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TITAN FINANCIAL SERVICES FUND
SEMI-ANNUAL REPORT
OCTOBER 31, 1999
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TITAN INVESTMENT ADVISORS, LLC
Titan Financial Services Fund
9672 Pennsylvania Avenue * Upper Marlboro, Maryland 20772
Telephone: 888-448-4826
Gilbert R. Giordano, President
December 6, 1999
Dear Fellow Shareholder,
As of October 31, 1999, the Titan Financial Services Fund closed at a
price of $16.83. The Fund's performance through October 31, 1999 is as
follows(1):
Cumulative Return Since Inception 93.21%
Average Annual Return Since Inception 21.08%
12-Month Return 24.05%
I am pleased to report that as of October 31, the Titan Financial Services
Fund was up 14.72% year-to-date. This compares favorably with the S&P 500 Index
which was up 10.88% for the same period. It appears that our blend of
investments, both financial and non-financial, are an excellent balance. 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
25% allocation to 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.
As previously indicated, the financial services sector has been in such an
oversold situation, that a rally was imminent. In the second half of October, we
saw that rally. The financials, particularly the bank and brokerages, moved up
nearly 20% during the month of October, representing a very significant rally.
In November, we saw a pull-back in the financials and approximately one-third of
the advance was lost. We now feel that the balance of the rally in the
financials is imminent, particularly after the first of the year. We expect a
relief rally to occur in the early part of January and continue throughout the
first part of the year.
The reasons to invest in financial services remains in focus and more
relevant today than ever. I would like to review the salient reasons that
support that opinion.
1. Stocks, particularly small, regional banks and brokers are selling at a
45% discount to the S&P 500 (Bear Stearns and Lehman Bros. are selling at
slightly more than a 50% premium to book and 10 times next year's earnings.)
2. The repeal of the Glass-Stegal Act will accelerate consolidation
activity to possibly 2-3 times its historical annual average. The Y2K issue has
delayed the expansion of the financials, but after January 1, we expect to see
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a multiplicity of mergers, not only between banks and brokerages in the U.S.,
but also of European and Asiatic banks seeking to acquire American banks and
brokerages. A recent example of this is HSBC Holdings acquisition of Republic
Bank.
3. The trading volume on the NASDAQ and the S&P are at historical heights,
with the NASDAQ trading many days at 1.5 billion shares. We believe that the
brokerages will have their best quarter ever, with many of them exceeding
estimates by as much as 10%-20%. It is for this reason that we, again, have
increased our position in the brokerage sector.
All of the above point to strong growth in the financial sector. 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 next,
once the Y2K concern is behind us. 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 commenced operations on May 22 1996. The Fund's total return for
the one year period and average annual since inception on May 22, 1996 through
September 30, 1999 were 21.30% and 18.53%, respectively. Past performance is not
a guarantee of future results. Investment return and principal value will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than the original cost.
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TITAN FINANCIAL SERVICES FUND
SCHEDULE OF INVESTMENTS at October 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Shares COMMON STOCKS: 99.2% Value
- --------------------------------------------------------------------------------
Airlines: 0.5%
2,000 UAL Corp.*.............................................. $ 136,125
-----------
Banks: 30.7%
3,500 Amsouth Bancorporation.................................. 90,125
1,000 Argentaria, Caja Postal y Banco Hipotecarlo
de Espene, SA......................................... 44,625
18,100 Banc One Corp. (a)...................................... 679,881
5,000 Bank of New York Co., Inc............................... 209,375
11,000 Bank of Tokyo Mitsubishi, LTD........................... 181,500
7,000 BankAmerica Corp. (a)................................... 450,625
2,500 BB & T Corporation...................................... 90,937
2,200 Cathay Bancorp, Inc..................................... 84,425
2,000 CCB Financial Corp...................................... 92,350
3,000 Chase Manhattan Corp. (a)............................... 262,125
2,000 Comerica, Inc........................................... 118,875
14,000 Fidelity National Corporation........................... 111,125
16,400 First Regional Bancorp* ................................ 123,000
4,175 First Security Corp..................................... 106,984
6,000 First Tennessee National Corp........................... 204,000
5,500 First Union Corp........................................ 234,781
3,136 Firstar Corp............................................ 92,135
10,500 Fleet Boston Corp....................................... 458,062
2,000 Hibernia Corporation, Class A .......................... 27,975
10,255 Hudson United Bancorp................................. 322,392
11,960 Imperial Bancorp* ...................................... 296,757
1,500 ING Groep N.V........................................... 88,688
4,000 ITLA Capital Corp.*..................................... 60,500
500 J.P. Morgan & Co........................................ 65,437
7,500 Keycorp................................................. 209,531
2,300 National Bank of Canada................................. 28,068
3,000 National City Corp...................................... 88,500
12,777 New England Community Bancorp, Inc...................... 381,713
4,000 NMBT Corp............................................... 99,250
8,000 North Fork Bancorporation, Inc.......................... 165,500
19,000 Patriot National Bank*.................................. 209,000
See accompanying Notes to Financial Statements.
3
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TITAN FINANCIAL SERVICES FUND
SCHEDULE OF INVESTMENTS at October 31, 1999 (Unaudited), Continued
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
Banks, continued
1,000 Peoples Bank Corp....................................... $ 79,500
8,000 PNC Bank Corp........................................... 477,000
11,500 Professional Bancorp, Inc............................... 117,875
19,453 PSB Bancorp, Inc.*...................................... 104,565
5,400 Redwood Empire Bancorp.................................. 106,650
3,000 Southtrust Corp......................................... 120,000
6,000 Summit Bancorp.......................................... 207,750
2,000 Summit Bancshares, Inc.................................. 37,500
2,600 Texas Regional Bancshares, Inc.......................... 72,638
13,600 Toronto Dominion Bank................................... 313,650
1,000 Unibanco - Sponsored, Gdr............................... 23,125
24,100 Union Bankshares Ltd.*.................................. 394,638
3,000 Union Planters Corp..................................... 133,500
6,000 US BANCORP, Inc......................................... 222,375
8,500 Wells Fargo & Company (a)............................... 406,938
1,000 Westernbank Puerto Rico................................. 13,875
-----------
8,509,820
-----------
Brokerage Services: 30.7%
3,000 A.G. Edwards, Inc....................................... 90,187
18,100 Ameritrade Holding Corp., Class A (a)*.................. 294,125
27,577 Bear Stearns Companies, Inc. (a)........................ 1,175,470
2,000 Blackrock, Inc.*........................................ 29,165
1,000 Charles Schwab Corp..................................... 38,938
20,500 Donaldson, Lufkin & Jenrette, Inc. -DLJ (a)............. 1,060,875
4,000 Donaldson, Lufkin & Jenrette, Inc.-DLJ Direct*.......... 56,500
7,000 E*TRADE Group, Inc (a)*................................. 166,687
5,019 First Albany Companies, Inc............................. 80,304
500 Hambrecht & Quist Group (a)*............................ 24,687
1,500 HSBC Holdings, Plc...................................... 92,344
14,866 Legg Mason, Inc. (a).................................... 540,751
21,100 Lehman Brothers Holdings, Inc. (a)...................... 1,554,806
12,500 Merrill Lynch & Company, Inc.(a)........................ 981,250
9,300 Morgan Stanley Dean Witter & Company (a)................ 1,025,906
See accompanying Notes to Financial Statements.
4
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TITAN FINANCIAL SERVICES FUND
SCHEDULE OF INVESTMENTS at October 31, 1999 (Unaudited), Continued
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Shares Value
- --------------------------------------------------------------------------------
Brokerage Services, continued
3,000 National Discount Brokers Group, Inc.*.................. $ 71,812
28,950 Paine Webber Group, Inc. (a)............................ 1,179,713
1,000 T. Rowe Price, Inc...................................... 35,500
1,000 TD Waterhouse Group, Inc.*.............................. 12,688
-----------
8,511,708
-----------
Collectibles: 0.4%
12,000 The Topps Company, Inc.(a)*............................. 117,750
-----------
Computer Networks: 0.9%
13,300 Novell, Inc. (a)*....................................... 266,831
-----------
Computer Services: 0.3%
3,000 Axent Technologies, Inc.*............................... 44,438
1,500 Sanchez Computer Associates (a)*........................ 33,000
-----------
77,438
-----------
Computer Software: 2.0%
9,000 Oracle Corp. (a)*....................................... 428,063
3,000 Remedy Corporation (a)*................................. 129,000
-----------
557,063
-----------
Constuction: 0.5%
8,000 Toll Brothers, Inc.*.................................... 140,000
-----------
Data Processing/Management: 1.5%
7,500 First Data Corp. (a).................................... 342,656
4,250 Fundtech Ltd.*.......................................... 56,844
-----------
399,500
-----------
See accompanying Notes to Financial Statements.
5
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TITAN FINANCIAL SERVICES FUND
SCHEDULE OF INVESTMENTS at October 31, 1999 (Unaudited), Continued
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
Distribution/Wholesale: 0.8%
2,000 Advanced Marketing Services, Inc........................ $ 38,750
2,500 FDX Corporation (a)*.................................... 107,656
2,000 GATX Corpotation........................................ 66,375
-----------
212,781
-----------
Fiber Optics: 0.4%
3,000 CIENA Corp. (a)*........................................ 105,750
-----------
Financial Services: 7.0%
2,000 Allmerica Financial Corp................................ 114,375
4,000 Capital One Financial Corp.............................. 212,000
6,500 CheckFree Holdings Corp.*............................... 242,938
15,750 Citigroup, Inc. (a)..................................... 852,469
2,000 Enhance Financial Services Group, Inc................... 38,100
9,700 Fidelity National Financial, Inc........................ 152,169
3,000 First Sierra Financial, Inc.*........................... 44,250
1,500 Hartford Financial Services Group, Inc.................. 77,719
6,000 InterCept Group, Inc.*.................................. 89,250
3,000 New Century Financial Corporation*...................... 41,063
1,500 The FINOVA Group, Inc................................... 66,094
-----------
1,930,427
-----------
Insurance: 2.0%
5,000 Allstate Corp........................................... 143,750
1,000 Aetna, Inc.............................................. 50,250
6,082 First American Financial Corp........................... 90,090
5,000 Franklin American Corp.................................. 0
500 Hartford Life, Inc...................................... 26,125
2,000 Philadelphia Consolidated Holding Corp.*................ 29,000
2,000 Selective Insurance Group, Inc.......................... 37,625
4,000 Stewart Information Services Corp....................... 59,500
3,000 Travelers Property Casualty Corp........................ 108,000
-----------
544,340
-----------
See accompanying Notes to Financial Statements.
6
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TITAN FINANCIAL SERVICES FUND
SCHEDULE OF INVESTMENTS at October 31, 1999 (Unaudited), Continued
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
Medical - Drugs: 6.1%
5,000 Abbott Laboratories (a)................................. $ 201,875
8,000 Merck & Co., Inc. (a)................................... 636,500
15,000 Pfizer, Inc............................................. 592,500
1,000 Pharmacia & Upjohn, Inc................................. 53,937
11,000 Pharmacopeia, Inc.*..................................... 163,625
1,000 Schering-Plough Corporation............................. 49,500
-----------
1,697,937
-----------
Medical Instruments: 0.5%
4,010 Medtronic, Inc. ........................................ 138,846
-----------
Medical Laser Systems: 0.7%
5,400 LaserSight Incorporated*................................ 74,587
8,000 Summit Technology, Inc.*................................ 124,500
-----------
199,087
-----------
Medical - Biomedical/Gene: 3.2%
9,500 CryoLife, Inc.*......................................... 110,437
11,100 Eli Lilly & Co. (a)..................................... 764,513
-----------
874,950
-----------
Restaurants: 0.7%
3,000 IHOP Corp............................................... 54,187
6,250 Outback Steakhouse, Inc. (a)*........................... 143,750
-----------
197,937
-----------
Racetracks: 0.1%
2,000 Dover Downs Entertainment, Inc.......................... 31,750
-----------
Retail: 2.9%
4,000 BJ's Wholesale Club, Inc.*.............................. 123,250
1,000 Costco Wholesale Corp.*................................. 80,312
4,000 Home Depot, Inc......................................... 302,000
15,200 TCBY Enterprises, Inc................................... 63,650
4,000 Wal-Mart Stores, Inc.................................... 228,500
-----------
797,712
-----------
See accompanying Notes to Financial Statements.
7
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TITAN FINANCIAL SERVICES FUND
SCHEDULE OF INVESTMENTS at October 31, 1999 (Unaudited), Continued
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
Telecommunications Equipment and Services: 3.6%
1,000 Antec Corp.*............................................ $ 48,500
3,000 AT&T Corp............................................... 140,250
2,000 Global Crossing, Ltd.*.................................. 69,250
2,500 IDT Corporation*........................................ 57,187
500 Lucent Technologies, Inc................................ 32,125
8,000 Periphonics Corporation (a)* ........................... 303,000
5,000 Quest Communications International, Inc.*............... 180,000
2,000 Sprint Corp. (PCS Group) (a)*........................... 165,875
-----------
996,187
-----------
Thrift and Savings / Savings Banks: 3.7%
21,388 Access Anytime Bancorp, Inc.*........................... 171,104
3,000 Coastal Bancorp, Inc................................... 57,187
7,500 Golden State Bancorp, Inc.*............................. 156,562
4,500 Haven Bancorp, Inc...................................... 72,000
5,400 NetB@nk, Inc.*.......................................... 119,475
1,000 People's Bancshares, Inc................................ 17,925
6,000 People's Bank........................................... 151,875
3,000 Sovereign Bancorp, Inc.................................. 26,438
4,500 St. Francis Capital Corp................................ 101,250
10,800 WSFS Financial Corp..................................... 153,900
-----------
1,027,716
-----------
Total Common Stocks (cost $22,231,857).................. 27,471,655
-----------
See accompanying Notes to Financial Statements.
8
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TITAN FINANCIAL SERVICES FUND
SCHEDULE OF INVESTMENTS at October 31, 1999 (Unaudited), Continued
- --------------------------------------------------------------------------------
Principal
Amount REPURCHASE AGREEMENT: 1.8% Value
- --------------------------------------------------------------------------------
$492,000 Firstar Repurchase Agreement, 3.30%, dated 10/29/99,
due 11/1/99, collateralized by $432,756 GNMA, 6.50%,
due 7/15/2009 (proceeds $492,135) (cost $492,000)..... $ 492,000
-----------
Total Investments in Securities
(cost $22,723,857): 101.0%............................ 27,963,655
Liabilities in Excess of Other Assets: (1.0)%.......... (282,440)
-----------
Total Net Assets: 100.0%................................ $27,681,215
===========
* Non-income producing security.
(a) Security subject to call option.
+ At October 31, 1999, the basis of securities for federal income tax puposes
was the same as their cost for financial reporting purposes. Gross unrealized
appreciation and depreciation of securities were as follows:
Gross unrealized appreciation........................... $ 5,738,901
Gross unrealized depreciation........................... (499,103)
-----------
Net unrealized appreciation............................. $ 5,239,798
===========
See accompanying Notes to Financial Statements.
9
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TITAN FINANCIAL SERVICES FUND
SCHEDULE OF CALL OPTIONS WRITTEN at October 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Contracts
Subject
to Call Common Stocks/Expiration Date/Exercise Price Value
- --------------------------------------------------------------------------------
10 Abbott Laboratories/Nov 35.............................. $ (5,687)
40 Ameritrade Holding Corp-Class A/Nov 30.................. (750)
30 Ameritrade Holding Corp-Class A/Nov 31.63............... (562)
50 Ameritrade Holding Corp-Class A/Nov 40.................. (937)
30 Banc One Corp./Nov 40................................... (1,500)
30 Bank of America Corp./Jan 65............................ (11,897)
40 Bear Stearns Companies, Inc./Jan 45..................... (10,250)
30 Chase Manhattan Corp./Jan 90............................ (15,022)
20 CIENA Corp./Nov 45...................................... (437)
41 Citigroup, Inc./Jan 55.................................. (14,606)
30 Donaldson, Lufkin, Jenrette, Inc./Nov 40................ (35,625)
20 E*TRADE Group, Inc./Jan 30.............................. (3,750)
20 E*TRADE Group, Inc./Nov 25.............................. (2,375)
50 Eli Lilly & Co./Jan 70.................................. (23,750)
20 FDX Corporation/Jan 40.................................. (11,000)
20 First Data Corp./Feb 45................................. (9,375)
5 Hambrecht & Quist Group/Nov 45.......................... (2,344)
30 Legg Mason/Nov 30....................................... (19,500)
20 Lehman Brothers Holdings, Inc./Dec 80................... (6,917)
20 Lehman Brothers Holdings, Inc./Jan 80................... (9,667)
20 Merck & Co., Inc./Dec 75................................ (12,500)
50 Merck & Co., Inc./Dec 80................................ (15,625)
30 Merril Lynch & Co./Jan 80............................... (16,688)
40 Morgan Stanley Dean Witter & Co./Jan 90................. (94,000)
50 Novell, Inc./Dec 17.5................................... (19,687)
30 Oracle Corp./Jan 45..................................... (18,750)
60 Outback Steakhouse, Inc./Nov 30......................... (1,125)
20 Paine Webber Group, Inc./Nov 30......................... (21,750)
12 Periphonics Corp./Nov 35................................ (4,125)
20 Remedy Corp./Nov 30..................................... (26,250)
15 Sanchez Computer Associates/Nov 35...................... (281)
10 Sprint Corp. (PCS Group)/Nov 65......................... (18,250)
10 Sprint Corp. (PCS Group)/Nov 75......................... (8,813)
30 The Topps Company/Nov 7.5 .............................. (7,219)
30 Wells Fargo Company/Jan 50.............................. (6,647)
-----------
Total Call Options (proceeds $379,809).................. $ (457,661)
===========
See accompanying Notes to Financial Statements.
10
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TITAN FINANCIAL SERVICES FUND
STATEMENT OF ASSETS AND LIABILITIES at October 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
ASSETS
Investments in securities, at value (cost $22,723,857).......... $27,963,655
Cash............................................................ 646
Receivables:
Securities sold............................................. 1,427,274
Fund shares sold............................................ 91,124
Dividends and interest...................................... 19,348
Prepaid expenses................................................ 24,820
-----------
Total assets................................................ 29,526,867
-----------
LIABILITIES
Options written, at value (proceeds $379,809)................... 457,661
Payable:
Securities purchased........................................ 1,317,432
Advisory fees .................................................. 21,810
Distribution fees............................................... 5,453
Administration fees............................................. 597
Other accrued expenses.......................................... 42,699
-----------
Total liabilities........................................... 1,845,652
-----------
NET ASSETS........................................................ $27,681,215
===========
Net asset value, offering and redemption price per share
($27,681,215/1,644,453) shares outstanding; unlimited
number of shares authorized without par value).............. $ 16.83
===========
COMPONENTS OF NET ASSETS
Paid-in capital................................................. $23,804,022
Accumulated net investment loss................................. (148,529)
Accumulated net realized loss on investment securities
and options................................................... (1,136,224)
Net unrealized appreciation on investment securities
and options................................................... 5,161,946
-----------
Net assets.................................................. $27,681,215
===========
See accompanying Notes to Financial Statements.
11
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TITAN FINANCIAL SERVICES FUND
STATEMENT OF OPERATIONS - For the Six Months Ended October 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Income
Dividends................................................... $ 150,167
Interest.................................................... 3,788
-----------
Total income............................................ 153,955
-----------
Expenses
Advisory fees .............................................. 139,586
Distribution fees........................................... 34,896
Administration fees ........................................ 27,917
Custody fees................................................ 55,200
Transfer agent fees......................................... 12,197
Fund accounting fees........................................ 13,292
Audit fees.................................................. 7,297
Trustee fees................................................ 3,649
Reports to shareholders..................................... 2,606
Legal fees.................................................. 2,085
Miscellaneous............................................... 2,605
Insurance .................................................. 1,154
-----------
Total expenses.......................................... 302,484
-----------
Net investment loss ................................ (148,529)
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Realized gain from:
Security transactions....................................... 982,062
Option transactions......................................... 718,726
-----------
Net realized gain from security and options transactions 1,700,788
Net change in unrealized appreciation on investment securities
and options................................................... (3,564,906)
-----------
Net realized and unrealized loss on investment securities
and options............................................... (1,864,118)
-----------
Net decrease in net assets resulting from operations.. $(2,012,647)
===========
See accompanying Notes to Financial Statements.
12
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TITAN FINANCIAL SERVICES FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Six Months Ended Year Ended
October 31, 1999 # April 30, 1999
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS
Net investment loss............................................... $ (148,529) $ (173,523)
Net realized gain(loss) from security and option transactions 1,700,788 (2,770,137)
Net change in unrealized appreciation(depreciation) on investments (3,564,906) 2,335,548
----------- -----------
Net decrease in net assets resulting from operations .......... (2,012,647) (608,112)
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS
From net realized gain ........................................... -- (2,013,790)
----------- -----------
CAPITAL SHARE TRANSACTIONS
Net increase(decrease) in net assets derived
from net change in outstanding shares (a)..................... (1,096,776) 306,490
----------- -----------
Total decrease in net assets ................................ (3,109,423) (2,315,412)
NET ASSETS
Beginning of period............................................... 30,790,638 33,106,050
----------- -----------
End of period ................................................... $27,681,215 $30,790,638
=========== ===========
(a) A summary of capital share transactions is as follows:
Six Months Ended Year Ended
October 31, 1999# April 30, 1999
- -----------------------------------------------------------------------------------------------------
Shares Value Shares Value
- -----------------------------------------------------------------------------------------------------
Shares sold ...................................... 75,229 $ 1,253,628 270,436 $ 4,538,355
Shares issued in reinvestment of distributions -- -- 145,278 1,983,046
Shares redeemed................................... (140,680) (2,350,404) (394,340) (6,214,911)
- -----------------------------------------------------------------------------------------------------
Net increase (decrease)..................... (65,451) $(1,096,776) 21,374 $ 306,490
=====================================================================================================
</TABLE>
# Unaudited.
See accompanying Notes to Financial Statements.
13
<PAGE>
TITAN FINANCIAL SERVICES FUND
FINANCIAL HIGHLIGHTS
For a capital share outstanding throughout each period
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Six Months Year Ended April 30, May 22, 1996*
Ended -------------------- through
October 31, 1999# 1999 1998 April 30, 1997
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period......... $18.01 $19.61 $12.60 $10.00
------ ------ ------ ------
Income from investment operations:
Net investment income (loss)............. (0.09) (0.10) (0.06) 0.04
Net realized and unrealized gain (loss)
on investments......................... (1.09) (0.31) 7.93 2.62
------ ------ ------ ------
Total from investment operations............. (1.18) (0.41) 7.87 2.66
------ ------ ------ ------
Less distributions:
From net investment income............... -- -- -- (0.06)
From net realized gain................... -- (1.19) (0.86) --
------ ------ ------ ------
Total distributions.......................... -- (1.19) (0.86) (0.06)
------ ------ ------ ------
Net asset value, end of period............... $16.83 $18.01 $19.61 $12.60
====== ====== ====== ======
Total return................................. (6.55)% (0.15)% 63.47% 26.67%
Ratios/supplemental data:
Net assets, end of period (millions)......... $ 27.7 $ 30.8 $ 33.1 $ 7.6
Ratio of expenses to average net assets:
Before expense reimbursement/recoupment.. 2.17%+ 2.06% 2.10% 3.14%+
After expense reimbursement/recoupment... 2.17%+ 2.06% 2.27% 2.49%+
Ratio of net investment income (loss)
to average net assets:
Before expense reimbursement/recoupment.. (1.06)%+ (0.62)% (0.44)% (0.33)%+
After expense reimbursement/recoupment... (1.06)%+ (0.62)% (0.61)% 0.33%+
Portfolio turnover rate...................... 85.85% 205.86% 107.12% 97.84%
</TABLE>
* Commencement of operations.
+ Annualized.
# Unaudited.
See accompanying Notes to Financial Statements.
14
<PAGE>
TITAN FINANCIAL SERVICES FUND
NOTES TO FINANCIAL STATEMENTS (Unaudited)
- --------------------------------------------------------------------------------
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 Nasdaq 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, 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. OPTIONS CONTRACTS. The Fund may purchase call options on securities
and indices. As the holder of a call option, the Fund has 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 the Fund enters into a closing sale
transaction, a gain or loss is realized. If the Fund exercises a
call option, the cost of the security acquired is increased by the
premium paid for the call.
15
<PAGE>
TITAN FINANCIAL SERVICES FUND
NOTES TO FINANCIAL STATEMENTS (Unaudited), Continued
- --------------------------------------------------------------------------------
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 reflect the current fair value of the options 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 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 six months ended October 31, 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 six months ended October 31, 1999, the Fund incurred $139,586 in advisory
fees.
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 $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 six months ended October 31, 1999, the Fund incurred $27,917 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 Distributor.
16
<PAGE>
TITAN FINANCIAL SERVICES FUND
NOTES TO FINANCIAL STATEMENTS (Unaudited), Continued
- --------------------------------------------------------------------------------
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 six months ended October 31, 1999, the
Fund paid fees of $34,896 to the Advisor.
NOTE 5 - PURCHASES AND SALES OF SECURITIES
The cost of purchases and the proceeds from sales of securities, excluding
short-term investments, for the six months ended October 31, 1999, were
$24,309,898 and $25,577,070, respectively.
The activity in call option transactions during the six months ended
October 31, 1999 are summarized as as follows:
Contracts
Written Amount
- --------- -----------
(745) Options outstanding, beginning of period............. $(1,165,590)
3,274 Options purchased.................................... 2,570,289
(4,613) Options written...................................... (2,614,707)
(385) Options closed....................................... (377,474)
50 Options exercised.................................... 55,875
1,436 Options expiring..................................... 1,151,798
-----------
(983) Options outstanding at October 31, 1999.............. (379,809)
Unrealized depreciation at October 31, 1999.......... (77,852)
-----------
Value of options at October 31, 1999................. $ (457,661)
===========
Average fair market value of options for the
six months ended October 31, 1999.................. $ (380,235)
===========
Net trading losses on options for the
six months ended October 31, 1999.................. $ (606,230)
===========
17
<PAGE>
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 Institutional Custody Services
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.
