STATEMENT OF ADDITIONAL INFORMATION October 31, 1996
THE HENLOPEN FUND
Suite 100
400 West Ninth Street
Wilmington, Delaware 19801
This Statement of Additional Information is not a Prospectus and
should be read in conjunction with the Prospectus of The Henlopen Fund
dated October 31, 1996. Requests for copies of the Prospectus should be
made in writing to The Henlopen Fund, Suite 100, 400 West Ninth Street,
Wilmington, Delaware, 19801, Attention: Corporate Secretary or by calling
(302) 654-3131.
<PAGE>
THE HENLOPEN FUND
Table of Contents
Page No.
Investment Restrictions ........................ 1
Trustees and Officers of the Fund .............. 3
Ownership of Management and Principal
Shareholders.................................. 6
Investment Adviser and Administrator............ 6
Determination of Net Asset Value ............... 9
Systematic Withdrawal Plan ..................... 9
Allocation of Portfolio Brokerage .............. 10
Performance Information......................... 11
Custodian ...................................... 12
Taxes .......................................... 12
Shareholder Meetings ........................... 13
Independent Accountants ........................ 15
Financial Statements ........................... 15
Description of Securities Ratings............... 15
No person has been authorized to give any information or to make
any representations other than those contained in this Statement of
Additional Information and the Prospectus dated October 31, 1996, and, if
given or made, such information or representations may not be relied upon
as having been authorized by The Henlopen Fund.
This Statement of Additional Information does not constitute an
offer to sell securities.
INVESTMENT RESTRICTIONS
As set forth in the prospectus dated October 31, 1996, of The
Henlopen Fund (the "Fund") under the caption "Investment Objective and
Policies", the primary investment objective of the Fund is to produce
long-term capital appreciation principally through investing in common
stocks. Current income is a secondary investment objective. Consistent
with its investment objectives, the Fund has adopted the following
investment restrictions which are matters of fundamental policy and cannot
be changed without approval of the holders of the lesser of: (i) 67% of
the Fund's shares present or represented at a shareholder's meeting at
which the holders of more than 50% of such shares are present or
represented; or (ii) more than 50% of the outstanding shares of the Fund.
1. The Fund will not purchase securities on margin,
participate in a joint-trading account, sell securities short, or write or
invest in put or call options. The Fund's investments in warrants, valued
at the lower of cost or market, will not exceed 5% of the value of the
Fund's net assets.
2. The Fund will not borrow money or issue senior securities,
except for temporary bank borrowings or for emergency or extraordinary
purposes (but not for the purpose of purchase of investments) and then
only in an amount not in excess of 5% of the value of its total assets and
will not pledge any of its assets except to secure borrowings and then
only to an extent not greater than 10% of the value of the Fund's net
assets. The Fund will not purchase securities while it has any
outstanding borrowings.
3. The Fund will not lend money, except by purchasing publicly
distributed debt securities or entering into repurchase agreements;
provided, however, that repurchase agreements maturing in more than seven
days plus all other illiquid securities will not exceed 10% of the Fund's
total assets. The Fund will not lend its portfolio securities.
4. The Fund will not purchase securities of other investment
companies except (a) as part of a plan of merger, consolidation or
reorganization approved by the shareholders of the Fund or (b) securities
of registered closed-end investment companies on the open market where no
commission or profit results, other than the usual and customary broker's
commission and where as a result of such purchase the Fund would hold less
than 3% of any class of securities, including voting securities, of any
registered closed-end investment company and less than 5% of the Fund's
assets, taken at current value, would be invested in securities of
registered closed-end investment companies.
5. The Fund will not make investments for the purpose of
exercising control or management of any company.
6. The Fund will limit its purchases of securities of any
issuer (other than the United States or an instrumentality of the United
States) in such a manner that it will satisfy at all times the
requirements of Section 5(b)(1) of the Investment Company Act of 1940
(i.e., that at least 75% of the value of its total assets is represented
by cash and cash items (including receivables), U.S. Government
Securities, securities of other investment companies, and other securities
for the purpose of the foregoing limited in respect of any one issuer to
an amount not greater than 5% of the value of the total assets of the Fund
and to not more than 10% of the outstanding voting securities of such
issuer.)
7. The Fund will not concentrate 25% or more of the value of
its total assets, determined at the time an investment is made, exclusive
of U.S. Government securities, in securities issued by companies engaged
in the same industry.
8. The Fund will not acquire or retain any security issued by
a company, an officer or director of which is an officer or director of
the Fund or an officer, director or other affiliated person of its
investment adviser.
9. The Fund will not acquire or retain any security issued by
a company if any of the directors or officers of the Fund, or directors,
officers or other affiliated persons of its investment adviser
beneficially own more than 1/2% of such company's securities and all of
the above persons owning more than 1/2% own together more than 5% of its
securities.
10. The Fund will not act as an underwriter or distributor of
securities other than shares of the Fund and will not purchase any
securities which are restricted from sale to the public without
registration under the Securities Act of 1933, as amended.
11. The Fund will not purchase any interest in any oil, gas or
any other mineral exploration or development program.
12. The Fund will not purchase or sell real estate or real
estate mortgage loans.
13. The Fund will not purchase or sell commodities or
commodities contracts, including futures contracts.
TRUSTEES AND OFFICERS OF THE FUND
The name, age, address, principal occupations during the past
five years and other information with respect to each of the trustees and
officers of the Fund are as follows:
MICHAEL L. HERSHEY*
400 West Ninth Street
Suite 100
Wilmington, Delaware
(CHAIRMAN, PRESIDENT
AND A TRUSTEE OF THE FUND)
Mr. Hershey, age 57, is President and Chairman of the Board of
Landis Associates, Inc., an investment advisory firm which he founded in
1986. Prior to that time, he served as President of Kalmar Investments,
Inc., an investment advisory firm, from 1982 to 1986. Mr. Hershey
attended Princeton University from 1956 to 1961. He has served as a
director of Nematron Corporation, a manufacturer of industrial computers,
since March, 1995.
ROBERT J. FAHEY, JR.
2 Logan Square
20th Floor
Philadelphia, Pennsylvania
(TRUSTEE)
Mr. Fahey, age 38, joined Cushman & Wakefield, a commercial real
estate services firm and a Rockefeller Group Company, in 1985. He
presently serves as a Director and Manager of Real Estate Investment
Banking of Cushman & Wakefield's Financial Services Group in its
Philadelphia, Pennsylvania office. Prior to joining Cushman & Wakefield,
Mr. Fahey was associated for three years with Strouse, Greenberg & Co.,
Inc. as an Associate in the Mortgage Banking Group. Mr. Fahey graduated
from Temple University in 1981 and is a candidate in the Masters of
Business Administration program at Temple University. He is currently a
part-time instructor of real estate finance in the graduate program at
Temple. He is a member of the Urban Land Institute, the Mortgage Bankers
Association, the National Association of Realtors and The World Affairs
Council.
STEPHEN L. HERSHEY, M.D.*
4745 Stanton-Ogletown Road
Suite 225
Newark, Delaware
(TRUSTEE)
Dr. Hershey, age 55, has been associated with First State
Orthopaedic Consultants, P.A. (formerly Wilmington Orthopaedic
Consultants, P.A.) since 1978. He graduated from Kenyon College in 1963
and received his M.D. from Jefferson Medical College in 1968. He is a
member of the American Medical Association, the American Academy of
Orthopaedic Surgeons, the American College of Surgeons, the Southern
Medical Association, the Jefferson Orthopaedic Society, the Delaware
Society of Orthopaedic Surgeons (charter member), the New Castle County
Medical Society and the Medical Society of Delaware.
P. COLEMAN TOWNSEND, JR.
P. O. Box 468
Millsboro, Delaware
(TRUSTEE)
Mr. Townsend, age 50, has been the President and Chief Executive
Officer of Townsends, Inc., an agricultural business, since 1984. He
graduated from the University of Delaware in 1969. Mr. Townsend is
presently a member of the Board of Directors of the Baltimore Trust
Company and the National Broiler Council. He is also a member of the
Board of Visitors of Delaware State University and a member of the
Foundation Board of Beebe Medical Center.
LORENZO A. VILLALON, C.F.A.
400 West Ninth Street
Suite 100
Wilmington, Delaware
(VICE PRESIDENT AND TREASURER)
Mr. Villalon, age 45, has been Vice President and Treasurer of
the Fund since July, 1996. He also has served as a research analyst with
Landis Associates, Inc., the Fund's investment adviser, since November,
1995. Prior to such time, he was a research analyst with Freiss
Associates, Inc. from June, 1992 to November, 1995. From May, 1979 to
May, 1992, he was employed by J.P. Morgan & Co., most recently as Vice
President. Mr. Villalon received his B.A. degree from Haverford College
and his M.B.A. degree from Wharton Graduate School.
BRUCE V. VOGENITZ, C.F.A.
400 West Ninth Street
Suite 100
Wilmington, Delaware
(VICE PRESIDENT AND SECRETARY)
Mr. Vogenitz, age 31, has been Secretary of the Fund since June,
1995. He joined Landis Associates, Inc., the Fund's investment adviser,
as an investment analyst in July, 1993. Prior to that time, he was an
equity analyst with Widmann, Siff & Co., Inc., from April, 1990 through
July, 1993. From April, 1988 through April, 1990, Mr. Vogenitz was
employed by SEI Corp. as a brokerage operations administrator. Mr.
Vogenitz received his B.A. degree from Drexel University in 1988. He
received his Chartered Financial Analyst designation in 1993.
CAMILLE F. WILDES
225 East Mason Street
Milwaukee, Wisconsin 53202
(VICE PRESIDENT/COMPLIANCE OFFICER)
Ms. Wildes, age 44, is a Vice President of Fiduciary Management,
Inc., the Fund's Administrator, and has been employed by such firm in
various capacities since December, 1982.
__________________
* Mr. Michael L. Hershey and Dr. Stephen L. Hershey are trustees who
are "interested persons" of the Fund as that term is defined in the
Investment Company Act of 1940.
The Fund's standard method of compensating trustees is to pay
each trustee who is not an officer of the Fund a fee of $250 for each
meeting of the trustees attended. The Fund also may reimburse its
trustees for travel expenses incurred in order to attend meetings of the
trustees. During the fiscal year ended June 30, 1996, the Fund paid a
total of $750 in fees to trustees who were not officers of the Fund. Mr.
Michael L. Hershey and Dr. Stephen L. Hershey are brothers. The table
below sets forth the compensation paid by the Fund to each of the current
trustees of the Fund during the fiscal year ended June 30, 1996:
<TABLE>
COMPENSATION TABLE
<CAPTION>
Pension or Estimated
Retirement Annual Total
Aggregate Benefits Accrued Benefits Upon Compensation
Name of Compensation As Part of Fund Retirement from Fund Paid
Person from Fund Expenses to Trustees
<S> <C> <C> <C> <C>
Michael L. Hershey $0 $0 $0 $0
Robert J. Fahey, Jr. $250 $0 $0 $250
Stephen L. Hershey, M.D. $250 $0 $0 $250
P. Coleman Townsend, Jr. $250 $0 $0 $250
</TABLE>
OWNERSHIP OF MANAGEMENT AND PRINCIPAL SHAREHOLDERS
Set forth below are the names and addresses of all holders of
the Fund's shares who as of September 30, 1996 beneficially owned more
than 5% of the Fund's then outstanding shares, as well as the number of
shares of the Fund beneficially owned by all officers and directors of the
Fund as a group.
Name and Address
of Beneficial Owner Number of Shares Percent of Class
Wilmington Trust Co., Custodian 452,555(1)(2) 23.45%
FBO J. Eric May Trust
c/o Mutual Funds
1100 North Market Street
Wilmington, DE 19890-0001
Meridian Asset Management 253,108(2) 13.11%
Post Office Box 16004
Reading, PA 19612-6004
Wilmington Trust Co., Trustee 102,370(2) 5.30%
Richards Layton & Finger Money
Purchase Pension Plan Dated 4/27/79
FBO R. Franklin Balotti #31896
1100 N. Market Street
Wilmington, DE 19890-0001
Officers and Trustees as
a Group (7 persons) 35,395 (3) 1.83%
___________________
(1) Excludes 74,901 shares held by Wilmington Trust Company, Trustee, FBO
J. Eric May Charitable Remainder Trust dated May 30, 1995.
(2) Consists solely of shares in one or more accounts managed by the
Adviser and over which the Adviser has investment authority.
(3) Excludes 1,008,848 shares in accounts managed by the Adviser and over
which the Adviser has investment authority.
INVESTMENT ADVISER AND ADMINISTRATOR
As set forth in the Prospectus under the caption "Management of
the Fund" the investment adviser to the Fund is Landis Associates, Inc.
(the "Adviser"). Pursuant to an investment advisory agreement between the
Fund and the Adviser (the "Advisory Agreement") the Adviser furnishes
continuous investment advisory services and management to the Fund. The
Adviser is controlled by Michael L. Hershey, who owns 80% of its
outstanding capital stock. Mr. Hershey is also Chairman, President,
Treasurer and a trustee of the Fund. Dr. Stephen L. Hershey is a director
of the Adviser.
The Fund will pay all of its expenses not assumed by the Adviser
including, but not limited to, the costs of preparing and printing its
registration statements required under the Securities Act of 1933 and the
Investment Company Act of 1940 and any amendments thereto, the expenses of
registering its shares with the Securities and Exchange Commission and in
the various states, the printing and distribution cost of prospectuses
mailed to existing shareholders, the cost of trustee and officer liability
insurance, reports to shareholders, reports to government authorities and
proxy statements, interest charges, brokerage commissions, and expenses
incurred in connection with portfolio transactions. The Fund will also
pay the fees of trustees who are not officers of the Fund, salaries of
administrative and clerical personnel, association membership dues,
auditing and accounting services, fees and expenses of any custodian or
trustees having custody of Fund assets, expenses of calculating the net
asset value and repurchasing and redeeming shares, and charges and
expenses of dividend disbursing agents, registrars, and share transfer
agents, including the cost of keeping all necessary shareholder records
and accounts and handling any problems relating thereto.
The Adviser has undertaken to reimburse the Fund to the extent
that the aggregate annual operating expenses, including the investment
advisory fee but excluding interest, taxes, brokerage commissions and
extraordinary items, exceed that percentage of the average net assets of
the Fund for such year, as determined by valuations made as of the close
of each business day of the year, which is the most restrictive percentage
provided by the state laws of the various states in which the Common Stock
is qualified for sale. As of the date of this Statement of Additional
Information the percentage applicable to the Fund is 2-1/2% on the first
$30,000,000 of its average daily net assets, 2% on the next $70,000,000 of
its average daily net assets and 1-1/2% of its average daily net assets in
excess of $100,000,000. The Fund monitors its expense ratio at least on a
monthly basis. If the accrued amount of the expenses of the Fund exceeds
the expense limitation, the Fund creates an account receivable from the
Adviser for the amount of such excess. In such a situation the monthly
payment of the Adviser's fee will be reduced by the amount of such excess,
subject to adjustment month by month during the balance of the Fund's
fiscal year if accrued expenses thereafter fall below this limit.
In addition to any reimbursement required under the most
restrictive applicable expense limitation of state securities commissions
described above, the Adviser has voluntarily undertaken to reimburse the
Fund for expenses in excess of 2.0% of average net assets. Such voluntary
reimbursements to the Fund may be modified or discontinued at any time by
the Adviser.
For services provided by the Adviser under the Advisory
Agreement for the fiscal years ended June 30, 1996, 1995 and 1994, the
Fund paid the Adviser $181,554, $91,873 and $46,390, respectively. In
turn, the Adviser reimbursed the Fund $38,073 for expenses, including
investment advisory fees, during the fiscal year ended June 30, 1994. No
reimbursement was made during the fiscal years ended June 30, 1996 and
1995.
The Advisory Agreement will remain in effect for as long as its
continuance is specifically approved at least annually, by (i) the
trustees of the Fund, or by the vote of a majority (as defined in the
Investment Company Act of 1940) of the outstanding shares of the Fund, and
(ii) by the vote of a majority of the trustees of the Fund who are not
parties to the Advisory Agreement or interested persons of the Adviser,
cast in person at a meeting called for the purpose of voting on such
approval. The Advisory Agreement provides that it may be terminated at
any time without the payment of any penalty, by the trustees of the Fund
or by vote of a majority of the Fund's shareholders, on sixty days written
notice to the Adviser, and by the Adviser on the same notice to the Fund
and that it shall be automatically terminated if it is assigned.
As set forth in the Prospectus under the caption "Management of
the Fund," the administrator to the Fund is Fiduciary Management, Inc.
(the "Administrator"). The administration agreement entered into between
the Fund and the Administrator (the "Administration Agreement") will
remain in effect until terminated by either party. The Administration
Agreement may be terminated at any time, without the payment of any
penalty, by the trustees of the Fund upon the giving of ninety (90) days'
written notice to the Administrator, or by the Administrator upon the
giving of ninety (90) days' written notice to the Fund. For the fiscal
years ended June 30, 1996, 1995 and 1994, the Fund paid the Administrator
$36,311, $18,374 and $9,278, respectively
The Advisory Agreement and the Administration Agreement provide
that the Adviser and Administrator, as the case may be, shall not be
liable to the Fund or its shareholders for anything other than willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations or duties. The Advisory Agreement and the Administration
Agreement also provide that the Adviser and Administrator, as the case may
be, and their officers, directors and employees may engage in other
businesses, devote time and attention to any other business whether of a
similar or dissimilar nature, and render investment advisory services to
others.
DETERMINATION OF NET ASSET VALUE
As set forth in the Prospectus under the caption "Determination
of Net Asset Value," the net asset value of the Fund will be determined as
of the close of regular trading (currently 4:00 p.m. Eastern time) on each
day the New York Stock Exchange is open for trading. The New York Stock
Exchange is open for trading Monday through Friday except New Year's Day,
Washington's Birthday, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day. Additionally, if any of the
aforementioned holidays falls on a Saturday, the New York Stock Exchange
will not be open for trading on the preceding Friday and when any such
holiday falls on a Sunday, the New York Stock Exchange will not be open
for trading on the succeeding Monday, unless unusual business conditions
exist, such as the ending of a monthly or the yearly accounting period.
SYSTEMATIC WITHDRAWAL PLAN
A shareholder who owns Fund shares worth at least $50,000 at the
current net asset value may, by completing either the appropriate portion
of the share purchase application included in the Prospectus or an
application which may be obtained from Firstar Trust Company, create a
Systematic Withdrawal Plan from which a fixed sum will be paid to the
shareholder at regular intervals. To establish the Systematic Withdrawal
Plan, the shareholder deposits Fund shares with the Fund and appoints it
as agent to effect redemptions of Fund shares held in the account for the
purpose of making monthly or quarterly withdrawal payments of a fixed
amount to the shareholder out of the account.
The minimum amount of a withdrawal payment is $500. These
payments will be made from the proceeds of periodic redemption of shares
in the account at net asset value. Redemptions will be made monthly or
quarterly on any day a shareholder chooses. If that day is a weekend or
holiday, such redemption will be made on the next business day. The
shareholder may elect to have payments automatically deposited to his or
her checking or savings account. Establishment of a Systematic Withdrawal
Plan constitutes an election by the shareholder to reinvest in additional
Fund shares, at net asset value, all income dividends and capital gains
distributions payable by the Fund on shares held in such account, and
shares so acquired will be added to such account. The shareholder may
deposit additional Fund shares in his account at any time.
Withdrawal payments cannot be considered as yield or income on
the shareholder's investment, since portions of each payment will normally
consist of a return of capital. Depending on the size or the frequency of
the disbursements requested, and the fluctuation in the value of the
Fund's portfolio, redemptions for
the purpose of making such disbursements may reduce or even exhaust the
shareholder's account.
The shareholder may vary the amount or frequency of withdrawal
payments, temporarily discontinue them, or change the designated payee or
payee's address, by notifying Firstar Trust Company in writing prior to
the fifteenth day of the month preceding the next payment.
ALLOCATION OF PORTFOLIO BROKERAGE
Decisions to buy and sell securities for the Fund are made by
the Adviser subject to review by the Fund's trustees. In placing purchase
and sale orders for portfolio securities for the Fund, it is the policy of
the Adviser to seek the best execution of orders at the most favorable
price in light of the overall quality of brokerage and research services
provided, as described in this and the following paragraph. In selecting
brokers to effect portfolio transactions, the determination of what is
expected to result in best execution at the most favorable price involves
a number of largely judgmental considerations. Among these are the
Adviser's evaluation of the broker's efficiency in executing and clearing
transactions, block trading capability (including the broker's willingness
to position securities) and the broker's financial strength and stability.
The most favorable price to the Fund means the best net price without
regard to the mix between purchase or sale price and commission, if any.
Over-the-counter securities are generally purchased and sold directly with
principal market makers who retain the difference in their cost in the
security and its selling price. In some instances, the Adviser feels that
better prices are available from non-principal market makers who are paid
commissions directly. The Fund does not intend to market its shares
through intermediary broker-dealers. However, the Fund may place
portfolio orders with broker-dealers who recommend the purchase of shares
to clients (if the Adviser believes the commissions and transaction
quality are comparable to that available from other brokers) and may
allocate portfolio brokerage on that basis.
In allocating brokerage business for the Fund, the Adviser also
takes into consideration the research, analytical, statistical and other
information and services provided by the broker, such as general economic
reports and information, reports or analyses of particular companies or
industry groups, market timing and technical information, and the
availability of the brokerage firm's analysts for consultation. While the
Adviser believes these services have substantial value, they are
considered supplemental to the Adviser's own efforts in the performance of
its duties under the Advisory Agreement. Other clients of the Adviser may
indirectly benefit from the availability of these services to the Adviser,
and the Fund may indirectly benefit from services available to the Adviser
as a result of transactions for other clients. The Advisory Agreement
provides that the Adviser may cause the Fund to pay a broker which
provides brokerage and research services to the Adviser a commission for
effecting a securities transaction in excess of the amount another broker
would have charged for effecting the transaction, if the Adviser
determines in good faith that such amount of commission is reasonable in
relation to the value of brokerage and research services provided by the
executing broker viewed in terms of either the particular transaction or
the Adviser's overall responsibilities with respect to the Fund and the
other accounts as to which he exercises investment discretion. Brokerage
commissions paid by the Fund during the fiscal years ended June 30, 1996,
1995 and 1994, respectively, totaled $55,895 on total transactions of
$71,042,888, $31,531 on total transactions of $28,200,925, and $18,365 on
total transactions of $11,016,344. All of the brokers to whom commissions
were paid provided research services to the Adviser.
PERFORMANCE INFORMATION
Any total rate of return quotation for the Fund will be for a
period of three or more months and will assume the reinvestment of all
dividends and capital gains distributions which were made by the Fund
during such period. Any period total rate of return quotation of the Fund
will be calculated by dividing the net change in value of a hypothetical
shareholder account established by an initial payment of $1,000 at the
beginning of the period by 1,000. The net change in the value of a
shareholder account is determined by subtracting $1,000 from the product
obtained by multiplying the net asset value per share at the end of the
period by the sum obtained by adding (A) the number of shares purchased at
the beginning of the period plus (B) the number of shares purchased during
the period with reinvested dividends and distributions. Any average
annual compounded total rate of return quotation of the Fund will be
calculated by dividing the redeemable value at the end of the period
(i.e., the product referred to in the preceding sentence) by $1,000. A
root equal to the period, measured in years, in question is then
determined and 1 is subtracted from such root to determine the average
annual compounded total rate of return.
The foregoing computation may also be expressed by the following
formula:
n
P(1+T) = ERV
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the stated periods at
the end of the stated periods.
An average annual compounded rate of return refers to the rate of return
which, if applied to an initial investment at the beginning of a stated
period and compounded over the period, would result in the redeemable
value of the investment at the end of the stated period. The calculation
assumes reinvestment of all dividends and distributions and reflects the
effect of all recurring fees. The Fund's average annual compounded rate
of return for the one year ended June 30, 1996 was 38.39% and for the
period from December 2, 1992 (commencement of operations) through June 30,
1996 was 23.76%.
The results below show the value of an assumed initial investment
in the Fund of $10,000 made on December 2, 1992 through June 30, 1995,
assuming reinvestment of all dividends and distributions.
Value of
$10,000 Cumulative
June 30, Investment % Change
1993 $ 11,562 15.62%
1994 $ 12,126 21.26%
1995 $ 15,494 54.94%
1996 $ 21,442 114.42%
The foregoing performance results are based on historical earnings
and should not be considered as representative of the performance of the
Fund in the future. Such performance results also reflect reimbursements
made by the Adviser during the period from December 2, 1992 to June 30,
1994 to keep the Fund's total fund operating expenses at or below 2.0%.
An investment in the Fund will fluctuate in value and at redemption its
value may be more or less than the initial investment.
CUSTODIAN
Firstar Trust Company, 615 East Michigan Street, Milwaukee,
Wisconsin 53202, acts as custodian for the Fund. As such, Firstar Trust
Company holds all securities and cash of the Fund, delivers and receives
payment for securities sold, receives and pays for securities purchased,
collects income from investments and performs other duties, all as
directed by officers of the Fund. Firstar Trust Company does not exercise
any supervisory function over the management of the Fund, the purchase and
sale of securities or the payment of distributions to shareholders.
Firstar Trust Company also acts as the Fund's transfer agent and dividend
disbursing agent.
TAXES
As set forth in the Prospectus under the caption "Dividends,
Distributions and Taxes, the Fund intends to qualify annually for and
elect tax treatment applicable to a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended.
Dividends from the Fund's net investment income and distributions
from the Fund's net realized short-term capital gains are taxable to
shareholders as ordinary income, whether received in cash or in additional
Fund shares. The 70% dividends-received deduction for corporations will
apply to such dividends and distributions, subject to proportionate
reductions if the aggregate dividends received by the Fund from domestic
corporations in any year are less than 100% of the Fund's net investment
company income taxable distributions.
Any dividend or capital gains distribution paid shortly after a
purchase of Fund shares will have the effect of reducing the per share net
asset value of such shares by the amount of the dividend or distribution.
Furthermore, if the net asset value of the Fund shares immediately after a
dividend or distribution is less than the cost of such shares to the
shareholder, the dividend or distribution will be taxable to the
shareholder even though it results in a return of capital to him.
The Fund may be required to withhold Federal income tax at a rate
of 31% ("backup withholding") from dividend payments and redemption
proceeds if a shareholder fails to furnish the Fund with his social
security or other tax identification number and certify under penalty of
perjury that such number is correct and that he is not subject to backup
withholding due to the underreporting of income. The certification form
is included as part of the share purchase application and should be
completed when the account is opened.
This section is not intended to be a full discussion of present or
proposed federal income tax laws and the effects of such laws on an
investor. Investors are urged to consult their own tax advisers for a
complete review of the tax ramifications of an investment in the Fund.
SHAREHOLDER MEETINGS
It is contemplated that the Fund will not hold an annual meeting of
shareholders in any year in which the election of trustees is not required
to be acted on by shareholders under the Investment Company Act of 1940.
The Fund's Trust Instrument and Bylaws also contain procedures for the
removal of trustees by the Fund's shareholders. At any meeting of
shareholders, duly called and at which a quorum is present, the
shareholders may, by the affirmative vote of the holders of at least
two-thirds (2/3) of the outstanding shares, remove any trustee or
trustees.
Upon the written request of the holders of shares entitled to not
less than ten percent (10%) of all the votes entitled to be cast at such
meeting, the Secretary of the Fund shall promptly call a special meeting
of shareholders for the purpose of voting upon the question of removal of
any trustee. Whenever ten or more shareholders of record who have been
such for at least six months preceding the date of application, and who
hold in the aggregate either shares having a net asset value of at least
$25,000 or at least one percent (1%) of the total outstanding shares,
whichever is less, shall apply to the Fund's Secretary in writing, stating
that they wish to communicate with other shareholders with a view to
obtaining signatures to a request for a meeting as described above and
accompanied by a form of communication and request which they wish to
transmit, the Secretary shall within five business days after such
application either: (1) afford to such applicants access to a list of the
names and addresses of all shareholders as recorded on the books of the
Fund; or (2) inform such applicants as to the approximate number of
shareholders of record and the approximate cost of mailing to them the
proposed communication and form of request.
If the Secretary elects to follow the course specified in clause
(2) of the last sentence of the preceding paragraph, the Secretary, upon
the written request of such applicants, accompanied by a tender of the
material to be mailed and of the reasonable expenses of mailing, shall,
with reasonable promptness, mail such material to all shareholders of
record at their addresses as recorded on the books unless within five
business days after such tender the Secretary shall mail to such
applicants and file with the Securities and Exchange Commission, together
with a copy of the material to be mailed, a written statement signed by at
least a majority of the trustees to the effect that in their opinion
either such material contains untrue statements of fact or omits to state
facts necessary to make the statements contained therein not misleading,
or would be in violation of applicable law, and specifying the basis of
such opinion.
After opportunity for hearing upon the objections specified in the
written statement so filed, the Securities and Exchange Commission may,
and if demanded by the trustees or by such applicants shall, enter an
order either sustaining one or more of such objections or refusing to
sustain any of them. If the Securities and Exchange Commission shall
enter an order refusing to sustain any of such objections, or if, after
the entry of an order sustaining one or more of such objections, the
Securities and Exchange Commission shall find, after notice and
opportunity for hearing, that all objections so sustained have been met,
and shall enter an order so declaring, the Secretary shall mail copies of
such material to all shareholders with reasonable promptness after the
entry of such order and the renewal of such tender.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, 3100 Multifoods Tower, 33 South Sixth Street,
Minneapolis, Minnesota 55402, currently serves as the independent
accountants for the Fund.
FINANCIAL STATEMENTS
The following financial statements are incorporated by reference to
the Annual Report, dated June 30, 1996, of The Henlopen Fund (File No.
811-7168), as filed with the Securities and Exchange Commission on August
14, 1996:
Statement of Net Assets
Statement of Operations
Statements of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
Report of Independent Accountants
DESCRIPTION OF SECURITIES RATINGS
As set forth in the Prospectus under the caption "Investment
Objective and Policies," the Fund may invest up to 30% of its total assets
in publicly distributed debt securities assigned one of the three highest
ratings of either Standard & Poor's Corporation ("Standard & Poor's") or
Moody's Investors Service, Inc. ("Moody's"). A brief description of the
ratings symbols and their meanings follows.
Standard & Poor's Debt Ratings. A Standard & Poor's corporate debt
rating is a current assessment of the creditworthiness of an obligor with
respect to a specific obligation. This assessment may take into
consideration obligors such as guarantors, insurers or lessees.
The debt rating is not a recommendation to purchase, sell or hold a
security, inasmuch as it does not comment as to market price or
suitability for a particular investor.
The ratings are based on current information furnished by the
issuer or obtained by Standard & Poor's from other sources it considers
reliable. Standard & Poor's does not perform any audit in connection with
any rating and may, on occasion, rely on unaudited financial information.
The ratings may be changed, suspended or withdrawn as a result of changes
in, or unavailability of, such information, or for other circumstances.
The ratings are based, in varying degrees, on the following
considerations:
I. Likelihood of default - capacity and willingness of the
obligor as to the timely payment of interest and
repayment of principal obligation;
II. Nature of and provisions of the obligation;
III. Protection afforded by, and relative position of the
obligation in the event of bankruptcy, reorganization or
other arrangement under the laws of bankruptcy and other
laws affecting creditors' rights;
AAA - Debt rated AAA has the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from the higher rated issues only in small
degree.
A - Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than debt in the
higher rated categories.
Moody's Bond Ratings.
Aaa - Bonds which are rated Aaa are judged to be the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edged." Interest payments are protected by a large,
or by an exceptionally stable, margin and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
Aa - Bonds which are Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high-grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude, or there
may be other elements present which make the long-term risks appear
somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium grade obligations.
Factors giving security to principal and interest are considered adequate,
but elements may be present which suggest a susceptibility to impairment
sometime in the future.
Moody's applies numerical modifiers 1, 2 and 3 in each of the
foregoing generic rating classifications. The modifier 1 indicates that
the company ranks in the higher end of its generic rating category; the
modifier 2 indicates a mid-range ranking; and the modifier 3 indicates
that the company ranks in the lower end of its generic rating category.
