TITAN LOGO HERE
ANNUAL REPORT
APRIL 30, 1999
<PAGE>
TITAN INVESTMENT ADVISORS, LLC
TITAN FINANCIAL SERVICES FUND
9672 Pennsylvania Avenue o Upper Marlboro, Maryland 20772
Telephone: 888-448-4826
Gilbert R. Giordano, President
June 14, 1999
Dear Fellow Shareholder,
As of April 30, 1999, the Titan Financial Services Fund closed at a price
of $18.01. The Fund's performance through April 30, 1999 is as follows(1):
Cumulative Return
(since inception on
May 22, 1996) 106.76%
Average Annual Return
(since inception) 28.03%
12-Month Return -0.15%
I am pleased to report that as of April 30, the Titan Financial Services
Fund was up 22.77% year- to-date. This compares favorably with the S&P 500 Index
which was up 8.62% for the same period. It appears that our blend of
investments, both financial and non-financial, have produced excellent balance
so far this year. As reported to you several months ago, we have diversified the
Fund so that we are no longer 95% or more in financial stocks. We instead are
trying to maintain a division of 25% in non-financials and 75% in financial
stocks. We have done this to avoid the periodic, sharp and severe pull-backs
that both the banks and the brokerages have experienced over the last 10 months.
In addition to diversifying the portfolio, there are a number of other
factors that account for our success during the past six months. The following
factors that have substantially contributed to the success of the Fund:
1. We have endeavored to concentrate on financial stocks that are on the
cutting edge of new technology and establishing themselves as market leaders. We
have taken a strong interest in those companies that provide service both to the
banks and brokerages that are expanding over the Internet. Accordingly, we have
taken strong positions in Check Free Holdings, FundTech Ltd, as well as First
Data Corporation. These stocks have performed extremely well, and they will be
responsible to a great degree for providing entry into a checkless society.
Based upon my 33 years of banking experience, it is my opinion that by the year
2005, the vast majority of banking transactions will occur over the Internet.
With this in mind, we have a strong position in NetBank and have enjoyed nearly
a three fold increase during the last eight months. We have also taken strong
positions in the various online brokerage firms, particularly Ameritrade and E-
Trade Group. In view of the fact that these stocks have enjoyed tremendous
appreciation during the last six months, we have written in-the-money calls in
an effort to hedge our position and protect ourselves against sharp sell-offs.
It is of vital importance to develop a defensive strategy when investing in
these extremely volatile Internet related stocks.
<PAGE>
2. In view of the fact that the traditional brokerages have been greatly
oversold, with many selling at a 50-60% discount to their 52 week high, we have
added to our positions in Merrill Lynch, Paine Webber, and Bear Stearns. We feel
that the brokerages are substantially undervalued, as compared to the S&P 500
Index, and we believe there will be additional appreciation in this sector
throughout the balance of the year.
3. With the thrifts having fallen out of favor, we have greatly reduced
our position in both them and in the smaller banks and concentrated on the
regional banks and the large community banks. These stocks are presently selling
at approximately 13 times next year's earnings and providing a 3% dividend. We
enjoy strong positions is Banc One, PNC Bank, and North Fork Bancorporation.
All of the above have helped in restructuring the Fund. It is my opinion
that the financials, particularly the regional banks and brokerages, will
outperform the broader market throughout the balance of this year and in the
years to come. One feature of our Fund that we think makes it unique, is that we
are heavily invested in it ourselves. We participate in the Fund's gains and
losses along with our fellow investors.
We thank you for your trust and support in the Fund. We hope for our
continued success during the remainder of this year and in the years to come.
Very truly yours,
Gilbert R. Giordano
President
(1) The Fund's average annual total return for the one year period and from
inception on May 22, 1996 through March 31, 1999 were -6.26% and 24.78%,
respectively. Past performance is not a guarantee of future returns and
investors may have a gain or loss when they sell shares.
2
<PAGE>
TITAN FINANCIAL SERVICES FUND
Value of $10,000 vs S & P 500 Index
Average Annual Total Return
Period Ended April 30, 1999
1 Year.....................-0.15%
Since Inception (5/22/96)..28.03%
QTR FUND S&P 500
-------- ------ -------
5/22/96 10,000 10,000
6/30/96 9,950 9,903
9/30/96 10,763 10,213
12/31/96 11,913 11,068
3/31/97 12,285 11,362
6/30/97 14,407 13,341
9/30/97 16,910 14,342
12/31/97 18,532 14,759
3/31/98 20,084 16,816
6/30/98 19,725 17,361
9/30/98 14,593 15,639
12/31/98 16,841 18,976
3/31/99 18,827 19,914
4/30/99 20,676 19,541
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
S&P 500 is unmanaged and returns include reinvested dividends.
3
<PAGE>
TITAN FINANCIAL SERVICES FUND
SCHEDULE OF INVESTMENTS AT APRIL 30, 1999
- --------------------------------------------------------------------------------
Shares COMMON STOCKS: 103.1% Market Value
- --------------------------------------------------------------------------------
AIRLINES: 3.9%
2,000 AMR Corp.*............................................. $ 139,625
6,000 Continental Airlines, Inc., Class B*................... 259,125
8,500 UAL Corp. (a)*......................................... 686,375
2,000 US Airways Group, Inc.*................................ 108,875
-----------
1,194,000
-----------
AUCTION HOUSES: 0.5%
4,000 Sotheby's Holdings, Inc. (a)........................... 170,500
-----------
BANKS: 27.0%
2,000 American Pacific Bank, Class B*........................ 8,000
1,000 Argentina, Caja Postal y Banco Hipotecarlo de
Espene, SA............................................. 46,625
14,600 Banc One Corp.......................................... 861,400
6,500 Bancorp Connecticut, Inc............................... 108,875
11,400 BankAmerica Corp....................................... 820,800
2,200 Cathay Bancorp Inc..................................... 76,725
6,000 Community First Bankshares, Inc........................ 122,625
21,000 Comstock Bancorp*...................................... 236,250
14,000 Fidelity National Corp................................. 126,000
22,700 First Bank of Philadelphia*............................ 99,312
16,400 First Regional Bancorp*................................ 131,200
12,899 First Union Corp....................................... 714,282
4,000 Fleet Financial Group, Inc............................. 172,250
2,000 FNB Rochester Corp..................................... 70,000
7,755 Hudson United Bancorp.................................. 274,333
12,960 Imperial Bancorp*...................................... 249,480
4,000 ITLA Capital Corp.*.................................... 63,000
5,600 NMBT Corp.............................................. 88,200
2,300 National Bank of Canada................................ 36,562
12,777 New England Community Bancorp, Inc..................... 257,137
12,200 North Fork Bancorporation, Inc......................... 274,500
19,000 Patriot National Bank*................................. 156,750
1,000 Peoples Bank Corp...................................... 38,000
14,000 PNC Bank Corp.......................................... 810,250
3,500 Premier Bancshares, Inc................................ 68,687
9,100 Professional Bancorp, Inc.............................. 159,250
See accompanying Notes to Financial Statements.
4
<PAGE>
TITAN FINANCIAL SERVICES FUND
SCHEDULE OF INVESTMENTS AT APRIL 30, 1999, CONTINUED
- --------------------------------------------------------------------------------
Shares Market Value
- --------------------------------------------------------------------------------
BANKS, CONTINUED
5,400 Redwood Empire Bancorp................................. $ 129,600
19,935 Republic Security Financial Corp....................... 173,185
2,000 Royal Bank of Canada................................... 98,250
4,100 Sterling Bancorp....................................... 85,075
4,000 Summit Bancorp......................................... 169,500
2,000 Summit Bancshares, Inc................................. 40,000
2,600 Texas Regional Bancshares, Inc......................... 74,506
11,000 Toronto Dominion Bank.................................. 590,672
26,100 Union Bankshares Ltd.*................................. 274,050
7,000 USBANCORP, Inc......................................... 259,438
7,500 Wells Fargo & Company.................................. 323,906
1,000 Westernbank Puerto Rico................................ 14,750
-----------
8,303,425
-----------
BIOTECHNOLOGY: 0.2%
1,100 Monsanto Company....................................... 49,775
-----------
BROKERAGE SERVICES: 36.8%
16,000 Ameritrade Holding Corp., Class A (a)*................. 2,137,000
33,077 Bear Stearns Companies, Inc............................ 1,542,215
15,000 Donaldson, Lufkin & Jenrette, Inc. (a)................. 1,049,063
12,500 E*TRADE Group, Inc. (a)*............................... 1,443,750
5,000 Eastbrokers International Inc.*........................ 30,937
4,780 First Albany Companies, Inc............................ 72,895
11,000 Hambrecht & Quist Group*............................... 387,750
5,000 Internet Financial Services, Inc.*..................... 79,063
16,866 Legg Mason, Inc........................................ 588,202
19,500 Lehman Brothers Holdings, Inc.......................... 1,083,469
9,000 Merrill Lynch & Company, Inc........................... 755,438
7,000 Morgan Stanley Dean Witter & Company................... 694,313
5,000 National Discount Brokers Group, Inc. (a)*............. 285,312
25,850 Paine Webber Group, Inc................................ 1,213,334
-----------
11,362,741
-----------
See accompanying Notes to Financial Statements.
5
<PAGE>
TITAN FINANCIAL SERVICES FUND
SCHEDULE OF INVESTMENTS AT APRIL 30, 1999, CONTINUED
- --------------------------------------------------------------------------------
Shares Market Value
- --------------------------------------------------------------------------------
BUSINESS SERVICES: 2.3%
14,500 CheckFree Holdings Corp. (a)*.......................... $ 696,000
-----------
COLLECTIBLES: 0.8%
37,000 The Topps Company, Inc.*............................... 256,688
-----------
COMMERCIAL SERVICES: 0.3%
2,000 Data Broadcasting Corp.*............................... 33,000
2,400 StarTek, Inc.*......................................... 48,150
-----------
81,150
-----------
COMMUNICATIONS SERVICES: 0.4%
3,000 Sprint Corp. (PCS Group)*.............................. 127,125
-----------
COMPUTER NETWORKS: 0.7%
9,300 Novell, Inc.*.......................................... 206,925
-----------
COMPUTER SERVICES: 0.1%
3,000 Computer Horizons Corp. (a)*........................... 42,375
-----------
COMPUTER SOFTWARE: 0.3%
3,000 Oracle Corp.*.......................................... 81,188
-----------
COMPUTERS: 0.3%
4,500 Compaq Computer Corp................................... 100,406
-----------
DATA PROCESSING / MANAGEMENT: 3.1%
9,500 First Data Corp........................................ 403,156
11,250 Fundtech Ltd.*......................................... 385,312
12,000 InterCept Group, Inc.*................................. 168,000
-----------
956,468
-----------
FIBER OPTICS: 0.5%
6,000 CIENA Corp. (a)*....................................... 141,000
-----------
See accompanying Notes to Financial Statements.
6
<PAGE>
TITAN FINANCIAL SERVICES FUND
SCHEDULE OF INVESTMENTS AT APRIL 30, 1999, CONTINUED
- --------------------------------------------------------------------------------
Shares Market Value
- --------------------------------------------------------------------------------
FINANCIAL SERVICES: 3.5%
2,000 Allmerica Financial Corp............................... $ 114,625
9,000 Citigroup, Inc......................................... 677,250
6,000 Finet Holdings Corp.*.................................. 52,687
2,000 First Sierra Financial, Inc.*.......................... 49,750
5,700 KBK Capital Corp.*..................................... 33,488
1,000 Metris Companies, Inc.................................. 61,125
3,000 Resource America, Inc., Class A........................ 37,125
1,000 T. Rowe Price Associates, Inc.......................... 37,688
-----------
1,063,738
-----------
FOOD - BAKING: 0.1%
1,000 Flowers Industries, Inc................................ 21,250
-----------
HOTELS AND MOTELS: 0.4%
9,000 Prime Hospitality Corp.*............................... 109,688
-----------
INSURANCE: 1.8%
1,000 AFLAC Inc.............................................. 54,250
3,000 Conseco, Inc........................................... 94,688
7,000 First American Financial Corp.......................... 125,125
5,000 Franklin American Corp................................. 9,375
3,000 MBIA, Inc.............................................. 201,750
4,600 National Information Group............................. 55,200
2,000 Scottish Annuity & Life Holdings, Inc.*................ 19,625
-----------
560,013
-----------
INTERNET SOFTWARE: 4.1%
8,500 America Online, Inc. (a)*.............................. 1,213,375
1,000 PSINet, Inc. (a)*...................................... 50,500
-----------
1,263,875
-----------
LIGHTING PRODUCTS AND SYSTEMS: 0.1%
1,000 SLI, Inc.*............................................. 27,437
-----------
MEDICAL INSTRUMENTS: 0.3%
1,267 Medtronic, Inc. (a).................................... 91,145
-----------
See accompanying Notes to Financial Statements.
7
<PAGE>
TITAN FINANCIAL SERVICES FUND
SCHEDULE OF INVESTMENTS AT APRIL 30, 1999, CONTINUED
- --------------------------------------------------------------------------------
Shares Market Value
- --------------------------------------------------------------------------------
MEDICAL LASER SYSTEMS: 0.6%
11,000 Summit Technology, Inc.*............................... $ 191,812
-----------
OIL - US ROYALTY TRUSTS: 0.0%
25,900 Freeport-McMoRan Oil and Gas Royalty Trust*............ 12,950
-----------
RESTAURANTS: 1.5%
2,000 Lone Star Steakhouse & Saloon, Inc.*................... 21,750
12,250 Outback SteakHouse, Inc.*.............................. 438,703
-----------
460,453
-----------
RACETRACKS: 0.1%
2,000 Dover Downs Entertainment, Inc......................... 33,375
-----------
RETAIL: 0.6%
5,000 Egghead.com, Inc. (a)*................................. 70,000
4,000 Kmart Corp. (a)*....................................... 59,500
3,000 Office Depot, Inc.*.................................... 66,000
-----------
195,500
-----------
RETAIL - AUTO: 0.1%
3,000 AutoNation, Inc.*...................................... 42,938
-----------
STEEL PRODUCERS: 0.3%
10,000 Bethlehem Steel Corp.*................................. 91,250
-----------
TELECOMMUNICATIONS EQUIPMENT: 0.1%
1,000 Antec Corp.*........................................... 27,125
-----------
THRIFT AND SAVINGS / SAVINGS BANKS: 12.3%
21,388 Access Anytime Bancorp, Inc............................ 163,083
4,000 Alliance Bancorp of New England, Inc................... 42,250
3,000 Coastal Bancorp, Inc................................... 51,750
2,000 Dime Bancorp, Inc...................................... 46,125
3,500 Golden State Bancorp, Inc.*............................ 85,969
4,500 Haven Bancorp, Inc..................................... 60,469
See accompanying Notes to Financial Statements.
8
<PAGE>
TITAN FINANCIAL SERVICES FUND
SCHEDULE OF INVESTMENTS AT APRIL 30, 1999, CONTINUED
- --------------------------------------------------------------------------------
Shares Market Value
- --------------------------------------------------------------------------------
THRIFT AND SAVINGS / SAVINGS BANKS, CONTINUED
5,200 MetroWest Bank......................................... $ 30,225
12,500 NetB@nk Inc. (a)*...................................... 2,362,500
6,645 People's Bancshares, Inc............................... 141,206
7,000 People's Bank.......................................... 220,500
16,000 Sovereign Bancorp, Inc................................. 218,000
4,500 St. Francis Capital Corp............................... 96,187
3,000 Webster Financial Corp................................. 92,250
10,800 WSFS Financial Corp.................................... 168,750
-----------
3,779,264
-----------
Total Common Stocks (cost $22,211,440)................. 31,741,579
-----------
CLOSED-END FUNDS - DOMESTIC: 1.0%
- --------------------------------------------------------------------------------
8,200 Petroleum & Resources Corp............................. 294,175
-----------
Total Closed End Funds - Domestic
(cost $286,926)........................................ 294,175
-----------
LONG EQUITY OPTIONS: 0.6%
- --------------------------------------------------------------------------------
Contracts
Subject
to Call Common Stocks/Expiration Date/Exercise Price
- --------------------------------------------------------------------------------
20 Astoria Financial Corp. / Jul 40....................... 22,000
30 Coneseco, Inc. / May 30................................ 7,875
10 Doubleclick, Inc. / Jul 80 (a)......................... 64,375
20 Federated Department Stores / May 35................... 23,250
20 Fleet Financial Group, Inc. / Jul 35................... 17,000
20 Intel Corp. / May 55................................... 14,375
30 Raymond James Financial, Inc. / Aug 17.50.............. 14,812
30 Toronto Dominion Bank / Jul 50......................... 20,250
-----------
Total Long Equity Options (cost $214,911).............. 183,937
-----------
See accompanying Notes to Financial Statements.
9
<PAGE>
TITAN FINANCIAL SERVICES FUND
SCHEDULE OF INVESTMENTS AT APRIL 30, 1999, CONTINUED
- --------------------------------------------------------------------------------
Principal
Amount REPURCHASE AGREEMENT: 1.4% Market Value
- --------------------------------------------------------------------------------
$448,000 Firstar Bank Repurchase Agreement, 3.30%, dated 4/30/99,
due 5/3/99, collateralized by $448,356 GNMA, 5.50%,
due 5/20/2024 (market value $457,429) (cost $448,000).. $ 448,000
-----------
Total Investments in Securities (cost $23,161,277+):
106.1%................................................. 32,667,691
Liabilities in Excess of Other Assets: (6.1%).......... (1,877,053)
-----------
TOTAL NET ASSETS: 100.0%............................... $30,790,638
===========
* Non-income producing security.
(a) Security subject to call option.
+At April 30, 1999, the cost for Federal income tax purposes was $24,005,857.
Unrealized appreciation and depreciation of securities and call options written
were as follows:
Gross unrealized appreciation.......................... $ 9,302,680
Gross unrealized depreciation.......................... (1,420,408)
-----------
Net unrealized appreciation................... $ 7,882,272
===========
SCHEDULE OF CALL OPTIONS WRITTEN at April 30, 1999: (7.0)%
- --------------------------------------------------------------------------------
Contracts
Subject
to Call Common Stocks/Expiration Date/Exercise Price
- --------------------------------------------------------------------------------
10 America Online, Inc. / May 130........................... $ (19,750)
40 America Online, Inc. / May 150........................... (37,000)
10 America Online, Inc. / Jun 120........................... (31,750)
25 America Online, Inc. / June 130.......................... (63,750)
30 Ameritrade Holding Corp. / May 95........................ (120,000)
20 Ameritrade Holding Corp. / May 100....................... (72,000)
30 Ameritrade Holding Corp. / May 140....................... (38,250)
40 Ameritrade Holding Corp. / Aug 55........................ (323,000)
30 Ameritrade Holding Corp. / Aug 75........................ (67,500)
20 CheckFree Holdings Corp. / May 30........................ (35,000)
30 CheckFree Holdings Corp. / May 45........................ (19,500)
See accompanying Notes to Financial Statements.
10
<PAGE>
TITAN FINANCIAL SERVICES FUND
SCHEDULE OF CALL OPTIONS WRITTEN AT APRIL 30, 1999, CONTINUED
- --------------------------------------------------------------------------------
Contracts
Subject
to Call Common Stocks/Expiration Date/Exercise Price Market Value
- --------------------------------------------------------------------------------
50 CIENA Corp. / Jul 25................................... $ (12,500)
30 Computer Horizons / Jun 15............................. (3,187)
40 Donaldson, Lufkin, Jenrette, Inc. / Jul 70............. (43,500)
60 Donaldson, Lufkin, Jenrette, Inc. / May 60............. (72,750)
10 Doubleclick, Inc. / Jul 130............................ (32,375)
15 E*TRADE Group, Inc. / May 75........................... (61,688)
15 E*TRADE Group, Inc. / May 80........................... (54,750)
15 E*TRADE Group, Inc. / May 100.......................... (30,187)
20 E*TRADE Group, Inc. / Jun 100.......................... (52,500)
30 E*TRADE Group, Inc. / Jul 70........................... (152,625)
30 E*TRADE Group, Inc. / Jul 115.......................... (77,625)
30 Egghead.com, Inc. / Jun 22.50.......................... (1,313)
40 Kmart Corp. / Jun 17.50................................ (1,375)
10 Medtronic, Inc. / May 75............................... (1,625)
30 National Discount Brokers Group, Inc. / May 40......... (54,375)
20 National Discount Brokers Group, Inc. / May 90......... (1,750)
40 NetB@nk, Inc. / May 120................................ (270,500)
20 NetB@nk, Inc. / May 150................................ (90,250)
20 NetB@nk, Inc. / May 170................................ (65,000)
20 NetB@nk, Inc. / May 210................................ (34,750)
25 NetB@nk, Inc. / Jul 130................................ (187,188)
10 PSINet, Inc. / Jun 65.................................. (3,500)
20 Sotheby's Holdings, Inc., Class A / Jul 45............. (8,125)
20 UAL Corp. / Jun 80..................................... (11,750)
20 UAL Corp. / Jun 85..................................... (7,375)
-----------
Total Call Options Written (proceeds $1,380,501)....... $(2,160,063)
===========
See accompanying Notes to Financial Statements.
11
<PAGE>
TITAN FINANCIAL SERVICES FUND
STATEMENT OF ASSETS AND LIABILITIES AT APRIL 30, 1999
- --------------------------------------------------------------------------------
ASSETS
Investments in securities, at value (cost $23,161,277)...... $32,667,691
Cash........................................................ 38,231
Receivables:
Securities sold....................................... 1,172,318
Dividends and interest................................ 14,760
Fund shares sold...................................... 6,597
Prepaid expenses............................................ 22,232
-----------
Total assets.................................... 33,921,829
-----------
LIABILITIES
Options written, at value (proceeds $1,380,501)............. 2,160,063
Payables:
Advisory fees......................................... 25,103
Administration fee.................................... 5,020
Distribution fees..................................... 6,276
Securities purchased.................................. 884,804
Fund shares redeemed.................................. 5,856
Accrued expenses............................................ 44,069
-----------
Total liabilities............................... 3,131,191
-----------
NET ASSETS........................................................ $30,790,638
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($30,790,638/1,709,904 shares outstanding;
unlimited number of shares authorized without
par value)............................................ $ 18.01
===========
COMPONENTS OF NET ASSETS
Paid-in capital............................................. $24,900,798
Accumulated net realized loss on investment securities
and options................................................. (2,837,012)
Net unrealized appreciation on investment securities
and options................................................. 8,726,852
-----------
Net assets............................................ $30,790,638
===========
See accompanying Notes to Financial Statements.
12
<PAGE>
TITAN FINANCIAL SERVICES FUND
STATEMENT OF OPERATIONS - FOR THE YEAR ENDED APRIL 30, 1999
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Income
Dividends............................................. $ 381,677
Interest.............................................. 24,910
-----------
Total income.................................... 406,587
-----------
Expenses
Advisory fees......................................... 281,856
Distribution fees..................................... 70,464
Custody fees.......................................... 67,943
Administration fee.................................... 56,371
Transfer agent fees................................... 30,665
Fund accounting fees.................................. 26,635
Audit fee............................................. 11,683
Registration fees..................................... 8,025
Trustee fees.......................................... 7,464
Reports to shareholders............................... 6,729
Miscellaneous......................................... 5,033
Legal fees............................................ 4,954
Insurance............................................. 2,288
-----------
Total expenses.................................. 580,110
-----------
NET INVESTMENT LOSS....................... (173,523)
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
SECURITIES AND OPTIONS
Net realized loss from:
Security transactions........................... (1,049,507)
Option transactions............................. (1,720,630)
-----------
Net realized loss from security and option
transactions............................ (2,770,137)
Net change in unrealized appreciation on investment
securities and options.............................. 2,335,548
-----------
Net realized and unrealized loss on investment
securities and options........................ (434,589)
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS.............................. $ (608,112)
===========
See accompanying Notes to Financial Statements.
13
<PAGE>
TITAN FINANCIAL SERVICES FUND
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
- ---------------------------------------------------------------------------------------------------
Year Year
Ended Ended
April 30, 1999 April 30, 1998
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
(DECREASE) INCREASE IN NET ASSETS FROM:
OPERATIONS
Net investment loss............................................ $ (173,523) $ (109,724)
Net realized (loss) gain from security and option transactions. (2,770,137) 2,577,248
Net change in unrealized appreciation on investment
securities and options....................................... 2,335,548 5,740,855
----------- -----------
NET (DECREASE) INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ................................ (608,112) 8,208,379
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS
Net realized gain from security transactions................... (2,013,790) (975,314)
----------- -----------
CAPITAL SHARE TRANSACTIONS
Net increase in net assets derived from net change in
outstanding shares (a)...................................... 306,490 18,292,734
----------- -----------
TOTAL (DECREASE) INCREASE IN NET ASSETS..................... (2,315,412) 25,525,799
NET ASSETS
Beginning of year.............................................. 33,106,050 7,580,251
----------- -----------
END OF YEAR ...................................................... $30,790,638 $33,106,050
=========== ===========
</TABLE>
(a) A summary of capital shares transactions is as follows:
<TABLE>
<CAPTION>
Year Year
Ended Ended
April 30, 1999 April 30, 1998
- ------------------------------------------------------------------------------------------------
Shares Value Shares Value
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold...................... 270,436 $ 4,538,355 1,044,410 $17,567,019
Shares issued in reinvestment
of distribution............... 145,278 1,983,046 56,239 960,009
Shares redeemed.................. (394,340) (6,214,911) (13,754) (234,294)
----------- ----------- ----------- -----------
Net increase..................... 21,374 $ 306,490 1,086,895 $18,292,734
=========== =========== =========== ===========
</TABLE>
See accompanying Notes to Financial Statements.
14
<PAGE>
TITAN FINANCIAL SERVICES FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- ----------------------------------------------------------------------------------------------------------
Year Ended April 30, May 22, 1996*
---------------------------- through
1999 1998 April 30, 1997
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period...................... $ 19.61 $ 12.60 $ 10.00
Income from investment operations:
Net investment (loss) income........................ (0.10) (0.06) 0.04
Net realized and unrealized (loss) gain
on investments.................................... (0.31) 7.93 2.62
----------- ----------- -----------
Total from investment operations.......................... (0.41) 7.87 2.66
Less distributions:
From net investment income.......................... 0.00 0.00 (0.06)
From net capital gains.............................. (1.19) (0.86) 0.00
----------- ----------- -----------
Total distributions....................................... (1.19) (0.86) (0.06)
Net asset value, end of period............................ $ 18.01 $ 19.61 $ 12.60
=========== =========== ===========
Total return.............................................. (0.15)% 63.47% 26.67%
Ratios/supplemental data:
Net assets, end of period (millions)...................... $ 30.8 $ 33.1 $ 7.6
Ratio of expenses to average net assets:
Before expense reimbursement/recoupment............. 2.06% 2.10% 3.14%+
After expense reimbursement/recoupment.............. 2.06% 2.27% 2.49%+
Ratio of net investment (loss) income to average net assets:
Before expense reimbursement/recoupment............. (0.62)% (0.44)% (0.33)%+
After expense reimbursement/recoupment.............. (0.62)% (0.61)% 0.33%+
Portfolio turnover rate................................... 205.86% 107.12% 97.84%
</TABLE>
*Commencement of operations.
+Annualized.
See accompanying Notes to Financial Statements.
15
<PAGE>
TITAN FINANCIAL SERVICES FUND
NOTES TO FINANCIAL STATEMENTS AT APRIL 30, 1999
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NOTE 1 - ORGANIZATION
The Titan Financial Services 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 investment management company. The Fund began
operations on May 22, 1996. The primary investment objective of the Fund is
capital appreciation. The secondary objective is moderate income.
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 sales 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.
As of April 30, 1999, for Federal income tax purposes, the Fund had
$1,992,430 of capital loss carryovers, expiring April 30, 2007,
which may be applied against future net taxable realized gain of
each succeeding year until the earlier of its utilization or its
expiration.
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 basis. Dividend
income and distributions to shareholders are recorded on the
ex-dividend date.
D. OPTIONS CONTRACTS. The Fund may purchase a call option on securities
and indices. As the holder of a call option, the Fund would have the
right to purchase the underlying security at the exercise price at
any time until the expiration date. The Fund may enter into closing
sale transactions with respect to such options, exercise such
options or permit such options to expire. If an option expires on
the stipulated expiration date or if a Fund enters into a closing
sale transaction, a gain or loss is realized. If a Fund exercises a
call option, the cost of the security acquired is increased by the
premium paid for the call.
16
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TITAN FINANCIAL SERVICES FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
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The Fund may write (sell) call options on securities and indices.
When the Fund writes an option, an amount equal to the premium
received by the Fund is recorded as a liability and is subsequently
adjusted to the current fair value of the option written. Premiums
received from writing options that expire unexercised are treated by
the Fund on the expiration date as realized gains from investments.
The difference between the premium and the amount paid on effecting
a closing purchase transaction, including brokerage commissions, is
also treated as a realized gain, or if the premium is less than the
amount paid for the closing purchase transaction, as a realized
loss. If a call option is exercised, the premium is added to the
proceeds from the sale of the underlying security in determining
whether the Fund has realized a gain or loss. The Fund as writer of
an option bears the market risk of an unfavorable change in the
price of the security underlying the written option.
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.
NOTE 3 - COMMITMENTS AND OTHER RELATED PARTY TRANSACTIONS
For the year ended April 30, 1999, Titan Investment Advisors, LLC (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 year ended April 30, 1999, the Fund incurred $281,856 in Advisory fees.
Investment Company Administration, LLC (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 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 year ended April 30, 1999, the Fund incurred $56,371 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.
17
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TITAN FINANCIAL SERVICES FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
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NOTE 4 - DISTRIBUTION PLAN
The Fund has adopted a Distribution Plan (the "Plan") in accordance with
Rule 12b-1 under the 1940 Act. The Plan provides that the Fund will pay a fee to
the Advisor as Distribution Coordinator at an annual rate of up to 0.25% of the
average daily net assets of the Fund. The fee is paid to the Advisor as
reimbursement for, or in anticipation of, expenses incurred for
distribution-related activity. During the year ended April 30, 1999, the Fund
paid fees of $70,464 to the Advisor.
NOTE 5 - PURCHASES AND SALES OF SECURITIES
The cost of purchases and the proceeds from sales of securities, excluding
U.S. Government obligations and short-term investments, for the year ended April
30, 1999, were $57,355,411 and $59,336,590, respectively.
The activity in call options during the year ended April 30, 1999 is
summarized as follows:
Contracts Amount
--------- -----------
105 Options outstanding, beginning of year.......... $ 191,306
4,470 Options purchased............................... 3,833,322
(5,845) Options closed.................................. (4,869,779)
(110) Options exercised............................... (495,440)
635 Options expired................................. 175,001
-----------
(745) Options outstanding at April 30, 1999........... (1,165,590)
Unrealized appreciation at April 30, 1999....... (810,536)
-----------
Market value of options at April 30, 1999....... $(1,976,126)
===========
Average fair market value of options for
the year ended April 30, 1999................ $ (163,681)
===========
Net trading losses on options for the
year ended April 30, 1999..................... $(1,720,630)
===========
18
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REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
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TO THE SHAREHOLDERS OF
TITAN FINANCIAL SERVICES FUND and
THE BOARD OF TRUSTEES OF
PROFESSIONALLY MANAGED PORTFOLIOS
We have audited the accompanying statement of assets and liabilities of Titan
Financial Services Fund, a series of Professionally Managed Portfolios,
including the schedule of investments, as of April 30, 1999, and the related
statement of operations for the year then ended, the statement 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
May 22, 1996 (commencement of operations) to April 30, 1997. 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 audit.
We conducted our audit 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. Our
procedures included confirmation of securities owned as of April 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 audit provides 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 Titan
Financial Services Fund as of April 30, 1999, the results of its operations for
the year then ended, 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 May 22, 1996 (commencement of
operations) to April 30, 1997, in conformity with generally accepted accounting
principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
June 21, 1999
19
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ADVISOR
Titan Investment Advisors, LLC
9672 Pennsylvania Avenue
Upper Marlboro, MD 20772
888-44-TITAN
Account Inquiries 1-800-282-2340
DISTRIBUTOR
First Fund Distributors, Inc.
4455 E. Camelback Rd., Suite 261E
Phoenix, AZ 85018
CUSTODIAN
Firstar Bank, N.A.
425 Walnut St.
Cincinnati, OH 45202
SHAREHOLDER SERVICE AND TRANSFER AGENT
American Data Services, Inc.
P.O. Box 5536
Hauppauge, NY 11788-0132
INDEPENDENT AUDITORS
Tait, Weller & Baker
8 Penn Center Plaza, Suite 800
Philadelphia, PA 19103
COUNSEL TO THE TRUST
Paul, Hastings, Janofsky & Walker LLP
345 California Street, 29th Floor
San Francisco, CA 94104
This report is intended for 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.
