<PAGE>
THE CHAPMAN FUNDS, INC.
- --------------------------------------------------------------------------------
[GRAPHIC]
DEM EQUITY FUND
A DOMESTIC EMERGING MARKETS INVESTMENT OPPORTUNITY
SEMI ANNUAL REPORT
APRIL 30, 1998
- --------------------------------------------------------------------------------
<PAGE>
A MESSAGE TO OUR SHAREHOLDERS
Dear Fellow Shareholders,
We extend a warm welcome to our shareholders with our first performance
report, covering the period of Fund inception, on April 8, 1998, through April
30, 1998. During the six-month period ended April 30, we saw a phenomenal
year-end market performance for 1997, in spite of the October Asian crisis.
Continued economic growth under low inflation and low unemployment occurred
during the first quarter of 1998 with particular strength in technology stocks.
The second quarter, including the first month of your fund's performance, saw
new April highs in all the major indices, with the Dow Jones Industrial Average
crossing both 9000 and 9100 for the first time. Small capitalization technology
stocks were particularly strong in April, beneficially impacting your Fund's
performance.
[GRAPH]
*PERFORMANCE FIGURES ARE HISTORICAL AND DO NOT REPRESENT FUTURE RESULTS.
The DEM Equity Fund had a gain of 2.6% from inception to April 30, compared
to a comparable period gain of 2.2% for the Russell 2000 Growth Index, your
Fund's benchmark. As we stated in our investment objectives, the Fund seeks
aggressive long-term growth through capital appreciation through investment in
the Domestic Emerging Markets market segment that it believes is positioned for
growth. We have initially positioned the portfolio in 36 DEM companies, with
the heaviest weightings in technology (29%), Consumer Discretionary (24%), and
Financial Services (12%). This exceeds the benchmark weightings, and further
benefited your Fund performance due to high sector returns realized during April
in those areas. Heavier Fund weightings in the Auto & Transportation (4%)
sector also benefited from strong performance for the period. This was evident
in your Fund's top performing stocks for the month which included Yurie Systems,
Solectron, Supreme International, R&G Financial Corporation, Bank Popular and
Atlas Air. We will reduce our 17% cash position as we believe market conditions
support its equity investment. With the increasing intensity of currency and
banking crises in Asia, we will limit our exposure to companies subject to
reduced Asian demand and intense price competition, and emphasize those
demonstrating strong management, strong fundamentals, and a strategic response
to global market developments.
<PAGE>
PORTFOLIO WEIGHTINGS
[CHART]
<TABLE>
<S> <C>
Cash 17%
Financial Services 12%
Technology 29%
Consumer Discretionary 24%
Health Care 6%
Producer Durable 5%
Auto & Transport 4%
Other 3%
</TABLE>
We believe that while the economy is currently strong with low interest
rates, low inflation, and strong economic growth, it remains vulnerable to
unpredictable global impacts that can affect investor sentiment and, therefore,
market valuations. The important consideration is to diversify your investments
through both the regular timing of your investments and the choice of a mutual
fund investment. These two approaches will average the cost of your investment
across high and low markets and diversify the risk across many different
companies. Taking a long-term view of your portfolio should support you through
the inevitable up and down cycles of the market and help you to benefit from the
superior total return which the stock market has historically provided over
other investments.
We thank you for your confidence and the opportunity to earn your business.
Respectfully submitted,
/s/ Nathan A Chapman, Jr.
Nathan A. Chapman, Jr.
President
<PAGE>
DEM EQUITY FUND
PORTFOLIO HIGHLIGHTS
TOP TEN PORTFOLIO HOLDINGS*
4/30/98
<TABLE>
<S> <C>
Solectron Corporation 5.18
Lattice Semiconductor Corp. 4.45
The Warnaco Group, Class A 4.12
Popular, Inc. 4.11
Atlas Air, Inc. 3.80
Computer Associates International, Inc. 3.42
Yurie Systems, Inc. 3.39
Ethan Allen Interiors, Inc. 2.98
Supreme International Corp. 2.89
MasTec, Inc. 2.61
</TABLE>
*AS A PERCENTAGE OF OF THE PORTFOLIO'S TOTAL NET ASSETS
PORTFOLIO TOP PERFORMERS*
(% GAIN ON INVESTMENTS)
<TABLE>
<S> <C>
Yurie Systems, Inc. 35.0
Atlas Air, Inc 22.1
R&G Financial Corp., Class B 15.9
Supreme International Corp. 14.2
Popular, Inc. 14.2
</TABLE>
*PERCENTAGE INCREASE IN MARKET VALUE OF INVESTMENTS FROM INCEPTION ON APRIL 8,
1998. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL VARY, AND YOU MAY HAVE A LOSS
WHEN YOU SELL SHARES.
<PAGE>
THE CHAPMAN FUNDS, INC.
DEM EQUITY FUND
Statement of Net Assets - April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares (Note 2)
- ----------- -------------
<C> <S> <C>
COMMON STOCK - 82.9%
APPAREL - 2.9%
18,500 Supreme International Corporation $ 296,000
-------------
BANKS - 5.1%
3,000 Hamilton Bancorp, Inc. 100,500
6,000 Popular, Inc. 421,500
-------------
522,000
-------------
COMMUNICATIONS - 5.7%
10,000 MasTec, Inc. 267,500
4,000 Premisys Communications, Inc. 116,750
8,000 Startec Global Communications Corporation 204,000
-------------
588,250
-------------
COMPUTERS - 2.1%
9,000 Smart Modular Technologies, Inc. 222,187
-------------
CONSUMER PRODUCTS - 2.4%
8,000 Movado Group, Inc. 243,500
-------------
FINANCIAL SERVICES - 6.6%
7,000 Doral Financial Corporation 245,875
4,000 Oriental Financial Group Inc. 166,500
4,000 R&G Financial Corp., Class B 164,000
9,000 Ugly Duckling Corporation 100,125
-------------
676,500
-------------
FURNITURE - 3.0%
6,000 Ethan Allen Interiors, Inc. 305,625
-------------
HEALTH CARE - 2.4%
6,000 Pediatrix Medical Group 253,125
-------------
MEDIA/ PUBLISHING - 1.9%
5,000 Univision Communications Inc. 191,563
-------------
PHARMACEUTICAL - 3.8%
6,000 Theragenics Corporation 171,000
5,000 Watson Pharmaceuticals, Inc. 215,313
-------------
386,313
-------------
RETAILERS - 6.8%
10,000 CHS Electronics, Inc. 250,500
7,000 PC Connection, Inc. 195,188
7,000 Wet Seal, Inc., Class A 248,625
-------------
694,313
-------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements
<PAGE>
THE CHAPMAN FUNDS, INC.
DEM EQUITY FUND
Statement of Net Assets - April 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Market Value
Shares (Note 2)
- ----------- ------------
<C> <S> <C>
COMMON STOCK - CONCLUDED
SOFTWARE & TECHNOLOGY SERVICE - 18.42%
3,000 Advent Software, Inc. $ 127,875
5,000 Autodesk, Inc. 235,000
10,000 Broadvision, Inc. 185,000
5,000 Complete Business Solutions, Inc. 170,937
6,000 Computer Associated International, Inc. 351,375
2,000 I2 Technologies, Inc. 200,250
5,000 Intelligroup, Inc. 153,750
12,000 Open Market, Inc. 226,500
5,000 Quickresponse Services, Inc. 235,000
-------------
1,885,687
-------------
TECHNOLOGY - 13.9%
10,000 Lattice Semiconductor Corp. 456,250
2,500 LCC International 51,938
5,000 OAO Technology Solutions, Inc. 41,562
12,000 Solectron Corporation 531,750
10,000 Yurie Systems, Inc. 347,500
-------------
1,429,001
-------------
TEXTILES - 4.1%
10,000 The Warnaco Group, Inc., Class A 422,500
-------------
TRANSPORTATION - 3.8%
10,000 Atlas Air, Inc. 390,000
-------------
Total Common Stock (Cost $8,225,671) - 82.9% $ 8,506,563
-------------
Total Investments in Securities - 82.9% 8,506,563
Other Assets Less Liabilities - 17.1% 1,751,574
-------------
Net Assets - 100% $ 10,258,137
-------------
-------------
Net Asset Value and Redemption Price Per:
Institutional Shares
($10,256,480 / 699,791 shares
outstanding) $ 14.66
-------------
-------------
Investor Shares
($1,657 / 113 shares outstanding) $ 14.66
-------------
-------------
Maximum Offering Price Per Investor Shares:
Net asset value $ 14.66
Sales Charge (4.75% of offering price) .73
-------------
Maximum offering price $ 15.39
-------------
-------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements
<PAGE>
THE CHAPMAN FUNDS, INC.
DEM EQUITY FUND
Statement of Assets And Liabilities - April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in securities (Cost $8,225,671) $ 8,506,563
Cash 2,448,589
Defferred Organization Costs 40,000
Dividend receivable 130
-------------
Total assets 10,995,282
-------------
LIABILITIES:
Payable for securities purchased 672,588
Payable due to adviser 40,000
Accrued expenses 24,557
-------------
Total liabilities 737,145
-------------
NET ASSETS $ 10,258,137
-------------
-------------
NET ASSETS CONSIST OF:
Paid-in capital:
Institutional Shares $ 10,000,014
Investor Shares 1,658
Undistributed net investment (loss) (24,427)
Net unrealized appreciation on investments 280,892
-------------
$ 10,258,137
-------------
-------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
THE CHAPMAN FUNDS, INC.
DEM EQUITY FUND
Statement of Operations - For the period April 8, 1998(1) through April 30,
1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends $ 130
-------------
EXPENSES:
Management and administrative fees (Note 3) 6,440
Custodian fees 4,750
Fund accounting fees 2,917
Legal fees 2,500
Audit fees 1,583
Distribution fees (Note 3) 1,533
Transfer and dividend disbursing agent's fees 1,500
(Note 3)
Registration fees 1,250
Director's fees 1,167
Other 917
-------------
Total expenses 24,557
-------------
Net investment loss (24,427)
-------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net unrealized appreciation on investments 280,892
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 256,465
-------------
-------------
</TABLE>
- --------------------------------------------------------------------------------
(1) Commencement of operations
See Notes to Financial Statements.
<PAGE>
THE CHAPMAN FUNDS, INC.
DEM EQUITY FUND
Statement Of Changes In Net Assets - For the period April 8, 1998(1) through
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INCREASE/(DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment loss $ (24,427)
Net unrealized appreciation on investments 280,892
-------------
Increase in net assets frrm operations 256,465
-------------
CAPITAL SHARE TRANSACTIONS: (NOTE - 4)
Shares sold
Institutional Shares 10,000,014
Investor Shares 1,658
-------------
Increase in net assets from capital share transactions 10,001,672
-------------
Total increase in net assets 10,258,137
-------------
NET ASSETS:
Beginning of period ---
-------------
End of period $ 10,258,137
-------------
-------------
</TABLE>
- --------------------------------------------------------------------------------
(1) Commencement of operations.
See Notes to Financial Statements.
<PAGE>
THE CHAPMAN FUND, INC.
DEM EQUITY FUND - INSTITUTIONAL SHARES
Financial Highlights
- --------------------------------------------------------------------------------
THE FINANCIAL HIGHLIGHTS TABLE IS INTENDED TO HELP YOU UNDERSTAND THE FUND'S
FINANCIAL PERFORMANCE SINCE APRIL 8, 1998, THE DATE ON WHICH THE FUND COMMENCED
OPERATIONS. CERTAIN INFORMATION REFLECTS FINANCIAL RESULTS FOR A SINGLE FUND
SHARE. THE TOTAL RETURN IN THE TABLE REPRESENT THE RATE THAT AN INVESTOR WOULD
HAVE EARNED ON AN INVESTMENT IN THE FUND (ASSUMING REINVESTMENT OF ALL
DIVIDENDS AND DISTRIBUTIONS). THIS INFORMATION HAS NOT BEEN AUDITED. IT
SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL STATEMENTS AND NOTES THERETO.
<TABLE>
<CAPTION>
(1)
April 8,1998
through
April 30, 1998
-------------
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 14.29
-------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss (.03)
Net unrealized gains .40
-------------
Total from investment operations .37
-------------
INCOME FROM DISTRIBUTIONS:
From net investment income -0-
From net realized gains -0-
-------------
Total from distributions -0-
-------------
Net asset value, end of period $ 14.66
-------------
-------------
TOTAL RETURN (2) 2.59%
RATIOS TO AVERAGE NET ASSETS: (3)
Expenses 4.00%
Net investment loss (3.98)%
SUPPLEMENTAL DATA:
Net Assets, end of period (000 omitted) $ 10,256
Portfolio turnover rate 0%
</TABLE>
- --------------------------------------------------------------------------------
(1) Commencement of operations.
(2) Total Return excludes the effect of sales load.
(3) Ratios have been annualized.
See notes to financial statements.
<PAGE>
THE CHAPMAN FUND, INC.
DEM EQUITY FUND - INVESTOR SHARES
Financial Highlights
- --------------------------------------------------------------------------------
THE FINANCIAL HIGHLIGHTS TABLE IS INTENDED TO HELP YOU UNDERSTAND THE FUND'S
FINANCIAL PERFORMANCE SINCE APRIL 8, 1998, THE DATE ON WHICH THE FUND COMMENCED
OPERATIONS. CERTAIN INFORMATION REFLECTS FINANCIAL RESULTS FOR A SINGLE FUND
SHARE. THE TOTAL RETURN IN THE TABLE REPRESENT THE RATE THAT AN INVESTOR WOULD
HAVE EARNED ON AN INVESTMENT IN THE FUND (ASSUMING REINVESTMENT OF ALL
DIVIDENDS AND DISTRIBUTIONS). THIS INFORMATION HAS NOT BEEN AUDITED. IT
SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL STATEMENTS AND NOTES THERETO.
<TABLE>
<CAPTION>
(1)
April 8,1998
through
April 30, 1998
-------------
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 14.29
-------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss (.03)
Net unrealized gains .40
-------------
Total from investment operations .37
-------------
INCOME FROM DISTRIBUTIONS:
From net investment income -0-
From net realized gains -0-
-------------
Total from distributions -0-
-------------
Net asset value, end of period $ 14.66
-------------
-------------
TOTAL RETURN (2) 2.59%
RATIOS TO AVERAGE NET ASSETS: (3)
Expenses 4.25%
Net investment loss (4.25)%
SUPPLEMENTAL DATA:
Net Assets, end of year (000 omitted) $ 2
Portfolio turnover rate 0%
</TABLE>
- --------------------------------------------------------------------------------
(1) Date on which the Fund commenced operations.
(2) Total Return excludes the effect of sales load.
(3) Ratios have been annualized.
See notes to financial statements
<PAGE>
THE CHAPMAN FUNDS, INC.
DEM EQUITY FUND
Notes To Financial Statements
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
NOTE 1 - GENERAL
The DEM Equity Fund (the "Fund") is a series of The Chapman Funds, Inc., a
diversified open-end management investment company registered under the
Investment Company Act of 1940 (the "1940 Act"). The Fund is a non-diversified
portfolio that seeks aggressive long-term growth through capital appreciation
from investments in companies that are controlled by African Americans, Asian
Americans, Hispanic/Latino Americans or women ("DEM Companies"). The Fund,
which commenced operations on April 8, 1998, offers two classes of shares,
Institutional Shares and Investor Shares, which both commenced operations on
April 8, 1998. The Institutional Shares are sold without a sales load, and the
Investor Shares have a 4.75% front-end sales load. The following is a summary
of significant accounting policies followed by the Fund.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Security Valuation - Portfolio securities primarily traded on an exchange are
valued at the last quoted sales price for that day. Securities traded
over-the-counter are valued, if bid and asked quotations are available, at
the mean between the current bid and asked prices. If bid and asked quotations
are not available, then over-the-counter securities are valued through
valuations obtained from an independent pricing service or as determined in
good faith by the Board of Directors. Investments in short-term securities
having a maturity of 60 days or less are valued at amortized cost.
Repurchase Agreements - The Fund may enter into repurchase agreements with
securities dealers or member banks of the Federal Reserve System. A repurchase
agreement is a short-term investment in which the fund purchases a security and
simultaneously agrees to resell it to the vendor at an agreed-upon future date.
The Fund's custodial bank holds the collateral until the agreement matures. The
collateral is monitored to ensure that it's market value, including accrued
interest, is sufficient if the dealer defaults. In the event of default, the
Fund might be delayed in, or prevented from, selling the collateral for it's
benefit.
Federal Income Taxes - No provision for federal income taxes has been made since
the Fund intends to continue to qualify as a Regulated Investment Company under
Subchapter M of the Internal Revenue Code and distribute all of its taxable
income.
Deferred Organization Costs - These costs represent expenses incurred in
connection with the Fund's organization and will be amortized on a straight line
basis over a five year period.
Securities Transactions, Investment Income, Distributions, and Other - The Fund
accounts for security transactions on a trade date basis. Realized gains and
losses on sales of securities are determined using the specific identification
method for both financial and income tax reporting purposes. Interest income
and expenses are recorded on an accrual basis. Income and common expenses are
allocated to each class based on its respective average net assets. Class
specific expenses are charged directly to each class. Dividend income and
distributions to shareholders are recorded on the ex-dividend date.
Use of Estimates in the Preparation of Financial Statements - 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 and
the reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates.
NOTE 3 - INVESTMENT ADVISORY FEES, TRANSACTIONS WITH AFFILIATES AND OTHER FEES
Chapman Capital Management, Inc. ("CCM"), a wholly-owned direct subsidiary of
Chapman Capital Management Holdings, Inc., is the investment adviser for the
Fund. The Fund pays CCM an advisory fee at an annual rate of .9 of 1% of the
Fund's average weekly net assets during the preceding month payable monthly in
arrears, and an administration fee of .15 of 1% of the Fund's average weekly net
assets during the preceding month payable monthly in arrears. For the period
April 8, 1998 to April 30, 1998, the Fund expensed $6,440 for advisory and
administrative services.
<PAGE>
THE CHAPMAN FUNDS, INC.
DEM EQUITY FUND
Notes To Financial Statements - Concluded
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
First Data Investor Services Group ("First Data") serves as the Funds Transfer
and Dividend Paying Agent (the "Transfer Agent") and Accounting Agent pursuant
to an Investment Company Services Agreement. As compensation for transfer agent
services, the Fund pays First Data an account fee plus an additional class fee.
As compensation for its accounting services, the Fund pays First Data a fee
based on its average monthly net assets plus an additional class fee. For the
period April 8, 1998 through April 30, 1998, the Fund expensed $1,500 and $2,917
for transfer agent and accounting services, respectively.
For the period ended April 30, 1998, The Chapman Company, an affiliate of The
Adviser, earned commissions on sales of Investor Shares of $13,075.
Pursuant to Rule 12b-1 under the 1940 Act, the Distributor receives a fee under
the Investor Shares Distribution Plan for stockholder service and distribution
services at an annual rate of .75% (up to .25% service fee and .50%
distribution fee) of the average daily net assets of the Fund attributable to
the Investor Shares. The Distributor has voluntarily limited such fee during the
first fiscal year of the Fund to an aggregate of .50% of average daily net
assets (up to .25% service fee and .25% distribution fee). These voluntary
limits are not contractual and could change. The Distributor also receives a fee
under the Institutional Shares Distribution Plan for stockholder administrative
and distribution services at an annual rate of .25% of the average daily net
assets of the Fund attributable to the Institutional Shares. For the period
April 8, 1998 to April 30, 1998, the Fund expensed $1,533 for distribution and
administrative services for the Institutional Shares and Investor Shares.
NOTE 4 - CAPITAL SHARE TRANSACTIONS
The Chapman Funds, Inc. is authorized to issue 10 billion full and fractional
shares of common stock, par value $.001 per share, of which 1 billion shares are
designated as DEM Equity Institutional Shares, and 1 billion are shares are
designated as DEM Equity Investor Shares. Transactions in shares of the
respective classes were as follows:
<TABLE>
<CAPTION>
For the Period
April 8, 1998 (1)
through
April 30, 1998
----------------------------
Institutional Investor
Shares Shares
----------------------------
<S> <C> <C>
Shares sold 699,791 113
Shares issued as reinvestment of dividends --- ---
Shares redeemed --- ---
----------------------------
Net increase in shares outstanding 699,791 113
----------------------------
----------------------------
</TABLE>
NOTE 5 - INVESTMENT TRANSACTIONS
Excluding short-term obligations, purchases of investment securities aggregated
$8,225,671 during the period April 8, 1998 through April 30, 1998. There were
no sales during the same period.
The following balances are as of April 30, 1998:
<TABLE>
<CAPTION>
Cost for Tax Basis Tax Basis Tax Basis
Federal (Net) (Gross) (Gross)
Income Tax Unrealized Unrealized Unrealized
Purposes Appreciation Appreciation Depreciation
-----------------------------------------------------------
<S> <C> <C> <C> <C>
DEM Equity Fund $8,225,671 $280,892 $529,402 $248,510
</TABLE>
- -----------------------------------
(1) Commencement of operations.
<PAGE>
THE CHAPMAN FUNDS, INC.
- --------------------------------------------------------------------------------
[GRAPHIC]
U.S. TREASURY MONEY FUND
SEMI ANNUAL REPORT
APRIL 30, 1998
- --------------------------------------------------------------------------------
<PAGE>
THE CHAPMAN FUNDS, INC.
U.S. TREASURY MONEY FUND
Schedule Of Investments - April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
(Showing Percentage of Total Value of Net Assets)
<TABLE>
<CAPTION>
Principal Value
Amount (Note B)
------------ -------------
U.S. GOVERNMENT - 52.1%
<C> <S> <C>
$ 21,000,000 U.S. Treasury Bills 4.700%, Due 05/07/98 $ 20,983,550
2,000,000 U.S. Treasury Bills 5.220%, Due 05/28/98 1,992,170
30,000 U.S. Treasury Bills 4.975%, Due 02/04/99 28,844
-------------
23,004,564
-------------
REPURCHASE AGREEMENTS - 48.4%
11,357,000 Societe Generale, dated 04/30/98, 5.46%
agreement to repurchase at $11,358,722 on
05/01/98 (collateralized by $10,955,000 U.S.
Treasury Notes, 6.50%, due 08/15/2005) 11,357,000
10,000,000 Morgan Stanley, dated 04/30/98, 5.37%
agreement to repurchase at $10,001,492 on
05/01/98 (collateralized by $9,360,000 U.S.
Treasury Notes, 7.500%, due 11/15/2001) 10,000,000
-------------
21,357,000
-------------
Total Investment (Cost $44,361,564)* - 100.5% 44,361,564
Other Assets and Liabilities - (0.5%) (239,696)
-------------
Net Assets - 100.0% $ 44,121,868
-------------
-------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements
*Cost for federal income tax purposes
<PAGE>
THE CHAPMAN FUNDS, INC.
U.S. TREASURY MONEY FUND
Statement Of Assets And Liabilities - April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in securities (Including
repurchase
agreements of $21,357,000) at value
(Amortized cost $44,361,564) (Note B) $ 44,361,564
Cash 104
Interest receivable 3,214
Prepaid expenses 1,437
-------------
Total assets 44,366,319
-------------
LIABILITIES:
Accrued expenses (Note D) 55,306
Distribution payable 189,145
-------------
Total liabilities 244,451
-------------
NET ASSETS $ 44,121,868
-------------
-------------
(Equivalent to $1.00 per share on 44,121,868
shares of common stock outstanding)
NET ASSETS CONSIST OF:
Capital stock $ 44,122
Paid-in-capital 44,077,746
-------------
Net assets, for 44,121,868 common shares
outstanding (Note C) $ 44,121,868
-------------
-------------
NET ASSET VALUE PER SHARE $ 1.00
-------------
-------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
THE CHAPMAN FUNDS, INC.
U.S. TREASURY MONEY FUND
Statement Of Operations - For the six months ended April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest income (Note B) $ 1,324,526
-------------
EXPENSES:
Management and administrative fees 143,871
(Note D)
Custodian fees 19,723
Legal and auditing fees 15,944
Director's fees (Note E) 11,282
Rating fees 10,911
Transfer and dividend disbursing agent's fees 9,190
(Note D)
Insurance fees 7,454
Other 10,662
-------------
Total expenses before reimbursement 229,037
-------------
Reimbursement of expenses (Note D) (73,177)
-------------
Net expenses 155,860
-------------
Increase in net assets
resulting from operations $ 1,168,666
-------------
-------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
THE CHAPMAN FUNDS, INC.
U.S. TREASURY MONEY FUND
Statement Of Changes In Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
---------------------------------------
Six months
ended Year ended
April 30, 1998 October 31, 1997
(Unaudited)
<S> <C> <C>
INCREASE IN NET ASSETS:
OPERATIONS:
Net increase in net assets from operations $ 1,168,666 $ 2,388,115
------------- -------------
DIVIDENDS:
Dividends paid to shareholders from net investment
income ($.0239 and $.0470 per share, respectively)
(Note B) (1,168,666) (2,388,115)
------------- -------------
CAPITAL SHARE TRANSACTIONS (AT $1 PER
SHARE):
Proceeds from sales of shares 55,996,749 176,692,845
Shares issued in reinvestment of dividends from
net investment income 706,368 1,381,641
Shares redeemed (72,791,359) (172,992,911)
------------- -------------
Increase in net assets derived
from capital share transactions (16,088,242) 5,081,575
------------- -------------
Total increase in net assets: (16,088,242) 5,081,575
NET ASSETS:
Beginning of period 60,210,110 55,128,535
------------- -------------
End of period $ 44,121,868 $ 60,210,110
------------- -------------
------------- -------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
THE CHAPMAN FUNDS, INC.
U.S. TREASURY MONEY FUND
Financial Highlights
- --------------------------------------------------------------------------------
THE FINANCIAL HIGHLIGHTS TABLE IS INTENDED TO HELP YOU UNDERSTAND THE FUND'S
FINANCIAL PERFORMANCE FOR THE PAST FIVE YEARS. CERTAIN INFORMATION REFLECTS
FINANCIAL RESULTS FOR A SINGLE FUND SHARE. THE TOTAL RETURNS IN THE TABLE
REPRESENT THE RATE THAT AN INVESTOR WOULD HAVE EARNED ON AN INVESTMENT IN THE
FUND (ASSUMING REINVESTMENT OF ALL DIVIDENDS AND DISTRIBUTIONS). THIS
INFORMATION HAS NOT BEEN AUDITED. IT SHOULD BE READ IN CONJUNCTION WITH THE
FINANCIAL STATEMENTS AND NOTES THERETO.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED OCTOBER 31,
-----------------------------------------------------------------------------
Six months
ended
April 30,
1998
(Unaudited) 1997 1996 1995 1994 1993
----------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- -------- ------- -------
INCOME FROM
INVESTMENT OPERATIONS:
Net investment income 0.0239 0.0470 0.0464 0.0497 0.0294 0.0241
Net realized and unrealized
gain (loss) -0- -0- -0- -0- -0- -0-
------- ------- ------- -------- ------- -------
Total from investment
operations 0.0239 0.0470 0.0464 0.0497 0.0294 0.0241
------- ------- ------- -------- ------- -------
DISTRIBUTIONS:
From net investment income (0.0239) (0.0470) (0.0464) (0.0497) (0.0294) (0.0241)
From net realized gains -0- -0- -0- -0- -0- -0-
------- ------- ------- -------- ------- -------
Total from distributions (0.0239) (0.0470) (0.0464) (0.0497) (0.0294) (0.0241)
------- ------- ------- -------- ------- -------
Net asset value,
end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- -------- ------- -------
------- ------- ------- -------- ------- -------
TOTAL RETURN: 4.84%(2) 4.80% 4.74% 5.09% 3.04% 2.44%
RATIOS TO AVERAGE NET SSETS:
Expenses(1) 0.65%(2) 0.67% 0.75% 0.75% 0.75% 0.75%
Expenses
(prior to limitation) 0.96%(2) 0.93% 0.87% 0.97% 1.12% 1.15%
Net investment income 4.87% 4.72% 4.63% 5.02% 2.94% 2.41%
SUPPLEMENTAL DATA:
Net Assets, end of period
(000 omitted) $ 44,122 $ 60,210 $ 55,129 $ 34,371 $ 20,011 $ 23,515
</TABLE>
- --------------------------------------------------------------------------------
(1) Chapman Capital Management, Inc. , the Fund's investment adviser, has
agreed to bear all expenses (excluding income, excise and other taxes and
extraordinary expenses) of the Fund in excess of .65% of average daily net
assets on an annual basis.
(2) Annualized
<PAGE>
THE CHAPMAN FUNDS, INC.
U.S. TREASURY MONEY FUND
Notes To Financial Statements - APRIL 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
NOTE A - GENERAL
The U.S. Treasury Money Fund (the "Fund") is a series of The Chapman Funds, Inc.
(the "Company"), a diversified open-end management investment company under the
Investment Company Act of 1940 (the "1940 Act"). The Fund seeks to earn as high
a level of current income as is consistent with preservation of capital and
maintenance of liquidity. The Fund invests solely in short-term direct
obligations of the U.S. Government and repurchase agreements collateralized
fully by direct obligations of the U.S. Government.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Fund uses the amortized cost method, which approximates market value, to
value portfolio securities pursuant to Rule 2a-7 of the 1940 Act, provided the
Fund complies with certain conditions. The amortized cost valuation method
involves valuing a security at its cost on the date of purchase and thereafter
assuming a constant amortization from date of purchase to date of maturity of
any discount or premium.
Repurchase Agreements - The Fund's custodian takes possession, through the
Federal Book Entry System, of the collateral pledged for investments in
repurchase agreements. The underlying collateral is valued daily to ensure that
the value, including accrued interest, is at least equal to the repurchase
price. In the event of default, the Fund has the right to liquidate the
collateral and apply the proceeds in satisfaction of the obligation.
Distributions to Stockholders - Dividends to shareholders of the Fund are
declared daily from net investment income, which consist of accrued interest and
earned discount (including both original issue and market discount), less
amortization of premium and the accrued expenses applicable to the dividend
period.
Federal Income Taxes - Each series of the Company is treated as a separate
entity for federal income tax purposes, and each intends to continue to qualify
as a Regulated Investment Company under Subchapter M of the Internal Revenue
Code and distribute all of its net investment income to its stockholders.
Therefore, no provision for income taxes has been made.
Securities Transactions and Investment Income - Securities transactions are
recorded on the trade date. Interest income is recorded on the accrual basis.
Use of Estimates in the Preparation of Financial Statements - 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 and
the reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates.
NOTE C - CAPITAL STOCK
The Chapman Funds, Inc. is authorized to issue 10 billion full and fractional
shares of common stock, par value $.001 per share, of which 1 billion shares are
designated as U.S. Treasury Money Fund shares.
NOTE D - MANAGEMENT ADVISORY AND ADMINISTRATIVE FEES
Chapman Capital Management, Inc. ("CCM") acts as the investment adviser and
administrator for the Fund. The investment advisory and administrative fees are
based on the average daily net assets of the Fund computed at annual rates of
.5% and .1%, respectively. For the six months ended April 30, 1998, these
expenses were $143,871.
CCM also serves as Transfer and Dividend Disbursing Agent for the Fund pursuant
to a Shareholder Services Agreement. For its services, CCM is compensated $18
per account with a monthly minimum of $1,500 per fund excluding out-of-pocket
expenses. For the six months ended April 30, 1998, expenses for these services
amounted to $9,190.
CCM has agreed to bear all expenses (excluding income, excise and other taxes
and extraordinary expenses) of the Fund in excess of .65% of average daily net
assets on an annual basis. Total expenses reimbursed for the six months ended
April 30, 1998 were $73,177.
<PAGE>
THE CHAPMAN FUNDS, INC.
U.S. TREASURY MONEY FUND
Notes To Financial Statements - April 30, 1998 (Concluded)
- --------------------------------------------------------------------------------
NOTE E - DISTRIBUTION FEES AND RELATED PARTIES
Certain officers and directors of the Fund are "affiliated persons", as defined
in the Investment Company Act of 1940, of the Advisor and Sub-Advisor. For the
six months ended April 30, 1998, these "affiliated persons" did not receive any
compensation from the fund.
Those directors who are not "affiliated persons" (independent directors) receive
$1,000 plus certain expenses from the Fund for each Board of Directors meeting
they attend. Total expenses paid to directors for the six months ended April
30, 1998 were $11,282.
