[US GLOBAL LEADERS GROWTH FUND LOGO]
ANNUAL REPORT
For the Year Ended
June 30, 2000
<PAGE>
[US GLOBAL LEADERS GROWTH FUND LOGO]
July 3, 2000
Dear Fellow Long Term Investor:
The following summarizes investment performance for our Fund including
comparisons with the S&P 500 Index:
INCEPTION
YEAR TO YEAR 9/30/95 TO
DATE ENDING 6/30/00
6/30/00 6/30/00 (ANNUALIZED)
------- ------- ------------
U.S. GLOBAL LEADERS GROWTH FUND 1.42% 2.81% 22.97%
U.S. GLOBAL LEADERS (AFTER-TAX) 1.42 2.81 22.88
S&P 500 Index -0.47 7.24 23.22
The market is less crazy than it was at the time of my last Letter to
Shareholders in early January. Indeed, it now appears that a significant
shakeout is underway among dot-com companies. Market participants are having
second thoughts about their previous tolerance of no-earnings-in-sight business
plans combined with out-of-sight stock valuations. However, some of the flow of
funds out of internet issues have migrated into the best of the technology
stories -- exacerbating their already la-la land valuations. Thus, some
significant imbalances in the stock market remain. There is a saying: "For every
complex problem there is a simple solution...and it is wrong!" Two gross
oversimplifications are currently distorting stock valuations and market
leadership: 1) buy the "new economy"; sell the "old economy," and 2) when the
Fed stops tightening, the whole market will come roaring back.
It is indisputable that a surge of technological innovation has been importantly
responsible for the strong and sustained economic expansion without inflation
that has been underway since 1990. What CAN be challenged is the prevalent
notion that being a fast growing provider of technological products and services
comes with a passport to high rates of sustainable EARNINGS growth. History
records otherwise. The flip side of rapid technological innovation and growth is
rapid technological obsolescence and decline. Only a tiny percentage of
technology enterprises have been able to sustain high profitability for a
meaningful length of time. And most of those were able to do so only while
2
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enjoying monopoly or near monopoly status. Microsoft was sold over a year ago
not because we had any inkling that they would be charged with abuse of their
monopoly position in personal computer software, but rather because we doubted
the company could achieve a similar monopoly over the internet. (The most
successful investors in technology have been adept buyers and sellers,
skillfully exploiting relatively short windows of opportunity. That style of
investing is quite different from our approach - building a core holding of
sustainable global growth franchises -- with tax efficiency as an important
byproduct of our approach for the taxable investor.)
While we dismiss as nonsense the concept that "technology is the ONLY place to
be for the future" and are even skeptical that at current valuation levels it is
generally an attractive place to be, we do spend a great deal of research effort
to ensure that technological trends are friends and not threats to our portfolio
companies. We take very seriously the fact that the internet has been
characterized as "Darwinism on Steroids." We are satisfied that at this juncture
neither the basic business plans of the portfolio companies are threatened nor
their growth rates undermined. Indeed, each of the current portfolio companies
is utilizing technological innovation (including use of the internet) to lower
their costs and/or to expand their sales reach. Thus far, we believe their
adoption of so-called new economy techniques has solidified or strengthened
their dominant positions in their respective global growth markets.
The second oversimplification dominating market thinking relates to the notion
that once the Federal Reserve stops tightening that the punch bowl will be
returned to the only real party that was taking place, and new levels of
intoxication will be reached. Don't believe it. The Fed will only stop
tightening when the economy slows. Of course, when the economy decelerates,
corporate profit growth in the aggregate also softens -- including the durable
goods sector where technology reigns supreme. The universe of companies that are
able to sustain superior growth in a slowing economy will inevitably shrink. And
if history repeats, we believe the shares of such companies, which comprise U.S.
Global Leaders Growth Fund, will regain their price premiums. Once again we can
reaffirm our belief that the portfolio companies collectively are likely to
maintain their earnings growth at close to 20 percent over the foreseeable
future. As providers of consumable goods and services that need to be replaced,
they are not dependent on a rapidly growing U.S. economy. Furthermore the
earnings growth for most of our "Global Leaders" is coming importantly from
their international operations where economic conditions are improving. We
believe being well-entrenched in Europe, Japan, Asia and Latin America -- which
are now in an upswing after two years or so of slack to severe business
conditions -- will be a boost rather than a drag. Also, the degree to which the
strong dollar has dented the sales and earnings of our multinational companies
should, at the very least, diminish and possibly become a positive. It is hardly
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a stretch to believe that strong positive earnings prospects for our "Global
Leaders" both on an absolute and relative basis, coupled with historically
attractive valuations, will translate once again into superior investment
performance.
I encourage you to periodically visit the Fund's internet website:
WWW.USGLOBALLEADERS.COM. The homepage for our site is a monthly update of the
Fact Sheet on the Fund, which shows current holdings, recent performance with
relevant comparisons and other important data. Also, shareholders can review
their account holdings and transaction information as well as the daily NAV
history of the Fund by selecting "View Shareholder Account Information" (the
last choice on the left side of the page). Passwords are not necessary to view
this information. However, the nine-digit shareholder account number (excluding
the "00" sub-account) must be provided as well as the last four digits of the
social security number or tax ID associated with the account.
It is said that successful investing, like success itself, is a journey, not a
destination. We are gratified that you have chosen to invest with U.S. Global
Leaders Growth Fund. We are committed to making it a safe and rewarding
experience.
Cordially,
/s/ George M. Yeager
George M. Yeager
"PATIENCE IS THE COMPANION OF WISDOM." St. Augustine
U.S. GLOBAL LEADERS GROWTH FUND
Value of $10,000 vs S&P 500 Index
Average Annual Total Return
Period Ended June 30, 2000
1 Year................................... 2.81%
Since Inception (9/29/95)................ 22.97%
U.S. Global Leaders S&P 500 Index
Growth Fund w/inc.
----------- ------
9/29/95 10,000 10,000
12/31/95 10,673 10,599
3/31/96 11,313 11,170
6/30/96 12,083 11,663
9/30/96 13,004 12,029
12/31/96 13,143 13,035
3/31/97 13,638 13,381
6/30/97 16,469 15,712
9/30/97 17,773 16,891
12/31/97 18,461 17,382
3/31/98 21,766 19,805
6/30/98 22,595 20,447
9/30/98 18,825 18,418
12/31/98 24,365 22,349
3/31/99 25,598 23,453
6/30/99 25,932 25,109
9/30/99 23,121 23,540
12/31/99 26,285 27,043
3/31/00 26,245 27,662
6/30/00 26,660 26,926
Past performance is not predictive of future performance.
The S&P 500 Index is a broad market-weighted average of U.S. blue-chip
companies. The index is unmanaged and returns include reinvested dividends.
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U.S. GLOBAL LEADERS GROWTH FUND
SCHEDULE OF INVESTMENTS AT JUNE 30, 2000
SHARES VALUE
--------------------------------------------------------------------------------
COMMON STOCKS: 98.1%
BEVERAGES: 5.1%
76,600 Coca-Cola Co. (The) ...................................... $ 4,399,712
------------
BUSINESS & INFORMATION SERVICES: 3.8%
62,200 Automatic Data Processing, Inc. .......................... 3,331,587
------------
ENTERTAINMENT & LODGING: 5.7%
137,400 Marriott International, Inc. - Class A ................... 4,954,987
------------
FINANCIAL SERVICES: 7.7%
20,000 American Express Co. ..................................... 1,042,500
53,050 State Street Corp. ....................................... 5,626,616
------------
6,669,116
------------
FOOD SERVICES: 11.3%
114,000 McDonald's Corp. ......................................... 3,754,875
159,360 Starbucks Corp.* ......................................... 6,085,560
------------
9,840,435
------------
FOODS: 3.0%
32,100 Wm. Wrigley, Jr. Co. ..................................... 2,574,019
------------
HEALTH PRODUCTS: 8.8%
59,100 Abbott Laboratories ...................................... 2,633,644
49,600 Johnson & Johnson ........................................ 5,053,000
------------
7,686,644
------------
HOUSEHOLD PRODUCTS: 3.1%
44,700 Colgate-Palmolive Co. .................................... 2,676,412
------------
INSURANCE: 4.9%
36,008 American International Group, Inc. ....................... 4,230,940
------------
MASS MERCHANDISING: 6.9%
104,313 Wal-Mart Stores, Inc. .................................... 6,011,037
------------
PHARMACEUTICALS: 13.6%
66,700 Merck & Co., Inc. ........................................ 5,110,888
140,100 Pfizer, Inc. ............................................. 6,724,800
------------
11,835,688
------------
SPECIALTY RETAILING: 16.1%
94,500 Home Depot, Inc. (The) ................................... 4,719,094
270,625 Staples Inc.* ............................................ 4,160,859
75,435 Tiffany & Company ........................................ 5,091,863
------------
13,971,816
------------
TECHNOLOGY PRODUCTS - DIRECT SALES & SERVICES: 4.3%
76,000 Dell Computer Corp.* ..................................... 3,747,750
------------
TOILETRIES: 3.8%
95,392 Gillette Company (The) ................................... 3,332,758
------------
TOTAL COMMON STOCKS (cost $54,411,250) 85,262,901
------------
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U.S. GLOBAL LEADERS GROWTH FUND
SCHEDULE OF INVESTMENT at June 30, 2000 (Continued)
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------------------------------------
REPURCHASE AGREEMENT: 3.2%
$2,782,000 Firstar Bank Repurchase Agreement, 4.25%, dated
06/30/2000, due 07/03/2000, [collaterized by
$2,837,552 FHLMC ARM, 6.311%, due 09/01/2029]
(value of proceeds $2,782,985) (cost $2,782,000) ...... $ 2,782,000
TOTAL INVESTMENTS IN SECURITIES
(cost $57,193,250+): 101.3% ................................... 88,044,901
Liabilities in excess of Other Assets: (1.3)% .................... (1,131,454)
-----------
NET ASSETS: 100.0% $86,913,447
===========
* Non-income producing security.
+ At June 30, 2000, the basis of investments for federal income tax purposes
was the same as their cost for financial reporting purposes. Unrealized
appreciation and depreciation were as follows:
Gross unrealized appreciation .......................... $31,174,795
Gross unrealized depreciation .......................... (323,144)
-----------
Net unrealized appreciation ............................ $30,851,651
===========
See accompanying Notes to Financial Statements.
6
<PAGE>
U.S. GLOBAL LEADERS GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES at June 30, 2000
ASSETS
Investments in securities, at value
(cost $57,193,250) ........................................... $88,044,901
Cash ........................................................... 103
Receivables:
Dividends and interest ....................................... 62,249
Fund shares sold ............................................. 28,000
Prepaid expenses ............................................... 8,526
-----------
Total assets ............................................. 88,143,779
-----------
LIABILITIES
Payables:
Securities purchased ......................................... 1,093,322
Due to advisor ............................................... 68,830
Fund shares redeemed ......................................... 30,231
Administration fees .......................................... 12,615
Accrued expenses ............................................... 25,334
-----------
Total liabilities ........................................ 1,230,332
-----------
NET ASSETS ....................................................... $86,913,447
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($86,913,447/3,296,079 shares outstanding; unlimited number
of shares authorized without par value)....................... $ 26.37
===========
COMPONENTS OF NET ASSETS
Paid-in capital ................................................ $61,278,908
Accumulated net realized loss on investments ................... (5,217,112)
Net unrealized appreciation on investments ..................... 30,851,651
-----------
Net assets ............................................... $86,913,447
===========
See accompanying Notes to Financial Statements.
7
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U.S. GLOBAL LEADERS GROWTH FUND
STATEMENT OF OPERATIONS For the Year Ended June 30, 2000
INVESTMENT INCOME
Income
Dividends ................................................... $ 1,054,617
Interest .................................................... 73,747
------------
Total income ............................................ 1,128,364
------------
Expenses
Advisory fees ............................................... 1,042,045
Administration fees ......................................... 164,270
Fund accounting fees ........................................ 34,646
Custody fees ................................................ 26,369
Transfer agent fees ......................................... 24,752
Audit fees .................................................. 17,206
Trustee fees ................................................ 15,883
Registration expense ........................................ 15,069
Reports to shareholders ..................................... 10,553
Miscellaneous ............................................... 5,259
Insurance expense ........................................... 4,608
Legal fees .................................................. 3,247
------------
Total expenses .......................................... 1,363,907
------------
NET INVESTMENT LOSS .................................. (235,543)
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on investments .............................. (3,128,940)
Net unrealized depreciation on investments .................... (11,006,573)
Net unrealized appreciation reclassified
on investments redeemed in-kind (Note 2) .................... 14,689,574
------------
Net realized and unrealized gain on investments ......... 554,061
------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS........................................... $ 318,518
============
See accompanying Notes to Financial Statements.
8
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U.S. GLOBAL LEADERS GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED
JUNE 30, 2000 JUNE 30, 1999
------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS
Net investment loss ...................... $ (235,543) $ (674,473)
Net realized loss on investments ......... (3,128,940) (1,563,910)
Net unrealized appreciation
(depreciation) on investments .......... (11,006,573) 16,808,184
Net unrealized appreciation
reclassified on investments
redeemed in-kind ....................... 14,689,574 --
------------- -------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ............ 318,518 14,569,801
------------- -------------
CAPITAL SHARE TRANSACTIONS
Net increase (decrease) in net assets
derived from net change in
outstanding shares (a) ................. (42,357,663) 24,966,391
------------- -------------
TOTAL INCREASE (DECREASE) IN
NET ASSETS ........................... (42,039,145) 39,536,192
NET ASSETS
Beginning of year ........................ 128,952,592 89,416,400
------------- -------------
END OF YEAR .............................. $ 86,913,447 $ 128,952,592
============= =============
(a) A summary of capital share transactions is as follows:
YEAR ENDED YEAR ENDED
JUNE 30, 2000 JUNE 30, 1999
---------------------------- ----------------------------
Shares Value Shares Value
------------ ------------ ------------ ------------
Shares sold 1,715,378 $ 42,449,422 1,580,614 $ 37,133,193
Shares redeemed (3,447,285) (84,807,085) (553,186) (12,166,802)
------------ ------------ ------------ ------------
Net increase
(decrease) (1,731,907) $(42,357,663) 1,027,428 $ 24,966,391
============ ============ ============ ============
See accompanying Notes to Financial Statements.
9
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U.S. GLOBAL LEADERS GROWTH FUND
FINANCIAL HIGHLIGHTS For a capital share throughout each period
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, SEPTEMBER 29, 1995*
----------------------------------------- THROUGH
2000 1999 1998 1997 JUNE 30, 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period .............. $ 25.65 $ 22.35 $ 16.29 $ 12.08 $ 10.00
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .................... (0.07) (0.13) (0.07) (0.04) 0.01
Net realized and unrealized gain
on investments ................................ 0.79 3.43 6.13 4.39 2.08
------- ------- ------- ------- -------
Total from investment operations ................ 0.72 3.30 6.06 4.35 2.09
------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
From net investment income ...................... -- -- -- -- (0.01)
From net realized gain .......................... -- -- -- (0.14) --
------- ------- ------- ------- -------
Total distributions ............................... -- -- -- (0.14) (0.01)
------- ------- ------- ------- -------
Net asset value, end of period .................... $ 26.37 $ 25.65 $ 22.35 $ 16.29 $ 12.08
======= ======= ======= ======= =======
Total return ...................................... 2.81% 14.77% 37.20% 36.29% 20.83%++
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (millions) ............ $ 86.9 $ 129.0 $ 89.4 $ 26.9 $ 9.0
RATIO OF EXPENSES TO AVERAGE NET ASSETS:
Before fees waived and
expenses absorbed ............................. 1.31% 1.31% 1.43% 1.87% 2.55%+
After fees waived and
expenses absorbed ............................. 1.31% 1.31% 1.42% 1.48% 1.48%+
RATIO OF NET INVESTMENT LOSS TO AVERAGE NET ASSETS:
Before fees waived and
expenses absorbed ............................. (0.23%) (0.66%) (0.67%) (0.79%) (1.08%)+
After fees waived and
expenses absorbed ............................. (0.23%) (0.66%) (0.66%) (0.39%) (0.01%)+
Portfolio turnover rate ......................... 24.91% 14.27% 4.02% 21.49% 4.91%++
</TABLE>
* Commencement of operations.
+ Annualized.
++ Not annualized.
See accompanying Notes to Financial Statements.
10
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U.S. GLOBAL LEADERS GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION
The U.S. Global Leaders Growth Fund (the "Fund") is a non-diversified
series of shares of beneficial interest of Professionally Managed Portfolios
(the "Trust") which is registered under the Investment Company Act of 1940 (the
"1940 Act") as an open-end management investment company. The Fund began
operations on September 29, 1995. The investment objective of the Fund is to
seek growth of capital. The Fund seeks to achieve its objective by investing in
sustainable growth companies with a global reach.
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 Nasdaq are valued at the last reported sale
price at the close of regular trading on each day that the exchanges
are open for trading; securities traded on an exchange or Nasdaq for
which there have been no sales and other over-the-counter securities
are valued at the last reported bid price. Securities for which
quotations are not readily available are valued at their respective
fair values as determined in good faith by the Board of Trustees.
Short-term investments are stated at cost which, when combined with
accrued interest, approximates market value.
B. FEDERAL INCOME TAXES. The Fund intends to comply with the requirements
of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its
shareholders. Therefore, no federal income tax provision is required.
C. SECURITY TRANSACTIONS, DIVIDEND INCOME AND DISTRIBUTIONS. Security
transactions are accounted for on the trade date. The cost of
securities sold is determined on an identified cost basis. Dividend
income and distributions to shareholders are recorded on the
ex-dividend date.
11
<PAGE>
U.S. GLOBAL LEADERS GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
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.
E. RECLASSIFICATION OF CAPITAL ACCOUNTS. The Fund accounts and reports
for distribution to shareholders in accordance with the American
Institute of Certified Public Accountant's Statement of Position 93-2:
DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF
INCOME, CAPITAL AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT
COMPANIES. For the year ended June 30, 2000, the Fund decreased
paid-in capital by $235,543 due to the Fund experiencing a net
investment loss during the year. In addition, the Fund distributed
securities with a market value of $23,948,109 and a cost of $9,258,535
to shareholders in in-kind redemptions during the year ended June 30,
2000. The net unrealized appreciation of $14,689,574 was reclassified
to paid-in capital. Net assets were not affected by these
reclassifications.
NOTE 3 - COMMITMENTS AND OTHER RELATED PARTY TRANSACTIONS
For the year ended June 30, 2000, Yeager, Wood & Marshall, Inc. (the
"Advisor") provided the Fund with investment management services under an
Investment Advisory Agreement. The Advisor furnished all investment advice,
office space, facilities and most of the personnel needed by the Fund. As
compensation for its services, the Advisor was entitled to a monthly fee at the
annual rate of 1.00% based upon the average daily net assets of the Fund. For
the year ended June 30, 2000, the Fund incurred $1,042,045 in advisory fees.
The Fund is responsible for its own operating expenses. However, the
Advisor has agreed to limit the Fund's total expenses to not more than 1.39% of
average daily net assets. 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 applicable
expense limitations then in effect. The Advisor has agreed not to seek
recoupment of the expenses waived for the Fund.
12
<PAGE>
U.S. GLOBAL LEADERS GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
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 accountants;
coordinates the preparation and payment of Fund expenses and reviews the Fund's
expense accruals. For its services, the Administrator receives a monthly fee at
the following annual rate:
Under $15 million $30,000
$15 to $50 million 0.20% of average daily net assets
$50 to $80 million 0.15% of average daily net assets
$80 to $100 million 0.10% of average daily net assets
Over $100 million 0.05% of average daily net assets
For the year ended June 30, 2000, the Fund incurred $164,270 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 proceeds from the sale of securities, excluding
short-term investments, for the year ended June 30, 2000, were $25,703,252 and
$69,175,389, respectively.
NOTE 5 - FEDERAL INCOME TAXES
As of June 30, 2000, the Fund had available for federal income tax purposes
$5,099,522 of unused capital loss carry forwards of which $524,262 will expire
in 2006, $1,563,910 will expire in 2007, and $3,011,350 will expire in 2008.
13
<PAGE>
U.S. GLOBAL LEADERS GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
NOTE 6 - REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements with government securities
dealers recognized by the Federal Reserve Board, with member banks of the
Federal Reserve System or with such other brokers or dealers that meet the
credit guidelines established by the Board of Trustees. The Fund will always
receive and maintain, as collateral, securities whose market value, including
accrued interest, will be at least equal to 102% of the dollar amount invested
by the Fund in each agreement, and the Fund will make payment for such
securities only upon physical delivery or upon evidence of book entry transfer
to the account of the custodian. To the extent that any repurchase transaction
exceeds one business day, the value of the collateral is marked-to-market on a
daily basis to ensure the adequacy of the collateral.
If the seller defaults and the value of the collateral declines, or if
bankruptcy proceedings are commenced with respect to the seller of the security,
realization of the collateral by the Fund may be delayed or limited.
14
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Shareholders of
U.S. Global Leaders Growth 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 U.S. Global Leaders Growth Fund (the "Fund")
(one of the portfolios constituting the series of Professionally Managed
Portfolios), as of June 30, 2000, and the related statement of operations for
the year then ended, 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
four years in the period then ended, and for the period from September 29, 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 auditing standards generally accepted
in the United States. 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, 2000 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 U.S.
Global Leaders Growth Fund as of June 30, 2000, 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 four
years in the period then ended, and for the period from September 29, 1995
(commencement of operations) through June 30, 1996, in conformity with
accounting principles generally accepted in the United States.
/s/ ERNST & YOUNG LLP
Los Angeles, California
July 31, 2000
15
<PAGE>
Advisor
YEAGER, WOOD & MARSHALL, INCORPORATED
630 Fifth Avenue
New York, New York 10111
(212) 765-5350
Distributor
FIRST FUND DISTRIBUTORS, INC.
4455 East Camelback Road, Suite 261E
Phoenix, Arizona 85018
Custodian
FIRSTAR INSTITUTIONAL CUSTODY SERVICES
425 Walnut Street
Cincinnati, Ohio 45202
Transfer and Dividend Disbursing Agent
AMERICAN DATA SERVICES, INC.
P.O. Box 5536
Hauppauge, New York 11788-0132
Auditors
ERNST & YOUNG LLP
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.
