July 8, 1998
Dear Shareholders:
At a current (July 8) net asset value of $9.83 per share, the PGP
Korea Growth Fund is down 2% since its inception on February 9, 1998. We're not
satisfied with that performance. Furthermore, as many of you have read our
quarterly newsletter sent out last week, we believe there will be continuing
high volatility in the Korean stock market for at least the next couple months.
The good news is that we've managed to minimize losses to our
shareholders and still retain exposure to the Korean market in a period where
the overall Korean market decline was 33%. Our conservative view on the market
may change as we look for signs that Korea is making real reforms and that the
stock market has hit bottom.
Most importantly, our optimism remains unshaken on the long-term
prospects for Korea and its attractiveness as an appropriate component of a
balanced investment portfolio. This view rests on the fundamental
competitiveness of Korean industry in those manufacturing categories where
demand will be strong in the higher growth regions of the world over the next
decade. The emerging markets of Latin America, Eastern Europe and Asia will grow
faster than the mature economies and they will require goods such as steel,
cars, ships and semiconductors. The other core argument is based on the dramatic
changes in the allocation of capital and practices in business management which
are currently occurring in Korea out of necessity. When Asia eventually
recovers, Korea should be a stronger competitor compared to Japan and others
because of the bitter medicine it is swallowing today.
Thank you for your confidence in us as an investor. I hope we have the
opportunity to speak soon. Of course, call us at anytime if you have any
questions.
Sincerely,
Stewart M. Kim
Managing Partner
<PAGE>
PGP Korea Growth Fund
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS at June 30, 1998 (Unaudited)
- ------------------------------------------------------------------------------------------------------------
Shares COMMON STOCKS: 66.3% Market Value
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Banks: 4.1%
59,500 Kookmin Bank*.................................................... $ 221,012
---------
Consumer Services: 1.9%
1,000 S1 Corp.......................................................... 101,238
---------
Cosmetics: 1.7%
10,000 Pacific Chemical Corp............................................ 91,041
---------
Electrical Components: 5.8%
60,000 Daewoo Electronics Company....................................... 157,320
5,000 Samsung Electronics.............................................. 154,770
---------
312,090
---------
Food and Beverage: 4.1%
4,300 Lotte Confectionary Company...................................... 219,228
---------
Insurance: 3.1%
1,000 Samsung Fire & Marine Insurance.................................. 166,788
---------
Non-Ferrous: 2.9%
20,000 Korea Zinc Company............................................... 155,863
---------
Office Equipment: 5.0%
10,000 Sindo Ricoh Company.............................................. 272,396
---------
Paper Products: 15.7%
180,000 Hansol Paper Company............................................. 852,148
---------
Securities Brokers: 2.6%
38,000 Daewoo Securities Company*....................................... 141,151
---------
Specialty Chemicals: 5.9%
32,000 Honam Petrochemical Corp......................................... 171,304
9,710 Namhae Chemical Corp............................................. 148,514
---------
319,818
---------
</TABLE>
2
<PAGE>
PGP Korea Growth Fund
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS at June 30, 1998 (Unaudited), Continued
- --------------------------------------------------------------------------------------------------------
Shares Market Value
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Steel: 13.5%
21,500 Pohang Iron & Steel Company, Ltd.................................. $ 729,089
---------
Total Common Stocks (cost $4,807,321)............................. 3,581,862
---------
PREFERRED STOCK: 3.7%
- --------------------------------------------------------------------------------------------------------
16,000 Lotte Chilsung Beverage Company* (cost $268,255).................. 196,940
---------
Principal Amount REPURCHASE AGREEMENT: 26.8%
- --------------------------------------------------------------------------------------------------------
$1,446,000 Star Bank Repurchase Agreement, 5.2%, dated 6/30/1998,
due 7/1/1998, collaterized by $1,450,000 GNMA, due 1/20/2024
(proceeds $1,446,209) (cost $1,446,000)........................... 1,446,000
---------
Total Investments in Securities (cost $6,521,576+): 96.8% ........ 5,224,802
Other Assets less Liabilities: 3.2%............................... 170,495
---------
Total Net Assets: 100.0% ......................................... $5,395,297
==========
</TABLE>
*Non-income producing security.
+At June 30, 1998, the cost of investments for Federal income tax purposes was
the same as the basis for financial reporting. Unrealized appreciation and
depreciation of securities were as follows:
<TABLE>
<S> <C>
Gross unrealized appreciation..................................... $ 30,754
Gross unrealized depreciation..................................... (1,327,528)
-----------
Net unrealized depreciation............................. $(1,296,774)
===========
</TABLE>
See accompanying Notes to Financial Statements.
3
<PAGE>
PGP Korea Growth Fund
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES at June 30, 1998 (Unaudited)
- ----------------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments in securities, at value (cost $6,521,576)...................................... $5,224,802
Foreign currency (cost $205,203)........................................................... 209,643
Cash....................................................................................... 297
Interest receivable........................................................................ 209
Other receivables.......................................................................... 29,490
----------
Total assets .................................................................... 5,464,441
----------
LIABILITIES
Accrued expenses........................................................................... 69,144
----------
Total liabilities................................................................ 69,144
----------
NET ASSETS........................................................................................ $5,395,297
==========
Net asset value and redemption price per share
($5,395,297/630,054 shares outstanding;
unlimited number of shares authorized without par value) .............................. $8.56
=====
Computation of offering price per share
(Net asset value $8.56/.975)........................................................... $8.78
=====
COMPONENTS OF NET ASSETS
Paid-in capital............................................................................ $6,611,097
Undistributed net realized gain on investments and foreign currency transactions........... 76,534
Net unrealized depreciation on investments and translation of foreign currencies........... (1,292,334)
----------
Net assets............................................................................. $5,395,297
==========
</TABLE>
See accompanying Notes to Financial Statements.
4
<PAGE>
PGP Korea Growth Fund
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Period from February 9, 1998* through June 30, 1998 (Unaudited)
- ----------------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Income
Interest .................................................................. $ 72,287
-----------
Total income...................................................... 72,287
-----------
Expenses
Advisory fees.............................................................. 35,379
Distribution fees.......................................................... 18,397
Administration fee......................................................... 11,589
Fund accounting fees....................................................... 11,589
Custody fees............................................................... 8,305
Transfer agent fees........................................................ 5,409
Audit fee.................................................................. 5,206
Amortization of deferred organization costs................................ 4,250
Legal fees................................................................. 2,820
Registration fees.......................................................... 2,169
Reports to shareholders.................................................... 1,468
Miscellaneous.............................................................. 1,184
Trustee fees............................................................... 966
-----------
Total expenses........................................................ 108,731
Less: expenses waived and reimbursed.................................. (29,490)
-----------
Net expenses.......................................................... 79,241
-----------
Net investment loss ......................................... (6,954)
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY
Net realized gain from:
Investments................................................................ 12,900
Foreign currency transactions.............................................. 63,634
-----------
76,534
-----------
Net change in unrealized appreciation (depreciation) on:
Investments................................................................ (1,296,774)
Translation of foreign currencies.......................................... 4,440
-----------
(1,292,334)
-----------
Net realized and unrealized gain (loss) from investments
and foreign currency.................................................. (1,215,800)
-----------
Net decrease in net assets resulting from operations ........ $(1,222,754)
===========
</TABLE>
*Commencement of operations.
See accompanying Notes to Financial Statements.
5
<PAGE>
PGP Korea Growth Fund
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS (Unaudited)
- -----------------------------------------------------------------------------------------------------------
February 9, 1998*
through
June 30, 1998
- -----------------------------------------------------------------------------------------------------------
<S> <C>
NET INCREASE IN ASSETS FROM:
OPERATIONS
Net investment loss ................................................................... $ (6,954)
Net realized gain from investments and foreign currency transactions................... 76,534
Net change in unrealized depreciation on investments and
translation of foreign currencies................................................... (1,292,334)
----------
Net decrease in net assets resulting from operations ........................ (1,222,754)
----------
CAPITAL SHARE TRANSACTIONS
Net increase in net assets derived from net change in outstanding shares (a)........... 6,618,051
----------
Total increase in net assets ................................................ 5,395,297
NET ASSETS
Beginning of period ................................................................... -0-
----------
End of period ......................................................................... $5,395,297
==========
(a) A summary of capital shares transactions is as follows:
February 9, 1998*
through
June 30, 1998
-------------------------
Shares Value
------- ----------
Shares sold........................................................... 827,594 $8,433,445
Shares redeemed....................................................... (197,540) (1,815,394)
-------- ----------
Net increase.......................................................... 630,054 $6,618,051
======== ==========
</TABLE>
*Commencement of operations.
See accompanying Notes to Financial Statements.
6
<PAGE>
PGP Korea Growth Fund
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS - For a capital share outstanding throughout the period (Unaudited)
- -----------------------------------------------------------------------------------------------------------
February 9, 1998*
through
June 30, 1998
- -----------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period................................................ $10.00
------
Income from investment operations:
Net investment loss....................................................... (0.01)
Net realized and unrealized loss on investments........................... (1.43)
------
Total from investment operations.................................................... (1.44)
------
Net asset value, end of period...................................................... $ 8.56
======
Total return ....................................................................... (14.40%)
Ratios/supplemental data:
Net assets, end of period (millions)................................................ $ 5.4
Ratio of expenses to average net assets:
Before expense reimbursement.............................................. 3.82%+
After expense reimbursement............................................... 2.80%+
Ratio of net investment loss to average net assets:
Before expense reimbursement.............................................. (1.28%)+
After expense reimbursement............................................... (0.24%)+
Portfolio turnover rate............................................................. 13.45%
</TABLE>
*Commencement of operations.
+Annualized.
See accompanying Notes to Financial Statements.
7
<PAGE>
PGP Korea Growth Fund
NOTES TO FINANCIAL STATEMENTS at June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION
PGP Korea 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 February 9, 1998. The investment objective of the Fund is to
attain long-term growth of capital. The Fund seeks to achieve its objective by
investing primarily in equity securities of Korean companies.
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 are valued at the last reported sales price at
the close of regular trading on the last business day of the
period; securities traded on an exchange for which there have been
no sales and other over-the-counter securities are valued at the
last reported bid price. Assets or liabilities initially expressed
in terms of foreign currencies are translated into U.S. dollars at
the prevailing market rates at the end of the reporting period.
Purchases and sales of securities and income and expenses are
translated into U.S. dollars at the prevailing market rates on the
dates of such transactions. The effects of changes in foreign
currency exchange rates on investment securities are included with
the net realized and unrealized gain or loss on investment
securities. 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 are relieved on a first-in, first-out cost basis.
Dividend income and distributions to shareholders are recorded on
the ex-dividend date.
D. Deferred Organization Costs. All of the expenses incurred by the
Adviser in connection with the organization and registration of
the Fund's shares will be borne by the Fund and are being
amortized to expense on a straight-line basis over a period of
five years.
E. Foreign Currency. Values of investments denominated in foreign
currencies are converted into U.S. dollars using the spot market
rate of exchange at the time of valuation. Purchases and sales of
investments and dividend and interest income are translated into
U.S. dollars using the spot market rate of exchange prevailing on
the respective dates of such translations. The gain or loss
resulting from changes in foreign exchange rates is included with
net realized and unrealized gain or loss from investments, as
appropriate.
8
<PAGE>
PGP Korea Growth Fund
NOTES TO FINANCIAL STATEMENTS (Unaudited), Continued
- --------------------------------------------------------------------------------
F. 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.
NOTE 3 - COMMITMENTS AND OTHER RELATED PARTY TRANSACTIONS
For the period ended June 30, 1998, Pacific Gemini Partners, LLC (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 1.25% based upon the average daily net assets of the Fund. For
the period ended June 30, 1998, the Fund incurred $35,379 in Advisory fees.
The Fund is responsible for its own operating expenses. The Adviser
has agreed to reduce fees payable to it by the Fund to the extent necessary to
limit the Fund's aggregate annual operating expenses to 2.80% of average net
assets. Any such reductions made by the Adviser in its fees or payments or
reimbursement of expenses which are the Fund's obligation may be subject to
reimbursement by the Fund within the following three years, provided the Fund is
able to effect such reimbursement and remain in compliance with applicable
expense limitations. For the six months ended June 30, 1998, the Adviser
reimbursed the Fund in the amount of $29,490.
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 $100 million 0.15% of average daily net assets
$100 to $150 million 0.10% of average daily net assets
Over $150 million 0.05% of average daily net assets
For the period ended June 30, 1998, the Fund incurred $11,589 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.
NOTE 4 - PURCHASES AND SALES OF SECURITIES
The cost of purchases and the proceeds from sales of securities, other
than U.S. Government and Government Agency Obligations and short-term
investments, for the period ended June 30, 1998, were $6,082,243 and $983,254,
respectively.
9
<PAGE>
Adviser
Pacific Gemini Partners, L.L.C.
633 West Fifth St., Suite 3600
Los Angeles, CA 90071
Distributor
First Fund Distributors, Inc.
4455 E. Camelback Rd., Suite 261E
Phoenix, AZ 85018
Custodian
Star Bank, N.A.
425 Walnut St.
Cincinnati, Ohio 45202
Transfer and Dividend Disbursing Agent
Countrywide Fund Services
P.O. Box 5354
Cincinnati, OH 45201-5354
(800) 841-0980
Auditors
Tait, Weller & Baker
8 Penn Center Plaza, Suite 800
Philadelphia, PA 19103
Legal Counsel
Paul, Hastings, Janofsky & Walker LLP
345 California St.
San Francisco, CA 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.
[Logo]
PGP Korea
Growth Fund
SEMI-ANNUAL REPORT
June 30, 1998
