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[US GLOBAL LEADERS GROWTH FUND LOGO]]
SEMI-ANNUAL REPORT
December 31, 1996
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U.S. GLOBAL LEADERS GROWTH FUND
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February 1, 1997
Dear Fellow Long-Term Investor:
The table below summarizes the performance of U.S. Global Leaders
Growth Fund since inception and includes comparable returns for the S&P 500
Index and two Lipper Fund indices which represent relevant benchmarks:
<TABLE>
<CAPTION>
6 Months Year Since
Ending Ending Inception
12/31/96 12/31/96 10/1/95
-------- -------- -------
<S> <C> <C> <C>
U.S. Global Leaders Growth Fund 8.77% 23.14% 31.43%
S&P 500 Index 11.77 22.98 30.35
Lipper Growth Fund Index 8.82 17.48 20.35
Lipper International Fund Index 5.28 14.43 16.50
</TABLE>
The average annual total return from inception through year-end 1996
was 24.27%.
Weakness in the bond market is almost always bad for the stock market
and for growth stocks in particular. Investor concern about a resurgence of
inflation -- unjustified in our view -- was primarily responsible for the Fund's
less impressive relative performance in the last half of 1996.
Your Fund continues to receive favorable media attention. For example,
the November 18, 1996 issue of Forbes -- which took a look at mutual funds that
focus on stocks of U.S. companies that generate a significant portion of their
earnings abroad -- said: "The most successful has been U.S. Global Leaders, a
$10 million no-load that in its first year has outperformed 99% of all funds
with overseas investment and almost as high a percentage of domestic funds."
While it is not possible to know how the stock market will perform in
1997, we believe we can confidently predict excellent earnings results on
average for the companies in which the Fund is invested. The following table
summarizes 1994 and 1995 earnings results for the current Fund holdings and the
S&P 500 Index companies' operating earnings together with our own estimates for
the portfolio and S&P companies.
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U.S. GLOBAL LEADERS GROWTH FUND
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<TABLE>
<CAPTION>
Earnings Gain
Portfolio S&P 500
Companies Companies
--------- ---------
<S> <C> <C>
1994 16.7% 15.8%
1995 17.1 17.5
1996E 17.5 8.3
1997E 18.0 7.6
</TABLE>
As noted, we expect a slight earnings acceleration on a dollar-weighted
basis for the Fund companies in contrast to a deceleration in the earnings
anticipated for the S&P 500 Index companies. The reasons for the significant
earnings divergence are twofold: (1) The Fund companies are suppliers of
consumable products or services so their revenue streams are recurring, even as
the U.S. economy slows down and (2) a significant and growing percentage of
their earnings are coming from non-U.S. markets which are growing much faster
and where they face less competition.
While the expectations of many market participants who are pursuing
short-term earnings momentum or other more speculative strategies may prove to
be unrealistic, long-term investors in sustainable growth companies with a
global reach should continue to be well rewarded. Confidence in this regard
should be particularly well founded in a global investment environment
characterized by the lowest rate of inflation in thirty years and a world more
at peace and with more market-oriented economies than at any time in six
decades.
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
"Patience is the companion of wisdom." St. Augustine
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U.S. GLOBAL LEADERS GROWTH FUND
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SCHEDULE OF INVESTMENTS
AT DECEMBER 31, 1996 (UNAUDITED)
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<TABLE>
<CAPTION>
Shares COMMON STOCKS: 99.6% Market Value
- -------------------------------------------------------------------------
<S> <C> <C>
BEVERAGES: 4.2%
8,300 Coca-Cola Co.................................. $ 436,787
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BUSINESS AND INFORMATION SERVICES: 6.8%
8,000 Automatic Data Processing, Inc................ 343,000
8,300 Electronic Data Systems Corp.................. 358,975
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701,975
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COMPUTER SOFTWARE: 4.4%
5,600 Microsoft Corp.*.............................. 462,700
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CONSUMER SERVICES: 5.9%
25,200 CUC International, Inc.*...................... 611,100
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DRUG DELIVERY SYSTEMS: 4.0%
16,100 Alza Corp.*................................... 416,587
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ENTERTAINMENT AND LODGING: 7.6%
10,300 Marriott International........................ 569,075
3,150 The Walt Disney Co............................ 219,319
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788,394
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FINANCIAL SERVICES: 6.0%
9,600 State Street Boston Corp...................... 619,200
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FOODS: 1.9%
3,500 Wm. Wrigley, Jr., Co.......................... 196,875
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FOOD SERVICES: 4.0%
9,100 McDonald's Corp............................... 411,775
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HEALTH PRODUCTS: 9.1%
10,400 Abbott Laboratories........................... 527,800
8,300 Johnson & Johnson............................. 412,925
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940,725
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HOUSEHOLD PRODUCTS: 10.1%
4,400 Colgate-Palmolive Co.......................... 405,900
1,600 Duracell International, Inc................... 111,800
4,900 Procter & Gamble Co........................... 526,750
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1,044,450
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</TABLE>
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U.S. GLOBAL LEADERS GROWTH FUND
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SCHEDULE OF INVESTMENTS
AT DECEMBER 31, 1996 (UNAUDITED), CONTINUED
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<TABLE>
<CAPTION>
Shares Market Value
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<S> <C> <C>
INDUSTRIAL CONSUMABLES: 3.0%
12,200 Pall Corp..................................... $ 311,100
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INSURANCE: 4.6%
4,400 American International Group.................. 476,300
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MASS MERCHANDISING: 5.0%
22,850 Wal-Mart Stores, Inc.......................... 522,694
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PHARMACEUTICALS: 10.0%
4,900 Merck & Co., Inc.............................. 388,325
7,800 Pfizer, Inc................................... 646,425
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1,034,750
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SPECIALTY RETAIL: 8.5%
8,400 Home Depot, Inc............................... 421,050
12,600 Tiffany & Co.................................. 461,475
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882,525
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TOILETRIES: 4.5%
6,000 Gillette Co................................... 466,500
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</TABLE>
<TABLE>
<CAPTION>
Principal
Amount REPURCHASE AGREEMENT: 3.0%
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<S> <C> <C>
$320,000 Star Bank Repurchase Agreement, 5.00%,
dated 12/31/96, due 1/2/97, collateralized
by $345,000 GNMA, due 1/20/24
(proceeds $320,088) (cost $320,000)........... 320,000
-----------
Total Investment in Securities
(cost $9,017,236+): 102.6%.................. 10,644,437
Liabilities in excess of Other
Assets: (2.6%).............................. (266,773)
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Total Net Assets: 100.0%................ $10,377,664
===========
</TABLE>
*Non-income producing security.
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U.S. GLOBAL LEADERS GROWTH FUND
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SCHEDULE OF INVESTMENTS
AT DECEMBER 31, 1996 (UNAUDITED), CONTINUED
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<TABLE>
<CAPTION>
Market Value
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+ At December 31, 1996, 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:
<S> <C>
Gross unrealized appreciation................. $1,761,412
Gross unrealized depreciation................. (134,211)
----------
Net unrealized appreciation............. $1,627,201
==========
</TABLE>
See Accompanying Notes to Financial Statements.
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U.S. GLOBAL LEADERS GROWTH FUND
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STATEMENT OF ASSETS AND LIABILITIES
AT DECEMBER 31, 1996 (UNAUDITED)
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<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (identified cost
$9,017,236) (Note 2-A) ............................. $10,644,437
Cash................................................... 503
Dividends and interest receivable...................... 7,498
Prepaid expenses and other assets...................... 19,117
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Total assets .................................... 10,671,555
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LIABILITIES
Payables:
Advisory fee........................................ 2,178
Administration fee.................................. 543
Securities purchased................................ 291,170
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Total liabilities................................ 293,891
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NET ASSETS .......................................... $10,377,664
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NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER SHARE ($10,377,664/798,470 shares
outstanding; unlimited number of shares
authorized without par value)........................ $13.00
======
COMPONENTS OF NET ASSETS
Paid-in capital ....................................... $ 8,685,360
Accumulated net investment loss........................ (19,753)
Undistributed net realized gain on investments......... 84,856
Net unrealized appreciation on investments............. 1,627,201
-----------
Net assets ......................................... $10,377,664
===========
</TABLE>
See Accompanying Notes to Financial Statements.
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U.S. GLOBAL LEADERS GROWTH FUND
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STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1996 (UNAUDITED)
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<TABLE>
<S> <C>
INVESTMENT INCOME
Income
Dividends........................................... $ 53,321
Interest............................................ 1,145
--------
Total investment income.......................... 54,466
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Expenses
Advisory fees (Note 3) ............................. 48,903
Administration fee (Note 3)......................... 13,027
Custodian and accounting fees....................... 9,468
Transfer agent fees................................. 8,086
Auditing fees....................................... 7,777
Trustees' fees...................................... 2,160
Registration fees................................... 1,876
Miscellaneous fees.................................. 1,821
Legal fees.......................................... 1,736
Reports to shareholders............................. 632
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Total expenses................................... 95,486
Less, expenses reimbursed (Note 3)............... (23,109)
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Net expenses..................................... 72,377
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NET INVESTMENT LOSS ............................. (17,911)
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REALIZED AND UNREALIZED GAIN
ON INVESTMENTS
Net realized gain from security transactions .......... 184,100
Net change in unrealized appreciation on
investments ......................................... 635,101
--------
Net realized and unrealized gain on investments .... 819,201
--------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS .................................... $801,290
========
</TABLE>
See Accompanying Notes to Financial Statements.
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U.S. GLOBAL LEADERS GROWTH FUND
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STATEMENT OF CHANGES IN NET ASSETS
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<TABLE>
<CAPTION>
Six Months October 1, 1995*
ended through
December 31, 1996# June 30, 1996
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<S> <C> <C>
INCREASE IN NET ASSETS FROM:
OPERATIONS
Net investment loss...................... $ (17,911) $ (430)
Net realized gain from security
transactions .......................... 184,100 4,980
Net change in unrealized appreciation
of investments......................... 635,101 992,100
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NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS .................... 801,290 996,650
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DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS
Net investment income.................... -0- (1,411)
Net realized gain from security
transactions........................... (104,225) -0-
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TOTAL DIVIDENDS AND DISTRIBUTIONS .... (104,225) (1,411)
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CAPITAL SHARE TRANSACTIONS
Net increase in net assets derived from
net change in outstanding shares (a)... 660,156 8,025,204
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TOTAL INCREASE IN NET ASSETS ......... 1,357,221 9,020,443
NET ASSETS
Beginning of period ..................... 9,020,443 -0-
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END OF PERIOD (including accumulated
net investment loss of $19,753 and
$1,841, respectively)................. $10,377,664 $9,020,443
=========== ==========
</TABLE>
(a) A summary of capital shares transactions is as follows:
<TABLE>
<CAPTION>
Six Months October 1, 1995*
ended through
December 31, 1996# June 30, 1996
------------------- ----------------------
Shares Value Shares Value
------ -------- ------- ----------
<S> <C> <C> <C> <C>
Shares sold........... 43,573 $556,488 747,451 $8,034,111
Shares issued in
reinvestment of
distributions....... 8,208 103,752 132 1,411
Shares redeemed....... (7) (84) (887) (10,318)
------ -------- ------- ----------
Net increase ......... 51,774 $660,156 746,696 $8,025,204
====== ======== ======= ==========
</TABLE>
*Commencement of operations.
#Unaudited.
See Accompanying Notes to Financial Statements.
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U.S. GLOBAL LEADERS GROWTH FUND
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FINANCIAL HIGHLIGHTS
FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT EACH PERIOD
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<TABLE>
<CAPTION>
Six Months October 1, 1995*
ended through
December 31, 1996# June 30, 1996
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<S> <C> <C>
Net asset value, beginning of period .... $12.08 $ 10.00
------ -------
Income from investment operations:
Net investment (loss) income ......... (.02) .01
Net realized and unrealized gain on
investments ....................... 1.08 2.08
------ -------
Total from investment operations......... 1.06 2.09
------ -------
Less distributions:
From net investment income............ -0- (.01)
From net capital gains................ (.14) -0-
------ -------
Total distributions...................... (.14) (.01)
------ -------
Net asset value, end of period .......... $13.00 $ 12.08
====== =======
Total return ............................ 8.77%(++) 20.83%(++)
Ratios/supplemental data:
Net assets, end of period (millions)..... $ 10.4 $ 9.0
Ratio of expenses to average net assets:
Before expense reimbursement ......... 1.95%+ 2.55%+
After expense reimbursement........... 1.48%+ 1.48%+
Ratio of net investment loss to
average net assets:
Before expense reimbursement ......... (.84)%+ (1.08)%+
After expense reimbursement .......... (.37)%+ (0.01)%+
Portfolio turnover rate ................. 14.62% 4.91%
Average commission rate paid per
share++............................... $.0700 $.0600
</TABLE>
# Unaudited.
* Commencement of operations.
+ Annualized.
(++) Not Annualized.
++ For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for security
trades on which commissions are charged. This amount may vary from period
to period and fund to fund depending on the mix of trades executed in
various markets where trading practices and commission rate structures may
differ.
See Accompanying Notes to Financial Statements.
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U.S. GLOBAL LEADERS GROWTH FUND
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NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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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 October 1, 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
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U.S. GLOBAL LEADERS GROWTH FUND
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NOTES TO FINANCIAL STATEMENTS (UNAUDITED), CONTINUED
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for on the trade date. 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 the
reported amount of assets and liabilities at the date of the
financial statements. Actual results could differ from those
estimates.
NOTE 3 - INVESTMENT MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
For the six months ended December 31, 1996, Yeager, Wood & Marshall,
Inc. (the "Advisor") provided the Fund with investment management services under
an Investment Advisory Agreement. The Advisor furnished all investment advice,
office space, facilities, and most 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 six months
ended December 31, 1996, the Fund incurred $48,903 in advisory fees.
The Fund is responsible for its own operating expenses. The Advisor has
agreed to reduce fees payable to 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 laws or expense limitations. The expense
reimbursement for the six months ended December 31, 1996 totaled $23,109.
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:
<TABLE>
<S> <C>
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
</TABLE>
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.
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U.S. GLOBAL LEADERS GROWTH FUND
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NOTES TO FINANCIAL STATEMENTS (UNAUDITED), CONTINUED
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Certain officers and Trustees of the Trust are also officers and/or
directors of the Administrator.
NOTE 4 - PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities, other than short-term investments,
for the six months ended December 31, 1996 were $1,957,119 and $1,411,983,
respectively.
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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.
24 West Carver Street, 2nd Floor
Huntington, New York 11743
AUDITORS
Ernst & Young LLP
515 South Flower Street
Los Angeles, California 90071
LEGAL COUNSEL
Heller, Ehrman, White & McAuliffe
333 Bush Street
San Francisco, California 94104
This report is intended for shareholders of the U.S. Global Leaders
Growth Fund and may not be used as sales literature unless
preceded or accompanied by a current prospectus.