[HODGES FUND LOGO]
Quietly & Consistently Growing Assets
SEMI-ANNUAL REPORT
For the Six Months Ended
September 30, 2000
<PAGE>
[HODGES FUND LOGO]
October 24, 2000
Dear Shareholder:
Since the end of March, the stock market has been in a decline. It seems that
virtually every area of the market except the oils and utilities have suffered
some kind of correction.
At a time like this - and we've had a number of severe corrections over the 40
years that we've been a participant in the market - the question arises, "Is
this a long drawn-out bear market, or is it just another painful adjustment?"
Only one of the declines, the one from 1972-1974, turned out to be extended. All
of the others have adjusted quickly and returned to a more favorable environment
within months. We believe this one will be the same. The reason for lining up on
that side of the question is that business is good, the country is having a
growth spurt, and inflation is basically under control, although accelerating to
a small extent.
Much of the decline has been centered on the high tech segment of the market,
but it has had a negative impact on all areas. Our thesis is that when
"everything" declines in price regardless of growth rate, price earnings ratio,
book value, and dividend payout, some of the companies become undervalued and,
consequently, represent opportunity for recovery. And, when a decline like this
one runs its course and recovery begins, the best percentage gains come quickly.
Consequently, anyone who has stepped aside with the idea of getting back in when
things "look better" misses the easiest and best gains. We think that will be
the scenario once again.
The question begs to be answered, "Why has the market taken such a hit?" To us
it is simply a matter that the growth rate in the high tech arena has been so
fast and so unusual that most every investor wanted to be represented in the
group, and it was carried to the extreme.
Is the growth of the high tech segment of the economy for real? In our opinion
it is. We are not certain that we know exactly how to evaluate the companies,
though. But, we've never seen a time when the revenues at so many diverse
companies are increasing so rapidly. That spells opportunity, but it also
carries risk in cases where the prices become too rich. We think from the
standpoint of investing that it necessitates a judicious amount of money be
invested in these high-growth type stocks, but be counterbalanced with what
could be described as old economy companies, too. That has been our strategy in
the past and will continue to be in the future. We own rapidly growing companies
like Sun Microsystems, Juniper Networks, Sandisk Corp., Network Appliance, and
Texas Instruments, but also core growth companies with more modest growth rates,
like Home Depot, Wal-Mart Stores, Starbucks Corp., McDonalds Corp., and
Southwest Airlines. These two areas are counterbalanced with out-of-favor stocks
1
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such as NCI Building Systems, Texas Industries, Earthgrains Co., Cutter & Buck,
Sharper Image, and CBRL Group. These three lists are just a sampling of the
fifty or so companies in which the Fund has invested and currently owns.
We conclude this letter sharing with you a strong conviction that we will see
recovery, and that as investors we are best served by riding out the rough
market and being invested when the turn comes. Of course, there are no
guarantees, but the preponderance of evidence from history suggests, as the dean
of investing, Sir John Templeton, has said, "Good markets are followed by bad
markets and bad markets are followed by good markets."
Thanks for being a shareholder in the Hodges Fund. We are available for calls if
you have questions.
Best regards,
/s/ Don W. Hodges /s/ Craig D. Hodges
Don Hodges Craig Hodges
2
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HODGES FUND
SCHEDULE OF INVESTMENTS at September 30, 2000 (Unaudited)
SHARES VALUE
------ -----
COMMON STOCKS: 98.3%
AIRLINES: 4.4%
15,000 AMR Corp.* $ 490,312
35,000 Southwest Airlines Co. 848,750
----------
1,339,062
----------
CLOTHING/SHOE/ACCESSORY STORES: 1.5%
38,000 Cutter & Buck, Inc.* 472,625
----------
COMMUNICATION: 6.9%
500 Broadcom Corp.* 121,875
2,000 Critical Path, Inc.* (DELTA) 121,500
12,000 Echostar Communications Corp. - Class A* 633,000
50,000 InterVoice-Brite, Inc.* 525,000
6,000 JDS Uniphase Corp.* 568,125
3,000 Palm, Inc.* 158,812
----------
2,128,312
----------
COMPUTERS, SOFTWARE & TECHNOLOGY: 28.3%
5,000 Cisco Systems, Inc.* 276,250
3,500 i2 Technologies, Inc.* 654,719
150,000 Intrusion.Com, Inc.* 1,781,250
3,000 Juniper Networks, Inc.* 656,812
7,500 Microsoft Corp.* 451,875
3,000 Network Appliance, Inc.* 382,125
9,000 Oracle Corp.* 708,750
30,000 Perot Systems Corp. - Class A* 322,500
6,000 Sandisk Corp.* 400,500
20,000 Sun Microsystems, Inc.* 2,335,000
260,800 Tyler Technologies, Inc.* 521,600
31,683 USinternetworking, Inc.* 211,385
----------
8,702,766
----------
CONSTRUCTION: 6.6%
70,000 Encore Wire Corp.* 498,750
46,000 NCI Building Systems, Inc.* 672,750
15,001 Palm Harbor Homes, Inc.* 206,264
20,000 Texas Industries, Inc. 637,500
----------
2,015,264
----------
ENERGY: 1.5%
10,000 Tidewater, Inc. 455,000
----------
ENTERTAINMENT: 6.0%
100,000 Grand Adventures Tour Travel Corp.* 237,500
20,000 International Speedway Corp. - Class A 780,000
40,000 Speedway Motorsports, Inc.* 832,500
----------
1,850,000
----------
FINANCIAL: 10.4%
50,000 Charles Schwab Corp. 1,775,000
60,000 E*Trade Group, Inc.* 986,250
12,500 Knight Trading Group, Inc.* 450,000
----------
3,211,250
----------
FOOD: 8.0%
30,000 CBRL Group, Inc. 431,250
19,300 Earthgrains Co. 355,844
10,000 IBP, Inc. 183,125
10,000 McDonald's Corp. 301,875
30,000 Starbucks Corp.* 1,201,875
----------
2,473,969
----------
INTERNET: 5.2%
20,000 America Online, Inc.* 1,075,000
15,000 VerticalNet, Inc.* 526,875
----------
1,601,875
----------
PUBLISHING & COMMUNICATION: 1.3%
22,000 A.H. Belo Corp. - Class A 405,625
----------
REAL ESTATE INVESTMENT TRUSTS: 0.5%
135,000 Prison Realty Corp. 160,313
----------
RETAIL: 10.1%
270,400 Calloway's Nursery, Inc.* 371,800
20,000 Costco Wholesale Corp.* 698,750
20,000 Home Depot, Inc. 1,061,250
20,000 Wal-Mart Stores, Inc. 962,500
----------
3,094,300
----------
SEMICONDUCTOR: 4.3%
6,000 Dallas Semiconductor, Inc. 197,250
4,000 International Rectifier Corp.* 202,250
2,000 Micron Technology, Inc.* 92,000
17,500 Texas Instruments, Inc. 825,781
----------
1,317,281
----------
SERVICES: 2.7%
55,000 Children's Comprehensive Services, Inc.* 189,063
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HODGES FUND
SCHEDULE OF INVESTMENTS at September 30, 2000 (Continued) (Unaudited)
SHARES VALUE
------ -----
225,000 Dwyer Group, Inc.* $ 562,500
10,000 Wackenhut Corrections Corp.* 78,125
-----------
829,688
-----------
VENTURE CAPITAL: 0.6%
100,000 Massey Burch Venture Fund I* 173,773
-----------
TOTAL COMMON STOCKS (Cost $25,598,139) 30,231,103
-----------
SHARES VALUE
------ -----
PREFERRED STOCK: 0.4%
6,750 Prison Realty Corp., Series B, convertible
preferred (cost $0) 128,250
-----------
CONTRACTS VALUE
--------- -----
LONG EQUITY OPTIONS: 0.9%
COMMON STOCKS/EXPIRATION DATE/EXERCISE PRICE
100 America Online, Inc. / Oct / $50.00 Call 46,000
100 Dallas Semiconductor Corp. / Oct / $30.00 Call 31,875
50 General Motors Corp. / Dec / $60.00 Call 38,750
50 General Motors Corp. / Jan / $60.00 Call 44,062
100 IBP, Inc. / Feb / $12.50 Call 62,500
20 Nasdaq 100 Index / Oct / $39.50 Call 62,000
50 Texas Instruments, Inc. / Oct / $60.00 Call 2,969
-----------
TOTAL LONG EQUITY OPTIONS
(Cost $672,555) 288,156
-----------
PRINCIPAL AMOUNT VALUE
---------------- -----
SHORT-TERM INVESTMENT: 1.6%
MONEY MARKET INVESTMENT: 1.6%
$479,803 Firstar Stellar Treasury Fund (cost $479,804) $ 479,804
TOTAL INVESTMENTS IN SECURITIES (Cost $26,750,497+): 101.2% 31,127,313
Liabilities in excess of Other Assets: (1.2)% (367,718)
-----------
NET ASSETS: 100.0% $30,759,595
===========
* Non-income producing security.
+ At September 30, 2000, the basis of invest- ments for federal income tax
purposes was the same as their cost for financial reporting pur- poses.
Unrealized appreciation and depreciation were as follows:
Gross unrealized appreciation $ 7,487,334
Gross unrealized depreciation (3,116,048)
------------
Net unrealized appreciation $ 4,371,286
============
See accompanying Notes to Financial Statements.
4
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HODGES FUND
SCHEDULE OF CALL OPTIONS WRITTEN at September 30, 2000 (Unaudited)
CONTRACTS VALUE
--------- -----
SUBJECT TO CALL
COMMON STOCKS/EXPIRATION DATE/EXERCISE PRICE
30 JDS Uniphase Corp. / Oct / $135.00 Call $ (563)
30 Juniper Networks, Inc. / Oct / $220.00 Call (54,000)
--------
TOTAL CALL OPTIONS WRITTEN (Premiums received $49,033) $(54,563)
========
See accompanying Notes to Financial Statements.
5
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HODGES FUND
STATEMENT OF ASSETS AND LIABILITIES at September 30, 2000 (Unaudited)
ASSETS
Investments in securities, at value (cost $26,750,497) ..... $ 31,127,313
Cash ....................................................... 452
Receivables:
Securities sold .......................................... 76,885
Fund shares sold ......................................... 14,938
Dividends and interest ................................... 3,546
Prepaid expenses and other assets ............................ 14,978
------------
Total assets ................................................. 31,238,112
------------
LIABILITIES
Options written, at value (proceeds $49,033) ............... 54,563
Payables:
Securities purchased ..................................... 292,499
Fund shares redeemed ..................................... 60,206
Due to Advisor ........................................... 22,221
Distribution fees ........................................ 20,326
Administration fees ...................................... 5,229
Accrued expenses ........................................... 23,473
------------
Total liabilities ........................................ 478,517
------------
NET ASSETS ................................................... $ 30,759,595
============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($30,759,595/2,056,655 shares outstanding; unlimited
number of shares authorized without par value) ............. $ 14.96
------------
COMPONENTS OF NET ASSETS
Paid-in capital ............................................ $ 24,602,986
Accumulated net investment loss ............................ (250,056)
Accumulated net realized gain on investments ............... 2,035,379
Net unrealized appreciation on investments ................. 4,371,286
------------
Net assets ............................................... $ 30,759,595
============
See accompanying Notes to Financial Statements.
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HODGES FUND
STATEMENT OF OPERATIONS For the Six Months Ended September 30, 2000 (Unaudited)
INVESTMENT INCOME
Income
Dividends .................................................. $ 15,205
Interest ................................................... 13,762
-----------
Total income ............................................. 28,967
-----------
Expenses
Advisory fees .............................................. 136,486
Distribution fees .......................................... 40,143
Administration fees ........................................ 32,114
Custody fees ............................................... 14,075
Fund accounting fees ....................................... 13,640
Transfer agent fees ........................................ 12,011
Audit fees ................................................. 10,201
Registration expense ....................................... 9,463
Reports to shareholders .................................... 4,026
Trustee fees ............................................... 3,723
Legal fees ................................................. 2,330
Miscellaneous .............................................. 811
-----------
Total expenses ............................................. 279,023
-----------
NET INVESTMENT LOSS ........................................ (250,056)
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on investments ............................. 2,306,097
Net unrealized depreciation on investments ................... (8,922,501)
-----------
Net realized and unrealized loss on investments ............ (6,616,404)
-----------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ..... $(6,866,460)
===========
See accompanying Notes to Financial Statements.
7
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HODGES FUND
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR ENDED
SEPTEMBER 30, MARCH 31,
2000# 2000
------------ ------------
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS
Net investment loss ......................... $ (250,056) $ (269,030)
Net realized gain on investments ............ 2,306,097 1,609,919
Net unrealized appreciation (depreciation)
on investments ............................ (8,922,501) 3,238,632
------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ............... (6,866,460) 4,579,521
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS
From net realized gain ...................... (2,000) (1,764,834)
------------ ------------
CAPITAL SHARE TRANSACTIONS
Net increase (decrease) in net assets derived
from net change in outstanding shares (a) . (1,216,351) 515,236
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ... (8,084,811) 3,329,923
NET ASSETS
Beginning of period ......................... 38,844,406 35,514,483
------------ ------------
END OF PERIOD ................................. $ 30,759,595 $ 38,844,406
============ ============
(a) A summary of capital share transactions is as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 2000# MARCH 31, 2000
------------------------- -------------------------
Shares Value Shares Value
-------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Shares sold ................. 82,732 $ 1,240,601 307,090 $ 5,047,617
Shares issued in reinvestment
of distributions .......... -- -- 107,614 1,689,535
Shares redeemed ............. (162,367) (2,456,952) (393,785) (6,221,916)
-------- ----------- -------- -----------
Net increase (decrease) ..... (79,635) $(1,216,351) 20,919 $ 515,236
======== =========== ======== ===========
</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>
SIX MONTHS ENDED YEAR ENDED MARCH 31,
SEPTEMBER 30, --------------------------------------------------------------------
2000# 2000 1999 1998 1997 1996
----- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period ............ $ 18.18 $ 16.79 $ 14.44 $ 13.20 $ 12.87 $ 11.55
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss ............ (0.12) (0.13) (0.15) (0.09) (0.11) (0.07)
Net realized and unrealized
gain (loss) on investments ... (3.10) 2.36 3.05 4.79 1.85 3.42
-------- -------- -------- -------- -------- --------
Total from investment
operations ..................... (3.22) 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 period ...................... $ 14.96 $ 18.18 $ 16.79 $ 14.44 $ 13.20 $ 12.87
======== ======== ======== ======== ======== ========
Total return ..................... (17.71)% 14.13% 21.11%* 41.26%* 14.18%* 32.33%*
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(millions) ....................... $ 30.8 $ 38.8 $ 35.5 $ 32.4 $ 19.4 $ 13.3
Ratio of expenses to
average net assets ............. 1.73%+ 1.75% 1.92% 1.96% 2.14% 2.08%
Ratio of net investment
loss to average net assets ..... (1.55)%+ (0.77)% (0.99)% (0.76)% (0.95)% (0.61)%
Portfolio turnover rate .......... 52.98% 126.05% 129.86% 94.05% 115.77% 124.89%
</TABLE>
* Sales load is not reflected in the total return number. Effective April 20,
1999, the Fund no longer imposed a sales load.
+ Annualized.
# Unaudited.
See accompanying Notes to Financial Statements.
9
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HODGES FUND
NOTES TO FINANCIAL STATEMENTS (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 long-term 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
10
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HODGES FUND
NOTES TO FINANCIAL STATEMENTS (Unaudited) - (Continued)
DISTRIBUTIONS BY INVESTMENT COMPANIES. For the year ended March 31, 2000, the
Fund decreased paid-in capital by $269,030 due to the Fund experiencing a net
investment loss during the year. Net realized loss and net assets were not
affected by this change.
NOTE 3 - COMMITMENTS AND OTHER RELATED PARTY TRANSACTIONS
For the six months ended September 30, 2000, Hodges Capital Management,
Inc. (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, 2000, the Fund incurred $136,486 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 six months ended September 30, 2000, the Fund incurred $32,114 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.
11
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HODGES FUND
NOTES TO FINANCIAL STATEMENTS (Unaudited) - (Continued)
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 activities. During
the six months ended September 30, 2000, the Fund paid fees of $40,143 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, 2000, were $17,632,051 and $16,820,784, respectively.
12
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================================================================================
Advisor
HODGES CAPITAL MANAGEMENT, INC.
2905 Maple Avenue Dallas,
Texas 75201 (877) 232-1222
Distributor
FIRST DALLAS SECURITIES, 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,
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.
