[PORTFOLIO 21 LOGO]
- --------------------------------------------------------------------------------
SEMI-ANNUAL REPORT
- --------------------------------------------------------------------------------
February 29, 2000
<PAGE>
PORTFOLIO 21
Dear Portfolio 21 Investors:
Thank you for being among the first investors in our new mutual fund, Portfolio
21, committed to investing in companies that are incorporating environmental
sustainability into their business strategies. We hope you are pleased with the
fund's progress so far. Here are a few highlights from the past five months:
ENVIRONMENTAL SUSTAINABILITY AND FINANCIAL PERFORMANCE
We launched the fund on September 30, 1999, and, as of February 29, 2000, the
fund's total assets had grown to $4,037,295. For the first three months ended
December 31, 1999, the fund's return was 9.62%, and, for its five-month life
ended February 29, 2000, the return has been 20.81%. This compares favorably
with the return of the Morgan Stanley World Equity Index--10.58% for the first
three months and 16.96% for the five months ending February 29, 2000. We are
using this index as our benchmark since Portfolio 21 holds both US and non-US
stocks.
We have stated in the fund's prospectus and other materials that we do not
expect Portfolio 21 to track the overall market on a quarter to quarter basis.
This is because we have intentionally focused the selection criteria for the
fund on environmental sustainability and the long term impact on corporations
that develop business strategies designed for prosperity amid ecological
challenges. Nonetheless, it has been exciting to witness the appreciation of
stocks of companies that have been leaders in the move to environmental
sustainability.
The past five months have seen the continuation of a particular trend in the
stock market. This is the tendency for an increasingly narrow band of stocks to
perform at unprecedented levels, while the majority of stocks have declined or
languished. This narrow band includes many companies in the technology,
telecommunications, and biotechnology sectors. Portfolio 21 has participated in
this price appreciation due to holdings in technology companies such as Hewlett
Packard and ST Microelectronics. In addition, the alternative energy stocks have
seen a recent jump in value, due in part to the concern engendered by rising oil
prices. Ballard Power and AstroPower have been beneficiaries of this enthusiasm.
While we certainly don't wish higher costs on hardworking citizens, we can't
1
<PAGE>
help but be hopeful that the oil price increase will encourage continued
research and development of new and better sources of energy. The outcome of the
presidential election will undoubtedly have an effect on these stocks as well,
since there is a pronounced difference of opinion and emphasis between the two
likely candidates.
Another interesting development has been the growing awareness of genetically
modified food in the United States. Although this has been a subject of great
controversy in Europe and the United Kingdom, it has only recently come to the
forefront in this country. We believe this awareness, coupled with the USDA's
recent publication of stringent standards for defining and labeling organic
food, bode well for the natural food companies in Portfolio 21, such as Wild
Oats, Whole Foods, Hemkop, and Horizon Organic.
INFORMATION AVAILABILITY
We are committed to providing comprehensive information to our shareholders and
other interested parties. We hope you have visited our website,
http://www.portfolio21.com. Look for continuing additions to the company
profiles and other new information. If you would like to receive future reports
via e-mail, please let us know by going to our website and sending an email
letting us know this. We applaud the SEC's concern for disclosure and fair
treatment of shareholders and particularly their acknowledgment of the
environmental benefits of electronic delivery of these reports.
YOUR INPUT REQUESTED
We hope to hear from you about anything you would like to share--feedback on the
website, companies we should consider for Portfolio 21, concerns or compliments
about the service you are receiving.
Sincerely,
/s/ Leslie E. Christian
Leslie E. Christian
2
<PAGE>
PORTFOLIO 21
PORTFOLIO OF INVESTMENTS BY INDUSTRY at February 29, 2000 (Unaudited)
Shares Value
- ------ ----------
COMMON STOCKS: 93.8%
APPAREL/TEXTILES: 2.2%
3,135 NIKE, Inc., Class B (United States) $ 89,152
----------
AUTO/TRUCK MANUFACTURERS: 1.9%
3,300 Volvo AB - Sponsored ADR (Sweden) 77,138
----------
BANKS: 4.0%
9,850 Union Bank of Switzerland AG - Sponsored ADR
(Switzerland) 123,125
5,450 Wainwright Bank & Trust Company (United States) 38,150
----------
161,275
----------
BUILDING MATERIALS: 1.7%
2,000 JM AB (Sweden) 38,326
4,200 Kafus Industries Ltd. (Canada)* 28,875
----------
67,201
----------
COMMUNICATION EQUIPMENT: 4.5%
1,875 Telefonaktiebolaget LM Ericsson - Sponsored
ADR (Sweden) 180,000
----------
COMMUNICATION SERVICES: 8.1%
3,600 AT&T Corp - Liberty Media Group (United States) 188,100
4,225 Swisscom AG - Sponsored ADR (Switzerland) 139,425
----------
327,525
----------
COMPUTERS - HARDWARE: 11.4%
1,760 Hewlett-Packard Company (United States) 236,720
2,195 International Business Machines Corp.
(United States) 223,890
----------
460,610
----------
ELECTRIC COMPANIES: 1.0%
2,500 Graninge AB (Sweden) 39,352
----------
ELECTRONICS: 6.3%
1,175 Mitsubishi Electric Corp. - Unsponsored ADR
(Japan) $ 99,287
495 Sony Corp. - Sponsored ADR (Japan) 155,121
----------
254,408
----------
ELECTRONICS - INSTRUMENTATION: 13.7%
7,700 AstroPower, Inc. (United States)* 215,600
2,925 Ballard Power Systems Inc. (Canada)* 335,827
----------
551,427
----------
ELECTRONICS - SEMICONDUCTORS: 4.1%
835 STMicroelectronics N.V. (France) 167,000
----------
ENVIRONMENTAL: 1.4%
3,150 Tomra Systems ASA - Sponsored ADR (Norway) 56,700
----------
FOOD - RETAIL: 6.7%
9,600 Hemkopskedjan AB (Sweden) 79,389
3,035 Whole Foods Market, Inc. (United States)* 115,235
4,087 Wild Oats Markets, Inc. (United States)* 76,631
----------
271,255
----------
FOOD PROCESSING: 1.6%
6,350 Horizon Organic Holding Corp. (United States)* 63,103
----------
HEALTH CARE - MEDICAL PRODUCTS: 3.9%
2,500 Novo Nordisk A/S - Sponsored ADR (Denmark) 158,281
----------
HOUSEHOLD FURNITURE/APPLIANCE: 4.4%
2,455 Electrolux AB - Sponsored ADR (Sweden) 92,062
4,220 Herman Miller, Inc. (United States) 86,510
----------
178,572
----------
See accompanying Notes to Financial Statements.
3
<PAGE>
PORTFOLIO 21
PORTFOLIO OF INVESTMENTS BY INDUSTRY at February 29, 2000 (Unaudited), Continued
Shares Value
- ------ ----------
HOUSEHOLD PRODUCTS - NON-DURABLES: 1.9%
4,500 Church & Dwight Co., Inc. (United States) $ 76,781
----------
INSURANCE - PROPERTY-CASUALTY: 3.0%
1,475 Swiss Reinsurance Company - Sponsored ADR (Switzerland) 120,950
----------
LODGING - HOTELS: 1.6%
6,950 Scandic Hotels AB (Sweden) 65,401
----------
MISC. FABRICATED PRODUCTS: 1.4%
2,775 SKF AB (Sweden) 55,076
----------
PAPER & FOREST PRODUCTS: 3.4%
4,600 AssiDoman AB (Sweden) 67,686
2,780 Svenska Cellulosa AB (Sweden) 67,700
----------
135,386
----------
PHOTOGRAPHY/IMAGING: 4.1%
7,685 Xerox Corp. (United States) 166,668
----------
RETAIL: 0.3%
3,000 Real Goods Trading Corp. (United States)* 11,906
----------
TEXTILES - HOME FURNISHINGS: 1.2%
10,800 Interface, Inc. (United States) 48,600
----------
TOTAL COMMON STOCKS
(Cost $3,306,159) 3,783,767
----------
Principal
Amount Value
- --------- ----------
SHORT-TERM INVESTMENTS: 6.8%
$275,870 UMB Money Market
Fiduciary (Cost $275,870) $ 275,870
----------
TOTAL SHORT-TERM INVESTMENTS
(Cost $275,870) 275,870
----------
TOTAL INVESTMENTS IN SECURITIES
(Cost $3,582,029+): 100.6% $4,059,637
Liabilities in Excess of
Other Assets: (0.6)% (22,342)
----------
TOTAL NET ASSETS: 100.0% $4,037,295
==========
* Non-income producing security.
ADR American depositary receipt.
+ At February 29, 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 $ 717,537
Gross unrealized depreciation (239,929)
----------
Net unrealized appreciation $ 477,608
==========
Percent of
Country Net Assets
- ------- ----------
Canada 9.0%
Denmark 3.9
France 4.2
Japan 6.3
Norway 1.4
Sweden 18.9
Switzerland 9.5
United States 47.4
Liabilities in excess of other assets (0.6)
-----
NET ASSETS 100.0%
=====
See accompanying Notes to Financial Statements.
4
<PAGE>
PORTFOLIO 21
STATEMENT OF ASSETS AND LIABILITIES at February 29, 2000 (Unaudited)
ASSETS
Investments in securities, at value (cost $3,582,029) .......... $4,059,637
Cash ........................................................... 16,360
Receivables:
Due from Advisor ............................................. 15,429
Dividends and interest ....................................... 1,916
Prepaid expenses ............................................... 395
----------
Total assets ............................................... 4,093,737
----------
LIABILITIES
Payable for securities purchased ................................. 28,721
Accrued expenses ................................................. 27,721
----------
Total liabilities .......................................... 56,442
----------
NET ASSETS ....................................................... $4,037,295
==========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($4,037,295/159,168 shares outstanding; unlimited
number of shares authorized without par value) ................. $ 25.37
==========
COMPONENTS OF NET ASSETS
Paid-in capital .................................................. $3,564,440
Accumulated net investment loss .................................. (4,758)
Undistributed net realized gain on investments ................... 5
Net unrealized appreciation on investments ....................... 477,608
----------
Net assets ................................................... $4,037,295
==========
See accompanying Notes to Financial Statements.
5
<PAGE>
PORTFOLIO 21
STATEMENT OF OPERATIONS For the Period Ended February 29, 2000* (Unaudited)
INVESTMENT INCOME
Income
Dividends ................................................... $ 1,521
Interest .................................................... 4,879
----------
Total income ........................................... 6,400
----------
Expenses
Administration fees ......................................... 12,459
Fund accounting fees ........................................ 10,842
Custody fees ................................................ 10,425
Advisory fees ............................................... 7,439
Audit fee ................................................... 6,334
Transfer agent fees ......................................... 4,971
Registration fees ........................................... 2,155
Distribution fees ........................................... 1,860
Legal fees .................................................. 1,647
Trustee fees ................................................ 1,625
Reports to shareholders ..................................... 860
Insurance ................................................... 315
Miscellaneous ............................................... 1,216
----------
Total expenses ......................................... 62,148
Less: fees waived and expenses absorbed ................ (50,990)
----------
Net expenses ........................................... 11,158
----------
NET INVESTMENT LOSS ............................... (4,758)
----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments ................................. 5
Net change in unrealized appreciation on investments ............. 477,608
----------
Net realized and unrealized gain on investments ........... 477,613
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.. $ 472,855
==========
* Operations commenced on September 30, 1999.
See accompanying Notes to Financial Statements.
6
<PAGE>
PORTFOLIO 21
STATEMENT OF CHANGES IN NET ASSETS
SEPTEMBER 30, 1999*
TO
FEBRUARY 29, 2000#
-------------------
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS
Net investment loss ......................................... $ (4,758)
Net realized gain on investments ............................ 5
Net change in unrealized appreciation on investments ........ 477,608
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ... 472,855
----------
CAPITAL SHARE TRANSACTIONS
Net increase in net assets derived from net change in
outstanding shares (a) ..................................... 3,564,440
----------
TOTAL INCREASE IN NET ASSETS .................................. 4,037,295
==========
NET ASSETS
Beginning of period ......................................... --
----------
END OF PERIOD ............................................... $4,037,295
==========
(a) A summary of capital share transactions is as follows:
SEPTEMBER 30, 1999*
TO
FEBRUARY 29, 2000#
-------------------------
SHARES VALUE
---------- ----------
Shares sold ....................................... 159,473 $3,570,952
Shares redeemed ................................... (305) (6,512)
---------- ----------
Net increase ...................................... 159,168 $3,564,440
========== ==========
* Commencement of operations.
# Unaudited.
See accompanying Notes to Financial Statements.
7
<PAGE>
PORTFOLIO 21
FINANCIAL HIGHLIGHTS For a capital share outstanding throughout each period
SEPTEMBER 30, 1999*
TO
FEBRUARY 29, 2000#
-------------------
Net asset value, beginning of period ........................ $ 21.00
----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss .................................... (0.03)
Net realized and unrealized gain on investments ........ 4.40
----------
Total from investment operations ............................ 4.37
----------
Net asset value, end of period .............................. $ 25.37
==========
Total return ........................................... 20.81%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (millions) ........................ $ 4.0
RATIO OF EXPENSES TO AVERAGE NET ASSETS:
Before fees waived and expenses absorbed .................... 8.35%+
After fees waived and expenses absorbed ..................... 1.50%+
RATIO OF NET INVESTMENT LOSS TO AVERAGE NET ASSETS:
Before fees waived and expenses absorbed .................... (7.49)%+
After fees waived and expenses absorbed ..................... (0.64)%+
Portfolio turnover rate ..................................... 0%
* Commencement of operations.
+ Annualized.
# Unaudited.
See accompanying Notes to Financial Statements.
8
<PAGE>
PORTFOLIO 21
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1 - ORGANIZATION
Portfolio 21 (the "Fund") is a 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 September 30, 1999.
The investment objective of the Fund is to seek 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. SECURITIES VALUATION. 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 stated 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 shareholders.
Therefore, no federal income tax provision is required.
C. SECURITY TRANSACTIONS, INVESTMENT INCOME AND DISTRIBUTIONS. Security
transactions are accounted for on the trade date. The cost of
securities sold is determined on a specific identification basis.
Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis.
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.
9
<PAGE>
PORTFOLIO 21
NOTES TO FINANCIAL STATEMENTS (Unaudited), Continued
NOTE 3 - COMMITMENTS AND OTHER RELATED PARTY TRANSACTIONS
Progressive Investment Management Corporation (the "Advisor") provides the
Fund with investment management services under an Investment Advisory Agreement
(the "Agreement"). Under the 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 receives a monthly fee at the
annual rate of 1.00% of Fund's average daily net assets. For the period ended
February 29, 2000, the Fund incurred $7,439 in advisory fees.
The Advisor has contractually agreed to limit the Fund's expenses by
reducing all or a portion of its fees and reimbursing the Fund's expenses so
that its ratio of expenses to average net assets will not exceed 1.50%. In the
case of the Fund's initial period of operations any fee withheld or voluntarily
reduced 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 fifth fiscal year following the
year to which the fee waiver and/or expense absorption relates, 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
of fees and/or expenses. For the period ended February 29, 2000, the Advisor
waived fees of $7,439 and absorbed expenses of $43,551.
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:
Under $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 $150 million 0.10% of average daily net assets
Over $150 million 0.05% of average daily net assets
10
<PAGE>
PORTFOLIO 21
NOTES TO FINANCIAL STATEMENTS (Unaudited), Continued
For the period ended February 29, 2000, the Fund incurred $12,459 in
administration fees.
First Fund Distributors, Inc. (the "Distributor") acts as the Fund's
principal uderwriter in a continuous public offering of the Fund's shares. The
Distributor is an affiliate of the Administrator.
Certain officers and trustees of the Trust are also officers and/or
directors of the Administrator and Distributor.
NOTE 4 - DISTRIBUTION 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 0.25% of the
average daily net assets of the Fund. For the period ended February 29, 2000,
the Fund incurred $1,860 in distribution fees.
NOTE 5 - INVESTMENT TRANSACTIONS
The cost of purchases and the proceeds from sales of securities for the
period ended February 29, 2000, excluding short-term investments, were
$3,306,173 and $18, respectively.
11
<PAGE>
================================================================================
Advisor
PROGRESSIVE INVESTMENT MANAGEMENT CORPORATION
2435 SW Fifth Avenue
Portland, Oregon 97201
(877) 351-4115 EXT. 21
Distributor
FIRST FUND DISTRIBUTORS, INC.
4455 East Camelback Road, Suite 261E
Phoenix, Arizona 85018
Custodian
UMB BANK, N.A.
928 Grand Boulevard
Kansas City, Missouri 64106
Transfer Agent
AMERICAN DATA SERVICES, INC.
P.O. Box 5536
Hauppauge, New York 11788-0132
Auditors
TAIT, WELLER & BAKER
8 Penn Center Plaza, Suite 800
Philadelphia, Pennsylvania 19103
Legal Counsel
PAUL, HASTINGS, JANOFSKY & WALKER, LLP
345 California Street, 29th Floor
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.
