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HODGES FUND
DESIGNED
FOR INVESTORS
WHO WANT GROWTH
SEMI-ANNUAL REPORT
FOR THE SIX MONTHS ENDED
SEPTEMBER 30, 1999
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HODGES FUND
Dear Shareholders:
I believe we have been down this road once before. Lately, the stock market
terrain looks very familiar to what we experienced last year. In 1998, the stock
market decline began July 17 and ended October 8. This year the fireworks
started July 16 and appears to have ended the last week of October. As you might
expect, we participated in the decline, but this month we have benefited from
the improved market conditions.
Our high-tech and Internet stocks have been our best performers this year.
Examples are Texas Instruments and Sun Microsystems. Also turning in good
performances have been some of our retail stocks, such as Home Depot and WalMart
Stores. However, for the blue chip category in general, stocks seem to have
leveled off, at least for awhile. Our biggest disappointments have been in our
mid and small cap stocks and stocks that we classify as value-type securities.
They have performed miserably these past few months. At the same time, they
appear to be so undervalued that I suspect these stocks will be our bright spots
sometime soon.
I continue to believe we are properly positioned for the type of market that we
are witnessing. We are well diversified, which year-in, year-out is a good
strategy. As of September 30, 1999, 36% of our holdings are in small cap, 38%
are in stocks that we classify as mid cap and 26% of our funds are in large cap
stocks. To break that down further, 43% of our stocks are the kind that we would
consider core growth holdings, 23% could be classified as momentum or high
multiple stocks, while 33% we classify as value or low multiple situations.
In spite of the poor performance of the third quarter ending September 30, our
one-year, three-year, five-year and since inception returns are still
attractive. Our 12-month return is 25.35%, our three-year average annual return
is 16.57%, our five-year average annual return is 19.80%, and our annual return
since inception, October 9, 1992, is 16.06%. Please remember past performance
does not guarantee future performance.
Declines such as the one we experienced these past few weeks sometime result in
most investors succumbing to the temptation to take a shorter-term focus. Please
allow me to inject that patient, long-term investment is still the best way to
invest for increasing one's net worth over time. My focus remains long term and
my view is to "buckle in" and stay for the long term. I think you will be
rewarded.
Allow me to express my appreciation for your being a shareholder in the Hodges
Fund. If you have questions, my telephone number is 214-954-1954 or
800-456-1979.
Sincerely,
/s/ Don Hodges
Don Hodges
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HODGES FUND
SCHEDULE OF INVESTMENTS AT SEPTEMBER 30, 1999 (UNAUDITED)
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Shares COMMON STOCKS: 91.6% Value
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AIRLINES: 5.8%
20,000 AMR Corp.*.......................................... $ 1,090,000
45,000 Southwest Airlines Company.......................... 683,438
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1,773,438
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COMMUNICATIONS: 3.2%
10,000 AT&T Corp........................................... 435,000
50,000 Intervoice*......................................... 553,125
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988,125
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COMPUTERS, SOFTWARE AND ELECTRONICS: 20.5%
4,000 Agile Software Corp.*............................... 256,000
40,000 American Power Conversion Corp.*.................... 760,000
15,000 Compaq Computer Corp................................ 344,063
25,000 InfoCure Corp.*..................................... 471,875
10,000 Microsoft Corp.*.................................... 905,625
144,970 ODS Networks, Inc.*................................. 829,047
25,000 Perot Systems Corp., Class A*....................... 467,187
10,000 Sun Microsystems, Inc.*............................. 930,000
5,000 Texas Intruments, Inc............................... 411,250
160,000 Tyler Technologies, Inc.*........................... 710,000
30,000 Ultrak, Inc.*....................................... 178,125
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6,263,172
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CONSTRUCTION AND MATERIALS: 10.7%
40,000 CMI Corp-Class A*................................... 280,000
68,800 NCI Building System, Inc.*.......................... 1,139,500
35,001 Palm Harbor Homes, Inc.*............................ 481,264
20,000 Republic Group, Inc................................. 278,750
10,000 Southdown, Inc...................................... 535,000
15,000 Vulcan Materials Co................................. 549,375
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3,263,889
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CONSUMER PRODUCTS: 2.2%
10,000 Gillette Co......................................... 339,375
293,500 Pentech International, Inc.* ....................... 348,531
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687,906
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See accompanying Notes to Financial Statements.
2
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HODGES FUND
SCHEDULE OF INVESTMENTS AT SEPTEMBER 30, 1999 (UNAUDITED)
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Shares Value
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ENTERTAINMENT: 10.1%
100,000 Hastings Entertainment, Inc.*....................... $ 862,500
18,000 International Speedway Corp., Class A............... 946,125
30,000 Speedway Motorsports, Inc.*......................... 1,299,375
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3,108,000
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FINANCIAL: 5.3%
9,000 Capital Southwest Corp.............................. 661,500
10,000 Charles Schwab Corp................................. 336,875
20,000 E*Trade Group, Inc.*................................ 470,000
5,000 Knight/Trimark Group*............................... 148,125
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1,616,500
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FOOD: 3.5%
35,000 Starbucks Corp.*.................................... 867,344
6,000 Tootsie Roll Industries, Inc........................ 197,250
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1,064,594
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INTERNET RELATED: 8.8%
15,000 America OnLine, Inc.*............................... 1,560,000
5,000 eBay, Inc.*......................................... 705,313
15,000 RoweCom*............................................ 416,250
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2,681,563
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NEWSPAPERS AND PUBLISHING: 1.3%
10,000 Houghton Mifflin Company............................ 406,250
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OIL-FIELD SERVICES: 0.8%
10,000 Tidewater, Inc...................................... 255,000
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REITS-MORTGAGE AND REAL-ESTATE: 1.4%
40,000 Prison Realty Corp.................................. 430,000
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See accompanying Notes to Financial Statements.
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HODGES FUND
SCHEDULE OF INVESTMENTS AT SEPTEMBER 30, 1999 (UNAUDITED)
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Shares Value
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RETAIL: 11.2%
10,000 Borders Group, Inc.*................................ $ 146,875
270,400 Calloway's Nursery, Inc.*........................... 304,200
20,000 Home Depot, Inc..................................... 1,372,500
35,000 Tractor Supply Co.*................................. 665,000
20,000 Wal-Mart Stores, Inc................................ 951,250
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3,439,825
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SERVICE INDUSTRIES: 2.3%
52,500 Childrens Comprehensive Services*................... 380,625
136,500 The Dwyer Group, Inc.*.............................. 341,250
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721,875
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SHOES AND APPAREL: 1.3%
25,000 Cutter & Buck, Inc.*................................ 389,062
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UTILITIES: 2.4%
30,000 Atmos Energy Corp................................... 723,750
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VENTURE CAPITAL: 0.8%
100,000 Southern Venture II LP.............................. 237,380
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Total Common Stocks (cost $25,328,476).............. 28,050,329
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PREFERRED STOCK: 1.8%
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55,000 Capstead Mortgage Preferred, Series B
(cost $451,119)..................................... 546,563
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See accompanying Notes to Financial Statements.
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HODGES FUND
SCHEDULE OF INVESTMENTS AT SEPTEMBER 30, 1999 (UNAUDITED)
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Contracts LONG EQUITY OPTIONS: 3.7% Value
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COMMON STOCKS / EXPIRATION DATE / EXERCISE PRICE
100 Allstate Corp. / Jan, 25 Call....................... $ 7,812
100 At Home Corp. / Jan, 25 Call........................ 177,500
100 Dallas Semiconductor / Oct, 40 Call................. 137,500
100 Eastman Kodak Co. / Jan, 60 Call.................... 163,125
100 Estee Lauder Cos / Jan, 40 Call..................... 33,125
100 Knight/Trimark / Oct, 25 Call....................... 51,875
75 Motorola Inc. / Oct, 60 Call........................ 211,875
100 Texas Instruments / Oct, 47.5 Call.................. 351,875
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Total Long Equity Options (cost $1,353,512)......... 1,134,687
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Principal
Amount SHORT-TERM INVESTMENTS: 6.6%
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MONEY MARKET INVESTMENT: 6.6%
$2,032,448 Firstar Bank Treasury Fund, 4.59% (cost $2,032,448) 2,032,448
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Total Investment in Securities
(cost $29,165,555+): 103.7%......................... 31,764,027
Other Assets less Liabilities: (3.7%)............... (1,142,119)
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TOTAL NET ASSETS: 100.0%............................ $30,621,908
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* Non-income producing security.
+ At September 30, 1999, the basis of securities for Federal tax purposes was
the same as their cost for financial reporting. Unrealized appreciation and
depreciation of securities were as follows:
Gross unrealized appreciation....................... $ 4,940,464
Gross unrealized depreciation....................... (2,341,992)
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Net unrealized appreciation....................... $ 2,598,472
===========
See accompanying Notes to Financial Statements.
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HODGES FUND
STATEMENT OF ASSETS AND LIABILITIES AT SEPTEMBER 30, 1999 (UNAUDITED)
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ASSETS
Investments in securities, at value (cost $29,165,555)......... $31,764,027
Receivables:
Dividends and interest....................................... 6,279
Fund shares sold............................................. 16,380
Securities sold.............................................. 6,300
Prepaid expenses and other assets.............................. 24,407
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Total assets........................................... 31,817,393
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LIABILITIES
Payables:
Securities purchased......................................... 154,125
Fund shares redeemed......................................... 928,448
Advisory fees................................................ 22,687
Distribution fees............................................ 21,693
Administration fees.......................................... 6,061
Other accrued expenses......................................... 62,471
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Total liabilities...................................... 1,195,485
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NET ASSETS....................................................... $30,621,908
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NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($30,621,908/2,127,186 shares outstanding; unlimited
number of shares authorized without par value)........... $ 14.40
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COMPONENTS OF NET ASSETS
Paid-in capital................................................ $25,653,889
Accumulated net investment loss ............................... (33,623)
Undistributed net realized gain on investments................. 2,403,170
Net unrealized appreciation on investments..................... 2,598,472
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Net assets............................................... $30,621,908
===========
See accompanying Notes to Financial Statements.
6
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HODGES FUND
STATEMENT OF OPERATIONS - FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1999
(UNAUDITED)
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INVESTMENT INCOME
Income
Dividends.................................................... $ 240,172
Interest..................................................... 35,315
-----------
Total income.............................................. 275,487
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Expenses
Advisory fees ............................................... 150,184
Distribution fees............................................ 48,903
Administration fees.......................................... 35,337
Transfer agent fees.......................................... 15,324
Custody fees................................................. 14,102
Fund accounting fees......................................... 13,550
Audit fees................................................... 9,112
Registration fees............................................ 9,017
Reports to shareholders...................................... 4,776
Trustee fees................................................. 4,531
Miscellaneous ............................................... 2,154
Legal fees................................................... 2,120
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Total expenses............................................ 309,110
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NET INVESTMENT LOSS ................................... (33,623)
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REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain from security transactions................... 2,606,096
Unrealized depreciation on investments......................... (7,456,683)
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Net realized and unrealized loss on investments.............. (4,850,587)
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NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS... $(4,884,210)
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See accompanying Notes to Financial Statements.
7
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HODGES FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
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Six Months Year
Ended Ended
September 30, 1999# March 31, 1999
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<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS
Net investment loss................................................. $ (33,623) $ (314,923)
Net realized gain from security transactions........................ 2,606,096 2,046,902
Unrealized appreciation (depreciation) on investments............... (7,456,683) 4,264,975
----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS.. (4,884,210) 5,996,954
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DISTRIBUTIONS TO SHAREHOLDERS
Net realized gain from security transactions........................ (358,153) (1,185,924)
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CAPITAL SHARE TRANSACTIONS
Net increase (decrease) in net assets derived from net change in
outstanding shares (a).............................................. 349,788 (1,730,682)
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TOTAL INCREASE (DECREASE) IN NET ASSETS........................ (4,892,575) 3,080,348
NET ASSETS
Beginning of period................................................. 35,514,483 32,434,135
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END OF PERIOD......................................................... $30,621,908 $35,514,483
=========== ===========
(a) A summary of capital share transactions is as follows:
Six Months Year
Ended Ended
September 30, 1999# March 31, 1998
-------------------------- --------------------------
Shares Value Shares Value
----------- ----------- ----------- -----------
Shares sold................................. 197,987 $ 3,238,100 269,362 $ 3,954,932
Shares issued in reinvestment of distributions -- -- 89,705 1,185,898
Shares redeemed............................. (186,171) (2,888,312) (489,920) (6,871,512)
----------- ----------- ----------- -----------
Net increase (decrease)..................... 11,816 $ 349,788 (130,853) $(1,730,682)
=========== =========== =========== ===========
</TABLE>
# Unaudited.
See accompanying Notes to Financial Statements.
8
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HODGES FUND
FINANCIAL HIGHLIGHTS
FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
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Six Months Year Ended March 31,
Ended ----------------------------------------------
September 30, 1999# 1999 1998 1997 1996 1995
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<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.. $16.79 $14.44 $13.20 $12.87 $11.55 $10.80
------ ------ ------ ------ ------ ------
Income from investment operations:
Net investment loss.................. (0.07) (0.15) (0.09) (0.11) (0.07) (0.08)
Net realized and unrealized gain
on investments..................... (2.32) 3.05 4.79 1.85 3.42 1.09
------ ------ ------ ------ ------ ------
Total from investment operations....... (2.39) 2.90 4.70 1.74 3.35 1.01
------ ------ ------ ------ ------ ------
Less distributions:
From net realized gains............. -- (0.55) (3.46) (1.41) (2.03) (0.26)
------ ------ ------ ------ ------ ------
Net asset value, end of period......... $14.40 $16.79 $14.44 $13.20 $12.87 $11.55
====== ====== ====== ====== ====== ======
Total return........................... (13.34)% 18.09% 41.21% 14.18% 32.33% 9.60%
Ratios/supplemental data:
Net assets, end of period (millions)... $ 30.6 $ 35.5 $ 32.4 $ 19.4 $ 13.3 $ 9.3
Ratio of expenses to average net assets 1.75%+ 1.92% 1.96% 2.14% 2.08% 2.31%
Ratio of net investment loss to
average net assets.................. (0.19)%+ (0.99)% (0.76)% (0.95)% (0.61)% (0.75)%
Portfolio turnover rate................ 53.41% 129.86% 94.05% 115.77% 124.89% 73.65%
</TABLE>
+ Annualized.
# Unaudited.
See accompanying Notes to Financial Statements.
9
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HODGES FUND
NOTES TO FINANCIAL STATEMENTS AT SEPTEMBER 30, 1999 (UNAUDITED)
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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 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 its
shareholders. Therefore, no federal income tax provision is required.
C. SECURITY TRANSACTIONS, DIVIDEND 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 six months ended September 30, 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 six months ended September 30, 1999, the Fund incurred
$150,184 in Advisory fees.
10
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HODGES FUND
NOTES TO FINANCIAL STATEMENTS AT SEPTEMBER 30, 1999 (UNAUDITED), CONTINUED
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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, 1999, the Fund incurred $35,337 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.
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 0.25% 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
six months ended September 30, 1999, the Fund paid fees of $48,903 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, 1999, were $16,910,360 and $18,105,209, respectively.
11
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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 Institutional Custody Services
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.
