[ACADEMY VALUE FUND LOGO]
SEMI-ANNUAL REPORT
FEBRUARY 28, 1999
<PAGE>
[ACADEMY VALUE FUND LOGO]
April 20, 1999
Dear Shareholder:
Over the last six months we have seen the continuation of several economic and
market conditions that are causing us to remain cautious in our investment
strategy. Corporate profits for the full year of 1998 declined compared to 1997
after early Wall Street forecasts of 12%-15% earnings growth. An inability to
raise prices and increased competition from imports has generated three straight
quarters of declining profit margins. This competitive environment should
continue as foreign economies, most facing recession or depression, are
exporting their cheaper goods to the United States. The result is domestic
companies are facing a difficult pricing environment while having an excess of
manufacturing capacity. This is a good environment for consumers, but very
difficult for companies to expand earnings.
In the face of this economic backdrop, smaller and mid-sized companies have seen
their market values decline significantly relative to larger companies. A recent
study showed that 61% of companies on the NYSE and NASD exchanges declined by
greater than 20% from their highs in early 1998. Fully 84% declined by more than
10%. We are currently experiencing one of the most dramatic divergences in
performance of the "largest of the large" corporations and the rest of the
market. For example, the NASD index for 1998 touted a return of 39.6%. However,
if you remove ten of the largest companies from the index, the return would drop
to -17.57%, a 57.17 percentage point spread. This narrowing of market return is
further demonstrated by the S&P 500 as seventeen companies in the first quarter
of 1999 contributed all of the return.
It is against this economic and market environment of declining profit margins
and earnings, low purchasing power for corporations, intense foreign
competition, and narrowing market leadership that we invest your portfolio to
maintain the value of your investment. As noted in our recent letter to
shareholders, the Fund significantly increased its holdings in fixed income
securities over the last two quarters as a response to the high risk environment
we are experiencing. We are continuing to be primarily invested in short term
U.S. Government securities (77.48% as of 3/31/99) while we wait for investment
opportunities in well positioned companies at attractive prices.
Sincerely,
Academy Capital Management
<PAGE>
ACADEMY VALUE FUND
SCHEDULE OF INVESTMENTS AT FEBRUARY 28, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
Shares COMMON STOCKS: 19.3% Market Value
- --------------------------------------------------------------------------------
COSMETIC AND PERSONAL CARE PRODUCTS: 2.3%
2,900 Block Drug Company, Inc., Class A................... $ 113,100
---------
FINANCIAL SERVICES: 2.6%
117,300 National Auto Credit, Inc.*......................... 126,684
---------
HEALTH CARE PROVIDERS: 1.3%
29,400 NovaCare, Inc.*..................................... 62,475
---------
HUMAN RESOURCES: 2.1%
16,550 Olsten Corp......................................... 102,403
---------
INDUSTRIAL PRODUCTS: 2.5%
8,900 Watts Industries, Inc., Class A..................... 124,044
---------
MEDICAL PRODUCTS: 1.0%
2,800 Vital Signs, Inc.................................... 49,525
---------
RESTAURANTS: 7.5%
22,550 Lone Star Steakhouse & Saloon, Inc.*................ 204,359
11,350 Luby's Cafeterias, Inc.............................. 161,028
---------
365,387
---------
Total Common Stocks (cost $1,870,156)............... 943,618
---------
Principal
Amount U.S. GOVERNMENT AND GOVERNMENT OBLIGATIONS: 72.2%
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$1,000,000 FHLB, 4.64%, 10/9/2002.............................. 968,293
565,000 FHLB, 4.675%, 10/15/2002............................ 547,602
1,000,000 FNMA, 6.29%, 2/11/2002.............................. 1,020,337
1,000,000 TSY INFL IX N/B, 3.875%, 1/15/2009.................. 1,000,938
-----------
Total U.S. Government and Government Agency
Obligations (cost $3,605,932)..................... 3,537,170
-----------
See accompanying Notes to Financial Statements
2
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ACADEMY VALUE FUND
SCHEDULE OF INVESTMENTS AT FEBRUARY 28, 1999 (UNAUDITED), CONTINUED
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Principal
Amount REPURCHASE AGREEMENT: 4.4% Market Value
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$218,000 Firstar Bank Repurchase Agreement, 3.50%, dated
2/26/1999, due 3/1/1999, collateralized by
$225,000 GNMA, 7.00%, due 3/20/2024 (proceeds
$218,064) (cost $218,000)...........................$ 218,000
Total Investments in Securities (cost
$5,694,088+): 95.9% .............. 4,698,788
Other Assets less Liabilities: 4.1%................. 201,056
-----------
TOTAL NET ASSETS: 100.0% ...........................$ 4,899,844
===========
*Non-income producing security.
+ At February 28, 1999, 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.......................$ 15,116
Gross unrealized depreciation....................... (1,010,416)
-----------
Net unrealized depreciation.......................$ (995,300)
===========
See accompanying Notes to Financial Statements
3
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES AT FEBRUARY 28, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
Investments in securities, at value (cost $5,694,088) ..... $ 4,698,788
Cash ...................................................... 215
Receivables:
Due from Advisor .................................... 2,851
Securities sold ..................................... 183,084
Dividends and interest .............................. 37,558
Prepaid expenses and other assets ......................... 1,886
-----------
Total assets .................................. 4,924,382
-----------
LIABILITIES
Payables:
Administration fee .................................. 2,381
Audit fees .......................................... 11,334
Accrued expenses .......................................... 10,823
-----------
Total liabilities ............................. 24,538
-----------
NET ASSETS ...................................................... $ 4,899,844
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($4,899,844/568,576 shares outstanding;
unlimited number of shares authorized without par value) .. $ 8.62
===========
COMPONENTS OF NET ASSETS
Paid-in capital ........................................... $ 6,416,098
Undistributed net investment income ....................... 28,980
Accumulated net realized loss on investments .............. (549,934)
Net unrealized depreciation on investments ................ (995,300)
-----------
Net assets .................................... $ 4,899,844
===========
See accompanying Notes to Financial Statements.
4
<PAGE>
ACADEMY VALUE FUND
STATEMENT OF OPERATIONS - FOR THE SIX MONTHS ENDED FEBRUARY 28, 1999 (UNAUDITED)
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INVESTMENT INCOME
Income
Dividends .................................................... $ 19,300
Interest ..................................................... 78,932
Other ........................................................ 626
---------
Total income ............................................... 98,858
---------
Expenses
Advisory fees ................................................ 26,550
Administration fee ........................................... 14,876
Fund accounting fees ......................................... 9,067
Audit fees ................................................... 8,382
Transfer agent fees .......................................... 6,825
Distribution fees ............................................ 6,638
Custody fees ................................................. 3,918
Registration fees ............................................ 3,318
Legal fees ................................................... 2,933
Trustee fees ................................................. 2,031
Miscellaneous ................................................ 1,907
Reports to shareholders ...................................... 1,661
Insurance .................................................... 226
---------
Total expenses ............................................. 88,332
Less: expenses reimbursed/waived ........................... (35,232)
---------
Net expenses ............................................... 53,100
---------
NET INVESTMENT INCOME .................................... 45,758
---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss from security transactions ................. (550,172)
Net change in unrealized depreciation on investments ......... 423,130
---------
Net realized and unrealized loss on investments ............ (127,042)
---------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ..... $ (81,284)
=========
See accompanying Notes to Financial Statements.
5
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ACADEMY VALUE FUND
STATEMENT OF CHANGES IN NET ASSETS
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<TABLE>
<CAPTION>
Six Months Year
Ended Ended
February 28, 1999# August 31, 1998
------------------ ---------------
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS
<S> <C> <C>
Net investment income ................................ $ 45,758 $ 22,049
Net realized (loss) gain from security transactions .. (550,172) 638,066
Net change in unrealized appreciation on investments . 423,130 (2,370,964)
----------- -----------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS (81,284) (1,710,849)
----------- -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Net investment income ................................ (31,135) -0-
Net realized gain from security transactions ......... (633,088) (601,385)
----------- -----------
Net distributions to shareholders .................. (664,223) (601,385)
----------- -----------
CAPITAL SHARE TRANSACTIONS
Net increase in net assets derived from net change in
outstanding shares (a) ............................. 158,631 1,530,157
----------- -----------
TOTAL DECREASE IN NET ASSETS ....................... (586,876) (782,077)
NET ASSETS
Beginning of period .................................. 5,486,720 6,268,797
----------- -----------
END OF PERIOD ........................................... $ 4,899,844 $ 5,486,720
=========== ===========
</TABLE>
(a) A summary of capital shares transactions is as follows:
<TABLE>
<CAPTION>
Six Months Year
Ended Ended
February 28, 1999# August 31, 1998
----------------------- -----------------------
Shares Value Shares Value
-------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Shares sold ................................... 64,607 $ 653,927 137,272 $ 1,811,156
Shares issued in reinvestment of distribution . 76,700 664,224 47,353 601,385
Shares redeemed ............................... (120,150) (1,159,520) (67,785) (882,384)
-------- ----------- -------- -----------
Net increase .................................. 21,157 $ 158,631 116,840 $ 1,530,157
======== =========== ======== ===========
</TABLE>
#Unaudited.
See accompanying Notes to Financial Statements.
6
<PAGE>
ACADEMY VALUE FUND
FINANCIAL HIGHLIGHTS
FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Six Months Year Ended August 31, December 9, 1994*
Ended ------------------------------ through
February 28, 1999# 1998 1997 1996 August 31,1995
------------------ ---- ---- ---- -----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........ $10.02 $14.56 $11.36 $11.60 $10.00
------ ------ ------ ------ ------
Income from investment operations:
Net investment income (loss).......... 0.08 0.04 (0.03) 0.01 0.03
Net realized and unrealized (loss)
gain on investments................. (0.20) (3.28) 3.23 (0.10) 1.57
------ ------ ------ ------ ------
Total from investment operations............ (0.12) (3.24) 3.20 (0.09) 1.60
------ ------ ------ ------ ------
Less distributions:
From net investment income............ (0.06) 0.00 0.00 (0.03) 0.00
From net capital gains................ (1.22) (1.30) 0.00 (0.12) 0.00
------ ------ ------ ------ ------
Total distributions......................... (1.28) (1.30) 0.00 (0.15) 0.00
------ ------ ------ ------ ------
Net asset value, end of period.............. $ 8.62 $10.02 $14.56 $11.36 $11.60
====== ====== ====== ====== ======
Total return................................ (1.26)% (24.16)% 28.17% (0.64)% 22.68%+
Ratios/supplemental data:
Net assets, end of period (millions)........ $ 4.9 $ 5.5 $ 6.3 $ 4.7 $ 3.2
Ratio of expenses to average net assets:
Before expense reimbursement and
waived fee...................... 3.33%+ 2.88% 3.42% 3.39% 5.20%+
After expense reimbursement and
waived fee...................... 2.00%+ 1.82% 2.00% 2.00% 2.00%+
Ratio of net investment (loss) gain to
average net assets:
Before expense reimbursement and
waived fee...................... 0.40%+ (0.73)% (1.67)% (1.20)% (2.62)%+
After expense reimbursement and
waived fee...................... 1.72%+ 0.33% (0.24)% 0.18% 0.64%+
Portfolio turnover rate..................... 97.80% 39.56% 49.72% 27.71% 13.26%
</TABLE>
#Unaudited.
*Commencement of operations.
+Annualized.
See accompanying Notes to Financial Statements.
7
<PAGE>
ACADEMY VALUE FUND
NOTES TO FINANCIAL STATEMENTS AT FEBRUARY 28, 1999 (UNAUDITED)
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NOTE 1 - ORGANIZATION
The Academy Value Fund (the "Fund") is a series of shares of beneficial
interest of Professionally Managed Portfolios (the "Trust"), which is registered
under the Investment Company Act of 1940 (the "1940 Act") as a diversified,
open-end management investment company. The Fund began operations on December 9,
1994. The investment objective of the Fund is growth of capital. The Fund seeks
to achieve its objective by investing primarily in common stocks.
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 its
shareholders. Therefore, no federal income tax provision is required.
C. SECURITY TRANSACTIONS, INVESTMENT INCOME AND DISTRIBUTIONS. As is
common in the industry, security transactions are accounted for on the
trade date. The cost of securities owned on realized transactions are
relieved on a first-in, first-out basis. Dividend income and
distributions to shareholders are recorded on the ex-dividend date.
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 RELATED PARTY TRANSACTIONS
For the six months ended February 28, 1999, Academy 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, facilities 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 1.00% based upon the average daily net assets of the Fund. For
the six months ended February 28, 1999, the Fund incurred $26,550 in Advisory
fees.
8
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ACADEMY VALUE FUND
NOTES TO FINANCIAL STATEMENTS AT FEBRUARY 28, 1999 (UNAUDITED), CONTINUED
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The Fund is responsible for its own operating expenses. The Advisor has
agreed to reduce its fees to the extent necessary to limit the Fund's aggregate
annual operating expenses to 2.00% of average daily net assets. Any such
reductions made by the Advisor in its fees or payments or reimbursement of
expenses which are the Fund's obligation are subject to reimbursement by the
Fund provided the Fund is able to effect such reimbursement and remain in
compliance with applicable expense limitations. For the six months ended
February 28, 1999, the Advisor waived fees of $26,550 and reimbursed the Fund in
the amount of $8,682.
Investment Company Administration, L.L.C. (the "Administrator") acts as
the Fund's Administrator under an Administration Agreement. The Administrator
prepares various federal and state regulatory filings, reports and returns for
the Fund; prepares reports and materials to be supplied to the trustees;
monitors the activities of the Fund's custodian, transfer agent and accountants;
coordinates the preparation and payment of Fund expenses and reviews the Fund's
expense accruals. For its services, the Administrator receives a monthly fee at
the following annual rate:
Under $15 million $30,000
$15 to $50 million 0.20% of average daily net assets
$50 to $100 million 0.15% of average daily net assets
$100 to $150 million 0.10% of average daily net assets
Over $150 million 0.05% of average daily net assets
For the six months ended February 28, 1999, the Fund incurred $14,876 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.
Certain officers and trustees of the Trust are also officers and/or
directors of the Administrator and the Distributor.
NOTE 4 - DISTRIBUTION PLAN
The Fund has adopted a Distribution Plan (the "Plan") in accordance with
Rule 12b-1 under the 1940 Act. The Plan provides that the Fund will pay a fee to
the Advisor as Distribution Coordinator at an annual rate of up to 0.25% of the
average daily net assets of the Fund. The fee is paid to the Advisor as
reimbursement for, or in anticipation of, expenses incurred for
distribution-related activity. During the six months ended February 28, 1999,
the Fund paid fees of $6,638 to the Advisor.
9
<PAGE>
ACADEMY VALUE FUND
NOTES TO FINANCIAL STATEMENTS AT FEBRUARY 28, 1999 (UNAUDITED), CONTINUED
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NOTE 5 - PURCHASES AND SALES OF SECURITIES
The cost of purchases and the proceeds from sales of securities, excluding
U.S. Government obligations and short-term investments, for the six months ended
February 28, 1999, were $34,651 and $3,270,168, respectively.
For the six months ended February 28, 1999, the cost of purchases and the
proceeds from sales of U.S. Government obligations, excluding short-term
securities, were $3,927,825 and $519,162, respectively.
NOTE 6 - REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements with bonds and government
securities dealers recognized by the Federal Reserve Board, with member banks of
the Federal Reserve System or with such other brokers or dealers that meet the
credit guidelines established by the Board of Trustees. The Fund will always
receive and maintain, as collateral, securities whose market value, including
accrued interest, will be at least equal to 100% of the dollar amount invested
by the Fund in each agreement, and the Fund will make payment for such
securities only upon physical delivery or upon evidence of book entry transfer
to the account of the custodian. To the extent that any repurchase transaction
exceeds one business day, the value of the collateral is marked-to-market on a
daily basis to ensure the adequacy of the collateral.
If the seller defaults and the value of the collateral declines, or if
bankruptcy proceedings are commenced with respect to the seller of the security,
realization of the collateral by the Fund may be delayed or limited.
10
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ADVISOR
Academy Capital Management, Inc.
500 North Valley Mills Drive
Suite 208
Waco, Texas 76710
(817) 751-0555
DISTRIBUTOR
First Fund Distributors, Inc.
4455 East Camelback Road
Suite 261E
Phoenix, Arizona 85018
CUSTODIAN
Firstar Bank, N.A.
425 Walnut Street
Cincinnati, Ohio 45202
TRANSFER AGENT
American Data Services, Inc.
P.O. Box 5536
Hauppauge, New York 11788-0132
INDEPENDENT AUDITORS
Ernst & Young LLP
725 South Figueroa Street
Suite 600
Los Angeles, California 90071
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.
