Trent Equity Fund
Annual Report
For the Year Ended
August 31, 1998
<PAGE>
Trent Equity Fund
September, 1998
Dear Shareholder:
The poor August stock market took its toll on Trent Equity Fund as it did on
funds across the board. Even though the recent drop in the market was dramatic,
we must not lose the perspective that short-term fluctuations are an unavoidable
part of investing for the long run. We are confident that the increasing
earnings of the strong companies in which we invest will continue to be
reflected over a longer period of time in rising stock prices. The Fund stays
fully invested and will continue that approach in the future: We think it is the
best formula for long- term success. For the twelve-month period ending August
31, 1998, the Trent Equity Fund was up 2.77% as compared with a gain of 8.31%
for the S&P 500 with dividends re-invested. The last trading day of the Fund's
fiscal year -- August 31, 1998 -- was the day of the 512 point drop in the Dow
Jones Industrial Average. After eleven months -- ending July 31, 1998 -- the
Fund was up 16.45%: August certainly took its toll.
ACTIVITY IN CURRENT HOLDINGS
Primarily because of August's market drop, there are only a couple of holdings
that merit mention for gains during the six-month period ending August 31, 1998.
Harley-Davidson gained 17% primarily because of a partial liquidation in July
1998 prior to the market drop. Harley's earnings continue to grow at a plus 20%
annualized rate. Newell rose 4% during the six-month period because its revenues
are virtually totally US-based and thus have not been affected by the Asian
economic turmoil. The worst performers during the six-month period were
Michael's Stores, off 29%; Disney, off 26%; Crown Cork & Seal, off 39%; and
Hewlett-Packard, off 27%. The drop in Michael's Stores' stock price reflects a
general drop in retail stock prices due to concern about the effect of a
possible recession on consumer purchasing habits. The Fund has owned Michael's
Stores since 1995. We purchased the stock because of its dominance in the arts
and crafts retail sector and because the stock price had dropped due to
management missteps. It has been our continuing belief that Michael's Stores has
a unique franchise because of its domination in a retail sector in which all
competitors are mom-and-pop stores. Michael's Stores' new management team has
been doing everything right, including inventory control and store format. We
believe that Michael's Stores is in the midst of a four-year long recovery and a
return to the high profit margin of 1994. The drop in Disney is due primarily to
Asian exposure, some tough earnings comparisons for its Creative Content
division and weak ratings at its ABC television network. The drop in Crown Cork
& Seal is due to the global nature of Crown Cork's business. Hewlett-Packard is
one of the leading technology companies, which as an investor gives us great
comfort. When we purchased Hewlett-Packard in December 1997, we did so with the
thought that its stock price was particularly attractive. In the face of current
slow revenue growth, we are happy to take a longer-term view that
Hewlett-Packard's strong presence in technology will lead to strong future
growth.
<PAGE>
NEW HOLDINGS
New purchases during the six month period were Campbell Soup, Caterpillar,
Claire's Stores, Schlumberger, Sinclair Broadcasting and Tribune Company. We
added to positions in Crown Cork & Seal, Intel, Nike, Oakley, Qualcomm and Young
Broadcasting. Campbell Soup is the leading US manufacturer of canned soup and is
a major manufacturer/marketer of spaghetti and Mexican sauces, bakery products
and fruit and vegetable juices. In addition to the Campbell's name, brand names
include Pepperidge Farm, Prego, Godiva and V8. As the world's largest producer
of earth moving equipment, Caterpillar adds a nice diversification to the Fund
in the category of Capital Goods. We purchased Caterpillar at an unusually low
price-earnings ratio relative to the market's P/E. Claire's Stores is the
largest US costume jewelry retailer. The retail group has recently purchased the
Mr. Rags apparel chain and has launched the Just Nikki catalog. For the past
year, oil service stocks have been pummeled. We have recently purchased
Schlumberger, one of the leading oil field service companies, after a large drop
in stock price due to the falling price of oil. Schlumberger is at a historic
low price-earnings ratio relative to the market. Sinclair Broadcasting is an
attractively priced TV broadcasting group based in Baltimore. In addition to the
Chicago Tribune, Tribune Company owns newspapers in Orlando and Fort Lauderdale,
two dynamic, fast growing areas. In addition, the company owns sixteen major
market TV stations. Operating income is evenly distributed between newspaper and
TV broadcasting.
SIGNIFICANT REALIZED GAINS AND LOSSES
Young Broadcasting was sold in July 1998 after the company announced that it was
seeking a buyer. The Fund made a 43% gain on Young Broadcasting.
We are optimistic that those nations suffering from currency devaluation and
foreign credit problems will emerge from their problems with much stronger
fiscal and monetary discipline and order. Due to free trade, low inflation,
increased productivity through technology, and the privatization of nationalized
industries, the next twenty years should be excellent for global commerce. Trent
Equity Fund owns excellent companies with bright prospects that we fully expect
to participate in that growth.
We thank you for being an investor in Trent Equity Fund.
TRENT CAPITAL MANAGEMENT, INC.
<PAGE>
Trent Equity Fund
Value of $10,000 vs. the S&P 500 Index
Average Annual Total Return
Period Ended August 31, 1998
1 Year..................... 2.77%
5 Year..................... 7.92%
Since Inception (8/13/90)*. 11.48%
Date Fund S&P
9/2/90 10,000 10,000
12/31/90 9,840 7,496
6/30/91 12,900 8,563
12/31/91 15,280 9,779
6/30/92 13,980 9,704
12/31/92 15,790 10,528
6/30/93 15,157 11,027
12/31/93 16,640 11,586
6/30/94 15,421 11,181
12/31/94 14,890 11,733
6/30/95 17,305 14,103
12/31/95 17,014 16,137
6/30/96 19,898 17,758
12/31/96 20,487 19,847
6/30/97 23,666 23,923
12/31/97 25,648 26,465
6/30/98 30,515 31,131
8/31/98 24,000 26,360
Past performance is not predictive of future performance.
The S&P 500 is a broad market-weighted average of U.S. blue-chip companies.
The index is unmanaged and returns include reinvested dividends.
*Performance for the Trent Equity Fund reflects the performance of the Trent
Partners LP, whose assets were transferred into the Trent Equity Fund on
September 11, 1992, net of actual fees and expenses.
<PAGE>
Trent Equity Fund
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS at August 31, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Shares COMMON STOCKS: 99.2% Market Value
- ------------------------------------------------------------------------------------------------------------------------------------
Commercial Services: 1.8%
<S> <C> <C>
2,500 Gartner Group, Inc., Class A*........................................... $ 57,813
--------
Computers: 3.9%
2,600 Hewlett-Packard Company................................................. 126,262
-------
Consumer Products: 9.9%
2,062 Gillette Company........................................................ 84,800
3,800 Nike, Inc., Class B..................................................... 131,813
10,500 Oakley, Inc.*........................................................... 105,656
-------
322,269
-------
Containers: 2.3%
2,300 Crown Cork & Seal Company, Inc.......................................... 75,325
------
Entertainment: 4.6%
5,475 Walt Disney Company..................................................... 150,220
-------
Financial Services: 12.1%
3,150 American Express Company................................................ 245,700
3,750 Federal Home Loan Mortgage Corp......................................... 148,125
-------
393,825
-------
Food and Beverage: 6.7%
2,400 Campbell Soup Company................................................... 120,900
1,500 Coca-Cola Company....................................................... 97,688
------
218,588
-------
Household Products: 11.1%
4,000 Libbey, Inc............................................................. 122,250
5,000 Newell Company.......................................................... 238,750
-------
361,000
-------
Machinery: 4.4%
3,380 Caterpillar, Inc........................................................ 142,594
-------
<PAGE>
Trent Equity Fund
SCHEDULE OF INVESTMENTS at August 31, 1998, Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Shares Market Value
Medical Supplies: 6.6%
1,600 Abbott Laboratories..................................................... $ 61,600
2,200 Johnson & Johnson....................................................... 151,800
-------
213,400
-------
Oil - Field Services: 3.2%
2,400 Schlumberger Ltd........................................................ 105,150
-------
Publishing - Newspapers: 4.4%
2,200 Tribune Company......................................................... 141,763
-------
Recreation: 6.8%
7,150 Harley-Davidson, Inc.................................................... 220,309
-------
Retail: 14.7%
7,600 Claire's Stores, Inc.................................................... 114,000
2,775 McDonald's Corp......................................................... 155,573
7,150 Michaels Stores, Inc.*.................................................. 168,025
8,000 PETsMART, Inc.*......................................................... 39,500
------
477,098
-------
Semiconductors: 2.8%
1,275 Intel Corp.............................................................. 90,764
------
Telecommunications: 3.1%
2,300 QUALCOMM, Inc.*......................................................... 101,056
-------
Television: 0.8%
1,600 Sinclair Broadcast Group, Inc., Class A................................. 25,700
------
Total Investments in Securities (cost $2,946,372+): 99.2% .............. 3,223,136
Other Assets less Liabilities: 0.8%..................................... 24,433
------
Total Net Assets: 100.0% ............................................... $3,247,569
==========
<FN>
* Non-income producing security.
<PAGE>
Trent Equity Fund
SCHEDULE OF INVESTMENTS at August 31, 1998, Continued
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+ At August 31, 1998, the cost of investments 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........................................... $ 664,630
Gross unrealized depreciation........................................... (387,866)
--------
Net unrealized appreciation....................................... $ 276,764
=========
</FN>
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
Trent Equity Fund
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES at August 31, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
<S> <C>
Investments in securities, at value (cost $2,946,372) ................................. $3,223,136
Cash................................................................................... 41,066
Receivables:
Dividends........................................................................ 2,345
Fund shares sold................................................................. 9,125
Other assets........................................................................... 28
--
Total assets .................................................................... 3,275,700
---------
LIABILITIES
Payables:
Advisory fees ...................................................................... 11,036
Administration fee.................................................................. 595
Accrued audit fee...................................................................... 12,039
Accrued expenses....................................................................... 4,461
-----
Total liabilities................................................................ 28,131
------
NET ASSETS ............................................................................... $3,247,569
==========
Net asset value, offering and redemption price per share
($3,247,569/265,590 shares outstanding;
unlimited number of shares authorized without par value) ............................. $12.23
======
COMPONENTS OF NET ASSETS
Paid-in capital ....................................................................... $2,500,608
Undistributed net realized gain on investments......................................... 470,197
Net unrealized appreciation on investments............................................. 276,764
-------
Net assets ...................................................................... $3,247,569
==========
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
Trent Equity Fund
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS - For the Year Ended August 31, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Income
<S> <C>
Dividends........................................................................ $ 31,353
Interest......................................................................... 924
---
Total income............................................................... 32,277
------
Expenses
Advisory fees.................................................................... 43,550
Administration fee............................................................... 15,000
Fund accounting fees............................................................. 13,104
Audit fee........................................................................ 12,027
Transfer agent fees.............................................................. 10,713
Reports to shareholders.......................................................... 4,565
Custody fees..................................................................... 4,291
Trustee fees..................................................................... 3,815
Registration fees................................................................ 3,615
Legal fees....................................................................... 3,178
Miscellaneous.................................................................... 2,585
Insurance........................................................................ 180
---
Total expenses............................................................. 116,623
Less: expenses waived and reimbursed....................................... (40,884)
-------
Net expenses............................................................... 75,739
------
Net investment loss ................................................. (43,462)
-------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain from security transactions..................................... 782,584
Net change in unrealized appreciation on investments............................. (611,439)
--------
Net realized and unrealized gain on investments............................ 171,145
-------
Net increase in net assets resulting from operations ................ $ 127,683
=========
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
Trent Equity Fund
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
Year Year
Ended Ended
August 31, August 31,
1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM:
OPERATIONS
<S> <C> <C>
Net investment loss........................................................ $ (43,462) $ (24,679)
Net realized gain (loss) from security transactions........................ 782,584 (108,559)
Net change in unrealized appreciation on investments....................... (611,439) 735,603
-------- -------
Net increase in net assets resulting from operations ................... 127,683 602,365
------- -------
CAPITAL SHARE TRANSACTIONS
Net decrease in net assets derived from net change
in outstanding shares (a)............................................... (199,961) (321,146)
-------- --------
Total (decrease) increase in net assets ................................ (72,278) 281,219
NET ASSETS
Beginning of year.......................................................... 3,319,847 3,038,628
--------- ---------
End of year .................................................................. $3,247,569 $3,319,847
========== ==========
<FN>
(a) A summary of capital share transactions is as follows:
Year Year
Ended Ended
August 31, 1998 August 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
Shares Value Shares Value
- ------------------------------------------------------------------------------------------------------------------------------------
Shares sold ......................................... 19,742 $ 281,652 14,605 $ 158,843
Shares redeemed...................................... (33,215) (481,613) (43,688) (479,989)
------- -------- ------- --------
Net decrease ........................................ (13,473) $(199,961) (29,083) $(321,146)
======= ========= ======= =========
</FN>
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
Trent Equity Fund
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
For a capital share outstanding throughout each year
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended August 31,
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year...................... $11.90 $ 9.86 $10.24 $11.50 $11.66
Income from investment operations:
Net investment loss............................... (0.16) (0.10) (0.06) 0.00 (0.07)
Net realized and unrealized gain
on investments................................. 0.49 2.14 0.67 0.67 0.15
---- ---- ---- ---- ----
Total from investment operations........................ 0.33 2.04 0.61 0.67 0.08
---- ---- ---- ---- ----
Less distributions:
From net investment income........................ 0.00 0.00 0.00 0.00 0.00
From net capital gains............................ 0.00 0.00 (0.99) (1.93) (0.24)
---- ---- ----- ----- -----
Total distributions..................................... 0.00 0.00 (0.99) (1.93) (0.24)
---- ---- ----- ----- -----
Net asset value, end of year............................ $12.23 $11.90 $ 9.86 $10.24 $11.50
====== ====== ====== ====== ======
Total return............................................ 2.77% 20.69% 7.23% 9.38% 0.64%
Ratios/supplemental data:
Net assets, end of period (millions).................... $ 3.2 $ 3.3 $ 3.0 $ 3.8 $ 3.9
Ratio of expenses to average net assets:
Before expense reimbursement...................... 3.08% 3.48% 3.63% 3.65% 3.16%
After expense reimbursement....................... 2.00% 2.00% 2.10% 1.85% 1.85%
Ratio of net investment loss to average net assets:
Before expense reimbursement...................... (2.23)% (2.25)% (2.15)% (2.00)% (1.68)%
After expense reimbursement....................... (1.15)% (0.76)% (0.62)% (0.15)% (0.36)%
Portfolio turnover rate................................. 41.14% 43.81% 59.33% 46.52% 149.25%
<FN>
</FN>
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
Trent Equity Fund
NOTES TO FINANCIAL STATEMENTS at August 31, 1998
- --------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION
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; 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.
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 year ended August 31, 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 year ended August 31, 1998, the Fund incurred
$43,550 in advisory
<PAGE>
NOTES TO FINANCIAL STATEMENTS, Continued
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 year ended August 31, 1998 was $32,846.
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 received a fee equal to
the greater of 0.25% of the Fund's average daily net assets or $15,000. During
the year ended August 31, 1998, the Administrator waived $8,038 of its fee.
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 the Distributor.
NOTE 4 - INVESTMENT TRANSACTIONS
The cost of purchases and the proceeds from sales of securities, other
than short-term investments, for the year ended August 31, 1998, were $1,521,647
and $1,782,413, respectively.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
To the Shareholders of
the Trent Equity Fund and
Board of Trustees of
Professionally Managed Portfolios
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of Trent Equity Fund (a series of
Professionally Managed Portfolios) as of August 31, 1998, and the related
statements of operations for the year then ended and the 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 audit.
We conducted our audit 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
August 31, 1998, by correspondence with the custodian. 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 audit provides 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
Trent Equity Fund as of August 31, 1998, the results of its operations for the
year then ended, the 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, in conformity with generally accepted accounting principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
September 11, 1998
<PAGE>
Advisor
Trent Capital Management, Inc.
3101 North Elm Street
Suite 150
Greensboro, North Carolina 27408
(336) 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.
