December 10, 1996
Securities and Exchange Commission
Attn: Filing Desk, Stop 1-4
450 Fifth Street, N.W.
Washington, DC 20549
Re: Professionally Managed Portfolios
File No. 811-5037
CIK No. 811030
Dear Sir or Madam:
On behalf of the above Registrant and pursuant to Rule 30b-2 under the
Investment Company Act of 1940, I enclose for filing via EDGAR, a copy of the
Semi-annual Report to shareholders of the Osterweis Fund series of the
Registrant for the six month period ended September 30, 1996.
If you have any questions, please contact me at (602) 952-1100.
Sincerely yours,
/s/
Robert H. Wadsworth
<PAGE>
THE OSTERWEIS FUND
Semi-Annual Report
September 30, 1996
<PAGE>
THE OSTERWEIS FUND
October 16, 1996
Dear Shareholders:
The Net Asset Value per share of The Osterweis Fund increased to
$12.40, as of September 30, 1996, representing a total return of 2.1% for the
third quarter and 12.0% year-to-date. Total assets grew to $18.1 million. The
returns moderately trailed the performance of the overall market, as represented
by the Standard and Poor's 500 Index, with returns of 3.1% and 13.5% for the
respective three and nine month periods. The gap in performance can largely be
attributed to the defensive portfolio structure we have maintained this year.
The market was volatile in the third quarter, experiencing both a
sell-off in July and a recovery in September. The Fed failed to tighten
short-term interest rates in its September meeting, apparently because of no
convincing evidence that inflation would worsen. The Fed's inaction helped to
alleviate market concerns.
There still is room for concern about the health of the stock market.
The recent increase in the price of crude oil to $25 per barrel could reduce
consumer spending and pressure the operating margins of companies that are
dependent on oil-related raw materials. The national election could produce a
power shift in the Congressional and Executive branches that might unsettle
markets. Thus, we maintain some cash reserves. We continue to search for and
hold stocks of companies with excellent cash flow generation capacity and
managements who keep shareholders' interests paramount.
Sincerely,
/s/
John S. Osterweis
The Osterweis Fund's annualized total return from its inception on October 1,
1993 through September 30, 1996 was 9.91%. The twelve months ending September
30, 1996 showed a total return of 9.61%. 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>
THE OSTERWEIS FUND
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS at September 30, 1996 (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Shares COMMON STOCKS: 76.5% Market Value
- ------------------------------------------------------------------------------------------------------------------------------------
Banks: 3.0%
<S> <C> <C>
18,800 The Bank of New York Company, Inc....................................... $ 552,250
---------
Beverages - Alcoholic: 2.2%
10,800 Anheuser-Busch Companies, Inc........................................... 406,350
-------
Building & Heavy Construction: 3.0%
29,800 Calmat Company.......................................................... 551,300
-------
Business Services: 13.1%
21,500 Allied Capital Corporation.............................................. 413,875
8,000 Dun & Bradstreet Corporation............................................ 477,000
49,567 National Education Corporation.......................................... 947,969
24,400 World Color Press, Inc.................................................. 542,900
-------
2,381,744
---------
Cosmetic - Soap: 2.8%
10,240 Avon Products, Inc...................................................... 508,160
-------
Consumer Products: 3.0%
6,300 Kimberly-Clark Corporation.............................................. 555,187
-------
Energy: 7.5%
51,856 Patina Oil & Gas Corporation............................................ 362,992
25,928 Patina Oil & Gas Corporation Warrants Exp: 5/2/2001..................... 25,928
34,909 Snyder Oil Corporation.................................................. 410,181
37,000 Wheelabrator Tech, Inc.................................................. 564,250
-------
1,363,351
---------
Healthcare: 1.1%
9,337 Fresenius Medical Care, ADR............................................. 217,083
-------
Insurance: 4.4%
22,480 NYMAGIC, Inc............................................................ 393,400
9,051 W. R. Berkley Corporation............................................... 414,083
-------
807,483
-------
See accompanying "Notes to Financial Statements."
<PAGE>
THE OSTERWEIS FUND
PORTFOLIO OF INVESTMENTS at September 30, 1996 (Unaudited), Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Shares Market Value
- ------------------------------------------------------------------------------------------------------------------------------------
Manufacturing - Diversified: 2.6%
8,900 W.R. Grace and Company.................................................. $ 462,800
---------
Media and Broadcasting: 7.4%
16,162 Infinity Broadcasting, Class A.......................................... 509,103
17,500 Scandinavian Broadcasting System SA..................................... 393,750
23,400 Westwood One, Inc....................................................... 429,975
-------
1,332,828
---------
Newspapers & Publishing: 2.5%
43,100 K-III Communications Corporation........................................ 447,163
-------
Pharmaceutical: 3.3%
14,300 Pharmacia & Upjohn, Inc................................................. 589,875
-------
Real Estate: 7.6%
81,300 Catellus Development Corporation........................................ 802,837
13,900 Crescent Real Estate Equities........................................... 571,638
-------
1,374,475
---------
Retail: 5.5%
15,200 Rite Aid Corporation.................................................... 551,000
10,852 Tandy Corporation....................................................... 438,149
-------
989,149
-------
Telecommunications: 7.5%
10,900 Cellular Communications International, Inc.............................. 365,150
18,300 Cellular Communications of Puerto Rico.................................. 466,650
20,267 International Cabletel, Inc............................................. 519,342
-------
1,351,142
---------
Total Common Stocks (cost $11,123,276).................................. 13,890,340
----------
PREFERRED STOCK: 3.3%
- ------------------------------------------------------------------------------------------------------------------------------------
Energy: 0.7%
6,400 Snyder Oil Corporation, 6.00%, Preferred Convertible A.................. 128,000
-------
See accompanying "Notes to Financial Statements."
<PAGE>
THE OSTERWEIS FUND
PORTFOLIO OF INVESTMENTS at September 30, 1996 (Unaudited), Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Shares Market Value
- ------------------------------------------------------------------------------------------------------------------------------------
Healthcare: 0.0%
8,900 Fresenius Medical Care AG............................................... $ 1,691
-------
Telecommunications: 2.6%
7,785 Airtouch Communications, Inc., 6.00%, Preferred Convertible,
Class B............................................................... 221,872
4,999 Airtouch Communications, Inc., 4.25%, Preferred Convertible,
Class C............................................................... 237,453
-------
459,325
-------
Total Preferred stock (cost $525,480)................................... 589,016
-------
U.S. GOVERNMENT AND
Principal Amount GOVERNMENT AGENCY OBLIGATIONS: 9.6%
- ------------------------------------------------------------------------------------------------------------------------------------
$300,000 Federal Farm Credit Bank, 5.45%, 11/1/1996.............................. 299,966
300,000 Federal Farm Credit Bank, 5.34%, 12/2/1996.............................. 299,833
400,000 Federal Farm Credit Bank, 4.95%, 3/3/1997............................... 399,115
400,000 Federal Home Loan Bank, 6.10%, 12/5/1997................................ 398,796
200,000 Federal Home Loan Bank, 6.20%, 10/16/1998............................... 199,389
150,000 U.S. Treasury Notes, 5.00%, 1/31/1998................................... 148,172
-------
Total U. S. Government and Government Agency Obligations
(cost $1,748,359)....................................................... 1,745,271
---------
CONVERTIBLE CORPORATE BONDS: 3.3%
- ------------------------------------------------------------------------------------------------------------------------------------
409,000 Kelley Oil & Gas Partners, 7.875%, 12/15/1999........................... 377,302
230,000 National Education Corporation, 6.50%, 5/15/2011........................ 219,650
-------
Total Convertible Corporate Bonds (cost $495,680)....................... 596,952
-------
See accompanying "Notes to Financial Statements."
<PAGE>
THE OSTERWEIS FUND
PORTFOLIO OF INVESTMENTS at September 30, 1996 (Unaudited), Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Principal Amount Market Value
$908,000 Star Bank Repurchase Agreement, 5.30%, dated 9/30/1996,
due 10/1/1996, collateralized by $980,000 GNMA, 6.5% due
1/20/2024 (value of collateral is $983,369) (proceeds $908,134)
(cost $908,000)......................................................... $ 908,000
---------
Total Investment in Securities (cost $14,800,795): 97.8%................ 17,729,579
Other Assets less Liabilities: 2.2%..................................... 401,421
-------
Total Net Assets: 100.0%................................................ $18,131,000
===========
At September 30, 1996, the cost of securities for Federal tax purposes was
the same as the basis for financial reporting. Unrealized appreciation and
depreciation of securities were as follows:
Gross unrealized appreciation................................................................ $ 3,293,139
Gross unrealized depreciation................................................................ (364,352)
--------
Net unrealized appreciation............................................. $ 2,928,784
===========
</TABLE>
See accompanying "Notes to Financial Statements."
<PAGE>
THE OSTERWEIS FUND
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES at September 30, 1996 (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
<S> <C>
Investments in securities, at value (identified cost $14,800,795) (Note 2-A) .......... $17,729,579
Cash ................................................................................. 376
Receivables:
Securities sold.................................................................. 350,169
Dividends and interest .......................................................... 56,242
Organization costs, net of accumulated amortization of $23,216......................... 15,548
Other assets........................................................................... 9,837
-----
Total assets .............................................................. 18,161,751
----------
LIABILITIES
Payable for Fund shares redeemed....................................................... 20,946
Accrued expenses ...................................................................... 9,805
-----
Total liabilities.......................................................... 30,751
------
NET ASSETS ................................................................................. $18,131,000
===========
Net asset value, offering and redemption price per share
($18,131,000/1,461,747 shares outstanding;
unlimited number of shares authorized without par value) ........................ $12.40
======
SOURCE OF NET ASSETS
Paid-in capital ....................................................................... $15,375,496
Undistributed net investment income.................................................... 10,858
Accumulated net realized loss on investments........................................... (184,138)
Net unrealized appreciation on investments............................................. 2,928,784
---------
Net assets ...................................................................... $18,131,000
===========
</TABLE>
See accompanying "Notes to Financial Statements."
<PAGE>
THE OSTERWEIS FUND
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS - For the Six Months Ended September 30, 1996
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Income
<S> <C>
Dividends........................................................................ $ 116,815
Interest ........................................................................ 93,382
Other ........................................................................... 7,606
-----
Total investment income ................................................... 217,803
-------
Expenses
Advisory fees (Note 3) .......................................................... 87,912
Administration fees (Note 3)..................................................... 17,033
Custodian and accounting fees.................................................... 9,820
Amortization of organization costs............................................... 3,887
Transfer agent fees.............................................................. 3,259
Auditing fees.................................................................... 1,594
Reports to shareholders.......................................................... 1,506
Trustees' fees................................................................... 1,504
Miscellaneous.................................................................... 1,504
Insurance........................................................................ 1,184
Registration fees................................................................ 835
Legal fees....................................................................... 752
---
Total expenses............................................................. 130,790
Expenses recouped (Note 3)................................................. 22,873
------
Total expenses after expense recoupment.................................... 153,663
-------
Net investment income ............................................. 64,140
------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss from security transactions .......................................... (55,975)
Net change in unrealized appreciation on investments .................................. 1,219,971
---------
Net realized and unrealized gain on investments ........................... 1,163,996
---------
Net Increase in Net Assets Resulting from Operations ................ $ 1,228,136
===========
</TABLE>
See accompanying "Notes to Financial Statements."
<PAGE>
THE OSTERWEIS FUND
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months Ended Year Ended
September 30, 1996* March 31, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM
OPERATIONS
<S> <C> <C>
Net investment income......................................................... $ 64,140 $ 223,664
Net realized (loss) gain on security transactions ............................ (55,975) 148,463
Net change in unrealized appreciation of investments.......................... 1,219,971 1,660,534
--------- ---------
Net increase in net assets resulting from operations ................... 1,228,136 2,032,661
--------- ---------
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income......................................................... (78,957) (279,118)
Net realized gain from security transactions.................................. (188,621) -0-
-------- -
Total dividends and distributions to shareholders ...................... (267,578) (279,118)
-------- --------
CAPITAL SHARE TRANSACTIONS
Net increase in net assets derived from net change in
outstanding shares (a) ................................................. 286,350 5,348,303
------- ---------
Total increase in net assets ........................................... 1,246,908 7,101,846
NET ASSETS
Beginning of period .......................................................... 16,884,092 9,782,246
---------- ---------
End of period (including undistributed net investment income
of $10,858 and $25,675, respectively)................................. $18,131,000 $16,884,092
=========== ===========
<FN>
(a) A summary of capital shares transactions is as follows:
Six Months Ended Year Ended
September 30, 1996* March 31, 1996
Shares Value Shares Value
Shares sold ......................................... 88,210 $1,065,543 709,552 $7,794,336
Shares reissued in reinvestment of distribution...... 21,738 263,906 24,121 271,115
Shares redeemed ..................................... (86,574) (1,043,099) (241,996) (2,717,148)
------- ---------- -------- ----------
Net increase ........................................ 23,374 $ 286,350 491,677 $5,348,303
====== ========= ======= ==========
*Unaudited.
</FN>
</TABLE>
See accompanying "Notes to Financial Statements."
<PAGE>
THE OSTERWEIS FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
For a capital share outstanding throughout each period
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months Year Year October 1, 1993*
Ended September Ended Ended through
30, 1996# March 31, 1996 March 31, 1995 March 31, 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ............. $11.74 $10.33 $10.28 $10.00
Income from investment operations:
Net investment income ...................... .04 .12 .28 .08
Net realized and unrealized gain on
investments .......................... .80 1.48 .11 .22
--- ---- --- ---
Total from investment operations.................. .84 1.60 .39 .30
--- ---- --- ---
Less distributions:
From net investment income.................. (.05) (.19) (.25) (.02)
From net capital gains ..................... (.13) -0- (.09) -0-
---- - ---- -
Total distributions............................... (.18) (.19) (.34) (.02)
---- ---- ---- ----
Net asset value, end of period ................... $12.40 $11.74 $10.33 $10.28
====== ====== ====== ======
Total return ..................................... 14.90%+ 15.59% 3.91% 6.29%+
Ratios/supplemental data:
Net assets, end of period (millions).............. $ 18.1 $ 16.9 $ 9.8 $ 5.1
Ratio of expenses to average net assets:
Before expense reimburse/recoup............ 1.49%+ 1.77% 2.32% 3.73%+
After expense reimburse/recoup............. 1.75%+ 1.75% 1.74% 1.75%+
Ratio of net investment income to average net assets:
Before expense reimburse/recoup........... 0.99%+ 1.47% 2.74% 0.42%+
After expense reimburse/recoup............. 0.73%+ 1.49% 3.32% 2.40%+
Portfolio turnover rate .......................... 19.88% 57.32% 28.65% 34.97%
Average commission rate paid...................... $ 0.0642++ - - -
<FN>
*Commencement of operations.
+Annualized.
#Unaudited.
++For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate per share for security trades on which
commissions are charged.
</FN>
</TABLE>
See accompanying "Notes to Financial Statements."
<PAGE>
THE OSTERWEIS FUND
NOTES TO FINANCIAL
STATEMENTS at September 30, 1996 (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. The
investment objective of the Fund is to attain long-term total returns. 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. 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.
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
<PAGE>
THE OSTERWEIS FUND
NOTES TO FINANCIAL STATEMENTS at September 30, 1996 (Unaudited),
Continued
- --------------------------------------------------------------------------------
NOTE 2 - CONTINUED
amount of assets and liabilities at the date of the financial statements.
Actual results could differ from those estimates.
NOTE 3 - INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
A. 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. Advisory 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. In
addition, the Advisor is to be reimbursed for amounts which it previously
reimbursed the Fund to the extent that expense limitations were exceeded in
prior years. For the six months ended September 30, 1996, the Advisor recouped
$22,873 of such expenses it previously reimbursed to the Fund.
B. Investment Company Administration Corporation (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
$15 to $50 million 0.20% of average net assets
$50 to $100 million 0.15% of average net assets
$100 to $150 million 0.10% of average net assets
Over $150 million 0.05% of average net assets.
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 Distributor.
NOTE 4 - PURCHASES AND SALES OF SECURITIES
Purchase and sales of securities, other than short-term investments, for
the six month ended September 30, 1996 were $3,344,885 and $4,069,900,
respectively.
<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
Star Bank, N.A.
425 Walnut Street
Cincinnati, Ohio 45202
================================================================================
Transfer Agent
American Data Services, Inc.
24 West Carver Street
2nd Floor
Huntington, New York 11743
================================================================================
Indepenant Auditors
Ernst & Young LLP
515 South Flower Street, 24 Floor
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.
