HODGES FUND
Designed
for Investors
Who Want Growth
Semi-Annual Report
For the Six Months Ended
September 30, 1998
<PAGE>
HODGES FUND
October 13, 1998
Letter to Shareholders:
Since 1960, when I began as a cub broker with what was then Merrill Lynch Pierce
Fenner & Beene, I have seen a number of dramatic stock market declines. They all
stand out in my mind. There are many similarities, and yet, they have been so
different. The market decline, which began in mid-July and finally bottomed out
on October 8th, was one of the most unusual I've witnessed. It went down quickly
and recovered quickly. During the last few days of the decline, many stocks
appeared ridiculously low. We took advantage of the low prices by purchasing a
number of issues.
Fortunately, our Fund is in much better shape now than we were at the end of the
fiscal September quarter, our official reporting period. At that time with a net
asset value of $12.09, we were down 19.24% for the quarter. The three-year
average annual return was 12.91%. Our five-year average annual return was
13.61%. Average annual return since inception, October 9, 1992, was 14.09%, or a
cumulative return since inception of 119.93%. The twelve months ending September
30, 1998 showed a total return of (15.38)%. I'm happy to report we are in much
better condition now.
During the decline, we made purchases of the following stocks: American Power
Conversion, AMR, Atmos Energy, Brinker International, Correction Corp. of
America, Cracker Barrel Old Country Store, Cutter & Buck, Elcor Corp., Estee
Lauder, General Motors, Home Depot, Mylan Labs, Office Depot and Starbucks Corp.
We also made some attractive buys after the quarter was over.
We will have our ups and downs from time to time. They go with the markets. But
I'm optimistic that, over time, the net asset value will reflect our long-term
objective of capital growth.
If you have questions, please feel free to call me.
Sincerely,
/s/
Don Hodges
<PAGE>
HODGES FUND
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS at September 30, 1998 (Unaudited)
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Shares COMMON STOCKS: 84.7% Market Value
- ------------------------------------------------------------------------------------------------------------------------------------
Aircraft Manufacturing: 0.7%
<S> <C> <C>
5,000 Boeing Company.......................................................... $ 171,562
---------
Airlines: 7.2%
10,000 AMR Corp.*.............................................................. 554,375
21,439 KLM Royal Dutch Airlines................................................ 530,615
40,000 Southwest Airlines Company.............................................. 800,000
-------
1,884,990
---------
Broadcasting and Communications: 0.8%
10,000 A.H. Belo Corp.......................................................... 200,000
-------
Building Materials: 9.3%
35,000 Elcor Corp.............................................................. 739,375
65,000 NCI Building System, Inc.*.............................................. 1,287,812
30,000 Republic Group, Inc..................................................... 399,375
-------
2,426,562
---------
Commercial Services: 1.0%
136,500 The Dwyer Group, Inc.*.................................................. 264,469
-------
Computer, Software and Networking: 5.4%
4,000 International Business Machines Corp.................................... 512,000
175,000 ODS Networks, Inc.*..................................................... 787,500
3,000 SAP Akteingesellschaft ADR.............................................. 116,812
-------
1,416,312
---------
Confectionaries: 3.5%
15,000 Tootsie Roll Industries, Inc............................................ 528,750
5,000 William Wrigley, Jr. Company............................................ 379,688
-------
908,438
-------
Construction Materials: 1.9%
20,000 Texas Industries, Inc................................................... 502,500
-------
Consumer Products: 1.5%
369,500 Pentech International, Inc.*............................................ 392,594
-------
See accompanying Notes to Financial Statements.
<PAGE>
HODGES FUND
SCHEDULE OF INVESTMENTS at September 30, 1998 (Unaudited), Continued
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Shares Market Value
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Correctional: 3.4%
50,000 Children's Comprehensive Services, Inc.*................................ $ 493,750
30,000 Corrections Corporation of America*..................................... 406,875
-------
900,625
-------
Cosmetics and Toiletries: 1.4%
9,000 Kimberly-Clark Corp..................................................... 364,500
-------
Financial: 3.3%
240,000 Capstead Mortgage Corp.................................................. 870,000
-------
Food Products: 1.2%
30,000 Chiquita Brands International, Inc...................................... 316,875
-------
Gas Distribution: 3.3%
30,000 Atmos Energy Corp....................................................... 856,875
-------
Home Manufacturing: 1.9%
20,000 Palm Harbor Homes, Inc.*................................................ 497,500
-------
Medical-Related Services: 5.0%
120,000 Diagnostic Health Services, Inc.*....................................... 532,500
198,000 Laboratory Specialists of America, Inc.*................................ 779,625
-------
1,312,125
---------
Oil and Gas Drilling: 0.9%
20,000 Global Marine, Inc.*.................................................... 221,250
-------
Pharmaceuticals: 2.0%
10,000 Mylan Laboratories, Inc................................................. 295,000
3,000 Warner Lambert Company.................................................. 226,500
-------
521,500
-------
Publishing - Books: 4.3%
20,000 Houghton Mifflin Company................................................ 620,000
40,000 Thomas Nelson, Inc...................................................... 510,000
-------
1,130,000
---------
See accompanying Notes to Financial Statements.
<PAGE>
HODGES FUND
SCHEDULE OF INVESTMENTS at September 30, 1998 (Unaudited), Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Shares Market Value
- ------------------------------------------------------------------------------------------------------------------------------------
Racetracks: 1.4%
20,000 Speedway Motorsports, Inc.*............................................. $ 377,500
---------
Restaurants: 2.6%
30,000 Cracker Barrel Old Country Store Corp................................... 682,500
-------
Retail: 9.6%
249,400 Calloway's Nursery, Inc.*............................................... 296,163
30,000 Harold's Stores, Inc.*.................................................. 198,750
10,000 Home Depot, Inc. ....................................................... 395,000
20,000 Office Depot, Inc.*..................................................... 448,750
250,000 Southland Corp.*........................................................ 625,000
10,000 Wal-Mart Stores, Inc.................................................... 546,250
-------
2,509,913
---------
Shoes and Boots Manufacturing: 2.8%
45,000 Rocky Shoes & Boots, Inc................................................ 360,000
45,000 Stride Rite Corp........................................................ 368,437
-------
728,437
-------
Stock Brokerage: 5.5%
20,000 The Charles Schwab Corp................................................. 787,500
35,000 E*Trade Group, Inc.*.................................................... 654,063
-------
1,441,563
---------
Textile - Home Furnishings: 2.3%
20,000 Pillowtex Corp.......................................................... 587,500
-------
Venture Capital: 2.5%
7,000 Capital Southwest Corp.................................................. 570,500
100,000 Southern Venture II LP*................................................. 87,430
------
657,930
-------
Total Common Stocks (cost $25,823,964).................................. 22,144,020
----------
See accompanying Notes to Financial Statements.
<PAGE>
HODGES FUND
SCHEDULE OF INVESTMENTS at September 30, 1998 (Unaudited), Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Shares PREFERRED STOCK: 0.3% Market Value
- ------------------------------------------------------------------------------------------------------------------------------------
10,000 Capstead Mortgage Preferred Series B (cost $92,700)..................... $ 85,000
--------
Principal Amount MONEY MARKET INVESTMENT: 0.5%
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$139,422 Star Bank Treasury Fund, 4.59%, 12/31/1999
(cost $139,422)......................................................... 139,422
-------
Total Investment in Securities (cost $26,056,086++): 85.5%............... 22,368,442
----------
CALL OPTIONS WRITTEN: (0.1)%
- ------------------------------------------------------------------------------------------------------------------------------------
Common Stocks / Expiration Date / Exercise Price
- ------------------------------------------------------------------------------------------------------------------------------------
(15) America Online, Inc. / Oct 125.......................................... (2,250)
(50) Home Depot, Inc. / Jan 55............................................... (3,750)
(25) Yahoo!, Inc. / Oct 130.................................................. (24,063)
-------
Total Call Options Written (proceeds $20,018)........................... (30,063)
-------
Other Assets less Liabilities: 14.6%.................................... 3,824,737
---------
Total Net Assets: 100.0%................................................ $26,163,116
===========
<FN>
* Non-income producing security.
++ At September 30, 1998, the cost of securities for Federal tax purposes was
$26,230,785. Unrealized appreciation and depreciation of securities were as
follows:
Gross unrealized appreciation........................................... $ 1,273,439
Gross unrealized depreciation........................................... (5,115,764)
----------
Net unrealized depreciation.................................... $ (3,842,325)
============
</FN>
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
HODGES FUND
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES at September 30, 1998 (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
<S> <C>
Investments in securities, at value (cost $26,056,086) ................................ $22,368,442
Receivables:
Dividends and interest .......................................................... 5,125
Fund shares sold ................................................................ 98
Securities sold.................................................................. 5,325,981
Prepaid expenses and other assets...................................................... 28,250
------
Total assets .............................................................. 27,727,896
----------
LIABILITIES
Options written, at value (proceeds $20,018)........................................... 30,063
Payables:
Advisory fees.................................................................... 18,321
Distribution fees................................................................ 38,179
Administration fee............................................................... 4,311
Securities purchased............................................................. 1,440,938
Fund shares redeemed............................................................. 16,190
Accrued expenses ...................................................................... 16,778
------
Total liabilities.......................................................... 1,564,780
---------
NET ASSETS ................................................................................. $26,163,116
===========
Net asset value and redemption price per share
($26,163,116/2,164,708 shares outstanding;
unlimited shares authorized without par value) .................................. $12.09
======
Computation of offering price per share
(Net asset value $12.09/.975).................................................... $12.40
======
COMPONENTS OF NET ASSETS
Paid-in capital ....................................................................... $26,199,093
Accumulated net investment loss........................................................ (158,966)
Undistributed net realized gain on investments......................................... 3,820,678
Net unrealized depreciation on investments............................................. (3,697,689)
----------
Net assets....................................................................... $26,163,116
===========
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
HODGES FUND
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS - For the Six Months Ended September 30, 1998
(Unaudited)
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INVESTMENT INCOME
Income
<S> <C>
Dividends........................................................................ $ 123,694
Interest ........................................................................ 24,463
Other............................................................................ 373
---
Total income .............................................................. 148,530
-------
Expenses
Advisory fees ................................................................... 136,892
Distribution fees................................................................ 80,525
Administration fee............................................................... 32,210
Custody fees..................................................................... 13,319
Fund accounting fees............................................................. 12,368
Transfer agent fees.............................................................. 9,304
Audit fee ....................................................................... 7,020
Registration fees ............................................................... 4,225
Trustee fees .................................................................... 3,277
Reports to shareholders.......................................................... 3,045
Miscellaneous.................................................................... 2,539
Legal fees ...................................................................... 2,002
Insurance........................................................................ 770
---
Total expenses............................................................. 307,496
-------
Net investment loss ............................................... (158,966)
--------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain from security transactions .......................................... 4,249,881
Net change in unrealized appreciation on investments .................................. (9,487,869)
----------
Net realized and unrealized loss on investments ........................... (5,237,988)
----------
Net decrease in net assets resulting from operations ................ $(5,396,954)
===========
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
HODGES FUND
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months Year
Ended Ended
September 30, 1998# March 31, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
(DECREASE) INCREASE IN NET ASSETS FROM:
OPERATIONS
<S> <C> <C>
Net investment loss..................................................... $ (158,966) $ (201,242)
Net realized gain from security transactions ........................... 4,249,881 3,942,955
Net change in unrealized appreciation on investments.................... (9,487,869) 4,957,429
---------- ---------
Net (decrease) increase in net assets resulting from operations .... (5,396,954) 8,699,142
---------- ---------
DISTRIBUTIONS TO SHAREHOLDERS
Net realized gain from security transactions............................ -0- (5,773,636)
- ----------
CAPITAL SHARE TRANSACTIONS
Net (decrease) increase in net assets derived from net change
in outstanding shares (a) ........................................... (874,065) 10,086,163
-------- ----------
Total (decrease) increase in net assets ............................. (6,271,019) 13,011,669
NET ASSETS
Beginning of period..................................................... 32,434,135 19,422,466
---------- ----------
End of period ............................................................ $26,163,116 $32,434,135
=========== ===========
<FN>
(a) A summary of capital shares transactions is as follows:
Six Months Year
Ended Ended
September 30, 1998# March 31, 1998
------------------- --------------
Shares Value Shares Value
Shares sold ...................................... 171,915 $ 2,524,261 478,221 $ 6,465,806
Shares issued in reinvestment of distribution .... -0- -0- 451,510 5,757,747
Shares redeemed .................................. (253,431) (3,398,326) (154,460) (2,137,390)
-------- ---------- -------- ----------
Net (decrease) increase .......................... (81,516) $ (874,065) 775,271 $10,086,163
======= ========== ======= ===========
#Unaudited.
</FN>
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
HODGES FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
For a capital share outstanding throughout each period
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months ended Year Ended March 31,
- ------------------------------------------------------------------------------------------------------------------------------------
Sept. 30, 1998 1998 1997 1996 1995 1994
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<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period . $14.44 $13.20 $12.87 $11.55 $10.80 $11.78
Income from investment operations:
Net investment loss................ (0.07) (0.09) (0.11) (0.07) (0.08) (0.03)
Net realized and unrealized
(loss) gain on investments ..... (2.28) 4.79 1.85 3.42 1.09 0.07
----- ---- ---- ---- ---- ----
Total from investment operations...... (2.35) 4.70 1.74 3.35 1.01 0.04
----- ---- ---- ---- ---- ----
Less distributions:
From net investment income......... 0.00 0.00 0.00 0.00 0.00 (0.01)
From net capital gains ............ 0.00 (3.46) (1.41) (2.03) (0.26) (1.01)
---- ----- ----- ----- ----- -----
Total distributions................... 0.00 (3.46) (1.41) (2.03) (0.26) (1.02)
---- ----- ----- ----- ----- -----
Net asset value, end of period........ $12.09 $14.44 $13.20 $12.87 $11.55 $10.80
====== ====== ====== ====== ====== ======
Total return ......................... (16.27)% 41.21% 14.18% 32.33% 9.60% 0.22%
Ratios/supplemental data:
Net assets, end of period (millions).. $ 26.2 $ 32.4 $ 19.4 $ 13.3 $ 9.3 $ 8.5
Ratio of expenses to average net assets:
Before expense reimbursement ...... 1.92%+ 1.96% 2.14% 2.08% 2.31% 2.63%
After expense reimbursement........ 1.92%+ 1.96% 2.14% 2.08% 2.31% 2.07%
Ratio of net investment loss to average net assets:
Before expense reimbursement ...... (0.99)%+ (0.76)% (0.95)% (0.61)% (0.75)% (0.84)%
After expense reimbursement ....... (0.99)%+ (0.76)% (0.95)% (0.61)% (0.75)% (0.29)%
Portfolio turnover rate .............. 55.04% 94.05% 115.77% 124.89% 73.65% 192.03%
<FN>
+Annualized.
#Unaudited.
</FN>
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
HODGES FUND
NOTES TO FINANCIAL STATEMENTS at September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION
Hodges Fund (the "Fund") is a non-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 management investment company. The Fund's primary investment objective
is capital appreciation. 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 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 OTHER RELATED PARTY TRANSACTIONS
For the six months ended September 30, 1998, 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, 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 0.85% based upon the average daily net assets
of the Fund. For the six months ended September 30, 1998, the Fund incurred
$136,892 in Advisory fees.
<PAGE>
HODGES FUND
NOTES TO FINANCIAL STATEMENTS (Unaudited), Continued
- --------------------------------------------------------------------------------
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
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 September 30, 1998, the Fund incurred $32,210 in
Administration fees.
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, 1998, the Distributor received as commissions $22,430 from the Fund in
connection with its distribution of the Fund's shares. The Distributor also
received $16,268 during the period in commissions for the purchases and sales of
portfolio securities for the Fund.
Certain officers and trustees of the Trust 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. During the
six months ended September 30, 1998, the Fund paid fees of $80,525 to the
Distributor.
NOTE 5 - PURCHASES AND SALES OF SECURITIES
The cost of purchases and proceeds from sales of securities, excluding
U.S. Government obligations and short-term securities, for the six months ended
September 30, 1998, were $16,220,890 and $20,338,189, respectively.
<PAGE>
Advisor
Hodges Capital Management, Incorporated
2905 Maple Avenue
Dallas, Texas 75201
(800) 388-8512
o
Distributor
First Dallas Securities, Inc.
2905 Maple Avenue
Dallas, Texas 75201
o
Custodian
Star Bank, N.A.
425 Walnut Street
Cincinnati, Ohio 45202
o
Transfer Agent
American Data Services, Inc.
P.O. Box 5536
Hauppauge, New York 11788-0132
o
Auditors
Tait, Weller & Baker
8 Penn Center Plaza, Suite 800
Philadelphia, Pennsylvania 19103
o
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.
