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PORTFOLIO 21
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ANNUAL REPORT
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August 31, 2000
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PORTFOLIO 21
Dear Portfolio 21 Investors:
It is with pleasure that we write our second shareholder letter. Portfolio 21 is
almost one year old--11 months as of August 31, 2000. Shareholder letters are
written and sent semi-annually, so we will concentrate on highlights from the
past six months.
FINANCIAL PERFORMANCE
We launched the Portfolio on September 30, 1999, as of February 29, 2000, the
Portfolio's total assets had grown to $3,567,380, and by August 31, 2000, total
assets were $7,271,799. Although for the six months ended August 31, 2000, the
Portfolio's cumulative total return was 0.00% (flat), for its 11-month life, the
return has been 20.81%. This compares favorably to The Morgan Stanley World
Equity Index which returned 1.65% for the past six months and 12.41% for the 11
months ending August 31, 2000. We are using this index as our benchmark since
Portfolio 21 holds both US and non-US stocks.
Probably the most memorable aspect of the past six months was the sharp drop in
technology stocks during the month of April. Many of these stocks have
rebounded, although the markets are much more skeptical about ".com" companies
than they had been prior to April. Portfolio 21 has significant exposure to the
technology sector, but we have been hesitant to focus on unprofitable companies
that require significant financing to continue operating. We have felt that the
risks were too high relative to the expected returns.
Portfolio 21's flat return for the past six months was actually composed of
widely dispersed returns. Companies such as Novo Nordisk, Whole Foods, Nike,
Herman Miller, Tomra, and Interface performed very well, while Agilent, AT & T,
Electrolux, and Wild Oats lagged.
It is our intention that Portfolio 21 holdings be long term in nature. However,
during the past six months, we have found it necessary to sell one holding--Real
Goods. In this case, we were concerned that its small size and a shaky financial
outlook outweighed the impressive sustainability aspirations of the company.
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ENVIRONMENTAL SUSTAINABILITY
During the past six months, three new companies--IMPCO, Nokia, and NEG
Micon--were qualified for inclusion in Portfolio 21. IMPCO and NEG Micon are
both involved in renewable energy. IMPCO (United States) hopes to develop
hydrogen storage facilities for fuel cells and has made a commitment to spend
research dollars in this area. Based in Denmark, NEG Micon (NEG) develops,
manufactures and markets wind energy products. Nokia, a Finnish company, is a
major participant in the development of wireless communications technology and
equipment.
We continue to seek out companies that understand how they can incorporate
environmental sustainability into their businesses in order to enhance
profitability and long term success and that are making substantive efforts to
do so now. A word about energy--as you review the holdings in Portfolio 21, you
will see that we have concentrated our energy holdings exclusively in companies
that have made significant commitments to developing, generating, and/or
distributing renewable energy. While some of the major oil companies have
publicly announced their awareness of the need to transition away from fossil
fuels, their underlying investment strategies and capital outlays continue to be
concentrated in "old energy". Thus, they are not included in Portfolio 21.
SHAREHOLDER ACTIVISM
Once Portfolio 21 has held positions in stocks for more than one year, we will
be eligible to sponsor and participate in the shareholder resolution process
designed to increase the sustainability commitments of companies in Portfolio 21
by entering into dialogue with companies and, if necessary, filing resolutions
that require shareholder votes. We are currently in the process of determining
our strategy for the upcoming "proxy season". Of course, on an ongoing basis, we
communicate with the companies in the portfolio whenever there are questions or
concerns about their activities. We have also participated in several
letterwriting campaigns dealing with issues ranging from the United States
Department of Agriculture's National Organic Standards Proposal and its Review
of Genetically Engineered Food Products to the Eu-ropean Union Directive on
Waste from Electrical and Electronic Equipment.
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INFORMATION AVAILABILITY
We continue to add information to our website, http://www.portfolio21.com.
Profiles for nearly all companies in Portfolio 21 are now posted, and we have
provided several position papers dealing with specific areas of interest and
particular companies. You can also find the Portfolio's daily share price (NAV)
on the website.
YOUR INPUT REQUESTED
We have heard from some of you who have comments or questions about Portfolio
21. Thank you! Please continue to let us know if you have questions, feedback,
or suggestions. We also want you to know that shareholder service is a priority.
If, for any reason, you have concerns about statements, confirmations, or other
account matters, please call us at 877-351-4115, ext. 21, or email
[email protected].
Sincerely,
/s/ Leslie E. Christian
Leslie E. Christian
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PORTFOLIO 21
Value of $10,000 vs MSCI World Index
Cumulative Total Return
Period Ended August 31, 2000
Since Inception..............20.81%
Portfolio 21 MSCI World Index
------------ ----------------
9/30/99 10,000 10,000
12/31/99 10,962 11,687
3/31/00 12,633 11,807
6/30/00 11,924 11,389
8/31/00 12,081 11,424
Past performance is not predictive of future performance.
Past MSCI World Index meeasures performance for a diverse range of developed
country global stock markets, including U.S., Canada, Europe, Australia, New
Zealand and the Far East. The index reflects the reinvestment of distributions
if any, but does not reflect fees, brokerage commissions, or other cost
investing.
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PORTFOLIO 21
SCHEDULE OF INVESTMENTS at August 31, 2000
SHARES VALUE
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COMMON STOCKS: 95.9%
ALTERNATIVE ENERGY: 10.8%
10,050 AstroPower, Inc. (United States)* $ 345,469
2,925 Ballard Power Systems Inc. (Canada)* 296,522
2,300 IMPCO Technologies, Inc. (United States)* 55,344
2,300 NEG Micon A/S (Denmark)* 91,874
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789,209
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APPAREL/TEXTILES: 1.7%
3,135 NIKE, Inc., Class B (United States) 124,028
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AUTO/TRUCK MANUFACTURERS: 1.8%
8,150 Volvo AB - Sponsored ADR (Sweden) 134,475
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BANKS: 3.5%
1,435 Union Bank of Switzerland AG - Sponsored ADR
(Switzerland) 209,779
5,450 Wainwright Bank & Trust Company (United States) 42,238
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252,017
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BUILDING MATERIALS: 0.9%
2,550 JM AB (Sweden) 48,911
14,200 Kafus Industries Ltd. (Canada)* 19,525
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68,436
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COMMUNICATION EQUIPMENT: 9.9%
9,025 Nokia Corp. - Sponsored ADR (United States) 405,561
15,500 Telefonaktiebolaget LM Ericsson - Sponsored ADR (Sweden) 317,750
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723,311
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COMMUNICATION SERVICES: 7.5%
9,650 AT&T Corp. - Liberty Media Group (United States) 303,975
8,525 Swisscom AG - Sponsored ADR (Switzerland) 240,298
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544,273
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COMPUTERS - HARDWARE: 11.2%
2,760 Hewlett-Packard Co. (United States) 333,270
3,625 International Business Machines Corp. (United States) 478,500
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811,770
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ELECTRIC COMPANIES: 0.6%
3,000 Graninge AB (Sweden) 42,283
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ELECTRONICS: 5.2%
1,175 Mitsubishi Electric Corp. - Unsponsored ADR (Japan) 114,562
8,000 Mitsubishi Electric Corp. (Japan) 74,644
1,630 Sony Corp. - Sponsored ADR (Japan) 186,228
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375,434
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ELECTRONICS - INSTRUMENTATION: 3.1%
3,678 Agilent Technologies, Inc. (United States)* 221,829
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ELECTRONICS - SEMICONDUCTORS: 4.5%
5,255 STMicroelectronics N.V. (France) 324,168
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ENVIRONMENTAL: 1.9%
4,650 Tomra Systems ASA - Sponsored ADR (Norway) 136,012
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FOOD - RETAIL: 5.9%
12,700 Axfood AB (Sweden) 86,807
3,935 Whole Foods Market, Inc. (United States)* 198,718
13,187 Wild Oats Markets, Inc. (United States)* 141,760
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427,285
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FOOD PROCESSING: 2.0%
16,550 Horizon Organic Holding Corp. (United States)* 144,295
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See accompanying Notes to Financial Statements.
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PORTFOLIO 21
SCHEDULE OF INVESTMENTS at August 31, 2000, Continued
SHARES VALUE
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HEALTH CARE - MEDICAL PRODUCTS: 5.1%
3,650 Novo Nordisk A/S - Sponsored ADR (Denmark) $ 370,475
HOUSEHOLD FURNITURE/APPLIANCE: 4.6%
6,055 Electrolux AB - Sponsored ADR (Sweden) 152,132
5,720 Herman Miller, Inc. (United States) 182,682
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334,814
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HOUSEHOLD PRODUCTS - NON-DURABLES: 1.8%
7,200 Church & Dwight Co., Inc. (United States) 129,150
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INSURANCE - PROPERTY-CASUALTY: 3.1%
2,150 Swiss Reinsurance Co. - Sponsored ADR (Switzerland) 223,331
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LODGING - HOTELS: 1.9%
13,550 Scandic Hotels AB (Sweden) 139,284
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MISC. FABRICATED PRODUCTS: 1.3%
6,875 SKF AB (Sweden) 99,812
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OFFICE FURNISHINGS: 1.9%
20,300 Interface, Inc. (United States) 140,831
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PAPER & FOREST PRODUCTS: 3.2%
5,800 AssiDoman AB (Sweden) 87,585
7,730 Svenska Cellulosa AB (Sweden) 146,630
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234,215
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PHOTOGRAPHY/IMAGING: 2.5%
11,135 Xerox Corp. (United States) 178,856
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TOTAL COMMON STOCKS
(Cost $6,451,909) 6,969,593
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PRINCIPAL
AMOUNT VALUE
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SHORT-TERM INVESTMENTS: 5.8%
$423,558 UMB Money Market Fiduciary (Cost $423,558) $ 423,558
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TOTAL INVESTMENTS IN SECURITIES
(Cost $6,875,467+): 101.7% $7,393,151
Liabilities in Excess of Other Assets: (1.7)% (121,352)
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NET ASSETS: 100.0% $7,271,799
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* Non-income producing security. ADR American depositary receipt.
+ At August 31, 2000, the basis of invest- ments for federal income tax purposes
was the same as their cost for financial report- ing purposes. Unrealized
appreciation and depreciation were as follows:
Gross unrealized appreciation $1,162,842
Gross unrealized depreciation (645,158)
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Net unrealized appreciation $ 517,684
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Percent of
Country Net Assets
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Canada 4.3%
Denmark 6.4
France 4.4
Japan 5.2
Norway 1.9
Sweden 17.3
Switzerland 9.3
United States 52.9
Liabilities in excess of other assets (1.7)
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NET ASSETS 100.0%
=====
See accompanying Notes to Financial Statements.
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PORTFOLIO 21
STATEMENT OF ASSETS AND LIABILITIES at August 31, 2000
ASSETS
Investments in securities, at value (cost $6,875,467) ......... $ 7,393,151
Receivables:
Dividends and interest ...................................... 5,006
Due from Advisor ............................................ 4,370
Prepaid expenses .............................................. 4,325
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Total assets .............................................. 7,406,852
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LIABILITIES
Cash overdraft ................................................ 4,992
Securities purchased .......................................... 80,766
Accrued expenses .............................................. 49,295
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Total liabilities ......................................... 135,053
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NET ASSETS ...................................................... $ 7,271,799
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NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($7,271,799 / 286,670 shares outstanding; unlimited
number of shares authorized without par value) ................ $ 25.37
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COMPONENTS OF NET ASSETS
Paid-in capital ............................................... $ 6,757,425
Accumulated net investment income ............................. 4,738
Accumulated net realized loss on investments .................. (8,048)
Net unrealized appreciation on investments and foreign currency 517,684
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Net assets ................................................ $ 7,271,799
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See accompanying Notes to Financial Statements.
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PORTFOLIO 21
STATEMENT OF OPERATIONS For the Period Ended August 31, 2000*
INVESTMENT INCOME
Income
Dividends (net of foreign taxes withheld of $2,240) ........... $ 43,491
Interest ...................................................... 15,051
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Total income ................................................ 58,542
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Expenses
Advisory fees ................................................. 35,632
Administration fees ........................................... 27,542
Custody fees .................................................. 24,922
Fund accounting fees .......................................... 24,025
Audit fees .................................................... 14,001
Transfer agent fees ........................................... 10,403
Distribution fees ............................................. 8,908
Reports to shareholders ....................................... 4,024
Registration expense .......................................... 4,019
Legal fees .................................................... 2,008
Trustee fees .................................................. 1,988
Insurance expense ............................................. 252
Miscellaneous ................................................. 2,310
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Total expenses .............................................. 160,034
Less: fees waived and expenses absorbed ..................... (106,577)
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Net expenses ................................................ 53,457
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NET INVESTMENT INCOME ..................................... 5,085
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REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY
Net realized loss on investments and foreign
currency transactions ......................................... (8,395)
Net unrealized appreciation on investments
and foreign currency .......................................... 517,684
Net realized and unrealized gain on
investments and foreign currency ............................ 509,289
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NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ........ $ 514,374
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* Commencement of operations on September 30, 1999.
See accompanying Notes to Financial Statements.
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PORTFOLIO 21
STATEMENT OF CHANGES IN NET ASSETS
September 30, 1999*
through
August 31, 2000
-----------
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS
Net investment income ..................................... $ 5,085
Net realized loss on investments .......................... (8,395)
Net unrealized appreciation on investments
and foreign currency .................................... 517,684
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NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .... 514,374
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CAPITAL SHARE TRANSACTIONS
Net increase in net assets derived from net change in
outstanding shares (a) ................................ 6,757,425
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TOTAL INCREASE IN NET ASSETS ............................ 7,271,799
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NET ASSETS
Beginning of period ....................................... --
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END OF PERIOD ............................................. $ 7,271,799
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(a) A summary of capital share transactions is as follows:
September 30, 1999*
through
August 31, 2000
---------------------------
Shares Value
----------- -----------
Shares sold 288,661 $ 6,806,094
Shares redeemed (1,991) (48,669)
----------- -----------
Net increase 286,670 $ 6,757,425
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* Commencement of operations.
See accompanying Notes to Financial Statements.
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PORTFOLIO 21
FINANCIAL HIGHLIGHTS For a capital share outstanding throughout the period
September 30, 1999*
through
August 31, 2000
------
Net asset value, beginning of period .......................... $21.00
------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ....................................... 0.02
Net realized and unrealized gain on investments
and foreign currency ...................................... 4.35
------
Total from investment operations .............................. 4.37
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Net asset value, end of period ................................ $25.37
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Total return ................................................ 20.81%++
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (millions) ........................ $ 7.3
RATIO OF EXPENSES TO AVERAGE NET ASSETS:
Before fees waived and expenses absorbed .................... 4.48%+
After fees waived and expenses absorbed ..................... 1.50%+
RATIO OF NET INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS:
Before fees waived and expenses absorbed .................... (2.84)%+
After fees waived and expenses absorbed ..................... 0.14%+
Portfolio turnover rate ..................................... 0.17%++
* Commencement of operations.
+ Annualized.
++ Not annualized.
See accompanying Notes to Financial Statements.
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PORTFOLIO 21
NOTES TO FINANCIAL STATEMENTS
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 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. FOREIGN CURRENCY. Foreign currency amounts, other than the cost of
investments, are translated into U.S. dollar values based upon the
spot exchange rate at the close of regular trading. The cost of
investments is translated at the rates of exchange prevailing on the
dates the portfolio securities were acquired. The Fund includes
foreign exchange gains and losses from dividend receivable and other
foreign currency denominated payables and receivables in realized and
unrealized gain (loss) on investments and foreign currency. The Fund
does not isolate that portion of realized and unrealized gain (loss)
on investments resulting from changes in foreign exchange rates on
investments from fluctuations arising from changes in the market price
of securities for financial reporting purposes. Fluctuations in
foreign exchange rates on investments are thus included with net
realized and unrealized gain (loss) on investments and foreign
currency.
C. 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.
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PORTFOLIO 21
NOTES TO FINANCIAL STATEMENTS Continued
At August 31, 2000, the Fund had a capital loss carry forward
available for federal income tax purposes of $8,048 which expires in
2007.
D. 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.
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.
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 is entitled to a monthly fee at
the annual rate of 1.00% of Fund's average daily net assets. For the period
ended August 31, 2000, the Fund incurred $35,632 in advisory fees.
The Fund is responsible for its own expenses. 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, excluding interest and tax 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. The Fund must pay
its current ordinary operating expenses before the Advisor is entitled to any
reimbursement of fees and/or expenses. Any such reimbursement is also contingent
upon Board of Trustees review and approval prior to the time the reimbursement
is initiated. For the period ended August 31, 2000, the Advisor waived fees of
$35,632 and absorbed expenses of $70,945.
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PORTFOLIO 21
NOTES TO FINANCIAL STATEMENTS 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:
Under $15 million $30,000
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$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 period ended August 31, 2000, the Fund incurred $27,542 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 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. The fee is paid to the Advisor as
reimbursement for, or in anticipation of, expenses incurred for
distribution-related activity. For the period ended August 31, 2000, the Fund
incurred $8,908 in distribution fees.
NOTE 5 - INVESTMENT TRANSACTIONS
The cost of purchases and the proceeds from sales of securities for the
period ended August 31, 2000, excluding short-term investments, were $6,466,502
and $6,545, respectively.
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REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders of
Portfolio 21
The Board of Trustees of
Professional Managed Portfolios
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Portfolio 21, a series of Professional Managed
Portfolios, as of August 31, 2000, and the related statement of operations, the
statements of changes in net assets, and the financial highlights for the period
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 August 31, 2000, by
correspondence with the custodians and brokers. 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
Portfolio 21 as of August 31, 2000, the results of its operations, the changes
in its net assets and the financial highlights for the period then ended, in
conformity with generally accepted accounting principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
October 16, 2000
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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.
