<PAGE>
[LOGO OF PROFUNDS APPEARS HERE]
Bull ProFund
UltraBull ProFund
Bear ProFund [ARTWORK APPEARS HERE]
UltraBear ProFund
UltraOTC ProFund
Money Market ProFund
Annual Report
December 31, 1997
<PAGE>
ProFunds
Table of Contents
================================================================================
Letter to Shareholders....................................2
ProFunds
Schedules of Portfolio of Investments...................3
Statements of Assets and Liabilities....................7
Statements of Operations................................9
Statements of Changes in Net Assets....................11
Financial Highlights...................................13
Notes to Financial Statements..........................15
Report of Independent Accountants......................22
Cash Management Portfolio
Schedule of Portfolio of Investments...................23
Statement of Assets and Liabilities....................28
Statement of Operations................................28
Statement of Changes in Net Assets.....................29
Financial Highlights...................................29
Notes to Financial Statements..........................30
Report of Independent Accountants......................31
<PAGE>
Dear ProFund Shareholders,
It is with great pleasure that we present to you the first Annual Report to
Shareholders, of the ProFunds.
We are very gratified with the early progress of the ProFunds, In a little over
one month since we commenced investment activities on November 26, 1997, assets
of the ProFunds grew to $12,210,421 at December 31, 1997. Most importantly,
while our start up period was marked by substantial volatility in the domestic
and international markets, the ProFunds achieved high correlation to their
benchmarks.
Thank you for your confidence in the ProFunds' management team during our
introduction. In 1998 we look forward to continue providing you, our
shareholders, with the investment tools and flexibility that allow you to pursue
your investment objectives.
If you have any questions feel free to call us at 888-776-3637.
Sincerely,
/s/ Michael L. Sapir
Michael L. Sapir
Chairman
2
<PAGE>
BULL PROFUND
Schedule of Portfolio Investments
December 31, 1997
<TABLE>
<S> <C>
Total Investments (Cost $0) - 0.0% $ 0
Other assets in excess of liabilities 100.0% 46,291
------
TOTAL NET ASSETS - 100.0% $ 46,291
======
</TABLE>
- ---------------
Percentages indicated are based on net assets of $46,291.
<TABLE>
<CAPTION>
Market
Contracts Value
--------- -----
<S> <C> <C>
Futures Purchased - 105.8%
S&P 500 Mini Future Contract expiring March 1998 1 $ 48,955
------
Total Futures (Cost $48,700) $ 48,955
======
</TABLE>
3
<PAGE>
ULTRABULL PROFUND
Schedule of Portfolio Investments
December 31, 1997
<TABLE>
<CAPTION>
Market
Shares Value
------ -----
<S> <C> <C>
Options Purchased - 42.5%
S&P 500 Call Option expiring January 1998 @ 690 40 $ 2,891,000
S&P 500 Call Option expiring March 1998 @ 700 10 697,750
---------
Total Options Purchased (Cost $3,541,500) 3,588,750
---------
Total Investments (Cost $3,541,500) (a) - 42.5% 3,588,750
Other assets in excess of liabilities 57.5% 4,849,287
---------
TOTAL NET ASSETS - 100.0% $ 8,438,037
=========
</TABLE>
- ---------------
Percentages indicated are based on net assets of $8,438,037.
<TABLE>
<CAPTION>
Market
Contracts Value
--------- -----
<S> <C> <C>
Futures Purchased - 34.8%
S&P 500 Future Contract expiring March 1998 12 $ 2,937,300
---------
Total Futures (Cost $2,937,960) $ 2,937,300
=========
</TABLE>
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
Unrealized Appreciation $ 59,750
Unrealized Depreciation (12,500)
---------
Net Unrealized Appreciation $ 47,250
=========
4
<PAGE>
BEAR PROFUND
Schedule of Portfolio Investments
December 31, 1997
<TABLE>
<S> <C>
Total Investments (Cost $0) - 0.0% $ 0
Other assets in excess of liabilities 100.0% 2,516,422
---------
TOTAL NET ASSETS - 100.0% $ 2,516,422
=========
</TABLE>
- ---------------
Percentages indicated are based on net assets of $2,516,422.
<TABLE>
<CAPTION>
Market
Contracts Value
--------- -----
<S> <C> <C>
Futures Sold - 89.5%
S&P 500 Future Contract expiring March 1998 9 $ (2,202,975)
S&P 500 Mini Future Contract expiring March 1998 1 (48,955)
-----------
Total Futures (Cost ($2,252,363)) $ (2,251,930)
===========
</TABLE>
5
<PAGE>
ULTRAOTC PROFUND
Schedule of Portfolio Investments
December 31, 1997
<TABLE>
<CAPTION>
Market
Shares Value
------ -----
<S> <C> <C>
Options Purchased - 24.9%
Nasdaq Call Option expiring January 1998 @ 840 14 $ 229,110
-------
Total Options Purchased (Cost $246,470) 229,110
-------
Total Investments (Cost $246,470) (a) - 24.9% 229,110
Other assets in excess of liabilities 75.1% 691,058
-------
TOTAL NET ASSETS - 100.0% $ 920,168
=======
</TABLE>
- ---------------
Percentages indicated are based on net assets of $920,168.
<TABLE>
<CAPTION>
Market
Contracts Value
--------- -----
<S> <C> <C>
Futures Purchased - 54.5%
Nasdaq 100 Future Contract expiring March 1998 5 $ 501,375
-------
Total Futures (Cost $503,775) $ 501,375
=======
</TABLE>
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
Unrealized Appreciation $ 0
Unrealized Depreciation (17,360)
----------
Net Unrealized Depreciation $(17,360)
=========
6
<PAGE>
ProFunds
Statements of Assets and Liabilities
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Bull UltraBull Bear
ProFund ProFund ProFund
----------- ------------- ------------
<S> <C> <C> <C>
Assets:
Investments at value (cost $0, $3,541,500, and $0, $ --- $ 3,588,750 $ ---
respectively)
Investment in Cash Management Portfolio at value --- --- ---
Cash 2,339 21,049 22,860
Net variation margin on open future contracts 2,513 --- 115,575
Receivable for investments sold 41,501 4,831,882 2,490,049
Receivable from Investment Advisor 14,263 22,607 22,399
Variation margin receivable --- --- 528
Prepaid registration costs 15,522 15,522 15,522
Deferred organization costs 13,278 13,248 13,493
----------- ------------- ------------
Total Assets 89,416 8,493,058 2,680,426
-------------------------------------------
Liabilities:
Payable to broker for investments purchased --- --- ---
Payable for capital shares redeemed --- --- ---
Payable to broker for net variation margin on
open future contracts 10 985 112,590
Dividend payable --- --- ---
Payable to Investment Advisor and Administrator 23,355 23,355 23,355
Accrued:
Audit fees 1,700 1,700 1,700
Custodian fees 550 550 200
Fund accounting fees 75 75 20
Insurance fees 283 317 10
Legal fees 393 8,737 8,621
Registration & filing fees 14 2,557 763
Printing fees 2,120 2,120 2,120
Transfer agent fees 508 508 508
Trustee fees 517 517 517
Organization costs 13,500 13,500 13,500
Other expenses 100 100 100
----------- ------------- ------------
Total Liabilities 43,125 55,021 164,004
----------- ------------- ------------
Net Assets $ 46,291 $ 8,438,037 $ 2,516,422
=========== ============= ============
Shares of beneficial interest outstanding 4,680 819,899 251,585
=========== ============= ============
Net Asset Value Per Share $ 9.89 $ 10.29 $ 10.00
=========== ============= ============
Net Assets consist of:
Paid-in Capital $ 46,797 $ 8,415,279 $ 2,515,852
Accumulated undistributed net investment income 85 1,899 ---
Net unrealized appreciation/(depreciation) on investments
and future contracts 255 46,590 433
Accumulated undistributed net realized gains (losses) on
investment transactions (846) (25,731) 137
=========== ============= ============
Net Assets $ 46,291 $ 8,438,037 $ 2,516,422
=========== ============= ============
Net Assets
Investor Shares $ 46,281 $ 6,043,740 $ 2,516,412
Service Shares 10 2,394,297 10
----------- ------------- -----------
Total Net Assets $ 46,291 $ 8,438,037 $ 2,516,422
=========== ============= ===========
Shares Outstanding
Investor Shares 4,679 587,296 251,584
Service Shares 1 232,603 1
----------- ------------- ------------
Total Shares Outstanding 4,680 819,899 251,585
=========== ============= ============
Net Asset Value
Investor Shares $ 9.89 $ 10.29 $ 10.00
=========== ============= ============
Service Shares $ 9.89 $ 10.29 $ 10.00
=========== ============= ============
</TABLE>
See accompanying notes to the financial statements.
7
<PAGE>
ProFunds
Statements of Assets and Liabilities
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
-----------------------------------------------
UltraBear UltraOTC Money Market
ProFund ProFund ProFund
-------------- ------------- ---------------
<S> <C> <C> <C>
Assets:
Investments at value (cost $0, $246,470, and $0, $ --- $ 229,110 $ ---
respectively)
Investment in Cash Management Portfolio at value --- --- 291,594
Cash 170 589,809 ---
Net variation margin on open future contracts 5,025 ---
Receivable for investments sold --- 343,864 ---
Receivable from Investment Advisor 23,969 17,348 19,938
Variation margin receivable --- 4,975 ---
Prepaid registration costs 15,522 15,522 15,522
Deferred organization costs 13,433 13,278 13,167
----------- ------------- -------------
Total Assets 58,119 1,213,906 340,221
-----------------------------------------------
Liabilities:
Payable to broker for investments purchased --- 246,545 ---
Payable for capital shares redeemed 1,542 --- ---
Payable to broker for net variation margin on
opern future contracts 2,710 --- ---
Dividend payable --- --- 293
Payable to Investment Advisor and Administrator 23,355 23,355 23,355
Accrued:
Audit fees 1,700 1,700 1,000
Custodian fees 550 550 180
Fund accounting fees 75 75 ---
Insurance fees 90 283 540
Legal fees 11,321 4,397 8,101
Registration & filing fees --- 88 572
Printing fees 2,120 2,120 2,025
Transfer agent fees 508 508 508
Trustee fees 517 517 495
Organization costs 13,500 13,500 13,500
Other expenses 100 100 180
----------- ------------- -------------
Total Liabilities 58,088 293,738 50,749
----------- ------------- -------------
Net Assets $ 31 $ 920,168 $ 289,472
=========== ============= =============
Shares of beneficial interest outstanding 3 110,079 289,475
=========== ============= =============
Net Asset Value Per Share $ 10.35 $ 8.36 $ 1.00
=========== ============= =============
Net Assets consist of:
Paid-in Capital $ 31 $ 1,806,320 $ 289,475
Accumulated undistributed net investment income --- 654 ---
Net unrealized appreciation/(depreciation) on investments
and future contracts --- (19,760) ---
Accumulated undistributed net realized gains (losses) on
investment transactions --- (867,046) (3)
=========== ============= =============
Net Assets $ 31 $ 920,168 $ 289,472
=========== ============= =============
Net Assets
Investor Shares $ 21 $ 256,184 $ 286,962
Service Shares 10 663,984 2,510
----------- ------------- -------------
Total Net Assets $ 31 $ 920,168 $ 289,472
=========== ============= =============
Shares Outstanding
Investor Shares 2 30,651 286,964
Service Shares 1 79,428 2,511
----------- ------------- -------------
Total Shares Outstanding 3 110,079 289,475
=========== ============= =============
Net Asset Value
Investor Shares $ 10.36 $ 8.36 $ 1.00
=========== ============= =============
Service Shares $ 10.35 $ 8.36 $ 1.00
=========== ============= =============
</TABLE>
See accompanying notes to the financial statements.
8
<PAGE>
ProFunds
Statements of Operations
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Bull UltraBull Bear
ProFund ProFund ProFund
-------------- --------------- --------------
December 2, November 28, December 31,
1997 to 1997 to 1997 to
December 31, December 31, December 31,
1997 (a) 1997 (a) 1997 (a)
-------------- --------------- --------------
<S> <C> <C> <C>
Investment Income:
Interest $ 167 $ 8,090 $ ---
Investment Income allocated from Cash Management Portfolio --- --- ---
-------------- --------------- --------------
Total Income 167 8,090 ---
-------------- --------------- --------------
Expenses:
Advisory fee 28 1,609 52
Administration fee 6 322 10
Management service fee 6 322 10
Shareholder service fee (Service Shares) --- 773 -
Audit fees 1,700 1,700 1,700
Custodian fees 550 550 200
Fund accounting fees 76 139 22
Insurance fees 283 317 10
Legal fees 393 8,737 8,621
Registration & filing fees 7,847 10,390 8,596
Printing fees 2,120 2,120 2,120
Transfer agent fees 2,591 2,591 508
Trustees' fees 517 517 517
Organization costs 222 252 7
Other expenses 100 605 100
-------------- --------------- --------------
Total expenses before waivers/reimbursements by Investment
Advisor and Administrator 16,439 30,944 22,473
Less expenses waived/reimbursed by Investment
Advisor and Administrator (16,387) (27,781) (22,473)
-------------- --------------- --------------
Net expenses 52 3,163 ---
-------------- --------------- --------------
Net investment income/(loss) 115 4,927 ---
-------------- --------------- --------------
Realized/Unrealized Gains(Losses) on Investments:
Net realized gain/(loss) on
investment transactions --- (647,812) 97
Net realized gain/(loss) on
future transactions (846) 655,340 40
Net change in unrealized appreciation/(depreciation) on
investment transactions --- 47,250 ---
Net change in unrealized appreciation/(depreciation) on
future transactions 255 (660) 433
-------------- --------------- --------------
Net realized/unrealized gains on investments (591) 54,118 570
-------------- --------------- --------------
Change in net assets resulting from operations $ (476) $ 59,045 $ 570
============== =============== ==============
</TABLE>
(a) Period from commencement of operations.
See accompanying notes to the financial statements.
9
<PAGE>
ProFunds
Statements of Operations
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UltraBear UltraOTC Money Market
ProFund ProFund ProFund
--------------- -------------- -------------
December 23, December 2, November 17,
1997 to 1997 to 1997 to
December 31, December 31, December 31,
1997 (a) 1997 (a) 1997 (a)
--------------- -------------- -------------
<S> <C> <C> <C>
Investment Income:
Interest $ 3,525 $ 2,973 $ ---
Investment Income allocated from Cash Management Portfolio --- --- 15,685
--------------- ------------- -------------
Total Income 3,525 2,973 15,685
--------------- ------------- -------------
Expenses:
Advisory fee 615 751 ---
Administration fee 123 150 422
Management service fee 123 150 984
Shareholder service fee (Service Shares) - 379 ---
Audit fees 1,700 1,700 1,000
Custodian fees 550 550 180
Fund accounting fees 99 105 ---
Insurance fees 90 283 540
Legal fees 11,321 4,397 8,101
Registration & filing fees 7,833 7,921 8,405
Printing fees 2,120 2,120 2,025
Transfer agent fees 1,133 2,591 3,632
Trustees' fees 517 517 495
Organization costs 67 222 333
Other expenses 280 375 180
--------------- ------------- -------------
Total expenses before waivers/reimbursements by Investment
Advisor and Administrator 26,571 22,211 26,297
Less expenses waived/reimbursed by Investment
Advisor and Administrator (25,479) (20,890) (24,468)
--------------- ------------- -------------
Net expenses 1,092 1,321 1,829
--------------- ------------- -------------
Net investment income/(loss) 2,433 1,652 13,856
--------------- ------------- -------------
Realized/Unrealized Gains(Losses) on Investments:
Net realized gain/(loss) on
investment transactions --- (159,586) (3)
Net realized gain/(loss) on
future transactions 167,320 (707,460) ---
Net change in unrealized appreciation/(depreciation) on
investment transactions --- (17,360) ---
Net change in unrealized appreciation/(depreciation) on
future transactions --- (2,400) ---
--------------- ------------- -------------
Net realized/unrealized gains on investments 167,320 (886,806) (3)
--------------- ------------- -------------
Change in net assets resulting from operations $ 169,753 $ (885,154) $ 13,853
=============== ============= =============
</TABLE>
(a) Period from commencement of operations.
See accompanying notes to financial statements.
10
<PAGE>
<TABLE>
<CAPTION>
ProFunds
Statements of Changes in Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
Bull UltraBull Bear
ProFund ProFund ProFund
---------------------------------------------
December 2, November 28, December 31
1997 to 1997 to 1997 to
December 31, December 31, December 31
1997 (a) 1997 (a) 1997 (a)
-------------- -------------- -------------
<S> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income/(loss) $ 115 $ 4,927 $ ---
Net realized gain/(loss) on investment transactions (846) 7,528 137
Net change in unrealized appreciation/(depreciation) on investments 255 46,590 433
--------------- -------------- ------------
Change in net assets resulting from operations (476) 59,045 570
--------------- -------------- ------------
Distributions to shareholders
Investor Shares:
Net investment income --- --- ---
--------------- -------------- ------------
Net decrease in net assets resulting from distributions --- --- ---
--------------- -------------- ------------
Increase from capital share transactions:
Proceeds from sales of shares 99,897 17,466,796 2,515,852
Issued on reinvestment of distributions --- --- ---
Cost of shares redeemed (53,130) (9,087,804) ---
--------------- -------------- ------------
Net increase (decrease) in net assets from capital share transactions 46,767 8,378,992 2,515,852
--------------- -------------- ------------
Total increase (decrease) in net assets 46,291 8,438,037 2,516,422
Net assets:
Beginning of period --- --- ---
=============== ============== ============
End of period $ 46,291 $ 8,438,037 $ 2,516,422
=============== ============== ============
</TABLE>
- ------------------------------------------------------------------
(a) Period from commencement of operations.
See accompanying notes to the financial statements.
11
<PAGE>
ProFunds
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UltraBear UltraOTC Money Market
ProFund ProFund ProFund
-------------------------------------------------
December 23, December 2, November 17,
1997 to 1997 to 1997 to
December 31, December 31, December 31,
1997 (a) 1997 (a) 1997 (a)
------------- ------------ ----------------
<S> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income/(loss) $ 2,433 $ 1,652 $ 13,856
Net realized gain/(loss) on investment transactions 167,320 (867,046) (3)
Net change in unrealized appreciation/(depreciation) on
investments --- (19,760) ---
-------------- ------------ --------------
Change in net assets resulting from operations 169,753 (885,154) 13,853
-------------- ------------ --------------
Distributions to shareholders
Investor Shares:
Net investment income --- --- (13,856)
-------------- ------------ --------------
Net decrease in net assets resulting from distributions --- --- (13,856)
-------------- ------------ --------------
Increase from capital share transactions:
Proceeds from sales of shares 4,806,030 9,874,239 5,454,779
Issued on reinvestment of distributions --- --- 5,771
Cost of shares redeemed (4,975,752) (8,068,917) (5,171,075)
-------------- ------------ --------------
Net increase (decrease) in net assets from capital share
transactions (169,722) 1,805,322 289,475
-------------- ------------ --------------
Total increase (decrease) in net assets 31 920,168 289,472
Net assets:
Beginning of period --- --- ---
-------------- ------------ --------------
End of period $ 31 $ 920,168 $ 289,472
============== ============ ==============
</TABLE>
- ------------------------------------------------------------------
(a) Period from commencement of operations.
See accompanying notes to the financial statements.
12
<PAGE>
ProFunds
Financial Highlights
- --------------------------------------------------------------------------------
Investor Class
<TABLE>
<CAPTION>
Bull UltraBull Bear
ProFund ProFund ProFund
-------------- -------------- --------------
December 2, November 28, December 31,
1997 to 1997 to 1997 to
December 31, December 31, December 31,
1997 (a) 1997 (a) 1997 (a)
-------------- -------------- -------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 10.00 $ 10.00 $ 10.00
-------------- -------------- -------------
Income from investment operations:
Net investment income/(loss) 0.02 0.01 ---
Net realized and unrealized gain/(loss) on
investments (0.13) 0.28 ---
-------------- -------------- -------------
Total from investment operations (0.11) 0.29 ---
-------------- -------------- -------------
Distributions to shareholders from:
Net investment income --- --- ---
-------------- -------------- -------------
Net asset value, end of period $ 9.89 $ 10.29 $ 10.00
============== ============== =============
Total return (1.10%)(b) 2.90%(b) 0.00%(b)
Ratios/Supplemental Data:
Net assets, end of period $ 46,281 $ 6,043,740 $ 2,516,412
Ratio of expenses to average net assets 1.33%(c) 1.33%(c) 0.00%(c)
Ratio of net investment income/(loss) to average net assets 2.97%(c) 2.26%(c) 0.00%(c)
Ratio of expenses to average net assets* 423.48%(c) 12.69%(c) 325.97%(c)
Ratio of net investment income/(loss) to average net assets* (419.18%)(c) (9.10%)(c) (325.97%)(c)
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------
UltraBear UltraOTC Money Market
ProFund ProFund ProFund
----------- --------------- ---------------
December 23, December 2, November 17,
1997 to 1997 to 1997 to
December 31, December 31, December 31,
1997 (a) 1997 (a) 1997 (a)
-------------- ---------------- ---------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 10.00 $ 10.00 $ 1.00
-------------- -------------- ---------------
Income from investment operations:
Net investment income/(loss) 1216.50(e) 0.06 0.006
Net realized and unrealized gain/(loss) on
investments (1216.14)(e) (1.70) ---
-------------- -------------- ---------------
Total from investment operations 0.36 (1.64) 0.006
-------------- -------------- ---------------
Distributions to shareholders from:
Net investment income --- --- (0.006)
-------------- -------------- ---------------
Net asset value, end of period $ 10.36 $ 8.36 $ 1.00
============== ============== ===============
Total return 3.60%(b) (16.40%)(b) 0.61%(b)
Ratios/Supplemental Data:
Net assets, end of period $ 21 $ 256,184 $ 286,962
Ratio of expenses to average net assets 1.33%(c) 1.07%(c) 0.83%(c),(d)
Ratio of net investment income/(loss) to average net assets 2.97%(c) 2.73%(c) 4.92%(c)
Ratio of expenses to average net assets* 32.39%(c) 21.74%(c) 9.52%(c),(d)
Ratio of net investment income/(loss) to average net assets* (28.09%)(c) (17.94%)(c) (3.77%)(c)
</TABLE>
- -----------------------------
* During the period, certain fees were voluntarily reduced and/or
reimbursed. If such voluntary fee reductions and/or reimbursements
had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) The Money Market ProFund expense ratio includes the expense
allocation of the Cash Management Portfolio Master Fund.
(e) The amount shown for a share outstanding throughout the period does
not accord with the earned income or the change in aggregate gains
and losses in the portfolio of securities during the period because
of the timing of sales of purchases of fund shares in relation to
fluctuating market values during the period.
See accompanying notes to the financial statements.
13
<PAGE>
ProFunds
Financial Highlights
- --------------------------------------------------------------------------------
Service Class
<TABLE>
<CAPTION>
Bull UltraBull Bear
ProFund ProFund ProFund
---------------- ---------------- -----------------
December 2, November 28, December 31,
1997 to 1997 to 1997 to
December 31, December 31, December 31,
1997 (a) 1997 (a) 1997 (a)
---------------- ---------------- -----------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 10.00 $ 10.00 $ 10.00
---------------- ---------------- -----------------
Income from investment operations:
Net investment income/(loss) --- 0.01 ---
Net realized and unrealized gain/(loss) on
investments (0.11) 0.28 ---
---------------- ---------------- -----------------
Total from investment operations (0.11) 0.29 ---
---------------- ---------------- -----------------
Distributions to shareholders from:
Net investment income --- --- ---
Net realized gain on investments --- --- ---
---------------- ---------------- -----------------
Total distributions to shareholders --- --- ---
---------------- ---------------- -----------------
Net asset value, end of period $ 9.89 $ 10.29 $ 10.00
================ ================ =================
Total return (1.10%)(b) 2.90% (b) 0.00% (b)
Ratios/Supplemental Data:
Net assets, end of period $ 10 $ 2,394,297 $ 10
Ratio of expenses to average net assets 1.33% (c) 1.33% (c) 0.00% (c)
Ratio of net investment income/(loss) to average net assets 0.00% (c) 1.69% (c) 0.00% (c)
Ratio of expenses to average net assets* 424.48% (c) 13.69% (c) 326.97% (c)
Ratio of net investment income/(loss) to average net assets* (424.48%) (c) (10.67%) (c) (326.97%) (c)
<CAPTION>
UltraBear UltraOTC Money Market
ProFund ProFund ProFund
------------ -------------- ------------
December 23, December 2, November 17,
1997 to 1997 to 1997 to
December 31, December 31, December 31,
1997 (a) 1997 (a) 1997 (a)
------------ -------------- ------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 10.00 $ 10.00 $ 1.00
------------ -------------- ------------
Income from investment operations:
Net investment income/(loss) --- --- ---
Net realized and unrealized gain/(loss) on
investments 0.35 (1.64) ---
------------ -------------- ------------
Total from investment operations 0.35 (1.64) ---
------------ -------------- ------------
Distributions to shareholders from:
Net investment income --- --- ---
Net realized gain on investments --- --- ---
------------ -------------- ------------
Total distributions to shareholders --- --- ---
------------ -------------- ------------
Net asset value, end of period $ 10.35 $ 8.36 $ 1.00
============ ============== ============
Total return 3.50% (b) (16.40%) (b) 0.21% (b)
Ratios/Supplemental Data:
Net assets, end of period $ 10 $ 663,984 $ 2,510
Ratio of expenses to average net assets 1.33% (c) 1.75% (c) 1.83% (c),(d)
Ratio of net investment income/(loss) to average net assets 0.00% (c) (0.06%) (c) 2.53% (c)
Ratio of expenses to average net assets* 33.39% (c) 23.42% (c) 10.52% (c),(d)
Ratio of net investment income/(loss) to average net assets* (33.39%) (c) (21.73%) (c) (6.16%) (c)
</TABLE>
- --------------------------------------------------------------------------------
* During the period, certain fees were voluntarily reduced and/or
reimbursed. If such voluntary fee reductions and/or reimbursements
had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) The Money Market ProFund expense ratio includes the expense allocation
of the Cash Management Portfolio Master Fund.
See accompanying notes to the financial statements.
14
<PAGE>
ProFunds
Notes to Financial Statements
December 31, 1997
1) Organization
ProFunds (the "Trust") is a registered open-end investment company under the
Investment Company Act of 1940 (the "1940 Act"). The Trust was organized as a
Delaware business trust on April 17, 1997, and has authorized capital of
unlimited shares of beneficial interest of no par value which may be issued in
more than one class or series. Currently, the Trust consists of six separately
managed series: Bull ProFund, UltraBull ProFund, Bear ProFund, UltraBear
ProFund, UltraOTC ProFund, and Money Market ProFund (individually, a "ProFund").
Each ProFund offers two classes of shares: the Service Shares and the Investor
Shares.
The investment objectives of the ProFunds are as follows:
The Bull ProFund and the UltraBull ProFund. The Bull ProFund's investment
objective is to provide investment returns that correspond to the performance of
the S&P 500 Index. The UltraBull ProFund's investment objective is to provide
investment returns that correspond to 200% of the performance of the S&P 500
Index. The UltraBull ProFund should gain more than the Bull ProFund when the
prices of the securities in the S&P 500 Index rise and lose more when such
prices decline.
The Bear ProFund and the UltraBear ProFund. The Bear ProFund's investment
objective is to provide investment results that will inversely correlate to the
performance of the S&P 500 Index. The UltraBear ProFund's investment objective
is to provide investment results that will inversely correlate to 200% of the
performance of the S&P 500 Index.
If the Bear ProFund is successful in meeting its objective, the net asset value
of Bear ProFund shares will increase in direct proportion to any decrease in the
level of the S&P 500 Index. Conversely, the net asset value of Bear ProFund
shares will decrease in direct proportion to any increases in the level of the
S&P 500 Index. The percentage change of net asset value of shares of the
UltraBear ProFund should increase or decrease approximately twice as much as
does that of the Bear ProFund on any given day.
The UltraOTC ProFund. The investment objective of the UltraOTC ProFund is to
provide investment results that correspond to 200% of the performance of the
NASDAQ 100 Index. The NASDAQ 100 Index includes 100 of the largest non-financial
domestic companies listed on the NASDAQ National Market tier of The NASDAQ Stock
Market.
The Money Market ProFund. The Money Market ProFund seeks, as its investment
objective, a high level of current income consistent with liquidity and
preservation of capital. To achieve its objective, the Money Market ProFund
invests all of its investable assets in the Cash Management Portfolio
("Portfolio"), which has the same investment objective as the Money Market
ProFund.
The performance of the Money Market ProFund is directly affected by the
performance of the Portfolio. The financial statements of the Portfolio,
including its schedule of investments, are included elsewhere within this report
and should be read in conjunction with the Money Market ProFund's financial
statements.
2) Significant Accounting Policies
The following is a summary of significant accounting policies consistently
followed by each ProFund in preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles. The
preparation of financial statements in accordance with generally accepted
accounting
15
<PAGE>
Notes to Financial Statements -- Continued
principles requires management to make estimates and assumptions that effect the
reported amount of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of income and expense during the reporting period. The actual results could
differ from those estimates.
a) Investment Valuation
The securities, except as otherwise noted, in the portfolio of a non-money
market ProFund that are listed or traded on a stock exchange, are valued on the
basis of the last sale on that day or, lacking any sales, at a price that is the
mean between the closing bid and asked prices. Other securities that are traded
on the OTC markets are priced using NASDAQ, which provides information on bid
and asked prices quoted by major dealers in such stocks. Bonds, other than
convertible bonds, are valued using a third-party pricing system. Convertible
bonds are valued using this pricing system only on days when there is no sale
reported. Short-term debt securities are valued at amortized cost, which
approximates market value. When market quotations are not readily available,
securities and other assets are valued at fair value as determined in good faith
under procedures established by and under general supervision and responsibility
of the ProFund's Board of Trustees.
Puts, calls and futures contracts purchased and held by the ProFunds are valued
at the close of the securities or commodities exchanges on which they are
traded. Options on securities and indices purchased by a ProFund generally are
valued at their last bid price in the case of exchange-traded options or, in the
case of options traded in the OTC market, the average of the last bid price as
obtained from two or more dealers unless there is only one dealer, in which case
that dealer's price is used. Futures contracts are valued with reference to
established futures exchanges. The value of a futures contract purchased by the
ProFunds will be either the closing price of that contract or the bid price.
Conversely, the value of a futures contract sold by the ProFunds will be either
the closing price or the asked price. The value of options on futures contracts
is determined based upon the current settlement price for a like option acquired
on the day on which the option is being valued.
Valuation of securities held by the Portfolio is discussed in Note 1 of the
notes to financial statements of the Portfolio which are included elsewhere in
this report.
b) Repurchase Agreements
Under a repurchase agreement, a ProFund purchases a debt security and
simultaneously agrees to sell the security back to the seller at a mutually
agreed-upon future price and date, normally one day or a few days later. The
resale price is greater than the purchase price, reflecting an agreed-upon
market interest rate during the purchaser's holding period. While the maturities
of the underlying securities in repurchase transactions may be more than one
year, the term of each repurchase agreement will always be less than one year. A
ProFund will enter into repurchase agreements only with member banks of the
Federal Reserve System or primary dealers of U.S. government securities. The
Advisor and, with respect to the Portfolio, Bankers Trust, will monitor the
creditworthiness of each of the firms which is a party to a repurchase agreement
with any of the ProFunds.
The ProFunds require that the securities purchased in a repurchase agreement
transaction be transferred to the custodian in a manner sufficient to enable the
ProFund to obtain those securities in the event of a counterparty default. The
seller, under the repurchase agreement, is required to maintain the value of the
securities held at not less than the repurchase price, including accrued
interest. Repurchase agreements are considered to be loans under the 1940 Act.
c) Federal Income Tax
Each of the ProFunds intends to elect to be treated to qualify each year as a
regulated investment company (a "RIC") under Subchapter M of the Internal
Revenue Code of 1986, as amended. A RIC generally is not subject to federal
income tax on income and gains distributed in a timely manner to its
shareholders; the ProFunds intend to make timely distributions in order to avoid
tax liability.
16
<PAGE>
Notes to Financial Statements -- Continued
d) Securities Transactions and Related Income
Securities transactions are accounted for on the date the security is purchased
or sold (trade date). Interest income is recognized on the accrual basis and
includes, where applicable, the pro rata amortization of premium or discount.
Dividend income is recorded on the ex-dividend date. Gains or losses realized on
sales of securities are determined by comparing the identified cost of the
security lot sold with the net sales proceeds.
e) Dividends, Distributions and Expenses
The ProFunds, other than the Money Market ProFund, will distribute net
investment income and net realized gains, if any, will be declared and
distributed at least once a year. Each ProFund bears expenses incurred
specifically on its behalf as well as a portion of general expenses.
The Money Market ProFund ordinarily (i) declares dividends of net investment
income (and net short-term capital gains, if any) for shares of the Money Market
ProFund on a daily basis and (ii) distributes such dividends to shareholders of
the Money Market ProFund on a monthly basis. Net realized capital gains will be
distributed annually.
All income dividends and capital gains distributions of each ProFund
automatically will be reinvested in additional shares of the ProFund at the net
asset value calculated on the ex-dividend date, unless an investor has requested
otherwise in writing.
f) Capital Accounts
The Trust follows the provisions of the AICPA's Statement of Position 93-2
"Determination, Disclosure and Financial Statement Presentation of Income,
Capital Gain and Return of Capital Distributions by Investment Companies"
("SOP"). The purpose of this SOP is to report undistributed net investment
income and accumulated net realized gain or loss in such a manner as to
approximate amounts available for future distributions to shareholders, if any.
g) Short Sales
When the Trust engages in a short sale, an amount equal to the proceeds received
by the Trust is reflected as an asset and an equivalent liability. The amount of
the liability is subsequently marked to market to reflect the market value of
the short sale. The Trust maintains a segregated account of securities as
collateral for the short sales. The Trust is exposed to market risk based on the
amount, if any, that the market value of the stock exceeds the market value of
the securities in the segregated account.
h) Options
When the Trust writes (sells) an option, an amount equal to the premium received
is entered in the Trust's accounting records as an asset and equivalent
liability. The amount of the liability is subsequently marked to market to
reflect the current value of the option written. When an option expires, or if
the Trust enters into a closing purchase transaction, the Trust realizes a gain
(or loss if the cost of a closing purchase transaction exceeds the premium
received with the option was sold).
i) Futures Contracts
The Trust may purchase or sell stock index futures contracts and options on such
futures contracts. Futures contracts are contracts for delayed delivery of
securities at a specified future delivery date and at a specific price. Upon
entering into a contract, the Trust deposits and maintains as collateral such
initial margin as required by the exchange on which the transaction is effected.
Pursuant to the contract, the Trust agrees to receive from or pay to the broker
an amount of cash equal to the daily fluctuation in value of the contract. Such
receipts or payments are known as variation margin and are recorded by the Trust
as unrealized gains or losses. When the contract is closed, the Trust records a
realized gain or loss equal to the difference between the value of the contract
at the time it was opened and the value at the time it was closed.
j) Risks of Futures Contracts and Options
Futures contracts and written options involve, to varying degrees, elements of
market risk and risks in excess of the amount recognized in the Statements of
Assets and Liabilities. The face or contract amounts reflect the extent of the
involvement each ProFund has in the particular classes of instruments. Risks may
17
<PAGE>
Notes to Financial Statements -- Continued
be caused by an imperfect correlation between movements in the price of the
instruments and the price of the underlying securities.
k) Organization Costs
Costs incurred by the Trust in connection with its organization have been
deferred and are being amortized on the straight-line method over a five-year
period beginning on the date on which each ProFund commenced its investment
activities.
3) Shares of Beneficial Interest
On December 31, 1997 there was an unlimited number of no par value shares of
beneficial interest authorized. Transactions in shares of beneficial interest
were as follows for the period ended December 31, 1997.
Bull ProFund
------------
Shares Amount
------ ------
Investor Shares Sold 9,966 $ 99,886
Investor Shares Redeemed (5,287) (53,129)
------ --------
Net Increase 4,679 46,757
====== ========
Service Shares Sold 1 $ 10
Service Shares Redeemed -- --
------ --------
Net Increase 1 10
====== ========
UltraBull ProFund
-----------------
Shares Amount
------ ------
Investor Shares Sold 1,421,658 $14,533,688
Investor Shares Redeemed (834,362) (8,590,224)
--------- -----------
Net Increase 587,296 5,943,464
========= ===========
Service Shares Sold 282,999 $ 2,933,108
Service Shares Redeemed (50,396) (497,580)
--------- -----------
Net Increase 232,603 2,435,528
========= ===========
Bear ProFund
------------
Shares Amount
------ ------
Investor Shares Sold 251,584 $2,515,842
Investor Shares Redeemed -- --
--------- ----------
Net Increase 251,584 2,515,842
========= ==========
Service Shares Sold 1 $ 10
Service Shares Redeemed -- --
--------- ----------
Net Increase 1 10
========= ==========
18
<PAGE>
Notes to Financial Statements -- Continued
UltraBear ProFund
-----------------
Shares Amount
------ ------
Investor Shares Sold 480,602 $ 4,806,020
Investor Shares Redeemed (480,600) (4,975,752)
--------- -----------
Net Increase (Decrease) 2 (169,732)
========= ===========
Service Shares Sold 1 $ 10
Service Shares Redeemed -- --
--------- -----------
Net Increase 1 10
========= ===========
UltraOTC ProFund
----------------
Shares Amount
------ ------
Investor Shares Sold 923,810 $ 9,080,432
Investor Shares Redeemed (893,159) (8,016,745)
--------- -----------
Net Increase 30,651 1,063,687
========= ===========
Service Shares Sold 85,747 $ 793,807
Service Shares Redeemed (6,319) (52,172)
--------- -----------
Net Increase 79,428 741,635
========= ===========
Money Market ProFund
--------------------
Shares Amount
------ ------
Investor Shares Sold 5,452,268 $ 5,452,268
Investor Shares Reinvested 5,771 5,771
Investor Shares Redeemed (5,171,075) (5,171,075)
----------- -----------
Net Increase 286,964 286,964
=========== ===========
Service Shares Sold 2,511 $ 2,511
Service Shares Redeemed -- --
----------- -----------
Net Increase 2,511 2,511
=========== ===========
4) Investment Advisory Fees, Administration Fees and Other Related Party
Transactions
The non-money market ProFunds have entered into an Investment Advisory Agreement
with ProFunds Advisors LLC (the "Advisor"). Under this agreement, dated October
28, 1997, the non-money market ProFunds each pay the Advisor a fee at an
annualized rate, based on the average daily net assets of each respective
ProFund, of 0.75%. ProFunds Advisors LLC voluntarily waived its advisory fee for
the period ended December 31, 1997.
BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services ("BISYS") acts
as Administrator to the ProFunds. For its services as Administrator, each
ProFund pays BISYS an annual fee ranging from 0.15% of average daily nets assets
of $0 to $300 million to 0.05% of average daily net assets of $1 billion and
over. BISYS Fund Services, Inc. ("BFSI"), an affiliate of BISYS, acts as
transfer agent and fund accounting agent for the ProFunds, for which it receives
additional fees. Additionally, ProFunds, BISYS and BFSI have entered into an
Omnibus Fee Agreement in which the amount of compensation due and payable to
BISYS shall be the greater of (i) the aggregate fee amount due and payable for
services pursuant to the Administration, Fund Accounting and Transfer Agency
Agreements and (ii) the minimum relationship fee described as specific dollar
amounts payable over a period of ten calendar quarters. BISYS Fund Services
voluntarily waived its administration fee, fund accounting and transfer agent
fees for the period ended December 31, 1997.
19
<PAGE>
Notes to Financial Statements -- Continued
ProFunds Advisors LLC, pursuant to a separate Management Services Agreement,
performs certain client support services and other administrative services on
behalf of the ProFunds. For these services, each non-money market ProFund will
pay to ProFunds Advisors LLC a fee at the annual rate of 0.15% of its average
daily net assets. Under this agreement, ProFunds Advisors LLC may receive up to
0.35% of the Money Market ProFund's average daily net assets for providing
feeder fund management and administrative services to the Money Market ProFund.
ProFunds Advisors LLC voluntarily waived its management service fee for the
period ended December 31, 1997.
Each ProFund has adopted a Shareholder Services Plan (the "Plan") and related
agreement ("Shareholder Services Agreement"). The Plan provides that each
ProFund will make payments to Authorized Firms in amount up to 1.00% (on an
annual basis) of the average net assets of such ProFund's Service class of
shares attributable to or held in the name of an Authorized Firm for its
clients. The Plan provides that the fee will be paid to registered investment
advisors, banks, trust companies and other financial organizations for providing
account administration and other services to their clients who are beneficial
owners of such shares. Each ProFund has adopted a shareholder service plan and
are voluntarily waiving the shareholder service fees, except for the Money
Market ProFund, for the period ended December 31, 1997.
Certain Trustees of the Trust are Officers of ProFunds Advisors LLC.
Waivers and reimbursements are detailed as follows:
<TABLE>
<CAPTION>
Investment Shareholder Management Fund Transfer
Advisor Admin Servicing Service Accounting Agent
Waiver Waiver Waiver Waiver Waiver Waiver
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Bull ProFund $28 $6 $-- $6 $1 $2,083
UltraBull ProFund 1,609 322 773 322 65 2,083
Bear ProFund 52 10 -- 10 2 --
UltraBear ProFund 615 123 -- 123 24 625
UltraOTC ProFund 751 150 379 150 29 2,083
Money Market ProFund -- 422 -- 984 -- 3,124
</TABLE>
The Advisor has voluntarily agreed to reimburse the ProFunds for expenses
incurred to maintain competitive expense ratios of the ProFunds. The total
reimbursement payable to the ProFunds is $120,524 as of December, 31, 1997.
The Advisor and Administrator paid registration and filing fees on behalf of the
ProFunds prior to commencement of operations. The ProFunds have a payable to the
Advisor and Administrator in the amounts of $126,500 and $13,630, respectively,
at December 31, 1997.
For the period ended December 31, 1997, the ProFunds incurred legal charges for
organization costs totaling $75,000 which were earned by an Officer of the
Trust. Certain officers of the Trust are "affiliated persons" of BISYS and of
ProFunds Advisors LLC.
5) Federal Income Tax Information (Unaudited)
During the period ended December 31, 1997 the following ProFunds made
equalization payments as long-term capital gain distributions in the following
amounts:
Fund Amount
---- ------
Ultra Bull $ 19,886
Ultra Bear 100,440
20
<PAGE>
Notes to Financial Statements -- Continued
Capital losses incurred within the Funds' fiscal year, but after October 31,
1997 are deemed to arise on the first business day of the following fiscal year
for tax purposes. The following ProFunds have incurred and will elect to defer
capital losses as follows:
Fund Capital Loss Deferred
---- ---------------------
Bull ProFund $ 591
OTC ProFund 886,806
Money Market ProFund 3
21
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders
of ProFunds
We have audited the accompanying statements of assets and liabilities of
ProFunds (comprising, respectively, the Bull ProFund, UltraBull ProFund, Bear
ProFund, UltraBear ProFund, UltraOTC ProFund, and Money Market ProFund),
including the schedules of portfolio investments, as of December 31, 1997, and
the related statements of operations, statements of changes in net assets, and
the financial highlights for the period then ended. These financial statements
and financial highlights are the responsibility of ProFunds 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 required 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
December 31, 1997 by correspondence with the custodian and brokers. 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
ProFunds as of December 31, 1997, and the results of their operations, the
changes in their net assets and their financial highlights for the period then
ended in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Columbus, Ohio
February 25, 1998
22
<PAGE>
- --------------------------------------------------------------------------------
Cash Management Portfolio
Schedule of Portfolio Investments December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Description Value
------ ----------- -----
<S> <C> <C>
CERTIFICATE OF DEPOSIT - 0.62%
$25,000,000 J.P. Morgan, 5.80%, 6/22/98
(Amortized Cost $25,000,000)................................$ 25,000,000
--------------
COMMERCIAL PAPER - 42.92%*
Abbey National:
25,000,000 5.495%, 3/31/98................................ 24,660,378
9,000,000 5.55%, 4/27/98................................. 8,839,050
25,500,000 Alcatel Alsthom,
6.10%, 1/06/98................................. 25,478,396
Asset Securitization Cooperative Corp.:
31,000,000 5.62%, 1/15/98................................. 30,932,248
33,000,000 5.61%, 1/29/98................................. 32,856,010
10,000,000 5.88%, 1/29/98................................. 9,954,267
25,000,000 5.74%, 2/13/98................................. 24,828,597
30,000,000 5.705%, 2/25/98................................ 29,738,521
20,000,000 5.69%, 2/26/98................................. 19,822,978
20,000,000 Australia Wheat Board,
5.72%, 3/04/98................................. 19,802,978
15,000,000 BBL North America,
5.75%, 3/10/98................................. 14,837,083
BTR Dunlop:
10,000,000 5.69%, 2/17/98................................. 9,925,714
10,000,000 5.68%, 2/26/98................................. 9,911,644
45,000,000 Bank of Austria,
5.72%, 3/17/98................................. 44,463,750
Bank of Nova Scotia:
10,000,000 5.667%, 2/17/98................................ 9,926,014
25,000,000 5.727%, 3/02/98................................ 24,761,375
30,000,000 Bayer Corp.,
5.78%, 2/18/98................................. 29,768,800
27,000,000 Bell Network,
5.88%, 1/29/98................................. 26,876,520
23,000,000 CAFCO,
5.75%, 2/13/98................................. 22,842,035
14,000,000 Caterpillar Financial,
5.52%, 1/21/98................................. 13,957,067
Commonwealth Bank of Australia:
12,000,000 5.54%, 4/30/98................................. 11,780,247
10,000,000 5.56%, 4/30/98................................. 9,816,211
10,000,000 Credit Suisse,
5.72%, 3/12/98................................. 9,888,778
Daimler Benz:
28,000,000 5.73%, 2/27/98................................. 27,745,970
15,000,000 5.72%, 3/24/98................................. 14,804,567
Delaware Funding Corp.:
15,770,000 5.52%, 1/12/98................................. 15,743,401
12,600,000 5.95%, 1/15/98................................. 12,570,845
25,000,000 5.95%, 1/16/98................................. 24,938,021
10,000,000 5.72%, 1/28/98................................. 9,957,100
16,219,000 5.85%, 1/30/98................................. 16,142,568
22,511,000 5.85%, 2/12/98................................. 22,357,362
60,000,000 Ford Motor Credit,
5.60%, 1/16/98................................. 59,860,000
General Electric Capital Corp.:
25,000,000 5.57%, 1/23/98................................. 24,914,903
5,000,000 5.54%, 1/30/98................................. 4,977,686
25,000,000 5.61%, 2/06/98................................. 24,859,750
20,000,000 5.70%, 2/18/98................................. 19,848,000
10,000,000 5.73%, 2/27/98................................. 9,909,275
25,000,000 5.71%, 4/17/98................................. 24,579,681
10,000,000 5.57%, 5/05/98................................. 9,808,144
Goldman Sachs:
10,000,000 5.60%, 1/20/98................................. 9,970,444
59,500,000 5.85%, 1/30/98................................. 59,219,606
21,000,000 5.72%, 3/16/98................................. 20,753,087
4,000,000 Hitachi America,
5.57%, 4/10/98................................. 3,938,730
20,000,000 Kingdom of Sweden,
5.52%, 3/16/98................................. 19,773,067
25,000,000 Kreditbank,
5.53%, 1/22/98................................. 24,919,354
10,000,000 MCI Communications,
5.55%, 1/15/98................................. 9,978,417
13,000,000 Manitoba Hydro Electric,
5.68%, 4/16/98................................. 12,784,633
</TABLE>
See Notes to Financial Statements
23
<PAGE>
- --------------------------------------------------------------------------------
Cash Management Portfolio
Schedule of Portfolio Investments December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Description Value
------ ----------- -----
<S> <C> <C>
Merrill Lynch & Co.:
$25,000,000 5.52%, 1/15/98.................................$ 24,946,333
28,000,000 5.57%, 1/16/98................................. 27,935,017
15,000,000 5.62%, 1/21/98................................. 14,953,167
20,000,000 5.61%, 1/30/98................................. 19,909,617
15,000,000 5.60%, 2/11/98................................. 14,904,333
8,000,000 5.71%, 2/25/98................................. 7,930,211
30,000,000 5.75%, 3/13/98................................. 29,659,792
10,000,000 5.57%, 5/05/98................................. 9,808,144
Morgan Guaranty,
40,000,000 5.69%, 4/15/98................................. 39,342,489
Morgan Stanley Group Inc.:
10,000,000 5.90%, 1/28/98................................. 9,955,750
28,000,000 5.75%, 2/18/98................................. 27,785,333
35,000,000 5.70%, 2/23/98................................. 34,706,292
60,000,000 Motorola,
5.65%, 2/04/98................................. 59,679,833
4,500,000 National Australia Funding,
5.55%, 1/09/98................................. 4,494,450
National Rural Utility Cooperative
Financial Corp.:
10,000,000 5.53%, 2/06/98................................. 9,944,700
10,000,000 5.692%, 4/21/98................................ 9,826,078
18,000,000 Norwest,
5.72%, 2/27/98................................. 17,836,980
15,000,000 Pacific Dunlop Holdings,
6.15%, 1/07/98................................. 14,984,625
28,000,000 Panasonic Finance,
6.07%, 1/21/98................................. 27,905,578
25,000,000 Province of Quebec,
5.57%, 3/05/98................................. 24,756,312
Rabobank:
10,000,000 5.56%, 1/29/98................................. 9,956,756
25,000,000 5.54%, 4/30/98................................. 24,542,181
Receivables Capital Corp.:
5,000,000 5.92%, 1/05/98................................. 4,996,711
22,000,000 5.93%, 1/30/98................................. 21,894,907
17,000,000 5.96%, 1/30/98................................. 16,918,381
10,000,000 5.79%, 2/10/98................................. 9,935,667
10,000,000 5.74%, 2/18/98................................. 9,923,467
27,401,000 5.76%, 2/20/98................................. 27,181,792
40,000,000 5.77%, 2/20/98................................. 39,679,444
14,000,000 5.813%, 2/25/98................................ 13,875,666
50,000,000 SBC Communications, Inc.,
6.70%, 1/02/98.................................$ 49,990,694
11,500,000 Schering Plough,
5.70%, 4/21/98................................. 11,299,708
60,000,000 Smith Barney Shearson,
5.62%, 2/17/98................................. 59,559,767
Sony Capital Corp.:
10,000,000 5.88%, 1/30/98................................. 9,952,633
18,000,000 5.90%, 2/12/98................................. 17,876,100
15,000,000 5.93%, 2/23/98................................. 14,869,046
10,000,000 Westpac Capital Corp.,
5.73%, 3/09/98................................. 9,893,358
--------------
Total Commercial Paper
(Amortized Cost $1,733,634,584)............................. 1,733,634,584
--------------
COMMERCIAL PAPER
(INTEREST BEARING) - 1.24%
50,000,000 General Electric Capital Corp.,
6.002%, 1/02/98
(Amortized Cost $50,000,000)................................ 50,000,000
--------------
EURODOLLAR CERTIFICATES OF
DEPOSIT - 8.98%
Abbey National:
20,000,000 5.76%, 2/17/98................................. 19,999,671
33,000,000 5.77%, 2/27/98................................. 32,996,828
20,000,000 Australia and New Zealand Bank,
5.75%, 2/17/98................................. 20,000,392
Banco Bilbao Vizcaya:
20,000,000 5.80%, 1/14/98................................. 20,000,188
4,000,000 5.65%, 1/20/98................................. 4,000,021
15,000,000 5.81%, 3/16/98................................. 15,000,304
23,000,000 Banco Santander,
5.79%, 1/20/98................................. 23,000,240
21,000,000 Bank of Tokyo-Mitsubishi,
5.80%, 1/26/98................................. 21,000,037
35,000,000 Banque Nationale de Paris,
5.82%, 3/05/98................................. 35,000,604
Barclays Bank:
20,000,000 5.60%, 1/07/98................................. 19,999,848
50,000,000 5.66%, 2/12/98................................. 50,000,000
</TABLE>
See Notes to Financial Statements
24
<PAGE>
- --------------------------------------------------------------------------------
Cash Management Portfolio
Schedule of Portfolio Investments December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Description Value
------ ----------- -----
<S> <C> <C>
$10,000,000 Bayerische Landesbank,
5.66%, 1/29/98.................................$ 9,998,251
11,000,000 Bayerische Vereinbank,
5.67%, 2/23/98................................. 10,999,986
15,000,000 Credit Anstaldt,
5.66%, 1/07/98................................. 15,000,109
International Nederlander Funding:
9,000,000 5.64%, 1/14/98................................. 8,999,968
11,000,000 5.65%, 1/16/98................................. 11,000,022
15,000,000 J.P. Morgan,
5.80%, 6/17/98................................. 15,005,466
8,000,000 Rabobank,
5.675%, 2/12/98................................ 7,999,125
Svenska Handelbanken:
10,000,000 5.62%, 1/09/98................................. 9,999,924
13,000,000 5.82%, 3/17/98................................. 12,999,874
--------------
Total Eurodollar Certificates of Deposit
(Amortized Cost $363,000,858)............................... 363,000,858
--------------
EURODOLLAR TIME DEPOSIT - 12.58%
70,000,000 Banco Santander,
5.70%, 1/29/98................................. 70,000,000
25,000,000 Bank of America,
5.67%, 1/29/98................................. 25,000,000
100,000,000 Bank of Nova Scotia,
7.00%, 1/02/98................................. 100,000,000
Bank of Tokyo-Mitsubishi:
20,000,000 5.75%, 1/05/98................................. 20,000,000
10,000,000 5.75%, 1/16/98................................. 10,000,000
35,000,000 Canadian Imperial Bank,
6.75%, 1/02/98................................. 35,000,000
25,000,000 Den Danske,
5.73%, 1/27/98................................. 25,000,000
International Nederlanden:
40,000,000 5.70%, 1/02/98................................. 40,000,000
20,000,000 5.68%, 1/14/98................................. 20,000,000
25,000,000 5.75%, 1/26/98................................. 25,000,000
30,000,000 National Australia,
5.84%, 3/04/98................................. 30,000,000
25,000,000 Nordeutsche Landesbank,
5.781%, 3/27/98................................ 25,000,000
35,000,000 Royal Bank of Scotland,
5.687%, 2/12/98................................ 35,000,000
23,031,762 Suntrust Bank,
5.00%, 1/02/98................................. 23,031,762
25,000,000 Svenska Handelbanken,
5.687%, 1/30/98................................ 25,000,000
--------------
Total Eurodollar Time Deposits
(Amortized Cost $508,031,762)............................... 508,031,762
--------------
FLOATING RATE NOTES - 11.48%
American Express Centurion Bank:
Monthly Variable Rate,
20,000,000 5.97%, 03/06/98................................ 20,000,000
20,000,000 5.928%, 9/25/98................................ 20,000,000
25,000,000 Associates Corp.:
Quarterly Variable Rate,
5.55%, 1/04/99................................. 24,987,796
11,000,000 Bank of America:
Quarterly Variable Rate,
6.10%, 6/30/98................................. 10,995,420
50,000,000 Bayerische Landesbank:
Monthly Variable Rate,
5.838%, 6/26/98................................ 49,981,243
8,000,000 Bear Stearns Co.:
Monthly Variable Rate,
6.118%, 4/28/98................................ 8,004,019
5,000,000 Chase Manhattan Bank:
Quarterly Variable Rate,
5.877%, 11/10/98............................... 5,007,561
35,000,000 Comerica:
Monthly Variable Rate,
5.90%, 2/05/98................................. 34,997,730
20,000,000 Corestates Bank:
Monthly Variable Rate,
5.96%, 2/02/98................................. 20,000,000
20,000,000 General Electric Capital Corporation:
Quarterly Variable Rate,
5.82%, 1/23/98................................. 20,000,000
</TABLE>
See Notes to Financial Statements
25
<PAGE>
- --------------------------------------------------------------------------------
Cash Management Portfolio
Schedule of Portfolio Investments December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Description Value
------ ----------- -----
<S> <C> <C>
$40,000,000 Key Bank:
Monthly Variable Rate,
5.854%, 3/19/98................................$ 39,993,801
Mellon Bank:
Quarterly Variable Rate,
10,000,000 5.846%, 6/16/98................................ 10,000,000
15,000,000 5.795%, 11/17/98............................... 15,000,000
25,000,000 Merrill Lynch & Co.:
Monthly Variable Rate,
5.98%, 2/06/98................................. 24,999,517
Morgan Stanley:
Quarterly Variable Rate,
40,000,000 5.96%, 1/30/98................................. 40,000,000
10,000,000 5.825%, 5/18/98................................ 10,000,000
15,000,000 National City Cleveland:
Monthly Variable Rate,
5.85%, 2/18/98................................. 14,998,571
PNC Bank:
Monthly Variable Rate,
40,000,000 5.878%, 1/09/98................................ 39,999,486
20,000,000 5.868%, 5/27/98................................ 19,995,331
10,000,000 Societe Generale:
Quarterly Variable Rate,
6.17%, 6/11/98................................. 9,998,602
25,000,000 Student Loan Marketing Association:
Weekly Variable Rate,
5.619%, 9/28/98................................ 24,998,152
--------------
Total Floating Rate Notes
(Amortized Cost $463,957,229)............................... 463,957,229
--------------
REPURCHASE AGREEMENTS - 6.19%
150,000,000 Tri-Party Repurchase Agreement
with Chase Manhattan Bank
Corp., Dated 12/31/97, Daily
Variable Rate, Principal amount
of $150,000,000, Interest
amount varies dependent on
rate, Due 1/07/98,
(Collateralized by FNMA, Par
Value of $159,343,563, Coupon
rates of 6.00% to 9.50%, Due
from 1/01/98 to 9/01/27,
Value of $153,000,279)......................... 150,000,000
$100,000,000 Tri-Party Repurchase Agreement
with Goldman Sachs & Co.,
Dated 12/31/97, 6.80%,
Principal & Interest in the
amount of $100,037,778,
Due 1/02/98,
(Collateralized by FGLMC,
Par Value of $159,831,991,
Coupon rates of 6.00% to
8.50%, Due from 2/01/00 to
12/01/27,
Value of $102,000,000).........................$ 100,000,000
--------------
Total Repurchase Agreements
(Amortized Cost $250,000,000)............................... 250,000,000
--------------
U.S. TREASURY AGENCY NOTES - 0.25%
10,000,000 U.S. Treasury Note,
6.125%, 8/31/98
(Amortized Cost $10,030,010)................................ 10,030,010
--------------
YANKEE CERTIFICATES OF DEPOSIT - 16.46%
35,000,000 ABN Amro Bank,
5.68%, 2/02/98................................. 35,000,506
25,000,000 Bank of Scotland,
5.77%, 2/23/98................................. 25,000,000
30,000,000 Bank of Tokyo-Mitsubishi,
6.23%, 4/02/98................................. 30,000,000
25,000,000 Bayerische Hypotheka,
5.77%, 2/20/98................................. 25,000,000
15,000,000 Canadian Imperial Bank of Commerce,
5.79%, 4/22/98................................. 15,000,000
Commerz Bank:
43,000,000 5.59%, 1/07/98................................. 43,000,000
6,000,000 5.63%, 1/14/98................................. 6,000,000
Dresdner Bank:
50,000,000 6.125%, 1/06/98................................ 50,000,000
10,000,000 5.93%, 4/09/98................................. 10,002,739
J.P. Morgan:
2,000,000 5.92%, 3/19/98................................. 2,000,264
11,000,000 5.94%, 3/20/98................................. 11,001,943
National Westminster Bank:
25,000,000 5.69%, 1/23/98................................. 25,000,000
10,000,000 5.77%, 3/03/98................................. 9,997,661
</TABLE>
See Notes to Financial Statements
26
<PAGE>
- --------------------------------------------------------------------------------
Cash Management Portfolio
Schedule of Portfolio Investments December 31, 1997
- --------------------------------------------------------------------------------
Principal
Amount Description Value
------ ----------- -----
$14,000,000 Rabobank,
5.97%, 3/20/98................................$ 13,996,148
Sanwa Bank:
21,000,000 5.755%, 1/22/98............................... 21,000,060
10,000,000 5.76%, 1/22/98................................ 10,000,057
Societe Generale:
35,000,000 5.78%, 2/27/98................................ 35,000,000
40,000,000 5.80%, 3/09/98................................ 40,000,000
4,000,000 5.97%, 3/18/98................................ 4,001,147
25,000,000 5.81%, 6/16/98................................ 25,001,120
Principal
Amount Description Value
------ ----------- -----
Swiss Bank Corp.:
$49,000,000 5.64%, 1/14/98................................$ 49,000,000
20,000,000 5.76%, 2/20/98................................ 20,000,000
50,000,000 5.76%, 2/25/98................................ 50,000,000
5,000,000 5.73%, 3/17/98................................ 5,000,360
Westdeutsche Landesbank:
30,000,000 6.25%, 1/09/98................................ 30,000,000
75,000,000 5.67%, 2/06/98................................ 75,000,000
--------------
Total Yankee Certificates of Deposit
(Amortized Cost $665,002,005)............................... 665,002,005
--------------
Total Investments
(Amortized Cost $4,068,656,448)................... 100.72% $4,068,656,448
Liabilities in Excess of Other Assets............... (0.72)% (28,931,473)
-------- --------------
Net Assets.......................................... 100.00% $4,039,724,975
======== ==============
- ----------
* Interest rates for commercial paper represent discount rates at the time of
purchase.
See Notes to Financial Statements
27
<PAGE>
- --------------------------------------------------------------------------------
Cash Management Portfolio
Statement of Assets and Liabilities December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Assets
Investments, at Value......................................... $ 4,068,656,448
Interest Receivable........................................... 16,411,303
Prepaid Expenses and Other.................................... 461,532
---------------
Total Assets..................................................... 4,085,529,283
---------------
Liabilities
Due to Bankers Trust.......................................... 708,486
Payable for Securities Purchased.............................. 45,051,382
Accrued Expenses and Other.................................... 44,440
---------------
Total Liabilities................................................ 45,804,308
---------------
Net Assets....................................................... $ 4,039,724,975
===============
Composition of Net Assets
Paid-in Capital............................................... $ 4,039,724,975
---------------
Net Assets, December 31, 1997.................................... $ 4,039,724,975
===============
</TABLE>
- --------------------------------------------------------------------------------
Statement of Operations For the year ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Investment Income
Interest...................................................... $ 244,875,536
---------------
Expenses
Advisory Fees................................................. 6,544,181
Administration and Services Fees.............................. 2,181,394
Professional Fees............................................. 31,250
Trustees Fees................................................. 2,100
Miscellaneous................................................. 34,622
---------------
Total Expenses................................................ 8,793,547
Less: Expenses Absorbed by Bankers Trust..................... (940,530)
---------------
Net Expenses............................................... 7,853,017
---------------
Net Investment Income............................................ 237,022,519
---------------
Net Realized Loss from Investment Transactions................... (41,207)
---------------
Net Increase in Net Assets from Operations....................... $ 236,981,312
===============
</TABLE>
See Notes to Financial Statements
28
<PAGE>
- --------------------------------------------------------------------------------
Cash Management Portfolio
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the For the
year ended year ended
December 31, 1997 December 31, 1996
----------------- -----------------
<S> <C> <C>
Increase (Decrease) in Net Assets from:
Operations
Net Investment Income................................................. $ 237,022,519 $ 173,497,388
Net Realized Gain (Loss) from Investment Transactions................. (41,207) 102,443
-------------- ---------------
Net Increase in Net Assets from Operations............................... 236,981,312 173,599,831
-------------- ---------------
Capital Transactions
Proceeds from Capital Invested........................................ 25,687,643,529 20,303,004,962
Value of Capital Withdrawn............................................ (25,146,809,558) (19,831,740,806)
-------------- ---------------
Net Increase in Net Assets from Capital Transactions..................... 540,833,971 471,264,156
-------------- ---------------
Contribution of Capital
Proceeds Contributed.................................................. -- 1,113,488
-------------- ---------------
Total Increase in Net Assets............................................. 777,815,283 645,977,475
Net Assets
Beginning of Year........................................................ 3,261,909,692 2,615,932,217
-------------- ---------------
End of Year.............................................................. $4,039,724,975 $ 3,261,909,692
============== ===============
</TABLE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
Contained below are selected ratios and supplemental data for each of the years
indicated for the Cash Management Portfolio.
<TABLE>
<CAPTION>
For the years ended December 31,
-----------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Supplemental Data and Ratios:
Net Assets, End of Year (000s omitted)...........$4,039,725 $3,261,910 $2,615,932 $2,735,025 $1,930,075
Ratios to Average Net Assets:
Net Investment Income......................... 5.43% 5.27% 5.77% 4.24% 3.06%
Expenses...................................... 0.18% 0.18% 0.18% 0.18% 0.20%
Decrease Reflected in Above Expense Ratio Due
to Absorption of Expenses by Bankers Trust.. 0.02% 0.02% 0.02% 0.02% 0.00%+
</TABLE>
- ----------
+ Less than 0.01%.
See Notes to Financial Statements
29
<PAGE>
- --------------------------------------------------------------------------------
Cash Management Portfolio
Notes to Financial Statements
- --------------------------------------------------------------------------------
Note 1--Organization and Significant Accounting Policies
A. Organization
The Cash Management Portfolio (the "Portfolio") is registered under the
Investment Company Act of 1940 (the "Act"), as amended, as an open-end
management investment company. The Portfolio was organized on March 26, 1990, as
an unincorporated trust under the laws of New York, and commenced operations on
July 23, 1990. The Declaration of Trust permits the Board of Trustees (the
"Trustees") to issue beneficial interests in the Portfolio.
B. Security Valuation
Investments are valued at amortized cost, which is in accordance to Rule 2a-7 of
the Investment Company Act of 1940 and represents the fair value of the
Portfolio's investments.
C. Security Transactions and Interest Income
Security transactions are accounted for on a trade date basis. Interest income
is recorded on the accrual basis and includes amortization of premium and
discount on investments. Realized gains and losses from securities transactions
are recorded on the identified cost basis.
All of the net investment income and realized and unrealized gains and losses
from the security transactions of the Portfolio are allocated pro rata among the
investors in the Portfolio at the time of such determination.
D. Repurchase Agreements
The Portfolio may enter into repurchase agreements with financial institutions
deemed to be creditworthy by the Portfolio's Investment Advisor, subject to the
seller's agreement to repurchase such securities at a mutually agreed upon
price. Securities purchased subject to repurchase agreements are deposited with
the Portfolio's custodian, and pursuant to the terms of the repurchase agreement
must have an aggregate market value greater than or equal to the repurchase
price plus all accrued interest at all times. If the value of the underlying
securities falls below the value of the repurchase price plus accrued interest,
the Portfolio will require the seller to deposit additional collateral by the
next business day. If the request for additional collateral is not met, or the
seller defaults on its repurchase obligation, the Portfolio maintains the right
to sell the underlying securities at market value and may claim any resulting
loss against the seller. However, in the event of default or bankruptcy by the
seller, realization and/or retention of the collateral may be subject to legal
proceedings.
E. Federal Income Taxes
It is the Portfolio's policy to comply with the requirements of the Internal
Revenue Code. Therefore, no federal income tax provision is required.
F. Other
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts in the financial statements. Actual results could
differ from those estimates.
Note 2--Fees and Transactions with Affiliates
The Portfolio has entered into an Administration and Services Agreement with
Bankers Trust Company ("Bankers Trust"). Under this Administration and Services
Agreement, Bankers Trust provides administrative, custody, transfer agency and
shareholder services to the Portfolio in return for a fee computed daily and
paid monthly at an annual rate of 0.05 of 1% of the Portfolio's average daily
net assets. For the year ended December 31, 1997, this fee aggregated
$2,181,394.
The Portfolio has entered into an Advisory Agreement with Bankers Trust. Under
this Advisory Agreement, the Portfolio pays Bankers Trust an advisory fee
computed daily and paid monthly at an annual rate of 0.15 of 1% of the
Portfolio's average daily net assets. For the year ended December 31, 1997, this
fee aggregated $6,544,181.
Bankers Trust has voluntarily undertaken to waive its fees and reimburse
expenses of the Portfolio, to the extent necessary, to limit all expenses to
0.18 of 1% of the average daily net assets of the Portfolio. For the year ended
December 31, 1997, expenses of the Portfolio have been reduced by $940,530.
In 1994, the Portfolio sold certain structured notes carried at par to an
unrelated third party financial institution at par plus accrued interest to a
put agreement and that third party financial institution immediately resold such
security to Bankers Trust New York Corporation, the parent of the Advisor, at
the same price, also pursuant to a put agreement. As a result of these
transactions the Portfolio's Financial Highlights for the year ended December
31, 1994 reflects the Portfolio's realized loss on the sale of these securities
and a capital contribution in the amount of $18,718,663. In 1996, Bankers Trust
contributed capital in the amount of $1,113,488 to reimburse the Cash Management
Portfolio for capital losses incurred in prior years.
Certain trustees and officers of the Portfolio are also directors, officers
and/or employees of Edgewood Services, Inc., distributor of BT Institutional
Funds. None of the trustees so affiliated received compensation for services as
trustees of the Portfolio. Similary, none of the Portfolio's officers received
compensation from the Portfolio.
30
<PAGE>
- --------------------------------------------------------------------------------
Cash Management Portfolio
Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Trustees and Holders of Beneficial Interest of the Cash
Management Portfolio:
We have audited the accompanying statement of assets and liabilities, including
the schedule of portfolio investments, of the Cash Management Portfolio as of
December 31, 1997, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended and the financial highlights for each of the five years in the
period then ended. These financial statements and financial highlights are the
responsibility of the Portfolio'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
December 31, 1997, by correspondence with the custodian and brokers. 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 the
Cash Management Portfolio as of December 31, 1997, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended and the financial highlights for each of the five years
in the period then ended, in conformity with generally accepted accounting
principles.
Coopers & Lybrand L.L.P.
Kansas City, Missouri
February 18, 1998
31
<PAGE>
Investment Advisor
- ------------------
All Non-Money Market ProFunds
Profunds Advisors LLC
7900 Wisconsin Avenue, Suite 300
Bethesda, Maryland 20814
Money Market ProFund
Bankers Trust Company
130 Liberty Street
New York, NY 10006
Administrator, Transfer Agent, Fund Accounting Agent
- ----------------------------------------------------
BISYS Fund Services
3435 Stelzer Road
Columbus, Ohio 43219-3035
Fund Counsel
- ------------
Dechert Price & Rhoads
1775 Eye Street, N.W.
Washington, D.C. 20006
Independent Auditors
- --------------------
Coopers & Lybrand LLP
100 East Broad Street,
Suite 2100
Columbus, Ohio 43215-3671
Custodian
- ---------
UMB Bank, N.A.
928 Grand Avenue
Kansas City, Missouri 64141
Distributor
- -----------
Concord Financial Group. Inc.
3435 Stelzer Road
Columbus, Ohio 43219-3035
This report is submitted for the general information of the shareholders of The
ProFunds. It is not authorized for distribution to prospective investors unless
preceded or accompanied by an effective prospectus.
