U.S. Global Leaders Growth Fund
Annual Report
June 30, 1998
<PAGE>
U.S. Global Leaders Growth Fund
August 1, 1998
Dear Fellow Long-Term Investor:
It is gratifying to report continued favorable investment performance results
for U. S. Global Leaders Growth Fund on both an absolute and relative basis:
Six Months Year Since Inception
Ending Ending (Annualized)
6/30/98 6/30/98 9/29/95 - 6/30/98
U.S. Global Leaders Growth Fund 22.40% 37.20% 34.45%
U.S. Global Leaders (After-Tax) 22.40% 37.20% 34.29%
S&P 500 Index 17.63% 30.13% 29.66%
Lipper Growth Index 15.58% 28.28% 23.34%
Lipper International Index 15.80% 8.96% 14.36%
The financial media increasingly treats business and market developments as
entertainment fodder. Events that galvanize traders and short-term momentum
players (but which are of little or no consequence to long-term investors)
predominate on TV and in the press. Snap judgments - particularly of the gloom
and doom variety - "sell" more than thoughtful long-term analyses. An abundance
of chatter about the possibility of a reversal of the non-inflationary economic
growth that we are enjoying often overshadows the almost daily evidence as to
the probability of its continuance. Fortunately, sweet music occasionally cuts
through the static as with the Federal Reserve Chairman's recent testimony
before Congress that "the current economic performance...is as impressive as any
I have witnessed in my near half-century of daily observation of the American
economy."
The Bank for International Settlements, the world's central banker, is an
institution whose global perspective is well worth paying attention to. Its
Annual Report released on June 8, l998 presented the following under-reported
conclusion: "In spite of the traumatic events in Asia, the economic prospects
for the rest of the world are still thought to look generally positive. The
long-running expansion of the economies of the United States and the United
Kingdom is projected to continue. European economic and monetary union is to be
introduced on schedule with a broad membership, amid emerging signs of
strengthening growth and confidence. Not only have serious contagion effects
thus far been avoided elsewhere outside the Asian region, but some have argued
that the worst may be over in Asia itself given that financial markets there
have stabilized to some degree... At a more fundamental level, the events in
Asia have even been interpreted positively by some as a confirmation of the
dominance of the market-driven model of economic growth that has become
increasingly fashionable since the 1970s." Obviously, not sound bite
<PAGE>
material but rather the type of substantive commentary that underpins our
confidence.
To be comfortable with the general investment environment is not to render a
blanket endorsement of all (or even most) stock price prospects. Indeed, at
current valuation levels, absolute and relative investment returns are likely to
more closely correlate with underlying earnings results. In our view, the number
of companies that can maintain pricing flexibility and sustain superior earnings
growth in a slower growing, non-inflationary, globally competitive market place
is a shrinking universe. Accordingly, we expect a re-emergence of a two-tier
market: the stock prices of earnings under-achievers should sink to risk
discounts and the sustainable growers are likely to regain their traditional
price premiums. It is thus reassuring to reaffirm our expectation that the
portfolio companies on a dollar-weighted basis will grow their earnings at about
20 percent for the foreseeable future.
We are pleased to announce the activation of our Internet website:
www.usgloballeaders.com. In addition to the latest Prospectus, background
materials, and Investor Kit order form, you will find a Fact Sheet presenting
investment performance results and many of the Fund's "vital statistics",
including all portfolio holdings. This Fact Sheet will be updated monthly.
Also, it is satisfying to be able to note that total expenses have been reduced
to the 1.39 percent annual rate from 1.48 percent. It is our expectation that
the expense ratio will be further reduced with continued growth in Fund assets.
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
"Patience is the companion of wisdom." St. Augustine
<PAGE>
U. S. Global Leaders Growth Fund
Value of $10,000 vs. S&P 500 Index
Average Annual Total Return
Period Ended June 30, 1998
1 Year.....................37.20%
Since Inception (9/29/95)..34.45%
Qtr Adj Fund Adj S&P
9/29/95 10,000 10,000
12/31/95 10,673 10,599
3/31/96 11,313 11,170
6/30/96 12,083 11,663
9/30/96 13,004 12,029
12/31/96 13,143 13,035
3/31/97 13,638 13,381
6/30/97 16,469 15,712
9/30/97 17,773 16,891
12/31/97 18,461 17,382
3/31/98 21,766 19,805
6/30/98 22,595 20,447
Past performance is not predictive of future performance.
The S&P 500 is a broad market-weighted average of U. S. blue-chip companies. The
index is unmanaged and returns include reinvested dividends.
<PAGE>
U.S. Global Leaders Growth Fund
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS at June 30, 1998
- --------------------------------------------------------------------------------
Shares COMMON STOCKS: 98.8% Market Value
- --------------------------------------------------------------------------------
Beverages: 2.6%
<S> <C>
26,700 Coca-Cola Company............................. $ 2,282,850
-----------
Business and Information Services: 9.0%
40,100 Automatic Data Processing, Inc................ 2,922,288
68,200 Gartner Group, Inc.*.......................... 2,387,000
49,050 Robert Half International, Inc.*.............. 2,740,669
------ ---------
8,049,957
---------
Computer Software: 3.0%
24,800 Microsoft Corp.*.............................. 2,687,700
---------
Consumer Services: 8.0%
166,300 Cendant Corp.*................................ 3,471,513
97,200 ServiceMaster Company......................... 3,699,675
---------
7,171,188
---------
Drug Delivery Systems: 3.4%
70,900 ALZA Corp.*................................... 3,066,425
---------
Entertainment and Lodging: 6.5%
144,800 Marriott International, Inc., Class A......... 4,687,900
10,750 Walt Disney Company........................... 1,129,422
---------
5,817,322
---------
Express Delivery Services: 3.8%
54,200 FDX Corp.*.................................... 3,401,050
---------
Financial Services: 3.9%
50,200 State Street Corp............................. 3,488,900
---------
Foods: 1.6%
14,300 Wm. Wrigley Jr. Company....................... 1,401,400
---------
Food Services: 8.9%
55,900 McDonald's Corp............................... 3,857,100
77,400 Starbucks Corp.*.............................. 4,136,062
---------
7,993,162
---------
Health Products: 5.4%
58,400 Abbott Laboratories........................... 2,387,100
33,200 Johnson & Johnson............................. 2,448,500
---------
4,835,600
---------
<PAGE>
U.S. Global Leaders Growth Fund
SCHEDULE OF INVESTMENTS at June 30, 1998, Continued
- --------------------------------------------------------------------------------
Shares Market Value
- --------------------------------------------------------------------------------
Household Products: 4.0%
22,900 Colgate-Palmolive Company..................... $ 2,015,200
17,000 Procter & Gamble Company...................... 1,548,063
---------
3,563,263
---------
Insurance: 2.9%
17,837 American International Group, Inc............. 2,604,202
---------
Mass Merchandising: 4.5%
66,850 Wal-Mart Stores, Inc.......................... 4,061,137
---------
Oil Services: 3.7%
48,200 Schlumberger Ltd.............................. 3,292,662
---------
Pharmaceuticals: 8.8%
21,700 Merck & Company, Inc.......................... 2,902,375
45,500 Pfizer, Inc................................... 4,945,281
---------
7,847,656
---------
Specialty Retail: 16.8%
63,800 Home Depot, Inc............................... 5,299,387
177,950 Staples, Inc.*................................ 5,149,428
95,100 Tiffany & Company............................. 4,564,800
---------
15,013,615
----------
Toiletries: 2.0%
31,492 Gillette Company.............................. 1,785,203
---------
Total Common Stocks (cost $63,313,252)........ 88,363,292
----------
Principal
Amount REPURCHASE AGREEMENT: 1.4%
- --------------------------------------------------------------------------------
$1,287,000 Star Bank Repurchase Agreement, 5.20%,
dated 6/30/1998, due 7/1/1998, collateralized
by $1,290,000 GNMA, 5.20%, due 5/20/2024,
(proceeds $1,287,183) (cost $1,287,000)....... 1,287,000
---------
Total Investment in Securities
(cost $64,600,252+): 100.2%................. 89,650,292
Liabilities in Excess of Other Assets: (0.2)%. (233,892)
--------
Total Net Assets: 100.0% ..................... $89,416,400
===========
<FN>
*Non-income producing security.
<PAGE>
U.S. Global Leaders Growth Fund
SCHEDULE OF INVESTMENTS at June 30, 1998, Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
+ At June 30, 1998, 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................. $26,313,799
Gross unrealized depreciation................. (1,263,759)
----------
Net unrealized appreciation............. $25,050,040
</FN>
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
U.S. Global Leaders Growth Fund
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES at June 30, 1998
- --------------------------------------------------------------------------------
ASSETS
Investments in securities, at value
<S> <C>
(cost $64,600,252) ................................. $89,650,292
Receivables:
Fund shares sold.................................... 897,503
Dividends and interest.............................. 52,238
Prepaid expenses....................................... 2,328
-----
Total assets .................................... 90,602,361
----------
LIABILITIES
Payables:
Advisory fees....................................... 67,730
Administration fee.................................. 12,286
Securities purchased................................ 823,393
Fund shares redeemed................................ 69,264
Other liabilities................................... 179,351
Accrued expenses....................................... 33,937
------
Total liabilities................................ 1,185,961
---------
NET ASSETS ........................................ $89,416,400
===========
Netasset value, offering and redemption price per share ($89,416,400/4,000,558
shares outstanding; unlimited number of shares
authorized without par value)........................ $22.35
======
COMPONENTS OF NET ASSETS
Paid-in capital ....................................... $64,890,622
Accumulated net realized loss on investments........... (524,262)
Net unrealized appreciation on investments............. 25,050,040
----------
Net assets ......................................... $89,416,400
===========
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
U.S. Global Leaders Growth Fund
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Year Ended June 30, 1998
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Income
<S> <C>
Dividends........................................... $ 374,938
Interest............................................ 34,649
------
Total income..................................... 409,587
-------
Expenses
Advisory fees ...................................... 539,774
Administration fee.................................. 95,452
Registration fees................................... 36,755
Fund accounting fees................................ 24,728
Transfer agent fees................................. 20,929
Custody fees........................................ 17,102
Audit fee........................................... 14,105
Reports to shareholders............................. 9,647
Trustee fees........................................ 7,548
Legal fees.......................................... 4,224
Miscellaneous....................................... 1,825
Insurance........................................... 1,326
-----
Total expenses................................... 773,415
Less: expenses waived and reimbursed............. (6,910)
------
Net expenses..................................... 766,505
-------
Net investment loss .......................... (356,918)
--------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized loss from security transactions .......... (408,137)
Net change in unrealized appreciation on
investments ......................................... 18,776,260
----------
Net realized and unrealized gain
on investments ............................... 18,368,123
----------
Net increase in net assets resulting from operations ..... $18,011,205
===========
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
U.S. Global Leaders Growth Fund
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------
Year Year
Ended Ended
June 30, 1998 June 30, 1997
- --------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM:
OPERATIONS
<S> <C> <C>
Net investment loss...................... $ (356,918) $ (58,693)
Net realized loss from security
transactions .......................... (408,137) (15,039)
Net change in unrealized appreciation
on investments......................... 18,776,260 5,281,680
---------- ---------
Net increase in net assets resulting
from operations .................... 18,011,205 5,207,948
---------- ---------
DISTRIBUTIONS TO SHAREHOLDERS
Net realized gain on investments......... -0- (104,225)
- --------
CAPITAL SHARE TRANSACTIONS
Net increase in net assets derived from
net change in outstanding shares (a)... 44,553,056 12,727,973
---------- ----------
Total increase in net assets ......... 62,564,261 17,831,696
NET ASSETS
Beginning of year........................ 26,852,139 9,020,443
---------- ---------
End of year ............................ $89,416,400 $26,852,139
=========== ===========
<FN>
(a) A summary of capital shares transactions is as follows:
Year Year
Ended Ended
June 30, 1998 June 30, 1997
- --------------------------------------------------------------------------------
Shares Value Shares Value
- --------------------------------------------------------------------------------
Shares sold........ 2,462,187 $46,809,937 965,711 $13,651,352
Shares issued in
reinvestment of
distributions... -0- -0- 8,208 103,752
Shares redeemed.... (109,778) (2,256,881) (72,466) (1,027,131)
-------- ---------- ------- ----------
Net increase ...... 2,352,409 $44,553,056 901,453 $12,727,973
========= =========== ======= ===========
</FN>
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
U.S. Global Leaders Growth Fund
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
For a capital share outstanding throughout each period
- --------------------------------------------------------------------------------
Year Ended June 30,Sept. 29, 1995*
through
1998 1997 June 30, 1996
- --------------------------------------------------------------------------------
Net asset value, beginning
<S> <C> <C> <C>
of period ......................... $16.29 $12.08 $10.00
------ ------ ------
Income from investment operations:
Net investment (loss) income ...... (0.07) (0.04) 0.01
Net realized and unrealized gain
on investments ................. 6.13 4.39 2.08
---- ---- ----
Total from investment operations...... 6.06 4.35 2.09
---- ---- ----
Less distributions:
From net investment income......... 0.00 0.00 (0.01)
From net capital gains............. 0.00 (0.14) 0.00
---- ----- ----
Total distributions................... 0.00 (0.14) (0.01)
---- ----- -----
Net asset value, end of period ....... $22.35 $16.29 $12.08
====== ====== ======
Total return ......................... 37.20% 36.29% 20.83%
Ratios/supplemental data:
Net assets, end of period
(millions)......................... $ 89.4 $ 26.9 $ 9.0
Ratio of expenses to average
net assets:
Before expense reimbursement ...... 1.43% 1.87% 2.55%+
After expense reimbursement........ 1.42% 1.48% 1.48%+
Ratio of net investment loss to average net assets:
Before expense reimbursement ...... (0.67)% (0.79)% (1.08)%+
After expense reimbursement ....... (0.66)% (0.39)% (0.01)%+
Portfolio turnover rate .............. 4.02% 21.49% 4.91%
<FN>
*Commencement of operations.
+Annualized.
</FN>
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
U.S. Global Leaders Growth Fund
NOTES TO FINANCIAL STATEMENTS at June 30, 1998
- --------------------------------------------------------------------------------
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.
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 for on
the trade date. The cost of securities owned on realized
transactions is 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 the reported
amounts of assets and liabilities at the date of the financial
statements. Actual results could differ from those estimates.
<PAGE>
U.S. Global Leaders Growth Fund
NOTES TO FINANCIAL STATEMENTS, Continued
NOTE 3 - COMMITMENTS AND OTHER RELATED
PARTY TRANSACTIONS
For the year ended June 30, 1998, Yeager, Wood & Marshall, Inc. (the
"Adviser") provided the Fund with investment management services under an
Investment Advisory Agreement. The Adviser furnished all investment advice,
office space, facilities, and most of the personnel needed by the Fund. As
compensation for its services, the Adviser 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, 1998, the Fund incurred $539,774 in advisory fees.
The Fund is responsible for its own operating expenses. The Adviser agreed
to reduce the limit the Fund's total expenses from 1.48% to 1.39% when the Fund
exceeded $50 million during the fiscal year. Any such reductions made by the
Adviser in its fees or payments or reimbursement of expenses which are the
Fund's obligation are subject to reimbursement by the Fund within three years,
provided the Fund is able to effect such reimbursement and remain in compliance
with any applicable expense limitations then in effect. The expense
reimbursement by the Adviser for the year ended June 30, 1998, totaled $6,910,
and the cumulative unrecouped amount paid by the Adviser from the Fund's
inception through June 30, 1998 totalled $109,694.
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 daily net assets
$50 to $80 million 0.15% of average daily net assets
$80 to $100 million 0.10% of average daily net assets
Over $100 million 0.05% of average daily net assets
For the year ended June 30, 1998, the Fund incurred $95,452 in
Administration fees.
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 the Distributor.
<PAGE>
U.S. Global Leaders Growth Fund
NOTES TO FINANCIAL STATEMENTS, Continued
NOTE 4 - PURCHASES AND SALES OF SECURITIES
The cost of purchases and the proceeds from sales of securities, other
than short-term investments, for the year ended June 30, 1998, were $46,167,107
and $2,153,543, respectively.
<PAGE>
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, including
the schedule of investments, of U.S. Global Leaders Growth Fund (the "Fund")
(one of the portfolios constituting the series of Professionally Managed
Portfolios), as of June 30, 1998, and the related statement of operations for
the year then ended, and the statements of changes in net assets for each of the
two years in the period then ended and the financial highlights for each of the
two years in the period 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 audits 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, 1998, 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, 1998, the results of its operations
for the year then ended, and the changes in its net assets for each of the two
years in the period then ended, and the financial highlights for each of the two
years in the period then ended, and for the period from September 29, 1995
(commencement of operations) to June 30, 1996, in conformity with generally
accepted accounting principles.
Los Angeles, California
July 31, 1998
<PAGE>
ADVISER
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.
