[JAMES C. EDWARDS LOGO]
JAMES C. EDWARDS
EQUITY MASTERS FUND
SEMI-ANNUAL REPORT
FOR THE SIX MONTHS ENDED
SEPTEMBER 30, 1999
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JAMES C. EDWARDS EQUITY MASTERS FUND
November 26, 1999
Dear Shareholders:
The third quarter of 1999 marks two quarters that the James C. Edwards Equity
Masters Fund has been in operation. For the six months ending September 30, 1999
the Fund had a total return of -6.00% compared with a return of 0.36% for the
S&P 500 (w/ dividends). At the beginning of the quarter, the Fund had 51% of its
assets invested in equities with the remainder invested in cash instruments. As
the domestic equity market pulled back, we began putting the cash to work as
valuations in certain areas became more compelling. By the end of the quarter we
were down to 18.2% in cash. At September 30, 1999, the sector allocation as a
percentage of equities was as follows: Consumer Staples 13%, Financial 22%,
Health 15%, Service 10%, Technology 21%, Utilities 9%, Media 5%, Conglomerates
5%.
Reflecting ongoing strength in our economy, coupled with recoveries in Europe
and Asia, investor concern about inflation continues to ebb and flow with the
almost daily release of new statistical information. So far the overall rate of
inflation has remained remarkably subdued. Nevertheless, the Fed's recent
decision to raise its key federal funds rate for the third time this year
underscores its resolve to keep inflationary pressures under control. Still,
some prices have been climbing, notably for such things as housing, oil, metals
and paper, and for transportation charges where margins have been squeezed by
higher energy costs. In addition, easy credit is fostering an explosion in
business and personal debt, and personal bankruptcies are expected to remain at
a high level. All things considered, the economic forest still looks pretty good
even though some of the trees are beginning to show signs of rot. While the
market has been in a strong rally since mid-October, it is probably due for a
rest as Y2K uncertainties once again rise to the surface.
James C. Edwards & Company is honored to be managing the money that you have
placed with this Fund. Please do not hesitate to call us if you have any
questions or comments regarding the Fund's activities at (212) 319-8488.
Sincerely,
/s/ Bart A. Johnston
Bart A. Johnston
Vice President
Portfolio Manager
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SCHEDULE OF INVESTMENT AT SEPTEMBER 30, 1999 (UNAUDITED)
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Shares COMMON STOCKS: 87.2% Value
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ADVERTISING SERVICES: 4.1%
1,000 TMP Worldwide Inc.*.................................. $ 60,875
-----------
COMMERCIAL SERVICES: 2.7%
2,000 Convergys Corp.*..................................... 39,625
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COMPUTERS: 9.2%
1,000 EMC Corp.*........................................... 71,437
700 Sun Microsystems, Inc.*.............................. 65,100
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136,537
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DATA PROCESSING/MANAGEMENT: 2.4%
1,900 Sterling Commerce, Inc.*............................. 35,269
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FINANCIAL SERVICES: 3.6%
600 Morgan Stanley Dean Witter & Co...................... 53,513
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FOODS: 6.2%
1,000 Groupe Danone-Sponsored ADR.......................... 48,438
1,000 H.J. Heinz Company................................... 43,000
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91,438
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INSURANCE: 7.4%
600 American International Group, Inc.................... 52,162
1,300 XL Capital Ltd....................................... 58,500
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110,662
-----------
MANUFACTURING - MISC./DIVERSIFIED: 9.5%
2,700 AptarGroup, Inc...................................... 72,225
1,000 Corning Inc.......................................... 68,562
-----------
140,787
-----------
MEDICAL - DRUGS: 9.9%
1,200 American Home Products Corp.......................... 49,800
700 Eli Lilly and Company................................ 44,800
800 Warner-Lambert Company............................... 53,100
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147,700
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See accompanying Notes to Financial Statements.
2
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JAMES C. EDWARDS EQUITY MASTERS FUND
SCHEDULE OF INVESTMENT AT SEPTEMBER 30, 1999 (UNAUDITED), CONTINUED
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Shares Value
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MEDICAL - WHOLESALE DRUG DISTRIBUTION: 2.9%
800 Cardinal Health, Inc................................. $ 43,600
-----------
SPECIALTY RETAIL: 3.7%
2,500 Staples, Inc.*....................................... 54,531
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SUPER-REGIONAL BANKS: 9.0%
2,000 Bank One Corp........................................ 69,625
1,800 First Union Corp..................................... 64,012
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133,637
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TELECOM SERVICES: 4.0%
1,500 Qwest Communications International Inc.*............. 44,344
600 Telesp Celular Participacoes S.A.*................... 15,675
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60,019
-----------
TELEPHONE: 6.6%
900 MCI WorldCom, Inc.*.................................. 64,688
2,100 Telesp Participacoes S.A.*........................... 33,075
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97,763
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TELECOMMUNICATIONS EQUIPMENT: 6.0%
1,800 Plantronics, Inc.*................................... 89,550
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Total Common Stock (cost $1,364,971)............... 1,295,506
-----------
Principal
Amount SHORT-TERM INVESTMENTS: 11.2%
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MONEY MARKET INVESTMENT: 11.2%
$166,496 Firststar Treasury, 4.04%, 3/31/2000 (cost $166,496) 166,496
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Total Investment in Securities (cost
$1,531,467+): 98.4%................................ 1,462,002
Other Assets less Liabilities: 1.6%.................. 23,046
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TOTAL NET ASSETS: 100.0% $ 1,485,048
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* Non-income producing security.
See accompanying Notes to Financial Statements.
3
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JAMES C. EDWARDS EQUITY MASTERS FUND
SCHEDULE OF INVESTMENT AT SEPTEMBER 30, 1999 (UNAUDITED), CONTINUED
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+ At September 30, 1999, the basis of securities for federal income tax purposes
was the same as their cost for financial reporting purposes. Gross unrealized
appreciation and depreciation were as follows:
Gross unrealized appreciation........................ $ 68,322
Gross unrealized depreciation........................ (137,787)
-----------
Net unrealized depreciation....................... $ (69,465)
===========
See accompanying Notes to Financial Statements.
4
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JAMES C. EDWARDS EQUITY MASTERS FUND
STATEMENT OF ASSETS AND LIABILITIES AT SEPTEMBER 30, 1999 (UNAUDITED)
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ASSETS:
Investments in securities, at value (cost $1,531,467) .... $ 1,462,002
Receivables:
Due from Advisor ................................... 22,289
Dividends and interest ............................. 2,659
Securities sold .................................... 19,171
Prepaid expenses ......................................... 5,391
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Total assets .................................... 1,511,512
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LIABILITIES
Accrued administration fee ............................... 2,383
Other accrued expenses ................................... 24,081
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Total liabilities ............................... 26,464
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NET ASSETS ..................................................... $ 1,485,048
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NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($1,485,048/157,965 shares outstanding; unlimited
number of shares authorized without par value) ........... $ 9.40
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COMPONENTS OF NET ASSETS
Paid-in capital .......................................... $ 1,578,570
Accumulated net investment income ........................ 6,547
Accumulated net realized loss on investments ............. (30,604)
Net unrealized depreciation on investments ............... (69,465)
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Net assets ......................................... $ 1,485,048
===========
See accompanying Notes to Financial Statements.
5
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JAMES C. EDWARDS EQUITY MASTERS FUND
STATEMENT OF OPERATIONS - FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1999
(UNAUDITED)*
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INVESTMENT INCOME
Income
Interest .................................................... $ 13,972
Dividends ................................................... 2,226
---------
Total income .......................................... 16,198
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Expenses
Administration fee .......................................... 14,959
Fund accounting fees ........................................ 8,225
Transfer agent fees ......................................... 7,560
Audit fee ................................................... 7,218
Advisory fees ............................................... 4,825
Custody fees ................................................ 3,275
Registration fees ........................................... 2,956
Reports to shareholders ..................................... 1,765
Trustee fees ................................................ 1,711
Miscellaneous ............................................... 1,711
Legal fees .................................................. 1,677
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Total expenses ............................................ 55,882
Less: expenses waived and reimbursed ...................... (46,231)
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Net expenses .............................................. 9,651
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NET INVESTMENT INCOME ................................... 6,547
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REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss from security transactions .................. (30,604)
Net unrealized depreciation on investments .................... (69,465)
---------
Net realized and unrealized loss on investments ............. (100,069)
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NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ...... $ (93,522)
=========
*Fund commenced operations on March 31, 1999.
See accompanying Notes to Financial Statements.
6
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STATEMENT OF CHANGES IN NET ASSETS
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Six Months
Ended
September 30, 1999#
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INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS
Net investment income ..................................... $ 6,547
Net realized loss from security transactions .............. (30,604)
Net unrealized depreciation on investments ................ (69,465)
-----------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ... (93,522)
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CAPITAL SHARE TRANSACTIONS
Net increase in net assets derived from net change in
outstanding shares (a) ................................ 1,578,570
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TOTAL INCREASE IN NET ASSETS .......................... 1,485,048
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NET ASSETS
Beginning of period ..................................... --
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END OF PERIOD ............................................... $ 1,485,048
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(a) A summary of capital share transactions is as follows:
Six Months
Ended
September 30, 1999#
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Shares Value
------ -----
Shares sold............................................... 157,965 $1,578,570
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Net increase.............................................. 157,965 $1,578,570
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# Unaudited. Fund commenced operations on March 31, 1999.
See accompanying Notes to Financial Statements.
7
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JAMES C. EDWARDS EQUITY MASTERS FUND
FINANCIAL HIGHLIGHTS
FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT THE PERIOD
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Six Months
Ended
September 30, 1999#
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Net asset value, beginning of period......................... $10.00
------
Income from investment operations:
Net investment income.................................. 0.04
Net realized and unrealized loss on investments........ (0.64)
------
Total from investment operations............................. (0.60)
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Net asset value, end of period............................... $ 9.40
======
Total return................................................. (6.00)%
Ratios/supplemental data:
Net assets, end of period (millions)......................... $ 1.5
Ratio of expenses to average net assets:
Before expense reimbursement and waiver................ 8.65%+
After expense reimbursement and waiver................. 1.50%+
Ratio of net investment income (loss) to average net assets:
Before expense reimbursement and waiver................ (6.14)%+
After expense reimbursement and waiver................. 1.01%+
Portfolio turnover rate...................................... 2.77%
+ Annualized.
# Unaudited. Fund commenced operations on March 31, 1999.
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JAMES C. EDWARDS EQUITY MASTERS FUND
NOTES TO FINANCIAL STATEMENTS AT SEPTEMBER 30, 1999 (Unaudited)
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NOTE 1 - ORGANIZATION
The James C. Edwards Equity Masters Fund (the "Fund") is a diversified
series of shares of beneficial interest of Professionally Managed Portfolios
(the "Trust") which is registered under the Investment Company Act of 1940 (the
"1940 Act") as a diversified, open-end management investment company. The Fund
began operations on March 31, 1999. The investment objective of the Fund is
long-term growth of capital. The Fund seeks to achieve its objective by
investing primarily in equity securities.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund. These policies are in conformity with generally accepted
accounting principles.
A. SECURITY VALUATION. Investments in securities traded on a national
securities exchange or Nasdaq are valued at the last reported sales
price at the close of regular trading on the last business day of the
period; securities traded on an exchange or Nasdaq for which there
have been no sales and other over-the-counter securities are valued at
the last reported bid price. Securities for which quotations are not
readily available are valued at their respective fair values as
determined in good faith by the Board of Trustees. Short-term
investments are stated at cost, which when combined with accrued
interest, approximates market value.
B. FEDERAL INCOME TAXES. The Fund intends to comply with the requirements
of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its
shareholders. Therefore, no federal income tax provision is required.
C. SECURITY TRANSACTIONS, DIVIDEND INCOME AND DISTRIBUTIONS. Security
transactions are accounted for on the trade date. The cost of
securities sold is determined on a first-in, first-out basis. Dividend
income and distributions to shareholders are recorded on the
ex-dividend date.
D. USE OF ESTIMATES. The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial
statements. Actual results could differ from those estimates.
NOTE 3 - COMMITMENTS AND RELATED PARTY TRANSACTIONS
For the six months ended September 30, 1999, James C. Edwards & Co., Inc.
(the "Advisor") provided the Fund with investment management services under an
Investment Advisory Agreement. The Advisor furnished all investment advice,
office space and certain administrative services, and most of the personnel
needed by the Fund. As compensation for its services, the Advisor was entitled
to a monthly fee at the annual rate of 0.75% based upon the average daily net
assets of the Fund. For the six months ended September 30, 1999, the Fund
incurred $4,825 in advisory fees.
9
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JAMES C. EDWARDS EQUITY MASTERS FUND
NOTES TO FINANCIAL STATEMENTS (Unaudited), continued
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The Fund is responsible for its own operating expenses. The Advisor has
agreed to limit the Fund's total expenses to not more than 1.50% of average net
assets. Any such reductions made by the Advisor in its fees or reimbursement of
expenses which are the Fund's obligation are subject to recoupment by the Fund
within the following three to five years, provided the Fund is able to effect
such recoupment and remain in compliance with any expense limitations then in
effect. For the six months ended September 30, 1999, the Advisor reimbursed the
Fund in the amount of $46,231.
Investment Company Administration, L.L.C. (the "Administrator") acts as the
Fund's administrator under an Administration Agreement. The Administrator
prepares various federal and state regulatory filings, reports and returns for
the Fund; prepares reports and materials to be supplied to the trustees;
monitors the activities of the Fund's custodian, transfer agent and accountants;
coordinates the preparation and payment of Fund expenses and reviews the Fund's
expense accruals. For its services, the Administrator receives a monthly fee at
the following annual rate:
Assets Fee or Fee Rate
------ ---------------
Less than $15 million $30,000
$15 to $50 million 0.20% of average daily net assets
$50 to $100 million 0.15% of average daily net assets
$100 to $200 million 0.10% of average daily net assets
$200 million and above 0.05% of average daily net assets
For the six months ended September 30, 1999, the Fund incurred $14,959 in
administration fees.
First Fund Distributors, Inc. (the "Distributor") acts as the Fund's
principal underwriter in a continuous public offering of the Fund's shares. The
Distributor is an affiliate of the Administrator and receives no compensation
for its services.
Certain officers and trustees of the Trust are also officers and/or
directors of the Administrator and Distributor.
NOTE 4 - PURCHASES AND SALES OF SECURITIES
The cost of purchases and the proceeds from sales of securities, other than
short-term investments, for the six months ended September 30, 1999, were
$1,414,749 and $19,171, respectively.
10
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INVESTMENT ADVISOR
James C. Edwards & Co., Inc.
370 Lexington Ave., 29th Floor
New York, New York 10032
(212) 319-8490
www.jcedwards.com
DISTRIBUTOR
First Fund Distributors, Inc.
4455 E. Camelback Rd., Suite 261-E
Phoenix, Arizona 85018
CUSTODIAN
Firstar Institutional Custody Services
425 Walnut Street
Cincinnati, Ohio 45202
TRANSFER AND DIVIDEND DISBURSING AGENT
American Data Services, Inc.
150 Motor Parkway, Suite 109
Hauppauge, New York 11788-0132
(800) 282-2340
AUDITORS
Tait, Weller & Baker
8 Penn Center Plaza
Philadelphia, Pennsylvania 19103
LEGAL COUNSEL
Paul, Hastings, Janofsky & Walker LLP
345 California Street
San Francisco, California 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.
