May 11, 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 Trent
Equity Fund series of the Registrant for the six month period ended
February 28, 1998.
If you have any questions, please contact me at (602) 952-1100.
Sincerely yours,
/s/
Robert H. Wadsworth
<PAGE>
TRENT EQUITY FUND
Semi-Annual Report
For the Six Months Ended
February 28, 1998
<PAGE>
Dear Shareholder:
For the six-month period ending February 28,1998, the Trent Equity Fund gained
20.0% versus 17.3% for the S&P 500. The Fund's strong performance was the result
of the market giving preference to companies with steady earnings growth and
having an aversion to cyclical companies. After six years of unusually high
profit growth due to a healthy economy and productivity increases, the earnings
growth of the average company is beginning to return to normal. Thus, the market
should continue to move toward those companies with steady and
higher-than-average earnings growth expectations, the kind of companies that
dominate Trent Equity Fund.
ACTIVITY IN CURRENT HOLDINGS
The most significant gains during the six months were in Family Dollar Stores,
Freddie Mac, Michaels Stores, The Walt Disney Company, Gillette, American
Express and Johnson & Johnson. The weakest stocks were First Data and Nike.
Family Dollar Stores' same store sales are running well into double digits,
creating strong upward earnings momentum. The company's new every day low
pricing strategy is working very well. Michaels Stores continues its dramatic
recovery from a myriad of problems. The Fund purchased the stock in the midst of
their difficulties and that purchase has paid off handsomely with the stock up
significantly since purchase. We believe the recovery will continue for a couple
of years, leading to higher profit margins and significant earnings growth.
Michaels is unique in retail with its emphasis on arts and crafts. Disney is one
of the great brand names in the world and will continue to exploit that through
continuing increases in movies, theme parks, and projects such as its new cruise
line. Disney has had a successful year in movies. Gillette recovered from
investor jitters stemming from concern, in the summer of 1997, about possible
slowing earnings growth, the focus is now on Gillette's bright long term
prospects for its new shaving system, to be introduced in July, 1998, and
continuing rosy prospects for its Duracell division. American Express' stock
price rose on continuing market share gains versus Visa and Master Card, and on
impressive growth from its American Express Financial Advisors money management
subsidiary. First Data's stock price has suffered from poor performance in some
of its operations outside its core credit card transaction processing. The
company is addressing these problems including jettisoning some of its non-core
subsidiaries. Nike's earnings have suffered from excessive inventory stemming
from recent weakness in retail demand for athletic shoes, particularly in Asia,
but also in the US. However, Nike's dominance of the athletic shoe market gives
it a huge competitive advantage on which it will be able to capitalize as the
market turns up again. We believe that Nike will continue to broaden its reach
in sports, so that in five years athletic shoes will be a minority of its
revenues.
NEW HOLDINGS
New purchases during the six month period were Claire's Stores, Hewlett-Packard,
Crown Cork & Seal, Young Broadcasting, Intel, Qualcomm, and Gartner Group. The
purchases of Hewlett-Packard, Intel, and Qualcomm are the first time the
<PAGE>
Fund has ventured into high tech. Although we have always felt that high tech
investments carry a great deal of risk because of the difficulty of sustaining
their competitive advantages, Hewlett-Packard and Intel both have the critical
mass to ensure their continued viability. Qualcomm is more of an upstart but has
proven proficient in a number of different areas. Claire's Stores, the jewelry
retail chain catering to teenagers, is a unique retail concept and a very
successful company. Crown Cork & Seal, the metal can packager, has completed its
acquisition strategy and will now benefit the next couple of years from
increased efficiencies. Young Broadcasting is a TV station group generating
impressive amounts of free cash flow and enjoys one of the lower multiples of
operating cash flows of all broadcasters. Gartner Group is the premiere tracker
of information for the technology industry.
SIGNIFICANT GAINS AND LOSSES
The largest realized gains during the six-month period were in Reuters and
Thompson Corp. There were no significant realized losses during the six-month
period.
Trent Equity Fund has had a banner six months and we look forward to what we
believe will be continued good performance because of the strength of our
holdings. Thank you for being a Fund shareholder.
TRENT CAPITAL MANAGEMENT, INC.
<PAGE>
TRENT EQUITY FUND
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS at February 28, 1998 (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Shares COMMON STOCKS: 97.9% Market Value
- ------------------------------------------------------------------------------------------------------------------------------------
Beverages: 3.1%
<S> <C> <C>
1,800 Coca-Cola Company....................................................... $ 123,638
---------
Commercial Services: 2.5%
2,500 Gartner Group, Inc., Class A*........................................... 99,687
------
Computers: 4.4%
2,600 Hewlett-Packard Company................................................. 174,200
-------
Consumer Products: 12.1%
2,081 Gillette Company........................................................ 224,488
3,400 Nike, Inc............................................................... 149,175
8,500 Oakley, Inc.*........................................................... 102,531
-------
476,194
-------
Containers: 2.5%
1,800 Crown Cork & Seal Company, Inc.......................................... 97,200
------
Financial Services: 16.9%
3,150 American Express Company................................................ 283,697
5,350 Federal Home Loan Mortgage Corp......................................... 252,788
3,800 First Data Corp......................................................... 129,200
-------
665,685
-------
Household Products: 9.6%
4,000 Libbey, Inc............................................................. 147,500
5,000 Newell Company.......................................................... 229,375
-------
376,875
-------
Medical Supplies: 7.1%
1,500 Abbott Laboratories..................................................... 112,219
2,200 Johnson & Johnson....................................................... 166,100
-------
278,319
-------
Multimedia: 5.2%
1,825 Walt Disney Company..................................................... 204,286
-------
Recreation: 7.1%
9,700 Harley-Davidson, Inc.................................................... 281,300
-------
<PAGE>
TRENT EQUITY FUND
SCHEDULE OF INVESTMENTS at February 28, 1998 (Unaudited), Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Shares Market Value
- ------------------------------------------------------------------------------------------------------------------------------------
Retail: 20.7%
5,500 Claire's Stores, Inc.................................................... $ 99,000
6,700 Family Dollar Stores, Inc............................................... 238,687
2,775 McDonald's Corp......................................................... 151,931
7,800 Michael's Stores, Inc................................................... 265,200
8,000 PETsMART, Inc.*......................................................... 61,000
------
815,818
-------
Semiconductors: 2.2%
950 Intel Corp.............................................................. 85,203
------
Telecommunications: 2.3%
1,800 QUALCOMM, Inc.*......................................................... 91,800
------
Television: 2.2%
2,000 Young Broadcasting Corp., Class A*...................................... 88,500
------
Total Common Stocks (cost $2,629,671)................................... 3,858,705
- ---------
Principal Amount REPURCHASE AGREEMENT: 2.4%
- ------------------------------------------------------------------------------------------------------------------------------------
$95,000 Star Bank Repurchase Agreement, 4.80%, dated 2/27/98,
due 3/2/98, collateralized by $101,813 GNMA, 7.375%,
due 5/20/24 (cost $95,000) (proceeds $95,038)........................... 95,000
------
Total Investments in Securities (cost $2,724,671+): 100.3% ............. 3,953,705
Liabilities in excess of Other Assets: (0.3)%........................... (10,047)
-------
Total Net Assets: 100.0% ............................................... $3,943,658
==========
<FN>
* Non-income producing security.
+ At February 28, 1998, 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........................................... $1,321,168
Gross unrealized depreciation........................................... (92,134)
-------
Net unrealized appreciation....................................... $1,229,034
==========
</FN>
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
TRENT EQUITY FUND
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES at February 28, 1998 (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
<S> <C>
Investments in securities, at value (cost $2,724,671) ................................. $3,953,705
Cash................................................................................... 437
Dividends and interest receivable...................................................... 2,027
Prepaid expenses....................................................................... 532
---
Total assets .................................................................... 3,956,701
---------
LIABILITIES
Payables:
Advisory fees ...................................................................... 3,843
Administration fee.................................................................. 1,132
Accrued expenses....................................................................... 8,068
-----
Total liabilities................................................................ 13,043
------
NET ASSETS ............................................................................... $3,943,658
==========
Net asset value, offering and redemption price per share
($3,943,658/276,175 shares outstanding;
unlimited number of shares authorized without par value) ............................. $14.28
======
COMPONENTS OF NET ASSETS
Paid-in capital ....................................................................... $2,660,652
Accumulated net investment loss........................................................ (20,108)
Undistributed net realized gain on investments......................................... 74,080
Net unrealized appreciation on investments............................................. 1,229,034
---------
Net assets ...................................................................... $3,943,658
==========
</TABLE>
<PAGE>
TRENT EQUITY FUND
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS - For the Six Months Ended February 28, 1998 (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Income
<S> <C>
Dividends........................................................................ $ 15,132
Interest......................................................................... 154
---
Total income............................................................... 15,286
------
Expenses
Advisory fees.................................................................... 20,352
Transfer agent fees.............................................................. 6,565
Audit fee........................................................................ 5,977
Fund accounting fees............................................................. 5,951
Administration fee............................................................... 3,433
Registration fees................................................................ 1,801
Miscellaneous.................................................................... 1,770
Legal fees....................................................................... 1,577
Custody fees..................................................................... 1,562
Trustee fees..................................................................... 1,483
Reports to shareholders.......................................................... 1,427
Insurance........................................................................ 180
---
Total expenses............................................................. 52,078
Less: expenses reimbursed and waived....................................... (16,684)
-------
Net expenses............................................................... 35,394
------
Net investment loss ................................................. (20,108)
-------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from security transactions..................................... 343,005
Net change in unrealized appreciation on investments............................. 340,831
-------
Net realized and unrealized gain on investments............................ 683,836
-------
Net increase in net assets resulting from operations ................ $ 663,728
=========
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
TRENT EQUITY FUND
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months Year
Ended Ended
February 28, August 31,
1998* 1997
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM:
OPERATIONS
<S> <C> <C>
Net investment loss........................................................... $ (20,108) $ (24,679)
Net realized gain (loss) from security transactions........................... 343,005 (108,559)
Net change in unrealized appreciation on investments.......................... 340,831 735,603
------- -------
Net increase in net assets resulting from operations ................... 663,728 602,365
------- -------
DISTRIBUTIONS TO SHAREHOLDERS
Net realized gain on investments ............................................. -0- -0-
- -
CAPITAL SHARE TRANSACTIONS
Net decrease in net assets derived from net change
in outstanding shares (a).................................................. (39,917) (321,146)
------- --------
Total increase in net assets ........................................... 623,811 281,219
NET ASSETS
Beginning of period........................................................... 3,319,847 3,038,628
--------- ---------
End of period ................................................................ $3,943,658 $3,319,847
========== ==========
<FN>
(a) A summary of capital share transactions is as follows:
Six Months Year
Ended Ended
February 28, 1998* August 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
Shares Value Shares Value
- ------------------------------------------------------------------------------------------------------------------------------------
Shares sold ......................................... 7,120 $ 94,353 14,605 $ 158,843
Shares issued in reinvestment of distribution........ -0- -0- -0- -0-
Shares redeemed...................................... (10,008) (134,270) (43,688) (479,989)
------- -------- ------- --------
Net decrease ........................................ (2,888) $ (39,917) (29,083) $(321,146)
====== ========= ======= =========
*Unaudited.
</FN>
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
TRENT EQUITY FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
For a capital share outstanding throughout each period
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months September 2,
Ended Year Ended August 31, 1992* through
February 28, August 31,
1998# 1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period........... $11.90 $ 9.86 $10.24 $11.50 $11.66 $10.00
------ ------ ------ ------ ------ ------
Income from investment operations:
Net investment loss...................... (0.07) (0.10) (0.06) -0- (0.07) (0.08)
Net realized and unrealized gain
on investments........................ 2.45 2.14 0.67 0.67 0.15 1.76
---- ---- ---- ---- ---- ----
Total from investment operations............... 2.38 2.04 0.61 0.67 0.08 1.68
---- ---- ---- ---- ---- ----
Less distributions:
From net investment income............... -0- -0- -0- -0- -0- (0.01)
From net capital gains................... -0- -0- (0.99) (1.93) (0.24) (0.01)
- - ----- ----- ----- -----
Total distributions............................ -0- -0- (0.99) (1.93) (0.24) (0.02)
- - ----- ----- ----- -----
Net asset value, end of period................. $14.28 $11.90 $ 9.86 $10.24 $11.50 $11.66
====== ====== ====== ====== ====== ======
Total return................................... 20.00% 20.69% 7.23% 9.38% 0.64% 16.91%+
Ratios/supplemental data:
Net assets, end of period (millions)........... $ 3.9 $ 3.3 $ 3.0 $ 3.8 $ 3.9 $ 4.7
Ratio of expenses to average net assets:
Before expense reimbursement............. 2.94%+ 3.48% 3.63% 3.65% 3.16% 3.33%+**
After expense reimbursement.............. 2.00%+ 2.00% 2.10% 1.85% 1.85% 2.54%+**
Ratio of net investment loss to average net assets:
Before expense reimbursement............. (2.08)%+ (2.25)% (2.15)% (2.00)% (1.68)% (1.84)%+**
After expense reimbursement.............. (1.14)%+ (0.76)% (0.62)% (0.15)% (0.36)% (1.05)%+**
Portfolio turnover rate........................ 19.97% 43.81% 59.33% 46.52% 149.25% 315.38%
Average commission rate paid per share++....... $0.0729 $0.0615 $0.0625 -- -- --
<FN>
#Unaudited.
*Commencement of operations.
+Annualized.
++For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its 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 varous markets where
trading practices and commission rate structures may differ.
**Excludes taxes and tax reimbursements of 2.84% of average daily net assets on
an annualized basis.
</FN>
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
TRENT EQUITY FUND
NOTES TO FINANCIAL STATEMENTS at February 28, 1998 (Unaudited)
- --------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION
The Trent Equity 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 a
diversified, open-end management investment company. The Fund began operations
on September 2, 1992. The investment objective of the Fund is to seek capital
appreciation, both realized and unrealized. The Fund seeks to achieve its
objective by investing primarily in 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; seurities traded on
an exchange or NASDAQ for which there have been no sales and other
over-the-counter securities are valued at the last reported bid
price. Securities for which quotations are not readily available are
valued at their respective fair values as determined in good faith
by the Board of Trustees. Short-term investments are stated at cost,
which when combined with accrued interest, approximates market
value.
B. Federal Income Taxes. The Fund intends to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income to
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 is relieved on a first-in, first-out basis. Dividend
income and distributions to shareholders are recorded on the
ex-dividend date.
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.
NOTE 3 - COMMITMENTS AND OTHER RELATED PARTY TRANSACTIONS
For the six months ended February 28, 1998, Trent Capital Management, Inc.
(the "Advisor") provided the Fund with investment management services under an
Investment Advisory Agreement. The Advisor furnished all investment advice,
office space and certain administrative services, and most of the personnel
needed by the Fund. As compensation for its services, the Advisor was entitled
to a monthly fee at the annual rate of 1.15% based upon the average daily net
assets of the Fund. For the six months ended February 28, 1998, the Fund
incurred $20,352
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited), Continued
in Advisory fees. The Advisor has voluntarily limited the Fund's expenses to the
annual level of 2.00% of average daily net assets. Total reimbursed expenses
from the Advisor for the six months ended February 28, 1998 was $16,684.
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 fee equal to
the greater of 0.25% of the Fund's average daily net assets or $15,000. For the
six months ended February 28, 1998, the Fund incurred $3,433 in Administration
fees.
First Fund Distributors, Inc. (the "Distributor") acts as the Fund's
principal underwriter in a continuous public offering of the Fund's shares. The
Distributor is an affiliate of the Administrator and receives no compensation
for its services.
Certain officers and trustees of the Trust are also officers and/or
directors of the Administrator and Distributor.
NOTE 4 - INVESTMENT TRANSACTIONS
The cost of purchases and the proceeds from sales of securities, other
than short-term investments, for the six months ended February 28, 1998, were
$707,904 and $845,792, respectively.
<PAGE>
Advisor
Trent Capital Management, Inc.
3101 North Elm Street
Suite 150
Greensboro, North Carolina 27408
(910) 282-9302
Distributor
First Fund Distributors, Inc.
4455 East Camelback Road
Suite 261E
Phoenix, Arizona 85018
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, LLP
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.
