THE HENLOPEN FUND
SEMIANNUAL REPORT
DECEMBER 31, 1998
To My Fellow Shareholders:
At The Henlopen Fund, our goal is to find and invest in market-leading growth
companies that should, over time, appreciate to the shareholder's benefit.
While the events of 1998 remind us that this appreciation will not happen in a
straight line, our experience gives us confidence that it will, indeed, happen.
This dedication to our investment approach has resulted in our fourth straight
year of double-digit appreciation.
For the Quarter ending December 31, 1998, the Fund advanced +26.8%. Mindful of
the current volatility, the Fund strives to produce solid long-term results and
our 1, 3, and 5 year annualized returns are +16.8%, +20.2% and +18.5%,
respectively. Since inception on 12/2/92, the Fund has an annualized return of
+20.0%.
In our December 31, 1997, report to shareholders, we described a favorable
background for equities heading into 1998. We also highlighted rich valuations
and slowing earnings growth caused by Asian economic problems as potential
impediments to an ever-expanding enthusiasm for equities. Ultimately
overpowering these negatives were the realities of declining interest rates, low
inflation, growth in the domestic economy, and the ongoing confidence of the
public investor. This latter factor led to continued positive money flows into
the market pushing the popular indices to yet another strong performance for the
year. While some decry the "narrowness" of the market and the "excessive"
valuation of the favored 100 stocks, the fact remains that the bull market
continues.
Mega-mergers and the Internet phenomenon are current factors affecting market
behavior, yet are only representative of the many powerful, creative and dynamic
forces at work in our industrial and business economies. Of singular importance
is the very low rate of inflation, which we expect to continue. A diversified
portfolio of growing companies gives our investors the best opportunity to
participate in the future growth of our economy. Consistency in our long-term
approach will allow our investors to weather the increased volatility inherent
in today's markets.
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 S&P 500 Lipper Growth
Fund Index 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
3/31/98 $31,183 $29,084 $25,229
6/30/98 $29,902 $30,341 $25,945
9/30/98 $23,918 $27,058 $22,985
12/31/98 $30,323 $32,818 $26,216
*<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
December 31, 1998 (Unaudited)
QUOTED
SHARES COST MARKET VALUE
------ ---- -------------
COMMON STOCKS -- 98.5% (A)<F3>
AUTO & TRUCK RELATED -- 2.7%
6,500 General Motors Corp. $ 461,890 $ 465,159
18,000 Keystone Automotive
Industries, Inc.*<F2> 390,250 376,884
9,000 Lear Corp.*<F2> 507,206 346,500
----------- -----------
1,359,346 1,188,543
BASIC RESOURCES -- 4.2%
5,000 Aluminum Company
of America 380,300 372,815
20,000 Barrick Gold Corp. 396,200 390,000
25,000 Getchell Gold Corp.*<F2> 400,839 681,250
70,000 Meridian Gold Inc.*<F2> 373,681 398,160
----------- -----------
1,551,020 1,842,225
BUSINESS SERVICES -- 3.3%
85,000 TeleSpectrum Worldwide Inc.*<F2> 591,450 834,105
22,500 USWeb Corp.*<F2> 337,500 593,437
----------- -----------
928,950 1,427,542
COMMUNICATIONS -- 5.5%
10,000 3Com Corp.*<F2> 368,750 448,130
2,000 Cisco Systems Inc.*<F2> 150,500 185,626
5,000 Cox Communications, Inc.*<F2> 335,118 345,625
5,000 Lucent Technologies Inc. 444,987 550,000
20,000 PairGain Technologies, Inc.*<F2> 248,516 153,760
17,000 RCN Corp.*<F2> 380,508 300,696
25,000 Tekelec*<F2> 519,450 414,075
----------- -----------
2,447,829 2,397,912
COMPUTER SYSTEMS -- 3.4%
15,000 Compaq Computer Corp. 520,588 629,070
4,000 EMC Corp. (Mass.)*<F2> 340,240 340,000
6,000 Sun Microsystems, Inc.*<F2> 350,625 513,750
----------- -----------
1,211,453 1,482,820
DISTRIBUTION -- 3.7%
42,500 D & K Healthcare
Resources, Inc.*<F2> 724,406 1,158,125
5,000 Insight Enterprises, Inc.*<F2> 247,188 254,375
12,000 VWR Scientific Products Corp.*<F2> 312,000 208,500
----------- -----------
1,283,594 1,621,000
ELECTRONICS/EQUIPMENT MANUFACTURING -- 1.4%
50,000 Checkpoint Systems, Inc.*<F2> 827,056 618,750
ENERGY/SERVICES -- 5.0%
40,000 AstroPower, Inc.*<F2> 240,000 385,000
9,000 Dominion Resources, Inc. 389,738 420,750
20,000 Montana Power Co. 872,019 1,131,260
50,000 Willbros Group, Inc.*<F2> 734,625 278,150
----------- -----------
2,236,382 2,215,160
FINANCIAL SERVICES -- 13.6%
20,000 Allied Capital Corp. 452,500 346,260
3,500 Capital One Financial Corp. 358,085 402,500
7,000 CCB Financial Corp. 393,085 399,000
7,000 Citigroup Inc. 328,107 346,500
7,000 First Virginia Banks, Inc. 352,948 329,000
8,000 First Union Corp. 387,000 486,504
10,000 Markel Corp.*<F2> 948,102 1,810,000
70,000 Philadelphia Consolidated
Holding Corp.*<F2> 1,001,839 1,583,750
10,000 Provident Bankshares Corp. 315,000 248,750
----------- -----------
4,536,666 5,952,264
FOOD & BEVERAGES -- 1.9%
55,000 Cott Corp. 346,698 194,205
10,000 Smithfield Foods, Inc.*<F2> 313,750 338,750
34,000 WLR Foods, Inc.*<F2> 306,495 306,000
----------- -----------
966,943 838,955
HEALTHCARE PRODUCTS -- 8.8%
79,000 Endosonics Corp.*<F2> 596,113 785,102
100,000 IGEN International, Inc.*<F2> 769,326 3,062,500
----------- -----------
1,365,439 3,847,602
HEALTHCARE SERVICES -- 0.9%
27,000 HEALTHSOUTH Corp.*<F2> 337,573 416,826
LEISURE/ENTERTAINMENT -- 6.1%
100,000 Aztar Corp.*<F2> 326,676 506,300
68,062 Steiner Leisure Ltd.*<F2> 1,405,909 2,177,984
----------- -----------
1,732,585 2,684,284
MISCELLANEOUS MANUFACTURING -- 10.1%
42,200 AIM Safety Company, Inc.*<F2> 525,331 301,781
55,000 Arguss Holdings, Inc.*<F2> 723,377 1,031,250
30,000 Harmon Industries, Inc. 658,125 691,890
16,000 Hussmann International, Inc. 320,960 310,000
16,000 Koala Corp.*<F2> 264,000 278,000
15,000 MotivePower Industries, Inc.*<F2> 285,900 482,820
40,000 Quixote Corp. 551,000 492,520
20,000 Shaw Industries, Inc. 396,600 485,000
15,000 Westinghouse Air Brake Co. 386,638 366,570
----------- -----------
4,111,931 4,439,831
MEDICAL PRODUCTS/SUPPLIES -- 0.7%
100,000 Cypress Bioscience, Inc.*<F2> 309,680 300,000
RESTAURANTS -- 1.5%
27,500 Logan's Roadhouse, Inc.*<F2> 571,187 646,250
RETAILING -- 4.7%
18,000 Borders Group, Inc.*<F2> 575,393 448,884
12,000 Lowe's Companies, Inc. 350,022 614,256
10,000 Saks Inc.*<F2> 355,600 315,630
12,000 TJX Companies, Inc. 296,235 348,000
25,000 Value City Dept. Stores Inc.*<F2> 429,569 348,450
----------- -----------
2,006,819 2,075,220
SEMICONDUCTORS/RELATED -- 1.7%
6,000 Altera Corp.*<F2> 349,700 365,250
6,000 Xilinx, Inc.*<F2> 378,750 390,750
----------- -----------
728,450 756,000
SOFTWARE & RELATED SERVICES -- 15.7%
90,000 Alydaar Software Corp.*<F2> 961,596 742,500
44,000 ANSYS, Inc.*<F2> 424,253 484,000
15,000 Cadence Design Systems, Inc.*<F2> 333,712 446,250
7,000 CMGI Inc.*<F2> 360,226 745,500
9,000 Electronic Data Systems Corp. 394,853 452,250
6,000 Keane, Inc.*<F2> 354,735 239,628
42,000 Level 8 Systems, Inc.*<F2> 485,993 406,896
10,000 Lycos, Inc.*<F2> 345,365 555,630
20,000 Open Market, Inc.*<F2> 266,250 233,760
10,000 Oracle Corp.*<F2> 414,375 431,250
30,000 Parametric Technology Corp.*<F2> 357,918 487,500
150,000 Prism Solutions, Inc.*<F2> 327,253 375,000
14,000 Sterling Commerce, Inc.*<F2> 413,132 630,000
12,000 Synopsys, Inc.*<F2> 414,750 651,000
----------- -----------
5,854,411 6,881,164
TRANSPORTATION -- 3.6%
5,000 FDX Corp.*<F2> 382,800 445,000
19,200 International Shipholding Corp. 327,552 301,210
100,000 RailAmerica, Inc.*<F2> 551,808 850,000
----------- -----------
1,262,160 1,596,210
----------- -----------
Total common stocks 35,629,474 43,228,558
PRINCIPAL
AMOUNT
------
SHORT-TERM INVESTMENTS -- 3.2% (A)<F3>
VARIABLE RATE DEMAND NOTE
$ 1,405,855 Firstar Bank
U.S.A., N.A. $ 1,405,855 $ 1,405,855
----------- -----------
Total investments $37,035,329 44,634,413
-----------
-----------
Liabilities, less cash and
receivables (1.7%) (A)<F3> (747,085)
-----------
NET ASSETS $43,887,328
-----------
-----------
Net Asset Value Per Share
(No par value, unlimited
shares authorized), offering
and redemption price
($43,887,328 / 2,539,591
shares outstanding) $17.28
------
------
*<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.
THE HENLOPEN FUND
STATEMENT OF OPERATIONS
For the Period Ending December 31, 1998 (Unaudited)
INCOME:
Dividends $ 98,195
Interest 81,286
---------
Total income 179,481
---------
EXPENSES:
Investment management fees 184,707
Administrative services 33,591
Professional fees 17,995
Transfer agent fees 15,453
Registration fees 14,531
Printing and postage expense 7,986
Custodian fees 5,998
Other expenses 2,437
---------
Total expenses 282,698
---------
NET INVESTMENT LOSS (103,217)
---------
NET REALIZED GAIN ON INVESTMENTS 1,337,253
NET DECREASE IN UNREALIZED APPRECIATION ON INVESTMENTS (578,317)
---------
NET GAIN ON INVESTMENTS 758,936
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 655,719
---------
---------
The accompanying notes to financial statements are an integral part of these
statements.
STATEMENTS OF CHANGES IN NET ASSETS
For the Period Ending December 31, 1998 (Unaudited) and for the
Year Ended June 30, 1998
DECEMBER 31, 1998 JUNE 30, 1998
----------------- -------------
OPERATIONS:
Net investment loss $ (103,217) $ (242,268)
Net realized gain on investments 1,337,253 3,547,239
Net (decrease) increase in unrealized
appreciation on investments (578,317) 6,145,527
---------- ----------
Net increase in net assets
resulting from operations 655,719 9,450,498
---------- ----------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net realized
gains ($3.3103 per share) -- (6,305,849)
---------- ----------
Total distributions -- (6,305,849)*<F4>
---------- ----------
FUND SHARE ACTIVITIES:
Proceeds from shares issued
(369,763 and 345,853 shares, respectively) 5,850,781 5,911,257
Net asset value of shares issued
in distributions (411,192 shares) -- 6,072,409
Cost of shares redeemed
(175,431 and 242,335 shares, respectively) (2,584,695) (4,141,813)
---------- ----------
Net increase in net assets derived
from Fund share activities 3,266,086 7,841,853
---------- ----------
TOTAL INCREASE 3,921,805 10,986,502
NET ASSETS AT THE BEGINNING OF THE PERIOD 39,965,523 28,979,021
---------- ----------
NET ASSETS AT THE END OF THE PERIOD $43,887,328 $39,965,523
---------- ----------
---------- ----------
*<F4> See Note 7.
The accompanying notes to financial statements are an integral part of these
statements.
THE HENLOPEN FUND
FINANCIAL HIGHLIGHTS
(Selected data for each share of the Fund outstanding throughout each period)
<TABLE>
(UNAUDITED) FOR THE
FOR THE PERIOD FROM
PERIOD ENDING FOR THE YEARS ENDED JUNE 30, 12/2/92*<F5>
----------------------------------------------
12/31/98 1998 1997 1996 1995 1994 TO 6/30/93
-------- ------ ------ ------ ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 17.04 $ 15.83 $ 17.47 $ 14.68 $ 11.67 $ 11.55 $ 10.00
Income from investment operations:
Net investment loss (a)<F8> (0.01) (0.03) (0.08) (0.05) (0.11) (0.07) (0.02)
Net realized and unrealized
gains on investments 0.25 4.55 0.58 5.10 3.31 0.64 1.58
------ ------ ------ ------ ------ ------ ------
Total from investment operations 0.24 4.52 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 $17.28 $17.04 $15.83 $17.47 $14.68 $11.67 $11.55
------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------
TOTAL INVESTMENT RETURN 1.4%***<F7> 32.8% 5.0% 38.4% 27.8% 4.9% 15.6%***<F7>
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's $) 43,887 39,966 28,979 26,972 11,685 6,798 1,062
Ratio of expenses (after reimbursement)
to average net assets (b)<F9> 1.5%**<F6> 1.5% 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)% (0.7)% (1.3)% (1.2)% (1.3)% (0.7)%**<F6>
Portfolio turnover rate 66.5% 116.3% 140.6% 177.5% 147.8% 63.0% 54.0%
*<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.
</TABLE>
The accompanying notes to financial statements are an integral part of this
statement.
THE HENLOPEN FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 (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. The Fund has $1,044,039
of post-October losses, which may be used to offset capital gains in
future years to the extent provided by tax regulations.
(d) Dividend income is recorded on the ex-dividend date. Interest
income is recorded on the accrual basis.
(e) The Fund has investments in short-term variable rate demand notes,
which are unsecured instruments. The Fund may be susceptible to credit
risk with respect to these notes to the extent the issuer defaults on
its payment obligation. The Fund's policy is to monitor the
creditworthiness of the issuer and does not anticipate nonperformance
by these counterparties.
(f) Generally accepted accounting principles require that permanent
financial reporting and tax differences be reclassified to paid-in
capital.
(g) The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from these estimates.
(2) INVESTMENT ADVISER AND MANAGEMENT AGREEMENT AND TRANSACTIONS WITH RELATED
PARTIES --
The Fund has a management agreement with Landis Associates, Inc. (the
"Adviser"), with whom certain officers and directors of the Fund are
affiliated, to serve as investment adviser and manager. Under the terms
of the agreement, the Fund will pay the Adviser a monthly management
fee at the annual rate of 1% on the daily net assets of the Fund.
(3) DISTRIBUTION TO SHAREHOLDERS --
Net investment income and net realized gains, if any, are distributed
to shareholders.
(4) INVESTMENT TRANSACTIONS --
For the period ended December 31, 1998, purchases and proceeds of sales
of investment securities (excluding short-term securities) were
$26,957,536 and $23,294,297, respectively.
(5) ACCOUNTS PAYABLE AND ACCRUED LIABILITIES --
As of December 31, 1998, liabilities of the Fund included the
following:
Payable to brokers for investments purchased $ 715,625
Payable to the Adviser for management fees 34,310
Other liabilities 24,617
(6) SOURCES OF NET ASSETS --
As of December 31, 1998, the sources of net assets were as follows:
Fund shares issued and outstanding $35,995,030
Net unrealized appreciation on investments 7,599,084
Accumulated net realized gain 293,214
-----------
$43,887,328
-----------
-----------
Aggregate net unrealized appreciation as of December 31, 1998,
consisted of the following:
Aggregate gross unrealized appreciation $10,609,813
Aggregate gross unrealized depreciation (3,010,729)
-----------
Net unrealized appreciation $ 7,599,084
-----------
-----------
(7) REQUIRED FEDERAL INCOME TAX DISCLOSURES (UNAUDITED) --
In early 1998, shareholders received information regarding all
distributions paid to them by the Fund during the fiscal year ended
June 30, 1998. The Fund hereby designates the following amounts as
long-term capital gains distributions.
Capital gains taxed at 20% $ 624,208
Capital gains taxed at 28% 2,718,218
-----------
Total long-term capital gains $ 3,342,426
-----------
-----------
The percentage of ordinary income which is eligible for the corporate
dividend received deduction for the fiscal year ended June 30, 1998 was
4%.
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
Custodian Investment Adviser
FIRSTAR BANK MILWAUKEE LANDIS ASSOCIATES, INC.
Transfer Agent and Independent Accountants
Dividend Disbursing Agent PRICEWATERHOUSECOOPERS LLP
FIRSTAR MUTUAL FUND
SERVICES, LLC 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.
