[LOGO]
HODGES
FUND
Quietly & Consistently Growing Assets
ANNUAL REPORT
For the Year Ended
March 31, 2000
<PAGE>
[LOGO]
Dear Shareholders,
With March 31 marking the Hodges Fund's fiscal year-end, we thought it
appropriate to communicate how we have done through that date.
As you may recall, our discipline since inception has been to keep a balance in
the portfolio among large, small and mid-cap sized companies. Balance is also
provided through our investments in a mix of companies, from ones that are
growing very rapidly and on the leading edge of the changing new economy, to
investments in core growth companies that have consistently experienced above
average growth for an extended period of time. Our third area of investment is
in companies that for one reason or another are temporarily out of favor, but
which excite us with their recovery potential and what we view as a likelihood
of being rediscovered by investors.
This portfolio blend has served us well in the past. The following returns are
through March 31, 2000. Since inception, October 9, 1992, the Hodges Fund
cumulative total return is 272.39% for an average annual return of 19.28%. Our
average annual return the past 12 months is 14.13%. Cumulative returns for the
three and five-year periods are 95.27% and 195%, or average annual returns of
25.04% and 24.20%, respectively.
Another important plus when considering the Hodges Fund is that we concentrate
all of our energies on this one mutual fund, providing the portfolio with a high
degree of focus and attention.
A glimpse of what has taken place this first quarter, we believe confirms our
philosophy of not being just a growth fund or a high-tech fund or even a
contrarian fund, but rather a combination of all of the above. Our high-tech
stocks have performed well, but may be losing some of their feverish activity.
Our blue chip and core growth stocks have begun to show life again, as have some
of our value and contrarian stocks. We are optimistic that some of our
out-of-favor stocks have the potential to significantly contribute to what we
hope will be rising Net Asset Value over the coming months.
Be assured that we are sensitive to your investment goals and that we are
dedicated to the task of effectively competing with the other funds available
today. If you have questions or would like additional information on the Hodges
Fund, please let us hear from you. If you have friends or family members who you
think would like to receive a prospectus on the Hodges Fund, please let us know.
/s/ Don Hodges /s/ Craig Hodges
Don Hodges Craig Hodges
<PAGE>
Average Annual Total Return
Period Ended March 31, 2000
1 Year...................... 14.13%
5 Year...................... 24.20%
Since Inception (10/9/92)... 19.28%
HODGES FUND
Value of $10,000 vs S&P 400 Midcap Index,
Russell 2000 Index and Wilshire 4500 Index
Hodges S&P 400 Russell Wilshire
Qtr Fund Midcap w/inc. 2000 w/inc. 4500 w/inc.
--- ---- ------------- ----------- -----------
10/9/92 10,000 10,000 10,000 10,000
3/31/93 11,493 11,541 12,280 11,631
9/30/93 11,608 12,404 13,647 12,672
3/31/94 11,518 12,250 13,627 12,345
9/30/94 11,454 12,603 14,004 12,789
3/31/95 12,624 13,270 14,379 13,412
9/30/95 15,268 15,850 17,280 16,201
3/31/96 16,704 17,067 18,556 17,626
9/30/96 17,849 18,069 19,550 18,835
3/31/97 19,071 18,879 19,504 18,689
9/30/97 25,986 25,135 26,039 24,883
3/31/98 26,942 28,137 27,698 27,372
9/30/98 22,558 23,550 21,087 21,883
3/31/99 32,630 28,264 23,196 26,599
9/30/99 28,276 29,555 25,108 27,835
3/31/00 37,239 39,028 31,846 39,690
Past performance is not predictive of future performance. Sales load is not
reflected in the graph and total return table presented above. Effective April
20, 1999 the Fund no longer imposed a sales load.
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.
2
<PAGE>
HODGES FUND
SCHEDULE OF INVESTMENTS at March 31, 2000
Shares Value
--------------------------------------------------------------------------------
COMMON STOCKS: 92.9%
AIRLINES: 3.7%
16,000 AMR Corporation* $ 510,000
45,000 Southwest Airlines Co 936,563
-----------
1,446,563
-----------
AUTOMOTIVE: 1 3%
6,000 General Motors Corporation 496,875
-----------
BIO-TECHNOLOGY: 1 4%
15,000 Genelabs Technologies, Inc * 92,813
5,000 Tularik, Inc * 154,375
5,000 ViroPharma, Inc * 306,563
-----------
553,751
-----------
CLOTHING: 0 7%
20,000 Cutter & Buck Inc * 268,750
-----------
COMMUNICATION: 4 1%
8,000 EchoStar Communications Corp * 632,000
8,000 JDS Uniphase Corporation* 964,500
-----------
1,596,500
-----------
COMPUTERS, SOFTWARE AND TECHNOLOGY: 31 6%
15,000 Cabletron Systems, Inc * 439,688
2,500 Juniper Networks, Inc * 658,906
10,000 Microsoft Corporation* 1,062,500
6,000 Network Appliance, Inc * 496,500
200,000 ODS Networks, Inc * 4,800,000
10,000 Oracle Corporation* 780,625
40,000 Perot Systems Corp , Class A* 805,000
25,000 Sun Microsystems, Inc * 2,342,578
150,500 Tyler Technologies, Inc * 893,594
-----------
12,279,391
-----------
CONSTRUCTION AND MATERIALS: 5 4%
60,000 Encore Wire Corp * 431,250
70,000 NCI Building Systems, Inc * 1,316,875
23,001 Palm Harbor Homes, Inc * 353,640
-----------
2,101,765
-----------
CONSUMER PRODUCTS: 0 9%
287,500 Pentech International, Inc * $ 359,375
-----------
ENTERTAINMENT: 5 9%
100,000 Grand Adventures Tour & Travel Publishing Corp * 500,000
20,000 International Speedway Corporation, Class A 898,750
35,000 Speedway Motorsports, Inc * 872,812
-----------
2,271,562
-----------
FINANCIAL: 6 7%
2,000 Capital Southwest Corp 109,500
25,000 Charles Schwab Corp 1,420,312
35,000 E*Trade Group, Inc * 1,054,375
-----------
2,584,187
-----------
FOOD: 4 6%
40,000 Starbucks Corporation* 1,792,500
-----------
INTERNET: 6 5%
25,000 America Online, Inc * 1,681,250
2,500 VerticalNet, Inc * 340,000
3,000 Yahoo! Inc * 514,125
-----------
2,535,375
-----------
MACHINERY: 0 6%
50,000 CMI Corp , Class A 228,125
-----------
REITS: 0 7%
100,000 Prison Realty Trust, Inc 287,500
-----------
RETAIL: 8 8%
270,400 Calloway's Nursery, Inc * 371,800
30,000 The Home Depot, Inc 1,935,000
20,000 Wal-Mart Stores, Inc 1,110,000
-----------
3,416,800
-----------
SEMICONDUCTOR: 7 0%
10,000 Cypress Semiconductor Corporation* 493,125
2,500 Micron Technology, Inc * 315,000
12,000 Texas Instruments, Incorporated* 1,920,000
-----------
2,728,125
-----------
3
<PAGE>
HODGES FUND
SCHEDULE OF INVESTMENTS at March 31, 2000 (Continued)
Shares Value
--------------------------------------------------------------------------------
SERVICE: 2 0%
200,000 The Dwyer Group, Inc * $ 575,000
20,000 Wackenhut Corrections Corporation* 192,500
-----------
767,500
-----------
VENTURE CAPITAL: 1 0%
100,000 Massey Burch Venture Fund I, L P * 397,072
-----------
Total Common Stocks (Cost $23,008,066) 36,111,716
-----------
Contracts
--------------------------------------------------------------------------------
LONG EQUITY OPTIONS: 3 5%
Common Stocks/Expiration Date/Exercise Price
100 AMR Corporation/Apr, 60 Call 18,750
200 Costco Wholesale Corp /Apr, 35 Call 350,000
100 E*Trade Group, Inc /Apr, 22 5 Call 71,875
200 E*Trade Group, Inc /Apr, 20 Call 190,000
100 E*Trade Group, Inc /Apr, 15 Call 145,000
50 International Business Machines Corp /Apr, 90 Call 140,625
100 Knight/Trimark Group Inc /Apr, 22 5 Call 276,250
100 Knight/Trimark Group Inc /May, 40 Call 125,000
50 Taiwan Semiconductor Manufacturing Co ,
Ltd /Apr, 50 Call 44,375
-----------
Total Long Equity Options (Cost $1,171,738) 1,361,875
-----------
Principal
Amount Value
--------------------------------------------------------------------------------
SHORT-TERM INVESTMENT: 2 5%
Money Market Investment: 2 5%
$960,341 Firstar Stellar Treasury Fund (Cost $960,341) $ 960,341
-----------
Total Investment in Securities
(Cost $25,140,145+): 98 9% 38,433,932
Other Assets less Liabilities: 1 1% 410,474
-----------
Net Assets: 100 0% $38,844,406
===========
* Non-income producing security
+ At March 31, 2000, the basis of investments for federal income tax purposes
was $25,355,308 Unrealized appreciation and depreciation were as follows:
Gross unrealized appreciation $13,981,982
Gross unrealized depreciation (903,358)
-----------
Net unrealized appreciation $13,078,624
===========
See accompanying Notes to Financial Statements.
4
<PAGE>
HODGES FUND
STATEMENT OF ASSETS AND LIABILITIES at March 31, 2000
ASSETS
Investments in securities, at value (cost $25,140,145) ...... $ 38,433,932
Receivables:
Securities sold .......................................... 1,601,043
Fund shares sold ......................................... 44,168
Dividends and interest ................................... 3,249
Prepaid expenses and other assets ........................... 15,228
------------
Total assets .......................................... 40,097,620
------------
LIABILITIES
Payables:
Securities purchased ..................................... 609,718
Due to custodian ......................................... 549,090
Advisory fees ............................................ 28,664
Distribution fees ........................................ 22,625
Administration fees ...................................... 7,562
Fund shares redeemed ..................................... 4,882
Accrued expenses ............................................ 30,673
------------
Total liabilities ..................................... 1,253,214
------------
NET ASSETS .................................................. $ 38,844,406
============
NET ASSET VALUE OFFERING AND REDEMPTION PRICE PER SHARE
($38,844,406/2,136,290 shares outstanding; unlimited
number of shares authorized without par value) ........... $ 18.18
============
COMPONENTS OF NET ASSETS
Paid-in capital ............................................. $ 25,819,337
Accumulated net realized loss on investments ................ (268,718)
Net unrealized appreciation on investments .................. 13,293,787
------------
Net assets ............................................ $ 38,844,406
============
See accompanying Notes to Financial Statements.
5
<PAGE>
HODGES FUND
STATEMENT OF OPERATIONS For the Year Ended March 31, 2000
INVESTMENT INCOME
Income
Dividends ................................................. $ 290,257
Interest .................................................. 49,067
Other ..................................................... 1,008
-----------
Total income ........................................... 340,332
-----------
Expenses
Advisory fees ............................................. 296,411
Distribution fees ......................................... 91,911
Administration fees ....................................... 69,744
Custody fees .............................................. 32,716
Fund accounting fees ...................................... 25,488
Transfer agent fees ....................................... 23,413
Registration expense ...................................... 22,647
Audit fees ................................................ 19,998
Reports to shareholders ................................... 10,291
Trustee fees .............................................. 5,895
Legal fees ................................................ 5,089
Miscellaneous ............................................. 4,159
Insurance expense ......................................... 1,600
-----------
Total expenses ......................................... 609,362
-----------
NET INVESTMENT LOSS ................................. (269,030)
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments ............................. 1,609,919
Net unrealized appreciation on investments ................... 3,238,632
-----------
Net realized and unrealized gain on investments ........ 4,848,551
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS ......................................... $ 4,579,521
===========
See accompanying Notes to Financial Statements.
6
<PAGE>
HODGES FUND
STATEMENT OF CHANGES IN NET ASSETS
Year Ended Year Ended
March 31, 2000 March 31, 1999
-------------- --------------
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS
Net investment loss ......................... $ (269,030) $ (314,923)
Net realized gain on investments ............ 1,609,919 2,046,902
Net unrealized appreciation on investments .. 3,238,632 4,264,975
------------ ------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ......................... 4,579,521 5,996,954
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS
From net realized gain ...................... (1,764,834) (1,185,924)
------------ ------------
CAPITAL SHARE TRANSACTIONS
Net increase (decrease) in net assets derived
from net change in outstanding shares (a)... 515,236 (1,730,682)
------------ ------------
TOTAL INCREASE IN NET ASSETS ............. 3,329,923 3,080,348
NET ASSETS
Beginning of year ........................... 35,514,483 32,434,135
------------ ------------
END OF YEAR ................................. $ 38,844,406 $ 35,514,483
============ ============
(a) A summary of capital share transactions is as follows:
Year Ended Year Ended
March 31, 2000 March 31, 1999
--------------------- ---------------------
Shares Value Shares Value
------ ----- ------ -----
Shares sold ................. 307,090 $ 5,047,617 269,362 $ 3,954,932
Shares issued in reinvestment
of distribution ............ 107,614 1,689,535 89,705 1,185,898
Shares redeemed ............. (393,785) (6,221,916) (489,920) (6,871,512)
-------- ----------- -------- -----------
Net increase (decrease)...... 20,919 $ 515,236 (130,853) $(1,730,682)
======== =========== ======== ===========
See accompanying Notes to Financial Statements.
7
<PAGE>
HODGES FUND
FINANCIAL HIGHLIGHTS For a capital share outstanding throughout each year
<TABLE>
<CAPTION>
Year Ended March 31,
-------------------------------------------------------
2000 1999 1998 1997 1996
------- ------- ------ ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ......... $ 16.79 $ 14.44 $13.20 $ 12.87 $ 11.55
------- ------- ------ ------- -------
Income from investment operations:
Net investment loss ....................... (0.13) (0.15) (0.09) (0.11) (0.07)
Net realized and unrealized
gain on investments ...................... 2.36 3.05 4.79 1.85 3.42
------- ------- ------ ------- -------
Total from investment operations ........... 2.23 2.90 4.70 1.74 3.35
------- ------- ------ ------- -------
Less distributions:
From net realized gain .................... (0.84) (0.55) (3.46) (1.41) (2.03)
Net asset value, end of year ............... $ 18.18 $ 16.79 $14.44 $ 13.20 $ 12.87
======= ======= ====== ======= =======
Total return ............................... 14.13% 21.11%* 41.26%* 14.18%* 32.33%*
Ratios/supplemental data:
Net assets, end of year (millions) ........ $ 38.8 $ 35.5 $ 32.4 $ 19.4 $ 13.3
Ratio of expenses to average net assets ... 1.75% 1.92% 1.96% 2.14% 2.08%
Ratio of net investment loss to average
net assets ............................... (0.77)% (0.99)% (0.76)% (0.95)% (0.61)%
Portfolio turnover rate ................... 126.05% 129.86% 94.05% 115.77% 124.89%
</TABLE>
* Sales load is not reflected in the total return numbers. Effective April
20, 1999 the Fund no longer imposed a sales load.
See accompanying Notes to Financial Statements.
8
<PAGE>
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.
E. RECLASSIFICATION OF CAPITAL ACCOUNTS. The Fund accounts and reports
for distributions to shareholders in accordance with the American
Institute of Certified Public Accountant's Statement of Position 93-2:
Determination, Disclosure, and Financial Statement Presentation of
Income, Capital and Return of Capital Distributions by Investment
Companies. For the year ended March 31, 2000, the Fund decreased net
realized gain by $269,030 due to the Fund experiencing a net
investment loss during the year. Paid-in capital and net assets were
not affected by this change.
9
<PAGE>
NOTE 3 - COMMITMENTS AND OTHER RELATED PARTY TRANSACTIONS
For the year ended March 31, 2000, 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, 2000, the Fund incurred $296,411 in Advisory fees.
Investment Company Administration, L.L.C. (the "Administrator") acts as the
Fund's Administrator under an Administration Agreement. The Administrator
prepares various federal and state regulatory filings, reports and returns for
the Fund; prepares reports and materials to be supplied to the trustees;
monitors the activities of the Fund's custodian, transfer agent and accountants;
coordinates the preparation and payment of Fund expenses and reviews the Fund's
expense accruals. For its services, the Administrator receives a monthly fee at
the following annual rate:
Under $15 million $30,000
$15 to $50 million 0.20% of average daily net assets
$50 to $100 million 0.15% of average daily net assets
$100 to $150 million 0.10% of average daily net assets
Over $150 million 0.05% of average daily net assets
For the year ended March 31, 2000, the Fund incurred $69,744 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, 2000,
the Distributor received as commissions $202 from the Fund in connection with
its distribution of the Fund's shares and $49,440 from the Fund in connection
with 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. First Fund
Distributors, Inc., an affiliate of the Administrator, serves as co-distributor
of the Fund's shares.
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
year ended March 31, 2000, the Fund paid fees of $91,911 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,
2000, were $40,657,867 and $46,024,480, respectively.
10
<PAGE>
================================================================================
Advisor
HODGES CAPITAL MANAGEMENT, INC.
2905 Maple Avenue
Dallas, Texas 75201
(877) 232-1222
Distributor
FIRST DALLASSECURITIES, INC.
2905 Maple Avenue
Dallas, Texas 75201
(800) 388-8512
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
(800) 282-2340
Auditors
TAIT, WELLER &BAKER
8 Penn Center Plaza, Suite 800
Philadelphia, Pennsylvania19103
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.
