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<S> <C>
HUDSON CAPITAL
APPRECIATION FUND 110 Wall Street
(A Series of The Fahnestock Funds) New York, New York 10005
</TABLE>
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Dear Shareholder:
We are pleased to present the Semi-Annual Report of Hudson Capital Appreciation
Fund for the period ending June 30, 1996.
PERFORMANCE COMPARISON
The Hudson Capital Appreciation Fund's net asset value per share increased from
$11.39 on December 31, 1995 to $13.60 on June 30, 1996, an increase of 19.4%
compared to a 11.1% increase for the Standard & Poors Composite Index of 500
stocks and compared to an increase of 10.5% for the NASDAQ Index. Since the
fund's inception on March 5, 1991, it has increased 82.9% compared to 102.4% for
the S&P 500.
INVESTMENT STRATEGY
The fund's strategy as described in our year-end report of holding a balanced
portfolio of small capitalization stocks and large capitalization stocks was
well rewarded during the first six months of 1996. The smaller stocks
substantially outperformed the market while the larger stocks performed in line
with broader market averages. We believe that an investment in well-managed
under-recognized companies whose stocks can be purchased at reasonable prices
will prove successful over time.
FACTORS AFFECTING PORTFOLIO PERFORMANCE
Market volatility has substantially increased in recent months and can be
expected to continue as speculation on the direction of interest rates, overall
growth in the economy and the upcoming national election affect the outlook for
the stock market. An added factor affecting market performance would be the
impact of new funds coming into the stock market via mutual fund purchases,
which have been a strong underpinning to the market for the past 12 months.
STOCK SELECTION
During the balance of 1996, out stock selection shall continue to focus on the
identification of undervalued companies whose stock prices do not reflect
fundamental trends such as growth in sales, earnings and strong industry
momentum due to technological change and innovations. We do not attempt to
anticipate market direction and so will remain relatively fully invested at all
times.
We appreciate your confidence as we serve your long term investment needs.
Very truly yours,
/s/ ALBERT G. LOWENTHAL
Albert G. Lowenthal
Chairman of the Board
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HUDSON CAPITAL APPRECIATION FUND
STATEMENT OF INVESTMENTS
JUNE 30, 1996
(UNAUDITED)
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<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- --------- -----------
<C> <S> <C>
COMMON STOCKS -- 92.71%
CHEMICAL COMPANIES -- 8.55%
15,000 ADCO Technologies $ 142,500
12,000 ARCO Chemical Company 624,000
20,000 Arcadian Corporation 395,000
-----------
1,161,500
-----------
COMMUNICATIONS -- 6.86%
15,000 Air Express International Corporation 423,750
10,000 Dynatech Corporation* 325,000
15,000 IFR Systems Inc.* 183,750
-----------
932,500
-----------
COMPUTER PRODUCTS -- 11.82%
5,000 Asyst Technologies, Inc.* 93,750
30,000 EMC Corporation* 558,750
15,000 Phoenix Technologies Ltd.* 251,250
5,000 Pomeroy Computer Service* 75,000
15,000 Teradyne, Inc.* 258,750
6,900 Xerox Corporation 369,150
-----------
1,606,650
-----------
CONSUMER PRODUCTS -- 13.39%
19,000 ConAgra, Inc. 862,125
15,000 Garden Fresh Restaurant* 163,125
20,000 Helen of Troy Ltd.* 570,000
20,000 Mackie Designs, Inc.* 225,000
-----------
1,820,250
-----------
</TABLE>
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The accompanying notes are an integral part of the financial statements.
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<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- --------- -----------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
FINANCIAL -- 5.02%
8,000 State Street Boston $ 408,000
6,000 Travelers Group Inc. 273,750
-----------
681,750
-----------
INDUSTRIAL PRODUCTS -- 18.88%
10,000 AGCO Corporation 277,500
17,600 Aeroflex, Inc. 107,800
6,000 Blount International, Ltd (Class A) 189,000
22,500 Genlyte Group, Inc.* 174,375
13,000 Graco Inc. 263,250
20,000 NL Industries, Inc.* 245,000
18,375 New Brunswick Scientific Co., Inc. 135,516
25,000 Speedfam International, Inc.* 406,250
33,000 Supreme Industries, Inc.* 257,812
15,000 Valmount Industries, Inc. 510,000
-----------
2,566,503
-----------
OIL, ENERGY & GAS EXPLORATION -- 8.63%
15,000 Forcenergy Inc.* 283,125
9,000 Petroleum Geo-Services A/S* 255,375
27,333 Southern Union Company* 601,326
5,000 Unit Corporation* 33,125
-----------
1,172,951
-----------
</TABLE>
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The accompanying notes are an integral part of the financial statements.
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HUDSON CAPITAL APPRECIATION FUND
STATEMENT OF INVESTMENTS (CONTINUED)
JUNE 30, 1996
(UNAUDITED)
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<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- --------- -----------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
PHARMACEUTICALS & HEALTH -- 6.78%
14,000 McKesson Corporation $ 666,750
15,000 Rehabcare Group, Inc.* 255,000
-----------
921,750
-----------
RETAIL -- 6.54%
2,700 Dairy Mart Convenience Stores Inc.* 14,175
40,000 Sirena Apparel Group, Inc* 125,000
30,000 Uni-Marts, Inc. 241,875
20,000 Wal-Mart Stores 507,500
-----------
888,550
-----------
TRANSPORTATION -- 6.24%
12,000 Matlack Systems, Inc.* 102,000
10,000 P.A.M. Transportation Services* 65,000
20,000 Simon Transportation Services* 250,000
10,000 Swift Transportation Co. Inc.* 191,250
15,000 Titan Wheel International, Inc. 240,000
-----------
848,250
-----------
TOTAL COMMON STOCKS (Cost $10,787,155) 12,600,654
-----------
</TABLE>
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The accompanying notes are an integral part of the financial statements.
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<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
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<C> <S> <C>
U.S. GOVERNMENT OBLIGATIONS -- 4.93%
$675,000 U.S. Treasury Bill, due 08/22/96 $ 670,078
-----------
TOTAL U.S. GOVERNMENT OBLIGATIONS (Cost $670,078) 670,078
-----------
SHORT-TERM INVESTMENTS -- 4.43%
602,000 Money Market Fiduciary Fund, on demand 602,000
-----------
TOTAL SHORT-TERM INVESTMENTS (Cost $602,000) 602,000
-----------
TOTAL INVESTMENTS -- 102.07% (Cost $12,059,233`D') 13,872,732
LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS -- 2.07% (281,882)
-----------
NET ASSETS -- 100.00% $13,590,850
-----------
-----------
</TABLE>
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* Non-income producing.
`D' Aggregate cost for Federal income tax purposes is $12,059,233. Aggregate
unrealized appreciation and depreciation of investments are $1,980,007 and
$166,508.
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The accompanying notes are an integral part of the financial statements.
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HUDSON CAPITAL APPRECIATION FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1996
(UNAUDITED)
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<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value (Cost $12,059,233)(Note 1).................................. $13,872,732
Cash............................................................................................ 826
Receivable for fund shares sold................................................................. 51,688
Accrued interest receivable..................................................................... 201
Dividends receivable............................................................................ 11,246
-----------
Total assets............................................................................... 13,936,693
-----------
LIABILITIES:
Payable for securities purchased................................................................ 102,685
Other payables and accrued expenses............................................................. 42,122
Due to Affiliates............................................................................... 201,036
-----------
Total liabilities.......................................................................... 345,843
-----------
Net assets...................................................................................... $13,590,850
-----------
-----------
Shares of beneficial interest outstanding (unlimited number of $.01 par value shares
authorized).................................................................................... 999,164
-----------
-----------
Net asset value and redemption price per share ($13,590,850/999,164)............................ $ 13.60
-----------
-----------
Maximum offering price per share (NAV/(1-maximum sales charge))................................. $ 14.24
-----------
-----------
NET ASSETS CONSIST OF:
Paid in capital................................................................................. $ 9,951,989
Net accumulated investment income (loss)........................................................ (60,502)
Undistributed net realized gains on investments................................................. 1,885,864
Net unrealized appreciation of investments...................................................... 1,813,499
-----------
Net assets................................................................................. $13,590,850
-----------
-----------
</TABLE>
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The accompanying notes are an integral part of the financial statements.
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HUDSON CAPITAL APPRECIATION FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
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INVESTMENT INCOME
<TABLE>
<S> <C>
Income:
Interest......................................................................................... $ 39,220
Dividends........................................................................................ 58,893
----------
Total income................................................................................ 98,113
----------
Expenses: (Notes 2 and 3)
Investment management fee........................................................................ 63,521
Distribution expenses............................................................................ 31,760
Legal, compliance and filing fees................................................................ 44,415
Custodian fee.................................................................................... 4,567
Shareholder servicing and related shareholder expenses........................................... 42,983
Audit and accounting............................................................................. 16,900
Amortization of organizational expenses.......................................................... 4,085
Trustees' fees and expenses...................................................................... 10,000
Other............................................................................................ 3,905
----------
Total expenses.............................................................................. 222,136
----------
Fees waived...................................................................................... (63,521)
Net expenses..................................................................................... 158,615
----------
Net investment loss.............................................................................. (60,502)
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on investments...................................................................... 1,885,864
Change in unrealized appreciation of investments...................................................... 415,118
----------
Net gain on investments.......................................................................... 2,300,982
----------
Net increase in net assets from operations............................................................ $2,240,480
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</TABLE>
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The accompanying notes are an integral part of the financial statements.
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HUDSON CAPITAL APPRECIATION FUND
STATEMENT OF CHANGES IN NET ASSETS
(UNAUDITED)
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<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 1996 DECEMBER 31, 1995
------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Investment income (loss) net.................................................. $ (60,502) $ (22,887)
Net realized gain on investments.............................................. 1,885,864 1,459,180
Unrealized appreciation of investments........................................ 415,118 1,073,821
------------- -----------------
Net increase in net assets resulting from operations..................... 2,240,480 2,510,114
Distributions to shareholders from net realized gains......................... -- (1,442,286)
Share transactions -- net (Note 4)............................................ (746,855) (4,844,459)
------------- -----------------
Net increase (decrease) in net assets.................................... 1,493,625 (3,776,631)
Net Assets:
Beginning of period...................................................... 12,097,225 15,873,856
------------- -----------------
End of period............................................................ $ 13,590,850 $12,097,225
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</TABLE>
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The accompanying notes are an integral part of the financial statements.
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HUDSON CAPITAL APPRECIATION FUND
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
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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) USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that effect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
increases and decreases in net assets from operations during the
reporting period. Actual results could differ from those estimates.
e) 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.
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HUDSON CAPITAL APPRECIATION FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
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f) 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.
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 period ended June 30, 1996, the
Fund incurred investment management fees of $63,521, all of which was waived by
the Advisor in order to comply with the agreement as stated above.
In acting as Distributor during the period, Fahnestock & Co. Inc. earned $21,000
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 $750 per meeting attended.
3. DISTRIBUTION PLAN.
Pursuant to Rule 12b-1 under the Investment Company Act of 1940, the Trust has
adopted a Distribution Plan (the 'Plan') under which it may reimburse Fahnestock
& Co. Inc. (the 'Distributor')
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for expenses relating to the distribution of Fund shares at an annual rate not
to exceed .50 of 1% of the Fund's average daily net assets. Distribution
expenses incurred in a year in excess of .50 of 1% of the Fund's average daily
net assets may be carried forward and sought to be reimbursed in future years.
Interest at the prevailing broker loan rate may be charged to the Fund on any
expenses carried forward and those expenses and interest will be reflected as
current expenses on the Fund's statement of operations for the year in which
they become accounting liabilities.
4. TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST.
At June 30, 1996, the Fund had an unlimited authorized number of shares of
beneficial interest ($.01 par value). Transactions were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1996 DECEMBER 31, 1995
----------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
-------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Sold........................................... 92,173 $ 1,183,624 141,457 $ 1,649,479
Issued on reinvestment of dividends and
distributions................................ -- -- 125,192 1,413,414
Redeemed....................................... (155,272) (1,930,479) (654,267) (7,907,352)
-------- ----------- -------- -----------
Net increase (decrease)................... (63,099) $ (746,855) (387,618) $(4,844,459)
-------- ----------- -------- -----------
-------- ----------- -------- -----------
</TABLE>
5. INVESTMENT TRANSACTIONS.
Purchases and sales of investment securities, other than short-term investments,
totalled $6,814,253 and $7,140,324, respectively. Fahnestock & Co. Inc. earned
commissions of approximately $3,000 for executing securities transactions of the
Fund during the period ended June 30, 1996.
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HUDSON CAPITAL APPRECIATION FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
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6. FINANCIAL HIGHLIGHTS. (for a share outstanding throughout each period)
<TABLE>
<CAPTION>
MARCH 5, 1991
(COMMENCEMENT
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OF OPERATIONS) TO
SIX MONTHS ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
JUNE 30, 1996 1995 1994 1993 1992 1991
----------------- ------------ ------------ ------------ ------------ -----------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period................ $ 11.39 $ 10.95 $ 13.72 $ 11.93 $ 11.36 $ 10.00
Income from investment
operations:
Net investment
income/(loss) (net)...... (0.06) (0.03) (0.06) (0.13) (0.05) .01
Net realized and unrealized
gains (losses) on
investments.............. 2.27 2.09 (1.48) 2.25 1.02 1.74
-------- ------------ ------------ ------------ ------------ --------
Total income from
investment
operations........... 2.21 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................... $ 13.60 $ 11.39 $ 10.95 $ 13.72 $ 11.93 $ 11.36
-------- ------------ ------------ ------------ ------------ --------
-------- ------------ ------------ ------------ ------------ --------
Total return................... 19.40% 18.94% (11.22)% 17.77% 8.54% 17.50%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000).................... $13,591 $ 12,097 $ 15,874 $ 19,227 $ 16,993 $11,987
Ratio of expenses to
average net assets....... 2.50%*`D' 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............... (0.95)%*`D' (0.16)%`D' (0.46)%`D' (1.00)%`D' (0.48)%`D' 0.11%*`D'
Portfolio turnover rate.... 54.90% 197.71% 194.55% 154.18% 256.84% 250.85%
Average commission rate
paid (per share)......... .06`D'`D' -- -- -- -- --
</TABLE>
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* 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 1.00%, .92%, .27%, .25%,
1.10% and .56%, respectively.
`D'`D' Required by regulations issued in 1995.
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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
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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.
HUDSON CAPITAL
APPRECIATION
FUND
SEMI-ANNUAL
REPORT
JUNE 30, 1996
(UNAUDITED)
[LOGO]
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[STATEMENT OF DIFFERENCES]
The dagger symbol shall be expressed as 'D'
