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JAMES C. EDWARDS EQUITY MASTERS FUND
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ANNUAL REPORT
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For the Year Ended
March 31, 2000
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James C. Edwards Equity Masters Fund
April 19, 2000
Dear Shareholders:
James C. Edwards & Company is pleased to submit our First annual report on the
James C. Edwards Equity Masters Fund for the fiscal year ending March 31, 2000.
The Fund had a total return of 24.70% for the year compared with 17.94% for the
S&P 500. For the first quarter of 2000, the Fund was up 6.22% versus 2.29% for
the S&P 500. We are also pleased to report that the Fund did not realize any
taxable capital gains during 1999.
On March 31, 2000, the sector allocation as a percentage of equities was as
follows: Consumer Staples 6%, Financial 18%, Health 13%, Service 13%, Technology
32%, Utilities 7%, Media 7%, Conglomerates 4%.
For the first three quarters of the Fund's life, technology and the internet
were the driving forces behind the stock market's advance. Most of the positive
returns came from a very narrow band of companies. The Fund benefited during the
year by buying on weakness some of the quality names in these areas including:
Sun Microsystems, EMC, Telesp Celular, Plantronics and Corning.
So far this year the market has been characterized by wildly gyrating stock
prices with some of the more speculative technology issues jumping back and
forth over trading ranges of twenty, thirty or more points in a single day. Many
of these high flyers skyrocketed to breathtakingly implausible valuations before
tumbling back to what, in many cases, are still exceedingly generous levels. At
the same time, most of the "old economy" stocks, which had been largely shunned
by today's investors, have experienced significant bounces.
Investor concern about inflation has ebbed and flowed rapidly, almost on a daily
basis. The principal barometer of this concern is long-term interest rates.
While the application of new technology is enhancing productivity and holding
down prices in some industries, there are other areas, e.g., petroleum, where
supply-demand imbalances can lead to a rapid run-up in prices which may or may
not be passed along to consumers. To the extent that they are not, profits and
profit margins may suffer. While recent market action has partially corrected
some of the more glaring excesses, notably in the internet issues, stocks in
general were not particularly inexpensive by the end of March and price-earnings
ratios remained vulnerable to adverse developments on the inflation-interest
rate front. Looking ahead, the market is likely to be favorably affected by good
earnings reports thanks to the economy's ongoing strength. On the other hand,
the Fed's determination to restrain inflation and keep the economy from
overheating may produce more interest rate hikes which could have a dampening
effect on the market.
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Consequently, we continue to believe that a relatively cautious, but
opportunistic, investment posture makes sense in this unsettled environment.
We hope that this has been informative. We also want you to know that we
appreciate your investment in the James C. Edwards Equity Masters Fund.
Sincerely,
/s/ Bart A. Johnston
Bart A. Johnston
Portfolio Manager
For the one year since the Fund's inception on March 31, 1999, the annualized
total return was 24.70%.
James C. Edwards Equity Masters Fund
Value of $10,000 vs S&P 500 Index
Average Annual Total Return
Period Ended March 31, 2000
1 Year...................... 24.70%
James C. Edwards
Equity Masters Fund S&P 500 Index w/inc.
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3/31/99 10,000 10,000
4/30/99 10,080 10,387
5/31/99 9,990 10,142
6/30/99 10,310 10,706
7/31/99 9,960 10,370
8/31/99 9,550 10,319
9/30/99 9,400 10,037
10/31/99 10,340 10,671
11/30/99 10,930 10,891
12/31/99 11,740 11,529
1/31/00 11,540 10,950
2/29/00 11,810 10,743
3/31/00 12,470 11,794
Past performance is not predictive of future performance.
The S&P 500 Index is a broad market-weighted average of U.S. blue-chip
companies. The S&P 500 Index is unmanaged and returns include reinvested
dividends.
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SCHEDULE OF INVESTMENTS AT MARCH 31, 2000
Shares Value
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COMMON STOCKS: 85.8%
Cable TV: 2.7%
3,000 USA Networks, Inc.* $ 67,687
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Commercial Services: 3.1%
2,000 Convergys Corporation* 77,250
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Computer Services: 2.0%
1,800 IXL Enterprises, Inc.* 50,400
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Computers: 13.1%
1,700 Dell Computer Corporation* 91,694
1,000 EMC Corporation* 125,000
1,200 Sun Microsystems, Inc.* 112,444
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329,138
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E-Commerce: 1.8%
2,300 Stamps.com Inc.* 44,419
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Financial Services: 3.9%
1,200 Morgan Stanley Dean Witter & Co. 97,875
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Foods: 2.3%
2,300 American Italian Pasta Company* 56,637
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Insurance: 7.9%
900 American International Group, Inc. 98,550
1,800 XL Capital Ltd. 99,675
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198,225
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Internet Software: 5.7%
1,100 Lycos, Inc.* 77,275
2,900 pcOrder.com, Inc.* 65,250
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142,525
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Manufacturing -- Misc./Diversified: 6.7%
2,700 AptarGroup, Inc. 72,056
500 Corning Incorporated 97,000
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169,056
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Medical -- Drugs: 8.4%
1,200 American Home Products Corporation $ 64,350
1,100 Eli Lilly and Company 69,300
800 Warner-Lambert Company 78,000
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211,650
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Medical -- Wholesale Drug Distribution: 2.6%
1,400 Cardinal Health, Inc. 64,225
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Specialty Retail: 6.2%
2,300 CVS Corporation 86,394
3,500 Staples, Inc.* 70,000
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156,394
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Super-Regional Banks: 3.6%
2,400 First Union Corporation 89,400
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Telecom Services: 9.1%
1,350 MCI WorldCom Incorporated* 61,172
1,500 Qwest Communications International Inc.* 72,750
600 Telesp Celular Participacoes S.A., preferred, ADR 34,012
2,100 Telesp - Telecomunicacoes de Sao Paulo S.A. 62,344
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230,278
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Telecommunications Equipment: 6.7%
1,800 Plantronics, Inc.* 167,738
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TOTAL COMMON STOCKS (cost $1,768,270) 2,152,897
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SCHEDULE OF INVESTMENTS AT MARCH 31, 2000 (CONTINUED)
Principal
Amount Value
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SHORT-TERM INVESTMENTS: 11.5%
Money Market Investment: 11.5%
$288,658 Firststar Stellar Treasury Fund (cost $288,658) $ 288,658
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TOTAL INVESTMENT IN SECURITIES
(cost $2,056,928+): 97.3% 2,441,555
Other Assets less Liabilities: 2.7% 68,585
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NET ASSETS: 100.0% $ 2,510,140
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* Non-income producing security.
+ At March 31, 2000, the basis of securities for federal income tax purposes
was the same as their cost for financial reporting purposes. Unrealized
appreciation and depreciation of securities were as follows:
Gross unrealized appreciation $ 520,468
Gross unrealized depreciation (135,841)
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Net unrealized appreciation $ 384,627
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See accompany Notes to Financial Statements.
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STATEMENT OF ASSETS AND LIABILITIES AT MARCH 31, 2000
ASSETS
Investments in securities, at value (cost $2,056,928) ....... $2,441,555
Receivables:
Securities sold ........................................... 84,075
Dividends and interest .................................... 4,117
Prepaid expenses ........................................... 1,640
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Total assets ........................................... 2,531,387
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LIABILITIES
Payables:
Administration fees ....................................... 2,466
Accrued expenses ............................................ 18,781
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Total liabilities ...................................... 21,247
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NET ASSETS .................................................... $2,510,140
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NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($2,510,140/201,345 shares outstanding; unlimited
number of shares authorized without par value) .............. $ 12.47
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COMPONENTS OF NET ASSETS
Paid-in capital ............................................. $2,080,936
Accumulated net investment income ........................... 7,649
Accumulated net realized gain on investments ................ 36,928
Net unrealized appreciation on investments .................. 384,627
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Net assets ............................................. $2,510,140
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See accompanying Notes to Financial Statements.
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STATEMENT OF OPERATIONS FOR THE YEAR ENDED MARCH 31, 2000
INVESTMENT INCOME
Income
Interest ................................................ $ 21,475
Dividends ............................................... 10,909
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Total income ......................................... 32,384
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Expenses
Administration fees ..................................... 30,000
Audit fees .............................................. 14,475
Fund accounting fees .................................... 13,186
Advisory fees ........................................... 12,367
Transfer agent fees ..................................... 10,250
Registration expense .................................... 7,952
Custody fees ............................................ 5,105
Legal fees .............................................. 3,977
Reports to shareholders ................................. 3,341
Trustee fees ............................................ 2,544
Miscellaneous ........................................... 1,894
Insurance expense ....................................... 150
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Total expenses ....................................... 105,241
Less: fees waived and expenses absorbed .............. (80,506)
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Net expenses ......................................... 24,735
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NET INVESTMENT INCOME ............................. 7,649
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REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments ......................... 36,928
Net unrealized appreciation on investments ............... 384,627
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Net realized and unrealized
gain on investments ................................ 421,555
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NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS .................................. $ 429,204
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See accompanying Notes to Financial Statements.
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STATEMENT OF CHANGES IN NET ASSETS
Year Ended
March 31 2000#
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INCREASE IN NET ASSETS FROM:
OPERATIONS
Net investment income ........................................ $ 7,649
Net realized gain on investments ............................. 36,928
Net unrealized appreciation on investments ................... 384,627
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NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ..... 429,204
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CAPITAL SHARE TRANSACTIONS
Net increase in net assets derived from net
change in outstanding shares (a) ........................... 2,080,936
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TOTAL INCREASE IN NET ASSETS ............................. 2,510,140
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NET ASSETS
Beginning of year ............................................ --
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END OF YEAR (including accumulated net
investment income of $7,649) ............................... $2,510,140
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(a) A summary of capital share transactions is as follows:
Year Ended
March 31, 2000#
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Shares Value
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Shares sold 201,345 $ 2,080,936
Shares redeemed -- --
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Net increase 201,345 $ 2,080,936
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# Fund commenced operations on March 31, 1999.
See accompanying Notes to Financial Statements.
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FINANCIAL HIGHLIGHTS FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT THE PERIOD
Year Ended
March 31, 2000#
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Net asset value, beginning of year ............................ $10.00
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Income from investment operations:
Net investment income ....................................... 0.04
Net realized and unrealized gain on investments ............. 2.43
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Total from investment operations .............................. 2.47
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Net asset value, end of year .................................. $12.47
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Total return .................................................. 24.70%
Ratios/supplemental data:
Net assets, end of year (millions) ........................ $ 2.5
Ratio of expenses to average net assets:
Before fees waived and expenses absorbed .................... 6.36%
After fees waived and expenses absorbed ..................... 1.50%
Ratio of net investment income (loss)
to average net assets:
Before fees waived and expenses absorbed .................... (4.40)%
After fees waived and expenses absorbed ..................... 0.46%
Portfolio turnover rate ..................................... 42.80%
# Fund commenced operations on March 31, 1999.
See accompanying Notes to Financial Statements.
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NOTES TO FINANCIAL STATEMENTS
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. SECURITIES VALUATION. 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 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 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 an identified cost 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.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 3 - COMMITMENTS AND RELATED PARTY TRANSACTIONS
For the year ended March 31, 2000, 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 year ended March 31, 2000, the Fund incurred $12,367
in advisory fees.
The Fund is responsible for its own operating expenses. The Advisor has
contractually agreed to limit the Fund's total expenses to not more than 1.50%
of average net assets. 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, pro vided 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 reim bursement 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 year ended March 31, 2000, the
Advisor waived fees of $12,367 and absorbed expenses of $68,139.
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
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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 year ended March 31, 2000, the Fund incurred $30,000 in
administration fees.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 year ended March 31, 2000, were $2,267,303 and
$535,961, respectively.
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REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
TO THE SHAREHOLDERS OF
JAMES C. EDWARDS EQUITY MASTERS FUND
THE BOARD OF TRUSTEES OF
PROFESSIONALLY MANAGED PORTFOLIOS
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of James C. Edwards Equity Masters Fund, a series
of Professionally Managed Portfolios, as of March 31, 2000, and the related
statement of operations, the statement of changes in net assets and the
financial highlights for the year then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit.
We conducted our audit 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 March 31, 2000, by
correspondence with the custodian. An 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
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of James
C. Edwards Equity Masters Fund as of March 31, 2000, the results of its
operations, the changes in its net assets and the financial highlights for the
year then ended, in conformity with generally accepted accounting principles.
TAIT, WELLER & BAKER
PHILADELPHIA, PENNSYLVANIA
APRIL 21, 2000
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Investment Adviser
JAMES C. EDWARDS & CO., INC.
570 Lexington Ave., 29th Floor
New York, New York 10022
(212) 319-8490
www.jcedwards.com
Distributor
FIRST FUND DISTRIBUTORS, INC.
4455 East 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
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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.
