THE
[LOGO] RCB
FUNDS
RCB GROWTH AND INCOME FUND
RCB SMALL CAP FUND
ANNUAL REPORT
JUNE 30, 1999
<PAGE>
RCB GROWTH AND INCOME FUND
Dear Fellow Shareholder:
We are pleased to report continued strong returns for the RCB Growth & Income
Fund, coming on the heels of the Fund's healthy start in 1998. Calculated at Net
Asset Value, the Fund returned 17.90% in the first half of 1999 compared to
12.37% for the S&P 500. Since inception on September 30, 1998, the Fund has
returned 38.55% (including dividend distributions) compared to 36.28% for the
S&P 500.
The first half of 1999 saw a "return to value", as the investing world
recognized that there were more than 20 stocks on the menu and that many of the
remaining companies had equally delicious prospects but demanded less of the
pocketbook. This broadening out of the market should continue, as the high
priced fare needs much more time for earnings to "catch up" (or prices to
decline), while perfectly fine, reasonably priced stocks continue to attract
investor attention and dollars. So while we strongly caution that it will be
difficult to reproduce the strong absolute returns of the first half, our
performance relative to that of our peers should prove to be satisfactory.
The change in the direction of the market has not prompted any major changes in
our fundamental, bottom-up stock selection process as we were never swept away
by the tidal wave of interest in this past market's "Nifty Twenty". Being
terminally un-trendy, we continue to carefully select the 25-35 stocks that we
feel have the greatest long-term potential, regardless of market trends. As the
Fund has grown, we have continued to identify great businesses which are
available at reasonable prices and have had no difficulty putting additional
deposits to work.
One of our best performers has been Comdisco, a major provider of equipment
leasing, network & asset management, and continuity services. Trading in the $11
- - $16 range earlier in the year, we conservatively calculate the value of the
core business at roughly $20 per share. The company also has two somewhat
"hidden" assets, each of which carries tremendous value. Its Prism subsidiary
offers communications services and has three publicly traded competitors (each
with arguably inferior business models). Comdisco plans a partial IPO of Prism
which, if valued similarly to its competitors, represents an additional $25 of
value. Management also plans a partial IPO and eventual spin-off to shareholders
of Comdisco Ventures, the other "hidden gem", with a potential value of $5 - $10
per share. While the company's plans may change or the IPO market may cool,
Comdisco offers exactly what we look for in a company -- healthy upside
potential along with a safety margin. Comdisco remains the Fund's largest
holding.
Other notable standouts among your Fund's holdings include Motorola, Hughes
Electronics (GM Class H), Corning, American Express and Enron, all of which have
risen more than 40% from their cost.
The only truly disappointing stock to date has been Albertson's (down 10%) which
faced an usually long and onerous regulatory process in completing its
acquisition of American Stores. With Federal and State approvals obtained and
the merger completed in late June, we anticipate great things for Albertson's as
the best management team in the grocery business transforms the acquired stores.
To date, turnover has been extremely low as the only sale has been AirTouch (for
a gain of 78%). Given our long time horizon, we strive to stay tax efficient by
keeping turnover low, however it will probably rise moderately from this low
initial pace. The Fund currently holds a moderate cash position of just over 5%.
<PAGE>
RCB GROWTH AND INCOME FUND
For the balance of 1999, the Fund is well positioned to prosper since the U.S.
economy is healthy, Asia continues to rebound, and the rest of the world marches
along. While we always keep our eyes open for the unexpected "shock" that
occasionally jolts the market, our price discipline provides a level of
protection which helps us, as fellow shareholders, sleep soundly every night.
Thank you for your continued confidence. We welcome your comments and can be
reached either by e-mail or telephone (toll-free: 877-478-4RCB.)
Sincerely,
/s/ Donn B. Conner /s/ Victor F. Hawley
Donn B. Conner, CFA Victor F. Hawley, CFA
Manager Co-Manager
[email protected] [email protected]
2
<PAGE>
RCB GROWTH AND INCOME FUND
Cumulative Total Return
Period Ended June 30, 1999
Since Inception (9/30/98)............33.70%
RCB Growth
and Income Fund S&P 500 w/inc Russell 1000 w/inc
--------------- ------------- ------------------
9/30/98 $10,000 $10,000 $10,000
11/30/98 $11,470 $11,472 $11,458
1/31/99 $11,791 $12,644 $12,622
3/31/99 $12,422 $12,734 $12,690
5/31/99 $13,223 $12,915 $12,317
6/30/99 $13,370 $13,633 $13,179
Past performance is not predictive of future performance. Performance figures
include the maximum applicable sales charge of 3.50%.
The S&P 500 is a broad market-weighted average of U. S. blue-chip companies. The
index is unmanaged and returns include reinvested dividends.
Russell 1000 Index measures the performance of the 1,000 largest companies in
the Russell 3000 Index, which comprises the 3,000 largest U. S. securities as
determined by total market capitalization.
3
<PAGE>
RCB GROWTH AND INCOME FUND
SCHEDULE OF INVESTMENTS AT JUNE 30, 1999
- --------------------------------------------------------------------------------
Shares COMMON STOCKS: 94.2% Value
- --------------------------------------------------------------------------------
AEROSPACE - DEFENSE: 3.1%
700 Raytheon Company, Class A.............................. $ 48,212
-----------
BANKS: 3.1%
800 Bank One Corp.......................................... 47,650
-----------
BASIC MATERIALS: 3.3%
900 Kimberly-Clark Corp.................................... 51,300
-----------
BEVERAGES: 5.3%
400 Anheuser-Busch Companies, Inc.......................... 28,375
1,400 PepsiCo, Inc........................................... 54,163
-----------
82,538
-----------
CHEMICALS: 3.5%
1,600 Sigma-Aldrich Corp..................................... 55,100
-----------
CONSUMER PRODCUTS: 12.0%
1,700 Consolidated Papers, Inc............................... 45,475
700 Eastman Kodak Company.................................. 47,425
1,200 Fortune Brands, Inc.................................... 49,650
2,000 Sara Lee Corp.......................................... 45,375
-----------
187,925
-----------
DATA PROCESSING: 3.6%
2,400 The Reynolds & Reynolds Company........................ 55,950
-----------
ELECTRONICS: 2.5%
700 General Motors Corporation - Class H*.................. 39,375
-----------
ENERGY SERVICES: 4.2%
800 Enron Corp............................................. 65,400
-----------
See accompanying Notes to Financial Statements.
4
<PAGE>
RCB GROWTH AND INCOME FUND
SCHEDULE OF INVESTMENTS AT JUNE 30, 1999, CONTINUED
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
FINANCE: 10.5%
300 American Express Company.............................. $ 39,037
1,700 Dun & Bradstreet Corp................................. 60,244
1,800 Equifax Inc........................................... 64,238
-----------
163,519
-----------
INSURANCE: 4.0%
900 The Chubb Corp........................................ 62,550
-----------
MEDIA & ENTERTAINMENT: 3.3%
700 Time Warner, Inc...................................... 51,450
-----------
MEDICAL INFORMATION: 4.4%
2,200 IMS Health Incorporated................................ 68,750
-----------
OIL COMPANY - INTEGRATED: 5.2%
700 Royal Dutch Petroleum Company ADR..................... 42,175
1,000 Unocal Corporation.................................... 39,625
-----------
81,800
-----------
PHARMACEUTICALS: 6.0%
1,000 Abbott Laboratories................................... 45,500
700 Warner-Lambert Company................................ 48,563
-----------
94,063
-----------
RESTAURANTS: 3.8%
1,100 TRICON Global Restaurants, Inc.*...................... 59,537
-----------
RETAIL - FOOD: 2.6%
800 Albertson's Inc....................................... 41,250
-----------
TECHNOLOGY SERVICES: 6.9%
3,000 Comdisco, Inc......................................... 76,875
1,500 Gartner Group, Inc.................................... 30,750
-----------
107,625
-----------
See accompanying Notes to Financial Statements.
5
<PAGE>
RCB GROWTH AND INCOME FUND
SCHEDULE OF INVESTMENTS AT JUNE 30, 1999, CONTINUED
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS - EQUIPMENT: 4.5%
1,000 Corning Inc........................................... $ 70,125
-----------
TELECOMMUNICATIONS: 2.4%
400 Motorola, Inc......................................... 37,900
-----------
Total Investments in Securities
(cost $1,242,818): 94.2%.............................. 1,472,019
Other Assets Less Liabilities: 5.8%................... 91,211
-----------
TOTAL NET ASSETS: 100.0%.............................. $ 1,563,230
===========
* Non-income producing security.
See accompanying Notes to Financial Statements.
6
<PAGE>
RCB GROWTH AND INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES AT JUNE 30, 1999
- --------------------------------------------------------------------------------
ASSETS
Investments in securities, at value (cost $1,242,818).......... $ 1,472,019
Cash........................................................... 23,220
Receivables:
Fund shares sold............................................. 180,814
Dividends.................................................... 1,482
Prepaid expenses and other assets.............................. 1,543
-----------
Total assets............................................... 1,679,078
-----------
LIABILITIES
Payables:
Administration fee........................................... 2,466
Advisory fees................................................ 666
Distribution fees............................................ 266
Securities purchased......................................... 91,518
Accrued expenses............................................... 20,932
-----------
Total liabilities.......................................... 115,848
-----------
NET ASSETS....................................................... $ 1,563,230
===========
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($1,563,230/112,996 shares outstanding; unlimited
number of shares authorized without par value)............... $ 13.83
===========
MAXIMUM OFFERING PRICE PER SHARE ($13.83/96.50%)............... $ 14.33
===========
COMPONENTS OF NET ASSETS
Paid-in capital................................................ $ 1,317,462
Undistributed net investment income............................ 990
Accumulated net realized gain on investments................... 15,577
Net unrealized appreciation on investments..................... 229,201
-----------
Net assets................................................... $ 1,563,230
===========
See accompanying Notes to Financial Statements.
7
<PAGE>
RCB GROWTH AND INCOME FUND
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM SEPTEMBER 30, 1998* THROUGH JUNE 30, 1999
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Income
Dividends (net of foreign taxes withheld of $155)............ $ 8,941
Interest..................................................... 819
-----------
Total income............................................... 9,760
-----------
Expenses
Administration fee........................................... 22,273
Audit fee.................................................... 11,826
Fund accounting fees......................................... 10,381
Transfer agent fees.......................................... 8,506
Registration fees............................................ 6,683
Custody fees................................................. 4,157
Advisory fees................................................ 3,702
Legal fees................................................... 2,528
Trustee fees................................................. 1,856
Reports to shareholders...................................... 1,781
Miscellaneous................................................ 1,647
Distribution fees............................................ 1,543
-----------
Total expenses............................................. 76,883
Less: expenses waived and reimbursed....................... (69,171)
-----------
Net expenses............................................... 7,712
-----------
NET INVESTMENT INCOME ..................................... 2,048
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from security transactions................... 15,577
Net unrealized appreciation on investments..................... 229,201
-----------
Net realized and unrealized gain on investments.............. 244,778
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS....... $ 246,826
===========
* Commencement of operations.
See accompanying Notes to Financial Statements.
8
<PAGE>
RCB GROWTH AND INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
September 30, 1998*
through
June 30, 1999
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM:
OPERATIONS
Net investment income....................................... $ 2,048
Net realized gain from security transactions................ 15,577
Net unrealized appreciation on investments.................. 229,201
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS...... 246,826
-----------
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income....................................... (1,058)
-----------
CAPITAL SHARE TRANSACTIONS
Net increase in net assets derived from net change
in outstanding shares (a)................................... 1,317,462
-----------
TOTAL INCREASE IN NET ASSETS.............................. 1,563,230
NET ASSETS
Beginning of period......................................... --
-----------
END OF PERIOD............................................... $ 1,563,230
===========
(a) A summary of capital share transactions is as follows:
September 30, 1998*
through
June 30, 1999
-------------------------
Shares Value
----------- -----------
Shares sold....................................... 114,638 $ 1,336,995
----------- -----------
Shares issued in reinvestment of distribution..... 88 987
----------- -----------
Shares redeemed................................... (1,730) (20,520)
----------- -----------
Net increase ..................................... 112,996 $ 1,317,462
=========== ===========
* Commencement of operations.
See accompanying Notes to Financial Statements.
9
<PAGE>
RCB GROWTH AND INCOME FUND
FINANCIAL HIGHLIGHTS
FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT THE PERIOD
- --------------------------------------------------------------------------------
September 30, 1998*
through
June 30, 1999
- --------------------------------------------------------------------------------
Net asset value, beginning of period.......................... $ 10.00
-----------
Income from investment operations:
Net investment income....................................... 0.03
Net realized and unrealized gain on investments............. 3.82
-----------
Total from investment operations.............................. 3.85
-----------
Less distributions:
From net investment income.................................. (0.02)
-----------
Net asset value, end of period................................ $ 13.83
===========
Total return.................................................. 38.55%**
Ratios/supplemental data:
Net assets, end of period (millions).......................... $ 1.6
Ratio of expenses to average net assets:
Before expenses waived and reimbursed....................... 12.32%+
After expenses waived and reimbursed........................ 1.25%+
Ratio of net investment income (loss) to average net assets:
Before expenses waived and reimbursed....................... (10.74)%+
After expenses waived and reimbursed........................ 0.33%+
Portfolio turnover rate....................................... 4.41%
* Commencement of operations.
** Not annualized.
+ Annualized.
See accompanying Notes to Financial Statements.
10
<PAGE>
RCB SMALL CAP FUND
Dear Fellow Shareholder:
In our first Annual Letter to Shareholders, we are extremely pleased to report
to you the results for the first six months of 1999 and the fiscal year-end.
Calculated at Net Asset Value, the Fund appreciated 24.94% for the first half of
1999 as compared with 9.29% for the Russell 2000. That brings the performance
for the partial fiscal year (since inception September 30, 1998) to 59.30% vs
27.11% for the Russell 2000.
It is particularly gratifying to present such strong results for two reasons.
First, we appreciate the support of our initial shareholders who understand the
underlying investment philosophy behind the Fund's approach and who, despite the
Fund's relative youth, realize that it is a strategy that has been honed over 40
years. Secondly, the Fund's portfolio managers have also invested a substantial
portion of their personal net worth in the Fund and share with you the fruits of
our labor.
We believe that the second quarter marked the end of the S&P 500 index fund
tyranny that has laid waste to many otherwise intelligently crafted investment
plans. The small cap, international and value sectors exploded during the last
three months. We sense that this change will be heralded as a wake-up bomb to
the herd followers that there indeed may be something of value in the other
8,000 or so publicly traded stocks that don't have the 50 largest market
capitalizations.
It is important for you to note that while our performance relative to other
small cap managers and indices has been terrific since inception, we have also
outperformed the S&P 500 during two of the past three quarters and just barely
missed in the other. In other words, we are making a strong argument that owning
shares of a small cap fund is an intelligent, wealth maximizing investment
strategy, not the exercise in relative value futility that has plagued the small
cap world over the past few years.
We believe strongly in maintaining investment focus and therefore strive to
limit the number of stocks in the portfolio. At June 30, they numbered 36. As a
result, our performance is much more a function of what we have chosen to own
than of the bigger macro trends, although we'll take all the help we can get
from some of the issues discussed above.
Our two cable holdings, UnitedGlobalCom (formerly United International Holdings)
and Jones Intercable led the way with strong performance both during the past
two quarters and since inception. We bought Jones in the low $20s, at the height
of the Asian crisis and when it was selling for the equivalent of $1,600 per
subscriber. Cable subscribers now are regularly purchased for an astounding
$4,000 per subscriber. We expect the remaining Jones shares to be purchased by
the majority holder, Comcast, within the year. At the risk of shortchanging
future shareholders, we regret to say it will be extraordinarily difficult to
repeat the success we have had with UnitedGlobalCom. Not to rehash old war
stories, we made this stock the largest position in the Fund at $9 per share
last fall and it is trading in the low $70s as we write this letter. Sharp-eyed
shareholders might remember that we felt "fair value" was somewhere in the $30s
in our last Fund letter. Fortunately, we were a tad conservative. Needless to
say, Wall Street was grossly undervaluing the company's non-US cable properties.
We spent much of the year scaling back our position and are content to hold
about 1.5% at current levels.
11
<PAGE>
RCB SMALL CAP FUND
Borg Warner Security was another strong performer as it announced that it had
been approached by a third party regarding acquisition of the company. Based
upon the recent acquisition price of its competitor, Pinkertons, we think fair
value is in the high $20s. On a similar note, building products wholesaler
Morgan Products is being acquired at $4 per share, which is a nice gain for the
Fund's shareholders, but represents a truly pathetic discount to our estimate of
fair market value. Unfortunately, the acquirer is Morgan's largest supplier and
is in a position to take away Morgan's upside from its public shareholders and
keep it for itself. We have seen this scenario unfold in a number of smaller cap
stocks recently and we can assure shareholders that we have and will continue to
loudly and publicly defend our rights to Boards of Trustees if we feel slighted.
Going forward, we believe there are still enormous opportunities in the small
cap sector. Our approach continues to seek solid businesses beset by some
short-term problem that has produced a stock price representing a significant
discount to our internally derived estimate of intrinsic fundamental value. We
then purchase the stock if there appears to be a catalyst for change that can
produce a material return for shareholders in the intermediate future. We are
finding clusters of such opportunities in niche industrially oriented companies
and the insurance industry, both of which are candidates for large bouts of
corporate consolidation.
Please feel free to look us up on our website: WWW.RCBINVEST.COM, where we
update our holdings and current thoughts on a monthly basis or to contact us
toll-free at 877-478-4RCB. We look forward to more good news to come. Thank you
again for your continuing confidence and support.
Sincerely,
/s/ Jeffrey Bronchick /s/ Thomas Kerr, CFA
Jeffrey Bronchick, CFA Thomas Kerr, CFA
Manager Co-Manager
[email protected] [email protected]
12
<PAGE>
RCB SMALL CAP FUND
Cumulative Total Return
Period Ended June 30, 1999
Since Inception (9/30/98)............53.72%
RCB Small Cap Fund S&P 500 w/inc Russell 2000 w/inc
------------------ ------------- ------------------
9/30/98 $10,000 $10,000 $10,000
11/30/98 $11,970 $11,472 $10,953
1/31/99 $13,580 $12,644 $11,785
3/31/99 $13,100 $12,734 $11,000
5/31/99 $15,000 $12,915 $11,990
6/30/99 $15,372 $13,633 $11,423
Past performance is not predictive of future performance. Performance figures
include the maximum applicable sales charge of 3.50%.
The S&P 500 is a broad market-weighted average of U. S. blue-chip companies. The
index is unmanaged and returns include reinvested dividends.
Russell 2000 Index is a widely regarded small-cap index of the 2,000 smallest
securities of the Russell 3000 Index, which comprises the 3,000 largest U. S.
securities as determined by total market capitalization.
13
<PAGE>
RCB SMALL CAP FUND
SCHEDULE OF INVESTMENTS AT JUNE 30, 1999
- --------------------------------------------------------------------------------
Shares COMMON STOCKS: 92.9% Value
- --------------------------------------------------------------------------------
ADVERTISING SERVICES: 3.1%
5,000 R.H. Donnelley Corp................................... $ 97,813
-----------
AEROSPACE/DEFENSE - EQUIPMENT: 3.1%
1,400 Sequa Corp.*.......................................... 98,000
-----------
AUTO PARTS & EQUIPMENT: 3.8%
4,400 Superior Industries International, Inc................ 120,175
-----------
BROADCAST SERVICES: 2.4%
1,100 UnitedGlobalCom*...................................... 74,387
-----------
CABLE: 1.6%
1,000 Jones Intercable, Inc. - Class A*..................... 49,000
-----------
COMMERCIAL SERVICES: 2.2%
2,400 Nielsen Media Research, Inc.*......................... 70,200
-----------
COMPUTER - INTEGRATED SYSTEMS: 1.2%
1,000 RadiSys Corp.*........................................ 38,875
-----------
COMPUTER SOFTWARE: 2.9%
11,000 Tripos Inc.*.......................................... 90,750
-----------
DATA PROCESSING: 8.7%
6,000 CCC Information Services Group Inc.*.................. 77,250
13,600 Information Resources, Inc.*.......................... 119,000
3,300 The Reynolds & Reynolds Company....................... 76,931
-----------
273,181
-----------
ELECTRIC PRODUCTS: 3.6%
4,500 UCAR International Inc.*............................. 113,625
-----------
See accompanying Notes to Financial Statements.
14
<PAGE>
RCB SMALL CAP FUND
SCHEDULE OF INVESTMENTS AT JUNE 30, 1999, CONTINUED
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
FINANCIAL SERVICES: 1.4%
4,000 Billing Concepts Corp.*............................... $ 44,750
-----------
INSURANCE: 15.0%
5,800 Horace Mann Educators Corp............................ 157,687
1,500 Millipore Corporation................................. 60,844
2,500 Philadelphia Consolidated Holdings Corp.*............. 61,250
3,800 The Guarantee Life Companies Inc...................... 95,475
700 White Mountains Insurance Group, Inc.................. 98,700
-----------
473,956
-----------
LINEN SUPPLY: 3.1%
5,600 Angelica Corp......................................... 98,700
-----------
MACHINERY - GENERAL: 5.1%
1,200 Franklin Electric Co., Inc............................ 78,000
2,500 IDEX Corporation...................................... 82,188
-----------
160,188
-----------
MANUFACTURING: 6.0%
3,500 AMETEK, Inc........................................... 80,500
10,000 Farr Company*......................................... 110,000
-----------
190,500
-----------
MARKET RESEARCH: 1.9%
2,000 ACNielsen Corp.*...................................... 60,500
-----------
MEDICAL: 0.6%
500 Dionex Corp.*......................................... 20,250
-----------
OFFICE SUPPLIES: 3.8%
4,000 American Business Products, Inc....................... 61,000
7,000 Hunt Corporation...................................... 57,750
-----------
118,750
-----------
See accompanying Notes to Financial Statements.
15
<PAGE>
RCB SMALL CAP FUND
SCHEDULE OF INVESTMENTS AT JUNE 30, 1999, CONTINUED
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
OIL-FIELD SERVICES: 5.4%
31,000 Gulf Canada Resources Limited*........................ $ 129,812
1,300 Hanover Compressor Company*........................... 41,762
-----------
171,574
-----------
RESTAURANT: 5.6%
5,000 IHOP Corp.*........................................... 120,313
3,200 VICORP Restaurants, Inc.*............................. 55,600
-----------
175,913
-----------
RETAIL: 3.4%
4,000 Whitehall Jewellers, Inc.*............................ 106,750
-----------
SECURITY SERVICES: 3.0%
4,700 Borg-Warner Security Corp............................. 95,469
-----------
TELEVISION: 4.1%
4,000 SBS Broadcasting SA (Luxenbarg)*...................... 129,000
-----------
WHOLESALE - FOOD: 1.9%
5,859 Smart & Final Inc..................................... 61,520
-----------
Total Common Stocks (cost $2,371,618)................. 2,933,826
-----------
PREFERRED STOCK: 1.1%
- --------------------------------------------------------------------------------
3,200 Philadelphia Consolidated Holdings Corp.
(cost $30,160)........................................ 33,400
-----------
Principal
Amount REPURCHASE AGREEMENTS: 8.1%
- --------------------------------------------------------------------------------
$255,000 Firstar Bank Repurchase Agreement, 3.30%, dated
6/30/1999, due 7/1/1999, collateralized by $260,034
GNMA, 5.50%, due 5/20/2024 (proceeds $255,024)
(cost $255,000)....................................... 255,000
-----------
Total Investments in Securities
(Cost $2,656,778): 102.1%............................. 3,222,226
Liabilities Less Other Assets: (2.1%)................. (66,196)
-----------
TOTAL NET ASSETS: 100.0%.............................. $ 3,156,030
===========
* Non-income producing security.
See accompanying Notes to Financial Statements.
16
<PAGE>
RCB SMALL CAP FUND
STATEMENT OF ASSETS AND LIABILITIES AT JUNE 30, 1999
- --------------------------------------------------------------------------------
ASSETS
Investments in securities, at value (cost $2,656,778).......... $ 3,222,226
Cash........................................................... 450
Receivables:
Securities sold.............................................. 52,973
Dividends and interest....................................... 1,826
Fund shares sold............................................. 183,385
Prepaid expenses and other assets.............................. 5,488
-----------
Total assets................................................. 3,466,348
-----------
LIABILITIES
Payables:
Administration fee........................................... 2,548
Advisory fees................................................ 1,851
Distribution fees............................................ 536
Securities purchased......................................... 283,609
Accrued expenses............................................... 21,774
-----------
Total liabilities............................................ 310,318
-----------
NET ASSETS ..................................................... $ 3,156,030
===========
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($3,156,030/198,108 shares outstanding; unlimited
number of shares authorized without par value)............... $ 15.93
===========
MAXIMUM OFFERING PRICE PER SHARE ($15.93/96.50%)............... $ 16.51
===========
COMPONENTS OF NET ASSETS
Paid-in capital................................................ $ 2,498,566
Accumulated net realized gain on investments................... 92,016
Net unrealized appreciation on investments..................... 565,448
-----------
Net assets................................................... $ 3,156,030
===========
See accompanying Notes to Financial Statements.
17
<PAGE>
RCB SMALL CAP FUND
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM SEPTEMBER 30, 1998* THROUGH JUNE 30, 1999
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Income
Dividends.................................................... $ 8,958
Interest..................................................... 3,587
-----------
Total income............................................... 12,545
-----------
Expenses
Administration fee........................................... 22,356
Audit fee.................................................... 11,870
Fund accounting fees......................................... 11,098
Advisory fees................................................ 9,180
Transfer agent fees.......................................... 8,351
Registration fees............................................ 6,708
Custody fees................................................. 4,172
Distribution fees............................................ 2,700
Legal fees................................................... 2,336
Miscellaneous................................................ 1,903
Reports to shareholders...................................... 1,880
Trustee fees................................................. 1,863
-----------
Total expenses............................................. 84,417
Less: expenses waived and reimbursed....................... (68,325)
-----------
Net expenses............................................... 16,092
-----------
NET INVESTMENT LOSS........................................ (3,547)
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from security transactions................... 95,563
Net unrealized appreciation on investments..................... 565,448
-----------
Net realized and unrealized gain on investments.............. 661,011
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS....... $ 657,464
===========
* Commencement of operations.
See accompanying Notes to Financial Statements.
18
<PAGE>
RCB SMALL CAP FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
September 30, 1998*
through
June 30, 1999
- --------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS
Net investment loss......................................... $ (3,547)
Net realized gain from security transactions................ 95,563
Net unrealized appreciation on investments.................. 565,448
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS...... 657,464
-----------
CAPITAL SHARE TRANSACTIONS
Net increase in net assets derived from net change
in outstanding shares (a)................................... 2,498,566
-----------
TOTAL INCREASE IN NET ASSETS.............................. 3,156,030
NET ASSETS
Beginning of period......................................... --
-----------
END OF PERIOD............................................... $ 3,156,030
===========
(a) A summary of capital share transactions is as follows:
September 30, 1998*
through
June 30, 1999
-------------------------
Shares Value
----------- -----------
Shares sold....................................... 198,111 $ 2,498,602
----------- -----------
Shares issued in reinvestment of distribution..... -- --
Shares redeemed................................... (3) (36)
----------- -----------
Net increase ..................................... 198,108 $ 2,498,566
=========== ===========
* Commencement of operations.
See accompanying Notes to Financial Statements.
19
<PAGE>
RCB SMALL CAP FUND
FINANCIAL HIGHLIGHTS
FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT THE PERIOD
- --------------------------------------------------------------------------------
September 30, 1998*
through
June 30, 1999
- --------------------------------------------------------------------------------
Net asset value, beginning of period.......................... $ 10.00
-----------
Income from investment operations:
Net investment loss..................................... (0.02)
Net realized and unrealized gain on investments......... 5.95
-----------
Total from investment operations.............................. 5.93
-----------
Net asset value, end of period................................ $ 15.93
===========
Total return.................................................. 59.30%**
Ratios/supplemental data:
Net assets, end of period (millions).......................... $ 3.2
Ratio of expenses to average net assets:
Before expenses waived and reimbursed................... 7.76%+
After expenses waived and reimbursed.................... 1.49%+
Ratio of net investment loss to average net assets:
Before expenses waived and reimbursed................... (6.60)%+
After expenses waived and reimbursed.................... (0.33)%+
Portfolio turnover rate....................................... 35.70%
* Commencement of operations.
** Not annualized.
+ Annualized.
See accompanying Notes to Financial Statements.
20
<PAGE>
RCB GROWTH AND INCOME FUND
RCB SMALL CAP FUND
NOTES TO FINANCIAL STATEMENTS AT JUNE 30, 1999
- --------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION
The RCB Growth and Income Fund and the RCB Small Cap Fund (the "Funds") are
each a 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 a diversified, open-end management investment
company. The Funds began operations on September 30, 1998. The investment
objectives of the Funds are capital appreciation with growth of income as a
secondary objective and capital appreciation, respectively.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Funds. 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 Funds intend to comply with the requirements
of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of their taxable income to their
shareholders. Therefore, no federal income tax provision is required.
C. SECURITIES 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. 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
Reed, Conner & Birdwell, Inc. (the "Advisor") provides the Funds with
investment management services under an Investment Advisory Agreement. The
Advisor furnished all investment advice, office space and certain administrative
services, and most of the personnel needed by the Funds. As compensation for its
services, the Advisor is entitled to a monthly fee at the annual rate of 0.60%
and 0.85% for the RCB Growth and Income Fund and the RCB Small Cap Fund,
respectively, based upon the average daily net assets of the Funds. For the
period ended June 30, 1999, the RCB Growth and Income Fund and the RCB Small Cap
Fund incurred $3,702 and $9,180 in advisory fees, respectively.
21
<PAGE>
RCB GROWTH AND INCOME FUND
RCB SMALL CAP FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
- --------------------------------------------------------------------------------
The Advisor has agreed to reduce fees payable to it by the Funds and
reimburse other expenses to the extent necessary to limit the Funds' aggregate
annual operating expenses, excluding brokerage commissions and other portfolio
transactions expenses, interest, taxes, capital expenditures and extraordinary
expenses, to 1.25% and 1.49% for the RCB Growth and Income Fund and the RCB
Small Cap Fund, respectively, of average daily net assets through June 30, 1999.
As a result, the Advisor has reimbursed the Funds for expenses in excess of the
limit in the amounts of $69,171 for the RCB Growth and Income Fund and $68,325
for the RCB Small Cap Fund, respectively.
Investment Company Administration, L.L.C. (the "Administrator") acts as the
Funds' Administrator under an Administration Agreement. The Administrator
prepares various federal and state regulatory filings, reports and returns for
the Funds; prepares reports and materials to be supplied to the trustees;
monitors the activities of the Funds' custodian, transfer agent and accountants;
coordinates the preparation and payment of Fund expenses and reviews the Funds'
expense accruals. For its services, the Administrator receives a monthly fee
from each Fund 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 $200 million 0.10% of average daily net assets
Over $200 million 0.05% of average daily net assets
For the period ended June 30, 1999, RCB Growth and Income Fund and RCB
Small Cap Fund incurred $22,273 and $22,356 in administration fees,
respectively.
First Fund Distributors, Inc. (the "Distributor") acts as the Funds'
principal underwriter in a continuous public offering of the Funds' 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.
NOTE 4 - DISTRIBUTION PLAN
The Funds have adopted a Distribution Plan (the "Plan") in accordance with
Rule 12b-1 under the 1940 Act. The Plan provides that the Funds 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 Funds. The fee is paid to the Advisor as
reimbursement for, or in anticipation of, expenses incurred for
distribution-related activity. For the period ended June 30, 1999, the RCB
Growth and Income Fund and the RCB Small Cap Fund paid fees of $1,543 and
$2,700, respectively, to the Advisor.
NOTE 5 - PURCHASES AND SALES OF SECURITIES
The cost of purchases and the proceeds from the sales of securities, other
than short-term investments, were $1,265,069 and $37,829, respectively, for the
RCB Growth and Income Fund and $2,838,231 and $532,016, respectively, for the
RCB Small Cap Fund.
22
<PAGE>
RCB GROWTH AND INCOME FUND
RCB SMALL CAP FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
- --------------------------------------------------------------------------------
NOTE 6 - SALES LOAD
The Advisor waived the sales load of 3.50% for the Funds from their
inception date through March 31, 1999.
NOTE 7 - TAX BASIS APPRECIATION
At June 30, 1999, the cost of securities for Federal tax purposes and the
gross unrealized appreciation and depreciation of securities were as follows:
RCB Growth and RCB Small
Income Fund Cap Fund
----------- -----------
Gross unrealized appreciation................. $ 238,987 $ 574,149
Gross unrealized depreciation................. (9,786) (23,112)
----------- -----------
Net unrealized appreciation................. $ 229,201 $ 551,037
=========== ===========
Cost for federal income tax purposes.......... $ 1,242,818 $ 2,671,189
=========== ===========
23
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
TO THE SHAREHOLDERS OF
RCB GROWTH AND INCOME FUND and RCB SMALL CAP FUND and
THE BOARD OF TRUSTEES OF
PROFESSIONALLY MANAGED PORTFOLIOS
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of RCB Growth and Income Fund and RCB
Small Cap Fund, each a series of Professionally Managed Portfolios, as of June
30, 1999, and the related statements of operations, of changes in net assets and
the financial highlights for the period then ended. These financial statements
and financial highlights are the responsibility of the Funds' 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. 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 positions of
RCB Growth and Income Fund and RCB Small Cap Fund as of June 30, 1999, the
results of their operations, the changes in their net assets and the financial
highlights for the period then ended, in conformity with generally accepted
accounting principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
August 6, 1999
24
<PAGE>
INVESTMENT ADVISOR
Reed, Conner & Birdwell, Inc.
11111 Santa Monica Blvd., Suite 1700
Los Angeles, CA 90025
(310) 478-4005
(888) 478-4RCB Toll-free
DISTRIBUTOR
First Fund Distributors, Inc.
4455 E. Camelback Rd., Suite 261-E
Phoenix, AZ 85018
CUSTODIAN
Firstar Institutional Custody Services
425 Walnut St.
Cincinnati, OH 45202
TRANSFER AND DIVIDEND DISBURSING AGENT
American Data Services, Inc.
P.O. Box 5536
Hauppauge, NY 11788-0132
(800) 282-2340
AUDITORS
Tait, Weller & Baker
8 Penn Center Plaza, Suite 800
Philadelphia, PA 19103
LEGAL COUNSEL
Paul, Hastings, Janofsky & Walker LLP
345 California Street
San Francisco, CA 94104
This report is intended for shareholders of the Funds 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.
