THE HENLOPEN FUND
(HENLOPEN LOGO)
ANNUAL REPORT
JUNE 30, 1997
To My Fellow Shareholders:
The performance gap between small and large capitalization stocks, which we
noted in our December 1996 report, persisted through the first half of 1997.
Fueled by the increasing popularity of indexing to the broad market averages,
large capitalization stocks continued their strong advance; however, there is
some recent evidence that investor attention is perhaps turning to the faster
growing companies in which the Fund invests.
The Henlopen Fund continues to produce superior long-term results, growing at a
22.9% compounded annual rate for the past three years. The first half of 1997
saw The Henlopen Fund build on a strong 1996, advancing 6.3%. We remain quite
pleased with the performance of long-term core holdings such as Markel Corp. and
Philadelphia Consolidated Holding Corp. and expect to continue generating
incremental value through our investment approach. We are confident that all the
companies comprising the portfolio will continue to show strong revenue and
profitability growth.
With approximately 70 stocks, the portfolio is well diversified across industry
lines, with no position exceeding 6% of the total. As a portfolio these
companies have a smaller market capitalization than the popular indices (median
market capitalization of approximately $490 million and average market
capitalization of approximately $1.4 billion) yet have attained leadership
positions within their market niches. Examples of such holdings include AIM
Safety (an innovative gas detection company, up 60% since purchase). Alydaar
Software (a company providing solutions to "Year 2000" software problems, up
77%), Lone Star Technologies (a leading oil services company, up 77%),
Philadelphia Consolidated Holding (a premier specialty insurance company, up
78%), and Steiner Leisure (a dominant player in the rapidly growing cruise
services industry, up 70%.)
As of July 29, 1997, the Board of Trustees has declared a distribution of
$0.00812 from short-term realized capital gains which will be treated as
ordinary income, and $0.94928 from long-term realized capital gains, payable
July 30, 1997, to shareholders of record on July 28, 1997.
Our goal is to invest in individual companies that are clearly demonstrating
superior revenue growth and improving profitability trends. We remain convinced
that a broad portfolio of such companies provides the best long-term prospects
to our shareholders within the context of reasonable risk.
Sincerely yours,
/s/ Mike L. Hershey
Michael L. Hershey
President
Managed by Landis Associates, Inc.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN
The Henlopen Fund, S&P 500 Index and Lipper Growth Fund Index*<F1>
The Henlopen Fund S&P 500 Index Lipper Growth Fund Index
12/2/92 $10,000 $10,000 $10,000
12/31/92 $10,010 $10,162 $10,204
3/31/93 $10,821 $10,600 $10,507
6/30/93 $11,562 $10,643 $10,661
9/30/93 $12,450 $10,928 $11,173
12/31/93 $12,999 $11,183 $11,426
3/31/94 $12,760 $10,754 $11,084
6/30/94 $12,126 $10,792 $10,841
9/30/94 $12,853 $11,330 $11,373
12/31/94 $12,644 $11,325 $11,246
3/31/95 $13,583 $12,432 $12,059
6/30/95 $15,493 $13,600 $13,350
9/30/95 $17,819 $14,693 $14,562
12/31/95 $17,453 $15,576 $14,855
3/31/96 $19,233 $16,413 $15,590
6/30/96 $21,442 $17,140 $16,109
9/30/96 $21,024 $17,670 $16,568
12/31/96 $21,182 $19,143 $17,259
3/31/97 $20,072 $19,656 $17,199
6/30/97 $22,519 $23,088 $19,916
Average Annual Total Return
1-Year 5.0%
Since inception 12/2/92 19.4%
*<F1>assumes equal $10,000 investments made on inception date of
December 2, 1992.
Past performance is not predictive of future performance. Investment return and
principal value will fluctuate, and redemption value may be more or less than
original cost.
STATEMENT OF NET ASSETS
JUNE 30, 1997
SHARES OR
PRINCIPAL QUOTED
AMOUNT COST MARKET VALUE
- ---------- ---- ------------
LONG-TERM INVESTMENTS -- 88.0% (A)<F3>
COMMON STOCKS -- 88.0% (A)<F3>
BASIC RESOURCES -- 1.0%
35,000 Royal Gold, Inc. $430,000 $297,500
CONSUMER NON-DURABLES -- 1.1%
5,500 Fortune Brands, Inc. 184,378 205,221
5,500 Gallaher Group Plc*<F2> 107,452 101,409
---------- ----------
291,830 306,630
ELECTRONICS/EQUIPMENT MANUFACTURING -- 7.8%
8,000 Benchmark Electronics, Inc.*<F2> 245,812 324,000
3,500 Celeritek, Inc.*<F2> 37,875 43,750
40,000 Checkpoint Systems, Inc.*<F2> 665,206 642,520
10,000 Gateway 2000, Inc.*<F2> 342,500 324,380
17,000 Phoenix Gold International,
Inc.*<F2> 156,750 85,000
20,000 Quad Systems Corp.*<F2> 230,000 165,000
13,000 Technitrol, Inc. 315,365 355,875
10,000 Western Digital Corp.*<F2> 383,870 316,250
---------- ----------
2,377,378 2,256,775
ENERGY/SERVICES -- 9.9%
10,000 Barrett Resources Corp.*<F2> 379,020 299,380
4,000 Diamond Offshore
Drilling, Inc.*<F2> 296,240 312,500
23,000 Lone Star Technologies, Inc.*<F2> 258,817 658,375
12,000 Ocean Energy, Inc.*<F2> 177,000 555,000
10,000 Reading & Bates Corp.*<F2> 274,350 267,500
20,000 Tuboscope, Inc.*<F2> (formerly
Tuboscope Vetco
International Corp.) 300,000 397,500
24,400 Willbros Group, Inc.*<F2> 316,525 387,350
---------- ----------
2,001,952 2,877,605
FINANCIAL SERVICES -- 14.4%
15,000 American Federal Bank, FSB 481,875 483,750
24,000 Arcadia Financial Ltd.*<F2> 449,240 220,512
24,000 Olympic Financial
Ltd. Rights*<F2> 0 0
10,000 Capital One Financial Corp. 390,898 377,500
8,000 Lehman Brothers Holdings Inc. 301,936 324,000
8,000 Markel Corp.*<F2> 668,495 1,024,000
59,500 Mego Financial Corp.*<F2> 444,395 431,375
20,000 Philadelphia Consolidated
Holding Corp.*<F2> 382,313 680,000
40,000 Phoenix Duff & Phelps Corp. 307,238 295,000
15,000 Pioneer Group, Inc. 306,550 345,000
---------- ----------
3,732,940 4,181,137
FOOD & BEVERAGES -- 1.3%
10,000 PepsiCo, Inc. 341,850 375,630
HEALTHCARE SERVICES -- 5.0%
15,000 Cooper Companies, Inc.*<F2> 316,475 348,750
60,000 IGEN International Inc.*<F2> 409,125 450,000
30,000 Physicians' Specialty Corp.*<F2> 240,000 168,750
40,000 Physician Support
Systems, Inc.*<F2> 557,500 490,000
---------- ----------
1,523,100 1,457,500
LEISURE/ENTERTAINMENT -- 3.9%
25,000 Dover Downs
Entertainment, Inc. 487,065 450,000
25,000 Steiner Leisure LTD*<F2> 410,625 696,875
---------- ----------
897,690 1,146,875
MISCELLANEOUS MANUFACTURING -- 8.8%
15,000 800-JR CIGAR, Inc.*<F2> 297,499 311,250
45,000 Aim Safety Company Inc.*<F2> 554,714 887,985
15,000 Ducommun Incorporated*<F2> 369,920 441,570
13,000 P. H. Glatfelter Co. 246,038 260,000
20,000 Morrison Knudsen Corp.*<F2> 239,950 272,500
20,000 Northwest Pipe Co.*<F2> 310,000 367,500
---------- ----------
2,018,121 2,540,805
MEDICAL PRODUCTS/SUPPLIES -- 0.9%
35,000 Cardiovascular
Diagnostics, Inc.*<F2> 219,688 262,500
NETWORKING -- 2.2%
6,500 Cabletron Systems, Inc.*<F2> 292,890 184,034
72,300 Osicom Technologies, Inc.*<F2> 666,687 456,430
---------- ----------
959,577 640,464
PHARMACEUTICALS -- 1.4%
15,000 Columbia Laboratories, Inc.*<F2> 250,080 245,625
50,000 Cortex Pharmaceuticals, Inc.*<F2> 328,749 156,250
---------- ----------
578,829 401,875
RESTAURANTS -- 1.0%
70,000 Pizza Inn, Inc.*<F2> 342,750 280,000
RETAILING -- 6.1%
7,000 Barnes & Noble Inc.*<F2> 272,239 301,000
35,000 Charming Shoppes, Inc.*<F2> 256,876 182,665
10,000 Insight Enterprises, Inc.*<F2> 240,000 300,630
10,000 Pep Boys-Manny, Moe
& Jack 288,100 340,630
30,000 PETsMART, Inc.*<F2> 535,500 345,000
17,000 Schultz Sav-O Stores, Inc. 212,813 301,750
---------- ----------
1,805,528 1,771,675
SEMICONDUCTORS/RELATED -- 13.7%
10,000 Advanced Micro
Devices, Inc.*<F2> 458,725 360,000
5,000 Applied Materials, Inc.*<F2> 297,115 354,065
8,000 ASM Lithography
Holding N.V.*<F2> 340,500 468,000
8,000 CFM Technologies, Inc.*<F2> 284,000 262,000
20,000 Cree Research, Inc.*<F2> 300,754 245,000
12,000 Electroglas, Inc.*<F2> 302,063 302,256
20,000 Integrated Measurement
Systems, Inc.*<F2> 330,000 296,260
35,000 Integrated Circuit
Systems, Inc.*<F2> 515,063 794,080
8,000 Kulicke & Soffa
Industries, Inc.*<F2> 260,500 259,752
8,000 PRI Automation, Inc.*<F2> 278,000 303,504
8,000 Teradyne, Inc.*<F2> 328,480 314,000
---------- ----------
3,695,200 3,958,917
SOFTWARE -- 6.1%
77,500 Alydaar Software
Corporation*<F2> 867,877 1,540,313
105,000 Communication Intelligence
Corp.*<F2> 350,582 216,615
---------- ----------
1,218,459 1,756,928
SPECIALTY CHEMICALS -- 2.2%
24,000 CFC International, Inc.*<F2> 291,000 234,000
15,000 ChemFirst Inc. 325,367 406,875
---------- ----------
616,367 640,875
TRANSPORTATION -- 1.2%
80,000 RailAmerica, Inc.*<F2> 420,558 350,000
---------- ----------
Total common stocks 23,471,817 25,503,691
Total long-term
investments 23,471,817 25,503,691
SHORT-TERM INVESTMENTS -- 13.1% (A)<F3>
VARIABLE RATE DEMAND NOTES
$1,056,036 American Family Financial
Services 1,056,036 1,056,036
1,370,000 Johnson Controls, Inc. 1,370,000 1,370,000
1,370,000 Wisconsin Electric Power
Company 1,370,000 1,370,000
---------- ----------
Total short-term
investments 3,796,036 3,796,036
---------- ----------
Total investments $27,267,853 29,299,727
===========
Liabilities, less cash and
receivables (1.1%) (A)<F3> (320,706)
-----------
NET ASSETS $28,979,021
===========
Net Asset Value Per Share
($0.01 par value, unlimited
shares authorized), offering
and redemption price
($28,979,021 / 1,830,549
shares outstanding) $15.83
======
*<F2>Non-income producing security.
(a)<F3>Percentages for the various classifications relate to net assets.
The accompanying notes to financial statements are an integral part of this
statement.
STATEMENT OF OPERATIONS
For the Year Ended June 30, 1997
INCOME:
Dividends $67,725
Interest 168,763
---------
Total income 236,488
---------
EXPENSES:
Investment management fees 286,734
Administrative services 56,926
Professional fees 23,100
Transfer agent fees 23,046
Registration fees 20,722
Custodian fees 12,064
Amortization of organizational expenses 11,193
Printing and postage expense 8,636
Other expenses 7,605
---------
Total expenses 450,026
---------
NET INVESTMENT LOSS (213,538)
---------
NET REALIZED GAIN ON INVESTMENTS 2,692,198
NET DECREASE IN UNREALIZED APPRECIATION ON INVESTMENTS (894,714)
---------
NET GAIN ON INVESTMENTS 1,797,484
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $1,583,946
==========
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended June 30, 1997 and 1996
1997 1996
--------- --------
OPERATIONS:
Net investment loss $(213,538) $(232,045)
Net realized gain on investments 2,692,198 4,302,445
Net (decrease) increase in unrealized
appreciation on investments (894,714) 1,769,703
---------- ----------
Net increase in net assets resulting
from operations 1,583,946 5,840,103
---------- ----------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net realized gains
($2.14451 and $2.26126 per share,
respectively) (3,623,419) (2,150,393)
---------- ----------
Total distributions (3,623,419)** (2,150,393)*
<F5> <F4>
---------- ----------
FUND SHARE ACTIVITIES:
Proceeds from shares issued (381,696 and
639,567 shares, respectively) 5,709,834 10,090,946
Net asset value of shares issued in
distributions (256,417 and 148,396
shares, respectively) 3,537,970 2,133,156
Cost of shares redeemed (351,595 and 39,690
shares, respectively) (5,201,112) (627,391)
---------- ----------
Net increase in net assets derived from Fund
share activities 4,046,692 11,596,711
---------- ----------
TOTAL INCREASE 2,007,219 15,286,421
NET ASSETS AT THE BEGINNING OF THE YEAR 26,971,802 11,685,381
---------- ----------
NET ASSETS AT THE END OF THE YEAR $28,979,021 $26,971,802
========== ==========
*<F4>Total distributions include $1,994,634 of ordinary income, of which 3% is
eligible for the corporate dividends received deduction.
** <F5>Total distributions include $2,731,317 of ordinary income, of which 3% is
eligible for the corporate dividends received deduction.
The accompanying notes to financial statements are an integral part of these
statements.
FINANCIAL HIGHLIGHTS
(Selected data for each share of the Fund outstanding throughout each period)
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
FOR THE YEARS ENDED JUNE 30, 12/2/92*<F6>
---------------------------------------
1997 1996 1995 1994 to 6/30/93
-------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $17.47 $14.68 $11.67 $11.55 $10.00
Income from investment operations:
Net investment loss (a<F8> (0.08) (0.05) (0.11) (0.07) (0.02)
Net realized and unrealized gains on investments 0.58 5.10 3.31 0.64 1.58
------- ------- ------- ------- --------
Total from investment operations 0.50 5.05 3.20 0.57 1.56
Less distributions:
Dividend from net investment income -- -- -- -- (0.01)
Distributions from net realized gains (2.14) (2.26) (0.19) (0.45) --
------- ------- ------- ------- --------
Total from distributions (2.14) (2.26) (0.19) (0.45) (0.01)
------- ------- ------- ------- --------
Net asset value, end of period $15.83 $17.47 $14.68 $11.67 $11.55
======= ======= ======= ======= ========
TOTAL INVESTMENT RETURN 5.0% 38.4% 27.8% 4.9% 28.5%**<F7>
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's $) 28,979 26,972 11,685 6,798 1,062
Ratio of expenses (after reimbursement) to average net assets(b)<F9> 1.6% 1.8% 2.0% 2.0% 2.0%**<F7>
Ratio of net investment loss to average net assets (c)<F10> (0.7)% (1.3)% (1.2)% (1.3)% (0.7)%**<F7>
Portfolio turnover rate 140.6% 177.5% 147.8% 63.0% 54.0%
Average commission rate paid (d)<F11> $0.0578 -- -- -- --
*<F6>Commencement of Operations.
**<F7>Annualized.
(a)<F8>Net investment loss per share is calculated using ending balances prior
to consideration of adjustments for permanent book and tax differences.
(b)<F9>Computed after giving effect to adviser's expense limitation undertaking.
If the Fund had paid all of its expenses, the ratio would have been 3.0% for the
year ended June 30, 1994 and 11.5%**<F7> for the period ended June 30, 1993.
(c)<F10>The ratio of net investment loss prior to the adviser's expense
limitation undertaking to average net assets would have been (2.2%) for the year
ended June 30, 1994 and (10.2%)**<F7> for the period ended June 30, 1993.
(d)<F11>Disclosure required for fiscal years beginning after September 1, 1995.
The accompanying notes to financial statements are an integral part of this
statement.
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES --
The following is a summary of significant accounting policies of The Henlopen
Fund (the "Fund"), which was organized as a Delaware Business Trust on
September 17, 1992 and is registered as an open-end management company under
the Investment Company Act of 1940. The Fund commenced operations on December
2, 1992. The investment objective of the Fund is long-term capital
appreciation.
(a) Each security, excluding short-term investments, is valued at the
last sale price reported by the principal security exchange on which the
issue is traded, or if no sale is reported, the latest bid price.
Securities which are traded over-the-counter are valued at the latest bid
price. Securities for which quotations are not readily available are
valued at fair value as determined by the investment adviser under the
supervision of the Board of Trustees. Short-term investments are valued at
cost which approximates quoted market value. Investment transactions are
recorded no later than the first business day after the trade date. Cost
amounts, as reported on the statement of net assets, are the same for
Federal income tax purposes.
(b) Net realized gains and losses on common stock are computed on the
basis of the cost of specific certificates.
(c) Provision has not been made for Federal income taxes since the Fund
has elected to be taxed as a "regulated investment company" and intends to
distribute substantially all income to its shareholders and otherwise
comply with the provisions of the Internal Revenue Code applicable to
regulated investment companies.
(d) Dividend income is recorded on the ex-dividend date. Interest income
is recorded on the accrual basis.
(e) The Fund has investments in short-term variable rate demand notes,
which are unsecured instruments. The Fund may be susceptible to credit
risk with respect to these notes to the extent the issuer defaults on its
payment obligation. The Fund's policy is to monitor the creditworthiness
of the issuer and does not anticipate nonperformance by these
counterparties.
(f) Generally accepted accounting principles require that permanent
financial reporting and tax differences be reclassified to paid-in
capital.
(g) 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 and
disclosure of contingent 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 these
estimates.
(2) INVESTMENT ADVISER AND MANAGEMENT AGREEMENT AND TRANSACTIONS WITH RELATED
PARTIES --
The Fund has a management agreement with Landis Associates, Inc. (the
"Adviser"), with whom certain officers and directors of the Fund are
affiliated, to serve as investment adviser and manager. Under the terms of
the agreement, the Fund will pay the Adviser a monthly management fee at the
annual rate of 1% on the daily net assets of the Fund.
(3) DISTRIBUTION TO SHAREHOLDERS --
Net investment income and net realized gains, if any, are distributed to
shareholders. On July 29, 1997, the Fund distributed $14,802 from net short-
term realized gains ($0.00812 per share) and $1,730,633 ($0.94928 per share)
from net long-term realized gains. The distributions were paid on July 30,
1997, to shareholders of record on July 28, 1997.
(4) DEFERRED EXPENSES --
Organizational expenses were deferred and are being amortized on a straight-
line basis over a period of five years beginning with the date of sales of
shares to the public. These expenses were advanced by the Adviser who will be
reimbursed by the Fund over a period of five years. The proceeds of any
redemption of the initial shares by the original shareholder will be reduced
by a pro-rata portion of any then unamortized deferred expenses in the same
proportion as the number of initial shares being redeemed bears to the number
of initial shares outstanding at the time of such redemption. The unamortized
organizational expenses at June 30, 1997 were $4,663.
(5) INVESTMENT TRANSACTIONS --
For the year ended June 30, 1997, purchases and proceeds of sales of
investment securities (excluding short-term securities) were $35,816,955 and
$37,740,208, respectively.
(6) ACCOUNTS PAYABLE AND ACCRUED LIABILITIES --
As of June 30, 1997, liabilities of the Fund included the following:
Payable to brokers for investments purchased $297,500
Payable to the Adviser for management fees and deferred expenses 27,778
Other liabilities 20,407
(7) SOURCES OF NET ASSETS --
As of June 30, 1997, the sources of net assets were as follows:
Fund shares issued and outstanding $25,201,712
Net unrealized appreciation on investments 2,031,874
Undistributed net realized gains and losses 1,745,435
-----------
$28,979,021
===========
Aggregate net unrealized appreciation as of June 30, 1997, consisted of the
following:
Aggregate gross unrealized appreciation $4,528,636
Aggregate gross unrealized depreciation (2,496,762)
----------
Net unrealized appreciation $2,031,874
==========
REPORT OF INDEPENDENT ACCOUNTANTS
(PRICE WATERHOUSE LOGO)
3100 Multifoods Tower Telephone 612 332 7000
33 South Sixth Street
Minneapolis, MN 55402
July 24, 1997
To the Shareholders and Trustees
of The Henlopen Fund
In our opinion, the accompanying statement of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
The Henlopen Fund (the "Fund") at June 30, 1997, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended and the financial highlights for each of the four years
in the period then ended and for the period from December 2, 1992 (commencement
of operations) through June 30, 1993, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at June 30, 1997 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
BOARD OF TRUSTEES
ROBERT J. FAHEY, JR.
Director of Real Estate Investment Banking
Cushman & Wakefield of Pennsylvania, Inc.
Philadelphia, Pennsylvania
MICHAEL L. HERSHEY
Chairman, Landis Associates, Inc.
Kennett Square, Pennsylvania
STEPHEN L. HERSHEY, M.D.
President,
First State Orthopaedic Consultants, P.A.
Newark, Delaware
P. COLEMAN TOWNSEND, JR.
President/CEO, Townsends, Inc.
Wilmington, Delaware
- ---------------------------
Investment Adviser
LANDIS ASSOCIATES, INC.
Independent Accountants
PRICE WATERHOUSE LLP
Custodian, Transfer Agent
FIRSTAR TRUST COMPANY
Legal Counsel
FOLEY & LARDNER
THE HENLOPEN FUND
LONGWOOD CORPORATE CENTER
SUITE 213
415 MCFARLAN ROAD
KENNETT SQUARE, PENNSYLVANIA 19348
(610-925-0400)
This report is not authorized for use as an offer of sale or a solicitation of
an offer to buy shares of The Henlopen Fund unless accompanied or preceded by
the Fund's current prospectus.
</TABLE>
