December 5, 1997
Securities and Exchange Commission
Attn: Filing Desk, Stop 1-4
450 Fifth Street, N.W.
Washington, DC 20549
Re: Professionally Managed Portfolios
File No. 811-5037
CIK No. 811030
Dear Sir or Madam:
On behalf of the above Registrant and pursuant to Rule 30b-2 under
the Investment Company Act of 1940, I enclose for filing via EDGAR,
a copy of the Semi-annual Report to shareholders of the Avondale
Total Return Fund series of the Registrant for the six month period
ended September 30, 1997.
If you have any questions, please contact me at (602) 952-1100.
Sincerely yours,
/s/
Robert H. Wadsworth
<PAGE>
December 5, 1997
Securities and Exchange Commission
Attn: Filing Desk, Stop 1-4
450 Fifth Street, N.W.
Washington, DC 20549
Re: Professionally Managed Portfolios
File No. 811-5037
CIK No. 811030
Dear Sir or Madam:
On behalf of the above Registrant and pursuant to Rule 30b-2 under
the Investment Company Act of 1940, I enclose for filing via EDGAR,
a copy of the Semi-annual Report to shareholders of the Avondale
Total Return Fund series of the Registrant for the six month period
ended September 30, 1997.
If you have any questions, please contact me at (602) 952-1100.
Sincerely yours,
Robert H. Wadsworth
<PAGE>
AVONDALE TOTAL RETURN FUND
SEMI-ANNUAL REPORT
September 30, 1997
<PAGE>
AVONDALE TOTAL RETURN FUND
November 11, 1997
Dear Fellow Shareholder:
Here we are at another half-year anniversary (September 30) with the stock
market still showing periodic signs of real life -- not just survival. One can
safely say that this bull has been rumbling along in almost uninterrupted
fashion since January 1995, each higher closing adding to its powerful longevity
record.
Last April I remarked about the "drawing power" of the magic economic
combination of positive growth and low inflation. That combination is still in
place. Investment dollars not only have accelerated their flow from sources
within the United States, but continue to be drawn from alternate sources around
the world. Undeniably, the U.S. offers the most attractive market combination of
low inflation, positive earnings growth, and outstanding market liquidity.
The cautious "negative" is the inevitable escalation of price earnings ratios.
They continue to rise. Coca-Cola is an excellent example -- a major
high-capitalization stock which trades at a price earnings multiple of 36 times
1997's estimated earnings -- 33 times December 1998's estimate.
In closing, I am going to repeat a paragraph I used in the Annual Report written
April 17, 1997. Why? Because it is still valid.
"Looking ahead, one has to at least anticipate an end to this euphoric stock
market environment. At that point, the true value of our balanced-fund approach
again will materialize -- namely, the ability to assume a defensive position by
expanding our bond and short-term, cash-equivalent positions."
We expect an end to this cycle, but we are grateful for our technical work which
caused us to remain heavily committed to stocks while the fundamentals became
less attractive. In the meantime, we maintain a position which is dependent on
the continuation of a slow-growth, low-inflation economy to support market
strength.
Please feel free to call with any questions.
Sincerely,
/S/
Herbert R. Smith, Chairman/CEO
Herbert R. Smith, Incorporated
<PAGE>
AVONDALE TOTAL RETURN FUND
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS at September 30, 1997 (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Shares COMMON STOCKS: 85.2% Market Value
Banks: 8.4%
<S> <C> <C>
5,300 First Commerce Corp..................................................... $ 297,462
7,285 First Commercial Corp................................................... 349,680
4,600 NationsBank Corp........................................................ 284,625
-------
931,767
-------
Beverages - Alcoholic: 2.4%
5,900 Anheuser-Busch Companies, Inc........................................... 266,237
-------
Beverages - Soft Drink: 2.5%
4,600 Coca-Cola Company....................................................... 280,313
-------
Computer Services: 5.6%
8,900 Exar Corp.*............................................................. 235,850
10,400 First Data Corp......................................................... 390,650
-------
626,500
-------
Computers and Peripherals: 6.9%
4,025 3Com Corp.*............................................................. 206,281
2,800 IBM Corp................................................................ 296,625
6,600 Western Digital Corp.*.................................................. 264,413
-------
767,319
-------
Consumer Products: 6.2%
6,200 Bell & Howell Holdings Company*......................................... 201,113
7,200 General Electric Corp................................................... 490,050
-------
691,163
-------
Consumer Services: 2.5%
3,400 Walt Disney Company..................................................... 274,125
-------
Electric Services: 2.2%
5,002 Duke Power Company...................................................... 247,286
-------
Electronic Instrumentation: 3.6%
21,600 Kollmorgen Corp......................................................... 405,000
-------
See accompanying Notes to Financial Statements.
<PAGE>
AVONDALE TOTAL RETURN FUND
SCHEDULE OF INVESTMENTS at September 30, 1997 (Unaudited), Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Shares Market Value
- ------------------------------------------------------------------------------------------------------------------------------------
Finance: 4.9%
3,400 American Express Company................................................ $ 278,375
2,700 Transamerica Corp....................................................... 268,650
-------
547,025
-------
Health Care: 1.5%
5,900 Columbia Healthcare..................................................... 169,625
-------
Hotel/Motel: 5.8%
5,600 Doubletree Corp.*....................................................... 270,200
5,200 Marriott International, Inc............................................. 369,525
-------
639,725
-------
Industrial Machinery: 7.2%
4,800 Caterpillar, Inc........................................................ 258,900
3,000 Stratasys, Inc.*........................................................ 50,625
6,400 Toro Company............................................................ 253,600
2,900 Tyco International Ltd.................................................. 237,981
-------
801,106
-------
Insurance: 3.5%
5,667 Travelers Group, Inc.................................................... 386,773
-------
Oil-Energy: 9.7%
4,600 Chevron Corp............................................................ 382,662
3,400 Exxon Corp.............................................................. 217,813
3,200 Louisiana Land and Exploration Corp..................................... 250,600
3,000 Mobil Corp.............................................................. 222,000
-------
1,073,075
---------
Pharmaceuticals: 11.9%
2,800 Bristol-Myers/Squibb Company............................................ 231,700
8,500 Carrington Labs, Inc.*.................................................. 52,063
4,800 Johnson & Johnson....................................................... 276,600
6,400 Pfizer, Inc............................................................. 384,400
7,200 Schering-Plough Corp.................................................... 370,800
-------
1,315,563
---------
See accompanying Notes to Financial Statements.
<PAGE>
AVONDALE TOTAL RETURN FUND
SCHEDULE OF INVESTMENTS at September 30, 1997 (Unaudited), Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Shares Market Value
Telecommunications Equipment: 0.4%
2,000 IPC Information Systems, Inc.*.......................................... $ 41,000
--------
Total Common Stock (cost $6,093,428).................................... 9,463,602
---------
Principal Amount BONDS: 9.5%
- ------------------------------------------------------------------------------------------------------------------------------------
Agencies: 8.1%
$100,000 FHLMC, 7.770%, 3/6/2002................................................. 100,283
150,000 FNMA, 5.300%, 12/10/1998................................................ 149,106
250,000 FNMA, 6.375%, 10/13/2000................................................ 250,939
228,113 FNMA, 7.000%, 6/1/2003.................................................. 230,679
158,538 FNMA, 7.500%, 8/1/2002.................................................. 161,891
-------
892,898
-------
U.S. Treasury Notes: 0.5%
50,000 7.125%, 2/29/2000....................................................... 51,406
------
Corporate: 0.9%
75,000 Associates Corp., 6.750%, 10/15/1999.................................... 75,953
25,000 IBM, 6.375%, 6/15/2000.................................................. 25,178
------
101,131
-------
Total Bonds (cost $1,041,961)........................................... 1,045,435
---------
SHORT-TERM INVESTMENTS: 4.7%
- ------------------------------------------------------------------------------------------------------------------------------------
Money Market Investment: 4.7%
524,680 Star Treasury Cash Management Fund, 4.71%, 4/1/1998
(cost $524,680)......................................................... 524,680
-------
See accompanying Notes to Financial Statements.
<PAGE>
AVONDALE TOTAL RETURN FUND
SCHEDULE OF INVESTMENTS at September 30, 1997 (Unaudited), Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Market Value
Total Investment in Securities (cost $7,660,069+): 99.4%................ $11,033,717
Other Assets less Liabilities: 0.6%..................................... 71,626
------
Total Net Assets: 100.0%................................................ $11,105,343
===========
<FN>
*Non-income producing security.
+At September 30, 1997, the cost of securities for Federal tax purposes was the
same as the basis for financial reporting. Unrealized appreciation and
depreciation of securities were as follows:
Gross unrealized appreciation....................................................... $ 3,540,025
Gross unrealized depreciation....................................................... (166,377)
--------
Net unrealized appreciation............................................. $ 3,373,648
===========
</FN>
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
AVONDALE TOTAL RETURN FUND
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES at September 30, 1997 (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
<S> <C>
Investments in securities, at value (cost $7,660,069).................................... $11,033,717
Cash..................................................................................... 59,946
Dividends and interest receivable........................................................ 26,275
Other assets ............................................................................ 8,996
-----
Total assets ................................................................ 11,128,934
----------
LIABILITIES
Payables:
Advisory fees...................................................................... 6,354
Administration fee................................................................. 2,728
Accrued expenses ........................................................................ 14,509
------
Total liabilities ........................................................... 23,591
------
NET ASSETS ................................................................................... $11,105,343
===========
Net asset value, offering and redemption price per share
($11,105,343/348,363 shares outstanding;
unlimited number of shares authorized without par value) ........................ $31.88
======
COMPONENTS OF NET ASSETS
Paid-in capital ......................................................................... $ 7,511,439
Undistributed net investment income...................................................... 1,175
Undistributed net realized gain on investments .......................................... 219,081
Net unrealized appreciation on investments .............................................. 3,373,648
---------
Net assets ........................................................................ $11,105,343
===========
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
AVONDALE TOTAL RETURN FUND
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS - For the Six Months Ended September 30, 1997
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Income
<S> <C>
Dividends ....................................................................... $ 61,628
Interest ......................................................................... 55,301
------
Total income ............................................................... 116,929
-------
Expenses
Advisory fees...................................................................... 37,257
Administration fee ................................................................ 15,041
Custodian and accounting fees .................................................... 11,210
Audit fees ....................................................................... 6,017
Registration fees.................................................................. 5,311
Transfer agent fees .............................................................. 4,513
Insurance fees..................................................................... 2,016
Reports to shareholders ........................................................... 2,006
Miscellaneous...................................................................... 1,504
Trustees' fees ................................................................... 1,504
Legal fees ....................................................................... 1,254
-----
Total expenses ............................................................. 87,633
------
Net investment income ................................................ 29,296
------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss from security transactions............................................. (27,975)
Net change in unrealized appreciation on investments..................................... 2,084,197
---------
Net realized and unrealized gain on investments.............................. 2,056,222
---------
Net Increase in Net Assets Resulting from Operations .................. $ 2,085,518
===========
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
AVONDALE TOTAL RETURN FUND
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months Year
Ended Ended
September 30, 1997* March 31,1997
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS
<S> <C> <C>
Net investment income ................................................ $ 29,296 $ 63,314
Net realized (loss) gain from security transactions ..................... (27,975) 328,367
Net change in unrealized appreciation on investments ..................... 2,084,197 (278,573)
--------- --------
Net increase in net assets resulting from operations .............. 2,085,518 113,108
--------- -------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Net investment income .................................................... (28,121) (103,009)
Net realized gain from security transactions ............................. -0- (618,518)
- --------
Total dividends and distributions to shareholders .................. (28,121) (721,527)
------- --------
CAPITAL SHARE TRANSACTIONS
Net (decrease) increase in net assets derived from net change in
outstanding shares (a).............................................. (829,995) 695,317
-------- -------
Total increase in net assets....................................... 1,227,402 86,898
NET ASSETS
Beginning of period....................................................... 9,877,941 9,791,043
--------- ---------
End of period (including undistributed net investment income of
$1,175 and $0, respectively)....................................... $11,105,343 $9,877,941
=========== ==========
<FN>
(a) A summary of capital share transactions is as follows:
Six Months Ended Year Ended
September 30, 1997* March 31, 1997
Shares Value Shares Value
Shares sold ...................................... 5,293 $ 159,935 50,865 $1,401,783
Shares issued in reinvestment of distributions.... 811 25,262 25,387 676,759
Shares redeemed................................... (35,821) (1,015,192) (50,907) (1,383,225)
------- ---------- ------- ----------
Net (decrease) increase........................... (29,717) $ (829,995) 25,345 $ 695,317
======= ========== ====== =========
*Unaudited.
</FN>
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
AVONDALE TOTAL RETURN FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
For a capital share outstanding throughout each period
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months
Ended Years Ended March 31,
- ------------------------------------------------------------------------------------------------------------------------------------
Sept. 30, 1997* 1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ... $26.13 $27.76 $23.58 $22.93 $24.78 $24.19
Income from investment operations:
Net investment income.............. .08 .18 .27 .23 .26 .46
Net realized and unrealized gain
(loss) on investments ....... 5.75 .14 6.00 1.49 (.44) 1.62
---- --- ---- ---- ---- ----
Total from investment operations......... 5.83 .32 6.27 1.72 (.18) 2.08
---- --- ---- ---- ---- ----
Less distributions:.....................
From net investment income......... (.08) (.28) (.27) (.23) (.35) (.49)
From net capital gains............. .00 (1.67) (1.82) (.84) (1.32) (1.00)
--- ----- ----- ---- ----- -----
Total distributions...................... (.08) (1.95) (2.09) (1.07) (1.67) (1.49)
---- ----- ----- ----- ----- -----
Net asset value, end of period........... $31.88 $26.13 $27.76 $23.58 $22.93 $24.78
====== ====== ====== ====== ====== ======
Total return............................. 22.32% 1.10% 26.67% 7.82% (0.82)% 9.19%
Ratios/supplemental data:
Net assets, end of period (millions)..... $11.1 $ 9.9 $ 9.8 $ 6.9 $ 7.4 $ 7.6
Ratio of expenses to average net assets.. 1.65%+ 1.83% 1.69% 1.77% 1.83% 1.78%
Ratio of net investment income to average
net assets......................... 0.55%+ 0.62% 1.03% 0.96% 1.09% 1.97%
Portfolio turnover rate ................ 14.27% 40.87% 52.25% 52.24% 73.65% 157.64%
Average commission rate paid per share++.. $.1000 $.1000 - - - -
<FN>
+Annualized.
++For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose average commission rate paid per share for security trades on which
commissions are charged. This amount may vary from period to period and fund to
fund depending on the mix of trades executed in various markets where trading
practices and commission rate structures may differ.
*Unaudited.
</FN>
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
AVONDALE TOTAL RETURN FUND
NOTES TO FINANCIAL STATEMENTS at September 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION
Avondale Total Return Fund (the "Fund") is a diversified series of shares
of beneficial interest of Professionally Managed Portfolios (the "Trust"), which
is registered under the Investment Company Act of 1940 (the "1940 Act") as an
open-end investment management company. The Fund began operations on October 12,
1988.
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.
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 sales price at the close of regular
trading on the last business day of the period; securities traded on
an exchange or NASDAQ for which there have been no sales and other
over-the-counter securities are valued at the last reported bid
price. Securities for which quotations are not readily available are
valued at their respective fair values as determined in good faith
by the Board of Trustees. Short-term investments are stated at cost,
which when combined with accrued interest, approximates market
value.
U.S. 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 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. The cost of securities owned on realized
transactions are relieved on a first-in, first-out basis. Dividend
income and distributions to shareholders are recorded on the
ex-dividend date. Interest income is recorded on an accrual basis.
Discounts and premiums on securities purchased are amortized over
the life of the respective securities.
D. Use of Estimates. The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the
financial statements. Actual results could differ from those
estimates.
<PAGE>
AVONDALE TOTAL RETURN FUND
NOTES TO FINANCIAL STATEMENTS (Unaudited), Continued
- --------------------------------------------------------------------------------
NOTE 3 - COMMITMENTS AND OTHER RELATED PARTY TRANSACTIONS
For the six months ended September 30, 1997, Herbert R. Smith,
Incorporated (the "Manager") provided the Fund with investment management
services under an Investment Advisory Agreement. The Manager furnished all
investment advice, office space, facilities, and most of the personnel needed by
the Fund. 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. For the six months ended September 30, 1997, the
Fund incurred $37,257 in Advisory fees.
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 a monthly fee at
an annual rate 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. The
Distributor is an affiliate of the Administrator.
Certain officers and trustees of the Trust are also officers and/or
directors of the Administrator and Distributor.
NOTE 4 - PURCHASES AND SALES OF SECURITIES
For the six months ended September 30, 1997, the cost of purchases and the
proceeds from sales of securities, excluding short-term securities and U.S.
Government securities, were $770,100 and $1,009,235, respectively. For the six
months ended September 30, 1997, the cost of purchases and the proceeds from
sales of U.S. Government securities, excluding short-term securities, were
$242,043 and $703,966, respectively.
<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, Inc.
P.O. Box 5536
Hauppauge, New York 11788-0132
Auditors
Tait, Weller & Baker
Eight Penn Center Plaza, Suite 800
Philadelphia, Pennsylvania 19103
Legal Counsel
Paul, Hastings, Janofsky & Walker
345 California Street, 29th Floor
San Francisco, California 94104
This report is intended for shareholders of the Fund and may not be used as
sales literature unless preceded or accompanied by a current prospectus.
Past performance results shown in this report should not be considered a
representation of future performance. Share price and returns will fluctuate
so that shares, when redeemed may be worth more or less than their original
cost. Statements and other information herein are dated and are subject to
change.
