<PAGE>
[LOGO OF PROFUNDS APPEARS HERE]
Bull ProFund
UltraBull ProFund
UltraOTC ProFund
Bear ProFund
[GRAPHIC APPEARS HERE]
UltraBear ProFund
UltraShort OTC ProFund
Money Market ProFund
Annual Report
December 31, 1998
<PAGE>
ProFunds
Table of Contents
Letter from Chairman
Page 1
Letter from Investment Advisor
Page 3
ProFunds
Bull ProFund
Page 4
UltraBull ProFund
Page 9
UltraOTC ProFund
Page 14
Bear ProFund
Page 20
UltraBear ProFund
Page 25
UltraShort OTC ProFund
Page 30
Money Market ProFund
Page 35
Notes to Financial Statements
Page 39
Report of Independent Accountants
Page 46
Cash Management Portfolio
Statement of Net Assets
Page 47
Statement of Operations
Page 52
Statement of Changes in Net Assets
Page 53
Financial Highlights
Page 53
Notes to Financial Statements
Page 54
Independent Auditor's Report
Page 55
<PAGE>
PROFUNDS
Message From Your Chairman
Dear Shareholders:
I am very pleased to present the Annual Report to the Shareholders of
ProFunds for the twelve months ended December 31, 1998. This, our first full
year in operation (ProFunds started in November of 1997), has been one of
tremendous success. Over the course of twelve months, net assets in ProFunds
increased from about $12 million at the beginning of 1998 to over $500 million
by year's end.
UltraOTC ProFund was the best performing diversified U.S. stock fund in the
country according to Morningstar*, beating out all other funds in this
category, including those offered by the investment companies with household
names and large advertising budgets.
ProFunds Concept Succeeds . . .
The success of the ProFunds concept has been very gratifying. ProFunds
started with the notion that conventional index funds were overly restrictive
to their shareholders--affording investors the limited ability to target a
return equal to the index and earn profit only in rising markets while
restricting their flexibility to adjust their portfolio based on current market
conditions. ProFunds set out to change this. 1998 helped prove this change was
needed.
Throughout the year, our portfolios won high marks as they consistently
delivered excellent tracking with their benchmarks. Each ProFund had a
statistical correlation of at least .98. Thus, we believe our shareholders
received the performance they expected from ProFunds.
Part of ProFunds concept is to extend the welcome mat for both long-term,
buy-and-hold investors and investors with shorter-term horizons--and give them
the flexibility to change their ProFund investment whenever their investment
outlook changes. ProFunds afforded both types of investors tremendous
investment opportunities in 1998.
For example, #1 performing UltraOTC ProFund (Investor Class) produced a total
return of 185.34% for the twelve months ended December 31, 1998.** For short-
term investors and those who were hedging their portfolio, the July/August
correction when the S&P 500 fell 19% caused the UltraBear ProFund to soar 51%
in value.
Not surprisingly, this type of performance and ProFunds' innovations
attracted an enormous amount of attention from the traditional print and
broadcast media as well as from the new electronic media. Just focusing on
November, December, and January, publications ranging from USA Today (11/27/98,
and 1/6/99) and the Wall Street Journal (12/2/98 and 1/7/99) to CBS
MarketWatch.com (12/3/98) and SmartMoney.com (12/30/98) covered the progress of
the ProFunds.
On January 12, 1999, Dr. William Seale, our Director of Portfolio, was
interviewed on CNBC about the performance of the ProFunds in general, and that
of the UltraOTC Fund specifically. All of this press, we're delighted to
report, succeeded in greatly enhancing the visibility of the ProFunds and help
to contribute to the substantial growth in net assets under management.
A Focus On Service . . .
With ProFunds' tremendous growth in assets in 1998, we recognize the need to
expand and upgrade our service capacity and options. We are hiring numerous
ProFund Service Representatives and adding many more phone lines to keep up
with the large volume of phone calls we are receiving each day. We also intend
to use technology to enhance our service to you. We expect to implement an
internet-based account information and transaction system and augment our
telephone response system to offer transactions. Our web site
1
<PAGE>
(www.profunds.com) will be frequently enhanced to provide more current
information about ProFunds.
New ProFunds to track European Market . . .
In the months ahead, we hope to build on our success and continue to develop
innovative investment vehicles that you our shareholders asked for so that they
can pursue their investment strategies. To this end, this Spring, we plan to
introduce two new funds to track equity activity in Europe: UltraEurope ProFund
will seek to double the return of a ProFunds-created European index and
UltraShort Europe ProFund will be designed to produce investment returns of
twice the inverse performance of the ProFunds Europe Index.
As with the rest of our portfolios, these ProFunds will charge no transaction
fees. Nor will there be any restrictions on exchanges between these ProFunds.
Also, like the rest of the ProFunds family, we expect that these new funds will
be available through all major mutual fund platforms and discount brokers. Or
you may contact us directly by phone for a prospectus or visit us at
www.profunds.com.
In closing . . .
We deeply appreciate your confidence and support. Going forward, we will
continue to strive to be worthy of it by providing you, and all our
shareholders, with ProFunds that provide you with the investment tools you need
and the services you require. As always, if you have any questions or require
any assistance, please don't hesitate to call us. Financial Professionals can
reach us at 1-888-PRO-5717 (1-888-776-5717). All other shareholders please call
1-888-PRO-FNDS (1-888-776-3637) or (614) 470-8122.
Sincerely,
[SIGNATURE APPEARS HERE]
Michael L. Sapir
Chairman, ProFunds
- -----
* Morningstar ratings reflect historical risk-adjusted performance as of
December 31, 1998. The ratings are subject to change every month. Past
performance is not a guarantee of future results. The funds are categorized
on the fund stated prospectus objective, as grouped by Morningstar.
** Past performance is not predictive of future results. The investment return
and NAV will fluctuate so that the investor's shares when redeemed, may be
worth more or less than the original cost.
2
<PAGE>
PROFUNDS
Message From Your Investment Advisor
Dear Shareholders:
The stock markets were more volatile over the twelve months ended December
31, 1998 than they were in any year during the last decade. If global economic,
political and financial turmoil, and profitless prosperity for certain sectors
of the economy were not enough to occupy investors' minds, they had two other
unusual events to ponder: the possible impeachment of President Clinton and the
financial situation in Asia. Throughout much of the first half of the year, an
amazingly resilient U.S. bull market seemed able to overlook both of these
situations. Many investors were anxious about the markets' increased volatility
but on the upside, in mid-July, both the S&P 500 and the Nasdaq 100 reached
record levels. Shortly thereafter, however, they began to ease down. In August,
the atmosphere continued to chill on news that the Russian economy was in far
worse shape than previously suspected and the fact that no viable solutions to
Japan's economic problems were at hand.
The fate of Russia and its economy has had only minimal impact on the global
economy. However the psychological impact of the deterioration in world
economic conditions in mid-summer, Japan's continued economic woes and concerns
caused by the failure of the hedge fund, Long Term Capital Management, were a
potent combination and investors became more concerned. This caused the markets
to slide significantly. For example, from its high of 1,190 in July, the S&P
500 fell to a low of 923 in early October. The Nasdaq 100 fell from its high of
1,486 to a low of 1,063 during the same period.
Upward Momentum Wins Out
In September, however, signs that many of the situations that had triggered
the markets' decline were beginning to ease. In Asia, structural economic
reforms were under consideration. Japanese regulators were proposing serious
banking reforms. In Latin America, the Brazilians were moving towards austerity
budgeting with the help of the IMF. Noting that financial conditions at home
had become less friendly to growth, the Federal Reserve made the first of three
cuts in short-term interest rates.
With these indications that some of the global economic problems were being
addressed rather than ignored, investors grew more confident and investors
began to move back into the marketplace. The downward trend reversed in mid-
October. Over the next two months the stock markets recovered to their mid-
summer levels and then, moved higher. Technology stocks were the undisputed
leaders and the sheer momentum of this group of stocks moved the market higher
in the latter part of 1998. By the end of December, the Nasdaq 100 had gained
85% for the year and our UltraOTC fund was up 185% for the year.
European Union Creates Opportunity
On January 1, 1999, the European Union introduced the Euro and the launch was
successful. As we go to press, the Europeans now have the first common currency
since the fall of the Roman Empire. It is anticipated that the elimination of
intra-European exchange rate uncertainty will make the region a far easier
place to do business and it should make Europe a much more efficient investment
venue.
In short, while complete European monetary unification is years off, the
adoption of the Euro makes it possible for investors to more efficiently track
the progress of EC financial markets. However, while the integration of the
individual European currencies isn't without potential peril, today, taken as a
whole, Europe nearly equals the United States in sheer economic weight. The EC
has a population of nearly 290 million and a Gross Domestic Product that is 80%
of the U. S. The eleven member nations of the EC account for 19% of world trade
versus 17% for the United States. In this light, we look forward to introducing
our new "bull" and "bear" ProFunds focusing on the combination of the three
largest capitalization European stock markets: London, Paris, and Frankfurt.
Sincerely,
William E. Seale, Ph.D.
Director of Portfolio
3
<PAGE>
The Bull ProFund
The Bull ProFund seeks to provide daily investment returns that correspond
to the performance of the S&P 500 Index. Over the course of the year ended
December 31, 1998, this benchmark gained 258.78 points which the Fund's
performance tracked with a statistical correlation of .98. As a result, for
the twelve months, the Fund (Investor Shares) produced a total return of
26.57%* versus a return of 26.67% for the S&P 500.
[GRAPH APPEARS HERE]
Bull-Investor Bull-Service S&P 500
------------- ------------ -------
12/2/97 10,000 10,000
12/31/97 9,890 9,890 10,172
3/31/98 11,210 11,190 11,591
6/30/98 11,550 11,540 11,975
9/30/98 10,400 10,350 10,783
12/31/98 12,518 12,430 13,079
Average Annual Total Return
(as of 12/31/98)
- ------------------------------------------------------------------------------
- --
Since
Inception
1 Year (12/2/97)
------ --------
Investor 26.57% 23.06%
Service 25.68% 22.26%
* Past performance is not predictive of future results. The investment return
and NAV will fluctuate so that the investor's shares, when redeemed, may be
worth more or less than the original cost.
The performance of the Bull ProFund is measured against the S&P 500 Index,
an unmanaged index generally representative of the performance of the U.S.
stock market as a whole. The index does not reflect reinvestment of dividends
or the deduction of expenses associated with a mutual fund, such as investment
management and accounting fees. The Fund's performance reflects the deduction
of these value-added services.
4
<PAGE>
PROFUNDS Schedule of Portfolio Investments
Bull ProFund December 31, 1998
See accompanying notes to the financial statements.
<TABLE>
<S> <C> <C>
Options Purchased (18.0%)
<CAPTION>
Contracts
or
Principal Market
Amount Value
--------- ----------
<S> <C> <C>
S&P 500 Call Option expiring
January 1999 @ 650....................................... 10 $1,467,500
----------
TOTAL OPTIONS PURCHASED
(Cost $1,292,550)........................................ 1,467,500
----------
U.S. Treasury Note (81.9%)
United States Treasury Note, 4.625%, 12/31/00............. 6,645,000 6,658,498
----------
TOTAL U.S. TREASURY NOTE
(Cost $6,658,479)........................................ 6,658,498
----------
TOTAL INVESTMENTS
(Cost $7,951,029)(a) (99.9%)............................. 8,125,998
Assets in excess of other liabilities (.1%)............... 7,471
----------
TOTAL NET ASSETS (100.0%)................................. $8,133,469
==========
</TABLE>
- -----
<TABLE>
<S> <C> <C>
Percentages
indicated
are based on
net assets
of
$8,133,469.
</TABLE>
<TABLE>
<S> <C> <C>
Futures Purchased
<CAPTION>
Contracts
or
Principal Market
Amount Value
--------- ----------
<S> <C> <C>
S&P 500 Future Contract expiring March 1999............... 16 $4,948,000
S&P 500 Future Contract expiring March 1999............... 1 309,250
----------
TOTAL FUTURES PURCHASED (Cost $5,161,980)................. $5,257,250
==========
</TABLE>
- -----
(a) Represents cost for financial reporting purposes and differs from cost
basis for federal income tax purposes due to differences in the timing of
recognition of certain gains and losses by $95,270. Cost for federal
income tax purposes differs from market value by net unrealized
appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation...... $174,969
Unrealized depreciation...... --
--------
Net Unrealized appreciation.. $174,969
========
</TABLE>
5
<PAGE>
PROFUNDS
Bull ProFund
See accompanying notes to the financial statements.
<TABLE>
<S> <C>
Statement of
Assets and
Liabilities
</TABLE>
December 31, 1998
<TABLE>
<S> <C>
Assets:
Investments, at value (cost $7,951,029)........................... $8,125,998
Cash.............................................................. 1,615
Interest receivable............................................... 1,027
Prepaid expenses.................................................. 22,538
Deferred organization costs....................................... 10,581
----------
Total Assets...................................................... 8,161,759
Liabilities:
Payable for capital shares redeemed............................... 928
Net payable for variation margin on futures contracts............. 22,375
Administration fees payable....................................... 659
Shareholder servicing fees payable--Service Class................. 2,265
Other payables and accrued expenses............................... 2,063
----------
Total Liabilities................................................. 28,290
----------
Net Assets........................................................ $8,133,469
==========
Net Assets consist of:
Capital........................................................... $8,112,397
Accumulated net realized (losses) on investments and futures
contracts........................................................ (249,167)
Net unrealized appreciation of investments and futures contracts.. 270,239
----------
Total Net Assets.................................................. $8,133,469
==========
Investor Shares:
Net Assets........................................................ $7,543,922
Shares of Capital Stock Outstanding*.............................. 120,736
Net Asset Value (offering and redemption price per share)*........ $ 62.48
==========
Service Shares:
Net Assets........................................................ $ 589,547
Shares of Capital Stock Outstanding*.............................. 9,490
Net Asset Value (offering and redemption price per share)*........ $ 62.12
==========
</TABLE>
- -----
* Reflects 5 for 1 reverse split that occurred on January 15, 1999.
<TABLE>
<S> <C>
Statement
of
Operations
</TABLE>
For the year ended December 31, 1998
<TABLE>
<S> <C>
Investment Income:
Interest............................................................ $129,335
Expenses:
Advisory fees....................................................... 21,581
Management servicing fees........................................... 4,316
Administration fees................................................. 7,605
Shareholder servicing fees--Service Class........................... 3,116
Fund accounting..................................................... 1,189
Transfer agent fees................................................. 2,629
Custody fees........................................................ 5,995
Registration & filing fees.......................................... 24,345
Other fees.......................................................... 5,156
--------
Total expenses before waivers/reimbursements........................ 75,932
Less expenses waived/reimbursed..................................... (25,639)
--------
Net expenses........................................................ 50,293
--------
Net Investment Income................................................ 79,042
--------
Realized and Unrealized Gains on Investments:
Net realized gains on investment transactions and futures con-
tracts............................................................. 456,309
Net change in unrealized appreciation of investments and futures
contracts.......................................................... 269,984
--------
Net realized and unrealized gains on investments and futures con-
tracts............................................................. 726,293
--------
Increase In Net Assets Resulting from Operations..................... $805,335
========
</TABLE>
6
<PAGE>
PROFUNDS
Bull ProFund
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the period from
For the December 2, 1997 (a)
year ended through
December 31, 1998 December 31, 1997
----------------- --------------------
<S> <C> <C>
Change in Net Assets:
Operations:
Net investment income.................. $ 79,042 $ 115
Net realized gains/(losses) on invest-
ments and futures contracts........... 456,309 (846)
Net change in unrealized appreciation
of investments and futures contracts.. 269,984 255
------------- --------
Net increase/(decrease) in net assets
resulting from operations............. 805,335 (476)
Distributions to Shareholders from:
Net investment income.................. (5,086) --
Net realized gains on investment trans-
actions and futures contracts......... (6,624) --
------------- --------
Net (decrease) in assets resulting from
distributions......................... (11,710) --
Capital Share Transactions:
Proceeds from shares issued............ 113,734,720 99,897
Dividends reinvested................... 11,264 --
Cost of shares redeemed................ (106,452,431) (53,130)
------------- --------
Net increase in net assets resulting
from capital share transactions....... 7,293,553 46,767
------------- --------
Total increase in net assets........... 8,087,178 46,291
Net Assets:
Beginning of period.................... 46,291 --
------------- --------
End of period.......................... $ 8,133,469 $ 46,291
============= ========
</TABLE>
- -----
(a) Commencement of operations.
See accompanying notes to the financial statements.
7
<PAGE>
PROFUNDS
Bull ProFund
Financial Highlights
<TABLE>
<CAPTION>
For a share of beneficial
interest outstanding Adjusted for 5:1 reverse stock split on January 15, 1999
Investor Class Service Class
-------------------------------------- --------------------------------------
For the year For the period from For the year For the period from
ended December 2, 1997 (a) ended December 2, 1997 (a)
December 31, 1998 to December 31, 1997 December 31, 1998 to December 31, 1997
----------------- -------------------- ----------------- --------------------
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period..... $ 49.45 $ 50.00 $ 49.45 $ 50.00
---------- ------- -------- -------
Net investment income... 1.63(d) 0.10 1.08(d) --
Net realized and
unrealized gain/(loss)
on investment
transactions and
futures contracts...... 11.49 (0.65) 11.64 (0.55)
---------- ------- -------- -------
Total income/(loss) from
investment operations.. 13.12 (0.55) 12.72 (0.55)
---------- ------- -------- -------
Distribution to
Shareholders from:
Net investment income... (0.04) -- --(e) --
Net realized gains on
investment transactions
and futures contracts.. (0.05) -- (0.05) --
---------- ------- -------- -------
Total distributions..... (0.09) -- (0.05) --
---------- ------- -------- -------
Net Asset Value, End of
Period.................. $ 62.48 $ 49.45 $ 62.12 $ 49.45
========== ======= ======== =======
Total Return............. 26.57 % (1.10)%(b) 25.68 % (1.10)%(b)
Ratios/Supplemental Data:
Net assets, end of year.. $7,543,922 $46,281 $589,547 $ 10
Ratio of expenses to
average net assets...... 1.63 % 1.33 %(c) 2.67 % 1.33 %(c)
Ratio of net investment
income to average net
assets.................. 2.84 % 2.97 %(c) 1.89 % 0.00 %(c)
Ratio of expenses to
average net assets*..... 2.40 % 423.48 %(c) 3.30 % 424.48 %(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 ratio would have been as indicated.
(a) Commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Per share net investment income has been calculated using the daily
average shares method.
(e) Distribution per share was less than $0.005.
8
<PAGE>
UltraBull ProFund
The UltraBull ProFund's investment objective is to provide daily investment
returns that correspond to 200% of the performance of the S&P 500 Index. For
the year ended December 31, 1998, this benchmark gained 258.78 points which the
Fund's performance tracked with a statistical correlation of .98. As a result,
for the twelve months, the Fund (Investor Shares) produced a total return of
42.95%* versus a return of 26.67% for the S&P 500. For this superb performance,
we are delighted to report that the Fund was recognized as #5 among large blend
funds by Morningstar.**
[GRAPH APPEARS HERE]
UltraBull-Investor UltraBull-Service S&P 500
------------------ ----------------- -------
11/28/97 10,000 10,000 10,000
12/31/97 10,290 10,290 10,172
3/31/98 12,940 12,930 11,591
6/30/98 13,420 13,380 11,974
9/30/98 10,406 10,346 10,783
12/31/98 14,710 14,558 13,079
Average Annual Total Return
(as of 12/31/98)
- -------------------------------------------------------------------------------
- -
Since
Inception
1 Year (11/28/97)
------ ---------
Investor 42.95% 42.34%
Service 41.48% 40.99%
* Past performance is not predictive of future results. The investment return
and NAV will fluctuate so that the investor's shares, when redeemed, may be
worth more or less than the original cost.
** Morningstar ratings reflect historical risk-adjusted performance as of
December 31, 1998. The ratings are subject to change every month. Past
performance is not a guarantee of future results. The funds are categorized
on the fund's stated prospectus objective, as grouped by Morningstar.
The performance of the UltraBull ProFund is measured against the S&P 500
Index, an unmanaged index generally representative of the performance of the
U.S. stock market as a whole. The index does not reflect reinvestment of
dividends or the deduction of expenses associated with a mutual fund, such as
investment management and accounting fees. The Fund's performance reflects the
deduction of these value-added services.
9
<PAGE>
PROFUNDS Schedule of Portfolio Investments
UltraBull ProFund December 31, 1998
See accompanying notes to the financial statements.
<TABLE>
<S> <C> <C>
Options Purchased (19.3%)
<CAPTION>
Contracts
or
Principal Market
Amount Value
---------- ------------
<S> <C> <C>
S&P 500 Call Option expiring
January 1999 @ 650.................................... 40 $ 5,870,000
S&P 500 Call Option expiring
January 1999 @ 675.................................... 50 7,025,000
S&P 500 Call Option expiring
January 1999 @ 700.................................... 50 6,712,500
S&P 500 Put Option expiring
January 1999 @ 650.................................... 400 5,000
S&P 500 Put Option expiring
January 1999 @ 700.................................... 200 2,500
S&P 500 Put Option expiring
January 1999 @ 750.................................... 200 2,500
------------
TOTAL OPTIONS PURCHASED
(Cost $17,270,950).................................... 19,617,500
------------
U.S. Treasury Note (81.5%)
United States Treasury Note,
4.625%, 12/31/00...................................... 82,838,000 83,006,265
------------
TOTAL U.S. TREASURY NOTE
(Cost $83,006,035).................................... 83,006,265
------------
TOTAL INVESTMENTS
(Cost $100,276,985)(a)(100.8%)........................ 102,623,765
Other liabilities in excess of
assets (-0.8%)........................................ (777,884)
------------
TOTAL NET ASSETS (100.0%).............................. $101,845,881
============
</TABLE>
- -----
<TABLE>
<S> <C> <C>
Percentages
indicated
are based on
net assets
of
$101,845,881.
</TABLE>
<TABLE>
<S> <C> <C>
Futures Purchased
<CAPTION>
Contracts
or
Principal Market
Amount Value
---------- ------------
<S> <C> <C>
S&P 500 Future Contract expiring
March 1999............................................ 522 $161,428,500
S&P 500 Future Contract expiring
March 1999............................................ 7 2,164,750
------------
TOTAL FUTURES PURCHASED
(Cost $157,617,370)................................... $163,593,250
============
</TABLE>
- -----
(a) Represents cost for financial reporting purposes and differs from cost
basis for federal income tax purposes due to differences in the timing of
recognition of certain gains and losses by $5,975,880. Cost for federal
income tax purposes differs from market value by net unrealized
appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation.... $2,367,315
Unrealized depreciation.... (20,535)
----------
Net Unrealized apprecia-
tion...................... $2,346,780
==========
</TABLE>
10
<PAGE>
PROFUNDS
UltraBull ProFund
See accompanying notes to the financial statements.
<TABLE>
<S> <C>
Statements
of Assets
and
Liabilities
</TABLE>
December 31, 1998
<TABLE>
<S> <C>
Assets:
Investments, at value (cost $100,276,985)....................... $102,623,765
Cash............................................................ 47,102
Interest receivable............................................. 12,801
Prepaid expenses................................................ 24,350
Deferred organizational costs................................... 10,551
------------
Total Assets.................................................... 102,718,569
Liabilities:
Net payable for variation margin on futures contracts........... 717,890
Advisory fees payable........................................... 55,872
Management servicing fees payable............................... 11,174
Administration fees payable..................................... 16,334
Shareholder servicing fees payable--Service Class............... 27,333
Other payables and accrued expenses............................. 44,085
------------
Total Liabilities............................................... 872,688
------------
Net Assets....................................................... 101,845,881
============
Net Assets consist of:
Capital......................................................... $100,894,237
Accumulated net realized (losses) on investments and futures
transactions................................................... (7,371,016)
Net unrealized appreciation of investments and futures
contracts...................................................... 8,322,660
------------
Total Net Assets................................................. $101,845,881
============
Investor Shares:
Net Assets...................................................... $ 90,854,397
Shares of Capital Stock Outstanding*............................ 1,237,135
Net Asset Value (offering and redemption price per share)*...... $ 73.44
============
Service Shares:
Net Assets...................................................... $ 10,991,484
Shares of Capital Stock Outstanding*............................ 151,058
Net Asset Value (offering and redemption price per share)*...... $ 72.76
============
</TABLE>
- -----
* Reflects 5 for 1 reverse split that occurred on January 15, 1999.
<TABLE>
<S> <C>
Statements
of
Operations
</TABLE>
For the year ended December 31, 1998
<TABLE>
<S> <C>
Investment Income:
Interest......................................................... $ 1,302,212
Expenses:
Advisory fees.................................................... 247,992
Management servicing fees........................................ 49,599
Administration fees.............................................. 100,776
Shareholder servicing fees--Service Class........................ 44,651
Fund accounting fees............................................. 10,273
Transfer agent fees.............................................. 41,721
Registration & filing fees....................................... 51,952
Other fees....................................................... 65,968
-----------
Total expenses before waivers/ reimbursements.................... 612,932
Less expenses waived/ reimbursed................................. (76,827)
-----------
Net expenses..................................................... 536,105
-----------
Net Investment Income............................................. 766,107
-----------
Realized and Unrealized Gains on Investments:
Net realized gains on investment transactions and futures
contracts....................................................... 3,734,412
Net change in unrealized appreciation of investments and futures
contracts....................................................... 8,276,070
-----------
Net realized and unrealized gains on investments and futures
contracts....................................................... 12,010,482
-----------
Increase in Net Assets Resulting from Operations................. $12,776,589
===========
</TABLE>
11
<PAGE>
PROFUNDS
UltraBull ProFund
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the period from
For the November 28, 1997 (a)
year ended through
December 31, 1998 December 31,1997
----------------- ---------------------
<S> <C> <C>
Change in Net Assets:
Operations:
Net investment income................. $ 766,107 $ 4,927
Net realized gains on investment
transactions and futures contracts... 3,734,412 7,528
Net change in unrealized appreciation
of investments and futures
contracts............................ 8,276,070 46,590
------------- -----------
Net increase in net assets resulting
from operations...................... 12,776,589 59,045
Distributions to Shareholders from:
Net investment income................. (73,926) --
Net realized gains on investment
transactions and futures contracts... (20,856) --
------------- -----------
Net (decrease) in assets resulting
from distributions................... (94,782) --
Capital Share Transactions:
Proceeds from shares issued........... 625,192,237 17,466,796
Dividends reinvested.................. 68,468 --
Cost of shares redeemed............... (544,534,668) (9,087,804)
------------- -----------
Net increase in net assets resulting
from capital share transactions...... 80,726,037 8,378,992
------------- -----------
Total increase in net assets.......... 93,407,844 8,438,037
Net Assets:
Beginning of period................... 8,438,037 --
------------- -----------
End of period......................... $ 101,845,881 $ 8,438,037
============= ===========
</TABLE>
- -----
(a) Commencement of operations.
See accompanying notes to the financial statements.
12
<PAGE>
PROFUNDS
UltraBull ProFund
Financial Highlights
<TABLE>
<CAPTION>
For a share of beneficial
interest outstanding Adjusted for 5:1 reverse stock split on January 15, 1999
Investor Class Service Class
--------------------------------------- ---------------------------------------
For the year For the period from For the year For the period from
ended November 28, 1997 (a) ended November 28, 1997 (a)
December 31, 1998 to December 31, 1997 December 31, 1998 to December 31, 1997
----------------- --------------------- ----------------- ---------------------
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period..... $ 51.45 $ 50.00 $ 51.45 $ 50.00
----------- ---------- ----------- ----------
Net investment income... 1.55(d) 0.05 0.95(d) 0.05
Net realized and
unrealized gains on
investment transactions
and futures contracts.. 20.53 1.40 20.39 1.40
----------- ---------- ----------- ----------
Total income from
investment operations.. 22.08 1.45 21.34 1.45
----------- ---------- ----------- ----------
Distribution to
Shareholders from:
Net investment income... (0.06) -- --(e) --
Net realized gains on
investment transactions
and futures contracts.. (0.03) -- (0.03) --
----------- ---------- ----------- ----------
Total Distributions..... (0.09) -- (0.03) --
----------- ---------- ----------- ----------
Net Asset Value, End of
Period.................. $ 73.44 $ 51.45 $ 72.76 $ 51.45
=========== ========== =========== ==========
Total Return............. 42.95 % 2.90%(b) 41.48 % 2.90%(b)
Ratios/Supplemental Data:
Net assets at end of
period.................. $90,854,397 $6,043,740 $10,991,484 $2,394,297
Ratio of expenses to
average net assets...... 1.50 % 1.33%(c) 2.39 % 1.33%(c)
Ratio of net investment
income to average net
assets.................. 2.43 % 2.26%(c) 1.53 % 1.69%(c)
Ratio of expenses to
average net assets*..... 1.70 % 12.69%(c) 2.84 % 13.69%(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) Commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Per share net investment income has been calculated using the daily
average shares method.
(e) Distribution per share was less than $0.005.
13
<PAGE>
The UltraOTC ProFund
The investment objective of the UltraOTC ProFund is to provide daily
investment results that correspond to 200% of the performance of the NASDAQ 100
Index. The NASDAQ 100 includes 100 of the largest non-financial domestic
companies listed on the NASDAQ National Market tier of the NASDAQ Stock Market.
For the year ended December 31, 1998, this benchmark gained 845.16 points which
the Fund's performance tracked with a statistical correlation of .99. As a
result, for the twelve months, the Fund (Investor Shares) produced a total
return of 185.34%* versus a return of 85.30% for its benchmark. For this superb
performance, we are delighted to report that the Fund was recognized as #1
among diversified U.S. stock funds by Morningstar.**
[GRAPH APPEARS HERE]
UltraOTC-Investor UltraOTC-Service Nasdaq 100
----------------- ---------------- ----------
12/2/97 10,000 10,000 10,000
12/31/97 8,360 8,360 9,432
3/31/98 12,440 12,440 11,620
6/30/98 14,560 14,530 12,730
9/30/98 13,810 13,750 12,808
12/31/98 23,854 23,740 17,477
Average Annual Total Return
(as of 12/31/98)
- -------------------------------------------------------------------------------
- -
Since
Inception
1 Year (12/2/97)
------ ---------
Investor 185.34% 123.30%
Service 183.98% 122.32%
* Past performance is not predictive of future results. The investment return
and NAV will fluctuate so that the investor's shares, when redeemed, may be
worth more or less than the original cost.
** Morningstar ratings reflect historical risk-adjusted performance as of
December 31, 1998. The ratings are subject to change every month. Past
performance is not a guarantee of future results. The funds are categorized on
the fund's stated prospectus objective, as grouped by Morningstar.
The performance of the UltraOTC ProFund is measured against the NASDAQ 100
Index, an unmanaged index generally representative of the performance of the
NASDAQ stock market a whole. The index does not reflect reinvestment of
dividends or the deduction of expenses associated with a mutual fund, such as
investment management and accounting fees. The Fund's performance reflects the
deduction of these value-added services.
14
<PAGE>
PROFUNDS Schedule of Portfolio Investments
UltraOTC ProFund December 31, 1998
See accompanying notes to the financial statements.
<TABLE>
<S> <C> <C>
Common Stocks (25.7%)
<CAPTION>
Market
Shares Value
------ ------------
<S> <C> <C>
Airlines (0.1%)
Comair Holdings, Inc. ...................................... 4,400 $ 148,500
Northwest Airlines Corp.--Class A*.......................... 5,676 145,093
------------
293,593
------------
Auto Manufacturers (0.1%)
PACCAR Inc.................................................. 7,326 301,282
------------
Biotechnology (1.3%)
Amgen, Inc.*................................................ 10,032 1,048,970
Biogen, Inc.*............................................... 7,656 635,448
Centocor, Inc.*............................................. 5,676 256,130
Chiron Corp*................................................ 21,120 553,080
Genzyme Corp.*.............................................. 8,492 422,477
Immunex Corp.*.............................................. 4,642 584,022
------------
3,500,127
------------
Chemicals (0.1%)
Sigma-Aldrich Corp.......................................... 8,800 258,500
------------
Commercial Services (0.6%)
Concord EFS, Inc.*.......................................... 9,284 393,410
Paychex, Inc................................................ 13,134 675,580
Quintiles Transnational Corp.*.............................. 9,152 488,488
Stewart Enterprises, Inc.--Class A.......................... 6,688 148,808
------------
1,706,286
------------
Computer Software (7.4%)
Adobe Systems, Inc.......................................... 4,884 228,327
Autodesk, Inc............................................... 3,190 136,173
BMC Software, Inc.*......................................... 13,882 618,617
Cambridge Technology Partners, Inc.*........................ 3,564 78,854
Citrix Systems, Inc.*....................................... 4,290 416,398
Compuware Corp.*............................................ 9,504 742,500
Electronic Arts Inc.*....................................... 5,170 290,166
Fiserv, Inc.*............................................... 8,602 442,465
HBO & Co.................................................... 24,882 713,802
Intuit, Inc.*............................................... 6,314 457,765
Microsoft Corp.*............................................ 72,688 10,080,916
Netscape Communications Corp.*.............................. 10,472 636,174
Network Associates Inc.*.................................... 11,858 785,593
Novell Inc.*................................................ 35,574 644,779
Oracle Corp.*............................................... 34,254 1,477,203
Parametric Technology Corp.*................................ 31,218 511,195
Peoplesoft, Inc.*........................................... 27,874 527,864
Yahoo!, Inc.*............................................... 4,004 948,698
------------
19,737,489
------------
Computers (4.4%)
3COM Corp.*................................................. 15,334 687,155
Adaptec Inc.*............................................... 7,480 131,368
Apple Computer, Inc.*....................................... 15,752 644,848
Ascend Communications, Inc.*................................ 10,230 672,623
Cisco Systems, Inc.*........................................ 47,806 4,436,993
Dell Computer Corp.*........................................ 39,666 2,903,054
Electronics for Imaging, Inc.*.............................. 3,410 137,039
Fore Systems, Inc.*......................................... 7,480 136,978
Micron Electronics, Inc.*................................... 6,336 109,692
Quantum Corp.*.............................................. 17,248 366,520
Sun Microsystems, Inc.*..................................... 13,970 1,196,181
</TABLE>
<TABLE>
<S> <C> <C>
Common Stock, continued
<CAPTION>
Market
Shares Value
------ ------------
<S> <C> <C>
Computers, continued
Synopsys Inc.*............................................. 6,446 $ 349,696
Veritas Software Corp.*.................................... 4,026 241,308
------------
12,013,455
------------
Distibution & Wholesale (0.1%)
Tech Data Corp.*........................................... 3,586 144,337
------------
Electrical & Electronic - Components & Equipment (0.3%)
American Power Conversion Corp.*........................... 10,626 514,697
Molex, Inc. ............................................... 6,182 235,689
------------
750,386
------------
Food (0.1%)
McCormick & Co., Inc....................................... 4,488 151,751
------------
Food - Distibution (0.1%)
Food Lion, Inc.--Class B................................... 17,424 175,329
------------
Health Care (0.3%)
Biomet, Inc. .............................................. 12,650 509,163
First Health Group Corp.*.................................. 3,344 55,385
Lincare Holdings Inc.*..................................... 4,114 166,874
Pacificare Health Systems--Class B*........................ 2,354 187,143
------------
918,565
------------
Internet Services (0.3%)
Amazon.Com, Inc.*.......................................... 2,948 947,045
------------
Media (1.2%)
Chancellor Media Corp.*.................................... 14,630 700,411
Comcast Corp.--Special Class A............................. 13,574 796,624
Jacor Communications, Inc.*................................ 4,422 284,666
Reuters Group PLC--ADR..................................... 2,376 150,579
TCI Group*................................................. 18,282 1,011,224
USA Networks, Inc.*........................................ 11,814 391,339
------------
3,334,843
------------
Metal Processing (0.0%)
Worthington Industries, Inc................................ 5,038 62,975
------------
Office Equipment & Services (0.1%)
Corporate Express, Inc.*................................... 5,082 26,363
Miller Herman, Inc......................................... 5,654 151,951
------------
178,314
------------
Packaging (0.1%)
Smurfit-Stone Container Corp.*............................. 17,864 282,475
------------
Pharmaceuticals (0.0%)
Rexall Sundown, Inc.*...................................... 3,784 52,976
------------
Professional Schools (0.1%)
Apollo Group, Inc.--Class A*............................... 5,918 200,472
------------
Restaurants (0.2%)
CBRL Group Inc. ........................................... 3,762 87,702
Starbucks Corp.*........................................... 10,384 582,802
------------
670,504
------------
</TABLE>
15
<PAGE>
PROFUNDS Schedule of Portfolio Investments
UltraOTC ProFund December 31, 1998
See accompanying notes to the financial statements.
<TABLE>
<S> <C> <C>
Common Stocks, continued
<CAPTION>
Market
Shares Value
------ ------------
<S> <C> <C>
Retail (1.1%)
Bed Bath & Beyond Inc.*..................................... 15,730 $ 536,786
Costco Companies, Inc.*..................................... 9,702 700,363
Dollar Tree Stores, Inc.*................................... 4,510 197,031
Fastenal Co................................................. 2,354 103,576
Nordstrom, Inc.............................................. 18,436 639,499
Ross Stores, Inc. .......................................... 2,992 117,810
Staples, Inc.*.............................................. 16,038 700,660
------------
2,995,725
------------
Semiconductors (3.7%)
Altera Corp.*............................................... 11,594 705,784
Applied Materials, Inc.*.................................... 16,126 688,379
Atmel Corp.*................................................ 5,984 91,630
Intel Corp.................................................. 49,500 5,868,843
KLA-Tencor Corp.*........................................... 8,954 388,380
Linear Technology Corp. .................................... 8,492 760,564
Maxim Integrated Products*.................................. 15,488 676,632
Microchip Technology, Inc.*................................. 3,542 131,054
Vitesse Semiconductor Corp.*................................ 6,688 305,140
Xilinx, Inc.*............................................... 7,964 518,656
------------
10,135,062
------------
Telecommunications - Services and Equipment (2.0%)
ADC Telecommunication, Inc.*................................ 14,124 490,809
Andrew Corp.*............................................... 5,302 87,483
Ericsson (Lm) Telephone--ADR................................ 26,026 622,997
Level 3 Communications, Inc.*............................... 17,996 776,077
McLeodUSA, Inc.--Class A*................................... 4,290 134,063
Nextel Communications, Inc.--Class A*....................... 29,172 689,188
NTL Inc.*................................................... 5,192 293,024
PanAmSat Corp.*............................................. 17,006 662,171
Qualcomm, Inc.*............................................. 7,106 368,180
Qwest Communications International Inc.*.................... 14,762 738,099
Tellabs, Inc.*.............................................. 9,372 642,568
------------
5,504,659
------------
Telephone (1.5%)
MCI Worldcom, Inc.*......................................... 55,902 4,010,968
------------
Textiles (0.3%)
Cintas Corp................................................. 10,648 750,019
------------
Waste Management (0.2%)
Allied Waste Industries, Inc.*.............................. 28,128 664,524
------------
TOTAL COMMON STOCKS
(Cost $67,979,269)......................................... 69,741,661
------------
Options Purchased (42.9%)
Nasdaq Call Option expiring
January 1999 @ 900......................................... 400 38,040,000
Nasdaq Call Option expiring
January 1999 @ 970......................................... 200 17,620,000
Nasdaq Call Option expiring
January 1999 @ 980......................................... 500 43,550,000
Nasdaq Call Option expiring
January 1999 @ 990......................................... 200 17,220,000
</TABLE>
<TABLE>
<S> <C> <C>
Options Purchased, continued
<CAPTION>
Market
Shares Value
---------- ------------
<S> <C> <C>
Nasdaq Put Option expiring
January 1999 @ 900.................................... 1,200 $ 24,000
Nasdaq Put Option expiring
January 1999 @ 950.................................... 2,200 44,000
------------
TOTAL OPTIONS PURCHASED
(Cost $108,684,000)................................... 116,498,000
------------
U.S. Treasury Note (29.5%)
<CAPTION>
Principal
Amount
----------
<S> <C> <C>
United States Treasury Note,
4.625%, 12/31/00...................................... 79,954,000 $ 80,116,407
------------
TOTAL U.S. TREASURY NOTE
(Cost $80,116,184).................................... 80,116,407
------------
TOTAL INVESTMENTS
(Cost $256,779,453)(a) (98.1%)........................ 266,356,068
Other assets in excess of
liabilities (1.9%).................................... 5,053,072
------------
TOTAL NET ASSETS (100.0%).............................. $271,409,140
============
- -----
Percentages indicated are based on net assets of $271,409,140.
Futures Purchased
<CAPTION>
Number of
Contracts
----------
<S> <C> <C>
Nasdaq 100 Future Contract expiring March 1999......... 1,168 $216,196,800
------------
TOTAL FUTURES PURCHASED
(Cost $157,049,510)................................... $216,196,800
============
</TABLE>
- -----
* non-income producing
(a) Represents cost for financial reporting purposes and differs from cost
basis for federal income tax purposes due to differences in the timing of
recognition of certain gains and losses by $60,174,022. Cost for federal
income tax purposes differs from market value by net unrealized
appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation.... $9,254,825
Unrealized depreciation.... (704,942)
----------
Net Unrealized apprecia-
tion...................... $8,549,883
==========
</TABLE>
ADR--American Depositary Receipt
PLC--Public Limited Company
16
<PAGE>
PROFUNDS
UltraOTC ProFund
<TABLE>
<S> <C>
Statement of
Assets and
Liabilities
</TABLE>
December 31, 1998
<TABLE>
<S> <C>
Assets:
Investments, at value (cost $256,779,453)....................... $266,356,068
Cash............................................................ 120,048
Net receivable from brokers for variation margin on futures
contracts...................................................... 39,612,550
Interest and dividends receivable............................... 15,687
Receivable from administrator................................... 36,667
Prepaid expenses................................................ 42,614
Deferred organization costs..................................... 10,581
------------
Total Assets.................................................... 306,194,215
Liabilities:
Payable for investment securities purchased..................... 34,438,000
Advisory fees payable........................................... 141,888
Management servicing fees payable............................... 28,378
Administration fees payable..................................... 26,807
Shareholder servicing--Service Class............................ 52,391
Other payables and accrued expenses............................. 97,611
------------
Total Liabilities............................................... 34,785,075
------------
Net Assets....................................................... $271,409,140
============
Net Assets consist of:
Capital......................................................... $264,570,905
Accumulated undistributed net investment income................. 1,513
Accumulated undistributed net realized (losses) on investments
and futures contracts.......................................... (61,887,183)
Net unrealized appreciation of investments and futures
contracts...................................................... 68,723,905
------------
Total Net Assets................................................ $271,409,140
============
Investor Shares:
Net Assets...................................................... $239,017,203
Shares of Capital Stock administrator........................... 2,004,023
Net Asset Value (offering and redemption price per share)*...... $ 119.27
============
Service Shares:
Net Assets...................................................... $ 32,391,937
Shares of Capital Stock Outstanding*............................ 272,879
Net Asset Value (offering and redemption price per share)*...... $ 118.70
============
</TABLE>
- -----
* Reflects 5 for 1 reverse split that occurred on January 15, 1999
<TABLE>
<S> <C>
Statement
of
Operations
</TABLE>
For the year ended December 31, 1998
<TABLE>
<S> <C>
Investment Income:
Interest......................................................... $ 1,409,196
Dividends........................................................ 6,987
-----------
Total Income..................................................... 1,416,183
Expenses:
Advisory fees.................................................... 419,023
Management servicing fees........................................ 83,805
Administration fees.............................................. 164,271
Shareholder servicing fees--Service Class........................ 77,145
Fund accounting fees............................................. 17,684
Transfer agent fees.............................................. 63,844
Registration & filing fees....................................... 82,997
Other fees....................................................... 101,451
-----------
Total expenses before waivers/reimbursements..................... 1,010,220
Less expenses waived/reimbursed.................................. (114,162)
-----------
Net expenses..................................................... 896,058
-----------
Net Investment Income............................................. 520,125
-----------
Realized and Unrealized Gains on Investments:
Net realized gains on investment transactions and futures
contracts....................................................... 14,500,678
Net change in unrealized appreciation of investments and futures
contracts....................................................... 68,743,665
-----------
Net realized and unrealized gains on investments and futures
contracts....................................................... 83,244,343
-----------
Increase in Net Assets Resulting from Operations.................. $83,764,468
===========
</TABLE>
See accompanying notes to the financial statements.
17
<PAGE>
PROFUNDS
UltraOTC ProFund
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the period from
For the December 2, 1997 (a)
year ended through
December 31, 1998 December 31, 1997
----------------- --------------------
<S> <C> <C>
Change in Net Assets:
Operations:
Net investment income.................. $ 520,125 $ 1,652
Net realized gains/(losses) on
investment transactions and futures
contracts............................. 14,500,678 (867,046)
Net change in unrealized
appreciation/(depreciation) of
investments and futures contracts..... 68,743,665 (19,760)
--------------- -----------
Net increase/(decrease) in net assets
resulting from operations............. 83,764,468 (885,154)
Distributions to shareholders from:
Net investment income.................. (38,062) --
--------------- -----------
Net (decrease) in assets resulting from
distributions......................... (38,062) --
Capital Share Transactions:
Proceeds from shares issued............ 1,198,375,948 9,874,239
Dividends reinvested................... 26,453 --
Cost of shares redeemed................ (1,011,639,835) (8,068,917)
--------------- -----------
Net increase in net assets from capital
share transactions.................... 186,762,566 1,805,322
--------------- -----------
Total increase in net assets........... 270,488,972 920,168
Net Assets:
Beginning of period.................... 920,168 --
--------------- -----------
End of period.......................... $ 271,409,140 $ 920,168
=============== ===========
</TABLE>
- -----
(a) Commencement of operations.
See accompanying notes to the financial statements.
18
<PAGE>
PROFUNDS
UltraOTC ProFund
Financial Highlights
<TABLE>
<CAPTION>
For a share of beneficial
interest outstanding Adjusted for 5:1 reverse stock split on January 15, 1999
Investor Class Service Class
--------------------------------------- --------------------------------------
For the year For the period from For the year For the period from
ended December 2, 1997 (a) ended December 2, 1997 (a)
December 31, 1998 to December 31, 1997 December 31, 1998 to December 31, 1997
----------------- -------------------- ----------------- --------------------
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period..... $ 41.80 $ 50.00 $ 41.80 $ 50.00
------------ -------- ----------- --------
Net investment income... 0.81(d) 0.30 0.40(d) --
Net realized and
unrealized gain/(loss)
on investment
transactions and
futures contracts...... 76.66 (8.50) 76.50 (8.20)
------------ -------- ----------- --------
Total income/(loss) from
investment operations.. 77.47 (8.20) 76.90 (8.20)
------------ -------- ----------- --------
Distribution to
Shareholders from:
Net investment income... --(e) -- --(e) --
------------ -------- ----------- --------
Total distributions..... -- -- -- --
------------ -------- ----------- --------
Net Asset Value, End of
Period.................. $ 119.27 $ 41.80 $ 118.70 $ 41.80
============ ======== =========== ========
Total Return............. 185.34% (16.40)%(b) 183.98% (16.40)%(b)
Ratios/Supplemental Data:
Net assets, end of year.. $239,017,203 $256,184 $32,391,937 $663,984
Ratio of expenses to
average net assets...... 1.47% 1.07 %(c) 2.38% 1.75 %(c)
Ratio of net investment
income to average net
assets.................. 1.05% 2.73 %(c) 0.07% (0.06)%(c)
Ratio of expenses to
average net assets*..... 1.67% 21.74 %(c) 2.61% 23.42 %(c)
Portfolio Turnover(f).... 156% 156%
</TABLE>
- -----
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred,
the ratio would have been as indicated.
(a) Commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Per share net investment income has been calculated using the daily
average shares method.
(e) Distribution per share was less than $0.005.
(f) Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
19
<PAGE>
The Bear ProFund
The Bear ProFund's investment objective is to provide daily investment
results that inversely correlate to the performance of the S&P 500 Index. Over
the twelve months, the Fund's performance tracked this benchmark with a
statistical correlation of .99. Consequently, in the July/August correction,
the Fund (Investor Shares) produced a total return of 21.0% versus a return of
- -17.9% over the same period for the S&P 500. Over the course of the year,
however, the Index gained 258.78 points and generated a return of 26.67%. The
Fund (Investor Shares), as anticipated, posted a total return of -19.46% for
the same period.*
[GRAPH APPEARS HERE]
Bear-Investor Bear-Service S&P 500
------------- ------------ -------
12/31/97 10,000 10,000
12/31/97 10,000 10,000 10,000
3/31/98 8,960 8,960 11,395
6/30/98 8,740 8,740 11,772
9/30/98 9,710 9,710 10,601
12/31/98 8,054 7,996 12,858
Average Annual Total Return
(as of 12/31/98)
- -------------------------------------------------------------------------------
- -
Since
Inception
1 Year (12/31/97)
------ ----------
Investor -19.46% -19.41%
Service -20.04% -19.99%
* Past performance is not predictive of future results. The investment return
and NAV will fluctuate so that the investor's shares, when redeemed, may be
worth more or less than the original cost.
The performance of the Bear ProFund is measured against the S&P 500 Index, an
unmanaged index generally representative of the performance of the U.S. stock
market as a whole. The index does not reflect reinvestment of dividends or the
deduction of expenses associated with a mutual fund, such as investment
management and accounting fees. The Fund's performance reflects the deduction
of these value-added services.
20
<PAGE>
PROFUNDS Schedule of Portfolio Investments
Bear ProFund December 31, 1998
See accompanying notes to the financial statements.
<TABLE>
<S> <C> <C>
Options Purchased (1.6%)
<CAPTION>
Contracts
or
Principal Market
Amount Value
--------- ----------
<S> <C> <C>
S&P 500 Put Option expiring
January 1999 @1525....................................... 1 $ 72,000
----------
TOTAL OPTIONS PURCHASED
(Cost $69,255)........................................... 72,000
----------
U.S. Treasury Note (86.6%)
United States Treasury Note,
4.625%, 12/31/00......................................... 3,932,000 3,939,987
----------
TOTAL U.S. TREASURY NOTE
(Cost $3,939,975)........................................ 3,939,987
----------
TOTAL INVESTMENTS
(Cost $4,009,230)(a) (88.2%)............................. 4,011,987
Other assets in excess of
liabilities (11.8%)...................................... 534,470
----------
TOTAL NET ASSETS (100.0%)................................. $4,546,457
==========
</TABLE>
- -----
Percentages indicated are based on net assets of $4,546,457.
(a) Represents cost for federal income tax purposes and differs from market
value by net unrealized appreciation of securities follows:
<TABLE>
<S> <C>
Unrealized appreciation........................................... $2,757
Unrealized depreciation........................................... --
------
Net Unrealized appreciation....................................... $2,757
======
</TABLE>
21
<PAGE>
PROFUNDS
Bear ProFund
See accompanying notes to the financial statements.
<TABLE>
<S> <C>
Statements
of Assets
and
Liabilities
</TABLE>
December 31,1998
<TABLE>
<S> <C>
Assets:
Investments, at value (cost $4,009,230)........................... $4,011,987
Net receivable for variation margin on open futures contracts..... 503,020
Receivable from Investment Advisor................................ 8,357
Interest receivable............................................... 608
Prepaid expenses.................................................. 17,471
Deferred organization cost........................................ 10,796
----------
Total Assets...................................................... 4,552,239
Liabilities:
Payable to custodian.............................................. 472
Administration fees payable....................................... 105
Shareholder Servicing fees payable--Service Class................. 2,994
Other payables and accrued expenses............................... 2,211
----------
Total Liabilities................................................. 5,782
----------
Net Assets......................................................... $4,546,457
==========
Net Assets consist of:
Capital........................................................... $5,312,124
Accumulated undistributed net investment income................... 1,290
Accumulated net realized (losses) on investments and futures
contracts........................................................ (769,714)
Net unrealized appreciation of investments and futures contracts.. 2,757
----------
Total Net Assets................................................... $4,546,457
==========
Investor Shares:
Net Assets........................................................ $4,166,787
Shares of Capital Stock Outstanding*.............................. 104,474
Net Asset Value (offering and redemption price per share)*........ $ 39.88
==========
Service Shares:
Net Assets........................................................ $ 379,670
Shares of Capital Stock Outstanding*.............................. 9,549
Net Asset Value (offering and redemption price per share)*........ $ 39.76
==========
</TABLE>
- -----
* Reflects 5 for 1 reverse split that occurred on January 15, 1999.
<TABLE>
<S> <C>
Statements
of
Operations
</TABLE>
For the year ended December 31,1998
<TABLE>
<S> <C>
Investment Income:
Interest.......................................................... $ 68,015
Expenses:
Advisory fees..................................................... 11,045
Management servicing fees......................................... 2,208
Administration fees............................................... 2,933
Shareholder servicing fees--Service Class......................... 3,555
Fund accounting fees.............................................. 483
Transfer agent fees............................................... 1,418
Custody fees...................................................... 3,039
Registration & filing fees........................................ 19,839
Insurance fees.................................................... 3,106
Organizational costs.............................................. 2,697
Other fees........................................................ 701
---------
Total expenses before waivers/reimbursements...................... 51,024
Less expenses waived/reimbursed................................... (25,001)
---------
Net expenses...................................................... 26,023
---------
Net Investment Income.............................................. 41,992
---------
Realized and Unrealized Gains/(Losses) on Investments:
Net realized (losses) on investment transactions and futures
contracts........................................................ (769,283)
Net change in unrealized appreciation of investments and futures
contracts........................................................ 2,324
---------
Net realized and unrealized (losses) on investments and futures
contracts........................................................ (766,959)
---------
Decrease in Net Assets Resulting from Operations................... $(724,967)
=========
</TABLE>
22
<PAGE>
PROFUNDS
Bear ProFund
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the period from
For the December 31, 1997 (a)
year ended through
December 31, 1998 December 31, 1997
----------------- ---------------------
<S> <C> <C>
Change in Net Assets:
Operations:
Net investment income................. $ 41,992 $ --
Net realized gains/(losses) on
investment transactions and futures
contracts............................ (769,283) 137
Net change in unrealized appreciation
of investments and futures
contracts............................ 2,324 433
------------ ----------
Net increase/(decrease) in net assets
resulting from operations............ (724,967) 570
Distributions to Shareholders from:
Net investment income................. (40,702) --
Net realized gains on investment
transactions and futures contracts... (568) --
------------ ----------
Net (decrease) in assets resulting
from distributions................... (41,270) --
Capital Share Transactions:
Proceeds from shares issued........... 53,489,566 2,515,852
Dividends reinvested.................. 39,914
Cost of shares redeemed............... (50,733,208) --
------------ ----------
Net increase in net assets resulting
from capital share transactions...... 2,796,272 2,515,852
------------ ----------
Total increase in net assets.......... 2,030,035 2,516,422
Net Assets:
Beginning of period................... 2,516,422 --
------------ ----------
End of period......................... $ 4,546,457 $2,516,422
============ ==========
</TABLE>
- -----
(a) Commencement of operations.
See accompanying notes to the financial statements.
23
<PAGE>
PROFUNDS
Bear ProFund
Financial Highlights
<TABLE>
<CAPTION>
For a share of beneficial
interest outstanding Adjusted for 5:1 reverse stock split on January 15, 1999
Investor Class Service Class
--------------------------------------- ---------------------------------------
For the year For the period from For the year For the period from
ended December 31, 1997 (a) ended December 31, 1997 (a)
December 31, 1998 to December 31, 1997 December 31, 1998 to December 31, 1997
----------------- --------------------- ----------------- ---------------------
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period..... $ 50.00 $ 50.00 $ 50.00 $ 50.00
---------- ---------- -------- -------
Net investment income... 1.47(d) -- 0.87(d) --
Net realized and
unrealized (loss) on
investment transactions
and futures contracts.. (11.22) -- (10.88) --
---------- ---------- -------- -------
Total (loss) from
investment operations.. (9.75) -- (10.01) --
---------- ---------- -------- -------
Distribution to
Shareholders from:
Net investment income... (0.37) -- (0.23) --
Net realized gains on
investment transactions
and futures contracts.. --(e) -- --(e) --
---------- ---------- -------- -------
Total Distributions..... (0.37) -- (0.23) --
---------- ---------- -------- -------
Net Asset Value, End of
Period.................. $ 39.88 $ 50.00 $ 39.76 $ 50.00
========== ========== ======== =======
Total Return............. (19.46)% 0.00%(b) (20.04)% 0.00%(b)
Ratios/Supplemental Data:
Net assets at end of
period.................. $4,166,787 $2,516,412 $379,670 $ 10
Ratio of expenses to
average net assets...... 1.54 % 0.00%(c) 2.49 % 0.00%(c)
Ratio of net investment
income to average net
assets.................. 3.12 % 0.00%(c) 1.90 % 0.00%(c)
Ratio of expenses to
average net assets*..... 3.26 % 325.97%(c) 4.09 % 326.97%(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) Commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Per share net investment income has been calculated using the daily
average shares method.
(e) Distribution per share was less than $0.005.
24
<PAGE>
The UltraBear ProFund
The UltraBear ProFund's investment objective is to provide daily investment
results that inversely correlate to 200% of the performance of the S&P 500
Index. Over the twelve months, the Fund's performance tracked this benchmark
with a statistical correlation of .98. Consequently, in the July/August
correction, the Fund (Investor Shares) produced a total return of 43.6% versus
a return of -17.9% over the same period for the S&P 500. Over the course of the
year, however, the index gained 2587.78 points and generated a return of
26.67%. The Fund (Investor Shares), as anticipated, posted a total return of -
38.34% for the same period.*
[GRAPH APPEARS HERE]
UltraBear-Investor UltraBear-Service S&P 500
------------------ ----------------- -------
12/23/97 10,000 10,000
12/31/97 10,360 10,350 10,000
3/31/98 8,390 8,380 11,395
6/30/98 8,000 8,020 11,772
9/30/98 9,430 9,410 10,601
12/31/98 6,388 6,370 12,858
Average Annual Total Return
(as of 12/31/98)
- -------------------------------------------------------------------------------
- -
Since
Inception
1 Year (12/23/97)
------ ----------
Investor -38.34% -35.43%
Service -38.45% -35.60%
* Past performance is not predictive of future results. The investment return
and NAV will fluctuate so that the investor's shares, when redeemed, may be
worth more or less than the original cost.
The performance of the UltraBear ProFund is measured against the S&P 500
Index, an unmanaged index generally representative of the performance of the
U.S. stock market as a whole. The index does not reflect reinvestment of
dividends or the deduction of expenses associated with a mutual fund, such as
investment management and accounting fees. The Fund's performance reflects the
deduction of these value-added services.
25
<PAGE>
PROFUNDS Schedule of Portfolio Investments
UltraBear ProFund December 31, 1998
See accompanying notes to the financial statements.
<TABLE>
<S> <C> <C>
Options Purchased (13.5%)
<CAPTION>
Contracts
or
Principal Market
Amount Value
---------- -----------
<S> <C> <C>
S&P 500 Call Option expiring
January 1999 @ 1500.................................... 100 $ 2,500
S&P 500 Call Option expiring
January 1999 @ 1525.................................... 200 2,500
S&P 500 Put Option expiring
January 1999 @ 1525.................................... 58 4,176,000
-----------
TOTAL OPTIONS PURCHASED
(Cost $5,197,790)...................................... 4,181,000
-----------
U.S. Treasury Note (86.0%)
United States Treasury Note, 4.625%, 12/31/00........... 26,578,000 26,631,987
-----------
TOTAL U.S. TREASURY NOTE
(Cost $26,631,913)..................................... 26,631,987
-----------
TOTAL INVESTMENTS
(Cost $31,829,703)(a) (99.5%).......................... 30,812,987
Other assets in excess
of liabilities (0.5%).................................. 139,217
-----------
TOTAL NET ASSETS (100%)................................. $30,952,204
===========
</TABLE>
- -----
Percentages indicated are based on net assets of $30,952,204.
<TABLE>
<S> <C> <C>
Futures Sold
<CAPTION>
Contracts
or
Principal Market
Amount Value
--------- ------------
<S> <C> <C>
S&P 500 Futures Contract
expiring March 1999................................... 134 $(41,439,500)
------------
TOTAL FUTURES SOLD
(Proceeds $40,807,230)................................ $(41,439,500)
============
</TABLE>
- -----
(a) Represents cost for financial reporting purposes and differs from cost
basis for federal income tax purposes due to differences in the timing of
recognition of certain gains and losses by $(632,270). Cost for federal
income tax purposes differs from market value by net unrealized
depreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation..................................... $ 74
Unrealized depreciation..................................... (1,016,790)
-----------
Net Unrealized depreciation................................. $(1,016,716)
===========
</TABLE>
26
<PAGE>
PROFUNDS
UltraBear ProFund
See accompanying notes to the financial statements.
<TABLE>
<S> <C>
Statement of
Assets and
Liabilities
</TABLE>
December 31, 1998
<TABLE>
<S> <C>
Assets:
Investments, at value (cost $31,829,703)......................... $30,812,987
Cash............................................................. 3,774
Net receivable for variation margin on open futures contracts.... 171,360
Interest receivable.............................................. 4,107
Prepaid expenses................................................. 23,785
Deferred organization costs...................................... 10,736
-----------
Total Assets..................................................... 31,026,749
Liabilities:
Advisory fees payable............................................ 14,407
Management servicing fees payable................................ 2,881
Administration fees payable...................................... 13,665
Shareholder servicing fees payable--Service Class................ 23,338
Other payables and accrued expenses.............................. 20,254
-----------
Total Liabilities................................................ 74,545
-----------
Net Assets........................................................ $30,952,204
===========
Net Assets consist of:
Capital.......................................................... $39,760,569
Accumulated net realized (losses) on investments and futures
contracts....................................................... (7,159,379)
Net unrealized (depreciation) of investments and futures
contracts....................................................... (1,648,986)
-----------
Total Net Assets.................................................. $30,952,204
===========
Investor Shares:
Net Assets....................................................... $27,939,876
Shares of Capital Stock Outstanding*............................. 876,542
Net Asset Value (offering and redemption price per share)*....... $ 31.88
===========
Service Shares:
Net Assets....................................................... $ 3,012,328
Shares of Capital Stock Outstanding*............................. 94,639
Net Asset Value (offering and redemption price per share)*....... $ 31.83
===========
</TABLE>
- -----
* Reflects 5 for 1 reverse split that occurred on January 15, 1999.
<TABLE>
<S> <C>
Statement
of
Operations
</TABLE>
For the year ended December 31, 1998
<TABLE>
<S> <C>
Investment Income:
Interest........................................................ $ 720,009
Expenses:
Advisory fees................................................... 126,301
Management servicing fees....................................... 25,260
Administration fees............................................. 53,264
Shareholder servicing fees--Service Class....................... 27,260
Fund accounting fees............................................ 5,516
Transfer agent fees............................................. 21,988
Registration & filing fees...................................... 34,207
Other fees...................................................... 31,050
-----------
Total expenses before waivers/reimbursements.................... 324,846
Less expenses waived/reimbursed................................. (36,966)
-----------
Net expenses.................................................... 287,880
-----------
Net Investment Income............................................ 432,129
-----------
Realized and Unrealized (Losses) on Investments:
Net realized (losses) on investment transactions and futures
contracts...................................................... (7,159,379)
Net change in unrealized (depreciation) of investments and
futures contracts.............................................. (1,648,986)
-----------
Net realized and unrealized (losses) on investments............. (8,808,365)
-----------
Decrease in Net Assets Resulting from Operations................. $(8,376,236)
===========
</TABLE>
27
<PAGE>
PROFUNDS
UltraBear ProFund
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the period from
For the December 23, 1997 (a)
year ended through
December 31, 1998 December 31, 1997
----------------- ---------------------
<S> <C> <C>
Change in Net Assets:
Operations:
Net investment income................. $ 432,129 $ 2,433
Net realized gains/(losses) on
investment transactions and futures
contracts............................ (7,159,379) 167,320
Net change in unrealized
appreciation/(depreciation) of
investment transactions and futures
contracts............................ (1,648,986) --
------------- -----------
Net increase/(decrease) in net assets
resulting from operations............ (8,376,236) 169,753
------------- -----------
Distributions to Shareholders from:
Net investment income................. (21,742)
------------- -----------
Net (decrease) in assets resulting
from distributions................... (21,742) --
Capital Share Transactions:
Proceeds from shares issued........... 457,690,222 4,806,030
Dividends reinvested.................. 11,707
Cost of shares redeemed............... (418,351,778) (4,975,752)
------------- -----------
Net increase/(decrease) in net assets
resulting from capital share
transactions......................... 39,350,151 (169,722)
------------- -----------
Total increase in net assets.......... 30,952,173 31
Net Assets:
Beginning of period................... 31 --
------------- -----------
End of period......................... $ 30,952,204 $ 31
============= ===========
</TABLE>
- -----
(a) Commencement of operations.
See accompanying notes to the financial statements.
28
<PAGE>
PROFUNDS
UltraBear ProFund
Financial Highlights
<TABLE>
<CAPTION>
For a share of beneficial
interest outstanding Adjusted for 5:1 reverse stock split on January 15, 1999
Investor Class Service Class
--------------------------------------- ---------------------------------------
For the year For the period from For the year For the period from
ended December 23, 1997 (a) ended December 23, 1997 (a)
December 31, 1998 to December 31, 1997 December 31, 1998 to December 31, 1997
----------------- --------------------- ----------------- ---------------------
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period..... $ 51.80 $ 50.00 $ 51.75 $50.00
----------- ---------- ---------- ------
Net investment income... 1.16(d) 6,082.50(e) 0.75(d) --
Net realized and
unrealized gain/(loss)
on investments and
futures contracts...... (21.04) (6,080.70)(e) (20.67) 1.75
----------- ---------- ---------- ------
Total income/(loss) from
investment operations.. (19.88) 1.80 (19.92) 1.75
----------- ---------- ---------- ------
Distribution to
Shareholders from:
Net investment income... (0.04) -- -- --
----------- ---------- ---------- ------
Total distributions..... (0.04) -- -- --
----------- ---------- ---------- ------
Net Asset Value, End of
Period.................. $ 31.88 $ 51.80 $ 31.83 $51.75
=========== ========== ========== ======
Total Return............. (38.34)% 3.60 %(b) (38.45)% 3.50%(b)
Ratios/Supplemental Data:
Net assets, end of year.. $27,939,876 $ 21 $3,012,328 $ 10
Ratio of expenses to
average net assets...... 1.57 % 1.33 %(c) 2.45 % 1.33%(c)
Ratio of net investment
income to average net
assets.................. 2.73 % 2.97 %(c) 1.74 % 0.00%(c)
Ratio of expenses to
average net assets*..... 1.78 % 32.39 %(c) 2.74 % 33.39%(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 ratio would have been as indicated.
(a) Commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Per share net investment income has been calculated using the daily
average shares method.
(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 and purchases of fund shares in relation to fluctuating market
values during the period.
29
<PAGE>
The UltraShort OTC ProFund
The investment objective of the UltraShort OTC ProFund is to provide daily
investment results that correspond to twice of the inverse (opposite) of the
performance of the NASDAQ 100 Index. The NASDAQ 100 includes 100 of the largest
non-financial domestic companies listed on the NASDAQ National Market tier of
the NASDAQ Stock Market. Over the twelve months, the Fund's performance tracked
this benchmark with a statistical correlation of .99. Consequently, in the
July/August correction, the Fund (Investor Shares) produced a total return of
38.4% versus a return of -17.0% over the same period for the NASDAQ 100. Over
the course of the year, however, the Index gained 845.16 points and generated a
return of 85.30%. The Fund (Investor Shares), as anticipated, posted a total
return of -67.48% since it began trading June 2, 1998.*
[GRAPH APPEARS HERE]
UltraShortOTC-Investor UltraShortOTC-Service Nasdaq 100
---------------------- --------------------- ----------
6/2/98 10,000 10,000 10,000
6/30/98 10,000 10,000 11,219
9/30/98 6,580 6,590 11,287
12/31/98 3,252 3,250 15,402
Average Annual Total Return
(as of 12/31/98)
- -------------------------------------------------------------------------------
- -
Since
Inception
(6/2/98)
--------
Investor -67.48%
Service -67.50%
* Past performance is not predictive of future results. The investment return
and NAV will fluctuate so that the investor's shares, when redeemed, may be
worth more or less than the original cost.
The performance of the UltraShort OTC ProFund is measured against the NASDAQ
100 Index, an unmanaged index generally representative of the performance of
NASDAQ stock market as a whole. The index does not reflect reinvestment of
dividends or the deduction of expenses associated with a mutual fund, such as
investment management and accounting fees. The Fund's performance reflects the
deduction of these value-added services.
30
<PAGE>
PROFUNDS Schedule of Portfolio Investments
UltraShort OTC ProFund December 31, 1998
Options Purchased (16.0%)
<TABLE>
<CAPTION>
Contracts
or
Principal Market
Amount Value
---------- -----------
<S> <C> <C>
Nasdaq Call Option expiring January 1999 @ 2200......... 100 $ 1,500
Nasdaq Call Option expiring January 1999 @ 2300......... 200 4,000
Nasdaq Put Option expiring January 1999 @ 2500.......... 50 3,245,000
-----------
TOTAL OPTIONS PURCHASED
(Cost $3,511,750)...................................... 3,250,500
-----------
U.S. Treasury Note (86.2%)
United States Treasury Note, 4.625%, 12/31/00........... 17,472,000 17,507,490
-----------
TOTAL U.S. TREASURY NOTE (Cost $17,507,441)............. 17,507,490
-----------
TOTAL INVESTMENTS (Cost $21,019,191)(a) (102.2%)........ 20,757,990
Other liabilities in excess of assets (-2.2%)........... (437,226)
-----------
TOTAL NET ASSETS (100%)................................. $20,320,764
===========
</TABLE>
- -----
Percentages indicated are based on net assets of $20,320,764.
Futures Sold
<TABLE>
<CAPTION>
Contracts
or
Principal Market
Amount Value
--------- ------------
<S> <C> <C>
Nasdaq Futures Contract expiring March 1999............ 163 $(30,171,300)
------------
TOTAL FUTURES SOLD (Proceeds $29,735,040).............. $(30,171,300)
============
</TABLE>
- -----
(a) Represents cost for financial reporting purposes and differs from cost
basis for federal income tax purposes due to differences in the timing of
recognition of certain gains and losses by $(436,260). Cost for federal
income tax purposes differs from market value by net unrealized
depreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation....................................... $ 49
Unrealized depreciation....................................... (261,250)
---------
Net Unrealized depreciation................................... $(261,201)
=========
</TABLE>
See accompanying notes to the financial statements.
31
<PAGE>
PROFUNDS
UltraShort OTC ProFund
Statement of Assets and Liabilities
December 31, 1998
<TABLE>
<S> <C>
Assets:
Investments, at value ($21,019,191)............................. $ 20,757,990
Receivable for capital shares issued............................ 2,883
Interest receivable............................................. 2,700
Prepaid expenses................................................ 17,586
------------
Total Assets.................................................... 20,781,159
Liabilities:
Payable to custodian............................................ 41,071
Net payable for variation margin on futures contracts........... 389,405
Advisory fees payable........................................... 7,221
Management servicing fees payable............................... 3,558
Administration fees payable..................................... 4,670
Shareholder servicing fees--Service Class....................... 3,988
Other payables and accrued expenses............................. 10,482
------------
Total Liabilities............................................... 460,395
------------
Net Assets....................................................... 20,320,764
============
Net Assets consist of:
Capital......................................................... $ 34,668,912
Accumulated net realized (losses) on investments and futures
contracts...................................................... (13,650,687)
Net unrealized (depreciation) of investments and futures
contracts...................................................... (697,461)
------------
Total Net Assets................................................. $ 20,320,764
============
Investor Shares:
Net Assets...................................................... $ 19,465,372
Shares of Capital Stock Outstanding*............................ 1,198,485
Net Asset Value (offering and redemption price per share)*...... $ 16.24
============
Service Shares:
Net Assets...................................................... $ 855,392
Shares of Capital Stock Outstanding*............................ 52,657
Net Asset Value (offering and redemption price per share)*...... $ 16.24
============
</TABLE>
- -----
*Reflects 5 for 1 reverse split that occurred on January 15, 1999.
Statement of Operations
For the period June 2, 1998 (a) through December 31, 1998
<TABLE>
<S> <C>
Investment Income:
Interest....................................................... $ 170,766
Expenses:
Advisory fees.................................................. 38,021
Management servicing fees...................................... 6,985
Administration fees............................................ 15,725
Shareholder servicing fees--Service Class...................... 5,823
Fund accounting fees........................................... 1,344
Transfer agent fees............................................ 8,466
Registration & filing fees..................................... 17,666
Printing fees.................................................. 5,599
Other fees..................................................... 7,932
------------
Total expenses before waivers/reimbursements................... 107,561
Less expenses waived/reimbursed................................ (8,873)
------------
Net expenses................................................... 98,688
------------
Net Investment Income........................................... 72,078
------------
Realized and Unrealized (Losses) on Investments:
Net realized (losses) on investment transactions and futures
contracts..................................................... (13,650,687)
Net change in unrealized (depreciation) of investments and
futures contracts............................................. (697,461)
------------
Net realized and unrealized (losses) on investments and futures
contracts..................................................... (14,348,148)
------------
Decrease in Net Assets Resulting from Operations................ $(14,276,070)
============
</TABLE>
- -----
(a) Commencement of operations.
See accompanying notes to the financial statements.
32
<PAGE>
PROFUNDS
UltraShort OTC ProFund
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
June 2, 1998 (a)
through
December 31, 1998
-----------------
<S> <C>
Change in Net Assets:
Operations:
Net investment income....................................... $ 72,078
Net realized (losses) on investment transactions and futures
contracts.................................................. (13,650,687)
Net change in unrealized (depreciation) of investments and
futures contracts.......................................... (697,461)
------------
Net decrease in net assets resulting from operations........ (14,276,070)
Distributions to Shareholders from:
Net investment income....................................... (4,476)
------------
Net (decrease) in net assets resulting from distributions... (4,476)
Capital Share Transactions:
Proceeds from shares issued................................. 227,068,217
Dividends reinvested........................................ 2,745
Cost of shares redeemed..................................... (192,469,652)
------------
Net increase in net assets resulting from capital share
transactions............................................... 34,601,310
------------
Total increase in net assets................................ 20,320,764
Net Assets:
Beginning of period......................................... --
------------
End of period............................................... $ 20,320,764
============
</TABLE>
- -----
(a) Commencement of operations.
See accompanying notes to the financial statements.
33
<PAGE>
PROFUNDS
UltraShort OTC ProFund
Financial Highlights
<TABLE>
<CAPTION>
For a share of beneficial Adjusted for 5:1 reverse stock split on January
interest outstanding 15, 1999
Investor Class Service Class
------------------------ ------------------------
For the period from For the period from
June 2, 1998 (a) through June 2, 1998 (a) through
December 31, 1998 December 31, 1998
------------------------ ------------------------
<S> <C> <C>
Net Asset Value, Beginning of
Period....................... $ 50.00 $ 50.00
----------- --------
Net investment income........ 0.26(d) 0.10(d)
Net realized and unrealized
(loss) on investment
transactions and futures
contracts................... (34.02) (33.86)
----------- --------
Total (loss) from investment
operations.................. (33.76) (33.76)
Distribution to Shareholders
from:
Net investment income........ --(e) --
----------- --------
Total distributions.......... -- --
Net Asset Value, End of
Period....................... $ 16.24 $ 16.24
=========== ========
Total Return.................. (67.48)%(b) (67.50)%(b)
Ratios/Supplemental Data:
Net assets, end of year....... $19,465,372 $855,392
Ratio of expenses to average
net assets................... 1.83 %(c) 2.92 %(c)
Ratio of net investment income
to average net assets........ 1.55 %(c) 0.54 %(c)
Ratio of expenses to average
net assets*.................. 1.98 %(c) 3.06 %(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 ratio would have been as indicated.
(a) Commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Per share net investment income has been calculated using the daily
average shares method.
(e) Distribution per share was less than $0.005.
34
<PAGE>
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. For the
year ended December 31, 1998 the Fund (Investor Class) returned 4.84%.
The assets of this fund are part of a $4.5 billion portfolio managed by
Bankers Trust company. Its managers seek to maintain a stable net asset value
of $1.00, there is no assurance that they will be able to do so. An investment
in the Fund is neither guaranteed nor insured by the FDIC or any other
government agency. Although the Fund strives to maintain the value of your
investment at $1.00 per share, it is possible to lose money by investing in
this Fund.
* Past performance is not predictive of future results. The investment return
and NAV will fluctuate so that the investor's shares, when redeemed, may be
worth more or less than the original cost.
35
<PAGE>
PROFUNDS
Money Market ProFund
Statement of Assets and Lliabilities
December 31, 1998
<TABLE>
<S> <C>
Assets:
Investment in Cash Management Portfolio, at value (cost
$77,623,310)..................................................... $77,623,310
Prepaid expenses.................................................. 35,392
Deferred organization costs....................................... 10,441
Other Assets...................................................... 3,525
-----------
Total Assets...................................................... 77,672,668
Liabilities:
Dividends payable................................................. 175,196
Management servicing fees payable................................. 563
Administration fees payable....................................... 23,248
Shareholder servicing fees payable--Service Class................. 41,246
-----------
Total Liabilities................................................. 240,253
-----------
Net Assets......................................................... $77,432,415
===========
Net Assets consist of:
Capital........................................................... 77,430,020
Accumulated undistributed net investment income................... 2,395
-----------
Total Net Assets................................................... $77,432,415
===========
Investor Shares:
Net Assets........................................................ $62,026,228
Shares of Capital Stock Outstanding............................... 62,024,251
Net Asset Value (offering and redemption price per share)......... $1.00
=====
Service Shares:
Net Assets........................................................ $15,406,187
Shares of Capital Stock Outstanding............................... 15,405,769
Net Asset Value (offering and redemption price per share)......... $1.00
=====
</TABLE>
Statement of Operations
For the year ended December 31, 1998
<TABLE>
<S> <C>
Investment Income:
Investment Income Allocated from Cash Management Fund............. $1,797,702
Expenses Allocated from Cash Management Fund...................... (9,823)
----------
1,787,879
Expenses:
Advisory fees..................................................... 49,214
Management servicing fees......................................... 114,832
Administration fees............................................... 49,214
Shareholder servicing fees--Service Class......................... 59,402
Transfer agent fees............................................... 32,222
Registration & filing fees........................................ 78,204
Other fees........................................................ 45,607
----------
Total expenses before waivers/reimbursements...................... 428,695
Less expenses waived/reimbursed................................... (106,749)
----------
Net expenses...................................................... 321,946
----------
Net Investment Income.............................................. 1,465,933
----------
Realized and Unrealized Gains on Investment:
Net realized gains on investment transactions..................... 2,398
----------
Increase in Net Assets Resulting from Operations................... $1,468,331
==========
</TABLE>
See accompanying notes to the financial statements.
36
<PAGE>
PROFUNDS
Money Market ProFund
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the period from
For the November 17, 1997 (a)
Year Ended through
December 31, 1998 December 31, 1997
----------------- ---------------------
<S> <C> <C>
Change in Net Assets:
Operations:
Net investment income................. $ 1,465,933 $ 13,856
Net realized gains/(losses) on
investment........................... 2,398 (3)
--------------- -----------
Net increase in net assets resulting
from operations...................... 1,468,331 13,853
Distributions to Shareholders from:
Net investment income................. (1,465,933) (13,856)
--------------- -----------
Net (decrease) in assets resulting
from distributions................... (1,465,933) (13,856)
Capital Share Transactions:
Proceeds from shares issued........... 1,182,465,274 5,454,779
Dividends reinvested.................. 1,242,690 5,771
Cost of shares redeemed............... (1,106,567,419) (5,171,075)
--------------- -----------
Net increase in net assets resulting
from capital share transactions...... 77,140,545 289,475
--------------- -----------
Total increase in net assets.......... 77,142,943 289,472
Net Assets:
Beginning of period................... 289,472 --
--------------- -----------
End of period......................... $ 77,432,415 $ 289,472
=============== ===========
</TABLE>
- -----
(a) Commencement of Operations.
See accompanying notes to the financial statements.
37
<PAGE>
PROFUNDS
Money Market ProFund
Financial Highlights
<TABLE>
<CAPTION>
For a share of beneficial
interest outstanding
Investor Class Service Class
----------------------------------------- -----------------------------------------
For the year For the period from For the year For the period from
ended November 17, 1997 (a) ended November 17, 1997 (a)
December 31, 1998 to December 31, 1997 December 31, 1998 to December 31, 1997
----------------- --------------------- ----------------- ---------------------
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period..... $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------- -------- ----------- ------
Net investment income... 0.05(d) 0.01 0.04(d) --
----------- -------- ----------- ------
Total income from
investment operations.. 0.05 0.01 0.04 --
Distributions to
Shareholder from:
Net investment income... (0.05) (0.01) (0.04) --
----------- -------- ----------- ------
Total distributions..... (0.05) (0.01) (0.04) --
Net Asset Value, End of
Period.................. $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========== ======== =========== ======
Total Return............. 4.84 % 0.61 %(b) 3.81 % 0.21%(b)
Ratios/Supplemental Data:
Net assets, end of year.. $62,026,228 $286,962 $15,406,187 $2,510
Ratio of expenses to
average net assets...... 0.85 %(d) 0.83 %(c),(d) 1.87 %(d) 1.83%(c),(d)
Ratio of net investment
income to average net
assets.................. 4.81 % 4.92 %(c) 3.43 % 2.53%(c)
Ratio of expenses to
average net assets*..... 1.18 %(d) 9.52 %(c),(d) 2.18 %(d) 10.52%(c),(d)
</TABLE>
- -----
* During the period, certain fees were voluntarily reduced and/ or reimbursed.
If such voluntary fee reductions and/ or reimbursements had not occurred,
the ratio would have been as indicated.
(a) Commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Per share net investment income has been calculated using the daily average
shares method.
(e) The Money Market ProFund expense ratio includes the expense allocation of
the Cash Management Portfolio Master Fund.
38
<PAGE>
PROFUNDS
Notes to Financial Statements
December 31, 1998
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. ProFunds Advisors LLC (the "Advisor")
serves as the investment advisor for each of the ProFunds except the Money
Market ProFund. BISYS Fund Services Limited Partnership ("BISYS"), a wholly
owned subsidiary of The BISYS Group, Inc., acts as the Trust's
administrator. Currently, the Trust consists of seven separately managed
series: Bull ProFund, UltraBull ProFund, UltraOTC ProFund, Bear ProFund,
UltraBear ProFund, UltraShort OTC ProFund, and Money Market ProFund
(collectively the "ProFunds" and individually, a "ProFund"). The ProFunds,
excluding the Money Market ProFund, are referred to as the "non-money market
ProFunds". 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 and the UltraShort OTC 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
UltraShort Profund seeks investment results that correspond each day to
twice of the inverse (opposite) of the performance of the NASDAQ 100 Index.
It is the policy of the UltraShort OTC Profund to pursue its investment
objective of correlating with its benchmark regardless of market conditions,
to remain fully invested and to not take defensive positions.
If the UltraShort OTC Profund achieved a perfect inverse correlation for any
single trading day, the net asset value of the shares of this ProFund would
increase for that day proportional to twice any decrease in the level of the
NASDAQ 100 Index. Conversely, the net asset value of the shares of the
ProFund would decrease for that day proportional to twice any increase in
the level of the NASDAQ 100 Index for that day. The percentage change of net
asset value of shares of the UltraOTC ProFund should increase or decrease
approximately twice as much as does that of the UltraShort ProFund on any
given day.
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 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.
Continued
39
<PAGE>
PROFUNDS
Notes to Financial Statements, Continued
December 31, 1998
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 closing price 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.
Futures contracts purchased and held by the ProFunds are valued at the last
sale price immediately prior to the 4:00pm Eastern Time price on the futures
exchanges on which they are traded. Conversely, the value of a futures
contract sold by ProFunds will be either the last sale price or the asked
price. Options on securities and indices purchased or sold by a ProFund are
valued at their last sale price. In the event market quotations are not
readily available, securities, futures contracts, options 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.
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 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.
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) Expenses
Expenses directly attributable to a ProFund are charged to the ProFund,
while expenses which are attributable to more than one ProFund are allocated
among the respective Profunds based upon relative net assets or another
appropriate basis. In addition, investors in Investor Shares will pay the
expenses directly attributable to the Investor Shares as a class, and
investors in Service Shares will pay the expenses directly attributable to
the Service Shares as a class.
The investment income and expenses of a ProFund (other than class specific
expenses) and realized and unrealized gains and losses on investments of a
ProFund, are allocated to each class of shares based upon relative net
assets on the date income is earned or expenses are realized and unrealized
gains and losses are incurred.
f) Distributions to Shareholders
The non-money market ProFunds will distribute net investment income and net
realized gains, if any, at least once a year. The Money Market ProFund
ordinarily (i) declares dividends of net investment income (and net short-
term capital gains, if any) for
Continued
40
<PAGE>
PROFUNDS
Notes to Financial Statements, Continued
December 31, 1998
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, if any, will be distributed annually.
The amount of distributions from net investment income and net realized
gains are determined in accordance with federal income tax regulations which
may differ from generally accepted accounting principles. These "book/tax"
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are
reclassified within the composition of net assets based on their federal
tax-basis treatment; temporary differences do not require a
reclassification. Distributions which exceed net investment income and net
realized capital gains for financial reporting purposes but not for tax
purposes are reported as distributions in excess of net investment income or
net realized gains. To the extent they exceed net investment income and net
realized capital gains for tax purposes, they are reported as distribution
of capital. The non-money market ProFunds utilize equalization accounting
for tax purposes and designate earnings and profits, including net realized
gains distributed to shareholders on redemption of shares, as a part of the
dividends paid deduction for income tax purposes.
As of December 31, 1998, the following reclassifications have been made to
increase (decrease) such accounts with offsetting adjustments made to paid-
in-capital:
<TABLE>
<CAPTION>
Accumulated
Accumulated Net Realized
Undistributed Net Gain/(Loss) on
Investment Income Investments
----------------- --------------
<S> <C> <C>
Bull ProFund............................... $ (74,041) $ (698,006)
UltraBull ProFund.......................... $(694,080) $(11,058,841)
UltraOTC ProFund........................... $(481,204) $(75,520,815)
Bear ProFund............................... $ -- $ --
UltraBear ProFund.......................... $(410,387) $ --
UltraShort OTC ProFund..................... $ (67,602) $ --
Money Market ProFund....................... $ 2,395 $ (2,395)
</TABLE>
g) Capital Accounts
The trust follows 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.
h) Short Sales
When a ProFund engages in a short sale, the ProFund records a liability for
securities sold short, and records an asset equal to the proceeds received.
The amount of the liability is subsequently marked to market to reflect the
market value of the short sale. The ProFund maintains a segregated account
of securities as collateral for outstanding short sales, when required. The
ProFund is exposed to market risk based on the amount, if any, that the
market value of the securities sold short exceeds the proceeds received.
i) Options
When a ProFund writes (sells) an option, an amount equal to the premium
received is entered in the ProFund'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 ProFund enters into a closing purchase transaction, the
ProFund realizes a gain (or loss if the cost of a closing purchase
transaction exceeds the premium received when the option was sold).
The following is a summary of written option activity for the year ended
December 31, 1998, for the UltraBear ProFund.
<TABLE>
<CAPTION>
UltraBear ProFund
------------------
Number of
Contracts Premiums
--------- --------
<S> <C> <C>
Covered Call Options
Balance at beginning of period.......................... -- $ --
Options written......................................... 79 44,930
Options closed.......................................... (35) ( 2,450)
Options expired......................................... (44) (42,480)
--- --------
Options outstanding at end of period.................... -- $ --
=== ========
</TABLE>
Continued
41
<PAGE>
PROFUNDS
Notes to Financial Statements, Continued
December 31, 1998
j) Futures Contracts
The ProFunds 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 ProFund may be required to deposit
and maintain as collateral such initial margin as required by the exchange
on which the transaction is effected. Pursuant to the contract, the ProFund
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 ProFund as unrealized
gains or losses. When the contract is closed or offset, the ProFund 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.
k) Risks of Futures Contracts and Options
Futures contracts and written options involve, to varying degrees, elements
of market risk and exposure to loss in excess of the amount recognized in
the Statements of Assets and Liabilities. The face or contract amounts
reflect the extent of the total exposure each ProFund has in the particular
classes of instruments. Risks may result from an imperfect correlation
between movements in the price of the instruments and the price of the
underlying securities.
l) 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
Transactions in shares of beneficial interest were as follows for the
periods ended December 31, 1998 and December 31, 1997. (Non-money market
ProFund shares have been adjusted to reflect the 5 for 1 reverse stock split
that occurred on January 15, 1999.)
<TABLE>
<CAPTION>
Bull ProFund
------------------------------------------------
December 2, 1997
Year ended through
December 31, 1998 December 31, 1997
------------------------- ---------------------
Shares Amount Shares Amount
---------- ------------- -------- -----------
<S> <C> <C> <C> <C>
Investor Shares Sold..... 1,819,504 $ 101,357,875 1,993 $ 99,887
Investor Shares
Reinvested.............. 174 10,906 -- --
Investor Shares
Redeemed................ (1,699,878) (94,711,215) (1,057) (53,130)
---------- ------------- -------- -----------
Net Increase............ 119,800 $ 6,657,566 936 $ 46,757
========== ============= ======== ===========
Service Shares Sold...... 217,707 $ 12,376,845 0.2 $ 10
Service Shares
Reinvested.............. 6 358 -- --
Service Shares Redeemed.. (208,223) (11,741,216) -- --
---------- ------------- -------- -----------
Net Increase............ 9,490 $ 635,987 0.2 $ 10
========== ============= ======== ===========
<CAPTION>
UltraBull ProFund
------------------------------------------------
November 28, 1997
Year ended through
December 31, 1998 December 31, 1997
------------------------- ---------------------
Shares Amount Shares Amount
---------- ------------- -------- -----------
<S> <C> <C> <C> <C>
Investor Shares Sold..... 9,228,361 $ 570,135,640 284,331 $14,533,688
Investor Shares
Reinvested.............. 988 67,254 -- --
Investor Shares
Redeemed................ (8,109,673) (497,376,316) (166,872) (8,590,224)
---------- ------------- -------- -----------
Net Increase............ 1,119,676 $ 72,826,578 117,459 $ 5,943,464
========== ============= ======== ===========
Service Shares Sold...... 889,665 $ 55,056,597 56,600 $ 2,933,108
Service Shares
Reinvested.............. 23 1,214 -- --
Service Shares Redeemed.. (785,151) (47,158,352) (10,079) (497,580)
---------- ------------- -------- -----------
Net Increase............ 104,537 $ 7,899,459 46,521 $ 2,435,528
========== ============= ======== ===========
</TABLE>
Continued
42
<PAGE>
PROFUNDS
Notes to Financial Statements, Continued
December 31, 1998
<TABLE>
<CAPTION>
UltraOTC ProFund
-------------------------------------------------
December 23, 1997
Year ended through
December 31, 1998 December 31, 1997
-------------------------- ---------------------
Shares Amount Shares Amount
----------- ------------- -------- -----------
<S> <C> <C> <C> <C>
Investor Shares Sold.... 12,827,450 $ 961,145,454 184,762 $ 9,080,432
Investor Shares
Reinvested............. 228 26,353 -- --
Investor Shares
Redeemed............... (10,829,785) (797,142,403) (178,632) (8,016,745)
----------- ------------- -------- -----------
Net Increase........... 1,997,893 $ 164,029,404 6,130 $ 1,063,687
=========== ============= ======== ===========
Service Shares Sold..... 3,349,477 $ 237,230,494 17,149 $ 793,807
Service Shares
Reinvested............. 2 100 -- --
Service Shares
Redeemed............... (3,092,485) (214,497,432) (1,264) (52,172)
----------- ------------- -------- -----------
Net Increase........... 256,994 $ 22,733,162 15,885 $ 741,635
=========== ============= ======== ===========
<CAPTION>
Bear ProFund
-------------------------------------------------
December 31, 1997
Year ended through
December 31, 1998 December 31, 1997
-------------------------- ---------------------
Shares Amount Shares Amount
----------- ------------- -------- -----------
<S> <C> <C> <C> <C>
Investor Shares Sold.... 1,002,423 $ 45,923,856 50,317 $ 2,515,842
Investor Shares
Reinvested............. 946 37,746 -- --
Investor Shares
Redeemed............... (949,212) (43,589,058) -- --
----------- ------------- -------- -----------
Net Increase........... 54,157 $ 2,372,544 50,317 $ 2,515,842
=========== ============= ======== ===========
Service Shares Sold..... 167,814 $ 7,565,710 0.2 $ 10
Service Shares
Reinvested............. 54 2,168 -- --
Service Shares
Redeemed............... (158,319) (7,144,150) -- --
----------- ------------- -------- -----------
Net Increase........... 9,549 $ 423,728 0.2 $ 10
=========== ============= ======== ===========
<CAPTION>
UltraBear ProFund
-------------------------------------------------
December 23, 1997
Year ended through
December 31, 1998 December 31, 1997
-------------------------- ---------------------
Shares Amount Shares Amount
----------- ------------- -------- -----------
<S> <C> <C> <C> <C>
Investor Shares Sold.... 9,428,709 $ 398,355,782 96,121 $ 4,806,020
Investor Shares
Reinvested............. 370 11,707 -- --
Investor Shares
Redeemed............... (8,552,538) (364,196,957) (96,120) (4,975,752)
----------- ------------- -------- -----------
Net Increase........... 876,541 $ 34,170,532 1 $ (169,732)
=========== ============= ======== ===========
Service Shares Sold..... 1,330,039 $ 59,334,440 0.2 $ 10
Service Shares
Redeemed............... (1,235,400) (54,154,821) -- --
----------- ------------- -------- -----------
Net Increase........... 94,639 $ 5,179,619 0.2 $ 10
=========== ============= ======== ===========
</TABLE>
<TABLE>
<CAPTION>
UltraShort ProFund
-------------------------
June 2, 1998 through
December 31, 1998
-------------------------
Shares Amount
---------- -------------
<S> <C> <C>
Investor Shares Sold.............................. 6,280,979 $ 185,715,842
Investor Shares Reinvested........................ 165 2,745
Investor Shares Redeemed.......................... (5,082,659) (153,765,286)
---------- -------------
Net Increase..................................... 1,198,485 $ 31,953,301
========== =============
Service Shares Sold............................... 1,398,985 $ 41,352,375
Service Shares Redeemed........................... (1,346,328) (38,704,366)
---------- -------------
Net Increase..................................... 52,657 $ 2,648,009
========== =============
</TABLE>
Continued
43
<PAGE>
PROFUNDS
Notes to Financial Statements, Continued
December 31, 1998
<TABLE>
<CAPTION>
Money Market ProFund
----------------------------------------------------
November 17, 1997
Year ended through
December 31, 1998 December 31, 1997
--------------------------- -----------------------
Shares Amount Shares Amount
------------ ------------- ---------- -----------
<S> <C> <C> <C> <C>
Investor Shares Sold.... 946,042,462 $ 946,042,462 5,452,268 $ 5,452,268
Investor Shares
Reinvested............. 1,061,891 1,061,891 5,771 5,771
Investor Shares
Redeemed............... (885,367,066) (885,367,066) (5,171,075) (5,171,075)
------------ ------------- ---------- -----------
Net Increase........... 61,737,287 $ 61,737,287 286,964 $ 286,964
============ ============= ========== ===========
Service Shares Sold..... 236,422,812 $ 236,422,812 2,511 $ 2,511
Service Shares
Reinvested............. 180,799 180,799 -- --
Service Shares
Redeemed............... (221,200,353) (221,200,353) -- --
------------ ------------- ---------- -----------
Net Increase........... 15,403,258 $ 15,403,258 2,511 $ 2,511
============ ============= ========== ===========
</TABLE>
4.Investment Advisory Fees, Administration Fees and Other Related Party
Transactions
The non-money market ProFunds have entered into an Investment Advisory
Agreement with 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%.
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. Concord Financial
Group, Inc. an affiliate of BISYS, serves as the Trust's distributor and
principal underwriter and receives no compensation from the ProFunds for
such services. BISYS Fund Services, Inc. ("BFSI"), also 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 began charging for their services as
of June 1, 1998.
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.
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.
Certain Trustees of the Trust are Officers of ProFunds Advisors LLC and are
compensated for such services.
Waivers and reimbursements are detailed as follows:
<TABLE>
<CAPTION>
Investment Shareholder Management Fund
Advisor Administration Servicing Servicing Accounting Expense
Waiver Waiver Waiver Waiver Waiver Reimbursement
---------- -------------- ----------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Bull ProFund............ $16,135 $ 4,316 $ 9 $ 4,316 $ 863 $ --
UltraBull ProFund....... 13,585 49,599 3,722 -- 9,921 --
UltraOTC ProFund........ -- 83,805 2,920 10,681 16,756 --
Bear ProFund............ 10,205 2,211 6 2,208 442 9,929
UltraBear ProFund....... -- 25,260 1,672 4,986 5,048 --
UltraShort OTC ProFund.. -- 6,616 -- 934 1,323 --
Money Market ProFund.... 49,214 5,728 -- 51,807 -- --
</TABLE>
Continued
44
<PAGE>
PROFUNDS
Notes to Financial Statements, Continued
December 31, 1998
The advisor and/or the administrator have voluntarily agreed to reimburse
the ProFunds for expenses incurred to maintain a competitive expense ratio
for the ProFunds.
5.Securities Transactions
The cost of security purchases and the proceeds from the sale of securities
(excluding short-term securities) during the year ended December 31, 1998
were as follows:
<TABLE>
<CAPTION>
Purchases Sales
------------ ------------
<S> <C> <C>
UltraOTC ProFund................................... $324,455,916 $186,130,180
</TABLE>
6.Federal Income Tax Information (Unaudited)
At December 31, 1998 the following funds had net capital loss carryforwards
to offset future net capital gains, if any, to the extent provided by the
Treasury regulations. To the extent that these carryovers are used to offset
future capital gains, it is probable that the gains so offset will not be
distributed to shareholders:
<TABLE>
<S> <C> <C>
Bear ProFund........................................ $ 629,925 Expires 2006
UltraBear ProFund................................... $3,665,791 Expires 2006
UltraShort OTC ProFund.............................. $7,192,872 Expires 2006
</TABLE>
During the year ended December 31, 1998, the following funds declared long-
term capital distributions as follows:
<TABLE>
<S> <C>
Bull ProFund......................................................... $ 3,969
UltraBull ProFund.................................................... $12,471
Bear ProFund......................................................... $ 283
</TABLE>
In addition, the following funds have deemed distributions from equalization
as follows:
<TABLE>
<S> <C>
Bull ProFund.................................................... $ 772,048
UltraBull ProFund............................................... $11,752,921
UltraBear ProFund............................................... $ 410,387
UltraShort OTC ProFund.......................................... $ 67,602
</TABLE>
Under current tax law, capital losses realized after October 31 may be
deferred and treated as occuring on the first business day of the following
fiscal year. The following funds had deferred losses, which will be treated
as arising on the first day of the fiscal year ending December 31, 1999:
<TABLE>
<CAPTION>
Fund Capital Loss Deferred
---- ---------------------
<S> <C>
Bear ProFund.......................................... $ 137,023
UltraBear ProFund..................................... $5,142,648
UltraShort OTC ProFund................................ $7,155,325
</TABLE>
45
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders of
ProFunds Trust
In our opinion, the accompanying statements of assets and liabilities,
including the schedules of portfolio investments, and the related statements
of operations and changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of the ProFunds Trust
(comprising, respectively, the Bull ProFund, UltraBull ProFund, UltraOTC
ProFund, Bear ProFund, UltraBear ProFund, UltraShort OTC ProFund and Money
Market ProFund, hereafter referred to as the "Trust") at December 31, 1998,
the results of each of their operations, the changes in their net assets, and
the financial highlights for each of the periods presented, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Trust's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at December 31, 1998 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
Columbus, Ohio
February 8, 1999
46
<PAGE>
- --------------------------------------------------------------------------------
Cash Management Portfolio
Statement of Net Assets December 31, 1998
- --------------------------------------------------------------------------------
Principal
Amount Description Value
------ ----------- -----
EURODOLLAR CERTIFICATES OF DEPOSIT - 8.5%
Abbey National:
$17,000,000 5.20%, 2/9/99................................ $ 17,000,000
30,000,000 4.92%, 3/23/99............................... 30,000,000
17,000,000 4.85%, 4/20/99............................... 17,000,000
Barclays Bank:
25,000,000 5.37%, 2/24/99............................... 25,000,704
41,000,000 4.88%, 4/27/99............................... 40,997,421
Bayerische Hypotheka Vereinbank:
20,000,000 5.36%, 2/22/99............................... 20,004,907
22,000,000 5.17%, 2/26/99............................... 22,000,338
Cariplo,
30,000,000 5.61%, 1/29/99............................... 30,000,232
Halifax Building Society:
15,000,000 5.16%, 2/5/99................................ 15,000,112
25,000,000 5.60%, 2/22/99............................... 25,000,000
25,000,000 5.27%, 2/26/99............................... 25,004,540
50,000,000 5.12%, 3/2/99................................ 50,001,219
International Nederlander Bank:
20,000,000 5.13%, 3/5/99................................ 20,001,028
50,000,000 4.90%, 4/28/99............................... 50,000,000
KBC Bank,
25,000,000 5.53%, 1/15/99............................... 25,000,097
Rabobank,
50,000,000 5.53%, 1/4/99................................ 50,000,000
-------------
Total Eurodollar Certificates of Deposit
(Amortized Cost $462,010,598)............................... 462,010,598
-------------
YANKEE CERTIFICATES OF DEPOSIT - 7.9%
Bank of Montreal:
30,000,000 5.25%, 1/29/99............................... 30,000,000
25,000,000 5.32%, 1/29/99............................... 25,000,000
10,000,000 5.53%, 2/17/99............................... 10,002,119
10,000,000 5.57%, 2/26/99............................... 10,000,000
Banque Nationale de Paris,
50,000,000 5.54%, 1/4/99................................ 50,000,000
Barclays Bank,
14,000,000 5.70%, 3/30/99............................... 13,997,703
Bayerische Hypotheka Vereinbank,
20,000,000 5.55%, 1/4/99................................ 20,000,017
Canadian Imperial Bank,
10,000,000 4.87%, 4/21/99............................... 9,998,389
Credit Agricole,
2,000,000 5.70%, 1/7/99................................ 1,999,980
Cregem,
12,000,000 5.51%, 1/11/99............................... 12,000,033
Deutsche Bank,
2,000,000 5.705%, 4/16/99.............................. 1,999,461
Hessen Thuringer,
30,000,000 5.265%, 1/29/99.............................. 30,001,016
KBC Bank,
2,000,000 5.69%, 3/29/99............................... 2,000,242
Lloyds Bank,
25,000,000 4.875%, 4/23/99.............................. 25,000,378
National Westminster Bank,
40,000,000 5.485%, 1/19/99.............................. 40,000,100
Nordeutsche Landesbank,
8,000,000 5.66%, 7/27/99............................... 8,025,322
Rabobank:
25,000,000 5.71%, 1/6/99................................ 25,000,668
17,000,000 5.60%, 3/17/99............................... 16,998,967
2,000,000 5.70%, 4/20/99............................... 2,000,602
25,000,000 5.65%, 6/16/99............................... 25,059,022
Royal Bank of Canada,
10,000,000 5.56%, 2/26/99............................... 9,999,265
Toronto Dominion Bank,
22,000,000 5.16%, 2/23/99............................... 22,000,000
Union Bank of Switzerland,
8,000,000 5.74%, 6/11/99............................... 8,021,281
West Deutsche Landesbank:
15,000,000 5.54%, 1/13/99............................... 15,000,000
15,000,000 5.51%, 2/19/99............................... 14,999,556
Total Yankee Certificates of Deposit
(Amortized Cost $429,104,121)............................... 429,104,121
-------------
CERTIFICATES OF DEPOSIT - 3.4%
American Express Centurion Bank,
13,000,000 5.47%, 1/14/99............................... 13,000,000
Chase Manhattan Bank,
20,000,000 4.875%, 4/21/99.............................. 20,000,000
First Union,
2,000,000 5.65%, 4/12/99............................... 2,000,699
See Notes to Financial Statements.
47
<PAGE>
- --------------------------------------------------------------------------------
Cash Management Portfolio
Statement of Net Assets December 31, 1998
- --------------------------------------------------------------------------------
Principal
Amount Description Value
------ ----------- -----
Mellon Bank:
$20,000,000 4.87%, 4/29/99.......... $ 20,000,000
15,000,000 5.05%, 5/3/99........... 15,000,000
Morgan Guaranty:
21,000,000 5.15%, 3/15/99.......... 21,000,000
42,000,000 4.95%, 3/16/99.......... 42,000,000
NationsBank,
55,000,000 5.20%, 2/5/99............ 55,000,000
----------------
Total Certificates of Deposit
(Amortized Cost $188,000,699).......... 188,000,699
----------------
EURO TIME DEPOSITS - 16.0%
Abbey National,
50,000,000 5.48%, 2/10/99.......... 50,000,000
Bank of America,
25,000,000 5.45%, 2/11/99.......... 25,000,000
Bank of Austria,
50,000,000 5.15%, 1/20/99.......... 50,000,000
Bank of Montreal,
115,000,000 5.35%, 2/9/99........... 115,000,000
Bank of Nova Scotia,
25,000,000 5.594%, 1/8/99.......... 25,000,000
Bayerische Landesbank,
40,000,000 4.938%, 4/28/99......... 40,000,000
Caisse de Depots,
200,000,000 5.25%, 1/4/99........... 200,000,000
Canadian Imperial Bank,
50,000,000 5.25%, 1/4/99........... 50,000,000
International Nederlander,
40,000,000 5.60%, 2/26/99.......... 40,000,000
KBC Bank,
29,000,000 5.16%, 1/22/99.......... 29,000,000
Nordeutsche Landesbank:
25,000,000 5.67%, 1/19/99.......... 25,000,000
35,000,000 5.25%, 3/29/99.......... 35,000,000
Union Bank of Switzerland,
144,257,257 4.25%, 1/4/99........... 144,257,257
West Deutsche Landesbank,
$50,000,000 5.25%, 1/4/99........... $ 50,000,000
----------------
Total Euro Time Deposits
(Amortized Cost $878,257,257).......... 878,257,257
----------------
FLOATING RATE - NOTES - 20.6%
Associates Corp:
Daily Variable Rate,
25,000,000 5.65%, 1/4/99........... 24,999,901
25,000,000 5.51%, 4/23/99.......... 24,992,492
20,000,000 5.52%, 6/29/99.......... 19,992,341
Bank of Austria:
Quarterly Variable Rate,
25,000,000 5.548%, 7/27/99......... 24,991,652
Bank of Nova Scotia:
Monthly Variable Rate,
35,000,000 5.512%, 6/10/99......... 34,988,376
Banque Nationale de Paris:
Monthly Variable Rate,
40,000,000 5.525%, 6/1/99.......... 39,990,071
40,000,000 5.541%, 7/29/99......... 39,986,429
Bayerische Hypotheka
Vereinbank:
Monthly Variable Rate,
40,000,000 5.505%, 5/28/99......... 39,987,303
Bayerische Landesbank:
Daily Variable Rate,
35,000,000 5.00%, 2/12/99.......... 35,000,400
Monthly Variable Rate,
20,000,000 5.495%, 2/25/99......... 19,998,255
25,000,000 5.521%, 6/29/99......... 24,990,962
Bear Stearns:
Monthly Variable Rate,
10,000,000 5.626%, 6/4/99.......... 10,000,000
Commerz Bank:
Monthly Variable Rate,
30,000,000 5.505%, 5/28/99......... 29,990,478
CoreStates Bank:
Monthly Variable Rate,
30,000,000 5.607%, 3/5/99.......... 30,000,000
Creditanstalt Bankverein:
Monthly Variable Rate,
20,000,000 5.515%, 6/3/99.......... 19,994,231
See Notes to Financial Statements.
48
<PAGE>
- --------------------------------------------------------------------------------
Cash Management Portfolio
Statement of Net Assets December 31, 1998
- --------------------------------------------------------------------------------
Principal
Amount Description Value
------ ----------- -----
Credit Suisse First Boston:
Daily Variable Rate,
$30,000,000 5.50%, 2/9/99....... $ 30,000,000
Deutsche Bank:
Quarterly Variable Rate,
40,000,000 5.528%, 6/1/99...... 39,987,010
15,000,000 5.53%, 8/16/99...... 14,993,593
First Union:
Quarterly Variable Rate,
10,000,000 5.208%, 10/20/99.... 10,000,000
20,000,000 5.422%, 11/16/99.... 20,000,000
General Electric Corp.:
Quarterly Variable Rate,
15,000,000 5.607%, 1/15/99..... 15,000,000
20,000,000 5.554%, 9/8/99...... 20,000,000
IBM Credit:
Quarterly Variable Rate,
13,000,000 5.22%, 11/2/99...... 12,997,828
J.P. Morgan:
Monthly Variable Rate,
55,000,000 5.50%, 2/24/99...... 54,994,038
Key Bank New York:
Daily Variable Rate,
10,000,000 5.54%, 1/29/99...... 9,999,592
Kreditbank:
Quarterly Variable Rate,
25,000,000 5.537%, 6/1/99...... 24,992,896
Merrill Lynch & Co.:
Daily Variable Rate,
35,000,000 5.625%, 2/17/99..... 34,999,331
12,000,000 5.29%, 4/7/99....... 12,002,342
Monthly Variable Rate,
20,000,000 5.606%, 4/13/99..... 19,999,442
Morgan Guaranty:
Monthly Variable Rate,
40,000,000 5.22%, 11/29/99..... 39,982,935
National City Bank of Cleveland:
Monthly Variable Rate,
15,000,000 5.578%, 3/5/99...... 14,998,988
National Rural Utility Cooperative:
Quarterly Variable Rate,
20,000,000 5.219%, 11/23/99.... 20,000,000
National Westminster:
Quarterly Variable Rate,
25,000,000 5.538%, 8/20/99..... 24,987,580
Nationsbank Corp.:
Daily Variable Rate,
25,000,000 5.70%, 3/18/99...... 25,004,536
Nordeutsche Landesbank:
Monthly Variable Rate,
17,000,000 5.525%, 2/2/99...... 16,999,281
20,000,000 5.505%, 2/25/99..... 19,998,527
Norwest Corp.:
Quarterly Variable Rate,
30,000,000 5.242%, 10/28/99.... 29,997,520
Societe Generale:
Daily Variable Rate,
40,000,000 5.59%, 2/9/99....... 39,997,693
10,000,000 5.58%, 3/2/99....... 9,999,198
Monthly Variable Rate,
25,000,000 5.567%, 5/7/99...... 24,994,469
10,000,000 5.555%, 6/1/99...... 9,996,788
Svenska Handelsbanken:
Monthly Variable Rate,
20,000,000 5.53%, 6/2/99....... 19,993,807
US Bank:
Monthly Variable Rate,
15,000,000 5.567%, 8/18/99..... 14,998,242
Wachovia Bank:
Monthly Variable Rate,
28,000,000 5.505%, 2/9/99...... 27,998,450
21,000,000 5.512%, 5/12/99..... 20,994,800
Walt Disney Co.:
Quarterly Variable Rate,
20,000,000 5.455%, 2/26/99..... 19,997,392
Westpac Capitol Corp.:
Quarterly Variable Rate,
5,000,000 5.544%, 4/9/99...... 4,999,342
--------------
Total Floating Rate - Notes
(Amortized Cost $1,125,808,511).... 1,125,808,511
--------------
See Notes to Financial Statements.
49
<PAGE>
- --------------------------------------------------------------------------------
Cash Management Portfolio
Statement of Net Assets December 31, 1998
- --------------------------------------------------------------------------------
Principal
Amount Description Value
------ ----------- -----
U.S. Treasury Securities - 0.5%
U.S. Treasury Note,
$25,000,000 5.87%, 8/31/99........... $ 25,181,973
-------------
Total U.S. Treasury Securities
(Amortized Cost $25,181,973)............ 25,181,973
-------------
Funding Agreement - 0.5%
First Allmerica Financial,
30,000,000 4.75%, 12/23/99.......... 30,000,000
-------------
Total Funding Agreement
(Amortized Cost $30,000,000)............ 30,000,000
-------------
Commercial Paper - 42.6%*
ABB Treasury Center,
35,000,000 5.20%, 2/18/99........... 34,757,333
Alcatel Alsthom,
22,000,000 5.08%, 2/22/99........... 21,838,569
Asset Securitization:
25,000,000 5.40%, 1/22/99........... 24,921,250
35,000,000 5.45%, 1/27/99........... 34,862,236
35,000,000 5.40%, 1/29/99........... 34,853,000
30,000,000 5.18%, 2/18/99........... 29,792,800
45,000,000 5.27%, 2/19/99........... 44,677,213
Associates Corp.:
37,000,000 5.04%, 2/3/99............ 36,829,060
25,000,000 5.25%, 2/5/99............ 24,872,396
12,000,000 5.25%, 2/26/99........... 11,902,000
Bank of Scotland,
25,000,000 4.89%, 6/4/99............ 24,477,041
Barclays Bank,
40,000,000 5.90%, 1/4/99............ 39,980,333
BBL North America:
23,000,000 5.52%, 1/12/99........... 22,960,095
30,000,000 5.50%, 1/15/99........... 29,935,833
35,000,000 5.14%, 1/25/99........... 34,880,066
13,000,000 5.50%, 1/26/99........... 12,950,348
British Columbia Province,
5,370,000 4.805%, 3/8/99........... 5,322,695
CAFCO:
1,000,000 5.55%, 1/19/99........... 997,226
16,000,000 5.40%, 1/20/99........... 15,954,400
24,000,000 5.33%, 1/29/99........... 23,900,507
40,000,000 5.30%, 2/3/99............ 39,805,666
30,000,000 5.29%, 2/9/99............ 29,828,075
15,000,000 5.20%, 2/18/99........... 14,896,000
Carnival PLC UK,
17,000,000 5.25%, 2/5/99............ 16,913,230
Chase Manhattan Bank,
25,000,000 4.80%, 3/23/99........... 24,730,000
Ciesco,
5,000,000 5.35%, 1/22/99........... 4,984,396
Commonwealth Bank of Australia,
40,000,000 5.75%, 1/11/99........... 39,936,111
Corporate Receivables:
20,000,000 5.40%, 1/15/99........... 19,958,000
14,000,000 5.55%, 1/15/99........... 13,969,783
30,000,000 5.40%, 1/19/99........... 29,919,000
50,000,000 5.43%, 1/25/99........... 49,819,000
25,000,000 5.42%, 1/27/99........... 24,902,139
20,000,000 5.18%, 2/11/99........... 19,882,011
30,000,000 5.25%, 2/16/99........... 29,798,750
15,000,000 5.375%, 2/18/99........... 14,892,500
8,000,000 5.375%, 2/19/99........... 7,941,473
Credit Suisse First Boston:
15,000,000 5.29%, 1/7/99............ 14,986,776
10,000,000 5.15%, 1/22/99........... 9,969,958
10,000,000 5.18%, 1/25/99........... 9,965,466
30,000,000 5.18%, 1/26/99........... 29,892,083
Cregem,
30,000,000 4.99%, 4/1/99............ 29,625,750
Daimler Benz North America:
12,000,000 5.03%, 1/29/99........... 11,953,053
25,000,000 5.22%, 2/23/99........... 24,807,875
18,000,000 5.03%, 4/15/99........... 17,738,440
Delaware Funding Corp.:
50,000,000 5.35%, 1/22/99........... 49,843,958
13,432,000 5.42%, 1/26/99........... 13,381,443
20,000,000 5.19%, 2/18/99........... 19,861,600
Diageo Capital:
45,000,000 5.35%, 1/4/99............ 44,979,938
25,000,000 5.23%, 2/12/99........... 24,847,458
22,000,000 5.26%, 2/17/99........... 21,848,921
13,000,000 5.10%, 3/5/99............ 12,883,975
Ford Motor Credit,
35,000,000 5.10%, 1/28/99........... 34,866,125
Gannett,
25,000,000 5.20%, 1/14/99........... 24,953,056
See Notes to Financial Statements.
50
<PAGE>
- --------------------------------------------------------------------------------
Cash Management Portfolio
Statement of Net Assets December 31, 1998
- --------------------------------------------------------------------------------
Principal
Amount Description Value
------ ----------- -----
General Electric Capital:
$ 20,000,000 5.04%, 2/8/99............. $ 19,893,600
10,000,000 5.24%, 2/9/99............. 9,943,233
20,000,000 5.33%, 2/17/99............ 19,860,828
45,000,000 4.95%, 2/19/99............ 44,696,813
40,000,000 5.37%, 2/26/99............ 39,672,867
25,000,000 4.93%, 3/15/99............ 24,750,076
13,000,000 4.98%, 3/24/99............ 12,852,537
General Electric Corp.,
30,000,000 5.05%, 1/15/99............ 29,941,083
General Motors Accept Corp.:
30,000,000 5.10%, 1/22/99............ 29,910,750
52,000,000 5.06%, 1/29/99............ 51,795,351
30,000,000 5.24%, 2/5/99............. 29,847,167
38,000,000 5.08%, 2/10/99............ 37,785,511
Glaxo Wellcome:
10,000,000 5.17%, 2/8/99............. 9,945,428
15,300,000 5.17%, 2/9/99............. 15,214,307
Goldman Sachs,
10,000,000 5.55%, 1/19/99............ 9,972,250
KFW International Finance:
30,000,000 5.00%, 1/14/99............ 29,945,833
15,000,000 4.87%, 2/19/99............ 14,900,571
Metropolitan Life,
20,000,000 5.22%, 1/28/99............ 19,921,700
National Rural Utility Financial
Cooperative:
7,000,000 4.90%, 2/22/99............ 6,950,456
10,000,000 5.08%, 3/5/99............. 9,911,100
20,000,000 4.97%, 4/26/99............ 19,682,473
Norwest Corp.:
15,000,000 5.14%, 1/22/99............ 14,955,025
25,000,000 5.10%, 2/5/99............. 24,876,042
Oesterreichische,
21,000,000 5.16%, 1/25/99............ 20,927,760
Panasonic Finance,
17,000,000 5.35%, 1/4/99............. 16,992,421
Pitney Bowes Credit,
50,000,000 5.15%, 1/4/99............. 49,978,542
Province of Quebec:
40,000,000 5.14%, 2/8/99............. 39,782,978
16,400,000 4.95%, 2/16/99............ 16,296,270
Quincy Capital Corp.:
18,136,000 5.50%, 1/15/99............ 18,097,209
28,492,000 5.48%, 1/27/99............ 28,379,235
15,000,000 5.41%, 1/28/99............ 14,939,138
Receivables Capital Corp.:
9,246,000 5.27%, 1/25/99............ 9,213,515
8,940,000 5.35%, 1/26/99............ 8,906,785
21,398,000 5.29%, 1/28/99............ 21,313,103
54,575,000 5.42%, 2/5/99............. 54,287,420
Repsol International Finance:
28,000,000 5.16%, 2/11/99............ 27,835,453
2,000,000 5.00%, 2/16/99............ 1,987,222
20,000,000 4.92%, 3/15/99............ 19,800,467
8,000,000 4.85%, 6/28/99............ 7,808,156
Swedish Export Credit,
25,000,000 5.02%, 2/24/99............ 24,811,750
Union Bank of Switzerland:
40,000,000 5.26%, 1/5/99............. 39,976,622
40,000,000 5.219%, 1/15/99............ 39,918,814
Walt Disney Co.,
2,600,000 5.05%, 2/5/99............. 2,587,234
Wells Fargo Bank,
20,000,000 5.25%, 1/29/99............ 19,918,332
--------------
Total Commercial Paper
(Amortized Cost $2,300,229,837).......... 2,300,229,837
--------------
Total Investments
(Amortized Cost $5,438,592,996)... 99.5% $5,438,592,996
Other Assets In Excess of
Liabilities...................... 0.5% 25,659,993
------ --------------
Net Assets......................... 100.0% $5,464,252,989
====== ==============
- -----------------
* Interest rates for commercial paper represent discount rates at the time of
purchase.
See Notes to Financial Statements.
51
<PAGE>
================================================================================
Cash Management Portfolio
Statement of Operations For the year ended December 31, 1998
================================================================================
Investment Income
Interest ................................................. $ 296,596,871
---------------
Expenses
Advisory Fees ............................................ 8,019,093
Administration and Services Fees ......................... 2,673,031
Professional Fees ........................................ 53,971
Trustees Fees ............................................ 3,285
Miscellaneous ............................................ 11,980
---------------
Total Expenses ........................................... 10,761,360
Less: Expenses absorbed by Bankers Trust ................. (1,151,727)
---------------
Net Expenses .......................................... 9,609,633
---------------
Net Investment Income ....................................... 286,987,238
Net Realized Gain from Investment Transactions .............. 320,470
---------------
Net Increase in Net Assets from Operations .................. $ 287,307,708
===============
See Notes to Financial Statements.
52
<PAGE>
- --------------------------------------------------------------------------------
Cash Management Portfolio
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the For the
year ended year ended
December 31, 1998 December 31, 1997
------------------ ------------------
<S> <C> <C>
Increase (Decrease) in Net Assets from:
Operations
Net Investment Income............................................. $ 286,987,238 $ 237,022,519
Net Realized Gain (Loss) from Investment Transactions............. 320,470 (41,207)
--------------- ---------------
Net Increase in Net Assets from Operations........................... 287,307,708 236,981,312
--------------- ---------------
Capital Transactions
Proceeds from Capital Invested.................................... 85,829,057,272 25,687,643,529
Value of Capital Withdrawn........................................ (84,691,836,966) (25,146,809,558)
--------------- ---------------
Net Increase in Net Assets from Capital Transactions................. 1,137,220,306 540,833,971
--------------- ---------------
Total Increase in Net Assets......................................... 1,424,528,013 777,815,283
Net Assets
Beginning of Year.................................................... 4,039,724,975 3,261,909,692
--------------- ---------------
End of Year.......................................................... $ 5,464,252,989 $ 4,039,724,975
=============== ===============
</TABLE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
Contained below are selected ratios and supplemental data for each of the
periods indicated for the Cash Management Portfolio.
<TABLE>
<CAPTION>
For the years ended December 31,
---------------------------------------------------------------------------
1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Supplemental Data and Ratios:
Net Assets, End of Year (000s omitted).... $5,464,253 $4,039,725 $3,261,910 $2,615,932 $2,735,025
Ratios to Average Net Assets:
Net Investment Income.................. 5.37% 5.43% 5.27% 5.77% 4.24%
Expenses............................... 0.18% 0.18% 0.18% 0.18% 0.18%
Decrease Reflected in Above Expense
Ratio Due to Absorption of Expenses
by Bankers Trust..................... 0.02% 0.02% 0.02% 0.02% 0.02%
</TABLE>
See Notes to Financial Statements.
53
<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 with 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
accretion of 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 must have
an aggregate market value greater than or equal to the repurchase price plus
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 a default or bankruptcy by the seller,
realization and/or retention of the collateral may be subject to legal
proceedings.
E. Federal Income Taxes
The Portfolio is considered a partnership under 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 .05% of the Portfolio's average daily net
assets. For the year ended December 31, 1998, administrative and service fees
amounted to $2,673,031, of which $249,048 was payable at the end of the period.
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 .15% of the Portfolio's
average daily net assets. For the year ended December 31, 1998, advisory fees
amounted to $8,019,093, of which $747,145 was payable at the end of the period.
Bankers Trust has voluntarily undertaken to waive its fees and reimburse
expenses of the Portfolio, to the extent necessary, to limit all expenses to
.18% of the average daily net assets of the Portfolio.
In 1994, the Portfolio sold certain structured notes carried at par to an
unrelated third party financial institution at par plus accrued interest
pursuant 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.
The Cash Management Portfolio is a participant with other affiliated entities in
a revolving credit facility and a discretionary demand line of credit facility
(collectively the "credit facilities") in the amounts of $50,000,000 and
$100,000,000, respectively, which expire March 15, 1999. A commitment fee of
.07% per annum on the average daily amount of the available commitment is
payable on a quarterly basis and apportioned equally among all participants.
Amounts borrowed under the credit facilities will bear interest at a rate per
annum equal to the Federal Funds Rate plus .45%. No amounts were drawn down or
outstanding under the credit facilities as of and for the year ended December
31, 1998.
Note 3--Net Assets
At December 31, 1998 net assets consisted of:
Paid-in-Capital $5,464,252,989
=============
54
<PAGE>
- --------------------------------------------------------------------------------
Cash Management Portfolio
Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Trustees and Holders of Beneficial Interest of
Cash Management Portfolio:
In our opinion, the accompanying statement of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Cash Management Portfolio (the "Portfolio") at December 31, 1998, and the
results of its operations, the changes in its net assets and the financial
highlights for each of the fiscal periods presented, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Portfolio's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1998 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
PricewaterhouseCoopers LLP
Baltimore, Maryland
February 5, 1999
55
<PAGE>
ProFunds(SM)
- ------------
Post Office Mailing Address For Investments:
P.O. Box 182800
Columbus, OH 43218-2800
Phone Numbers:
For Financial Professionals: (888) PRO-5717 (888) 776-5717
For All Others: (888) PRO-FNDS (888) 776-3637
or (614) 470-8122
Fax Number: (800) 782-4797
Website Address: www.profunds.com
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.
2/99
