HARRIS BRETALL SULLIVAN & SMITH
GROWTH EQUITY FUND
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SEMI-ANNUAL REPORT
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For the Six Months Ended
September 30, 2000
<PAGE>
September 30, 2000
Dear Shareholders,
The stock market, and particularly the technology sector, experienced some
volatility during the third quarter as investors were bombarded with conflicting
comments. Weakness in July was followed by exceptional strength in August, only
to see a sharp correction in stock prices manifest itself in September. For the
quarter, the S&P 500 Index closed down 1.0% and the "tech heavy" NASDAQ was off
7.4%. This sell-off left all of the popular averages in negative territory
year-to-date.
Weakness during the last month of a quarter has become more commonplace as
companies and analysts feel obligated to forewarn investors when they suspect
that the companies will not be able to report quarter-end earnings in line with
expectations. Unfortunately, only bad news seems to be pre-announced, so an air
of pessimism now seems to dominate the last weeks of each quarter. In addition
to this seasonal caution, there was concern that a run-up in energy prices could
spawn a new energy crisis - slowing economic growth, particularly abroad.
On the earnings front, Harris Bretall expects the news for this third calendar
quarter to be impressive. Second quarter reported earnings for the companies
held in the Fund Portfolio witnessed a 52.5% increase over prior year numbers.
For the quarter just ending, we forecast earnings growth to again surpass the
50% level. This remarkable earnings performance reflects the continued growth
opportunities that many companies have been able to exploit, as well as the
overall strength of the U.S. Economy. The productivity gains that the "Digital
Revolution" have fostered are a cornerstone of this success. We remain
optimistic that the core drivers of the U.S. Economy and the U.S. Financial
Markets will remain intact.
We invite you to review our outlook entitled Quarterly Comments: Technology,
Technology, Technology found on our website at www.hbss.com, in which we
reprinted an interview that we had with The Wall Street Transcript. We discuss
our thinking as to where the best opportunities lie in the technology sector. We
expect that technology companies will remain the primary focus of investor
activity for some time.
Sincerely,
/s/ John J. Sullivan /s/ Gordon J. Ceresino
John J. Sullivan, CFA Gordon J. Ceresino, CIMA
Partner Partner
1
<PAGE>
Harris Bretall Sullivan & Smith Growth Equity Fund
SCHEDULE OF INVESTMENTS at September 30, 2000 (Unaudited)
Shares Value
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COMMON STOCKS: 98.3%
Banks: 1.9%
12,000 Wells Fargo & Co. $ 551,250
-----------
Capital Goods: 6.6%
24,000 General Electric Co. 1,384,500
10,000 Illinois Tool Works, Inc. 558,750
-----------
1,943,250
-----------
Communication: 11.1%
8,000 America Online, Inc.* 430,000
20,000 Cisco Systems, Inc.* 1,105,000
9,200 JDS Uniphase Corp.* 871,125
11,000 Lucent Technologies, Inc. 336,187
6,000 Yahoo!, Inc.* 546,000
-----------
3,288,312
-----------
Consumer Cyclical: 7.0%
15,000 Costco Wholesale Corp.* 524,062
11,000 Home Depot, Inc. 583,687
17,000 Target Corp. 435,625
11,000 Wal-Mart Stores, Inc. 529,375
-----------
2,072,749
-----------
Consumer Products: 1.9%
10,000 Coca-Cola Co. 551,250
-----------
Consumer Services: 2.1%
16,000 The Walt Disney Co. 612,000
-----------
Consumer Staples: 2.0%
16,000 Walgreen Co. 607,000
-----------
Drugs/Biotechnology: 6.8%
4,000 Genentech, Inc.* 742,750
14,000 Pfizer, Inc. 629,125
14,000 Schering Plough Corp. 651,000
-----------
2,022,875
-----------
Electronics: 1.9%
2,300 Broadcom Corp.* 560,625
-----------
Energy: 4.9%
16,000 Halliburton Co. 783,000
8,000 Schlumberger Ltd. 658,500
-----------
1,441,500
-----------
Financial: 11.8%
7,312 American International Group, Inc. 699,667
18,000 Charles Schwab Corp. 639,000
12,000 Citigroup, Inc. 648,696
6,000 Goldman Sachs Group, Inc. 683,625
9,000 Morgan Stanley Dean Witter & Co. 822,937
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3,493,925
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Hardware: 15.0%
13,000 Dell Computer Corp.* 400,563
13,000 EMC Corp/Mass* 1,288,625
5,000 International Business Machines Corp. 562,500
9,000 Network Appliance, Inc.* 1,146,375
9,000 Sun Microsystems, Inc.* 1,050,750
-----------
4,448,813
-----------
Healthcare: 2.2%
7,000 Johnson & Johnson 657,563
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Retail - Apparel: 1.2%
17,000 Gap, Inc. 342,125
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Semiconductor: 8.8%
9,000 Applied Materials, Inc.* 533,813
20,000 Intel Corp. 832,500
3,500 PMC-Sierra, Inc.* 753,375
10,000 Texas Instruments, Inc. 471,875
-----------
2,591,563
-----------
Software & Services: 7.1%
18,000 Broadvision, Inc.* 460,125
15,000 Microsoft Corp.* 903,750
6,600 Siebel Systems, Inc.* 734,663
-----------
2,098,538
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Telecommunications - Equipment: 1.7%
8,500 Nortel Network Corp. 506,281
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Utilities: 4.3%
13,000 Qwest Communications International, Inc.* 624,813
13,000 SBC Communications, Inc. 650,000
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1,274,813
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TOTAL COMMON STOCKS
(cost $21,005,623) 29,064,432
-----------
See accompanying Notes to Financial Statements.
2
<PAGE>
Harris Bretall Sullivan & Smith Growth Equity Fund
SCHEDULE OF INVESTMENTS at September 30, 2000 (Unaudited) - (Continued)
Principal
Amount Value
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REPURCHASE AGREEMENT: 1.8%
$538,000 Firstar Bank Repurchase Agreement, 4.25%
dated 9/29/2000, due 10/2/2000,
[collateralized by $556,687 FHLB,
5.19% due 10/20/2003] (value of
proceeds $538,191) (cost $538,000) $ 538,000
-----------
TOTAL INVESTMENTS IN SECURITIES
(cost $21,543,623+): 100.1% 29,602,432
Liabilities in excess of Other Assets: (0.1)% (19,768)
-----------
NET ASSETS: 100.0% $29,582,664
===========
* Non-income producing security.
+ At September 30, 2000, the basis of investments 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 $ 9,163,229
Gross unrealized depreciation (1,104,420)
-----------
Net unrealized appreciation $ 8,058,809
===========
See accompanying Notes to Financial Statements.
3
<PAGE>
Harris Bretall Sullivan & Smith Growth Equity Fund
STATEMENT OF ASSETS AND LIABILITIES at September 30, 2000 (Unaudited)
ASSETS
Investments in securities, at value (cost $21,543,623 ) ..... $ 29,602,432
Cash ........................................................ 487
Receivables:
Dividends and interest .................................... 11,000
Fund shares sold .......................................... 19,920
Prepaid expenses .......................................... 5,216
------------
Total assets ........................................ 29,639,055
------------
LIABILITIES
Payables:
Distribution fees ......................................... 25,716
Due to Advisor ............................................ 15,246
Administration fees ....................................... 2,712
Accrued expenses ............................................ 12,717
------------
Total liabilities ................................... 56,391
------------
NET ASSETS .................................................. $ 29,582,664
============
Net asset value, offering and redemption price per share
($29,582,664/1,313,635 shares outstanding; unlimited
number of shares authorized without par value) ............ $ 22.52
============
COMPONENTS OF NET ASSETS
Paid-in capital ............................................. $ 21,100,400
Accumulated net investment loss ............................ (104,008)
Accumulated net realized gain on investments ................ 527,463
Net unrealized appreciation on investments .................. 8,058,809
------------
Net assets .......................................... $ 29,582,664
============
See accompanying Notes to Financial Statements.
4
<PAGE>
Harris Bretall Sullivan & Smith Growth Equity Fund
STATEMENT OF OPERATIONS For the Six Months Ended September 30, 2000 (Unaudited)
INVESTMENT INCOME
Income
Dividends ................................................... $ 65,448
Interest .................................................... 21,129
-----------
Total income.............................................. 86,577
-----------
Expenses
Advisory fees ............................................... 110,805
Distribution fees ........................................... 36,935
Administration fees ......................................... 16,575
Registration expense ........................................ 11,790
Fund accounting fees ........................................ 11,560
Transfer agent fees ......................................... 9,204
Audit fees .................................................. 7,797
Custody fees ................................................ 6,406
Trustee fees ................................................ 3,358
Reports to shareholders ..................................... 2,593
Legal fees .................................................. 1,089
Miscellaneous ............................................... 535
-----------
Total expenses............................................ 218,647
Less: fees waived......................................... (28,062)
-----------
Net expenses.............................................. 190,585
-----------
Net investment loss.................................. (104,008)
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on investments .............................. 214,593
Net unrealized depreciation on investments .................... (2,641,568)
-----------
Net realized and unrealized loss on investments........... (2,426,975)
-----------
Net decrease in net assets resulting from operations..... $(2,530,983)
===========
See accompanying Notes to Financial Statements.
5
<PAGE>
Harris Bretall Sullivan & Smith Growth Equity Fund
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended Year Ended
September 30, March 31,
2000# 2000
------------ ------------
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS
Net investment loss ........................... $ (104,008) $ (140,774)
Net realized gain on investments .............. 214,593 1,171,749
Net unrealized appreciation (depreciation)
on investments ............................... (2,641,568) 4,859,300
------------ ------------
Net increase (decrease) in net assets
resulting from operations ............ (2,530,983) 5,890,275
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS
From net realized gain ........................ -- (1,307,471)
------------ ------------
CAPITAL SHARE TRANSACTIONS
Net increase in net assets derived from net
change in outstanding shares (a) ............. 1,648,983 8,764,845
------------ ------------
Total increase (decrease) in net assets (882,000) 13,347,649
NET ASSETS
Beginning of period ........................... 30,464,664 17,117,015
------------ ------------
End of period ............................... $ 29,582,664 $ 30,464,664
============ ============
(a) A summary of capital share transactions is as follows:
Six Months Ended Year Ended
September 30, 2000# March 31, 2000
---------------------- -----------------------
Shares Value Shares Value
------- ------------ -------- ------------
Shares sold ................. 145,859 $ 3,409,136 584,466 $ 12,532,016
Shares issued in reinvestment
of distributions ........... -- -- 54,627 1,195,782
Shares redeemed ............. (76,304) (1,760,153) (240,814) (4,962,953)
------- ------------ -------- ------------
Net increase ................ 69,555 $ 1,648,983 398,279 $ 8,764,845
======= ============ ======== ============
# Unaudited
See accompanying Notes to Financial Statements.
6
<PAGE>
Harris Bretall Sullivan & Smith Growth Equity Fund
FINANCIAL HIGHLIGHTS For a capital share outstanding throughout each period
(Unaudited)
<TABLE>
<CAPTION>
Six Months May 1, 1996*
Ended Year Ended March 31, through
September 30, --------------------------- March 31,
2000# 2000 1999 1998 1997
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period .............. $24.49 $20.24 $16.20 $11.03 $10.00
------ ------ ------ ------ ------
Income from investment operations:
Net investment loss ............................. (0.08) (0.11) (0.08) (0.02) --
Net realized and unrealized gain
(loss) on investments .......................... (1.89) 5.60 4.77 5.20 1.04
------ ------ ------ ------ ------
Total from investment operations ................ (1.97) 5.49 4.69 5.18 1.04
------ ------ ------ ------ ------
Less distributions:
From net investment income ...................... -- -- -- -- (0.01)
From net realized gain .......................... -- (1.24) (0.65) (0.01) --
------ ------ ------ ------ ------
Total distributions ............................. -- (1.24) (0.65) (0.01) (0.01)
------ ------ ------ ------ ------
Net asset value, end of period .................. $22.52 $24.49 $20.24 $16.20 $11.03
====== ====== ====== ====== ======
Total return .................................... (8.04%)^ 27.87% 29.88% 47.02% 10.36%^
Ratios/supplemental data:
Net assets, end of period (millions) ............ $ 29.6 $ 30.5 $ 17.1 $ 12.0 $ 3.5
Ratio of expenses to average net assets:
Before fees waived and expenses absorbed ........ 1.48%+ 1.66% 1.95% 2.39% 4.97%+
After fees waived and expenses absorbed ......... 1.29%+ 1.29% 1.29% 1.29% 1.28%+
Ratio of net investment loss to average net assets:
Before fees waived and expenses absorbed ........ (0.89%)+ (1.03%) (1.19%) (1.42%) (3.69%)+
After fees waived and expenses absorbed ......... (0.70%)+ (0.66%) (0.53%) (0.31%) --+
Portfolio turnover rate ........................... 9.71% 55.07% 52.77% 40.96% 14.62%^
</TABLE>
* Commencement of operations.
+ Annualized.
^ Not annualized.
# Unaudited.
See accompanying Notes to Financial Statements.
7
<PAGE>
Harris Bretall Sullivan & Smith Growth Equity Fund
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1 - ORGANIZATION
Harris Bretall Sullivan & Smith Growth Equity Fund (the "Fund") is a
diversified series of shares of beneficial interest of Professionally Managed
Portfolios (the "Trust"), which is registered under the Investment Company Act
of 1940 (the "1940 Act") as an open-end management investment company. The Fund
began operations on May 1, 1996. The investment objective of the Fund is to seek
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 each day that the exchanges
are open for trading; securities traded on an exchange or Nasdaq for
which there have been no sales and other over-the-counter securities
are valued at the last reported bid price. Securities for which
quotations are not readily available are valued at their respective
fair values as determined in good faith by the Board of Trustees.
Short-term investments are stated at cost, which when combined with
accrued interest, approximates market value.
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. Harris
Bretall Sullivan & Smith Growth Equity Fund
8
<PAGE>
Harris Bretall Sullivan & Smith Growth Equity Fund
NOTES TO FINANCIAL STATEMENTS (Unaudited) - (Continued)
E. Reclassification of Capital Accounts. The Fund accounts and reports
for distributions to shareholders in accordance with the American
Institute of Certified Public Accountant's Statement of Position 93-2:
Determination, Disclosure, and Financial Statement Presentation of
Income, Capital and Return of Capital Distributions by Investment
Companies. For the six months ended Septem-ber 30, 2000, the Fund
decreased paid-in capital by $140,774 due to the Fund experiencing a
net investment loss during the previous fiscal year. Net realized loss
and net assets were not affected by this change.
NOTE 3 - COMMITMENTS AND OTHER RELATED PARTY TRANSACTIONS
For the six months ended September 30, 2000, Harris Bretall Sullivan &
Smith L.L.C. (the "Advisor") provided the Fund with investment management
services under an Investment Advisory Agreement. The Advisor furnishes all
investment advice, office space, facilities, 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, 2000, the Fund incurred
$110,805 in advisory fees.
The Fund is responsible for its own operating expenses. The Advisor has
agreed to limit the Fund's total expenses to not more than 1.29% of average
daily net assets. Any fee withheld and/or any Fund expense absorbed by the
Advisor pursuant to an agreed upon expense cap shall be reimbursed by the Fund
to the Advisor, if so requested by the Advisor, anytime before the end of the
third fiscal year following the year to which the fees waived and expenses
absorbed relate, provided the aggregate amount of the Fund's current operating
expenses for such fiscal year does not exceed the applicable limitation on Fund
expenses. Any such reimbursement is also contingent upon Board of Trustees
review and approval prior to the time the reimbursement is initiated. The Fund
must pay its current ordinary operating expenses before the Advisor is entitled
to any reimbursement. For the six months ended September 30, 2000, the Advisor
waived fees of $28,062. Harris Bretall Sullivan & Smith Growth Equity Fund
9
<PAGE>
Harris Bretall Sullivan & Smith Growth Equity Fund
NOTES TO FINANCIAL STATEMENTS (Unaudited) - (Continued)
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, with a minimum fee of $30,000:
Under $25 million 0.12% of average daily net assets
$25 to $50 million 0.07% of average daily net assets
$50 to $100 million 0.05% of average daily net assets
Over $100 million 0.03% of average daily net assets
For the six months ended September 30, 2000, the Fund incurred $16,575 in
Administration fees.
First Fund Distributors, Inc. (the "Distributor") acts as the Fund's
principal underwriter in a continuous public offering of the Fund's shares. The
Distributor is an affiliate of the Administrator.
Certain officers and trustees of the Trust are also officers and/or
directors of the Administrator and the Distributor.
NOTE 4 - DISTRIBUTION PLAN
The Fund has adopted a Distribution Plan (the "Plan") in accordance with
Rule 12b-1 under the 1940 Act. The Plan provides that the Fund will pay a fee to
the Advisor as Distribution Coordinator at an annual rate of up to 0.25% of the
average daily net assets of the Fund. The fee is paid to the Advisor as
reimbursement for, or in anticipation of, expenses incurred for
distribution-related activity. For the six months ended September 30, 2000, the
Fund paid to the Distributor $36,935.
NOTE 5 - PURCHASES AND SALES OF SECURITIES
The cost of purchases and the proceeds from the sale of securities, other
than short-term investments, for the six months ended September 30, 2000, were
$6,021,015 and $2,774,698, respectively. Harris Bretall Sullivan & Smith Growth
Equity Fund
10
<PAGE>
Harris Bretall Sullivan & Smith Growth Equity Fund
NOTES TO FINANCIAL STATEMENTS (Unaudited) - (Continued)
NOTE 6 - REPURCHASE AGREEMENTS
The Fund 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 Fund 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 Fund in each agreement, and the Fund 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.
11
<PAGE>
================================================================================
Advisor
HARRIS BRETALL SULLIVAN & SMITH L.L.C.
One Sansome Street, Suite 3300
San Francisco, CA 94104
(415) 765-8300
Account Inquiries (800) 282-2340
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 Dividend Disbursing Agent
AMERICAN DATA SERVICES, INC.
P.O. Box 5536
Hauppauge, NY 11788-0132
(800) 282-2340
Independent Auditors
ERNST & YOUNG LLP
725 South Figueroa Street
Los Angeles, CA 90017
Legal Counsel
PAUL, HASTINGS, JANOFSKY & WALKER LLP
345 California Street, 29th Floor
San Francisco, CA 94104
================================================================================
This report is intended for the shareholders of the Fund and may not be used as
sales literature unless preceded or accompanied by a current prospectus.
Past performance results shown in this report should not be considered a
representation of future performance. Share price and returns will fluctuate so
that shares, when redeemed, may be worth more or less than their original cost.
Statements and other information herein are dated and are subject to change.
