The Osterweis Fund
Semi-Annual Report
September 30, 1995
<PAGE>
October, 1995
Dear Shareholder:
As of the end of September, The Osterweis Fund had total assets of
$16.9 million. Net Asset Value per share increased to $11.68, representing total
returns of 6.18% and 17.27% for the third quarter and year-to-date,
respectively. While these gains were solid in absolute terms, they trailed the
performance of the overall market due largely to the somewhat defensive
structure of the portfolio.
The market remains somewhat dichotomous with a great deal of
speculation in some sectors, especially technology, and record corporate share
buy-backs in others. Our strategy of avoiding the speculative areas of the
market, and focusing instead on more out of favor sectors has limited our
relative performance this year. It should, however, pay off when the speculative
boom falters and the currently depressed sectors regain market favor.
The economy remains rather free of inflation. Instead investors are
beginning to worry that the economy may be in a recession. We doubt conditions
are that weak. But, until the situation is clarified, the market will be
particularly wary of potential earnings shortfalls. The fourth quarter is
likely, therefore, to be more prone to rotational corrections, which could
ultimately provide some favorable investment opportunities.
Sincerely,
John S. Osterweis
* The Osterweis Fund's annualized total return from its inception on October 4,
1993 through September 30, 1995 was 10.07%. The twelve months ending September
30, 1995 showed a total return of 12.50%. Results shown are past performance,
which should not be regarded as an indicator of future results. Investment
return and principal value will fluctuate so that an investor's shares when
redeemed may be worth more or less than their cost. The Osterweis Fund is
distributed by First Fund Distributors, Inc., Phoenix, AZ 85018. <PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS at September 30, 1995 (Unaudited)
- - ------------------------------------------------------------------------------------------------------------------------------------
Shares COMMON STOCKS: 70.6% Market Value
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Business Services: 8.2%
21,500 Allied Capital Corporation.............................................. $ 338,625
4,600 Dun & Bradstreet Corporation............................................ 266,225
98,600 National Education Corporation.......................................... 788,800
-------
1,393,650
---------
Cosmetic - Soap: 2.0%
4,650 Avon Products, Inc...................................................... 333,637
-------
Consumer Products: 2.9%
7,400 Kimberly-Clark Corporation.............................................. 496,725
-------
Electronics: 1.2%
8,700 Sensormatic Electronics Corporation..................................... 200,100
-------
Energy: 5.3%
2,750 Enterra Corporation..................................................... 60,500
32,700 Snyder Oil Corporation.................................................. 396,487
43,700 Varco International, Inc................................................ 442,463
-------
899,450
-------
Industrial Machinery: 2.7%
14,000 Stewart & Stevenson Services, Inc....................................... 451,500
-------
Industrial Raw Materials: 4.8%
5,000 Alumax, Inc............................................................. 168,750
3,800 Aluminum Company of America............................................. 200,925
5,700 Boise Cascade Corporation............................................... 230,137
10,000 J & L Speciality Steel, Inc............................................. 210,000
-------
809,812
-------
Insurance: 4.3%
21,100 NYMAGIC, Inc............................................................ 358,700
8,250 W. R. Berkley Corporation............................................... 374,344
-------
733,044
-------
Manufacturing: 1.3%
106,600 Fruehauf Trailer Corporation............................................ 213,200
-------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS at September 30, 1995 (Unaudited), Continued
- - ------------------------------------------------------------------------------------------------------------------------------------
Shares Market Value
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Manufacturing - Diversified: 5.9%
11,900 Avery-Dennison Corporation.............................................. $ 499,800
7,500 W.R. Grace and Company.................................................. 500,625
-------
1,000,425
---------
Media and Broadcasting: 7.5%
10,055 Infinity Broadcasting, Class A.......................................... 329,301
17,500 Scandinavian Broadcasting System SA..................................... 494,375
800 Time Warner, Inc........................................................ 31,800
23,400 Westwood One, Inc....................................................... 421,200
-------
1,276,676
---------
Real Estate: 4.0%
9,300 Crescent Real Estate Equities........................................... 285,975
10,000 First Industrial Realty Trust........................................... 200,000
400 Manufactured Home Communities, Inc...................................... 6,900
11,000 RFS Hotel Investors, Inc................................................ 167,750
300 Trinet Corporation Realty............................................... 8,325
-----
668,950
-------
Restaurants: 2.6%
20,800 International Dairy Queen, Inc., Class A................................ 440,700
-------
Retail: 8.9%
27,500 Limited, Inc............................................................ 522,500
15,200 Rite Aid Corporation.................................................... 425,600
9,052 Tandy Corporation....................................................... 549,909
-------
1,498,009
---------
Telecommunications: 9.0%
600 Airtouch Communications................................................. 18,375
8,650 Cellular Communications, Inc., Class A.................................. 471,425
3,000 Cellular Communications International, Inc.............................. 112,500
13,500 Cellular Communications of Puerto Rico.................................. 411,750
18,267 International Cabletel, Inc............................................. 511,467
-------
1,525,517
---------
Total Common Stocks (cost $10,328,037).................................. 11,941,395
----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS at September 30, 1995 (Unaudited), Continued
Shares PREFERRED STOCK: 0.8% Market Value
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
6,400 Snyder Oil Corporation, 6.00%, Preferred Convertible A.................. $ 128,000
---------
Total Preferred Stock (cost $126,400)................................... 128,000
-------
<CAPTION>
U. S. GOVERNMENT AND
Principal Amount GOVERNMENT AGENCY OBLIGATIONS: 16.3%
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$300,000 FFCB, 6.15%, 10/2/1995.................................................. 300,000
310,000 FFCB, 5.73%, 11/1/1995.................................................. 310,034
250,000 FFCB, 5.70%, 1/2/1996................................................... 250,018
400,000 FFCB, 5.73%, 3/1/1996................................................... 400,420
300,000 FHLB Discount Note, 11/16/1995.......................................... 297,756
300,000 FHLB, 7.90%, 12/20/1996................................................. 300,762
300,000 SLMA Sallie Mae Float, 11/9/1995........................................ 300,000
300,000 SLMA Sallie Mae Float, 12/14/1995....................................... 299,997
300,000 U.S. Treasury Bill, 10/12/1995.......................................... 299,436
-------
Total U. S. Government and Government Agency Obligations
(cost $2,759,367)....................................................... 2,758,423
---------
NON-CONVERTIBLE CORPORATE BONDS: 5.5%
- - ------------------------------------------------------------------------------------------------------------------------------------
295,000 Grupo Televisa, 10.00%, 11/9/1997....................................... 292,050
475,000 Northwest Air Corporation, 8.625%, 8/1/1996............................. 479,156
150,000 Unisys Corporation, 9.75%, 9/15/1996.................................... 152,813
-------
Total Non-Convertible Corporate Bonds (cost $921,553)................... 924,019
-------
CONVERTIBLE CORPORATE BONDS: 3.0%
- - ------------------------------------------------------------------------------------------------------------------------------------
80,000 Albany International, 5.25%, 3/15/2002.................................. 76,800
372,000 Kelley Oil & Gas Partners, 7.875%, 12/15/1999........................... 275,280
230,000 National Education Corporation, 6.50%, 5/15/2011........................ 159,850
-------
Total Convertible Corporate Bonds (cost $530,851)....................... 511,930
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS at September 30, 1995 (Unaudited), Continued
- - ------------------------------------------------------------------------------------------------------------------------------------
Principal Amount REPURCHASE AGREEMENTS: 3.3% Market Value
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$559,000 Provident Bank Repurchase Agreement, 6.10%, dated 9/29/1995,
due 10/2/1995, collateralized by $560,000 U.S. Treasury Bills, due
10/5/1995 (proceeds $559,284) (cost $559,000)........................... $ 559,000
---------
Total Investment in Securities (cost $15,225,208): 99.5%................ 16,822,767
Other Assets less Liabilities: 0.5%.................................... 87,326
------
Total Net Assets: 100.0%................................................ $16,910,093
===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES at September 30, 1995 (Unaudited)
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments in securities, at value (identified cost $15,225,208) (Note 2-A) .......... $16,822,767
Cash ................................................................................. 898
Receivables:
Dividends and interest .......................................................... 84,331
Organizational costs, net of accumulated amortization of $15,442....................... 23,322
Other assets........................................................................... 9,071
-----
Total assets .............................................................. 16,940,389
----------
LIABILITIES
Payable for Fund shares repurchased.................................................... 598
Accrued expenses ...................................................................... 29,698
------
Total liabilities.......................................................... 30,296
------
NET ASSETS .............................................................................. $16,910,093
===========
Net asset value and redemption price per share
($16,910,093/1,447,417 shares outstanding;
unlimited number of shares authorized without par value) ........................ $11.68
======
SOURCE OF NET ASSETS
Paid-in capital ....................................................................... $15,193,362
Undistributed net investment income.................................................... 212,227
Accumulated net realized loss on investments........................................... (93,055)
Net unrealized appreciation on investments............................................. 1,597,559
---------
Net assets ...................................................................... $16,910,093
===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS - for the Six Months Ended September 30, 1995 (Unaudited)
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Income
Interest ........................................................................ $ 159,373
Dividends........................................................................ 90,998
------
Total investment income ................................................... 250,371
-------
Expenses
Advisory fees (Note 3) .......................................................... 70,258
Administration fee (Note 3)...................................................... 18,074
Custodian and accounting fees.................................................... 7,013
Transfer agent fees.............................................................. 3,259
Auditing fees.................................................................... 11,823
Legal fees....................................................................... 763
Reports to shareholders.......................................................... 495
Trustees' fees................................................................... 1,504
Registration fees................................................................ 2,202
Amortization of organization costs............................................... 3,887
Insurance........................................................................ 1,277
Miscellaneous.................................................................... 1,487
-----
Total expenses............................................................. 122,042
Less, expenses reimbursed (Note 3)......................................... (2,769)
------
Net expenses............................................................... 119,273
-------
Net investment income ............................................. 131,098
-------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss from security transactions .......................................... (5,050)
Net unrealized appreciation of investments ............................................ 1,549,280
---------
Net realized and unrealized gain on investments ........................... 1,544,230
---------
Net Increase in Net Assets Resulting from Operations ................ $ 1,675,328
===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
- - ------------------------------------------------------------------------------------------------------------------------------------
Six Months Ended Year
September 30, Ended
1995* March 31, 1995
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE IN NET ASSETS FROM:
OPERATIONS
Net investment income.................................................. $ 131,098 $ 257,697
Net realized loss on security transactions ............................ (5,050) (88,092)
Net change in unrealized appreciation of investments................... 1,549,280 121,166
--------- -------
Net increase in net assets resulting from operations ............ 1,675,328 290,771
--------- -------
DIVIDEND AND DISTRIBUTIONS TO SHAREHOLDERS
Net investment income ($0.25 per share)................................ -0- (204,606)
Net realized gain from securities transactions ($0.09 per share)....... -0- (62,942)
- -------
Total dividends and distributions to shareholders ............... -0- (267,548)
- --------
CAPITAL SHARE TRANSACTIONS
Net increase in net assets derived from net change in
outstanding shares (a) .......................................... 5,452,519 4,630,005
--------- ---------
Total increase in net assets .................................... 7,127,847 4,653,228
NET ASSETS
Beginning of period ................................................... 9,782,246 5,129,018
--------- ---------
End of period (including undistributed net investment income
of $212,227 and $81,129, respectively)......................... $16,910,093 $9,782,246
=========== ==========
<FN>
(a) A summary of capital shares transactions is as follows:
</FN>
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended Year Ended
September 30, 1995* March 31, 1995
Shares Value Shares Value
<S> <C> <C> <C> <C>
Shares sold ......................................... 516,429 $5,630,641 471,000 $4,870,334
Shares reissued in reinvestment of distribution...... -0- -0- 25,349 254,537
Shares redeemed ..................................... (15,708) (178,122) (48,473) (494,866)
------- -------- ------- --------
Net increase ........................................ 500,721 $5,452,519 447,876 $4,630,005
======= ========== ======= ==========
<FN>
*Unaudited.
</FN>
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
for a capital share outstanding throughout each period
- - ------------------------------------------------------------------------------------------------------------------------------------
Six Months Ended Year October 1, 1993*
September 30, Ended through
1995** March 31, 1995 March 31, 1994
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period ............................. $10.33 $10.28 $10.00
Income from investment operations:
Net investment income ...................................... .06 .28 .08
Net realized and unrealized gain on investments ............ 1.29 .11 .22
---- --- ---
Total from investment operations.................................. 1.35 .39 .30
---- --- ---
Less distributions:
Dividends from net investment income........................ -0- (.25) (.02)
Distributions from net capital gains ....................... -0- (.09) -0-
- ---- -
Total distributions............................................... -0- (.34) (.02)
- ---- ----
Net asset value, end of period ................................... $11.68 $10.33 $10.28
====== ====== ======
Total return ..................................................... 27.76%+ 3.91% 6.29%+
Ratios/supplemental data:
Net assets, end of period (millions).............................. $16.9 $9.8 $5.1
Ratio of expenses to average net assets:
Before expense reimbursement ............................... 1.79%+ 2.32% 3.73%+
After expense reimbursement................................. 1.75%+ 1.74% 1.75%+
Ratio of net investment income to average net assets:
Before expense reimbursement ............................... 1.88%+ 2.74% 0.42%+
After expense reimbursement ................................ 1.92%+ 3.32% 2.40%+
Portfolio turnover rate .......................................... 10.94% 28.65% 34.97%
<FN>
*Commencement of operations.
**Unaudited.
+Annualized.
</FN>
</TABLE>
See accompanying notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS at September 30, 1995 (Unaudited)
- - --------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION
The Osterweis Fund (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 company.
The Fund began operations on October 1, 1993.
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. Security Valuation. Investments in securities traded on a national
securities exchange or included in the NASDAQ National Market System are valued
at the last reported sale price at the close of regular trading on the last
business day of the period; securities traded on an exchange or NASDAQ for which
there has been no sale 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.
U.S. Government securities with less than 60 days remaining
to maturity when acquired by the Fund are valued on an amortized cost basis.
U.S. Government securities with more than 60 days remaining to maturity are
valued at the current market value (using the mean between the bid and asked
price) until the 60th day prior to maturity, and are then valued at amortized
cost based upon the value on such date unless the Board determines during such
60 day period that this amortized cost basis does not represent fair 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, Dividends and Distributions. As is common in the
industry, security transactions are accounted for on the trade date. Dividend
income and distributions to shareholders are recorded on the ex-dividend date.
D. Deferred Organization Costs. The Fund has incurred expenses of $38,764
in connection with the organization of the Fund. These costs have been deferred
and are being amortized on a straight line basis over a period of sixty months
from the date the Fund commenced investment operations.
NOTE 3 - INVESTMENT MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
A. Administrative Management Agreement. The Trust, on behalf of the Fund,
has approved an Administrative Management Agreement with Southampton Investment
Management Company, Inc. ("Southampton"). The Administrative Management fee is
computed daily and paid monthly by the Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS at September 30, 1995 (Unaudited), Continued
- - --------------------------------------------------------------------------------
at the annualized rate of .25% of the Fund's average daily net assets or
$30,000, whichever is greater. For the period ended September 30, 1995, the Fund
incurred $18,074 in administrative management fees.
B. Investment Advisory Agreement. The Trust, on behalf of the Fund, has
approved an Advisory Agreement with Osterweis Capital Management, Inc. (the
"Advisor"). The Advisor agrees to furnish all investment advice, office space,
facilities, and most personnel needed by the Fund. Management fees are computed
daily and paid monthly by the Fund at the annualized rate of 1.00% of the Fund's
average daily net assets. For the period ended September 30, 1995, the Fund
incurred $70,258 in advisory fees.
C. Agency Agreement. The Trust, on behalf of the Fund, has approved an
Agency Agreement with The Provident Bank ("Provident") whereby Provident
performs certain record keeping services related to issuance of share,
declaration of dividends, redemption of share, etc. For these services, the Fund
shall pay Provident a transfer agency fee of $500 per month plus $.25 per
shareholder account in excess of 500 accounts. For the period ended September
30, 1995 the Fund incurred $3,259 in transfer agency fees.
D. Fund Accounting Agreement. The Trust, on behalf of the Fund, has
approved a fund accounting agreement with Provident whereby Provident will keep
current the accounting records, including calculation of net asset value. The
Fund will pay Provident $200 per month plus its pro rata share of a $600 monthly
base amount for the mutual family in which it belongs.
E. Custodian Agreement. The Trust, on behalf of the Fund, has approved a
custodian agreement to employ Provident as its custodian. The Custodian fee is
computed at rates ranging from $12.15 to $32.65 for each transaction. For the
period ended September 30, 1995, the Fund incurred $7,013 in fund accounting and
custodian fees.
F. Expense Limitations. The Advisor has undertaken to limit the Fund's
operating expenses to an annual level of 1.75% of the Fund's average net assets,
exclusive of brokerage commissions, interest, taxes and extraordinary expenses.
Any such reductions made by the Advisor in its fees or payments or reimbursement
of expenses which are the Fund's obligation are subject of reimbursement by the
Fund within the following three years provided the Fund is able to effect such
reimbursement and remain in compliance with applicable expense limitations.
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 Fund are also officers and/or
directors of the Administrator and Manager.
NOTE 4 - REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements with government securities
dealers recognized by the Federal Reserve Board, with member banks of the
Federal Reserve System or with such other brokers
<PAGE>
NOTES TO FINANCIAL STATEMENTS at September 30, 1995 (Unaudited), Continued
- - --------------------------------------------------------------------------------
or dealers that meet the credit guidelines established by the Board of
Trustees. The Fund will always receive and maintain, as collateral, securities
whose market value, including accrued interest, will be at least equal to 100%
of the dollar amount invested by the Fund in each agreement, and the Fund will
make payment for such securities only upon physical delivery or upon evidence of
book entry transfer to the account of the custodian. To the extent that any
repurchase transaction exceeds one business day, the value of the collateral is
marked-to-market on a daily basis to ensure the adequacy of the collateral.
If the seller defaults and the value of the collateral declines, or if
bankruptcy proceedings are commenced with respect to the seller of the security,
realization of the collateral by the Fund may be delayed or limited.
NOTE 5 - PURCHASES AND SALES OF SECURITIES
Purchase and sales of securities, other than short-term investments, for
the period ended September 30, 1995 were $6,624,878 and $1,199,258,
respectively. At September 30, 1995, the cost of securities for Federal tax
purposes was the same as the basis for financial reporting. Unrealized
appreciation and depreciation of securities was as follows:
<TABLE>
<S> <C>
Gross unrealized appreciation.................................................... $2,124,604
Gross unrealized depreciation.................................................... (527,045)
--------
Net unrealized appreciation...................................................... $1,597,559
==========
</TABLE>
NOTE 6 - RELATED PARTY TRANSACTIONS
As of September 30, 1995, the Fund owned $559,000 of repurchase agreements
issued by its custodian.
As of September 30, 1995, the Fund shares owned by the Fund's Advisor and
its affiliates totalled 130,625 shares, out of 1,447,417 shares outstanding.
As of September 30, the Fund had the following receivables and payables
with the Advisor:
<TABLE>
<S> <C>
Payable to Advisor for Investment Advisory Fee.......................... $ (13,957)
=========
</TABLE>
<PAGE>
Advisor
Osterweis Capital Management, Inc.
One Maritime Plaza, Suite 1201
San Francisco, California 94111
================================================================================
Distributor
First Fund Distributors, Inc.
4455 E. Camelback Road, Suite 261E
Phoenix, Arizona 85018
================================================================================
Custodian and Transfer Agent
The Provident Bank
One East Fourth Street
Cincinnati, Ohio 45250-0967
(800) 424-2295
================================================================================
Auditors
Ernst & Young
515 South Flower Street
Los Angeles, California 90071
================================================================================
Legal Counsel
Heller, Ehrman, White & McAuliffe
333 Bush Street
San Francisco, California 94104
This report is intended for shareholders
of The Osterweis Fund and may not be
used as sales literature unless preceded
or accompanied by a current prospectus.
