[MATRIX FUND LOGO]
MATRIX GROWTH FUND
MATRIX EMERGING GROWTH FUND
ANNUAL REPORT
DECEMBER 31, 1999
<PAGE>
Dear Matrix Shareholders,
Following erratic but generally positive action for most of 1999, stock
prices closed out the year with quite a flourish. During the fourth quarter the
S&P 500 produced about two thirds of its 21.0% gain for the year, while the
Russell 2000 picked up more than three quarters of its 21.3% rise in the closing
quarter. For the year the Matrix Growth and Emerging Growth Funds gained 16.0%
and 29.6%, respectively.
In many ways the past year was no less remarkable than the preceding years
of this still vigorous bull market. In several particular aspects, however, 1999
was absolutely one of a kind. While the major stock indexes recorded solid
gains, a bit more than half of the stocks populating the S&P 500 experienced a
loss for the year. And among the 200 largest technology companies in the market
as measured by capitalization at year end, 57 of these issues became public
companies during the year. Investors clearly had a much stronger appetite for
companies newly arrived on the scene than for the classic growth companies which
had carried the bull market to this point.
Such high optimism was encouraged by a practically perfect economic
environment. Producer and consumer prices were essentially stable, while the
increased money supply provided by the world's central banks to offset financial
problems in late 1998 had a very stimulative effect. In the U.S., a rapidly
rising Federal budget surplus is allowing much of this liquidity to be directed
to capital investment in the private sector which has a powerful multiplier
effect on economic growth.
Working against these economic and stock market themes were the
pronouncements and actions by the policy makers at the Federal Reserve Board
(the "Fed"). While giving due respect to the increasing productivity and
efficiency of the U.S. economy, the governors of the Fed simply don't believe
the current pace of economic expansion can be sustained without inflation again
becoming a problem.
At mid-year the Fed began to actively raise rates and reduce system
liquidity and this process continues as we begin the year 2000. One ramification
of this was the worst performance by the U.S. bond market in recent memory, and
such circumstances present investors with a vexing dilemma. Everyone knows one
should run with a bull market and not "fight the tape", while it is equally
known that successive rate increases from the Federal Reserve always produces
"three steps and a stumble".
We believe this contradiction will be resolved in the same way the market
discriminated among stocks in 1999: companies with good earnings growth will
perform relatively better than companies with poor earnings growth. And we doubt
very much that the market will continue to be so extremely optimistic about
companies which have no earnings. We believe it will come about that traditional
valuation and other measures used to evaluate stocks will return to more normal
efficacy.
<PAGE>
In the near future we believe the small and mid-capitalization issues
are likely to have the edge on earnings growth. The fabulous 1999 performance of
emerging Growth Fund holdings like JDS Uniphase (up 830%) and Applied Micro
Circuits (up 535%) will not likely be repeated, but the factors which motivated
such gains are still in place. We expect the potential 25% earnings growth rate
for emerging growth stocks to be about twice the rate of growth for issues in
the S&P 500.
Such conditions have caused the managers of large capitalization growth
funds to be unusually aggressive in pursuing companies with high earnings
growth, which likely explains the large technology weightings of most mutual
funds at present. For the present this sector is where the earnings are.
It is a certainty that persistent tightening moves by the Fed will
ultimately have a restraining effect, and it is also likely that at some point
investors will have raised even the best growing companies to excessive market
valuations and some combination of these factors will precipitate some long
delayed rotation to alternate stock groups. This will be a healthy development
for the continuation of this bull market.
We would not rule out that such rotation could happen in dramatic
fashion. The volatility of all markets is highly elevated at present and market
action (similar to the third quarter of 1998) can be literally spectacular. By
focusing on the best quality and best performing companies, we believe that both
Matrix Growth and Matrix Emerging Growth should endure any such market
disturbances with minimum difficulty.
Sincerely,
SENA-WELLER-ROHS-WILLIAMS-INC
2
<PAGE>
MATRIX GROWTH FUND
Value of $10,000 vs S&P 500 Index
Average Annual Total Return
Period Ended December 31, 1999
------------------------------
1 Year 16.04%
5 Year 22.32%
10 Year 14.37%
Qtr Fund S&P
--- ---- ---
5/14/86 $10,000 $10,000
6/30/86 $10,000 $10,573
12/31/86 $10,000 $10,387
6/30/87 $11,880 $13,237
12/31/87 $10,080 $10,930
6/30/88 $10,394 $12,356
12/31/88 $9,878 $12,744
6/30/89 $11,655 $14,833
12/31/89 $13,443 $16,778
6/30/90 $13,900 $17,315
12/31/90 $12,837 $16,292
6/30/91 $14,792 $18,612
12/31/91 $17,224 $21,253
6/30/92 $16,044 $21,091
12/31/92 $18,085 $22,882
6/30/93 $18,921 $23,967
12/31/93 $19,757 $25,181
6/30/94 $18,409 $24,302
12/31/94 $18,804 $25,502
6/30/95 $21,111 $30,652
12/31/95 $23,226 $35,073
6/30/96 $25,974 $38,596
12/31/96 $27,391 $43,137
6/30/97 $32,110 $51,996
12/31/97 $36,859 $57,521
6/30/98 $42,475 $67,662
9/30/98 $37,630 $60,949
12/31/98 $44,392 $73,956
12/31/99 $51,512 $85,274
Past performance is not predictive of future performance.
The S&P 500 is a broad market-weighted average of U.S. blue-chip companies. The
S&P 500 is unmanaged and returns include reinvested dividends.
3
<PAGE>
MATRIX EMERGING GROWTH FUND
Value of $10,000 vs S&P 500 and Russell 2000 Indexes
Average Annual Total Return
Period Ended December 31, 1999
------------------------------
1 Year 29.58%
Since Inception (4/4/95) 17.01%
Qtr Fund S&P Russell
--- ---- --- -------
4/4/95 10,000 10,000 10,000
6/30/95 $10,790 $10,853 $10,913
9/30/95 $12,350 $11,715 $11,991
12/31/95 $12,980 $12,419 $12,251
3/31/96 $13,900 $13,088 $12,876
6/30/96 $14,490 $13,666 $13,520
9/30/96 $14,060 $14,094 $13,566
12/31/96 $14,339 $15,274 $14,272
3/31/97 $12,789 $15,679 $13,534
6/30/97 $15,779 $18,411 $15,728
9/30/97 $18,669 $19,792 $18,069
12/31/97 $16,718 $20,367 $17,464
3/31/98 $19,461 $23,206 $19,045
6/30/98 $18,376 $23,958 $18,324
9/30/98 $14,087 $21,581 $14,633
12/31/98 $16,262 $26,186 $17,019
3/31/99 $15,024 $27,481 $16,096
6/30/99 $15,450 $29,421 $18,599
9/30/99 $15,096 $27,582 $17,423
12/31/99 $21,072 $31,687 $20,636
Past performance is not predictive of future performance.
The Russell 2000 Index is formed by taking the 3,000 largest U.S. companies and
then eliminating the largest 1,000 leaving a good small company index. The S&P
500 is a broad market-weighted average of U.S. blue-chip companies. The indicies
are unmanaged and returns include reinvested dividends.
4
<PAGE>
MATRIX GROWTH FUND
SCHEDULE OF INVESTMENTS AT DECEMBER 31, 1999
- --------------------------------------------------------------------------------
Shares COMMON STOCKS: 94.6% Value
- --------------------------------------------------------------------------------
CONGLOMERATES: 9.4%
8,000 General Electric Company $ 1,238,000
-----------
CONSUMER CYCLICAL: 3.0%
10,000 McDonald's Corp 403,125
-----------
CONSUMER NON-CYCLICAL: 10.7%
14,000 Colgate-Palmolive Company 910,000
12,000 Schering-Plough Corp 506,250
-----------
1,416,250
-----------
COMPUTERS AND SOFTWARE: 8.7%
5,000 BMC Software, Inc.* 399,687
5,000 Dell Computer Corp.* 255,000
6,000 Intel Corp 493,875
-----------
1,148,562
-----------
ENERGY: 14.9%
4,000 BP Amoco Plc 237,250
20,000 Enron Corp 887,500
10,561 Exxon Mobil Corporation 850,821
-----------
1,975,571
-----------
FINANCIAL: 5.0%
4,000 American Express Company 665,000
-----------
INSURANCE: 3.3%
4,000 American International Group, Inc 432,500
-----------
INTERNET CONTENT: 3.3%
4,000 At Home Corp.* 171,500
6,000 USWEB Corp.* 266,625
-----------
438,125
-----------
MEDICAL - DRUGS: 6.7%
12,000 Biomet, Inc 480,000
5,000 Warner-Lambert Company 409,688
-----------
889,688
-----------
See accompanying Notes to Financial Statements.
5
<PAGE>
MATRIX GROWTH FUND
SCHEDULE OF INVESTMENTS AT DECEMBER 31, 1999, CONTINUED
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
TECHNOLOGY: 8.8%
16,400 Automatic Data Processing $ 883,550
5,000 Honeywell International, Inc 288,437
-----------
1,171,987
-----------
TELECOMMUNICATIONS: 20.8%
7,000 Lucent Technologies, Inc 523,687
12,000 MCI WorldCom, Inc.* 636,750
17,108 SBC Communications, Inc 834,015
6,500 Tellabs, Inc.* 417,219
8,000 Qwest Communications* 344,000
-----------
2,755,671
-----------
Total Common Stocks (cost $5,172,808) 12,534,479
-----------
Principal
Amount REPURCHASE AGREEMENT: 5.6%
- --------------------------------------------------------------------------------
$748,000 Firstar Bank Repurchase Agreement, 1.00%,
dated 12/31/99, due 1/3/00, collateralized
by $787,297 GNMA, 6.00% - 7.00%, due 9/15/08 -
4/15/09 (proceeds $748,062) (cost $748,000) 748,000
-----------
Total Investment in Securities (cost
$5,920,808+): 100.2% 13,282,479
Liabilities in excess of Other Assets: (0.2)% (31,368)
-----------
Total Net Assets: 100.0% $13,251,111
===========
* Non-income producing security.
+ At December 31,1999, the cost of investments for federal income tax purposes
was the same as for financial reporting purposes. Gross unrealized appreciation
and depreciation of securities were as follows:
Gross unrealized appreciation $ 7,420,702
Gross unrealized depreciation (59,031)
-----------
Net unrealized appreciation $ 7,361,671
===========
See accompanying Notes to Financial Statements.
6
<PAGE>
MATRIX GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES AT DECEMBER 31, 1999
- --------------------------------------------------------------------------------
ASSETS
Investments in securities, at value (cost $5,920,808) ........ $13,282,479
Cash ......................................................... 606
Receivables:
Dividends and interest ..................................... 4,736
Fund shares sold ........................................... 6,777
Prepaid expenses and other assets ............................ 2,188
-----------
Total assets ............................................ 13,296,786
-----------
LIABILITIES
Payable for Fund shares redeemed ............................. 5,424
Advisory fees ................................................ 8,186
Distribution fees ............................................ 8,020
Accrued expenses ............................................. 24,045
-----------
Total liabilities ....................................... 45,675
-----------
NET ASSETS .................................................... $13,251,111
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($13,251,111/790,392 shares outstanding; unlimited
number of shares authorized without par value) .............. $ 16.77
===========
COMPONENTS OF NET ASSETS
Paid-in capital ............................................. $ 5,682,666
Accumulated net realized gain on investments ................ 206,774
Net unrealized appreciation on investments .................. 7,361,671
-----------
Net assets .............................................. $13,251,111
===========
See accompanying Notes to Financial Statements.
7
<PAGE>
MATRIX GROWTH FUND
STATEMENT OF OPERATIONS - FOR THE YEAR ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Income
Dividends .................................................. $ 128,164
Interest ................................................... 33,403
-----------
Total income ............................................ 161,567
-----------
Expenses
Advisory fees .............................................. 115,056
Distribution fees .......................................... 31,960
Administration fees ........................................ 30,000
Fund accounting fees ....................................... 20,066
Audit fees ................................................. 14,497
Transfer agent fees ........................................ 11,189
Custody fees ............................................... 9,199
Trustee fees ............................................... 5,343
Amortization of deferred organization costs ................ 4,984
Legal fees ................................................. 4,324
Reports to shareholders .................................... 3,004
Registration fees .......................................... 1,310
Insurance .................................................. 454
Miscellaneous .............................................. 2,468
-----------
Total expenses .......................................... 253,854
Less: expenses reimbursed ............................... (30,134)
-----------
Net expenses ............................................ 223,720
-----------
NET INVESTMENT LOSS ................................... (62,153)
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on investments ............................. 3,819,403
Net change in unrealized appreciation on investments ......... (1,840,676)
-----------
Net realized and unrealized gain on investments ......... 1,978,727
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .. $ 1,916,574
===========
See accompanying Notes to Financial Statements.
8
<PAGE>
MATRIX GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1999 December 31, 1998
----------------- -----------------
<S> <C> <C>
INCREASE IN NET ASSETS FROM:
OPERATIONS
Net investment loss ........................................ $ (62,153) $ (49,739)
Net realized gain on investments ........................... 3,819,403 1,156,986
Net change in unrealized appreciation on investments........ (1,840,676) 1,233,028
------------ ------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.... 1,916,574 2,340,275
------------ ------------
DISTRIBUTION TO SHAREHOLDERS
From net realized gain ..................................... (3,722,309) (1,309,143)
------------ ------------
CAPITAL SHARE TRANSACTIONS
Net increase (decrease) in net assets derived from
net change in outstanding shares (a) ...................... 1,511,376 (53,812)
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ................ (294,359) 977,320
NET ASSETS
Beginning of year .......................................... 13,545,470 12,568,150
------------ ------------
END OF YEAR ................................................ $ 13,251,111 $ 13,545,470
============ ============
(a) A summary of capital share transactions is as follows:
Year Ended Year Ended
December 31, 1999 December 31, 1998
----------------------- -----------------------
Shares Value Shares Value
Shares sold .......................................... 16,166 $ 333,555 18,675 $ 375,201
Shares issued in reinvestment of distributions ....... 221,930 3,668,495 64,225 1,203,586
Shares redeemed ...................................... (120,105) (2,490,674) (84,711) (1,632,599)
-------- ----------- ------- -----------
Net increase (decrease) .............................. 117,991 $ 1,511,376 (1,811) $ (53,812)
======== =========== ======= ===========
</TABLE>
See accompanying Notes to Financial Statements.
9
<PAGE>
MATRIX GROWTH FUND
FINANCIAL HIGHLIGHTS
FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT EACH YEAR
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ..... $20.14 $18.64 $15.09 $14.96 $13.45
------ ------ ------ ------ ------
Income from investment operations:
Net investment income (loss) .......... (0.08) (0.07) (0.06) (0.01) 0.10
Net realized and unrealized gain
on investments ....................... 2.97 3.72 5.24 2.69 3.06
------ ------ ------ ------ ------
Total from investment operations ....... 2.89 3.65 5.18 2.68 3.16
------ ------ ------ ------ ------
Less distributions:
From net investment income ............ -- -- -- -- (0.10)
From net realized gain ................ (6.26) (2.15) (1.63) (2.55) (1.55)
------ ------ ------ ------ ------
Total distributions .................... (6.26) (2.15) (1.63) (2.55) (1.65)
------ ------ ------ ------ ------
Net asset value, end of year ........... $16.77 $20.14 $18.64 $15.09 $14.96
====== ====== ====== ====== ======
Total return ........................... 16.04% 20.44% 34.57% 17.93% 23.52%
Ratios/supplemental data:
Net assets, end of year (millions) ..... $ 13.3 $ 13.5 $ 12.6 $ 12.1 $ 12.3
Ratio of expenses to average net assets:
Before expenses waived and reimbursed . 1.98% 2.00% 1.98% 1.99% 1.76%
After expenses waived and reimbursed .. 1.75% 1.75% 1.75% 1.75% 1.75%
Ratio of net investment income (loss) to
average net assets:
Before expenses waived and reimbursed . (0.72)% (0.63)% (0.57)% (0.33)% 0.47%
After expenses waived and reimbursed .. (0.49)% (0.38)% (0.34)% (0.08)% 0.48%
Portfolio turnover rate ................ 49% 1% -- -- 27%
</TABLE>
See accompanying Notes to Financial Statements.
10
<PAGE>
MATRIX EMERGING GROWTH FUND
SCHEDULE OF INVESTMENTS AT DECEMBER 31, 1999
- --------------------------------------------------------------------------------
Shares COMMON STOCKS: 99.6% Value
- --------------------------------------------------------------------------------
ADVERTISING SERVICES: 2.4%
1,500 Modem Media Poppe Tyson, Inc.* $ 105,563
3,500 Snyder Communications, Inc.* 67,375
----------
172,938
----------
BROADCASTING RADIO/TV: 4.0%
1,800 Citadel Communications Corp.* 116,775
2,000 Radio Unica Corp.* 57,750
2,300 Young Broadcasting Corp., Class A* 117,300
----------
291,825
----------
BUSINESS SERVICES: 4.3%
3,000 HNC Software, Inc.* 317,250
----------
CABLE COMMUNICATIONS: 0.8%
2,000 Insight Communications Co.* 59,249
----------
CHEMICALS: 2.2%
3,000 Cambrex Corp 103,312
1,700 OM Group, Inc 58,544
----------
161,856
----------
COMMERCIAL SERVICES: 2.5%
3,575 NOVA Corp.* 112,836
3,000 Pre-Paid Legal Services, Inc.* 72,000
----------
184,836
----------
COMPUTERS AND SOFTWARE: 23.1%
3,375 Advent Software, Inc.* 217,477
1,700 BindView Development Corp.* 84,469
3,500 Cisco Systems, Inc.* 374,937
2,500 Comverse Technology, Inc.* 361,875
5,887 Oracle Corp.* 659,712
----------
1,698,470
----------
CONSULTING SERVICES: 1.0%
2,500 Professional Detailing, Inc.* 74,844
----------
See accompanying Notes to Financial Statements.
11
<PAGE>
MATRIX EMERGING GROWTH FUND
SCHEDULE OF INVESTMENTS AT DECEMBER 31, 1999, CONTINUED
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
DAY CARE: 1.0%
4,000 Bright Horizons Family Solutions, Inc.* $ 75,000
----------
EDUCATIONAL SOFTWARE: 1.8%
4,000 CBT Group Public Ltd.* 134,000
----------
ELECTRONICS: 10.9%
3,000 Applied Micro Circuits Corp.* 381,750
1,000 Broadcom Corp., Class A* 272,375
2,000 Chartered Semiconductor* 146,000
----------
800,125
----------
FINANCIAL SERVICES: 1.7%
3,500 Freedom Securities Corp 39,375
1,866 Radian Group, Inc 89,102
----------
128,477
----------
HEALTH PRODUCTS/CARE: 0.9%
1,200 United Healthcare Corp 63,750
----------
INDUSTRIALS: 0.8%
4,500 Res-Care, Inc.* 57,375
----------
INTERNET CONTENT: 4.6%
1,500 Covad Communications Group* 83,906
1,800 Deltathree.com, Inc.* 46,350
1,500 Digex, Inc.* 103,125
5,000 Rainmaker Systems, Inc.* 101,250
----------
334,631
----------
MEDICAL SERVICE AND SUPPLIES: 3.0%
3,500 Express Scripts, Inc., Class A* 224,000
----------
MEDICAL SUPPLIES: 2.2%
3,500 Guidant Corp 164,500
----------
See accompanying Notes to Financial Statements.
12
<PAGE>
MATRIX EMERGING GROWTH FUND
SCHEDULE OF INVESTMENTS AT DECEMBER 31, 1999, CONTINUED
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
OIL AND GAS PRODUCERS: 2.4%
7,000 Comstock Resources, Inc.* $ 19,688
4,500 Cross Timbers Oil Company 40,781
5,000 Ocean Energy, Inc.* 38,750
6,000 R&B Falcon Corp.* 79,500
----------
178,719
----------
OTHER RETAIL: 1.6%
3,125 99 Cents Only Stores* 119,531
----------
PHARMACEUTICALS: 4.9%
4,600 Elan Corp. Plc* 135,700
2,600 Transkaryotic Therapies, Inc.* 100,100
3,478 Watson Pharmaceuticals, Inc.* 124,556
----------
360,356
----------
SCHOOLS: 1.1%
2,000 Apollo Group, Inc.* 40,125
3,000 Sylvan Learning Systems, Inc.* 39,000
----------
79,125
----------
TELECOMMUNICATIONS: 21.2%
2,700 Global Crossing Ltd.* 135,000
2,200 ITC DeltaCom, Inc.* 60,775
4,400 JDS Uniphase Corp.* 709,775
3,750 MCI WorldCom, Inc.* 198,984
1,500 Metromedia Fiber Network* 71,906
1,800 Netro Corp.* 91,800
3,000 RSL Communications, Ltd.* 51,375
1,000 Teligent, Inc.* 61,750
1,500 Terayon Communications Systems* 94,219
1,500 Tut Systems, Inc.* 80,438
----------
1,556,022
----------
See accompanying Notes to Financial Statements.
13
<PAGE>
MATRIX EMERGING GROWTH FUND
SCHEDULE OF INVESTMENTS AT DECEMBER 31, 1999, CONTINUED
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
TRAVEL SERVICES: 1.2%
2,800 Galileo International, Inc $ 83,825
----------
Total Common Stocks (cost $2,910,741) 7,320,704
----------
Total Investments in Securities (cost $2,910,741+): 99.6% 7,320,704
Other Assets less Liabilities: 0.4% 28,377
----------
Total Net Assets: 100.0% $7,349,081
==========
* Non-income producing security.
+ At December 31, 1999, the cost of investments for federal income tax purposes
was the same as for financial reporting purposes. Gross unrealized appreciation
and depreciation of securities were as follows:
Gross unrealized appreciation $4,703,679
Gross unrealized depreciation (293,716)
----------
Net unrealized appreciation $4,409,963
==========
See accompanying Notes to Financial Statements.
14
<PAGE>
MATRIX EMERGING GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES AT DECEMBER 31, 1999
- --------------------------------------------------------------------------------
ASSETS
Investments in securities, at value (cost $2,910,741) ........ $ 7,320,704
Cash ......................................................... 62,677
Receivables:
Fund shares sold ........................................... 713
Dividends and interest ..................................... 45
Deferred organization costs .................................. 1,778
-----------
Total assets ............................................. 7,385,917
-----------
LIABILITIES
Distribution fees ............................................ 7,357
Advisory fees ................................................ 3,338
Accrued expenses ............................................. 26,141
-----------
Total liabilities ........................................ 36,836
-----------
NET ASSETS ..................................................... $ 7,349,081
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($7,349,081/363,090 shares outstanding; unlimited
number of shares authorized without par value) .............. $ 20.24
===========
COMPONENTS OF NET ASSETS
Paid-in capital .............................................. $ 3,654,823
Accumulated net realized loss on investments ................. (715,705)
Net unrealized appreciation on investments ................... 4,409,963
-----------
Net assets ............................................... $ 7,349,081
===========
See accompanying Notes to Financial Statements.
15
<PAGE>
MATRIX EMERGING GROWTH FUND
STATEMENT OF OPERATIONS - FOR THE YEAR ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Income
Interest ................................................... $ 6,342
Dividends .................................................. 4,004
-----------
Total income ............................................. 10,346
-----------
Expenses
Advisory fees .............................................. 54,784
Administration fees ........................................ 30,000
Fund accounting fees ....................................... 18,629
Distribution fees .......................................... 15,218
Audit fees ................................................. 14,397
Transfer agent fees ........................................ 10,850
Custody fees ............................................... 7,683
Amortization of deferred organization costs ................ 6,001
Reports to shareholders .................................... 5,517
Trustee fees ............................................... 4,224
Legal fees ................................................. 3,971
Insurance .................................................. 510
Registration fees .......................................... 423
Miscellaneous .............................................. 2,015
-----------
Total expenses ........................................... 174,222
Less: expenses waived and reimbursed ..................... (52,252)
-----------
Net expenses ............................................. 121,970
-----------
NET INVESTMENT LOSS ................................ (111,624)
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on investments ............................. (434,762)
Net change in unrealized appreciation on investments ......... 2,131,981
-----------
Net realized and unrealized gain on investments .......... 1,697,219
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ... $ 1,585,595
===========
See accompanying Notes to Financial Statements.
16
<PAGE>
MATRIX EMERGING GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1999 December 31, 1998
----------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS
Net investment loss ................................ $ (111,624) $ (114,307)
Net realized loss on investments ................... (434,762) (195,449)
Net change in unrealized appreciation on investments 2,131,981 58,539
----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS .............................. 1,585,595 (251,217)
----------- -----------
DISTRIBUTION TO SHAREHOLDERS
From net realized gain ............................. -- (103,792)
----------- -----------
CAPITAL SHARE TRANSACTIONS
Net increase (decrease) in net assets derived from
net change in outstanding shares (a) .............. (1,061,294) 215,079
----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS ....... 524,301 (139,930)
NET ASSETS
Beginning of year .................................. 6,824,780 6,964,710
----------- -----------
END OF YEAR ........................................ $ 7,349,081 $ 6,824,780
=========== ===========
(a) A summary of capital share transactions is as follows:
Year Ended Year Ended
December 31, 1999 December 31, 1998
----------------------- ----------------------
Shares Value Shares Value
------ ----- ------ -----
Shares sold ......................................... 32,530 $ 498,112 59,862 $1,031,630
Shares issued in reinvestment of distribution ....... -- -- 3,755 53,016
Shares redeemed ..................................... (106,356) (1,559,406) (53,153) (869,567)
-------- ----------- ------- ----------
Net increase (decrease) ............................. (73,826) $(1,061,294) 10,464 $ 215,079
======== =========== ======= ==========
</TABLE>
See accompanying Notes to Financial Statements.
17
<PAGE>
MATRIX EMERGING GROWTH FUND
FINANCIAL HIGHLIGHTS
FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31, April 4, 1995*
------------------------------------------- through
1999 1998 1997 1996 December 31,1995
---- ---- ---- ---- ----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........ $15.62 $16.33 $14.24 $12.98 $10.00
------ ------ ------ ------ ------
Income from investment operations:
Net investment loss ....................... (0.31) (0.26) (0.21) (0.18) (0.03)
Net realized and unrealized gain
(loss) on investments..................... 4.93 (0.21) 2.56 1.54 3.01
------ ------ ------ ------ ------
Total from investment operations ........... 4.62 (0.47) 2.35 1.36 2.98
------ ------ ------ ------ ------
Less distributions:
From net realized gain .................... -- (0.24) (0.26) (0.10) --
------ ------ ------ ------ ------
Net asset value, end of period ............. $20.24 $15.62 $16.33 $14.24 $12.98
====== ====== ====== ====== ======
Total return ............................... 29.58% (2.72)% 16.58% 10.47% 29.80%
Ratios/supplemental data:
Net assets, end of period (millions)........ $ 7.3 $ 6.8 $ 7.0 $ 5.7 $ 4.3
Ratio of expenses to average net assets:
Before expenses waived and reimbursed ..... 2.86% 2.70% 2.71% 3.13% 3.43%+
After expenses waived and reimbursed ...... 2.00% 2.00% 2.00% 2.00% 2.00%+
Ratio of net investment loss to average
net assets:
Before expenses waived and reimbursed ..... (2.69)% (2.29)% (2.19)% (2.53)% (1.87)%+
After expenses waived and reimbursed ...... (1.83)% (1.59)% (1.48)% (1.40)% (0.43)%+
Portfolio turnover rate .................... 25% 25% 41% 30% 10%
</TABLE>
* Commencement of operations.
+ Annualized.
See accompanying Notes to Financial Statements.
18
<PAGE>
MATRIX GROWTH FUND
MATRIX EMERGING GROWTH FUND
NOTES TO FINANCIAL STATEMENTS AT DECEMBER 31, 1999
- --------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION
The Matrix Growth Fund and the Matrix Emerging Growth Fund (the "Funds")
are each 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 Funds began operations on May 14, 1986 and April 4, 1995, respectively.
Prior to January 1, 1995, Matrix Growth Fund was a series of the Gateway Trust,
a family of four no-load, diversified mutual funds. The investment objectives of
the Funds are long-term growth of capital and long-term capital appreciation,
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 sales
price at the close of regular trading on the last business day of the
reporting period; securities traded on an exchange or Nasdaq for which
there have been no sales and other over-the-counter securities are
valued at the last reported bid price. Securities for which quotations
are not readily available are valued at their respective fair values
as determined in good faith by the Board of Trustees. Short-term
investments are stated at cost, which when combined with accrued
interest, approximates market value.
B. FEDERAL INCOME TAXES. The Funds intend to comply with the requirements
of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of their taxable income to their
shareholders. Therefore, no federal income tax provision is required.
At December 31, 1999, Matrix Emerging Growth had a capital loss
carryforward available to offset future gains of $633,725 which
expires in 2007.
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. DEFERRED ORGANIZATION COSTS. The costs incurred by the Funds with
respect to adopting their current management and trust agreements, and
initial organization for Matrix Emerging Growth, have been deferred
and are being amortized using the straight-line method over a period
of five years commencing January 1, 1995 for Matrix Growth and April
4, 1995 for Matrix Emerging Growth.
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. Actual results could differ from those estimates.
19
<PAGE>
MATRIX GROWTH FUND
MATRIX EMERGING GROWTH FUND
NOTES TO FINANCIAL STATEMENTS AT DECEMBER 31, 1999, CONTINUED
- --------------------------------------------------------------------------------
NOTE 3 - COMMITMENTS AND OTHER RELATED PARTY TRANSACTIONS
Sena, Weller, Rohs, Williams, Inc. (the "Advisor") provided the Funds 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 Funds. As compensation for its
services, the Advisor receives a monthly fee at the annual rate of 0.90% based
upon the average daily net assets of the Funds up to $50 million per Fund, 0.70%
of the next $50 million and 0.60% of all such assets over $100 million. For the
year ended December 31, 1999, the advisory fees incurred were $115,056 for
Matrix Growth and $54,784 for Matrix Emerging Growth.
The Advisor has agreed to reduce fees payable to it by the Funds and
reimburse other expenses to the extent necessary to limit the Funds' aggregate
annual operating expenses, excluding brokerage commissions and other portfolio
transaction expenses, interest, taxes, capital expenditures and extraordinary
expenses, to 1.75% and 2.00% of average daily net assets for the Matrix Growth
and the Matrix Emerging Growth, respectively, through December 31, 2000. During
the year ended December 31, 1999 the Advisor reimbursed the Funds for expenses
in excess of their limits in the amounts of $30,134 for Matrix Growth and
$52,252 for Matrix Emerging Growth.
The Funds are responsible for their own operating expenses. The Advisor may
reduce its fees or make reimbursement to the Funds at any time in order to
reduce the Funds' expenses. Any such reductions made by the Advisor are subject
to reimbursement by the Funds provided the Funds are able to effect such
reimbursement and remain in compliance with any expense limitations then in
effect. At December 31, 1999, the aggregate amount of the Funds' unreimbursed
expenses were $121,999 and $239,244 for Matrix Growth and Matrix Emerging Growth
Funds, respectively, of which, $32,156, $59,709 and $30,134 are recoupable by
December 31, 2000, December 31, 2001 and December 31, 2002, respectively, for
the Matrix Growth Fund and $91,241, $95,751 and $52,252 are recoupable by
December 31, 2000, December 31, 2001 and December 31, 2002, respectively, for
the Matrix Emerging Growth Fund.
Investment Company Administration L.L.C. (the "Administrator") acts as the
Funds' administrator under an Administration Agreement. The Administrator
prepares various federal and state regulatory filings, reports and returns for
the Funds; prepares reports and materials to be supplied to the trustees;
monitors the activities of the Funds' custodian, transfer agent and accountants;
coordinates the preparation and payment of Fund expenses and reviews the Funds'
expense accruals. For its services, the Administrator receives a monthly fee
from each Fund 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
For the year ended December 31, 1999, Matrix Growth Fund and Matrix
Emerging Growth Fund each incurred $30,000 in administration fees.
20
<PAGE>
MATRIX GROWTH FUND
MATRIX EMERGING GROWTH FUND
NOTES TO FINANCIAL STATEMENTS AT DECEMBER 31, 1999, CONTINUED
- --------------------------------------------------------------------------------
Reynolds DeWitt Securities Company (the "Distributor") acts as the Funds'
principal underwriter in a continuous public offering of the Funds' shares. The
Distributor is an affiliate of the Advisor.
Certain officers and trustees of the Trust are also officers and/or
directors of the Administrator.
NOTE 4 - DISTRIBUTION PLAN
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 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 Funds. The fee is paid to the Advisor as
reimbursement for, or in anticipation of, expenses incurred for
distribution-related activity. For the year ended December 31, 1999, the Matrix
Growth Fund and the Matrix Emerging Growth Fund incurred distribution fees of
$31,960 and $15,218, respectively.
NOTE 5 - PURCHASES AND SALES OF SECURITIES
The cost of purchases and the proceeds from sales of securities, other than
short-term investments, were $5,699,782 and $7,639,316, respectively, for the
Matrix Growth Fund and $1,486,028 and $2,170,113, respectively, for the Matrix
Emerging Growth Fund.
NOTE 6 - RETURN OF CAPITAL STATEMENT OF POSITION
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. Paid-in capital, accumulated net investment loss and
accumulated net realized gain (loss) have been adjusted for permanent book-tax
differences. For the year ended December 31, 1999, the Matrix Growth Fund
decreased paid-in capital, accumulated net investment loss and increased
accumulated net realized gain by $65,670, $62,153 and $3,517, respectively. For
the year ended December 31, 1999, the Matrix Emerging Growth Fund decreased
paid-in capital, accumulated net investment loss and accumulated net realized
loss by $113,823, $111,624 and $2,199, respectively.
21
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Trustees
Professionally Managed Portfolios
We have audited the accompanying statement of assets and liabilities of the
Matrix Growth Fund and of the Matrix Emerging Growth Fund, each a series of
shares of the Professionally Managed Portfolios, including the schedules of
investments as of December 31, 1999, and the related statements of operations
for the year then ended, changes in net assets for each of the two years in the
period then ended and the financial highlights for the periods indicated
thereon. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1999, by correspondence with the custodian. Our audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion the 1999 financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Matrix Growth Fund and Matrix Emerging Growth Fund as of December 31, 1999, the
results of their operations for the year then ended, the changes in their net
assets for each of the two years in the period then ended and their financial
highlights for the periods indicated thereon, in conformity with generally
accepted accounting principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
January 28, 2000
22
<PAGE>
ADVISOR
Sena Weller Rohs Williams, Inc.
300 Main Street
Cincinnati, Ohio 45202
(513) 621-2875
(800) 877-3344
+
DISTRIBUTOR
Reynolds DeWitt Securities Company
a division of Sena Weller Rohs Williams, Inc.
300 Main Street
Cincinnati, Ohio 45202
(513) 621-2875
(800) 877-3344
+
CUSTODIAN
Firstar Institutional Custody Services
425 Walnut Street
Cincinnati, Ohio 45202
+
TRANSFER AGENT
ICA Fund Services Corp.
4455 East Camelback Road, Suite E261
Phoenix, Arizona 85018
+
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.
