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 811-21317
---------
PMFM INVESTMENT TRUST
---------------------
(Exact name of registrant as specified in charter)
1551 Jennings Mill Road, Suite 2400-A, Bogart, Georgia 30622
------------------------------------------------------------
(Address of principal executive offices) (Zip code)
C. Frank Watson III
116 South Franklin Street, Post Office Box 69, Rocky Mount, North Carolina 27802
- --------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: 252-972-9922
------------
Date of fiscal year end: May 31, 2004
------------
Date of reporting period: May 31, 2004
------------
Item 1. REPORTS TO STOCKHOLDERS.
________________________________________________________________________________
PMFM ETF Portfolio Trust
________________________________________________________________________________
a series of the PMFM Investment Trust
Annual Report
FOR THE PERIOD FROM JUNE 30, 2003
(DATE OF INITIAL PUBLIC INVESTMENT)
THROUGH MAY 31, 2004
INVESTMENT ADVISOR
PMFM, Inc.
1551 Jennings Mill Road - Suite 2400A
Bogart, Georgia 30622
PMFM ETF Portfolio Trust
1551 Jennings Mill Road - Suite 2400A
Bogart, Georgia 30622
1-866-ETF-PMFM (1-866-383-7636)
DISTRIBUTOR
Capital Investment Group, Inc.
P.O. Box 4365
Rocky Mount, NC 27803
1-800-773-3863
This report and the financial statements contained herein are submitted for the
general information of the shareholders of the PMFM ETF Portfolio Trust (the
"Fund"). This report is not authorized for distribution to prospective investors
in the Fund unless preceded or accompanied by an effective prospectus. Mutual
fund shares are not deposits or obligations of, or guaranteed by, any depository
institution. Shares are not insured by the FDIC, Federal Reserve Board or any
other agency, and are subject to investment risks, including possible loss of
principal amount invested. Neither the Fund nor the Fund's distributor is a
bank.
- --------------------------------------------------------------------------------
Statements in this Annual Report that reflect projections or expectations of
future financial or economic performance of the PMFM ETF Portfolio Trust
("Fund") and of the market in general and statements of the Fund's plans and
objectives for future operations are forward-looking statements. No assurance
can be given that actual results or events will not differ materially from those
projected, estimated, assumed or anticipated in any such forward-looking
statements. Important factors that could result in such differences, in addition
to the other factors noted with such forward-looking statements, include,
without limitation, general economic conditions such as inflation, recession and
interest rates. Past performance is not a guarantee of future results.
Investments in the Fund are subject to investment risks, including, without
limitation, market risk, investment style risk, investment advisor risk, market
sector risk, equity securities risk, portfolio turnover risk, and other risks as
set forth in the Fund's prospectus. An investment in the Fund is subject to
investment risks, including the possible loss of some or the entire principal
amount invested. There can be no assurance that the Fund will be successful in
meeting its investment objective. Investment in the Fund is also subject to the
following risks: market risk, management style risks, sector risks, fixed income
risks, "Fund of Funds" structure limitations and expenses risks, tracking risks,
ETF net asset value and market price risk, portfolio turnover risk and
non-diversified fund risk. More information about these risks and other risks
can be found in the Fund's prospectus.
The performance information quoted in this annual report represents past
performance, which is not a guarantee of future results. Investment return and
principal value of an investment will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their original cost. Current
performance may be lower or higher than the performance data quoted. An investor
may obtain performance data current to the most recent month-end by visiting
www.ncfunds.com.
An investor should consider the investment objectives, risks, and charges and
expenses of the Fund carefully before investing. The prospectus contains this
and other information about the Fund. A copy of the prospectus is available by
calling Shareholder Services at 1-877-892-4226. The prospectus should be read
carefully before investing.
- --------------------------------------------------------------------------------
PMFM ETF PORTFOLIO TRUST
July 29, 2004
Dear Shareholder,
Looking back on the first year of the PMFM ETF Portfolio Trust we see two very
different five to six month time periods. In general, stocks moved higher in the
last half of 2003 as the economy strengthened and corporate earnings improved,
but have remained in a narrow trading range during the first half of 2004. The
fund's inception was June 30, 2003 and we received large inflows of cash during
the fund's first several months of operations. We worked to get the new money
invested as prudently as possible but the cash inflows caused us to be under
invested in the stock market during much of that period, especially during the
third quarter of 2003. By the fourth quarter we had increased the fund's
exposure to equities and, as a result, we captured a greater percentage of the
gains of the S&P 500 (8.1% for the fund, net of fees and expenses, versus 12.2%
for the S&P 500 for the same period).
To date, in 2004, the S&P 500 has remained in a narrow 73 point trading range.
The upper end of the range has been 1157 and the lower end has been 1084. The
movements between those price points have been quick and volatile, but the
market has been unable to sustain a trend in either direction. This volatile,
sideways movement presents a challenge for our tactical asset allocation
approach. For the first six months of 2004, the fund returned -0.9%, while the
market (the S&P 500) returned 3.4%. The equity exposure in our portfolio during
the first half of 2004 has ranged from zero (100% cash or cash equivalents) to
77%. The risk indicators in our model have kept us from being fully exposed to
the market, and as a result our portfolio has been less volatile than the major
indices, including the S&P 500. While this reduced exposure has caused the fund
to underperform the S&P 500, we feel it is justified by the protection provided
if the market breaks out of the trading range to the downside.
As we move into the last half of 2004 there are several issues weighing on the
market including Iraq's transition to self-governance, anticipated interest rate
increases by the Federal Reserve, and the upcoming presidential election. Many
"experts" in the investment business make predictions for the future and have
target prices for the major indices. Our investment philosophy is based on what
we believe are sound indicators that measure what is really happening in the
markets, not what we wish would happen, and instead of predicting, we react
accordingly. Our goal is to participate in the equity market when we deem the
risk levels to be reasonable, and to avoid equities when the risk levels are
unacceptable.
As explained in detail in a separate "Important Notice" to shareholders dated
July 28, 2004 (the "Notice"), the fund will be renamed the "PMFM Managed
Portfolio Trust" effective September 27, 2004. As explained in the Notice, the
name change will remove the term "ETF" from the name so that the Fund will not
be required to invest at least 80% of its assets in ETFs. We believe this will
benefit the fund by increasing the fund's flexibility to invest in cash
positions, bond indexes (including those not tracked by an ETF) and other
instruments when we deem it advisable, and clarifying that the fund is not an
ETF.
Thank you for your continued support and allowing us to serve you and the fund.
Please feel free to contact us with any questions or concerns.
Sincerely,
PMFM, Inc.
Timothy A. Chapman
PMFM ETF Portfolio Trust
Investor Class
Performance Update - $10,000 Investment
For the period from June 30, 2003 (Date of Initial
Public Investment) through May 31, 2004
[Graph Here]
80% S&P 500 Total Return
PMFM ETF S&P 500 Total Index /20% Lehman Brothers
Portfolio Trust Return Index Aggregate Bond Index
--------------- ------------ --------------------
6/30/2003 $10,000 $10,000 $10,000
7/31/2003 9,820 10,176 10,067
8/31/2003 9,780 10,375 10,240
9/30/2003 9,570 10,265 10,208
10/31/2003 9,910 10,845 10,653
11/30/2003 10,080 10,941 10,734
12/31/2003 10,348 11,514 11,215
1/31/2004 10,498 11,726 11,402
2/29/2004 10,619 11,889 11,556
3/31/2004 10,488 11,709 11,430
4/30/2004 10,147 11,526 11,224
5/31/2004 10,147 11,684 11,342
This graph depicts the performance of PMFM ETF Portfolio Trust (the "Fund")
Investor Class shares versus the S&P 500 Total Return Index and a combined index
of 80% S&P 500 Total Return Index and 20% Lehman Brothers Aggregate Bond Index.
It is important to note that the Fund is a professionally managed mutual fund
while the indices are not available for investment and are unmanaged. The
comparison is shown for illustrative purposes only.
Cumulative Total Returns
-------------------------------
Since 06/30/03 (Date of
Initial Public Investment)
-------------------------------
1.47 %
-------------------------------
>> The graph assumes an initial $10,000 investment at June 30, 2003 (date of
initial public investment). All dividends and distributions are reinvested.
>> At May 31, 2004, the value of the Fund's Investor Class shares would have
increased to $10,147 - a cumulative total investment return of 1.47% since
June 30, 2003.
>> At May 31, 2004, the value of a similar investment in the S&P 500 Total
Return Index would have increased to $11,684 - a cumulative total
investment return of 16.84%; and a similar investment in a combined index
of 80% S&P 500 Total Return Index and 20% Lehman Brothers Aggregate Bond
Index would have increased to $11,342 - a cumulative total investment
return of 13.42% since June 30, 2003.
The performance information quoted above represents past performance, which is
not a guarantee of future results. Investment return and principal value of an
investment will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost. Current performance may be lower or
higher than the performance data quoted. An investor may obtain performance data
current to the most recent month-end by visiting www.ncfunds.com.
The graph and table do not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares. Cumulative
total returns are historical in nature and measure net investment income and
capital gain or loss from portfolio investments assuming reinvestments of
dividends.
PMFM ETF Portfolio Trust
PORTFOLIO OF INVESTMENTS
May 31, 2004
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT COMPANIES - 99.82%
Evergreen Institutional Money Market Fund Class I ............................... 40,625,265 $ 40,625,265
Merrimac Cash Series Fund ....................................................... 182,904,918 182,904,918
------------
Total Investment Companies (Cost $223,530,183) ................................................. 223,530,183
------------
Total Value of Investments (Cost $223,530,183 (b)) ......................................... 99.82 % $223,530,183
Other Assets Less Liabilities .............................................................. 0.18 % 402,244
---------- ------------
Net Assets ........................................................................... 100.00 % $223,932,427
========== ============
(a) Non-income producing investment.
(b) Aggregate cost for financial reporting and federal income tax purposes is the same. Unrealized appreciation /
(depreciation) of investments for financial reporting and federal income tax purposes is as follows:
Unrealized appreciation ........................................................................ $ 0
Unrealized depreciation ........................................................................ 0
------------
Net unrealized appreciation ......................................................... $ 0
============
See accompanying notes to financial statements
PMFM ETF Portfolio Trust
STATEMENT OF ASSETS AND LIABILITIES
May 31, 2004
ASSETS
Investments, at value (cost $223,530,183) ........................................................ $223,530,183
Cash ............................................................................................. 4,173
Income receivable ................................................................................ 176,714
Receivable for fund shares sold .................................................................. 343,746
Other asset ...................................................................................... 49,487
------------
Total assets ................................................................................ 224,104,303
------------
LIABILITIES
Accrued expenses ................................................................................. 92,213
Payable for fund shares redeemed ................................................................. 79,663
------------
Total liabilities ........................................................................... 171,876
------------
NET ASSETS ............................................................................................. $223,932,427
============
NET ASSETS CONSIST OF
Paid-in capital .................................................................................. $220,990,765
Undistributed net realized gain on investments ................................................... 2,941,662
------------
$223,932,427
============
INVESTOR CLASS
Net asset value, redemption and offering price per share
($223,698,786 / 22,097,483 shares) .......................................................... $ 10.12
============
ADVISOR CLASS
Net asset value, redemption and offering price per share
($233,641 / 23,093 shares) .................................................................. $ 10.12
============
See accompanying notes to financial statements
PMFM ETF Portfolio Trust
STATEMENT OF OPERATIONS
For the Period from June 30, 2003
(Date of Initial Public Investment)
through May 31, 2004
NET INVESTMENT LOSS
Income
Interest ..................................................................................... $ 35,121
Dividends .................................................................................... 2,350,054
-----------
Total income ............................................................................. 2,385,175
-----------
Expenses
Investment advisory fees (note 2) ............................................................ 1,726,181
Fund administration fees (note 2) ............................................................ 207,147
Distribution and service fees - Investor Class (note 3) ...................................... 345,228
Distribution and service fees - Advisor Class (note 3) ....................................... 35
Custody fees (note 2) ........................................................................ 32,221
Registration and filing administration fees (note 2) ......................................... 7,622
Fund accounting fees (note 2) ................................................................ 39,309
Audit and tax preparation fees ............................................................... 22,875
Legal fees ................................................................................... 24,063
Securities pricing fees ...................................................................... 1,008
Shareholder recordkeeping fees (note 2) ...................................................... 19,750
Other accounting fees (note 2) ............................................................... 1,929
Shareholder servicing expenses ............................................................... 9,877
Registration and filing expenses ............................................................. 107,438
Printing expenses ............................................................................ 5,813
Trustee fees and meeting expenses ............................................................ 7,916
Other operating expenses ..................................................................... 27,586
-----------
Total expenses ........................................................................... 2,585,998
Less investment advisory fees waived (note 2) ....................................... (31,589)
-----------
Net expenses ............................................................................. 2,554,409
-----------
Net investment loss ................................................................. (169,234)
-----------
REALIZED GAIN ON INVESTMENTS
Net realized gain from investment transactions .................................................... 3,543,557
-----------
Net increase in net assets resulting from operations ..................................... $ 3,374,323
===========
See accompanying notes to financial statements
PMFM ETF Portfolio Trust
STATEMENT OF CHANGES IN NET ASSETS
For the Period from June 30, 2003
(Date of Initial Public Investment)
through May 31, 2004
INCREASE IN NET ASSETS
Operations
Net investment loss ........................................................................ $ (169,234)
Net realized gain from investment transactions ............................................. 3,543,557
------------
Net increase in net assets resulting from operations .................................. 3,374,323
------------
Distributions to shareholders from
Net investment income - Investor Class ..................................................... (469,488)
------------
Capital share transactions
Increase in net assets resulting from capital share transactions (a) ....................... 221,027,592
------------
Total increase in net assets ............................................. 223,932,427
NET ASSETS
Beginning of period ............................................................................ 0
------------
End of period .................................................................................. $223,932,427
============
(a) A summary of capital share activity follows:
-----------------------------------------
Shares Value
- ----------------------------------------------------------------------------------- -----------------------------------------
INVESTOR CLASS
- -----------------------------------------------------------------------------------
Shares sold ....................................................................... 25,642,144 $256,788,307
Shares issued for reinvestment of distributions ................................... 45,493 469,488
Shares redeemed ................................................................... (3,590,154) (36,463,902)
------------- ------------
Net increase ................................................................. 22,097,483 $220,793,893
============= ============
- -----------------------------------------------------------------------------------
ADVISOR CLASS (b)
- -----------------------------------------------------------------------------------
Shares sold ....................................................................... 23,093 $ 233,699
Shares issued for reinvestment of distributions ................................... 0 0
Shares redeemed ................................................................... 0 0
------------- ------------
Net increase ................................................................. 23,093 $ 233,699
============= ============
- -----------------------------------------------------------------------------------
FUND SUMMARY
- -----------------------------------------------------------------------------------
Shares sold ....................................................................... 25,665,237 $257,022,006
Shares issued for reinvestment of distributions ................................... 45,493 469,488
Shares redeemed ................................................................... (3,590,154) (36,463,902)
------------- ------------
Net increase ................................................................. 22,120,576 $221,027,592
============= ============
(b) For the period from April 30, 2004 (Date of Initial Public Offering) through May 31, 2004.
See accompanying notes to financial statements
PMFM ETF Portfolio Trust
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
INVESTOR ADVISOR
CLASS CLASS
- ------------------------------------------------------------------------------------------------------------------------------------
Period ended Period ended
May 31, May 31,
2004 (a) 2004 (b)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ............................................... $ 10.00 $ 10.12
Income from investment operations
Net investment income ................................................... 0.00 0.00
Net realized and unrealized gain on investments ......................... 0.15 0.00
------------- ------------
Total from investment operations .................................... 0.15 0.00
------------- ------------
Distributions to shareholders from
Net investment income ................................................... (0.03) 0.00
------------- ------------
Net asset value, end of period ..................................................... $ 10.12 $ 10.12
============= ============
Total return ....................................................................... 1.47 % 0.00 %
============= ============
Ratios/supplemental data
Net assets, end of period .................................................... $ 223,698,786 $ 233,641
============= ============
Ratio of expenses to average net assets (c)
Before expense reimbursements and waived fees ........................... 1.87 % 2.65 %
After expense reimbursements and waived fees ............................ 1.85 % 2.65 %
Ratio of net investment loss to average net assets (c)
Before expense reimbursements and waived fees ........................... (0.15)% (1.74)%
After expense reimbursements and waived fees ............................ (0.12)% (1.74)%
Portfolio turnover rate ...................................................... 421.74 % 421.74 %
(a) For the period from June 30, 2003 (date of initial public investment) through May 31, 2004.
(b) For the period from April 30, 2004 (date of initial public offering) through May 31, 2004.
(c) Annualized.
See accompanying notes to financial statements
PMFM ETF Portfolio Trust
NOTES TO FINANCIAL STATEMENTS
May 31, 2004
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
The PMFM ETF Portfolio Trust (the "Fund") is a non-diversified series of
shares of beneficial interest of the PMFM Investment Trust (the "Trust"), a
registered open-end management investment company. The Trust was organized
in 2003 as a Delaware Statutory Trust and is registered under the
Investment Company Act of 1940, as amended (the "Act"). The Fund began
operations on June 30, 2003 (Date of Initial Public Investment). The
investment objective of the Fund is to seek long-term growth of capital
through investments in exchange-traded funds and in cash or cash equivalent
positions. The Fund has an unlimited number of authorized shares, which are
divided into two classes - Investor Class and Advisor Class.
Each class of shares has equal rights as to assets of the Fund, and the
classes are identical except for differences in their sales charge
structures and ongoing distribution and service fees. Income, expenses
(other than distribution and service fees), and realized and unrealized
gains or losses on investments are allocated to each class of shares based
upon its relative net assets. Both classes have equal voting privileges,
except where otherwise required by law or when the Board of Trustees (the
"Trustees") determines that the matter to be voted on affects only the
interests of the shareholders of a particular class. The following is a
summary of significant accounting policies followed by the Fund.
A. Security Valuation - The Fund's investments in securities are carried
at value. Securities listed on an exchange or quoted on a national
market system are valued at the last sales price as of the close of
normal trading on the New York Stock Exchange, generally 4:00 p.m.
Eastern Time. Other securities traded in the over-the-counter market
and listed securities for which no sale was reported on that date are
valued at the most recent bid price. Securities for which market
quotations are not readily available or which cannot be accurately
valued using the Fund's normal pricing procedures, if any, are valued
following procedures approved by the Trustees. Short-term investments
are valued at cost, which approximates value.
B. Federal Income Taxes - No provision has been made for federal income
taxes since the Fund intends to distribute substantially all taxable
income to shareholders. It is the policy of the Fund to comply with
the provisions of the Internal Revenue Code applicable to regulated
investment companies and to make sufficient distributions of taxable
income to relieve it from all federal income taxes.
Net investment income (loss) and net realized gains (losses) may
differ for financial statement and income tax purposes primarily
because of losses incurred subsequent to October 31, which are
deferred for income tax purposes. The character of distributions made
during the year from net investment income or net realized gains may
differ from their ultimate characterization for federal income tax
purposes. Also, due to the timing of dividend distributions, the
fiscal year in which amounts are distributed may differ from the year
that the income or realized gains were recorded by the Fund.
As a result of the Fund's operating net investment loss and
distribution of income required, a reclassification adjustment of
$601,895 has been charged to undistributed net realized gains, $36,827
has been charged to paid-in capital, and accumulated net investment
loss has been credited $638,722, bringing it to zero.
C. Investment Transactions - Investment transactions are recorded on the
trade date. Realized gains and losses are determined using the
specific identification cost method. Interest income is recorded daily
on an accrual basis. Dividend income is recorded on the ex-dividend
date.
(Continued)
PMFM ETF Portfolio Trust
NOTES TO FINANCIAL STATEMENTS
May 31, 2004
D. Distributions to Shareholders - The Fund may declare dividends
quarterly, payable in March, June, September and December, or on a
date selected by the Trustees. In addition, distributions may be made
annually in December out of net realized gains through October 31 of
that year. Distributions to shareholders are recorded on the
ex-dividend date.
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 amounts of assets, liabilities, expenses
and revenues reported in the financial statements. Actual results
could differ from those estimates.
NOTE 2 - INVESTMENT ADVISORY FEE AND OTHER RELATED PARTY TRANSACTIONS
Pursuant to an investment advisory agreement, PMFM, Inc. (the "Advisor")
provides the Fund with a continuous program of supervision of the Fund's
assets, including the composition of its portfolio, and furnishes advice
and recommendations with respect to investments, investment policies, and
the purchase and sale of securities. As compensation for its services, the
Advisor receives a fee at the annual rate of 1.25% of the Fund's average
daily net assets. The Advisor has entered into a contractual agreement (the
"Expense Limitation Agreement") with the Trust under which it has agreed to
waive or reduce its fees and to assume other expenses of the Fund, if
necessary, in an amount that limits the Fund's total operating expenses
(exclusive of interest, taxes, brokerage fees and commissions,
extraordinary expenses, and payments, if any, under a Rule 12b-1 Plan) to
not more than 1.70% of the average daily net assets of the Fund's Investor
Class and Advisor Class for the fiscal year ending May 31, 2004. The
Advisor has voluntarily waived a portion of its fee amounting to $31,589
for the period ended May 31, 2004. There can be no assurance that the
Expense Limitation Agreement will continue in the future.
The Fund's administrator, The Nottingham Company (the "Administrator"),
provides administrative services to and is generally responsible for the
overall management and day-to-day operations of the Fund pursuant to a fund
accounting and compliance agreement with the Trust. As compensation for its
services, the Administrator receives a fee at the annual rate of 0.175% of
the Fund's first $50 million of average daily net assets, 0.150% of the
next $50 million, 0.125% of the next $50 million, 0.100% of the next $50
million, and 0.075% of average daily net assets over $200 million, with a
minimum administration fee of $2,000 per month. The Administrator also
receives a monthly fund accounting fee of $2,250 for accounting and
recordkeeping services for the initial class of shares and $750 per month
for each additional class of shares, plus 0.01% of the annual net assets.
The Administrator will also receive the following to procure and pay the
custodian for the Trust: 0.02% on the first $100 million of the Fund's net
assets and 0.009% on all assets over $100 million plus transaction fees
with a minimum fee of $400 per month. The Administrator will also charge
the Fund for certain expenses involved with the daily valuation of
portfolio securities, which are believed to be immaterial in amount.
NC Shareholder Services, LLC (the "Transfer Agent") serves as the Fund's
transfer, dividend paying, and shareholder servicing agent. The Transfer
Agent maintains the records of each shareholder's account, answers
shareholder inquiries concerning accounts, processes purchases and
redemptions of Fund shares, acts as dividend and distribution disbursing
agent, and performs other shareholder servicing functions. The Transfer
Agent will be compensated for its services based upon a $15 fee per
shareholder per year, subject to a minimum fee of $1,750 per month, plus
$500 per month for each additional class of shares. In addition, the
Transfer Agent shall be entitled to reimbursement of actual out-of-pocket
expenses incurred by the Transfer Agent on behalf of the Trust or the Fund.
Certain Trustees and officers of the Trust are also officers of the Advisor
or the Administrator.
(Continued)
PMFM ETF Portfolio Trust
NOTES TO FINANCIAL STATEMENTS
May 31, 2004
NOTE 3 - DISTRIBUTION AND SERVICE FEES
The Trustees, including the Trustees who are not "interested persons" of
the Trust as defined in the Act, adopted a distribution and service plan
pursuant to Rule 12b-1 of the Act (the "Plan"). The Act regulates the
manner in which a regulated investment company may assume costs of
distributing and promoting the sales of its shares and servicing of its
shareholder accounts. The Plan provides that the Fund may incur certain
costs, which may not exceed 0.25% and 1.00% per annum of the average daily
net assets of the Investor Class and Advisor class, respectively, for each
year elapsed subsequent to adoption of the Plan, for payment to the
Distributor and others for items such as advertising expenses, selling
expenses, commissions, travel, or other expenses reasonably intended to
result in sales of Investor Class shares and Advisor Class shares in the
Fund or support servicing of Investor Class and Advisor Class shareholder
accounts. The Fund incurred $345,228 of such expenses for the Investor
Class and $35 of such expenses for the Advisor Class under the Plan for the
period ended May 31, 2004.
NOTE 4 - PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments other than short-term investments
aggregated $340,338,193 and $343,645,354, respectively, for the period
ended May 31, 2004.
(Continued)
PMFM ETF Portfolio Trust
ADDITIONAL INFORMATION
May 31, 2004
(Unaudited)
PROXY VOTING POLICY
A copy of the Trust's Proxy Voting and Disclosure Policy and the Advisor's Proxy
Voting and Disclosure Policy are included as Appendix B to the Fund's Statement
of Additional Information and is available, without charge, upon request, by
calling 1-866-383-7636. Effective with the 12-month period ended June 30, 2004,
the Fund will file Form N-PX stating how the Fund voted proxies relating to
portfolio securities during the most recent 12-month period ended June 30 within
60 days after the end of such period. Information regarding how the Fund voted
proxies as set forth in its most recent filing of Form N-PX will be available
(i) without charge, upon request, by calling the Fund at 1-866-383-7636; and
(ii) on the SEC's website at http://www.sec.gov.
INFORMATION ABOUT TRUSTEES AND OFFICERS
The business and affairs of the Fund and the Trust are managed under the
direction of the Trustees. Information concerning the Trustees and officers of
the Trust and Fund is set forth below. Generally, each Trustee and officer
serves an indefinite term or until certain circumstances such as their
resignation, death, or otherwise as specified in the Trust's organizational
documents. Any Trustee may be removed at a meeting of shareholders by a vote
meeting the requirements of the Trust's organizational documents. The Statement
of Additional Information of the Fund includes additional information about the
Trustees and officers and is available, without charge, upon request by calling
the Fund toll-free at 1-866-383-7636. The address of each Trustee and officer,
unless otherwise indicated below, is 1551 Jennings Mill Road - Suite 2400A,
Bogart, Georgia 30622. The Trustees received aggregate compensation of $2,300
during the fiscal year ended May 31, 2004 from the Fund for their services to
the Fund and Trust. The officers did not receive compensation from the Fund for
their services to the Fund and Trust.
TRUSTEES
- ---------------------------- ----------- ---------- -------------------------------------- -------------- ------------------------
Number of
Portfolios
in Fund
Position(s) Length Complex
Name, Age and held with of Time Principal Occupation(s) Overseen by Other Directorships
Address Fund/Trust Served During Past 5 Years Trustee Held by Trustee
- ---------------------------- ----------- ---------- -------------------------------------- -------------- ------------------------
Independent Trustees
- ---------------------------- ----------- ---------- -------------------------------------- -------------- ------------------------
James M. Baker (52) Trustee Since Mr. Baker has been the President of 1 Mr. Baker serves as a
6/2003 Baker & Lassiter, Inc. (real estate director of Community
development and management) since Capital Bank, a
1993. closely held state
chartered bank.
- ---------------------------- ----------- ---------- -------------------------------------- -------------- ------------------------
Norman A. McLean (50) Trustee Since Mr. McLean has been the Associate 1 None
6/2003 Athletic Director for Marketing and
Promotions at the University of
Georgia Athletic Association, Inc.
("UGAA") since 2000. Mr. McLean
previously was Assistant Athletic
Director at UGAA.
- ---------------------------- ----------- ---------- -------------------------------------- -------------- ------------------------
Interested Trustees*
- ---------------------------- ----------- ---------- -------------------------------------- -------------- ------------------------
Donald L. Beasley (61) Trustee, Since Mr. Beasley has been the President 1 None
Treasurer 6/2003 of the Advisor since 1991.
and
Principal
Financial
Officer
- ----------------------------------------------------------------------------------------------------------------------------------
* The Interested Trustee is an Interested Trustee because he is an officer and employee of the Advisor.
- ----------------------------------------------------------------------------------------------------------------------------------
PMFM ETF Portfolio Trust
ADDITIONAL INFORMATION
May 31, 2004
(Unaudited)
- ---------------------------- ----------- ---------- -------------------------------------- -------------- ------------------------
Number of
Portfolios
in Fund
Position(s) Length Complex
Name, Age and held with of Time Principal Occupation(s) Overseen by Other Directorships
Address Fund/Trust Served During Past 5 Years Trustee Held by Trustee
- ---------------------------- ----------- ---------- -------------------------------------- -------------- ------------------------
Other Officers
- ---------------------------- ----------- ---------- -------------------------------------- -------------- ------------------------
Timothy A. Chapman (43) President Since Mr. Chapman has been the Secretary n/a n/a
and 6/2003 and Treasurer of the Advisor since
Principal February, 1993. Mr. Chapman has
Executive been a Vice President of the
Officer MurphyMorris Money Management Co.
(investment advisory firm) since
1996. Mr. Chapman has also
been the President of
Financial Toobox, Inc.
(website publishing firm)
since 2000.
- ---------------------------- ----------- ---------- -------------------------------------- -------------- ------------------------
C. Frank Watson III (33) Secretary Since Mr. Watson has been the President n/a n/a
The Nottingham Company 6/2003 and Chief Operating Officer of The
116 South Franklin Street Nottingham Company, the Fund's
Post Office Box 69 administrator, since 1999. Mr.
Rocky Mount, NC 27802 Watson previously was the Chief
Operating Officer of The Nottingham
Company.
- ---------------------------- ----------- ---------- -------------------------------------- -------------- ------------------------
Julian G. Winters (35) Asst. Since Mr. Winters has been the Vice n/a n/a
The Nottingham Company Secretary 6/2003 President of Compliance
116 South Franklin Street and Asst. Administration at The Nottingham
Post Office Box 69 Treasurer Company since 1998.
Rocky Mount, NC 27802
- ---------------------------- ----------- ---------- -------------------------------------- -------------- ------------------------
Deloitte
Deloitte & Touche LLP
Two World Financial Center
New York, New York 10281-1414
Tel: (212) 436-2000
Fax: (212) 436-5000
www.deloitte.com
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of PMFM Investment Trust and the Shareholders of PMFM
ETF Portfolio Trust:
We have audited the accompanying statement of assets and liabilities of PMFM ETF
Portfolio Trust (the "Fund") (a portfolio of PMFM Investment Trust), including
the portfolio of investments, for the period from June 30, 2003 (date of initial
public investment) through May 31, 2004, and the related statement of
operations, the statement of changes in net assets and the financial highlights
for the period then ended. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned at May 31, 2004, by correspondence with the custodian. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of PMFM
ETF Portfolio Trust from June 30, 2003 (date of initial public investment)
through May 31, 2004, the results of its operations, the changes in its net
assets, and the financial highlights for the period then ended, in conformity
with accounting principles generally accepted in the United States of America.
/s/ Deloitte & Touche LLP
July 19, 2004
Member of
Deloitte Touche Tohmatsu
________________________________________________________________________________
PMFM ETF Portfolio Trust
________________________________________________________________________________
a series of the PMFM Investment Trust
This Report has been prepared for shareholders and may be
distributed to others only if preceded or accompanied by a
current prospectus.
________________________________________________________________________________
PMFM Moderate Portfolio Trust
________________________________________________________________________________
a series of the PMFM Investment Trust
Annual Report
FOR THE PERIOD FROM MARCH 25, 2004
(DATE OF INITIAL PUBLIC INVESTMENT)
THROUGH MAY 31, 2004
INVESTMENT ADVISOR
PMFM, Inc.
1551 Jennings Mill Road - Suite 2400A
Bogart, Georgia 30622
PMFM Moderate Portfolio Trust
1551 Jennings Mill Road - Suite 2400A
Bogart, Georgia 30622
1-866-383-PMFM (1-866-383-7636)
DISTRIBUTOR
Capital Investment Group, Inc.
P.O. Box 4365
Rocky Mount, NC 27803
1-800-773-3863
This report and the financial statements contained herein are submitted for the
general information of the shareholders of the PMFM Moderate Portfolio Trust
(the "Fund"). This report is not authorized for distribution to prospective
investors in the Fund unless preceded or accompanied by an effective prospectus.
Mutual fund shares are not deposits or obligations of, or guaranteed by, any
depository institution. Shares are not insured by the FDIC, Federal Reserve
Board or any other agency, and are subject to investment risks, including
possible loss of principal amount invested. Neither the Fund nor the Fund's
distributor is a bank.
- --------------------------------------------------------------------------------
Statements in this Annual Report that reflect projections or expectations of
future financial or economic performance of the PMFM Moderate Portfolio Trust
("Fund") and of the market in general and statements of the Fund's plans and
objectives for future operations are forward-looking statements. No assurance
can be given that actual results or events will not differ materially from those
projected, estimated, assumed or anticipated in any such forward-looking
statements. Important factors that could result in such differences, in addition
to the other factors noted with such forward-looking statements, include,
without limitation, general economic conditions such as inflation, recession and
interest rates. Past performance is not a guarantee of future results.
Investments in the Fund are subject to investment risks, including, without
limitation, market risk, investment style risk, investment advisor risk, market
sector risk, equity securities risk, portfolio turnover risk, and other risks as
set forth in the Fund's prospectus. An investment in the Fund is subject to
investment risks, including the possible loss of some or the entire principal
amount invested. There can be no assurance that the Fund will be successful in
meeting its investment objective. Investment in the Fund is also subject to the
following risks: market risk, management style risks, sector risks, fixed income
risks, risks related to "Fund of Funds" structure, foreign securities risk,
tracking risks, risk related to ETF net asset value and market price, risks
related to portfolio turnover and non-diversified fund risk. More information
about these risks and other risks can be found in the Fund's prospectus.
The performance information quoted in this annual report represents past
performance, which is not a guarantee of future results. Investment return and
principal value of an investment will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their original cost. Current
performance may be lower or higher than the performance data quoted. An investor
may obtain performance data current to the most recent month-end by visiting
www.ncfunds.com.
An investor should consider the investment objectives, risks, and charges and
expenses of the Fund carefully before investing. The prospectus contains this
and other information about the Fund. A copy of the prospectus is available by
calling Shareholder Services at 1-877-892-4226. The prospectus should be read
carefully before investing.
- --------------------------------------------------------------------------------
PMFM Moderate Portfolio Trust
PORTFOLIO OF INVESTMENTS
May 31, 2004
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT COMPANIES - 99.86%
Evergreen Institutional Money Market Fund Class I ........................... 3,928,324 $ 3,928,324
Merrimac Cash Series Fund ................................................... 17,686,278 17,686,278
------------
Total Investment Companies (Cost $21,614,602) .................................................. 21,614,602
------------
Total Value of Investments (Cost $21,614,602 (b)) ...................................... 99.86 % $21,614,602
Other Assets Less Liabilities .......................................................... 0.14 % 30,979
-------- ------------
Net Assets ....................................................................... 100.00 % $ 21,645,581
======== ============
(a) Non-income producing investment.
(b) Aggregate cost for financial reporting and federal income tax purposes is the same. Unrealized appreciation /
(depreciation) of investments for financial reporting and federal income tax purposes is as follows:
Unrealized appreciation ........................................................................ $ 0
Unrealized depreciation ........................................................................ 0
------------
Net unrealized appreciation ......................................................... $ 0
============
See accompanying notes to financial statements
PMFM Moderate Portfolio Trust
STATEMENT OF ASSETS AND LIABILITIES
May 31, 2004
ASSETS
Investments, at value (cost $21,614,602) ........................................................ $ 21,614,602
Income receivable ............................................................................... 17,395
Due from advisor (note 2) ....................................................................... 3,914
Other asset ..................................................................................... 40,389
------------
Total assets ............................................................................... 21,676,300
------------
LIABILITIES
Accrued expenses ................................................................................ 30,719
------------
NET ASSETS ............................................................................................ $ 21,645,581
============
NET ASSETS CONSIST OF
Paid-in capital ................................................................................. $ 21,969,210
Accumulated net realized loss on investments .................................................... (323,629)
------------
$ 21,645,581
============
INVESTOR CLASS
Net asset value, redemption and offering price per share
($21,643,083 / 2,203,294 shares) ........................................................... $ 9.82
============
ADVISOR CLASS
Net asset value, redemption and offering price per share
($2,498 / 254 shares) ...................................................................... $ 9.82
============
See accompanying notes to financial statements
PMFM Moderate Portfolio Trust
STATEMENT OF OPERATIONS
For the Period from March 25, 2004
(Date of Initial Public Investment)
through May 31, 2004
NET INVESTMENT LOSS
Income
Dividends ..................................................................................... $ 30,811
------------
Expenses
Investment advisory fees (note 2) ............................................................. 45,177
Fund administration fees (note 2) ............................................................. 6,325
Distribution and service fees - Investor Class (note 3) ....................................... 9,035
Distribution and service fees - Advisor Class (note 3) ........................................ 2
Custody fees (note 2) ......................................................................... 1,400
Registration and filing administration fees (note 2) .......................................... 1,885
Fund accounting fees (note 2) ................................................................. 6,046
Audit and tax preparation fees ................................................................ 19,350
Legal fees .................................................................................... 2,185
Securities pricing fees ....................................................................... 58
Shareholder recordkeeping fees (note 2) ....................................................... 4,000
Shareholder servicing expenses ................................................................ 530
Registration and filing expenses .............................................................. 22,774
Printing expenses ............................................................................. 2,039
Trustee fees and meeting expenses ............................................................. 2,798
Other operating expenses ...................................................................... 6,002
------------
Total expenses ............................................................................ 129,606
Less:
Expense reimbursements (note 2) ...................................................... (3,914)
Investment advisory fees waived (note 2) ............................................. (36,673)
------------
Net expenses .............................................................................. 89,019
------------
Net investment loss .................................................................. (58,208)
------------
REALIZED LOSS ON INVESTMENTS
Net realized loss from investment transactions ..................................................... (323,629)
------------
Net decrease in net assets resulting from operations ...................................... $ (381,837)
============
See accompanying notes to financial statements
PMFM Moderate Portfolio Trust
STATEMENT OF CHANGES IN NET ASSETS
For the Period from March 25, 2004
(Date of Initial Public Investment)
through May 31, 2004
INCREASE IN NET ASSETS
Operations
Net investment loss ........................................................................ $ (58,208)
Net realized loss from investment transactions ............................................. (323,629)
------------
Net decrease in net assets resulting from operations .................................. (381,837)
------------
Capital share transactions
Increase in net assets resulting from capital share transactions (a) ....................... 22,027,418
------------
Total increase in net assets ............................................. 21,645,581
NET ASSETS
Beginning of period ............................................................................ 0
------------
End of period .................................................................................. $ 21,645,581
============
(a) A summary of capital share activity follows:
-----------------------------------------------
Shares Value
- -------------------------------------------------------------------------------- -----------------------------------------------
- --------------------------------------------------------------------------------
INVESTOR CLASS
- --------------------------------------------------------------------------------
Shares sold .................................................................... 2,275,986 $ 22,746,134
Shares redeemed ................................................................ (72,692) (721,216)
------------ ------------
Net increase .............................................................. 2,203,294 $ 22,024,918
============ ============
- --------------------------------------------------------------------------------
ADVISOR CLASS (b)
- --------------------------------------------------------------------------------
Shares sold .................................................................... 254 $ 2,500
Shares redeemed ................................................................ 0 0
------------ ------------
Net increase .............................................................. 254 $ 2,500
============ ============
- --------------------------------------------------------------------------------
FUND SUMMARY
- --------------------------------------------------------------------------------
Shares sold .................................................................... 2,276,240 $ 22,748,634
Shares redeemed ................................................................ (72,692) (721,216)
------------ ------------
Net increase .............................................................. 2,203,548 $ 22,027,418
============ ============
(b) For the period from April 30, 2004 (Date of Initial Public Offering) through May 31, 2004.
See accompanying notes to financial statements
PMFM Moderate Portfolio Trust
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
INVESTOR ADVISOR
CLASS CLASS
- ------------------------------------------------------------------------------------------------------------------------------------
Period ended Period ended
May 31, May 31,
2004 (a) 2004 (b)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ............................................................ $ 10.00 $ 9.83
Loss from investment operations
Net investment loss .................................................................. (0.03) (0.02)
Net realized and unrealized (loss) gain on investments ............................... (0.15) 0.01
------------ ------------
Total from investment operations ................................................. (0.18) (0.01)
------------ ------------
Net asset value, end of period .................................................................. $ 9.82 $ 9.82
============ ============
Total return .................................................................................... (1.80)% (0.10)%
============ ============
Ratios/supplemental data
Net assets, end of period ................................................................. $ 21,643,083 $ 2,498
============ ============
Ratio of expenses to average net assets (c)
Before expense reimbursements and waived fees ........................................ 3.59 % 4.61 %
After expense reimbursements and waived fees ......................................... 2.46 % 3.25 %
Ratio of net investment loss to average net assets (c)
Before expense reimbursements and waived fees ........................................ (2.73)% (3.55)%
After expense reimbursements and waived fees ......................................... (1.61)% (2.20)%
Portfolio turnover rate ................................................................... 400.93 % 400.93 %
(a) For the period from March 25, 2004 (date of initial public investment) through May 31, 2004.
(b) For the period from April 30, 2004 (date of initial public offering) through May 31, 2004.
(c) Annualized.
See accompanying notes to financial statements
PMFM Moderate Portfolio Trust
NOTES TO FINANCIAL STATEMENTS
May 31, 2004
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
The PMFM Moderate Portfolio Trust (the "Fund") is a non-diversified series
of shares of beneficial interest of the PMFM Investment Trust (the
"Trust"), a registered open-end management investment company. The Trust
was organized in 2003 as a Delaware Statutory Trust and is registered under
the Investment Company Act of 1940, as amended (the "Act"). The Fund began
operations on March 25, 2004 (Date of Initial Public Investment). The
investment objective of the Fund is to seek long-term growth of capital
through investments in exchange-traded funds and in cash or cash equivalent
positions. The Fund has an unlimited number of authorized shares, which are
divided into two classes - Investor Class and Advisor Class.
Each class of shares has equal rights as to assets of the Fund, and the
classes are identical except for differences in their sales charge
structures and ongoing distribution and service fees. Income, expenses
(other than distribution and service fees), and realized and unrealized
gains or losses on investments are allocated to each class of shares based
upon its relative net assets. Both classes have equal voting privileges,
except where otherwise required by law or when the Board of Trustees (the
"Trustees") determines that the matter to be voted on affects only the
interests of the shareholders of a particular class. The following is a
summary of significant accounting policies followed by the Fund.
A. Security Valuation - The Fund's investments in securities are carried
at value. Securities listed on an exchange or quoted on a national
market system are valued at the last sales price as of the close of
normal trading on the New York Stock Exchange, generally 4:00 p.m.
Eastern Time. Other securities traded in the over-the-counter market
and listed securities for which no sale was reported on that date are
valued at the most recent bid price. Securities for which market
quotations are not readily available or which cannot be accurately
valued using the Fund's normal pricing procedures, if any, are valued
following procedures approved by the Trustees. Short-term investments
are valued at cost, which approximates value.
B. Federal Income Taxes - No provision has been made for federal income
taxes since the Fund intends to distribute substantially all taxable
income to shareholders. It is the policy of the Fund to comply with
the provisions of the Internal Revenue Code applicable to regulated
investment companies and to make sufficient distributions of taxable
income to relieve it from all federal income taxes.
Net investment income (loss) and net realized gains (losses) may
differ for financial statement and income tax purposes primarily
because of losses incurred subsequent to October 31, which are
deferred for income tax purposes. The character of distributions made
during the year from net investment income or net realized gains may
differ from their ultimate characterization for federal income tax
purposes. Also, due to the timing of dividend distributions, the
fiscal year in which amounts are distributed may differ from the year
that the income or realized gains were recorded by the Fund.
The Fund has capital loss carryforwards for federal income tax
purposes of $323,629, which expires in the year 2012. It is the
intention of the Board of Trustees of the Trust not to distribute any
realized gains until the carryforwards have been offset or expire.
As a result of the Fund's operating net investment loss, a
reclassification adjustment of $58,208 has been charged to paid-in
capital and accumulated net investment loss has been credited $58,208,
bringing it to zero.
(Continued)
PMFM Moderate Portfolio Trust
NOTES TO FINANCIAL STATEMENTS
May 31, 2004
C. Investment Transactions - Investment transactions are recorded on the
trade date. Realized gains and losses are determined using the
specific identification cost method. Interest income is recorded daily
on an accrual basis. Dividend income is recorded on the ex-dividend
date.
D. Distributions to Shareholders - The Fund may declare dividends
quarterly, payable in March, June, September and December, or on a
date selected by the Trustees. In addition, distributions may be made
annually in December out of net realized gains through October 31 of
that year. Distributions to shareholders are recorded on the
ex-dividend date.
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 amounts of assets, liabilities, expenses
and revenues reported in the financial statements. Actual results
could differ from those estimates.
NOTE 2 - INVESTMENT ADVISORY FEE AND OTHER RELATED PARTY TRANSACTIONS
Pursuant to an investment advisory agreement, PMFM, Inc. (the "Advisor")
provides the Fund with a continuous program of supervision of the Fund's
assets, including the composition of its portfolio, and furnishes advice
and recommendations with respect to investments, investment policies, and
the purchase and sale of securities. As compensation for its services, the
Advisor receives a fee at the annual rate of 1.25% of the Fund's average
daily net assets. The Advisor has entered into a contractual agreement (the
"Expense Limitation Agreement") with the Trust under which it has agreed to
waive or reduce its fees and to assume other expenses of the Fund, if
necessary, in an amount that limits the Fund's total operating expenses
(exclusive of interest, taxes, brokerage fees and commissions,
extraordinary expenses, and payments, if any, under a Rule 12b-1 Plan) to
not more than 2.25% of the average daily net assets of the Fund's Investor
Class and Advisor Class for the fiscal year ending May 31, 2004. The
Advisor has voluntarily waived a portion of its fee amounting to $36,673
and will reimburse the fund for $3,914 for the period ended May 31, 2004.
There can be no assurance that the Expense Limitation Agreement will
continue in the future.
The Fund's administrator, The Nottingham Company (the "Administrator"),
provides administrative services to and is generally responsible for the
overall management and day-to-day operations of the Fund pursuant to a fund
accounting and compliance agreement with the Trust. As compensation for its
services, the Administrator receives a fee at the annual rate of 0.175% of
the Fund's first $50 million of average daily net assets, 0.150% of the
next $50 million, 0.125% of the next $50 million, 0.100% of the next $50
million, and 0.075% of average daily net assets over $200 million, with a
minimum administration fee of $2,000 per month. The Administrator also
receives a monthly fund accounting fee of $2,250 for accounting and
recordkeeping services for the initial class of shares and $750 per month
for each additional class of shares, plus 0.01% of the annual net assets.
The Administrator will also receive the following to procure and pay the
custodian for the Trust: 0.02% on the first $100 million of the Fund's net
assets and 0.009% on all assets over $100 million plus transaction fees
with a minimum fee of $400 per month. The Administrator will also charge
the Fund for certain expenses involved with the daily valuation of
portfolio securities, which are believed to be immaterial in amount.
(Continued)
PMFM Moderate Portfolio Trust
NOTES TO FINANCIAL STATEMENTS
May 31, 2004
NC Shareholder Services, LLC (the "Transfer Agent") serves as the Fund's
transfer, dividend paying, and shareholder servicing agent. The Transfer
Agent maintains the records of each shareholder's account, answers
shareholder inquiries concerning accounts, processes purchases and
redemptions of Fund shares, acts as dividend and distribution disbursing
agent, and performs other shareholder servicing functions. The Transfer
Agent will be compensated for its services based upon a $15 fee per
shareholder per year, subject to a minimum fee of $1,750 per month, plus
$500 per month for each additional class of shares. In addition, the
Transfer Agent shall be entitled to reimbursement of actual out-of-pocket
expenses incurred by the Transfer Agent on behalf of the Trust or the Fund.
Certain Trustees and officers of the Trust are also officers of the Advisor
or the Administrator.
NOTE 3 - DISTRIBUTION AND SERVICE FEES
The Trustees, including the Trustees who are not "interested persons" of
the Trust as defined in the Act, adopted a distribution and service plan
pursuant to Rule 12b-1 of the Act (the "Plan"). The Act regulates the
manner in which a regulated investment company may assume costs of
distributing and promoting the sales of its shares and servicing of its
shareholder accounts. The Plan provides that the Fund may incur certain
costs, which may not exceed 0.25% and 1.00% per annum of the average daily
net assets of the Investor Class and Advisor class, respectively, for each
year elapsed subsequent to adoption of the Plan, for payment to the
Distributor and others for items such as advertising expenses, selling
expenses, commissions, travel, or other expenses reasonably intended to
result in sales of Investor Class shares and Advisor Class shares in the
Fund or support servicing of Investor Class and Advisor Class shareholder
accounts. The Fund incurred $9,035 of such expenses for the Investor Class
and $2 of such expenses for the Advisor Class under the Plan for the period
ended May 31, 2004.
NOTE 4 - PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments other than short-term investments
aggregated $6,964,704 and $6,641,075, respectively, for the period ended
May 31, 2004.
(Continued)
PMFM Moderate Portfolio Trust
ADDITIONAL INFORMATION
May 31, 2004
(Unaudited)
PROXY VOTING POLICY
A copy of the Trust's Proxy Voting and Disclosure Policy and the Advisor's Proxy
Voting and Disclosure Policy are included as Appendix B to the Fund's Statement
of Additional Information and is available, without charge, upon request, by
calling 1-866-383-7636. Effective with the 12-month period ended June 30, 2004,
the Fund will file Form N-PX stating how the Fund voted proxies relating to
portfolio securities during the most recent 12-month period ended June 30 within
60 days after the end of such period. Information regarding how the Fund voted
proxies as set forth in its most recent filing of Form N-PX will be available
(i) without charge, upon request, by calling the Fund at 1-866-383-7636; and
(ii) on the SEC's website at http://www.sec.gov.
INFORMATION ABOUT TRUSTEES AND OFFICERS
The business and affairs of the Fund and the Trust are managed under the
direction of the Trustees. Information concerning the Trustees and officers of
the Trust and Fund is set forth below. Generally, each Trustee and officer
serves an indefinite term or until certain circumstances such as their
resignation, death, or otherwise as specified in the Trust's organizational
documents. Any Trustee may be removed at a meeting of shareholders by a vote
meeting the requirements of the Trust's organizational documents. The Statement
of Additional Information of the Fund includes additional information about the
Trustees and officers and is available, without charge, upon request by calling
the Fund toll-free at 1-866-383-7636. The address of each Trustee and officer,
unless otherwise indicated below, is 1551 Jennings Mill Road - Suite 2400A,
Bogart, Georgia 30622. The Trustees received aggregate compensation of $1,000
during the fiscal year ended May 31, 2004 from the Fund for their services to
the Fund and Trust. The officers did not receive compensation from the Fund for
their services to the Fund and Trust.
TRUSTEES
- ---------------------------- ----------- ---------- -------------------------------------- -------------- ------------------------
Number of
Portfolios
in Fund
Position(s) Length Complex
Name, Age and held with of Time Principal Occupation(s) Overseen by Other Directorships
Address Fund/Trust Served During Past 5 Years Trustee Held by Trustee
- ---------------------------- ----------- ---------- -------------------------------------- -------------- ------------------------
Independent Trustees
- ---------------------------- ----------- ---------- -------------------------------------- -------------- ------------------------
James M. Baker (52) Trustee Since Mr. Baker has been the President of 1 Mr. Baker serves as a
6/2003 Baker & Lassiter, Inc. (real estate director of Community
development and management) since Capital Bank, a
1993. closely held state
chartered bank.
- ---------------------------- ----------- ---------- -------------------------------------- -------------- ------------------------
Norman A. McLean (50) Trustee Since Mr. McLean has been the Associate 1 None
6/2003 Athletic Director for Marketing and
Promotions at the University of
Georgia Athletic Association, Inc.
("UGAA") since 2000. Mr. McLean
previously was Assistant Athletic
Director at UGAA.
- ---------------------------- ----------- ---------- -------------------------------------- -------------- ------------------------
Interested Trustees*
- ---------------------------- ----------- ---------- -------------------------------------- -------------- ------------------------
Donald L. Beasley (61) Trustee, Since Mr. Beasley has been the President 1 None
Treasurer 6/2003 of the Advisor since 1991.
and
Principal
Financial
Officer
- ---------------------------- ----------- ---------- -------------------------------------- -------------- ------------------------
* The Interested Trustee is an Interested Trustee because he is an officer and employee of the Advisor.
- ----------------------------------------------------------------------------------------------------------------------------------
PMFM Moderate Portfolio Trust
ADDITIONAL INFORMATION
May 31, 2004
(Unaudited)
- ---------------------------- ----------- ---------- -------------------------------------- -------------- ------------------------
Number of
Portfolios
in Fund
Position(s) Length Complex
Name, Age and held with of Time Principal Occupation(s) Overseen by Other Directorships
Address Fund/Trust Served During Past 5 Years Trustee Held by Trustee
- ---------------------------- ----------- ---------- -------------------------------------- -------------- ------------------------
Other Officers
- ---------------------------- ----------- ---------- -------------------------------------- -------------- ------------------------
Timothy A. Chapman (43) President Since Mr. Chapman has been the Secretary n/a n/a
and 6/2003 and Treasurer of the Advisor since
Principal February, 1993. Mr. Chapman has
Executive been a Vice President of the
Officer MurphyMorris Money Management Co.
(investment advisory firm) since
1996. Mr. Chapman has also been the
President of Financial Toobox, Inc.
(website publishing firm) since
2000.
- ---------------------------- ----------- ---------- -------------------------------------- -------------- ------------------------
C. Frank Watson III (33) Secretary Since Mr. Watson has been the President n/a n/a
The Nottingham Company 6/2003 and Chief Operating Officer of The
116 South Franklin Street Nottingham Company, the Fund's
Post Office Box 69 administrator, since 1999. Mr.
Rocky Mount, NC 27802 Watson previously was the Chief
Operating Officer of The Nottingham
Company.
- ---------------------------- ----------- ---------- -------------------------------------- -------------- ------------------------
Julian G. Winters (35) Asst. Since Mr. Winters has been the Vice n/a n/a
The Nottingham Company Secretary 6/2003 President of Compliance
116 South Franklin Street and Asst. Administration at The Nottingham
Post Office Box 69 Treasurer Company since 1998.
Rocky Mount, NC 27802
- ---------------------------- ----------- ---------- -------------------------------------- -------------- ------------------------
Deloitte
Deloitte & Touche LLP
Two World Financial Center
New York, New York 10281-1414
Tel: (212) 436-2000
Fax: (212) 436-5000
www.deloitte.com
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of PMFM Investment Trust and the Shareholders of PMFM
Moderate Portfolio Trust:
We have audited the accompanying statement of assets and liabilities of PMFM
Moderate Portfolio Trust (the "Fund") (a portfolio of PMFM Investment Trust),
including the portfolio of investments, for the period from March 25, 2004 (date
of initial public investment) through May 31, 2004, and the related statement of
operations, the statement of changes in net assets and the financial highlights
for the period then ended. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned at May 31, 2004, by correspondence with the custodian. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of PMFM
Moderate Portfolio Trust from March 25, 2004 (date of initial public investment)
through May 31, 2004, the results of its operations, the changes in its net
assets, and the financial highlights for the period then ended, in conformity
with accounting principles generally accepted in the United States of America.
/s/ Deloitte & Touche LLP
July 19, 2004
Member of
Deloitte Touche Tohmatsu
(This page was intentionally left blank.)
________________________________________________________________________________
PMFM Moderate Portfolio Trust
________________________________________________________________________________
a series of the PMFM Investment Trust
This Report has been prepared for shareholders and may be
distributed to others only if preceded or accompanied by a
current prospectus.
Item 2. CODE OF ETHICS.
(a) The registrant, as of the end of the period covered by this report, has
adopted a code of ethics that applies to its Principal Executive
Officer, Principal Financial Officer, and Principal Accounting
Officer(s), or persons performing similar functions, regardless of
whether these individuals are employed by the registrant or a third
party.
(c) There have been no amendments during the period covered by this report.
(d) The registrant has not granted, during the period covered by this
report, any waivers, including an implicit waiver.
(f)(1) A copy of the code of ethics that applies to the registrant's Principal
Executive Officer and Principal Financial Officer is filed pursuant to
Item 11(a)(1) below.
Item 3. AUDIT COMMITTEE FINANCIAL EXPERT.
(a)(1) The registrant does not have an audit committee financial expert
serving on its audit committee.
(a)(2) Not applicable.
(a)(3) At this time, the registrant believes that the collective experience
provided by the members of the audit committee together offer the
registrant adequate oversight for the registrant's level of financial
complexity.
Item 4. Principal Accountant Fees and Services.
(a) Audit Fees - Audit fees billed for the registrant for the fiscal year
ended May 31, 2004 are reflected in the table below. These amounts
represent aggregate fees billed by the registrants' independent
accountant, Deloitte & Touche LLP ("Accountant"), in connection with
the annual audit of the registrant's financial statements and for
services normally provided by the Accountant in connection with the
statutory and regulatory filings. The fiscal year ended May 31, 2004
was the initial fiscal year for the registrant.
------------------------------------------------------------- --------------
Fund 2004
------------------------------------------------------------- --------------
PMFM ETF Portfolio Trust $13,500
------------------------------------------------------------- --------------
PMFM Moderate Portfolio Trust $14,250
------------------------------------------------------------- --------------
(b) Audit-Related Fees - There were no additional fees billed in the fiscal
year ended May 31, 2004 for assurance and related services by the
Accountant that were reasonably related to the performance of the audit
of the registrant's financial statements that were not reported under
paragraph (a) of this Item.
(c) Tax Fees - The tax fees billed in the fiscal year ended May 31, 2004
for professional services rendered by the principal accountant for tax
compliance, tax advice, and tax planning were $1,025. These services
were for the completion of the PMFM ETF Portfolio Trust's excise tax
return for the calendar year 2003.
(d) All Other Fees - The registrant was billed a fee of $1,500 in the
fiscal year ended May 31, 2004 which was associated with the initial
balance sheet audit and procedures by the Accountant of the seed
capital used to capitalize the registrant's inception of its initial
fund, the PMFM ETF Portfolio Trust. There were no other fees paid to
the Accountant which were not disclosed in Items (a) through (c) above
during the fiscal year ended May 31, 2004.
(e)(1) The registrant's board of trustees pre-approved the engagement of the
Accountant for the fiscal year ended May 31, 2004 at the registrant's
initial board of trustees meeting and will pre-approve the Accountant
for each fiscal year thereafter at an audit committee meeting called
for such purpose. The charter of the audit committee states that the
audit committee should pre-approve any audit services and, when
appropriate, evaluate and pre-approve any non-audit services provided
by the Accountant to the registrant and to pre-approve, when
appropriate, any non-audit services provided by the Accountant to the
registrant's investment adviser, or any entity controlling, controlled
by, or under common control with the investment adviser that provides
ongoing services to the registrant if the engagement relates directly
to the operations and financial reporting of the registrant.
(2) There were no services as described in each of paragraph (b) through
(d) of this Item that were approved by the audit committee pursuant to
paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Not Applicable.
(g) There were no fees billed by the Accountant for services rendered to
the registrant, the registrant's investment adviser, or any other
entity controlling, controlled by, or under common control with the
registrant's investment adviser.
(h) Not applicable.
Item 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
Item 6. SCHEDULE OF INVESTMENTS.
Not applicable to the reporting period covered by this report.
Item 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
Item 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
Item 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS.
Not applicable.
Item 10. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal financial
officer have concluded that the registrant's disclosure controls and
procedures are effective based on their evaluation of these disclosure
controls and procedures as of a date within 90 days of the filing of
this report.
(b) There were no changes in the registrant's internal control over
financial reporting that occurred during the registrant's second fiscal
half-year that have materially affected, or are reasonably likely to
materially affect, the registrant's internal control over financial
reporting.
Item 11. EXHIBITS.
(a)(1) Code of Ethics required by Item 2 of Form N-CSR is filed herewith as
Exhibit 11.(a)(1).
(a)(2) Certifications required by Item 11.(a)(2) of Form N-CSR are filed
herewith as Exhibit 11.(a)(2).
(a)(3) Not applicable.
(b) Certifications required by Item 11.(b) of Form N-CSR are filed herewith
as Exhibit 11.(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.
PMFM INVESTMENT TRUST
By: (Signature and Title) /s/ Timothy A. Chapman
________________________________
Timothy A. Chapman
President and Principal Executive Officer
Date: August 4, 2004
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/ Timothy A. Chapman
________________________________
Timothy A. Chapman
President and Principal Executive Officer
PMFM Investment Trust
Date: August 4, 2004
By: (Signature and Title) /s/ Donald L. Beasley
________________________________
Donald L. Beasley
Trustee, Chairman, Treasurer and Principal
Financial Officer
PMFM Investment Trust
Date: August 4, 2004