<PAGE>
<PAGE>
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HUDSON CAPITAL
APPRECIATION FUND 110 Wall Street
(A Series of The Fahnestock Funds) New York, New York 10005
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Dear Shareholder:
For the past few years performance of the Fund has been lower than many of
the well-known market indices and many other capital appreciation oriented
funds. Effective October 1, 1995, we installed a new Portfolio Manager, James
Gerson, with a view to improving performance.
Jim is well known to us at Fahnestock. He has an exceptional record in
Corporate Finance and served as the head of our Corporate Finance Department in
New York. Prior to becoming Portfolio Manager he was a successful equity
research analyst. He is currently a director of six successful NASDAQ listed
companies.
The portfolio has been refocused to include companies that do not have a
large Wall Street or institutional following. The new manager believes there is
opportunity in stocks which are not yet widely recognized or followed. The Fund
has a 'value' orientation and the Portfolio Manager looks for companies with
strong competitive positions in their markets, successful historical track
records, sound balance sheets and favorable earnings outlooks. History has
shown, however, that these unrecognized smaller companies may underperform the
'market' in the short run while outperforming over the long term. For that
reason the managers intend to continue to invest a portion of the Fund's assets
in larger, growing companies as well.
The new strategy has begun to bear fruit. In the fourth quarter of 1995 the
Fund's return was 3.6% as compared to: +3.06% for all equity funds, +1.66% for
small company funds and +2.17% for capital appreciation funds (according to The
Wall Street Journal). In January 1996, the Fund's return was +3.4% compared to
+3.3% for the S&P 500 and - 0.2% for the Russell 2000, a measure of 'small cap'
stock performance.
We are all working hard to improve the performance of the Fund and to
increase its asset base. Your support is appreciated and your comments would be
most welcome.
Very truly yours,
ALBERT G. LOWENTHAL
Albert G. Lowenthal
Chairman of the Board
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<PAGE>
<PAGE>
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HUDSON CAPITAL APPRECIATION FUND
STATEMENT OF INVESTMENTS
DECEMBER 31, 1995
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<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ----------- -----------
<C> <S> <C>
COMMON STOCKS -- 85.49%
COMPUTER PRODUCTS -- 6.42%
2,300 Xerox Corporation $ 315,100
30,000 EMC Corporation* 461,250
-----------
776,350
-----------
COMMUNICATIONS -- 15.35%
10,000 Federal Express Corp.* 738,750
20,000 Worldcom Inc.* 705,000
20,000 Westcott Communications Inc.* 275,000
15,000 IFR Systems Inc.* 138,750
-----------
1,857,500
-----------
CONSUMER PRODUCTS -- 20.42%
19,000 Conagra, Inc. 783,750
35,000 Warnaco Group Inc. Cl A 875,000
20,000 Helen of Troy Corp.* 420,000
8,300 Regis Corp. 199,200
20,000 Fresh America Corp.* 192,500
-----------
2,470,450
-----------
FINANCIAL -- 3.77%
6,300 PNC Bank Corp. 203,175
4,000 Travelers Inc. 251,500
20 Transport Holdings Inc.* 815
-----------
455,490
-----------
</TABLE>
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The accompanying notes are an integral part of the financial statements.
<PAGE>
<PAGE>
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HUDSON CAPITAL APPRECIATION FUND
STATEMENT OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1995
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<TABLE>
VALUE
SHARES (NOTE 1)
- ----------- -----------
<C> <S> <C>
COMMON STOCKS (CONTINUES)
INDUSTRIAL PRODUCTS -- 17.35%
10,000 Rayonier, Inc. $ 333,750
22,500 Genlyte Group, Inc.* 151,875
30,000 NL Industries, Inc.* 371,250
17,500 New Brunswick Scientific Co., Inc. 100,625
12,000 ARCO Chemical Company 583,500
25,000 Speedfam International, Inc.* 281,250
33,000 Supreme Industries, Inc.* 276,375
-----------
2,098,625
-----------
OIL & GAS EXPLORATION -- 5.45%
10,000 Petroleum Geo-Services A/S* 250,000
10,500 Southern Union Company 265,125
5,000 ICO, Inc. 24,375
5,000 Enron Oil & Gas Company 120,000
-----------
659,500
-----------
PHARMACEUTICALS & HEALTH -- 5.86%
14,000 McKesson Corporation 708,750
-----------
708,750
-----------
RETAIL -- 10.87%
2,700 Dairy Mart Convenience Stores Inc.* 14,850
30,000 The Vons Companies, Inc.* 847,500
20,000 Central Tractor Farm & Country Inc.* 205,000
30,000 Uni-Marts, Inc. 247,500
-----------
1,314,850
-----------
TOTAL COMMON STOCKS (Cost $9,063,974) 10,341,515
-----------
</TABLE>
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The accompanying notes are an integral part of the financial statements.
<PAGE>
<PAGE>
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HUDSON CAPITAL APPRECIATION FUND
STATEMENT OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1995
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<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
- ----------- -----------
<C> <S> <C>
CORPORATE BONDS -- 1.32%
$ 150,000 Time Warner Inc. Debentures, 8.75%, due 04/01/17 $ 159,846
-----------
TOTAL CORPORATE BONDS (Cost $137,180) 159,846
-----------
U.S. GOVERNMENT OBLIGATIONS -- 6.55%
650,000 U.S. Treasury Bond, 7.25%, due 05/15/16 742,219
50,000 U.S. Treasury Note, 7.50%, due 01/31/96 50,086
-----------
TOTAL U.S. GOVERNMENT OBLIGATIONS (Cost $694,131) 792,305
-----------
SHORT-TERM INVESTMENTS -- 7.69%
931,000 Money Market Fiduciary Fund, on demand 931,000
-----------
TOTAL SHORT-TERM INVESTMENTS (Cost $931,000) 931,000
-----------
TOTAL INVESTMENTS -- 101.05% (Cost $10,826,285`D') 12,224,666
LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS -- 1.05% (127,441)
-----------
NET ASSETS -- 100.00% $12,097,225
-----------
-----------
</TABLE>
- ------------
* Non-income producing.
`D' Aggregate cost for Federal income tax purposes is $10,826,285. Aggregate
unrealized appreciation and depreciation of investments are $1,758,963 and
$360,582.
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The accompanying notes are an integral part of the financial statements.
<PAGE>
<PAGE>
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HUDSON CAPITAL APPRECIATION FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
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<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value (Cost $10,826,285)(Note 1).................................. $12,224,666
Receivable for Fund shares sold................................................................. 41,313
Accrued interest receivable..................................................................... 11,282
Dividends receivable............................................................................ 11,250
Deferred organization expenses.................................................................. 4,085
-----------
Total assets............................................................................... 12,292,596
-----------
LIABILITIES:
Due to custodian bank........................................................................... 29,331
Payable for Fund shares redeemed................................................................ 8,851
Payable for capital gain distribution........................................................... 28,873
Other payables and accrued expenses............................................................. 24,311
Due to Affiliates............................................................................... 104,005
-----------
Total liabilities.......................................................................... 195,371
-----------
Net assets...................................................................................... $12,097,225
-----------
-----------
Shares of beneficial interest outstanding (unlimited number of $.001 par value shares
authorized).................................................................................... 1,062,263
-----------
-----------
Net asset value and redemption price per share ($12,097,225/1,062,263).......................... $ 11.39
-----------
-----------
Maximum offering price per share (NAV/(1-maximum sales charge))................................. $ 11.93
-----------
-----------
NET ASSETS CONSIST OF:
Paid in capital................................................................................. $10,698,844
Net unrealized appreciation of investments...................................................... 1,398,381
-----------
Net assets................................................................................. $12,097,225
-----------
-----------
</TABLE>
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The accompanying notes are an integral part of the financial statements.
<PAGE>
<PAGE>
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HUDSON CAPITAL APPRECIATION FUND
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
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INVESTMENT INCOME
<TABLE>
<S> <C>
Income:
Interest........................................................................................ $ 166,136
Dividends....................................................................................... 170,918
-----------
Total income............................................................................... 337,054
-----------
Expenses: (Notes 2 and 3)
Investment management fee....................................................................... 143,793
Distribution expenses........................................................................... 71,897
Legal, compliance and filing fees............................................................... 97,252
Custodian fee................................................................................... 9,711
Shareholder servicing and related shareholder expenses.......................................... 84,178
Audit and accounting............................................................................ 38,624
Amortization of organization expenses........................................................... 23,294
Trustees' fees and expenses..................................................................... 19,981
Other........................................................................................... 3,436
-----------
Total expenses............................................................................. 492,166
-----------
Fees waived..................................................................................... (132,225)
Net expenses.................................................................................... 359,941
-----------
Net investment loss............................................................................. (22,887)
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments..................................................................... 1,459,180
Change in unrealized appreciation of investments..................................................... 1,073,821
-----------
Net gain on investments......................................................................... 2,533,001
-----------
Net increase in net assets from operations........................................................... $ 2,510,114
-----------
-----------
</TABLE>
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The accompanying notes are an integral part of the financial statements.
<PAGE>
<PAGE>
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HUDSON CAPITAL APPRECIATION FUND
STATEMENT OF CHANGES IN NET ASSETS
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<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
----------------- --------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Investment loss net.................................................... $ (22,887) $ (80,483)
Net realized gain on investments....................................... 1,459,180 1,615,823
Unrealized appreciation (depreciation) of investments.................. 1,073,821 (3,659,303)
----------------- --------------------
Net increase (decrease) in net assets resulting from operations... 2,510,114 (2,123,963)
Distributions to shareholders from net realized gains.................. (1,442,286) (1,547,323)
Share transactions -- net (Note 4)..................................... (4,844,459) 318,411
----------------- --------------------
Net decrease in net assets........................................ (3,776,631) (3,352,875)
Net Assets:
Beginning of year................................................. 15,873,856 19,226,731
----------------- --------------------
End of year....................................................... $12,097,225 $ 15,873,856
----------------- --------------------
----------------- --------------------
</TABLE>
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The accompanying notes are an integral part of the financial statements.
<PAGE>
<PAGE>
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HUDSON CAPITAL APPRECIATION FUND
NOTES TO FINANCIAL STATEMENTS
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1. SUMMARY OF ACCOUNTING POLICIES.
Hudson Capital Appreciation Fund (the 'Fund') is a series of The Fahnestock
Funds, a Massachusetts business trust (the 'Trust'). The Trust is an open-end
diversified management investment company registered under the Investment
Company Act of 1940. Its financial statements are prepared in accordance with
generally accepted accounting principles for investment companies as follows:
A) VALUATION OF SECURITIES
Securities traded on a national securities exchange are valued at
the price of the last sale on such exchange on the date as of which
assets are valued. If no sale has occurred on such date, or if the
security is traded only in the over-the-counter market, it will
normally be valued at its current bid price. Debt securities having
a remaining maturity of 60 days or less are valued at amortized
cost, which approximates market value. Portfolio securities for
which current quotations are not readily available are valued at
fair value as determined in good faith by the Board of Trustees.
B) FEDERAL INCOME TAXES
It is the Trust's policy 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 provision for Federal income tax is required.
C) ORGANIZATION COSTS
Organization expenses are being amortized on a straight-line basis
over a period of five years.
D) GENERAL
Securities transactions are recorded on a trade date basis. Interest
income, including amortization of premium and discount, is accrued
as earned and dividend income is recorded on the ex-dividend date.
Realized gains and losses from securities transactions are recorded
on the identified cost basis.
E) DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the
ex-dividend date.
Income distributions and capital gain distributions are determined
in accordance with income tax regulations which may differ from
generally accepted accounting principles. These differences are
primarily due to differing treatments for net operating losses.
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<PAGE>
<PAGE>
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HUDSON CAPITAL APPRECIATION FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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The effect of these differences for the year ended December 31, 1995
decreased undistributed net investment loss by $22,887, decreased
undistributed realized gains by $16,894 and decreased aggregate
paid-in-capital by $5,993.
2. INVESTMENT MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
Under the Investment Management Agreement, the Fund pays an investment
management fee to Hudson Capital Advisors, Inc. (the 'Advisor') equal to 1% of
the Fund's average daily net assets up to $25 million and .75% of annual average
net assets in excess of $25 million.
Under the Fund's Administration Agreement with Fahnestock & Co. Inc. (the
'Administrator'), the Administrator has agreed to provide administrative
services to the Fund at no charge.
The Advisor has agreed that, if in any fiscal year the sum of the Fund's
expenses (excluding payments under the Distribution Plan) exceeds 2 1/2% of the
first $30 million of its average daily net assets, 2% of the next $70 million of
its average daily net assets and 1 1/2% of its average daily net assets in
excess of $100 million, the Advisor will reduce the advisory fee or reimburse
the Fund for any such excess amounts. During the year ended December 31, 1995,
the Fund incurred investment management fees of $143,793. However, the Advisor
has waived $132,225 of expenses in order to comply with the agreement as stated
above.
In acting as Distributor during the year, Fahnestock & Co. Inc. earned $27,421
of commissions on sales of the Fund's shares.
Fees are paid to Trustees who are unaffiliated with the Advisor on the basis of
$3,000 per annum plus $750 per meeting attended.
3. DISTRIBUTION PLAN.
Pursuant to Rule 12b-1 under the Investment Company Act of 1940, the Trust has
adopted a Distribution Plan (the 'Plan') under which it may reimburse Fahnestock
& Co. Inc. (the 'Distributor') for expenses relating to the distribution of Fund
shares at an annual rate not to exceed .50 of 1% of the Fund's average daily net
assets. Distribution expenses incurred in a year in excess of .50 of 1% of the
Fund's average daily net assets may be carried forward and sought to be
reimbursed in future years. Interest at the prevailing broker loan rate may be
charged to the Fund on any expenses carried forward and those expenses and
interest will be reflected as current expenses on the Fund's statement of
operations for the year in which they become accounting liabilities.
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<PAGE>
<PAGE>
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HUDSON CAPITAL APPRECIATION FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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4. TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST.
At December 31, 1995, the Fund had authorized an unlimited number of shares of
beneficial interest ($.001 par value). Transactions were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
----------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
-------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Sold........................................... 141,457 $ 1,649,479 216,591 $ 2,699,380
Issued on reinvestment of dividends and
distributions................................ 125,192 1,413,414 136,870 1,499,247
Redeemed....................................... (654,267) (7,907,352) (305,437) (3,880,216)
-------- ----------- -------- -----------
Net increase (decrease)................... (387,618) $(4,844,459) 48,024 $ 318,411
-------- ----------- -------- -----------
-------- ----------- -------- -----------
</TABLE>
5. INVESTMENT TRANSACTIONS.
Purchases and sales of investment securities, other than short-term investments,
totalled $26,596,553 and $30,671,023, respectively. Fahnestock & Co. Inc. earned
commissions of $9,338 for executing securities transactions of the Fund during
the year ended December 31, 1995.
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<PAGE>
<PAGE>
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HUDSON CAPITAL APPRECIATION FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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6. FINANCIAL HIGHLIGHTS.
(for a share outstanding throughout each period)
<TABLE>
<CAPTION>
MARCH 5, 1991
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED (COMMENCEMENT OF
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, OPERATIONS) TO
1995 1994 1993 1992 DECEMBER 31, 1991
------------ ------------ ------------ ------------ -----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period......................... $ 10.95 $ 13.72 $ 11.93 $ 11.36 $ 10.00
Income from investment
operations:
Net investment income/(loss)..... (0.03) (0.06) (0.13) (0.05) 0.01
Net realized and unrealized gains
(losses) on investments........ 2.09 (1.48) 2.25 1.02 1.74
------------ ------------ ------------ ------------ -----------------
Total income from investment
operations................ 2.06 (1.54) 2.12 0.97 1.75
Less dividends paid to
shareholders:
Dividends paid from net realized
gains on investments........... (1.62) (1.23) (0.33) (0.40) (0.39)
------------ ------------ ------------ ------------ -----------------
Net asset value, end of period... $ 11.39 $ 10.95 $ 13.72 $ 11.93 $ 11.36
------------ ------------ ------------ ------------ -----------------
------------ ------------ ------------ ------------ -----------------
Total return.......................... 18.94% (11.22)% 17.77% 8.54% 17.50%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000).......................... $ 12,097 $ 15,874 $ 19,227 $ 16,993 $11,987
Ratio of expenses to average net
assets......................... 2.50%`D' 2.49%`D' 2.49%`D' 2.50%`D' 2.48%*`D'
Ratio of net investment income
(loss) to average net assets... (0.16)%`D' (0.46)%`D' (1.00)%`D' (0.48)%`D' 0.11%*`D'
Portfolio turnover rate.......... 197.71% 194.55% 154.18% 256.84% 250.85%
</TABLE>
- ------------
* Annualized
`D' The ratios of expenses and investment income/(loss) (net) to average net
assets are net of expenses voluntarily reimbursed by the Advisor,
Administrator and Distributor in the amount of .92%, .27%, .25%, 1.10% and
.56%, respectively.
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<PAGE>
<PAGE>
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HUDSON CAPITAL APPRECIATION FUND
REPORT OF COOPERS & LYBRAND, INDEPENDENT ACCOUNTANTS
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To the Stockholders and Board of Trustees of
Hudson Capital Appreciation Fund:
We have audited the accompanying statement of assets and liabilities of
Hudson Capital Appreciation Fund (the 'Fund') (the one series comprising The
Fahnestock Funds), including the statement of investments, as of December 31,
1995, and the related statement of operations for the year then ended, the
statement of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the three years in the period
then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits. The financial highlights for the year ended December 31, 1992, and for
the period March 5, 1991 (commencement of operations) to December 31, 1991, were
audited by other auditors, whose report, dated February 10, 1993, expressed an
unqualified opinion thereon.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Hudson Capital Appreciation Fund as of December 31, 1995, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the three years in the period then ended, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
February 6, 1996
New York, New York
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<PAGE>
<PAGE>
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[Graph]
<TABLE>
<CAPTION>
Hudson Hudson S&P 500
Inception With Load Without Load With Income
- --------- --------- ------------ -----------
<S> <C> <C> <C>
03/05/91 10,00.00 10,000.00 10,000.00
06/30/91 9,642.00 10,230.00 10,159.00
09/30/91 10,735.40 11,390.08 10,701.49
12/31/91 11,074.64 11,750.01 11,597.21
03/31/92 11,230.79 11,915.68 11,304.96
06/30/92 10,616.47 11,263.90 11,519.75
09/30/92 10,655.75 11,305.57 11,882.62
12/31/92 12,020.75 12,753.82 12,480.32
03/31/93 12,524.42 13,288.20 13,025.71
06/30/93 12,382.90 13,138.04 13,088.23
09/30/93 13,671.96 14,505.71 13,425.91
12/31/93 14,155.94 15,019.22 13,737.39
03/31/94 13,392.94 14,209.68 13,220.86
06/30/94 12,732.67 13,509.14 13,276.39
09/30/94 13,413.86 14,231.88 13,922.95
12/31/94 12,567.45 13,333.85 13,920.17
03/31/95 13,313.95 14,125.88 15,275.99
06/30/95 13,957.02 14,808.16 16,734.85
09/30/95 14,427.37 15,307.20 18,065.27
12/31/95 14,932.33 15,842.95 19,152.80
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN SINCE
COMMENCEMENT OF OPERATIONS
ONE YEAR MARCH 5, 1991
-------- ---------------------------------
<S> <C> <C>
Hudson Capital Appreciation Fund:
with sales load 13.59% 8.65%
without sales load 18.94% 10.00%
S&P 500 with income 37.58% 14.40%
</TABLE>
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HUDSON CAPITAL
APPRECIATION FUND
(A Series of The Fahnestock Funds)
110 Wall Street
New York, New York 10005
Telephone (800) 221-5588
INVESTMENT ADVISOR
Hudson Capital Advisors, Inc.
805 Third Avenue
New York, New York 10022
PRINCIPAL DISTRIBUTOR
Fahnestock & Co. Inc.
110 Wall Street
New York, New York 10005
CUSTODIAN AND TRANSFER AGENT
Investors Fiduciary Trust Company
127 West 10th Street
Kansas City, Missouri 64105
- -------------------------------------
This report is submitted for the
general information of the
shareholders of the Fund. It is not
authorized for distribution to
prospective investors in the Fund
unless preceded or accompanied by an
effective prospectus, which includes
information regarding the Fund's
objectives and policies, experience
of its management, marketability of
shares, and other information.
[LOGO]
ANNUAL REPORT
DECEMBER 31, 1995
[LOGO]
- -------------------------------------
- -------------------------------------
STATEMENT OF DIFFERENCES
------------------------
The dagger symbol shall be expressed as `D'
