UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-09485
Choice Funds
(Exact name of registrant as specified in charter)
5299 DTC Boulevard Suite 1150, Greenwood Village, CO 80111
(Address of principal executive offices) (Zip code)
Choice Investment Management, LLC, 5299 DTC Boulevard Suite 1150, Greenwood Village, CO 80111
(Name and address of agent for service)
Registrant's telephone number, including area code: (303) 488-2200
Date of fiscal year end: October 31
Date of reporting period: April 30, 2005
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. § 3507.
Item 1. Reports to Stockholders.
![[frontcover002.jpg]](https://capedge.com/proxy/N-CSRS/0000910472-05-000137/frontcover002.jpg)
A Choice for all Seasons
Choice Focus Fund
Choice Long-Short Fund
Choice Market Neutral Fund
Semi-Annual Report – April 30, 2005
PERSPECTIVES FROM PATRICK ADAMS
![[letter002.jpg]](https://capedge.com/proxy/N-CSRS/0000910472-05-000137/letter002.jpg) | The Long-Short Fund for the six month semi-annual period ending April 30, 2005 was up 2.6% relative to our goal of positive return, while the NASDAQ was down (2.7)% and the S&P® 500 Index was up 2.4%.(1, 2, 4)
We made portfolio management changes for the Market Neutral Fund during this six month period. We believe these changes are improving the return of the fund. During the semi-annual period the fund was down (5.1)% but off only (1.3)% since the first of the year through April 30th. We are encouraged by the funds progress. We are hopeful the fund can achieve its goal of a positive return for the calendar year 2005. (1, 4) | |
The Focus Fund was down (10.4)% during the semi-annual period. (1,3) The Fund underperformed during March and the first half of April falling just over (12)%. This corresponds to a (12.5)% drop in the PHLX Semiconductor Index and a (7)% drop in the NASDAQ. The Focus Fund has significant exposure to technology and semiconductors and consequently had a high degree of correlation with these indices. We anticipate holding positions in technology and semiconductors and are optimistic these stocks will perform better.
We would describe the market during the semi-annual period as volatile. The S&P® 500 Index was up 7.2% from the end of October through the end of 2004 but fell (4.5)% from the first of the year through April. (2) The NASDAQ composite was even more volatile. The NASDAQ composite is down (11.7)% since the start of the calendar year. (2)
We believe many of the issues that impacted the markets so far this calendar year are transitional and expect the equity markets to improve during 2005. The big move in the equity market during the last couple of months of 2004 we believe was only technical. As we moved through 2005 the concerns mounted about the economy slowing while the Federal Reserve continued to raise interest rates; thus, causing a significant sell off in the equity markets.
Valuation for equities appears to be very attractive relative to interest rates. The 10-Year Treasury Note is the typical matrix we use as a benchmark to value equities. The S&P® 500 Index was 16 times 2005 earnings and the 10-Year Treasury around 4% at the end of April. We believe this represents value in the stock market.
It appears the Federal Reserve is near the end of raising interest rates, and the economy is holding up. We do not believe the Fed will raise rates to the point of causing a recession.
Our two favorite sectors of the stock market are technology, specifically semiconductors, and financials. The semiconductor sector has been through a brutal correction that started early 2004 and fell about (35)% from its highs. In the meantime, the fundamentals have improved as excess inventory has been substantially reduced. The financial sector should perform better. The financial sector is attractively valued and traditionally performance improves when the Fed is not raising rates.
Overall we are pleased with the near-term performance of our funds. It is the goal of both the Long-Short and Market Neutral Funds to provide positive returns during a 12-month period and to be less correlated with the overall equity markets. (1, 4) If the market has a sustained upward move the Focus Fund is designed to perform best in this environment. (1, 3)
![[letter004.jpg]](https://capedge.com/proxy/N-CSRS/0000910472-05-000137/letter004.jpg)
Patrick Adams, CFA
Managing Partner
(1) There is no guarantee the Fund will achieve its stated investment objective.
(2) The S&P® 500 Index and NASDAQ Composite Index are an unmanaged index generally representative of the U.S. Stock Market. Performance numbers reflect reinvestment of dividends and other distributions. You cannot invest directly in an index.
(3) The Focus Fund is non-diversified and therefore more exposed to individual stock volatility and market pressure than a fully diversified fund.
(4) To attempt to achieve its investment goal, the Fund may use derivatives strategies and other leveraging techniques speculatively. These strategies subject the Fund to greater risks, and its performance may be more volatile than other funds. The Fund may be required to pay a premium to sell a security short. In addition, there is no guarantee that the price of a shorted security will fall. This Fund is not a complete investment program and investors should consider the Fund for that portion of their investments allocated to higher risk, more aggressive investments.
CHOICE FOCUS FUND
INVESTMENT RETURNS TABLE* | |||
One Year Ended | Five Year Ended | Average Annual Since Inception | |
4-30-05 | 4-30-05 | 4-30-05 | |
Choice Focus Class A (inception date 11-1-99) | |||
Fund With Sales Load Effect | -22.02% | -21.39% | -16.71% |
Fund Without Sales Load Effect | -17.52% | -20.49% | -15.85% |
Choice Focus Class C (inception date 3-2-04) | |||
Fund With Sales Load Effect | -18.35% | N/A | -21.50% |
Fund Without Sales Load Effect | -17.52% | N/A | -21.50% |
S&P 500® Stock Index (inception date 11-1-99) | 5.71% | -2.94% | -1.33% |
Performance is historical and does not represent future results, current performance may be higher or lower than performance data quoted. Investment returns and principal will fluctuate so that shares, when redeemed, may be worth more or less than their original investment. For Class A shares, total return figures include an upfront maximum applicable sales charge of 5.50%. Class C shareholders are subject to a contingent deferred sales charge of 1% (as a percentage of original purchase price or redemption proceeds, whichever is lower) on shares sold within one year of purchase. A Fund’s performance, especially for very short periods of time, should not be the sole factor in making your investment decisions. Fund prices change daily and performance may change significantly during periods of market volatility. Visit our website at www.choicefunds.net for current fund performance information. The Fund is non-diversified; therefore, it is more exposed to individual stock volatility and market pressure than funds investing in a larger number of securities. The Fund has invested a substantial portion of its assets in technology-related companies, and thus is more susceptible to any economic, business or other developments that generally affect those types of companies.
GROWTH OF AN ASSUMED $10,000 INVESTMENT*
![[focusfund10000graphrev001.jpg]](https://capedge.com/proxy/N-CSRS/0000910472-05-000137/focusfund10000graphrev001.jpg)
This chart assumes an initial investment of $10,000 made on 11-1-99. Total return is based on net change in N.A.V. assuming reinvestment of distributions. Returns shown on this page include the reinvestment of all dividends and other distributions. Performance figures reflect fee waivers in effect, represent past performance, which is no guarantee of future results, and will fluctuate.
It is not possible to make a direct investment in the S&P 500® Stock Index.
*The Investment Returns Table and graph do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
CHOICE FOCUS FUND |
Objective |
The Choice Focus Fund seeks capital appreciation by investing primarily in 20-30 securities of companies that the portfolio manager believes have superior potential for earnings growth. |
Strategy |
The portfolio manager looks for reasonably priced securities of companies that occupy a dominant position in a market due to size, products or services, and whose growth potential is not yet fully reflected in the company’s stock price. |
CHOICE LONG-SHORT FUND
INVESTMENT RETURNS TABLE* | ||
One Year Ended | Average Annual Since Inception | |
4-30-05 | 4-30-05 | |
Choice Long-Short Class A (inception date 2-1-01) | ||
Fund With Sales Load Effect | -13.21% | -11.71% |
Fund Without Sales Load Effect | -8.10% | -10.53% |
Choice Long-Short Class C (inception date 2-1-01) | ||
Fund With Sales Load Effect | -9.93% | -12.24% |
Fund Without Sales Load Effect | -9.02% | -12.24% |
S&P 500® Stock Index (inception date 2-1-01) | 5.71% | -2.38% |
Performance is historical and does not represent future results, current performance maybe higher or lower than performance data quoted. Investment returns and principal will fluctuate so that shares, when redeemed, may be worth more or less than their original investment. For Class A shares, total return figures include an upfront maximum applicable sales charge of 5.50%. Class C shareholders are subject to a contingent deferred sales charge of 1% (as a percentage of original purchase price or redemption proceeds, whichever is lower) on shares sold within one year of purchase. The Fund’s performance, especially for very short periods of time, should not be the sole factor in making your investment decisions. Fund prices change daily and performance may change significantly during periods of market volatility. Visit our website at www.choicefunds.net for current fund performance information. The Fund is non-diversified; therefore , it is more exposed to individual stock volatility and market pressure than funds investing in a larger number of securities. The Fund has invested a substantial portion of its assets in technology-related companies, and thus is more susceptible to any economic, business or other developments that generally affect those types of companies.
GROWTH OF AN ASSUMED $10,000 INVESTMENT*
![[longshortfund10000graphre001.jpg]](https://capedge.com/proxy/N-CSRS/0000910472-05-000137/longshortfund10000graphre001.jpg)
This chart assumes an initial investment of $10,000 made on 2-1-01. Total return is based on net change in N.A.V. assuming reinvestment of distributions. Returns shown on this page include the reinvestment of all dividends and other distributions. Performance figures reflect fee waivers in effect, represent past performance, which is no guarantee of future results, and will fluctuate.
It is not possible to make a direct investment in the S&P 500® Stock Index.
*The Investment Returns Table and graph do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
CHOICE LONG-SHORT FUND |
Objective |
The Fund’s investment objective is to seek long-term growth of capital through all market conditions. |
Strategy |
The Fund will invest primarily in a non-diversified portfolio of common stocks of companies of all sizes that have been analyzed intensely by the portfolio manager. The Fund will use various strategies, such as buying long and short sales. |
CHOICE MARKET NEUTRAL FUND
INVESTMENT RETURNS TABLE* | ||
One Year Ended | Average Annual Since Inception | |
4-30-05 | 4-30-05 | |
Choice Market Neutral Class A (inception date 3-31-03) | ||
Fund With Sales Load Effect | -20.48% | -12.58% |
Fund Without Sales Load Effect | -15.88% | -10.18% |
Choice Market Neutral Class C (inception date 3-31-03) | ||
Fund With Sales Load Effect | -17.62% | -11.10% |
Fund Without Sales Load Effect | -16.79% | -11.10% |
S&P 500® Stock Index (inception date 3-31-03) | 5.71% | 18.14% |
Performance is historical and does not represent future results, current performance maybe higher or lower than performance data quoted. Investment returns and principal will fluctuate so that shares, when redeemed, may be worth more or less than their original investment. For Class A shares, total return figures include an upfront maximum applicable sales charge of 5.50%. Class C shareholders are subject to a contingent deferred sales charge of 1% (as a percentage of original purchase price or redemption proceeds, whichever is lower) on shares sold within one year of purchase. The Fund’s performance, especially for very short periods of time, should not be the sole factor in making your investment decisions. Fund prices change daily and performance may change significantly during periods of market volatility. Visit our website at www.choicefunds.net for current fund performance information. The Fund is non-diversified; therefore , it is more exposed to individual stock volatility and market pressure than funds investing in a larger number of securities.
GROWTH OF AN ASSUMED $10,000 INVESTMENT*
![[marketneutralfund10000gra001.jpg]](https://capedge.com/proxy/N-CSRS/0000910472-05-000137/marketneutralfund10000gra001.jpg)
This chart assumes an initial investment of $10,000 made on 3-31-03. Total return is based on net change in N.A.V. assuming reinvestment of distributions. Returns shown on this page include the reinvestment of all dividends and other distributions. Performance figures reflect fee waivers in effect, represent past performance, which is no guarantee of future results, and will fluctuate.
It is not possible to make a direct investment in the S&P 500® Stock Index.
*The Investment Returns Table and graph do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
CHOICE MARKET NEUTRAL FUND |
Objective |
The Fund seeks to produce positive returns while remaining market neutral by investing actively long and short in a portfolio of equity securities. “Remaining market neutral” means that a Fund will generally maintain a balance of long and short positions. The Fund has a secondary goal of preservation of capital. |
Strategy |
The Portfolio Manager will use pair trading to attempt to capture the “alpha” and minimize the market and sector risks. He will also attempt to preserve capital and enhance returns by utilizing an aggressive risk management and trading process. (See the prospectus for additional information). |
CHOICE TOP TEN INDUSTRIES AND INVESTMENTS
Focus Fund
Top Ten Industries as of April 30, 2005 | % of Net Assets | Top Ten Holdings as of April 30, 2005 | % of Net Assets | |
Electronic-Semiconductor Manufact. | 19.2 | U.S. Bancorp | 6.8 | |
Banking | 16.3 | Goldman Sachs Group Inc. Pref. A | 6.1 | |
Computers-Software | 16.0 | Cisco Systems, Inc. | 5.7 | |
Computers-Services | 11.3 | Vitesse Semiconductor Corp. | 5.4 | |
Telecommunications-Equipment | 10.4 | McDATA Corp. | 4.7 | |
Electronic-Semiconductor Equip. | 10.2 | RF Micro Devices, Inc. | 4.3 | |
Short-Term Investments | 7.2 | Validian Corp. | 4.2 | |
Preferred Stocks | 6.1 | New York Community Bancorp | 4.1 | |
Medical-Biotechnology | 5.1 | Lexar Media, Inc. | 4.0 | |
Retail-Department / Discount | 3.1 | International Business Machines Corp. | 3.9 |
Long-Short Fund
Top Ten Industries as of April 30, 2005 | % of Net Assets | Top Ten Holdings as of April 30, 2005 | % of Net Assets | |
Short-Term Investments Medical-Biotechnology Banking Utilities Oil-Gas Producers & Services REITS Manufacturing Communications Index Tracking Stocks Beverages | 82.2 5.9 2.9 2.9 1.9 1.5 1.0 1.0 0.9 0.9 | Abbott Laboratories Johnson & Johnson General Electric Co. Consolidated Edison, Inc. Citigroup, Inc. SBC Communications, Inc. Bank of America Corp. SPDR Utilities Select Sector Exxon Mobil Corp. Pfizer Inc. | 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 |
Market Neutral Fund
Top Ten Industries as of April 30, 2005 | % of Net Assets | Top Ten Holdings as of April 30, 2005 | % of Net Assets | |
REITS Electronics-Semiconductor Manufact. Preferred Stocks Banking Computers-Software Short-Term Investments Diversified Financial Services Telecommunications-Equipment Utilities Oil-Gas Producers & Services | 19.8 15.4 14.8 13.4 11.0 9.3 5.2 4.3 4.3 3.7 | New York Community Bancorp Goldman Sachs Group Inc. Pref. A PS Business Parks Inc. Pref. M Cisco Systems, Inc. Xilinx, Inc. Fannie Mae Preferred U.S. Bancorp ABN AMRO Holding NV Colonial Properties Trust Family Dollar Stores, Inc. | 6.2 5.0 4.1 3.7 3.6 3.2 3.0 3.0 2.8 2.7 |
CHOICE FOCUS FUND |
|
|
| ||
SCHEDULE OF INVESTMENTS | |||||
April 30, 2005 (Unaudited) | |||||
Number of Shares |
|
|
|
| Value |
COMMON STOCKS | 100.1% |
| |||
Appliances | 0.7% |
| |||
600 | Maytag Corp. | $ 5,814 | |||
| |||||
Banking | 16.3% |
| |||
900 | Bank of New York Company, Inc. | 25,146 | |||
1,800 | BofI Holding, Inc. * | 17,694 | |||
1,800 | New York Community Bancorp | 31,860 | |||
1,900 | U.S. Bancorp | 53,010 | |||
127,710 | |||||
Chemicals | 2.0% |
| |||
900 | Olin Corp. | 15,966 | |||
| |||||
Computers-Services | 11.3% |
| |||
700 | First Data Corp. | 26,621 | |||
400 | International Business Machines Corp. | 30,552 | |||
6,900 | Lexar Media, Inc. * | 31,257 | |||
88,430 | |||||
Computers-Software | 16.0% |
| |||
29 | Computer Associates International, Inc. | 780 | |||
11,900 | McDATA Corp. * | 36,652 | |||
3,000 | OpenTV Corp. * | 6,540 | |||
2,300 | Packeteer Inc. * | 26,864 | |||
1,200 | Symantec Corp. * | 22,536 | |||
67,932 | Validian Corp. * | 32,607 | |||
27,778 | Validian Corp., Warrants 3/8/2009* | - | |||
125,979 | |||||
Electronics-Semiconductor Equipment | 10.2% |
| |||
500 | Applied Materials, Inc.* | 7,435 | |||
6,200 | Asyst Technologies, Inc. * | 20,336 | |||
800 | Novellus Systems, Inc. * | 18,744 | |||
8,600 | RF Micro Devices, Inc. * | 33,712 | |||
80,227 | |||||
Electronics-Semiconductor Manufacturing | 19.2% |
| |||
8,500 | Applied Micro Circuits Corp. * | 22,695 | |||
3,200 | Atheros Communications, Inc. * | 23,296 | |||
800 | Linear Technology Corp. | 28,592 | |||
300 | Maxim Integrated Products, Inc. | 11,220 | |||
2,800 | PMC-Sierra, Inc. * | 22,568 | |||
20,300 | Vitesse Semiconductor Corp.* | 42,224 | |||
150,595 | |||||
Medical-Biotechnology | 5.1% |
| |||
500 | Amgen, Inc. * | 29,105 | |||
3,100 | Elite Pharmaceuticals, Inc. * | 11,005 | |||
40,110 | |||||
CHOICE FOCUS FUND |
|
|
| ||
SCHEDULE OF INVESTMENTS | |||||
April 30, 2005 (Unaudited) | |||||
Number of Shares |
|
|
|
| Value |
Pharmaceuticals | 1.5% |
| |||
200 | Eli Lilly & Co. | $ 11,694 | |||
| |||||
REIT's | 2.2% |
| |||
1,100 | Truststreet Properties, Inc. | 17,204 | |||
| |||||
Retail-Department / Discount | 3.1% |
| |||
900 | Family Dollar Stores, Inc. | 24,282 | |||
| |||||
Retail-Home Specialty | 2.1% |
| |||
200 | Bed Bath & Beyond, Inc. * | 7,442 | |||
200 | The Home Depot, Inc. | 7,074 | |||
100 | Staples, Inc. | 1,907 | |||
16,423 | |||||
Telecommunications-Equipment | 10.4% |
| |||
1,200 | Axesstel Inc. | 4,272 | |||
2,600 | Cisco Systems, Inc.* | 44,928 | |||
5,300 | Extreme Networks, Inc. * | 23,585 | |||
400 | Juniper Networks, Inc. * | 9,036 | |||
164 | Lucent Technologies Inc., Warrants 12/10/07 * | 79 | |||
81,900 | |||||
| |||||
Total Common Stocks (Cost $819,683) | 786,334 | ||||
| |||||
PREFERRED STOCKS | 6.1% |
| |||
Financial/Investment Banking |
| ||||
1,900 | Goldman Sachs Group Inc. Preferred Series A, 3.91% ** | 47,500 | |||
| |||||
Total Preferred Stocks (Cost $47,500) | 47,500 | ||||
| |||||
| |||||
SHORT-TERM INVESTMENTS | 7.2% |
| |||
56,594 | UMB Bank Money Market Fiduciary, |
| |||
Variable Rate Demand Deposit, 0.84% ** | 56,594 | ||||
| |||||
Total Short-Term Investments (Cost $56,594) | 56,594 | ||||
| |||||
TOTAL INVESTMENTS (Cost $923,777) | 113.4% | $ 890,428 | |||
| |||||
Liabilities less Other Assets | -13.4% | (105,224) | |||
| |||||
NET ASSETS | 100.0% | $ 785,204 | |||
* Non-income producing securities. | |||||
** Variable rate security; the coupon rate shown represents the rate at April 30, 2005. | |||||
CHOICE LONG-SHORT FUND |
|
|
| ||
SCHEDULE OF INVESTMENTS | |||||
April 30, 2005 (Unaudited) | |||||
Number of Shares |
|
|
|
| Value |
COMMON STOCKS | 21.5% |
| |||
Aerospace-Defense | 0.5% |
| |||
1,000 | The Boeing Co. | $ 59,520 | |||
| |||||
Banking | 2.9% |
| |||
2,800 | Bank of America Corp. | 126,112 | |||
2,700 | Citigroup, Inc. | 126,792 | |||
1,200 | PNC Financial Services Group, Inc. | 63,876 | |||
1,100 | Wells Fargo & Co. | 65,934 | |||
382,714 | |||||
| |||||
Beverages | 0.9% |
| |||
1,300 | Anheuser-Busch Companies, Inc. | 60,931 | |||
1,100 | PepsiCo, Inc. | 61,204 | |||
122,135 | |||||
| |||||
Casino Services | 0.5% |
| |||
1,200 | Boyd Gaming Corp. | 63,336 | |||
| |||||
Computers-Software | 0.3% |
| |||
2,500 | EMC Corp. * | 32,800 | |||
8,220 | Imageware Systems, Inc., Warrants 6/10/2009 * | - | |||
88,889 | Validian Corp., Warrants 3/8/2009 * | - | |||
32,800 | |||||
| |||||
Communications | 0.9% |
| |||
5,300 | SBC Communications, Inc. | 126,140 | |||
| |||||
Electronics-Semiconductor Manufacturing | 0.5% |
| |||
2,600 | Intel Corp. | 61,152 | |||
| |||||
Financial | 0.5% |
| |||
1,800 | Countrywide Financial Corp. | 65,142 | |||
| |||||
Food | 0.5% |
| |||
1,300 | General Mills, Inc. | 64,220 | |||
| |||||
Index Tracking Stocks | 0.9% |
| |||
4,200 | SPDR Utilities Select Sector | 125,874 | |||
| |||||
Manufacturing | 1.0% |
| |||
3,600 | General Electric Co. | 130,320 | |||
CHOICE LONG-SHORT FUND |
|
|
| ||
SCHEDULE OF INVESTMENTS | |||||
April 30, 2005 (Unaudited) | |||||
Number of Shares |
|
|
|
| Value |
Medical-Biotechnology | 5.9% |
| |||
2,700 | Abbott Laboratories | $ 132,732 | |||
25,778 | GlycoGenesys, Inc., Warrants 8/13/2008* | - | |||
1,200 | HCA, Inc. | 67,008 | |||
1,900 | Johnson & Johnson | 130,397 | |||
4,600 | Pfizer Inc. | 124,982 | |||
1,600 | St. Jude Medical, Inc. * | 62,448 | |||
3,000 | Schering-Plough Corp. | 62,610 | |||
700 | UnitedHealth Group Inc. | 66,157 | |||
500 | WellPoint Inc. * | 63,875 | |||
800 | Zimmer Holdings, Inc. * | 65,136 | |||
775,345 | |||||
| |||||
Oil-Gas Producers & Services | 1.9% |
| |||
1,200 | ChevronTexaco Corp. | 62,400 | |||
8,100 | Daugherty Resources, Inc., Warrants 1/13/2008 * | - | |||
2,200 | Exxon Mobil Corp. | 125,466 | |||
20,000 | Galaxy Energy Corp., Warrants 1/2008 * | - | |||
6,400 | Provident Energy Trust | 62,464 | |||
250,330 | |||||
| |||||
REITS | 1.5% |
| |||
1,800 | Archstone-Smith Trust | 64,746 | |||
900 | Avalonbay Communities, Inc. | 64,800 | |||
2,900 | United Dominion Realty Trust, Inc. | 64,235 | |||
193,781 | |||||
| |||||
Utilities | 2.9% |
| |||
3,000 | Consolidated Edison, Inc. | 129,840 | |||
3,400 | Edison International | 123,420 | |||
4,800 | Hawaiian Electric Utilities, Inc. | 121,440 | |||
374,700 | |||||
| |||||
Total Common Stocks (Cost $2,799,715) | 2,827,509 | ||||
| |||||
Principal/Shares |
| ||||
SHORT-TERM INVESTMENTS | 82.1% |
| |||
5,360,522 | UMB Bank Money Market Fiduciary, |
| |||
Variable Rate Demand Deposit, 0.84% ** | 5,360,522 | ||||
5,400,000 | U.S. Treasury Bill, 2.68%, 07/14/05 # | 5,369,892 | |||
| |||||
Total Short-Term Investments (Cost $10,730,414) | 10,730,414 | ||||
CHOICE LONG-SHORT FUND |
|
|
| ||
SCHEDULE OF INVESTMENTS | |||||
April 30, 2005 (Unaudited) | |||||
Number of Shares |
|
|
|
| Value |
| |||||
TOTAL INVESTMENTS (Cost $13,530,128) | 103.7% | $ 13,557,923 | |||
| |||||
Liabilities less Other Assets | -3.7% | (485,394) | |||
| |||||
NET ASSETS | 100.0% | $ 13,072,529 | |||
| |||||
| |||||
Number of Contracts |
|
|
| Unrealized Gain | |
| |||||
FUTURES CONTRACT SOLD SHORT |
| ||||
20 | DJIA Index Futures Contracts maturing |
| |||
Jun 2005 (Underlying Face Amount at |
| ||||
Value $1,040,500) | $ 20,800 | ||||
* Non-income producing securities. | |||||
** Variable rate security; the coupon rate shown represents the rate at April 30, 2005. | |||||
# Portion of security is pledged as collateral for futures contract. | |||||
SPDR - Standard & Poor's Depositary Receipts | |||||
CHOICE MARKET NEUTRAL FUND |
|
|
| ||
SCHEDULE OF INVESTMENTS | |||||
April 30, 2005 (Unaudited) | |||||
Number of Shares |
|
|
|
| Value |
COMMON STOCKS | 92.7% |
| |||
Appliances | 0.6% |
| |||
700 | Maytag Corp. | $ 6,783 | |||
| |||||
Automotive | 2.4% |
| |||
3,200 | Ford Motor Co. | 29,152 | |||
| |||||
Banking | 13.4% |
| |||
1,500 | ABN AMRO Holding NV | 35,775 | |||
1,000 | Citizens Banking Corp. | 26,810 | |||
4,200 | New York Community Bancorp | 74,340 | |||
1,200 | Susquehanna Bancshares, Inc. | 25,236 | |||
162,161 | |||||
| |||||
Business Services | 0.7% |
| |||
600 | StarTek, Inc. | 8,730 | |||
| |||||
Chemicals | 1.8% |
| |||
1,200 | Olin Corp. | 21,288 | |||
| |||||
Computers-Software | 11.0% |
| |||
600 | First Data Corp. | 22,818 | |||
6,027 | Imageware Systems, Inc., Warrants 6/10/2009 * | - | |||
400 | International Business Machines Corp. | 30,552 | |||
4,800 | Lexar Media, Inc. * | 21,744 | |||
10,200 | McDATA Corp. * | 31,416 | |||
1,900 | OpenTV Corp. * | 4,142 | |||
500 | Packeteer, Inc. * | 5,840 | |||
500 | Symantec Corp. * | 9,390 | |||
15,200 | Validian Corp. * | 7,296 | |||
133,198 | |||||
| |||||
Diversified Financial Services | 5.2% |
| |||
800 | Friedman, Billings, Ramsey Group, Inc. | 9,672 | |||
400 | MCG Capital Corp. | 6,172 | |||
400 | Mellon Financial Corp. | 11,076 | |||
1,300 | U.S. Bancorp | 36,270 | |||
63,190 | |||||
| |||||
Electronics-Semiconductor Manufacturing | 15.4% |
| |||
6,200 | Applied Materials, Inc. * | 16,554 | |||
5,700 | Asyst Technology Corp. * | 18,696 | |||
900 | Linear Technology Corp. | 32,166 | |||
900 | Novellus Systems, Inc. * | 21,087 | |||
CHOICE MARKET NEUTRAL FUND |
|
|
| ||
SCHEDULE OF INVESTMENTS | |||||
April 30, 2005 (Unaudited) | |||||
Number of Shares |
|
|
|
| Value |
Electronics-Semiconductor Manufacturing (continued) |
| ||||
1,700 | PMC-Sierra, Inc. * | $ 13,702 | |||
5,000 | RF Micro Devices, Inc. * | 19,600 | |||
9,800 | Vitesse Semiconductor Corp. * | 20,384 | |||
1,600 | Xilinx, Inc. | 43,104 | |||
185,293 | |||||
| |||||
Entertainment | 0.5% |
| |||
300 | Regal Entertainment Group Class A | 6,087 | |||
| |||||
Foods | 3.0% |
| |||
700 | ConAgra Foods, Inc. | 18,725 | |||
800 | Sara Lee Corp. | 17,112 | |||
35,837 | |||||
| |||||
Medical-Biotechnology | 2.9% |
| |||
400 | Amgen, Inc. * | 23,284 | |||
200 | Eli Lilly & Co. | 11,694 | |||
16,111 | GlycoGenesys, Inc., Warrants 8/13/2008 * | - | |||
9,367 | Large Scale Biology Corp., Warrants 5/5/2009 * | - | |||
34,978 | |||||
| |||||
Oil & Gas Producers & Services | 3.7% |
| |||
5,700 | Daugherty Resources, Inc., Warrants 1/13/2008 * | - | |||
17,000 | Galaxy Energy Corp., Warrants 1/2008 * | - | |||
500 | Northern Border Partners, L.P. | 22,950 | |||
700 | Pengrowth Energy Trust Class A | 14,119 | |||
300 | Vectren Corp. | 8,103 | |||
45,172 | |||||
| |||||
Personal & Household Products | 1.0% |
| |||
600 | Tupperware Corp. | 12,660 | |||
| |||||
REITS | 19.8% |
| |||
300 | American Home Mortgage Investment Corp. | 9,810 | |||
1,100 | Annaly Mortgage Management Inc. | 21,032 | |||
2,900 | Anworth Mortgage Asset Corp. | 27,057 | |||
883 | Colonial Properties Trust | 34,128 | |||
900 | Glenborough Realty Trust Inc. | 18,486 | |||
500 | Glimcher Realty Trust | 12,585 | |||
2,200 | HRPT Properties Trust | 25,850 | |||
300 | Heritage Property Investment Trust | 9,240 | |||
1,100 | Impac Mortgage Holdings, Inc. | 20,152 | |||
200 | Liberty Property Trust | 7,966 | |||
CHOICE MARKET NEUTRAL FUND |
|
|
| ||
SCHEDULE OF INVESTMENTS | |||||
April 30, 2005 (Unaudited) | |||||
Number of Shares |
|
|
|
| Value |
REITS (continued) |
| ||||
400 | Nationwide Health Properties, Inc. | $ 8,572 | |||
200 | New Century Financial Corp. | 9,090 | |||
700 | Senior Housing Properties Trust | 12,110 | |||
1,500 | Truststreet Properties, Inc. | 23,460 | |||
239,538 | |||||
| |||||
Retail-Department / Discount | 2.7% |
| |||
1,200 | Family Dollar Stores, Inc. | 32,376 | |||
| |||||
Telecommunications-Equipment | 4.3% |
| |||
2,600 | Cisco Systems, Inc.* | 44,928 | |||
1,700 | Extreme Networks, Inc. * | 7,565 | |||
52,493 | |||||
| |||||
Utilities | 4.3% |
| |||
800 | Duquesne Light Holdings Inc. | 14,072 | |||
500 | Pinnacle West Capital Corp. | 20,950 | |||
400 | Progress Energy, Inc. | 16,796 | |||
51,818 | |||||
| |||||
Total Common Stocks (Cost $1,147,742) | 1,120,754 | ||||
| |||||
PREFERRED STOCKS | 14.8% |
| |||
1,200 | Converium Finance Preferred | 29,940 | |||
700 | Fannie Mae Preferred | 38,872 | |||
2,400 | Goldman Sachs Group Inc. Preferred Series A | 60,000 | |||
2,000 | PS Business Parks Inc. Preferred Series M | 50,000 | |||
| |||||
Total Preferred Stocks (Cost $179,612) | 178,812 | ||||
| |||||
SHORT-TERM INVESTMENTS | 9.3% |
| |||
| |||||
112,701 | UMB Bank Money Market Fiduciary, |
| |||
Variable Rate Demand Deposit, 0.84% ** | 112,701 | ||||
| |||||
Total Short-Term Investments (Cost $112,701) | 112,701 | ||||
| |||||
TOTAL INVESTMENTS (Cost $1,440,055) | 116.8% | $ 1,412,267 | |||
| |||||
Liabilities less Other Assets | -16.8% | (203,192) | |||
| |||||
NET ASSETS | 100.0% | $ 1,209,075 | |||
| |||||
CHOICE MARKET NEUTRAL FUND |
|
|
| ||
SCHEDULE OF INVESTMENTS | |||||
April 30, 2005 (Unaudited) | |||||
Number of Shares |
|
|
|
| Value |
OPTIONS WRITTEN |
| ||||
Common Stock/Expiration Date/Exercise Price |
| ||||
3 | Amgen, Inc. * Put/June/55 | 195 | |||
8 | Dell, Inc. Put/May/35 | 760 | |||
5 | Eli Lilly & Co. Call/May/60 | 70 | |||
4 | Eli Lilly & Co. Put/May/55 | 100 | |||
2 | Fifth Third Bancorp Put/May/40 | 50 | |||
4 | International Business Machines Corp. Put/May/70 | 80 | |||
10 | Novellus Systems, Inc. * Put/May/22.50 | 300 | |||
6 | Progress Energy, Inc. Put/June/40 | 120 | |||
5 | Xilinx, Inc. Put/May/25 | 125 | |||
TOTAL OPTIONS WRITTEN |
| ||||
(premiums received $1,711) | $ 1,800 | ||||
| |||||
SECURITIES SOLD SHORT |
| ||||
1,100 | Altera Corp. * | 22,803 | |||
700 | Baxter International, Inc. | 25,970 | |||
77 | Freescale Semiconductor Class B | 1,458 | |||
800 | Intersil Holding Corp. Class A | 13,968 | |||
1,000 | Jabil Circuit, Inc. * | 27,600 | |||
2,000 | NASDAQ-100 Index | 69,980 | |||
400 | Oil Service HOLDRs Trust | 35,612 | |||
200 | P.F. Chang's China Bistro | 11,104 | |||
1,600 | SPDR Trust Series I | 185,200 | |||
500 | Sonic Corp. | 16,020 | |||
500 | Starbucks Corp. | 24,760 | |||
1,300 | Telefonaktiebolaget LM Ericsson Sp ADR | 38,285 | |||
1,200 | Texas Instruments, Inc. | 29,952 | |||
100 | Whole Foods Market, Inc. | 9,972 | |||
TOTAL SECURITIES SOLD SHORT |
| ||||
(proceeds $506,780) | $ 512,684 | ||||
* Non-income producing securities. | |||||
** Variable rate security; the coupon rate shown represents the rate at April 30, 2005. | |||||
SPDR - Standard & Poor's Depositary Receipts | |||||
CHOICE FUNDS |
|
|
|
|
|
|
STATEMENTS OF ASSETS AND LIABILITIES | ||||||
April 30, 2005 (Unaudited) |
| Long-Short | Market Neutral | |||
|
| Focus Fund |
| Fund |
| Fund |
|
|
| ||||
ASSETS |
|
|
| |||
Investments in securities, at value |
|
|
| |||
(Cost $923,777, $13,530,128, and $1,440,055) | $ 890,428 | $ 13,557,923 | $ 1,412,267 | |||
Receivable for Fund shares sold | - | 23,575 | - | |||
Deposit at broker | - | 39,000 | 562,138 | |||
Receivable for investments sold | 144,604 | 244,174 | 734,918 | |||
Dividends and interest receivable | 573 | 13,082 | 5,646 | |||
Due from adviser | 12,307 | - | 9,426 | |||
Prepaid expenses and other assets | 16,072 | 22,068 | 21,937 | |||
Total Assets | 1,063,984 | 13,899,822 | 2,746,332 | |||
|
|
| ||||
LIABILITIES |
|
|
| |||
Securitites sold short, at value |
|
|
| |||
(proceeds of $0, $0, and $506,780) | - | - | 512,684 | |||
Options written, at value |
|
|
| |||
(proceeds of $0, $0, and $1,711) | - | - | 1,800 | |||
Payable for investments purchased | 252,687 | 733,518 | 973,935 | |||
Due to broker - variation margin | - | 13,300 | - | |||
Fund shares repurchased | - | 1,948 | - | |||
Accrued distribution fee | 55 | 34,469 | 5,231 | |||
Accrued investment advisory fee | - | 25,224 | - | |||
Accrued expenses and other liabilities | 26,038 | 18,834 | 43,607 | |||
Total Liabilities | 278,780 | 827,293 | 1,537,257 | |||
NET ASSETS | $ 785,204 | $ 13,072,529 | $ 1,209,075 | |||
|
|
| ||||
NET ASSETS CONSIST OF |
|
|
| |||
Paid in capital | $ 28,675,232 | $ 27,097,963 | $ 2,218,064 | |||
Accumulated net investment loss | (4,729) | (115,870) | (2,756) | |||
Accumulated net realized loss on investments, |
|
|
| |||
securities sold short, options, and futures contracts | (27,851,950) | (13,958,159) | (972,452) | |||
Net unrealized appreciation (depreciation) on investments | (33,349) | 48,595 | (33,781) | |||
NET ASSETS | $ 785,204 | $ 13,072,529 | $ 1,209,075 | |||
|
|
| ||||
CLASS A SHARES |
|
|
| |||
Net assets | $ 785,194 | $ 12,702,902 | $ 949,945 | |||
Shares outstanding (no par value, unlimited shares authorized) | 203,264 | 2,036,673 | 118,745 | |||
Net Asset Value Per Share (Net Assets/Shares Outstanding) | $ 3.86 | $ 6.24 | $ 8.00 | |||
Maximum Offering Price Per Share (Net Asset Value Plus |
|
|
| |||
5.82% of Net Asset Value or 5.50% of Offering Price) * | $ 4.08 | $ 6.60 | $ 8.47 | |||
|
|
| ||||
CLASS C SHARES |
|
|
| |||
Net assets | $ 10 | $ 369,627 | $ 259,130 | |||
Shares outstanding (no par value, unlimited shares authorized) | 3 | 64,238 | 33,100 | |||
Net Asset Value and Offering Price Per Share |
|
|
| |||
(Net Assets/Shares Outstanding) | $ 3.86 |
| $ 5.75 |
| $ 7.83 | |
Net Asset Value Per Share after Maximum Contingent |
|
|
| |||
Deferred Sales Charge * | $ 3.82 | $ 5.69 | $ �� 7.75 | |||
* - The Fund will impose a 2.00% redemption fee for any redemptions of Fund shares ocurring within the first 30 days of purchase. | ||||||
CHOICE FUNDS |
|
|
|
|
|
|
STATEMENTS OF OPERATIONS | ||||||
For the Six Months Ended April 30, 2005 (Unaudited) |
| Long-Short | Market Neutral | |||
|
| Focus Fund |
| Fund |
| Fund |
|
|
| ||||
INVESTMENT INCOME |
|
|
| |||
Dividends | $ 20,715 | $ 52,851 | $ 19,091 | |||
Interest | 10,079 | 60,820 | 9,555 | |||
Less: Foreign withholding taxes | - | (212) | 57 | |||
Total Investment Income | 30,794 | 113,459 | 28,703 | |||
|
|
| ||||
EXPENSES |
|
|
| |||
Investment advisory fees | 14,260 | 142,330 | 12,463 | |||
Distribution fees - Class A | 3,565 | 19,319 | 1,771 | |||
Distribution fees - Class C | - | 1,736 | 2,492 | |||
Fund administration and accounting fees | 21,231 | 21,996 | 22,631 | |||
Transfer agent fees and expenses | 10,775 | 12,181 | 13,323 | |||
State registration fees | 16,086 | 20,470 | 19,459 | |||
Professional fees | 9,168 | 12,323 | 11,486 | |||
Custody fees | 5,424 | 5,320 | 8,437 | |||
Reports to shareholders | 3,832 | 4,462 | 4,786 | |||
Insurance expense | 2,771 | 5,612 | 1,723 | |||
Trustees' fees and related expenses | 2,609 | 5,603 | 2,777 | |||
Dividends on short positions | - | - | 3,172 | |||
Other | 1,494 | 2,015 | 1,889 | |||
Total expenses | 91,215 | 253,367 | 106,409 | |||
Less: |
|
|
| |||
Fees waived and reimbursed | (55,692) | (24,038) | (74,950) | |||
Net Expenses | 35,523 | 229,329 | 31,459 | |||
Net Investment Loss | (4,729) | (115,870) | (2,756) | |||
|
|
| ||||
|
|
| ||||
REALIZED AND UNREALIZED GAIN (LOSS) |
|
|
| |||
ON INVESTMENTS |
|
|
| |||
Net realized gain (loss) on: |
|
|
| |||
Investment securities | (118,282) | 322,510 | (156,966) | |||
Short positions | - | 23,594 | 14,185 | |||
Options purchased | - | - | - | |||
Futures contracts | 31,815 | 36,879 | 7,897 | |||
Net change in unrealized appreciation (depreciation) on |
|
|
| |||
investments, securities sold short, options and futures contracts | 32,880 | (98,195) | 51,352 | |||
Net Realized and Unrealized Gain (Loss) |
|
|
| |||
on Investments | (53,587) | 284,788 | (83,532) | |||
|
|
| ||||
Net Increase (Decrease) in Net Assets Resulting |
|
|
| |||
from Operations | $ (58,316) | $ 168,918 | $ (86,288) | |||
Net Asset Value Per Share after Maximum Contingent | ||||||
CHOICE FOCUS FUND | ||||
STATEMENTS OF CHANGES IN NET ASSETS | ||||
For the Six | ||||
Months Ended | For the Year | |||
April 30, 2005 | Ended | |||
(Unaudited) | October 31, 2004 | |||
OPERATIONS |
| |||
Net investment loss | $ (4,729) | $ (89,972) | ||
Net realized gain (loss) on: |
| |||
Investment securities | (118,282) | (106,789) | ||
Futures contracts | 31,815 | 32,167 | ||
Net change in unrealized appreciation (depreciation) on investments |
| |||
and futures contracts | 32,880 | (261,586) | ||
Net decrease in net assets resulting from operations | (58,316) | (426,180) | ||
| ||||
CAPITAL SHARE TRANSACTIONS |
| |||
Shares sold: |
| |||
Class A shares | 22,479 | 3,997,168 | ||
Class C shares | - | 12 | ||
Shares redeemed: |
| |||
Class A shares | (3,603,766) | (3,266,638) | ||
Class C shares | - | - | ||
Net increase (decrease) in net assets from capital share transactions | (3,581,287) | 730,542 | ||
| ||||
Total Increase (Decrease) in Net Assets | (3,639,603) | 304,362 | ||
| ||||
| ||||
NET ASSETS |
| |||
Beginning of Year | 4,424,807 | 4,120,445 | ||
End of Period* | $ �� 785,204 | $ 4,424,807 | ||
| ||||
| ||||
* Includes accumulated net investment loss of: | $ (4,729) | $ - | ||
| ||||
| ||||
CAPITAL SHARE TRANSACTIONS |
| |||
Class A shares: |
| |||
Shares sold | 5,006 | 829,301 | ||
Shares redeemed | (827,200) | (690,518) | ||
Net increase (decrease) | (822,194) | 138,783 | ||
| ||||
Class C shares: |
| |||
Shares sold | - | 3 | ||
Shares redeemed | - | - | ||
Net increase | - | 3 | ||
CHOICE LONG-SHORT FUND |
|
|
|
|
STATEMENTS OF CHANGES IN NET ASSETS | ||||
For the Six | ||||
Months Ended | For the Year | |||
April 30, 2005 | Ended | |||
(Unaudited) | October 31, 2004 | |||
OPERATIONS |
| |||
Net investment loss | $ (115,870) | $ (349,501) | ||
Net realized gain (loss) on: |
| |||
Investment securities | 322,510 | (94,284) | ||
Short positions | 23,594 | (581,416) | ||
Options purchased | - | 10,194 | ||
Futures contracts | 36,879 | (56,159) | ||
Net change in unrealized appreciation (depreciation) on investments, |
| |||
futures contracts, and securites and futures contracts sold short | (98,195) | (233,879) | ||
Net increase (decrease) in net assets resulting from operations | 168,918 | (1,305,045) | ||
| ||||
CAPITAL SHARE TRANSACTIONS |
| |||
Shares sold |
| |||
Class A shares | 7,894,395 | 11,483,632 | ||
Class C shares | 174,500 | 5,000 | ||
Shares redeemed |
| |||
Class A shares | (3,914,275) | (12,895,870) | ||
Class C shares | (30,921) | (477,241) | ||
Redemption fee proceeds |
| |||
Class A shares | - | 482 | ||
Class C shares | - | 15 | ||
Net increase (decrease) in net assets from capital share transactions | 4,123,699 | (1,883,982) | ||
| ||||
Total Increase (Decrease) in Net Assets | 4,292,617 | (3,189,027) | ||
| ||||
NET ASSETS |
| |||
Beginning of Year | 8,779,912 | 11,968,939 | ||
End of Period* | $ 13,072,529 | $ 8,779,912 | ||
| ||||
| ||||
* Includes accumulated net investment loss of: | $ (115,870) | $ - | ||
| ||||
CAPITAL SHARE TRANSACTIONS |
| |||
Class A shares: |
| |||
Shares sold | 1,247,712 | 1,755,239 | ||
Shares redeemed | (622,998) | (1,844,173) | ||
Net increase (decrease) | 624,714 | (88,934) | ||
| ||||
Class C shares: |
| |||
Shares sold | 30,350 | 793 | ||
Shares redeemed | (5,329) | (76,152) | ||
Net increase (decrease) | 25,021 | (75,359) | ||
CHOICE MARKET NEUTRAL FUND |
|
|
|
|
STATEMENTS OF CHANGES IN NET ASSETS | ||||
For the Six | ||||
Months Ended | For the Period | |||
April 30, 2005 | Ended | |||
(Unaudited) | October 31, 2004 | |||
OPERATIONS |
| |||
Net investment loss | $ (2,756) | $ (255,818) | ||
Net realized gain (loss) on: |
| |||
Investment securities | (156,966) | (256,932) | ||
Short positions | 14,185 | (455,300) | ||
Futures contracts | 7,897 | (587) | ||
Net change in unrealized appreciation (depreciation) on investments, |
| |||
options and securities sold short | 51,352 | (408,460) | ||
Net decrease in net assets resulting from operations | (86,288) | (1,377,097) | ||
| ||||
CAPITAL SHARE TRANSACTIONS |
| |||
Shares sold |
| |||
Class A shares | 379,500 | 7,012,706 | ||
Class C shares | 950 | 942,441 | ||
Shares redeemed |
| |||
Class A shares | (509,067) | (14,062,400) | ||
Class C shares | (701,076) | (1,890,283) | ||
Redemption fee proceeds |
| |||
Class A shares | - | 181 | ||
Class C shares | - | 166 | ||
Net decrease in net assets from capital share transactions | (829,693) | (7,997,189) | ||
| ||||
Total Decrease in Net Assets | (915,981) | (9,374,286) | ||
| ||||
NET ASSETS |
| |||
Beginning of Year | 2,125,056 | 11,499,342 | ||
End of Period* | $ 1,209,075 | $ 2,125,056 | ||
| ||||
| ||||
* Includes accumulated net investment loss of: | $ (2,756) | $ �� - | ||
| ||||
| ||||
CAPITAL SHARE TRANSACTIONS |
| |||
Class A shares: |
| |||
Shares sold | 46,503 | 681,172 | ||
Shares redeemed | (61,957) | (1,429,613) | ||
Net decrease | (15,454) | (748,441) | ||
| ||||
Class C shares: |
| |||
Shares sold | 118 | 93,562 | ||
Shares redeemed | (86,965) | (201,664) | ||
Net decrease | (86,847) | (108,102) | ||
CHOICE FOCUS FUND CLASS A | |||||||||||||
FINANCIAL HIGHLIGHTS | |||||||||||||
For the Six | |||||||||||||
Months Ended | |||||||||||||
April 30, 2005 | For the Years Ended October 31, | ||||||||||||
(unaudited) | 2004 | 2003 | 2002 | 2001 | 2000 | ||||||||
PER SHARE OPERATING PERFORMANCE* |
| ||||||||||||
| |||||||||||||
Net Asset Value, Beginning of Period | $ 4.31 | $ 4.65 | $ 3.17 | $ 5.52 | $ 12.77 | $ 10.00 | |||||||
| |||||||||||||
INCOME (LOSS) FROM |
| ||||||||||||
INVESTMENT OPERATIONS |
| ||||||||||||
Net investment loss | (0.01) | (0.08) | (0.21) | (0.17) | (0.15) | (0.02) | |||||||
Net realized and unrealized gain (loss) |
| ||||||||||||
on investments | (0.44) | (0.26) | 1.69 | (2.18) | (7.07) | 2.80 | |||||||
Total Income (Loss) from Investment Operations | (0.45) | (0.34) | 1.48 | (2.35) | (7.22) | 2.78 | |||||||
| |||||||||||||
LESS DISTRIBUTIONS PAID |
| ||||||||||||
From net realized gains on investments | - | - | - | - | (0.03) | (0.01) | |||||||
Total Distributions Paid | - | - | - | - | (0.03) | (0.01) | |||||||
| |||||||||||||
Net Asset Value, End of Period | $ 3.86 | $ 4.31 | $ 4.65 | $ 3.17 | $ 5.52 | $ 12.77 | |||||||
| |||||||||||||
Total Return (1,2) | -10.44% | -7.31% | 46.69% | -42.75% | -56.63% | 27.81% | |||||||
| |||||||||||||
SUPPLEMENTAL DATA AND RATIOS |
| ||||||||||||
Net assets, end of year (000s) | $ 785 | $ 4,425 | $ 4,120 | $ 2,586 | $ 10,911 | $ 57,802 | |||||||
Ratio of expenses to average net assets, |
| ||||||||||||
net of fees waived and paid indirectly (3) | 2.50% | 2.22% | 3.05% | 1.97% | 1.88% | 2.05% | |||||||
Ratio of expenses to average net assets, |
| ||||||||||||
before fees waived and paid indirectly (3) | 6.43% | 4.00% | 3.78% | 2.61% | 1.88% | 2.05% | |||||||
Ratio of net investment loss to average net assets, |
| ||||||||||||
net of fees waived and paid indirectly (3) | -0.34% | -1.68% | -2.49% | -1.43% | -0.85% | -0.26% | |||||||
Ratio of net investment loss to average net assets, |
| ||||||||||||
before fees waived and paid indirectly (3) | -4.25% | -3.46% | -3.22% | -2.07 | -0.85% | -0.26% | |||||||
Portfolio turnover rate | 1141% | 1524% | 1066% | 1454% | 1239% | 1603% | |||||||
| |||||||||||||
(1) | The total return does not reflect the 5.50% front-end sales charge. |
|
|
|
|
| |||||||
(2) | Not annualized for periods less than a full year. | ||||||||||||
(3) | Annualized for periods less than a full year. | ||||||||||||
* | Selected data for a share of capital stock outstanding throughout the period. | ||||||||||||
CHOICE FOCUS FUND CLASS C | |||||||
FINANCIAL HIGHLIGHTS | |||||||
For the Six | |||||||
Months Ended | |||||||
April 30, 2005 | For the Period Ended | ||||||
(unaudited) | October 31, 2004(1) | ||||||
PER SHARE OPERATING PERFORMANCE* |
| ||||||
| |||||||
Net Asset Value, Beginning of Period | $ 4.31 | $ 5.11 | |||||
| |||||||
INCOME (LOSS) FROM INVESTMENT OPERATIONS |
| ||||||
Net investment loss | (0.01) | (0.08) | |||||
Net realized and unrealized gain (loss) |
| ||||||
on investments | (0.44) | (0.72) | |||||
Total Loss from Investment Operations | (0.45) | (0.80) | |||||
| |||||||
LESS DISTRIBUTIONS PAID |
| ||||||
From net realized gains on investments | - | - | |||||
Total Distributions Paid | - | - | |||||
| |||||||
Net Asset Value, End of Period | $ 3.86 | $ 4.31 | |||||
| |||||||
Total Return (2,3) | -10.44% | -15.65% | |||||
| |||||||
SUPPLEMENTAL DATA AND RATIOS |
| ||||||
Net assets, end of period | $ 10 | $ 11 | |||||
Ratio of expenses to average net assets, |
| ||||||
net of fees waived and paid indirectly (4) | 3.25% | 2.97% | |||||
Ratio of expenses to average net assets, |
| ||||||
before fees waived and paid indirectly (4) | 7.18% | 4.75% | |||||
Ratio of net investment loss to average net assets, |
| ||||||
net of fees waived and paid indirectly (4) | -1.08% | -2.43% | |||||
Ratio of net investment loss to average net assets, |
| ||||||
before fees waived and paid indirectly (4) | -5.01% | -4.21% | |||||
Portfolio turnover rate (2) | 1141% | 1524% | |||||
(1) | Commenced operations on March 2, 2004. |
| |||||
(2) | Not annualized for periods less than a full year. | ||||||
(3) | The total return does not reflect the 1.00% deferred sales charge. | ||||||
(4) | Annualized for periods less than a full year. | ||||||
* | Selected data for a share of capital stock outstanding throughout the period. | ||||||
CHOICE LONG-SHORT FUND CLASS A | |||||||||||
FINANCIAL HIGHLIGHTS | |||||||||||
For the Six | |||||||||||
Months Ended | For the Year | For the Year | For the Year | For the Period | |||||||
April 30, 2005 | Ended | Ended | Ended | Ended | |||||||
(unaudited) | October 31, 2004 | October 31, 2003 | October 31, 2002 | October 31, 2001 (1) | |||||||
PER SHARE OPERATING PERFORMANCE* |
| ||||||||||
| |||||||||||
Net Asset Value, Beginning of Period | $ 6.08 | $ 7.46 | $ 6.22 | $ 9.66 | $ 10.00 | ||||||
| |||||||||||
INCOME (LOSS) FROM |
| ||||||||||
INVESTMENT OPERATIONS |
| ||||||||||
Net investment loss | (0.17) | (0.25) | (0.16) | (0.35) | (0.08) | ||||||
Net realized and unrealized gain (loss) |
| ||||||||||
on investments | 0.33 | (1.13) | 1.40 | (3.09) | (0.26) | ||||||
Total Income (Loss) from Investment Operations | 0.16 | (1.38) | 1.24 | (3.44) | (0.34) | ||||||
| |||||||||||
Net Asset Value, End of Period | $ 6.24 | $ 6.08 | $ 7.46 | $ 6.22 | $ 9.66 | ||||||
| |||||||||||
Total Return (2,3) | 2.63% | -18.50% | 19.94% | -35.82% | -3.40% | ||||||
| |||||||||||
SUPPLEMENTAL DATA AND RATIOS |
| ||||||||||
Net assets, end of period (000s) | $ 12,703 | $ 8,559 | $ 11,169 | $ 13,845 | $ 54,303 | ||||||
Ratio of expenses to average net assets, |
| ||||||||||
net of fees waived and paid indirectly (4) | 4.00% | 4.34% | (5) | 4.14% | (5) | 3.34% | (5) | 3.51% | |||
Ratio of expenses to average net assets, before |
| ||||||||||
fees waived and paid indirectly (4) | 4.39% | 5.14% | (5) | 4.79% | (5) | 3.80% | (5) | 3.51% | |||
Ratio of net investment loss to average net assets, |
| ||||||||||
net of fees waived and paid indirectly (4) | -2.03% | -3.68% | -2.39% | -2.21% | -1.14% | ||||||
Ratio of net investment loss to average net assets, |
| ||||||||||
before fees waived and paid indirectly (4) | -2.42% | -4.48% | -3.04% | -2.67% | -1.14% | ||||||
Portfolio turnover rate (2) | 475% | 1863% | 1383% | 3882% | 2469% | ||||||
(1) | Commenced operations on February 1, 2001. |
|
|
|
|
| |||||
(2) | Not annualized for periods less than a full year. | ||||||||||
(3) | The total return does not reflect the 5.50% front-end sales charge. | ||||||||||
(4) | Annualized for periods less than a full year. | ||||||||||
(5) | Includes dividends on short sales. Excluding dividends on short sales, the ratio of expenses to average net assets, net of fees | ||||||||||
waived and paid indirectly and before fees waived and paid indirectly would be 4.27% and 5.07%, 3.99% and 4.64%, 3.16% and 3.62%, | |||||||||||
for the Class A shares for the year ended October 31, 2004, October 31, 2003 and October 31, 2002, respectively. | |||||||||||
* | Selected data for a share of capital stock outstanding throughout the period. | ||||||||||
CHOICE LONG-SHORT FUND CLASS C | |||||||||||
FINANCIAL HIGHLIGHTS | |||||||||||
For the Six | |||||||||||
Months Ended | For the Year | For the Year | For the Year | For the Period | |||||||
April 30, 2005 | Ended | Ended | Ended | Ended | |||||||
(unaudited) | October 31, 2004 | October 31, 2003 | October 31, 2002 | October 31, 2001 (1) | |||||||
PER SHARE OPERATING PERFORMANCE* |
| ||||||||||
| |||||||||||
Net Asset Value, Beginning of Period | $ 5.64 | $ 6.98 | $ 6.00 | $ 9.53 | $ 10.00 | ||||||
| |||||||||||
INCOME (LOSS) FROM |
| ||||||||||
INVESTMENT OPERATIONS |
| ||||||||||
Net investment loss | (0.78) | (0.58) | (0.38) | (0.77) | (0.12) | ||||||
Net realized and unrealized gain (loss) |
| ||||||||||
on investments | 0.89 | (0.76) | 1.36 | (2.76) | (0.35) | ||||||
Total Income (Loss) from Investment Operations | 0.11 | (1.34) | 0.98 | (3.53) | (0.47) | ||||||
| |||||||||||
Net Asset Value, End of Period | $ 5.75 | $ 5.64 | $ 6.98 | $ 6.00 | $ 9.53 | ||||||
| |||||||||||
Total Return (2,3) | 1.95% | -19.20% | 16.33% | -37.25% | -4.70% | ||||||
| |||||||||||
SUPPLEMENTAL DATA AND RATIOS |
| ||||||||||
Net assets, end of period (000s) | $ 370 | $ 221 | $ 800 | $ 567 | $ 2,614 | ||||||
Ratio of expenses to average net assets, |
| ||||||||||
net of fees waived and paid indirectly (4) | 4.65% | 5.26% | (5) | 7.41% | (5) | 5.16% | (5) | 4.70% | |||
Ratio of expenses to average net assets, before |
| ||||||||||
fees waived and paid indirectly (4) | 5.09% | 6.37% | (5) | 8.06% | (5) | 5.54% | (5) | 4.70% | |||
Ratio of net investment loss to average net assets, |
| ||||||||||
net of fees waived and paid indirectly (4) | -2.69% | -4.63% | -5.78% | -4.11% | -2.31% | ||||||
Ratio of net investment loss to average net assets, |
| ||||||||||
before fees waived and paid indirectly (4) | -3.13% | -5.74% | -6.43% | -4.49% | -2.31% | ||||||
Portfolio turnover rate (2) | 475% | 1863% | 1383% | 3882% | 2469% | ||||||
(1) | Commenced operations on February 1, 2001. |
|
|
|
|
| |||||
(2) | Not annualized for periods less than a full year. | ||||||||||
(3) | The total return does not reflect the 1.00% deferred sales charge. | ||||||||||
(4) | Annualized for periods less than a full year. | ||||||||||
(5) | Includes dividends on short sales. Excluding dividends on short sales, the ratio of expenses to average net assets net of fees | ||||||||||
waived and and paid indirectly and before fees waived and paid indirectly would be 5.21% and 6.32%, 7.25% and 7.90%, 5.02% and 5.40%, | |||||||||||
for the Class C shares for the year ended October 31, 2004, October 31, 2003 and October 31, 2002, respectively. | |||||||||||
* | Selected data for a share of capital stock outstanding throughout the period. | ||||||||||
CHOICE MARKET NEUTRAL FUND CLASS A | |||||||||||
FINANCIAL HIGHLIGHTS | |||||||||||
For the Six | |||||||||||
Months Ended | For the Year | For the Period | |||||||||
April 30, 2005 | Ended | Ended | |||||||||
(unaudited) | October 31, 2004 | October 31, 2003 (1) | |||||||||
PER SHARE OPERATING |
| ||||||||||
PERFORMANCE* |
| ||||||||||
| |||||||||||
Net Asset Value, Beginning of Period | $ 8.43 | $ 10.36 | $ 10.00 | ||||||||
| |||||||||||
INCOME (LOSS) FROM |
| ||||||||||
INVESTMENT OPERATIONS |
| ||||||||||
Net investment loss | (0.76) | (0.16) | (0.17) | ||||||||
Net realized and unrealized gain (loss) |
| ||||||||||
on investments | 0.33 | (1.77) | 0.53 | ||||||||
Total Income (Loss) from Investment Operations | (0.43) | (1.93) | 0.36 | ||||||||
| |||||||||||
Net Asset Value, End of Period | $ 8.00 | $ 8.43 | $ 10.36 | ||||||||
| |||||||||||
Total Return (2,3) | -5.10% | -18.63% | 3.60% | ||||||||
| |||||||||||
SUPPLEMENTAL DATA AND |
| ||||||||||
RATIOS |
| ||||||||||
Net assets, end of period (000s) | $ 950 | $ 1,131 | $ 9,147 | ||||||||
Ratio of expenses to average net assets, |
| ||||||||||
net of fees waived and paid indirectly (4) | 3.81% | (5) | 3.66% | (5) | 3.59% | (5) | |||||
Ratio of expenses to average net assets, before |
| ||||||||||
fees waived and paid indirectly (4) | 13.87% | (5) | 4.53% | (5) | 4.88% | (5) | |||||
Ratio of net investment loss to average net assets, |
| ||||||||||
net of fees waived and paid indirectly (4) | 0.15% | -2.93% | -2.84% | ||||||||
Ratio of net investment loss to average net assets, |
| ||||||||||
before fees waived and paid indirectly (4) | -9.91% | -3.79% | -4.12% | ||||||||
Portfolio turnover rate (2) | 2150% | 1635% | 1175% | ||||||||
(1) | Commenced operations on March 31, 2003. | ||||||||||
(2) | Not annualized for periods less than a full year. | ||||||||||
(3) | The total return does not reflect the 5.50% front end sales charge and 1.00% deferred sales charge on Class | ||||||||||
A and Class C shares, respectively. | |||||||||||
(4) | Annualized for periods less than a full year. | ||||||||||
(5) | Includes dividends on short sales. Excluding dividends on short sales, the ratio of expenses to average net assets, net of | ||||||||||
fees waived and paid indirectly and before fees waived and paid indirectly would be 3.40% and 13.46%, 3.40% and 4.27%, | |||||||||||
3.40% and 4.70%, for the Class A shares for the periods ended April 30, 2005, October 31, 2004 and October 31, 2003, | |||||||||||
respectively. | |||||||||||
* | Selected data for a share of capital stock outstanding throughout the period. | ||||||||||
CHOICE MARKET NEUTRAL FUND CLASS C | |||||||||||
FINANCIAL HIGHLIGHTS | |||||||||||
For the Six | |||||||||||
Months Ended | For the Year | For the Period | |||||||||
April 30, 2005 | Ended | Ended | |||||||||
(unaudited) | October 31, 2004 | October 31, 2003 (1) | |||||||||
PER SHARE OPERATING |
| ||||||||||
PERFORMANCE* |
| ||||||||||
| |||||||||||
Net Asset Value, Beginning of Period | $ 8.29 | $ 10.31 | $ 10.00 | ||||||||
| |||||||||||
INCOME (LOSS) FROM |
| ||||||||||
INVESTMENT OPERATIONS |
| ||||||||||
Net investment loss | (0.57) | (0.17) | (0.24) | ||||||||
Net realized and unrealized gain (loss) |
| ||||||||||
on investments | 0.11 | (1.85) | 0.55 | ||||||||
Total Income (Loss) from Investment Operations | (0.46) | (2.02) | 0.31 | ||||||||
| |||||||||||
Net Asset Value, End of Period | $ 7.83 | $ 8.29 | $ 10.31 | ||||||||
| |||||||||||
Total Return (2,3) | -5.55% | -19.59% | 3.10% | ||||||||
| |||||||||||
SUPPLEMENTAL DATA AND |
| ||||||||||
RATIOS |
| ||||||||||
Net assets, end of period (000s) | $ 259 | $ 994 | $ 2,352 | ||||||||
Ratio of expenses to average net assets, |
| ||||||||||
net of fees waived and paid indirectly (4) | 4.93% | (5) | 4.83% | (5) | 4.70% | (5) | |||||
Ratio of expenses to average net assets, before |
| ||||||||||
fees waived and paid indirectly (4) | 14.51% | (5) | 5.95% | (5) | 6.00% | (5) | |||||
Ratio of net investment loss to average net assets, |
| ||||||||||
net of fees waived and paid indirectly (4) | -1.43% | -3.97% | -3.94% | ||||||||
Ratio of net investment loss to average net assets, |
| ||||||||||
before fees waived and paid indirectly (4) | -11.01% | -5.09% | -5.24% | ||||||||
Portfolio turnover rate (2) | 2150% | 1635% | 1175% | ||||||||
(1) | Commenced operations on March 31, 2003. | ||||||||||
(2) | Not annualized for periods less than a full year. | ||||||||||
(3) | The total return does not reflect the 5.50% front end sales charge and 1.00% deferred sales charge on Class | ||||||||||
A and Class C shares, respectively. | |||||||||||
(4) | Annualized for periods less than a full year. | ||||||||||
(5) | Includes dividends on short sales. Excluding dividends on short sales, the ratio of expenses to average net assets net of | ||||||||||
fees waived and paid indirectly and before fees waived and paid indirectly would be 4.50% and 14.08%, 4.50% and 5.62%, | |||||||||||
4.50% and 5.82%, for the Class C shares for the periods ended April 30, 2005, October 31, 2004 and October 31, 2003, | |||||||||||
respectively. | |||||||||||
* | Selected data for a share of capital stock outstanding throughout the period. | ||||||||||
CHOICE FUNDS
NOTES TO FINANCIAL STATEMENTS
April 30, 2005 (Unaudited)
(1) Organization
Choice Funds (the “Trust”) was established on July 16, 1999 as a Delaware Statutory Trust and is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company issuing its shares in series, each series representing a distinct portfolio with its own investment objectives and policies. The Focus Fund, Long-Short Fund and Market Neutral Fund (each a “Fund” and collectively, the “Funds”) are separate investment portfolios of the Trust. The Focus Fund is a non-diversified fund that seeks capital appreciation by normally investing in a core position of 20-30 common stocks. The Long-Short Fund is a non-diversified fund that seeks to achieve long-term growth of capital in both rising and falling markets by investing in “long” stocks believed to be undervalued and selling “short” stocks believed to be overvalued. The Market Neutral Fund is a non-diversified fund that seeks to produce positive returns while remaining market neutral by investing actively long and short in a portfolio of equity securities. “Remaining market neutral” means the Market Neutral Fund will generally maintain a balance of long and short positions. The Funds offer two classes of shares (Class A and Class C). Class A shares are subject to a maximum sales charge of 5.50% and the Class C shares are subject to a maximum contingent deferred sales charge of 1.00% on redemptions of shares held less than one year. Each class of shares has equal rights to earnings and assets except that each class bears different distribution and shareholder servicing fees. Each class of shares has exclusive voting rights with respect to matters that affect just that class. Income and realized and unrealized gains or losses on invest ments are allocated to each class of shares based on relative net assets.
(2) Significant Accounting Policies
The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of their financial statements. These policies are in conformity with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from those estimates.
(a) Investment Valuation
Securities (other than short-term instruments) for which market quotations are readily available are valued at the last sales price on the national securities exchange on which such securities are primarily traded. NASDAQ traded securities are valued using the NASDAQ Official Closing Price (NOCP). Securities for which there were no sales on a given day or securities not listed on a national securities exchange are valued at the most recent bid prices. Securities maturing within 60 days of purchase are valued by the amortized cost method, which approximates fair value. Any securities for which market quotations are not readily available are valued at their fair value pursuant to Portfolio Securities Valuation Procedures (the “Procedures”) adopted by the Board of Trustees. The Procedures consider, among others, the following factors to determine a security’s fair value: the nature and pri cing history of the security; whether dealer quotations for the security are available; and possible valuation methodologies that could be used to determine the fair value of the security.
(b) Expenses
The Funds are charged for those expenses that are directly attributable to each Fund, such as advisory and custodian fees. Expenses that are not directly attributable to a Fund are typically allocated among the Funds in proportion to their average net assets. Certain Fund expenses may be reduced by brokerage credits, which are shown as Expenses Paid Indirectly in the Statements of Operations. Brokerage credits are generated when a Fund directs portfolio trades to certain brokers.
(c) Short Positions
When a Fund sells a security short, an amount equal to the sales proceeds is included in the Statement of Assets and Liabilities as an asset and an equal amount as a liability. The amount of the liability is subsequently marked-to-market to reflect the current value of the security sold short. A gain, limited by the price at which the Fund sold the security short, or a loss, unlimited in size, will be recognized upon the termination of a short sale. The Fund is liable for any dividends paid on securities sold short. Dividends on short sales are included as Dividends on Short Positions on the Statements of Operations. The Fund maintains assets consisting of cash or liquid securities at least equal in amount to the liability created by the short sale. These assets are adjusted to reflect changes in the value of the securities sold short.
(d) Futures Contracts
Each Fund may purchase and sell stock index futures contracts. Upon entering into a contract, the Fund deposits
CHOICE FUNDS
NOTES TO FINANCIAL STATEMENTS (continued)
April 30, 2005(Unaudited)
and maintains as collateral such initial margin as required by the exchange on which the transaction is effected.
Pursuant to the contract, the Fund agrees to receive from or pay to the futures commission merchant an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts of payments are known as variation margin and are recorded by the Fund as unrealized gains and losses. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. As collateral for futures contracts, the Fund is required under the 1940 Act to maintain assets consisting of cash or liquid securities. This collateral must be equal to a certain percentage of the contract amount (initial margin deposit). All collateral is required to be adjusted daily. The risks inherent in the use of futures contracts include: 1) adverse changes in the value of such instruments; 2) imperfect correlation betwe en the price of the futures contracts and movements in the price of the underlying securities or futures contracts; 3) the possible absence of a liquid secondary market for any particular instrument at any time; 4) the possible need to defer closing out certain positions to avoid adverse tax consequences; and 5) the possible nonperformance by the counterparty under the terms of the contract.
(e) Option Transactions
For hedging purposes, the Funds may buy or sell put or call options, write covered put or call options on portfolio securities and write over-the-counter options where the completion of the obligation is independent upon the credit standing of another party. The risk in writing a call option is that a Fund may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Fund pays a premium whether or not the option is exercised. A Fund also has the additional risk of not being able to enter into a closing transaction if a liquid secondary market does not exist.
Option contracts are valued daily and unrealized appreciation or depreciation is recorded. A Fund will realize a gain or loss upon expiration or closing of the option transaction. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option, or the cost of a security for a purchased put or call option is adjusted by the amount of premium received or paid.
(f) Federal Income and Excise Taxes
No federal income tax provision has been made since the Funds intend to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all investment company taxable income and net capital gains to shareholders in a manner which results in no tax to the Funds.
(g) Dividends and Distributions to Shareholders
Dividends from net investment income and distributions of net realized gains, if any, will be declared and paid at least annually. Distributions to shareholders are recorded on the ex-dividend date. The character of distributions made during the year from net investment income or net realized gain may differ from the characterization for federal income tax purposes due to differences in the recognition of income, expense and gain items for financial statement and tax purposes. Where appropriate, reclassifications between net asset accounts are made for such differences that are permanent in nature.
(h) Other
Investment transactions are accounted for on the trade date. The Funds determine the gain or loss realized from investment transactions by comparing the original cost of the security lot sold with the net sale proceeds. Dividend income is recognized on the ex-dividend date and interest income is recognized on an accrual basis.
(3) Investment Adviser and Transactions with Affiliates
The Funds have an agreement with Choice Investment Management, LLC (the “Adviser”), with whom certain officers and trustees of the Funds are affiliated, to furnish investment advisory services to the Funds. Under the terms of this agreement, the Funds will pay the Adviser a monthly fee at the annual rate of 1.00%, 2.50% and 1.65% of the Fund’s average daily net assets for the Focus Fund, Long-Short Fund and Market Neutral Fund, respectively. For the six months ended April 30, 2005, the Adviser received advisory fees of $14,260, $142,330 and $12,463 for the Focus Fund, Long-Short Fund and Market Neutral Fund, respectively. The Adviser has agreed to contractually waive its management fee and/or
CHOICE FUNDS
NOTES TO FINANCIAL STATEMENTS (continued)
April 30, 2005(Unaudited)
reimburse the Funds’ operating expenses (exclusive of brokerage commissions, dividends on securities sold short, interest on borrowings, taxes and extraordinary expenses) to ensure that the Funds’ operating expenses do not exceed 2.50%, 3.25%, 3.40%, 4.50%, 4.00% and 4.65% of the Fund’s average daily net assets for the Focus Fund Class A, Focus Fund Class C, Market Neutral Fund Class A, Market Neutral Fund Class C, Long-Short Fund Class A, and Long-Short Fund Class C, respectively, through October 31, 2005.
The Adviser is entitled to recoup from the Funds amounts waived or reimbursed for a period of up to three years from the date such amounts were waived or reimbursed, provided the Funds’ expenses, including such recouped amounts, do not exceed the stated expense limitations. At October 31, 2004, amounts that are subject to potential recoupment are as follows:
Recoverable Through Focus Fund Long-Short Fund Market Neutral Fund
October 31, 2006 $35,545 $54,842 $60,236
October 31, 2007 $80,226 $56,588 $74,230
October 31, 2008 $55,692 $24,038 $74,950
During the six months ended April 30, 2005, the Focus Fund, Long-Short Fund and Market Neutral Fund paid $60,761, $37,898, and $57,238 in brokerage commissions, respectively, to CIM Securities, LLC (“CIM”) an affiliate of the Adviser, on the purchase and sale of portfolio securities.
(4) Distribution Plan
CIM, an affiliate of the Adviser, is the distributor of the Funds’ shares. The Funds have adopted a Distribution Plan (the “Plan”) pursuant to Rule 12b-1 under the 1940 Act. The Plan authorizes payments by the Funds in connection with the distribution of its shares and certain shareholder and related services at an annual rate, as determined from time to time by the Board of Trustees. Under this Plan, the Class A shares and Class C shares of the Focus Fund pay up to 0.25% and 0.75% of each class’s average daily net assets, respectively, for distribution services. The Class A shares and Class C shares of the Long-Short Fund and Market Neutral Fund pay up to 0.35% and 0.75% of each class’s average daily net assets, respectively, for distribution services. The Class C shares pay up to 0.25% of each Fund 46;s average daily net assets for shareholder related activities. For the six months ended April 30, 2005 the Funds incurred 12b-1 fees of $3,565, $19,319, $1,736, $1,771, and $2,492 for the Focus Fund Class A shares, Long-Short Fund Class A shares, Long-Short Fund Class C shares, Market Neutral Fund Class A shares and Market Neutral Fund Class C shares, respectively
(5) Investment Transactions
The aggregate purchases and sales of securities, excluding short-term investments, for the Funds for the six months ended April 30, 2005 were as follows:
Focus Fund Long-Short Fund Market Neutral Fund
Purchases $27,092,135 $21,306,432 $17,957,001
Sales $28,879,701 $22,915,310 $18,015,239
For the six months ended April 30, 2005, the options written for the Market Neutral Fund were as follows:
Number of Contracts | Premiums Received | |
Options outstanding at October 31, 2004 | 0 | $0 |
Options written | 47 | 1,711 |
Options terminated in closing purchase transactions | 0 | 0 |
Options outstanding at April 30, 2005 | 47 | $1,711 |
CHOICE FUNDS
NOTES TO FINANCIAL STATEMENTS (continued)
April 30, 2005(Unaudited)
(6) Federal Income Tax Information
At April 30, 2005, the cost of securities on a tax basis and gross unrealized appreciation (depreciation) on investments for federal income tax purposes were as follows:
Focus Fund Long-Short Fund Market Neutral Fund
Cost of Investments $923,777 $13,530,128 $1,440,055
Gross Unrealized Appreciation $ 12,044 $ 59,510 $ 14,940
Gross Unrealized (Depreciation) (45,393) (10,915) (48,721)
Net Unrealized Appreciation
(Depreciation) on Investments $ (33,349) $ 48,595 $ (33,781)
The difference between cost amounts for financial statement and federal income tax purposes is due primarily to timing differences attributable to: deferral of losses on wash sales and the realization for tax purposes of unrealized gains/(losses) on certain derivative instruments.
As of October 31, 2004, the components of accumulated earnings (deficit) on a tax basis were as follows:
Focus Fund Long-Short Fund Market Neutral Fund
Undistributed ordinary
Income (loss) $ - $ - $ -
Net realized capital losses (35,034) (715,630) (699,683)
Net Unrealized Appreciation
(Depreciation) (33,349) 27,794 (33,640) &nbs p;
Total Accumulated Deficit $(140,851) $(574,875) $ (797,952) &nb sp;
Federal income tax capital loss carry forwards for the Focus Fund expire as follows: $20,645,351 in 2009, $6,017,459 in 2010 and $85,225 in 2012. Federal income tax capital loss carry forwards for the Long-Short Fund expire as follows: $10,097,960 in 2010 and $1,060,186 in 2012. Federal income tax capital loss carry forwards for the Market Neutral Fund expire as follows: $75,079 in 2011 and $749,353 in 2012. To the extent future gains are offset by capital loss carry forwards, such gains will not be distributed.
(7) Control Ownership
The beneficial ownership, either directly or indirectly, of more than 25% of the voting securities of a Fund creates presumption of control of the Fund, under Section 2(a)9 of the Investment Company Act of 1940. As of April 30, 2005, Patrick Adams, an officer of the Fund and President of the Adviser of the Fund, held 100% of the Focus Fund Class C shares. As of April 30, 2005, Patrick Adams, an officer of the Fund and President of the Adviser of the Fund, held approximately 32.61% of the Market Neutral Fund Class A shares. As of April 30, 2005, National Financial Service Corp. (“NFSC”) held for the benefit of others, in aggregate, approximately 28.03% of the Market Neutral Fund Class C shares.
CHOICE FUNDS SUPPLEMENTAL INFORMATION (Unaudited) |
Shareholders of funds will pay ongoing expenses, such as advisory fees, distribution and services fees (12b-1 fees), and other fund expenses. The following examples are intended to help the shareholder understand the ongoing cost (in dollars) of investing in a fund and to compare these costs with the ongoing costs of investing in other mutual funds. Please note, the expenses shown in the tables are meant to highlight ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), or contingent deferred sales charges (CDSCs) on redemptions.
This example is based on an investment of $1,000 invested at the beginning of the period and held for the six-month period from November 1, 2004 through April 30, 2005.
Actual Expenses: The first table provides information about actual account values and actual expenses. The shareholder may use the information in this line, together with the amount invested, to estimate the expenses that paid over the period. Simply divide 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 under the heading entitled “Expenses Paid” to estimate the expenses paid on the account during the period.
Beginning Account Value 11/1/2004 |
Ending Account Value 4/30/2005 | Expense Paid 11/1/2004-4/30/2005* | Expense Ratio [Annualized] | |||
Actual Expenses – Table 1: | ||||||
Focus Fund Class A | $1,000.00 | $ 893.52 | $ 11.74 | 2.50% | ||
Focus Fund Class C | 1,000.00 | 893.52 | 15.26 | 3.25% | ||
Long-Short Fund Class A | 1,000.00 | 1,024.63 | 20.08 | 4.00% | ||
Long-Short Fund Class C | 1,000.00 | 1,017.70 | 23.26 | 4.65% | ||
Market Neutral Fund Class A | 1,000.00 | 952.38 | 18.44 | 3.81% | ||
Market Neutral Fund Class C | 1,000.00 | 946.80 | 23.80 | 4.93% | ||
Hypothetical Examples for Comparison Purposes: The second table below provides information about hypothetical account values and hypothetical expenses based on the fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses paid for the period. This information may be used to compare the ongoing costs of investing in the fund and other mutual funds. To do so, a shareholder would compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds.
Beginning Account Value 11/1/2004 |
Ending Account Value 4/30/2005 | Expense Paid 11/1/2004-4/30/2005* | Expense Ratio [Annualized] | |
Hypothetical [5% Return Before Expenses] – Table 2: | ||||
Focus Fund Class A | $1,000.00 | $1,012.40 | $ 12.47 | 2.50% |
Focus Fund Class C | 1,000.00 | 1,008.68 | 16.19 | 3.25% |
Long-Short Fund Class A | 1,000.00 | 1,004.96 | 19.88 | 4.00% |
Long-Short Fund Class C | 1,000.00 | 1,001.74 | 23.08 | 4.65% |
Market Neutral Fund Class A | 1,000.00 | 1,007.93 | 18.95 | 3.81% |
Market Neutral Fund Class C | 1,000.00 | 1,002.48 | 24.45 | 4.93% |
* Expenses are equal to the Portfolio’s annualized expense ratio, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the days in reporting period).
Item 2. Code of Ethics.
Not applicable.
Item 3. Audit Committee Financial Expert.
Not applicable.
Item 4. Principal Accountant Fees and Services.
Not applicable.
Item 5. Audit Committee of Listed Companies.
Not applicable.
Item 6. Schedule of Investments.
Schedule of investments in securities of unaffiliated issuers is included in item 1.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Funds.
Not applicable.
Item 8. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Item 9. Submission of Matters to a Vote of Security Holder. None.
Item 10. Controls and Procedures.
(a) Based on their evaluation of the Disclosure Controls and Procedures as of a date within 90 days of the filing date of this Report, the Registrant's Principal Executive and Financial Officers have concluded that the Registrant's Disclosure Controls and Procedures, which are designed to ensure that information required to be disclosed on Form N-CSR is recorded, processed, summarized and reported on a timely basis, and that information required to be disclosed in the Report is communicated to the Registrant's management, as appropriate, to allow timely decisions regarding required disclosure, are effective.
(b) There were no significant changes in the registrant’s internal control over financial reporting that occurred during the registrant’s last fiscal half-year that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 11. Exhibits.
(a)(1) Not applicable.
(a)(2) Certifications required by Section 302 of the Sarbanes-Oxley Act of 2002 (and Item 11(a)(2) of Form N-CSR) are filed and attached hereto as Exhibit 99.CERT.
(a)(3) Not applicable.
(b) Certification required by Section 906 of the Sarbanes-Oxley Act of 2002 (and Item 11(b) of Form N-CSR) is filed and attached hereto as Exhibit 99.906CERT.
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.
Choice Funds
By: /s/ Patrick S. Adams
Patrick S. Adams
Chief Executive Officer
Date July 8, 2005
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: /s/ Patrick S. Adams
Patrick S. Adams
Chief Executive Officer
Date July 8, 2005
By: /s/ Chester Hebert
Chester Hebert
Chief Financial Officer
Date July 8, 2005
I, Chester Hebert, certify that:
1. I have reviewed this report on Form N-CSR of Choice Funds;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal half-year (the registrant’s second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date:
/s/ Chester Hebert
Chester Hebert, Chief Financial Officer