* The Halter Pope USX China Fund commenced operations on July 1, 2005.
FINANCIAL HIGHLIGHTS | |
Per Share Data For a Share Outstanding Throughout Each Period | ANNUAL REPORT |
| | | Class A * | | Class C ** | |
| | | | | | |
| | | For the Period September 23, 2005 to April 30, 2006 | | For the Period July 1, 2005 to April 30, 2006 | |
| | | | | | |
Net Asset Value, Beginning of Period | | $ | 10.10 | | $ | 10.00 | |
| | | | | | | | |
Investment Operations: | | | | | | | |
Net investment income (loss) (a) | | | 0.01 | | | (0.10 | ) |
| Net realized and unrealized gain on investments | | | 1.92 | | | 2.11 | |
| Total from investment operations | | | 1.93 | | | 2.01 | |
| | | | | | | | |
Net Asset Value, End of Period | | $ | 12.03 | | $ | 12.01 | |
| | | | | | | | |
Total Return (b) | | | 19.11% | | | 20.10% | |
| | | | | | | | |
Ratios/Supplemental Data | | | | | | | |
| Net assets, end of period (in 000's) | | $ | 11,409 | | $ | 202 | |
| | | | | | | | |
Ratio of expenses to average net assets: | | | | | | | |
| Before fees waived and expenses absorbed | | | 9.46% | 1 | | 7.94% | 1 |
| After fees waived and expenses absorbed | | | 1.99% | 1 | | 1.67% | 1 |
| | | | | | | | |
Ratio of net investment income (loss) to average net assets: | | | |
| Before fees waived and expenses absorbed | | | (7.38)% | 1 | | (7.40)% | 1 |
| After fees waived and expenses absorbed | | | 0.09% | 1 | | (1.12)% | 1 |
| | | | | | | | |
| Portfolio turnover rate | | | 14.52% | | | 14.52% | |
(a) | Per share amounts were calculated using the average shares method. |
(b) | Aggregate total return, not annualized. |
| * | The Halter Pope USX China Fund Class A commenced operations on September 23, 2005. |
| ** | The Halter Pope USX China Fund Class C commenced operations on July 1, 2005. |
The accompanying notes are an integral part of these financial statements.
Pope Family of Funds | ANNUAL REPORT |
NOTES TO THE FINANCIAL STATEMENTS
April 30, 2006
1. | ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES |
The Pope Family of Funds, (the “Trust”) was organized on February 25, 2005 as a Delaware statutory trust. The sole series of shares of the Trust is the Halter Pope USX China Fund (the “Fund”). The Fund is a non-diversified Fund. The Trust is registered as an open-end management investment company under the Investment Company Act of 1940 (the “1940 Act”). The Fund was registered to offer two classes of shares, Class A and Class C shares. Each class differs as to sales and redemption charges and ongoing fees. Income and realized/unrealized gains or losses are allocated to each class based on relative share balances.
The Funds investment objective is long term growth of capital.
The Class C shares commenced operations on July 1, 2005. The Class A shares commenced operations on September 23, 2005.
The following is a summary of significant accounting policies consistently followed by the Funds. The policies are in conformity with accounting principles generally accepted in the United States of America.
a) Investment Valuation—Common stocks and other equity securities listed on a securities exchange or quoted on a national market system are valued at 4:00 p.m., New York time, on the day of valuation. Price information on listed stocks is taken from the exchange where the security is primarily traded. Equity securities that are traded on the NASDAQ National Market System, for which quotes are readily available, are valued at the official closing price. Securities that are listed on an exchange but which are not traded on the valuation date are valued at the most recent bid quotation. Short-term instruments (those with remaining maturities of 60 days or less) are valued at amortized cost, which approximates fair market value. Securities and assets for which representative market quotations are not readily available or which cannot be accurately valued using the Fund's normal pricing procedures are valued at fair value as determined in good faith under policies approved by the Trustees. Fair value pricing may be used, for example, in situations where (i) a portfolio security, such as a small-cap stock, is so thinly traded that there have been no transactions for that stock over an extended period of time or the validity of a market quotation received is questionable; (ii) the exchange on which the portfolio security is principally traded closes early; (iii) trading of the particular portfolio security is halted during the day and does not resume prior to the Fund's net asset value calculation; or (iv) the security was purchased in a private placement and is an illiquid investment (e.g., “restricted securities” that are not freely tradable because they are not registered under federal securities laws). Consistent with the foregoing, the Fund has adopted guidelines and instructions for the valuation of restricted securities held by the Fund focusing on such important factors, among others, as valuation, liquidity and availability of relevant information. Because a fair value determination is based on an assessment of the value of the security pursuant to the policies approved by the Fund's Board of Trustees rather than a market price, the fair value price may differ substantially from the price at which the security may ultimately be traded or sold. At April 30, 2006, two (2) securities were valued as determined by the Board of Trustees.
b) Restricted Securities—The investments in 53,124 shares of Fushi International, Inc., 26,562 warrants of Fushi International, Inc. and 36,900 shares of China-Biotics, Inc. were initiated by Pope Asset Management, LLC (the “Adviser”) as private placement offerings. Other clients of the adviser also participated in the private placement. The offerings are designed so that a company doing business in China, merges with a United States publicly traded company with little or no operations, changes its name, commences operations under the former name and files a registration statement with the Securities and Exchange Commission. The securities that are part of the private placement are restricted from sale until such time as their registrations become effective and the restrictions are lifted.
These securities have been valued based upon fair value pricing procedures approved by the Board of Trustees after considering certain pertinent factors including but not limited to the restriction from sale, the results of operations, economic news and expectations and currency changes. The securities have been priced at a discount from market quotations available for these securities. It is possible that the estimated value may differ significantly from the amount that might ultimately be realized in the near term, and the difference could be material. The total fair value of these securities at April 30, 2006 is $270,215, which represents 2.33% of total net assets.
c) Federal Income Taxes—The Trust’s policy is to comply with the requirements of the Internal Revenue Code that are applicable to regulated investment companies and to distribute all its taxable income to its shareholders. Therefore, no federal income tax provision is required.
Pope Family of Funds | ANNUAL REPORT |
NOTES TO THE FINANCIAL STATEMENTS
April 30, 2006
1. | ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued) |
d) Distributions to Shareholders—Dividends from net investment income and distributions of net realized capital gains, if any, will be declared and paid at least annually. Income and capital gain distributions, which are determined in accordance with income tax regulations, are recorded on the ex-dividend date. Accounting principles generally accepted in the United States of America require that permanent financial reporting differences relating to shareholder distributions be reclassified to paid in capital or net realized gains.
e) Use of Estimates—The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
f) Other—Investment and shareholder transactions are recorded on trade date. The Funds determine the gain or loss realized from the investment transactions by comparing the original cost of the security lot sold with the net sales proceeds. Dividend income is recognized on the ex-dividend date or as soon as information is available to the Fund and interest income is recognized on an accrual basis. Withholding taxes on foreign dividends have been provided for in accordance with the Fund’s understanding of the applicable country’s tax rules and rates.
2. | CAPITAL SHARE TRANSACTIONS |
Transactions in shares of capital stock for the Halter Pope USX China Fund Class A shares for the period September 23, 2005 through April 30, 2006 were as follows:
| | | Class A | |
| | | Shares | | Amount | |
| Sold | | | 995,063 | | $ | 10,931,867 | |
| Redeemed | | | (46,679 | ) | | (550,823 | ) |
| Net Increase | | | 948,384 | | $ | 10,381,044 | |
Transactions in shares of capital stock for the Halter Pope USX China Fund Class C shares for the period July 1, 2005 through April 30, 2006 were as follows:
| | | Class C | |
| | | Shares | | Amount | |
| Sold | | | 647,948 | | $ | 6,807,023 | |
| Redeemed | | | (641,168 | ) | | (6,794,377 | ) |
| Net Increase | | | 6,780 | | $ | 12,646 | |
3. | INVESTMENT TRANSACTIONS |
For the period ended April 30, 2006, aggregate purchases and sales of investment securities (excluding short-term investments) for the Halter Pope USX China Fund were as follows:
Purchases | Sales |
| $10,861,361 | $563,032 |
There were no government securities purchased or sold during the period.
Pope Family of Funds | ANNUAL REPORT |
NOTES TO THE FINANCIAL STATEMENTS
April 30, 2006
4. | ADVISORY FEES AND OTHER RELATED PARTY TRANSACTIONS |
Effective April 28, 2005, the Fund has entered into an Advisory Agreement with Pope Asset Management, LLC (the “Adviser”) to provide investment management services to the Fund in accordance with its investment objectives, policies and restrictions. Pursuant to the Advisory Agreement, the Adviser is entitled to receive a fee, calculated daily and payable monthly at the annual rate of 1.25% as applied to the Fund’s average daily net assets. For the period July 1, 2005 to April 30, 2006, the Halter Pope USX China Fund incurred $39,568 of advisory fees. For the period July 1, 2005 to April 30, 2006, the Adviser waived advisory fees of $34,293.
The Adviser and the Fund have entered into an Expense Limitation Agreement under which the Adviser has agreed to waive or reduce its fees and to assume other expenses of the Fund, if necessary, in an amount that limits annual operating expenses (exclusive of interest, taxes, brokerage fees and commissions, and extraordinary expenses and payments, if any, under the Rule 12b-1 Plan). It is expected that the contractual agreement will continue from year-to-year provided such continuance is approved by the Board of Trustees of the Fund. Pursuant to the Agreement, the Adviser has agreed to reimburse the Fund to the extent that total annualized expenses exceed 2.25% of the Fund's average daily net assets.
Upon commencement of operations, the Adviser voluntarily reduced the expense limitation to 2.00% of the Fund's average daily net assets. On August 9, 2005 and through January 31, 2006, the expense limitation was voluntarily revised again to limit the annualized expenses even further to 1.25% of the Fund's average daily net assets. Beginning February 1, 2006, the expense limitation was revised back to 2.00% of the Fund's average daily net assets. For the period July 1, 2005 to April 30, 2006, the Adviser reimbursed $181,220 of Fund expenses.
One trustee of the Fund is also an officer of the Adviser.
The Fund has entered into an Investment Company Services Agreement (“ICSA”) with Matrix Capital Group, Inc. (“Matrix”). Pursuant to the ICSA, Matrix will provide day-to-day operational services to the Funds including, but not limited to, accounting, administrative, transfer agent, dividend disbursement, registrar and record keeping services. For its services, Matrix receives a minimum fee of $6,250 per month. In addition, the following asset based fees will apply at the following breakpoints: 0.10% on assets between $20 million and $50 million; 0.075% on the next $50 million; 0.05% on the next $100 million; 0.03% in excess of $200 million of daily net assets. For the period July 1, 2005 to April 30, 2006, Matrix earned $62,038, with $5,788 remaining payable at April 30, 2006.
Pursuant to the ICSA, Matrix will provide chief compliance officer services to the Fund. For these services Matrix will receive a fee of $18,000 per year. For the period July 1, 2005 to April 30, 2006, Matrix earned $14,889, with $1,389 remaining payable at April 30, 2006.
Certain officers of the Fund are also employees of Matrix
The Fund and Adviser have entered into a Distribution Agreement with Matrix Capital Group, Inc. Pursuant to the Distribution Agreement, Matrix will provide distribution services to the Funds. Matrix serves as underwriter/distributor of the Funds. Pursuant to the Distribution Agreement, Matrix receives $7,200 per year from the Fund. For the period July 1, 2005 to April 30, 2006, Matrix received $5,256 of distribution fees, with $456 remaining payable at April 30, 2006.
A separate plan of distribution has been adopted pursuant to Rule 12b-1 under the Investment Company Act of 1940 for each class of shares. With respect to Class A shares, the plan provides that the Fund may pay a servicing or Rule 12b-1 fee of up to 0.25% annually of the Fund’s average net assets, and up to 1.00% annually of the Fund’s average net assets attributable to Class C shares to persons or institutions for performing certain servicing functions for the Fund’s shareholders. Under the Plan the Fund may pay for any activity primarily intended to result in the sale of shares of the Fund and the servicing of shareholder accounts, provided that the Trustees have approved the category of expenses for which payment is being made.
The distribution plans for the Class A and Class C shares in the Halter Pope USX China Fund took effect September 23, 2005 and July 1, 2005, respectively. There were no Rule 12b-1 accruals for Class A shares during the period September 23, 2005 through April 30, 2006. For the period July 1, 2005 to April 30, 2006, the Class C shares accrued $1,585 in 12b-1 expenses.
Pope Family of Funds | ANNUAL REPORT |
NOTES TO THE FINANCIAL STATEMENTS
April 30, 2006
There were no distributions during the period July 1, 2005 to April 30, 2006 for the Halter Pope USX China Fund.
As of April 30, 2006, the components of distributable earnings on a tax basis were as follows:
| | | Halter Pope USX China Fund | |
| Cost of investments for tax purposes | | $ | 10,701,727 | |
| Unrealized Appreciation / (Depreciation): | | | | |
| Gross Appreciation | | | 1,328,466 | |
| Gross Depreciation | | | (329,286 | ) |
| Net Unrealized Appreciation / (Depreciation) | | $ | 999,180 | |
| Undistributed Ordinary Income: | | | 117,902 | |
| Distributable Earnings, Net | | $ | 1,117,082 | |
6. | RECLASS OF CAPITAL ACCOUNTS |
In accordance with accounting pronouncements, the Fund has recorded reclassifications in the capital accounts. These reclassifications have no impact on the net asset value of the Fund and are designed generally to present undistributed net investment income and accumulated net realized gain (loss) on a tax basis which is considered to be more informative to the shareholder. As of April 30, 2006, the Fund recorded the following reclassifications to increase (decrease) the capital accounts listed below:
| | Undistributed Net Investment Loss | Accumulated Net Realized Gain |
| Halter Pope USX China Fund | $ 19,968 | $ (19,968) |
The Halter Pope USX China Fund will primarily invest 80% of its assets in equity securities issued by companies listed on the Halter USX China Index which is mainly comprised of U.S. listed companies doing business in China. Investing in the companies from one geographic region may pose additional risks inherent to a region's economical and political situation.
The beneficial ownership, either directly or indirectly, of more than 25% of the voting securities of a fund creates a presumption of control of the fund, under Section 2(a)(9) of the Investment Company Act of 1940. As of April 30, 2006, Patrick and Amy Gotcher held 30.33% of Class A Halter Pope USX China Fund in a joint tenants account. As of April 30, 2006, ADP Clearing & Outsourcing Services, Inc. held 100% of Class C Halter Pope USX China Fund in an omnibus account for the sole benefit of its customers.
Additional Information (Unaudited)
The Fund files its complete schedules of portfolio holdings with the Securities and Exchange Commission (the “Commission”) for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available on the Commissions website at http://www.sec.gov. The Fund’s Forms N-Q may be reviewed and copied at the Commission’s Public Reference Room in Washington, DC. Information on the operation of the Commission’s Public Reference Room may be obtained by calling 1-800-SEC-0330.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, by calling 877-244-6235; and on the Commissions website at http://www.sec.gov.
Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, 2005 is available without charge, upon request, by calling 877-244-6235; and on the Commission’s website at http://www.sec.gov.
