TRENT
EQUITY
FUND
ANNUAL REPORT
FOR THE YEAR ENDED
AUGUST 31, 1999
<PAGE>
TRENT EQUITY FUND
ANNUAL REPORT
FOR THE YEAR ENDING AUGUST 31, 1999
September 30, 1999
Dear Shareholder:
Trent Equity Fund completed an excellent year in performance with a gain of
52.81% for the fiscal year ending August 31, 1999 compared to a gain of 39.79%
for the S&P 500 with dividends reinvested. For the semi-annual period -- from
February 28, 1999 to August 31, 1999 -- the Fund was up 19.79% as compared to a
gain of 7.32% for the S&P 500 with dividends reinvested. Although the market
index averages remain high, we believe there exists a dichotomy between a very
few large capitalization, grossly overvalued stocks and a preponderance of
fairly valued and undervalued stocks. During the past twelve months, the Fund
has bought stocks that we have tracked for a long time because prices have
fallen to attractive valuations. Given that inflation remains in check, the
winds of global trade are blowing favorably and the Asian tigers are getting
their financial houses in order, we believe the stock market is the most
attractive that it has been since 1994. We are optimistic about the potential
for good performance during the next couple of years.
ACTIVITY IN CURRENT HOLDINGS
The best performers during the six month period in order of dollar impact
were Qualcomm, up 426%; American Express, up 27%; Michaels Stores, up 79%; and
Tribune Company, up 41%. Qualcomm, the digital wireless technology leader and
equipment provider, settled a patent dispute with the Swedish telecom equipment
maker Ericsson and had its technology accepted in China. American Express's
earnings continue to grow at 15% per year and the company continues to be
innovative in both product line and with internet initiatives. Michaels Stores'
rebound from its difficult period of a couple of years ago continues apace.
Tribune Company is enjoying wonderful results from its 25% ownership in the
up-and-coming WB Network and a number of internet initiatives. The four poorest
performers in order of dollar impact were Oakwood Homes, down 56%; Mattel, down
24%; Infoseek, down 38%; and Oakley, down 63%. As with other major manufactured
home manufacturers, Oakwood Homes is plagued by an industry-wide inventory glut.
Mattel has yet to rebound from its retail customers' shift to just-in-time
inventory. Infoseek's future is still clouded by uncertainty about how The Walt
Disney Company will integrate Infoseek into its existing internet division.
Oakley has yet to produce results from its foray into shoes and watches.
NEW HOLDINGS
New purchases during the six-month period were Central Parking, Flycast
Communications, H.J. Heinz, Infoseek, Lockheed Martin, Oakwood Homes,
Owens-Illinois, Reed International, Servicemaster, Sigma-Aldrich, Unifi and
United Asset Management. Central Parking is a parking lot operator. Flycast
Communications is an internet-based advertising network. H.J. Heinz is a major
food company which, in addition to the Heinz name, owns Ore-Ida potatoes and
Starkist tuna. Infoseek is Disney's internet affiliate. Lockheed Martin is a
major defense contractor with a significant presence in communications and
information systems. Oakwood Homes is a major housing manufacturer. With a 45%
<PAGE>
market share, Owens-Illinois is the largest global glass container manufacturer.
Reed International is a publisher of scientific, professional and business
periodicals. Servicemaster is a provider of residential and commercial services
that include carpet cleaning, maid services, plumbing services, pest control and
lawn care. Sigma-Aldrich is a provider of manufacturing and research chemicals.
Unifi is a leading processor of polyester and nylon yarns. United Asset
Management is an amalgam of independent money management firms.
SIGNIFICANT REALIZED GAINS AND LOSSES
In order of dollar magnitude, the largest realized gains during the
six-month period were taken in the partial liquidation of Qualcomm, up 351%;
McDonald's, up 72%; Gillette, up 105%; partial liquidation of Brunswick, up
118%; and Disney, up 32%. The partial sale of Qualcomm was to take advantage of
the drop in price of Infoseek. McDonald's and Gillette were both sold because of
overvaluations. We sold Disney because of deteriorating fundamentals,
particularly in its creative content division. Although we do not consider it
overvalued, we sold Brunswick to find funds for the purchase of Flycast
Communications.
In order of dollar impact the largest realized losses were a partial sale
of Oakley, down 50%, and a full liquidation of Petsmart, down 34%. Oakley lacks
earnings momentum due to tepid acceptance of its new shoe and watch lines. The
market has not been recognizing improvements in the execution of Petsmart's
business plan and we felt the funds could be employed better elsewhere.
We thank you for being an investor in Trent Equity Fund.
TRENT CAPITAL MANAGEMENT, INC.
2
<PAGE>
TRENT EQUITY FUND
Average Annual Total Return
Period Ended August 31, 1999
1 Year ........................... 52.81%
5 Year ........................... 17.32%
Since inception (8/13/90)* ....... 15.43%
Value of $10,000 vs S&P 500 Index
Trent Equity Fund S&P 500 w/inc
----------------- -------------
8/13/90 10,000 10,000
12/31/90 9,840 7,496
6/30/91 12,900 8,563
12/31/91 15,280 9,779
6/30/92 13,980 9,704
12/31/92 15,790 10,528
6/30/93 15,157 11,027
12/31/93 16,640 11,586
6/30/94 15,421 11,181
12/31/94 14,890 11,733
6/30/95 17,305 14,103
12/31/95 17,014 16,137
6/30/96 19,898 17,758
12/31/96 20,487 19,847
6/30/97 23,666 23,923
12/31/97 25,648 26,465
6/30/98 30,515 31,131
12/31/98 30,227 34,027
3/31/99 33,475 35,709
6/30/99 39,608 38,230
8/31/99 36,675 36,849
Past performance is not predictive of future performance.
The S&P 500 is a broad market-weighted average of U.S. blue-chip companies. The
index is unmanaged and returns include reinvested dividends.
* Performance for the Trent Equity Fund reflects the performance of the Trent
Partners LP, whose assets were transferred into the Trent Equity Fund on
September 11, 1992, net of actual fees and expenses.
3
<PAGE>
TRENT EQUITY FUND
SCHEDULE OF INVESTMENTS AT AUGUST 31, 1999
- --------------------------------------------------------------------------------
Shares COMMON STOCKS: 98.9% Market Value
- --------------------------------------------------------------------------------
AEROSPACE/DEFENSE - EQUIPMENT: 2.2%
3,150 Lockheed Martin Corporation............................. $ 116,550
----------
CHEMICALS - SPECIALTY: 1.6%
2,500 Sigma-Aldrich Corporation............................... 80,625
----------
COMMERCIAL SERVICES: 8.3%
4,100 Central Parking Corporation............................. 131,712
1,150 Equifax Inc............................................. 35,075
6,950 Gartner Group, Inc., Class A............................ 145,516
7,375 The ServiceMaster Company............................... 121,687
----------
433,990
----------
COMPUTERS: 2.0%
1,000 Hewlett-Packard Company................................. 105,375
----------
CONSUMER PRODUCTS: 5.9%
8,160 Mattel, Inc............................................. 173,910
2,400 NIKE, Inc., Class B..................................... 111,000
3,500 Oakley, Inc.*........................................... 21,437
----------
306,347
----------
CONTAINERS: 1.8%
2,300 Crown Cork & Seal Company, Inc.......................... 61,094
1,250 Owens-Illinois, Inc.*................................... 30,938
----------
92,032
----------
COSMETICS AND TOILETRIES: 2.6%
6,600 Revlon, Inc., Class A*.................................. 134,062
----------
FINANCIAL SERVICES: 13.5%
3,150 American Express Company................................ 433,125
2,450 Federal Home Loan Mortgage Corp......................... 126,175
7,500 United Asset Management Corporation..................... 146,719
----------
706,019
----------
4
<PAGE>
TRENT EQUITY FUND
SCHEDULE OF INVESTMENTS AT AUGUST 31, 1999, CONTINUED
- --------------------------------------------------------------------------------
Shares Market Value
- --------------------------------------------------------------------------------
FOOD & BEVERAGE: 2.5%
1,800 Campbell Soup Company................................... $ 79,538
1,050 H.J. Heinz Company...................................... 49,022
----------
128,560
----------
HOME MANUFACTURING: 1.2%
10,600 Oakwood Homes Corporation............................... 64,262
----------
HOUSEHOLD PRODUCTS: 3.7%
2,700 Libbey Inc.............................................. 82,687
2,620 Newell Rubbermaid Inc................................... 107,420
----------
190,107
----------
INTERNET CONTENT: 4.2%
6,100 Flycast Communications Corporation*..................... 141,063
2,500 Infoseek Corporation*................................... 76,094
----------
217,157
----------
LEISURE AND RECREATION PRODUCTS: 3.1%
6,300 Brunswick Corporation................................... 161,044
----------
MEDIA: 9.3%
7,400 AMFM Inc.*.............................................. 364,450
7,400 Sinclair Broadcast Group, Inc., Class A*................ 120,250
----------
484,700
----------
MEDICAL SUPPLIES: 1.7%
875 Johnson & Johnson....................................... 89,469
----------
OILFIELD SERVICES: 3.1%
2,400 Schlumberger Limited.................................... 160,200
----------
PERSONAL SERVICES: 2.0%
7,700 Service Corporation International....................... 106,356
----------
PUBLISHING: 5.9%
3,900 Reed International P.L.C., ADR.......................... 105,788
2,200 Tribune Company......................................... 205,287
----------
311,075
----------
5
<PAGE>
TRENT EQUITY FUND
SCHEDULE OF INVESTMENTS AT AUGUST 31, 1999, CONTINUED
- --------------------------------------------------------------------------------
Shares Market Value
- --------------------------------------------------------------------------------
RETAIL: 9.9%
7,600 Claire's Stores, Inc.................................... $ 142,975
6,575 Dollar General Corporatioun............................. 170,950
6,600 Michaels Stores, Inc.*.................................. 202,537
----------
516,462
----------
TELECOMMUNICATIONS: 12.5%
3,400 QUALCOMM Incorporated*.................................. 653,438
----------
TEXTILE - APPAREL: 1.9%
7,300 Unifi, Inc.*............................................ 98,550
----------
Total Investments in Securities (cost
$3,938,659+): 98.9%................................... 5,156,380
Other Assets less Liabilities: 1.1%..................... 57,860
----------
Total Net Assets: 100.0%................................ $5,214,240
==========
* Non-income producing security.
+ At August 31, 1999, the basis of investments for federal income tax purposes
was the same as their cost for financial reporting purposes. Unrealized
appreciation and depreciation of securities were as follows:
Gross unrealized appreciation............................... $1,611,302
Gross unrealized depreciation............................... (393,581)
----------
Net unrealized appreciation............................... $1,217,721
==========
See accompanying Notes to Financial Statements.
6
<PAGE>
TRENT EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES AT AUGUST 31, 1999
- --------------------------------------------------------------------------------
ASSETS
Investments in securities, at value (cost $3,938,659) ..... $5,156,380
Cash ...................................................... 82,630
Receivables:
Dividends ........................................... 4,231
Fund shares sold .................................... 1,442
----------
Total assets ........................................ 5,244,683
----------
LIABILITIES
Payables:
Fund shares redeemed ................................ 150
Advisory fees ....................................... 570
Accrued audit fee ......................................... 12,030
Other accrued expenses .................................... 17,693
----------
Total liabilities ............................. 30,443
----------
NET ASSETS ...................................................... $5,214,240
==========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($5,214,240/344,517 shares outstanding; unlimited
number of shares authorized without par value) ............ $ 15.13
==========
COMPONENTS OF NET ASSETS
Paid-in capital ........................................... $3,456,392
Accumulated net realized gain on investments .............. 540,127
Net unrealized appreciation on investments ................ 1,217,721
----------
Net assets .......................................... $5,214,240
==========
See accompanying Notes to Financial Statements.
7
<PAGE>
TRENT EQUITY FUND
STATEMENT OF OPERATIONS - FOR THE YEAR ENDED AUGUST 31, 1999
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Income
Dividends .................................................. $ 45,875
Interest ................................................... 603
-----------
Total income ......................................... 46,478
-----------
Expenses
Advisory fees .............................................. 50,691
Administration fee ......................................... 30,000
Fund accounting fees ....................................... 17,275
Audit fee .................................................. 13,990
Transfer agent fees ........................................ 12,600
Custody fees ............................................... 5,698
Legal fees ................................................. 4,199
Trustee fees ............................................... 3,831
Reports to shareholders .................................... 3,803
Registration fees .......................................... 3,599
Miscellaneous .............................................. 2,368
Insurance .................................................. 298
-----------
Total expenses ........................................... 148,352
Less: expenses waived and reimbursed ..................... (60,194)
-----------
Net expenses ............................................. 88,158
-----------
NET INVESTMENT LOSS .................................... (41,680)
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from security transactions ............... 796,793
Net unrealized appreciation on investments ................. 940,957
-----------
Net realized and unrealized gain on investments .......... 1,737,750
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ... $ 1,696,070
===========
See accompanying Notes to Financial Statements.
8
<PAGE>
TRENT EQUITY FUND
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------
Year Year
Ended Ended
August 31, August 31,
1999 1998
----------- -----------
<S> <C> <C>
INCREASE IN NET ASSETS FROM:
OPERATIONS
Net investment loss ..................................... $ (41,680) $ (43,462)
Net realized gain from security transactions ............ 796,793 782,584
Net unrealized appreciation (depreciation) on investments 940,957 (611,439)
----------- -----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 1,696,070 127,683
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS
From net realized gain on investments ................... (725,130) --
----------- -----------
CAPITAL SHARE TRANSACTIONS
Net increase (decrease) in net assets derived from net
change in outstanding shares (a) ..................... 995,731 (199,961)
----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS ............ 1,966,671 (72,278)
NET ASSETS
Beginning of year .................................... 3,247,569 3,319,847
----------- -----------
END OF YEAR ................................................ $ 5,214,240 $ 3,247,569
=========== ===========
</TABLE>
(a) A summary of capital shares transactions is as follows:
Year Year
Ended Ended
August 31, 1999 August 31, 1998
-------------------- --------------------
Shares Value Shares Value
------ ----- ------ -----
Shares sold .................... 45,236 $ 666,688 19,742 $ 281,652
Shares issued in reinvestment
of distributions ............. 60,162 693,068 -- --
Shares redeemed ................ (26,471) (364,025) (33,215) (481,613)
------- --------- ------- ---------
Net increase (decrease) ........ 78,927 $ 995,731 (13,473) $(199,961)
======= ========= ======= =========
See accompanying Notes to Financial Statements.
9
<PAGE>
TRENT EQUITY FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- ---------------------------------------------------------------------------------------------------------
Year Ended August 31,
-----------------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year...................... $12.23 $11.90 $ 9.86 $10.24 $11.50
------ ------ ------ ------ ------
Income from investment operations:
Net investment loss ............................... (0.12) (0.16) (0.10) (0.06) --
Net realized and unrealized gain on investments.... 5.73 0.49 2.14 0.67 0.67
------ ------ ------ ------ ------
Total from investment operations........................ 5.61 0.33 2.04 0.61 0.67
------ ------ ------ ------ ------
Less distributions:
From net realized gains............................ (2.71) -- -- (0.99) (1.93)
------ ------ ------ ------ ------
Total distributions..................................... (2.71) -- -- (0.99) (1.93)
------ ------ ------ ------ ------
Net asset value, end of year............................ $15.13 $12.23 $11.90 $ 9.86 $10.24
====== ====== ====== ====== ======
Total return............................................ 52.81% 2.77% 20.69% 7.23% 9.38%
Ratios/supplemental data:
Net assets, end of year (millions)...................... $ 5.2 $ 3.2 $ 3.3 $ 3.0 $ 3.8
Ratio of expenses to average net assets:
Before expense reimbursement and waiver............ 3.36% 3.08% 3.48% 3.63% 3.65%
After expense reimbursement and waiver............. 2.00% 2.00% 2.00% 2.10% 1.85%
Ratio of net investment loss to average net assets:
Before expense reimbursement and waiver............ (2.31%) (2.23%) (2.25%) (2.15%) (2.00%)
After expense reimbursement and waiver............. (0.94%) (1.15%) (0.76%) (0.62%) (0.15%)
Portfolio turnover rate................................. 53.71% 41.14% 43.81% 59.33% 46.52%
</TABLE>
See accompanying Notes to Financial Statements.
10
<PAGE>
TRENT EQUITY FUND
NOTES TO FINANCIAL STATEMENTS AT AUGUST 31, 1999
- --------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION
Trent Equity Fund (the "Fund") is a diversified series of shares of
beneficial interest of Professionally Managed Portfolios (the "Trust"), which is
registered under the Investment Company Act of 1940 (the "1940 Act") as a
diversified, open-end management investment company. The Fund began operations
on September 2, 1992. The investment objective of the Fund is to seek capital
appreciation, both realized and unrealized. The Fund seeks to achieve its
objective by investing primarily in equity securities.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund. These policies are in conformity with generally accepted
accounting principles.
A. SECURITY VALUATION. Investments in securities traded on a national
securities exchange or Nasdaq are valued at the last reported sales
price at the close of regular trading on the last business day of the
period; securities traded on an exchange or Nasdaq for which there
have been no sales and other over-the-counter securities are valued at
the last reported bid price. Securities for which quotations are not
readily available are valued at their respective fair values as
determined in good faith by the Board of Trustees. Short-term
investments are stated at cost, which when combined with accrued
interest, approximates market value.
B. FEDERAL INCOME TAXES. The Fund intends to comply with the requirements
of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to shareholders.
Therefore, no federal income tax provision is required.
C. SECURITY TRANSACTIONS, INVESTMENT INCOME AND DISTRIBUTIONS. Security
transactions are accounted for on the trade date. The cost of
securities sold is determined on a first-in, first-out basis. Dividend
income and distributions to shareholders are recorded on the
ex-dividend date.
D. USE OF ESTIMATES. The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial
statements. Actual results could differ from those estimates.
NOTE 3 - COMMITMENTS AND OTHER RELATED PARTY TRANSACTIONS
For the year ended August 31, 1999, Trent Capital Management, Inc. (the
"Advisor") provided the Fund with investment management services under an
Investment Advisory Agreement. The Advisor furnished all investment advice,
office space and certain administrative services, and most of the personnel
needed by the Fund. As compensation for its services, the Advisor was entitled
to a monthly fee at the annual rate of 1.15% based upon the average daily net
assets of the Fund. For the year ended August 31, 1999, the Fund incurred
$50,691 in advisory fees.
11
<PAGE>
TRENT EQUITY FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
- --------------------------------------------------------------------------------
The Fund is responsible for its own operating expenses. The Advisor has
agreed to limit the Fund's total expenses to not more than 2.00% of average 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 the
reimbursement by the Fund, within three years, provided the Fund is able to
effect such reimbursement and remain in compliance with any expense limitations
then in effect. For the year ended August 31, 1999, the Advisor reimbursed the
Fund in the amount of $60,194.
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 year ended August 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 and receives no compensation
for its services.
Certain officers and trustees of the Trust are also officers and/or
directors of the Administrator and Distributor.
NOTE 4 - INVESTMENT TRANSACTIONS
The cost of purchases and the proceeds from sales of securities, other than
short-term investments, for the year ended August 31, 1999, were $2,538,721 and
$2,343,226, respectively.
12
<PAGE>
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
To the Shareholders of
the Trent Equity Fund and
Board of Trustees of
Professionally Managed Portfolios
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of Trent Equity Fund (a series of
Professionally Managed Portfolios) as of August 31, 1999, and the related
statements of operations for the year then ended and the changes in net assets
for each of the two years in the period then ended and the financial highlights
for each of the five years in the period then ended. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1999, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Trent Equity Fund as of August 31, 1999, the results of its operations for the
year then ended, the changes in net assets for each of the two years in the
period then ended and the financial highlights for each of the five years in the
period then ended, in conformity with generally accepted accounting principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
October 1, 1999
13
<PAGE>
ADVISOR
Trent Capital Management, Inc.
3101 North Elm Street
Suite 150
Greensboro, North Carolina 27408
(336) 282-9302
DISTRIBUTOR
First Fund Distributors, Inc.
4455 East Camelback Road
Suite 261E
Phoenix, Arizona 85018
CUSTODIAN
Firstar Institutional Custody Services
425 Walnut Street
Cincinnati, Ohio 45202
TRANSFER AGENT
ICA Fund Services Corp.
4455 East Camelback Road
Suite 261E
Phoenix, Arizona 85018
AUDITORS
Tait, Weller & Baker
Eight Penn Center Plaza, Suite 800
Philadelphia, Pennsylvania 19103
LEGAL COUNSEL
Paul, Hastings, Janofsky & Walker LLP
345 California Street, 29th Floor
San Francisco, California 94104
This report is intended for shareholders of the Fund and may not be
used as sales literature unless preceded or accompanied by a current
prospectus.
Past performance results shown in this report should not be considered
a representation of future performance. Share price and returns will
fluctuate so that shares, when redeemed, may be worth more or less
than their original cost. Statements and other information herein are
dated and are subject to change.
