PZENA FOCUSED VALUE FUND
Dear Shareholders:
It is my pleasure to present you with our semi-annual report. As of October 31,
1997, the Fund is up 24.73% calendar year-to-date and 33.11% for the past twelve
months(1).
We are particularly pleased to report that our classic value approach to
investing has been highly successful during 1997's brief, but real, market
tests. For example, during August the market was down 5.5% while our Fund was
able to break even. Traditionally, one of the characteristics of value investing
is reduced portfolio volatility during down markets. While our record should
still be considered anecdotal rather than empirical, we are encouraged by the
attractive risk/return profile our Fund has earned thus far.
Perhaps the most significant portfolio decision over the past six months has
been our expanding focus on electric utilities. The negative market perception
of deregulation and nuclear power has kept these stocks undervalued. By
researching these companies plant by plant, we believe we have found a
significant value opportunity. Illinois based Unicom Corp. is our first position
and we are actively researching others.
Thank you again for your trust in us and we look forward to continued investment
success.
Sincerely,
/s/ Richard S. Pzena
Richard S. Pzena
(1)The average annual total return for the year ended September 30, 1997, and
from inception through September 30, 1997, was 42.29% and 31.95%, respectively.
<PAGE>
Pzena Focused Value Fund
SCHEDULE OF INVESTMENTS at October 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Shares COMMON STOCKS: 97.6% Market Value
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Aluminum: 0.9%
1,925 Alumax, Inc.*.................................................. $ 62,563
----------
Automobiles: 2.2%
3,475 Ford Motor Company............................................. 151,814
----------
Banks - Money Center: 0.9%
325 Bankers Trust New York Corp.................................... 38,350
225 Chase Manhattan Corp........................................... 25,959
----------
64,309
----------
Banks - Regional: 1.7%
2,275 Pacific Century Financial Corp................................. 114,603
----------
Basic Materials: 1.3%
7,025 J&L Specialty Steel, Inc....................................... 88,691
----------
Building Materials: 2.7%
3,835 USG Corp.*..................................................... 180,964
----------
Chemicals: 4.3%
5,925 Lyondell Petrochemical Company................................. 151,828
3,050 Union Carbide Corp............................................. 139,347
----------
291,175
----------
Chemicals - Diversified: 2.4%
2,025 FMC Corp.*..................................................... 163,645
----------
Chemicals - Specialty: 3.2%
4,550 Great Lakes Chemical Corp...................................... 213,850
----------
Communications Equipment: 3.7%
13,100 Anixter International, Inc.*................................... 247,262
----------
Computers - Peripherals: 2.9%
6,150 Quantum Corp.*................................................. 194,494
----------
</TABLE>
2
<PAGE>
Pzena Focused Value Fund
SCHEDULE OF INVESTMENTS at October 31, 1997 (Unaudited), Continued
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Shares Market Value
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Computers - Software/Services: 2.0%
3,575 Electronic Data Systems Corp................................... $ 138,308
----------
Distributors - Health Food: 4.1%
10,400 Fleming Companies, Inc......................................... 175,500
2,700 Supervalu, Inc................................................. 98,887
----------
274,387
----------
Electric - Companies: 4.4%
10,750 Unicom Corp.................................................... 301,000
----------
Electronic Parts - Components Distributors: 2.4%
2,625 Avnet, Inc..................................................... 165,211
----------
Financial - Diversified: 1.8%
2,820 Ambac Financial Group, Inc..................................... 119,145
----------
Foods: 2.6%
5,530 RJR Nabisco Holdings Corp...................................... 175,232
----------
Health Care - Managed Care: 9.9%
4,750 Columbia/HCA Healthcare Corp................................... 134,187
4,400 Foundation Health Systems, Inc.*............................... 126,500
1,900 PacifiCare Health Systems, Inc.*............................... 120,887
17,425 Quest Diagnostics, Inc.*....................................... 290,780
----------
672,354
----------
Health Care - Long-Term: 1.9%
8,750 Beverly Enterprises, Inc.*..................................... 130,703
----------
Home Building: 0.6%
1,125 Pulte Corp..................................................... 42,047
----------
Insurance - Multi-Line: 5.3%
1,175 Cigna Corp..................................................... 182,419
8,775 USF&G Corp..................................................... 177,694
----------
360,113
----------
</TABLE>
3
<PAGE>
Pzena Focused Value Fund
SCHEDULE OF INVESTMENTS at October 31, 1997 (Unaudited), Continued
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Shares Market Value
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Insurance - Property and Casualty: 5.4%
1,375 CNA Financial Corp.*........................................... $ 170,586
2,475 St. Paul Companies, Inc........................................ 197,845
----------
368,431
----------
Leisure Time - Products: 3.3%
7,250 Polaris Industries, Inc........................................ 220,672
----------
Machinery - Diversified: 2.7%
9,300 Coltec Industries, Inc.*....................................... 186,000
----------
Oil and Gas - Refining/Marketing: 3.3%
6,675 Mapco, Inc..................................................... 220,275
----------
Textiles - Apparel: 4.2%
7,740 Fruit of the Loom, Inc., Class A*.............................. 201,724
900 VF Corp........................................................ 80,437
----------
282,161
----------
Textiles - Specialty: 5.9%
26,830 Burlington Industries, Inc.*................................... 400,773
----------
Tobacco: 1.1%
1,950 Philip Morris Companies, Inc................................... 77,269
----------
Transportation - Air Freight: 1.7%
1,735 Federal Express Corp.*......................................... 115,811
----------
Transportation - Airlines: 4.6%
3,065 Delta Airlines, Inc............................................ 308,799
----------
Transportation - Railroads: 1.5%
3,505 Canadian Pacific, Ltd., ADR.................................... 104,493
----------
Utilities - Electric Companies: 0.7%
1,750 Puget Sound Energy, Inc........................................ 46,594
----------
</TABLE>
4
<PAGE>
Pzena Focused Value Fund
SCHEDULE OF INVESTMENTS at October 31, 1997 (Unaudited), Continued
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Shares Market Value
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Waste Management: 2.0%
20,075 Waste Management International PLC, ADR*....................... $ 138,016
----------
Total Common Stocks (cost $5,966,509).......................... 6,621,164
----------
Principal Amount REPURCHASE AGREEMENT: 1.9%
- ---------------------------------------------------------------------------------------------------------
$126,000 Star Bank Repurchase Agreement, 5.00%, dated 10/31/1997,
due 11/3/1997, collateralized by $126,000 GNMA, due 2/20/2024,
(value of collateral $129,150) (cost $126,000)................. 126,000
----------
Total Investments in Securities (cost $6,092,509+): 99.5% ..... 6,747,164
Other Assets less Liabilities: 0.5%............................ 34,904
----------
Total Net Assets: 100.0% ...................................... $6,782,068
==========
*Non-income producing security.
+ At October 31, 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.................................. $ 781,128
Gross unrealized depreciation.................................. (126,473)
----------
Net unrealized appreciation.......................... $ 654,655
==========
</TABLE>
See accompanying Notes to Financial Statements.
5
<PAGE>
Pzena Focused Value Fund
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES at October 31, 1997 (Unaudited)
- ---------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments in securities, at value (cost $6,092,509)......................... $6,747,164
Cash.......................................................................... 834
Receivables:
Fund shares sold........................................................ 42,000
Dividends and interest ................................................. 7,404
Deferred organization costs (net of accumulated amortization of $9,470)....... 25,530
Prepaid expenses.............................................................. 6,501
----------
Total assets ..................................................... 6,829,433
----------
LIABILITIES
Payables:
Administration fee...................................................... 2,774
Advisory fees........................................................... 2,372
Deferred organization costs............................................. 35,000
Accrued expenses.............................................................. 7,219
----------
Total liabilities................................................. 47,365
----------
NET ASSETS $6,782,068
==========
Net asset value, offering and redemption price per share
($6,782,068/492,365 shares outstanding;
unlimited number of shares authorized without par value) ............... $13.77
==========
COMPONENTS OF NET ASSETS
Paid-in capital .............................................................. $5,608,064
Accumulated net investment loss............................................... (8,683)
Undistributed net realized gain on investments................................ 528,032
Net unrealized appreciation on investments.................................... 654,655
----------
Net assets ............................................................. $6,782,068
==========
</TABLE>
See accompanying Notes to Financial Statements.
6
<PAGE>
Pzena Focused Value Fund
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS - For the Six Months Ended October 31, 1997 (Unaudited)
- ---------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Income
Dividends............................................................... $ 34,880
Interest................................................................ 6,516
----------
Total income...................................................... 41,396
----------
Expenses
Advisory fees........................................................... 35,771
Administration fee...................................................... 15,216
Custodian and accounting fees........................................... 10,367
Transfer agent fees..................................................... 4,981
Audit fee............................................................... 4,583
Amortization of deferred organization costs............................. 3,527
Miscellaneous........................................................... 1,830
Trustee fees............................................................ 1,820
Reports to shareholders................................................. 1,577
Registration fees....................................................... 1,514
Legal fees.............................................................. 1,270
----------
Total expenses.................................................... 82,456
Less: expenses waived and reimbursed.............................. (32,377)
----------
Net expenses...................................................... 50,079
----------
Net investment loss ........................................ (8,683)
----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from security transactions............................ 463,090
Net change in unrealized appreciation on investments.................... 384,448
----------
Net realized and unrealized gain on investments................... 847,538
----------
Net increase in net assets resulting from operations ....... $ 838,855
==========
</TABLE>
See accompanying Notes to Financial Statements.
7
<PAGE>
Pzena Focused Value Fund
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------------------------------------
Six Months June 24, 1996*
Ended through
October 31, 1997# April 30, 1997
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE IN NET ASSETS FROM:
OPERATIONS
Net investment loss.................................................... $ (8,683) $ (1,578)
Net realized gain from security transactions........................... 463,090 72,267
Net change in unrealized appreciation on investments................... 384,448 270,207
---------- ----------
Net increase in net assets resulting from operations ............ 838,855 340,896
---------- ----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Net investment income.................................................. -0- (1,000)
Net realized gain on investments....................................... -0- (4,747)
---------- ----------
Total dividends and distributions to shareholders ............... -0- (5,747)
---------- ----------
CAPITAL SHARE TRANSACTIONS
Net increase in net assets derived from net change in
outstanding shares (a).............................................. 2,086,530 3,521,534
---------- ----------
Total increase in net assets .................................... 2,925,385 3,856,683
NET ASSETS
Beginning of period.................................................... 3,856,683 -0-
---------- ----------
End of period ......................................................... $6,782,068 $3,856,683
========== ==========
</TABLE>
(a) A summary of capital shares transactions is as follows:
<TABLE>
<CAPTION>
Six Months June 24, 1996*
Ended through
October 31, 1997# April 30, 1997
------------------------ -----------------------
Shares Value Shares Value
------- ---------- ------- ----------
<S> <C> <C> <C> <C>
Shares sold............................. 170,277 $2,247,737 340,987 $3,605,818
Shares issued in reinvestment
of distribution...................... -0- -0- 497 5,483
Shares redeemed......................... (11,514) (161,207) (7,882) (89,767)
------- ---------- ------- ----------
Net increase............................ 158,763 $2,086,530 333,602 $3,521,534
======= ========== ======= ==========
</TABLE>
*Commencement of operations.
#Unaudited.
See accompanying Notes to Financial Statements.
8
<PAGE>
Pzena Focused Value Fund
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
For a capital share outstanding throughout each period
- -----------------------------------------------------------------------------------------------------------------
Six Months June 24, 1996*
Ended through
October 31, 1997# April 30, 1997
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period................................... $11.56 $10.00
Income from investment operations:
Net investment loss.............................................. (0.02) 0.00
Net realized and unrealized gain on investments.................. 2.23 1.59
------ ------
Total from investment operations....................................... 2.21 1.59
------ ------
Less distributions:
From net investment income....................................... 0.00 (0.01)
From net capital gains........................................... 0.00 (0.02)
------ ------
Total distributions.................................................... 0.00 (0.03)
------ ------
Net asset value, end of period......................................... $13.77 $11.56
====== ======
Total return........................................................... 19.12% 15.88%
Ratios/supplemental data:
Net assets, end of period (millions)................................... $ 6.8 $ 3.9
Ratio of expenses to average net assets:
Before expense reimbursement..................................... 2.87%+ 5.82%+
After expense reimbursement...................................... 1.75%+ 1.75%+
Ratio of net investment loss to average net assets:
Before expense reimbursement..................................... (1.43%)+ (4.16)%+
After expense reimbursement...................................... (0.30%)+ (0.09)%+
Portfolio turnover rate................................................ 30.49% 22.06%
Average commission rate paid per share................................. $.0600 $.0598
</TABLE>
#Unaudited.
*Commencement of operations.
+Annualized.
See accompanying Notes to Financial Statements.
9
<PAGE>
Pzena Focused Value Fund
NOTES TO FINANCIAL STATEMENTS at October 31, 1997 (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 (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 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. 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 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.
U.S. Governement 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. 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. 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.
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.
10
<PAGE>
Pzena Focused Value Fund
NOTES TO FINANCIAL STATEMENTS at October 31, 1997 (Unaudited), Continued
- --------------------------------------------------------------------------------
NOTE 3 - COMMITMENTS AND OTHER RELATED PARTY TRANSACTIONS
For the six months ended October 31, 1997, Pzena Investment Management,
LLC (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 1.25% based upon the average daily net assets of the Fund. For
the six months ended October 31, 1997, the Fund incurred $35,771 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 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 are subject to reimbursement by the
Fund provided the Fund is able to effect such reimbursement and remain in
compliance with applicable law. For the six months ended October 31, 1997, the
Advisor waived its advisory fee and reimbursed the Fund in the total amount of
$32,377.
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 an annual fee at
the following 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 the Distributor.
NOTE 4 - PURCHASES AND SALES OF SECURITES
The cost of purchases and the proceeds from sales of securities, other
than short-term investments, for the six months ended October 31, 1997, were
$3,679,153 and $1,628,641, respectively.
<PAGE>
Advisor
Pzena Investment Management, LLC
830 Third Avenue
14th Floor
New York, NY 10022
Distributor
First Fund Distributors, Inc.
4455 E. Camelback Road
Suite 261E
Phoenix, AZ 85018 PZENA
FOCUSED
Custodian VALUE
FUND
Star Bank, N.A.
425 Walnut Street
Cincinnati, OH 45202
Shareholder Service and Transfer Agent
American Data Services, Inc.
150 Motor Parkway, Suite 109
Hauppauge, NY 11788
(800) 385-7003
Independent Auditors
Tait, Weller, & Baker
8 Penn Center Plaza, Suite 800
Philadelphia, PA 19103
Counsel to the Trust
Paul, Hastings, Janofsky & Walker
345 California Street, 29th Floor
San Francisco, CA 94104
Counsel to the Fund
Lane, Altman & Owens
101 Federal Street
Boston, MA 02110
Semi-Annual Report
This report is intended for
shareholders of the Fund and may not For the Six Months Ended
be used as sales literature unless
preceded or accompanied by a current October 31, 1997
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.
