N-CSR/A 1 thf-ncsrse.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-07168 The Henlopen Fund ----------------- (Exact name of registrant as specified in charter) Longwood Corporate Center South Suite 213 415 McFarlan Road Kennett Square, PA 19348 (Address of principal executive offices) (Zip code) Michael L. Hershey Landis Associates LLC Longwood Corporate Center South Suite 213 415 McFarlan Road Kennett Square, PA 19348 ------------------------ (Name and address of agent for service) (610) 925-0400 -------------- Registrant's telephone number, including area code: Date of fiscal year end: June 30 Date of reporting period: 12/31/2004 ITEM 1. REPORTS TO STOCKHOLDERS. -------------------------------- THE HENLOPEN FUND SEMIANNUAL REPORT DECEMBER 31, 2004 To My Fellow Shareholders: For the quarter ended December 31, 2004, The Henlopen Fund increased 12.39%. Annualized returns for the Fund for 1, 5 and 10 years are 16.78%, 4.58%, and 17.14%, respectively. Since our inception on December 2, 1992, the Fund has an annualized return of 16.23%. The December quarter saw a broad-based rally that lifted the major indices into positive territory for the year. Whether it was relief over a clean conclusion to a divisive presidential election or normal seasonal bias, investor sentiment turned decidedly positive during the quarter. The breadth of the rally was evidenced throughout The Henlopen Fund portfolio with especially strong gains found among the Fund's holdings in the gaming, tanker, homebuilding and financial sectors. The Fund continues to be positioned to benefit from our belief that energy prices are in the midst of a secular upturn but that the economy, being less impacted by higher energy costs than in past decades, will show continued growth. A rise in speculative behavior in the quarter and a disturbingly weak "Santa Claus rally" at year-end raises a near-term caution flag, as does the knowledge that both the bull market and the economic recovery are both one year older. However, the bigger picture is that we exit the year with much the same backdrop as we entered it: Interest rates are low and expected to rise at a "measured" pace; inflation is occasionally spoken about but rarely seen; and the economy continues to grow at a respectable and non-threatening rate. This environment has proven favorable for our stock-picking style in the past, and we will continue to work hard to benefit our current shareholders. On December 29, 2004, our Board of Trustees declared an income dividend of $0.01002 per share, payable December 30, 2004, to shareholders of record on December 28, 2004. Sincerely yours, /s/Michael L. Hershey /s/Bruce V. Vogenitz Michael L. Hershey Bruce V. Vogenitz President Vice President MANAGED BY LANDIS ASSOCIATES LLC WWW.HENLOPENFUND.COM COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT* IN The Henlopen Fund, S&P 500 Index and Lipper Growth Fund Index Lipper Growth S&P 500 Fund The Henlopen Fund Index*** Index**** 12/2/92 $10,000 $10,000 $10,000 12/31/92 $10,010 $10,162 $10,204 12/31/93 $12,999 $11,179 $11,426 12/31/94 $12,644 $11,330 $11,246 12/31/95 $17,453 $15,574 $14,918 12/31/96 $21,182 $19,141 $17,527 12/31/97 $25,971 $25,524 $22,450 12/31/98 $30,323 $32,818 $28,216 12/31/99 $49,163 $39,820 $36,100 12/31/00 $40,043 $36,192 $32,170 12/31/01 $40,342 $31,906 $26,389 12/31/02 $31,926 $24,853 $20,004 12/31/03 $52,672 $31,987 $25,652 12/31/04** $61,511 $35,464 $28,024 Performance data quoted represents past performance; past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by visiting www.henlopenfund.com. The graph does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. * Assumes equal $10,000 investments made on inception date of December 2, 1992. ** Ending values represent compounded annualized returns of 16.23%, 11.05%, and 8.91% for The Henlopen Fund, S&P 500 Index and Lipper Growth Fund Index, respectively. *** 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. COST DISCUSSION As a shareholder of the Fund you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in The Henlopen Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from June 30, 2004 through December 31, 2004. INDUSTRY SECTORS AS OF DECEMBER 31, 2004 Energy Related 23.7% Technology 11.9% Financial 10.8% Raw/Intermediate Materials 8.6% Miscellaneous Manufacturing 7.4% Construction Services 6.6% Leisure/Entertainment 5.5% Healthcare 5.6% Business Services 4.4% REITS 3.5% Cash -0.5% Other 12.5% ACTUAL EXPENSES The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. In addition to the costs highlighted and described below, the only Fund transaction costs you might currently incur would be wire fees ($15 per wire), if you choose to have proceeds from a redemption wired to your bank account instead of receiving a check. Additionally, U.S. Bank charges an annual processing fee ($15) if you maintain an IRA account with the Fund. To determine your total costs of investing in the Fund, you would need to add any applicable wire or IRA processing fees you've incurred during the period to the costs provided in the example at the end of this article. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. Beginning Ending Expenses Paid Account Account During Period* Value 6/30/04 Value 12/31/04 6/30/04-12/31/04 ------------- -------------- ---------------- The Henlopen Fund Actual $1,000 $1,000.00 $1,100.80 $6.72 Hypothetical (5% return before expenses) $1,000.00 $1,025.00 $6.48
* Expenses are equal to the Fund's annualized expense ratio of 1.27%, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period between June 30, 2004 and December 31, 2004). STATEMENT OF NET ASSETS December 31, 2004 (Unaudited) SHARES COST VALUE ------ ---- ----- LONG-TERM INVESTMENTS -- 100.5% (A) COMMON STOCKS -- 97.0% (A) AEROSPACE & DEFENSE -- 0.5% 50,000 ARGON ST, Inc.* $ 1,812,995 $ 1,772,500 AIRLINES & RELATED -- 0.4% 200,000 World Airways, Inc.* 1,455,280 1,270,000 AUTO & TRUCK RELATED -- 1.5% 400,000 Amerigon Inc.* 2,151,000 1,495,200 150,000 Coast Distribution System, Inc. 958,493 1,102,500 150,000 Rush Enterprises, Inc.* 2,395,680 2,434,500 ------------ ------------ 5,505,173 5,032,200 BASIC MATERIALS -- 2.5% 100,000 Cemex S.A. de C.V. SP-ADR 3,146,250 3,642,000 150,000 Oregon Steel Mills, Inc.* 3,001,755 3,043,500 100,000 Universal Stainless & Alloy Products, Inc.* 1,363,100 1,485,200 ------------ ------------ 7,511,105 8,170,700 BIOTECHNOLOGY -- 1.4% 400,000 Axonyx Inc.* 2,398,580 2,480,000 170,700 OrthoLogic Corp.* 1,187,349 1,066,875 200,000 OXiGENE, Inc.* 1,821,327 1,100,000 ------------ ------------ 5,407,256 4,646,875 BUSINESS SERVICES -- 4.4% 200,000 Gevity HR, Inc. 2,577,387 4,112,000 175,000 Infocrossing, Inc.* 3,032,067 2,962,750 250,000 Marchex, Inc. Cl B* 2,636,126 5,250,000 65,000 ProQuest Co.* 2,042,638 1,930,500 ------------ ------------ 10,288,218 14,255,250 COAL -- 2.3% 100,000 CONSOL Energy Inc. 3,432,910 4,105,000 100,000 Massey Energy Co. 3,450,130 3,495,000 ------------ ------------ 6,883,040 7,600,000 COMMUNICATIONS -- 2.1% 350,000 Optical Communication Products, Inc.* 1,373,520 875,000 250,000 Packeteer, Inc.* 3,518,665 3,612,500 300,000 Radyne ComStream Inc.* 2,396,676 2,241,000 ------------ ------------ 7,288,861 6,728,500 COMMUNICATIONS SERVICES -- 1.4% 85,000 America Movil S.A. de C.V. ADR Series L 2,367,050 4,449,750 COMPUTER SYSTEMS -- 1.0% 75,000 Dell Inc.* 3,012,600 3,160,500 CONSTRUCTION SERVICES -- 6.6% 100,000 Chicago Bridge & Iron Co. N.V. - NYS 3,699,840 4,000,000 125,000 Comstock Homebuilding Companies, Inc.* 2,393,944 2,721,250 25,000 KB Home, Inc. 2,370,565 2,610,000 50,000 Lennar Corp. 2,483,865 2,834,000 100,000 Masco Corp. 2,751,682 3,653,000 35,000 Pulte Homes, Inc. 1,992,953 2,233,000 100,000 Walter Industries, Inc. 3,325,180 3,373,000 ------------ ------------ 19,018,029 21,424,250 ENERGY/SERVICES -- 6.6% 60,000 Ashland Inc. 3,537,702 3,502,800 40,000 Cheniere Energy, Inc.* 2,050,528 2,548,000 200,000 Energy Conversion Devices, Inc.* 3,445,412 3,864,000 100,000 Giant Industries, Inc.* 2,427,560 2,651,000 125,000 InterOil Corp.* 3,164,957 4,730,000 80,000 Questar Corp. 3,029,030 4,076,800 ------------ ------------ 17,655,189 21,372,600 FINANCIAL SERVICES -- 10.2% 175,000 ASTA Funding, Inc. 3,350,015 4,697,000 100,000 Franklin Bank Corp.* 1,842,311 1,825,000 90,000 Main Street Banks, Inc. 2,845,960 3,143,700 75,000 North Fork Bancorporation, Inc. 2,191,090 2,163,750 185,000 Pacific Premier Bancorp, Inc.* 2,420,688 2,453,100 250,000 Sanders Morris Harris Group Inc. 3,219,021 4,452,500 47,500 Shore Bancshares, Inc. 1,596,065 1,723,775 100,000 Texas Capital Bancshares, Inc.* 1,739,427 2,162,000 125,000 Texas United Bancshares, Inc. 2,148,412 2,468,750 175,000 Tradestation Group Inc.* 1,543,133 1,228,500 60,000 Wachovia Corp. 3,082,698 3,156,000 60,000 WSFS Financial Corp. 3,398,755 3,619,200 ------------ ------------ 29,377,575 33,093,275 FURNITURE -- 0.8% 60,000 Stanley Furniture Company, Inc. 2,652,480 2,697,000 HEALTHCARE PRODUCTS -- 4.2% 250,000 Access Pharmaceuticals, Inc.* 1,513,841 885,000 310,000 Bioveris Corp.* 5,285,500 2,266,100 100,000 Cantel Medical Corp.* 3,383,565 3,742,000 300,000 Neurometrix Inc.* 2,400,000 3,525,000 65,000 Smith & Nephew PLC - SP-ADR 3,525,342 3,364,400 ------------ ------------ 16,108,248 13,782,500 INSURANCE -- 0.6% 130,000 American Safety Insurance Holdings, Ltd.* 1,843,465 2,124,200 INTERNET/SOFTWARE/SERVICES -- 1.4% 30,000 Overstock.com, Inc.* 2,265,138 2,070,000 150,000 Rediff.com India LTD. ADR* 2,020,977 1,273,500 450,000 VA Software Corp.* 1,255,718 1,125,000 ------------ ------------ 5,541,833 4,468,500 LEISURE/ENTERTAINMENT -- 5.5% 175,000 Aztar Corp.* 4,498,403 6,111,000 90,000 Gaylord Entertainment Co.* 3,392,226 3,737,700 125,000 Isle of Capri Casinos, Inc.* 3,113,775 3,206,250 50,000 Penn National Gaming, Inc.* 2,631,090 3,027,500 300,300 WestCoast Hospitality Corp.* 2,002,776 1,831,830 ------------ ------------ 15,638,270 17,914,280 METALS -- 3.8% 45,000 Cameco Corp.* 2,501,443 4,718,700 150,000 Metal Management, Inc. 3,516,645 4,030,500 738,000 Southern Cross Resources Inc.* 1,040,988 374,609 350,000 Western Silver Corp.* 1,173,129 3,164,000 ------------ ------------ 8,232,205 12,287,809 MISCELLANEOUS MANUFACTURING -- 7.4% 225,000 American Technology Corp.* 2,225,913 2,486,250 50,000 Ampex Corp.* 2,113,738 1,950,000 225,000 Axsys Technologies, Inc.* 4,046,085 3,955,500 186,600 I.D. Systems, Inc.* 1,638,008 3,481,956 80,000 Manitowoc Company, Inc. 2,983,475 3,012,000 100,000 Paxar Corp.* 2,252,941 2,217,000 100,000 Taser International, Inc.* 3,044,950 3,159,000 150,000 Tempur-Pedic International Inc.* 2,335,669 3,180,000 33,334 TurboChef Technologies, Inc.* 902,940 762,682 ------------ ------------ 21,543,719 24,204,388 OIL & GAS EXPLORATION/PRODUCTION -- 14.6% 150,000 ATP Oil & Gas Corp.* 2,395,400 2,787,000 90,000 Burlington Resources Inc. 2,878,354 3,915,000 75,000 Comstock Resources, Inc.* 1,696,882 1,653,750 100,000 Contango Oil & Gas Co.* 750,762 724,000 100,000 Edge Petroleum Corp.* 1,075,088 1,458,000 50,000 EOG Resources, Inc. 2,713,825 3,568,000 175,000 KCS Energy, Inc.* 1,483,006 2,586,500 100,000 McMoRan Exploration Co.* 1,492,010 1,870,000 75,000 Niko Resources Ltd. 2,096,668 3,150,075 50,000 Noble Energy, Inc. 2,702,440 3,083,000 75,000 Plains Exploration & Production Co.* 1,711,560 1,950,000 100,000 Quicksilver Resources Inc.* 3,128,612 3,678,000 200,000 Range Resources Corp. 2,557,700 4,092,000 80,000 Southwestern Energy Co.* 1,934,185 4,055,200 90,000 Suncor Energy, Inc. 2,837,790 3,186,000 75,000 Ultra Petroleum Corp.* 2,040,731 3,609,750 60,000 XTO Energy, Inc. 1,976,190 2,122,800 ------------ ------------ 35,471,203 47,489,075 OILFIELD PRODUCTS/SERVICES -- 2.5% 600,000 Grey Wolf, Inc.* 3,887,199 3,162,000 100,000 Patterson-UTI Energy, Inc. 2,013,748 1,945,000 300,000 Pioneer Drilling Co.* 2,094,327 3,027,000 ------------ ------------ 7,995,274 8,134,000 PAPER PRODUCTS -- 0.9% 75,000 Georgia-Pacific Corp. 2,851,883 2,811,000 RESTAURANTS -- 0.9% 250,000 Rubio's Restaurants, Inc.* 2,147,740 3,032,500 RETAILING -- 2.7% 60,000 Home Depot, Inc. 2,541,850 2,564,400 100,000 Krispy Kreme Doughnuts, Inc.* 1,522,310 1,260,000 100,000 MarineMax, Inc.* 2,619,785 2,976,000 50,000 Tractor Supply Co.* 1,802,806 1,860,500 ------------ ------------ 8,486,751 8,660,900 SEMICONDUCTORS/RELATED -- 3.1% 100,000 Advanced Micro Devices, Inc.* 2,100,550 2,202,000 175,000 ChipMOS TECHNOLOGIES LTD.* 1,300,206 1,114,750 400,000 Microtune, Inc.* 2,499,720 2,444,000 70,000 Rambus Inc.* 2,399,253 1,610,000 175,000 Semitool, Inc.* 2,247,925 1,624,000 302,500 Siliconware Precision Industries Co. - ADR 1,643,098 1,240,250 ------------ ------------ 12,190,752 10,235,000 SOFTWARE & RELATED SERVICES -- 4.3% 500,000 BindView Development Corp.* 2,092,802 2,175,000 150,000 Carreker Corp.* 1,692,345 1,290,000 85,000 CheckFree Corp.* 3,150,264 3,236,800 125,000 Click Commerce, Inc.* 1,710,058 2,008,750 500,000 Novell, Inc.* 2,454,555 3,375,000 250,000 Phase Forward Inc.* 1,984,043 2,042,500 ------------ ------------ 13,084,067 14,128,050 SPECIALTY CHEMICALS -- 1.1% 60,000 Air Products and Chemicals, Inc. 3,326,465 3,478,200 TOBACCO -- 0.9% 50,000 Altria Group, Inc. 2,977,500 3,055,000 TRANSPORTATION -- 1.4% 125,000 Celadon Group, Inc.* 2,192,833 2,781,250 125,000 Golar LNG Ltd.* 2,093,342 1,861,250 ------------ ------------ 4,286,175 4,642,500 ------------ ------------ Total common stocks 281,960,401 316,121,302 REITS -- 3.5% (A) 150,000 Friedman, Billings, Ramsey Group, Inc. 3,025,155 2,908,500 70,000 New Century Financial Corp. 4,158,297 4,473,700 350,000 New York Mortgage Trust, Inc. 3,150,000 3,920,000 ------------ ------------ Total REITS 10,333,452 11,302,200 ------------ ------------ Total long-term investments 292,293,853 327,423,502 SHORT-TERM INVESTMENTS -- 1.4% (A) VARIABLE RATE DEMAND NOTE -- 1.4% $4,762,370 U.S. Bank, N.A., 2.17% 4,762,370 4,762,370 ------------ ------------ Total short-term investments 4,762,370 4,762,370 ------------ ------------ Total investments $297,056,223 332,185,872 ------------ ------------ Liabilities, less cash and receivables -- (1.9%) (A) (6,307,214) ------------ NET ASSETS $325,878,658 ------------ ------------ Net Asset Value Per Share (No par value, unlimited shares authorized), offering and redemption price ($325,878,658 / 10,693,802 shares outstanding) $ 30.47 ------------ ------------
* Non-income producing security. (a) Percentages for the various classifications relate to net assets. ADR - American Depository Receipts N.V. - Netherlands Antilles Limited Liability Corp. NYS - New York Registered Shares The accompanying notes to financial statements are an integral part of this statement. STATEMENT OF OPERATIONS For the Period Ending December 31, 2004 (Unaudited) INCOME: Dividends $ 904,306 Interest 47,088 ----------- Total income 951,394 ----------- EXPENSES: Investment management fees 1,580,527 Transfer agent fees 165,630 Administrative services 112,776 Printing and postage expense 49,600 Custodian fees 27,803 Professional fees 20,306 Insurance expense 18,675 Registration fees 15,367 Board of Trustees fees 13,500 Other expenses 4,115 ----------- Total expenses 2,008,299 ----------- NET INVESTMENT LOSS (1,056,905) ----------- NET REALIZED GAIN ON INVESTMENTS 1,621,923 CHANGE IN UNREALIZED APPRECIATION ON INVESTMENTS 25,889,813 ----------- NET GAIN ON INVESTMENTS 27,511,736 ----------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $26,454,831 ----------- ----------- The accompanying notes to financial statements are an integral part of this statement. STATEMENTS OF CHANGES IN NET ASSETS For the Period Ending December 31, 2004 (Unaudited) and For the Year Ended June 30, 2004 DECEMBER 31, 2004 JUNE 30, 2004 ----------------- ------------- OPERATIONS: Net investment loss $ (1,056,905) $ (1,709,190) Net realized gain on investments 1,621,923 26,606,550 Change in unrealized appreciation on investments 25,889,813 23,126,655 ------------ ------------ Net increase in net assets resulting from operations 26,454,831 48,024,015 ------------ ------------ DISTRIBUTION TO SHAREHOLDERS: Dividend from net investment income ($0.01002 per share) (108,497)* -- ------------ ------------ FUND SHARE ACTIVITIES: Proceeds from shares issued (2,382,968 and 10,464,939 shares, respectively) 64,448,168 278,958,856 Net asset value of shares issued in distribution reinvested (3,532 shares) 107,362 -- Cost of shares redeemed (4,254,687 and 2,202,536 shares, respectively) (112,860,148) (57,182,968) Redemption fees 13,057 66,882 ------------ ------------ Net (decrease) increase in net assets derived from Fund share activities (48,291,561) 221,842,770 ------------ ------------ TOTAL (DECREASE) INCREASE (21,945,227) 269,866,785 NET ASSETS AT THE BEGINNING OF THE PERIOD 347,823,885 77,957,100 ------------ ------------ NET ASSETS AT THE END OF THE PERIOD $325,878,658 $347,823,885 ------------ ------------ ------------ ------------
* See Note 7. FINANCIAL HIGHLIGHTS (Selected data for each share of the Fund outstanding throughout each period) (UNAUDITED) FOR THE FOR THE YEARS ENDED JUNE 30, PERIOD ENDING ---------------------------- DECEMBER 31, 2004 2004 2003 2002 2001 2000 ----------------- ---- ---- ---- ---- ---- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 27.69 $ 18.13 $ 16.79 $ 19.15 $ 28.39 $ 19.84 Income from investment operations: Net investment loss (a) (0.09) (0.23) (0.16) (0.18) (0.16) (0.25) Net realized and unrealized gains (losses) on investments 2.88 9.79 1.50 (2.14) (7.85) 10.18 ------- ------- ------- ------- ------- ------- Total from investment operations 2.79 9.56 1.34 (2.32) (8.01) 9.93 Less distributions: Dividend from net investment income (0.01) -- -- -- -- -- Distributions from net realized gains -- -- -- (0.04) (1.23) (1.38) ------- ------- ------- ------- ------- ------- Total from distributions (0.01) -- -- (0.04) (1.23) (1.38) ------- ------- ------- ------- ------- ------- Net asset value, end of period $ 30.47 $ 27.69 $ 18.13 $ 16.79 $ 19.15 $ 28.39 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- TOTAL RETURN 10.08%* 52.73% 7.98% (12.11)% (27.96)% 53.71% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's $) 325,879 347,824 77,957 95,317 150,872 240,106 Ratio of expenses to average net assets 1.27%** 1.38% 1.58% 1.39% 1.28% 1.37% Ratio of net investment loss to average net assets (0.67)%** (0.90)% (1.04)% (0.98)% (0.74)% (0.97)% Portfolio turnover rate 100.61% 113.27% 90.06% 132.21% 287.66% 156.85%
(a) Net investment loss per share is calculated using average shares outstanding. * Not annualized. ** Annualized. The accompanying notes to financial statements are an integral part of these statements. NOTES TO FINANCIAL STATEMENTS December 31, 2004 (Unaudited) (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- The following is a summary of significant accounting policies of The Henlopen Fund (the "Fund"), which is organized as a Delaware Business Trust and is registered as a diversified open-end management company under the Investment Company Act of 1940, as amended. 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. Securities that are traded on the Nasdaq National Market or the Nasdaq SmallCap Market are valued at the Nasdaq Office Closing Price, 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. The fair value of a security is the amount which the Fund might reasonably expect to receive upon a current sale. The fair value of a security may differ from the last quoted price and the Fund may not be able to sell a security at the fair value. Market quotations may not be available, for example, if trading in particular securities was halted during the day and not resumed prior to the close of trading on the New York Stock Exchange. Short-term investments with maturities of 60 days or less are valued at amortized cost which approximates market value. For financial reporting purposes, investment transactions are recorded on trade date. (b) Net realized gains and losses on sales of securities are computed on the identified cost basis. (c) Dividend income is recorded on the ex-dividend date. Interest income is recorded on the accrual basis. (d) 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 nonperformance by these counterparties is not anticipated. (e) Accounting principles generally accepted in the United States of America ("GAAP") require that permanent differences between income for financial reporting and tax purposes be reclassified in the capital accounts. (f) The preparation of financial statements in conformity with GAAP 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. (g) 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 net investment company taxable income and net capital gains to its shareholders and otherwise comply with the provisions of the Internal Revenue Code applicable to regulated investment companies. (h) The Fund imposes a 1.0% redemption fee on the value of shares redeemed less than 30 days after purchase. The redemption fee will not apply to shares purchased through reinvested distributions (dividends and capital gains), shares held in retirement plans or through the systematic withdrawal plan. The redemption fee is designed to discourage short-term trading and any proceeds of the fee will be credited to paid in capital. (2) INVESTMENT ADVISER AND MANAGEMENT AGREEMENT AND TRANSACTIONS WITH RELATED PARTIES -- The Fund has a management agreement with Landis Associates LLC (the "Adviser"), with whom certain officers and trustees 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. The Fund has an administrative agreement with Fiduciary Management, Inc. ("FMI"), with whom an officer of the Fund is affiliated, to supervise all aspects of the Fund's operations except those performed by the Adviser. Under the terms of the agreement, the Fund will pay FMI a monthly administrative fee at the annual rate of 0.2% on the first $30,000,000 of the daily net assets of the Fund, 0.1% on the daily net assets of the Fund on the next $30,000,000 and 0.05% on the daily net assets of the Fund over $60,000,000. In the normal course of business the Fund enters into contracts with service providers that contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. However, based on experience, the Fund expects the risk of loss to be remote. (3) DISTRIBUTIONS TO SHAREHOLDERS -- Net investment income and net realized gains, if any, are distributed to shareholders at least annually. On December 29, 2004, the Fund distributed $108,497 from net investment income ($0.01002 per share). The distribution was paid on December 30, 2004, to shareholders of record on December 28, 2004. (4) INVESTMENT TRANSACTIONS -- For the period ending December 31, 2004, purchases and proceeds of sales of investment securities (excluding short-term securities) were $313,134,169 and $350,879,250, respectively. (5) ACCOUNTS PAYABLE AND ACCRUED LIABILITIES -- As of December 31, 2004, liabilities of the Fund included the following: Payable to shareholders for redemptions $4,556,032 Payable to brokers for investments purchased 2,559,994 Payable to the Adviser for management fees 273,804 Due to custodian 200,675 Payable to FMIfor administrative fees 18,786 Other liabilities 45,305 (6) SOURCES OF NET ASSETS -- As of December 31, 2004 the sources of net assets were as follows: Fund shares issued and outstanding $299,268,289 Net unrealized appreciation on investments 35,129,649 Accumulated net realized loss (7,329,909) Accumulated net investment loss (1,189,371) ------------ $325,878,658 ------------ ------------ (7) INCOME TAX INFORMATION -- The following information for the Fund is presented on an income tax basis as of December 31, 2004: GROSS GROSS NET UNREALIZED COST OF UNREALIZED UNREALIZED APPRECIATION INVESTMENTS APPRECIATION DEPRECIATION ON INVESTMENTS ----------- ------------ ------------- -------------- $298,245,594 $49,124,795 $15,184,517 $33,940,278 The following information for the Fund is presented on an income tax basis as of June 30, 2004: GROSS GROSS NET UNREALIZED DISTRIBUTABLE DISTRIBUTABLE COST OF UNREALIZED UNREALIZED APPRECIATION ORDINARY LONG-TERM INVESTMENTS APPRECIATION DEPRECIATION ON INVESTMENTS INCOME CAPITAL GAINS ----------- ------------ ------------ -------------- ------ ------------- $332,181,527 $40,228,957 $32,186,998 $8,041,959 $ -- $ --
The difference, if any, between the cost amount for financial statement and federal income tax purposes is due primarily to timing differences in recognizing certain gains and losses in security transactions and for mark to market for Passive Foreign Investment Companies ("PFICs").The tax components of dividends paid during the years ended June 30, 2004 and 2003, capital loss carryovers, which may be used to offset future capital gains, subject to Internal Revenue Code limitations, (expiring in 2011), as of June 30, 2004, and tax basis post-October losses as of June 30, 2004, which are not recognized for tax purposes until the first day of the following fiscal year are: JUNE 30, 2004 JUNE 30, 2003 ---------------------------------------------------------------------------- --------------------------------- ORDINARY LONG -TERM NET CAPITAL ORDINARY LONG-TERM INCOME CAPITAL GAINS LOSS POST-OCTOBER INCOME CAPITAL GAINS DISTRIBUTIONS DISTRIBUTIONS CARRYOVERS LOSSES DISTRIBUTIONS DISTRIBUTIONS ------------- ------------- ---------- ------ ------------- ------------- $ -- $ -- $8,943,326 $ -- $ -- $ --
The Fund has utilized $14,631,388 of its post-October losses from the prior year to decrease current year net capital gains. The Fund has also utilized $11,975,664 of its capital loss carryovers during the year ended June 30, 2004. Since there were no ordinary distributions paid for the year ended June 30, 2004, there were no distributions designated as qualifying for the dividends received deduction for corporate shareholders nor as qualified dividend income under the Jobs and Growth Tax Relief Act of 2003. (8) OTHER -- On June 22, 2004 the Securities and Exchange Commission filed a civil action in the United States District Court for the Eastern District of Pennsylvania against, among others, the Fund's investment adviser, Landis Associates LLC, and its principal, Michael L. Hershey, the President of the Fund and a member of the Fund's Board of Trustees. The complaint in the civil action alleges that Mr. Hershey and Landis Associates LLC violated certain federal securities laws by breaching their fiduciary duty to a wealthy private client in connection with investments made by the client in a private company between 1998 and 2001. The complaint seeks an injunction against Mr. Hershey and Landis Associates LLC for violating the federal securities laws it alleges were violated in connection with such private client's investments. The allegations raised in the complaint do not involve the Fund nor the type of investments which the Fund makes. If the court issues the injunction requested by the Securities and Exchange Commission, Landis Associates LLC would no longer be eligible to serve as the Fund's investment adviser and Mr. Hershey would no longer be eligible to serve as an officer or trustee of the Fund. Landis Associates LLC and Mr. Hershey have advised the Fund that they deny all allegations of wrongdoing, intend to vigorously contest the allegations raised by the Securities and Exchange Commission and believe they will be successful in their defense. BOARD OF TRUSTEES HOWARD E. COSGROVE ROBERT J. FAHEY, JR. Chairman, NRG Energy Executive Vice President Retired Chairman, Conectiv, Inc. CB Richard Ellis Wilmington, Delaware Investment Properties - Institutional Group Philadelphia, Pennsylvania MICHAEL L. HERSHEY JOHN H. REMER Chairman, Retired Landis Associates LLC Kennett Square, Pennsylvania Kennett Square, Pennsylvania U.S. BANCORP FUND PRICEWATERHOUSECOOPERS LLP SERVICES, LLC Independent Registered Transfer Agent and Public Accounting Firm Dividend Disbursing Agent LANDIS ASSOCIATES LLC Investment Adviser U.S. BANK, N.A. FOLEY & LARDNER LLP Custodian Legal Counsel THE HENLOPEN FUND LONGWOOD CORPORATE CENTER SOUTH 415 MCFARLAN ROAD, SUITE 213 KENNETT SQUARE, PENNSYLVANIA 19348 (610-925-0400) WWW.HENLOPENFUND.COM 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. For a description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities, please call (866) 880-0032 and request a Statement of Additional Information. One will be mailed to you free of charge. The Statement of Additional Information is also available on the website of the Securities and Exchange Commission (the "Commission") at http://www.sec.gov. Information on how the Fund voted proxies relating to portfolio securities during the twelve month period ending June 30, 2004 is available on the Fund's website at http://www.henlopenfund.com or the website of the Commission. The Fund files its complete schedule of portfolio holdings with the Commission for the first and third quarter of each fiscal year on Form N-Q; (ii) the Fund's Form N-Q is available on the Commission's website; and (iii) the Fund's Form N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, D.C., and that information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. ITEM 2. CODE OF ETHICS. ----------------------- Not applicable. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. ----------------------------------------- Not applicable. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. ----------------------------------------------- Not applicable. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. ---------------------------------------------- Not applicable. ITEM 6. SCHEDULE OF INVESTMENTS. --------------------------------- Not applicable. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END ------------------------------------------------------------------------- MANAGEMENT INVESTMENT COMPANIES ------------------------------- Not applicable. ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT -------------------------------------------------------------------------- COMPANY AND AFFILIATED PURCHASERS. ---------------------------------- Not applicable. ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. ------------------------------------------------------------ None ITEM 10. CONTROLS AND PROCEDURES. --------------------------------- (a) The disclosure controls and procedures of The Henlopen Fund are periodically evaluated. As of February 10, 2005, the date of the last evaluation, we concluded that our disclosure controls and procedures are adequate. (b) The internal controls of The Henlopen Fund are periodically evaluated. Since, February 10, 2005, the date of the last evaluation, there have been no significant changes in The Henlopen Fund's internal controls or in other factors that could have had a significant effect on such controls. There have also been no significant deficiencies or material weaknesses identified since the last evaluation that required any corrective action. ITEM 11. EXHIBITS. ------------------ (a) Any code of ethics or amendment thereto. Not applicable. (b) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith. (c) Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Filed herewith. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. The Henlopen Fund ----------------- Registrant By /s/Michael L. Hershey ----------------------------------------------- Michael L. Hershey, Principal Executive Officer Date February 10, 2005 ----------------- Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. The Henlopen Fund ----------------- Registrant By /s/Michael L. Hershey ----------------------------------------------- Michael L. Hershey, Principal Financial Officer Date February 10, 2005 -----------------