AVONDALE TOTAL RETURN FUND
ANNUAL REPORT
March 31, 1996
<PAGE>
AVONDALE TOTAL RETURN FUND
April 30, 1996
Dear Fellow Shareholder:
Avondale's fiscal year ending March 31, 1996 was, again, a rewarding experience
for those of us who are shareholders.
Total return performance for the year was 26.67%, according to Morningstar's
ranking system, placing Avondale in the top 6% of the 306 funds in Morningstar's
balanced-fund category.
Our position structure between stocks, bonds and cash equivalents at fiscal year
end was: equities, 71.7%; fixed income, 15.6%; and cash equivalents, 12.7%.
Movement was toward a slightly less aggressive policy -- and far less aggressive
than many in our balanced-fund category.
There has been no change in our strict adherence to our combined disciplines of
both fundamental and technical analysis. I do not anticipate any deviation from
our thesis of diversified equity positions, either in terms of industry group
diversification or number of individual positions. We are prepared to play
stronger defense when necessary.
Our weakness continues to be marketing. While we do run a daily ad in the local
newspaper and we "co-sponsor" in other areas such as the local symphony program
and various charitable affairs, growth is a frustrating accomplishment. As of
April 2, we crossed above the $10 million level. This has been primarily
performance-driven.
As I look ahead over the future months, I anticipate that we will be forced to a
more defensive stature by our disciplines. Perhaps this will be a period where
we gain back some of the distance between ourselves and those at the front of
the balanced-fund pack. Certainly, from a content and variability of structure
standpoint, differences between manager styles and portfolio structures within
the balanced-fund group are more varied than in any other fund category.
As always, please feel comfortable contacting me with any questions or comments
- -- or marketing ideas.
Sincerely,
/S/
Herbert R. Smith, Chairman/CEO
Herbert R. Smith, Incorporated
<PAGE>
AVONDALE TOTAL RETURN FUND
COMPARISON OF $10,000 INVESTMENT IN THE AVONDALE TOTAL
RETURN FUND AND A MATCHING INDEX
Annual Average Total Return
1 Year 5 Year Since Inception
26.67% 10.43% 10.02%
<TABLE>
<CAPTION>
Date Avondale Total Return Fund Matching Index* S&P 500 Shearson 4yr
<S> <C> <C> <C> <C>
Inception 10,000 10,000 10,000 10,000
3/31/89 10,589 10,734 10,898 10,664
9/30/89 11,251 11,450 11,991 11,126
3/31/90 11,663 11,962 12,738 11,346
9/30/90 11,039 12,012 11,576 12,015
3/31/91 12,334 13,512 14,228 12,700
9/30/91 13,296 13,876 13,952 13,630
3/31/92 13,526 15,017 15,654 14,095
9/30/92 13,953 15,805 16,508 14,684
3/31/93 14,529 16,794 17,579 15,560
9/30/93 14,699 17,441 18,278 16,113
3/31/94 14,787 17,291 18,247 15,606
9/30/94 15,010 17,436 18,395 15,663
3/31/95 16,780 20,266 21,960 17,111
9/30/95 19,788 22,718 25,219 17,935
1/31/96 20,064 23,948 27,026 17,983
<FN>
* Combination of the S&P 500 and Shearson 4-year Govt/Corp. Index weighted according
to month-end balance of Avondale Total Return Fund.
</FN>
</TABLE>
Past performance is not predictive of future performance.
<PAGE>
AVONDALE TOTAL RETURN FUND
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS at March 31, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Shares COMMON STOCKS: 71.7% Market Value
Banks: 5.3%
<S> <C> <C>
8,200 Countrywide Credit Industries, Inc...................................... $ 181,425
5,034 First Commercial Corp................................................... 157,312
2,300 Nationsbank Corp........................................................ 184,288
-------
523,025
-------
Beverages - Soft Drink: 1.9%
2,300 Coca-Cola Co............................................................ 190,037
-------
Building - Heavy Construction: 2.0%
2,800 Fluor Corp.............................................................. 191,100
-------
Chemicals: 2.1%
6,000 M. A. Hanna Co.......................................................... 208,500
-------
Computer Services: 6.4%
8,900 Exar Corp. (a).......................................................... 131,275
5,200 First Data Corp......................................................... 366,600
12,500 General DataComm Industries, Inc. (a)................................... 132,813
-------
630,688
-------
Computers: 3.5%
5,700 Bell & Howell Co. (a)................................................... 186,675
1,400 IBM Corp................................................................ 155,575
-------
342,250
-------
Consumer Products: 2.9%
3,600 General Electric Co..................................................... 280,350
-------
Drugs: 10.9%
2,400 Bristol-Myers/Squibb Co................................................. 205,500
8,500 Carrington Labs, Inc. (a)............................................... 244,375
2,100 Johnson & Johnson....................................................... 193,725
3,200 Pfizer, Inc............................................................. 214,400
3,600 Schering-Plough Corp.................................................... 209,250
-------
1,067,250
---------
<PAGE>
AVONDALE TOTAL RETURN FUND
PORTFOLIO OF INVESTMENTS at March 31, 1996, Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Shares Market Value
- ------------------------------------------------------------------------------------------------------------------------------------
Durable Goods: 2.7%
4,900 Silicon Graphics, Inc. (a).............................................. $ 122,500
3,900 Watkins Johnson Co...................................................... 139,425
-------
261,925
-------
Electronics Instrumentation: 7.6%
3,900 AMP, Inc................................................................ 161,362
7,600 Dallas Semiconductor Corp............................................... 139,650
5,200 Kent Electronics Corp. (a).............................................. 183,950
21,600 Kollmorgen Corp......................................................... 253,800
---- -------
738,762
-------
Entertainment: 2.2%
3,400 The Walt Disney Co...................................................... 217,175
-------
Hotel/Motel: 5.3%
2,500 Doubletree Corp. (a).................................................... 68,438
6,875 La Quinta Motor Inns, Inc............................................... 201,953
5,200 Marriott International, Inc............................................. 247,000
-------
517,391
-------
Industrial Machinery: 2.1%
6,400 Toro Co................................................................. 205,600
-------
Insurance: 1.5%
3,600 American RE Corp........................................................ 144,000
-------
Manufacturing - Diversified: 2.0%
7,700 Pall Corp............................................................... 197,313
-------
Oil-Energy: 3.5%
1,500 Mobil Corp.............................................................. 173,812
5,500 Panhandle Eastern Corp.................................................. 171,188
-------
345,000
-------
Restaurants: 1.3%
2,700 McDonald's Corp......................................................... 129,600
-------
<PAGE>
AVONDALE TOTAL RETURN FUND
PORTFOLIO OF INVESTMENTS at March 31, 1996, Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Shares Market Value
Telecommunications Equipment: 2.2%
4,100 Belden, Inc............................................................. $ 120,950
4,000 IPC Information Systems (a)............................................. 94,000
------
214,950
-------
Toys/Games: 2.2%
7,813 Mattel, Inc............................................................. 211,914
-------
Utilities/Electric: 4.1%
3,900 Duke Power Co........................................................... 196,950
5,100 Oklahoma Gas & Electric................................................. 203,362
-------
400,312
-------
Total Common Stock (cost $5,446,741).................................... 7,017,142
---------
Principal Amount BONDS: 15.6%
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Notes: 0.5%
$ 50,000 7.125%, 2/29/2000....................................................... 51,812
------
Agencies: 13.8%
500,000 FHLB, 8.00%, 5/16/2001.................................................. 500,646
100,000 FHLMC, 6.50%, 8/7/1998.................................................. 100,017
100,000 FNMA, 6.15%, 11/6/1998.................................................. 99,495
150,000 FNMA, 5.30%, 12/10/1998................................................. 146,751
250,000 FNMA, 6.375%, 10/13/2000................................................ 248,599
250,000 FNMA, 8.03%, 5/16/2001.................................................. 251,101
-------
1,346,609
---------
Corporate: 1.3%
50,000 Dean Witter Discover, 5.00%, 4/1/1996................................... 50,000
75,000 Pfizer, Inc., 6.50%, 2/1/1997........................................... 75,569
------
125,569
-------
Total Bonds (cost $1,526,367)........................................... 1,523,990
---------
<PAGE>
AVONDALE TOTAL RETURN FUND
PORTFOLIO OF INVESTMENTS at March 31, 1996, Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Market Value
Repurchase Agreement: 11.1%
$1,090,000 Star Bank Repurchase Agreement, 5.10%, dated 3/29/1996,
due 4/1/1996 (proceeds $1,090,457) (cost $1,090,000) (b)................ $1,090,000
----------
Money Market Fund: 3.2%
315,823 Star Treasury Cash Management (cost $315,823)........................... 315,823
-------
Total Short-Term Investments (cost $1,405,823).......................... 1,405,823
---------
Total Investment in Securities (cost $8,378,931*): 101.6%............... 9,946,955
Liabilities in excess of Other Assets: (1.6)%........................... (155,912)
--------
Net Assets: 100.0%...................................................... $9,791,043
==========
<FN>
(a) Indicates security on which no cash dividends were paid.
(b) It is the Fund's intention to receive U.S. Government securities as
collateral for any repurchase agreement with a market value which is at least
equal to 100% of the value of the amount invested by the Fund plus accrued
interest. The repurchase agreement is collateralized by $1,165,000 GNMA, 7.0%,
due 5/20/22, which has a value of $1,184,300. If the market value of the U.S.
Government securities subject to the repurchase agreement becomes less than the
repurchase price (including interest), the Fund will obtain additional
collateral. The Fund further intends for collateral to be physically delivered
or transferred by book entry to the account of the Custodian.
*Cost for federal income tax purposes is the same.
Net unrealized appreciation consists of:
Gross unrealized appreciation....................................................... $1,739,806
Gross unrealized depreciation....................................................... (171,782)
--------
Net unrealized appreciation............................................. $1,568,024
==========
</FN>
</TABLE>
See accompanying notes to financial statements.
<PAGE>
AVONDALE TOTAL RETURN FUND
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES at March 31, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
<S> <C>
Investments in securities, at value (identified cost $8,378,931) (Note 2-A) ............. $9,946,955
Cash..................................................................................... 818
Dividends and interest receivable ....................................................... 47,312
Prepaid expenses ........................................................................ 4,004
-----
Total assets ................................................................ 9,999,089
---------
LIABILITIES
Payables:
Investment manager ................................................................ 5,961
Administrator ..................................................................... 2,630
Investment securities purchased.................................................... 184,517
Dividends.......................................................................... 1,633
Accrued expenses ........................................................................ 13,305
------
Total liabilities ........................................................... 208,046
-------
NET ASSETS ................................................................................... $9,791,043
==========
Net asset value, offering and redemption price per share
($9,791,043/352,735 shares outstanding;
unlimited number of shares authorized without par value) ........................ $27.76
======
SOURCE OF NET ASSETS
Paid-in capital ......................................................................... $7,753,525
Undistributed net investment income...................................................... 958
Undistributed net realized gain on investments .......................................... 468,536
Net unrealized appreciation of investments .............................................. 1,568,024
---------
Net assets ........................................................................ $9,791,043
==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
AVONDALE TOTAL RETURN FUND
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS - For the Year Ended March 31, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Income
<S> <C>
Interest ......................................................................... $ 146,774
Dividends ....................................................................... 80,768
------
Total investment income .................................................... 227,542
-------
Expenses
Investment management fees (Note 3) .............................................. 58,529
Administration fee (Note 3) ...................................................... 30,000
Custodian and accounting fees .................................................... 16,551
Transfer agent fees .............................................................. 6,518
Auditing fees .................................................................... 11,973
Legal fees ....................................................................... 915
Insurance ........................................................................ 5,801
Shareholder reports ............................................................... 1,597
Registration fees ................................................................. 1,239
Trustees' fees ................................................................... 3,308
Miscellaneous .................................................................... 5,172
-----
Total expenses ............................................................. 141,603
-------
Net investment income ................................................. 85,939
------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from security transactions............................................. 1,164,049
Net increase in unrealized appreciation of investments................................... 601,115
-------
Net realized and unrealized gain on investments.............................. 1,765,164
---------
Net Increase in Net Assets Resulting from Operations................... $1,851,103
==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
AVONDALE TOTAL RETURN FUND
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended
March 31, March 31,
1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM:
OPERATIONS
<S> <C> <C>
Net investment income ................................................ $ 85,939 $ 66,695
Net realized gain (loss) from security transactions ..................... 1,164,049 (150,144)
Net increase in unrealized appreciation of investments ................... 601,115 608,781
------- -------
Net increase in net assets resulting from operations .............. 1,851,103 525,332
--------- -------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income ($0.27 and $0.23 per share,
respectively) ..................................................... (85,296) (66,394)
Distributions from realized gains ($1.82 and $0.84 per share, respectively) (545,369) (253,847)
-------- --------
Total dividends and distributions .................................. (630,665) (320,241)
-------- --------
CAPITAL SHARE TRANSACTIONS
Net increase (decrease) in net assets derived from net change in
outstanding shares (a).............................................. 1,635,207 (719,021)
--------- --------
Total increase (decrease) in net assets............................ 2,855,645 (513,930)
NET ASSETS
Beginning of year......................................................... 6,935,398 7,449,328
--------- ---------
End of year (including undistributed net investment income of
$958 and $315, respectively)....................................... $9,791,043 $6,935,398
========== ==========
<FN>
(a) A summary of capital share transactions is as follows:
Year Ended Year Ended
March 31, 1996 March 31, 1995
Shares Value Shares Value
Shares sold ...................................... 66,460 $1,814,618 21,036 $ 486,350
Shares issued in reinvestment of dividends
and distributions........................... 21,687 598,280 13,329 296,641
------ ------- ------ -------
88,147 2,412,898 34,365 782,991
Shares redeemed................................... (29,486) (777,691) (65,179) (1,502,012)
------- -------- ------- ----------
Net increase (decrease)........................... 58,661 $1,635,207 (30,814) $ (719,021)
====== ========== ======= ===========
</FN>
</TABLE>
See accompanying notes to financial statements.
<PAGE>
AVONDALE TOTAL RETURN FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
For a capital share outstanding throughout each year
- ------------------------------------------------------------------------------------------------------------------------------------
Years Ended March 31,
- ------------------------------------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ................. $23.58 $22.93 $24.78 $24.19 $22.44
Income from investment operations:
Net investment income.......................... .27 .23 .26 .46 .51
Net realized and unrealized gain (loss)
on investments ......................... 6.00 1.49 (.44) 1.62 1.92
---- ---- ---- ---- ----
Total from investment operations..................... 6.27 1.72 (.18) 2.08 2.43
---- ---- ---- ---- ----
Less distributions:.................................
Dividends from net investment income........... (.27) (.23) (.35) (.49) (.68)
Distributions from net capital gains........... (1.82) (.84) (1.32) (1.00) -0-
----- ---- ----- ----- -
Total distributions.................................. (2.09) (1.07) (1.67) (1.49) (.68)
----- ----- ----- ----- ----
Net asset value, end of year......................... $27.76 $23.58 $22.93 $24.78 $24.19
====== ====== ====== ====== ======
Total return......................................... 26.67% 7.82% (0.82)% 9.19% 11.04%
Ratios/supplemental data:
Net assets, end of year (millions)................... $ 9.8 $ 6.9 $ 7.4 $ 7.6 $ 7.8
Ratio of expenses to average net assets:
Before expense reimbursement................... 1.69% 1.77% 1.83% 1.78% 2.13%
After expense reimbursement.................... 1.69% 1.77% 1.83% 1.78% 1.96%
Ratio of net investment income to average net assets:
Before expense reimbursement................... 1.03% 0.96% 1.09% 1.97% 2.00%
After expense reimbursement.................... 1.03% 0.96% 1.09% 1.97% 2.17%
Portfolio turnover rate ............................ 52.25% 52.24% 73.65% 157.64% 59.58%
</TABLE>
See accompanying notes to financial statements.
<PAGE>
AVONDALE TOTAL RETURN FUND
NOTES TO FINANCIAL STATEMENTS at March 31, 1996
- --------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION
Avondale Total Return Fund (the "Fund") is a series of shares of
beneficial interest of Professionally Managed Portfolios (the "Trust"), which is
registered under the Investment Company Act of 1940 (the "1940 Act") as a
diversified, open-end management company.
The Fund's primary investment objective 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. The market value of the Fund's investment portfolio will fluctuate
with market conditions and an investor's shares, when redeemed, may be worth
more or less than their original cost.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund. These policies are in conformity with generally accepted
accounting principles.
A. Security Valuation. Investments in securities traded on a national
securities exchange or included in the NASDAQ National Market System
are valued at the last reported sale price at the close of regular
trading on the last business day of the period; securities traded on
an exchange or NASDAQ for which there has been no sale and other
over-the-counter securities are valued at the last reported bid
price. Securities for which quotations are not readily available are
valued at their respective fair values as determined in good faith
by the Board of Trustees. Short-term investments are stated at cost,
which when combined with accrued interest, approximates market
value.
U.S. Government securities with less than 60 days remaining to
maturity when acquired by the Fund are valued on an amortized cost
basis. U.S. Government securities with more than 60 days remaining
to maturity are valued at the current market value (using the mean
between the bid and asked price) until the 60th day prior to
maturity, and are then valued at amortized cost based upon the value
on such date unless the Board determines during such 60 day period
that this amortized cost basis does not represent fair value.
B. Federal Income Taxes. The Fund intends to comply with the
requirements of the Internal Revenue Code applicable to
regulated investment companies and to distribute all of its
taxable income to its shareholders. Therefore, no federal
income tax provision is required.
C. Security Transactions, Investment Income and Distributions. As
is common in the industry, security transactions are
accounted for on the trade date. Dividend income and distributions
to shareholders are recorded on the ex-dividend date.
Interest income is recognized on an accrual basis. Discounts and
premiums on securities purchased are amortized over the
life of the respective securities.
D. Accounting Estimates. In preparing financial statements in
conformity with generally accepted accounting principles, management
makes estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements, as
well as the reported amounts of revenues and expenses during the
period. Actual results could differ from those estimates.
<PAGE>
AVONDALE TOTAL RETURN FUND
NOTES TO FINANCIAL STATEMENTS, Continued
- --------------------------------------------------------------------------------
NOTE 3 - INVESTMENT MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
For the year ended March 31, 1996, Herbert R. Smith, Incorporated (the
"Manager") provided the Fund with investment management services under an
Investment Management Agreement. The Manager furnished all investment advice,
office space and certain administrative services. As compensation for its
services, the Manager was entitled to a monthly fee at the annual rate of 0.70%
on the first $200 million of average daily 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 under an Administration Agreement. The Administrator
prepares various federal and state regulatory filings, reports and returns for
the Fund; prepares reports and materials to be supplied to the trustees;
monitors the activities of the Fund's custodian, transfer agent and accountants;
coordinates the preparation and payment of Fund expenses and reviews the Fund's
expense accruals. For its services, the Administrator receives an annual fee
equal to the greater of 0.15% of the Fund's average daily net assets or $30,000.
First Fund Distributors, Inc. (the "Distributor") acts as the Fund's
principal underwriter in a continuous public offering of the Fund's shares. For
the year ended March 31, 1996, the Distributor did not receive any fees from the
Fund in connection with its distribution of shares.
Certain officers and Trustees of the Fund are also officers and/or
directors of the Administrator and Distributor.
NOTE 4 - PURCHASES AND SALES OF SECURITIES
For the year ended March 31, 1996, the cost of purchases and the proceeds
from sales of securities, excluding short-term securities and U.S. Government
securities, were $3,360,165 and $3,280,267, respectively. For the year ended
March 31, 1996, the cost of purchases and the proceeds from sales of U.S.
Government securities, excluding short-term securities, were $599,969 and
$750,234, respectively.
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
TO THE SHAREHOLDERS OF
AVONDALE TOTAL RETURN FUND and
THE BOARD OF TRUSTEES OF
PROFESSIONALLY MANAGED PORTFOLIOS
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Avondale Total Return Fund (a series
of Professionally Managed Portfolios) as of March 31, 1996, and the related
statement of operations for the year then ended, the statement 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 Fund'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 generally accepted auditing
standards. 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. 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 March
31, 1996, by correspondence with the custodian and brokers. 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
Avondale Total Return Fund as of March 31, 1996, the results of its operations
for the year then ended, the changes in its 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 generally accepted accounting
principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
April 26, 1996
<PAGE>
Investment Manager
Herbert R. Smith, Incorporated
1105 Holliday
Wichita Falls, Texas 76301
Custodian
Star Bank, N.A.
425 Walnut Street
Cincinnati, Ohio 45202
Transfer Agent
American Data Services
24 West Carver Street
2nd Floor
Huntington, New York 11743
Auditors
Tait, Weller & Baker
2 Penn Center Plaza
Philadelphia, Pennsylvania 19102
Legal Counsel
Heller, Ehrman, White & McAuliffe
333 Bush Street
San Francisco, California 94104
This report is intended only for the information
of shareholders or those who have received the
prospectus covering shares of beneficial interest
of Avondale Total Return Fund, which contains
information about the management fee and other costs.
