JAMES C. EDWARDS EQUITY MASTERS FUND
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SEMI-ANNUAL REPORT
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For the Six Months Ended
September 30, 2000
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James C. Edwards Equity Masters Fund
November 21, 2000
Dear Shareholders:
James C. Edwards & Company is pleased to submit our report on the James C.
Edwards Equity Masters Fund for the six month period ended September 30, 2000.
This marks 11/2 years that the Fund has been in operation.
Thus far, I am happy to report that the performance has been solid. Through
September 30, 2000, the Fund rose 27.00% since inception on March 31, 1999
versus 13.70% for the S&P 500. For the six months ended September 30, 2000, the
Fund advanced 1.84% versus a decline of 3.60% for the S&P 500.
The top ten holdings of the Fund on September 30, 2000 were:
1. XL Capital 6. CVS
2. American International Group 7. Charter Communications
3. Plantronics 8. EMC
4. Lycos 9. Pfizer
5. Morgan Stanley/Dean Witter 10. Motorola
Amid signs of slowing economic growth, stocks dropped in the second quarter of
2000. Reacting to fears over corporate earnings shortfalls and rising interest
rates, investors shied away from basic consumer and old economy companies, fled
from financials, and crushed many of the fledging Internet dot-com stocks.
Except for a brief respite in August, the declines continued through the third
quarter. These sell-offs have only served to reduce price/earnings levels from
excessive to more acceptable, while still generous, levels. Moreover, individual
corporate earnings disappointments have been increasing and are often very
severely received by the market.
The stock market has not entered the final quarter of 2000 quietly. October has,
of course, a reputation for being volatile. While the technology sector has
provided most of the excitement this year, other sectors including telecoms,
pharmaceuticals, financials and consumer-dependent companies have struggled with
high valuations and slowing earnings.
We are encouraged by the more rational performance recently of the traditional
growth stocks vis-a-vis high techs confirming there is value in companies with
steady earnings growth albeit at slower rates. We should not be overly concerned
about a possible slowdown in the economy that could serve to prevent increasing
inflationary pressures and a return to higher interest rates.
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As I am writing this, the race for President of the United States is still very
much up in the air. What the public voted for was gridlock. No matter who
ascends to the White House in January, there will be no real mandate and no
sweeping changes on the legislative front. This is not necessarily a negative
environment for the financial markets. Gridlock reigned through much of the bull
market of the 90's. After the uncertainty of the election fades away, investors
will return to scrutinizing with particular care the flood of third quarter
earnings reports in an attempt to divine whether the economy is just pausing or
is on the brink of a more significant and lasting slowdown. Whatever the
verdict, it still seems to us that there are a lot of interesting and exciting
things going on in the world of high technology, and the current shakeout is
likely to produce some worthwhile investment opportunities.
We hope that this has been informative. We truly appreciate your investment in
the James C. Edwards Equity Masters Fund. Please do not hesitate to call me at
our offices if you have any questions about the firm, or the Fund. Our number is
(212) 319-8488. Also, as a reminder, you can get information about your
investment in the Fund through our website at www.jcedwards.com.
Sincerely,
/s/ Bart A. Johnston
Vice President/Portfolio Manager
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James C. Edwards Equity Masters Fund
SCHEDULE OF INVESTMENTS at September 30, 2000 (Unaudited)
Shares Value
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COMMON STOCKS: 86.7%
Advertising: 2.3%
900 TMP Worldwide, Inc.* $ 72,450
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Banks: 2.2%
1,500 Wells Fargo & Co. 68,906
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Cable Television: 6.0%
6,100 Charter Communications, Inc.* 99,220
4,000 USA Networks, Inc.* 87,750
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186,970
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Commercial Services: 2.5%
2,000 Convergys Corp.* 77,750
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Computers: 7.7%
2,200 Dell Computer Corp.* 67,787
1,000 EMC Corp./Mass* 99,062
600 Sun Microsystems, Inc.* 70,050
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236,899
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Drugs & Pharmaceuticals: 10.4%
1,200 American Home Products Corp. 67,875
1,100 Lilly (Eli) & Co. 89,237
1,700 Novartis A.G., ADR 65,769
2,200 Pfizer, Inc. 98,863
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321,744
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Financial Services: 3.5%
1,200 Morgan Stanley Dean Witter & Co. 109,725
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Food: 2.4%
3,800 American Italian Pasta Co. - Class A* 72,913
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Identification Systems/Devices: 1.7%
1,500 Symbol Technologies, Inc. 53,906
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Insurance: 8.4%
1,350 American International Group, Inc. 129,178
1,800 XL Capital Ltd. 132,300
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261,478
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Internet Content: 1.1%
2,800 Priceline.Com* 33,250
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Internet Software: 3.6%
1,600 Lycos, Inc.* 110,025
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Manufacturing - Diversified: 7.0%
2,700 AptarGroup, Inc. 64,631
300 Corning, Inc. 89,100
700 Minnesota Mining & Manufacturing Co. 63,788
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217,519
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Medical - Wholesale Drug Distribution: 2.3%
800 Cardinal Health, Inc. 70,550
Specialty Retailing: 5.8%
2,300 CVS Corp. 106,519
5,100 Staples, Inc.* 72,356
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178,875
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Super - Regional Banks: 2.5%
2,400 First Union Corp. 77,250
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Telecommunications: 4.4%
800 ALLTEL Corp. 41,750
3,300 Motorola, Inc. 93,225
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134,975
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Telecommunications - Equipment: 3.7%
3,000 Plantronics, Inc.* 114,000
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Telecommunications - Services: 6.8%
1,500 Qwest Communications International, Inc.* 72,094
908 Telefonica S.A., ADR 53,969
600 Telesp - Telecomunicacoes de Sao Paulo S.A.* 19,763
60 Telesp Celular Participacoes S.A., preferred, ADR 0
2,150 Worldcom, Inc.* 65,306
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211,132
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Transportation - Services: 2.4%
1,300 United Parcel Service, Inc. 73,288
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TOTAL COMMON STOCKS
(cost $2,213,002) 2,683,605
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James C. Edwards Equity Masters Fund
SCHEDULE OF INVESTMENTS at September 30, 2000 (Unaudited) - (Continued)
Principal
Amount Value
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SHORT-TERM INVESTMENT: 13.6%
Money Market Investment: 13.6%
$419,741 Firstar Stellar Treasury Fund (cost $419,741) $ 419,741
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TOTAL INVESTMENTS IN SECURITIES
(cost $2,632,743+): 100.3% 3,103,346
Liabilities in excess of Other Assets: (0.3)% (8,821)
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NET ASSETS: 100.0% $3,094,525
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* Non-income producing security.
+ At September 30, 2000, the basis of investments for federal income tax
purposes was the same as their cost for financial reporting purposes.
Unrealized appreciation and depreciation were as follows:
Gross unrealized appreciation $ 665,576
Gross unrealized depreciation (194,973)
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Net unrealized appreciation $ 470,603
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See accompanying Notes to Financial Statements.
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James C. Edwards Equity Masters Fund
STATEMENTS OF ASSETS AND LIABILITIES at September 30, 2000 (Unaudited)
ASSETS
Investments in securities, at value (cost $2,632,743) ......... $3,103,346
Receivables:
Dividends and interest ....................................... 4,729
Due from advisor ............................................. 4,079
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Total assets ............................................. 3,112,154
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LIABILITIES
Administration fees payable ................................... 2,466
Accrued expenses .............................................. 15,163
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Total liabilities ........................................ 17,629
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NET ASSETS ...................................................... $3,094,525
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Net asset value, offering and redemption price per share
($3,094,525/243,642 shares outstanding; unlimited number
of shares authorized without par value) ...................... $ 12.70
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COMPONENTS OF NET ASSETS
Paid-in capital ............................................... $2,608,231
Accumulated net investment income ............................. 5,257
Accumulated net realized gain on investments .................. 10,434
Net unrealized appreciation on investments .................... 470,603
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Net assets .................................................... $3,094,525
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See accompanying Notes to Financial Statements.
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James C. Edwards Equity Masters Fund
STATEMENT OF OPERATIONS For the Six Months Ended September 30, 2000 (Unaudited)
INVESTMENT INCOME
Income Dividends ................................................ $ 11,107
Interest ........................................................ 7,965
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Total income ............................................... 19,072
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Expenses
Administration fees ............................................. 15,041
Advisory fees ................................................... 10,732
Audit fees ...................................................... 7,616
Fund accounting fees ............................................ 7,095
Transfer agent fees ............................................. 5,583
Registration fees ............................................... 3,931
Custody fees .................................................... 2,023
Legal fees ...................................................... 1,500
Trustee fees .................................................... 1,076
Reports to shareholders ......................................... 1,018
Miscellaneous ................................................... 810
Insurance expense ............................................... 17
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Total expenses ............................................. 56,442
Less: fees waived and expenses absorbed .................... (34,978)
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Net expenses ............................................... 21,464
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Net investment loss .................................... (2,392)
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REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on investments ................................ (26,494)
Net unrealized appreciation on investments ...................... 85,976
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Net realized and unrealized gain on investments ............ 59,482
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Net increase in net assets resulting from operations.... $ 57,090
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See accompanying Notes to Financial Statements.
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James C. Edwards Equity Masters Fund
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended Year Ended
September 30, March 31,
2000# 2000
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INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS
Net investment income (loss) .................. $ (2,392) $ 7,649
Net realized gain on investments .............. (26,494) 36,928
Net unrealized appreciation
on investments ............................... 85,976 384,627
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Net increase in net assets resulting
from operations ......................... 57,090 429,204
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CAPITAL SHARE TRANSACTIONS
Net increase in net assets derived from net
change in outstanding shares (a) ............. 527,295 2,080,936
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Total increase in net assets ............. 584,385 2,510,140
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NET ASSETS
Beginning of period ........................... 2,510,140 --
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End of period ................................. $ 3,094,525 $ 2,510,140
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Accumulated net investment income ............. $ 5,257 $ 7,649
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(a) A summary of capital share transactions is as
follows:
Six Months Ended Year Ended
September 30, 2000# March 31, 2000
------------------------- ------------------------
Shares Value Shares Value
---------- ---------- ---------- ----------
Shares sold ............ 42,299 $ 527,319 201,345 $2,080,936
Shares redeemed ........ (2) (24) -- --
---------- ---------- ---------- ----------
Net increase ........... 42,297 $ 527,295 201,345 $2,080,936
========== ========== ========== ==========
# Unaudited.
See accompanying Notes to Financial Statements.
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James C. Edwards Equity Masters Fund
FINANCIAL HIGHLIGHTS For a capital share outstanding throughout each period
(Unaudited)
Six Months Ended Year Ended
September 30, March 31,
2000# 2000*
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Net asset value, beginning of period ............ $12.47 $10.00
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Income from investment operations:
Net investment income (loss) .................. (0.02) 0.04
Net realized and unrealized gain
on investments ............................... 0.25 2.43
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Total from investment operations ................ 0.23 2.47
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Net asset value, end of period .................. $12.70 $12.47
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Total return .................................... 1.84% 24.70%
Ratios/supplemental data:
Net assets, end of period (millions) .......... $ 3.1 $ 2.5
Ratio of expenses to average net assets:
Before fees waived and expenses absorbed ...... 3.96%+ 6.36%
After fees waived and expenses absorbed ....... 1.50%+ 1.50%
Ratio of net investment income (loss)
to average net assets:
Before fees waived and expenses absorbed ...... (2.62)%+ (4.40)%
After fees waived and expenses absorbed ....... (0.17)%+ 0.46%
Portfolio turnover rate ......................... 23.07% 42.80%
+ Annualized
# Unaudited.
* Fund commenced operations on March 31, 1999.
See accompanying Notes to Financial Statements.
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James C. Edwards Equity Masters Fund
NOTES TO FINANCIAL STATEMENTS (Unaudited)
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 an 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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James C. Edwards Equity Masters Fund
NOTES TO FINANCIAL STATEMENTS (Unaudited) - (Continued)
NOTE 3 - COMMITMENTS AND RELATED PARTY TRANSACTIONS
James C. Edwards & Co., Inc. (the "Advisor") provides the Fund with
investment management services under an Investment Advisory Agreement. The
Advisor furnishes all investment advice, office space, 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 six months ended
September 30, 2000, the Fund incurred $10,732 in advisory fees.
The Fund is responsible for its own operating expenses. The Advisor has
contractually agreed to limit the Fund's total operating expenses by reducing
all or a portion of its fees and reimbursing the Fund for expenses, excluding
interest and tax expense, so that its ratio of expenses to average net assets
will not exceed 1.50%. Any fee waived 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, provided the aggregate amount of
the Fund's current operating expenses for such fiscal year does not exceed the
applicable limitation on Fund expenses. For the six months ended September 30,
2000, the Advisor waived fees of $10,732 and absorbed expenses of $24,246. At
September 30, 2000, the cumulative unreimbursed amount paid and/or waived by the
Advisor on behalf of the Fund is $34,978.
The Fund must pay its current ordinary operating expenses before the
Advisor is entitled to any reimbursement. Any such reimbursement is also
contingent upon Board of Trustees review and approval prior to the time the
reimbursement is initiated.
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
------ ---------------
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
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James C. Edwards Equity Masters Fund
NOTES TO FINANCIAL STATEMENTS (Unaudited) - (Continued)
For the six months ended September 30, 2000, the Fund incurred $15,041 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 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 six months ended September 30, 2000, were
$1,068,335 and $567,032, respectively.
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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, Suite 800
Philadelphia, Pennsylvania 19103
Legal Counsel
PAUL, HASTINGS, JANOFSKY & WALKER LLP
345 California Street
San Francisco, California 94104
This report is intended for the shareholders of the Fund and may not be used as
sales literature unless preceded or accompanied by a current prospectus.
Past performance results shown in this report should not be considered a
representation of future performance. Share price and returns will fluctuate so
that shares, when redeemed, may be worth more or less than their original cost.
Statements and other information herein are dated and are subject to change.
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