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hours per response: 18.9
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-21868
--------------------------------------------
Surgeons Diversified Investment Fund
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
633 N. Clair Street Chicago, Illinois 60611
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(Address of principal executive offices) (Zip code)
Savitri P. Pai
Surgeons Asset Management, LLC 633 N. Clair Street Chicago, Illinois 60611
- --------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: (312) 202-5056
----------------------------
Date of fiscal year end: August 31, 2009
----------------------------
Date of reporting period: February 28, 2009
----------------------------
Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. Section 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
- --------------------------------------------------------------------------------
SURGEONS
DIVERSIFIED
INVESTMENT
FUND
[LOGO] SERVING THE MEMBERSHIP OF THE
AMERICAN COLLEGE OF SURGEONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SEMI-ANNUAL REPORT
FEBRUARY 28, 2009
(UNAUDITED)
| DIVERSIFIED
SURGEONS | INVESTMENT
| FUND
- --------------------------------------------------------------------------------
SURGEONS DIVERSIFIED INVESTMENT FUND
PORTFOLIO INFORMATION
FEBRUARY 28, 2009 (UNAUDITED)
================================================================================
ASSET ALLOCATION (% OF TOTAL ASSETS)
- --------------------------------------------------------------------------------
[PIE CHART OMITTED]
Short-Term Investments - 99.5%
Other Assets - 0.5%
2
SURGEONS DIVERSIFIED INVESTMENT FUND
SCHEDULE OF INVESTMENTS
FEBRUARY 28, 2009 (UNAUDITED)
================================================================================
SHARES SHORT-TERM INVESTMENTS -- 104.3% VALUE
- --------------------------------------------------------------------------------
10,628,339 Northern Institutional Government Select Portfolio*
(Cost $10,628,339) .......................... $ 10,628,339
------------
TOTAL INVESTMENTS AT VALUE -- 104.3%
(Cost $10,628,339) .......................... $ 10,628,339
LIABILITIES IN EXCESS OF OTHER ASSETS -- (4.3%) (433,345)
------------
NET ASSETS -- 100.0% .......................... $ 10,194,994
============
* Affiliated investment (Note 4).
See accompanying notes to financial statements.
3
SURGEONS DIVERSIFIED INVESTMENT FUND
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 2009 (UNAUDITED)
===============================================================================================
ASSETS
Investments in affiliates at market value (Cost $10,628,339) (Note 2 and 4) $ 10,628,339
Dividends receivable ...................................................... 441
Receivable from Manager (Note 4) .......................................... 56,992
--------------
TOTAL ASSETS ........................................................... 10,685,772
--------------
LIABILITIES
Payable for capital shares redeemed ....................................... 462,833
Payable to Administrator (Note 4) ......................................... 6,130
Payable to Custodian (Note 4) ............................................. 1,000
Accrued Trustees' fees .................................................... 7,750
Other accrued expenses .................................................... 13,065
--------------
TOTAL LIABILITIES ...................................................... 490,778
--------------
NET ASSETS ................................................................... $ 10,194,994
==============
Net assets consist of:
Paid-in capital .............................................................. $ 20,767,202
Distributions in excess of net investment income ............................. (115)
Accumulated net realized losses from security transactions ................... (10,572,093)
--------------
Net assets ................................................................... $ 10,194,994
==============
Shares of beneficial interest outstanding (unlimited number of
shares authorized, no par value) .......................................... 1,553,839
==============
Net asset value, offering price and redemption price per share (Note 2) ...... $ 6.56
==============
See accompanying notes to financial statements.
4
SURGEONS DIVERSIFIED INVESTMENT FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED FEBRUARY 28, 2009 (UNAUDITED)
===================================================================================
INVESTMENT INCOME
Dividends ....................................................... $ 345,034
Dividends from affiliates ....................................... 660
------------
TOTAL INVESTMENT INCOME ...................................... 345,694
------------
EXPENSES
Investment management fees (Note 4) ............................. 92,297
Professional fees ............................................... 42,834
Registration fees ............................................... 25,328
Compliance service fees (Note 4) ................................ 18,000
Fund accounting fees (Note 4) ................................... 15,930
Administration fees (Note 4) .................................... 13,995
Trustees' fees and meeting expenses ............................. 12,383
Insurance expense ............................................... 12,290
Distribution expense (Note 4) ................................... 10,251
Printing, postage and supplies .................................. 9,869
Transfer agent and shareholder services fees (Note 4) ........... 9,000
Custodian fees (Note 4) ......................................... 6,420
Other expenses .................................................. 7,879
------------
TOTAL EXPENSES ............................................... 276,476
Less fees reduced and expenses reimbursed by the Manager (Note 4) (202,639)
------------
NET EXPENSES ................................................. 73,837
------------
NET INVESTMENT INCOME .............................................. 271,857
------------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized losses from security transactions .................. (10,556,663)
Net change in unrealized appreciation/depreciation on investments 2,344,883
------------
NET REALIZED AND UNREALIZED LOSSES ON INVESTMENTS .................. (8,211,780)
------------
NET DECREASE IN NET ASSETS FROM OPERATIONS ......................... $ (7,939,923)
============
See accompanying notes to financial statements.
5
SURGEONS DIVERSIFIED INVESTMENT FUND
STATEMENTS OF CHANGES IN NET ASSETS
=========================================================================================
SIX MONTHS
ENDED YEAR
FEBRUARY 28, ENDED
2009 AUGUST 31,
(UNAUDITED) 2008
- -----------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income ................................. $ 271,857 $ 931,686
Net realized gains (losses) from security transactions (10,556,663) 136,183
Net realized gains from in-kind redemptions (Note 2) .. -- 276,129
Net change in unrealized appreciation/
depreciation on investments ........................ 2,344,883 (3,378,913)
------------ ------------
Net decrease in net assets from operations ............ (7,939,923) (2,034,915)
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income ............................ (584,211) (762,447)
From net realized gains from security transactions .... (56,225) (62,370)
------------ ------------
Decrease in net assets from distributions to shareholders (640,436) (824,817)
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ............................. 1,642,212 6,860,286
Net asset value of shares issued in
reinvestment of distributions to shareholders ...... 638,000 823,038
Payments for shares redeemed .......................... (7,289,896) (25,821,479)
------------ ------------
Net decrease in net assets from capital share transactions (5,009,684) (18,138,155)
------------ ------------
TOTAL DECREASE IN NET ASSETS ............................. (13,590,043) (20,997,887)
NET ASSETS
Beginning of period ................................... 23,785,037 44,782,924
------------ ------------
End of period ......................................... $ 10,194,994 $ 23,785,037
============ ============
UNDISTRIBUTED (DISTRIBUTIONS IN EXCESS OF)
NET INVESTMENT INCOME ................................. $ (115) $ 311,374
============ ============
CAPITAL SHARE ACTIVITY
Sold .................................................. 213,122 631,429
Reinvested ............................................ 83,947 74,686
Redeemed .............................................. (1,095,758) (2,414,999)
------------ ------------
Net decrease in shares outstanding .................... (798,689) (1,708,884)
Shares outstanding at beginning of period ............. 2,352,528 4,061,412
------------ ------------
Shares outstanding at end of period ................... 1,553,839 2,352,528
============ ============
See accompanying notes to financial statements.
6
SURGEONS DIVERSIFIED INVESTMENT FUND
FINANCIAL HIGHLIGHTS
======================================================================================
SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- --------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR PERIOD
FEBRUARY 28, ENDED ENDED
2009 AUGUST 31, AUGUST 31,
(UNAUDITED) 2008 2007 (a)
- --------------------------------------------------------------------------------------
Net asset value at beginning of period .. $ 10.11 $ 11.03 $ 10.00
---------- ---------- ----------
Income (loss) from investment operations:
Net investment income ................ 0.12 0.28 0.13
Net realized and unrealized
gains (losses) on investments ..... (3.40) (1.01) 1.00
---------- ---------- ----------
Total from investment operations ........ (3.28) (0.73) 1.13
---------- ---------- ----------
Less distributions:
From net investment income ........... (0.25) (0.18) (0.10)
From net realized gains
from security transactions ........ (0.02) (0.01) --
---------- ---------- ----------
Total distributions ..................... (0.27) (0.19) (0.10)
---------- ---------- ----------
Net asset value at end of period ........ $ 6.56 $ 10.11 $ 11.03
========== ========== ==========
Total return (b) ........................ (32.79%)(c) (6.72%) 11.32%(c)
========== ========== ==========
Net assets at end of period (000's) ..... $ 10,195 $ 23,785 $ 44,783
========== ========== ==========
Ratio of net expenses
to average net assets(e) ............. 0.80%(d) 1.08% 1.35%(d)
Ratio of net investment income
to average net assets ................ 2.95%(d) 2.21% 1.37%(d)
Portfolio turnover rate ................. 18%(c) 25% 4%(c)
(a) Represents the period from the commencement of operations on September 22,
2006 through August 31, 2007.
(b) Total return is a measure of the change in value of an investment in the
Fund over the periods covered, which assumes any dividends or capital
gains distributions are reinvested in shares of the Fund. The returns
shown do not reflect the deduction of taxes a shareholder would pay on
Fund distributions or the redemption of Fund shares.
(c) Not annualized.
(d) Annualized.
(e) Absent investment management fee reductions and expense reimbursements by
the Manager, the ratio of expenses to average net assets would have been
3.00%(d), 1.86% and 1.96%(d) for the periods ended February 28,
2009, August 31, 2008 and 2007, respectively.
See accompanying notes to financial statements.
7
SURGEONS DIVERSIFIED INVESTMENT FUND
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 2009 (UNAUDITED)
================================================================================
1. ORGANIZATION
Surgeons Diversified Investment Fund (the "Fund") is an open-end diversified
management investment company established as an Ohio business trust under a
Declaration of Trust dated March 2, 2006. On July 27, 2006, 10,000 shares of the
Fund were issued for cash, at $10.00 per share, to Surgeons Asset Management,
LLC (the "Manager"), the investment manager to the Fund. The public offering of
shares of the Fund commenced on September 22, 2006. The Fund had no operations
prior to the public offering of shares except for the initial issuance of shares
to the Manager.
The investment objective of the Fund is to provide long-term capital
appreciation and income.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the Fund's significant accounting policies:
SECURITIES VALUATION - The Fund's portfolio securities are valued as of the
close of the regular session of trading on the New York Stock Exchange ("NYSE")
(normally 4:00 p.m., Eastern time). Securities listed on the NYSE or other
exchanges are valued on the basis of their last sale price on the exchanges on
which they are primarily traded. However, if the last sale price on the NYSE is
different than the last sale price on any other exchange, the NYSE price will be
used. If there are no sales on that day, the securities are valued at the
closing bid price on the NYSE or other primary exchange for that day. Securities
which are quoted by NASDAQ are valued at the NASDAQ Official Closing Price. If
there are no sales on that day, the securities are valued at the last bid price
as reported by NASDAQ. Securities traded in the over-the-counter market are
valued at the last sales price, if available, otherwise at the mean of the
closing bid and ask prices. In the event that market quotations are not readily
available, securities and other assets are valued at fair value as determined in
accordance with procedures adopted by the Board of Trustees.
The Financial Accounting Standards Board's ("FASB") Statement on Financial
Accounting Standards No. 157 "Fair Value Measurements" establishes a single
authoritative definition of fair value, sets out a framework for measuring fair
value and requires additional disclosures about fair value measurements.
Various inputs are used in determining the value of the Fund's investments.
These inputs are summarized in the three broad levels listed below:
o Level 1 - quoted prices in active markets for identical securities
o Level 2 - other significant observable inputs
o Level 3 - significant unobservable inputs
8
SURGEONS DIVERSIFIED INVESTMENT FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
The inputs or methodology used for valuing securities are not necessarily an
indication of the risk associated with investing in those securities.
As of February 28, 2009, all of the inputs used to value the Fund's investments
were Level 1.
SHARE VALUATION - The net asset value per share of the Fund is calculated daily
by dividing the total value of the Fund's assets, less liabilities, by the
number of shares outstanding. The offering price and redemption price per share
of the Fund is equal to the net asset value per share.
INVESTMENT INCOME - Dividend income is recorded on the ex-dividend date.
Interest income, including amortization of discount or premium, is accrued as
earned.
SECURITY TRANSACTIONS - Security transactions are accounted for on the trade
date. Gains and losses on securities sold are determined on a specific
identification basis.
DISTRIBUTIONS TO SHAREHOLDERS - Distributions to shareholders arising from net
investment income and net realized capital gains, if any, are distributed at
least once each year. The amount of distributions from net investment income and
net realized gains are determined in accordance with federal income tax
regulations, which may differ from accounting principles generally accepted in
the United States of America. Dividends and distributions to shareholders are
recorded on ex-dividend date.
The tax character of distributions paid during the periods ended February 28,
2009 and August 31, 2008 was as follows:
Long-Term
Ordinary Capital Total
Period Ended Income Gains Distributions
- --------------------------------------------------------------------------------
February 28, 2009 ... $ 584,211 $ 56,225 $ 640,436
August 31, 2008 ..... $ 774,751 $ 50,066 $ 824,817
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 the disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
income and expenses during the reporting period. Actual results could differ
from those estimates.
FEDERAL INCOME TAX - It is the Fund's policy to comply with the special
provisions of Subchapter M of the Internal Revenue Code applicable to regulated
investment companies. As provided therein, in any fiscal year in which the Fund
so qualifies and distributes at least 90% of its taxable net income, the Fund
(but not the shareholders) will be relieved of federal income tax on the income
distributed. Accordingly, no provision for income taxes is required.
9
SURGEONS DIVERSIFIED INVESTMENT FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
In order to avoid imposition of the excise tax applicable to regulated
investment companies, it is also the Fund's intention to declare as dividends in
each calendar year at least 98% of its net investment income (earned during the
calendar year) and 98% of its net realized capital gains (earned during the
twelve months ended October 31), plus undistributed amounts from prior years.
The following information is computed on a tax basis for each item as of
February 28, 2009:
- --------------------------------------------------------------------------------
Tax cost of portfolio investments ............................ $ 10,628,339
============
Gross unrealized appreciation ................................ $ --
Gross unrealized depreciation ................................ --
------------
Net unrealized appreciation .................................. --
Distributions in excess of net investment income ............. (115)
Other losses ................................................. (10,572,093)
------------
Accumulated deficit .......................................... $(10,572,208)
============
- --------------------------------------------------------------------------------
During the year ended August 31, 2008, the Fund realized $276,129 of net capital
gains resulting from in-kind redemptions (redemptions in which shareholders who
redeemed Fund shares received securities held by the Fund rather than cash). The
Fund recognizes a gain on in-kind redemptions to the extent that the value of
the distributed securities on the date of redemption exceeds the cost of those
securities. Such gains are not taxable to the Fund and are not required to be
distributed to shareholders.
During the six months ended February 28, 2009, the Fund reclassified a
non-deductible expense of $865 against paid-in capital. This reclassification is
reflected on the Statement of Assets and Liabilities. Such reclassification, the
result of permanent differences between the financial statement and income tax
reporting requirements, has no effect on the Fund's net assets or net asset
value per share.
FASB's Interpretation No. 48 ("FIN 48") "Accounting for Uncertainty in Income
Taxes" provides guidance for how uncertain tax positions should be recognized,
measured, presented and disclosed in the financial statements. FIN 48 requires
the evaluation of tax positions taken in the course of preparing the Fund's tax
returns to determine whether the tax positions are "more-likely-than-not" of
being sustained by the applicable tax authority. Tax positions not deemed to
meet the "more-likely-than-not" threshold would be recorded as a tax benefit or
expense in the current year. As required by FIN 48, management has analyzed the
Fund's tax positions taken on Federal income tax returns for all open tax years
(tax years ended August 31, 2007 through August 31, 2008) and has concluded that
no provision for income tax is required in these financial statements.
3. INVESTMENT TRANSACTIONS
During the six months ended February 28, 2009, cost of purchases and proceeds
from sales of investment securities, other than short-term investments and U.S.
government securities, amounted to $3,022,853 and $18,557,382, respectively.
10
SURGEONS DIVERSIFIED INVESTMENT FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
4. TRANSACTIONS WITH AFFILIATES
INVESTMENT MANAGEMENT CONTRACT
Under the terms of an Investment Management Contract between the Fund and the
Manager, the Manager serves as the investment manager to the Fund. For its
services, the Fund pays the Manager an investment management fee computed at the
annual rate of 1.00% of the Fund's average daily net assets.
Pursuant to an Expense Limitation Agreement, the Manager has contractually
agreed for the life of the Fund to reduce its management fees and/or reimburse
the Fund to the extent necessary to limit the "ratio of net expenses to average
net assets," as disclosed in the Financial Highlights, to an amount that, when
added to the underlying costs of investing in the Exchange Traded Funds ("ETFs")
and Exchange Traded Notes ("ETNs") held by the Fund (e.g., management fees and
other operating expenses of the ETFs and ETNs), and based upon such ETF and ETN
expenses incurred during the Fund's most recently completed fiscal year, it will
result in a total annual operating expense ratio (Fund expenses plus ETF and ETN
expenses) not to exceed 1.08%.
Any such fee reductions by the Manager, or payments by the Manager of expenses
which are the Fund's obligation, are subject to repayment by the Fund, provided
that the repayment does not cause the Fund's total annual operating expense
ratio (Fund expenses plus ETF expenses) to exceed the 1.08% limit, and provided
further that the fees and expenses which are the subject of the repayment were
incurred within three years of the repayment. During the six months ended
February 28, 2009, the Manager reduced its entire advisory fee of $92,297 and
reimbursed $110,342 of other Fund expenses.
SUBADVISORY AGREEMENT
Northern Trust Investments, N.A. (the "ETF Subadviser"), has been retained by
the Manager to manage the Fund's investments in ETFs and ETNs pursuant to the
terms of a Subadvisory Agreement between the ETF Subadviser, the Manager and the
Fund. The Manager (not the Fund) pays the ETF Subadviser a fee based on the
Fund's average daily net assets, subject to a minimum annual fee. The ETF
Subadviser is a wholly-owned subsidiary of The Northern Trust Company, which is
the principal subsidiary of Northern Trust Corporation and serves as the
custodian to the Fund.
11
SURGEONS DIVERSIFIED INVESTMENT FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
CUSTODY AGREEMENT
The Northern Trust Company (the "Custodian") serves as custodian to the Trust
pursuant to a Custody Agreement. The Custodian's responsibilities include
safeguarding and controlling the Fund's cash and securities, handling the
receipt and delivery of securities, and collecting interest and dividends on the
Fund's investments.
ADMINISTRATION AGREEMENT
Under the terms of an Administration Agreement with the Fund, Ultimus Fund
Solutions, LLC ("Ultimus") supplies executive, administrative and regulatory
services to the Fund, supervises the preparation of tax returns, and coordinates
the preparation of reports to shareholders and reports to and filings with the
Securities and Exchange Commission and state securities authorities. For these
services, the Fund pays to Ultimus, on a monthly basis, a fee equal to 0.15% per
annum of the Fund's average daily net assets up to $50 million, 0.125% of such
assets from $50 million to $100 million, 0.10% of such assets from $100 million
to $250 million, 0.075% of such assets from $250 million to $500 million and
0.05% of such assets in excess of $500 million, provided, however, that the
minimum fee is $2,000 per month.
FUND ACCOUNTING AGREEMENT
Under the terms of a Fund Accounting Agreement with the Fund, Ultimus calculates
the daily net asset value per share and maintains the financial books and
records of the Fund. For these services, Ultimus earns a base fee of $2,500 per
month, plus an asset-based fee at the annual rate of 0.01% of the first $500
million of the Fund's average daily net assets and 0.005% of such assets in
excess of $500 million. In addition, the Fund pays all costs of external pricing
services.
TRANSFER AGENT AND SHAREHOLDER SERVICES AGREEMENT
Under the terms of a Transfer Agent and Shareholder Services Agreement with the
Fund, Ultimus maintains the records of each shareholder's account, answers
shareholders' inquiries concerning their accounts, processes purchase and
redemption of the Fund's shares, acts as dividend and distribution disbursing
agent and performs other shareholder service functions. For these services,
Ultimus earns a fee payable monthly at an annual rate of $20 per account,
provided, however, that the minimum fee is $1,500 per month. In addition, the
Fund pays out-of-pocket expenses, including but not limited to, postage and
supplies.
DISTRIBUTION AGREEMENT
Pursuant to the terms of a Distribution Agreement with the Fund, Ultimus Fund
Distributors, LLC (the "Distributor") serves as the Fund's principal
underwriter. The Distributor earns annual compensation of $6,000 for such
services from the Fund.
Certain Trustees and officers of the Fund are directors and officers of the
Manager, or of Ultimus, or of the Distributor.
12
SURGEONS DIVERSIFIED INVESTMENT FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
DISTRIBUTION PLAN
The Fund has adopted a plan of distribution pursuant to and in accordance with
Rule 12b-1 of the Investment Company Act of 1940 (the "Plan") under which the
Fund may reimburse expenses related to the distribution and promotion of Fund
shares. The annual limitation for payment of such expenses pursuant to the Plan
is 0.25% of the Fund's average daily net assets. During the six months ended
February 28, 2009, the Fund incurred $10,251 of distribution related expenses.
COMPLIANCE CONSULTING AGREEMENT
Under the terms of a Compliance Consulting Agreement, Drake Compliance, LLC
("Drake") provides ongoing regulatory compliance consulting, monitoring and
reporting services for the Fund. In addition, a principal of Drake serves as the
Trust's Chief Compliance Officer as required under Rule 38a-1 of the Investment
Company Act of 1940. For these services, Drake earns $3,000 per month from the
Fund. In addition, the Fund reimburses certain out-of-pocket expenses, if any,
incurred by Drake including, but not limited to, postage and supplies and travel
expenses.
5. MANDATORY REDEMPTION OF SHARES AND TERMINATION OF THE FUND
At a meeting held on February 11, 2009, the Board of Trustees of the Fund
approved the mandatory redemption of all shares of the Fund and subsequent
termination of the Fund. Following the decision of the Board of Trustees, the
Manager had the Fund liquidate its investments in ETFs and ETNs and move into
cash and cash equivalents. By taking this action, the Fund is no longer seeking
to achieve its investment objective. It is anticipated that all outstanding
shares of the Fund will be redeemed and that the Fund will discontinue
operations on or about April 20, 2009. The Manager will continue to reduce fees
and reimburse expenses of the Fund, as necessary, in order to maintain fees and
expenses at the agreed upon level pursuant to the Expense Limitation Agreement.
6. CONTINGENCIES AND COMMITMENTS
The Fund indemnifies its officers and Trustees for certain liabilities that
might arise from their performance of their duties to the Fund. Additionally, in
the normal course of business the Fund enters into contracts that contain a
variety of representations and warranties and that provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
that have not yet occurred. However, based on experience, the Fund expects the
risk of loss to be remote.
13
SURGEONS DIVERSIFIED INVESTMENT FUND
ABOUT YOUR FUND'S EXPENSES (UNAUDITED)
================================================================================
We believe it is important for you to understand the impact of costs on your
investment. As a shareholder of the Fund, you incur ongoing costs, including
management fees, distribution fees (12b-1) and other Fund expenses. The
following examples are intended to help you understand your ongoing costs (in
dollars) of investing in the Fund and to compare these costs with the ongoing
costs of investing in other mutual funds.
A mutual fund's ongoing costs are expressed as a percentage of its average net
assets. This figure is known as the expense ratio. The expenses in the table
below are based on an investment of $1,000 made at the beginning of the period
shown and held for the entire period (September 1, 2008 through February 28,
2009).
The table below illustrates the Fund's costs in two ways:
Actual fund return - This section helps you to estimate the actual expenses that
you paid over the period. The "Ending Account Value" shown is derived from the
Fund's actual return, and the third column shows the dollar amount of operating
expenses that would have been paid by an investor who started with $1,000 in the
Fund. You may use the information here, together with the amount you invested,
to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
given for the Fund under the heading "Expenses Paid During Period."
Hypothetical 5% return - This section is intended to help you compare the Fund's
costs with those of other mutual funds. It assumes that the Fund had an annual
return of 5% before expenses during the period shown, but that the expense ratio
is unchanged. In this case, because the return used is not the Fund's actual
return, the results do not apply to your investment. The example is useful in
making comparisons because the Securities and Exchange Commission requires all
mutual funds to calculate expenses based on a 5% return. You can assess the
Fund's costs by comparing this hypothetical example with the hypothetical
examples that appear in shareholder reports of other funds.
Note that expenses shown in the table are meant to highlight and help you
compare ongoing costs only. The Fund does not charge any sales loads or
redemption fees.
The calculations assume no shares were bought or sold during the period. Your
actual costs may have been higher or lower, depending on the amount of your
investment and the timing of any purchases or redemptions.
14
SURGEONS DIVERSIFIED INVESTMENT FUND
ABOUT YOUR FUND'S EXPENSES (UNAUDITED)
(CONTINUED)
================================================================================
More information about the Fund's expenses, including annualized expense ratios,
can be found in this report. For additional information on operating expenses
and other shareholder costs, please refer to the Fund's prospectus.
- ------------------------------------------------------------------------------------------
BEGINNING ENDING
ACCOUNT VALUE ACCOUNT VALUE EXPENSES PAID
SEPTEMBER 1, 2008 FEBRUARY 28, 2009 DURING PERIOD*
- ------------------------------------------------------------------------------------------
Based on Actual Fund Return $ 1,000.00 $ 672.10 $ 3.32
Based on Hypothetical 5% Return
(before expenses) $ 1,000.00 $ 1,020.83 $ 4.01
- ------------------------------------------------------------------------------------------
* Expenses are equal to the Fund's annualized expense ratio of 0.80% for the
period, multiplied by the average account value over the period,
multiplied by 181/365 (to reflect the one-half year period).
OTHER INFORMATION (UNAUDITED)
================================================================================
The Fund files a complete listing of portfolio holdings of the Fund with the
Securities and Exchange Commission ("SEC") as of the end of the first and third
quarters of each fiscal year on Form N-Q. The filings are available upon
request, by calling 1-800-282-1581. Furthermore, you may obtain a copy of these
filings on the SEC's website at http://www.sec.gov. The Fund's Forms N-Q may
also be reviewed and copied at the SEC's Public Reference Room in Washington,
DC, and information on the operation of the Public Reference Room may be
obtained by calling 1-800-SEC-0330.
A description of the policies and procedures that the Fund uses to vote proxies
relating to portfolio securities is available without charge upon request by
calling toll-free 1-800-208-6070, or on the SEC's 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 is available
without charge upon request by calling toll-free 1-800-208-6070, or on the SEC's
website at http://www.sec.gov.
15
INVESTMENT MANAGER CUSTODIAN
Surgeons Asset Management, LLC The Northern Trust Company
633 North Saint Clair Street 50 South LaSalle Street
Chicago, Illinois 60611-3211 Chicago, Illinois 60675
312.202.5056
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
SUBADVISER
Ernst & Young LLP
Northern Trust Investments, N.A. 1900 Scripps Center
50 South LaSalle Street 312 Walnut Street
Chicago, Illinois 60675 Cincinnati, Ohio 45202
ADMINISTRATOR/TRANSFER AGENT LEGAL COUNSEL
Ultimus Fund Solutions, LLC K&L Gates LLP
225 Pictoria Drive, Suite 450 Three First National Plaza
Cincinnati, Ohio 45246 70 West Madison Street, Suite 3100
Chicago, Illinois 60602-4207
1-800.208.6070
[LOGO] SERVING THE MEMBERSHIP OF THE
AMERICAN COLLAGE OF SURGEONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
| DIVERSIFIED
SURGEONS | INVESTMENT
| FUND
633 N. Saint Clair St.
Chicago, IL 60611
Voice 800.208.6070 Fax 312.202.5026
www.surgeonsfund.com
- --------------------------------------------------------------------------------
ITEM 2. CODE OF ETHICS.
Not required
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not required
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not required
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable
ITEM 6. SCHEDULE OF INVESTMENTS.
Not applicable [schedule filed with Item 1]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The registrant's Committee of Independent Trustees shall review shareholder
recommendations to fill vacancies on the registrant's board of trustees if such
recommendations are submitted in writing, addressed to the Committee at the
registrant's offices, and meet any minimum qualifications adopted by the
Committee from time to time. The Committee may adopt, by resolution, a policy
regarding its procedures for considering candidates for the board of trustees,
including any recommended by shareholders.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Based on their evaluation of the registrant's disclosure controls and
procedures (as defined in Rule 30a-3(c) under the Investment Company Act of
1940) as of a date within 90 days of the filing date of this report, the
registrant's principal executive officer and principal financial officer have
concluded that such disclosure controls and procedures are reasonably designed
and are operating effectively to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is made known to them
by others within those entities, particularly during the period in which this
report is being prepared, and that the information required in filings on Form
N-CSR is recorded, processed, summarized, and reported on a timely basis.
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940)
that occurred during the second fiscal quarter of the period covered by this
report that have materially affected, or are reasonably likely to materially
affect, the registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
File the exhibits listed below as part of this Form. Letter or number the
exhibits in the sequence indicated.
(a)(1) Any code of ethics, or amendment thereto, that is the subject of the
disclosure required by Item 2, to the extent that the registrant intends to
satisfy the Item 2 requirements through filing of an exhibit: Not required
(a)(2) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2(a) under
the Act (17 CFR 270.30a-2(a)): Attached hereto
(a)(3) Any written solicitation to purchase securities under Rule 23c-1 under
the Act (17 CFR 270.23c-1) sent or given during the period covered by the report
by or on behalf of the registrant to 10 or more persons: Not applicable
(b) Certifications required by Rule 30a-2(b) under the Act (17 CFR
270.30a-2(b)): Attached hereto
Exhibit 99.CERT Certifications required by Rule 30a-2(a) under the Act
Exhibit 99.906CERT Certifications required by Rule 30a-2(b) under the Act
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Surgeons Diversified Investment Fund
--------------------------------------------------------------------
By (Signature and Title)* /s/ Savitri P. Pai
--------------------------------------------------
Savitri P. Pai, President
Date May 1, 2009
--------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ Savitri P. Pai
--------------------------------------------------
Savitri P. Pai, President
Date May 1, 2009
--------------------------
By (Signature and Title)* /s/ Mark J. Seger
--------------------------------------------------
Mark J. Seger, Treasurer
Date May 1, 2009
--------------------------
* Print the name and title of each signing officer under his or her signature.