PZENA
FOCUSED
VALUE FUND
================================================================================
SEMI-ANNUAL REPORT
================================================================================
For the Six Months Ended
October 31, 2000
<PAGE>
PZENA
FOCUSED
VALUE FUND
Dear Shareholders,
In this report exactly one year ago, we offered the following reminder,
"valuation extremes are always temporary." At the time, it felt like we were
shouting into a hurricane. The world was tripping over itself to invest more and
more money in technology. But today, after a significant recovery for value
investors, our words need only be whispered to be heard.
As of October 31st, our Fund had gained 21.13% year-to-date, 26.35% for the
prior twelve months, and 11.07% on an annualized basis since inception (June 24,
1996). As a basis for comparison, for the year-to-date the S&P 500 is down
(5.44%), the Russell 1000 Value Index is up 5.84%, and last year's darling, the
NASDAQ, is down (26.57%).
So what happened, and is this return to value likely to continue? Let's look
first at the causes of the shift. Put simply, the fundamentals have changed.
Growth rates for technology have slowed. The prices for basic semiconductors,
called DRAMs, have fallen nearly 50% this year. Demand for PC's has fallen. Even
Dell Computer was forced to revise its growth rate downward for 2001 from 35% to
20%. Prices for data transmission services have collapsed. In short, the
technology sector is returning to normal, and the market is beginning to reflect
the shift.
Next, let's address why we believe that the value cycle has only just begun. The
following graph measures the segment of companies in our universe (the largest
1500 U.S.-listed companies) with the lowest price-to-book value ratio with that
of the S&P 500 over the past forty years. As you can see, the cheapest companies
still sell for a discount of 77%, even after the recent value rally.
PRICE/BOOK: CHEAPEST QUINTILE OF 1500 STOCK UNIVERSE TO S&P 500
LIMITED VALUE OPPORTUNITY
1966 1970 1975 1980 1985 1990 1995 2000
---- ---- ---- ---- ---- ---- ---- ----
0.32 0.38 0.34 0.45 0.53 0.43 0.45 0.24
0.34 0.39 0.33 0.42 0.52 0.43 0.45 0.22
0.33 0.39 0.34 0.42 0.52 0.43 0.43 0.22
0.33 0.37 0.33 0.43 0.54 0.40 0.44 0.23
0.32 0.35 0.33 0.44 0.53 0.39 0.44 0.24
0.32 0.32 0.33 0.44 0.52 0.39 0.43 0.22
0.32 0.32 0.34 0.44 0.53 0.37 0.44 0.22
0.31 0.33 0.33 0.44 0.52 0.35 0.45 0.23
0.31 0.35 0.33 0.42 0.49 0.32 0.43 0.23
0.30 0.33 0.32 0.41 0.50 0.29 0.41
0.29 0.31 0.32 0.37 0.50 0.29 0.41
0.30 0.33 0.33 0.41 0.52 0.34 0.42
0.32 0.36 0.35 0.43 0.52 0.36 0.39
0.37 0.38 0.38 0.43 0.50 0.38 0.41
0.38 0.38 0.37 0.45 0.51 0.39 0.41
0.37 0.38 0.38 0.47 0.50 0.40 0.41
0.37 0.37 0.37 0.46 0.50 0.40 0.41
0.38 0.36 0.37 0.47 0.48 0.40 0.41
0.40 0.35 0.37 0.46 0.46 0.39 0.40
0.40 0.35 0.37 0.46 0.47 0.39 0.40
0.41 0.34 0.37 0.46 0.49 0.39 0.39
0.40 0.33 0.37 0.45 0.47 0.39 0.39
0.39 0.31 0.38 0.46 0.45 0.39 0.38
0.40 0.33 0.40 0.47 0.50 0.41 0.41
0.43 0.35 0.42 0.48 0.49 0.44 0.39
0.43 0.37 0.42 0.50 0.48 0.45 0.39
0.42 0.36 0.43 0.50 0.47 0.45 0.40
0.43 0.35 0.44 0.50 0.46 0.43 0.38
0.44 0.33 0.44 0.50 0.46 0.43 0.39
0.45 0.33 0.44 0.49 0.46 0.43 0.38
0.45 0.32 0.44 0.47 0.46 0.43 0.37
0.45 0.32 0.44 0.47 0.45 0.42 0.39
0.46 0.31 0.43 0.47 0.45 0.42 0.39
0.46 0.30 0.44 0.48 0.43 0.42 0.38
0.46 0.30 0.45 0.48 0.44 0.43 0.36
0.49 0.31 0.46 0.50 0.45 0.46 0.39
0.49 0.32 0.48 0.51 0.46 0.47 0.37
0.49 0.32 0.48 0.51 0.47 0.46 0.36
0.47 0.31 0.49 0.52 0.48 0.46 0.36
0.46 0.31 0.48 0.51 0.48 0.45 0.38
0.45 0.28 0.48 0.54 0.48 0.45 0.37
0.42 0.27 0.48 0.52 0.50 0.44 0.35
0.41 0.29 0.48 0.53 0.50 0.44 0.32
0.40 0.29 0.48 0.53 0.50 0.45 0.31
0.39 0.30 0.48 0.54 0.50 0.45 0.30
0.40 0.30 0.45 0.53 0.48 0.45 0.30
0.39 0.28 0.45 0.54 0.48 0.44 0.28
0.36 0.30 0.46 0.54 0.49 0.45 0.28
0.33 0.48 0.55 0.49 0.45 0.25
0.34 0.47 0.54 0.50 0.45 0.25
0.34 0.48 0.54 0.50 0.44 0.26
0.33 0.48 0.51 0.49 0.44 0.28
0.31 0.48 0.51 0.48 0.43 0.30
0.29 0.48 0.50 0.49 0.43 0.28
0.31 0.49 0.48 0.47 0.44 0.27
0.31 0.48 0.49 0.47 0.44 0.27
0.32 0.47 0.51 0.47 0.44 0.25
0.29 0.45 0.49 0.45 0.43 0.23
0.30 0.45 0.49 0.43 0.43 0.22
0.29 0.46 0.51 0.44 0.44 0.24
LARGE VALUE OPPORTUNITY
1
<PAGE>
Next consider the following table. These nine positions earned at least 50% for
the Fund this year. As you can see, at the start of this year these positions
had valuation and historical return characteristics that were very attractive.
Look at the last line in the table labeled "current first quintile." This line
highlights that the cheapest segment of companies in our current universe are,
on average, actually more undervalued than the average valuation level of the
biggest gainers when the year began. In other words, the pool of available
investment opportunities is still very exciting for a value investor.
AT 1/1/00
2000 GAIN --------------------------
SECTOR COMPANY (10/31/00) PRICE/NORMAL ROE HISTORY
------ ------- ---------- ------------ -----------
Producer Durables Boeing 65% 8.4x 12.5%
Northrop 68% 6.7x 14.3%
Hussman 93% 7.2x 15.3%
Healthcare Foundation 103% 4.7x 19.4%
Consumer Discretionary Cracker Barrel 84% 4.1x 12.1%
Financial Services John Hancock 86% 5.7x 10.0%
Materials & Processing Cytec 51% 6.1x 13.9%
Utilities Unicom 76% 8.4x 11.6%
Technology Quantum-HDD 65% 8.6x N/A
Average 77% 6.7x 13.6%
Current First Quintile 6.2x 16.5%
In sum, we stuck to our deep value investment discipline while most of the world
proclaimed a new era, one in which value investing was dead. Your patience has
begun to be rewarded because as we suggested, "VALUATION EXTREMES ARE ALWAYS
TEMPORARY."
Thank you again for your confidence in us.
Sincerely,
/s/ Richard S. Pzena
Richard S. Pzena
2
<PAGE>
PZENA FOCUSED VALUE FUND
SCHEDULE OF INVESTMENTS AT OCTOBER 31, 2000 (UNAUDITED)
SHARES VALUE
--------------------------------------------------------------------------------
COMMON STOCKS: 100.0%
AEROSPACE/DEFENSE EQUIPMENT: 6.3%
3,000 Boeing Co. $ 203,437
2,125 Northrop Grumman Corp. 178,500
----------
381,937
----------
AUTO/TRUCK PARTS AND EQUIPMENT: 3.0%
10,200 Visteon Corp 180,412
----------
BANKS: 3.8%
8,200 Pacific Century
Financial Corp. 104,037
3,875 Southtrust Corp. 125,453
----------
229,490
----------
CHEMICALS: 2.5%
3,550 Union Carbide Corp.* 152,650
----------
CHEMICALS - DIVERSIFIED: 2.7%
2,200 FMC Corp. 167,200
----------
CHEMICALS - SPECIALTY: 6.4%
5,575 Cytec Industries, Inc.* 193,034
9,150 Lubrizol Corp. 198,441
----------
391,475
----------
COMMUNICATIONS - EQUIPMENT: 1.1%
2,650 Anixter International, Inc.* 64,263
----------
COMPUTERS - HARDWARE: 2.6%
10,600 Quantum Corp. - DLT
& Storage* 159,000
----------
COMPUTERS - SOFTWARE: 2.8%
1,650 Autodesk, Inc. 36,403
4,150 Computer Associates
International, Inc. 132,281
----------
168,684
----------
ELECTRIC COMPANIES: 3.4%
3,434 Exelon Corporation 206,492
----------
FINANCIAL - DIVERSIFIED: 6.1%
11,750 CIT Group, Inc. 204,891
8,450 Healthcare Realty
Trust, Inc. 168,472
----------
373,363
----------
FOODS: 2.2%
6,275 Sara Lee Corp. 135,305
----------
HEALTHCARE - LONG TERM CARE: 2.2%
27,025 Beverly Enterprises, Inc.* $ 135,125
----------
HEALTHCARE - MANAGED CARE: 8.6%
4,825 Aetna, Inc. 278,945
11,950 Foundation Health
Systems, Inc.* 241,241
----------
520,186
----------
INSURANCE - MULTILINE: 6.0%
6,850 John Hancock Financial
Services, Inc.* 216,631
1,925 Xl Capital Ltd. 147,984
----------
364,615
----------
INSURANCE - PROPERTY/CASUALTY: 1.4%
2,400 CNA Financial Corp.* 87,600
----------
IRON & Steel: 1.6%
12,075 UCAR International, Inc.* 99,619
----------
LEISURE TIME - PRODUCTS: 0.9%
4,900 Hasbro, Inc 52,675
----------
MACHINERY - DIVERSIFIED: 2.2%
11,700 AGCO Corp. 133,088
----------
METAL FABRICATING: 3.1%
6,475 Kennametal, Inc. 190,203
----------
OIL & Gas - Drilling: 2.7%
5,825 Precision Drilling Corp.* 166,741
----------
OIL - DOMESTIC INTEGRATED: 2.5%
2,450 Amerada Hess Corp. 151,900
----------
OIL REFINING AND MARKETING: 3.0%
6,325 Tosco Corp. 181,053
----------
PAPER AND RELATED PRODUCTS: 1.8%
3,950 Georgia-Pacific Corporation
(Timber Group) 111,834
----------
RESTAURANTS: 7.1%
24,275 CBRL Group, Inc. 433,916
----------
RETAIL - DEPARTMENT STORES: 3.2%
2,425 Federated
Department Stores 78,964
12,375 ServiceMaster Co. (The) 112,922
----------
191,886
----------
3
<PAGE>
PZENA FOCUSED VALUE FUND
SCHEDULE OF INVESTMENTS AT OCTOBER 31, 2000 (UNAUDITED)
SHARES VALUE
--------------------------------------------------------------------------------
RETAIL - SPECIALTY: 3.0%
3,125 Payless ShoeSource, Inc.* $ 181,055
----------
TOBACCO: 3.8%
6,350 Philip Morris
Companies, Inc. 232,569
----------
TRUCKERS: 1.5%
3,525 CNF Transportation, Inc. 94,073
----------
TRANSPORTATION - RAILROADS: 2.5%
3,250 Union Pacific Corp. 152,344
----------
TOTAL COMMON STOCKS
(cost $5,180,577) 6,090,753
----------
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------------------------------------
SHORT-TERM INVESTMENT: 2.1%
MONEY MARKET INVESTMENT: 2.1%
$131,088 Firstar Stellar Treasury
Fund (cost $131,088) $ 131,088
----------
TOTAL INVESTMENTS IN SECURITIES
(cost $5,311,665+): 102.1% 6,221,841
Liabilities in excess of other Assets: (2.1)% (130,429)
----------
NET ASSETS: 100.0% $6,091,412
==========
* Non-income producing security.
+ At October 31, 2000, the basis of investments for federal income tax
purposes was the same as their cost for financial reporting
purposes.
Unrealized appreciation and depreciation were as follows:
Gross unrealized appreciation $1,231,708
Gross unrealized depreciation (321,532)
----------
Net unrealized appreciation $ 910,176
==========
See accompanying Notes to Financial Statements.
4
<PAGE>
PZENA FOCUSED VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES AT OCTOBER 31, 2000 (UNAUDITED)
ASSETS
Investments in securities, at value (cost $5,311,665) ......... $ 6,221,841
Receivables:
Due from advisor ............................................ 14,182
Dividends and interest ...................................... 4,468
Deferred organization costs ................................... 4,517
-----------
Total assets .............................................. 6,245,008
-----------
LIABILITIES
Payables:
Securities purchased ........................................ 126,047
Organization costs .......................................... 4,719
Administration fees ......................................... 2,794
Accrued expenses .............................................. 20,036
-----------
Total liabilities ......................................... 153,596
-----------
NET ASSETS .................................................... $ 6,091,412
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($6,091,412/452,252 shares outstanding; unlimited
number of shares authorized without par value) ................ $ 13.47
===========
COMPONENTS OF NET ASSETS
Paid-in capital ............................................... $ 5,657,686
Accumulated net investment income ............................. 7,024
Accumulated net realized loss on investments .................. (483,474)
Net unrealized appreciation on investments .................... 910,176
-----------
Net assets ................................................ $ 6,091,412
===========
See accompanying Notes to Financial Statements.
5
<PAGE>
PZENA FOCUSED VALUE FUND
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED OCTOBER 31, 2000 (UNAUDITED)
INVESTMENT INCOME
Income
Interest ..................................................... $ 53,377
Dividends .................................................... 2,696
---------
Total income ............................................... 56,073
---------
Expenses
Advisory fees .................................................. 35,033
Administration fees ............................................ 15,123
Fund accounting fees ........................................... 9,402
Audit fees ..................................................... 7,852
Registration fees .............................................. 7,134
Transfer agent fees ............................................ 6,368
Amortization of deferred organization costs .................... 3,530
Custody fees ................................................... 2,731
Trustee fees ................................................... 2,163
Legal fees ..................................................... 1,890
Reports to shareholders ........................................ 1,726
Miscellaneous .................................................. 1,635
---------
Total expenses ............................................... 94,587
Less: fees waived and expenses absorbed ...................... (45,538)
---------
Net expenses ................................................. 49,049
---------
NET INVESTMENT INCOME ...................................... 7,024
---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on investments ............................... (5,429)
Net unrealized appreciation on investments ..................... 825,706
---------
Net realized and unrealized gain on investments .............. 820,277
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ....... $ 827,301
=========
See accompanying Notes to Financial Statements.
6
<PAGE>
PZENA FOCUSED VALUE FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
OCTOBER 31, 2000# APRIL 30, 2000
----------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS
Net investment income (loss) .................... $ 7,024 $ (30,150)
Net realized loss on investments ................ (5,429) (410,995)
Net unrealized appreciation on investments ...... 825,706 423,705
----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS .................... 827,301 (17,440)
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS
From net realized gain .......................... -- (171,493)
----------- -----------
CAPITAL SHARE TRANSACTIONS
Net decrease in net assets derived from net
change in outstanding shares (a) ............... (72,835) (1,635,207)
----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS ....... 754,466 (1,824,140)
NET ASSETS
Beginning of period ............................. 5,336,946 7,161,086
----------- -----------
END OF PERIOD ................................... $ 6,091,412 $ 5,336,946
=========== ===========
Accumulated net investment income ............... $ 7,024 $ --
=========== ===========
</TABLE>
(a) A summary of capital share transactions is as follows:
SIX MONTHS ENDED YEAR ENDED
OCTOBER 31, 2000# APRIL 30, 2000
----------------- ------------------
Shares Value Shares Value
------ ----- ------ -----
Shares sold 13,063 $ 159,730 121,683 $ 1,399,831
Shares issued in reinvestment
of distributions -- -- 16,252 171,134
Shares redeemed (19,517) (232,565) (284,645) (3,206,172)
Net decrease (6,454) $ (72,835) (146,710) $(1,635,207)
# Unaudited.
See accompanying Notes to Financial Statements.
7
<PAGE>
PZENA FOCUSED VALUE FUND
FINANCIAL HIGHLIGHTS FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
SIX MONTHS JUNE 24, 1996*
ENDED YEAR ENDED APRIL 30, THROUGH
OCTOBER 31, ----------------------------------- APRIL 30,
2000# 2000 1999 1998 1997
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ................. $ 11.63 $ 11.83 $ 14.40 $ 11.56 $ 10.00
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) ....................... 0.02 (0.06) (0.05) (0.03) --
Net realized and unrealized
gain (loss) on investments ........................ 1.82 0.19 (2.02) 3.93 1.59
------- ------- ------- ------- -------
Total from investment operations ..................... 1.84 0.13 (2.07) 3.90 1.59
------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
From net investment income ......................... -- -- -- -- (0.01)
From net capital gain .............................. -- (0.33) (0.50) (1.06) (0.02)
------- ------- ------- ------- -------
Total distributions .................................. -- (0.33) (0.50) (1.06) (0.03)
------- ------- ------- ------- -------
Net asset value, end of period ....................... $ 13.47 $ 11.63 $ 11.83 $ 14.40 $ 11.56
======= ======= ======= ======= =======
Total return ......................................... 15.82% 1.34% (14.03%) 35.10% 15.88%
Ratios/supplemental data:
Net assets, end of period (millions)................ $ 6.1 $ 5.3 $ 7.2 $ 9.7 $ 3.9
RATIO OF EXPENSES TO AVERAGE NET ASSETS:
Before fees waived and expenses absorbed ........... 3.37%+ 2.99% 2.60% 2.69% 5.82%+
After fees waived and expenses absorbed ............ 1.75%+ 1.75% 1.75% 1.75% 1.75%+
RATIO OF NET INVESTMENT INCOME (LOSS) TO AVERAGE
NET ASSETS:
Before fees waived and expenses absorbed ........... (1.37%)+ (1.71%) (1.26%) (1.26%) (4.16%)+
After fees waived and expenses absorbed ............ 0.25%+ (0.47%) (0.41%) (0.32%) (0.09%)+
Portfolio turnover rate .............................. 32.33% 50.07% 47.14% 53.95% 22.06%
</TABLE>
* Commencement of operations.
+ Annualized.
# Unaudited.
See accompanying Notes to Financial Statements.
8
<PAGE>
PZENA FOCUSED VALUE FUND
NOTES TO FINANCIAL STATEMENTS (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 Nasdaq are valued at the last reported sales
price at the close of regular trading on each day that the exchanges
are open for trading; securities traded on an exchange or Nasdaq for
which there have been no sales and other over-the-counter securities
are valued at the last reported bid price. Securities for which
quotations are not readily available are valued at their respective
fair values as determined in good faith by the Board of Trustees.
Short-term investments are stated at cost, which when combined with
accrued interest, approximates market value.
B. Federal Income Taxes. The Fund intends to comply with the requirements
of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its
shareholders. Therefore, no federal income tax provision is required.
C. Security Transactions, Investment Income and Distributions. Security
transactions are accounted for on the trade date. The cost of
securities sold is determined on first-in, first-out basis. Dividend
income and distributions to shareholders are recorded on the
ex-dividend date. Interest income is recorded on an accrual basis.
D. Deferred Organization Costs. All of the expenses incurred by the
Advisor in connection with the organization and registration of the
Fund's shares have been borne by the Fund and are being amortized on a
straight-line basis over a period of five years.
9
<PAGE>
PZENA FOCUSED VALUE FUND
NOTES TO FINANCIAL STATEMENTS (Unaudited) - (Continued)
E. Use of Estimates. The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial
statements. Actual results could differ from those estimates.
F. Reclassification of Capital Accounts. The Fund accounts and reports
for distributions to shareholders in accordance with the American
Institute of Certified Public Accountant's Statement of Position 93-2:
Determination, Disclosure, and Financial Statement Presentation of
Income, Capital and Return of Capital Distributions by Investment
Companies.
NOTE 3 - COMMITMENTS AND OTHER RELATED PARTY TRANSACTIONS
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, 2000, the
Fund incurred $35,033 in advisory fees.
The Fund is responsible for its own operating expenses. The Advisor has
agreed to limit the Fund's total expenses to not more than 1.75% of average
daily net assets. Any fee waived and/or any Fund expense absorbed by the Advisor
pursuant to an agreed upon expense cap shall be reimbursed by the Fund to the
Advisor, if so requested by the Advisor, provided the aggregate amount of the
Fund's current operating expenses for such fiscal year does not exceed the
applicable limitation on Fund expenses. For the six months ended October 31,
2000, the Advisor waived fees of $45,538. At October 31, 2000, the cumulative
unreimbursed amount paid and/or waived by the Advisor on behalf of the Fund is
$327,747. The Advisor may recapture $133,391 of the above amount no later than
April 30, 2002 and $194,356 no later than April 30, 2003. The Fund must pay its
current ordinary operating expenses before the Advisor is entitled to any
reimbursement. Any such reimbursement is also contingent upon Board of Trustees
review and approval prior to the time the reimbursement is initiated.
Investment Company Administration, L.L.C. (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;
10
<PAGE>
PZENA FOCUSED VALUE FUND
NOTES TO FINANCIAL STATEMENTS (Unaudited) - (Continued)
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
For the six months ended October 31, 2000, the Fund incurred $15,123 in
Administration fees, and waived $5,000 in fees.
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.
NOTE 4 - PURCHASES AND SALES OF SECURITIES
The cost of purchases and the proceeds from the sale of securities, other
than short-term investments, for the six months ended October 31, 2000, were
$1,933,396 and $1,777,920, respectively.
NOTE 5 - 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.
11
<PAGE>
================================================================================
Advisor
PZENA INVESTMENT MANAGEMENT, LLC
830 Third Avenue
14th Floor
New York, NY 10022
Distributor
FIRST FUND DISTRIBUTORS, INC.
4455 East Camelback Road, Suite 261E
Phoenix, AZ 85018
Custodian
FIRSTAR INSTITUTIONAL CUSTODY SERVICES
425 Walnut Street
Cincinnati, OH 45202
Transfer Agent
AMERICAN DATA SERVICES, INC.
P.O. Box 5536
Hauppauge, NY 11788
Independent Auditors
TAIT, WELLER & BAKER
8 Penn Center Plaza, Suite 800
Philadelphia, PA 19103
Counsel to the Fund
PAUL, HASTINGS, JANOFSKY & WALKER LLP
345 California Street, 29th Floor
San Francisco, CA 94104
Counsel to the Advisor
NUTTER, McCLENNEN & FISH, LLP
One International Place
Boston, MA 02110
================================================================================
This report is intended for shareholders of the Fund and may not be used as
sales literature unless preceded or accompanied by a current prospectus.
Past performance results shown in this report should not be considered a
representation of future performance. Share price and returns will fluctuate so
that shares, when redeemed, may be worth more or less than their original cost.
Statements and other information herein are dated and are subject to change.
