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<PAGE> PAGE 2
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<PAGE> PAGE 3
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<PAGE> PAGE 4
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<PAGE> PAGE 5
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<PAGE> PAGE 6
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<PAGE> PAGE 7
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<PAGE> PAGE 8
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<PAGE> PAGE 9
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<PAGE> PAGE 10
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<PAGE> PAGE 11
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<PAGE> PAGE 12
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<PAGE> PAGE 13
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<PAGE> PAGE 14
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<PAGE> PAGE 15
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<PAGE> PAGE 16
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SIGNATURE NATHAN A. CHAPMAN, JR.
TITLE PRESIDENT
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S ANNUAL FINANCIAL STATEMENTS DATED OCTOBER 31, 1998 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS 12-MOS
<FISCAL-YEAR-END> OCT-31-1998 OCT-31-1998 OCT-31-1998
<PERIOD-END> OCT-31-1998 OCT-31-1998 OCT-31-1998
<INVESTMENTS-AT-COST> 84714786 9720104 9720104
<INVESTMENTS-AT-VALUE> 84714786 8071234 8071234
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<INTEREST-INCOME> 2629535 8 2533
<OTHER-INCOME> 0 0 0
<EXPENSES-NET> 316558 406 213538
<NET-INVESTMENT-INCOME> 2312977 (381) (201228)
<REALIZED-GAINS-CURRENT> 0 (185) (41982)
<APPREC-INCREASE-CURRENT> 0 1214 (1650083)
<NET-CHANGE-FROM-OPS> 2312977 648 (1893293)
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<PER-SHARE-NAV-BEGIN> 1.00 14.29 14.29
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</TABLE>
Report of Independent Auditors
Board of Directors
The Chapman Funds, Inc.
In planning and performing our audit of the financial statements of the The
Chapman Funds, Inc. (U.S.
Treasury Money Fund and DEM Equity Fund) (the Funds) for the year or period
ended October 31, 1998, we considered its internal control, including control
activities for safeguarding securities, in order to determine our auditing
procedures for the purpose of expressing our opinions on the financial
statements and to comply with the requirements of Form N-SAR, and
not to provide assurance on internal control.
The management of the Funds is responsible for establishing and maintaining
internal control. In fulfilling this responsibility, estimates and judgments
by management are required to assess the expected benefits and related costs
of controls. Generally, controls that are relevant to an audit pertain to the
entitys objective of preparing financial statements for external purposes
that are fairly presented in conformity with generally accepted accounting
principles. Those controls include the safeguarding of assets against
unauthorized acquisition, use or disposition.
Because of inherent limitations in internal control, errors or fraud may occur
and not be detected. Also, projection of any evaluation of internal control
to future periods is subject to the risk that it may become inadequate because
of changes in conditions or that the effectiveness of the design and operation
may deteriorate.
Our consideration of internal control would not necessarily disclose all
matters in internal control that might be material weaknesses under standards
established by the American Institute of Certified Public Accountants. A
material weakness is a condition in which the design or operation of one or
more specific internal control components does not reduce to a relatively low
level the risk that errors or fraud in amounts that would be material in
relation to the financial statements being audited may occur and not be
detected within a timely period by employees in the normal course of
performing their assigned functions. However, we noted no matters
involving internal control and its operation, including controls for
safeguarding securities, that we consider to be material weaknesses as defined
above at October 31, 1998.
This report is intended solely for the information and use of the board of
trustees and management of The Chapman Funds, Inc. and the Securities and
Exchange Commission.
ERNST & YOUNG LLP
Philadelphia, Pennsylvania
December 4, 1998