<PAGE>
- --------------------------------------------------------------------------------
HUDSON CAPITAL
APPRECIATION FUND 125 Broad Street
(A Series of The Fahnestock Funds) New York, New York 10004
================================================================================
Dear Shareholder,
We are pleased to present the Semi-Annual Report of Hudson Capital Appreciation
Fund for the period ending June 30, 1998.
The Hudson Capital Appreciation Fund produced a total return for Class A Shares,
Class B Shares, and Class N Shares of 1.61%, 1.49%, and 1.61%, respectively, for
the first six months of 1998. This compared to a 16.8% increase for the Standard
& Poor's Composite Index of 500 stocks, and a 4.7% increase in the Russell 2000
index.
In recent years, small capitalization stocks have substantially underperformed
large capitalization stocks. The trend continued in 1998 and recently the
relative valuations of small versus large companies has reached 20 year lows on
several significant yardsticks such as price to sales and price to cash flow
ratios.
Accordingly, our value orientation has led to an overweighing of small cap
stocks in the portfolio. Fortunately statistics have shown that while small
company stocks may indeed underperform large market weighted indices during some
periods, over the long run, small cap stocks generally outperform large cap
stocks. Thus, while we are clearly disappointed with our six months results, we
remain optimistic that our strategy will ultimately lead to worthwhile returns.
We believe that the recent relative extremes of small versus large cap
valuations are unlikely to continue. We therefore continue to focus on well
managed companies of all sizes that represent attractive valuation and promising
prospects.
Sincerely,
/s/ James D. Gerson
James D. Gerson
Senior Vice President and
Portfolio Manager
* Past performance is no guarantee of future results. Investment return and
principal value will fluctuate so when shares are redeemed, they may be worth
more or less than the original cost. The S&P 500 is not adjusted to reflect
sales loads, expenses, or other fees that the SEC requires to be reflected in
a mutual fund's performance. Actual investments may not be made in an index.
Total returns for the period based on offering price for Class A and B Shares
were (2.95%) and (3.54%), respectively.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
HUDSON CAPITAL APPRECIATION FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998 (Unaudited)
================================================================================
<TABLE>
<CAPTION>
Shares Value
------ ------
<S> <C> <C>
COMMON STOCKS--96.1%
Agricultural--5.0%
30,000 AGCO Corp. $ 616,875
40,000 Agrium, Inc. 505,000
30,000 ConAgra, Inc. 950,625
----------
Total 2,072,500
----------
Building & Construction-- 11.3%
22,500 Genlyte Group, Inc. 596,250
10,000 Lone Star Industries, Inc. 770,625
30,000 NCI Building Systems, Inc. 1,732,500
35,400 Republic Group, Inc. 743,400
30,000 Southern Energy Homes, Inc. 294,375
20,000 Toll Brothers, Inc. 573,750
----------
Total 4,710,900
----------
Computer Products--6.3%
25,000 Electronic Data Systems Corp. 1,000,000
20,000(a) EMC Corporation 896,250
42,000(a) Phoenix Technologies Ltd. 535,500
20,000 Programers Paradise, Inc. 165,000
----------
Total 2,596,750
----------
Consumer Products--8.2%
30,000 Bush Industries 652,500
38,000 Fresh America Corp. 703,000
54,000(a) Helen of Troy Ltd. 1,188,000
30,000 ITI Technologies, Inc. 849,375
----------
Total 3,392,875
----------
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
<PAGE>
- --------------------------------------------------------------------------------
HUDSON CAPITAL APPRECIATION FUND
PORTFOLIO OF INVESTMENTS (Continued)
JUNE 30, 1998 (Unaudited)
================================================================================
<TABLE>
<CAPTION>
Shares Value
------ ------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
Electronics--15.2%
15,000 ASECO Corp. $ 60,938
25,000 Altera Corp. 739,062
10,000 Ciprico, Inc. 100,625
15,000 Hadco Corp. 349,688
37,500(a) IFR Systems, Inc. 675,000
20,000 Innovex Corp. 261,250
15,000 PCD Inc. 256,875
20,000 Raychem Corp. 591,250
50,000(a) Speedfam International, Inc. 921,875
40,000 Storage Technology Corp. 1,735,000
2,100 Unitrode Corp. 24,150
40,000 Zygo Corp. 592,500
-----------
Total 6,308,213
-----------
Financial--6.0%
40,000 TIG Holdings. 920,000
12,000 Travelers Group, Inc. 727,500
20,000 Travelers Property and Casualty, Corp. 857,500
-----------
Total 2,505,000
-----------
Industrial Products--16.0%
12,000 Blount International, Inc. - Class A 342,000
50,000 Checkpoint Systems, Inc. 706,250
30,000 DT Industries, Inc. 727,500
38,500 ESCO Electronics Corp. 731,500
16,000(a) Esterline Technologies Corp. 329,000
33,000 Gundle/ SLT Environmental, Inc. 148,500
17,100(a) Jacobs Engineering Group, Inc. 549,337
40,000 Mark IV Industries, Inc. 865,000
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
<PAGE>
- --------------------------------------------------------------------------------
HUDSON CAPITAL APPRECIATION FUND
PORTFOLIO OF INVESTMENTS (Continued)
JUNE 30, 1998 (Unaudited)
================================================================================
<TABLE>
<CAPTION>
Shares Value
------ ------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
Industrial Products (Continued)
5,000 Park Ohio Industries, Inc. $ 92,500
73,811(a) Supreme Industries, Inc. - Class A 904,185
15,000 Titan International, Inc. 255,000
50,000 Valmont Industries, Inc. 998,437
-----------
Total 6,649,209
-----------
Oil, Energy & Gas Exploration--8.4%
40,000 Ceanic Corp. 775,000
24,000 Global Industries, Inc. 405,000
17,500(a) Hvide Marine, Inc. 237,345
31,700(a) Louis Dreyfus Natural Gas Corp. 600,319
35,000 Occidental Petrolium Corp. 945,000
36,000 Southern Mineral Corp. 123,750
12,000 Tidewater, Inc. 396,000
-----------
Total 3,482,414
-----------
Pharmaceuticals & Health--6.0%
12,000 Amgen, Inc. 784,500
20,000 Coherent, Inc. 686,250
31,823(a) New Brunswick Scientific, Inc. 274,473
30,000 VWR Scientific Products Corp. 738,750
-----------
Total 2,483,973
-----------
Restaurants--1.9%
26,000(a) Garden Fresh Restaurants Corp. 468,000
22,500(a) O'Charleys, Inc. 337,500
-----------
Total 805,500
-----------
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
<PAGE>
- --------------------------------------------------------------------------------
HUDSON CAPITAL APPRECIATION FUND
PORTFOLIO OF INVESTMENTS (Continued)
JUNE 30, 1998 (Unaudited)
================================================================================
<TABLE>
<CAPTION>
Shares Value
------ ------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
Retail--6.4%
50,000 Corporate Express, Inc. $ 634,375
15,000 Regis Corp. Minnesota 443,437
15,000(a) Travis Boats & Motors, Inc. 367,500
20,000 Wal-Mart Stores, Inc. 1,215,000
-----------
Total 2,660,312
-----------
Transportation--5.4%
20,000 AMR Corp. 1,665,000
20,000(a) Celadon Group, Inc. 380,000
32,000(a) Simon Transportation Service, Inc. 214,000
-----------
Total 2,259,000
-----------
Total Common Stocks
(identified cost $34,254,650)(b) $39,926,646
===========
</TABLE>
- -----------
(a) Non-income producing security.
(b) The cost of investments for federal tax purposes amounts to $34,254,650. The
net unrealized appreciation of investments on a federal tax basis amounts to
$5,671,996 which is comprised of $9,409,065 appreciation and $3,737,069
depreciation at June 30, 1998.
Note: The categories of investments are shown as a percentage of net assets
($41,563,436) at June30, 1998.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
<PAGE>
- --------------------------------------------------------------------------------
HUDSON CAPITAL APPRECIATION FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998 (Unaudited)
================================================================================
<TABLE>
<S> <C>
ASSETS:
Total investments in securities, at value (cost $34,254,650) (Note 1)..... $39,926,646
Cash...................................................................... 1,874,153
Income receivable......................................................... 18,830
Receivable for Fund shares sold........................................... 172,167
-----------
Total assets............................................................ 41,991,796
-----------
LIABILITIES:
Payable for Fund shares redeemed.......................................... 48,813
Accrued expenses.......................................................... 379,547
-----------
Total liabilities....................................................... 428,360
-----------
Net Assets for 2,529,743 shares of beneficial interest understanding.... $41,563,436
===========
NET ASSETS CONSIST OF:
Paid in capital........................................................... $34,555,016
Net unrealized appreciation of investments................................ 5,671,996
Accumulated net investment loss........................................... (659,366)
Accumulated net realized gain on investments.............................. 1,995,790
-----------
Net Assets............................................................ $41,563,436
===========
Class A Shares:
Net Asset Value Per Share ($32,745,818 / 1,992,167 shares outstanding).. $ 16.44
-----------
Offering Price Per Share (100/95.50 of $16.44)*......................... $ 17.21
-----------
Redemption Proceeds Per Share........................................... $ 16.44
-----------
Class B Shares:
Net Asset Value Per Share ($3,218,739 / 196,908 shares outstanding)..... $ 16.35
-----------
Offering Price Per Share................................................ $ 16.35
-----------
Redemption Proceeds Per Share........................................... $ 16.35
-----------
Class N Shares:
Net Asset Value Per Share ($5,598,879 / 340,668 shares outstanding)..... $ 16.44
-----------
Offering Price Per Share................................................ $ 16.44
-----------
Redemption Proceeds Per Share........................................... $ 16.44
-----------
</TABLE>
- -----------
* See "How to Buy Shares" in the Prospectus
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
<PAGE>
- --------------------------------------------------------------------------------
HUDSON CAPITAL APPRECIATION FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998 (Unaudited)
================================================================================
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest................................................ $ 10,394
Dividends............................................... 93,090
----------
Total investment income.............................. 103,484
----------
Expenses: (Notes 2 and 3)
Investment management fee............................... 183,950
Distribution expenses Class A Shares.................... 34,563
Distribution expenses Class B Shares.................... 14,235
Distribution expenses Class N Shares.................... 7,489
Legal, compliance and filing fees....................... 76,981
Custodian fee........................................... 2,702
Shareholder servicing and related shareholder expenses.. 81,595
Audit and accounting.................................... 34,870
Trustees' fees and expenses............................. 9,000
Other................................................... 26,904
----------
Total expenses....................................... 472,289
----------
Investment management fee waived........................ (57,208)
----------
Net expenses............................................ 415,081
----------
Net investment loss..................................... (311,597)
----------
Realized and Unrealized Gain (Loss) on Investments:
Net realized gain on investments............................ 1,726,032
Net change in unrealized appreciation of investments........ (821,503)
----------
Net realized and unrealized gain on investments......... 904,529
----------
Net increase in net assets from operations.................. $ 592,932
==========
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
<PAGE>
- --------------------------------------------------------------------------------
HUDSON CAPITAL APPRECIATION FUND
STATEMENT OF CHANGES IN NET ASSETS
================================================================================
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
June 30, 1998 December 31, 1997
------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Net investment loss........................................... $ (311,597) $ (347,769)
Net realized gain on investments.............................. 1,726,032 4,615,862
Unrealized appreciation (depreciation) of investments......... (821,503) 3,300,887
----------- -----------
Net increase in net assets from operations.................. 592,932 7,568,980
----------- -----------
Distributions to shareholders from net realized gains:
Class A Shares.............................................. -- (3,480,078)
Class B Shares.............................................. -- (233,027)
Class N Shares.............................................. -- (649,346)
----------- -----------
Total distributions to shareholders from net realized gains... -- (4,362,451)
----------- -----------
Share transactions--net (Note 4).............................. 3,674,122 18,419,133
----------- -----------
Net increase in net assets.................................. 4,267,054 21,625,662
Net Assets:
Beginning of year........................................... 37,296,382 15,670,720
----------- -----------
End of year................................................. $41,563,436 $37,296,382
=========== ===========
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
<PAGE>
- --------------------------------------------------------------------------------
HUDSON CAPITAL APPRECIATION FUND
NOTES TO FINANCIAL STATEMENTS
================================================================================
1. Organization and Summary of Significant 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. If no sale has occurred, or if the
security is traded only in the over-the-counter market, it will normally be
valued at its current bid price. Short-term 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) Securities Transactions and Interest Income
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.
d) 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.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
HUDSON CAPITAL APPRECIATION FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
e) Other
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 revenues
and expenses during the reporting period. Actual results could differ from
those estimates.
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 0.75% 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.
Effective February 1, 1997, Class A Shares changed its expense limit from 2.5%
to 2.0%.
The Advisor has voluntarily agreed to limit expenses applicable to Class B
Shares to 2.5% and to 2.0% with respect to Class N Shares. During the period
ended June 30, 1998, the Fund incurred investment management fees of $183,950.
However, the Advisor has waived $57,208 of expenses in order to comply with the
agreement as stated above.
In acting as Distributor during the year, Fahnestock & Co. Inc. earned $7,000 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.
At June 30, 1998, affiliated Trustees owned 19,744 shares (0.78%) of the Fund.
3. Distribution Plan.
Pursuant to Rule 12b-1 under the Investment Company Act of 1940, the Trust has
adopted Distribution Plans (the "Plans") under which it may reimburse Fahnestock
& Co. Inc. (the "Distributor") for expenses relating to the distribution of
Class A Shares, Class B Shares, and Class N Shares at annual rates not to exceed
a percentage of average daily net assets according to the schedule listed below.
Distribution expenses incurred in a year in excess of the amounts listed below
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
HUDSON CAPITAL APPRECIATION FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
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.
Percentage of Average Daily
Share Class Name Net Assets of the Class
- ---------------- ---------------------------
Class A Shares....... 0.50%
Class B Shares....... 1.00%
Class N Shares....... 0.25%
4. Transactions in Shares of Beneficial Interest.
At June 30, 1998, the Fund had authorized an unlimited number of shares of
beneficial interest ($0.01 par value). Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 1998 December 31, 1997
--------------------- ----------------------
Shares Amount Shares Amount
------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Class A Shares
Sold..................................... 278,509 $ 4,595,154 643,522 $10,576,390
Issued on reinvestment of dividends and
distributions.......................... -- -- 215,020 3,317,928
Redeemed................................. (99,188) (1,645,426) (251,609) (4,108,076)
------- ----------- -------- -----------
Net increase (decrease) in
Class A Shares..................... 179,321 $ 2,949,728 606,933 $ 9,786,242
======= =========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended Period Ended
June 30, 1998 December 31, 1997(a)
--------------------- ---------------------
Shares Amount Shares Amount
------- ----------- ------- -----------
<S> <C> <C> <C> <C>
Class B Shares
Sold..................................... 79,002 $ 1,317,986 118,105 $ 2,060,818
Issued on reinvestment of dividends and
distributions.......................... -- -- 14,954 229,987
Redeemed................................. (14,023) (231,372) (1,130) (19,117)
------- ----------- ------- -----------
Net increase (decrease) in
Class B Shares..................... 64,979 $ 1,086,614 131,929 $ 2,271,688
======= =========== ======= ===========
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
HUDSON CAPITAL APPRECIATION FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
<TABLE>
<CAPTION>
Six Months Ended Period Ended
June 30, 1998 December 31, 1997(a)
--------------------- -----------------------
Shares Amount Shares Amount
------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Class N Shares
Sold......................................................................... 64,655 $ 1,054,407 386,089 $ 6,937,229
Issued on reinvestment of dividends and
distributions.............................................................. -- -- 41,696 642,949
Redeemed..................................................................... (85,370) (1,416,627) (66,402) (1,218,975)
------- ----------- --------- -----------
Net increase (decrease) in
Class N Shares........................................................... (20,715) $ (362,220) 361,383 $ 6,361,203
======= =========== ========= ===========
Net increase (decrease) in Fund Share
transactions............................................................. 223,585 $ 3,674,122 1,100,245 $ 8,419,133
======= =========== ========= ===========
</TABLE>
- -----------
(a) Reflects operations from April 17, 1997 (date of initial public offering) to
December 31, 1997.
5. Investment Transactions.
Purchases and sales of investment securities, other than short-term investments,
totaled $9,168,345 and $7,218,558, respectively, Fahnestock & Co. Inc. did not
earn any commissions for executing securities transactions of the Fund during
the period ended June 30, 1998.
6. Year 2000.
Similar to other financial organizations, the Fund could be adversely affected
if the computer systems used by the Fund's service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. The Fund's Advisor and Administrator are taking measures that they
believe are reasonably designed to address the Year 2000 issue with respect to
computer systems that they use and to obtain reasonable assurances that
comparable steps are being taken by each of the Fund's other service providers.
At this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact to the Fund.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
HUDSON CAPITAL APPRECIATION FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
7. Financial Highlights.
Class A Shares
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months
Ended
June 30, Year Ended December 31,
---------------------------------------------------------------------
1998 1997 1996 1995 1994 1993
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period............. $ 16.18 $ 12.99 $ 11.39 $ 10.95 $ 13.72 $ 11.93
Income from investment operations
Net investment income (loss)..................... (0.13)** (0.21)** (0.10) (0.03) (0.06) (0.13)
Net realized and unrealized gain (loss)
on investments................................. 0.39 5.67 4.72 2.09 (1.48) 2.25
------- ------- ------- ------- ------- -------
Total income (loss) from
investment operations.......................... 0.26 5.46 4.62 2.06 (1.54) 2.12
------- ------- ------- ------- ------- -------
Less dividends paid to shareholders:
Dividends paid from net realized gain
on investments............................... -- (2.27) (3.02) (1.62) (1.23) (0.33)
------- ------- ------- ------- ------- -------
Net asset value, end of period................... $ 16.44 $ 16.18 $ 12.99 $ 11.39 $ 10.95 $ 13.72
======= ======= ======= ======= ======= =======
Total return....................................... 1.61% 42.88% 40.68% 18.94% (11.22%) 17.77%
Ratios/Supplemental Data
Net assets, end of period (000 omitted).......... $32,746 $29,325 $15,671 $12,097 $15,874 $19,227
Ratio of expenses to average net assets.......... 2.00%+* 2.03%+ 2.50%+ 2.50%+ 2.49%+ 2.49%+
Ratio of net investment income (loss) to
average net assets............................. (1.51%)+* (1.38%)+ (1.13%)+ (0.16%)+ (0.46%)+ (1.00%)+
Average commission rate paid++................... $0.0600 $0.0600 $0.0597 -- -- --
Portfolio turnover rate.......................... 18.04% 50.46% 85.37% 197.71% 194.55% 154.18%
</TABLE>
- -----------
* Annualized
** Per share information presented is based on the average number of shares
outstanding.
+ The ratios of expenses and net investment income/(loss) to average net assets
are net of expenses voluntarily reimbursed by the Advisor, Administrator and
Distributor in the amount of 0.28%, 1.04%, 1.00%, 0.92%, 0.27%, and 0.25%,
respectively.
++ For the fiscal year beginning on or after September 1, 1995, the Fund is
required to disclose its average commission rate per share for purchases or
sales of equity securities.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
HUDSON CAPITAL APPRECIATION FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
Financial Highlights.
Class B Shares
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Period Ended
Ended June 30, December 31,
1998 1997*
-------------- ------------
<S> <C> <C>
Net asset value, beginning of period...................... $ 16.11 $ 13.54
Income from investment operations
Net investment income (loss).............................. (0.16)** (0.09)**
Net realized and unrealized gain (loss)
on investments.......................................... 0.40 4.93
------- -------
Total income (loss) from
investment operations............................... 0.24 4.84
------- -------
Less dividends paid to shareholders:
Dividends paid from net realized gain
on investments.......................................... -- (2.27)
------- -------
Net asset value, end of period............................ $ 16.35 $ 16.11
======= =======
Total return................................................ 1.49% 36.54%
Ratios/Supplemental Data
Net assets, end of period (000 omitted)................... $ 3,219 $ 2,125
Ratio of expenses to average net assets................... 2.50%+*** 2.50%+***
Ratio of net investment income (loss)
to average net assets................................... (1.82%)+*** (0.77%)+***
Average commission rate paid.............................. $0.0600 $0.0600
Portfolio turnover rate................................... 18.04% 50.46%
</TABLE>
- -----------
* Reflects operations from April 17, 1997 (date of initial public offering) to
December 31, 1997.
** Per share information presented is based on the average number of shares
outstanding.
*** Annualized
+ The ratios of expenses and net investment income/(loss) to average net
assets are net of expenses voluntarily reimbursed by the Advisor in the
amount of 0.28% and 1.04%, respectively.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
HUDSON CAPITAL APPRECIATION FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
Financial Highlights.
Class N Shares
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Period Ended
Ended June 30, December 31,
1998 1997*
-------------- ------------
<S> <C> <C>
Net asset value, beginning of period.................. $ 16.18 $ 13.54
Income from investment operations
Net investment income (loss).......................... (0.13)** (0.18)**
Net realized and unrealized gain (loss)
on investments...................................... 0.39 5.59
------- -------
Total income (loss) from investment operations.... 0.26 5.41
------- -------
Less dividends paid to shareholders:
Dividends paid from net realized gain
on investments...................................... -- (2.77)
------- -------
Net asset value, end of period........................ $ 16.44 $ 16.18
======= =======
Total return............................................ 1.61% 37.09%
Ratios/Supplemental Data
Net assets, end of period (000 omitted)............... $ 5,599 $ 5,846
Ratio of expenses to average net assets............... 2.00%+*** 2.00%+***
Ratio of net investment income (loss) to
average net assets.................................. (1.51%)+*** (1.48%)+***
Average commission rate paid.......................... $0.0600 $0.0600
Portfolio turnover rate............................... 18.04% 50.46%
</TABLE>
- -----------
* Reflects operations from April 17, 1997 (date of initial public offering) to
December 31, 1997.
** Per share information presented is based on the average number of shares
outstanding.
*** Annualized
+ The ratios of expenses and net investment income/(loss) to average net
assets are net of expenses voluntarily reimbursed by the Advisor in the
amount of 0.28% and 1.04%, respectively.
- --------------------------------------------------------------------------------
<PAGE>
================================================================================
Hudson Capital
Appreciation Fund HUDSON CAPITAL
(A Series of The Fahnestock Funds) APPRECIATION
125 Broad Street FUND
New York, New York 10004
Telephone (800) 221-5588
Investment Advisor
- ------------------
Hudson Capital Advisors, Inc.
805 Third Avenue
New York, New York 10022 Class A Shares
Class B Shares
Principal Distributor Class N Shares
- ---------------------
Fahnestock & Co. Inc.
125 Broad Street
New York, New York 10004
Custodian and Transfer Agent
- ----------------------------
Investors Fiduciary Trust Company
1004 Baltimore Semi-Annual Report
Kansas City, Missouri 64105 June 30, 1998
- ---------------------------------------------
This report is submitted for the general
information of the shareholders of the Fund.
It is not authorized for distribution to FAHNESTOCK
prospective investors in the Fund unless ----------------
preceded or accompanied by an effective ESTABLISHED 1881
prospectus, which includes information ----------------
regarding the Fund's objectives and policies, Distributor
experience of its management, marketability
of shares, and other information.
================================================================================
G02329-02 (8/98)
