Registration No. 33-52154
811-07168
_________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
__________________________
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. _____ [_]
Post-Effective Amendment No. 7 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 8 [X]
(Check appropriate box or boxes.)
_________________________________
THE HENLOPEN FUND
(Exact name of Registrant as Specified in Charter)
Longwood Corporate Center, Suite 213
415 McFarlan Road
Kennett Square, Pennsylvania 19348
(Address of Principal Executive Offices) (Zip Code)
(610) 925-0400
(Registrant's Telephone Number, including Area Code)
Copy to:
Michael L. Hershey
Longwood Corporate Center Richard L. Teigen
Suite 213 Foley & Lardner
415 McFarlan Road 777 East Wisconsin Avenue
Kennett Square, Pennsylvania 19348 Milwaukee, Wisconsin 53202
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: As soon as practicable
after the Registration Statement becomes effective.
It is proposed that this filing become effective (check appropriate box):
[_] immediately upon filing pursuant to paragraph (b)
[_] on (date) pursuant to paragraph (b)
[_] 60 days after filing pursuant to paragraph (a)(1)
[X] on October 30, 1998 pursuant to paragraph (a)(1)
[_] 75 days after filing pursuant to paragraph (a)(2)
[_] on (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
[_] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment
<PAGE>
THE HENLOPEN FUND
CROSS REFERENCE SHEET
(Pursuant to Rule 481 showing the location in the Prospectus and
the Statement of Additional Information of the responses to the Items of
Parts A and B of Form N-1A.)
Caption or Subheading in Prospectus
Item No. on Form N-1A or Statement of Additional Information
Part A - INFORMATION REQUIRED IN PROSPECTUS
1. Front and Back Cover Page Cover Pages
2. Risk/Return Summary: Questions Every Investor Should Ask
Investments, Risks and Before Investing In the Henlopen Fund
Performance
3. Fee Table Fees and Expenses
4. Investment Objectives, Investment Objective, Strategies and
Principal Investment Risks
Strategies and Related
Risks
5. Management's Discussion of Included in Annual Report to
Fund Performance Shareholders
6. Management Organization and Fees and Expenses; Management of the
Capital Structure Fund
7. Shareholder Information Determining Net Asset Value; Purchasing
Shares; Redeeming Shares; Dividends,
Distributions and Taxes
8. Distribution Arrangements *
9. Financial Highlights Financial Highlights
Information
PART B - INFORMATION REQUIRED IN STATEMENT OF ADDITIONAL INFORMATION
10. Cover Page and Table of Cover Page; Table of Contents
Contents
11. Fund History Fund History and Classification
12. Description of the Fund and Investment Restrictions; Investment
Its Investments and Risks Considerations
13. Management of the Fund Trustees and Officers of the Fund
14. Control Persons and Ownership of Management and Principal
Principal Holders of Shareholders
Securities
15. Investment Advisory and Investment Adviser and Administrator;
Other Services Custodian; Independent Accountants
16. Brokerage Allocation and Allocation of Portfolio Brokerage
Other Practices
17. Capital Stock and Other Capital Structure
Securities
18. Purchase, Redemption and Determination of Net Asset Value;
Pricing of Shares Automatic Investment Plan; Retirement
Plans; Redemption of Shares
19. Taxation of the Fund Taxes
20. Underwriters *
21. Calculation of Performance Performance Information
Data
22. Financial Statements Cover Page
____________________________
* Answer negative or inapplicable
<PAGE>
[cover page]
PROSPECTUS October 30, 1998
THE HENLOPEN FUND
The Henlopen Fund seeks long-term capital appreciation by
investing mainly in common stocks of U.S. companies.
Please read this Prospectus and keep it for future reference.
It contains important information, including information on how The
Henlopen Fund invests and the services it offers to shareholders.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED
IF THIS PROSPECTUS IS COMPLETE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
Table of Contents
Questions Every Investor Should Ask
Before Investing in The Henlopen Fund . . . . . . . . . . . . . . . . __
Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . __
Investment Objective, Strategies and Risks . . . . . . . . . . . . . . __
Management of the Fund . . . . . . . . . . . . . . . . . . . . . . . . __
Determining Net Asset Value . . . . . . . . . . . . . . . . . . . . . . __
Purchasing Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . __
Redeeming Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . __
Dividends, Distributions and Taxes . . . . . . . . . . . . . . . . . . __
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . __
<PAGE>
QUESTIONS EVERY INVESTOR
SHOULD ASK BEFORE INVESTING IN
THE HENLOPEN FUND
1. What are the Fund's Goals?
The Henlopen Fund is a growth fund seeking long-term capital
appreciation.
2. What are the Fund's Principal Investment Strategies?
The Henlopen Fund mainly invests in common stocks of United
States companies. The Fund invests in companies that its investment
adviser believes will appreciate significantly over a one to two year
period. The Fund follows no single investment selection criterion. It
invests in companies of all sizes and in any industry. At any time the
Fund may hold both "growth" stocks and "value" stocks.
3. What are the Principal Risks in Investing in the Fund?
The Fund mainly invests in common stocks. The prices of the
stocks in which the Fund invests may decline for a number of reasons. The
price declines may be steep, sudden and/or prolonged. As a consequence,
investors in the Fund may lose money.
For this reason the Fund is a suitable investment only for those
investors who have long-term investment goals such as investing for
retirement. Prospective investors who might need to redeem their shares
in a hurry or who are uncomfortable with an investment that will increase
and decrease in value should not invest in the Fund.
4. How has the Fund Performed?
The bar chart and table that follows provide some indication of
the risks of investing in the Fund by showing changes in the Fund's
performance from year to year and how its average annual returns over
various periods compare to those of the Standard & Poor's Composite Index
of 500 Stocks and the Lipper Growth Fund Index. Please remember that the
Fund's past performance is not necessarily an indication of its future
performance. It may perform better or worse in the future.
50%
40%
38.03%
30% ------ 29.86%
22.61% 21.37% ------ ------
20% ------ ------ ------ ------
------ ------ ------ ------
10% ------ ------ ------ ------
------ ------ ------ ------
------ ------ ------ ------
0%-----------------------------------------------------------------------
------
-2.73%
-10%
-20%
1997 1996 1995 1994 1993
_______________
Note: The Fund's 1998 year-to-date return is 15.14% (January 1, 1998
through the quarter ending June 30, 1998).
During the five year period shown on the bar chart, the Fund's
highest return for a quarter was 24.76% (quarter ended September 30, 1997)
and the lowest return for a quarter was -7.56% (quarter ended December 31,
1997).
Average Annual Total Since the inception
Returns (for the date of the
periods ending Fund (December 2,
December 31, 1997) Past Year Past 5 Years 1992)
The Henlopen Fund 22.61% 21.01% 20.67%
S&P 500* 33.4% 20.30% 20.33%
Lipper Growth Fund
Index ** 28.09% 17.08% 17.26%
___________________
* The S&P 500/R/ is the Standard & Poor's Composite Index of 500
Stocks, a widely recognized unmanaged index of common stock prices.
** The Lipper Growth Fund Index is an index of mutual funds having an
investment objective similar to the Fund's investment objective.
FEES AND EXPENSES
The table below describes the fees and expenses that you may pay
if you buy and hold shares of the Fund.
SHAREHOLDER FEES (fees paid directly from your
investment)
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price) None
Maximum Deferred Sales Charge (Load) None
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends and Distributions None
Redemption Fee None*
Exchange Fee None
Maximum Account Fee None
ANNUAL FUND OPERATING EXPENSES (expenses that are
deducted from Fund assets)
Management Fees 1.00%
Distribution and/or Service (12b-1) Fees None
Other Expenses 0.53%
Total Annual Fund Operating Expenses 1.53%
====
________
* A fee of $12.00 is charged for each wire redemption.
EXAMPLE
This Example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the Fund for the
time periods indicated and then redeem all of your shares at the end of
these periods. The Example also assumes that your investment has a 5%
return each year and that the Fund's operating expenses remain the same.
Although your actual costs may be higher or lower, based on these
assumptions, your costs would be:
1 Year 3 Years 5 Years 10 Years
$156 $483 $834 $1824
INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
The Fund's investment objective is long-term capital
appreciation. The Fund may change its investment objective without
obtaining shareholder approval. Please remember that an investment
objective is not a guarantee. An investment in the Fund might not
appreciate and investors may lose money.
The Fund mainly invests in common stocks of U.S. companies. The
Fund may invest 100% of its assets in such companies. Except for
temporary defensive positions, the Fund will invest at least 70% of its
assets in common stocks of U.S. companies. When the Fund's portfolio
manager selects stocks for the Fund, he follows these principles:
1. Makes investment decisions based on company specific factors
(like new products or changes in management) not general
economic conditions (like interest rate changes or general stock
market trends). He's a "stock picker" not a "market timer."
2. Looks for companies whose stock may appreciate significantly
over a one to two year period and who are leaders in their
industries. He's neither an active trader nor a "buy and hold"
investor.
3. Considers companies of all sizes and industries and will invest
in both "growth" stocks and "value" stocks. While he does not
fit in any one "style" box, most of the Fund's investments will
be in "growth" stocks.
4. Avoids stocks that have high price/earning ratios or have had a
significant increase in price over a short period of time.
5. Diversifies investments. The Fund will normally own 50 to 80
stocks of companies operating in a number of industries.
Initial investments in a stock rarely exceed 2% of the Fund's
assets.
Investing in common stock involves risks. The common stocks in
which the Fund invests may decline in value for any number of reasons. If
that happens, the value of your investment will decline as well. The
following are some of the main reasons why common stocks purchased by the
Fund might decline in value.
1. The Fund's portfolio manager is wrong in his assessment of a
company's prospects.
2. The Fund's portfolio manager is correct in his assessment of a
company's prospects but the company is out-of-favor with other
investors.
3. Investors shift their assets from common stocks in general to
other assets such as debt securities or money market
instruments.
The Fund may, in response to adverse market, economic, political
or other conditions, take temporary defensive positions. This means the
Fund will invest in money market instruments (like U.S. Treasury Bills,
commercial paper or repurchase agreements). The Fund will not be able to
achieve its investment objective of capital appreciation to the extent
that it invests in money market instruments since these securities do not
appreciate in value. When the Fund is not taking a temporary defensive
position, it still will hold some cash and money market instruments so
that it can pay its expenses, satisfy redemption requests or take
advantage of investment opportunities.
Although the Fund does not intend to engage in frequent short-
term trading, in most years its annual portfolio turnover rate has
exceeded 100%. (Generally speaking, a turnover rate of 100% occurs when
the Fund replaces securities valued at 100% of its average net assets
within a one year period.) Higher portfolio turnover will result in the
Fund incurring more transaction costs such as brokerage commissions or
mark-ups or mark-downs. Payment of these transaction costs reduce total
return. Higher portfolio turnover could result in the payment by the
Fund's shareholders of increased taxes on realized gains. Distributions
to the Fund's shareholders, to the extent they are short-term capital
gains, will be taxed at ordinary income rates for federal income tax
purposes, rather than at lower capital gains rates.
MANAGEMENT OF THE FUND
Landis Associates, Inc. (the "Adviser") is the Fund's investment
adviser. The Adviser's address is:
Longwood Corporate Center
Suite 213
415 McFarlan Road
Kennett Square, PA 19348
The Adviser has been in business since 1986 and has been the
Fund's only investment adviser. At July 31, 1998 the Adviser managed
approximately $145 million in assets. As the investment adviser to the
Fund, the Adviser manages the investment portfolio for the Fund. It makes
the decisions as to which securities to buy and which securities to sell.
The Fund pays the Adviser an annual investment advisory fee equal to 1.0%
of its average net assets.
Michael L. Hershey is primarily responsible for the day-to-day
management of the Fund's portfolio and has been so since the Fund
commenced operations on December 2, 1992. He is the Fund's portfolio
manager. Mr. Hershey has been President and Chairman of the Board of the
Adviser since he founded the Adviser in 1986.
DETERMINING NET ASSET VALUE
The price at which investors purchase shares of the Fund and at
which shareholders redeem shares of the Fund is called its net asset
value. The Fund calculates its net asset value as of the close of regular
trading on the New York Stock Exchange (normally 4:00 p.m. Eastern Time)
on each day the New York Stock Exchange is open for trading. The Fund
calculates its net asset value based on the market prices of the
securities (other than money market instruments) it holds. It values most
money market instruments it holds at their amortized cost. The Fund will
process purchase and redemption orders that it receives and accepts prior
to the close of regular trading on a day in which the New York Stock
Exchange is open at the net asset value determined later that day. It
will process purchase and redemption orders that it receives and accepts
after the close of regular trading at the net asset value determined at
the close of regular trading on the next day the New York Stock Exchange
is open.
The Fund's net asset value can be found daily in the mutual fund
listings of many major newspapers under the heading "Henlopen Fd". The
Fund's NASDAQ symbol is "HENLX."
PURCHASING SHARES
How to purchase shares from the Fund
1. Read this Prospectus carefully
2. Determine how much you want to invest keeping in mind the following
minimums:
a. New accounts
- Individual Retirement Accounts $ 2,000
- Education IRAs $ 500
- 401(k) plans None
- All other accounts $10,000
b. Existing accounts
- Dividend reinvestment None
- 401(k) plans None
- Automatic Investment Plan $ 100
- Individual Retirement Accounts $ 500
- Education IRA $ 500
- All other accounts $ 2,000
3. Complete the share purchase application at the back of the
Prospectus, carefully following the instructions. (The Fund has
additional share purchase applications if you need them.) If you
have any questions, please call 1-800-922-0224 for assistance.
4. Make your check payable to "The Henlopen Fund." All checks must be
drawn on U.S. banks. The Fund will not accept cash or third party
checks. Firstar Trust Company, the Fund's transfer agent, will
charge a $20 fee against a shareholder's account for any payment
check returned to the custodian. The shareholder will also be
responsible for any losses suffered by the Fund as a result.
5. Send the application and check to:
For First Class Mail
The Henlopen Fund
c/o Firstar Trust Company
Mutual Fund Services
P.O. Box 701
Milwaukee, WI 53201-0701
For Overnight Delivery Service or Registered Mail
The Henlopen Fund
c/o Firstar Trust Company
Mutual Fund Services
615 East Michigan Street, 3rd Floor
Milwaukee, WI 53202-5207
Please do not mail letters by overnight delivery service or registered
mail to the Post Office Box address.
6. If you wish to open an account by wire, please call 1-800-922-0224
prior to wiring funds in order to obtain a confirmation number and to
ensure prompt and accurate handling of funds. Funds should be wired
to:
Firstar Bank Milwaukee, N.A.
777 East Wisconsin Avenue
Milwaukee, WI 53202
ABA #075000022
Credit:
Firstar Trust Company
Account #112-952-137
Further Credit:
The Henlopen Fund
(shareholder registration)
(shareholder account number, if known)
You should then send a properly signed share purchase application
marked "FOLLOW-UP" to either of the addresses listed above. Please
remember that Firstar Trust Company must receive your wired funds
prior to the close of regular trading on the New York Stock Exchange
for you to receive same day pricing. The Fund and Firstar Trust
Company are not responsible for the consequences of delays resulting
from the banking or Federal Reserve Wire system, or from incomplete
wiring instructions.
Purchasing shares from broker-dealers, financial institutions and others
Some broker-dealers may sell shares of the Fund. These broker-
dealers may charge investors a fee either at the time of purchase or
redemption. The fee, if charged, is retained by the broker-dealer and not
remitted to the Fund or the Adviser.
The Fund may enter into agreements with broker-dealers,
financial institutions or other service providers ("Servicing Agents")
that may include the Fund as an investment alternative in the programs
they offer or administer. Servicing agents may:
1. Become shareholders of record of the Fund. This means all
requests to purchase additional shares and all redemption
requests must be sent through the Servicing Agent. This also
means that purchases made through Servicing Agents are not
subject to the Fund's minimum purchase requirement.
2. Use procedures and impose restrictions that may be in addition
to, or different from, those applicable to investors purchasing
shares directly from the Fund.
3. Charge fees to their customers for the services they provide
them. Also, the Fund and/or the Adviser may pay fees to
Servicing Agents to compensate them for the services they
provide their customers.
4. Be allowed to purchase shares by telephone with payment to
follow the next day. If the telephone purchase is made prior to
the close of regular trading on the New York Stock Exchange, it
will receive same day pricing.
5. Be authorized to accept purchase orders on the Fund's behalf.
This means that the Fund will process the purchase order at the
net asset value which is determined following the Servicing
Agent's acceptance of the customer's order.
If you decide to purchase shares through Servicing Agents,
please carefully review the program materials provided to you by the
Servicing Agent. When you purchase shares of the Fund through a Servicing
Agent, it is the responsibility of the Servicing Agent to place your order
with the Fund on a timely basis. If the Servicing Agent does not, or if
it does not pay the purchase price to the Fund within the period specified
in its agreement with the Fund, it may be held liable for any resulting
fees or losses.
Other information about purchasing shares of the Fund
The Fund may reject any share purchase applications for any
reason. The Fund will not accept purchase orders made by telephone,
unless they are from a Servicing Agent which has an agreement with the
Fund.
The Fund will not issue certificates evidencing shares
purchased. The Fund will send investors a written confirmation for all
purchases of shares.
The Fund offers an automatic investment plan allowing
shareholders to make purchases on a regular and convenient basis. The
Fund also offers the following retirement plans:
- Traditional IRA
- Roth IRA
- Education IRA
- SEP-IRA
- SIMPLE IRA
- 403(b)(7) Custodial Account
- Defined Contribution Plan with profit
sharing, including 401(k), and money
purchase pension component
Investors can obtain further information about the automatic
investment plan and the retirement plans by calling the Fund at 1-800-922-
0224. The Fund recommends that investors consult with a competent
financial and tax advisor regarding the retirement plans before investing
through these plans.
REDEEMING SHARES
How to redeem (sell) shares by mail
1. Prepare a letter of instructions containing
- account number(s)
- the amount of money or number of shares
being redeemed
- the names on the account
- daytime phone number
- additional information that the Fund may
require for redemptions by corporations,
executors, administrators, trustees,
guardians, or others who hold shares in a
fiduciary or representative capacity.
Contact the Fund's transfer agent, Firstar
Trust Company, in advance at 1-800-922-0224
if you have questions.
2. Sign the letter of instructions exactly as the shares are
registered. Joint ownership accounts must be signed by all
owners.
3. Have the signatures guaranteed by a commercial bank or trust
company in the United States, a member firm of the New York
Stock Exchange or other eligible guarantor institution in the
following situations:
- The redemption proceeds are to be sent to a
person other than whose name the shares are
registered
- The redemption proceeds are to be sent to an
address other than the address of record
A notarized signature is not an acceptable substitute for a signature
guarantee.
4. Send the letter of instructions to:
First Class Mail
The Henlopen Fund
c/o Firstar Trust Company
Mutual Fund Services
P.O. Box 701
Milwaukee, WI 53201-0701
Overnight Delivery Service or Registered Mail
The Henlopen Fund
c/o Firstar Trust Company
Mutual Fund Services
615 East Michigan Street, 3rd Floor
Milwaukee, WI 53202-5207
Please do not mail letters by overnight delivery service or
registered mail to the Post Office Box address.
How to redeem (sell) shares by telephone
1. Instruct Firstar Trust Company that you want the option of
redeeming shares by telephone. This can be done by completing
the appropriate section on the share purchase application.
Shares held in IRA's cannot be redeemed by telephone.
2. Assemble the same information that you would include in the
letter of instruction for a written redemption request.
3. Call Firstar Trust Company at 1-800-922-0224 or 1-414-765-4127.
Please do not call the Fund or the Adviser.
How to redeem (sell) shares through Servicing Agents
If your shares are held by a Servicing Agent, you must redeem
your shares through the Servicing Agent. Contact the Servicing Agent for
instructions on how to do so.
Payment of Redemption Proceeds
The redemption price per share you receive for redemption
requests is the next determined net asset value after:
1. Firstar Trust Company receives your written request in proper
form with all required information.
2. Firstar Trust Company receives your authorized telephone request
with all required information.
3. A Servicing Agent that has been authorized to accept redemption
requests on behalf of the Fund receives your request in
accordance with its procedures.
For those shareholders who redeem shares by mail, Firstar Trust
Company will mail a check in the amount of the redemption proceeds no
later than the seventh day after it receives the written request in proper
form with all required information. For those shareholders who redeem by
telephone, Firstar Trust Company normally will transfer the redemption
proceeds to your designated bank account if you have elected to receive
redemption proceeds by either Electronic Funds Transfer or wire. An
Electronic Funds Transfer generally takes up to 3 business days to reach
the shareholder's account whereas Firstar Trust Company generally wires
redemption proceeds on the business day following the calculation of the
redemption price. However, the Fund may direct Firstar Trust Company to
pay the proceeds of a telephone redemption on a date no later than the
seventh day after the redemption request. Firstar Trust Company currently
charges $12 for each wire redemption but does not charge a fee for
Electronic Funds Transfers. Those shareholders who redeem shares through
Servicing Agents will receive their redemption proceeds in accordance with
the procedures established by the Servicing Agent.
Other Redemption Considerations
When redeeming shares of the Fund, shareholders should consider
the following:
1. The redemption may result in a taxable gain.
2. Shareholders who redeem shares held in an IRA must indicate on
their redemption request whether or not to withhold federal
income taxes. If not, these redemptions, as well as redemptions
of other retirement plans not involving a direct rollover to an
eligible plan, will be subject to federal income tax
withholding.
3. The Fund may delay the payment of redemption proceeds for up to
seven days in all cases.
4. If you purchased shares by check, the Fund may delay the payment
of redemption proceeds until it is reasonably satisfied the
check has cleared.
5. Firstar Trust Company will send the proceeds of telephone
redemptions to an address or account other than that shown on
its records only if the shareholder has sent it a written
request with signatures guaranteed.
6. The Fund requires that signature guarantees accompany all
written redemption requests received within 30 days after an
address change. Firstar Trust Company will not accept
telephone redemption requests made within 30 days after an
address change.
7. The Fund reserves the right to refuse a telephone redemption
request if it believes it is advisable to do so. Both the Fund
and Firstar Trust Company may modify or terminate its procedures
for telephone redemptions at any time. Neither the Fund nor
Firstar Trust Company will be liable for following instructions
for telephone redemption transactions that they reasonably
believe to be genuine, provided they use reasonable procedures
to confirm the genuineness of the telephone instructions. They
may be liable for unauthorized transactions if they fail to
follow such procedures. These procedures include requiring some
form of personal identification prior to acting upon the
telephone instructions and recording all telephone calls.
During periods of substantial economic or market change,
telephone redemptions may be difficult to implement. If a
shareholder cannot contact Firstar Trust Company by telephone,
he or she should make a redemption request in writing in the
manner set forth above.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund intends to distribute to its shareholders annually
substantially all of its net investment income and capital gains. The
Fund will automatically reinvest on behalf of shareholders all dividends
and distributions in additional shares of the Fund unless the shareholder
has elected to receive dividends and distributions in cash. Shareholders
may make this election on the share purchase application or by writing to
Firstar Trust Company.
The Fund's distributions, whether received in cash or additional
shares of the Fund, may be subject to federal and state income tax. These
distributions may be taxed as ordinary income and capital gains (which may
be taxed at different rates depending on the length of time the Fund holds
the assets generating the capital gains).
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you
understand the Fund's financial performance for the past 5 years. Certain
information reflects financial results for a single Fund share. The total
returns in the table represent the rate that an investor would have earned
on an investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by PricewaterhouseCoopers
LLP, whose report, along with the Fund's financial statements, are included
in the Annual Report which is available upon request.
For the Years Ended
6/30/98 6/30/97 6/30/96 6/30/95 6/30/94
Net Asset Value,
Beginning of Period $15.83 $17.47 $14.68 $11.67 $11.55
Income from
investment
operations:
Net Investment
Loss(a) (0.03) (0.08) (0.05) (0.11) (0.07)
Net Realized and
Unrealized Gains on
Investments 4.55 0.58 5.10 3.31 0.64
------ ------ ------ ------ ------
Total from
Investment
Operations 4.52 0.50 5.05 3.20 0.57
Less Distributions:
Dividends (from net
investment income) -- -- -- -- --
Distributions (from
net realized gains) (3.31) (2.14) (2.26) (0.19) (0.45)
------- ------- ------ ------- ------
Total Distributions (3.31) (2.14) (2.26) (0.19) (0.45)
------- ------- ------ ------- ------
Net Asset Value, End
of Period $17.04 $15.83 $17.47 $14.68 $11.67
====== ====== ====== ====== ======
TOTAL RETURN 32.8% 5.0% 38.4% 27.8% 4.9%
RATIOS/SUPPLEMENTAL
DATA:
Net Assets, End of
Period (in 000's) $39,996 $28,979 $26,972 $11,685 $6,798
Ratio of Expenses
(after
reimbursement)
to Average Net
Assets 1.5% 1.6% 1.8% 2.0% 2.0%(b)
Ratio of Net
Investment Loss
to Average Net
Assets (0.7)% (0.7)% (1.3)% (1.2)% (1.3)%(c)
Portfolio Turnover
Rate 116.3% 140.6% 177.5% 147.8% 63.0%
_______________
(a) Net investment loss per share is calculated using ending balances
prior to consideration of adjustments for permanent book and tax
differences.
(b) Computed after giving effect to the 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.
(c) 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.
<PAGE>
[back cover page]
THE HENLOPEN FUND
A NO-LOAD MUTUAL FUND
SEEKING LONG-TERM
CAPITAL APPRECIATION
To learn more about The Henlopen Fund you may want to read The
Henlopen Fund's Statement of Additional Information (or "SAI") which
contains additional information about the Fund. The Henlopen Fund has
incorporated by reference the SAI into the Prospectus. This means that
you should consider the contents of the SAI to be part of the Prospectus.
You also may learn more about The Henlopen Fund's investments by
reading the Fund's annual and semi-annual reports to shareholders. The
annual report includes a discussion of the market conditions and
investment strategies that significantly affected the performance of The
Henlopen Fund during its last fiscal year.
The SAI and the annual and semi-annual reports are all available
to shareholders and prospective investors without charge, simply by
calling 1-800-922-0224 or by writing to:
The Henlopen Fund
Longwood Corporate Center
Suite 213
415 McFarlan Road
Kennett Square, PA 19348
Prospective investors and shareholders who have questions about The
Henlopen Fund may also call the above number or write to the above
address.
The general public can review and copy information about The
Henlopen Fund (including the SAI) at the Securities and Exchange
Commission's Public Reference Room in Washington, D.C. (Please call 1-
800-SEC-0330 for information on the operations of the Public Reference
Room.) Reports and other information about The Henlopen Fund are also
available at the Securities and Exchange Commission's Internet site at
http://www.sec.gov. and copies of this information may be obtained, upon
payment of a duplicating fee, by writing to:
Public Reference Section
Securities and Exchange Commission
Washington, D.C. 20549-6009
Please refer to The Henlopen Fund's Investment Company Act File No., 811-
07168 when seeking information about the Fund from the Securities and
Exchange Commission.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION October 30, 1998
THE HENLOPEN FUND
Longwood Corporate Center
Suite 213
415 McFarlan Road
Kennett Square, Pennsylvania 19348
This Statement of Additional Information is not a Prospectus and
should be read in conjunction with the Prospectus of The Henlopen Fund
dated October 30, 1998. Requests for copies of the Prospectus should be
made in writing to The Henlopen Fund, Longwood Corporate Center, Suite
213, 415 McFarlan Road, Kennett Square, Pennsylvania 19348, Attention:
Corporate Secretary or by calling (610) 925-0400.
The following financial statements are incorporated by reference
to the Annual Report, dated June 30, 1998, of The Henlopen Fund (File No.
811-07168), as filed with the Securities and Exchange Commission on August
5, 1998:
Statement of Net Assets
Statement of Operations
Statements of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
Report of Independent Accountants
Shareholders may obtain a copy of the Annual Report, without charge, by
calling 1-800-922-0224.
THE HENLOPEN FUND
Table of Contents
Page No.
Fund History and Classification ..................... 1
Investment Restrictions ............................. 1
Investment Considerations ........................... 3
Trustees and Officers of the Fund ................... 4
Ownership of Management and Principal
Shareholders....................................... 8
Investment Adviser and Administrator................. 9
Determination of Net Asset Value .................... 12
Automatic Investment Plan ........................... 12
Retirement Plans .................................... 13
Redemption of Shares ................................ 16
Systematic Withdrawal Plan .......................... 16
Allocation of Portfolio Brokerage ................... 17
Performance Information.............................. 18
Custodian ........................................... 20
Taxes ............................................... 21
Shareholder Meetings ................................ 22
Capital Structure ................................... 23
Independent Accountants ............................. 24
Description of Securities Ratings.................... 24
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 30, 1998, 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.
FUND HISTORY AND CLASSIFICATION
The Fund was organized as a business trust under the laws of
Delaware on September 17, 1992. The Fund is an open-end, diversified
management investment company registered under the Investment Company Act
of 1940.
INVESTMENT RESTRICTIONS
As set forth in the prospectus dated October 30, 1998, of The
Henlopen Fund (the "Fund") under the caption "Investment Objective,
Strategies and Risks ", the investment objective of the Fund is to produce
long-term capital appreciation principally through investing in common
stocks of U.S. companies. Consistent with its investment objective, 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.
INVESTMENT CONSIDERATIONS
The Fund invests mainly in common stocks of U.S. companies.
However when the Fund's investment adviser, Landis Associates, Inc., (the
"Adviser") believes that securities other than common stocks offer
opportunity for long-term capital appreciation, the Fund may invest up to
30% of its net assets in publicly distributed debt securities, preferred
stocks, particularly those which are convertible into or carry rights to
acquire common stocks, and warrants. Investments in publicly distributed
debt securities and nonconvertible preferred stocks offer an opportunity
for growth of capital during periods of declining interest rates, when the
market value of such securities in general increases. The Fund will limit
its investments in publicly distributed debt securities to those which
have been assigned one of the three highest ratings of either Standard &
Poor's Corporation (AAA, AA and A) or Moody's Investors Service, Inc.
(Aaa, Aa and A). In the event a publicly distributed debt security is
downgraded after investment, the Fund may retain such security unless it
is rated less than investment grade (i.e., less than BBB by Standard &
Poor's Corporation or Baa by Moody's Investors Service, Inc.). If it is
downgraded below investment grade, the Fund will promptly dispose of such
publicly distributed debt security. A description of the foregoing
ratings is set forth in "Description of Securities Ratings."
The Fund may invest in securities of foreign issuers or in
American Depository Receipts of such issuers but will limit its
investments in such securities to 10% of its net assets. Such investments
may involve risks which are in addition to the usual risks inherent in
domestic investments. The value of the Fund's foreign investments may be
significantly affected by changes in currency exchange rates and the Fund
may incur costs in converting securities denominated in foreign currencies
to U.S. dollars. In many countries, there is less publicly available
information about issuers than is available in the reports and ratings
published about companies in the United States. Additionally, foreign
companies are not subject to uniform accounting, auditing and financial
reporting standards. Dividends and interest on foreign securities may be
subject to foreign withholding taxes, which would reduce the Fund's income
without providing a tax credit for the Fund's shareholders. Although the
Fund intends to invest in securities of foreign issuers domiciled in
nations which the Fund's investment adviser considers as having stable and
friendly governments, there is the possibility of expropriation,
confiscatory taxation, currency blockage or political or social
instability which could affect investments in those nations.
The money market instrument in which the Fund invests include
conservative fixed-income securities, such as United States Treasury
Bills, certificates of deposit of U.S. banks (provided that the bank has
capital, surplus and undivided profits, as of the date of its most
recently published annual financial statements, with a value in excess of
$100,000,000 at the date of investment), commercial paper rated A-1 or
better by Standard & Poor's Corporation, commercial paper master notes and
repurchase agreements. Commercial paper master notes are unsecured
promissory notes issued by corporations to finance short-term credit
needs. They permit a series of short-term borrowings under a single note.
Borrowings under commercial paper master notes are payable in whole or in
part at any time upon demand, may be prepaid in whole or in part at any
time, and bear interest at rates which are fixed to known lending rates
and automatically adjusted when such known lending rates change. There is
no secondary market for commercial paper master notes. The Adviser will
monitor the creditworthiness of the issuer of the commercial paper master
notes while any borrowings are outstanding.
Repurchase agreements are agreements under which the seller of a
security agrees at the time of sale to repurchase the security at an
agreed time and price. The Fund will not enter into repurchase agreements
with entities other than banks or invest over 5% of its net assets in
repurchase agreements with maturities of more than seven days. If a seller
of a repurchase agreement defaults and does not repurchase the security
subject to the agreement, the Fund will look to the collateral security
underlying the seller's repurchase agreement, including the securities
subject to the repurchase agreement, for satisfaction of the seller's
obligation to the Fund. In such event, the Fund might incur disposition
costs in liquidating the collateral and might suffer a loss if the value
of the collateral declines. In addition, if bankruptcy proceedings are
instituted against a seller of a repurchase agreement, realization upon
the collateral may be delayed or limited.
The percentage limitations set forth in this section are not
fundamental policies and may be changed without shareholder approval.
TRUSTEES AND OFFICERS OF THE FUND
As a Delaware business trust, the business and affairs of the
Fund are managed by its officers under the direction of its trustees. 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*
Longwood Corporate Center
Suite 213
415 McFarlan Road
Kennett Square, Pennsylvania 19348
(CHAIRMAN, PRESIDENT
AND A TRUSTEE OF THE FUND)
Mr. Hershey, age 59, 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 40, 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 57, 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.
__________________
* 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. Mr. Michael L. Hershey and Dr.
Stephen L. Hershey are brothers.
PAUL J. LARSON, C.F.A.
Longwood Corporate Center
Suite 213
415 McFarlan Road
Kennett Square, Pennsylvania 19348
(VICE PRESIDENT AND TREASURER)
Mr. Larson, age 53, has been Vice President and Treasurer of the
Fund since August, 1997. He joined Landis Associates, Inc., the Fund's
investment adviser, as an investment manager in July, 1997. Prior to such
time, he was an investment adviser with Kalmar Investments, Inc. from
April, 1995 to October, 1996. From June, 1993 to April, 1995 he was
employed by Ashford Capital Management as an investment adviser. From
December, 1984 to August, 1993, Mr. Larson was employed by YMCA Retirement
Fund, most recently as a Retirement Fund Manager. Mr. Larson received
his B.S. degree from Rensselaer Polytechnic Institute in 1967 and his M.S.
degree in 1968 also from Rensselaer Polytechnic Institute. He received
his Chartered Financial Analyst designation in 1976.
P. COLEMAN TOWNSEND, JR.
919 N. Market Street
Mellon Bank Center, Suite 420
Wilmington, Delaware 19801
(TRUSTEE)
Mr. Townsend, age 52, 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.
BRUCE V. VOGENITZ, C.F.A.
Longwood Corporate Center
Suite 213
415 McFarlan Road
Kennett Square, Pennsylvania 19348
(VICE PRESIDENT AND SECRETARY)
Mr. Vogenitz, age 33, has been Vice President and Secretary of
the Fund since August, 1998. He joined Landis Associates, Inc. as a Vice
President in August, 1998. Prior to such time, he was an analyst at
Gardner Lewis Asset Management. From July, 1993 until May, 1997, he was
an investment analyst with Landis Associates, Inc. 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 46, 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.
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, 1998, the Fund paid a
total of $750 in fees to trustees who were not officers of the Fund. 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, 1998:
<TABLE>
COMPENSATION TABLE
<CAPTION>
Pension or
Retirement Estimated Total
Aggregate Benefits Accrued Annual Compensation
Compensation As Part of Fund Benefits Upon from Fund Paid
Name of Person from Fund Expenses Retirement 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 July 31, 1998 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 571,893(1)(2) 23.78%
FBO J. Eric May Trust
c/o Mutual Funds
1100 North Market Street
Wilmington, DE 19890-0001
Patterson & Co. 304,278(2) 12.65%
c/o Corestates Bank
P. O. Box 7829
Philadelphia, PA 19101-7829
Wilmington Trust Co., Trustee 129,626(2) 5.39%
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) 43,475 (3) 1.81%
___________________
(1) Excludes 94,653 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 shares in accounts managed by the Adviser and over which the
Adviser has investment authority.
INVESTMENT ADVISER AND ADMINISTRATOR
Investment Adviser
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.
Under the Advisory Agreement, the Adviser, at its own expense
and without reimbursement from the Fund, will furnish office space and all
necessary office facilities, equipment and executive personnel for making
the investment decisions necessary for managing the Fund and maintaining
its organization, and will pay the salaries and fees of all officers and
directors of the Fund (except the fees paid to disinterested directors)
and the printing and distribution cost of prospectuses mailed to persons
other than existing shareholders. For the foregoing, the Adviser will
receive a monthly fee of 1/12 of 1% (1.0% per annum) of the daily net
assets of the Fund.
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 shares of the Fund are not qualified for sale in any state
that imposes an expense limitation. 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, 1998, 1997 and 1996, the
Fund paid the Adviser $358,623, $286,734 and $181,554, respectively. No
reimbursement was made during the fiscal years ended June 30, 1998, 1997
and 1996.
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.
Administrator
The administrator to the Fund is Fiduciary Management, Inc. (the
"Administrator"), 225 East Mason Street, Milwaukee, Wisconsin 53202.
Under the administration agreement entered into between the Fund and the
Administrator (the "Administration Agreement"), the Administrator prepares
and maintains the books, accounts and other documents required by the Act,
calculates the Fund's net asset value, responds to shareholder inquiries,
prepares the Fund's financial statements and tax returns, prepares certain
reports and filings with the Securities and Exchange Commission and with
state Blue Sky authorities, furnishes statistical and research data,
clerical, accounting and bookkeeping services and stationery and office
supplies, keeps and maintains the Fund's financial and accounting records
and generally assists in all aspects of the Fund's operations. The
Administrator, at its own expense and without reimbursement from the Fund,
furnishes office space and all necessary office facilities, equipment and
executive personnel for performing the services required to be performed
by it under the Administration Agreement. For the foregoing, the
Administrator receives from the Fund a monthly fee of 1/12 of 0.2% (0.2%
per annum) of the first $30,000,000 of the Fund's average daily net
assets, 1/12 of 0.1% (0.1% per annum) of the next $30,000,000 of the
Fund's average daily net assets and 1/12 of 0.05% (0.05% per annum) of the
average daily net assets of the Fund in excess of $30,000,000, subject to
a fiscal year minimum of $20,000. 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, 1998, 1997 and 1996, the Fund paid the Administrator
$65,837, $56,926 and $36,311, respectively, pursuant to the Administration
Agreement.
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 and
administrative services, as the case may be, to others.
DETERMINATION OF NET ASSET VALUE
As set forth in the Prospectus under the caption "Determining
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,
Martin Luther King, Jr. Day, President's Day, 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.
Securities traded on any national securities exchange or quoted
on the Nasdaq Stock Market will be valued at the last sale price on the
date of valuation, or in the absence of any sale on that date, the most
recent bid price. Other securities will be valued at the most recent bid
price, if market quotations are readily available. Any securities for
which there are no readily available market quotations and other assets
will be valued at their fair market value as determined in good faith by
the trustees.
AUTOMATIC INVESTMENT PLAN
The Fund offers an Automatic Investment Plan whereby a
shareholder may automatically make purchases of shares of the Fund
("Shares") on a regular, convenient basis ($100 minimum per transaction).
Under the Automatic Investment Plan, a shareholder's designated bank or
other financial institution debits a preauthorized amount on the
shareholder's account either monthly or quarterly and applies the amount
to the purchase of Shares. A shareholder may make automatic withdrawals
on any day he or she chooses. If such a day is a weekend or holiday, the
automatic withdrawal will be made on the next business day. The Automatic
Investment Plan must be implemented with a financial institution that is a
member of the Automated Clearing House ("ACH"). No service fee is
currently charged by the Fund for participating in the Automatic
Investment Plan. A $20 fee will be imposed by the transfer agent if
sufficient funds are not available in the shareholder's account at the
time of the automatic transaction. An application to establish the
Automatic Investment Plan is included as part of the share purchase
application.
RETIREMENT PLANS
The Fund offers the following retirement plans that may be
funded with purchases of Shares and may allow investors to shelter some of
their income from taxes.
Individual Retirement Accounts
Individual shareholders may establish their own tax-sheltered
Individual Retirement Account ("IRA"). The Fund currently offers three
types of IRAs that can be adopted by executing the appropriate Internal
Revenue Service ("IRS") Form.
Traditional IRA. In a Traditional IRA, amounts contributed to
the IRA may be tax deductible at the time of contribution depending on
whether the shareholder is an "active participant" in an employer-
sponsored retirement plan and the shareholder's income. Distributions
from a Traditional IRA will be taxed at distribution except to the extent
that the distribution represents a return of the shareholder's own
contributions for which the shareholder did not claim (or was not eligible
to claim) a deduction. Distributions prior to age 59-1/2 may be subject
to an additional 10% tax applicable to certain premature distributions.
Distributions must commence by April 1 following the calendar year in
which the shareholder attains age 70-1/2. Failure to begin distributions
by this date (or distributions that do not equal certain minimum
thresholds) may result in adverse tax consequences.
Roth IRA. In a Roth IRA (sometimes known as American Dream
IRA), amounts contributed to the IRA are taxed at the time of
contribution, but distributions from the IRA are not subject to tax if the
shareholder has held the IRA for certain minimum periods of time
(generally, until age 59-1/2). Shareholders whose incomes exceed certain
limits are ineligible to contribute to a Roth IRA. Distributions that do
not satisfy the requirements for tax-free withdrawal are subject to income
taxes (and possibly penalty taxes) to the extent that the distribution
exceeds the shareholder's contributions to the IRA. The minimum
distribution rules applicable to Traditional IRAs do not apply during the
lifetime of the shareholder. Following the death of the shareholder,
certain minimum distribution rules apply.
For Traditional and Roth IRAs, the maximum annual contribution
generally is equal to the lesser of $2,000 or 100% of the shareholder's
compensation (earned income). An individual may also contribute to a
Traditional IRA or Roth IRA on behalf of his or her spouse provided that
the individual has sufficient compensation (earned income). Contributions
to a Traditional IRA reduce the allowable contribution under a Roth IRA,
and contributions to a Roth IRA reduce the allowable contribution to a
Traditional IRA.
Education IRA. In an Education IRA, contributions are made to
an IRA maintained on behalf of a beneficiary under age 18. The maximum
annual contribution is $500 per beneficiary. The contributions are not
tax deductible when made. However, if amounts are used for certain
educational purposes, neither the contributor nor the beneficiary of the
IRA are taxed upon distribution. The beneficiary is subject to income
(and possibly penalty taxes) on amounts withdrawn from an Education IRA
that are not used for qualified educational purposes. Shareholders whose
income exceeds certain limits are ineligible to contribute to an Education
IRA.
Under current IRS regulations, an IRA applicant must be
furnished a disclosure statement containing information specified by the
IRS. The applicant generally has the right to revoke his account within
seven days after receiving the disclosure statement and obtain a full
refund of his contributions. The custodian may, in its discretion, hold
the initial contribution uninvested until the expiration of the seven-day
revocation period. The custodian does not anticipate that it will
exercise its discretion but reserves the right to do so.
Simplified Employee Pension Plan
A Traditional IRA may also be used in conjunction with a
Simplified Employee Pension Plan ("SEP-IRA"). A SEP-IRA is established
through execution of Form 5305-SEP together with a Traditional IRA
established for each eligible employee. Generally, a SEP-IRA allows an
employer (including a self-employed individual) to purchase Shares with
tax deductible contributions not exceeding annually for any one
participant 15% of compensation (disregarding for this purpose
compensation in excess of $160,000 per year). The $160,000 compensation
limit applies for 1998 and is adjusted periodically for cost of living
increases. A number of special rules apply to SEP Plans, including a
requirement that contributions generally be made on behalf of all
employees of the employer (including for this purpose a sole
proprietorship or partnership) who satisfy certain minimum participation
requirements.
SIMPLE IRA
An IRA may also be used in connection with a SIMPLE Plan
established by the shareholder's employer (or by a self-employed
individual). When this is done, the IRA is known as a SIMPLE IRA,
although it is similar to a Traditional IRA with the exceptions described
below. Under a SIMPLE Plan, the shareholder may elect to have his or her
employer make salary reduction contributions of up to $6,000 per year to
the SIMPLE IRA. The $6,000 limit applies for 1998 and is adjusted
periodically for cost of living increases. In addition, the employer will
contribute certain amounts to the shareholder's SIMPLE IRA, either as a
matching contribution to those participants who make salary reduction
contributions or as a non-elective contribution to all eligible
participants whether or not making salary reduction contributions. A
number of special rules apply to SIMPLE Plans, including (1) a SIMPLE Plan
generally is available only to employers with fewer than 100 employees;
(2) contributions must be made on behalf of all employees of the employer
(other than bargaining unit employees) who satisfy certain minimum
participation requirements; (3) contributions are made to a special SIMPLE
IRA that is separate and apart from the other IRAs of employees; (4) the
early distribution excise tax (if otherwise applicable) is increased to
25% on withdrawals during the first two years of participation in a SIMPLE
IRA; and (5) amounts withdrawn during the first two years of participation
in a SIMPLE IRA may be rolled over tax-free only into another SIMPLE IRA
(and not to a Traditional IRA or to a Roth IRA). A SIMPLE IRA is
established by executing Form 5304-SIMPLE together with an IRA established
for each eligible employee.
403(b)(7) Custodial Account
A 403(b)(7) Custodial Account is available for use in
conjunction with the 403(b)(7) program established by certain educational
organizations and other organizations that are exempt from tax under
501(c)(3) of the Internal Revenue Code, as amended. Amounts contributed
to the custodial account in accordance with the employer's 403(b)(7)
program will be invested on a tax-deductible basis in Shares of the Fund.
Various contribution limits apply with respect to 403(b)(7) arrangements.
Defined Contribution Retirement Plan (401(k))
A prototype defined contribution plan is available for employers
who wish to purchase Shares of the Fund with tax deductible contributions.
The plan consists of both profit sharing and money purchase pension
components. The profit sharing component includes a Section 401(k) cash
or deferred arrangement for employers who wish to allow eligible employees
to elect to reduce their compensation and have such amounts contributed to
the plan. The limit on employee salary reduction contributions is $10,000
annually (as adjusted for cost-of-living increases) although lower limits
my apply as a result of non-discrimination requirements incorporated into
the plan. The Fund has received an opinion letter from the IRS holding
that the form of the prototype defined contribution retirement plan is
acceptable under Section 401 of the Code. The maximum annual contribution
that may be allocated to the account of any participant is generally the
lesser of $30,000 or 25% of compensation (earned income). Compensation in
excess of $160,000 (as periodically indexed for cost-of-living increases)
is disregarded for this purpose. The maximum amount that is deductible by
the employer depends upon whether the employer adopts both the profit
sharing and money purchase components of the plan, or only one component.
Retirement Plan Fees
Firstar Trust Company, Milwaukee, Wisconsin, serves as trustee
or custodian of the retirement plans. Firstar invests all cash
contributions, dividends and capital gains distributions in shares of the
Fund. For such services, the following fees are charged against the
accounts of participants: $12.50 annual maintenance fee per participant
account; $15 for transferring to a successor trustee or custodian; $15 for
distribution(s) to a participant; and $15 for refunding any contribution
in excess of the deductible limit. Firstar's fee schedule may be changed
upon written notice.
Requests for information and forms concerning the retirement
plans should be directed to the Fund. Because a retirement program may
involve commitments covering future years, it is important that the
investment objective of the Fund be consistent with the participant's
retirement objectives. Premature withdrawal from a retirement plan will
result in adverse tax consequences. Consultation with a competent
financial and tax advisor regarding the retirement plans is recommended.
REDEMPTION OF SHARES
The right to redeem Shares of the Fund will be suspended for any
period during which the New York Stock Exchange is closed because of
financial conditions or any other extraordinary reason and may be
suspended for any period during which (a) trading on the New York Stock
Exchange is restricted pursuant to rules and regulations of the Securities
and Exchange Commission, (b) the Securities and Exchange Commission has by
order permitted such suspension or (c) an emergency, as defined by rules
and regulations of the Securities and Exchange Commission, exists as a
result of which it is not reasonably practicable for the Fund to dispose
of its securities or fairly to determine the value of its net assets.
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 via wire or Electronic Funds Transfer.
Firstar Trust Company currently charges a $12.00 fee for each payment of
redemption proceeds made by wire. 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 (i.e. "markups" when the market maker sells
a security and "markdowns" when the market maker purchases a security).
In some instances, the Adviser feels that better prices are available from
non-principal market makers who are paid commissions directly. 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 it exercises investment discretion. Brokerage
commissions paid by the Fund during the fiscal years ended June 30, 1998,
1997 and 1996, respectively, totaled $67,011 on total transactions of
$35,495,463, $83,895 on total transactions of $28,175,647 and $55,895 on
total transactions of $19,027,798. During the fiscal year ended June 30,
1998 the Adviser did not direct any of the Fund's brokerage transactions
to brokers because of research services provided.
PERFORMANCE INFORMATION
The Fund may provide from time to time in advertisements,
reports to shareholders and other communications with shareholders its
average annual compounded rate of return as well as its total return and
cumulative total return. 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 assuming reinvestment of all dividends and distributions and
reflecting the effect of all recurring fees. Total return and cumulative
total return similarly reflect net investment income generated by, and the
effect of any realized and unrealized appreciation or depreciation of, the
underlying investments of the Fund for the stated period, assuming the
reinvestment of all dividends and distributions and reflecting the effect
of all recurring fees. Total return figures are not annualized or
compounded and represent the aggregate percentage of dollar value change
over the period in question. Cumulative total return reflects the Fund's
total return since inception.
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.
The Fund's average annual compounded rate of return for each of the one
year ended June 30, 1998, the five year period ended June 30, 1998 and the
period from December 2, 1992 (commencement of operations) through June 30,
1998 was 32.78%, 20.93% and 21.71%, respectively.
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, 1998,
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%
1997 $ 22,519 125.19%
1998 $ 29,902 199.02%
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.
The Fund may compare its performance to other mutual funds with
similar investment objectives and to the industry as a whole, as reported
by Lipper Analytical Services, Inc., Morningstar, Inc., Money, Forbes,
Business Week and Barron's magazines and The Wall Street Journal. (Lipper
Analytical Services, Inc. and Morningstar, Inc. are independent fund
ranking services that rank mutual funds based upon total return
performance.) The Fund may also compare its performance to the Dow Jones
Industrial Average, NASDAQ Composite Index, NASDAQ Industrials Index,
Value Line Composite Index, the Standard & Poor's Composite Index of 500
Stocks and the Consumer Price Index. Such comparisons may be made in
advertisements, shareholder reports or other communications to
shareholders.
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
The Fund annually will endeavor to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code, as
amended. The Fund has so qualified in each of its fiscal years. If the
Fund fails to qualify as a regulated investment company under Subchapter M
in any fiscal year, it will be treated as a corporation for federal income
tax purposes. As such the Fund would be required to pay income taxes on
its net investment income and net realized capital gains, if any, at the
rates generally applicable to corporations. Shareholders of the Fund
would not be liable for income tax on the Fund's net investment income or
net realized capital gains in their individual capacities. Distributions
to shareholders whether from the Fund's net investment income or net
realized capital gains, would be treated as taxable dividends to the
extent of current or accumulated earnings and profits of the Fund.
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 dividends from the Fund's net investment income, 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 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.
CAPITAL STRUCTURE
The Fund's authorized capital consists of an unlimited number of
shares of beneficial interest, having no par value (the "Shares").
Shareholders are entitled: (i) to one vote per full Share; (ii) to such
distributions as may be declared by the Fund's Trustees out of funds
legally available; and (iii) upon liquidation, to participate ratably in
the assets available for distribution. There are no conversion or sinking
fund provisions applicable to the Shares, and the holders have no
preemptive rights and may not cumulate their votes in the election of
Trustees. Consequently, the holders of more than 50% of the Shares voting
for the election of Trustees can elect all the Trustees, and in such
event, the holders of the remaining Shares voting for the election of
Trustees will not be able to elect any persons as Trustees. As indicated
above, the Fund does not anticipate holding an annual meeting 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 Shares are redeemable and are transferable. All Shares issued
and sold by the Fund will be fully paid and nonassessable. Fractional
Shares entitle the holder of the same rights as whole Shares.
Pursuant to the Trust Instrument, the Trustees may establish and
designate one or more separate and distinct series of Shares, each of
which shall be authorized to issue an unlimited number of Shares. In
addition, the Trustees may, without obtaining any prior authorization or
vote of shareholders, redesignate or reclassify any issued Shares of any
series. In the event that more than one series is established, each Share
outstanding, regardless of series, would still entitle its holder to one
(1) vote. As a general matter, Shares would be voted in the aggregate and
not by series, except where class voting would be required by the
Investment Company Act of 1940 (e.g., change in investment policy or
approval of an investment advisory agreement). All consideration received
from the sale of Shares of any series, together with all income, earnings,
profits and proceeds thereof, would belong to that series and would be
charged with the liabilities in respect of that series and of that series'
share of the general liabilities of the Fund in the proportion that the
total net assets of the series bear to the total net assets of all series.
The net asset value of a Share of any series would be based on the assets
belonging to that series less the liabilities charged to that series, and
dividends could be paid on Shares of any series only out of lawfully
available assets belonging to that series. In the event of liquidation or
dissolution of the Fund, the shareholders of each series would be
entitled, out of the assets of the Fund available for distribution, to the
assets belonging to that series.
The Fund's Trust Instrument contains an express disclaimer of
shareholder liability for its acts or obligations and requires that notice
of such disclaimer be given in each agreement, obligation or instrument
entered into or executed by the Fund or its Trustees. The Trust
Instrument provides for indemnification and reimbursement of expenses out
of the Fund's property for any shareholder held personally liable for its
obligations. The Trust Instrument also provides that the Fund shall, upon
request, assume the defense of any claim made against any shareholder for
any act or obligation of the Fund and satisfy any judgment thereon.
The Trust Instrument further provides that the Trustee will not be
liable for errors of judgment or mistakes of fact or law, but nothing in
the Trust Instrument protects a Trustee against any liability to which he
would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involved in the
conduct of his office.
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, 3100 Multifoods Tower, 33 South Sixth
Street, Minneapolis, Minnesota 55402, currently serves as the independent
accountants for the Fund.
DESCRIPTION OF SECURITIES RATINGS
As set forth in the Prospectus under the caption "Investment
Objective, Strategies and Risks," 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 in accordance with the terms of
the 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.
PART C
OTHER INFORMATION
Item 23. Exhibits
(a)(i) Registrant's Certificate of Trust (1)
(a)(ii) Registrant's Trust Instrument (1)
(b) Registrant's Bylaws, as amended (1)
(c) None
(d) Investment Advisory Agreement (1)
(e) None
(f) None
(g) Custodian Agreement with Firstar Trust Company (1)
(h)(i) Administration Agreement with Fiduciary Management, Inc. (1)
(h)(ii) Transfer Agent Agreement with Firstar Trust Company (1)
(i) Opinion of Foley & Lardner, counsel for Registrant
(j) Consent of Independent Accountants
(k) None
(l) Subscription Agreement (1)
(m) None
(n) Financial Data Schedule
(o) None
_________________
(1) Previously filed as an exhibit to Post-Effective Amendment No. 6 to
the Registration Statement and incorporated by reference thereto.
Post-Effective Amendment No. 6 was filed on October 28, 1997 and
its accession number is 0000897069-97-000422.
Item 24. Persons Controlled by or under Common Control with Registrant
No person is directly or indirectly controlled by or under common
control with Registrant.
Item 25. Indemnification
Pursuant to Chapter 38 of Title 12 of the Delaware Code, the
Registrant's Trust Instrument, dated September 16, 1992, contains the
following article, which is in full force and effect and has not been
modified or canceled:
ARTICLE X
LIMITATION OF LIABILITY AND INDEMNIFICATION
Section 10.1. Limitation of Liability. A Trustee, when acting in such
capacity, shall not be personally liable to any person other than the
Trust or a beneficial owner for any act, omission or obligation of the
Trust or any Trustee. A Trustee shall not be liable for any act or
omission or any conduct whatsoever in his capacity as Trustee, provided
that nothing contained herein or in the Delaware Act shall protect any
Trustee against any liability to the Trust or to Shareholders to which he
would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the
conduct of the office of Trustee hereunder.
Section 10.2. Indemnification.
(a) Subject to the exceptions and limitations contained in Section
10.2(b) below:
(i) every Person who is, or has been, a Trustee or officer of
the Trust (hereinafter referred to as a "Covered Person") shall be
indemnified by the Trust to the fullest extent permitted by law
against liability and against all expenses reasonably incurred or
paid by him in connection with any claim, action, suit or
proceeding in which he becomes involved as a party or otherwise by
virtue of his being or having been a Trustee or officer and against
amounts paid or incurred by him in the settlement thereof;
(ii) the words "claim," "action," "suit," or "proceeding"
shall apply to all claims, actions, suits or proceedings (civil,
criminal or other, including appeals), actual or threatened while
in office or thereafter, and the words "liability" and "expenses"
shall include, without limitation, attorneys' fees, costs,
judgments, amounts paid in settlement, fines, penalties and other
liabilities.
(b) No indemnification shall be provided hereunder to a Covered
Person:
(i) who shall have been adjudicated by a court or body before
which the proceeding was brought (A) to be liable to the Trust or
its Shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of his office or (B) not to have acted in good faith in the
reasonable belief that his action was in the best interest of the
Trust; or
(ii) in the event of a settlement, unless there has been a
determination that such Trustee or officer did not engage in
willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office,
(A) by the court or other body approving the settlement;
(B) by at least a majority of those Trustees who are neither
Interested Persons of the Trust nor are parties to the matter
based upon a review of readily available facts (as opposed to
a full trial-type inquiry); or
(C) by written opinion of independent legal counsel based
upon a review of readily available facts (as opposed to a full
trial-type inquiry);
provided, however, that any Shareholder may, by appropriate legal
proceedings, challenge any such determination by the Trustees or by
independent counsel.
(c) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable, shall
not be exclusive of or affect any other rights to which any Covered
Person may now or hereafter be entitled, shall continue as to a person
who has ceased to be a Covered Person and shall inure to the benefit of
the heirs, executors and administrators of such a person. Nothing
contained herein shall affect any rights to indemnification to which
Trust personnel, other than Covered Persons, and other persons may be
entitled by contract or otherwise under law.
(d) Expenses in connection with the preparation and presentation
of a defense to any claim, action, suit or proceeding of the character
described in paragraph (a) of this Section 10.2 may be paid by the Trust
or Series from time to time prior to final disposition thereof upon
receipt of an undertaking by or on behalf of such Covered Person that
such amount will be paid over by him to the Trust or Series if it is
ultimately determined that he is not entitled to indemnification under
this Section 10.2; provided, however, that either (a) such Covered
Person shall have provided appropriate security for such undertaking,
(b) the Trust is insured against losses arising out of any such advance
payments or (c) either a majority of the Trustees who are neither
Interested Persons of the Trust nor parties to the matter, or
independent legal counsel in a written opinion, shall have determined,
based upon a review of readily available facts (as opposed to a trial-
type inquiry or full investigation), that there is reason to believe
that such Covered Person will be found entitled to indemnification under
this Section 10.2.
Section 10.3. Shareholders. In case any Shareholder or former
Shareholder of any Series shall be held to be personally liable solely by
reason of his being or having been a Shareholder of such Series and not
because of his acts or omissions or for some other reason, the Shareholder
or former Shareholder (or his heirs, executors, administrators or other
legal representatives, or, in the case of a corporation or other entity,
its corporate or other general successor) shall be entitled out of the
assets belonging to the applicable Series to be held harmless from and
indemnified against all loss and expense arising from such liability. The
Trust, on behalf of the affected Series, shall, upon request by the
Shareholder, assume the defense of any claim made against the Shareholder
for any act or obligation of the Series and satisfy any judgment thereon
from the assets of the Series.
Insofar as indemnification for and with respect to liabilities
arising under the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of Registrant pursuant to the foregoing
provisions or otherwise, Registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by Registrant of expenses incurred or paid by a
director, officer or controlling person or Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
Item 26. Business and Other Connections of Investment Adviser
Incorporated by reference to pages 4 through 7 of the Statement of
Additional Information pursuant to General Instruction D.1. of Form N-1A.
Item 27. Principal Underwriters
Registrant has no principal underwriters.
Item 28. Location of Accounts and Records
The accounts, books and other documents required to be maintained
by Registrant pursuant to Section 31(a) of the Investment Company Act of
1940 and the rules promulgated thereunder are in the physical possession
of Registrant, Registrant's Custodian and Registrant's Administrator as
follows: the documents required to be maintained by paragraphs (5) and
(11) of Rule 31a-1(b) will be maintained by the Registrant; the documents
required to be maintained by paragraphs (3) and (7) of Rule 31a-1(b) will
be maintained by Registrant's Custodian; and all other records will be
maintained by Registrant's Administrator.
Item 29. Management Services
All management-related service contracts entered into by Registrant
are discussed in Parts A and B of this Registration Statement.
Item 30. Undertakings
Registrant undertakes to furnish each person to whom a prospectus
is delivered with a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Amended Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Wilmington and
State of Delaware on the 18th day of August, 1998.
THE HENLOPEN FUND
(Registrant)
By: /s/ Michael L. Hershey
Michael L. Hershey,
President and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this
Amended Registration Statement has been signed below by the following
persons in the capacities and on the date indicated.
Name Title Date
/s/ Michael L. Hershey Principal Executive, August 18, 1998
Michael L. Hershey Financial and Accounting
Officer and Trustee
Trustee August __, 1998
Robert J. Fahey, Jr.
/s/ Stephen L. Hershey, M.D. Trustee August 18, 1998
Stephen L. Hershey, M.D.
/s/ P. Coleman Townsend, Jr. Trustee August 18, 1998
P. Coleman Townsend, Jr.
<PAGE>
EXHIBIT INDEX
Exhibit No. Exhibit Page No.
(a)(i) Registrant's Certificate of Trust*
(a)(ii) Registrant's Trust Instrument*
(b) Registrant's Bylaws, as amended*
(c) None
(d) Investment Advisory Agreement*
(e) None
(f) None
(g) Custodian Agreement with Firstar
Trust Company*
(h)(i) Administration Agreement with
Fiduciary Management, Inc.*
(h)(ii) Transfer Agent Agreement with
Firstar Trust Company*
(i) Opinion of Foley & Lardner,
counsel for Registrant
(j) Consent of Independent
Accountants
(k) None
(l) Subscription Agreement*
(m) None
(n) Financial Data Schedule
(o) None
_________________
* Incorporated by reference.
F O L E Y & L A R D N E R
A T T O R N E Y S A T L A W
CHICAGO FIRSTAR CENTER SAN DIEGO
JACKSONVILLE 777 EAST WISCONSIN AVENUE SAN FRANCISCO
LOS ANGELES MILWAUKEE, WISCONSIN 53202-5367 TALLAHASSEE
MADISON TELEPHONE (414) 271-2400 TAMPA
ORLANDO FACSIMILE (414) 297-4900 WASHINGTON, D.C.
SACRAMENTO WEST PALM BEACH
WRITER'S DIRECT LINE
(414) 297-5660
August 26, 1998
The Henlopen Fund
Longwood Corporate Center
Suite 213
Kennett Square, Pennsylvania 19348
Gentlemen:
We have acted as counsel for you in connection with the
preparation of an amendment to your Registration Statement on Form N-1A
relating to the sale by you of an indefinite amount of The Henlopen Fund
shares of beneficial interest having no par value (such shares of
beneficial interest being hereinafter referred to as the "Shares"), in the
manner set forth in the Amended Registration Statement to which reference
is made. In this connection we have examined: (a) the Amended
Registration Statement on Form N-1A; (b) your Trust Instrument and Bylaws,
as amended to date; (c) corporate proceedings relative to the
authorization for issuance of the Stock; and (d) such other proceedings,
documents and records as we have deemed necessary to enable us to render
this opinion.
Based upon the foregoing, we are of the opinion that the shares
of Stock when sold as contemplated in the Amended Registration Statement
will be legally issued, fully paid and nonassessable.
We hereby consent to the use of this opinion as an exhibit to
the Form N-1A Registration Statement. In giving this consent, we do not
admit that we are experts within the meaning of Section 11 of the
Securities Act of 1933, as amended, or within the category of persons
whose consent is required by Section 7 of said Act.
Very truly yours,
FOLEY & LARDNER
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-
Effective Amendment No. 7 to the registration statement on Form N-1A (the
"Registration Statement") of our report dated July 24, 1998, relating to
the financial statements and financial highlights appearing in the June
30, 1998 Annual Report to Shareholders of The Henlopen Fund, portions of
which are incorporated by reference into the Registration Statement. We
also consent to the reference to us under the heading "Independent
Accountants" in the Statement of Additional Information.
/s/ Pricewaterhouse Coopers LLP
Pricewaterhouse Coopers LLP
Minneapolis, Minnesota
August 26, 1998
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<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
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<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 6,305
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<NUMBER-OF-SHARES-REDEEMED> 242
<SHARES-REINVESTED> 411
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<ACCUMULATED-NII-PRIOR> 0
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<OVERDISTRIB-NII-PRIOR> 0
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<PER-SHARE-NAV-BEGIN> 15.83
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<PER-SHARE-GAIN-APPREC> 4.55
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<PER-SHARE-NAV-END> 17.04
<EXPENSE-RATIO> 1.5
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