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U.S. GLOBAL LEADERS GROWTH FUND
-------------
August 1, 1997
Dear Fellow Long-Term Investor:
It is gratifying to report the following investment performance results for U.S.
Global Leaders Growth Fund with relevant comparisons:
Six Months Year Since Inception
Ending Ending (Annualized)
6/30/97 6/30/97 9/29/95 - 6/30/97
------- ------- -----------------
U.S. Global Leaders
Growth Fund 25.3% 36.3% 33.0%
S&P 500 Index 20.5% 34.7 29.5%
Lipper Growth Index 15.4% 25.6 20.6%
Lipper International Index 14.0% 20.0 17.6%
We do not share the widespread concern about the level of the U. S. stock market
- -- although the state of caution it reflects is no doubt welcome. Stock indices
in most leading financial centers are also posting new all-time highs, and the
valuations of many foreign stock markets actually exceed that of the S&P 500
Index. After all, why shouldn't U. S. equities be attaining new peaks? As we
said in our latest quarterly letter to our separately-managed accounts:
"The nation is enjoying peace and prosperity on a scale not seen since prior to
the First World War. Jobs are plentiful, unemployment is low, inflation is
moderate, profits are expanding and the U. S. is the preeminent power in the
growing world economy. We hate to sound so cheerful when the stock market is at
an all-time high, but these are the facts."
Looking ahead, we do expect some slowdown in the rate of U. S. economic growth.
Accordingly, we anticipate an increasing divergence in the earnings results
between companies that need a strong domestic business cycle to sustain demand
and pricing flexibility and our non-cyclical multinational providers of
consumable goods and services that are likely to sustain their superior rates of
earnings gains. If true, a two-tier stock market should re-emerge. This would
come about if the stock prices of cyclical companies are accorded more
traditional risk discounts and sustainable growth companies regain to some
degree their historical price premiums.
In any event, we estimate that the portfolio companies' collective earnings gain
this year will exceed last year's. In contrast, most analysts expect earnings
gains for the S&P 500 Index companies to slow significantly from their very good
net gains of the last four years.
<PAGE>
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U.S. GLOBAL LEADERS GROWTH FUND
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Also, I am pleased to report that the Fund's NAV now appears daily in The Wall
Street Journal ("USGlbLdrs") and that shares are now available through the
no-transaction-fee networks of Charles Schwab's Mutual Fund Marketplace and
OneSource, Fidelity Funds- Network, Pershing FundVest, and Jack White's No Fee
Network.
It is said that successful investing, like success itself, is a journey, not a
destination. We are gratified that you have chosen to invest with U. S. Global
Leaders Growth Fund. We are committed to making it a safe and rewarding
experience.
Cordially,
/s/ George M. Yeager
George M. Yeager
U.S. Global Leaders Growth Fund
Value of $10,000 vs. S&P 500 Index
US Global S&P 500 Index
--------- -------------
29-Sep-95 10,000 10,000
31-Dec-95 10,673 10,599
31-Mar-96 11,313 11,169
30-Jun-96 12,083 11,663
30-Sep-96 13,004 12,028
31-Dec-96 13,143 13,035
31-Mar-97 13,638 13,383
30-Jun-97 16,469 15,712
Annual Average Total Return Periods
Ended June 30, 1997
1 Year ............................... 36.29%
Cumulative Since Inception
(9/29/95) ......................... 64.69%
Annualized Total Return .............. 32.91%
Past performance is not predictive of future performance.
"Patience is the companion of wisdom." St. Augustine
<PAGE>
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U.S. GLOBAL LEADERS GROWTH FUND
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SCHEDULE OF INVESTMENTS
at June 30, 1997
- ----------------------------------------------------------------------------
Shares COMMON STOCKS: 96.8% Market Value
- ----------------------------------------------------------------------------
Beverages: 3.1%
12,300 Coca-Cola Company............................. $ 830,250
----------
Business and Information Services: 11.1%
22,200 Automatic Data Processing, Inc................ 1,043,400
23,000 First Data Corp............................... 1,010,563
19,800 Robert Half International*.................... 931,837
----------
2,985,800
----------
Computer Software: 3.3%
6,900 Microsoft Corp.*.............................. 871,988
----------
Consumer Services: 5.0%
51,800 CUC International, Inc.*...................... 1,337,087
----------
Drug Delivery Systems: 3.1%
29,000 Alza Corp.*................................... 841,000
----------
Entertainment and Lodging: 6.8%
22,600 Marriott International, Inc................... 1,387,075
5,550 Walt Disney Company........................... 445,388
----------
1,832,463
----------
Financial Services: 4.2%
24,400 State Street Boston Corp...................... 1,128,500
----------
Foods: 2.6%
10,600 William Wrigley, Jr., Company................. 710,200
----------
Food Services: 5.5%
30,300 McDonald's Corp............................... 1,463,868
----------
Health Products: 8.1%
17,000 Abbott Laboratories........................... 1,134,750
16,300 Johnson & Johnson............................. 1,049,313
----------
2,184,063
----------
Household Products: 7.1%
17,000 Colgate-Palmolive Company..................... 1,109,250
5,600 Procter & Gamble Company...................... 791,000
----------
1,900,250
----------
4
<PAGE>
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U.S. GLOBAL LEADERS GROWTH FUND
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SCHEDULE OF INVESTMENTS
at June 30, 1997, Continued
- ----------------------------------------------------------------------------
Shares Market Value
- ----------------------------------------------------------------------------
Insurance: 4.3%
7,800 American International Group, Inc............. $ 1,165,125
-----------
Mass Merchandising: 6.6%
51,850 Wal-Mart Stores, Inc.......................... 1,753,178
-----------
Oil Services: 3.3%
7,000 Schlumberger Ltd.............................. 875,000
-----------
Pharmaceuticals: 9.1%
8,700 Merck & Company, Inc.......................... 900,450
12,900 Pfizer, Inc................................... 1,541,550
-----------
2,442,000
-----------
Specialty Retail: 10.3%
22,500 Home Depot, Inc............................... 1,551,093
26,300 Tiffany & Company............................. 1,214,731
-----------
2,765,824
-----------
Toiletries: 3.3%
9,446 Gillette Company.............................. 895,009
-----------
Total Common Stocks (cost $19,707,825)........ 25,981,605
-----------
Principal
Amount REPURCHASE AGREEMENT: 0.7%
- -------------------------------------------------------------------------
$194,000 Star Bank Repurchase Agreement, 5.25%,
dated 6/30/1997, due 7/1/1997, collateralized
by $195,000 GNMA, 6.50%, due 2/20/2024
(proceeds $194,028) (cost $194,000)........... 194,000
-----------
Total Investment in Securities
(cost $19,901,825+): 97.5%.................. 26,175,605
Other Assets less Liabilities: 2.5%........... 676,534
-----------
Total Net Assets: 100.0%...................... $26,852,139
===========
*Non-income producing security.
5
<PAGE>
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U.S. GLOBAL LEADERS GROWTH FUND
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SCHEDULE OF INVESTMENTS
at June 30, 1997, Continued
- --------------------------------------------------------------------------------
Market Value
- --------------------------------------------------------------------------------
+ At June 30, 1997, the cost of securities for Federal tax purposes was the same
as the basis for financial reporting. Unrealized appreciation and depreciation
of securities were as follows:
Gross unrealized appreciation................. $ 6,292,198
Gross unrealized depreciation................. (18,418)
-----------
Net unrealized appreciation............. $ 6,273,780
===========
See accompanying Notes to Financial Statements.
6
<PAGE>
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U.S. GLOBAL LEADERS GROWTH FUND
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STATEMENT OF ASSETS AND LIABILITIES
at June 30, 1997
- ----------------------------------------------------------------------------
ASSETS
Investments in securities, at value
(cost $19,901,825) ................................. $26,175,605
Cash................................................... 905
Receivables:
Fund shares sold.................................... 810,965
Dividends and interest receivable................... 18,476
Prepaid expenses....................................... 6,344
-----------
Total assets .................................... 27,012,295
-----------
LIABILITIES
Payables:
Advisory fee........................................ 7,333
Administration fee.................................. 1,832
Securities purchased................................ 131,346
Accrued expenses....................................... 19,645
-----------
Total liabilities................................ 160,156
-----------
NET ASSETS ............................................... $26,852,139
===========
Net asset value, offering and redemption price per
share ($26,852,139/1,648,149 shares outstanding;
unlimited number of shares authorized without par
value)................................................. $16.29
======
COMPONENTS OF NET ASSETS
Paid-in capital ....................................... $20,753,177
Accumulated net investment loss........................ (60,534)
Accumulated net realized loss on investments........... (114,284)
Net unrealized appreciation on investments............. 6,273,780
-----------
Net assets ......................................... $26,852,139
===========
See accompanying Notes to Financial Statements.
7
<PAGE>
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U.S. GLOBAL LEADERS GROWTH FUND
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STATEMENT OF OPERATIONS
For the Year Ended June 30, 1997
- ----------------------------------------------------------------------------
INVESTMENT INCOME
Income
Dividends........................................... $ 149,583
Interest............................................ 11,508
----------
Total income..................................... 161,091
----------
Expenses
Advisory fees ...................................... 148,503
Administration fee.................................. 27,423
Custodian and accounting fees....................... 25,637
Transfer agent fees................................. 17,480
Audit fees.......................................... 17,685
Trustees' fees...................................... 6,032
Registration fees................................... 16,251
Miscellaneous fees.................................. 8,405
Legal fees.......................................... 5,858
Reports to shareholders............................. 5,719
----------
Total expenses................................... 278,993
Less, expenses reimbursed........................ (59,209)
----------
Net expenses..................................... 219,784
----------
Net investment loss ............................. (58,693)
----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized loss from security transactions .......... (15,039)
Net change in unrealized appreciation on
investments ......................................... 5,281,680
----------
Net realized and unrealized gain on investments .... 5,266,641
----------
Net Increase in Net Assets Resulting from
Operations .................................... $5,207,948
==========
See accompanying Notes to Financial Statements.
8
<PAGE>
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U.S. GLOBAL LEADERS GROWTH FUND
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STATEMENT OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------
Year September 29, 1995*
Ended through
June 30, 1997 June 30, 1996
- -----------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM:
OPERATIONS
Net investment loss...................... $ (58,693) $ (430)
Net realized (loss) gain from security
transactions .......................... (15,039) 4,980
Net change in unrealized appreciation
on investments......................... 5,281,680 992,100
----------- ----------
Net increase in net assets resulting
from operations .................... 5,207,948 996,650
----------- ----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Net investment income.................... -0- (1,411)
Net realized gain from security
transactions........................... (104,225) -0-
----------- ----------
Total dividends and distributions .... (104,225) (1,411)
----------- ----------
CAPITAL SHARE TRANSACTIONS
Net increase in net assets derived from
net change in outstanding shares (a)... 12,727,973 8,025,204
----------- ----------
Total increase in net assets ......... 17,831,696 9,020,443
NET ASSETS
Beginning of period ..................... 9,020,443 -0-
----------- ----------
End of period (including accumulated
net investment loss of $60,534 and
$1,841, respectively)................. $26,852,139 $9,020,443
=========== ==========
(a) A summary of capital shares transactions is as follows:
Year September 29, 1995*
Ended through
June 30, 1997 June 30, 1996
--------------------- ----------------------
Shares Value Shares Value
------- ----------- ------- ----------
Shares sold......... 965,711 $13,651,352 747,451 $8,034,111
Shares issued in
reinvestment of
distributions.... 8,208 103,752 132 1,411
Shares redeemed..... (72,466) (1,027,131) (887) (10,318)
------- ----------- ------- ----------
Net increase ....... 901,453 $12,727,973 746,696 $8,025,204
======= =========== ======= ==========
*Commencement of operations.
See accompanying Notes to Financial Statements.
9
<PAGE>
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U.S. GLOBAL LEADERS GROWTH FUND
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FINANCIAL HIGHLIGHTS
For a capital share outstanding throughout each period
- ----------------------------------------------------------------------------
Year September 29, 1995*
Ended through
June 30, 1997 June 30, 1996
- ----------------------------------------------------------------------------
Net asset value, beginning of period .... $12.08 $10.00
------ ------
Income from investment operations:
Net investment (loss) income ......... (.04) .01
Net realized and unrealized gain on
investments ....................... 4.39 2.08
------ ------
Total from investment operations......... 4.35 2.09
------ ------
Less distributions:
Dividends from net investment
income............................. -0- (.01)
Distributions from net
realized gain...................... (.14) -0-
------ ------
Total distributions............. (.14) (.01)
------ ------
Net asset value, end of period .......... $16.29 $12.08
====== ======
Total return ............................ 36.29% 20.83%++
Ratios/supplemental data:
Net assets, end of period (millions)..... $ 26.9 $ 9.0
Ratio of expenses to average net assets:
Before expense reimbursement ......... 1.87% 2.55%+
After expense reimbursement........... 1.48% 1.48%+
Ratio of net investment loss to average
net assets:
Before expense reimbursement ......... (.79)% (1.08)%+
After expense reimbursement .......... (.39)% (0.01)%+
Portfolio turnover rate ................. 21.49% 4.91%
Average commission rate paid per
share................................. $.0688 $.0700
*Commencement of operations.
+Annualized.
++Not Annualized.
See accompanying Notes to Financial Statements.
10
<PAGE>
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U.S. GLOBAL LEADERS GROWTH FUND
-------------
NOTES TO FINANCIAL STATEMENTS at June 30, 1997
- --------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION
The U.S. Global Leaders Growth Fund (the "Fund") is a non-diversified
series of shares of beneficial interest of Professionally Managed Portfolios
(the "Trust"), which is registered under the Investment Company Act of 1940 (the
"1940 Act") as an open-end management investment company. The Fund began
operations on September 29, 1995. The investment objective of the Fund is to
seek growth of capital. The Fund seeks to achieve its objective by investing
primarily in common stocks of United States companies that have substantial
international activities.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund. These policies are in conformity with generally accepted
accounting principles.
A. Security Valuation. Investments in securities traded on a national
securities exchange or included in the NASDAQ National Market System
are valued at the last reported sale price at the close of regular
trading on the last business day of the period; securities traded on
an exchange or NASDAQ for which there have been no sales and other
over-the-counter securities are valued at the last reported bid
price. Securities for which quotations are not readily available are
valued at their respective fair values as determined in good faith by
the Board of Trustees. Short-term investments are stated at cost,
which when combined with accrued interest, approximates market value.
U.S. Government securities with less than 60 days remaining to
maturity when acquired by the Fund are valued on an amortized cost
basis. U.S. Government securities with more than 60 days remaining to
maturity are valued at the current market value (using the mean
between the bid and asked price) until the 60th day prior to
maturity, and are then valued at amortized cost based upon the value
on such date unless the Board determines during such 60 day period
that this amortized cost basis does not represent fair value.
B. Federal Income Taxes. The Fund intends to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income to
its shareholders. Therefore, no federal income tax provision is
required.
C. Security Transactions, Investment Income and Distributions. As is
common in the industry, security transactions are accounted
11
<PAGE>
=============
U.S. GLOBAL LEADERS GROWTH FUND
-------------
NOTES TO FINANCIAL STATEMENTS, Continued
- --------------------------------------------------------------------------------
for on the trade date. The cost of securities owned on realized
transactions are relieved on a first-in, first-out basis. Dividend
income and distributions to shareholders are recorded on the
ex-dividend date.
D. Use of Estimates. The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect amounts
reported in the financial statements and accompanying notes. Actual
results could differ from those estimates.
NOTE 3 - COMMITMENTS AND OTHER RELATED PARTY
TRANSACTIONS
For the year ended June 30, 1997, Yeager, Wood & Marshall, Inc. (the
"Advisor") provided the Fund with investment management services under an
Investment Advisory Agreement. The Advisor furnishes all investment advice,
office space, facilities, and most of the personnel needed by the Fund. As
compensation for its services, the Advisor was entitled to a monthly fee at the
annual rate of 1.00% based upon the average daily net assets of the Fund. For
the year ended June 30, 1997, the Fund incurred $148,503 in advisory fees.
The Fund is responsible for its own operating expenses. The Advisor has
agreed to limit the Fund's total expenses to not more than 1.48% of average net
assets annually. Any such reductions made by the Advisor in its fees or payments
or reimbursement of expenses which are the Fund's obligation are subject to
reimbursement by the Fund provided the Fund is able to effect such reimbursement
and remain in compliance with applicable expense limitations. The expense
reimbursement by the Advisor for the year ended June 30, 1997 totaled $59,209,
and the cumulative unrecouped amount paid by the Advisor from the Fund's
inception through June 30, 1997 totalled $102,784.
Investment Company Administration Corporation (the "Administrator") acts
as the Fund's Administrator under an Administration Agreement. The Administrator
prepares various federal and state regulatory filings, reports and returns for
the Fund; prepares reports and materials to be supplied to the trustees;
monitors the activities of the Fund's custodian, transfer agent and accountants;
coordinates the preparation and payment of Fund expenses and reviews the Fund's
expense accruals. For its services, the Administrator receives a monthly fee at
the following annual rate:
Under $15 million $30,000
$15 to $50 million 0.20% of average net assets
$50 to $100 million 0.15% of average net assets
$100 to $150 million 0.10% of average net assets
Over $150 million 0.05% of average net assets
12
<PAGE>
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U.S. GLOBAL LEADERS GROWTH FUND
-------------
NOTES TO FINANCIAL STATEMENTS, Continued
- --------------------------------------------------------------------------------
First Fund Distributors, Inc. (the "Distributor") acts as the Fund's
principal underwriter in a continuous public offering of the Fund's shares. The
Distributor is an affiliate of the Administrator.
Certain officers and trustees of the Trust are also officers and/or
directors of the Administrator and Distributor.
NOTE 4 - PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities, other than U.S. Government obligations
and short-term investments, for the year ended June 30, 1997 were $14,960,383
and $3,205,519, respectively.
13
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U.S. GLOBAL LEADERS GROWTH FUND
-------------
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
To the Shareholders of
U.S. Global Leaders Growth Fund and
the Board of Trustees of
Professionally Managed Portfolios
We have audited the accompanying statement of assets and liabilities of
U.S. Global Leaders Growth Fund (the "Fund"), a series of Professionally Managed
Portfolios, including the schedule of investments, as of June 30, 1997, and the
related statement of operations for the year then ended, and the statements of
changes in net assets and the financial highlights for the year then ended and
for the period from September 29, 1995 (commencement of operations) to June 30,
1996. These financial statements and financial highlights are the responsibility
of the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1997, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
U.S. Global Leaders Growth Fund as of June 30, 1997, the results of its
operations for the year then ended, and the changes in its net assets and the
financial highlights for the year then ended and for the period from September
29, 1995 (commencement of operations) to June 30, 1996, in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
Los Angeles, California
July 30, 1997
14
<PAGE>
[This page intentionally left blank.]
<PAGE>
ADVISOR
Yeager, Wood & Marshall, Incorporated
630 Fifth Avenue
New York, New York 10111
(212) 765-5350
DISTRIBUTOR
First Fund Distributors, Inc.
4455 East Camelback Road, Suite 261E
Phoenix, Arizona 85018
CUSTODIAN
Star Bank, N.A.
425 Walnut Street
Cincinnati, Ohio 45202
TRANSFER AND
DIVIDEND
DISBURSING AGENT
American Data Services, Inc.
P.O. Box 5536
Hauppauge, New York 11788-0132
AUDITORS
Ernst & Young LLP
515 South Flower Street
Los Angeles, California 90071
LEGAL COUNSEL
Paul, Hastings, Janofsky & Walker, LLP
345 California Street, 29th Floor
San Francisco, California 94104
This report is intended for the shareholders of the Fund and may not be used as
sales literature unless preceded or accompanied by a current prospectus.
Past performance results shown in this report should not be considered a
representation of future performance. Share price and returns will fluctuate so
that shares, when redeemed, may be worth more or less than their original cost.
Statements and other information herein are dated and are subject to change.
<PAGE>
US
GLOBAL
LEADERS
-----
GROWTH
FUND
Annual Report
June 30, 1997
