PAUZE FUNDS(TM)
Pauze Tombstone Fund(TM)
ANNUAL REPORT
APRIL 30, 1999
Dear Investor:
Thank you for investing in the Pauze Tombstone Fund(TM), the first-ever mutual
fund that invests in stocks of the death care industry. In the past, the death
care industry has been largely overlooked by the investing public. Now, with the
introduction of the Pauze Tombstone Fund(TM), investors are focusing in on this
growth industry where U.S. and Canadian companies are leading the way towards
globalization and consolidating what has been traditionally an independent
funeral home dominated industry. Of the 22,500 funeral homes in the U.S., about
18% are now owned by consolidators such as Service Corporation International,
the Loewen Group, Carriage Services, and Stewart Enterprises. Eager for more
market share, these companies have been aggressive purchasers of funeral and
cemetery properties. While purchases have slowed during the past months, it is
our opinion that over the next twenty years consolidators will own over 80% of
the funeral homes in the country. In addition, many of these companies are now
international in scope with operations in Europe, Australia, New Zealand, and
Mexico. Again, in our opinion, over the next twenty years, these companies, and
other North American companies like them, will dominate funeral service
globally. As the world now turns to U.S. companies for computer chips,
airplanes, personal computers, telecommunications, and energy, the world will
also be turning to North American companies for funeral service.
Aside from the expansion of services offered by the consolidators, there are
also the demographics of an aging "baby boomer" population in not only the
United States and Canada, but in most countries that were Allies during World
War II. This fact leads to strong markets overseas as well.
As you know, the Pauze Tombstone Fund(tm) is based upon the Pauze Tombstone
Common Stock Index ("Index") which is composed of the common stock of public
companies which service the death care industry. During this fiscal year, there
were significant events which impacted the Net Asset Value of the shares of the
Fund:
o Service Corporation International ("Service Corp"), the largest
funeral service company in the world announced in January, 1999, that
its earnings would not equal or exceed analysts' expectations. In the
current market environment, disappointing earnings will usually cause
a dramatic sell-off of the shares of the company and that is what
happened in the case of Service Corp. Service Corp is the largest
component of the Index and therefore the largest holding of the Fund.
o The Loewen Group ("Loewen"), the second largest funeral service
company in the world, experienced severe financial difficulties. As a
result, the stock steadily declined in price. Subsequent to the end of
the fiscal year, Loewen filed for Chapter 11 bankruptcy protection.
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o Equity Corporation International ("ECI") was purchased by Service Corp
in January, 1999, thereby reducing the number of stocks in the Index
to eight and the number of companies in the Fund to eight.
The decline in price of the shares of Service Corporation International and the
Loewen Group, comprising more than fifty percent of the Pauze Tombstone Common
Stock Index and therefore more than fifty percent of the assets of the Fund,
caused the net asset value of the shares of the Fund to decline by more than
fifty percent during this fiscal year. The elimination of ECI from the Index and
the Fund caused a greater concentration of value among the remaining companies.
Going forward, it is anticipated that a new company will be added to the Index
and to the Fund. That firm is Neptune Society, Inc. We are compiling information
on the firm to determine if it qualifies for inclusion in the Index. As you
know, if it does, the Fund will purchase shares in proportion to its Index
percentage.
Again, thank you for your trust and confidence in allowing us to serve your
investment needs.
Philip C. Pauze, President
Pauze Tombstone Fund(TM)
April 30, 1999
The graph is a comparison of the change in value of a hypothetical $10,000
investment in Pauze Tombstone Fund (Class A and Class B) and the S&P 500 Index.
The graph points are listed below. The "y" axis reflects the value of the
investment. The "x" axis reflects the computation periods from inception, May 6,
1997 through April 30, 1999. There is a table on the graph with one year and
since inception average annual returns which are listed below.
- ---------------------
GRAPH POINTS Class A Shares Class B Shares S & P 500 Index
- --------------------- -----------------------------------------------------
05/06/97 9,625 10,000 10,000
04/30/98 10,318 10,649 13,613
04/30/99 5,910 5,748 16,584
- ----------------------
AVERAGE ANNUAL RETURN* Since
- ---------------------- 1 Year Inception
-------- ---------
Class A Shares (inception 05/06/97) (44.83)% (23.26)%
Class B Shares (inception 05/06/97) (45.87)% (24.33)%
S & P 500 Index (since 05/06/97) 21.82 % 29.00 %
* The data presented herein represents past performance and is not a
guarantee of future performance. The value of your shares may fluctuate and
be worth more or less than their original cost at the time of redemption.
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REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES
PAUZE FUNDS
HOUSTON, TEXAS
We have audited the accompanying statement of assets and liabilities of Pauze
Tombstone Fund, a series of shares of Pauze Funds, including the schedule of
investments, as of April 30, 1999, and the related statement of operations for
the year then ended and the statement of changes in net assets and the financial
highlights for each of the two years in the period then ended. These financial
statements and financial highlights are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 as of April
30, 1999, 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 audits provide 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 Pauze
Tombstone Fund, as of April 30, 1999, the results of its operations for the year
then ended, the changes in its net assets and the financial highlights for each
of the two years in the period then ended, in conformity with generally accepted
accounting principles.
PHILADELPHIA, PENNSYLVANIA
JUNE 23, 1999
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PAUZE TOMBSTONE FUND(TM)
SCHEDULE OF INVESTMENTS
APRIL 30, 1999
- --------------------------------------------------------------------------------
Number of Market
Shares or Principal Value
- ------------------- -----------
EQUITY SECURITIES (31.30%)
1,253 Carriage Services, Inc. * $ 24,042
2,107 Hillenbrand Industries, Inc 98,897
8,593 The Loewen Group, Inc.* 10,204
1,828 Matthews International Corporation, Class A 48,671
870 Rock of Ages Corporation * 9,026
500 Service Corporation International 10,375
6,648 Stewart Enterprises, Inc., Class A 132,129
973 The York Group, Inc. 8,697
-----------
Total equity securities (Cost $653,062) 342,041
-----------
AGENCY OBLIGATIONS (16.65%)
$182,000 FHLB Discount Note, 5/3/99, 4.80% (Cost $181,948) 181,948
-----------
TREASURY BILLS (36.55%)
400,000 U.S. Treasury Bill, 05/13/99, 4.28% (Cost $399,465) 399,465
-----------
MISCELLANEOUS ASSETS (20.23%)
221,130 Firstar Treasury Fund (Cost $221,130) 221,130
-----------
Total Investments (Cost $1,455,606) (104.73%) 1,144,584
Liabilities in excess of other assets (-4.73%) (51,646)
-----------
Net Assets (100.00%) $ 1,092,938
===========
* Non-incoming producing
The accompanying notes are an integral part of these financial statements.
4
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PAUZE TOMBSTONE FUND(TM)
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1999
- --------------------------------------------------------------------------------
Assets:
Investment in securities, at market value
(cost $1,455,606) (Note 2) $ 1,144,584
Cash 30,261
Receivables:
Capital shares sold 2,975
Interest 774
Dividends 785
Due from administrator 12,458
Unamortized organization costs (Note 2) 11,966
-----------
Total assets 1,203,803
-----------
Liabilities:
Payables:
Advisory fees 3,321
Accrued expenses 3,167
Other liabilities 4,704
Payable fund shares purchased 99,673
-----------
Total liabilities 110,865
-----------
Net assets $ 1,092,938
===========
Net assets:
Paid-in-capital 2,054,732
Accumulated net realized loss from investments (650,772)
Net unrealized depreciation on investments (311,022)
-----------
Net assets applicable to
outstanding capital shares $ 1,092,938
===========
Class A:
Net assets $ 568,724
===========
Shares outstanding, no par value,
unlimited shares authorized 110,740
===========
Net asset value and redemption price per share $ 5.14
===========
Offering price per share
(Net asset value / 96.25%) $ 5.34
===========
Class B:
Net assets $ 524,214
===========
Shares outstanding, no par value,
unlimited shares authorized 104,225
===========
Net asset value, offering price per share $ 5.03
===========
Minimum redemption price per share
(net asset value X 96.25%) $ 4.84
===========
The accompanying notes are an integral part of these financial statements.
5
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PAUZE TOMBSTONE FUND(TM)
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED APRIL 30, 1999
- --------------------------------------------------------------------------------
Investment income:
Interest income $ 31,622
Dividend income 12,875
-----------
Total income 44,497
-----------
Expenses:
Investment advisory fees (Note 5) 12,651
Administrative fees (Note 5) 6,550
Distribution fees- Class A (Note 5) 2,507
Distribution fees- Class B (Note 5) 15,307
Accounting service fees (Note 5) 4,815
Transfer agent fees (Note 5) 4,188
Registration fees 5,637
Custodian fees 2,701
Professional fees 1,982
Trustees' fees and expenses (Note 5) 1,522
Amortization of organization expense (Note 2) 3,986
Miscellaneous 1,754
-----------
Total expenses 63,600
-----------
Net investment loss (19,103)
-----------
Net realized and unrealized loss from investments:
Net realized loss on investments (341,054)
Net change in unrealized depreciation
of investments (815,278)
-----------
Net realized and unrealized loss on investments (1,156,332)
-----------
Net decrease in net assets resulting
from operations $(1,175,435)
===========
The accompanying notes are an integral part of these financial statements.
6
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PAUZE TOMBSTONE FUND(TM)
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year For the Year
Ended Ended
April 30, 1999 April 30, 1998
----------- -----------
From operations:
<S> <C> <C>
Net investment loss $ (19,103) $ (93,970)
Net realized loss on investments (341,054) (3,731)
Net change in unrealized appreciation
(depreciation) of investments (815,278) 504,256
----------- -----------
Net increase (decrease) in net assets
resulting from operations (1,175,435) 406,555
----------- -----------
Distributions to shareholders from:
Net realized gain on investments
Class A (162,910) --
Class B (143,077) --
----------- -----------
(305,987) --
----------- -----------
Capital share transactions - net (Note 4) (2,320,562) 4,488,367
----------- -----------
Net increase (decrease) in net assets (3,801,984) 4,894,922
Net assets at beginning of year 4,894,922 --
----------- -----------
Net assets at end of year $ 1,092,938 $ 4,894,922
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
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PAUZE TOMBSTONE FUND(TM)
FINANCIAL HIGHLIGHTS TABLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For a capital share outstanding throughout each year:
For the For the For the For the
year ended year ended year ended year ended
April 30, April 30, April 30, April 30,
1999 1998 1999 1998
Class A Class A Class B Class B
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net asset value, beginning of year $ 10.71 $ 10.00 $ 10.64 $ 10.00
--------- --------- --------- ---------
Income from investment operations:
Net investment loss (0.03) (0.16) (0.15) (0.22)
Net realized and unrealized gain (loss)
on investments (3.95) 0.87 (3.87) 0.86
--------- --------- --------- ---------
Total from investment operations (3.98) 0.71 (4.02) 0.64
--------- --------- --------- ---------
Distributions from net realized gain on investments (1.59) -- (1.59) --
--------- --------- --------- ---------
Net asset value, end of year $ 5.14 $ 10.71 $ 5.03 $ 10.64
========= ========= ========= =========
Total return (43.02)% 7.20%(a) (43.76)% 6.49%(a)
Ratios/Supplemental Data:
Net assets, end of year (000) $ 569 $ 1,419 $ 524 $ 3,476
Ratio of expenses to average net assets 2.06% 3.36%(b) 2.81% 4.1%(b)
Ratio of net investment loss to average net assets (0.30)% (2.08)%(b) (1.05)% (2.86)%(b)
Portfolio turnover rate 278.24% 124.2% 278.24% 124.2%
</TABLE>
- ----------------
(a) Annualized from commencement of investment activity, May 6, 1997.
(b) Net investment income is net of expense reimbursements and fee waivers of
$.002 and $.002 per share for Class A and Class B, respectively. Had such
reimbursements not been made, the expense ratio would have been 3.51% and
4.25% for Class A and Class B, respectively, and the net investment income
ratio would have been (2.22)% and (3.01)% for Class A and Class B
respectively.
The accompanying notes are an integral part of these financial statements.
8
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PAUZE TOMBSTONE FUND(TM)
Notes To Financial Statements
April 30, 1999
- --------------------------------------------------------------------------------
1. ORGANIZATION
Pauze Tombstone Fund(TM) (the "FUND") is a non-diversified, open-end
management investment company, organized as a series of Pauze Funds (the
"TRUST") on January 29, 1997, and commencing operations on May 1, 1997. The
Trust was organized as a Massachusetts business trust on October 15, 1993.
There are currently three additional series within the Trust which are not
a subject of these financial statements.
The Fund offers its shares in two classes. Class A shares are subject to a
sales charge at the time of purchase. Class B shares are subject to a
contingent deferred sales charge on redemptions made within seven years of
purchase.
The investment objective of the Fund is to provide shareholders with
long-term capital appreciation. The Fund seeks to achieve this objective by
investing primarily in all or a representative group of equity securities
comprising the Pauze Tombstone Common Stock Index TM, an index of publicly
traded companies providing goods and/or services to the death care sector
of the economy.
The death care sector consists of companies whose primary business is
concentrated in one or more of three broad categories: (1) funeral
services, (2) cemetery services, (3) funeral and cemetery support goods and
services. Any regulatory, demographic or other economic factor particularly
affecting the death care industry could have a material adverse impact on
the Fund. The Fund is a non-diversified fund, and, as such, presents
substantially more investment risk and potential for volatility than a
mutual fund which is diversified.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the
financial statements. Actual results could differ from those estimates.
9
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PAUZE TOMBSTONE FUND(TM)
Notes To Financial Statements - (continued)
April 30, 1999
- --------------------------------------------------------------------------------
SECURITY VALUATION
Securities which are traded on any exchange or on the NASDAQ
over-the-counter market are valued at the last quoted sale price. Lacking a
last sale price, a security is valued at its last bid price except when, in
the Advisor's opinion, the last bid price does not accurately reflect the
current value of the security. Short-term securities with maturities of
sixty days or less at the time of purchase ordinarily are value on an
amortized cost basis. All other securities for which over-the-counter
market quotations are readily available are valued at their last bid price.
When market quotations are not readily available, when the Advisor
determines the last bid price does not accurately reflect the current value
or when restricted securities are being valued, such securities are valued
as determined in good faith by the Advisor, subject to review of the Board
of Trustees of the Trust.
INCOME AND EXPENSES
Expenses directly attributable to the Fund are charged to the Fund; other
expenses of the Trust are allocated proportionately among each of the Funds
within the Trust in relation to the net assets of each Fund or on another
reasonable basis. Expenses directly attributable to a particular class are
charged directly to such class. In calculating net asset value per share of
each class, investment income, realized and unrealized gains and losses and
expenses other than class specific expenses are allocated daily to each
class of shares based upon the proportion of net assets of each class at
the beginning of each day.
SECURITIES TRANSACTIONS AND RELATED INVESTMENT INCOME
Investment transactions are accounted for on the trade date (the date the
order to buy or sell is executed). Securities gains and losses are
calculated on the identified cost basis. Interest income is determined on
the basis of coupon interest accrued daily, adjusted for amortization of
premiums, and accretion of discount. Dividend income is recorded on the
ex-dividend date.
REPURCHASE AGREEMENTS
The Trust's policy is for the custodian to receive delivery of the
underlying securities used to collateralize the repurchase agreements in an
amount at least equal to 102% of the resale price. In the event of default
of the obligation to repurchase, the Fund has the right to liquidate the
collateral and apply the proceeds in satisfaction of the obligation.
Provisions of each agreement require that the market value of the
collateral is sufficient to pay principal and interest; however, in the
event of default or bankruptcy by the other party to the agreement,
realization and/or retention of the collateral may be subject to legal
proceedings.
10
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PAUZE TOMBSTONE FUND(TM)
Notes To Financial statements - (continued)
April 30, 1999
- --------------------------------------------------------------------------------
FEDERAL INCOME TAXES
It is the intention of the Fund to continue to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code and to
distribute all of its taxable income to its shareholders. Accordingly, no
federal income tax provision is required.
DEFERRED ORGANIZATIONAL COSTS
Costs incurred by the Fund in connection with its organization have been
deferred and are being amortized using the straight-line method over a
five-year period beginning with the commencement of operations of the Fund.
In the event that any of the initial shares of the Fund are redeemed during
the amortization period by any holder thereof, the redemption proceeds will
be reduced by any unamortized organization expenses in the same proportion
as the number of initial shares being redeemed bears to the number of
initial shares outstanding at the time of such redemption.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends and distributions to shareholders are recorded by the Fund on
ex-dividend date. The Fund generally pays dividends quarterly and capital
gains distributions, if any, at least annually. The Fund distributes tax
basis earnings in accordance with the minimum distribution requirements of
the Internal Revenue Code, which may result in dividends or distributions
in excess of financial statement (book) earnings. Income dividends and
capital gain distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
3. INVESTMENT TRANSACTIONS
For the year ended April 30, 1999, the cost of purchases and proceeds from
sales of investments, excluding short-term investments, were $5,139,953 and
$8,487,308, respectively. At April 30, 1999, the unrealized depreciation of
investments for tax purposes was $311,022. Gross unrealized appreciation of
investments aggregated $11,891 and gross unrealized depreciation of
investments aggregated $322,913. The cost of investments for federal income
tax purposes at April 30, 1999 was $1,455,606. Accumulated net realized
loss on investment transactions at April 30, 1999 amounted to $650,772.
11
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PAUZE TOMBSTONE FUND(TM)
Notes To Financial Statements - (continued)
April 30, 1999
- --------------------------------------------------------------------------------
4. CAPITAL SHARES TRANSACTIONS
<TABLE>
<CAPTION>
Year Ended Year Ended
April 30, 1999 April 30, 1998
--------------------------- ---------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Shares sold 13,785 $ 92,092 159,333 $ 1,558,718
Reinvestment of dividends 19,689 162,910 -- --
Shares redeemed (55,219) (441,205) (26,848) (255,437)
----------- ----------- ----------- -----------
Net increase
(decrease) (21,745) ($ 186,203) 132,485 $ 1,303,281
=========== =========== =========== ===========
CLASS B SHARES AMOUNT SHARES AMOUNT
----------- ----------- ----------- -----------
Shares sold 4,139 $ 41,545 335,481 $ 3,275,767
Reinvestment of dividends 16,732 143,077 -- --
Shares redeemed (243,176) (2,318,981) (8,951) (90,681)
----------- ----------- ----------- -----------
Net increase
(decrease) (222,305) ($2,134,359) 326,530 $ 3,185,086
=========== =========== =========== ===========
</TABLE>
5. TRANSACTIONS WITH THE MANAGER AND AFFILIATES
Pauze, Swanson & Associates Investment Advisors, Inc. d/b/a Pauze Swanson
Capital Management Co. (the "ADVISOR" or the "MANAGER"), under an
Investment Advisory Agreement with the Trust in effect through October 31,
1999, furnishes management and investment advisory services to the Fund.
This agreement provides for a monthly management fee at the annual rate of
0.38% of the average daily net assets of the Fund.
Certain officers/trustees of the Fund are also officers and/or directors of
the Manager.
12
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PAUZE TOMBSTONE FUND(TM)
Notes To Financial Statements - (continued)
April 30, 1999
- --------------------------------------------------------------------------------
Declaration Service Company serves as the Administrator to the Trust
pursuant to an Administrative Services Agreement with the Trust. As
Administrator, Declaration Service Company is responsible for services such
as financial reporting, compliance monitoring and corporate management. For
the Services provided, the Administrator receives an annual fee of
$214,000, payable in equal monthly installments which are allocated to each
series based upon the relative net assets of each series. The series also
pay standard out-of-pocket costs to Declaration Service Company. The Fund's
share of these fees and expenses for the year ended April 30, 1999 was
$6,550.
Declaration Service Company determines the net asset value per share of the
Fund and provides accounting services to the Fund pursuant to an Accounting
Services Agreement with the Trust. For its services, Declaration Service
Company receives an annual fee of $178,000, payable in equal monthly
installments which are allocated to each series based upon the relative net
assets of each series. The series also pay standard out-of-pocket costs to
Declaration Service Company. The Fund's share of these fees and expenses
for the year ended April 30, 1999 was $4,815.
Declaration Distributors, Inc., an affiliate of Declaration Service
Company, serves as the Trust agent in connection with the distribution of
Fund shares. For the services provided, Declaration Distributors, Inc.
receives an annual fee of $20,000 from the Trust. The Fund's share of these
expenses for the year ended April 30, 1999 was $661.
Declaration Service Company serves as Transfer Agent and dividend paying
agent of the Trust pursuant to a separate Transfer Agency and Shareholder
Services Agreement with the Trust. For its services, the Trust pays
Declaration Service Company an annual fee of $18 per account (subject to a
minimum annual fee of $24,000 for the trust) plus standard out-of-pocket
expenses. The Fund's share of these fees and expenses for the year ended
April 30, 1999 was $4,188.
An officer of Declaration Service Company and Declaration Distributors,
Inc. (the underwriter of the Trust) is an officer/trustee of the Trust. The
officer receives no compensation for these services. This person resigned
as Trustee of the Trust subsequent to April 30,1999.
B.C. Ziegler and Company (formally GS2 Securities, Inc.) of which
officers/directors of the Advisor may be deemed to be affiliates received
$19,803 in brokerage commissions on purchases and sales of Fund investments
during the year ended April 30, 1999.
Independent trustees are each paid an annual fee of $10,500 from the Trust
plus $500 per meeting and out-of-pocket expenses. The Fund's share of these
expenses for the year ended April 30, 1999 was $1,522.
13
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PAUZE TOMBSTONE FUND(TM)
Notes To Financial Statements - (continued)
April 30, 1999
- --------------------------------------------------------------------------------
DISTRIBUTION AND UNDERWRITING FEES
CLASS A SHARES
Class A shares of the Fund are sold at net asset value plus a sales charge
and are redeemed at net asset value (without a contingent deferred sales
charge).
During the year ended April 30, 1999, Declaration Distributors, Inc., the
Fund's Underwriter earned $2,379 from commissions and underwriting fees.
CLASS B SHARES
Class B shares of the Fund are sold at net asset value and are redeemed at
net asset value less a contingent deferred sales charge if redeemed within
seven years of purchase. The charge is a declining percentage starting at
3.75% of the lesser of net asset value of the shares redeemed or the total
cost of such shares.
RULE 12B-1 DISTRIBUTION PLAN
A plan of distribution has been adopted under Rule 12b-1 of the Investment
Company Act of 1940 for the Fund, with separate provisions for each class
of shares. The plan provides that the Fund will pay a servicing or Rule
12b-1 fee of 0.25% of the Fund's average net assets (1/12 of 0.25% monthly)
to the Advisor for its distribution related services and expenses. With
respect to the Class B shares, the distribution plan provides that the Fund
will use Fund assets allocable to those shares to pay the Advisor
additional Rule 12b-1 fees of 0.75% of said assets (1/12 of 0.75% monthly)
for its services and expenditures related to the distribution of Class B
shares, including fees paid to broker-dealers for sales and promotional
services. Under the plan the Advisor bears all distribution expenses of the
Fund in excess of the 12b-1 fees. The fees received by the Advisor for
either class of shares during any year may be more or less than its costs
of providing distribution and shareholder services to the class of shares.
6. SUBSEQUENT EVENT
On March 30, 1999, the Board of Trustees approved a resolution to change
certain service providers for the Trust. Effective July 1, 1999, Champion
Fund Services(TM), an affiliate of the Manager, will become the
Administrator, Fund Accounting Agent and Transfer Agent to the Trust.
Concurrently, B.C. Ziegler and Company will become the Distributor of the
Trust. Such services will be provided at fees comparable to those
previously incurred by the Trust.
14
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PAUZE FUNDS(TM)
RESULTS OF SPECIAL MEETING OF SHAREHOLDERS ON NOVEMBER 18, 1998
(Unaudited)
A special meeting of the shareholders of the Pauze Funds(TM) was held on
November 18, 1998. Several matters were submitted for shareholder vote.
The first matter voted upon was the approval of new distribution plans pursuant
to Rule 12b-1 under the Investment Company Act of 1940. The plans were approved
for all classes and the results of the voting were as follows:
Fund For Against Abstain
- ---- --- ------- -------
PAUZE TOMBSTONE FUND(TM)
Class A 75,481 2,197 729
Class B 67,160 1,422 811
The next matter voted upon was the ratification of the selection of Tait, Weller
& Baker as independent accountants for the Trust for the fiscal year ending
April 30, 1999. The shareholders ratified the selection and the results of the
voting were as follows:
Fund For Against Abstain
- ---- --- ------- -------
PAUZE TOMBSTONE FUND(TM) 145,749 1,082 969
15
