PAUZE FUNDS(TM)
Pauze U.S. Government Total Return Bond Fund(TM)
Pauze U.S. Government Intermediate Term Bond Fund(TM)
Pauze U.S. Government Short Term Bond Fund(TM)
SEMI- ANNUAL REPORT
OCTOBER 31, 2000
This reporting period has experienced another interesting period for interest
sensitive markets. From April 30, 2000 through October 31, 2000, the figures
were:
==========================================================================
3 MO 1YR 2YR 5YR 10YR 30YR
U.S. Treasury Bills Bills Notes Notes Notes Bonds
--------------------------------------------------------------------------
Total Return* 2.49% 3.52% 4.12% 5.98% 5.59% 5.66%
==========================================================================
* Source: Salomon Brothers Indexes. Includes capital gain (loss) and paid/
accrued interest.
==========================================================================
Pauze Funds(TM) Total Return 05/01/00 to 10/31/00
--------------------------------------------------------------------------
U.S. Government Total Return Bond Fund 6.52%
--------------------------------------------------------------------------
U.S. Government Intermediate Term Fund 5.80%
--------------------------------------------------------------------------
U.S. Government Short Term Bond Fund 3.04%
==========================================================================
The fundamental economic factors that normally are viewed as inflationary moved
forward during the period. Low unemployment was enjoyed across industry sectors
as real gains in wages rose slightly. Savings rates among American workers
slowed slightly. New home sales increased, though slightly, showing a continued
demand for the "American castle". Construction spending rose sharply, indicating
a robust demand for new office space. New car sales stayed steady during the
model change-over period. You might expect from these readings that higher
inflation was in the forecast.
Other inflation gauges, however, bucked this trend. Consumer sentiment continued
to decline from its January high, a sign that consumers are less confident in
the future of the economy. The National Association of Purchasing Managers
Index, a key and carefully watched indicator of economic growth, declined. A
significant index, the Economic Cycle Research Institute Future Inflation Gauge,
closely watched by the Federal Reserve Board ("Fed") as an inflation forecasting
tool, declined throughout the period, indicating a benign inflationary
environment. A continued decline might cause the Fed to reassess its position on
short term rates. The net impact of this data, coupled with a strong dollar, was
positive for the U.S. Government bond market. Rates declined over the period
causing the price of the 30 year U.S. Government bond to rise 3.33%.
These fundamental factors, coupled with strong proprietary market technical
indicators, caused fund managers to well position the Pauze Funds(TM) to take
advantage of this market. The Total Return Fund No Load Class shares had a
return of 6.52%, with dividends reinvested in the fund; the Intermediate Term
Fund No Load Class shares had a total return of 5.80%, with dividends reinvested
in the fund; the Short Term Fund No Load Class shares had a total return of
3.04%, with dividends reinvested in the fund.
1
<PAGE>
As we move through the election season and look to the year 2001 and beyond,
fund management will continue to monitor those key indicators to again position
the funds to take advantage of market opportunities.
Our commitment to our Shareholders has been, and always will be, to work
diligently to maximize investor returns. We will continue to strive to do so now
and in the future. We thank all of our investors for their confidence in our
abilities to manage cash prudently and wisely.
Sincerely yours,
Philip C. Pauze, President
2
<PAGE>
<TABLE>
<CAPTION>
PAUZE FUNDS OCTOBER 31,2000
SCHEDULE OF INVESTMENTS (UNAUDITED)
=================================================================================================
Principal
or Shares Value
----------- -----------
PAUZE U.S. GOVERNMENT TOTAL RETURN BOND FUND
--------------------------------------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 97.88%
<S> <C> <C>
U.S. Treasury Bond, 5.25%, 11/15/28 $61,300,000 $55,735,110
U.S. Treasury Strip, Princ, 11/15/27 48,000,000 9,908,592
FHLB Discount Note, 6.44%, 11/01/00 303,000 303,000
-----------
Total U.S. Government and Agency Obligations (Cost $66,751,155) 65,946,702
-----------
OTHER INVESTMENTS - 0.05%
Firstar Treasury Fund (Cost $35,860) 35,860 35,860
-----------
TOTAL INVESTMENTS (Cost $66,787,015) - 97.93% 65,982,562
Other assets and liabilities, net - 2.07% 1,394,673
-----------
NET ASSETS - 100.00% $67,377,235
===========
PAUZE U.S. GOVERNMENT INTERMEDIATETERM BOND FUND
------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS - 98.29%
U.S. Treasury Note, 5.75%, 08/15/10 (Cost $7,050,545) $ 7,050,000 $ 7,045,594
OTHER INVESTMENTS - 0.70%
Firstar Treasury Fund (Cost $50,079) 50,079 50,079
-----------
TOTAL INVESTMENTS (COST $7,100,624) - 98.99% 7,095,673
Other assets and liabilities, net - 1.01% 72,101
-----------
NET ASSETS - 100.00% $ 7,167,774
===========
PAUZE U.S. GOVERNMENT SHORT TERM BOND FUND
------------------------------------------
U.S. GOVERNMENT OBLIGATIONS - 98.13%
U.S. Treasury Note, 5.25%, 08/15/03 (Cost $10,337,442) $10,500,000 $10,327,734
-----------
OTHER INVESTMENTS - .91%
Firstar Treasury Fund (Cost $96,216) 96,216 96,216
-----------
TOTAL INVESTMENTS (Cost $10,433,658) - 99.04% 10,423,950
Other assets and liabilities, net - .96% 100,362
-----------
NET ASSETS - 100.00% $10,524,312
===========
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
PAUZE FUNDS OCTOBER 31,2000
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
=================================================================================================
U.S.
U.S. GOVERNMENT U.S.
GOVERNMENT INTERMEDIATE GOVERNMENT
TOTAL RETURN TERM SHORT TERM
BOND FUND BOND FUND BOND FUND
------------ ------------ ------------
<S> <C> <C> <C>
Assets:
Investments, at value (cost $66,787,015
$7,100,624 and $10,433,658 respectively) $ 65,982,562 $ 7,095,673 $ 10,423,950
Receivables:
Interest 1,487,053 86,075 117,049
Organizational costs -- 1,261 1,261
------------ ------------ ------------
Total assets 67,469,615 7,183,009 10,542,260
------------ ------------ ------------
Liabilities:
Accounts payable and accrued expenses 57,856 12,202 13,350
Advisory fees payable 34,524 3,033 4,598
------------ ------------ ------------
Total liabilities 92,380 15,235 17,948
------------ ------------ ------------
NET ASSETS $ 67,377,235 $ 7,167,774 $ 10,524,312
============ ============ ============
Net assets consist of:
Paid-in-capital $ 75,363,231 $ 7,591,130 $ 10,560,213
Undistributed net investment income 3,607 1,360 1,076
Accumulated net realized loss on investments (7,185,150) (419,765) (27,269)
Net unrealized depreciation of investments (804,453) (4,951) (9,708)
------------ ------------ ------------
Net assets applicable to outstanding
capital shares $ 67,377,235 $ 7,167,774 $ 10,524,312
============ ============ ============
NO LOAD CLASS:
Net assets $ 58,597,597 $ 1,792,745 $ 418,306
============ ============ ============
Shares outstanding 6,963,506 185,174 42,420
============ ============ ============
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE $ 8.41 $ 9.68 $ 9.86
============ ============ ============
CLASS B:
Net assets $ 1,284,921 $ 941,361 $ 35,089
============ ============ ============
Shares outstanding 139,174 96,924 3,623
============ ============ ============
NET ASSET VALUE AND OFFERING PRICE PER SHARE $ 9.23 $ 9.71 $ 9.69
============ ============ ============
Minimum redemption price per share (Net asset
value X 96.25%) $ 8.88 $ 9.35 $ 9.33
============ ============ ============
CLASS C:
Net assets $ 7,494,717 $ 4,433,666 $ 10,070,917
============ ============ ============
Shares outstanding 850,131 441,452 1,027,816
============ ============ ============
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE $ 8.82 $ 10.04 $ 9.80
============ ============ ============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
PAUZE FUNDS FOR THE SIX MONTHS ENDED OCTOBER 31,2000
STATEMENT OF OPERATIONS (UNAUDITED)
=================================================================================================
U.S.
U.S. GOVERNMENT U.S.
GOVERNMENT INTERMEDIATE GOVERNMENT
TOTAL RETURN TERM SHORT TERM
BOND FUND BOND FUND BOND FUND
----------- ----------- -----------
<S> <C> <C> <C>
Investment income:
Interest income $ 1,975,945 $ 230,942 $ 207,363
----------- ----------- -----------
Expenses:
Investment advisory fees 190,367 17,642 16,271
Distribution fees- No load class 72,818 5,096 1,612
Distribution fees- Class B 6,357 4,782 519
Distribution fees- Class C 19,651 10,116 25,574
Administrative fees 62,114 6,810 3,576
Accounting service fees 53,547 5,871 3,082
Transfer agent fees 41,449 4,544 2,386
Distributor fees 12,851 1,409 740
Registration fees 3,649 1,729 2,384
Custodian fees 7,950 2,400 2,250
Professional fees 31,768 6,367 4,031
Trustees' fees and expenses 28,862 3,166 1,672
Amortization of organization expense -- 741 741
Miscellaneous 13,047 3,387 3,184
----------- ----------- -----------
Total expenses 544,430 74,060 68,022
----------- ----------- -----------
NET INVESTMENT INCOME 1,431,515 156,882 139,341
----------- ----------- -----------
Net realized and unrealized gain (loss) on investments:
Net realized gain on investments 3,237,158 163,410 14,817
Net change in unrealized appreciation
(depreciation) of investments (804,453) 48,690 13,608
----------- ----------- -----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 2,432,705 212,100 28,425
----------- ----------- -----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 3,864,220 $ 368,982 $ 167,766
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
PAUZE FUNDS
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
================================================================================================================
U.S. GOVERNMENT U.S. GOVERNMENT
TOTAL RETURN BOND FUND INTERMEDIATE TERM BOND FUND
============================== ==============================
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
OCTOBER 31, APRIL 30, OCTOBER 31, APRIL 30,
2000 2000 2000 2000
---------------- ------------ ---------------- ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
>From operations:
Net investment income $ 1,431,515 $ 2,215,522 $ 156,882 $ 218,013
Net realized gain (loss) on investments 3,237,158 (4,613,178) 163,410 (204,660)
Net change in unrealized appreciation
(depreciation) of investments (804,453) 609,169 48,690 (53,641)
------------ ------------ ------------ ------------
Net increase (decrease) in net assets
from operations 3,864,220 (1,788,487) 368,982 (40,288)
------------ ------------ ------------ ------------
Distributions to shareholders from:
Net investment income:
No load class (1,329,831) (2,208,967) (87,812) (193,989)
Class B (20,685) (32,603) (19,496) (24,672)
Class C (77,392) (8,517) (49,047) --
------------ ------------ ------------ ------------
Total distributions to shareholders (1,427,908) (2,250,087) (156,355) (218,661)
------------ ------------ ------------ ------------
>From net capital share transactions - (Note 4) 4,564,924 6,938,887 705,976 (3,115,128)
------------ ------------ ------------ ------------
Net increase (decrease) in net assets 7,001,237 2,900,313 918,603 (3,374,077)
Net assets at beginning of period 60,375,999 57,475,686 6,249,171 9,623,248
------------ ------------ ------------ ------------
NET ASSETS AT END OF PERIOD $ 67,377,235 $ 60,375,999 $ 7,167,774 $ 6,249,171
============ ============ ============ ============
Including undistributed net investment income of: $ 3,607 $ 0 $ 1,360 $ 834
============ ============ ============ ============
<CAPTION>
U.S. GOVERNMENT
SHORT TERM BOND FUND
==============================
SIX MONTHS ENDED YEAR ENDED
OCTOBER 31, APRIL 30,
2000 2000
---------------- ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
>From operations:
Net investment income $ 139,341 $ 48,155
Net realized gain (loss) on investments $ 14,817 (42,414)
Net change in unrealized appreciation
(depreciation) of investments 13,608 (22,442)
------------ ------------
Net increase (decrease) in net assets
from operations 167,766 (16,701)
------------ ------------
Distributions to shareholders from:
Net investment income:
No load class (25,417) (40,705)
Class B (2,025) (1,747)
Class C (112,307) (5,693)
------------ ------------
Total distributions to shareholders (139,749) (48,145)
------------ ------------
>From net capital share transactions - (Note 4) 7,758,629 648,556
------------ ------------
Net increase (decrease) in net assets 7,786,646 583,710
Net assets at beginning of period 2,737,666 2,153,956
------------ ------------
NET ASSETS AT END OF PERIOD $ 10,524,312 $ 2,737,666
============ ============
Including undistributed net investment income of: $ 1,076 $ 1,484
============ ============
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
PAUZE FUNDS
FINANCIAL HIGHLIGHTS (UNAUDITED)
========================================================================================================================
For a capital share outstanding throughout each period indicated:
U.S. Government Total Return Bond Fund
--------------------------------------------------------------------------
No Load
--------------------------------------------------------------------------
05/01/00 to Year Ended April 30
-------------------------------------------------------------
10/31/00 2000 1999 1998 1997 1996
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.08 $ 8.62 $ 9.60 $ 9.17 $ 9.54 $ 9.37
--------- --------- --------- --------- --------- ---------
Income from investment operations:
Net investment income 0.19 0.32 0.35 0.43 0.45 0.44
Net realized and unrealized gain (loss)
on investments 0.33 (0.54) (0.79) 1.27 (0.37) 0.31
Dividends from net investment income (0.19) (0.32) (0.35) (0.44) (0.45) (0.44)
Distributions from capital gains -- -- (0.19) (0.83) -- (0.14)
--------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 8.41 $ 8.08 $ 8.62 $ 9.60 $ 9.17 $ 9.54
========= ========= ========= ========= ========= =========
TOTAL RETURN 6.52% -2.63% -4.83% 18.91% 0.80% 8.08%
Ratios to Average Net Assets (a)
Net investment income 4.61% 3.74% 3.73% 4.41% 4.75% 4.74%
Total expenses 1.65% 1.71% 1.68% 1.65% 1.40% 1.23%
Net assets, end of period (000's) $ 58,598 $ 58,281 $ 56,124 $ 78,350 $ 67,936 $ 71,294
Turnover Ratio 1422% 4365% 1226% 252% 202% 228%
</TABLE>
----------------------------------------------------------
* Commencement of operations.
(a) Ratios are annualized for periods of less than one year, except for the
total return ratio.
See accompanying notes to financial statements.
7
<PAGE>
<TABLE>
<CAPTION>
PAUZE FUNDS
FINANCIAL HIGHLIGHTS (UNAUDITED)
===================================================================================================================================
For a capital share outstanding throughout each period indicated:
U.S. GOVERNMENT TOTAL RETURN BOND FUND
--------------------------------------------------------------------------------------
CLASS B CLASS C
--------------------------------------------------------------------------------------
05/01/00 Year Ended April 30 09/03/96* 05/01/00 05/01/99 05/13/98*
to ------------------------------ to to to to
10/31/00 2000 1999 1998 04/30/97 10/31/00 04/30/00 04/30/99
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.84 $ 9.39 $ 10.41 $ 9.84 $ 10.00 $ 8.45 $ 8.99 $ 10.00
-------- -------- -------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.15 0.27 0.27 0.36 0.27 0.15 0.23 0.28
Net realized and unrealized gain (loss)
on investments 0.39 (0.58) (0.83) 1.40 (0.16) 0.37 (0.53) (0.82)
Dividends from net investment income (0.15) (0.24) (0.27) (0.36) (0.27) (0.15) (0.24) (0.28)
Distributions from capital gains -- -- (0.19) (0.83) -- -- -- (0.19)
-------- -------- -------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 9.23 $ 8.84 $ 9.39 $ 10.41 $ 9.84 $ 8.82 $ 8.45 $ 8.99
======== ======== ======== ======== ======== ======== ======== ========
TOTAL RETURN 6.14% -3.41% -5.57% 18.16% 1.09% 6.22% -3.38% -5.63%
Ratios to Average Net Assets (a)
Net investment income 3.86% 2.99% 2.98% 3.41% 3.82% 3.86% 2.99% 2.98%
Total expenses 2.40% 2.46% 2.43% 2.66% 2.33% 2.40% 2.46% 2.43%
Net assets, end of period (000's) $ 1,258 $ 1,226 $ 1,285 $ 280 $ 387 $ 7,495 $ 869 $ 67
Turnover Ratio 1422% 4365% 1226% 252% 76% 1422% 4365% 1226%
</TABLE>
----------------------------------------------
* Commencement of operations.
(a) Ratios are annualized for periods of less than one year, except for the
total return ratio.
See accompanying notes to financial statements.
8
<PAGE>
<TABLE>
<CAPTION>
PAUZE FUNDS
FINANCIAL HIGHLIGHTS (UNAUDITED)
=================================================================================================================
For a capital share outstanding throughout each period indicated:
U.S. GOVERNMENT INTERMEDIATE BOND FUND
--------------------------------------------------------------------
NO LOAD
--------------------------------------------------------------------
05/01/00 Year Ended April 30 10/10/96* 05/01/00
to -------------------------------- to to
10/31/00 2000 1999 1998 4/30/97 10/31/00
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.38 $ 9.77 $ 10.10 $ 9.72 $ 10.00 $ 9.41
-------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.24 0.32 0.33 0.34 0.18 0.20
Net realized and unrealized gain (loss)
on investments 0.30 (0.39) (0.21) 0.43 (0.19) 0.30
Dividends from net investment income (0.24) (0.32) (0.33) (0.34) (0.18) (0.20)
Distributions from capital gains -- -- (0.12) (0.05) (0.09) --
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 9.68 $ 9.38 $ 9.77 $ 10.10 $ 9.72 $ 9.71
======== ======== ======== ======== ======== ========
TOTAL RETURN 5.80% -0.77% 1.13% 8.01% -0.12% 5.34%
Ratios of Average Net Assets (a)
Net investment income 4.33% 3.39% 3.15% 3.51% 3.23% 3.58%
Total expenses (before waivers) 1.80% 2.08% 1.66% 2.17% 2.48% 2.55%
Waivers (b) 0.00% 0.00% 0.00% 0.00% -0.01% 0.00%
Net expenses 1.80% 2.08% 1.66% 2.17% 2.47% 2.55%
Net assets, end of period (000's) $ 1,793 $ 5,281 $ 8,564 $ 2,722 $ 1,247 $ 941
Turnover Ratio 1056% 2255% 711% 260% 299% 1056%
<CAPTION>
U.S. GOVERNMENT INTERMEDIATE BOND FUND
---------------------------------------------------------
CLASS B CLASS C
---------------------------------------------------------
Year Ended April 30 09/03/96* 08/04/00*
-------------------------------- to to
2000 1999 1998 4/30/97 10/31/00
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.81 $ 10.12 $ 9.74 $ 10.00 $ 10.00
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.23 0.25 0.26 0.18 0.11
Net realized and unrealized gain (loss)
on investments (0.40) (0.19) 0.43 (0.15) 0.04
Dividends from net investment income (0.23) (0.25) (0.26) (0.17) (0.11)
Distributions from capital gains -- (0.12) (0.05) (0.12) --
NET ASSET VALUE, END OF PERIOD $ 9.41 $ 9.81 $ 10.12 $ 9.74 $ 10.04
======== ======== ======== ======== ========
TOTAL RETURN -1.72% 0.58% 7.13% 0.32% 1.27%
Ratios of Average Net Assets (a)
Net investment income 2.64% 2.40% 2.55% 2.64% 3.58%
Total expenses (before waivers) 2.83% 2.41% 2.96% 3.20% 2.55%
Waivers (b) 0.00% 0.00% 0.00% -0.02% 0.00%
Net expenses 2.83% 2.41% 2.96% 3.18% 2.55%
Net assets, end of period (000's) $ 968 $ 1,060 $ 442 $ 1,418 $ 4,434
Turnover Ratio 2255% 711% 260% 447% 1056%
</TABLE>
----------------------------------------------
* Commencement of operations.
(a) Ratios are annualized for periods of less than one year, except for the
total return ratio.
(b) Expenses waived reflect reductions to total expenses and would, similarly,
decrease the net investment income ratio for the period had such reductions
not occurred.
See accompanying notes to financial statements.
9
<PAGE>
<TABLE>
<CAPTION>
PAUZE FUNDS
FINANCIAL HIGHLIGHTS (UNAUDITED)
============================================================================================================
For a capital share outstanding throughout each period indicated:
U.S. GOVERNMENT SHORT TERM BOND FUND
NO LOAD
---------------------------------------------------------------
05/01/00 Year Ended April 30 09/03/96* 05/01/00
to ------------------------------ to to
10/31/00 2000 1999 1998 04/30/97 10/31/00
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.79 $ 10.09 $ 10.06 $ 9.98 $ 10.00 $ 9.61
-------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.22 0.25 0.29 0.29 0.14 0.19
Net realized and unrealized gain
(loss) on investments 0.07 (0.30) 0.19 0.08 (0.01) 0.07
Dividends from net investment income (0.22) (0.25) (0.33) (0.29) (0.14) (0.19)
Distributions from capital gains -- -- (0.12) -- (0.01) --
Liquidations from Capital -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 9.86 $ 9.79 $ 10.09 $ 10.06 $ 9.98 $ 9.68
======== ======== ======== ======== ======== ========
TOTAL RETURN 3.04% -0.52% 4.79% 3.76% 1.25% 2.69%
Ratios to Average Net Assets (a)
Net investment income 3.82% 2.75% 3.15% 3.18% 2.58% 3.07%
Total expenses (before waivers) 1.49% 2.80% 1.73% 2.60% 5.18% 2.24%
Waivers (b) 0.00% 0.00% 0.00% -0.18% -2.15% 0.00%
Net expenses 1.49% 2.80% 1.73% 2.42% 3.03% 2.24%
Net assets, end of period (000's) $ 418 $ 1,915 $ 2,008 $ 1,868 $ 236 $ 35
Turnover Ratio 527% 1265% 258% 47% 352% 527%
<CAPTION>
CLASS B CLASS C
----------------------------------------------------------------------------------------------
Year Ended April 30 09/03/96* 05/01/00 Year Ended April 30 11/07/96*
------------------------------ to to ------------------------------ to
2000 1999 # 1998 # 04/30/97 10/31/00 2000 1999 1998 04/30/97
-------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.91 $ 10.00 $ 9.96 $ 10.00 $ 9.73 $ 10.00 $ 9.98 $ 9.91 $ 10.00
-------- -------- -------- -------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.16 0.14 0.13 0.13 0.19 0.16 0.22 0.22 0.09
Net realized and unrealized gain
(loss) on investments (0.30) 0.07 0.07 (0.03) 0.07 (0.27) 0.18 0.07 (0.10)
Dividends from net investment income (0.16) (0.18) (0.13) (0.13) (0.19) (0.16) (0.26) (0.22) (0.08)
Distributions from capital gains -- (0.12) -- (0.01) -- -- (0.12) -- --
Liquidations from Capital -- -- (10.03) -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end of period $ 9.61 $ 9.91 $ 0.00 $ 9.96 $ 9.80 $ 9.73 $ 10.00 $ 9.98 $ 9.91
======== ======== ======== ======== ======== ======== ======== ======== ========
Total return -1.40% 2.11% 1.99% 1.05% 2.69% -1.14% 4.01% 2.93% -0.07%
Ratios to Average Net Assets (a)
Net investment income 2.00% 2.40% 2.01% 1.96% 3.07% 2.00% 2.40% 2.22% 1.74%
Total expenses (before waivers) 3.55% 2.48% 3.56% 6.01% 2.24% 3.55% 2.48% 3.49% 5.55%
Waivers (b) 0.00% 0.00% 0.00% -2.16% 0.00% 0.00% 0.00% -0.23% -2.02%
Net expenses 3.55% 2.48% 3.56% 3.85% 2.24% 3.55% 2.48% 3.26% 3.53%
Net assets, end of period (000's) $ 104 $ 106 -- $ 177 $ 10,071 $ 718 $ 39 $ 158 $ 302
Turnover Ratio 1265% 258% 47% 396% 527% 1265% 258% 47% 256%
</TABLE>
-----------------------------------------
* Commencement of operations.
# Class B discontinued operations from December 20, 1997 through September
16, 1998.
(a) Ratios are annualized for periods of less than one year, except for the
total return ratio.
(b) Expenses waived reflect reductions to total expenses and would, similarly,
decrease the net investment income ratio for the period had such reductions
not occurred.
See accompanying notes to financial statements.
10
<PAGE>
PAUZE FUNDS
Notes to Financial Statements October 31, 2000
(Unaudited)
--------------------------------------------------------------------------------
1. ORGANIZATION
Pauze Funds (the "Trust") is a diversified, open-end management investment
company registered under the Investment Company Act of 1940, as amended. The
Trust was organized as a Massachusetts business trust on October 15, 1993. There
are presently three series within the Trust: the Pauze U.S. Government Total
Return Bond Fund (the "Total Return Fund"), which commenced operations on
January 10, 1994; the Pauze U.S. Government Intermediate Term Bond Fund (the
"Intermediate Term Fund"), which commenced operations on September 3, 1996; and
the Pauze U.S. Government Short Term Bond Fund (the "Short Term Fund"), which
commenced operations on September 3, 1996. The three series included in these
financial statements are collectively referred to as the "Funds" and
individually as a "Fund".
Each Fund seeks to provide investors with a high total return (investment income
plus or minus realized and unrealized capital appreciation and depreciation)
consistent with preservation of capital and liquidity.
Shares of each Fund are issued in classes. No load shares and Class C shares are
sold and redeemed at net asset value without sales commission or redemption
fees. Class B shares are sold at net asset value and are subject to a maximum
3.75% contingent deferred sales charge on redemptions made within seven years of
purchase.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Trust in preparation of its financial statements. 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.
SECURITY VALUATION. Fund securities (except securities with less than 60 days to
maturity and repurchase agreements) are valued at market prices based on an
independent pricing service, or, in the event such service is not available, at
the mean between the most recent bid and ask prices as obtained from one or more
dealers that make markets in the securities. Short-term investments with
maturities of 60 days or less at the time of purchase are valued on the
amortized cost basis. If the Advisor determines that amortized cost does not
reflect fair value of a security, the Board may select an alternative method of
valuing the security.
SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME. Investment transactions are
accounted for on the trade date. Realized gains and losses from security
transactions are determined on the identified cost basis. Interest income is
recorded on the basis of coupon interest accrued daily adjusted for amortization
of premiums and accretion of discount.
REPURCHASE AGREEMENTS. The Trust's policy is for the custodian to hold, as
collateral for the repurchase agreement, underlying securities with a value of
at least 102% of the repurchase price. In the event of default or bankruptcy by
the other party a Fund has a right to the collateral, which may be subject to
legal proceedings, for satisfaction of the obligation.
11
<PAGE>
PAUZE FUNDS
Notes to Financial Statements October 31, 2000
(Unaudited)
--------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
ORGANIZATIONAL COSTS. Organizational costs incurred by the Trust were
capitalized and are being amortized ratably over a five-year period from
commencement of operations of the Fund. If the initial shares of a Fund are
redeemed during the amortization period, the redemption proceeds will be reduced
by any unamortized organization expenses.
INCOME AND EXPENSES. Each Fund bears expenses incurred specifically on its
behalf plus an allocation of its share of Trust level expenses. Trust expenses
are allocated based on the relative net assets of each Fund or on another
reasonable basis. Class specific expenses 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 to each class of shares based on the relative net assets of each
class.
FEDERAL INCOME TAXES. Each Fund intends to continue to qualify as regulated
investment companies 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.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders are recorded on ex-dividend date. The Funds generally pay dividends
monthly and capital gain distributions, if any, at least annually. The Funds
distribute tax basis earnings in accordance with the 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. Capital loss carryforwards
may be utilized to offset current or future capital gains, if any.
3. INVESTMENT TRANSACTIONS
TOTAL RETURN FUND
For the six months ended October 31, 2000, the cost of purchases and proceeds
from sales/maturities of investments, excluding short-term investments, were
$587,759,377 and $521,579,918, respectively. All purchases and sales were U.S.
Government and Agency Obligations. At October 31, 2000, the gross and net
unrealized depreciation of investments for tax purposes was $804,453, and the
cost of investments for federal income tax purposes was $66,787,015.
At October 31, 2000, the Fund had capital loss carryforwards for federal income
tax purposes of $6,640,535, which expire through the year 2008. Tax rules
require that losses of $3,781,773 realized after October 31, 1999 are deemed to
have occurred on May 1, 2000.
INTERMEDIATE TERM FUND
For the six months ended October 31, 2000, the cost of purchases and proceeds
from sales/maturities of investments, excluding short-term investments, were
$82,354,263 and $78,453,630, respectively. All purchases and sales were U.S.
Government and Agency Obligations. At October 31, 2000, the gross and net
unrealized depreciation of investments for tax purposes was $4,951, and the cost
of investments for Federal income tax purposes was $7,100,624.
At October 31, 2000, the Fund had capital loss carryforwards for federal income
tax purposes of
12
<PAGE>
PAUZE FUNDS
Notes to Financial Statements October 31, 2000
(Unaudited)
--------------------------------------------------------------------------------
$466,186, which expire through the year 2008. Tax rules require that losses of
$84,581 realized after October 31, 1999 are deemed to have occurred on May 1,
2000.
SHORT TERM FUND
For the six months ended October 31, 2000, the cost of purchases and proceeds
from sales/maturities of investments, excluding short-term investments, were
$34,820,773 and $27,206,822, respectively. All purchases and sales were U.S.
Government and Agency Obligations. At October 31, 2000, the gross and net
unrealized depreciation of investments for tax purposes was $9,708 and the cost
of investments for Federal income tax purposes was $10,433,658.
At October 31, 2000, the Fund had capital loss carryforwards for federal income
tax purposes of $12,010, which expire through the year 2008. Tax rules require
that losses of $28,399 realized after October 31, 1999 are deemed to have
occurred on May 1, 2000.
4. CAPITAL SHARE TRANSACTIONS
Each class of shares in each Fund has an unlimited number of no par value shares
authorized. The following is a summary of capital share activity for the period
indicated:
SIX MONTHS ENDED YEAR ENDED
OCTOBER 31, 2000 APRIL 30, 2000
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ----------- ----------- -----------
TOTAL RETURN FUND
-----------------
NO LOAD CLASS
Shares sold 30,183 $ 246,076 979,738 $ 8,403,649
Shares reinvested 147,642 1,224,268 173,062 1,455,327
Shares redeemed (430,870) (3,502,331) (444,034) (3,775,616)
----------- ----------- ----------- -----------
NET INCREASE (DECREASE) (253,045) $(2,031,987) 708,766 $ 6,083,360
=========== =========== =========== ===========
CLASS B
Shares sold -- $ -- 396 $ 3,711
Shares reinvested 1,779 16,128 3,535 32,603
Shares redeemed (1,380) (12,299) (2,017) (18,650)
----------- ----------- ----------- -----------
NET INCREASE 399 $ 3,829 1,914 $ 17,664
=========== =========== =========== ===========
CLASS C
Shares sold 743,201 $ 6,555,539 96,708 $ 849,376
Shares reinvested 8,806 77,392 979 8,517
Shares redeemed (4,733) (39,849) (2,281) (20,030)
----------- ----------- ----------- -----------
NET INCREASE 747,274 $ 6,593,082 95,406 $ 837,863
=========== =========== =========== ===========
13
<PAGE>
PAUZE FUNDS
Notes to Financial Statements October 31, 2000
(Unaudited)
--------------------------------------------------------------------------------
4. CAPITAL SHARE TRANSACTIONS (continued)
INTERMEDIATE TERM FUND
----------------------
NO LOAD CLASS
Shares sold 29,804 $ 279,468 175,896 $ 1,676,523
Shares reinvested 8,393 79,639 13,572 129,712
Shares redeemed (415,914) (4,009,181) (502,888) (4,871,802)
----------- ----------- ----------- -----------
NET DECREASE (377,717) $(3,650,074) (313,420) $(3,065,567)
=========== =========== =========== ===========
CLASS B
Shares sold -- $ -- 831 $ 7,962
Shares reinvested 769 7,371 2,333 22,433
Shares redeemed (6,711) (63,800) (8,335) (79,956)
----------- ----------- ----------- -----------
NET DECREASE (5,942) $ (56,429) (5,171) $ (49,561)
=========== =========== =========== ===========
CLASS C
Shares sold 436,552 $ 4,363,433 $ --
Shares reinvested 4,900 49,047
Shares redeemed -- --
----------- ----------- ----------- -----------
NET INCREASE 441,452 $ 4,412,480 -- $ --
=========== =========== =========== ===========
SHORT TERM
----------
NO LOAD CLASS
Shares sold 10,266 $ 100,502 64,974 $ 646,269
Shares reinvested 2,541 24,915 3,790 37,602
Shares redeemed (166,131) (1,636,352) (72,059) (725,133)
----------- ----------- ----------- -----------
NET DECREASE (153,324) $(1,510,935) (3,295) $ (41,262)
=========== =========== =========== ===========
CLASS B
Shares sold -- $ -- 64 $ 658
Shares reinvested -- -- 149 1,456
Shares redeemed (7,232) (70,000) (64) (623)
----------- ----------- ----------- -----------
NET INCREASE (DECREASE) (7,232) $ (70,000) 149 $ 1,491
=========== =========== =========== ===========
CLASS C
Shares sold 943,202 $ 9,233,940 71,216 $ 701,650
Shares reinvested 11,472 112,307 580 5,692
Shares redeemed (687) (6,683) (1,910) (19,015)
----------- ----------- ----------- -----------
NET INCREASE 953,987 $ 9,339,564 69,886 $ 688,327
=========== =========== =========== ===========
14
<PAGE>
PAUZE FUNDS
Notes to Financial Statements October 31, 2000
(Unaudited)
--------------------------------------------------------------------------------
5. TRANSACTIONS WITH THE ADVISOR AND AFFILIATES
Pauze, Swanson & Associates Investment Advisors, Inc. d/b/a Pauze Swanson
Capital Management Co. (the "Advisor"), under an Advisory Agreement with the
Trust in effect through October 31, 2001, furnishes management and investment
advisory services and, subject to the supervision of the Trust's Board of
Trustees, directs the investments of the Trust in accordance with the individual
Fund's investment objectives, policies and limitations.
Total Return Fund pays a monthly management fee at the annual rate of 0.60% of
the average daily net assets on the first $100 million, 0.50% on the next $150
million, 0.45% on the next $250 million and 0.40% on net assets in excess of
$500 million. Intermediate Term Fund and Short Term Fund each pay a monthly
management fee at the annual rate of 0.50% of the average daily net assets.
Effective July 1, 1999, Champion Fund Services ("Champion"), an affiliate of the
Advisor, became the Administrator, Fund Accounting Agent and Transfer Agent for
the Trust under two year contracts. The annual fees for the contracts of
$145,000, $125,000 and $90,000 (plus a maximum of $21 per shareholder account),
respectively, and standard out-of-pocket expenses, are paid monthly and
allocated to the Funds in the Trust based on each Fund's relative net assets.
The Administrator is responsible for financial reporting, compliance monitoring
and corporate management. The Fund Accounting Agent determines the net asset
value per share of each Fund and provides accounting services to the Trust. The
Transfer Agent provides shareholder services and is the dividend paying agent of
the Trust. The fees to Champion for the six months ended October 31, 2000 were:
Total Return Intermediate Term Short Term
------------ ----------------- ------------
Administrative fees $ 62,114 $ 6,810 $ 3,576
Accounting service fees 53,547 5,871 3,082
Transfer agency fees 41,449 4,544 2,386
B. C. Ziegler and Company ("Distributor"), a broker-dealer for which trustees
and officers of the Trust act as registered representatives, became the Trust
agent in connection with the distribution of Fund shares effective July 1, 1999.
For the services provided, the Distributor receives an annual fee of $30,000
from the Trust. The Funds' share of this expense for the six months ended
October 31, 2000 was $15,000.
Independent trustees each receive an annual fee of $11,000 from the Trust plus
$500 per meeting and out-of-pocket expenses. Certain employees of the Advisor
and Champion are trustees and officers of the Trust but receive no compensation
from the Trust.
The Trust has adopted a plan of distribution under Rule 12b-1 of the Investment
Company Act of 1940 for each Fund, with separate provisions for each class of
shares. The Advisor, for its distribution related services and expenses,
receives a 12b-1 fee at an annual rate of 0.25% of each Fund's average net
assets. Additionally, the Advisor receives a 12b-1 annual fee of 0.75% of the
average net assets of Class B shares as compensation for fees the Advisor paid
to broker-dealers. Class C shares pay an annual 12b-1 fee of 0.75% of their
average net assets directly to broker-dealers. All fees are paid monthly. Under
the plans, the Advisor bears all distribution expenses of the Funds in excess of
the 12b-1 fees, however, the fees received by the Advisor for any class of
shares during any year may be more or less than its distribution related costs.
15