January 3, 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 Pzena Focused Value Fund series of the
Registrant for the six month period ended October 31, 1996.
If you have any questions, please contact me at (602) 952-1100.
Sincerely yours,
/s/
Robert H. Wadsworth
<PAGE>
PZENA FOCUSED VALUE FUND
Semi-Annual Report
For the Period Ended
October 31, 1996
<PAGE>
PZENA FOCUSED VALUE FUND
Dear Shareholders,
We are pleased to report to you the results of our first interim period of
operation. The Fund's net asset value appreciated by 3.7% from its inception on
June 24, 1996 through October 31, 1996. Total net assets in the Fund are nearly
$2 million.
While the stock market has sustained its strong upward march in 1996, we
continue to search for those companies that sell at low prices relative to their
long term earnings potential. Even in this robust market, there are
opportunities, particularly with a focused portfolio of approximately 35
securities. We are selecting investments from a market of stocks- not investing
in a stock market. The Fund selects companies which exhibit one or both of the
following characteristics:
Current earnings are depressed relative to historical and projected
norms;
The price to normal earnings ratio is low.
In the event that the market does correct, we have the advantage of owning
companies where, over time, earnings will tend to be higher than expectations.
With a 3 to 5 year time horizon, our investments should generate an attractive
return regardless of market conditions.
Will there be market corrections periodically? Of course. Can we time a
correction? Probably not. That is why we follow our investment strategy, which
is not influenced by the tendency to get overly excited either positively or
negatively by current conditions. By staying the course and investing for the
long term, we hope to be able to produce an attractive result.
We appreciate your investment in the Fund during its initial months and we
at Pzena Investment Management will continue to work diligently to achieve
superior investment performance.
Sincerely,
/s/
Richard Pzena
<PAGE>
PZENA FOCUSED VALUE FUND
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS at October 31, 1996 (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Shares COMMON STOCKS: 93.8% Market Value
- ------------------------------------------------------------------------------------------------------------------------------------
Aluminum: 4.3%
<S> <C> <C>
1,475 Alumax, Inc............................................................. $ 47,384
675 Reynolds Metals Co...................................................... 37,969
------
85,353
------
Automobiles: 1.3%
800 Ford Motor Co........................................................... 25,000
------
Banks - Major Regional: 1.9%
400 Nationsbank Corp........................................................ 37,700
------
Banks - Money Center: 3.0%
150 Bankamerica Corp........................................................ 13,725
325 Bankers Trust New York Corp............................................. 27,462
225 Chase Manhattan Corp.................................................... 19,294
------
60,481
------
Building Materials: 1.8%
1,200 USG Corp................................................................ 35,400
------
Chemicals: 3.8%
1,800 Lyondell Petrochemical Co............................................... 38,250
850 Union Carbide Corp...................................................... 36,231
------
74,481
------
Chemicals - Diversified: 3.0%
800 FMC Corp................................................................ 58,900
------
Chemicals - Specialty: 1.3%
700 Nalco Chemical Co....................................................... 25,463
------
Computers - Hardware: 1.6%
250 IBM..................................................................... 32,250
------
Containers - Metal & Glass: 2.9%
3,750 Owens Illinois, Inc..................................................... 58,125
------
See accompanying "Notes to Financial Statements."
<PAGE>
PZENA FOCUSED VALUE FUND
PORTFOLIO OF INVESTMENTS at October 31, 1996 (Unaudited), Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Shares Market Value
- ------------------------------------------------------------------------------------------------------------------------------------
Distributors - Food/Health: 7.8%
5,825 Fleming Companies, Inc.................................................. $ 101,209
1,800 Supervalu, Inc.......................................................... 53,550
------
154,759
-------
Financial - Diversified: 4.3%
1,350 Ambac, Inc.............................................................. 84,375
------
Foods: 2.5%
1,700 RJR Nabisco Holdings Corp............................................... 49,088
------
Health Care - Managed Care: 3.1%
1,600 United Healthcare Corp.................................................. 60,600
------
Homebuilding: 2.2%
625 Centex Corp............................................................. 18,828
950 Pulte Corp.............................................................. 25,175
------
44,003
------
Insurance - Multi Line: 3.1%
475 Cigna Corp.............................................................. 61,988
------
Leisure Time - Products: 4.8%
1,575 Brunswick Corp.......................................................... 37,012
3,000 Polaris Industries, Inc................................................. 58,875
------
95,887
------
Machinery - Diversified: 4.6%
2,975 Coltec Industries, Inc.................................................. 51,319
1,600 Lam Research Corp....................................................... 39,000
------
90,319
------
Oil & Gas - Refining/Marketing: 4.5%
675 Ashland, Inc............................................................ 28,687
1,150 Mapco, Inc.............................................................. 35,794
450 Tosco Corp.............................................................. 25,256
------
89,737
------
See accompanying "Notes to Financial Statements."
<PAGE>
PZENA FOCUSED VALUE FUND
PORTFOLIO OF INVESTMENTS at October 31, 1996 (Unaudited), Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Shares Market Value
- ------------------------------------------------------------------------------------------------------------------------------------
Retail - Specialty Apparel: 1.9%
2,075 Limited, Inc............................................................ $ 38,128
--------
Telecommunications - Long Distance: 0.3%
150 AT&T Corp............................................................... 5,231
-----
Textiles - Apparel: 4.4%
1,425 Fruit of the Loom, Inc., Class A........................................ 51,834
550 VF Corp................................................................. 35,956
------
87,790
------
Textiles - Specialty: 5.3%
9,200 Burlington Industries, Inc.............................................. 104,650
-------
Tobacco: 1.6%
350 Philip Morris Companies, Inc............................................ 32,419
------
Transportation/Air Freight: 5.0%
1,225 Federal Express Corp.................................................... 98,612
------
Transportation/Airlines: 5.0%
200 AMR Corp................................................................ 16,800
1,175 Delta Airlines, Inc..................................................... 83,278
------
100,078
-------
Transportation/Railroads: 4.2%
3,350 Canadian Pacific, Ltd................................................... 84,588
------
Utilities/Electric Companies: 1.3%
1,200 Puget Sound Power & Light Co............................................ 26,550
------
Utilities/Natural Gas: 0.7%
850 Transcanada Pipeline, Ltd............................................... 14,344
------
Utilities/Power Producers - Independent: 1.0%
1,250 Wheelabrator Technologies, Inc.......................................... 19,375
------
See accompanying "Notes to Financial Statements."
<PAGE>
PZENA FOCUSED VALUE FUND
PORTFOLIO OF INVESTMENTS at October 31, 1996 (Unaudited), Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Shares Market Value
- ------------------------------------------------------------------------------------------------------------------------------------
Waste Management: 1.3%
2,850 Waste Management International PLC, ADR................................. $ 26,006
--------
Total Common Stocks (cost $1,774,916)................................... 1,861,680
---------
Principal Amount REPURCHASE AGREEMENT: 18.9%
- ------------------------------------------------------------------------------------------------------------------------------------
$376,000 Star Bank Repurchase Agreement, 5.0%, dated 10/31/96, due 11/1/96,
collateralized by $405,000 GNMA, 6.50%, due 1/20/2024 (value of
collateral is $406,392) (proceeds $376,052) (cost $376,000)............. 376,000
-------
Total Investments in Securities (cost $2,150,916+): 112.7% ............. 2,237,680
Liabilities in excess of Other Assets: (12.7)%.......................... (253,310)
--------
Total Net Assets: 100.0% ............................................... $1,984,370
===== ==========
<FN>
+At October 31, 1996, the cost of investments for federal income tax purposes
was the same. Unrealized appreciation and depreciation of securities were as
follows:
Gross unrealized appreciation........................................... $ 102,835
Gross unrealized depreciation........................................... (16,071)
-------
Net unrealized appreciation................................... $ 86,764
========
</FN>
</TABLE>
See accompanying "Notes to Financial Statements."
<PAGE>
PZENA FOCUSED VALUE FUND
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES at October 31, 1996 (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
<S> <C>
Investments in securities, at value (identified cost $2,150,916) (Note 2-A) ........... $2,237,680
Cash................................................................................... 938
Receivables:
Dividends and interest .......................................................... 1,554
From Advisor..................................................................... 4,759
Organization costs (net of accumulated amortization of $2,473)......................... 32,527
Prepaid expenses....................................................................... 2,697
-----
Total assets .............................................................. 2,280,155
---------
LIABILITIES
Organization costs payable............................................................. 35,000
Payable for securities purchased....................................................... 254,895
Other accrued expenses and liabilities................................................. 5,890
-----
Total liabilities.......................................................... 295,785
-------
NET ASSETS $1,984,370
==========
Net asset value, offering price and redemption price per share
($1,984,370/191,370 shares outstanding;
unlimited number of shares authorized without par value) ........................ $10.37
======
SOURCE OF NET ASSETS
Paid-in capital ....................................................................... $1,894,354
Undistributed net investment income.................................................... 627
Undistributed net realized gain on investment transactions............................. 2,625
Net unrealized appreciation of investments............................................. 86,764
------
Net assets ...................................................................... $1,984,370
==========
</TABLE>
See accompanying "Notes to Financial Statements."
<PAGE>
PZENA FOCUSED VALUE FUND
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS - For the Period June 24, 1996* through October 31, 1996
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Income:
<S> <C>
Dividends........................................................................ $ 4,318
Interest......................................................................... 1,651
-----
Total income............................................................... 5,969
-----
Expenses:
Advisory fees (Note 3)........................................................... 3,816
Administration fee (Note 3)...................................................... 10,603
Custodian and accounting fees.................................................... 5,386
Transfer agent fees.............................................................. 2,402
Auditing fees.................................................................... 4,241
Trustees' fees................................................................... 1,060
Amortization of organization costs............................................... 2,473
Legal fees....................................................................... 572
Reports to shareholders.......................................................... 530
Miscellaneous.................................................................... 851
---
Total expenses............................................................. 31,934
Less: expense reimbursements (Note 3)...................................... (26,592)
-------
Net expenses............................................................... 5,342
-----
Net investment income ............................................... 627
---
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain from securities transactions................................... 2,625
Net change in unrealized appreciation of investments............................. 86,764
------
Net realized and unrealized gain on investments............................ 89,389
------
Net Increase in Net Assets Resulting from Operations ................ $ 90,016
========
<FN>
*Commencement of operations.
</FN>
</TABLE>
See accompanying "Notes to Financial Statements."
<PAGE>
PZENA FOCUSED VALUE FUND
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
June 24, 1996*
through
October 31, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM:
OPERATIONS
<S> <C>
Net investment income...................................................................... $ 627
Net realized gain on securities transactions............................................... 2,625
Net change in unrealized appreciation of investments....................................... 86,764
------
Net increase in net assets resulting from operations ................................ 90,016
------
CAPITAL SHARE TRANSACTIONS
Net increase in net assets derived from net change in outstanding shares (a)............... 1,894,354
---------
Total increase in net assets ........................................................ 1,984,370
NET ASSETS
Beginning of period........................................................................ -0-
-
End of period (including undistributed net investment income of $627)...................... $1,984,370
==========
<FN>
(a) A summary of capital shares transactions is as follows:
June 24, 1996*
through
October 31, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Shares Value
- ------------------------------------------------------------------------------------------------------------------------------------
Shares sold................................................................. 191,516 $1,895,813
Shares redeemed............................................................. (146) (1,459)
---- ------
Net increase................................................................ 191,370 $1,894,354
======= ==========
*Commencement of operations.
</FN>
</TABLE>
See accompanying "Notes to Financial Statements."
<PAGE>
PZENA FOCUSED VALUE FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
For a capital share outstanding throughout the period (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
June 24, 1996*
through
October 31, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Net Asset Value, Beginning of Period....................................................... $10.00
Income from Investment Operations:
Net investment income................................................................ .01
Net realized and unrealized gain on investments...................................... .36
---
Total from investment operations........................................................... .37
---
Net Asset Value, End of Period............................................................. $10.37
======
Total Return............................................................................... 10.74%+
Ratios/Supplemental Data:
Net assets, end of period (millions)....................................................... $ 2.0
Ratio of expenses to average net assets:
Before expense reimbursement......................................................... 10.30%+
After expense reimbursement.......................................................... 1.75%+
Ratio of net investment income (loss) to average net assets:
Before expense reimbursement......................................................... (8.37)%+
After expense reimbursement.......................................................... 0.20%+
Portfolio turnover rate.................................................................... 12.24%
Average commission rate paid............................................................... $ 0.0600++
<FN>
*Commencement of operations.
+Annualized.
++For fiscal years beginning after September 1, 1995, a fund is required to
disclose average commission rate per share for security trades on which
commissions are charged.
</FN>
</TABLE>
See accompanying "Notes to Financial Statements."
<PAGE>
PZENA FOCUSED VALUE FUND
NOTES TO FINANCIAL STATEMENTS at October 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION
The Pzena Focused Value Fund (the "Fund") is a non-diversified series of
shares of beneficial interest of Professionally Managed Portfolios, which is
registered under the Investment Company Act of 1940 as an open-end management
company. The Fund began operations on June 24, 1996. The investment objective of
the Fund is to seek long term growth of capital.
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: The Fund's investments are carried at market
value. Securities listed on an exchange or quoted on a national
market system are valued at the last sale price. Other securities
are valued at the last quoted bid price. Securities for which market
quotations are not readily available, if any, are valued at an
independent pricing service or determined following procedures
approved by the Board of Trustees. Short-term investments are valued
at amortized cost which approximates market value.
B. Federal Income Taxes: It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to
regulated investment companies and to distribute substantially all
of its taxable income to its shareholders. Therefore,
no federal income tax provision is required.
C. Securities 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. 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 amount of assets and liabilities at the date of the
financial statements. Actual results could differ from those
estimates.
E. Organization Costs. Expenses originally 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
on a straight-line basis over a period of five years.
NOTE 3 - INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Pzena Investment Management, LLC (the "Advisor") provides the Fund with
investment management services under an Investment Advisory Agreement. The
Advisor furnishes all investment advice, office space, facilities, and provides
most of the personnel needed by the Fund. As compensation for its services, the
Advisor is entitled to a monthly fee at the annual rate of 1.25% based upon the
average daily net assets of the Fund.
<PAGE>
PZENA FOCUSED VALUE FUND
NOTES TO FINANCIAL STATEMENTS, Continued
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 necessary to limit
the Fund's aggregate annual operating expenses to 1.75% of average net assets
annually. Any such reductions made by the Advisor in its fees or payments may be
subject to reimbursement by the Fund in the next succeeding fiscal year if the
Fund is able to effect such reimbursement and remain in compliance with any
expense limitations in effect. For the period ended October 31, 1996, the
Advisor has waived its fees and reimbursed the Fund in the amount of $22,776.
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 the Distributor.
NOTE 4 - PURCHASES AND SALES OF SECURITES
For the period ended October 31, 1996, the cost of purchases and the
proceeds from sales of securities, excluding short-term securities, were
$1,904,795 and $90,030, respectively.
<PAGE>
Advisor
Pzena Investment Management, LLC
830 Third Avenue
14th Floor
New York, NY 10022
Distributor
First Fund Distributors, Inc.
4455 E. Camelback Rd.,
Suite 261E
Phoenix, AZ 85018
Custodian
Star Bank, N.A.
425 Walnut St.
Cincinnati, OH 45202
Shareholder Service and Transfer Agent
American Data Services, Inc.
24 West Carver St.
Huntington, NY 11743
(800) 385-7003
Independent Auditors
Tait, Weller, & Baker
2 Penn Center Plaza
Philadelphia, PA 19102
Counsel to the Trust
Heller, Ehrman, White & McAuliffe
333 Bush Street
San Francisco, CA 94104
Counsel to the Fund
Lane Altman & Owens
101 Federal Street
Boston, MA 02110
This report is intended for shareholders of
Pzena Focused Value Fund and may not be
used as sales literature unless preceded or
accompanied by a current prospectus.
