<PAGE>
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HUDSON CAPITAL
APPRECIATION FUND
(A Series of The Fahnestock Funds) 125 Broad Street
New York, New York 10004
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- -------------------------------------------------------------------------------
Dear Shareholders:
Recently the Board of Trustees of the Hudson Capital Appreciation Fund ("the
Fund") has been reviewing the costs associated with operating the Fund as a
stand-alone portfolio, based on its regular and necessary operating expenses.
The Board has concluded and is recommending to you that the Fund be merged
with and into the Ivy U.S. Emerging Growth Fund. Information on this
recommendation is set forth in the proxy statement soliciting your support. We
urge you to review this material carefully.
The first six months of 1999 saw a continuation of many of the same stock
market trends witnessed over the last few years. These trends included the
outperformance of large vs. small companies and very high prices for selected
"growth" companies such as the new crop of internet and communications stocks.
Nevertheless, the second quarter was far better than the first quarter for
smaller companies and for our portfolio. For the six months as a whole our net
asset value increased 7.2% vs. 8.5% for the Russell 2000 Index and 11.7% for
the S&P Index./1/ We remain optimistic that our strategy, which targets long
term value, will be rewarding.
Very truly yours,
/s/ James Gerson
Senior Vice President
/1/The Russell 2000 measures the performance of the 2,000 smallest companies
in the Russell 3,000 index. The S&P 500 is a capitalization-weighted index of
500 stocks designed to measure the performance of the broad domestic economy
through changes in the aggregate market value of 500 stocks representing all
major industries. These indices are unmanaged and actual investment cannot be
made in an index. These indices are not adjusted to reflect sales loads,
expenses or other fees the SEC requires to be reflected in the Fund's
performance.
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1
<PAGE>
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HUDSON CAPITAL APPRECIATION FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 1999 (Unaudited)
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<TABLE>
<CAPTION>
Shares Value
------ -----
<C> <S> <C>
COMMON STOCKS--101.5%
Agriculture--3.4%
40,000 Agrium, Inc. $ 352,500
30,000 Valmont Industries, Inc. 510,936
-----------
Total 863,436
-----------
Building & Construction--6.7%
22,500(a) Genlyte Group, Inc. 504,844
35,400 Republic Group, Inc. 637,200
25,000(a) Southern Energy Homes, Inc. 132,812
20,000(a) Toll Brothers, Inc. 428,750
-----------
Total 1,703,606
-----------
Chemicals--3.1%
30,000 Cambrex Corp. 787,500
-----------
Communications--0.6%
32,500(a) IFR Systems, Inc. 154,375
-----------
Computer Products--14.8%
50,000 Computer Horizons Corp. 690,625
25,000 HNC Software, Inc. 770,313
10,000 International Business Machines 1,292,500
42,000(a) Phoenix Technologies Ltd. 750,750
20,000 Programmers Paradise, Inc. 245,000
-----------
Total 3,749,188
-----------
Consumer Products--11.9%
24,800 Bush Industries 412,300
54,000(a) Helen of Troy Ltd. 968,625
25,000(a) ITI Technologies, Inc. 565,625
2,000(a) Meade Instruments Corp. 34,500
</TABLE>
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The accompanying notes are an integral part of the financial statements.
2
<PAGE>
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HUDSON CAPITAL APPRECIATION FUND
PORTFOLIO OF INVESTMENTS (Continued)
JUNE 30, 1999 (Unaudited)
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<TABLE>
<CAPTION>
Shares Value
------ -----
<C> <S> <C>
COMMON STOCKS (Continued)
Consumer Products (Continued)
22,500 Regis Corp. Minnesota $ 431,719
50,000(a) Rexall Sundown Inc. 609,375
-----------
Total 3,022,144
-----------
Distributors--2.6%
48,000(a) Fresh America Corp. 672,000
-----------
Electronics--10.1%
9,800 Belden, Inc. 234,588
15,000 PCD Inc. 165,000
20,000 Innovex Corp. 280,000
30,000(a) Micrion Corp. 337,500
40,000(a) Speedfam International 642,500
40,000(a) Storage Technology Corp. 910,000
-----------
Total 2,569,588
-----------
Financial--6.4%
18,000 Citigroup Inc. 855,000
20,000 Travelers Group, Inc. 782,500
-----------
Total 1,637,500
-----------
Industrial Products--18.3%
12,000 Blount International, Inc.--Class A 326,250
50,000(a) Checkpoint Systems 446,875
30,000 DT Industries, Inc. 275,625
49,500(a) ESCO Electronics Corp. 634,219
40,000 Interface, Inc. 345,000
17,100(a) Jacobs Engineering Group, Inc. 649,800
30,000 MPW Industrial Group, Inc. 300,000
35,005(a)(b) New Brunswick Scientific 245,035
</TABLE>
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The accompanying notes are an integral part of the financial statements.
3
<PAGE>
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HUDSON CAPITAL APPRECIATION FUND
PORTFOLIO OF INVESTMENTS (Continued)
JUNE 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
<C> <S> <C>
COMMON STOCKS (Continued)
Industrial Products (Continued)
5,000(a) Park Ohio Industries $ 84,688
26,000(a) Right Management Consultants Inc. 403,000
77,501(a) Supreme Industries, Inc.--Class A 750,791
15,000 Titan Wheel International, Inc. 178,125
-----------
Total 4,639,408
-----------
Manufacturing--0.5%
6,500 Wabash National Corp. 125,938
-----------
Information Services--5.6%
25,000 Electronic Data Systems Corp. 1,414,062
-----------
Oil, Energy & Gas Exploration--2.7%
31,700(a) Louis Dreyfus Natural Gas Corp. 683,531
-----------
Paints & Coatings--0.5%
3,000 Valspar Corp. 114,000
-----------
Pharmaceuticals--1.8%
30,000 K V Pharmaceutical Co. 465,000
-----------
Restaurants--3.3%
26,000(a) Garden Fresh Restaurants Corp. 487,500
22,500(a) O'Charleys, Inc. 360,000
-----------
Total 847,500
-----------
Retail--2.6%
15,000 Jos. A. Bank Clothiers, Inc. 95,625
50,000(a) Corporate Express, Inc. 350,000
15,000(a) Travis Boats & Motors, Inc. 217,500
-----------
Total 663,125
-----------
</TABLE>
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The accompanying notes are an integral part of the financial statements.
4
<PAGE>
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HUDSON CAPITAL APPRECIATION FUND
PORTFOLIO OF INVESTMENTS (Continued)
JUNE 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
<C> <S> <C>
COMMON STOCKS (Continued)
Transportation--6.6%
20,000(a) AMR Corp. $ 1,365,000
20,000(a) Celadon Group, Inc. 170,000
27,000(a) Simon Transportation Service 133,312
-----------
Total 1,668,312
-----------
Total Common Stocks (cost $24,006,840) 25,780,213
-----------
<CAPTION>
Principal
Amount
---------
<C> <S> <C>
Time Deposit--1.5%
$370,000 State Street Bank and Trust Co., 4.00% dated
6/30/1999 due 7/1/1999 (cost $278,000) 370,000
-----------
Total Investments (cost $24,376,840)(c) $26,150,213
===========
</TABLE>
- --------
(a) Non-income producing security.
(b) Security issue rights.
(c) The cost of investments for federal tax purposes amounts to $24,376,840.
The net unrealized appreciation of investments on a federal tax basis
amounts to $1,773,373 which is comprised of $5,136,553 appreciation and
$3,363,180 depreciation at June 30, 1999.
Note: The categories of investments are shown as a percentage of net assets
($25,393,473) at June 30, 1999.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
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HUDSON CAPITAL APPRECIATION FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999
(Unaudited)
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- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total investments in securities, at value (cost $24,376,840)
(Note 1) $26,150,213
Cash............................................................ 557
Income receivable............................................... 5,776
Receivable for Fund shares sold................................. 5,035
-----------
Total assets.................................................. 26,161,581
-----------
LIABILITIES:
Payable for Fund shares redeemed................................ 585,462
Accrued expenses................................................ 182,646
-----------
Total liabilities............................................. 768,108
-----------
Net Assets...................................................... $25,393,473
===========
NET ASSETS CONSIST OF:
Paid in capital................................................. $22,636,168
Net unrealized appreciation of investments...................... 1,773,373
Accumulated net investment loss................................. (1,117,895)
Accumulated net realized gain on investments.................... 2,101,827
-----------
Net Assets.................................................... $25,393,473
===========
Class A Shares:
Net Asset Value Per Share ($21,271,456 / 1,405,124 shares
outstanding)................................................... $ 15.14
-----------
Offering Price Per Share (100/95.50 of $15.14)*................. $ 15.85
-----------
Redemption Proceeds Per Share................................... $ 15.14
-----------
Class B Shares:
Net Asset Value Per Share ($2,315,895 / 154,612 shares
outstanding)................................................... $ 14.98
-----------
Offering Price Per Share........................................ $ 14.98
-----------
Redemption Proceeds Per Share+.................................. $ 14.98
-----------
Class N Shares:
Net Asset Value Per Share ($1,806,122 / 119,306 shares
outstanding)................................................... $ 15.14
-----------
Offering Price Per Share........................................ $ 15.14
-----------
Redemption Proceeds Per Share................................... $ 15.14
-----------
</TABLE>
- --------
*See "How to Buy Shares" in the Prospectus.
+ Class B Shares are sold without an initial sales charge, but are subject to a
5.00% contingent deferred sales charge if shares are redeemed within eleven
months, reduced on shares held over twelve months.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
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HUDSON CAPITAL APPRECIATION FUND
STATEMENT OF OPERATIONS
PERIOD ENDED JUNE 30, 1999
(Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.......................................................... $ 9,365
Dividends......................................................... 53,433
----------
Total investment income......................................... 62,798
----------
Expenses: (Notes 2 and 3)
Investment management fee......................................... 133,868
Distribution expenses Class A Shares.............................. 24,307
Distribution expenses Class B Shares.............................. 12,209
Distribution expenses Class N Shares.............................. 3,064
Legal, compliance and filing fees................................. 83,355
Custodian fee..................................................... 4,649
Shareholder servicing and related shareholder expenses............ 76,699
Audit and accounting.............................................. 24,881
Trustees' fees and expenses....................................... 11,250
Other............................................................. 13,489
----------
Total expenses.................................................. 387,771
Investment management fee waived.................................. (106,826)
----------
Net expenses...................................................... 280,945
----------
Net investment loss............................................... (218,147)
----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments.................................... 1,905,025
Net change in unrealized appreciation of investments................ (25,455)
----------
Net realized and unrealized gain on investments................... 1,879,570
----------
Net increase in net assets from operations.......................... $1,661,423
==========
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
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HUDSON CAPITAL APPRECIATION FUND
STATEMENT OF CHANGES IN NET ASSETS
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- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Period Ended Year Ended
June 30, 1999 December 31,
(unaudited) 1998
------------- ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Net investment loss................................. $ (218,147) $ (551,979)
Net realized gain on investments.................... 1,905,025 714,676
Net change in unrealized appreciation of
investments........................................ (25,455) (4,694,671)
----------- -----------
Net increase (decrease) in net assets from
operations....................................... 1,661,423 (4,531,974)
----------- -----------
Distributions to shareholders from net realized
gains:
Class A Shares.................................... 0 (626,454)
Class B Shares.................................... 0 (70,383)
Class N Shares.................................... 0 (90,793)
----------- -----------
Total distributions to shareholders from net
realized gains..................................... 0 (787,630)
----------- -----------
Share transactions--net (Note 4).................... (7,717,288) (527,440)
----------- -----------
Net decrease in net assets........................ (6,055,865) (5,847,044)
Net Assets:
Beginning of year................................. 31,449,338 37,296,382
----------- -----------
End of year....................................... $25,393,473 $31,449,338
=========== ===========
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
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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. Effective April 15, 1997, the Fund renamed its original
shares to Class A shares and added Class B Shares and Class N Shares. 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.
- --------------------------------------------------------------------------------
9
<PAGE>
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HUDSON CAPITAL APPRECIATION FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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.
The Adviser has voluntarily agreed to limit expenses applicable to Class A and
N shares to 2.0% and to 2.5% with respect to Class B shares. During the period
ended June 30, 1999, the Fund incurred investment management fees of $133,868.
However, the Advisor has waived $106,826 of expenses in order to comply with
the agreement as stated above.
In acting as Distributor during the year, Fahnestock & Co. Inc. earned $6,300
of commissions on sales of the Class A and $16,200 of contingent deferred sales
charges on redemptions of Class B shares.
Fees are paid to Trustees who are unaffiliated with the Advisor on the basis of
$3,000 per annum plus $750 per meeting attended.
At June 30, 1999, affiliated Trustees owned 20,284 shares (1.21%) of the Fund.
3.Distribution Plan.
Pursuant to Rule 12b-1 under the Investment Company Act of 1940, the Trust has
adopted Distribution Plans (the "Plans") under which it may reimburse
Fahnestock & Co. Inc. (the
- --------------------------------------------------------------------------------
10
<PAGE>
- --------------------------------------------------------------------------------
HUDSON CAPITAL APPRECIATION FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
"Distributor") for expenses relating to the distribution of Class A Shares,
Class B Shares, and Class N Shares at annual rates not to exceed a percentage
of average daily net assets according to the schedule listed below.
Distribution expenses incurred in a year in excess of the amounts listed below
may be carried forward and sought to be reimbursed in future years. Interest at
the prevailing broker loan rate may be charged to the Fund on any expenses
carried forward and those expenses and interest will be reflected as current
expenses on the Fund's statement of operations for the year in which they
become accounting liabilities.
<TABLE>
<CAPTION>
Percentage of Average Daily
Share Class Name Net Assets of the Class
- ---------------- ---------------------------
<S> <C>
Class A Shares.. 0.50%
Class B Shares.. 1.00%
Class N Shares.. 0.25%
</TABLE>
4.Transactions in Shares of Beneficial Interest.
At June 30, 1999, the Fund had authorized an unlimited number of shares of
beneficial interest ($.01 par value). Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
Period Ended Year Ended
June 30, 1999 December 31, 1998
--------------------- ----------------------
Shares Amount Shares Amount
-------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Class A Shares
Sold............................ 31,354 $ 448,412 390,048 $ 6,133,114
Issued on reinvestment of
dividends
and distributions.............. 0 0 42,491 605,885
Redeemed........................ (419,137) (5,901,652) (452,478) (6,483,983)
-------- ----------- --------- -----------
Net change in Class A Shares.... (387,783) $(5,453,240) (19,939) $ 255,016
======== =========== ========= ===========
</TABLE>
- --------------------------------------------------------------------------------
11
<PAGE>
- --------------------------------------------------------------------------------
HUDSON CAPITAL APPRECIATION FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Period Ended Year Ended
June 30, 1999 December 31, 1998
--------------------- ---------------------
Shares Amount Shares Amount
-------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Class B Shares
Sold............................. 4,946 $ 69,681 93,322 $ 1,528,022
Issued on reinvestment of
dividends and distributions..... 0 0 4,962 70,213
Redeemed......................... (41,671) (582,579) (38,876) (581,950)
-------- ----------- -------- -----------
Net change in Class B Shares..... (36,725) $ (512,898) 59,408 $ 1,016,285
======== =========== ======== ===========
<CAPTION>
Period Ended Year Ended
June 30, 1999 December 31, 1998
--------------------- ---------------------
Shares Amount Shares Amount
-------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Class N Shares
Sold............................. 6,102 $ 86,221 76,054 $ 1,236,310
Issued on reinvestment of
dividends and distributions..... 0 0 6,295 89,773
Redeemed......................... (129,625) (1,837,371) (200,903) (3,124,824)
-------- ----------- -------- -----------
Net change in Class N Shares..... (123,523) $(1,751,150) (118,554) $(1,798,741)
======== =========== ======== ===========
Net change in Fund Share
transactions.................... $(7,717,288) $ (527,440)
=========== ===========
</TABLE>
5.Investment Transactions.
Purchases and sales of investment securities, other than short-term
investments, totaled $3,522,851 and $10,197,022, respectively. Fahnestock & Co.
Inc. did not earn any commissions for executing securities transactions of the
Fund during the period ended June 30, 1999.
- --------------------------------------------------------------------------------
12
<PAGE>
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HUDSON CAPITAL APPRECIATION FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6.Financial Highlights.
Class A Shares
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------------
1999* 1998 1997 1996 1995 1994
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period... $ 14.13 $ 16.18 $ 12.99 $ 11.39 $ 10.95 $ 13.72
Income from investment
operations
Net investment loss.... (0.11) (0.24) (0.21)** (0.10) (0.03) (0.06)
Net realized and
unrealized gain (loss)
on investments........ 1.12 (1.43) 5.67 4.72 2.09 (1.48)
------- ------- ------- ------- ------- -------
Total income (loss)
from investment
operations............ 1.01 (1.67) 5.46 4.62 2.06 (1.54)
------- ------- ------- ------- ------- -------
Less dividends paid to
shareholders:
Dividends paid from net
realized gains on
investments........... -- (0.38) (2.27) (3.02) (1.62) (1.23)
------- ------- ------- ------- ------- -------
Net asset value, end of
period................ $ 15.14 $ 14.13 $ 16.18 $ 12.99 $ 11.39 $ 10.95
======= ======= ======= ======= ======= =======
Total return............ 7.15% (10.35%) 42.88% 40.68% 18.94% (11.22%)
Ratios/Supplemental Data
Net assets, end of
period (000 omitted).. $21,271 $25,336 $29,325 $15,671 $12,097 $15,874
Ratio of gross expenses
to average net assets. 2.39%*** 2.18% 3.07% 3.50% 3.42% 2.76%
Ratio of net expenses
to average net assets. 2.00%*** 2.00% 2.03%+ 2.50% 2.50% 2.49%
Ratio of net investment
loss to average net
assets................ (1.54%)*** (1.46%) (1.38%) (1.13%) (0.16%) (0.46%)
Portfolio turnover
rate.................. 12.82% 40.98% 50.46% 85.37% 197.71% 194.55%
</TABLE>
- --------
* For the six months ended June 30, 1999 (unaudited).
** Per share information presented is based on the average number of shares
outstanding.
*** Annualized.
+ Effective February 1, 1997, Class A shares changed its expense limit from
2.50% to 2.00%.
- --------------------------------------------------------------------------------
13
<PAGE>
- --------------------------------------------------------------------------------
HUDSON CAPITAL APPRECIATION FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Financial Highlights.
Class B Shares
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------
1999* 1998 1997**
------- ------- --------
<S> <C> <C> <C>
Net asset value, beginning of period.. $ 14.02 $ 16.11 $ 13.54
Income from investment operations:
Net investment loss................... (0.16) (0.34)*** (0.09)***
Net realized and unrealized gains
(losses) on investments.............. 1.12 (1.37) 4.93
------- ------- -------
Total income from investment
operations......................... 0.96 (1.71) 4.84
------- ------- -------
Less dividends paid to shareholders:
Dividends paid from net realized
gains on investments................. -- (0.38) (2.27)
------- ------- -------
Net asset value, end of period........ $ 14.98 $ 14.02 $ 16.11
======= ======= =======
Total return........................... 6.85% (10.64)% 36.54%
Ratios/Supplemental Data
Net assets, end of period (000
omitted)............................. $ 2,316 $ 2,682 $ 2,125
Ratio of gross expenses to average
net assets........................... 2.89%**** 2.97% 3.54%****
Ratio of net expenses to average net
assets............................... 2.50%**** 2.50% 2.50%****
Ratio of net investment loss to
average net assets................... (2.07%)**** (1.95%) (0.77%)****
Portfolio turnover rate............... 12.82% 40.98% 50.46%
</TABLE>
- --------
*For the six months ended June 30, 1999 (unaudited).
**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.
- --------------------------------------------------------------------------------
14
<PAGE>
- --------------------------------------------------------------------------------
HUDSON CAPITAL APPRECIATION FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Financial Highlights.
Class N Shares
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------
1999* 1998 1997**
------- ------- --------
<S> <C> <C> <C>
Net asset value, beginning of period.. $ 14.13 $ 16.18 $ 13.54
Income from investment operations:
Net investment loss................... (0.11) (0.24)*** (0.18)***
Net realized and unrealized gains
(losses) on investments.............. 1.12 (1.43) 5.09
------- ------- -------
Total income from investment
operations......................... 1.01 (1.67) 4.91
------- ------- -------
Less dividends paid to shareholders:
Dividends paid from net realized
gains on investments................. -- (0.38) (2.27)
------- ------- -------
Net asset value, end of period........ $ 15.14 $ 14.13 $ 16.18
======= ======= =======
Total return........................... 7.15% (10.35)% 37.09%
Ratios/Supplemental Data
Net assets, end of period (000
omitted)............................. $ 1,806 $ 3,432 $ 5,846
Ratio of gross expenses to average
net assets........................... 2.39% 2.22% 3.04%
Ratio of net expenses to average net
assets............................... 2.00%**** 2.00% 2.00%****
Ratio of net investment loss to
average net assets................... (1.54%)**** (1.47%) (1.48%)****
Portfolio turnover rate............... 12.82% 40.98% 50.46%
</TABLE>
- --------
*For the six months ended June 30, 1999 (unaudited).
**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.
- --------------------------------------------------------------------------------
15
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Hudson Capital
Appreciation Fund
(A Series of The Fahnestock Funds)
125 Broad Street
New York, New York 10004
Telephone (800) 221-5588
Investment Advisor
Hudson Capital Advisors, Inc.
780 Third Avenue
New York, New York 10022
Principal Distributor
Fahnestock & Co. Inc.
125 Broad Street
New York, New York 10004
Custodian and Transfer Agent
Investors Fiduciary Trust Company
801 Pennsylvania Avenue
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.
LOGO OF
HUDSON CAPITAL
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APPRECIATION
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FUND
Class A Shares
Class B Shares
Class N Shares
Semi-Annual Report
June 30, 1999
LOGO OF FAHNESTOCK
ESTABLISHED 1881
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G02329-02 (8/99) HUD 802109
