UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
INVESTMENT COMPANIES
Investment Company Act file number 811-10261
Pearl Mutual Funds
on behalf of its series:
Pearl Total Return Fund
Pearl Aggressive Growth Fund
2610 Park Avenue
P.O. Box 209
Muscatine, Iowa 52761
Copies to: | ||
Robert H. Solt | Eric S. Purple | |
2610 Park Avenue | K& L Gates LLP | |
P. O. Box 209 | 1601 K Street, N.W. | |
Muscatine, Iowa 52761 | Washington, DC 20006 |
(Name and address of agents for service)
Registrant's telephone number, including area code: (563) 288-2773
Date of fiscal year end: December 31
Date of reporting period: June 30, 2010
Item 1. Reports to Shareholders.
![](https://capedge.com/proxy/N-CSRS/0000898432-10-001184/reportcover2.jpg)
PFTRX — Pearl Total Return Fund | PFAGX — Pearl Aggressive Growth Fund |
2010 Semi-Annual Report | |
Page | |
News for Pearl Shareholders | 1 |
Performance Review | 2 - 3 |
Investment Strategy | 3 - 5 |
Investment Management Team | 5 |
Pearl Total Return Fund Overview | 6 - 7 |
Pearl Aggressive Growth Fund Overview | 8 - 9 |
Understanding Your Expenses | 10 - 11 |
General Information | 11 - 13 |
Pearl Total Return Fund Financial Statements | 14 - 16 |
Pearl Total Return Fund Financial Highlights | 17 |
Pearl Aggressive Growth Fund Financial Statements | 18 - 20 |
Pearl Aggressive Growth Fund Financial Highlights | 21 |
Notes to Financial Statements | 22 - 24 |
IRA Contribution Limits for 2010 (IRA – Individual Retirement Account, all types) | ||
● | You may contribute $5,000 to your IRA in 2010. | |
● | The 2010 limit is $6,000 if you are age 50 or over. The extra $1,000 is called a catch-up contribution. | |
● | These limits apply to both Roth and Traditional IRAs. | |
IRA contribution limits may be different in future years. | ||
More Good News: | ||
● | You can use Pearl Funds (either or both) for all types of IRAs and IRA rollovers. | |
● | No maintenance fee for your Pearl IRA – or for any Pearl Funds Account. |
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August 26, 2010 |
Chairman of the Board Dr. James P. Stein President Robert H. Solt Senior Counsel David M. Stanley Vice President Richard R. Phillips Portfolio Management Associate Karen M. Brookhart Compliance Associate Peggy A. Cherrier Shareholder Services Director Christopher S. Ingstad Controller Renata R. LaMar Chief Compliance Officer Anthony J. Toohill Board of Trustees John W. Axel Douglas B. Coder Dr. David N. DeJong David L. Evans Robert H. Solt David M. Stanley Dr. James P. Stein | News for Pearl Shareholders: | |
● | UPDATE: At August 25, 2010, Pearl Total Return Fund was down 3.10% year-to-date and Pearl Aggressive Growth Fund was down 2.58% year-to-date. | |
● | Pearl Total Return Fund was down 4.70% but outperformed all 3 comparison indexes in the 6 months ended June 30, 2010. See pages 6-7. Pearl Aggressive Growth Fund was down 5.99% but outperformed 2 of the 3 comparison indexes in the 6 months ended June 30, 2010. See pages 8-9. | |
● | During the 5 years ended June 30, 2010, Pearl Total Return Fund was up 7.99%; Pearl Aggressive Growth Fund was up 16.24%; and the 3 compari-son indexes were down 1.33% on average: 160;Dow Jones Wilshire 5000 down 040%, MSCI World up 0.30%, S&P 500 down 3.89% (all figures not annualized). | |
● | During the 10 years through June 30, 2010, Pearl Total Return Fund was up 65.51% while the 3 comparison indexes were down 10.35% on average: Dow Jones Wilshire 5000 down 6.50%, MSCI World down 9.74%, S&P 500 down 14.81%. During the 9 years from Pearl Aggressive Growth Fund’s inception through June 30, 2010, this Fund was up 76.26% while the 3 comparison indexes were up 8.02% on average: Dow Jones Wilshire 5000 up 10.72%, MSCI World up 13.29%, S&P 500 up 0.05% (all figures not annualized). | |
● | Pearl Total Return Fund outperformed all 3 comparison indexes for all of these periods through June 30, 2010: Year-to-date, 5 years, and 10 years. | |
● | Pearl Aggressive Growth Fund outperformed all 3 comparison indexes for all of these periods through June 30, 2010: 1 year, 5 years, and the 9 years since this Fund’s inception on July 2, 2001. | |
● | All Pearl performance figures are net ― after deducting all expenses of each Fund and all expenses of all the mutual funds in its portfolio. | |
● | Both Pearl Funds are no-load ― no sales charge, commission, or redemption fee (except each Fund receives a 2% fee on redemption of shares owned for 30 days or less). Also, both Funds are no-load investors; they make all their investments with no transaction costs. See page 3. | |
Please consider all of the Prospectus and this report. Figures above are not annualized. Past performance does not guarantee future results. | ||
Thank you for your confidence in Pearl Funds. www.pearlfunds.com has more information. Please call, e-mail, or write to us. We are here to help you. | ||
Sincerely, | ||
Your Investment Management Team: |
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Robert H. Solt | David M. Stanley | Richard R. Phillips |
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Pearl Mutual Funds
Performance Review as of June 30, 2010
First Half 2010 Performance. Total Returns of Pearl Total Return Fund, Pearl Aggressive Growth Fund, and the Funds’ Comparison Indexes:*
For the 6 months ended June 30, 2010: | * All total returns include dividends reinested. Pearl Funds’ total returns are net ― after deduction of all expenses of the Fund and all expenses of all the mutual funds in the Fund’s portfolio. In contrast, the total returns of indexes do not reflect any deduction of expenses (fees, transaction costs, etc.) Pearl Funds’ total returns do not reflect the deduction of taxes that a shareholder would pay on Fund dividends or on redemption of Fund shares. Likewise, the total returns of indexes do not reflect the deduction of taxes that an investor in stocks would pay on dividends or on sale of stocks. See page 13 for a description of each index. | |||
Pearl Total Return Fund | - 4.70 | % | ||
Pearl Aggressive Growth Fund | - 5.99 | % | ||
Dow Jones Wilshire 5000 | - 5.67 | % | ||
MSCI World Index | - 9.84% | % | ||
Standard & Poor’s 500 Index | - 6.65% | % |
2010 Performance Factors. We believe Pearl Total Return Fund’s and Pearl Aggressive Growth Fund’s comparative performance and total return during the first 6 months of 2010 were affected by many factors, including each Fund’s investment strategy and decisions by the Funds’ Manager, Pearl Management Company. These factors include:
● | U.S. and global stock markets had moderate losses during the first half of 2010. Most stock markets experienced positive returns through April before suffering substantial losses in May and June. |
● | During the first half of 2010: U.S. value-style stocks outperformed U.S. growth-style stocks. Morningstar’s U.S. Value Index was down 5.29% while its U.S. Growth Index was down 8.33%. U.S. small-capitalization stocks (down 1.08%) slightly outperformed mid-cap stocks (down 1.91%) and outperformed large-cap stocks (down 7.88%). Overall, foreign stocks underperformed U.S. stocks. Foreign small-to-mid-cap stocks generally outperformed foreign large-cap stocks. Trends in foreign growth stocks and foreign value stocks were not clear in the first 6 months of 2010. |
● | During the first half of 2010: Pearl Total Return Fund invested globally through mutual funds holding U.S. or foreign securities or both. A majority of this Fund’s investments were in mutual funds we believed to be relatively conservative and with below-average risk records. This Fund’s indirect investments (through the mutual funds in its portfolio; see page 4) had nearly equal exposure to value-style and growth-style stocks. This Fund emphasized U.S. stocks and small-cap and mid-cap stocks. Pearl Total Return Fund was 81% to 99% invested in equity mutual funds during the first half of 2010. This Fund usually invests 80% or more of its net assets in equity funds. The Fund held one high - -quality bond fund, plus cash positions in money market funds. The Fund also had indirect investments (through its portfolio funds) in bonds and cash. We believe Pearl Total Return Fund’s partial defensive position (see pages 3-5) was helpful when stock markets declined but reduced the Fund’s performance when markets rose. Overall, we believe this partial defensive position decreased risk without significantly slowing performance. We believe the Fund’s performance was helped by its emphasis on U.S. mutual funds. See pages 6-7. |
● | During the first half of 2010: Pearl Aggressive Growth Fund invested globally through mutual funds holding U.S. or foreign securities or both. This Fund’s indirect investments (through the mutual funds in its portfolio; see page 4) emphasized foreign stocks and emerging markets, and had a slight growth-stocks emphasis plus large positions in value-style and blend-style stocks. This Fund emphasized small-cap and mid-cap stocks and also had a large position in large-cap stocks. Pearl Aggressive Growth Fund’s investments tended to be more volatile than Pearl Total Return Fund’s investments. We believe this |
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additional risk and Pearl Aggressive Growth Fund’s fully-invested position helped its performance during rising market periods and reduced its performance during declining market periods. As its investment strategy requires, this Fund is always fully invested (95% or more) in equity mutual funds. We believe this Fund’s large indirect investments in foreign stocks and in growth stocks slightly reduced its performance. See pages 8-9. |
● | Both Funds made no-load purchases of mutual funds that would require most individual investors to pay a sales charge. We believe this reduced the cost of investing, and thus helped both Funds’ performance. See “Access to Many Funds” on page 4. |
● | Both Pearl Funds did not pay any transaction costs – no commission, sales charge, or redemption fee. Both Funds made all their investments on a no-load basis. See “No-Load Investing” below. This helped both Funds control costs and helped their performance. |
● | Pearl Management Company, the Funds’ Manager, continues to research, analyze, and evaluate data on many mutual funds, categories of funds, and global stock markets. We believe this work helps our allocation decisions and selection of mutual funds. |
● | All Trustees, Officers, and employees of Pearl Funds and Pearl Management Company are Pearl Funds shareholders. This group, plus Pearl Management Company and its shareholders, owned more than $7.0 million of Pearl Funds shares at June 30, 2010. We believe this large investment gives all Pearl decision-makers and managers a shared interest with all our shareholders ― and a strong incentive to work for the Funds’ performance. |
Investment Strategy
Pearl Total Return Fund is a diversified fund of funds that seeks long-term total return by being primarily invested (80% or more of net assets) in equity mutual funds, except when Management believes a lower percentage is justified by high risks affecting stock markets. This Fund seeks to limit shareholders’ risk by usually holding a modest defensive position and by selecting some mutual funds that have had relatively low volatility in the past.
Pearl Aggressive Growth Fund is a diversified fund of funds that seeks long-term aggressive growth of capital by being fully invested (95% or more) in equity mutual funds at all times. This Fund almost never takes a temporary defensive position, although it has the ability to do so if Management determines that extreme circumstances exist.
"Equity mutual funds” means funds whose objective is growth or capital appreciation, including funds that invest in U.S. or foreign securities or both.
Long-Term Investing, Not Trading. Both Pearl Funds are long-term investors, not short-term traders. Your Investment Management Team is always ready to change investments when we believe this is in our shareholders’ interest, but we work to avoid excessive portfolio turnover.
The Funds’ portfolio turnover (annualized rate) during the first half of 2010 was 58% for Pearl Total Return Fund and 56% for Pearl Aggressive Growth Fund.
No-Load Investing. No Transaction Costs. Each Pearl Fund is a no-load investor, seeking to prevent all transaction costs for you and all our shareholders. When either Pearl Fund invests in a load fund, the purchase is large enough to receive a 100% waiver of the sales load, so the Fund buys without paying any load. Each Fund is authorized to pay a low sales load or redemption fee (not exceeding 2%, combined), but we work hard to avoid this. The Funds do not impose any distribution fee (12b-1 fee). Some mutual funds in which the Funds may invest may impose a 12b-1 fee.
Both Funds seek to avoid paying any transaction costs ― no sales charges, no commissions, no redemption fees ― and both Funds again paid no transaction costs to date in 2010.
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Pearl Total Return Fund has not paid any sales charge, commission, or redemption fee since 1998. All of its investments in the years 1999 through 2010 to date were made on a no-load basis.
Pearl Aggressive Growth Fund has never paid any sales charge, commission, or redemption fee. All of its investments to date were made on a no-load basis.
Access to Many Funds. Both Funds’ investments in most mutual funds have been consistently large enough to take advantage of 100% sales load waivers on large purchases. Thus, both Pearl Funds are able to select their investments from a very wide range of funds, without paying any sales load ― even though many of those funds would require most individual investors to pay a sales load.
Investments. At June 30, 2010, 81.4% of Pearl Total Return Fund’s total assets were invested in a diversified group of equity mutual funds, 1.2% in a high-quality bond fund, and 17.4% in cash. Nearly all of the cash was held in money market mutual funds.
At June 30, 2010, 96.2% of Pearl Aggressive Growth Fund’s total assets were invested in a diversified group of equity mutual funds, and 3.8% in cash (mostly money market mutual funds).
A more precise way to measure each Fund’s asset allocation is its investment portfolio assets breakdown, which counts each Fund’s indirect investments through the mutual funds held in its portfolio, using recent information on the portfolio assets of those mutual funds (Source: Morningstar, Inc.). Based on the Funds’ portfolio holdings at June 30, 2010, each Fund’s investment portfolio assets breakdown was:
Total Return Fund | Aggressive Growth Fund | ||||||||||
(as a percentage of total assets, rounded to nearest single decimal place) |
Total Stocks | 70.2% | 90.4% | |||||||||
U.S. Stocks | 43.0% | 38.6% | |||||||||
Foreign Stocks | 27.2% | 51.8% | |||||||||
Bonds | 3.0% | 0.5% | |||||||||
Cash | 24.6% | 7.3% | |||||||||
Other | 2.2% | 1.8% | |||||||||
Total | 100.0% | 100.0% |
For example, Pearl Total Return Fund directly held 17.4% of total assets in cash, but it held 24.6% in cash when the varying amounts of cash held by the mutual funds in this Fund's portfolio were added.
Each Fund’s asset allocation varies when the Fund changes its investments in mutual funds and when those funds change their investments.
Top 5 Mutual Fund Portfolio Holdings at June 30, 2010 (as a percentage of total net assets):
Pearl Total Return Fund: | Pearl Aggressive Growth Fund: | ||
Fairholme Fund | 14.78% | John Hancock Global Opportunities Fund, Class I | 16.01% |
Thornburg Global Opportunities Fund, Class I | 10.85% | Fidelity Leveraged Company Stock Fund | 15.40% |
Oakmark International Fund, Class I | 10.58% | William Blair Small Cap Growth Fund, Class I | 14.72% |
Weitz Partners III Opportunity Fund | 9.32% | Lazard Emerging Markets Fund, Institutional Class | 13.66% |
Matthews Asia Pacific Fund | 8.63% | U.S. Global Eastern European Fund | 13.14% |
Investments of both Funds at June 30, 2010 are listed in the financial statements at pages 14 and 18. Each Fund’s most recent month-end portfolio holdings are listed at www.pearlfunds.com.
Portfolio investments are subject to change at any time without notice, and some changes have been made after June 30, 2010. Each Fund’s portfolio holdings will be at least slightly different, and may be significantly different, by the time you read this report.
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Current Investment Outlook. We must evaluate many positive and negative factors that may affect U.S. and global stock markets. This outlook is written on August 25, 2010 and states our current views and positions, which are subject to change without notice:
We believe positive stock market factors now include the willingness of governments and central banks to take recovery action; global low interest rates; large amounts of cash on the sidelines, potentially available for investment; volatility continuing to be far below 2008 highs; relatively low valuation of many stocks; and high pessimism of most investors (this has sometimes been a useful contrary indicator in the past).
We believe stock market risks include the huge increase in U.S. federal spending, deficits, debt, and unfunded entitlements; credit problems continuing (U.S. and global); failure of U.S. and foreign bailouts and other efforts to improve credit markets; effects of U.S. tax increases, nationalization, and redistribution; effects of massive U.S. and global wealth destruction; U.S. and global consumer and business retrenchment in response to those problems; high uncertainty of businesses and investors about tax increases and government policies; U.S. current accounts deficit; potential hyperinflation (a future risk, but markets may anticipate it); and vulnerability to shocks.
We believe total US stock market risks remain high. However, we believe the reward/risk ratio is slightly negative near-term (1-3 mo.), neutral intermediate-term (4-12 mo), and slightly positive long-term (1-2 yrs). We believe foreign stock market risks are also high but the intermediate-term and long-term reward/risk ratios are better than for the U.S. As always, foreign markets may have risks and opportunities different from the U.S.
Weighing these factors, Pearl Total Return Fund has kept its investment in equity mutual funds at about 82% of net assets at August 25, 2010. This Fund now has nearly equal value-style and growth-style exposure and its U.S. stocks position exceeds its foreign stocks position (as measured by indirect investments through this Fund’s portfolio of mutual funds).
Pearl Aggressive Growth Fund continues to be fully invested (95% or more; now about 99%) in equity mutual funds. In comparison with Total Return Fund, Aggressive Growth Fund’s portfolio as a whole is more volatile and holds more foreign and emerging markets funds.
Both Pearl Funds hold a broad, diversified mixture of equity funds that hold small-cap, mid-cap, and large-cap stocks, with emphasis on small-cap and mid-cap. Aggressive Growth Fund has more small-cap and mid-cap investments than Total Return Fund.
At August 25, 2010, Pearl Total Return Fund was down 3.10% and Pearl Aggressive Growth Fund was down 2.58% year-to-date.
Investment Management Team |
Pearl Mutual Funds’ Manager is Pearl Management Company. The Manager’s Investment Committee manages each Fund’s portfolio. The Investment Committee consists of Robert H. Solt, President and Chief Executive Officer; David M. Stanley, Senior Counsel; and Richard R. Phillips, Vice President. Other Staff persons also provide research and analysis. For more information on the entire Staff, go to www.pearlfunds.com and click on Management and Real, Live People.
Did you know? Current performance, daily prices (net asset value), and recent portfolio holdings of both Pearl Funds are available at www.pearlfunds.com. |
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Pearl Total Return Fund |
Pearl Total Return Fund's 10-Year Performance Record is summarized in this graph:
Comparison of change in value of $10,000 investment in
Pearl Total Return Fund and its comparison indexes *
(as of June 30 each year - with dividends reinvested)
![](https://capedge.com/proxy/N-CSRS/0000898432-10-001184/pearlchart2.jpg)
* The Fund’s total returns in this report, including the graph and tables, do not reflect the deduction of taxes that a shareholder would pay on Fund dividends or on redemption of Fund shares. Likewise, the total returns of indexes do not reflect the deduction of taxes that an investor in stocks would pay on dividends or on sale of stocks. | |
All Pearl Funds total returns are net, after deducting all expenses (all fees, transaction costs, etc.) ― including all expenses of the Fund and all expenses of all the mutual funds in the Fund’s portfolio. In contrast, the total returns of indexes do not reflect any deduction of expenses. |
● | Through June 30, 2010, the value of an investment in Pearl Total Return Fund grew 7.99% during the last 5 years and grew 65.51% over the last 10 years (not annualized). The Fund outperformed all 3 comparison indexes during the 5 and 10 years ended June 30, 2010. |
Performance of Pearl Total Return Fund and Comparison Indexes through June 30, 2010:
Average Annual Total Returns for periods ended June 30, 2010, with dividends reinvested: | Year-to-date, not annualized | 1 year | 3 years | 5 years | 10 years |
Pearl Total Return Fund | - 4.70% | + 12.53% | - 9.14% | + 1.55% | + 5.17% |
Dow Jones Wilshire 5000 Index | - 5.67% | + 16.20% | - 9.08% | - 0.08% | - 0.67% |
MSCI World Index | - 9.84% | + 10.20% | - 11.46% | +0.06% | - 1.02% |
Standard & Poor’s 500 Index | - 6.65% | + 14.43% | - 9.81% | - 0.79% | - 1.59% |
*See pages 10-13 for information on expenses. See page 13 for a description of each index. Past performance does not predict future performance.
Did you know? Your Pearl Investment Management Team — Rob Solt, Dave Stanley, and Rich Phillips — together have over 52 years of experience in mutual funds investment management. |
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Pearl Total Return Fund |
Performance Summary. Past performance does not predict future performance.
● | Pearl Total Return Fund had a - 4.70% total return for the 6 months ended June 30, 2010, but outperformed all 3 comparison indexes. This Fund had a + 12.53% total return for the 1 year ended June 30, 2010. |
● | During the 5 years through June 30, 2010, Pearl Total Return Fund was up 7.99% while the 3 comparison indexes were down 1.33% on average (not annualized). The Fund outperformed all 3 comparison indexes during that period: Dow Jones Wilshire 5000 down 0.40%, MSCI World up 0.30%, S&P 500 down 3.89% (not annualized). See page 6. |
● | During the 10 years through June 30, 2010, Pearl Total Return Fund was up 65.51% while the 3 comparison indexes were down 10.35% on average (not annualized). The Fund outperformed all 3 comparison indexes during that period: Dow Jones Wilshire 5000 down 6.50%, MSCI World down 9.74%, S&P 500 down 14.81% (not annualized). See page 6. |
● | Your Fund outperformed all 3 comparison indexes during the last 5 and 10 years ended June 30, 2010. We believe this outperformance is significant because (a) it was achieved during both rising and falling stock markets, and (b) usually less than 80% of Pearl Total Return Fund’s total assets were invested in stocks, as measured by the holdings of the mutual funds in the Fund’s portfolio. The 3 comparison indexes always consist of 100% stocks. See page 4. |
● | Your Fund’s annual total return was + 26.05% in 2009, - 38.67% in 2008, + 10.37% in 2007, + 20.67% in 2006, + 11.55% in 2005, + 16.83% in 2004, + 35.73% in 2003, - 10.75% in 2002, + 3.13% in 2001, and + 1.56% in 2000. |
● | All Pearl Funds performance figures are after deduction of all expenses (all fees, transaction costs, etc.) — including all expenses of your Fund and all expenses of all the mutual funds in its portfolio. In contrast, the total returns of indexes do not reflect any expenses. |
Net Asset Value and Net Assets of Pearl Total Return Fund at June 30, 2010:
NAV (net asset value) per share: $9.54 — down from $10.01 (after dividends) at Dec. 31, 2009
Net Assets: $73,164,178 — down from $78,581,535 at Dec. 31, 2009
Did you know? Pearl Funds offer you an Automatic Investment Plan that allows you to make regular monthly investments by electronic transfer from your bank account in the amount you choose. To begin this plan, the minimum investment is $1,000; then the minimum monthly investment is $100. For information, call 866-747-9030 (toll-free) or go to www.pearlfunds.com/application_information.htm Systematic investing does not ensure a profit. |
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Pearl Aggressive Growth Fund |
Pearl Aggressive Growth Fund's Performance Record for the 9 years since its inception is summarized in this graph:
Comparison of change in value of $10,000 investment in
Pearl Aggressive Growth Fund and its comparison indexes *
(as of June 30 each year, from July 2, 2001 inception -- with dividends reinvested)
![](https://capedge.com/proxy/N-CSRS/0000898432-10-001184/pearlchart3.jpg)
* The Fund’s total returns in this report, including the graph and tables, do not reflect the deduction of taxes that a
shareholder would pay on Fund dividends or on redemption of Fund shares. Likewise, the total returns of indexes do not reflect the deduction of taxes that an investor in stocks would pay on dividends or on sale of stocks.
All Pearl Funds total returns are net, after deducting all expenses (all fees, transaction costs, etc.) — including all expenses of the Fund and all expenses of all the mutual funds in the Fund’s portfolio. In contrast, the total returns of indexes do not reflect any deduction of expenses.
● | Through June 30, 2010, the value of an investment in Pearl Aggressive Growth Fund grew 16.24% during the last 5 years and grew 76.26% during the last 9 years from this Fund’s inception on July 2, 2001 (not annualized). The Fund outperformed all 3 comparison indexes during all these periods ended June 30, 2010: 1 year, 5 years, and the 9 years since this Fund’s inception. |
Performance of Pearl Aggressive Growth Fund and Comparison Indexes through June 30, 2010:
Average Annual Total Returns for periods ended June 30, 2010, with dividends reinvested: | Year-to-date, not annualized | 1 year | 3 years | 5 years | 9 years, since inception |
Pearl Aggressive Growth Fund | - 5.99% | + 17.78% | - 9.96% | + 3.06% | + 6.50% |
Dow Jones Wilshire 5000 Index | - 5.67% | + 16.20% | - 9.08% | - 0.08% | + 1.14% |
MSCI World Index | - 9.84% | + 10.20% | - 11.46% | +0.06% | + 1.40% |
Standard & Poor’s 500 Index | - 6.65% | + 14.43% | - 9.81% | - 0.79% | + 0.01% |
* See pages 10-13 for information on expenses. See page 13 for a description of each index. Past performance does not predict future performance.
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Pearl Aggressive Growth Fund |
Performance Summary. Past performance does not predict future performance.
● | Pearl Aggressive Growth Fund had a - 5.99% total return for the 6 months ended June 30, 2010, but outperformed 2 of the 3 comparison indexes. This fund had a + 17.78% total return for the 1 year ended June 30, 2010. | |
● | During the 5 years through June 30, 2010, Pearl Aggressive Growth Fund was up 16.24% while the 3 comparison indexes were down 1.33% on average (not annualized). The Fund outperformed all 3 comparison indexes during that period: Dow Jones Wil shire 5000 down 0.40%, MSCI World up 0.30%, S&P 500 down 3.89% (not annualized). See page 8. | |
● | During the 9 years from this Fund’s inception through June 30, 2010, Pearl Aggressive Growth Fund was up 76.26% while the 3 comparison indexes were up 8.02% on average (not annualized). The Fund outperformed all 3 comparison indexes during that period: Dow Jones Wilshire 5000 up 10.72%, MSCI World up 13.29%, S&P 500 up 0.05% (not annualized). See page 8. | |
● | Pearl Aggressive Growth Fund outperformed the Standard & Poor’s 500 Index for each year, of the 7 years from this Fund’s inception (July 2, 2001) through 2007; underperformed it in 2008; and again outperformed it during 2009 and the first half of 2010. | |
● | Your Fund outperformed all 3 comparison indexes during all these periods through June 30, 2010: 1 year, 5 years, and the 9 years since this Fund’s inception. We believe this outperformance is significant because (a) it was achieved during both rising and falling stock markets, and (b) usually less than 95% of this Fund’s total assets were invested in stocks, as measured by the holdings of the mutual funds in the Fund’s portfolio. The 3 comparison indexes always consist of 100% stocks. See page 4. | |
● | Your Fund’s annual total return was + 54.34% in 2009, - 52.83% in 2008, + 19.11% in 2007, + 22.10% in 2006, + 18.01% in 2005, + 17.60% in 2004, + 53.36% in 2003, - 17.27% in 2002, and + 0.60% in the last 6 months of 2001. | |
● | All Pearl Funds performance figures are after deduction of all expenses (all fees, transaction costs, etc.) — including all expenses of each Fund and all expenses of all the mutual funds in its portfolio. In contrast, the total returns of indexes do not reflect any expenses. |
Net Asset Value and Net Assets of Pearl Aggressive Growth Fund at June 30, 2010:
NAV (net asset value) per share: $10.20 — down from $10.85 at Dec. 31, 2009
Net Assets: $38,029,358 — down from $41,455,158 at Dec. 31, 2009
Did you know? We are shareholders too! All our Trustees, Officers, and employees, plus our Manager and all its shareholders, are Pearl Funds shareholders. Together we own more than $7.0 million of Pearl Funds shares at June 30, 2010. We eat our own cooking! When your Pearl Funds investment goes up or down, so does ours! |
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Understanding Your Expenses
Pearl Total Return Fund and Pearl Aggressive Growth Fund, June 30, 2010
As a mutual fund shareholder, you may incur two types of costs. There may be transaction costs, which generally include sales charges (loads) on purchases and may include redemption or exchange fees. Both Pearl Funds have no load, sales charge, exchange fee, or redemption fee ― except that to help protect long-term shareholders and discourage freq uent trading of Fund shares, a 2% redemption fee is charged if a shareholder sells shares owned for 30 days or less. There are also continuing costs, which generally include investment advisory fees and other fund expenses, and may include Rule 12b-1 distribution fees. Both Pearl Funds do not impose any 12b-1 fee. Some of the mutual funds in which Pearl Funds invest may impose 12b-1 fees. The information on these two pages is intended to help you understand your ongoing costs of investing in Pearl Funds and to compare these costs with the ongoing costs of investing in other mutual funds.
Analyzing Your Fund's Expenses. To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors in each Pearl Fund during the reporting period. The information in the table below is based on an initial investment of $1,000, which is invested at the beginning of the 6-months reporting period and held for the entire period. Expense information is calculated two ways; each method provides you with different information. The amount in the "actual" column is calculated using each Pearl Fund’s actual operating expenses and total return. The amount in the "hypothetical" column assume s that the return each year is 5% before expenses, and uses the Fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during the period. See "Compare with Other Funds" for details on using the hypothetical data.
Estimating Your Actual Expenses. To estimate the expenses that you paid over the 6-months period, first you will need your account balance at the end of the period. Check your Shareholder Account Statement for this information.
1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6.
2. In the "Expenses paid during the period" section of the table, locate the amount for your Fund. You will find this number in the "Actual" column. Multiply this number by the result from step 1.
Your answer is an estimate of the expenses you paid on your account during the period.
Compare with Other Funds. Since all mutual funds are required to include the same hypothetical calculations of expenses in shareholder reports, you can use this information to compare the ongoing costs of investing in each Pearl Fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight only the continuing costs of investing in a fund and do not reflect any transaction costs, such as sales charges or redemptio n or exchange fees, which may be incurred by shareholders of other funds.
Pearl Funds are No-load. It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in your Fund. As a Pearl Funds shareholder, you do not incur any transaction costs, such as sales charges, exchange fees, or redemption fees (except a 2% redemption fee if you sell shares owned for 30 days or less). The hypothetical example is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning other mutual funds whose shareholders may incur transaction co sts.
10
January 1, 2010 through June 30, 2010 (6 months):
Account value at the beginning of the period ($) | Account value at the end of the period ($) | Expenses paid during the period ($) | Fund’s annualized expense ratio (%) | ||||
Actual | Hypothetical | Actual | Hypothetical | Actual | Hypothetical | Actual | |
Pearl Total Return Fund | 1,000.00 | 1,000.00 | 953.05 | 1,025.00 | 5.81 | 6.03 | 1.20% |
Pearl Aggressive Growth Fund | 1,000.00 | 1,000.00 | 940.09 | 1,025.00 | 5.77 | 6.03 | 1.20% |
Expenses paid during the period are equal to the Fund's annualized expense ratio, multiplied by the average account value over the period, then multiplied by the number of days in the Fund's most recent fiscal half-year, divided by 365 (to reflect the half-year period).
Each Pearl Fund is a Fund of Funds. This should be kept in mind when comparing with other funds. Both Pearl Funds invested substantially all of their assets in other mutual funds throughout the reporting period. Thus, in addition to the Pearl Funds’ expenses shown in the table above, Pearl Funds shareholders also indirectly paid a proportional share of the expenses of the portfolio mutual funds in which the Pearl Funds were invested. However, there were no transaction costs for Pearl Funds’ investments in other mutual fun ds. Each Pearl Fund did not pay any transaction cost, such as sales charges or redemption or exchange fees, during the reporting period. Also, all Pearl Funds performance and total return figures are net ― after deduction of all expenses of each Pearl Fund and all expenses of all the mutual funds in its portfolio.
General Information
This report is provided for the shareholders of Pearl Mutual Funds. This report is not an offer of or a solicitation of an offer to buy either Fund, nor shall either Fund be offered or sold to any person, in any jurisdiction in which the offer, solicitation, purchase, or sale would be unlawful under its securities laws. The Funds are offered only to residents of the United States. This report is not authorized for distribution to prospective investors unless preceded or accompanied by a current Prospectus. Before investing, an investor should read the Prospectus and carefully consider a Fund’s objectives, risks, charges, and expenses. To obtain a Prospectus containing this and other information, please visit our Website at www.pearlfunds.com or call toll-free 866-747-9030.
Pearl Funds shares are available to residents of 42 states and the District of Columbia. Please go to www.pearlfunds.com or call toll-free 866-747-9030 to find whether Pearl Funds shares are available in your state.
We Invite and Welcome Your Calls. A real, live person will talk with you ― promptly. He or she will be one of our Officers or key Staff persons. You will get a straight answer. If we don’t know the answer, we will find it and get back to you quickly. 866-747-9030 (toll-free).
If we break this promise, tell us and you will receive our personal apology.
We Also Invite You to E-mail, Fax, or Write to Us:
E-mail: info@pearlfunds.com
Fax: 563-288-4101
Write to: Pearl Mutual Funds, 2610 Park Avenue, PO Box 209, Muscatine, IA 52761
You May Send a Message to the Funds’ Board of Trustees on any subject. Send your message to the Pearl office, addressed to the Board of Trustees. We will promptly send it to all of the Trustees.
11
Communications Invited on Accounting and Auditing. Any person may communicate, confidentially and anonymously, any concerns regarding accounting or auditing matters to David L. Evans, Chairman of the Audit Committee of Pearl Mutual Funds, by either of these two means:
1. Mail to 32500 El Diente Court, Evergreen, CO 80439 (preferred method)
2. Telephone to 303-679-9689
Performance is historical and does not guarantee future results. Investment return and principal value of an investment in each Pearl Fund will fluctuate, so an investor’s shares in the Fund, when redeemed, may be worth more or less than their original cost. Performance changes over time and may be materially different by the time you read this report. For recent information on performance, prices, and portfolio holdings, go to www.pearlfunds.com or call toll-free 866-747-9030.
All investments involve risk. Even though Pearl Total Return Fund and Pearl Aggressive Growth Fund each invest in many mutual funds, that investment strategy cannot eliminate risk.
Many factors affect risks of mutual funds that invest in various kinds of stocks. For example:
Stocks of small and mid-sized companies may be more volatile or less liquid than stocks of larger companies. Smaller companies may have a shorter history of operations, may not have the ability to raise capital as easily as large companies, and may have a less diversified product line, making them more susceptible to market pressure.
Value stocks include stocks of companies that may have experienced adverse business or industry developments or may be subject to special risks that have caused the stocks to be out of favor and undervalued. Growth stocks are stocks of companies believed to have above-average potential for growth of revenue and earnings. Prices of growth stocks may be more sensitive to changes in current or expected earnings than prices of other stocks. Growth stocks may not perform as well as value stocks or the stock market in general.
Investments in foreign securities involve risks, including currency fluctuation, different regulation, accounting standards, trading practices, levels of available information, generally higher transaction costs, and political risks. The risks of foreign investments are typically increased in less developed countries, which are sometimes referred to as emerging markets. For example, political and economic structures in these countries may be new and developing rapidly, which may cause instability. These countries are also more likely to experience high levels of inflation, deflation, or currency devaluations, which could hurt their economies and securities markets.
For more detailed information on the risks of investing in the Funds, please read the Prospectus, available at www.pearlfunds.com or by calling 866-747-9030 (toll-free).
Total return means total growth of the investment, with all dividends (including capital gains dividends) reinvested.
Expenses. Each Pearl Fund is a fund of funds which bears its allocable share of the expenses of the mutual funds in which it invests. Each Fund is thus subject to two levels of fees and a potentially higher expense ratio than would be associated with an investment in a fund that invests directly in stocks or other financial instruments. However, all Pearl Funds performance and total return figures are net, after deducting all expenses (all fees, transaction costs, etc.) ― i ncluding all expenses of all the mutual funds in your Fund’s portfolio.
For the year 2009, each Fund’s total annual fund operating expenses, including the Fund’s share of all expenses of all the mutual funds in its portfolio, were: Pearl Total Return Fund 2.18%, which was reduced to 1.89% by the Manager’s reimbursement due to the Limit on Expenses; and Pearl Aggressive Growth Fund 2.50%, reduced to 2.15% by the Manager’s reimbursement. However, all
12
Pearl Funds performance and total return figures are net, after deducting all expenses (all fees, transaction costs, etc.) – including all expenses of all the mutual funds in your Fund’s portfolio.
Limit on Expenses. Pearl Management Company, the Funds’ Manager, has contractually agreed to reimburse each Pearl Fund for all ordinary operating expenses (including all management, advisory, and administrative fees) exceeding 1.20% of a Fund's average net assets. When the Manager has reimbursed a Fund for expenses in excess of this limit, the Manager may recover the reimbursed amounts, for a period that does not exceed five years, to the extent this can be done without exceeding the expense limit. The Manager may continue to recover amounts reimbur sed under the Funds’ previous contractual expense limit, but only to the extent this can be done without exceeding the previous expense limit. The expense limit applies to each Fund’s direct ordinary operating expenses and does not apply to the indirect expenses incurred by a Fund through its investment in the mutual funds in its portfolio. The expense limit does not have an expiration date, and will continue unless a change is approved by the Funds’ Board of Trustees.
The Manager's reimbursement of expenses that exceed the expense limit lowers the expense ratio and increases the overall return to investors.
Disclosure of Portfolio Holdings. Pearl Funds’ most recent month-end portfolio holdings are disclosed to the public at www.pearlfunds.com. The Funds also file a complete schedule of portfolio holdings with the SEC for the first and third quarters of each year on Form N-Q, and for the half-year and full year on Form N-CSR. The Forms N-Q and N-CSR are available on the SEC’s Website at www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Proxy Votes by the Funds. A description of each Fund’s proxy voting policies and procedures and a record of each Fund’s proxy votes for the most recent 12-months period ended June 30 are available without charge at www.pearlfunds.com or by calling toll-free 866-747-9030, and are also available on the SEC’s Website at www.sec.gov.
Privacy Policy. Because we consider the preservation of your privacy a priority, Pearl Mutual Funds has a privacy policy. You may view the privacy policy at www.pearlfunds.com (click on Privacy Policy) or by calling toll-free 866-747-9030. The privacy policy is sent to shareholders annually.
Comparison Indexes. The Dow Jones Wilshire 5000 Composite Index, often referred to as Dow Jones Wilshire 5000, is an unmanaged index, is market-capitalization weighted, includes all publicly-traded U.S. common stocks headquartered in the U.S. with readily available price data, and is generally representative of the performance of the average dollar invested in U.S. common stocks. The MSCI World Index is an unmanaged index, is market-capitalization weighted, and is generally representative of the performance of the global (U.S. and international) market for common stocks. The Standard & Poor’s (S & P) 500 Index is an unmanag ed index of 500 stocks, is market-capitali-zation weighted, and is generally representative of the performance of larger companies in the U.S.
The Funds’ holdings are not the same as the indexes. Each Pearl Fund’s performance will not mirror the returns of any particular index. It is not possible to invest directly in an index. Trademarks and copyrights relating to the indexes are owned by: Dow Jones Wilshire 5000: Dow Jones Indexes and Wilshire Associates, Inc; MSCI World Index: Morgan Stanley Capital International; Standard & Poor’s 500 Index: The McGraw Hill Companies.
Other Information. Please consult your tax advisor regarding the tax consequences of owning shares of the Funds in your particular circumstances.
From July 1, 1972 through July 1, 2001, Pearl Total Return Fund’s shares were not registered under the Securities Act of 1933 and only private sales of its shares were made. The Fund began offering its shares to the public pursuant to an effective registration statement on July 2, 2001.
13
PEARL TOTAL RETURN FUND | |||||||||||||
STATEMENT OF NET ASSETS (UNAUDITED) June 30, 2010 | |||||||||||||
ASSETS: | |||||||||||||
INVESTMENTS in mutual funds, | % of | ||||||||||||
all unaffiliated issuers: | Shares | net | Market | ||||||||||
owned | assets | value | |||||||||||
Equity mutual funds: | |||||||||||||
Dreyfus Opportunistic Small Cap Fund | 273,957 | 8.50 | % | 6,218,827 | |||||||||
Fairholme Fund | 356,953 | 14.79 | % | 10,815,682 | |||||||||
John Hancock Large Cap Equity Fund, Class I | 110,119 | 3.30 | % | 2,416,018 | |||||||||
Marshall Small Cap Growth Fund | 384,935 | 7.47 | % | 5,466,081 | |||||||||
Matthews Asia Pacific Fund | 432,951 | 8.63 | % | 6,316,760 | |||||||||
Matthews Asian Growth and Income Fund | 169,577 | 3.67 | % | 2,682,708 | |||||||||
Oakmark International Fund, Class I | 487,227 | 10.58 | % | 7,742,034 | |||||||||
T. Rowe Price New America Growth Fund | 123,168 | 4.35 | % | 3,180,197 | |||||||||
Thornburg Global Opportunities Fund, Class I | 612,535 | 10.87 | % | 7,944,577 | |||||||||
Weitz Partners III Opportunity Fund | 715,595 | 9.32 | % | 6,819,623 | |||||||||
TOTAL EQUITY MUTUAL FUNDS (cost $57,152,478, including reinvested dividends) | 81.48 | % | 59,602,507 | ||||||||||
Income mutual funds: | |||||||||||||
PIMCO Total Return Fund, Institutional Class (cost $829,620, including reinvested dividends) | 80,394 | 1.24 | % | 905,231 | |||||||||
TOTAL INCOME MUTUAL FUNDS | 1.24 | % | 905,231 | ||||||||||
Money market mutual funds: | |||||||||||||
Vanguard Money Market Prime Fund (cost $47,518, including reinvested dividends) | 47,518 | 0.06 | % | 47,518 | |||||||||
TOTAL MONEY MARKET FUNDS | 0.06 | % | 47,518 | ||||||||||
TOTAL INVESTMENTS (cost $58,029,616, including reinvested dividends) | 82.78 | % | 60,555,256 | ||||||||||
Cash and cash equivalents through custodian bank | 17.26 | % | 12,637,265 | ||||||||||
Receivable for Fund shares sold | 0.00 | % | 0 | ||||||||||
Accrued interest | 0.00 | % | 195 | ||||||||||
TOTAL ASSETS | 100.04 | % | 73,192,716 | ||||||||||
LIABILITIES: | |||||||||||||
Dividend payable | 0.00 | % | 0 | ||||||||||
Payable for shares redeemed | 0.04 | % | 28,538 | ||||||||||
Investment manager's fees payable (Note 5) | 0.00 | % | 0 | ||||||||||
Payable to manager for expenses of Fund (Note 5) | 0.00 | % | 0 | ||||||||||
Other liabilities | 0.00 | % | 0 | ||||||||||
TOTAL LIABILITIES | 0.04 | % | 28,538 | ||||||||||
NET ASSETS, applicable to 7,671,638 outstanding shares of beneficial interest (no par value); unlimited shares authorized | 100.00 | % | $ | 73,164,178 | |||||||||
NET ASSET VALUE -- OFFERING AND REDEMPTION PRICE PER SHARE | $ | 9.54 | |||||||||||
NET ASSETS CONSIST OF: | |||||||||||||
Capital | $ | 97,533,886 | |||||||||||
Accumulated net investment loss | (428,574 | ) | |||||||||||
Accumulated net realized losses | (26,466,774 | ) | |||||||||||
Net unrealized appreciation in value of investments | 2,525,640 | ||||||||||||
TOTAL NET ASSETS | $ | 73,164,178 |
See notes to financial statements.
14
PEARL TOTAL RETURN FUND | ||||
STATEMENT OF OPERATIONS (UNAUDITED) | ||||
Six Months Ended | ||||
June 30, 2010 | ||||
INVESTMENT INCOME: | ||||
Income: | ||||
Dividends | $ | 45,812 | ||
Interest income | 320 | |||
TOTAL INVESTMENT INCOME | 46,132 | |||
Expenses, current year (Note 5): | ||||
Investment management and | ||||
administrative services fees (Note 5) | 298,323 | |||
Associations | 2,356 | |||
Auditors' fees | 49,075 | |||
Chief Compliance Officer compensation | 11,429 | |||
Chief Compliance Officer expenses | 457 | |||
Custodian fees | 3,828 | |||
Data processing | 8,343 | |||
Trustees' fees (Note 7) | 39,849 | |||
Registration fees | 16,818 | |||
Insurance | 24,591 | |||
Legal fees | 42,787 | |||
Meetings | 3,486 | |||
Other | 122 | |||
TOTAL EXPENSES BEFORE REIMBURSEMENT | 501,464 | |||
Expenses reimbursed by investment manager (Note 5) | (26,758 | ) | ||
TOTAL EXPENSES | 474,706 | |||
NET INVESTMENT (LOSS) | (428,574 | ) | ||
NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: | ||||
Net realized gains on investments (securities of unaffiliated issuers) | 2,770,991 | |||
Change in net unrealized (depreciation) on investments | (5,924,186 | ) | ||
NET REALIZED AND UNREALIZED (LOSSES) ON INVESTMENTS | (3,153,195 | ) | ||
NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ | (3,581,769 | ) | |
See notes to financial statements.
15
PEARL TOTAL RETURN FUND | ||||||||
STATEMENT OF CHANGES IN NET ASSETS | ||||||||
Six Months Ended | Year Ended | |||||||
June 30, 2010 | December 31, 2009 | |||||||
INCREASE (DECREASE) IN NET ASSETS: | (UNAUDITED) | (AUDITED) | ||||||
FROM OPERATIONS: | ||||||||
Net investment income (loss) | $ | (428,574 | ) | $ | 574,736 | |||
Net realized gains (losses) on investments | 2,770,991 | (12,934,273 | ) | |||||
Change in net unrealized appreciation (depreciation) on investments | (5,924,186 | ) | 29,148,823 | |||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | (3,581,769 | ) | 16,789,286 | |||||
FROM DIVIDENDS TO SHAREHOLDERS (Note 8): | ||||||||
Dividends from net investment income | 0 | (574,736 | ) | |||||
Dividends from net realized gains | 0 | 0 | ||||||
TOTAL DIVIDENDS | 0 | (574,736 | ) | |||||
FROM CAPITAL SHARES TRANSACTIONS (2010 and 2009 respectively): | ||||||||
Proceeds received for shares sold (75,238 and 140,788 shares) | 767,797 | 1,229,916 | ||||||
Net asset value of shares (0 and 55,272 shares) issued in reinvestment of dividends | 0 | 553,272 | ||||||
Paid on redemption of shares (254,945 and 673,387 shares), including exchanges into Pearl Aggressive Growth Fund | (2,603,385 | ) | (6,017,848 | ) | ||||
(DECREASE ) IN NET ASSETS FROM CAPITAL SHARES TRANSACTIONS: | ||||||||
(net decreases of 179,707 and 477,327 shares) | (1,835,588 | ) | (4,234,660 | ) | ||||
TOTAL INCREASE (DECREASE) IN NET ASSETS | (5,417,357 | ) | 11,979,890 | |||||
NET ASSETS: | ||||||||
Beginning of period | 78,581,535 | 66,601,645 | ||||||
End of period (including accumulated net investment income (loss), ($428,574) and $0, respectively) | $ | 73,164,178 | $ | 78,581,535 |
See notes to financial statements.
16
PEARL TOTAL RETURN FUND | ||||||||||||||||||||||||||||||||||||||||||||
FINANCIAL HIGHLIGHTS | ||||||||||||||||||||||||||||||||||||||||||||
SELECTED PER-SHARE DATA | Six Months Ended | Year ended December 31, | ||||||||||||||||||||||||||||||||||||||||||
derived from the financial statements: | June 30, 2010 | 2009 | 2008 | 2007 | 2006 | 2005 | 2004 | 2003 | 2002 | 2001 | 2000 | |||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $ | 10.01 | $ | 8.00 | $ | 13.26 | $ | 15.35 | $ | 14.13 | $ | 14.02 | $ | 12.69 | $ | 9.50 | $ | 10.75 | $ | 10.54 | $ | 12.16 | ||||||||||||||||||||||
Income from Investment Operations | ||||||||||||||||||||||||||||||||||||||||||||
Net investment income | (0.06 | ) | 0.07 | 0.13 | 0.44 | 0.34 | 0.23 | 0.28 | 0.20 | 0.09 | 0.12 | 0.69 | ||||||||||||||||||||||||||||||||
Net realized and unrealized gains (losses) on investments | (0.41 | ) | 2.01 | (5.26 | ) | 1.15 | 2.58 | 1.39 | 1.85 | 3.19 | (1.25 | ) | 0.21 | (0.50 | ) | |||||||||||||||||||||||||||||
Total investment operations | (0.47 | ) | 2.08 | (5.13 | ) | 1.59 | 2.92 | 1.62 | 2.13 | 3.39 | (1.16 | ) | 0.33 | 0.19 | ||||||||||||||||||||||||||||||
Less Dividends (Note 7) | ||||||||||||||||||||||||||||||||||||||||||||
Dividends from net investment income | None | (0.07 | ) | (0.13 | ) | (0.44 | ) | (0.34 | ) | (0.23 | ) | (0.28 | ) | (0.20 | ) | (0.09 | ) | (0.12 | ) | (0.69 | ) | |||||||||||||||||||||||
Dividends from net realized capital gains on investments | None | None | None | (3.24 | ) | (1.36 | ) | (1.28 | ) | (0.52 | ) | None | None | None | (1.12 | ) | ||||||||||||||||||||||||||||
Total dividends | 0.00 | (0.07 | ) | (0.13 | ) | (3.68 | ) | (1.70 | ) | (1.51 | ) | (0.80 | ) | (0.20 | ) | (0.09 | ) | (0.12 | ) | (1.81 | ) | |||||||||||||||||||||||
Net asset value, end of period | $ | 9.54 | $ | 10.01 | $ | 8.00 | $ | 13.26 | $ | 15.35 | $ | 14.13 | $ | 14.02 | $ | 12.69 | $ | 9.50 | $ | 10.75 | $ | 10.54 | ||||||||||||||||||||||
Total Return | (4.70 | %) | 26.05 | % | (38.67 | %) | 10.37 | % | 20.67 | % | 11.55 | % | 16.83 | % | 35.73 | % | (10.75 | %) | 3.13 | % | 1.56 | % | ||||||||||||||||||||||
RATIOS AND SUPPLEMENTAL DATA | ||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (thousands of dollars) | $ | 73,164 | $ | 78,582 | $ | 66,602 | $ | 121,204 | $ | 106,712 | $ | 88,159 | $ | 74,058 | $ | 56,352 | $ | 39,928 | $ | 46,807 | $ | 58,875 | ||||||||||||||||||||||
Ratio of net expenses to average net assets | 1.20 | %** | 0.97 | % | 0.98 | % | 0.94 | % | 0.98 | % | 0.98 | % | 0.98 | % | 0.98 | % | 0.97 | % | 0.94 | % | 0.93 | % | ||||||||||||||||||||||
Ratio of gross expenses to average net assets | 1.28 | %** | 1.26 | % | 1.14 | % | 1.03 | % | 1.10 | % | 1.16 | % | 1.14 | % | 1.17 | % | 1.26 | % | 1.29 | % | 1.05 | % | ||||||||||||||||||||||
Ratio of net investment income to average net assets | -1.10 | %** | 0.82 | % | 1.12 | % | 2.64 | % | 2.20 | % | 1.64 | % | 2.25 | % | 1.97 | % | 0.90 | % | 0.95 | % | 5.62 | % | ||||||||||||||||||||||
Ratio of total investment income less gross expenses to average net assets | -1.16 | %** | 0.53 | % | 0.97 | % | 2.56 | % | 2.07 | % | 1.45 | % | 2.08 | % | 1.75 | % | 0.61 | % | 0.61 | % | 5.50 | % | ||||||||||||||||||||||
Portfolio turnover (excluding money market mutual funds) | 58 | %** | 82 | % | 50 | % | 67 | % | 15 | % | 24 | % | 34 | % | 34 | % | 55 | % | 50 | % | 78 | % |
** Annualized
See notes to financial statements.
17
PEARL AGGRESSIVE GROWTH FUND | |||||||||||||
STATEMENT OF NET ASSETS (UNAUDITED) June 30, 2010 | |||||||||||||
ASSETS: | |||||||||||||
INVESTMENTS in mutual funds, all unaffiliated issuers: | |||||||||||||
Shares owned | % of net | Market value | |||||||||||
Equity mutual funds: | |||||||||||||
Fidelity Leveraged Company Stock Fund | 269,703 | 15.42 | % | 5,866,046 | |||||||||
Hotchkis and Wiley Small Cap Value Fund | 62,854 | 5.18 | % | 1,969,830 | |||||||||
Janus Overseas Fund, Class T | 53,204 | 5.74 | % | 2,183,493 | |||||||||
John Hancock Global Opportunities Fund, Class I | 412,416 | 16.02 | % | 6,095,514 | |||||||||
Lazard Emerging Markets Equity Fund, Institutional Class | 299,185 | 13.68 | % | 5,202,827 | |||||||||
Matthews Pacific Tiger Fund | 246,097 | 12.41 | % | 4,720,132 | |||||||||
US Global Investors Eastern European Fund | 612,336 | 13.16 | % | 5,002,784 | |||||||||
William Blair Small Cap Growth Fund, Class I | 281,345 | 14.74 | % | 5,604,398 | |||||||||
TOTAL EQUITY MUTUAL FUNDS (cost $38,785,239, including reinvested dividends) | 96.35 | % | 36,645,024 | ||||||||||
Money market mutual fund: | |||||||||||||
Vanguard Money Market Prime Fund (cost $9,791, including reinvested dividends) | 9,791 | 0.03 | % | 9,791 | |||||||||
TOTAL MONEY MARKET FUNDS | 0.03 | % | 9,791 | ||||||||||
TOTAL INVESTMENTS (cost $38,795,030, including reinvested dividends) | 96.38 | % | 36,654,815 | ||||||||||
Cash and cash equivalents through custodian bank | 3.75 | % | 1,425,499 | ||||||||||
Receivable for Fund shares sold | 0.00 | % | 0 | ||||||||||
Accrued interest | 0.00 | % | 23 | ||||||||||
TOTAL ASSETS | 100.13 | % | 38,080,337 | ||||||||||
LIABILITIES: | |||||||||||||
Dividend payable | 0.00 | % | 0 | ||||||||||
Payable for shares redeemed | 0.13 | % | 50,979 | ||||||||||
Investment manager's fees payable (Note 5) | 0.00 | % | 0 | ||||||||||
Payable to manager for expenses of Fund (Note 5) | 0.00 | % | 0 | ||||||||||
Other liabilities | 0.00 | % | 0 | ||||||||||
TOTAL LIABILITIES | 0.13 | % | 50,979 | ||||||||||
NET ASSETS, applicable to 3,729,105 outstanding shares of beneficial interest (no par value); unlimited shares authorized | 100.00 | % | $ | 38,029,358 | |||||||||
NET ASSET VALUE -- OFFERING AND REDEMPTION PRICE PER SHARE | $ | 10.20 | |||||||||||
NET ASSETS CONSIST OF: | |||||||||||||
Capital | $ | 53,152,280 | |||||||||||
Accumulated net investment loss | (248,007 | ) | |||||||||||
Accumulated net realized losses | (12,734,700 | ) | |||||||||||
Net unrealized depreciation in value of investments | (2,140,215 | ) | |||||||||||
TOTAL NET ASSETS | $ | 38,029,358 |
See notes to financial statements.
18
PEARL AGGRESSIVE GROWTH FUND | ||||
STATEMENT OF OPERATIONS (UNAUDITED) | ||||
Six Months Ended | ||||
June 30, 2010 | ||||
INVESTMENT INCOME: | ||||
Income: | ||||
Dividends | $ | 2 | ||
Interest income | 44 | |||
TOTAL INVESTMENT INCOME | 46 | |||
Expenses, current year (Note 5): | ||||
Investment management and administrative services fees (Note 5 | 162,332 | |||
Associations | 1,219 | |||
Auditors' fees | 25,598 | |||
Chief Compliance Officer compensation | 5,971 | |||
Chief Compliance Officer expenses | 237 | |||
Custodian fees | 2,002 | |||
Data processing | 4,361 | |||
Trustees' fees (Note 7) | 20,651 | |||
Registration fees | 15,695 | |||
Insurance | 12,973 | |||
Legal fees | 22,384 | |||
Meetings | 1,807 | |||
Other | 63 | |||
TOTAL EXPENSES BEFORE REIMBURSEMENT | 275,293 | |||
Expenses reimbursed by investment manager (Note 5) | (27,240 | ) | ||
TOTAL EXPENSES | 248,053 | |||
NET INVESTMENT (LOSS) | (248,007 | ) | ||
NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: | ||||
Net realized gains on investments (securities of unaffiliated issuers) | 2,112,608 | |||
Change in net unrealized (depreciation) on investments | (4,277,302 | ) | ||
NET REALIZED AND UNREALIZED (LOSSES) ON INVESTMENTS | (2,164,694 | ) | ||
NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ | (2,412,701 | ) |
See notes to financial statements.
19
PEARL AGGRESSIVE GROWTH FUND | ||||||||
STATEMENTS OF CHANGES IN NET ASSETS | ||||||||
Six Months Ended | Year Ended | |||||||
June 30, 2010 | December 31, 2009 | |||||||
INCREASE (DECREASE) IN NET ASSETS: | (UNAUDITED) | (AUDITED) | ||||||
FROM OPERATIONS: | ||||||||
Net investment income (loss) | $ | (248,007 | ) | $ | (29,343 | ) | ||
Net realized gains (losses) on investments | 2,112,608 | (13,691,636 | ) | |||||
Change in net unrealized appreciation (depreciation) on investments | (4,277,302 | ) | 28,031,947 | |||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | (2,412,701 | ) | 14,310,968 | |||||
FROM DIVIDENDS TO SHAREHOLDERS (Note 8): | ||||||||
Dividends from net investment income | 0 | 0 | ||||||
Dividends from net realized gains | 0 | 0 | ||||||
TOTAL DIVIDENDS | 0 | 0 | ||||||
FROM CAPITAL SHARES TRANSACTIONS (2010 and 2009 respectively): | ||||||||
Proceeds received for shares sold (50,044 and 130,008 shares) | 553,525 | 1,118,155 | ||||||
Net asset value of shares (0 and 0 shares) issued in reinvestment of dividends | 0 | 0 | ||||||
Paid on redemption of shares (143,216 and 814,508 shares), including exchanges into Pearl Total Return Fund | (1,566,624 | ) | (5,653,636 | ) | ||||
(DECREASE) IN NET ASSETS FROM CAPITAL | ||||||||
SHARES TRANSACTIONS: | ||||||||
(net decreases of 93,172 and 684,500 shares) | (1,013,099 | ) | (4,535,481 | ) | ||||
TOTAL INCREASE (DECREASE) IN NET ASSETS | (3,425,800 | ) | 9,775,487 | |||||
NET ASSETS: | ||||||||
Beginning of period | 41,455,158 | 31,679,671 | ||||||
End of period (including accumulated net investment income (loss), ($248,007) and $0, respectively) | $ | 38,029,358 | $ | 41,455,158 |
See notes to financial statements.
20
PEARL AGGRESSIVE GROWTH FUND | ||||||||||||||||||||||||||||||||||||||||
FINANCIAL HIGHLIGHTS | ||||||||||||||||||||||||||||||||||||||||
Period July 2, 2001 | ||||||||||||||||||||||||||||||||||||||||
Six Months | Year ended December 31, | (inception) through | ||||||||||||||||||||||||||||||||||||||
SELECTED PER-SHARE DATA derived from the financial statements: | Ended June 30, 2010 | 2009 | 2008 | 2007 | 2006 | 2005 | 2004 | 2003 | 2002 | December 31,2001 | ||||||||||||||||||||||||||||||
Net asset value, beginning of period | $ | 10.85 | $ | 7.03 | $ | 15.01 | $ | 14.48 | $ | 13.50 | $ | 13.51 | $ | 12.56 | $ | 8.19 | $ | 9.90 | $ | 10.00 | ||||||||||||||||||||
Income from Investment Operations | ||||||||||||||||||||||||||||||||||||||||
Net investment income (loss) | (0.07 | ) | (0.01 | ) | 0.05 | 0.21 | 0.35 | 0.30 | 0.15 | (0.03 | ) | (0.07 | ) | 0.06 | ||||||||||||||||||||||||||
Net realized and unrealized gains (losses) on investments | (0.58 | ) | 3.83 | (7.98 | ) | 2.56 | 2.63 | 2.13 | 2.06 | 4.40 | (1.64 | ) | 0.00 | |||||||||||||||||||||||||||
Total investment operations | (0.65 | ) | 3.82 | (7.93 | ) | 2.77 | 2.98 | 2.43 | 2.21 | 4.37 | (1.71 | ) | 0.06 | |||||||||||||||||||||||||||
Less Dividends (Note 7) | ||||||||||||||||||||||||||||||||||||||||
Dividends from net investment income | None | None | (0.05 | ) | (0.21 | ) | (0.35 | ) | (0.30 | ) | (0.15 | ) | None | None | (0.06 | ) | ||||||||||||||||||||||||
Dividends from net realized capital gains on investments | None | None | None | (2.02 | ) | (1.65 | ) | (2.14 | ) | (1.11 | ) | None | None | (0.10 | ) | |||||||||||||||||||||||||
Total dividends | 0.00 | 0.00 | (0.05 | ) | (2.24 | ) | (2.00 | ) | (2.44 | ) | (1.26 | ) | None | None | (0.16 | ) | ||||||||||||||||||||||||
Net asset value, end of period | $ | 10.20 | $ | 10.85 | $ | 7.03 | $ | 15.01 | $ | 14.48 | $ | 13.50 | $ | 13.51 | $ | 12.56 | $ | 8.19 | $ | 9.90 | ||||||||||||||||||||
Total Return | (5.99 | %) | 54.34 | % | (52.83 | %) | 19.11 | % | 22.10 | % | 18.01 | % | 17.60 | % | 53.36 | % | (17.27 | %) | 0.60 | % | ||||||||||||||||||||
RATIOS AND SUPPLEMENTAL DATA | ||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (thousands of dollars) | $ | 38,029 | $ | 41,455 | $ | 31,680 | $ | 67,944 | $ | 47,872 | $ | 34,370 | $ | 26,382 | $ | 21,056 | $ | 14,605 | $ | 15,846 | ||||||||||||||||||||
Ratio of net expenses to average net assets | 1.20 | %** | 0.96 | % | 0.98 | % | 0.97 | % | 0.98 | % | 0.98 | % | 0.98 | % | 0.98 | % | 0.98 | % | 0.96 | % | ||||||||||||||||||||
Ratio of gross expenses to average net assets | 1.34 | %** | 1.31 | % | 1.16 | % | 1.10 | % | 1.16 | % | 1.24 | % | 1.20 | % | 1.22 | % | 1.31 | % | 2.07 | % | ||||||||||||||||||||
Ratio of net investment income (loss) to average net assets | -1.22 | %** | -0.09 | % | 0.41 | % | 1.44 | % | 2.45 | % | 2.21 | % | 1.17 | % | (0.29 | %) | (0.82 | %) | 1.48 | % | ||||||||||||||||||||
Ratio of total investment income (loss) less gross expenses to average net assets | -1.34 | %** | -0.44 | % | 0.23 | % | 1.31 | % | 2.26 | % | 1.94 | % | 0.93 | % | (0.55 | %) | (1.15 | %) | 0.60 | % | ||||||||||||||||||||
Portfolio turnover (excluding money market mutual funds) | 56 | %** | 57 | % | 36 | % | 38 | % | 24 | % | 44 | % | 29 | % | 47 | % | 56 | % | 13 | % | ||||||||||||||||||||
** Annualized |
See notes to financial statements.
21
PEARL TOTAL RETURN FUND and
PEARL AGGRESSIVE GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 2010 AND YEAR ENDED DECEMBER 31, 2009
1. | ORGANIZATION. Pearl Total Return Fund (PTRF) and Pearl Aggressive Growth Fund (PAGF) (collectively, the “Funds”) are each a series of Pearl Mutual Funds, a Massachusetts business trust (the “Trust”) registered under the Investment Company Act of 1940, and are diversified, no-load, open-end management investment companies (mutual funds). The Funds’ investments are limited to: (1) shares of mutual funds (open-end funds) that the Funds can buy no-load (with no applicable sales load or redemption fee); (2) shares of “low-load” mutual funds (open-end funds) that the Funds can buy with a sales load or redemption fee that together do not exceed 2% of the purchase price (however, the Funds expect that substantially all of their investments in mutual funds will be on a no-load basis); and (3) cash and cash equivalents. These financial statements have not been audited. Management believes that these financial statements include all adjustments (which, unless otherwise noted, include only normal recurring adjustments) necessary for a fair presentation of the financial results for each period shown. |
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. The policies are in conformity with accounting principles generally accepted in the United States of America. 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 and disclosure of contingent assets and liabilities at the date of the financial statements and the amounts of income and expenses during the reporting period. Actual results could differ from those estimates. (a) Investments in shares of other mutual funds are valued at the net asset value as reported by each mutual fund as of 4:00 p.m. Eastern (U.S.) on days the New York Stock Exchange is open. (b) Securities transactions are accounted for on the trade date. (c) Dividend income and the Funds' dividends to their shareholders are recorded on the ex-dividend date. (d) Expenses that are directly related to one of the Funds are charged directly to the respective Fund. General expenses of the Funds are allocated to each of the Funds based upon their net assets. (e) Gains or losses on sales of investments and unrealized appreciation or depreciation of investments are determined on the basis of average cost. The Funds have assessed subsequent events through the date the financial statements were issued. |
3. | INCOME TAXES. It is the Funds’ policy to comply with the special provisions of the Internal Revenue Code applicable to regulated investment companies and to make all necessary distributions of net investment income and realized gains so that the Funds will not be required to pay any federal or state income taxes. Therefore, the Funds make no provision for income taxes. As of December 31, 2009, PTRF had a total capital loss carry-forward in the amount of $29,237,765 available to offset future capital gains. There was a $16,303,492 capital loss carry-forward in 2008 that may be used to offset future capital gains through December 31, 2016. There was an additional capital loss carry-forward in the amount of $12,934,273 in 2009 that may be used to offset future capital gains through December 31, 2017. At December 31, 2009, PTRF had no post-October capital losses. As of June 30, 2010 PTRF had accumulated net realized losses of $26,466,774. For Federal tax purposes PTRF’s cost was $58,029,616, including the amounts of all reinvested dividends, as of June 30, 2010; the aggregate gross unrealized appreciation was $5,164,492; and the aggregate gross unrealized depreciation was ($2,638,852); resulting in net unrealized appreciation of $2,525,640. As of December 31, 2009, PAGF had a total capital loss carry-forward in the amount of $14,785,158 available to offset future capital gains. There was a $1,155,673 capital loss carry-forward in 2008 that may be used to offset future capital gains through December 31, 2016. There was an additional capital loss carry-forward in the amount of $13,629,485 in 2009 that may be used to offset future capital gains through December 31, 2017. At December 31, 2009, PAGF had post-October capital losses of $62,151. As of June 30, 2010 PAGF had accumulated net realized losses of $12,734,700. For Federal tax purposes PAGF’s cost was $38,795,030, including the amounts of all reinvested dividends, as of June 30, 2010; the aggregate gross unrealized appreciation was $1,623,820; and the aggregate gross unrealized depreciation was ($3,764,035); resulting in net unrealized depreciation of ($2,140,215). |
22
The Funds file U.S. and Iowa tax returns. No tax returns are currently under examination. The statute of limitations on the Funds' tax returns remains open for the years ended December 31, 2006 through December 31, 2009. The Funds have no material uncertain tax positions and have not recorded a liability for unrecognized tax benefits at June 30, 2010. The Funds recognized no interest or penalties related to uncertain tax positions in 2009 or 2010 year-to-date. | |
4. | INVESTMENT TRANSACTIONS. PTRF's costs of purchases and proceeds of sales of investment securities (excluding money market mutual funds) were $21,457,178 and $35,098,228, respectively, for the first half of 2010. Purchases include reinvestments of dividends. PAGF's costs of purchases and proceeds of sales of investment securities (excluding money market mutual funds) were $11,250,003 and $13,722,659, respectively, for the first half of 2010. Purchases include reinvestments of dividends. |
5. | INVESTMENT MANAGER; EXPENSES. Pearl Management Company (the “Manager”) has supervisory responsibility for the general management and investment of the Funds’ assets, including the decisions to buy and sell securities. The Manager provides personnel and office space for the Funds and pays all expenses of marketing the Funds’ shares. The Manager's combined fees are at the annual rate of 0.81% of each Fund’s average net assets up to $30,000,000 (computed at the beginning of each month); 0.72% of each Fund’s net assets in excess of $30,000,000 and up to $100,000,000; and 0.48% of each Fund’s net assets in excess of $100,000,000. The Funds’ expenses are limited by contract with the Manager. Through December 31, 2009, each Fund’s total operating expenses in any year (including the Manager’s fees but excluding interest, taxes, expenses for purchase or sale of investments, and extraordinary expenses) could not exceed 0.98% of the Fund’s average net assets up to $100,000,000 (computed at the beginning of each month) and 0.78% of the Fund’s average net assets in excess of $100,000,000. The Manager paid or reimbursed all the Funds’ operating expenses beyond this limit. Effective January 1, 2010, the Funds’ Board of Trustees approved an increase to the expense limit of both Funds to 1.20% of each Fund’s average net assets. It is important to note that Pearl Management Company reduced its administrative services fee by 5 basis points, or 0.05%, to help keep Fund expenses down. The Manager can recoup the expenses listed below only if total annual expenses are below the expense limit through December 31, 2009. For the first half of 2010 expenses totaling $26,758 were reimbursed by the Manager beyond the expense limit for PTRF. Under the expense reimbursement agreement with PTRF, at June 30, 2010 the Manager may recoup a net total of $760,787 of reimbursed expenses from PTRF in the future, subject to the annual expense limit and a five year period in which the Manager has the right to recover such reimbursed expenses. The net total expenses that may be recouped by the Manager for the past five years are: $153,719 for 2005, $130,815 for 2006, $100,501 for 2007, $146,305 for 2008, and $202,689 for 2009. For the first half of 2010 expenses totaling $27,240 were reimbursed by the Manager beyond the expense limit for PAGF. Under the expense reimbursement agreement with PAGF, at June 30, 2010 the Manager may recoup a net total of $483,082 of reimbursed expenses from PAGF in the future, subject to the annual expense limit and a five year period in which the Manager has the right to recover such reimbursed expenses. The net total expenses that may be recouped by the Manager for the past five years are: $81,868 for 2005, $79,553 for 2006, $76,425 for 2007, $99,027 for 2008, and $118,969 for 2009. |
6. | OWNERSHIP OF FUND SHARES. The Manager and its shareholders, plus the Trustees, Officers, and employees of Pearl Mutual Funds and of the Manager, as a group owned 5.60% of PTRF's outstanding shares, with a net asset value of $4,097,684, as of June 30, 2010. The Manager and its shareholders, plus the Trustees, Officers, and employees of Pearl Mutual Funds and of the Manager, as a group owned 7.80% of PAGF's outstanding shares, with a net asset value of $2,967,991, as of June 30, 2010. |
7. | COMPENSATION. The Officers and two Trustees (Robert H. Solt and David M. Stanley) of the Funds are also Officers of the Manager; they are paid by the Manager and receive no compensation from the Funds. The Funds’ five Trustees who are not affiliated with the Manager are John W. Axel, Douglas B. |
23
Coder, Dr. David N. DeJong, David L. Evans, and Dr. James P. Stein. The Trustees received fees from the Funds of $60,500 for the first half of 2010 and $108,000 for 2009. | |
8. | DIVIDENDS. On January 29, 2010, PTRF paid an income dividend of $.0737 per share from 2009 net investment income to shareholders of record on December 31, 2009. On January 31, 2009, PTRF paid an income dividend of $.1326 per share from 2008 net investment income to shareholders of record on December 31, 2008. For shareholders reinvesting dividends, each reinvestment date was the same as the record date. For 2009, PAGF paid no income dividend as PAGF had a net investment loss. On January 31, 2009, PAGF paid an income dividend of $.0498 per share from 2008 net investment income to shareholders of record on December 31, 2008. For shareholders reinvesting dividends, each reinvestment date was the same as the record date. |
9. | FAIR VALUE MEASUREMENTS. The Funds adopted Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures, (formerly Financial Accounting Standards Board Statement of Financial Accounting Standards No. 157, Fair Value Measurements), effective January 1, 2008. In accordance with ASC 820, fair value is defined as the price that the Funds would receive upon selling an investment in a timely transaction to an independent buyer in the principal or most advantageous market of the investment. ASC 820 established a three-tier hierarchy to maximize the use of the observable market data and minimize the use of unobservable inputs and to establish classification of the fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including the technique or pricing model used to measure fair value and the risk inherent in the inputs to the valuation technique. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability, developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity's own assumptions about the assumptions market participants would use in pricing the asset or liability, developed based on the best information available in the circumstances. The three-tier hierarchy of inputs is summarized in the three broad Levels listed below: | ||
● | Level 1 - quoted prices in active markets for identical investments | ||
● | Level 2 - other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risks, etc.) | ||
● | Level 3 - significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments) | ||
The valuation techniques used by the Funds to measure fair value during the six months ended June 30, 2010 maximized the use of observable inputs and minimized the use of unobservable inputs. The following is a summary of the inputs used as of June 30, 2010 in valuing the Funds’ investments carried at fair value: |
VALUATION INPUTS | PTRF | PAGF | |||
Level 1 - Quoted Prices (A) | $60,555,256 | $36,654,815 | |||
Level 2 - Other Significant Observable Inputs | -- | -- | |||
Level 3 - Significant Unobservable Inputs | -- | -- | |||
TOTAL | $60,555,256 | $36,654,815 |
(A) | See Statements of Net Assets for further description of the Funds’ investments at June 30, 2010. |
24
![](https://capedge.com/proxy/N-CSRS/0000898432-10-001184/backcover.jpg)
Item 2. Code of Ethics.
Not applicable to this filing on Form N-CSR of a semi-annual report.
Item 3. Audit Committee Financial Expert.
Not applicable to this filing on Form N-CSR of a semi-annual report.
Item 4. Principal Accountant Fees and Services.
Not applicable to this filing on Form N-CSR of a semi-annual report.
Item 5. Audit Committee of Listed Registrants.
Not applicable to this filing on Form N-CSR of a semi-annual report.
Item 6. Investments.
(a) | The Schedule of Investments in securities of unaffiliated issuers is included as part of the semi-annual report to shareholders filed under Item 1 of this Form. |
(b) | Not applicable. |
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.
None.
Item 11. Controls and Procedures.
(a) Based on an evaluation of the disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, the "Disclosure Controls") as of a date within 90 days prior to the filing date (the "Filing Date") of this Form N-CSR (the "Report"), the Disclosure Controls are effectively designed to ensure that information required to be disclosed by the registrant in the Report is recorded, processed, summarized and reported by the Filing Date, including ensuring that information required to be disclosed in the Report is accumulated and communicated to the registrant's management, including the registrant's principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
(b) There were no changes in the registrant's internal controls 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 has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.
Item 12. Exhibits.
(a) | (1) | Not applicable to this filing on Form N-CSR of a semi-annual report. |
(2) | Certifications pursuant to Rule 30a-2 under the Investment Company Act of 1940 (17 CFR 270.30a-2), attached hereto as Exhibit (a)(2). | |
(b) | Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, attached hereto as Exhibit (b). |
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.
Pearl Mutual Funds
By: | /s/ Robert H. Solt_____________________________________________ | |
Robert H. Solt | ||
President, Chief Executive Officer, Chief Operating Officer and Treasurer | ||
Date: | September 3, 2010 |
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/ Robert H. Solt_____________________________________________ | |
Robert H. Solt | ||
President, Chief Executive Officer, Chief Operating Officer and Treasurer | ||
Date: | September 3, 2010 |