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OMB APPROVAL
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OMB Number: 3235-0570
Expires: April 30, 2008
Estimated average burden
hours per response: 19.4
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-21360
---------------------------------------------
CM ADVISERS FAMILY OF FUNDS
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
805 LAS CIMAS PARKWAY, SUITE 430 AUSTIN, TEXAS 78746
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
John F. Splain, Esq.
ULTIMUS FUND SOLUTIONS, LCC 225 PICTORIA DRIVE, SUITE 450 CINCINNATI, OHIO 45246
- --------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: (512) 329-0050
----------------------------
Date of fiscal year end: FEBRUARY 29, 2008
------------------------------------------------------
Date of reporting period: AUGUST 31, 2007
------------------------------------------------------
Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
CM ADVISERS FAMILY OF FUNDS
SEMI-ANNUAL REPORT 2007
----------------
CM ADVISERS FUND
CM ADVISERS FIXED INCOME FUND
August 31, 2007
(Unaudited)
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR THE
GENERAL INFORMATION OF THE SHAREHOLDERS OF THE CM ADVISERS FAMILY OF FUNDS (THE
"FUNDS"). THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE
INVESTORS IN THE FUNDS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE
PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
CM ADVISERS FUND
SUPPLEMENTARY PORTFOLIO INFORMATION
AUGUST 31, 2007 (UNAUDITED)
================================================================================
ASSET AND SECTOR ALLOCATION
(% OF NET ASSETS)
- --------------------------------------------------------------------------------
[The following information was depicted as a pie chart in the printed material]
Consumer Discretionary - 20.3%
Consumer Staples - 15.7%
Financials - 9.4%
[PIE CHART] Health Care - 5.2%
Industrials - 20.8%
Information Technology - 16.3%
Materials - 1.9%
U.S. Government Obligations - 6.2%
Money Market Funds - 3.9%
Other Assets and Liabilities - 0.3%
TOP 10 HOLDINGS
- --------------------------------------------------------------------------------
SECURITY DESCRIPTION % OF NET ASSETS
- ------------------------------------------ ---------------
Microsoft Corporation 6.5%
3M Company 5.7%
W.P. Stewart & Co. Ltd. 4.2%
Pfizer, Inc. 3.9%
Wal-Mart Stores, Inc. 3.8%
Seagate Technology 3.3%
Marsh & McLennan Companies, Inc. 3.2%
U.S. Treasury Strip, 6.25%, due 05/15/2030 3.1%
U.S. Treasury Strip, 4.50%, due 05/15/2036 3.1%
Talbots, Inc. (The) 3.1%
1
CM ADVISERS FIXED INCOME FUND
SUPPLEMENTARY PORTFOLIO INFORMATION
AUGUST 31, 2007 (UNAUDITED)
================================================================================
ASSET ALLOCATION
(% OF NET ASSETS)
- --------------------------------------------------------------------------------
[The following information was depicted as a pie chart in the printed material]
U.S. Government Obligations - 75.4%
[PIE CHART] Money Market Funds - 21.2%
Other Assets and Liabilities - 3.4%
TOP HOLDINGS
- --------------------------------------------------------------------------------
SECURITY DESCRIPTION % OF NET ASSETS
- ------------------------------------------ ---------------
U.S. Treasury Strip, 4.50%, due 02/15/2036 55.3%
U.S. Treasury Strip, 6.25%, due 05/15/2030 20.1%
2
CM ADVISERS FUND
SCHEDULE OF INVESTMENTS
AUGUST 31, 2007 (UNAUDITED)
================================================================================
SHARES COMMON STOCKS -- 89.6% VALUE
- --------------------------------------------------------------------------------
APPAREL -- 1.0%
145,200 Kellwood Company................................ $ 2,860,440
-------------
BEVERAGES -- 5.5%
139,635 Anheuser-Busch Companies, Inc................... 6,897,969
155,520 Coca-Cola Company (The)......................... 8,363,866
-------------
15,261,835
-------------
BUILDING MATERIALS -- 1.9%
203,275 Masco Corporation............................... 5,289,215
-------------
CHEMICALS -- 1.9%
109,125 E.I. Du Pont de Nemours & Company............... 5,319,844
-------------
COMMERCIAL SERVICES -- 1.0%
59,900 Aaron Rents, Inc................................ 1,532,841
40,272 CDI Corporation................................. 1,151,779
1,000 CPI Corporation................................. 44,760
-------------
2,729,380
-------------
COMPUTERS -- 7.7%
286,600 Hutchinson Technology, Inc. *................... 6,594,666
191,075 Imation Corporation............................. 5,558,372
7,340 Maxwell Technologies, Inc. *.................... 90,576
356,665 Seagate Technology.............................. 9,209,090
-------------
21,452,704
-------------
COSMETICS/PERSONAL CARE -- 2.4%
99,875 Colgate-Palmolive Company....................... 6,623,710
-------------
DISTRIBUTORS/WHOLESALE -- 1.2%
893,400 Handleman Company............................... 3,234,108
-------------
DIVERSIFIED FINANCIAL SERVICES -- 6.2%
150,675 Wells Fargo & Company........................... 5,505,664
1,035,015 W.P. Stewart & Company Ltd...................... 11,716,370
-------------
17,222,034
-------------
ELECTRONICS -- 1.6%
106,750 Rogers Corporation *............................ 4,397,032
-------------
FOOD -- 1.0%
50,300 General Mills, Inc. ............................ 2,810,764
-------------
HEALTH CARE - PRODUCTS -- 1.3%
158,475 Invacare Corporation............................ 3,671,866
-------------
3
CM ADVISERS FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
================================================================================
SHARES COMMON STOCKS -- 89.6% (CONTINUED) VALUE
- --------------------------------------------------------------------------------
HOME BUILDERS -- 1.0%
125,200 Toll Brothers, Inc. *........................... $ 2,674,272
-------------
HOME FURNISHINGS -- 2.0%
80,000 Ethan Allen Interiors, Inc...................... 2,688,000
311,745 La-Z-Boy, Inc. ................................. 3,005,222
-------------
5,693,222
-------------
HOUSEHOLD PRODUCTS -- 2.5%
115,349 Avery Dennison Corporation...................... 6,896,717
-------------
HOUSEWARES -- 0.4%
44,335 Newell Rubbermaid, Inc.......................... 1,143,400
-------------
INDUSTRIAL EQUIPMENT -- 0.0%
2,700 Lawson Products, Inc............................ 98,604
-------------
INSURANCE -- 3.2%
339,912 Marsh & McLennan Companies, Inc................. 9,058,655
-------------
MACHINERY - DIVERSIFIED -- 2.9%
275,200 Briggs & Stratton Corporation................... 8,033,088
-------------
MEDIA -- 3.1%
182,800 Gannett Company, Inc. .......................... 8,591,600
-------------
MISCELLANEOUS MANUFACTURING -- 10.7%
175,085 3M Company...................................... 15,930,984
7,930 Eastman Kodak Company........................... 211,493
100,425 Illinois Tool Works, Inc. ...................... 5,841,722
390,440 Leggett & Platt, Inc............................ 7,964,976
-------------
29,949,175
-------------
PHARMACEUTICALS -- 3.9%
436,865 Pfizer, Inc..................................... 10,851,727
-------------
RETAIL -- 14.9%
262,288 Cost Plus, Inc. *............................... 1,049,152
346,925 Office Depot, Inc. *............................ 8,482,316
99,000 Pacific Sunwear of California, Inc. *........... 1,386,990
404,665 Talbots, Inc. (The)............................. 8,611,271
190,350 Walgreen Company................................ 8,579,074
240,455 Wal-Mart Stores, Inc. .......................... 10,491,052
91,675 Williams-Sonoma, Inc............................ 3,055,528
-------------
41,655,383
-------------
4
CM ADVISERS FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
================================================================================
SHARES COMMON STOCKS -- 89.6% (CONTINUED) VALUE
- --------------------------------------------------------------------------------
SEMICONDUCTORS -- 1.8%
200,000 Intel Corporation............................... $ 5,150,000
-------------
SOFTWARE -- 6.8%
7,000 Dun & Bradstreet Corporation (The).............. 682,850
632,240 Microsoft Corporation........................... 18,164,255
-------------
18,847,105
-------------
TEXTILES -- 0.6%
153,091 Dixie Group, Inc. (The) *....................... 1,556,935
-------------
TRANSPORTATION -- 3.1%
40,912 Arkansas Best Corporation....................... 1,468,741
233,455 YRC Worldwide, Inc. *........................... 7,192,749
-------------
8,661,490
-------------
TOTAL COMMON STOCKS (Cost $247,495,033) ........ $ 249,734,305
-------------
================================================================================
PAR VALUE U.S. GOVERNMENT OBLIGATIONS -- 6.2% VALUE
- --------------------------------------------------------------------------------
$ 26,345,000 U.S. Treasury Bond, stripped principal
payment, 6.25%, due 05/15/2030................ $ 8,721,038
34,000,000 U.S. Treasury Bond, stripped principal
payment, 4.50%, due 02/15/2036................ 8,625,018
-------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $16,374,301).............................. $ 17,346,056
-------------
================================================================================
SHARES MONEY MARKET FUNDS -- 3.9% VALUE
- --------------------------------------------------------------------------------
10,996,533 Evergreen Institutional Treasury Money
Market Fund - Class I (Cost $10,996,533)........ $ 10,996,533
-------------
TOTAL INVESTMENTS AT VALUE -- 99.7%
(Cost $274,865,867)............................. $ 278,076,894
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.3%... 799,306
-------------
NET ASSETS -- 100.0%............................ $ 278,876,200
=============
* Non-income producing security
See accompanying notes to financial statements.
5
CM ADVISERS FIXED INCOME FUND
SCHEDULE OF INVESTMENTS
AUGUST 31, 2007 (UNAUDITED)
================================================================================
PAR VALUE U.S. GOVERNMENT OBLIGATIONS -- 75.4% VALUE
- --------------------------------------------------------------------------------
$ 6,000,000 U.S. Treasury Bond, stripped principal
payment, 6.25%, due 05/15/2030................ $ 1,986,192
21,600,000 U.S. Treasury Bond, stripped principal
payment, 4.50%, due 02/15/2036................ 5,479,423
-------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $7,058,517)............................... $ 7,465,615
-------------
================================================================================
SHARES MONEY MARKET FUNDS -- 21.2% VALUE
- --------------------------------------------------------------------------------
2,097,836 Evergreen Institutional Treasury Money
Market Fund - Class I (Cost $2,097,836)......... $ 2,097,836
-------------
TOTAL INVESTMENTS AT VALUE -- 96.6%
(Cost $9,156,353)............................... $ 9,563,451
OTHER ASSETS IN EXCESS OF LIABILITIES -- 3.4%... 337,969
-------------
NET ASSETS -- 100.0%............................ $ 9,901,420
=============
See accompanying notes to financial statements.
6
CM ADVISERS FAMILY OF FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
AUGUST 31, 2007 (UNAUDITED)
==================================================================================
CM ADVISERS
CM ADVISERS FIXED INCOME
FUND FUND
- ----------------------------------------------------------------------------------
ASSETS
Investments in securities:
At cost ......................................... $274,865,867 $ 9,156,353
============ ============
At value (Note 2) ............................... $278,076,894 $ 9,563,451
Dividends and interest receivable .................. 750,634 6,174
Receivable for investment securities sold .......... 1,186,717 332,027
Receivable for capital shares sold ................. 20,209 --
Receivable from Adviser (Note 5) ................... -- 12,332
Other assets ....................................... 30,719 13,215
------------ ------------
TOTAL ASSETS .................................... 280,065,173 9,927,199
------------ ------------
LIABILITIES
Payable for investment securities purchased ........ 510,849 --
Payable for capital shares redeemed ................ 343,039 --
Payable to Adviser (Note 5) ........................ 292,100 --
Payable to Administrator (Note 5) .................. 26,610 4,930
Other accrued expenses ............................. 16,375 20,849
------------ ------------
TOTAL LIABILITIES ............................... 1,188,973 25,779
------------ ------------
NET ASSETS ......................................... $278,876,200 $ 9,901,420
============ ============
NET ASSETS CONSIST OF:
Paid-in capital .................................... $254,257,338 $ 9,455,742
Accumulated undistributed net investment income .... 3,062,129 129,512
Accumulated net realized gains (losses)
from security transactions ....................... 18,345,706 ( 90,932 )
Net unrealized appreciation on investments ......... 3,211,027 407,098
------------ ------------
NET ASSETS ......................................... $278,876,200 $ 9,901,420
============ ============
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) ....... 21,711,606 942,845
============ ============
Net asset value, redemption price and
offering price per share (a) ..................... $ 12.84 $ 10.50
============ ============
(a) Redemption price may differ from the net asset value per share depending
upon the length of time the shares are held (Note 2).
See accompanying notes to financial statements.
7
CM ADVISERS FAMILY OF FUNDS
STATEMENTS OF OPERATIONS
SIX MONTHS ENDED AUGUST 31, 2007 (UNAUDITED)
==================================================================================
CM ADVISERS
CM ADVISERS FIXED INCOME
FUND FUND
- ----------------------------------------------------------------------------------
INVESTMENT INCOME
Interest ................................ $ 1,196,658 $ 268,360
Dividend ................................ 3,321,089 23,859
------------ ------------
TOTAL INVESTMENT INCOME .............. 4,517,747 292,219
------------ ------------
EXPENSES
Investment advisory fees (Note 5) ....... 1,762,364 15,664
Administration fees (Note 5) ............ 112,793 9,600
Professional fees ....................... 31,609 9,784
Fund accounting fees (Note 5) ........... 26,105 12,314
Registration fees ....................... 19,995 16,340
Trustees' fees and expenses ............. 23,967 10,962
Transfer agent fees (Note 5) ............ 21,279 7,000
Custody fees ............................ 18,829 2,902
Report printing fees .................... 5,094 1,462
Insurance expense ....................... 2,819 32
Other expenses .......................... 22,391 8,899
------------ ------------
TOTAL EXPENSES ....................... 2,047,245 94,959
Advisory fees waived and expenses
reimbursed by Adviser (Note 5) ........ -- (47,968)
------------ ------------
NET EXPENSES ......................... 2,047,245 46,991
------------ ------------
NET INVESTMENT INCOME ...................... 2,470,502 245,228
------------ ------------
REALIZED AND UNREALIZED GAINS (LOSSES)
ON INVESTMENTS
Net realized gains (losses) from security
transactions .......................... 17,637,927 (90,157)
Net change in unrealized appreciation/
depreciation on investments ........... (18,091,723) 273,665
------------ ------------
NET REALIZED AND UNREALIZED
GAINS (LOSSES) ON INVESTMENTS ........... (453,796) 183,508
------------ ------------
NET INCREASE IN NET ASSETS
FROM OPERATIONS ......................... $ 2,016,706 $ 428,736
============ ============
See accompanying notes to financial statements.
8
CM ADVISERS FUND
STATEMENTS OF CHANGES IN NET ASSETS
====================================================================================
SIX MONTHS
ENDED
AUGUST 31, YEAR ENDED
2007 FEBRUARY 28,
(UNAUDITED) 2007
- ------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income .......................... $ 2,470,502 $ 3,900,507
Net realized gains from security transactions .. 17,637,927 7,591,767
Net change in unrealized appreciation/
depreciation on investments .................. (18,091,723) 10,758,384
------------- -------------
Net increase in net assets from operations ........ 2,016,706 22,250,658
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net investment income ....... -- (3,793,796)
Distributions from net realized gains
from security transactions ................... -- (7,051,785)
------------- -------------
Net decrease in assets from distributions to
shareholders .................................... -- (10,845,581)
------------- -------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ...................... 32,805,097 81,912,984
Net asset value of shares issued in
reinvestment of distributions to shareholders -- 9,823,036
Proceeds from redemption fees collected (Note 2) 26,348 55,918
Payments for shares redeemed ................... (24,832,644) (21,893,439)
------------- -------------
Net increase in net assets from capital share
transactions .................................... 7,998,801 69,898,499
------------- -------------
TOTAL INCREASE IN NET ASSETS ...................... 10,015,507 81,303,576
NET ASSETS
Beginning of period ............................ 268,860,693 187,557,117
------------- -------------
End of period .................................. $ 278,876,200 $ 268,860,693
============= =============
ACCUMULATED UNDISTRIBUTED
NET INVESTMENT INCOME .......................... $ 3,062,129 $ 591,627
============= =============
CAPITAL SHARE ACTIVITY
Shares sold .................................... 2,536,484 6,603,955
Shares reinvested .............................. -- 765,318
Shares redeemed ................................ (1,918,852) (1,768,195)
------------- -------------
Net increase in shares outstanding ............. 617,632 5,601,078
Shares outstanding, beginning of period ........ 21,093,974 15,492,896
------------- -------------
Shares outstanding, end of period .............. 21,711,606 21,093,974
============= =============
See accompanying notes to financial statements.
9
CM ADVISERS FIXED INCOME FUND
STATEMENTS OF CHANGES IN NET ASSETS
====================================================================================
SIX MONTHS
ENDED
AUGUST 31, YEAR ENDED
2007 FEBRUARY 28,
(UNAUDITED) 2007(a)
- ------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income .......................... $ 245,228 $ 157,974
Net realized losses from security transactions . (90,157) (775)
Net change in unrealized appreciation/
depreciation on investments .................. 273,665 133,433
------------- -------------
Net increase in net assets from operations ........ 428,736 290,632
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income ..................... (149,212) (124,478)
------------- -------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ...................... 6,360,165 2,851,782
Net asset value of shares issued in reinvestment
of distributions to shareholders ............ 144,925 122,591
Proceeds from redemption fees collected (Note 2) 85 140
Payments for shares redeemed ................... (9,321) (14,625)
------------- -------------
Net increase in net assets from capital share
transactions .................................... 6,495,854 2,959,888
------------- -------------
TOTAL INCREASE IN NET ASSETS ...................... 6,775,378 3,126,042
NET ASSETS
Beginning of period ............................ 3,126,042 --
------------- -------------
End of period .................................. $ 9,901,420 $ 3,126,042
============= =============
ACCUMULATED UNDISTRIBUTED
NET INVESTMENT INCOME .......................... $ 129,512 $ 33,496
============= =============
CAPITAL SHARE ACTIVITY
Shares sold .................................... 635,942 282,766
Shares reinvested .............................. 14,654 11,811
Shares redeemed ................................ (911) (1,417)
------------- -------------
Net increase in shares outstanding ............. 649,685 293,160
Shares outstanding, beginning of period ........ 293,160 --
------------- -------------
Shares outstanding, end of period .............. 942,845 293,160
============= =============
(a) Represents the period from the commencement of operations (March 24, 2006)
through February 28, 2007.
See accompanying notes to financial statements.
10
CM ADVISERS FUND
FINANCIAL HIGHLIGHTS
===========================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD:
===========================================================================================================================
SIX MONTHS
ENDED YEARS ENDED PERIOD
AUGUST 31, -------------------------------------------------- ENDED
2007 FEBRUARY 28, FEBRUARY 28, FEBRUARY 28, FEBRUARY 29,
(UNAUDITED) 2007 2006 2005 2004(a)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value at
beginning of period ....... $ 12.75 $ 12.11 $ 11.50 $ 10.74 $ 10.00
------------ ------------ ------------ ------------ ------------
Income (loss) from
investment operations:
Net investment
income (loss) ........... 0.11 0.19 0.17 0.01 (0.01)
Net realized and unrealized
gains (losses) on
investments ............. (0.02) 1.00 1.11 0.78 0.75
------------ ------------ ------------ ------------ ------------
Total from investment
operations ................ 0.09 1.19 1.28 0.79 0.74
------------ ------------ ------------ ------------ ------------
Less distributions:
Dividends from net
investment income ....... -- (0.19) (0.15) -- --
Distributions from net
realized gains .......... -- (0.36) (0.52) (0.03) --
------------ ------------ ------------ ------------ ------------
Total distributions ......... -- (0.55) (0.67) (0.03) --
------------ ------------ ------------ ------------ ------------
Proceeds from redemption
fees collected (Note 2) ... 0.00(f) 0.00(f) 0.00(f) 0.00(f) 0.00(f)
------------ ------------ ------------ ------------ ------------
Net asset value at
end of period ............. $ 12.84 $ 12.75 $ 12.11 $ 11.50 $ 10.74
============ ============ ============ ============ ============
Total return (b) ............ 0.71%(c) 9.88% 11.31% 7.36% 7.40%(c)
============ ============ ============ ============ ============
RATIOS AND SUPPLEMENTAL DATA:
Net assets at
end of period (000's) ..... $ 278,876 $ 268,861 $ 187,557 $ 79,992 $ 36,589
============ ============ ============ ============ ============
Ratio of gross expenses
to average net assets ..... 1.45%(e) 1.50% 1.83% 2.03% 2.84%(e)
Ratio of net expenses
to average net assets (d) . 1.45%(e) 1.50% 1.50% 1.50% 1.50%(e)
Ratio of net investment
income (loss) to
average net assets (d) .... 1.75%(e) 1.70% 1.86% 0.10% (0.30%)(e)
Portfolio turnover rate ..... 30%(c) 22% 19% 18% 6%(c)
(a) Represents the period from the commencement of operations (May 13, 2003)
through February 29, 2004.
(b) Total return is a measure of the change in value of an investment in the
Fund over the period covered, which assumes any dividends or capital gains
distributions are reinvested in shares of the Fund. The returns shown do
not reflect the deduction of taxes a shareholder would pay on Fund
distributions or the redemption of Fund shares.
(c) Not annualized.
(d) Ratio was determined after investment advisory fee waivers and/or expense
reimbursements.
(e) Annualized.
(f) Amount rounds to less than $0.01 per share.
See accompanying notes to financial statements.
11
CM ADVISERS FIXED INCOME FUND
FINANCIAL HIGHLIGHTS
=====================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD:
=====================================================================================
SIX MONTHS
ENDED PERIOD
AUGUST 31, ENDED
2007 FEBRUARY 28,
(UNAUDITED) 2007 (a)
- -------------------------------------------------------------------------------------
Net asset value at beginning of period ......... $ 10.66 $ 10.00
------------ ------------
Income (loss) from investment operations:
Net investment income ........................ 0.19 0.58
Net realized and unrealized gains (losses)
on investments ............................. (0.18) 0.55
------------ ------------
Total from investment operations ............... 0.01 1.13
------------ ------------
Less distributions:
Dividends from net investment income ......... (0.17) (0.47)
------------ ------------
Proceeds from redemption fees collected (Note 2) 0.00(f) 0.00(f)
------------ ------------
Net asset value at end of period ............... $ 10.50 $ 10.66
============ ============
Total return (b) ............................... 0.19%(c) 11.39%(c)
============ ============
RATIOS AND SUPPLEMENTAL DATA:
Net assets at end of period (000's) ............ $ 9,901 $ 3,126
============ ============
Ratio of gross expenses to average net assets .. 3.01%(e) 7.28%(e)
Ratio of net expenses to average net assets (d) 1.50%(e) 1.50%(e)
Ratio of net investment income to average
net assets (d) ............................... 7.78%(e) 6.71%(e)
Portfolio turnover rate ........................ 36%(c) 0%
(a) Represents the period from the commencement of operations (March 24, 2006)
through February 28, 2007.
(b) Total return is a measure of the change in value of an investment in the
Fund over the period covered, which assumes any dividends or capital gains
distributions are reinvested in shares of the Fund. The returns shown do
not reflect the deduction of taxes a shareholder would pay on Fund
distributions or the redemption of Fund shares.
(c) Not annualized.
(d) Ratio was determined after investment advisory fee waivers and/or expense
reimbursements.
(e) Annualized.
(f) Amount rounds to less than $0.01 per share.
See accompanying notes to financial statements.
12
CM ADVISERS FAMILY OF FUNDS
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2007 (UNAUDITED)
================================================================================
1. ORGANIZATION
The CM Advisers Fund and the CM Advisers Fixed Income Fund (collectively the
"Funds" and individually a "Fund") are each no-load series of the CM Advisers
Family of Funds (the "Trust"), which was organized as a Delaware statutory trust
and is registered under the Investment Company Act of 1940 (the "1940 Act") as
an open-end management investment company.
The CM Advisers Fund commenced operations on May 13, 2003. The investment
objective of the Fund is long-term growth of capital.
The CM Advisers Fixed Income Fund commenced operations on March 24, 2006. The
investment objective of the Fund is to seek to preserve capital and maximize
total return using fixed income securities.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the Funds' significant accounting policies:
INVESTMENT VALUATION - The Funds' investments in securities are carried at
market value. Securities listed on an exchange or quoted on a national market
system are valued at the last sales price as of 4:00 p.m. Eastern Time.
Securities which are quoted by NASDAQ are generally valued at the NASDAQ
Official Closing Price. 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. It is expected that fixed income securities will
ordinarily be traded in the over-the-counter market. Securities and assets for
which representative market quotations are not readily available (e.g., if the
exchange on which the portfolio security is principally traded closes early or
if trading of the particular portfolio security is halted during the day and
does not resume prior to the Funds' net asset value calculations) or which
cannot be accurately valued using the Funds' normal pricing procedures are
valued at fair value as determined in good faith under policies approved by the
Trustees. A portfolio security's "fair value" price may differ from the price
next available for that portfolio security using the Funds' normal pricing
procedures. Instruments with maturities of 60 days or less are valued at
amortized cost, which approximates market value.
SHARE VALUATION AND REDEMPTION FEES -- The net asset value per share of each
Fund is calculated daily by dividing the total value of each Fund's assets, less
liabilities, by the number of shares outstanding. The offering price and
redemption price per share of each Fund is equal to the net asset value per
share, except that shares of each Fund are subject to a redemption fee of 1%
payable to the applicable Fund, if redeemed within one year of the date of the
purchase. During the periods ended August 31, 2007 and February 28, 2007,
proceeds from redemption fees totaled $26,348 and $55,918, respectively, for the
CM Advisers Fund and $85 and $140, respectively, for the CM Advisers Fixed
Income Fund.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME - Investment transactions are
accounted for on trade date. Dividend income is recorded on the ex-dividend
date. Interest income is accrued as earned. Discounts and premiums on fixed
income securities purchased are amortized using the interest method. Gains and
losses on securities sold are determined on a specific identification basis,
which is the same basis used for federal income tax purposes.
13
CM ADVISERS FAMILY OF FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
EXPENSES - The Funds bear expenses incurred specifically on their behalf as well
as a portion of general Trust expenses, which are allocated according to methods
authorized by the Trustees.
DIVIDEND DISTRIBUTIONS - Dividends arising from net investment income, if any,
are declared and paid at least annually to shareholders of the CM Advisers Fund
and declared and paid quarterly to shareholders of the CM Advisers Fixed Income
Fund. Distributions from capital gains (if any) are generally declared and
distributed annually. The amount of distributions from net investment income and
net realized gains are determined in accordance with federal income tax
regulations which may differ from accounting principles generally accepted in
the United States of America. These "book/tax" differences are either temporary
or permanent in nature. Dividends and distributions are recorded on the
ex-dividend date.
The tax character of distributions paid during the periods ended August 31, 2007
and February 28, 2007 was as follows:
- --------------------------------------------------------------------------------
PERIODS ORDINARY LONG-TERM TOTAL
ENDED INCOME CAPITAL GAINS DISTRIBUTIONS
- --------------------------------------------------------------------------------
CM Advisers Fund......... 08/31/07 $ -- $ -- $ --
02/28/07 $ 4,532,157 $ 6,313,424 $ 10,845,581
- --------------------------------------------------------------------------------
CM Advisers Fixed
Income Fund............ 08/31/07 $ 149,212 $ -- $ 149,212
02/28/07 $ 124,478 $ -- $ 124,478
- --------------------------------------------------------------------------------
ESTIMATES - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates.
3. FEDERAL INCOME TAX
It is each Fund's policy to comply with the special provisions of Subchapter M
of the Internal Revenue Code applicable to regulated investment companies. As
provided therein, in any fiscal year in which a Fund so qualifies, and
distributes at least 90% of its taxable net income, the Fund (but not the
shareholders) will be relieved of federal income tax on the income distributed.
Accordingly, no provision for income taxes has been made.
In order to avoid imposition of the excise tax applicable to regulated
investment companies, it is also each Fund's intention to declare as dividends
in each calendar year at least 98% of its net investment income (earned during
the calendar year) and 98% of its net realized capital gains (earned during the
twelve months ended October 31) plus undistributed amounts from prior years.
14
CM ADVISERS FAMILY OF FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
The following information is computed on a tax basis for each item as of August
31, 2007:
- --------------------------------------------------------------------------------
CM ADVISERS
CM ADVISERS FIXED INCOME
FUND FUND
- --------------------------------------------------------------------------------
Tax cost of portfolio investments ............ $ 274,865,867 $ 9,156,353
============= =============
Gross unrealized appreciation ................ $ 20,946,432 $ 422,031
Gross unrealized depreciation ................ (17,735,405) (14,933)
------------- -------------
Net unrealized appreciation .................. $ 3,211,027 $ 407,098
Undistributed ordinary income ................ 8,398,205 129,512
Undistributed long-term gains ................ 13,009,630 --
Capital loss carryforward .................... -- (775)
Other losses ................................. -- (90,157)
------------- -------------
Accumulated earnings ......................... $ 24,618,862 $ 445,678
============= =============
- --------------------------------------------------------------------------------
As of February 28, 2007, the CM Advisers Fixed Income Fund had a capital loss
carryforward for federal income tax purposes of $775, which expires February 28,
2015. This capital loss carryforward may be utilized in the current and future
years to offset net realized capital gains, if any, prior to distribution to
shareholders.
4. INVESTMENT TRANSACTIONS
During the period ended August 31, 2007, cost of purchases and proceeds from
sales of investment securities, other than short-term investments and U.S.
government securities, were as follows:
- --------------------------------------------------------------------------------
CM ADVISERS
CM ADVISERS FIXED INCOME
FUND FUND
- --------------------------------------------------------------------------------
Cost of purchases of investment securities ... $ 77,147,052 $ --
============= =============
Proceeds from sales of investment securities . $ 62,086,136 $ --
============= =============
- --------------------------------------------------------------------------------
5. TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY AGREEMENT
The Funds pay a monthly advisory fee to the Adviser based upon the average daily
net assets of each Fund and calculated at the annual rate of 1.25% for the CM
Advisers Fund and 0.50% for the CM Advisers Fixed Income Fund. The Adviser has
entered into a contractual agreement (the "Expense Limitation Agreement") with
the Funds under which it has agreed to waive or reduce its fees and to assume
other expenses of the Funds, if necessary, in an amount that limits the Funds'
total operating expenses (exclusive of interest, taxes, brokerage fees and
commissions, extraordinary expenses, and payments, if any, under a Rule 12b-1
plan) during the fiscal year ended February 29, 2008 to not more than 2.00% and
1.50% of the average daily net assets of the CM Advisers Fund and the CM
Advisers Fixed Income Fund, respectively. There can be no assurance that the
Expense Limitation Agreement or any voluntary fee waivers will continue beyond
February 29, 2008. For the six months ended August 31, 2007, the Adviser waived
its entire investment advisory fee of $15,664 with respect to the CM Advisers
Fixed Income Fund and reimbursed the Fund for additional expenses in the amount
of $32,304. There were no advisory fee waivers or expense reimbursements with
respect to the CM Advisers Fund during the six months ended August 31, 2007.
15
CM ADVISERS FAMILY OF FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
ADMINISTRATION AGREEMENT
Under the terms of an Administration Agreement with the Trust, Ultimus Fund
Solutions, LLC ("Ultimus") provides executive and administrative services and
internal regulatory compliance services for the Funds. Ultimus supervises the
preparation of tax returns, reports to shareholders of the Funds, reports to and
filings with the Securities and Exchange Commission ("SEC") and state securities
commissions and prepares materials for meetings of the Board of Trustees. For
these services, each Fund pays to Ultimus a monthly fee at an annual rate of
0.08% per annum of its average daily net assets up to $500 million, 0.05% of
such assets from $500 million to $2 billion, 0.04% of such assets from $2
billion to $3 billion and 0.03% of such assets in excess of $3 billion,
provided, however, that the minimum fee is $2,000 per month with respect to each
Fund. During the six months ended August 31, 2007, Ultimus agreed to discount
the foregoing fee by 20% for the CM Advisers Fixed Income Fund. Accordingly,
Ultimus was paid administration fees of $112,793 and $9,600 by the CM Advisers
Fund and the CM Advisers Fixed Income Fund, respectively.
FUND ACCOUNTING AGREEMENT
Under the terms of a Fund Accounting Agreement with the Trust, Ultimus
calculates the daily net asset value per share and maintains the financial books
and records of the Funds. For these services, each Fund pays to Ultimus a base
fee of $2,000 per month, plus an asset-based fee at the annual rate of 0.01% of
the first $500 million of each Fund's average daily net assets and 0.005% of
such assets in excess of $500 million. In addition, the Funds pay all costs of
external pricing services. During the six months ended August 31, 2007, Ultimus
was paid fund accounting fees of $26,105 and $12,314 by the CM Advisers Fund and
the CM Advisers Fixed Income Fund, respectively.
TRANSFER AGENT AND SHAREHOLDER SERVICES AGREEMENT
Under the terms of a Transfer Agent and Shareholder Services Agreement with the
Trust, Ultimus maintains the records of each shareholder's account, answers
shareholders' inquiries concerning their accounts, processes purchases and
redemptions of each Fund's shares, acts as dividend and distribution disbursing
agent and performs other shareholder service functions. For these services,
Ultimus receives from each Fund a fee, payable monthly, at an annual rate of $17
per account, provided, however, that the minimum fee with respect to each Fund
is $1,000 per month if a Fund has 25 shareholder accounts or less, $1,250 if a
Fund has more than 25 but less than 100 shareholder accounts, and $1,500 per
month if a Fund has more than 100 shareholder accounts. In addition, each Fund
pays out-of-pocket expenses, including but not limited to, postage and supplies.
During the six months ended August 31, 2007, Ultimus was paid transfer agent
fees of $21,279 and $7,000 by the CM Advisers Fund and the CM Advisers Fixed
Income Fund, respectively.
DISTRIBUTION AGREEMENT
Pursuant to the terms of a Distribution Agreement with the Trust, Ultimus Fund
Distributors, LLC (the "Distributor") serves as the Funds' principal
underwriter. The Distributor receives compensation of $250 per month from each
Fund for such services.
DISTRIBUTION AND SERVICE FEES
The Trustees, including a majority of the Trustees who are not "interested
persons" of the Trust as defined in the 1940 Act (the "Independent Trustees"),
have adopted a distribution plan pursuant to Rule 12b-1 under the 1940 Act for
each of the Funds (the "Plans"). Rule 12b-1 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 Plans provide
that the Funds may incur certain costs, which may not exceed 0.25% per annum of
the CM Advisers Fund's average daily net
16
CM ADVISERS FAMILY OF FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
assets and 0.45% per annum of the CM Advisers Fixed Income Fund's average daily
net assets, related to activities reasonably intended to result in sales of
shares of the Funds or support servicing of shareholder accounts. During the six
months ended August 31, 2007, the Funds did not incur any distribution related
expenses under the Plans.
6. CONTINGENCIES AND COMMITMENTS
The Funds indemnify the Trust's officers and Trustees for certain liabilities
that might arise from their performance of their duties to the Funds.
Additionally, in the normal course of business, the Funds enter into contracts
that contain a variety of representations and warranties and which provide
general indemnifications. Each Fund's maximum exposure under these arrangements
is unknown, as this would involve future claims that may be made against the
Funds that have not yet occurred. However, based on experience, the Trust
expects the risk of loss to be remote.
7. ACCOUNTING PRONOUNCEMENTS
On July 13, 2006, the Financial Accounting Standards Board ("FASB") released
FASB Interpretation No. 48 ("FIN 48") "Accounting for Uncertainty in Income
Taxes." FIN 48 provides guidance for how uncertain tax positions should be
recognized, measured, presented and disclosed in the financial statements. FIN
48 requires the evaluation of tax positions taken in the course of preparing a
Fund's tax returns to determine whether the tax positions are
"more-likely-than-not" of being sustained by the applicable tax authority. Tax
positions not deemed to meet the more-than-likely-than-not threshold would be
recorded as a tax benefit or expense in the current year. Adoption of FIN 48 is
required for fiscal years beginning after December 15, 2006 and is to be applied
to all open tax years as of the effective date. As a result, the Funds have
adopted FIN 48 with this Semi-Annual Report. Based on its analysis, management
does not believe that the adoption of FIN 48 has a material impact on the
financial statments.
In September 2006, the FASB issued Statement on Financial Accounting Standards
("SFAS") No. 157, "Fair Value Measurements." This standard establishes a single
authoritative definition of fair value, sets out a framework for measuring fair
value and requires additional disclosures about fair value measurements. SFAS
No. 157 applies to fair value measurements already required or permitted by
existing standards. SFAS No. 157 is effective for financial statements issued
for fiscal years beginning after November 15, 2007 and interim periods within
those fiscal years. The changes to current generally accepted accounting
principles from the application of SFAS No. 157 relate to the definition of fair
value, the methods used to measure fair value, and the expanded disclosures
about fair value measurements. As of August 31, 2007, the Funds do not believe
the adoption of SFAS No. 157 will impact the amounts reported in the financial
statements, however, additional disclosures may be required about the inputs
used to develop the measurements and the effect of the measurements reported on
the statement of changes in net assets for a fiscal period.
17
CM ADVISERS FAMILY OF FUNDS
ABOUT YOUR FUNDS' EXPENSES (UNAUDITED)
================================================================================
We believe it is important for you to understand the impact of costs on your
investment. All mutual funds have operating expenses. As a shareholder of the
Funds, you may incur two types of costs: (1) transaction costs, including
redemption fees; and (2) ongoing costs, including management fees, distribution
(12b-1) fees and other Fund expenses. Operating expenses, which are deducted
from each Fund's gross income, directly reduce the investment return of the
Funds.
A mutual fund's ongoing costs are expressed as a percentage of its average net
assets. This figure is known as the expense ratio. The following examples are
intended to help you understand the ongoing costs (in dollars) of investing in
the Funds and to compare these costs with the ongoing costs of investing in
other mutual funds. The examples below are based on an investment of $1,000 made
at the beginning of the period shown and held for the entire period.
The table below illustrates each Fund's costs in two ways:
ACTUAL FUND RETURN - This section helps you to estimate the actual expenses that
you paid over the period. The "Ending Account Value" shown is derived from each
Fund's actual return, and the third column shows the dollar amount of operating
expenses that would have been paid by an investor who started with $1,000 in the
Funds. You may use the information here, together with the amount you invested,
to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
given for the Funds under the heading "Expenses Paid During Period."
HYPOTHETICAL 5% RETURN - This section is intended to help you compare the Funds'
costs with those of other mutual funds. It assumes that each Fund had an annual
return of 5% before expenses during the period shown, but that the expense ratio
is unchanged. In this case, because the return used is not the Funds' actual
returns, the results do not apply to your investment. The example is useful in
making comparisons because the Securities and Exchange Commission requires all
mutual funds to calculate expenses based on a 5% return. You can assess each
Fund's costs by comparing this hypothetical example with the hypothetical
examples that appear in shareholder reports of other funds.
Note that expenses shown in the table are meant to highlight and help you
compare ongoing costs only. The Funds do not impose any sales loads. However, a
redemption fee of 1% is applied on the sale of shares (sold within one year of
the date of their purchase.) The calculations assume no shares were bought or
sold during the period. Your actual costs may have been higher or lower,
depending on the amount of your investment and the timing of any purchases or
redemptions.
More information about the Funds' expenses, including annual expense ratios, can
be found in this report. For additional information on operating expenses and
other shareholder costs, please refer to the Funds' prospectus.
CM ADVISERS FUND
- --------------------------------------------------------------------------------
BEGINNING ENDING
ACCOUNT VALUE ACCOUNT VALUE EXPENSES PAID
MARCH 1, 2007 AUG. 31, 2007 DURING PERIOD*
- --------------------------------------------------------------------------------
Based on Actual Fund Return... $1,000.00 $1,007.10 $ 7.34
Based on Hypothetical
5% Return (before expenses). $1,000.00 $1,017.90 $ 7.37
- --------------------------------------------------------------------------------
* Expenses are equal to the CM Adviser Fund's annualized expense ratio of
1.45% for the period, multiplied by the average account value over the
period, multiplied by 184/365 (to reflect the one-half year period).
18
CM ADVISERS FAMILY OF FUNDS
ABOUT YOUR FUNDS' EXPENSES (UNAUDITED) (CONTINUED)
================================================================================
CM ADVISERS FIXED INCOME FUND
- --------------------------------------------------------------------------------
BEGINNING ENDING
ACCOUNT VALUE ACCOUNT VALUE EXPENSES PAID
MARCH 1, 2007 AUG. 31, 2007 DURING PERIOD*
- --------------------------------------------------------------------------------
Based on Actual Fund Return... $1,000.00 $1,001.90 $ 7.52
Based on Hypothetical
5% Return (before expenses). $1,000.00 $1,017.69 $ 7.58
- --------------------------------------------------------------------------------
* Expenses are equal to the CM Advisers Fixed Income Fund's annualized
expense ratio of 1.50% for the period, multiplied by the average account
value over the period, multiplied by 184/365 (to reflect the one-half year
period).
OTHER INFORMATION (UNAUDITED)
================================================================================
The Trust files a complete listing of portfolio holdings for the Funds with the
SEC as of the first and third quarters of each fiscal year on Form N-Q. The
filings are available upon request, by calling 1-888-859-5856. Furthermore, you
may obtain a copy of these filings on the SEC's website at http://www.sec.gov.
The Trust's Forms N-Q may also be reviewed and copied at the SEC's Public
Reference Room in Washington, DC, and information on the operation of the Public
Reference Room may be obtained by calling 1-800-SEC-0330.
A description of the policies and procedures that the Funds use to determine how
to vote proxies relating to portfolio securities is available without charge
upon request by calling toll-free 1-888-859-5856, or on the SEC's website at
http://www.sec.gov. Information regarding how the Funds voted proxies relating
to portfolio securities during the most recent 12-month period ended June 30 is
also available without charge upon request by calling toll-free 1-888-859-5856,
or on the SEC's website at http://www.sec.gov.
19
CM ADVISERS FUNDS
APPROVAL OF INVESTMENT ADVISORY AGREEMENT (UNAUDITED)
================================================================================
The Board of Trustees (the "Board"), including the Independent Trustees voting
separately, has reviewed and approved the continuance of the Investment Advisory
Agreement on behalf of CM Advisers Fund (the "Fund") with the Adviser for an
additional one year term. Approval took place at an in-person meeting held on
April 16, 2007, at which all of the Trustees were present.
In the course of their deliberations, the Board was advised by experienced legal
counsel. The Board received and reviewed a substantial amount of information
provided by the Adviser in response to requests of the Board and counsel.
In considering the Investment Advisory Agreement and reaching their conclusions
with respect thereto, the Board reviewed and analyzed various factors that they
determined were relevant, including the factors described below.
THE NATURE, EXTENT, AND QUALITY OF THE SERVICES PROVIDED BY THE ADVISER. In this
regard, the Board reviewed the services being provided by the Adviser to the
Fund including, without limitation, its investment advisory services since the
Fund's inception, its efforts during the Fund's start-up phase, its coordination
of services for the Fund among the Fund's service providers, its compliance
procedures and practices, and its efforts to promote the Fund and assist in its
distribution. The Board also noted that the Trust's chief compliance officer,
principal executive officer, and principal financial officer are employees of
the Adviser, and serve the Trust without additional compensation from the Fund.
After reviewing the foregoing information and further information provided by
the Adviser regarding its business and key personnel, the Board concluded that
the quality, extent, and nature of the services provided by the Adviser are
satisfactory and adequate for the Fund.
THE INVESTMENT PERFORMANCE OF THE FUND AND ADVISER. In this regard, the Board
compared the performance of the Fund with the performance of benchmark indices,
comparable funds managed by other advisers and comparable peer group indices.
The Board also considered the consistency of the Adviser's management of the
Fund with the Fund's investment objective and policies. Following discussion of
the short and long-term investment performance of the Fund and its Morningstar
ratings, the Adviser's experience managing the Fund and separate accounts, the
Adviser's historical investment performance and other factors, the Board
concluded that the investment performance of the Fund and Adviser has been
satisfactory.
THE COSTS OF THE SERVICES TO BE PROVIDED AND PROFITS TO BE REALIZED BY THE
ADVISER AND ITS AFFILIATES FROM THE RELATIONSHIP WITH THE FUND. In this regard,
the Board considered the Adviser's staffing, personnel, and methods of
operating; the Adviser's compliance policies and procedures; the financial
condition of the Adviser and the level of commitment to the Fund and the Adviser
by the principals of the Adviser; the asset levels of the Fund; the Adviser's
payment of startup costs for the Fund; and the overall expenses of the Fund,
including past fee waivers and expense reimbursements by the Adviser on behalf
of the Fund. The Board discussed the Fund's Expense Limitation Agreement with
the Adviser, and considered the Adviser's past fee waivers under the Expense
Limitation Agreement. In addition, the Board took into account that, for the
fiscal years ended February 28, 2006 and 2005, the Adviser voluntarily waived a
greater portion of its fees than required so as to reduce the Fund's expenses
below the level designated in the Expense Limitation Agreement.
The Board also considered potential benefits to the Adviser in managing the
Fund, including promotion of the Adviser's name, the ability for the Adviser to
place small accounts into the Fund, and the potential for the Adviser to
generate soft dollars from Fund trades that may benefit the Adviser's clients
other than the Fund. The Board
20
CM ADVISERS FUNDS
APPROVAL OF INVESTMENT ADVISORY AGREEMENT (UNAUDITED) (CONTINUED)
================================================================================
compared the fees and expenses of the Fund (including the management fee) to a
peer group of other funds comparable to the Fund in terms of the type of fund,
the style of investment management, the size of the fund and the nature of the
investment strategy and markets invested in, among other factors. The Board
determined that, while the Fund's management fee is higher than all but one of
the other funds included in the peer group, the Fund's net expense ratio (after
contractual and voluntary fee waivers and expense reimbursements) was equal to
the median and average of the others. Following this comparison and upon further
consideration and discussion of the foregoing, the Board concluded that the fees
paid to the Adviser by the Fund are fair and reasonable.
THE EXTENT TO WHICH ECONOMIES OF SCALE WOULD BE REALIZED AS THE FUND GROWS AND
WHETHER ADVISORY FEE LEVELS REFLECT THESE ECONOMIES OF SCALE FOR THE BENEFITS OF
THE FUND'S INVESTORS. In this regard, the Board considered that the Fund's fee
arrangements with the Adviser involve both the management fee and the Expense
Limitation Agreement. The Board determined that, although the Fund's assets have
grown to a level where the Adviser is receiving its full fee, the Fund has
experienced benefits from the Expense Limitation Agreement in prior years. The
Board noted that, while the management fee would remain the same at all asset
levels, the Fund will benefit from economies of scale under its agreements with
service providers other than the Adviser. The Board further considered that the
Adviser will consider closing the Fund to new investors if certain assets levels
are reached. Following further discussion of the Fund's asset levels,
expectations for growth and levels of fees, the Board determined that the Fund's
fee arrangements with the Adviser continued to provide benefits through the
Expense Limitation Agreement and that, at the Fund's current and projected asset
levels for the next year, the Fund's arrangements with the Adviser are fair and
reasonable.
THE ADVISER'S PRACTICES REGARDING BROKERAGE AND PORTFOLIO TRANSACTIONS. In this
regard, the Board considered the Adviser's standards, and performance in
utilizing those standards, to seek best execution for Fund portfolio
transactions, including the use of alternative markets (e.g., direct purchases
from issuers or underwriters or, as to equity securities, "third market" for
listed securities and principal market makers for over-the counter securities).
The Board noted that the Fund's fixed income portfolio transactions are normally
principal transactions executed in over-the-counter markets on a "net" basis.
The Board also considered the anticipated portfolio turnover rate for the Fund;
the process by which evaluations are made of the overall reasonableness of
commissions paid; the method and basis for selecting and evaluating the
broker-dealers used; any anticipated allocation of portfolio business to persons
affiliated with the Adviser; and the extent to which the Fund allocates
portfolio business to broker-dealers who provide research, statistical, or other
services ("soft dollars"). After further review and discussion, the Board
determined that the Adviser's practices regarding brokerage and portfolio
transactions are satisfactory.
POSSIBLE CONFLICTS OF INTEREST. In evaluating the possibility for conflicts of
interest, the Board considered such matters as the experience and ability of the
advisory personnel assigned to the Fund; the basis of decisions to buy or sell
securities for the Fund and/or the Adviser's other accounts; the method for
bunching of portfolio securities transactions; and the substance and
administration of the Adviser's code of ethics. Following further consideration
and discussion, the Board found the Adviser's standards and practices relating
to the identification and mitigation of potential conflicts of interests to be
satisfactory.
Conclusion
- ----------
After full consideration of the above factors as well as other factors, the
Board unanimously concluded that approval of the Investment Advisory Agreement
was in the best interests of the Fund and its shareholders.
21
CM ADVISERS FUND AND
CM ADVISERS FIXED INCOME FUND
ARE SERIES OF THE
CM ADVISERS FAMILY OF FUNDS
----------------------
FOR SHAREHOLDER SERVICE INQUIRIES: FOR INVESTMENT ADVISER INQUIRIES:
Ultimus Fund Solutions, LLC Van Den Berg Management, Inc.
P.O. Box 46707 (d/b/a CM Fund Advisers)
Cincinnati, OH 45246-0707 805 Las Cimas Parkway, Suite 430
Austin, Texas 78746
TOLL-FREE TELEPHONE: TOLL-FREE TELEPHONE:
1-888-859-5856 1-888-859-5856
WORLD WIDE WEB @:
centman.com
- --------------------------------------------------------------------------------
Investment in the Funds is subject to investment risks, including the possible
loss of some or all of the principal amount invested. No investment strategy
works all the time, and past performance is not necessarily indicative of future
performance.
THE PERFORMANCE INFORMATION QUOTED IN THIS REPORT REPRESENTS PAST PERFORMANCE,
WHICH IS NOT A GUARANTEE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL
VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA QUOTED. A
REDEMPTION FEE OF 1% OF THE AMOUNT REDEEMED IS IMPOSED ON REDEMPTIONS OF FUND
SHARES OCCURRING WITHIN ONE YEAR FOLLOWING THE ISSUANCE OF SUCH SHARES.
AN INVESTOR SHOULD CONSIDER THE INVESTMENT OBJECTIVES, RISKS, AND CHARGES AND
EXPENSES OF THE FUNDS CAREFULLY BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS
AND OTHER INFORMATION ABOUT THE FUNDS. A COPY OF THE PROSPECTUS IS AVAILABLE AT
WWW.CENTMAN.COM OR BY CALLING SHAREHOLDER SERVICES AT 1-888-859-5856. THE
PROSPECTUS SHOULD BE READ CAREFULLY BEFORE INVESTING.
- --------------------------------------------------------------------------------
Stated performance in the CM Advisers Fixed Income Fund was achieved
at some or all points during the year by waiving or reimbursing part
of the Fund's total expenses to ensure shareholders did not absorb
expenses significantly greater than the industry norm.
FOR MORE INFORMATION ON YOUR CM ADVISERS FAMILY OF FUNDS:
See Our Web site @ www.centman.com or
Call Our Shareholder Services Group Toll-Free at 1-888-859-5856
ITEM 2. CODE OF ETHICS.
No required
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not required
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not required
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable
ITEM 6. SCHEDULE OF INVESTMENTS.
Not applicable [schedule filed with Item 1]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The registrant has not adopted procedures by which shareholders may recommend
nominees to the registrant's board of trustees.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Based on their evaluation of the registrant's disclosure controls and
procedures (as defined in Rule 30a-3(c) under the Investment Company Act of
1940) as of a date within 90 days of the filing date of this report, the
registrant's principal executive officer and principal financial officer have
concluded that such disclosure controls and procedures are reasonably designed
and are operating effectively to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is made known to them
by others within those entities, particularly during the period in which this
report is being prepared, and that the information required in filings on Form
N-CSR is recorded, processed, summarized, and reported on a timely basis.
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940)
that occurred during the second fiscal quarter of the period covered by this
report that have materially affected, or are reasonably likely to materially
affect, the registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
File the exhibits listed below as part of this Form. Letter or number the
exhibits in the sequence indicated.
(a)(1) Any code of ethics, or amendment thereto, that is the subject of the
disclosure required by Item 2, to the extent that the registrant intends to
satisfy the Item 2 requirements through filing of an exhibit: Not required
(a)(2) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2(a) under
the Act (17 CFR 270.30a-2(a)): Attached hereto
(a)(3) Any written solicitation to purchase securities under Rule 23c-1 under
the Act (17 CFR 270.23c-1) sent or given during the period covered by the report
by or on behalf of the registrant to 10 or more persons: Not applicable
(b) Certifications required by Rule 30a-2(b) under the Act (17 CFR
270.30a-2(b)): Attached hereto
Exhibit 99.CERT Certifications required by Rule 30a-2(a) under the Act
Exhibit 99.906CERT Certifications required by Rule 30a-2(b) under the Act
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) CM Advisers Family of Funds
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By (Signature and Title)* /s/ Arnold Van Den Berg
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Arnold Van Den Berg, Chairman and President
Date October 24, 2007
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Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ Arnold Van Den Berg
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Arnold Van Den Berg, Chairman and President
Date October 24, 2007
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By (Signature and Title)* /s/ James D. Brilliant
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James D. Brilliant, Treasurer
Date October 24, 2007
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* Print the name and title of each signing officer under his or her signature.