THE HENLOPEN FUND
SEMIANNUAL REPORT
DECEMBER 31, 1997
To My Fellow Shareholders:
We believe that during the second half of 1997 the stock market lost sight of
two basic investment tenets - relative assessment of risk and capital
preservation. Even considering the solid domestic fundamentals, it seemed to us
that most market valuations were excessive. Further, the stock market seemed
relatively oblivious to storm clouds gathering in Southeast Asia. Bob Shrouds,
duPont's corporate economist, recently called the crisis a developing case of
economic "Bahtulism".
The Henlopen Fund moved to protect its shareholders' assets, selling into what
we considered were the particularly heady valuations accorded technology and oil
service stocks. Cash levels reached 30%, unusually high for the Fund. The large
cash reserve allowed us to wait for more attractive valuations. With whole
sectors of the market having moved sharply lower, we believe such valuations are
emerging.
Even with such volatility, The Henlopen Fund advanced 15.3% for the six months
ending 12/31/97, placing The Henlopen Fund on Investor's Business Daily's list
of the top 100 Stock Funds for the second half of 1997. The Henlopen Fund
continues to produce solid long-term results with 1, 3 and 5 year annualized
returns of 22.6%, 27.1% and 21.0%, respectively and 20.7% since inception on
12/2/92.
Falling interest rates, strong profitability, low inflation, low unemployment,
continuing retirement savings flows and a fairly stable geopolitical environment
provide a favorable background for equity investment. Looking into 1998, we see
evidence that domestic economic growth probably will slow from the pace of 1997.
Some earnings forecasts may be too optimistic and could be revised downward.
Through all this we continue to search for new opportunities and are beginning
to invest our cash reserves. Individual stock research and selection, a
disciplined sell strategy and the Fund's manageable size have been advantageous
to our shareholders in the past. We expect this to continue.
Sincerely yours,
/s/ Michael L. Hershey
Michael L. Hershey
President
MANAGED BY LANDIS ASSOCIATES, INC.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT*<F1> IN
The Henlopen Fund, S&P 500 Index and Lipper Growth Fund Index
The Henlopen Fund S&P 500 Index Lipper Growth Fund Index
----------------- ------------- ------------------------
12/2/92 $10,000 $10,000 $10,000
12/31/92 $10,010 $10,162 $10,204
3/31/93 $10,821 $10,604 $10,507
6/30/93 $11,562 $10,654 $10,661
9/30/93 $12,450 $10,928 $11,173
12/31/93 $12,999 $11,179 $11,426
3/31/94 $12,760 $10,758 $11,084
6/30/94 $12,126 $10,804 $10,841
9/30/94 $12,853 $11,332 $11,373
12/31/94 $12,644 $11,330 $11,246
3/31/95 $13,583 $12,430 $12,059
6/30/95 $15,494 $13,613 $13,349
9/30/95 $17,819 $14,692 $14,563
12/31/95 $17,453 $15,574 $14,918
3/31/96 $19,233 $16,409 $15,691
6/30/96 $21,442 $17,144 $16,107
9/30/96 $21,024 $17,670 $16,566
12/31/96 $21,182 $19,141 $17,627
3/31/97 $20,072 $19,658 $17,468
6/30/97 $22,519 $23,083 $20,228
9/30/97 $28,095 $24,811 $22,301
12/31/97 $25,971 $25,524 $22,450
*<F1>assumes equal $10,000 investments made on inception date of December 2,
1992.
Past performance is not predictive of future performance. Investment return and
principal value will fluctuate, and redemption value may be more or less than
original cost.
STATEMENT OF NET ASSETS
December 31, 1997 (Unaudited)
SHARES QUOTED
OR PRINCIPAL MARKET
AMOUNT COST VALUE
---------- ----- -------
LONG-TERM INVESTMENTS -- 72.6% (A)<F3>
COMMON STOCKS -- 71.4% (A)<F3>
AUTO & TRUCK RELATED -- 1.3%
18,000 Keystone Automotive
Industries, Inc.*<F2> $390,250 $427,500
BASIC RESOURCES -- 1.8%
1,000 Peter Kiewit Sons', Inc.
CL D*<F2> 151,000 148,000
9,000 USG Corp.*<F2> 444,357 441,000
---------- ---------
595,357 589,000
COMMUNICATIONS -- 2.3%
35,500 Arguss Holdings, Inc.*<F2> 414,994 514,750
15,000 Scientific-Atlanta, Inc. 312,195 251,250
---------- ---------
727,189 766,000
COMPUTER PERIPHERALS -- 3.6%
12,000 In Focus Systems, Inc.*<F2> 404,717 364,500
60,000 Unisys Corp.*<F2> 641,312 832,500
---------- ---------
1,046,029 1,197,000
CONSUMER NON-DURABLES -- 2.3%
20,000 Action Performance
Companies Inc.* <F2> 547,670 757,500
DISTRIBUTION -- 1.5%
30,000 D & K Healthcare
Resources, Inc.*<F2> 261,250 251,250
25,000 En Pointe
Technologies, Inc.*<F2> 525,272 243,750
---------- ---------
786,522 495,000
ELECTRONICS/EQUIPMENT MANUFACTURING -- 2.6%
50,000 Checkpoint Systems, Inc.*<F2> 827,056 875,000
ENERGY/SERVICES -- 3.7%
15,000 Crown Central Petroleum
Corp. Cl B*<F2> 316,375 304,695
15,000 Valero Energy Corp. 494,963 471,570
30,000 Willbros Group, Inc.*<F2> 433,425 450,000
---------- ---------
1,244,763 1,226,265
FINANCIAL SERVICES -- 12.8%
6,675 CCB Financial Corp. 481,875 717,562
8,000 First Union Corp.
(N.C.) 387,000 410,000
5,000 Fleet Financial Group, Inc. 325,300 374,690
9,000 Markel Corp.*<F2> 797,042 1,405,125
59,500 Mego Financial Corp.*<F2> 157,327 275,188
6,000 Mellon Bank Corp. 324,360 363,750
40,000 Philadelphia Consolidated
Holding Corp.*<F2> 382,314 710,000
---------- ---------
2,855,218 4,256,315
HEALTHCARE PRODUCTS -- 5.2%
25,000 Columbia
Laboratories, Inc.*<F2> 421,930 396,875
100,000 IGEN International, Inc.*<F2> 769,325 1,325,000
---------- ---------
1,191,255 1,721,875
LEISURE/ENTERTAINMENT -- 8.0%
35,500 Ambassadors
International, Inc.*<F2> 701,097 692,250
25,000 Dover Downs
Entertainment, Inc. 487,065 573,450
45,375 Steiner Leisure Ltd.*<F2> 557,188 1,400,953
---------- ---------
1,745,350 2,666,653
MISCELLANEOUS MANUFACTURING -- 6.5%
42,200 AIM Safety Company, Inc.*<F2> 525,331 525,095
20,000 Harmon Industries, Inc. 528,269 555,000
35,000 Morrison Knudsen
Corp.* <F2> 444,872 341,250
15,000 MotivePower
Industries, Inc.*<F2> 285,900 348,750
15,000 Westinghouse Air
Brake Co. 386,638 384,375
---------- ---------
2,171,010 2,154,470
RESTAURANTS -- 1.2%
70,000 Pizza Inn, Inc. 342,750 393,750
RETAILING -- 2.9%
9,000 Family Dollar Stores, Inc. 266,742 263,817
40,000 PETsMART, Inc.*<F2> 639,250 290,000
25,500 Schultz Sav-O Stores, Inc. 212,812 395,250
---------- ---------
1,118,804 949,067
SEMICONDUCTORS/RELATED -- 3.4%
40,000 Integrated Circuit
Systems, Inc.* <F2> 728,813 1,140,000
SOFTWARE & RELATED SERVICES -- 9.1%
77,500 Alydaar Software
Corp.* <F2> 867,877 1,220,625
20,000 American Management
Systems, Inc.*<F2> 433,750 390,000
44,000 ANSYS, Inc.*<F2> 424,253 319,000
6,500 Citrix Systems, Inc.*<F2> 504,563 494,000
125,000 Communication Intelligence
Corp.*<F2> 203,125 164,125
11,000 Sterling Commerce, Inc.* <F2> 374,660 422,818
---------- ---------
2,808,228 3,010,568
SPECIALTY CHEMICALS -- 0.8%
24,000 CFC International, Inc.*<F2> 291,000 282,000
TRANSPORTATION -- 2.4%
10,000 Eagle USA Airfreight, Inc.*<F2> 330,750 285,000
80,000 RailAmerica, Inc.* <F2> 420,558 515,040
---------- ---------
751,308 800,040
Total common stocks $20,168,572 $23,708,003
---------- ---------
REITS 1.2%
28,000 Imperial Credit Commercial
Mortgage Investment
Corp. 446,750 409,500
---------- ---------
Total long-term
investments 20,615,322 24,117,503
---------- ---------
SHORT-TERM INVESTMENTS -- 27.4% (A)<F3>
VARIABLE RATE DEMAND NOTES
$1,550,000 American Family
Financial Services 1,550,000 1,550,000
1,550,000 General Mills, Inc. 1,550,000 1,550,000
1,351,363 Johnson Controls, Inc. 1,351,363 1,351,363
1,550,000 Pitney Bowes Credit Corp. 1,550,000 1,550,000
1,550,000 Warner-Lambert Company 1,550,000 1,550,000
1,550,000 Wisconsin Electric
Power Company 1,550,000 1,550,000
---------- ---------
Total short-term
investments 9,101,363 9,101,363
---------- ---------
Total investments $29,716,685 33,218,866
==========
Liabilities, less cash and
receivables (0.0%) (A)<F3> (7,987)
----------
NET ASSETS $33,210,879
==========
Net Asset Value Per Share
($0.01 par value unlimited
shares authorized), offering
and redemption price
($33,210,879 / 2,244,480
shares outstanding) $14.80
======
*<F2>Non-income producing security.
(a)<F3>Percentages for the various classifications relate to net assets.
The accompanying notes to financial statements are an integral part of this
statement.
STATEMENT OF OPERATIONS
For the Period Ending December 31, 1997 (Unaudited)
INCOME:
Dividends $47,252
Interest 115,347
----------
Total income 162,599
----------
EXPENSES:
Investment management fees 167,747
Administrative services 31,873
Transfer agent fees 17,905
Professional fees 13,411
Registration fees 9,433
Printing and postage expense 6,029
Custodian fees 5,714
Amortization of organizational expenses 4,663
Other expenses 2,845
----------
Total expenses 259,620
----------
NET INVESTMENT LOSS (97,021)
----------
NET REALIZED GAIN ON INVESTMENTS 3,030,157
NET INCREASE IN UNREALIZED APPRECIATION ON INVESTMENTS 1,470,307
----------
NET GAIN ON INVESTMENTS 4,500,464
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $4,403,443
========
STATEMENTS OF CHANGES IN NET ASSETS
For the Period Ending December 31, 1997 (Unaudited) and for the Year Ended
June 30, 1997
DECEMBER 31, 1997 JUNE 30, 1997
----------------- ------------
OPERATIONS:
Net investment loss $(97,021) $(213,538)
Net realized gain on investments 3,030,157 2,692,198
Net increase (decrease) in unrealized
appreciation on investments 1,470,307 (894,714)
----------- ----------
Net increase in net assets resulting
from operations 4,403,443 1,583,946
----------- ----------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net realized gains
($3.3103 and $2.14451 per share, respectively) (6,305,849) (3,623,419)
----------- ----------
Total distributions (6,305,849)(3,623,419)*
<F4>
----------- ----------
FUND SHARE ACTIVITIES:
Proceeds from shares issued (97,136 and
381,696 shares, respectively) 1,679,243 5,709,834
Net asset value of shares issued in
distributions (411,192 and 256,417
shares, respectively) 6,072,409 3,537,970
Cost of shares redeemed (94,397 and 351,595
shares, respectively) (1,617,388) (5,201,112)
----------- ----------
Net increase in net assets derived from
Fund share activities 6,134,264 4,046,692
----------- ----------
TOTAL INCREASE 4,231,858 2,007,219
NET ASSETS AT THE BEGINNING OF THE PERIOD 28,979,021 26,971,802
----------- ----------
NET ASSETS AT THE END OF THE PERIOD $33,210,879 $28,979,021
=========== ==========
*<F4>Total distributions include $2,731,317 of ordinary income, of which 3% is
eligible for the corporate dividends received deduction.
The accompanying notes to financial statements are an integral part of these
statements.
FINANCIAL HIGHLIGHTS
(Selected data for each share of the Fund outstanding throughout each period)
<TABLE>
<CAPTION>
(UNAUDITED) FOR THE
FOR THE PERIOD FROM
PERIOD ENDING FOR THE YEARS ENDED JUNE 30, 12/2/92*<F5>
12/31/97 1997 1996 1995 1994 to 6/30/93
------------- ----- ------ ------ ----- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $15.83 $17.47 $14.68 $11.67 $11.55 $10.00
Income from investment operations:
Net investment loss (a)<F8> (0.02) (0.08) (0.05) (0.11) (0.07) (0.02)
Net realized and unrealized gains on investments 2.30 0.58 5.10 3.31 0.64 1.58
------- ------ ------- ------- ------- -------
Total from investment operations 2.28 0.50 5.05 3.20 0.57 1.56
Less distributions:
Dividend from net investment income -- -- -- -- -- (0.01)
Distributions from net realized gains (3.31) (2.14) (2.26) (0.19) (0.45) --
------- ------ ------- ------- ------- -------
Total from distributions (3.31) (2.14) (2.26) (0.19) (0.45) (0.01)
------- ------ ------- ------- ------- -------
Net asset value, end of period $14.80 $15.83 $17.47 $14.68 $11.67 $11.55
======= ======= ======= ======= ======= ======
TOTAL INVESTMENT RETURN 15.3%***<F7> 5.0% 38.4% 27.8% 4.9% 28.5%**<F6>
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's $) 33,211 28,979 26,972 11,685 6,798 1,062
Ratio of expenses (after reimbursement) to average
net assets (b)<F9> 1.5%**<F6> 1.6% 1.8% 2.0% 2.0% 2.0%**<F6>
Ratio of net investment loss to average net assets (c)<F10> (0.6)%**<F6>(0.7)% (1.3)% (1.2)% (1.3)% (0.7)%**<F6>
Portfolio turnover rate 69.0% 140.6% 177.5% 147.8% 63.0% 54.0%
Average commission rate paid (d)<F11> $0.0561 $0.0578 -- -- -- --
*<F5>Commencement of Operations.
**<F6>Annualized.
***<F7>Not Annualized.
(a)<F8>Net investment loss per share is calculated using ending balances prior
to consideration of adjustments for permanent book and tax differences.
(b)<F9>Computed after giving effect to adviser's expense limitation undertaking.
If the Fund had paid all of its expenses, the ratio would have been 3.0% for the
year ended June 30, 1994 and 11.5%**<F6> for the period ended June 30, 1993.
(c)<F10>The ratio of net investment loss prior to the adviser's expense
limitation undertaking to average net assets would have been (2.2%) for the
year ended June 30, 1994 and (10.2%)**<F6> for the period ended June 30, 1993.
(d)<F11>Disclosure required for fiscal years beginning after September 1, 1995.
The accompanying notes to financial statements are an integral part of this
statement.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 (Unaudited)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES --
The following is a summary of significant accounting policies of The Henlopen
Fund (the "Fund"), which was organized as a Delaware Business Trust on
September 17, 1992 and is registered as an open-end management company under
the Investment Company Act of 1940. The Fund commenced operations on December
2, 1992. The investment objective of the Fund is long-term capital
appreciation.
(a) Each security, excluding short-term investments, is valued at the
last sale price reported by the principal security exchange on which the
issue is traded, or if no sale is reported, the latest bid price.
Securities which are traded over-the-counter are valued at the latest bid
price. Securities for which quotations are not readily available are
valued at fair value as determined by the investment adviser under the
supervision of the Board of Trustees. Short-term investments are valued at
cost which approximates quoted market value. Investment transactions are
recorded no later than the first business day after the trade date. Cost
amounts, as reported on the statement of net assets, are the same for
Federal income tax purposes.
(b) Net realized gains and losses on common stock are computed on the
basis of the cost of specific certificates.
(c) Provision has not been made for Federal income taxes since the Fund
has elected to be taxed as a "regulated investment company" and intends to
distribute substantially all income to its shareholders and otherwise
comply with the provisions of the Internal Revenue Code applicable to
regulated investment companies.
(d) Dividend income is recorded on the ex-dividend date. Interest income
is recorded on the accrual basis.
(e) The Fund has significant investments in short-term variable rate
demand notes, which are unsecured instruments. The Fund may be susceptible
to credit risk with respect to these notes to the extent the issuer
defaults on its payment obligation. The Fund's policy is to monitor the
creditworthiness of the issuer and does not anticipate nonperformance by
these counterparties.
(f) Generally accepted accounting principles require that permanent
financial reporting and tax differences be reclassified to paid-in
capital.
(g) The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from these
estimates.
(2) INVESTMENT ADVISER AND MANAGEMENT AGREEMENT AND TRANSACTIONS WITH RELATED
PARTIES --
The Fund has a management agreement with Landis Associates, Inc. (the
"Adviser"), with whom certain officers and directors of the Fund are
affiliated, to serve as investment adviser and manager. Under the terms of
the agreement, the Fund will pay the Adviser a monthly management fee at the
annual rate of 1% on the daily net assets of the Fund.
(3) DISTRIBUTION TO SHAREHOLDERS --
Net investment income and net realized gains, if any, are distributed to
shareholders. On December 29, 1997, the Fund distributed $2,948,606 from net
short-term realized gains ($1.5213 per share) and $1,611,782 ($0.8316 per
share) from net long-term realized gains. The distributions were paid on
December 30, 1997, to shareholders of record on December 26, 1997.
(4) DEFERRED EXPENSES --
Organizational expenses were deferred and were amortized on a straight-line
basis over a period of five years. These expenses were advanced by the
Adviser who was reimbursed by the Fund. The unamortized organizational
expenses at December 31, 1997 were $- 0 -.
(5) INVESTMENT TRANSACTIONS --
For the period ended December 31, 1997, purchases and proceeds of sales of
investment securities (excluding short-term securities) were $19,778,978 and
$25,665,630, respectively.
(6) ACCOUNTS PAYABLE AND ACCRUED LIABILITIES --
As of December 31, 1997, liabilities of the Fund included the following:
Payable to the Adviser for management fees $27,805
Other liabilities 26,464
(7) SOURCES OF NET ASSETS --
As of December 31, 1997, the sources of net assets were as follows:
Fund shares issued and outstanding $31,335,976
Net unrealized appreciation on investments 3,502,181
Undistributed net realized gains and losses (1,530,257)
Accumulated net investment loss (97,021)
----------
$33,210,879
===========
Aggregate net unrealized appreciation as of December 31, 1997, consisted of
the following:
Aggregate gross unrealized appreciation $5,005,058
Aggregate gross unrealized depreciation (1,502,877)
----------
Net unrealized appreciation $3,502,181
==========
BOARD OF TRUSTEES
ROBERT J. FAHEY, JR.
Director of Real Estate Investment Banking
Cushman & Wakefield of Pennsylvania, Inc.
Philadelphia, Pennsylvania
MICHAEL L. HERSHEY
Chairman, Landis Associates, Inc.
Kennett Square, Pennsylvania
STEPHEN L. HERSHEY, M.D.
President,
First State Orthopaedic Consultants, P.A.
Newark, Delaware
P. COLEMAN TOWNSEND, JR.
President/CEO, Townsends, Inc.
Wilmington, Delaware
Investment Adviser
LANDIS ASSOCIATES, INC.
Independent Accountants
PRICE WATERHOUSE LLP
Custodian, Transfer Agent
FIRSTAR TRUST COMPANY
Legal Counsel
FOLEY & LARDNER
THE HENLOPEN FUND
LONGWOOD CORPORATE CENTER
SUITE 213
415 MCFARLAN ROAD
KENNETT SQUARE, PENNSYLVANIA 19348
(610-925-0400)
This report is not authorized for use as an offer of sale or a solicitation of
an offer to buy shares of The Henlopen Fund unless accompanied or preceded by
the Fund's current prospectus.
