HODGES
FUND
LOGO
DESIGNED
FOR INVESTORS
WHO WANT GROWTH
ANNUAL REPORT
FOR THE YEAR ENDED
MARCH 31, 1999
<PAGE>
Dear Shareholders:
Allow me to begin this letter thanking you for entrusting some of your funds to
be managed in the Hodges Fund. Although I've been in the investment business in
one way or another since 1960, the Fund has only existed since October 9, 1992.
When we started the Fund, many asked us "why are you doing this?" The answer we
gave then and if asked now is "we think we can do as well as many in this
business of investing and better than a vast number." I think the results we've
shown since we began support our belief. Although one of the required SEC
caveats is "past performance does not guarantee future performance" and "when
you sell shares they can be worth more or less than what you paid" this annual
report carefully outlines our performance since inception on October 9, 1992,
but please remember the caveat.
Being boastful is not my nature, but in a business of giant funds with large
marketing budgets sometimes a Fund like ours gets lost in the shuffle. As you
can well imagine, this causes me much frustration. We only hope that people will
compare our results with any fund. One of the hallmarks of our Fund has been
consistency of performance.
As a long time observer of the market, one of my strong convictions is that the
best method of investing is to diversify into different types and degrees of
risk. Although we strongly believe in investing in growth stocks, we think it
would be a mistake to invest all of our funds into that category alone. On the
other hand, investing in only value type or contrarian stocks would be a faulty
strategy too. However, there are compelling reasons to invest some of our assets
there. The market is very diverse and there are many choices available of
varying degrees of risk and potential reward. Although anxious to have stocks
that are moving up in price now, we are ever aware that we should also seek to
own stocks that can be moving up in price eighteen months from now. We
constantly strive to anticipate what the future market might look like.
I am pleased to announce that Craig Hodges has joined me as a co-manager of the
Hodges Fund. Craig brings a freshness and a talent for timing. I believe the two
of us together can do a creditable job of managing the Funds. One idea we have
under review is a fund which will invest only in Texas businesses. The
enterprising nature of our state's business community, plus demographic
projections for the state's future growth encourages us to consider such a fund.
All of the present shareholders received notice that on April 20, 1999, our Fund
became a no load Fund, with no up front commissions. We also lowered our 12b-1
fee to 0.25% from 0.50%.
We shall continue to strive to represent you well in your desires to build your
net worth and provide for future financial needs.
Again thanks for being a shareholder.
Sincerely,
/s/ Don W. Hodges
Don Hodges
<PAGE>
HODGES FUND LOGO
SHAREHOLDER TOTAL NET RETURNS
THROUGH 3-31-99
AFTER MAXIMUM SALES CHARGE
CUMULATIVE AVERAGE ANNUAL
NET RETURN RETURN
SINCE INCEPTION 222.21% 19.80%
12 MONTHS 18.09%
2 YR. 66.80% 29.15%
3 YR. 90.46% 23.96%
4 YR. 151.94% 25.97%
5 YR. 176.15% 22.51%
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. FUND SHARE VALUES AND
RETURNS FLUCTUATE AND INVESTORS MAY HAVE A GAIN OR LOSS WHEN THEY SELL SHARES.
RESULTS REFLECT ALL EXPENSES AND THE MAXIMUM SALES CHARGE OF 2.5% THAT APPLIED
DURING THIS PERIOD. INCEPTION DATE WAS 10-9-92. THIS INFORMATION IS FOR
SHAREHOLDERS OF THE HODGES FUND AND OFFERS WHO HAVE RECEIVED A HODGES FUND
PROSPECTUS. IT INCLUDES MORE INFORMATION ON FUND OPERATING EXPENSES AND THE
RISKS OF NON-DIVERSIFICATION. READ IT CAREFULLY BEFORE INVESTING. THE
DISTRIBUTOR OF THE HODGES FUND IS FIRST DALLAS SECURITIES, MEMBER SIPC.
<PAGE>
HODGES FUND LOGO
Average Annual Total Return
Period Ended March 31, 1999
1 Year......................... 18.09%
5 Year......................... 22.51%
Since Inception (10/9/92) ..... 19.80%
Qtr Hodges S & P 400 Russell 2000 Wilshire 4500
- ------- ------ --------- ------------ -------------
10/9/92 9,875 10,000 10,000 10,000
3/31/93 11,349 11,541 12,280 11,631
9/30/93 11,464 12,404 13,647 12,672
3/31/94 11,373 12,250 13,627 12,345
9/30/94 11,311 12,603 14,004 12,789
3/31/95 12,465 13,270 14,379 13,412
9/30/95 15,076 15,850 17,280 16,201
3/31/96 16,495 17,067 18,556 17,626
9/30/96 17,625 18,069 19,550 18,835
3/31/97 18,832 18,879 19,504 18,689
9/30/97 25,661 25,135 26,039 24,883
3/31/98 26,605 28,137 27,698 27,372
9/30/98 22,275 23,550 21,087 21,883
3/31/99 32,222 28,264 23,196 26,599
Past performance is not predictive of future performance.
The S&P 400 Midcap Index is comprised of 400 domestic stocks chosen for market
size liquidity and industry group representation. The Russell 2000 Index is
formed by taking the 3,000 largest U.S. companies and then eliminating the
largest 1,000 leaving a good small company index. The Wilshire 4500 Index
measures the performance of all U.S. headquartered equity securities with
readily available price data, with the exception of the S&P 500 securities. The
indices are unmanaged and returns include reinvested dividends.
The S&P 500 (dividends reinvested) has been removed from the above chart, and is
being replaced by the S&P 400 Midcap Index. The S&P 400 Midcap Index more
appropriately reflects our investment style. As a broad market reference, the
total return for the S&P 500 Index for the year ended March 31, 1999 was 18.42%
compared to 0.45% for the S&P 400 Midcap Index.
<PAGE>
HODGES FUND LOGO
SCHEDULE OF INVESTMENTS AT MARCH 31, 1999
- --------------------------------------------------------------------------------
Shares COMMON STOCKS: 90.2% Market Value
- --------------------------------------------------------------------------------
AIRLINES: 5.9%
20,000 AMR Corp.*............................................ $ 1,171,250
30,000 Southwest Airlines Company............................ 907,500
-----------
2,078,750
-----------
APPAREL: 2.7%
30,000 Cutter & Buck, Inc.*.................................. 960,000
-----------
BUILDING MATERIALS: 6.7%
25,000 Elcor Corp............................................ 879,687
50,000 NCI Building System, Inc.*............................ 1,175,000
20,500 Republic Group, Inc................................... 308,781
-----------
2,363,468
-----------
COLLECTIBLES: 0.4%
5,000 Action Performance Companies, Inc.*................... 150,625
-----------
COMMERCIAL SERVICES: 0.7%
136,500 The Dwyer Group, Inc.*................................ 247,406
-----------
COMPUTER, SOFTWARE AND NETWORKING: 5.2%
5,000 Network Solutions, Inc., Class A*..................... 528,750
116,850 ODS Networks, Inc.*................................... 328,641
3,500 Sun Microsystems, Inc.*............................... 437,281
130,000 Tyler Corp./Del*...................................... 568,750
-----------
1,863,422
-----------
CONFECTIONARIES: 1.3%
10,300 Tootsie Roll Industries, Inc.......................... 474,444
-----------
CONSTRUCTION MATERIALS: 3.1%
20,000 Texas Industries, Inc................................. 496,250
15,000 Vulcan Materials Co................................... 619,687
-----------
1,115,937
-----------
CONSUMER PRODUCTS: 0.5%
252,000 Pentech International, Inc.*.......................... 173,250
-----------
See accompanying Notes to Financial Statements.
4
<PAGE>
HODGES FUND LOGO
SCHEDULE OF INVESTMENTS AT MARCH 31, 1999, Continued
- --------------------------------------------------------------------------------
Shares Market Value
- --------------------------------------------------------------------------------
COSMETICS: 2.7%
10,000 Estee Lauder Cosmetics, Class A (a)................... $ 945,000
-----------
ENTERTAINMENT: 4.8%
15,000 Hastings Entertainment, Inc.*......................... 154,687
10,000 International Speedway Corp., Class A................. 527,500
25,000 Speedway Motorsports, Inc.*........................... 1,031,250
-----------
1,713,437
-----------
FINANCIAL: 4.5%
300,000 Capstead Mortgage Corp................................ 1,612,500
-----------
GAS DISTRIBUTION: 2.4%
35,000 Atmos Energy Corp..................................... 842,187
-----------
HOME MANUFACTURING: 1.2%
20,001 Palm Harbor Homes, Inc.*.............................. 435,022
-----------
INTERNET RELATED: 12.9%
20,000 America OnLine,Inc. (a)............................... 2,920,000
6,000 eBay, Inc. (a)........................................ 823,875
5,000 Yahoo! Inc............................................ 841,875
-----------
4,585,750
-----------
MEDICAL-RELATED SERVICES: 1.2%
106,250 Diagnostic Health Services, Inc.*..................... 129,492
5,000 Guidant Corp.......................................... 302,500
-----------
431,992
-----------
PHARMACEUTICALS: 1.2%
15,000 Mylan Laboratories, Inc............................... 411,563
-----------
PUBLISHING - BOOKS: 1.3%
10,000 Houghton Mifflin Company.............................. 468,750
-----------
See accompanying Notes to Financial Statements.
5
<PAGE>
HODGES FUND LOGO
SCHEDULE OF INVESTMENTS AT MARCH 31, 1999, Continued
- --------------------------------------------------------------------------------
Shares Market Value
- --------------------------------------------------------------------------------
REITS - MORTGAGE AND REAL ESTATE: 2.1%
43,700 Prison Realty Corp.................................... $ 762,019
-----------
RESTAURANTS: 2.7%
15,000 Brinker International, Inc............................ 387,188
20,000 Starbucks Corp........................................ 561,250
-----------
948,438
-----------
RETAIL: 12.0%
10,000 Borders Group, Inc.*.................................. 140,625
270,400 Calloway's Nursery, Inc.*............................. 388,700
20,000 Home Depot, Inc. ..................................... 1,245,000
25,000 Office Depot, Inc.*................................... 920,313
25,000 Tractor Supply Co.*................................... 639,062
10,000 Wal-Mart Stores, Inc.................................. 921,875
-----------
4,255,575
-----------
STOCK BROKERAGE: 11.4%
10,000 Charles Schwab Corp................................... 961,250
30,000 E*Trade Group, Inc. (a)*.............................. 1,749,375
15,000 Merrill Lynch & Co.................................... 1,326,563
-----------
4,037,188
-----------
TELEPHONE: 1.3%
6,000 AT&T Corp............................................. 478,875
-----------
VENTURE CAPITAL: 2.0%
8,500 Capital Southwest Corp................................ 620,500
100,000 Southern Venture II LP*............................... 83,540
-----------
704,040
-----------
Total Common Stocks (cost $22,484,894)................ 32,059,638
-----------
See accompanying Notes to Financial Statements.
6
<PAGE>
HODGES FUND LOGO
SCHEDULE OF INVESTMENTS AT MARCH 31, 1999, Continued
- --------------------------------------------------------------------------------
Shares PREFERRED STOCK: 1.9% Market Value
- --------------------------------------------------------------------------------
REITS - MORTGAGE AND REAL ESTATE: 1.9%
55,000 Capstead Mortgage Preferred, Series B (cost $451,119). $ 663,437
-----------
Contracts LONG EQUITY OPTIONS: 1.5%
- --------------------------------------------------------------------------------
Common Stocks / Expiration Date / Exercise Price
------------------------------------------------
60 AMR Corp. / Aug, 50 Call.............................. 68,250
80 Amgen, Inc. / Apr, 40 Call............................ 281,000
50 Exxon Corp. / Apr, 60 Call............................ 53,750
100 Mylan Laboratories, Inc. / Apr, 25 Call............... 27,500
70 Southdown, Inc. / Apr, 40 Call........................ 96,688
-----------
Total Long Equity Options (cost $422,430)............. 527,188
-----------
LONG INDEX OPTIONS: 3.1%
- --------------------------------------------------------------------------------
Index / Expiration Date / Exercise Price
----------------------------------------
100 S&P Index / May 1,400 Put (cost $1,035,250)........... 1,110,000
-----------
Principal
Amount SHORT-TERM INVESTMENTS: 4.6%
- --------------------------------------------------------------------------------
MONEY MARKET INVESTMENT: 4.6%
$1,620,659 Firstar Bank Treasury Cash Management Fund, 4.04%
(cost $1,620,659)................................... 1,620,659
-----------
Total Investment in Securities (cost
$26,014,352++): 101.3%.............................. 35,980,922
Liabilities in excess of Other Assets: (1.3%)......... (466,439)
-----------
TOTAL NET ASSETS: 100.0%.............................. $35,514,483
===========
* Non-income producing security.
(a) Portion of the security is segregated as collateral for call options
written.
++ At March 31, 1999, the cost of securities for Federal tax purposes was the
same basis for financial reporting.
Unrealized appreciation and depreciation of securities and call options written
were as follows:
Gross unrealized appreciation................................ $10,801,433
Gross unrealized depreciation................................ (746,278)
-----------
Net unrealized appreciation................................ $10,055,155
===========
7
See accompanying Notes to Financial Statements.
<PAGE>
HODGES FUND LOGO
SCHEDULE OF CALL OPTIONS WRITTEN AT MARCH 31, 1999: (0.5)%
- --------------------------------------------------------------------------------
Market Value
- --------------------------------------------------------------------------------
Common Stocks / Expiration Date / Exercise Price
------------------------------------------------
100 America Online, Inc. / May, 170....................... $ (79,375)
100 E*Trade Group, Inc. / Apr, 60......................... (33,125)
100 E*Trade Group, Inc. / Apr, 65......................... (22,500)
40 eBay, Inc. / Apr, 160................................. (13,250)
50 Estee Lauder Cosmetics, Class A / Apr, 95............. (11,875)
-----------
Total Call Options Written (proceeds $248,710)...... $ (160,125)
===========
See accompanying Notes to Financial Statements.
8
<PAGE>
HODGES FUND LOGO
STATEMENT OF ASSETS AND LIABILITIES AT MARCH 31, 1999
- --------------------------------------------------------------------------------
ASSETS
Investments in securities, at value (cost $26,014,352) ....... $35,980,922
Receivables:
Dividends and interest ..................................... 14,403
Investment securities sold ................................. 965,626
Fund shares sold ........................................... 36,910
Other assets ................................................. 24,992
-----------
Total assets ............................................. 37,022,853
-----------
LIABILITIES
Call options written, at value (proceeds $248,710) ........... 160,125
Payables:
Advisory fees .............................................. 25,022
Distribution fees .......................................... 42,605
Fund shares redeemed ....................................... 21,932
Investment securities purchased ............................ 1,226,075
Accrued expenses ............................................. 32,611
-----------
Total liabilities ........................................ 1,508,370
-----------
NET ASSETS ..................................................... $35,514,483
===========
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($35,514,483/2,115,371 shares outstanding;
unlimited shares authorized without par value) ............. $ 16.79
===========
COMPUTATION OF OFFERING PRICE PER SHARE
(Net asset value $16.79/.975) .............................. $ 17.22
===========
COMPONENTS OF NET ASSETS
Paid-in capital .............................................. $25,304,101
Undistributed net realized gain on investments ............... 155,227
Net unrealized appreciation on investments ................... 10,055,155
-----------
Net assets ................................................. $35,514,483
===========
See accompanying Notes to Financial Statements.
9
<PAGE>
HODGES FUND LOGO
STATEMENT OF OPERATIONS - FOR THE YEAR ENDED MARCH 31, 1999
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Income
Dividends .................................................. $ 249,740
Interest ................................................... 47,002
Other ...................................................... 373
-----------
Total income ......................................... 297,115
-----------
Expenses
Advisory fees .............................................. 271,022
Distribution fees .......................................... 159,425
Administration fee ......................................... 63,770
Custody fees ............................................... 24,983
Fund accounting fees ....................................... 24,684
Transfer agent fees ........................................ 23,985
Audit fee .................................................. 12,002
Reports to shareholders .................................... 9,537
Registration fees .......................................... 8,413
Trustees' fees ............................................. 6,519
Legal fees ................................................. 3,996
Miscellaneous .............................................. 2,932
Insurance fees ............................................. 770
-----------
Total expenses ........................................... 612,038
-----------
NET INVESTMENT LOSS .................................... (314,923)
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from security transactions ................. 2,046,902
Net change in unrealized appreciation on investments ......... 4,264,975
-----------
Net realized and unrealized gain on investments ............ 6,311,877
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ..... $ 5,996,954
===========
See accompanying Notes to Financial Statements.
10
<PAGE>
HODGES FUND LOGO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
Year Year
Ended Ended
March 31, 1999 March 31, 1998
-------------- --------------
(DECREASE) INCREASE IN NET ASSETS FROM:
OPERATIONS
Net investment loss .......................... $ (314,923) $ (201,242)
Net realized gain from security transactions . 2,046,902 3,942,955
Net change in unrealized appreciation on
investments ................................ 4,264,975 4,957,429
------------ ------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS .......................... 5,996,954 8,699,142
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS
Net realized gain from security transactions . (1,185,924) (5,773,636)
------------ ------------
CAPITAL SHARE TRANSACTIONS
Net (decrease) increase in net assets derived
from net change in outstanding shares (a) .. (1,730,682) 10,086,163
------------ ------------
TOTAL INCREASE IN NET ASSETS ............. 3,080,348 13,011,669
NET ASSETS
Beginning of year ............................ 32,434,135 19,422,466
------------ ------------
END OF YEAR .................................... $ 35,514,483 $ 32,434,135
============ ============
(a) A summary of capital shares transactions is as follows:
Year Year
Ended Ended
March 31, 1999 March 31, 1998
------------------------ -------------------------
Shares Value Shares Value
------ ----- ------ -----
Shares sold ............. 269,362 $ 3,954,932 478,221 $ 6,465,806
Shares issued in
reinvestment of
distribution .......... 89,705 1,185,898 451,510 5,757,747
Shares redeemed ......... (489,920) (6,871,512) (154,460) (2,137,390)
-------- ----------- -------- ------------
Net (decrease) increase . (130,853) $(1,730,682) 775,271 $ 10,086,163
======== =========== ======== ============
See accompanying Notes to Financial Statements.
11
<PAGE>
HODGES FUND LOGO
FINANCIAL HIGHLIGHTS
FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT EACH YEAR
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Year Ended March 31,
-------------------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year......... $14.44 $13.20 $12.87 $11.55 $10.80
Income from investment operations:
Net investment loss..................... (0.15) (0.09) (0.11) (0.07) (0.08)
Net realized and unrealized gain on
investments .......................... 3.05 4.79 1.85 3.42 1.09
------ ------ ------ ------ ------
Total from investment operations........... 2.90 4.70 1.74 3.35 1.01
------ ------ ------ ------ ------
Less distributions:
From net capital gains ................. (0.55) (3.46) (1.41) (2.03) (0.26)
------ ------ ------ ------ ------
Net asset value, end of year............... $16.79 $14.44 $13.20 $12.87 $11.55
====== ====== ====== ====== ======
Total return .............................. 18.09% 41.21% 14.18% 32.33% 9.60%
Ratios/supplemental data:
Net assets, end of year (millions)......... $ 35.5 $ 32.4 $ 19.4 $ 13.3 $ 9.3
Ratio of expenses to average net assets.... 1.92% 1.96% 2.14% 2.08% 2.31%
Ratio of net investment loss to average
net assets .............................. (0.99)% (0.76)% (0.95)% (0.61)% (0.75)%
Portfolio turnover rate ................... 129.86% 94.05% 115.77% 124.89% 73.65%
</TABLE>
See accompanying Notes to Financial Statements.
12
<PAGE>
HODGES FUND LOGO
NOTES TO FINANCIAL STATEMENTS AT MARCH 31, 1999
- --------------------------------------------------------------------------------
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 year ended March 31, 1999, 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 year ended March 31, 1999, the Fund incurred $271,022 in Advisory fees.
Investment Company Administration, LLC (the "Administrator") acts as the
Fund's Administrator under an
13
<PAGE>
HODGES FUND LOGO
NOTES TO FINANCIAL STATEMENTS AT MARCH 31, 1999
- --------------------------------------------------------------------------------
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 March 31, 1999, the Fund incurred $63,770 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 year ended March 31, 1999,
the Distributor received as commissions $40,458 from the Fund in connection with
its distribution of the Fund's shares and $8,359 from the Fund in connection
with its distribution of the purchases and sales of securities in the Fund's
portfolio. Effective April 20, 1999, the Fund no longer imposed a sales load on
purchases.
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. Effective April 20, 1999, the fee that the Fund will pay to the
Distributor was reduced to an annual rate of up to 0.25% 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 year ended March 31, 1999, the Fund paid fees of $159,425 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 year ended March 31,
1999, were $38,503,880 and $44,210,328, respectively.
14
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
TO THE SHAREHOLDERS OF
THE HODGES 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 Hodges 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 Hodges 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
15
<PAGE>
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
Firstar Bank, N.A.
425 Walnut Street
Cincinnati, Ohio 45202
--
TRANSFER AGENT
American Data Services, Inc.
P.O. Box 5536
Hauppauge, New York 11788-0132
--
AUDITORS
Tait, Weller & Baker
8 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.
