THE PERKINS DISCOVERY FUND
THE PERKINS OPPORTUNITY FUND
PCM LOGO
ANNUAL REPORT
TO SHAREHOLDERS FOR
THE YEAR ENDED
MARCH 31, 1999
<PAGE>
THE PERKINS DISCOVERY FUND
THE PERKINS OPPORTUNITY FUND
PCM LOGO
May 11, 1999
Dear Shareholders:
Since our last shareholder letter we have seen greatly improved performance in
small company growth stocks, although during late 1998 and early 1999 the market
was still led by the mega-cap stocks. Now we are seeing signs that this too is
changing, with small company stocks beginning to lead the market. This change
has been reflected in the performance of The Perkins Funds, as can be seen in
the following table which shows the performance of The Funds and several indices
for the last year and the month of April. The tide began to turn in the March
quarter and continued to move toward smaller stocks in April.
THE PERKINS THE PERKINS S&P NASDAQ RUSSELL
DISCOVERY OPPORTUNITY 500 COMPOSITE 2000
PERIOD FUND FUND INDEX INDEX INDEX
------ ---- ---- ----- ----- -----
03/31/98 to 06/30/98 8.60% (5.34)% 3.24% 3.22% (4.85)%
06/30/98 to 09/30/98 (18.97)% (29.67)% (9.92)% (10.60)% (20.51)%
09/30/98 to 12/31/98 24.62% 11.81% 21.34% 29.45% 16.05%
12/31/98 to 03/31/99 5.47% 11.79% 4.94% 12.24% (5.77)%
03/31/99 to 04/30/99 11.25% 10.55% 3.90% 3.31% 8.85%
The last several years were both "The Best Of Times and The Worst Of Times"
depending upon the market segment in which you were invested. For all of 1998
only 15 stocks accounted for 50% of the S&P 500 performance and just 5 stocks
accounted for 53% of the S&P first quarter performance. That shows how very
narrow the market has been; if you didn't own some of those few stocks you
didn't do very well. As a result, the relative valuation of small-cap stocks vs.
the S&P 500 is lower than the first quarter of 1977 or the fall of 1990. The
point is that from those unusual low relative valuations the performance of
small stocks over the next 5 or 6 years was twice that of the S&P 500. And so,
once again, the pendulum has swung too far to one side, thus creating the kind
of opportunity we see only infrequently. And yes, there are two opportunities
available here - to sell the handful of large stocks that have given the
averages their recent past big performance (today's nifty fifty) and to buy
small-cap stocks, or a small stock fund. In our view, it's a beautiful double
play!
Small-cap funds experienced nearly $11 billion of net redemptions in the first 4
months of 1999. Even in the week ending April 28, with small-caps on the
rebound, redemptions totaled nearly $1 billion from small-cap funds. What is
going on here? Why, with trends changing, are there still net redemptions from
small-cap funds? The reason is, of course, that investors often tend to put new
money into investments with the best performance over the recent past. People
change course belatedly as they always expect current trends to continue into
the future. As far as the Perkins Opportunity Fund is concerned our redemptions
have slowed, but still exceed new money. And while we believe it is a mistake
for mutual fund shareholders in general to be redeeming small-cap funds, after a
prolonged down cycle in small-cap stocks, we think it is an even greater mistake
for shareholders to redeem shares of The Perkins Opportunity Fund. Why?
Remember, when buying a mutual fund that has appreciated in value, part of the
purchase is a future tax liability for capital gains realized for the year to
date as well as those that are unrealized. For The Perkins Opportunity Fund,
however, this situation is the opposite as the fund has a tax loss carry forward
of $13.9 million. This is a potential asset for taxable investors since the fund
may be able to take gains of $5.45 per share, without creating a tax liability.
How did we get in this position? During
1
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THE PERKINS DISCOVERY FUND
THE PERKINS OPPORTUNITY FUND
PCM LOGO
1995 when the Fund was appreciating dramatically in value, funds flowed in
rapidly for the purchase of new shares, especially in 1996 after the Fund
enjoyed exceptional performance. These funds were invested at what turned out to
be high prices for many of the small- and mid-cap stocks which we were buying at
the time (this same thing is happening today in large-cap funds). In 1997 and
1998, as the Fund's shares declined in price, many shareholders that had
purchased at high prices redeemed their shares and many of the Fund's holdings
had to be sold at a loss in order to provide funds for these redemptions. We are
pleased that you as a shareholder have elected to retain your shares. We also
believe it would be an excellent time to add to your holdings.
The Discovery Fund, which just celebrated its 1st birthday, is well positioned
in micro-cap growth stocks, I.E., those with less than a $100 million market
cap. There are plenty to choose from, as the price decline in small-cap stocks
has moved many into the micro-cap category. The Fund is still very small, just
approaching $1 million, which makes it very interesting for new money since it
contains only 30 stocks and therefore price increases in just a few can be
meaningful.
The following table shows the Fund's returns by year and since inception,
compared to several popular indices.
THE PERKINS THE PERKINS S&P NASDAQ RUSSELL
DISCOVERY OPPORTUNITY 500 COMPOSITE 2000
CALENDAR PERIOD FUND 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 (Discovery -- (16.01)% 28.57% 39.63% (3.45)%
Fund Partial Year) 9.67% -- 12.84% 21.34 (11.23)%
1999 YTD (4/30/99) 17.33% 23.58% 9.03% 15.97% 2.57%
ANNUALIZED SINCE
INCEPTION -- 13.37% 22.64% 24.23% 11.54%
THROUGH 4/30/99 26.91% -- 21.59% 38.01% (8.46)%
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 Discovery Fund's average annual total return, after the maximum sales charge
of 4.75%, from inception on April 9, 1998 through March 31, 1999 was 10.43%. The
Opportunity Fund's average annual total return, after the maximum sales charge
of 4.75%, from inception on February 18, 1993 through March 31, 1999 was 10.83%,
for the five-year period ended on that date was 5.98% and for the 12 months
ended on that date was (20.74)%. The Funds' returns and share values 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 Funds are distributed by
First Fund Distributors, Inc., Phoenix, AZ 85018.
2
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THE PERKINS DISCOVERY FUND LOGO
THE PERKINS OPPORTUNITY FUND LOGO
PERKINS DISCOVERY FUND
Qtr Fund S&P Russell 2000
--- ---- --- ------------
4/9/98 10,000 10,000 10,000
4/30/98 10,641 10,017 10,065
5/31/98 10,489 9,839 9,523
6/30/98 10,857 10,239 9,543
7/31/98 11,537 10,137 8,771
8/31/98 8,464 8,670 7,068
9/30/98 8,800 9,223 7,621
10/31/98 8,514 9,979 7,932
11/30/98 9,632 10,581 8,347
12/31/98 10,445 11,191 8,864
1/31/99 12,140 11,662 8,982
2/28/99 10,413 11,293 8,254
3/31/99 11,016 11,745 8,383
Total Return for the
Period Ended March 31, 1999
Since Inception (4/9/98) 10.16%
Past performance is not predictive of future performance.
The Russell 2000 Index is formed by taking the 3,000 largest U.S. companies and
then eliminating the largest 1,000 leaving a good small company index. The S&P
500 is a broad market-weighted average of U.S. blue-chip companies. The indicies
are unmanaged and returns include reinvested dividends.
PERKINS OPPORTUNITY FUND
Qtr Fund S&P Russell 2000
--- ---- --- ------------
2/17/93 10,000 10,000 10,000
3/31/93 10,108 10,458 10,204
6/30/93 10,603 10,500 10,428
9/30/93 12,324 10,779 11,339
12/31/93 13,288 11,032 11,633
3/31/94 13,365 10,610 11,323
6/30/94 12,053 10,647 10,880
9/30/94 15,294 11,178 11,636
12/31/94 15,260 11,173 11,421
3/31/95 18,540 12,260 11,948
6/30/95 21,833 13,429 13,068
9/30/95 25,856 14,496 14,359
12/31/95 25,996 15,366 14,670
3/31/96 28,020 16,194 15,419
6/30/96 31,173 16,910 16,190
9/30/96 27,488 17,440 16,245
12/31/96 24,090 18,899 17,090
3/31/97 19,911 19,400 16,206
6/30/97 22,159 22,781 18,833
9/30/97 25,388 24,490 21,636
12/31/97 19,975 25,201 20,912
3/31/98 22,539 28,714 22,806
6/30/98 21,336 29,644 21,942
9/30/98 15,005 26,703 17,522
12/31/98 16,778 32,402 20,380
3/31/99 18,756 34,004 19,274
Average Annual Total Return
Period Ended March 31, 1999
---------------------------
1 Year......................... -20.74%
5 Year......................... 5.98%
Since Inception (2/17/93) ..... 10.83%
Past performance is not predictive of future performance.
The Russell 2000 Index is formed by taking the 3,000 largest U.S. companies and
then eliminating the largest 1,000 leaving a good small company index. The S&P
500 is a broad market-weighted average of U.S. blue-chip companies. The indicies
are unmanaged and returns include reinvested dividends.
3
<PAGE>
THE PERKINS DISCOVERY FUND LOGO
SCHEDULE OF INVESTMENTS AT MARCH 31, 1999
- --------------------------------------------------------------------------------
Shares COMMON STOCKS: 90.0% Market Value
- --------------------------------------------------------------------------------
CHEMICALS: 0.7%
5,000 Verdant Brands, Inc.*.................................. $ 5,625
---------
COMPUTER - DATA SECURITY: 2.9%
5,000 Datakey, Inc.*......................................... 22,812
---------
COMPUTER - INTEGRATED SYSTEMS: 6.0%
5,000 Check Technology Corp.*................................ 11,875
3,000 Javelin Systems, Inc.*................................. 36,375
---------
48,250
---------
COMPUTER - INTERNET: 6.8%
4,000 OnHealth Network Company*.............................. 54,500
---------
COMPUTER - SOFTWARE: 17.4%
7,500 Cover-All Technologies, Inc.*.......................... 19,688
3,000 Digital Lava, Inc.*.................................... 33,750
5,000 Fourth Shift Corp.*.................................... 26,875
4,000 IntraNet Solutions, Inc.*.............................. 33,000
7,500 Spanlink Communications, Inc.*......................... 25,313
---------
138,626
---------
DISTRIBUTION / WHOLESALE: 2.1%
2,500 En Pointe Technologies, Inc.*.......................... 16,250
---------
ELECTRONIC PRODUCTS - MISCELLANEOUS: 3.9%
2,500 Universal Electronics, Inc.*........................... 31,250
---------
MEDICAL - DRUGS: 2.4%
10,000 GalaGen, Inc.*......................................... 19,375
---------
4
<PAGE>
THE PERKINS DISCOVERY FUND LOGO
SCHEDULE OF INVESTMENTS AT MARCH 31, 1999, Continued
- --------------------------------------------------------------------------------
Shares Market Value
- --------------------------------------------------------------------------------
MEDICAL INSTRUMENTS: 9.7%
5,000 CardioThoracic Systems, Inc.*.......................... $ 47,812
5,000 Diametrics Medical, Inc.*.............................. 29,687
---------
77,499
---------
MISCELLANEOUS MANUFACTURING: 14.8%
2,500 American Educational Products, Inc.*................... 23,125
2,000 AMX Corp.*............................................. 18,500
4,000 Creative Master International, Inc.*................... 24,000
1,500 Koala Corp.*........................................... 31,125
2,500 Northstar Computer Forms, Inc.*........................ 21,250
---------
118,000
---------
RETAIL: 10.3%
4,000 Damark International*.................................. 34,500
5,000 Evans Inc.*............................................ 8,125
1,800 Funco Inc.*............................................ 39,600
---------
82,225
---------
RETAIL - RESTAURANTS: 3.0%
10,000 Famous Daves of America, Inc.*......................... 23,750
---------
TELECOMMUNICATIONS: 10.0%
20,000 ACI Telecentrics, Inc.*................................ 16,250
3,000 Metro One Telecommunications, Inc.*.................... 42,750
8,500 RSI Systems, Inc.*..................................... 20,188
---------
79,188
---------
Total Common Stocks (cost $649,160).................... 717,350
---------
WARRANTS: 0.8%
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE: 0.8%
1,500 Digital Lava, Inc., Exp. 2/17/2004..................... 6,469
---------
Total Warrants (cost $150)............................. 6,469
---------
See accompanying Notes to Financial Statements.
5
<PAGE>
Total Investment in Securities (cost $649,310++): 90.8% $ 723,819
Other Assets less Liabilities: 9.2%.................... 72,956
---------
TOTAL NET ASSETS: 100.0%............................... $ 796,775
=========
*Non-income producing security.
++At March 31, 1999, 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 .......................... $ 148,720
Gross unrealized depreciation .......................... (74,211)
---------
Net unrealized appreciation .................. $ 74,509
=========
6
<PAGE>
THE PERKINS DISCOVERY FUND LOGO
STATEMENT OF ASSETS AND LIABILITIES AT MARCH 31, 1999
- --------------------------------------------------------------------------------
ASSETS
Investments in securities, at value (cost $649,310) ............ $ 723,819
Cash ........................................................... 75,317
Receivables:
Due from Advisor ............................................. 11,447
Fund shares sold ............................................. 7,762
Prepaid expenses ............................................... 17,499
---------
Total assets .............................................. 835,844
---------
LIABILITIES
Accrued expenses ............................................... 39,069
---------
Total liabilities ......................................... 39,069
---------
NET ASSETS ....................................................... $ 796,775
=========
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($796,775/45,918 shares outstanding;
unlimited number of shares authorized without par value) .... $ 17.35
=========
COMPUTATION OF OFFERING PRICE PER SHARE
(Net asset value $17.35/.9525) .............................. $ 18.22
=========
COMPONENTS OF NET ASSETS
Paid-in capital ................................................ $ 723,467
Accumulated net realized loss on investments ................... (1,201)
Net unrealized appreciation on investments ..................... 74,509
---------
Net assets ................................................ $ 796,775
=========
See accompanying Notes to Financial Statements.
7
<PAGE>
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM APRIL 9, 1998* THROUGH MARCH 31, 1999
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Income
Interest ..................................................... $ 6,609
Dividend ..................................................... 480
---------
Total income ............................................... 7,089
---------
Expenses
Administration fee ........................................... 29,260
Transfer agent fees .......................................... 27,379
Registration fees ............................................ 18,530
Fund accounting fees ......................................... 13,336
Audit fee .................................................... 12,554
Legal fees ................................................... 9,275
Custody fees ................................................. 6,724
Reports to shareholders ...................................... 5,866
Advisory fees ................................................ 5,616
Trustee fees ................................................. 3,426
Amortization of deferred organization costs .................. 2,933
Miscellaneous ................................................ 1,626
Distribution fees ............................................ 1,407
Shareholder service fee ...................................... 1,126
---------
Total expenses ............................................. 139,058
Less: expenses waived and reimbursed ....................... (124,989)
---------
Net expenses ............................................... 14,069
---------
NET INVESTMENT LOSS ...................................... (6,980)
---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss from security transactions ................. (1,201)
Net change in unrealized appreciation on investments ......... 74,509
---------
Net realized and unrealized gain on investments ............ 73,308
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ..... $ 66,328
=========
*Commencement of operations.
See accompanying Notes to Financial Statements.
8
<PAGE>
THE PERKINS DISCOVERY FUND LOGO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
April 9, 1998*
through
March 31, 1999
--------------
INCREASE IN NET ASSETS FROM:
OPERATIONS
Net investment loss .......................................... $ (6,980)
Net realized loss from security transactions ................. (1,201)
Net change in unrealized appreciation on investments ......... 74,509
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ...... 66,328
---------
CAPITAL SHARE TRANSACTIONS
Net increase in net assets derived from net change
in outstanding shares (a) .................................. 730,447
---------
TOTAL INCREASE IN NET ASSETS .............................. 796,775
NET ASSETS
Beginning of period .......................................... --
---------
END OF PERIOD ................................................... $ 796,775
=========
(a) A summary of capital share transactions is as follows:
April 9, 1998*
through
March 31, 1999
-----------------------
Shares Value
------ -----
Shares sold ...................................... 60,507 $ 942,959
Shares redeemed .................................. (14,589) (212,512)
------- ---------
Net increase ..................................... 45,918 $ 730,447
======= =========
*Commencement of operations.
See accompanying Notes to Financial Statements.
9
<PAGE>
THE PERKINS DISCOVERY FUND LOGO
FINANCIAL HIGHLIGHTS
FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT THE PERIOD
- --------------------------------------------------------------------------------
April 9, 1998*
through
March 31, 1999
--------------
Net asset value, beginning of period........................... $15.00
Income from investment operations:
Net investment loss ........................................ (0.15)
Net realized and unrealized gain on investments............. 2.50
------
Total from investment operations............................... 2.35
------
Net asset value, end of period................................. $17.35
======
Total return .................................................. 15.67%
Ratios/supplemental data:
Net assets, end of period (millions)......................... $ 0.8
Ratio of expenses to average net assets:
Before expense reimbursement ............................... 24.67%+
After expense reimbursement................................. 2.50%+
Ratio of net investment loss to average net assets:
Before expense reimbursement ............................... (23.41%)+
After expense reimbursement ................................ (1.24%)+
Portfolio turnover rate ....................................... 137.32%
*Commencement of operations.
+Annualized.
See accompanying Notes to Financial Statements.
10
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THE PERKINS OPPORTUNITY FUND LOGO
SCHEDULE OF INVESTMENTS AT MARCH 31, 1999
- --------------------------------------------------------------------------------
Shares COMMON STOCKS: 97.7% Market Value
- --------------------------------------------------------------------------------
BUSINESS SERVICES: 2.2%
87,500 Appliance Recycling Centers of America, Inc.*........ $ 54,688
437,500 Health Fitness Corp.*................................ 164,063
449,300 Integrated Security Systems, Inc.*................... 449,300
250,000 Reality Interactive, Inc.(a)*........................ 30,000
------------
698,051
------------
COMPUTER - INTERNET: 20.2%
470,000 OnHealth Network Company*............................ 6,403,750
------------
COMPUTER - MEMORY DEVICES: 2.6%
100,000 Ciprico, Inc.*....................................... 825,000
------------
COMPUTER - PERIPHERAL EQUIPMENT: 1.8%
250,000 Digital Biometrics, Inc.*............................ 328,125
100,000 RSI Systems, Inc.*................................... 237,500
------------
565,625
------------
COMPUTER - SOFTWARE: 10.5%
200,000 Fourth Shift Corp.*.................................. 1,075,000
250,000 IntraNet Solutions, Inc.*............................ 2,062,500
115,000 OneLink Communications, Inc.*........................ 199,813
------------
3,337,313
------------
CONSUMER PRODUCTS - MISCELLANEOUS: 2.7%
250,000 Minnesota Brewing Company (a)*....................... 390,625
50,000 Recovery Engineering, Inc.*.......................... 468,750
----------
859,375
----------
EDUCATIONAL - PRODUCTS/SERVICES: 2.4%
200,000 The Tesseract Group, Inc.*........................... 575,000
50,000 UOL Publishing, Inc.*................................ 200,000
----------
775,000
----------
See accompanying Notes to Financial Statements.
11
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THE PERKINS OPPORTUNITY FUND LOGO
SCHEDULE OF INVESTMENTS AT MARCH 31, 1999, Continued
- --------------------------------------------------------------------------------
Shares Market Value
- --------------------------------------------------------------------------------
ELECTRICAL PRODUCTS - MISCELLANEOUS: 14.2%
75,000 Ametek, Inc.......................................... $ 1,368,750
100,000 Barringer Technologies, Inc.*........................ 662,500
300,000 Destron Fearing Corp.*............................... 318,750
500,000 Insignia Systems, Inc. (a)*.......................... 812,500
400,000 Micro Component Technology, Inc.(a)*................. 750,000
100,000 Sheldahl, Inc.*...................................... 606,250
-----------
4,518,750
-----------
LEISURE - GAMING: 1.5%
48,000 American Wagering, Inc.*............................. 300,000
175,000 Innovative Gaming Corporation of America*............ 185,937
-----------
485,937
-----------
MEDICAL - DRUGS: 3.5%
250,000 GalaGen, Inc.*....................................... 484,375
75,000 MGI Pharma, Inc.*.................................... 628,125
-----------
1,112,500
-----------
MEDICAL - PRODUCTS: 17.9%
150,000 ATS Medical, Inc.*................................... 1,125,000
250,000 Diametrics Medical, Inc.*............................ 1,484,375
50,000 Eclipse Surgical Technologies, Inc.*................. 525,000
500,000 Everest Medical Corp. (a)*........................... 750,000
425,000 InnerDyne, Inc.*..................................... 823,437
62,500 Lectec Corp.*........................................ 113,281
200,000 SpectraScience, Inc.*................................ 862,500
-----------
5,683,593
-----------
REAL ESTATE INVESTMENT TRUST: 3.8%
50,000 Capital Automotive REIT.............................. 621,875
50,000 Resource Asset Investment Trust...................... 587,500
-----------
1,209,375
-----------
RETAIL - MISCELLANEOUS: 2.2%
75,000 Wilsons The Leather Experts, Inc.*................... 707,813
-----------
See accompanying Notes to Financial Statements.
12
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THE PERKINS OPPORTUNITY FUND LOGO
SCHEDULE OF INVESTMENTS AT MARCH 31, 1999, Continued
- --------------------------------------------------------------------------------
Shares Market Value
- --------------------------------------------------------------------------------
RETAIL - RESTAURANTS: 1.7%
200,000 Big Buck Brewery & Steakhouse, Inc.*................. $ 450,000
100,000 Cafe Odyssey, Inc.*.................................. 75,000
------------
525,000
------------
TELECOMMUNICATIONS - EQUIPMENT AND SERVICES: 5.8%
85,000 ChoiceTel Communications, Inc.*...................... 138,125
100,000 Norstan, Inc.*....................................... 925,000
350,000 Zamba Corp.*......................................... 776,563
------------
1,839,688
------------
TRAVEL: 4.7%
50,000 American Classic Voyages Co.*........................ 812,500
25,000 Northwest Airlines Corp.*............................ 695,312
------------
1,507,812
------------
Total Common Stocks (cost $44,108,200)............... 31,054,582
------------
WARRANTS: 1.8%
- --------------------------------------------------------------------------------
BUSINESS SERVICES: 0.0%
62,500 Health Fitness Corp., Exp. 4/4/1999.................. 0
------------
COMPUTER - SOFTWARE: 1.6%
280,000 Delphi Information Systems, Inc., Exp. 6/17/1999..... 280,000
500,000 Insignia Systems, Inc., Exp. 1/16/2000............... 0
70,000 IntraNet Solutions, Inc., Exp. 7/22/2002 ............ 214,900
275,000 Reality Interactive, Inc., Exp. 4/10/2000 (a)........ 275
------------
495,175
------------
ELECTRIC PRODUCTS - MISCELLANEOUS: 0.1%
100,000 Barringer Technologies, Inc., Exp. 11/12/1999........ 28,125
------------
RETAIL - RESTAURANTS: 0.1%
300,000 Big Buck Brewery & Steakhouse, Inc.,
Exp. 6/12/2000....................................... 37,500
------------
See accompanying Notes to Financial Statements.
13
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THE PERKINS OPPORTUNITY FUND LOGO
SCHEDULE OF INVESTMENTS AT MARCH 31, 1999, Continued
- --------------------------------------------------------------------------------
Shares Market Value
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS - EQUIPMENT AND SERVICES: 0.0%
85,000 ChoiceTel Communications, Inc., Exp. 11/10/2002...... $ 5,312
------------
Total Warrants (cost $140,225)....................... 566,112
------------
Principal
Amount REPURCHASE AGREEMENT: 1.0%
- --------------------------------------------------------------------------------
$323,000 Firstar Bank Repurchase Agreement, 3.50%,
dated 3/31/1999, due 4/1/1999, collateralized
by $330,907 GNMA, 7.375%, due 5/20/2024 (proceeds
$323,066) (cost $323,000)............................ 323,000
------------
Total Investment in Securities
(cost $44,571,425++): 100.5%....................... 31,943,694
Liabilities in excess of Other Assets: (0.5)%........ (169,294)
------------
TOTAL NET ASSETS: 100.0%............................. $ 31,774,400
============
*Non-income producing security.
(a)Affiliated company (see Note 8).
++At March 31, 1999, 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.......................... $ 7,098,514
Gross unrealized depreciation ......................... (19,726,245)
------------
Net unrealized depreciation ..................... $(12,627,731)
============
See accompanying Notes to Financial Statements.
14
<PAGE>
THE PERKINS OPPORTUNITY FUND LOGO
STATEMENT OF ASSETS AND LIABILITIES AT MARCH 31, 1999
- --------------------------------------------------------------------------------
ASSETS
Investments in securities, at value (cost $44,571,425) ...... $ 31,943,694
Cash ........................................................ 3,788
Prepaid expenses ............................................ 29,461
------------
Total assets ............................................ 31,976,943
------------
LIABILITIES
Payables:
Advisory fees ............................................. 27,604
Administration fee ........................................ 4,345
Fund shares redeemed ...................................... 64,167
Accrued expenses ............................................ 106,427
------------
Total liabilities ....................................... 202,543
------------
NET ASSETS .................................................... $ 31,774,400
============
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($31,774,400/2,681,396 shares outstanding;
unlimited number of shares authorized without par value) .. $ 11.85
============
COMPUTATION OF OFFERING PRICE PER SHARE
(Net asset value $11.85/.9525) ............................ $ 12.44
============
COMPONENTS OF NET ASSETS
Paid-in capital ............................................. $ 59,396,556
Accumulated net realized loss on investments ................ (14,994,425)
Net unrealized depreciation on investments .................. (12,627,731)
------------
Net assets .............................................. $ 31,774,400
============
See accompanying Notes to Financial Statements.
15
<PAGE>
THE PERKINS OPPORTUNITY FUND LOGO
STATEMENT OF OPERATIONS - FOR THE YEAR ENDED MARCH 31, 1999
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Income
Interest ................................................... $ 66,276
Dividends .................................................. 145,890
-----------
Total income ............................................. 212,166
-----------
Expenses
Advisory fees .............................................. 387,486
Transfer agent fees ........................................ 125,550
Distribution fees .......................................... 77,497
Administration fee ......................................... 66,370
Shareholder service fee .................................... 55,740
Reports to shareholders .................................... 35,728
Fund accounting fees ....................................... 26,527
Registration fees .......................................... 19,063
Custody fees ............................................... 18,222
Legal fees ................................................. 17,663
Audit fee .................................................. 13,214
Insurance .................................................. 12,128
Miscellaneous .............................................. 5,249
Trustee fees ............................................... 4,707
-----------
Total expenses ........................................... 865,144
-----------
NET INVESTMENT LOSS .................................. (652,978)
-----------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized loss from security transactions ................. (2,754,312)
Net change in unrealized depreciation on investments ......... (5,416,328)
-----------
Net realized and unrealized loss on investments ............ (8,170,640)
-----------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ..... $(8,823,618)
===========
See accompanying Notes to Financial Statements.
16
<PAGE>
THE PERKINS OPPORTUNITY FUND LOGO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
Year Ended Year Ended
March 31, March 31,
1999 1998
------------ ------------
(DECREASE) INCREASE IN NET ASSETS FROM:
OPERATIONS
Net investment loss ......................... $ (652,978) $ (1,341,964)
Net realized loss from security transactions (2,754,312) (5,974,426)
Net change in unrealized depreciation on
investments ............................... (5,416,328) 16,076,454
------------ ------------
NET (DECREASE) INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS .............. (8,823,618) 8,760,064
------------ ------------
CAPITAL SHARE TRANSACTIONS
Net decrease in net assets derived from
net change in outstanding shares (a) ...... (15,531,012) (27,905,372)
------------ ------------
TOTAL DECREASE IN NET ASSETS ............. (24,354,630) (19,145,308)
NET ASSETS
Beginning of year ........................... 56,129,030 75,274,338
------------ ------------
END OF YEAR .................................... $ 31,774,400 $ 56,129,030
============ ============
(a) A summary of capital share transactions is as follows:
Year Ended Year Ended
March 31, 1999 March 31, 1998
--------------------------- ---------------------------
Shares Value Shares Value
---------- ------------ ---------- ------------
Shares sold ........ 261,889 $ 3,012,619 890,435 $ 12,140,118
Shares redeemed .... (1,521,977) (18,543,631) (2,932,794) (40,045,490)
---------- ------------ ---------- ------------
Net decrease ....... (1,260,088) $(15,531,012) (2,042,359) $(27,905,372)
========== ============ ========== ============
See accompanying Notes to Financial Statements.
17
<PAGE>
THE PERKINS OPPORTUNITY FUND LOGO
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT EACH YEAR
- --------------------------------------------------------------------------------------------------------
Year Ended March 31,
----------------------------------------------------
1999 1998 1997 1996++ 1995++
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year............. $14.24 $12.58 $18.78 $13.03 $10.37
------ ------ ------ ------ ------
Income from investment operations:
Net investment loss ........................ (0.24) (0.34) (0.24) (0.12) (0.13)
Net realized and unrealized
gain (loss) on investments................ (2.15) 2.00 (4.98) 6.66 3.79
------ ------ ------ ------ ------
Total from investment operations............... (2.39) 1.66 (5.22) 6.54 3.66
------ ------ ------ ------ ------
Less distributions:
From net capital gains .................... 0.00 0.00 (0.98) (0.79) (1.00)
------ ------ ------ ------ ------
Net asset value, end of year................... $11.85 $14.24 $12.58 $18.78 $13.03
====== ====== ====== ====== ======
Total return .................................. (16.78)% 13.20% (28.94)% 51.29% 38.72%
Ratios/supplemental data:
Net assets, end of year (millions)............. $ 31.8 $ 56.1 $ 75.3 $ 92.3 $ 12.5
Ratio of expenses to average net assets:
Before expense reimbursement ............... 2.24% 2.27% 1.90% 1.97% 3.08%
After expense reimbursement................. 2.24% 2.27% 1.90% 1.97% 2.63%
Ratio of net investment loss to average net assets:
Before expense reimbursement ............... (1.69)% (1.85)% (1.25)% (1.16)% (2.76)%
After expense reimbursement ................ (1.69)% (1.85)% (1.25)% (1.16)% (2.31)%
Portfolio turnover rate ....................... 19.34% 53.37% 86.88% 92.45% 124.86%
</TABLE>
++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.
18
<PAGE>
THE PERKINS OPPORTUNITY FUND LOGO
THE PERKINS DISCOVERY FUND LOGO
NOTES TO FINANCIAL STATEMENTS AT MARCH 31, 1999
- --------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION
The Perkins Discovery Fund and the Perkins Opportunity Fund (the "Funds")
are 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 Funds' primary investment objective is capital appreciation. The
Perkins Discovery Fund and the Perkins Opportunity Fund began operations on
April 9, 1998 and February 18, 1993, respectively.
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. 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 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 provision is required.
For the Perkins Opportunity Fund, at March 31, 1999, there is a
capital loss carryforward of approximately $13,900,000, of which
$11,200,000 expires March 31, 2006 and $2,700,000 expires March 31,
2007, 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. The cost of securities owned on realized transactions are
relieved on a specific identification basis. 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. DEFERRED ORGANIZATION COSTS. All of the expenses incurred by the
Advisor in connection with the organization and registration of the
Perkins Discovery Fund's shares will be borne by the Fund and are
being amortized to expense on a straight-line basis over a period of
five years.
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
19
<PAGE>
THE PERKINS OPPORTUNITY FUND LOGO
THE PERKINS DISCOVERY FUND LOGO
NOTES TO FINANCIAL STATEMENTS, Continued
- --------------------------------------------------------------------------------
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 period ended March 31, 1999, Perkins Capital Management, Inc. (the
"Advisor") provided the Funds with investment management services under an
Investment Advisory Agreement. The Advisor furnishes all investment advice,
office space and certain administrative services, and provides 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 period ended March 31, 1999, the Perkins
Discovery Fund and the Perkins Opportunity Fund incurred $5,616 and $387,486 in
Advisory fees, respectively.
The Funds are responsible for their own operating expenses. The Advisor has
agreed to reduce fees for the Perkins Discovery Fund to the extent necessary to
limit the Fund's aggregate annual operating expenses to 2.50% of average daily
net assets. For the period ended March 31, 1999, the Advisor has waived its fees
and reimbursed the Perkins Discovery Fund in the amount of $124,989.
The Advisor may recapture from the Perkins Discovery Fund the total amount
above no later than March 31, 2004, subject to the requirement that the Fund
must pay the current ordinary operating expenses of the Fund before any such
recapture, and subject to its continued compliance with any other expense
limitations (both the payment of current expenses and continued compliance are
"additional requirements"). The Advisor may recapture a partial amount of the
above amount no later than March 31, 2005, except that the amount paid by the
Advisor during the Fund's first year of operation is excluded and subject to the
additional requirements listed above. The Advisor may recapture a partial amount
of the above amount no later than March 31, 2006, except that the amounts paid
by the Advisor during the Fund's first two years of operation are excluded and
subject to the additional requirements listed above. After the Fund's seventh
year of operations, the Advisor may only seek to recapture for any amounts paid
during the previous three fiscal years of the Fund's operations, subject to the
additional requirements listed above.
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 accountants;
coordinates the preparation and payment of Funds' expenses and reviews the
Funds' 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
20
<PAGE>
THE PERKINS OPPORTUNITY FUND LOGO
THE PERKINS DISCOVERY FUND LOGO
NOTES TO FINANCIAL STATEMENTS, Continued
- --------------------------------------------------------------------------------
For the period ended March 31, 1999, the Funds incurred $29,260 and $66,370
in Administration fees for the Perkins Discovery Fund and the Perkins
Opportunity Fund, respectively.
First Fund Distributors, Inc. (the "Distributor") acts as the Funds'
principal underwriter in a continuous public offering of the Funds' 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 Funds have adopted a Distribution Plan (the "Plan") in accordance with
Rule 12b-1 under the 1940 Act. The Plan provides that the Funds may pay a fee to
the Distributor at an annual rate of up to 0.20% of the average daily net assets
of the Funds. The fee is paid to the Distributor as reimbursement for, or in
anticipation of, expenses incurred for distribution-related activity. During the
period ended March 31, 1999, the Perkins Discovery Fund and the Perkins
Opportunity Fund paid the Distributor $1,407 and $77,497 under the Plan,
respectively.
NOTE 5 - SHAREHOLDER SERVICING FEE
The Funds have entered into a Shareholder Service Agreement with the
Advisor, under which the Funds pay servicing fees at an annual rate of up to
0.25% of each 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 Funds.
The services provided by such intermediaries are primarily designed to assist
shareholders of the Funds and include the furnishing of office space and
equipment, telephone facilities, personnel and assistance to the Funds in
servicing such shareholders. Services provided by such intermediaries also
include the provision of support services to the Funds and include establishing
and maintaining shareholders' accounts and record processing, purchase and
redemption transactions, answering routine client inquiries regarding the Funds,
and providing such other personal services to shareholders as the Funds may
reasonably request. For the period ended March 31, 1999, the Perkins Discovery
Fund and the Perkins Opportunity Fund incurred $1,126 and $55,740 in Shareholder
Servicing fees, respectively.
NOTE 6 - PURCHASES AND SALES OF SECURITIES
For the period ended March 31, 1999, the cost of purchases and the proceeds
from sales of securities for the Perkins Discovery Fund, excluding short-term
securities, were $1,248,488 and $597,976, respectively.
For the year ended March 31, 1999, the cost of purchases and the proceeds
from sales of securities for the Perkins Opportunity Fund, excluding short-term
securities, were $7,302,753 and $22,220,190, respectively.
NOTE 7 - REPURCHASE AGREEMENTS
The Funds may enter into repurchase agreements with government securities
dealers recognized by the Federal Reserve Board, with member banks of the
Federal Reserve System or with such other brokers or dealers
21
<PAGE>
THE PERKINS OPPORTUNITY FUND LOGO
THE PERKINS DISCOVERY FUND LOGO
NOTES TO FINANCIAL STATEMENTS, Continued
- --------------------------------------------------------------------------------
that meet the credit guidelines established by the Board of Trustees. The Funds
will always receive and maintain, as collateral, securities whose market value,
including accrued interest, will be at least equal to 100% of the dollar amount
invested by the Funds in each agreement, and the Funds will make payment for
such securities only upon physical delivery or upon evidence of book entry
transfer to the account of the custodian. To the extent that any repurchase
transaction exceeds one business day, the value of the collateral is
marked-to-market on a daily basis to ensure the adequacy of the collateral.
If the seller defaults and the value of the collateral declines, or if
bankruptcy proceedings are commenced with respect to the seller of the security,
realization of the collateral by the Funds may be delayed or limited.
NOTE 8 - 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 year ended March 31, 1999, the Perkins
Opportunity Fund had the following transactions with affiliated companies:
<TABLE>
<CAPTION>
Shares Held
-------------------------------------------------- Value Realized
March 31, Shares Shares March 31, March 31, Dividend Gain/
1998 Purchased Sold 1999 1999 Income (Loss)
---- --------- ---- ---- ---- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Everest Medical Corp.:
550,000 -- 50,000 500,000 $ 750,000 -- $ (19,410)
Insignia Systems, Inc.:
500,000 -- -- 500,000 812,500 -- --
Micro Component Technology, Inc.:
410,000 -- 10,000 400,000 750,000 -- (19,220)
Minnesota Brewing Co.:
300,000 -- 50,000 250,000 390,625 -- (164,468)
Reality Interactive, Inc.:
275,000 -- 25,000 250,000 30,000 -- (141,000)
Reality Interactive, Inc. - Warrants:
275,000 -- -- 275,000 275 -- --
-----------------------------------
Totals $ 2,733,400 -- $(344,098)
===================================
</TABLE>
22
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
TO THE SHAREHOLDERS OF
THE PERKINS DISCOVERY FUND and THE PERKINS OPPORTUNITY FUND and
THE BOARD OF TRUSTEES OF
PROFESSIONALLY MANAGED PORTFOLIOS
We have audited the accompanying statements of assets and liabilities of
the Perkins Discovery Fund and of the Perkins Opportunity Fund, each a series of
shares of the Professionally Managed Portfolios, including the schedules of
investments, as of March 31, 1999, and the related statements of operations for
the period then ended, the statements of changes in net assets, and the
financial highlights for the period then ended. These financial statements and
financial highlights are the responsibility of the Funds' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of March
31, 1999, by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
Perkins Discovery Fund and the Perkins Opportunity Fund as of March 31, 1999,
the results of their operations, the changes in their net assets and the
financial highlights for the period then ended, in conformity with generally
accepted accounting principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
April 16, 1999
<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.
4455 East Camelback Road, Suite 261E
Phoenix, AZ 85018
*
CUSTODIAN
Firstar Bank, N.A.
425 Walnut Street
Cincinnati, OH 45202
*
TRANSFER AGENT AND SHAREHOLDER SERVICES
PFPC, Inc.
P.O. Box 8813
Wilmington, DE 19899-8813
(800) 280-4779
*
AUDITORS
Tait, Weller & Baker
8 Penn Center Plaza, Suite 800
Philadelphia, PA 19101
*
LEGAL COUNSEL
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.
