<PAGE> 1
[HODGES FUND LOGO]
November 15, 1996
Dear Hodges Fund Shareholders:
The third calendar quarter was a volatile one for common stocks. The market
dropped precipitously, but then reversed itself and recovered. The Hodges Fund
NAV rose 0.45%, our least productive quarter this year. In spite of the
lackluster performance, our NAV went up 21.05% for the full nine months, giving
us one of the better year-to-date performances for any fund.
During the quarter we increased our existing positions in: Southwest Airlines,
Cyrix Corp., Optical Data Systems, Sterling Electronics, Eljer Industries, CMI
Corp., American Express, William Wrigley, National Surgery Centers and Charles
Schwab.
We also established new positions in: Boeing Co., Agouron Pharmaceuticals,
Price/Costco, Wackenhut Corrections, NCI Buildings and Ross Technology.
Thank you for entrusting your funds to our investment. If you have friends or
relatives that should know about The Hodges Fund, please call us at
800-456-1979, and we will send them a prospectus and ask them to read it
carefully.
Sincerely,
/s/ Don W. Hodges
- ------------------
DON W. HODGES
<PAGE> 2
[HODGES FUND LOGO]
PORTFOLIO OF INVESTMENTS AT SEPTEMBER 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Shares COMMON STOCKS: 94.1% Market Value
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
AIRLINES, TRANSPORTATION: 3.3%
1,000 Boeing Company.......................................................... $ 94,500
20,000 Southwest Airlines Company.............................................. 457,500
-----------
552,000
-----------
BUILDING AND CONSTRUCTION MATERIALS: 1.8%
5,000 Vulcan Materials Company................................................ 300,000
-----------
COMPUTERS, SOFTWARE AND ELECTRONICS: 6.4%
15,000 Cyrix Corporation*...................................................... 245,625
10,000 Optek Technology, Inc.*................................................. 97,500
20,000 Ross Technology, Inc.*.................................................. 127,500
11,000 Texas Instruments, Inc.................................................. 606,375
-----------
1,077,000
-----------
CONSTRUCTION EQUIPMENT: 2.3%
100,000 CMI Corp., Class A*..................................................... 387,500
-----------
CONSTRUCTION & MATERIALS: 2.5%
20,000 Eljer Industries, Inc................................................... 195,000
7,000 NCI Building System..................................................... 227,500
-----------
422,500
-----------
CONSUMER PRODUCTS: 1.7%
25,000 Fossil, Inc.*........................................................... 287,500
-----------
CORRECTIONS INDUSTRY: 4.7%
13,400 Wackenhut Corporation................................................... 246,225
20,000 Wackenhut Corporation, Class B.......................................... 312,500
10,000 Wackenhut Corrections Corporation*...................................... 222,500
-----------
781,225
-----------
ELECTRICAL PRODUCTS DISTRIBUTION: 2.8%
40,000 Sterling Electronics Corporation*....................................... 475,000
-----------
ENTERTAINMENT: 2.0%
15,000 Gaylord Entertainment Company........................................... 339,375
-----------
</TABLE>
See accompanying "Notes to Financial Statements."
2
<PAGE> 3
[HODGES FUND LOGO]
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS AT SEPTEMBER 30, 1996 (UNAUDITED), CONTINUED
- -------------------------------------------------------------------------------------------------------------------
Shares Market Value
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FINANCIAL: 3.9%
14,000 American Express Company................................................ $ 647,500
-----------
FOOD: 3.6%
8,000 William Wrigley, Jr., Company........................................... 482,000
10,000 Unimark Group, Inc...................................................... 117,500
-----------
599,500
-----------
GAS/UTILITIES: 1.4%
10,000 Atmos Energy Corporation................................................ 233,750
-----------
INSURANCE: 9.1%
7,000 Allstate Corporation.................................................... 344,750
72,000 Nobel Insurance, Ltd.*.................................................. 823,500
5,000 Transport Holdings, Inc., Class A*...................................... 347,500
-----------
1,515,750
-----------
LONG TERM HEALTH CARE: 1.9%
10,000 Vencor, Inc.*........................................................... 322,500
-----------
MEDICAL RELATED SERVICES: 11.8%
6,000 Agouron Pharmaceuticals................................................. 261,750
100,000 Diagnostic Health Services, Inc.*....................................... 837,500
11,500 EmCare Holding, Inc..................................................... 310,500
1,500 Guidant Corporation..................................................... 82,875
17,000 National Surgery Centers, Inc........................................... 476,000
-----------
1,968,625
-----------
MISCELLANEOUS SERVICES: 1.1%
10,000 Children's Comprehensive Services, Inc.*................................ 177,500
-----------
NETWORKING: 5.1%
50,000 Optical Data Systems, Inc.*............................................. 850,000
-----------
OIL & GAS: 1.0%
10,000 Quaker State Corporation................................................ 172,500
-----------
</TABLE>
See accompanying "Notes to Financial Statements."
3
<PAGE> 4
[HODGES FUND LOGO]
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS AT SEPTEMBER 30, 1996 (UNAUDITED), CONTINUED
- -------------------------------------------------------------------------------------------------------------------
Shares Market Value
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PUBLISHING/BOOKS: 0.4%
1,500 Houghton Mifflin Company................................................ $ 70,688
-----------
RESTAURANTS: 3.0%
15,000 Brinker International, Inc.*............................................ 255,000
10,000 Luby's Cafeterias, Inc.................................................. 240,000
-----------
495,000
-----------
RETAIL: 14.7%
207,400 Calloway's Nursery, Inc.*............................................... 194,438
110,000 E-Z Serve Corporation*.................................................. 206,250
13,000 Home Depot, Inc. ....................................................... 739,375
35,000 Kmart Corporation....................................................... 358,750
20,000 Office Depot, Inc.*..................................................... 472,500
20,000 Price/Costco, Inc....................................................... 410,000
25,000 Southland Corporation................................................... 75,781
-----------
2,457,094
-----------
SERVICE INDUSTRIES: 1.1%
2,000 Assisted Living......................................................... 38,000
35,000 Avalon Community Services, Inc.......................................... 144,375
-----------
182,375
-----------
STOCK BROKERAGE: 5.9%
20,000 Charles Schwab Corporation.............................................. 462,500
20,000 Quick & Reilly Group, Inc............................................... 525,000
-----------
987,500
-----------
VENTURE CAPITAL: 2.6%
5,500 Capital Southwest Corporation........................................... 372,625
60,000 Southern Venture II LP*................................................. 68,311
-----------
440,936
-----------
Total Common Stocks (cost $14,594,281) ................................. 15,743,318
-----------
</TABLE>
See accompanying "Notes to Financial Statements."
4
<PAGE> 5
[HODGES FUND LOGO]
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS AT SEPTEMBER 30, 1996 (UNAUDITED), CONTINUED
- ------------------------------------------------------------------------------------------------------------------
Shares WARRANTS: 1.6% MARKET VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CORRECTIONS INDUSTRY: 0.6%
11,500 Correctional Service Corporation, Warrants, Class A,
Expiring 7/31/1999...................................................... $ 94,875
-----------
MEDICAL RELATED: 0.8%
55,500 Diagnostic Health Services, Warrants, Expiring 6/24/1998................ 131,812
-----------
RETAIL: 0.2%
3,000 Zale Corporation, Warrants, Class A, Expiring 7/29/1998................. 35,625
-----------
Total Warrants (cost $235,395).......................................... 262,312
-----------
CONVERTIBLE PREFERRED STOCK: 3.0%
33,600 Capstead Mortgage Corporation, $1.26, Series B (cost $423,634).......... 499,800
-----------
Principal Amount REPURCHASE AGREEMENT: 1.1%
$189,000 Star Bank Repurchase Agreement, 5.30%, dated 9/30/1996, due
10/1/1996, collateralized by $205,000 GNMA, 7.0%, due
1/20/2024 (value of collateral is $205,705) (proceeds
$189,028) (cost $189,000)............................................... 189,000
-----------
Total Investment in Securities (cost $15,442,310+): 99.8%............... 16,694,430
Other Assets less Liabilities: 0.2%..................................... 38,709
-----------
Total Net Assets: 100.0%................................................ $16,733,139
===========
* Indicates non-income producing security.
+ Cost for federal income tax purposes is the same.
Net unrealized appreciation consists of:
Gross unrealized appreciation.................................. $ 2,271,121
Gross unrealized depreciation.................................. (1,019,001)
-----------
Net unrealized appreciation........................... $ 1,252,120
===========
</TABLE>
See accompanying "Notes to Financial Statements."
5
<PAGE> 6
[HODGES FUND LOGO]
STATEMENT OF ASSETS AND LIABILITIES AT SEPTEMBER 30, 1996 (UNAUDITED)
- ---------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments in securities, at value (identified cost $15,442,310) (Note 2-A) .......... $16,694,430
Cash................................................................................... 778
Receivables:
Dividends and interest .......................................................... 7,026
Fund shares sold ................................................................ 62,917
Prepaid expenses....................................................................... 9,823
-----------
Total assets .............................................................. 16,774,974
-----------
LIABILITIES
Payables:
Distribution costs............................................................... 19,435
Advisor ......................................................................... 11,322
Fund shares redeemed............................................................. 2,208
Accrued expenses ...................................................................... 8,870
-----------
Total liabilities.......................................................... 41,835
-----------
NET ASSETS ................................................................................. $16,733,139
===========
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($16,733,139/1,246,351 shares outstanding;
unlimited number of shares authorized without par value) ........................ $13.43
COMPUTATION OF OFFERING PRICE PER SHARE ======
(Net asset value $13.43/.975).................................................... $13.77
======
SOURCE OF NET ASSETS
Paid-in capital ....................................................................... $14,104,398
Accumulated net investment loss........................................................ (65,168)
Undistributed net realized gain on investments ........................................ 1,441,789
Net unrealized appreciation of investments............................................. 1,252,120
-----------
Net assets ...................................................................... $16,733,139
===========
</TABLE>
See accompanying "Notes to Financial Statements."
6
<PAGE> 7
[HODGES FUND LOGO]
STATEMENT OF OPERATIONS - FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1996
- ---------------------------------------------------------------------
(UNAUDITED)
INVESTMENT INCOME
<TABLE>
<CAPTION>
<S> <C>
Income
Dividends........................................................................ $ 73,831
Interest ........................................................................ 20,342
-----------
Total investment income ................................................... 94,173
-----------
Expenses
Advisory fees (Note 3) .......................................................... 63,486
Distribution costs (Notes 3 and 4) .............................................. 37,345
Administration fee (Note 3) ..................................................... 15,348
Auditing fees ................................................................... 6,017
Legal fees ...................................................................... 1,851
Custodian and accounting fees.................................................... 13,845
Trustees' fees .................................................................. 1,690
Registration fees ............................................................... 867
Transfer agent fees.............................................................. 8,073
Reports to shareholders.......................................................... 3,190
Insurance ....................................................................... 1,155
Miscellaneous.................................................................... 6,474
-----------
Total expenses............................................................. 159,341
-----------
NET INVESTMENT LOSS ............................................... (65,168)
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on security transactions ............................................ 1,553,787
Net realized loss on long options...................................................... (21,734)
Net change in unrealized appreciation of investments .................................. (485,377)
-----------
Net realized and unrealized gain on investments ........................... 1,046,676
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ................ $ 981,508
===========
</TABLE>
See accompanying "Notes to Financial Statements."
7
<PAGE> 8
[HODGES FUND LOGO]
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Year
Ended Ended
September 30, March 31,
1996* 1996
- -----------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM
OPERATIONS
<S> <C> <C>
Net investment loss........................................................ $ (65,168) $ (67,390)
Net realized gain on security transactions ................................ 1,553,787 1,783,600
Net realized loss on long options.......................................... (21,734) -0-
Net change in unrealized appreciation of investments....................... (485,377) 1,406,629
----------- -----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ............... 981,508 3,122,839
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS
From net realized gain .................................................... (352,020) (1,719,697)
----------- -----------
CAPITAL SHARE TRANSACTIONS
Net increase in net assets derived from net change in outstanding
shares (a) .......................................................... 2,832,087 2,572,239
----------- -----------
TOTAL INCREASE IN NET ASSETS ........................................ 3,461,575 3,975,381
NET ASSETS
Beginning of period........................................................ 13,271,564 9,296,183
----------- -----------
END OF PERIOD ............................................................ $16,733,139 $13,271,564
=========== ===========
</TABLE>
(a) A summary of capital shares transactions is as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
September 30, 1996* March 31, 1996
-------------------- ---------------------
Shares Value Shares Value
-------------------- ---------------------
<S> <C> <C> <C> <C>
Shares sold ...................................... 237,894 $3,131,930 137,704 $1,683,074
Shares issued in connection with reinvestment
of dividends ............................... 3,700 51,423 153,128 1,695,559
Shares redeemed .................................. (26,607) (351,266) (64,430) (806,394)
------- ---------- ------- ----------
Net increase ..................................... 214,987 $2,832,087 226,402 $2,572,239
======= ========== ======= ==========
</TABLE>
*Unaudited.
See accompanying "Notes to Financial Statements."
8
<PAGE> 9
[HODGES FUND LOGO]
FINANCIAL HIGHLIGHTS
FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Six Months Year Year Year Oct. 9, 1992*
Ended Ended Ended Ended through
September March 31, March 31, March 31, March 31,
30, 1996# 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ............. $12.87 $11.55 $10.80 $11.78 $10.25
Income from investment operations:
Net investment income (loss) ............... (.05) (.07) (.08) (.03) .02
Net realized and unrealized gain on
investments ................................ .94 3.42 1.09 .07 1.51
------ ------ ------ ------ ------
Total from investment operations.................. .89 3.35 1.01 .04 1.53
------ ------ ------ ------ ------
Less distributions:
From net investment income.................. -0- -0- -0- (.01) -0-
From net capital gains ..................... (.33) (2.03) (.26) (1.01) -0-
------ ------ ------ ------ ------
Total distributions............................... (.33) (2.03) (.26) (1.02) -0-
------ ------ ------ ------ ------
Net asset value, end of period ................... $13.43 $12.87 $11.55 $10.80 $11.78
====== ====== ====== ====== ======
Total return ..................................... 13.79%+ 32.33% 9.60% 0.22% 25.59%+
Ratios/supplemental data:
Net assets, end of period (millions).............. $ 16.7 $ 13.3 $ 9.3 $ 8.5 $ 6.9
Ratio of expenses to average net assets:
Before expense reimbursement ............... 2.13%+ 2.08% 2.31% 2.63% 2.17%+
After expense reimbursement................. 2.13%+ 2.08% 2.31% 2.07% 2.17%+
Ratio of net investment income (loss) to
average net assets:
Before expense reimbursement ............... (0.87%)+ (0.61%) (0.75%) (0.84%) 0.41%+
After expense reimbursement ................ (0.87%)+ (0.61%) (0.75%) (0.29%) 0.41%+
Portfolio turnover rate .......................... 46.78% 124.89% 73.65% 192.03% 26.23%
Average commission rate paid...................... $0.0306++ - - - -
</TABLE>
*Commencement of operations.
+Annualized.
++For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate per share for security trades on which
commissions are charged.
#Unaudited.
See accompanying "Notes to Financial Statements."
9
<PAGE> 10
[HODGES FUND LOGO]
NOTES TO FINANCIAL STATEMENTS AT SEPTEMBER 30, 1996 (UNAUDITED)
NOTE 1 - ORGANIZATION
Hodges 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 non-diversified, open-end
management company. The Fund's primary investment objective is capital
appreciation. The Fund seeks to achieve its objective by investing in securities
with attractive capital appreciation potential, but there are no assurances that
this objective will be achieved. The value of the Fund's investment portfolio
will fluctuate with market conditions and an investor's shares, when redeemed,
may be worth more or less than their original cost. The Fund began operations on
October 9, 1992.
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 sale 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 has been no sale 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 are 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. Dividend income and distributions to shareholders are
recorded on the ex-dividend date. Interest income is recognized on an
accrual basis. Income and capital gains distributions to shareholders
are determined in accordance with income tax regulations which may
differ from generally accepted accounting principles. Those
differences are primarily due to differing treatments for net
operating losses and deferral of wash sale losses.
10
<PAGE> 11
[HODGES FUND LOGO]
NOTES TO FINANCIAL STATEMENTS (UNAUDITED), CONTINUED
D. Accounting Estimates. In preparing financial statements in conformity
with generally accepted accounting principles, management makes
estimates and assumptions that affect the reported amounts of assets
and liabilities at the date of the financial statements, as well as
the reported amounts of revenues and expenses during the period.
Actual results could differ from those estimates.
NOTE 3 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
For the six months ended September 30, 1996, Hodges Capital Management,
Incorporated (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
provides most of the personnel needed by the Fund. As compensation for its
services, the Advisor receives a monthly fee at the annual rate of 0.85% based
upon the average daily net assets of the Fund.
Investment Company Administration Corporation (the "Administrator") acts
as the Fund's Administrator under an Administration Agreement. The Administrator
prepares various federal and state regulatory filings, reports and returns for
the Fund; prepares reports and materials to be supplied to the trustees;
monitors the activities of the Fund's custodian, transfer agent and accountants;
coordinates the preparation and payment of Fund expenses and reviews the Fund's
expense accruals. For its services, the Administrator receives a monthly fee at
the following annual rate:
Under $15 million - $30,000
$15 to $50 million - 0.20% of average net assets
$50 to $100 million - 0.15% of average net assets
$100 to $150 million - 0.10% of average net assets
over $150 million - 0.05% of average net assets
First Dallas Securities, 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 Advisor. For the six months ended September
30, 1996, the Distributor received as commissions $3,907 from the Fund in
connection with its distribution of the Fund's shares.
Certain officers and Trustees of the Fund are also officers and/or
directors of the Administrator.
NOTE 4 - DISTRIBUTION COSTS
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 Distributor at an annual rate of up to 0.50% of the average daily net assets
of the Fund. The fee is paid to the Distributor as reimbursement for, or in
anticipation of, expenses incurred for distribution-related activity.
NOTE 5 - PURCHASES AND SALES OF SECURITIES
For the six months ended September 30, 1996, the cost of purchases and the
proceeds from sales of securities, excluding short-term securities, were
$8,966,879 and $6,578,489, respectively.
11
<PAGE> 12
ADVISOR
Hodges Capital Management, Inc.
2905 Maple Avenue
Dallas, Texas 75201
(800) 388-8512
--
DISTRIBUTOR
First Dallas Securities, Inc.
2905 Maple Avenue
Dallas, Texas 75201
--
CUSTODIAN
Star Bank, N.A.
425 Walnut Street
Cincinnati, Ohio 45202
--
TRANSFER AGENT
American Data Services, Inc.
24 West Carver Street
2nd Floor
Huntington, New York 11743
--
AUDITORS
Tait, Weller & Baker
2 Penn Center Plaza, Suite 700
Philadelphia, Pennsylvania 19102
--
LEGAL COUNSEL
Heller, Ehrman, White & McAuliffe
333 Bush Street
San Francisco, California 94104
This report is intended for the shareholders of
the Hodges Fund and should not be used as sales
literature unless accompanied or preceded by
the Fund's current prospectus.
[HODGES FUND LOGO]
DESIGNED
FOR INVESTORS
WHO WANT GROWTH
SEMI-ANNUAL REPORT
FOR THE SIX MONTHS ENDED
SEPTEMBER 30, 1996
