Avondale Total Return Fund
Supplement to Prospectus dated August 1, 1995
The disclosure under the caption "How to Invest in the Fund" and "How to Redeem
an Investment in the Fund" in the Fund's prospectus dated August 1, 1995 is
supplemented by the following information. Shareholders should review those
portions of the prospectus for a complete discussion regarding purchases and
redemptions of fund shares.
Effective March 8, 1996, Star Bank, N.A., 425 Walnut Street, Cincinnati, OH
45202 will serve as Custodian of the Fund's assets and American Data Services,
Inc., 24 West Carver St., Huntington, NY 11743 will serve as the Fund's Transfer
and Shareholder Service Agent.
Shareholders should direct correspondence and inquiries as follows:
INVESTMENTS
BY MAIL: Initial and subsequent investments should be sent to Avondale Total
Return Fund, P.O. Box 856, Cincinnati, OH 45264-0856.
BY WIRE: It is necessary to notify the Fund prior to each wire purchase. Wires
sent without notifying the Fund will result in a delay of the effective date of
your purchase.
Shareholders should instruct their bank to wire funds as follows:
Star Bank, N.A. Cinti/Trust
ABA #0420-0001-3
Attn: Avondale Total Return Fund
DDA # 483897914
Account name (shareholder name)
Shareholder account number
BY COURIER: All investments sent by overnight or other courier services should
be sent to Avondale Total Return Fund, c/o Star Bank, N.A., 425 Walnut Street,
Mutual Fund Custody Dept. M.L. 6118, Cincinnati, OH 45202.
REDEMPTIONS:
DIRECT REDEMPTION: Requests for redemption of fund shares should be mailed to
Avondale Total Return Fund, 24 West Carver St., Huntington, NY 11743.
TELEPHONE REDEMPTION: If you have completed the Redemption by Telephone portion
of the Fund's account application you may redeem shares on any business day the
New York Stock Exchange is open by calling the Transfer Agent at 1-800-385-7003
before 4:00 p.m. Eastern time.
All other shareholder account questions should be directed to 1-800-385-7003.
<PAGE>
AVONDALE TOTAL RETURN FUND
1105 Holliday
Wichita Falls, Texas 76301
(817) 761-3777
The AVONDALE TOTAL RETURN FUND (the "Fund") is a mutual fund with the
investment objective of seeking the combination of income and capital
appreciation that will produce the maximum total return consistent with
reasonable risk. The Fund seeks to achieve its objective by investing primarily
in higher quality fixed income obligations and equity securities (common and
preferred stocks). The balance between debt and equity securities will be
adjusted based upon the market interpretation of the Manager of the Fund.
This Prospectus sets forth basic information about the Fund that
prospective investors should know before investing. It should be read and
retained for future reference. The Fund is a series of Professionally Managed
Portfolios. A Statement of Additional Information dated August 1, 1995, as may
be amended from time to time, has been filed with the Securities and Exchange
Commission and is incorporated herein by reference. The Statement of Additional
Information is available without charge upon written request to the Fund at the
address given above.
TABLE OF CONTENTS
Expense Table ....................................... 2
Financial Highlights ................................ 3
Objective and Investment Approach of the Fund ....... 4
Management of the Fund .............................. 6
How To Invest in the Fund ........................... 7
How To Redeem an Investment in the Fund ............. 8
Services Available to the Fund's Shareholders ....... 9
How the Fund's Per Share Value Is Determined ........ 10
Distributions and Taxes ............................. 10
General Information ................................. 11
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated August 1, 1995
<PAGE>
The AVONDALE TOTAL RETURN FUND (the "Fund") is a diversified series of
Professionally Managed Portfolios (the "Trust"), an open-end management
investment company offering redeemable shares of beneficial interest. Shares of
the Fund may be purchased at their net asset value per share. The minimum
initial investment is $1,000, with subsequent investments of $250 or more ($500
and $100, respectively, for retirement plans). Shares will be redeemed at net
asset value per share.
EXPENSE TABLE
Expenses are one of several factors to consider when investing in the Fund.
The purpose of the following fee table is to provide an understanding of the
various costs and expenses which may be borne directly or indirectly by an
investment in the Fund. Actual expenses may be more or less than those shown.
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases.............................. None
Maximum Sales Load Imposed on Reinvested Dividends................... None
Deferred Sales Load.................................................. None
Redemption Fees...................................................... None
Exchange Fee ........................................................ None
Annual Fund Operating Expenses
(As a percentage of average net assets)
Management Fees...................................................... 0.70%
Other Expenses....................................................... 1.07%
-----
Total Fund Operating Expenses ....................................... 1.77%
=====
Example
This table illustrates the net transaction and operating expenses that
would be incurred by an investment in the Fund over different time periods
assuming a $1,000 investment, a 5% annual return, and
redemption at the end of each time period.....................
1 Year 3 Years 5 Years 10 Years
$18 $56 $96 $208
The Example shown above should not be considered a representation of past
or future expenses and actual expenses may be greater or less than those shown.
In addition, federal regulations require the example to assume a 5% annual
return, but the Fund's actual return may be higher or lower. See "Management of
the Fund."
<PAGE>
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period.
The following information has been audited by Tait, Weller & Baker,
independent accountants, whose unqualified report covering the five years in the
fiscal period ended March 31, 1995 is incorporated by reference herein and
appears in the annual report to shareholders. This information should be read in
conjunction with the financial statements and accompanying notes which appear in
the Statement of Additional Information. Further information about the Fund's
performance is contained in its annual report to shareholders, which may be
obtained without charge by writing or calling the address or telephone number on
the Prospectus cover.
<TABLE>
<CAPTION>
Year Ended March 31, October 12, 1988*
---------------------------------------------------- to
1995 1994 1993 1992 1991 1990 March 31, 1989
--------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, beginning of period........... $22.93 $24.78 $24.19 $22.44 $20.76 $19.84 $20.00
Income from Investment Operations:
Net investment income ................... .23 .26 .46 .51 .75 .88 .48
Net realized and unrealized (loss) gain
on investments........................ 1.49 (.44) 1.62 1.92 1.46 1.13 (.14)
- -------------------------------------------------------------------------------------------------------------------
Total from investment operations......... 1.72 (.18) 2.08 2.43 2.21 2.01 .34
- -------------------------------------------------------------------------------------------------------------------
Less Distributions:
Dividends (from net investment income) (.23) (.35) (.49) (.68) (.53) (.79) (.50)
Distributions (from net capital gains).. (.84) (1.32) (1.00) -0- -0- (.30) -0-
- -------------------------------------------------------------------------------------------------------------------
Total distributions..................... (1.07) (1.67) (1.49) (.68) (.53) (1.09) (.50)
- -------------------------------------------------------------------------------------------------------------------
Net Asset Value, end of period................. $23.58 $22.93 $24.78 $24.19 $22.44 $20.76 $19.84
===================================================================================================================
Total Return............................. 7.82% (0.82)% 9.19% 11.07% 10.90% 10.13% 1.72%
Net Assets, end of period (millions) .......... $ 6.9 $ 7.4 $ 7.6 $ 7.8 $ 5.4 $ 2.4 $ 0.7
Ratios/Supplemental Data:
Ratios of expenses to average net assets:
Before expense reimbursement............. 1.77% 1.83% 1.78% 2.13% 2.58% 4.27% 9.33%+
After expense reimbursement............. 1.77% 1.83% 1.78% 1.96% 1.98% 1.92% 1.30%+
Ratios of net income (loss) to average net assets:
Before expense reimbursement............. 0.96% 1.09% 1.97% 2.00% 3.02% 1.81% (2.63)%+
After expense reimbursement............. 0.96% 1.09% 1.97% 2.17% 3.62% 4.16% 5.40%+
Portfolio turnover rate ....................... 52.24% 73.65% 157.64% 59.58% 65.51% 99.50% 60.82%+
</TABLE>
* Effective date of the Fund's initial registration under the Securities Act of
1933.
+ Annualized.
<PAGE>
OBJECTIVE AND INVESTMENT APPROACH OF THE FUND
The investment objective of the Fund is to realize the combination of
income and capital appreciation that will produce the maximum total return
consistent with reasonable risk. The Fund seeks to achieve its objective by
investing primarily in higher quality fixed income debt securities and equity
securities. There is, of course, no assurance that the Fund's objective will be
achieved, and the Fund's net asset value per share will fluctuate as the market
value of its investment portfolio fluctuates.
General Policies. The Fund will normally invest in fixed income debt
securities, common stocks, securities convertible into common stocks, and
preferred stocks.
The Fund's investment manager, Herbert R. Smith, Incorporated, (the
"Manager") has the flexibility to select among different types of investments
for growth and income and to alter the composition of the portfolio as economic
and market trends change. The Fund may invest up to 100% of the value of its
total assets in higher quality debt securities which, at the time of purchase,
are rated A or better by either Moody's Investors service ("Moody's") or by
Standard & Poor's Corporation ("S&P") or, if unrated, are judged by the Manager
to be of comparable quality to such rated securities. An Appendix in the
Statement of Additional Information contains a complete description of the
applicable ratings of Moody's and S&P.
Up to 85% of the Fund's total assets at any time may be invested in equity
securities (common and preferred stocks). For defensive purposes or pending
longer-term investment, the Fund also may temporarily invest any amount of its
assets in high quality short-term money market instruments rated in the top two
grades by Moody's or S&P or, if unrated, instruments deemed to be of comparable
quality by the Fund's Manager.
The average dollar-weighted effective maturity of the Fund's debt security
portfolio will not exceed 10 years, and no debt security will have an effective
maturity exceeding 15 years.
The Fund is diversified, which under applicable federal law means that as
to 75% of its total assets, no more than 5% may be invested in securities of a
single issuer and that no more than 10% of its total assets may be invested in
the voting securities of such issuer.
Investment Approach. The Manager is a risk-averse investor. The Manager
follows a dual screen process it has developed that uses a combination of
fundamental and technical analysis.
Fundamental analysis with respect to debt securities is concerned with the
present and future state of the economy, monetary conditions, the outlook for
interest rates and the creditworthiness of the issuer. Technical analysis
studies and tracks various economic data as well as supply and demand factors
such as price movements and trading volume. From this dual analysis, the Manager
develops its policy regarding maturity and duration of debt securities. It pays
close attention to the yield curve, i.e., the yields to be earned by investing
in various maturities.
Fundamental analysis with respect to equity securities is concerned with
the business value of the individual company as well as the economy and factors
relating to the company's prospects for increased earnings and a higher stock
price. In the equity area, technical analysis focuses on supply and demand
conditions for a stock, or the stock market as a whole, as revealed by price
movements, money flow, trading volume and other factors. Using this dual
analysis, the Manager is able to identify individual stocks, industries and
industry groups whose statistical patterns are weakening or strengthening.
Foreign Securities. The Fund may invest up to 15% of its assets in foreign
securities. These include U.S. Dollar denominated securities of foreign issuers,
securities of foreign issuers that are listed and traded on a domestic national
securities exchange, and American Depositary Receipts ("ADR's"). ADR's are
receipts typically issued by a U.S. bank or trust company evidencing ownership
of underling foreign securities.
There are risks associated with investing in foreign securities. There
may be less publicly available information about these issuers than is available
about companies in the U.S., and foreign auditing requirements may not be
comparable to those in the U.S. Interest or dividends on foreign securities may
be subject to foreign withholding taxes. Investments in foreign countries may be
subject to the possibility of expropriation or confiscatory taxation, exchange
controls, political or social instability or diplomatic developments that could
adversely affect the value of those investments. In addition, the value of the
foreign securities may be adversely affected by movements in the exchange rates
between foreign currencies and the U.S. dollar, as well as other political and
economic developments.
Securities Lending. In order to generate additional income, the Fund may
lend up to 30% of its portfolio securities to broker-dealers, major banks or
other recognized domestic institutional borrowers of securities who are not
affiliated with the Fund's Manager or Distributor and whose creditworthiness is
acceptable to the Manager. The borrower must deliver to the Fund cash or cash
equivalent collateral, or provide to the Fund an irrevocable letter of credit
equal in value to at least 100% of the value of the securities loaned at all
times during the loan. During the time the portfolio securities are on loan, the
borrower pays the Fund any interest paid on such securities. The Fund may invest
the cash collateral and earn additional income, or it may receive an agreed-upon
amount of interest income if the borrower has delivered equivalent collateral or
a letter of credit.
Repurchase Agreements. The Fund may enter into repurchase agreements in
order to earn additional income on available cash, or as a defensive investment
in periods when the Fund is primarily in short-term maturities. A repurchase
agreement is a short-term investment in which the purchaser (i.e., the Fund)
acquires ownership of a U.S. Government security (which may be of any maturity)
and the seller agrees to repurchase the obligation at a future time at a set
price, thereby determining the yield during the purchaser's holding period
(usually not more than seven days from the date of purchase). Any repurchase
transaction in which the Fund engages will require full collateralization of the
seller's obligation during the entire term of the repurchase agreement. In the
event of a bankruptcy or other default of the seller, the Fund could experience
both delays in liquidating the underlying security and losses in value. However,
the Fund intends to enter into repurchase agreements only with banks with assets
of $500 million or more that are insured by the Federal Deposit Insurance
Corporation and the most creditworthy registered securities dealers pursuant to
procedures adopted and regularly reviewed by the Trust's Board of Trustees. The
Manager monitors the creditworthiness of the banks and securities dealers with
whom the Fund engages in repurchase transactions, and the Fund will not invest
more than 10% of its total assets in illiquid securities, including repurchase
agreements maturing in more than seven days.
When-Issued Securities. The Fund may purchase securities on a when-issued
basis, for payment and delivery at a later date, generally within one month. The
price and yield are generally fixed on the date of commitment to purchase, and
the value of the security is thereafter reflected in the Fund's net asset value.
During the period between purchase and settlement, no payment is made by the
Fund and no interest accrues to the Fund. At the time of settlement, the market
value of the security may be more or less than the purchase price. The Fund
limits its investments in when-issued securities to less than 5% of its total
assets. When the Fund purchases securities on a when-issued basis, it maintains
liquid assets in a segregated account with its Custodian in an amount equal to
the purchase price as long as the obligation to purchase continues.
Portfolio Turnover. The annual rate of portfolio turnover is anticipated to
be less than 100%. However, under certain market conditions, the Fund may
experience a higher rate of portfolio turnover. The Fund's portfolio turnover
rate is set forth in the Financial Highlights table on page 3. In general, the
Manager will not consider the rate of portfolio turnover to be a limiting factor
in determining when or whether to purchase or sell securities in order to
achieve the Fund's objective. Although the Fund anticipates that it will be able
to effect transactions at sharply discounted brokerage commission rates or
spreads, high portfolio turnover involves correspondingly greater brokerage
commissions and other transaction costs, which are borne directly by the Fund,
and may increase realized capital gains which are taxable to Fund shareholders
when distributed.
Investment Restrictions. The Fund has adopted certain investment
restrictions, which are described fully in the Statement of Additional
Information. One of these restrictions states that the Fund may borrow money
only from banks for temporary or emergency purposes in amounts not to exceed 10%
of the Fund's assets, and that additional investments may not be made while any
such borrowings are in excess of 5% of the Fund's assets. Like the Fund's
investment objective, certain of these restrictions are fundamental and may be
changed only by a majority vote of the Fund's outstanding shares.
MANAGEMENT OF THE FUND
The Board of Trustees of the Trust establishes the Fund's policies and
supervises and reviews the management of the Fund. Herbert R. Smith,
Incorporated, 1105 Holliday, Wichita Falls, Texas 76301, the Fund's Manager, has
been in the investment advisory business since 1970 and manages private and
institutional accounts with aggregate assets of approximately $3 billion as of
the date of this Prospectus. Mr. Herbert R. Smith is principally responsible for
management of the Fund's portfolio.
The Manager provides the Fund with advice on buying and selling securities,
manages the investments of the Fund, furnishes the Fund with office space and
certain administrative services, and provides most of the personnel needed by
the Fund. As compensation, the Fund pays the Manager a monthly management fee
(accrued daily) based upon the average daily net assets of the Fund at the
following annual rates: 0.70% on the first $200 million of net assets; 0.60% on
the next $300 million of net assets; and 0.50% on net assets exceeding $500
million.
Investment Company Administration Corporation (the "Administrator") acts as
the Fund's administrator. The Administrator prepares various federal and state
regulatory filings, reports and returns for the Fund, prepares reports and
materials to be supplied to the trustees, monitors the activities of the Fund's
custodian, transfer agent and accountants, and coordinates the preparation and
payment of Fund expenses and reviews the Fund's expense accruals. For its
services, the Administrator receives an annual fee equal to the greater of 0.15
of 1% of the Fund's average daily net assets or $30,000.
The Fund is responsible for its own operating expenses. The Manager has
agreed to reduce its fees or reimburse the Fund for its annual operating
expenses which exceed the most stringent limits prescribed by any state in which
the Fund's shares are offered for sale. The Manager also may reimburse
additional amounts to the Fund at any time in order to reduce the Fund's
expenses, or to the extent required by applicable securities laws. To the extent
the Manager performs a service for which the Fund is obligated to pay, the Fund
shall reimburse the Manager for its costs incurred in rendering such service.
The Manager considers a number of factors in determining which brokers or
dealers to use for the Fund's portfolio transactions. While these are more fully
discussed in the Statement of Additional Information, the factors include, but
are not limited to, the reasonableness of commissions, quality of services and
execution, and the availability of research which the Manager may lawfully and
appropriately use in its investment management and advisory capacities. Provided
the Fund receives prompt execution at competitive prices, the Manager may also
consider the sale of Fund shares as a factor in selecting broker-dealers for the
Fund's portfolio transactions. The Fund will not effect portfolio transactions
with, nor pay commissions to, any broker-dealer affiliated with the Manager.
HOW TO INVEST IN THE FUND
The minimum initial investment is $1,000. Subsequent investments must be at
least $250. Investments in retirement plans may be for minimums of $500 and
$100, respectively. The Distributor may, at its discretion, waive the minimum
investment requirements for purchases in conjunction with certain group or
periodic plans. In addition to cash purchases, shares may be purchased by
tendering payment in kind in the form of shares of stock, provided that any such
tendered stock is readily marketable, its acquisition is consistent with the
Fund's investment objective, the tendered stock is otherwise acceptable to the
Fund's Manager, and the investor agrees to pay the brokerage commissions on any
sale of stock so tendered if it is sold by the Fund within 90 days of
acquisition.
Investors may purchase shares of the Fund by check or by wire:
By check
Initial Investment. Complete the Fund's Account Application (included with
this Prospectus). Make your check payable to "Avondale Total Return Fund." Mail
or deliver the completed Account Application and your check to the Fund's
Transfer Agent:
The Provident Bank
Mutual Fund Services
P.O. Box 14967
Cincinnati, Ohio 45250-0967
Subsequent Investments. Detach and complete the stub attached to your
account statement. Make your check payable to "Avondale Total Return Fund."
Write your shareholder account number on the check. Mail or deliver the check
and reinvestment form to The Provident Bank in the envelope provided or send to
the Bank at the address indicated above.
By wire
Initial Investment. Before wiring funds, call the Transfer Agent at (800)
424-2295 to advise the Transfer Agent that you intend to make an initial
investment by wire and to receive an account number. Provide the Transfer Agent
with your name, and the dollar amount to be invested. Complete the Fund's
Account Application (included with this Prospectus). Be sure to include the date
and the order confirmation number. Mail or deliver the completed Application to
the appropriate address shown at the top of the Account Application. Request
your bank to transmit immediately available funds by wire for purchase of shares
in your name to the Fund's Custodian, as follows:
The Provident Bank
ABA Routing Number: 042000424
for further credit to Avondale Total Return Fund DDA 0118-754
Custody acct. # 188001051
Account Number [Name of Shareholder]
Subsequent Investments. Instruct your bank to wire funds as indicated
above. It is not necessary to contact the Transfer Agent prior to making
subsequent investments by wire. It is essential that complete information
regarding your account be included in all wire instructions in order to
facilitate prompt and accurate handling of investments. Investors may obtain
further information about remitting funds in this manner from the Transfer
Agent, and any fees that may be imposed from their own banks.
General. Investors will not be permitted to redeem any shares purchased
with an initial investment made by wire until one business day after the
completed Account Application is received by the Fund. All investments must be
made in U.S. dollars and, to avoid fees and delays, checks should be drawn only
on U.S. banks and should not be made by third party check. A charge may be
imposed if any check used for investment does not clear. The Fund and its
Distributor, First Fund Distributors, Inc. (the "Distributor"), reserve the
right to reject any purchase order in whole or in part.
If an order, together with payment in proper form, is received by the
Transfer Agent by the close of trading on the New York Stock Exchange (currently
4:00 p.m., New York City time), Fund shares will be purchased at the offering
price determined as of the close of trading on that day. Otherwise, Fund shares
will be purchased at the offering price determined as of the close of trading on
the New York Stock Exchange on the next business day.
Federal tax regulations require that investors provide a certified Taxpayer
Identification Number and certain other required certifications upon opening or
reopening an account in order to avoid backup withholding of taxes at the rate
of 31% on taxable distributions and proceeds of redemptions. See the Fund's
Account Application for further information concerning this requirement.
The Fund does not issue share certificates. All shares are held in
non-certificated form registered on the books of the Fund and the Fund's
Transfer Agent for the account of the shareholder.
HOW TO REDEEM AN INVESTMENT IN THE FUND
A shareholder has the right to have the Fund redeem all or any portion of
his outstanding shares at their current net asset value on each day the New York
Stock Exchange is open for trading. The redemption price is the net asset value
per share next determined after the shares are validly tendered for redemption.
Direct Redemption
A written request for redemption must be received by the Fund's Transfer
Agent in order to constitute a valid tender for redemption. To protect the Fund
and its shareholders, a signature guarantee is required for certain
transactions, including redemptions. Signature(s) on the redemption request must
be guaranteed by an "eligible guarantor institution" as defined in the federal
securities laws; these institutions include banks, broker-dealers, credit unions
and savings institutions. A broker-dealer guaranteeing signatures must be a
member of a clearing corporation or maintain net capital of at least $100,000.
Credit unions must be authorized to issue signature guarantees. Signature
guarantees will be accepted from any eligible guarantor institution which
participates in a signature guarantee program. A notary public is not an
acceptable guarantor.
Telephone Redemption.
Shareholders who complete the Redemption by Telephone portion of the Fund's
Account Application may redeem shares on any business day the New York Stock
Exchange is open by calling the Fund's Transfer Agent at (800) 424-2295 before
4:00 p.m. Eastern time. Redemption proceeds will be mailed or wired at the
shareholder's direction the next business day to the predesignated account. The
minimum amount that may be wired is $1,000 (wire charges, if any, will be
deducted from redemption proceeds).
By establishing telephone redemption privileges, a shareholder authorizes
the Fund and its Transfer Agent to act upon the instruction of any person by
telephone to redeem from the account for which such service has been authorized
and transfer the proceeds to the bank account designated in the Authorization.
The Fund and the Transfer Agent will use procedures to confirm that redemption
instructions received by telephone are genuine, including recording of telephone
instructions and requiring a form of personal identification before acting on
such instructions. Neither the Fund nor the Transfer Agent will be liable for
any loss, expense, or cost arising out of any telephone redemption request,
including any fraudulent or unauthorized requests that are reasonably believed
to be genuine, provided that such procedures are followed. The Fund may change,
modify, or terminate these privileges at any time upon at least 60 days' notice
to shareholders.
Shareholders may request telephone redemption after an account is opened;
however, the authorization form will require a separate signature guarantee.
Shareholders may experience delays in exercising telephone redemption during
periods of abnormal market activity.
General
Payment of the redemption proceeds will be made promptly, but not later
than seven days after the receipt of all documents in proper form, including a
written redemption order with appropriate signature guarantee in cases where
telephone redemption privileges are not being utilized. The Fund may suspend the
right of redemption under certain extraordinary circumstances in accordance with
the rules of the Securities and Exchange Commission. In the case of shares
purchased by check and redeemed shortly after purchase, the Fund will not mail
redemption proceeds until it has been notified that the check used for the
purchase has been collected, which may take up to 15 days from the purchase
date. To minimize or avoid such delay, investors may purchase shares by
certified check or federal funds wire. A redemption may result in recognition of
a gain or loss for federal income tax purposes.
Due to the relatively high cost of maintaining smaller accounts, the Fund
reserves the right to redeem shares in any account, other than retirement plan
or Uniform Gifts/Transfers to Minors Acts accounts, if at any time, due to
redemptions by the shareholder, the total value of a shareholder's account does
not equal at least $1,000. If the Fund determines to make such an involuntary
redemption, the shareholder will first be notified that the value of his account
is less than $1,000 and will be allowed 30 days to make an additional investment
to bring the value of his account to at least $1,000 before the Fund takes any
action.
SERVICES AVAILABLE TO THE FUND'S SHAREHOLDERS
Retirement Plans. The minimum initial investment for such plans is $500,
with minimum subsequent investments of $100. The Fund also offers a prototype
Individual Retirement Account ("IRA") plan. Investors should consult a tax
adviser before establishing an IRA plan.
Check-A-Matic Plan. For the convenience of shareholders, the Fund offers a
preauthorized check service under which a check is automatically drawn on the
shareholder's personal checking account each month for a predetermined amount
(but not less than $500), as if the shareholder had written it directly. Upon
receipt of the check, the Fund automatically invests the money in additional
shares of the Fund at the current net asset value. Applications for this service
are available from the Distributor. There is no charge by the Fund for this
service. The Distributor may terminate or modify this privilege at any time, and
shareholders may terminate their participation by notifying the Transfer Agent
in writing.
Systematic Withdrawal Program. As another convenience, the Fund offers a
Systematic Withdrawal Program whereby shareholders may request that a check
drawn in a predetermined amount be sent to them each month or calendar quarter.
A shareholder's account must have Fund shares with a value of at least $10,000
in order to start a Systematic Withdrawal Program, and the minimum amount that
may be withdrawn each month or quarter under the Systematic Withdrawal Program
is $100. This Program may be terminated or modified by a shareholder or the Fund
at any time without charge or penalty.
A withdrawal under the Systematic Withdrawal Program involves a redemption
of shares, and may result in a gain or loss for federal income tax purposes. In
addition, if the amount withdrawn exceed the dividends credited to the
shareholder's account, the account ultimately may be depleted.
HOW THE FUND'S PER SHARE VALUE IS DETERMINED
The net asset value of a Fund share is determined once daily as of the
close of public trading on the New York Stock Exchange (currently 4:00 p.m.
Eastern time) on each day the New York Stock Exchange is open for trading. Net
asset value per share is calculated by dividing the value of the Fund's total
assets, less its liabilities, by the number of Fund shares outstanding.
Portfolio securities are valued using current market values, if available.
Securities for which market quotations are not readily available are valued at
fair values as determined in good faith by or under the supervision of the
Trust's officers in accordance with methods which are specifically authorized by
the Board of Trustees. Short-term obligations with maturities of sixty days or
less are valued at amortized cost as reflecting fair value.
DISTRIBUTIONS AND TAXES
Dividends and Distributions. Dividends from net investment income are
declared and paid quarterly, shortly before the end of each calendar quarter.
Any net realized long-term capital gains not previously distributed and any
undistributed short-term capital gains earned during the Fund's fiscal year will
be distributed to shareholders following the conclusion of the Fund's fiscal
year (March 31), with a supplemental distribution on or about December 31 of any
additional undistributed capital gains earned during the 12-month period ended
October 31.
Dividends and capital gains distributions (net of any required tax
withholding) are automatically reinvested in additional shares of the Fund at
the net asset value per share on the reinvestment date unless the shareholder
has previously requested in writing to the Transfer Agent that payment be made
in cash.
Any dividend or distribution paid by the Fund has the effect of reducing
the net asset value per share on the reinvestment date by the amount of the
dividend or distribution. Investors should note that a dividend or distribution
paid on shares purchased shortly before such dividend or distribution was
declared will be subject to income taxes as discussed below even though the
dividend or distribution represents, in substance, a partial return of capital
to the shareholder.
Taxes. The Fund has qualified and elected to be treated as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986 (the
"Code"). As long as the Fund continues to qualify, and as long as the Fund
distributes all of its net investment income and net realized capital gains in
accordance with the timing requirements of the Code, the Fund will not be
subject to any federal or excise taxes. However, distributions made by the Fund
will be taxable to shareholders (other than tax-exempt entities), whether
received in shares (through dividend reinvestment ) or in cash. Distributions
derived from net investment income and short-term capital gains are taxable to
shareholders as ordinary income. A portion of such distributions may qualify for
the intercorporate dividends-received deduction. Distributions derived from
long-term capital gains are taxable as such regardless of the length of time
shares of the fund have been held. Although distributions are generally taxable
when received, certain distributions made in January are taxable as if received
the prior December. Shareholders will be informed annually of the amount and
nature of the Fund's distributions.
Additional information about taxes is set forth in the Statement of
Additional Information. Shareholders should consult their own advisers
concerning federal, state and local taxation of distributions from the Fund.
GENERAL INFORMATION
The Trust. The Trust was organized as a Massachusetts business trust on
February 17, 1987. The Agreement and Declaration of Trust permits the Board of
Trustees to issue an unlimited number of full and fractional shares of
beneficial interest, without par value, which may be issued in any number of
series. The Board of Trustees may from time to time issue other series, the
assets and liabilities of which will be separate and distinct from any other
series.
Shareholder Rights. Shares issued by the Fund have no preemptive,
conversion, or subscription rights. Shareholders have equal and exclusive rights
as to dividends and distributions as declared by the Fund and to the net assets
of the Fund upon liquidation or dissolution. The Fund, as a separate series of
the Trust, votes separately on matters affecting only the Fund (e.g., approval
of the Management Agreement); all series of the Trust vote as a single class on
matters affecting all series jointly or the Trust as a whole (e.g., election or
removal of Trustees). Voting rights are not cumulative, so that the holders of
more than 50% of the shares voting in any election of Trustees can, if they so
choose, elect all of the Trustees. While the Trust is not required and does not
intend to hold annual meetings of shareholders, such meetings may be called by
the Trustees in their discretion, or upon demand by the holders of 10% or more
of the outstanding shares of the Trust for the purpose of electing or removing
Trustees.
Performance Information. From time to time, the Fund may publish its total
return in advertisements and communications to investors. Total return
information will include the Fund's average annual compounded rate of return
over the most recent four calendar quarters, the past five years and from the
Fund's inception of operations. The Fund may also advertise aggregate and
average total return information over different periods of time. The Fund's
total return will be based upon the value of the shares acquired through a
hypothetical $1,000 investment (at the maximum public offering price) at the
beginning of the specified period and the net asset value of such shares at the
end of the period, assuming reinvestment of all distributions at net asset
value. Total return figures will reflect all recurring charges against Fund
income. Investors should note that the investment results of the Fund will
fluctuate over time, and any presentation of the Fund's total return for any
prior period should not be considered as a representation of what an investor's
total return may be in any future period.
Shareholder Inquiries. Shareholder inquiries should be directed to the
Transfer Agent at (800) 424-2295.
This Prospectus is not an offering of the securities herein described in any
state in which the offering is unauthorized. No salesman, dealer or other person
is authorized to give any information or make any representation other than
those contained in this Prospectus or in the Statement of Additional
Information.
<PAGE>
Investment Manager
Herbert R. Smith, Incorporated
1105 Holliday
Wichita Falls, Texas 76301
(817) 761-3777
o
Distributor
First Fund Distributors, Inc.
4455 E. Camelback Road, Suite 261-E
Phoenix, Arizona 85018
o
Custodian and Transfer Agent
The Provident Bank
One East Fourth Street
Cincinnati, Ohio 45202
(800) 424-2295
o
Auditors
Tait, Weller & Baker
2 Penn Center Plaza
Philadelphia, Pennsylvania 19102
o
Legal Counsel
Heller, Ehrman, White & McAuliffe
333 Bush Street
San Francisco, California 94104
A fully managed
mutual fund
AVONDALE
TOTAL RETURN FUND
A fully managed
mutual fund
investing in equity and
higher quality fixed-income
securities, seeking the
combination of income
and capital appreciation
that will produce
maximum total return
P R O S P E C T U S
August 1, 1995
