THE LEONETTI FUNDS
[THE LEONETTI FUNDS LOGO]
LEONETTI BALANCED FUND
LEONETTI GROWTH FUND
SEMI-ANNUAL REPORT
DECEMBER 31, 1999
<PAGE>
January, 2000
Dear Shareholder:
The Leonetti Balanced Fund enjoyed another outstanding year, gaining 26.02
percent. This compared to the Fund's benchmark, the Lipper Balanced Fund Index,
which had a return of 8.98 percent.* 1999 was the third consecutive year that
the Fund's return has exceeded 20 percent. These results permitted the Leonetti
Balanced Fund throughout 1999 to be consistently included in lists of the best
performing Balanced Mutual Funds for its year to date, twelve month and three
year performance as printed in various financial newspapers and magazines during
the year. Assets of the Fund grew to more than $28 million.
The 1999 stock market rally was unusual in that just a small group of stocks led
the way. According to Dorsey, Wright and Associates, 66 percent of all New York
Stock Exchange stocks were down for the year, while the Standard & Poor's 500
stocks did not fare much better with only 48 percent higher for the year. Even
on the Nasdaq, which enjoyed outsized gains in 1999, only 45 percent of the
stocks were up for the year. These results indicate how important stock
selection was in 1999.
Your Fund had great success with its technology holdings in 1999. Holdings such
as Cisco Systems, EMC Corp., Oracle Corp. and Sun Microsystems all had triple
digit returns during 1999. The Fund's retail holdings of Home Depot and Wal-Mart
were strong, while the telecommunications sector and the media group also
performed very well.
The Leonetti Balanced Fund's ten largest stock holdings as of December 31, 1999
were, in order - EMC Corp., Cisco Systems, Sun Microsystems, General Electric,
Lucent Technologies, America Online, Oracle Corp., Tribune Cos., IBM Corp. and
Alcoa.
The Fund's fixed-income portfolio stayed with very short-term maturities during
the year and only invested in the U.S. Government Treasury market. This prudent
stance proved to be very positive as bonds suffered one of their worst years in
recent history.
Our outlook for the year 2000 remains positive for stocks. The new year should
provide many opportunities for the financial markets. We welcome the many new
fundholders to the Leonetti Balanced Fund and thank the existing fundholders for
their continued confidence.
Cordially,
LEONETTI & ASSOCIATES
* The Fund's average annual total return from inception on August 1, 1995
through December 31, 1999 was 19.53%. Past performance does not guarantee future
results. Share value and returns fluctuate and you may have a gain or loss when
you sell your shares. Performance results for Leonetti Balanced Fund and the
Lipper Balanced Index include reinvested dividends, interest and other earnings.
<PAGE>
January, 2000
Dear Shareholder:
Welcome to our newest Fund, the Leonetti Growth Fund. Your Fund came out of the
gate with a bang and in its short four-month life gained 26.00 percent. This
compared to the 23.42 percent return that the Lipper Large-Cap Growth Index
achieved and the Standard & Poor's 500 total return of 10.88 percent for the
same period.*
The Leonetti Growth Fund's portfolio reaches into many sectors and market niches
with its two-part strategy of growth and value. The first part is the growth
objective of buying companies that are exhibiting growth now and in the future.
The second part is the out-of-favor value objective, where we measure a
company's business potential through our fundamental focus. Utilizing the
different investing styles lets your fund participate in different types of
market leadership. In the current market, our large capitalization exposure has
been emphasizing the growth style of investing.
As of December 31, 1999, your Fund's ten largest holdings in order were -
Univision, Cisco Systems, General Electric, Doubleclick, Lucent Technologies,
Wal-Mart, Solectron, Nokia, Harley-Davidson and Amgen.
The early success achieved in the beginning of your Fund's life has been
exciting. The new year should be filled with opportunity and potential for the
financial markets. Once again, welcome to the Leonetti Growth Fund.
Cordially,
LEONETTI & ASSOCIATES, INC.
* The Fund commenced operations on September 1, 1999. Past performance does not
guarantee future results. Share value and returns fluctuate and you may have a
gain or loss when you sell your shares. Performance results for Leonetti Growth
Fund, Lipper Large-Cap Growth Index and Standard & Poor's 500 Index include
reinvested dividends, interest and other earnings.
2
<PAGE>
LEONETTI BALANCED FUND
Value of $10,000 vs Wilshire 5000+Salomon+US Treasury and Lipper Balanced Index
Average Annual Total Return
Period Ended December 31, 1999
1 Year............................. 26.02%
3 Year............................. 24.76%
Since Inception (8/1/95)........... 19.53%
Wilshire
5000+Salomon+US Lip.
Date Fund Treasury Balanced
---- ---- -------- --------
08/01/95 $ 10,000 $ 10,000 $ 10,000
09/30/95 $ 9,940 $ 10,375 $ 10,354
12/31/95 $ 10,605 $ 10,842 $ 10,817
03/31/96 $ 10,936 $ 11,187 $ 11,059
06/30/96 $ 10,846 $ 11,535 $ 11,283
09/30/96 $ 10,856 $ 11,821 $ 11,579
12/31/96 $ 11,330 $ 12,456 $ 12,224
03/31/97 $ 11,218 $ 12,509 $ 12,277
06/30/97 $ 12,464 $ 13,994 $ 13,586
09/30/97 $ 13,709 $ 15,030 $ 14,465
12/31/97 $ 13,691 $ 15,342 $ 14,675
03/31/98 $ 14,993 $ 16,736 $ 15,834
06/30/98 $ 15,468 $ 17,085 $ 16,111
09/30/98 $ 14,387 $ 16,014 $ 15,183
12/31/98 $ 17,459 $ 18,222 $ 16,930
03/31/99 $ 18,506 $ 18,628 $ 17,201
06/30/99 $ 19,224 $ 19,552 $ 17,974
09/30/99 $ 19,212 $ 18,760 $ 17,229
12/31/99 $ 22,002 $ 20,967 $ 18,449
Past performance is not predictive of future performance.
The Lipper Balanced Index is an equally weighted performance index, of the
largest qualifying funds in the Lipper category. The Wilshire 5000 + Salomon +
US Treasury Index is a blend of the Wilshire 5000 Equity Index (65%), the
Salomon Broad Investment Grade Bond Index (25%) and the 90-day U.S. Government
Treasury Bill (10%). The Wilshire 5000 measures the performance of all equity
securities issued by companies with headquarters in the U.S. The Salomon Broad
Bond Index consists of U.S. Treasury and Government-sponsored agency bonds with
a maturity of one year or longer. The indices are unmanaged and returns include
reinvested dividends.
3
<PAGE>
LEONETTI GROWTH FUND
Value of $10,000 vs S&P 500 Index
Average Annual Total Return
Period Ended December 31, 1999
Since Inception (9/1/99)........... 26.00%
Fund S&P
---- ---
9/1/99 10,000 10,000
9/30/99 10,190 9,646
10/31/99 10,460 10,263
11/30/99 11,270 10,470
12/31/99 12,600 11,088
Past performance is not predictive of future performance.
The S&P 500 is a broad market-weighted average of U.S. blue-chip companies. The
S&P 500 is unmanaged and returns include reinvested dividends.
4
<PAGE>
LEONETTI BALANCED FUND
SCHEDULE OF INVESTMENTS AT DECEMBER 31, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
Shares COMMON STOCKS: 65.1% Value
- --------------------------------------------------------------------------------
COMPUTERHARDWARE: 7.3%
8,000 International Business Machines Corp.................... $ 864,000
16,000 Sun Microsystems, Inc.*................................. 1,239,000
-----------
2,103,000
-----------
COMPUTERLOCAL NETWORK: 6.0%
16,000 Cisco Systems, Inc.*.................................... 1,714,000
-----------
COMPUTERMEMORY DEVICES: 6.1%
16,000 EMC Corp.*.............................................. 1,748,000
-----------
COMPUTERNETWORK AND COMMUNICATIONS: 0.9%
5,000 Adaptec, Inc.*.......................................... 249,375
-----------
COMPUTERONLINE SERVICES: 4.2%
16,000 America Online, Inc.*................................... 1,207,000
-----------
DIVERSIFIED OPERATIONS: 4.3%
8,000 General Electric Company................................ 1,238,000
-----------
ENTERPRISE SOFTWARE/SERVICES: 3.9%
10,000 Oracle Corp.*........................................... 1,120,625
-----------
FINANCEINVESTMENT BANK: 1.7%
6,000 Merrill Lynch & Company, Inc............................ 501,000
-----------
FINANCIAL SERVICES: 1.9%
10,000 Citigroup, Inc.......................................... 555,625
-----------
LEISURE-GAMING: 1.4%
8,000 MGM Grand, Inc.*........................................ 402,500
-----------
LEISURE-PRODUCTS: 2.2%
10,000 Harley-Davidson, Inc.................................... 640,625
-----------
See accompanying Notes to Financial Statements.
5
<PAGE>
LEONETTI BALANCED FUND
SCHEDULE OF INVESTMENTS AT DECEMBER 31, 1999 (UNAUDITED), CONTINUED
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
MEDIA-CABLE/TV: 1.7%
10,000 Comcast Corp., Class A.................................. $ 502,500
-----------
MEDIA-NEWSPAPERS: 3.1%
16,000 Tribune Company......................................... 881,000
-----------
METAL-ALUMINUM: 2.9%
10,000 Alcoa, Inc.............................................. 830,000
-----------
PAPER AND RELATED PRODUCTS: 2.0%
10,000 International Paper Company............................. 564,375
-----------
RETAIL-BUILDING PRODUCTS: 2.9%
12,000 Home Depot, Inc......................................... 822,750
-----------
RETAIL-DISCOUNT: 2.4%
10,000 WalMart Stores, Inc..................................... 691,250
-----------
RETAIL-RESTAURANTS: 2.2%
16,000 McDonald's Corp......................................... 645,000
-----------
TELECOMMUNICATION EQUIPMENT: 6.5%
16,368 Lucent Technologies, Inc................................ 1,224,531
10,000 Tellabs, Inc............................................ 641,875
-----------
1,866,406
-----------
TELECOMMUNICATIONS SERVICES: 1.5%
10,000 Qwest Communications International, Inc.*............... 430,000
-----------
Total Common Stocks (cost $9,809,618)................... 18,713,031
-----------
See accompanying Notes to Financial Statements.
6
<PAGE>
LEONETTI BALANCED FUND
SCHEDULE OF INVESTMENTS AT DECEMBER 31, 1999 (UNAUDITED), CONTINUED
- --------------------------------------------------------------------------------
Principal
Amount U.S. TREASURY OBLIGATIONS: 28.0% Value
- --------------------------------------------------------------------------------
$ 900,000 U.S. Treasury Note, 5.375%, due 1/31/2000............... $ 900,282
400,000 U.S. Treasury Note, 5.875%, due 2/15/2000............... 400,375
800,000 U.S. Treasury Note, 5.500%, due 2/29/2000............... 800,500
400,000 U.S. Treasury Note, 6.125%, due 7/31/2000............... 400,750
800,000 U.S. Treasury Note, 4.500%, due 9/30/2000............... 791,500
1,000,000 U.S. Treasury Note, 4.625%, due 11/30/2000.............. 987,813
500,000 U.S. Treasury Note, 5.500%, due 12/31/2000.............. 492,969
500,000 U.S. Treasury Note, 5.250%, due 1/31/2001............... 495,937
800,000 U.S. Treasury Note, 5.000%, due 2/28/2001............... 790,250
1,000,000 U.S. Treasury Note, 5.250%, due 5/31/2001............... 987,813
500,000 U.S. Treasury Note, 5.500%, due 8/31/2001............... 494,219
500,000 U.S. Treasury Bill, 5.875%, due 11/30/2001.............. 497,032
-----------
Total U.S. Treasury Obligations (cost $8,087,307)....... 8,039,440
-----------
REPURCHASE AGREEMENT: 6.6%
- --------------------------------------------------------------------------------
1,910,000 Firstar Bank Repurchase Agreement, 1.00%,
dated 12/31/1999, due 1/3/2000, collateralized
by $2,010,344 GNMA, 6.00% 7.00%, due
9/15/2008 4/15/2009, (proceeds $1,910,159)
(cost $1,910,000)...................................... 1,910,000
-----------
Total Investments (cost $19,806,925): 99.7%............. 28,662,471
Other Assets Less Liabilities: 0.3%..................... 87,458
-----------
Net Assets: 100.0%............................ $28,749,929
===========
* Nonincome producing.
See accompanying Notes to Financial Statements.
7
<PAGE>
LEONETTI GROWTH FUND
SCHEDULE OF INVESTMENTS AT DECEMBER 31, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
Shares COMMON STOCKS: 81.0% Value
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES: 2.1%
1,400 Paychex, Inc............................................. $ 56,000
----------
COMPUTER-HARDWARE: 2.9%
1,000 Sun Microsystems, Inc.*.................................. 77,437
----------
COMPUTER-MEMORY DEVICES: 2.0%
500 EMC Corp.*............................................... 54,625
----------
COMPUTER-LOCAL NETWORKS: 4.8%
1,200 Cisco Systems, Inc.*..................................... 128,550
----------
COMPUTER-ONLINE SERVICES: 2.8%
1,000 America Online, Inc.*.................................... 75,437
----------
COMPUTER-SOFTWARE: 4.9%
1,000 Computer Associates International, Inc................... 69,937
1,000 Intuit, Inc.*............................................ 59,937
----------
129,874
----------
CONSULTING SERVICES: 1.2%
700 USWeb Corp.*............................................. 31,106
----------
DIVERSIFIED OPERATIONS: 4.0%
700 General Electric Company................................. 108,325
----------
ELECTRONIC COMPONENTS: 3.5%
1,000 Solectron Corp.*......................................... 95,125
----------
ENTERPRISE SOFTWARE/SERVICES: 2.9%
700 Oracle Corp.*............................................ 78,444
----------
FINANCE-INVESTMENT BANK: 1.6%
500 Merrill Lynch & Company, Inc............................. 41,750
----------
See accompanying Notes to Financial Statements.
8
<PAGE>
LEONETTI GROWTH FUND
SCHEDULE OF INVESTMENTS AT DECEMBER 31, 1999 (UNAUDITED), CONTINUED
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
FINANCIAL SERVICES: 2.9%
1,400 Citigroup, Inc........................................... $ 77,787
----------
INTERNET CONTENT: 3.8%
400 DoubleClick, Inc.*....................................... 101,225
----------
LEISURE-GAMING: 2.6%
1,400 MGM Grand*............................................... 70,437
----------
LEISURE-PRODUCTS: 3.3%
1,400 Harley-Davidson, Inc..................................... 89,688
----------
MEDICAL-BIOMEDICAL: 3.1%
1,400 Amgen, Inc.*............................................. 84,088
----------
MEDIA-RADIO/TV: 5.3%
1,400 Univision Communications, Inc.*.......................... 143,063
----------
MEDICAL-HOSPITALS: 1.5%
1,400 Columbia HCA Healthcare Corp............................. 41,038
----------
PAPER AND RELATED PRODUCTS: 2.9%
1,400 International Paper Company.............................. 79,013
----------
RETAIL-DISCOUNT: 4.6%
700 BJ's Wholesale Club, Inc.*............................... 25,550
1,400 Wal-Mart Stores, Inc..................................... 96,775
----------
122,325
----------
TELECOMMUNICATION EQUIPMENT: 11.0%
1,300 Lucent Technologies, Inc................................. 97,256
500 Nokia Oyj................................................ 95,000
1,000 Tellabs, Inc.*........................................... 64,188
700 Tut Systems, Inc.*....................................... 37,538
----------
293,982
----------
See accompanying Notes to Financial Statements.
9
<PAGE>
LEONETTI GROWTH FUND
SCHEDULE OF INVESTMENTS AT DECEMBER 31, 1999 (UNAUDITED), CONTINUED
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES: 4.7%
1,400 Metromedia Fiber Network, Inc.*.......................... $ 67,112
1,400 Qwest Communications International, Inc.*................ 60,200
----------
127,312
----------
TELEVISION-CABLE: 2.6%
1,400 Comcast Corp., Class A................................... 70,350
----------
Total Common Stocks (cost $1,834,855).................... 2,176,981
----------
Principal
Amount REPURCHASE AGREEMENT: 21.6%
- --------------------------------------------------------------------------------
$580,000 Firstar Repurchase Agreement, 1.00%, dated 12/31/1999,
due 1/3/2000, collateralized by $610,470 GNMA,
6.00% 7.00%, due 9/15/2008 4/15/2009, (proceeds
$580,048) (cost $580,000)................................. 580,000
----------
Total Investments (cost $2,414,855): 102.6%............... 2,756,981
Liabilities Less Other Assets: (2.6)%..................... (71,093)
----------
Net Assets: 100.0%............................. $2,685,888
==========
* Non-income producing.
See accompanying Notes to Financial Statements.
10
<PAGE>
LEONETTI BALANCED FUND
LEONETTI GROWTH FUND
STATEMENTS OF ASSETS AND LIABILITIES AT DECEMBER 31, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Leonetti Leonetti
Balanced Fund Growth Fund
------------- -----------
<S> <C> <C>
ASSETS
Investments in securities, at value (cost
$19,806,925 and $2,414,855, respectively) ......... $28,662,471 $2,756,981
Cash ............................................... 861 174
Receivables:
Due from Advisor ................................. -- 9,900
Fund shares sold ................................. 3,960 19,740
Dividends and interest ........................... 115,104 393
Deferred organization costs ...................... 4,074 --
Prepaid expenses ................................... 613 9,928
----------- ----------
Total assets ................................... 28,787,083 2,797,116
----------- ----------
LIABILITIES
Payables:
Advisory fees .................................... 23,563 --
Trustees' fees ................................... 1,173 885
Securities purchased ............................. -- 97,798
Accrued expenses ................................... 12,418 12,545
----------- ----------
Total liabilities .............................. 37,154 111,228
----------- ----------
NET ASSETS .......................................... $28,749,929 $2,685,888
=========== ==========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER SHARE
($28,749,929/1,579,394 and $2,685,888/213,128,
respectively; unlimited number of shares
authorized without par value) ..................... $ 18.20 $ 12.60
=========== ==========
COMPONENTS OF NET ASSETS
Paidin capital ................................. $18,944,173 $2,318,012
Accumulated net investment loss ................ (11,334) (4,104)
Accumulated net realized gain on investments.... 961,544 29,854
Net unrealized appreciation on investments...... 8,855,546 342,126
----------- ----------
Net assets ................................ $28,749,929 $2,685,888
=========== ==========
</TABLE>
See accompanying Notes to Financial Statements.
11
<PAGE>
LEONETTI BALANCED FUND
LEONETTI GROWTH FUND
STATEMENTS OF OPERATIONS FOR THE PERIODS ENDED DECEMBER 31, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Leonetti Leonetti
Balanced Fund Growth Fund*
------------- ------------
<S> <C> <C>
INVESTMENT INCOME
Income
Interest ............................................. $ 201,883 $ 3,771
Dividends ............................................ 32,635 907
Other ................................................ 3,416 --
---------- ---------
Total income ...................................... 237,934 4,678
---------- ---------
Expenses
Advisory fees ........................................ 127,002 4,391
Administration fee ................................... 27,710 9,945
Fund accounting fees ................................. 11,255 6,068
Registration fees .................................... 10,081 6,035
Audit fee ............................................ 8,942 5,790
Transfer agent fees .................................. 6,867 5,202
Legal fees ........................................... 5,763 1,283
Custody fees ......................................... 5,445 2,276
Amortization of deferred organization costs .......... 3,025
Trustees' fees ....................................... 2,803 1,372
Reports to shareholders .............................. 2,017 433
Miscellaneous ........................................ 1,814 542
---------- ---------
Total expenses .................................... 212,724 43,337
Less: expenses waived and reimbursed .............. -- (34,555)
---------- ---------
Net expenses ...................................... 212,724 8,782
---------- ---------
NET INVESTMENT INCOME (LOSS) ...................... 25,210 (4,104)
---------- ---------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments ....................... 925,211 29,854
Net change in unrealized appreciation on investments.... 2,630,179 342,126
---------- ---------
Net realized and unrealized gain on investments.... 3,555,390 371,980
---------- ---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.... $3,580,600 $ 367,876
========== =========
</TABLE>
* Commenced operations on September 1, 1999.
See accompanying Notes to Financial Statements.
12
<PAGE>
LEONETTI BALANCED FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Year
Ended Ended
December 31, 1999# June 30, 1999
------------------ -------------
<S> <C> <C>
INCREASE IN NET ASSETS FROM:
OPERATIONS
Net investment income ...................................... $ 25,210 $ 65,238
Net realized gain on investments ........................... 925,211 676,378
Net change in unrealized appreciation on investments........ 2,630,179 3,510,644
------------ ------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.... 3,580,600 4,252,260
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income ................................. (68,992) (59,358)
From net realized gain ..................................... (675,334) (1,019,875)
------------ ------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS .................... (744,326) (1,079,233)
------------ ------------
CAPITAL SHARE TRANSACTIONS
Net increase in net assets derived from net change in
outstanding shares (a) .................................... 1,845,833 5,397,710
------------ ------------
TOTAL INCREASE IN NET ASSETS ........................... 4,682,107 8,570,737
NET ASSETS
Beginning of period ........................................ 24,067,822 15,497,085
------------ ------------
END OF PERIOD .............................................. $ 28,749,929 $ 24,067,822
============ ============
Accumulated net investment income (loss) .................... $ (11,334) $ 32,448
============ ============
(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 ......................................... 138,998 $ 2,339,021 365,405 $ 5,421,234
Shares issued in reinvestment of distributions....... 41,794 743,508 78,386 1,074,676
Shares redeemed...................................... (74,617) (1,236,696) (75,553) (1,098,200)
------- ----------- ------- -----------
Net increase ...................................... 106,175 $ 1,845,833 368,238 $ 5,397,710
======= =========== ======= ===========
</TABLE>
# Unaudited.
See accompanying Notes to Financial Statements.
13
<PAGE>
LEONETTI GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
- --------------------------------------------------------------------------------
September 1, 1999*
Through
December 31, 1999
-----------------
INCREASE IN NET ASSETS FROM:
OPERATIONS
Net investment loss ......................................... $ (4,104)
Net realized gain from security transactions ................ 29,854
Net unrealized appreciation on investments .................. 342,126
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS..... 367,876
CAPITAL SHARE TRANSACTIONS
Net increase in net assets derived from net change in
outstanding shares (a) ..................................... 2,318,012
----------
TOTAL INCREASE IN NET ASSETS ............................ 2,685,888
NET ASSETS
Beginning of period ......................................... --
----------
END OF PERIOD ............................................... $2,685,888
==========
Accumulated net investment loss .............................. $ (4,104)
==========
(a) A summary of capital share transactions is as follows:
September 1, 1999*
Through
December 31, 1999
-----------------------
Shares Value
------ -----
Shares sold............................................ 213,917 $2,327,421
Shares redeemed........................................ (789) (9,409)
------- ----------
Net increase........................................... 213,128 $2,318,012
======= ==========
* Commencement of operations.
See accompanying Notes to Financial Statements.
14
<PAGE>
LEONETTI BALANCED FUND
FINANCIAL HIGHLIGHTS
FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Year Ended June 30, August 1, 1995*
Ended ----------------------------- Through
December 31, 1999# 1999 1998 1997 June 30, 1996
------------------ ---- ---- ---- -------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $16.34 $14.02 $12.31 $ 10.80 $10.00
------ ------ ------ ------- ------
Income from investment operations:
Net investment income ................ 0.02 0.05 0.05 0.06 0.09
Net realized and unrealized
gain on investments ................. 2.33 3.18 2.75 1.54 0.76
------ ------ ------ ------- ------
Total from investment operations........ 2.35 3.23 2.80 1.60 0.85
------ ------ ------ ------- ------
Less distributions:
From net investment income ........... (0.05) (0.05) (0.03) (0.09) (0.05)
From net realized gain ............... (0.44) (0.86) (1.06) -- --
------ ------ ------ ------- ------
Total distributions .................... (0.49) (0.91) (1.09) (0.09) (0.05)
------ ------ ------ ------- ------
Net asset value, end of period ......... $18.20 $16.34 $14.02 $ 12.31 $10.80
====== ====== ====== ======= ======
Total return ........................... 14.45%++ 24.28% 24.10% 14.91% 8.46%++
Ratios/supplemental data:
Net assets, end of period (millions).... $ 28.7 $ 24.1 $ 15.5 $ 11.3 $ 10.1
Ratio of expenses to
average net assets .................... 1.67%+ 1.77% 1.99% 2.29% 2.26%+
Ratio of net investment income to
average net assets .................... 0.20%+ 0.35% 0.40% 0.47% 1.02%+
Portfolio turnover rate ................ 40.84%++ 81.16% 89.51% 119.75% 42.16%++
</TABLE>
# Unaudited.
* Commencement of operations.
+ Annualized.
++ Not annualized.
See accompanying Notes to Financial Statements.
15
<PAGE>
LEONETTI GROWTH FUND
FINANCIAL HIGHLIGHTS
FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT THE PERIOD (UNAUDITED)
- --------------------------------------------------------------------------------
September 1, 1999*
Through
December 31, 1999
-----------------
Net asset value, beginning of period ...................... $10.00
------
Income from investment operations:
Net investment loss ...................................... (0.02)
Net realized and unrealized gain on investments .......... 2.62
------
Total from investment operations .......................... 2.60
------
Net asset value, end of period ............................ $12.60
======
Total return++ ............................................ 26.00%
Ratios/supplemental data:
Net assets, end of period (millions) ...................... $ 2.7
Ratio of expenses to average net assets:
Before waiver and expense reimbursement .................. 9.71%+
After waiver and expense reimbursement ................... 2.00%+
Ratio of net investment loss to average net assets:
Before waiver and expense reimbursement .................. (8.63)%+
After waiver and expense reimbursement ................... (0.92)%+
Portfolio turnover rate++ ................................. 81.88%
* Commencement of operations.
+ Annualized.
++ Not annualized.
See accompanying Notes to Financial Statements.
16
<PAGE>
LEONETTI BALANCED FUND
LEONETTI GROWTH FUND
NOTES TO FINANCIAL STATEMENTS AT DECEMBER 31, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION
The Leonetti Balanced Fund and the Leonetti Growth Fund (the "Funds") are
each a series of shares of beneficial interest of Professionally Managed
Portfolios (the "Trust") which is registered under the Investment Company Act of
1940 (the "1940 Act") as an open-end management investment company. The Leonetti
Balanced Fund and the Leonetti Growth Fund began operations on August 1, 1995
and September 1, 1999, respectively. The investment objective of the Leonetti
Balanced Fund is to seek total return through a combination of income and
capital growth, consistent with preservation of capital. The investment
objective of the Leonetti Growth Fund is long-term growth of capital.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Funds. These policies are in conformity with generally accepted
accounting principles.
A. SECURITY VALUATION. Securities traded on an exchange, or Nasdaq are
valued daily at the last reported sale price at the close of regular
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.
U.S. Government securities with less than 60 days remaining to
maturity when acquired are valued on an amortized cost basis. U.S.
Government securities with more than 60 days remaining to maturity are
valued at the current market value (using the mean between the bid and
asked price) until the 60th day prior to maturity, and are then valued
at amortized cost based upon the value on such date unless the Board
determines during such 60 day period that this amortized cost basis
does not represent fair value.
B. FEDERAL INCOME TAXES. The Funds intend to comply with the requirements
of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of their taxable income to their
shareholders. Therefore, no federal income tax provisions are
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 a first-in, first-out basis. Dividend
income and distributions to shareholders are recorded on the
ex-dividend date.
D. DEFERRED ORGANIZATION COSTS. The Leonetti Balanced Fund incurred
expenses of $30,000 in connection with its organization. These costs
have been deferred and are being amortized on a straight-line basis
over a period of sixty months from the date the Fund commenced
operations.
17
<PAGE>
LEONETTI BALANCED FUND
LEONETTI GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED), CONTINUED
- --------------------------------------------------------------------------------
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
Leonetti & Associates, Inc. (the "Advisor") provides the Funds 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 Funds. 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 Funds. For the periods ended December 31, 1999, the
Leonetti Balanced Fund and the Leonetti Growth Fund incurred $127,002 and
$4,391, in Advisory fees, respectively.
The Funds are responsible for their own operating expenses. The Advisor has
agreed to reduce fees for the Leonetti Growth Fund and reimburse other expenses
to the extent necessary to limit the Fund's aggregate annual operating expenses,
excluding brokerage commissions and other portfolio transactions expenses,
interest, taxes, capital expenditures and extraordinary expenses, to 2.00%, of
average daily net assets through December 31, 1999. During the period ended
December 31, 1999, the Advisor waived $4,391 in fees and reimbursed the fund
$20,219.
The Advisor may recapture from the Leonetti Growth Fund the cumulative
expense reimbursement of $24,610, subject to the requirements that the Fund must
pay the current ordinary operating expenses of the Fund before any such
recapture and its continued compliance with any other expense limitations. The
Advisor must seek recapture no later than June 30, 2005, or the Advisor forgoes
the right to recapture these amounts.
Investment Company Administration, L.L.C. (the "Administrator") acts as the
Funds' Administrator under an Administration Agreement. The Administrator
prepares various federal and state regulatory filings, reports and returns for
the Funds; prepares reports and materials to be supplied to the trustees;
monitors the activities of the Funds' custodian, transfer agent and accountant;
coordinates the preparation and payment of Fund expenses and reviews the Funds'
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 period ended December 31, 1999, the Leonetti Balanced Fund incurred
$27,710 in administration fees. The Leonetti Growth Fund's administration fees
were waived through January 1, 2000.
18
<PAGE>
LEONETTI BALANCED FUND
LEONETTI GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED), CONTINUED
- --------------------------------------------------------------------------------
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 the proceeds from the sale of securities for the
periods ended December 31, 1999, excluding U.S. Government obligations and
short-term investments, were $7,617,079 and $8,698,583, respectively, for the
Leonetti Balanced Fund and $2,650,537 and $845,536, respectively, for the
Leonetti Growth Fund.
For the periods ended December 31, 1999, the cost of purchases and the
proceeds from sales of U.S. Government obligations, excluding short-term
securities, were $2,017,161 and $0, respectively, for the Leonetti Balanced
Fund.
NOTE 5 - TAX BASIS APPRECIATION
At December 31, 1999, the cost of securities for federal income tax
purposes was the same as their basis for financial reporting purposes. Gross
unrealized appreciation and depreciation of securities were as follows:
Leonetti Leonetti
Balanced Fund Growth Fund
------------- -----------
Gross unrealized appreciation............... $ 8,923,379 $ 358,771
Gross unrealized depreciation............... (67,833) (16,645)
----------- ---------
Net unrealized appreciation............ $ 8,855,546 $ 342,126
=========== =========
19
<PAGE>
ADVISOR
Leonetti & Associates, Inc.
1130 Lake Cook Road, Suite 300
Buffalo Grove, Illinois 60089
(800) 454-0999
+
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 AGENT
American Data Services, Inc.
P.O. Box 5536
Hauppauge, New York 11788-0132
(800) 282-2340
+
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.
