U.S. Global Leaders Growth Fund
Semi-Annual Report
December 31, 1997
<PAGE>
U.S. Global Leaders Growth Fund
Dear Fellow Long-Term Investor:
Although it is neither our objective nor expectation that U.S. Global Leaders
Growth Fund will be the best performing mutual fund in any one year or short
term time period, it is nevertheless gratifying that the following total return
results in 1997 and since inception do represent top tier performance:
Inception
9/30/95 to Date
1997 (Annualized)
U.S. Global Leaders Growth Fund 40.46% 31.20%
U.S. Global Leaders Growth Fund
(After-Tax) 40.46 31.00
S&P 500 Index 33.34 27.75
Lipper Growth Fund Index 28.08 21.31
Lipper International Fund Index 7.26 10.37
It is our goal to build a portfolio of sustainable growth companies with a
global reach that will play a sound core role in each shareholder's long term
financial plan and to provide superior investment returns over time. Toward that
end, we feel very comfortable with the earnings prospects for 1998 and beyond
for the Fund's portfolio companies, as well as their absolute and relative
valuations. If we were to construct an investment environment scenario where the
companies in which we invest would most likely excel, it would be very close to
the global economic, monetary and political conditions that presently exist.
The Asian crisis -- which we believe has passed its peak of intensity -- is
actually improving the longer-term prospects for many of the portfolio companies
with representation in that region. The international financial markets are
forcing these Asian countries to reform their fiscal, monetary, regulatory and
political policies and practices which, on balance, should play out to the
benefit of our "Global Leaders." Even in the short-term, strategic opportunities
that otherwise would not have been presented are being seized, e.g. American
International Group's purchase of a Thai financial institution and Coca Cola's
purchase of a soft drink bottling subsidiary of a Korean conglomerate.
Strong corporate earnings results -- which in part are dividends from the
restructuring in the 1980's and technology investments in the 1990's -- have
fueled the unprecedented sustained strength of the stock market. Profit margins
have reached their highest level in thirty-five years, having been boosted by
lower interest rates on corporate debt and a meaningful decline in wage costs as
a percent of pre-tax profits. However, the benefits from these factors are
largely played out for most companies. Accordingly, in 1998's slower growth
economy there should be a significant deceleration
<PAGE>
in the rate of earnings gains for corporations in the aggregate including the
S&P 500 Index companies. Thus, the high rewards for just having been invested in
equities these past several years are highly unlikely to be sustained. This year
- -- and for the foreseeable future -- superior investment results will be more
closely tied to superior earnings gains. Although there can be no assurances of
future returns, given our current estimates that the average earnings gains for
our "Global Leaders" will approximate 20 percent, we believe that the Fund's
investment performance will continue to be favorable on both an absolute and
relative basis.
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
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS
at December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
Shares COMMON STOCKS: 99.5% Market Value
- --------------------------------------------------------------------------------
Beverages: 3.1%
<S> <C>
20,300 Coca-Cola Company............................. $ 1,352,487
-----------
Business and Information Services: 8.0%
31,700 Automatic Data Processing, Inc................ 1,945,588
40,050 Robert Half International, Inc.*.............. 1,602,000
---------
3,547,588
---------
Computer Software: 2.6%
8,900 Microsoft Corp.*.............................. 1,150,325
---------
Consumer Services: 8.2%
105,800 Cendant Corp.*................................ 3,636,875
---------
Drug Delivery Systems: 4.6%
63,400 ALZA Corp.*................................... 2,016,912
---------
Entertainment and Lodging: 5.6%
25,100 Marriott International, Inc................... 1,738,175
7,550 Walt Disney Company........................... 747,922
-------
2,486,097
---------
Express Delivery Services: 3.3%
23,600 FDX Corp.*.................................... 1,441,075
---------
Financial Services: 6.8%
30,800 Charles Schwab Corp........................... 1,291,675
29,400 State Street Corp............................. 1,710,713
---------
3,002,388
---------
Foods: 1.9%
10,600 Wm. Wrigley Jr. Company....................... 843,363
-------
Food Services: 4.2%
39,200 McDonald's Corp............................... 1,871,800
---------
Health Products: 7.1%
21,800 Abbott Laboratories........................... 1,429,262
25,800 Johnson & Johnson............................. 1,699,575
---------
3,128,837
---------
Household Products: 4.8%
17,000 Colgate-Palmolive Company..................... 1,249,500
11,200 Procter & Gamble Company...................... 893,900
-------
2,143,400
---------
<PAGE>
U.S. Global Leaders Growth Fund
SCHEDULE OF INVESTMENTS
at December 31, 1997 (Unaudited) , Continued
- --------------------------------------------------------------------------------
Shares Market Value
- --------------------------------------------------------------------------------
Insurance: 3.4%
13,700 American International Group, Inc............. $ 1,489,875
-----------
Mass Merchandising: 4.6%
51,850 Wal-Mart Stores, Inc.......................... 2,044,834
---------
Oil Services: 4.7%
26,000 Schlumberger Ltd.............................. 2,093,000
---------
Pharmaceuticals: 9.8%
17,700 Merck & Company, Inc.......................... 1,880,625
32,700 Pfizer, Inc................................... 2,438,194
---------
4,318,819
---------
Specialty Retailing: 14.2%
43,250 Home Depot, Inc............................... 2,546,344
69,000 Staples, Inc.*................................ 1,914,750
50,400 Tiffany & Company............................. 1,817,550
---------
6,278,644
---------
Toiletries: 2.6%
11,346 Gillette Company.............................. 1,139,564
---------
Total Common Stocks (cost $33,103,991)........ 43,985,883
----------
Principal
Amount REPURCHASE AGREEMENT: 0.6%
- --------------------------------------------------------------------------------
$257,000 Star Bank Repurchase Agreement, 5.50%,
dated 12/31/1997, due 1/2/1998, collateralized
by $257,000 GNMA, (proceeds $257,079)
(cost $257,000)............................... 257,000
-------
Total Investment in Securities
(cost $33,360,991+): 100.1%................. 44,242,883
Liabilities in excess of Other Assets: (0.1)%. (22,314)
-------
Total Net Assets: 100.0% ..................... $44,220,569
===========
<FN>
*Non-income producing security.
<PAGE>
U.S. Global Leaders Growth Fund
SCHEDULE OF INVESTMENTS
at December 31, 1997 (Unaudited) , Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
+ At December 31, 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................. $10,898,896
Gross unrealized depreciation................. (17,004)
-------
Net unrealized appreciation............. $10,881,892
===========
</FN>
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
U.S. Global Leaders Growth Fund
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
at December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
ASSETS
Investments in securities, at value
<S> <C>
(cost $33,360,991) ................................. $44,242,883
Cash................................................... 2
Receivables:
Fund shares sold.................................... 143,606
Dividends and interest.............................. 29,614
Prepaid expenses....................................... 4,384
-----
Total assets .................................... 44,420,489
----------
LIABILITIES
Payables:
Advisory fees....................................... 34,892
Administration fee.................................. 5,407
Securities purchased................................ 142,280
Fund shares redeemed................................ 12,721
Accrued expenses....................................... 4,620
-----
Total liabilities................................ 199,920
-------
NET ASSETS .......................................... $44,220,569
===========
Netasset value, offering and redemption price per share ($44,220,569/2,421,709
shares outstanding; unlimited number of shares
authorized without par value)........................ $18.26
======
COMPONENTS OF NET ASSETS
Paid-in capital ....................................... $34,028,782
Accumulated net investment loss........................ (164,344)
Accumulated net realized loss on investments........... (525,761)
Net unrealized appreciation on investments............. 10,881,892
----------
Net assets ......................................... $44,220,569
===========
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
U.S. Global Leaders Growth Fund
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Six Months Ended December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Income
<S> <C>
Dividends........................................... $ 164,892
Interest............................................ 11,745
------
Total income..................................... 176,637
-------
Expenses
Advisory fees ...................................... 189,491
Administration fee.................................. 37,898
Registration fees................................... 18,655
Fund accounting fees................................ 10,166
Transfer agent fees................................. 7,174
Audit fee........................................... 6,378
Custody fees........................................ 5,547
Reports to shareholders............................. 2,521
Trustee fees........................................ 1,970
Miscellaneous....................................... 1,618
Legal fees.......................................... 1,594
Insurance........................................... 278
---
Total expenses................................... 283,290
Less: expenses waived and reimbursed............. (2,843)
------
Net expenses..................................... 280,447
-------
Net investment loss .......................... (103,810)
--------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized loss from security transactions .......... (411,477)
Net change in unrealized appreciation on
investments ......................................... 4,608,112
---------
Net realized and unrealized gain on investments . 4,196,635
---------
Net increase in net assets resulting from
operations ................................. $4,092,825
==========
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
U.S. Global Leaders Growth Fund
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
Six Months Year
Ended Ended
December 31, 1997* June 30, 1997
- --------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM:
OPERATIONS
<S> <C> <C>
Net investment loss...................... $ (103,810) $ (58,693)
Net realized loss from security
transactions .......................... (411,477) (15,039)
Net change in unrealized appreciation
on investments......................... 4,608,112 5,281,680
--------- ---------
Net increase in net assets resulting
from operations .................... 4,092,825 5,207,948
--------- ---------
DIVIDENDS AND 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)... 13,275,605 12,727,973
---------- ----------
Total increase in net assets ......... 17,368,430 17,831,696
NET ASSETS
Beginning of period ..................... 26,852,139 9,020,443
---------- ---------
End of period .......................... $44,220,569 $26,852,139
=========== ===========
<FN>
(a) A summary of capital shares transactions is as follows:
Six Months Year
Ended Ended
December 31, 1997* June 30, 1997
- --------------------------------------------------------------------------------
Shares Value Shares Value
- --------------------------------------------------------------------------------
Shares sold......... 790,943 $13,576,902 965,711 $13,651,352
Shares issued in
reinvestment of
distribution..... -0- -0- 8,208 103,752
Shares redeemed..... (17,383) (301,297) (72,466) (1,027,131)
------- -------- ------- ----------
Net increase ....... 773,560 $13,275,605 901,453 $12,727,973
======= =========== ======= ===========
*Unaudited.
</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
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months Year Sept. 29, 1995*
Ended Ended through
Dec. 31, 1997#June 30, 1997June 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 ...... (.03) (.04) .01
Net realized and unrealized gain
on investments ................. 2.00 4.39 2.08
---- ---- ----
Total from investment operations...... 1.97 4.35 2.09
---- ---- ----
Less distributions:
From net investment income......... -0- -0- (.01)
From net capital gains............. -0- (.14) -0-
- ---- -
Total distributions................... -0- (.14) (.01)
- ---- ----
Net asset value, end of period ....... $18.26 $16.29 $12.08
====== ====== ======
Total return ......................... 12.09% 36.29% 20.83%++
Ratios/supplemental data:
Net assets, end of period
(millions)......................... $ 44.2 $ 26.9 $ 9.0
Ratio of expenses to average
net assets:
Before expense reimbursement ...... 1.49%+ 1.87% 2.55%+
After expense reimbursement........ 1.48%+ 1.48% 1.48%+
Ratio of net investment loss to average net assets:
Before expense reimbursement ...... (.56)%+ (.79)% (1.08)%+
After expense reimbursement ....... (.55)%+ (.39)% (0.01)%+
Portfolio turnover rate .............. 2.04% 21.49% 4.91%
Average commission rate paid per
share.............................. $.0693 $.0688 $.0700
<FN>
#Unaudited.
*Commencement of operations.
+Annualized.
++Not Annualized.
</FN>
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
U.S. Global Leaders Growth Fund
NOTES TO FINANCIAL STATEMENTS
at December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
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 six months ended December 31, 1997, 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 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 six months ended December 31, 1997, the Fund incurred $189,491 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 within three years, 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 six months ended
December 31, 1997 totaled $2,843, and the cumulative unrecouped amount paid by
the Advisor from the Fund's inception through December 31, 1997 totalled
$105,627.
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
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.
<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 six months ended December 31, 1997 were
$14,556,010 and $748,367, respectively.
<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.
