May 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 Lighthouse Growth Fund series of the
Registrant for the six month period ended February 28, 1997.
If you have any questions, please contact me at (602) 952-1100.
Sincerely yours,
Robert H. Wadsworth
<PAGE>
LIGHTHOUSE GROWTH FUND
SEMI-ANNUAL REPORT
February 28, 1997
<PAGE>
LIGHTHOUSE GROWTH FUND
February 28, 1997
Dear Shareholder,
Performance
The Lighthouse Growth Fund began on September 29, 1995, with an NAV of $12.00
and closed on February 28, 1997, at $14.47. As of the date of this report, the
twelve month total return, including dividends, was 16.99%. The annualized
return since inception was 15.95%.
Momentum Investing - 1960s vs 1990s
Momentum investing and value investing are diametrically opposed. The former
favors currently outperforming money managers, companies, and industries. The
latter gravitates toward temporary underperformance. Momentum relies on
extrapolation of perceived trends, whereas value depends on markets moving in
cycles. Momentum investing has generated brief periods of spectacular results,
whereas value investing has generated better returns, albeit with less
excitement, over the long haul.
The "go-go" stock market of the late 1960s witnessed a speculative orgy
dominated by momentum investors, or "performance investors" as they were called.
Then, mutual fund managers commanded great respect and huge salaries. As mutual
fund buyers chased higher returns, young "gunslingers" were more than willing to
pull the triggers. Many speculated on fledgling technology stocks, bought and
immediately sold hot initial public offerings, and paid premium prices for
growth stocks. Several left large companies to start their own funds, raising
huge sums of money. Investors who flocked to these performance funds were
greeted by two of the worst bear markets this century: 1969-70 when the Dow
dropped 35% and 1973-74 when the Dow lost 45% of its value.
The 1990s version of the 1960s "gunslinger" is more commonly referred to as a
"momentum investor". These mutual fund managers are attracted to stocks with
strong earnings and price momentum. Performance is everything. As Barron's
editor Alan Abelson recently said, "Momentum investing is based on the principle
that what goes up must go higher." Money poured into this style during 1996 as
evidenced by 46% of new equity mutual fund money going into aggressive growth
funds. Most of these funds peaked in May or June of last year and many are
showing double digit losses so far in 1997.
Momentum Spreads to Index Funds
The current mania for buying large-cap stocks regardless of price is just the
latest example of momentum investing. As aggressive funds have swooned,
"conservative" funds have picked up the slack. Strong performance of blue chip
stocks has attracted a flood of new money into index funds, creating a virtuous
cycle. Passive index funds have outperformed 90% of active fund managers over
the past three years. This has put enough pressure on many portfolio managers to
throw in the towel and jump on the bandwagon.
According to investment adviser Steve Leuthold, index funds attracted less than
3% of new money flowing into mutual funds in 1994. So far this year that
proportion has jumped to 20%. Assets in index funds have climbed from under $10
billion to over $60 billion in the last six years. And the number of new funds
is exploding: 21 were created last year, bringing the total to over 100.
<PAGE>
Many investors are underestimating the risks associated with index funds. The
S&P 500 index is not a diversified basket of equally weighted stocks. It is a
capitalization-weighted, large company index. Popular stocks (those with the
highest market caps) get top billing. In 1992, when Intel was cheap, it ranked
#35 and accounted for just 0.6% of the index. Today, selling for 24 times
earnings, Intel ranks #4 with nearly a 2% weighting. Many of the highest
weighted stocks are extremely overvalued in relation to their growth rates.
Coca-Cola (61), for example, ranks #2 in the index with a 2.4% weighting, yet
trades at 44 times earnings, more than twice its expected growth rate of 17.7%.
Investment Strategy
The Lighthouse Growth Fund has remained defensive. The Fund increased its short
position from 19.8% to 22.3%, reduced cash from 45.6% to 40.4%, raised its
energy weighting from 19.3% to 21.3%, and increased its position in gold mining
stocks from 1.6% to 4.4%. As of February 28, a small position in S&P 500 put
options hedged approximately 14.8% of the portfolio.
Our August, 1996 report warned about speculative excesses in areas such as the
Internet and networking. Stocks in these industries have been among the worst
performers over the past six months (dragging many of the momentum funds down
with them). As a result, we took some profits in our Internet and networking
short positions. We have had little problem finding suitable replacements,
initiating short positions in banking - 2.4% (Citicorp, NationsBank), computers
- - 1.2% (Gateway 2000), and software -1.4% (Microsoft, Zitel - a year 2000
company). A strong rally in semiconductor equipment stocks allowed us to
increase our short position from 1.9% to 5.6%. As of February 28, the Fund was
net short 6.4% in technology, up from 2.0% six months ago.
Whether it is aggressive growth stocks, index funds, networking stocks, Internet
hopefuls, or the next, as yet unidentified mania, the implication is clear. When
too many people start chasing the latest hot stock, industry, or mutual fund,
somebody will be left holding the proverbial bag. Those who resist the urge to
participate in such folly are often presented with tremendous opportunities as
the bubbles burst around them.
Special Thanks
I would like to thank our energy analyst, Richard Hunter, for his outstanding
contribution to the Lighthouse Growth Fund during its first 1 1/2 years. During
calendar year 1996, energy stocks accounted for nearly one-third of the Fund's
gains. We believe that Richard's education as a scientist, experience as an
exploration geologist, and ability to think independently of the crowd are
assets that will continue to benefit shareholders for years to come.
All of us at Lighthouse would like to thank you for your support. Net assets in
the Fund have grown to $21 million. Several financial publications, including
The Wall Street Journal, will soon begin reporting the Fund's daily NAV and NAV
change. You can also receive closing prices using the NASDAQ symbol "LGFTX", or
by visiting our Web site at http://www.lightkeepers.com.
/S/
Kevin P. Duffy
Portfolio Manager
<PAGE>
LIGHTHOUSE GROWTH FUND
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS at February 28, 1997 (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Shares COMMON STOCKS: 78.7% Market Value
- ------------------------------------------------------------------------------------------------------------------------------------
Capital Goods: 4.3%
<S> <C> <C> <C>
24,000 3D Systems Corp......................................................... $ 258,000
2,000 Chaparral Steel Company................................................. 24,500
3,000 Commercial Metals Company............................................... 87,000
10,000 Huntco, Inc............................................................. 115,000
9,000 Nucor Corp.............................................................. 433,125
-------
917,625
-------
Consumer Goods - Apparel: 6.9%
12,000 Donna Karan International, Inc.......................................... 144,000
8,200 Jones Apparel Group, Inc................................................ 304,425
4,300 Liz Claiborne, Inc...................................................... 174,150
29,100 Norton McNaughton, Inc.................................................. 178,238
17,500 Oshkosh B'Gosh, Inc., Class A........................................... 271,250
16,000 Quiksilver, Inc......................................................... 400,000
-------
1,472,063
---------
Consumer Goods - Consumer Products: 4.1%
45,000 Fossil, Inc............................................................. 585,000
7,700 Helen of Troy, Ltd...................................................... 190,575
9,700 Polk Audio, Inc......................................................... 98,212
------
873,787
-------
Consumer Goods - Food Producers: 0.4%
10,000 The Unimark Group, Inc.................................................. 80,000
------
Consumer Goods - Restaurants: 0.9%
5,500 Lone Star Steakhouse & Saloon, Inc...................................... 145,750
4,000 Vicorp Restaurants, Inc................................................. 45,000
------
190,750
-------
Consumer Goods - Retail, Apparel: 2.0%
10,000 Ann Taylor Stores, Inc.................................................. 200,000
19,200 Designs, Inc............................................................ 122,400
6,000 The Limited, Inc........................................................ 114,000
-------
436,400
-------
Consumer Goods - Retail, General Merchandise: 2.0%
7,200 Dillard Department Stores, Inc., Class A................................ 216,900
17,000 Kmart Corp.............................................................. 212,500
-------
429,400
-------
See accompanying Notes to Financial Statements.
<PAGE>
LIGHTHOUSE GROWTH FUND
SCHEDULE OF INVESTMENTS at February 28, 1997 (Unaudited), Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Shares Market Value
- ------------------------------------------------------------------------------------------------------------------------------------
Consumer Goods - Retail, Mail Order: 4.9%
37,600 Lands' End, Inc......................................................... $ 1,043,400
-----------
Consumer Goods - Retail, Specialty: 6.9%
8,000 Claire's Stores, Inc.................................................... 113,000
47,700 Good Guys, Inc.......................................................... 339,863
24,800 MicroAge, Inc........................................................... 322,400
52,900 REX Stores Corp......................................................... 443,037
45,200 Sun Television & Appliances, Inc........................................ 98,875
6,500 Toys "R" Us, Inc........................................................ 169,000
-------
1,486,175
---------
Consumer Goods - Tobacco: 2.0%
800 Philip Morris Companies, Inc............................................ 108,100
9,000 RJR Nabisco Holdings Corp............................................... 329,625
-------
437,725
-------
Energy - Oil, Secondary: 17.1%
5,700 Anadarko Petroleum Corp................................................. 320,625
19,900 Barrett Resources Corp.................................................. 654,213
27,000 Basin Exploration, Inc.................................................. 162,000
7,000 Flores & Rucks, Inc..................................................... 315,000
11,000 Forest Oil Corp......................................................... 147,125
23,100 Key Production Company.................................................. 242,550
16,300 Nuevo Energy Company.................................................... 676,450
36,800 Optima Petroleum Corp................................................... 101,200
22,000 Petrocorp, Inc.......................................................... 198,000
25,400 Plaines Resources, Inc.................................................. 336,550
6,750 Pogo Producing Company.................................................. 232,031
5,000 Titan Exploration, Inc.................................................. 52,500
9,000 Union Pacific Resources Group, Inc...................................... 219,375
-------
3,657,619
---------
Energy - Oil Field Services: 2.1%
6,800 Dreco Energy Services, Ltd.............................................. 238,000
7,500 Numar Corp.............................................................. 125,625
2,000 Tidewater, Inc.......................................................... 86,000
------
449,625
-------
See accompanying Notes to Financial Statements.
<PAGE>
LIGHTHOUSE GROWTH FUND
SCHEDULE OF INVESTMENTS at February 28, 1997 (Unaudited), Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Shares Market Value
- ------------------------------------------------------------------------------------------------------------------------------------
Energy - Seismic: 2.1%
32,200 Mitcham Industries, Inc................................................. $ 293,825
2,500 Western Atlas, Inc...................................................... 152,188
-------
446,013
-------
Financial - Brokerage Firms: 3.0%
1,000 Charles Schwab Corp..................................................... 37,500
2,600 Edwards (A.G.) & Sons, Inc.............................................. 92,300
2,000 Interra Financial Incorporated.......................................... 81,750
8,200 Legg Mason, Inc......................................................... 364,900
2,000 Raymond James Financial, Inc............................................ 66,750
------
643,200
-------
Financial - Mutual Fund Companies: 0.1%
1,050 Value Line, Inc......................................................... 30,975
------
Health Care - Biotechnology: 1.2%
37,000 Xoma Corp............................................................... 254,375
-------
Health Care - Pharmaceuticals: 3.2%
27,100 ICN Pharmaceuticals, Inc................................................ 684,275
-------
Precious Metals - Gold Mining: 4.4%
23,000 Agnico Eagle Mines, Ltd................................................. 327,750
16,000 Crown Resources Corp.................................................... 110,000
10,500 Newmont Mining Corp..................................................... 498,750
-------
936,500
-------
Technology - Communications: 0.3%
10,000 Vtel Corp............................................................... 70,000
------
Technology - Computers: 3.5%
27,600 Advanced Logic Research, Inc............................................ 296,700
4,000 Dell Computer Corp...................................................... 284,500
5,400 Sun Microsystems, Inc................................................... 166,725
-------
747,925
-------
See accompanying Notes to Financial Statements.
<PAGE>
LIGHTHOUSE GROWTH FUND
SCHEDULE OF INVESTMENTS at February 28, 1997 (Unaudited), Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Shares Market Value
- ------------------------------------------------------------------------------------------------------------------------------------
Technology - Semiconductors: 0.5%
5,000 QLogic Corp............................................................. $ 101,250
---------
Technology - Software: 5.3%
10,000 7th Level, Inc.......................................................... 35,312
12,000 Informix Corp........................................................... 209,250
12,000 Intersolv, Inc.......................................................... 109,500
44,600 Progress Software Corp.................................................. 604,888
11,000 Sybase, Inc............................................................. 180,125
-------
1,139,075
---------
Transportation - Airlines: 1.5%
14,100 Southwest Airlines Company.............................................. 331,350
-------
Total Common Stocks (cost $15,449,345).................................. 16,859,507
----------
CLOSED-END FUNDS - INTERNATIONAL: 2.4%
- ------------------------------------------------------------------------------------------------------------------------------------
15,000 Argentina Fund.......................................................... 196,875
13,000 Chile Fund.............................................................. 313,625
-------
Total Closed-End Funds (cost $474,926).................................. 510,500
-------
LONG EQUITY OPTIONS: 0.1%
- ------------------------------------------------------------------------------------------------------------------------------------
Contracts Common Stocks / Expiration Date / Exercise Price
- ------------------------------------------------------------------------------------------------------------------------------------
50 Micron Technology, Inc. / April 40 Puts (cost $37,900).................. 21,250
------
LONG INDEX OPTIONS: 0.6%
- ------------------------------------------------------------------------------------------------------------------------------------
Contracts Index / Expiration Date / Exercise Price
- ------------------------------------------------------------------------------------------------------------------------------------
40 S&P 500 / September 775 Puts (cost $176,831)............................ 124,000
-------
See accompanying Notes to Financial Statements.
<PAGE>
LIGHTHOUSE GROWTH FUND
SCHEDULE OF INVESTMENTS at February 28, 1997 (Unaudited), Continued
- ------------------------------------------------------------------------------------------------------------------------------------
$2,111,000 Star Bank Repurchase Agreement, 4.85%, dated 2/28/97, due 3/3/97,
collateralized by $2,255,000 GNMA, due 1/20/24 (proceeds $2,111,853)
(cost $2,111,000)....................................................... $ 2,111,000
-----------
Total Investment in Securities (cost $18,250,002+): 91.6%............... 19,626,257
Other Assets less Liabilities: 8.4%..................................... 1,800,234
---------
Total Net Assets: 100.0%................................................ $21,426,491
===========
SECURITIES SOLD SHORT at February 28, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
Shares Common Stocks: (22.3)%
- ------------------------------------------------------------------------------------------------------------------------------------
Consumer Goods - Luxury Items: (2.7)%
4,000 Gucci Group, NV......................................................... $ 258,500
9,500 Saks Holdings, Inc...................................................... 318,250
-------
576,750
-------
Consumer Goods - Restaurants: (0.6)%
7,000 Planet Hollywood International, Inc..................................... 119,000
-------
Consumer Goods - Retail, Specialty: (0.6)%
5,700 Just For Feet, Inc...................................................... 123,263
-------
Financial - Banks: (2.4)%
2,500 Citicorp................................................................ 291,875
3,600 NationsBank Corp........................................................ 215,550
-------
507,425
-------
Technology - Computers: (1.2)%
4,300 Gateway 2000 Inc........................................................ 252,625
-------
Technology - Internet: (2.9)%
4,500 Netscape Communications Corp............................................ 131,063
7,100 Security Dynamics Technologies, Inc..................................... 195,250
10,000 Yahoo!, Inc............................................................. 302,500
-------
628,813
-------
See accompanying Notes to Financial Statements.
<PAGE>
LIGHTHOUSE GROWTH FUND
SCHEDULE OF INVESTMENTS at February 28, 1997 (Unaudited), Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Shares Common Stocks Market Value
- ------------------------------------------------------------------------------------------------------------------------------------
Technology - Networking: (1.9)%
5,500 Ascend Communications, Inc.............................................. $ 287,375
3,000 Shiva Corp.............................................................. 49,875
3,500 Xylan Corp.............................................................. 62,125
------
399,375
-------
Technology - Semiconductors: (3.0)%
7,500 Alliance Semi-Conductor Corp............................................ 66,562
3,500 C-Cube Microsystems, Inc................................................ 101,938
1,000 Integrated Silicon Solutions, Inc....................................... 9,125
8,000 Logic Devices, Inc...................................................... 20,000
11,000 Micron Technology, Inc.................................................. 412,500
500 Xilinx, Inc. ................................................... 22,562
------
632,687
-------
Technology - Semiconductor Equipment: (5.6)%
8,000 Applied Materials, Inc.................................................. 405,000
9,500 KLA Instruments Corp.................................................... 396,031
13,000 Kulicke & Soffa Industries, Inc......................................... 344,500
1,600 Tencor Instruments...................................................... 64,100
------
1,209,631
---------
Technology - Software: (1.4)%
1,500 Microsoft Corp.......................................................... 146,250
5,000 Zitel Corp.............................................................. 159,375
-------
305,625
-------
Total Common Stocks Sold Short (proceeds $5,188,870).................... $ 4,755,194
===========
<FN>
+At February 28, 1997, the cost and proceeds of securities for Federal tax
purposes were the same as the basis for financial reporting. Unrealized
appreciation and depreciation of securities were as follows:
Gross unrealized appreciation........................................... $ 3,336,010
Gross unrealized depreciation........................................... (1,526,079)
----------
Net unrealized appreciation....................................... $ 1,809,931
===========
</FN>
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
LIGHTHOUSE GROWTH FUND
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES at February 28, 1997 (Unaudited)
- --------------------------------------------------------------------------------
ASSETS
<S> <C>
Investments in securities, at value (identified cost $15,924,271) (Note 2-A) .......... $17,370,007
Repurchase agreement (cost $2,111,000) (Note 7)........................................ 2,111,000
Cash................................................................................... 344
Deposits with brokers for securities sold short........................................ 7,351,895
Put options purchased (cost $214,731).................................................. 145,250
Receivables:
Expense reimbursement from Advisor (Note 4)...................................... 1,781
Fund shares sold................................................................. 12,364
Dividends and interest .......................................................... 26,648
Deferred organization costs (Note 2-D)................................................. 22,612
Other assets........................................................................... 40,762
------
Total assets .............................................................. 27,082,663
----------
LIABILITIES
Securities sold short, at value (proceeds $5,188,870).................................. 4,755,194
Payables:
Securities purchased............................................................. 856,943
Advisory fee..................................................................... 19,421
Fund shares redeemed............................................................. 18,767
Other accrued expenses ................................................................ 5,847
-----
Total liabilities.......................................................... 5,656,172
---------
NET ASSETS ................................................................................. $21,426,491
===========
Net asset value, offering and redemption price per share
($21,426,491/1,480,604 shares outstanding; unlimited shares authorized
of no par value) ................................................................ $14.47
======
COMPONENTS OF NET ASSETS
Paid-in capital ....................................................................... $19,406,904
Accumulated net investment loss........................................................ (23,140)
Undistributed net realized gain on investments......................................... 232,796
Net unrealized appreciation on investments............................................. 1,809,931
---------
Net assets ...................................................................... $21,426,491
===========
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
LIGHTHOUSE GROWTH FUND
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS - For the Six Months Ended February 28, 1997 (Unaudited)
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Income
<S> <C>
Interest......................................................................... $ 176,165
Dividends........................................................................ 59,008
------
Total income............................................................... 235,173
-------
Expenses
Advisory fees (Note 4)........................................................... 105,198
Distribution costs (Note 5)...................................................... 21,040
Administration fee (Note 4)...................................................... 16,322
Registration fee................................................................. 11,169
Audit fees....................................................................... 10,544
Custodian and accounting fees.................................................... 9,807
Transfer agent fees.............................................................. 8,646
Miscellaneous fees............................................................... 2,942
Amortization of deferred organization costs (Note 2-D)........................... 2,458
Legal fees....................................................................... 1,945
Reports to shareholders.......................................................... 1,416
Trustees' fees................................................................... 1,416
-----
Total expenses............................................................. 192,903
Less, expenses waived/reimbursed (Note 4).................................. (23,248)
-------
Net expenses............................................................... 169,655
-------
Net investment income ............................................... 65,518
------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain from security transactions..................................... 460,427
Net realized loss on put options purchased....................................... (103,778)
Net change in unrealized appreciation on investments............................. 854,616
-------
Net realized and unrealized gain on investments............................ 1,211,265
---------
Net Increase in Net Assets Resulting from Operations ................ $ 1,276,783
===========
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
LIGHTHOUSE GROWTH FUND
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months September 29,
ended 1995* through
INCREASE IN NET ASSETS FROM: February 28, 1997# August 31, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
<S> <C> <C>
Net investment income (loss)............................................... $ 65,518 $ (88,658)
Net realized gain on security transactions................................. 460,427 244,701
Net realized loss on put options purchased................................. (103,778) (23,135)
Net change in unrealized appreciation on investments....................... 854,616 955,315
------- -------
Net increase in net assets resulting from operations ................ 1,276,783 1,088,223
--------- ---------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Net realized gain from security transactions............................... (315,958) (29,461)
-------- -------
CAPITAL SHARE TRANSACTIONS
Net increase in net assets derived from net change in outstanding shares (a) 6,501,241 12,905,663
--------- ----------
Total increase in net assets......................................... 7,462,066 13,964,425
NET ASSETS:
Beginning of period........................................................ 13,964,425 -0-
---------- -
End of period (including undistributed net investment loss of $23,140
and $88,658, respectively)........................................... $21,426,491 $13,964,425
=========== ===========
<FN>
(a) A summary of capital shares transactions is as follows:
Six Months September 29, 1995*
ended through
February 28, 1997# August 31, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Shares Value Shares Value
- ------------------------------------------------------------------------------------------------------------------------------------
Shares sold ......................................... 499,515 $7,194,763 1,114,505 $14,014,925
Shares issued in reinvestment of distributions....... 20,938 311,143 2,409 29,010
Shares redeemed...................................... (69,129) (1,004,665) (87,634) (1,138,272)
------- ---------- ------- ----------
Net increase................................... 451,324 $6,501,241 1,029,280 $12,905,663
======= ========== ========= ===========
*Commencement of operations.
#Unaudited.
</FN>
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
LIGHTHOUSE GROWTH FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
For a capital share outstanding throughout each period
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months September 29, 1995*
ended through
February 28, 1997# August 31, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period................................... $13.57 $12.00
------ ------
Income from investment operations:
Net investment income............................................ .07 (.09)
Net realized and unrealized gain on investments.................. 1.10 1.72
---- ----
Total from investment operations....................................... 1.17 1.63
---- ----
Less:
Distributions (from capital gains)............................... (.27) (.06)
---- ----
Net asset value, end of period......................................... $14.47 $13.57
====== ======
Total return........................................................... 23.37%++ 13.67%++
Ratios/supplemental data:
Net assets, end of period (millions)................................... $ 21.4 $ 14.0
Ratio of expenses to average net assets:
Before expense reimbursement..................................... 2.26%+ 2.95%+
After expense reimbursement...................................... 2.00%+ 2.00%+
Ratio of net investment income (loss) to average net assets:
Before expense reimbursement..................................... 0.50%+ (2.14)%+
After expense reimbursement...................................... 0.77%+ (1.19)%+
Portfolio turnover rate................................................ 32.23% 20.56%
Average commission rate paid per share++++............................... $.0537 $.0588
<FN>
#Unaudited.
*Commencement of operations.
+Annualized.
++Not Annualized.
++++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. 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>
LIGHTHOUSE GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (Unaudited)
- --------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION
The Lighthouse Growth 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 investment management company. The Fund began operations on September
29, 1995. The investment objective of the Fund is to seek growth of capital. The
Fund seeks to achieve its objective by investing primarily in equity securities.
Equity securities in which the Fund invests include common stocks and securities
having the characteristics of common stocks, such as convertible preferred
stocks, convertible debt securities and warrants.
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 have 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 valued 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. 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 amount of assets and liabilities at the date of the
financial statements. Actual results could differ from those
estimates.
<PAGE>
LIGHTHOUSE GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (Unaudited), Continued
NOTE 3 - SECURITIES SOLD SHORT
Securities sold short represent obligations of the Fund to make a future
delivery of a specific security and, correspondingly, create an obligation to
purchase the security at prevailing market prices (or deliver the security, if
owned by the Fund) at the later delivery date. As a result, these short sales
create the risk that the Fund's ultimate obligation to satisfy the delivery
requirements may exceed the amount recorded in the accompanying statement of
assets and liabilities.
The amount deposited with brokers for securities sold short is essentially
restricted to the extent that it serves as a deposit for securities sold short.
It is the Fund's policy to continuously monitor the credit standing of the
brokers with whom it conducts business.
NOTE 4 - INVESTMENT MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
For the six months ended February 28, 1997, Lighthouse Capital Management,
Inc. (the "Advisor") provided the Fund with investment management services under
an Investment Advisory Agreement. The Advisor furnishes all investment advice,
office space, facilities, and most personnel needed by the Fund. As compensation
for its services, the Advisor was entitled to a monthly fee at the annualized
rate of 1.25% based upon the average daily net assets of the Fund. For the six
months ended February 28, 1997, the Fund incurred $105,198 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 necessary to limit
the Fund's aggregate annual operating expenses to 2.00% of average daily net
assets. As a result, the Advisor reimbursed $23,248 of its fee. The Fund will
reimburse the Advisor, pursuant to this agreement, in later years in which
operating expenses for the Fund are less than the applicable percentage
limitation, set forth previously for any such year.
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 Trust are also officers and/or
directors of the Administrator and Distributor.
<PAGE>
LIGHTHOUSE GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (Unaudited), Continued
NOTE 5 - DISTRIBUTION COSTS
The Fund has adopted a Distribution Plan (the "Plan") in accordance with
Rule 12b-1 under the 1940 Act. The Plan provides that the Fund will pay a fee to
the Distribution Coordinator at an annual rate of up to 0.25% of the average
daily net assets of the Fund. The Plan allows that approved excess distribution
costs can be resubmitted by the Distribution Coordinator in the future years, up
to a maximum of three subsequent fiscal years following initial submission. No
such excess costs were incurred during the current period ended. The Fund
incurred $21,040 in distribution costs, to the Advisor as the appointed
Distribution Coordinator, for the six months ended February 28, 1997.
NOTE 6 - PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities, other than short-term investments, for
the six months ended February 28, 1997 were $6,890,212 and $3,292,429,
respectively.
Purchased options transactions during the six months ended February 28,
1997 are summarized as follows:
<TABLE>
Put Options Purchased
<S> <C>
Options outstanding, beginning of period................................ $ 120,711
Options purchased....................................................... 253,476
Options closed.......................................................... (159,456)
Options exercised....................................................... -0-
Options expired......................................................... -0-
-
Options outstanding at February 28, 1997................................ 214,731
Unrealized depreciation at February 28, 1997............................ (69,481)
-------
Market value of options at February 28, 1997............................ $ 145,250
=========
Average fair market value of options for the
six months ended February 28, 1997.................................... $ 145,698
=========
Net trading losses on options for the six months
ended February 28, 1997............................................... $(103,778)
=========
</TABLE>
NOTE 7 - REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements with government securities
dealers recognized by the Federal Reserve Board, with member banks of the
Federal Reserve System or with such other brokers or dealers that meet the
credit guidelines established by the Board of Trustees. The Fund will always
receive and maintain, as collateral, securities whose market value, including
accrued interest, will be at least equal to 100% of the dollar amount invested
by the Fund in each agreement, and the Fund will make payment for such
securities only upon physical delivery or upon evidence of book entry transfer
to the account of the custodian. To the extent that any repurchase transaction
exceeds one business day, the value of the collateral is marked-to-market on a
daily basis to ensure the adequacy of the collateral.
If the seller defaults and the value of the collateral declines, or if
bankruptcy proceedings are commenced with respect to the seller of the security,
realization of the collateral by the Fund may be delayed or limited.
<PAGE>
Advisor
LIGHTHOUSE CAPITAL MANAGEMENT, INC.
10000 Memorial Drive, Suite 660
Houston, Texas 77024
(713) 688-6881
Account Inquiries (800) 282-2340
Distributor
FIRST FUND DISTRIBUTORS, INC.
4455 East Camelback Road, Suite 261E
Phoenix, Arizona 85018
Custodian
STAR BANK, N.A.
425 Walnut Street
Cincinnati, Ohio 45202
Transfer and Dividend Disbursing Agent
AMERICAN DATA SERVICES, INC.
24 West Carver Street
2nd Floor
Huntington, New York 11743
Independent Auditors
ERNST & YOUNG LLP
515 South Flower Street
Los Angeles, California 90071
Legal Counsel
HELLER, EHRMAN, WHITE & McAULIFFE
333 Bush Street
San Francisco, California 94104
