[LOGO]
LEONETTI BALANCED FUND
ANNUAL REPORT
JUNE 30, 1999
<PAGE>
[LOGO]
July, 1999
Dear Shareholder,
The Leonetti Balanced Fund has gotten a quick jump on the first half of 1999
with a gain of 10.11 percent as of June 30,1999. Our Fund beat the Lipper
Balanced Fund Index's return of 6.16 percent by 3.95 percent. The Leonetti
Balanced Fund has remained for all of 1999 as one of the top 15 performing
balanced funds out of a universe of more than 400 for the past twelve months
return. At June 30, 1999, our Fund was ranked in sixth place. This ranking,
which is conducted by Lipper Inc., is done weekly and can be found in the Wall
Street Journal Interactive edition, and monthly in the print version of The Wall
Street Journal. Our Fund also continues to be ranked as a top performing hybrid
fund by Morningstar for its past twelve months' return. At the end of the second
quarter, the assets of the Fund crossed the $24 million level.
A combination of falling bond prices, worries over earnings, and what actions
the Federal Reserve would take, left the stock market in a state of flux in the
second quarter. The large capitalization growth stocks that had led the market
higher over the past year reached a short-term top in early April, as did the
top performing Internet stocks. As these stocks went into normal corrections of
20-40 percent from their highs, basic material stocks, oil stocks and cyclicals
such as chemicals, papers and steel stocks took over the market leadership.
These stocks, which had underperformed for so long, rallied higher during the
second quarter. The correction in the growth stocks lasted for the last two
weeks of April, all of May and nearly all of June before finishing the end of
the quarter back on their upward trek. Much of the market activity in June and
even late May revolved around what the Federal Reserve would do at their June
month-end meeting. Bonds had been weak since February and remained weak
throughout the second quarter. A good measure of performance by bonds is the
Salomon Smith Barney Bond Index which finished the quarter down 0.84 percent and
down 2.26 percent year to date. The Federal Reserve announced that they would
increase the Federal Funds rate by a quarter percent, but remove the tightening
bias that they had been maintaining. The bond and stock markets reacted very
favorably sending prices nicely higher at the end of the quarter.
The Leonetti Balanced Fund's ten largest stock holdings as of June 30, 1999 were
IBM Corp., Cisco Systems, Lucent Technologies, General Electric, America Online,
EMC Corp., Microsoft Corp., Tribune Co., MCI Worldcom, and McDonalds Corp.
As we write this newsletter, the large capitalization stocks have regained their
leadership over the past couple of weeks. This is very positive for the stock
market and, of course, for our Fund. Bonds remain lackluster, and other than
short-term rallies we do not see a lot of potential in the fixed-income market.
The stock market remains a liquidity driven market and we do not see that
changing for quite some time. Large flows of cash will continue to
<PAGE>
find their way into the stock market with the support of the low interest rate,
low inflation and low unemployment environment. Our outlook continues to be
bright.
We appreciate your continued support and interest in the Leonetti Balanced Fund
and look forward to serving your investment needs and objectives.
Cordially,
LEONETTI & ASSOCIATES, INC.
Leonetti Wilshire 5000+Salomon+ Lipper
Balanced Fund US Treasury Index Balanced Index
------------- ----------------- --------------
8/1/95 $10,000 $10,000 $10,000
9/30/95 $ 9,940 $10,375 $10,354
12/31/95 $10,605 $10,842 $10,817
3/31/96 $10,936 $11,187 $11,059
6/30/96 $10,846 $11,535 $11,283
9/30/96 $10,856 $11,821 $11,579
12/31/96 $11,330 $12,456 $12,224
3/31/97 $11,218 $12,509 $12,277
6/30/97 $12,464 $13,994 $13,586
9/30/97 $13,709 $15,030 $14,465
12/31/97 $13,691 $15,342 $14,675
3/31/98 $14,993 $16,736 $15,834
6/30/98 $15,468 $17,085 $16,111
9/30/98 $14,387 $16,014 $15,183
12/31/98 $17,459 $18,222 $16,930
3/31/99 $18,506 $18,628 $17,201
6/30/99 $19,224 $19,552 $17,974
Average Annual Total Return
Period Ended June 30, 1999
1 Year.............................. 24.28%
3 Year.............................. 21.02%
Since Inception (8/1/95)............ 18.17 %
Past performance is not predictive of future performance.
The Lipper Balanced Index is an equally weighted performance index, of the
largest qualifying funds in the Lipper category. The Wilshire 5000 + Salomon +
US Treasury Index is a blend of the Wilshire 5000 Equity Index (65%), the
Salomon Broad Investment Grade Bond Index (25%) and the 90-day U.S. Government
Treasury Bill Yield (10%). The Wilshire 5000 measures the performance of all
equity securities issued by companies with headquarters in the U.S. The Salomon
Broad Bond Index consists of U.S. Treasury and Government-sponsored agency bonds
with a maturity of one year or longer and a minimum of one-hundred million
dollars outstanding. The indices are unmanaged and returns include reinvested
dividends.
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LEONETTI BALANCED FUND
SCHEDULE OF INVESTMENTS AT JUNE 30, 1999
- --------------------------------------------------------------------------------
Shares COMMON STOCKS: 67.4% Value
- --------------------------------------------------------------------------------
BANKS: 0.9%
5,208 Commerce Bancshares, Inc............................. $ 209,622
-----------
COMMUNICATIONS - EQUIPMENT: 4.6%
16,368 Lucent Technologies Inc.............................. 1,103,817
-----------
COMPUTER - HARDWARE: 10.9%
8,000 Sun Microsystems, Inc.*.............................. 551,000
16,000 International Business Machines Corp................. 2,068,000
-----------
2,619,000
-----------
COMPUTER - LOCAL NETWORKS: 6.0%
22,500 Cisco Systems, Inc.*................................. 1,451,250
-----------
COMPUTER - MEMORY DEVICES: 3.7%
16,000 EMC Corp.*........................................... 880,000
-----------
COMPUTER - NETWORK AND COMMUNICATIONS: 0.7%
5,000 Adaptec, Inc.*....................................... 176,562
-----------
COMPUTER - ONLINE SERVICES: 3.7%
8,000 America Online, Inc.*................................ 884,000
-----------
COMPUTER - SOFTWARE: 3.5%
5,000 Novell, Inc.*........................................ 132,500
8,000 Microsoft Corp.*..................................... 721,500
-----------
854,000
-----------
DIVERSIFIED OPERATIONS: 2.4%
6,000 Tyco International Ltd............................... 568,500
-----------
DURABLE GOODS: 3.8%
8,000 General Electric Company............................. 904,000
-----------
See accompanying Notes to Financial Statements.
3
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LEONETTI BALANCED FUND
SCHEDULE OF INVESTMENTS AT JUNE 30, 1999, CONTINUED
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
ELECTRONICS - SEMICONDUCTORS: 1.0%
4,000 Xilinx, Inc.*....................................... $ 229,000
-----------
FINANCIAL SERVICES: 2.0%
10,000 Citigroup Inc........................................ 475,000
-----------
LEISURE - SERVICES: 0.7%
4,000 Royal Caribbean Cruises Ltd.......................... 175,000
-----------
MANUFACTURING - LARGE APPLIANCES: 1.2%
4,000 Maytag Corp.......................................... 278,750
-----------
MEDIA - NEWSPAPERS/CABLE TV: 3.8%
8,000 Fox Entertainment Group, Inc.*....................... 215,500
8,000 Tribune Company...................................... 697,000
-----------
912,500
-----------
MEDICAL - PHARMACEUTICALS: 1.8%
6,000 Merck & Co., Inc..................................... 444,000
-----------
OFFICE AUTOMATION & EQUIPMENT: 1.2%
5,000 Xerox Corp........................................... 295,313
-----------
OIL & GAS - FIELD SERVICES: 2.1%
8,000 Schlumberger Limited................................. 509,500
-----------
RETAIL - BUILDING PRODUCTS: 2.1%
8,000 The Home Depot, Inc.................................. 515,500
-----------
RETAIL - DRUG STORE: 1.7%
8,000 CVS Corp............................................. 409,000
-----------
RETAIL - RESTAURANTS: 2.7%
16,000 McDonald's Corp...................................... 661,000
-----------
See accompanying Notes to Financial Statements.
4
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LEONETTI BALANCED FUND
SCHEDULE OF INVESTMENTS AT JUNE 30, 1999, CONTINUED
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
RETAIL - SUPERMARKETS: 1.2%
10,000 Kroger Company*...................................... $ 279,375
-----------
TELECOMMUNICATIONS: 4.6%
8,000 Sprint Corp.......................................... 422,500
8,000 MCI WorldCom Inc.*................................... 690,000
-----------
1,112,500
-----------
TELECOMMUNICATIONS SERVICES: 1.1%
8,000 Qwest Communications International Inc.*............. 264,500
-----------
Total Common Stocks (Cost $9,965,912)................ 16,211,689
-----------
Principal
Amount U.S. GOVERNMENT OBLIGATIONS: 26.7%
- --------------------------------------------------------------------------------
$ 350,000 U.S. Treasury Note, 6.000%, 10/15/1999............... 351,203
800,000 U.S. Treasury Note, 5.500%, 02/29/2000............... 802,000
800,000 U.S. Treasury Note, 5.000%, 02/28/2001............... 794,000
500,000 U.S. Treasury Note, 4.625%, 12/31/2000............... 494,063
1,000,000 U.S. Treasury Note, 4.625%, 11/30/2000............... 989,063
800,000 U.S. Treasury Note, 4.500%, 09/30/2000............... 791,000
400,000 U.S. Treasury Note, 5.875%, 02/15/2000............... 401,750
900,000 U.S. Treasury Note, 5.375%, 01/31/2000............... 901,969
500,000 U.S. Treasury Note, 5.250%, 01/31/2001............... 498,438
400,000 U.S. Treasury Note, 6.125%, 07/31/2000............... 403,125
-----------
Total U.S. Government Obligations (Cost $6,447,021).. 6,426,611
-----------
REPURCHASE AGREEMENT: 10.2%
- --------------------------------------------------------------------------------
2,455,000 Firstar Bank Repurchase Agreement, 3.30%, dated
03/30/1999, due 7/1/1999, collateralized by
$2,503,511 GNMA, 5.50%, due 5/20/2024, (proceeds
$2,455,225) (cost $2,455,000)........................ 2,455,000
-----------
Total Investments In Securities
(cost $18,867,933): 104.3%........................... 25,093,300
Liabilities in Excess of Other Assets: (4.3%)........ (1,025,478)
-----------
TOTAL NET ASSETS: 100.0%............................. $24,067,822
===========
* Non-income producing securities.
See accompanying Notes to Financial Statements.
5
<PAGE>
LEONETTI BALANCED FUND
STATEMENT OF ASSETS AND LIABILITIES AT JUNE 30, 1999
- --------------------------------------------------------------------------------
ASSETS
Investments in securities, at value (cost $18,867,933).......... $25,093,300
Cash............................................................ 205
Receivables:
Fund shares sold.............................................. 13,895
Dividends and interest........................................ 98,981
Deferred organization costs..................................... 7,099
Prepaid expenses................................................ 86
-----------
Total assets.............................................. 25,213,566
-----------
LIABILITIES
Payables:
Advisory fees................................................. 18,986
Administration fee............................................ 4,179
Securities purchased.......................................... 1,077,700
Fund shares redeemed.......................................... 19,414
Accrued expenses................................................ 25,465
-----------
Total liabilities......................................... 1,145,744
-----------
NET ASSETS ...................................................... $24,067,822
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($24,067,822/1,473,219 shares outstanding; unlimited number
of shares authorized without par value)....................... $ 16.34
===========
COMPONENTS OF NET ASSETS
Paid-in capital................................................. $17,098,340
Undistributed net investment income............................. 32,448
Undistributed net realized gain on investments.................. 711,667
Net unrealized appreciation on investments ..................... 6,225,367
-----------
Net assets.................................................. $24,067,822
===========
See accompanying Notes to Financial Statements.
6
<PAGE>
LEONETTI BALANCED FUND
STATEMENT OF OPERATIONS - FOR THE YEAR ENDED JUNE 30, 1999
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Income
Interest...................................................... $ 315,555
Dividends..................................................... 72,895
Other......................................................... 3,952
-----------
Total income................................................ 392,402
-----------
Expenses
Advisory fees................................................. 184,956
Administration fee............................................ 36,278
Registration fees............................................. 19,998
Fund accounting fees.......................................... 20,648
Transfer agent fees........................................... 18,949
Audit fee..................................................... 16,023
Custody fees.................................................. 9,650
Amortization of deferred organization costs................... 6,000
Legal fees.................................................... 4,775
Trustee fees.................................................. 4,250
Reports to shareholders....................................... 2,900
Miscellaneous................................................. 2,014
Insurance..................................................... 723
-----------
Total expenses............................................ 327,164
-----------
NET INVESTMENT INCOME....................................... 65,238
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments................................ 676,378
Net unrealized appreciation on investments...................... 3,510,644
-----------
Net realized and unrealized gain on investments............... 4,187,022
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............. $ 4,252,260
===========
See accompanying Notes to Financial Statements.
7
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LEONETTI BALANCED FUND
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------------------------
Year Year
Ended Ended
June 30, 1999 June 30, 1998
----------- -----------
<S> <C> <C>
INCREASE IN NET ASSETS FROM:
OPERATIONS
Net investment income........................................... $ 65,238 $ 51,772
Net realized gain on investments................................ 676,378 1,694,629
Net unrealized appreciation on investments...................... 3,510,644 1,050,874
----------- -----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.......... 4,252,260 2,797,275
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income...................................... (59,358) (30,287)
From net realized gain on investments........................... (1,019,875) (973,796)
----------- -----------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS........................... (1,079,233) (1,004,083)
----------- -----------
CAPITAL SHARE TRANSACTIONS
Net increase in net assets derived from net change in
outstanding shares (a)........................................ 5,397,710 2,420,672
----------- -----------
TOTAL INCREASE IN NET ASSETS.................................. 8,570,737 4,213,864
----------- -----------
NET ASSETS
Beginning of period............................................. 15,497,085 11,283,221
----------- -----------
END OF PERIOD................................................... $24,067,822 $15,497,085
=========== ===========
</TABLE>
(a) A summary of capital share transactions is as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
June 30, 1999 June 30, 1998
--------------------------- ---------------------------
Shares Value Shares Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Shares sold..................... 365,405 $ 5,421,234 218,573 $ 2,894,591
Shares issued in reinvestment
of distributions.............. 78,386 1,074,676 81,718 994,509
Shares redeemed................. (75,553) (1,098,200) (112,150) (1,468,428)
----------- ----------- ----------- -----------
Net increase.................... 368,238 $ 5,397,710 188,141 $ 2,420,672
=========== =========== =========== ===========
</TABLE>
See accompanying Notes to Financial Statements.
8
<PAGE>
LEONETTI BALANCED FUND
FINANCIAL HIGHLIGHTS
FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Year Ended June 30, August 1, 1995*
------------------------------------------- through
1999 1998 1997 June 30, 1996
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period...... $ 14.02 $ 12.31 $ 10.80 $ 10.00
----------- ----------- ----------- -----------
Income from investment operations:
Net investment income................... 0.05 0.05 0.06 0.09
Net realized and unrealized gain
on investments........................ 3.18 2.75 1.54 0.76
----------- ----------- ----------- -----------
Total from investment operations.......... 3.23 2.80 1.60 0.85
----------- ----------- ----------- -----------
Less distributions:
From net investment income.............. (0.05) (0.03) (0.09) (0.05)
From net realized gains................. (0.86) (1.06) 0.00 0.00
----------- ----------- ----------- -----------
Total distributions....................... (0.91) (1.09) (0.09) (0.05)
----------- ----------- ----------- -----------
Net asset value, end of period............ $ 16.34 $ 14.02 $ 12.31 $ 10.80
=========== =========== =========== ===========
Total return.............................. 24.28% 24.10% 14.91% 8.46%**
Ratios/supplemental data:
Net assets, end of period (millions)...... $ 24.1 $ 15.5 $ 11.3 $ 10.1
Ratio of expenses to average net assets... 1.77% 1.99% 2.29% 2.26%+
Ratio of net investment income to
average net assets...................... 0.35% 0.40% 0.47% 1.02%+
Portfolio turnover rate................... 81.16% 89.51% 119.75% 42.16%
</TABLE>
* Commencement of operations.
+ Annualized.
** Not annualized.
See accompanying Notes to Financial Statements.
9
<PAGE>
LEONETTI BALANCED FUND
NOTES TO FINANCIAL STATEMENTS AT JUNE 30, 1999
- --------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION
The Leonetti Balanced Fund (the "Fund") is a 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 August 1,
1995. The investment objective of the Fund is to seek total return through a
combination of income and capital growth, consistent with preservation of
capital. The Fund seeks to achieve its objective by investing primarily in
equity securities and high quality fixed income obligations.
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 obligations with less than 60 days remaining to
maturity when acquired by the Fund are valued on an amortized cost
basis. U.S. Government obligations with more than 60 days remaining to
maturity are valued at their 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, DIVIDEND INCOME AND DISTRIBUTIONS. Security
transactions are accounted for on the trade date. The cost of
securities sold is determined on a first-in, first-out basis. Dividend
income and distributions to shareholders are recorded on the
ex-dividend date.
D. DEFERRED ORGANIZATION COSTS. The Fund incurred expenses of $30,000 in
connection with its organization. These costs have been deferred and
are being amortized on a straight-line basis over a period of sixty
months from the date the Fund commenced operations.
E. 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.
10
<PAGE>
LEONETTI BALANCED FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
- --------------------------------------------------------------------------------
NOTE 3 - COMMITMENTS AND OTHER RELATED PARTY TRANSACTIONS
Leonetti & Associates, Inc. (the "Advisor") provides 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
is 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, 1999, the Fund
incurred $184,956 in advisory fees.
The Fund is responsible for its own operating expenses. The Advisor may
reduce its fees or make reimbursement to the Fund at any time in order to reduce
the Fund's expenses. 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 any expense
limitations then in effect.
Investment Company Administration, L.L.C. (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 accountant;
coordinates the preparation and payment of Fund expenses and reviews the Fund's
expense accruals. For its services, the Administrator receives a monthly fee
based on average daily net assets at the following annual rates:
Under $15 million $30,000
$15 to $50 million 0.20%
$50 to $100 million 0.15%
$100 to $150 million 0.10%
Over $150 million 0.05%
For the year ended, June 30, 1999, the Fund incurred $36,278 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 the sale of securities for the
year ended June 30, 1999, excluding short-term investments, were $15,650,234 and
$13,491,550, respectively.
For the year ended June 30, 1999, the cost of purchases and the proceeds
from sales of U.S. Government and Government Agency obligations, excluding
short-term securities, were $3,098,969 and $1,050,000 respectively.
11
<PAGE>
LEONETTI BALANCED FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
- --------------------------------------------------------------------------------
NOTE 5 - TAX BASIS APPRECIATION
At June 30, 1999, the cost of securities for Federal tax purposes was the
same as their basis for financial reporting purposes. Unrealized appreciation
and depreciation of securities were as follows:
Gross unrealized appreciation........................... $ 6,335,492
Gross unrealized depreciation........................... (110,125)
-----------
Net unrealized appreciation........................... $ 6,225,367
===========
12
<PAGE>
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
To the Shareholders of
Leonetti Balanced 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 Leonetti Balanced Fund (the "Fund") (one of the
portfolios constituting the series of Professionally Managed Portfolios), as of
June 30, 1999, 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 three years in
the period then ended and for the period August 1, 1995 (commencement of
operations) through June 30, 1996. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of June 30, 1999, 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
Leonetti Balanced Fund as of June 30, 1999, 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 three
years in the period then ended, and for the period August 1, 1995 (commencement
of operations) through June 30, 1996, in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
Los Angeles, California
July 30, 1999
13
<PAGE>
ADVISOR
Leonetti & Associates, Inc.
1130 Lake Cook Road, Suite 300
Buffalo Grove, Illinois 60089
(800) 454-0999
--
DISTRIBUTOR
First Fund Distributors, Inc.
4455 East Camelback Road, Suite 261E
Phoenix, Arizona 85018
--
CUSTODIAN
Firstar Institutional Custody Services
425 Walnut Street
Cincinnati, Ohio 45202
--
TRANSFER AGENT
American Data Services, Inc.
P.O. Box 5536
Hauppauge, New York 11788-0132
--
AUDITORS
Ernst & Young LLP
725 South Figueroa Street
Los Angeles, California 90017
--
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.
