December 5, 1997
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, 1997.
If you have any questions, please contact me at (602) 952-1100.
Sincerely yours,
/s/
Robert H. Wadsworth
<PAGE>
The Osterweiss Fund
Semi-Annual Report
September 30, 1997
<PAGE>
The Osterweiss Fund
October 13, 1997
Dear Shareholders,
Despite being somewhat less-than-fully invested, The Osterweis Fund (the
"Fund") outperformed the market during the third quarter. The Fund's total
return of 9.10% compared favorably to the 7.49% return of the Standard and
Poor's 500 Index. Since the Fund has been conservatively managed with
less-than-full exposure to the equity market, performance results are quite
gratifying, reflecting above-average returns in our equity positions.
As of the end of September, the Fund had a Net Asset Value of $16.18 per
share. This represented a 26.11% increase for the year-to-date. Performance
slightly trailed that of the Standard and Poor's 500 Index, as strong equity
results were mitigated by a modestly defensive portfolio structure.
The key forces driving the stock market are the favorable economic trends
of a growing economy, rising corporate profits, and subdued inflation on the one
hand and the risks inherent in historically-rich valuations on the other. As
long as the economy can sustain growth without igniting inflation, the stock
market should continue to be rewarding. But if anything were to interrupt the
growth of corporate profits or cause inflation to accelerate, the stock market
would likely correct. As a result, we continue to maintain a moderately
defensive portfolio structure and to focus our stock selection efforts on
specific situations with reasonable valuations and improving fundamentals.
Sincerely,
/s/
John S. Osterweis
- ---------------------------------------
The Osterweis Fund's annualized total return from its inception on October 1,
1993 through September 30, 1997 was 14.79%. The twelve months ending September
30, 1997 showed a total return of 30.76%. 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 Osterweiss Fund
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS at September 30, 1997 (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Shares COMMON STOCKS: 84.5% Market Value
- ------------------------------------------------------------------------------------------------------------------------------------
Banks: 2.8%
<S> <C> <C>
8,000 Barnett Banks, Inc...................................................... $ 566,000
---------
Beverages - Alcoholic: 2.4%
10,800 Anheuser-Busch Companies, Inc........................................... 487,350
-------
Building and Heavy Construction: 3.2%
26,800 CalMat Company.......................................................... 636,500
-------
Business Services: 2.8%
23,666 A.C. Nielsen Corp....................................................... 567,984
-------
Computer Services: 2.3%
13,200 Electronic Data Systems Corp............................................ 468,600
-------
Consumer Products: 5.5%
11,400 Kimberly-Clark Corp..................................................... 557,887
54,000 Playtex Products, Inc................................................... 546,750
-------
1,104,637
---------
Cosmetics: 2.9%
9,240 Avon Products, Inc...................................................... 572,880
-------
Energy: 11.8%
51,856 Patina Oil & Gas Corp................................................... 512,078
15,000 Pioneer Natural Resources Company....................................... 628,125
34,909 Snyder Oil Corp......................................................... 791,998
27,000 Wheelabrator Technology, Inc............................................ 432,000
- -------
2,364,201
---------
Financial Services: 3.6%
11,400 Associates First Capital Corp., Class A................................. 709,650
-------
Insurance: 3.5%
12,700 HSB Group, Inc.......................................................... 707,231
-------
See accompanying Notes to Financial Statements.
<PAGE>
The Osterweiss Fund
SCHEDULE OF INVESTMENTS at September 30, 1997 (Unaudited), Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Shares Market Value
- ------------------------------------------------------------------------------------------------------------------------------------
Manufacturing - Diversified: 2.9%
7,900 W.R. Grace & Company.................................................... $ 581,638
---------
Media and Broadcasting: 9.2%
12,500 Scandinavian Broadcasting System SA..................................... 300,000
29,119 Westinghouse Electric Corp.............................................. 788,033
23,400 Westwood One, Inc....................................................... 742,950
-------
1,830,983
---------
Newspapers and Publishing: 2.6%
43,100 K-III Communications Corp............................................... 519,894
-------
Pharmaceuticals: 3.1%
14,500 Forest Laboratories, Inc................................................ 610,812
-------
Real Estate: 10.4%
49,800 Catellus Development Corp............................................... 1,033,350
2,480 Crescent Operating, Inc................................................. 49,910
24,800 Crescent Real Estate Equities Company................................... 995,100
-------
2,078,360
---------
Retail: 10.2%
15,300 Rite Aid Corp........................................................... 848,194
50,000 Sunglass Hut International, Inc......................................... 387,500
23,704 Tandy Corp.............................................................. 797,047
-------
2,032,741
---------
Telecommunications: 5.3%
7,900 Cellular Communications International, Inc.............................. 327,850
15,320 CoreComm, Inc........................................................... 252,780
18,267 NTL Inc. ............................................................... 481,792
-------
1,062,422
---------
Total Common Stocks (cost $11,246,076).................................. 16,901,883
----------
See accompanying Notes to Financial Statements.
<PAGE>
The Osterweiss Fund
SCHEDULE OF INVESTMENTS at September 30, 1997 (Unaudited), Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Shares Market Value
CONVERTIBLE PREFERRED STOCK: 2.2%
- ------------------------------------------------------------------------------------------------------------------------------------
Energy: 0.9%
6,400 Snyder Oil Corp., 6.00%, Convertible Class A............................ $ 176,800
---------
Telecommunications: 1.3%
7,785 AirTouch Communications, Inc., 6.00%, Class B........................... 253,499
-------
Total Convertible Preferred Stock (cost $320,127)....................... 430,299
-------
U.S. GOVERNMENT AND
Principal Amount GOVERNMENT AGENCY OBLIGATIONS: 8.7%
- ------------------------------------------------------------------------------------------------------------------------------------
$ 350,000 FFCB, 5.47%, 4/1/1998................................................... 349,836
200,000 FHLB, 6.20%, 10/16/1998................................................. 200,126
300,000 FHLD, 5.58%, 11/5/1997.................................................. 298,373
350,000 FHLD, 5.37%, 12/9/1997.................................................. 346,344
400,000 SLMA, 5.27%, 12/18/1997................................................. 399,956
150,000 U.S. Treasury Notes, 5.00%, 1/31/1998................................... 149,859
-------
Total U. S. Government and Government Agency Obligations
(cost $1,744,590)....................................................... 1,744,494
---------
CONVERTIBLE CORPORATE BONDS: 2.0%
- ------------------------------------------------------------------------------------------------------------------------------------
414,000 Kelley Oil & Gas Partners, 7.875%, 12/15/1999 (cost $361,500)........... 402,491
-------
Shares WARRANTS: 0.3%
- ------------------------------------------------------------------------------------------------------------------------------------
25,928 Patina Oil & Gas Corp., Exp. 5/2/2001 (cost $46,995).................... 58,338
------
Principal Amount REPURCHASE AGREEMENT: 5.6%
- ------------------------------------------------------------------------------------------------------------------------------------
$1,114,000 Star Bank Repurchase Agreement, 5.45%, dated 9/30/1997,
due 10/1/1997, collateralized by $1,110,000 GNMA, due
2/20/2024 (value of collateral $1,137,750) (cost $1,114,000)............ 1,114,000
---------
See accompanying Notes to Financial Statements.
<PAGE>
The Osterweiss Fund
SCHEDULE OF INVESTMENTS at September 30, 1997 (Unaudited), Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Market Value
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investment in Securities (cost $14,833,288+): 103.3%.............. $20,651,505
Liabilities in excess of Other Assets: (3.3)%........................... (667,610)
--------
Total Net Assets: 100.0%................................................ $19,983,895
===========
<FN>
+At September 30, 1997, 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........................................... $ 6,060,267
Gross unrealized depreciation........................................... (242,050)
--------
Net unrealized appreciation.................................... $ 5,818,217
===========
</FN>
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
The Osterweiss Fund
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES at September 30, 1997 (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
<S> <C>
Investments in securities, at value (cost $14,833,288)................................. $20,651,505
Cash ................................................................................. 3,311
Receivables:
Dividends and interest ......................................................... 34,270
Fund shares sold................................................................. 45,000
Deferred organization costs...................................................... 7,796
Prepaid expenses....................................................................... 1,042
-----
Total assets .............................................................. 20,742,924
----------
LIABILITIES
Payables:
Advisory fees.................................................................... 18,917
Administration fee............................................................... 3,197
Investment securities purchased.................................................. 734,375
Accrued expenses ...................................................................... 2,540
-----
Total liabilities.......................................................... 759,029
-------
NET ASSETS ................................................................................. $19,983,895
===========
Net asset value, offering and redemption price per share
($19,983,895/1,235,462 shares outstanding;
unlimited number of shares authorized without par value) ........................ $16.18
======
COMPONENTS OF NET ASSETS
Paid-in capital........................................................................ $12,499,771
Undistributed net investment income.................................................... 55,808
Undistributed net realized gain on investments......................................... 1,610,099
Net unrealized appreciation on investments............................................. 5,818,217
---------
Net assets ...................................................................... $19,983,895
===========
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
The Osterweiss Fund
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS - For the Six Months Ended September 30, 1997
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Income
<S> <C>
Interest ........................................................................ $ 78,881
Dividends........................................................................ 104,675
Other ........................................................................... 7,331
-----
Total income .............................................................. 190,887
-------
Expenses
Advisory fees.................................................................... 98,536
Administration fee............................................................... 17,996
Custodian and accounting fees.................................................... 12,335
Audit fees....................................................................... 7,772
Registration fees................................................................ 5,177
Transfer agent fees.............................................................. 4,813
Amortization of deferred organization costs...................................... 3,887
Trustees' fees................................................................... 1,504
Reports to shareholders.......................................................... 1,504
Miscellaneous.................................................................... 1,504
Legal fees....................................................................... 1,254
Insurance fees................................................................... 1,184
-----
Total expenses............................................................. 157,466
-------
Net investment income ............................................. 33,421
------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from security transactions .......................................... 1,161,720
Net change in unrealized appreciation on investments .................................. 2,884,654
---------
Net realized and unrealized gain on investments ........................... 4,046,374
---------
Net Increase in Net Assets Resulting from Operations ................ $ 4,079,795
===========
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
The Osterweiss Fund
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months Ended Year Ended
September 30, 1997* March 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS
<S> <C> <C>
Net investment income......................................................... $ 33,421 $ 109,972
Net realized gain from security transactions ................................. 1,161,720 576,542
Net change in unrealized appreciation on investments.......................... 2,884,654 1,224,750
--------- ---------
Net increase in net assets resulting from operations ................... 4,079,795 1,911,264
--------- ---------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Net investment income......................................................... -0- (113,260)
Net realized gain from security transactions.................................. -0- (188,621)
- --------
Total dividends and distributions to shareholders ...................... -0- (301,881)
- --------
CAPITAL SHARE TRANSACTIONS
Net decrease in net assets derived from net change in
outstanding shares (a) .................................................... (645,842) (1,943,533)
-------- ----------
Total increase (decrease) in net assets ................................ 3,433,953 (334,150)
NET ASSETS
Beginning of period........................................................... 16,549,942 16,884,092
---------- ----------
End of period (including undistributed net investment income
of $55,808 and $22,387, respectively)................................. $19,983,895 $16,549,942
=========== ===========
<FN>
(a) A summary of capital shares transactions is as follows:
Six Months Ended Year Ended
September 30, 1997* March 31, 1997
Shares Value Shares Value
Shares sold ......................................... 58,526 $ 889,372 329,346 $ 4,104,926
Shares issued in reinvestment of distribution........ -0- -0- 24,407 297,077
Shares redeemed ..................................... (107,610) (1,535,214) (507,580) (6,345,536)
-------- ---------- -------- ----------
Net decrease ........................................ (49,084) $ (645,842) (153,827) $(1,943,533)
======= ========== ======== ===========
*Unaudited.
</FN>
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
The Osterweiss Fund
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
For a capital share outstanding throughout each period
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months Year Year Year October 1, 1993*
Ended Ended Ended Ended through
September 30, 1997#March 31, 1997March 31, 1996March 31, 1995 March 31, 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $12.88 $11.74 $10.33 $10.28 $10.00
------ ------ ------ ------ ------
Income from investment operations:
Net investment income ............ .03 .08 .12 .28 .08
Net realized and unrealized
gain on investments ........... 3.27 1.27 1.48 .11 .22
---- ---- ---- --- ---
Total from investment operations..... 3.30 1.35 1.60 .39 .30
---- ---- ---- --- ---
Less distributions:
From net investment income........ -0- (.08) (.19) (.25) (.02)
From net capital gains ........... -0- (.13) -0- (.09) -0-
- ---- - ---- -
Total distributions.................. -0- (.21) (.19) (.34) (.02)
- ---- ---- ---- ----
Net asset value, end of period ...... $16.18 $12.88 $11.74 $10.33 $10.28
====== ====== ====== ====== ======
Total return ........................ 25.62% 11.60% 15.59% 3.91% 6.29%+
Ratios/supplemental data:
Net assets, end of period (millions). $ 20.0 $ 16.5 $ 16.9 $ 9.8 $ 5.1
Ratio of expenses to average net assets:
Before expense reimbursement..... 1.75%+ 1.75% 1.77% 2.32% 3.73%+
After expense reimbursement...... 1.75%+ 1.75% 1.75% 1.74% 1.75%+
Ratio of net investment income to average net assets:
Before expense reimbursement.... 0.37%+ 0.63% 1.47% 2.74% 0.42%+
After expense reimbursement...... 0.37%+ 0.63% 1.49% 3.32% 2.40%+
Portfolio turnover rate ............. 22.89% 41.30% 57.32% 28.65% 34.97%
Average commission rate paid
per share++........................ $.0697 $.0551 - - -
<FN>
*Commencement of operations.
#Unaudited.
+Annualized.
++For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate paid per share for security trades on
which commissions are charged. This amount may vary from period to period and
fund to fund depending on the mix of trades executed in various markets where
trading practices and commission rate structures may differ.
</FN>
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
The Osterweiss Fund
NOTES TO FINANCIAL STATEMENTS at September 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION
The Osterweis 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 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 sales 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 have been no sales and other
over-the-counter securities are valued at the last reported bid
price. Securities for which quotations are not readily available are
valued at their respective fair values as determined in good faith by
the Board of Trustees. Short-term investments are stated at cost,
which when combined with accrued interest, approximates market value.
B. 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. The cost of securities owned on realized
transactions are relieved on a first-in, first-out basis. Dividend
income and distributions to shareholders are recorded on the
ex-dividend date.
D. Deferred Organization Costs. All of the expenses incurred by the
Advisor in connection with the organization and registration of the
Fund's shares will be borne by the Fund and are being amortized to
expense on a straight-line basis over a period of five years.
E. Use of Estimates. The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial
statements. Actual results could differ from those estimates.
<PAGE>
The Osterweiss Fund
NOTES TO FINANCIAL STATEMENTS (Unaudited), Continued
- --------------------------------------------------------------------------------
NOTE 3 - COMMITMENTS AND OTHER RELATED PARTY TRANSACTIONS
For the six months ended September 30, 1997, Osterweis Capital Management,
Inc. (the "Advisor") provided the Fund with investment management services under
an Investment Advisory Agreement. The Advisor furnished all investment advice,
office space, facilities, 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 1.00% based upon the average daily net assets of the Fund. For
the six months ended September 30, 1997, the Fund incurred $98,536 in Advisory
fees.
The Fund is responsible for its own operating expenses. The Advisor has
agreed to reduce fees payable to it by the Fund to the extent neccessary to
limit the Fund's aggregate annual operating expenses to 1.75% of average net
assets. Any such reductions made by the Advisor in its fees or payments or
reimbursement of expenses which are the Fund's obligation may be 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
limitations. For the six months ended September 30, 1997, the Advisor recouped
$13,736 of such expenses it previously reimbursed to the Fund.
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 daily net assets
$50 to $100 million 0.15% of average daily net assets
$100 to $150 million 0.10% of average daily net assets
Over $150 million 0.05% of average daily net assets
First Fund Distributors, Inc. (the "Distributor") acts as the Fund's
principal underwriter in a continuous public offering of the Fund's shares. The
Distributor is an affiliate of the Administrator.
Certain officers and trustees of the Trust are also officers and/or
directors of the Administrator and Distributor. As of September 30, 1997, the
Fund shares owned by the Fund's Advisor and its affiliates totaled 147,455
shares, out of 1,235,462.
NOTE 4 - PURCHASES AND SALES OF SECURITIES
The cost of purchases and the proceeds from sales of securities, other
than U.S. Government obligations and short-term investments, for the six months
ended September 30, 1997, were $3,874,558 and $4,011,867, 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.
P.O. Box 5536
Hauppauge, New York 11788-0132
================================================================================
Independent Auditors
Ernst & Young LLP
515 South Flower Street, 24th Floor
Los Angeles, California 90071
================================================================================
Legal Counsel
Paul, Hastings, Janofsky & Walker
345 California Street, 29th Floor
San Francisco, California 94104
This report is intended for shareholders of the Fund and may not be used as
sales literature unless preceded or accompanied by a current prospectus.
Past performance results shown in this report should not be considered a
representation of future performance. Share price and returns will
fluctuate so that shares, when redeemed, may be worth more or less than
their original cost. Statements and other information herein are dated and
are subject to change.
