, the amount disallowed is added to the
cost of the shares acquired upon the reinvestment.
PURCHASES BY RELATED PARTIES AND GROUPS. Reductions in sales charges apply
to purchases by a single "person," including an individual, members of a family
unit, consisting of a husband, wife and children under the age of 21 purchasing
securities for their own account, or a trustee or other fiduciary purchasing for
a single fiduciary account or single trust estate.
Reductions in sales charges also apply to purchases by individual members of a
"qualified group." The reductions are based on the aggregate dollar value of
shares purchased by all members of the qualified group and still owned by the
group plus the shares currently being purchased. For purposes of this paragraph,
a qualified group consists of a "company," as defined in the 1940 Act, which has
been in existence for more than six months and which has a primary purpose other
than acquiring shares of the Fund at a reduced sales charge, and the "related
parties" of such company. For purposes of this paragraph, a "related party" of a
company is: (i) any individual or other company who directly or indirectly owns,
controls, or has the power to vote five percent or more of the outstanding
voting securities of such company; (ii) any other company of which such company
directly or indirectly owns, controls, or has the power to vote five percent of
more of its outstanding voting securities; (iii) any other company under common
control with such company; (iv) any executive officer, director or partner of
such company or of a related party; and (v) any partnership of which such
company is a partner.
EXCHANGE FEATURE. Investors may exchange shares of the Fund for shares of any
other comparable series of the Trust. Shares of the Fund may be exchanged at the
net asset value plus the percentage difference between that series' sales charge
and any sales charge previously paid in connection with the shares being
exchanged. For example, if a 2% sales charge was paid on shares that are
exchanged into a series with a 3% sales charge, there would be an additional
sales charge of 1% on the exchange. Exchanges may only be made by investors in
states where shares of the other series are qualified for sale. An investor may
direct the Fund to exchange his shares by writing to the Fund at its principal
office. The request must be signed exactly as the investor's name appears on the
account, and it must also provide the account number, number of shares to be
exchanged, the name of the series to which the exchange will take place and a
statement as to whether the exchange is a full or partial redemption of existing
shares. Notwithstanding the foregoing, exchanges of shares may only be within
the same class or type of class of shares involved. For example, Investor Shares
may not be exchanged for Institutional Shares.
A pattern of frequent exchange transactions may be deemed by the Advisor to be
an abusive practice that is not in the best interests of the shareholders of the
Fund. Such a pattern may, at the discretion of the Advisor, be limited by the
Fund's refusal to accept further purchase and/or exchange orders from an
investor, after providing the investor with 60 days prior notice. The Board of
Trustees of the Trust also reserves the right to suspend or terminate, or amend
the terms of, the exchange privilege upon 60 days written notice to the
shareholders.
REDEMPTION OF SHARES
The Fund may suspend redemption privileges or postpone the date of payment (i)
during any period that the New York Stock Exchange (the "NYSE") is closed for
other than customary weekend and holiday closings, or that trading on the NYSE
is restricted as determined by the Securities and Exchange Commission (the
"Commission"); (ii) during any period when an emergency exists as defined by the
rules of the Commission as a result of which it is not reasonably 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 normally is
determined at the time regular 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, Martin
Luther King, Jr. Day, President's Day, Good Friday, Memorial Day, Fourth of
July, Labor Day, Thanksgiving Day, and Christmas Day. Any other holiday
recognized by the NYSE will be considered a business holiday on which the net
asset value of each Class of Shares of the Fund will not be calculated.
The net asset value per share of each Class of the Fund is calculated separately
by adding the value of the Fund's securities and other assets belonging to the
Fund and attributable to that Class, subtracting the liabilities charged to the
Fund and to that Class, and dividing the result by the number of outstanding
shares of such Class. "Assets belonging to" the Fund consist of the
consideration received upon the issuance of shares of the Fund together with all
net investment income; realized gains/losses and proceeds derived from the
investment thereof, including any proceeds from the sale of such investments;
any funds or payments derived from any reinvestment of such proceeds; and a
portion of any general assets of the Trust not belonging to a particular
investment Fund. Income, realized and unrealized capital gains and losses, and
any expenses of the Fund not allocated to a particular Class of the Fund will be
allocated to each Class of the Fund on the basis of the net asset value of that
Class in relation to the net asset value of the Fund. Assets belonging to the
Fund are charged with the direct liabilities of the Fund and with a share of the
general liabilities of the Trust, which are normally allocated in proportion to
the number of or the relative net asset values of all of the Trust's series at
the time of allocation or in accordance with other allocation methods approved
by the Board of Trustees. Certain expenses attributable to a particular Class of
shares (such as the distribution and service fees attributable to Investor
Shares) will be charged against that Class of shares. Certain other expenses
attributable to a particular Class of shares (such as registration fees,
professional fees, and certain printing and postage expenses) may be charged
against that Class of shares if such expenses are actually incurred in a
different amount by that Class, or if the Class receives services of a different
kind or to a different degree than other Classes, and the Board of Trustees
approves such allocation. Subject to the provisions of the Declaration of Trust,
determinations by the Board of Trustees as to the direct and allocable
liabilities, and the allocable portion of any general assets, with respect to
the Fund and the Classes of the Fund are conclusive.
In valuing the Fund's total assets, portfolio securities are generally valued at
their market value. Instruments with maturities of sixty days or less are valued
at amortized costs, which approximates market value. Securities and assets for
which representative market quotations are not readily available are valued at
fair value as determined in good faith under policies approved by the Trustees.
ADDITIONAL TAX INFORMATION
The following summarizes certain additional tax considerations generally
affecting the Fund and its shareholders that are not described in the
Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of the Fund or its shareholders. The discussion here and in the
Prospectus is not intended as a substitute for careful tax planning and is based
on tax laws and regulations that are in effect on the date hereof; such laws and
regulations may be changed by legislative, judicial, or administrative action.
Investors are advised to consult their tax advisors with specific reference to
their own tax situations.
The Fund, and any other series of the Trust, will be treated as a separate
corporate entity under the Internal Revenue 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 authorizes the issuance of shares in two or
more series. Currently, the Trust consists of two series: the Capital Management
Mid-Cap Fund and the Capital Management Small-Cap Fund. These shares are divided
into two Classes ("Institutional Shares" and "Investor Shares") as described in
the Prospectuses. 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.
FINANCIAL STATEMENTS
The audited financial statements for the fiscal year ended November 30, 1999,
including the financial highlights appearing in the Fund's Annual Report to
Shareholders, are incorporated by reference and made a part of this document.
<PAGE>
APPENDIX A
DESCRIPTION OF RATINGS
The Fund will normally be at least 90% invested in equities. As a temporary
defensive position, however, when the Advisor determines that market conditions
warrant such investments, the Fund may invest up to 100% of its assets in
investment grade bonds, U.S. Government Securities, repurchase agreements, or
money market instruments ("Investment-Grade Debt Securities"). When the Fund
invests in Investment-Grade Debt Securities as a temporary defensive measure, it
is not pursuing its investment objective. Under normal circumstances, however,
the Fund may invest in money market instruments. 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 that is rated A possesses many favorable investment attributes
and is to be considered as an upper medium grade obligation. Factors
giving security to principal and interest are considered adequate but
elements may be present which suggest a susceptibility to impairment
sometime in the future.
Baa - Debt that 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 that 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 that are rated B generally lack characteristics of a desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the security over any long period for time may be small. Bonds that are rated
Caa are of poor standing. Such securities may be in default or there may be
present elements of danger with respect to principal or interest. Bonds that are
rated Ca represent obligations that are speculative in a high degree. Such
issues are often in default or have other marked shortcomings. Bonds that 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 MID-CAP FUND
________________________________________________________________________________
a series of the Capital Management Investment Trust
Annual Report 1999
FOR THE YEAR ENDED NOVEMBER 30
INVESTMENT ADVISOR
Capital Management Associates, Inc.
140 Broadway
New York, New York 10005
CAPITAL MANAGEMENT MID-CAP FUND
107 North Washington Street
Post Office Drawer 4365
Rocky Mount, North Carolina 27803-0365
1-888-626-3863
<PAGE>
CAPITAL MANAGEMENT ASSOCIATES
INCORPORATED
140 BROADWAY NEW YORK, N.Y. 10005
INVESTMENT ADVISORS TEL: (212) 320-2000
FAX: (212) 320-2040
Dear Fellow Shareholders:
As the year, decade, century, and millennium all draw to a close, U.S.
companies continue to reel in profits at a surprising clip, and equity investors
are enjoying another year of positive returns. We are pleased to report that,
once again, your fund has participated with a return in excess of 17% for the
twelve months ended November 30.
In terms of stock market action, 1999 has turned out to be in large
measure a mirror image of 1998, and almost a repeat of 1997. The two groups,
which were the bete noire of last year, are once again leading the market
averages: these being technology and energy. We began over weighting these
groups in late 1998, and until late summer they were our largest sector
concentration. In May we developed a more positive view of the economy, which
had significant strategy implications in terms of portfolio construction. We
began to rotate toward the many depressed groups that had not participated in
the narrow advance of 1998, specifically select capital goods and basic
industries. We also felt that the odds of a Fed tightening were increasing,
which lead us to begin thinking about reducing our tech weighting.
After an unusual degree of debate and uncertainty, the Federal Reserve
has cleared the policy air (for now) with its third 25-basis-point rate hike
since midyear. Along with a similar bump up in the discount rate, the return to
a 5.5% fed funds rate completes the unwinding of the last year's easing detour
and cements a relatively high level of real short-term interest rates into the
millennium. We continue to believe that the Fed is reasonably on track toward
keeping inflation in check and thereby maintaining conditions for sustainable
economic growth. However, the economy appears to be taking its medicine well -
perhaps a little too well, and financial conditions on balance are tightening
only hesitantly.
Chances are, barring a financial bolt from the blue, the Fed will have
to tighten again at some point in the next three to six months. We do not
believe the remaining task is significant, but the Fed probably cannot remain
comfortable that tightening is complete as long as imbalances (tight labor
markets, low savings, and record current account deficit) continue to
deteriorate. Also, there is a good chance that Y2K-related distortions are
beginning to cloud assessments of underlying economic activity and inflation.
This period of uncertainty could last through much of the first quarter, perhaps
hampering the Fed's ability to discern the appropriate monetary police. As such,
significant swings in equity markets are likely to continue. Investors are
balancing the influences of earnings reports against the ongoing weakness in
bonds and concerns about inflation. Rising interest rates have contained the
performance of U.S. equities since April, and in our view the expansion in
equity valuation measures likely peaked in the first quarter of 1999 and is not
expected to be a major force in the 1999/2000 time frame.
<PAGE>
Our present investment stance is that, notwithstanding current
volatility, broader market leadership is likely to unfold into 2000. We believe
that improved, broader-based earnings, driven primarily by global growth and
less by U.S. consumer growth, are unfolding. Presently, however, the gap between
performance of the S&P 500 top 50 stocks and the overall S&P 500 is wider than
in recent years. It appears that investors continue to seek strong growth and
are willing to pay a significant premium for it as long as growth persists. In
essence, the popular averages have been supported increasingly by a diminishing
number of stocks. As noted previously, we think this narrowness will change as
earnings gains continue, but until breadth improves the upside potential of the
market is likely to be limited.
In terms of market cap, mid- and small-cap stocks continue to show more
attractive valuations that the large caps.
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 2, 1999
<PAGE>
CAPITAL MANAGEMENT MID-CAP FUND
INSTITUTIONAL SHARES
Performance Update - $250,000 Investment
For the period from January 27, 1995 (Commencement of Operations)
to November 30, 1999
------------------------------------------------------------------------
Institutional S&P 400 Russell 2500
Shares Mid-Cap Index Index
------------------------------------------------------------------------
27-Jan-95 $250,000 $250,000 $250,000
28-Feb-95 260,950 262,369 262,480
31-May-95 280,704 278,878 279,504
31-Aug-95 304,612 310,987 315,156
30-Nov-95 307,511 323,827 324,294
29-Feb-96 313,391 338,624 342,173
31-May-96 338,926 357,925 375,203
31-Aug-96 332,125 347,749 356,438
30-Nov-96 367,685 384,443 387,294
28-Feb-97 375,531 396,031 397,455
31-May-97 414,220 423,012 419,630
31-Aug-97 474,283 477,328 468,817
30-Nov-97 492,411 489,952 479,159
28-Feb-98 526,789 540,574 515,674
31-May-98 511,976 549,380 515,243
31-Aug-98 384,830 432,544 389,794
30-Nov-98 438,528 540,789 462,105
28-Feb-99 459,341 551,979 457,118
31-May-99 509,967 614,836 516,569
31-Aug-99 512,128 612,250 516,098
30-Nov-99 519,246 656,353 548,886
This graph depicts the performance of the Capital Management Mid-Cap Fund
Institutional Shares versus the S&P 400 Mid-Cap 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
- -------------------------------------------------
18.41% 12.19% 16.29%
- -------------------------------------------------
The graph assumes an initial $250,000 investment at January 27, 1995. All
dividends and distributions are reinvested.
At November 30, 1999, the value of the Capital Management Mid-Cap Fund
Institutional Shares would have grown to $519,246 - total investment return of
107.70% since January 27, 1995.
At November 30, 1999, a similar investment in the S&P 400 Mid-Cap Index would
have grown to $656,353 - total investment return of 162.54% since January 27,
1995; and a similar investment in the Russell 2500 Index would have grown to
$548,886 - total investment return of 119.55% since January 27, 1995. The Lipper
Capital Appreciation Index that was used in the prior year's annual report graph
for illustrative purposes is not used in this year's annual report graph because
the index is no longer in existence.
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 (Commencement of Operations)
to November 30, 1999
------------------------------------------------------------------------
Investor S&P 400 Russell 2500
Shares Mid-Cap Index Index
------------------------------------------------------------------------
7-Apr-95 $ 9,700 $10,000 $10,000
31-May-95 9,825 10,433 10,350
31-Aug-95 10,619 11,635 11,671
30-Nov-95 10,693 12,115 12,009
29-Feb-96 10,878 12,669 12,671
31-May-96 11,750 13,391 13,894
31-Aug-96 11,541 13,010 13,199
30-Nov-96 12,790 14,383 14,342
28-Feb-97 13,063 14,816 14,718
31-May-97 14,393 15,826 15,540
31-Aug-97 16,440 17,858 17,361
30-Nov-97 17,025 18,330 17,744
28-Feb-98 18,173 20,224 19,096
31-May-98 17,634 20,553 19,080
31-Aug-98 13,228 16,182 14,435
30-Nov-98 15,038 20,232 17,112
28-Feb-99 15,727 20,650 16,928
31-May-99 17,429 23,002 19,129
31-Aug-99 17,473 22,905 19,112
30-Nov-99 17,677 24,555 20,326
This graph depicts the performance of the Capital Management Mid-Cap Fund
Investor Shares versus the S&P 400 Mid-Cap 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 17.55% 11.39% 13.77%
- ------------------------------------------------------------------------
Maximum 3.0% Sales Load 14.02% 10.27% 13.03%
- ------------------------------------------------------------------------
The graph assumes an initial $10,000 investment at April 7, 1995 ($9,700 after
maximum sales load of 3.0%). All dividends and distributions are reinvested.
At November 30, 1999, the value of the Capital Management Mid-Cap Fund Investor
Shares would have grown to $17,677 - total investment return of 76.77% since
April 7, 1995. Without the deduction of the 3.0% maximum sales load, the value
of the Capital Management Mid-Cap Fund Investor Shares would have grown to
$18,224 - total investment return of 82.24% since April 7, 1995. The sales load
may be reduced or eliminated for larger purchases.
At November 30, 1999, a similar investment in the S&P 400 Mid-Cap Index would
have been worth $24,555 - total investment return of 145.55% since April 7,
1995; and a similar investment in the Russell 2500 Index would have grown to
$20,326 - total investment return of 103.26% since April 7, 1995. The Lipper
Capital Appreciation Index that was used in the prior year's annual report graph
for illustrative purposes is not used in this year's annual report graph because
the index is no longer in existence.
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> <C> <C>
CAPITAL MANAGEMENT MID-CAP FUND
PORTFOLIO OF INVESTMENTS
November 30, 1999
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - 88.68%
Advertising - 3.75%
(a)Outdoor Systems, Inc. .................................................. 5,750 $ 255,875
----------
Airlines - 2.80%
Southwest Airlines Co. ................................................. 11,750 190,937
----------
Computer Software & Services - 4.82%
(a)Compuware Corporation .................................................. 6,700 226,544
(a)Comverse Technology, Inc. .............................................. 850 102,744
----------
329,288
----------
Electrical Equipment - 2.62%
Avista Corporation ..................................................... 11,000 178,750
----------
Electronics - Semiconductor - 12.06%
(a)Analog Devices, Inc. ................................................... 1,700 97,750
(a)Applied Materials, Inc. ................................................ 800 78,000
Helix Technology Corporation ........................................... 3,000 121,453
(a)LSI Logic Corporation .................................................. 1,800 108,787
(a)National Semiconductor Corporation ..................................... 5,400 229,500
(a)PRI Automation, Inc. ................................................... 300 14,213
(a)Teradyne, Inc. ......................................................... 4,000 174,250
----------
823,953
----------
Financial - Banks, Commercial - 7.20%
Compass Bancshares, Inc. ............................................... 6,200 157,325
Old Kent Financial Corporation ......................................... 4,000 162,250
UnionBanCal Corporation ................................................ 3,900 172,331
----------
491,906
----------
Food - Processing - 2.82%
McCormick & Company, Incorporated ...................................... 6,000 192,375
----------
Forest Products & Paper - 3.50%
Bowater Incorporated ................................................... 3,500 171,500
Weyerhaeuser Company ................................................... 1,100 67,238
----------
238,738
----------
Machine - Diversified - 2.64%
Deere & Company ........................................................ 4,200 180,337
----------
Medical - Biotechnology - 3.03%
(a)Chiron Corporation ..................................................... 6,300 206,719
----------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
CAPITAL MANAGEMENT MID-CAP FUND
PORTFOLIO OF INVESTMENTS
November 30, 1999
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Medical Supplies - 2.94%
C. R. Bard, Inc. ....................................................... 3,700 $ 200,956
----------
Oil & Gas - Domestic - 1.78%
El Paso Energy Corporation ............................................. 3,200 121,800
----------
Oil & Gas - Equipment & Services - 12.27%
Apache Corporation ..................................................... 5,000 179,063
ENSCO International Incorporated ....................................... 9,400 188,588
Halliburton Company .................................................... 4,000 154,750
(a)Nabors Industries, Inc. ................................................ 5,900 156,719
The Williams Companies, Inc. ........................................... 4,700 158,625
----------
837,745
----------
Pharmaceuticals - 3.88%
(a)IVAX Corporation ....................................................... 13,000 264,875
----------
Publishing - 2.36%
Houghton Mifflin Company ............................................... 4,400 161,425
----------
Publishing - Printing - 2.48%
(a)Valassis Communications, Inc. .......................................... 4,300 169,312
----------
Retail - Grocery - 2.55%
Hannaford Bros. Co. .................................................... 2,400 174,450
----------
Retail - Restaurants - 2.42%
Brinker International, Inc. ............................................ 7,300 165,163
----------
Retail - Specialty Line - 2.24%
Harcourt General, Inc. ................................................. 4,600 152,662
----------
Steel - Specialty - 2.71%
Texas Industries, Inc. ................................................. 5,100 184,875
----------
Utilities - Electric - 2.26%
IDACORP, Inc ........................................................... 5,500 154,000
----------
Utilities - Gas - 2.64%
Sempra Energy .......................................................... 9,774 180,208
----------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
CAPITAL MANAGEMENT MID-CAP FUND
PORTFOLIO OF INVESTMENTS
November 30, 1999
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Utilities - Telecommunications - 2.91%
U S WEST, Inc. ......................................................... 3,200 $ 198,600
----------
Total Common Stocks (Cost $5,056,597) ............................................................ 6,054,949
----------
INVESTMENT COMPANIES - 9.21%
Evergreen Money Market Fund Institutional Money
Market Fund Institutional Service Shares ............................... 314,600 314,600
Evergreen Money Market Treasury Institutional Money
Market Fund Institutional Service Shares ............................... 314,600 314,600
----------
Total Investment Companies (Cost $629,200) ....................................................... 629,200
----------
Total Value of Investments (Cost $5,685,797 (b)) ................................... 97.89 % $6,684,149
Other Assets in Excess of Liabilities .............................................. 2.11 % 143,990
------ ----------
Net Assets .................................................................. 100.00 % $6,828,139
====== ==========
(a) Non-income producing investment.
(b) Aggregate cost for financial reporting and federal income tax purposes is the same. Unrealized appreciation
(depreciation) of investments for financial reporting and federal income tax purposes is as follows:
Unrealized appreciation .......................................................................... $1,167,757
Unrealized depreciation .......................................................................... (169,405)
----------
Net unrealized appreciation ...................................................... $ 998,352
==========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
CAPITAL MANAGEMENT MID-CAP FUND
STATEMENT OF ASSETS AND LIABILITIES
November 30, 1999
ASSETS
Investments, at value (cost $5,685,797) ...................................................................... $6,684,149
Cash ......................................................................................................... 168,710
Income receivable ............................................................................................ 5,201
----------
Total assets ............................................................................................ 6,858,060
----------
LIABILITIES
Accrued expenses ............................................................................................. 29,648
Other liabilities ............................................................................................ 273
----------
Total liabilities ....................................................................................... 29,921
----------
NET ASSETS .......................................................................................................... $6,828,139
==========
NET ASSETS CONSIST OF
Paid-in capital .............................................................................................. $5,314,995
Undistributed net realized gain on investments ............................................................... 514,792
Net unrealized oappreciation on investments .................................................................. 998,352
----------
$6,828,139
==========
INSTITUTIONAL CLASS
Net asset value, offering and redemption price per share ($5,796,478 / 345,045 shares outstanding) ........... $16.80
==========
INVESTOR CLASS
Net asset value, offering and redemption price per share ($1,031,661 / 62,862 shares outstanding) ............ $16.41
==========
Maximum offering price per share (100 / 97% of 16.41) ........................................................ $16.92
==========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
CAPITAL MANAGEMENT MID-CAP FUND
STATEMENT OF OPERATIONS
Year ended November 30, 1999
INVESTMENT INCOME
Income
Dividends ..................................................................................... $ 117,474
----------
Expenses
Investment advisory fees (note 2) ............................................................. 67,423
Fund administration fees (note 2) ............................................................. 8,430
Distribution and service fees - Investor Class (note 3) ....................................... 10,519
Custody fees .................................................................................. 3,205
Registration and filing administration fees (note 2) .......................................... 7,919
Fund accounting fees (note 2) ................................................................. 36,000
Audit fees .................................................................................... 10,300
Legal fees .................................................................................... 6,667
Securities pricing fees ....................................................................... 2,424
Shareholder recordkeeping fees ................................................................ 9,000
Other accounting fees (note 2) ................................................................ 3,731
Shareholder servicing expenses ................................................................ 2,842
Registration and filing expenses .............................................................. 13,697
Printing expenses ............................................................................. 7,000
Trustee fees and meeting expenses ............................................................. 8,468
Other operating expenses ...................................................................... 2,460
----------
Total expenses .......................................................................... 200,085
----------
Less:
Expense reimbursements (note 2) .................................................... (21,045)
Investment advisory fees waived (note 2) ........................................... (67,423)
----------
Net expenses ............................................................................ 111,617
----------
Net investment income .............................................................. 5,857
----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from investment transactions ..................................................... 603,046
Increase in unrealized appreciation on investments ................................................. 500,396
----------
Net realized and unrealized gain on investments ............................................... 1,103,442
----------
Net increase in net assets resulting from operations .................................... $1,109,299
==========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
CAPITAL MANAGEMENT MID-CAP FUND
STATEMENTS OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
Year ended Year ended
November 30, November 30,
1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income (loss) ........................................................ $ 5,857 $ (3,416)
Net realized gain (loss) from investment transactions ............................... 603,046 (70,827)
Increase (decrease) in unrealized appreciation on investments ....................... 500,396 (795,106)
---------- ----------
Net increase (decrease) in net assets resulting from operations ................. 1,109,299 (869,349)
---------- ----------
Distributions to shareholders from
Net investment income - Institutional Class ......................................... (8,499) 0
Net realized gain from investment transactions - Institutional Class ................ 0 (678,656)
Net realized gain from investment transactions - Investor Class ..................... 0 (244,032)
---------- ----------
Decrease in net assets resulting from distributions ............................. (8,499) (922,688)
---------- ----------
Capital share transactions
(Decrease) increase in net assets resulting from capital share transactions (a) ..... (969,079) 1,303,097
---------- ----------
Total increase (decrease) in net assets .................................... 131,721 (488,940)
NET ASSETS
Beginning of year ........................................................................ 6,696,418 7,185,358
---------- ----------
End of year .............................................................................. $6,828,139 $6,696,418
========== ==========
(a) A summary of capital share activity follows:
--------------------------------------------------------------------------
Year ended Year ended
November 30, 1999 November 30, 1998
Shares Value Shares Value
--------------------------------------------------------------------------
- -----------------------------------------------
INSTITUTIONAL CLASS
- -----------------------------------------------
Shares sold ............................................. 68,421 $1,118,601 18,735 $ 299,573
Shares issued for reinvestment of distributions ......... 529 8,501 41,056 678,656
---------- ---------- ---------- ----------
68,950 1,127,102 59,791 978,229
Shares redeemed ......................................... (70,880) (1,111,573) (4,650) (73,195)
---------- ---------- ---------- ----------
Net (decrease) increase ............................ (1,930) $ 15,529 55,141 $ 905,034
========== ========== ========== ==========
- -----------------------------------------------
INVESTOR CLASS
- -----------------------------------------------
Shares sold ............................................. 2,985 $ 45,557 57,629 $ 941,702
Shares issued for reinvestment of distributions ......... 0 0 14,339 234,590
---------- ---------- ---------- ----------
2,985 45,557 71,968 1,176,292
Shares redeemed ......................................... (66,673) (1,030,165) (49,270) (778,229)
---------- ---------- ---------- ----------
Net (decrease) increase ............................ (63,688) $ (984,608) 22,698 $ 398,063
========== ========== ========== ==========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <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 of
Year ended Year ended Year ended Year ended operations) to
Nov. 30, Nov. 30, Nov. 30, Nov. 30, Nov. 30,
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ...................... $14.21 $18.20 $13.99 $12.16 $10.00
Income from investment operations
Net investment income .............................. 0.03 0.03 0.01 0.23 0.20
Net realized and unrealized gain (loss)
on investments ................................... 2.58 (1.70) 4.60 2.08 2.10
---------- ---------- ---------- ---------- ----------
Total from investment operations ............... 2.61 (1.67) 4.61 2.31 2.30
---------- ---------- ---------- ---------- ----------
Distributions to shareholders from
Net investment income .............................. (0.02) 0.00 (0.04) (0.26) (0.14)
Distributions in excess of net investment income ... 0.00 0.00 (0.02) 0.00 0.00
Net realized gain from investment transactions ..... 0.00 (2.32) (0.34) (0.22) 0.00
---------- ---------- ---------- ---------- ----------
Total distributions ............................ (0.02) (2.32) (0.40) (0.48) (0.14)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period ............................ $16.80 $14.21 $18.20 $13.99 $12.16
========== ========== ========== ========== ==========
Total return (a) .......................................... 18.41 % (10.94)% 33.92 % 19.57 % 23.00 %
========== ========== ========== ========== ==========
Ratios/supplemental data
Net assets, end of period ............................ $5,796,478 $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 ...... 2.81 % 2.60 % 2.92 % 3.70 % 7.20 %(b)
After expense reimbursements and waived fees ....... 1.50 % 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 ...... (1.07)% (0.93)% (1.34)% (1.77)% (4.45)%(b)
After expense reimbursements and waived fees ....... 0.24 % 0.17 % 0.08 % 1.94 % 2.44 %(b)
Portfolio turnover rate .............................. 114.00 % 89.04 % 66.30 % 82.30 % 47.74 %
(a) Total return does not reflect payment of a sales charge.
(b) Annualized.
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
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 Year ended operations) to
Nov. 30, Nov. 30, Nov. 30, Nov. 30, Nov. 30,
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ...................... $13.96 $18.04 $13.96 $12.09 $11.07
Income from investment operations
Net investment (loss) income ....................... (0.11) (0.09) (0.05) 0.24 0.11
Net realized and unrealized gain (loss)
on investments ................................... 2.56 (1.67) 4.53 2.06 1.02
---------- ---------- ---------- ---------- ----------
Total from investment operations ............... 2.45 (1.76) 4.48 2.30 1.13
---------- ---------- ---------- ---------- ----------
Distributions to shareholders from
Net investment income .............................. 0.00 0.00 (0.03) (0.21) (0.11)
Distributions in excess of net investment income ... 0.00 0.00 (0.03) 0.00 0.00
Net realized gain from investment transactions ..... 0.00 (2.32) (0.34) (0.22) 0.00
---------- ---------- ---------- ---------- ----------
Total distributions ............................ 0.00 (2.32) (0.40) (0.43) (0.11)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period ............................ $16.41 $13.96 $18.04 $13.96 $12.09
========== ========== ========== ========== ==========
Total return (a) .......................................... 17.55 % (11.67)% 33.11 % 19.61 % 10.24 %
========== ========== ========== ========== ==========
Ratios/supplemental data
Net assets, end of period ............................ $1,031,661 $1,766,893 $1,873,942 $ 746,136 $ 550,814
========== ========== ========== ========== ==========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees ...... 3.56 % 3.35 % 3.71 % 4.45 % 7.18 %(b)
After expense reimbursements and waived fees ....... 2.25 % 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 ...... (1.82)% (1.67)% (2.10)% (2.50)% (4.23)%(b)
After expense reimbursements and waived fees ....... (0.51)% (0.57)% (0.63)% 1.95 % 1.89 %(b)
Portfolio turnover rate .............................. 114.00 % 89.04 % 66.30 % 82.30 % 47.74 %
(a) Total return does not reflect payment of a sales charge.
(b) Annualized.
See accompanying notes to financial statements
</TABLE>
<PAGE>
CAPITAL MANAGEMENT MID-CAP FUND
NOTES TO FINANCIAL STATEMENTS
November 30, 1999
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
$0.01 par value beneficial interest shares that are authorized, 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 - The Fund is considered a personal
holding company as defined under Section 542 of the Internal
Revenue Code since 50% of the value of the Fund's shares were
owned directly or indirectly by five or fewer individuals at
certain times during the last year. As a personal holding
company, the Fund is subject to federal income taxes on
undistributed personal holding company income at the maximum
individual income tax rate. 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.
(Continued)
<PAGE>
CAPITAL MANAGEMENT MID-CAP FUND
NOTES TO FINANCIAL STATEMENTS
November 30, 1999
As a result of the Fund's operating net investment loss, a
reclassification adjustment of $2,644 has been made on the
statement of assets and liabilities to decrease accumulated
net investment loss, bringing it to zero, and decrease
undistributed net realized gain on investments.
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.
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 estimates.
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 $67,423 ($0.17 per share) and reimbursed $21,045 of the
operating expenses incurred by the Fund for the year ended November 30,
1999.
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 0.125% 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 $4,000 per month. The Administrator also charges
the Fund for certain expenses involved with the daily valuation of
portfolio securities.
(Continued)
<PAGE>
CAPITAL MANAGEMENT MID-CAP FUND
NOTES TO FINANCIAL STATEMENTS
November 30, 1999
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.
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,
1999, the Distributor retained sales charges in the amount of $168.
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 $10,519 of such
expenses under the Plan for the year ended November 30, 1999.
NOTE 4 - PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments, other than short-term investments,
aggregated $6,902,859 and $7,697,225 respectively, for the year ended
November 30, 1999.
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. The total $0.02 per share
distributions for the year ended November 30, 1999, represents ordinary
distributions. 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 (the "Fund")(a portfolio of Capital Management
Investment Trust), including the portfolio of investments, as of November 30,
1999, and the related statement of operations for the year then ended, the
statement 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
audits.
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, 1999, 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, such 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, 1999, 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
December 17, 1999
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
CAPITAL MANAGEMENT SMALL-CAP FUND
March 31, 2000
A series of the
CAPITAL MANAGEMENT INVESTMENT TRUST
Capital Management Associates, Inc.
140 Broadway
New York, New York 10005
Telephone 1-888-626-3863
TABLE OF CONTENTS
PAGE
INVESTMENT OBJECTIVE AND POLICIES............................................ 2
INVESTMENT LIMITATIONS....................................................... 3
MANAGEMENT AND SERVICE PROVIDERS............................................. 5
ADDITIONAL INFORMATION ON PERFORMANCE........................................ 9
PORTFOLIO TRANSACTIONS...................................................... 10
SPECIAL SHAREHOLDER SERVICES................................................ 12
PURCHASE OF SHARES.......................................................... 13
REDEMPTION OF SHARES........................................................ 16
NET ASSET VALUE............................................................. 16
ADDITIONAL TAX INFORMATION.................................................. 16
CAPITAL SHARES AND VOTING................................................... 18
FINANCIAL STATEMENTS........................................................ 18
APPENDIX A...................................................................19
This Statement of Additional Information (the "SAI") is meant to be read in
conjunction with the Prospectuses of the Capital Management Small-Cap Fund (the
"Fund"), dated March 31, 2000, relating to the Fund's Institutional Shares and
Investor Shares and hereby incorporates by reference the Prospectuses in their
entirety. Because this SAI is not itself a prospectus, no investment in shares
of the Fund should be made solely upon the information contained herein. Copies
of the Prospectuses for the Investor Shares and Institutional Shares of the Fund
and Annual Reports may be obtained at no charge by writing or calling the Fund
at the address or phone number shown above. Capitalized terms used but not
defined herein have the same meanings as in each Prospectus.
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The Capital Management Small-Cap Fund is a diversified series of the Capital
Management Investment Trust (the "Trust"), a registered open-end management
company. The Trust was organized on October 18, 1994, as a Massachusetts
business trust. The primary investment strategies and risks of the Fund are
described in the Prospectus for each class of shares of the Fund. In addition to
the principal investment strategies discussed in the Fund's Prospectuses, the
Fund may also employ the use of the financial instruments described below in
order to achieve its objective. The strategies set forth below are not principle
strategies of the Fund.
REPURCHASE AGREEMENTS. The Fund may acquire U.S. Government obligations or
corporate debt securities subject to repurchase agreements. A repurchase
agreement involves the purchase by the Fund of a security (normally a U.S.
Treasury obligation) and an agreement to resell the security at the same price,
plus specified interest to the counter-party (normally a member bank of the
Federal Reserve or a registered Government Securities dealer). Repurchase
agreements are considered "loans" under the Investment Company Act of 1940, as
amended (the "1940 Act"), collateralized by the underlying security. The Trust
will implement procedures to monitor on a continuous basis the value of the
collateral serving as security for repurchase obligations. Additionally, the
Advisor to the Fund, Capital Management Associates, Inc., will consider the
creditworthiness of the counter-parties with which it transacts these repurchase
agreements. If the counter-party fails to pay the agreed upon resale price on
the delivery date, the Fund will retain or attempt to dispose of the collateral.
The Fund's risk is that such default may include any decline in value of the
collateral to an amount which is less than 100% of the repurchase price, any
costs of disposing of such collateral, and any loss resulting from any delay in
foreclosing on the collateral. The Fund will not enter into any repurchase
agreement that will cause more than 15% of its net assets to be invested in
repurchase agreements extending beyond seven days, to the extent such agreements
are deemed illiquid securities.
MONEY MARKET INSTRUMENTS. Money market instruments may include U.S. Government
obligations or corporate debt obligations (including those subject to repurchase
agreements), provided that they mature in thirteen months or less from the date
of acquisition and are otherwise eligible for purchase by the Fund. Money market
instruments also may include Banker's Acceptances and Certificates of Deposit of
domestic branches of U.S. banks, Commercial Paper, and Variable Amount Demand
Master Notes ("Master Notes"). BANKER'S ACCEPTANCES are time drafts drawn on and
"accepted" by a bank. When a bank "accepts" such a time draft, it assumes
liability for its payment. When the Fund acquires a Banker's Acceptance, the
bank that "accepted" the time draft is liable for payment of interest and
principal when due. The Banker's Acceptance carries the full faith and credit of
such bank. A CERTIFICATE OF DEPOSIT ("CD") is an unsecured, interest bearing
debt obligation of a bank. COMMERCIAL PAPER is an unsecured, short-term debt
obligation of a bank, corporation, or other borrower. Commercial Paper maturity
generally ranges from two to 270 days and is usually sold on a discounted basis
rather than as an interest-bearing instrument. The Fund will invest in
Commercial Paper only if it is rated in one of the top two rating categories by
Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's Ratings Group
("S&P"), Fitch Investors Service, Inc. ("Fitch"), or Duff & Phelps ("D&P"), or
if not rated, of equivalent quality in the Advisor's opinion. Commercial Paper
may include Master Notes of the same quality. MASTER NOTES are unsecured
obligations which are redeemable upon demand of the holder and which permit the
investment of fluctuating amounts at varying rates of interest. Master Notes are
acquired by the Fund only through the Master Note program of the Fund's
custodian bank, acting as administrator thereof. The Advisor will monitor, on a
continuous basis, the earnings' power, cash flow, and other liquidity ratios of
the issuer of a Master Note held by the Fund.
ILLIQUID INVESTMENTS. The Fund may invest up to 15% of its net assets in
illiquid securities, which are investments that cannot be sold or disposed of in
the ordinary course of business within seven days at approximately the prices at
which they are valued. Under the supervision of the Board of Trustees, the
Advisor determines the liquidity of the Fund's investments, and through reports
from the Advisor, the Board monitors investments in illiquid instruments. In
determining the liquidity of the Fund's investments, the Advisor may consider
various factors including: (1) the frequency of trades and quotations; (2) the
number of dealers and prospective purchasers in the marketplace; (3) dealer
undertakings to make a market; (4) the nature of the security (including any
demand or tender features); and (5) the nature of the marketplace for trades
(including the ability to assign or offset the Fund's rights and obligations
relating to the investment). If through a change in values, net assets, or other
circumstances, the Fund were in a position where more than 15% of its net assets
were invested in illiquid securities, it would seek to take appropriate steps to
protect liquidity.
The investments in illiquid securities may involve a high degree of business and
financial risk and may result in substantial losses. Because of the illiquid
nature of these securities, the Fund may take longer to liquidate these
positions than would be the case for other more liquid securities. The Fund's
investment in these illiquid securities is subject to the risk that should the
Fund desire to sell any of these securities when a ready buyer is not available
at a price that is deemed to be representative of their fair market value, the
value of the Fund's net assets could be adversely affected.
Historically, illiquid securities have included securities subject to
contractual or legal restrictions on resale because they have not been
registered under the 1933 Act, securities that are otherwise not readily
marketable and repurchase agreements having a maturity of longer than seven
days. Securities which have not been registered under the 1933 Act are referred
to as private placements or restricted securities and are purchased directly
from the issuer or in the secondary market. Mutual funds do not typically hold a
significant amount of these restricted or other illiquid securities because of
the potential for delays on resale and uncertainty in valuation. Limitations on
resale may have an adverse effect on the marketability of portfolio securities
and a mutual fund might be unable to dispose of restricted or other illiquid
securities promptly or at reasonable prices and might thereby experience
difficulty satisfying redemptions within seven days. A mutual fund might also
have to register such restricted securities in order to dispose of them
resulting in additional expense and delay. Adverse market conditions could
impede such a public offering of securities.
In recent years, however, a large institutional market has developed for certain
securities that are not registered under the 1933 Act including repurchase
agreements, commercial paper, foreign securities, municipal securities, and
corporate bonds and notes. Institutional investors depend on an efficient
institutional market in which the unregistered security can be readily resold or
on an issuer's ability to honor a demand for repayment. The fact that there are
contractual or legal restrictions on resale to the general public or to certain
institutions may not be indicative of the liquidity of such investments.
Rule 144A Securities will be considered illiquid and therefore subject to a
Portfolio's limit on the purchase of illiquid securities unless the Board or its
delegates determines that the Rule 144A Securities are liquid. In reaching
liquidity decisions, the Board of Trustees and its delegates may consider, inter
alia, the following factors: (1) the unregistered nature of the security; (2)
the frequency of trades and quotes for the security; (3) the number of dealers
wishing to purchase or sell the security and the number of other potential
purchasers; (4) dealer undertakings to make a market in the security; and (5)
the nature of the security and the nature of the marketplace trades (e.g., the
time needed to dispose of the security, the method of soliciting offers, and the
mechanics of the transfer).
FORWARD COMMITMENT & WHEN-ISSUED SECURITIES. The Fund may purchase securities on
a when-issued basis or for settlement at a future date if the Fund holds
sufficient assets to meet the purchase price. In such purchase transactions, the
Fund will not accrue interest on the purchased security until the actual
settlement. Similarly, if a security is sold for a forward date, the Fund will
accrue the interest until the settlement of the sale. When-issued security
purchases and forward commitments have a higher degree of risk of price movement
before settlement due to the extended time period between the execution and
settlement of the purchase or sale. As a result, the exposure to the
counterparty of the purchase or sale is increased. Although the Fund would
generally purchase securities on a forward commitment or when-issued basis with
the intention of taking delivery, the Fund may sell such a security prior to the
settlement date if the Advisor felt such action was appropriate. In such a case,
the Fund could incur a short-term gain or loss.
INVESTMENT LIMITATIONS
The Fund has adopted the following fundamental investment limitations, which
cannot be changed without approval by holders of a majority of the outstanding
voting shares of the Fund. A "majority" for this purpose means the lesser of (i)
67% of the Fund's outstanding shares represented in person or by proxy at a
meeting at which more than 50% of its outstanding shares are represented, or
(ii) more than 50% of its outstanding shares. Unless otherwise indicated,
percentage limitations apply at the time of purchase.
As a matter of fundamental policy, the Fund may not:
1. Issue senior securities, borrow money, or pledge its assets, except that it
may borrow from banks as a temporary measure (a) for extraordinary or
emergency purposes, in amounts not exceeding 5% of its total assets or (b)
to meet redemption requests in amounts not exceeding 33 1/3% of its total
assets. The Fund will not make any investments if borrowing exceeds 5% of
its total assets until such time as total borrowing represents less than 5%
of Fund assets;
2. With respect to 75% of its total assets, invest more than 5% of the value
of its total assets in the securities of any one issuer or purchase more
than 10% of the outstanding voting securities of any class of securities of
any one issuer (except that securities of the U.S. government, its
agencies, and instrumentalities are not subject to this limitation);
3 Invest 25% or more of the value of its total assets in any one industry or
group of industries (except that securities of the U.S. Government, its
agencies, and instrumentalities are not subject to this limitation);
4. Invest for the purpose of exercising control or management of another
issuer;
5. Purchase or sell commodities or commodities contracts; real estate
(including limited partnership interests, but excluding readily marketable
interests in real estate investment trusts or other securities secured by
real estate or interests therein or readily marketable securities issued by
companies that invest in real estate or interests therein);
6. Underwrite securities issued by others except to the extent that the
disposition of portfolio securities, either directly from an issuer or from
an underwriter for an issuer, may be deemed to be an underwriting under the
federal securities laws;
7. Participate on a joint or joint and several basis in any trading account in
securities;
8. Invest its assets in the securities of one or more investment companies
except to the extent permitted by the 1940 Act; or
9. Make loans of money or securities, except that the Fund may invest in
repurchase agreements, money market instruments, and other debt securities.
The following investment limitations are not fundamental and may be changed
without shareholder approval. As a matter of non-fundamental policy, the Fund
may not:
1. Invest in securities of issuers that have a record of less than three years
of continuous operation (including predecessors and, in the case of bonds,
guarantors) if more than 5% of its total assets would be invested in such
securities;
2. Invest more than 15% of its net assets in illiquid securities. For this
purpose, illiquid securities include, among others, (a) securities for
which no readily available market exists or which have legal or contractual
restrictions on resale, (b) fixed-time deposits that are subject to
withdrawal penalties and have maturities of more than seven days, and (c)
repurchase agreements not terminable within seven days;
3. Invest in the securities of any issuer if those Officers or Trustees of the
Trust and those Officers and Directors of the Advisor who individually own
more than 1/2 of 1% of the outstanding securities of such issuer together
own more than 5% of such issuer's securities;
4. Make short sales of securities or maintain a short position, except short
sales "against the box." (A short sale is made by selling a security the
Fund does not own. A short sale is "against the box" to the extent that the
Fund contemporaneously owns or has the right to obtain at no additional
cost securities identical to those sold short.) While the Fund has reserved
the right to make short sales "against the box," the Advisor has no present
intention of engaging in such transactions at this time or during the
coming year;
5. Purchase foreign securities other than those traded on domestic U.S.
exchanges;
6. Write, purchase, or sell puts, calls, straddles, spreads, or combinations
thereof, or futures contracts or related options, except to the extent
permitted by the Fund's Prospectus or Statement of Additional Information,
as may be amended from time to time; or
7. Purchase or sell interests in oil, gas, or other mineral exploration or
development programs or leases (although it may invest in readily
marketable securities of issuers that invest in or sponsor such programs or
leases), except to the extent permitted by the Fund's Prospectus or
Statement of Additional Information, as may be amended from time to time.
MANAGEMENT AND SERVICE PROVIDERS
The Trust's Board of Trustees (the "Trustees") is responsible for the management
and supervision of the Fund. The Trustees approve all significant agreements
between the Trust, on behalf of the Fund, and those companies that furnish
services to the Fund. This section of the Statement of Additional Information
provides the persons who serve as Trustees and Officers to the Trust and Fund,
respectively, as well as the entities that provide services to the Fund.
TRUSTEES AND OFFICERS. Following are the Trustees and Officers of the Trust,
their age, their present position with the Trust or the Fund, and their
principal occupation during the past five years. Those Trustees who are
"interested persons" (as defined in the 1940 Act) by virtue of their affiliation
with either the Trust or the Advisor, are noted by an asterisk (*). Messrs.
David V. Shields and Joseph V. Shields, Jr. are brothers.
<TABLE>
<S> <C> <C>
- --------------------------------------------------- ----------------------- ---------------------------------------------------
Name, Age, Position(s) with Position with Principal Occupation(s)
Fund and/or Trust, and Address The Fund During Past 5 Years
- --------------------------------------------------- ----------------------- ---------------------------------------------------
Lucius E. Burch, III, 57 Trustee Chairman and Chief Executive Officer
438 Rosemeade Lane Massey Burch Investment Group, Inc.
Naples, Florida 33999 (venture capital firm)
Nashville, Tennessee
- --------------------------------------------------- ----------------------- ---------------------------------------------------
George S. Reichenbach, 70 Trustee Managing Director
123 West Street Advent International Corporation
Carlisle, Massachusetts 01741 (venture capital firm)
Boston, Massachusetts
- --------------------------------------------------- ----------------------- ---------------------------------------------------
Thomas A. Saunders, III, 62 Trustee General Partner
667 Madison Avenue Saunders Karp & Company
21st Floor (merchant bank)
New York, New York 10021 New York, New York
- --------------------------------------------------- ----------------------- ---------------------------------------------------
David V. Shields, 59 Trustee* Managing Director
140 Broadway Capital Management Associates, Inc.
New York, New York 10005 (Advisor to the Fund)
New York, New York;
Managing Director
Shields & Company
(Distributor of the Fund)
New York, New York
- --------------------------------------------------- ----------------------- ---------------------------------------------------
Joseph V. Shields, Jr., 60 Chairman & Trustee* Chairman and Chief Executive Officer
140 Broadway Capital Management Associates, Inc.
New York, New York 10005 (Advisor to the Fund)
New York, New York;
Managing Director
Shields & Company
(Distributor to the Fund)
New York, New York
- --------------------------------------------------- ----------------------- ---------------------------------------------------
Anthony J. Walton 56 Trustee Chief Executive Officer
230 Park Avenue Armstrong Holdings Corporation
Suite 1440 (investment and corporate finance advisory firm)
New York, New York 10169 New York, New York, since 1995;
Vice Chairman
Petsec Energy, Inc.
(exploration and production company), Sydney,
Australia, and Lafayette, Louisiana, since
1995; previously
Chief Executive Officer
Llama Company
Fayetteville, Arkansas
- --------------------------------------------------- ----------------------- ---------------------------------------------------
C. Frank Watson, III, 29 Secretary President
105 North Washington Street The Nottingham Company
Rocky Mount, North Carolina 27802 (Administrator to the Fund)
Rocky Mount, North Carolina
- --------------------------------------------------- ----------------------- ---------------------------------------------------
Julian G. Winters, 31 Treasurer Legal and Compliance Director
105 North Washington Street The Nottingham Company
Rocky Mount, North Carolina 27802 (Administrator to the Fund)
Rocky Mount, North Carolina since 1996; previously
Operations Manager, Tar Heel
Medical, Nashville, North Carolina
- --------------------------------------------------- ----------------------- ---------------------------------------------------
Joseph A. Zock, 45 Vice-President Senior Vice President
140 Broadway Capital Management Associates, Inc.
New York, New York 10005 (Advisor to the Fund)
New York, New York
- --------------------------------------------------- ----------------------- ---------------------------------------------------
</TABLE>
COMPENSATION. Trustees and Officers of the Trust who are interested persons of
the Trust or the Advisor will receive no salary or fees from the Trust. Other
Trustees will receive $2,000 each year plus $250 per fund per meeting attended
in person and $100 per fund per meeting attended by telephone. The Trust will
also reimburse each Trustee for his or her travel and other expenses relating to
attendance at such meetings.*
<TABLE>
<S> <C> <C> <C> <C>
- ------------------------------- -------------------- ------------------------ ---------------------- ---------------------------
Total Compensation From
Aggregate Estimated Annual Fund and Fund Complex
Compensation Pension or Retirement Benefits Upon Paid to Directors
Name of Person From the Fund Benefits Retirement
- ------------------------------- -------------------- ------------------------ ---------------------- ---------------------------
Lucius E. Burch, III $2,200 None None $4,600
- ------------------------------- -------------------- ------------------------ ---------------------- ---------------------------
George S. Reichenbach $1,450 None None $3,100
- ------------------------------- -------------------- ------------------------ ---------------------- ---------------------------
Thomas A. Saunders, III $2,350 None None $4,800
- ------------------------------- -------------------- ------------------------ ---------------------- ---------------------------
David V. Shields None None None None
- ------------------------------- -------------------- ------------------------ ---------------------- ---------------------------
Joseph V. Shields, Jr. None None None None
- ------------------------------- -------------------- ------------------------ ---------------------- ---------------------------
Anthony J. Walton $2,450 None None $5,100
- ------------------------------- -------------------- ------------------------ ---------------------- ---------------------------
</TABLE>
*Figures are for the fiscal period ended November 30, 1999.
PRINCIPAL HOLDERS OF VOTING SECURITIES. As of March 17, 2000, 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. 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 17, 2000.
INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
Name and Address of Amount and Nature of
BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT
- --------------------------------------------------------------------------------
Alex Brown LLC 17,519.271 shares 68.474%*
fbo Parker Trust
P.O. Box 1346
Baltimore, Maryland 21203
Capital Management Associates, Inc. 8,056.891 shares 31.490%*
140 Broadway
New York, New York 10005
Baltimore, Maryland 21203
INVESTOR SHARES
- --------------------------------------------------------------------------------
Name and Address of Amount and Nature of
BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT
- --------------------------------------------------------------------------------
Capital Management Associates, Inc. 5,264.212 shares 100.000%*
140 Broadway
New York, New York 10005
Baltimore, Maryland 21203
* Deemed a "control person" of the Fund as defined by applicable SEC
regulations.
INVESTMENT ADVISOR. Information about Capital Management Associates, Inc. (the
"Advisor"), 140 Broadway, New York, New York 10005 and its duties and
compensation as Advisor is contained in the Prospectus. The Advisor supervises
the Fund's investments pursuant to an Investment Advisory Agreement (the
"Advisory Agreement"). The Advisory Agreement is effective for a one-year period
and will be renewed thereafter only so long as such renewal and continuance is
specifically approved at least annually by the Board of Trustees or by vote of a
majority of the Fund's outstanding voting securities, provided the continuance
is also approved by a majority of the Trustees who are not parties to the
Advisory Agreement or interested persons of any such party. The Advisory
Agreement is terminable without penalty on 60-days' notice by the Board of
Trustees of the Trust or by vote of a majority of the outstanding voting
securities of the Fund. The Advisory Agreement provides that it will terminate
automatically in the event of its assignment.
As compensation for its services to the Fund, the Advisor will receive a monthly
management fee based on the Fund's daily net assets at the annual rate of 1.00%
of the first $100 million of the Fund's net assets, 0.90% of the next $150
million, 0.85% of the next $250 million, and 0.80% of all assets over 500
million. For the fiscal period ended November 30, 1999, the Advisor waived all
of its investment advisory fees of $1,608 and reimbursed $84,291 of the Fund's
expenses.
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; from a
loss resulting from willful misfeasance, bad faith, or gross negligence on the
part of the Advisor in the performance of its duties; or from its reckless
disregard of its duties and obligations under the Agreement.
The employees of the Advisor control the Advisor. Affiliates of the Advisor also
control the Distributor.
ADMINISTRATOR. The Trust has entered into a Fund Accounting and Compliance
Administration Agreement with The Nottingham Company (the "Administrator"), 105
North Washington Street, Post Box 69, Rocky Mount, North Carolina 27802-0069,
pursuant to which the Administrator receives a fund administration fee at the
following annual rates: on the first $50 million of the Fund's net assets,
0.20%; on the next $50 million, 0.175%; on all assets over $100 million, 0.15%.
In addition, the Administrator currently receives a monthly fund accounting 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 charges a minimum fee of $4,000 per month for all of its fees
taken in the aggregate, analyzed monthly. For the fiscal period ended November
30, 1999, the Administrator received $30,123 (after waivers of $1,519) in such
fees. The Administrator also charges the Trust for certain costs involved with
the daily valuation of investment securities and is reimbursed for out-of-pocket
expenses.
The Administrator will perform the following services for the Fund: (1)
coordinate with the Custodian and monitor the services it provides to the Fund;
(2) coordinate with and monitor any other third parties furnishing services to
the Fund; (3) provide the Fund with necessary office space, telephones, and
other communications facilities and personnel competent to perform
administrative and clerical functions for the Fund; (4) supervise the
maintenance by third parties of such books and records of the Fund as may be
required by applicable federal or state law; (5) prepare or supervise the
preparation by third parties of all federal, state, and local tax returns and
reports of the Fund required by applicable law; (6) prepare and, after approval
by the Trust, file and arrange for the distribution of proxy materials and
periodic reports to shareholders of the Fund as required by applicable law; (7)
prepare and, after approval by the Trust, arrange for the filing of such
registration statements and other documents with the Securities and Exchange
Commission and other federal and state regulatory authorities as may be required
by applicable law; (8) review and submit to the Officers of the Trust for their
approval invoices or other requests for payment of Fund expenses and instruct
the Custodian to issue checks in payment thereof; and (9) take such other action
with respect to the Fund as may be necessary in the opinion of the Administrator
to perform its duties under the agreement. The Administrator also provides
certain accounting and pricing services for the Fund.
TRANSFER AGENT. The Trust has entered into a Dividend Disbursing and Transfer
Agent Agreement with NC Shareholder Services, LLC (the "Transfer Agent"), a
North Carolina limited liability company, to serve as transfer, dividend paying,
and shareholder servicing agent for the Fund. The Transfer Agent is compensated
for its services based upon a $15 fee per shareholder per year, subject to a
minimum fee of $750 per month. The address of the Transfer Agent is 107 North
Washington Street, Post Office Box 4365, Rocky Mount, North Carolina 27803-0365.
DISTRIBUTOR. Shields & Company (the "Distributor") is the principal underwriter
and distributor of Fund shares pursuant to a Distribution Agreement with the
Trust. The Distributor, which is affiliated with the Advisor, serves as
exclusive agent for the distribution of the shares of the Fund. The Distributor
may sell such shares to or through qualified securities dealers or others. The
Distributor receives commissions consisting of that portion of the sales charge
for Investor Shares remaining after the discounts which it allows to dealers.
For the fiscal period ended November 30, 1999, no sales charges were paid on the
sale of Investor Shares.
J.V. Shields, Jr. and David V. Shields, affiliated persons of the Fund, are also
affiliated persons of the Advisor and the Distributor.
The Fund has adopted an Amended and Restated 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. It is expected that the Plan will be approved by shareholders at a
shareholder meeting to be held on April 27, 2000.
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 period ended November 30, 1999,
the Fund incurred distribution and service fees under the Plan in the amount of
$375.
The Distribution Plan is of a type known as a "compensation" plan because
payments are made for services rendered to the Fund with respect to Investor
Shares regardless of the level of expenditures by the Distributors. The Trustees
will, however, take into account such expenditures for purposes of reviewing
operations under the Distribution Plan and in connection with their annual
consideration of the Plan's renewal. The Distributors have indicated that they
expect their expenditures to include, without limitation: (a) the printing and
mailing of Fund prospectuses, statements of additional information, any
supplements thereto, and shareholder reports for prospective Contract owners
with respect to the Investor Shares of the Fund; (b) those relating to the
development, preparation, printing, and mailing of advertisements, sales
literature, and other promotional materials describing and/or relating to the
Investor Shares of the Fund; (c) holding seminars and sales meetings designed to
promote the distribution of Fund Investor Shares; (d) obtaining information and
providing explanations to wholesale and retail distributors of Contracts
regarding Fund investment objectives and policies and other information about
the Fund and its Funds, including the performance of the Funds; (e) training
sales personnel regarding the Investor Shares of the Fund; and (f) financing any
other activity that the Distributors determine is primarily intended to result
in the sale of Investor Shares.
CUSTODIAN. First Union National Bank of North Carolina (the "Custodian"), Two
First Union Center, Charlotte, North Carolina 28288-1151, serves as custodian
for the Fund's assets. The Custodian acts as the depository for the Fund,
safekeeps its portfolio securities, collects all income and other payments with
respect to portfolio securities, disburses monies at the Fund's request, and
maintains records in connection with its duties as Custodian. For its services
as Custodian, the Custodian is entitled to receive from the Fund an annual fee
based on the average net assets of the Fund held by the Custodian.
INDEPENDENT AUDITORS. The Board of Trustees of the Trust has selected the firm
of Deloitte & Touche LLP, Princeton Forrestal Village, 116-300 Village
Boulevard, Princeton, New Jersey 08540, to serve as independent auditors for the
Fund for the current fiscal year and to audit the annual financial statements of
the Fund, prepare the Fund's federal and state tax returns, and consult with the
Fund on matters of accounting and federal and state income taxation.
Independent auditors audit the financial statements of the Fund at least once
each year. Shareholders will receive annual audited and semi-annual (unaudited)
reports when published and written confirmation of all transactions in their
account. A copy of the most recent Annual Report will accompany the SAI whenever
a shareholder or a prospective investor requests it.
LEGAL COUNSEL. Dechert Price & Rhoads serves as legal counsel to the Trust and
the Fund.
CODE OF ETHICS. The Trust, the Advisor, and the Distributor each have adopted a
code of ethics, as required by applicable law, which is designed to prevent
affiliated persons of the Trust, the Advisor, and the Distributor from engaging
in deceptive, manipulative, or fraudulent activities in connection with
securities held or to be acquired by the Fund (which may also be held by persons
subject to a code). There can be no assurance that the codes will be effective
in preventing such activities.
ADDITIONAL INFORMATION ON PERFORMANCE
From time to time, the total return of the Fund may be quoted in advertisements,
sales literature, shareholder reports, or other communications to shareholders.
The Fund computes the "average annual total return" of the Fund by determining
the average annual compounded rates of return during specified periods that
equate the initial amount invested to the ending redeemable value of such
investment. This is done by determining the ending redeemable value of a
hypothetical $1,000 initial payment. This calculation is as follows:
P(1+T)n = ERV
Where: T = average annual total return.
ERV = ending redeemable value at the end of the period
covered by the computation of a hypothetical $1,000
payment made at the beginning of the period.
P = hypothetical initial payment of $1,000 from which
the maximum sales load is deducted.
n = period covered by the computation, expressed in terms
of years.
The Fund may als compute the aggregate total return of the Fund, which is
calculated in a similar manner, except that the results are not annualized.
The calculation of average annual total return and aggregate total return assume
an initial $1,000 investment and that there is a reinvestment of all dividends
and capital gain distributions on the reinvestment dates during the period. The
ending redeemable value is determined by assuming complete redemption of the
hypothetical investment and the deduction of all nonrecurring charges at the end
of the period covered by the computations.
These performance quotations should not be considered as representative of the
Fund's performance for any specified period in the future.
The Fund's performance may be compared in advertisements, sales literature,
shareholder reports, and other communications to the performance of other mutual
funds having similar objectives or to standardized indices or other measures of
investment performance. In particular, the Fund may compare its performance to
the S&P 500 Index, which is generally considered to be representative of the
performance of unmanaged common stocks that are publicly traded in the United
States securities markets. The Fund may also measure its performance against the
Lipper Growth Fund Index, which ranks the performance of mutual funds that have
an objective of growth of capital. Comparative performance may also be expressed
by reference to a ranking prepared by a mutual fund monitoring service or by one
or more newspapers, newsletters, or financial periodicals. The Fund may
occasionally cite statistics to reflect its volatility and risk. The Fund may
also compare its performance to other published reports of the performance of
unmanaged portfolios of companies. The performance of such unmanaged portfolios
generally does not reflect the effects of dividends or dividend reinvestment.
The Fund may compare its performance to other reports of the performance of
managed accounts of the Advisor, such as the Capital Management Mid-Cap Fund,
another series of the Trust. Of course, there can be no assurance the Fund will
experience the same results. Performance comparisons may be useful to investors
who wish to compare the Fund's past performance to that of other mutual funds
and investment products. Of course, past performance is not a guarantee of
future results.
The cumulative total return for the Institutional Shares of the Fund since
commencement of operations of the Institutional Shares (January 12, 1999)
through the fiscal period ended November 30, 1999 was 26.57%.
The cumulative total return for the Investor Shares of the Fund since
commencement of operations of the Investor Shares (January 12, 1999) through the
fiscal period ended November 30, 1999 was 21.98%. This quotation assumes that
the maximum 3% sales load was deducted from the initial investment. Without
reflecting the effects of the maximum 3% sales load, the cumulative total return
for the Investor Shares since commencement of operations through the fiscal
period ended November 30, 1999 was 25.75%.
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 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 depict the historical performance of the securities in
which the Fund may invest over periods reflecting a variety of market or
economic conditions either alone or in comparison with alternative investments,
performance indices of those investments, or economic indicators. The Fund may
also include in advertisements and in materials furnished to present and
prospective shareholders statements or illustrations relating to the
appropriateness of types of securities and/or mutual funds that may be employed
to meet specific financial goals, such as saving for retirement, children's
education, or other future needs.
PORTFOLIO TRANSACTIONS
Subject to the general supervision of the Trust's Board of Trustees, the Advisor
is responsible for, makes decisions with respect to, and places orders for all
purchases and sales of portfolio securities for the Fund.
The annualized portfolio turnover rate for the Fund is calculated by dividing
the lesser of purchases or sales of portfolio securities for the reporting
period by the monthly average value of the portfolio securities owned during the
reporting period. The calculation excludes all securities whose maturities or
expiration dates at the time of acquisition are one year or less. Portfolio
turnover of the Fund may vary greatly from year to year as well as within a
particular year, and may be affected by cash requirements for redemption of
shares and by requirements that enable the Fund to receive favorable tax
treatment. Portfolio turnover will not be a limiting factor in making Fund
decisions, and the Fund may engage in short-term trading to achieve its
investment objectives.
Purchases of money market instruments by the Fund are made from dealers,
underwriters, and issuers. The Fund currently does not expect to incur any
brokerage commission expense on such transactions because money market
instruments are generally traded on a "net" basis by a dealer acting as
principal for its own account without a stated commission. The price of the
security, however, usually includes a profit to the dealer. Securities purchased
in underwritten offerings include a fixed amount of compensation to the
underwriter, generally referred to as the underwriter's concession or discount.
When securities are purchased directly from or sold directly to an issuer, no
commissions or discounts are paid.
Transactions on U.S. stock exchanges involve the payment of negotiated brokerage
commissions. On exchanges on which commissions are negotiated, the cost of
transactions may vary among different brokers. Transactions in the
over-the-counter market are generally on a net basis (i.e., without commission)
through dealers, or otherwise involve transactions directly with the issuer of
an instrument.
The Fund may participate, if and when practicable, in bidding for the purchase
of Fund securities directly from an issuer in order to take advantage of the
lower purchase price available to members of a bidding group. The Fund will
engage in this practice, however, only when the Advisor, in its sole discretion,
believes such practice to be otherwise in the Fund's interest.
In executing Fund transactions and selecting brokers or dealers, the Advisor
will seek to obtain the best overall terms available for the Fund. In assessing
the best overall terms available for any transaction, the Advisor shall consider
factors it deems relevant, including the breadth of the market in the security,
the price of the security, the financial condition and execution capability of
the broker or dealer, and the reasonableness of the commission, if any, both for
the specific transaction and on a continuing basis. The sale of Fund shares may
be considered when determining the firms that are to execute brokerage
transactions for the Fund. In addition, the Advisor is authorized to cause the
Fund to pay a broker-dealer which furnishes brokerage and research services a
higher commission than that which might be charged by another broker-dealer for
effecting the same transaction, provided that the Advisor determines in good
faith that such commission is reasonable in relation to the value of the
brokerage and research services provided by such broker-dealer, viewed in terms
of either the particular transaction or the overall responsibilities of the
Advisor to the Fund. Such brokerage and research services might consist of
reports and statistics relating to specific companies or industries; general
summaries of groups of stocks or bonds and their comparative earnings and
yields; or broad overviews of the stock, bond, and government securities
markets; and the economy.
Supplementary research information so received is in addition to, and not in
lieu of, services required to be performed by the Advisor and does not reduce
the advisory fees payable by the Fund. The Trustees will periodically review any
commissions paid by the Fund to consider whether the commissions paid over
representative periods of time appear to be reasonable in relation to the
benefits inuring to the Fund. It is possible that certain of the supplementary
research or other services received will primarily benefit one or more other
investment companies or other accounts for which the Advisor exercises
investment discretion. Conversely, the Fund may be the primary beneficiary of
the research or services received as a result of securities transactions
affected 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 period ended November 30, 1999, the Fund paid brokerage
commissions of $1,267. For the same period, transactions in which the Fund used
the Distributor as broker involved 100% of the aggregate dollar amount of
transactions involving the payment of commissions and 100% 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 Fund will automatically charge the checking account for the amount
specified ($100 minimum) which will be automatically invested in shares at the
public offering price on or about the 21st day of the month. The shareholder may
change the amount of the investment or discontinue the plan at any time by
writing to the Fund.
SYSTEMATIC WITHDRAWAL PLAN. Shareholders owning shares with a value of $10,000
or more for Investor Shares and $250,000 or more for Institutional Shares may
establish a Systematic Withdrawal Plan. A shareholder may receive monthly or
quarterly payments, in amounts of not less than $100 per payment, by authorizing
the Fund to redeem the necessary number of shares periodically (each month, or
quarterly in the months of March, June, September, and December) in order to
make the payments requested. The Fund has the capability of electronically
depositing the proceeds of the systematic withdrawal directly to the
shareholder's personal bank account ($5,000 minimum per bank wire). Instructions
for establishing this service are included in the Fund Shares Application,
enclosed in the Prospectus, or are available by calling the Fund. If the
shareholder prefers to receive his/her systematic withdrawal proceeds in cash,
or if such proceeds are less than the $5,000 minimum for a bank wire, checks
will be made payable to the designated recipient and mailed within seven days of
the valuation date. If the designated recipient is other than the registered
shareholder, the signature of each shareholder must be guaranteed on the
application (see "Signature Guarantees" in the Prospectus). A corporation (or
partnership) must also submit a "Corporate Resolution" (or "Certification of
Partnership") indicating the names, titles, and required number of signatures
authorized to act on its behalf. The application must be signed by a duly
authorized Officer(s) and the corporate seal affixed. No redemption fees are
charged to shareholders under this plan. Costs in conjunction with the
administration of the plan are borne by the Fund. Shareholders should be aware
that such systematic withdrawals may deplete or use up entirely their initial
investment and may result in realized long-term or short-term capital gains or
losses. The Systematic Withdrawal Plan may be terminated at any time by the Fund
upon 60-days' written notice or by a shareholder upon written notice to the
Fund. Applications and further details may be obtained by calling the Fund at
1-888-626-3863 or by writing to:
CAPITAL MANAGEMENT SMALL-CAP FUND
c/o NC Shareholder Services
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 that the Advisor may deem appropriate. If
accepted, the securities will be valued using the same criteria and methods as
described in "Determining the Fund's Net Asset Value" in the Prospectus.
REDEMPTIONS IN KIND. The Fund does not intend, under normal circumstances, to
redeem its securities by payment in kind. It is possible, however, that
conditions may arise in the future which would, in the opinion of the Trustees,
make it undesirable for the Fund to pay for all redemptions in cash. In such
case, the Board of Trustees may authorize payment to be made in readily
marketable portfolio securities of the Fund. Securities delivered in payment of
redemptions would be valued at the same value assigned to them in computing the
net asset value per share. Shareholders receiving them would incur brokerage
costs when these securities are sold. An irrevocable election has been filed
under Rule 18f-1 of the 1940 Act, wherein the Fund committed itself to pay
redemptions in cash, rather than in kind, to any shareholder of record of the
Fund who redeems during any 90-day period, the lesser of (a) $250,000 or (b) one
percent (1%) of the Fund's net asset value at the beginning of such period.
TRANSFER OF REGISTRATION. To transfer shares to another owner, send a written
request to the Fund at the address shown above. Your request should include the
following: (1) the Fund name and existing account registration; (2) signature(s)
of the registered owner(s) exactly as the signature(s) appear(s) on the account
registration; (3) the new account registration, address, Social Security or
Taxpayer Identification Number, and how dividends and capital gains are to be
distributed; (4) signature guarantees (See the Prospectus under the heading
"Signature Guarantees"); and (5) any additional documents which are required for
transfer by corporations, administrators, executors, trustees, guardians, etc.
If you have any questions about transferring shares, call or write the Fund.
PURCHASE OF SHARES
The purchase price of shares of the Fund is the net asset value next determined
after the order is received. Net asset value per share is calculated for
purchases and redemptions of shares of the Fund by dividing the value of total
Fund assets, less liabilities (including Fund expenses, which are accrued
daily), by the total number of outstanding shares of that Fund. The net asset
value per share of the Fund is determined at the time trading closes on the New
York Stock Exchange (currently 4:00 p.m. Eastern time, Monday through Friday),
except on business holidays when the New York Stock Exchange is closed.
The Fund reserves the right in its sole discretion (i) to suspend the offering
of its shares, (ii) to reject purchase orders when in the judgment of management
such rejection is in the best interest of the Fund and its shareholders, and
(iii) to reduce or to waive the minimum for initial and subsequent investments
under circumstances where certain economies can be achieved in sales of Fund
shares.
EMPLOYEES AND AFFILIATES OF THE FUND. The Fund has adopted initial investment
minimums for the purpose of reducing the cost to the Fund (and consequently to
the shareholders) of communicating with and servicing its shareholders. In
keeping with this purpose, a reduced minimum initial investment of $1,000
applies to Trustees, Officers, and employees of the Fund; the Advisor and
certain parties related thereto; including clients of the Advisor or any
sponsor, Officer, committee member thereof, or the immediate family of any of
them. The Fund may also sell shares at net asset value without a sales charge to
such persons. In addition, accounts having the same mailing address may be
aggregated for purposes of the minimum investment if they consent in writing to
sharing a single mailing of shareholder reports, proxy statements (but each such
shareholder would receive his/her own proxy) and other Fund literature.
SALES CHARGES. The public offering price of Investor Shares of the Fund equals
net asset value plus a sales charge. The Distributor receives this sales charge
and may reallow it in the form of dealer discounts and brokerage commissions as
follows:
<TABLE>
<S> <C> <C> <C>
- ------------------------------------- ------------------------- ------------------------- -----------------------------------
Sales Dealers Discounts and
Amount of Transaction At Public Charge As % of Net Sales Charge As % of Brokerage Commissions as % of
Offering Price Amount Invested Public Offering 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>
From time to time, dealers who receive dealer discounts and brokerage
commissions from the Distributor may reallow all or a portion of such dealer
discounts and brokerage commissions to other dealers or brokers. Pursuant to the
terms of the Distribution Agreement, the sales charge payable to the Distributor
and the dealer discounts may be suspended, terminated, or amended.
The dealer discounts and brokerage commissions schedule above applies to all
dealers who have agreements with the Distributor. The Distributor, at its
expense, may also provide additional compensation to dealers in connection with
sales of shares of the Fund. Compensation may include financial assistance to
dealers in connection with conferences, sales or training programs for their
employees, seminars for the public, advertising campaigns regarding the Fund,
and/or other dealer-sponsored special events. In some instances, this
compensation may be made available only to certain dealers whose representatives
have sold or are expected to sell a significant amount of such shares.
Compensation may include payment for travel expenses, including lodging,
incurred in connection with trips taken by invited registered representatives
and members of their families to locations within or outside of the United
States for meetings or seminars of a business nature. Dealers may not use sales
of the Fund shares to qualify for this compensation to the extent such may be
prohibited by the laws of any state or any self-regulatory agency, such as the
National Association of Securities Dealers, Inc. None of the aforementioned
compensation is paid for by the Fund or its shareholders.
REDUCED SALES CHARGES
CONCURRENT PURCHASES. For purposes of qualifying for a lower sales charge
for Investor 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 five percent of the amount indicated in the letter of
intent will be held in escrow during the 13-month period (while remaining
registered in the name of the investor) for this purpose. The value of any
shares redeemed or otherwise disposed of by the investor prior to termination or
completion of the letter of intent will be deducted from the total purchases
made under such letter of intent.
A 90-day backdating period can be used to include earlier purchases at the
investor's cost (without a retroactive downward adjustment of the sales charge);
the 13-month period would then begin on the date of the first purchase during
the 90-day period. No retroactive adjustment will be made if purchases exceed
the amount indicated in the letter of intent. Investors must notify the
Administrator or the Distributor whenever a purchase is being made pursuant to a
letter of intent.
Investors electing to purchase shares pursuant to a letter of intent should
carefully read the letter of intent, which is included in the Fund Shares
Application accompanying this Prospectus or is otherwise available from the
Administrator or the Distributor. This letter of intent option may be modified
or eliminated at any time or from time to time by the Trust without notice.
REINVESTMENTS. Investors may reinvest, without a sales charge, proceeds
from a redemption of Investor Shares in Investor Shares or in shares of another
series of the Trust affiliated with the Advisor and sold with a sales charge,
within 90 days after the redemption. If the other class of shares charges a
sales charge higher than the sales charge the investor paid in connection with
the shares redeemed, the investor must pay the difference. In addition, the
shares of the class to be acquired must be registered for sale in the investor's
state of residence. The amount that may be so reinvested may not exceed the
amount of the redemption proceeds, and a written order for the purchase of such
shares must be received by the Fund or the Distributor within 90 days after the
effective date of the redemption.
If an investor realizes a gain on the redemption, the reinvestment will not
affect the amount of any federal capital gains tax payable on the gain. If an
investor realizes a loss on the redemption, the reinvestment may cause some or
all of the loss to be disallowed as a tax deduction, depending on the number of
shares purchased by reinvestment and the period of time that has elapsed after
the redemption, although for tax purposes, the amount disallowed is added to the
cost of the shares acquired upon the reinvestment.
PURCHASES BY RELATED PARTIES AND GROUPS. Reductions in sales charges apply
to purchases by a single "person," including an individual, members of a family
unit, consisting of a husband, wife, and children under the age of 21 purchasing
securities for their own account, or a Trustee or other fiduciary purchasing for
a single fiduciary account or single trust estate.
Reductions in sales charges also apply to purchases by individual members of a
"qualified group." The reductions are based on the aggregate dollar value of
shares purchased by all members of the qualified group and still owned by the
group plus the shares currently being purchased. For purposes of this paragraph,
a qualified group consists of a "company," as defined in the 1940 Act, which has
been in existence for more than six months and which has a primary purpose other
than acquiring shares of the Fund at a reduced sales charge, and the "related
parties" of such company. For purposes of this paragraph, a "related party" of a
company is: (i) any individual or other company who directly or indirectly owns,
controls, or has the power to vote five percent or more of the outstanding
voting securities of such company; (ii) any other company of which such company
directly or indirectly owns, controls, or has the power to vote five percent of
more of its outstanding voting securities; (iii) any other company under common
control with such company; (iv) any executive Officer, Director or Partner of
such company or of a related party; and (v) any partnership of which such
company is a partner.
SALES AT NET ASSET VALUE. The Fund may sell shares at a purchase price
equal to the net asset value of such shares, without a sales charge, to
Trustees; Officers; and employees of the Trust, Fund, and Advisor; and to
employees and principals of related organizations and their families, and
certain parties related thereto, including clients and related accounts of the
Advisor. Clients of investment advisors and financial planners may also purchase
Investor Shares at net asset value if the investment advisor or financial
planner has made arrangements to permit them to do so with the Distributor. The
public offering price of shares of the Fund may also be reduced to net asset
value per share in connection with the acquisition of the assets of or merger or
consolidation with a personal holding company or a public or private investment
company.
EXCHANGE FEATURE
Investors may exchange shares of the Fund for shares of any other comparable
series of the Trust. Shares of the Fund may be exchanged at the net asset value
plus the percentage difference between that series' sales charge and any sales
charge previously paid in connection with the shares being exchanged. For
example, if a 2% sales charge was paid on shares that are exchanged into a
series with a 3% sales charge, there would be an additional sales charge of 1%
on the exchange. Exchanges may only be made by investors in states where shares
of the other series are qualified for sale. An investor may direct the Fund to
exchange his shares by writing to the Fund at its principal office. The request
must be signed exactly as the investor's name appears on the account, and it
must also provide the account number, number of shares to be exchanged, the name
of the series to which the exchange will take place, and a statement as to
whether the exchange is a full or partial redemption of existing shares.
Notwithstanding the foregoing, exchanges of shares may only be within the same
class or type of class of shares involved. For example, Investor Shares may not
be exchanged for Institutional Shares.
A pattern of frequent exchange transactions may be deemed by the Advisor to be
an abusive practice that is not in the best interest of the shareholders of the
Fund. Such a pattern may, at the discretion of the Advisor, be limited by the
Fund's refusal to accept further purchase and/or exchange orders from an
investor, after providing the investor with 60-days' prior notice. The Board of
Trustees of the Trust also reserves the right to suspend or terminate, or amend
the terms of, the exchange privilege upon 60 days written notice to the
shareholders.
REDEMPTION OF SHARES
The Fund may suspend redemption privileges or postpone the date of payment (i)
during any period that the New York Stock Exchange (the "NYSE") is closed for
other than customary weekend and holiday closings, or that trading on the NYSE
is restricted as determined by the Securities and Exchange Commission (the
"Commission"); (ii) during any period when an emergency exists as defined by the
rules of the Commission as a result of which it is not reasonably practical for
the Fund to dispose of securities owned by it, or to determine fairly the value
of its assets; and (iii) for such other periods as the Commission may permit.
The Fund may also suspend or postpone the recordation of the transfer of shares
upon the occurrence of any of the foregoing conditions. Any redemption may be
more or less than the shareholder's cost depending on the market value of the
securities held by the Fund. No charge is made by the Fund for redemptions other
than the possible charge for wiring redemption proceeds.
In addition to the situations described in the Prospectus under "How to Redeem
Shares," the Fund may redeem shares involuntarily to reimburse the Fund for any
loss sustained by reason of the failure of a shareholder to make full payment
for shares purchased by the shareholder or to collect any charge relating to a
transaction effected for the benefit of a shareholder which is applicable to
Fund shares as provided in the Prospectus from time to time.
NET ASSET VALUE
The net asset value per share of each class of Shares of the Fund is determined
at the time trading closes on the NYSE (currently 4:00 p.m., New York time,
Monday through Friday), except on business holidays when the NYSE is closed. The
NYSE recognizes the following holidays: New Year's Day, Martin Luther King, Jr.
Day, President's Day, Good Friday, Memorial Day, Fourth of July, Labor Day,
Thanksgiving Day, and Christmas Day. Any other holiday recognized by the NYSE
will be considered a business holiday on which the net asset value of each class
of Shares of the Fund will not be calculated.
The net asset value per share of each class of the Fund is calculated separately
by adding the value of the Fund's securities and other assets belonging to the
Fund and attributable to that class, subtracting the liabilities charged to the
Fund and to that class, and dividing the result by the number of outstanding
shares of such class. "Assets belonging to" the Fund consist of the
consideration received upon the issuance of shares of the Fund together with all
net investment income; realized gains/losses and proceeds derived from the
investment thereof, including any proceeds from the sale of such investments;
any funds or payments derived from any reinvestment of such proceeds; and a
portion of any general assets of the Trust not belonging to a particular
investment Fund. Income, realized and unrealized capital gains and losses, and
any expenses of the Fund not allocated to a particular class of the Fund will be
allocated to each class of the Fund on the basis of the net asset value of that
class in relation to the net asset value of the Fund. Assets belonging to the
Fund are charged with the direct liabilities of the Fund and with a share of the
general liabilities of the Trust, which are normally allocated in proportion to
the number of or the relative net asset values of all of the Trust's series at
the time of allocation or in accordance with other allocation methods approved
by the Board of Trustees. Certain expenses attributable to a particular class of
shares (such as the distribution and service fees attributable to Investor
Shares) will be charged against that class of Shares. Certain other expenses
attributable to a particular class of Shares (such as registration fees,
professional fees, and certain printing and postage expenses) may be charged
against that class of Shares if such expenses are actually incurred in a
different amount by that class, or if the class receives services of a different
kind or to a different degree than other classes, and the Board of Trustees
approves such allocation. Subject to the provisions of the Declaration of Trust,
determinations by the Board of Trustees as to the direct and allocable
liabilities, and the allocable portion of any general assets, with respect to
the Fund and the classes of the Fund are conclusive.
In valuing the Fund's total assets, portfolio securities are generally valued at
their market value. Instruments with maturities of 60 days or less are valued at
amortized costs, which approximates market value. Securities and assets for
which representative market quotations are not readily available are valued at
fair value as determined in good faith under policies approved by the Trustees.
ADDITIONAL TAX INFORMATION
The following summarizes certain additional tax considerations generally
affecting the Fund and its shareholders that are not described in the
Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of the Fund or its shareholders. The discussion here and in the
Prospectus is not intended as a substitute for careful tax planning and is based
on tax laws and regulations that are in effect on the date hereof; such laws and
regulations may be changed by legislative, judicial, or administrative action.
Investors are advised to consult their tax advisors with specific reference to
their own tax situations.
The Fund, and any other series of the Trust, will be treated as a separate
corporate entity under the Code. The Fund intends to qualify and to remain
qualified as a regulated investment company. To so qualify, the Fund must elect
to be a regulated investment company or have made such an election for a
previous year and must satisfy, in addition to the distribution requirement
described in the Prospectus, certain requirements with respect to the source of
its income for a taxable year. At least 90% of the gross income of the Fund must
be derived from dividends; interest; payments with respect to securities loans,
gains from the sale or other disposition of stocks, securities, or foreign
currencies; and other income derived with respect to the Fund's business of
investing in such stock, securities, or currencies. Any income derived by the
Fund from a partnership or trust is treated as derived with respect to the
Fund's business of investing in stock, securities, or currencies only to the
extent that such income is attributable to items of income that would have been
qualifying income if realized by the Fund in the same manner as by the
partnership or trust.
An investment company may not qualify as a regulated investment company for any
taxable year unless it satisfies certain requirements with respect to the
diversification of its investments at the close of each quarter of the taxable
year. In general, at least 50% of the value of its total assets must be
represented by cash, cash items, government securities, securities of other
regulated investment companies, and other securities which, with respect to any
one issuer, do not represent more than 5% of the total assets of the investment
company nor more than 10% of the outstanding voting securities of such issuer.
In addition, not more than 25% of the value of the investment company's total
assets may be invested in the securities (other than government securities or
the securities of other regulated investment companies) of any one issuer. The
Fund intends to satisfy all requirements on an ongoing basis for continued
qualification as a regulated investment company.
The Fund will designate any distribution of long-term capital gains as a capital
gain dividend in a written notice mailed to shareholders within 60 days after
the close of the Fund's taxable year. Shareholders should note that upon the
sale or exchange of Fund shares, if the shareholder has not held such shares for
at least six months, any loss on the sale or exchange of those shares will be
treated as long-term capital loss to the extent of the capital gain dividends
received with respect to the shares.
A 4% non-deductible excise tax is imposed on regulated investment companies that
fail to distribute currently an amount equal to specified percentages of their
ordinary taxable income and capital gain net income (excess of capital gains
over capital losses). The Fund intends to make sufficient distributions or
deemed distributions of its ordinary taxable income and any capital gain net
income prior to the end of each calendar year to avoid liability for this excise
tax.
If for any taxable year the Fund does not qualify for the special federal income
tax treatment afforded to regulated investment companies, all of its taxable
income will be subject to federal income tax at regular corporate rates (without
any deduction for distributions to its shareholders). In such event, dividend
distributions (whether or not derived from interest on tax-exempt securities)
would be taxable as ordinary income to shareholders to the extent of the Fund's
current and accumulated earnings and profits.
The Fund will be required in certain cases to withhold and remit to the U.S.
Treasury 31% of taxable dividends or 31% of gross proceeds realized upon sale
paid to shareholders who have failed to provide a correct Taxpayer
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
two series: the Capital Management Mid-Cap Fund and the Capital Management
Small-Cap Fund. Each series of shares are divided into two classes
("Institutional Shares" and "Investor Shares") as described in the Prospectus.
Shares of the Fund, when issued, are fully paid and non-assessable and have no
preemptive or conversion rights. Shareholders are entitled to one vote for each
full share and a fractional vote for each fractional share held. Shares have
non-cumulative voting rights, which means that the holders of more than 50% of
the shares voting for the election of Trustees can elect 100% of the Trustees,
and in this event, the holders of the remaining shares voting will not be able
to elect any Trustees. The Trustees will hold office indefinitely, except that:
(1) any Trustee may resign or retire; and (2) any Trustee may be removed: (a)
any time by written instrument signed by at least two-thirds of the number of
Trustees prior to such removal; (b) at any meeting of shareholders of the Trust
by a vote of two-thirds of the outstanding shares of the Trust; or (c) by a
written declaration signed by shareholders holding not less than two-thirds of
the outstanding shares of the Trust and filed with the Trust's custodian.
Shareholders have certain rights, as set forth in the Declaration of Trust,
including the right to call a meeting of the shareholders. Shareholders holding
not less than 10% of the shares then outstanding may require the Trustees to
call a meeting, and the Trustees are obligated to provide certain assistance to
shareholders desiring to communicate with other shareholders in such regard
(e.g., providing access to shareholder lists, etc.). In case a vacancy or an
anticipated vacancy on the Board of Trustees shall for any reason exist, the
vacancy shall be filled by the affirmative vote of a majority of the remaining
Trustees, subject to certain restrictions under the 1940 Act. Otherwise, there
will normally be no meeting of shareholders for the purpose of electing
Trustees, and the Trust does not expect to have an annual meeting of
shareholders.
FINANCIAL STATEMENTS
The audited financial statements for the fiscal period ended November 30, 1999,
including the financial highlights appearing in the Fund's Annual Report to
Shareholders, are incorporated by reference and made a part of this document.
<PAGE>
APPENDIX A
DESCRIPTION OF RATINGS
The Fund will normally be at least 90% invested in equities. As a temporary
defensive position, however, when the Advisor determines that market conditions
warrant such investments, the Fund may invest up to 100% of its assets in
investment grade bonds, U.S. Government Securities, repurchase agreements, or
money market instruments ("Investment-Grade Debt Securities"). When the Fund
invests in Investment-Grade Debt Securities as a temporary defensive measure, it
is not pursuing its investment objective. Under normal circumstances, however,
the Fund may invest in money market instruments as described in the Prospectus.
The various ratings used by the nationally recognized securities rating services
are described below.
A rating by a rating service represents the service's opinion as to the credit
quality of the security being rated. However, the ratings are general and are
not absolute standards of quality or guarantees as to the creditworthiness of an
issuer. Consequently, the Advisor believes that the quality of fixed-income
securities in which the Fund may invest should be continuously reviewed and that
individual analysts give different weightings to the various factors involved in
credit analysis. A rating is not a recommendation to purchase, sell, or hold a
security because it does not take into account market value or suitability for a
particular investor. When a security has received a rating from more than one
service, each rating is evaluated independently. Ratings are based on current
information furnished by the issuer or obtained by the rating services from
other sources that they consider reliable. Ratings may be changed, suspended, or
withdrawn as a result of changes in or unavailability of such information, or
for other reasons.
STANDARD & POOR'S RATINGS GROUP. The following summarizes the highest four
ratings used by Standard & Poor's Ratings Group ("S&P") for bonds that are
deemed to be Investment-Grade Debt Securities by the Advisor:
AAA - This is the highest rating assigned by S&P to a debt obligation
and indicates an extremely strong capacity to pay interest and to repay
principal.
AA - Debt rated AA is considered to have a very strong capacity to pay
interest and to repay principal and differs from AAA issues only in a
small degree.
A - Debt rated A has a strong capacity to pay interest and to repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt
in higher-rated categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and to repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and to repay principal for bonds in this category than for
debt in higher rated categories.
To provide more detailed indications of credit quality, the AA, A, and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within these major rating categories.
Bonds rated BB, B, CCC, CC, and C are not considered by the Advisor to be
Investment-Grade Debt Securities and are regarded, on balance, as predominantly
speculative with respect to the issuer's capacity to pay interest and principal
in accordance with the terms of the obligation. BB indicates the lowest degree
of speculation and C the highest degree of speculation. While such bonds may
have some quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
Commercial paper rated A-1 by S&P indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted A-1+. Capacity for timely payment on
commercial paper rated A-2 is satisfactory, but the relative degree of safety is
not as high as for issues designated A-1.
The rating SP-1 is the highest rating assigned by S&P to municipal notes and
indicates very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics are given a
plus (+) designation.
MOODY'S INVESTORS SERVICE, INC. The following summarizes the highest four
ratings used by Moody's Investors Service, Inc., ("Moody's") for bonds that are
deemed to be Investment-Grade Debt Securities by the Advisor:
Aaa - Bonds that are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a large
or by an exceptionally stable margin, and principal is secure. While
the various protective elements are likely to change, such changes as
can be visualized are most unlikely to impair the fundamentally strong
position of such issues.
Aa - Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high-grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities,
or fluctuation of protective elements may be of greater amplitude, or
there may be other elements present which make the long-term risks
appear somewhat larger than in Aaa securities.
A - Debt that is rated A possesses many favorable investment attributes
and is to be considered as an upper-medium-grade obligation. Factors
giving security to principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to impairment
sometime in the future.
Baa - Debt which is rated Baa is considered as a medium-grade
obligation, i.e., it is neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the
present, but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such debt
lacks outstanding investment characteristics and, in fact, has
speculative characteristics as well.
Moody's applies numerical modifiers (l, 2 and 3) with respect to bonds rated Aa,
A, and Baa. The modifier 1 indicates that the bond being rated ranks in the
higher end of its generic rating category; the modifier 2 indicates a mid-range
ranking, and the modifier 3 indicates that the bond ranks in the lower end of
its generic rating category.
The Advisor does not consider bonds that are rated Ba, B, Caa, Ca, or C by
Moody's Investment-Grade Debt Securities. Bonds rated Ba are judged to have
speculative elements because their future cannot be considered as well assured.
Uncertainty of position characterizes bonds in this class because the protection
of interest and principal payments often may be very moderate and not well
safeguarded.
Bonds that are rated B generally lack characteristics of a desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the security over any long period for time may be small. Bonds that are rated
Caa are of poor standing. Such securities may be in default, or there may be
present elements of danger with respect to principal or interest. Bonds that are
rated Ca represent obligations that are speculative in a high degree. Such
issues are often in default or have other marked shortcomings. Bonds that are
rated C are the lowest rated class of bonds, and issues so rated can be regarded
as having extremely poor prospects of ever attaining any real investment
standing.
The rating Prime-1 is the highest commercial paper rating assigned by Moody's.
Issuers rated Prime-1 (or related supporting institutions) are considered to
have a superior capacity for repayment of short-term promissory obligations.
Issuers rated Prime-2 (or related supporting institutions) are considered to
have a strong capacity for repayment of short-term promissory obligations. This
will normally be evidenced by many of the characteristics of issuers rated
Prime-1 but to a lesser degree. Earnings' trends and coverage ratios, while
sound, will be more subject to variation. Capitalization characteristics, while
still appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
The following summarizes the highest rating used by Moody's for short-term notes
and variable-rate, demand obligations:
MIG-l; VMIG-l - Obligations bearing these designations are of the best
quality, enjoying strong protection by established cash flows, superior
liquidity support, or demonstrated broad-based access to the market for
refinancing.
DUFF & PHELPS CREDIT RATING CO. The following summarizes the highest four
ratings used by Duff & Phelps Credit Rating Co. ("D&P") for bonds that are
deemed to be Investment-Grade Debt Securities by the Advisor:
AAA - Bonds that are rated AAA are of the highest credit quality. The
risk factors are considered to be negligible, being only slightly more
than for risk-free U.S. Treasury debt.
AA - Bonds that are rated AA are of high credit quality. Protection
factors are strong. Risk is modest but may vary slightly from time to
time because of economic conditions.
A - Bonds rated A have average but adequate protection factors. The
risk factors are more variable and greater in periods of economic
stress.
BBB - Bonds rated BBB have below-average protection factors but are
still considered sufficient for prudent investment. There is
considerable variability in risk during economic cycles.
Bonds rated BB, B, and CCC by D&P are not considered Investment-Grade Debt
Securities and are regarded, on balance, as predominantly speculative with
respect to the issuer's ability to pay interest and to make principal payments
in accordance with the terms of the obligations. BB indicates the lowest degree
of speculation and CCC the highest degree of speculation.
The rating Duff l is the highest rating assigned by D&P for short-term debt,
including commercial paper. D&P employs three designations, Duff l+, Duff 1, and
Duff 1- within the highest rating category. Duff l+ indicates highest certainty
of timely payment. Short-term liquidity, including internal operating factors
and/or access to alternative sources of funds, is judged to be "outstanding, and
safety is just below risk-free U.S. Treasury short-term obligations." Duff 1
indicates very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are
considered to be minor. Duff 1- indicates high certainty of timely payment.
Liquidity factors are strong and supported by good fundamental protection
factors. Risk factors are very small.
FITCH INVESTORS SERVICE, INC. The following summarizes the highest four ratings
used by Fitch Investors Service, Inc., ("Fitch") for bonds that are deemed to be
Investment-Grade Debt Securities by the Advisor:
AAA - Bonds are considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability to pay
interest and to repay principal, which is unlikely to be affected by
reasonably foreseeable events.
AA - Bonds are considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and to repay
principal is very strong, although not quite as strong as bonds rated
AAA. Because bonds rated in the AAA and AA categories are not
significantly vulnerable to foreseeable future developments, short-term
debt of these issuers is generally rated F-1+.
A - Bonds that are rated A are considered to be investment grade and of
high credit quality. The obligor's ability to pay interest and to repay
principal is considered to be strong, but may be more vulnerable to
adverse changes in economic conditions and circumstances than bonds
with higher ratings.
BBB - Bonds rated BBB are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and
to repay principal is considered to be adequate. Adverse changes in
economic conditions and circumstances, however, are more likely to have
adverse impact on these bonds and, therefore, impair timely payment.
The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.
To provide more detailed indications of credit quality, the AA, A, and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within a rating category.
Bonds rated BB, B, and CCC by Fitch are not considered Investment-Grade Debt
Securities and are regarded, on balance, as predominantly speculative with
respect to the issuer's ability to pay interest and to make principal payments
in accordance with the terms of the obligations. BB indicates the lowest degree
of speculation and CCC the highest degree of speculation.
The following summarizes the three highest ratings used by Fitch for short-term
notes, municipal notes, variable rate demand instruments, and commercial paper:
F-1+ - Instruments assigned this rating are regarded as having the
strongest degree of assurance for timely payment.
F-1 - Instruments assigned this rating reflect an assurance of timely
payment only slightly less in degree than issues rated F-1+
F-2 - Instruments assigned this rating have a satisfactory degree of
assurance for timely payment, but the margin of safety is not as great
as for issues assigned F-1+ and F-1 ratings.
<PAGE>
________________________________________________________________________________
CAPITAL MANAGEMENT SMALL-CAP FUND
________________________________________________________________________________
a series of the Capital Management Investment Trust
Annual Report 1999
FOR THE YEAR ENDED NOVEMBER 30
INVESTMENT ADVISOR
Capital Management Associates, Inc.
140 Broadway
New York, New York 10005
CAPITAL MANAGEMENT SMALL-CAP FUND
107 North Washington Street
Post Office Drawer 4365
Rocky Mount, North Carolina 27803-0365
1-888-626-3863
<PAGE>
CAPITAL MANAGEMENT ASSOCIATES
INCORPORATED
140 BROADWAY NEW YORK, N.Y. 10005
INVESTMENT ADVISORS TEL: (212) 320-2000
FAX: (212) 320-2040
Dear Fellow Shareholders:
The year 1999 marked the beginning of the Capital Management Small-Cap
Fund, and I am pleased to report that your fund is off to a rousing start with a
total return of 32.2% for investor shares for the period January 12, 199,
through December 31, 1999.
Looking ahead, we expect stock markets in general to be tugged back and
forth by continued above-average corporate earnings on the plus side and by the
fear of higher interest rates on the negative side. No doubt, small-stock shares
will participate in these moves, as recent volatility has shown. The good news
remains, however, that relative valuations in the small-stock sector are still
near historic lows, even after the rally of 1999. In other word, while the road
may be bumpy in the near term, the one- to two-year outlook for small-company
investments is excellent.
Thank you for your support in our initial year, and we look forward to
serving you in the future.
C. Lennis Koontz, II, CFA
President
January 4, 2000
<PAGE>
CAPITAL MANAGEMENT SMALL-CAP FUND
INSTITUTIONAL SHARES
Performance Update - $250,000 Investment
For the period from January 12, 1999 (Commencement of Operations)
to November 30, 1999
- -----------------------------------------------------
Institutional S&P 600 Small-Cap
Shares Index
- -----------------------------------------------------
12-Jan-99 $250,000 $250,000
31-Jan-99 259,554 247,859
28-Feb-99 250,227 225,531
31-Mar-99 249,090 228,446
30-Apr-99 271,383 243,534
31-May-99 286,397 249,462
30-Jun-99 303,458 263,659
31-Jul-99 306,415 261,345
31-Aug-99 299,136 249,843
30-Sep-99 301,183 250,906
31-Oct-99 308,917 250,276
30-Nov-99 316,424 260,905
This graph depicts the performance of the Capital Management Small-Cap Fund
Institutional Shares versus the S&P 600 Small-Cap Index. It is important to note
that the Capital Management Small-Cap Fund is a professionally managed mutual
fund while the index is not available for investment and is unmanaged. The
comparison is shown for illustrative purposes only.
Cumulative Total Return
- -------------------------
Since 1/12/99
- -------------------------
26.57%
- -------------------------
The graph assumes an initial $250,000 investment at January 12, 1999. All
dividends and distributions are reinvested.
At November 30, 1999, the value of the Capital Management Small-Cap Fund
Institutional Shares would have grown to $316,424 - total investment return of
26.57% since January 12, 1999.
At November 30, 1999, a similar investment in the S&P 600 Small-Cap Index would
have grown to $260,905 - total investment return of 4.36% since January 12,
1999.
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 SMALL-CAP FUND
INVESTOR SHARES
Performance Update - $10,000 Investment
For the period from January 12, 1999 (Commencement of Operations)
to November 30, 1999
- -----------------------------------------------------
Investor S&P 600 Small-Cap
Shares Index
- -----------------------------------------------------
12-Jan-99 $ 9,700 $10,000
31-Jan-99 10,062 9,914
28-Feb-99 9,691 9,021
31-Mar-99 9,647 9,138
30-Apr-99 10,503 9,741
31-May-99 11,077 9,978
30-Jun-99 11,730 10,546
31-Jul-99 11,836 10,454
31-Aug-99 11,545 9,994
30-Sep-99 11,615 10,036
31-Oct-99 11,907 10,011
30-Nov-99 12,198 10,436
This graph depicts the performance of the Capital Management Small-Cap Fund
Investor Shares versus the S&P 600 Small-Cap Index. It is important to note that
the Capital Management Small-Cap Fund is a professionally managed mutual fund
while the index is not available for investment and is unmanaged. The comparison
is shown for illustrative purposes only.
Cumulative Total Return
- ------------------------- ----------------
No Sales Load 25.75%
- ------------------------- ----------------
Maximum 3.0% Sales Load 21.98%
- ------------------------- ----------------
The graph assumes an initial $10,000 investment at January 12, 1999 ($9,700
after maximum sales load of 3.0%). All dividends and distributions are
reinvested.
At November 30, 1999, the value of the Capital Management Small-Cap Fund
Investor Shares would have grown to $12,198 - total investment return of 21.98%
since January 12, 1999. Without the deduction of the 3.0% maximum sales load,
the value of the Capital Management Small-Cap Fund Investor Shares would have
grown to $12,575 - total investment return of 25.75% since January 12, 1999. The
sales load may be reduced or eliminated for larger purchases.
At November 30, 1999, a similar investment in the S&P 600 Small-Cap Index would
have grown to $10,436 - total investment return of 4.36% since January 12, 1999.
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> <C> <C>
CAPITAL MANAGEMENT SMALL-CAP FUND
PORTFOLIO OF INVESTMENTS
November 30, 1999
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - 76.98%
Broadcast - Radio & Television - 1.71%
(a)Cox Radio, Inc. .......................................................... 50 $ 3,800
--------
Chemicals - 2.15%
MacDermid, Incorporated .................................................. 125 4,758
--------
Computer Software & Services - 5.90%
(a)Digi International Inc. .................................................. 150 2,419
(a)MICROS Systems, Inc. ..................................................... 100 5,056
(a)Proxim, Inc. ............................................................. 100 5,600
--------
13,075
--------
Electrical Equipment - 2.21%
Baldor Electric Company .................................................. 250 4,891
--------
Electronics - Semiconductor - 12.93%
(a)Brooks Automation, Inc. .................................................. 200 5,450
(a)Burr-Brown Corporation ................................................... 100 4,431
(a)Credence Systems Corporation ............................................. 100 5,794
Helix Technology Corporation ............................................. 100 4,048
(a)Novellus Systems, Inc. ................................................... 50 4,106
(a)Photronics, Inc. ......................................................... 200 4,825
--------
28,654
--------
Entertainment - 1.89%
(a)Pixar, Inc. .............................................................. 100 4,200
--------
Financial - Banks, Commercial - 8.20%
Carolina First Corporation ............................................... 200 4,087
Cullen/Frost Bankers, Inc. ............................................... 150 4,256
FirstMerit Corporation ................................................... 150 3,895
JSB Financial, Inc. ...................................................... 100 5,925
--------
18,163
--------
Forest Production & Paper - 2.15%
Pope & Talbot, Inc. ...................................................... 400 4,775
--------
Household Products & Housewares - 2.53%
Church & Dwight Co., Inc. ................................................ 200 5,600
--------
Insurance - Life & Health - 1.57%
Hooper Holmes, Inc. ...................................................... 150 3,488
--------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
CAPITAL MANAGEMENT SMALL-CAP FUND
PORTFOLIO OF INVESTMENTS
November 30, 1999
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Leisure Time - 2.05%
(a)The Topps Company, Inc. .................................................. 400 $ 4,550
--------
Machine - Construction & Mining - 3.51%
(a)Astec Industries, Inc. ................................................... 200 4,975
(a)Terex Corporation ........................................................ 100 2,800
--------
7,775
--------
Office & Business Equipment - 2.09%
John H. Harland Company .................................................. 250 4,641
--------
Oil & Gas - Equipment & Services - 6.14%
(a)R&B Falcon Corporation ................................................... 400 4,950
(a)Rowan Companies, Inc. .................................................... 250 4,281
(a)Veritas DGC Inc. ......................................................... 300 4,369
--------
13,600
--------
Oil & Gas - Exploration - 5.15%
Cabot Oil & Gas Corporation .............................................. 250 3,828
EOG Resources, Inc. ...................................................... 200 3,712
(a)Newfield Exploration Company ............................................. 150 3,872
--------
11,412
--------
Real Estate Investment Trust - 1.44%
Crown American Realty Trust .............................................. 500 3,188
--------
Restaurants & Food Service - 5.63%
(a)NPC International, Inc. .................................................. 400 5,050
(a)Ryan's Family Steak Houses, Inc. ......................................... 400 3,950
(a)Taco Cabana, Inc. ........................................................ 400 3,475
--------
12,475
--------
Retail - Apparel - 1.81%
Spiegel, Inc. ............................................................ 500 4,000
--------
Utilities - Electric - 1.47%
Cleco Corporation ........................................................ 100 3,262
--------
Utilities - Gas - 2.65%
South Jersey Industries, Inc. ............................................ 200 5,863
--------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
CAPITAL MANAGEMENT SMALL-CAP FUND
PORTFOLIO OF INVESTMENTS
November 30, 1999
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Utilities - Water - 3.80%
Connecticut Water Service, Inc. .......................................... 100 $ 3,400
United Water Resources Inc. .............................................. 150 5,025
--------
8,425
--------
Total Common Stocks (Cost $157,331) ............................................................... 170,595
--------
INVESTMENT COMPANIES - 10.03%
Evergreen Money Market Treasury Institutional Money
Market Fund Institutional Service Shares ................................. 11,119 11,119
Evergreen Money Market Treasury Institutional Treasury
Money Market Fund Institutional Service Shares ........................... 11,118 11,118
--------
Total Investment Companies (Cost $22,237) .......................................................... 22,237
--------
Total Value of Investments (Cost $179,568 (b)) ............................................ 87.01% $192,832
Other Assets Less Liabilities ............................................................. 12.99% 28,776
------ --------
Net Assets ......................................................................... 100.00% $221,608
====== ========
(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 .......................................................................... $ 20,299
Unrealized depreciation .......................................................................... (7,035)
--------
Net unrealized appreciation $ 13,264
========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
CAPITAL MANAGEMENT SMALL-CAP FUND
STATEMENT OF ASSETS AND LIABILITIES
November 30, 1999
ASSETS
Investments, at value (cost $179,568) ............................................................... $192,832
Cash ................................................................................................ 42,162
Income receivable ................................................................................... 249
Due from advisor (note 2) ........................................................................... 7,293
--------
Total assets ................................................................................... 242,536
--------
LIABILITIES
Accrued expenses .................................................................................... 20,928
--------
NET ASSETS ................................................................................................. $221,608
========
NET ASSETS CONSIST OF
Paid-in capital ..................................................................................... $180,052
Undistributed net realized gain on investments ...................................................... 28,292
Net unrealized appreciation on investments .......................................................... 13,264
--------
$221,608
========
INSTITUTIONAL CLASS
Net asset value, offering and redemption price per share ............................................ $13.91
($158,754 / 11,411 shares outstanding) ========
INVESTOR CLASS
Net asset value, offering and redemption price per share ............................................ $13.82
($62,854 / 4,550 shares outstanding) ========
Maximum offering price per share (100 / 97% of $13.82) .............................................. $14.25
========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
CAPITAL MANAGEMENT SMALL-CAP FUND
STATEMENT OF OPERATIONS
Period from January 12, 1999
(commencement of operations)
to November 30, 1999
INVESTMENT LOSS
Income
Dividends ....................................................................................... $ 2,165
--------
Expenses
Investment advisory fees (note 2) ............................................................... 1,608
Fund administration fees (note 2) ............................................................... 201
Distribution and service fees - Investor Class (note 3) ......................................... 375
Custody fees .................................................................................... 3,783
Registration and filing administration fees (note 2) ............................................ 522
Fund accounting fees (note 2) ................................................................... 31,441
Audit fees ...................................................................................... 10,100
Legal fees ...................................................................................... 6,668
Securities pricing fees ......................................................................... 2,524
Shareholder recordkeeping fees .................................................................. 7,500
Other accounting fees (note 2) .................................................................. 10,346
Shareholder servicing expenses .................................................................. 1,470
Registration and filing expenses ................................................................ 1,759
Printing expenses ............................................................................... 3,518
Trustee fees and meeting expenses ............................................................... 7,000
Other operating expenses ........................................................................ 1,393
--------
Total expenses ............................................................................ 90,208
--------
Less:
Expense reimbursements (note 2) ...................................................... (84,291)
Investment advisory fees waived (note 2) ............................................. (1,608)
Other accounting fees waived (note 2) ................................................ (1,519)
--------
Net expenses .............................................................................. 2,790
--------
Net investment loss .................................................................. (625)
--------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from investment transactions ....................................................... 28,917
Increase in unrealized appreciation on investments ................................................... 13,264
--------
Net realized and unrealized gain on investments ................................................. 42,181
--------
Net increase in net assets resulting from operations ...................................... $ 41,556
========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
CAPITAL MANAGEMENT SMALL-CAP FUND
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
Period ended
November 30,
1999 (b)
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS
Operations
Net investment loss ............................................................................. $ (625)
Net realized gain from investment transactions .................................................. 28,917
Increase in unrealized appreciation on investments .............................................. 13,264
---------
Net increase in net assets resulting from operations ....................................... 41,556
---------
Capital share transactions
Increase in net assets resulting from capital share transactions (a) ............................ 180,052
---------
Total increase in net assets .......................................................... 221,608
NET ASSETS
Beginning of period .................................................................................... 0
---------
End of period .......................................................................................... $ 221,608
=========
(a) A summary of capital share activity follows:
--------------------------------
Period ended
November 30, 1999 (b)
Shares Value
--------------------------------
- --------------------------
INSTITUTIONAL CLASS
- --------------------------
Shares sold ............................................................................ 11,411 $ 130,052
Shares redeemed ........................................................................ 0 0
--------- ---------
Net increase .................................................................... 11,411 $ 130,052
========= =========
- --------------------------
INVESTOR CLASS
- --------------------------
Shares sold ............................................................................ 4,550 $ 50,000
Shares redeemed ........................................................................ 0 0
--------- ---------
Net increase .................................................................... 4,550 $ 50,000
========= =========
(b) For the period beginning January 12, 1999 (commencement of operations) to November 30, 1999.
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
CAPITAL MANAGEMENT SMALL-CAP FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
- ------------------------------------------------------------------------------------------------------------------------------------
Institutional Investor
Class Class
- ------------------------------------------------------------------------------------------------------------------------------------
Period ended Period ended
November 30, November 30,
1999 (a) 1999 (a)
-------------- -------------
Net asset value, beginning of period ................................................ $10.99 $10.99
Income from investment operations
Net investment loss ......................................................... (0.01) (0.10)
Net realized and unrealized gain on investments ............................. 2.93 2.93
-------- --------
Total from investment operations ........................................ 2.92 2.83
-------- --------
Net asset value, end of period ...................................................... $13.91 $13.82
======== ========
Total return (b) .................................................................... 26.57 % 25.75 %
======== ========
Ratios/supplemental data
Net assets, end of period ...................................................... $158,754 $ 62,854
======== ========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees ............................... 55.71 % (c) 56.45 % (c)
After expense reimbursements and waived fees ................................ 1.50 % (c) 2.25 % (c)
Ratio of net investment loss to average net assets
Before expense reimbursements and waived fees ............................... (54.36)% (c) (55.11)% (c)
After expense reimbursements and waived fees ................................ (0.15)% (c) (0.91)% (c)
Portfolio turnover rate ........................................................ 145.58 % 145.58 %
(a) For the period beginning January 12, 1999 (commencement of operations) to November 30, 1999.
(b) Total return does not reflect payment of a sales charge.
(c) Annualized.
See accompanying notes to financial statements
</TABLE>
<PAGE>
CAPITAL MANAGEMENT SMALL-CAP FUND
NOTES TO FINANCIAL STATEMENTS
November 30, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
The Capital Management Small-Cap Fund (the "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 12, 1999. 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 pursues its investment objective by investing primarily in equity
securities of small-capitalization ("small-cap") companies. The Fund
considers a small-cap company to be one that has market capitalization,
measured at the time the Fund purchases the security, within the range
of $100 million to $1 billion. The Fund has an unlimited number of
$0.01 par value beneficial interest shares that are authorized, which
are divided into two classes - Institutional Shares and Investor
Shares.
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 - The Fund is considered a personal
holding company as defined under Section 542 of the Internal
Revenue Code since 50% of the value of the Fund's shares were
owned directly or indirectly by five or fewer individuals at
certain times during the last half of the year. As a personal
holding company, the Fund is subject to federal income taxes
on undistributed personal holding company income at the
maximum individual income tax rate. 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.
(Continued)
<PAGE>
CAPITAL MANAGEMENT SMALL-CAP FUND
NOTES TO FINANCIAL STATEMENTS
November 30, 1999
As a result of the Fund's operating net investment loss, a
reclassification adjustment of $625 has been made on the
statement of assets and liabilities to decrease accumulated
net investment loss, bringing it to zero, and decrease
undistributed net realized gain on investments.
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.
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 estimates.
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 shares and a maximum of 2.25%
of the average daily net assets of the Fund's Investor Class shares.
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 $1,608 ($0.11 per share) and reimbursed
$84,291 of the operating expenses incurred by the Fund for the period
ended November 30, 1999.
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 0.125% of the Fund's first $50 million of average daily
net assets, 0.10% of the next $50 million, and 0.075% 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. The contract with the Administrator provides that the aggregate
fees for the aforementioned administration, accounting, and
recordkeeping services shall not be less than $4,000 per month. The
Administrator also charges the Fund for certain expenses involved with
the daily valuation of portfolio securities. The Administrator has
voluntarily waived a portion of its fees amounting to $1,519 ($0.10 per
share) for the period ended November 30, 1999.
(Continued)
<PAGE>
CAPITAL MANAGEMENT SMALL-CAP FUND
NOTES TO FINANCIAL STATEMENTS
November 30, 1999
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.
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,
the Distributor did not retain any sales charges.
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 Class 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 Class Shares in the
Fund or support servicing of Investor Class Share shareholder accounts.
Such expenditures incurred as service fees may not exceed 0.25% per
annum of the Investor Class Shares' average daily net assets. The Fund
incurred $375 of such expenses for the period ended November 30, 1999.
NOTE 4 - PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments, other than short-term investments,
aggregated $360,026 and $231,612, respectively, for the period ended
November 30, 1999.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees of Capital Management Investment Trust and Shareholders
of Capital Management Small-Cap Fund:
We have audited the accompanying statement of assets and liabilities of Capital
Management Small-Cap Fund(the "Fund") (a portfolio of Capital Management
Investment Trust), including the portfolio of investments, as of November 30,
1999, and the related statements of operations and of changes in net assets and
the financial highlights for the period from January 12, 1999 (commencement of
operations) to November 30, 1999. 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.
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,
1999, by correspondence with the custodian and broker. 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 financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Capital Management Small-Cap Fund as of November 30 1999, the results of its
operations, the changes in its net assets and the financial highlights for the
period from January 12, 1999 to November 30, 1999, in conformity with generally
accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
December 17, 1999
<PAGE>
PART C
======
FORM N1-A
OTHER INFORMATION
ITEM 23. Exhibits
--------
(a) Declaration of Trust.^1
(b) By-Laws.^1
(c) Certificates for shares are not issued. Articles V, VI, VII, IX, and X
of the Declaration of Trust, previously filed as Exhibit (a)(1) hereto,
define the rights of holders of Shares.^1
(d) Amended and Restated Investment Advisory Agreement between the Capital
Management Investment Trust and Capital Management Associates, Inc., as
Advisor.^4
(e) Amended and Restated Distribution Agreement between the Capital
Management Investment Trust and Shields & Company, as Distributor.^4
(f) Not Applicable.
(g) Custodian Agreement between the Capital Management Investment Trust and
First Union National Bank of North Carolina, as Custodian.^3
(h)(1) Fund Accounting and Compliance Administration Agreement between the
Capital Management Investment Trust and The Nottingham Company, Inc.,
as Administrator.^4
(h)(2) Dividend Disbursing and Transfer Agent Agreement between the Capital
Management Investment Trust and NC Shareholder Services, LLC, as
Transfer Agent.^4
(h)(3) Expense Limitation Agreement between the Capital Management Investment
Trust and Capital Management Associates, Inc.
(h)(4) Form of Expense Limitation Agreement between the Capital Management
Investment Trust and Capital Management Associates, Inc. with regards
to the Capital Management Mid-Cap Fund.^5
(h)(5) Form of Expense Limitation Agreement between the Capital Management
Investment Trust and Capital Management Associates, Inc. with regards
to the Capital Management Small-Cap Fund.^5
(i)(1) Opinion and Consent of Dechert Price & Rhoads, Counsel, regarding the
legality of the securities registered.^1
(i)(2) Consent of Dechert Price & Rhoads.
(j) Consent of Deloitte & Touche LLP, Independent Public Accountants.
(k) Not applicable.
(l) Initial Capital Agreement.^1
(m)(1) Distribution Plan under Rule 12b-1 for the Capital Management
Investment Trust.^1
(m)(2) Form of Amended and Restated Distribution Plan under Rule 12b-1 for the
Capital Management Investment Trust.
(n) Rule 18f-3 Multi-Class Plan.^1
(p)(1) Code of Ethics for the Capital Management Investment Trust and Capital
Management Associates, Inc.
(p)(2) Code of Ethics for Shields and Company.^5
(q) Powers of Attorney.^2
- -----------------------
1. Incorporated herein by reference to Capital Management Investment Trust's
Registration Statement Post-Effective Amendment No. 3 on Form N-1A filed on
March 26, 1996 (File No. 33-85242).
2. Incorporated herein by reference to Capital Management Investment Trust's
Registration Statement Post-Effective Amendment No. 4 on Form N-1A filed on
March 31, 1997 (File No. 33-85242).
3. Incorporated herein by reference to Capital Management Investment Trust's
Registration Statement Post-Effective Amendment No. 6 on Form N-1A filed on
October 29, 1998 (File No. 33-85242).
4. Incorporated herein by reference to Capital Management Investment Trust's
Registration Statement Post-Effective Amendment No. 8 on Form N-1A filed on
January 29, 1999 (File No. 33-85242).
5. To be filed by Amendment.
ITEM 24. Persons Controlled by or Under Common Control with the Registrant
-----------------------------------------------------------------
No person is controlled by or under common control with the Capital Management
Investment Trust.
ITEM 25. Indemnification
---------------
The Trust's Declaration of Trust, Investment Advisory Agreements, Administration
Agreement, and Distribution Agreements provide for indemnification of certain
persons acting on behalf of the Trust.
Article V, Section 5.4 of the Trust's Declaration of Trust states:
1. Subject only to the provisions hereof, every person who is
or has been a Trustee, officer, employee or agent of the
Trust and every person who serves at the Trustees request as
director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise shall
be indemnified by the Trust to the fullest extent permitted
by law against all liabilities and against all expenses
reasonably incurred or paid by him in connection with any
debt, claim, action, demand, suit, proceeding, judgment,
decree, liability or obligation of any kind in which he
becomes involved as a party or otherwise or is threatened by
virtue of his being or having been a Trustee, officer,
employee or agent of the Trust or of another corporation,
partnership, joint venture, trust or other enterprise at the
request of the Trust and against amounts paid or incurred by
him in the compromise or settlement thereof.
2. The words "claim", "action", "suit", or "proceeding" shall
apply to all claims, actions, suits or proceedings (civil,
criminal, administrative, legislative, investigative or
other, including appeals), actual or threatened, and the
words "liabilities" and "expenses" shall include, without
limitation, attorneys' fees, costs, judgments, amounts paid
in settlement, fines, penalties and other liabilities.
3. No indemnification shall be provided hereunder to a Trustee
or officer:
a. against any liability to the Trust or the Shareholders
by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved
in the conduct of his office ("disabling conduct");
b. with respect to any matter as to which he shall, by the
court or other body by or before which the proceeding
was brought or engaged, have been finally adjudicated
to be liable by reason of disabling conduct;
c. in the absence of a final adjudication on the merits
that such Trustee or officer did not engage in disabling
conduct, unless a reasonable determination, based upon
a review of the facts that the person to be indemnified
is not liable by reason of such conduct, is made:
(A) by vote of a majority of a quorum of the Trustees who
are neither Interested Persons nor parties to the
proceedings; or
(B) by independent legal counsel, in a written opinion.
4. The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be
severable, shall not affect any other rights to which any
Trustee, officer, employee or agent may now or hereafter be
entitled, shall continue as to a person who has ceased to be
such Trustee, officer, employee, or agent and shall inure to
the benefit of the heirs, executors and administrators of
such a person; provided, however, that no person may satisfy
any right of indemnity or reimbursement granted herein
except out of the property of the Trust, and no other person
shall be personally liable to provide indemnity or
reimbursement hereunder (except an insurer or surety or
person otherwise bound by contract).
5. Expenses in connection with the preparation and presentation
of a defense to any claim, action, suit or proceeding of the
character described in paragraph (a) of this Section 5.4 may
be paid by the Trust prior to final disposition thereof upon
receipt of a written undertaking by or on behalf of the
Trustee, officer, employee or agent to reimburse the Trust
if it is ultimately determined under this Section 5.4 that
he is not entitled to indemnification. Such undertaking
shall be secured by a surety bond or other suitable
insurance or such security as the Trustees shall require
unless a majority of a quorum of the Trustees who are
neither Interested Persons nor parties to the proceeding, or
independent legal counsel in a written opinion, shall have
determined, based on readily available facts, that there is
reason to believe that the indemnitee ultimately will be
found to be entitled to indemnification.
Insofar as indemnification for liability arising under the Securities Act of
1933, as amended (the "Act") may be permitted to Trustees, officers and
controlling persons of the Capital Management Investment Trust pursuant to the
foregoing provisions, or otherwise, the Capital Management Investment Trust has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Capital Management Investment
Trust of expenses incurred or paid by a Trustee, officer or controlling person
of the Capital Management Investment Trust in the successful defense of any
action, suit or proceeding) is asserted by such Trustee, officer or controlling
person in connection with the securities being registered, the Capital
Management Investment Trust will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
ITEM 26. Business and other Connections of the Investment Advisor
--------------------------------------------------------
See the Statement of Additional Information section entitled "Management and
Other Service Providers" of the Funds and the Investment Advisor's Form ADV
filed with the Commission, which is hereby incorporated by reference, for the
activities and affiliations of the officers and directors of the Investment
Advisor of the Capital Management Investment Trust. Except as so provided, to
the knowledge of the Capital Management Investment Trust, none of the directors
or executive officers of the Investment Advisor is or has been at any time
during the past two fiscal years engaged in any other business, profession,
vocation or employment of a substantial nature. The Investment Advisor currently
serves as investment advisor to numerous institutional and individual clients.
ITEM 27. Principal Underwriter
---------------------
(a) Shields & Company is underwriter and distributor for the Capital Management
Mid-Cap Fund and the Capital Management Small-Cap Fund.
(b) Name and Position(s) Position(s)
Principal and Offices and Offices
Business Address with Underwriter with Registrant
================ ================ ===============
Joseph V. Shields, Jr. Chairman Trustee
140 Broadway
New York, New York 10005
David V. Shields President Trustee
140 Broadway
New York, New York 10005
Richard B. Thatcher Vice President None
140 Broadway Secretary
New York, New York 10005 Treasurer
Bruce L. Graham, CFA Vice President None
140 Broadway
New York, New York 10005
Brian Keep Vice President None
140 Broadway
New York, New York 10005
(c) Not applicable
ITEM 28. Location of Accounts and Records
--------------------------------
All account books and records not normally held by the Custodian are held by the
Trust, in the offices of The Nottingham Company, Inc. or NC Shareholder
Services, LLC, Administrator and Transfer Agent, respectively, to the Trust, or
in the offices of Capital Management Associates, Inc., the Advisor.
The address of The Nottingham Company, Inc. is 105 North Washington Street, P.O.
Box 69, Rocky Mount, North Carolina 27802-0069. The address of NC Shareholder
Services, LLC is 107 North Washington Street, P.O. Box 4365, Rocky Mount, North
Carolina 27802-0365. The address of Capital Management Associates, Inc. is 140
Broadway, New York, New York 10005. The address of First Union National Bank of
North Carolina is Two First Union Center, Charlotte, North Carolina 28288-1151.
ITEM 29. Management Services
-------------------
Not applicable
ITEM 30. Undertakings
------------
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended
("Securities Act"), and the Investment Company Act of 1940, as amended, the
Registrant certifies that it meets all of the requirements for effectiveness of
this registration statement under Rule 485(b) under the Securities Act and has
duly caused this Post-Effective Amendment No. 8 to its Registration Statement to
be signed on its behalf by the undersigned, thereto duly authorized, in the City
of Rocky Mount, and State of North Carolina on this 31st day of March, 2000.
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, as amended, this
Post-Effective Amendment No. 8 to the Registration Statement has been signed
below by the following persons in the capacities and on the date indicated.
*
Trustee
- -------------------------------------------------------------
Lucius E. Burch, III Date
*
Trustee
- -------------------------------------------------------------
George S. Reichenbach Date
*
Trustee
- -------------------------------------------------------------
Thomas A. Saunders, III Date
*
Trustee
- -------------------------------------------------------------
David V. Shields Date
*
Trustee and
- ------------------------------------------------------------- Chairman
Joseph V. Shields Date
*
Trustee
- -------------------------------------------------------------
Anthony J. Walton Date
*
- ------------------------------------------------------------- Vice-President
Joseph A. Zock Date
/s/ Julian G. Winters March 31, 2000
- ------------------------------------------------------------- Treasurer
Julian G. Winters Date
* By: /s/ C. Frank Watson, III Dated: March 31, 2000
--------------------------------------------
C. Frank Watson, III
Attorney-in-Fact
<PAGE>
INDEX TO EXHIBITS
(FOR POST-EFFECTIVE AMENDMENT NO. 8)
_____________________________________
EXHIBIT NO.
UNDER PART C
OF FORM N-1A NAME OF EXHIBIT
- ------------ ---------------
(h)(3) Expense Limitation Agreement
(i)(2) Consent of Counsel
(j) Consent of Independent Public Accountants
(m)(2) Form of Amended and Restated Distribution Plan under Rule 12b-1
(p)(1) Code of Ethics for the Capital Management Investment Trust and
Capital
Exhibit (h)(3): Expense Limitation Agreement
--------------
EXPENSE LIMITATION AGREEMENT
CAPITAL MANAGEMENT INVESTMENT TRUST
EXPENSE LIMITATION AGREEMENT, effective as of November 30, 1998 by and
between Capital Management Associates, Inc. (the "Manager") and Capital
Management Investment Trust (the "Trust"), on behalf of each series of the Trust
set forth in Schedule A attached hereto (each a "Fund," and collectively, the
"Funds").
WHEREAS, the Trust is a Delaware business trust organized under the
Amended and Restated Agreement and Declaration of Trust ("Declaration of
Trust"), and is registered under the Investment Company Act of 1940, as amended
(the "1940 Act"), as an open-end management company of the series type, and each
Fund is a series of the Trust; and
WHEREAS, the Trust and the Manager have entered into an Investment
Management Agreement dated November 10, 1998, as amended ("Management
Agreement"), pursuant to which the Manager provides investment management
services to each Fund listed in Schedule A, which may be amended from time to
time, for compensation based on the value of the average daily net assets of
each such Fund; and
WHEREAS, the Trust and the Manager have determined that it is
appropriate and in the best interests of each Fund and its shareholders to
maintain the expenses of each Fund, and, therefore, have entered into this
Expense Limitation Agreement, in order to maintain each Fund's expense ratios at
the levels specified Schedule A attached hereto; and
NOW THEREFORE, the parties hereto agree that the Expense Limitation
Agreement provides as follows:
1. EXPENSE LIMITATION.
1.1. APPLICABLE EXPENSE LIMIT. To the extent that the aggregate expenses of
every character incurred by a Fund in any fiscal year, including but
not limited to investment management fees of the Manager (but
excluding interest, taxes, brokerage commissions, other expenditures
which are capitalized in accordance with generally accepted accounting
principles, other extraordinary expenses not incurred in the ordinary
course of such Fund's business, and amounts, if any, payable pursuant
to a plan adopted in accordance with Rule 12b-1 under the 1940 Act)
("Fund Operating Expenses"), exceed the Operating Expense Limit, as
defined in Section 1.2 below, such excess amount (the "Excess Amount")
shall be the liability of the Manager.
1.2. OPERATING EXPENSE LIMIT. The maximum Operating Expense Limit in any
year with respect to each Fund shall be the amount specified in
Schedule A based on a percentage of the average daily net assets of
each Fund.
1.3. METHOD OF COMPUTATION. To determine the Manager's liability with
respect to the Excess Amount, each month the Fund Operating Expenses
for each Fund shall be annualized as of the last day of the month. If
the annualized Fund Operating Expenses for any month of a Fund exceed
the Operating Expense Limit of such Fund, the Manager shall first
waive or reduce its investment management fee for such month by an
amount sufficient to reduce the annualized Fund Operating Expenses to
an amount no higher than the Operating Expense Limit. If the amount of
the waived or reduced investment management fee for any such month is
insufficient to pay the Excess Amount, the Manager may also remit to
the appropriate Fund or Funds an amount that, together with the waived
or reduced investment management fee, is sufficient to pay such Excess
Amount.
1.4. YEAR-END ADJUSTMENT. If necessary, on or before the last day of the
first month of each fiscal year, an adjustment payment shall be made
by the appropriate party in order that the amount of the investment
management fees waived or reduced and other payments remitted by the
Manager to the Fund or Funds with respect to the previous fiscal year
shall equal the Excess Amount.
2. REIMBURSEMENT OF FEE WAIVERS AND EXPENSE REIMBURSEMENTS.
2.1. REIMBURSEMENT. If in any year during which the total assets of a Fund
are greater than $10 million and in which the Management Agreement is
still in effect, the estimated aggregate Fund Operating Expenses of
such Fund for the fiscal year are less than the Operating Expense
Limit for that year, subject to quarterly approval by the Trust's
Board of Trustees as provided in Section 2.2 below, the Manager shall
be entitled to reimbursement by such Fund, in whole or in part as
provided below, of the investment management fees waived or reduced
and other payments remitted by the Manager to such Fund pursuant to
Section 1 hereof. The total amount of reimbursement to which the
Manager may be entitled (the "Reimbursement Amount") shall equal, at
any time, the sum of all investment management fees previously waived
or reduced by the Manager and all other payments remitted by the
Manager to the Fund, pursuant to Section 1 hereof, during any of the
previous five (5) fiscal years, less any reimbursement previously paid
by such Fund to the Manager, pursuant to Sections 2.2 or 2.3 hereof,
with respect to such waivers, reductions, and payments. The
Reimbursement Amount shall not include any additional charges or fees
whatsoever, including, e.g., interest accruable on the Reimbursement
Amount.
2.2. BOARD APPROVAL. No reimbursement shall be paid to the Manager with
respect to any Fund pursuant to this provision in any fiscal quarter,
unless the Trust's Board of Trustees has determined that the payment
of such reimbursement is in the best interests of such Fund and its
shareholders. The Trust's Board of Trustees shall determine quarterly
in advance whether any reimbursement may be paid to the Manager with
respect to any Fund in such quarter.
2.3. METHOD OF COMPUTATION. To determine each Fund's payments, if any, to
reimburse the Manager for the Reimbursement Amount, each month the
Fund Operating Expenses of each Fund shall be annualized as of the
last day of the month. If the annualized Fund Operating Expenses of a
Fund for any month are less than the Operating Expense Limit of such
Fund, such Fund, only with the prior approval of the Trust's Board of
Trustees, shall pay to the Manager an amount sufficient to increase
the annualized Fund Operating Expenses of that Fund to an amount no
greater than the Operating Expense Limit of that Fund, provided that
such amount paid to the Manager will in no event exceed the total
Reimbursement Amount.
2.4. YEAR-END ADJUSTMENT. If necessary, on or before the last day of the
first month of each fiscal year, an adjustment payment shall be made
by the appropriate party in order that the actual Fund Operating
Expenses of a Fund for the prior fiscal year (including any
reimbursement payments hereunder with respect to such fiscal year) do
not exceed the Operating Expense Limit.
3. TERM AND TERMINATION OF AGREEMENT.
This Agreement with respect to the Funds shall continue in effect on November
30, 1998, and from year to year thereafter provided each such continuance is
specifically approved by a majority of the Trustees of the Trust who (i) are not
"interested persons" of the Trust or any other party to this Agreement, as
defined in the 1940 Act, and (ii) have no direct or indirect financial interest
in the operation of this Agreement ("Non-Interested Trustees"). Nevertheless,
this Agreement may be terminated by either party hereto, without payment of any
penalty, upon ninety (90) days' prior written notice to the other party at its
principal place of business; provided that, in the case of termination by the
Trust, such action shall be authorized by resolution of a majority of the
Non-Interested Trustees of the Trust or by a vote of a majority of the
outstanding voting securities of the Trust.
4. MISCELLANEOUS.
4.1. CAPTIONS. The captions in this Agreement are included for convenience
of reference only and in no other way define or delineate any of the
provisions hereof or otherwise affect their construction or effect.
4.2. INTERPRETATION. Nothing herein contained shall be deemed to require
the Trust or the Funds to take any action contrary to the Trust's
Declaration of Trust or By-Laws, or any applicable statutory or
regulatory requirement to which it is subject or by which it is bound,
or to relieve or deprive the Trust's Board of Trustees of its
responsibility for and control of the conduct of the affairs of the
Trust or the Funds.
4.3. DEFINITIONS. Any question of interpretation of any term or provision
of this Agreement, including but not limited to the investment
management fee, the computations of net asset values, and the
allocation of expenses, having a counterpart in or otherwise derived
from the terms and provisions of the Management Agreement or the 1940
Act, shall have the same meaning as and be resolved by reference to
such Management Agreement or the 1940 Act.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by their
respective officers thereunto duly authorized and their respective corporate
seals to be hereunto affixed, as of the day and year first above written.
CAPITAL MANAGEMENT INVESTMENT TRUST
ON BEHALF OF EACH OF ITS SERIES
LISTED BELOW IN SCHEDULE A
By:
CAPITAL MANAGEMENT ASSOCIATES, INC.
By:
<PAGE>
SCHEDULE A
OPERATING EXPENSE LIMITS
This Agreement relates to the following Funds of the Trust:
Maximum Operating
NAME OF FUND EXPENSE LIMIT
- ------------ ----------------
Capital Management Mid-Cap Fund 1.50%
Capital Management Small-Cap Fund 1.50%
Capital Management Energy Fund 1.50%
Exhibit (i)(2): Consent of Counsel
--------------
[LETTERHEAD]
Law Offices of
DECHERT PRICE & RHOADS
1775 Eye St., N.W.
Washington, DC 20006-2401
Telephone: (202) 261-3300
Fax: (202) 261-3333
March 31, 2000
Capital Management Investment Trust
107 North Washington Street
Post Office Box 4365
Rocky Mount, NC 27803-0365
Re: Post-Effective Amendment No. 8 to Registration Statement on Form N-1A for
Capital Management Investment Trust ("Trust") (FILE NOS. 33-85242 AND
811-08822)
Dear Sirs and Madams:
We hereby consent to the reference to our firm as counsel in the Trust's
Statements of Additional Information contained in the Post-Effective Amendment
No. 8 to the Trust's Registration Statement.
Very truly yours,
/S/ Dechert Price & Rhoads
Dechert Price & Rhoads
Exhibit (j): Consent of Independent Public Accountants
-----------
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Post-Effective Amendment
No. 8 to Registration Statement No. 33-85242 of Capital Management Mid-Cap Fund
of our report dated December 17, 1999, appearing in the Annual Report for the
year ended November 30, 1999, and to the reference to us under the heading
"Financial Highlights" in the Prospectus, which is part of such Registration
Statement.
/s/ Deloitte & Touche LLP
Princeton, New Jersey
March 30, 2000
<PAGE>
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Post-Effective Amendment
No. 8 to Registration Statement No. 33-85242 of Capital Management Small-Cap
Fund of our report dated December 17, 1999, appearing in the Annual Report for
the period ended November 30, 1999, and to the reference to us under the heading
"Financial Highlights" in the Prospectus, which is part of such Registration
Statement.
/s/ Deloitte & Touche LLP
Princeton, New Jersey
March 30, 2000
Exhibit (m)(2): Form of Amended and Restated Distribution Plan under Rule 12b-1
--------------
FORM OF AMENDED AND RESTATED
PLAN OF DISTRIBUTION PURSUANT TO RULE 12B-1
WHEREAS, Capital Management Investment Trust, an unincorporated business trust
organized and existing under the laws of the Commonwealth of Massachusetts (the
"Trust"), engages in business as an open-end management investment company and
is registered as such under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Trust is authorized to issue an unlimited number of shares of
beneficial interest (the "Shares"), in separate series representing the
interests in separate funds of securities and other assets; and
WHEREAS, the Trust offers a series of such Shares representing interests in THE
CAPITAL MANAGEMENT MID-CAP FUND AND THE CAPITAL MANAGEMENT SMALL-CAP FUND (the
"Funds") of the Trust;
WHEREAS, the Trustees of the Trust as a whole, and the Trustees who are not
interested persons of the Trust (as defined in the 1940 Act) and who have no
direct or indirect financial interest in the operation of this Plan or in any
agreement relating hereto (the "Non-Interested Trustees"), having determined, in
the exercise of reasonable business judgment and in light of their fiduciary
duties under state law and under Section 36(a) and (b) of the 1940 Act, that
there is a reasonable likelihood that this Plan will benefit the Funds and its
shareholders, have approved this Plan by votes cast at a meeting held in person
and called for the purpose of voting hereon and on any agreements related
hereto; and
NOW, THEREFORE, the Trust hereby adopts this Plan in accordance with Rule 12b-1
under the 1940 Act, on the following terms and conditions:
1. DISTRIBUTION AND SERVICING ACTIVITIES. Subject to the supervision of the
Trustees of the Trust, the Trust may, directly or indirectly, engage in any
activities primarily intended to result in the sale of Investor Shares of
the Funds, which activities may include, but are not limited to, the
following: (a) payments to the Trust's Distributor and to securities
dealers and others in respect of the sale of Investor Shares of the Funds;
(b) payment of compensation to and expenses of personnel (including
personnel of organizations with which the Trust has entered into agreements
related to this Plan) who engage in or support distribution of Investor
Shares of the Funds or who render shareholder support services not
otherwise provided by the Trust's transfer agent, administrator, or
custodian, including but not limited to, answering inquiries regarding the
Trust, processing shareholder transactions, providing personal services
and/or the maintenance of shareholder accounts, providing other shareholder
liaison services, responding to shareholder inquiries, providing
information on shareholder investments in the Funds, and providing such
other shareholder services as the Trust may reasonably request; (c)
formulation and implementation of marketing and promotional activities,
including, but not limited to, direct mail promotions and television,
radio, newspaper, magazine and other mass media advertising; (d)
preparation, printing and distribution of sales literature; (e)
preparation, printing and distribution of prospectuses and statements of
additional information and reports of the Trust for recipients other than
existing shareholders of the Trust; and (f) obtaining such information,
analyses and reports with respect to marketing and promotional activities
as the Trust may, from time to time, deem advisable. The Trust is
authorized to engage in the activities listed above, and in any other
activities primarily intended to result in the sale of Investor Shares of
the Funds, either directly or through other persons with which the Trust
has entered into agreements related to this Plan.
2. MAXIMUM EXPENDITURES. The expenditures to be made by the Funds pursuant to
this Plan and the basis upon which payment of such expenditures will be
made shall be determined by the Trustees of the Trust, but in no event may
such expenditures exceed an amount calculated at the rate of 0.75% per
annum of the average daily net asset value of the Investor Shares of the
Funds for each year or portion thereof included in the period for which the
computation is being made, elapsed since the inception of this Plan to the
date of such expenditures. Notwithstanding the foregoing, in no event may
such expenditures paid by the Funds as service fees exceed an amount
calculated at the rate of 0.75% of the average annual net assets of the
Investor Shares of the Funds, nor may such expenditures paid as service
fees to any person who sells Shares of the Funds exceed an amount
calculated at the rate of 0.25% of the average annual net asset value of
such shares. Such payments for distribution and shareholder servicing
activities may be made directly by the Trust or to other persons with which
the Trust has entered into agreements related to this Plan.
3. TERM AND TERMINATION.
(a) This Plan shall become effective as of the 27TH OF APRIL, 2000. Unless
terminated as herein provided, this Plan shall continue in effect for
one year from the date hereof and shall continue in effect for
successive periods of one year thereafter, but only so long as each
such continuance is specifically approved by votes of a majority of
both (i) the Trustees of the Trust and (ii) the Non-Interested
Trustees, cast at a meeting called for the purpose of voting on such
approval.
(b) This Plan may be terminated at any time with respect to the Funds by a
vote of a majority of the Non-Interested Trustees or by a vote of a
majority of the outstanding voting securities of the Funds as defined
in the 1940 Act.
4. AMENDMENTS. This Plan may not be amended to increase materially the maximum
expenditures permitted by Section 2 hereof unless such amendment is
approved by a vote of the majority of the outstanding voting securities of
the Funds as defined in the 1940 Act with respect to which a material
increase in the amount of expenditures is proposed, and no material
amendment to this Plan shall be made unless approved in the manner provided
for annual renewal of this Plan in Section 3(a) hereof.
5. SELECTION AND NOMINATION OF TRUSTEES. While this Plan is in effect, the
selection and nomination of the Non-Interested Trustees of the Trust shall
be committed to the discretion of such Non-Interested Trustees.
6. QUARTERLY REPORTS. The Treasurer of the Trust shall provide to the Trustees
of the Trust and the Trustees shall review quarterly a written report of
the amounts expended pursuant to this Plan and any related agreement and
the purposes for which such expenditures were made.
7. RECORDKEEPING. The Trust shall preserve copies of this Plan and any related
agreement and all reports made pursuant to Section 6 hereof, for a period
of not less than six years from the date of this Plan. Any such related
agreement or such reports for the first two years will be maintained in an
easily accessible place.
8. LIMITATION OF LIABILITY. Any obligations of the Trust hereunder shall not
be binding upon any of the Trustees, officers or shareholders of the Trust
personally, but shall bind only the assets and property of the Trust. The
term "Capital Management Investment Trust" means and refers to the Trustees
from time to time serving under the Agreement and Declaration of Trust of
the Trust, a copy of which is on file with the Secretary of The
Commonwealth of Massachusetts. The execution of this Plan has been
authorized by the Trustees, and this Plan has been signed on behalf of the
Trust by an authorized officer of the Trust, acting as such and not
individually, and neither such authorization by such Trustees nor such
execution by such officer shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally, but
shall bind only the assets and property of the Trust as provided in the
Agreement and Declaration of Trust.
Exhibit (p)(1): Code of Ethics for the Capital Management Investment
-------------- Trust and Capital Management Associates, Inc.
CODE OF ETHICS
WHEREAS, the Capital Management Investment Trust (the "Trust"), is a
registered investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"), which is authorized to issue its shares of beneficial
interest in separate series representing the interests in separate funds of
securities and other assets (each a "Fund");
WHEREAS, Rule 17j-1 under the 1940 Act makes it unlawful for certain
persons, including Trustees, officers, and other investment personnel of the
Trust and any Fund of the Trust, to engage in fraudulent, manipulative, or
deceptive conduct in connection with their personal trading of securities "held
or to be acquired" by any Fund of the Trust;
WHEREAS, Rule 17j-1 under the 1940 Act requires the Trust, and the
investment adviser of and principal underwriter for each Fund of the Trust, to
adopt a Code of Ethics and procedures reasonably designed to prevent trading
prohibited by the Rule and to use reasonable diligence to prevent violations of
such Code;
WHEREAS, the Investment Company Institute (the "ICI") has also
suggested that investment companies adopt additional measures to obviate
conflicts, prevent and detect abusive practices, and preserve the confidence of
investors; and
WHEREAS, the policies, restrictions, and procedures included in this
Code of Ethics are designed to prevent violations of Rule 17j-1 under the 1940
Act and to conform in substantial part to the additional measures suggested by
the ICI;
NOW, THEREFORE, the Trust hereby adopts this Code of Ethics for the
Trust and each Fund of the Trust to read in its entirety as follows:
I. RULES APPLICABLE TO TRUSTEES, OFFICERS, AND OTHER ACCESS PERSONS OF THE
TRUST
A. DEFINITIONS
1. "Access Person" shall mean (i) any trustee, director, officer,
general partner, or advisory person (as defined below) of the
Trust or any Fund of the Trust or an investment adviser thereof,
or (ii) any director, officer, or general partner of a principal
underwriter for the Trust or any Fund of the Trust who, in the
ordinary course of his or her business, makes, participates in,
or obtains information regarding the purchase or sale of
securities for any Fund of the Trust for which the principal
underwriter so acts or whose functions or duties as part of the
ordinary course of his or her business relate to the making of
any recommendation to any Fund of the Trust regarding the
purchase and sale of securities, or (iii) notwithstanding the
provisions of clause (i) above, where an investment adviser is
primarily engaged in a business or businesses other than advising
registered investment companies or other advisory clients, any
director, officer, general partner, or advisory person of the
investment adviser who, with respect to any Fund of the Trust,
makes any recommendation, participates in the determination of
which recommendation shall be made, or whose principal function
or duties relate to the determination of which recommendation
shall be made to any Fund of the Trust, or who, in connection
with his or her duties, obtains any information concerning
securities recommendations being made by such investment adviser
to any Fund of the Trust.
2. An "Advisory Person" is any employee of the Trust or any Fund of
the Trust or of an investment adviser thereof (or of any company
in a control relationship thereto) who, in connection with his or
her regular functions or duties, makes, participates in, or
obtains information regarding the purchase or sale of securities
for any Fund of the Trust or whose functions relate to the making
of any recommendations with respect to such purchases or sales,
and any natural person in a control relationship with the Trust
or any Fund of the Trust or an adviser thereof who obtains
information concerning recommendations made to any Fund of the
Trust regarding the purchase or sale of securities.
3. "Beneficial Ownership" shall be interpreted subject to the
provisions of Rule 16a-1(a)(exclusive of Section (a)(1) of such
Rule) of the Securities Exchange Act of 1934, as amended, which
generally speaking, encompasses those situations in which the
beneficial owner has the right to enjoy some direct or indirect
"pecuniary interest" (i.e., some economic benefit) from the
ownership of a security. A direct pecuniary interest is the
opportunity, directly or indirectly, to profit, or share in any
profit, from the transaction. An indirect pecuniary interest is
any indirect financial interest in the transaction. For example,
a person is normally regarded as the beneficial owner of
securities held in the name of a member of his or her immediate
family living in his or her household. Moreover, a person is
normally regarded as the beneficial owner of securities held by a
partnership to the extent he or she is a general partner or of
securities held by a trust of which the person is settlor of the
trust with the power to revoke the trust without the consent of
another person, or is a beneficiary of the trust, in both cases
if the person also has or shares investment control over the
securities in the trust. A person may also have an indirect
pecuniary interest in securities that such person may acquire
upon exercise of an option or other right or through conversion
of a security. A report of beneficial ownership hereunder may
disclaim such beneficial ownership.
4. "Control" shall have the meaning set forth in Section 2(a)(9) of
the 1940 Act.
5. "Disinterested Trustee" of the Trust means a Trustee who is not
an "interested person" of the Trust within the meaning of Section
2(a)(19) of the 1940 Act. An "interested person" of the Trust
includes any person who is a trustee, director, officer,
employee, or owner of 5% or more of the outstanding stock of an
investment adviser of or principal underwriter, if any, for any
Fund of the Trust. Affiliates of brokers or dealers are also
"interested persons" of the Trust, except as provided in Rule
2a19-1 under the 1940 Act.
6. "Portfolio Manager" means the person or persons who have or share
direct responsibility and authority to make investment decisions
affecting any Fund of the Trust.
7. "Purchase or sale of a security" includes, among other things,
the writing of an option to purchase or sell a security or the
purchase or sale of a future or index on a security or option
thereon.
8. "Review Officer" means, with respect to the Trust, the Secretary
of the Trust or such other person(s) as may be designated by the
Board of Trustees of the Trust. In this regard, each investment
adviser of and principal underwriter for each Fund of the Trust
shall appoint a compliance officer of each such adviser or
underwriter, which person shall be designated by the Board of
Trustees of the Trust as the "Review Officer" with respect to
such adviser or underwriter. The purpose of this arrangement is
for each such compliance officer to monitor compliance with this
Code of Ethics in connection with all persons covered hereunder
associated with such compliance officer's particular associated
adviser or underwriter. For example, the investment adviser of
each Fund of the Trust shall appoint a compliance officer of such
adviser to serve as the Review Officer hereunder with respect to
that adviser and Fund, who shall approve transactions, receive
reports, and otherwise monitor compliance with this Code of
Ethics in connection with all Access Persons associated with such
adviser and Fund. In turn each such compliance officer shall
report at least quarterly to the Secretary of the Trust all
violations of this Code that occurred during the past quarter. As
Review Officer with respect to the Trust, the Secretary of the
Trust shall approve transactions, receive reports, and otherwise
monitor compliance with this Code of Ethics in connection with
all Access Persons not otherwise associated with an investment
adviser of or principal underwriter to any Fund of the Trust;
receive reports from all other Review Officers designated
hereunder; report at least quarterly to the Board of Trustees of
the Trust all violations of this Code that occurred during the
past quarter; and report at least annually to the Board of
Trustees the information listed under Section II-F below.
9. "Security" shall have the meaning as set forth in Section
2(a)(36) of the 1940 Act, except that it shall not include
securities issued by the U.S. Government (or any other "U.S.
Government security" as the term is defined in the 1940 Act),
bankers acceptances, bank certificates of deposit, commercial
paper, and shares of registered open-end investment companies
(i.e., other mutual funds generally).
10. A security is "held or to be acquired" by any Fund of the Trust
if within the most recent 15 days it (i) is or has been held by a
Fund of the Trust or (ii) is being held or has been considered by
a Fund of the Trust or its investment adviser for purchase by the
Fund.
11. A security is "being considered for purchase or sale" when, among
other circumstances, the assigned analyst or Portfolio Manager is
seriously considering a change in the rating of the security.
12. All references herein to an "investment adviser" of a Fund of the
Trust shall be deemed to include any "co-adviser" or
"sub-adviser" of such Fund as the case may be.
B. STATEMENT OF GENERAL PRINCIPLES ON PERSONAL INVESTMENT ACTIVITIES
NO ACCESS PERSON OF THE TRUST OR ANY FUND OF THE TRUST SHALL ENGAGE IN
ANY ACT, PRACTICE, OR COURSE OF CONDUCT THAT VIOLATES THE PROVISIONS
OF RULE 17j-1 OF THE 1940 ACT. IN ORDER TO EFFECTUATE THIS
PROHIBITION, THE FOLLOWING GENERAL PRINCIPLES AND SPECIFIC PROHIBITED
ACTIVITIES, AND RELATED COMPLIANCE PROCEDURES, SHALL GOVERN THE
PERSONAL INVESTMENT ACTIVITIES OF SUCH PERSONS.
PERSONAL INVESTMENT ACTIVITIES ENGAGED IN BY AN ACCESS PERSON SHALL BE
SUBJECT TO THE FOLLOWING GENERAL PRINCIPLES:
1. NO PERSONAL INVESTMENT ACTIVITIES SHALL CONFLICT WITH THE DUTY TO
PLACE THE INTERESTS OF THE INVESTMENT COMPANY BEFORE ANY PERSONAL
INTERESTS;
2. ALL PERSONAL INVESTMENT ACTIVITIES SHALL BE CONDUCTED CONSISTENT
WITH THE REQUIREMENTS AND STANDARDS SET FORTH IN THIS CODE AND IN
SUCH A MANNER AS TO AVOID ANY ACTUAL OR POTENTIAL CONFLICT OF
INTEREST OR ANY ABUSE OF AN INDIVIDUAL'S POSITION OF TRUST AND
RESPONSIBILITY; AND
3. NO ACCESS PERSON SHALL, DIRECTLY OR INDIRECTLY, OTHERWISE TAKE
INAPPROPRIATE ADVANTAGE OF HIS OR HER POSITION WITH THE
INVESTMENT COMPANY.
C. AVOIDING CONFLICTS OF INTEREST
WITHOUT LIMITING THE FOREGOING SECTION I-B, NO TRUSTEE, OFFICER, OR
OTHER ACCESS PERSON SHALL ENTER INTO OR ENGAGE IN A SECURITY
TRANSACTION OR BUSINESS ACTIVITY OR RELATIONSHIP THAT MAY RESULT IN
ANY FINANCIAL OR OTHER CONFLICT OF INTEREST BETWEEN SUCH PERSON AND
THE INVESTMENT COMPANY, AND EACH SUCH PERSON SHALL AT ALL TIMES AND IN
ALL MATTERS ENDEAVOR TO PLACE THE INTERESTS OF THE INVESTMENT COMPANY
BEFORE HIS OR HER PERSONAL INTERESTS.
D. PROHIBITED ACTIVITIES
1. INTERESTED TRANSACTIONS: No Trustee, officer, or other Access
Person shall recommend any securities transactions by any Fund of
the Trust without having disclosed his or her interest, if any,
in such securities or the issuer thereof, including without
limitation:
a. any direct or indirect Beneficial Ownership of any
securities of such issuer;
b. any contemplated transaction by such person in such
securities;
c. any position with such issuer or its affiliates; and
d. any present or proposed business relationship between such
issuer or its affiliates and such person or any party in
which such person has a significant interest.
2. BLACKOUT PERIODS: No Trustee, officer, or other Access Person
shall purchase or sell, directly or indirectly, any security in
which he or she has, or by reason of such transaction acquires,
any direct or indirect Beneficial Ownership:
a. and which to his or her knowledge at the time of such
purchase or sale is being considered for purchase or sale by
any Fund of the Trust; or
b. and which to his or her knowledge at the time of such
purchase or sale is being purchased or sold by any Fund of
the Trust; or
c. on a day during which, to his or her knowledge, any Fund of
the Trust has a pending "buy" or "sell" order in that same
security until that order is executed or withdrawn.
No Portfolio Manager shall purchase or sell, directly or
indirectly, any security in which he or she has, or by reason of
such transaction acquires, any direct or indirect Beneficial
Ownership within seven (7) calendar days before or after any Fund
of the Trust that he or she manages trades in that security.
Unless the Trust's Board approves otherwise, any trades made in
violation of this Section I-D(2) shall be unwound or, if that is
not practical, any profit so realized shall be paid over to the
affected Fund of the Trust or to a charitable organization of the
Access Person's choosing.
3. INITIAL PUBLIC OFFERINGS: No Advisory Person who is an employee
of an investment adviser of any Fund of the Trust shall acquire
any securities in an initial public offering for his or her
personal account.
4. PRIVATE PLACEMENTS: No Advisory Person who is an employee of an
investment adviser of any Fund of the Trust shall acquire,
directly or indirectly, Beneficial Ownership of any securities in
a private placement without the prior approval of the Review
Officer, who has been provided by such Advisory Person with full
details of the proposed transaction (including written
certification that the investment opportunity did not arise by
virtue of the Advisory Person's activities on behalf of such Fund
of the Trust) and has concluded after consultation with other
investment advisory personnel of such Fund of the Trust (who have
no personal interest in the issuer involved in the private
placement) that such Fund of the Trust has no foreseeable
interest in purchasing such securities.
5. SHORT-TERM TRADING PROFITS: No Advisory Person who is an employee
of an investment adviser of any Fund of the Trust shall profit
from the purchase and sale, or sale and purchase, of the same (or
equivalent) securities of which such Advisory Person has
Beneficial Ownership within sixty (60) calendar days. Unless the
Trust's Board approves otherwise, any trades made in violation of
this Section I-D(5) shall be unwound or, if that is not
practical, any profit so realized shall be paid over to the
affected Fund of the Trust or to a charitable organization of the
Advisory Person's choosing.
6. GIFTS: No Advisory Person who is an employee of an investment
adviser of any Fund of the Trust shall receive any gift or other
things of more than de minimis value from any person or entity
that does business with or on behalf of such Fund of the Trust;
PROVIDED, HOWEVER, that the foregoing shall not prohibit receipt
of:
a. an occasional breakfast, luncheon, dinner, or reception,
ticket to a sporting event or the theater, or comparable
entertainment, attended in the company of the giver of the
entertainment in question, that is not so frequent, costly,
or extensive as to raise any question of impropriety;
b. a breakfast, luncheon, dinner, reception, or cocktail party
in conjunction with a bona fide business meeting;
c. a promotional item, such as a mug, pen, or other article
bearing the logo or advertising of any such person or
entity, having a value not in excess of $100; or
d. a gift approved in writing by the Review Officer.
7. SERVICE AS A DIRECTOR: No Advisory Person who is an employee of
an investment adviser of any Fund of the Trust shall serve on the
board of directors of any publicly traded company without prior
authorization from the Review Officer based upon a determination
that such board service would be consistent with the interests of
such Fund of the Trust and its shareholders.
E. EXEMPTED TRANSACTIONS:
The prohibitions of Sections I-D(2) through I-D(5) above shall not
apply to:
1. purchases or sales effected in any account over which such person
has no direct or indirect influence or control;
2. purchases or sales that are nonvolitional on the part of the
person or any Fund of the Trust;
3. purchases that are part of an automatic dividend reinvestment
plan;
4. purchases effected upon the exercise of rights issued by an
issuer PRO RATA to all holders of a class of its securities, to
the extent such rights were acquired from such issuer, and sales
of such rights so acquired;
5. sales effected pursuant to a tender offer or similar transaction
involving an offer to acquire all or a significant portion of a
class of securities;
6. purchases and sales previously approved in writing by the Review
Officer (a) as only remotely potentially harmful to a Fund of the
Trust because they would be very unlikely to affect a highly
institutional market or because they clearly are not economically
related to the securities to be purchased or sold or held by such
Fund of the Trust or (b) as not representing any danger of the
abuses proscribed by Rule 17j-1 under the 1940 Act;
7. purchases or sales of securities that are not eligible for
purchase or sale by a Fund of the Trust. In this regard, this
exemption shall be applied on a Fund-by-Fund basis, since the
Trust may have separate series of Funds, with unaffiliated
investment advisers, that are affiliated only by virtue of their
affiliation with the Trust or a common underwriter. For example,
an Advisory Person who is an employee of an investment adviser of
one Fund of the Trust shall not otherwise be restricted in
trading securities that are not eligible for trading by that Fund
merely because another otherwise unaffiliated Fund of the Trust
is entitled to trade such securities, PROVIDED that, at the time
of each such transaction, the Advisory -------- Person has no
actual knowledge that the same security is being purchased or
sold or considered for purchase or sale by such other Fund of the
Trust.
II. COMPLIANCE PROCEDURES
A. PRECLEARANCE
An Advisory Person who is an employee of an investment adviser of any
Fund of the Trust may directly or indirectly, acquire or dispose of
Beneficial Ownership of a security only if (1) such purchase or sale
has been approved by the Review Officer, (2) the approved transaction
is completed within two (2) business days of the day approval is
received, and (3) the Review Officer has not rescinded such approval
prior to execution of the transaction. The requirements of this
Section II-A shall not apply to (i) transactions described in Sections
I-E(l), (2), and (3), and (ii) transactions involving purchases or
sales of capital stock of issuers with aggregate market
capitalizations of at least $5 billion or of investment grade debt
securities, PROVIDED that the aggregate amount of such transactions by
the Advisory Person in any one calendar week does not exceed $10,000
and PROVIDED FURTHER that, at the time of each such transaction, the
Advisory Person has no actual knowledge that the same security is
being purchased or sold or considered for purchase or sale by any Fund
of the Trust.
B. QUARTERLY REPORTING REQUIREMENTS FOR ALL TRUSTEES, EXECUTIVE OFFICERS,
AND
1. COVERAGE. All Trustees, executive officers, and other Access
Persons, OTHER THAN DISINTERESTED TRUSTEES, shall file with the
Review Officer confidential quarterly reports containing the
information required in this Code with respect to all
transactions during the preceding quarter in any securities in
which such person has, or by reason of such transaction acquires,
any direct or indirect Beneficial Ownership, except for exempted
transactions listed under Section I-E(l) above. However, an
Access Person who is an Access Person of an investment adviser of
any Fund of the Trust shall file such Access Person's reports
with the investment adviser unless such reports would duplicate
information recorded pursuant to Rules 204-2(a)(12) or
204-2(a)(13) of the Investment Advisers Act of 1940, in which
case no such reports need be filed by such Access Person pursuant
to this Code, and an Access Person who is an Access Person of a
principal underwriter of the Trust shall file such Access
Person's reports with the principal underwriter.
2. FILINGS: Every report shall be made no later than 10 days after
the end of the calendar quarter in which the transaction being
reported was effected, and shall contain the following
information:
a. the date of the transaction, the title and the number of
shares and the principal amount of each security involved;
b. the nature of the transaction (i.e., purchase, sale, or any
other type of acquisition or disposition);
c. the price at which the transaction was effected; and
d. the name of the broker, dealer, or bank with or through whom
the transaction was effected.
Such report shall be in the form attached hereto as EXHIBIT
A, or if the Access Person is an Access Person of an
investment adviser of or principal underwriter for any Fund
of the Trust, in such form as is provided by such adviser or
underwriter if it contains the information requested herein.
In lieu of providing such quarterly reports, an Access
Person may arrange for duplicate confirmations and account
statements to be provided directly to the Review Officer.
3. DISCLAIMER OF BENEFICIAL OWNERSHIP: Any report may contain a
statement that it shall not be construed as an admission by the
person making the report that he or she has any direct or
indirect Beneficial Ownership in the security to which the report
relates.
4. BROKERAGE STATEMENTS: Each Advisory Person who is an employee of
an investment adviser of any Fund of the Trust shall cause copies
of all of such person's brokerage statements and confirmations to
be furnished to the Review Officer on at least a quarterly basis.
C. QUARTERLY REPORTING REQUIREMENTS FOR DISINTERESTED TRUSTEES
1. Every Disinterested Trustee shall file with the Review Officer a
report containing the information required by Section II-B(2)
above with respect to transactions in any securities in which
such person has, or by reason of such transactions acquires, any
direct or indirect Beneficial Ownership, except for exempted
transactions listed under Section I-E(l) above, if such Trustee,
at the time of that transaction, knew or, in the ordinary course
of fulfilling his or her official duties as Trustee, should have
known, that during the 15 day period immediately preceding or
after the date of the transaction by the Trustee:
a. such security is or was being purchased or sold by any Fund
of the Trust; or
b. such security is or was being considered by of any Fund of
the Trust or its investment adviser for purchase or sale.
2. Notwithstanding the preceding sentence, any Disinterested Trustee
may, at his or her option, report the information described in
Section II-B(2) with respect to any one or more transactions and
may include a statement that the report shall not be construed as
an admission that the person knew or should have known of
portfolio transactions by any Fund of the Trust in such
securities.
D. DISCLOSURE OF PERSONAL HOLDINGS
Upon commencement of employment and annually thereafter, each Advisory
Person who is an employee of an investment adviser of any Fund of the
Trust shall be required to disclose his or her current personal
securities holdings.
E. CERTIFICATION OF COMPLIANCE
Each Access Person is required to certify annually that he or she has
read and understands this Code and recognizes that he or she is
subject to this Code. Further, each Access Person is required to
certify annually that he or she has complied with all the requirements
of the Code and that he or she has disclosed or reported all personal
securities transactions required to be disclosed or reported pursuant
to the requirements of the Code. Such certification shall be in the
form attached hereto as EXHIBIT B, which shall be delivered annually
to the Review Officer. This requirement applies to all Trustees,
INCLUDING DISINTERESTED TRUSTEES.
F. REVIEW BY THE BOARD OF TRUSTEES
At least quarterly, the Review Officer shall report to the Board of
Trustees all violations or apparent violations of this Code that
occurred during the past quarter. At least quarterly, the Review
Officer shall also report to the Board of Trustees any reported
transactions in a security that was purchased or sold (or considered
for purchase or sale) by a Fund of the Trust within 15 days before or
after the date of the reported transaction, unless the amount involved
in the transaction was less than $50,000 (and regardless of the
amount, if the Review Officer nonetheless believes the transaction may
evidence a violation of this Code). Upon discovery of a violation of
this Code, the Board of Trustees may impose such sanctions as it deems
appropriate. At least annually, the Review Officer shall report to the
Board of Trustees:
1. All existing procedures concerning Access Persons' personal
investing activities and any procedural changes made during the
past year;
2. Any recommended changes to this Code or procedures; and
3. A summary of any violations that occurred during the past year
requiring significant remedial action.
G. NOTICE BY REVIEW OFFICER
The Review Officer shall notify each Access Person who may be required
to preclear transactions and/or make reports pursuant to this Code of
Ethics that such person is subject to this Code and shall deliver a
copy of this Code to each such person. Any amendments to the Code
shall be similarly furnished to each such person.
III. REVIEW
In reviewing transactions, the Review Officer shall take into account
the exemptions allowed under Section I-E above. Before making a
determination that a violation or apparent violation has been committed
by a Trustee, the Review Officer shall give such person an opportunity
to supply additional information regarding the transaction in question.
IV. SANCTIONS
A. SANCTIONS FOR VIOLATIONS BY TRUSTEES, EXECUTIVE OFFICERS, AND OTHER
ACCESS PERSONS (OTHER THAN DISINTERESTED TRUSTEES)
If the Review Officer determines that a violation or apparent
violation of this Code has occurred, he or she shall so advise the
Board of Trustees of the Trust, and if a violation is determined, such
persons may be subject to sanctions, including, INTER ALIA, a letter
of censure or suspension or termination of the employment of the
violator. As provided in Sections I-D(2) and I-D(5) above, any
financial profits realized by an Access Person or Advisory Person
through the prohibited personal trading activities described in such
Sections may be required to be disgorged. All material violations of
the Code and any sanctions imposed as a result thereto shall be
reported periodically to the Board of Trustees.
B. SANCTIONS FOR VIOLATIONS BY DISINTERESTED TRUSTEES
If the Review Officer determines that any Disinterested Trustee, has
violated or apparently violated this Code, he or she shall so advise
the Chairman of the Trust, the President of any affected Fund of the
Trust, and also the Disinterested Trustees (other than the person
whose transaction is at issue) and shall provide such persons with the
report, the record of pertinent actual or contemplated portfolio
transactions of any affected Fund of the Trust, and any additional
information supplied by such person. If a violation is determined, the
Disinterested Trustees, at their option, shall either impose such
sanctions as they deem appropriate or refer the matter to the full
Board of Trustees of the Trust, which shall impose such sanctions as
it deems appropriate.
V. MISCELLANEOUS
A. RECORDS
The administrator of the Trust shall maintain records in the manner
and to the extent set forth below, which records may be maintained on
microfilm under the conditions described in Rule 31a-2(f) under the
1940 Act, and shall be available for examination by representatives of
the Securities and Exchange Commission:
1. a copy of this Code and any other code that is, or at any time
within the past five years has been, in effect shall be preserved
in an easily accessible place;
2. a record of any violation of this Code, and of any action taken
as a result of such violation, shall be preserved in an easily
accessible place for a period of not less than five years
following the end of the fiscal year in which the violation
occurs;
3. a copy of each report made pursuant to this Code shall be
preserved for a period of not less than five years from the end
of the fiscal year in which it is made, the first two years in an
easily accessible place; and
4. a list of all persons who are required, or within the past five
years have been required, to make reports pursuant to this Code
shall be maintained in an easily accessible place.
B. CONFIDENTIALITY
All reports of securities transactions and any other information filed
pursuant to this Code shall be treated as confidential, except that
the same may be disclosed to the Board of Trustees of the Trust, to
any regulatory or self-regulatory authority or agency upon its
request, or as required by law or court or administrative order.
C. INTERPRETATION OF PROVISIONS
The Board of Trustees of the Trust may from time to time adopt such
interpretations of this Code as it deems appropriate.
<PAGE>
EXHIBIT A
CODE OF ETHICS
SECURITIES TRANSACTION REPORT
For the Calendar Quarter Ended: _______________________________
(mo./day/yr.)
During the quarter referred to above, the following transactions were
effected in securities of which I had, or by reason of such transaction
acquired, direct or indirect Beneficial Ownership, and which are required to be
reported pursuant to the Trust's Code of Ethics:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
=================== ===================== =============== ===================== ==================== ============ ==================
Broker,
Dealer
No. of or
Shares Nature of Bank
or Dollar Transaction Through
Date of Principal Amount of (Purchase, Whom
Security Transaction Amount Transaction Sale, Other) Price Effected
- ------------------- --------------------- --------------- --------------------- -------------------- ------------ ------------------
=================== ===================== =============== ===================== ==================== ============ ==================
</TABLE>
This report (i) excludes transactions with respect to which I had no
direct or indirect influence or control, (ii) excludes other transactions in
securities not required to be reported because such securities are excluded from
the definition of "security" under the Code of Ethics, and (iii) is not an
admission that I have or had any direct or indirect Beneficial Ownership in the
securities listed above.
Date: ________________________ Signature: _______________________________
<PAGE>
EXHIBIT B
CODE OF ETHICS
ANNUAL CERTIFICATE OF COMPLIANCE
For the Calendar Year Ended December 31, 1998
As an Access Person as defined in Section I-A(1) of the Trust's Code of
Ethics adopted pursuant to Rule 17j-1 under the Investment Company Act of 1940,
as amended (the "Code"), I hereby certify that I have read and understand the
Code, recognize that I am subject to the Code, and intend to comply with the
Code. I further certify that, during the calendar year specified above, and
since my last Certificate of Compliance under the Code, I have complied with the
requirements of the Code and have disclosed or reported all personal securities
transactions required to be disclosed or reported pursuant to the requirements
of the Code.
-------------------------------
Signature
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Name (Please Print)
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Date
