THE PERKINS
OPPORTUNITY
FUND
Dear Perkins Opportunity Fund Shareholders:
Shares of small growth companies reached a top in the spring of 1996 and now, 2
1/2 years later, finally appear to be in the process of making meaningful
bottoms. In a recent letter to our private clients we stated that the current
market climate reminds us of the fall of 1990, when market sentiment was very
negative for a variety of reasons, not the least of which was the invasion of
Kuwait by Iraq. Today, just as then, there are many things that are negative in
the world: Terrorists who can and will strike anywhere, anytime; a new Russia in
both financial and political turmoil; Asia (especially Japan) in an economic
downspin; and last, but not least, President Clinton's problems and the
resulting concern worldwide about his leadership. But there are times of
uncertainty in any market cycle, times when stocks, both good and bad, go down
together. The past 2 1/2 years have been difficult, but opportunity is created
as the result of corrections and market bottoms, which are the market's way of
resolving speculative excesses and creating the foundation for the next advance.
The market bottom in 1990 marked the end of a long period of underperformance by
small company shares vs. the shares of larger-cap companies. Today this relative
valuation is lower than it was at the bottom of the 1990 market.
The relative values are there, and so are the real values. One of our holdings,
Ciprico, is selling at less than its cash per share, giving zero value to the
business. Another, Wilsons The Leather Experts, is selling at six times its
estimated earnings per share for the current year. There are numerous other
examples of valuations which we believe to be ludicrous. Yes, we do own some
stocks which we wish we had not purchased and certainly others which we now wish
we had sold before they went down. Nevertheless, we have what we feel are many
very attractive holdings in the Fund, which we expect to rebound when the market
for the out-of-favor smaller growth companies turns, which we believe is now
happening. There has been a 4-year election cycle in the stock market since
1914; there has usually been a significant bottom in the mid-term year and our
view is that 1998 will likely not be an exception. There is a stock market adage
which says "don't fight the Fed". An old rule developed by Edson Gould called
"two tumbles and a jump" was recently activated when the Federal Reserve cut
both the discount rate and the Fed Funds rate close on the heels of the discount
rate cut on September 29. When the discount rate, Fed Funds rate or margin
requirements have been cut twice within a short period of time, it is widely
regarded as a buy signal. The record of this rule is excellent. Within six
months after the second cut the market has been up an average of 10% and one
year later up an average of 23%. This is based on 16 buy signals between 1921
and 1995. Furthermore, the Dow Jones has on average risen 55% from the date of
the "two tumbles and a jump" buy signal to the next bull market top. Therefore,
it is likely that this recent Fed action has given new life to the market. We
believe this pertains especially to small stocks which have been literally
thrown out of the window by investors out of fear that they were going lower. We
never cease to be amazed that people are willing to sell good companies simply
because they are going lower, which has nothing whatsoever to do with the
fundamentals of the investment. Market bottoms are not made of smiles and
pleasant feelings; rather they come with a great deal of pain. John Templeton,
probably the most famous of all money managers, has said that the time to buy
stocks is at the time of greatest despair, because that is the time when the
greatest values are available. We believe the fall of 1998 to be one of those
times.
<PAGE>
We wish to thank all of our shareholders for sticking with us, which under the
circumstances has not been an easy thing to do. We are confident, however, that
valuations will improve, perhaps significantly.
The following table shows the Fund's returns by year and since inception
compared to several popular indices:
- --------------------------------------------------------------------------------
CALENDAR PERIOD THE PERKINS S&P NASDAQ RUSSELL
OPPORTUNITY 500 COMPOSITE 2000
FUND INDEX INDEX INDEX
- --------------------------------------------------------------------------------
1993 39.52% 10.67% 17.26% 17.62%
1994 14.85% 1.27% (3.20)% (3.18)%
1995 70.35% 37.53% 39.92% 26.21%
1996 (7.33)% 22.99% 22.71% 14.76%
1997 (17.08)% 33.34% 21.64% 20.52%
1998 YTD (9/30/98) (24.88)% 5.96% 7.86% (16.80)%
ANNUALIZED SINCE
2-18-93 INCEPTION 8.43% 19.17% 18.18% 9.37%
- --------------------------------------------------------------------------------
In closing, we thank you for your continued support.
Sincerely,
/s/ Richard W. Perkins /s/ Daniel S. Perkins
Richard W. Perkins, C.F.A. Daniel S. Perkins, C.F.A.
President Vice President
The Fund's average annual total return, after the maximum sales charge of 4.75%,
from inception of February 18, 1993 through September 30, 1998 was 7.49%, for
the three-year period ended on that date was (17.92%), for the five-year period
ended on that date was 3.00% and for the 12 months ended on that date was
(43.71%). The Fund's returns and share value will fluctuate and shares may be
worth more or less than their original cost when redeemed. Past performance is
no guarantee of future performance. Small company investing involves greater
risks and volatility. The Fund is distributed by First Fund Distributors, Inc.,
Phoenix, AZ 85018.
<PAGE>
THE PERKINS
OPPORTUNITY
FUND
SCHEDULE OF INVESTMENTS AT SEPTEMBER 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
Shares COMMON STOCKS: 90.7% Market Value
- --------------------------------------------------------------------------------
BUSINESS SERVICES: 2.4%
87,500 Appliance Recycling Centers of America, Inc.(a)*...... $ 54,687
437,500 Health Fitness Corp.*................................. 218,750
450,000 Integrated Security Systems, Inc.(a)*................. 421,875
275,000 Reality Interactive, Inc.(a)*......................... 27,500
----------
722,812
----------
COMMERCIAL SERVICES: 0.3%
20,000 Giga Information Group, Inc.*......................... 80,000
----------
COMPUTER - INTERNET: 6.5%
500,000 OnHealth Network Company(a)*.......................... 1,937,500
----------
COMPUTER - MEMORY DEVICES: 2.4%
100,000 Ciprico, Inc.*........................................ 731,250
----------
COMPUTER - PERIPHERAL EQUIPMENT: 1.9%
250,000 Digital Biometrics, Inc.*............................. 324,219
100,000 RSI Systems, Inc.*.................................... 231,250
----------
555,469
----------
COMPUTER - SOFTWARE: 8.1%
280,000 Delphi Information Systems, Inc.(a)*.................. 962,500
200,000 Fourth Shift Corp.*................................... 637,500
50,000 Information Advantage, Inc.*.......................... 231,250
115,000 IntraNet Solutions, Inc.*............................. 445,625
115,000 OneLink Communications, Inc.*......................... 154,531
----------
2,431,406
----------
CONSUMER PRODUCTS - MISCELLANEOUS: 2.9%
300,000 Minnesota Brewing Company (a)*........................ 562,500
35,000 Recovery Engineering, Inc.*........................... 293,125
----------
855,625
----------
EDUCATIONAL - PRODUCTS/SERVICES: 3.0%
200,000 The TesseracT Group, Inc.*............................ 662,500
50,000 UOL Publishing, Inc.*................................. 243,750
----------
906,250
----------
See accompanying Notes to Financial Statements.
3
<PAGE>
THE PERKINS
OPPORTUNITY
FUND
SCHEDULE OF INVESTMENTS AT SEPTEMBER 30, 1998 (UNAUDITED), CONTINUED
- --------------------------------------------------------------------------------
Shares Market Value
- --------------------------------------------------------------------------------
ELECTRICAL PRODUCTS - MISCELLANEOUS: 12.1%
75,000 AMETEK, Inc.......................................... $ 1,293,750
100,000 Barringer Technologies, Inc.*........................ 743,750
430,000 Destron Fearing Corp.*............................... 537,500
500,000 Insignia Systems, Inc. (a)*.......................... 812,500
410,000 Micro Component Technology, Inc.(a)*................. 217,813
-----------
3,605,313
-----------
FINANCIAL SERVICES - MISCELLANEOUS: 6.4%
20,000 Metris Companies, Inc................................ 932,500
50,000 TCF Financial Corp................................... 993,750
-----------
1,926,250
-----------
LEISURE - GAMING: 2.0%
58,000 American Wagering, Inc.*............................. 253,750
175,000 Innovative Gaming Corporation of America*............ 339,063
-----------
592,813
-----------
MEDICAL - DRUGS: 4.1%
250,000 GalaGen, Inc.*....................................... 453,125
100,000 Orphan Medical, Inc.*................................ 768,750
-----------
1,221,875
-----------
MEDICAL - PRODUCTS: 18.0%
175,000 ATS Medical, Inc.*................................... 1,028,125
250,000 Diametrics Medical, Inc.*............................ 1,250,000
550,000 Everest Medical Corp. (a)*........................... 825,000
425,000 InnerDyne, Inc.*..................................... 690,625
90,000 Lectec Corp.*........................................ 292,500
200,000 SpectraSCIENCE, Inc. (a)*............................ 987,500
75,000 ZymeTx, Inc.*........................................ 300,000
-----------
5,373,750
-----------
REAL ESTATE INVESTMENT TRUST: 4.3%
50,000 Capital Automotive REIT.............................. 584,375
50,000 Resource Asset Investment Trust...................... 712,500
-----------
1,296,875
-----------
See accompanying Notes to Financial Statements.
4
<PAGE>
THE PERKINS
OPPORTUNITY
FUND
SCHEDULE OF INVESTMENTS AT SEPTEMBER 30, 1998 (UNAUDITED), CONTINUED
- --------------------------------------------------------------------------------
Shares Market Value
- --------------------------------------------------------------------------------
RETAIL - MISCELLANEOUS: 3.6%
100,000 Wilsons The Leather Experts, Inc.*................... $ 1,062,500
-----------
RETAIL - RESTAURANTS: 2.8%
200,000 Big Buck Brewery & Steakhouse, Inc.(a)*.............. 750,000
100,000 Cafe Odyssey, Inc.*.................................. 100,000
-----------
850,000
-----------
TELECOMMUNICATIONS - EQUIPMENT AND SERVICES: 9.9%
85,000 ChoiceTel Communications, Inc.*...................... 350,625
100,000 Norstan, Inc.*....................................... 1,750,000
450,000 Racotek, Inc.*....................................... 871,875
-----------
2,972,500
-----------
Total Common Stocks (cost $47,985,989)............... 27,122,188
-----------
PREFERRED STOCK: 1.6%
- --------------------------------------------------------------------------------
BUSINESS SERVICES: 1.6%
70,000 IntraNet Solutions, Inc. (cost $350,000)............. 466,669
-----------
WARRANTS: 0.4%
- --------------------------------------------------------------------------------
BUSINESS SERVICES: 0.0%
62,500 Health Fitness Corp., Exp. 4/4/1999.................. 0
-----------
COMPUTER - SOFTWARE: 0.0%
280,000 Delphi Information Systems, Inc., Exp. 4/17/1999..... 0
500,000 Insignia Systems, Inc., Exp. 1/16/2000 (a)........... 0
70,000 IntraNet Solutions, Inc., Exp. 7/22/2002............. 0
275,000 Reality Interactive, Inc., Exp. 4/10/2000(a)......... 275
-----------
275
-----------
ELECTRIC PRODUCTS - MISCELLANEOUS: 0.1%
100,000 Barringer Technologies, Inc., Exp. 11/12/1999........ 31,250
-----------
See accompanying Notes to Financial Statements.
5
<PAGE>
THE PERKINS
OPPORTUNITY
FUND
SCHEDULE OF INVESTMENTS AT SEPTEMBER 30, 1998 (UNAUDITED), CONTINUED
- --------------------------------------------------------------------------------
Shares WARRANTS, continued Market Value
- --------------------------------------------------------------------------------
RETAIL - RESTAURANTS: 0.2%
300,000 Big Buck Brewery & Steakhouse, Inc., Exp. 6/12/2000... $ 75,000
------------
TELECOMMUNICATIONS - EQUIPMENT AND SERVICES: 0.1%
85,000 ChoiceTel Communications, Inc., Exp. 11/10/2002....... 21,250
------------
Total Warrants (cost $140,225)........................ 127,775
------------
Principal Amount REPURCHASE AGREEMENT: 8.0%
- --------------------------------------------------------------------------------
$2,405,000 Star Bank Repurchase Agreement, 4.90%, dated
9/30/1998, due 10/1/1998, collateralized by
$2,457,629 GNMA, 7.375%, due 5/20/2024
(proceeds $2,405,327) (cost $2,405,000)............... 2,405,000
------------
Total Investment in Securities (cost
$50,881,214++): 100.7%................................ 30,121,632
Liabilities in excess of Other Assets: (0.7)%......... (205,790)
------------
TOTAL NET ASSETS: 100.0%.............................. $ 29,915,842
============
* Non-income producing security.
(a) Affiliated company (see Note 7).
++ At September 30, 1998, the cost of securities for Federal income tax purposes
was the same as the basis for financial reporting. Unrealized appreciation and
depreciation were as follows:
Gross unrealized appreciation ........................ $ 1,824,865
Gross unrealized depreciation ........................ (22,584,447)
------------
Net unrealized depreciation .................... $(20,759,582)
============
See accompanying Notes to Financial Statements.
6
<PAGE>
THE PERKINS
OPPORTUNITY
FUND
STATEMENT OF ASSETS AND LIABILITIES AT SEPTEMBER 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
Investments in securities, at value (cost $50,881,214)...... $ 30,121,632
Cash........................................................ 725
Receivables:
Securities sold .......................................... 17,610
Fund shares sold.......................................... 2,381
Interest.................................................. 328
Prepaid expenses............................................ 30,461
------------
Total assets ........................................... 30,173,137
------------
LIABILITIES
Payables:
Advisory fees............................................. 25,090
Administration fee........................................ 3,807
Fund shares redeemed...................................... 59,333
Accrued expenses ........................................... 169,065
------------
Total liabilities ..................................... 257,295
------------
NET ASSETS .................................................. $ 29,915,842
============
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($29,915,842/3,156,659 shares outstanding;
unlimited number of shares authorized without
par value)................................................ $ 9.48
============
COMPUTATION OF OFFERING PRICE PER SHARE
(Net asset value $9.48/.9525) ............................ $ 9.95
============
COMPONENTS OF NET ASSETS
Paid-in capital ............................................ $ 65,225,503
Accumulated net investment loss............................. (400,286)
Accumulated net realized loss on investments ............... (14,149,793)
Net unrealized depreciation on investments ................. (20,759,582)
------------
Net assets ............................................. $ 29,915,842
============
See accompanying Notes to Financial Statements.
7
<PAGE>
THE PERKINS
OPPORTUNITY
FUND
STATEMENT OF OPERATIONS - FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998
(UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Income
Interest ................................................. $ 49,837
Dividends................................................. 73,115
-------------
Total income .......................................... 122,952
-------------
Expenses
Advisory fees............................................. 230,033
Transfer agent fees ...................................... 90,536
Distribution fees......................................... 46,007
Administration fee........................................ 41,966
Shareholder service fee................................... 30,089
Reports to shareholders .................................. 19,502
Fund accounting fees...................................... 15,068
Custody fees.............................................. 11,460
Registration fees......................................... 9,590
Audit fee................................................. 8,391
Insurance................................................. 6,081
Trustee fees ............................................. 5,899
Miscellaneous............................................. 5,860
Legal fees................................................ 2,756
-------------
Total expenses ......................................... 523,238
-------------
NET INVESTMENT LOSS ................................. (400,286)
-------------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized loss from security transactions ............... (1,909,680)
Net change in unrealized depreciation on investments ....... (13,548,179)
-------------
Net realized and unrealized loss on investments ......... (15,457,859)
-------------
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS...................................... $ (15,858,145)
=============
See accompanying Notes to Financial Statements.
8
<PAGE>
THE PERKINS
OPPORTUNITY
FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
Six Months Ended Year Ended
September 30, March 31,
1998# 1998
- --------------------------------------------------------------------------------
(DECREASE) INCREASE IN NET ASSETS FROM:
OPERATIONS
Net investment loss ............................ $ (400,286) $ (1,341,964)
Net realized loss from security transactions ... (1,909,680) (5,974,426)
Net change in unrealized depreciation on
investments ................................... (13,548,179) 16,076,454
------------ ------------
NET (DECREASE) INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ................... (15,858,145) 8,760,064
------------ ------------
CAPITAL SHARE TRANSACTIONS
Net decrease in net assets derived from
net change in outstanding shares (a)........... (10,355,043) (27,905,372)
------------ ------------
TOTAL DECREASE IN NET ASSETS ................. (26,213,188) (19,145,308)
NET ASSETS
Beginning of period.............................. 56,129,030 75,274,338
------------ ------------
END OF PERIOD .................................... $ 29,915,842 $ 56,129,030
============ ============
(a) A summary of capital share transactions is as follows:
Six Months Ended Year Ended
September 30, 1998# March 31, 1998
----------------------- -----------------------
Shares Value Shares Value
------ ----- ------ -----
Shares sold ............... 99,739 $ 1,302,781 890,435 $ 12,140,118
Shares issued in
reinvestment of
distribution.............. -0- -0- -0- -0-
Shares redeemed ........... (884,564) (11,657,824) (2,932,794) (40,045,490)
-------- ------------ ---------- ------------
Net decrease............... (784,825) $(10,355,043) (2,042,359) $(27,905,372)
======== ============ ========== ============
# Unaudited.
See accompanying Notes to Financial Statements.
9
<PAGE>
THE PERKINS
OPPORTUNITY
FUND
FINANCIAL HIGHLIGHTS
FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Six Months Ended Year Ended March 31,
September 30, -------------------------------------------
1998# 1998 1997 1996++ 1995++ 1994++
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period............... $ 14.24 $12.58 $18.78 $13.03 $ 10.37 $ 7.96
------- ------ ------ ------ ------- ------
Income from investment operations:
Net investment loss .............. (0.13) (0.34) (0.24) (0.12) (0.13) (0.13)
Net realized and unrealized
gain (loss) on investments....... (4.63) 2.00 (4.98) 6.66 3.79 2.70
------- ------ ------ ------ ------- ------
Total from investment operations... (4.76) 1.66 (5.22) 6.54 3.66 2.57
------- ------ ------ ------ ------- ------
Less distributions:
From net capital gains ........... 0.00 0.00 (0.98) (0.79) (1.00) (0.16)
------- ------ ------ ------ ------- ------
Net asset value, end of period..... $ 9.48 $14.24 $12.58 $18.78 $ 13.03 $10.37
======= ====== ====== ====== ======= ======
Total return ...................... (33.43)% 13.20% (28.94)% 51.29% 38.72% 32.22%
Ratios/supplemental data:
Net assets, end of period
(millions)....................... $ 29.9 $ 56.1 $ 75.3 $ 92.3 $ 12.5 $ 3.3
Ratio of expenses to average
net assets:
Before expense reimbursement ..... 2.28%+ 2.27% 1.90% 1.97% 3.08% 5.14%
After expense reimbursement....... 2.28%+ 2.27% 1.90% 1.97% 2.63% 2.49%
Ratio of net investment loss to
average net assets:
Before expense reimbursement ..... (1.75)%+ (1.85)% (1.25)% (1.16)% (2.76)% (4.93)%
After expense reimbursement ...... (1.75)%+ (1.85)% (1.25)% (1.16)% (2.31)% (2.28)%
Portfolio turnover rate ........... 7.40% 53.37% 86.88% 92.45% 124.86% 90.63%
</TABLE>
# Unaudited.
+ Annualized.
++ Per share data has been restated to give effect to a 2-for-1 stock split to
shareholders of record as of the close on June 3, 1996.
See accompanying Notes to Financial Statements.
10
<PAGE>
THE PERKINS
OPPORTUNITY
FUND
NOTES TO FINANCIAL STATEMENTS AT SEPTEMBER 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION
The Perkins Opportunity 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 management investment company. The Fund's primary
investment objective is capital appreciation. The Fund began operations on
February 18, 1993.
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 included in the NASDAQ National Market System
are valued at the last reported sale 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.
At September 30, 1998, there is a capital loss carryforward of
approximately $11,200,000, which expires March 31, 2006, available
to offset future gains, if any.
C. SECURITY TRANSACTIONS, DIVIDENDS AND DISTRIBUTIONS. As is common in
the industry, security transactions are accounted for on the trade
date. Dividend income and distributions to shareholders are recorded
on the ex-dividend date. Interest income is recognized on an accrual
basis. Income and capital gains distributions to shareholders are
determined in accordance with income tax regulations which may
differ from generally accepted accounting principles. Those
differences are primarily due to differing treatments for net
operating losses.
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, as well as the reported amounts of revenues
and expenses during the period. Actual results could differ from
those estimates.
NOTE 3 - COMMITMENTS AND OTHER RELATED PARTY TRANSACTIONS
For the six months ended September 30, 1998, Perkins Capital Management,
Inc. (the "Advisor") provided the Fund with investment management services under
an Investment Advisory Agreement. The Advisor furnishes
11
<PAGE>
THE PERKINS
OPPORTUNITY
FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED), CONTINUED
- --------------------------------------------------------------------------------
all investment advice, office space and certain administrative services, and
provides 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
September 30, 1998, the Fund incurred $230,033 in Advisory fees.
Investment Company Administration, LLC (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 $12 million -- $30,000
$12 to $50 million -- 0.25% of average daily net assets
$50 to $100 million -- 0.20% of average daily net assets
$100 to $200 million -- 0.15% of average daily net assets
over $200 million -- 0.10% of average daily net assets
For the six months ended September 30, 1998, the Fund incurred $41,966 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.
NOTE 4 - DISTRIBUTION COSTS
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 may pay a fee to
the Distributor at an annual rate of up to 0.20% of the average daily net assets
of the Fund. The fee is paid to the Distributor as reimbursement for, or in
anticipation of, expenses incurred for distribution-related activity. During the
six months ended September 30, 1998, the Fund paid the Distributor $46,007.
NOTE 5 - SHAREHOLDER SERVICING FEE
The Fund has entered into a Shareholder Services Agreement with the
Advisor, under which the Fund pays servicing fees at an annual rate of up to
0.25% of the Fund's average daily net assets. Payments to the Advisor under the
Shareholder Servicing Agreement may reimburse the Advisor for payments it makes
to selected brokers, dealers and administrators which have entered into Service
Agreements with the Advisor for services provided to shareholders of the Fund.
The services provided by such intermediaries are primarily designed to assist
shareholders of the Fund and include the furnishing of office space and
equipment, telephone facilities, personnel and assistance
12
<PAGE>
THE PERKINS
OPPORTUNITY
FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED), CONTINUED
- --------------------------------------------------------------------------------
to the Fund in servicing such shareholders. Services provided by such
intermediaries also include the provision of support services to the Fund and
include establishing and maintaining shareholders' accounts and record
processing, purchase and redemption transactions, answering routine client
inquiries regarding the Fund, and providing such other personal services to
shareholders as the Fund may reasonably request. For the six months ended
September 30, 1998, the Fund incurred $30,089 in Shareholder Servicing fees.
NOTE 6 - PURCHASES AND SALES OF SECURITIES
For the six months ended September 30, 1998, the cost of purchases and the
proceeds from sales of securities, excluding short-term securities, were
$2,501,675 and $14,756,788, respectively.
NOTE 7 - INVESTMENTS IN AFFILIATES
Affiliated companies, as defined in Section 2 (a) (3) of the Investment
Company Act of 1940, are companies 5% or more of whose outstanding voting shares
are held by the Fund. During the six months ended September 30, 1998, the Fund
had the following transactions with affiliated companies:
13
<PAGE>
THE PERKINS
OPPORTUNITY
FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED), CONTINUED
- --------------------------------------------------------------------------------
Shares Held
- -------------------------------------------- Value Realized
March 31, Shares Shares September 30, September 30, Dividend Gain/
1998 Purchased Sold 1998 1998 Income (Loss)
---- --------- ---- ---- ---- ------ ------
Appliance Recycling Centers of America, Inc.:
87,500 -- -- 87,500 $ 54,687 -- $ --
Big Buck Brewery & Steakhouse, Inc.:
200,000 -- -- 200,000 750,000 -- --
Delphi Information Systems, Inc.:
1,400,000 -- 1,120,000 280,000 962,500 -- --
Everest Medical Corp.:
550,000 -- -- 550,000 825,000 -- --
Insignia Systems, Inc.:
500,000 -- -- 500,000 812,500 -- --
Insignia Systems, Inc. -- Warrants:
250,000 -- -- 500,000 -- -- --
Integrated Security Systems, Inc.:
450,000 -- -- 450,000 421,875 -- --
Lamaur Corp.:
75,000 -- 75,000 -- -- -- (217,107)
Micro Component Technology, Inc.:
410,000 -- -- 410,000 217,813 -- --
Minnesota Brewing Co.:
300,000 -- -- 300,000 562,500 -- --
OnHealth Network Company:
584,375 -- 84,375 500,000 1,937,500 -- 374,222
Reality Interactive, Inc.:
275,000 -- -- 275,000 27,500 -- --
Reality Interactive, Inc. -- Warrants:
275,000 -- -- 275,000 275 -- --
SpectraSCIENCE, Inc.:
200,000 -- -- 200,000 987,500 -- --
---------------------------------
Totals $7,559,650 -- $ 157,115
=================================
14
<PAGE>
ADVISOR
Perkins Capital Management, Inc.
730 East Lake Street
Wayzata, MN 55391-1769
(800) 998-3190
(612) 473-8367
+
DISTRIBUTOR
First Fund Distributors, Inc. THE PERKINS
4455 East Camelback Road, Suite 261E OPPORTUNITY
Phoenix, AZ 85018 FUND
+
CUSTODIAN
Star Bank, N.A.
425 Walnut Street
Cincinnati, OH 45202 A MUTUAL FUND SEEKING TO PROVIDE
+ CAPITAL APPRECIATION THROUGH
TRANSFER AGENT AND SHAREHOLDER SERVICES A CONTINUING SEARCH FOR
PFPC, Inc. INVESTMENT OPPORTUNITIES
P.O. Box 8813
Wilmington, DE 19899-8813
(800) 280-4779
+
AUDITORS
Tait, Weller & Baker
8 Penn Center Plaza, Suite 800 SEMI-ANNUAL REPORT
Philadelphia, PA 19101 TO SHAREHOLDERS FOR
+ THE SIX MONTHS ENDED
LEGAL COUNSEL SEPTEMBER 30, 1998
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.
