AVONDALE HESTER [LOGO]
TOTAL RETURN FUND
ANNUAL REPORT
MARCH 31, 1999
<PAGE>
AVONDALE HESTER [LOGO]
TOTAL RETURN FUND
April 16, 1999
Dear Shareholders:
Hester Capital Management, L.L.C. (HCM) is pleased to send you the annual report
for the Avondale Hester Total Return Fund for the year ended March 31. It has
been an eventful period in the U.S. financial markets since shareholders
approved a new investment advisory agreement with HCM on September 30 of last
year.
Avondale Hester experienced a return of 4.51 % for the quarter ended March 31
and a 21.95% gain during the last 6 months. The portfolio began the quarter with
85.9% of the assets allocated to common stocks, 8.5% to fixed-income securities
and 5.6% to short-term investments. Since our last letter, we have increased the
sector exposure in the equity component of the portfolio in technology to 14.9%
and consumer cyclicals to 6.2%. Weightings were reduced in the utility and
consumer services sectors. In addition, the fixed-income component of the
portfolio now accounts for 7.8% of the total assets. This percentage has been
influenced by the outperformance of stocks versus bonds, and the fact that we
have had sales and maturities and some principal paydowns in the mortgage-backed
component of the portfolio. Avondale ended the fiscal year with 88.8% of the
assets and 7.8% allocated to common stocks and fixed-income securities,
respectively, with the remaining 3.4% invested in short-term investments.
INVESTMENT PERFORMANCE
01/01/99 10/01/98 04/01/98
THROUGH THROUGH THROUGH
03/31/99 03/31/99 03/31/99
-------- -------- --------
Avondale Hester 4.51% 21.95% 10.94%
S&P 500 Composite Index 4.98% 27.32% 18.47%
S&P 500 Composite Unweighted (0.89%) 14.38% (4.93%)
Lipper Growth & Income Fund Index 2.08% 20.62% 6.82%
Lehman Intermediate Bond Index (0.19%) 0.10% 6.57%
90 Day U.S. Treasury Bills 1.13% 2.20% 4.89%
Consumer Price Index 0.67% 0.86% 1.73%
<PAGE>
We did not execute our original plan to invest the cash reserves in fixed-income
securities as per our last letter. The continuing strength of the economy and
the increase in oil prices caused us to take a somewhat cautious stance with
regard to the fixed-income markets. However, with the tremendous back-up in
market rates and the extreme negative market sentiment, we plan to take
advantage of this environment and raise the fixed-income allocation back to
within 15%-20% of the portfolio. We found government agency securities and
high-grade corporate bonds attractive relative to U.S. treasuries in the current
market.
The U.S. economy has experienced near perfect economic conditions, low inflation
and a passive to accommodative Federal Reserve. The global situation has
improved due to massive monetary stimulus in Europe via declining short-term
interest rates and in Japan. Tight labor markets and limited pricing power have
put a squeeze on corporate profit margins. However, productivity has exploded
which has helped hold unit labor costs. The biggest risks on the horizon today
are the recent indications of emerging inflationary pressures, primarily through
energy prices. While inflation is primarily a monetary event, the pick-up in
global economic activity combined with rising energy prices would be of concern
to the Fed.
Economic growth in the United States is now in the 97th consecutive month. The
record goes back to the 1961-69 expansion, which recorded 107 consecutive months
of uninterrupted economic growth. We fully expect this expansion to break that
record. But the Fed has to be concerned about the strong rate of growth and
indications of inflation. As a result, the Federal Reserve will continue to
jawbone interest rates with no increase in the Fed Funds rate at the upcoming
meeting, but the minutes should reflect a shift to a tightening bias. We expect
30-year government bonds not to trade outside of an upper band of 5.90%-6.25%,
and look for a decline in rates as the year progresses.
The stock market as measured by the Standard & Poor's 500 Composite Index
continued its momentum characteristics in the first quarter and became even more
narrower than in 1998. In calendar 1998, the narrow breadth of the market was
exemplified by the fact that 10 stocks accounted for 50% of the 500's 28.6%
total return, with the majority of the advance coming from less than 50 of the
largest stocks in the Index. In the first quarter of 1999, only 21 stocks
accounted for the S&P's 4.9% increase. The key drivers of the U.S. market since
1982 have been decelerating inflation, improving corporate profitability and a
tremendous expansion in valuation via the market's price-to-earnings ratio. As
we enter the second quarter of the calendar year, we view the valuation as high
and there are signs that inflation may be raising its head. These issues
combined with the speculation in internet stocks and the rise in interest rates
are signs of caution. However, the overseas markets continue to establish new
highs on the strength of global rate cuts which have stimulated liquidity, and
earnings expectations are on the rise, which should lend support to stock
prices.
We value the opportunity to serve as advisor to the Avondale Hester Total Return
Fund and look forward to serving you in the future.
Very truly yours,
/s/ Ira Craig Hester /s/ John E. Gunthorp
Ira Craig Hester, CFA John E. Gunthorp, CFA
President & CEO Executive Vice President
<PAGE>
AVONDALE HESTER TOTAL RETURN FUND
AVONDALE HESTER TOTAL RETURN FUND
Value of $10,000 vs S & P 500
AVONDALE HESTER
QUARTER TOTAL RETURN FUND S & P 500
------- ----------------- ---------
10/12/88 $10,000 $10,000
12/31/88 9,965 10,280
3/31/89 10,172 11,007
6/30/89 10,772 11,966
9/30/89 11,196 13,264
12/31/89 11,411 13,535
3/31/90 11,202 13,159
6/30/90 11,645 13,968
9/30/90 10,781 12,062
12/31/90 11,488 13,143
3/31/91 12,424 15,063
6/30/91 12,182 15,014
9/30/91 13,391 15,818
12/31/91 14,573 17,145
3/31/92 13,800 16,711
6/30/92 13,466 17,014
9/30/92 13,752 17,566
12/31/92 14,351 18,458
3/31/93 15,068 19,255
6/30/93 14,977 19,334
9/30/93 15,429 19,847
12/31/93 15,379 20,313
3/31/94 14,944 19,535
6/30/94 14,654 19,604
9/30/94 15,659 20,581
12/31/94 15,731 20,572
3/31/95 16,113 22,573
6/30/95 17,929 24,727
9/30/95 19,416 26,690
12/31/95 20,229 28,293
3/31/96 20,410 29,818
6/30/96 20,696 31,135
9/30/96 20,878 32,111
12/31/96 21,173 34,798
3/31/97 20,636 35,720
6/30/97 23,968 41,945
9/30/97 25,241 45,092
12/31/97 25,419 46,402
3/31/98 28,406 52,870
6/30/98 28,744 54,582
9/30/98 25,842 49,167
12/31/98 30,154 59,660
3/31/99 31,514 62,610
Average Annual Total Return
Period Ended March 31, 1999
1 Year.................. 10.94%
5 Year.................. 16.08%
10 Year................. 11.96%
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
S&P 500 is unmanaged and returns include reinvested dividends.
<PAGE>
AVONDALE HESTER TOTAL RETURN FUND
SCHEDULE OF INVESTMENTS AT MARCH 31, 1999
- --------------------------------------------------------------------------------
Shares COMMON STOCKS: 88.8% Market Value
- --------------------------------------------------------------------------------
BANKS: 10.3%
8,014 Bank One Corp............................................ $ 441,271
4,713 BankAmerica Corp......................................... 332,856
11,020 Regions Financial Corp................................... 381,568
----------
1,155,695
----------
BEVERAGES - ALCOHOLIC: 2.4%
3,500 Anheuser-Busch Companies, Inc............................ 273,970
----------
BEVERAGES - SOFT DRINK: 1.2%
2,266 Coca-Cola Company........................................ 139,076
----------
COMMUNICATION SERVICES: 0.0%
50 Sodexho Marriott Services*............................... 1,103
----------
COMPUTER SERVICES: 7.2%
4,500 Adobe Systems, Inc....................................... 255,375
9,737 First Data Corp.......................................... 416,257
5,000 Oracle Corp.*............................................ 131,875
----------
803,507
----------
COMPUTERS: 6.9%
696 3Com Corp.*.............................................. 16,225
3,500 Hewlett-Packard Co....................................... 237,344
2,913 International Business Machines Corp..................... 516,329
----------
769,898
----------
CONSUMER PRODUCTS: 8.2%
3,000 Bell & Howell Company*................................... 87,937
7,537 General Electric Company................................. 833,781
----------
921,718
----------
ELECTRIC SERVICES: 2.5%
5,168 Duke Power Company....................................... 282,302
----------
See accompanying Notes to Financial Statements.
4
<PAGE>
AVONDALE HESTER TOTAL RETURN FUND
SCHEDULE OF INVESTMENTS AT MARCH 31, 1999, CONTINUED
- --------------------------------------------------------------------------------
Shares Market Value
- --------------------------------------------------------------------------------
ELECTRONICS: 1.4%
1,500 AMP, Inc................................................. $ 80,531
600 Intel Corp.*............................................. 71,475
----------
152,006
----------
FINANCIAL SERVICES: 7.7%
3,513 American Express Company................................. 412,777
7,023 Citigroup, Inc........................................... 448,594
----------
861,371
----------
FURNITURE: 3.5%
5,000 Ethan Allen Interiors, Inc............................... 207,813
10,000 Herman Miller, Inc....................................... 182,500
----------
390,313
----------
HOTEL/MOTEL: 3.1%
10,400 Marriott International, Inc., Class A.................... 349,700
----------
INDUSTRIAL MACHINERY: 3.5%
5,524 Tyco International Ltd................................... 396,347
----------
LINEN SUPPLIES: 1.6%
12,500 Angelica Corp............................................ 175,000
----------
OIL-ENERGY: 2.2%
3,539 Exxon Corp............................................... 249,721
----------
PHARMACEUTICALS: 21.2%
5,932 Bristol-Myers/Squibb Company............................. 381,502
4,166 Johnson & Johnson........................................ 390,302
6,624 Pfizer, Inc.............................................. 919,080
12,458 Schering-Plough Corp..................................... 689,083
----------
2,379,967
----------
PHOTOGRAPHY / IMAGING: 1.1%
2,000 Eastman Kodak Co......................................... 127,750
----------
See accompanying Notes to Financial Statements.
5
<PAGE>
AVONDALE HESTER TOTAL RETURN FUND
SCHEDULE OF INVESTMENTS AT MARCH 31, 1999, CONTINUED
- --------------------------------------------------------------------------------
Shares Market Value
- --------------------------------------------------------------------------------
RETAIL - RESTAURANTS: 2.4%
6,000 McDonald's Corp.......................................... $ 271,875
----------
TELECOMMUNICATIONS EQUIPMENT: 2.4%
4,000 IPC Information Systems, Inc.*........................... 77,000
2,000 Tellabs, Inc.*........................................... 195,500
----------
272,500
----------
Total Common Stock (cost $4,988,248)..................... 9,973,819
----------
Principal Amount BONDS: 7.8%
- --------------------------------------------------------------------------------
AGENCIES: 6.4%
$500,000 FHLMC, 5.865%, 7/16/2001................................. 500,835
67,178 FNMA, 7.500%, 8/1/2002................................... 68,940
104,538 FNMA, 7.000%, 6/1/2003................................... 106,982
48,116 GNMA, 5.500%, 5/20/2027.................................. 48,735
----------
725,492
----------
U.S. TREASURY NOTES: 0.5%
50,000 7.125%, 2/29/2000........................................ 51,000
----------
CORPORATE: 0.9%
75,000 Associates Corp., 6.750%, 10/15/1999..................... 75,596
25,000 IBM, 6.375%, 6/15/2000................................... 25,235
----------
100,831
----------
Total Bonds (cost $871,163).............................. 877,323
----------
SHORT-TERM INVESTMENTS: 3.7%
- --------------------------------------------------------------------------------
MONEY MARKET INVESTMENT: 3.7%
412,348 Star Treasury Cash Management Fund, 4.710%, 4/1/1999
(cost $412,348).......................................... 412,348
----------
See accompanying Notes to Financial Statements.
6
<PAGE>
AVONDALE HESTER TOTAL RETURN FUND
SCHEDULE OF INVESTMENTS AT MARCH 31, 1999, CONTINUED
- --------------------------------------------------------------------------------
Market Value
- --------------------------------------------------------------------------------
Total Investment in Securities
(cost $6,271,759+): 100.3%.............................$11,263,490
Liabilities in excess of Other Assets: (0.3)%............ (38,993)
-----------
TOTAL NET ASSETS: 100.0% ................................$11,224,497
===========
*Non-income producing security.
+At March 31, 1999, the cost of securities for Federal tax purposes was the same
as the basis for financial reporting. Unrealized appreciation and depreciation
of securities were as follows:
Gross unrealized appreciation................................$ 5,135,606
Gross unrealized depreciation................................ (143,875)
-----------
Net unrealized appreciation................................$ 4,991,731
===========
See accompanying Notes to Financial Statements.
7
<PAGE>
AVONDALE HESTER TOTAL RETURN FUND
STATEMENT OF ASSETS AND LIABILITIES AT MARCH 31, 1999
- --------------------------------------------------------------------------------
ASSETS
Investments in securities, at value (cost $6,271,759) ....... $11,263,490
Dividends and interest receivable ........................... 28,913
Other assets ................................................ 1,709
-----------
Total assets .................................... 11,294,112
-----------
LIABILITIES
Payables:
Advisory fees ......................................... 6,721
Administration fee .................................... 2,728
Securities purchased .................................. 35,274
Accrued expenses ............................................ 24,892
-----------
Total liabilities ............................... 69,615
-----------
NET ASSETS ........................................................ $11,224,497
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($11,224,497/293,528 shares outstanding;
unlimited number of shares authorized without par value) .. $ 38.24
===========
COMPONENTS OF NET ASSETS
Paid-in capital ............................................. $ 5,743,237
Undistributed net investment income ......................... 30,836
Accumulated net realized gain on investments ................ 458,693
Net unrealized appreciation on investments .................. 4,991,731
-----------
Net assets ............................................ $11,224,497
===========
See accompanying Notes to Financial Statements.
8
<PAGE>
AVONDALE HESTER TOTAL RETURN FUND
STATEMENT OF OPERATIONS - FOR THE YEAR ENDED MARCH 31, 1999
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Income
Dividend ............................................... $ 121,420
Interest ............................................... 83,994
Other .................................................. 797
----------
Total income ..................................... 206,211
----------
Expenses
Advisory fees .......................................... 67,472
Administration fee ..................................... 30,000
Fund accounting fees ................................... 19,192
Audit fee .............................................. 13,163
Transfer agent fees .................................... 10,640
Legal fees ............................................. 6,876
Custody fees ........................................... 5,298
Trustee fees ........................................... 4,535
Registration fees ...................................... 2,343
Reports to shareholders ................................ 1,995
Miscellaneous .......................................... 1,706
----------
Total expenses ....................................... 163,220
----------
NET INVESTMENT INCOME ...................... 42,991
----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from security transactions ................. 481,917
Net change in unrealized appreciation on investments ......... 603,123
----------
Net realized and unrealized gain on investments ...... 1,085,040
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS . $1,128,031
==========
See accompanying Notes to Financial Statements.
9
<PAGE>
AVONDALE HESTER TOTAL RETURN FUND
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------
Year Year
Ended Ended
March 31, 1999 March 31,1998
-------------- -------------
<S> <C> <C>
INCREASE IN NET ASSETS FROM:
OPERATIONS
Net investment income ...................................... $ 42,991 $ 51,755
Net realized gain from security transactions .............. 481,917 217,544
Net change in unrealized appreciation on investments ....... 603,123 3,099,157
----------- -----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ... 1,128,031 3,368,456
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income ...................................... (14,289) (49,621)
Net realized gain from security transactions ............... (213,810) (166,584)
----------- -----------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS ..................... (228,099) (216,205)
----------- -----------
CAPITAL SHARE TRANSACTIONS
Net decrease in net assets derived from net change in
outstanding shares (a).................................... (589,689) (2,115,938)
----------- -----------
Total increase in net assets............................ 310,243 1,036,313
NET ASSETS
Beginning of year........................................... 10,914,254 9,877,941
----------- -----------
END OF YEAR (including undistributed net investment
income of $30,836 and $2,134, respectively)................. $11,224,497 $10,914,254
=========== ===========
</TABLE>
(a) A summary of capital share transactions is as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
March 31, 1999 March 31, 1998
---------------------- ----------------------
Shares Value Shares Value
-------- ------------ -------- ------------
<S> <C> <C> <C> <C>
Shares sold .................................... 76,567 $ 2,596,160 11,969 $ 383,640
Shares issued in reinvestment of distributions.. 6,221 214,284 6,229 196,258
Shares redeemed................................. (98,828) (3,400,133) (86,710) (2,695,836)
------- ----------- ------- -----------
Net decrease.................................... (16,040) $ (589,689) (68,512) $(2,115,938)
======= =========== ======= ===========
</TABLE>
See accompanying Notes to Financial Statements.
10
<PAGE>
AVONDALE HESTER TOTAL RETURN FUND
FINANCIAL HIGHLIGHTS
FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT EACH YEAR
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Years Ended March 31,
-----------------------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year .......... $35.26 $26.13 $27.76 $23.58 $22.93
Income from investment operations:
Net investment income.................. 0.15 0.16 0.18 0.27 0.23
Net realized and unrealized gain
on investments .................. 3.62 9.61 0.14 6.00 1.49
------ ------ ------ ------ ------
Total from investment operations............. 3.77 9.77 0.32 6.27 1.72
------ ------ ------ ------ ------
Less distributions:
From net investment income............. (0.05) (0.15) (0.28) (0.27) (0.23)
From net capital gains................. (0.74) (0.49) (1.67) (1.82) (0.84)
------ ------ ------ ------ ------
Total distributions.......................... (0.79) (0.64) (1.95) (2.09) (1.07)
------ ------ ------ ------ ------
Net asset value, end of year................. $38.24 $35.26 $26.13 $27.76 $23.58
====== ====== ====== ====== ======
Total return................................. 10.94% 37.65% 1.10% 26.67% 7.82%
Ratios/supplemental data:
Net assets, end of year (millions)........... $ 11.2 $ 10.9 $ 9.9 $ 9.8 $ 6.9
Ratio of expenses to average net assets...... 1.57% 1.59% 1.83% 1.69% 1.77%
Ratio of net investment income to average
net assets............................. 0.41% 0.48% 0.62% 1.03% 0.96%
Portfolio turnover rate .................... 25.71% 9.38% 40.87% 52.25% 52.24%
</TABLE>
See accompanying Notes to Financial Statements.
11
<PAGE>
AVONDALE HESTER TOTAL RETURN FUND
NOTES TO FINANCIAL STATEMENTS AT MARCH 31, 1999
- --------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION
Avondale Hester Total Return Fund (the "Fund") is a diversified series of
shares of beneficial interest of Professionally Managed Portfolios (the
"Trust"), which is registered under the Investment Company Act of 1940 (the
"1940 Act") as an open-end investment management company. The Fund began
operations on October 12, 1988.
Hester Capital Management, L.L.C. (the "Advisor"), the Fund's Advisor, is a
registered investment advisor, and provides investment advisory services to
individuals and institutions with assets of approximately $500 million. Mr. I.
Craig Hester, President, and Mr. John Gunthorp, Executive Vice President, are
responsible for the management of the Fund's portfolio. Prior to September 1,
1998, the Fund was known as the Avondale Total Return Fund and was managed by
Herbert R. Smith & Co., Inc.
The Fund's primary investment objective is to realize the combination of
income and capital appreciation that will produce the maximum total return
consistent with reasonable risk. The Fund seeks to achieve its objective by
investing primarily in higher quality fixed income debt securities and equity
securities.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund. These policies are in conformity with generally accepted
accounting principles.
A. SECURITY VALUATION. Investments in securities traded on a national
securities exchange or included in the NASDAQ National Market System
are valued at the last reported sales price at the close of regular
trading on the last business day of the period; securities traded on
an exchange or NASDAQ for which there have been no sales and other
over-the-counter securities are valued at the last reported bid price.
Securities for which quotations are not readily available are valued
at their respective fair values as determined in good faith by the
Board of Trustees. Short-term investments are stated at cost, which
when combined with accrued interest, approximates market value.
U.S. Government securities with less than 60 days remaining to
maturity when acquired by the Fund are valued on an amortized cost
basis. U.S. Government securities with more than 60 days remaining to
maturity are valued at the current market value (using the mean
between the bid and asked price) until the 60th day prior to maturity,
and then valued at amortized cost based upon the value on such date
unless the Board determines during such 60-day period that this
amortized cost basis does not represent fair value.
B. FEDERAL INCOME TAXES. The Fund intends to comply with the requirements
of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its
shareholders. Therefore, no federal income tax provision is required.
C. SECURITY TRANSACTIONS, INVESTMENT INCOME AND DISTRIBUTIONS. As is
common in the industry, security transactions are accounted for on the
trade date. The cost of securities owned on realized transactions are
relieved on a first-in, first-out basis. Dividend income and
distributions to shareholders are recorded on the ex-dividend date.
Interest income is recorded on an accrual basis. Discounts and
premiums on securities purchased are amortized over the life of the
respective securities.
12
<PAGE>
AVONDALE HESTER TOTAL RETURN FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
- --------------------------------------------------------------------------------
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 five months ended August 31, 1998, Herbert R. Smith, Incorporated
provided the Fund with investment management services under an Investment
Advisory Agreement. As of September 1, 1998, the management of the Fund
transferred to Hester Capital Management, L.L.C. Herbert R. Smith, Incorporated
and Hester Capital Management, L.L.C. (the "Managers") furnished all investment
advice, office space, facilities, and most of the personnel needed by the Fund.
As compensation for its services, the Managers were entitled to a monthly fee at
the annual rate of 0.70% on the first $200 million of average daily net assets;
0.60% on the next $300 million of net assets; and 0.50% on net assets exceeding
$500 million. For the year ended March 31, 1999, the Fund incurred $67,472 in
Advisory fees.
Investment Company Administration, LLC (the "Administrator") acts as the
Fund's Administrator under an Administration Agreement. The Administrator
prepares various federal and state regulatory filings, reports and returns for
the Fund; prepares reports and materials to be supplied to the trustees;
monitors the activities of the Fund's custodian, transfer agent and accountants;
coordinates the preparation and payment of Fund expenses and reviews the Fund's
expense accruals. For its services, the Administrator receives a monthly fee at
an annual rate equal to the greater of 0.15% of the Fund's average daily net
assets or $30,000. For the year ended March 31, 1999, the Fund incurred $30,000
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 Distributor.
NOTE 4 - PURCHASES AND SALES OF SECURITIES
The cost of purchases and the proceeds from sales of securities, excluding
short-term securities and U.S. Government securities, for the year ended March
31, 1999, were $2,073,185 and $2,877,942, respectively. For the year ended March
31, 1999, the cost of purchases and the proceeds from sales of U.S. Government
and Government Agency obligations, excluding short-term securities, were
$499,141 and $586,702, respectively.
13
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
TO THE SHAREHOLDERS OF
AVONDALE HESTER TOTAL RETURN FUND and
THE BOARD OF TRUSTEES OF
PROFESSIONALLY MANAGED PORTFOLIOS
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of Avondale Hester Total Return Fund, a
series of Professionally Managed Portfolios, as of March 31, 1999, and the
related statement of operations for the year then ended, the statement of
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 March
31, 1999, by correspondence with the custodian and brokers. 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 audits provide 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
Avondale Hester Total Return Fund as of March 31, 1999, the results of its
operations for the year then ended, the changes in its 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
April 16, 1999
14
<PAGE>
INVESTMENT ADVISOR
Hester Capital Management, L.L.C.
100 Congress Ave., Suite 1960
Austin, TX 78701
DISTRIBUTOR
First Fund Distributors, Inc.
4455 E. Camelback Road, Suite 261E
Phoenix, AZ 85018
CUSTODIAN
Firstar Bank, N.A.
425 Walnut Street
Cincinnati, OH 45202
TRANSFER AGENT
American Data Services, Inc.
P.O. Box 5536
Hauppauge, NY 11788-0132
(800) 282-2340
AUDITORS
Tait, Weller & Baker
8 Penn Center Plaza, Suite 800
Philadelphia, PA 19103
LEGAL COUNSEL
Paul, Hastings, Janofsky & Walker, LLP
345 California Street, 29th Floor
San Francisco, CA 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.
