CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
PROFESSIONALLY MANAGED PORTFOLIOS
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
1) Amount previously paid:
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2) Form, Schedule or Registration No.
Schedule 14A
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3) Filing party:
Registrant
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4) Date filed:
September 3, 1998
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<PAGE>
[Herbert R. Smith, Incorporated letterhead]
September 1, 1998
Shareholder Name
Shareholder Address
City, State, Zip Code__
RE: Avondale Total Return Fund
Dear Shareholder:
Please find enclosed Notice of Special Meeting to be Held September 30, 1998 and
Proxy Statement relating thereto.
Herbert R. Smith Incorporated ("HRSI"), the investment adviser to the Avondale
Total Return Fund (the "Fund") , a series of the Professionally Managed
Portfolios (the "Trust") has recommended to the Board of Trustees of the Trust
that Hester Capital Management, L.L.C. ("Hester Capital Management") be engaged
to serve as investment adviser to the Fund. Hester Capital Management was
founded in 1989 and provides investment counseling and portfolio management
services to private clients and institutional investors primarily in Texas.
Hester Capital Management will continue the Fund's traditional investment
objective of seeking a combination of income and capital appreciation. The goal
remains maximum total return consistent with reasonable risk through investments
in common stocks and fixed income securities.
You are cordially invited to attend the meeting at 9 a.m. on Wednesday,
September 30th at 1105 Holliday Street, Wichita Falls (Herb Smith's office) to
approve a new investment advisory agreement between the Fund and Hester Capital
Management.
Regardless of whether you plan to attend the meeting, please complete, sign and
return promptly the enclosed proxy card.
Very truly yours,
Herbert R. Smith I. Craig Hester
Enclosures
<PAGE>
Professionally Managed Portfolios
Avondale Total Return Fund
1105 Holliday Street
Wichita Falls, Texas 76301
Notice of Special Meeting
To Be Held September 30, 1998
To the shareholders of the Avondale Total Return Fund (the "Fund"), a series of
Professionally Managed Portfolios (the "Trust"), for a Special Meeting of the
Fund to be held on September 30, 1998:
Notice is hereby given that a Special Meeting (the "Meeting") of
shareholders of the Fund, will be held on September 30, 1998, at 9:00 a.m.,
(local time), at 1105 Holliday Street, Wichita Falls, Texas 76301. At the
Meeting, you and the other shareholders of the Fund will be asked to consider
and vote:
1. To approve and confirm a new investment advisory
agreement between the Fund and Hester Capital Management, L.L.C.
("Hester Capital Management") pursuant to which Hester Capital
Management will act as investment adviser to the Fund on the same
basic terms as the current investment advisory agreement between
the Fund and Herbert R. Smith Incorporated ("HRSI").
2. To transact such other business as may properly come before
the Meeting or any adjournments thereof.
Shareholders of record at the close of business on September 1, 1998 are
entitled to notice of, and to vote at, the Meeting. Please read the accompanying
Proxy Statement. Regardless of whether you plan to attend the Meeting, PLEASE
COMPLETE, SIGN AND RETURN PROMPTLY THE ENCLOSED PROXY CARD so that a quorum will
be present and a maximum number of shares may be voted. If you attend the
Meeting, you may change your vote at that time.
By Order of the Board of Trustees
Robin Berger, Secretary
Wichita Falls, Texas
September 1, 1998
<PAGE>
Professionally Managed Portfolios
Avondale Total Return Fund
1105 Holliday Street
Wichita Falls, Texas 76301
PROXY STATEMENT
To the shareholders of the Avondale Total Return Fund (the "Fund"), a series of
Professionally Managed Portfolios (the "Trust"), an open-end management
investment company, for a Special Meeting of Shareholders of the Fund to be held
on September 30,1998:
This Proxy Statement is being sent to the shareholders of the Fund on
behalf of the Trust's Board of Trustees in connection with the Fund's
solicitation of voting instructions for use at a Special Meeting of Shareholders
of the Fund (the "Meeting") to be held on September 30, 1998 at 9:00 a.m.,
(local time), at the offices of the Fund, 1105 Holiday Street, Wichita Falls
Texas, 76301. The approximate mailing date of this Proxy Statement is September
15, 1998. At the Meeting, the shareholders of the Fund will be asked:
1. To approve and confirm a new investment advisory agreement
between the Fund and Hester Capital Management, L.L.C. ("Hester
Capital Management") pursuant to which Hester Capital Management will
act as investment adviser to the Fund on the same basic terms as the
current investment advisory agreement between the Fund and Herbert R.
Smith Incorporated ("HRSI").
2. To transact such other business as may properly come before
the Meeting or any adjournments thereof.
Any voting instructions given to the Fund may be revoked at any time before
the Meeting by notifying the Secretary of the Trust.
If sufficient votes are not received by the date of the Meeting, a person named
as proxy may propose one or more adjournments of the Meeting for a period or
periods of not more than 120 days in the aggregate to permit further
solicitation of proxies. The persons named as proxies will vote all proxies in
favor of adjournment.
Shareholders of the Fund at the close of business on September 1, 1998 will
be entitled to be present and vote at the Meeting. As of that date, there were
288,286 shares of the Fund outstanding and entitled to vote, representing total
net assets of approximately $9,121,796.57.
To the knowledge of the Trust's management, before the close of business on
September 1, 1998 the officers and Trustees of the Trust owned, as a group, less
than 1% of the shares of the Fund.
To the knowledge of the Trust's management, before the close of business on
September 1, 1998, persons owning beneficially more than 5% of the outstanding
shares of the Fund were as follows:
Name and Address; Shares Held and Percent of Fund
Westwood Trust TTEE 19,485
Humphrey Printing Company 6.76%
Profit Sharing Trust
200 Crescent Court, Suite 1300
Dallas, TX 75201
E. Paul Helen Buck Waggoner Foundation 17,787
Waggoner National Bank Trust Dept. 6.17%
P.O. Box 2271
Vernon, TX 76385-2271
Herbert R. Smith, Inc. Employee Benefit Plan 15,637
1105 Holliday Street 5.42%
Wichita Falls, TX 76301-4421
As noted above, the Fund's investment adviser was Herbert R. Smith,
Incorporated, 1105 Holliday Street, Wichita Falls, Texas 76301. The Fund's
distributor is First Fund Distributors, Inc., 4455 E. Camelback, Suite 261E,
Phoenix, Arizona 85018. The Fund's Transfer and Dividend Distributing Agent is
American Data Services, P.O. Box 5536, Hauppauge, New York 11788-0132.
The persons named in the accompanying proxy will vote in each case as
directed in the proxy, but in the absence of such direction, they intend to vote
FOR Proposal No. 1 and may vote in their discretion with respect to other
matters not now known to the Board of Trustees that may be presented to the
Meeting.
PROPOSAL NO. 1:
APPROVAL OR DISAPPROVAL OF INVESTMENT
ADVISORY AGREEMENT BETWEEN
THE FUND AND THE ADVISER
Background
General. Herbert R. Smith, Incorporated ("HRSI"), the Fund's investment
adviser, has resigned as investment adviser to the Fund effective August 31,
1998. This Meeting has been called for the purpose of considering a new
investment advisory agreement for the Fund as a result of HRSI's recommendation
to the Trustees that the Fund engage Hester Capital Management to serve as
investment adviser to the Fund. Herbert R. Smith, the Fund's portfolio manager,
has entered into an agreement with Hester Capital Management whereby Mr. Smith
will consult with Hester Capital Management with respect to its management of
the Fund. At meetings on July 23 and August 18, 1998, the Board of Trustees of
the Fund met with Hester Capital Management's chief executive officer, I. Craig
Hester, and the proposed new portfolio co-manager for the Fund, John Gunthorp.
After reviewing Hester Capital Management's credentials and discussing how
Hester Capital Management would manage the Fund, the Trustees approved Hester
Capital Management as investment adviser to the Fund commencing September 1,
1998. The new Advisory Agreement with Hester Capital Management (the "New
Advisory Agreement") contains the same terms and fees, differing only in the
effective and termination dates and minor updating changes. The Fund's Board of
Trustees has approved the submission of the New Advisory Agreement to
shareholders and has recommended that shareholders approve it.
Information Regarding HRSI and Hester Capital Management
HRSI, is a Texas corporation with offices at 1105 Holliday Street, Wichita
Falls, Texas 76301. HRSI is registered under the Investment Advisers Act of 1940
(the "Advisers Act").
Herbert R. Smith will be retained by Hester Capital Management as a
consultant to the Fund. In this capacity Mr. Smith will work to provide for a
smooth transition of the management of the Fund to Hester Capital Management.
Hester Capital Management, L.L.C, a Texas limited liability company, is a
registered investment adviser under the Advisers Act and is located at 100
Congress Avenue, Austin, TX 78701, and provides investment advisory services to
individuals and institutions with assets of approximately $450 million. Hester
Capital Management is a majority-owned subsidiary of Morgan Asset Management,
Inc., which is owned by Morgan Keegan & Co., a New York Stock Exchange listed,
brokerage and investment firm headquartered in Memphis, Tennessee. Mr. I. Craig
Hester, President, and Mr. John Gunthorp, Executive Vice President, will be
responsible for the management of the Fund's portfolio. Mr. Hester and Mr.
Gunthorp have been associated with Hester Capital Management as principal
investment officers since 1989 (inception) and 1990, respectively.
The directors of Hester Capital Management include: I. Craig Hester, James
R. Huffines, S. Mark Powell, Glenn Biggs, Jack A. Griggs, Robert P. Colombo,
Allen Morgan, Jr., William F. Hughes, Jr. and Dr. Peter T. Flawn. With the
exception of Mr. Griggs and Dr. Flawn, each director has a membership interest
in Hester Capital Management.
Hester Capital Management currently manages fixed income, balanced and
equity portfolios. As an equity adviser, Hester Capital Management typically
follows a growth and income, coupled with a "growth at reasonable value,"
strategy. Hester Capital Management emphasizes fundamental analysis
(shareholders note: HRSI relied on a more technical approach).
Under Hester Capital Management, the Fund will pursue its traditional
investment objective of seeking the combination of income and capital
appreciation that will produce the maximum total return consistent with
reasonable risk through investments in common stocks and fixed income
securities. Hester Capital Management does not anticipate materially increasing
or decreasing the Fund's current equity allocations, but has indicated that it
wants the flexibility to invest up to 100% of the Fund's assets in equity or
fixed income as circumstances warrant. The Board of Trustees has approved giving
Hester Capital Management this additional flexibility. In selecting equity
investments for the Fund, Hester Capital Management uses fundamental analysis
and focuses on stocks of companies that have a market capitalization equal to or
in excess of $500 million (commonly known as large mid-cap stocks) and stocks of
companies that have a market capitalization in excess of $1 billion (commonly
known as large cap stocks). Hester Capital Management anticipates that, on
average, the Fund's equity portfolio might contain 45 to 50 names (under HRSI,
the Fund typically held about 30 names). The Fund will retain many of its
current equity positions, and the annual portfolio turnover in the equity
portion of the Fund is not expected to exceed 30%. On the fixed income side,
Hester Capital Management would continue to use U.S. Treasury obligations, but
would also mix in high grade corporate and asset backed securities, as well as
government agency securities. Typically, the average maturity for the fixed
income portion of the Fund's portfolio would be between two and ten years. This
does not preclude, however, the Fund from purchasing fixed income securities
with longer maturity periods (e.g. thirty-year government bonds).
Name of Fund
The Board of Trustees has approved a change in the Fund's name to "Avondale
Hester Total Return Fund," contingent upon shareholder approval of a new
investment advisory agreement with Hester Capital Management.
HRSI Advisory Agreement
Under the HRSI Advisory Agreement, HRSI was entitled to receive a
management fee computed at the rate of 0.70% per annum of the first $200 million
of the average daily net assets of the Fund, 0.60% per annum on the next $300
million of the average daily net assets of the Fund, and 0.50% per annum on the
average daily net assets of the Fund in excess of $500 million. The Fund was
responsible for its own operating expenses. HRSI had agreed to limit the Fund's
operating expenses to assure that the Fund's ratio of operating expenses to
average net assets does not exceed 2.50%. HRSI had also reimbursed additional
amounts to the Fund from time to time in order to reduce the Fund's expenses.
During the fiscal year ended March 31, 1998, HRSI earned advisory fees of
$75,323 from the Fund under the HRSI Advisory Agreement.
New Advisory Agreement
Except for different effective and termination dates and minor updating
changes, the terms of the New Advisory Agreement are identical in all respects
to the terms of the HRSI Advisory Agreement. A form of the New Advisory
Agreement is attached to this Proxy Statement as Exhibit A, and the description
set forth in this Proxy Statement of the New Advisory Agreement is qualified in
its entirety by reference to Exhibit A.
Under the New Advisory Agreement, Hester Capital Management will provide
investment advisory services to the Fund, including deciding what securities
will be purchased and sold by the Fund, when such purchases and sales are to be
made, and arranging for such purchases and sales, all in accordance with the
provisions of the Investment Company Act of 1940, as amended (the "Investment
Company Act") and any rules or regulations thereunder; any other applicable
provisions of law; the provisions of the Declaration of Trust and ByLaws of the
Trust as amended from time to time; any policies and determinations of the Board
of Trustees of the Trust; and the fundamental policies of the Fund, as reflected
in the Fund's Registration Statement under the Investment Company Act (including
the prospectus and, by reference, the Statement of Additional Information) as
such Registration Statement is amended from time to time, or as amended by the
shareholders of the Fund.
As compensation for its services to the Fund under the New Advisory
Agreement, Hester Capital Management will be entitled to receive from the Fund
fees calculated at the same rate as those charged under the HRSI Advisory
Agreement described above. However, Hester Capital Management will not begin
earning advisory fees until the appointment is confirmed by shareholders of the
Fund.
The New Advisory Agreement will continue in effect for a period not to
exceed two years from its effective date, and will continue in effect thereafter
for successive annual periods, provided its continuance is specifically approved
at least annually by (1) a majority vote, cast in person at a meeting called for
that purpose, of the Trust's Board of Trustees, or (2) a vote of the holders of
a majority of the outstanding voting securities (as defined in the Investment
Company Act and the rules thereunder) of the Fund, and (3) in either event by a
majority of the Trustees who are not parties to the New Advisory Agreement or
interested persons of the Trust or of any such party. The Board of Trustees of
the Trust approved the New Advisory Agreement at the regular Board meeting on
August 18, 1998, and will regularly review the Agreement thereafter at the
Board's regular summer meeting beginning in the year 2000 or at such earlier
time as circumstances shall warrant. Like the HRSI Advisory Agreement, the New
Advisory Agreement provides that it may be terminated with respect to the Fund
at any time, without penalty, by either party upon 60-days' written notice,
provided that such termination by the Fund shall be directed or approved by a
vote of the Trustees of the Trust, or by a vote of holders of a majority of the
shares of the Fund.
Hester Capital Management will provide, at its expense, office space,
facilities and equipment for carrying out its duties under the New Advisory
Agreement. All other expenses incurred in the operation of the Fund will be
borne by the Fund. Fund expenses include legal and auditing fees, fees and
expenses of its custodian, accounting services fees, shareholder servicing fees,
transfer agency fees, Trustees' fees, the cost of communicating with
shareholders and registration fees, as well as other normal mutual fund
operating expenses. Expenses of the Fund, as defined in both the New Advisory
Agreement and the HRSI Advisory Agreement, exclude (i) interest, (ii) taxes,
(iii) brokerage commissions, (iv) extraordinary expenses, and (v) any sales
charges and distribution fees.
New Expense Cap
Although Hester Capital Management is not required to subsidize the Fund in
any respect, the New Advisory Agreement, like the HRSI Advisory Agreement,
permits Hester Capital Management to reimburse the Fund to the extent necessary
so that its ratio of operating expenses to average net assets will not exceed
voluntary expense limits. Hester Capital Management has advised the Board of
Trustees that it will reimburse the Fund to the extent necessary to ensure that
the Fund's current annual operating expenses for the next two fiscal years do
not exceed the amount (expressed as a percentage of net assets) of the Fund's
1997 operating expenses, which is 1.83%.
Liability and Indemnification of Adviser
The New Advisory Agreement is identical to the HRSI Advisory Agreement with
respect to the standard of care required on the Fund's adviser, the scope of the
adviser's liability and the adviser's indemnification, as described below.
Specifically, the New Advisory Agreement provides that Hester Capital Management
shall not be liable for any loss sustained by reason of the purchase, sale or
retention of any security whether the purchase, sale or retention has been based
on its own investigation and research or upon investigation and research made by
any other individual, firm or corporation, if the purchase, sale or retention
has been made and the other individual, firm or corporation has been selected in
good faith. The New Advisory Agreement, however, provides that nothing contained
in the New Advisory Agreement shall be construed to protect Hester Capital
Management against any liability to the Fund or its shareholders by reason of
willful misfeasance, bad faith, or negligence in the performance of its duties,
or by reason of its reckless disregard of obligations and duties under the New
Advisory Agreement. Additionally, the New Advisory Agreement provides that the
federal securities laws impose liabilities under certain circumstances on
persons who act in good faith, and therefore nothing in the New Advisory
Agreement shall in any way constitute a waiver or limitation of any rights which
the Funds' shareholders may have under any federal securities laws. The New
Advisory Agreement also provides that Hester Capital Management shall have no
responsibility or liability for the accuracy or completeness of the Fund's
Registration Statement under the Investment Company Act or the Securities Act of
1933 except for information supplied by Hester Capital Management for inclusion
in the Fund's Registration Statement. The New Advisory Agreement provides that
the Fund may indemnify Hester Capital Management to the full extent permitted by
the Trust's Declaration of Trust.
Legal Requirements Under the Investment Company Act
HRSI served as the adviser for the Fund under an investment advisory
agreement (the "HRSI Advisory Agreement") dated June 1, 1991. The HRSI Advisory
Agreement provided for its automatic termination in the event of a legal
assignment. Mr. Smith's resignation as the Fund's investment adviser and the
Trustees' approval of Hester Capital Management as the Fund's new investment
adviser have, in effect, terminated the HRSI Advisory Agreement as of August 31,
1998. The Trustees have appointed Hester Capital Management to assume active
management of the Fund effective September 1, 1998 (see "Trustees
Considerations" below). Hester Capital Management's appointment as the Fund's
investment adviser will not become fully effective however and Hester Capital
Management will not begin earning advisory fees, until the appointment is
confirmed by shareholders.
Section 15(f) of the Investment Company Act provides that, when a new
investment adviser is appointed to a fund, the previous investment advisers and
any of their affiliated persons may receive some amount or benefit in connection
therewith as long as two conditions are satisfied. First, no "unfair burden" may
be imposed on the mutual fund as a result of the change. The term "unfair
burden," as defined in the Investment Company Act, includes any arrangement
during the two-year period after the change whereby the investment adviser (or
predecessor or successor adviser), or any interested person of any such adviser,
receives or is entitled to receive any compensation, directly or indirectly,
from the mutual fund (other than fees for bona fide investment advisory or other
services) or from any person in connection with the purchase or sale of
securities or other property to, from, or on behalf of the mutual fund (other
than fees for bona fide principal underwriting services). HRSI and Hester
Capital Management have agreed to use their best efforts to ensure that none of
the transactions contemplated by the proposed agreement will cause the
imposition of an unfair burden, as that term is defined in Section 15(f) of the
Investment Company Act, on the Fund.
The second condition is that, during the three-year period immediately
following the changes, at least 75% of the mutual fund's board of trustees must
not be "interested persons" of the investment adviser or predecessor investment
adviser within the meaning of the Investment Company Act. The composition of the
Fund's Board of Trustees is presently in compliance with the 75% requirement.
Hester Capital Management began active management of the Fund on September
1, 1998. If, for some unforeseen reason, the shareholders do not confirm the
Trustees' appointment of Hester Capital Management, the Trustees will promptly
seek to enter into an alternative advisory arrangement for the Fund.
Trustees' Consideration
The New Advisory Agreement was approved by the Board of Trustees on behalf
of the Fund, including a majority of the non-interested Trustees, at the
regularly scheduled Board meeting on August 18, 1998. This meeting was preceded
by a special telephone meeting held on July 23, 1998.
In approving the transition, the Board of Trustees was presented with
information demonstrating that the terms of the New Advisory Agreement are fair
to, and in the best interest of, the Fund and the shareholders of the Fund, and
that Hester Capital Management is fully qualified to take over the advisory
function. Hester Capital Management advised the Board of Trustees that it
expects that there will be no diminution in the scope and quality of advisory
services provided to the Fund as a result of the Proposed Transaction. In
considering the New Advisory Agreement, the Trustees had before them information
that allowed them to evaluate the experience of Hester Capital Management's key
personnel in portfolio management, the quality of services Hester Capital
Management is expected to provide to the Fund, and the compensation proposed to
be paid to Hester Capital Management. The Trustees gave consideration to all
factors deemed to be relevant to the Fund, including, but not limited to the
following: (1) that the fee and expense ratio of the Fund is reasonable given
the quality of services expected to be provided and the fee and expense ratios
of comparable mutual funds; (2) the performance of Hester Capital Management in
managed accounts similar to the Fund; (3) the research-intensive nature and
quality of the services expected to be rendered to the Fund by Hester Capital
Management; (4) that the compensation payable to Hester Capital Management will
be at the same rate as the compensation now payable by the Fund under the HRSI
Advisory Agreement; (5) that the terms of the New Advisory Agreement will be
unchanged from the HRSI Advisory Agreement except for different effective and
termination dates and minor updating changes; (6) that Hester Capital Management
has a favorable history and reputation, and that its key personnel have
excellent qualifications and background; (7) that Hester Capital Management
and/or HRSI has committed to pay or reimburse the Fund for the expenses incurred
in connection with the Proposed Assignment; and (8) other factors deemed
relevant.
Voting Requirements
In addition to the approval of the Board of Trustees of the Trust, the
affirmative vote of the holders of a majority of the outstanding shares of the
Fund is required for the New Advisory Agreement to become fully effective.
(Pending shareholder approval, Hester Capital Management is serving as the
Fund's investment adviser for no fee.) A "majority" of the outstanding shares
for purposes of confirming Hester Capital Management as the Fund's investment
adviser under the Investment Company Act means the lesser of (i) 67% of the
shares represented at the meeting if more than 50% of the outstanding shares is
represented, or (ii) shares representing more than 50% of the outstanding
shares. 40% of the outstanding shares entitled to vote on a proposal must be
present in person or by proxy to have a quorum to conduct business at the
Meeting.
All properly executed proxies received prior to the Meeting will be voted
at the Meeting in accordance with the instructions marked thereon. Proxies
received prior to the Meeting on which no vote is indicated will be voted "for"
each proposal as to which it is entitled to vote. Abstentions and nominee
non-votes will be counted as "present" for purposes of calculating whether a
quorum exists and whether the proposal has a majority vote or whether more than
50% of the shares are represented, but will be excluded when calculating the
number of shares voting in favor of the proposal (i.e., when calculating whether
67% of the shares have voted in favor of the proposal). "Nominee non-votes" are
proxies from custodians, brokers or nominees indicating that such nominees have
not received instructions from the beneficial owner or other person entitled to
vote shares and the nominee does not have discretionary power to vote in place
of the beneficial owner.
THE BOARD OF TRUSTEES OF THE TRUST HAS APPROVED THE SUBMISSION OF THE NEW
ADVISORY AGREEMENT TO SHAREHOLDERS FOR APPROVAL
Additional Information on the Trust and the Adviser
The following is a listing of the executive officers and Trustees of the
Trust, their positions with the Trust, and their positions with the Adviser, if
any:
Name Position with Trust Position with Adviser
Steven J. Paggioli President and Trustee n/a
Dorothy A. Berry Trustee n/a
Wallace L. Cook Trustee n/a
Carl A. Froebel Trustee n/a
Rowley W.P. Redington Trustee n/a
Eric M. Banhazl Treasurer n/a
Robin Berger Secretary n/a
Robert H. Wadsworth Vice President n/a
No Trustee of the Trust has had any direct or indirect interest in any
transaction with Hester Capital Management, or any parent or subsidiary of
Hester Capital Management. In addition, no Trustee has had such an interest in
any proposed transaction with any of the above entities.
GENERAL INFORMATION
The Trust will request broker-dealer firms, custodians, nominees and
fiduciaries to forward proxy materials to the beneficial owners of the shares of
the Fund held of record by such persons. Hester Capital Management may reimburse
such broker-dealer firms, custodians, nominees and fiduciaries for their
reasonable expenses incurred in connection with such proxy solicitation. In
addition to the solicitation of proxies by mail, officers and employees of the
Trust, without additional compensation, may solicit proxies in person or by
telephone. The costs associated with such solicitation and the Meeting will be
borne by Hester Capital Management or HRSI and not by the Fund or the Trust.
Other Matters to Come Before the Meeting
Management does not know of any matters to be presented at the Meeting
other than those described in this Proxy Statement. If other business should
properly come before the Meeting, the proxyholders will vote thereon in
accordance with their best judgment.
Shareholder Proposals
The Meeting is a Special Meeting of Shareholders. The Fund is not required
to, nor does it intend to, hold regular annual meetings of its shareholders. If
such a meeting is called, any shareholder who wishes to submit a proposal for
consideration at the meeting should submit the proposal promptly to the Trust.
Any proposal to be considered for submission to shareholders must comply with
Rule 14a-8 under the Securities Exchange Act of 1934.
Reports to Shareholders
The Trust will furnish, without charge, a copy of the most recent Annual
Report to Shareholders of the Fund, and the most recent Semi-Annual Report
succeeding such Annual Report, if any, on request. Requests for such reports
should be directed to Professionally Managed Portfolios, Avondale Total Return
Fund, 1105 Holliday, Wichita Falls, Texas 76301 (817) 761-3777.
IN ORDER THAT THE PRESENCE OF A QUORUM AT THE MEETING MAY BE ASSURED,
PROMPT EXECUTION AND RETURN OF THE ENCLOSED PROXY IS REQUESTED. A
SELF-ADDRESSED, POSTAGE-PAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
Robin Berger, Secretary
Wichita Falls, Texas
September 1, 1998
<PAGE>
Exhibit A Form of New Investment Management Agreement.
Form of Agreement
PROFESSIONALLY MANAGED PORTFOLIOS
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this day of , 1998 by and between PROFESSIONALLY MANAGED
PORTFOLIOS (the "Trust"), a Massachusetts business trust and Hester Capital
Management, L.L.C., a Texas limited liability corporation (the "Advisor").
WITNESSETH:
WHEREAS, a series of the Trust having separate assets and liabilities has
been created entitled the [ ] Fund (the "Fund"); and
WHEREAS, it is therefore desirable to have an investment advisory agreement
(i.e., this Agreement) relating to the Fund, which agreement will apply only to
this Fund;
NOW THEREFORE, in consideration of the mutual promises and agreements
herein contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, it is hereby agreed by and among the parties hereto as
follows:
l. In General
The Advisor agrees, all as more fully set forth herein, to act as
investment adviser to the Trust with respect to the investment of the assets of
the Fund and to supervise and arrange the purchase and sale of securities held
in the portfolio of the Fund.
2. Duties and Obligations of the Advisor with respect to Investment of Assets of
the Fund.
(a) Subject to the succeeding provisions of this section and
subject to the direction and control of the Board of Trustees of the Trust,
the Advisor shall:
(i) Decide what securities shall be purchased or sold by the
Trust with respect to the Fund and when; and
(ii) Arrange for the purchase and the sale of securities
held in the portfolio of the Fund by placing purchase and sale
orders for the Trust with respect to the Fund.
(b) Any investment purchases or sales made by the Advisor shall at
all times conform to, and be in accordance with, any requirements imposed
by: (l) the provisions of the 1940 Act and of any rules or regulations in
force thereunder; (2) any other applicable provisions of law; (3) the
provisions of
the Declaration of Trust and By-Laws of the Trust as amended from time
to time; (4) any policies and determinations of the Board of Trustees of
the Trust; and (5) the fundamental policies of the Trust relating to the
Fund, as reflected in the Trust's registration statement under the 1940 Act
(including by reference the Statement of Additional Information) as such
registration statement is amended from time to time, or as amended by the
shareholders of the Fund.
(c) The Advisor shall give the Trust the benefit of its best
judgment and effort in rendering services hereunder, but the Advisor shall
not be liable for any loss sustained by reason of the purchase, sale or
retention of any security whether or not such purchase, sale or retention
shall have been based on its own investigation and research or upon
investigation and research made by any other individual, firm or
corporation, if such purchase, sale or retention shall have been made and
such other individual, firm or corporation shall have been selected in good
faith. Nothing herein contained shall, however, be
construed to protect the Advisor against any liability to the Trust or
its security holders by reason of willful misfeasance, bad faith, or gross
negligence in the performance of its duties, or by reason of its reckless
disregard of obligations and duties under this Agreement.
(d) Nothing in this Agreement shall prevent the Advisor or any
affiliated person (as defined in the 1940 Act) of the Advisor from acting
as investment adviser or manager and/or principal underwriter for any other
person, firm or corporation and shall not in any way limit or restrict the
Advisor or any such affiliated person from buying, selling or trading any
securities for its or their own accounts or the accounts of others for whom
it or they may be acting, provided, however, that the Advisor expressly
represents that it will undertake no activities which, in its judgment,
will adversely affect the performance of its obligations to the Trust under
this Agreement.
(e) It is agreed that the Advisor shall have no responsibility or
liability for the accuracy or completeness of the Trust's Registration
Statement under the 1940 Act or the Securities Act of 1933 except for
information supplied by the Advisor for inclusion therein. The Trust may
indemnify the Advisor to the full extent permitted by the Trust's
Declaration of Trust.
The Fund may use the name Avondale Hester Total Return Fund or any name
derived from or using the name Avondale Hester Total Return Fund only
for so long as this Agreement or any extension,
renewal or amendment hereof remains in effect. At such time as such an
agreement shall no longer be in effect, the Fund shall cease to use such a
name or any other name connected with the Advisor.
3. Broker-Dealer Relationships
The Advisor is responsible for decisions to buy and sell securities for the
Fund, broker-dealer selection, and negotiation of brokerage commission rates.
The Advisor's primary consideration in effecting a securities transaction will
be execution at the most favorable price. In selecting a broker-dealer to
execute each particular transaction, the Advisor will take the following into
consideration: the best net price available; the reliability, integrity and
financial condition of the broker-dealer; the size of and difficulty in
executing the order; and the value of the expected contribution of the
broker-dealer to the investment performance of the Fund on a continuing basis.
Accordingly, the price to the Fund in any transaction may be less favorable than
that available from another broker-dealer if the difference is reasonably
justified by other aspects of the portfolio execution services offered. Subject
to such policies as the Board of Trustees of the Trust may determine, the
Advisor shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of its having
caused the Fund to pay a broker or dealer that provides brokerage or research
services to the Advisor an amount of commission for effecting a portfolio
transaction in excess of the amount of commission another broker or dealer would
have charged for effecting that transaction, if the Advisor determines in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research services provided by such broker or dealer, viewed in
terms of either that particular transaction or the Advisor's overall
responsibilities with respect to the Trust. The Advisor is further authorized to
allocate the orders placed by it on behalf of the Fund to such brokers or
dealers who also provide research or statistical material, or other services, to
the Trust, the Advisor, or any affiliate of either. Such allocation shall be in
such amounts and proportions as the Advisor shall determine, and the Advisor
shall report on such allocations regularly to the Trust, indicating the
broker-dealers to whom such allocations have been made and the basis therefor.
The Advisor is also authorized to consider sales of shares as a factor in the
selection of brokers or dealers to execute portfolio transactions, subject to
the requirements of best execution, i.e., that such brokers or dealers are able
to execute the order promptly and at the best obtainable securities price.
4. Allocation of Expenses
The Advisor agrees that it will furnish the Trust, at the Advisor's
expense, with office space and facilities, equipment and clerical personnel
necessary for carrying out its duties under this Agreement. The Advisor will
also pay all compensation of any Trustees, officers and employees of the Trust
who are affiliated persons of the Advisor. All operating costs and expenses
relating to the Fund not expressly assumed by the Advisor under this Agreement
shall be paid by the Trust from the assets of the Fund, including, but not
limited to (I) interest and taxes; (ii) brokerage commissions; (iii) insurance
premiums; (iv) compensation and expenses of the Trust's Trustees other than
those affiliated with the Advisor or the Manager; (v) legal and audit expenses;
(vi) fees and expenses of the Trust's custodian, shareholder servicing or
transfer agent and accounting services agent; (vii) expenses incident to the
issuance of the Fund's shares, including issuance on the payment of, or
reinvestment of, dividends; (viii) fees and expenses incident to the
registration under Federal or state securities laws of the Trust or the shares
of the Fund; (ix) expenses of preparing, printing and mailing reports and
notices and proxy material to shareholders of the Trust; (x) all other expenses
incidental to holding meetings of the Trust's shareholders; (xi) dues or
assessments of or contributions to the Investment Company Institute or any
successor; and (xii) such non-recurring expenses as may arise, including
litigation affecting the Trust and the legal obligations which the Trust may
have to indemnify its officers and Trustees with respect thereto;
5. Compensation of the Advisor
(a) The Trust agrees to pay the Advisor and the Advisor agrees to
accept as full compensation for all services rendered by the Advisor
hereunder, an annual management fee, payable monthly and computed on
the value of the net assets of the Fund as of the close of business
each business day at the annual rate of __% of such net assets.
(b) In the event the expenses of the Fund (including the fees of
the Advisor and amortization of organization expenses but excluding
interest, taxes, brokerage commissions, extraordinary expenses and
sales charges and any distribution fees) for any fiscal year exceed
the limits set by applicable regulations of state securities
commissions where the Fund is registered or qualified for sale, the
Advisor will reduce its fees by the amount of such excess. Any such
reductions are subject to readjustment during the year. The payment of
the advisory fee at the end of any month will be reduced or postponed
or, if necessary, a refund will be made to the Fund so that at no time
will there be any accrued but unpaid liability under this expense
limitation. The Advisor may reduce any portion of the compensation or
reimbursement of expenses due to it under this agreement, or may agree
to make payments to limit the expenses which are the responsibility of
the Fund. Any such reduction or payment shall be applicable only to
such specific reduction or payment and shall not constitute an
agreement to reduce any future compensation or reimbursement due to
the Advisor hereunder or to continue future payments. Any fee withheld
from the Advisor under this paragraph shall be reimbursed by the Fund
to the Advisor to the extent permitted by the applicable state law if
the aggregate expenses for the next succeeding fiscal year do not
exceed the applicable state limitation or any more restrictive
limitation to which the Advisor has agreed.
6. Duration and Termination
(a) This Agreement shall go into effect on the effective date of the
Post-Effective Amendment of the Registration Statement of the Trust
covering the shares of the Fund and shall, unless terminated as hereinafter
provided, continue in effect for a period of two years from that date, and
thereafter from year to year, but only so long as such continuance is
specifically approved at least annually by the Trust's Board of Trustees,
including the vote of a majority of the Trustees who are not parties to
this Agreement or "interested persons" (as defined in the 1940 Act) of any
such party cast in person at a
meeting called for the purpose of voting on such approval, or by the
vote of the holders of a "majority" (as so defined) of the outstanding
voting securities of the Fund and by such a vote of the Trustees.
(b) This Agreement may be terminated by the Advisor at any time without
penalty upon giving the Trust sixty (60) days' written notice (which notice
may be waived by the Trust) and may be terminated by the Trust at any time
without penalty upon giving the Advisor sixty (60) days' written notice
(which notice may be waived by the Advisor), provided that such termination
by the Trust shall be directed or approved by the vote of a majority of all
of its Trustees in office at the time or by the vote of the holders of a
majority (as defined in the 1940 Act) of the voting securities of the Trust
at the time outstanding and entitled to vote. This Agreement shall
automatically terminate in the event of its assignment (as so defined).
7. Agreement Binding Only on Fund Property
The Advisor understands that the obligations of this Agreement are not
binding upon any shareholder of the Trust personally, but bind only the
Trust's property; the Advisor represents that it has notice of the
provisions of the Trust's Declaration of Trust disclaiming shareholder
liability for acts or obligations of the Trust. This agreement has been
executed by or with reference to any Trustee in such person's capacity as a
Trustee, and the Trustees shall not be personally liable hereon.
IN WITNESS WHEREOF, the parties hereto have caused the foregoing instrument to
be executed by duly authorized persons and their seals to be hereunto affixed,
all as of the day and year first above written.
PROFESSIONALLY MANAGED PORTFOLIOS
---------------------------------------
By:
Title:
ATTEST:
HESTER CAPITAL MANAGEMENT, LLC
----------------------------------------
By:
Title:
ATTEST:
<PAGE>
PROXY
Avondale Total Return Fund
SPECIAL MEETING OF SHAREHOLDERS
September 30, 1998
SOLICITED ON BEHALF OF
THE BOARD OF TRUSTEES OF
PROFESSIONALLY MANAGED PORTFOLIOS
The undersigned hereby appoints _________________ and _____________, and
each of them, as proxies of the undersigned, each with the power to appoint his
substitute, for the Special Meeting of Shareholders of Avondale Total Return
Fund (the "Fund"), a series of Professionally Managed Portfolios (the "Trust"),
to be held on September 30, 1998 at the offices of Herbert R. Smith,
Incorporated, 1105 Holliday Street, Wichita Falls, Texas 76301, or at any and
all adjournments thereof (the "Meeting"), to vote, as designated below, all
shares of the Fund, held by the undersigned at the close of business on
September 1, 1998. Capitalized terms used without definition have the meanings
given to them in the accompanying Proxy Statement.
A SIGNED PROXY WILL BE VOTED IN FAVOR OF THE PROPOSAL LISTED BELOW UNLESS
YOU HAVE SPECIFIED OTHERWISE. PLEASE SIGN, DATE AND RETURN THIS PROXY PROMPTLY.
YOU MAY VOTE ONLY IF YOU HELD SHARES IN THE FUND AT THE CLOSE OF BUSINESS ON
SEPTEMBER 1, 1998. YOUR SIGNATURE AUTHORIZES THE PROXIES TO VOTE IN THEIR
DISCRETION UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING,
INCLUDING WITHOUT LIMITATION ALL MATTERS INCIDENT TO THE CONDUCT OF THE MEETING.
1. Approval of the new Investment Management Agreement between the Adviser and
the Fund:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Dated:
-----------------------------------
Signature
-----------------------------------
Title (if applicable)
-----------------------------------
Signature (if held jointly)
-----------------------------------
Title (if applicable)
Please sign exactly as name or names appear on your shareholder account
statement. When signing as attorney, trustee, executor, administrator,
custodian, guardian or corporate officer, please give full title. If shares are
held jointly, each shareholder should sign.
