U. S. GLOBAL LEADERS GROWTH FUND LOGO
Semi-Annual Report
December 31, 1999
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U. S. GLOBAL LEADERS GROWTH FUND
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January 3, 2000
Dear Fellow Long-Term Investor:
The following summarizes investment performance for our Fund as compared to the
S&P 500 Index:
12 MONTHS INCEPTION 9/29/95
ENDED TO 12/31/99
12/31/99 (ANNUALIZED)
-------- ------------
U.S. GLOBAL LEADERS GROWTH FUND 7.88% 25.48%
U.S. GLOBAL LEADERS (AFTER-TAX) 7.88% 25.38%
S&P 500 Index 21.03% 26.33%
Market participants who have concentrated holdings in technology and
internet-related shares -- despite their extraordinary high valuations and/or
remote prospects for sustainable earnings growth -- are no doubt delighted with
their 1999 performance results. (Although "Thanks for the Memories" may well be
their consoling theme song sometime in this first year of the New Millennium.)
As to the overall market, Berkshire Hathaway's Warren Buffet, Vanguard's John
Bogle and Goldman Sach's Abby Cohen have recently weighed in with their
assessments that future annual gains for the S&P 500 Index should average 10
percent or less rather than the better than 20 percent rate enjoyed the past
five years. Those considering joining the stampede into index funds (or their
look-alikes) should ponder the under-recognized fact that the S&P's current
multiple is about 4 times what most market observers believe to be its
sustainable earnings growth rate. This relationship EXCEEDS the 3.5 times
multiple for the extremely overvalued large capitalization growth stocks back in
the 1970's Nifty Fifty period.
While disappointed in U.S. Global Leaders Growth Fund's relatively modest
absolute investment return last year and its significant relative
underperformance, we are greatly reassured by the EARNINGS performance and
prospects for the portfolio companies themselves. We are estimating that their
1999 earnings gain on a dollar-weighted basis will approximate 20 percent. This
year we believe the earnings gain should be over 20 percent as our "Global
Leaders" will get a boost from improving economic conditions in emerging markets
after two difficult years. In dramatically favorable contrast to the S&P, the
P/E multiple of "Global Leaders" on a dollar-weighted basis divided by its
sustainable earnings growth rate is only 1.5 times -- the most attractive
relationship in over forty years. That is an important reason U.S. Global
Leaders Growth Fund is regarded by many in the financial planning community as
an ideal alternative to the S&P 500 Index as a core holding in a long-term
financial plan. With both relative earnings and valuation so compellingly
attractive, we believe that shareholders can be confident their patience during
1999 will be rewarded. Of course, our charter shareholders have intact
annualized returns of over 25 percent, with nearly 100% tax efficiency.
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U. S. GLOBAL LEADERS GROWTH FUND
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Steve Leuthold, a leading investment strategist and market historian recently
observed that the surge in equity prices has been fueled primarily by Main
Street's enthusiasm. "The public doesn't know the rules" (i.e. sustainability of
earnings and valuation levels DO matter). "And if you don't know the rules, you
don't play the game that way. The more you know the rules the more you have
underperformed. But this too shall pass...but I don't know when!"
In 1968 the market became as grossly unbalanced as it is today. That period even
had a name: "Go-Go." Investors had prospered since 1960 as a result of the
dramatic advance in equity prices that accompanied the previous seven years of
non-inflationary economic growth without recession. Although the Vietnam War and
"The War on Poverty" were beginning to undermine the economic and monetary
fundamentals, market participants tried to keep the party going by downgrading
the quality of their investments in the quest for continued performance. It was
as tough and "unfun" then as it is today to resist the enormous pressures to
bend or abandon "the rules." Of course, those who succumbed, took a shellacking,
and those that remained disciplined, eventually benefited handsomely. As Mark
Twain said, "History doesn't always repeat itself, but it does have a habit of
rhyming."
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 and
other important data. Also, there are twelve additional web pages providing a
wealth of information. 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
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U. S. GLOBAL LEADERS GROWTH FUND
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SCHEDULE OF INVESTMENTS
AT DECEMBER 31, 1999 (UNAUDITED)
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Shares COMMON STOCKS: 98.5% Value
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BEVERAGES: 4.0%
81,700 The CocaCola Company.................................. $ 4,759,025
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BUSINESS & INFORMATION SERVICES: 4.5%
99,900 Automatic Data Processing............................. 5,382,113
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CONSUMER SERVICES: 3.4%
328,800 The ServiceMaster Company............................. 4,048,350
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ENTERTAINMENT & LODGING: 4.1%
155,600 Marriott International, Inc. Class A................. 4,911,125
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FINANCIAL SERVICES: 4.9%
79,300 State Street Corporation.............................. 5,793,856
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FOOD SERVICES: 9.7%
128,800 McDonald's Corporation................................ 5,192,250
262,200 Starbucks Corporation*................................ 6,358,350
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11,550,600
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FOODS: 2.5%
36,300 Wm. Wrigley, Jr. Company.............................. 3,010,631
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HEALTH PRODUCTS: 6.5%
102,400 Abbott Laboratories................................... 3,718,400
44,000 Johnson & Johnson..................................... 4,097,500
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7,815,900
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HOUSEHOLD PRODUCTS: 3.7%
68,000 ColgatePalmolive Company.............................. 4,420,000
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INSURANCE: 5.1%
56,943 American International Group, Inc..................... 6,156,962
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MASS MERCHANDISING: 7.7%
133,700 WalMart Stores, Inc................................... 9,242,012
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PHARMACEUTICALS: 9.0%
75,600 Merck & Co., Inc...................................... 5,069,925
176,400 Pfizer, Inc........................................... 5,721,975
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10,791,900
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See accompanying Notes to Financial Statements.
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U. S. GLOBAL LEADERS GROWTH FUND
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SCHEDULE OF INVESTMENTS
AT DECEMBER 31, 1999 (UNAUDITED), CONTINUED
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Shares Value
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SPECIALTY RETAIL: 25.6%
339,925 Staples, Inc.*........................................ $ 7,053,444
170,700 The Home Depot, Inc................................... 11,703,619
132,800 Tiffany & Co.......................................... 11,852,400
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30,609,463
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TOILETRIES: 2.7%
78,792 The Gillette Company.................................. 3,245,245
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TECHNOLOGY PRODUCTS DIRECT
SALES & SERVICES: 5.1%
120,400 Dell Computer Corporation*............................ 6,140,400
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Total Investment in Securities
(cost $73,767,528)+: 98.5%............................ 117,877,582
Other Assets less Liabilities: 1.5%................... 1,855,362
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TOTAL NET ASSETS: 100.0% ............................. $119,732,944
============
* Non-income producing security.
+ At December 31, 1999, the basis of investments for federal income tax
purposes was the same as their cost for financial reporting purposes. Gross
unrealized appreciation and depreciation were as follows:
Gross unrealized appreciation....................... $ 46,107,852
Gross unrealized depreciation....................... (1,997,798)
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Net unrealized appreciation................... $ 44,110,054
============
See accompanying Notes to Financial Statements.
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U. S. GLOBAL LEADERS GROWTH FUND
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STATEMENT OF ASSETS AND LIABILITIES
AT DECEMBER 31, 1999 (UNAUDITED)
ASSETS
Investment in securities,
at value (cost $73,767,528) ............................. $ 117,877,582
Receivables:
Securities sold ......................................... 3,266,434
Fund shares sold ........................................ 983,043
Dividends ............................................... 68,406
Prepaid expenses ........................................... 13,110
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Total assets ......................................... 122,208,575
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LIABILITIES
Payables:
Fund shares redeemed ...................................... 926,818
Funds advanced by custodian ............................... 1,422,556
Advisory fees ............................................. 100,827
Administration fee ........................................ 1,911
Accrued expenses ........................................... 23,519
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Total liabilities .................................... 2,475,631
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NET ASSETS .................................................. $ 119,732,944
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NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER SHARE ($119,732,944/4,605,536 shares
outstanding; unlimited number of shares
authorized without par value) .............................. $ 26.00
=============
COMPONENTS OF NET ASSETS
Paidin capital ............................................. $ 78,909,381
Undistributed net investment income ........................ 5,231
Accumulated net realized loss on investments ............... (3,291,722)
Net unrealized appreciation on investments ................. 44,110,054
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Net assets .............................................. $ 119,732,944
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See accompanying Notes to Financial Statements.
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U. S. GLOBAL LEADERS GROWTH FUND
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STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 (UNAUDITED)
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INVESTMENT INCOME
Income
Dividends ................................................. $ 731,135
Interest .................................................. 32,113
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Total income ........................................... 763,248
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Eenses
Advisory fees ............................................. 585,080
Administration fees ....................................... 87,068
Fund accounting fees ...................................... 20,338
Custody fees .............................................. 17,080
Registration fees ......................................... 10,081
Transfer agent fees ....................................... 9,307
Audit fees ................................................ 8,873
Trustee fees .............................................. 8,630
Reports to shareholders ................................... 6,138
Legal fees ................................................ 2,090
Insurance ................................................. 1,104
Miscellaneous ............................................. 2,228
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Total expenses ......................................... 758,017
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NET INVESTMENT INCOME ............................... 5,231
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REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net realized loss from investments ......................... (1,203,550)
Net change in unrealized appreciation
on investments ........................................... 2,251,830
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Net realized and unrealized gain on investments ......... 1,048,280
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NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ...................................... $ 1,053,511
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See accompanying Notes to Financial Statements.
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U. S. GLOBAL LEADERS GROWTH FUND
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STATEMENT OF CHANGES IN NET ASSETS
Six Months Year
Ended Ended
December 31, 1999# June 30, 1999
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INCREASE IN NET ASSETS FROM:
OPERATIONS
Net investment income (loss) ................ $ 5,231 $ (674,473)
Net realized loss from investments .......... (1,203,550) (1,563,910)
Net change in unrealized
appreciation on investments ................ 2,251,830 16,808,184
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NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS .............. 1,053,511 14,569,801
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CAPITAL SHARE TRANSACTIONS
Net increase (decrease) in net
assets derived from net change
in outstanding shares (a) .................. (10,273,159) 24,966,391
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TOTAL INCREASE (DECREASE) IN
NET ASSETS ............................. (9,219,648) 39,536,192
NET ASSETS
Beginning of period .......................... 128,952,592 89,416,400
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END OF PERIOD ................................ $ 119,732,944 $ 128,952,592
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(a) A summary of capital share transactions is as follows:
Six Months Ended Year Ended
December 31, 1999# June 30, 1999
Shares Value Shares Value
------ ----- ------ -----
Shares sold .......... 799,568 $ 19,320,575 1,580,614 $ 37,133,193
Shares
redeemed ........... (1,222,018) (29,593,734) (553,186) (12,166,802)
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Net increase
(decrease) ......... (422,450) $(10,273,159) 1,027,428 $ 24,966,391
========== ============ ========= ============
# Unaudited.
See accompanying Notes to Financial Statements.
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U. S. GLOBAL LEADERS GROWTH FUND
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FINANCIAL HIGHLIGHTS
FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Six Months Year Ended June 30, Sept. 29, 1995*
Ended ------------------------- through
Dec. 31, 1999# 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) ................... 0.00 (0.13) (0.07) (0.04) 0.01
Net realized and
unrealized gain
on investments .................. 0.35 3.43 6.13 4.39 2.08
------ ------ ------ ------ ------
Total from investment
operations ........................ 0.35 3.30 6.06 4.35 2.09
------ ------ ------ ------ ------
Less distributions:
From net investment
income ........................... 0.00 0.00 0.00 0.00 (0.01)
From net realized
gains ............................ 0.00 0.00 0.00 (0.14) 0.00
------ ------ ------ ------ ------
Total distributions ................ 0.00 0.00 0.00 (0.14) (0.01)
------ ------ ------ ------ ------
Net asset value,
end of period ..................... $26.00 $25.65 $22.35 $16.29 $12.08
====== ====== ====== ====== ======
Total return ....................... 1.36% 14.77% 37.20% 36.29% 20.83%
Ratios/supplemental data:
Net assets, end of
period (millions) ................ $119.7 $129.0 $ 89.4 $ 26.9 $ 9.0
Ratio of expenses to average
net assets:
Before expense waiver and
reimbursement .................... 1.30%+ 1.31% 1.43% 1.87% 2.55%+
After expense waiver and
reimbursement .................... 1.30%+ 1.31% 1.42% 1.48% 1.48%+
Ratio of net investment income
(loss) to average net assets:
Before expense waiver and
reimbursement .................... 0.01%+ (0.66)% (0.67)% (0.79)% (1.08)%+
After expense waiver and
reimbursement .................... 0.01%+ (0.66)% (0.66)% (0.39)% (0.01)%+
Portfolio turnover rate ............ 16.19% 14.27% 4.02% 21.49% 4.91%
</TABLE>
* Commencement of operations.
# Unaudited.
+ Annualized.
See accompanying Notes to Financial Statements.
9
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U. S. GLOBAL LEADERS GROWTH FUND
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NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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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 the last business day of the
reporting 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.
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.
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.
10
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U. S. GLOBAL LEADERS GROWTH FUND
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NOTES TO FINANCIAL STATEMENTS (UNAUDITED),
CONTINUED
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NOTE 3 - COMMITMENTS AND OTHER RELATED PARTY TRANSACTIONS
For the six months ended December 31,1999, 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 six months ended December 31, 1999, the Fund incurred $585,080 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 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. While under certain circumstances the
Advisor has the right to seek recoupment of expenses they have reimbursed to the
Fund, the Advisor has agreed not to seek recoupment of the expenses waived for
the Fund.
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 six months ended December 31, 1999, the Fund incurred $87,068 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.
11
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U. S. GLOBAL LEADERS GROWTH FUND
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NOTES TO FINANCIAL STATEMENTS (UNAUDITED),
CONTINUED
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Certain officers and trustees of the Trust are also officers and/or
directors of the Administrator and the Distributor.
NOTE 4 - PURCHASES AND SALES OF SECURITIES
The cost of purchases and the proceeds from the sale of securities for the
six months ended December 31, 1999, other than short-term investments, were
$18,867,037 and $30,220,866, respectively.
NOTE 5 - FEDERAL INCOME TAXES
As of December 31, 1999, the Fund had available for federal income tax
purposes $2,088,172 of unused capital loss carryforwards of which $524,262 will
expire in 2006 and $1,563,910 will expire in 2007.
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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.
