[THE PERKINS DISCOVERY FUND LOGO]
[THE PERKINS OPPORTUNITY FUND LOGO]
SEMI-ANNUAL REPORT
TO SHAREHOLDERS FOR
THE SIX MONTHS ENDED
SEPTEMBER 30, 1999
<PAGE>
[THE PERKINS DISCOVERY FUND LOGO]
[THE PERKINS OPPORTUNITY FUND LOGO]
November 10, 1999
Dear Shareholders:
In our last shareholder letter we talked about the improved performance in small
company growth stocks. Since then the market leadership has continued to shift
from the large-cap stocks to small-cap stocks, although during much of 1999 the
market has still been led by the large-caps. Obviously, they don't just ring a
bell to signal the change in leadership. Instead it happens slowly, often over
an extended period of time. Why do we believe this change should be taking place
now? As we discussed in our last shareholder letter, for the last 3+ years the
market's gains have been fueled by a few of the largest mega-cap stocks. As an
article on page C1 of the November 8, 1999 Wall Street Journal points out, the
65 largest companies out of 4845 in the NASDAQ Composite Index accounted for
almost all of its gain since the October 1998 bottom. Three of those stocks
accounted for 40% of that gain. Over this same period of time the advance
decline line, a measure of what stocks have done on average, has been down. This
is a cycle that exists between the performance of large vs. small company
stocks, and although at times it seems that the current trend will go on
forever, that is not possible. Once the pendulum has swung too far to one side,
it must stop and swing back. The chart below, which shows relative P/E ratios by
market cap segment, serves to illustrate this point. You can see that currently
the fifty largest companies sell with the greatest P/E premium while the
smallest companies sell with the largest discount. In fact the smaller company
relative P/E recently was at a lower level than the bottom in 1990, the last
time the cycle changed.
[GRAPHIC DESCRIPTION]
Morgan Stanley Dean Witter Research graph of "Relative P/E Ratios By Market Cap
Segment" from 1988 to 1999 of the top 1500 market cap companies.
Source: Morgan Stanley Dean Witter Research
<PAGE>
[THE PERKINS DISCOVERY FUND LOGO]
[THE PERKINS OPPORTUNITY FUND LOGO]
As we mentioned in our last letter, The Perkins Opportunity Fund has a
significant tax loss carry forward. This is an asset for taxable investors since
the fund may be able to take gains of up to $6.12 per share, without creating a
tax liability. How did we get in this position? During 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 was the second best performing
general mutual fund for 1995. 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. This
can work in reverse when the cycle for small stocks changes. The Fund has many
good holdings that have the potential for capital appreciation and will not have
to distribute any tax liability until its carry forward is used up. 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 to take advantage
of this hidden asset when the next upswing in the Fund's portfolio takes place.
The Discovery Fund, which is just 1 1/2 years old, 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 26 stocks and, therefore, price increases in just a few can be
meaningful.
The following table shows the Funds' returns by year and since inception,
compared to several popular indices.
THE PERKINS THE PERKINS RUSSELL NASDAQ S&P
DISCOVERY OPPORTUNITY 2000 COMPOSITE 500
CALENDAR PERIOD FUND FUND INDEX INDEX INDEX
- --------------- ---- ---- ----- ----- -----
1993 -- 39.52% 17.62% 17.26% 10.67%
1994 -- 14.85% (3.18)% (3.20)% 1.27%
1995 -- 70.35% 26.21% 39.92% 37.53%
1996 -- (7.33)% 14.76% 22.71% 22.99%
1997 -- (17.08)% 20.52% 21.64% 33.34%
1998 - Discovery (Part Yr) 9.67% -- (11.23)% 21.34% 12.84%
- Opportunity -- (16.01)% (3.45)% 39.63% 28.57%
1999 (YTD to 10/31/99) 25.96% 27.92% 1.58% 35.29% 12.03%
Annualized - Discovery 22.98% -- (7.00)% 36.72% 15.58%
Annualized - Opportunity -- 12.88% 10.47% 25.06% 21.26%
(Inception to 10/31/99)
2
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[THE PERKINS DISCOVERY FUND LOGO]
[THE PERKINS OPPORTUNITY FUND LOGO]
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 of April 9, 1998 through September 30, 1999 was 19.70%
and for the 12 months ended on that date was 48.20%. The Opportunity Fund's
average annual total return, after the maximum sales charge of 4.75%, from
inception of February 18, 1993 through September 30, 1999 was 10.56%, for the
five-year period ended on that date was 3.89% and for the 12 months ended on
that date was 23.42%. 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 fund is distributed by First Fund
Distributors, Inc., Phoenix, AZ 85018.
3
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[THE PERKINS DISCOVERY FUND LOGO]
SCHEDULE OF INVESTMENTS AT SEPTEMBER 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
Shares COMMON STOCKS: 83.2% Value
- --------------------------------------------------------------------------------
COMPUTER - DATA SECURITY: 0.8%
5,000 Datakey, Inc.*........................................... $ 7,500
---------
COMPUTER - INTEGRATED SYSTEMS: 15.9%
7,500 Check Technology Corp.*.................................. 21,562
6,500 Ontrack Data International, Inc.*........................ 35,953
2,500 Optimal Robotics Corp.*.................................. 45,000
8,000 United Shipping & Technology, Inc.*...................... 46,000
---------
148,515
---------
COMPUTER - INTERNET: 2.7%
4,000 OnHealth Network Company*................................ 25,000
---------
COMPUTER - SOFTWARE: 15.7%
10,000 ALPNET, Inc.*............................................ 22,500
7,500 Cover-All Technologies, Inc.............................. 10,780
5,000 Fourth Shift Corp.*...................................... 14,688
2,500 Interspeed, Inc.*........................................ 44,063
4,000 IntraNet Solutions, Inc.*................................ 34,500
7,500 Spanlink Communications, Inc.*........................... 20,625
---------
147,156
---------
DISTRIBUTION/WHOLESALE: 2.9%
2,500 En Pointe Technologies, Inc.*............................ 26,875
---------
MEDICAL - DRUGS: 1.7%
10,000 GalaGen, Inc.*........................................... 16,250
---------
MEDICAL INSTRUMENTS: 6.9%
15,000 Conceptus, Inc.*......................................... 24,375
5,000 Diametrics Medical, Inc.*................................ 25,000
5,000 Lectec Corp.*............................................ 15,312
---------
64,687
---------
See Accompanying Notes to Financial Statements.
4
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[THE PERKINS DISCOVERY FUND LOGO]
SCHEDULE OF INVESTMENTS AT SEPTEMBER 30, 1999 (UNAUDITED), CONTINUED
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
MISCELLANEOUS MANUFACTURING: 17.9%
2,500 American Educational Product, Inc.*...................... $ 25,469
4,000 Creative Master International, Inc.*..................... 16,250
1,500 Koala Corp.*............................................. 46,125
2,500 Northstar Computer Forms, Inc............................ 26,875
2,000 Panja, Inc.*............................................. 25,875
3,500 Troy Group, Inc.*........................................ 26,469
---------
167,063
---------
RETAIL: 6.7%
4,000 Damark International, Inc.*.............................. 40,250
4,000 Diedrich Coffee, Inc.*................................... 17,000
5,000 Evans, Inc.*............................................. 5,156
---------
62,406
---------
TELECOMMUNICATIONS: 12.0%
25,000 ACI Telecentrics, Inc.*.................................. 23,438
3,000 Metro One Telecommunications*............................ 57,563
10,000 Onelink Communication, Inc.*............................. 20,625
8,500 RSI Systems, Inc.*....................................... 10,625
---------
112,251
---------
Total Common Stocks (cost $750,454)..................... 777,703
---------
WARRANTS: 0.2%
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE: 0.2%
1,500 Digital Lava, Inc., Exp. 2/17/2004 ...................... 1,875
---------
Total Warrants (cost $150)............................... 1,875
---------
Principal
Amount REPURCHASE AGREEMENT: 18.0%
- --------------------------------------------------------------------------------
$168,000 Firstar Bank Repurchase Agreement, 3.30%, dated
9/30/1999, due 10/1/1999, collateralized by $171,358
FNMA, 6.00%, due 3/01/2013 (proceeds $168,015)
(cost $168,000) ......................................... 168,000
---------
See Accompanying Notes to Financial Statements.
5
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[THE PERKINS DISCOVERY FUND LOGO]
SCHEDULE OF INVESTMENTS AT SEPTEMBER 30, 1999 (UNAUDITED), CONTINUED
- --------------------------------------------------------------------------------
Value
- --------------------------------------------------------------------------------
Total Investments In Securities (cost
$918,604+): 101.4% ................................... $ 947,578
Liabilities in excess of other assets: (1.4)% ........... (12,773)
---------
Total Net Assets: 100.0% ................................ $ 934,805
=========
* Non-income producing security.
+ At September 30, 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............................ $ 159,105
Gross unrealized depreciation............................ (130,131)
---------
Net unrealized appreciation.................. $ 28,974
=========
See Accompanying Notes to Financial Statements
6
<PAGE>
[THE PERKINS DISCOVERY FUND LOGO]
STATEMENT OF ASSETS AND LIABILITIES AT SEPTEMBER 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
Investments in securities, at value (cost $918,604) ....... $ 947,578
Cash ...................................................... 537
Receivables:
Due from Advisor .................................... 9,945
Interest ............................................ 15
Prepaid expenses and other assets ......................... 10,792
---------
Total assets ........................................ 968,867
---------
LIABILITIES
Administration fees ....................................... 2,548
Other Accrued expenses .................................... 31,514
---------
Total liabilities ................................... 34,062
---------
NET ASSETS ...................................................... $ 934,805
=========
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($934,805/45,515 shares outstanding; unlimited
number of shares authorized without par value) ...... $ 20.54
=========
COMPUTATION OF OFFERING PRICE PER SHARE
(Net asset value $20.54/.9525) ...................... $ 21.56
=========
COMPONENTS OF NET ASSETS
Paid-in capital ........................................... $ 715,881
Undistributed net investment loss ......................... (9,379)
Undistributed net realized gain on investments ............ 199,329
Net unrealized appreciation on investments ................ 28,974
---------
Net assets .......................................... $ 934,805
=========
See Accompanying Notes to Financial Statements.
7
<PAGE>
[THE PERKINS DISCOVERY FUND LOGO]
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Income
Interest .................................................... $ 727
Dividends ................................................... 675
---------
Total income .............................................. 1,402
---------
Expenses
Transfer agent fees ......................................... 22,812
Administration fees ......................................... 15,041
Registration fees ........................................... 9,525
Fund accounting fees ........................................ 7,407
Audit fees .................................................. 5,254
Advisory fees ............................................... 4,312
Custody fees ................................................ 3,611
Reports to shareholders ..................................... 1,694
Amortization of deferred organization costs ................. 1,504
Trustee fees ................................................ 1,504
Miscellaneous fees .......................................... 1,504
Distribution fees ........................................... 1,078
Shareholder service fees .................................... 862
---------
Total expenses ............................................ 76,108
Less: expenses waived and reimbursed ...................... (65,327)
---------
Net expenses .............................................. 10,781
---------
NET INVESTMENT LOSS ..................................... (9,379)
---------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from security transactions .................. 200,530
Unrealized depreciation on investments ........................ (45,535)
---------
Net realized and unrealized gain on investments ............... 154,995
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ..... $ 145,616
=========
See Accompanying Notes to Financial Statements.
8
<PAGE>
[THE PERKINS DISCOVERY FUND LOGO]
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
Six Months April 9, 1998*
Ended through
September 30, 1999# March 31, 1999
- --------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM:
OPERATIONS
Net investment loss ........................... $ (9,379) $ (6,980)
Net realized gain (loss) from
security transactions ....................... 200,530 (1,201)
Net unrealized appreciation (depreciation)
on investments .............................. (45,535) 74,509
--------- ---------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ............................... 145,616 66,328
--------- ---------
CAPITAL SHARE TRANSACTIONS
Net increase (decrease) in net assets derived
from net change in outstanding shares (a) ... (7,586) 730,447
--------- ---------
TOTAL INCREASE IN NET ASSETS .................... 138,030 796,775
NET ASSETS
Beginning of period ........................... 796,775 -0-
--------- ---------
END OF PERIOD ................................... $ 934,805 $ 796,775
========= =========
(a) A summary of capital shares transactions is as follows:
April 9, 1998
Six Months Ended through
September 30, 1999# March 31, 1999
----------------- ------------------
Shares Value Shares Value
------ ----- ------ -----
Shares sold ............ 2,637 $ 50,512 60,507 $ 942,959
Shares redeemed ........ (3,040) (58,098) (14,589) (212,512)
------ -------- ------- ---------
Net increase (decrease) (403) $ (7,586) 45,918 $ 730,447
====== ======== ======= =========
* Commencement of operations.
# Unaudited.
See Accompanying Notes to Financial Statements.
9
<PAGE>
[THE PERKINS DISCOVERY FUND LOGO]
FINANCIAL HIGHLIGHTS
FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
Six Months April 9, 1998*
Ended through
September 30, 1999# March 31, 1999
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period................... $17.35 $15.00
------ ------
Income from investment operations:
Net investment loss................................. (0.21) (0.15)
Net realized and unrealized gain on investments..... 3.40 2.50
------ ------
Total from investment operations....................... 3.19 2.35
------ ------
Net asset value, end of period......................... $20.54 $17.35
====== ======
Total return........................................... 18.39% 15.67%
Ratios/supplemental data:
Net assets, end of period (millions)................... $ 0.9 $ 0.8
Ratio of expenses to average net assets:
Before expense reimbursement........................ 17.68%+ 24.67%+
After expense reimbursement......................... 2.50%+ 2.50%+
Ratio of net investment loss to average net assets:
Before expense reimbursement........................ (17.36)%+ (23.41)%+
After expense reimbursement......................... (2.18)%+ (1.24)%+
Portfolio turnover rate................................ 60.98% 137.32%
</TABLE>
* Commencement of operations.
# Unaudited.
+ Annualized.
See accompanying Notes to Financial Statements.
10
<PAGE>
[THE PERKINS OPPORTUNITY FUND LOGO]
SCHEDULE OF INVESTMENTS AT SEPTEMBER 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
Shares COMMON STOCKS: 89.0% Value
- --------------------------------------------------------------------------------
BUSINESS SERVICES: 1.8%
87,500 Appliance Recycling Centers of America, Inc.*.......... $ 76,563
437,500 Health Fitness Corp.*.................................. 191,406
449,300 Integrated Security Systems, Inc.*..................... 211,171
250,000 Reality Interactive, Inc. (a)*......................... 17,500
-----------
496,640
-----------
COMPUTER - INTERNET: 6.2%
250,000 OnHealth Network Company*.............................. 1,562,500
50,000 VCampus Corporation*................................... 156,250
-----------
1,718,750
-----------
COMPUTER - MEMORY DEVICES: 4.0%
100,000 Ciprico, Inc.*......................................... 1,112,500
-----------
COMPUTER - PERIPHERAL EQUIPMENT: 2.5%
200,000 Digital Biometrics, Inc.*.............................. 562,500
100,000 RSI Systems, Inc.*..................................... 125,000
-----------
687,500
-----------
COMPUTER - SOFTWARE: 17.2%
50,000 3DO Company............................................ 503,125
225,000 Delphi Information Systems, Inc.*...................... 1,518,750
200,000 Fourth Shift Corp.*.................................... 587,500
225,000 Intranet Solutions, Inc.*.............................. 1,940,625
115,000 OneLink Communications, Inc.*.......................... 237,188
-----------
4,787,188
-----------
CONSUMER PRODUCTS - MISCELLANEOUS: 1.9%
250,000 Minnesota Brewing Company (a)*......................... 531,250
-----------
ELECTRICAL PRODUCTS - MISCELLANEOUS: 10.9%
300,000 Destron Fearing Corp.*................................. 665,625
750,000 Insignia Systems, Inc. (a)*............................ 562,500
313,000 Micro Component Technology, Inc.*...................... 1,212,875
100,000 Sheldahl, Inc.*........................................ 587,500
-----------
3,028,500
-----------
See accompanying Notes to Financial Statements.
11
<PAGE>
[THE PERKINS OPPORTUNITY FUND LOGO]
SCHEDULE OF INVESTMENTS AT SEPTEMBER 30, 1999 (UNAUDITED), CONTINUED
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
LEISURE - GAMING: 0.8%
100,000 Innovative Gaming Corporation of America*.............. $ 231,250
-----------
MEDICAL - DRUGS: 4.9%
250,000 GalaGen, Inc.*......................................... 406,250
75,000 MGI Pharma, Inc.*...................................... 975,000
-----------
1,381,250
-----------
MEDICAL - PRODUCTS: 23.8%
150,000 ATS Medical, Inc.*..................................... 1,490,625
250,000 Diametrics Medical, Inc.* ............................. 1,250,000
50,000 Eclipse Surgical Tech., Inc.*.......................... 825,000
500,000 Everest Medical Corp. (a)*............................. 843,750
400,000 InnerDyne, Inc.*....................................... 1,300,000
62,500 Lectec Corp. .......................................... 191,406
175,000 Spectrascience, Inc.*.................................. 743,750
-----------
6,644,531
-----------
RETAIL - MISCELLANEOUS: 4.3%
75,000 Wilsons The Leather Experts, Inc.*..................... 1,200,000
-----------
RETAIL - RESTAURANTS: 1.1%
200,000 Big Buck Brewery & Steakhouse, Inc.*................... 300,000
-----------
TELECOMMUNICATIONS - EQUIPMENT AND SERVICES: 5.5%
85,000 Choicetel Communications, Inc.*........................ 191,250
100,000 Norstan, Inc.*......................................... 800,000
250,000 Zamba Corp.*........................................... 531,250
-----------
1,522,500
-----------
TRAVEL: 4.1%
50,000 American Classic Voyages Co.*.......................... 1,146,875
-----------
Total Common Stocks (cost $36,074,391)................ 24,788,734
-----------
See accompanying Notes to Financial Statements.
12
<PAGE>
[THE PERKINS OPPORTUNITY FUND LOGO]
SCHEDULE OF INVESTMENTS AT SEPTEMBER 30, 1999 (UNAUDITED), CONTINUED
- --------------------------------------------------------------------------------
Shares WARRANTS: 0.9% Value
- --------------------------------------------------------------------------------
BUSINESS SERVICES: 0.0%
275,000 Reality Interactive, Inc., Exp. 4/10/00 (a)............ $ 275
-----------
COMPUTER SOFTWARE: 0.9%
70,000 IntraNet Solutions, Inc., Exp. 7/22/2002 .............. 241,150
-----------
ELECTRICAL: 0.0%
100,000 Barringer Tech, Inc., Exp. 11/12/1999.................. 0
-----------
RETAIL - RESTAURANTS: 0.0%
300,000 Big Buck Brewery & Steakhouse, Inc., Exp. 6/12/2000 ... 9,375
-----------
TELECOMMUNICATIONS: 0.0%
85,000 Choicetel Communications, Exp. 11/10/2002.............. 13,281
-----------
Total Warrants (cost $5,000)........................... 264,081
-----------
Principal
Amount REPURCHASE AGREEMENT: 11.4%
- --------------------------------------------------------------------------------
$3,164,000 Firstar Bank Repurchase Agreement, 3.30%, dated 9/30/99,
due 10/1/1999, collateralized by $3,227,247 FNMA, 6.00%,
due 3/01/2013 (proceeds $3,164,290) (cost $3,164,000) 3,164,000
-----------
Total Investments In Securities
(cost $39,243,391+): 101.3%............................ 28,216,815
Liabilities in excess of Other Assets: (1.3%).......... (364,642)
-----------
TOTAL NET ASSETS: 100.0%............................... $27,852,173
===========
* Non-Income producing security.
(a) Affiliated company (see Note 8).
See accompanying Notes to Financial Statements.
13
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[THE PERKINS OPPORTUNITY FUND LOGO]
SCHEDULE OF INVESTMENTS AT SEPTEMBER 30, 1999 (UNAUDITED), CONTINUED
- --------------------------------------------------------------------------------
Value
- --------------------------------------------------------------------------------
+ At September 30, 1999, the basis of securities for Federal income tax purposes
was the same as their cost for financial reporting purposes. Unrealized
appreciation and depreciation were as follows:
Gross unrealized appreciation......................... $ 3,964,412
Gross unrealized depreciation......................... (14,990,988)
------------
Net unrealized depreciation...................... $(11,026,576)
============
See accompanying Notes to Financial Statements.
14
<PAGE>
[THE PERKINS OPPORTUNITY FUND LOGO]
STATEMENT OF ASSETS AND LIABILITIES AT SEPTEMBER 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
Investments in securities, at value (cost 39,243,391)........ $28,216,815
Cash......................................................... 390
Receivables:
Securities sold........................................ 40,624
Fund shares sold....................................... 1,302
Interest............................................... 290
Prepaid expenses and other assets............................ 22,578
-----------
Total assets........................................... 28,281,999
-----------
LIABILITIES
Payables:
Fund shares redeemed................................... 112,103
Advisory fees.......................................... 23,680
Administration fees.................................... 3,931
Other accrued expenses....................................... 290,112
-----------
Total liabilities...................................... 429,826
-----------
NET ASSETS......................................................... $27,852,173
===========
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($27,852,173/2,268,461 shares outstanding; unlimited
number of shares authorized without par value)......... $ 12.28
===========
COMPUTATION OF OFFERING PRICE PER SHARE
(Net asset value $12.28/.9525)......................... $ 12.89
===========
COMPONENTS OF NET ASSETS
Paid-in capital.............................................. $54,183,736
Undistributed net investment loss............................ (245,117)
Accumulated net realized loss on investments................. (15,059,870)
Net unrealized depreciation on investments................... (11,026,576)
-----------
Net assets............................................. $27,852,173
===========
See accompanying Notes to Financial Statements.
15
<PAGE>
[THE PERKINS OPPORTUNITY FUND LOGO]
STATEMENT OF OPERATIONS - FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1999
(UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Income
Dividends.................................................. $ 59,296
Interest................................................... 11,270
-----------
Total income......................................... 70,566
-----------
Expenses
Advisory fees.............................................. 154,094
Distribution fees.......................................... 30,819
Administration fees........................................ 23,524
Shareholder service fees................................... 23,113
Transfer agent fees........................................ 21,493
Fund accounting fees....................................... 14,274
Legal fees................................................. 11,250
Custody fees............................................... 11,011
Registration fees.......................................... 9,526
Audit fees................................................. 6,942
Insurance.................................................. 6,081
Trustee fees............................................... 2,320
Miscellaneous.............................................. 1,236
-----------
Total expenses....................................... 315,683
-----------
NET INVESTMENT LOSS .............................. (245,117)
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss from security transactions..................... (65,445)
Unrealized appreciation on investments........................... 1,601,155
-----------
Net realized and unrealized gain on investments............ 1,535,710
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.. $ 1,290,593
===========
See accompanying Notes to Financial Statements.
16
<PAGE>
[THE PERKINS OPPORTUNITY FUND LOGO]
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Six Months Year Ended
Ended March 31,
September 30, 1999# 1998
- --------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS
Net investment loss...................................... $ (245,117) $ (652,978)
Net realized loss from security transactions............. (65,445) (2,754,312)
Unrealized appreciation (depreciation) on investments.... 1,601,155 (5,416,328)
----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS .................................... 1,290,593 (8,823,618)
----------- -----------
CAPITAL SHARE TRANSACTIONS
Net decrease in net assets derived from net change
in outstanding shares (a)............................. (5,212,820) (15,531,012)
----------- -----------
TOTAL DECREASE IN NET ASSETS ...................... (3,922,227) (24,354,630)
NET ASSETS
Beginning of period...................................... 31,774,400 56,129,030
----------- -----------
END OF PERIOD .............................................. $27,852,173 $31,774,400
=========== ===========
(a) A summary of capital share transactions is as follows:
Six Months Ended Year Ended
September 30, 1999# March 31, 1999
------------------------- --------------------------
Shares Value Shares Value
-------- ----------- ---------- ------------
Shares sold.......... 77,399 $ 974,497 261,889 $ 3,012,619
Shares redeemed...... (490,334) (6,187,317) (1,521,977) (18,543,631)
-------- ----------- ---------- ------------
Net decrease ........ (412,935) $(5,212,820) (1,260,088) $(15,531,012)
======== =========== ========== ============
</TABLE>
# Unaudited.
See accompanying Notes to Financial Statements.
17
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[THE PERKINS OPPORTUNITY FUND LOGO]
FINANCIAL HIGHLIGHTS
FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Six Months Year Ended March 31,
Ended ------------------------------------------------------
September 30, 1999# 1999 1998 1997 1996++ 1995++
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period................. $11.85 $14.24 $12.58 $18.78 $13.03 $10.37
------ ------ ------ ------ ------ ------
Income from investment operations:
Net investment loss................. (0.11) (0.24) (0.34) (0.24) (0.12) (0.13)
Net realized and unrealized gain
(loss) on investments............ 0.54 (2.15) 2.00 (4.98) 6.66 3.79
------ ------ ------ ------ ------ ------
Total from investment operations....... 0.43 (2.39) 1.66 (5.22) 6.54 3.66
------ ------ ------ ------ ------ ------
Less distributions
From net realized gains............. -- -- -- (0.98) (0.79) (1.00)
------ ------ ------ ------ ------ ------
Net asset value, end of period......... $12.28 $11.85 $14.24 $12.58 $18.78 $13.03
====== ====== ====== ====== ====== ======
Total return........................... 3.63% (16.78)% 13.20% (28.94)% 51.29% 38.72%
Ratios/supplemental data:
Net assets, end of period (millions)... $ 27.9 $ 31.8 $ 56.1 $ 75.3 $ 92.3 $ 12.5
Ratio of expenses to average net assets:
Before expense reimbursement........ 2.05%+ 2.24% 2.27% 1.90% 1.97% 3.08%
After expense reimbursement......... 2.05%+ 2.24% 2.27% 1.90% 1.97% 2.63%
Ratio of net investment loss to
average net assets:
Before expense reimbursement........ (1.59)%+ (1.69)% (1.85)% (1.25)% (1.16)% (2.76)%
After expense reimbursement......... (1.59)%+ (1.69)% (1.85)% (1.25)% (1.16)% (2.31)%
Portfolio turnover rate................ 0.92% 19.34% 53.37% 86.88% 92.45% 124.86%
</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 of business on June 3, 1996.
See accompanying Notes to Financial Statements.
18
<PAGE>
[THE PERKINS DISCOVERY FUND LOGO]
[THE PERKINS OPPORTUNITY FUND LOGO]
NOTES TO FINANCIAL STATEMENTS AT SEPTEMBER 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
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 are 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 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 Nasdaq 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 its 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, DIVIDEND INCOME AND DISTRIBUTIONS. 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
Adviser in connection with the organization and registration of the
Perkins Discovery Fund have been 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
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.
19
<PAGE>
[THE PERKINS DISCOVERY FUND LOGO]
[THE PERKINS OPPORTUNITY FUND LOGO]
NOTES TO FINANCIAL STATEMENTS (UNAUDITED), CONTINUED
- --------------------------------------------------------------------------------
NOTE 3 - COMMITMENTS AND OTHER RELATED PARTY TRANSACTIONS
For the six months ended September 30, 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 six months ended September 30, 1999, the
Perkins Discovery Fund and the Perkins Opportunity Fund incurred $4,312 and
$154,094 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 the average
daily net assets. For the six months ended September 30, 1999, the Advisor has
waived its fees and reimbursed the Perkins Discovery Fund in the amount of
$65,327.
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 tax 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
For the six months ended September 30, 1999, the Perkins Discovery Fund and
the Perkins Opportunity Fund incurred $15,041 and $23,524 in administration
fees, respectively.
20
<PAGE>
[THE PERKINS DISCOVERY FUND LOGO]
[THE PERKINS OPPORTUNITY FUND LOGO]
NOTES TO FINANCIAL STATEMENTS (UNAUDITED), CONTINUED
- --------------------------------------------------------------------------------
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
six months ended September 30, 1999, the Perkins Discovery Fund and the Perkins
Opportunity Fund paid the Distributor $1,078 and $30,819 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 six months ended September 30, 1999, the Perkins
Discovery Fund and Perkins Opportunity Fund incurred $862 and $23,113 in
shareholder servicing fees, respectively.
NOTE 6 - PURCHASES AND SALES OF SECURITIES
For the six months ended September 30, 1999, the cost of purchases and the
proceeds from sales of securities, for the Perkins Discovery Fund, excluding
short-term securities, were $475,929 and $616,727, respectively.
For the six months ended September 30, 1999, the cost of purchases and the
proceeds from sales of securities for the Perkins Opportunity Fund, excluding
short-term securities, were $271,875 and $10,600,028, respectively.
21
<PAGE>
[THE PERKINS DISCOVERY FUND LOGO]
[THE PERKINS OPPORTUNITY FUND LOGO]
NOTES TO FINANCIAL STATEMENTS (UNAUDITED), CONTINUED
- --------------------------------------------------------------------------------
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 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 with 5% or more of their outstanding voting
shares held by either Fund. During the six months ended September 30, 1999, the
Perkins Opportunity Fund had the following transactions with affiliated
companies:
<TABLE>
<CAPTION>
Shares Held
------------------------------------------- Value
March 31, Shares Shares September 30, September 30, Realized
1998 Purchased Sold 1999 1999 Gain
------- --------- ---- ------- ---------- --------
<S> <C> <C> <C>
Everest Medical Corp.: 500,000 -- 500,000 $ 843,750 --
Insignia Systems Inc.: 500,000 250,000 -- 750,000 562,500 --
Micro Component Technology, Inc.: 400,000 400,000 -- -- $182,977
Minnesota Brewing Co.: 250,000 -- 250,000 531,250 --
Reality Interactive, Inc.: 250,000 -- 250,000 17,500 --
Reality Interactive, Inc.- Warrants: 275,000 275,000 -- -- --
---------- --------
TOTALS $1,955,275 $182,977
========== ========
</TABLE>
22
<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 Institutional Custody Services
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.
