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Professionally Managed Portfolios – ‘N-CSR/A’ for 9/30/14

On:  Monday, 4/13/15, at 1:53pm ET   ·   Effective:  4/13/15   ·   For:  9/30/14   ·   Accession #:  898531-15-175   ·   File #:  811-05037

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Amendment to Certified Annual Shareholder Report of a Management Investment Company   —   Form N-CSR
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N-CSR/A   —   Tcm Growth Funds Annual Report 9/30/2014


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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES




Investment Company Act file number  [811-05037]



Professionally Managed Portfolios
(Exact name of registrant as specified in charter)



615 East Michigan Street
Milwaukee, WI 53202
(Address of principal executive offices) (Zip code)



Elaine E. Richards
Professionally Managed Portfolios
2020 E. Financial Way, Ste. 100
Glendora, CA 91741
(Name and address of agent for service)



(626) 914-7363

Registrant's telephone number, including area code



Date of fiscal year end: September 30



Date of reporting period:  September 30, 2014



 
 

 
 
Item 1. Report to Stockholders.




 
 
 
  TCM GROWTH FUNDS



ANNUAL REPORT
 
 
TCM Small Cap Growth Fund
TCM Small-Mid Cap Growth Fund



September 30, 2014


 
 

 


TCM GROWTH FUNDS
   

Table of Contents
 
Letter to Shareholders
 
2
TCM Small Cap Growth Fund
   
    Performance Discussion
 
7
    Performance
 
9
    Fund Information
 
10
    Schedule of Investments
 
11
TCM Small-Mid Cap Growth Fund
   
    Performance Discussion
 
14
    Performance
 
16
    Fund Information
 
17
    Schedule of Investments
 
18
Fund Expense Examples
 
21
Financial Statements
   
    Statements of Assets and Liabilities
 
23
    Statements of Operations
 
24
    Statements of Changes in Net Assets
 
25
Financial Highlights
 
27
Notes to Financial Statements
 
29
Report of Independent Registered Public Accounting Firm
 
37
Approval of Investment Advisory Agreement
 
38
Trustees and Executive Officers
 
41
Additional Information
 
44
Privacy Policy
 
46


 
1

 


 
TCM GROWTH FUNDSCM GROWTH FUNDS

 
November 10, 2014
 
Dear Fellow Shareholder:
 
Thank you for your investment in the TCM Small Cap Growth Fund (the “Small Cap Fund”) and the TCM Small-Mid Cap Growth Fund (the “SMID Cap Fund”).  This is the annual report to shareholders of the Funds, covering the fiscal year ended September 30, 2014.  The report includes a discussion of the factors that impacted the performance of the Funds for the period, as well as information on Fund expenses and holdings.  The report also contains the audited financial statements of each Fund and a Report of Independent Registered Public Accounting Firm.
 
Following a period of very strong performance, the small cap equity market weakened over the past year period ended September 30, 2014 (returns for the consecutive quarters during that period for the Russell 2000® Growth Index were 8.17%, 0.48%, 1.72% and -6.13%, respectively).  This letter summarizes the market environment over the past fiscal year and our current investment outlook.  Following this letter are the discussions on performance and Fund information for the Small Cap Fund and the SMID Cap Fund, which begin on pages 7 and 14, respectively.  The individual Fund discussions are similar because the investment process for each Fund is the same and there is significant overlap in the portfolios.
 
Market Review
 
Fourth Quarter 2013 – Fed Tapering and Congressional Shenanigans (again).  Not to be stopped, the bull market in equities throughout 2013 continued into the fourth quarter as investors reacted positively to continued signs of an improving economy.  Investor reaction to an anticipated reduction in the Fed’s quantitative easing program of buying bonds, as well as a short two week government shutdown, was muted at best.  The Fed had signaled earlier in the year that it intended to taper its quantitative easing program of buying mortgage-backed bonds and subsequent Fed pronouncements tried to provide a sense that the withdrawal would be both measured and depend on continued signs of economic growth and that, in any event, short term rates would stay low for the foreseeable future.  In what could have been another blow to investor confidence, the fourth quarter started out with Congress unable to agree on legislation to continue the operations of the federal government, shutting down most federal agency activities for the first two weeks of October.  The refusal to pass a budget was not well received by the public and activist members of the Republican Party relented under intense pressure to get the government back up and running.  While the market sold off slightly at the start, investors shrugged off the negative effects of the shutdown and after both sides of the aisle stopped the demagogy, continuing resolutions were passed but the finger pointing continued.
 

 

 

 

 
2

 

TCM GROWTH FUNDS
 
 
First Quarter 2014 – Turmoil in Ukraine and Fed Leadership Changes.  After a year of little aversion to risk, the equity markets proved to be more challenging in the first quarter of 2014.  A variety of factors led to more subdued returns as investors focused on stretched valuations, mixed economic data, political turmoil in Ukraine, Fed tapering, and continued concerns in emerging markets.  A market driven by expanding profit margins and higher valuations always raises concerns about a pullback.  And with the mixed bag of information flow during the first quarter, that pullback occurred in many stocks as investors took profits and reacted to concerns that future equity returns may be under pressure.  Geopolitical concerns added to the uncertainty as Russia annexed Crimea and threats of sanctions reverberated throughout European markets.  In terms of fiscal and monetary policy developments, while not a strong tailwind, the news was not that bad.  Due to a contraction in the growth rates of expenditures and higher tax receipts (improving economy and higher rates), the federal deficit declined from previously high levels.  On the monetary policy front, there was a transition in Fed leadership from Bernanke to Yellen and confirmation that steps to taper the current level of quantitative easing were on track.  Congress for once gave everyone a break by avoiding another government showdown and passed a bipartisan omnibus spending bill that funded the government until September of 2014.
 
Second Quarter 2014 – Calm Before the Storm.  While returns in the equity markets were generally positive in the second quarter, excluding small cap stocks (which at one point in the quarter were down almost 13% from their March 4 high), the stock market in this quarter was distinguished primarily by its tranquility.  The most distinctive factor was a lack of volatility for the period, with the CBOE Volatility Index (VIX) hitting its lowest level since June 2007.  Leading economic indicators during the period were somewhat mixed, and the debate amongst investors continued on whether the lack of volatility reflects a stable investment environment or an undeserved complacency.  In this environment, larger cap names outperformed smaller cap stocks and value continued to trump growth after a stellar year for growth stocks in 2013.  The lackluster gain in small cap growth stocks for the quarter (the Russell 2000® Growth Index ended up 1.72% after a strong rally) reflected a concern over whether smaller companies could generate the revenue and earnings growth rates that warranted the then high valuations.
 
The economy continued to chug along in the second quarter after an uninspiring performance in the first quarter driven in part by very poor weather.  We saw a rebound in many sectors of the economy as the negative effects of winter on consumer spending and capital expenditures dissipated.  The June data from the ISM Production Manufacturers Index provided a reading of 55.3%, indicating an expansion in manufacturing for the 13th consecutive month (although the
 

 

 

 

 
3

 


 
TCM GROWTH FUNDSCM GROWTH FUNDS
 
components of that index were somewhat mixed).  The tone of comments from representative industry respondents was positive and the data supported the view that the U.S. economy accelerated in the second quarter, supported by improving manufacturing activity, better employment trends and consumer spending improving in certain areas.  The manufacturing/energy renaissance in the U.S. continued to gather steam as companies reduced their outsourcing of capacity to foreign markets.  The relative competitive advantage that has long existed for those companies seeking lower manufacturing and labor costs is dissipating and that is giving rise to the so-called renaissance.  New completion technologies in the oil and gas industry are one of the main catalysts for the trend, as energy prices for both oil and especially natural gas are now lower in the U.S. than in most parts of the world.  Modern economies are still driven by the availability and cost of energy, and we have hit a “gusher” in terms of horizontal drilling and hydraulic fracturing techniques that have unlocked vast shale resources that were previously uneconomic to produce.
 
Third Quarter 2014 – Volatility Returns.  Volatility returned during the third quarter as geopolitical events weighed on markets both here and abroad.  The total return for the Russell 2000® Growth Index for the period was -6.13%.  Given that the last negative quarterly return in that benchmark was the second quarter of 2012, a correction, while never painless, was not unexpected given the recent valuation expansion and high returns.  Growth stocks continued to lag value and large cap indexes also maintained their edge over smaller cap indexes, with the S&P 500® Index outperforming the Russell 2000® Index by 8.5% for the quarter, the worst relative performance since the first quarter of 1979.  We believe relative small cap valuations are returning to historical levels, and although our process focuses on fundamental analysis rather than trading technicals, we note that small cap underperformance does not often continue for very long following these levels of relative underperformance as long as the economy does not deteriorate.  Regarding valuation, a combination of falling prices during 2014 and rising earnings has made the Russell 2000® Index 8% less expensive compared to the end of 2013.
 
In the U.S., the economy continues to do relatively well but the indicators are flashing some early warnings.  The manufacturing index issued by the Institute for Supply Management (“ISM”) for September showed a slip to 56.6 from the high of 59 in August. As with the prior report, some components of the index were stronger than others.  While there is evidence of both higher new orders and better production levels, those improvements have not translated to stronger hiring of factory workers.  Part of the labor problem is access to qualified workers, as job openings were up significantly in August.  The fact that September’s ISM Manufacturing Index was below all 85 economists’ projections is not exactly a
 

 

 

 

 
4

 

TCM GROWTH FUNDS
 
 
bullish sign of a strengthening economic picture, although it still shows resilience.  The issue for investors is determining whether these somewhat confusing data points are signs of a delay or a derailment of positive economic trends.  From a monetary policy standpoint, these mixed signals are keeping the Fed on a “steady as she goes” policy course.  Quantitative easing (“QE”) is projected to end as we close 2014 but the central bank hasn’t moved off its language of  a “considerable time” before rate increases will take place after the end of QE.  Fed actions to tighten monetary policy haven’t impacted interest rates, with the 10-year Treasury yield at 2.38% at the time of this letter.  That yield likely reflects a flight to safety as investors grow weary of foreign markets, a strengthening dollar, and a relatively long bull market in the U.S.
 
Market Outlook.  Geopolitical risks have without a doubt increased since the end of the second quarter.  The impact of the Ukraine/Russia conflict is still a growing concern; the potential outcomes of disputes in the Middle East are unclear; and South American economies such as Brazil and Argentina are struggling to avoid deeper recessions.  Although stimulus efforts in China have stabilized GDP growth rates, the underlying debt issues and a weak real estate market will likely weigh on future growth rates.  Contemporaneous with Fed action in the U.S. to take away the punch bowl, the European Central Bank has committed to low rates and begun the process of possible quantitative easing through asset purchases due to economic woes, particularly in France and Italy.
 
From the perspective of the U.S. stock market, and therefore our portfolios, the pressing question is whether our domestic economy can stay on track with a positive trajectory while the rest of the world catches a cold (the buzzword de jour is decoupling)?  How will different types of companies be impacted by those conflicting economic forces?  The anemic economic growth outside the U.S. will impact domestic multinational firms that derive a significant portion of their revenues from foreign sources or that are impacted by a stronger dollar, causing currency translation losses and possibly restraining exports.  Recent statements by top policy makers acknowledge that these trends may slow the pace by the Fed on increasing rates.  We are under no illusion that weakening investor sentiment worldwide won’t impact the broader equity markets in the U.S., as they have done over the last couple weeks.  The depth of that downturn will depend on the impact of these issues on company earnings, which we will see in management guidance as this earnings season unfolds.
 
Given globalization and the interconnections of economies and business activities, weak European and emerging markets will at a minimum not be a positive for domestic equities.  Small cap has taken the brunt of that impact so far this year (following strong outperformance last year) relative to large cap but we think that a good portion of this performance gap has played out because we’ve seen valuations
 

 

 

 
5

 
 
 
TCM GROWTH FUNDSCM GROWTH FUNDS
 
retract and earnings levels hold the line.  We are focused on high quality companies with more dependable earnings streams, which we believe is the correct strategy to deliver strong relative performance in these markets.  Volatility will likely be with us throughout the current quarter but there are positive underlying fundamentals for the U.S. economy, such as low mortgage rates, declining energy prices and improving labor markets.  Again, please see the following pages for the discussions on the individual Funds.
 
Sincerely,
   
   
Richard J. Johnson
Jeff B. Curtis
Chief Investment Officer
President

 
This material must be preceded or accompanied by a current prospectus. Please refer to the prospectus for important information about the Funds, including investment objectives, risks and expenses.
 
Past performance is no guarantee of future results.
 
This report reflects our views, opinions and portfolio holdings as of September 30, 2014, the end of the reporting period.  These views are subject to change at any time based on market and other conditions and we disclaim any responsibility to update these views.  The views should not be relied on as investment advice or an indication of trading intent on behalf of the Funds.
 
Mutual fund investing involves risk, principal loss is possible.  The Funds invest in smaller companies, which involve additional risks such as limited liquidity and greater volatility.
 
Fund holdings and sector allocations are subject to change at any time and are not recommendations to buy or sell any security.  Please refer to the Schedule of Investments for a complete listing of Fund holdings.
 
Lipper Analytical Services, Inc. is an independent mutual fund research and ranking agency.  Each Lipper average represents a universe of funds with similar investment objectives.  The Russell 2000® Index is an unmanaged index that serves as a benchmark for small-cap stocks by measuring the performance of approximately 2,000 small-cap companies.  The Russell 2000® Growth Index and the Russell 2500™ Growth Index are unmanaged indices representing those Russell 2000® Index companies and Russell 2500™ Index companies, respectively, with higher price-to-book ratios and future projected earnings according to the Frank Russell Company.  The S&P 500® Index is a broad-based, unmanaged measurement of changes in stock market conditions based on the average of 500 widely held common stocks.  The VIX Index measures expectations of volatility, or fluctuations in price, of the S&P 500® Index.  The ISM Manufacturing Index is an unmanaged index that monitors employment, production inventories and supplier deliveries based on surveys of more than 300 manufacturing firms by the Institute of Supply Management.  One cannot invest directly in an index.
 
Quasar Distributors, LLC, Distributor
 



 
6

 

TCM SMALL CAP GROWTH FUND
 
 
  PERFORMANCE DISCUSSION (Unaudited)

Fiscal Year Performance Overview.  Quarterly returns and the total return for the one year ended September 30, 2014 for the Small Cap Fund, the Russell 2000® Growth Index, the Fund’s benchmark, and the Lipper Small Cap Growth category average were:
 
 
Small
Russell
Lipper Small
 
Cap Fund
2000® Growth
Cap Growth
4th Quarter 2013
10.95%
 8.17%
 8.22%
1st Quarter 2014
  4.66%
 0.48%
 0.17%
2nd Quarter 2014
  0.83%
 1.72%
 0.28%
3rd Quarter 2014
 -5.98%
-6.13%
-5.78%
1 Year Ended 9/30/14
10.09%
 3.79%
 2.39%
 
Longer term performance for the Small Cap Fund is set forth in the chart and table that follows this narrative.
 
Performance Attribution – Year in Review.  Below is a summary performance attribution for each of the past four quarters.
 
Fourth Quarter 2013.  Small cap growth stocks added to their streak of three quarters of positive returns with the Russell 2000® Growth Index posting a return of 8.17% for the quarter, culminating in a total return of 43.30% for 2013.  All sectors in our benchmark during the fourth quarter posted positive returns, with the best performers coming from the telecom, industrials, consumer discretionary and materials sectors.  The Small Cap Fund outperformed the benchmark for the quarter based entirely on stock selection, with the best relative contribution coming from the healthcare, consumer discretionary, financials and materials sectors.  Cash was a drag on performance in a strong quarter but was offset by the positive effect of our economic sector allocations.
 
First Quarter 2014.  From an investment style perspective, small cap stocks underperformed larger cap stocks and value outpaced growth stocks, particularly in the selloff at the end of the quarter.  In the Russell 2000® Growth Index, the top performing sectors were healthcare, consumer staples, energy and industrials.  The Small Cap Fund outperformed the benchmark for the quarter based primarily on stock selection, with the best relative contribution coming from the industrials, technology, healthcare, and consumer discretionary sectors.  The effect of the portfolio’s economic sector allocations was also positive, based principally on the underweight to consumer discretionary and overweight to industrials for the quarter.
 
Second Quarter 2014.  Following a new 10-year high in small cap stocks in early March, a selloff in momentum stocks with higher valuations ensued, bringing down the Russell 2000® Growth Index by almost 13%.  That selloff proved to be short-lived and was followed by a strong rally beginning on May 8 that erased those losses, with the benchmark ending in positive territory by quarter end.  Larger cap
 

 

 

 
7

 

 
TCM SMALL CAP GROWTH FUND
 
  PERFORMANCE DISCUSSION (Unaudited) (Continued)

stocks were much less volatile during the same period and also climbed to new highs during the quarter.  In the Russell 2000® Growth Index, the top performing sectors were energy, materials, financials and technology.  The Small Cap Fund slightly lagged the benchmark for the quarter based on stock selection, as our positive selection in the consumer discretionary and industrials sectors was offset by selection in other sectors.  The effect of the portfolio’s economic sector allocations was slightly positive, based principally on the underweight to consumer staples and healthcare and an overweight to energy for the quarter.
 
Third Quarter 2014.  Overall, smaller cap stocks were under pressure during the quarter as investors looked to take profits following a long period of rising stock prices and increasing valuations.  Problems in overseas economies, as well as a stronger dollar, contributed to a flight to safety mentality particularly by foreign investors, which benefits larger cap U.S. stocks over small caps.  In this environment, healthcare and telecommunication stocks offered the greatest protection in the correction.  The Small Cap Fund bested the benchmark by a slight margin, primarily due to our underweight to the energy sector, and the effect of our overall stock selection in that portfolio for the period was neutral.
 
Top and Bottom Contributing Stocks.  The top and bottom five contributing stocks to absolute performance for the 2014 fiscal year were:
 
 
Average
Contribution
Top Five
Weight (%)
uuuu
Skyworks Solutions (semiconductors)
1.24
1.00
Lannett Company (generic pharmaceuticals)
0.46
0.90
Integrated Device Technology
   
  (mixed signal semiconductor)
1.55
0.75
Motorcar Parts of America
   
  (aftermarket automobile parts)
0.58
0.71
Patrick Industries (building products and materials)
2.00
0.70
     
 
Average
Contribution
Bottom Five
Weight (%)
to Returns (%)
PDF Solutions
   
  (integrated circuits infrastructure technology)
1.07
-0.63
Ciena Corporation (network specialist)
1.09
-0.49
Natural Grocers by Vitamin Cottage
   
  (natural and organic grocery)
0.22
-0.41
Veeva Systems (cloud-based software solutions)
0.47
-0.39
8x8 (IP phone systems)
0.78
-0.39




 
8

 


TCM SMALL CAP GROWTH FUND
 

  VALUE OF $100,000 VS. RUSSELL 2000® GROWTH INDEX (Unaudited)
 

 
Average Annual Returns for the periods ended September 30, 2014
 
 
One
Three
Five
Ten
Since Inception
 
Year
Year
Year
Year
(10/1/2004)
TCM Small Cap Growth Fund
10.09%
24.48%
14.51%
9.79%
9.79%
Russell 2000® Growth Index
  3.79%
21.91%
15.51%
8.80%
8.80%
Lipper Small Cap Growth Average
  2.39%
20.29%
15.18%
8.53%
8.53%
 
This chart illustrates the performance of a hypothetical $100,000 investment made on October 1, 2004, and is not intended to imply any future performance. The returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The returns reflect fee waivers in effect. In the absence of such waivers, total return would be reduced. The chart assumes reinvestment of capital gains and dividends for a fund and dividends for an index.
 
Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by calling 1-800-536-3230.
 
The Fund imposes a 1% redemption fee on shares held for less than 60 days. Performance does not reflect the redemption fee. If reflected, total returns would be reduced.




 
9

 

 
TCM SMALL CAP GROWTH FUND
 
  FUND INFORMATION at September 30, 2014 (Unaudited)

 Basic Fund Facts

Ticker Symbol
TCMSX
Inception Date
10/1/04
Total Net Assets
$274 million
Total Operating Expenses*
0.93%
   
*  Expense Ratio as of most recent prospectus dated January 31, 2014.
 

 Top Ten Holdings (% of net assets)

Integrated Device Technology, Inc.
2.7%
 
Verint Systems, Inc.
1.8%
Amerisafe, Inc.
2.3%
 
Genesee & Wyoming, Inc.
1.6%
ExamWorks Group, Inc.
1.9%
 
H&E Equipment
 
Skyworks Solutions, Inc.
1.9%
 
  Services, Inc.
1.6%
Patrick Industries, Inc.
1.9%
 
CLARCOR, Inc.
1.6%
     
Eagle Materials, Inc.
1.6%
 
 Sector Allocation (% of net assets)


**  Cash equivalents and other assets less liabilities.



 
10

 


TCM SMALL CAP GROWTH FUND
 

  SCHEDULE OF INVESTMENTS at September 30, 2014

 
Shares
     
Value
 
   
COMMON STOCKS - 95.8%
 
   
Air Freight & Logistics - 0.2%
 
    64,401  
UTi Worldwide, Inc.*
  $ 684,583  
                 
Airlines - 1.0%
 
    207,665  
Hawaiian Holdings, Inc.*
    2,793,094  
                 
Auto Components - 0.9%
 
    48,589  
Drew Industries, Inc.
    2,049,970  
    6,964  
Gentherm, Inc.*
    294,090  
              2,344,060  
Beverages - 0.2%
 
    88,221  
REEDS, Inc.*
    520,504  
                 
Biotechnology - 1.8%
       
    41,211  
Cepheid*
    1,814,520  
    32,926  
Medivation, Inc.*
    3,255,394  
              5,069,914  
Building Products - 2.8%
       
    65,687  
Apogee Enterprises, Inc.
    2,614,343  
    121,903  
Patrick Industries, Inc.*
    5,163,811  
              7,778,154  
Capital Markets - 1.4%
       
    13,945  
Affiliated Managers
       
       
  Group, Inc.*
    2,794,020  
    32,332  
Financial Engines, Inc.
    1,106,240  
              3,900,260  
Commercial Services & Supplies - 2.8%
       
    71,693  
Healthcare Services
       
       
  Group, Inc.
    2,051,137  
    69,861  
Mobile Mini, Inc.
    2,443,039  
    66,781  
US Ecology, Inc.
    3,122,679  
              7,616,855  
Communications Equipment - 1.3%
       
    216,614  
Ciena Corp.*
    3,621,786  
                 
Construction & Engineering - 3.0%
       
    95,466  
Dycom Industries, Inc.*
    2,931,761  
    107,609  
EMCOR Group, Inc.
    4,300,055  
    34,845  
MasTec, Inc.*
    1,066,954  
              8,298,770  
Construction Materials - 1.6%
       
    43,879  
Eagle Materials, Inc.
    4,468,199  
                 
Distributors - 1.7%
       
    125,485  
LKQ Corp.*
    3,336,646  
    25,775  
Pool Corp.
    1,389,788  
              4,726,434  
Diversified Consumer Services - 1.9%
       
    59,799  
Grand Canyon
       
       
  Education, Inc.*
    2,438,005  
    83,729  
Liberty Tax, Inc.*
    2,704,447  
              5,142,452  
Diversified Telecommunication Services - 1.7%
       
    191,571  
8x8, Inc.*
    1,279,694  
    102,227  
Cogent Communications
       
       
  Holdings, Inc.
    3,435,850  
              4,715,544  
Electrical Equipment - 0.9%
       
    34,002  
Power Solutions
       
       
  International, Inc.*
    2,346,138  
                 
Electronic Equipment,
       
  Instruments & Components - 0.1%
       
    12,527  
National Instruments
       
       
  Corp.
    387,460  
                 
Energy Equipment & Services - 0.1%
       
    6,494  
RigNet, Inc.*
    262,682  
                 
Food & Staples Retailing - 1.6%
       
    25,127  
The Andersons, Inc.
    1,579,986  
    39,855  
Casey’s General
       
       
  Stores, Inc.
    2,857,603  
              4,437,589  
Food Products - 1.9%
       
    44,000  
Treehouse Foods, Inc.*
    3,542,000  
    46,699  
Whitewave Foods Co.*
    1,696,575  
              5,238,575  
Health Care Equipment & Supplies - 5.2%
       
    84,401  
Insulet Corp.*
    3,110,177  
    139,152  
LDR Holding Corp.*
    4,331,802  
    129,292  
Spectranetics Corp.*
    3,435,288  
    43,530  
Trinity Biotech Plc - ADR
    795,293  

The accompanying notes are an integral part of these financial statements.




 
11

 

 
TCM SMALL CAP GROWTH FUND
 
  SCHEDULE OF INVESTMENTS at September 30, 2014 (Continued)

 
Shares
     
Value
 
       
COMMON STOCKS - 95.8% (Continued)
     
       
Health Care Equipment & Supplies - 5.2% (Continued)
     
    87,227  
Wright Medical
     
       
  Group, Inc.*
  $ 2,642,978  
              14,315,538  
Health Care Providers & Services - 8.9%
       
    15,298  
Athenahealth, Inc.*
    2,014,594  
    112,100  
Brookdale Senior
       
       
  Living, Inc.*
    3,611,862  
    36,003  
Centene Corp.*
    2,977,808  
    160,642  
ExamWorks Group, Inc.*
    5,261,025  
    109,313  
HealthEquity, Inc.*
    2,001,521  
    71,405  
MEDNAX, Inc.*
    3,914,422  
    18,269  
MWI Veterinary
       
       
  Supply, Inc.*
    2,711,120  
    35,589  
Team Health
       
       
  Holdings, Inc.*
    2,063,806  
              24,556,158  
Health Care Technology - 1.5%
       
    60,360  
Medidata Solutions, Inc.*
    2,673,344  
    47,523  
Veeva Systems, Inc.*
    1,338,723  
              4,012,067  
Hotels, Restaurants & Leisure - 4.9%
       
    124,471  
Chuy’s Holdings, Inc.*
    3,907,145  
    78,022  
Kona Grill, Inc.*
    1,539,374  
    54,418  
Life Time Fitness, Inc.*
    2,744,844  
    110,701  
Noodles & Company*
    2,124,352  
    108,162  
Texas Roadhouse, Inc.
    3,011,230  
              13,326,945  
Household Durables - 0.6%
       
    182,253  
The Dixie Group, Inc.*
    1,580,134  
                 
Insurance - 2.3%
       
    161,303  
Amerisafe, Inc.
    6,308,560  
         
Internet Software & Services - 3.6%
       
    256,501  
Borderfree, Inc.*
    3,308,863  
    61,822  
Dealertrack
       
       
  Technologies, Inc.*
    2,683,693  
    99,680  
Global Eagle
       
       
  Entertainment, Inc.*
    1,118,409  
    308,038  
Marin Software, Inc.*
    2,649,127  
              9,760,092  
IT Services - 1.9%
       
    81,085  
iGate Corp.*
    2,977,441  
    25,577  
Syntel, Inc.*
    2,249,242  
              5,226,683  
Life Science Tools & Services - 1.1%
       
    52,054  
ICON Plc*
    2,979,050  
                 
Machinery - 6.6%
       
    71,064  
CLARCOR, Inc.
    4,482,717  
    74,947  
Manitex Intl, Inc.*
    846,152  
    33,497  
Middleby Corp.*
    2,952,090  
    256,454  
Mueller Water
       
       
  Products, Inc.
    2,123,439  
    105,148  
Navistar
       
       
  International Corp.*
    3,460,421  
    86,263  
Woodward, Inc.
    4,107,844  
              17,972,663  
Marine - 0.4%
       
    234,192  
Baltic Trading Ltd.
    969,555  
                 
Media - 1.1%
       
    183,456  
The E.W.
       
       
  Scripps Company*
    2,992,167  
                 
Metals & Mining - 2.4%
       
    201,737  
Globe Specialty
       
       
  Metals, Inc.
    3,669,596  
    12,047  
Haynes International, Inc.
    554,041  
    141,773  
Horsehead
       
       
  Holding Corp.*
    2,343,508  
              6,567,145  
Multiline Retail - 1.2%
       
    163,537  
Tuesday Morning Corp.*
    3,173,435  
                 
Oil, Gas & Consumable Fuels - 1.5%
       
    54,869  
Matador Resources Co.*
    1,418,364  
    63,198  
Rosetta Resources, Inc.*
    2,816,103  
              4,234,467  
Personal Products - 0.8%
       
    79,660  
Inter Parfums, Inc.
    2,190,650  
                 
Pharmaceuticals - 1.3%
       
    234,040  
Horizon Pharma Plc*
    2,874,011  
    7,106  
Pacira
       
       
  Pharmaceuticals, Inc.*
    688,714  
              3,562,725  

The accompanying notes are an integral part of these financial statements.


 
12

 

TCM SMALL CAP GROWTH FUND
 
 
  SCHEDULE OF INVESTMENTS at September 30, 2014 (Continued)

 
Shares
     
Value
 
COMMON STOCKS - 95.8% (Continued)
     
       
Professional Services - 0.2%
     
    20,384  
On Assignment, Inc.*
  $ 547,310  
                 
Road & Rail - 3.6%
       
    47,468  
Genesee &
       
       
  Wyoming, Inc.*
    4,524,175  
    253,306  
Quality Distribution, Inc.*
    3,237,251  
    99,303  
Swift
       
       
  Transportation Co.*
    2,083,377  
              9,844,803  
Semiconductors &
       
  Semiconductor Equipment - 8.4%
       
    41,564  
Cavium, Inc.*
    2,066,978  
    101,576  
Diodes, Inc.*
    2,429,698  
    463,586  
Integrated Device
       
       
  Technology, Inc.*
    7,394,197  
    75,190  
Monolithic Power
       
       
  Systems, Inc.
    3,312,119  
    205,559  
PDF Solutions, Inc.*
    2,592,099  
    89,676  
Skyworks Solutions, Inc.
    5,205,692  
              23,000,783  
Software - 6.4%
       
    71,683  
Bottomline
       
       
  Technologies, Inc.*
    1,977,734  
    59,929  
FireEye, Inc.*
    1,831,430  
    95,010  
Monotype Imaging
       
       
  Holdings, Inc.
    2,690,683  
    107,492  
Qlik Technologies, Inc.*
    2,906,584  
    47,365  
Tableau Software, Inc.*
    3,441,067  
    86,791  
Verint Systems, Inc.*
    4,826,448  
              17,673,946  
Specialty Retail - 2.0%
       
    70,367  
Five Below, Inc.*
    2,787,237  
    34,107  
Restoration Hardware
       
       
  Holdings, Inc.*
    2,713,212  
              5,500,449  
Textiles, Apparel & Luxury Goods - 1.4%
       
    66,022  
Kate Spade & Co.*
    1,731,757  
    34,791  
Oxford Industries, Inc.
    2,121,903  
              3,853,660  
Trading Companies & Distributors - 1.6%
       
    111,327  
H&E Equipment
       
       
  Services, Inc.
    4,484,252  
                 
TOTAL COMMON STOCKS
       
  (Cost $231,244,983)
    262,986,290  
                 
SHORT-TERM INVESTMENTS - 3.7%
       
         
Money Market Funds - 3.7%
       
    10,224,793  
SEI Daily Income Trust
       
       
  Government Fund -
       
       
  Class B, 0.020%(1)
    10,224,793  
                 
TOTAL SHORT-TERM INVESTMENTS
       
  (Cost $10,224,793)
    10,224,793  
                 
TOTAL INVESTMENTS
       
  IN SECURITIES - 99.5%
       
  (Cost $241,469,776)
    273,211,083  
Other Assets in
       
  Excess of Liabilities - 0.5%
    1,227,419  
TOTAL NET ASSETS - 100.0%
  $ 274,438,502  

*
 
Non-income producing security.
ADR
 
American Depositary Receipt
(1)
 
Seven-day yield as of September 30, 2014.
 

 
The accompanying notes are an integral part of these financial statements.

 
13

 
 
 
TCM SMALL CAP GROWTH FUND
 
  PERFORMANCE DISCUSSION (Unaudited)

Performance Overview.  Quarterly returns and the total return for the one year ended September 30, 2014 for the SMID Cap Fund and the Russell 2500™ Growth Index, the Fund’s benchmark, were:
 
   
SMID
Russell
   
Cap Fund
2500™ Growth
4th Quarter 2013
 
  9.56%
 8.49%
1st Quarter 2014
 
  3.51%
 1.04%
2nd Quarter 2014
 
  3.22%
 2.90%
3rd Quarter 2014
 
 -3.69%
-4.21%
1 Year Ended 9/30/14
 
12.73%
 8.05%
 
Longer term performance for the SMID Cap Fund is set forth in the chart and table that follows this narrative.
 
Performance Attribution – Year in Review.  Below is a summary performance attribution for each of the past four quarters.
 
Fourth Quarter 2013.  Small cap growth stocks added to their streak of three quarters of positive returns with the Russell 2500™ Growth Index posting a return of 8.49% for the quarter, culminating in a total return of 40.65% for 2013.  All sectors in our benchmark during the fourth quarter posted positive returns, with the best performers coming from the telecom, industrials, consumer discretionary and materials sectors.  The SMID Cap Fund outperformed the benchmark for the quarter based entirely on stock selection, with the best relative contribution coming from the healthcare, materials, financials, and consumer discretionary sectors.  The effect of our economic sector weights was neutral for the quarter but cash was a drag in such a strong market.
 
First Quarter 2014.  From an investment style perspective, small cap stocks underperformed larger cap stocks and value outpaced growth stocks, particularly in the selloff at the end of the quarter.  In the Russell 2500™ Growth Index, the top performing sectors were healthcare, consumer staples, energy and industrials.  The SMID Cap Fund outperformed the benchmark for the quarter based almost entirely on stock selection, with the best relative contribution coming from the technology, healthcare, consumer staples and industrials sectors.  The positive effect of our overweight to healthcare and industrials and underweight to consumer staples more than offset the effect of our underweight to materials, financials and utilities.
 
Second Quarter 2014.  Following a new 10-year high in small cap stocks in early March, a selloff in momentum stocks with higher valuations ensued, bringing down the Russell 2000® Growth Index by almost 13%.  That selloff proved to be short-lived and was followed by a strong rally beginning on May 8 that erased those losses,
 

 

 

 
14

 
 
TCM SMALL-MID CAP GROWTH FUND
 
 
  PERFORMANCE DISCUSSION (Unaudited) (Continued)

with the benchmark ending in positive territory by quarter end.  Larger cap stocks were much less volatile during the same period and also climbed to new highs during the quarter.  The SMID Cap Fund outperformed the benchmark for the quarter based entirely on stock selection, with the best relative contribution coming from the consumer discretionary, industrials and technology sectors.  The positive effect of our overweight to healthcare, energy and industrials and underweight to consumer discretionary was offset by the effect of our underweight to materials and cash.
 
Third Quarter 2014.  Overall, smaller cap stocks were under pressure during the quarter as investors looked to take profits following a long period of rising stock prices and increasing valuations.  Problems in overseas economies, as well as a stronger dollar, contributed to a flight to safety mentality particularly by foreign investors, which benefits larger cap U.S. stocks over small caps.  In this environment, healthcare and telecommunication stocks offered the greatest protection in the correction.  The SMID Cap Fund bested the benchmark, primarily due to our overweight to both the healthcare and telecommunication sectors, and the effect of our overall stock selection for the period was neutral.
 
Top and Bottom Contributing Stocks.  The top and bottom five stocks contributing to absolute performance for the 2014 fiscal year were:
 
 
Average
Contribution
Top Five
Weight (%)
to Returns (%)
Skyworks Solutions (semiconductors)
1.18
0.98
Lannett Company (generic pharmaceuticals)
0.45
0.88
Trex Company (composite deck products)
0.61
0.68
Lam Research
   
  (semiconductor processing equipment)
1.72
0.68
Illumina (life science tools)
0.65
0.67
     
 
Average
Contribution
Bottom Five
Weight (%)
to Returns (%)
PDF Solutions
   
  (integrated circuits infrastructure technology)
1.01
-0.56
Veeva Systems (cloud-based software solutions)
0.46
-0.42
8x8 (IP phone systems)
0.77
-0.39
Ciena Corporation (network specialist)
0.95
-0.37
Tangoe (communications management software)
0.12
-0.36




 
15

 
 
 
TCM SMALL-MID CAP GROWTH FUND
 
  VALUE OF $100,000 VS. RUSSELL 2500™ GROWTH INDEX (Unaudited)
 
 
Average Annual Returns for the periods ended September 30, 2014
 
       
Since Inception
 
One Year
Three Year
Five Year
(6/29/2007)
TCM Small-Mid Cap Growth Fund
12.73%
21.43%
13.87%
4.59%
Russell 2500™ Growth Index
  8.05%
22.68%
16.85%
7.46%
 
This chart illustrates the performance of a hypothetical $100,000 investment made on June 29, 2007, and is not intended to imply any future performance. The returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The returns reflect fee waivers in effect. In the absence of such waivers, total return would be reduced. The chart assumes reinvestment of capital gains and dividends for a fund and dividends for an index.
 
Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by calling 1-800-536-3230.
 
The Fund imposes a 1% redemption fee on shares held for less than 60 days. Performance does not reflect the redemption fee. If reflected, total returns would be reduced.




 
16

 


TCM SMALL-MID CAP GROWTH FUND
 

  FUND INFORMATION at September 30, 2014 (Unaudited)

 Basic Fund Facts
 
Ticker Symbol
TCMMX
Inception Date
6/29/07
Total Net Assets
$47 million
Total Operating Expenses*
0.95%
   
* Expense Ratio as of most recent prospectus dated January 31, 2014.
 
 
 Top Ten Holdings (% of net assets)
 
Integrated Device Technology, Inc. 2.5%   Eagle Materials, Inc. 1.6%
Skyworks Solutions, Inc. 1.9%   CLARCOR, Inc. 1.6%
ExamWorks Group, Inc. 1.9%   Jones Lang Lasalle, Inc. 1.6%
Verint Systems, Inc. 1.8%   LDR Holding Corp. 1.5%
Lam Research Corp. 1.7%   Genesee & Wyoming, Inc. 1.5%
 
 Sector Allocation (% of net assets)
 

 
**  Cash equivalents and liabilities less other assets.




 
17

 

 
TCM SMALL-MID CAP GROWTH FUND
 
  SCHEDULE OF INVESTMENTS at September 30, 2014
 
 
Shares
     
Value
 
       
COMMON STOCKS - 96.2%
     
       
Air Freight & Logistics - 0.3%
     
    11,171  
UTi Worldwide, Inc.*
  $ 118,748  
         
Airlines - 1.0%
       
    34,179  
Hawaiian Holdings, Inc.*
    459,708  
         
Auto Components - 0.8%
       
    8,218  
Drew Industries, Inc.
    346,717  
    1,168  
Gentherm, Inc.*
    49,325  
              396,042  
Biotechnology - 1.8%
       
    6,581  
Cepheid*
    289,761  
    5,532  
Medivation, Inc.*
    546,949  
              836,710  
Building Products - 2.3%
       
    11,168  
Apogee Enterprises, Inc.
    444,486  
    15,372  
Patrick Industries, Inc.*
    651,158  
              1,095,644  
Capital Markets - 0.9%
       
    2,195  
Affiliated Managers
       
       
  Group, Inc.*
    439,790  
         
Commercial Services & Supplies - 3.4%
       
    11,914  
Healthcare Services
       
       
  Group, Inc.
    340,859  
    11,869  
Mobile Mini, Inc.
    415,059  
    11,353  
US Ecology, Inc.
    530,866  
    7,257  
Waste Connections, Inc.
    352,110  
              1,638,894  
Communications Equipment - 3.2%
       
    26,407  
Ciena Corp.*
    441,525  
    4,146  
F5 Networks, Inc.*
    492,296  
    5,693  
Palo Alto Networks, Inc.*
    558,483  
              1,492,304  
Construction & Engineering - 3.3%
       
    15,646  
Dycom Industries, Inc.*
    480,489  
    16,226  
EMCOR Group, Inc.
    648,391  
    5,735  
MasTec, Inc.*
    175,606  
    6,639  
Quanta Services, Inc.*
    240,929  
              1,545,415  
Construction Materials - 1.6%
       
    7,421  
Eagle Materials, Inc.
    755,680  
         
Containers & Packaging - 1.0%
       
    7,536  
AptarGroup, Inc.
    457,435  
         
Distributors - 1.7%
       
    22,069  
LKQ Corp.*
    586,815  
    4,433  
Pool Corp.
    239,027  
              825,842  
Diversified Consumer Services - 0.8%
       
    9,709  
Grand Canyon
       
       
  Education, Inc.*
    395,836  
         
Diversified Telecommunication Services - 1.7%
       
    31,662  
8x8, Inc.*
    211,502  
    17,356  
Cogent Communications
       
       
  Holdings, Inc.
    583,335  
              794,837  
Electrical Equipment - 0.8%
       
    5,756  
Power Solutions
       
       
  International, Inc.*
    397,164  
                 
Electronic Equipment,
       
  Instruments & Components - 1.1%
       
    6,698  
IPG Photonics Corp.*
    460,689  
    1,839  
National Instruments Corp.
    56,880  
              517,569  
Energy Equipment & Services - 1.2%
       
    1,602  
Core Laboratories NV
    234,453  
    5,235  
Oceaneering
       
       
  International, Inc.
    341,165  
              575,618  
Food & Staples Retailing - 1.6%
       
    4,252  
The Andersons, Inc.
    267,366  
    6,785  
Casey’s General Stores, Inc.
    486,484  
              753,850  
Food Products - 1.9%
       
    7,610  
Treehouse Foods, Inc.*
    612,605  
    8,020  
Whitewave Foods Co.*
    291,367  
              903,972  
 
The accompanying notes are an integral part of these financial statements.
 

 
 


 
18

 

TCM SMALL-MID CAP GROWTH FUND
 
 
  SCHEDULE OF INVESTMENTS at September 30, 2014 (Continued)

 
Shares
     
Value
 
             
COMMON STOCKS - 96.2% (Continued)
     
             
Health Care Equipment & Supplies - 5.1%
     
    14,028  
Insulet Corp.*
  $ 516,932  
    23,014  
LDR Holding Corp.*
    716,426  
    21,818  
Spectranetics Corp.*
    579,704  
    7,534  
Trinity Biotech Plc - ADR
    137,646  
    14,760  
Wright Medical
       
       
  Group, Inc.*
    447,228  
              2,397,936  
Health Care Providers & Services - 13.2%
       
    2,596  
Athenahealth, Inc.*
    341,867  
    17,984  
Brookdale Senior
       
       
  Living, Inc.*
    579,444  
    12,681  
Catamaran Corp.*
    534,504  
    6,184  
Centene Corp.*
    511,479  
    12,991  
Envision Healthcare
       
       
  Holdings, Inc.*
    450,528  
    26,741  
ExamWorks Group, Inc.*
    875,768  
    18,861  
HealthEquity, Inc.*
    345,345  
    3,814  
Henry Schein, Inc.*
    444,217  
    11,704  
MEDNAX, Inc.*
    641,613  
    2,992  
MWI Veterinary
       
       
  Supply, Inc.*
    444,013  
    6,112  
Team Health
       
       
  Holdings, Inc.*
    354,435  
    6,620  
Universal Health
       
       
  Services, Inc.
    691,790  
              6,215,003  
Health Care Technology - 1.4%
       
    9,899  
Medidata Solutions, Inc.*
    438,427  
    7,973  
Veeva Systems, Inc.*
    224,599  
              663,026  
Hotels, Restaurants & Leisure - 4.2%
       
    21,375  
Chuy’s Holdings, Inc.*
    670,961  
    9,403  
Life Time Fitness, Inc.*
    474,287  
    18,708  
Noodles & Company*
    359,007  
    17,992  
Texas Roadhouse, Inc.
    500,897  
              2,005,152  
Internet Software & Services - 1.0%
       
    10,414  
Dealertrack
       
       
  Technologies, Inc.*
    452,072  
                 
IT Services - 1.9%
       
    14,024  
iGate Corp.*
    514,961  
    4,257  
Syntel, Inc.*
    374,361  
              889,322  
Life Science Tools & Services - 1.1%
       
    8,939  
ICON Plc*
    511,579  
                 
Machinery - 6.1%
       
    11,649  
CLARCOR, Inc.
    734,819  
    5,650  
Middleby Corp.*
    497,935  
    17,254  
Navistar
       
       
  International Corp.*
    567,829  
    4,937  
Westinghouse Air
       
       
  Brake Technologies Corp.
    400,094  
    14,306  
Woodward, Inc.
    681,252  
              2,881,929  
Marine - 0.3%
       
    38,208  
Baltic Trading Ltd.
    158,181  
                 
Media - 1.1%
       
    30,882  
The E.W.
       
       
  Scripps Company*
    503,685  
                 
Metals & Mining - 2.1%
       
    33,186  
Globe Specialty
       
       
  Metals, Inc.
    603,653  
    23,537  
Horsehead Holding Corp.*
    389,067  
              992,720  
Multiline Retail - 0.8%
       
    20,306  
Tuesday Morning Corp.*
    394,038  
                 
Oil, Gas & Consumable Fuels - 1.1%
       
    3,289  
Cheniere Energy, Inc.*
    263,219  
    9,259  
Matador Resources Co.*
    239,345  
              502,564  
Personal Products - 0.8%
       
    13,046  
Inter Parfums, Inc.
    358,765  
                 
Pharmaceuticals - 1.6%
       
    1,191  
Pacira
       
       
  Pharmaceuticals, Inc.*
    115,432  
    4,042  
Salix
       
       
  Pharmaceuticals Ltd.*
    631,522  
              746,954  
 
The accompanying notes are an integral part of these financial statements.
 

 

 


 
19

 
 
 
TCM SMALL-MID CAP GROWTH FUND
 
  SCHEDULE OF INVESTMENTS at September 30, 2014 (Continued)
 
 
Shares
     
Value
 
       
COMMON STOCKS - 96.2% (Continued)
     
       
Real Estate Management & Development - 1.6%
     
    5,798  
Jones Lang Lasalle, Inc.
  $ 732,519  
                 
Road & Rail - 2.3%
       
    7,473  
Genesee & Wyoming, Inc.*
    712,251  
    17,109  
Swift Transportation Co.*
    358,947  
              1,071,198  
Semiconductors &
       
  Semiconductor Equipment - 8.7%
       
    7,160  
Cavium, Inc.*
    356,067  
    73,328  
Integrated Device
       
       
  Technology, Inc.*
    1,169,582  
    10,714  
Lam Research Corp.
    800,336  
    11,489  
Monolithic Power
       
       
  Systems, Inc.
    506,090  
    30,328  
PDF Solutions, Inc.*
    382,436  
    15,449  
Skyworks Solutions, Inc.
    896,814  
              4,111,325  
Software - 7.1%
       
    12,043  
Bottomline
       
       
  Technologies, Inc.*
    332,266  
    10,292  
FireEye, Inc.*
    314,524  
    16,004  
Monotype Imaging
       
       
  Holdings, Inc.
    453,233  
    18,092  
Qlik Technologies, Inc.*
    489,208  
    6,009  
Solera Holdings, Inc.
    338,667  
    7,833  
Tableau Software, Inc.*
    569,068  
    15,223  
Verint Systems, Inc.*
    846,551  
              3,343,517  
Specialty Retail - 2.9%
       
    11,964  
Five Below, Inc.*
    473,894  
    5,781  
Restoration Hardware
       
       
  Holdings, Inc.*
    459,879  
    12,320  
Urban Outfitters, Inc.*
    452,144  
              1,385,917  
Textiles, Apparel & Luxury Goods - 1.4%
       
    11,242  
Kate Spade & Co.*
    294,878  
    5,975  
Oxford Industries, Inc.
    364,415  
              659,293  
TOTAL COMMON STOCKS
       
  (Cost $39,340,192)
    45,377,753  
                 
SHORT-TERM INVESTMENTS - 4.5%
       
         
Money Market Funds - 4.5%
       
    2,124,109  
SEI Daily Income Trust
       
       
  Government Fund -
       
       
  Class B, 0.020%(1)
    2,124,109  
                 
TOTAL SHORT-TERM INVESTMENTS
       
  (Cost $2,124,109)
    2,124,109  
                 
TOTAL INVESTMENTS
       
  IN SECURITIES - 100.7%
       
  (Cost $41,464,301)
       
              47,501,862  
Liabilities in Excess of
       
  Other Assets - (0.7)%
    (347,470 )
                 
TOTAL NET ASSETS - 100.0%
  $ 47,154,392  

*
 
Non-income producing security.
ADR
 
American Depositary Receipt
(1)
 
Seven-day yield as of September 30, 2014.
 
 
 
The accompanying notes are an integral part of these financial statements.

 
20

 
 

TCM GROWTH FUNDS
 
 
  EXPENSE EXAMPLES For the Six Months Ended September 30, 2014 (Unaudited)

As a shareholder of the TCM Small Cap Growth Fund and the TCM Small-Mid Cap Growth Fund (the “Funds”), you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including investment advisory fees and other Fund expenses.  This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds.  The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (4/01/14 - 9/30/14).
 
Actual Expenses
 
The first line of the table below provides information about actual account values based on actual returns and actual expenses.  Although the Funds charge no sales load or transaction fees, you will be assessed fees for outgoing wire transfers, returned checks and stop payment orders at prevailing rates charged by U.S. Bancorp Fund Services, LLC, the Funds’ transfer agent.  If you request that a redemption be made by wire transfer, currently, a $15.00 fee is charged by the Funds’ transfer agent.  You will be charged a redemption fee equal to 1% of the net amount of the redemption if you redeem your shares less than 60 days after you purchase them.  To the extent the Funds invest in shares of other investment companies as part of its investment strategy, you will indirectly bear your proportionate share of any fees and expenses charged by the underlying funds in which the Funds invest in addition to the expenses of the Funds.  Actual expenses of the underlying funds are expected to vary among the various underlying funds.  These expenses are not included in the example below.  The example below includes, but is not limited to, investment advisory fees, fund accounting fees, custody fees and transfer agent fees.  However, the example below does not include portfolio trading commissions and related expenses, interest expense or dividends on short positions taken by the Funds and other extraordinary expenses as determined under generally accepted accounting principles.  You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period.  Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During the Period’’ to estimate the expenses you paid on your account during this period.
 
Hypothetical Example for Comparison Purposes
 
The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Funds’ actual expense ratios and an assumed rate of return of 5% per year before expenses, which is not the Funds’ actual return.  The hypothetical account values and expenses may not be
 

 

 

 

 
21

 
 
 
TCM GROWTH FUNDS
 
  EXPENSE EXAMPLES For the Six Months Ended September 30, 2014 (Unaudited) (Continued)
 
used to estimate the actual ending account balance or expenses you paid for the period.  You may use this information to compare the ongoing costs of investing in the Funds and other funds.  To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.  Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees.  Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.  In addition, if these transactional costs were included, your costs would have been higher.
 
TCM Small Cap Growth Fund
 
Beginning
Ending
Expenses Paid
 
Account Value
Account Value
During the Period
 
4/01/14
9/30/14
4/01/14 – 9/30/14*
Actual
$1,000.00
$   948.00
$4.59
Hypothetical (5% return
     
  before expenses)
$1,000.00
$1,020.36
$4.76
 
*
 
Expenses are equal to the Fund’s annualized expense ratio for the most recent six-month period of 0.94% (reflecting fee waivers in effect) multiplied by the average account value over the period multiplied by 183/365 (to reflect one-half year period).

TCM Small-Mid Cap Growth
 
Beginning
Ending
Expenses Paid
 
Account Value
Account Value
During the Period
 
4/01/14
9/30/14
4/01/14 – 9/30/14**
Actual
$1,000.00
$   994.00
$4.75
Hypothetical (5% return
     
  before expenses)
$1,000.00
$1,020.31
$4.81
 
**
 
Expenses are equal to the Fund’s annualized expense ratio for the most recent six-month period of 0.95% (reflecting fee waivers in effect) multiplied by the average account value over the period multiplied by 183/365 (to reflect one-half year period).





 
22

 


TCM GROWTH FUNDS
 
 
  STATEMENTS OF ASSETS AND LIABILITIES at September 30, 2014

   
TCM Small Cap
   
TCM Small-Mid
 
   
Growth Fund
   
Cap Growth
 
  ASSETS
           
Investments in securities, at value (cost $241,469,776
           
  and $41,464,301) (Note 2)
  $ 273,211,083     $ 47,501,862  
Receivables:
               
Investment securities sold
    5,616,602       916,617  
Fund shares sold
    809,372       80,453  
Dividends and interest
    49,857       9,719  
Prepaid expenses
    22,489       19,489  
Total assets
    279,709,403       48,528,140  
                 
  LIABILITIES
               
Payables:
               
Due to custodian
    7       7  
Fund shares redeemed
    27,513        
Investment securities purchased
    4,982,680       1,300,928  
Investment advisory fees, net
    187,632       24,131  
Administration fees
    22,627       10,054  
Fund accounting fees
    7,636       6,084  
Custody fees
    4,664       2,704  
Transfer agent fees
    4,495       2,349  
Trustee fees
    2,076       1,569  
Chief Compliance Officer fees
    1,710       1,239  
Other accrued expenses
    29,861       24,683  
Total liabilities
    5,270,901       1,373,748  
  NET ASSETS
  $ 274,438,502     $ 47,154,392  
  Net Asset Value (unlimited shares authorized):
         
  Net assets
  $ 274,438,502     $ 47,154,392  
  Shares of beneficial interest issued and outstanding
    8,013,621       2,825,537  
  Net asset value, offering and redemption price per share
  $ 34.25     $ 16.69  
                 
  COMPONENTS OF NET ASSETS
               
Paid-in capital
  $ 197,517,621     $ 32,359,715  
Undistributed net realized gain on investments
    45,179,574       8,757,116  
Net unrealized appreciation of investments
    31,741,307       6,037,561  
Net assets
  $ 274,438,502     $ 47,154,392  

The accompanying notes are an integral part of these financial statements.



 
23

 


 
TCM GROWTH FUNDS

  STATEMENTS OF OPERATIONS For the Year Ended September 30, 2014

   
TCM Small Cap
   
TCM Small-Mid
 
   
Growth Fund
   
Cap Growth
 
 INVESTMENT INCOME
           
Income
           
Dividends (net of $4,606 and $922 of
           
  foreign withholding tax, respectively)
  $ 1,300,248     $ 128,393  
Interest
    1,668       197  
Total investment income
    1,301,916       128,590  
                 
 EXPENSES (Note 3)
               
Investment advisory fees
    2,273,739       385,717  
Administration fees
    144,836       58,512  
Fund accounting fees
    47,373       37,225  
Custody fees
    31,754       21,883  
Transfer agent fees
    28,258       14,434  
Audit fees
    25,437       20,450  
Registration fees
    19,583       21,897  
Miscellaneous expenses
    15,012       5,877  
Chief Compliance Officer fees
    10,410       7,539  
Reports to shareholders
    9,408       2,294  
Trustees fees
    8,227       6,348  
Legal fees
    4,631       5,213  
Insurance expenses
    3,333       3,291  
Interest expense
    324       2,269  
Total expenses
    2,622,325       592,949  
Less: fees waived
    (94 )     (134,910 )
Net expenses
    2,622,231       458,039  
Net investment loss
    (1,320,315 )     (329,449 )
                 
 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
               
Net realized gain on investments
    58,165,811       13,255,401  
Change in net unrealized
               
  depreciation on investments
    (30,537,857 )     (7,104,519 )
Net realized and unrealized
               
  gain on investments
    27,627,954       6,150,882  
Net increase in net assets
               
  resulting from operations
  $ 26,307,639     $ 5,821,433  

The accompanying notes are an integral part of these financial statements.



 
24

 


TCM SMALL CAP GROWTH FUND
 

  STATEMENTS OF CHANGES IN NET ASSETS

   
Year Ended
   
Year Ended
 
         
 INCREASE (DECREASE) IN NET ASSETS FROM:
           
             
 OPERATIONS
           
Net investment loss
  $ (1,320,315 )   $ (870,492 )
Net realized gain on investments
    58,165,811       51,767,393  
Change in net unrealized
               
  appreciation (depreciation) on investments
    (30,537,857 )     19,796,094  
Net increase in net assets
               
  resulting from operations
    26,307,639       70,692,995  
                 
 DISTRIBUTIONS TO SHAREHOLDERS
               
From net realized gain
    (59,228,776 )     (5,178,391 )
Total distributions to shareholders
    (59,228,776 )     (5,178,391 )
                 
 CAPITAL SHARE TRANSACTIONS
               
Net increase (decrease) in net assets derived
               
  from net change in outstanding shares(1)
    49,553,470       (37,000,823 )
Total increase in net assets
    16,632,333       28,513,781  
                 
 NET ASSETS
               
Beginning of year
    257,806,169       229,292,388  
End of year
  $ 274,438,502     $ 257,806,169  

  (1)
Summary of share transactions is as follows:

     
Year Ended
   
Year Ended
 
           
     
Shares
   
Value
   
Shares
   
Value
 
 
Shares sold
    1,377,248     $ 50,039,840       1,174,512     $ 38,673,199  
 
Shares issued in
                               
 
  reinvested
                               
 
  of distributions
    1,765,867       58,962,302       180,691       5,156,929  
 
Shares redeemed(2)
    (1,676,347 )     (59,448,672 )     (2,523,735 )     (80,830,951 )
 
Net increase (decrease)
    1,466,768     $ 49,553,470       (1,168,532 )   $ (37,000,823 )

  (2)
Net of redemption fees of $61 and $0, respectively.

The accompanying notes are an integral part of these financial statements.



 
25

 


 
TCM SMALL-MID CAP GROWTH FUND

  STATEMENTS OF CHANGES IN NET ASSETS

   
Year Ended
   
Year Ended
 
         
 INCREASE (DECREASE) IN NET ASSETS FROM:
           
             
 OPERATIONS
           
Net investment loss
  $ (329,449 )   $ (114,332 )
Net realized gain on investments
    13,255,401       26,981,725  
Net realized gain on redemptions-in-kind
          30,264,661  
Change in net unrealized
               
  depreciation on investments
    (7,104,519 )     (28,113,421 )
Net increase in net assets
               
  resulting from operations
    5,821,433       29,018,633  
                 
 DISTRIBUTIONS TO SHAREHOLDERS
               
From net investment income
          (149,098 )
From net realized gain
    (14,867,825 )     (23,400,391 )
Total distributions to shareholders
    (14,867,825 )     (23,549,489 )
                 
 CAPITAL SHARE TRANSACTIONS
               
Net decrease in net assets derived from
               
  net change in outstanding shares(1)
    (187,133 )     (217,170,669 )
Total decrease in net assets
    (9,233,525 )     (211,701,525 )
                 
 NET ASSETS
               
Beginning of year
    56,387,917       268,089,442  
End of year
  $ 47,154,392     $ 56,387,917  
Accumulated net investment loss
  $     $ (264,037 )

  (1)
Summary of share transactions is as follows:
 
     
Year Ended
   
Year Ended
 
           
     
Shares
   
Value
   
Shares
   
Value
 
 
Shares sold
    292,101     $ 5,079,521       577,233     $ 10,702,255  
 
Shares issued in
                               
 
  reinvested
                               
 
  of distributions
    948,522       14,844,369       1,381,669       23,543,635  
 
Shares redeemed(2)
    (1,010,808 )     (20,111,023 )     (13,446,242 )     (251,416,559 )
 
Net increase (decrease)
    229,815     $ (187,133 )     (11,487,340 )   $ (217,170,669 )

  (2)
Net of redemption fees of $0 and $475, respectively.

The accompanying notes are an integral part of these financial statements.



 
26

 


TCM SMALL CAP GROWTH FUND
 

  FINANCIAL HIGHLIGHTS For a capital share outstanding throughout each year

   
Year Ended September 30,
 
       
2013
   
2012
   
2011
   
2010
 
 Net asset value,
                             
   beginning of year
  $ 39.38     $ 29.72     $ 23.03     $ 24.71     $ 22.56  
                                         
 INCOME FROM INVESTMENT OPERATIONS:
                                       
 Net investment loss(1)
    (0.17 )     (0.12 )     (0.10 )     (0.17 )     (0.15 )
 Net realized and unrealized
                                       
   gain (loss) on investments
    3.91       10.48       6.79       (1.51 )     2.30  
 Total from
                                       
   investment operations
    3.74       10.36       6.69       (1.68 )     2.15  
                                         
 LESS DISTRIBUTIONS:
                                       
 From net realized gain
    (8.87 )     (0.70 )                  
 Total distributions
    (8.87 )     (0.70 )                  
 Paid-in capital from
                                       
   redemption fees (Note 2)
    *           *     *     *
 Net asset value, end of year
  $ 34.25     $ 39.38     $ 29.72     $ 23.03     $ 24.71  
 Total return
    10.09 %     35.77 %     29.05 %     (6.80 )%     9.53 %
                                         
 SUPPLEMENTAL DATA:
                                       
 Net assets, end
                                       
   of year (millions)
  $ 274.4     $ 257.8     $ 229.3     $ 380.5     $ 491.1  
 Portfolio turnover rate
    149 %     137 %     102 %     91 %     110 %
   
 RATIOS OF EXPENSES TO AVERAGE NET ASSETS:
 
 Before fees waived/recouped
    0.92 %     0.93 %     0.94 %     0.91 %     0.92 %
 After fees waived/recouped
    0.92 %     0.93 %     0.94 %     0.91 %     0.92 %
   
 RATIO OF NET INVESTMENT LOSS TO AVERAGE NET ASSETS:
 
 Before fees waived/recouped
    (0.46 )%     (0.38 )%     (0.34 )%     (0.54 )%     (0.62 )%
 After fees waived/recouped
    (0.46 )%     (0.38 )%     (0.34 )%     (0.54 )%     (0.62 )%

(1)
 
Calculated using average shares outstanding method.
*
 
Less than $0.01 per share.

The accompanying notes are an integral part of these financial statements.



 
27

 

tcm logo  
TCM SMALL-MID CAP GROWTH FUND

  FINANCIAL HIGHLIGHTS For a capital share outstanding throughout each year

   
Year Ended September 30,
 
       
2013
   
2012
   
2011
   
2010
 
 Net asset value,
                             
   beginning of year
  $ 21.72     $ 19.04     $ 15.42     $ 16.05     $ 14.42  
 INCOME FROM INVESTMENT OPERATIONS:
                                       
                                         
 Net investment loss(1)
    (0.12 )     (0.01 )     (0.11 )     (0.10 )     (0.05 )
 Net realized and unrealized
                                       
   gain (loss) on investments
    2.40       4.51       4.05       (0.53 )     1.68  
 Total from
                                       
   investment operations
    2.28       4.50       3.94       (0.63 )     1.63  
                                         
 LESS DISTRIBUTIONS:
                                       
 From net investment income
          (0.01 )                  
 From net realized gain
    (7.31 )     (1.81 )     (0.32 )            
 Total distributions
    (7.31 )     (1.82 )     (0.32 )            
 Paid-in capital from
                                       
   redemption fees (Note 2)
          *     *     *     *
 Net asset value, end of year
  $ 16.69     $ 21.72     $ 19.04     $ 15.42     $ 16.05  
 Total return
    12.73 %     26.29 %     25.75 %     (3.93 )%     11.30 %
                                         
 SUPPLEMENTAL DATA:
                                       
 Net assets, end
                                       
   of year (millions)
  $ 47.2     $ 56.4     $ 268.1     $ 274.2     $ 235.0  
 Portfolio turnover rate
    149 %     108 %     94 %     114 %     121 %
   
 RATIOS OF EXPENSES TO AVERAGE NET ASSETS:
 
 Before fees waived/recouped
    1.23 %     0.97 %     0.94 %     0.92 %     0.97 %
 After fees waived/recouped
    0.95 %     0.95 %     0.95 %     0.95 %     0.95 %
   
 RATIO OF NET INVESTMENT LOSS TO AVERAGE NET ASSETS:
 
 Before fees waived/recouped
    (0.96 )%     (0.09 )%     (0.58 )%     (0.53 )%     (0.50 )%
 After fees waived/recouped
    (0.68 )%     (0.07 )%     (0.59 )%     (0.56 )%     (0.48 )%

(1)
Calculated using average shares outstanding method.
*
Less than $0.01 per share.

The accompanying notes are an integral part of these financial statements.




 
28

 

TCM GROWTH FUNDS
 
 
  NOTES TO FINANCIAL STATEMENTSSeptember 30, 2014

 NOTE 1 – ORGANIZATION
 
The TCM Small Cap Growth Fund and the TCM Small-Mid Cap Growth Fund  (collectively the “Funds”) are each diversified series of shares of beneficial interest of the Professionally Managed Portfolios (the “Trust”), which is registered under the Investment Company Act of 1940, as amended  (the “1940 Act”), as an open-end investment management company. The Funds commenced operations on October 1, 2004 and June 29, 2007, respectively.
 
Each Fund’s investment objective is to seek long-term capital appreciation.
 
 NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
 
The following is a summary of significant accounting policies consistently followed by the Funds.  These policies are in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
 
 
A.
Security Valuation.  All equity securities that are traded on a national securities exchange, except those listed on the NASDAQ Global Market® (“NASDAQ”), are valued at the last reported sale price on the exchange on which the security is principally traded.  Securities traded on NASDAQ will be valued at the NASDAQ Official Closing Price (“NOCP”).  If, on a particular day, an exchange-traded or NASDAQ security does not trade, then the mean between the most recent quoted bid and asked prices will be used.  All equity securities that are not traded on a listed exchange are valued at the last sale price in the over-the-counter market.  If a non-exchange traded security does not trade on a particular day, then the mean between the last quoted closing bid and asked price will be used.
 
   
Short-term securities that have maturities of less than 60 days, at time of purchase, are valued at amortized cost, which when combined with accrued interest, approximates market value.
 
   
Securities for which quotations are not readily available are valued at their respective fair values as determined in good faith by the Valuation Committee.  When a security is “fair valued,” consideration is given to the facts and circumstances relevant to the particular situation, including a review of various factors set forth in the pricing procedures adopted by the Board of Trustees.  Fair value pricing is an inherently subjective process, and no single standard exists for determining fair value.  Different funds could reasonably arrive at different values for the same security.  The use of fair value pricing by a Fund may cause the net asset value of its shares to differ significantly from the net asset value that would be calculated without regard to such considerations.

 

 

 
29

 
 
 
tcm logo  
TCM GROWTH FUNDS
 
  NOTES TO FINANCIAL STATEMENTSSeptember 30, 2014 (Continued)
 
 
As described above, the Funds utilize various methods to measure the fair value of most of its investments on a recurring basis. U.S. GAAP establishes a hierarchy that prioritizes inputs to valuation methods. The three levels of inputs are:
 
 
Level 1 –
Unadjusted quoted prices in active markets for identical assets or liabilities that the Funds have the ability to access.
     
 
Level 2 –
Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly.  These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data.
     
 
Level 3 –
Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available; representing the Funds’ own assumptions about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available.
 
 
The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including, for example, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the security. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in level 3.
 
 
The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety, is determined based on the lowest level input that is significant to the fair value measurement in its entirety.


 
30

 
 
TCM GROWTH FUNDS
 
 
  NOTES TO FINANCIAL STATEMENTSSeptember 30, 2014 (Continued)
 
 
The following is a summary of the inputs used to value the Funds’ net assets as of September 30, 2014. See the Schedules of Investments for industry breakouts.
 
 
TCM Small Cap Growth Fund
                       
     
Level 1
   
Level 2
   
Level 3
   
Total
 
 
Common Stocks
  $ 262,986,290     $     $     $ 262,986,290  
 
Short-Term Investments
    10,224,793                   10,224,793  
 
Total Investments
                               
 
  in Securities
  $ 273,211,083     $     $     $ 273,211,083  
                                   
 
TCM Small-Mid Cap Growth Fund
                               
     
Level 1
   
Level 2
   
Level 3
   
Total
 
 
Common Stocks
  $ 45,377,753     $     $     $ 45,377,753  
 
Short-Term Investments
    2,124,109                   2,124,109  
 
Total Investments
                               
 
  in Securities
  $ 47,501,862     $     $     $ 47,501,862  

   
It is the Funds’ policy to recognize transfers between levels at the end of each Fund’s reporting period.
   
There were no transfers made into or out of Level 1, 2, or 3 as of September 30, 2014.
 
 
B.
Federal Income Taxes.  Each Fund has elected to be taxed as a “regulated investment company” and intends to distribute substantially all taxable income to its shareholders and otherwise comply with the provisions of the Internal Revenue Code applicable to regulated investment companies.  Therefore, no provision for federal income taxes or excise taxes has been made.
 
   
In order to avoid imposition of the excise tax applicable to regulated investment companies, each Fund intends to declare each year as dividends in each calendar year at least 98.0% of its net investment income (earned during the calendar year) and 98.2% of its net realized capital gains (earned during the twelve months ended October 31) plus undistributed amounts, if any, from prior years.
 
   
Net capital losses incurred after October 31 and net investment losses incurred after December 31, and within the taxable year are deemed to arise on the first business day of each Fund’s next taxable year.  As of September 30, 2014, the Funds did not have any post-October losses or late year losses.
 
   
As of September 30, 2014, there were no Capital Loss Carryovers for the Funds.

 

 

 
31

 

 
tcm logo  
TCM GROWTH FUNDS
 
  NOTES TO FINANCIAL STATEMENTSSeptember 30, 2014 (Continued)
 
   
As of September 30, 2014, the Funds did not have any tax positions that did not meet the threshold of being sustained by the applicable tax authority. Generally, tax authorities can examine all the tax returns filed for the last three years.
 
   
Each Fund identifies its major tax jurisdiction as U.S. Federal and the Commonwealth of Massachusetts; however the Funds are not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next twelve months.
 
 
C.
Security Transactions and Investment Income.  Investment securities transactions are accounted for on the trade date.  Gains and losses realized on sales of securities are determined on a specific identification basis.  Discounts/premiums on debt securities purchased are accreted/amortized over the life of the respective securities using the effective interest method.  Dividend income is recorded on the ex-dividend date.  Interest income is recorded on an accrual basis.  Other non-cash dividends are recognized as investment income at the fair value of the property received.  Withholding taxes on foreign dividends have been provided for in accordance with the Trust’s understanding of the applicable country’s tax rules and rates.
 
 
D.
Distributions to Shareholders.  Distributions to shareholders from net investment income and net realized gains on securities for the Funds normally are declared and paid on an annual basis. Distributions are recorded on the ex-dividend date.
 
 
E.
Use of Estimates.  The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amount of revenue and expenses during the reporting period.  Actual results could differ from those estimates.
 
 
F.
Share Valuation.  The net asset value (“NAV”) per share of each Fund is calculated by dividing the sum of the value of the securities held by each Fund, plus cash or other assets, minus all liabilities (including estimated accrued expenses) by the total number of shares outstanding, rounded to the nearest cent.  The Funds’ shares will not be priced on the days on which the NYSE is closed for trading.  The offering and redemption price is equal to the Funds’ NAV per share.  The Funds charge a 1.00% redemption fee on shares held less than 60 days. This fee is deducted from the redemption proceeds otherwise payable to the shareholder.  Both Funds will retain the fee charged as paid-in capital and such fees become part of that Fund’s daily NAV calculation.

 

 

 
32

 


TCM GROWTH FUNDS
 
 
  NOTES TO FINANCIAL STATEMENTSSeptember 30, 2014 (Continued)
 
 
G.
Guarantees and Indemnifications.  In the normal course of business, the Funds enter into contracts with service providers that contain general indemnification clauses.  The Funds’ maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Funds that have not yet occurred.  However, based on experience, the Funds expect the risk of loss to be remote.
 
 
H.
Reclassification of Capital Accounts.  Accounting principles generally accepted in the United States of America require that certain components of net assets relating to permanent differences be reclassified between financial and tax reporting. These reclassifications have no effect on net assets or net asset value per share. For the year ended September 30, 2014, the following adjustments were made:

   
Undistributed
Accumulated
   
Net Investment
Net Realized
   
Income/(Loss)
Gain/(Loss)
 
TCM Small Cap
   
 
  Growth Fund
$1,320,315
$(1,320,315)
 
TCM Small-Mid Cap
   
 
  Growth Fund
$   593,486
$   (593,486)
 
 
I.
Subsequent Events.  In preparing these financial statements, management has evaluated events and transactions for potential recognition or disclosure through the date the financial statements were issued. The Funds have determined that there are no subsequent events that would need to be disclosed in the Funds’ Financial Statements.
 
 
J.
Recent Accounting Pronouncement.  In June 2014, the Financial Accounting Standard Board issued ASU No. 2014-11 “Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures.” ASU No. 2014-11 makes limited changes to the accounting for repurchase agreements, clarifies when repurchase agreements and securities lending transactions should be accounted for as secured borrowings, and requires additional disclosures regarding these types of transactions. The guidance is effective for fiscal years beginning after December 15, 2014, and for interim periods within those fiscal years.
 
 NOTE 3 – COMMITMENTS AND OTHER RELATED PARTY TRANSACTIONS
 
Tygh Capital Management, Inc., (the “Advisor”) provides each Fund with investment management services under an Investment Advisory Agreement (the “Agreement”). Under each Agreement, the Advisor furnishes all investment advice, office space, certain administrative services, and provides most of the personnel
 

 

 

 
33

 
 
tcm logo  
TCM GROWTH FUNDS
 
  NOTES TO FINANCIAL STATEMENTSSeptember 30, 2014 (Continued)

needed by the Fund.  As compensation for its services, the Advisor is entitled to a monthly fee at the annual rate of 0.80% based upon the average daily net assets of the Funds.  For the year ended September 30, 2014, the TCM Small Cap Growth Fund and the TCM Small-Mid Cap Growth Fund incurred $2,273,739 and $385,717 in advisory fees, respectively.
 
The Advisor has contractually agreed to limit each Fund’s annual ratio of expenses to 0.95% of each Fund’s average daily net assets.  The contract’s term is indefinite and may be terminated only by the Board of Trustees.  For the year ended September 30, 2014, the Advisor waived $94 and $134,910 in fees from the TCM Small Cap Growth Fund and TCM Small-Mid Cap Growth Fund, respectively.
 
The Advisor is permitted to seek reimbursement from the Funds, subject to limitations for fees waived and/or Fund expenses it pays over the following three years after payment. At September 30, 2014, the remaining cumulative unreimbursed amount paid and/or waived by the Advisor on behalf of the TCM Small Cap Growth Fund and the TCM Small-Mid Cap Growth Fund that may be reimbursed was $94 and $171,384, respectively. The Advisor may recapture a portion of the above amount no later than the dates as stated below:
 
 
TCM Small Cap Growth Fund
 
 
Year of Expiration
Amount
 
 
$         94
 
       
 
TCM Small-Mid Cap Growth Fund
 
 
Year of Expiration
Amount
 
 
$  36,474
 
 
$134,910
 
   
$171,384
 
 
Each 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.
 
U.S. Bancorp Fund Services, LLC (“USBFS”), an indirect wholly-owned subsidiary of U.S. Bancorp, serves as the Funds’ Administrator (“Administrator”) and, in that capacity, performs various administrative and accounting services for the Funds. USBFS also serves as the Funds’ fund accountant and transfer agent. The Administrator prepares various federal and state regulatory filings, reports and returns for the Funds; prepares reports and materials to be supplied to the trustees; monitors the activities of the Funds’ custodian, transfer agent and accountants; coordinates the preparation and payment of the Funds’ expenses and reviews the Funds’ expense accruals. The officers of the Trust and the Chief Compliance Officer
 

 

 
34

 

TCM GROWTH FUNDS
 
 
  NOTES TO FINANCIAL STATEMENTSSeptember 30, 2014 (Continued)
 
are also employees of the Administrator. As compensation for its services, the Administrator is entitled to a monthly fee at an annual rate based upon the average daily net assets of each Fund. Fees paid by each Fund for Administration and Chief Compliance Officer Services for the year ended September 30, 2014, are disclosed in the Statements of Operations.
 
Quasar Distributors, LLC (the “Distributor”) acts as the Funds’ principal underwriter in a continuous public offering of the Funds’ shares.  U.S. Bank N.A. (the “Custodian”) serves as custodian to the Funds. Both the Distributor and Custodian are affiliates of the Administrator.
 
 NOTE 4 – PURCHASES AND SALES OF SECURITIES
 
Investment transactions (excluding short-term investments) for the year ended September 30, 2014, were as follows:
 
   
Purchases
Sales or Maturity
   
at Cost
Proceeds
 
TCM Small Cap Growth Fund
$411,205,417
$428,346,659
 
TCM Small-Mid Cap Growth Fund
     70,454,221
    86,088,232
 
There were no purchases or sales of long-term U.S. Government securities for the year ended September 30, 2014.
 
 NOTE 5 – DISTRIBUTIONS TO SHAREHOLDERS
 
The tax character of distributions paid during the year ended September 30, 2014 and the year ended September 30, 2013 were as follows:
 
   
September 30,
   
2013
 
TCM Small Cap Growth Fund
   
 
From net investment income
$19,586,851
$             —
 
Long-term Capital Gain
$39,641,925
$  5,178,391
 
TCM Small-Mid Cap Growth Fund
   
 
From net investment income
$  3,617,639
$  3,324,084
 
Long-term Capital Gain
$11,250,186
$20,225,405

 
 
35

 
 
tcm logo  
TCM GROWTH FUNDS
 
  NOTES TO FINANCIAL STATEMENTSSeptember 30, 2014 (Continued)
 
As of September 30, 2014, the components of accumulated earnings/(losses) on a tax basis were as follows:
 
     
TCM Small Cap
   
TCM Small-Mid
 
     
Growth Fund
   
Cap Growth Fund
 
 
Cost of investments (a)
  $ 242,398,013     $ 41,591,756  
 
Gross unrealized appreciation
    44,457,629       7,697,886  
 
Gross unrealized depreciation
    (13,644,559 )     (1,787,780 )
 
Net unrealized appreciation
    30,813,070       5,910,106  
 
Undistributed ordinary income
    25,968,985       4,654,627  
 
Undistributed long-term capital gain
    20,138,826       4,229,944  
 
Total distributable earnings
    46,107,811       8,884,571  
 
Net unrealized appreciation on
               
 
  foreign currency transactions
           
 
Capital loss carryover
           
 
Post-October capital loss
           
 
Post-October currency loss
           
 
Total accumulated gains
  $ 76,920,881     $ 14,794,677  
 
  (a)
At September 30, 2014, the difference between book basis and tax basis unrealized appreciation was attributable primarily to the treatment of wash sales.
 
 
 NOTE 6 – CREDIT FACILITY
 
U.S. Bank N.A. has made available to the Funds a credit facility to be used for temporary or extraordinary purposes related to Fund redemptions.  During the year ended September 30, 2014, both funds drew on the line of credit.  There was no loan payable balance in either Fund at September 30, 2014.  For the year ended September 30, 2014, the average interest rate on the outstanding balance for each Fund was 3.25% and the interest expense for the TCM Small Cap Growth Fund and the TCM Small-Mid Cap Growth Fund was $324 and $2,269, respectively.  During the year ended September 30, 2014, the average daily balance for the TCM Small Cap Growth Fund and the TCM Small-Mid Cap Growth Fund was $9,836 and $69,104, respectively.  The maximum amounts available for the TCM Small Cap Growth Fund and the TCM Small-Mid Cap Growth Fund were $20 million and $6 million, respectively.
 



 
36

 

TCM GROWTH FUNDS
 
 
  REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders of TCM Growth Funds and
The Board of Trustees of Professionally Managed Portfolios
 
We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of the TCM Small Cap Growth Fund and the TCM Small - Mid Cap Growth Fund, each a series of Professionally Managed Portfolios (the “Trust”), as of September 30, 2014 and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended.  These financial statements and financial highlights are the responsibility of the Trust’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
 
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting.  Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of September 30, 2014, by correspondence with the custodian and brokers or through other appropriate auditing procedures where replies from brokers were not received.   An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the TCM Small Cap Growth Fund and the TCM Small - Mid Cap Growth Fund as of September 30, 2014, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
 
 
TAIT, WELLER & BAKER LLP
Philadelphia, Pennsylvania
November 25, 2014
 




 
37

 


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TCM GROWTH FUNDS

  APPROVAL OF INVESTMENT ADVISORY AGREEMENT (Unaudited)

At a meeting held on August 7 and 8, 2014, the Board (which is comprised of five persons all of whom are Independent Trustees as defined under the Investment Company Act) considered and approved the continuance of the Investment Advisory Agreements (the “Advisory Agreements”) between Professionally Managed Portfolios (the “Trust”) and Tygh Capital Management, Inc. (the “Advisor”) for the TCM Small Cap Growth Fund and the TCM Small-Mid Cap Growth Fund (the “Funds”).  At this meeting and at a prior meeting held on May 12 and 13, 2014, the Board received and reviewed substantial information regarding the Funds, the Advisor and the services provided by the Advisor to the Funds under the Advisory Agreements.  This information, together with the information provided to the Board throughout the course of the year, formed the primary (but not exclusive) basis for the Board’s determinations.  Below is a summary of the factors considered by the Board and the conclusions that formed the basis for the Board’s approval of the continuance of the Advisory Agreements:
 
 
1.
The nature, extent and quality of the services provided and to be provided by the Advisor under the Advisory Agreements.  The Trustees considered the nature, extent and quality of the Advisor’s overall services provided to the Funds as well as its specific responsibilities in all aspects of day-to-day investment management of the Funds.  The Board considered the qualifications, experience and responsibilities of the portfolio manager, as well as the responsibilities of other key personnel of the Advisor involved in the day-to-day activities of the Funds.  The Board also considered the resources and compliance structure of the Advisor, including information regarding its compliance program, its chief compliance officer and the Advisor’s compliance record, and the Advisor’s disaster recovery/business continuity plan.  The Board also considered the prior relationship between the Advisor and the Trust, as well as the Board’s knowledge of the Advisor’s operations, and noted that during the course of the prior year they had met with the Advisor in person to discuss fund performance, investment outlook as well as various marketing and compliance topics, including the Advisor’s risk management process.  The Board concluded that the Advisor had the quality and depth of personnel, resources, investment methods and compliance policies and procedures essential to performing its duties under the Advisory Agreements and that the nature, overall quality and extent of such management services are satisfactory.
     
 
2.
The Funds’ historical performance and the overall performance of the Advisor.  In assessing the quality of the portfolio management delivered by the Advisor, the Board reviewed the short-term and long-term performance of each Fund on both an absolute basis, and in comparison to appropriate securities

 

 

 
38

 


TCM GROWTH FUNDS
 
 
  APPROVAL OF INVESTMENT ADVISORY AGREEMENT (Unaudited) (Continued)
 
   
benchmarks and its peer funds utilizing Morningstar classifications.  While the Board considered both short-term and long-term performance, it placed greater emphasis on longer term performance.  When reviewing each Fund’s performance against its comparative peer group universe, the Board took into account that the investment objective and strategies of each Fund, as well as its level of risk tolerance, may differ significantly from funds in the peer universe.  The Trustees also considered each Fund’s marginal underperformance compared to its similarly managed accounts for the one-year, three-year and five-year periods, but found the differences to be reasonable.
 
   
For the TCM Small Cap Growth Fund, the Board noted that the Fund significantly outperformed its peer group median and average for the one-year period, outperformed its peer group median and average for the three-year period, and underperformed its peer group median and average for the five-year period.  The Board also considered the performance of the TCM Small Cap Growth Fund against a broad-based securities market benchmark.
 
   
For the TCM Small-Mid Cap Growth Fund, the Board noted that the Fund outperformed its peer group median for the one-year period, marginally outperformed its peer group median and marginally underperformed its peer group average for the three-year period, and underperformed its peer group median for the five-year time period.  The Board also considered the performance of the TCM Small-Mid Cap Growth Fund against a broad-based securities market benchmark.
 
 
3.
The costs of the services to be provided by the Advisor and the structure of the Advisor’s fees under the Advisory Agreements.  In considering the advisory fee and total fees and expenses of each Fund, the Board reviewed comparisons to the peer funds and similarly managed separate accounts for other types of clients advised by the Advisor, as well as all expense waivers and reimbursements.  When reviewing fees charged to other similarly managed accounts, the Board took into account the type of account and the differences in the management of that account that might be germane to the difference, if any, in the fees charged to such accounts.  The Trustees found that the fees charged to each Fund were generally in line with or comparable to the fees charged by the Advisor to its similarly managed separate account clients, and to the extent fees charged to a Fund were higher than for similarly managed separate accounts of similar size, it was largely a reflection of the greater costs to the Advisor of managing the Fund.
 
   
For the TCM Small Cap Growth Fund, the Board noted that the Advisor had contractually agreed to maintain an annual expense ratio of 0.95% for the

 

 

 
39

 
 
 
tcm logo  
TCM GROWTH FUNDS
 
  APPROVAL OF INVESTMENT ADVISORY AGREEMENT (Unaudited) (Continued)
 
   
Fund (the “Expense Cap”), but was currently operating below this level.  The Board noted that the Fund’s advisory fee and net expense ratio were lower than those of its peer group median and average.  The Board concluded that the fees paid to the Advisor were not unreasonable.
 
   
For the TCM Small-Mid Cap Growth Fund, the Board noted that the Advisor had contractually agreed to maintain an annual expense ratio of 0.95% for the Fund (the “Expense Cap”).  The Board noted that the Fund’s advisory fee was in line with its peer group median and average, and the net expense ratio was lower than its peer group median and average.  The Board concluded that the fees paid to the Advisor were not unreasonable.
 
 
4.
Economies of Scale.  The Board also considered whether economies of scale were being realized by the Advisor that should be shared with shareholders.  The Board noted that the Advisor has contractually agreed to reduce its advisory fees or reimburse Fund expenses so that each Fund does not exceed its specified Expense Cap.  The Board noted that at current asset levels, it did not appear that there were additional significant economies of scale being realized by the Advisor that should be shared with shareholders and concluded that it would continue to monitor economies of scale in the future as circumstances changed and assuming asset levels increase.
 
 
5.
The profits to be realized by the Advisor and its affiliates from their relationship with the Funds.  The Board reviewed the Advisor’s financial information and took into account both the direct benefits and the indirect benefits to the Advisor from advising the Funds.  The Board considered the profitability to the Advisor from its relationship with the Funds and considered any additional benefits derived by the Advisor from its relationship with the Funds, particularly benefits received in exchange for “soft dollars” paid to the Advisor.  After such review, the Board determined that the profitability to the Advisor with respect to the Advisory Agreements was not excessive, and that the Advisor had maintained adequate profit levels to support the services it provides to the Funds.
 
 No single factor was determinative of the Board’s decision to approve the continuance of the Advisory Agreements, but rather the Board based its determination on the total combination of information available to them.  Based on a consideration of all the factors in their totality, the Board determined that the advisory arrangements with the Advisor, including each Fund’s advisory fee, were fair and reasonable.  The Board therefore determined that continuing the Advisory Agreements would be in the best interests of the Funds and their shareholders.
 



 
40

 


TCM GROWTH FUNDS
 
 
  TRUSTEES AND EXECUTIVE OFFICERS (Unaudited)

The Board is responsible for the overall management of the Trust, including general supervision and review of the investment activities of the Fund.  The Board, in turn, elects the officers of the Trust, who are responsible for administering the day-to-day operations of the Trust and its separate series.  The current Trustees and officers of the Trust, their dates of birth, positions with the Trust, terms of office with the Trust and length of time served, their principal occupations for the past five years and other directorships are set forth in the table below.
 
       
Number of
 
   
Term
 
Portfolios
Other
   
of Office
 
in Fund
Directorships
 
Positions
and Length
Principal
Complex(2)
Held During
Name, Address
with the
of Time
Occupation During
Overseen
Past Five
and Age
Trust(1)
Served
Past Five Years
by Trustees
Years
 
Independent Trustees of the Trust
Dorothy A. Berry
Chairman
Indefinite
Formerly, President,
2
Director, PNC
(born 1943)
and
Term;
Talon Industries, Inc.
 
Funds, Inc.
c/o U.S. Bancorp
Trustee
Since
(business consulting);
   
  Fund Services, LLC
 
May
formerly, Executive Vice
   
2020 E. Financial Way
 
1991.
President and Chief
   
Suite 100
   
Operating Officer,
   
   
Integrated Asset
   
     
Management
   
     
(investment advisor
   
     
and manager) and
   
     
formerly, President,
   
     
Value Line, Inc.
   
     
(investment advisory
   
     
and financial
   
     
publishing firm).
   
           
Wallace L. Cook
Trustee
Indefinite
Investment Consultant;
2
The Dana
(born 1939)
 
Term;
formerly, Chief Executive
 
Foundation;
c/o U.S. Bancorp
 
Since
Officer, Rockefeller
 
The Univ. of
  Fund Services, LLC
 
May
Trust Co., (prior thereto
 
Virginia Law
2020 E. Financial Way
 
1991.
Senior Vice President),
 
School Fdn.
Suite 100
   
and Managing Director,
   
   
Rockefeller & Co.
   
     
(Investment Manager
   
     
and Financial Advisor);
   
     
formerly, Senior Vice
   
     
President, Norton
   
     
Simon, Inc.
   

 

 
41

 

 
tcm logo  
TCM GROWTH FUNDS
 
  TRUSTEES AND EXECUTIVE OFFICERS (Unaudited) (Continued)
 
       
Number of
 
   
Term
 
Portfolios
Other
   
of Office
 
in Fund
Directorships
 
Positions
and Length
Principal
Complex(2)
Held During
Name, Address
with the
of Time
Occupation During
Overseen
Past Five
and Age
Trust(1)
Served
Past Five Years
by Trustees
Years
           
Eric W. Falkeis
Trustee
Indefinite
Chief Operating Officer,
2
None.
(born 1973)
 
Term;
Direxion Funds since
   
c/o U.S. Bancorp
 
Since
2013; formerly, Senior
   
  Fund Services, LLC
 
September
Vice President, and
   
2020 E. Financial Way
 
2011.
Chief Financial
   
Suite 100
   
Officer (and other
   
   
positions), U.S. Bancorp
   
     
Fund Services, LLC,
   
     
(1997-2013).
   
           
Carl A. Froebel
Trustee
Indefinite
Formerly President and
2
None.
(born 1938)
 
Term;
Founder, National
   
c/o U.S. Bancorp
 
Since
Investor Data Services,
   
  Fund Services, LLC
 
May
Inc. (investment related
   
2020 E. Financial Way
 
1991.
computer software).
   
Suite 100
         
         
           
Steven J. Paggioli
Trustee
Indefinite
Consultant, since
2
Independent
(born 1950)
 
Term;
July 2001; formerly,
 
Trustee, The
c/o U.S. Bancorp
 
Since
Executive Vice
 
Managers
  Fund Services, LLC
 
May
President, Investment
 
Funds;
2020 E. Financial Way
 
1991.
Company Administration,
 
Trustee,
Suite 100
   
LLC (mutual fund
 
Managers
   
administrator).
 
AMG Funds,
         
Aston Funds;
         
Advisory
         
Board
         
Member,
         
Sustainable
         
Growth
         
Advisers, LP;
         
Independent
         
Director,
         
Chase
         
Investment
         
Counsel.

 

 
42

 


TCM GROWTH FUNDS
 
 
  TRUSTEES AND EXECUTIVE OFFICERS (Unaudited) (Continued)
 
       
Number of
 
   
Term
 
Portfolios
Other
   
of Office
 
in Fund
Directorships
 
Positions
and Length
Principal
Complex(2)
Held During
Name, Address
with the
of Time
Occupation During
Overseen
Past Five
and Age
Trust(1)
Served
Past Five Years
by Trustees
Years
 
Officers of the Trust
President
Indefinite
Vice President and
Not
Not
(born 1968)
 
Term;
Legal Compliance
Applicable.
Applicable.
c/o U.S. Bancorp
 
Since
Officer, U.S. Bancorp
   
  Fund Services, LLC
 
March
Fund Services, LLC,
   
2020 E. Financial Way
 
2013.
since July 2007.
   
Suite 100
Secretary
Indefinite
     
 
Term;
     
   
Since
     
   
February
     
   
2008.
     
           
Treasurer
Indefinite
Vice President,
Not
Not
(born 1975)
 
Term;
U.S. Bancorp Fund
Applicable.
Applicable.
c/o U.S. Bancorp
 
Since
Services, LLC,
   
  Fund Services, LLC
 
April
since April 2005.
   
615 East Michigan St.
 
2013.
     
         
           
Donna Barrette
Chief
Indefinite
Senior Vice
Not
Not
(born 1966)
Compliance
Term;
President and
Applicable.
Applicable.
c/o U.S. Bancorp
Officer
Since
Compliance Officer
   
  Fund Services, LLC
 
July 2011.
(and other positions),
   
615 East Michigan St.
Anti-Money
Indefinite
U.S. Bancorp Fund
   
Laundering
Term;
Services, LLC since
   
 
Officer
Since
August 2004.
   
   
July 2011.
     
 
Vice
Indefinite
     
 
President
Term;
     
   
Since
     
   
July 2011.
     

(1)
The Trustees of the Trust are not “interested persons” of the Trust as defined under the 1940 Act (“Independent Trustees”).
(2)
The Trust is comprised of numerous series managed by unaffiliated investment advisers.  The term “Fund Complex” applies only to the Funds.  The Funds do not hold themselves out as related to any other series within the Trust for purposes of investment and investor services, nor does it share the same investment advisor with any other series.




 
43

 

tcm logo  
TCM GROWTH FUNDS

  QUALIFIED DIVIDEND INCOME/DIVIDENDS RECEIVED DEDUCTION (Unaudited)

For the fiscal year ended September 30, 2014, certain dividends paid by the Funds may be subject to a maximum tax rate of 15%, as provided for by the Jobs and Growth Tax Relief Reconciliation Act of 2003.
 
The percentage of dividends declared from the ordinary income designated as qualified dividend income was as follows:
 
 
  TCM Small Cap Growth Fund
6.81%
 
 
  TCM Small-Mid Cap Growth Fund
65.66%
 
 
Dividends received deduction for the fiscal year ended September 30, 2014 was as follows:
 
 
TCM Small Cap Growth Fund
6.22%
 
 
TCM Small-Mid Cap Growth Fund
65.94%
 
 
The percentage of taxable ordinary income distributions that are designated as short-term capital gain distributions under the Internal Revenue Section 871(k)(2)(C) for each Fund were as follows:
 
 
TCM Small Cap Growth Fund
100.00%
 
 
TCM Small-Mid Cap Growth Fund
100.00%
 

  INFORMATION ABOUT THE PORTFOLIO HOLDINGS (Unaudited)

The TCM Small Cap Growth Fund and the TCM Small-Mid Cap Growth Fund file their complete schedule of portfolio holdings for their first and third quarters with the SEC on Form N-Q. The Funds’ Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Funds’ Form N-Q is available without charge, upon request, by calling (800) 536-3230. Furthermore, you can obtain the Form N-Q on the SEC’s website at www.sec.gov.

  INFORMATION ABOUT PROXY VOTING (Unaudited)

A description of the policies and procedures that the TCM Small Cap Growth Fund and the TCM Small-Mid Cap Growth Fund use to determine how to vote proxies relating to portfolio securities is available without charge, upon request, by calling (800) 536-3230 and on the Funds’ website at www.tyghcap.com.  Furthermore, you can obtain the description on the SEC’s website at www.sec.gov.
 
Information regarding how the TCM Small Cap Growth Fund and the TCM Small-Mid Cap Growth Fund voted proxies relating to portfolio securities during the most recent year ending June 30 is available without charge, upon request, by calling (800) 536-3230 or through the SEC’s website at www.sec.gov.
 





 
44

 

TCM GROWTH FUNDS
 
 
  INFORMATION ABOUT HOUSEHOLDING (Unaudited)

In an effort to decrease costs, the Funds will reduce the number of duplicate prospectuses, proxy statements and annual and semi-annual reports that you receive by sending only one copy of each to those addresses shared by two or more accounts and to shareholders the Transfer Agent reasonably believes are from the same family or household. If you would like to discontinue householding for your accounts, please call the transfer agent toll free at (800) 536-3230 to request individual copies of these documents. The Funds will begin sending individual copies 30 days after receiving your request. This policy does not apply to account statements.

  INFORMATION ABOUT THE FUND’S TRUSTEES (Unaudited)

The Statement of Additional Information (“SAI”) includes additional information about the Funds’ Trustees and is available without charge, upon request, by calling (800) 536-3230. Furthermore, you can obtain the SAI on the SEC’s website at www.sec.gov or the Funds’ website at www.tyghcap.com.
 







 
45

 


tcm logo  
TCM GROWTH FUNDS

  PRIVACY NOTICE

The Funds collect non-public information about you from the following sources:
 
 
Information we receive about you on applications or other forms;
 
 
Information you give us orally; and
 
 
Information about your transactions with us or others.
 
We do not disclose any non-public personal information about our shareholders or former shareholders without the shareholder’s authorization, except as permitted by law or in response to inquiries from governmental authorities.  We may share information with affiliated and unaffiliated third parties with whom we have contracts for servicing the Funds.  We will provide unaffiliated third parties with only the information necessary to carry out their assigned responsibilities.  We maintain physical, electronic and procedural safeguards to guard your non-public personal information and require third parties to treat your non-public personal information with the same high degree of confidentiality.
 
In the event that you hold shares of a Fund through a financial intermediary, including, but not limited to, a broker-dealer, bank, or trust company, the privacy policy of your financial intermediary would govern how your non-public personal information would be shared by those entities with unaffiliated third parties.
 

 

 
46

 


 

 

 
(This Page Intentionally Left Blank.)
 

 

 

 
 

 


 

Investment Advisor
Tygh Capital Management, Inc.
1211 SW Fifth Avenue, Suite 2100
Portland, Oregon  97204

Independent Registered Public Accounting Firm
Tait, Weller & Baker, LLP
1818 Market Street, Suite 2400
Philadelphia, Pennsylvania  19103-3638

Legal Counsel
Paul Hastings LLP
Park Avenue Tower
75 E. 55th Street, Floor 15
New York, New York  10022

Custodian
U.S. Bank National Association
Custody Operations
1555 North RiverCenter Drive, Suite 302
Milwaukee, Wisconsin  53212

Transfer Agent, Fund Accountant
and Fund Administrator
U.S. Bancorp Fund Services, LLC
615 East Michigan Street
Milwaukee, Wisconsin  53202
1-800-536-3230

Distributor
Quasar Distributors, LLC
615 East Michigan Street
Milwaukee, Wisconsin  53202
 


 
TCM Small Cap Growth Fund
Symbol – TCMSX
CUSIP – 742935455

TCM Small-Mid Cap Growth Fund
Symbol – TCMMX
CUSIP – 742935323



 
 

 

Item 2. Code of Ethics.

The registrant has adopted a code of ethics that applies to the registrant’s principal executive officer and principal financial officer.  The registrant has not made any amendments to its code of ethics during the period covered by this report.  The registrant has not granted any waivers from any provisions of the code of ethics during the period covered by this report.

A copy of the registrant’s Code of Ethics is filed herewith.

Item 3. Audit Committee Financial Expert.

The registrant’s Board of Trustees of the Trust has determined that there is at least one audit committee financial expert serving on its audit committee. Ms. Dorothy A. Berry and Messrs. Wallace L. Cook, Carl A. Froebel, Eric W. Falkeis and Steven J. Paggioli are each an “audit committee financial expert” and are considered to be “independent” as each term is defined in Item 3 of Form N-CSR.

Item 4. Principal Accountant Fees and Services.

The registrant has engaged its principal accountant to perform audit services, audit-related services, tax services and other services during the past two fiscal years.  “Audit services” refer to performing an audit of the registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years.  “Audit-related services” refer to the assurance and related services by the principal accountant that are reasonably related to the performance of the audit.  “Tax services” refer to professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning.  There were no “Other services” provided by the principal accountant.  The following table details the aggregate fees billed or expected to be billed for each of the last two fiscal years for audit fees, audit-related fees, tax fees and other fees by the principal accountant.

TCM Small Cap Growth Fund
 
FYE  9/30/2014
FYE  9/30/2013
Audit Fees
$22,900
$22,400
Audit-Related Fees
N/A
N/A
Tax Fees
$2,600
$2,600
All Other Fees
N/A
N/A

 
TCM Small-Mid Cap Growth Fund
 
FYE  9/30/2014
FYE  9/30/2013
Audit Fees
$18,500
$18,000
Audit-Related Fees
N/A
N/A
Tax Fees
$2,600
$2,600
All Other Fees
N/A
N/A

The audit committee has adopted pre-approval policies and procedures that require the audit committee to pre-approve all audit and non-audit services of the registrant, including services provided to any entity affiliated with the registrant.

All of the principal accountant’s hours spent on auditing the registrant’s financial statements were attributed to work performed by full-time permanent employees of the principal accountant.

The following table indicates the non-audit fees billed or expected to be billed by the registrant’s accountant for services to the registrant and to the registrant’s investment adviser (and any other controlling entity, etc.—not sub-adviser) for the last two years.  The audit committee of the board of trustees/directors has considered whether the provision of non-audit services that were rendered to the registrant's investment adviser is compatible with maintaining the principal accountant's independence and has concluded that the provision of such non-audit services by the accountant has not compromised the accountant’s independence.

TCM Small Cap Growth Fund
Non-Audit Related Fees
FYE  9/30/2014
FYE  9/30/2013
Registrant
N/A
N/A
Registrant’s Investment Adviser
N/A
N/A

TCM Small-Mid Cap Growth Fund
Non-Audit Related Fees
FYE  9/30/2014
FYE  9/30/2013
Registrant
N/A
N/A
Registrant’s Investment Adviser
N/A
N/A

Item 5. Audit Committee of Listed Registrants.

Not applicable to open-end investment companies.

Item 6. Schedule of Investments.

Schedule of Investments is included as part of the report to shareholders filed under Item 1 of this Form.

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.

Not applicable to open-end investment companies.

Item 8. Portfolio Managers of Closed-End Management Investment Companies

Not applicable to open-end investment companies.

Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.

Not applicable to open-end investment companies.

Item 10. Submission of Matters to a Vote of Security Holders.

There have been no material changes to the procedures by which shareholders may recommend nominees to the registrant’s board of trustees.

Item 11. Controls and Procedures.

(a)  
The Registrant’s President and Treasurer have reviewed the Registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “Act”)) as of a date within 90 days of the filing of this report, as required by Rule 30a-3(b) under the Act and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934.  Based on their review, such officers have concluded that the disclosure controls and procedures are effective in ensuring that information required to be disclosed in this report is appropriately recorded, processed, summarized and reported and made known to them by others within the Registrant and by the Registrant’s service provider.

(b)  
There were no significant changes in the Registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting.

Item 12. Exhibits.

(a)  
(1) Any code of ethics or amendment thereto, that is subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy Item 2 requirements through filing an exhibit. Filed herewith.

(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.  Filed herewith.

(3) Any written solicitation to purchase securities under Rule 23c-1 under the Act sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons.  Not applicable to open-end investment companies.

(b)  
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.  Furnished herewith.

 
 

 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


(Registrant)  Professionally Managed Portfolios                                                                                                                     

By (Signature and Title)                      /s/Elaine E. Richards
Elaine E. Richards, President

Date     November 21, 2014        



Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By (Signature and Title)*                    /s/Elaine E. Richards      
Elaine E. Richards, President

Date     November 21, 2014

By (Signature and Title)*                    /s/Eric C. VanAndel
Eric C. VanAndel, Treasurer

 
Date     November 21, 2014


* Print the name and title of each signing officer under his or her signature.




Dates Referenced Herein   and   Documents Incorporated by Reference

This ‘N-CSR/A’ Filing    Date    Other Filings
9/30/17
9/30/16
Filed on / Effective on:4/13/15
12/15/14485BPOS
11/25/14
11/21/14485BPOS,  497,  N-Q
11/10/14
For Period End:9/30/1424F-2NT,  N-CSR,  N-CSRS,  N-Q,  NSAR-A,  NSAR-B
1/31/14485BPOS,  497,  497K,  N-CSRS,  N-Q,  NSAR-A
9/30/1324F-2NT,  497,  N-CSR,  N-CSRS,  N-Q,  NSAR-A,  NSAR-B
6/29/07485BPOS,  NSAR-A
10/1/04PRE 14A
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