Leonetti Balanced Fund
Semi-Annual Report
December 31, 1995
<PAGE>
January 1996
Dear Shareholder:
We are pleased to report to you that the Leonetti Balanced Fund's first complete
quarter gained 6.69 percent. This compared quite favorably with the Standard &
Poors 500 return of 6.02 percent. Since the August 1, 1995 inception date the
Leonetti Balanced Fund is up 6.05 percent.*
The Fund's first dividend was declared, which reduced the net asset value
of the Fund on December 29, 1995 by .045 cents. If your dividends were
reinvested, additional shares were purchased, otherwise a check was sent to you.
To date, the portfolio mix has been quite conservative, which makes the Fund's
quarterly performance even more remarkable. At the quarter's end the mix was:
stocks 60 percent, fixed income 25 percent and cash 15 percent. The Fund
currently holds 22 stocks. The ten largest holdings listed in order at quarter's
end were: Minnesota Mining and Manufacturing, General Electric, Chevron, General
Motors, Eastman Kodak, Dialogic Corp., International Paper, American Electric
Power, Elan Corp., and Kansas City Southern.
On the fixed income side, all of the holdings are short-term U.S. Treasury
notes, which we currently believe is appropriate at this point in the interest
rate cycle. The average maturity on the fixed income holdings is 1-3/4 years.
Our cash level is much higher than our portfolio plan, but in the coming months
as opportunities present themselves, the cash level will be reduced.
After a correction early in the year, our expectation for the first half of 1996
is quite positive. We would like to welcome our shareholders to the Leonetti
Balanced Fund and hope the enthusiasm we have for the Fund will be shared by
you. Thank you for your confidence in us.
We wish you and yours a happy, healthy and prosperous 1996.
Cordially,
/s/ Craig Johnson /s/ Michael Leonetti
Craig Johnson Michael Leonetti
Portfolio Manager President, Leonetti & Associates, Inc.
*Results shown are past performance, which is not a guarantee of future
returns. Share value and returns fluctuate and you may have a gain or loss when
you sell shares. Performance results for the Leonetti Balanced Fund and the
Standard & Poor's 500 Index include reinvested dividends.
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<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS at December 31, 1995 (Unaudited)
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Shares COMMON STOCKS: 59.6% Market Value
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Aerospace / Defense: 1.5%
<S> <C> <C>
3,000 Litton Industries....................................................... $ 133,500
---------
Auto: 4.2%
7,000 General Motors Corporation.............................................. 370,125
-------
Commercial Services - Security / Safety: 1.2%
7,000 ADT, Ltd................................................................ 105,000
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Computer Technology: 3.2%
8,000 Creative Technology, Ltd................................................ 69,000
8,000 Computervision Corporation.............................................. 123,000
9,000 Submicron Systems Corporation........................................... 84,375
------
276,375
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Diversified Operations: 10.0%
6,000 General Electric Company................................................ 432,000
6,700 Minnesota Mining & Manufacturing Company................................ 443,875
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875,875
-------
Finance: 2.3%
15,000 Mercury Finance Company................................................. 198,750
-------
Food: 2.6%
7,000 Nabisco Holdings Corporation - Class A.................................. 228,375
-------
Food Services: 1.4%
10,000 Darden Restaurants, Inc................................................. 118,750
-------
Leisure: 4.2%
5,500 Eastman Kodak Company................................................... 368,500
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Medical: 9.6%
5,000 Abbott Laboratories..................................................... 208,750
5,000 American Medical Response............................................... 162,500
5,000 Elan Corporation, PLC - ADR............................................. 243,125
8,000 IVAX Corporation........................................................ 228,000
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842,375
-------
<PAGE>
PORTFOLIO OF INVESTMENTS at December 31, 1995 (Unaudited), Continued
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Shares Market Value
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Office Supply: 1.7%
9,000 BT Office Products International........................................ $ 144,000
---------
Oil: 4.8%
8,000 Chevron Corporation..................................................... 420,000
-------
Paper: 3.5%
8,000 International Paper Company............................................. 303,000
-------
Railroad: 2.6%
5,000 Kansas City Southern Industries......................................... 228,750
-------
Telecommunication: 3.5%
8,000 Dialogic Corporation.................................................... 308,000
-------
Utility: 3.3%
7,000 American Electric Power................................................. 283,500
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Total Common Stocks (cost $4,598,530)................................... 5,204,875
---------
</TABLE>
<TABLE>
<CAPTION>
Principal Amount U.S. GOVERNMENT OBLIGATIONS: 25.2%
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$350,000 Treasury Note, 4.375%, due 11/15/96..................................... 347,435
400,000 Treasury Note, 4.750%, due 2/15/97...................................... 397,952
350,000 Treasury Note, 5.625%, due 6/30/97...................................... 352,205
350,000 Treasury Note, 5.625%, due 1/31/98...................................... 352,947
400,000 Treasury Note, 5.125%, due 2/28/98...................................... 399,360
350,000 Treasury Note, 5.875%, due 8/15/98...................................... 355,435
-------
Total U.S. Government Obligations (cost $2,189,965) ... 2,205,334
---------
<PAGE>
PORTFOLIO OF INVESTMENTS at December 31, 1995 (Unaudited), Continued
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Market Value
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$1,253,217 Provident Bank Repurchase Agreement, 5.40%, dated 12/29/95,
due 1/2/96, collateralized by $1,295,000 U.S. Treasury Bills,
due 3/7/96 (proceeds $1,253,969) (cost $1,253,217)...................... $ 1,253,217
-----------
Total Investment in Securities (cost $8,041,712+): 99.2%................ 8,663,426
Other Assets less Liabilities: 0.8%..................................... 67,956
------
Total Net Assets: 100.0%................................................ $ 8,731,382
===========
<FN>
+ At December 31, 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:
Gross unrealized appreciation........................................... $ 675,697
Gross unrealized depreciation........................................... (53,983)
-------
Net unrealized appreciation............................................. $ 621,714
=========
</FN>
</TABLE>
See accompanying notes to financial statements.
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<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES at December 31, 1995 (Unaudited)
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ASSETS
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Investments in securities, at value (identified cost $8,041,712) (Note 2-A) ........... $8,663,426
Receivables:
Expense reimbursement............................................................ 919
Dividends and interest .......................................................... 48,938
Organization costs, net of accumulated amortization of $1,907.......................... 28,093
Other assets........................................................................... 11,248
------
Total assets .............................................................. 8,752,624
---------
LIABILITIES
Accrued expenses ...................................................................... 21,242
------
NET ASSETS .............................................................................. $8,731,382
==========
Net asset value, offering and redemption price per share
($8,731,382/827,087 shares outstanding;
unlimited number of shares authorized without par value) ........................ $10.56
======
SOURCE OF NET ASSETS
Paid-in capital ....................................................................... $8,312,188
Dividends in excess of net investment income........................................... (25)
Accumulated net realized loss on investments........................................... (202,495)
Net unrealized appreciation of investments............................................. 621,714
-------
Net assets ...................................................................... $8,731,382
==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Period August 1, 1995* through December 31, 1995 (Unaudited)
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INVESTMENT INCOME
Income
<S> <C>
Interest ........................................................................ $ 72,305
Dividends........................................................................ 36,424
------
Total investment income ................................................... 108,729
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Expenses
Advisory fees (Note 3) .......................................................... 36,180
Administration fee (Note 3)...................................................... 12,575
Custodian and accounting fees.................................................... 5,869
Transfer agent fees.............................................................. 2,725
Auditing fees.................................................................... 6,707
Legal fees....................................................................... 629
Trustees' fees................................................................... 1,258
Registration fees................................................................ 2,903
Amortization of organization costs............................................... 1,907
Reports to shareholders.......................................................... 1,258
Miscellaneous.................................................................... 1,257
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Total expenses............................................................. 73,268
Less, expenses reimbursed (Note 3)......................................... (1,575)
------
Net expenses............................................................... 71,693
------
Net investment income ................................................... 37,036
------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on security transactions ............................................ (202,495)
Net unrealized appreciation of investments ............................................ 621,714
-------
Net realized and unrealized gain on investments ................................. 419,219
-------
Net Increase in Net Assets Resulting from Operations ...................... $ 456,255
=========
<FN>
*Commencement of operations.
</FN>
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS (Unaudited)
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August 1, 1995*
through
December 31, 1995
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INCREASE IN NET ASSETS FROM:
OPERATIONS
<S> <C>
Net investment income........................................................................ $ 37,036
Net realized loss on security transactions .................................................. (202,495)
Net unrealized appreciation of investments................................................... 621,714
-------
Net increase in net assets resulting from operations .................................. 456,255
-------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Net investment income ($0.045 per share)..................................................... (37,061)
-------
CAPITAL SHARE TRANSACTIONS
Net increase in net assets derived from net change in outstanding shares (a)................. 8,312,188
---------
Total increase in net assets .......................................................... 8,731,382
NET ASSETS
Beginning of period ......................................................................... -0-
-
End of period (including dividends in excess of net investment income of $25)............... $8,731,382
==========
(a) A summary of capital shares transactions is as follows:
August 1, 1995* through
December 31, 1995
Shares Value
Shares sold .............................................................. 836,455 $8,401,792
Shares issued in reinvestment of distribution............................. 3,510 37,061
Shares redeemed........................................................... (12,878) (126,665)
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Net increase ............................................................. 827,087 $8,312,188
======= ==========
<FN>
*Commencement of operations.
</FN>
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
For a capital share outstanding throughout the period (Unaudited)
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August 1, 1995*
through
December 31, 1995
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<S> <C>
Net asset value, beginning of period ......................................................... $10.00
------
Income from investment operations:
Net investment income .................................................................. .05
Net realized and unrealized gain on investments ........................................ .56
---
Total from investment operations.............................................................. .61
---
Less distributions:
Dividends from net investment income.................................................... (.05)
----
Net asset value, end of period ............................................................... $10.56
======
Total return ................................................................................. 12.36%+
Ratios/supplemental data:
Net assets, end of period (millions).......................................................... $ 8.8
Ratio of expenses to average net assets:
Before expense reimbursement ........................................................... 2.55%+
After expense reimbursement............................................................. 2.50%+
Ratio of net investment income to average net assets:
Before expense reimbursement ........................................................... 1.24%+
After expense reimbursement ............................................................ 1.29%+
Portfolio turnover rate ...................................................................... 17.26%
<FN>
*Commencement of operations.
+Annualized.
</FN>
</TABLE>
See accompanying notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
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NOTE 1 - ORGANIZATION
The Leonetti Balanced Fund (the "Fund") is a non-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 August 1, 1995.
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, Investment Income 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 $30,000
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
For the period ended December 31, 1995, Leonetti & Associates, Inc. (the
"Adviser") provided the Fund with investment management services under an
Investment Advisory Agreement. The Adviser furnished all investment advice,
office space, facilities, and most personnel needed by the Fund. As compensation
for its services, the
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited),
Continued
Adviser was entitled to a monthly fee at the annual rate of 1.00% based
upon the average daily net assets of the Fund. For the period ended December 31,
1995, the Fund incurred $36,180 in advisory fees.
The Fund is responsible for its own operating expenses. The Adviser has
agreed to reduce fees payable to it by the Fund to the extent necessary to limit
the Fund's aggregate annual operating expenses to the most stringent limits
prescribed by any state in which the Fund's shares are offered for sale. Any
such reductions made by the Adviser in its fees or payments or reimbursement of
expenses which are the Fund's obligation are subject to 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.
Southampton Investment Management Company (the "Manager") acts as the
Fund's Manager under an Investment Management Agreement. The Manager 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 Manager receives an annual fee equal to the
greater of 0.25% of the Fund's average daily net assets or $30,000.
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 Manager.
Certain officers and Trustees of the Fund are also officers and/or
directors of the Manager.
NOTE 4 - PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities, other than short-term investments, for
the period ended December 31, 1995 were $7,813,986 and $824,668, respectively.
<PAGE>
Adviser
Leonetti & Associates, Inc.
1130 Lake Cook Road, Suite 105
Buffalo Grove, IL 60089
(800) 454-0999
--
Distributor
First Fund Distributors, Inc.
4455 East Camelback Road, Suite 261E
Phoenix, Arizona 85018
--
Custodian
Star Bank
P.O. Box 1118
Cincinnati, Ohio 45201-1118
--
Transfer Agent
American Data Services, Inc.
24 West Carver Street, 2nd Floor
Huntington, New York 11743
--
Auditors
Ernst & Young
515 South Flower Street
Los Angeles, CA 90071
--
Legal Counsel
Heller, Ehrman, White & McAuliffe
333 Bush Street
San Francisco, California 94104
This report is intended for the shareholders of
the Leonetti Balanced Fund and should not be
used as sales literature unless accompanied
or preceded by a current prospectus.
