THE HENLOPEN FUND
(THE HENLOPEN FUND LOGO)
QUARTERLY REPORT
SEPTEMBER 30, 1998
To My Fellow Shareholders:
The climate for equity investing changed dramatically in the September quarter
with storm clouds gathering on all fronts: economic, financial and political.
While bouts of uncertainty can arise at any time, the current reaction seems to
have been exacerbated by the existence of historically high valuation levels and
the fact that it has been such a long time since the market has undergone even a
10% correction. The damage that has been done to both prices and confidence is
evident in market statistics. Since the recent highs, the average price change
of stocks listed on the New York Stock Exchange is -36%, while on the NASDAQ the
average price decline is -47%. The fact that the still favored, large-
capitalization companies on both exchanges sport price-earnings ratios well in
excess of their growth rates probably means that the correction has yet to run
its course.
Our strategy of investing in market leading growth companies has not left us
immune to the negative forces currently in place. For the quarter, the Fund is
- -20.0% and for the year -14.9%, while annualized returns for 3 years, 5 years
and since inception (December 2, 1992) are +10.3%, +14.0%, and +16.1%,
respectively. The recent volatility is unsettling yet not completely unfamiliar
to experienced market participants.
Much of the current uncertainty and risk has been related to financial excess,
both domestically and globally. Barron's recently reported that of the total of
$365 billion of commercial loans made in this country last year, $125 billion
was extended to finance securities dealings. Global liquidity has been strained
by banking and currency problems in the Far East and Latin America while hedge-
fund misadventures have uncovered other types of "irrational exuberance" in the
system. While the Fund is not heavily exposed to financial stocks, the sector's
far-reaching shakeout has left few industries unscathed. Though the
discontinuity between relatively sound economic underpinnings and financial
excess seems to be in the process of resolution, we cannot preclude further
surprises.
As we move into the fall quarter, market volatility is likely to remain high. We
have noted in the past (June 1995 Annual Report) how the Federal Reserve tends
to be reactive rather than proactive in setting interest rates, and it is our
feeling that they will be forced into further cuts before long. It is also
likely that earnings expectations will have to be reduced further as third
quarter results are reported and assimilated. It is sometimes easy to be swept
away by the forces of the moment, but long-term investors must, by necessity,
endure periods of heightened uncertainty. The basic economy is still reasonably
sound with high employment levels, low inflation, falling interest rates and
good (albeit slowing) corporate profitability. While the stock market's recovery
is unlikely to be either swift or universal, the stocks of many excellent
companies have retreated to price levels which we feel will allow significant
future price appreciation. Our ongoing goal is to invest in these growing
businesses at valuations that give us the opportunity for superior long-term
performance.
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 $15,591
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
3/31/98 $31,183 $29,084 $25,229
6/30/98 $29,902 $30,041 $25,946
9/30/98 $23,918 $27,058 $22,985
*<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.
THE HENLOPEN FUND
STATEMENT OF NET ASSETS
September 30, 1998 (Unaudited)
SHARES OR
PRINCIPAL QUOTED MARKET
AMOUNT VALUE (B)<F3>
---------- -------------
COMMON STOCKS -- 87.0% (A)<F2>
AUTO & TRUCK RELATED -- 3.4%
6,500 General Motors Corp. $ 355,472
18,000 Keystone Automotive Industries, Inc. 355,500
9,000 Lear Corp. 393,750
----------
1,104,722
BASIC RESOURCES -- 4.1%
6,000 Aluminum Co. of America 426,000
20,000 Barrick Gold Corp. 400,000
25,000 Getchell Gold Corp. 526,575
----------
1,352,575
BUSINESS SERVICES -- 2.9%
20,000 AlphaNet Solutions, Inc. 88,760
15,000 CKS Group, Inc. 265,320
70,000 TeleSpectrum Worldwide Inc. 581,910
----------
935,990
COMMUNICATIONS -- 2.0%
5,000 Lucent Technologies Inc. 345,315
20,000 Tekelec 305,000
----------
650,315
COMPUTER SYSTEMS -- 3.2%
15,000 Compaq Computer Corp. 474,375
25,000 Unisys Corp. 568,750
----------
1,043,125
DISTRIBUTION -- 2.7%
32,500 D & K Healthcare Resources, Inc. 585,000
12,000 VWR Scientific Products Corp. 300,756
----------
885,756
ELECTRONICS/EQUIPMENT
MANUFACTURING -- 2.5%
50,000 Checkpoint Systems, Inc. 434,400
8,000 Gemstar International Group Ltd. 371,000
----------
805,400
ENERGY/SERVICES -- 9.3%
40,000 AstroPower, Inc. 270,000
21,000 Core Laboratories N.V. 362,250
9,000 Dominion Resources, Inc. 401,625
12,000 Illinova Corp. 344,256
30,000 Montana Power Co. 1,340,640
50,000 Willbros Group, Inc. 318,750
----------
3,037,521
FINANCIAL SERVICES -- 15.5%
20,000 Allied Capital Corp. 355,000
4,000 American Express Co. 310,500
3,500 CCB Financial Corp. 352,625
7,000 First Virginia Banks, Inc. 311,066
8,000 First Union Corp. 409,504
10,000 Markel Corp. 1,525,000
70,000 Philadelphia Consolidated
Holding Corp. 1,548,750
10,000 Provident Bankshares Corp. 253,750
----------
5,066,195
FOOD & BEVERAGES -- 3.6%
8,000 Albertson's, Inc. 433,000
55,000 Cott Corp. 295,625
10,000 Smithfield Foods, Inc. 176,880
34,000 WLR Foods, Inc. 263,500
----------
1,169,005
HEALTHCARE PRODUCTS -- 9.5%
63,000 Endosonics Corp. 299,250
100,000 IGEN International, Inc. 2,825,000
----------
3,124,250
HEALTHCARE SERVICES -- 1.7%
5,000 Access Health, Inc. 184,375
13,000 HBO & Co. 375,375
----------
559,750
LEISURE/ENTERTAINMENT -- 3.6%
75,000 Steiner Leisure Ltd. 1,171,875
MISCELLANEOUS MANUFACTURING -- 11.1%
42,200 AIM Safety Co., Inc. 274,426
55,000 Arguss Holdings, Inc. 783,750
30,000 Harmon Industries, Inc. 660,000
16,000 Hussmann International, Inc. 227,008
35,000 Morrison Knudsen Corp. 376,250
15,000 MotivePower Industries, Inc. 350,625
28,000 Quixote Corp. 350,000
20,000 Shaw Industries, Inc. 325,000
15,000 Westinghouse Air Brake Co. 296,250
----------
3,643,309
RESTAURANTS -- 1.0%
19,500 Logan's Roadhouse, Inc. 326,625
RETAILING -- 2.6%
9,000 Borders Group, Inc. 200,250
10,000 Saks Inc. 224,380
12,000 TJX Companies, Inc. 213,756
25,000 Value City Dept. Stores Inc. 220,325
----------
858,711
SOFTWARE & RELATED SERVICES -- 5.6%
90,000 Alydaar Software Corp. 635,670
44,000 ANSYS, Inc. 319,000
6,000 Keane, Inc. 210,750
40,000 Level 8 Systems, Inc. 330,000
12,000 Metamor Worldwide, Inc. 330,000
----------
1,825,420
TRANSPORTATION -- 2.7%
19,200 International Shipholding Corp. 284,410
100,000 RailAmerica, Inc. 587,500
----------
871,910
----------
Total common stocks 28,432,454
SHORT-TERM INVESTMENTS -- 14.5% (A)<F2>
VARIABLE RATE DEMAND NOTES
$ 202,078 American Family Financial Services 202,078
1,600,000 Firstar Bank U.S.A., N.A. 1,600,000
1,600,000 General Mills, Inc. 1,600,000
1,360,000 Pitney Bowes Credit Corp. 1,360,000
----------
Total variable rate
demand notes 4,762,078
----------
Total investments 33,194,532
Liabilities, less cash and
receivables (1.5%) (A)<F2> (497,318)
----------
NET ASSETS $32,697,214
----------
----------
Net Asset Value Per Share
(No par value, unlimited
shares authorized), offering
and redemption price
($32,697,214 / 2,399,448
shares outstanding) $13.63
-----
-----
(a)<F2> Percentages for the various classifications relate to net assets.
(b)<F3> 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. Short-term
investments are valued at cost which approximates quoted market value.
BOARD OF TRUSTEES
ROBERT J. FAHEY, JR. MICHAEL L. HERSHEY
Director of Real Estate Investment Banking Chairman, Landis Associates, Inc.
Cushman &Wakefield of Pennsylvania, Inc. Kennett Square, Pennsylvania
Philadelphia, Pennsylvania
STEPHEN L. HERSHEY, M.D. P. COLEMAN TOWNSEND, JR.
President, President/CEO, Townsends, Inc.
First State Orthopaedic Consultants, P.A. Wilmington, Delaware
Newark, Delaware
----------------------------
Investment Adviser Independent Accountants
LANDIS ASSOCIATES, INC. PRICEWATERHOUSECOOPERS LLP
Custodian, Transfer Agent Legal Counsel
FIRSTAR TRUST COMPANY 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.
